<PAGE> 1
'33 ACT FILE NO.333-40455
'40 ACT FILE NO.811-08495
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 7, 1998
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933/X/
POST-EFFECTIVE AMENDMENT NO. 4
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940/X/
AMENDMENT NO. 5
(CHECK APPROPRIATE BOX OR BOXES)
NATIONWIDE INVESTING FOUNDATION III
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
NATIONWIDE MID CAP GROWTH FUND NATIONWIDE
GROWTH FUND NATIONWIDE FUND NATIONWIDE S&P
500 INDEX FUND NATIONWIDE BOND FUND
NATIONWIDE TAX-FREE INCOME FUND NATIONWIDE
LONG-TERM U.S. GOVERNMENT BOND FUND
NATIONWIDE INTERMEDIATE U.S. GOVERNMENT BOND
FUND NATIONWIDE MONEY MARKET FUND MORLEY
CAPITAL ACCUMULATION FUND PRESTIGE LARGE CAP
VALUE FUND PRESTIGE LARGE CAP GROWTH FUND
PRESTIGE SMALL CAP FUND PRESTIGE BALANCED
FUND PRESTIGE INTERNATIONAL FUND
THREE NATIONWIDE PLAZA
COLUMBUS, OHIO 43216
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (614) 249-7855
SEND COPIES OF COMMUNICATIONS TO:
MS. ELIZABETH A. DAVIN
DRUEN, DIETRICH, REYNOLDS AND KOOGLER
ONE NATIONWIDE PLAZA
COLUMBUS, OHIO 43215
(NAME AND ADDRESS OF AGENT FOR SERVICE)
It is proposed that this filing will become effective:
[X] 75 days after filing pursuant to paragraph (a)(2) of Rule 485.
In accordance with Rules 24f-1 and 24f-2 under the Investment Company Act of
1940, upon the effective date of its registration statement, Registrant shall be
deemed to have registered in indefinite amount of securities and will pay
registration fees on later than 90 days after its fiscal year-end.
Title of Securities being Registered: Shares of Beneficial Interest, without par
value.
<PAGE> 2
NATIONWIDE INVESTING FOUNDATION III
NATIONWIDE MID CAP GROWTH FUND
NATIONWIDE GROWTH FUND
NATIONWIDE FUND
NATIONWIDE S&P 500 INDEX FUND
NATIONWIDE BOND FUND
NATIONWIDE TAX-FREE INCOME FUND
NATIONWIDE LONG-TERM U.S. GOVERNMENT BOND FUND
NATIONWIDE INTERMEDIATE U.S. GOVERNMENT BOND FUND
NATIONWIDE MONEY MARKET FUND
MORLEY CAPITAL ACCUMULATION FUND
PRESTIGE LARGE CAP VALUE FUND
PRESTIGE LARGE CAP GROWTH FUND
PRESTIGE SMALL CAP FUND
PRESTIGE BALANCED FUND
PRESTIGE INTERNATIONAL FUND
<TABLE>
<CAPTION>
CROSS REFERENCE SHEET
N-1A ITEM NO. LOCATION
PART A
<S> <C> <C>
Item 1. Cover Page Cover Page
Item 2. Synopsis Summary of Fund Expenses
Item 3. Condensed Financial Information *
Item 4. General Description of Registrant Objectives and Management; Investment
Techniques, and Risk Considerations
Item 5. Management of the Fund Management of the Trust
Item 6. Capital Stock and Other Securities Additional Information; Distributions
and Taxes
Item 7. Purchase of Securities Being Offered How to Purchase Shares
Item 8. Redemption or Repurchase How to Sell(Redeem) Shares
Item 9. Pending Legal Proceedings *
PART B
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information and History General Information and History
Item 13. Investment Objectives and Policies Additional Information on Portfolio
Instruments and Investment Policies;
Investment Restrictions
Item 14. Management of Registrant Trustees and Officers of the Trust
Item 15. Control Persons and Principal Holders of Securities
*
Item 16. Investment Advisory and Other Services Investment Advisory and Other Services
Item 17. Brokerage Allocation Brokerage Allocation
Item 18. Capital Stock and Other Securities Additional Information
Item 19. Purchase, Redemption and Pricing *
Item 20. Tax Status Additional General Tax Information
Item 21. Underwriters *
Item 22. Calculation of Performance Data Performance Information
Item 23. Financial Statements *
</TABLE>
<PAGE> 3
[NATIONWIDE
ADVISORY
SERVICES, INC.
LOGO]
PRESTIGE ADVISOR SERIES
PROSPECTUS
SUBJECT TO COMPLETION
________, 1998
(PROSPECTUS BEGINS ON PAGE 1)
<PAGE> 4
This Prospectus provides you with information you should know before investing
in the Prestige Advisor Series. Read it and keep it for future reference.
A Statement of Additional Information dated ____________, 1998, incorporated
herein by reference and containing further information about the Prestige
Advisor Series, has been filed with the Securities and Exchange Commission (the
"SEC"). You may obtain a copy without charge by calling Nationwide Advisory
Services, Inc. ("NAS") at 1-800-848-0920 or by writing NAS at Three Nationwide
Plaza, P.O. Box 1492, Columbus, Ohio 43216-1492.
Nationwide Investing Foundation III ("NIF III" or the "Trust") is an open-end
management investment company. NIF III was created under the laws of Ohio as an
Ohio business trust as of October 30, 1997. The Trust currently offers shares in
fifteen separate mutual funds, each with its own investment objectives
(collectively, the "Nationwide Family of Funds"). This Prospectus relates only
to the following five funds, which comprise the Prestige Advisor Series
(collectively, the "Funds"):
Prestige Large Cap Value Fund
Prestige Large Cap Growth Fund
Prestige Balanced Fund
Prestige Small Cap Fund
Prestige International Fund
Separate prospectuses are available for the other mutual funds in the Nationwide
Family of Funds. To obtain a prospectus for one of these other mutual funds,
please call or write NAS at the telephone number and address set forth above.
NAS, as the Funds' investment adviser, may from time to time use one or more
sub-advisers to manage a Fund's portfolio as part of a multi-manager structure.
See "MANAGEMENT OF THE TRUST." This Prospectus offers three classes of shares
for each of the Funds: Class A, Class B and Class Y. For more detailed
information and specific limitations on purchasing shares, see "HOW TO PURCHASE
SHARES."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
Three Nationwide Plaza -
P.O. Box 1492
Columbus, Ohio 43216-1492
____________, 1998
Call toll-free 1-800-848-0920
for information, assistance,
and wire orders, 8 AM-5 PM
Call toll-free 1-800-637-0012
for 24-hour account access
FAX: (614) 249-8705
1
<PAGE> 5
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO THE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH
STATE.
2
<PAGE> 6
CONTENTS
<TABLE>
<S> <C>
A Brief Overview of the Funds....................................................................................5
Summary of Fund Expenses.........................................................................................6
Which Fund is Right for You?....................................................................................11
Objectives and Management.......................................................................................12
Investment Techniques, Considerations and Risk Factors..........................................................17
How to Purchase Shares..........................................................................................29
How to Sell (Redeem) Shares.....................................................................................33
Valuation of Shares.............................................................................................35
Investor Strategies.............................................................................................36
Investor Privileges.............................................................................................37
Investor Services...............................................................................................39
Management of the Trust.........................................................................................40
Distributions and Taxes.........................................................................................44
Fund Performance................................................................................................45
Additional Information .........................................................................................49
</TABLE>
3
<PAGE> 7
PRESTIGE ADVISOR SERIES
PRESTIGE LARGE CAP VALUE FUND
Total return--
Generally larger companies
PRESTIGE LARGE CAP GROWTH FUND
Long-term capital appreciation--
Generally larger companies
PRESTIGE BALANCED FUND
Total return--
Equity and fixed income securities
PRESTIGE SMALL CAP FUND
Long-term capital appreciation--
Generally smaller companies
PRESTIGE INTERNATIONAL FUND
Long-term capital appreciation--
Generally foreign companies
4
<PAGE> 8
A BRIEF OVERVIEW OF THE FUNDS
WHAT ARE THE INVESTMENT OBJECTIVES OF THE FUNDS?
The Prestige Large Cap Value Fund (the "Large Cap Value Fund") seeks to maximize
total return, consisting of both capital appreciation and current income. The
Prestige Large Cap Growth Fund (the "Large Cap Growth Fund"), the Prestige Small
Cap Fund (the "Small Cap Fund") and the Prestige International Fund (the
"International Fund") each seek long-term capital appreciation. The Prestige
Balanced Fund (the "Balanced Fund") seeks a high total return from a diversified
portfolio of equity and fixed income securities.
HOW WILL THE FUNDS ATTEMPT TO ACHIEVE THEIR INVESTMENT OBJECTIVES?
The Large Cap Value Fund and Large Cap Growth Fund will invest primarily in
equity securities of U.S. companies with large market capitalizations. The Small
Cap Fund will invest primarily in equity securities of U.S. companies with small
market capitalizations. The International Fund will invest primarily in equity
securities of foreign companies, and the Balanced Fund will invest in both
equity and fixed income securities.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUNDS?
Each of the Funds involves the risk that the value of a Fund's shares will
fluctuate in response to changes in economic conditions, interest rates and
market perception. Because each of the Funds invests in equity securities, each
Fund is subject to general stock market risk, i.e., the possibility that stock
prices will decline over short or even extended periods of time. In addition, to
the extent that a Fund invests in fixed income or foreign securities or engages
in certain other investment techniques, the Fund will be subject to additional
risks as more fully described below.
WHAT CLASSES OF SHARES ARE AVAILABLE?
The Funds currently offer three classes of shares: Class A, Class B, and Class
Y. Class A shares are subject to a front-end sales charge and a 0.25% 12b-1 fee.
Class B shares are subject to a contingent deferred sales charge ("CDSC") on
redemption and a 1.00% 12b-1 fee. Class Y shares are not subject to a front-end
sales charge or 12b-1 fee but are subject to a 0.25% administrative services
fee. For further information on 12b-1 fees, see "MANAGEMENT OF THE
TRUST--Distribution Plan" below. Class Y shares are only available to certain
types of investors. For further information on the types of investors that are
eligible to purchase Class Y shares, see "HOW TO PURCHASE SHARES" below.
HOW DO I PURCHASE AND REDEEM SHARES?
You can purchase or redeem shares on any day that the Funds are open for
business through a designated registered sales representative or directly with
the Funds. For further information, see "HOW TO PURCHASE SHARES" and "HOW TO
SELL (REDEEM) SHARES" below.
WHEN ARE DIVIDENDS AND CAPITAL GAINS PAID?
The Funds distribute dividends to their shareholders each quarter and pay
capital gains, if any, at least once a year.
5
<PAGE> 9
WHO IS THE FUNDS' INVESTMENT ADVISER?
NAS, a wholly-owned subsidiary of Nationwide Life Insurance Company, is the
investment adviser, administrator and distributor of the Funds. In its capacity
as investment adviser for each Fund, NAS selects and monitors the performance of
one or more subadvisers, who manage the investment portfolio of a particular
Fund on a daily basis.
PRESTIGE ADVISOR SERIES
SUMMARY OF FUND EXPENSES
This summary helps you understand the various costs and expenses you will bear,
directly or indirectly, when investing in the Funds. Shareholder transaction
expenses are paid directly by shareholders when they purchase or redeem shares.
Annual fund operating expenses are paid by the Funds (and thus are paid
indirectly by shareholders) for such things as investment advisory services and
shareholder services such as furnishing shareholder statements, maintaining
shareholder records, and providing semi-annual financial reports.
The information set forth in the Fee Tables and examples relates to Class A,
Class B and Class Y shares. Each class of shares is generally subject to the
same expenses except as follows: Class A and Class B shares are subject to
different 12b-1 fees but are not subject to an administrative services fee;
Class Y shares are subject to a 0.25% administrative services fee but not a
12b-1 fee.
SHAREHOLDER TRANSACTION EXPENSES FOR CLASS A SHARES
<TABLE>
<CAPTION>
LARGE CAP LARGE CAP
VALUE GROWTH BALANCED SMALL CAP INTERNATIONAL
<S> <C> <C> <C> <C> <C>
Maximum Sales Charge Imposed 5.50% 5.50% 5.50% 5.50% 5.50%
on Purchases* (as a % of
offering price)
Redemption Fee** (as a % of
amount redeemed, if None None None None None
applicable)
</TABLE>
* Lower sales charges are available as the amount of the investment increases.
To receive even greater sales charge discounts, investors may also include the
value of Class A shares held in certain other accounts (including household
family members' accounts). For further information, see "HOW TO PURCHASE
SHARES--Sales Charge Schedule and Available Discounts for Class A and Y Shares"
below.
** A $5 fee will be deducted from the proceeds of any redemptions wired to your
bank. A separate fee will also be charged if you use Western Union's Quick Cash
service; this fee is $9.50 per $10,000 redeemed. For further information, see
"HOW TO SELL (REDEEM) SHARES" below.
6
<PAGE> 10
ESTIMATED ANNUAL FUND OPERATING EXPENSES***
(as a percentage of average net assets)
<TABLE>
<CAPTION>
LARGE CAP LARGE CAP
VALUE GROWTH BALANCED SMALL CAP INTERNATIONAL
<S> <C> <C> <C> <C> <C>
Management Fees 0.75% 0.80% 0.75% 0.95% 0.85%
12b-1 Fees(1) 0.25% 0.25% 0.25% 0.25% 0.25%
Other Expenses (2) 0.15% 0.15% 0.10% 0.15% 0.20%
Estimated Total Fund
Operating Expenses(3) 1.15% 1.20% 1.10% 1.35% 1.30%
===== ===== ===== ===== =====
</TABLE>
(1) As a result of the accrual of 12b-1 fees on Class A shares, long-term
shareholders may pay more than the economic equivalent of the maximum
initial sales charges permitted by the National Association of Securities
Dealers, Inc.
(2) Because the Funds are new and do not yet have significant operating
histories, "Other Expenses" are based upon estimates for the current
fiscal year.
(3) NAS has voluntarily agreed to waive or limit its advisory fees or to
reimburse a Fund for other expenses (except 12b-1 fees or administrative
service fees) in an amount that operates to limit annual operating
expenses to the "Estimated Total Operating Expenses" shown above. Each
waiver of advisory fees or assumption of other expenses by NAS for a Fund
is subject to a possible reimbursement by that Fund within five years of
the Fund's commencement of operations if such reimbursement can be
achieved within the foregoing annual expense limits. NAS's waiver of fees
and its reimbursement agreement are expected to be in effect until
November 1, 1999. NAS may terminate its waiver of advisory fees and
reimbursement of other expenses at any time, in its sole discretion,
without notice to shareholders. In the absence of such fee waivers and
reimbursements, it is estimated that "Estimated Total Operating Expenses"
for Class A shares would be 1.60% for the Large Cap Value Fund, 1.65% for
the Large Cap Growth Fund, 1.60% for the Balanced Fund, 1.80% for the
Small Cap Fund and 1.72% for the International Fund.
*** For a more detailed explanation of these expenses, see "MANAGEMENT OF THE
TRUST" below.
Example: The following example illustrates the expenses you would pay on a
$1,000 investment over the indicated time periods assuming: (1) a 5% annual
return, (2) redemption at the end of each time period, and (3) payment of the
maximum applicable sales charge.
<TABLE>
<CAPTION>
LARGE CAP LARGE CAP
VALUE GROWTH BALANCED SMALL CAP INTERNATIONAL
<S> <C> <C> <C> <C> <C>
1 Year $66 $67 $66 $68 $68
3 Years $90 $91 $88 $95 $94
</TABLE>
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
7
<PAGE> 11
SHAREHOLDER TRANSACTION EXPENSES FOR CLASS B SHARES
<TABLE>
<CAPTION>
LARGE CAP LARGE CAP
VALUE GROWTH BALANCED SMALL CAP INTERNATIONAL
<S> <C> <C> <C> <C> <C>
Maximum Contingent Deferred 5.0% 5.0% 5.0% 5.0% 5.0%
Sales Charge on Redemptions
(as a % of original purchase
price or redemption
proceeds, as applicable)*
Redemption Fee** (as a % of
amount redeemed, if None None None None None
applicable)
</TABLE>
* A CDSC ranging from 5.00% to 1.00% is charged whenever Class B shares are
redeemed within the first six years of purchase. For further information, see
"HOW TO PURCHASE SHARES--Class B shares of the Funds and CDSC" below. A CDSC
will also be charged if Class B shares are exchanged for shares of the
Nationwide Money Market Fund and the shares of the Nationwide Money Market Fund
are subsequently redeemed. In addition, the CDSC aging schedule will stop
running whenever Class B shares are held in the Nationwide Money Market Fund.
For further information, see "INVESTOR PRIVILEGES--Exchanges Among Funds" below.
** A $5 fee will be deducted from the proceeds of any redemptions wired to your
bank. A separate fee will also be charged if you use Western Union's Quick Cash
service; this fee is $9.50 per $10,000 redeemed. For further information, see
"HOW TO SELL (REDEEM) SHARES" below.
ESTIMATED ANNUAL FUND OPERATING EXPENSES***
(as a percentage of average net assets)
<TABLE>
<CAPTION>
LARGE CAP LARGE CAP
VALUE GROWTH BALANCED SMALL CAP INTERNATIONAL
<S> <C> <C> <C> <C> <C>
Management Fees 0.75% 0.80% 0.75% 0.95% 0.85%
12b-1 Fees(1) 1.00% 1.00% 1.00% 1.00% 1.00%
Other Expenses (2) 0.15% 0.15% 0.10% 0.15% 0.20%
Estimated Total Fund
Operating Expenses(3) 1.90% 1.95% 1.85% 2.10% 2.05%
===== ===== ===== ===== =====
</TABLE>
(1) As a result of the accrual of 12b-1 fees on Class B shares, long-term
shareholders may pay more than the economic equivalent of the maximum
initial sales charges permitted by the National Association of Securities
Dealers, Inc.
(2) Because the Funds are new and do not yet have significant operating
histories, "Other Expenses" are based upon estimates for the current
fiscal year.
(3) NAS has voluntarily agreed to waive or limit its advisory fees or to
reimburse a Fund for other expenses (except 12b-1 fees or administrative
service fees) in an amount that operates to limit annual operating
expenses to the "Estimated Total Operating Expenses" shown above. Each
waiver of advisory fees or assumption of other expenses by NAS for a Fund
is subject to a possible reimbursement by that Fund within five years of
the Fund's commencement of operations if such reimbursement can be
achieved within the foregoing annual expense limits. NAS's waiver of fees
8
<PAGE> 12
and its reimbursement agreement are expected to be in effect until
November 1, 1999. NAS may terminate its waiver of advisory fees and
reimbursement of other expenses at any time, in its sole discretion,
without notice to shareholders. In the absence of such fee waivers and
reimbursements, it is estimated that "Estimated Total Operating Expenses"
for Class B shares would be 2.35% for the Large Cap Value Fund, 2.40% for
the Large Cap Growth Fund, 2.35% for the Balanced Fund, 2.55% for the
Small Cap Fund and 2.47% for the International Fund.
*** For a more detailed explanation of these expenses, see "MANAGEMENT OF THE
TRUST" below.
Example: The following example illustrates the expenses you would pay on a
$1,000 investment over the indicated time periods assuming: (1) a 5% annual
return, (2) redemption at the end of each time period, and (3) payment of the
applicable CDSC on redemption.
<TABLE>
<CAPTION>
LARGE CAP LARGE CAP
VALUE GROWTH BALANCED SMALL CAP INTERNATIONAL
<S> <C> <C> <C> <C> <C>
1 Year $69 $70 $69 $71 $71
3 Years $90 $91 $88 $96 $94
</TABLE>
You would pay the following expenses on the same investment assuming no
redemption at the end of each time period.
<TABLE>
<CAPTION>
LARGE CAP LARGE CAP
VALUE GROWTH BALANCED SMALL CAP INTERNATIONAL
<S> <C> <C> <C> <C> <C>
1 Year $19 $20 $19 $21 $21
3 Years $60 $61 $58 $66 $64
</TABLE>
THESE EXAMPLES SHOULD NOT BE CONSIDERED REPRESENTATIONS OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
SHAREHOLDER TRANSACTION EXPENSES FOR CLASS Y SHARES
Class Y shares are purchased without a front-end sales charge or CDSC and are
available for purchase only by institutional accounts purchasing on behalf of
beneficial investors through an omnibus Fund account as well as other open-end
investment companies (each, a "Fund of Funds") advised by NAS.
<TABLE>
<CAPTION>
LARGE CAP LARGE CAP
VALUE GROWTH BALANCED SMALL CAP INTERNATIONAL
<S> <C> <C> <C> <C> <C>
Maximum Sales Charge Imposed None None None None None
on Purchases (as a % of
offering price)
Redemption Fee* (as a % of None None None None None
amount redeemed, if
applicable)
</TABLE>
* A $5 fee will be deducted from the proceeds of any redemptions wired to your
bank. A separate fee will also be charged if you use Western Union's Quick
Cash service; this fee is $9.50 per $10,000 redeemed. For further information,
see "HOW TO SELL (REDEEM) SHARES" below.
9
<PAGE> 13
ESTIMATED ANNUAL FUND OPERATING EXPENSES***
(as a percentage of average net assets)
<TABLE>
<CAPTION>
LARGE CAP LARGE CAP
VALUE GROWTH BALANCED SMALL CAP INTERNATIONAL
<S> <C> <C> <C> <C> <C>
Management Fees 0.75% 0.80% 0.75% 0.95% 0.85%
12b-1 Fees None None None None None
Other Expenses (1) 0.40% 0.40% 0.35% 0.40% 0.45%
Estimated Total Fund
Operating Expenses(2) 1.15% 1.20% 1.10% 1.35% 1.30%
===== ===== ===== ===== =====
</TABLE>
(1) Because the Funds are new and do not yet have significant operating
histories, "Other Expenses" are based upon estimates for the current
fiscal year. "Other Expenses" include any administrative services fee paid
by the Funds.
(2) NAS has voluntarily agreed to waive or limit its advisory fees or to
reimburse a Fund for other expenses (except administrative service fees)
in an amount that operates to limit annual operating expenses to the
"Estimated Total Operating Expenses" shown above. Each waiver of advisory
fees or assumption of other expenses by NAS for a Fund is subject to a
possible reimbursement by that Fund within five years of the Fund's
commencement of operations if such reimbursement can be achieved within
the foregoing annual expense limits. NAS's waiver of fees and its
reimbursement agreement are expected to be in effect until November 1,
1999. NAS may terminate its waiver of advisory fees and reimbursement of
other expenses at any time, in its sole discretion, without notice to
shareholders. In the absence of such fee waivers and reimbursements, it is
estimated that "Estimated Total Operating Expenses" for Class Y shares
would be 1.43% for the Large Cap Value Fund, 1.48% for the Large Cap
Growth Fund, 1.43% for the Balanced Fund, 1.63% for the Small Cap Fund and
1.55% for the International Fund.
*** For a more detailed explanation of these expenses, see "MANAGEMENT OF THE
TRUST" below.
Example: The following example illustrates the expenses you would pay on a
$1,000 investment over the indicated time periods assuming: (1) a 5% annual
return, (2) redemption at the end of each time period, and (3) payment of the
maximum applicable sales charge.
<TABLE>
<CAPTION>
LARGE CAP LARGE CAP
VALUE GROWTH BALANCED SMALL CAP INTERNATIONAL
<S> <C> <C> <C> <C> <C>
1 Year $12 $12 $11 $14 $13
3 Years $37 $38 $35 $43 $41
</TABLE>
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
10
<PAGE> 14
WHICH FUND IS RIGHT FOR YOU?
Each Fund is a separate investment fund of the Trust, which was organized as of
October 30, 1997 as an Ohio business trust. The Trust is registered and operates
as an open-end management investment company.
AVAILABLE SHARE CLASS OPTIONS. Class A shares are available for purchase with a
front-end sales charge and a 0.25% 12b-1 fee. Class B shares are available for
purchase with a CDSC and a 1.00% 12b-1 fee. Class Y shares are purchased without
a front-end sales charge, CDSC or 12b-1 fee but are only available to certain
classes of investors as described more fully under "HOW TO PURCHASE SHARES."
SELECTING A FUND. Long-term and short-term goals require different financial
planning. Whether you're seeking greater growth opportunity, looking for more
income, or a combination of both, Nationwide's Family of Funds, strategies, and
services may help. However, although the Funds are constantly supervised and
their portfolio investments are carefully selected, there can be no guarantee
that any Fund will achieve its investment objective.
CONSIDER YOUR TIME FRAME. If you have long-term goals, you have the luxury of
time on your side. If your goals are five or more years away--where growth of
your investments is the highest priority--you may want to consider investing in
one or more of the Funds. The Funds provide greater long-term return potential
because they invest in equity securities such as common stocks, which have a
higher degree of risk. Keep in mind, however, that the risks and potential
return are different for each of the Funds. For example, a Fund that invests in
small capitalization stocks typically presents a higher risk of price volatility
than a Fund that invests in stocks of larger, more established companies. A Fund
that invests internationally presents its own special risks, such as the
potential for political and economic instability and currency fluctuations. You
may want to consider diversifying your investment portfolio by investing in more
than one Fund and in more than one type of Fund. Doing so may help cushion the
impact that a fluctuation in the value of any particular security or type of
security held by a Fund might have on your overall investment portfolio because,
with your assets spread across a variety of securities and types of securities,
your investment portfolio is less dependent on the success of any one particular
security or one investment style. Before making an investment in any Fund,
however, you should carefully review the information in this Prospectus
concerning each of the Funds.
If you are seeking greater income today or have intermediate to long-term goals,
you may want to consider investing in the Balanced Fund, which invests in a
combination of stocks and bonds, or in one or more of the bond funds that are
part of the Nationwide Family of Funds (the "Bond Funds"). If you have
short-term goals (for example, saving for next year's needs) or would like to
establish a reserve for emergencies, or if you simply want to place your money
temporarily in an account, you may want to consider investing in the Nationwide
Money Market Fund. This Prospectus, however, relates only to the Funds. As a
result, before you consider whether to make an investment in a Bond Fund or in
the Nationwide Money Market Fund, please call or write for the prospectus that
relates to these funds.
ASSESS YOUR TOLERANCE FOR RISK. Where you choose to invest depends as much on
your tolerance for risk as on your desire for reward. Opportunity and risk go
hand-in-hand. Generally, the greater the potential long-term opportunity, the
greater the potential risk.
The most common risk people associate with investing is short-term market risk,
i.e., the risk that the value of an investment will fluctuate from day-to-day.
Although short-term market risk cannot be eliminated, the Funds' portfolio
managers seek to minimize this risk by investing in what they believe are
quality securities.
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If you are looking for greater potential for growth, you should be willing to
accept greater fluctuation in the value of your account. A wide range of
factors, such as corporate earnings potential, interest rates, competition, and
other economic conditions, can cause the price of a security to move up or down.
However, in the past, investors with a long-term time horizon and a tolerance
for fluctuation have typically been rewarded. In other words, despite years when
short-term returns have not been satisfactory, over most long-term holding
periods, money invested in common stocks has grown more than money invested in
fixed income securities.
You should also consider the potential consequence of being too conservative or
procrastinating. If you are too conservative, you may not earn enough of a
return on your investments to achieve your financial goals. In addition, if you
delay too long before investing your money, you may not have enough time to
achieve your financial goals.
Inflation is another risk to consider. Inflation erodes the value of money. As a
result, the amount of money needed to satisfy your financial goals--after taking
inflation into consideration--may require you to invest in a Fund that has the
potential for greater returns. And although common stocks may generally be
volatile, historically they have provided higher returns than bonds or money
market instruments and their returns have exceeded inflation over long periods.
For more information concerning the risk factors of the Funds, see "INVESTMENT
TECHNIQUES, CONSIDERATIONS AND RISK FACTORS."
OBJECTIVES AND MANAGEMENT
The investment objectives of each Fund are fundamental and may not be changed
without shareholder approval. However, certain of the investment policies of the
Funds and the types of investments made by the Funds, as described below, may be
changed without prior shareholder approval. There is no guarantee that any Fund
will achieve its investment objectives.
NAS provides investment management evaluation services to the Funds by initially
selecting and monitoring on an ongoing basis the performance of subadvisers who
manage the Funds' portfolios. NAS has selected one or more subadvisers (each, a
"Subadviser") for each of the Funds. Each Subadviser manages the investment
portfolio of a particular Fund in accordance with the Fund's investment
objectives and policies. The investment objectives and policies of the Funds and
the investment strategies of the Subadvisers are described below and in the
Funds' Statement of Additional Information. For further information on the
Subadvisers, see "MANAGEMENT OF THE TRUST--Investment Management of the Funds"
below.
LARGE CAP VALUE FUND
INVESTMENT OBJECTIVE & POLICY: The investment objective of the Large Cap Value
Fund is to maximize total return, consisting of both capital appreciation and
current income. The Large Cap Value Fund seeks to achieve its investment
objective by investing in U.S. equity securities that are currently undervalued
as determined by its Subadviser.
SUBADVISER: Brinson Partners, Inc. ("Brinson Partners"), 209 South LaSalle
Street, Chicago, Illinois 60604-1295.
PORTFOLIO MANAGEMENT: Under normal market conditions, substantially all, but in
no event less than 65%, of the Large Cap Value Fund's total assets will be
invested in equity securities of large capitalization U.S. companies, including
foreign companies whose securities are traded in the United States and who
comply with U.S. accounting standards. A large capitalization company is a
company with a market capitalization and industry characteristics that are
similar to companies in the Russell 1000
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Value Index. The Russell 1000 Value Index, published by The Frank Russell
Company, contains companies from the Russell 1000 Index (which is comprised of
the 1000 largest U.S. companies, based upon total market capitalization) whose
stocks have greater than average value orientation. The Large Cap Value Fund
seeks to achieve its investment objective by investing in a wide range of equity
securities of companies that are traded on major U.S. stock exchanges as well as
in the over-the-counter market.
The Large Cap Value Fund's investments are selected by identifying discrepancies
between the market price and the fundamental value of securities based upon the
Subadviser's single focus that investment fundamentals determine and describe
future cash flows, which define fundamental investment value. The Large Cap
Value Fund may also invest in foreign securities, either directly or through
depository receipts, that are not traded in the United States and that do not
comply with U.S. accounting standards, but the Large Cap Value Fund will not
invest more than 5% of its total assets in such securities under normal market
conditions. See "INVESTMENT TECHNIQUES, CONSIDERATIONS AND RISK FACTORS" and the
Statement of Additional Information.
LARGE CAP GROWTH FUND
INVESTMENT OBJECTIVE & POLICY: The investment objective of the Large Cap Growth
Fund is long-term capital appreciation. The Large Cap Growth Fund seeks to
achieve its investment objective from a broadly diversified portfolio of equity
securities of large capitalization U.S. companies that are expected to have
better prospects for earnings growth than the growth rate of the general
domestic economy. Dividend income is a secondary consideration.
SUBADVISER: Goldman Sachs Asset Management ("GSAM"), One New York Plaza, New
York, New York 10004.
PORTFOLIO MANAGEMENT: The Large Cap Growth Fund usually is fully invested with
90% of its total assets invested in equity securities of large capitalization
U.S. companies, including foreign companies whose securities are traded in the
United States (including American Depository Receipts and Global Depository
Receipts). However, under normal market conditions, the Large Cap Growth Fund
will invest at least 65% of its total assets in such securities. A large
capitalization company is a company with a market capitalization and industry
characteristics that are similar to companies in the Russell 1000 Growth Index.
The Russell 1000 Growth Index, published by The Frank Russell Company, contains
companies from the Russell 1000 Index whose stocks have greater than average
growth orientation. GSAM emphasizes the growth prospects of a company in
analyzing equity securities to be purchased by the Large Cap Growth Fund. The
Large Cap Growth Fund's investments are selected using a variety of quantitative
techniques and fundamental research in seeking to maximize the expected return
of the Large Cap Growth Fund, while maintaining risk, style, capitalization and
industry characteristics that are similar to the Russell 1000 Growth Index. The
Large Cap Growth Fund seeks a portfolio comprised of companies with above
average market capitalizations and earnings growth expectations and below
average dividend yields. The Large Cap Growth Fund may also invest in foreign
securities that are not traded in the United States or that are issued by
companies that do not comply with U.S. accounting standards, but the Large Cap
Growth Fund will not invest more than 15% of its total assets in such securities
under normal market conditions.
The Large Cap Growth Fund is managed in accordance with a Computer-Optimized,
Research-Enhanced ("CORE") investment process, using both quantitative and
fundamental techniques. GSAM begins with a broad universe of equity securities
and uses a proprietary multifactor model (the "Multifactor Model"), described
more fully below, to forecast the returns of different markets and individual
securities. If an equity security is followed by the Goldman Sachs Global
Investment Research Department (the "Research Department"), a rating may be
assigned to a security based upon the Research Department's evaluation of the
security or, in the discretion of GSAM, a rating may be assigned based upon
research ratings obtained from other industry sources. In assigning ratings to
equity securities, the Research
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Department uses a four category rating system ranging from "recommended for
purchase" to "likely to underperform." The ratings reflect the analyst's
judgment as to the investment results of a specific security and incorporate
economic outlook, valuation, risk and a variety of other factors. By employing
both a quantitative (i.e., the Multifactor Model) and a qualitative (i.e.,
research enhanced) method of selecting securities, GSAM seeks to capitalize on
the strengths of each discipline.
In building a diversified portfolio for the Large Cap Growth Fund, GSAM utilizes
optimization techniques to seek to maximize the Large Cap Growth Fund's expected
return, while maintaining a risk profile similar to its benchmark. The Large Cap
Growth Fund's portfolio is primarily comprised of securities rated highest by
the foregoing investment process and has risk characteristics and industry
weightings similar to the Russell 1000 Growth Index, the Large Cap Growth Fund's
benchmark.
The Multifactor Model is a rigorous computerized rating system for forecasting
the returns of different equity markets and individual equity securities
according to fundamental investment characteristics. The Multifactor Model is
used to forecast the returns of securities held in the Large Cap Growth Fund's
portfolio and incorporates common variables covering measures of value, growth,
momentum and risk (e.g., book-price ratio, earnings-price ratio, price momentum,
price volatility, consensus growth forecasts, earnings estimate revisions and
earnings stability). All of the factors used in the Multifactor Model have been
shown to significantly impact the performance of the securities and markets they
were designed to forecast.
The weightings assigned to the factors in the Multifactor Model are derived from
a statistical formulation that considers each factor's historical performance in
different market environments. Consequently, the Multifactor Model is designed
to evaluate each security using only the factors that are statistically related
to returns in the anticipated market environment. Because the Multifactor Model
includes many disparate factors, GSAM believes that it is broader in scope and
provides a more thorough evaluation than most conventional quantitative models.
Securities and markets ranked highest by the Multifactor Model do not have one
dominant investment characteristic; rather, they possess an attractive
combination of investment characteristics.
BALANCED FUND
INVESTMENT OBJECTIVE & POLICY: The investment objective of the Balanced Fund is
to provide a high total return from a diversified portfolio of equity and fixed
income securities. The Balanced Fund seeks to provide a total return that
approaches the total return of the universe of equity securities of large and
medium sized companies and that exceeds the return typical of a portfolio of
fixed income securities.
SUBADVISER: J.P. Morgan Investment Management Inc. ("J.P. Morgan"), 522 Fifth
Avenue, New York, New York 10036.
PORTFOLIO MANAGEMENT: Under normal market conditions, the Balanced Fund will
invest approximately 60% of its assets in equity securities and 40% in fixed
income securities. The equity portion of the Balanced Fund's portfolio will
consist primarily of large and medium sized companies included in the Standard &
Poor's 500 Composite Stock Price Index (the "S&P 500 Index"). The S&P 500 Index,
an indicator of broad stock price movements, is a market-weighted, unmanaged
index of 500 common stocks in a variety of industry sectors. The fixed income
portion of the Balanced Fund's portfolio will consist of a range of fixed income
sectors and securities, including government, corporate, asset-backed and
mortgage-backed securities. The Balanced Fund will invest in fixed income
securities of U.S. and foreign issuers, including issuers in emerging markets.
Once the Balanced Fund attains approximately $100 million in assets, its
allocation between equity and fixed income securities may be adjusted
periodically according to J.P. Morgan's judgment about the relative
attractiveness of these two
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asset classes. However, under normal market conditions, the Balanced Fund
intends to maintain at least 25% of the value of its assets in fixed income
securities.
J.P. Morgan selects the Balanced Fund's securities within the foregoing asset
allocation framework. The industrial sector weightings of the equity portion of
the Balanced Fund's portfolio will approximate the industrial sector weightings
in the S&P 500 Index. In selecting individual stocks, J.P. Morgan will rank
stocks according to their relative value using a proprietary model that
incorporates research from J.P. Morgan's research analysts. Within each industry
the Balanced Fund will generally give modestly more weight than the S&P 500
Index to stocks that are ranked as undervalued or fairly valued and will give
modestly less weight than the S&P 500 Index to--or will not invest in--stocks
that appear overvalued. The Balanced Fund may invest in foreign stocks included
in the S&P 500 Index and, in addition, may invest up to 5% of its equity assets
in foreign stocks not included in the S&P 500 Index.
J.P Morgan uses fundamental, economic and capital markets research to select
securities for the fixed income portion of the Balanced Fund's portfolio. J.P
Morgan actively manages the mix of U.S. and foreign securities held in the fixed
income portfolio while typically keeping the duration of the fixed income
portfolio within one year of the average for the U.S. investment grade bond
universe (currently about five years). The fixed income securities in which the
Balanced Fund may invest include debt obligations of U.S. and foreign
corporations and governments, asset-backed securities, mortgage-backed
securities and debt obligations of supranational organizations.
At least 75% of the Balanced Fund's fixed income portfolio will consist of
securities rated investment grade (e.g., Baa or better by Moody's Investors
Service, Inc. ("Moody's") or BBB or better by Standard & Poors Corporation
("S&P")) at the time of purchase. At least 65% of the Balanced Fund's fixed
income portfolio will consist of securities rated within the top four rating
categories of a nationally recognized statistical rating organization ("NRSRO")
(e.g., A or better by Moody's or S&P) at the time of purchase. No more than 25%
of the Balanced Fund's fixed income portfolio will consist of securities rated
below investment grade (e.g., Ba or B by Moody's or BBB or B by S&P) at the time
of purchase. These securities are commonly known as "junk bonds." The Balanced
Fund will not purchase securities rated lower than B. The Balanced Fund may
invest in fixed income securities that are unrated if, in the opinion of J.P.
Morgan, the unrated securities are equivalent in terms of quality to the rated
securities in which the Balanced Fund may invest. Ratings standards must be
satisfied at the time a security is purchased. If the quality of a security
later declines, the Balanced Fund will not be required to sell the security but
rather may continue to hold it.
SMALL CAP FUND
INVESTMENT OBJECTIVE & POLICY: The investment objective of the Small Cap Fund is
long-term capital appreciation. The Small Cap Fund seeks to achieve its
investment objective from a broadly diversified portfolio of equity securities
issued by U.S. companies that have small market capitalizations.
SUBADVISERS: Institutional Trust Company ("Institutional Trust"), 7800 East
Union Avenue, Suite 300, Denver, Colorado 80237, and INVESCO Management &
Research, Inc. ("IMR"), 101 Federal Street, Boston, Massachusetts 02110
(collectively, "INVESCO").
PORTFOLIO MANAGEMENT: Under normal market conditions, the Small Cap Fund will
invest at least 65% of its total assets in equity securities of companies whose
equity market capitalizations at the time of investment do not exceed 110% of
the largest company in the Russell 2000 Small Stock Index (the "Russell 2000").
The Russell 2000, published by The Frank Russell Company, is an index consisting
of approximately 2000 companies with small market capitalizations relative to
the market capitalizations of other U.S. companies. The balance of the Small Cap
Fund's assets may be invested in equity securities of companies whose market
capitalizations exceed that of small companies, in U.S. Government securities
and in nonconvertible long-term debt securities, including mortgage-backed and
asset-backed
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securities. The Small Cap Fund may also invest directly in foreign securities
but will not invest more than 25% of its total assets in such securities under
normal market conditions (direct investments in foreign securities do not
include investments in depository receipts such as American Depository Receipts,
European Depository Receipts, and Global Depository Receipts).
INVESCO will use a bottom-up process, employing a multi-factor model, to select
securities for the Small Cap Fund. INVESCO considers a number of factors in
selecting stocks, including measures of value, momentum and quality. Each month
INVESCO calculates an expected return for each stock based upon the stock's
current exposure to these factors. INVESCO also calculates each stock's expected
trading cost, based upon estimates of market impact, bid-ask spread, and
commission. The estimated excess return and trading cost are combined with a
risk model that measures each stock's contribution to total portfolio risk.
INVESCO will seek to design a portfolio for the Small Cap Fund that maximizes
expected return after taking trading costs into consideration. At the same time,
INVESCO will seek to control unwanted risks, such as exposure to macroeconomic
factors and business sectors, through diversification of investments.
Once an initial portfolio is generated, INVESCO will use a traditional
fundamental analysis to evaluate information that cannot be captured in its
quantitative analysis. For example, INVESCO will evaluate changes, if any, in a
company's operating environment that might cast doubt upon the company's ability
to continue its current level of profitability. Such changes include, for
example, financial or operating restructuring, management turnover, emergence of
new competition, filing of substantial lawsuits, or adverse regulatory action.
INTERNATIONAL FUND
INVESTMENT OBJECTIVE & POLICY: The investment objective of the International
Fund is capital appreciation. The International Fund seeks to accomplish its
investment objective by investing primarily in equity securities of non-United
States companies that, in the opinion of its Subadviser, are inexpensively
priced relative to the return on total capital or equity.
SUBADVISER: Lazard Asset Management ("Lazard"), a division of Lazard Freres &
Co. LLC, 30 Rockefeller Plaza, New York, New York 10112.
PORTFOLIO MANAGEMENT: The International Fund invests primarily in the equity
securities of non-United States companies (i.e., incorporated or organized
outside the United States). The International Fund is not required to invest
exclusively in common stocks or other equity securities and, if deemed
advisable, may invest up to 20% of the value of its total assets in fixed-income
securities and short-term money market instruments. The International Fund will
not invest in fixed-income securities rated lower than investment grade (as
described above under the "BALANCED FUND"). In addition, the International Fund
may have substantial investments in depository receipts, such as American
Depository Receipts and Global Depositary Receipts, and in convertible bonds and
other convertible securities.
Lazard currently intends to invest the International Fund's assets in companies
based in Continental Europe, the United Kingdom, the Pacific Basin and in such
other areas and countries as Lazard may determine from time to time. Under
normal market conditions, the International Fund will invest at least 80% of the
value of its total assets in the equity securities of companies within not less
than three different countries (not including the United States). The percentage
of the International Fund's assets invested in particular geographic sectors may
shift from time to time in accordance with the judgment of Lazard. The
International Fund may also engage in various investment techniques, such as
foreign currency transactions and lending portfolio securities. For further
information, see "INVESTMENT TECHNIQUES, CONSIDERATIONS AND RISK FACTORS" below.
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ADDITIONAL INFORMATION CONCERNING INVESTMENTS BY THE FUNDS. Each of the Funds
may invest in equity securities, including common stock, preferred stock,
convertible securities and warrants. To the extent described above, each Fund
may invest in foreign securities directly or through depository receipts. In
addition to investing in equity securities, the Funds may invest in futures
contracts, options and other derivatives for hedging and other permissible
purposes and in securities that are not readily marketable or that are
restricted as to disposition. The Funds may also invest in U.S. Government
securities, short-term fixed income securities and money market obligations for
cash management and temporary investment purposes and in shares of other
investment companies. The Funds may also enter into repurchase agreements, lend
portfolio securities, and purchase securities on a when-issued or delayed
delivery basis. In addition, as a temporary defensive position as determined by
the applicable Subadviser or Subadvisers, each Fund may invest up to 100% of its
total assets in cash or money market obligations (as described below under
"INVESTMENT TECHNIQUES, CONSIDERATIONS AND RISK FACTORS--Money Market
Obligations") or any combination of the two. The International Fund may also
invest without limit in the equity securities of U.S. companies as a temporary
defensive position. For further information, see "INVESTMENT TECHNIQUES,
CONSIDERATIONS AND RISK FACTORS" below and "ADDITIONAL INFORMATION ON PORTFOLIO
INSTRUMENTS AND INVESTMENT POLICIES" in the Statement of Additional Information.
MARKET CAPITALIZATION. The Large Cap Value Fund, Large Cap Growth Fund, and
Small Cap Fund seek to achieve their investment objectives in part by investing
in securities of companies with certain market capitalizations. The market
capitalization of a company is the value of the company's stock in the public
market and is determined by multiplying the total number of outstanding shares
of the company's stock by the current market price per share.
BROKERAGE ALLOCATION. The Subadvisers are primarily responsible for buying and
selling securities and making other investments for the Funds. In doing so, the
Subadvisers may effect portfolio transactions through affiliated broker-dealers,
acting as agent and not as principal, in accordance with Rule 17e-1 under the
Investment Company Act of 1940, as amended (the "1940 Act") and other applicable
securities laws. For further information on brokerage allocation, see "BROKERAGE
ALLOCATION" in the Statement of Additional Information.
INVESTMENT TECHNIQUES, CONSIDERATIONS AND RISK FACTORS
An investment in the Funds involves certain risks. As a general matter, an
investment in the Funds involves the risk that the net asset value of a Fund's
shares will fluctuate in response to changes in economic conditions, interest
rates, and the market's perception of the securities held by the Fund. In
addition, because each of the Funds invests in equity securities (including
securities that are convertible into equity securities), an investment in any of
the Funds is subject to stock market risk, which means that an investment in any
of the Funds is subject to the risk that stock prices in general will decline
over short or extended periods of time.
Because the Balanced Fund also invests in bonds, an investment in the Balanced
Fund is subject to bond market risk, which is the risk that the market price of
bonds in general will fluctuate. Bond prices fluctuate largely in response to
changes in the level of interest rates. When interest rates rise, bond prices
generally fall; conversely, when interest rates fall, bond prices generally
rise. Although the fluctuation in the price of bonds is normally less than that
of common stocks, in the past there have been extended periods of cyclical
increases in interest rates, increases that caused the price of bonds in general
to decline significantly. This market activity, which may occur again, extended
the effective maturity of bonds with prepayment features, effectively converting
short or intermediate term bonds (which tend to be less volatile in price) into
longer term bonds (which tend to be more volatile in price). The value of shares
of the Balanced Fund may also be affected by the market's assessment of the
credit risk of the issuer of a bond. As perceived credit risk increases, the
value of a bond generally decreases. Likewise, as perceived credit risk
decreases, the value of a bond generally increases.
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An investment in a Fund is subject to other risks as well, depending upon the
particular investment techniques employed by the Fund, the types of securities
in which the Fund invests, and the diversified or non-diversified status of the
Fund. Certain of these risks are described below.
SECURITIES OF SMALL COMPANIES -- Each of the Funds may, and the Small Company
Fund will primarily, invest in equity securities of companies with small market
capitalizations. Investing in securities issued by small companies may involve
greater risks than investing in securities issued by larger, more established
companies because the securities of small companies may have limited
marketability, which may affect or limit the liquidity of these securities and,
therefore, the ability of an investor to sell these securities at a time and
price deemed advisable. It may also be more difficult for an investor to buy or
sell significant numbers of securities of a small company without adversely
affecting the market price of the security. In addition, securities of small
companies may be more volatile than securities of larger, more established
companies, meaning that the market price of securities of small companies may be
subject to more abrupt or erratic movements over time than the market price of
larger, more established companies or even the market as a whole. In addition,
investors in a small company may never realize the value discount percentage
that appeared to be inherent in the price of the company's stock at the time of
investment. Small companies may also fail as a business. For example, a new
product or innovation may not take hold, an anticipated takeover or turnaround
may not occur, or a trademark may lose its value to other generic products.
Small companies may also have limited product lines or markets, may lack
management depth, and may not have the resources, financial or otherwise, to
take advantage of a valuable product or favorable market position or to
withstand competitive pressure applied by larger, more established rivals. Small
companies also typically experience wider variations in earnings and business
prospects than larger, more established companies, and the amount of information
on small companies is typically less widely available than the information on
larger, more established companies.
FOREIGN SECURITIES - To the extent described above, each of the Funds may invest
in foreign securities, either directly or indirectly through investments in one
or more types of depository receipts. Depository receipts evidence ownership of
underlying foreign securities, are generally issued by banks or trust companies,
and include American Depository Receipts, European Depository Receipts, Global
Depository Receipts and American Depository Shares. For further information on
depository receipts, see "ADDITIONAL INFORMATION ON PORTFOLIO INSTRUMENTS AND
INVESTMENT POLICIES--Depository Receipts" in the Statement of Additional
Information. The Funds may invest in securities of foreign investment funds or
trusts (including passive foreign investment companies) and in securities of
issuers in developing or emerging markets and economies. The Funds may also
purchase and sell foreign currency on a spot basis and may engage in forward
currency contracts, currency options, and futures transactions for hedging or
risk management purposes. See "INVESTMENT TECHNIQUES, CONSIDERATIONS AND RISK
FACTORS--Derivative Instruments" below.
Foreign investments involve special risks, including the possibility of
expropriation, confiscatory taxation, and withholding taxes on dividends and
interest; less extensive regulation of foreign brokers, securities markets, and
issuers; political, economic or social instability; and less publicly available
information and different accounting standards. An investor in foreign
securities may also incur costs in conversions between currencies, possible
delays in settlement in foreign securities markets, limitations on the use or
transfer of assets (including suspension of the ability to transfer currency
from a given country), and difficulty in enforcing obligations in other
countries. In addition, the expected introduction of a single currency, the
euro, on January 1, 1999, for participating nations in the European Economic and
Monetary Union, presents unique uncertainties, including whether the payment and
operational systems of banks and other financial institutions will be ready by
the scheduled launch date; the legal treatment of certain outstanding financial
contracts after January 1, 1999 that refer to existing currencies rather than
the euro; the establishment of exchange rates for existing currencies and the
euro; and the creation of suitable clearing and settlement payment systems for
the new currency. These or other factors, including
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political and economic risks, could cause market disruptions before or after the
introduction of the euro and could adversely affect the value of foreign
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, which may make it difficult for an investor to liquidate foreign
securities rapidly without adversely affecting the price of the securities. The
prices of many foreign securities are also more volatile than comparable U.S.
securities. In addition, certain costs attributable to foreign investing, such
as custody charges and brokerage costs, are higher than those attributable to
domestic investing.
Investing in securities of issuers in developing or emerging markets involves
special risks, including the risk that these markets will experience social,
political, and economic instability. Developing or emerging markets may also
have smaller securities markets and lower trading volume, which may cause
securities of issuers in these markets to be illiquid or to experience greater
price volatility. Developing or emerging markets may also have less highly
developed legal structures governing private or foreign investment or allowing
for judicial redress for injury to private property. Certain national policies
may also restrict an investor's opportunities in these developing or emerging
markets. Such policies may include restrictions on investments in issuers or
industries deemed sensitive to national interests or expropriation or
confiscation of assets or property, any of which could result in the loss of an
entire investment. Brokerage commissions, custodial services, withholding taxes,
and other costs relating to investment in developing or emerging markets
generally are more expensive than in the U.S. and certain more established
foreign markets. And economies in developing or emerging markets generally are
heavily dependent upon international trade and, accordingly, have been and may
continue to be affected adversely by trade barriers, exchange controls, managed
adjustments in relative currency values, and other protectionist measures
negotiated or imposed by the countries with which they trade.
Because most foreign securities are not denominated in U.S. dollars, an investor
in foreign securities is subject to the risk that changes in foreign currency
exchange rates may adversely affect the performance of the investment. The value
of any investment denominated in a foreign currency will increase or decrease in
response to fluctuations in the value of the foreign currency relative to the
U.S. dollar. Currency exchange rates can be volatile at times in response to
supply and demand in the currency exchange markets, international balances of
payments, governmental intervention, speculation, and other political and
economic conditions.
SPECIAL SITUATION COMPANIES - Each of the Funds may invest in securities of
companies in special situations. These securities may be more volatile than
other securities since the market value of these securities may decline in value
if the anticipated benefits of the special situation do not materialize. A
company in a "special situation" includes, but is not limited to, a company
involved in an acquisition, a consolidation, a reorganization, a
recapitalization, a merger, a liquidation, a distribution of cash, securities or
other assets, a tender or exchange offer, a breakup or workout of a holding
company, a change in corporate control, or litigation which, if resolved
favorably, would improve the value of the company's securities. Although
investing in securities of companies in "special situations" offers potential
for above-average returns if the companies are successful, the risk exists that
the benefit of the "special situation" may not materialize, and therefore the
prices of those companies' shares could significantly decline in value.
WARRANTS -- Each of the Funds may invest in warrants. A warrant is an instrument
which gives the holder the right to subscribe to a specified amount of the
issuer's securities at a set price for a specified period of time or on a
specified date. Warrants do not carry the right to dividends or voting rights
with respect to their underlying securities and do not represent any rights in
assets of the issuer. An investment in warrants may be considered speculative.
In addition, the value of a warrant does not necessarily change
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with the value of the underlying securities, and a warrant ceases to have value
if it is not exercised prior to its expiration date.
WHEN-ISSUED OR DELAYED-DELIVERY SECURITIES -- Each of the Funds may invest in
securities purchased on a when-issued or delayed delivery basis. Although the
payment and interest terms of these securities are established at the time the
Fund enters into the commitment, these securities may be delivered and paid for
at a future date, generally within 45 days; for mortgage-backed securities, the
delivery date may extend to as long as 120 days. Purchasing securities on a
when-issued or delayed-delivery basis allows a Fund to lock in a fixed price or
yield on a security it intends to purchase. However, when the Fund purchases a
security on this basis, it immediately assumes the risk of ownership, including
the risk of price fluctuation until the settlement date.
The greater a Fund's outstanding commitments for these securities, the greater
the exposure to potential fluctuations in the net asset value of a Fund.
Purchasing when-issued or delayed-delivery securities may involve the additional
risk that the yield available in the market when the delivery occurs may be
higher or the market price lower than that obtained at the time of commitment.
Although the Fund may be able to sell these securities prior to the delivery
date, it will purchase when-issued or delayed-delivery securities for the
purpose of actually acquiring the securities, unless after entering into the
commitment a sale appears desirable for investment reasons. The Fund will set
aside liquid assets in a segregated account to secure its outstanding
commitments for these types of securities.
CONVERTIBLE SECURITIES - Each of the Funds may invest in convertible securities,
which 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. Although to a lesser extent than
with debt obligations generally, the market value of convertible securities
tends to decline as interest rates increase and, conversely, tends to increase
as interest rates decline. In addition, because of the conversion feature, the
market value of convertible securities tends to vary with fluctuations in the
market value of the underlying common stock and therefore will also react to
variations in the general market for equity securities. A unique feature of
convertible securities is that as the market price of the underlying common
stock declines, convertible securities tend to trade increasingly on a yield
basis and so may not experience market value declines to the same extent as the
underlying common stock. When the market price of the underlying common stock
increases, the prices of the convertible securities tend to rise as a reflection
of the value of the underlying common stock. While no securities investments are
without risk, investments in convertible securities generally entail less risk
than investments in common stock of the same issuer.
As fixed-income securities, convertible securities are investments that provide
for a stable stream of income with generally higher yields than common stocks.
Of course, like all debt obligations, there can be no assurance of current
income because the issuers of the convertible securities may default on their
obligations. Convertible securities, however, generally offer lower interest or
dividend yields than non-convertible securities of similar quality because of
the potential for capital appreciation. A convertible security, in addition to
providing fixed income, offers the potential for capital appreciation through
the conversion feature, which enables the holder to benefit from increases in
the market price of the underlying common stock. There can be no assurance of
capital appreciation, however, because the market value of securities will
fluctuate.
Convertible securities generally are subordinated to other similar but
non-convertible securities of the same issuer, although convertible bonds, as
corporate debt obligations, 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, convertible
securities typically are rated below investment grade or are not rated. The
Funds will limit their investment in convertible securities rated below
investment grade to less than 5% of total net assets.
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CORPORATE FIXED INCOME SECURITIES - Each of the Funds may invest in publicly and
privately issued debt obligations of U.S. and non-U.S. corporations, including
obligations of industrial, utility, banking and other financial issuers. These
securities are subject to the risk of an issuer's inability to meet principal
and interest payments on the obligation and may also be subject to price
volatility due to such factors as market interest rates, market perception of
the creditworthiness of the issuer and general market liquidity.
MONEY MARKET OBLIGATIONS -- Each of the Funds may invest in high-quality,
short-term money market obligations. Such obligations include U.S. Government
Securities (as described below) with remaining maturities of one year or less,
commercial paper rated in one of the two highest ratings categories of any
NRSRO, short-term bank obligations that are rated in one of the two highest
categories by any NRSRO (with respect to obligations maturing in one year or
less), repurchase agreements relating to debt obligations that a Fund can
purchase directly, unrated debt obligations with remaining maturities of one
year or less that are determined by the applicable Subadviser to be of
comparable quality to securities described above, and money market mutual funds.
U.S. Government Securities include U.S. Treasury obligations, such as Treasury
bills, notes, and bonds. Securities issued by U.S. Government agencies or
instrumentalities include, but are not limited to, securities issued by (1) the
Federal Housing Administration, the Farmers Home Administration, and the
Government National Mortgage Association ("GNMA") (including GNMA pass-through
certificates), whose securities are supported by the full faith and credit of
the United States, (2) the Federal Home Loan Banks, (3) the Federal National
Mortgage Association ("FNMA"), (4) the Student Loan Marketing Association, (5)
the Federal Home Loan Mortgage Corporation ("FHLMC"), and (6) the Federal Farm
Credit Banks. 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.
REPURCHASE AGREEMENTS -- Each of the Funds may enter into repurchase agreements
so long as the underlying securities are of the type that the Fund would be
permitted to purchase directly. Under the terms of a typical repurchase
agreement, the Fund would acquire an underlying security for a relatively short
period (usually not more than one week) subject to an obligation of the seller
to repurchase, and the Fund to resell, the obligation at an agreed upon price
and time, thereby determining the yield during the Fund's holding period. The
Funds will enter into repurchase agreements with member banks of the Federal
Reserve System or certain non-bank dealers. Under each repurchase agreement the
selling institution will be required to maintain the value of the securities
subject to the repurchase agreement at not less than their repurchase price
(including interest). Repurchase agreements could involve certain risks in the
event of default or insolvency of the other party, including possible delays or
restrictions upon a Fund's ability to dispose of the underlying securities. The
Subadvisers, acting under the supervision of the Board of Trustees of the Trust
and NAS, review the creditworthiness of those banks and non-bank dealers with
which the Funds may enter into repurchase agreements to evaluate these risks. In
addition, a Fund, together with other registered investment companies having
management agreements with the same Subadviser or its affiliates, may transfer
uninvested cash balances into a single joint account, the daily aggregate
balance of which will be invested in one or more repurchase agreements provided
that the Subadviser has received an order from the SEC permitting the Subadviser
to enter into such transactions. For additional information, see "Repurchase
Agreements" in the Statement of Additional Information.
INVESTMENT COMPANIES -- As permitted by the Investment Company Act of 1940, as
amended (the "1940 Act"), each of the Funds may invest up to 10% of its total
assets, calculated at the time of investment, in the securities of other
investment companies. No more than 5% of a Fund's total assets may be invested
in the securities of any one investment company, nor may any Fund acquire more
than 3% of the voting securities of any other investment company. Each Fund will
indirectly bear its proportionate share of any management fees paid by an
investment company in which it invests in addition to the advisory fee paid by
the Fund.
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DERIVATIVE INSTRUMENTS - Each of the Funds may invest in derivative instruments
for hedging or risk management purposes or for any other permissible purposes
consistent with the Funds' investment objectives. Derivative instruments are
securities or agreements whose value is based on the value of some underlying
asset (e.g., a security or currency) or the level of a reference index. Options,
futures, and options on futures transactions are considered derivative
transactions. 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 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. In addition to options,
futures, and options on futures transactions, derivative transactions may
include short sales against the box, in which the Funds sells a security it owns
for delivery at a future date. Derivative transactions may also include forward
currency contracts and foreign currency exchange-related securities.
Derivative transactions in which each of the Funds may engage include the
writing of covered put and call options on securities and the purchase of put
and call options thereon, the purchase of put and call options on securities
indices and exchange-traded options on currencies and the writing of put and
call options on securities indices. Each of the Funds may also enter into spread
transactions and swap agreements. The Funds may also buy and sell financial
futures contracts, which may include interest-rate futures, futures on currency
exchanges and stock and bond index futures contracts. The Funds may enter into
any futures contracts and related options without limit for "bona fide hedging"
purposes (as defined in Commodity Futures Trading Commission regulations) and
for other permissible purposes, provided that aggregate initial margin and
premiums on positions engaged in for purposes other than "bona fide hedging"
will not exceed 5% of its net asset value, after taking into account unrealized
profits and losses on such contracts. Each of the Funds may also enter into
forward currency contracts to purchase or sell foreign currencies, although the
Large Cap Growth Fund does not intend to engage in currency trades of any type.
Derivative instruments may be exchange-traded or traded in OTC transactions
between private parties. OTC transactions are subject to the credit risk of the
counterparty to the instrument and are less liquid than exchange-traded
derivatives since they often can only be closed out with the other party to the
transaction. When required by guidelines of the Securities and Exchange
Commission, the Funds will set aside permissible liquid assets in a segregated
account to secure their obligations under derivative transactions. Segregated
assets cannot be sold or transferred unless equivalent assets are substituted in
their place or it is no longer necessary to segregate them. As a result, there
is a possibility that segregation of a large percentage of a Fund's assets could
impede portfolio management or a Fund's ability to meet redemption requests or
other current obligations. In order to maintain its required cover for a
derivative transaction, the Funds may need to sell portfolio securities at
disadvantageous prices or times since it may not be possible to liquidate a
derivative position.
The successful use of derivative transactions by a Fund is dependent upon its
Subadviser's ability to correctly anticipate trends in the underlying asset.
Hedging transactions are subject to risks; if a Subadviser incorrectly
anticipates trends in the underlying asset, the Fund may be in a worse position
than if no hedging had occurred. In addition, there may be imperfect correlation
between the Fund's derivative transactions and the instruments being hedged.
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SWAP AGREEMENTS -- To the extent consistent with each Fund's investment
objective and policies, the International Fund may enter into equity, interest
rate, index, total return and currency rate swap agreements and the Large Cap
Growth Fund may enter into equity swap agreements. Swap agreements are a type of
derivative. Swap agreements are entered into in an attempt to obtain a
particular return when it is considered desirable to do so, possibly because it
is less expensive than if the Fund had invested directly in the asset yielding
the return. An equity swap agreement may also be used to invest in a market
without owning or taking physical custody of securities in circumstances in
which direct investment may be restricted for legal reasons or is otherwise
impractical. Swap agreements are two-party contracts entered into primarily by
institutional investors for periods from a few weeks to more than a year. In a
standard swap transaction, two parties agree to exchange the returns (or
differential in rates of return) earned or realized on particular predetermined
investments or instruments, which may be adjusted for an interest factor. Equity
swaps allow the parties to a swap agreement to exchange the dividend income or
other components of return on an equity investment (e.g., a group of equity
securities or an index) for a component of return on another non-equity or
equity investment.
The gross returns to be exchanged or "swapped" between parties are generally
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. Forms of swap agreements include interest rate caps, under
which, in return for a premium, one party agrees to make payments to the other
to the extent 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 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.
Because swap agreements are derivatives, their value can be very volatile. In
addition, if the potential relative fluctuation of the components swapped with
another party are not accurately analyzed or predicted, an investor in the swap
agreement may suffer a loss. However, most swap agreements entered into by a
Fund would calculate the obligations of the parties to the agreement on a net
basis. Consequently, the Fund's current obligations (or rights) under a swap
agreement will 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"), and the risk of loss with respect to swaps is
limited to the net amount of payments that the Fund is contractually obligated
to make. If the other party to a swap agreement defaults, the Fund's risk of
loss consists of the net amount of payments that the Fund is contractually
entitled to receive. If such an investment is made, the Fund will either
segregate cash or liquid assets or otherwise cover its obligations in a manner
required by the SEC.
SHORT SALES - Each of the Funds may engage in short sales of securities. In a
short sale, a Fund sells stock which it does not own, making delivery with
securities "borrowed" from a broker. The Fund is then obligated to replace the
security borrowed by purchasing it at the market price at the time of
replacement. This price may or may not be less than the price at which the
security was sold by the Fund. Until the security is replaced, the Fund is
required to pay the lender any dividends or interest which accrue during the
period of the loan. In order to borrow the security, the Fund may also have to
pay a fee 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.
LENDING PORTFOLIO SECURITIES -- Each of the Funds may lend their portfolio
securities to brokers, dealers and other financial institutions who need to
borrow securities to complete certain transactions, but no Fund will lend
portfolio securities in excess of one-third of the value of its total assets. In
connection with such loans, the Funds will receive collateral consisting of
cash, U.S. Government Securities or irrevocable letters of credit. Such
collateral will be maintained at all times in an amount equal to at least 100%
of the current market value of the loaned securities. The Funds can
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increase their income through the investment of such collateral and continue to
be entitled to payments in amounts equal to the interest, dividends or other
distributions payable on the loaned securities and receive interest on the
amount of the loan. Such loans will be terminable at any time upon specified
notice. A Fund might experience risk of loss if the institution with which it
has engaged in a portfolio loan transaction breaches its agreement with the
Fund.
MEDIUM-GRADE OBLIGATIONS -- The Balanced Fund may invest in medium-grade
obligations, which are obligations rated in the fourth highest rating category
by an NRSRO. Medium-grade obligations, although considered investment-grade,
have speculative characteristics and may be subject to greater fluctuations in
value than higher-rated securities. In addition, the issuers of medium-grade
obligations may be more vulnerable to adverse economic conditions or changing
circumstances than issuers of higher-rated securities. All ratings are
determined at the time of investment. Any subsequent rating downgrade of a debt
obligation will be monitored by the Balanced Fund's Subadviser to determine what
action, if any, the Balanced Fund should take consistent with its investment
objective. There is no requirement that any such obligations must be sold if
downgraded.
BELOW INVESTMENT GRADE OBLIGATIONS - Up to 25% of the Balanced Fund's fixed
income portfolio may consist of obligations rated below investment grade by an
NRSRO (e.g., rated below Baa by Moody's or BBB by S&P). The Balanced Fund may
invest in obligations rated as low as B by Moody's or S&P or that are comparably
rated by another NRSRO, a rating which may indicate that the obligations are
speculative to a high degree and in default. Lower rated securities are
generally referred to as junk bonds. The Balanced Fund is not obligated to
dispose of obligations whose issuers subsequently are in default or which are
downgraded below the minimum ratings noted above. The credit ratings of Moody's,
S&P or any other NRSRO may not be changed in a timely fashion to reflect
subsequent economic events. These credit ratings also do not evaluate market
risk.
Debt securities that are rated in the lower rating categories, or which are
unrated, involve greater volatility of price and risk of loss of principal and
income, including the possibility of default or bankruptcy of the issuer of such
securities, and have greater price volatility, especially during periods of
economic uncertainty or change. These lower quality fixed income securities tend
to be affected by economic changes and short-term corporate and industry
developments to a greater extent than higher quality securities, which react
primarily to fluctuations in the general level of interest rates. Although the
Subadviser seeks to minimize these risks through diversification, investment
analysis and attention to current developments in interest rates and economic
conditions, there can be no assurance that the Subadviser will be successful in
limiting the Balanced Fund's exposure to the risks associated with lower rated
securities. Because the Balanced Fund invests in securities in the lower rated
categories, the achievement of the Balanced Fund's investment objective is more
dependent on the Subadviser's ability than would be the case if the Balanced
Fund were investing in securities in the higher rated categories.
Lower quality fixed income securities are affected by the market's perception of
their credit quality, especially during times of adverse publicity, and the
outlook for economic growth. Economic downturns or an increase in interest rates
may cause a higher incidence of default by the issuers of these securities,
especially issuers that are highly leveraged. The market for these lower quality
fixed income securities is generally less liquid than the market for investment
grade fixed income securities. It may be more difficult to sell these lower
rated securities to meet redemption requests, to respond to changes in the
market, or to determine accurately a portfolio's net asset value.
Reduced volume and liquidity in the market for below investment grade
obligations or the reduced availability of market quotations may make it more
difficult to dispose of an investment in these obligations or to value these
obligations accurately. The reduced availability of reliable, objective data may
increase the need to rely on the Subadviser's judgment in valuing below
investment grade obligations. In addition, investments in below investment grade
obligations may be susceptible to adverse publicity and investor perceptions,
whether or not justified by fundamental factors.
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FOREIGN GOVERNMENT OBLIGATIONS; SECURITIES OF SUPRANATIONAL ENTITIES --The
Balanced Fund, Small Cap Fund and International Fund may invest in obligations
issued or guaranteed by one or more foreign governments or any of their
political subdivisions, agencies or instrumentalities provided that its
Subadviser has determined that such obligations are of comparable quality to the
other obligations in which the particular Fund may invest. Supranational
entities include international organizations designated or supported by
governmental entities to promote economic reconstruction or development and
international banking institutions and related government agencies. Examples
include the International Bank for Reconstruction and Development (the World
Bank), the European Coal and Steel Community, the Asian Development Bank and the
InterAmerican Development Bank.
MORTGAGE- AND ASSET-BACKED SECURITIES -- The Balanced Fund and Small Cap Fund
may invest in mortgage-backed securities (both fixed-rate and adjustable-rate)
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. These securities include single- and multi-class
pass-through securities and collateralized mortgage obligations ("CMOs"). Such
securities may be issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, or by private issuers, generally originators of or investors
in mortgage loans, including savings and loan associations, mortgage bankers,
commercial banks, investment banks, and special purpose entities (collectively,
"private lenders"). The underlying mortgage assets may have fixed rates or
adjustable rates of interest.
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 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- and asset-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 investor purchases these securities at a
premium, a prepayment rate that is higher than expected will reduce yield, while
a prepayment rate that is lower than expected will have the opposite effect of
increasing the yield. Conversely, if these securities are purchased at a
discount, a prepayment rate that is faster than expected will increase yield,
while a prepayment rate that is slower than expected will reduce yield.
Accelerated prepayments on securities purchased at a premium also impose a risk
of loss of principal because the premium may not have been fully amortized by
the time the principal is prepaid in full.
Unlike fixed rate mortgage securities, adjustable rate mortgage securities are
collateralized by or represent interest in mortgage loans with variable rates of
interest. These variable rates of interest reset periodically to align
themselves with market rates. A Fund will not benefit from increases in interest
rates to the extent that interest rates rise to the point where they cause the
current coupon of the underlying adjustable rate mortgages to exceed any maximum
allowable annual or lifetime reset limits (or "cap rates") for a particular
mortgage. In this event, the value of the adjustable rate mortgage-backed
securities would likely decrease. Also, a Fund's net asset value could vary to
the extent that current yields on adjustable rate mortgage-backed securities are
different than market yields during interim periods between coupon reset dates
or if the timing of changes to the index upon which the rate for the underlying
mortgage is based lags behind changes in market rates. During periods of
declining interest rates, income derived from adjustable rate mortgages which
remain in a mortgage pool will decrease in contrast to the income
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on fixed rate mortgages, which will remain constant. Adjustable rate mortgages
also have less potential for appreciation in value as interest rates decline
than do fixed rate investments.
The Balanced Fund and Small Cap Fund may purchase mortgage-backed securities
issued by private issuers. The purchase of such securities may entail greater
risk than the purchase of mortgage-backed securities that are 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. 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.
COLLATERALIZED MORTGAGE OBLIGATIONS -- The Balanced Fund and Small Cap Fund may
invest in CMOs and stripped mortgage-backed securities. CMOs are debt
obligations collateralized by mortgage loans or mortgage pass-through
securities. Typically, CMOs are collateralized by GNMA or FHLMC certificates or
certificates issued by the FNMA. However, CMOs may also be collateralized by
whole loans or private mortgage pass-through securities (such collateral
collectively referred to as "Mortgage Assets"). Payments of principal or
interest on the Mortgage Assets, and any reinvestment income thereon, provide
the income to pay debt service on the CMOs. CMOs may be issued by agencies or
instrumentalities of the U.S. Government or by private lenders.
LOAN PARTICIPATIONS AND ASSIGNMENTS - The Balanced Fund may invest in loan
participations and assignments. These investments are "debt securities" for
purposes of this Prospectus and the Statement of Additional Information. Loan
participations typically will cause the Balanced Fund
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to have a contractual relationship with the lender, not the borrower. The
Balanced 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 loan
participation and only upon receipt by the lender of the payments from the
borrower. In connection with purchasing loan participations, the Balanced 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 Balanced Fund may not benefit directly from any
collateral supporting the loan in which it has purchased the loan participation.
As a result, the Balanced Fund will assume the credit risk of both the borrower
and the lender that is selling the loan participation. In the even of the
insolvency of the lender selling a loan participation, the Balanced Fund may be
treated as a general creditor of the lender and may not benefit from any set-off
between the lender and the borrower. The Balanced Fund will acquire loan
participations only if the lender interpositioned between the Balanced Fund and
the borrower is determined by the J.P. Morgan to be creditworthy. When the
Balanced Fund purchases assignments from lenders, it will acquire direct rights
against the borrower on the loan, except that under certain circumstances such
rights may be more limited than those held by the assigning lender.
The Balanced Fund may have difficulty disposing of assignments and loan
participations. Because the market for such instruments is not highly liquid,
only a limited number of institutional investors may be available to purchase
such instruments. The lack of a highly liquid secondary market may have an
adverse impact on the value of such instruments and will have an adverse impact
on the Balanced 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.
The Board of Trustees has adopted policies and procedures for the purpose of
determining whether assignments and loan participations are liquid or illiquid.
Pursuant to those policies and procedures, the Board of Trustees has delegated
to J.P. Morgan the determination as to whether a particular loan participation
or assignment is liquid or illiquid, requiring that consideration be given to,
among other things, the frequency of quotes, the number of dealers willing to
sell and the number of potential purchasers, the nature of the loan
participation or assignment and the time needed to dispose of it and the
contractual provisions of the relevant documentation. The Board of Trustees
periodically reviews purchases and sales of assignments and loan participations.
To the extent that liquid assignments and loan participations that the Balanced
Fund holds become illiquid, due to the lack of sufficient buyers or market or
other conditions, the percentage of the Balanced Fund's assets invested in
illiquid assets would increase. J.P. Morgan, under the supervision of NAS and
the Board of Trustees, monitors the Balanced Fund's investments in assignments
and loan participations and will consider appropriate measures to enable the
Balanced Fund to maintain sufficient liquidity for operating purposes and to
meet redemption requests.
In valuing a loan participation or assignment held by the Balanced Fund for
which a secondary trading market exists, the Balanced Fund will rely upon prices
or quotations provided by banks, dealers or pricing services. To the extent a
secondary trading market does not exist, the Balanced Fund's loans
participations and assignments will be valued in accordance with the 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.
LOANS SECURED BY MORTGAGES -- The Balanced Fund may make loans secured by
mortgages on real property. Unlike investing in mortgage-backed
securities--which generally represent an interest in a pool of
mortgage-loans--making such loans presents prepayment and credit risks that
relate to individual borrowers and parcels of property. As a result, making
these loans involves an investment and credit analysis of the individual
borrower and the real property that is the subject of the loan.
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Loans made by the Balanced Fund may be secured by residential mortgages,
multifamily mortgages, mortgages on cooperative apartment buildings, or
commercial mortgages or may be secured by sale-leaseback arrangements. These
mortgages may be backed by assets such as office buildings, shopping centers,
retail stores, warehouses, apartment buildings or single-family dwellings. If
the Balanced Fund is required to foreclose on a non-performing loan and acquire
a direct ownership interest in the real property securing the loan, the Balanced
Fund will incur expenses in foreclosing on the loan and will become subject to
all of the risks that are related to owning real property. The market value of
the foreclosed property may fluctuate and may be less than the amount of the
loan. The property may not be able to be operated profitably. The property may
require renovation, occupancy rates may be low, rent schedules may be
unfavorable, and operating expenses may be high. There may also be adverse
changes in local, regional or general economic conditions, a deterioration of
the real estate market or the financial circumstances of tenants and sellers,
unfavorable changes in zoning, building environmental and other laws, increased
real property taxes, rising interest rates, reduced availability and increased
cost of mortgage-loans, unexpected increases in the cost of energy, adverse
environmental factors, acts of God or other uncontrollable factors. The property
may contain hazardous or toxic substances, which could adversely affect the
value of the property. The owners of any property containing such substances may
be held responsible under various laws for containing, monitoring, removing or
cleaning up such substances. The present of such substances may also provide a
basis for other claims by third parties. Costs of clean-up or of liabilities to
third parties may exceed the value of the property. In addition, these risks may
be uninsurable. In light of these and similar risks, it may be impossible to
dispose profitably of properties in foreclosure.
STANDARD AND POOR'S DEPOSITORY RECEIPTS - The Balanced Fund and the Large Cap
Growth Fund may purchase Standard & Poor's Depository Receipts ("SPDRs"). SPDRs
are American Stock Exchange-traded securities that represent ownership in the
SPDR Trust, a trust established to accumulate and hold a portfolio of common
stocks that is intended to track the price performance and dividend yield of the
S&P 500 Index. SPDRs may be used for several reasons, including, but not limited
to, facilitating the handling of cash flows or trading and reducing transaction
costs. The use of SPDRs presents additional risk to the Large Cap Growth Fund as
the price movement of the instrument does not perfectly correlate with the price
action of the underlying index.
REAL ESTATE INVESTMENT TRUSTS -- The Large Cap Growth Fund, the Balanced Fund,
and the Small Cap Fund may invest in Real Estate Investment Trusts ("REITs"),
which are pooled investment vehicles that invest primarily in either real estate
or real estate related loans. The value of a REIT is affected by changes in the
value of properties owned by the REIT or securing mortgage loans held by the
REIT. REITs are dependent upon the ability of the REITs' manager and cash flow
from their investments to repay financing costs. REITs are also subject to risks
generally associated with investments in real estate. An investor in a REIT will
indirectly bear its proportionate share of any expenses, including management
fees, paid by a REIT in which it invests.
PARTICIPATION INTERESTS. The International Fund may purchase from financial
institutions participation interests in securities in which the International
Fund may invest. A participation interest in a security gives the purchaser an
undivided interest in the security in the proportion that the purchaser's
participation interest bears to the total principal amount of the security.
These instruments may have fixed, floating or variable rates of interest with
remaining maturities of 13 months or less. If the participation interest is
unrated or has a rating that is below the minimum rating established by the
International Fund, the participation interest will be collateralized by U.S.
Government securities or, in the case of unrated participation interests, the
Subadviser will have determined that the participation interest is of comparable
quality to securities in which the International Fund may invest.
ADDITIONAL INFORMATION CONCERNING THE DURATION OF THE BOND PORTION OF THE
BALANCED FUND'S PORTFOLIO. The bond portion of the Balanced Fund's portfolio
will maintain a duration which, on a weighted average basis and under normal
market conditions, will
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<PAGE> 32
generally be within one year of the average for the U.S. investment-grade bond
universe (currently about five years). There is no limit, however, as to the
maturity of any one security that the Balanced Fund may purchase. In addition,
because the computation of duration is based on predictions of future events
rather than known factors, there can be no assurance that the bond portion of
the Balanced Fund will at all times achieve its targeted portfolio duration.
Duration is a measure of the average life of a fixed-income security.
Incorporating a security's yield, coupon interest payments, final maturity and
call features into one measure, duration 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. 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 flat, 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.
DIVERSIFIED AND NON-DIVERSIFIED STATUS OF THE FUNDS. Each of the Funds, except
the International Fund, is classified as diversified under the 1940 Act; the
International Fund is classified as non-diversified. The International Fund
does, however, intend to meet the diversification and other requirements of
subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"), to
qualify as a "regulated investment company" under the Code. See "DISTRIBUTIONS
AND TAXES." The 1940 Act limits the ability of a diversified fund to invest in
the securities of a single issuer but does not limit the ability of a
non-diversified fund. As a result, under the 1940 Act, a non-diversified fund
may invest a greater proportion of its assets in the securities of a small
number of issuers, which means that a non-diversified fund may be more dependent
than a diversified fund upon the financial condition or market assessment of a
single issuer. A non-diversified fund therefore presents a greater risk that its
return will fluctuate more widely than the return of a diversified fund in
response to changes in the financial condition or market assessment of a single
issuer.
HOW TO PURCHASE SHARES
YOU MAY INVEST IN THREE CONVENIENT WAYS:
BY MAIL -- Complete the application and mail with your check or other negotiable
bank draft payable to: NATIONWIDE ADVISORY SERVICES, INC., THREE NATIONWIDE
PLAZA, P.O. BOX 1492, COLUMBUS, OHIO 43216-1492. Purchases must be made in U.S.
dollars only. The share price you receive will be determined as of the Valuation
Time (see "HOW TO PURCHASE SHARES--Valuation of Shares") on the day the properly
completed application is received by NAS in Columbus, Ohio. Checks or drafts
drawn on non-U.S. banks are not accepted. NAS reserves the right to refuse
certain third-party checks.
BY WIRE -- To avoid mail delays on initial and subsequent investments, you can
request that your bank transmit funds (Federal Funds) by wire to the Fund's
custodian bank. In order to use this method, you must call NAS by 11 A.M.
Eastern Time, and the wire must be received by the custodian bank by 2 P.M.
Eastern Time. The share price you receive will be determined as of the next
Valuation Time after your order is received. If NAS does not receive Federal
Funds for your order within 3 business days, your order will be canceled. The
bank that wires your money may charge you a fee for this service. IF YOU CHOOSE
THIS METHOD TO OPEN YOUR ACCOUNT, YOU MUST CALL OUR TOLL-FREE NUMBER BEFORE YOU
WIRE YOUR INVESTMENT. If this is an initial investment, you must then complete
and mail the application.
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<PAGE> 33
BY TELEPHONE (NAS NOW) -- By calling 1-800-637-0012, 24 hours a day, seven days
a week you will be connected to our automated voice-response system, NAS NOW. It
gives you quick, easy access to mutual fund information. Select from a menu of
choices to conduct transactions and hear fund price information, mailing and
wiring instructions as well as other mutual fund information.
IN ORDER TO USE NAS NOW TO MAKE A PURCHASE YOU MUST COMPLETE THE APPROPRIATE
SECTION ON THE APPLICATION.
MINIMUM INVESTMENT -- The minimum investment in Class A or Class B shares of any
of the Funds is $1,000. Minimum subsequent investments in Class A or Class B
shares of the Funds are $100 each. However, you may establish an Automatic Asset
Accumulation plan for as little as $25 per month. See "HOW TO PURCHASE
SHARES--Investor Strategies" for more information. Minimum investment
requirements may also be waived for certain retirement plans. See "HOW TO
PURCHASE SHARES--Retirement Plans" for further information.
CHOOSE A CLASS OF SHARES -- Each Fund offers three classes of shares. Class A
shares are purchased with a front-end sales charge and a 0.25% 12b-1 fee. Class
B shares are subject to a CDSC on redemption within the first six years of
purchase and a 1.00% 12b-1 fee. See "HOW TO PURCHASE SHARES--Factors to Consider
When Choosing a Class of Shares" described below. Class Y shares are purchased
without a front-end sales charge, CDSC or 12b-1 fee but are available for
purchase only by institutional accounts purchasing on behalf of beneficial
investors through an omnibus account or meeting the minimum account
requirements, as well as other open-end investment companies (each, a "Fund of
Funds") advised by NAS.
PURCHASE PRICE AND SALES CHARGES -- The purchase prices of the funds are
determined as follows:
CLASS A SHARES OF THE FUNDS -- Class A shares are purchased at the offering
price. The offering price is determined by adding the sales charge (based as a
percentage of the offering price) to the net asset value per share.
SALES CHARGE SCHEDULE AND AVAILABLE DISCOUNTS FOR CLASS A SHARES -- For
purchases of Class A shares, your sales charge percentage is calculated
according to the following chart:
SALES CHARGE SCHEDULE - CLASS A SHARES OF THE FUNDS
<TABLE>
<CAPTION>
SALES CHARGE
AS A PERCENTAGE OF: COMMISSIONS AS A
PERCENTAGE OF
If your investment plus the value of other OFFERING PRICE AMOUNT INVESTED OFFERING PRICE
shares held is: -------------- --------------- -----------------
<S> <C> <C>
less than $50,000, the sales charge is: 5.50% 5.82%
$50,000 but less than $100,000 4.50% 4.71%
$100,000 but less than $250,000 3.50% 3.63%
$250,000 but less than $500,000 2.50% 2.56%
$500,000 but less than $1,000,000 2.00% 2.04%
$1,000,000 but less than $25,000,000 0.50% 0.50%
$25,000,000 or more 0.25% 0.25%
</TABLE>
NAS reserves the right to reallow the entire commission to dealers. If that
occurs, the dealer may be considered an "underwriter" under federal securities
laws.
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<PAGE> 34
Shareholders can receive even greater discounts through one or more of the
discounts described below:
LIFETIME ADDITIONAL DISCOUNT -- The sales charge for Class A shares is computed
at the rate applied to the amount invested plus the accumulated value of Class A
and D shares held in any of the funds within the Nationwide Family of Funds
including shares acquired by reinvestment of dividends and capital gains
distributions.
FAMILY MEMBER DISCOUNT -- In addition, all Class A and D shares held in any
accounts for funds within the Nationwide Family of Funds of members of the
shareholder's family may be included in calculating the applicable sales charge
rate, provided these family members reside at the shareholder's address.
INSURANCE PROCEEDS OR BENEFITS DISCOUNT PRIVILEGE -- If the funds used to
purchase Class A shares come from proceeds or benefits of an insurance policy
issued by any member of the Nationwide Insurance Enterprise, the sales charge is
one-half the rate established, provided the purchase is made within 60 days
after receipt of the proceeds or benefits.
LETTER OF INTENT (LOI) DISCOUNT -- This discount permits you to purchase Class A
shares at a reduced cost during a 13-month period if the amount invested or the
value of shares of the Funds held by you and other family members of your
household, plus the amount invested equals or exceeds $50,000. LOI is not a
binding obligation upon the investor to buy the shares. It is merely a statement
of intent.
By making the appropriate selection on the application, you indicate your
intention to complete the appropriate LOI. The LOI will be completed when your
new investments in a particular class, together with the value of all existing
shares of such class held by you, your spouse, minor children, and other family
members of your household, total an amount equal to the amount indicated on the
application. You obtain a reduced sales charge on each share purchased during
the 13-month period. The LOI may be backdated, up to 90 days, to include
previous purchases under the reduced sales charge available under the LOI.
If the intended investment is not completed, the investor will be asked to pay
the difference between the sales charge actually paid and the sales charge due
on the amount invested according to the "Sales Charge Schedule." If the
difference is not paid within 20 days after written request, the investor
irrevocably constitutes and appoints NAS as his or her attorney-in-fact, with
full power of substitution, to redeem an appropriate number of shares from his
or her account to cover the amount due. For more details on the LOI Discount,
call 1-800-848-0920.
NET ASSET VALUE PURCHASE PRIVILEGE (CLASS A SHARES ONLY) -- THE SALES CHARGE
THAT APPLIES TO CLASS A SHARES MAY BE WAIVED FOR CLASS A SHARES SOLD:
(1) to any person purchasing through an account with an unaffiliated brokerage
firm having an agreement with NAS;
(2) to any directors, officers, full-time employees, sales representatives and
their employees or any investment advisory clients of a broker-dealer having a
dealer/selling agreement with NAS; or
(3) to any person who pays for such shares with the proceeds of mutual fund
shares redeemed from an NAS brokerage account or the proceeds of Class D shares
redeemed from funds within the Nationwide Family of Funds offering Class D
shares; to qualify, such person must have paid an initial sales charge or CDSC
on the redeemed shares and the purchase of Class A shares must be made within 60
days of the redemption. This waiver must be requested when the purchase order is
placed, and NAS may require evidence of qualification for this waiver.
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<PAGE> 35
CLASS B SHARES OF THE FUNDS AND CDSC -- A CDSC will be imposed on any redemption
of Class B shares which causes the current value of your account to fall below
the total amount of all purchases made during the preceding six years. THE CDSC
IS NEVER IMPOSED ON DIVIDENDS, WHETHER PAID IN CASH OR REINVESTED, OR ON
APPRECIATION. The CDSC applies only to the lesser of the original investment or
current market value.
Where the CDSC is imposed, the amount of the CDSC will depend on the number of
years since you made the purchase payment from which an amount is being
redeemed, according to the following table:
<TABLE>
<CAPTION>
YEAR OF REDEMPTION AFTER PURCHASE CONTINGENT DEFERRED SALES CHARGE
<S> <C>
First 5.00%
Second 4.00%
Third 3.00%
Fourth 3.00%
Fifth 2.00%
Sixth 1.00%
Seventh and following 0.00%
</TABLE>
For purposes of calculating the CDSC, it is assumed that the oldest Class B
shares remaining in your account will be sold first. All payments during a month
will be aggregated and deemed to have been made on the last day of the preceding
month.
NAS compensates dealers and agents for selling Class B shares at the time of
purchase from its own assets. The proceeds of the CDSC and the 12b-1 fee, in
part, are used to defray these expenses.
THE CDSC WILL BE WAIVED IN THE CASE OF A TOTAL OR PARTIAL REDEMPTION FOLLOWING
THE DEATH OR DISABILITY OF A SHAREHOLDER (ACCOUNTS OWNED BY AN INDIVIDUAL OR AN
INDIVIDUAL JOINTLY WITH SPOUSE) IF REDEMPTION OCCURS WITHIN ONE YEAR OF DEATH OR
INITIAL DETERMINATION OF DISABILITY. In addition, NAS may refuse a purchase
order for Class B shares of over $100,000. See "HOW TO PURCHASE SHARES--FACTORS
TO CONSIDER WHEN CHOOSING A CLASS OF SHARES."
CONVERSION FEATURES FOR CLASS B SHARES -- Class B shares which have been
outstanding for seven years will automatically convert to Class A shares on the
first business day of the next month following the seventh anniversary of the
date on which such Class B shares were purchased. Such conversion will be on the
basis of the relative net asset values of the two classes, without the
imposition of a sales charge or other charge except that the lower 12b-1 fee
applicable to Class A shares shall thereafter be applied to such converted
shares. Because the per share net asset value of the Class A shares may be
higher than that of the Class B shares at the time of the conversion, a
shareholder may receive fewer Class A shares than the number of Class B shares
converted, although the dollar value will be the same. Reinvestments of
dividends and distributions in Class B shares will not be considered a new
purchase for purposes of the conversion feature and will convert to Class A
shares in the same proportion as the number of the shareholder's Class B shares
converting to Class A shares bears to the shareholder's total Class B shares not
acquired through dividends and distributions.
If you effect one or more exchanges among Class B shares of the Funds during the
seven-year period, the holding period for shares so exchanged will be counted
toward such period. If you exchange Class B shares into the Nationwide Money
Market Fund for a period of time, the conversion aging period will be stopped
during the time period when shares are exchanged into the Nationwide Money
Market Fund.
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<PAGE> 36
FACTORS TO CONSIDER WHEN CHOOSING A CLASS OF SHARES -- Before purchasing Class A
shares or Class B shares of a Fund, investors should consider whether, during
the anticipated life of their investment in a Fund, the accumulated 12b-1 fee
and potential CDSC on Class B shares prior to conversion (as described above)
would be less than the initial sales charge and accumulated 12b-1 fee on Class A
shares purchased at the same time, and to what extent such differential would be
offset by the higher yield of Class A shares as a result of the lower expenses.
In this regard, to the extent that the sales charge for the Class A shares is
waived or reduced by one of the methods described above or the investment is
$100,000 or more, investments in Class A shares become more desirable. NAS may
refuse a purchase order for Class B shares of over $100,000.
Although Class A shares are subject to a 12b-1 fee, they are not subject to the
higher 12b-1 fee applicable to Class B shares. For this reason, Class A shares
can be expected to pay correspondingly higher dividends per shares. However,
because initial sales charges are deducted at the time of purchase, purchasers
of Class A shares who do not qualify for waivers of or reductions in the initial
sales charge would have less of their purchase price initially invested in the
Fund than purchasers of Class B shares.
As described above, purchasers of Class B shares will have more of their initial
purchase price invested. Any positive investment return on this additional
invested amount may partially or wholly offset the expected higher annual
expenses borne by Class B shares. Because a Fund's future returns cannot be
predicted, there can be no assurance that this will be the case. Investors in
Class B shares would, however, own shares that are subject to higher annual
expenses and, for a six-year period, such shares would be subject to a CDSC
ranging from 5.00% to 1.00% upon redemption. Investors expecting to redeem
during this six-year period should compare the cost of the CDSC plus the
aggregate annual Class B shares' 12b-1 fees to the cost of the initial sales
charge and 12b-1 fee on the Class A shares. Over time the expense of the annual
12b-1 fee on the Class B shares may be equal to or exceed the initial sales
charge and annual 12b-1 fee applicable to Class A shares.
For example, if a Fund's net asset value remains constant and assuming no waiver
of any 12b-1 fees, the aggregate 12b-1 fee with respect to Class B shares of a
Fund would equal or exceed the initial sales charge and aggregate 12b-1 fee of
Class A shares approximately eight years after the purchase. In order to reduce
such fees for Class B Shareholders, they will be automatically converted to
Class A shares, as described above, at the end of a seven-year period. This
example assumes that the initial purchase of Class A shares would be subject to
the maximum initial sales charge of 5.50%. This example does not take into
account the time value of money which reduces the impact of the Class B shares'
12b-1 fee on the investment, the benefit of having the additional initial
purchase price invested during the period before it is effectively paid out as a
12b-1 fee, fluctuations in net asset value, any waiver of 12b-1 fees or the
effect of different performance assumptions. For investors who are eligible to
purchase Class Y shares, the purchase of Class Y shares will usually be
preferable to purchasing Class A or Class B shares.
If a shareholder who owns both Class A shares and Class B shares redeems less
than his or her entire investment, then shares will be redeemed in the following
order unless a shareholder has made a specific election otherwise: (a) any Class
B shares that are not subject to a CDSC (e.g., shares acquired as a result of
reinvested dividends and distributions); (b) Class A shares; and (c) Class B
shares subject to a CDSC, these share are redeemed according to age, with the
share held the longest redeemed first.
HOW TO SELL (REDEEM) SHARES
You can sell (redeem) all, or any part of, your shares of any Fund at any time.
Shares are redeemed at the net asset value next computed after receipt of the
properly completed request by NAS, at its offices in Columbus, Ohio. Redemptions
of Class B shares may be subject to a CDSC as described above.
Requests for redemptions may be in writing or by telephone (if authorized).
Payment for shares redeemed is made within three business days of receipt. The
value of shares redeemed depends upon the market
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<PAGE> 37
value of the investments of each Fund at the time of redemption and may be more
or less than the shareholders' cost.
Payment of redemption proceeds may be delayed until the check purchasing shares
has cleared or up to fifteen days from the date of purchase, whichever occurs
first. This is to assure that your check has cleared. To avoid this possible
delay, you may make your investment by wire (see "HOW TO PURCHASE SHARES--How To
Purchase Shares by Wire"). You will receive a confirmation each time a
liquidation of shares is requested. Redemptions may be suspended or the date of
payment postponed when the New York Stock Exchange is closed (other than
customary weekend and holiday closings listed in "HOW TO PURCHASE
SHARES--Valuation of Shares"), or if trading is restricted or if any emergency
exists.
YOU CAN REDEEM IN ANY OF THE FOLLOWING WAYS:
BY TELEPHONE
NAS NOW -- By calling 1-800-637-0012, 24 hours a day, seven days a week, you
will automatically have access to NAS NOW, the automated voice-response
system, to make a redemption (check mailed to address of record) unless you
declined the option in your application. Additional NAS NOW redemption
options are also available, if elected. NAS NOW also gives you quick, easy
access to mutual fund information. Select from a menu of choices to conduct
transactions and hear fund price information, mailing and wiring
instructions as well as other mutual fund information. (Redemptions through
NAS NOW will be limited to the following registrations: Individual, Joint,
Transfer on Death, Trust, and Uniform Gift/Transfer to Minor accounts.
Western Union redemptions are not allowed through NAS NOW.)
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 -- A check payable to the shareholder of record can be
mailed to the address of record, unless you declined the option in your
account application. Redemptions of $1,000 or more can be wired directly to
your account at a commercial bank (voided check must be attached to the
application) or sent via Western Union, if elected in the application. For
additional information on Western Union, please see below.
Telephone redemptions for IRAs are available upon receipt of the proper
forms. These redemptions will be subject to mandatory 10% Federal income tax
withholding, unless you elect out of withholding. For further information,
or to request these forms, please call our customer service line at
1-800-848-0920.
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.
The Funds will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. The Funds will not be liable for any
loss, injury, damage, or expense as a result of acting upon instructions
communicated by telephone reasonably believed to be genuine, and the Funds
will be held harmless from any loss, claims or liability arising from its
compliance with such instructions. These options are subject to the terms
and conditions set forth in this Prospectus and all telephone transaction
calls may be tape recorded. The Funds reserve the right to revoke this
privilege at any time without notice to shareholders and request the
redemption in writing, signed by all shareholders.
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<PAGE> 38
BY BANK WIRE -- Your funds will be wired to your bank on the next business
day after your redemption order has been processed. A $5 fee will be
deducted from the proceeds for this service. Your financial institution may
also charge you a fee for receipt of the wire. (If elected, this
authorization will remain in effect until written notice of its termination
is received by NAS.)
BY AUTOMATED CLEARING HOUSE ("ACH") -- Your funds will be sent via ACH to
your bank account on the second business day after your redemption order has
been received by NAS. There is no fee to receive your funds via ACH. (If
elected, this authorization will remain in effect until written notice of
its termination is received by NAS.) Funds sent through the automated
clearing house should reach your bank in two business days.
BY WESTERN UNION -- With Western Union's Quick Cash(R) service, you can
receive your redemptions the next business day across the United States or
throughout the world. If you have elected, you can phone in your request to
receive funds on the next business day at 24,000 locations, including major
supermarkets and mail-box type outlets, many of which are open 24 hours a
day, seven days a week. The fee for the Western Union service is $9.50 per
$10,000. Funds being sent outside of the United States may be subject to a
higher fee. This fee is deducted from your account.
BY MAIL OR FAX (NO MINIMUM) -- Write or fax to Nationwide Advisory Services,
Inc., Three Nationwide Plaza, P.O. Box 1492, Columbus, Ohio 43216-1492 or FAX
(614) 249-8705. 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 withdrawal 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 redemption request. For an IRA redemption,
you must include date of birth. Also, you must indicate whether or not you wish
Federal income tax (not less than 10%) to be withheld from the distribution. The
distribution will be processed effective the date the signed letter or fax is
received. Fax requests received after 4 P.M. Eastern Time will be processed as
of the next business day. NAS reserves the right to require the original
document if you use the fax method.
ACCOUNTS FALLING BELOW MINIMUM INVESTMENT REQUIREMENTS
Because of the high cost of maintaining small accounts, NAS MAY CLOSE ANY
ACCOUNT WHICH, AS A RESULT OF REDEMPTIONS, HAS A VALUE OF LESS THAN $250
(EXCLUDING AUTOMATIC ASSET ACCUMULATION ACCOUNTS). However, you will be notified
if your account value is less than the required minimum, and you will be allowed
90 days to make additional investments before the account is liquidated.
SIGNATURE GUARANTEE -- Based on the circumstances of each transaction, NAS
reserves the right to require that your signature be guaranteed by an authorized
agent of an "eligible guarantor institution," which includes, but is not limited
to, certain banks, credit unions, savings associations, and member firms of
national security exchanges. A signature guarantee is designed to protect the
shareholder by helping to prevent an unauthorized person from redeeming shares
and obtaining the proceeds. A notary public is not an acceptable guarantor. In
certain special cases (such as corporate or fiduciary registrations), additional
legal documents may be required to ensure proper authorizations. If NAS decides
to require signature guarantees in all circumstances, shareholders will be
notified in writing prior to implementation of the policy.
VALUATION OF SHARES
The net asset value per share for each Fund is determined as of the close of
regular trading on the New York Stock Exchange (usually 4 P.M. Eastern Time),
each day that the exchange is open and on such other days as the Board of
Trustees determines and on days in which there is sufficient trading in
portfolio securities of a Fund to materially affect the net asset value of that
Fund (the "Valuation Time"). The Funds will not compute net asset value on
customary business holidays, including Christmas, New
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<PAGE> 39
Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day and Thanksgiving.
The net asset value per share of a class is computed by adding the value of all
securities and other assets in a Fund's portfolio allocable to such class,
deducting any liabilities allocable to such class and any other liabilities
charged directly to that class and dividing by the number of shares outstanding
in such class.
In determining net asset value, portfolio securities listed on national
exchanges are valued at the last sale price on the principal exchange, or if
there is no sale on that day, or if the securities are traded only in the OTC
market, at the quoted bid prices, all obtained from an independent pricing
organization. Securities for which market quotations are not available, or for
which an independent pricing agent does not provide a value or provides a value
that does not represent fair value in the judgment of NAS are valued at fair
value in accordance with procedures adopted by the Board of Trustees.
INVESTOR STRATEGIES
1. 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. You can get started with
Automatic Asset Accumulation for as little as $25 a month in a Fund.
2. AUTOMATIC ASSET TRANSFER -- This systematic investment plan is designed
especially for investors who want to invest $5,000 or more using regularly
scheduled transfers of assets from one fund to another. Once an initial
investment of $5,000 or more is made into a Fund, then a fixed amount of $25 or
more for each Fund selected is transferred systematically monthly or quarterly
into another fund within the Nationwide Family of Funds. The money is
transferred on the 25th day of the month as selected or on the preceding
business day. 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 a Fund
to another fund within the Nationwide Family of Funds 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 Nationwide Money Market Fund to
another fund within the Nationwide Family of Funds, sales charges may apply if
not already paid.
Those who have a more conservative outlook on investing can transfer smaller
sums monthly and spread the transfer of assets into another fund within the
Nationwide Family of Funds over a longer period of time, while those with a more
aggressive outlook can transfer larger sums over a shorter period.
3. AUTOMATIC WITHDRAWAL PLAN ($50 OR MORE) -- You may have checks for any fixed
amount of $50 or more automatically sent bi-monthly, monthly, quarterly, three
times/year, semi-annually or annually, to you (or anyone you designate) from
your account.
NOTE: If your monthly withdrawals exceed the monthly dividends from your
account, you will be depleting principal, which will reduce your future dividend
potential. In addition, an Automatic Withdrawal Plan for Class B shares will be
subject to the applicable CDSC.
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<PAGE> 40
INVESTOR PRIVILEGES
The Funds offer the following privileges to shareholders. Additional information
may be obtained by calling NAS toll-free at 1-800-848-0920.
1. 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 or another specifically requested Fund 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.
2. EXCHANGE PRIVILEGE -- The exchange privilege is a convenient way to exchange
shares from one Fund to another fund within the Nationwide Family of Funds in
order to respond to changes in your goals or in market conditions. HOWEVER, AN
EXCHANGE IS A SALE AND PURCHASE OF SHARES AND, FOR FEDERAL AND STATE INCOME TAX
PURPOSES, MAY RESULT IN A CAPITAL GAIN OR LOSS. 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.
EXCHANGES AMONG FUNDS -- Exchanges may be made among any of the Funds within the
same class. For certain exchanges of Class A shares among the Nationwide Family
of Funds, you may pay the difference between the sales charges, if a higher
sales charge is applicable. Exchanges within Class B or Class Y shares may be
made without incurring a sales charge.
An exchange from the Nationwide Money Market Fund into another fund in the
Nationwide Family of Funds will be subject to the applicable sales charge unless
already paid. For an exchange into the Nationwide Money Market Fund, the CDSC
aging period for Class B shares will be stopped during the time period such
Nationwide Money Market Fund shares are held. If the Nationwide Money Market
Fund shares are subsequently sold, a CDSC will be charged at the level that
would have been charged had the shares been sold at the time when they were
exchanged into the Nationwide Money Market Fund. If the Nationwide Money Market
Fund shares are exchanged back into Class B shares, the CDSC aging period will
continue from the point in time when the shares were originally exchanged into
the Nationwide Money Market Fund.
Shareholders of other classes of any of the other funds within the Nationwide
Family of Funds may exchange into Class Y shares of the Funds if they are
eligible to purchase Class Y shares.
There is no administrative fee or exchange fee. The Trust reserves the right to
reject any exchange request it believes will result in excessive transaction
costs, or otherwise adversely affect other shareholders. An exchange, whether or
not subject to sales charges, is a sale and purchase of shares, and for Federal
and state income tax purposes, may result in a capital gain or loss. 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. For a description of CDSC see "HOW TO SELL (REDEEM)
SHARES--Class B Shares of the Funds and CDSC." The Trust reserves the right to
change the exchange privilege upon at least 60 days' written notice to
shareholders.
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EXCHANGES MAY BE MADE THREE CONVENIENT WAYS:
BY TELEPHONE
NAS NOW -- You can automatically process exchanges by calling
1-800-637-0012, 24 hours a day, seven days a week. However, if you declined
the option in the application, you will not have this automatic exchange
privilege. NAS NOW also gives you quick, easy access to mutual fund
information. Select from a menu of choices to conduct transactions and hear
fund price information, mailing and wiring instructions as well as other
mutual fund information. You must call our toll-free number by the
Valuation Time to receive that day's closing share price. The Valuation
Time is the close of regular trading of the New York Stock Exchange, which
is usually 4:00 p.m. Eastern Time.
CUSTOMER SERVICE LINE -- By calling 1-800-848-0920, 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.
NAS may record all instructions to exchange shares. NAS 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 Funds will employ the same procedure described under "HOW TO REDEEM
(SELL) SHARES" to confirm that the instructions are genuine.
The Funds will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. The Funds will not be liable for any
loss, injury, damage, or expense as a result of acting upon instructions
communicated by telephone reasonably believed to be genuine, and the Funds
will be held harmless from any loss, claims or liability arising from its
compliance with such instructions. These options are subject to the terms
and conditions set forth in this Prospectus and all telephone transaction
calls may be tape recorded. The Funds reserve the right to revoke this
privilege at any time without notice to shareholders and request the
redemption in writing, signed by all shareholders.
BY MAIL OR FAX -- Write or fax to Nationwide Advisory Services, Inc., Three
Nationwide Plaza, P.O. Box 1492, Columbus, Ohio 43216-1492 or FAX (614)
249-8705. 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 4 P.M. Eastern Time will be processed as of the next business
day. NAS reserves the right to require the original document if you use the fax
method.
3. NO SALES CHARGE ON A REPURCHASE -- If you redeem all or part of your Class A
shares on which you paid a front-end sales charge, you have a one-time privilege
to reinvest all or part of the redemption proceeds in any shares of the same
class of any fund within the Nationwide Family of Funds, without a sales charge,
within 30 days after the effective date of the redemption. If you redeem Class B
shares, and then reinvest the proceeds in Class B shares within 30 days, NAS
will reinvest an amount equal to any CDSC you paid on redemption.
If you realize a gain on your redemption, the transaction is taxable, and
reinvestment will not alter any capital gains tax payable. If you realize a loss
and you use the reinstatement privilege, some or all of the loss will not be
allowed as a tax deduction depending upon the amount reinvested.
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INVESTOR SERVICES
1. NAS NOW AUTOMATED VOICE RESPONSE SYSTEM -- Our toll-free number
1-800-637-0012 will connect you 24 hours a day, seven days a week to NAS NOW.
Through a selection of menu options, you can conduct transactions, hear fund
price information, mailing and wiring instructions and other mutual fund
information.
2. 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 5 P.M. Eastern Time. Call toll-free:
1-800-848-0920 or contact NAS at our FAX telephone number (614) 249-8705.
3. RETIREMENT PLANS -- Shares of the Funds may be purchased for Self-Employed
Retirement Plans, Individual Retirement Accounts (IRAs), Roth IRAs, Educational
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.
4. MUTUAL FUND GIFT CERTIFICATES -- Gift Certificates may be purchased for
special occasions such as birthdays, graduations, weddings and as appreciation
gifts. NOTE: Respective minimum initial and subsequent purchase amounts must be
met when using gift certificates to open new accounts. Contact one of our
service representatives at 1-800-848-0920 for complete details and instructions.
5. 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. Instead, these will appear
on your next consolidated statement. Please review your confirmations carefully
and notify us if there is a discrepancy or error with respect to a transaction.
6. CONSOLIDATED STATEMENTS -- Shareholders of the Funds receive quarterly
statements as of the end of March, June, September and December. Please review
your statement carefully and notify us immediately if there is a discrepancy or
error in your account.
For shareholders with multiple accounts, your consolidated statement will
reflect all your current holdings in the 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.
7. 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 1-800-848-0920.
8. SHAREHOLDER REPORTS -- All shareholders will receive reports semi-annually
detailing the financial operations of the funds.
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<PAGE> 43
9. PROSPECTUSES -- Updated prospectuses will be mailed to you annually.
10. UNDELIVERABLE MAIL -- If mail from NAS to a shareholder is returned as
undeliverable on three or more consecutive occasions, NAS will not send any
future mail to the shareholder unless it receives notification of a correct
mailing address for the shareholder. Any dividends that would be payable by
check to such shareholders will be reinvested in the shareholder's account until
NAS receives notification of the shareholder's correct mailing address.
MANAGEMENT OF THE TRUST
Except where shareholder action is required by law, all of the authority of the
Trust is exercised under the direction of the Board of Trustees. Unless required
by the Trust's Declaration of Trust, its By-Laws, or Ohio law, at any given time
all of the members of the Board of Trustees may not have been elected by
shareholders. The members of the Board of Trustees set and review policies
regarding the operation of the Trust and are empowered to elect officers and
contract with and provide for the compensation of agents, consultants and other
professionals to assist and advise in the Trust's day-to-day operation. The
Trust will be managed in accordance with its Declaration of Trust and the laws
of Ohio governing business trusts. The officers of the Trust perform the daily
functions of the Trust.
INVESTMENT MANAGEMENT OF THE FUNDS
THE ADVISER. Under the terms of the Investment Advisory Agreement, NAS, Three
Nationwide Plaza, Columbus, Ohio 43215, oversees the investment of the Funds'
assets, supervises the daily business affairs of the Funds, and, subject to the
supervision and direction of the Trustees, evaluates and monitors the
performance of the Subadvisers. NAS is also authorized to select and make
portfolio investments for the Funds, although NAS does not intend to do so at
this time.
NAS and its predecessors have managed investments since 1965, and as of June 30,
1998 have approximately $9.8 billion in assets under management. NAS, an Ohio
corporation, is a wholly owned subsidiary of Nationwide Life Insurance Company,
which is owned by Nationwide Financial Services, Inc. (NFS). NFS, a holding
company, has two classes of common stock outstanding with different voting
rights enabling Nationwide Corporation (the holder of all outstanding Class B
Common Stock) to control NFS. Nationwide Corporation is also a holding company
in the Nationwide Insurance Enterprise. All of the Common Stock of Nationwide
Corporation is held by Nationwide Mutual Insurance Company (95.3%) and
Nationwide Mutual Fire Insurance Company (4.7%), each of which is a mutual
company owned by its policyholders.
NAS and the Trust have received an exemptive order from the SEC concerning the
Funds' multi-manager structure. The order is intended to facilitate the
efficient operation of the Funds and afford the Trust increased management
flexibility. The order allows NAS, without the approval of shareholders, to
hire, replace or terminate any subadviser or revise any subadvisory agreement.
The Trust's Board of Trustees, including a majority of Trustees who are not
interested persons of the Trust or NAS, will approve any such changes and, if a
new subadviser is hired, shareholders will be notified within 90 days of such
hiring.
NAS provides investment management services to the Funds principally by
performing initial due diligence on prospective subadvisers for the Funds and by
monitoring the performance of the Subadvisers. NAS monitors the performance of
the Subadvisers through quantitative and qualitative analysis in addition to
periodic in-person, telephonic and written consultations with the Subadvisers.
NAS is responsible for communicating performance expectations and evaluations to
the Subadvisers and recommending to the Trust's Board of Trustees whether a
Subadviser's contract should be renewed, modified, or terminated. However, NAS
does not expect to recommend frequent changes of Subadvisers. NAS will regularly
provide written reports to the Board of Trustees regarding the results of its
evaluation
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<PAGE> 44
and monitoring functions. Although NAS will monitor the performance of the
Subadvisers, there can be no assurance that any Subadviser or any Fund will
obtain favorable results at any given time.
For the services provided by NAS, the Funds pay NAS fees based on the average
daily net assets of each Fund at the following annual rates:
<TABLE>
<CAPTION>
FUND ASSETS FEE
<S> <C> <C>
Large Cap Value up to $100 million 0.75%
$100 million or more 0.70%
Large Cap Growth up to $150 million 0.80%
$150 million or more 0.70%
Balanced up to $100 million 0.75%
$100 million or more 0.70%
Small Cap up to $100 million 0.95%
$100 million or more 0.80%
International up to $200 million 0.85%
$200 million or more 0.80%
</TABLE>
In the interest of limiting the expenses of each of the Funds. NAS has
voluntarily entered into an expense limitation agreement for each of the Funds
(the "Expense Limitation Agreement") pursuant to which NAS has agreed to waive
or limit a portion of its fee and to assume other expenses (except for 12b-1
fees or fees paid pursuant to the Administrative Services Plan for Class Y
shares) in an amount necessary to limit total annual operating expenses of each
of the Funds. See "SUMMARY OF FUND EXPENSES -- Estimated Annual Fund Operating
Expenses" above. Reimbursement by a Fund of the advisory fees waived or limited
and other expenses paid by NAS pursuant to the Expense Limitation Agreement may
be made within five years from the date a Fund begins operations when that Fund
has reached a sufficient size to permit reimbursement to be made without causing
the total annual operating expense ratio to exceed the annual expense limits.
Consequently, no reimbursement by a Fund will be made unless: (i) the Fund's
assets exceed $ million; (ii) the total annual operating expenses of the
Class making reimbursement is less than the relevant annual expense limit; and
(iii) the payment for such reimbursement is approved by the Board of Trustees on
a quarterly basis.
THE SUBADVISERS AND PORTFOLIO MANAGERS -- Subject to the supervision of the NAS
and the Trustees, one or more Subadvisers manages the assets of each Fund in
accordance with that Fund's investment objectives and policies. A Subadviser
makes investment decisions for the Fund whose assets it manages, and in
connection with such investment decisions places purchase and sell orders for
securities.
For the investment management services they provide to the Funds, the
Subadvisers receive annual fees from NAS, calculated at an annual rate based on
the average daily net assets of the Funds, in the following amounts:
<TABLE>
<CAPTION>
FUND ASSETS FEE
<S> <C> <C>
Large Cap Value Fund up to $100 million 0.35%
$100 million or more 0.30%
Large Cap Growth Fund up to $150 million 0.40%
$150 million or more 0.30%
Balanced Fund up to $100 million 0.35%
$100 million or more 0.30%
Small Cap Fund up to $100 million 0.55%
$100 million or more 0.40%
International Fund up to $200 million 0.45%
$200 million or more 0.40%
</TABLE>
The following is a brief description of the Subadvisers and the portfolio
managers of the Funds.
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<PAGE> 45
LARGE CAP VALUE FUND. Brinson Partners, a Delaware corporation, serves as
Subadviser to the Large Cap Value Fund. Brinson Partners is registered with the
SEC as an investment adviser and, as of March 31, 1998, manages more than $99.8
billion, primarily for pension and profit sharing institutional accounts.
Brinson Partners was organized in 1989 when it acquired the institutional asset
management business of The First National Bank of Chicago and First Chicago
Investment Advisors, N.A. Brinson Partners and its predecessor entities have
managed domestic and international investment assets since 1974 and global
investment assets since 1982. Brinson Partners has offices in Chicago, Basel,
London, Frankfurt, Geneva, Melbourne, New York, Paris, Singapore, Sydney, Tokyo
and Zurich. Brinson Partners is an indirect wholly-owned subsidiary of UBS AG,
an internationally diversified organization headquartered in Zurich,
Switzerland, with operations in many aspects of the financial services industry.
Investment decisions for the Large Cap Value Fund are made by an investment
management team at Brinson Partners. No individual member of the investment
management team is primarily responsible for making recommendations regarding
portfolio purchases.
LARGE CAP GROWTH FUND. GSAM, a separate operating division of Goldman, Sachs &
Co. ("Goldman Sachs"), serves as Subadviser to the Large Cap Growth Fund.
Goldman Sachs registered with the SEC as an investment adviser in 1981. As of
March 23, 1998, GSAM, together with its affiliates, acted as investment adviser
or distributor for assets in excess of $153 billion.
In performing its investment advisory services, GSAM, although responsible for
the management of the Large Cap Growth Fund, is able to draw upon the research
and expertise of its asset management affiliates for portfolio decisions and
management with respect to certain portfolio securities. In addition, GSAM will
have access to the research of Goldman Sachs, as well as certain proprietary
technical models developed by Goldman Sachs, and may apply quantitative and
qualitative analysis in determining the appropriate allocations among the
categories of issuers and types of securities.
Robert C. Jones, Managing Director, Kent A. Clark, Vice President and Senior
Portfolio Manager, Victor H. Pinter, Vice President, and Leonard Ioffe, Vice
President, are the portfolio managers for the Large Cap Growth Fund. Mr. Jones
joined GSAM in 1989. From 1987 to 1989, Mr. Jones was the senior quantitative
analyst in the Goldman Sachs Investment Research Department and the author of
Stock Selection, a monthly publication. Mr. Clark joined GSAM in 1992. Mr.
Pinter joined GSAM in 1990. From 1985 to 1990, Mr. Pinter was a project manager
in the Information Technology Division of Goldman Sachs. Mr. Ioffe joined the
quantitative equity team in 1996. Prior to doing so, Mr. Ioffe was responsible
for equity applications in the GSAM Information Technology department, which he
joined in 1994, first as a consultant.
BALANCED FUND. J.P. Morgan, a wholly owned subsidiary of J.P. Morgan & Co.
Incorporated, serves as Subadviser to the Balanced Fund. J.P. Morgan & Co.
Incorporated is a bank holding company organized under the laws of Delaware.
J.P. Morgan offers a wide range investment management services and acts as
investment adviser to corporate and institutional clients. J.P. Morgan uses a
sophisticated, disciplined, collaborative process for managing all asset
classes. As of March 31, 1998, J.P. Morgan had assets under management of
approximately $285 billion.
Patrik Jakobson, Vice President, and Kate Jonas, Vice President, are the
portfolio managers for the Balanced Fund. Mr. Jakobson joined J.P. Morgan in
1987, spending five years as a research analyst specializing in the retailing
industry. Subsequently, Mr. Jakobson managed equity and balanced accounts and is
currently responsible for managing global balanced portfolios. Ms. Jonas joined
J.P. Morgan in 1997 after eleven years at Morgan Stanley & Co., where she was a
member of Morgan Stanley Asset Management's Emerging Markets investment team.
From 1985 to 1994, prior to joining Morgan Stanley Asset Management, Ms. Jonas
co-managed the Morgan Stanley Capital International Indices business.
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<PAGE> 46
SMALL CAP FUND. Institutional Trust and IMR collectively manage the Small Cap
Fund. Institutional Trust, a Colorado trust company, specializes in providing
trust and investment advisory services to retirement plan clients. Incorporated
in 1969, Institutional Trust manages more than $5 billion in retirement trust
assets, primarily through the services of affiliated companies that are
registered investment advisers. Institutional Trust performs general
administration, management, compliance, legal, and oversight responsibilities
for the Small Cap Fund. IMR has been a registered investment adviser since 1956.
IMR makes investment decisions for the Small Cap Fund in addition to placing
purchase and sell orders for securities. Institutional Trust and IMR are part of
a global investment organization, AMVESCAP plc. AMVESCAP plc is a
publicly-traded holding company that, through its subsidiaries, engages in the
business of investment management on an international basis. AMVESCAP plc
manages in excess of $260 billion through specialized investment management
teams dedicated to clients and financial markets in their region of the world.
The Small Cap Fund is managed by IMR's Structured Products Team, which is
comprised of 11 investment professionals, each with an average of 13 years of
industry experience. No individual member of the Structured Products Team is
primarily responsible for making recommendations regarding portfolio purchases.
INTERNATIONAL FUND. Lazard, a New York-based division of Lazard Freres & Co. LLC
("Lazard Freres") manages over $67 billion in investments for corporations,
endowments, public and private pension plans and wealthy individuals and is
recognized as one of the premier global investment advisory firms. Lazard
Freres--the world's first global investment bank--has advised sophisticated
investors for more than 145 years. Lazard Freres has offices in San Francisco,
Washington DC, and Chicago, and affiliates in London, Tokyo, Frankfurt, Sydney,
Paris, and Cairo that extend its research worldwide.
Lazard manages the International Fund on a team basis. The team is involved in
all levels of the investment process. This team approach allows for every
portfolio manager to benefit from his/her peers, and for clients to receive the
firm's best thinking, not that of a single portfolio manager. Lazard's
international equity investment team operates under the guidance of Herbert
Gullquist, Vice Chairman and Chief Investment Officer with responsibility for
overall adherence to the firm's investment principles, and John Reinsberg,
Managing Director of International/Global Equity, who is responsible for the
team's day-to-day operations and monitoring the International Fund's composition
to ensure appropriate diversification.
DISTRIBUTION PLAN
The Trust has adopted a Distribution Plan under Rule 12b-1 of the 1940 Act which
permits the Funds to compensate the Distributor, NAS, for expenses associated
with distribution of its shares. Under the Distribution Plan, the Funds pay NAS
compensation accrued daily and paid monthly. The Funds shall pay amounts not
exceeding an annual maximum amount of 0.25% of the daily net assets of Class A
shares and 1.00% of the daily net assets of Class B shares. Class Y shares pay
no 12b-1 fees. Distribution expenses paid by NAS may include the costs of
printing and mailing prospectuses and sales literature to prospective investors,
advertising, and compensation to sales personnel and broker-dealers.
FUND ADMINISTRATION
Under the terms of a Fund Administration Agreement, NAS also provides various
administrative and accounting services, including daily valuation of the Funds'
shares and preparation of financial statements, tax returns, and regulatory
reports. For these services, each Fund pays NAS an annual fee based on each
Fund's average daily net assets in the amount of 0.10% up to $250 million in
assets, 0.06% on the next $750 million of assets and 0.04% on assets of $1
billion and more, subject to a minimum of $75,000 per Fund per year.
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<PAGE> 47
ADMINISTRATIVE SERVICES PLAN
Under the terms of an Administrative Services Plan, NAS has agreed to provide
certain administrative support services in connection with the Class Y shares of
the Funds. Such administrative support services include but are not limited to
the following: establishing and maintaining shareholder accounts, processing
purchase and redemption transactions, arranging for bank wires, performing
shareholder sub-accounting, answering inquiries regarding the Funds, providing
periodic statements showing the account balance for beneficial owners or for
Plan participants or 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.
As authorized by the Administrative Services Plan, the Trust has entered into a
Servicing Agreement effective ____________, 1998, pursuant to which Nationwide
Life Insurance Company has agreed to provide certain administrative support
services in connection with Class Y shares held beneficially by its customers.
In consideration for providing administrative support services, Nationwide Life
Insurance Company and other entities with which the Trust may enter into
Servicing Agreements, including NAS, will receive a fee, computed at the annual
rate of up to 0.15% of the average daily net assets of Class Y shares held by
customers of Nationwide Life Insurance Company or such other entity.
TRANSFER AND DIVIDEND DISBURSING AGENT
NAS, through its wholly-owned subsidiary, Nationwide Investors Services, Inc.
("NISI"), serves as transfer agent and dividend disbursing agent for the Trust.
For these services, NAS receives an annual fee from each of the Funds at the
following rate: $18 per Fund account for Class A and B shares, and 0.01% of each
Fund's average daily net assets for Class Y shares.
DISTRIBUTIONS AND TAXES
INCOME DIVIDENDS AND CAPITAL GAINS
Substantially all of the net investment income, if any, will be distributed to
shareholders quarterly by the Funds in the form of additional shares of the Fund
unless the shareholder has chosen to receive them in cash. Unless requested in
writing by the Shareholder, checks will not be mailed for dividends and capital
gains of less than $5. These dividends will be automatically reinvested in
additional shares of the applicable Fund and you will receive a confirmation
showing the transaction. If a shareholder has elected to receive dividends
and/or capital gains distributions in cash, and the postal or other delivery
service is unable to deliver checks to the shareholder's address of record, or
the shareholder does not respond to mailings with regard to uncashed
distribution checks, such shareholder's distribution option will automatically
be converted to having all dividends and other distributions reinvested in
additional shares. Any request to change a distribution option must be received
by NISI by the record date for a dividend or distribution in order to be
effective for that dividend or distribution. No interest will accrue on amounts
represented by uncashed distribution, dividend or redemption checks.
In those years in which sales of a Fund's portfolio securities result in net
realized capital gains, these gains will be declared and cause to be paid to
shareholders in December.
FEDERAL TAXES
Each of the Funds intends to qualify for treatment under subchapter M of the
Code and, therefore, must distribute all or substantially all of its net
investment income and capital gains to shareholders annually. In general, if a
Fund distributes all of its net investment income, it is not required to pay any
Federal income taxes. In addition to Federal income tax, if a Fund fails to
distribute the required portion of investment income or capital gains in any
year, it will be subject to a non-deductible 4% excise tax on the amount which
it failed to distribute. Each Fund intends to make distributions in sufficient
amounts to avoid the imposition of this excise tax.
Dividends paid by each of the Funds are taxable as income to the shareholder for
Federal income tax purposes. For corporate shareholders, a portion of each
year's distribution may be eligible for the corporate dividend received
deduction.
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<PAGE> 48
The Funds will annually report to each shareholder that shareholder's portion of
the net income and capital gain of each Fund, for inclusion in the shareholder's
income.
A shareholder may be subject to federal backup withholding at a rate of 31% of
each distribution if the shareholder fails to certify that the taxpayer
identification number given is correct and that the shareholder is not subject
to such withholding because of underreporting of income (or if the Internal
Revenue Service gives notice that such certifications are not accurate).
FOREIGN INCOME TAXES
Investment income received by a Fund from sources within foreign countries may
be subject to foreign income taxes withheld at the source. It is anticipated
that the Funds will be operated so as to meet the requirements of the Code to
"pass through" to the Funds' shareholders credits for foreign income taxes paid,
but there can be no assurance that the Funds will qualify.
STATE AND LOCAL TAXES
Distributions to shareholders of the Funds may also be subject to state and
local taxes. These laws vary, and you are advised to consult a tax adviser
regarding such taxes.
REDEMPTIONS OF SHARES
Redeeming shares may result in a capital gain or loss for tax purposes. For your
convenience, NAS provides a year-end statement, reflecting your taxable gain or
loss for the year based on the average cost paid for redeemed shares.
FUND PERFORMANCE
PERFORMANCE ADVERTISING
The Funds may use historical performance in advertisements, sales literature,
semi-annual and annual reports and the prospectus for the Funds. Performance
will be shown separately for Class A, B, and Y shares, because performance will
usually be different from Class to Class as a result of the different kinds of
expenses or fees that each Class bears. All performance figures represent past
performance. Past performance does not indicate or predict the future
performance of any Fund.
One measure of a Fund's historical performance is total return. There are
different types of total return, including average annual (compound) total
return (also known as the standard return), simple average total return, and
aggregate total return (also known as cumulative total return).
Average annual (compound) total return will be shown for a Fund's most recent
one, five, and ten-year periods (or for the life of the Fund, if less). Average
annual (compound) total return represents the average annual percentage change
in the value of a hypothetical investment for the specified periods assuming a
redemption of the investment at the end of such periods. It reflects the changes
in share price and the effect of the maximum sales charge, if any, and assumes
reinvestment of all dividends and distributions at net asset value.
Nonstandard returns, such as simple average total return and aggregate total
return, may also be shown. Nonstandard returns may or may not reflect
reinvestment of all dividends and capital gains. In addition, sales charge
assumptions will vary. Initial sales charge percentages decrease as amounts
invested increase, and thus returns increase as sales charges decrease. Simple
average total return is calculated by dividing total return by the number of
years in the period and, unlike average annual (compound) total return, does not
reflect compounding. Aggregate total return represents the cumulative percentage
change
45
<PAGE> 49
in the value of a hypothetical investment over time and is calculated by
subtracting the original investment from the redeemable value and dividing the
result by the original amount of the investment.
The SEC yield of the Balanced Fund may also be shown. The SEC yield is based on
a 30-day period and takes into account the yields to maturity on all debt
instruments and all dividends accrued on equity securities (since equity
securities do not have maturity dates). The SEC yield is computed by dividing
the net investment income per share earned during the 30-day period by the
maximum offering price per share on the last day of the period.
RANKINGS AND RATINGS IN FINANCIAL PUBLICATIONS
The Funds may report their performance relative to other mutual funds or
investments. Performance comparisons may be made to other mutual funds with
similar or dissimilar investment objectives. Performance comparisons may also be
made to other sectors of the economy or to other types of investments, including
precious metals, real estate, stocks and bonds, closed-end funds, market
indexes, bank CDs that are insured and that have fixed rates, bank money market
deposit accounts and passbook savings, and the Consumer Price Index.
Mutual fund rankings and ratings, which may or may not include the effects of
sales charges, are normally published by independent tracking services and
publications of general interest, including tracking services such as Lipper
Analytical Services, Inc., CDA/Wiesenberger, Morningstar, Donoghue's, Schabaker
Investment Management, and Kanon Bloch Carre & Co. and publications such as
Money, Fortune, Forbes, Kiplinger's Personal Finance Magazine, Smart Money,
Mutual Funds, Worth, Financial World, Consumer Reports, Business Week, Time,
Newsweek, U.S. News and World Report, the Wall Street Journal, Barron's,
Columbus Dispatch, Investor's Business Daily, and Standard & Poor's Outlook.
HISTORICAL PERFORMANCE OF SUBADVISERS. The Funds commenced operations on _____,
1998, and thus have no significant operating history or performance record of
their own. The following performance information relates to other mutual funds,
or is derived from discretionary institutional accounts, that are managed by a
Subadviser and that have investment objectives, policies and strategies that are
substantially similar but not necessarily identical to those of a Fund. THESE
OTHER MUTUAL FUNDS AND INSTITUTIONAL ACCOUNTS ARE SEPARATE AND DISTINCT FROM THE
FUNDS. THEIR PERFORMANCE IS NOT INDICATIVE OF THE PAST OR FUTURE PERFORMANCE OF
ANY FUND AND SHOULD NOT BE VIEWED AS A SUBSTITUTE FOR A FUND'S OWN PERFORMANCE.
The performance information set forth below should not be deemed to be
indicative of future results of the Funds because of differences in brokerage
commissions and dealer spreads, expenses, including investment advisory fees,
the size of positions taken in relation to fund size, timing of purchases and
sales and the market conditions at the time of a transaction, timing of cash
flows, and availability of cash for new investments. In addition, institutional
accounts may not be subject to an obligation to redeem shares upon request or
meet diversification requirements and may not be subject to specific tax
restrictions and investment limitations imposed on a fund by the 1940 Act or
Subchapter M of the Code. The information set forth below has been provided
by the Subadvisers and is believed to be reliable; however, none of the
information has been independently verified by the Funds.
BRINSON PARTNERS. The following are average annual total return figures of the
Brinson U.S. Equity Fund, a registered investment company managed by Brinson
Partners that has investment objectives, policies and strategies that are
substantially similar but not necessarily identical to those of the Large Cap
Value Fund. The information presented relates to the Class I shares of the
Brinson U.S. Equity Fund and is shown net of 0.80% total operating expenses.
These expenses are lower than the expected total operating expenses of each
class of shares of the Large Cap Value Fund. Class I shares are designed
primarily for institutional investors and have no sales load or 12b-1 fee.
46
<PAGE> 50
AVERAGE ANNUAL TOTAL RETURN
BRINSON U.S. EQUITY FUND
<TABLE>
<CAPTION>
One Year Ended Three Years Ended Period of 2/28/94(1)
6/30/98 6/30/98 to 6/30/98
------- ------- ----------
<S> <C> <C>
21.48% 27.89% 23.14%
</TABLE>
(1) Performance inception date.
GSAM. The tables below set forth the performance data relating to the historical
performance of the Goldman Sachs CORE Large Cap Growth Composite ("Composite").
Each account represented in the Composite is managed by Goldman Sachs and has
substantially similar investment objectives, policies, and strategies to those
of the Large Cap Growth Fund. The Composite currently consists of eight
accounts,including six advisory accounts and two mutual funds. In prior years,
the Composite consisted of fewer advisory accounts and no mutual funds. The
performance information for the Composite is presented in two forms: the first
presentation reflects the average fees and expenses charged to the accounts in
the Composite; the second presentation uses the gross performance of the
Composite as adjusted to reflect the fees and expenses of the Large Cap Growth
Fund. The expenses shown for the Composite in the first presentation include
investment advisory fees but do not include the expense for custody (or other
expenses for mutual funds), which, if included, could lessen performance and
which are expenses the Large Cap Growth Fund bears. The average fees for the
Composite from January 1995 through December 1997 are estimated. The Composite
performance figures also reflect the inclusion of any dividends and interest
income received, the deduction of any brokerage commission, and other related
portfolio transaction expenses which are generally reflected as part of the cost
of a security.
The Composite data were calculated using the methodology recommended by the
Association of Investment Management and Research ("AIMR"), retroactively
applied to all time periods. Accounts under Goldman Sachs' management are
included in the Composite the month after operations commenced. To determine
Composite values, the beginning market value of each comparable account is
divided by the sum of the market value of all comparable accounts, which
results in percentage number. The percentage number is multiplied by each
comparable account's rate of return. The sum of all accounts for the comparable
accounts results in a dollar-weighted composite return. The Composite results
are unaudited.
COMPOSITE PERFORMANCE
CORE LARGE CAP GROWTH
<TABLE>
<CAPTION>
One Year Ended Three Years Ended Five Years Ended Period of / / (1)
/ /98 / /98 / /98 to / /98
------- ------- ------- ----------
<S> <C> <C> <C>
% % % %
</TABLE>
(1) Composite inception date.
COMPOSITE PERFORMANCE
CORE LARGE CAP GROWTH
(as adjusted)
<TABLE>
<CAPTION>
One Year Ended Three Years Ended Five Years Ended Period of / / (1)
/ /98 / /98 / /98 to / /98
------- ------- ------- ----------
<S> <C> <C> <C>
% % % %
</TABLE>
(1) Composite inception date.
J.P. MORGAN. The following total return figures represent a blend of two
existing private account composites of J.P. Morgan Investment Management, Inc.,
an affiliate of J.P. Morgan ("JPMIM"): JPMIMs U.S. Structured Stock Selection
Composite (60%) and JPMIMs Risk Controlled Public Only Fixed Income Composite
(40%). The accounts in the JPMIM U.S. Structured Stock Selection Composite and
the accounts in the JPMIM Risk Controlled Public Only Fixed Income Composite
have investment objectives, policies and strategies that are substantially
similar but not necessarily identical to those of the equity and fixed income
portfolios of the Balanced Fund, respectively. The total return figures are
shown before the deduction of custody fees and include reinvestment of earnings.
The total return figures are shown net of a 1.20% advisory fee, a fee that may
be higher or lower than the expected total operating expenses of the Balanced
Fund depending upon the class of shares. JPMIM prepared this performance
information in compliance with the Performance Presentation Standards of the
Association for Investment Management and Research; however, the Association for
Investment Management and Research ("AIMR") was not involved with the
preparation or review of this information.
47
<PAGE> 51
COMPOSITE PERFORMANCE
JPMIM U.S. STRUCTURED STOCK SELECTION COMPOSITE
JPMIM RISK CONTROLLED PUBLIC ONLY FIXED INCOME COMPOSITE
<TABLE>
<CAPTION>
One Year Ended Three Years Ended Five Years Ended Period of 11/1/89(1)
6/30/98 6/30/98 6/30/98 to 6/30/98
------- ------- ------- ----------
<S> <C> <C> <C>
21.60% 20.38% 16.03% 15.38%
</TABLE>
(1) Inception date of the U.S. Structured Stock Selection Composite, the newer
of the two composites.
The composite performance information presented above is derived from the
performance of institutional discretionary separate accounts. The performance of
any such account that is not a registered investment company might have been
less favorable had the account been subject to regulation under federal law as
an investment company.
INVESCO. The following are average annual total return figures of the INVESCO
Small Company Value Fund, a registered investment company managed by INVESCO
that has investment objectives, policies and strategies that are substantially
similar but not necessarily identical to those of the Small Cap Fund. For the
one-year period ended July 31, 1997, the ratio of expenses to average net assets
for the INVESCO Small Company Value Fund was 1.25%. These expenses are lower
than the expected total operating expenses of each class of shares of the Small
Cap Fund.
AVERAGE ANNUAL TOTAL RETURN
INVESCO SMALL COMPANY VALUE FUND
<TABLE>
<CAPTION>
One Year Ended Three Years Ended Period of 12/31/93 (1)
7/31/97 7/31/97 to 7/31/97
------- ------- ----------
<S> <C> <C>
36.97% 21.05% 16.21%
</TABLE>
(1) Performance inception date.
LAZARD. The following are total return figures of the Lazard International
Equity Composite, a composite of accounts managed by Lazard that have investment
objectives, policies and strategies that are substantially similar but not
necessarily identical to those of the International Fund. The total return
figures include reinvestment of earnings and are shown net of investment
advisory fees but before the deduction of custody fees. Lazard's standard fee
schedule is 0.75% of the first $50 million of assets and 0.50% of the balance,
unless the initial account size is $50 million or more, in which case the
standard fee is 0.50% on all assets. These fees are lower than the expected
total operating expenses of each class of shares of the International Fund. The
total return figures are also shown net of foreign withholding taxes on
dividends, interest, and capital gains. Lazard prepared this performance
information in compliance with the Performance Presentation Standards of the
Association for Investment Management and Research; however, the AIMR was not
involved with the preparation or review of this information.
48
<PAGE> 52
COMPOSITE PERFORMANCE
LAZARD INTERNATIONAL EQUITY COMPOSITE
<TABLE>
<CAPTION>
One Year Ended Three Years Ended Five Years Ended Ten Years Ended
3/31/98 3/31/98 3/31/98 3/31/98
------- ------- ------- -------
<S> <C> <C> <C>
24.95% 19.59% 16.37% 14.04%
</TABLE>
The composite performance information presented above is derived from the
performance of fully discretionary, fee-paying, institutional U.S. tax exempt
portfolios with an international equity investment mandate and a minimum of $5
million in assets under management for certain time periods. The performance of
any such account that is not a registered investment company might have been
less favorable had the account been subject to regulation under federal law as
an investment company.
ADDITIONAL INFORMATION
DESCRIPTION OF SHARES
The Trust presently offers fifteen series of shares of beneficial interest,
without par value, five of which are the Funds. The shares of each of the Funds
are offered in three separate classes: Class A, Class B and Class Y.
Shareholders have an interest only in the shares of the Fund that they own.
Shares of a particular class are equal in all respects to the other shares of
that class. If a Fund is liquidated, 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 above but will have no other preference, conversion, exchange or
preemptive rights.
In addition to the Large Cap Value Fund, Large Cap Growth Fund, Balanced Fund,
Small Cap Fund, and International Fund, the Nationwide Family of Funds also
includes Nationwide Mid Cap Growth Fund, Nationwide Growth Fund, Nationwide
Fund, Nationwide Bond Fund, Nationwide Tax-Free Income Fund, Nationwide
Long-Term U.S. Government Bond Fund, Nationwide Intermediate U.S. Government
Bond Fund, Nationwide Money Market Fund, Nationwide S&P 500 Index Fund, and the
Morley Capital Accumulation Fund.
VOTING RIGHTS
Shareholders of each class of shares have one vote for each share held and a
proportionate fractional vote for any fractional shares 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, and fundamental investment objectives, policies, and 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 fundamental 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 Class A shares or Class B
shares of a Fund will vote as a class and not with holders of any other class of
that Fund with respect to any action regarding 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 Commission that 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
49
<PAGE> 53
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
Inquiries regarding the Funds should be directed by writing to Nationwide
Advisory Services, Inc., Three Nationwide Plaza, P.O. Box 1492, Columbus, Ohio
43216-1492, or by calling 1-800-848-0920.
50
<PAGE> 54
PRESTIGE ADVISOR SERIES
Large Cap Value Fund
Large Cap Growth Fund
Balanced Fund
Small Cap Fund
International Fund
UNDERWRITER AND
INVESTMENT ADVISER
Nationwide Advisory Services, Inc.
P.O. Box 1492
Three Nationwide Plaza
Columbus, Ohio 43216-1492
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
Two Nationwide Plaza
Columbus, Ohio 43215-2537
TRANSFER AGENT AND DIVIDEND
DISBURSING AGENT
Nationwide Advisory Services, Inc.
(Through its wholly owned subsidiary,
Nationwide Investors Services, Inc.)
P.O. Box 1492
Three Nationwide Plaza
Columbus, Ohio 43216-1492
LEGAL COUNSEL
Druen, Dietrich, Reynolds & Koogler
One Nationwide Plaza
Columbus, Ohio 43215-2220
CUSTODIAN
The Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, Ohio 45263-0001
51
<PAGE> 55
PART B:
PRESTIGE ADVISOR SERIES
STATEMENT OF ADDITIONAL INFORMATION _______________, 1998
Prestige Large Cap Value Fund
Prestige Large Cap Growth Fund
Prestige Balanced Fund
Prestige Small Cap Fund
Prestige International Fund
(collectively, the "Funds" and individually, a "Fund")
This Statement of Additional Information is not a prospectus. It contains
information in addition to and more detailed than that set forth in the
Prospectus for the Funds and should be read in conjunction with the Prospectus
dated ___________, 1998. The Prospectus may be obtained by writing Nationwide
Advisory Services, Inc. ("NAS") at Three Nationwide Plaza, P.O. Box 1492,
Columbus, Ohio 43216-1492 or by calling 1-800-848-0920.
Terms not defined in this Statement of Additional Information have the meanings
assigned to them in the Prospectus.
<PAGE> 56
TABLE OF CONTENTS
<TABLE>
<S> <C>
General Information and History B-1
Additional Information on Portfolio Instruments and Investment Policies B-1
Investment Restrictions B-24
Trustees and Officers of the Trust B-25
Investment Advisory and Other Services B-28
Brokerage Allocation B-34
Calculating Yield and Total Return B-36
Nonstandard Returns B-37
Additional Information B-37
Additional General Tax Information B-38
Major Shareholders B-42
Appendix A-1
</TABLE>
B-i
<PAGE> 57
GENERAL INFORMATION AND HISTORY
Nationwide Investing Foundation III ("NIF III") is an open-end management
investment company, created under the laws of Ohio by a Declaration of Trust
dated as of October 30, 1997.
ADDITIONAL INFORMATION ON PORTFOLIO INSTRUMENTS AND INVESTMENT POLICIES
The following information supplements the discussion of the Funds' investment
policies discussed in the Prospectus. The investment objectives of each Fund are
fundamental and may not be changed without shareholder approval. The investment
policies and types of permitted investments described here may be changed
without approval by the shareholders unless otherwise noted. There is no
guarantee that any of the Funds' investment objectives will be realized.
DEBT OBLIGATIONS. Each of the Funds may invest in debt obligations. Debt
obligations are subject to the risk of an issuer's inability to meet principal
and interest payments on its obligations ("credit risk") and are subject to
price volatility due to such factors as interest rate sensitivity, market
perception of the creditworthiness of the issuer, and general market liquidity
("market risk"). Lower-rated securities are more likely to react to developments
affecting market and credit risk than are more highly rated securities, which
react primarily to movements in the general level of interest rates.
RATINGS AS INVESTMENT CRITERIA. High-grade, investment grade, and below
investment grade debt obligations are characterized as such based on their
ratings by nationally recognized statistical rating organizations ("NRSROs"). 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 risk of the securities. These ratings are used by the Funds as
initial criteria for the selection of portfolio securities. Among the factors
that will be considered by the Subadvisers are the long-term ability of the
issuer to pay principal and interest and general economic trends. The Appendix
to this Statement of Additional Information contains further information about
the rating categories of NRSROs and their significance.
Subsequent to its purchase by a Fund, an issue of securities may cease to be
rated or its rating may be reduced below the minimum required for purchase by
the Fund. In addition, it is possible that an NRSRO might not change its rating
of a particular issue to reflect subsequent events. None of these events
generally will require the sale of such securities, but the Subadvisers will
consider such events in determining whether the Fund they advise should continue
to hold the securities. In addition, to the extent that the ratings change as a
result of changes in such NRSROs or their rating systems, or due to a corporate
reorganization, the Funds will attempt to use comparable ratings as standards
for its investments in accordance with their investment objective and policies.
B-1
<PAGE> 58
MONEY MARKET OBLIGATIONS. Each of the Funds may invest in certain types of money
market obligations, which may include the following types of instruments:
-- obligations with remaining maturities of 13 months or less issued
or guaranteed as to interest and principal by the U.S. Government, its
agencies, or instrumentalities, or any federally chartered
corporation; securities issued or guaranteed by the U.S. Government or
its agencies or instrumentalities include U.S. Treasury securities
that differ in their interest rates, maturities and times of issuance.
Some obligations issued or guaranteed by U.S. Government agencies and
instrumentalities are supported by the full faith and credit of the
U.S. Treasury; others by the right of the issuer to borrow from the
Treasury; others by discretionary authority of the U.S. Government to
purchase certain obligations of the agency or instrumentality; and
others only by the credit of the agency or instrumentality. These
securities bear fixed, floating or variable rates of interest. While
the U.S. Government provides financial support to such U.S.
Government-sponsored agencies and instrumentalities, no assurance can
be given that it will always do so, because it is not required to do
so by law;
-- short-term foreign government securities (with respect to the
International Fund) representing securities issued or guaranteed by a
foreign government or its agencies or instrumentalities;
-- repurchase agreements;
-- certificates of deposit, time deposits and bankers' acceptances and
other short-term obligations issued by domestic banks (including their
branches located outside the United States (Eurodollars) and
subsidiaries located in Canada), domestic and foreign branches of
foreign banks (Yankees dollars), savings and loan associations and
similar institutions;
-- commercial paper, which are short-term unsecured promissory notes
issued by corporations in order to finance their current operations.
The commercial paper of U.S. issuers or foreign issuers acquired by
the International Fund will consist only of direct obligations.
Generally the commercial paper will be rated within the top two rating
categories by an NRSRO, or if not rated, will have been issued and
guaranteed as to payment of principal and interest by companies which
at the date of investment have outstanding debt issue with a high
quality rating or will have been determined by its Subadviser to be of
comparable quality to those rated obligations that such Fund may
purchase;
-- adjustable and variable rate instruments;
-- short-term (with remaining maturities of 397 days or less)
corporate obligations rated within the top two categories by an NRSRO;
-- bank loan participation agreements (except with respect to the
International Fund) representing obligations of corporations and banks
having a high quality short-term
B-2
<PAGE> 59
rating, at the date of investment, and under which a Fund will look to
the creditworthiness of the lender bank, which is obligated to make
payments of principal and interest on the loan, as well as to
creditworthiness of the borrower.
STRIPPED TREASURY SECURITIES. The Balanced Fund may invest in U.S. Treasury
securities that have been stripped of their unmatured interest coupons (which
typically provide for interest payments semi-annually); interest coupons that
have been stripped from such U.S. Treasury securities; and receipts and
certificates for such stripped debt obligations and stripped coupons
(collectively, "Stripped Treasury Securities"). Stripped Treasury Securities
will include coupons that have been stripped from U.S. Treasury bonds which may
be held through the Federal Reserve Bank's book-entry system called "Separate
Trading of Registered Interest and Principal of Securities ("STRIPS") or through
a program entitled "Coupon Under Book-Entry Safekeeping" ("CUBES"). Stripped
Treasury Securities are sold at a deep discount because the buyer receives only
the right to receive a future fixed payment (representing principal or interest)
on the securities and does not receive any rights to periodic interest payments
on the security.
PARTICIPATION INTERESTS. The International Fund may invest in corporate
obligations denominated in U.S. or foreign currencies that are originated,
negotiated and structured by a syndicate of lenders ("Co-Lenders") consisting of
commercial banks, thrift institutions, insurance companies, financial companies
or other financial institutions one or more of which administers the security on
behalf of the syndicate (the "Agent Bank"). Co-Lenders may sell such securities
to third parties called "Participants." The International Fund may invest in
such securities either by participating as a Co-Lender at origination or by
acquiring an interest in the security from a Co-Lender or a Participant
(collectively, "participation interests"). Co-Lenders and Participants
interposed between the International Fund and the corporate borrower (the
"Borrower"), together with Agent Banks, are referred to herein as "Intermediate
Participants." The International Fund may also purchase a participation interest
in a portion of the rights of an Intermediate Participant, which would not
establish any direct relationship between the Trust, on behalf of the
International Fund, and the Borrower. In such cases, the International Fund
would be required to rely on the Intermediate Participant that sold the
participation interest not only for the enforcement of the International Fund's
rights against the Borrower, but also for the receipt and processing of payments
due to the International Fund under the security. Because it may be necessary to
assert through an Intermediate Participant such rights as may exist against the
Borrower, if the Borrower fails to pay principal and interest when due, the
International Fund may be subject to delays, expenses and risks that are greater
than those that would be involved if the International Fund were to enforce its
rights directly against the Borrower. Moreover, under the terms of a
participation interest, the International Fund may be regarded as a creditor of
the Intermediate Participant (rather than of the Borrower), so that the
International Fund also may be subject to the risk that the Intermediate
Participant may become insolvent. Similar risks may arise with respect to the
Agent Bank if, for example, assets held by the Agent Bank for the benefit of the
International Fund were determined by the appropriate regulatory authority or
court to be subject to the claims of the Agent Bank's creditors. In such case,
the International Fund might incur certain costs and delays in realizing payment
in connection with the participation interest or suffer a loss of principal
and/or interest. Further, in the event of the bankruptcy or insolvency of the
Borrower, the obligation of the Borrower to repay the loan may
B-3
<PAGE> 60
be subject to certain defenses that can be asserted by such Borrower as a result
of improper conduct by the Agent Bank or Intermediate Participant.
MORTGAGE- AND ASSET-BACKED SECURITIES. The Balanced Fund and Small Cap Fund may
each purchase mortgage-backed securities and asset-backed securities, including
securities issued by private lenders. Private lenders or government-related
entities may create mortgage loan pools offering mortgage-backed securities
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-backed securities are developed and offered
to investors, a Fund, consistent with its investment objectives and policies,
may consider making investments in such new types of securities. The market for
privately issued mortgage and asset-backed securities is smaller and less liquid
than the market for government sponsored mortgaged-backed securities.
There are a number of important differences among the agencies and
instrumentalities of the U.S. Government that issue mortgage-related securities
and among the securities that they issue. Mortgage-related securities issued by
GNMA include GNMA Mortgage Pass-Through Certificates (also known as "Ginnie
Maes") which are guaranteed as to the timely payment of principal and interest
by GNMA and such guarantee is backed by the full faith and credit of the United
States. GNMA certificates also are supported by the authority of GNMA to borrow
funds from the U.S. Treasury to make payments under its guarantee.
Mortgage-related securities issued by FNMA include FNMA Guaranteed Mortgage
Pass-Through Certificates (also known as "Fannie Maes") which are solely the
obligations of FNMA and are not backed by or entitled to the full faith and
credit of the United States. Fannie Maes are guaranteed as to timely payment of
the principal and interest by FNMA. Mortgage-related securities issued by the
Federal Home Loan Mortgage Corporation ("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. Freddie Macs are
not guaranteed by the United States or by any Federal Home Loan Banks and do not
constitute a debt or obligation of the United States or of 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.
STRIPPED MORTGAGE-BACKED SECURITIES. The Balanced Fund and Small Cap Fund may
each invest in stripped mortgage-backed securities. Stripped mortgage-backed
securities ("SMBS") are derivative multi-class mortgage securities. SMBS 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 entities of the foregoing. SMBS are usually structured with two classes
that receive different proportions of the interest and principal distributions
on an underlying pool of mortgage assets. A common type of SMBS will have one
class receiving
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some of the interest and most of the principal from the mortgage assets, while
the other class will receive most of the interest and the remainder of the
principal. In the most extreme case, one class will receive all of the interest
(the interest-only or "IO" class), while the other class will receive all of the
principal (the principal-only or "PO" class). The yield to maturity on an IO
class is extremely sensitive 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 a Fund's yield to
maturity from these securities. If the underlying mortgage assets experience
greater than anticipated prepayments of principal, a Fund may fail to fully
recoup its initial investment in these securities even if the security is in one
of the highest rating categories.
Although SMBS are purchased and sold by institutional investors through several
investment banking firms acting as brokers or dealers, these securities were
only recently developed. As a result, established trading markets have not yet
developed and, accordingly, certain of these securities may be deemed "illiquid"
and subject to a Fund's limitations on investment in illiquid securities.
The market value of such securities generally is more sensitive to changes in
prepayment and interest rates than is the case with traditional mortgage- and
asset-backed securities, and in some cases the market value may be extremely
volatile.
INTEREST ONLY AND PRINCIPAL ONLY SECURITIES -- Stripped mortgage-backed
securities are securities representing interest in a pool of mortgages the cash
flow from which has been separated into interest and principal components. "IOs"
(interest only securities) receive the interest portion of the cash flow while
"POs" (principal only securities) receive the principal portion. Stripped
mortgage-backed securities may be issued by U.S. Government agencies or by
private lenders. As interest rates rise and fall, the value of IOs tends to move
in the same direction as interest rates. The value of POs, like other debt
instruments, will tend to move in the opposite direction compared to interest
rates. POs perform best when prepayments on the underlying mortgages rise since
this increases the rate at which the investment is returned and the yield to
maturity on the PO. When payments on mortgages underlying a PO are slow, the
life of the PO is lengthened and the yield to maturity is reduced.
The Balanced Fund may purchase stripped mortgage-backed securities for hedging
purposes to protect that Fund against interest rate fluctuations. For example,
since an IO will tend to increase in value as interest rates rise, it may be
utilized to hedge against a decrease in value of other fixed-income securities
in a rising interest rate environment. With respect to IOs, if the underlying
mortgage securities experience greater than anticipated prepayments of
principal, the Balanced Fund may fail to recoup fully its initial investment in
these securities even if the securities are rated in the highest rating category
by a NRSRO. Stripped mortgage-backed securities may exhibit greater price
volatility than ordinary debt securities because of the manner in which their
principal and interest are returned to investors. The market value of the class
consisting entirely of principal payments can be extremely volatile in response
to changes in interest rates. The yields on stripped mortgage-backed securities
that receive all or most of the interest are generally higher than prevailing
market yields on other mortgage-backed obligations because their cash flow
patterns are also volatile and there is a greater risk that the initial
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investment will not be fully recouped. No more than 10% of the Balanced Fund's
total assets will be invested in IOs and in POs. 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, the Balanced
Fund may have difficulty in selling such securities.
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS. Each of the Funds may
enter into repurchase agreements with certain banks or non-bank dealers. In
connection with the purchase of a repurchase agreement by a Fund, the Fund's
custodian, or a subcustodian, will have custody of, and will hold in a
segregated account, securities acquired by the 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 Securities and Exchange Commission (the "SEC") to be loans by a Fund.
Repurchase agreements may be entered into with respect to securities of the type
in which a Fund may invest or government securities regardless of their
remaining maturities. A Fund will require that additional securities be
deposited with its custodian if the value of the securities purchased should
decrease below resale price. Repurchase agreements involve certain risks in the
event of default or insolvency by the other party, including possible delays or
restrictions upon a Fund's ability to dispose of the underlying securities, the
risk of a possible decline in the value of the underlying securities during the
period in which a Fund seeks to assert its rights to the securities, the risk of
incurring expenses associated with asserting those rights and the risk of losing
all or part of the income from the repurchase agreement.
The Balanced Fund may borrow funds for temporary purposes by entering into
reverse repurchase agreements in accordance with its investment restrictions. A
reverse repurchase agreement requires a Fund to sell portfolio securities to a
financial institution, such as a bank or broker-dealer, and agree to repurchase
the securities at a mutually agreed-upon date and price. A Fund intends to enter
into a reverse repurchase agreement only to be able to meet redemptions without
having to sell securities during unfavorable market conditions. When a Fund
enters into a reverse repurchase agreement, it will place in a segregated
custodial account assets such as U.S. Government securities or other liquid
securities consistent with its investment restrictions having a value equal to
the repurchase price (including accrued interest). The Fund will continually
monitor the account to ensure that such equivalent value is maintained at all
times. Reverse repurchase agreements involve the risk that the market value of
the securities sold by a Fund may decline below the price at which the Fund is
obligated to repurchase the securities. Reverse repurchase agreements are
considered to be borrowings by a Fund under the 1940 Act.
MORTGAGE DOLLAR ROLL TRANSACTIONS. The Balanced Fund may enter into mortgage
dollar roll transactions. Under a mortgage "dollar roll," the Balanced Fund
sells mortgage-backed securities for delivery in the current month and
simultaneously contracts to repurchase substantially similar (same type, coupon
and maturity) securities on a specified future date. During the roll period, the
Balanced Fund forgoes principal and interest paid on the mortgage-backed
securities. The Balanced Fund is compensated by the difference between the
current sales price and the lower forward price for the future purchase (often
referred to as the "drop") as well as by the interest earned on the cash
proceeds of the initial sale. Mortgage dollar rolls involve the risk that the
market value of the securities the Balanced Fund is obligated to
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repurchase under the agreement may decline below the repurchase price. In the
event the buyer of securities under a mortgage dollar roll files for bankruptcy
or becomes insolvent, the Balanced Fund's use of proceeds of the dollar roll may
be restricted pending a determination by the other party, or its trustee or
receiver, whether to enforce the Balanced Fund's obligation to repurchase the
mortgage dollar rolls.
WHEN-ISSUED SECURITIES AND DELAYED-DELIVERY TRANSACTIONS. Each of the Funds may
purchase securities on a "when-issued" or "delayed delivery" basis (i.e.,
payment or delivery occurs beyond the normal settlement date at a stated price
and yield). A Fund will do so, however, only for the purpose of acquiring
portfolio securities consistent with its investment objectives and policies and
not for investment leverage. When-issued transactions normally settle within 45
days. The payment obligation and the interest rate, if applicable, that will be
received on when-issued securities are fixed at the time a Fund enters into the
commitment to buy such securities. Due to fluctuations in the value of
securities purchased or sold on a when-issued or delayed-delivery basis, the
yields obtained on or prices of such securities may be higher or lower than the
yields or prices available in the market on the dates when the investments are
actually delivered to the buyers.
When a Fund agrees to purchase when-issued or delayed-delivery securities, to
the extent required by the SEC, the Fund's 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. If the custodian does so, the Fund may be required
subsequently to place additional assets in the segregated account in order to
ensure that the value of the account remains equal to the amount of the Fund's
commitment. It may be expected that the Fund's net assets will fluctuate to a
greater degree when it sets aside portfolio securities to cover such purchase
commitments than when it sets aside cash. In addition, because the Fund will set
aside cash or liquid portfolio securities to satisfy its purchase commitments in
the manner described above, the Fund's liquidity and the ability of the Fund's
Subadviser to manage the Fund might be affected if the Fund's commitments to
purchase "when-issued" securities ever exceeded 25% of the value of the Fund's
total assets. Under normal market conditions, however, a Fund's commitment to
purchase "when-issued" or "delayed-delivery" securities will not exceed 25% of
the value of its total assets (this percentage limitation, however, does not
apply to the International Fund; it may purchase "when-issued" or
"delayed-delivery" securities without limit). When a Fund engages in when-issued
or delayed-delivery transactions, it relies on the other party to consummate the
trade. Failure of the seller to do so may cause the Fund to incur a loss or miss
an opportunity to obtain a price considered to be advantageous.
LENDING PORTFOLIO SECURITIES. Each of the Funds may lend its portfolio
securities to brokers, dealers and other financial institutions, provided that
the Fund receives cash collateral with a value that is at all times equal to at
least 100% of the current market value of the securities the Fund has loaned.
The amount of securities lent by a Fund may not exceed 33 1/3% of the value of
such Fund's total assets. By lending its portfolio securities, a Fund can
increase its income through the investment of the cash collateral. For the
purposes of this policy, a Fund will consider U.S. Government securities or
letters of credit issued by banks whose securities meet the standards for
investment by the Fund to be the equivalent of cash. From time to time, a Fund
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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 a
Fund lends its portfolio securities: (1) the Fund must receive cash collateral
from the borrower with a value that is at least equal to 100% of the current
market value of the securities lent by the Fund; (2) the borrower must provide
the Fund with additional collateral whenever the market value of the securities
loaned by the Fund becomes greater than the value of the collateral; (3) the
Fund must be able to terminate the loan at any time; (4) the Fund must receive
reasonable interest on the loan, as well as any dividends, interest or other
distributions payable on the loaned securities, and must receive the benefit of
any increase in the market value of the securities it has loaned; (5) the Fund
may pay only reasonable custodian fees in connection with the loan; and (6)
although any voting rights on the loaned securities are permitted to pass to the
borrower, the Trust'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 Fund's investment in the securities 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 a Fund's ability to recover the loaned securities or dispose
of the collateral for the loan.
FOREIGN SECURITIES. Each of the Funds may invest, directly or indirectly through
the use of depository receipts, in foreign securities. However, the Large Cap
Value Fund will invest in foreign securities only if the securities are traded
in the U.S. and the issuers comply with U.S. accounting standards
Investing in foreign securities involves certain special considerations which
are not typically associated with investing in domestic securities. Because
investments in foreign companies will frequently involve currencies of foreign
countries, and because a Fund may hold securities and funds in foreign
currencies, a Fund may be affected favorably or unfavorably by changes in
currency rates and 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. Securities of some foreign companies may also be less
liquid and more volatile than securities of comparable domestic companies.
Because non-U.S. companies are not generally subject to uniform accounting,
auditing and financial reporting standards and practices that are comparable to
the standards that apply to domestic issuers, there may be less publicly
available information about certain foreign securities than about domestic
securities. Fixed commissions on foreign securities exchanges are generally
higher than negotiated commissions on U.S. exchanges, although each Fund
endeavors to achieve the most favorable net results on its portfolio
transactions. There is generally less government supervision and regulation of
securities exchanges, brokers and listed companies in foreign countries than in
the United States. In addition, with respect to certain foreign countries, there
is the possibility of exchange control restrictions, expropriation or
confiscatory taxation, and political, economic or social instability, which
could affect investments in those countries. Foreign securities may also be
subject to foreign government taxes, higher custodian fees and dividend
collection fees which could reduce the yield on such securities.
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Certain foreign governments levy withholding taxes against dividend and interest
income. Although in some countries a portion of these taxes are recoverable, the
non-recovered portion of foreign withholding taxes will reduce the income
received from investments in such countries. However, these foreign withholding
taxes are not expected to have a significant impact on those Funds for which the
investment objective is to seek long-term capital appreciation and any income
should be considered incidental.
DEPOSITORY RECEIPTS. Each of the Funds may invest in foreign securities
indirectly by purchasing depository receipts, including American Depository
Receipts ("ADRs"), European Depository Receipts ("EDRs") and Global Depository
Receipts ("GDRs") (the Large Cap Growth Fund will not purchase EDRs but may
purchase ADRs and GDRs) or 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, while EDRs (also referred to as
Continental Depository Receipts ("CDRs") and GDRs, in bearer form, may be
denominated in other currencies and are designed for use in European securities
markets or in other markets outside of the United States. 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 issued outside of the United States, typically by
non-United States banks and trust companies, that evidence ownership of either
foreign or domestic securities. For purposes of a Fund's investment policies,
ADRs, EDRs and GDRs are deemed to have the same classification as the underlying
securities they represent. Thus, for example, an ADR, EDR or GDR that represents
ownership of common stock will be treated as common stock.
A Fund may invest in depository receipts through "sponsored" or "unsponsored"
facilities. While ADRs, EDRs and GDRs 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, EDR and GDR holders and the practices of
market participants. A depository may establish an unsponsored facility without
participation by (or even necessarily the acquiescence of) the issuer of the
deposited securities, although typically the depository requests a letter of
non-objection from such issuer prior to the establishment of the facility.
Holders of unsponsored ADRs, EDRs and GDRs generally bear all the costs of such
facilities. The depository 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 depository of an unsponsored facility frequently is under no obligation to
pass through voting rights to ADR, EDR and GDR 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 depository receipts. Unsponsored ADRs, EDRs and GDRs tend to be
less liquid than sponsored ADRs, EDRs and GDRs.
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Sponsored ADR, EDR and GDR 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 depository. The deposit agreement sets
out the rights and responsibilities of the issuer, the depository, and the ADR,
EDR and GDR 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 depository), although ADR, EDR and GDR 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.
EURODOLLAR AND YANKEE OBLIGATIONS. The Large Cap Growth Fund, Small Cap Fund,
Balanced Fund and International Fund may each invest in Eurodollar bank
obligations, which are dollar-denominated certificates of deposit and time
deposits issued outside the U.S. capital markets by foreign branches of U.S.
banks and by foreign banks. Yankee bank obligations are dollar-denominated
obligations issued in the U.S. capital markets by foreign banks.
Eurodollar and Yankee bank obligations are subject to the same risks that
pertain to domestic issues, notably credit risk, market risk and liquidity risk.
Additionally, Eurodollar (and to a limited extent, Yankee) bank obligations are
subject to certain sovereign risks. One such risk is the possibility that a
sovereign country might prevent capital, in the form of dollars, from flowing
across their borders. Other risks include: adverse political and economic
developments; the extent and quality of government regulation of financial
markets and institutions; the imposition of foreign withholding taxes, and the
expropriation or nationalization of foreign issuers. However, Eurodollar and
Yankee bank obligations held in a Fund will undergo the same credit analysis as
domestic issues in which a Fund invests, and will have at least the same
financial strength as the domestic issuers approved for the Fund.
FOREIGN CURRENCY TRANSACTIONS. The Balanced Fund and the International Fund may
engage in foreign currency transactions. Currency exchange rates may fluctuate
significantly over short periods of time. These rates are generally determined
by the forces of supply and demand in the foreign exchange markets and the
relative merits of investments in different countries, actual or perceived
changes in interest rates and other complex factors, as seen from an
international perspective. Currency exchange rates also can be affected
unpredictably by intervention of U.S. or foreign governments or central banks,
or the failure to intervene, or by currency controls or political developments
in the United States or abroad.
Such a Fund may enter into a foreign currency transaction for a variety of
purposes, including the following: to fix in U.S. Dollars, between trade and
settlement date, the value of a security that the Balanced Fund or the
International Fund has agreed to buy or sell; to hedge the U.S. dollar value of
securities that the Balanced Fund or the International Fund already owns,
particularly if they expects a decrease in the value of the currency in which
the foreign security is denominated; or to gain exposure to the foreign currency
in an attempt to realize gains.
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Foreign currency transactions may involve, for example, the Balanced Fund's or
International Fund's purchase of foreign currencies for U.S. dollars or the
maintenance of short positions in foreign currencies, which would involve the
Balanced Fund's or the International Fund's agreeing to exchange an amount of a
currency it did not currently own for another currency at a future date in
anticipation of a decline in the value of the currency sold relative to the
currency the Balanced Fund or International Fund contracted to receive in the
exchange. The Balanced Fund's and the International Fund's success in these
transactions will depend principally on its Subadviser's ability to predict
accurately the future exchange rates between foreign currencies and the U.S.
dollar.
CONVERTIBLE SECURITIES. Each of the Funds may invest in convertible securities
to the extent described in the Prospectus. 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. 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. 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, with investment value declining as interest rates increase
and increasing as interest rates decline. The credit standing of the issuer and
other factors also may have an effect on the convertible security's investment
value. The conversion value of a convertible security is determined by the
market price of the underlying common stock. 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.
A convertible security may be subject to redemption at the option of the issuer
at a price established in the convertible security's governing instrument. If a
convertible security held by a Fund is called for redemption, the Fund will be
required to permit the issuer to redeem the security, convert it into the
underlying common stock, or sell it to a third party.
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WARRANTS. Each of the Funds may acquire warrants. Warrants are securities that
give 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 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.
RESTRICTED, NON-PUBLICLY TRADED AND ILLIQUID SECURITIES. Each of the Funds may
invest up to 15% of its net assets in illiquid securities. However, the Large
Cap Value Fund does not currently intend to invest in illiquid securities. Such
securities include 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. 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. 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 a Fund might be unable to dispose of restricted or
other illiquid securities promptly or at reasonable prices and might thereby
experience difficulty satisfying redemptions within seven days. A Fund might
also have to register such restricted securities in order to dispose of them
resulting in additional expense and delay. Adverse market conditions could
impede such a public offering of securities.
In recent years, however, a large institutional market has developed for certain
securities that are not registered under the Securities Act including 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 under the Securities Act 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. It is anticipated that the
market for certain restricted securities such as institutional commercial paper
will expand further as a result of this regulation and use of automated systems
for the trading, clearance and
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settlement of unregistered securities of domestic and foreign issuers, such as
the PORTAL System sponsored by the National Association of Securities Dealers,
Inc.
Any such restricted securities will be considered to be illiquid for purposes of
a Fund's limitations on investments in illiquid securities unless, pursuant to
procedures adopted by the Board of Trustees of the Trust, the Fund's Subadviser
has determined such securities to be liquid because such securities are eligible
for resale pursuant to Rule 144A and are readily saleable. To the extent that
qualified institutional buyers may become uninterested in purchasing Rule 144A
securities, a Fund's level of illiquidity may increase.
The Balanced Fund may buy or sell over-the-counter ("OTC") options and, in
connection therewith, segregate assets or cover its obligations with respect to
OTC options written by the Balanced Fund. The Small Cap Fund may buy OTC options
but will not write OTC options. The assets used as cover for OTC options written
by a Fund will be considered illiquid unless the OTC options are sold to
qualified dealers who agree that the Fund may repurchase any OTC option it
writes at a maximum price to be calculated by a formula set forth in the option
agreement. The cover for an OTC option written subject to this procedure would
be considered illiquid only to the extent that the maximum repurchase price
under the formula exceeds the intrinsic value of the option.
The Subadvisers will monitor the liquidity of restricted securities in the Fund
they advise. In reaching liquidity decisions, the Subadvisers may consider the
following factors: (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. Each of the Funds may borrow money, subject to the Funds' fundamental
investment restriction described below. Each Fund expects that its borrowings
will be on a secured basis. In such situations, either the custodian will
segregate the pledged assets for the benefit of the lender or arrangements will
be made with a suitable subcustodian, which may include the lender. The Funds
have established a line-of-credit ("LOC") with their custodian that allows them
to borrow for temporary or emergency purposes. The Funds intend to use the LOC
to meet large or unexpected redemptions that would otherwise force a Fund to
liquidate securities under circumstances which are unfavorable to the Fund's
remaining shareholders.
DERIVATIVE INSTRUMENTS. Each of the Funds may invest in a variety of derivative
instruments, including options, futures contracts (sometimes referred to as
"futures"), options on futures contracts, stock index options and forward
currency contracts to hedge a Fund's portfolio or for risk management (the Funds
may invest in futures contracts and options on futures contracts for hedging
purposes without limit). Derivative instruments are financial instruments whose
value and performance are based on the value and performance of another
security, financial instrument or index. 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").
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SPECIAL RISKS OF DERIVATIVE INSTRUMENTS. The use of derivative instruments
involves special considerations and risks as described below. Risks pertaining
to particular instruments are described in the sections that follow.
(1) Successful use of most of these instruments depends upon a
Subadviser's ability to predict movements of the overall securities
and currency markets, which requires different skills than predicting
changes in the prices of individual securities. There can be no
assurance that any particular strategy adopted will succeed.
(2) There might be imperfect correlation, or even no correlation,
between price movements of an instrument and price movements of
investments being hedged. For example, if the value of an instrument
used in a short hedge (such as writing a call option, buying a put
option, or selling a futures contract) increased by less than the
decline in value of the hedged investment, the hedge would not be
fully successful. Such a lack of correlation might occur due to
factors unrelated to the value of the investments being hedged, such
as speculative or other pressures on the markets in which these
instruments are traded. The effectiveness of hedges using instruments
on indices will depend on the degree of correlation between price
movements in the index and price movements in the investments being
hedged, as well as how similar the index is to the portion of the
Fund's assets being hedged in terms of securities composition.
(3) Hedging strategies, if successful, can reduce the risk of loss by
wholly or partially offsetting the negative effect of unfavorable
price movements in the investments being hedged. However, hedging
strategies can also reduce opportunity for gain by offsetting the
positive effect of favorable price movements in the hedged
investments. For example, if a Fund entered into a short hedge
because a Subadviser projected a decline in the price of a security
in the Fund's portfolio, and the price of that security increased
instead, the gain from that increase might be wholly or partially
offset by a decline in the price of the instrument. Moreover, if the
price of the instrument declined by more than the increase in the
price of the security, the Fund could suffer a loss.
(4) As described below, a Fund might be required to maintain assets
as "cover," maintain segregated accounts, or make margin payments
when it takes positions in these instruments involving obligations to
third parties (i.e., instruments other than purchased options). If
the Fund were unable to close out its positions in such instruments,
it might be required to continue to maintain such assets or accounts
or make such payments until the position expired or matured. The
requirements might impair the Fund's ability to sell a portfolio
security or make an investment at a time when it would otherwise be
favorable to do so, or require that the Fund sell a portfolio
security at a disadvantageous time. A 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 ("counter party") 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 a
Fund.
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For a discussion of the federal income tax treatment of a Fund's derivative
instruments, see "Additional General Tax Information".
OPTIONS. The Balanced Fund may purchase or write put and call options on
securities and indices, and may purchase options on foreign currencies, and
enter into closing transactions with respect to such options to terminate an
existing position. The Small Cap Fund may purchase such options and enter into
closing transactions but otherwise will not write such options. The Large Cap
Growth Fund may purchase and write call options and enter into closing
transactions only with respect to future contracts. The International Fund may
purchase call and put option contracts and may write (i.e., sell) covered call
and put option contracts.
A call option gives the purchaser the right to buy, and the writer the
obligation to sell, the underlying security at the agreed upon exercise (or
"strike") price during the option period. A put option gives the purchaser the
right to sell, and the writer the obligation to buy, the underlying security at
the strike price during the option period. Purchasers of options pay an amount,
known as a premium, to the option writer in exchange for the right under the
option contract. Option contracts may be written with terms which would permit
the holder of the option to purchase or sell the underlying security only upon
the expiration date of the option. The initial purchase or sale of an option
contract is an "opening transaction". In order to close out an option position,
a Fund may enter into a "closing transaction", the sale or purchase, as the case
may be, of an option contract on the same security with the same exercise price
and expiration date as the option contract originally opened. The purchase of
call options serves as a long hedge, and the purchase of put options serves as a
short hedge. Writing put or call options can enable a Fund to enhance income by
reason of the premiums paid by the purchaser of such options. Writing call
options serves as a limited short hedge because declines in the value of the
hedged investment would be offset to the extent of the premium received for
writing the option. However, if the security appreciates to a price higher than
the exercise price of the call option, it can be expected that the option will
be exercised, and the Fund will be obligated to sell the security at less than
its market value or will be obligated to purchase the security at a price
greater than that at which the security must be sold under the option. All or a
portion of any assets used as cover for OTC options written by a Fund would be
considered illiquid to the extent described under "Restricted and Illiquid
Securities" above. Writing put options serves as a limited long hedge because
increases in the value of the hedged investment would be offset to the extent of
the premium received for writing the option. However, if the security
depreciates to a price lower than the exercise price of the put option, it can
be expected that the put option will be exercised, and the Fund will be
obligated to purchase the security at more than its market value.
The value of an option position will reflect, among other things, the historical
price volatility of the underlying investment, the current market value of the
underlying investment, the time remaining until expiration of the option, the
relationship of the exercise price to the market price of the underlying
investment, and general market conditions. Options that expire unexercised have
no value. Options used by the Fund may include European-style options, which can
only be exercised at expiration. This is in contrast to American-style options
which can be exercised at any time prior to the expiration date of the option.
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A Fund may effectively terminate its right or obligation under an option by
entering into a closing transaction. For example, the Fund may terminate its
obligation under a call or put option that it had written by purchasing an
identical call or put option; this is known as a closing purchase transaction.
Conversely, the Fund may terminate a position in a put or call option it had
purchased by writing an identical put or call option; this is known as a closing
sale transaction. Closing transactions permit the Fund to realize the profit or
limit the loss on an option position prior to its exercise or expiration.
A Fund may purchase or write both OTC options and options traded on foreign and
U.S. exchanges. Exchange-traded options are issued by a clearing organization
affiliated with the exchange on which the option is listed that, in effect,
guarantees completion of every exchange-traded option transaction. OTC options
are contracts between the Fund and the counterparty (usually a securities dealer
or a bank) with no clearing organization guarantee. Thus, when a Fund purchases
or writes an OTC option, it relies on the counter party to make or take delivery
of the underlying investment upon exercise of the option. Failure by the counter
party to do so would result in the loss of any premium paid by the Fund as well
as the loss of any expected benefit of the transaction.
The ability to establish and close out positions in exchange-listed options
depends on the existence of a liquid market. Only exchange-traded options for
which there appears to be a liquid secondary market will be purchased or
written. 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 OTC options will be entered into only
with counterparties that are expected to be capable of entering into closing
transactions with a Fund, there is no assurance that such Fund will in fact be
able to close out an OTC option at a favorable price prior to expiration. In the
event of insolvency of the counter party, a Fund might be unable to close out an
OTC option position at any time prior to its expiration.
Transactions using OTC options expose a Fund to certain risks. To the extent
required by SEC guidelines, a Fund will not enter into any such transactions
unless it owns either (1) an offsetting ("covered") position in securities,
other options, or futures or (2) cash and liquid obligations with a value
sufficient at all times to cover its potential obligations to the extent not
covered as provided in (1) above. A Fund will also set aside cash and/or
appropriate liquid assets in a segregated custodial account if required to do so
by the SEC and CFTC regulations. Assets used as cover or held in a segregated
account cannot be sold while the position in the corresponding option or futures
contract is open, unless they are replaced with similar assets. As a result, the
commitment of a large portion of a Fund's assets to segregated accounts as a
cover could impede portfolio management or the Fund's ability to meet redemption
requests or other current obligations.
If a Fund is unable to effect a closing transaction for an option it had
purchased, it would have to exercise the option to realize any profit. The
inability to enter into a closing purchase transaction for a covered call option
written by a Fund could cause material losses because the Fund would be unable
to sell the investment used as a cover for the written option until the option
expires or is exercised.
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A Fund may engage in options transactions on indices in much the same manner as
the options on securities discussed above, except that index options may serve
as a hedge against overall fluctuations in the securities markets in general.
Index options (or options on securities indices) are similar in many respects to
options on securities except that an index option gives the holder the right to
receive, upon exercise, cash instead of securities, if the closing level of the
securities index upon which the option is based is greater than, in the case of
a call, or less than, in the case of a put, the exercise price of the option.
Price movements in securities in which a Fund owns or intends to purchase
probably will not correlate perfectly with movements in the level of an index
and, therefore, the Fund bears the risk of a loss on an index option that is not
completely offset by movements in the price of such securities. Because index
options are settled in cash, a call writer cannot determine the amount of its
settlement obligations in advance and, unlike call writing on specific
securities, cannot provide in advance for, or cover, its potential settlement
obligations by acquiring and holding the underlying securities. A Fund will be
required to segregate assets and/or provide an initial margin to cover index
options that would require it to pay cash upon exercise.
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.
FUTURES CONTRACTS. Each of the Funds may enter into the following types of
futures contracts and may purchase and write (sell) related options: the Large
Cap Growth Fund and Large Cap Value Fund may enter into futures contracts on
indices; the Small Cap Fund may enter into futures contracts on options and
indices; the Balanced Fund and the International Fund are not limited with
respect to the futures contracts that they may enter into and may, for example,
enter into interest rate, index, and currency futures. The purchase of futures
or call options thereon can serve as a long hedge, and the sale of futures or
the purchase of put options thereon can serve as a short hedge. Writing covered
call options on futures contracts can serve as a limited short hedge, and
writing covered put options on futures contracts can serve as a limited long
hedge, using a strategy similar to that used for writing covered options in
securities. A Fund's hedging may include purchases of futures as an offset
against the effect of expected increases in securities prices or currency
exchange rates and sales of futures as an offset against the effect of expected
declines in securities prices or currency exchange rates. A Fund may write put
options on futures contracts while at the same time purchasing call options on
the same futures contracts in order to create synthetically a long futures
contract position. Such options would have the same strike prices and expiration
dates. A Fund will engage in this strategy only when its Subadviser believes it
is more advantageous to the Fund than purchasing a futures contract.
To the extent required by regulatory authorities, a Fund will only enter into
futures contracts that are traded on U.S. or foreign exchanges or boards of
trade approved by the CFTC and are standardized as to maturity date and
underlying financial instrument. These transactions may be entered into for
"bona fide hedging" purposes as defined in CFTC regulations and other
permissible purposes including increasing return, managing duration, and hedging
against
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changes in the value of portfolio securities due to anticipated changes in
interest rates, currency values and/or market conditions. The ability of a Fund
to trade in futures contracts may be limited by the requirements of the Code
applicable to a regulated investment company.
A Fund will not enter into futures contracts and related options for other than
"bona fide hedging" purposes for which the aggregate initial margin and premiums
required to establish positions exceed 5% of the Fund's net asset value after
taking into account unrealized profits and unrealized losses on any such
contracts it has entered into. There is no overall limit on the percentage of a
Fund's assets that may be at risk with respect to futures activities. Although
techniques other than sales and purchases of futures contracts could be used to
reduce a Fund's exposure to markets and currencies or to manage duration, such
Fund may be able to manage or increase 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, a Fund realizes a gain; if
it is more, a Fund realizes a loss. Conversely, if the offsetting sale price is
more than the original purchase price, a Fund realizes a gain; if it is less, a
Fund realizes a loss. The transaction costs must also be included in these
calculations. There can be no assurance, however, that a Fund will be able to
enter into an offsetting transaction with respect to a particular futures
contract at a particular time. If a Fund is not able to enter into an offsetting
transaction, the Fund will continue to be required to maintain the margin
deposits on the futures contract.
No price is paid by a Fund upon entering into a futures contract. Instead, at
the inception of a futures contract, the Fund is required to deposit in a
segregated account with its custodian or a Futures Commissions Merchant, in the
name of the futures broker through whom the transaction was effected, "initial
margin" consisting of cash, U.S. Government securities or other liquid
obligations, in an amount generally equal to 10% or less of the contract value.
Margin must also be deposited when writing a call or put option on a futures
contract, in accordance with applicable exchange rules. Unlike margin in
securities transactions, initial margin on futures contracts does not represent
a borrowing, but rather is in the nature of a performance bond or good-faith
deposit that is returned to the Fund at the termination of the transaction if
all contractual obligations have been satisfied. Under certain circumstances,
such as periods of high volatility, the Fund may be required by an exchange to
increase the level of its initial margin
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payment, and initial margin requirements might be increased generally in the
future by regulatory action.
Subsequent "variation margin" payments are made to and from the futures broker
daily as the value of the futures position varies, a process known as "marking
to market." Variation margin does not involve borrowing, but rather represents a
daily settlement of a Fund's obligations to or from a futures broker. When a
Fund purchases an option on a future, the premium paid plus transaction costs is
all that is at risk. In contrast, when a Fund purchases or sells a futures
contract or writes a call or put option thereon, it is subject to daily
variation margin calls that could be substantial in the event of adverse price
movements. If a Fund has insufficient cash to meet daily variation margin
requirements, it might need to sell securities at a time when such sales are
disadvantageous. Purchasers and sellers of futures positions and options on
futures can enter into offsetting closing transactions by selling or purchasing,
respectively, an instrument identical to the instrument held or written.
Positions in futures and options on futures may be closed only on an exchange or
board of trade on which they were entered into (or through a linked exchange).
Although the Funds intend to enter into futures transactions only on exchanges
or boards of trade where there appears to be an active market, there can be no
assurance that such a market will exist for a particular contract at a
particular time.
Under certain circumstances, futures exchanges may establish daily limits on the
amount that the price of a future or option on a futures contract can vary from
the previous day's settlement price; once that limit is reached, no trades may
be made that day at a price beyond the limit. Daily price limits do not limit
potential losses because prices could move to the daily limit for several
consecutive days with little or no trading, thereby preventing liquidation of
unfavorable positions.
If a Fund were unable to liquidate a futures or option on a futures contract
position due to the absence of a liquid secondary market or the imposition of
price limits, it could incur substantial losses, because it would continue to be
subject to market risk with respect to the position. In addition, except in the
case of purchased options, the Fund would continue to be required to make daily
variation margin payments and might be required to maintain the position being
hedged by the future or option or to maintain cash or securities in a segregated
account.
Certain characteristics of the futures market might increase the risk that
movements in the prices of futures contracts or options on futures contracts
might not correlate perfectly with movements in the prices of the investments
being hedged. For example, all participants in the futures and options on
futures contracts markets are subject to daily variation margin calls and might
be compelled to liquidate futures or options on futures contracts positions
whose prices are moving unfavorably to avoid being subject to further calls.
These liquidations could increase price volatility of the instruments and
distort the normal price relationship between the futures or options and the
investments being hedged. Also, because initial margin deposit requirements in
the futures markets are less onerous than margin requirements in the securities
markets, there might be increased participation by speculators in the future
markets. This participation also might cause temporary price distortions. In
addition, activities of large traders in both the futures and securities markets
involving arbitrage, "program trading" and other investment strategies might
result in temporary price distortions.
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FORWARD CURRENCY CONTRACTS. Each of the Funds may enter into forward currency
contracts. A forward currency contract involves an obligation to purchase or
sell a specific currency at a future date, which may be any fixed number of days
from the date of the contract agreed upon by the parties, at a price set at the
time of the contract. These contracts are entered into in the interbank market
conducted directly between currency traders (usually large commercial banks) and
their customers.
At or before the maturity of a forward currency contract, a Fund may either sell
a portfolio security and make delivery of the currency, or retain the security
and fully or partially offset its contractual obligation to deliver the currency
by purchasing a second contract. If a Fund retains the portfolio security and
engages in an offsetting transaction, the Fund, at the time of execution of the
offsetting transaction, will incur a gain or a loss to the extent that movement
has occurred in forward 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, a Fund might need to purchase or
sell foreign currencies in the spot (cash) market to the extent such foreign
currencies are not covered by forward contracts. The projection of short-term
currency market movements is extremely difficult, and the successful execution
of a short-term hedging strategy is highly uncertain.
SHORT SALES. Each of the Funds may engage in short sales of securities. In a
short sale, a Fund sells stock which it does not own, making delivery with
securities "borrowed" from a broker. The Fund is then obligated to replace the
security borrowed by purchasing it at the market price at the time of
replacement. This price may or may not be less than the price at which the
security was sold by the Fund. Until the security is replaced, the Fund is
required to pay the lender any dividends or interest which accrue during the
period of the loan. In order to borrow the security, the Fund may also have to
pay a fee 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.
SECURITIES OF OTHER NON-AFFILIATED INVESTMENT COMPANIES. Some of the countries
in which a Fund may invest may not permit direct investment by outside
investors. Investments in such countries may only be permitted through foreign
government-approved or government-authorized investment vehicles, which may
include other investment companies. Each of the Funds may also invest in shares
of other non-affiliated investment companies registered under the 1940 Act.
Investing through such vehicles may involve frequent or layered fees or expenses
and may also be subject to limitation under the 1940 Act. Under the 1940 Act, a
Fund may invest up to 10% of its assets in shares of investment companies and up
to 5% of its assets in any one investment company as long as the investment does
not represent more than 3% of the voting stock of the acquired investment
company.
BANK OBLIGATIONS. As stated in the Prospectus, each of the Funds may purchase
bank obligations, including certificates of deposit, banker's acceptances and
fixed time deposits. Bank
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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. 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.
FLOATING AND VARIABLE RATE INSTRUMENTS. The Balanced Fund, Small Cap Fund, and
International Fund may invest in floating and variable rate instruments. The
Large Cap Growth Fund may also invest in such securities but will not invest in
inverse floating rate securities. Variable and floating rate securities provide
for a periodic adjustment in the interest rate paid on the obligations. The
terms of such obligations must provide that interest rates are adjusted
periodically based upon an interest rate adjustment index as provided in the
respective obligations. The adjustment intervals may be regular, and range from
daily up to annually, or may be event based, such as based on a change in the
prime rate. Because of the interest rate reset feature, floaters provide
investors with a certain degree of protection against rises in interest rates,
although an investor will participate in any declines in interest rates as well.
Certain of the floating or variable rate obligations 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 are not 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, a Fund will nonetheless treat the instrument as "readily
marketable" for the purposes of its investment restriction limiting investments
in illiquid securities unless the demand feature has a notice period of more
than seven days in which case the instrument will be characterized as "not
readily marketable" and therefore illiquid.
A Fund's right to obtain payment at par on a demand instrument could be affected
by events occurring between the date the Fund elects to demand payment and the
date payment is due that may affect the ability of the issuer of the instrument
or third party providing credit support to make payment when due, except when
such demand instruments permit same day settlement. To facilitate settlement,
these same day demand instruments may be held in book entry form at a bank other
than a Fund's custodian subject to a subcustodian agreement approved by the Fund
between that bank and the Fund's custodian.
The Balanced Fund may invest in inverse floating rate debt instruments ("inverse
floaters"). The interest rate on an inverse floater resets in the opposite
direction from the market rate of interest to which the inverse floater is
indexed. An inverse floating rate security may exhibit greater price volatility
than a fixed rate obligation of similar credit quality.
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ZERO COUPON SECURITIES, PIK BONDS AND DEFERRED PAYMENT SECURITIES - Each of the
Funds except the Large Cap Value Fund and the International Fund may invest in
zero coupon securities. The Balanced Fund may also invest in payment-in-kind
("PIK") bonds and deferred payment securities. Zero coupon securities are debt
securities that pay zero 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. Certain zero coupon securities also are sold at
substantial discounts from their maturity value and provide for the commencement
of regular interest payments at a deferred date. 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.
Zero coupon securities, PIK bonds and deferred payment securities tend to be
subject to greater price fluctuations in response to changes in interest rates
than are ordinary interest-paying debt securities with similar maturities. The
value of zero coupon securities appreciates more during periods of declining
interest rates and depreciates more during periods of rising interest rates than
ordinary interest-paying debt securities with similar maturities. Zero coupon
securities, PIK bonds and deferred payment securities may be issued by a wide
variety of corporate and governmental issuers. Although these instruments are
generally not traded on a national securities exchange, they are widely traded
by brokers and dealers and, to such extent, will not be considered illiquid for
the purposes of the Fund's limitation on investments in illiquid securities.
Current federal income tax law requires the holder of a zero coupon security,
certain PIK bonds, deferred payment securities and certain other securities
acquired at a discount (such as Brady Bonds) to accrue income with respect to
these securities prior to the receipt of cash payments. Accordingly, to avoid
liability for federal income and excise taxes, the Fund may be required to
distribute income accrued with respect to these securities and may have to
dispose of portfolio securities under disadvantageous circumstances in order to
generate cash to satisfy these distribution requirements.
ADDITIONAL INFORMATION CONCERNING THE DURATION OF THE BOND PORTION OF THE
BALANCED FUND'S PORTFOLIO. The bond portion of the Balanced Fund's portfolio
will maintain a duration which, on a weighted average basis and under normal
market conditions, will generally be within one year of the average for the U.S.
investment-grade bond universe (currently about five years). There is no limit,
however, as to the maturity of any one security that the Balanced Fund may
purchase.
Duration is a measure of the average life of a fixed-income security.
Incorporating a security's yield, coupon interest payments, final maturity and
call features into one measure, duration 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.
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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.
Under some circumstances, 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, J.P. Morgan 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 bond portion of the Balanced 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 flat, 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.
PORTFOLIO TURNOVER. Each of the Funds will attempt to purchase securities with
the intent of holding them for investment but may purchase and sell portfolio
securities whenever NAS or the Subadviser to such Fund believes it to be in the
best interests of the Fund. The Funds will not consider portfolio turnover rate
a limiting factor in making investment decisions consistent with their
investment objective and policies.
The annual portfolio turnover rate for each of the Funds (including both the
equity and debt portions of the Balanced Fund's portfolio) is not expected to
exceed 100% of such Fund's portfolio. Higher turnover rates will generally
result in higher transaction costs to the Fund, as well as higher brokerage
expenses and higher levels of capital gains. The portfolio turnover rates of
each Fund may vary greatly from year to year and within a particular year.
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INVESTMENT RESTRICTIONS
The following are fundamental investment restrictions of each Fund which cannot
be changed without the authorization of the majority of the outstanding shares
of the Fund for which a change is proposed.
Each of the Funds:
o May not (except for the International Fund) purchase securities of any
one issuer, other than obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, if, immediately after
such purchase, more than 5% of the Fund's total assets would be
invested in such issuer or the Fund would hold more than 10% of the
outstanding voting securities of the issuer, except that 25% or less of
the Fund's total assets may be invested without regard to such
limitations. There is no limit to the percentage of assets that may be
invested in U.S. Treasury bills, notes, or other obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities.
o May not borrow money or issue senior securities, except that each Fund
may enter into reverse repurchase agreements and mortgage dollar roll
transactions 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 real estate, except that each Fund may (i)
acquire real estate through ownership of securities or instruments and
sell any real estate acquired thereby, (ii) purchase or sell
instruments secured by real estate (including interests therein), and
(iii) purchase or sell securities issued by entities or investment
vehicles that own or deal in real estate (including interests therein).
o May not purchase or sell commodities or commodities contracts, except
to the extent disclosed in the current Prospectus of such Fund.
o May not lend any security or make any other loan except that each Fund
may, in accordance with its investment objectives and policies, (i)
lend portfolio securities, (ii) purchase 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.
o May not purchase the securities of any issuer if, as a result, 25% or
more (taken at current value) of the Fund's total assets would be
invested in the securities of issuers the
B-24
<PAGE> 81
principal activities of which are in the same industry. This limitation
does not apply to securities issued by the U.S. Government or its
agencies or instrumentalities and obligations issued by state, county
or municipal governments. The following industries are considered
separate industries for purposes of this investment restriction:
electric, natural gas distribution, natural gas pipeline, combined
electric and natural gas, and telephone utilities, captive borrowing
conduit, equipment finance, premium finance, leasing finance, consumer
finance and other finance.
The following are the non-fundamental operating policies of the Funds, which may
be changed by the Board of Trustees of the Trust without shareholder approval:
Each of the Funds 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 securities if, as a result, more than
15% of its net assets would be invested in securities that are
illiquid.
o Purchase securities of other investment companies except (a) in
connection with a merger, consolidation, acquisition, reorganization or
offer of exchange, or (b) to the extent permitted by the 1940 Act or
any rules or regulations thereunder or pursuant to any exemptions
therefrom.
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.
TRUSTEES AND OFFICERS OF THE TRUST
The principal occupation of the Trustees and Officers during the last five
years, their ages and their affiliations are:
JOHN C. BRYANT, Trustee*, Age - 62, 11 Oak St., Suite 306, Cincinnati, Ohio
45219 Dr. Bryant is Executive Director, Cincinnati Youth Collaborative, a
partnership of business,
B-25
<PAGE> 82
government, schools and social service agencies to address the educational needs
of students. He was formerly Professor of Education, Wilmington College.
C. BRENT DEVORE, Trustee, Age -- 58, Otterbein College, North Walnut and West
College Avenue, Westerville, Ohio 43081. Dr. DeVore is President of Otterbein
College.
SUE A. DOODY, Trustee, Age -- 64, 169 East Beck Street, Columbus, Ohio 43026.
Ms. Doody is President of Lindey's Restaurant, Columbus, Ohio. She is an active
member of the Greater Columbus Area Chamber of Commerce Board of Trustees.
ROBERT M. DUNCAN, Trustee*, Age -- 71, 1397 Haddon Road, Columbus, Ohio 43209.
Mr. Duncan is a member of the Ohio Elections Commission. He was formerly
Secretary to the Board of Trustees of The Ohio State University. Prior to that,
he was Vice President and General Counsel of The Ohio State University
CHARLES L. FUELLGRAF, JR., Trustee*+, Age -- 67, 600 South Washington Street,
Butler, Pennsylvania 16001. Mr. Fuellgraf is Chief Executive Officer of
Fuellgraf Electric Company, an electrical construction and engineering company.
He is a Director of the Nationwide Insurance Companies and associated companies.
THOMAS J. KERR, IV, Trustee*, Age -- 64, 4890 Smoketalk Lane, Westerville, Ohio
43081. Dr. Kerr is President Emeritus of Kendall College. He was formerly
President of Grant Hospital Development Foundation.
DOUGLAS F. KRIDLER, Trustee, Age -- 42, 55 E. State Street, Columbus, Ohio
43212. Mr. Kridler is President of the Columbus Association of Performing Arts.
DIMON R. MCFERSON, Trustee*+, Age -- 61, One Nationwide Plaza, Columbus, Ohio
43215. Mr. McFerson is President and Chief Executive Officer of the Nationwide
Insurance Enterprise.
NANCY C. THOMAS, Trustee+, Age -- 64, 10835 Georgetown Road, NE, Louisville,
Ohio 44641. Ms. Thomas is a farm owner and operator. She is also a Director of
the Nationwide Insurance Companies and associated companies.
HAROLD W. WEIHL, Trustee+, Age -- 66, 14282 King Road, Bowling Green, Ohio
43402. Mr. Weihl is a owner and operator of Weihl Farms. He is also a Director
of the Nationwide Insurance Companies and associated companies.
DAVID C. WETMORE, Trustee, Age -- 50, 11495 Sunset Hills Rd - Suite #210,
Reston, Virginia 20190. Mr. Wetmore is the Managing Director of The Updata
Capital, a venture capital firm.
JAMES F. LAIRD, JR., Treasurer, Three Nationwide Plaza, Columbus, Ohio 43215.
Mr. Laird is Vice President and General Manager of Nationwide Advisory Services,
Inc., the Distributor and Investment Manager.
B-26
<PAGE> 83
CHRISTOPHER A. CRAY, Assistant Treasurer, Three Nationwide Plaza, Columbus, Ohio
43215. Mr. Cray is Treasurer of Nationwide Advisory Services, Inc., the
Distributor and Investment Manager. Prior to that he was Director - Corporate
Accounting of Nationwide Insurance Enterprise.
ELIZABETH A. DAVIN, Secretary, Three Nationwide Plaza, Columbus, Ohio 43215. Ms.
Davin is Counsel of Druen, Dietrich, Reynolds & Koogler, the Trust's legal
counsel.
+ A Trustee who is an "interested person" of the Trust as defined in the
Investment Company Act.
*Members of the Executive Committee. Mr. McFerson is Chairman. Mr. Fuellgraf is
the Alternate Member. The Executive Committee has the authority to act for the
Board of Trustees except as provided by law and except as specified in the
Trust's Bylaws.
All Trustees and Officers of the Trust own less than 1% of its outstanding
shares.
The Trustees receive fees and reimbursement for expenses of attending board
meetings from the Trust. NAS reimburses the Trust for fees and expenses paid to
Trustees who are interested persons of the Trust. The Compensation Table below
sets forth the total compensation to be paid to the Trustees of the Trust,
before reimbursement, for the fiscal period ending October 31, 1998. In
addition, the table sets forth the total compensation to be paid to the Trustees
from all funds in the Nationwide Fund Complex, included the predecessor
investment companies to the Trust, for the fiscal year ended October 31, 1997.
Trust officers receive no compensation from the Trust in their capacity as
officers.
COMPENSATION TABLE
<TABLE>
<CAPTION>
PENSION
RETIREMENT TOTAL
AGGREGATE BENEFITS COMPENSATION
COMPENSATION ACCRUED AS PART ANNUAL FROM THE
NAME OF PERSON, FROM THE OF FUND BENEFITS UPON FUND
POSITION COMPLEX** TRUST EXPENSE RETIREMENT COMPLEX
<S> <C> <C> <C> <C>
John C. Bryant, Trustee $10,000 --0-- --0-- $21,000
C. Brent DeVore, Trustee $10,000 --0-- --0-- $10,000
Sue A. Doody, Trustee $10,000 --0-- --0-- $21,000
Robert M. Duncan, Trustee $10,000 --0-- --0-- $21,000
Charles L. Fuellgraf, Jr.,
Trustee $10,000 --0-- --0-- $10,000
Thomas J. Kerr, IV,
Trustee $10,000 --0-- --0-- $21,000
Douglas F. Kridler, Trustee $10,000 --0-- --0-- $21,000
Dimon R. McFerson,
Trustee --0-- --0-- --0-- --0--
</TABLE>
B-27
<PAGE> 84
<TABLE>
<CAPTION>
PENSION
RETIREMENT TOTAL
AGGREGATE BENEFITS COMPENSATION
COMPENSATION ACCRUED AS PART ANNUAL FROM THE
NAME OF PERSON, FROM THE OF FUND BENEFITS UPON FUND
POSITION COMPLEX** TRUST EXPENSE RETIREMENT COMPLEX
<S> <C> <C> <C> <C>
Nancy C. Thomas, Trustee $10,000 --0-- --0-- $10,000
Harold W. Weihl, Trustee $10,000 --0-- --0-- $10,000
David C. Wetmore, Trustee $10,000 --0-- --0-- $10,000
</TABLE>
**The Fund Complex includes Trusts comprised of thirty-five investment company
portfolios.
INVESTMENT ADVISORY AND OTHER SERVICES
Under the terms of the Investment Advisory Agreement dated May 9, 1998, as
amended as of ________________, 1998 Nationwide Advisory Services, Inc. ("NAS"),
in accordance with the policies and procedures established by the Trustees,
manages the day-to-day investment of the assets of each of the funds in the
Nationwide Family of Funds except the Funds and the Morley Capital Accumulation
Fund. With respect to the Funds, NAS provides investment management evaluation
services in initially selecting and monitoring on an ongoing basis the
performance of the Subadvisers, who each manage the investment portfolio of a
particular Fund.
The Adviser pays the compensation of the Trustees and officers affiliated with
the Adviser. The Adviser 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.
The Investment Advisory Agreement also specifically provides that the Adviser,
including its directors, officers, and employees, shall not be liable for any
error of judgment, or mistake of law, or for any loss arising out of any
investment, or for any act or omission in the execution and management of the
Trust, except for willful misfeasance, bad faith, or gross negligence in the
performance of its duties, or by reason of reckless disregard of its obligations
and duties under the Agreement. The Agreement will continue 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 a Fund without penalty
by vote of a majority of the outstanding voting securities of that Fund, or by
either party, on not less than 60 days written notice. The Agreement further
provides that the Adviser may render similar services to others.
The Trust pays the compensation of the Trustees who are not affiliated with the
Adviser and all expenses (other than those assumed by the Adviser), including
governmental fees, interest charges, taxes, membership dues in the Investment
Company Institute allocable to the Trust; fees
B-28
<PAGE> 85
under the Trust's Fund Administration Agreement; 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; and 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.
NAS, an Ohio corporation, is a wholly owned subsidiary of Nationwide Life
Insurance Company, which is owned by Nationwide Financial Services, Inc. (NFS).
NFS, a holding company, has two classes of common stock outstanding with
different voting rights enabling Nationwide Corporation (the holder of all of
the outstanding Class B common stock) to control NFS. Nationwide Corporation, is
also a holding company in the Nationwide Insurance Enterprise.
For services provided under the Investment Management Agreement, NAS receives an
annual fee paid monthly based on average daily net assets of each fund in the
Nationwide Family of Funds according to the following schedule:
<TABLE>
<CAPTION>
FUND ASSETS FEE
<S> <C> <C>
Nationwide Mid Cap Growth Fund, $0 up to $250 million 0.60%
Nationwide Growth Fund, and $250 million up to $1 billion 0.575%
Nationwide Fund $1 billion up to $2 billion 0.55%
$2 billion up to $5 billion 0.525%
$5 Billion and more 0.50%
Nationwide Bond Fund, $0 up to $250 million 0.50%
Nationwide Tax-Free Income Fund, $250 million up to $1 billion 0.475%
Nationwide Long-Term U.S. Government $1 billion up to $2 billion 0.45%
Bond Fund, and Nationwide Intermediate $2 billion up to $5 billion 0.425%
U.S. Government Bond Fund $5 Billion and more 0.40%
Nationwide Money Market Fund $0 up to $1 billion 0.40%
$1 billion up to $2 billion 0.38%
$2 billion up to $5 billion 0.36%
$5 billion and more 0.34%
Nationwide S&P 500 Index Fund all assets 0.13%
Large Cap Value up to $100 million 0.75%
$100 million or more 0.70%
Large Cap Growth up to $150 million 0.80%
$150 million or more 0.70%
Balanced up to $100 million 0.75%
$100 million or more 0.70%
</TABLE>
B-29
<PAGE> 86
<TABLE>
<CAPTION>
FUND ASSETS FEE
<S> <C> <C>
Small Cap up to $100 million 0.95%
$100 million or more 0.80%
International up to $200 million 0.85%
$200 million or more 0.80%
</TABLE>
During the fiscal years ended October 31, 1997, 1996 and 1995, NAS received the
following fees for investment advisory services*:
<TABLE>
<CAPTION>
FISCAL YEARS ENDED OCTOBER 31,
NATIONWIDE FUND 1997 1996 1995
<S> <C> <C> <C>
Mid Cap Growth $ 63,883 $ 54,053 $ 46,886
Growth 3,750,599 3,212,196 2,542,155
Nationwide Fund 5,938,011 4,425,921 3,658,939
Bond 629,068 663,545 635,757
Tax-Free 1,688,233 1,704,966 1,629,584
Long-Term U.S. Government 343,259 414,415 447,894
Intermediate U.S. Government 256,016 255,149 248,765
Money Market** 3,502,716 2,952,726 2,465,549
</TABLE>
* The fees paid to NAS during the fiscal years ended October 31, 1997, 1996, and
1995 were paid by funds that were acquired by NIF III in a reorganization that
occurred on May 9, 1998. As part of the reorganization, NIF III acquired all of
the assets and assumed all of the liabilities of each of the funds in Nationwide
Investing Foundation, Nationwide Investing Foundation II, and Financial Horizons
Investment Trust.
** Net of waivers of $389,150, $328,076 and $273,950 for 1997, 1996 and 1995,
respectively.
B-30
<PAGE> 87
The Subadvisers for the Funds are as follows:
<TABLE>
<CAPTION>
FUND SUBADVISER
<S> <C>
Large Cap Value Brinson Partners, Inc. ("Brinson Partners")
Large Cap Growth Goldman Sachs Asset Management ("GSAM")
Balanced J.P. Morgan Investment Management, Inc. (J.P. Morgan")
Small Cap Institutional Trust Company ("Institutional Trust") and INVESCO Management &
Research, Inc. ("IMR")
International Lazard Asset Management ("Lazard")
</TABLE>
Brinson Partners, a Delaware corporation and an investment management firm, is
an indirect wholly-owned subsidiary of UBS AG, an internationally diversified
organization headquartered in Zurich, Switzerland, with operations in many
aspects of the financial services industry. GSAM is a separate operating
division of Goldman Sachs & Co., an investment banking firm whose headquarters
are in New York, New York. J.P. Morgan is a directly wholly owned subsidiary of
J.P. Morgan & Co. Incorporated, a bank holding company organized under the laws
of Delaware. J.P. Morgan offers a wide range investment management services and
acts as investment adviser to corporate and institutional clients. Institutional
Trust and IMR are part of a global investment organization, AMVESCAP plc.
AMVESCAP plc is a publicly-traded holding company that, through its
subsidiaries, engages in the business of investment management on an
international basis. Lazard is a New York-based division of Lazard Freres & Co.
LLC, a limited liability company registered as an investment adviser and
providing investment management services to client discretionary accounts.
Subject to the supervision of the NAS and the Trustees, each of the Subadvisers
manages the assets of the Fund listed above in accordance with the Fund's
investment objectives and policies. Each Subadviser makes investment decisions
for the Fund and in connection with such investment decisions places purchase
and sell orders for securities. For the investment management services they
provide to the Funds, the Subadvisers receive annual fees from NAS, calculated
at an annual rate based on the average daily net assets of the Funds, in the
following amounts:
<TABLE>
<CAPTION>
FUND ASSETS FEE
<S> <C> <C>
Large Cap Value Fund up to $100 million 0.35%
$100 million or more 0.30%
Large Cap Growth Fund up to $150 million 0.40%
$150 million or more 0.30%
Balanced Fund up to $100 million 0.35%
</TABLE>
B-31
<PAGE> 88
<TABLE>
<CAPTION>
FUND ASSETS FEE
<S> <C> <C>
$100 million or more 0.30%
Small Cap Fund up to $100 million 0.55%
$100 million or more 0.40%
International Fund up to $200 million 0.45%
$200 million or more 0.40%
</TABLE>
DISTRIBUTOR
NAS serves as agent for each of the Funds in the distribution of its Shares
pursuant to a Underwriting Agreement dated as of May 9, 1998, as amended as of
_________________, 1998, (the "Underwriting Agreement"). Unless otherwise
terminated, the Underwriting Agreement will continue in effect until May 9,
2000, and year to year thereafter for successive annual periods, if, as to each
Fund, such continuance is approved at least annually by (i) the Trust's Board of
Trustees or by the vote of a majority of the outstanding shares of that Fund,
and (ii) the vote of a majority of the Trustees of the Trust who are not parties
to the Underwriting Agreement or interested persons (as defined in the 1940 Act)
of any party to the Underwriting Agreement, cast in person at a meeting called
for the purpose of voting on such approval. The Underwriting Agreement may be
terminated in the event of any assignment, as defined in the 1940 Act.
In its capacity as Distributor, NAS solicits orders for the sale of Shares,
advertises and pays the costs of advertising, office space and the personnel
involved in such activities. NAS receives no compensation under the Underwriting
Agreement with the Trust, but may retain all or a portion of the sales charge
imposed upon sales of Shares of each of the Funds.
DISTRIBUTION PLAN
The Funds have adopted a Distribution Plan (the "Plan") under Rule 12b-1 of the
1940 Act. The Plan permits the Funds to compensate NAS, as the Funds'
Distributor, for expenses associated with the distribution of shares of the
Funds. Although actual distribution expenses may be more or less, under the Plan
the Funds shall pay NAS an annual fee in an amount that will not exceed 0.25% of
the average daily net assets of Class A shares and 1.00% of the average daily
net assets of Class B shares. Distribution expenses paid by NAS may include the
costs of marketing, printing and mailing prospectuses and sales literature to
prospective investors, advertising, and compensation to sales personnel and
broker-dealers.
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 a Fund
and who have no direct or indirect financial interest in the operation of the
Plan (the "Independent Trustees"). The Plan was approved by the Board of
Trustees with respect to the Funds on __________, 1998. The Plan may be
terminated as to the Funds by vote of a majority of the Independent Trustees, or
by vote of majority of the outstanding Shares of that Fund. Any change in the
Plan that would materially increase the distribution cost to the Funds requires
Shareholder approval. The Trustees review quarterly a written report of such
costs and the purposes for which such costs have been incurred.
B-32
<PAGE> 89
The Plan may be amended by vote of the Trustees including a majority of the
Independent Trustees, cast in person at a meeting called for that purpose. For
so long as the Plan is in effect, selection and nomination of those Trustees who
are not interested persons of the Trust shall be committed to the discretion of
such disinterested persons. All agreements with any person relating to the
implementation of the Plan may be terminated at any time on 60 days' written
notice without payment of any penalty, by vote of a majority of the Independent
Trustees or by a vote of the majority of the outstanding Shares of the Funds.
The Plan will continue in effect for successive one-year periods, provided that
each such continuance is specifically approved (i) by the vote of a majority of
the Independent Trustees, and (ii) by a vote of a majority of the entire Board
of Trustees cast in person at a meeting called for that purpose. The Board of
Trustees has a duty to request and evaluate such information as may be
reasonably necessary for them to make an informed determination of whether the
Plan should be implemented or continued. In addition the Trustees in approving
the Plan as to a Fund must determine that there is a reasonable likelihood that
the Plan will benefit such Fund and its Shareholders.
The Board of Trustees of the Trust believes that the Plan is in the best
interests of the Funds since it encourages Fund growth and maintenance of Fund
assets. As the Funds grow in size, certain expenses, and therefore total
expenses per Share, may be reduced and overall performance per Share may be
improved.
NAS 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 a Fund's Shares including, but not limited
to, those discussed above.
OTHER SERVICES FOR ALL THE FUNDS
Under the terms of a Fund Administration Agreement, NAS also provides various
administrative and accounting services, including daily valuation of the Funds'
shares and preparation of financial statements, tax returns, and regulatory
reports. For these services, each Fund pays NAS an annual fee based on each
Fund's average daily net assets in the amount of 0.10% up to $250 million in
assets, 0.06% on the next $750 million of assets and 0.04% on assets of $1
billion and more, subject to a minimum of $75,000 per Fund per year.
Under the terms of an Administrative Services Plan, NAS has agreed to provide
certain administrative support services in connection with the Class Y shares of
the Funds. Such administrative support services include but are not limited to
the following: establishing and maintaining shareholder accounts, processing
purchase and redemption transactions, arranging for bank wires, performing
shareholder sub-accounting, answering inquiries regarding the Funds,
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.
NAS, through its wholly-owned subsidiary, Nationwide Investors Services, Inc.
("NISI"), serves as transfer agent and dividend disbursing agent for the Trust.
For these services, NAS receives an
B-33
<PAGE> 90
annual fee from each of the Funds at the following rate: $18 per Fund account
for Class A and B shares, and 0.01% of each Fund's average daily net assets for
Class Y shares.
The Fifth Third Bank ("Fifth Third"), 38 Fountain Square Plaza, Cincinnati, OH
45263, is the custodian for the Funds and makes all receipts and disbursements
under a Custody Agreement. Fifth Third performs no managerial or policy-making
functions for the Funds.
KPMG Peat Marwick LLP, Two Nationwide Plaza, Columbus, OH 43215, serves as the
independent auditors for the Trust.
BROKERAGE ALLOCATION
NAS (or a Subadviser) is responsible for decisions to buy and sell securities
and other investments for the Funds, the selection of brokers and dealers to
effect the transactions and the negotiation of brokerage commissions, if any. In
transactions on stock and commodity exchanges in the United States, these
commissions are negotiated, whereas on foreign stock and commodity exchanges
these commissions are generally fixed and are generally higher than brokerage
commissions in the United States. In the case of securities traded on the
over-the-counter markets, 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. A dealer's profit, if
any, is the difference, or spread, between the dealer's purchase and sale price
for the obligation.
The primary consideration in portfolio security transactions is "best price -
best execution," i.e., execution at the most favorable prices and in the most
effective manner possible. NAS or a Subadviser always attempts to achieve best
price - best execution, and both NAS and the Subadvisers have complete freedom
as to the markets in and the broker-dealers through which they seek this result.
Subject to the requirement of seeking best execution, securities may be bought
from or sold to broker-dealers who have furnished statistical, research, and
other information or services to NAS or a Subadviser. In placing orders with
such broker-dealers, NAS or a Subadviser will, where possible, take into account
the comparative usefulness of such information. Such information is useful to
NAS or a Subadviser even though its dollar value may be indeterminable, and its
receipt or availability generally does not reduce NAS' or a Subadviser'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.
B-34
<PAGE> 91
There may be occasions when portfolio transactions for a Fund are executed as
part of concurrent authorizations to purchase or sell the same security for
trusts or other accounts served by affiliated companies of NAS or a Subadviser.
Although such concurrent authorizations potentially could be either advantageous
or disadvantageous to a Fund, they are effected only when NAS or a Subadviser
believes that to do so is in the interest of the Fund. When such concurrent
authorizations occur, the executions will be allocated in an equitable manner.
The Trustees periodically review NAS' and each Subadviser's performance of their
responsibilities in connection with the placement of portfolio transactions on
behalf of the Funds and review the commissions paid by the Funds over
representative periods of time to determine if they are reasonable in relation
to the benefits to the Funds.
In purchasing and selling investments for the Funds, it is the policy of each of
the Subadvisers to obtain best execution at the most favorable prices through
responsible broker-dealers. In selecting broker-dealers, each Subadviser will
consider various relevant factors, including but not limited to the size and
type of the transaction, the nature and character of the markets for the
security or asset to be purchased or sold, the execution efficiency, settlement
capability, and financial condition of the broker-dealer's firm, the
broker-dealer's execution services (rendered on a continuing basis), and the
reasonableness of any commissions.
Each Subadviser may cause a Fund to pay a broker-dealer who furnishes brokerage
and/or research services a commission that is in excess of the commission
another broker-dealer would have received for executing the transaction if it is
determined, pursuant to the requirements of Section 28(e) of the Securities
Exchange Act of 1934, that such commission is reasonable in relation to the
value of the brokerage and/or research services provided. Such research services
may include, among other things, analyses and reports concerning issuers,
industries, securities, economic factors and trends, and portfolio strategy. Any
such research and other information provided by brokers to a Subadviser is
considered to be in addition to and not in lieu of services required to be
performed by the Subadviser under its subadvisory agreement with NAS. The fees
paid to each of the Subadvisers pursuant to its subadvisory agreement with NAS
are not reduced by reason of its receiving any brokerage and research services.
The research services provided by broker-dealers can be useful to a Subadviser
in serving its other clients or clients of the Subadviser's affiliates. Subject
to the policy of the Subadvisers to obtain best execution at the most favorable
prices through responsible broker-dealers, a Subadviser also may consider the
broker-dealer's sale of shares of any fund for which the Subadviser serves as
investment adviser, subadviser or administrator.
Under the 1940 Act, "affiliated persons" of a Fund are prohibited from dealing
with it as a principal in the purchase and sale of securities unless an
exemptive order allowing such transactions is obtained from the SEC. However,
each Fund may purchase securities from underwriting syndicates of which a
Subadviser or any of its affiliates, as defined in the 1940 Act, is a member
under certain conditions, in accordance with Rule 10f-3 under the 1940 Act.
Each of the Funds contemplate that, consistent with the policy of obtaining best
results, brokerage transactions may be conducted through "affiliated brokers or
dealers," as defined in the 1940 Act. Under the 1940 Act, commissions paid by a
Fund to an "affiliated broker or
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dealer" in connection with a purchase or sale of securities offered on a
securities exchange may not exceed the usual and customary broker's commission.
Accordingly, it is the Funds' policy that the commissions to be paid to an
affiliated broker-dealer must, in the judgment of NAS or the appropriate
Subadviser, be (1) at least as favorable as those that would be charged by other
brokers having comparable execution capability and (2) at least as favorable as
commissions contemporaneously charged by such broker or dealer on comparable
transactions for the broker's or dealer's most favored unaffiliated customers,
except for accounts for which the affiliated broker or dealer acts as a clearing
broker for another brokerage firm and customers of an affiliated broker or
dealer that, in the opinion of a majority of the independent trustees, are not
comparable to the Fund. The Funds do not deem it practicable or in their best
interests to solicit competitive bids for commissions on each transaction.
However, consideration regularly is given to information concerning the
prevailing level of commissions charged on comparable transactions by other
brokers during comparable periods of time.
CALCULATING YIELD AND TOTAL RETURN
The Funds may from time to time advertise historical performance, subject to
Rule 482 under the Securities Act. An investor should keep in mind that any
return or yield quoted represents past performance and is not a guarantee of
future results. The investment return and principal value of investments will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost.
All performance advertisements shall include average annual (compound) total
return quotations for the most recent one, five, and ten-year periods (or life
if a Fund has been in operation less than one of the prescribed periods).
Average annual (compound) total return represents redeemable value at the end of
the quoted period. It is calculated in a uniform manner by dividing the ending
redeemable value of a hypothetical initial payment of $1,000 minus the maximum
sales charge, for a specified period of time, by the amount of the initial
payment, assuming reinvestment of all dividends and distributions. In
calculating the standard total returns for Class A shares, the current maximum
applicable sales charge is deducted from the initial investment. For Class B
shares, the payment of the applicable CDSC is applied to the investment result
for the period shown. The one, five, and ten-year periods are calculated based
on periods that end on the last day of the calendar quarter preceding the date
on which an advertisement is submitted for publication.
Standardized yield and total return quotations will be compared separately for
Class A, B and Y shares. Because of differences in the fees and/or expenses
borne by Class A, B and Y shares of the Funds, the net yields and total returns
on Class A, B and Y shares can be expected, at any given time, to differ from
class to class for the same period.
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NONSTANDARD RETURNS
The Funds may also choose to show nonstandard returns including total return,
and simple average total return. Nonstandard returns may or may not reflect
reinvestment of all dividends and capital gains; in addition, sales charge
assumptions will vary. Sales charge percentages decrease as amounts invested
increase as outlined in the prospectus; therefore, returns increase as sales
charges decrease.
Total return represents the cumulative percentage change in the value of an
investment over time, calculated by subtracting the initial investment from the
redeemable value and dividing the result by the amount of the initial
investment. The simple average total return is calculated by dividing total
return by the number of years in the period, and unlike average annual
(compound) total return, does not reflect compounding.
The Balanced Fund may also from time to time advertise a uniformly calculated
yield quotation. This yield is calculated by dividing the net investment income
per share earned during a 30-day base period by the maximum offering price per
share on the last day of the period, assuming reinvestment of all dividends and
distributions. This yield formula uses the average number of shares entitled to
receive dividends, provides for semi-annual compounding of interest, and
includes a modified market value method for determining amortization. The yield
will fluctuate, and there is no assurance that the yield quoted on any given
occasion will remain in effect for any period of time.
ADDITIONAL INFORMATION
DESCRIPTION OF SHARES. The Trust presently offers fifteen series of shares of
beneficial interest, without par value. Five of these series are the Funds. The
shares of each of the funds in the Nationwide Family of Funds except the
Nationwide Money Market Fund are offered in three separate classes. A
shareholder has an interest only in the assets of the shares of the Fund that he
or she own. Shares of a particular class are equal in all respects to the other
shares of that class. In the event of the liquidation of a fund in the
Nationwide Family of Funds, shares of the same class will share pro rata in the
distribution of the net assets of such Fund with all other shares of that class.
The Nationwide Money Market Fund offers shares without class designation; its
shareholders have an equal proportionate interest in the shares of that Fund.
All shares are without par value and, when issued and paid for, are fully paid
and nonassessable by the Trust. Shares of the Funds may be exchanged or
converted as described above 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,
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
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Investment Advisory Agreement, the right to vote is limited to the holders of
shares of the particular class fund affected by the proposal. In addition,
holders of Class A shares or Class B shares 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 Commission that the Trustees will call a special meeting of shareholders for
purposes of considering the removal of one or more Trustees upon written request
therefor from shareholders holding not less than 10% of the outstanding votes of
the Trust and the Trust will assist in communicating with other shareholders as
required by Section 16(c) of the 1940 Act. At such meeting, a quorum of
shareholders (constituting a majority of votes attributable to all outstanding
shares of the Trust), by majority vote, has the power to remove one or more
Trustees.
ADDITIONAL GENERAL TAX INFORMATION
Each of the Funds is treated as a separate entity for Federal income tax
purposes and intends to qualify as a "regulated investment company" under the
Code, for so long as such qualification is in the best interest of that Fund's
shareholders. In order to qualify as a regulated investment company, a Fund
must, among other things: diversify its investments within certain prescribed
limits; derive at least 90% of its gross income from dividends, interest,
payments with respect to securities loans, and gains from the sale or other
disposition of securities or foreign currencies, or other income derived with
respect to its business of investing in such stock, securities, or currencies;
and, in taxable years beginning on or before August 5, 1997, derive less than
30% of its gross income from the sale or other disposition of stock, securities,
options, future contracts or foreign currencies held less than three months. In
addition, to utilize the tax provisions specially applicable to regulated
investment companies, a Fund must distribute to its shareholders at least 90% of
its investment company taxable income for the year. In general, the Fund's
investment company taxable income will be its taxable income subject to certain
adjustments and excluding the excess of any net mid-term or net long-term
capital gain for the taxable year over the net short-term capital loss, if any,
for such year.
A non-deductible 4% excise tax is imposed on regulated investment companies that
do not distribute in each calendar year (regardless of whether they otherwise
have a non-calendar taxable year) an amount equal to 98% of their ordinary
income for the calendar year plus 98% of their capital gain net income for the
one-year period ending on October 31 of such calendar year. The balance of such
income must be distributed during the next calendar year. If distributions
during a calendar year were less than the required amount, the Fund would be
subject to a non-deductible excise tax equal to 4% of the deficiency.
Although each Fund expects to qualify as a "regulated investment company" and to
be relieved of all or substantially all federal income taxes, depending upon the
extent of its activities in states and localities in which its offices are
maintained, in which its agents or independent contractors are located, or in
which it is otherwise deemed to be conducting business, a Fund may be subject to
the tax laws of such states or localities. In addition, if for any taxable year
a Fund does not qualify for the special tax treatment afforded regulated
investment companies, all of its taxable
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income will be subject to federal tax at regular corporate rates (without any
deduction for distributions to its shareholders). In such event, dividend
distributions would be taxable to shareholders to the extent of earnings and
profits, and would be eligible for the dividends received deduction for
corporations.
It is expected that each Fund will distribute annually to shareholders all or
substantially all of that Fund's net ordinary income and net realized capital
gains and that such distributed net ordinary income and distributed net realized
capital gains will be taxable income to shareholders for federal income tax
purposes, even if paid in additional shares of that Fund and not in cash.
Distribution by a Fund of the excess of net mid-term or net long-term capital
gain over net short-term capital loss, if any, is taxable to shareholders as
mid-term or long-term capital gain, respectively, in the year in which it is
received, regardless of how long the shareholder has held the shares. Such
distributions are not eligible for the dividends-received deduction.
Federal taxable income of individuals is subject to graduated tax rates of 15%,
28%, 31%, 36% and 39.6%. Further, the effective marginal tax rate may be in
excess of 39.6%, because adjustments reduce or eliminate the benefit of the
personal exemption and itemized deductions for individuals with gross income in
excess of certain threshold amounts.
Long-term capital gains of individuals are subject to a maximum tax rate of 20%
(10% for individuals in the 15% ordinary income tax bracket). Mid-term capital
gains of individuals are subject to tax at the same rates applicable to ordinary
income; however, the tax rate on mid-term capital gains of individuals cannot
exceed 28%. Capital losses may be used to offset capital gains. In addition,
individuals may deduct up to $3,000 of net capital loss each year to offset
ordinary income. Excess net capital loss may be carried forward and deducted in
future years. The holding period for mid-term capital gains is more than one
year but not more than eighteen months; the holding period for long-term capital
gains is more than eighteen months.
Federal taxable income of corporations in excess of $75,000 up to $10 million is
subject to a 34% tax rate; however, because the benefit of lower tax rates on a
corporation's taxable income of less than $75,000 is phased out for corporations
with income in excess of $100,000 but lower than $335,000, a maximum marginal
tax rate of 39% may result. Federal taxable income of corporations in excess of
$10 million is subject to a tax rate of 35%. Further, a corporation's federal
taxable income in excess of $15 million is subject to an additional tax equal to
3% of taxable income over $15 million, but not more than $100,000.
Capital gains of corporations are subject to tax at the same rates applicable to
ordinary income. Capital losses may be used only to offset capital gains and
excess net capital loss may be carried back three years and forward five years.
Certain corporations are entitled to a 70% dividends received deduction for
distributions from certain domestic corporations. Each Fund will designate the
portion of any distributions which qualify for the 70% dividends received
deduction. The amount so designated may not exceed the amount received by that
Fund for its taxable year that qualifies for the dividends received deduction.
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Foreign taxes may be imposed on a Fund by foreign countries with respect to its
income from foreign securities. Tax conventions between certain countries and
the United States may reduce or eliminate such taxes. It is impossible to
determine the effective rate of foreign tax in advance since the amount of each
Fund's assets to be invested in various countries is not known.
If less than 50% in value of any Fund's total assets at the end of its fiscal
year are invested in stocks or securities of foreign corporations, such Fund
will not be entitled under the Code to pass through to its Shareholders their
pro rata share of the foreign taxes paid by that Fund. These taxes will be taken
as a deduction by the Fund. Under Section 1256 of the Code, gain or loss
realized by a Fund from certain financial futures and options transactions will
be treated as 60% long-term capital gain or loss and 40% short-term capital gain
or loss. Gain or loss will arise upon exercise or lapse of such futures and
options as well as from closing transactions. In addition, any such futures and
options remaining unexercised at the end of a Fund's taxable year will be
treated as sold for their then fair market value, resulting in additional gain
or loss to such Fund characterized in the manner described above.
If more than 50% of the value of a Fund's total assets at the close of its
taxable year consists of the stock or securities of foreign corporations, the
Fund may elect to "pass through" to its shareholders the amount of foreign
income taxes paid by the Fund. Pursuant to such election, shareholders would be
required (i) to include in gross income, even though not actually received,
their respective pro rata share of the foreign taxes paid by the Fund, (ii) to
treat their income from the Fund as being from foreign sources to the extent
that the Fund's income is from foreign sources, and (iii) to either deduct their
pro rata share of foreign taxes in computing their taxable income or use it as a
foreign tax credit against federal income (but not both). No deduction for
foreign taxes could be claimed by a shareholder who does not itemize deductions.
It is anticipated that the International Fund will be operated so as to meet the
requirements of the Code to "pass through" to its shareholders credits for
foreign taxes paid, although there can be no assurance that these requirements
will be met. Each shareholder will be notified within 45 days after the close of
the International Fund's taxable year whether the foreign taxes paid by the
International Fund will "pass through" for that year and, if so, the amount of
each shareholder's pro rata share of (i) the foreign taxes paid, and (ii) the
International Fund's gross income from foreign sources. Of course, shareholders
who are not liable for federal income taxes, such as retirement plans qualified
under Section 401 of the Code, will not be affected by any such "pass through"
of foreign tax credits.
If a Fund invests in an entity that is classified as a "passive foreign
investment company" ("PFIC") for federal income tax purposes, the operation of
certain provisions of the Code applying to PFICs could result in the imposition
of certain federal income taxes on the Fund. In addition, gain realized from the
sale, other disposition, or marking-to-market of PFIC securities may be treated
as ordinary income under Section 1291 or Section 1296 of the Code.
Offsetting positions held by a Fund involving certain futures contracts or
options transactions may be considered, for tax purposes, to constitute
"straddles." Straddles are defined to include "offsetting positions" in actively
traded personal property. The tax treatment of straddles is
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governed by Sections 1092 and 1258 of the Code, which, in certain circumstances,
overrides or modifies the provisions of Section 1256. As such, all or a portion
of any short or long-term capital gain from certain straddle and/or conversion
transactions may be recharacterized as ordinary income.
If a Fund were treated as entering into straddles by reason of its engaging in
futures or options transactions, such straddles would be characterized as "mixed
straddles" if the futures or options comprising a part of such straddles were
governed by Section 1256 of the Code. A Fund may make one or more elections with
respect to mixed straddles. If no election is made, to the extent the straddle
rules apply to positions established by a Fund, losses realized by such Fund
will be deferred to the extent of unrealized gain in any offsetting positions.
Moreover, as a result of the straddle and conversion transaction rules,
short-term capital losses on straddle positions may be recharacterized as
long-term capital losses and long-term capital gains may be recharacterized as
short-term capital gain or ordinary income.
Investment by a Fund in securities issued at a discount or providing for
deferred interest or for payment of interest in the form of additional
obligations could, under special tax rules, affect the amount, timing and
character of distributions to Shareholders. For example, a Fund could be
required to take into account annually a portion of the discount (or deemed
discount) at which such securities were issued and to distribute such portion in
order to maintain its qualification as a regulated investment company. In that
case, that Fund may have to dispose of securities which it might otherwise have
continued to hold in order to generate cash to satisfy these distribution
requirements.
Each Fund may be required by federal law to withhold and remit to the U.S.
Treasury 31% of taxable dividends, if any, and capital gain distributions to any
Shareholder, and the proceeds of redemption or the values of any exchanges of
Shares of the Fund, if such Shareholder (1) fails to furnish the Fund with a
correct taxpayer identification number, (2) under-reports dividend or interest
income, or (3) fails to certify to the Fund that he or she is not subject to
such withholding. An individual's taxpayer identification number is his or her
Social Security number.
Information set forth in the Prospectus and this Statement of Additional
Information which relates to Federal taxation is only a summary of some of the
important Federal tax considerations generally affecting purchasers of shares of
the Funds. No attempt has been made to present a detailed explanation of the
Federal income tax treatment of the Funds or their shareholders and this
discussion is not intended as a substitute for careful tax planning.
Accordingly, potential purchasers of shares of a Fund are urged to consult their
tax advisers with specific reference to their own tax situation. In addition,
the tax discussion in the Prospectus and this Statement of Additional
Information is based on tax laws and regulations which are in effect on the date
of the prospectuses and this Statement of Additional Information; such laws and
regulations may be changed by legislative or administrative action.
Information as to the federal income tax status of all distributions will be
mailed annually to each shareholder.
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MAJOR SHAREHOLDERS
As of _____________, 1998, there were no outstanding shares of the Funds.
Immediately prior to the public offering of shares of the Funds, NAS owned all
of the issued and outstanding shares of each Fund. It is anticipated that upon
the public offering of shares of the Funds, NAS' holdings will be reduced below
5% of the outstanding shares of each Fund.
As of ____________ , 1998, the Trustees and Officers of the Trust as a group
owned beneficially less than 1% of the shares of the Trust.
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APPENDIX A
BOND RATINGS
STANDARD & POOR'S DEBT RATINGS
A Standard & Poor's corporate or municipal debt rating is a current assessment
of the creditworthiness of an obligor with respect to a specific obligation.
This assessment may take into consideration obligors such as guarantors,
insurers, or lessees.
The debt rating is not a recommendation to purchase, sell, or hold a security,
inasmuch as it does not comment as to market price or suitability for a
particular investor. The ratings are based on current information furnished by
the issuer or obtained by Standard & Poor's from other sources it considers
reliable. Standard & Poor's does not perform an audit in connection with any
rating and may, on occasion, rely on unaudited financial information. The
ratings may be changed, suspended, or withdrawn as a result of changes in, or
unavailability of, such information, or for other circumstances.
The ratings are based, in varying degrees, on the following considerations:
1. Likelihood of default - capacity and willingness of the obligor as
to the timely payment of interest and repayment of principal in
accordance with the terms of the obligation.
2. Nature of and provisions of the obligation.
3. Protection afforded by, and relative position of, the obligation
in the event of bankruptcy, reorganization, or other arrangement
under the laws of bankruptcy and other laws affecting creditors'
rights.
INVESTMENT GRADE
AAA - Debt rated 'AAA' has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA - Debt rated 'AA' has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
A - Debt rated 'A' has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB - Debt rated 'BBB' is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
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SPECULATIVE GRADE
Debt rated 'BB', 'B', 'CCC', 'CC' and 'C' is regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and repay
principal. 'BB' indicates the least degree of speculation and 'C' the highest.
While such debt will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major risk exposures to adverse
conditions.
BB - Debt rated 'BB' has less near-term vulnerability 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. The 'BB'
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied 'BBB-' rating.
B - Debt rated 'B' has a greater vulnerability to default 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. The 'B' rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied 'BB' or 'BB-'
rating.
CCC - Debt rated 'CCC' has a currently identifiable vulnerability 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. The 'CCC' rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied 'B' or 'B-' rating.
CC - Debt rated 'CC' typically is applied to debt subordinated to senior debt
that is assigned an actual or implied 'CCC' rating.
C - Debt rated 'C' typically is applied to debt subordinated to senior debt
which is assigned an actual or implied 'CCC-' debt rating. The 'C' rating may be
used to cover a situation where a bankruptcy petition has been filed, but debt
service payments are continued.
CI - The rating 'CI' is reserved for income bonds on which no interest is being
paid.
D - Debt rated 'D' is in payment default. The 'D' rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless Standard & Poor's believes that
such payments will be made during such grade period. The 'D' rating also will be
used upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
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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.
Ca - Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C - Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
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STATE AND MUNICIPAL NOTES
Excerpts from Moody's Investors Service, Inc., description of state and
municipal note ratings:
MIG-1--Notes bearing this designation are of the best quality, enjoying strong
protection from established cash flows of funds for their servicing from
established and board-based access to the market for refinancing, or both.
MIG-2--Notes bearing this designation are of high quality, with margins of
protection ample although not so large as in the preceding group.
MIG-3--Notes bearing this designation are of favorable quality, with all
security elements accounted for but lacking the strength of the preceding grade.
Market access for refinancing, in particular, is likely to be less well
established.
FITCH INVESTORS SERVICE, INC. BOND RATINGS
Fitch investment grade bond ratings provide a guide to investors in determining
the credit risk associated with a particular security. The ratings represent
Fitch's assessment of the issuer's ability to meet the obligations of a specific
debt issue or class of debt in a timely manner.
The rating takes into consideration special features of the issue, its
relationship to other obligations of the issuer, the current and prospective
financial condition and operating performance of the issuer and any guarantor,
as well as the economic and political environment that might affect the issuer's
future financial strength and credit quality.
Fitch ratings do not reflect any credit enhancement that may be provided by
insurance policies or financial guaranties unless otherwise indicated.
Bonds that have the same rating are of similar but not necessarily identical
credit quality since the rating categories do not fully reflect small
differences in the degrees of credit risk.
Fitch ratings are not recommendations to buy, sell, or hold any security.
ratings do not comment on the adequacy of market price, the suitability of any
security for a particular investor, or the tax-exempt nature or taxability of
payments made in respect of any security.
Fitch ratings are based on information obtained from issuers, other obligors,
underwriters, their experts, and other sources Fitch believes to be reliable.
Fitch does not audit or verify the truth or accuracy of such information.
Ratings may be changed, suspended, or withdrawn as a result of changes in, or
the unavailability of, information or for other reasons.
AAA Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events.
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AA Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated 'AAA'.
Because bonds rated in the 'AAA' and 'AA' categories are not
significantly vulnerable to foreseeable future developments,
short-term debt of the issuers is generally rated 'F-1+'.
A Bonds considered to be investment grade and of high credit quality.
The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse
changes in economic conditions and circumstances than bonds with
higher ratings.
BBB Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on
these bonds, and therefore, impair timely payment. The likelihood
that the ratings of these bonds will fall below investment grade is
higher than for bonds with higher ratings.
Fitch speculative grade bond ratings provide a guide to investors in
determining the credit risk associated with a particular security.
The ratings ('BB' to 'C') represent Fitch's assessment of the
likelihood of timely payment of principal and interest in accordance
with the terms of obligation for bond issues not in default. For
defaulted bonds, the rating ('DDD' to 'D') is an assessment of the
ultimate recovery value through reorganization or liquidation.
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.
Bonds that have the same rating are of similar but not necessarily identical
credit quality since the rating categories cannot fully reflect the differences
in the degrees of credit risk.
BB Bonds are considered speculative. The obligor's ability to pay
interest and repay principal may be affected over time by adverse
economic changes. However, business and financial alternatives can be
identified which could assist the obligor in satisfying its debt
service requirements.
B Bonds are considered highly speculative. While bonds in this class
are currently meeting debt service requirements, the probability of
continued timely payment of principal and interest reflects the
obligor's limited margin of safety and the need for reasonable
business and economic activity throughout the life of the issue.
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CCC Bonds have certain identifiable characteristics which, if not
remedied, may lead to default. The ability to meet obligations
requires an advantageous business and economic environment.
CC Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C Bonds are in imminent default in payment of interest or principal.
DDD Bonds are in default on interest and/or principal payments. Such
bonds are extremely speculative,
DD and should be valued on the basis of their ultimate recovery value in
liquidation or reorganization of &D the obligor. 'DDD' represents the
highest potential for recovery of these bonds, and 'D' represents the
lowest potential for recovery.
DUFF & PHELPS, INC. LONG-TERM DEBT RATINGS
These ratings represent a summary opinion of the issuer's long-term fundamental
quality. Rating determination is based on qualitative and quantitative factors
which may vary according to the basic economic and financial characteristics of
each industry and each issuer. Important considerations are vulnerability to
economic cycles as well as risks related to such factors as competition,
government action, regulation, technological obsolescence, demand shifts, cost
structure, and management depth and expertise. The projected viability of the
obligor at the trough of the cycle is a critical determination.
Each rating also takes into account the legal form of the security, (e.g., first
mortgage bonds, subordinated debt, preferred stock, etc.). The extent of rating
dispersion among the various classes of securities is determined by several
factors including relative weightings of the different security classes in the
capital structure, the overall credit strength of the issuer, and the nature of
covenant protection. Review of indenture restrictions is important to the
analysis of a company's operating and financial constraints.
The Credit Rating Committee formally reviews all ratings once per quarter (more
frequently, if necessary). Ratings of 'BBB-' and higher fall within the
definition of investment grade securities, as defined by bank and insurance
supervisory authorities.
RATING SCALE DEFINITION
- ------------ ----------
AAA Highest credit quality. The risk factors are
negligible, being only slightly more than
for risk-free U.S. Treasury debt.
AA+ High credit quality. Protection factors are
AA strong. Risk is modest, but may vary slightly
A-6
<PAGE> 105
AA- from time to time because of economic
conditions.
A+ Protection factors are average but adequate.
A However, risk factors are more variable and
A- greater in periods of economic stress.
BBB+ Below average protection factors but still
considered sufficient BBB for prudent
investment. Considerable variability in risk
during BBB- economic cycles.
BB+ Below investment grade but deemed likely to
BB meet obligations when due. Present or
BB- prospective financial protection factors
fluctuate according to industry conditions
or company fortunes. Overall quality may
move up or down frequently within this
category.
B+ Below investment grade and possessing risk
B that obligations will not be met when due.
B- Financial protection factors will fluctuate
widely according to economic cycles,
industry conditions and/or company fortunes.
Potential exists for frequent Changes in the
rating within this category or into a higher
or lower rating grade.
CCC Well below investment grade securities.
Considerable uncertainty exists as to timely
payment of principal, interest or preferred
dividends. Protection factors are narrow and
risk can be substantial with unfavorable
economic/industry conditions, and/or with
unfavorable company developments.
DD Defaulted debt obligations. Issuer failed to
meet scheduled principal and/or interest
payments.
DP Preferred stock with dividend arrearages.
SHORT-TERM RATINGS
STANDARD & POOR'S COMMERCIAL PAPER RATINGS
A Standard & Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt considered short-term in the relevant
market.
Ratings are graded into several categories, ranging from 'A-1' for the highest
quality obligations to 'D' for the lowest. These categories are as follows:
A-7
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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 grade period.
STANDARD & POOR'S NOTE RATINGS
An S&P note rating reflects the liquidity factors and market-access risks unique
to notes. Notes maturing in three years or less will likely receive a note
rating. Notes maturing beyond three years will most likely receive a long-term
debt rating.
The following criteria will be used in making the assessment:
1. Amortization schedule - the larger the final maturity relative to
other maturities, the more likely the issue is to be treated as a
note.
2. Source of payment - the more the issue depends on the market for
its refinancing, the more likely it is to be considered a note.
Note rating symbols and definitions are as follows:
SP-1 Strong capacity to pay principal and interest. Issues determined
to possess very strong characteristics 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.
A-8
<PAGE> 107
MOODY'S SHORT-TERM RATINGS
Moody's short-term debt ratings are opinions on the ability of issuers to repay
punctually senior debt obligations. These obligations have an original maturity
not exceeding one year, unless explicitly noted. Moody's employs the following
three designations, all judged to be investment grade, to indicate the relative
repayment capacity of rated issuers:
Issuers rated Prime-1 (or supporting institutions) have a superior capacity for
repayment of senior short-term debt obligations. Prime-1 repayment capacity will
normally be evidenced by the following characteristics: (I) leading market
positions in well established industries, (II) high rates of return on funds
employed, (III) conservative capitalization structures with moderate reliance on
debt and ample asset protection, (IV) broad margins in earnings coverage of
fixed financial charges and high internal cash generation, and (V) well
established access to a range of financial markets and assured sources of
alternative liquidity.
Issuers rated Prime-2 (or supporting institutions) have a strong capacity for
repayment of short-term promissory obligations. This will normally be evidenced
by many of the characteristics cited above, but to a lesser degree. Earnings
trends and coverage ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.
Issuers rated Prime-3 (or supporting institutions) have an acceptable capacity
for repayment of short-term promissory obligations. The effect of industry
characteristics and market composition may be more pronounced. Variability in
earnings and profitability may result in changes in the level of debt protection
measurements and may require relatively high financial leverage. Adequate
alternate liquidity is maintained.
Issuers rated Not Prime do not fall within any of the prime rating categories.
MOODY'S NOTE RATINGS
MIG 1/VMIG 1 This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or demonstrated
broad based access to the market for refinancing.
MIG 2/VMIG 2 This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
MIG 3/VMIG 3 This designation denotes favorable quality. All security elements
are accounted for but there is lacking the undeniable strength of the preceding
grades. Liquidity and cash flow protection may be narrow and market access for
refinancing is likely to be less well established.
MIG 4/VMIG 4 This designation denotes adequate quality. Protection commonly
regarded as required of an investment security is present and although not
distinctly or predominantly speculative, there is specific risk.
A-9
<PAGE> 108
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 generally 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.
F-3 Fair credit quality. Issues assigned this rating have
characteristics suggesting that the degree of assurance for timely
payment is adequate, however, near-term adverse changes could cause
these securities to be rated below investment grade.
F-S Weak credit quality. Issues assigned this rating have
characteristics suggesting a minimal degree of assurance for timely
payment and are vulnerable to near-term adverse changes in financial
and economic conditions.
D Default. Issues assigned this rating are in actual or imminent
payment default.
LOC The symbol LOC indicates that the rating is based on a letter of
credit issued by a commercial bank.
DUFF & PHELPS SHORT-TERM DEBT RATINGS
Duff & Phelps' short-term ratings are consistent with the rating criteria
utilized by money market participants. The ratings apply to all obligations with
maturities under one year, including commercial paper, the uninsured portion of
certificates of deposit, unsecured bank loans, master notes, bankers
acceptances, irrevocable letters of credit, and current maturities of long-term
debt. Asset-backed commercial paper is also rated according to this scale.
Emphasis is placed on liquidity which is defined as not only cash from
operations, but also access to alternative sources of funds including trade
credit, bank lines, and the capital markets.
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An important consideration is the level of an obligor's reliance on short-term
funds on an ongoing basis.
RATING SCALE DEFINITION
HIGH GRADE
D-1+ Highest certainty of timely payment. short-term liquidity,
including internal operating factors and/or access to
alternative sources of funds, is outstanding, and safety is
just below risk-free U.S. Treasury short-term obligations.
D-1 Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection
factors. Risk factors are minor.
D-1- High certainty of timely payment. Liquidity factors are
strong and supported by good fundamental protection factors.
Risk factors are very small.
GOOD GRADE
D-2 Good certainty of timely payment. Liquidity factors and
company fundamentals are sound. Although ongoing funding
needs may enlarge total financing requirements, access to
capital markets is good. Risk factors are small.
SATISFACTORY GRADE
D-3 Satisfactory liquidity and other protection factors qualify
issue as to investment grade. Risk factors are larger and subject
to more variation. Nevertheless, timely payment is expected.
NON-INVESTMENT GRADE
D-4 Speculative investment characteristics. Liquidity is not
sufficient to insure against disruption in debt service.
Operating factors and market access may be subject to a high
degree of variation.
DEFAULT
D-5 Issuer failed to meet scheduled principal and/or interest
payments.
A-11
<PAGE> 110
THOMSON'S SHORT-TERM RATINGS
The Thomson Short-Term Ratings apply, unless otherwise noted, to specific debt
instruments of the rated entities with a maturity of one year or less. Thomson
short-term ratings are intended to assess the likelihood of an untimely or
incomplete payments of principal or interest.
TBW-1 the highest category, indicates a very high likelihood that principal and
interest will be paid on a timely basis.
TBW-2 the second highest category, while the degree of safety regarding timely
repayment of principal and interest is strong, the relative degree of safety is
not as high as for issues rated "TBW-1".
TBW-3 the lowest investment-grade category; indicates that while the obligation
is more susceptible to adverse developments (both internal and external) than
those with higher ratings, the capacity to service principal and interest in a
timely fashion is considered adequate.
TBW-4 the lowest rating category; this rating is regarded as non-investment
grade and therefore speculative.
IBCA SHORT-TERM RATINGS
IBCA short-term ratings assess the borrowing characteristics of banks and
corporations, and the capacity for timely repayment of debt obligations. The
short-term ratings relate to debt which has a maturity of less than one year.
IBCA issues ratings and reports on the largest U.S. and international bank
holding companies, as well as major investment banks. IBCA's short-term rating
system utilizes a dual system--Individual Ratings and Legal Ratings. The
Individual Rating addresses 1) the current strength of consolidated banking
companies and their principal bank subsidiaries. A consolidated bank holding
company/bank with an "A" rating has a strong balance sheet, and a favorable
credit profile without significant problems. A "B" rating indicates sound credit
profile without significant problems. Performance is generally in line with or
better than that of its peers. The legal rating addresses the question of
whether an institution would receive support if it ran into difficulties. Issues
rated "A-1" are obligations supported by a very strong capacity for timely
repayment. Issues rated "A-2" have a very strong capacity for timely repayment
although such capacity may be susceptible to adverse changes in business,
economic or financial conditions.
A1+ Obligations supported by the highest capacity for timely
repayment and possess a particularly strong credit feature.
A1 Obligations supported by the highest capacity for
timely repayment.
A2 Obligations supported by a good capacity for timely
repayment.
A3 Obligations supported by a satisfactory capacity
for timely repayment.
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<PAGE> 111
B Obligations for which there is an uncertainty as to
the capacity to ensure timely repayment.
C Obligations for which there is a high risk of default
or which are currently in default.
D Obligations which are currently in default.
BOND RATINGS
Bonds rated AA or AAA by D&P are deemed to be high quality. Protection factors
are strong. Risk is modest but may vary slightly from time to time because of
economic conditions.
Bonds rated AA or AAA by Fitch are considered to be investment grade and of very
high credit quality. The obligor's ability to pay interest and repay principal
is very strong.
Moody's three highest bond ratings are: Aaa - judged to be the best quality -
carry the smallest degree of investment risk; Aa - judged to be high quality by
all standards; A possess favorable attributes and are considered "upper medium"
grade obligations.
S&P's three highest bond ratings are: AAA - highest grade obligations - possess
the ultimate degree of protection and indicates an extremely strong capacity to
pay principal and interest; AA - also qualify as high grade obligations, and in
the majority of instances differ only in small degrees from issues rated AAA;
A - strong ability to pay interest and repay principal although more susceptible
to change in circumstances.
Bonds rated AA or AAA by IBCA indicates a very strong capacity for timely
repayment of debt. Margins of protection may not be as large as for AAA issues.
Bonds rated AA or AAA by Thomson indicates ability to repay principal and
interest on a timely basis. Bonds rated AA may have limited incremental risk
versus AAA issues.
Bonds BBB are 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 repay principal for debt in this category than in higher
rated categories.
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<PAGE> 112
PART C
Information required to be included in Part C is set forth under the appropriate
item, so numbered, in Part C to this Registration statement.
* Not applicable or negative answer.
<PAGE> 113
The Prospectus, as well as the Statement of Additional Information, for the Mid
Cap Growth Fund, Growth Fund, Fund, Bond Fund, Tax-Free Income Fund, Long-Term
U.S. Government Bond Fund, Intermediate U.S. Government Bond Fund, and Money
Market Fund, and the Prospectuses, as well as the Statements of Additional
Information for the S&P 500 Index Fund and Morley Capital Accumulation Fund are
incorporated by reference into this filing of Post-Effective Amendment No. 4 to
the Registration Statement.
<PAGE> 114
PART C
<TABLE>
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENT AND EXHIBITS
(a) Financial Statements:
<S> <C> <C>
(1) Financial statements and schedules included in the Prospectus
for the Funds (except the S&P 500 Index Fund, the Morley
Capital Accumulation Fund, the Prestige Large Cap Value Fund,
the Prestige Large Cap Growth Fund, the Prestige Small Cap
Fund, the Prestige International Fund and the Prestige
Balanced Fund) (Part A):
Financial Highlights
(2) Financial statements and schedules included in Part B:
Those schedules required by Item 23 to be included
in Part B have been incorporated therein by
reference to the Prospectus (Part A).
(i) Audited Financials: (except the S&P 500 Index Fund, the Morley Capital
Accumulation Fund, the Prestige Large Cap Value Fund, the Prestige Large Cap Growth
Fund, the Prestige Small Cap Fund, the Prestige International Fund and the Prestige
Balanced Fund):
Audited financial statements for the Growth Fund of FHIT, Growth Fund of NIF,
Nationwide Fund of NIF, Bond Fund of NIF, Tax-Free Fund of NIF II, Government Bond
Fund of FHIT, U.S. Government Fund of NIF II, and Money Market Fund of NIF are
hereby incorporated by reference to Forms N-30D filed by Financial Horizons
Investment Trust, Nationwide Investing Foundation and Nationwide Investing
Foundation II on January 6, 1998.
(ii) Audited Financials for the S&P 500 Index Fund:
Statement of Assets & Liabilities at December 23, 1997.
Notes to Financial Statements Independent Auditors'
Report
(b) Exhibits
(1) Amended Declaration of Trust.
(2) Amended Bylaws.
(3) Not Applicable.
(4) Certificates for shares are not issued. Articles V, VI, VII,
and VIII of the Declaration of Trust, incorporated by
reference to Exhibit (1) hereto, define rights of holders of
shares.
(5) (a) Investment Advisory Agreement (except for the Morley Capital Accumulation Fund).
(b) Proposed Investment Advisory Agreement for the Morley Capital Accumulation.
(c) Subadvisory Agreements.
(1) Subadvisory Agreement with the Dreyfus Corporation
for S, & P 500 Index fund previously file in the
Trust's original Registration Statement on November
18, 1997, and is hereby incorporated by reference.
(2) Proposed Subadvisory Agreement for the Prestige
Large Cap Value Fund, the Prestige Large Cap Growth
Fund, the Prestige Small Cap Fund, the Prestige
International Fund, and the Prestige Balanced Fund.
(6) (a) Underwriting Agreement (except for the Morley Capital Accumulation Fund).
(b) Proposed Underwriting Agreement for the Morley Capital Accumulation.
(c) Proposed Selected Dealer Agreement for the Morley Capital Accumulation Fund
(7) Not applicable.
(8) (a) Custody Agreement previously filed with the Trust's
original Registration Statement on November 18, 1997, and is
hereby incorporated by reference.
(9) (a) Fund Administration Agreement
(b) Transfer and Dividend Disbursing Agent.
(c) Agreement and Plan of Reorganization between
Nationwide Investing Foundation and the Trust previously
filed with the Trust's Registration Statement on form N-14
('33 Act File No. 333- 41175) on November 24, 1997, and is
hereby incorporated by reference.
(d) Agreement and Plan of Reorganization between
Nationwide Investing Foundation II and the Trust Previously
filed with the Trust's Registration Statement on Form N-14
('33 Act File No. 333-41175) on November 24, 1997, and is
hereby incorporated by reference.
</TABLE>
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<TABLE>
<S> <C> <C>
(e) Agreement and Plan of Reorganization between
Financial Horizons Investment Trust and the Trust previously
filed with the Trust's Registration Statement on Form N-14
('33 Act File No.333-41175) on November 24,1997 and is hereby
incorporated by reference.
(f) Administrative Services Plan and Services Agreement
(10) Opinion of Counsel.
(11) Not applicable.
(12) Not applicable.
(13) Proposed Purchase Agreement to be filed by subsequent post-effective amendment.
(14) Not applicable.
(15) (a) Proposed Amended Distribution Plan.
(b) Proposed Dealer Agreement for Morley Capital Accumulation Fund (see Exhibit 6(c)).
(16) Schedule for Computation of Performance Quotations previously filed with Post-Effective
Amendment to Registration Statement and herein incorporated by reference.
(17) Financial Data Schedules.
(18) Amended 18f-3 Plan to be filed by subsequent post effective amendment.
(19) Power of Attorney dated November 7, 1997 previously filed in the Trust's Pre-Effective
Amendment and is hereby incorporated by reference.
</TABLE>
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL
WITH REGISTRANT
No person is presently controlled by or under common control with
Registrant.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
<TABLE>
<CAPTION>
Number of Record Holders as of July 31, 1998
Series Class A Class B Class D No Class
------ ------- ------- ------- --------
<S> <C> <C> <C> <C>
Mid Cap Growth Fund 64 64 758 --
Growth Fund 437 374 48,554 --
Nationwide Fund 1,866 1,715 65,111 --
Bond Fund 57 33 7,589 --
Tax-Free Income Fund 23 27 7,893 --
Intermediate U.S. Government Bond 20 10 2,023 --
Long-Term U.S. Government Bond 13 16 1,791 --
Money Market Fund -- -- -- 26,634
S&P 500 Index Fund -- -- -- --
Morley Capital Accumulation Fund -- -- -- --
Large Cap Value Fund -- -- -- --
Large Cap Growth Fund -- -- -- --
Balanced Fund -- -- -- --
Small Cap Fund -- -- -- --
International Fund -- -- -- --
</TABLE>
ITEM 27. INDEMNIFICATION
Indemnification provisions for officers, directors and employees of
Registrant are set forth in Article V, Section 5.2 of the Declaration
of Trust. In addition, Section 1743.13 of the Ohio Revised Code
provides that no liability to third persons for any act, omission or
obligation shall attach to the trustees, officers, employees or
agents of a business trust organized under Ohio statutes. The
trustees are also covered by an errors and omissions policy provided
by the Trust covering actions taken by the trustees in their capacity
as trustee. See Item 24(b)1 above.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
(a) Nationwide Advisory Services, Inc. (NAS), the investment
adviser of the Trust, also serves as investment adviser to
the Nationwide Separate Account Trust, and Nationwide
Asset Allocation Trust and serves as general distributor
to the Nationwide Multi-Flex Variable Account, Nationwide
Variable Account, Nationwide Variable Account-II,
Nationwide Variable Account-5, Nationwide Variable
Account-6, Nationwide Variable Account-8, Nationwide
Variable Account-9, Nationwide DC Variable Account,
Nationwide DCVA II, Nationwide VA Separate Account-A,
Nationwide VA
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Separate Account-B, Nationwide VA Separate Account-C, NACo
Variable Account, Nationwide VLI Separate Account-2,
Nationwide VLI Separate Account-3, Nationwide VL Separate
Account-A, Nationwide VL Separate Account-B, Nationwide VL
Separate Account-C, and Nationwide VL Separate Account-D,
separate accounts of Nationwide Life Insurance Company, or
its subsidiary Nationwide Life and Annuity Insurance
Company, registered as unit investment trusts under the
Investment Company Act of 1940.
<TABLE>
<S> <C>
Joseph J. Gasper DIRECTOR AND PRESIDENT AND CHIEF OPERATING OFFICER
Nationwide Life Insurance Company
Nationwide Life and Annuity Insurance Company
Nationwide Financial Services, Inc.
DIRECTOR AND CHAIRMAN OF THE BOARD
Nationwide Investment Services Corporation
DIRECTOR AND VICE CHAIRMAN
Nationwide Financial Institution Distributors Agency, Inc.
Nationwide Global Holdings, Inc.
NEA Valuebuilder Investor Services, Inc.
NEA Valuebuilder Investor Services of Arizona, Inc.
Public Employees Benefit Services Corporation
DIRECTOR AND PRESIDENT
Nationwide Advisory Services, Inc.
Nationwide Investor Services, Inc.
DIRECTOR
Affiliate Agency, Inc.
Affiliate Agency of Ohio, Inc.
Financial Horizons Distributors Agency of Alabama, Inc.
Financial Horizons Distributors Agency of Ohio, Inc.
Financial Horizons Distributors Agency of Oklahoma, Inc.
Financial Horizons Securities Corporation
Landmark Financial Services of New York, Inc.
Nationwide Indemnity Company
TRUSTEE AND CHAIRMAN
Nationwide Asset Allocation Trust
Nationwide Separate Account Trust
TRUSTEE AND PRESIDENT
Nationwide Insurance Golf Charities, Inc.
Dennis W. Click VICE PRESIDENT AND SECRETARY
Nationwide Mutual Insurance Company
Nationwide Mutual Fire Insurance Company
Nationwide Life Insurance Company
Nationwide General Insurance Company
Nationwide Property and Casualty Insurance Company
Nationwide Life and Annuity Insurance Company
Nationwide Financial Services, Inc.
Nationwide Insurance Enterprise Services, Ltd.
Nationwide Properties, Ltd.
Nationwide Realty Investors, Ltd.
NEA Valuebuilder Investor Services, Inc.
</TABLE>
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<TABLE>
<S> <C>
NEA Valuebuilder Investor Services of Arizona, Inc.
Nationwide Financial Institution
Distributors Agency, Inc.
Colonial County Mutual Insurance Company
California Cash Management Company
Colonial Insurance Company of Wisconsin
Gates McDonald & Company
GatesMcDonald Health Plus Inc.
Nationwide Global Holdings, Inc.
Nationwide Cash Management Company
Nationwide Indemnity Company
Nationwide Community Urban Redevelopment Corporation
Gates, McDonald & Company of Nevada
Gates, McDonald & Company of New York, Inc.
Farmland Mutual Insurance Company
Lone Star General Agency, Inc.
Nationwide Agribusiness Insurance Company
Employers Insurance of Wausau A Mutual Company
Nationwide Advisory Services, Inc.
Nationwide Investors Services, Inc.
Nationwide Corporation
Nationwide Insurance Enterprise Foundation
Nationwide Investment Services Corporation
Scottsdale Indemnity Company
Scottsdale Insurance Company
Scottsdale Surplus Lines Insurance Company
Wausau Underwriters Insurance Company
Wausau Service Corporation
Wausau Business Insurance Company
Wausau General Insurance Company
Affiliate Agency, Inc.
Affiliate Agency of Ohio, Inc.
Financial Horizons Distributors Agency of Alabama, Inc.
Financial Horizons Distributors Agency of Ohio, Inc.
Financial Horizons Distributors Agency of Oklahoma, Inc.
Financial Horizons Securities Corporation
Landmark Financial Services of New York, Inc.
NEA Valuebuilder Investor Services of Alabama, Inc.
NEA Valuebuilder Investor Services of Montana, Inc.
NEA Valuebuilder Investor Services of Nevada, Inc.
NEA Valuebuilder Investor Services of Ohio, Inc.
NEA Valuebuilder Investor Services of Oklahoma, Inc.
NEA Valuebuilder Investor Services of Wyoming, Inc.
Nationwide Agency, Inc.
Nationwide Health Plans, Inc.
Nationwide Management Systems, Inc.
MRM Investments, Inc.
NWE, Inc.
TIG Countrywide Insurance Company
Morley Financial Services, Inc.
ASSISTANT SECRETARY
Pension Associates of Wausau, Inc.
Companies Agency, Inc.
Companies Agency of Alabama, Inc.
Companies Agency Insurance Services of California
Companies Agency of Georgia, Inc.
Companies Agency of Idaho, Inc.
</TABLE>
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<TABLE>
<S> <C>
Companies Agency of Kentucky, Inc.
Companies Agency of New York, Inc.
Companies Agency of Pennsylvania, Inc.
Companies Agency of Phoenix, Inc.
Countrywide Services Corporation
Key Health Plan, Inc.
Wausau (Bermuda) Ltd.
Wausau International Underwriters
VICE PRESIDENT AND ASSISTANT SECRETARY
National Casualty Company
SECRETARY
The Beak and Wire Company
CLERK
NEA Valuebuilder Services Insurance Agency, Inc.
ASSISTANT CLERK
Companies Agency of Massachusetts, Inc.
Dimon R. McFerson CHAIRMAN AND CHIEF EXECUTIVE OFFICER-NATIONWIDE INSURANCE
ENTERPRISE AND DIRECTOR
Nationwide Mutual Insurance Company
Nationwide Mutual Fire Insurance Company
Nationwide General Insurance Company
Nationwide Property and Casualty Insurance Company
Nationwide Life Insurance Company
Nationwide Life and Annuity Insurance Company
Colonial Insurance Company of Wisconsin
Farmland Mutual Insurance Company
Nationwide Agribusiness Insurance Company
National Casualty Company
Nationwide Financial Services, Inc.
Nationwide Global Holdings, Inc.
Nationwide Indemnity Company
Nationwide Investment Services Corporation
California Cash Management Company
Nationwide Cash Management Company
Employers Insurance of Wausau A Mutual Company
Scottsdale Indemnity Company
Scottsdale Insurance Company
Scottsdale Surplus Lines Insurance Company
Wausau Service Corporation
Wausau General Insurance Company
Wausau Business Insurance Company
Wausau Underwriters Insurance Company
CHAIRMAN AND CHIEF EXECUTIVE OFFICER - NATIONWIDE INSURANCE
ENTERPRISE, PRESIDENT AND DIRECTOR
Nationwide Corporation
CHAIRMAN OF THE BOARD, CHAIRMAN AND CHIEF EXECUTIVE
OFFICER-NATIONWIDE INSURANCE ENTERPRISE AND DIRECTOR
American Marine Underwriters, Inc.
</TABLE>
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<PAGE> 119
<TABLE>
<S> <C>
Gates, McDonald and Company
Gates McDonald Health Plus, Inc.
Nationwide Investor Services, Inc.
Public Employees Benefit Services Corporation
Companies Agency, Inc.
Companies Agency of Alabama, Inc.
Companies Agency Insurance Services of California
Companies Agency of Georgia, Inc.
Companies Agency of Idaho, Inc.
Companies Agency of Kentucky, Inc.
Companies Agency of Massachusetts, Inc.
Companies Agency of New York, Inc.
Companies Agency of Pennsylvania, Inc.
Companies Agency of Phoenix, Inc.
Countrywide Services Corporation
Employers Life Insurance Company of Wausau
Nationwide Advisory Services, Inc.
Nationwide Financial Institution Distributors Agency, Inc.
Nationwide Insurance Enterprise Services, Ltd.
TIG Countrywide Insurance Company
Wausau International Underwriters
Wausau Preferred Health Insurance Company
TRUSTEE AND CHAIRMAN
Financial Horizons Investment Trust
Nationwide Investing Foundation
Nationwide Investing Foundation II
Nationwide Investing Foundation III
CHAIRMAN OF THE BOARD
Nationwide Insurance Golf Charities, Inc.
CHAIRMAN OF THE BOARD AND DIRECTOR
Lone Star General Agency, Inc.
Nationwide Community Urban Redevelopment Corporation
NEA Valuebuilder Investor Services, Inc.
NEA Valuebuilder Investor Services of Arizona, Inc
Colonial County Mutual Insurance Company
DIRECTOR
Gates, McDonald & Company of Nevada
Gates, McDonald & Company of New York
CHAIRMAN OF THE BOARD, CHAIRMAN AND CHIEF EXECUTIVE
OFFICER-NATIONWIDE INSURANCE ENTERPRISE AND TRUSTEE
Nationwide Insurance Enterprise Foundation
MEMBER-BOARD OF MANAGERS, CHAIRMAN OF THE BOARD,
CHAIRMAN AND CHIEF EXECUTIVE OFFICER-NATIONWIDE INSURANCE
ENTERPRISE
Nationwide Properties, Ltd.
Nationwide Realty Investors, Ltd.
Robert A. Oakley EXECUTIVE VICE PRESIDENT-CHIEF FINANCIAL OFFICER
Nationwide Mutual Insurance Company
Nationwide Mutual Fire Insurance Company
</TABLE>
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<TABLE>
<S> <C>
Nationwide General Insurance Company
Nationwide Property and Casualty Insurance Company
Nationwide Life Insurance Company
Nationwide Life and Annuity Insurance Company
American Marine Underwriters, Inc.
Companies Agency, Inc.
Companies Agency of Alabama, Inc.
Companies Agency of Idaho, Inc.
Companies Agency of Kentucky, Inc.
Companies Agency of Massachusetts, Inc.
Companies Agency of New York, Inc.
Companies Agency of Pennsylvania, Inc.
Companies Agency of Phoenix, Inc.
Countrywide Services Corporation
Employers Life Insurance Company of Wausau
National Casualty Company
National Premium and Benefit Administration Company
The Beak and Wire Corporation
Employers Insurance of Wausau A Mutual Company
Farmland Mutual Insurance Company
Nationwide Financial Institution Distributors Agency, Inc.
Lone Star General Agency, Inc.
Nationwide Agribusiness Insurance Company
Nationwide Corporation
Nationwide Financial Services, Inc.
Nationwide Investment Services Corporation
Nationwide Investor Services, Inc.
Nationwide Insurance Enterprise Foundation
Nationwide Properties, Ltd.
Nationwide Realty Investors, Ltd.
NEA Valuebuilder Investor Services, Inc.
NEA Valuebuilder Investor Services of Arizona, Inc.
Colonial County Mutual Insurance Company
Pension Associates of Wausau, Inc.
Public Employees Benefit Services Corporation
Scottsdale Indemnity Company
Scottsdale Insurance Company
Scottsdale Surplus Lines Insurance Company
Wausau Business Insurance Company
Wausau General Insurance Company
Wausau Preferred Health Insurance Company
Wausau Service Corporation
Wausau Underwriters Insurance Company
</TABLE>
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<TABLE>
<S> <C>
DIRECTOR, CHAIRMAN OF THE BOARD
Neckura Holding Company
Neckura Insurance Company
Neckura Life Insurance Company
EXECUTIVE VICE PRESIDENT-CHIEF FINANCIAL OFFICER AND
DIRECTOR
California Cash Management Company
Colonial Insurance Company of Wisconsin
Nationwide Cash Management Company
Nationwide Community Urban Redevelopment
Corporation
Nationwide Global Holdings, Inc.
Nationwide Insurance Enterprise Services, Ltd.
MRM Investments, Inc.
Nationwide Advisory Services, Inc.
Nationwide Indemnity Company
TIG Countrywide Insurance Company
EXECUTIVE VICE PRESIDENT
Companies Agency Insurance Services of
California
Wausau International Underwriters
DIRECTOR AND VICE CHAIRMAN
Leben Direkt Insurance Company
Neckura General Insurance Company
Auto Direkt Insurance Company
DIRECTOR
NWE, Inc.
Gates, McDonald & Company
GatesMcDonald Health Plus Inc.
Susan A. Wolken SENIOR VICE PRESIDENT - LIFE COMPANY OPERATIONS
Nationwide Mutual Insurance Company
Nationwide Mutual Fire Insurance Company
Nationwide Property and Casualty Insurance Company
Nationwide Life Insurance Company
Nationwide Life and Annuity Insurance Company
DIRECTOR
Affiliate Agency, Inc.
Affiliate Agency of Ohio, Inc.
Financial Horizons Distributors Agency of Alabama, Inc.
Financial Horizons Distributors Agency of Ohio, Inc.
Financial Horizons Distributors Agency of Oklahoma, Inc.
Financial Horizons Securities Corporation
Landmark Financial Services of New York, Inc.
NATIONWIDE ADVISORY SERVICES, INC.
Nationwide Investment Services Corporation
NEA Valuebuilder Investor Services of Alabama, Inc.
NEA Valuebuilder Investor Services of Arizona, Inc.
NEA Valuebuilder Investor Services of Montana, Inc.
NEA Valuebuilder Investor Services of Nevada, Inc.
NEA Valuebuilder Investor Services of Ohio, Inc.
NEA Valuebuilder Investor Services of Oklahoma, Inc.
</TABLE>
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<TABLE>
<S> <C>
NEA Valuebuilder Investor Services of Wyoming, Inc.
NEA Valuebuilder Services Insurance Agency, Inc.
PEBSCO of Massachusetts Insurance Agency, Inc.
Public Employees Benefit Services Corporation of Alabama
Public Employees Benefit Services Corporation of Arkansas
Public Employees Benefit Services Corporation of Montana
Public Employees Benefit
Services Corporation of New Mexico
Robert J. Woodward, Jr. EXECUTIVE VICE PRESIDENT-CHIEF INVESTMENT OFFICER
Nationwide Mutual Insurance Company
Nationwide Mutual Fire Insurance Company
Nationwide General Insurance Company
Nationwide Property and Casualty Insurance Company
Nationwide Life Insurance Company
Nationwide Life and Annuity Insurance Company
Colonial County Mutual Insurance Company
Colonial Insurance Company of Wisconsin
Employers Insurance of Wausau A Mutual Company
Employers Life Insurance Company of Wausau
Farmland Mutual Insurance Company
Gates, McDonald & Company
GatesMcDonald Health Plus, Inc.
Lone Star General Agency, Inc.
National Casualty Company
Nationwide Financial Services, Inc.
Nationwide Agribusiness Insurance Company
Nationwide Corporation
Nationwide Insurance Enterprise Foundation
Nationwide Insurance Enterprise Services, Ltd.
Nationwide Investment Services Corporation
Pension Associates of Wausau, Inc.
Public Employees Benefit Services
Corporation Scottsdale Indemnity Company
Scottsdale Insurance Company
Scottsdale Surplus Lines Insurance Company
Wausau Business Insurance Company
Wausau General Insurance Company
Wausau Preferred Health Insurance Company
Wausau Service Corporation
Wausau Underwriters Insurance Company
DIRECTOR
Nationwide Global Holdings, Inc.
Nationwide Investors Services, Inc.
MEMBER-BOARD OF MANAGERS AND VICE CHAIRMAN
Nationwide Properties, Ltd.
Nationwide Realty Investors, Ltd.
DIRECTOR AND PRESIDENT
California Cash Management Company
MRM Investments, Inc.
Nationwide Cash Management Company
Nationwide Community Urban Redevelopment Corporation
NWE, Inc.
</TABLE>
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<TABLE>
<S> <C>
DIRECTOR, EXECUTIVE VICE PRESIDENT-CHIEF INVESTMENT OFFICER
Nationwide Indemnity Company
Nationwide Advisory Services, Inc.
TIG Countrywide Insurance Company
TRUSTEE AND VICE CHAIRMAN
Nationwide Asset Allocation Trust
Nationwide Separate Account Trust
James F. Laird, Jr. VICE PRESIDENT AND GENERAL MANAGER AND ACTING TREASURER
Nationwide Advisory Services, Inc.
VICE PRESIDENT AND GENERAL MANAGER AND ACTING TREASURER
AND DIRECTOR
Nationwide Investors Services, Inc.
TREASURER
Nationwide Investing Foundation
Nationwide Separate Account Trust
Nationwide Investing Foundation II
Financial Horizons Investment Trust
Nationwide Asset Allocation Trust
Nationwide Investing Foundation III
Christopher A. Cray TREASURER
Nationwide Advisory Services, Inc.
Nationwide Investors Services, Inc.
ASSISTANT TREASURER
Nationwide Investing Foundation
Nationwide Separate Account Trust
Nationwide Investing Foundation II
Nationwide Investing Foundation III
Financial Horizons Investment Trust
Nationwide Asset Allocation Trust
David E. Simaitis SECRETARY
Nationwide Horizons Investment Trust
Nationwide Investing Foundation
Nationwide Investing Foundation II
Nationwide Investing Foundation III
ASSISTANT SECRETARY
Nationwide Advisory Services, Inc.
Nationwide Investors Services, Inc.
Nationwide Separate Account Trust
Elizabeth A. Davin SECRETARY
Nationwide Asset Allocation Trust
Nationwide Separate Account Trust
</TABLE>
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<TABLE>
<S> <C>
ASSISTANT SECRETARY
Nationwide Advisory Services, Inc.
Nationwide Horizons Investment Trust
Nationwide Investing Foundation
Nationwide Investing Foundation III
Nationwide Investors Services, Inc.
W. Sidney Druen SENIOR VICE PRESIDENT AND GENERAL COUNSEL AND
ASSISTANT SECRETARY
Nationwide Mutual Insurance Company
Nationwide Mutual Fire Insurance Company
Nationwide General Insurance Company
Nationwide Property and Casualty Insurance Company
Nationwide Life Insurance Company
Nationwide Life and Annuity Insurance Company
Nationwide Advisory Services, Inc.
Nationwide Global Holdings, Inc.
Nationwide Investors Services, Inc.
Employers Insurance of Wausau A Mutual Company
Employers Life Insurance Company of Wausau
Wausau Business Insurance Company
Wausau General Insurance Company
Wausau Underwriters Insurance Company
Wausau Preferred Health Insurance Company
Wausau Service Corporation
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
Affiliate Agency, Inc.
Affiliate Agency of Ohio, Inc.
American Marine Underwriters, Inc.
The Beak and Wire Corporation
California Cash Management Company
Colonial County Mutual Insurance Company
Colonial Insurance Company of California
Farmland Mutual Insurance Company
Nationwide Agribusiness Insurance Company
Nationwide Financial Services, Inc.
Nationwide Financial Institution Distributors
Agency, Inc.
Financial Horizons Distributors Agency of Alabama,
Inc.
Financial Horizons Distributors Agency of Ohio, Inc.
Financial Horizons Distributors Agency of Oklahoma, Inc.
Financial Horizons Securities Corporation
Gates, McDonald & Company
Gates, McDonald & Company of Nevada
Gates, McDonald & Company of New York, Inc.
GatesMcDonald Health Plus, Inc.
Landmark Financial Services of New York, Inc.
National Casualty Company
Nationwide Cash Management Company
Nationwide Corporation
Nationwide Insurance Enterprise Services, Ltd.
Nationwide Investment Services Corporation
Companies Agency, Inc.
Companies Agency Insurance Services of California
Companies Agency of Alabama, Inc.
Companies Agency of Georgia, Inc.
</TABLE>
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<TABLE>
<S> <C>
Companies Agency of Idaho, Inc.
Companies Agency of Kentucky, Inc.
Companies Agency of Massachusetts, Inc.
Companies Agency of New York, Inc.
Companies Agency of Pennsylvania, Inc.
Companies Agency of Phoenix, Inc.
Countrywide Services Corporation
Lone Star General Agency Inc.
Nationwide Insurance Enterprise Foundation
Nationwide Properties, Ltd.
Nationwide Realty Investors, Ltd.
NEA Valuebuilder Investor Services, Inc.
NEA Valuebuilder Investor Services of Alabama, Inc.
NEA Valuebuilder Investor Services of Arizona, Inc.
NEA Valuebuilder Investor Services of Montana, Inc.
NEA Valuebuilder Investor Services of Nevada, Inc.
NEA Valuebuilder Investor Services of Ohio, Inc.
NEA Valuebuilder Investor Services of Oklahoma, Inc.
NEA Valuebuilder Investor Services of Wyoming, Inc.
NEA Valuebuilder Services Insurance Agency, Inc.
PEBSCO of Massachusetts Insurance Agency, Inc.
Pension Associates of Wausau, Inc.
Public Employees Benefit Services Corporation
Public Employees Benefit Services Corporation of Alabama
Public Employees Benefit Services Corporation of Arkansas
Public Employees Benefit Services Corporation of Montana
Public Employees Benefit Services Corporation of New Mexico
Scottsdale Indemnity Company
Scottsdale Insurance Company
Scottsdale Surplus Lines Insurance Company
Wausau International Underwriters
Morley Financial Services, Inc.
SENIOR VICE PRESIDENT AND GENERAL COUNSEL AND DIRECTOR
Nationwide Community Urban Redevelopment Corporation
Nationwide Indemnity Company
MRM Investments, Inc.
NWE, Inc.
TIG Countrywide Insurance Company
ASSISTANT SECRETARY
Key Health Plan, Inc.
GENERAL COUNSEL
Nationwide Insurance Golf Charities, Inc.
Patricia J. Smith ASSISTANT SECRETARY
Nationwide Advisory Services, Inc.
Nationwide Horizons Investment Trust
Nationwide Investing Foundation
Nationwide Investing Foundation II
Nationwide Investing Foundation III
Nationwide Investors Services, Inc.
Nationwide Separate Account Trust
</TABLE>
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<TABLE>
<S> <C>
Peter J. Neckermann VICE PRESIDENT - ECONOMIC AND INVESTMENT SERVICES
Nationwide Mutual Insurance Company
Nationwide Mutual Fire Insurance Company
Nationwide General Insurance Company
Nationwide Property and Casualty Insurance Company
Nationwide Life Insurance Company
Nationwide Life and Annuity Insurance Company
Nationwide Indemnity Company
VICE PRESIDENT
Nationwide Advisory Services, Inc.
DIRECTOR
Leben Direkt Insurance Company
Nationwide Investors Services, Inc.
Neckura Holding Company
ASSISTANT TREASURER
Financial Horizons Investment Trust
National Casualty Company
National Premium and Benefit Administration Company
Nationwide Investing Foundation
Nationwide Investing Foundation II
Nationwide Investing Foundation III
Nationwide Separate Account Trust
Nationwide Asset Allocation Trust
Edwin P. McCausland, Jr. SR. VICE PRESIDENT - FIXED INCOME SECURITIES
Nationwide Mutual Insurance Company
Nationwide Mutual Fire Insurance Company
Nationwide General Insurance Company
Nationwide Property and Casualty Insurance Company
Nationwide Life Insurance Company
Nationwide Life and Annuity Insurance Company
Nationwide Advisory Services, Inc.
California Cash Management Company
Colonial Insurance Company of Wisconsin
Nationwide Cash Management Company
Nationwide Indemnity Company
Nationwide Insurance Enterprise Foundation
Morley Financial Services, Inc.
VICE PRESIDENT - FIXED INCOME SECURITIES
Employers Insurance of Wausau A Mutual Company
Employers Life Insurance Company of Wausau
Farmland Mutual Insurance Company
Gates, McDonald & Company
GatesMcDonald Health Plus, Inc.
National Casualty Company
Nationwide Agribusiness Insurance Company
Scottsdale Indemnity Company
Scottsdale Insurance Company
Scottsdale Surplus Lines Insurance Company
TIG Countrywide Insurance Company
Wausau Business Insurance Company
Wausau General Insurance Company
</TABLE>
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<TABLE>
<S> <C>
Wausau Preferred Health Insurance Company
Wausau Service Corporation
Wausau Underwriters Insurance
Company
ASSISTANT TREASURER
Financial Horizons Investment Trust
Nationwide Asset Allocation Trust
Nationwide Investing Foundation
Nationwide Investing Foundation II
Nationwide Investing Foundation III
Nationwide Separate Account Trust
Joseph P. Rath VICE PRESIDENT - PRODUCT AND MARKET COMPLIANCE
Nationwide Mutual Insurance Company
Nationwide Mutual Fire Insurance Company
Nationwide Property and Casualty Insurance Company
Nationwide Life Insurance Company
Nationwide Life and Annuity Insurance Company
VICE PRESIDENT-COMPLIANCE
Nationwide Advisory Services, Inc.
Nationwide Investment Services Corporation
VICE PRESIDENT-CHIEF COMPLIANCE OFFICER
Nationwide Financial Services, Inc.
William G. Goslee VICE PRESIDENT
Nationwide Advisory Services, Inc.
</TABLE>
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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:
Farmland Mutual Insurance Company
Nationwide Agribusiness Insurance Company
1963 Bell Avenue
Des Moines, Iowa 50315-1000
Colonial Insurance Company of Wisconsin
5525 Park Center Circle
Dublin, Ohio 43017
Employers Insurance of Wausau A Mutual Company
2000 Westwood Drive
Wausau, Wisconsin 54401-7881
Scottsdale Insurance Company
8877 North Gainey Center Drive
P.O. Box 4110
Scottsdale, Arizona 85261-4110
National Casualty Company
P.O. Box 4110
Scottsdale, Arizona 85261-4110
Lone Star General Agency, Inc.
P.O. Box 14700
Austin, Texas 78761
Auto Direkt Insurance Company
Columbus Insurance Brokerage and Service, GMBH
Leben Direkt Insurance Company
Neckura General Insurance Company
Neckura Holding Company
Neckura Insurance Company
Neckura Life Insurance Company
John E. Fisher Str. 1
61440 Oberursel/Ts.
Germany
Public Employees Benefit Services Corporation
Two Nationwide Plaza
Columbus, Ohio 43215
Nationwide Advisory Services, Inc.
Nationwide Investors Services, Inc.
Three Nationwide Plaza,
Columbus, Ohio 43215
Morley Financial Services, Inc.
5665 S. W. Meadows Rd. , Suite 400
Lake Oswego, Oregon 97035
(b) UBT serves as investment adviser to the Morley Capital
Accumulation Fund. UBT, a trust company organized under the laws
of the State of Oregon, is a wholly owned subsidiary of
Nationwide Life Insurance Company. UBT conducts a variety of
trust activities.
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<PAGE> 129
To the knowledge of the Trust, none of the directors or officers
of UBT, 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. The directors except as noted below may be
contacted C/O UBT, 5665 SW Meadows Rd., Suite 400, Lake Oswego,
Oregon 97035.
Donald C. Burdick, 434 Ridgeway Road, Lake Oswego, OR 97034 Mr.
Burdick has been an independent consultant and investor for the
past 10 years. Prior to that he was President of Investcorp
Financial Services.
Harold H. Morley, President, CEO and Director of UBT. Mr. Morley
is Chairman and Chief Executive Officer of Morley Financial
Services, Inc.
Joan K. Hall, Senior Vice President, Corporate Secretary,
Financial Officer and Director of UBT. Ms. Hall is Senior Vice
President and Financial Officer of Morley Financial Services.
David Fallow, Executive Vice President of UBT. Mr. Fallow is
President and Chief Investment Officer of Morley Financial
Services, Inc.
(c) Information for the Subadviser of the S&P 500 Index Fund
(1) The Dreyfus Corporation
The Dreyfus Corporation ("Dreyfus") acts as subadviser to
the S&P 500 Index Fund and as adviser or subadviser to a
number of other registered investment companies. The list
required by this Item 28 of officers and directors of
Dreyfus, 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 Dreyfus (SEC file No. 801-8147).
(d) Information for the Subadviser of the Prestige Large Cap Value
Fund
(1) Brinson Partners, Inc.
Brinson Partners, Inc. ("Brinson") acts as a subadviser to
the Prestige Large Cap Value Fund and as adviser or
subadviser to a number of other registered investment
companies. The list required by this Item 28 of officers
and directors of Brinson, 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 Brinson (SEC file No. 801-34910.)
(e) Information for the Subadviser of the Prestige Large Cap Growth
Fund
(1) Goldman Sachs Asset Management
Goldman Sachs Asset Management ("Goldman") acts as a
subadviser to the Large Cap Growth Fund and as adviser or
subadviser to a number of other registered investment
companies. The list required by this Item 28 of officers
and directors of Goldman, 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 Goldman (SEC file No. 801-16048.)
(f) Information for the Subadviser of the Prestige Balanced Fund
(1) J. P. Morgan Investment Management
J. P. Morgan Investment Management, Inc. ("JPMIM"), a
registered investment adviser, is a wholly owned
subsidiary of J. P. Morgan & Co. Incorporated. JPMIM
manages employee
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benefit plans for corporations and unions. JPMIM also
provides investment management services for a broad
spectrum of other institutional investors, including
foundations, endowments, sovereign governments, and
insurance companies.
To the knowledge of the Registrant, none of the directors
or executive officers of JPMIM is or has been in the past
two fiscal years engaged in any other business or
profession, vocation or employment of a substantial
nature, except that certain officers and directors of
JPMIM also hold various positions with, and engage in
business for, J.P. Morgan & Co. Incorporated or Morgan
Guaranty Trust Company of New York, a New York trust
company which is also a wholly owned subsidiary of J. P.
Morgan & Co. Incorporated.
(g) Information for the Subadviser of the Prestige Small Cap Fund
(1) Institutional Trust Company
Institutional Trust Company ("ITC") acts as a subadviser
to the Small Cap Fund and as adviser or subadviser to a
number of other registered investment companies. The list
required by this Item 28 of officers and directors of ITC,
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 ITC
(SEC file No. 801-12389.)
(2) Invesco Management & Research, Inc.
Invesco Management & Research, Inc. ("Invesco") acts as a
subadviser to the Small Cap Fund and as adviser or
subadviser to a number of other registered investment
companies. The list required by this Item 28 of officers
and directors of INVESCO, 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 INVESCO (SEC file No. 801-01596.)
(h) Information for the Subadviser of the Prestige International
Fund
(1) Lazard Asset Management
Lazard Asset Management ("Lazard") acts as subadviser to
the International Fund and as adviser or subadviser to a
number of other registered investment companies as well as
to separate institutional investors.
<TABLE>
<CAPTION>
Name and Address of Company with
which General Member is Connected
Name of General Member other than with Lazard and its affiliates. Capacity
- ---------------------- ------------------------------------------ --------
<S> <C> <C>
Eileen D. Alexanderson None
William Araskog None
F. Harlan Batrus Mutual of America Capital Management Corp. Director
666 Fifth Ave.
New York, New York 10103
Ryan Labs, Inc. Director
350 Albany Street
New York, New York 10280
</TABLE>
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<TABLE>
<S> <C> <C>
David G. Braunschvig None
Patrick J. Callahan, Jr. Berry Metal Co. Director
Route 68
Harmony, Pennsylvania 16307
BT Capital Corp. Director
280 Park Avenue
New York, New York 10017
Lee Brass Co. (Prior to 3/1/95) Director
P.O. Box 1229
Anniston, Alabama 36202
Michigan Wheel Corp. Director
1501 Buchanan Avenue
Southwest Grand Rapids, Michigan 49507
Rotation Dynamics Corp. Director
15 Salt Creek Lane
Suite 316
Hinsdale, Illinois 60521
Somerset Technologies, Inc. Director
P.O. Box 791
New Brunswick, New Jersey 08903
GAR Holding Co. (Prior to 4/1/96) Director
600 Union Street
Ashland, Ohio 44905
Michael David-Weill BSN Gervias Danone (Prior to 8/1/96) Director
1260130 Rue Jules Grueade
Levallois-Perret (Hauts de Seinc)
France 92303
Credit Mobilier Industrial Chairman of the Board
(Prior to 8/1/96)
(SOVAC)
19-21 rue de la Bienfaisance
75008 Paris, France
The Dannon Company, Inc. Director
22-11 38th Avenue
Long Island City, New York 11101
Eurafrance President and Chairman of the Board
12 Avenue Percier
75008 Paris, France
Exor Group Director
19 Avenue Montaigne
75008 Paris, France
Euralux Director
8 Rue Ste-Zithe
</TABLE>
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<TABLE>
<S> <C> <C>
2763 Luxembourg
Pist S.P.A. (Prior to 8/1/96) Director
Corso Marconi 10
10125 Torino
Italy
Group Danone Director
7 Rue de Teheran
75008 Paris, France
ITT Industries, Inc. Director
320 Park Avenue
New York, New York 10022
La France S.A. Director
7 & 9 Boulevard Hauggmann
75009 Paris, France
La France-Iard Director
7 & 9 Boulevard Hauggmann
75009 Paris, France
La France-Vic Director
7 & 9 Boulevard Hauggmann
75009 Paris, France
Lazard Brothers & Co., Limited Director
21 Moorfields
London EC2P-2HT
Pearson plc Director
Millbank Tower
London SWI P4Q2
Publicis S.A. Director
133 Champs-Ezlysees
75008 Paris, France
S.A. de la Rue Imperiale de Lyon Director
49, Rue de la Republique
Lyon (Rhone) 69002 France
John V. Doyle None
Charles R. Dreifus None
Thomas F. Dunn Goldman, Sach & Co. Senior Portfolio Manager
(Prior to 1/1/96)
65 Broadway Street
New York, New York 10004
Norman Eig The Lazard Funds, Inc. Director, Chairman
30 Rockefeller Plaza
New York, New York 10020
The Emerging World Trust Fund Limited Director
</TABLE>
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<PAGE> 133
<TABLE>
<S> <C> <C>
30 Rockefeller Plaza
New York, New York 10020
Lazard Pension Management, Inc. Director
30 Rockefeller Plaza
New York, New York 10020
Richard P. Emerson None
Peter R. Ezersky None
Jonathan F. Foster None
Albert H. Garner None
James S. Gold Smart & Final, Inc. Director
4700 South Boyle Avenue
Los Angeles, California 90058
Jeffrey A. Golman None
Steven J. Golub Mineral Technologies, Inc. Director
405 Lexington Avenue
New York, New York 10174-1901
Herbert W. Gullquist The Lazard Funds, Inc. Director, President
30 Rockefeller Plaza
New York, New York 10020
The Emerging World Trust Fund Limited Director
30 Rockefeller Plaza
New York, New York 10020
Lazard Freres Asset Director, President
Management (Canada(, Inc.
30 Rockefeller Plaza
New York, New York 10020
Lazard Pension Management, Inc. Director, President
30 Rockefeller Plaza
New York, New York 10020
Thomas R. Haack None
J. Ira Harris Manpower, Inc. Director
5301 North Ironwood Road
Milwaukee, Wisconsin 53201
Caremark International, Inc. Director
(Prior to 9/20/96)
2215 Sanders Road
Northbrook, Illinois 60062
Brinker International, Inc. Director
6820 LBJ Freeway
Dallas, Texas 75240
</TABLE>
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<TABLE>
<S> <C> <C>
Melvin Heineman Lazard Freres & Co., Ltd. Director
21 Moorsfields
London EC2P 2HT
England
Lazard Pension Management, Inc. Director
(Prior to 1/1/97)
30 Rockefeller Plaza
New York, New York 100200
Kenneth M. Jacobs None
Jonathan H. Kagan Continental Cablevision, Inc. Director
Pilot House
54 Lewis Wharf
Boston, Massachusetts 02110
Firearms Training Systems, Inc. Director
7340 McGinnis Ferry Road
Suwanee, Georgia 301274
La SalleRe Ltd. Director
Cumberland House
One Victoria Street
P.O. HM 1502
Hamilton Hm FX
Bermuda
Patient Education Media, Inc. Director
1271 Avenue of the Americas
New York, New York 10020
Phar-Mor, Inc. (Prior to 1/1/96) Director
20 Federal Plaza West
Youngstown, Ohio 44501
Tyco Toys, Inc. Director
6000 Midlantic Drive
Mount Laurel, New Jersey 09054
James L. Kempner Lazard Freres & Co. Capital Markets
30 Rockefeller Plaza
New York, New York 10020
William J. Kreisel Morgan Stanley & Co., Inc. Managing Director
(Prior to 12/95)
1221 Avenue of the Americas
New York, New York 10020
Larry A. Kohn Goldman Sachs & Co. Vice President
(Prior to 1/97)
85 Broad Street
New York, New York 10004
Sandra A. Lamb None
</TABLE>
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<PAGE> 135
<TABLE>
<S> <C> <C>
Edgar D. Legaspi None
Michael S. Liss Bear Stearns & Co. Senior Portfolio Manager
(Prior to 10/1/95)
245 Park Avenue
New York, New York 10004
William R. Loomis, Jr. Englehard Hanovia, Inc. Director
290 Park Avenue
3rd Floor - West Wing
New York, New York 10017
Minorco S.A. Director
Boite Postal 185
L-2011 Luxembourg
Minorco U.S.A., Inc. Director
30 Rockefeller Plaza
Suite 4212
New York, New York 10112
Terra Industries, Inc. Director
600 4th Street
Sioux City, Iowa 51101
J. Robert Lovejoy Lazard Freres & Co. Capital Markets
30 Rockefeller Plaza
New York, New York 10020
Matthew J. Lustig None
Philippe L. Magistretti None
Damon Mezzacappa Corporate Property Investors Director
30 Rockefeller Plaza
New York, New York 10020
Christina A. Mohr Loehmann's Holdings, Inc. Director
2500 Halsey Street
Bronx, New York 10461
United Retail Group, Inc. Director
365 West Passaic Street
Rochelle Park, New Jersey 07662
Robert P. Morgenthau Lazard Freres Asset Management Director, Vice President
(Canada, Inc.
30 Rockefeller Plaza
New York, New York 10020
Steven J. Niemczyk None
Hamish W. M. Norton None
</TABLE>
C-22
<PAGE> 136
<TABLE>
<S> <C> <C>
Jonathan O'Herron Trigon Energy Corporation Director
1 Water Street
White Plains, New York 10601
James A. Paduano Donovan Data Systems, Inc. Director
666 Fifth Avenue
New York, New York 10019
Pilgrim Electronics, Inc. Director
(Prior to 4/1/95)
60 Beaver Brook Road
Danbury, Connecticut 06810
Secure Products, Inc. Director
17 Maple Street
Summit, New Jersey 07901
Louis Perlmutter None
Robert E. Poll, Jr. None
Lester Pollack Continental Cablevision, Inc. Director
Pilot House
54 Louis Wharf
Boston, Massachusetts 02210
CNA Financial Corp (Prior to 3/1/95) Director
CNA Plaza
Chicago, Illinois 60685
Firearms Training Systems, Inc. Director
7340 McGinnis Ferry Road
Suwannee, Georgia 30174
Kaufman & Broad Home Corp. Director
11601 Wilshire Boulevard
Los Angeles, California 90025-1748
</TABLE>
C-23
<PAGE> 137
<TABLE>
<S> <C> <C>
LaSalle Re Ltd. Director
Cumberland House
One Victoria Street
P.O. HM FX
Bermuda
LaSalle Re Holdings Ltd. Director
Cumberland House
One Victoria Street
P.O. HM FX
Bermuda
Loews Corporation (Prior to 1/1/96) Director
666 Fifth Avenue
New York, New York 10103
Paramount Communications, Inc. Director
(Prior to 3/1/95)
15 Columbus Circle
New York, New York 10023
Parlex Corp. Director
145 Milk Street
Metuen, Massachusetts 01844
Polaroid Corp. Director
549 Technology Square
Cambridge, Massachusetts 02139
SD Holding (Bermuda) Ltd. Director
Hurst Holme
Trott Road
Hamilton HMII
Bermuda
Sphere Drake Acquisitions (U.K.) Ltd. Director
52-54 Leadenhall Street
London EC3A 2BJ
England
Sphere Drake Holding Ltd. Director
52-24 Leadenhall Street
London EC3A 2BJ
England
Sun America Inc. Director
11601 Wilshire Boulevard
Los Angeles, California 90025
Tidewater, Inc. Director
1440 Canal Street
Suite 2100
New Orleans, Louisiana 70112
Michael J. Price Avidia Systems, Inc. Director
10 Fairfield Blvd.
Wallingford, Connecticut 06492
</TABLE>
C-24
<PAGE> 138
<TABLE>
<S> <C> <C>
Steven L. Rattner Falcon Holding Group L.P. Director
10900 Wilshire Boulevard
Los Angeles, California 90024
John R. Reese Owosso Corp. Director
312 West Main Street
Owosso, Michigan 48867
Owosso Gan, Inc. Director
312 West Main Street
Owosso, Michigan 48867
John R. Reinsberg None
Louis G. Rice None
Luis E. Rinaldini Cedar Fair Management Co. Director
(Prior to 3/1/95)
CN 5006 Causeway Drive
Sandusky, Ohio 44870
Bruno M. Roger CAP Gemini Sogeti Director
6, Bid Jean Pain a Grenoble (38005)
France
Carnaud Metal Box Packaging Director
(Prior to 8/1/96)
152, Rue de Courcelles aq Paris 17cme
France
Compagnie De Credit Director
121, Boulevard Haussmann a Paris Seme
France
Compagnie De Saint-Gobain Director
Les Miroirs
18 Avenue d'Alsace
Paris la Defense (92096)
France
Eurafrance Director
12, Avenue Percier a Paris Seme
France
Financiere Et Industrielle Gaz Director
Et. Eaux
3, Rue Jacques Bingen a Paris 17cmc
France
Fonde Partonaires Gestion (F.P.G.) Director
121, Boulevard Hausemann a Paris Seme
France
</TABLE>
C-25
<PAGE> 139
<TABLE>
<S> <C> <C>
Lazard, Burlkin, Euna & Co. Director
(Prior to 1/1/96)
Ulmenstrasse 37-39
60325 Frankfurt am Main
Federal Republic of Germany
Lazard & Co., GmbH Director
Ulmenstrasse 37-39
60325 Frankfurt am Main
Federal Republic of Germany
LVMH-Moet Hennesy Louis Vuitton Director
30, Avenue Roche a Paris Seme
France
Marine-Wendel Director
189, Rue Taitbout a Paris 9cmc
France
Midial (Prior to 11/96) Director
192, Avenue Charles de Gaulle
Neuille S/Sein (92200)
France
Pinault-Printemps-Redoute Director
61, Rue Caumartin
75009 Paris
PSA Finance Holding (Prior to 1/1/96) Director
75, av. de la Grande Armee a Paris 16eme
France
Sidel Director
66, Rue de Miromeanil
75008 Paris
Societe Centrale Puour O'Industrie Director
9, Avenue Roche a Paris 8emc
France
Sociote Financiere Generale Director
Immobilierc (S.F.G.I.)
23, rue de I'Arcaede a Paris 9eme
France
Sofina (Belgique) Director
Rue de Naples, 38-B-1050 Bruzelles
Sogeti S.A. (Prior to 8/1/96) Director
6, bld Jean Pain a Grenoble (38005)
France
Sovac (Prior to 8/1/96) Director
19-21, rue de la Bienfaisance a Paris 8eme
France
</TABLE>
C-26
<PAGE> 140
<TABLE>
<S> <C> <C>
Sovaclux S.A. Director
14 rue Aldrigen - Luxembourg
Thomson S.A.
51 esplanade du General de Gaulle
La Defense 10-92800 Puteaux
France
Thomson CSF Director
51 Eslanade du General de Gaulle
La Defense 10-92800 Puteaux
France
U.A.P. Director
9 place Vendome
75001 Paris
Felix G. Rohatyn Crown Cork & Seal Co., Inc. Director
9300 Ashton Road
Philadelphia, Pennsylvania 19136
General Instrument Corp. Director
161 West Madison St.
Chicago, Illinois 60602
Howmet Turbine Components Corp. Director
(Prior to 1/1/96)
221 West Webster Avenue
Muskegon, Michigan 49440
Pechiney S.A. (Prior to 3/1/95) Director
23 Rue Balzac
75008 Paris, France
Pfizer, Inc. Director
235 East 42nd Street
New York, New York 10017-5755
Michael S. Rome None
Gerald Rosenfeld Case Corporation Director
700 State Street
Racine, Wisconsin 53404
Steven H. Sands None
Peter L. Smith Dixie Yarns, Inc. Director
1100 Watkins Street
Chattanooga, Tennessee 37401
Arthur P. Solomon None
Michael B. Solomon Charming Shoppes, Inc. Director
450 Winks Lane
Bensalem, Pennsylvania 19020
</TABLE>
C-27
<PAGE> 141
<TABLE>
<S> <C> <C>
Edouard M. Stern Mainz Holdings Limited Director
P.O. Boxes 3161
Roadtown Tortola BVI
Penthievre Holdings B.V. Director
Jupiter Straat 158
2130 Ah Hoofdorp Netherlands
John S. Tamagni Western Holdings, Inc. Director
(Prior to 9/20/96)
1491 Tyrell Lane
Boise, Idaho 82706
David L. Tashjian None
J. Mikceoll Thomas First National Bank of Chicago Executive Vice President
(Prior to 1/1/95)
One First National Plaza
Chicago, Illinois 60603
Donald A. Wagner None
Ali E. Wambold The Albert Fisher Group plc Director
Fisher House
61 Thames St.
Windsor, Berkshire S04 IQW
England
Lazard Brothers & Co., Ltd. Director
21 Moorfields
London EC2P 2HT
England
Lazard Burklin, Kuna & Co. Director
(Prior to 3/1/95)
Ulmenstrasse 37039
60325 Frankfurt and Main
Federal Republic of Germany
Lazard Freres & Co., Ltd. Director
21 Moorfields
London EC2P 2HT
England
Lazard S.P.A. Director
Plazza Meda, 3
Milano, Italy 20121
Tomkins PLC Director
East Putney House
84 Upper Richmond Road
London SW15 25T
England UK
John B. Ward None
</TABLE>
C-28
<PAGE> 142
<TABLE>
<S> <C> <C>
Michael A. Wildish None
Kendrick P. Wilson III American Buildings Company Director
State Docks Road
Eufaula, Alabama 36027
Bank United Director
3200 Southwest Freeway
Houston, Texas 77027
ITT Corp. Director
1330 Avenue of the Americas
New York, New York 10019
Meigher Communications, Inc. Director
100 Avenue of the Americas
New York, New York 10013
Alexander E. Zagoreoa Drayton Korea Investment Trust Director
11 Devenshire Square
London EC2M 4YR
The Egypt Trust Director
One Rockefeller Plaza
New York, New York 10020
The Emerging World Trust Fund Limited Director
One Rockefeller Plaza
New York, New York 10020
Fleming Continental European Director
One Rockefeller Plaza
New York, New York 10020
Fleming Continental European Director
Investment Trust
25 Copthall Avenue
London EC2R 7DR
Gartmore Emerging Pacific Director
Investment Trust
Gartmore House
16-18 Monument Street
London EC3R 8AJ
Greek Progress Fund Director
Ergobank
S. Evripidou
40-44, Praxit, Elous
105-61 Athens
Greece
Latin American Investment Trust Director
Exchange House
Primrose Street
London EC2A 2NY
</TABLE>
C-29
<PAGE> 143
<TABLE>
<S> <C> <C>
Merlin Green International Director
Investment Trust
Knightsbridge House
197 Knightsbridge
London SW7 1RB
New Zealand Investment Director
23 Cathedral Yard
Exeter EX1 1HB
Taiwan Opportunities Fund Director
C/O Martin-Currie
20 Castle Terrace
Edinburgh 2H1 2ES
U.K.
World Trust Fund Director
Kredietrust
11 rue Aldringen
Luxembourg 1-2960
</TABLE>
C-30
<PAGE> 144
ITEM 29. PRINCIPAL UNDERWRITERS
(a)(1) See Item 28 above.
(a)(2) Portland Investment Services, Inc. is the Distributor
for shares of the Registrant. Portland Investment
Services, Inc. does not act as principal underwriter
for any other investment
company.
(b)(1) Nationwide Advisory Services, Inc.
<TABLE>
<CAPTION>
Position with Position
Name Business Address Underwriter With Registrant
---- ---------------- ----------- ---------------
<S> <C> <C> <C>
Dimon R. McFerson One Nationwide Plaza Chairman and CEO Chairman of Board of
Columbus OH 43215 Trustees
Joseph J. Gasper One Nationwide Plaza President and Director Vice Chairman of
Board
Columbus OH 43215 of Trustees
Robert A. Oakley One Nationwide Plaza Exec. VP - Chief Financial N/A
Columbus OH 43215 Officer and Director
Robert J. Woodward, Jr. One Nationwide Plaza Exec. VP - Chief Investment Trustee
Columbus OH 43215 Officer and Director
William S. Druen One Nationwide Plaza Sr. VP - General Counsel N/A
Columbus OH 43215 and Assistant Secretary
James F. Laird, Jr. Three Nationwide Plaza VP - General Manager Treasurer
Columbus OH 43215
Edwin P. McCausland One Nationwide Plaza Senior VP - Fixed Income Assistant Treasurer
Columbus OH 43215 Securities
Joseph P. Rath One Nationwide Plaza VP - Compliance N/A
Columbus OH 43215
Peter J. Neckermann One Nationwide Plaza Vice President Assistant Treasurer
Columbus OH 43215
William G. Goslee One Nationwide Plaza Vice President N/A
Columbus OH 43215
Christopher A. Cray Three Nationwide Plaza Treasurer Assistant Treasurer
Columbus OH 43215
Susan A. Wolken Three Nationwide Plaza Director N/A
Columbus OH 43215
Dennis W. Click One Nationwide Plaza Vice President and Secretary N/A
Columbus OH 43215
David E. Simaitis One Nationwide Plaza Assistant Secretary Secretary
Columbus OH 43215
Patricia J. Smith Three Nationwide Plaza Assistant Secretary Assistant Secretary
Columbus OH 43215
Elizabeth A. Davin One Nationwide Plaza Assistant Secretary Assistant Secretary
Columbus OH 43215
</TABLE>
C-31
<PAGE> 145
(b)(2) Set forth below are the names, principal business
addresses and positions of each officer of the Distributor.
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT
---------------- ---------------- ---------------
<S> <C> <C>
Richard T. Borst President and Director None
2155 Bridle Way
West Linn, OR 97065
Taylor E. Drake Vice President None
5665 SW Meadows
Suite 400
Lake Oswego, OR 97035
Joan K. Hall Secretary None
5665 SW Meadows Rd.
Suite 400
Lake Oswego, OR 97035
Richard Fletcher Treasurer None
5665 SW Meadows Rd.
Suite 400
Lake Oswego, OR 97035
</TABLE>
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
Christopher A. Cray
Nationwide Advisory Services, Inc.
Three Nationwide Plaza
Columbus, OH 43215
ITEM 31. MANAGEMENT SERVICES
Not applicable.
ITEM 32. UNDERTAKINGS
(1) The Trust undertakes to furnish to each person to whom a prospectus is
delivered, a copy of the Trust's Annual Report, upon request and
without charge.
(2) The Trust undertakes to hold a shareholder meeting, if requested to do
so by the shareholders of at least 10% of the Trust's outstanding
shares, to call a meeting of shareholders for the purpose of voting
upon removal of a trustee or trustees and to assist shareholders in
communications with other shareholders as required by Section 16(c) of
the Investment Company Act of 1940.
C-32
<PAGE> 146
SIGNATURES
Pursuant to the requirements of the Securities Act 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Post-Effective
Amendment No.3 to this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Columbus, and State of
Ohio, on this ___ day of August 1998.
NATIONWIDE INVESTING FOUNDATION III
By: JAMES F. LAIRD, JR.
-------------------------
James F. Laird, Jr., Treasurer
PURSUANT TO THE REQUIREMENT OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE CAPACITIES
INDICATED ON THE ___ DAY OF AUGUST 1998.
<TABLE>
<CAPTION>
SIGNATURE & TITLE
Principal Executive Officer
<S> <C>
DIMON R. MCFERSON*
- ------------------
Dimon R. McFerson, Trustee and Chairman
Principal Accounting and Financial Officer
JAMES F. LAIRD, JR. DAVID C. WETMORE*
- ------------------- -----------------
James F. Laird, Jr., Treasurer David C. Wetmore, Trustee
JOHN C. BRYANT* *By: JAMES F. LAIRD, JR.
- --------------- -------------------
John C. Bryant, Trustee James F. Laird, Jr., Attorney-In-Fact
C. BRENT DEVORE
- ---------------
C. Brent Devore, Trustee
SUE A. DOODY*
- ------------
Sue A. Doody, Trustee
ROBERT M. DUNCAN*
- ----------------
Robert M. Duncan, Trustee
CHARLES L. FUELLGRAF, JR.*
- -------------------------
Charles L. Fuellgraf, Jr., Trustee
THOMAS J. KERR, IV*
- ------------------
Thomas J. Kerr, IV, Trustee
DOUGLAS F. KRIDLER*
- -------------------
Douglas F. Kridler, Trustee
NANCY C. THOMAS*
- ----------------
Nancy C. Thomas, Trustee
HAROLD W. WEIHL*
- ----------------
Harold W. Weihl, Trustee
</TABLE>
C-33
<PAGE> 1
Exhibit 1
NATIONWIDE INVESTING FOUNDATION III
-----------------------------------------
AMENDED DECLARATION OF TRUST
FOR AN OHIO BUSINESS TRUST
(ESTABLISHED AS OF OCTOBER 30, 1997)
(AMENDED MARCH 5, 1998)
<PAGE> 2
<TABLE>
<CAPTION>
INDEX
PAGE
ARTICLE I - NAME, PRINCIPAL OFFICE, DEFINITIONS AND PURPOSES OF TRUST 1
<S> <C> <C>
Section 1.1. Name and Principal Office
Section 1.2. Definitions
Section 1.3. Purposes of Trust
ARTICLE II - TRUSTEES 3
Section 2.1. Initial Trustees
Section 2.2 Number of Trustees
Section 2.3. Election and Term
Section 2.4. Resignation and Removal
Section 2.5. Vacancies
Section 2.6. Delegation of Power to Other Trustees
ARTICLE III - POWERS OF TRUSTEES 4
Section 3.1. General
Section 3.2. Investments
Section 3.3 Legal Title
Section 3.4. Issuance and Repurchase of Securities
Section 3.5. Borrowing Money; Lending Trust Assets
Section 3.6. Delegation; Committees
Section 3.7. Collection and Payment
Section 3.8. Expenses
Section 3.9. Manner of Acting; Bylaws
Section 3.10. Miscellaneous Powers
Section 3.11. Litigation
ARTICLE IV - INVESTMENT ADVISOR, DISTRIBUTOR,
ADMINISTRATOR AND TRANSFER AGENT 9
Section 4.1. Investment Advisor
Section 4.2. Distributor
Section 4.3 Administrator
Section 4.4. Transfer Agent
Section 4.5. Parties to Contract
Section 4.6. Compliance with 1940 Act
ARTICLE V - LIMITATIONS OF LIABILITY OF SHAREHOLDERS,
TRUSTEES AND OTHERS 11
Section 5.1. No Personal Liability of Shareholders, Trustees, etc.
Section 5.2 Mandatory Indemnification
Section 5.3 No Bond Required of Trustees
Section 5.4 No Duty of Investigation; Notice in Trust Instruments, etc.
Section 5.5 Reliance on Experts, etc.
Section 5.6 Indemnification not Exclusive, etc.
Section 5.7 Liability of Series
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE VI - SHARES OF BENEFICIAL INTEREST 15
Section 6.1. Beneficial Interest
Section 6.2. Establishment and Designation of Series
Section 6.3 Rights of Shareholders
Section 6.4. Trust Only
Section 6.5 Issuance of Shares
Section 6.6. Register of Shares; Share Certificates
Section 6.7. Transfer of Shares
Section 6.8. Notices
Section 6.9. Treasury Shares
Section 6.10. Investments in Trust
Section 6.11. Series or Class Designation
ARTICLE VII - REDEMPTIONS 22
Section 7.1. Redemption of Shares
Section 7.2. Price
Section 7.3. Payment
Section 7.4. Effect of Suspension of Determination of Net Asset Value
Section 7.5. Repurchase by Agreement
Section 7.6. Redemption of Shareholder's Interest
Section 7.7. Reductions in Number of Outstanding Shares Pursuant to Net Asset
Value Formula
Section 7.8. Suspension of Right of Redemption
Section 7.9. Redemption of Shares; Disclosure of Holding
ARTICLE VIII - DETERMINATION OF NET ASSET VALUE, NET 24
INCOME AND DISTRIBUTIONS
Section 8.1. Net Asset Value
Section 8.2. Distribution to Shareholders
Section 8.3. Determination of Net Income
Section 8.4. Power to Modify Foregoing Procedures
ARTICLE IX - DURATION; TERMINATION AND TRUST; AMENDMENT; 25
MERGERS, ETC.
Section 9.1. Duration
Section 9.2. Termination of Trust
Section 9.3. Amendment Procedure
Section 9.4. Merger, Consolidation and Sale or Disposition of Assets
Section 9.5. Incorporation
Section 9.6. Absence of Dissenters' Rights
ARTICLE X - SHAREHOLDERS' VOTING POWERS AND MEETINGS 28
Section 10.1. Voting Powers
Section 10.2. Meetings of Shareholders
Section 10.3. Quorum and Required Vote
Section 10.4. Record Date for Meetings
Section 10.5. Proxies
Section 10.6. Action Without a Meeting
Section 10.7. Inspection of Records
Section 10.8. Additional Provisions
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
ARTICLE XI - MISCELLANEOUS 31
Section 11.1. Filing
Section 11.2. Governing Law
Section 11.3. Counterparts
Section 11.4. Reliance by Third Parties
Section 11.5. Provisions in Conflict with Law or Regulations
Section 11.6. Index and Heading for Reference Only
</TABLE>
iii
<PAGE> 5
AMENDED DECLARATION OF TRUST
NATIONWIDE INVESTING FOUNDATION III
DECLARATION OF TRUST made at Columbus, Ohio as of the 30th day of
October, 1997 and amended as of the 5th day of March, 1998 by the Trustees
hereunder, and by the holders of Shares of beneficial interest to be issued
hereunder as hereinafter provided.
WHEREAS, the Trustees desire to establish a trust for the investment
and reinvestment of funds contributed thereto; and
WHEREAS, the Trustees desire that the beneficial interest in the trust
assets be divided into transferable shares of beneficial interest; and:
WHEREAS, the Trustees have agreed to manage all property coming into
their hands as trustees of an Ohio business trust in accordance with the
provisions of Chapter 1746, Ohio Revised Code, and as hereinafter set forth.
NOW THEREFORE, the Trustees hereby declare that all money and property
contributed to the trust established hereunder shall be held and managed in
trust for the benefit of holders, from time to time, of the shares of beneficial
interest issued hereunder and subject to the provisions hereof.
ARTICLE I
NAME, PRINCIPAL OFFICE, DEFINITIONS AND PURPOSES OF TRUST
SECTION 1.1. NAME AND PRINCIPAL OFFICE. The name of the trust created
hereby is "Nationwide Investing Foundation III" and the Trustees shall conduct
the business of the Trust under that name or any other name as the Trustees may
from time to time determine. The principal office of the Trust is located in
Columbus, Ohio.
SECTION 1.2. DEFINITIONS. Wherever they are used herein, the following
terms have the following respective meanings:
(a) "ADMINISTRATOR" means the party other than the Trust, to the
contract described in Section 4.3 hereof.
(b) "BYLAWS" means the Bylaws referred to in Section 3.9 hereof, as
from time to time amended.
(c) "CLASS" refers to one or more classes or sub-series of Shares
established and designated under or in accordance with the provisions
of Article VI.
1
<PAGE> 6
(d) The terms "COMMISSION" and "INTERESTED PERSON" shall have the
meanings given them in the 1940 Act. The term "MAJORITY SHAREHOLDER
VOTE" shall refer to the 67% or 50% requirement in Section 2(a)(42) of
the 1940 Act, whichever may be applicable and as may be amended, except
to the extent that the Trustees have otherwise defined "Majority
Shareholder Vote" in conjunction with the establishment of any Series
of Shares.
(e) "DECLARATION" means this Declaration of Trust as amended from time
to time. Reference in this Declaration of Trust to "DECLARATION",
"HEREOF", "HEREIN" and "HEREUNDER" shall be deemed to refer to this
Declaration rather than the article or section in which such words
appear.
(f) "DISTRIBUTOR" means the party, other than the Trust, to the
contract described in Section 4.2 hereof.
(g) "INVESTMENT ADVISER" means the party, other than the Trust, to the
contract described in Section 4.1 hereof.
(h) The "1940 ACT" means the Investment Company Act of 1940 and the
rules and regulations thereunder, as amended from time to time.
(i) "PERSON" means and includes individuals, corporations,
partnerships, trusts, associations, joint ventures and other entities,
whether or not legal entities, and governments and agencies and
political subdivisions thereof.
(j) "SERIES" refers to a series of Shares established and designated
under or in accordance with the provisions of Article VI.
(k) "SHARE" or "SHARES" means the units of interest into which the
beneficial interest in the Trust shall be divided from time to time,
including the Shares of any Series or Class which may be established by
the Trustees, and includes fractions of Shares as well as whole Shares.
(l) "SHAREHOLDER" means a record owner of outstanding Shares.
(m) "TRANSFER AGENT" means the party, other than the Trust, to the
contract described in Section 4.4 hereof.
(n) The "TRUST" means Nationwide Investing Foundation III and refers to
the Ohio business trust established by this Declaration of Trust, as
amended from time to time.
(o) The "TRUST PROPERTY" means any and all property, real or personal,
tangible or intangible, which is owned or held by or for the account of
the Trust or the Trustees.
(p) The "TRUSTEE" OR "TRUSTEES" means the person or persons who have
signed this Declaration, so long as such person or persons shall
continue in office in accordance with the
2
<PAGE> 7
terms hereof, and all other persons who may from time to time be duly
elected, qualified and serving as Trustees in accordance with the
provisions hereof, and reference herein to a Trustee or the Trustees
shall refer to such person or persons in their capacity as trustee or
trustees hereunder.
SECTION 1.3. PURPOSES OF TRUST. The purposes of the Trust are to
operate as an investment company as defined in the 1940 Act and to engage in any
lawful activity for which business trusts may be formed under Chapter 1746, Ohio
Revised Code.
ARTICLE II
TRUSTEES
SECTION 2.1. INITIAL TRUSTEES. Upon the execution of this Declaration
of Trust or a counterpart hereof or some other writing in which each of the
Trustees accepts such trusteeship and agrees to the provisions hereof, each of
the Trustees listed at the end of this Declaration of Trust shall become the
initial Trustees of the Trust.
SECTION 2.2. NUMBER OF TRUSTEES. The number of Trustees shall be such
number as shall be fixed from time to time by a written instrument signed by a
majority of the Trustees. The Trustees serving as such, whether described in
Section 2.1 above or hereafter becoming a Trustee, may increase or decrease the
number of Trustees to a number other than the number theretofore determined. A
Trustee shall qualify by accepting in writing his election or appointment and
agreeing to be bound by the Declaration of Trust. No decrease in the number of
Trustees shall have the effect of removing any Trustee from office prior to the
expiration of his or her term, but the number of Trustees may be decreased in
conjunction with the removal of a Trustee pursuant to Section 2.4.
SECTION 2.3. ELECTION AND TERM. Except for the Trustees named herein or
appointed to fill vacancies pursuant to Section 2.5 hereof, the Trustees shall
be elected by the Shareholders, who shall vote as a single class and not by
Series and shall vote at such times as the Trustees shall determine that such
election is required by the 1940 Act or is otherwise advisable. There is no
requirement that the Trustees have an annual meeting of the Shareholders. In the
event the Trustees determine to have an annual or special meeting of the
Shareholders at which Trustees will be elected, it shall be held at such time
and place and in such manner as the Bylaws shall provide notwithstanding
anything in this section to the contrary. Except in the event of death,
resignation or removal, each of the Trustees shall hold office until the next
meeting of Shareholders called for the purpose of electing Trustees and until
his successor is elected and qualified to serve as Trustee.
SECTION 2.4. RESIGNATION AND REMOVAL. Any Trustee may resign his trust
(without need for prior or subsequent accounting except to the extent required
by the 1940 Act or under circumstances that would justify the Trustee's removal
for cause and then only if required by the remaining Trustees) by an instrument
in writing signed by him and delivered to the other Trustees or to any officer
of the Trust or at a meeting of the Trustees, and such resignation shall be
effective upon such delivery, or at a later date according to the terms of the
instrument. Any of the Trustees may be removed with or without cause, by the
written action of two-thirds of the number of Trustees
3
<PAGE> 8
prior to such removal or by Shareholders at any meeting called for that purpose.
No Trustee shall be entitled to any damages on account of such removal. Upon the
resignation or removal of a Trustee, or his otherwise ceasing to be a Trustee,
he shall execute and deliver such documents as the remaining Trustees shall
require for the purpose of conveying to the Trust or the remaining Trustees any
Trust Property held in the name of the resigning or removed Trustee. Upon the
incapacity or death of any Trustee, his legal representative shall execute and
deliver on his behalf such documents as the remaining Trustees shall require as
provided in the preceding sentence.
SECTION 2.5. VACANCIES. The term of office of a Trustee shall terminate
and a vacancy shall occur in the event of the death, resignation, removal,
bankruptcy, adjudicated incompetence or other incapacity to perform the duties
of the office of a Trustee. No such vacancy shall operate to annul this
Declaration or to revoke any existing agency or contract created or entered into
pursuant to the terms of the Declaration. In the case of an existing vacancy,
including a vacancy existing by reason of an increase in the number of Trustees
as set forth in Section 2.2. hereof, subject to the provisions of Section 16(a)
of the 1940 Act, the remaining Trustees may fill such vacancy by the appointment
of such other person or persons as they in their discretion shall see fit, made
by a written instrument signed by a majority of the remaining Trustees. Any such
appointment shall not become effective, however, until the person named in the
written instrument of appointment shall have accepted in writing such
appointment and agreed in writing to be bound by the terms of the Declaration.
An appointment of a Trustee may be made in anticipation of a vacancy to occur at
a later date by reason of retirement, resignation or increase in the number of
Trustees, provided that such appointment shall not become effective prior to
such retirement, resignation or increase in the number of Trustees. Whenever a
vacancy in the number of Trustees shall occur, until such vacancy is filled as
provided in this Section 2.5., the Trustees in office, regardless of their
number, shall have all the powers granted to the Trustees and shall discharge
all the duties imposed upon the Trustees by the Declaration. A written
instrument certifying the existence of such vacancy signed by a majority of the
Trustees shall be conclusive evidence of the existence of such vacancy.
Notwithstanding the foregoing, to the extent the Trust adopts and
implements a written plan pursuant to Rule 12b-1 under the 1940 Act, and so long
as required by the 1940 Act, the selection and nomination of Trustees who are
"interested persons" of the Trust as defined in the 1940 Act, shall be committed
to the discretion of the Trustees who are not "interested persons," as so
defined.
SECTION 2.6. DELEGATION OF POWER TO OTHER TRUSTEES. Any Trustee may, by
power of attorney, delegate his power for a period not exceeding six (6) months
at any one time to any other Trustee or Trustees; provided that in no case shall
less than two (2) Trustees personally exercise the powers granted to the
Trustees under the Declaration except as herein otherwise expressly provided and
except to the extent that the exercise of such power would be prohibited by the
1940 Act.
ARTICLE III
POWERS OF TRUSTEES
SECTION 3.1. GENERAL. The Trustees shall have exclusive and absolute
control over the Trust Property and over the business of the Trust to the same
extent as if the Trustees were the sole owners
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of the Trust Property and business in their own right, but with such powers of
delegation as may be permitted by the Declaration. The Trustees shall have power
to conduct the business of the Trust and carry on its operations and maintain
offices both within and without the State of Ohio, in any and all states of the
United States of America, in the District of Columbia, and in any and all
commonwealths, territories, dependencies, colonies, possessions, agencies or
instrumentalities of the United States of America and of foreign governments,
and to do all such other things and execute all such instruments as they deem
necessary, proper or desirable in order to promote the interests of the Trust
although such things are not herein specifically mentioned. Any determination as
to what is in the interest of the Trust made by the Trustees in good faith shall
be conclusive. In construing the provisions of the Declaration, the presumption
shall be in favor of a grant of power to the Trustees.
The enumeration of any specific power herein shall not be construed as
limiting the aforesaid power. Such powers of the Trustees may be exercised
without order of or resort to any court.
SECTION 3.2. INVESTMENTS. The Trustees shall have the power to:
(a) Conduct, operate and carry on the business of an investment company
and exercise all the powers necessary and appropriate for the conduct
of such operations;
(b) Invest in, hold for investment, or reinvest in, securities,
including common and preferred stocks; shares of other investment
companies; warrants; bonds; debentures; bills; time notes and all other
evidences of indebtedness; negotiable or non-negotiable instruments;
government securities, including securities of any state, municipality
or other political subdivision, or any governmental or
quasi-governmental agency or instrumentality; and money market
instruments including bank certificates of deposit, finance paper,
commercial paper, bankers' acceptances and all kinds of repurchase
agreements, of any corporation, company, trust, association, firm or
other business organization however established, and of any country,
state, municipality or other political subdivisions, or any
governmental or quasi-governmental agency or instrumentality;
(c) Acquire (by purchase, subscription or otherwise), to hold, to trade
in and deal in, to acquire or write any rights or options to purchase
or sell, to sell or otherwise dispose of, to lend, and to pledge any
such securities and repurchase agreements and forward foreign currency
exchange contracts, to purchase and sell futures contracts on
securities, securities indices and foreign currencies, to purchase or
sell options on such contracts, foreign currency contracts and foreign
currencies and to engage in all types of hedging and risk management
transactions;
(d) Exercise all rights, powers and privileges of ownership or interest
in all securities included in the Trust Property, including the right
to vote thereon and otherwise act with respect thereto, to exercise the
powers and rights of subscription, and to do all acts for the
preservation, protection, improvements and enhancement in value of all
such securities;
(e) Join with other holders of any securities or debt instruments in
acting through a committee, depository, voting trustee or otherwise,
and in that connection to deposit any
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security or debt instrument with, or transfer any security or debt
instrument to, any such committee, depository or trustee, and to
delegate to them such power and authority with relation to any security
or debt instrument (whether or not so deposited or transferred) as the
Trustees shall deem proper, and to agree to pay, and to pay, such
committee, depository or trustee as the Trustees shall deem proper;
(f) Acquire (by purchase, lease or otherwise) and to hold, use,
maintain, develop and dispose of (by sale or otherwise) any property,
real or personal, including cash, and any interest therein;
(g) Act as a distributor of shares and as underwriter of, or broker or
dealer in, securities or other property;
(h) Allocate assets, liabilities and expenses of the Trust to a
particular Series or Class of Shares or to apportion the same among two
or more Series or Classes, provided that any liabilities or expenses
incurred by a particular Series or Class of Shares shall be payable
solely out of the assets of that Series;
(i) Consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or issuer the security or
debt instrument of which is or was held in the Trust; to consent to any
contract, lease, mortgage, purchase or sale of property by such
corporation or issuer, and to pay calls or subscriptions with respect
to any security or debt instrument held in the Trust;
(j) Aid by further investment any corporation, company, trust,
association or firm, any obligation of or interest in which is included
in the Trust Property or in the affairs of which the Trustees have any
direct or indirect interest; to do all acts and things designed to
protect, preserve, improve or enhance the value of such obligation or
interest; to guarantee or become surety on any or all of the contracts,
stocks, bonds, notes, debentures and other obligations of any such
corporation, company, trust, association or firm; and
(k) In general to carry on any other business in connection with or
incidental to any of the foregoing powers, to do everything necessary,
suitable or proper for the accomplishment of any purpose or the
attainment of any object or the furtherance of any power hereinbefore
set forth, either alone or in association with others, to do every
other act or thing incidental or appurtenant to or growing out of or
connected with the aforesaid business or purposes, objects or powers,
and to engage in any other lawful act or activity in which corporations
organized under Chapter 1701, Ohio Revised Code, may engage.
The foregoing clauses shall be construed both as objects and powers,
and the foregoing enumeration of specific powers shall not be held to limit or
restrict in any manner the general powers of the Trustees.
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The Trustees shall not be limited to investing in obligations maturing
before the possible termination of the Trust, nor shall the Trustees be limited
by any law limiting the investments which may be made by fiduciaries.
SECTION 3.3. LEGAL TITLE. Legal title to all the Trust Property shall
be vested in the Trustees except that the Trustees shall have power to cause
legal title to any Trust Property to be held by or in the name of one or more of
the Trustees, or in the name of the Trust, or in the name of any other Person as
nominee, on such terms as the Trustees may determine, provided that the interest
of the Trust therein is appropriately protected. The right, title and interest
of the Trustees in the Trust Property shall vest automatically in each Person
who may hereafter become a Trustee. Upon the resignation, removal or death of a
Trustee, he shall automatically cease to have any right, title or interest in
any of the Trust Property, and the right, title and interest of such Trustee in
the Trust Property shall vest automatically in the remaining Trustees. Such
vesting and cessation of title shall be effective whether or not conveyancing
documents have been executed and delivered.
SECTION 3.4. ISSUANCE AND REPURCHASE OF SECURITIES. The Trustees shall
have the power to issue, sell, repurchase, redeem, retire, cancel, acquire,
hold, resell, reissue, dispose of, transfer, and otherwise deal in Shares and,
subject to the provisions set forth in Articles VI, VII, VIII, and IX hereof, to
apply to any such repurchase, redemption, retirement, cancellation or
acquisition of Shares any funds or property of the Trust whether capital or
surplus or otherwise, to the full extent now or hereafter permitted by the laws
of the of Ohio governing business corporations.
SECTION 3.5. BORROWING MONEY; LENDING TRUST ASSETS. The Trustees shall
have power to borrow money or otherwise obtain credit to secure the same by
mortgaging, pledging or otherwise subjecting as security the assets of the
Trust, to endorse, guarantee, or undertake the performance of any obligation,
contract or engagement of any other Person and to lend Trust assets.
SECTION 3.6. DELEGATION; COMMITTEES. The Trustees shall have power to
delegate from time to time to such of their number or to officers, employees or
agents of the Trust the doing of such things and the execution of such
instruments either in the name of the Trust or the names of the Trustees or
otherwise as the Trustees may deem expedient, to the extent such delegation is
permitted by the 1940 Act, including without implied limitation the power and
authority to act in the name of the Trust and of the Trustees, to sign documents
and to act as attorney-in-fact for the Trustees.
SECTION 3.7. COLLECTION AND PAYMENT. The Trustees shall have power to
collect all property due to the Trust; to pay all claims, including taxes,
against the Trust Property; to prosecute, defend, compromise or abandon any
claims relating to the Trust Property; to foreclose any security interest
securing any obligations, by virtue of which any property is owed to the Trust;
and to enter into releases, agreements and other instruments.
SECTION 3.8. EXPENSES. The Trustees are authorized to pay or cause to
be paid out of the principal or income of the Trust, or partly out of principal
and partly out of income, and to charge or allocate the same to, between or
among such one or more of the Series or Classes that may be established pursuant
to Article VI, as the Trustees deem fair, all expenses, fees, charges, taxes and
liabilities incurred or arising in connection with the Trust, or in connection
with the management
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thereof, including, but not limited to, the Trustees' compensation and such
expenses and charges for the services of the Trust's officers, employees,
Investment Adviser, Distributor, Administrator, Transfer Agent, auditor, counsel
and such other agents, consultants and independent contractors and such other
expenses and charges as the Trustees may deem necessary or proper to incur.
Without limiting the generality of any other provision hereof, the Trustees
shall be entitled to reasonable compensation from the Trust for their services
as Trustees and may fix the amount of such compensation.
SECTION 3.9. MANNER OF ACTION; BYLAWS. Except as otherwise provided
herein or in the Bylaws or in the 1940 Act, any action to be taken by the
Trustees may be taken by a majority of the Trustees present at a meeting of
Trustees (a quorum being present), including any meeting held by means of a
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, or by written consents
of a majority of the Trustees (unless a higher proportion is required by the
1940 Act or other applicable law). The Trustees may adopt Bylaws not
inconsistent with this Declaration to provide for the conduct of the business of
the Trust and may amend or repeal such Bylaws to the extent such power is not
reserved to the Shareholders.
Notwithstanding the foregoing provisions of this Section 3.9 and in
addition to such provisions or any other provision of this Declaration or of the
Bylaws, the Trustees may by resolution appoint a committee consisting of less
than the whole number of Trustees then in office, which committee may be
empowered to act for and bind the Trustees and the Trust, as if the acts of such
committee were the acts of all the Trustees then in office, with respect to the
institution, prosecution, dismissal, settlement, review or investigation of any
action, suit or proceeding which shall be pending or threatened to be brought
before any court, administrative agency or other adjudicatory body.
SECTION 3.10. MISCELLANEOUS POWERS. The Trustees shall have the power
to: (a) employ or contract with such Persons as the Trustees may deem desirable
for the transaction of the business of the Trust; (b) enter into joint ventures,
partnerships and any other combinations or associations; (c) remove Trustees or
fill vacancies in or add to their number, elect and remove such officers and
appoint and terminate such agents or employees as they consider appropriate, any
one or more of the foregoing of whom may be a Trustee, and appoint from their
own number, and terminate, any one or more committee which may exercise some or
all of the power and authority of the Trustees as the Trustees may determine;
(d) purchase, and pay for out of Trust Property, insurance policies insuring the
assets of the Trust and the payment of distributions and principal on its
portfolio investments and insurance policies insuring the Shareholders,
Trustees, officers, employees, agents, investment advisers, distributors,
selected dealers or independent contractors of the Trust against all claims
arising by reason of holding or having held any such position or by reason of
any action taken or omitted by any such Person in such capacity, whether or not
constituting negligence, or whether or not the Trust would have the power to
indemnify such Person against such liability; (e) establish pension,
profit-sharing, Share purchase, and other retirement, incentive and benefit
plans for any Trustees, officers, employees and agents of the Trust; (f) to the
extent permitted by law, indemnify any person with whom the Trust has dealings,
including the Investment Adviser, Distributor, Administrator, Transfer Agent and
selected dealers, to such extent the Trustees shall determine; (g)
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guarantee indebtedness or contractual obligations of others; (h) determine and
change the fiscal year of the Trust and the method by which its accounts shall
be kept; and (i) adopt a seal for the Trust, but the absence of such seal shall
not impair the validity of any instrument executed on behalf of the Trust.
SECTION 3.11. LITIGATION. The Trustees shall have the power to engage
in and to prosecute, defend, compromise, abandon, or adjust, by arbitration, or
otherwise, any actions, suits, proceedings, disputes, claims, and demands
relating to the Trust, and out of the assets of the Trust to pay or to satisfy
any debts, claims or expenses incurred in connection therewith, including those
of litigation, and such power shall include without limitation the power of the
Trustees or any appropriate committee thereof, in the exercise of their or its
good faith business judgment, to dismiss any action, suit, proceeding, dispute,
claim, or demand, derivative or otherwise, brought by any person, including a
Shareholder in its own name or the name of the Trust, whether or not the Trust
or any of the Trustees may be named individually therein or the subject matter
arises by reason of business for or on behalf of the Trust.
ARTICLE IV
INVESTMENT ADVISER, DISTRIBUTOR, ADMINISTRATOR
AND TRANSFER AGENT
SECTION 4.1. INVESTMENT ADVISER. Subject to a Majority Shareholder Vote
unless such vote is not required pursuant to the 1940 Act or Commission rule or
exemption, the Trustees may, in their discretion, from time to time enter into
one or more investment advisory or management contracts whereby the other party
to such contract shall undertake to furnish the Trust such management,
investment advisory, statistical and research facilities and services,
promotional activities, and such other facilities and services, if any, as the
Trustees shall from time to time consider desirable and all upon such terms and
conditions as the Trustees may, in their discretion, determine. Notwithstanding
any provisions of the Declaration, the Trustees may authorize the Investment
Adviser (subject to such general or specific instructions as the Trustees may
from time to time adopt) to effect purchases, sales, loans or exchanges of
portfolio securities of the Trust on behalf of the Trustees or may authorize any
officer, employee or Trustee to effect such purchases, sales, loans or exchanges
pursuant to recommendations of the Investment Adviser (and all without further
action by the Trustees). Any such purchases, sales, loans and exchanges shall be
deemed to have been authorized by all of the Trustees.
SECTION 4.2. DISTRIBUTOR. The Trustees may, in their discretion, from
time to time enter into a contract, providing for the sale of Shares to the
Trust at not less than the net asset value per Share (as described in Article
VIII hereof), whereby the Trust may either agree to sell the Shares to the other
party to the contract or appoint such other party its sales agent for such
Shares. In either case, the contract shall be on such terms and conditions as
the Trustees may in their discretion determine not inconsistent with the
provisions of this Article IV or the Bylaws; and such contract may also provide
for the repurchase or sale of Shares of the Trust by such other party as
principal or as agent of the Trust and may provide that such other party may
enter into selected dealer agreements with
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registered securities dealers or other qualified distributors to further the
purpose of the distribution or repurchase of the Shares.
SECTION 4.3. ADMINISTRATOR. The Trustees may, in their discretion, from
time to time enter into an administrative services agreement whereby the other
party to such contract shall provide facilities, equipment, and personnel to
carry out certain administrative services for the operation of the business and
affairs of the Trust and each of its separate Series, including the fund
accounting responsibilities with respect to the Trust, the Series and any
Classes. The contract shall have such terms and conditions as the Trustees may,
in their discretion, determine not inconsistent with the Declaration or the
Bylaws. Such services may be provided by one or more Persons.
SECTION 4.4. TRANSFER AGENT. The Trustees may, in their discretion,
from time to time enter into a transfer agency and shareholder service contract
whereby the other party to such contract shall undertake to furnish transfer
agency and shareholder services to the Trust. The contract shall have such terms
and conditions as the Trustees may, in their discretion, determine not
inconsistent with the Declaration or the Bylaws. Such services may be provided
by one or more Persons.
SECTION 4.5. PARTIES TO CONTRACT. Subject to compliance with the
provisions of the 1940 Act, but not withstanding any limitations of present and
future law or custom in regard to delegation of powers by trustees generally,
the Trustees may, at any time and without limiting the generality of their
powers and authority otherwise set forth herein, enter into one or more
exclusive or non-exclusive contracts with any one or more corporations, trusts,
associations, partnerships, limited partnerships, other types of organizations
or individuals ("Contracting Party") to provide for the performance and
assumption of the services, duties and responsibilities to, for or of the Trust
and /or the Trustees as described in Sections 4.1, 4.2, 4.3, and 4.4 above and
to provide for the performance and assumption of such other services, duties and
responsibilities in addition to those set forth above as the Trustees may
determine appropriate (collectively, such services, duties and responsibilities
are referred to as "Services").
The same person may be the Contracting Party for some or all of the
Services and the contracts with respect thereto may contain such terms
interpretive of or in addition to the delineation of the Services for, including
provisions (to the extent consistent with the 1940 Act) relating to the standard
of duty of and the rights to indemnification of the Contacting Party and others,
as the Trustees may determine. Subject to the 1940 Act, nothing herein shall
preclude, prevent or limit the Trust or a Contracting Party from entering into
sub-contractual arrangements for any of the Services.
Subject to the provisions of the 1940 Act, the fact that:
(a) any of the Shareholders, Trustees or officers of the Trust is a
shareholder, director, officer, partner, trustee, employee, manager,
investment adviser, distributor or agent of or for any Contracting
Party, or of or for any parent or affiliate of any Contracting Party or
that the Contracting Party or any parent or affiliate thereof is a
Shareholder or has an interest in the Trust; or
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(b) any Contracting Party may have a contract providing for the
rendering of any similar Services to one or more other corporations,
trusts, associations, partnerships, limited partnerships or other
organizations, or has other business or interests shall not affect the
validity of any contract for the performance and assumption of Services
or disqualify any Shareholder, Trustee or officer of the Trust from
voting upon or executing the same or create any liability or
accountability to the Trust or its Shareholders, provided in the case
of any relationship or interest referred to in the preceding clause (a)
on the part of on the part of any Trustee or officer of the Trust
either (i) the material facts as to such relationship of interest have
been disclosed to or are known by the Trustees not having any such
relationship or interest and the contract involved is approved in good
faith by a majority of such Trustees not having any such relationship
or interest (even though such unrelated or disinterested Trustees are
less than a quorum of all of the Trustees); or (ii) the material facts
as to such relationship or interest and as to the contract have been
disclosed to or are known by the Shareholders entitled to vote thereon
and the contract involved is specifically approved in good faith by
vote of the Shareholders; or (iii) the specific contract involved is
fair to the Trust as of the time it is authorized, approved or ratified
by the Trustees or by the Shareholders.
SECTION 4.6. COMPLIANCE WITH 1940 ACT. Any contract entered into
pursuant to Sections 4.1 or 4.2 shall be consistent with and subject to the
requirements of Section 15 of the 1940 Act (including any amendment thereof or
other applicable Act of Congress hereafter enacted) with respect to its
continuance in effect, its termination and the method of authorization and
approval of such contract or renewal thereof.
ARTICLE V
LIMITATIONS OF LIABILITY OF SHAREHOLDERS
TRUSTEES AND OTHERS
SECTION 5.1. NO PERSONAL LIABILITY OF SHAREHOLDERS, TRUSTEES, ETC. No
Trustee, officer, employee or agent of the Trust shall be subject to any
personal liability whatsoever to any Person, other than the Trust or its
Shareholders, in connection with Trust Property or the affairs of the Trust,
except that arising from bad faith, willful misfeasance, gross negligence or
reckless disregard for his duty to such Person; and all such Persons shall look
solely to the Trust Property for satisfaction of claims of any nature arising in
connection with the affairs of the Trust.
No Shareholder as such shall be subject to any personal liability
whatsoever to any Person in connection with Trust Property or the acts,
obligations or affairs of the Trust. If any Shareholder or former Shareholder
shall be charged or held personally liable for any obligation or liability of
the Trust solely by reason of being or having been a Shareholder and not because
of such Shareholder's acts or omissions or for some other reason, the Trust
(upon proper and timely request by the Shareholder) shall assume the defense
against such charge and satisfy any judgment or settlement thereon, and the
Shareholder or former Shareholder (or his heirs, executors, administrators or
other legal representatives or in the case of a corporation or other entity, its
corporate or other general
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successor) shall be entitled out of the assets of the Trust Property to be held
harmless from and indemnified against all loss and expense arising from such
liability.
The exercise by the Trustees of their powers and discretion hereunder
shall be binding upon everyone interested. A Trustee shall be liable for his own
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the office of Trustee, and for nothing else,
and shall not be liable for errors of judgment or mistakes of fact or law.
Subject to the foregoing, (a) the Trustees shall not be responsible or liable in
any event for any neglect or wrongdoing of any officer, agent, employee,
consultant, Investment Adviser, Distributor, Administrator, or Transfer Agent of
the Trust, nor shall any Trustee be responsible for the act or omission of any
other Trustee; and (b) the Trustees may rely on the advice of counsel or experts
as described in Section 5.6 below.
SECTION 5.2. MANDATORY INDEMNIFICATION.
(a) Subject to the exceptions and limitations contained in paragraph
(b) below:
(i) Every person who is, or has been a Trustee or officer of
the Trust shall be indemnified by the Trust against all
liability and against all expenses reasonably incurred or paid
by him in connection with any claim, action, suit or
proceeding in which he becomes involved as a party or
otherwise by virtue of his being or having been a Trustee or
officer and against amounts paid or incurred by him in the
settlement thereof.
(ii) The words "claim", "action", "suit" or "proceeding" shall
apply to all claims, actions, suits or proceedings (civil,
criminal or other, including appeals), actual or threatened;
and the words "liability" and "expenses" shall include,
without limitation, attorneys' fees, costs, judgments, amounts
paid in settlement, fines, penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a Trustee or
officer:
(i) against any liability to the Trust or the Shareholders by
reason of a final adjudication by the court or other body
before which the proceeding was brought that he engaged in
willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office;
(ii) with respect to any matter as to which he shall have been
finally adjudicated not to have acted in good faith or in the
reasonable belief that his action was in or not opposed to the
best interest of the Trust; or
(iii) in the event of a settlement or other disposition not
involving a final adjudication as provided in paragraphs
(b)(i) or (b)(ii) resulting in a payment by a Trustee or
officer, unless there has been either a determination that
such Trustee or officer did not engage in willful misfeasance,
bad faith, gross negligence or reckless
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disregard of the duties involved in the conduct of his office
by the court or other body approving the settlement or other
disposition or by a reasonable determination, based upon a
review of readily available facts (as opposed to a full
trial-type inquiry) that he did not engage in such conduct:
(A) by vote of a majority of the Disinterested
Trustees acting on the matter (provided that a
majority of the Disinterested Trustees then in office
act on the matter); or
(B) by written opinion of independent legal counsel.
(c) The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable, shall
not affect any other rights to which any Trustee or officer may now or
hereafter be entitled, shall continue as to a Person who has ceased to
be such Trustee or officer and shall inure to the benefit of the heirs,
executors and administrators of such Person. Nothing contained herein
shall affect any rights to indemnification to which personnel other
than Trustees and officers may be entitled by contract or otherwise
under law.
(d) Expenses of preparation and presentation of a defense to any claim,
action, suit or proceeding of the character described in paragraph (a)
of this Section 5.2 shall be advanced by the Trust prior to final
disposition thereof upon receipt of an undertaking by or on behalf of
the recipient to repay such amount if it is ultimately determined that
he is not entitled to indemnification under this Section 5.2, provided
that either:
(i) such undertaking is secured by a surety bond or some other
appropriate security or the Trust shall be insured against
losses arising out of any such advances; or
(ii) a majority of the Disinterested Trustees acting on the
matter (provided that a majority of the Disinterested Trustees
then in office act on the matter) or an independent legal
counsel in a written opinion, shall determine, based upon a
review of readily available facts (as opposed to a full
trial-type inquiry), that there is reason to believe that the
recipient ultimately will be found entitled to
indemnification.
As used in this Section 5.2, a "Disinterested Trustee" is one (i) who
is not an "Interested Person" of the Trust (including anyone who has been
exempted from being an "Interested Person" by any rule, regulation or order of
the Commission), and (ii) against whom none of such actions, suits or other
proceedings or another action, suit or other proceeding on the same similar
grounds is then or had been pending.
Agents and employees of the Trust who are not Trustees or officers of
the Trust may be indemnified under the same standards and procedures set forth
in this Section 5.2., in the discretion of the Board.
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SECTION 5.4. NO BOND REQUIRED OF TRUSTEES. No Trustee shall be
obligated to give any bond or other security for the performance of any of his
duties hereunder.
SECTION 5.5. NO DUTY OF INVESTIGATION; NOTICE IN TRUST INSTRUMENTS,
etc. All Persons extending credit to, contracting with or having any claim
against the Trust shall look only to the assets of the Trust for payment under
such credit, contract or claim; and neither the Shareholders nor the Trustees,
nor any of the Trust?s officers, employees or agents, whether past, present or
future, shall be personally liable therefor. Every obligation, contract,
instrument, certificate, Share, other security of the Trust or undertaking, and
every other act or thing whatsoever executed in connection with the Trust shall
be conclusively presumed to have been executed or done by the executors thereof
only in their capacity as Trustees under the Declaration or in their capacity as
officers, employees or agents of the Trust and not personally. Every written
obligation, contract, instrument, certificate, Share, other security of the
Trust or undertaking made or issued by the Trustees or by any officer, employee
or agent may give notice that this Declaration of Trust is on file with the
Secretary of State of Ohio and recite that the same is executed or made by them
not individually, but as Trustee, officer, employee or agent, and that the
obligations of any such instrument are not binding upon any of the them or
Shareholders, individually, but bind only the estate of the applicable Trust,
Series or Class, as set forth in Section 1746.13(A), Ohio Revised Code, and may
contain any further recital which they or he may deem appropriate, but the
omission of such recital shall not operate to bind the Trustees individually.
The Trustees may at all times maintain insurance for the protection of the Trust
Property, its Shareholders, Trustees, officers, employees and agents in such
amount as the Trustees shall deem adequate to cover possible tort liability, and
such other insurance as the Trustees in their sole judgment shall deem
advisable.
SECTION 5.6. RELIANCE ON EXPERTS, ETC. Each Trustee and officer or
employee of the Trust shall, in the performance of his duties, be fully and
completely justified and protected with regard to any act or any failure to act
resulting from reliance in good faith upon the books of account or other records
of the Trust, upon an opinion of counsel, or upon reports made to the Trust by
any of its officers or employees or by the Investment Adviser, the Distributor,
the Administrator, Transfer Agent, selected dealers, accountants, appraisers or
other experts or consultants selected with reasonable care by the Trustees,
officers or employees of the Trust, regardless of whether such counsel or expert
may also be a Trustee.
SECTION 5.7. INDEMNIFICATION NOT EXCLUSIVE, ETC. The right of
indemnification provided by this Article V shall not be exclusive of or affect
any other rights to which any Trustee or officer may be entitled. As used in
this Article V, Trustee or officer shall include such person?s heirs, executors
and administrators. Nothing contained in this Article V shall affect any rights
to indemnification to which personnel of the Trust, other than any Trustee or
officer, may be entitled, by contract or otherwise under law, nor the power of
the Trust to purchase and maintain liability insurance on behalf of any such
person.
SECTION 5.8. LIABILITY OF SERIES. Liabilities belonging to any Series
or Class of the Trust, including, without limitation, expenses, fees, charges,
taxes, and liabilities incurred or arising in connection with the management
thereof, shall be paid only from the assets belonging to that Series or Class.
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ARTICLE VI
SHARES OF BENEFICIAL INTEREST
-----------------------------
SECTION 6.1. BENEFICIAL INTEREST. The interest of the Shareholders
hereunder shall be divided into transferable shares of beneficial interest,
without par value. The number of shares of beneficial interest authorized
hereunder, and the number of Shares of each Series or Class thereof that may be
issued hereunder, is unlimited. The Trustees shall have the exclusive authority
without the requirement of Shareholder authorization or approval to establish
and designate one or more Series of Shares and one or more Classes thereof as
the Trustees deem necessary, appropriate or desirable. Each Share of any Series
shall represent a beneficial interest only in the assets of that Series. Subject
to the provisions of Section 6.11 hereof, the Trustees may also authorize the
creation of additional Series of Shares (the proceeds of which may be invested
in separate and independent investment portfolios) and additional Classes of
Shares within any Series. All Shares issued hereunder including, without
limitation, Shares issued in connection with a dividend in Shares or a split of
Shares, shall be fully paid and non-assessable.
SECTION 6.2. ESTABLISHMENT AND DESIGNATION OF SERIES. Without limiting
the authority of the Trustees set forth above to establish and designate any
further Series or Class or to classify all or any part of the issued Shares of
any Series to make them part of an existing or newly created Class or to amend
rights and preferences of new or existing Series or Class, including the
following Series, all without Shareholder approval, there are hereby established
and designated, subject to the provisions and rights of this Declaration of
Trust, (i) initial Series of Shares designated Series A, which shall represent
interests in the Nationwide Mid Cap Growth Fund, Series B, which shall represent
interests in the Nationwide Growth Fund, Series C, which shall represent
interests in the Nationwide Fund, Series D, which shall represent interests in
the Nationwide Bond Fund, Series E, which shall represent interests in the
Nationwide Tax-Free Income Fund, Series F, which shall represent interests in
the Nationwide Long-Term U.S. Government Bond Fund, Series G, which shall
represent interests in the Nationwide Intermediate U.S. Government Bond Fund,
Series H, which shall represent interests in the Nationwide Money Market Fund
and Series I, which shall represent interests in the Nationwide S&P 500 Index
Fund, (ii) three Classes of Shares for each current Series of the Trust, other
than Series H and I, which Classes shall be known as Class A, Class B and Class
D Shares. Series H will issue Shares without any class designation. Series I
will issue Shares known as Local Fund Shares.
SECTION 6.3. RIGHTS OF SHAREHOLDERS. The ownership of the Trust
Property and the property of each Series of the Trust and the right to conduct
any business as described herein are vested exclusively in the Trustees, and the
Shareholders shall have no interest therein other than the beneficial interest
conferred by their Shares, and they shall have no right to call for any
partition or division of any property, profits, rights or interests of the Trust
nor can they be called upon to assume any losses of the Trust or suffer an
assessment of any kind by virtue of their ownership of Shares. Every Shareholder
by virtue of having become a Shareholder shall be held to have expressly
assented and agreed to the terms hereof and to have become a party hereto. The
Shares shall be personal property giving only the rights in the Declaration
specifically set forth. The Shares shall not entitle the holder to preference,
preemptive, appraisal, conversion or exchange rights, except as the Trustees
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may determine with respect to any Series or Class of Shares. The death of a
Shareholder during the continuance of the Trust shall not operate to terminate
the Trust nor entitle the representative of any deceased Shareholder to an
accounting or to take any action in court or elsewhere against the Trust or the
Trustees, but only to the rights of said decedent under this Declaration of
Trust.
SECTION 6.4. TRUST ONLY. It is the intention of the Trustees to create
only the relationship of Trustee and beneficiary between the Trustees and each
Shareholder from time to time. It is not the intention of the Trustees to create
a general partnership, limited partnership, joint stock association,
corporation, bailment or any form of legal relationship other than an Ohio
business trust. Nothing in the Declaration shall be construed to make the
Shareholders, either by themselves or with the Trustees, partners or members of
a joint stock association.
SECTION 6.5. ISSUANCE OF SHARES. The Trustees, in their discretion,
may, from time to time without vote of the Shareholders, issue Shares, in
addition to the then issued and outstanding Shares and Shares held in the
treasury, to such party or parties and for such amount and type of
consideration, including cash or property, at such time or times (including,
without limitation, each business day in accordance with the determination of
net asset value per Share as set forth in Section 8.1 hereof), and on such terms
as the Trustees may deem best, except that only Shares previously contracted to
be sold may be issued during any period when the right of redemption is
suspended, and may in such manner acquire other assets (including the
acquisition of assets subject to, and in connection with the assumption of
liabilities) and businesses. In connection with any issuance of Shares, the
Trustees may issue fractional Shares and reissue and resell full and fractional
Shares held in the treasury. Any outstanding fractional Share of any Series
shall carry proportionately all the rights and obligations of a whole Share of
that Series, including with respect to voting, receipt of dividends and
distributions, redemption of Shares, and liquidation of the Trust. Shares may
also be issued in separate Series or Classes as provided in Section 6.11 hereof.
The Trustees may from time to time divide or combine the Shares into a greater
or lesser number without thereby changing the proportionate beneficial interests
in the Trust. Contributions to the Trust may be accepted for, and Shares shall
be redeemed as, whole Shares and/or 1/1,000ths of a Share or integral multiples
thereof.
SECTION 6.6. REGISTER OF SHARES; SHARE CERTIFICATES. A register will be
kept at the principal office of the Trust or at an office of the Transfer Agent
which shall contain the names and addresses of the Shareholders and the number
of Shares held by them respectively and a record of all transfers thereof. Such
register shall be conclusive as to who are the holders of the Shares and who
shall be entitled to receive dividends or distributions or otherwise to exercise
or enjoy the rights of Shareholders. No Shareholder shall be entitled to receive
payment of any dividend or distribution, nor to have notice given to him as
herein or in the Bylaws provided, until he has given his address to the Transfer
Agent or such other officer or agent of the Trustees as shall keep the said
register for entry thereon. It is not contemplated that certificates will be
issued for the Shares; however, the Trustees, in their discretion, may authorize
the issuance of Share certificates and promulgate appropriate rules and
regulations as to their use.
SECTION 6.7. TRANSFER OF SHARES. Shares shall be transferable on the
records of the Trust only by the record holder thereof or by his agent thereunto
duly authorized in writing, upon delivery to the Trustees or the Transfer Agent
of a duly executed instrument of transfer, together with such
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evidence of the genuineness of each such execution and authorization and of
other matters as may reasonably be required. Upon such delivery, the transfer
shall be recorded on the register of the Trust. Until such record is made, the
Shareholder of record shall be deemed to be the holder of such Shares for all
purposes hereunder and neither the Trustees nor any Transfer Agent or registrar
nor any officer, employee or agent of the Trust shall be affected by any notice
of the proposed transfer.
Any person becoming entitled to any Shares in consequence of the death,
bankruptcy, or incompetence of any Shareholder, or otherwise by operation of
law, shall be recorded on the register of Shares as the holder of such Shares
upon production of the proper evidence thereof to the Trustees or the Transfer
Agent, but until such record is made, the Shareholder of record shall be deemed
to be the holder of such Shares for all purposes hereunder and neither the
Trustees nor any Transfer Agent or registrar nor any officer or agent of the
Trust shall be affected by any notice of such death, bankruptcy or incompetence,
or other operation of law.
SECTION 6.8. NOTICES. Any and all notices to which any Shareholder may
be entitled and any and all communications shall be deemed duly served or given
if mailed, postage prepaid, addressed to any Shareholder of record at his last
known address as recorded on the register of the Trust.
SECTION 6.9. TREASURY SHARES. Shares held in the treasury shall, until
reissued pursuant to Section 6.5, not confer any voting rights on the Trustees,
nor shall such Shares be entitled to any dividends or other distributions
declared with respect to the Shares.
SECTION 6.10. INVESTMENTS IN TRUST. The Trustees may accept investments
in the Trust from such persons and on such terms and for such consideration, not
inconsistent with the provisions of the 1940 Act, as they from time to time
authorize. The Trustees may authorize any Distributor, Custodian, Transfer Agent
or other Person to accept orders for the purchase of Shares that conform to such
authorized terms and to reject any purchase orders for Shares whether or not
conforming to such authorized terms.
SECTION 6.11. SERIES OR CLASS DESIGNATION. The Trustees, in their
discretion, may authorize the issuance of Shares of multiple Series or Classes,
and the different Series or Classes shall be established and designated, and the
variations in the relative rights and preferences as between the different
Series or Classes shall be fixed and determined by the Trustees, provided, that
all Shares shall be identical except that there may be variations so fixed and
determined between different Series as to investment objective, purchase price,
right of redemption and the price, terms and manner of redemption, special and
relative rights as to dividends and on liquidation, conversion rights,
conditions under which the several Series shall have separate voting rights or
no voting rights, and such other matters, as the Trustees deem appropriate. All
references to Shares in the Declaration shall be deemed to be shares of any or
all Series as the context may require.
If the Trustees shall authorize the issuance of Shares of the Trust
with multiple Series or Classes, the following provisions shall be applicable:
(a) The number of authorized shares and the number of shares of each
Series or Class that may be issued shall be unlimited. The Trustees may
classify or reclassify any unissued
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Shares or any Shares previously issued and reacquired of any Series or
Class into one or more other Series, or one or more other Classes that
may be established and designated from time to time. The Trustees may
hold as treasury shares (of the same or some other Series or Class),
reissue for such consideration and on such terms as they may determine,
or cancel any Shares of any Series or Class reacquired by the Trust at
their discretion from time to time.
(b) The power of the Trustees to invest and reinvest the Trust Property
shall be governed by Section 3.2 of this Declaration with respect to
the existing Series or Classes which represents the interests in the
assets of the Trust immediately prior to the establishment of any
additional Series or Classes and the power of the Trustees to invest
and reinvest assets applicable to any such additional Series or Classes
shall be as set forth in the instrument of the Trustees establishing
such Series or Classes which is hereinafter described.
(c) All consideration received by the Trust for the issue or sale of
Shares of a particular Series, together with all assets in which such
consideration is invested or reinvested, all income, earnings, profits
and proceeds thereof, including any proceeds derived from the sale,
exchange or liquidation of such assets, and any funds or payments
derived from any reinvestment of such proceeds in whatever form the
same may be, shall irrevocably belong to that Series for all purposes,
subject only to the rights of creditors of such Series, and shall be so
recorded upon the books of account of the Trust. In the event that
there are any assets, income, earnings, profits, and proceeds thereof,
funds, or payments which are not readily identifiable as belonging to
any particular Series, the Trustees or their delegate shall allocate
them among any one or more of the Series established and designated
from time to time in such manner and on such basis as the Trustees, in
their sole discretion, deem fair and equitable. Each such allocation by
the Trustees shall be conclusive and binding upon the shareholders of
all Series for all purposes. No holder of Shares of any Series shall
have any claim on or right to any assets allocated or belonging to any
other Series.
(d) The assets belonging to each particular Series shall be charged
with the liabilities of the Trust allocated to that Series and all
expenses, costs, charges and reserves attributable to that Series which
are not readily identifiable as belonging to any particular Class, and
any general liabilities, expenses, costs, charges or reserves of the
Trust which are not readily identifiable as belonging to any particular
Series shall be allocated and charged by the Trustees or their delegate
to and among any one or more of the Series, established and designated
from time to time in such manner and on such basis as the Trustees, in
their sole discretion, deem fair and equitable and no Series shall be
liable to any person except for its allocated share. Each allocation of
liabilities, expenses, costs, charges and reserves by the Trustees or
their delegate shall be conclusive and binding upon the Shareholders of
all Series and Classes for all purposes. The Trustees shall have full
discretion, to the extent not inconsistent with the 1940 Act, to
determine which items shall be treated as income and which items as
capital; and each such determination and allocation shall be conclusive
and binding upon the Shareholders. The assets of a particular Series of
the Trust shall, under no circumstances, be charged with liabilities,
expenses, costs, charges and reserves attributable to any other Series
thereof of the Trust. All Persons extending credit to, contracting
with,
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or having any claim against a particular Series of the Trust shall look
only to the assets of that particular Series for payment of such
credit, contract or claim.
(e) With respect to any Series, dividends and distributions on Shares
of a particular Series or Class may be paid or credited in such manner
and with such frequency as the Trustees may determine, which may be
daily or otherwise, pursuant to a standing resolution or resolutions
adopted only once or with such frequency as the Trustees may determine,
to the holders of Shares of that Series or Class, from such of the
income and capital gains, accrued or realized, from the assets
belonging to that Series, as the Trustees may determine, after
providing for actual and accrued liabilities belonging to that Series
or Class or after retaining such amounts as the Trustees may deem
desirable to use in the conduct of the Trust's current or future
business requirements. All dividends and distributions on Shares of a
particular Series or Class shall be distributed pro rata to the holders
of that Series or Class in proportion to the number of Shares of that
Series or Class held by such holders at the date and time of record
established for the payment of such dividends or distributions, except
that in connection with any dividend or distribution program or
procedure the Trustees may determine that no dividend or distribution
shall be payable on Shares as to which the Shareholder's purchase order
and/or payment have not been received by the time or times established
by the Trustees under such program or procedure. Such dividends and
distributions may be made in cash or Shares or a combination thereof as
determined by the Trustees or pursuant to any program that the Trustees
may have in effect at the time for the election by each Shareholder of
the mode of the making of such dividend or distribution to that
Shareholder. Any such dividend or distribution paid in Shares will be
paid at the net asset value thereof as determined in accordance with
Section 8.1.
The dividends and distributions of investment income and
capital gains with respect to Shares of a Class shall be in such amount
as may be declared from time to time by the Trustees, and such
dividends and distributions may vary between the Classes to reflect
differing allocations of the expenses of the Trust between the Classes
to such extent and for such purposes as the Trustees may deem
appropriate.
(f) Each Share of a Series of the Trust shall represent a beneficial
interest in the net assets of such Series. Each holder of Shares of a
Series or Class thereof shall be entitled to receive his pro rata Share
of distributions of income and capital gains made with respect to such
Series or Class net of liabilities, expenses, costs, charges and
reserves belonging and allocated to such Series or Class. Upon
redemption of his Shares or indemnification for liabilities incurred by
reason of his being or having been a Shareholder of a Series, such
Shareholder shall be paid solely out of the funds and property of such
Series or Class of the Trust. Upon liquidation or termination of a
Series or Class thereof of the Trust, a Shareholder of such Series or
Class thereof shall be entitled to receive a pro rata Share of the net
assets of such Series based on the net asset value of his Shares. A
Shareholder of a particular Series of the Trust shall not be entitled
to commence or participate in a derivative or class action on behalf of
any other Series or the Shareholders of any other Series of the Trust.
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(g) The proceeds of the redemption of a Class B Share (including a
fractional Share), except those purchased through reinvestment of a
dividend or a distribution, shall be reduced by the amount of any
applicable contingent deferred sales charge payable on such redemption
to the distributor of the Class B Shares pursuant to the terms of the
issuance of the Shares (to the extent consistent with the 1940 Act, or
regulations or exemptions thereunder), and the Trust shall promptly pay
to such distributor the amount of any such contingent deferred sales
charge.
(h)(1) Each Class B Share, other than a Share purchased through the
reinvestment of a dividend or a distribution with respect to the Class
B Share, shall be converted automatically, and without any action or
choice on the part of the holder thereof, into Class A Shares, at the
relative net asset value of each Class, at the time of the calculation
of the net asset value of such Class of Shares on the date that is the
first business day of the month after which the seventh anniversary of
the issuance of such Class B Shares occurs (which for the purpose of
calculating the holding period required for conversion, shall mean (i)
the date on which the issuance of such Class B Shares occurred or (ii)
for Class B Shares obtained through an exchange, the date on which the
issuance of the Class B Shares were exchanged directly, or through a
series of exchanges, for the Trust's Class B Shares (the "Conversion
Date")).
(h)(2) Each Class B Share purchased through the reinvestment of a
dividend or a distribution with respect to the Class B Shares and the
dividends and distributions on such Shares shall be segregated in a
separate sub-account on the share records of the Trust for each of the
holders of record thereof. On any Conversion Date, a number of the
Shares held in the sub-account of the holder of record of the Share or
Shares being converted, calculated in accordance with the next
following sentence, shall be converted automatically, and without any
action of choice on the part of the holder thereof, into Class A Shares
of the same Series. The number of Shares in the holder's sub-account so
conveyed shall bear the same relation to the total number of Shares
maintained in the sub-account on the Conversion Date as the number of
Shares of the holder converted on the Conversion Date pursuant to
subsection (h)(1) hereof bears to the total number of Class B Shares of
the holder on the Conversion Date not purchased through the automatic
reinvestment of dividends or distributions with respect to the Class B
Shares.
(h)(3) The number of Shares of Class A Shares into which a Class B
Share is converted pursuant to subsections (h)(1) and (h)(2) hereof
shall equal the number (including for this purpose fractions of a
Share) obtained by dividing the net asset value per Share of the Class
B Share for purposes of sales and redemptions thereof at the time of
the calculation of the net asset value on the Conversion Date by the
net asset value per Share of the Class A Shares for the purposes of
sales and redemptions thereof at the time of the calculation of the net
asset value on the Conversion Date.
(h)(4) On the Conversion Date, the Class B Shares converted into Class
A Shares will cease to accrue dividends and will no longer be
outstanding and the rights of the holders thereof will cease (except
the right to receive declared but unpaid dividends to the Conversion
Date).
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(h)(5) The Trustees shall have full power and authority to adopt such
other terms and conditions concerning the conversion of the Class B
Shares to Class A Shares as they deem appropriate; provided such terms
and conditions are not inconsistent with the terms contained herein and
subject to any restrictions or requirements under the 1940 Act and the
rules, regulations and interpretations thereof promulgated or issued by
the Commission or any conditions or limitations contained in an order
issued by the Commission applicable to the Trust.
(i) All Shares of all Series shall have "equal voting rights" as
provided in Section 18(i) of the 1940 Act, except as otherwise
permitted or required by the 1940 Act. The holder of each of the Shares
shall be entitled to one vote for each Share held. The Trustees shall
have full power and authority to call meetings of the Shareholders of a
particular Class or Classes of Shares or of one or more particular
Series of Shares, or otherwise call for the action of such Shareholders
on any particular matter. On each matter submitted to a vote of the
Shareholders, all Shares of all Series shall vote as a single class
("Single Class Voting"), provided, however, that (a) as to any matter
with respect to which a separate vote of any Series is required by the
1940 Act, such requirements as to a separate vote by that Series shall
apply in lieu of Single Class Voting as described above; (b) in the
event that the separate vote requirements referred to in (a) above
apply with respect to one or more Series, then, subject to (c) below,
the Shares of all other Series shall vote as a single class; and (c) as
to any matter which does not affect the interest of a particular
Series, only the holders of Shares of the one or more affected Series
shall be entitled to vote.
(j) Except as otherwise provided in this Article VI, the Trustees shall
have full power and authority to determine the designations,
preferences, privileges, sales charges, purchase prices, assets,
liabilities, expenses, costs, charges and reserves belonging or
allocated thereto, limitations and rights, including without limitation
voting, dividend, distribution and liquidation rights, of each Series
and Class of Shares. Subject to any applicable requirements of the 1940
Act, the Trustees shall have the authority to provide that the Shares
of one Class shall be automatically converted into Shares of another
Class of the same Series or that the holders of Shares of any Series or
Class shall have the right to convert or exchange such Shares into
Shares of one or more other Series or Classes of Shares, all in
accordance with such requirements, conditions and procedures as may be
established by the Trustees.
(k) The establishment and designation of any Series or Class of shares
shall be effective upon the execution by a majority of the then
Trustees of an instrument setting forth such establishment and
designation and the relative rights and preferences of such Series, or
as otherwise provided in such instrument. At any time that there are no
shares outstanding of any particular Series or Class previously
established and designated, the Trustees may, by an instrument executed
by a majority of their number, abolish that Series or Class and the
establishment and designation thereof.
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ARTICLE VII
REDEMPTIONS
-----------
SECTION 7.1. REDEMPTION OF SHARES. All Shares of the Trust shall be
redeemable, at the redemption price determined in the manner set out in this
Declaration. The Trustees shall have full power and authority to vary and change
the right of redemption applicable to the various Series and Classes of Shares.
Redeemed or repurchased Shares may be resold by the Trust.
The Trust shall redeem the Shares at the price determined as
hereinafter set forth, upon the appropriately verified written application of
the record holder thereof (or upon such other form of request as the Trustees
may determine) at such office or agency as may be designated from time to time
for that purpose by the Trustees. The Trustees may from time to time specify
additional conditions, not inconsistent with the 1940 Act, regarding the
redemption of Shares in the Trust's then effective registration statement or
prospectus under the Securities Act of 1933.
SECTION 7.2. PRICE. Shares will be redeemed at their net asset value
determined as set forth in Section 8.1 hereof as of such time as the Trustees
shall have theretofore prescribed by resolution. In the absence of such
resolution, the redemption price of Shares deposited shall be the net asset
value of such Shares next determined as set forth in Section 8.1 hereof after
receipt of such application.
SECTION 7.3. PAYMENT. Payment for such Shares shall be made in cash or
in property out of the assets of the relevant Series of the Trust to the
Shareholder of record at such time and in the manner, not inconsistent with the
1940 Act or other applicable laws, as may be specified from time to time in the
Trust's then effective registration statement or prospectus under the Securities
Act of 1933, subject to the provisions of Section 7.3 hereof. Notwithstanding
the foregoing, the Trust or its delegate may withhold from such redemption
proceeds any amount arising (i) from a liability of the redeeming Shareholder to
the Trust, or (ii) in connection with any federal or state tax withholding
requirements.
SECTION 7.4. EFFECT OF SUSPENSION OF DETERMINATION OF NET ASSET VALUE.
If, pursuant to Section 7.8 hereof, the Trustees shall declare a suspension of
the determination of net asset value with respect to Shares of the Trust or of
any Series or Class thereof, the rights of Shareholders (including those who
shall have applied for redemption pursuant to Section 7.1 hereof but who shall
not yet have received payment) to have Shares redeemed and paid for by the Trust
shall be suspended until the termination of such suspension is declared. Any
record holder who shall have his redemption right so suspended may, during the
period of such suspension, by appropriate written notice of revocation at the
office or agency where application was made, revoke any application for
redemption not honored and withdraw any certificates on deposit. The redemption
price of Shares for which redemption applications have not been revoked shall be
the net asset value of such Shares next determined as set forth in Section 8.1
after the termination of such suspension, and payment shall be made within seven
(7) days after the date upon which the application was made plus the period
after such application during which the determination of net asset value was
suspended.
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SECTION 7.5. REPURCHASE BY AGREEMENT. The Trust may repurchase Shares
directly, or through the Distributor or another agent designated for the
purpose, by agreement with the owner thereof at a price not exceeding the net
asset value per Share determined as of the time when the purchase or contract of
purchase is made or the net asset value as of any time which may be later
determined pursuant to Section 8.1 hereof, provided payment is not made for the
Shares prior to the time as of which such net asset value is determined.
SECTION 7.6. REDEMPTION OF SHAREHOLDER'S INTEREST. The Trust shall have
the right at any time without prior notice to the Shareholder to redeem Shares
of any Shareholder for their then current net asset value per Share if the
aggregate net asset value of such Shares is less than the minimum amount
established by the Trustees from time to time, subject to such terms and
conditions as the Trustees may approve, and subject to the Trust's giving
general notice to all Shareholders of its intention to avail itself of such
right, either by publication in the Trust's prospectus, if any, or by such other
means as the Trustees may determine.
SECTION 7.7. REDUCTIONS IN NUMBER OF OUTSTANDING SHARES PURSUANT TO NET
ASSET VALUE FORMULA. The Trust may also reduce the number of outstanding Shares
pursuant to the provisions of Section 8.2.
SECTION 7.8. SUSPENSION OF RIGHT OF REDEMPTION. The Trust may declare a
suspension of the right of redemption or postpone the date of payment or
redemption for the whole or any part of any period (i) during which the New York
Stock Exchange is closed other than customary weekend and holiday closings; (ii)
during which trading on the New York Stock Exchange is restricted; (iii) during
which an emergency exists as a result of which disposal by the Trust of
securities owned by it is not reasonably practicable or it is not reasonably
practicable for the Trust fairly to determine the value of its net assets; or
(iv) during any other period when the Commission may for the protection of
security holders of the Trust by order permit suspension of the right of
redemption or postponement of the date of payment or redemption; provided that
applicable rules and regulations of the Commission shall govern as to whether
the conditions prescribed in (ii), (iii), or (iv) exist. Such suspension shall
take effect at such time as the Trust shall specify, but not later than the
close of business on the business day next following the declaration of
suspension, and thereafter there shall be no right of redemption or payment on
redemption until the Trust shall declare the suspension at an end, except that
the suspension shall terminate in any event on the first day on which said stock
exchange shall have reopened or the period specified in (ii) or (iii) shall have
expired (as to which, in the absence of an official ruling by the Commission,
the determination of the Trust shall be conclusive). In the case of a suspension
of the right of redemption, a Shareholder may either withdraw his request for
redemption or receive payment based on the net asset value existing after the
termination of the suspension.
SECTION 7.9. REDEMPTION OF SHARES; DISCLOSURE OF HOLDING. If the
Trustees shall, at any time and in good faith, be of the opinion that direct or
indirect ownership of Shares or other securities of the Trust has or may become
concentrated in any Person to an extent which would disqualify the Trust as a
regulated investment company under the Internal Revenue Code, then the Trustees
shall have the power by lot or other means deemed equitable by them (i) to call
for redemption by any such Person of a number, or principal amount, of Shares or
other securities of the
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Trust sufficient to maintain or bring the direct or indirect ownership of Shares
or other securities of the Trust into conformity with the requirements for such
qualification; and (ii) to refuse to transfer or issue Shares or other
securities of the Trust to any Person whose acquisition of the Shares or other
securities of the Trust in question would result in such disqualification. The
redemption shall be effected at the redemption price and in the manner provided
in Section 7.1.
The holders of Shares or other securities of the Trust shall upon
demand disclose to the Trustees in writing such information with respect to
direct and indirect ownership of Shares or other securities of the Trust as the
Trustees deem necessary to comply with the provisions of the Internal Revenue
Code, or to comply with the requirements of any other authority.
ARTICLE VIII
DETERMINATION OF NET ASSET VALUE
--------------------------------
NET INCOME AND DISTRIBUTIONS
----------------------------
SECTION 8.1. NET ASSET VALUE. For all purposes under this Declaration
of Trust, the net asset value of any Series or Class shall be determined by at
least once on each business day, as of the close of the New York Stock Exchange
or as of such other time or times as the Trustees shall determine.
The value of the assets of any Series of the Trust shall include the
appraisal of the securities allocated to such Series, such appraisal to be on
the basis of the amortized cost of money market securities or market value in
the case of other securities, or, consistent with the rules and regulations of
the Commission, by such other method as shall be deemed to reflect the fair
value thereof, determined in good faith by or under the direction of the
Trustees, together with all the other assets belonging to such Series. From the
total value of said assets, there shall be deducted all indebtedness, interest,
taxes, payable or accrued, including estimated taxes on unrealized book profits,
expenses and management charges accrued to the appraisal date, net income
determined and declared as a distribution and all other items in the nature of
liabilities attributable to such Series which shall be deemed appropriate. The
net asset value per Share of the Shares of any Series shall be the quotient
obtained by dividing the resulting amount by the total number of Shares of that
Series outstanding. The power and duty to make the daily calculations may be
delegated by the Trustees to the Investment Adviser, the Custodian, the Transfer
Agent or such other Person as the Trustees by resolution may determine. The
Trustees may suspend the daily determination of net asset value to the extent
permitted by the 1940 Act.
SECTION 8.2. DISTRIBUTIONS TO SHAREHOLDERS. As described in Section
6.11, the Trustees shall from time to time distribute ratably among the
Shareholders of the Trust or of a Series or a Class thereof such proportion of
the net profits, surplus (including paid-in surplus), capital, or assets held by
the Trustees as they may deem proper. The Trustees may adopt and offer to
Shareholders such dividend reinvestment plans, cash dividend payout plans or
related plans as the Trustees shall deem appropriate.
Inasmuch as the computation of net income and gains for Federal income
tax purposes may vary from the computation thereof on the books, the above
provisions shall be interpreted to give the
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<PAGE> 29
Trustees the power in their discretion to distribute for any fiscal year as
ordinary dividends and as capital gains distributions, respectively, additional
amounts sufficient to enable the Trust or the Series to avoid or reduce
liability for taxes.
SECTION 8.3. DETERMINATION OF NET INCOME. The term "net income" with
respect to a Series or Class of shares is hereby defined as the gross earnings
of the Series or Class, excluding gains on sales of securities and stock
dividends received, less the expenses of the Trust allocated to the Series or
Class by the Trustees in such manner as they determine to be fair and equitable
or otherwise chargeable to the Series or Class. The expenses shall include (1)
taxes attributable to the income of the Trust exclusive of gains on sales, and
(2) other charges properly deductible for the maintenance and administration of
the Trust; but there shall not be deducted from gross or net income any losses
on securities, realized or unrealized. The Trustees shall otherwise have full
discretion to determine which items shall be treated as income and which items
as capital and their determination shall be binding upon the Shareholders.
SECTION 8.4. POWER TO MODIFY FOREGOING PROCEDURES. Notwithstanding any
of the foregoing provisions of this Article VIII, the Trustees may prescribe, in
their absolute discretion, such other bases and times for determining the per
Share net asset value of the Shares or net income, or the declaration and
payment of dividends and distributions as they may deem necessary or desirable.
Without limiting the generality of the foregoing, the Trustees may establish
additional Series or Classes of Shares in accordance with Section 6.11, and
declare dividends thereon in such manner as they shall determine.
ARTICLE IX
DURATION; TERMINATION OF TRUST
------------------------------
AMENDMENT; MERGERS; ETC.
------------------------
SECTION 9.1. DURATION. The Trust shall continue without limitation of
time but subject to the provisions of this Article IX.
SECTION 9.2. TERMINATION OF TRUST.
(a) The Trust or any Series or Class of the Trust may be terminated:
(i) by the affirmative vote of the holders of a majority of
the Shares voting at any meeting of Shareholders, or
(ii) by an instrument in writing, without a meeting, signed by
a majority of the Trustees and consented to by the holders of
a majority of Shares outstanding and entitled to vote, or by
such other vote as may be established by the Trustees with
respect to any Series or Class of Shares.
Upon the termination of the Trust or any one or more Series or Class:
25
<PAGE> 30
(i) The Trust or the Series or Class, as applicable, shall
carry on no business except for the purpose of winding up its
affairs or the affairs of such Series or Class and that
required by the 1940 Act.
(ii) The Trustees shall proceed to wind up the affairs of the
Trust and/or the Series or Class and all of the powers of the
Trustees under this Declaration shall continue until the
affairs of the Trust or any Series or Class shall have been
wound up, including the power to fulfill or discharge the
contracts of the Trust or the Series of the Trust, collect its
assets, sell, convey, assign, exchange, transfer or otherwise
dispose of all or any part of the remaining Trust Property to
one or more persons at public or private sale for
consideration which may consist in whole or in part of cash,
securities or other property of any kind, discharge or pay its
liabilities, and to do all other acts appropriate to liquidate
its business; provided that any sale, conveyance, assignment,
exchange, transfer or other disposition of all or
substantially all the Trust Property shall require Shareholder
approval in accordance with Section 9.4 hereof.
(iii) After paying or adequately providing for the payment of
all liabilities, and upon receipt of such releases,
indemnities and refunding agreements, as they deem necessary
for their protection, the Trustees may distribute the
remaining Trust Property, in cash or in kind or partly each,
among the Shareholders according to their respective rights.
(b) After termination of the Trust or any Series or Class of the Trust
and distribution to the Shareholders as herein provided, a majority of
the Trustees shall execute and lodge among the records of the Trust an
instrument in writing setting forth the fact of such termination, and
the Trustees shall thereupon be discharged from all further liabilities
and duties hereunder, and the rights and interests of all Shareholders
thereof shall thereupon cease with regard to the Trust, Series or
Class, as applicable.
SECTION 9.3. AMENDMENT PROCEDURE.
----------------------------------
(a) All rights granted to the Shareholders under this Declaration are
granted subject to the reservation of the right to amend this
Declaration as provided herein, except that no amendment shall repeal
the limitations on personal liability of any Shareholder or Trustee or
repeal the prohibition of assessment upon the Shareholders without the
express consent of each Shareholder or Trustee involved. Subject to the
foregoing, the Trustees may amend this Declaration without the vote or
consent of Shareholders to designate Series or Classes in accordance
with Sections 6.2 and 6.11 hereof, to change the name of the Trust or
any Series or Class thereof, to supply any omission, to cure, correct
or supplement any ambiguous, defective or inconsistent provision
hereof, or if they deem it necessary to conform this Declaration to the
requirements of applicable federal laws or regulations or the
requirements of the regulated investment company provisions of the
Internal Revenue Code, or to make any other changes in the Declaration
which do not materially adversely affect the rights of Shareholders
hereunder, but the Trustees shall not be liable for failing to do so.
In addition amendment of this Declaration of Trust as it may affect any
one or more Series may
26
<PAGE> 31
be effected by vote of the Trustees at any time when the Trust has no
outstanding Shares or Shareholders of such Series.
(b) No amendment may be made under this Section 9.3 which would change
any rights with respect to any Shares of the Trust by reducing the
amount payable thereon upon liquidation of the Trust or by diminishing
or eliminating any voting rights pertaining thereto, except with the
vote or consent of the holders of two-thirds of the Shares outstanding
and entitled to vote, or by such other vote as may be established by
the Trustees with respect to any Series of Shares.
(c) Amendments shall be effective upon the taking of action as provided
in this section or at such later time as shall be specified in the
applicable vote or instrument. A certificate signed by a majority of
the Trustees setting forth an amendment and reciting that it was duly
adopted by the Shareholders or by the Trustees as aforesaid or a copy
of the Declaration, as amended, and executed by a majority of the
Trustees, shall be conclusive evidence of such amendment when lodged
among the records of the Trust.
Notwithstanding any other provision hereof, until such time as a
Registration Statement under the Securities Act of 1933, as amended, covering
the first public offering of securities of the Trust shall become effective, or
at any time there are no longer outstanding any Shares of the Trust, this
Declaration may be terminated or amended in any respect by the affirmative vote
of a majority of the Trustees or by an instrument signed by a majority of the
Trustees.
SECTION 9.4. MERGER, CONSOLIDATION AND SALE OR DISPOSITION OF ASSETS.
The Trustees may sell, convey and transfer the assets of the Trust, or the
assets belonging to one or more or all Series, to another trust, partnership,
association or corporation organized under the laws of any state of the United
States, or to the Trust to be held as assets belonging to one or more Series of
the Trust, in exchange for cash, shares or other securities (including, in the
case of a transfer to another Series of the Trust, Shares of such other Series)
with such transfer being made subject to, or with the assumption by the
transferee, of the liabilities belonging to each Series the assets of which are
so transferred; provided, however, that no assets belonging to the Trust or to
any particular Series shall be so transferred unless the terms of such transfer
shall have first been approved at a meeting called for that purpose by the
affirmative vote of Shareholders holding a majority of the voting power of Trust
or of each Series affected. Following such transfer, the Trustees shall
distribute such cash, shares or other securities (giving due effect to the
assets and liabilities belonging to and any other differences among the various
Series the assets belonging to which have so been transferred) among the
Shareholders of the Series the assets belonging to which have been so
transferred; and if all the assets of the Series or Trust have been so
transferred, the Series or Trust, as the case may be, shall be terminated.
The Trust or any Series thereof may be a party, with one or more
entities (including another Series) to an agreement of merger or consolidation;
provided, however, that any such agreement of merger or consolidation shall be
approved by the Trustees, and by the affirmative vote of Shareholders holding a
majority of the voting power of the Trust or of each Series affected.
27
<PAGE> 32
SECTION 9.5. INCORPORATION. With the approval of the holders of a
majority of the Shares outstanding and voting, or by such other vote as may be
established by the Trustees with respect to any Series of Shares (if Shareholder
approval is required), the Trustees may cause to be organized or assist in
organizing a corporation or corporations under the laws of any jurisdiction or
any other trust, partnership, association or other organization to take over all
of the Trust Property or to carry on any business in which the Trust shall
directly or indirectly have any interest, and to sell, convey and transfer the
Trust Property to any such corporation, trust, association or organization in
exchange for the shares or securities thereof and assumption of liabilities of
the Trust or otherwise, and to lend money to, subscribe for the shares or
securities of, and enter into any contracts with any such corporation, trust,
partnership, association or organization in which the Trust holds or is about to
acquire shares or any other interest. The Trustees may also cause a merger or
consolidation between the Trust or any successor thereto and any such
corporation, trust, partnership, association or other organization if and to the
extent permitted by law, as provided under the law then in effect.
SECTION 9.6. ABSENCE OF DISSENTERS' RIGHTS. No shareholder shall be
entitled, as a matter of right, to relief as a dissenting shareholder in respect
of any proposal or action involving the Trust.
ARTICLE X
SHAREHOLDERS' VOTING POWERS AND MEETINGS
----------------------------------------
SECTION 10.1. VOTING POWERS. The Shareholders shall have power to vote
only (i) for the election of Trustees as provided in Section 2.3 hereof or as
required by Section 16 (a) of the 1940 Act; (ii) with respect to any investment
advisory or management contract as provided in Section 4.1; (iii) with respect
to termination or reorganization of the Trust or any Series or Class as provided
in Section 9.2.; (iv) with respect to any amendment of the Declaration to the
extent and as provided in Section 9.3; (v) with respect to any merger,
consolidation or sale or disposition of assets as provided in Section 9.4; (vi)
with respect to incorporation of the Trust to the extent and as provided in
Section 9.5; (vii) to the same extent as the stockholders of an Ohio business
corporation as to whether or not a court action, proceeding or claim should or
should not be brought or maintained derivatively or as a class action on behalf
of the Trust or the Shareholders; and (viii) with respect to such additional
matters relating to the Trust as may be required by the Declaration, the Bylaws,
the 1940 Act or any registration of the Trust with the Commission (or any
successor agency), or as the Trustees may consider necessary or desirable.
Each whole Share shall be entitled to one vote as to any matter on
which it is entitled to vote and each fractional Share shall be entitled to
proportionate fractional vote, except that Shares held in the treasury of the
Trust shall not be voted, that on matters relating to the Trust and governed by
specific voting requirements in the 1940 Act shall be voted in accordance with
the 1940 Act and that the Trustees may, in conjunction with the establishment of
any Series of Shares, establish conditions under which the several Series shall
have separate voting rights or no voting rights. There shall be no cumulative
voting in the election of Trustees. Until Shares are issued, the Trustees may
exercise all rights of Shareholders and may take any action required by law, the
Declaration or the Bylaws to be taken by Shareholders. The Bylaws may include
further provisions for Shareholder votes and meetings and related matters.
28
<PAGE> 33
SECTION 10.2. MEETINGS OF SHAREHOLDERS. A meeting of the Shareholders
shall be held at such times, on such day and at such hour as the Trustees may
from time to time determine, or at the written request of the holder or holders
of ten percent (10%) or more of the total number of Shares then issued and
outstanding of the Trust entitled to vote at such meeting or as required by law.
Any such request shall state the purpose of the proposed meeting.
Written notice of all meetings of the Shareholders, stating the time,
date, place and purpose of the meeting, shall be given by, or at the direction
of, the person calling the meeting to each Shareholder of record entitled to
vote at the meeting at his address as recorded on the register of the Trust,
mailed at least ten (10) days prior to the date named for the meeting. No notice
need be given to any Shareholder who shall have failed to inform the Trust of
his current address or if a written waiver of notice, executed before or after
the meeting by the Shareholder or his attorney thereunto authorized, is filed
with the records of the meeting.
SECTION 10.3. QUORUM AND REQUIRED VOTE. At any meeting of Shareholders,
a quorum for the transaction of business shall consist of a majority represented
in person or by proxy of all votes attributable to the outstanding Shares
(without regard to individual Series or Class) entitled to vote with respect to
a matter; provided, however, that at any meeting at which the only actions to be
taken are actions required by the 1940 Act to be taken by vote of the
Shareholders of an individual Series or Class, a quorum shall consist of a
majority of all votes attributable to the outstanding Shares of such individual
Series or Class entitled to vote thereon, and that at any meeting at which the
only action to be taken shall have been determined by the Board of Trustees to
affect the rights and interests of one or more but not all Series or Classes of
the Trust, a quorum shall consist of a majority of all votes attributable to the
outstanding Shares of the Series or Classes so affected; and provided, further,
that reasonable adjournments of such meeting until a quorum is obtained may be
made by a vote attributable to the Shares present in person or by proxy. In
addition, a meeting may adjourned and postponed for any other reason as
determined by the Trustees.
Except as otherwise provided in the Declaration or as required by the
1940 Act or other applicable law, and subject to applicable quorum requirements,
matters voted on by Shareholders must be approved by the affirmative vote of the
holders of a majority of the Shares voting at any meeting of Shareholders and
Trustees must be elected by a plurality of the Shares voting, or by an
instrument in writing, without a meeting, signed by a majority of the Trustees
and consented to by the holders of a majority of Shares outstanding and entitled
to vote, or by such other vote as may be established by the Trustees with
respect to any Series or Class of Shares, provided that the election of Trustees
(after the election by the initial sole Shareholder) must be approved by the
Shareholders at a meeting of Shareholders.
SECTION 10.4. RECORD DATE FOR MEETINGS. For the purpose of determining
the Shareholders who are entitled to notice of and to vote at any meeting, or to
participate in any distribution, or for the purpose of any other action, the
Trustees may from time to time close the transfer books for such period, not
exceeding thirty (30) days, as the Trustees may determine; or without closing
the transfer books the Trustees may fix a date not more than ninety (90) days
prior to the date of any meeting of Shareholders or distribution or other action
as a record date for the determination of the persons
29
<PAGE> 34
to be treated as Shareholders of record for such purposes. Only Shareholders of
record at the close of business on the record date will be entitled to notice of
and to vote at any meeting.
SECTION 10.5. PROXIES. At any meeting of Shareholders, any holder of
Shares entitled to vote thereat may vote by proxy, provided that no proxy shall
be voted at any meeting unless it shall have been placed on file with the
Secretary, or with such other officer or agent of the Trust as the Trustees may
direct, for verification prior to the time at which such vote shall be taken.
Pursuant to a resolution of a majority of the Trustees, proxies may be solicited
in the name of one or more Trustees or one or more of the officers or agents of
the Trust. Only Shareholders of record shall be entitled to vote. Each full
Share shall be entitled to one vote and fractional Shares shall be entitled to a
vote of such fraction. When any share is held jointly by several persons, any
one of them may vote at any meeting in person or by proxy in respect of such
Share, but if more than one of them shall be present at such meeting in person
or by proxy, and such joint owners or their proxies so present disagree as to
any vote to be cast, such vote shall not be received in respect of such Share. A
proxy purporting to be executed by or on behalf of a Shareholder shall be deemed
valid unless challenged at or prior to its exercise, and the burden of proving
invalidity shall rest on the challenger. If the holder of any such Share is a
minor or a person of unsound mind, and subject to guardianship or to the legal
control of any other person as regards the change or management of such Share,
he may vote by his guardian or such other person appointed or having such
control, and such vote may be given in person or by proxy.
To the extent that one or more Series are included as underlying
investment options in variable contracts issued by Nationwide Life Insurance
Company or Nationwide Life and Annuity Insurance Company (collectively,
"Nationwide"), with respect to Shares of such Series held by Nationwide in
connection with those contracts, Nationwide will vote such Shares at any meeting
in accordance with timely instructions received pursuant to the variable
contracts issued by Nationwide. Nationwide will vote shares attributable to
variable contracts as to which no voting instructions are received in proportion
(for, against or abstain) to those for which timely instructions are received.
If voting instructions are received that do not specify a choice, but have been
properly executed Nationwide will consider their timely receipt as an
instruction to vote in favor the proposal to which it relates. In certain
circumstances, Nationwide may have the right to disregard voting instructions
from certain variable contract owners. Variable contract owners may revoke
previously submitted voting instructions given to Nationwide at any time prior
to any meeting by either submitting to Nationwide subsequently dated voting
instructions, delivering to Nationwide a written notice of revocation or
otherwise giving notice of revocation in open meeting, in all cases prior to the
exercise of the authority granted in the proxy.
SECTION 10.6. ACTION WITHOUT A MEETING. Subject to the 1940 Act, any
action which may be taken by Shareholders may be taken without a meeting if a
majority of Shareholders entitled to vote on the matter (or such larger
proportion thereof as shall be required by law, the Declaration or these Bylaws
for approval of such matter) consent to the action in writing and the written
consents are filed with the records of the meetings of Shareholders. Such
consent shall be treated for all purposes as a vote taken at a meeting of
Shareholders.
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<PAGE> 35
SECTION 10.7. INSPECTION OF RECORDS. The records of the Trust shall be
open to inspection by Shareholders to the same extent as is permitted
stockholders of an Ohio corporation organized under Chapter 1701, Ohio Revised
Code.
SECTION 10.8. ADDITIONAL PROVISIONS. The Bylaws may include further
provisions for Shareholders' votes and meetings and related matters not
inconsistent with the provisions hereof.
ARTICLE XI
MISCELLANEOUS
-------------
SECTION 11.1. FILING. The original or a copy of this instrument and of
each amendment hereto shall be kept at the office of the Trust where it may be
inspected by any Shareholder. This Declaration, any amendment and the report
required by Section 1746.04, Ohio Revised Code, hereto shall be filed in the
office of the Secretary of the of Ohio and in such other places as may be
required under the laws of Ohio and may also be filed or recorded in such other
places as the Trustees deem appropriate. The Declaration and each amendment
thereto shall be effective upon adoption. A restated Declaration, integrating
into a single instrument all of the provisions of the Declaration which are then
in effect and operative, may be executed from time to time by a majority of the
Trustees and shall, upon filing with the Secretary of the State of Ohio, be
conclusive evidence of all amendments contained herein and may thereafter be
referred to in lieu of the original Declaration and the various amendments
thereto.
SECTION 11.2. GOVERNING LAW. This Declaration is executed by the
Trustees and delivered with reference to the laws of the of Ohio, and the rights
of all parties and the validity and construction of every provision hereof shall
be subject to and construed according to the laws of said State.
SECTION 11.3. COUNTERPARTS. This Declaration may be simultaneously
executed in several counterparts, each of which shall be deemed to be an
original, and such counterparts, together, shall constitute one and the same
instrument, which shall sufficiently be evidenced by any such original
counterpart.
SECTION 11.4. RELIANCE BY THIRD PARTIES. Any certificate executed by an
individual who, according to the records of the Trust appears to be a Trustee
hereunder, certifying to: (a) the number or identity of Trustees or
Shareholders, (b) the due authorization of the execution of any instrument or
writing, (c) the form of any vote passed at a meeting of Trustees or
Shareholders, (d) the fact that the number of Trustees or Shareholders present
at any meeting or executing any written instrument satisfies the requirements of
this Declaration, (e) the form of any Bylaws adopted by or the identity of any
officers elected by the Trustees, or (f) the existence of any fact or facts
which in any manner relate to the affairs of the Trust, shall be conclusive
evidence as to the matters so certified in favor of any Person dealing with the
Trustees and their successors.
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<PAGE> 36
SECTION 11.5. PROVISIONS IN CONFLICT WITH LAW OR REGULATIONS.
---------------------------------------------------------------
(a) The provisions of the Declaration are severable, and if the
Trustees shall determine, with the advice of counsel, that any of such
provisions is in conflict with the 1940 Act, the regulated investment
company provisions of the Internal Revenue Code or with other
applicable laws and regulations, the conflicting provisions shall be
deemed never to have constituted a part of the Declaration; provided,
however, that such determination shall not affect any of the remaining
provisions of the Declaration or render invalid or improper any action
taken or omitted prior to such determination.
(b) If any provision of the Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability
shall attach only to such provision in such jurisdiction and shall not
in any manner affect such provision in any other jurisdiction or any
other provision of the Declaration in any jurisdiction.
SECTION 11.6. INDEX AND HEADING FOR REFERENCE ONLY. The Index and
heading preceding the text, articles and sections hereof have been inserted for
convenience and reference only and shall not be construed to affect the meaning,
construction or effect of this Declaration.
IN WITNESS WHEREOF, the undersigned Trustees have hereunto set their hand this
5th day of March, 1998.
- -------------------------------- ------------------------------------
Sue A. Doody, Trustee Douglas F. Kridler, Trustee
- -------------------------------- ------------------------------------
Robert M. Duncan, Trustee John C. Bryant, Trustee
- -------------------------------- ------------------------------------
Dimon R. McFerson, Trustee C. Brent DeVore, Trustee
- -------------------------------- ------------------------------------
Nancy C. Thomas, Trustee Charles L. Fuellgraf, Jr., Trustee
- -------------------------------- ------------------------------------
Harold W. Weihl, Trustee Thomas J. Kerr, IV, Trustee
- --------------------------------
David C. Wetmore, Trustee
32
<PAGE> 37
Trust Address: Three Nationwide Plaza
26th Floor
Columbus, Ohio 43216
33
<PAGE> 1
Exhibit 2
NATIONWIDE INVESTING FOUNDATION III
- --------------------------------------------------------------------------------
AMENDED BYLAWS
- --------------------------------------------------------------------------------
Dated October 30, 1997
(Amended as of March 5, 1998)
<PAGE> 2
AMENDED BYLAWS
OF
NATIONWIDE INVESTING FOUNDATION III
ARTICLE I
DEFINITIONS
The terms "CLASS" "COMMISSION", "DECLARATION", "DISTRIBUTOR",
"INVESTMENT ADVISER", "MAJORITY SHAREHOLDER VOTE", "1940 ACT", "SERIES",
"SHAREHOLDER", "SHARES", "TRANSFER AGENT", "TRUST", "TRUST PROPERTY" and
"TRUSTEES" have the respective meaning given them in the Declaration of Trust of
Nationwide Investing Foundation III adopted October 30, 1997, and as amended
from time to time.
ARTICLE II
OFFICES
SECTION 1. PRINCIPAL OFFICE. Until changed by the Trustees, the
principal office of the Trust in the State of Ohio shall be in the City of
Columbus, County of Franklin, with the principal office at Three Nationwide
Plaza, Columbus, Ohio.
SECTION 2. OTHER OFFICES. The Trust may have offices in such other
places within as well as without the State of Ohio, as the Trustees may from
time to time determine.
ARTICLE III
TRUSTEES
SECTION 1. MEETINGS OF THE TRUSTEES. The Trustees may in their
discretion provide for regular or stated meetings of the Trustees. Notice of
regular or stated meetings need not be given. Meetings of the Trustees other
than by regular or stated meetings shall be held whenever called by the
Chairman, or by any one of the Trustees, at the time being in office. Notice of
the time and place of each meeting other than regular or stated meetings shall
be given by the Secretary or an Assistant Secretary or by the officer or Trustee
calling the meeting and shall be mailed to each Trustee at least two days before
the meeting, or shall be sent by telecopy, electronic mail or overnight delivery
to each Trustee at his business address, or personally delivered to him at least
one day before the meeting. Such notice may, however, be waived by an Trustee.
Notice of a meeting need not be given to any Trustee if a written waiver of
notice, executed by him before or after the meeting, is filed with the records
of the meeting, or to any Trustee who attends the meeting without protesting
prior thereto or at its commencement the lack of notice to him. A notice or
waiver of notice need not specify the purpose of any meeting. The Trustees may
meet by means of a telephone conference
<PAGE> 3
circuit or similar communications equipment by means of which all persons
participating in the meeting can hear each other, which telephone conference
meeting shall be deemed to have been held at a place designated by the Trustees
at the meeting. Participation in a telephone conference meeting shall constitute
presence in person at such meeting. Any action required or permitted to be taken
at any meeting of the Trustees may be taken by the Trustees without a meeting if
a majority the Trustees consent to the action in writing and the written
consents are filed with the records of the Trustees' meetings. Such consents
shall be treated as a vote for all purposes.
SECTION 2. QUORUM AND MANNER OF ACTING. A majority of the Trustees
shall be present in person at any regular or special meeting of the Trustees in
order to constitute a quorum for the transaction of business at such meeting and
(except as otherwise required by law, the Declaration or these Bylaws) the act
of a majority of the Trustees present at any such meeting, at which a quorum is
present, shall be the act of the Trustees. In the absence of a quorum, a
majority of the Trustees present may adjourn the meeting from time to time until
a quorum shall be present. Notice of an adjourned meeting need not be given.
ARTICLE IV
COMMITTEES AND ADVISORY BOARD
SECTION 1. EXECUTIVE AND OTHER COMMITTEES. The Trustees by vote of a
majority of all the Trustees may elect from their own number an Executive
Committee to consist of not less than three (3) to hold office at the pleasure
of the Trustees, which shall have the power to conduct the current and ordinary
business of the Trust while the Trustees are not in session, including the
purchase and sale of securities and the designation of securities to be
delivered upon redemption of Shares of the Trust, and such other powers of the
Trustees as the Trustees may, from time to time, delegate to them except those
powers which by law, the Declaration or these Bylaws they are prohibited from
delegating. The Trustees may also elect from their own number other Committees
from time to time, the number composing such Committees and powers conferred
upon the same (subject to the same limitations with respect to the Executive
Committee) and the term of membership on such Committees to be determined by the
Trustees. The Trustees may designate a chairman of any such Committee. In the
absence of such designation, the Committee may elect its own Chairman. Any
member of a Committee may resign therefrom by a written instrument signed by him
which shall take effect upon delivery to the Trustees.
SECTION 2. MEETING, QUORUM AND MANNER OF ACTING. The Trustees may (1)
provide for stated meetings of any Committees, (2) specify the manner of calling
and notice required for special meetings of any Committee, (3) specify the
number of members of a Committee required to constitute a quorum and the number
of members of a Committee required to exercise specified powers delegated to
such Committee, (4) authorize the making of decisions or the exercise of
specified powers by written action of the requisite number of members of a
Committee without a meeting and (5) authorize the members of a Committee to meet
by means of a telephone conference circuit.
The Executive Committee shall keep regular minutes of its meetings and
records of decisions taken without a meeting and cause them to be recorded in a
book designated for that purpose and
<PAGE> 4
kept in the offices of the Trust. In addition, the Executive Committee shall
report to the full Board of Trustees any actions taken by the Executive
Committee at the next Trustees meeting.
SECTION 3. ADVISORY BOARD. The Trustees may from time to time appoint
an Advisory Board to consist of not less than three (3) members. Members of such
Advisory Board shall not be Trustees or officers and need not be Shareholders.
Members of this Board shall hold office for such period as the Trustees may by
resolution provide. Any member of such Board may resign therefrom by a written
instrument signed by him which shall take effect upon delivery to the Trustees.
The Advisory Board shall have no legal powers and shall not perform the
functions of Trustees in any manner, said Board being intended merely to act in
an advisory capacity. Such Advisory Board shall meet at such times and upon such
notice as the Trustees may by resolution provide.
ARTICLE V
OFFICERS
SECTION 1. GENERAL PROVISIONS. The officers of the Trust shall be a
Chairman, a Treasurer and a Secretary, who shall be elected by the Trustees. The
Trustees may, from time to time elect or appoint a Vice Chairman, one or more
Assistant Secretaries and one or more Assistant Treasurers.
SECTION 2. OTHER OFFICERS. The Trustees may from time to time appoint
such other officers and agents as they shall deem advisable, who shall hold
their offices for such terms and shall exercise such powers and perform such
duties as shall be determined from time to time by the Trustees. The Trustees
may delegate to one or more officers or agents the power to appoint any such
subordinate officers or agents and to prescribe their respective rights, terms
of office, authorities, and duties.
SECTION 3. TERM OF OFFICE AND QUALIFICATIONS. Except as otherwise
provided by law, the Declaration of Trust or the Bylaws, the Chairman, the Vice
Chairman, the Treasurer and the Secretary shall hold office until such officer's
successor shall have been duly elected and qualified, and all other officers
shall hold office at the pleasure of the Trustees.
SECTION 4. REMOVAL. The Trustees, at any regular or special meeting of
the Trustees, may remove any officer with or without cause by a vote of a
majority of the Trustees. Any officer or agent appointed by any officer or
committee may be removed with or without cause by such appointing officer or
committee or by the Trustees.
SECTION 5. POWERS AND DUTIES OF THE CHAIRMAN. The Chairman may call
meetings of the Trustees and of any Committee thereof when he deems it necessary
and may preside at all meetings of the Shareholders. Subject to the control of
the Trustees and any Committees of the Trustees, within their respective
spheres, as provided by the Trustees, he shall at all times exercise a general
supervision and direction over the affairs of the Trust. He shall have the power
to employ attorneys and counsel for the Trust and to employ such subordinate
officers, agents, clerks and employees as he may find necessary to transact the
business of the Trust. He shall also have the power to grant, issue, execute or
sign such powers of attorney, proxies or other documents as may be deemed
<PAGE> 5
advisable or necessary in furtherance of the interest of the Trust. The Chairman
shall have such other powers and duties as, from time to time, may be conferred
upon or assigned to him by the Trustees.
SECTION 6. POWERS AND DUTIES OF VICE CHAIRMAN. In the absence or
disability of the Chairman, the Vice Chairman or, if there be more than one Vice
Chairman, any Vice Chairman designated by the Trustees shall perform all the
duties and may exercise any of the powers of the Chairman, subject to the
control of the Trustees. Each Vice Chairman shall perform such other duties as
may be assigned to him from time to time by the Trustees and the Chairman.
SECTION 7. POWERS AND DUTIES OF THE TREASURER. The Treasurer shall be
the principal financial and accounting officer of the Trust. He shall deliver
all funds of the Trust which may come into his hands to such custodian as the
Trustees may employ pursuant to Article X of these Bylaws. He shall render a
statement of condition of the finances of the Trust to the Trustees as often as
they shall require the same and he shall in general perform all the duties
incident to the office of Treasurer and such other duties as from time to time
may be assigned to him by the Trustees.
SECTION 8. POWERS AND DUTIES OF THE SECRETARY. The Secretary shall keep
the minutes of all meetings of the Shareholders and the Trustees in proper books
provided for that purpose; he shall have charge of the Share transfer books,
lists and records unless the same are in the charge of the Transfer Agent. The
Secretary shall attend to the giving and serving of all notices by the Trust in
accordance with the provisions of these Bylaws and as required by law; and
subject to these Bylaws, he shall in general perform all duties incident to the
office of Secretary and such other duties as from time to time may be assigned
to him by the Trustees.
SECTION 9. POWERS AND DUTIES OF THE ASSISTANT TREASURERS. In the
absence or disability of the Treasurer, any Assistant Treasurer designated by
the Trustees shall perform all the duties, and may exercise any of the powers,
of the Treasurer. The Assistant Treasurers shall perform such other duties as
from time to time may be assigned to them by the Trustees. Each Assistant
Treasurer shall give a bond for the faithful discharge of his duties, if
required to so by the Trustees, in such sum and with such surety or sureties as
the Trustees shall require.
SECTION 10. POWERS AND DUTIES OF THE ASSISTANT SECRETARIES. In the
absence or disability of the Secretary, any Assistant Secretary designated by
the Trustees shall perform all of the duties, and may exercise any of the
powers, of the Secretary. The Assistant Secretaries shall perform such other
duties as from time to time may be assigned to them by the Trustees.
SECTION 11.COMPENSATION OF OFFICERS AND TRUSTEES AND MEMBERS OF THE
ADVISORY BOARD. Subject to any applicable provisions of the Declaration, the
compensation of the officers and Trustees and members of the Advisory Board
shall be fixed from time to time by the Trustees or, in the case of officers, by
any Committee or officer upon whom such power may be conferred by the Trustees.
No officer shall be prevented from receiving such compensation as such officer
by reason of the fact that he is also a Trustee.
<PAGE> 6
ARTICLE VI
FISCAL YEAR
The fiscal year of the Trust shall begin on the first day of November
in each year and shall end on the last day of October in each year, provided,
however, that the Trustees may from time to time change the fiscal year.
ARTICLE VII
SEAL
The Trustees may adopt a seal which shall be in such form and shall
have such inscription thereon as the Trustees may from time to time prescribe.
ARTICLE VIII
WAIVERS OF NOTICE
Whenever any notice whatever is required to be given by law, the
Declaration or these Bylaws, a waiver thereof in writing, signed by the person
or persons entitled to said notice, whether before or after the time stated
therein, shall be deemed equivalent thereto.
ARTICLE IX
CUSTODIAN
The Trustees shall at all times employ a bank or trust company as
Custodian in accordance with the 1940 Act as amended and the rules promulgated
thereunder as amended.
ARTICLE X
AMENDMENTS
These Bylaws, or any of them, may be altered, amended or repealed, or
new Bylaws may be adopted (a) by Majority Shareholder Vote, or (b) by the
Trustees, provided, however that no Bylaw may be amended, adopted or repealed by
the Trustees if such amendment, adoption or repeal requires, pursuant to law,
the Declaration or these Bylaws, a vote of the Shareholders.
<PAGE> 1
Exhibit 5(a)
INVESTMENT ADVISORY AGREEMENT
-----------------------------
THIS AGREEMENT is made and entered into on this ____ day of
____________, 1998, between NATIONWIDE INVESTING FOUNDATION III (the "Trust"),
an Ohio business trust, and NATIONWIDE ADVISORY SERVICES, INC. (the "Adviser"),
an Ohio corporation registered under the Investment Advisers Act of 1940 (the
"Advisers Act").
W I T N E S S E T H :
WHEREAS, the Trust is registered with the Securities and Exchange
Commission (the "SEC") as an open-end management investment company under the
Investment Company Act of 1940 (the "1940 Act");
WHEREAS, the Trust desires to retain the Adviser to furnish certain
investment advisory services, as described herein, with respect to certain of
the series of the Trust, all as now are or may be hereafter listed on Exhibit A
to this Agreement (each, a "Fund"); and
WHEREAS, the Adviser represents that it is willing and possesses legal
authority to render such services subject to the terms and conditions set forth
in this Agreement.
NOW, THEREFORE, the Trust and the Adviser do mutually agree and promise
as follows:
1. APPOINTMENT AS ADVISER. The Trust hereby appoints the Adviser to act
as investment adviser to each Fund subject to the terms and conditions set forth
in this Agreement. The Adviser hereby accepts such appointment and agrees to
furnish the services hereinafter described for the compensation provided for in
this Agreement.
2. DUTIES OF ADVISER.
------------------
(a) INVESTMENT MANAGEMENT SERVICES. (1) Subject to the
supervision of the Trust's Board of Trustees (and except as otherwise
permitted under the terms of any exemptive relief obtained by the
Adviser from the Securities and Exchange Commission, or by rule or
regulation), the Adviser will provide, or arrange for the provision of,
a continuous investment program and overall investment strategies for
each Fund, including investment research and management with respect to
all securities and investments and cash equivalents in each Fund. The
Adviser will determine, or arrange for others to determine, from time
to time what securities and other investments will be purchased,
retained or sold by each Fund and will implement, or arrange for others
to implement, such determinations through the placement, in the name of
a Fund, of orders for the execution of portfolio transactions with or
through such brokers or dealers as may be so selected. The Adviser will
provide, or arrange for the provision of, the services under this
Agreement in accordance with the stated investment policies and
restrictions of each Fund as set forth in that Fund's current
prospectus and statement of additional information as currently in
effect and as supplemented or amended
<PAGE> 2
from time to time (collectively referred to hereinafter as the
"Prospectus") and subject to the directions of the Trust's Board of
Trustees.
(2) Subject to the provisions of this Agreement and the 1940
Act and any exemptions thereto, the Adviser is authorized to appoint
one or more qualified subadvisers (each a "Subadviser") to provide each
Fund with certain services required by this Agreement. Each Subadviser
shall have such investment discretion and shall make all determinations
with respect to the investment of a Fund's assets as shall be assigned
to that Subadviser by the Adviser and the purchase and sale of
portfolio securities with respect to those assets and shall take such
steps as may be necessary to implement its decisions. The Adviser shall
not be responsible or liable for the investment merits of any decision
by a Subadviser to purchase, hold, or sell a security for a Fund.
(3) Subject to the supervision and direction of the Trustees,
the Adviser shall (i) have overall supervisory responsibility for the
general management and investment of a Fund's assets; (ii) determine
the allocation of assets among the Subadvisers, if any; and (iii) have
full investment discretion to make all determinations with respect to
the investment of Fund assets not otherwise assigned to a Subadviser.
(4) The Adviser shall research and evaluate each Subadviser,
if any, including (i) performing initial due diligence on prospective
Subadvisers and monitoring each Subadviser's ongoing performance; (ii)
communicating performance expectations and evaluations to the
Subadvisers; and (iii) recommending to the Trust's Board of Trustees
whether a Subadviser's contract should be renewed, modified or
terminated. The Adviser shall also recommend changes or additions to
the Subadvisers and shall compensate the Subadvisers.
(5) The Adviser shall provide to the Trust's Board of Trustees
such periodic reports concerning a Fund's business and investments as
the Board of Trustees shall reasonably request.
(b) COMPLIANCE WITH APPLICABLE LAWS AND GOVERNING DOCUMENTS.
In the performance of its duties and obligations under this Agreement,
the Adviser shall act in conformity with the Trust's Declaration of
Trust and By-Laws and the Prospectus and with the instructions and
directions received from the Trustees of the Trust and will conform to
and comply with the requirements of the 1940 Act, the Internal Revenue
Code of 1986, as amended (the "Code") (including the requirements for
qualification as a regulated investment company) and all other
applicable federal and state laws and regulations.
The Adviser acknowledges and agrees that subject to the
supervision and directions of the Trust's Board of Trustees, it shall
be solely responsible for compliance with all disclosure requirements
under all applicable federal and state laws and regulations relating to
the Trust or a Fund, including, without limitation, the 1940 Act, and
the rules and regulations
2
<PAGE> 3
thereunder, except that each Subadviser shall have liability in
connection with information furnished by the Subadviser to a Fund or to
the Adviser.
(c) CONSISTENT STANDARDS. It is recognized that the Adviser
will perform various investment management and administrative services
for entities other than the Trust and the Funds; in connection with
providing such services, the Adviser agrees to exercise the same skill
and care in performing its services under this Agreement as the Adviser
exercises in performing similar services with respect to the other
fiduciary accounts for which the Adviser has investment
responsibilities.
(d) BROKERAGE. The Adviser is authorized, subject to the
supervision of the Trust's Board of Trustees, to establish and maintain
accounts on behalf of each Fund with, and place orders for the purchase
and sale of assets not allocated to a Subadviser, with or through, such
persons, brokers or dealers ("brokers") as Adviser may select and
negotiate commissions to be paid on such transactions. In the selection
of such brokers and the placing of such orders, the Adviser shall seek
to obtain for a Fund the most favorable price and execution available,
except to the extent it may be permitted to pay higher brokerage
commissions for brokerage and research services, as provided below. In
using its reasonable efforts to obtain for a Fund the most favorable
price and execution available, the Adviser, bearing in mind the Fund's
best interests at all times, shall consider all factors it deems
relevant, including price, the size of the transaction, the nature of
the market for the security, the amount of the commission, if any, the
timing of the transaction, market prices and trends, the reputation,
experience and financial stability of the broker involved, and the
quality of service rendered by the broker in other transactions.
Subject to such policies as the Trustees may determine, the Adviser
shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of its
having caused a Fund to pay a broker that provides brokerage and
research services (within the meaning of Section 28(e) of the
Securities Exchange Act of 1934) to the Adviser an amount of commission
for effecting a Fund investment transaction that is in excess of the
amount of commission that another broker would have charged for
effecting that transaction if, but only if, the Adviser determines in
good faith that such commission was reasonable in relation to the value
of the brokerage and research services provided by such broker or
dealer, viewed in terms of either that particular transaction or the
overall responsibilities of the Adviser with respect to the accounts as
to which it exercises investment discretion.
It is recognized that the services provided by such brokers
may be useful to the Adviser in connection with the Adviser's services
to other clients. On occasions when the Adviser deems the purchase or
sale of a security to be in the best interests of a Fund as well as
other clients of the Adviser, the Adviser, to the extent permitted by
applicable laws and regulations, may, but shall be under no obligation
to, aggregate the securities to be sold or purchased in order to obtain
the most favorable price or lower brokerage commissions and efficient
execution. In such event, allocation of securities so sold or
purchased, as well as the expenses incurred in the transaction, will be
made by the Adviser in the manner the Adviser
3
<PAGE> 4
considers to be the most equitable and consistent with its fiduciary
obligations to each Fund and to such other clients.
(e) SECURITIES TRANSACTIONS. The Adviser will not purchase
securities or other instruments from or sell securities or other
instruments to a Fund; PROVIDED, HOWEVER, the Adviser may purchase
securities or other instruments from or sell securities or other
instruments to a Fund if such transaction is permissible under
applicable laws and regulations, including, without limitation, the
1940 Act and the Advisers Act and the rules and regulations promulgated
thereunder or any exemption therefrom.
The Adviser agrees to observe and comply with Rule 17j-1 under
the 1940 Act and the Trust's Code of Ethics, as the same may be amended
from time to time.
(f) BOOKS AND RECORDS. In accordance with the 1940 Act and the
rules and regulations promulgated thereunder, the Adviser shall
maintain separate books and detailed records of all matters pertaining
to the Funds and the Trust (the "Fund's Books and Records"), including,
without limitation, a daily ledger of such assets and liabilities
relating thereto and brokerage and other records of all securities
transactions. The Adviser acknowledges that the Fund's Books and
Records are property of the Trust. In addition, the Fund's Books and
Records shall be available to the Trust at any time upon request and
shall be available for telecopying without delay to the Trust during
any day that the Funds are open for business.
3. EXPENSES. During the term of this Agreement, the Adviser will pay
all expenses incurred by it in connection with its activities under this
Agreement other than the cost of securities, commodities and other investments
(including brokerage commissions and other transaction charges, if any)
purchased for a Fund. The Adviser shall, at its sole expense, employ or
associate itself with such persons as it believes to be particularly fitted to
assist it in the execution of its duties under this Agreement. The Adviser shall
be responsible for the expenses and costs for the officers of the Trust and the
Trustees of Trust who are "interested persons" (as defined in the 1940 Act) of
the Adviser.
It is understood that the Trust will pay all of its own expenses
including, without limitation, (1) all charges and expenses of any custodian or
depository appointed by the Trust for the safekeeping of its cash, securities
and other assets, (2) all charges and expenses paid to an administrator
appointed by the Trust to provide administrative or compliance services, (3) the
charges and expenses of any transfer agents and registrars appointed by the
Trust, (4) the charges and expenses of independent certified public accountants
and of general ledger accounting and internal reporting services for the Trust,
(5) the charges and expenses of dividend and capital gain distributions, (6) the
compensation and expenses of Trustees of the Trust who are not "interested
persons" of the Adviser, (7) brokerage commissions and issue and transfer taxes
chargeable to the Trust in connection with securities transactions to which the
Trust is a party, (8) all taxes and fees payable by the Trust to Federal, State
or other governmental agencies, (9) the cost of stock certificates representing
shares of the Trust, (10) all expenses of shareholders' and Trustees' meetings
4
<PAGE> 5
and of preparing, printing and distributing prospectuses and reports to
shareholders, (11) charges and expenses of legal counsel for the Trust in
connection with legal matters relating to the Trust, including without
limitation, legal services rendered in connection with the Trust's existence,
financial structure and relations with its shareholders, (12) insurance and
bonding premiums, (13) association membership dues, (14) bookkeeping and the
costs of calculating the net asset value of shares of the Trust's Funds, and
(15) expenses relating to the issuance, registration and qualification of the
Trust's shares.
4. COMPENSATION. For the services provided and the expenses assumed
with respect to a Fund pursuant to this Agreement, the Adviser will be entitled
to the fee listed for each Fund on Exhibit A. Such fees will be computed daily
and payable monthly at an annual rate based on a Fund's average daily net
assets.
The method of determining net assets of a Fund for purposes hereof
shall be the same as the method of determining net assets for purposes of
establishing the offering and redemption price of the Shares as described in
each Fund's Prospectus. If this Agreement shall be effective for only a portion
of a month, the aforesaid fee shall be prorated for the portion of such month
during which this Agreement is in effect.
Notwithstanding any other provision of this Agreement, the Adviser may
from time to time agree not to impose all or a portion of its fee otherwise
payable hereunder (in advance of the time such fee or portion thereof would
otherwise accrue). Any such fee reduction may be discontinued or modified by the
Adviser at any time.
5. REPRESENTATIONS AND WARRANTIES OF ADVISER. The Adviser represents
and warrants to the Trust as follows:
(a) The Adviser is registered as an investment adviser under
the Advisers Act;
(b) The Adviser is a corporation duly organized, validly
existing and in good standing under the laws of the State of Ohio with
the power to own and possess its assets and carry on its business as it
is now being conducted;
(c) The execution, delivery and performance by the Adviser of
this Agreement are within the Adviser's powers and have been duly
authorized by all necessary action on the part of its shareholders
and/or directors, and no action by or in respect of, or filing with,
any governmental body, agency or official is required on the part of
the Adviser for the execution, delivery and performance by the Adviser
of this Agreement, and the execution, delivery and performance by the
Adviser of this Agreement do not contravene or constitute a default
under (i) any provision of applicable law, rule or regulation, (ii) the
Adviser's governing instruments, or (iii) any agreement, judgment,
injunction, order, decree or other instrument binding upon the Adviser;
5
<PAGE> 6
(d) The Form ADV of the Adviser previously provided to the
Trust is a true and complete copy of the form filed with the SEC and
the information contained therein is accurate and complete in all
material respects and does not omit to state any material fact
necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading.
6. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; DUTY TO UPDATE
INFORMATION. All representations and warranties made by the Adviser pursuant to
Section 5 shall survive for the duration of this Agreement and the parties
hereto shall promptly notify each other in writing upon becoming aware that any
of the foregoing representations and warranties are no longer true.
7. LIABILITY AND INDEMNIFICATION.
------------------------------
(a) LIABILITY. In the absence of wilful misfeasance, bad faith
or gross negligence on the part of the Adviser or a reckless disregard
of its duties hereunder, the Adviser shall not be subject to any
liability to a Fund or the Trust, for any act or omission in the case
of, or connected with, rendering services hereunder or for any losses
that may be sustained in the purchase, holding or sale of Fund assets;
PROVIDED, HOWEVER, that nothing herein shall relieve the Adviser from
any of its obligations under applicable law, including, without
limitation, the federal and state securities laws.
(b) INDEMNIFICATION. The Adviser shall indemnify the Trust and
its officers and trustees, for any liability and expenses, including
attorneys fees, which may be sustained as a result of the Adviser's
wilful misfeasance, bad faith, gross negligence, reckless disregard of
its duties hereunder or violation of applicable law, including, without
limitation, the federal and state securities laws.
8. DURATION AND TERMINATION.
-------------------------
(a) DURATION. Unless sooner terminated, this Agreement shall
continue until _______________, 2000, and thereafter shall continue
automatically for successive annual periods, provided such continuance
is specifically approved at least annually by the Trust's Board of
Trustees or the vote of the lesser of (a) 67% of the shares of a Fund
represented at a meeting if holders of more than 50% of the outstanding
shares of the Fund are present in person or by proxy or (b) more than
50% of the outstanding shares of the Fund; PROVIDED that in either
event its continuance also is approved by a majority of the Trust's
Trustees who are not "interested persons" (as defined in the 1940 Act)
of any party to this Agreement, by vote cast in person at a meeting
called for the purpose of voting on such approval.
(b) TERMINATION. Notwithstanding whatever may be provided
herein to the contrary, this Agreement may be terminated at any time,
without payment of any penalty by vote of a majority of the Trust's
Board of Trustees, or by vote of a majority of the outstanding
6
<PAGE> 7
voting securities of a Fund, or by the Adviser, in each case, not less
than sixty (60) days' written notice to the other party.
This Agreement shall not be assigned (as such term is defined in the
1940 Act) and shall terminate automatically in the event of its assignment.
9. SERVICES NOT EXCLUSIVE. The services furnished by the Adviser
hereunder are not to be deemed exclusive, and the Adviser shall be free to
furnish similar services to others so long as its services under this Agreement
are not impaired thereby. It is understood that the action taken by the Adviser
under this Agreement may differ from the advice given or the timing or nature of
action taken with respect to other clients of the Adviser, and that a
transaction in a specific security may not be accomplished for all clients of
the Adviser at the same time or at the same price.
10. AMENDMENT. This Agreement may be amended by mutual consent of the
parties, provided that the terms of each such amendment shall be approved by the
Trust's Board of Trustees or by a vote of a majority of the outstanding voting
securities of a Fund (as required by the 1940 Act).
11. CONFIDENTIALITY. Subject to the duties of the Adviser and the Trust
to comply with applicable law, including any demand of any regulatory or taxing
authority having jurisdiction, the parties hereto shall treat as confidential
all information pertaining to a Fund and the Trust and the actions of the
Adviser and the Funds in respect thereof.
12. NOTICE. Any notice that is required to be given by the parties to
each other under the terms of this Agreement shall be in writing, delivered, or
mailed postpaid to the other party, or transmitted by facsimile with
acknowledgment of receipt, to the parties at the following addresses or
facsimile numbers, which may from time to time be changed by the parties by
notice to the other party:
(a) If to the Adviser:
Nationwide Advisory Services, Inc.
Three Nationwide Plaza, 26th Floor
Columbus, OH 43215
Attention: James F. Laird, Jr.
Facsimile: (614) 249-7424
(b) If to the Trust:
Nationwide Investing Foundation III
Three Nationwide Plaza, 26th Floor
Columbus, OH 43215
Attention: James F. Laird, Jr.
7
<PAGE> 8
Facsimile: (614) 249-7424
13. JURISDICTION. This Agreement shall be governed by and construed to
be in accordance with substantive laws of the State of Ohio without reference to
choice of law principles thereof and in accordance with the 1940 Act. In the
case of any conflict, the 1940 Act shall control.
14. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, all of which shall
together constitute one and the same instrument.
15. CERTAIN DEFINITIONS. For the purposes of this Agreement,
"interested person," "affiliated person," "assignment" shall have their
respective meanings as set forth in the 1940 Act, subject, however, to such
exemptions as may be granted by the SEC.
16. CAPTIONS. The captions herein are included for convenience of
reference only and shall be ignored in the construction or interpretation
hereof.
17. SEVERABILITY. If any provision of this Agreement shall be held or
made invalid by a court decision or applicable law, the remainder of the
Agreement shall not be affected adversely and shall remain in full force and
effect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first written above.
ADVISER
NATIONWIDE ADVISORY SERVICES, INC.
By:
-------------------------------------
Name:
Title:
TRUST
NATIONWIDE INVESTING FOUNDATION III
By:
-------------------------------------
Name:
Title:
8
<PAGE> 9
EXHIBIT A
NATIONWIDE INVESTING FOUNDATION III
Investment Advisory Agreement
Effective November 1, 1998
<TABLE>
<CAPTION>
FUNDS OF THE TRUST ADVISORY FEES
- ------------------ -------------
- --------------------------------------------------------------------------------
FOR EACH OF THE NATIONWIDE EQUITY FUNDS
---------------------------------------
<S> <C>
Nationwide Mid Cap Growth Fund 0.60% on assets up to $250 million
Nationwide Growth Fund 0.575% on assets of $250 million and more but less
Nationwide Fund than $1 billion
0.55% on assets of $1 billion and more but less than
$2 billion
0.525% on assets of $2 billion and more but less than
$5 billion
0.50% for assets of $5 billion and more
- --------------------------------------------------------------------------------
FOR THE NATIONWIDE FIXED INCOME FUNDS
-------------------------------------
Nationwide Bond Fund 0.50% on assets up to $250 million
Nationwide Tax Free Income Fund 0.475% on assets of $250 million and more but less
Nationwide Long-term U.S. than $1 billion
Government Bond Fund 0.45% on assets of $1 billion and more but less
Nationwide Intermediate U.S. than $2 billion
Government Bond Fund 0.425% on assets of $2 billion and more but less
than $5 billion
0.40% for assets of $5 billion and more
- --------------------------------------------------------------------------------
FOR THE NATIONWIDE MONEY MARKET FUND
------------------------------------
Nationwide Money Market Fund 0.40% on assets up to $1 billion
0.38% on assets of $1 billion and more but less
than $2 billion
0.36% on assets of $2 billion and more but less
than $5 billion
0.34% for assets of $5 billion and more
- --------------------------------------------------------------------------------
</TABLE>
1
<PAGE> 10
INVESTMENT ADVISORY AGREEMENT
(page 2)
<TABLE>
<CAPTION>
FUNDS OF THE TRUST ADVISORY FEES
- --------------------------------------------------------------------------------
<S> <C>
FOR OTHER FUNDS
Nationwide S&P 500 0.13% of average daily net assets
Index Fund
Prestige Large Cap Value Fund 0.75% on assets up to $100 million
0.70% on assets of $100 million and more
Prestige Large Cap Growth Fund 0.80% on assets up to $150 million
0.70% on assets of $150 million and more
Prestige Small Cap Fund 0.95% on assets up to $100 million
0.80% on assets of $100 million and more
Prestige Balanced Fund 0.75% on assets up to $100 million
0.70% on assets of $100 million and more
Prestige International Fund 0.85% on assets up to $200 million
0.80% on assets of $200 million and more
</TABLE>
- --------------------------------------------------------------------------------
2
<PAGE> 1
Exhibit 5(b)
INVESTMENT ADVISORY AGREEMENT
-----------------------------
THIS AGREEMENT is made and entered into on this ____ day of
____________, 1998, between NATIONWIDE INVESTING FOUNDATION III (the "Trust"),
an Ohio business trust, and UNION BOND & TRUST COMPANY (the "Adviser"), a trust
company organized under the laws of Oregon.
W I T N E S S E T H :
WHEREAS, the Trust is registered with the Securities and Exchange
Commission (the "SEC") as an open-end management investment company under the
Investment Company Act of 1940 (the "1940 Act");
WHEREAS, the Trust desires to retain the Adviser to furnish certain
investment advisory services, as described herein, with respect to certain of
the series of the Trust, all as now are or may be hereafter listed on Exhibit A
to this Agreement (each, a "Fund"); and
WHEREAS, the Adviser represents that it is willing and possesses legal
authority to render such services subject to the terms and conditions set forth
in this Agreement.
NOW, THEREFORE, the Trust and the Adviser do mutually agree and promise
as follows:
1. APPOINTMENT AS ADVISER. The Trust hereby appoints the Adviser
to act as investment adviser to each Fund subject to the terms
and conditions set forth in this Agreement. The Adviser hereby
accepts such appointment and agrees to furnish the services
hereinafter described for the compensation provided for in
this Agreement.
2. DUTIES OF ADVISER.
------------------
(a) INVESTMENT MANAGEMENT SERVICES. (1) Subject to the
supervision of the Trust's Board of Trustees (and except as otherwise
permitted under the terms of any exemptive relief obtained by the
Adviser from the Securities and Exchange Commission, or by rule or
regulation), the Adviser will provide, or arrange for the provision of,
a continuous investment program and overall investment strategies for
each Fund, including investment research and management with respect to
all securities and investments and cash equivalents in each Fund. The
Adviser will determine, or arrange for others to determine, from time
to time what securities and other investments will be purchased,
retained or sold by each Fund and will implement, or arrange for others
to implement, such determinations through the placement, in the name of
a Fund, of orders for the execution of portfolio transactions with or
through such brokers or dealers as may be so selected. The Adviser will
provide, or arrange for the provision of, the services under this
Agreement in accordance with the stated investment policies and
restrictions of each Fund as set forth in that Fund's current
prospectus and statement of additional information as currently in
effect and as supplemented or amended from time to time (collectively
referred to hereinafter as the "Prospectus") and subject to the
directions of the Trust's Board of Trustees. To the extent that the
Fund enters into wrapper
<PAGE> 2
agreements as described in the Prospectus, the Adviser will work with
the wrap agreement providers to furnish the Fund with the monthly
crediting rate applicable for the wrap agreements.
(2) Subject to the provisions of this Agreement and the 1940
Act and any exemptions thereto, the Adviser is authorized to appoint
one or more qualified subadvisers (each a "Subadviser") to provide each
Fund with certain services required by this Agreement. Each Subadviser
shall have such investment discretion and shall make all determinations
with respect to the investment of a Fund's assets as shall be assigned
to that Subadviser by the Adviser and the purchase and sale of
portfolio securities with respect to those assets and shall take such
steps as may be necessary to implement its decisions. The Adviser shall
not be responsible or liable for the investment merits of any decision
by a Subadviser to purchase, hold, or sell a security for a Fund.
(3) Subject to the supervision and direction of the Trustees,
the Adviser shall (i) have overall supervisory responsibility for the
general management and investment of a Fund's assets; (ii) determine
the allocation of assets among the Subadvisers, if any; and (iii) have
full investment discretion to make all determinations with respect to
the investment of Fund assets not otherwise assigned to a Subadviser.
(4) The Adviser shall research and evaluate each Subadviser,
if any, including (i) performing initial due diligence on prospective
Subadvisers and monitoring each Subadviser's ongoing performance; (ii)
communicating performance expectations and evaluations to the
Subadvisers; and (iii) recommending to the Trust's Board of Trustees
whether a Subadviser's contract should be renewed, modified or
terminated. The Adviser shall also recommend changes or additions to
the Subadvisers and shall compensate the Subadvisers.
(5) The Adviser shall provide to the Trust's Board of Trustees
such periodic reports concerning a Fund's business and investments as
the Board of Trustees shall reasonably request.
(b) COMPLIANCE WITH APPLICABLE LAWS AND GOVERNING DOCUMENTS.
In the performance of its duties and obligations under this Agreement,
the Adviser shall act in conformity with the Trust's Declaration of
Trust and By-Laws and the Prospectus and with the instructions and
directions received from the Trustees of the Trust and will conform to
and comply with the requirements of the 1940 Act, the Internal Revenue
Code of 1986, as amended (the "Code") (including the requirements for
qualification as a regulated investment company) and all other
applicable federal and state laws and regulations.
The Adviser acknowledges and agrees that subject to the
supervision and directions of the Trust's Board of Trustees, it shall
be solely responsible for compliance with all disclosure requirements
under all applicable federal and state laws and regulations relating to
the Trust or a Fund, including, without limitation, the 1940 Act, and
the rules and regulations
<PAGE> 3
thereunder, except that each Subadviser shall have liability in
connection with information furnished by the Subadviser to a Fund or to
the Adviser.
(c) CONSISTENT STANDARDS. It is recognized that the Adviser
will perform various investment management and administrative services
for entities other than the Trust and the Funds; in connection with
providing such services, the Adviser agrees to exercise the same skill
and care in performing its services under this Agreement as the Adviser
exercises in performing similar services with respect to the other
fiduciary accounts for which the Adviser has investment
responsibilities.
(d) BROKERAGE. The Adviser is authorized, subject to the
supervision of the Trust's Board of Trustees, to establish and maintain
accounts on behalf of each Fund with, and place orders for the purchase
and sale of assets not allocated to a Subadviser, with or through, such
persons, brokers or dealers ("brokers") as Adviser may select and
negotiate commissions to be paid on such transactions. In the selection
of such brokers and the placing of such orders, the Adviser shall seek
to obtain for a Fund the most favorable price and execution available,
except to the extent it may be permitted to pay higher brokerage
commissions for brokerage and research services, as provided below. In
using its reasonable efforts to obtain for a Fund the most favorable
price and execution available, the Adviser, bearing in mind the Fund's
best interests at all times, shall consider all factors it deems
relevant, including price, the size of the transaction, the nature of
the market for the security, the amount of the commission, if any, the
timing of the transaction, market prices and trends, the reputation,
experience and financial stability of the broker involved, and the
quality of service rendered by the broker in other transactions.
Subject to such policies as the Trustees may determine, the Adviser
shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of its
having caused a Fund to pay a broker that provides brokerage and
research services (within the meaning of Section 28(e) of the
Securities Exchange Act of 1934) to the Adviser an amount of commission
for effecting a Fund investment transaction that is in excess of the
amount of commission that another broker would have charged for
effecting that transaction if, but only if, the Adviser determines in
good faith that such commission was reasonable in relation to the value
of the brokerage and research services provided by such broker or
dealer, viewed in terms of either that particular transaction or the
overall responsibilities of the Adviser with respect to the accounts as
to which it exercises investment discretion.
It is recognized that the services provided by such brokers
may be useful to the Adviser in connection with the Adviser's services
to other clients. On occasions when the Adviser deems the purchase or
sale of a security to be in the best interests of a Fund as well as
other clients of the Adviser, the Adviser, to the extent permitted by
applicable laws and regulations, may, but shall be under no obligation
to, aggregate the securities to be sold or purchased in order to obtain
the most favorable price or lower brokerage commissions and efficient
execution. In such event, allocation of securities so sold or
purchased, as well as the expenses incurred in the transaction, will be
made by the Adviser in the manner the Adviser
<PAGE> 4
considers to be the most equitable and consistent with its fiduciary
obligations to each Fund and to such other clients.
(e) SECURITIES TRANSACTIONS. The Adviser will not purchase
securities or other instruments from or sell securities or other
instruments to a Fund; PROVIDED, HOWEVER, the Adviser may purchase
securities or other instruments from or sell securities or other
instruments to a Fund if such transaction is permissible under
applicable laws and regulations, including, without limitation, the
1940 Act and the Investment Advisers Act of 1940 (the "Advisers Act")
and the rules and regulations promulgated thereunder or any exemption
therefrom.
The Adviser agrees to observe and comply with Rule 17j-1 under
the 1940 Act and the Adviser's Code of Ethics (which shall comply in
all material respects with Rule 17j-1 under the 1940 Act), as the same
may be amended from time to time. On a quarterly basis, the Adviser
will either (i) certify to the Trust that the Adviser and its Access
Persons have complied with the Adviser's Code of Ethics with respect to
the Fund or (ii) identify any violations which have occurred with
respect to the Fund.
(f) BOOKS AND RECORDS. In accordance with the 1940 Act and the
rules and regulations promulgated thereunder, the Adviser shall
maintain separate books and detailed records of all matters pertaining
to the Funds and the Trust (the "Fund's Books and Records"), including,
without limitation, a daily ledger of such assets and liabilities
relating thereto and brokerage and other records of all securities
transactions. The Adviser acknowledges that the Fund's Books and
Records are property of the Trust. In addition, the Fund's Books and
Records shall be available to the Trust at any time upon request and
shall be available for telecopying without delay to the Trust during
any day that the Funds are open for business.
3. EXPENSES. During the term of this Agreement, the Adviser will pay
all expenses incurred by it in connection with its activities under this
Agreement other than the cost of securities, commodities and other investments
(including brokerage commissions and other transaction charges, if any)
purchased for a Fund. The Adviser shall, at its sole expense, employ or
associate itself with such persons as it believes to be particularly fitted to
assist it in the execution of its duties under this Agreement. The Adviser shall
be responsible for the Fund's pro rata share of the compensation and expenses of
the Trustees of Trust who are "interested persons" (as defined in the 1940 Act)
of the Trust and for the compensation and expenses of the officers of the Trust
who are employees of the Adviser.
It is understood that the Trust will pay all of its own expenses
including, without limitation, (1) all charges and expenses of any custodian or
depository appointed by the Trust for the safekeeping of its cash, securities
and other assets, (2) all charges and expenses paid to an administrator
appointed by the Trust to provide administrative or compliance services, (3) the
charges and expenses of any transfer agents and registrars appointed by the
Trust, (4) the charges and expenses of independent certified public accountants
and of general ledger accounting and internal
<PAGE> 5
reporting services for the Trust, (5) the charges and expenses of dividend and
capital gain distributions, (6) the compensation and expenses of Trustees of the
Trust who are not "interested persons" of the Adviser, (7) brokerage commissions
and issue and transfer taxes chargeable to the Trust in connection with
securities transactions to which the Trust is a party, (8) all taxes and fees
payable by the Trust to Federal, State or other governmental agencies, (9) the
cost of stock certificates representing shares of the Trust, (10) all expenses
of shareholders' and Trustees' meetings and of preparing, printing and
distributing prospectuses and reports to shareholders, (11) charges and expenses
of legal counsel for the Trust in connection with legal matters relating to the
Trust, including without limitation, legal services rendered in connection with
the Trust's existence, financial structure and relations with its shareholders,
(12) insurance and bonding premiums, (13) association membership dues, (14)
bookkeeping and the costs of calculating the net asset value of shares of the
Trust's Funds, and (15) expenses relating to the issuance, registration and
qualification of the Trust's shares.
4. COMPENSATION. For the services provided and the expenses assumed
with respect to a Fund pursuant to this Agreement, the Adviser will be entitled
to the fee listed for each Fund on Exhibit A. Such fees will be computed daily
and payable monthly at an annual rate based on a Fund's average daily net
assets.
The method of determining net assets of a Fund for purposes hereof
shall be the same as the method of determining net assets for purposes of
establishing the offering and redemption price of the Shares as described in
each Fund's Prospectus. If this Agreement shall be effective for only a portion
of a month, the aforesaid fee shall be prorated for the portion of such month
during which this Agreement is in effect.
Notwithstanding any other provision of this Agreement, the Adviser may
from time to time agree not to impose all or a portion of its fee otherwise
payable hereunder (in advance of the time such fee or portion thereof would
otherwise accrue). Any such fee reduction may be discontinued or modified by the
Adviser at any time.
5. REPRESENTATIONS AND WARRANTIES OF ADVISER. The Adviser represents
and warrants to the Trust as follows:
(a) The Adviser is exempt from registration as an investment
adviser under the Advisers Act;
(b) The Adviser is a trust company duly organized, validly
existing and in good standing under the laws of the State of Oregon
with the power to own and possess its assets and carry on its business
as it is now being conducted;
(c) The execution, delivery and performance by the Adviser of
this Agreement are within the Adviser's powers and have been duly
authorized by all necessary action on the part of its shareholders
and/or directors, and no action by or in respect of, or filing with,
any governmental body, agency or official is required on the part of
the Adviser for the execution,
<PAGE> 6
delivery and performance by the Adviser of this Agreement, and the
execution, delivery and performance by the Adviser of this Agreement do
not contravene or constitute a default under (i) any provision of
applicable law, rule or regulation, (ii) the Adviser's governing
instruments, or (iii) any agreement, judgment, injunction, order,
decree or other instrument binding upon the Adviser;
(d) The Form ADV of the Adviser previously provided to the
Trust is a true and complete copy of the form filed with the SEC and
the information contained therein is accurate and complete in all
material respects and does not omit to state any material fact
necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading.
6. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; DUTY TO UPDATE
INFORMATION. All representations and warranties made by the Adviser pursuant to
Section 5 shall survive for the duration of this Agreement and the parties
hereto shall promptly notify each other in writing upon becoming aware that any
of the foregoing representations and warranties are no longer true.
7. LIABILITY AND INDEMNIFICATION.
------------------------------
(a) LIABILITY. In the absence of wilful misfeasance, bad faith
or gross negligence on the part of the Adviser or a reckless disregard
of its duties hereunder, the Adviser shall not be subject to any
liability to a Fund or the Trust, for any act or omission in the case
of, or connected with, rendering services hereunder or for any losses
that may be sustained in the purchase, holding or sale of Fund assets;
PROVIDED, HOWEVER, that nothing herein shall relieve the Adviser from
any of its obligations under applicable law, including, without
limitation, the federal and state securities laws.
(b) INDEMNIFICATION. The Adviser shall indemnify the Trust and
its officers and trustees, for any liability and expenses, including
attorneys fees, which may be sustained as a result of the Adviser's
wilful misfeasance, bad faith, gross negligence, reckless disregard of
its duties hereunder or violation of applicable law, including, without
limitation, the federal and state securities laws.
8. DURATION AND TERMINATION.
-------------------------
(a) DURATION. Unless sooner terminated, this Agreement shall
continue until _______________, 2000, and thereafter shall continue
automatically for successive annual periods, provided such continuance
is specifically approved at least annually by the Trust's Board of
Trustees or the vote of the lesser of (a) 67% of the shares of a Fund
represented at a meeting if holders of more than 50% of the outstanding
shares of the Fund are present in person or by proxy or (b) more than
50% of the outstanding shares of the Fund; PROVIDED that in either
event its continuance also is approved by a majority of the Trust's
Trustees who are not "interested persons" (as defined in the 1940 Act)
of any party to this Agreement, by vote cast in person at a meeting
called for the purpose of voting on such approval.
<PAGE> 7
(b) TERMINATION. Notwithstanding whatever may be provided
herein to the contrary, this Agreement may be terminated at any time,
without payment of any penalty by vote of a majority of the Trust's
Board of Trustees, or by vote of a majority of the outstanding voting
securities of a Fund, or by the Adviser, in each case, not less than
sixty (60) days' written notice to the other party.
This Agreement shall not be assigned (as such term is defined in the
1940 Act) and shall terminate automatically in the event of its assignment.
9. SERVICES NOT EXCLUSIVE. The services furnished by the Adviser
hereunder are not to be deemed exclusive, and the Adviser shall be free to
furnish similar services to others so long as its services under this Agreement
are not impaired thereby. It is understood that the action taken by the Adviser
under this Agreement may differ from the advice given or the timing or nature of
action taken with respect to other clients of the Adviser, and that a
transaction in a specific security may not be accomplished for all clients of
the Adviser at the same time or at the same price.
10. AMENDMENT. This Agreement may be amended by mutual consent of the
parties, provided that the terms of each such amendment shall be approved by the
Trust's Board of Trustees or by a vote of a majority of the outstanding voting
securities of a Fund (as required by the 1940 Act).
11. CONFIDENTIALITY. Subject to the duties of the Adviser and the Trust
to comply with applicable law, including any demand of any regulatory or taxing
authority having jurisdiction, the parties hereto shall treat as confidential
all information pertaining to a Fund and the Trust and the actions of the
Adviser and the Funds in respect thereof.
12. NOTICE. Any notice that is required to be given by the parties to
each other under the terms of this Agreement shall be in writing, delivered, or
mailed postpaid to the other party, or transmitted by facsimile with
acknowledgment of receipt, to the parties at the following addresses or
facsimile numbers, which may from time to time be changed by the parties by
notice to the other party:
(a) If to the Adviser:
Union Bank & Trust Company
5665 SW Meadow Road, Suite 400
Lake Oswego, Oregon 97035
Attention:
Facsimile:
<PAGE> 8
(b) If to the Trust:
Nationwide Investing Foundation III
Three Nationwide Plaza, 26th Floor
Columbus, OH 43215
Attention: James F. Laird, Jr.
Facsimile: (614) 249-7424
13. JURISDICTION. This Agreement shall be governed by and construed to
be in accordance with substantive laws of the State of Ohio without reference to
choice of law principles thereof and in accordance with the 1940 Act. In the
case of any conflict, the 1940 Act shall control.
14. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, all of which shall
together constitute one and the same instrument.
15. CERTAIN DEFINITIONS. For the purposes of this Agreement,
"interested person," "affiliated person," "assignment" shall have their
respective meanings as set forth in the 1940 Act, subject, however, to such
exemptions as may be granted by the SEC.
16. CAPTIONS. The captions herein are included for convenience of
reference only and shall be ignored in the construction or interpretation
hereof.
17. SEVERABILITY. If any provision of this Agreement shall be held or
made invalid by a court decision or applicable law, the remainder of the
Agreement shall not be affected adversely and shall remain in full force and
effect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first written above.
ADVISER
UNION BANK & TRUST COMPANY
By:
-------------------------------------
Name:
Title:
TRUST
NATIONWIDE INVESTING FOUNDATION III
By:
-------------------------------------
Name:
Title:
<PAGE> 9
EXHIBIT A
NATIONWIDE INVESTING FOUNDATION III
Investment Advisory Agreement
<TABLE>
<CAPTION>
Funds of the Trust Advisory Fees (applicable for each Fund)
- ------------------ ----------------------------------------
<S> <C>
Morley Capital Accumulation Fund 0.35% of the average daily net assets of the Fund
</TABLE>
<PAGE> 1
Exhibiti 5(c)(2)
SUBADVISORY AGREEMENT
---------------------
THIS AGREEMENT is made and entered into on this day of , among
Nationwide Investing Foundation III, an Ohio trust (the "Trust"), Nationwide
Advisory Services, Inc. (the "Adviser"), an Ohio corporation registered under
the Investment Advisers Act of 1940, as amended (the "Advisers Act"), and
_________________________, a _______________ corporation (the "Subadviser"),
also registered under the Advisers Act.
W I T N E S S E T H :
WHEREAS, the Trust is registered with the Securities and Exchange
Commission (the "SEC") as an open-end management investment company under the
Investment Company Act of 1940 (the "1940 Act");
WHEREAS, the Adviser has, pursuant to an Advisory Agreement with the
Trust dated as of May 9, 1998 (the "Advisory Agreement"), been retained to act
as investment adviser for certain of the series of the Trust which are listed on
Exhibit A to this Agreement (each a "Fund");
WHEREAS, the Advisory Agreement permits the Adviser to delegate certain
of its duties under the Advisory Agreement to other investment advisers, subject
to the requirements of the 1940 Act; and
WHEREAS, the Adviser desires to retain Subadviser to assist it in the
provision of a continuous investment program for that portion of the Trust's
assets which the Adviser will assign to the Subadviser (the "Subadviser
Assets"), and Subadviser is willing to render such services subject to the terms
and conditions set forth in this Agreement.
NOW, THEREFORE, the parties do mutually agree and promise as follows:
1. APPOINTMENT AS SUBADVISER. The Adviser hereby retains the Subadviser
to act as investment adviser for and to manage the Subadviser Assets subject to
the supervision of the Adviser and the Board of Trustees of the Trust and
subject to the terms of this Agreement; and the Subadviser hereby accepts such
employment. In such capacity, the Subadviser shall be responsible for the
investment management of the Subadviser Assets. It is recognized that the
Subadviser or certain of its affiliates now act, and that from time to time
hereafter may act, as investment adviser to one or more other investment
companies and to fiduciary or other managed accounts and that the Adviser and
the Trust have no objection to such activities.
2. DUTIES OF SUBADVISER.
---------------------
(a) INVESTMENTS. The Subadviser is hereby authorized and
directed and hereby agrees, subject to the stated investment policies
and restrictions of the Funds as set forth in the Funds' prospectus and
statement of additional information as currently in effect and as
1
<PAGE> 2
supplemented or amended from time to time (collectively referred to
hereinafter as the "Prospectus") and subject to the directions of the
Adviser and the Trust's Board of Trustees, to purchase, hold and sell
investments for the Subadviser Assets and to monitor on a continuous
basis the performance of the Subadviser Assets. In providing these
services, the Subadviser will conduct a continual program of
investment, evaluation and, if appropriate, sale and reinvestment of
the Subadviser Assets. The Adviser agrees to provide the Subadviser
with such assistance as may be reasonably requested by the Subadviser
in connection with its activities under this Agreement, including,
without limitation, information concerning the Funds, their funds
available, or to become available, for investment and generally as to
the conditions of the Funds' or Trust's affairs.
(b) COMPLIANCE WITH APPLICABLE LAWS AND GOVERNING DOCUMENTS.
In the performance of its duties and obligations under this Agreement,
the Subadviser shall act in conformity with the Trust's Declaration of
Trust and By-Laws and the Prospectus and with the instructions and
directions received in writing from the Adviser or the Trustees of the
Trust and will conform to and comply with the requirements of the 1940
Act, the Internal Revenue Code of 1986, as amended (the "Code"), and
all other applicable federal and state laws and regulations.
Notwithstanding the foregoing, the Adviser shall remain responsible for
ensuring each Fund's overall compliance with the 1940 Act and the Code
and the Subadviser is only obligated to comply with this subsection (b)
with respect to the Subadviser Assets. The Adviser will provide the
Subadviser with a copy of the minutes of the meetings of the Board of
Trustees of the Trust to the extent they may affect the Funds or the
duties of the Subadviser, and with copies of any financial statements
or reports made by the Funds to their shareholders, and any further
materials or information which the Subadviser may reasonably request to
enable it to perform its functions under this Agreement.
The Adviser will also provide the Subadviser with reasonable
advance notice of any change in a Fund's investment objectives,
policies and restrictions as stated in the Prospectus, and the
Subadviser shall, in the performance of its duties and obligations
under this Agreement, manage the Subadviser Assets consistent with such
changes, provided the Subadviser has received prompt notice of the
effectiveness of such changes from the Trust or the Adviser. In
addition to such notice, the Adviser shall provide to the Subadviser a
copy of a modified Prospectus reflecting such changes. The Adviser
acknowledges and agrees that the Prospectus will at all times be in
compliance with all disclosure requirements under all applicable
federal and state laws and regulations relating to the Trust or the
Funds, including, without limitation, the 1940 Act, and the rules and
regulations thereunder, and that the Subadviser shall have no liability
in connection therewith, except as to the accuracy of material
information furnished by the Subadviser to the Trust or to the Adviser
specifically for inclusion in the Prospectus. The Subadviser hereby
agrees to provide to the Adviser in a timely manner such information
relating to the Subadviser and its relationship to, and actions for,
the Trust as may be required to be contained in the Prospectus or in
the Trust's registration statement on Form N-1A.
2
<PAGE> 3
(c) VOTING OF PROXIES. The Subadviser shall have the power to
vote, either in person or by proxy, all securities in which the
Subadviser Assets may be invested from time to time, and shall not be
required to seek or take instructions from, the Adviser or a Fund or
take any action with respect thereto. If both the Subadviser and
another entity managing assets of a Fund have invested in the same
security, the Subadviser and such other entity will each have the power
to vote its pro rata share of the security.
(d) AGENT. Subject to any other written instructions of the
Adviser or the Trust, the Subadviser is hereby appointed the Adviser's
and the Trust's agent and attorney-in-fact for the limited purposes of
executing account documentation, agreements, contracts and other
documents as the Subadviser shall be requested by brokers, dealers,
counterparties and other persons in connection with its management of
the Subadviser Assets. The Subadviser agrees to provide the Adviser and
the Trust with copies of any such agreements executed on behalf of the
Adviser or the Trust.
(e) BROKERAGE. The Subadviser is authorized, subject to the
supervision of the Adviser and the Trust's Board of Trustees, to
establish and maintain accounts on behalf of the Fund with, and place
orders for the purchase and sale of the Subadviser Assets with or
through, such persons, brokers (including, to the extent permitted by
applicable law, any broker affiliated with the Subadviser) or dealers
("brokers") as the Subadviser may elect and negotiate commissions to be
paid on such transactions. The Subadviser, however, is not required to
obtain the consent of the Adviser or the Trust's Board of Trustees
prior to establishing any such brokerage account. The Subadviser shall
place all orders for the purchase and sale of portfolio investments for
the Funds' account with brokers selected by the Subadviser. In the
selection of such brokers and the placing of such orders, the
Subadviser shall seek to obtain for the Funds the most favorable price
and execution available, except to the extent it may be permitted to
pay higher brokerage commissions for brokerage and research services,
as provided below. In using its reasonable efforts to obtain for the
Funds the most favorable price and execution available, the Subadviser,
bearing in mind the best interests of each Fund at all times, shall
consider all factors it deems relevant, including price, the size of
the transaction, the breadth and nature of the market for the security,
the difficulty of the execution, the amount of the commission, if any,
the timing of the transaction, market prices and trends, the
reputation, experience and financial stability of the broker involved,
and the quality of service rendered by the broker in other
transactions. Subject to such policies as the Trustees may determine,
or as may be mutually agreed to by the Adviser and the Subadviser, the
Subadviser shall not be deemed to have acted unlawfully or to have
breached any duty created by this Agreement or otherwise solely by
reason of its having caused a Fund to pay a broker that provides
brokerage and research services (within the meaning of Section 28(e) of
the Securities Exchange Act of 1934) to the Subadviser an amount of
commission for effecting a Fund investment transaction that is in
excess of the amount of commission that another broker would have
charged for effecting that transaction if, but only if, the Subadviser
determines in good faith that such commission was reasonable in
relation to the value of the brokerage and research services provided
by such broker or
3
<PAGE> 4
dealer viewed in terms of either that particular transaction or the
overall responsibility of the Subadviser with respect to the accounts
as to which it exercises investment discretion.
It is recognized that the services provided by such brokers
may be useful to the Subadviser in connection with the Subadviser's
services to other clients. On occasions when the Subadviser deems the
purchase or sale of a security to be in the best interests of a Fund as
well as other clients of the Subadviser, the Subadviser, to the extent
permitted by applicable laws and regulations, may, but shall be under
no obligation to, aggregate the securities to be sold or purchased. In
such event, allocation of securities so sold or purchased, as well as
the expenses incurred in the transaction, will be made by the
Subadviser in the manner the Subadviser considers to be the most
equitable and consistent with its fiduciary obligations to the Funds
and to such other clients. It is recognized that in some cases, this
procedure may adversely affect the price paid or received by the FundS
or the size of the position obtainable for, or disposed of by, the
Funds.
(f) SECURITIES TRANSACTIONS. The Subadviser and any affiliated
person of the Subadviser will not purchase securities or other
instruments from or sell securities or other instruments to a Fund;
provided, however, the Subadviser and any affiliated person of the
Subadviser may purchase securities or other instruments from or sell
securities or other instruments to a Fund if such transaction is
permissible under applicable laws and regulations, including, without
limitation, the 1940 Act and the Advisers Act and the rules and
regulations promulgated thereunder.
The Subadviser, including its Access Persons (as defined in
subsection (e) of Rule 17j- 1 under the 1940 Act), agrees to observe
and comply with Rule 17j-1 and its Code of Ethics (which shall comply
in all material respects with Rule 17j-1), as the same may be amended
from time to time. On a quarterly basis, the Subadviser will either (i)
certify to the Adviser that the Subadviser and its Access Persons have
complied with the Subadviser's Code of Ethics with respect to the
Subadviser Assets or (ii) identify any violations which have occurred
with respect to the Subadviser Assets.
(g) BOOKS AND RECORDS. The Subadviser shall maintain separate
detailed records of all matters pertaining to the Subadviser Assets
(the "Funds' Records"), including, without limitation, brokerage and
other records of all securities transactions. The Subadviser
acknowledges that the Funds' Records are property of the Trust. The
Funds' Records (relating to the Subadviser Assets) shall be available
to the Adviser at any time upon reasonable request during normal
business hours and shall be available for telecopying without delay to
the Adviser during any day that the Fund is open for business.
(h) INFORMATION CONCERNING FUND INVESTMENTS AND SUBADVISER.
From time to time as the Adviser or the Trust may request, the
Subadviser will furnish the requesting party reports on portfolio
transactions and reports on Fund Investments held in the portfolio, all
in such detail as the Adviser or the Trust may reasonably request. The
Subadviser will also
4
<PAGE> 5
inform the Adviser in a timely manner of material changes in portfolio
managers responsible for Subadviser Assets, any changes in the
ownership or management of the Subadviser, or of material changes in
the control of the Subadviser. Upon reasonable request, the Subadviser
will make available its officers and employees to meet with the Trust's
Board of Trustees to review the Fund Investments.
The Subadviser will also provide such information or perform
such additional acts as are customarily performed by a subadviser and
may be required for the Trust or the Adviser to comply with their
respective obligation, the Code, the 1940 Act, the Advisers Act, and
the Securities Act of 1933, as amended (the "Securities Act"), and any
rule or regulation thereunder.
(i) CUSTODY ARRANGEMENTS. The Subadviser shall on each
business day provide the Adviser and the Trust's custodian such
information as the Adviser and the Trust's custodian may reasonably
request relating to all transactions concerning the Subadviser Assets.
(j) HISTORICAL PERFORMANCE INFORMATION. To the extent agreed
upon by the parties, the Subadviser will provide the Trust with
historical performance information on similarly managed investment
companies or for other accounts to be included in the Prospectus or for
any other uses permitted by applicable law.
3. INDEPENDENT CONTRACTOR. In the performance of its duties hereunder,
the Subadviser is and shall be an independent contractor and unless otherwise
expressly provided herein or otherwise authorized in writing, shall have no
authority to act for or represent the Fund, the Trust or the Adviser in any way
or otherwise be deemed an agent of the Fund, the Trust or the Adviser.
4. EXPENSES. During the term of this Agreement, Subadviser will pay all
expenses incurred by it in connection with its activities under this Agreement
other than the cost of securities, commodities and other investments (including
brokerage commissions and other transaction charges, if any) purchased for the
FundS. The Subadviser shall, at its sole expense, employ or associate itself
with such persons as it believes to be particularly fitted to assist it in the
execution of its duties under this Agreement. The Subadviser shall not be
responsible for the Trust's, the Fund's or Adviser's expenses, which shall
include, but not be limited to, organizational and offering expenses (which
include out-of-pocket expenses, but not overhead or employee costs of the
Subadviser); expenses for legal, accounting and auditing services; taxes and
governmental fees; dues and expenses incurred in connection with membership in
investment company organizations; costs of printing and distributing shareholder
reports, proxy materials, prospectuses, stock certificates and distribution of
dividends; charges of the Funds' custodians and sub-custodians, administrators
and sub-administrators, registrars, transfer agents, dividend disbursing agents
and dividend reinvestment plan agents; payment for portfolio pricing services to
a pricing agent, if any; registration and filing fees of the Securities and
Exchange Commission (the "SEC"); expenses of registering or qualifying
securities of the Funds for sale in the various states; freight and other
charges in connection with the shipment of the Funds'
5
<PAGE> 6
portfolio securities; fees and expenses of non-interested Trustees; salaries of
shareholder relations personnel; costs of shareholders meetings; insurance;
interest; brokerage costs; and litigation and other extraordinary or
non-recurring expenses. The Trust or the Adviser, as the case may be, shall
reimburse the Subadviser for any expenses of the Funds or the Adviser as may be
reasonably incurred by such Subadviser on behalf of the Funds or the Adviser.
The Subadviser shall keep and supply to the Trust and the Adviser reasonable
records of all such expenses.
5. COMPENSATION. For the services provided and the expenses assumed
with respect to the Funds and the Subadviser Assets pursuant to this Agreement,
the Subadviser will be entitled to the fee listed for each Fund on Exhibit A.
Such fees will be computed daily and payable no later than the seventh business
day following the end of each month, from the Adviser or the Trust, calculated
at an annual rate based on the Subadviser Assets' average daily net assets.
The method of determining net assets of a Fund for purposes hereof
shall be the same as the method of determining net assets for purposes of
establishing the offering and redemption price of the shares of that Fund as
described in the Funds' Prospectus. If this Agreement shall be effective for
only a portion of a month, the aforesaid fee shall be prorated for the portion
of such month during which this Agreement is in effect.
6. REPRESENTATIONS AND WARRANTIES OF SUBADVISER. The Subadviser
represents and warrants to the Adviser and the Trust as follows:
(a) The Subadviser is registered as an investment adviser
under the Advisers Act;
(b) The Subadviser has filed a notice of exemption pursuant to
Rule 4.14 under the Commodity Exchange Act (the "CEA") with the
Commodity Futures Trading Commission (the "CFTC") and the National
Futures Association ("NFA"), or is not required to file such exemption;
(c) The Subadviser is a corporation duly organized and validly
existing under the laws of the with the power to own and possess its
assets and carry on its business as it is now being conducted;
(d) The execution, delivery and performance by the Subadviser
of this Agreement are within the Subadviser's powers and have been duly
authorized by all necessary action on the part of its board of
directors, and no action by or in respect of, or filing with, any
governmental body, agency or official is required on the part of the
Subadviser for the execution, delivery and performance by the
Subadviser of this Agreement, and the execution, delivery and
performance by the Subadviser of this Agreement do not contravene or
constitute a default under (i) any provision of applicable law, rule or
regulation, (ii) the Subadviser's governing instruments, or (iii) any
agreement, judgment, injunction, order, decree or other instrument
binding upon the Subadviser;
6
<PAGE> 7
(e) The Form ADV of the Subadviser previously provided to the
Adviser is a true and complete copy of the form as currently filed with
the SEC and the information contained therein is accurate and complete
in all material respects and does not omit to state any material fact
necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading.
7. REPRESENTATIONS AND WARRANTIES OF ADVISER. The Adviser represents
and warrants to the Subadviser as follows:
(a) The Adviser is registered as an investment adviser under
the Advisers Act;
(b) The Adviser has filed a notice of exemption pursuant to
Rule 4.14 under the CEA with the CFTC and the NFA or is not required to
file such exemption;
(c) The Adviser is a corporation duly organized and validly
existing under the laws of the State of Ohio with the power to own and
possess its assets and carry on its business as it is now being
conducted;
(d) The execution, delivery and performance by the Adviser of
this Agreement are within the Adviser's powers and have been duly
authorized by all necessary action on the part of its shareholders or
directors, and no action by or in respect of, or filing with, any
governmental body, agency or official is required on the part of the
Adviser for the execution, delivery and performance by the Adviser of
this Agreement, and the execution, delivery and performance by the
Adviser of this Agreement do not contravene or constitute a default
under (i) any provision of applicable law, rule or regulation, (ii) the
Adviser's governing instruments, or (iii) any agreement, judgment,
injunction, order, decree or other instrument binding upon the Adviser;
(e) The Form ADV of the Adviser previously provided to the
Subadviser is a true and complete copy of the form filed with the SEC
and the information contained therein is accurate and complete in all
material respects and does not omit to state any material fact
necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading;
(f) The Adviser acknowledges that it received a copy of the
Subadviser's Form ADV prior to the execution of this Agreement; and
(g) The Adviser and the Trust have duly entered into the
Advisory Agreement pursuant to which the Trust authorized the Adviser
to enter into this Agreement.
8. REPRESENTATIONS AND WARRANTIES OF THE TRUST. The Trust represents
and warrants to the Adviser and the Subadviser as follows:
7
<PAGE> 8
(a) The Trust is a business trust duly organized and validly
existing under the laws of the State of Ohio with the power to own and
possess its assets and carry on its business as it is now being
conducted;
(b) The Trust is registered as an investment company under the
1940 Act and the Fund's shares are registered under the Securities Act;
and
(c) The execution, delivery and performance by the Trust of
this Agreement are within the Trust's powers and have been duly
authorized by all necessary action on the part of the Trust and its
Board of Trustees, and no action by or in respect of, or filing with,
any governmental body, agency or official is required on the part of
the Trust for the execution, delivery and performance by the Adviser of
this Agreement, and the execution, delivery and performance by the
Trust of this Agreement do not contravene or constitute a default under
(i) any provision of applicable law, rule or regulation, (ii) the
Trust's governing instruments, or (iii) any agreement, judgment,
injunction, order, decree or other instrument binding upon the Trust.
9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; DUTY TO UPDATE
INFORMATION. All representations and warranties made by the Subadviser, the
Adviser and the Trust pursuant to Sections 6, 7 and 8, respectively, shall
survive for the duration of this Agreement and the parties hereto shall promptly
notify each other in writing upon becoming aware that any of the foregoing
representations and warranties are no longer true.
10. LIABILITY AND INDEMNIFICATION.
------------------------------
(a) LIABILITY. The Subadviser shall exercise its best judgment
in rendering the services in accordance with the terms of this
Agreement. In the absence of wilful misfeasance, bad faith or gross
negligence on the part of the Subadviser or a reckless disregard of its
duties hereunder, the Subadviser, each of its affiliates and all
respective partners, officers, directors and employees ("Affiliates")
and each person, if any, who within the meaning of the Securities Act
controls the Subadviser ("Controlling Persons") shall not be liable for
any error of judgment or mistake of law and shall not be subject to any
expenses or liability to the Adviser, the Trust or the Funds or any of
the Funds' shareholders, in connection with the matters to which this
Agreement relates. In the absence of wilful misfeasance, bad faith or
gross negligence on the part of the Adviser or a reckless disregard of
its duties hereunder, the Adviser, any of its Affiliates and each of
the Adviser's Controlling Persons, if any, shall not be subject to any
liability to the Subadviser, for any act or omission in the case of, or
connected with, rendering services hereunder or for any losses that may
be sustained in the purchase, holding or sale of Subadviser Assets,
provided, however, that nothing herein shall relieve the Adviser and
the Subadviser from any of their obligations under applicable law,
including, without limitation, the federal and state securities laws
and the CEA.
8
<PAGE> 9
(b) INDEMNIFICATION. The Subadviser shall indemnify the
Adviser and the Trust, and their respective Affiliates and Controlling
Persons for any liability and expenses, including reasonable attorneys'
fees, which the Adviser and the Trust and their respective Affiliates
and Controlling Persons may sustain as a result of the Subadviser's
wilful misfeasance, bad faith, gross negligence, reckless disregard of
its duties hereunder or violation of applicable law, including, without
limitation, the federal and state securities laws or the CEA.
Notwithstanding any other provision in this Agreement, the Subadviser
will indemnify the Adviser and the Trust, and their respective
Affiliates and Controlling Persons for any liability and expenses,
including reasonable attorneys' fees, to which they may be subjected as
a result of their reliance upon and use of the historical performance
calculations provided by the Subadviser concerning the Subadviser's
composite account data or historical performance information on
similarly managed investment companies or accounts, except that the
Adviser and the Trust and their respective Affiliates and Controlling
Persons shall not be indemnified for a loss or expense resulting from
their negligence or willful misconduct in using such numbers, or for
their failure to conduct reasonable due diligence with respect to such
information.
The Adviser shall indemnify the Subadviser, its Affiliates and
its Controlling Persons, for any liability and expenses, including
reasonable attorneys' fees, which may be sustained as a result of the
Adviser's wilful misfeasance, bad faith, gross negligence, reckless
disregard of its duties hereunder or violation of applicable law,
including, without limitation, the federal and state securities laws or
the CEA, or as a result of any negligence or willful misconduct on the
part of the Adviser in the reliance upon and/or use of any historical
performance calculations provided by the Subadviser concerning the
Subadviser's composite account data or historical performance
information or similarly managed investment companies.
11. DURATION AND TERMINATION.
-------------------------
(a) DURATION. Unless sooner terminated, this Agreement shall
continue until __________________ , and thereafter shall continue
automatically for successive annual periods, provided such continuance
is specifically approved at least annually by the Trust's Board of
Trustees or vote of the lesser of (a) 67% of the shares of the Funds
represented at a meeting if holders of more than 50% of the outstanding
shares of the Funds are present in person or by proxy or (b) more than
50% of the outstanding shares of the Funds; provided that in either
event its continuance also is approved by a majority of the Trust's
Trustees who are not "interested persons" (as defined in the 1940 Act)
of any party to this Agreement, by vote cast in person at a meeting
called for the purpose of voting on such approval.
(b) TERMINATION. Notwithstanding whatever may be provided
herein to the contrary, this Agreement may be terminated at any time,
without payment of any penalty:
9
<PAGE> 10
(i) By vote of a majority of the Trust's Board of
Trustees, or by vote of a majority of the outstanding voting
securities of the Fund, or by the Adviser, in each case, upon
at least 60 days' written notice to the Subadviser;
(ii) By any party hereto immediately upon written
notice to the other parties in the event of a breach of any
provision of this Agreement by either of the other parties; or
(iii) By the Subadviser upon at least 60 days'
written notice to the Adviser and the Trust.
This Agreement shall not be assigned (as such term is defined in the
1940 Act) and shall terminate automatically in the event of its
assignment or upon the termination of the Advisory Agreement.
12. DUTIES OF THE ADVISER. The Adviser shall continue to have
responsibility for all services to be provided to the Trust pursuant to the
Advisory Agreement and shall oversee and review the Subadviser's performance of
its duties under this Agreement. Nothing contained in this Agreement shall
obligate the Adviser to provide any funding or other support for the purpose of
directly or indirectly promoting investments in the Trust.
13. REFERENCE TO SUBADVISER. Neither the Adviser nor any Affiliate or
agent of it shall make reference to or use the name of Subadviser or any of its
Affiliates, or any of their clients, except references concerning the identity
of and services provided by the Subadviser to the Fund, which references shall
not differ in substance from those included in the Prospectus and this
Agreement, in any advertising or promotional materials without the prior
approval of Subadviser, which approval shall not be unreasonably withheld or
delayed. The Adviser hereby agrees to make all reasonable efforts to cause the
Fund and any Affiliate thereof to satisfy the foregoing obligation.
14. AMENDMENT. This Agreement may be amended by mutual consent of the
parties, provided that the terms of any material amendment shall be approved by:
a) the Trust's Board of Trustees or by a vote of a majority of the outstanding
voting securities of the Funds (as required by the 1940 Act) and b) the vote of
a majority of those Trustees of the Trust who are not "interested persons" of
any party to this Agreement cast in person at a meeting called for the purpose
of voting on such approval, if such approval is required by applicable law.
15. CONFIDENTIALITY. Subject to the duties of the Adviser, the Trust
and the Subadviser to comply with applicable law, including any demand of any
regulatory or taxing authority having jurisdiction, the parties hereto shall
treat as confidential all information pertaining to the Fund and the actions of
the Subadviser, the Adviser and the Fund in respect thereof.
16. NOTICE. Any notice that is required to be given by the parties to
each other under the terms of this Agreement shall be in writing, delivered, or
mailed postpaid to the other parties, or
10
<PAGE> 11
transmitted by facsimile with acknowledgment of receipt, to the parties at the
following addresses or facsimile numbers, which may from time to time be changed
by the parties by notice to the other party:
(a) If to the Subadviser:
----------------------------
----------------------------
----------------------------
Attention:
-----------------
Facsimile:
-----------------
(b) If to the Adviser:
Nationwide Advisory Services, Inc.
Three Nationwide Plaza
Columbus, Ohio 43215
Attention: Christopher A. Cray
Facsimile: (614) 249-7424
(c) If to the Trust:
Nationwide Investing Foundation III
Three Nationwide Plaza
Columbus, Ohio 43215
Attention: James F. Laird, Jr.
Facsimile: (614) 249-7424
16. JURISDICTION. This Agreement shall be governed by and construed to
be consistent with the Advisory Agreement and in accordance with substantive
laws of the State of Ohio without reference to choice of law principles thereof
and in accordance with the 1940 Act. In the case of any conflict, the 1940 Act
shall control.
17. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, all of which shall
together constitute one and the same instrument.
18. CERTAIN DEFINITIONS. For the purposes of this Agreement and except
as otherwise provided herein, "interested person," "affiliated person," and
"assignment" shall have their respective meanings as set forth in the 1940 Act,
subject, however, to such exemptions as may be granted by the SEC.
11
<PAGE> 12
19. CAPTIONS. The captions herein are included for convenience of
reference only and shall be ignored in the construction or interpretation
hereof.
20. SEVERABILITY. If any provision of this Agreement shall be held or
made invalid by a court decision or applicable law, the remainder of the
Agreement shall not be affected adversely and shall remain in full force and
effect.
21. THE TRUST AND ITS TRUSTEES. The Trust is a business trust organized
under Chapter 1746, Ohio Revised Code and under a Declaration of Trust dated as
of October 30, 1997, as has been or may be amended from time to time, and to
which reference is hereby made and a copy of which is on file at the office of
the Secretary of State of Ohio as required by law, and to any and all amendments
thereto so filed or hereafter filed. The obligations of the Trust entered into
in the name or on behalf thereof by any of Nationwide Investing Foundation III
Trustees, representatives, or agents are not made individually, but only in
their capacities with respect to Nationwide Investing Foundation III. Such
obligations are not binding upon any of the Trustees, shareholders, or
representatives of the Trust personally, but bind only the assets of the Trust.
All persons dealing with any series of Shares of the Trust must look solely to
the assets of the Trust belonging to such series for the enforcement of any
claims against the Trust.
12
<PAGE> 13
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first written above.
TRUST
NATIONWIDE INVESTING FOUNDATION III
By:
----------------------------------
Name: James F. Laird, Jr.
Title: Treasurer
ADVISER
NATIONWIDE ADVISORY SERVICES, INC.
By:
----------------------------------
Name: Christopher A. Cray
Title: Treasurer
SUBADVISER
By:
----------------------------------
Name:
--------------------------------
Title:
--------------------------------
13
<PAGE> 14
EXHIBIT A
SUBADVISORY AGREEMENT
BETWEEN _________________
EFFECTIVE _______________
Funds of the Trust Advisory Fees
- ------------------ -------------
14
<PAGE> 1
Exhibit 6(a)
UNDERWRITING AGREEMENT
BETWEEN
NATIONWIDE INVESTING FOUNDATION III
AND
NATIONWIDE ADVISORY SERVICES, INC.
AGREEMENT, made as of this 9th day of May, 1998, by and between
Nationwide Investing Foundation III, an Ohio business trust (the "Trust"), and
Nationwide Advisory Services, Inc., an Ohio corporation (the "Underwriter").
W I T N E S S E T H:
WHEREAS, the Trust is engaged in business as an open-end management
investment company, as defined in the Investment Company Act of 1940 (the "1940
Act"), and is so registered with the Securities and Exchange Commission (the
"SEC") under the provisions of that Act; and
WHEREAS, it is mutually desired that the Underwriter undertake as agent
of the Trust, the sale and distribution of Shares of each of the investment
portfolios of the Trust which are listed on Schedule A to this Agreement (each a
"Fund");
NOW, THEREFORE, the parties do mutually agree and promise as follows:
1. APPOINTMENT AS UNDERWRITER. The Trust hereby appoints the
Underwriter their agent for the sale of the Shares covered by the registration
statement for the Trust. As used in this Agreement, the "registration statement"
shall refer to the Trust's current registration on Form N-1A and shall include
the prospectus (Part A), Statement of Additional Information (Part B) and Part
C, and together the current prospectus and Statement of Additional Information
shall be referred to as the "Prospectus." The Trust understands that Underwriter
is now and may in the future be the distributor of the shares of several
investment companies or series (together, "Companies") including Companies
having investment objectives similar to those of the Trust. The Trust agrees
that Distributor's duties to such Companies shall not be deemed in conflict with
its duties to the Trust under this paragraph.
2. DUTIES OF UNDERWRITER. (a) The Underwriter hereby accepts such
appointment as distributor for the sale of the Shares and agrees that it will
use its best efforts to solicit orders for the sale of the Shares and will
undertake such advertising and promotion as it believes reasonable in connection
with such solicitation. The Underwriter shall, at its own expense, finance
appropriate activities which are primarily intended to result in the sale of the
Shares, including, but not limited to, advertising, compensation of
underwriters, dealers and sales personnel, the printing and mailing of
prospectuses to other than current Shareholders, and the printing and mailing of
sales literature.
(b) In its capacity as Underwriter, Underwriter agrees to act
in conformity with the Prospectus and the Trust's Declaration of Trust and
Bylaws and with instructions received from the Trustees of the Trust and shall
conform to and comply with all applicable laws, rules and regulations,
including, without limitation, the 1940 Act, all rules and regulations
promulgated by the
<PAGE> 2
SEC thereunder and all rules and regulations adopted by any securities
association registered under the Securities Exchange Act of 1934.
(c) The Underwriter may, and when requested by the Trustees or
their representatives shall, suspend its efforts to effectuate sales of Shares
on behalf of the Trust at any time when in the opinion of the Underwriter or of
the Trustees no sales should be made because of market or other economic
considerations or abnormal circumstances of any kind. The Trust and its Trustees
may withdraw the offering of the Shares (i) at any time with the consent of the
Underwriter, or (ii) without such consent when so required by the provisions of
any statute or of any order, rule or regulation of any governmental body having
jurisdiction. It is mutually understood and agreed that the Underwriter does not
undertake to sell all or any specific portion of the Shares.
(d) The Underwriter agrees on behalf of itself and its
directors, officers and employees to treat confidentially and as proprietary
information of the Trust all records and other information relative to the Trust
and its prior, present or potential Shareholders, and not to use such records
and information for any purpose other than performance of its responsibilities
and duties hereunder, except when requested by the Trust or when requested to
divulge such information by duly constituted authorities, after prior
notification to and approval in writing by the Trust. Such approval shall not be
unreasonably withheld and may not be withheld where the Underwriter may be
exposed to civil or criminal contempt proceedings for failure to comply.
3. SALE AND PAYMENT OF SHARES. (a) The Underwriter shall have the right
to purchase Shares of the Funds at the net asset value in effect at the time
that orders for such Shares are received by the Trust or its authorized agent
and to sell such Shares at the applicable public offering price through dealers
or other persons. The public offering price for the Shares of each Fund shall
equal to the sum of (a) the net asset value per Share next computed for a Fund
by the Trust and (b) any applicable sales charge, all as set forth in the
current Prospectus for the Fund. The net asset value of the Shares shall be
determined in accordance with the provisions of the Trust's Declaration of Trust
and the Prospectus. The Trust shall allow the Underwriter as compensation for
its services the particular sales charge applicable to the Shares sold. The
Underwriter may fix the portion of the distribution charge to be allowed to
dealers and others.
(b) The Underwriter agrees that it will deliver or cause to be
delivered to the Trust or to its authorized agent, as the Trustees may direct,
an amount equal to the net asset value of Shares for which purchase orders have
been placed with and accepted by the Underwriter and shall forward to the Trust
or its authorized agent, as the Trustees may direct, all orders for the purchase
of Shares with reasonable promptness after the receipt and acceptance thereof by
the Underwriter; provided, however, that the Underwriter shall have the sole
right to accept or reject all orders for the purchase of Shares and will return
promptly any rejected order together with the consideration which accompanied
it.
4. ISSUANCE OF SHARES. The Trust reserves the right to issue, transfer
or sell Shares, which are otherwise subject to a sales charge, at net asset
value (a) in connection with the merger or consolidation of the Trust or the
Fund(s) with any other investment company or the acquisition by the Trust or the
Fund(s) of all or substantially all of the assets or of the outstanding Shares
of any
2
<PAGE> 3
other investment company; (b) in connection with a pro rata distribution
directly to the holders of Shares in the nature of a stock dividend or split;
(c) upon the exercise of subscription rights granted to the holders of Shares on
a pro rata basis; (d) in connection with the issuance of Shares pursuant to any
exchange and reinvestment privileges described in the Prospectus of a Fund; (e)
in a sale to the Trustees, employees, officers and directors of or salespersons
employed by the Underwriter and to officers, directors and employees of any
investment adviser of the Trust; and (f) otherwise in accordance with the
Prospectus of a Fund.
5. The Trust agrees as follows:
(1) to use its best efforts to maintain its registration
as a diversified open-end management investment
company under the 1940 Act, and to comply with all of
the provisions of that Act and of the rules and
regulations thereunder;
(2) to register its Shares under the Securities Act of
1933, and to use its best efforts to maintain such
registration;
(3) to prepare and file such amendments to the
registration statements and Prospectus and other
statements or reports as may be necessary to comply
with the Securities Act of 1933, the 1940 Act, and
the rules and regulations of the SEC;
(4) to furnish the Underwriter with a sufficient number
of Prospectuses to meet the Underwriter's
requirements for use in connection with sales of
Shares, and that the Underwriter will not be required
to use any prospectuses of the Trust which shall not
be in form and content satisfactory to counsel for
the Underwriter; and
(5) at the request of the Underwriter, to take such steps
as may be necessary and feasible to qualify Shares
for sale in each state, territory or dependency of
the United States of America, in the District of
Columbia and in foreign countries, in accordance with
the laws thereof, and to renew or extend any such
qualification; provided, however, that the Trust
shall not be required to qualify Shares or to
maintain the qualification of Shares in any state,
territory, dependency, district or country where they
shall deem such qualification disadvantageous to the
Trust.
6. The Underwriter agrees as follows:
(1) that the Underwriter and its officers or directors
will purchase and keep Shares only for investment
purposes;
(2) that it will not purchase Shares from the
Shareholders except as agent for the Trust;
(3) that upon the request of the Trust or its
representative it will furnish to the Trust or such
representative any information in its possession
which is pertinent to the preparation of any
registration statement, prospectus or amendment
thereto, or any report required by law or regulation;
and
(4) that neither the Underwriter nor any other person
authorized by it to solicit purchases of Shares shall
give any information or make any representations,
3
<PAGE> 4
other than those contained in the Registration
Statement or Prospectus or in any supplemental sales
literature authorized by the Trust for use in
connection with the sale of shares.
7. FEES AND EXPENSES. The Trust may pay a distribution fee to the
Underwriter determined in accordance with any applicable Distribution Plan
adopted by the Trustees and approved by the shareholders pursuant to Rule 12b-1
under the 1940 Act.
The Underwriter shall pay expenses for (i) printing and distributing
any prospectus and preparing, printing and distributing any other literature
used by the Underwriter in connection with the offering of the Shares for sale
to the public (except such expenses as may be incurred by the Trust in
connection with the preparation, printing and distribution of any Prospectus,
report or other communication to Shareholders, to the extent that such expenses
are necessarily incurred to effect compliance by the Trust with any Federal or
state law or to enable such distribution to Shareholders), and (ii) expenses of
advertising in connection with such offering. The Trust will pay or cause to be
paid (i) all fees and expenses for the issue and delivery of Shares, and (ii)
all auditing expenses of the Trust.
8. REPURCHASE OF SHARES. The Trustees hereby appoints the Underwriter
its agent to repurchase Shares, upon the written request of the Shareholders,
accompanied by the certificate or certificates representing such Shares (if
certificates for such Shares have been issued by the Trust) properly endorsed
for transfer, at the net asset value in effect at the time when the sale is
made.
9. INDEMNIFICATION. (a) The Trust agrees to indemnify, defend and hold
the Underwriter, its directors, officers and employees, and any person who
controls the Underwriter within the meaning of Section 15 of the Securities Act
("Underwriter Affiliates") free and harmless from and against any and all
claims, demands, liabilities and expenses (including the cost of investigating
or defending such claims, demands or liabilities and any counsel fees incurred
in connection therewith) which the Underwriter and the Underwriter Affiliates
may incur under the Securities Act or under common law or otherwise, arising out
of or based upon any untrue statement, or alleged untrue statement, of a
material fact contained in any registration statement or any prospectus or
arising out of or based upon any omission, or alleged omission, to state a
material fact required to be stated in either any registration statement or any
prospectus or necessary to make the statements in either thereof not misleading.
Provided, however, that the Trust's agreement to indemnify the Underwriter and
the Underwriter Affiliates shall not be deemed to cover any claims, demands,
liabilities or expenses arising out of any information or representations which
were furnished in writing to the Trust by the Underwriter, or arising out of or
based upon any omission or alleged omission to state a material fact in
connection with the giving of such information required to be stated in such
answers or necessary to make the answers not misleading; and further provided
that the Trust's agreement to indemnify Underwriter and the Underwriter
Affiliates shall not be deemed to cover any liability to the Trust or its
Shareholders to which the Underwriter would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the performance of its
duties, or by reason of the Underwriters reckless disregard of its obligations
and duties under this Agreement.
4
<PAGE> 5
(b) The Underwriter agrees to indemnify, defend and hold the
Trust, its several officers and Trustees and any person who controls the Trust
within the meaning of Section 15 of the Securities Act ("Trust Affiliates") free
and harmless from and against any and all claims, demands, liabilities and
expenses (including the costs of investigating or defending such claims, demands
or liabilities and any counsel fees incurred in connection therewith) which the
Trust and the Trust Affiliates may incur under the Securities Act or under
common law or otherwise, but only to the extent that such liability or expense
incurred by the Trust or the Trust Affiliates resulting from such claims or
demands, shall arise out of or be based upon any untrue, or alleged untrue,
statement of a material fact contained in information furnished in writing by
the Underwriter to the Trust and used in the answers to any of the items of the
registration statement or in the Prospectus, or shall arise out of or be based
upon any omission, or alleged omission, to state a material fact in connection
with such information furnished in writing by the Underwriter to the Trust
required to be stated in such answers or necessary to make such information not
misleading.
10. TERM, DURATION AND TERMINATION. The term of this Agreement shall
begin as of the date first written above (or, if a particular Fund is not in
existence on that date, the date an amendment to Schedule A to this Agreement
adding the new Fund is executed) and, unless sooner terminated as provided
herein, shall remain in effect for a period of two (2) years from that date.
Thereafter, if not terminated, this Agreement shall continue in effect from year
to year thereafter provided such continuance shall be approved at least annually
by (a) a majority of the Trustees or by the affirmative vote or written approval
of the holders of a majority of the outstanding Shares and (b) a majority of the
Trustees who are not interested persons of the Underwriter, the term "interested
person" having the meaning defined in Section 2(a)(19) of the 1940 Act. This
Agreement is terminable without penalty, on not less than sixty days prior
written notice, by the Trust's Board of Trustees, by vote of a majority of the
outstanding voting securities of the Trust or by the Underwriter. This Agreement
will also terminate automatically in the event of its assignment (as such term
is defined in the 1940 Act).
11. AMENDMENT. This Agreement may not be amended or changed in any
manner except by a written agreement executed by both the Trust and the
Underwriter.
12. JURISDICTION. This Agreement shall be governed by and in accordance
with the substantive laws of the State of Ohio without reference to choice of
law principles thereof and in accordance with the 1940 Act. In case of any
conflict, the 1940 Act shall control.
13. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS. It is
understood and is expressly stipulated that this Agreement is executed on behalf
of the Trustees of Nationwide Investing Foundation III as Trustees and not
individually and that the obligations of this Agreement are not binding upon any
of the Trustees or shareholders of the Trust individually but are binding only
upon the assets and property of the Trust.
5
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
NATIONWIDE INVESTING FOUNDATION III
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
NATIONWIDE ADVISORY SERVICES, INC.
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
6
<PAGE> 7
Dated: As of ______________
Amended Schedule A
to the
Underwriting Agreement
between Nationwide Investing Foundation III and
Nationwide Advisory Services, Inc.
Name of Fund
- --------------------------------
Nationwide Fund
Nationwide Growth Fund
Nationwide Mid Cap Growth Fund
Nationwide Bond Fund
Nationwide Tax-Free Income Fund
Nationwide Long-Term U.S. Government Bond Fund
Nationwide Intermediate U.S. Government Bond Fund
Nationwide Money Market Fund
Nationwide S&P 500 Index Fund
Prestige Large Cap Value Fund
Prestige Large Cap Growth Fund
Prestige Balanced Fund
Prestige Small Cap Fund
Prestige International Fund
NATIONWIDE INVESTING
FOUNDATION III
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
NATIONWIDE ADVISORY SERVICES, INC.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
7
<PAGE> 1
Exhibit 6(b)
UNDERWRITING AGREEMENT
BETWEEN
NATIONWIDE INVESTING FOUNDATION III
AND
PORTLAND INVESTMENT SERVICES, INC.
AGREEMENT, made as of this _____ day of _________________, 1998, by and
between Nationwide Investing Foundation III, an Ohio business trust (the
"Trust"), and Portland Investment Services, Inc., an Oregon corporation (the
"Underwriter").
W I T N E S S E T H:
WHEREAS, the Trust is engaged in business as an open-end management
investment company, as defined in the Investment Company Act of 1940 (the "1940
Act"), and is so registered with the Securities and Exchange Commission (the
"SEC") under the provisions of that Act; and
WHEREAS, it is mutually desired that the Underwriter undertake as agent
of the Trust, the sale and distribution of Shares of each of the investment
portfolios of the Trust which are listed on Schedule A to this Agreement (each a
"Fund");
NOW, THEREFORE, the parties do mutually agree and promise as follows:
1. APPOINTMENT AS UNDERWRITER. The Trust hereby appoints the
Underwriter their agent for the sale of the Shares covered by the registration
statement for the Trust. As used in this Agreement, the "registration statement"
shall refer to the Trust's current registration on Form N-1A and shall include
the prospectus (Part A), Statement of Additional Information (Part B) and Part
C, and together the current prospectus and Statement of Additional Information
shall be referred to as the "Prospectus." The Trust understands that Underwriter
is now and may in the future be the distributor of the shares of several
investment companies or series (together, "Companies") including Companies
having investment objectives similar to those of the Trust. The Trust agrees
that Distributor's duties to such Companies shall not be deemed in conflict with
its duties to the Trust under this paragraph.
2. DUTIES OF UNDERWRITER. (a) The Underwriter hereby accepts such
appointment as distributor for the sale of the Shares and agrees that it will
use its best efforts to solicit orders for the sale of the Shares and will
undertake such advertising and promotion as it believes reasonable in connection
with such solicitation. The Underwriter shall, at its own expense, finance
appropriate activities which are primarily intended to result in the sale of the
Shares, including, but not limited to, advertising, compensation of
underwriters, dealers and sales personnel, the printing and mailing of
prospectuses to other than current Shareholders, and the printing and mailing of
sales literature.
(b) In its capacity as Underwriter, Underwriter agrees to act
in conformity with the Prospectus and the Trust's Declaration of Trust and
Bylaws and with instructions received from the Trustees of the Trust and shall
conform to and comply with all applicable laws, rules and regulations,
including, without limitation, the 1940 Act, all rules and regulations
promulgated by the
<PAGE> 2
SEC thereunder and all rules and regulations adopted by any securities
association registered under the Securities Exchange Act of 1934.
(c) The Underwriter may, and when requested by the Trustees or
their representatives shall, suspend its efforts to effectuate sales of Shares
on behalf of the Trust at any time when in the opinion of the Underwriter or of
the Trustees no sales should be made because of market or other economic
considerations or abnormal circumstances of any kind. The Trust and its Trustees
may withdraw the offering of the Shares (i) at any time with the consent of the
Underwriter, or (ii) without such consent when so required by the provisions of
any statute or of any order, rule or regulation of any governmental body having
jurisdiction. It is mutually understood and agreed that the Underwriter does not
undertake to sell all or any specific portion of the Shares.
(d) The Underwriter agrees on behalf of itself and its
directors, officers and employees to treat confidentially and as proprietary
information of the Trust all records and other information relative to the Trust
and its prior, present or potential Shareholders, and not to use such records
and information for any purpose other than performance of its responsibilities
and duties hereunder, except when requested by the Trust or when requested to
divulge such information by duly constituted authorities, after prior
notification to and approval in writing by the Trust. Such approval shall not be
unreasonably withheld and may not be withheld where the Underwriter may be
exposed to civil or criminal contempt proceedings for failure to comply.
3. SALE AND PAYMENT OF SHARES. (a) The Underwriter shall have the right
to purchase Shares of the Funds at the net asset value in effect at the time
that orders for such Shares are received by the Trust or its authorized agent
and to sell such Shares at the applicable public offering price through dealers
or other persons. The public offering price for the Shares of each Fund shall
equal to the sum of (a) the net asset value per Share next computed for a Fund
by the Trust and (b) any applicable sales charge, all as set forth in the
current Prospectus for the Fund. The net asset value of the Shares shall be
determined in accordance with the provisions of the Trust's Declaration of Trust
and the Prospectus. The Trust shall allow the Underwriter as compensation for
its services any particular sales charge applicable to the Shares sold. The
Underwriter may fix the portion of the distribution charge to be allowed to
dealers and others.
(b) The Underwriter agrees that it will deliver or cause to be
delivered to the Trust or to its authorized agent, as the Trustees may direct,
an amount equal to the net asset value of Shares for which purchase orders have
been placed with and accepted by the Underwriter and shall forward to the Trust
or its authorized agent, as the Trustees may direct, all orders for the purchase
of Shares with reasonable promptness after the receipt and acceptance thereof by
the Underwriter; provided, however, that the Underwriter shall have the sole
right to accept or reject all orders for the purchase of Shares and will return
promptly any rejected order together with the consideration which accompanied
it.
4. ISSUANCE OF SHARES. The Trust reserves the right to issue, transfer
or sell Shares, which are otherwise subject to a sales charge, at net asset
value (a) in connection with the merger or consolidation of the Trust or the
Fund(s) with any other investment company or the acquisition by the Trust or the
Fund(s) of all or substantially all of the assets or of the outstanding Shares
of any
2
<PAGE> 3
other investment company; (b) in connection with a pro rata distribution
directly to the holders of Shares in the nature of a stock dividend or split;
(c) upon the exercise of subscription rights granted to the holders of Shares on
a pro rata basis; (d) in connection with the issuance of Shares pursuant to any
exchange and reinvestment privileges described in the Prospectus of a Fund; (e)
in a sale to the Trustees, employees, officers and directors of or salespersons
employed by the Underwriter and to officers, directors and employees of any
investment adviser of the Trust; and (f) otherwise in accordance with the
Prospectus of a Fund.
5. The Trust agrees as follows:
(1) to use its best efforts to maintain its registration
as a diversified open-end management investment
company under the 1940 Act, and to comply with all of
the provisions of that Act and of the rules and
regulations thereunder;
(2) to register its Shares under the Securities Act of
1933, and to use its best efforts to maintain such
registration;
(3) to prepare and file such amendments to the
registration statements and Prospectus and other
statements or reports as may be necessary to comply
with the Securities Act of 1933, the 1940 Act, and
the rules and regulations of the SEC;
(4) to furnish the Underwriter with a sufficient number
of Prospectuses to meet the Underwriter's
requirements for use in connection with sales of
Shares, and that the Underwriter will not be required
to use any prospectuses of the Trust which shall not
be in form and content satisfactory to counsel for
the Underwriter; and
(5) at the request of the Underwriter, to take such steps
as may be necessary and feasible to qualify Shares
for sale in each state, territory or dependency of
the United States of America, in the District of
Columbia and in foreign countries, in accordance with
the laws thereof, and to renew or extend any such
qualification; provided, however, that the Trust
shall not be required to qualify Shares or to
maintain the qualification of Shares in any state,
territory, dependency, district or country where they
shall deem such qualification disadvantageous to the
Trust.
6. The Underwriter agrees as follows:
(1) that the Underwriter and its officers or directors
will purchase and keep Shares only for investment
purposes;
(2) that it will not purchase Shares from the
Shareholders except as agent for the Trust;
(3) that upon the request of the Trust or its
representative it will furnish to the Trust or such
representative any information in its possession
which is pertinent to the preparation of any
registration statement, prospectus or amendment
thereto, or any report required by law or regulation;
and
(4) that neither the Underwriter nor any other person
authorized by it to solicit purchases of Shares shall
give any information or make any representations,
3
<PAGE> 4
other than those contained in the Registration
Statement or Prospectus or in any supplemental sales
literature authorized by the Trust for use in
connection with the sale of shares.
7. FEES AND EXPENSES. The Trust may pay a distribution fee to the
Underwriter determined in accordance with any applicable Distribution Plan
adopted by the Trustees and approved by the shareholders pursuant to Rule 12b-1
under the 1940 Act.
The Underwriter shall pay expenses for (i) printing and distributing
any prospectus and preparing, printing and distributing any other literature
used by the Underwriter in connection with the offering of the Shares for sale
to the public (except such expenses as may be incurred by the Trust in
connection with the preparation, printing and distribution of any Prospectus,
report or other communication to Shareholders, to the extent that such expenses
are necessarily incurred to effect compliance by the Trust with any Federal or
state law or to enable such distribution to Shareholders), and (ii) expenses of
advertising in connection with such offering. The Trust will pay or cause to be
paid (i) all fees and expenses for the issue and delivery of Shares, and (ii)
all auditing expenses of the Trust.
8. REPURCHASE OF SHARES. The Trustees hereby appoints the Underwriter
its agent to repurchase Shares, upon the written request of the Shareholders,
accompanied by the certificate or certificates representing such Shares (if
certificates for such Shares have been issued by the Trust) properly endorsed
for transfer, at the net asset value in effect at the time when the sale is
made.
9. INDEMNIFICATION. (a) The Trust agrees to indemnify, defend and hold
the Underwriter, its directors, officers and employees, and any person who
controls the Underwriter within the meaning of Section 15 of the Securities Act
("Underwriter Affiliates") free and harmless from and against any and all
claims, demands, liabilities and expenses (including the cost of investigating
or defending such claims, demands or liabilities and any counsel fees incurred
in connection therewith) which the Underwriter and the Underwriter Affiliates
may incur under the Securities Act or under common law or otherwise, arising out
of or based upon any untrue statement, or alleged untrue statement, of a
material fact contained in any registration statement or any prospectus or
arising out of or based upon any omission, or alleged omission, to state a
material fact required to be stated in either any registration statement or any
prospectus or necessary to make the statements in either thereof not misleading.
Provided, however, that the Trust's agreement to indemnify the Underwriter and
the Underwriter Affiliates shall not be deemed to cover any claims, demands,
liabilities or expenses arising out of any information or representations which
were furnished in writing to the Trust by the Underwriter, or arising out of or
based upon any omission or alleged omission to state a material fact in
connection with the giving of such information required to be stated in such
answers or necessary to make the answers not misleading; and further provided
that the Trust's agreement to indemnify Underwriter and the Underwriter
Affiliates shall not be deemed to cover any liability to the Trust or its
Shareholders to which the Underwriter would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the performance of its
duties, or by reason of the Underwriters reckless disregard of its obligations
and duties under this Agreement.
4
<PAGE> 5
(b) The Underwriter agrees to indemnify, defend and hold the
Trust, its several officers and Trustees and any person who controls the Trust
within the meaning of Section 15 of the Securities Act ("Trust Affiliates") free
and harmless from and against any and all claims, demands, liabilities and
expenses (including the costs of investigating or defending such claims, demands
or liabilities and any counsel fees incurred in connection therewith) which the
Trust and the Trust Affiliates may incur under the Securities Act or under
common law or otherwise, but only to the extent that such liability or expense
incurred by the Trust or the Trust Affiliates resulting from such claims or
demands, shall arise out of or be based upon any untrue, or alleged untrue,
statement of a material fact contained in information furnished in writing by
the Underwriter to the Trust and used in the answers to any of the items of the
registration statement or in the Prospectus, or shall arise out of or be based
upon any omission, or alleged omission, to state a material fact in connection
with such information furnished in writing by the Underwriter to the Trust
required to be stated in such answers or necessary to make such information not
misleading.
10. TERM, DURATION AND TERMINATION. The term of this Agreement shall
begin as of the date first written above (or, if a particular Fund is not in
existence on that date, for that Fund the Agreement will begin on the date an
amendment to Schedule A to this Agreement adding the new Fund is executed) and,
unless sooner terminated as provided herein, shall remain in effect for a period
of two (2) years from that date. Thereafter, if not terminated, this Agreement
shall continue in effect from year to year thereafter provided such continuance
shall be approved at least annually by (a) a majority of the Trustees or by the
affirmative vote or written approval of the holders of a majority of the
outstanding Shares and (b) a majority of the Trustees who are not interested
persons of the Underwriter, the term "interested person" having the meaning
defined in Section 2(a)(19) of the 1940 Act. This Agreement is terminable
without penalty, on not less than sixty days prior written notice, by the
Trust's Board of Trustees, by vote of a majority of the outstanding voting
securities of the Trust or by the Underwriter. This Agreement will also
terminate automatically in the event of its assignment (as such term is defined
in the 1940 Act).
11. AMENDMENT. This Agreement may not be amended or changed in any
manner except by a written agreement executed by both the Trust and the
Underwriter.
12. JURISDICTION. This Agreement shall be governed by and in accordance
with the substantive laws of the State of Ohio without reference to choice of
law principles thereof and in accordance with the 1940 Act. In case of any
conflict, the 1940 Act shall control.
13. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS. It is
understood and is expressly stipulated that this Agreement is executed on behalf
of the Trustees of Nationwide Investing Foundation III as Trustees and not
individually and that the obligations of this Agreement are not binding upon any
of the Trustees or shareholders of the Trust individually but are binding only
upon the assets and property of the Trust.
5
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
NATIONWIDE INVESTING FOUNDATION III
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
PORTLAND INVESTMENT SERVICES, INC.
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
6
<PAGE> 7
Dated: As of ______________
Schedule A
to the
Underwriting Agreement
between Nationwide Investing Foundation III and
Portland Investment Services, Inc.
Name of Fund
- --------------------------------
Morley Capital Accumulation Fund
NATIONWIDE INVESTING
FOUNDATION III
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
PORTLAND INVESTMENT SERVICES, INC.
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
7
<PAGE> 1
Exhibit 6(c)
DEALER AGREEMENT
AGREEMENT, made as of this __th day of ________, 1998, by and between Portland
Investment Services, Inc. ("Distributor") and ________________________
("Dealer") whereby Dealer agrees to participate in the distribution of
Institutional Service Class shares ("Class ISC shares") or Investor Class shares
("Class IVC shares") (collectively, the "Shares") of the Morley Capital
Accumulation Fund, a series of Nationwide Investing Foundation III (the "Fund").
1. DEALER AUTHORITY. With respect to the distribution and sales of Shares,
Dealer shall have no authority to act as agent of the Fund, Distributor
or any other dealer in any respect in these transactions. All orders
are subject to acceptance by Distributor and become effective only upon
confirmation by Distributor, and are subject to acceptance or rejection
by Distributor or the Fund in its sole discretion. Dealer shall have no
authority to make any representations concerning the Shares of the Fund
except such representations as may be contained in the Fund's current
prospectus ("Prospectus"), in its then current Statement of Additional
Information, and in such other printed information as the Fund or
Distributor may subsequently prepare or distribute to Dealer for
purposes of selling the Shares, and Dealer shall have no authority to
distribute any other sales material relating to the Fund or any of its
Shares without the prior written approval of Distributor. Dealer agrees
to follow any written guidelines of standards relating to the sale or
distribution of the ISC Class and IVC Class shares of the Fund, as well
as to follow any applicable rules or regulations affecting the sale or
distribution of shares of investment companies offering multiple
classes of shares.
2. SALES AND PRICING OF SHARES. Dealer shall offer and sell Shares at the
net asset value of the Class ISC shares or Class IVC shares of the
Fund, in accordance with the terms and conditions of the Prospectus of
the Fund. An order for the purchase of Shares shall be accepted at the
time such order is received by Distributor and at the price next
determined unless the order is otherwise rejected in accordance with
section 1 above. In addition, Distributor will not accept any order
from Dealer which is placed on a conditional basis or subject to any
delay or contingency prior to execution. Dealer shall place orders for
Shares only with Distributor and shall promptly transmit all orders to
Distributor in time for processing at the price next determined after
receipt of the order by Dealer, in accordance with the Prospectus of
the Fund. Distributor shall confirm the transaction with Dealer's
customer in writing. Prices of the Shares are computed by the Fund in
accordance with its Prospectus.
3. DEALER COMPENSATION. Distributor will pay Dealer the compensation which
is paid by the Fund pursuant to a Rule 12b-1 Plan under the Investment
Company Act of 1940 and Rule 2830 of the Rules of Conduct of the
National Association of Securities Dealers, Inc. ("NASD"). Dealer shall
not share or rebate any portion of such compensation to a person who is
not a broker or dealer actually engaged in the securities business and
is not a member in good standing of the NASD.
<PAGE> 2
4. OTHER DUTIES OF DEALER. Dealer will maintain records of all sales,
redemptions and repurchases of Shares and will furnish the Distributor
with such records on request. Dealer will also distribute prospectuses
and report to its customers in compliance with applicable legal
requirements unless the parties expressly agree that Distributor will
do so on Dealer's behalf.
5. DEALER AUTHORIZATION. Dealer hereby authorizes Distributor to act as
its agent in connection with all transactions in shareholder accounts
for which Dealer is designated as Dealer of Record. All designations of
Dealer of Record and all authorizations of Distributor to act as
Dealer's agent shall cease upon the termination of this Agreement or
upon the shareholders' instructions to transfer his or her account to
another Dealer of Record.
6. PAYMENT FOR SHARES. Payment for all Shares purchased from Distributor
by Dealer shall be received by Distributor within three business days
after acceptance of Dealer's order. If such payment is not so received
by Distributor, Distributor and the Fund reserve the right, without
notice, to immediately cancel the sale, or, at Distributor's option, to
sell the Shares ordered by Dealer back to the Fund in which latter
case, Distributor may hold Dealer responsible for any loss, including
the loss of profit, suffered by Distributor or by the Fund resulting
from Dealer's failure to make payment as described above.
7. PURCHASE OF SHARES. Dealer shall purchase Shares of the Fund only from
Distributor or from Dealer's customers. If Dealer purchases Shares from
Distributor, Dealer agrees that all such purchases shall be made only
to cover orders already received by Dealer from its customers, or for
Dealer's own bona fide investment without a view to resale. If Dealer
purchases Shares from its customers, Dealer agrees to pay such
customers the applicable net asset value per share less any redemption
charge that would be applicable if such Shares were then tendered for
redemption in accordance with the applicable Prospectus ("Repurchase
Price").
8. LIMITATION ON SALE OF SHARES. Dealer shall sell Shares only:
(a) to Dealer's customers at the prices described in section 2
above; or
(b) to Distributor as agent for the Fund at the Repurchase Price.
In such a sale to Distributor, Dealer may act either as
principal for its own account or as agent for its customer. If
Dealer acts as principal for its own account in purchasing
Shares for resale to Distributor, Dealer agrees to pay its
customer not less than nor more than the Repurchase Price
which Dealer received from Distributor. If Dealer acts as
agent for its customer in selling Shares to Distributor,
Dealer agrees not to charge its customer more than a fair
commission for handling the transaction.
9. DEALER'S REPRESENTATIONS AND WARRANTIES. Dealer hereby represents and
warrants to Distributor that:
2
<PAGE> 3
(a) Dealer is willing and possesses the legal authority to provide
the services contemplated by this Agreement without violation
of applicable laws;
(b) Dealer is and shall remain throughout the term of this
Agreement a member in good standing of the NASD and shall
immediately notify Distributor should it cease to be a member
of the NASD;
(c) Dealer is and shall remain throughout the term of this
Agreement a broker-dealer duly and properly registered and
qualified under all applicable laws, rules and regulations,
including, but not limited to, all state and federal
securities laws, rules and regulations, as may be necessary or
appropriate for Dealer to perform and observe all of its
duties, obligations and covenants set forth or contemplated by
this Agreement;
(d) Dealer shall throughout the term of this Agreement comply with
the requirements of all applicable laws, rules and
regulations, including, but not limited to, federal and state
securities laws, the rules, regulations and orders of the
Securities and Exchange Commission and the NASD, in performing
and observing all of its duties, obligations and covenants set
forth or contemplated by this Agreement; and
(e) Dealer shall not withhold placing with Distributor orders
received from Dealer's customers so as to profit from such
withholding.
10. INDEMNIFICATION. Dealer shall indemnify and hold harmless Distributor,
its affiliates and the Fund against any losses, claims, damages,
liabilities or expenses (including reasonable attorneys' fees and
expenses) resulting from (a) any negligence or misfeasance of Dealer or
any of its officers, directors, employees or registered
representatives; or (b) any violation of any law, rule or regulation or
any failure to perform or observe any obligations of Dealer set forth
in this Agreement by Dealer or any of its officers, directors,
employees or registered representatives.
11. PROVISION OF SALES MATERIAL. Distributor shall deliver to Dealer
without charge reasonable quantities of the Fund's Prospectuses with
any supplements thereto currently in effect, copies of current
shareholder reports of the Fund, and sales material issued by
Distributor from time to time.
12. RULE 12B-1 AGREEMENT; TERMINATION. This Agreement is a related
agreement under the Distribution Plan applicable for the Fund ("Rule
12b-1 Plan"), as adopted pursuant to Rule 12b-1 under the 1940 Act.
This Agreement may be terminated as to the payments made by the Fund
under the Rule 12b-1 Plan at any time, without the payment of any
penalty, by the vote of a majority of the members of the Board of
Trustees of Nationwide Investing Foundation III ("NIF III") who are not
interested persons of NIF III and who have no direct or indirect
financial interest in the operation of the Rule 12b-1 Plan or in any
related agreements to the Rule 12b-1 Plan ("Disinterested Trustees") or
by a majority of the
3
<PAGE> 4
outstanding ISC Class shares or IVC Class shares, each with respect its
own class, upon delivery of written notice thereof to the parties to
this Agreement.
This Agreement will terminate automatically in the event of its
assignment as defined in the 1940 Act or upon termination of the
Distributer underwriting agreement with the Fund. In addition, either
the Distributor or Dealer may terminate this Agreement upon at least 60
days written notice to the other party.
13. COMPLETE AGREEMENT. This Agreement supersedes and cancels any prior
agreement with respect to the sale of Shares of the Fund and may be
amended at any time and from time to time by written agreement of the
parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers as of the day and year first written above.
PORTLAND INVESTMENT SERVICES, INC.
------------------------------------
By:
DEALER
------------------------------------
By:
4
<PAGE> 1
Exhibit 9(a)
FUND ADMINISTRATION AGREEMENT
This Fund Administration Agreement is made as of this 9th day of May, 1998,
between Nationwide Investing Foundation III, an Ohio business trust (the
"Trust"), and Nationwide Advisory Services, Inc., an Ohio corporation, (the
"Administrator").
WHEREAS, the Trust is an Ohio business trust, which operates as an open-end
management investment company and is registered under the Investment Company Act
of 1940, as amended (the "Investment Company Act"); and
WHEREAS, the Trust desires to retain the Administrator to provide certain
administrative and fund accounting services described below with respect to
certain of the series of the Trust (the "Funds"), each of which as are now, or
may hereafter be, listed on Exhibit A to this Agreement, and the Administrator
is willing to render such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants set forth
herein, the parties hereto agree as follows:
1. APPOINTMENT OF ADMINISTRATOR. The Trust hereby appoints the
Administrator as administrator of the Funds on the terms and conditions
set forth in this Agreement; and the Administrator hereby accepts such
appointment and agrees to perform the services and duties set forth in
Section 2 of this Agreement in consideration of the compensation
provided for in Section 4 hereof.
2. SERVICES AND DUTIES. As Administrator, and subject to the supervision
and control of the Trust's Board of Trustees, the Administrator will
provide facilities, equipment, and personnel to carry out the following
administrative and fund accounting services for operation of the
business and affairs of the Trust and each of the Funds covered by this
Agreement:
a. prepare, file, and maintain the Trust's governing documents,
including the Declaration of Trust, the Bylaws, minutes of
meetings of Trustees and shareholders, and proxy statements
for meetings of shareholders;
b. prepare and file on a timely basis with the Securities and
Exchange Commission and the appropriate state securities
authorities the registration statements for the Trust,
relating to the Funds and the Funds' shares, and all
amendments thereto, the Trust's reports pursuant to Investment
Company Act Rule 24f-2, reports to shareholders and regulatory
authorities, including form N-SAR, and prospectuses, proxy
statements, and such other documents as may be necessary or
convenient to enable the Trust to make continuous offering of
the Fund's shares and to conduct its affairs;
c. prepare, negotiate, and administer contracts on behalf of the
Funds with, among others, the Trust's custodian and transfer
agent;
d. supervise the Trust's custodian;
<PAGE> 2
e. calculate performance data of the Funds;
f. prepare and file on a timely basis the Federal and State
income and other tax returns for the Funds;
g. examine and review the operations of the Trust's custodian,
transfer agent and investment adviser and the Funds'
subadvisers, if any, to promote compliance with applicable
state and federal law;
h. coordinate the layout and printing of publicly disseminated
prospectuses and reports;
i. perform internal audit examinations in accordance with
procedures to be adopted by the Administrator and the Trust;
j. assist with the design, development, and operation of the
Funds;
k. provide individuals reasonably acceptable to the Trust's Board
of Trustees for nomination, appointment, or election as
officers of the Trust, who will be responsible for the
management of certain of the Trust's affairs as determined by
the Trust's Board of Trustees;
l. monitor the Trust's compliance with Section 817 and Sections
851 through 855 of the Internal Revenue Code of 1986, as
amended, and the regulations promulgated thereunder, so as to
enable the Trust and each Fund to comply with the
diversification requirements applicable to investments of
variable contracts and for each to maintain its status as a
"regulated investment company;"
m. advise the Trust and its Board of Trustees on matters
concerning the Funds and their affairs;
n. provide the Trust with office space and personnel; and
o. provide the Trust and each Fund with fund accounting services,
including but not limited to the following services:
1) keeping and maintaining the following books and
records of the Trust and each of the Funds pursuant
to Rule 31a-1 under the Investment Company Act,
including:
a) journals containing an itemized daily record
of all purchase and sales of securities, all
receipts and disbursements of cash and all
other debit and credits, as required by Rule
31a-1(b)(1);
2
<PAGE> 3
b) general and auxiliary ledgers reflecting all
asset, liability, reserve, capital, income
and expense accounts, including interest
accrued and interest received, as required
by Rule 31a-1(b)(2)(i);
c) separate ledger accounts required by Rule
31a-1(b)(2)(ii) and (iii); and
d) a monthly trial balance of all ledger
accounts (except shareholder accounts) as
required by Rule 31a-1(b)(8).
2) performing the following accounting services on a
regular basis for each Fund, as may be reasonably
requested by the Trust:
a) calculate the net asset value per share;
b) calculate the dividend and capital gain
distribution, if any;
c) calculate a Fund's yield;
d) reconcile cash movements with the Trust's
custodian;
e) affirm to the Trust's custodian all
portfolio trades and cash movements;
f) verify and reconcile with the Trust's
custodian all daily trade activity;
g) provide such reports as may be required by
the Trust;
h) preparation of the Trust's financial
statements, including oversight of expense
accruals and payments;
(i) calculating the deviation between
marked-to-market and amortized cost
valuations for any money market funds; and
h) such other similar services with respect to
a Fund as may be reasonably requested by the
Trust; and
p. assist in all aspects of the Funds' operations other than
those provided under other specific contracts.
The foregoing, along with any additional services that the
Administrator shall agree in writing to perform for the Trust
hereunder, shall hereafter be referred to as "Administrative Services."
In compliance with the requirements of Rule 31a-3 under the Investment
Company Act, the Administrator hereby agrees that all records that it
maintains for the Trust are the property
3
<PAGE> 4
of the Trust and further agrees to surrender promptly to the Trust any
of such records upon the Trust's request. The Administrator further
agrees to preserve for the periods prescribed by Investment Company Act
Rule 31a-2 the records required to be maintained by Investment Company
Act Rule 31a-1. Administrative Services shall not include any duties,
functions, or services to be performed for the Trust by the Trust's
investment adviser, custodian, or transfer agent pursuant to their
agreements with the Trust.
The Administrator acknowledges the importance of efficient and prompt
transmission of information to the life insurance companies affiliated
with the Administrator ("Nationwide"), the purchaser of Trust shares to
fund the obligations of certain variable annuity contracts. The
Administrator agrees to use its best efforts to meet the deadline for
transmission of pricing information presently set by Nationwide and
such other time deadlines as may be established from time to time in
the future.
When performing Administrative Services to the Trust and for the Funds,
the Administrator will comply with the provisions of the Declaration of
Trust and Bylaws of the Trust, will safeguard and promote the welfare
of the Trust and the Funds, and will comply with the policies that the
Trustees may from time to time reasonably determine, provided that such
policies are not in conflict with this Agreement, the Trust's governing
documents, or any applicable statutes or regulations.
3. EXPENSES. The Administrator shall be responsible for expenses incurred
in providing all the Administrative Services to the Trust, including
the compensation of the Administrator's employees who serve as officers
of the Trust, except that the Trust shall reimburse the Administrator
for the cost of the pricing services that the Administer utilizes. The
Trust (or the Trust's investment adviser) shall be responsible for all
other expenses of the Trust, including without limitation: (i)
investment advisory and subadvisory fees; (ii) interest and taxes;
(iii) brokerage commissions and other costs in connection with the
purchase or sale of securities and other investment instruments; (iv)
fees and expenses of the Trust's trustees, other than those who are
"interested persons" of the Administrator or investment adviser of the
Trust; (v) legal and audit expenses; (vi) custodian and transfer and
dividend disbursing agent fees and expenses; (vii) fees and expenses
related to the registration and qualification of the Trust and the
Trust's shares for distribution under state and federal securities
laws; (viii) expenses of printing and mailing reports and notices and
proxy material to beneficial shareholders of the Trust; (ix) all other
expenses incidental to holding meetings of the Trust's shareholders,
including proxy solicitations therefor; (x) insurance premiums for
fidelity and other coverage; (xi) association membership dues; (xii)
such nonrecurring or extraordinary expenses as may arise, including
those relating to actions, suits or proceedings to which the Trust is a
party and the legal obligation which the Trust may have to indemnify
the Trust's trustees and officers with respect thereto.
4. COMPENSATION. For the Administrative Services provided, the Trust
hereby agrees to pay and the Administrator hereby agrees to accept as
full compensation for its services rendered
4
<PAGE> 5
hereunder the administrative fee listed for each Fund on Exhibit A.
Such fees will be computed daily and payable monthly at an annual rate
based on a Fund's average daily net assets and will be paid monthly as
soon as practicable after the last day of each month.
In case of termination of this Agreement during any month, the
administrative fee for that month shall be reduced proportionately on
the basis of the number of business days during which it is in effect,
and the fee computed upon the average net assets for the business days
it is so in effect for that month.
5. RESPONSIBILITY OF ADMINISTRATOR.
--------------------------------
a. The Administrator shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the
Trust in connection with the matters to which this Agreement
relates, except a loss resulting from willful misfeasance, bad
faith or negligence on its part in the performance of its
duties or from reckless disregard by it of its obligations and
duties under this Agreement. Any person, even though also an
officer, director, partner, employee or agent of the
Administrator, who may be or become an officer or trustee of
the Trust, shall be deemed, when rendering services to the
Trust or acting on any business of the Trust (other than
services or business in connection with the duties of the
Administrator hereunder) in accordance with his
responsibilities to the Trust as such officer or trustee, to
be rendering such services to or acting solely for the Trust
and not as an officer, director, partner, employee or agent or
one under the control or direction of the Administrator even
through paid by the Administrator.
b. The Administrator shall be kept indemnified by the Trust and
be without liability for any action taken or thing done by it
in performing the Administrative Services in accordance with
the above standards; provided, however, that the Trust will
not indemnify the Administrator for the portion of any loss or
claim caused, directly or indirectly, by the negligence,
wilfull misfeasance or bad faith of the Administrator or by
the Administrator's reckless disregard of its duties and
obligations hereunder. In order that the indemnification
provisions contained in this Section 5 shall apply, however,
it is understood that if in any case the Trust may be asked to
indemnify or save the Administrator harmless, the Trust shall
be fully and promptly advised of all pertinent facts
concerning the situation in question, and it is further
understood that the Administrator will use all reasonable care
to identify and notify the Trust promptly concerning any
situation which presents or appears likely to present the
probability of such a claim for indemnification against the
Trust. The Trust shall have the option to defend the
Administrator against any claim which may be the subject of
this indemnification. In the event that the Trust so elects it
will so notify the Administrator and thereupon the Trust shall
take over complete defense of the claim, and the Administrator
shall in such situation initiate no further legal or other
expenses for which it shall seek indemnification under this
Section. The Administrator shall in
5
<PAGE> 6
no case confess any claim or make any compromise or settlement
in any case in which the Trust will be asked to indemnify the
Administrator except with the Trust's written consent.
6. DURATION AND TERMINATION.
-------------------------
a. This Agreement shall become effective as of the date first
written above. The Agreement may be terminated at any time,
without payment of any penalty, by either party upon 90 days'
advance written notice to the other party. The Agreement may
also be terminated immediately upon written notice to the
other party in the event of a material breach of any provision
of this Agreement by such other party.
b. Upon the termination of this Agreement, the Trust shall pay to
the Administrator such compensation as may be payable prior to
the effective date of such termination. In the event that the
Trust designates a successor to any of the Administrator's
obligations hereunder, the Administrator shall, at the
direction of the Trust, transfer to such successor all
relevant books, records and other data established or
maintained by the Administrator under the foregoing
provisions.
7. AMENDMENT. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing
signed by the party against which an enforcement of the change, waiver,
discharge or termination is sought.
8. NOTICES. Notices of any kind to be given to the Trust hereunder by the
Administrator shall be in writing and shall be duly given if delivered
to the Trust and to its investment adviser at the following address:
Nationwide Investing Foundation III
Three Nationwide Plaza
Columbus, Ohio 43215
Attn: James F. Laird, Treasurer
Notices of any kind to be given to the Administrator hereunder by the
Trust shall be in writing and shall be duly given if delivered to the
Administrator at:
Nationwide Advisory Services, Inc.
Three Nationwide Plaza
Columbus, Ohio 43215
Attn: James F. Laird, Vice President and General Manager
9. MISCELLANEOUS. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of
the provisions hereof or otherwise affect their construction or effect.
If any provision of this Agreement shall be held or made invalid by a
6
<PAGE> 7
court or regulatory agency decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby. Subject to
the provisions of Section 5, hereof, this Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their
respective successors. This Agreement shall be governed by and
construed to be in accordance with substantive laws of the State of
Ohio without reference to choice of law principles thereof and in
accordance with the 1940 Act. In the case of any conflict, the 1940 Act
shall control.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
NATIONWIDE ADVISORY SERVICES, INC.
By:
-------------------------------------
Vice President and General Manager
NATIONWIDE INVESTING FOUNDATION III
By:
------------------------------------
7
<PAGE> 8
AMENDED EXHIBIT A
NATIONWIDE INVESTING FOUNDATION III
Fund Administration Agreement
<TABLE>
<CAPTION>
Funds of the Trust Fund Administration Fees
- ------------------ ------------------------
<S> <C>
Nationwide Fund For each of the Nationwide Funds
Nationwide Growth Fund and the Morley Capital Accumulation
Nationwide Mid Cap Growth Fund Fund,
Nationwide Bond Fund 0.07% on assets up to$250 million
Nationwide Tax-Free Income Fund 0.05% on assets of $250 million and
Nationwide Long-Term U.S. Government Bond Fund more but less than $1 billion
Nationwide Intermediate U.S. Government Bond Fund 0.04% on assets of $1 billion and more
Nationwide Money Market Fund (effective October 1, 1998) For the Morley Capital Accumulation
Morley Capital Accumulation Fund Fund, the fee is subject to a $50,000
minimum per year
Nationwide S&P 500 Stock Index Fund For the S&P 500 Index Fund,
0.05% on assets up to $1 billion
0.04% on assets of $1 billion and more
Prestige Large Cap Value Fund (effective November 1, 1998) For each of the Prestige Funds,
Prestige Large Growth Fund (effective November 1, 1998) 0.10% on assets up to $250 million
Prestige Small Cap Fund (effective November 1, 1998) 0.06% on assets of $250 million
Prestige Balanced Fund (effective November 1, 1998) and more but less than $1 billion
Prestige International Fund (effective November 1, 1998) 0.04% on assets of $1 billion and more
(the "Prestige Funds") For each Prestige Fund, the fee is subject
to a $75,000 minimum per year
</TABLE>
8
<PAGE> 1
Exhibit 9(b)
TRANSFER AND DIVIDEND DISBURSING AGENT AGREEMENT
BETWEEN
NATIONWIDE INVESTING FOUNDATION III
AND
NATIONWIDE INVESTORS SERVICES, INC.
This Transfer and Dividend Disbursing Agent Agreement ("Agreement"),
made this ______ day of __________________, ______, by and between Nationwide
Investing Foundation III, an Ohio business trust, hereinafter called the
("Trust") and Nationwide Investors Services, Inc., an Ohio corporation
hereinafter called the ("Agent").
WITNESSETH:
-----------
WHEREAS, the Trust desires to enter into a Transfer and Dividend
Disbursing Agent Agreement with the Agent under which Agent will provide the
services as set forth in detail in this Agreement and the Agent is desirous of
providing such services upon the terms and conditions hereinafter provided; and
WHEREAS, Trust is an open-end management investment company and is or
will be so registered under the Investment Company Act of 1940, as amended, and
has or will have registered its shares for public offering under the Securities
Act of 1933; and
NOW, THEREFORE, in consideration of the mutual covenants and promises
herein contained, it is agreed as follows:
1. The Agent shall act as Transfer Agent for the Trust and in
this capacity, the Agent shall:
a. maintain the current name and address,
issuance date, and number of shares and
fractional shares owned by all shareholders
of the Trust;
b. deposit and process all investments on a
daily basis;
c. establish new accounts;
d. process and mail redemption checks including
Systematic Withdrawal Plan checks;
e. examine and process all legal changes in
share registrations and transfers of
ownership;
<PAGE> 2
f. respond to inquiries from investors and
representatives selling shares of the Trust;
g. prepare and mail confirmation statements.
2. The Agent shall act as the Dividend Disbursing Agent and shall:
a. calculate the shareholders' dividends and
capital gains distributions;
b. prepare and mail dividend and capital gains
distribution checks;
c. cause reinvestment of such dividends and
capital gains where required
d. prepare and mail dividend and capital gains
distribution confirmations.
3. The Agent shall also:
a. address and mail semi-annual reports, annual
reports and prospectuses;
b. prepare and mail all necessary reports to
investors, State and Federal authorities,
including Federal Form 1099, 1042, and
1042S;
c. issue replacement checks and maintain a
"Stop Payment" file;
d. solicit taxpayer identification numbers;
e. provide comprehensive accounting controls
and reconciliations of all cash flow.
4. The Agent agrees to act in good faith in furnishing the
services provided for herein and shall at all times maintain a
staff of trained personnel for the purpose of performing its
obligations under the Agreement. The Agent assumes no
responsibility under this Agreement other than to render the
services called for hereunder in good faith. Anything herein
to the contrary notwithstanding, Trust hereby agrees that
while Agent has sole responsibility for performance of its
obligations under this Agreement, any or all duties of Agent
may be performed from time to time by one or more third
parties as Agent, in its discretion, shall select, provided
that Trust shall be notified of all contracts between Agent
and such third party or parties and provided copies thereof
upon request.
5. The Agent agrees that in all matters relating to the services
to be performed by it hereunder, it will use its best efforts
to act in conformity with the terms of the Declaration of
Trust, Bylaws, Code of Ethics, Registration Statements and
current Prospectuses of the Trust. Each of the parties agree
that in all matters relating to the performance of this
Agreement, it will use its best efforts to conform to and
comply
<PAGE> 3
with the requirements of the Investment Company Act of 1940
and all other applicable Federal, State or other laws and
regulations. Nothing herein contained shall be deemed to
relieve or deprive the Board of Trustees of the Trust of its
responsibility for and control of the conduct of the affairs
of the Trust.
6. The services of the Agent as provided herein are not to be
deemed to be exclusive, and it shall be free to render
services of any kind to any other group, firm, individual or
association, and to engage in other business or activity.
7. This Agreement, including Exhibit A hereto, may be amended at
any time by mutual written consent of the parties.
8. This Agreement may be terminated by either party hereto upon
sixty (60) days written notice given by one to the other,
provided that no such notice of termination given by the Agent
to the Trust shall be effective unless and until a substitute
person or entity has been engaged by the Trust to perform the
services required hereunder for the Trust, or the Trust has
certified to the Agent that other arrangements have been made
by it to provide such services.
9. For its services specified above, the Trust shall pay to the
Agent fees as provided in Exhibit A which is attached hereto
and made a part hereof.
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.
NATIONWIDE INVESTING
FOUNDATION III
Attest:
- -------------------------------- -----------------------------------
David E. Simaitis
Secretary James F. Laird, Jr.
Treasurer
NATIONWIDE INVESTORS SERVICES, INC.
Attest:
- -------------------------------- -----------------------------------
David E. Simaitis Christopher A. Cray
Secretary Treasurer
<PAGE> 4
EXHIBIT A
REVISED SCHEDULE OF FEES
Funds of the Trust
- ------------------
Nationwide Mid Cap Growth Fund
Nationwide Growth Fund
Nationwide Fund
(the "Nationwide Equity Funds")
Nationwide Bond Fund
Nationwide Tax-Free Income Fund
Nationwide Long-Term U.S. Government Bond Fund
Nationwide Intermediate U.S. Government Bond Fund
(the "Nationwide Fixed Income Funds")
(collectively, the "Nationwide Funds")
Nationwide Money Market Fund
Nationwide S&P 500 Index Fund
Morley Capital Accumulation Fund
Prestige Large Cap Value Fund
Prestige Large Cap Growth Fund
Prestige Small Cap Fund
Prestige Balanced Fund
Prestige International Fund
(the "Prestige Funds")
For the services specified in the Agreement, the Trust shall pay the Agent the
sum of:
$16.00 per account for Class A, Class B and Class D Shares of the
Nationwide Equity Funds per annum; and Class A and Class B Shares of
the Prestige Funds per annum;
$18.00 per account for Class A, Class B and Class D Shares of the
Nationwide Fixed Income Funds per annum;
$27.00 per account for the Nationwide Money Market Fund;
to be computed monthly, based on the number of accounts as shown on the books of
each class of each Fund at each month-end.
<PAGE> 5
In addition, for the services specified in the Agreement, the Trust shall pay
the Agent an annual fee, computed daily and payable monthly, of 0.01% of average
daily net assets of the Local Fund Shares of the Nationwide S&P 500 Index Fund,
the Class Y Shares of the Prestige Funds and the Institutional Service Class
shares, Institutional Class shares and Investor Class shares of the Morley
Capital Accumulation Fund.
The fees listed above becomes are payable on or before the 10th of each
suceeding month.
In addition, the Trust shall pay the Agent reimbursement for the out-of-pocket
expenses, including postage, telephone, forms, supplies and counsel.
Special extraordinary projects shall be performed by the Agent at rates to be
determined and agreed upon by parties, based on time and effort involved.
AGREED TO AND ACCEPTED BY:
NATIONWIDE INVESTING
FOUNDATION III
Dated as of: By:
----------- --------------------------------
James F. Laird, Jr., Treasurer
NATIONWIDE INVESTORS
SERVICES, INC.
By:
--------------------------------
Christopher A. Cray, Treasurer
<PAGE> 1
Exhibit 9(f)
Administrative Services Plan
----------------------------
SECTION 1. This Administrative Services Plan (the "Plan") constitutes
the administrative services plan for the Class Y Shares of the Prestige Large
Cap Value Fund, Prestige Large Cap Growth Fund, Prestige Small Cap Fund,
Prestige Balanced Fund, Prestige International Fund (the "Prestige Funds") and
for the Institutional Service Class and the Investor Class of the Morley Capital
Appreciation Fund (the "Morley Fund") (collectively, the "Funds"), each a series
of Nationwide Investing Foundation III (the "Trust"), and is adopted upon review
and approval by the Board of Trustees of the Trust.
SECTION 2. Upon the recommendation of the administrator of the Funds,
any officer of a Fund is authorized to execute and deliver, in the name and on
behalf of the Fund, written agreements in substantially the form attached hereto
as Appendix A or in any other form duly approved by the Board of Trustees of the
Trust ("Servicing Agreements") with financial institutions which are
shareholders of record or which have a servicing relationship ("Service
Organizations") with the beneficial owners of a class of a Fund's shares of
beneficial interest ("Shares"). Such Servicing Agreements shall require the
Service Organizations to provide administrative support services as set forth
therein and as described in a Fund's applicable Prospectus to their customers
who own of record or beneficially Shares. In consideration for providing such
services, a service organization will receive a fee, computed daily and paid
monthly in the manner set forth in the Servicing Agreements, at the annual rate
of up to 0.15% of the average daily net asset value of the Institutional
Services Class Shares and Investor Class Shares of the Morley Fund and up to
0.25% of the average daily net asset value of the Class Y Shares of the Prestige
Funds owned of record or beneficially by such customers. Any bank, trust
company, thrift institution, broker-dealer, insurance company or other financial
institution is eligible to become a Service Organization and to receive fees
under this Plan. All expenses incurred by a Fund with respect to its Shares in
connection with the Servicing Agreements and the implementation of this Plan
shall be borne entirely by the holders of Shares of that Fund.
SECTION 3. So long as this Plan is in effect, the administrator shall
provide to a Fund's Board of Trustees, and the Trustees shall review, at least
quarterly, a written report of the amounts expended pursuant to this Plan and
the purposes for which such expenditures were made.
SECTION 4. The Plan shall not take effect with respect to the Shares of
a Fund until it has been approved, together with the form of the Servicing
Agreements, by a vote of a majority of the Trustees who are not "interested
persons" of that Fund (as defined in the Investment Company Act of 1940) and who
have no direct or indirect financial interest in the operation of this Plan or
in any agreements related to this Plan (the "Disinterested Trustees"), cast in
person at a meeting called for the purpose of voting on the Plan or such
Servicing Agreement, PROVIDED, however, that the Plan is not implemented prior
to the effective date of the post-effective amendment to a Fund's registration
statement describing the Plan and its implementation with respect to that Fund.
1
<PAGE> 2
SECTION 5. Unless sooner terminated, this Plan shall continue until
_____________, 1999, and thereafter, shall continue automatically for successive
annual periods provided such continuance is approved at least annually by a
majority of the Board of Trustees, including a majority of the Disinterested
Trustees.
SECTION 6. This Plan may be amended at any time with respect to a Fund
by the Board of Trustees, provided that any material amendments of the terms of
this Plan shall become effective only upon the approvals set forth in Section 4.
SECTION 7. This Plan is terminable at any time with respect to the Fund
by vote of a majority of the Disinterested Trustees.
SECTION 8. While this Plan is in effect, the selection and nomination
of those Disinterested Trustees shall be committed to the discretion of the
Disinterested Trustees of the Trust.
SECTION 9. This Plan has been adopted as of _____________, 1998, and
was effective _____________, 1998.
SECTION 10. The Trust is a business trust organized under Chapter 1746,
Ohio Revised Code and under a Declaration of Trust, to which reference is hereby
made and a copy of which is on file at the office of the Secretary of State of
Ohio as required by law, and to any and all amendments thereto so filed or
hereafter filed. The obligations of a Fund entered into in the name or on behalf
thereof by any of the Trustees, officers, employees or agents are made not
individually, but in such capacities, and are not binding upon any of the
Trustees, officers, employees, agents or shareholder as they relate to the Fund
personally, but bind only the assets of a Fund, and all persons dealing with
that Fund must look solely to the assets of that Fund.
2
<PAGE> 3
SERVICING AGREEMENT
TO
ADMINISTRATIVE SERVICES PLAN
Ladies and Gentlemen:
We wish to enter into this Servicing Agreement with you concerning the
provision of administrative support services to your customers who may from time
to time be the record or beneficial owners of shares (such shares referred to
herein as the "Shares") of __________________ (the "Fund").
The terms and conditions of this Servicing Agreement are as follows:
Section 1. You agree to provide administrative support services to your
customers who may from time to time own of record or beneficially the Fund's
Shares. Services provided may include some or all of the following: (i)
processing dividend and distribution payments from the Fund on behalf of
customers; (ii) providing periodic statements to your customers showing their
positions in the Shares; (iii) arranging for bank wires; (iv) responding to
routine customer inquiries relating to services performed by you; (v) providing
sub-accounting with respect to the Shares beneficially owned by your customers
or the information necessary for sub-accounting; (vi) if required by law,
forwarding shareholder communications from the Fund (such as proxies,
shareholder reports, annual and semi-annual financial statements and dividend,
distribution and tax notices) to your customers; (vii) forwarding to customers
proxy statements and proxies containing any proposals regarding this Agreement
or the Administrative Services Plan related hereto; (viii) aggregating and
processing purchase, exchange, and redemption requests from customers and
placing net purchase, exchange, and redemption orders for your customers; (ix)
providing customers with a service that invests the assets of their accounts in
the Shares pursuant to specific or pre-authorized instructions; (x) establishing
and maintaining accounts and records relating to transactions in the Shares;
(xi) assisting customers in changing dividend or distribution options, account
designations and addresses; or (xii) other similar services if requested by the
Fund.
Section 2. You will provide such office space and equipment, telephone
facilities and personnel (which may be any part of the space, equipment and
facilities currently used in your business, or any personnel employed by you) as
may be reasonably necessary or beneficial in order to provide the aforementioned
services to customers.
Section 3. Neither you nor any of your officers, employees or agents
are authorized to make any representations concerning the Fund or its Shares
except those contained in our then-current prospectus for such shares, copies of
which will be supplied by the Fund's distributor and/or administrator, to you,
or in such supplemental literature or advertising as may be authorized by the
Fund in writing.
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<PAGE> 4
Section 4. For all purposes of this Agreement you will be deemed to be
an independent contractor, and will have no authority to act as agent for the
Fund in any matter or in any respect. By your written acceptance of this
Agreement, you agree to and do release, indemnify and hold us harmless from and
against any and all direct or indirect liabilities or losses resulting from
requests, directions, actions or inactions of or by you or your officers,
employees or agents regarding your responsibilities hereunder or the purchase,
redemption, transfer or registration of the Shares by or on behalf of customers.
You and your employees will, upon request, be available during normal business
hours to consult with the Fund or its designees concerning the performance of
your responsibilities under this Agreement.
Section 5. In consideration for the services and facilities provided by
you hereunder, the Fund will pay to you, and you will accept as full payment
therefore, a fee at the annual rate designated in Appendix A of the average
daily net assets of a Fund's Shares owned of record or beneficially by your
customers from time to time for which you provide services hereunder, which fee
will be computed daily and payable monthly. The fee rate stated above may be
prospectively increased or decreased by the Fund, in its sole discretion, at any
time upon notice to you. Further, the Fund may, in its discretion and without
notice, suspend or withdraw the sale of such Shares, including the sale of such
Shares to you for the account of any customer(s).
Section 6. Any person authorized to direct the disposition of monies
paid or payable by the Fund pursuant to this Agreement will provide to the Board
of Trustees of Nationwide Investing Foundation III, and the Trustees will
review, at least quarterly, a written report of the amounts so expended and the
entities to whom such expenditures were made. In addition, you will furnish the
Fund or its designees with such information as the Fund or its designees may
reasonably request (including, without limitation, periodic certifications
confirming the provision to customers of some or all of the services described
herein), and will otherwise cooperate with the Fund and its designees
(including, without limitation, any auditors designed by the Fund), in
connection with the preparation of reports to the Fund's Board of Trustees
concerning this Agreement and the monies paid or payable by the Fund pursuant
hereto, as well as any other reports or filings that may be required by law.
Section 7. We may enter into other similar Servicing Agreements with
any other person or persons without your consent.
Section 8. By your written acceptance of this Agreement, you represent,
warrant and agree that: (i) in no event will any of the services provided by you
hereunder be primarily intended to result in the sale of any shares issued by
the Fund; (ii) the compensation payable to you hereunder, together with any
other compensation you receive from customers for services contemplated by this
Agreement, will be fully disclosed to your customers, and will not be excessive
or unreasonable under the laws and instruments governing your relationships with
your customers; and (iii) if you are subject to the provisions of the
Glass-Steagall Act and other laws governing, among other things, the conduct of
activities by federally chartered and supervised banks and other affiliated
banking organizations, you will perform only those activities which are
consistent with your statutory and regulatory obligations and will act solely as
agent for, upon the order of, and for the account of, your customers.
2
<PAGE> 5
Section 9. This Agreement will become effective on the date a fully
executed copy of this Agreement is received by the Fund or its designee. This
Agreement may be terminated at any time, without the payment of any penalty with
respect to the Fund by the vote of a majority of the members of the Board of
Trustees and who have no direct or indirect financial interest in the operation
of the Administrative Servicing Plan or in any related agreements to the
Administrative Servicing Plan ("Disinterested Trustees") or by a majority of the
outstanding voting securities of the Fund on not more than sixty (60) days
written notice to the parties to this Agreement.
Section 10. All notices and other communications to either you or the
Fund will be duly given if mailed, telegraphed, telexed or transmitted by
similar telecommunications device to the appropriate address shown given in this
Agreement.
Section 11. This Agreement will be construed in accordance with the
laws of the State of Ohio and is non-assignable by the parties hereto.
Section 12. This Agreement, or form thereof, has been approved by vote
of a majority of (i) the Board of Trustees and (ii) the Disinterested Trustees,
cast in person at a meeting called for the purpose of voting on such approval.
Section 13. Nationwide Investing Foundation III is a business trust
organized under Chapter 1746, Ohio Revised Code and under a Declaration of
Trust, to which reference is hereby made and a copy of which is on file at the
office of the Secretary of State of Ohio as required by law, and to any and all
amendments thereto so filed or hereafter filed. The obligations of the Fund
entered into in the name or on behalf thereof by any of the Trustees, officers,
employees or agents are made not individually, but in such capacities, and are
not binding upon any of the Trustees, officers, employees, agents or
shareholders as they related to the Fund personally, but bind only the assets of
the Fund, and all persons dealing with the Fund must look solely to the assets
of the Fund.
If you agree to be legally bound by the provisions of this Agreement,
please sign a copy of this letter where indicated below and promptly return it
to the Fund's designee, Nationwide Advisory Services, Inc., Attention: James F.
Laird, Jr., Three Nationwide Plaza, Columbus, Ohio 43215.
Nationwide Advisory Services, Inc., as the Fund's designee, will notify
the Fund concerning any future operational changes pertaining to the Agreement.
Very truly yours, Accepted and Agreed to:
- -------------------------- ------------------------------
James F. Laird, Jr. Name:
Vice President and General Manager Title:
Nationwide Advisory Services, Inc.
Date:_____________________, 1998 Date:_________________, 1998
3
<PAGE> 6
APPENDIX A
----------
TO SERVICING AGREEMENT FOR ADMINISTRATIVE SERVICING PLAN
Funds of Nationwide Investing Foundation III Administrative Servicing Fees
- -------------------------------------------- -----------------------------
Prestige Large Cap Value Fund For Class Y shares of each
Prestige Large Cap Growth Fund Prestige Fund:
Prestige Small Cap Fund 0.25% of the average daily
Prestige Balanced Fund net assets of a fund
Prestige International Fund
(collectively, the "Prestige Funds")
Morley Capital Accumulation Fund For the Institutional Service
(the "Morley Fund") Class and Investor Class
Shares of the Morley Fund:
0.15% of the average daily
net asset of the fund
Signed:
---------------------------
(Title)
Dated:_____________________, 1998
4
<PAGE> 1
Exhibit 10
DRUEN, DIETRICH, REYNOLDS & KOOGLER
ATTORNEYS AT LAW
ONE NATIONWIDE PLAZA
COLUMBUS, OHIO 43215-2220
(614) 249-7617
FACSIMILE: (614) 249-2418
<TABLE>
<S> <C> <C> <C>
BRIAN M. BACON ANGELA R. JETT CHRISTINE A. NESS THERESA R. SCHAEFER
THOMAS E. BARNES LEROY JOHNSTON, III PETER J. OESTERLING* W. JOSEPH SCHLEPPI
ROGER A. CRAIG MARK B. KOOGLER RANDALL L. ORR DAVID E. SIMAITIS
RAE ANN DANKOVIC WALTER R. LEAHY ROBERT M. PARSONS KENT N. SIMMONS
ELIZABETH A. DAVIN GEORGE K. MACKLIN THOMAS J. PRUNTE DINA A. TANTRA
THOMAS W. DIETRICH RANDALL W. MAY ARLENE L. REILLY LEE A. THORNBURY
W. SIDNEY DRUEN M. LINDA MAZZITTI LUCINDA A. REYNOLDS PHILIP W. WHITAKER
JOHN D. GILLESPIE DAVID A. MEYER DANIEL R. RUPP DAVID L. WHITE
JEANNE A. GRIFFIN SANDRA L. NEELY ANNE DANZA SAXON STEVEN L. ZISSER
</TABLE>
Practice limited to Nationwide Insurance Companies and their associated
companies
* Practice limited to the State of Pennsylvania
August 7, 1998
VIA EDGAR
- ---------
Nationwide Investing Foundation III
Three Nationwide Plaza, 26th Floor
Columbus, Ohio 43215
Re: Nationwide Investing Foundation III
Post-Effective Amendment No. 4
SEC File Nos. 333-40455, 811-08495
Ladies and Gentlemen:
In connection with the filing of Post-Effective Amendment No. 4 to the
Registration Statement for Nationwide Investing Foundation III (the
"Amendment"), it is our opinion that, upon the effectiveness of the Amendment,
the indefinite number of units of beneficial interest of the following five new
separate investment portfolios of the Nationwide Investing Foundation III, when
issued for the consideration described in the Amendment, will be legally issued,
fully paid and nonassessable:
1. Prestige Large Cap Value Fund
2. Prestige Large Cap Growth Fund
3. Prestige Small Cap Fund
4. Prestige Balanced Fund
5. Prestige International Fund
We hereby consent to the filing of this opinion as an exhibit to the Amendment.
Very truly yours,
DRUEN, DIETRICH, REYNOLDS & KOOGLER
<PAGE> 1
Exhibit 15(a)
DISTRIBUTION PLAN OF NATIONWIDE INVESTING FOUNDATION III
(Effective ________, 1998)
Section 1. This Distribution Plan (the "Plan") constitutes the
distribution plan for the Class A and Class B shares of Nationwide Mid Cap
Growth Fund, Nationwide Growth Fund, Nationwide Fund, Nationwide Bond Fund,
Nationwide Tax-Free Income Fund, Nationwide Intermediate U.S. Government Bond
Fund, Nationwide Long-Term U.S. Government Bond Fund, Prestige Large Cap Value
Fund, Prestige Large Cap Growth Fund, Prestige Small Cap Fund, Prestige Balanced
Fund and Prestige International Fund (the "Retail Funds"), for the Local Fund
Shares of Nationwide S&P 500 Index Fund, and for the Institutional Service Class
("Class ISC"), the Institutional Class ("Class IC") and the Investor Class
("Class IVC") shares of Morley Capital Accumulation Fund (collectively, the
"Funds"), each a series of Nationwide Investing Foundation III (the "Trust"),
and is adopted pursuant to Rule 12b-1 under the Investment Company Act of 1940,
as amended (the "1940 Act").
Section 2. Subject to the limitations on the payment of asset-based
sales charges set forth in Section 2830 of the Conduct Rules of the National
Association of Securities Dealers, Inc. ("NASD"), the Funds shall pay amounts
not exceeding on an annual basis a maximum amount of:
(a) 25 basis points (.25%) of the average daily net assets of the Class ISC
and Class IVC Shares of the Morley Capital Accumulation Fund and of the
Class A Shares of the Retail Funds, all of which will be a "service
fee"(as described below); and
(b) 100 basis points (1.00%) of the average daily net assets of the Class B
Shares of the Nationwide Mid Cap Growth Fund, Nationwide Growth Fund,
Nationwide Fund, Prestige Large Cap Value Fund, Prestige Large Cap
Growth Fund, Prestige Small Cap Fund, Prestige Balanced Fund and
Prestige International Fund, 75 basis points (.75%) of which will be a
"distribution fee" (as described below) and 25 basis points (.25%) of
which will be a service fee; and
(c) 85 basis points (.85%) of the average daily net assets of the Class B
Shares of the Nationwide Bond Fund, Nationwide Tax-Free Income Fund,
Nationwide Intermediate U.S. Government Bond Fund and Nationwide
Long-Term U.S. Government Bond Fund, 75 basis points (.75%) of which
will be a distribution fee and 10 basis points (.10%) of which will be
considered a service fee; and
(d) 7 basis points (.07%) of the average daily net assets of the Local Fund
Shares of the Nationwide S&P 500 Index Fund; and
(E) 5 basis points (.05%) of the average daily net assets of the Class IC
Shares of the Morley Capital Accumulation Fund, all of which will be a
service fee.
These fees will be paid to Nationwide Advisory Services, Inc.for activities or
expenses primarily intended to result in the sale or servicing of such Class A,
Class B and Local Fund Shares of the
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<PAGE> 2
Funds or to Portland Investment Services, Inc. for activities or expenses
primarily intended to result in the sale or servicing of such Class ISC, Class
IC and Class IVC Shares of the Morley Capital Accumulation Fund. Nationwide
Advisory Services, Inc. and Portland Investment Services, Inc. are each an
"Underwriter." As described above, the following types of fees may be paid
pursuant to the Plan:
(a) a distribution fee for: (i) (a) efforts of an Underwriter expended in
respect of or in furtherance of sales of Class B Shares, and (b) to
enable an Underwriter to make payments to other broker/dealers and
other eligible institutions (each a "Broker/Dealer") for distribution
assistance pursuant to an agreement with the Broker/Dealer; and (ii)
reimbursement of expenses (a) incurred by an Underwriter, and (b)
incurred by a Broker/Dealer pursuant to an agreement in connection with
distribution assistance including, but not limited to, the
reimbursement of expenses relating to printing and distributing
advertising and sales literature and reports to shareholders for use in
connection with the sales of Class B Shares, processing purchase,
exchange and redemption requests from customers and placing orders with
an Underwriter or the Funds' transfer agent, and personnel and
communication equipment used in servicing shareholder accounts and
prospective shareholder inquiries; and
(b) a service fee, if applicable and not otherwise covered under an
administrative services plan and/or agreement, for: (i) (a) efforts of
an Underwriter expended in servicing shareholders and (b) to enable an
Underwriter to make payments to a Broker/Dealer for shareholder
services pursuant to an agreement with the Broker/Dealer; and (ii)
reimbursement of expenses (a) incurred by an Underwriter, and (b)
incurred by a Broker/Dealer pursuant to an agreement in connection with
shareholder service including, but not limited to personal, continuing
services to investors. For purposes of the Plan, a Broker/Dealer may
include any of an Underwriter's affiliates or subsidiaries. A service
fee will be considered as such pursuant to Section 2830(b)(9) of the
Conduct Rules of the NASD.
Section 3. This Plan shall not take effect until it has been approved
by a vote of at least a majority (as defined in the 1940 Act) of the outstanding
voting securities of each of the Funds, if adopted after any public offering of
such shares, and by the vote of the Board of Trustees of the Trust, as described
in Section 4 of the Plan.
Section 4. This Plan shall not take effect with respect to a class of a
Fund until it has been approved, together with any related agreements, by votes
of the majority of both (a) the Board of Trustees of the Trust and (b) those
Trustees of the Trust who are not "interested persons" (as defined in the 1940
Act) of the Trust and who have no direct or indirect financial interest in the
operation of this Plan or any agreements related to this Plan (the "Rule 12b-1
Trustees"), cast in person at a meeting called for the purpose of voting on this
Plan or such agreements.
Section 5. Unless sooner terminated pursuant to Section 7 or 8, this
Plan shall continue in effect with respect to the class of a Fund for a period
of one year from the date it takes effect with respect to such class and
thereafter shall continue in effect so long as such continuance is specifically
2
<PAGE> 3
approved at least annually in the manner provided for approval of this Plan in
Section 4.
Section 6. Any person authorized to direct the disposition of monies
paid or payable by a Fund pursuant to this Plan or any related agreement shall
provide to the Trustee's Board and the Board shall review at least quarterly a
written report of the amounts so expended and the purposes for which such
expenditures were made.
Section 7. This Plan may be terminated as to a class of a Fund at any
time by vote of a majority of the Rule 12b-1 Trustees, or by vote of a majority
of the outstanding affected class of such Fund.
Section 8. Any agreement with any person relating to the implementation
of this Plan shall be in writing, and shall provide:
A. That such agreement may be terminated at any time with respect
to a Class, without payment of any penalty, by vote of a
majority of the Rule 12b-1 Trustees or by a vote of a majority
of the outstanding Class Shares of the Fund on not more than
60 days written notice to any other party to the agreement;
and
B. That such agreement shall terminate automatically in the event
of its assignment.
Section 9. This Plan may not be amended to increase materially the
amount of distribution expenses of a Fund provided for in Section 2 hereof,
unless such amendment is approved in the manner provided in Section 3 hereof. No
material amendment to this Plan shall be made unless approved in the manner
provided for approval of this Plan in Section 4 hereof.
Section 10. The provisions of the Plan are severable for each class of
shares of the Funds and any action required hereunder must be taken separately
for each class covered hereby.
3
<PAGE> 1
Exhibit 18
RULE 18f-3 PLAN
(Effective _____, 1998)
WHEREAS, Nationwide Investing Foundation III, an Ohio business trust (the
"Trust"), is an open-end management investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, Nationwide Advisory Services, Inc. ("NAS"), an Ohio corporation, serves
as investment adviser and underwriter for the Trust for Nationwide Mid Cap
Growth Fund, Nationwide Growth Fund, Nationwide Fund, Nationwide Bond Fund,
Nationwide Tax-Free Income Fund, Nationwide Intermediate U.S. Government Bond
Fund, Nationwide Long-Term U.S. Government Bond Fund, Prestige Large Cap Value
Fund, Prestige Large Cap Growth Fund, Prestige Small Cap Fund, Prestige Balanced
Fund and Prestige International Fund ("collectively, the "Funds");
WHEREAS, Union Bank and Trust Company ("UBT"), an Oregon corporation, serves as
investment adviser and Portland Investment Services, Inc. ("Portland"), an
Oregon corporation, serves as underwriter for the Morley Capital Accumulation
Fund (the "Morley Fund");
WHEREAS, the Trust has adopted a Distribution Plan ("12b-1 Plan") under Rule
12b-1 of the 1940 Act providing for: (1) in the case of Class A shares of the
Funds, and of Institutional Service Class ("Class ISC") and the Investor Class
("Class IVC") shares of the Morley Fund, fees of not more than 0.25% per annum
of average net assets, (2) in the case of Class B shares of the Funds, fees of
not more than 1.00% per annum of average net assets, of which 0.25% per annum of
average net assets is considered a service fee, and (3) in the case of the
Institutional Class ("Class IC") shares of the Morley Fund, fees of not more
than 0.05% per annum of average net assets;
WHEREAS, the Trust has adopted an Administrative Services Plan providing for:
(1) in the case of Class ISC and Class IVC Shares of the Morley Fund, fees of
not more than 0.15% per annum of average net assets, and (2) in the case of
Class Y Shares of the Funds, fees of not more than 0.25% per annum of average
net assets;
WHEREAS, The Trust has established a Multiple Class Distribution System enabling
the Trust, as described in its prospectuses, to offer eligible investors the
option of purchasing shares of its non- money market series (a) with a front-end
sales load (which can vary among series and which is subject to certain
reductions and waivers among groups of purchasers) and providing for a 12b-1 fee
(the "Class A shares of the Funds"), (b) without a front-end load, but subject
to a contingent deferred sales charge ("CDSC") (which can vary among series) and
providing for a 12b-1 fee (the "Class B shares of the Funds"), (c) with a
front-end load (which can vary among series and which is subject to certain
reductions and waivers among groups of purchasers), but not providing for a
12b-1 fee (the "Class D shares of the Funds"), (d) without a front-end sales
load or CDSC, but providing for an administrative services fee (the "Class Y
shares of the Funds") (e) without a front-end load or a CDSC, but providing for
a 12b-1 fee, an administrative services fee and
1
<PAGE> 2
subject to a redemption fee in certain circumstances (the "Class ISC and Class
IVC shares of the Morley Fund"), and (f) without a front-end load or a CDSC, but
providing for a 12b-1 fee and subject to a redemption fee in certain
circumstances (the "Class IC shares of the Morley Fund");
WHEREAS, Rule 18f-3 under the 1940 Act permits an open-end management investment
company to issue multiple classes of voting stock representing interests in the
same portfolio notwithstanding Sections 18 (f) (1) and 18 (i) under the 1940 Act
if, among other things, such investment company adopts a written plan setting
forth the separate arrangements and expense allocation of each class and any
related conversion features or exchange privileges;
NOW, THEREFORE, the Trust, wishing to be governed by Rule 18f-3 under the 1940
Act, hereby adopts this Rule 18f-3 Plan as follows:
1. Each class of shares of a non-money market fund series will represent
interests in the same portfolio of investments of such series of the Trust, and
be identical in all respects to each other class of that series, except as set
forth below. The only differences among the various classes of shares of the
non-money market fund series of the Trust will relate solely to (a) different
distribution or service fee payments associated with any Rule 12b-1 Plan for a
particular class of shares and any other costs relating to implementing or
amending such Plan (including obtaining shareholder approval of such Plan or any
amendment thereto), which will be borne solely by shareholders of such class;
and (b) different administrative service fees associated with any Administrative
Services Plan; (c) different Class Expenses, which will be limited to the
following expenses as determined by the Trustees to be attributable to a
specific class of shares: (i) transfer agency fees identified as being
attributable to a specific class; (ii) printing and postage expenses related to
preparing and distributing materials such as shareholder reports, prospectuses,
and proxy statements to current shareholders of a specific class; (iii) Blue Sky
notification and/or filing fees incurred by a class of shares; (iv) SEC
registration fees incurred by a class; (v) expenses of administrative personnel
and services as required to support the shareholders of a specific class; (vi)
litigation or other legal expenses and audit or other accounting expenses
relating solely to one class; (vii) Trustee's fees or expenses incurred as a
result of issues relating to one class; (viii) shareholder meeting costs that
relate to a specific class; (ix) wrapper fees, premiums and expenses related to
wrapper agreements for the Morley Fund; (d) the voting rights related to any
12b-1 Plan affecting a specific class of shares or related to any other matter
submitted to shareholders in which the interests of a Class differ from the
interests of any other Class; (e) conversion features; (f) exchange privileges;
and (g) class names or designations. Any additional incremental expenses not
specifically identified above that are subsequently identified and determined to
be properly applied to one class of shares of a series of the Trust shall be so
applied upon approval by a majority of the Trustees of the Trust, including a
majority of the Trustees who are not interested persons of the Trust.
2. Under the Multiple Class Distribution System, certain expenses may be
attributable to the Trust, but not to a particular series or class thereof. All
such expenses will be allocated among series based upon the relative aggregate
net assets of such series. Expenses that are attributable
2
<PAGE> 3
to a particular series, but not to a particular class thereof, and income,
realized gains and losses, and unrealized appreciation and depreciation will be
borne by each class of such series on the basis of the total shares outstanding
of the classes if such series does not pay daily dividends and if the series
does pay daily dividends on the basis of the Settled Shares Method (as described
in Rule 18f-3 (c) (iii)). Notwithstanding the foregoing, the principal
underwriter, the investment adviser or other provider of services to the Trust
may waive or reimburse the expenses of a specific class or classes to the extent
permitted under Rule 18f-3 under the 1940 Act and pursuant to any applicable
ruling, procedure or regulation of the Internal Revenue Service.
A class of shares may be permitted to bear expenses that are directly
attributable to such class including: (a) any distribution/service fees
associated with any Rule 12b-1 plan for a particular class and any other costs
relating to implementing or amending such Plan (including obtaining shareholder
approval of such plan or any amendment thereto); (b) any administrative services
fees associated with any administrative services plan for a particular class and
any other costs relating to implementing or amending such plan (including
obtaining shareholder approval of such plan or any amendment thereto)
attributable to such class; and (c) any Class Expenses determined by the
Trustees to be attributable to such class.
3. Class B Shares of the Funds, other than Shares purchased through reinvestment
of a dividend or a distribution with respect to the Class B Shares of the Funds,
shall automatically convert to Class A Shares of the Funds on the date that is
the first business day of the month after which the Class B Shares of the Funds
were outstanding for seven years. Such conversion will be on the basis of the
relative net asset values of each class. After the conversion, such Shares will
have all of the characteristics and rights of Class A Shares of the Funds.
Shares purchased through the reinvestment of a dividend or a distribution with
respect to the Class B Shares of the Funds will be converted to Class A Shares
of the Funds in the same proportion as the number of the shareholder's Class B
Shares of the Funds converting to Class A Shares of the Funds bears to the
shareholder's total Class B Shares of the Funds not acquired through dividends
and distributions.
4. To the extent exchanges are permitted, shares of any class of the Trust will
be exchangeable with shares of the same class of another series of the Trust, or
with money market fund shares of the Trust as described in the applicable
prospectus. Exchanges will comply with all applicable provisions of Rule 11a-3
under the 1940 Act.
5. Dividends paid by a series of the Trust as to each class of its shares, to
the extent any dividends are paid, will be calculated in the same manner, at the
same time, on the same day, and will be in the same amount, except that any
distribution/service fees, administrative services fees, and Class Expenses
allocated to a class will be borne exclusively by that class.
6. Any distribution arrangement of the Trust, including distribution fees and
front-end and deferred sales loads, will comply with Section 2830 of the Conduct
Rules of the National Association of Securities Dealers, Inc.
3
<PAGE> 4
7. The initial adoption of, and all material amendments, to this 18f-3 Plan must
be approved by a majority of the members of the Trust's Trustees, including a
majority of the Board members who are not interested persons of the Trust.
8. Prior to the initial adoption of, and any material amendments to, this 18f-3
Plan, the Trust's Trustees shall request and evaluate, and any agreement
relating to a class arrangement shall require the parties thereto to furnish,
such information as may be reasonably necessary to evaluate the 18f-3 Plan.
4
