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SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(c) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Check the appropriate box:
[ ] Preliminary Information Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14c-5(d)(2))
[X] Definitive Information Statement
NATIONWIDE MUTUAL FUNDS
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
1) Title of each class of securities to which transaction applies:____________
2) Aggregate number of securities to which transaction applies:_______________
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):_______________________________
4) Proposed maximum aggregate value of transaction:___________________________
5) Total fee paid: ___________________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid: ___________________________________________________
2) Form, Schedule or Registration Statement No.:______________________________
3) Filing Party: _____________________________________________________________
4) Date Filed: _______________________________________________________________
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NATIONWIDE MUTUAL FUNDS
Three Nationwide Plaza
Columbus, Ohio 43215
(800) 848-0920
March 29, 2000
Dear Nationwide S&P 500 Index Fund Shareholders:
The enclosed information statement details a recent subadviser change for the
Nationwide S&P 500 Index Fund (the "Fund"), a series of Nationwide Mutual Funds
(the "Trust"). Specifically, the Trust's Board of Trustees has selected Fund
Asset Management, L.P. ("FAM"), which is a part of the Merrill Lynch Asset
Management Group, to manage the Fund, replacing The Dreyfus Corporation. The
change was effective December 29, 1999. The Fund has an exemptive order from the
Securities and Exchange Commission which allows this change to be made without
shareholder approval. The order instead requires that this information statement
be sent to you.
The Board replaced the former subadviser upon the recommendation of Villanova
Mutual Fund Capital Trust, the Fund's investment adviser. This recommendation
was based on several factors, including:
- FAM's experience and success in managing index funds;
- The proposed reduction in investment advisory and subadvisory
fees; and
- The Trust's and Villanova Mutual Fund Capital Trust's recent
engagement of FAM to provide investment advisory services to the
other index funds within the Trust.
Please read the enclosed document for additional information.
We look forward to continue serving you and the Fund in the future.
Sincerely,
James F. Laird, Jr.
Treasurer, Nationwide Mutual Funds
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NATIONWIDE S&P 500 INDEX FUND
A Series of Nationwide Mutual Funds
Three Nationwide Plaza
Columbus, Ohio 43215
INFORMATION STATEMENT
The Board of Trustees of Nationwide Mutual Funds (the "Board of Trustees") is
furnishing this Information Statement to all shareholders of the Nationwide S&P
500 Index Fund (the "Fund"), a series of Nationwide Mutual Funds (the "Trust"),
and to owners of variable insurance contracts issued by Nationwide Life
Insurance Company or Nationwide Life and Annuity Insurance Company (collectively
"Nationwide") who are entitled to give voting instructions to Nationwide as a
shareholder of the Fund ("Contract Owners"). This Information Statement is being
provided to advise shareholders of a change in the Fund's subadviser and is in
lieu of a proxy statement pursuant to the terms of an exemptive order the Trust
received from the Securities and Exchange Commission. The exemptive order
permits the Fund's investment adviser to hire new subadvisers and to make
changes to existing subadvisory contracts with the approval of the Board of
Trustees, but without obtaining shareholder approval, provided, among other
things, the Fund sends its shareholders an information statement describing a
new subadviser within 90 days of hiring such subadviser.
WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND US A PROXY.
This Information Statement will be mailed to Shareholders
on or about March 29, 2000.
INTRODUCTION
The Fund is an investment portfolio or series of the Trust. The Trust, on behalf
of the Fund, initially entered into an Investment Advisory Agreement with
Nationwide Advisory Services, Inc. ("NAS") on July 23, 1998; on September 1,
1999, the investment advisory services being performed by NAS for the Fund were
transferred to Villanova Mutual Fund Capital Trust (the "Adviser"), an entity
under common control with NAS. Shareholder approval was not required in order to
transfer the investment advisory services from NAS to the Adviser because such
transfer did not result in a change in the actual control or management of the
Fund's investment adviser. Pursuant to the Investment Advisory Agreement, the
Adviser selects the subadvisers for and/or manages the investments of the Fund
and supervises the Fund's daily business affairs, subject to the supervision and
direction of the Board of Trustees. The Adviser selects one or more subadvisers
it believes will provide the Fund with high quality investment services
consistent with the Fund's investment objectives. The Adviser is responsible for
the overall monitoring of the Fund's subadviser(s).
The current subadviser for the Fund is Fund Asset Management, L.P. ("FAM"). FAM
began serving as subadviser on December 29, 1999, following a decision by the
Board of Trustees to
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(1) terminate the Fund's then current subadvisory agreement with The Dreyfus
Corporation ("Dreyfus"); and (2) approve a new subadvisory agreement with FAM.
The decision by the Board of Trustees to replace Dreyfus with FAM, as well as
other important information, is described in more detail below.
RECOMMENDATION TO REPLACE SUBADVISERS
As part of the Adviser's duties to select and supervise the Fund's subadvisers,
the Adviser is responsible for communicating performance expectations and
evaluations to the subadvisers and recommending to the Board of Trustees whether
a subadviser's contract with the Trust should be renewed, modified or
terminated. The Adviser regularly provides written reports to the Board of
Trustees describing the results of its evaluation and monitoring functions.
Prior to the transfer of the Investment Advisory Agreement to the Adviser, NAS
provided these services to the Fund.
Recently, the Trust has added four new index funds the investment management of
which is provided by FAM. The Adviser's increased relationship with FAM prompted
the Adviser to review more closely the services provided to the Fund by Dreyfus.
This review was undertaken as part of the responsibility of the Adviser to
recommend to the Board of Trustees whether a subadvisory agreement should be
terminated. As part of its analysis of the options, the Adviser considered (1)
FAM's substantial experience in managing funds, (2) FAM's use of the "sampling
method" of index portfolio management (as opposed to the full replication
approach used by Dreyfus) which is intended to minimize the amount by which the
Fund's performance would deviate from that of its benchmark, the S&P 500 Index,
(3) the desirability to strengthen FAM's relationship and commitment to the
Trust and (4) a belief that a consistent index fund adviser will attract more
assets to the Fund, which will lead to an overall decrease in Fund expenses over
time. As part of the recommendation, the Adviser proposed a reduction of its
contractual investment advisory fee (on an annual basis) from 0.13% to 0.13% of
the Fund's average daily net assets up to $1.5 billion, 0.12% on the next $1.5
billion of average daily net assets and 0.11% on the average daily net assets in
excess of $3 billion.
Upon completion of its analysis, the Adviser decided to recommend that FAM
replace Dreyfus. It based its decision to recommend FAM on a number of factors,
including FAM's substantial experience with managing index funds, its current
relationship with FAM as investment adviser to the other Nationwide index funds,
four series of the Trust, and the proposed reduction in subadvisory fees, as
described below.
BOARD OF TRUSTEES' CONSIDERATIONS
At a regular meeting of the Board of Trustees on November 5, 1999, the Board of
Trustees reviewed the Adviser's recommendations to hire FAM as subadviser for
the Fund and to terminate the subadvisory agreement with Dreyfus. The Board of
Trustees reviewed a report that described in detail the basis for such
recommendations and also reviewed the proposed decrease in the Fund's investment
advisory fees and the proposed subadvisory agreement with FAM. The Board
considered the differences in subadvisory fees payable to Dreyfus and those
proposed to be paid to FAM as follows:
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Dreyfus
0.07% on assets up to $250 million
0.06% on assets of $250 million or more but less than $500
million
0.05% on assets of $500 million or more but less than
$1 billion
0.04% on assets of $1 billion or more
FAM
0.05% on assets up to $200 million
0.04% on assets of $200 million or more, but less than $1
billion
0.02% on assets of $1 billion or more
Having carefully considered the Adviser's recommendations and the reasons for
them, the Board of Trustees, including a majority of the Trustees who were not
interested persons of the Adviser, Dreyfus or FAM, approved the termination of
the subadvisory agreement with Dreyfus and the appointment of FAM to serve as
the new subadviser to the Fund. The termination of the subadvisory agreement
with Dreyfus and the appointment of FAM as a subadviser both took effect on
December 29, 1999. The Board of Trustees also approved the form of the
subadvisory agreement among the Adviser, the Trust (acting on behalf of the
Fund) and FAM and the amendment to the Investment Advisory Agreement between the
Adviser and the Trust. In doing so, the Board of Trustees found that the
compensation payable under the subadvisory agreement with FAM and under the
Investment Advisory Agreement with the Adviser was fair and reasonable in light
of the services to be provided and the expenses to be assumed by FAM and the
Adviser, respectively, under such agreements.
COMPARISON OF SUBADVISORY AGREEMENTS
The subadvisory agreement with FAM (the "New Agreement") is the same in all
material respects as the subadvisory agreement with Dreyfus (the "Former
Agreement") except with respect to the fees payable thereunder. The Former
Agreement took effect on July 23, 1998, and was approved by the Fund's initial
shareholder on July 23, 1998. The Former Agreement has not been submitted for
shareholder approval since then. A comparison of the fees under the Former
Agreement and the New Agreement are set forth above under "BOARD OF TRUSTEES'
CONSIDERATIONS."
The Former Agreement had an initial two-year term and would have continued
automatically for successive one-year terms provided that its continuance was
approved annually by the Board of Trustees. The New Agreement is the same except
that its two-year initial term began on December 29, 1999. Each Agreement can be
terminated by the Trust or the Adviser on 60 days' notice and both terminate
automatically if they are assigned to anyone else.
The Adviser's responsibilities under the Former Agreement and the New Agreement
are the same. Under each Agreement, the Adviser is responsible for assigning a
portion of the Fund's assets to the subadviser and for overseeing the review of
the performance of the subadviser. The duties of FAM under the New Agreement are
the same as the duties required of Dreyfus under
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the Former Agreement. FAM is required to manage the portion of the Fund's
portfolio allocated to it (which constitutes all of the Fund's portfolio at this
time) in accordance with the Fund's investment objective and policies, subject
to the supervision and control of the Adviser and the Board of Trustees.
With respect to brokerage allocation, under the Former Agreement, Dreyfus was
authorized to purchase and sell securities on behalf of the Fund through brokers
or dealers and to negotiate commissions to be paid on such transactions. In
doing so, Dreyfus was required to use reasonable efforts to obtain the most
favorable price and execution available but were permitted, subject to certain
limitations, to pay brokerage commissions that were higher than what another
broker might have charged in return for brokerage and research services. The New
Agreement contains provisions with respect to FAM that are the same in all
material respects.
The indemnification and liability provisions of the Former Agreement and the New
Agreement are the same in all material respects except as described below. Under
the Former Agreement, Dreyfus and its affiliates could not be held liable to the
Adviser, the Trust, the Fund or the Fund's shareholders in the absence of
willful misfeasance, bad faith or gross negligence on the part of Dreyfus or a
reckless disregard of its duties under the Former Agreement. The New Agreement
contains provisions that are substantially the same except that liability of FAM
is limited to any error of judgment or mistake of law. The New Agreement also
provides that nothing in such Agreement, however, relieves FAM from any of its
obligations under federal and state securities laws and other applicable law.
The Former Agreement does not contain such a provision.
Dreyfus was required under the Former Agreement to indemnify the Adviser, the
Trust and their respective officers, directors and trustees for any liability or
expenses sustained by them as a result of Dreyfus' willful misfeasance, bad
faith, gross negligence or reckless disregard of its duties. FAM is required
under the New Agreement to indemnify the Adviser, the Trust, the Fund and their
respective affiliates and controlling persons for any liability or expenses
sustained by them as a result of FAM's willful misfeasance, bad faith, gross
negligence, reckless disregard of its duties or violation of applicable law.
The foregoing description of the Former Agreement and the New Agreement is only
a summary and is qualified in its entirety by reference to the text of the full
agreements. Copies of the Former Agreement and the New Agreement are on file
with the Commission. Copies of the Former Agreement and the New Agreement are
available 1) in person at the Commission's Public Reference Room in Washington,
DC; 2) by mail at the Securities and Exchange Commission, Public Reference
Section, Washington, DC 20549-6009; 3) at the Commission's website - http://
www.sec.gov; or (4) by electronic request at [email protected].
OTHER INFORMATION ABOUT FAM
FAM is a Delaware limited partnership. Its general partner is Princeton
Services, Inc. and its sole limited partner is Merrill Lynch & Co., a publicly
held corporation. Princeton Services, Inc. is an indirect wholly owned
subsidiary of Merrill Lynch & Co. The address of FAM and Princeton
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Services, Inc. is 800 Scudder Mill Road, Plainsboro, New Jersey. The address of
Merrill Lynch & Co. is World Financial Center, New York, New York.
The following table sets for the name and principal occupation of Princeton
Services, Inc.'s principal executive officer and directors. The address for each
person is 800 Scudder Mill Road, Plainsboro, New Jersey.
<TABLE>
<CAPTION>
- ------------------------------------------------------------ ---------------------------------------------------------
Name Principal Occupation
- ------------------------------------------------------------ ---------------------------------------------------------
<S> <C>
Jeffrey M. Peek President and Director of Princeton Services, Inc.
- ------------------------------------------------------------ ---------------------------------------------------------
Terry K. Glenn Executive Vice President and Director of Princeton
Services, Inc.
- ------------------------------------------------------------ ---------------------------------------------------------
Gregory A. Bundy Managing Director and Chief Operating Officer of
Princeton Services, Inc.
- ------------------------------------------------------------ ---------------------------------------------------------
Philip L. Kirstein Senior Vice President, Secretary, Director and General
Counsel of Princeton Services, Inc.
- ------------------------------------------------------------ ---------------------------------------------------------
</TABLE>
FAM currently serves as investment adviser or subadviser to several
institutional accounts and three other investment companies that have investment
objectives similar to those of the Fund. The net assets and investment advisory
fees as of February 29, 2000, for the three other investment companies are set
forth in the following table:
<TABLE>
<CAPTION>
- ---------------------------------------- -------------------------------------- --------------------------------------
Fund Net Assets Advisory Fees*
- ---------------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C>
Master S&P 500 Index Series of $1.5 billion 0.05% (which FAM has voluntarily
Quantitative Master Series Trust reduced to 0.005%)
- ---------------------------------------- -------------------------------------- --------------------------------------
Index 500 Portfolio of Merrill Lynch $500 million 0.30%
Variable Series Funds
- ---------------------------------------- -------------------------------------- --------------------------------------
S&P 500 Series of Pacific Life Series $2 billion currently approximately 0.09%
Fund (within a range of 0.05% to 0.30%
based upon a number of factors)
- ---------------------------------------- -------------------------------------- --------------------------------------
</TABLE>
- -------------------
*Calculated as an annual percentage of the Fund's average daily nets assets.
MORE ABOUT FEES AND EXPENSES
Prior to December 29, 1999, the Adviser was entitled to a fee calculated at the
annual rate of 0.13% of the Fund's average daily net assets. Effective December
29, 1999, the Fund's investment advisory fee (calculated on an annual basis)
decreased from 0.13% on all the Fund's average daily net assets to 0.13% for the
Fund's first $1.5 billion of average daily net assets, 0.12% for the next $1.5
billion of average daily net assets and 0.11% of average daily net assets in
excess of $3 billion.
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Had the lower investment advisory fee been in effect during the fiscal year
ended October 31, 1999, it would have had no effect upon the Adviser's
investment advisory fees since (i) the Fund's assets during that period were
less than $1.5 billion and therefore the breakpoints in the investment advisory
fee would not have been in effect; and (ii) as described below, the Adviser
waived all of its investment advisory fees during the period.
Since the Fund's inception, the Adviser has agreed to voluntarily waive all or
part of its fees and reimburse Fund expenses in order to limit the Fund's total
operating expenses, as a percentage of the Fund's average daily net assets on an
annual basis, to not more than 0.63% for Class A Shares, 1.23% for Class B
Shares, 0.35% for Local Fund Shares, 0.63% for Service Class Shares, 0.48% for
Institutional Service Class Shares, and 0.23% for Institutional Class Shares.
Although these fee waivers and/or expense reimbursements are voluntary, the
Adviser has agreed to them at least through October 31, 2000. However, they may
be terminated at any time after October 31, 2000. During the fiscal year ended
October 31, 1999, the Adviser was entitled to receive from the Fund advisory
fees in the amount of $79,372, all of which were waived. Such waiver had no
effect on the Adviser's obligations to compensate Dreyfus.
Without waivers or reimbursements, total Fund expenses for Local Fund Shares,
Service Class Shares and Institutional Service Class Shares for the fiscal year
ended October 31, 1999, would have been 0.52%, 0.83% and 0.67%, respectively.
The other classes of shares of the Fund were not available until January 3,
2000.
NAS and the Trust (acting on behalf of the Fund) entered into a subadvisory
agreement dated July 23, 1998, with Dreyfus pursuant to which Dreyfus managed
the Fund's assets in accordance with the Fund's investment objective and
policies. Dreyfus made investment decisions for the Fund and purchased and sold
securities for the Fund. For the investment management services it provided to
the Fund, Dreyfus received a fee from the Adviser in an amount equal to 0.07% on
assets up to $250 million, 0.06% on assets of $250 million or more but less than
$500 million, 0.05% on assets of $500 million or more but less than $750
million, and 0.04% on assets of $1 billion or more. During the year ended
October 31, 1999, the Adviser paid Dreyfus a total of $36,609 pursuant to such
agreement.
ADDITIONAL INFORMATION
As of March 7, 2000, the Fund had issued and outstanding 13,617,947.074 shares
of beneficial interest ("shares"). As of that date, to the Trust's knowledge,
the following are the only persons who had or shared voting or investment power
over more than 5% of the outstanding shares of any class of shares of the Fund:
<TABLE>
<CAPTION>
Amount and Nature of
Name and Address Voting and Investment Power % of Class
<S> <C> <C>
Villanova Mutual Fund Capital Trust 785.5 Class A Shares 10.6%
Three Nationwide Plaza 785.5 Class B Shares 44.8%
Columbus, Ohio 43215 785.5 Institutional Class Shares 100.0%
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C>
NAS as Custodian for P.W. Miller IRA 3,286.8 Class A Shares 44.4%
RR 1 Box 703
Sugar Grove, Ohio 43155
NAS as Custodian for Michael R. Day 973.2 Class A Shares 13.1%
IRA Plan
303 Norle Street
State College, Pennsylvania 16801
Christopher P. and Clare C. Gale 1,241.1 Class A Shares 16.8%
12464 Saylor Road
Baltimore, Ohio 43105
Timothy H. and Laurie E. Leimkuehler 164.3 Class B Shares 9.4%
5196 Sudbury Point Lane
Sugar Hill, Georgia 30518
Debra A. Merijohn 739.5 Class B Shares 42.1%
12623 South 69th Court
Palos Heights, Illinois 60463
Nationwide Asset Allocation Trust 652,164.8 Local Fund Shares 31.2%
Three Nationwide Plaza
Columbus, Ohio 43215
Nationwide Life Insurance Company* 1,427,872.1 Local Fund Shares 68.3%
One Nationwide Plaza 9,320,254.4 Service Class Shares 97.2%
Columbus, Ohio 43215 1,926,880.5 Institutional Service
Class Shares 99.9%
</TABLE>
- ----------------
*Certain separate accounts of Nationwide are the record owner of such shares. As
described below, Nationwide will vote these shares in accordance with the voting
instructions of the underlying Contract Owners.
As of March 7, 2000, the officers and Trustees of the Trust as a group owned
less than 1% of the outstanding shares of the Fund.
Although shareholders and Contract Owners are not being asked to vote on the
replacement of Dreyfus with FAM, the Trust is required by the rules of the
Commission to summarize the voting rights of shareholders. Whenever a matter
affecting the Fund requires shareholder approval, a shareholder meeting
generally will be held and a proxy statement and proxy/voting instruction forms
will be sent to the Fund's shareholders and to Contract Owners who have selected
the Fund as an underlying mutual fund option. Contract Owners do not vote on
such matters directly because they are not shareholders of the Fund, but they
will be asked in the proxy statement to give voting instructions to those
separate accounts of Nationwide that are shareholders of the
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Fund. These separate accounts will then vote the shares of the Fund attributable
to the Contract Owners in accordance with the voting instructions received from
the Contract Owners. If voting instructions are not received, the separate
accounts will vote the shares of the Fund for which voting instructions have not
been received in proportion (for, against or abstain) to those for which timely
voting instructions have been received.
Each share of the Fund is entitled to one vote, and each fraction of a share is
entitled to a proportionate fractional vote. Shareholders will also be permitted
to revoke previously submitted proxies in accordance with instructions contained
in the proxy statement sent to the Fund's shareholders.
The foregoing description of shareholder voting rights is only a brief summary
of these rights; whenever shareholder approval of a matter affecting the Fund is
required, the proxy statement sent to the Fund's shareholders will fully
describe the voting rights of shareholders and the voting procedures that will
be followed at the shareholder meeting.
NAS serves as the Fund's principal underwriter. Villanova SA Capital Trust, an
affiliate of the Adviser and NAS, serves as the Fund's administrator. The
address for the Adviser, NAS and Villanova SA Capital Trust is Three Nationwide
Plaza, Columbus, Ohio 43215.
No officer or Trustee of the Trust is an officer, employee, or director of FAM,
nor do any such officers or Trustees own securities issued by FAM or any
affiliate thereof, or have any other material direct or indirect interest in
FAM.
THE TRUST WILL FURNISH, WITHOUT CHARGE, A COPY OF THE TRUST'S MOST RECENT ANNUAL
REPORT TO SHAREHOLDERS AND SEMI-ANNUAL REPORT TO SHAREHOLDERS SUCCEEDING THE
ANNUAL REPORT, IF ANY, UPON REQUEST. SUCH REQUEST MAY BE MADE EITHER BY WRITING
TO THE TRUST AT THE ADDRESS CONTAINED ON THE FIRST PAGE OF THIS INFORMATION
STATEMENT OR BY CALLING TOLL-FREE (800) 848-0920. THE ANNUAL REPORT AND THE
SEMI-ANNUAL REPORT WILL BE MAILED TO YOU BY FIRST-CALL MAIL WITHIN THREE
BUSINESS DAYS OF RECEIPT OF YOUR REQUEST.
By Order of the Board of Trustees,
Elizabeth A. Davin, Secretary
March 29, 2000
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