<PAGE> 1
SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(c) OF THE SECURITIES EXCHANGE
ACT OF 1934 (AMENDMENT NO. )
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Information Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14c-5(d)(2))
[X] Definitive Information Statement
NATIONWIDE SEPARATE ACCOUNT TRUST
(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: ___________________________________________________________________________
</TABLE>
<PAGE> 2
NATIONWIDE SEPARATE ACCOUNT TRUST
1200 River Road
Conshohocken, Pennsylvania 19428
(800) 848-6331
December 27, 2000
Dear Nationwide Small Cap Growth Fund Shareholders:
The enclosed information statement details a recent subadviser change for the
Nationwide Small Cap Growth Fund (the "Fund"), a series of Nationwide Separate
Account Trust (the "Trust"). Specifically, the Trust's Board of Trustees has
selected Waddell & Reed Investment Management Company ("Waddell & Reed"), to
manage a portion of the Fund, replacing Franklin Advisers, Inc. ("Franklin").
The change was effective October 1, 2000. The Fund has an exemptive order from
the U.S. Securities and Exchange Commission that allows this change to be made
without shareholder approval. The order instead requires that this information
statement be sent to you.
The Board replaced Franklin upon the recommendation of Villanova Mutual Fund
Capital Trust, the Fund's investment adviser (the "Adviser"). This
recommendation was based on several factors, including:
o Franklin's reaching its capacity to manage small cap growth
stocks of the type invested in by the Fund;
o The portion of the Fund's portfolio managed by Franklin
periodically being invested in securities or levels of cash
which the Adviser believed were not consistent with the Fund's
investment strategy; and
o Waddell & Reed's experience and success in managing other
small cap growth funds and accounts.
Please read the enclosed document for additional information.
We look forward to continuing to serve you and the Fund in the future.
Sincerely,
/s/ KEVIN S. CROSSETT
----------------------------------
Kevin S. Crossett
Secretary, Nationwide Separate Account Trust
<PAGE> 3
NATIONWIDE SMALL CAP GROWTH FUND
A Series of Nationwide Separate Account Trust
1200 River Road
Conshohocken, Pennsylvania 19428
INFORMATION STATEMENT
The Board of Trustees of Nationwide Separate Account Trust (the "Board of
Trustees") is furnishing this Information Statement to all owners of variable
annuity contracts or variable life insurance policies ("Contract Owners") issued
by Nationwide Life Insurance Company or Nationwide Life and Annuity Insurance
Company (collectively, "Nationwide") who are entitled to give voting
instructions to the shareholders of the Nationwide Small Cap Growth Fund (the
"Fund"), a series of Nationwide Separate Account Trust (the "Trust"). The
Information Statement is being provided in lieu of a proxy statement pursuant to
the terms of an exemptive order the Trust received from the U.S. 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 (or, in
this case, the Contract Owners who have selected the Fund as an investment
option) 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 Contract Owners
on or about December 29, 2000.
INTRODUCTION
The Fund is one 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 May 1, 1999; 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 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).
One of the current subadvisers for the Fund is Waddell & Reed Investment
Management Company ("Waddell & Reed"). Waddell & Reed began serving as a
subadviser on October 1,
- 2 -
<PAGE> 4
2000, following a decision by the Board of Trustees to (1) approve a new
subadvisory agreement with Waddell & Reed; and (2) terminate the Fund's then
current subadvisory agreement with Franklin Advisers, Inc. ("Franklin"). The
decision by the Board of Trustees to replace Franklin with Waddell & Reed, 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 periodically 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, NAS provided these
services to the Fund.
In response to questions from the Adviser Franklin informed the Adviser that
because it was managing a substantial amount of small cap growth assets,
Franklin was reaching its capacity to effectively manage its portion of the
Fund. Franklin stated that these capacity issues were due to the limited size of
the small cap growth securities market and the limitations placed on Franklin's
ability to take positions in any one particular small cap growth security. As a
result, the portion of the Fund's portfolio managed by Franklin periodically was
invested in securities or had levels of cash which the Adviser believed were not
consistent with the Fund's investment strategy. This situation prompted the
Adviser to review more closely the performance of Franklin and its overall
management of that portion of the Fund assigned to it. As a result of this
review, which was undertaken as part of the Adviser's responsibility to make
recommendations about the Fund's subadvisers to the Board of Trustees, the
Adviser decided to recommend that the subadvisory agreement with Franklin be
terminated because the Adviser was concerned about Franklin's ability to conform
to the Fund's investment strategy.
Upon completion of its analysis of Franklin, the Adviser reviewed possible
replacements and decided to recommend that Waddell & Reed replace Franklin. The
Adviser based its decision to recommend Waddell & Reed on a number of factors,
including Waddell & Reed's experience and past performance in managing small cap
growth investments and the Adviser's belief that Waddell & Reed's investment
style will complement that of the other subadvisers to the Fund.
BOARD OF TRUSTEES' CONSIDERATIONS
At a regular meeting of the Board of Trustees on August 8, 2000, the Board of
Trustees reviewed the Adviser's recommendations to terminate the subadvisory
agreement with Franklin and to hire Waddell & Reed as a subadviser. The Board of
Trustees reviewed a report that described in detail the basis for such
recommendations and also reviewed the proposed subadvisory agreement with
Waddell & Reed. Specifically the Board of Trustees was informed that Waddell &
Reed is a subsidiary of Waddell & Reed Financial, Inc. which was originally
founded in 1937. The Board reviewed Waddell & Reed's investment philosophy for,
and the amount of assets managed in the small cap growth style, as well as the
good performance that Waddell & Reed has achieved in the style.
- 3 -
<PAGE> 5
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, Franklin or Waddell & Reed, approved the
termination of the subadvisory agreement with Franklin and the appointment of
Waddell & Reed to serve as a new subadviser to the Fund. The termination of the
subadvisory agreement with Franklin and the appointment of Waddell & Reed as a
subadviser both took effect on October 1, 2000. The Board of Trustees also
approved the form of the subadvisory agreement among the Adviser, the Trust
(acting on behalf of the Fund) and Waddell & Reed. In doing so, the Board of
Trustees found that the compensation payable under the subadvisory agreement
with Waddell & Reed was fair and reasonable in light of the services to be
provided and the expenses to be assumed by Waddell & Reed under such agreement.
COMPARISON OF SUBADVISORY AGREEMENTS
The subadvisory agreement with Waddell & Reed (the "New Agreement") is the same
in all material respects as the subadvisory agreement with Franklin (the "Former
Agreement"), including the fees payable thereunder, which will remain at 0.60%
of the assets managed by Waddell & Reed. The Former Agreement took effect on May
1, 1999, and was approved by the Fund's initial shareholder on May 1, 1999. The
Former Agreement has not been submitted for shareholder approval since then.
The Former Agreement had a 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 October 1, 2000. Each Agreement can be terminated
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 substantially 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 Waddell & Reed
under the New Agreement are the same as the duties required of Franklin under
the Former Agreement. Waddell & Reed is required to manage the portion of the
Fund's portfolio allocated to it (which constitutes approximately 38% 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.
The brokerage provisions of the Former Agreement and the New Agreement are the
same in all material respects. Under the Former Agreement, Franklin 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, Franklin was required to use reasonable efforts to obtain the most
favorable price and execution available but was 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 that are the same in all material respects.
- 4 -
<PAGE> 6
The provisions of the Former Agreement and the New Agreement relating to
indemnification by and the liability of the subadviser are substantially the
same. Under the Former Agreement, Franklin and its affiliates and controlling
persons could not be held liable for any error of judgement or mistake of law 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 Franklin or
reckless disregard of its duties under the Former Agreement. The Former
Agreement provided that nothing in such Agreement, however, relieved Franklin
from any of its obligations under federal and state securities laws and other
applicable law. The New Agreement contains provisions that are substantially the
same.
Franklin was required under its Former 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 Franklin's willful
misfeasance, bad faith, gross negligence, reckless disregard of its duties or
violation of applicable law. The New Agreement contains provisions that are
substantially the same. Each of the Former Agreement and the New Agreement
contains provisions pursuant to which the Adviser is required to indemnify the
subadviser in certain circumstances.
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 or 3) at the Commission's website - http://
www.sec.gov.
OTHER INFORMATION ABOUT WADDELL & REED
Waddell & Reed, located at 6300 Lamar Avenue, Overland Park, Kansas 66202, is an
indirect, wholly owned subsidiary of Waddell & Reed Financial, Inc., 6300 Lamar
Avenue, Overland Park, Kansas 66202, a publicly held company. Originally founded
in 1937, Waddell & Reed, Inc. offers a broad array of investment products and,
through its subsidiary Waddell & Reed, provides investment advice to both
registered investment companies and separate accounts. As of August 31, 2000,
Waddell & Reed had in excess of $39 billion in assets under management.
The following table sets forth the name, address and principal occupation of the
principal executive officer and each of the Directors of Waddell & Reed.
- 5 -
<PAGE> 7
<TABLE>
<CAPTION>
---------------------------------- ------------------------------------------ ----------------------------------------
NAME TITLE WITH WADDELL & REED PRINCIPAL OCCUPATION AND ADDRESS*
---------------------------------- ------------------------------------------ ----------------------------------------
<S> <C> <C>
Keith Albert Tucker Director Chairman of Waddell & Reed Financial,
Inc.
---------------------------------- ------------------------------------------ ----------------------------------------
Robert Lee Hechler Executive Vice President, Treasurer, President and Chief Executive Officer
Director and Chief Financial Officer of Waddell & Reed, Inc.
---------------------------------- ------------------------------------------ ----------------------------------------
Henry John Herrmann Director, President, Chief Executive President and Chief Executive Officer
Officer, and Chief Investment Officer of Waddell & Reed
---------------------------------- ------------------------------------------ ----------------------------------------
</TABLE>
*Unless otherwise indicated, all of the above individuals can be contacted at
6300 Lamar Avenue, Overland Park, Kansas 66202.
Waddell & Reed currently serves as investment adviser to three other series of
investment companies that have investment objectives similar to those of the
Fund. The net assets and investment advisory fees as of November 30, 2000, for
the three other investment companies are set forth in the following table:
<TABLE>
<CAPTION>
---------------------------------------- -------------------------------------- --------------------------------------
Fund Net Assets Advisory Fees*
---------------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C> <C> <C>
Waddell & Reed Advisors Small Cap $388 million 0.85% of the first $1 billion, 0.83%
Fund, Inc. of the second $1 billion, 0.80% of
the third $1 billion, and 0.76% of
the Fund's average daily net assets
in excess of $3 billion
---------------------------------------- -------------------------------------- --------------------------------------
Small Cap Growth Fund, one series of $582 million 0.85% of the first $1 billion, 0.83%
W&R Funds, Inc. of the second $1 billion, 0.80% of
the third $1 billion, and 0.76% of
the Fund's average daily net assets
in excess of $3 billion
---------------------------------------- -------------------------------------- --------------------------------------
Small Cap Portfolio, one series of W&R $332 million 0.85% of the first $1 billion, 0.83%
Target Funds, Inc. of the second $1 billion, 0.80% of
the third $1 billion, and 0.76% of
the Fund's average daily net assets
in excess of $3 billion
---------------------------------------- -------------------------------------- --------------------------------------
</TABLE>
-------------------
*Calculated as an annual percentage of the Fund's average daily nets assets.
MORE ABOUT FEES AND EXPENSES
The Fund pays the Adviser an investment advisory fee at the annual rate of 1.10%
of the Fund's average daily net assets. 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 to not more than 1.30% of the Fund's average
daily net assets on an annual basis. During its first fiscal period ended
December 31, 1999, the Adviser was entitled to receive from the Fund advisory
fees in the amount of $47,647, all of which was waived or reimbursed. This fee
waiver is voluntary and
- 6 -
<PAGE> 8
may be terminated at any time. Without waivers or reimbursements, total Fund
expenses would have been 3.40% for the fiscal period ended December 31, 1999.
NAS and the Trust (acting on behalf of the Fund) entered into the Former
Agreement with Franklin pursuant to which Franklin managed a portion of the
Fund's assets as allocated to it by the Fund's investment adviser in accordance
with the Fund's investment objective and policies. Franklin made investment
decisions for the Fund and purchased and sold securities for the Fund. For the
investment management services it provided to the Fund, Franklin received a fee
from the Adviser in an amount equal to 0.60% on the Fund's assets which it
managed. During the fiscal period ended December 31, 1999, the Adviser paid
Franklin a total of $25,989. If Waddell & Reed had been a subadviser for the
Fund for the fiscal period ended December 31, 1999, it would have earned the
same subadvisory fees.
ADDITIONAL INFORMATION
As of December 18, 2000, the Fund had issued and outstanding 5,544,858 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 the Fund:
<TABLE>
<CAPTION>
Amount and Nature of
Name and Address Voting and Investment Power
---------------- ---------------------------
<S> <C>
Nationwide Variable Account-9 of Shared voting and investment power over
Nationwide Life Insurance Company 4,102,944 shares of the Fund representing
One Nationwide Plaza 73.996% of the Fund's outstanding shares.
Columbus, Ohio 43215
Nationwide Variable Account-II of Voting and investment power over 589,609
Nationwide Life Insurance Company shares of the Fund representing 10.633% of the
One Nationwide Plaza Fund's outstanding shares.
Columbus, Ohio 43215
Nationwide VLI Separate Account-4 of Voting and investment power over 310,698
Nationwide Life Insurance Company shares of the Fund representing 5.603% of the
One Nationwide Plaza Fund's outstanding shares.
Columbus, Ohio 43215
</TABLE>
As of December 18, 2000, the officers and Trustees of the Trust as a group owned
less than 1% of the outstanding shares of the Fund.
Although Contract Owners are not being asked to vote on the replacement of
Franklin with Waddell & Reed, the Trust is required by the rules of the
Commission to summarize the voting rights of Contract Owners. 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
- 7 -
<PAGE> 9
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 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.
Contract Owners will also be permitted to revoke previously submitted voting
instructions in accordance with instructions contained in the proxy statement
sent to the Fund's shareholders and to Contract Owners.
The foregoing description of Contract Owner 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 and to
Contract Owners will fully describe the voting rights of Contract Owners and the
voting procedures that will be followed at the shareholder meeting.
Because the Fund is sold as an underlying mutual fund option in variable annuity
and insurance products, the Fund has no principal underwriter. However, NAS
provides marketing and wholesaling at no cost to the Fund. Villanova SA Capital
Trust, an affiliate of the Adviser and NAS, serves as the Fund's administrator.
The address for the Adviser and Villanova SA Capital Trust is 1200 River Road,
Conshohocken, Pennsylvania 19428. The address for NAS is One Nationwide Plaza,
Columbus, Ohio 43215.
No officer or Trustee of the Trust is an officer, employee, or director of
Waddell & Reed, nor do any such officers or Trustees own securities issued by
Waddell & Reed or have any other material direct or indirect interest in Waddell
& Reed.
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, 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-CLASS MAIL WITHIN THREE BUSINESS DAYS OF
RECEIPT OF YOUR REQUEST.
By Order of the Board of Trustees,
/s/ KEVIN S. CROSSETT
----------------------------
Kevin S. Crossett, Secretary
December 27, 2000
- 8 -
