Announcement of Investment Changes

Three changes to our investment line-up are scheduled for June 2, 2017. Changes affect options in the small-cap value, small-cap growth, and international categories. Our independent investment consultant recommended and the Ohio DC Board of Trustees approved moving participants to investment options with better potential risk/return, performance, and/or lower costs.

Fund Changes

Two small-cap options will move from retail mutual funds to white-label1 separate accounts2. Since they are new portfolios, these investment options will not initially have a fund profile or historical performance to report, but will have more flexibility in investment strategy and costs.

Small-Cap Value. The FPA Capital fund will be closed and replaced by the Ohio DC Small-Cap Value fund. The new customized investment option will be managed by Westwood Management Corp. The Ohio DC Small-Cap Value fund will:

  • be a white-label separate account option rather than a mutual fund and only available to Ohio DC investors;
  • have lower fees with an initial net expense ratio of approximately 0.59%;
  • have the same investment strategy as the Westwood SmallCap fund (ticker WHGSX);
  • have an investment strategy intended to exceed the performance of the Russell 2000 Value Index, and;
  • not have redemption fees or administrative rebates.
Old Investment Option New Investment Option
FPA Capital (FPPTX)
Net Expense Ratio: 0.72%
Ohio DC Small-Cap Value (managed by Westwood Management Corp.)
Net Expense Ratio: 0.59%

Expense ratio information as of March 31, 2017

Small-Cap Growth. The Hartford Small Company fund will be closed and replaced by the Ohio DC Small-Cap Growth fund. The new customized investment option will be 70% managed by Westfield Capital Management Company, L.P. and 30% managed by Apex Capital Management. The Ohio DC Small-Cap Growth fund will:

  • be a white-label separate account option rather than a mutual fund and only available to Ohio DC investors;
  • have 70% invested with the same strategy Westfield implements as a subadvisor to the Harbor Small Cap Growth fund (ticker HNSGX);
  • have 30% invested with the same strategy Apex implements as a subadvisor to the Touchstone Small Cap Growth fund (ticker MXCIX);
  • have an investment strategy intended to exceed the performance of the Russell 2000 Growth Index, and;
  • not have administrative rebates, redemption fees, and a slightly higher initial net expense ratio of approximately 0.77%.
Old Investment Option New Investment Option
Hartford Small Company (HIASX)
Net Expense Ratio: 0.67%
Ohio DC Small-Cap Growth (managed by Westfield Capital Management Company, L.P. & Apex Capital Management)
Net Expense Ratio: 0.77%

Expense ratio information as of March 31, 2017

While this new investment option has a higher expense ratio, participants should be better served by more diverse investments and better risk/return characteristics. Investors in the FPA Capital or Hartford Small Company funds will receive a letter in April explaining these changes.

Share Class Change

International. The Templeton Foreign fund (advisor shares, ticker: TFFAX) will be closed and replaced by the Templeton Foreign fund (R6 shares, ticker: FTFGX). This change is simply to a lower-costing share class of the same investment team and strategy. The current advisor shares have an expense ratio of 0.97% with 0.15% of administrative rebates resulting in a net cost of 0.82%. The R6 shares have an expense ratio of only 0.72%, which results in annual savings of 0.10% or approximately $140,000 to the participants invested in this fund.

Old Investment Option New Investment Option
Templeton Foreign, Advisor Shares (TFFAX)
Net Expense Ratio: 0.82%
Templeton Foreign, R6 Shares (FTFGX)
Net Expense Ratio: 0.72%

Expense ratio information as of March 31, 2017

Exchange Deadline

To help process the required fund exchanges, participants invested in these funds should make any of their own planned exchange requests before 4 p.m. on June 1. On June 2, shares in the closing funds will be sold at that day’s price, and an equivalent value of shares in the replacement funds will be purchased. Once the mandatory exchanges are completed, a letter with detailed transaction information will be sent to affected participants.

1 A white-label fund is a professionally managed portfolio of stocks, bonds, and other assets with a custom branded name based on the investment strategy or objective rather than the investment manager’s name. These funds may use multiple investment managers to achieve the stated objective.

2 A separate account is a privately managed investment account that uses pooled money to buy individual assets. It is similar to a mutual fund. However, in a retirement-plan context, while a mutual fund is available to the general public, a separate account is available only to participants of the plan that sponsors it.

NRW-4811OH-OH
NRW-4811OH-OH
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