NATIONWIDE SEPARATE ACCOUNT TRUST, 485APOS, 1995-08-14

NATIONWIDE SEPARATE ACCOUNT TRUST
485APOS, 1995-08-14

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<PAGE> 1
'33 Act File No. 2-73024
'40 Act File No. 811-3213

As filed with the Securities and Exchange Commission on August 14, 1995
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 19 [x]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 20 [x]
(Check appropriate box or boxes)

NATIONWIDE SEPARATE ACCOUNT TRUST
-Total Return Fund
-Capital Appreciation Fund
-Government Bond Fund
-Money Market Fund
-Small Company Fund
(Exact Name of Registrant as Specified in Charter)

ONE NATIONWIDE PLAZA
COLUMBUS, OHIO 43216
(Address of Principal Executive Office)(Zip Code)

Registrant's Telephone Number, including Area Code: (614) 249-7111

Send Copies of Communications to:
MS. RAE I. MERCER DRUEN, RATH & DIETRICH
ONE NATIONWIDE PLAZA ONE NATIONWIDE PLAZA
COLUMBUS, OHIO 43216 COLUMBUS, OHIO 43216
(NAME AND ADDRESS OF AGENT FOR SERVICE)

[x] It is proposed that this filing will become effective on October 25,
1995 pursuant to paragraph (a) of Rule 485.

Registrant has declared that an indefinite number of its shares are registered
by a prior registration statement in accordance with Rule 24f-2 under the
Investment Company Act of 1940. Pursuant to Paragraph (a)(3) thereof, a
non-refundable fee in the amount of $500 has been paid to the Commission for
the shares. Registrant filed its Rule 24f-2 Notice for the fiscal year ended
December 31, 1994, on February 28, 1995.

<PAGE> 2
NATIONWIDE SEPARATE ACCOUNT TRUST

The Prospectus, dated April 28, 1995, which relates to the Total Return
Fund, Capital Appreciation Fund, Government Bond Fund and Money Market Fund,
is incorporated by reference in its entirety into this Post-Effective Amendment
to the Registration Statement. The Items relating to the Prospectus for the
Nationwide Small Company Fund are listed below. The Items in Part B and C
relate to all of the Funds in the Nationwide Separate Account Trust.

<TABLE>
<CAPTION>
N-1A Item No. Location
------------- --------
<S> <C> <C>
PART A
Item 1. Cover Page . . . . . . . . . . . . . . . . . . Cover Page
Item 2. Synopsis . . . . . . . . . . . . . . . . . . . *
Item 3. Condensed Financial Information . . . . . . . *
Item 4. General Description of Registrant . . . . . . Investment Objective and Policies; Investment
Techniques, Considerations and Risk Factors
Item 5. Management of the Fund . . . . . . . . . . . . Management of the Trust
Item 6. Capital Stock and Other Securities . . . . . . Additional Information
Item 7. Purchase of Securities Being Offered . . . . . Sale of Fund Shares; Investment in Fund Shares; Net
Income and Distributions
Item 8. Redemption or Repurchase . . . . . . . . . . . Share Redemption
Item 9. 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 Objective and Policies . . . . . . Investment Objectives and Policies; Investment
Restrictions
Item 14. Management of the Registrant . . . . . . . . . Trustees and Offices of the Trust
Item 15. Control Persons and Principal Holders of
Securities . . . . . . . . . . . . . . . . . . Major Shareholders
Item 16. Investment Advisory and Other Services . . . . Investment Adviser and Other Services
Item 17. Brokerage Allocation . . . . . . . . . . . . . Brokerage Allocations
Item 18. Capital Stock and Other Securities . . . . . . *
Item 19. Purchase, Redemption and Pricing of Securities
Being Offered . . . . . . . . . . . . . . . . Purchases, Redemptions and Pricing of Shares
Item 20. Tax Status . . . . . . . . . . . . . . . . . . Tax Status; Tax Consequences for the Small Company
Fund; Tax Consequences to Shareholders
Item 21. Underwriters . . . . . . . . . . . . . . . . . *
Item 22. Calculation of Performance Data . . . . . . . Calculating Yield - The Money Market Fund; Calculating
Yield and Total Return - Non-Money Market Funds
Financial Statements
Item 23. Financial Statements . . . . . . . . . . . . .

PART C
<FN>
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
</TABLE>

<PAGE> 3

PROSPECTUS
OCTOBER ____, 1995

Shares of Beneficial Interest
NATIONWIDE SMALL COMPANY FUND
NATIONWIDE SEPARATE ACCOUNT TRUST
One Nationwide Plaza
Columbus, Ohio 43216
For Information and Assistance, Call
(614) 249-5134

Nationwide Small Company Fund (the "Fund") is a non-diversified portfolio of
the Nationwide Separate Account Trust (the "Trust"). The Trust is an open-end
management investment company organized under the laws of Massachusetts, by a
Declaration of Trust, dated June 30, 1981, as subsequently amended. The Trust
offers shares in five separate mutual funds, each with its own investment
objective. This Prospectus relates only to the Nationwide Small Company Fund.
The shares of the Fund are sold only to life insurance company separate
accounts to fund the benefits of variable insurance and annuity policies.

The Fund seeks long-term growth of capital. The Fund invests primarily in
equity securities of small capitalization companies.

This Prospectus provides you with the basic information you should know before
investing in the Funds. You should read it and keep it for future reference.
A Statement of Additional Information dated October ____, 1995, has been filed
with the Securities and Exchange Commission. You can obtain a copy without
charge by calling (614) 249-5134, or writing Nationwide Life Insurance Company,
One Nationwide Plaza, Columbus, Ohio 43216.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES 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.

THE STATEMENT OF ADDITIONAL INFORMATION, DATED OCTOBER ____, 1995,
IS INCORPORATED HEREIN BY REFERENCE.

<PAGE> 4

SALE OF FUND SHARES

Currently, shares of the Fund are sold only to life insurance company
separate accounts ("Accounts") to fund the benefits of variable insurance or
annuity policies ("Policies") issued by life insurance companies. The Accounts
purchase shares of the Fund in accordance with variable account allocation
instructions received from owners of the Policies. The Fund then uses the
proceeds to buy securities for its portfolio. The investment adviser, together
with a group of subadvisers, manages the portfolio from day to day to
accomplish the Fund's investment objective. The types of investments and the
way they are managed depend on what is happening in the economy and the
financial marketplaces. Each of the Accounts, as a shareholder, has an
ownership in the Fund's investments. The Fund also offers to buy back (redeem)
shares of the Fund from the Accounts at any time at net asset value.

INVESTMENT OBJECTIVE AND POLICIES

Nationwide Small Company Fund (the "Fund") seeks long-term growth of capital.
The Fund invests primarily in equity securities of small market capitalization
companies ("small company stocks"). Market capitalization means the total
market value of a company's outstanding common stock. The Fund anticipates
that under normal market conditions, the Fund will invest at least 65% of its
assets in equity securities of domestic and foreign companies with market
capitalizations of less than $1 billion at the time of purchase. The equity
securities in which the Fund may invest include common stocks, preferred stocks
(both convertible and non-convertible), warrants and rights. It is anticipated
that the Fund will invest primarily in companies whose securities are traded on
foreign or domestic stock exchanges or in the over-the-counter market ("OTC").
The Fund may also invest in securities of emerging growth companies, some of
which may have market capitalizations over $1 billion. Emerging growth
companies are companies which have passed their start-up phase and which show
positive earnings and prospects of achieving significant profit and gain in a
relatively short period of time.

The Fund may purchase an unlimited number of foreign securities, including
securities of companies in emerging markets. The Fund may also invest in
foreign securities indirectly through American Depository Receipts ("ADRs") and
other similar instruments as described below in "INVESTMENT TECHNIQUES,
CONSIDERATIONS AND RISK FACTORS - Foreign Securities and Currencies".

Under normal conditions, the Fund intends to invest primarily in small
company stocks; however, the Fund is also permitted to invest up to 35% of its
assets in equity securities of domestic and foreign issuers with a market
capitalization of more than $1 billion at the time of purchase, debt
obligations and domestic and foreign money market instruments, including
bankers acceptances, certificates of deposit and discount notes of U.S.
Government securities. In addition, for temporary or emergency purposes, the
Fund can invest up to 100%

<PAGE> 5

of total assets in cash, cash equivalents, U.S. Government securities,
commercial paper and certain other money market instruments, as well as
repurchase agreements collateralized by these types of securities.

At various times the Fund may invest in derivative instruments for hedging or
risk management purposes or to generate return. See "INVESTMENT TECHNIQUES,
CONSIDERATIONS AND RISK FACTORS - Derivative Instruments" below.

While there is careful selection and constant supervision by a group of
professional investment managers, there can be no guarantee that the Fund's
objective will be achieved. The fundamental policies of the Fund do not
require shareholder approval to change the Fund's investment objective.

MANAGEMENT OF THE FUND

Nationwide Financial Services, Inc. (the "Adviser") has employed a group of
subadvisers (each, a "Subadviser") each of which will manage part of the Fund's
portfolio. Although the Adviser reserves the right to allocate and reallocate
the assets among the Subadvisers at any time, it is anticipated that each of
the Subadvisers will receive a substantially equal proportion of the funds that
are invested in the Fund and will generally retain such assets and any capital
appreciation attributable to them. In addition, it is anticipated that the
Adviser will maintain a portion of the Fund's assets in cash or money market
instruments.

The Adviser has chosen the Subadvisers because they utilize a number of
different investment styles when investing in small company stocks. The
Adviser has decided to employ a number of Subadvisers because even successful
investment managers may experience fluctuations in performance which may be
caused by factors or conditions that affect the particular securities
emphasized by that Subadviser or that may impact its particular investment
style. As a result of the diversification among securities and styles, the
Adviser hopes to increase prospects for investment return and to reduce market
risk and volatility.

The following is a brief description of the investment strategies for each of
the Subadvisers:

THE DREYFUS CORPORATION ("Dreyfus") primarily seeks out domestic and foreign
small company stocks that have the potential for significant growth. Dreyfus
believes these companies to be characterized by new or innovative products or
services which should enhance prospects for growth in future earnings. Dreyfus
will also make investments based on prospective economic or political changes
and will invest in securities relating to

<PAGE> 6

special situations, such as corporate restructurings, mergers or acquisitions,
thereby seeking out undervalued securities.

NEUBERGER & BERMAN L.P. ("Neuberger & Berman") tries to enhance the potential
for appreciation and limit the risk of decline in the value of the small
company stocks that it purchases for the Fund by employing a value-oriented
investment approach. Neuberger & Berman seeks securities that appear to be
underpriced and are issued by companies with proven management, sound finances
and strong potential for market growth. It focuses on the fundamentals of each
smaller company, instead of trying to anticipate what changes might occur in
the stock market or in the economy or the political environment; in doing so,
the Fund's securities will be selected in the belief that they are currently
undervalued, based on existing conditions.

STRONG CAPITAL MANAGEMENT, INC. ("Strong") invests in companies whose earnings
are believed to be in a relatively strong growth trend, and, to a lesser
extent, in companies in which significant further growth is not anticipated but
which are perceived to be undervalued. In identifying companies with favorable
growth prospects, Strong considers factors such as prospects for above-average
sales and earnings growth; high return on invested capital; overall financial
strength; competitive advantages, including innovative products and services;
effective research, product development and marketing; and stable, capable
management.

VAN ECK ASSOCIATES CORPORATION ("VEAC") AND PICTET INTERNATIONAL MANAGEMENT
LIMITED ("PIML") invest internationally in small company stocks. VEAC and PIML
will primarily choose securities of issuers whose individual market
capitalizations would place them at the time of purchase in the same size range
as companies in approximately the lowest 20% by total market capitalization of
companies that have equities listed on major U.S. exchanges or traded in the
NASDAQ system. These companies will typically have individual market
capitalizations below $500 million. Because this policy is applied on an
international basis, the Fund may invest in companies that may rank above the
lowest 20% by total market capitalization in local markets and in some
countries such companies might rank among the largest companies in terms of
capitalization. When considering where assets will be allocated abroad, VEAC
and PIML will assess where opportunities for long-term capital appreciation are
greatest. In making specific stock selections, VEAC and PIML will invest in
quality, growth-oriented smaller companies that are relatively inexpensive.

WARBURG, PINCUS COUNSELLORS, INC. ("Counsellors") invests primarily in domestic
small company stocks. Counsellors may choose securities of small companies
which may be in the developmental stage, may be older companies that appear to
be entering a new stage of growth owing to factors such as

<PAGE> 7

management changes or development of new technology, products or markets or may
be companies providing products or services with a high unit volume growth
rate. Counsellors may also select securities of emerging growth companies,
which can be either small- or medium-sized companies that have passed their
start-up phase and that show positive earnings and prospects of achieving
significant profit and gain in a relatively short period of time. Emerging
growth companies generally stand to benefit from new products or services,
technological developments or changes in management and other factors and
include smaller companies experiencing unusual developments affecting their
market value.

INVESTMENT TECHNIQUES, CONSIDERATIONS AND RISK FACTORS

SMALL COMPANY AND EMERGING GROWTH STOCKS

Investing in securities of small-sized and emerging growth companies may
involve greater risks than investing in larger, more established issuers since
these securities may have limited marketability and, thus, they may be more
volatile than securities of larger, more established companies or the market
averages in general. Small-sized companies may have limited product lines,
markets or financial resources and may lack management depth. In addition,
small-sized companies are typically subject to wider variations in earnings and
business prospects than are larger, more established companies. There is
typically less publicly available information concerning small-sized companies
than for larger, more established ones. Because small-sized companies normally
have fewer shares outstanding than larger companies, it may be more difficult
for the Fund to buy or sell significant numbers of such shares without an
unfavorable impact on prevailing prices.

Securities of issuers in "special situations" also may be more volatile,
since the market value of these securities may decline in value if the
anticipated benefits do not materialize. Companies in "special situations"
include, but are not limited to, companies involved in an acquisition or
consolidation; reorganization; recapitalization; merger, liquidation or
distribution of cash, securities or other assets; a tender or exchange offer, a
breakup or workout of a holding company; litigation which, if resolved
favorably, would improve the value of the companies' securities; or a change in
corporate control.

Although investing in securities of emerging growth companies or "special
situations" offers potential for above-average returns if the companies are
successful, the risk exists that the companies will not succeed and the prices
of the companies' shares could significantly decline in value. Therefore, an
investment in the Fund may involve a greater degree of risk than an investment
in other mutual funds that seek long-term growth of capital by investing in
better-known, larger companies.

<PAGE> 8

FOREIGN SECURITIES AND CURRENCIES

The Fund may invest in foreign securities, either directly or indirectly
through the use of depositary receipts. Depositary receipts, including ADRs,
European Depository Receipts and American Depository Shares, are generally
issued by banks or trust companies and evidence ownership of underlying foreign
securities. The Fund may also invest in securities of foreign investment funds
or trusts (including passive foreign investment companies).

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. When investing in foreign
securities, the Fund 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.

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 and their prices more volatile than comparable U.S. securities.
Although the Fund generally invests only in securities that are regularly
traded on recognized exchanges or OTC, from time to time, foreign securities
may be difficult to liquidate rapidly without adverse price effects. Certain
costs attributable to foreign investing, such as custody charges and brokerage
costs, are higher than those attributable to domestic investing.

The Fund may invest a portion of its assets in securities of issuers in
developing or emerging markets and economies. Investing in securities of
issuers in developing or emerging markets involves special risks, including
less social, political, and economic stability; smaller securities markets and
lower trading volume, which may result in a lack of liquidity and greater price
volatility; certain national policies that may restrict the Fund's investment
opportunities, including restrictions on investments in issuers or industries
deemed sensitive to national interests, or expropriation or confiscation of
assets or property, which could result in a Fund's loss of its entire
investment in that market; and less developed legal structures governing
private or foreign investment or allowing for judicial redress for injury to
private property.

<PAGE> 9

In addition, brokerage commissions, custodial services, withholding taxes,
and other costs relating to investment in emerging markets generally are more
expensive than in the U.S. and certain more established foreign markets.
Economies in 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 denominated in non-U.S. currencies, the
investment performance of the Fund could be significantly affected by changes
in foreign currency exchange rates. The value of the Fund's assets denominated
in foreign currencies will increase or decrease in response to fluctuations in
the value of those foreign currencies 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.

The Fund may 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 "Derivative
Instruments" below.)

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.

CONVERTIBLE SECURITIES

A convertible security is a fixed income security or preferred stock that may
be converted at either a stated price or stated rate into underlying shares of
common stock. 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, also will 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

<PAGE> 10

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 debt obligations, 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 have lower ratings than similar non-convertible
securities.

DEBT OBLIGATIONS

IN GENERAL - Debt obligations in which the Fund may invest will be
investment-grade debt obligations, although the Fund may invest up to 5% of its
assets in non-investment-grade debt obligations. The market value of all debt
obligations is affected by changes in the prevailing interest rates. The
market value of such instruments generally reacts inversely to interest rate
changes. If the prevailing interest rates decrease, the market value of debt
obligations generally increases. If the prevailing interest rates increase,
the market value of debt obligations generally decreases. In general, the
longer the maturity of a debt obligation, the greater its sensitivity to
changes in interest rates.

Investment-grade debt obligations include 1) bonds or bank obligations rated
in one of the four highest rating categories by any nationally recognized
statistical rating organization ("NRSRO") (e.g., Moody's Investors Service,
Inc. or Standard & Poor's Ratings Group); 2) U.S. government securities (as
described below); 3) commercial paper rated in one of the three

<PAGE> 11

highest ratings categories of any NRSRO; 4) short-term bank obligations that
are rated in one of the three highest categories by any NRSRO, with respect to
obligations maturing in one year or less; 5) repurchase agreements involving
investment-grade debt obligations; or 6) unrated debt obligations which are
determined by the Adviser or a Subadviser to be of comparable quality.

All ratings are determined at the time of investment. Any subsequent rating
downgrade of a debt obligation will be monitored by the Adviser or a Subadviser
to consider what action, if any, the Fund should take consistent with its
investment objective; such event will not automatically require the sale of the
downgraded securities. Securities rated in the fourth highest category by an
NRSRO, although considered investment-grade, have speculative characteristics
and may be subject to greater fluctuations in value than higher-rated
securities. Non-investment-grade debt obligations include 1) securities rated
as low as C by Standard & Poor's or its equivalents; 2) commercial paper rated
as low as C by Standard & Poor's or its equivalents; or 3) unrated debt
securities judged to be of comparable quality by the Adviser or a Subadviser.

REPURCHASE AGREEMENTS - The Fund may engage in repurchase agreement
transactions as 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 debt obligation 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 Fund will enter into repurchase agreements with
respect to securities in which it may invest 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. 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 Adviser or a Subadviser, acting under the supervision of the Board of
Trustees, reviews the creditworthiness of those banks and non-bank dealers with
which the Fund enters into repurchase agreements to evaluate these risks. See
"Repurchase Agreements" in the Statement of Additional Information.

U.S. GOVERNMENT SECURITIES - U.S. government securities are issued or
guaranteed by the U.S. government or its agencies or instrumentalities.
Securities issued by the government include U.S. Treasury obligations, such as
Treasury bills, notes, and bonds. Securities issued by government agencies or
instrumentalities include, but are not limited to, obligations of the

<PAGE> 12

following:

- the Federal Housing Administration, 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;
- the Federal Home Loan Banks and the Tennessee Valley Authority, whose
securities are supported by the right of the agency to borrow from the U.S.
Treasury;
- the Federal National Mortgage Association, whose securities are supported by
the discretionary authority of the U.S. government to purchase certain
obligations of the agency or instrumentality; and
- the Student Loan Marketing Association and the International Bank for
Reconstruction and Development, whose securities are supported only by the
credit of such agencies.

Although the U.S. government provides financial support to such U.S.
government-sponsored agencies or instrumentalities, no assurance can be given
that it will always do so. 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.

DERIVATIVE INSTRUMENTS

Derivative instruments may be used by the Fund for hedging or risk management
purposes, but not for speculation. Derivative instruments are securities or
agreements whose value is based on the value of some underlying asset, for
example, securities, currencies, or reference indices. 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 corresponding losses due to
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 due to 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

<PAGE> 13

to options, futures, and options on futures transactions, derivative
transactions may include short sales against the box, in which the Fund 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 the Fund may engage include the writing of
covered put and call options and the purchase of put and call options, the
purchase of put and call options on stock indexes and exchange-traded options
on currencies and the writing of put and call options on stock indexes. The
Fund also may buy and sell financial futures contracts which may include
security and interest-rate futures, futures on currency exchanges and stock and
bond index futures contracts. The Fund 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. The Fund may also enter into forward currency contracts to
purchase or sell foreign currencies.

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 ("SEC"), the Fund will set aside permissible liquid assets or
securities positions that substantially correlate to the market movements of
the derivatives transactions in a segregated account to secure its 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 the Fund's assets could impede portfolio
management or the Fund's ability to meet redemption requests or other current
obligations. In order to maintain its required cover for a derivative
transaction, the Fund 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 the Fund is dependent upon a
Subadviser's ability to correctly anticipate

<PAGE> 14

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.

SHORT SALES AGAINST THE BOX

The Fund may also engage in short selling against the box as long as no more
than 15% of the value of the Fund's net assets is in deposits on short sales
against the box at any one time.

HARD ASSET SECURITIES

The Fund may invest in equity securities of issuers which are directly or
indirectly engaged to a significant extent in the exploration, development or
distribution of one or more of the following: precious metals; ferrous and
non-ferrous metals; gas, petroleum, petrochemical and/or other hydrocarbons;
forest products; real estate and other basic non-agricultural commodities
(collectively, "Hard Assets"). The production and marketing of Hard Assets may
be affected by actions and changes in governments. In addition, Hard Asset
securities may be cyclical in nature. During periods of economic or financial
instability, the securities of some Hard Asset companies may be subject to
broad price fluctuations, reflecting the volatility of energy and basic
materials prices and the possible instability of supply of various Hard Assets.
In addition, some Hard Asset companies may also be subject to the risks
generally associated with extraction of natural resources, such as the risks of
mining and oil drilling, and the risks of the hazards associated with natural
resources, such as fire, drought, increased regulatory and environmental costs,
and others. Securities of Hard Asset companies may also experience greater
price fluctuations than the relevant Hard Asset. In periods of rising Hard
Asset prices, such securities may rise at a faster rate, and, conversely, in
time of falling Hard Asset prices, such securities may suffer a greater price
decline.

REAL ESTATE SECURITIES

Although the Fund will not invest in real estate directly, it may invest in
equity securities of real estate investment trusts ("REITs") and other real
estate industry companies or companies with substantial real estate investments
and therefore, the Fund may be subject to certain risks associated with direct
ownership of real estate and with the real estate industry in general. These
risks include, among others: possible declines in the value of real estate;
possible lack of availability of mortgage funds; extended vacancies of
properties; risks related to general and local economic conditions;
overbuilding; increases in competition, property taxes and operating expenses;
changes in zoning laws; costs resulting from the clean-up of, and liability to
third parties for damages resulting from, environmental problems; casualty or
condemnation losses; uninsured damages from floods, earthquakes or other
natural disasters; limitations on and variations in rents; and changes in
interest rates.

<PAGE> 15

REITs are pooled investment vehicles which invest primarily in income
producing real estate or real estate related loans or interests. REITs are
generally classified as equity REITs, mortgage REITs or hybrid REITs. Equity
REITs invest the majority of their assets directly in real property and derive
income primarily from the collection of rents. Equity REITs can also realize
capital gains by selling properties that have appreciated in value. Mortgage
REITs invest the majority of their assets in real estate mortgages and derive
income from the collection of interest payments. REITs are not taxed on income
distributed to shareholders provided they comply with several requirements of
Internal Revenue Code, as amended (the "Code").

ILLIQUID SECURITIES

The Fund may invest up to 15% of its net assets in securities that are
illiquid, in that they cannot be expected to be sold within seven days at
approximately the price at which they are valued. Due to the absence of an
active trading market, the Fund may experience difficulty in valuing or
disposing of illiquid securities. Each Subadviser will determine the liquidity
of the Fund's securities, under the supervision the Trust's trustees.

RESTRICTED SECURITIES, NON-PUBLICLY TRADED SECURITIES AND RULE 144A SECURITIES

Each Portfolio may invest in restricted securities and Rule 144A securities.
Restricted securities cannot be sold to the public without registration under
the Securities Act of 1933 ("1933 Act"). Unless registered for sale, these
securities can be sold only in privately negotiated transactions or pursuant to
an exemption from registration. Restricted securities are generally considered
illiquid and, therefore, subject to the Fund's 15% limitation on illiquid
securities.

Non-publicly traded securities (including Rule 144A securities) may be less
liquid than publicly traded securities. Although these securities may be
resold in privately negotiated transactions, the prices realized from these
sales could be less than those originally paid by the Fund. In particular,
Rule 144A securities may be resold only to qualified institutional buyers in
accordance with Rule 144A under the 1933 Act. Unregistered securities may also
be sold abroad pursuant to Regulation S under the 1933 Act. Companies whose
securities are not publicly traded are not subject to the disclosure and other
investor protection requirements that would be applicable if their securities
were publicly traded. Acting pursuant to guidelines established by the
Trustees of the Trust, some restricted securities and Rule 144A securities may
be considered liquid.

WHEN-ISSUED SECURITIES

<PAGE> 16

The Fund may invest without limitation 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 purchaser enters into the
commitment, these securities may be delivered and paid for at a future date,
generally within 45 days. Purchasing when-issued securities allows the Fund to
lock in a fixed price or yield on a security it intends to purchase. However,
when the Fund purchases a when-issued security, it immediately assumes the risk
of ownership, including the risk of price fluctuation until the settlement
date.

The greater the 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 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 securities for the purpose of actually acquiring the
securities, unless after entering into the commitment a sale appears desirable
for investment reasons. When required by SEC guidelines, the Fund will set
aside permissible liquid assets in a segregated account to secure its
outstanding commitments for when-issued securities.

REVERSE REPURCHASE AGREEMENTS

The Fund may also enter into reverse repurchase agreements with the same
parties with whom it may enter into repurchase agreements. Reverse repurchase
agreements involve the sale of securities held by the Fund pursuant to its
agreement to repurchase them at a mutually agreed upon date, price and rate of
interest. At the time the Fund enters into a reverse repurchase agreement, it
will establish and maintain a segregated account with an approved custodian
containing cash or liquid high-grade debt securities having a value not less
than the repurchase price (including accrued interest). The assets contained
in the segregated account will be marked-to-market daily and additional assets
will be placed in such account on any day in which the assets fall below the
repurchase price (plus accrued interest). The Fund's liquidity and ability to
manage its assets might be affected when it sets aside cash or portfolio
securities to cover such commitments. Reverse repurchase agreements involve
the risk that the market value of the securities retained in lieu of sale may
decline below the price of the securities the Fund has sold but is obligated to
repurchase. In the event the buyer of securities under a reverse repurchase
agreement files for bankruptcy or becomes insolvent, such buyer or its trustee
or receiver may receive an extension of time to determine whether to enforce
the Fund's obligation to repurchase the securities, and the Portfolio's use of
the proceeds of the reverse repurchase agreement may effectively be restricted
pending such decision.

<PAGE> 17

Reverse repurchase agreements are considered to be borrowings under the
Investment Company Act of 1940 (the "1940 Act").

LENDING PORTFOLIO SECURITIES

From time to time, the Fund may lend its portfolio securities to brokers,
dealers and other financial institutions needing to borrow securities to
complete certain transactions. In connection with such loans, the Fund 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 Fund can increase its income through the investment of such
collateral. The Fund continues to be entitled to payments in amounts equal to
the interest, dividends or other distributions payable on the loaned security
and receives interest on the amount of the loan. Such loans will be terminable
at any time upon specified notice. The 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.

BORROWING MONEY

As a fundamental policy, the Fund is permitted to borrow to the extent
permitted under the 1940 Act. However, the Fund currently intends to borrow
money only for temporary or emergency purposes (but not for leverage or the
purchase of investments, except when entering into reverse repurchase
agreements as described above), in an amount up to 30% of the value of the
Fund's total assets (including the amount borrowed) valued at the time the
borrowing is made.

NON-DIVERSIFIED STATUS

The Fund is classified as non-diversified under the 1940 Act, which means
that the Fund is not limited by the 1940 Act in the proportion of its assets
that it may invest in securities of a single issuer. The Fund's investments
will be limited, however, in order to qualify as a "regulated investment
company" for purposes of the Code. To qualify, the Fund will comply with
certain requirements, including limiting its investments so that at the close
of each quarter of the taxable year (a) not more than 25% of the market value
of its total assets will be invested in the securities of a single issuer, and
(b) with respect to 50% of the market value of its total assets, not more than
5% of the market value of its total assets will be invested in the securities
of a single issuer and the Fund will not own more than 10% of the outstanding
voting securities of a single issuer. Being non-diversified means that the
Fund may invest a greater proportion of its assets in the obligations of a
small number of issuers and, as a result, may be subject to greater risk with

<PAGE> 18

respect to portfolio securities. To the extent that the Fund assumes large
positions in the securities of a small number of issuers, its return may
fluctuate to a greater extent than that of a diversified company as a result of
changes in the financial condition or in the market's assessment of the
issuers.

PORTFOLIO TURNOVER

The Fund will attempt to purchase securities with the intent of holding them
for investment but may purchase and sell portfolio securities whenever the
Adviser or a Subadviser believes it to be in the best interests of the Fund.
The Fund will not consider portfolio turnover rate a limiting factor in making
investment decisions consistent with its investment objective and policies.

The portfolio turnover rate for the Fund is not expected to exceed 150%.
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 for the Fund may vary greatly from year to year
and within a particular year.

MANAGEMENT OF THE TRUST

TRUSTEES AND OFFICERS

The business and affairs of the Trust are managed under the direction of its
Board of Trustees.

The Board of Trustees sets and reviews policies regarding the operation of
the Trust whereas the officers perform the daily functions of the Trust.

INVESTMENT MANAGEMENT OF THE FUND

THE ADVISER - Under the terms of the Investment Advisory Agreement,
Nationwide Financial Services, Inc., One Nationwide Plaza, Columbus, Ohio
43216, oversees the investment of the assets and, subject to the supervision of
the Trustees, provides various administrative services and supervises the daily
business affairs of the Fund.

Subject to the supervision and direction of the Trustees, the Adviser also
determines the allocation of assets among the Subadvisers and evaluates and
monitors the performance of Subadvisers. The Adviser is also authorized to
select and place portfolio investments on behalf of the Fund; however, the
Adviser generally intends to limit its direct portfolio management to the
investment of a portion of the Fund's assets in cash or money market
instruments.

<PAGE> 19

The Adviser provides to the Fund investment management evaluation services
principally by performing initial due diligence on prospective Subadvisers for
the Fund and thereafter monitoring the performance of the Subadvisers through
quantitative and qualitative analysis as well as periodic in-person, telephonic
and written consultations with the Subadvisers. The Adviser has responsibility
for communicating performance expectations and evaluations to the Subadvisers
and ultimately recommending to the Trust's Board of Trustees whether a
Subadviser's contract should be renewed, modified or terminated; however, the
Adviser does not expect to recommend frequent changes of Subadvisers. The
Adviser will regularly provide written reports to the Board of Trustees
regarding the results of its evaluation and monitoring functions. Although the
Adviser will monitor the performance of the Subadvisers, there is no certainty
that any Subadviser or the Fund will obtain favorable results at any given
time.

The Adviser, an Ohio corporation, is a wholly owned subsidiary of Nationwide
Life Insurance Company, which is wholly owned by Nationwide Corporation, a
holding company in the Nationwide Insurance Enterprise. The Fund pays to the
Adviser a fee at the annual rate of 1.00% of the Fund's average daily net
assets.

THE SUBADVISERS - Subject to the supervision of the Adviser and the Trustees,
the Subadvisers each manage separate portions of the Fund's assets in
accordance with the Fund's investment objective and policies. With regard to
the portion of the Fund's assets allocated to it, each Subadviser shall make
investment decisions for the Fund and in connection with such investment
decisions shall place purchase and sell orders for securities. No Subadviser
shall have any investment responsibility for any portion of the Fund's assets
not allocated to it for investment management. For the investment management
services they provide to the Fund, each Subadviser receives a fee from the
Adviser at the annual rate of .60% of the average daily net assets of the
portion of the Fund managed by that Subadviser.

Below is a brief description of each of the subadvisers.

THE DREYFUS CORPORATION. Dreyfus, located at 200 Park Avenue, New York, New
York 10166, was formed in 1947 and serves as one of the Fund's Subadvisers.
Dreyfus is a wholly-owned subsidiary of Mellon Bank, N.A., which is a
wholly-owned subsidiary of Mellon Bank Corporation ("Mellon"). As of June 30,
1995, Dreyfus managed or administered approximately $76 billion in assets for
approximately 1.8 million investor accounts nationwide.

<PAGE> 20

subsidiaries are Mellon Bank, N.A., Mellon Bank (DE) National Association,
Mellon Bank (MD), The Boston Company, Inc. AFCO Credit Corporation and a number
of companies known as Mellon Financial Services Corporations. Through its
subsidiaries, including Dreyfus, Mellon managed approximately $200 billion in
assets as of March 31, 1995, including approximately $72 billion in mutual fund
assets. As of March 31, 1995, various subsidiaries of Mellon provided
non-investment services, such as custodial or administration services, for
approximately $680 billion in assets including approximately $67 billion in
mutual fund assets.

The primary portfolio manager of the portion of the Fund's portfolio managed
by Dreyfus is Thomas A. Frank. Mr. Frank joined Dreyfus in June 1985 and
currently serves as Senior Portfolio Manager and Director of Equity Research
responsible for directing all equity research functions. Mr. Frank also serves
as Portfolio Manager for various investment companies advised or administered
by Dreyfus, including Dreyfus New Leaders Fund, Inc.

Prior to joining Dreyfus, Mr. Frank served for twelve years at A.G. Becker
and Company, beginning in 1969 as a securities analyst, and eventually becoming
a shareholder and senior line officer in that firm's institutional department.
From 1981 through 1984, Mr. Frank served as Vice President, Special Equities
Group, at Chase Investors Management Corporation, an affiliate of The Chase
Manhattan Bank, N.A., where he shared management responsibility for investment
in smaller capitalization securities for pension, profit sharing and foundation
accounts totalling approximately $1 billion. From 1984 through 1985, Mr. Frank
was a portfolio manager at Neuberger & Berman, with primary responsibility for
overseeing that firm's internal research effort. Mr. Frank received a B.A.
from Williams College and attended the Columbia University Graduate School of
Business Administration.

Neuberger & Berman L.P. Neuberger & Berman also serves as a sub-adviser to
the Fund. Neuberger & Berman and its predecessor firms have specialized in the
management of no-load mutual funds since 1950.

Neuberger & Berman and its affiliates manage securities accounts that had
approximately $34 billion of assets as of August 1, 1995. Neuberger &
Berman is a member firm of the NYSE and other principal exchanges and acts as
the Fund's principal broker in the purchase and sale of their securities for
that portion of the Fund's portfolio managed by Neuberger & Berman.

Stephen E. Milman, who is a Vice President of Neuberger & Berman Management,
Inc. ("N&B Management", an affiliate of Neuberger & Berman) and a general
partner of Neuberger & Berman,

<PAGE> 21

is the Manager of the Small Cap Group of Neuberger & Berman. He has overall
responsibility for activities of the Small Cap Group, providing guidance and
reviewing portfolio strategy and structure. Judith M. Vale, who has been a
member of the Small Cap Group since 1992 and a Vice President of N&B Management
since November 1994, is primarily responsible for the day-to-day management of
Neuberger & Berman's advisory activities for the Fund. Ms. Vale also has
primary responsibility for day-to-day management of the Neuberger & Berman
Genesis Fund. Ms. Vale was a portfolio manager for another investment
management group from 1990 to 1992, and was a senior fund analyst at another
prominent investment adviser from 1987 to 1990.

STRONG CAPITAL MANAGEMENT, INC. Strong, which also serves as one of the
Subadvisers for the Fund, began conducting business in 1974. Since then, its
principal business has been providing continuous investment supervision for
individuals and institutional accounts, such as pension funds and
profit-sharing plans. Strong also acts as investment advisor for each of the
mutual funds within the Strong Family of Funds. As of June 30, 1995, Strong
had over $14 billion under management. Strong's principal mailing address is
P.O. Box 2936, Milwaukee, Wisconsin 53201. Mr. Richard S. Strong is the
controlling shareholder of Strong.

Ronald C. Ognar is responsible for Strong's portfolio management activities
for the Fund. Mr. Ognar, a Chartered Financial Analyst with more than 25 years
of investment experience, joined Strong in April 1993 after two years as a
principal and portfolio manager with RCM Capital Management. For approximately
three years prior to that, he was a portfolio manager at Kemper Financial
Services in Chicago. Mr. Ognar began his investment career in 1968 at LaSalle
National Bank in Chicago after serving two years in the U.S. Army. He received
his bachelor's degree in accounting from the University of Illinois in 1968.
In addition to his portfolio management duties for the Fund, he also manages
the Strong Growth Fund and co-manages the Strong Total Return Fund.

VAN ECK ASSOCIATES AND PICTET INTERNATIONAL MANAGEMENT LIMITED. VEAC
and PIML will together manage a portion of the Fund. VEAC is located at
99 Park Avenue, New York, New York 10016. PIML is located at Cutlers Gardens,
5 Devonshire Square, London, United Kingdom EC2M 4LD. PIML is primarily
responsible for managing the portion of the Fund's assets allocated to the
PIML and VEAC. PIML determines which securities are to be bought and sold.
VEAC, however, makes recommendations to PIML regarding Hard Asset securities.
VEAC will also make recommendations regarding the allocation among each of the
Hard Asset sectors. PIML is not obligated to act on VEAC's recommendation's
and the amount, if any, allocated to Hard Assets will be determined by PIML.
VEAC will also assist PIML on issues regarding determining

<PAGE> 22

the liquidity of securities, portfolio diversification and matters involving
United States federal securities and tax law as they apply to management of the
Fund.

PIML is an operating company of Pictet (London) Limited, an affiliate of
Pictet & Cie ("Pictet"). Pictet was founded in 1805 and is the leading private
bank in Switzerland. Pictet is the largest specialist investment bank
domiciled in Europe. Pictet has a worldwide network of offices employing over
200 investment professionals in Geneva, London, Zurich, Luxembourg, Hong Kong,
Tokyo, Montreal and Nassau. PIML has access to all of Pictet's investment
infrastructure. As of ____________, 1995, total assets under management by
Pictet and its affiliates, including PIML, on behalf of all clients, amounted
to approximately $___ billion.

In performing its investment management duties, PIML assigns a team of
managers led by a Chief Investment Officer. The primary portfolio managers for
the Fund are listed below. This team also performs similar functions for the
Van Eck Worldwide Insurance Trust, Worldwide Small Cap Fund and the Van Eck
Funds Global Small Cap Fund.

Fabien Pictet is Investment Director acting for the Fund on behalf of PIML.
Mr. Pictet, a Director of PIML, joined PIML in 1986 and has been responsible
for establishing PIML's international small companies and emerging market
programs. Prior to joining PIML, Mr. Pictet spent three years as an Assistant
Vice President with Merrill Lynch in New York, working in international
institutional sales.

Nicholas Johnson is the Chief Investment Officer and Chief Investment Officer
for the portion of the Fund managed by PIML. Mr. Johnson is responsible for
all aspects of the investment process including global asset allocation. Prior
to joining PIML in 1993, Mr. Johnson specialized in Japanese and Asian
investments at Invesco MIM, where he had been head of international investment
responsible for investment operations outside of North America.

Jonathan Neill is a Senior Investment Manager for the portion of the Fund
managed by PIML. Mr. Neill is jointly responsible for worldwide small
companies and emerging markets. Prior to joining PIML in 1990, Mr. Neill
worked for two years with Mercury Asset Management as an investment manager
responsible for specialist international funds.

Douglas Polunin is also a Senior Investment Manager for the portion of the
Fund managed by PIML. Mr. Polunin joined PIML in 1989 and is jointly
responsible for worldwide small companies and emerging markets. Prior to
joining PIML, Mr. Polunin spent two and a half years with the Union Bank of
Switzerland in London

<PAGE> 23

where he was in charge of the Discretionary Portfolio Management section.
Before that, he spent four years as an equity analyst with UBS in Switzerland.

VEAC utilizes a team approach to managing the Hard Asset sector. The team
performs similar functions for the Van Eck Funds Hard Assets Fund and Van Eck
Worldwide Insurance Trust, Worldwide Hard Assets Fund. The members of this are
listed below:

John C. van Eck is Chairman of VEAC and previously served as the portfolio
manager of other mutual funds advised by VEAC. Mr. van Eck has over 45 years
of investment experience.

William Trebilcock is an Analyst and serves as Director of Mining Research
for the VEAC. Mr. Trebilcock has 28 years of experience in his field.

Lucille Palermo is also an Analyst and is Associate Director, Mining Research
of VEAC and an officer and portfolio manager of other mutual funds advised by
VEAC. Ms. Palermo has 20 years of experience in the investment business.

Derek van Eck is an Analyst and is Director of Global Investments and
Executive Vice President of VEAC. Mr. van Eck is also an officer and portfolio
manager of other mutual funds advised by VEAC.

Kevin Reid, an Analyst on the Hard Asset team, is Director of Real Estate of
VEAC. For the five year period prior to _____________, he was portfolio
manager at Trammel Crow.

WARBURG, PINCUS COUNSELLORS, INC. The Fund also employs Counsellors as a
Subadviser to the Fund. Counsellors is a professional investment counselling
firm which provides investment services to investment endowment funds,
foundations and other institutions and individuals. As of June 30, 1995,
Counsellors managed approximately $10.8 billion of assets including
approximately $4.9 billion of assets of nineteen mutual funds. Incorporated in
1970, Counsellors is a wholly owned subsidiary of Warburg, Pincus Counsellors
G.P. ("Counsellors G.P."), a New York general partnership. E.M. Warburg,
Pincus & Co., Inc. ("EMW") controls Counsellors through its ownership of a
class of voting preferred stock of Counsellors. Counsellors G.P. has no
business other than being a holding company of Counsellors and its
subsidiaries. Counsellor's address is 466 Lexington Avenue, New York, New York
10017-3147.

The portfolio managers for Counsellors' portion of the Fund are Elizabeth B.
Dater and Stephen J. Lurito. Ms. Dater and Mr. Lurito are also co-portfolio
managers of Warburg, Pincus Emerging Growth Fund and Warburg, Pincus Small
Company Growth Portfolio, a

<PAGE> 24

portfolio of Warburg, Pincus Trust. Ms. Dater is a managing director of EMW
and has been a portfolio manager of Counsellors since 1978. Mr. Lurito is a
managing director of EMW and has been with Counsellors since 1987, before which
time he was a research analyst at Sanford C. Bernstein & Company, Inc.

OTHER SERVICES

NFS provides the accounting services, including daily valuation of each
Fund's shares, preparation of financial statements, taxes, and regulatory
reports. For these accounting services, NFS receives an annual fee of $12,000
from the Fund.

The Transfer and Dividend Disbursing Agent, Nationwide Investors Services,
Inc., ("NIS"), One Nationwide Plaza, Columbus, Ohio 43216, serves as transfer
agent and dividend disbursing agent for the Trust. NIS is a wholly owned
subsidiary of NFS.

INVESTMENT IN FUND SHARES

An insurance company purchases the shares of the Fund at the Fund's net asset
value using purchase payments received on Policies issued by Accounts. These
Accounts are funded by shares of the Fund. There is no sales charge. All
shares are sold at net asset value.

Shares of the Fund are currently sold only to separate accounts of Nationwide
Life Insurance Company and Nationwide Life and Annuity Insurance Company, One
Nationwide Plaza, Columbus, Ohio 43216, to fund the benefits under variable
insurance or annuity policies.

All investments in the Fund are credited to the shareholder's account in the
form of full and fractional shares of the Fund (rounded to the nearest 1/1000
of a share). The Trust does not issue share certificates. Initial and
subsequent purchase payments allocated to the Fund are subject to the limits
applicable to the policies.

SHARE REDEMPTION

An insurance company separate account redeems shares to make benefit or
surrender payments under the terms of its Policies. Redemptions are processed
on any day on which the Trust is open for business and are effected at net
asset value next determined after the redemption order, in proper form, is
received by the Trust's transfer agent, NIS.

The net asset value per share of the Fund is determined once daily, as of
4:00 P.M. on each business day the New York Stock Exchange is open and on such
other days as the Board determines

<PAGE> 25

and on any other day during which there is a sufficient degree of trading in
the Fund's portfolio securities that the net asset value of the Fund is
materially affected by changes in the value of portfolio securities. The Trust
will not compute net asset value on customary national business holidays,
including the following: Christmas, New Year's Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, and Thanksgiving. In
addition, unless the shareholders of the Fund request otherwise, the Fund will
not compute net asset value on the Friday following Thanksgiving, and either
the day before Christmas (if Christmas falls on a Tuesday, Wednesday,
Thursday, Friday, or Saturday) or the day after Christmas (if Christmas falls
on a Sunday or Monday). The net asset value per share is calculated by adding
the value of all securities and other assets of a Fund, deducting its
liabilities, and dividing by the number of shares outstanding.

The Trust may suspend the right of redemption only under the following
unusual circumstances:

- when the New York Stock Exchange is closed (other than weekends and
holidays) or trading is restricted;

- when an emergency exists, making disposal of portfolio securities or the
valuation of net assets not reasonably practicable; or

- during any period when the Securities and Exchange Commission has by order
permitted a suspension of redemption for the protection of shareholders.

NET INCOME AND DISTRIBUTIONS

Substantially all of the net investment income, if any, of the Funds will be
paid as dividends in March, June, September, and December. In those years in
which sales of the Fund's portfolio securities result in net realized capital
gains, the Fund will distribute such gains to its shareholders with the
December dividend.

ADDITIONAL INFORMATION

DESCRIPTION OF SHARES - The Declaration of Trust permits the Trustees to
issue an unlimited number of full and fractional shares of beneficial interest
of the Fund and to divide or combine such shares into a greater or lesser
number of shares without thereby changing the proportionate beneficial
interests in the Trust. Each share of the Fund represents an equal
proportionate interest in that Fund with each other share. The Trust reserves
the right to create and issue a number of different Funds. In that case, the
shares of each Fund would participate equally in the earnings, dividends, and
assets of the

<PAGE> 26

particular Fund, but shares of all Funds would vote together in the election of
Trustees. Upon liquidation of a Fund, its shareholders are entitled to share
pro rata in the net assets of such Fund available for distribution to
shareholders.

VOTING RIGHTS - Shareholders are entitled to one vote for each share held.
Shareholders may vote in the election or removal of Trustees and on other
matters submitted to meetings of shareholders. No amendment may be made to the
Declaration of Trust without the affirmative vote of a majority of the
outstanding shares of the Trust. The sole shareholders of the Trust are
Nationwide Life Insurance Company and Nationwide Life and Annuity Insurance
Company. The Trustees may, however, amend the Declaration of Trust without the
vote or consent of shareholders to:

- designate series of the Trust;

- change the name of the Trust; or

- supply any omission, cure, correct, or supplement any ambiguous, defective,
or inconsistent provision to conform the Declaration of Trust to the
requirements of applicable federal and state laws or regulations if they
deem it necessary.

Shares have no pre-emptive or conversion rights. Shares are fully paid and
nonassessable, except as set forth below. In regard to termination, sale of
assets, or changes of investment restrictions, the right to vote is limited to
the holders of shares of the particular Fund affected by the proposal. When a
majority is required, it means the lesser of 67% or more of the shares present
at a meeting when the holders of more than 50% of the outstanding shares are
present or represented by proxy, or more than 50% of the outstanding shares.

SHAREHOLDER INQUIRIES - All inquiries regarding the Fund should be directed
to the Trust at the telephone number or address shown on the cover page of this
Prospectus.

PERFORMANCE ADVERTISING FOR THE FUND

The Fund may use historical performance in advertisements, sales literature,
and the prospectus. Such figures will include quotations of average annual
total return for the most recent one, five, and ten year periods (or the life
of the Fund if less). Average annual total return represents the rate required
each year for an initial investment to equal the redeemable value at the end of
the specific period. Average annual total return reflects reinvestment of all
distributions.

<PAGE> 27

TAX STATUS

The Trust's policy is to qualify as a regulated investment company and to
meet the requirements of Subchapter M of the Code. The Fund intends to
distribute all its taxable net investment income and capital gains to
shareholders, and therefore, will not be required to pay any federal income
taxes. Nationwide Life Insurance Company and Nationwide Life and Annuity
Insurance Company are the sole shareholders of the Trust.

Because each Fund of the Trust is treated as a separate entity for purposes
of the regulated investment company provisions of the Code, the assets, income,
and distributions of the Fund are considered separately for purposes of
determining whether or not the Fund qualifies as a regulated investment
company. The Fund intends to comply with the diversification requirements
currently imposed by the Internal Revenue Service on separate accounts of
insurance companies as a condition of maintaining the tax-deferred status of
the Policies. See the Statement of Additional Information for more specific
information.

Dividends and interest received by the Fund may be subject to withholding and
other taxes imposed by foreign countries. However, tax conventions between
certain countries and the United States may reduce or eliminate such taxes.
Policy holders will bear the cost of foreign tax withholding in the form of
increased expenses to the Fund, but generally will not be able to claim a
foreign tax credit or deduction for foreign taxes paid by the Fund by reason of
the tax-deferred status of the Policies.

The tax treatment of payments made by a separate account to a Policy holder
is described in the separate account prospectus.

<PAGE> 28

<TABLE>
<CAPTION>
CONTENTS PAGE
<S> <C>
Sale of Fund Shares 2
Investment Objective and Policies 2
Investment Techniques, Considerations and Risk Factors 5
Management of the Trust 16
Investment in Fund Shares 22
Share Redemption 22
Net Income and Distributions 23
Additional Information 23
Performance Advertising for the Fund 24
Tax Status 25
</TABLE>

NATIONAL DISTRIBUTOR AND INVESTMENT ADVISER
Nationwide Financial Services, Inc.
One Nationwide Plaza
Columbus, Ohio 43216

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Nationwide Investors Services, Inc.
Box 1492
One Nationwide Plaza
Columbus, Ohio 43216

AUDITORS
KPMG Peat Marwick LLP
Two Nationwide Plaza
Columbus, Ohio 43215

LEGAL COUNSEL
Druen, Rath & Dietrich
One Nationwide Plaza
Columbus, Ohio 43216

<PAGE> 29
STATEMENT OF ADDITIONAL INFORMATION

October , 1995

NATIONWIDE SEPARATE ACCOUNT TRUST
--TOTAL RETURN FUND
--CAPITAL APPRECIATION FUND
--GOVERNMENT BOND FUND
--MONEY MARKET FUND

--SMALL COMPANY 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
Prospectuses for the Funds and should be read in conjunction with the
Prospectus, dated April 28, 1995 for the Total Return Fund, Capital
Appreciation Fund, Government Bond Fund and Money Market Fund and the
prospectus dated October __, 1995 for the Small Company Fund. The Prospectuses
may be obtained from Nationwide Life Insurance Company, One Nationwide Plaza,
Columbus, Ohio 43216, or by calling (614) 249-5134.

________________________________________________________________________________

<TABLE>
<CAPTION>
TABLE OF CONTENTS PAGE
<S> <C>

General Information and History 1
Investment Objectives and Policies 1
Investment Restrictions 29
Major Shareholders 34
Trustees and Officers of the Trust 34
Calculating Yield - The Money Market Fund 35
Calculating Yield and Total Return-Non-Money Market Funds 36
Investment Adviser and Other Services 37
Brokerage Allocations 41
Purchases, Redemptions and Pricing of Shares 44
Additional Information 46
Tax Status 47
Tax Consequences for the Small Company Fund 49
Tax Consequences to Shareholders 52
Appendix A - Bond Ratings 53
Independent Auditors' Report 65
Financial Statements 66

</TABLE>

GENERAL INFORMATION AND HISTORY

Nationwide Separate Accounts Trust is an open-end investment company
organized under the laws of Massachusetts, by a Declaration of Trust, dated
June 30, 1981, as amended October 22, 1981, September 3, 1982, April 16, 1987,
May 1, 1992, and August __, 1995. The Trust offers shares in five separate
mutual funds, each with its own investment objective.

INVESTMENT OBJECTIVES AND POLICIES

The following information supplements the discussion of the Funds' investment
objectives and policies discussed in the Prospectuses.

<PAGE> 30
The investment policies and types of permitted investments described here may
be changed without prior approval by, or notice to, the shareholders. There is
no guarantee that the objectives will be realized.

--TOTAL RETURN FUND

This Fund's investment objective is to obtain a reasonable, long term total
return on invested capital from a flexible combination of dividend return and
capital gains. The Fund seeks to achieve its objective through investments in
common stocks, convertible issues, money market instruments, and bonds, with a
primary emphasis on common stocks.

While it is the intention of the Fund to invest in common stocks or in issues
convertible to common stock, there are no restrictive provisions covering the
proportion of one or another class of securities that may be held, or other
restriction, other than those stated in the investment restrictions.

--CAPITAL APPRECIATION FUND

The Fund is designed for investors who are interested in long-term growth.
The Fund seeks to meet its objectives primarily through a diversified portfolio
of the common stock of companies which the investment manager determines have a
better-than-average potential for sustained capital growth over the long term.

The investment manager will focus mainly on a company's or industry's
potential for long term growth, with dividend and interest income being
secondary in importance. The manager's evaluation of a company or industry
will be based more on probable future earnings, relative financial strength and
competitive position. The manager believes this approach will provide a
greater return potential over the long run than simply seeking current dividend
or interest income. The Fund's portfolio will not be limited to any particular
type of company or industry.

--GOVERNMENT BOND FUND

The investment objective of the Government Bond Fund is to provide as high a
level of income as is consistent with the preservation of capital. It seeks to
achieve its objective by investing in a diversified portfolio of securities
issued or backed by the U.S. Government, it agencies or instrumentalities.

<PAGE> 31
These securities are of varying types which include but are not limited to:

o TREASURY NOTES AND BONDS - These are direct obligations of the U.S.
Government. New issues of notes mature in one to ten years while bonds
generally have a maturity of ten years or more.

o TREASURY BILLS - These are direct obligations of the U.S. Government backed
by the full faith and credit of the United States and mature in one year or
less.

o SECURITIES ISSUED BY INSTRUMENTALITIES OF THE U.S. GOVERNMENT - These
securities are issued by federally-chartered instrumentalities. Some of
these securities are guaranteed by the United States Treasury or are
supported by the issuer's right to borrow from the Treasury and are backed
by the credit of the Federal instrumentality itself. Some of these
instrumentalities (listed for example purposes only) are:

- Bank for Cooperatives (COOP)
- Federal Home Loan Banks (FHLB)
- Federal National Mortgage Association (FNMA)
- Government National Mortgage Association (GNMA)
- Tennessee Valley Authority (TVA)
- Farmers Home Administration (FHA)

The Government Bond Fund will normally invest at least 65% of its assets in
bonds issued by the U.S. Government, and its agencies and instrumentalities.
These bonds pay interest at regular intervals, usually semi-annually, and pay
principal at maturity.

The Government Bond Fund may invest up to 35% of its assets in zero coupon
securities or mortgage-related securities and up to 20% of its assets in
securities purchased on a "when-issued" or on a "forward delivery" basis,
provided those securities are issued or backed by the U.S. Government, its
agencies or instrumentalities. The Government Bond Fund may also enter into
repurchase agreements in any of the securities described above.

The Government Bond Fund will normally invest no more than 20% of its assets
in repurchase agreements or in U.S. Government Securities maturing in less than
one year. For temporary defensive purposes, however the Fund may invest up to
100% of its assets in these securities.

There is a minimal risk involved in the purchase of U.S. Government or U.S.
Government guaranteed securities. Securities issued by U.S. Government
agencies or instrumentalities, while perhaps having the implicit backing of the
U.S. Government, may not have an explicit guarantee of the payment of principal
and interest.

<PAGE> 32
The value of shares of the Government Bond Fund will vary inversely with
changes in interest rates. As with any fixed income investment, interest rate
risk does exist; i.e., when interest rates decline, the market value of a
portfolio can be expected to rise; conversely, when interest rates rise, the
market value of the portfolio can be expected to fall. While the Government
Bond Fund will engage in portfolio trading to manage this risk (i.e.,
shortening the average maturity of the portfolio in anticipation of a rise in
interest rates so as to minimize depreciation of principal, or lengthening the
portfolio in anticipation of a decline in interest rates so as to maximize
appreciation of capital) there is no assurance that capital will be preserved.
Thus, the Government Bond Fund is designed for those willing to accept market
fluctuations to obtain income.

--MONEY MARKET FUND

The investment objective of this Fund is to seek as high a level of current
income as it considered consistent with the preservation of capital and
liquidity through investments in a portfolio of money market instruments with
remaining maturities of 397 days or less. The Fund seeks to achieve its
objective by investing primarily in instruments receiving a rating in one of
the two highest categories by the following six nationally recognized
statistical rating organizations ("NRSROs"): Duff and Phelps, Inc. ("D&P"),
Fitch Investors Services, Inc. ("Fitch"), Moody's Investors Service Inc.
("Moody's"), Standard & Poor's Ratings Group ("Standard & Poor's"), IBCA
Limited and its affiliate, IBCA Inc. ("IBCA"), and Thomson Bank Watch
("Thomson"). See Appendix A for a further description of the NRSRO ratings.

The Fund may invest in the following instruments:

o obligations issued or guaranteed as to interest and principal by the U.S.
government, its agencies, or instrumentalities, or any federally chartered
corporation.

o repurchase agreements, subject to the restrictions set forth under
"Investment Restrictions." Potential risks associated with investment in
repurchase agreements are twofold: (a) in the event of default of an issuer
and a decrease in the value of the underlying securities below the
repurchase price, the Fund could suffer a loss, and (b) in the event of an
issuer's bankruptcy, the Fund's ability to dispose of underlying securities
could be delayed.

o obligations of banks which at the date of investment are rated A2 or better
by IBCA or TBW1 by Thomson. Obligations of savings and loan associations
(including certificates of deposit and bankers' acceptances) which at the
date of investment have capital, surplus, and undivided profits (as of

<PAGE> 33
the date of their most recently published financial statements) in excess of
$100 million; and obligations of other banks or savings and loan
associations if such obligations are insured by the Federal Deposit
Insurance Corporation, provided that not more than 10% of the Fund's total
assets shall be invested in such insured obligations.

o commercial paper which at the date of investment is rated Duff 1 or Duff 2,
by D&F, F-1 or F-2 by Fitch, P-1 or P-2 by Moody's, or A-1 or A-2 by
Standard & Poor's, or if not rated, is issued and guaranteed as to payment
of principal and interest by companies which at the date of investment have
an outstanding debt issue rated AA or better by D&F, AA or better by Fitch,
Aa or better by Moody's, or AA or better by Standard & Poor's.

o up to 5% of its total assets in commercial paper which at the date of
investment is rated F-2 by Fitch, Duff 2 by D&P, P-2 by Moody's, or A-2 by
Standard and Poor's. However, the Fund is limited as to the amount it may
invest in the commercial paper of a single issuer to the greater of 1% of
the Fund's total assets or $1 million.

o short-term (maturity in 397 days or less) corporate obligations which at the
date of investment are rated AA or better by D&F, AA or better by Fitch, Aa
or better by Moody's, or AA or better by Standard & Poor's.

o bank loan participation agreements representing corporations and banks
having a short-term rating, at the date of investment, of F-1 or F-2 by
Fitch, Duff 1 or Duff 2 by D&P, P-1 or P-2 by Moody's or A-1 or A-2 by
Standard & Poor's, under which the 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.

All the assets of the Fund will be invested in obligations with stated
remaining maturities of 397 days or less and which will be held to maturity.
The Fund will, to the extent feasible, make portfolio investments primarily in
anticipation of, or in response to, changing economic and financial conditions.
The Fund will attempt to maximize the return on its investments through careful
analysis of a wide range of investments available and different yield
relationships existing among various sectors of the market. The average dollar
weighted maturity of the Fund's investments may not exceed 90 days. There can
be no assurance that the Fund's investment objective will be achieved.

The Fund may invest in the securities of foreign corporate issuers and in the
securities of foreign branches of U.S. banks, such as negotiable certificates
of deposit (Eurodollars) in U.S.

<PAGE> 34
dollar denominations which at the date of investment are rated A1 or A2 by IBCA
or TBW1 by Thomson. Because of this, investment in the Fund involves risks
that are different in some respects from an investment in a fund which invests
only in debt obligations of U.S. domestic issuers. Such risks may include
future political and economic developments, the possible imposition of foreign
withholding taxes on interest income payable on the securities held in the
portfolio, possible seizure or nationalization of foreign deposits, the
possible establishment of exchange controls, or the adoption of other foreign
governmental restrictions which might adversely affect the payment of principal
and interest on securities in the portfolio.

SMALL COMPANY FUND

The Small Company Fund seeks long-term growth of capital. It seeks to achieve
this objective by investing primarily in equity securities of both domestic and
foreign small market capitalization companies ("small company stocks"). To
attempt to achieve this objective, the Adviser has hired a number of
subadvisers to direct the day-to-day management of the Small Company Fund. The
following information supplements the discussion of the Fund's objectives,
policies and techniques that are described in the Fund's prospectus under
"INVESTMENT OBJECTIVES AND POLICIES" and "INVESTMENT TECHNIQUES, CONSIDERATIONS
AND RISK FACTORS."

SPECIAL SITUATION COMPANIES. The Small Company Fund may invest in the
securities of "special situation companies," which include those involved in an
actual or prospective acquisition or consolidation; reorganization;
recapitalization; merger, liquidation or distribution of cash, securities or
other assets; a tender or exchange offer; a breakup or workout of a holding
company; or litigation which, if resolved favorably, would improve the value of
the company's stock. If the actual or prospective situation does not
materialize as anticipated, the market price of the securities of a "special
situation company" may decline significantly. The Fund believes, however, that
if a Subadviser analyzes "special situation companies" carefully and invests in
the securities of these companies at the appropriate time, the Fund may achieve
capital growth. There can be no assurance however, that a special situation
that exists at the time the Fund makes its investment will be consummated under
the terms and within the time period contemplated.

FOREIGN SECURITIES. Investors in the Small Company Fund should recognize that
investing in foreign securities involves certain special considerations which
are not typically associated with investing in United States securities. Since
investments in foreign companies will frequently involve currencies of foreign
countries, and since the Fund may hold securities and funds in foreign
currencies, the Fund may be affected favorably or unfavorably by changes in
currency rates and in exchange control

<PAGE> 35

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, and
securities of some foreign companies are less liquid and more volatile than
securities of comparable domestic companies. Similarly, volume and liquidity
in most foreign bond markets are less than in the United States and at times,
volatility of price can be greater than in the United States. Fixed
commissions on foreign securities exchanges are generally higher than
negotiated commissions on United States exchanges, although the Fund endeavors
to achieve the most favorable net results on their 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 such as those purchased by
the Fund may be subject to foreign government taxes, higher custodian fees and
dividend collection fees which could reduce the yield on such securities.

Investments may be made from time to time by the Small Company Fund in
companies in developing countries as well as in developed countries. Although
there is no universally accepted definition, a developing country is generally
considered to be a country which is in the initial stages of industrialization.
Shareholders should be aware that investing in the equity and fixed income
markets of developing countries involves exposure to unstable governments,
economies based on only a few industries, and securities markets which trade a
small number of securities. Securities markets of developing countries tend to
be more volatile than the markets of developed countries; however, such markets
have in the past provided the opportunity for higher rates of return to
investors.

The value and liquidity of investments in developing countries may be affected
favorably or unfavorably by political, economic, fiscal, regulatory or other
developments in the particular countries or neighboring regions. The extent of
economic development, political stability and market depth of different
countries varies widely. Certain countries in the Asia region, including
Cambodia, China, Laos, Indonesia, Malaysia, the Philippines, Thailand, and
Vietnam are either comparatively underdeveloped or are in the process of
becoming developed. Such investments typically involve greater potential for
gain or loss than investments in securities of issuers in developed countries.

The securities markets in developing countries are substantially smaller, less
liquid and more volatile than the major securities markets in the United
States. A high proportion of the shares of many issuers may be held by a
limited number of persons and

<PAGE> 36

financial institutions, which may limit the number of shares available for
investment by the fund. Similarly, volume and liquidity in the bond markets in
developing countries are less than in the United States and, at times, price
volatility can be greater than in the United States. A limited number of
issuers in developing countries' securities markets may represent a
disproportionately large percentage of market capitalization and trading
volume. The limited liquidity of securities markets in developing countries
may also affect the Fund's ability to acquire or dispose of securities at the
price and time it wishes to do so. Accordingly, during periods of rising
securities prices in the more illiquid securities markets, the Fund's ability
to participate fully in such price increases may be limited by its investment
policy of investing not more than 15% of its total net assets in illiquid
securities. Conversely, the Fund's inability to dispose fully and promptly of
positions in declining markets will cause the Fund's net asset value to decline
as the value of the unsold positions is marked to lower prices. In addition,
securities markets in developing countries are susceptible to being influenced
by large investors trading significant blocks of securities.

Political and economic structures in many of such countries may be undergoing
significant evolution and rapid development, and such countries may lack the
social, political and economic stability characteristic of the United States.
Certain of such countries have in the past failed to recognize private property
rights and have at times nationalized or expropriated the assets of private
companies. As a result, the risks described above, including the risks of
nationalization or expropriation of assets, may be heightened. In addition,
unanticipated political or social developments may affect the value of the
Fund's investments in those countries and the availability to the fund of
additional investments in those countries.

Economies of developing countries may differ favorably or unfavorably from the
United States economy in such respects as rate of growth of gross national
product, rate of inflation, capital reinvestment, resource self-sufficiency and
balance of payments position. As export-driven economies, the economies of
countries in the Asia Region are affected by developments in the economies of
their principal trading partners. Hong Kong, Japan and Taiwan have limited
natural resources, resulting in dependence on foreign sources for certain raw
materials and economic vulnerability to global fluctuations of price and
supply.

Certain developing countries do not have comprehensive systems of laws,
although substantial changes have occurred in many such countries in this
regard in recent years. Laws regarding fiduciary duties of officers and
directors and the protection of shareholders may not be well developed. Even
where adequate law exists in such developing countries, it may be impossible to
obtain swift and

<PAGE> 37

equitable enforcement of such law, or to obtain enforcement of the judgment by
a court of another jurisdiction.

Trading in futures contracts traded on foreign commodity exchanges may be
subject to the same or similar risks as trading in foreign securities.

DEPOSITARY RECEIPTS. As indicated in the Fund's prospectus, the Small Company
Fund may invest in foreign securities by purchasing depositary receipts,
including American Depositary Receipts ("ADRs") and European Depositary
Receipts ("EDRs") or other 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 Depositary Receipts ("CDRs"), in bearer form,
may be denominated in other currencies and are designed for use in European
securities markets. 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. For purposes of the Fund's
investment policies, ADRs and EDRs are deemed to have the same classification
as the underlying securities they represent. Thus, an ADR or EDR representing
ownership of common stock will be treated as common stock.

The Small Company Fund may invest in depositary receipts through "sponsored"
or "unsponsored" facilities. A sponsored facility is established jointly by the
issuer of the underlying security and a depositary, whereas a depositary may
establish an unsponsored facility without participation by the issuer of the
deposited security. Holders of unsponsored depositary receipts generally bear
all the costs of such facilities and the depositary of an unsponsored facility
frequently is under no obligation to distribute shareholder communications
received from the issuer of the deposited security or to pass through voting
rights to the holders of such receipts in respect of the deposited securities.

DEBT OBLIGATIONS. While the emphasis of the Small Company Fund's investment
is on common stocks and other equity securities (including preferred stocks and
securities convertible into or exchangeable for common stocks), it may also
invest in money market instruments, U.S. Government or Agency securities, and
corporate bonds and debentures receiving one of the four highest ratings from a
nationally recognized statistical rating organization ("NRSRO"), or if not
rated by any NRSRO, deemed comparable by a Subadviser to such rated securities
("Comparable Unrated Securities"). The ratings of an NRSRO represent its
opinion as to the quality of securities it undertakes to rate. Ratings are not
absolute standards of quality; consequently, securities with the same maturity,
coupon, and rating may have different yields. The

<PAGE> 38

ratings assigned by the NRSROS are described in Appendix A to this Statement of
Additional Information.

Fixed income securities 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. Subsequent to its purchase by the Fund, an issue of securities may
cease to be rated or its rating may be reduced, so that the securities would
not be eligible for purchase by the Fund. In such a case, the Subadviser will
evaluate whether the downgraded security should be disposed of.

HIGH-YIELD (HIGH-RISK) SECURITIES

IN GENERAL. The Fund has the authority to invest up to 5% of its net assets
in non-investment grade debt securities. Non-investment grade debt securities
(hereinafter referred to as "lower-quality securities") include (i) bonds rated
as low as C by Moody's, Standard & Poor's, or Fitch, or CCC by D&P; (ii)
commercial paper rated as low as C by Standard & Poor's, Not Prime by Moody's
or Fitch 4 by Fitch; and (iii) unrated debt securities of comparable quality.
Lower-quality securities, while generally offering higher yields than
investment grade securities with similar maturities, involve greater risks,
including the possibility of default or bankruptcy. They are regarded as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal. The special risk considerations in connection with
investments in these securities are discussed below. Refer to Appendix A of
this Statement of Additional Information for a discussion of securities
ratings.

EFFECT OF INTEREST RATES AND ECONOMIC CHANGES. All interest-bearing
securities typically experience appreciation when interest rates decline and
depreciation when interest rates rise. The market values of lower-quality and
comparable unrated securities tend to reflect individual corporate developments
to a greater extent than do higher rated securities, which react primarily to
fluctuations in the general level of interest rates. Lower-quality and
comparable unrated securities also tend to be more sensitive to economic
conditions than are higher-rated securities. As a result, they generally
involve more credit risks than securities in the higher-rated categories.
During an economic downturn or a sustained period of rising interest rates,
highly leveraged issuers of lower-quality and comparable unrated securities may
experience financial stress and may not have sufficient revenues to meet their
payment obligations. The issuer's ability to service its debt obligations may
also be adversely affected by specific corporate developments, the issuer's
inability to meet specific projected business forecasts or the unavailability
of additional financing. The risk of loss due to default by an issuer of these
securities is significantly greater than issuers of higher-rated securities
because such securities are generally unsecured and are often subordinated to
other creditors. Further, if the issuer of a lower-quality or comparable
unrated security defaulted, the Fund might incur additional expenses to seek
recovery. Periods of economic uncertainty and changes would

<PAGE> 39

also generally result in increased volatility in the market prices of these
securities and thus in the Fund's net asset value.

As previously stated, the value of a lower-quality or comparable unrated
security will decrease in a rising interest rate market, and accordingly so
will the Fund's net asst value. If the Fund experiences unexpected net
redemptions in such a market, it may be forced to liquidate a portion of its
portfolio securities without regard to their investment merits. Due to the
limited liquidity of lower-quality and comparable unrated securities (discussed
below), the Fund may be forced to liquidate these securities at a substantial
discount. Any such liquidation would reduce the Fund's asset base over which
expenses could be allocated and could result in a reduced rate of return for
the Fund.

PAYMENT EXPECTATIONS. Lower-quality and comparable unrated securities
typically contain redemption, call or prepayment provisions which permit the
issuer of such securities containing such provisions to, at its discretion,
redeem the securities. During periods of falling interest rates, issuers of
these securities are likely to redeem or prepay the securities and refinance
them with debt securities at a lower interest rate. To the extent an issuer is
able to refinance the securities, or otherwise redeem them, the Fund may have
to replace the securities with a lower yielding security, which would result in
a lower return for the Fund.

CREDIT RATINGS. Credit ratings issued by credit-rating agencies evaluate the
safety of principal and interest payments of rated securities. They do not,
however, evaluate the market value risk of lower-quality securities and,
therefore, may not fully reflect the true risks of an investment. In addition,
credit rating agencies may or may not make timely changes in a rating to
reflect changes in the economy or in the condition of the issuer that affect
the market value of the security. Consequently, credit ratings are used only
as a preliminary indicator of investment quality. Investments in lower-quality
and comparable unrated securities will be more dependent on a Subadviser's
credit analysis than would be the case with investments in investment-grade
debt securities. Each Subadviser will employ its own credit research and
analysis, which includes a study of existing debt, capital structure, ability
to service debt and to pay dividends, the issuer's sensitivity to economic
conditions, its operating history and the current trend of earnings. When
investing in lower-quality securities, each Subadviser will continually monitor
the investments in the Fund's portfolio and carefully evaluate whether to
dispose of or to retain lower-quality and comparable unrated securities whose
credit ratings or credit quality may have changed.

LIQUIDITY AND VALUATION. The Fund may have difficulty disposing of certain
lower-quality and comparable unrated securities because there may be a thin
trading market for such securities. Because

<PAGE> 40

not all dealers maintain markets in all lower-quality and comparable unrated
securities, there is no established retail secondary market for many of these
securities. The Fund anticipates that such securities could be sold only to a
limited number of dealers or institutional investors. To the extent a
secondary trading market does exist, it is generally not as liquid as the
secondary market for higher-rated securities. The lack of a liquid secondary
market may have an adverse impact on the market price of the security. As a
result, the Fund's asset value and ability to dispose of particular securities,
when necessary to meet the Fund's liquidity needs or in response to a specific
economic event, may be impacted. The lack of a liquid secondary market for
certain securities may also make it more difficult for the Fund to obtain
accurate market quotations for purposes of valuing the Fund's portfolio.
Market quotations are generally available on many lower-quality and comparable
unrated issues only from a limited number of dealers and may not necessarily
represent firm bids of such dealers or prices for actual sales. During periods
of thin trading, the spread between bid and asked prices is likely to increase
significantly. In addition, adverse publicity and investor perceptions,
whether or not based on fundamental analysis, may decrease the values and
liquidity of lower-quality and comparable unrated securities, especially in a
thinly traded market.

PROPOSED LEGISLATION. From time to time proposals have been discussed,
regarding new legislation designed to limit the use of certain lower-quality
and comparable unrated securities by certain issuers. However, it is
possible that if legislation is enacted or proposed, it could have a material
affect on the value of these securities and the existence of a secondary
trading market for the securities.

CONVERTIBLE SECURITIES. Convertible securities in which the Fund may invest,
including both convertible debt and convertible preferred stock, may be
converted at either a stated price or stated rate into underlying shares of
common stock. Because of this feature, convertible securities enable an
investor to benefit from increases in the market price of the underlying common
stock. Convertible securities provide higher yields than the underlying equity
securities, but generally offer lower yields than non-convertible securities of
similar quality. Like bonds, the value of convertible securities fluctuates in
relation to changes in interest rates and, in addition, also fluctuates in
relation to the underlying common stock.

<PAGE> 41

WARRANTS. The Small Company Fund may acquire warrants. Warrants are
securities giving 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. The Fund may purchase warrants, valued at the lower
of cost or market value, of up to 5% of the Fund's net assets. Included in
that amount, but not to exceed 2% of the Fund's net assets, may be warrants
that are not listed on any recognized U.S. or foreign stock exchange. Warrants
acquired by the Fund in units or attached to securities are not subject to
these restrictions. 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.

REPURCHASE AGREEMENTS. The Small Company Fund's custodian or a sub-custodian
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 the Fund. In an attempt to reduce the
risk of incurring a loss on the repurchase agreement, the Fund will enter into
repurchase agreements with certain banks and non-bank dealers, all of whose
use has been approved by the Board of Trustees. Repurchase agreements may be
entered into with respect to securities of the type in which it may invest or
government securities regardless of their remaining maturities, and will
require that additional securities be deposited with it if the value of the
securities purchased should decrease below resale price. Each Subadviser will
monitor on an ongoing basis the value of the collateral to assure that it
always equals or exceeds the repurchase price. The Fund will consider on an
ongoing basis the creditworthiness of the institutions with which the Fund
enters into repurchase agreements. Repurchase agreements involve certain risks
in the event of default or insolvency by the other party, including possible
delays or restrictions upon the Fund's ability to dispose of the underlying
securities.

SHORT SALES "AGAINST THE BOX". In a short sale, the Small Company Fund sells
a borrowed security and has a corresponding obligation to the lender to return
the identical security. The Fund may engage in short sales if at the time of
the short sale the

<PAGE> 42

Fund owns or has the right to obtain without additional cost an equal amount of
the security being sold short. This investment technique is known as a short
sale "against the box."

In a short sale, the seller does not immediately deliver the securities sold
and is said to have a short position in those securities until delivery occurs.
If the Fund engages in a short sale, the collateral for the short position will
be maintained by the Fund's custodian or qualified sub-custodian. while the
short sale is open, the Fund will maintain in a segregated account an amount of
securities equal in kind and amount to the securities sold short or securities
convertible into or exchangeable for such equivalent securities. These
securities constitute the Fund's long position. Not more than 15% of the
Fund's net assets (taken at current value) may be held as collateral for such
short sales at any one time.

The Fund does not intend to engage in short sales against the box for
investment purposes. The Fund may, however, make a short sale as a hedge, when
it believes that the price of a security may decline, causing a decline in the
value of a security owned by the Fund (or a security convertible or
exchangeable for such security), or when the Fund wants to sell the security at
an attractive current price, but also wishes to defer recognition of gain or
loss for U.S. federal income tax purposes and for purposes of satisfying
certain tests applicable to regulated investment companies under the Code. In
such case, any future losses in the Fund's long position should be offset by a
gain in the short position and, conversely, any gain in the long position
should be reduced by a loss in the short position. The extent to which such
gains or losses are reduced will depend upon the amount of the security sold
short relative to the amount the Fund owns. There will be certain additional
transaction costs associated with short sales against the box, but the Fund
will endeavor to offset these costs with the income from the investment of the
cash proceeds of short sales.

RESTRICTED, NON-PUBLICLY TRADED AND ILLIQUID SECURITIES. The Small Company
Fund may not invest more than 15% of its net assets, in the aggregate, in
illiquid securities, including 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. Repurchase agreements
subject to demand are deemed to have a maturity equal to the notice period.

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

<PAGE> 43

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 an
investment company 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. An investment company
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
repurchase agreements, commercial paper, 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 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 settlement of unregistered securities of domestic and
foreign issuers, such as the PORTAL System sponsored by the National
Association of Securities Dealers, Inc.

The Fund may sell over-the-counter ("OTC") options and, in connection
therewith, segregate assets or cover its obligations with respect to OTC
options written by the Fund. the assets used as cover for OTC options written
by the 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.

<PAGE> 44

Each Subadviser will monitor the liquidity of restricted securities in the
portion of the Fund it manages under the supervision of the Board and the
Adviser. In reaching liquidity decisions, each Subadviser 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).

WHEN-ISSUED SECURITIES AND DELAYED-DELIVERY TRANSACTIONS. The Small Company
Fund may invest without limitation in securities purchased on a "when-issued"
basis or purchase or sell securities for delayed delivery (i.e., payment or
delivery occurs beyond the normal settlement date at a stated price and yield).
When-issued transactions normally settle within 45 days. The Fund will enter
into a when-issued transaction for the purpose of acquiring portfolio
securities and not for the purpose of leverage, but may sell the securities
before the settlement date if a Subadviser which purchased such security deems
it advantageous to do so. The payment obligation and the interest rate that
will be received on when-issued securities are fixed at the time the buyer
enters into the commitment. Due to fluctuations in the value of securities
purchased or sold on a when-issued or delayed-delivery basis, the yields
obtained on such securities may be higher or lower than the yields available in
the market on the dates when the investments are actually delivered to the
buyers.

When the Fund agrees to purchase when-issued or delayed-delivery securities,
its custodian will set aside cash, U.S. government securities or other liquid
high-grade debt obligations equal to the amount of the commitment in a
segregated account. Normally, the custodian will set aside portfolio
securities to satisfy a purchase commitment, and in such a case 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. When the 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 result in the Fund
incurring a loss or missing an opportunity to obtain a price considered to be
advantageous.

LENDING PORTFOLIO SECURITIES. The Small Company Fund may lend its portfolio
securities to brokers, dealers and other financial institutions, provided it
receives cash collateral which at all times is maintained in an amount equal to
at least 100% of the

<PAGE> 45

current market value of the securities loaned. by lending its portfolio
securities, the Fund can increase its income through the investment of the cash
collateral. For the purposes of this policy, the Fund considers collateral
consisting of cash, 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, the Fund may return to the borrower or
a third party which is unaffiliated with the Fund, 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
portfolio securities are loaned: (1) the Fund must receive at least 100% cash
collateral of the type discussed in the preceding paragraph from the borrower;
(2) the borrower must increase such collateral whenever the market value of the
securities loaned rises above the level of such 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 any increase in market value; (5) the
Fund may pay only reasonable custodian fees in connection with the loan; and
(6) while any voting rights on the loaned securities may pass to the borrower,
the Trust's Trustees must be able to terminate the loan and regain the right to
vote the securities if a material event adversely affecting the investment
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 the Fund's ability
to recover the loaned securities or dispose of the collateral for the loan.

BORROWING. The Small Company Fund may borrow money from banks, limited by the
Fund's fundamental investment restriction to 33-1/3% of its total assets, and
may engage in reverse repurchase agreements which may be considered a form of
borrowing. (See "INVESTMENT TECHNIQUES, CONSIDERATIONS AND RISK FACTORS -
Reverse Repurchase Agreements" in the Small Company Fund's Prospectus.) In
addition, the Fund may borrow up to an additional 5% of its total assets from
banks for temporary or emergency purposes. The Fund will not purchase
securities when bank borrowings exceed 5% of the Fund's total assets. The Fund
expects that some of its borrowings may 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.

DERIVATIVE INSTRUMENTS. As discussed in its Prospectus, each of the Small
Company Fund's Subadvisers may use a variety of derivative instruments,
including options, futures contracts (sometimes referred to as "futures"),
options on futures contracts,

<PAGE> 46

stock index options and forward currency contracts to hedge the Fund's
portfolio or for risk management.

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, the
Commodity Futures Trading Commission ("CFTC") and various state regulatory
authorities. In addition, the Fund's ability to use these instruments will be
limited by tax considerations.

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. While each Subadviser is experienced in the use of
these instruments, 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.

(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 the 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.

<PAGE> 47

(4) As described below, the 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. The 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 the Fund.

For a discussion of the federal income tax treatment of the Fund's derivative
instruments, see "Tax Status" below.

Options. The Small Company Fund may purchase or write put and call options on
securities, indices, and foreign currency, and enter into closing transactions
with respect to such options to terminate an existing position. 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 the 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

<PAGE> 48

remaining until expiration, 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 are only exercisable at expiration. This
is in contrast to American-style options which are exercisable at any time
prior to the expiration date of the option.

The 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.

The 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 counter party (usually a
securities dealer or a bank) with no clearing organization guarantee. Thus,
when the 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 Fund's ability to establish and close out positions in exchange-listed
options depends on the existence of a liquid market. The Fund intends to
purchase or write only those exchange-traded options for which there appears to
be a liquid secondary market. 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 counter party, or by a
transaction in the secondary market if any such market exists. Although the
Fund will enter into OTC options only with counter parties that are expected to
be capable of entering into closing transactions with the fund, there is no
assurance that the 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, the Fund might be unable to close out an OTC option position at any time
prior to its expiration.

If the Fund were 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

<PAGE> 49

transaction for a covered call option written by the 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.

The 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.

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.

Transactions using options (other than purchased options) expose the Fund to
counter party risk. To the extent required by sec guidelines, the 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 high grade debt obligations with a value sufficient at all times to
cover its potential obligations to the extent not covered as provided in (1)
above. The 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 the 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.

Futures Contracts. The Small Company Fund may enter into futures contracts,
including interest rate, index, and currency futures and purchase and write
(sell) related options. 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. The 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. The 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. The Fund
will engage in this strategy

<PAGE> 50

only when a Subadviser believes it is more advantageous to the Fund than is
purchasing the futures contract.

The 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 and
hedging against changes in the value of portfolio securities due to anticipated
changes in interest rates, currency values and/or market conditions. The
ability of the Fund to trade in futures contracts may be limited by the
requirements of the code applicable to a regulated investment company.

The 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 the 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 the Fund's exposure to market, currency, or
interest rate fluctuations, the Fund may be able to hedge 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, the Fund
realizes a gain; if it is more, the Fund realizes a loss. Conversely, if the
offsetting sale price is more than the original purchase price, the Fund
realizes a gain; if it is less, the Fund realizes a loss. The transaction
costs must also be included in these calculations. There can be no assurance,
however, that the

<PAGE> 51

Fund will be able to enter into an offsetting transaction with respect to a
particular futures contract at a particular time. If the 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 the 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, 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, high grade debt 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 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
the fund purchases an option on a future, the premium paid plus transaction
costs is all that is at risk. In contrast, when the 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 the 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 Fund intends 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

<PAGE> 52

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 the 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. The Fund 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.

Foreign Currency-Related Derivative Strategies - Special Considerations. The
Small Company Fund may use options and futures on foreign currencies and
forward currency contracts to hedge against movements in the values of the
foreign currencies in which the Fund's securities are denominated. The Fund
may engage in currency exchange transactions to protect against uncertainty in
the level of future exchange rates and may also engage in currency transactions
to increase income and total return. Such currency hedges can protect against
price movements in a security the Fund owns or intends to acquire that are
attributable to changes in the value of the currency in which it is
denominated. Such hedges do not, however, protect against price movements in
the securities that are attributable to other causes.

The Fund might seek to hedge against changes in the value of a particular
currency when no hedging instruments on that currency are available or such
hedging instruments are more expensive than

<PAGE> 53
certain other hedging instruments. In such cases, the Fund may hedge against
price movements in that currency by entering into transactions using hedging
instruments on another foreign currency or a basket of currencies, the values
of which a subadviser believes will have a high degree of positive correlation
to the value of the currency being hedged. The risk that movements in the
price of the hedging instrument will not correlate perfectly with movements in
the price of the currency being hedged is magnified when this strategy is used.

The value of derivative instruments on foreign currencies depends on the value
of the underlying currency relative to the U.S. dollar. Because foreign
currency transactions occurring in the interbank market might involve
substantially larger amounts than those involved in the use of such hedging
instruments, the Fund could be disadvantaged by having to deal in the odd lot
market (generally consisting of transactions of less than $1 million) for the
underlying foreign currencies at prices that are less favorable than for round
lots.

There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirement that quotations available through
dealers or other market sources be firm or revised on a timely basis.
Quotation information generally is representative of very large transactions in
the interbank market and thus might not reflect odd-lot transactions where
rates might be less favorable. The interbank market in foreign currencies is a
global, round-the-clock market. To the extent the U.S. options or futures
markets are closed while the markets for the underlying currencies remain open,
significant price and rate movements might take place in the underlying markets
that cannot be reflected in the markets for the derivative instruments until
they reopen.

Settlement of derivative transactions involving foreign currencies might be
required to take place within the country issuing the underlying currency.
Thus, the Fund might be required to accept or make delivery of the underlying
foreign currency in accordance with any U.S. or foreign regulations regarding
the maintenance of foreign banking arrangements by U.S. residents and might be
required to pay any fees, taxes and charges associated with such delivery
assessed in the issuing country.

Permissible foreign currency options will include options traded primarily in
the OTC market. Although options on foreign currencies are traded primarily in
the OTC market, the Fund will normally purchase OTC options on foreign currency
only when a Subadviser believes a liquid secondary market will exist for a
particular option at any specific time.

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

25
[/R]

<PAGE> 54

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 contract, the Small Company 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 the 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, the 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.

CURRENCY HEDGING. While the values of forward currency contracts, currency
options, currency futures and options on futures may be expected to correlate
with exchange rates, they will not reflect other factors that may affect the
value of the Small Company Fund's investments. A currency hedge, for example,
should protect a Yen-denominated bond against a decline in the Yen, but will
not protect the Fund against price decline if the issuer's creditworthiness
deteriorates. Because the value of the Fund's investments denominated in
foreign currency will change in response to many factors other than exchange
rates, a currency hedge may not be entirely successful in mitigating changes in
the value of the Fund's investments denominated in that currency over time.

A decline in the dollar value of a foreign currency in which the Fund's
securities are denominated will reduce the dollar value of the securities, even
if their value in the foreign currency remains constant. The use of currency
hedges does not eliminate fluctuations in the underlying prices of the
securities, but it does establish a rate of exchange that can be achieved in
the future. In order to protect against such diminutions in the value of
securities it holds, the Fund may purchase put options on the foreign currency.
If the value of the currency does decline, the Fund will have the right to sell
the currency for a fixed amount in dollars and will thereby offset, in whole or
in part, the adverse effect on its securities that otherwise would have
resulted. Conversely, if a rise in the dollar value of a currency in which

<PAGE> 55

securities to be acquired are denominated is projected, thereby potentially
increasing the cost of the securities, the Fund may purchase call options on
the particular currency. The purchase of these options could offset, at least
partially, the effects of the adverse movements in exchange rates. Although
currency hedges limit the risk of loss due to a decline in the value of a
hedged currency, at the same time, they also limit any potential gain that
might result should the value of the currency increase.

The Fund's currency hedging will be limited to hedging involving either
specific transactions or portfolio positions. Transaction hedging is the
purchase or sale of forward currency with respect to specific receivables or
payables of the Fund generally accruing in connection with the purchase or sale
of its portfolio securities. Position hedging is the sale of forward currency
with respect to portfolio security positions. The Fund may not position hedge
to an extent greater than the aggregate market value (at the time of making
such sale) of the hedged securities.

SECURITIES OF OTHER INVESTMENT COMPANIES. Some of the countries in which the
Small Company 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. 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.

COMMERCIAL PAPER. The Small Company Fund may invest in commercial paper which
is indexed to certain specific foreign currency exchange rates. The terms of
such commercial paper provide that its principal amount is adjusted upwards or
downwards (but not below zero) at maturity to reflect changes in the exchange
rate between two currencies while the obligation is outstanding. The Fund will
purchase such commercial paper with the currency in which it is denominated
and, at maturity, will receive interest and principal payments thereon in that
currency, but the amount or principal payable by the issuer at maturity will
change in proportion to the change (if any) in the exchange rate between two
specified currencies between the date the instrument is issued and the date the
instrument matures. While such commercial paper entails the risk of loss of
principal, the potential for realizing gains as a result of changes in foreign
currency exchange rate enables the Fund to hedge or cross-hedge against a
decline in the U.S. Dollar value of investments denominated in foreign
currencies while providing an attractive money market rate of return. The Fund
will purchase such commercial paper for hedging purposes only, not for
speculation. The staff of the SEC is currently considering

<PAGE> 56

whether the purchase of this type of commercial paper would result in the
issuance of a "senior security" within the meaning of the 1940 Act. The Fund
believes that such investments do not involve the creation of such a senior
security, but nevertheless will establish a segregated account with respect to
its investments in this type of commercial paper and to maintain in such
account cash not available for investment or U.S. Government securities or
other liquid high quality debt securities having a value equal to the aggregate
principal amount of outstanding commercial paper of this type.

INVESTMENT RESTRICTIONS

The following policies, which cannot be changed without the approval of the
holders of a majority of the shares of the Fund for which the change is
proposed, apply to all of the Funds of the Trust (except the Small Company
Fund, whose restrictions are listed separately below), unless otherwise stated.

The Trust may not:

1. borrow money, except an amount equal to no more than 5% of the value of each
of the Fund's total assets (calculated when the loan is made) for temporary,
emergency purposes or for the clearance of transactions. This limited
borrowing authority will not be used to leverage the Funds or to borrow for
extended periods of time. This authority is intended to provide the
investment manager additional flexibility in the execution of routine daily
transactions, and allow for more efficient cash management.

2. purchase securities on margin, but the Trust may obtain such credits as may
be necessary for the clearance of purchases and sales of securities.

3. make short sales of securities.

4. write or purchase any put or call options.

5. make loans to other persons, except by the purchase of obligations in which
the Trust is authorized to invest. The Trust may, however, enter into
repurchase agreements, but a Fund will not enter into repurchase agreements
if, as a result thereof, more than 10% of the Fund's total assets (taken at
current value) would be subject to repurchase agreements maturing in more
than 7 days.

6. purchase voting securities of any issuer or purchase the securities of any
issuer if, as a result thereof: (a) more than 5% of a Fund's total assets
(taken at current value) would be invested in the securities of such issuer
(except that the Money Market Fund may invest up to 10% of its total

<PAGE> 57
assets in the highest rated securities of a single issuer for a period of up
to three business days thereafter, provided that the Money Market Fund does
not make more than one such investment at any one time), (b) a Fund would
hold more than 10% of the voting securities of such issuer, or (c) more than
25% of a Fund's total assets (taken at current value) would be concentrated
in any one industry. There is, however no limitation on investments in
obligations issued or guaranteed by the U.S. government, its agencies, or
instrumentalities. The Money Market Fund only may invest up to 75% of its
assets in all finance companies as a group, all banks and bank holding
companies as a group, and all utility companies as a group, when in the
opinion of management, yield differentials and money market conditions
suggest, and when cash is available for such investment and instruments are
available for purchase which fulfill the Money Market Fund's objective in
terms of quality and marketability.

7. invest in securities which are restricted as to disposition under federal
securities law, or securities with other legal or contractual restrictions
on resale (except for repurchase agreements).

8. purchase securities issued by any registered investment company, except by
purchase in the open market where no commission or profit to a sponsor or
dealer results from such purchase other than the customary broker's
commission, or except when such purchase, though not made in the open
market, is part of a plan of merger or consolidation. The Trust shall not,
however, purchase the securities of any registered investment companies if
such purchase at the time thereof would cause more than 10% of the total
assets of a Fund, taken at current value, to be invested in the securities
of such issuers. Further, the Trust shall not purchase securities issued by
any open-end investment company.

9. invest more than 5% of a Fund's total assets (taken at current value) in
companies which, including predecessors, have a record of less than three
years continuous operation.

10. purchase or retain securities of any issuer, any of whose officers,
directors, or securityholders is a trustee, director, or officer of the
Trust, or of the Adviser, if or so long as, one or more of such persons
owns beneficially more than 1/2% of any class of securities, taken at
market value, of such issuer, and such persons owning more than 1/2% of
such securities together own beneficially more than 5% of any class of
securities of such issuer, taken at market value.

11. act as an underwriter, except as it may technically be deemed an
underwriter under the Securities Act of 1933 in selling a portfolio
security.

<PAGE> 58
12. invest in companies for the purpose of exercising control or management.

13. purchase or retain real estate (including limited partnership interests,
but excluding securities of companies which deal in real estate or
interests therein), mineral leases, commodities, or commodity contracts.

14. issue securities except as permitted by the Investment Company Act of 1940.

INVESTMENT RESTRICTIONS FOR THE SMALL COMPANY FUND -- The following are the
Small Company Fund's fundamental investment limitations which cannot be changed
without shareholder approval:

THE SMALL COMPANY FUND:

1. May (i) borrow money from banks and (ii) make other investments or engage in
other transactions permissible under the Investment Company Act of 1940 (the
"1940 Act") which may involve a borrowing, provided that the combination of
(i) and (ii) shall not exceed 33-1/3% of the value of the Fund's total
assets (including the amount borrowed), less the Fund's liabilities (other
than borrowings), except that the Fund may borrow up to an additional 5% of
its total assets (not including the amount borrowed) from a bank for
temporary or emergency purposes (but not for leverage or the purchase of
investments). The Fund may also borrow money from other persons to the
extent permitted by applicable law. For purposes of this restriction, short
sales, the entry into currency transactions, options, futures contracts,
options on futures contracts, forward commitment transactions and dollar
roll transactions that are not accounted for as financings (and the
segregation of assets in connection with any of the foregoing) shall not
constitute borrowing.

2. May not issue senior securities, except as permitted under the 1940 Act.

3. 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.

4. May not purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments, but this shall not prevent the
Fund from purchasing or selling options, futures contracts, or other
derivative instruments, or from investing in securities or other instruments
backed by physical commodities.

5. May not lend any security or make any other loan if, as a result, more than
33 1/3% of its total assets (taken at current value) would be lent to other
parties, except in accordance with its investment objective, policies and
limitations through (i) purchase of debt securities or other debt
instruments, including loan participations, assignments

<PAGE> 59

and structured securities, or (ii) by engaging in repurchase agreements.

6. May not purchase the securities of any issuer if, as a result, more than 25%
(taken at current value) of the Fund's total assets would be invested in the
securities of issuers, the 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.

7. May not purchase or sell real estate unless acquired as a result of
ownership of securities or instruments, but this restriction shall not
prohibit the Fund from purchasing or selling securities issued by entities
or investment vehicles that own or deal in real estate or interests therein
or instruments secured by real estate or interests therein.

The following are the Fund's non-fundamental operating policies which may be
changed by the Board of Trustees of the Trust without shareholder approval:

The Fund may not:

1. 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 sale 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.

2. 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.

3. Invest in illiquid securities if, as a result of such investment, more than
15% of its net assets would be invested in illiquid securities. Illiquid
securities include securities that cannot be sold within seven days in the
ordinary course of business for approximately the amount at which the Fund
has valued the securities, such as repurchase agreements maturing in more
than seven days.

4. Purchase securities of other investment companies except in connection with
a merger, consolidation, acquisition, reorganization or offer of exchange,
or as otherwise permitted under the 1940 Act.

<PAGE> 60

5. Purchase the securities of any issuer (other than securities issued or
guaranteed by domestic or foreign governments or political subdivisions
thereof) if, as a result, more than 5% of its total assets would be invested
in the securities of issuers that, including predecessor or unconditional
guarantors, have a record of less than three years of continuous operation.
This policy does not apply to securities of pooled investment vehicles or
mortgage or asset-backed securities.

6. Invest in direct interests in oil, gas, or other mineral exploration or
development programs or leases, except that the Fund may invest in
securities of companies that invest in, engage in, or sponsor oil, gas or
mineral exploration or development programs or leases.

7. Pledge, mortgage or hypothecate any assets owned by the Fund except as may
be necessary in connection with permissible borrowings or investments and
then such pledging, mortgaging, or hypothecating may not exceed 33 1/3%
of the Fund's total assets at the time of the borrowing or investment.

8. Purchase or retain the securities of any issuer if, to the knowledge of the
Fund, any officer or trustee of the Fund, or one or more of the officers,
directors or partners of the adviser or of the subadviser responsible for
the investment beneficially owns more than 1/2 of 1% of the outstanding
securities of such issuer and together own beneficially more than 5% of the
securities of such issuer.

9. Invest in the securities of a company for the purpose of exercising
management or control, but the Fund will vote the securities it owns as a
shareholder in accordance with its views.

10. Invest in warrants (other than warrants acquired by the Fund as part of a
unit or attached to securities at the time of purchase) if, as a result,
the investments (valued at the lower of cost or market) would exceed 5% of
the value of the Fund's net assets.

INSURANCE LAW RESTRICTIONS - In connection with the Trust's agreement to sell
shares to the Accounts, the Adviser and the insurance companies may enter into
agreements, required by certain state insurance departments, under which the
Adviser may agree to use its best efforts to assure and to permit insurance
companies to monitor that each Fund of the Trust complies with the investment
restrictions and limitations prescribed by state insurance laws and regulations
applicable to the investment of separate account assets

<PAGE> 61
in shares of mutual funds. If a Fund failed to comply with such restrictions
or limitations, the Accounts would take appropriate action which might include
ceasing to make investments in the Fund or withdrawing from the state imposing
the limitation. Such restrictions and limitations are not expected to have a
significant impact on the Trust's operations.

MAJOR SHAREHOLDERS

As of July 31, 1995, separate accounts of Nationwide Life Insurance
Company and Nationwide Life and Annuity Insurance Company had shared voting and
investment power of 93.0% and 7.0% of the shares of the Total Return Fund, 90.8%
and 9.2% of the shares of Government Bond Fund, 99.0% and 1.0% of the shares of
Money Market Fund, and 92.8% and 7.2% of the Capital Appreciation Fund,
respectively.

As of July 31, 1995, the Trustees and Officers of the Trust as a group owned
less than 1% of the shares of the Funds.

TRUSTEES AND OFFICERS OF THE TRUST
Trustees and Officers

The principal occupations of the Trustees and Officers during the last five
years and their affiliations are:

DR. JOHN C. BRYANT, Trustee.
44 Faculty Place, Wilmington, Ohio.
Dr. Bryant is Executive Director of the Cincinnati Youth Collaborative. He was
formerly Professor of Education, Wilmington College.

ROBERT M. DUNCAN, Trustee.
378 Bricker Hall, 190 North Oval Mall, Columbus, Ohio.
Mr. Duncan is Vice President-General Counsel of the Ohio State University. He
was formerly a partner in the law firm of Jones, Day, Reavis & Pogue in
Columbus, Ohio. He was formerly U.S. District Court Judge, Southern District
of Ohio.

PETER F. FRENZER, Trustee, Chairman*
One Nationwide Plaza, Columbus, Ohio.
Mr. Frenzer is President and Chief Operating Officer of Nationwide Life
Insurance Company, Nationwide Corporation and Nationwide Life and Annuity
Insurance Company; and Executive Vice President-Investments of the Nationwide
Insurance Enterprise.

DR. THOMAS J. KERR, IV, Trustee
1223-A Central Street, Evanston, Illinois.
Dr. Kerr is President of Kendall College. He was formerly President of Grant
Hospital Development Foundation.

<PAGE> 62
D. RICHARD MCFERSON, Trustee*.
One Nationwide Plaza, Columbus, Ohio
Mr. McFerson is President and Chief Executive Officer of the Nationwide
Insurance Enterprise.

JAMES F. LAIRD, JR., Treasurer.
One Nationwide Plaza, Columbus, Ohio.
Mr. Laird is Vice President and General Manager of Nationwide Financial
Services, Inc., the Distributor and Investment Adviser. He was formerly
Treasurer of Nationwide Financial Services, Inc.

RAE I. MERCER, Secretary.
One Nationwide Plaza, Columbus, Ohio.
Mrs. Mercer is Corporate Secretary of Nationwide Financial Services, Inc., the
Distributor and Investment Adviser.

*A Trustee who is an "interested person" of the Trust as defined in the
Investment Company Act of 1940.

The Funds do not pay any fees to Officers or to Trustees who are considered
"interested persons" of the Trust. The table below lists the aggregate
compensation paid by the Trust to each disinterested Trustee during the fiscal
year ended December 31, 1994, and the aggregate compensation paid to each
disinterested Trustee during the year by all registered investment companies to
which the Adviser provides investment advisory services (the "Nationwide Fund
Complex").

The Trust does not maintain any pension or retirement plans for the Officers
or Trustees of the Trust.
<TABLE>
Fiscal Year Ended December 31, 1994
<CAPTION>
Total Compensation
Aggregate from the Nationwide
Compensation Fund Complex
from the Trust including the Trust
<S> <C> <C>
Dr. John C. Bryant $1,000 $12,500
Robert M. Duncan $1,000 $12,500
Dr. Thomas J. Kerr, IV $1,000 $12,500
</TABLE>

CALCULATING YIELD - THE MONEY MARKET FUND

Any current Fund yield quotations, subject to Rule 482 under the Securities
Act of 1933, shall consist of a seven calendar day historical yield, carried at
least to the nearest hundredth of a percent. The yield shall be calculated by
determining the net change, excluding realized and unrealized gains and losses,
in the value of a hypothetical pre-existing account having a balance of one
share at the beginning of the period, dividing the net change in account value
by the value of the account at the beginning of the base period to obtain the
base period return,

<PAGE> 63
and multiplying the base period return by 365/7 (or 366/7 during a leap year).
For purposes of this calculation, the net change in account value reflects the
value of additional shares purchased with dividends from the original share,
and dividends declared on both the original share and any such additional
shares. As of December 31, 1994, the Fund's seven-day current yield was 5.65%.
The Fund's effective yield represents an annualization of the current seven day
return with all dividends reinvested, and for the period ended December 31,
1994 was 5.81%.

The Fund's yield will fluctuate daily. Actual yields will depend on factors
such as the type of instruments in the Fund's portfolio, portfolio quality and
average maturity, changes in interest rates, and the Fund's expenses. There is
no assurance that the yield quoted on any given occasion will remain in effect
for any period of time and there is no guarantee that the net asset value will
remain constant. It should be noted that a shareholder's investment in the
Fund is not guaranteed or insured. Yields of other money market funds may not
be comparable if a different base period or another method of calculation is
used.

CALCULATING YIELD AND TOTAL RETURN - NON-MONEY MARKET FUNDS

The Funds may from time to time advertise historical performance, subject to
Rule 482 under the Securities Act of 1933. 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 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 total return represents the rate required each year for an initial
investment to equal the 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 for a specified period of time, by the
amount of the initial payment, assuming reinvestment of all dividends and
distributions. 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.

The uniformly calculated average annual total returns for the one year, five
year, and ten year periods for the Total Return and Government Bond Funds,
ended December 31, 1994 are shown below.

<PAGE> 64
<TABLE>
<CAPTION>
Total Government
Return Bond
<S> <C> <C>
1 Year 1.07% (3.23)%
5 Years 9.08% 7.87%
10 Years 12.88% 9.36%
</TABLE>

The Capital Appreciation Fund began operations on May 1, 1992. Its annualized
average annual total return for one year ended December 31, 1994 and for the
two years and eight months from May 1, 1992 through December 31, 1994 was
(.90)% and 5.90%, respectively.

The Government Bond 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. The Government Bond Fund yield for the 30-day period ended December 31,
1994, was 7.72%.

INVESTMENT ADVISER AND OTHER SERVICES

The Adviser manages the Funds (except the Small Company Fund) pursuant to an
Investment Advisory Agreement (the "Agreement") dated October 22, 1981. This
Agreement was assigned on May 1, 1984 to the Adviser by the former Adviser,
Nationwide Annuity Advisers, Inc., with the consent of the Trust and
ratification by the Trust's shareholders. The Adviser provides the Trust with
overall investment advisory and administrative services, and general office
facilities. Subject to such policies as the Trustees may determine, the
Adviser makes investment decisions for the Trust. For these services and
facilities, the Adviser receives a fee computed and paid monthly at the annual
rate equal to .5% of the average daily net assets of each Fund of the Trust
(except for the Small Company Fund).

The Trust pays the compensation of the three 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 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

<PAGE> 65
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.

For the year ended December 31, 1994, the Adviser received fees in the
following amounts: Total Return Fund $2,556,764, Government Bond Fund
$1,997,185, Money Market Fund $3,269,449 and Capital Appreciation Fund
$237,838.

The Adviser pays the compensation of two Trustees affiliated with the
Adviser. The officers of the Trust receive no compensation from the Trust.
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 organization, investment advisory
facilities, and executive and supervisory personnel for managing the
investments and effecting the portfolio transactions of the Trust.

The 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 only if its
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 if it is assigned. It may be terminated without penalty by vote
of a majority of the out standing voting securities, or by either party, on not
more than 60 days nor less than 30 days written notice. The Agreement further
provides that the Adviser may render services to others.

ADVISORY SERVICES FOR THE SMALL COMPANY FUND

The Adviser oversees the management of the Small Company Fund pursuant to an
Investment Advisory Agreement dated October __, 1995. Subject to the
supervision and direction of the Trustees, the Adviser determines the
allocation of assets among the Subadvisers and evaluates and monitors the
performance of subadvisers. The Adviser is also authorized to select and place
portfolio investments on behalf of the Fund; however, the Adviser generally
intends to limit its direct portfolio management to the

<PAGE> 66

investment of a portion of the Fund's assets in cash or money market
instruments. The Adviser has responsibility for communicating performance
expectations and evaluations to the Subadvisers and ultimately recommending to
the Trust's Board of Trustees whether a Subadviser's contract should be
renewed, modified or terminated; however, the Adviser does not expect to
recommend frequent changes of subadvisers. The Adviser will regularly provide
written reports to the Board of Trustees regarding the results of its
evaluation and monitoring functions. The Advisory Agreement of the Small
Company Fund contains termination and indemnification provisions similar to
those in the Agreement as described above.

The Fund pays to the Adviser a fee at the annual rate of 1.00% of the Fund's
average daily net assets.

The Subadvisers - Pursuant to Subadvisory Agreements between each of the
Subadvisers and the Adviser, each of which are dated October ___, 1995, the
Subadvisers each manage a portion of the Fund's assets in accordance with the
Fund's investment objective and policies. With regard to the portion of the
Fund's assets allocated to it, each Subadviser shall make investment decisions
for the Fund and in connection with such decisions place purchase and sell
orders for the securities in the Fund. For the investment management services
they provide to the Fund, each Subadviser, or PIML and VEAC together, receives a
fee from the Adviser at the annual rate of .60% of the average daily net assets
of the portion of the Fund managed by that subadviser or group of Subadvisers.

Each of the Subadvisory Agreements specifically provides that the Subadviser,
including its directors, officers, partners 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 Small Company Fund, 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 such Agreement. Each Subadvisory 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 Fund, and in either case,
by a majority of the Trustees who are not parties to the Agreement or
interested persons of any such party. Each Subadvisory Agreement terminates
automatically if it is assigned. It may also be terminated without penalty by
vote of a majority of the out standing voting securities, or by either party,
on not more than 60 days nor less than 30 days written notice.

Below is a brief description of each of the subadvisers.

<PAGE> 67

The Dreyfus Corporation. Dreyfus, located at 200 Park Avenue, New York, New
York 10166, was formed in 1947 and serves as one of the Fund's Subadvisers.
Dreyfus is a wholly-owned subsidiary of Mellon Bank, N.A., which is a
wholly-owned subsidiary of Mellon Bank Corporation ("Mellon"). As of June 30,
1995, Dreyfus managed or administered approximately $76 billion in assets for
approximately 1.8 million investor accounts nationwide.

Mellon is a publicly owned multibank holding company incorporated under
Pennsylvania law in 1971 and registered under the Federal Bank Holding Company
Act of 1956, as amended. Mellon provides a comprehensive range of financial
products and services in domestic and selected international markets. Mellon
is among the twenty-five largest bank holding companies in the United States
based on total assets. Mellon's principal wholly-owned subsidiaries are Mellon
Bank, N.A., Mellon Bank (DE) National Association, Mellon Bank (MD), The Boston
Company, Inc. AFCO Credit Corporation and a number of companies known as
Mellon Financial Services Corporations. Through its subsidiaries, including
Dreyfus, Mellon managed approximately $200 billion in assets as of march 31,
1995, including approximately $72 billion in mutual fund assets. As of March
31, 1995, various subsidiaries of Mellon provided non-investment services, such
as custodial or administration services, for approximately $680 billion in
assets including approximately $67 billion in mutual fund assets.

Neuberger & Berman L.P. Neuberger & Berman, also serves as a sub-adviser to
the Fund. Neuberger & Berman and its predecessor firms have specialized in the
management of no-load mutual funds since 1950.

Strong Capital Management, Inc. Strong, which also serves as one of the
Subadvisers for the Fund, began conducting business in 1974. Since then, its
principal business has been providing continuous investment supervision for
individuals and institutional accounts, such as pension funds and
profit-sharing plans. Strong also acts as investment advisor for each of the
mutual funds within the Strong Family of Funds. As of June 30, 1995, Strong
had over $14 billion under management. Strong's principal mailing address is
P.O. Box 2936, Milwaukee, Wisconsin 53201. Mr. Richard S. Strong is the
controlling shareholder of Strong.

<PAGE> 68

Van Eck Associates and Pictet International Management Limited. VEAC and
PIML will together manage a portion of the Fund. VEAC is located at 99 Park
Avenue, New York, New York 10016. PIML is located at Cutlers Gardens, 5
Devonshire Square, London, United Kingdom EC2M 4LD. PIML is primarily
responsible for managing the portion of the Fund's assets allocated to the
PIML and VEAC. PIML determines which securities are to be bought and sold.
VEAC, however, makes recommendations to PIML regarding Hard Asset securities.
VEAC will also make recommendations regarding the allocation among each of the
Hard Asset sectors. PIML is not obligated to act on VEAC'S recommendation's
and the amount, if any, allocated to Hard Assets will be determined by PIML.
VEAC will also assist PIML on issues regarding determining the liquidity of
securities, portfolio diversification and matters involving United States
federal securities and tax law as they apply to management of the Fund.

Warburg, Pincus Counsellors, Inc. The Fund also employs Counsellors as a
Subadviser to the Fund. Counsellors is a professional investment counselling
firm which provides investment services to endowment funds, foundations and
other institutions and individuals. As of June 30, 1995, Counsellors managed
approximately $10.8 billion of assets including approximately $4.9 billion of
assets of nineteen mutual funds. Incorporated in 1970, Counsellors is a wholly
owned subsidiary of Warburg, Pincus Counsellors G.P. ("Counsellors G.P."), a
New York general partnership. E.M. Warburg, Pincus & Co., Inc. ("EMW")
controls Counsellors through its ownership of a class of voting preferred stock
of Counsellors. Counsellors G.P. has no business other than being a holding
company of Counsellors and its subsidiaries. Counsellors' address is 466
Lexington Avenue, New York, New York 10017-3147.

BROKERAGE ALLOCATIONS

IN GENERAL. The Total Return Fund, during the fiscal years ended December
31, 1994, December 31, 1993, and December 31, 1992, paid brokerage commissions
of $258,714, $177,675, and $134,702, respectively, and the Capital Appreciation
Fund, during the fiscal year ended December 31, 1994, December 31, 1993 and

<PAGE> 69
the period ended December 31, 1992, paid brokerage commissions of $52,032,
$42,439 and $27,862, all to firms rendering statistical services. The Money
Market Fund and Government Bond Fund paid no brokerage commissions during the
periods covered by the financial statements.

The Adviser (or a Sub-Adviser) 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 OTC markets, there is generally no commission, but the
price includes a spread between the dealer's purchase and sale price which
makes up 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. 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
execution," i.e., execution at the most favorable prices and in the most
effective manner possible. The Adviser always attempts to achieve best
execution, and it has complete freedom as to the markets in and the
broker-dealers through which it seeks 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 the Adviser or a Subadviser. In placing orders with such
broker-dealers, the Adviser will, where possible, take into account the
comparative usefulness of such information. Such information is useful to the
Adviser or a Subadviser even though its dollar value may be indeterminable, and
its receipt or availability generally does not reduce the Adviser's or a
Subadviser's normal research activities or expenses.

Trust portfolio transactions may be effected with broker-dealers who have
assisted investors in the purchase of Policies. 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.

There may be occasions when portfolio transactions for the Trust are executed
as part of concurrent authorizations to

<PAGE> 70
purchase or sell the same security for trusts or other accounts served by
affiliated companies of the Adviser or a Subadviser. Although such concurrent
authorizations potentially could be either advantageous or disadvantageous to
the Trust, they are effected only when the Adviser or a Subadviser believes
that to do so is in the interest of the Trust. When such concurrent
authorizations occur, the executions will be allocated in an equitable manner.

SPECIAL BROKERAGE ALLOCATION CONSIDERATIONS RELATING TO THE SMALL COMPANY
FUND. In purchasing and selling the Small Company Fund's portfolio investments,
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 the 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 that such commission is reasonable in relation
to the value of the brokerage and/or research services as defined in Section
28(e) of the Securities Exchange Act of 1934 which have been 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 the Adviser. The fees to each of the Subadvisers pursuant to
its subadvisory agreement with the Adviser is 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.

Neuberger & Berman will act as the principal broker in the purchase and sale
of portfolio securities for the portion of the Fund advised by Neuberger &
Berman and in connection with the writing of covered call options on their
securities. Transactions in portfolio securities for which Neuberger & Berman
serves as broker will be affected in accordance with Rule 17e-1 under the 1940
Act.

<PAGE> 71

The Fund will continue to use Neuberger & Berman as its principal broker for
the portion of the Fund advised by Neuberger & Berman where, in the judgment of
Neuberger & Berman, the firm is able to obtain a price and execution at least
as favorable as that provided by other qualified brokers. To the Fund's
knowledge, however, no affiliate of Neuberger & Berman receives give-ups or
reciprocal business in connection with their securities transactions.

Under the 1940 Act, commissions paid by the Fund to Neuberger & Berman 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 Fund's policy that the commissions to be paid to
Neuberger & Berman must, in its judgment, 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
Neuberger & Berman on comparable transactions for its most favored unaffiliated
customers, except for accounts for which Neuberger & Berman acts as a clearing
broker for another brokerage firm and customers of Neuberger & Berman
considered by a majority of the independent trustees not to be comparable to
the Fund. The Fund does not deem it practicable and in its 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. The 1940 Act generally prohibits Neuberger &
Berman from acting as principal in the purchase or sale of securities for the
Fund's account, unless an appropriate exemption is available.

The Trustees periodically review each Subadviser's performance of its
responsibilities in connection with the placement of portfolio transactions on
behalf of the Fund and review the commissions paid by the Fund over
representative periods of time to determine if they are reasonable in relation
to the benefits to the Fund.

PURCHASES, REDEMPTIONS AND PRICING OF SHARES

An insurance company purchases shares of the Funds at their net asset value
using purchase payments received on Policies issued by Accounts. These
Accounts are funded by shares of the Trust.

All investments in the Trust are credited to the shareholder's account in the
form of full and fractional shares of the designated Fund (rounded to the
nearest 1/1000 of a share). The Trust does not issue share certificates.

The net asset value per share of the Funds is determined once daily, as of
the close of the New York Stock Exchange (currently

<PAGE> 72
4 P.M. eastern time) on each business day the New York Stock Exchange is open
and on such days as the Board determines and on any other day during which
there is a sufficient degree of trading in each Fund's portfolio securities
that the net asset value of the Fund is materially affected by changes in the
value of portfolio securities. The Fund will not compute net asset value on
customary national business holidays, including the following: Christmas, New
Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day and Thanksgiving. The net asset value per share is calculated by adding
the value of all securities and other assets of a Fund, deducting its
liabilities, and dividing by the number of shares outstanding.

The offering price for orders placed before the close of the New York Stock
Exchange, on each business day the Exchange is open for trading, will be based
upon calculation of the net asset value at the close of the Exchange. For
orders placed after the close of the Exchange, or on a day on which the
Exchange is not open for trading, the offering price is based upon net asset
value at the close of the Exchange on the next day thereafter on which the
Exchange is open for trading. The net asset value of a share of the Money
Market Fund, the Government Bond Fund, Capital Appreciation Fund, and the Total
Return Fund on which offering and redemption prices are based is the net asset
value of a Fund, divided by the number of shares outstanding, the result being
adjusted to the nearer cent. The net asset value of each Fund is determined by
subtracting the liabilities of the Fund from the value of its assets (chiefly
composed of investment securities). Securities of the Fund listed on national
exchanges are valued at the last sales price on the principal exchange, or if
there is no sale on that day, or if the securities are traded only in the
over-the-counter market, at the quoted bid prices. Securities and other
assets, for which such market prices are unavailable, are valued at fair value
as determined by the Trustees. For the Total Return Fund, Capital Appreciation
Fund and Government Bond Fund, short-term notes and bank certificates of
deposit are valued at amortized cost, which approximates market. For the Money
Market Fund, securities are valued at amortized cost, which approximates market
value, in accordance with Rule 2a-7 of the Investment Company Act of 1940.

The net income of the Money Market Fund is determined once daily, as of the
close of the New York Stock Exchange (currently 4:00 P.M., New York time) on
each business day on which such Exchange is open. All the net income of the
Fund, so determined, is declared in shares as a dividend to shareholders of
record at the time of such determination. (Shares purchased become entitled to
dividends declared as of the first day following the date of investment.)
Dividends are distributed in the form of additional shares of the Fund on the
last business day of each

<PAGE> 73
month at the rate of one share (and fraction thereof) of the Fund for each one
dollar (and fraction thereof) of dividend income.

For this purpose, the net income of the Money Market Fund (from the time of
the immediately preceding determination thereof) shall consist of: (a) all
interest income accrued on the portfolio assets of the Fund, (b) less all
actual and accrued expenses and (c) plus or minus net realized gains and losses
on the assets of the Fund determined in accordance with generally accepted
accounting principles. Interest income shall include discount earned
(including both original issue and market discount) on discount paper accrued
ratably to the date of maturity. Securities are valued at market or amortized
cost which approximates market, which the Trustees have determined in good
faith constitutes fair value for the purposes of complying with the Investment
Company Act of 1940.

Because the net income of the Money Market Fund is declared as a dividend
each time the net income is determined, the net asset value per share (i.e.,
the value of the net assets of the Fund divided by the number of shares
outstanding) remains at one dollar per share immediately after each such
determination and dividend declaration. Any increase in the value of a
shareholder's investment in the Fund, representing the reinvestment of dividend
income, is reflected by an increase in the number of shares of the Fund in its
account.

Pursuant to its objective of maintaining a fixed one dollar share price, the
Fund will not purchase securities with a remaining maturity of more than 397
days and will maintain a dollar weighted average portfolio maturity of 90 days
or less.

The Trust may suspend the right of redemption for such periods as are
permitted under the 1940 Act and under the following unusual circumstances:
(a) when the New York Stock Exchange is closed (other than weekends and
holidays) or trading is restricted; (b) when an emergency exists, making
disposal of portfolio securities or the valuation of net assets not reasonably
practicable; or (c) during any period when the Securities and Exchange
Commission has by order permitted a suspension of redemption for the protection
of shareholders.

ADDITIONAL INFORMATION

DESCRIPTION OF SHARES - The Declaration of Trust permits the Trustees to
issue an unlimited number of full and fractional

<PAGE> 74
shares of beneficial interest of each Fund and to divide or combine such shares
into a greater or lesser number of shares without thereby exchanging the
proportionate beneficial interests in the Trust. Each share of a Fund
represents an equal proportionate interest in that Fund with each other share.
The Trust reserves the right to create and issue a number of series of shares.
In that case, the shares of each series would participate equally in the
earnings, dividends, and assets of the particular series, but shares of all
series would vote together in the election of Trustees. Upon liquidation of a
Fund, shareholders are entitled to share pro rata in the election of Trustees.
Upon liquidation of a Fund, shareholders are entitled to share pro rata in the
net assets of such Fund available for distribution to shareholders.

VOTING RIGHTS - Shareholders are entitled to one vote for each share held.
Shareholders may vote in the election of Trustees and on other matters
submitted to meetings of shareholders. No amendment may be made to the
Declaration of Trust without the affirmative vote of a majority of the
outstanding shares of the Trust. The Trustees may, however, amend the
Declaration of Trust without the vote or consent of shareholders to:

o designate series of the Trust; or

o change the name of the Trust; or

o supply any omission, cure, correct, or supplement any ambiguous, defective,
or inconsistent provision to conform the Declaration of Trust to the
requirements of applicable federal laws or regulations if they deem it
necessary.

Shares have no pre-emptive or conversion rights. Shares are fully paid and
nonassessable, except as set forth below. In regard to termination, sale of
assets, or change of investment restrictions, the right to vote is limited to
the holders of shares of the particular Fund affected by the proposal. When a
majority is required, it means the lesser of 67% or more of the shares present
at a meeting when the holders of more than 50% of the outstanding shares are
present or represented by proxy, or more than 50% of the outstanding shares.

SHAREHOLDER INQUIRIES - All inquiries regarding the Trust should be directed
to the Trust at the telephone number or address shown on the cover page of this
Prospectus.

TAX STATUS

Nationwide Life Insurance Company and Nationwide Life and Annuity Insurance
are the sole shareholders of record of the Trust. Each Fund of the Trust is
treated as a separate entity for purpose of the regulated investment company
provisions of the

<PAGE> 75

Internal Revenue Code, and, therefore, the assets, income, and distributions of
each Fund are considered separately for purposes of determining whether or not
the Fund qualifies as a regulated investment company.

Each Fund of the Trust intends to qualify as a "regulated investment company"
under Subchapter M of the Code. If it qualifies as a regulated investment
company, a Fund will pay no federal income taxes on its taxable net investment
income (that is, taxable income other than net realized capital gains) and its
net realized capital gains that are distributed to shareholders. To qualify
under Subchapter M, a Fund must, among other things: (i) distribute to its
shareholders at least 90% of its taxable net investment income (for this
purpose consisting of taxable net investment income and net realized short-term
capital gains); (ii) derive at least 90% of its gross income from dividends,
interest, payments with respect to loans of securities, gains from the sale or
other disposition of securities, or other income (including, but not limited
to, gains from options, futures, and forward contracts) derived with respect to
its business of investing in securities; (iii) derive less than 30% of its
annual gross income from the sale or other disposition of securities, options,
futures or forward contracts held for less than three months; and (iv)
diversify its holdings so that, at the end of each fiscal quarter of the Fund
(a) at least 50% of the market value of the Fund assets is represented by cash,
U.S. government securities and other securities, with those other securities
limited, with respect to any one issuer, to an amount no greater in value than
5% of the Fund's total assets and to not more than 10% of the outstanding
voting securities of the issuer, and (b) not more than 25% of the market value
of the Fund's assets is invested in the securities of any one issuer (other
than U.S. government securities or securities of other regulated investment
companies) or of two or more issuers that the Fund controls and that are
determined to be in the same or similar trades or businesses or related trades
or businesses. In meeting these requirements, a Fund may be restricted in the
selling of securities held by the Fund for less than three months and in the
utilization of certain of the investment techniques described above and in the
respective Fund's Prospectus. As a regulated investment company, a Fund will
be subject to a 4% non-deductible excise tax measured with respect to certain
undistributed amounts of ordinary income and capital gain required to be but
not distributed under a prescribed formula. The formula requires payment to
shareholders during a calendar year of distributions representing at least 98%
of the Fund's taxable ordinary income for the calendar year and at least 98% of
the excess of its capital gains over capital losses realized during the
one-year period ending October 31 during such year, together with any
undistributed, untaxed amounts of ordinary income and capital gains from the
previous calendar year. The Funds expect to pay

<PAGE> 76

the dividends and make the distributions necessary to avoid the application of
this excise tax.

In addition, each Fund intends to comply with the diversification requirements
of Section 817(h) of the Code related to the tax-deferred status of insurance
company separate accounts. To comply with regulations under Section 817(h) of
the code, each Fund will be required to diversify its investments so that on
the last day of each calendar quarter no more than 55% of the value of its
assets is represented by any one investment, no more than 70% is represented by
any two investments, no more than 80% is represented by any three investments
and no more than 90% is represented by any four investments. Generally, all
securities of the same issuer are treated as a single investment. For the
purposes of Section 817(h), obligations of the United States Treasury and each
U.S. government instrumentality are treated as securities of separate issuers.
The Treasury Department has indicated that it may issue future pronouncements
addressing the circumstances in which a Policy owner's control of the
investments of a separate account may cause the Policy owner, rather than the
participating insurance company, to be treated as the owner of the assets held
by the separate account. If the Policy owner is considered the owner of the
securities underlying the separate account, income and gains produced by those
securities would be included currently in the Policy owner's gross income. It
is not known what standards will be set forth in such pronouncements or when,
if at all, these pronouncements may be issued. In the event that rules or
regulations are adopted, there can be no assurance that the Funds will be able
to operate as currently described, or that the Trust will not have to change
the investment goal or investment policies of a Fund. The board reserves the
right to modify the investment policies of a Fund as necessary to prevent any
such prospective rules and regulations from causing a Policy owner to be
considered the owner of the shares of the Fund underlying the separate
account.

TAX CONSEQUENCES FOR THE SMALL COMPANY FUND

FOREIGN TRANSACTIONS. Dividends and interest received by the Small Company
Fund may be subject to income, withholding, or other taxes imposed by foreign
countries and U.S. possessions that would reduce the yield on its securities.
Tax conventions between certain countries and the United States may reduce or
eliminate these foreign taxes, however, and many foreign countries do not
impose taxes on capital gains in respect of investments by foreign investors.
Policy holders will bear the cost of foreign tax withholding in the form of
increased expenses to the Fund but generally will not be able to claim a
foreign tax credit or deduction for foreign taxes paid by the Fund by reason of
the tax-deferred status of the policies.

<PAGE> 77

The Fund's transactions, if any, in foreign currencies, forward contracts,
options and futures contracts (including options and forward contracts on
foreign currencies) will be subject to special provisions of the Code that,
among other things, may affect the character of gains and losses recognized by
the Fund (i.e., may affect whether gains or losses are ordinary or capital),
accelerate recognition of income to the Fund, defer Fund losses and cause the
fund to be subject to hyperinflationary currency rules. These rules could
therefore affect the character, amount and timing of distributions to
shareholders. These provisions also (a) will require the Fund to
mark-to-market certain types of its positions (i.e., treat them as if they were
closed out) and (b) may cause the fund to recognize income without receiving
cash with which to pay dividends or make distributions in amounts necessary to
satisfy the distribution requirements for avoiding income and excise taxes.
The Fund will monitor its transactions, will make the appropriate tax elections
and will make the appropriate entries in its books and records when it acquires
any foreign currency, forward contract, option, futures contract or hedged
investment so that (i) neither the Fund nor its shareholders will be treated as
receiving a materially greater amount of capital gains or distributions than
actually realized or received, (ii) the Fund will be able to use substantially
all of its losses for the fiscal years in which the losses actually occur, and
(iii) the Fund will continue to qualify as a regulated investment company.

As described in the Prospectus, because shares of the Fund may only be
purchased through Policies, it is anticipated that dividends and distributions
will be exempt from current taxation if left to accumulate within the Policies.

INVESTMENT IN PASSIVE FOREIGN INVESTMENT COMPANIES. If the Fund purchases
shares in certain foreign entities classified under the Code as "passive
foreign investment companies" ("PFICs"), the Fund may be subject to federal
income tax on a portion of an "excess distribution" or gain from the
disposition of the shares, even though the income may have to be distributed by
the Fund to its shareholders, the Policies. In addition, gain on the
disposition of shares in a PFIC generally is treated as ordinary income even
though the shares are capital assets in the hands of the Fund. Certain
interest charges may be imposed on the Fund with respect to any taxes arising
from excess distributions or gains on the disposition of shares in a PFIC.

The Fund may be eligible to elect to include in its gross income its share of
earnings of a PFIC on a current basis. Generally, the election would eliminate
the interest charge and the ordinary income treatment on the disposition of
stock, but such an election may have the effect of accelerating the recognition
of income and gains by the Fund compared to a fund that did not make the
election. In addition, information

<PAGE> 78

required to make such an election may not be available to the Fund.

On April 1, 1992 proposed regulations of the Internal Revenue Service (the
"IRS") were published providing a mark-to-market election for shares in certain
PFICs held by regulated investment companies. If the Fund is able to make the
foregoing election in the first year in which it is permitted to do so, it may
be able to avoid the interest charge (but not the ordinary income treatment) on
disposition of the PFIC stock by each year marking-to-market the stock (that
is, by treating it as if it were sold for fair market value on the last day of
the year). Such an election could also result in acceleration of income to the
Fund.

DERIVATIVE INSTRUMENTS. The use of derivatives strategies, such as purchasing
and selling (writing) options and futures and entering into forward currency
contracts, involves complex rules that will determine for income tax purposes
the character and timing of recognition of the gains and losses the Small
Company Fund realizes in connection therewith. Gains from the disposition of
foreign currencies (except certain gains therefrom that may be excluded by
future regulations), and income from transactions in options, futures, and
forward currency contracts derived by the Fund with respect to its business of
investing in securities or foreign currencies, will qualify as permissible
income. However, income from the disposition of options and futures (other
than those on foreign currencies) will be subject to a 30% limitation if they
are held for less than three months. Income from the disposition of foreign
currencies, and options, futures, and forward contracts on foreign currencies,
that are not directly related to the Fund's principal business of investing in
securities (or options and futures with respect to securities) also will be
subject to a 30% limitation if they are held for less than three months.

If the Fund satisfies certain requirements, any increase in value of a
position that is part of a "designated hedge" will be offset by any decrease in
value (whether realized or not) for the offsetting hedging position during the
period of the hedge for purposes of determining whether the Fund satisfies the
30% limitation on the gross income that can be derived from the sale or other
disposition of securities or derivative instruments that were held for less
than three months. Thus, only the net gain (if any) from the designated hedge
will be included in gross income for purposes of that limitation. The Fund
intends that, when it engages in hedging strategies, the hedging transactions
will qualify for this treatment, but at the present time it is not clear
whether this treatment will be available for all of the Fund's hedging
transactions. To the extent this treatment is not available or is not elected
by the Fund, it may be forced to defer the closing out of certain options,
futures, or forward currency contracts beyond the time when it otherwise would
be

<PAGE> 79

advantageous to do so, in order for the Fund to continue to qualify as a RIC.

TAX CONSEQUENCES TO SHAREHOLDERS

Since shareholders of the Funds will be the Accounts, no discussion is
included herein as to the Federal income tax consequences at the level of the
holders of the Policies. For information concerning the Federal income tax
consequences to such holders, see the Prospectuses for such Policies.

<PAGE> 80

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 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

<PAGE> 81

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.

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.

<PAGE> 82

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.

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

<PAGE> 83

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.

Fitch's 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.

<PAGE> 84

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.

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.

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. Moreover, the character of the risk factor
varies from

<PAGE> 85

industry to industry and between corporate, health care and municipal
obligations.

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.

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
DD are extremely speculative and should be valued on the basis of their
and ultimate recovery value in liquidation or reorganization of the obligor.
D 'DDD' represents the highest potential for recovery of these bonds, and
'D' represents the lowest potential for recovery.

DUFF & PHELPS' 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,

<PAGE> 86

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.

<TABLE>
<CAPTION>
Rating
-------
Scale Definition
----- ----------
<S> <C>
_______________________________________________________________________________________________________________________________
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
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
BBB considered sufficient for prudent investment.
BBB- Considerable variability in risk during economic cycles.
_______________________________________________________________________________________________________________________________

BB+ Below investment grade but deemed likely to meet
BB obligations when due. Present or prospective
BB- 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 that
B obligations will not be met when due. Financial
B- protection factors will fluctuate widely according to economic cycles, industry conditions and/or company
fortunes. Potential exists for frequent
</TABLE>

<PAGE> 87

<TABLE>
<S> <C>
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. Preferred stock with dividend arrearages.
__________________________________________________________________________________________________________________
</TABLE>

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. Factors such as liquidity of the issuer, long-term debt ratings,
reliability and quality of management, and earning and cost flows are
considered by Standard & Poor's when assigning these ratings.

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-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.

<PAGE> 88

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.

MOODY'S COMMERCIAL PAPER RATINGS
--------------------------------

The term "commercial paper" as used by moody's means promissory obligations
not having an original maturity in excess of nine months. Moody's makes no
representation as to whether such commercial paper is by any other definition
"commercial paper" or is exempt from registration under the 1933 Act.

Moody's commercial paper ratings are opinions on the ability of issuers to
repay punctually promissory obligations not having an original maturity in
excess of nine months. Moody's does not represent that any specific note is a
valid obligation of a rated issuer or issued in conformity with any applicable
law. 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 related supporting institutions) have a superior
capacity for repayment of short-term promissory 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 related 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 relates 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 the requirement for relatively high financial
leverage. Adequate alternate liquidity is maintained.

<PAGE> 89

Issuers rated Not Prime do not fall within any of the prime rating categories.

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

<PAGE> 90

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 as defined is not only cash from
operations, but also access to alternative sources of funds including trade
credit, bank lines, and the capital markets. An important consideration is the
level of an obligor's reliance on short-term funds on an ongoing basis.

<TABLE>
Rating Scale Definition

<S> <C>
Duff 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.

Duff 1 Very high certainty of timely payment. Liquidity factors are excellent and supported by good fundamental
protection factors. Risk factors are minor.

Duff 1- High certainty of timely payment. Liquidity factors are strong and supported by good fundamental
protection factors. Risk factors are very small.

Good Grade

Duff 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

Duff 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

Duff 4 Speculative investment characteristics. Liquidity is not sufficient to insure against disruption in debt
service. Operating
</TABLE>

<PAGE> 91

<TABLE>
<S> <C>
Factors and market access may be subject to a high degree of variation.

Default

Duff 5 Issuer failed to meet scheduled principal and/or interest payments.

</TABLE>

Thomson's Short-Term Ratings
----------------------------

The Thomson Short-Term Ratings apply, unless otherwise noted, to
unsubordinated instruments of the rated entities with a maturity of one year or
less, including deposits, bank notes, bankers' acceptances, federal funds,
letters of credit, commercial paper and other obligations comparable in
priority and security to those specifically listed herein. These ratings do
not consider any collateral or security as the basis for the rating, although
some of the securities may in fact have collateral. Further, these ratings do
not incorporate consideration of the possible sovereign risk associated with a
foreign deposit (defined as a deposit taken in a branch outside the country in
which the rated entity is headquartered) of the rated entity. 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

<PAGE> 92

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.

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.

<PAGE> 93
[KPMG PEAT MARWICK LLP LETTERHEAD]

Independent Auditors' Report
----------------------------

The Shareholders and Board of Trustees
Nationwide Separate Account Trust:

We have audited the accompanying statements of assets and liabilities,
including the statements of investments, of Nationwide Separate Account Trust
(comprised of Capital Appreciation Fund, Total Return Fund, Government Bond
Fund, and Money Market Fund), as of December 31, 1994, and the related
statements of operations for the year then ended, the statements of changes in
net assets for each of the years in the two-year period then ended and the
financial highlights for each of the periods indicated herein. These
financial statements and financial highlights are the responsibility of
Nationwide Separate Account Trust's management. Our responsibility is to
express an opinion on these financial statements and financial highlights
based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1994 by correspondence with the custodian and
brokers, and where replies were not received, we carried out other appropriate
auditing procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective funds constituting Nationwide Separate Account Trust at
December 31, 1994, the results of their operations for the year then ended,
the changes in their net assets for each of the years in the two-year period
then ended, and the financial highlights for each of the periods indicated
herein, in conformity with generally accepted accounting principles.

Columbus, Ohio KPMG Peat Marwick LLP
February 17, 1995

<PAGE> 94
<TABLE>
CAPITAL APPRECIATION FUND STATEMENT OF INVESTMENTS - DECEMBER 31, 1994

----------------------------------------------------------------------------------------------
SHARES SECURITY VALUE (NOTE 1)
----------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (86.1%)
AUTO & AUTO PARTS (5.3%)
33,800 Chrysler Corporation............................................. $ 1,656,200
55,400 Ford Motor Company............................................... 1,551,200
-----------
3,207,400
-----------
BROADCASTING (4.6%)
35,495 CBS Inc.......................................................... 1,965,536
4,000 Capital Cities/ABC, Inc.......................................... 341,000
21,500 Tele-Communications Inc., Class A*............................... 467,625
-----------
2,774,161
-----------
BUILDING (5.7%)
37,900 Masco Corporation................................................ 857,487
18,400 National Gypsum Company*......................................... 749,800
27,500 USG Corporation*................................................. 536,250
25,100 Vulcan Materials Co.............................................. 1,270,688
-----------
3,414,225
-----------
CHEMICALS (12.1%)
26,300 Georgia Gulf Corporation*........................................ 1,022,412
33,000 IMC Global, Inc.*................................................ 1,427,250
57,800 Morton International Inc......................................... 1,647,300
39,700 OM Group, Inc.................................................... 952,800
63,310 Raychem Corporation.............................................. 2,255,419
-----------
7,305,181
-----------
DRUGS & HEALTHCARE (6.4%)
17,600 Schering-Plough Corp............................................ 1,302,400
33,700 Warner-Lambert Co............................................... 2,594,900
-----------
3,897,300
-----------
ELECTRONICS (0.2%)
1,600 AMP Inc......................................................... 116,400
-----------

FINANCIAL SERVICES (9.2%)
15,000 Barnett Banks, Inc.............................................. 575,625
13,000 Chubb Corporation............................................... 1,005,875
14,900 CoreStates Financial Corp....................................... 387,400
30,000 FirstFed Michigan Corp.......................................... 615,000
20,100 Fund American Enterprises*...................................... 1,452,225
73,000 Horace Mann Educators Corp...................................... 1,551,250
-----------
5,587,375
-----------
FOOD & BEVERAGES (11.8%)
14,500 Anheuser-Busch Companies, Inc................................... 737,687
51,500 PepsiCo, Inc.................................................... 1,866,875
4,800 Philip Morris Companies, Inc.................................... 276,000
44,600 Quaker Oats Company............................................. 1,371,450
74,633 Ralcorp Holdings Inc.*.......................................... 1,660,584
27,500 Ralston Purina Group............................................ 1,227,188
-----------
7,139,784
-----------

FOREST PRODUCTS (0.3%)
1,100 Georgia-Pacific Corp............................................. 78,650
2,700 Temple-Inland Inc................................................ 121,838
-----------
200,488
-----------
HOUSEHOLD PRODUCTS (5.8%)
19,300 Avon Products, Inc............................................... 1,153,175
43,400 Dial Corp. (The)................................................. 922,250
3,500 Gillette Company................................................. 261,625
12,300 Helene Curtis Industries, Inc.................................... 410,512
17,600 Maybelline, Inc.................................................. 316,800
6,600 Procter & Gamble Co.............................................. 409,200
-----------
3,473,562
-----------
LEISURE PRODUCTS (3.3%)
107,200 Brunswick Corp................................................... 2,023,400
-----------

LODGING (1.5%)
91,900 Host Marriott Corp.*............................................ 884,537
-----------

MACHINERY & CAPITAL GOODS (3.2%)
4,400 Cummins Engine, Inc.............................................. 199,100
33,800 Johnstown America Industries, Inc.*.............................. 553,475
12,200 PACCAR, Inc...................................................... 539,850
20,200 Trinity Industries, Inc.......................................... 636,300
-----------
1,928,725
-----------
NONFERROUS METALS (0.4%)
8,950 Alumax Inc.*..................................................... 253,956
-----------

OIL & GAS (6.3%)
31,200 Texaco Inc........................................................ 1,868,100
71,800 Unocal Corporation................................................ 1,956,550
-----------
3,824,650
-----------
PRINTING & PUBLISHING (6.2%)
51,200 American Greetings Corp., Class A.................................. $ 1,382,400
12,800 Dun & Bradstreet Corp.............................................. 704,000
3,500 Gannett Company, Inc............................................... 186,375
35,500 Gibson Greetings, Inc.............................................. 523,625
4,900 Knight-Ridder, Inc................................................. 247,450
2,800 Washington Post Company (The), Class B............................. 679,000
-----------
3,722,850
-----------
TELECOMMUNICATIONS (0.5%)
10,000 Airtouch Communications............................................ 291,250
-----------

TOYS (3.3%)
79,431 Mattel, Inc........................................................ 1,995,705
-----------

Total common stocks
(cost $49,973,710).................................... 52,040,949
-----------

---------
PRINCIPAL
---------

CONVERTIBLE BOND (1.9%)
$ 1,494,000 Consorcio G. Grupo Dina, 8.00%, 2004.......................... 1,165,320
Total convertible bonds -----------
(cost $1,375,826)

COMMERCIAL PAPER (9.2%)
Associates Corp. of North America
2,000,000 6.00%, due 01/23/95........................................ 1,992,333
Avco Financial Services, Inc.
1,010,000 6.11%, due 02/13/95........................................ 1,002,457
General Electric Capital Corp.
168,000 5.18%, due 01/19/95........................................ 167,540
140,000 5.29%, due 01/26/95........................................ 139,465
112,000 6.00%, due 02/06/95........................................ 111,309
286,000 5.12%, due 02/13/95........................................ 284,210
Goldman Sachs Group
853,000 5.30%, due 01/17/95........................................ 850,865
212,000 5.50%, due 01/17/95........................................ 211,449
100,000 6.07%, due 02/01/95........................................ 99,461
Merrill Lynch & Co., Inc.
405,000 5.50%, due 01/09/95........................................ 404,443
280,000 5.82%, due 02/27/95........................................ 277,374
-----------

Total commercial paper
(cost $5,540,906).................................... 5,540,906
-----------

U.S. GOVERNMENT OBLIGATIONS (5.8%)
U.S. Treasury Bills
5.53% through 5.49%, due 03/16/95
3,565,000 (cost $3,524,038)..................................... 3,524,038
-----------

Total investments
(cost $60,414,480).................................... $ 62,271,213
===========

<FN>
* Denotes a non-income producing security.

Cost also represents cost for federal income tax purposes.
Portfolio holding percentages represent market value as a
percentage of net assets.

See accompanying notes to financial statements.
</TABLE>

66
<PAGE> 95
<TABLE>
TOTAL RETURN FUND STATEMENT OF INVESTMENTS - DECEMBER 31, 1994

----------------------------------------------------------------------
SHARES SECURITY VALUE (NOTE 1)
----------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (85.3%)
AEROSPACE (1.2%)
140,000 The Boeing Company...................... $ 6,545,000
------------

AUTOMOBILE (1.8%)
230,000 General Motors Corp..................... 9,717,500
------------

CHEMICALS (5.3%)
100,000 Dow Chemical Company.................... 6,725,000
150,000 Dupont (E.I.) DeNemours & Co............ 8,437,500
100,000 Eastman Chemical Co..................... 5,050,000
268,400 Lawter International, Inc............... 3,254,350
150,000 Lubrizol Corp........................... 5,081,250
------------
28,548,100
------------

COMPUTER EQUIPMENT (1.4%)
75,000 Hewlett-Packard Co...................... 7,490,625
------------

COMPUTER SERVICES (2.1%)
160,000 Automatic Data Processing, Inc.......... 9,360,000
70,000 National Data Corp...................... 1,802,500
43,100 SCS/COMPUTE Inc.*....................... 96,975
------------
11,259,475
------------
CONGLOMERATE (9.5%)
200,000 EG&G, Inc............................... 2,825,000
311,000 Eastman Kodak Co........................ 14,850,250
900,000 Hanson Plc.............................. 16,200,000
305,300 Honeywell Inc........................... 9,616,950
200,000 Rockwell International Corp............. 7,150,000
------------
50,642,200
------------
CONSUMER DURABLES (0.1%)
78,500 Smith-Corona Corp....................... 196,250
------------

DRUGS & HEALTHCARE (1.5%)
90,000 Bristol-Meyers Squibb Co................ 5,208,750
40,000 Schering-Plough Corp.................... 2,960,000
------------
8,168,750
------------
ELECTRONICS (3.6%)
63,650 AMP, Inc................................ 4,630,537
120,000 Intel Corporation....................... 7,665,000
128,937 Molex Inc., Class A..................... 3,997,047
142,300 Richardson Electronic Ltd............... 1,102,825
118,000 Woodhead Industries, Inc................ 1,888,000
------------
19,283,409
------------
ENERGY (4.2%)
268,900 Mobil Corporation........................ 22,654,825
------------

ENGINEERING & CONSTRUCTION (0.4%)
50,000 Fluor Corporation....................... 2,156,250
------------

FINANCIAL SERVICES (12.7%)
130,000 Bankers Trust NY Corp................... 7,198,750
551,250 Bear Stearns Company, Inc............... 8,475,469
310,000 Firstar Corp............................ 8,331,250
350,000 Merrill Lynch & Co., Inc................ 12,512,500
140,000 Morgan, J.P. & Co., Inc................. 7,840,000
50,000 Morgan Stanley Group Inc................ 2,950,000
200,000 NBD Bancorp, Inc........................ 5,475,000
490,000 National City Corp...................... 12,678,750
88,000 Price, T Rowe & Assoc., Inc............. 2,640,000
------------
68,101,719
------------
FOOD & BEVERAGES (4.4%)
2,000,000 Grand Metropolitan Plc.................. 12,735,000
151,700 Grand Metropolitan ADR.................. 3,792,500
189,000 Heinz (H.J.) Co......................... 6,945,750
------------
23,473,250
------------
MACHINERY & CAPITAL GOODS (2.4%)
80,000 Cooper Industries, Inc.................. 2,730,000
117,600 Duriron Company, Inc.................... 2,058,000
60,000 Emerson Electric Co..................... 3,750,000
40,000 Ingersoll-Rand Company.................. 1,260,000
50,000 Nordson Corporation..................... 3,000,000
------------
12,798,000
------------
OIL & GAS (10.5%)
180,000 Amoco Corporation....................... 10,642,500
130,000 Exxon Corporation....................... 7,897,500
110,000 Royal Dutch Petroleum Co................ 11,825,000
331,300 Sonat, Inc.............................. 9,276,400
105,000 Texaco, Inc............................. 6,286,875
400,000 The Williams Companies, Inc............. 10,050,000
------------
55,978,275
------------
PAPER (0.7%)
40,000 Georgia-Pacific Corp.................... 2,860,000
62,400 Glatfelter (P.H.) Company............... 967,200
------------
3,827,200
------------
POLLUTION CONTROL (1.0%)
200,000 WMX Technologies, Inc................... $ 5,250,000
------------

PRINTING & PUBLISHING (5.5%)
275,000 Dun & Bradstreet Corp................... 15,125,000
217,600 Reader's Digest Assoc., Inc., Class B... 9,737,600
160,000 Wallace Computer Services, Inc.......... 4,640,000
------------
29,502,600
------------
RESTAURANTS (0.2%)
185,000 Pancho's Mexican Buffet, Inc............ 1,271,875
------------

RETAIL (0.9%)
59,300 Consolidated Stores Corp.*.............. 1,104,462
149,000 Supervalu Inc........................... 3,650,500
------------
4,754,962
------------
TELECOMMUNICATIONS (11.4%)
464,300 AT&T Co................................. 23,331,075
600,000 Hong Kong Telecommunications Ltd. ADR... 11,475,000
200,000 MCI Communications Corp................. 3,675,000
801,800 Sprint Corporation...................... 22,149,725
------------
60,630,800
------------
TRANSPORTATION (1.6%)
193,000 Union Pacific Corp...................... 8,805,625
------------

OTHER (2.9%)
618,580 Archer-Daniels-Midland Co............... 12,758,213
150,500 Property Trust of America............... 2,709,000
------------
15,467,213
------------

Total common stocks (cost $398,418,816). 456,523,903
------------

---------
PRINCIPAL
---------
REPURCHASE AGREEMENT (0.5%)
Merrill Lynch & Co.,Inc.,
5.32%, due 01/03/95, Collateralized by
$2,320,958 FHLMC 6.074%, due 7/1/21
$210,158 FNMA 8.50%, due 1/1/23
Market value - $2,531,116
$ 2,481,000 (cost $2,481,000)....................... 2,481,000
------------

U.S. TREASURY BILLS (17.6%)
3.62% through 6.36%,
due 1/12/95 through 8/24/95
95,268,000 (cost $94,251,420)...................... 94,251,420
------------

Total investments (cost $495,151,236)... $553,256,323
============

<FN>
* Denotes a non-income producing security.

Cost also represents cost for federal income tax purposes.
Portfolio holding percentages represent market value as a
percentage of net assets.

See accompanying notes to financial statements.
</TABLE>

<PAGE> 96
<TABLE>
GOVERNMENT BOND FUND STATEMENT OF INVESTMENTS - DECEMBER 31, 1994

----------------------------------------------------------------------------------------
PRINCIPAL SECURITY VALUE (NOTE 1)
----------------------------------------------------------------------------------------
<S> <C> <C>
MORTGAGE BACKED SECURITIES (32.6%)
Federal Home Loan Mortgage Corp., REMIC,
$13,000,000 Series 1344-D, 6.00%, due 8/15/07 ........... $ 10,738,377
20,000,000 Series 1415-N, 6.75%, due 11/15/07 .......... 17,703,980
9,454,271 Series 31-E, 7.55%, due 5/15/20 ............. 8,670,340
10,000,000 Series 94-E, 8.95%, due 11/15/20 ............ 10,116,890
17,739,932 Series 1143-Z, 7.50%, due 10/15/21 .......... 15,196,158
4,000,000 Series 190-D, 9.20%, due 10/15/21 ........... 4,091,476
4,781,603 Series 193-D, 9.00%, due 11/15/21 ........... 4,824,486

Federal National Mortgage Association
Debentures, REMIC,
6,500,000 Series 68-E, 8.35%, due 10/25/03 ............ 6,496,874
5,000,000 Series 34-E, 9.85%, due 8/25/14 ............. 5,200,545
3,161,730 Series 88-25-B, 9.25%, due 10/25/18 ......... 3,172,826
14,000,000 Series 16-D, 9.00%, due 3/25/20 ............. 14,263,886
7,485,192 Series 67-Z, 9.00%, due 6/25/20 ............. 7,476,959
5,000,000 Series 73-A, 8.00%, due 7/25/21 ............. 4,850,895
17,000,000 Series 203-PJ, 6.50%, due 10/25/23 .......... 14,741,363
------------

Total mortgage backed obligations
(cost $134,127,014) ...................... 127,545,055
------------

U.S. GOVERNMENT AND AGENCY
LONG-TERM OBLIGATIONS (67.1%)
Federal Home Loan Banks Bonds,
10,000,000 7.75%, due 4/25/96 .......................... 9,988,450
20,435,000 5.78%, due 2/16/01 .......................... 18,289,243
12,000,000 6.36%, due 3/21/01 .......................... 11,059,776
15,800,000 7.44%, due 8/10/01 .......................... 15,280,575
Private Export Funding Corporation
38,000,000 6.86%, due 4/30/04 .......................... 36,112,768
Resolution Funding Corporation, STRIPS,
25,000,000 0.00%, due 4/15/08 .......................... 8,683,725
58,000,000 0.00%, due 7/15/13 .......................... 13,080,102
U.S. Treasury Bonds,
23,000,000 11.75%, due 2/15/01 ......................... 27,348,403
39,000,000 11.75%, due 2/15/10 ......................... 49,127,754
15,000,000 11.25%, due 2/15/15 ......................... 19,809,375
U.S. Treasury Notes,
35,000,000 6.50%, due 5/15/97 .......................... 34,037,500
20,000,000 6.50%, due 9/30/96 .......................... 19,637,500
------------

Total U.S. government and agency long-term
obligations (cost $273,978,778) .......... 262,455,171
------------

REPURCHASE AGREEMENT (0.5%)
Merrill Lynch & Co., Inc.,
5.25%, due 1/3/95, Collateralized by
$2,155,000 Federal National Mortgage Association
5.35%, due 10/10/97
market value - $2,059,722
2,000,000 (cost $2,000,000) ........................... 2,000,000
------------

Total investments
(cost $410,105,792) ...................... $392,000,226
============
<FN>
Cost also represents cost for Federal income tax purposes.
Portfolio holding percentages represent market value as a percentage of net
assets.

See accompanying notes to financial statements.
</TABLE>

<PAGE> 97
<TABLE>
MONEY MARKET FUND STATEMENT OF INVESTMENTS - DECEMBER 31, 1994

---------------------------------------------------------------------------
PRINCIPAL SECURITY VALUE (NOTE 1)
---------------------------------------------------------------------------
<S> <C> <C>

CANADIAN GOVERNMENT OBLIGATIONS (4.5%)
British Columbia, Prov. of
$ 3,000,000 5.05%, due 02/02/95........... $ 2,986,112
2,000,000 5.05%, due 02/22/95........... 1,985,130
5,000,000 6.05%, due 02/22/95........... 4,955,465
Canadian Wheat Board
9,020,000 5.70%, due 01/25/95........... 8,984,296
5,000,000 6.05%, due 02/06/95........... 4,968,910
4,000,000 5.03%, due 02/27/95........... 3,967,583
9,200,000 5.82%, due 03/20/95........... 9,082,500
------------
Total Canadian government obligations
(cost $36,929,996).................... 36,929,996
------------

COMMERCIAL PAPER (89.7%)
Banks (11.3%)
Banc One Corporation
10,000,000 5.90%, due 01/03/95........... 9,995,083
5,000,000 6.05%, due 01/09/95........... 4,992,437
6,000,000 6.00%, due 01/10/95........... 5,990,000
6,000,000 6.17%, due 02/06/95........... 5,961,952
3,000,000 5.75%, due 02/14/95........... 2,978,437
CoreStates Capital Corporation
15,000,000 5.98%, due 01/11/95........... 14,972,592
Morgan J.P. & Co., Inc.
7,288,000 6.05%, due 02/09/95........... 7,239,008
5,000,000 6.20%, due 03/01/95........... 4,948,333
National City Credit Corporation
4,000,000 5.14%, due 02/13/95........... 3,974,871
Norwest Financial Corporation
3,000,000 5.93%, due 01/19/95........... 2,990,611
664,000 5.90%, due 01/20/95........... 661,823
4,000,000 6.05%, due 01/26/95........... 3,982,522
3,000,000 6.03%, due 01/26/95........... 2,986,935
9,000,000 6.14%, due 01/30/95........... 8,953,950
4,000,000 5.80%, due 02/07/95........... 3,975,511
5,000,000 5.77%, due 02/22/95........... 4,957,526
4,000,000 5.62%, due 02/22/95........... 3,966,905
------------
93,528,496
------------
Broker Dealers (16.8%)
Bear Stearns Companies Inc.
8,268,000 5.75%, due 01/24/95........... 8,236,306
2,000,000 6.07%, due 01/26/95........... 1,991,232
7,000,000 5.81%, due 02/13/95........... 6,950,292
3,000,000 5.80%, due 02/15/95........... 2,977,767
Dean Witter Discover & Co.
5,000,000 5.25%, due 01/03/95........... 4,997,812
2,635,000 5.78%, due 01/23/95........... 2,625,269
10,000,000 5.75%, due 01/27/95........... 9,956,875
10,000,000 5.85%, due 01/31/95........... 9,949,625
5,000,000 6.10%, due 02/02/95........... 4,972,042
Goldman Sachs Group
3,000,000 4.98%, due 01/04/95........... 2,998,340
6,000,000 5.00%, due 01/05/95........... 5,995,833
2,000,000 5.10%, due 01/18/95........... 1,994,900
10,000,000 5.70%, due 01/30/95........... 9,952,500
8,000,000 6.07%, due 02/01/95........... 7,956,835
3,000,000 5.18%, due 02/10/95........... 2,982,301
Merrill Lynch & Company, Inc.
5,000,000 5.98%, due 02/01/95........... 4,973,422
5,000,000 5.78%, due 02/15/95........... 4,963,071
9,000,000 5.82%, due 02/21/95........... 8,924,340
5,000,000 5.83%, due 02/23/95........... 4,956,275
9,000,000 5.80%, due 02/27/95........... 8,915,900
Smith Barney Inc.
8,000,000 5.94%, due 01/12/95........... 7,984,160
5,000,000 5.75%, due 01/13/95........... 4,989,618
5,000,000 5.83%, due 01/13/95........... 4,989,474
4,000,000 5.75%, due 01/19/95........... 3,987,860
------------
139,222,049
------------
Captive Borrowing Conduit (0.9%)
Prudential Funding Corporation
7,505,000 5.25%, due 01/03/95........... 7,501,717
------------
Chemicals (0.2%)
Ciba-Geigy Corporation
1,400,000 6.00%, due 01/10/95........... 1,397,667
------------
Commercial Finance (3.8%)
Ford Motor Credit Co.
$ 4,000,000 5.68%, due 01/05/95........... $ 3,996,844
2,593,000 5.75%, due 01/09/95........... 2,589,272
4,000,000 5.95%, due 01/19/95........... 3,987,439
4,000,000 6.06%, due 01/20/95........... 3,986,533
3,000,000 5.95%, due 01/26/95........... 2,987,108
4,000,000 6.05%, due 01/26/95........... 3,982,522
9,000,000 6.05%, due 01/27/95........... 8,959,163
662,000 6.05%, due 02/08/95........... 657,662
------------
31,146,543
------------
Consumer Finance (14.0%)
Associates Corp. of North America
4,754,000 5.81%, due 01/13/95........... 4,744,026
5,000,000 5.93%, due 01/20/95........... 4,983,528
5,000,000 6.02%, due 01/20/95........... 4,983,278
6,000,000 5.77%, due 01/23/95........... 5,977,881
1,022,000 6.05%, due 01/23/95........... 1,018,050
4,000,000 6.12%, due 01/30/95........... 3,979,600
5,306,000 6.05%, due 02/03/95........... 5,275,682
Becton, Dickinson & Co.
10,560,000 5.95%, due 01/06/95........... 10,549,528
Beneficial Corporation
5,588,000 6.05%, due 01/12/95........... 5,576,731
6,000,000 6.08%, due 01/18/95........... 5,981,760
6,968,000 6.00%, due 01/23/95........... 6,941,289
4,985,000 5.77%, due 01/24/95........... 4,965,824
3,960,000 6.05%, due 02/03/95........... 3,937,373
4,000,000 6.09%, due 02/17/95........... 3,967,520
Commercial Credit Company
5,740,000 5.75%, due 01/17/95........... 5,724,414
4,000,000 6.03%, due 01/30/95........... 3,979,900
16,000,000 5.78%, due 02/07/95........... 15,902,381
9,000,000 6.03%, due 02/09/95........... 8,939,700
Koch Industries Inc.
8,470,000 5.90%, due 01/03/95........... 8,465,836
------------
115,894,301
------------
Consumer Products (0.3%)
Clorox Company (The)
2,870,000 6.15%, due 03/27/95........... 2,827,835
------------
Diversified Finance (5.3%)
Deere, (John) Capital Corp.
4,608,000 6.05%, due 02/08/95........... 4,577,798
8,000,000 5.78%, due 02/09/95........... 7,948,622
Transamerica Finance Group, Inc.
6,000,000 6.00%, due 01/04/95........... 5,996,000
1,043,000 6.00%, due 01/04/95........... 1,042,305
5,998,000 5.76%, due 01/24/95........... 5,974,968
10,000,000 5.75%, due 01/25/95........... 9,960,069
2,624,000 5.77%, due 01/30/95........... 2,611,383
6,000,000 6.03%, due 01/31/95........... 5,968,845
------------
44,079,990
------------
Drugs & Cosmetics (0.6%)
Bausch & Laumb Inc.
5,000,000 6.00%, due 01/26/95........... 4,978,333
------------
Financial (3.1%)
General Electric Capital Corporation
6,000,000 5.03%, due 01/12/95........... 5,989,940
4,000,000 5.05%, due 02/06/95........... 3,979,239
8,525,000 5.77%, due 02/15/95........... 8,462,147
3,000,000 5.06%, due 03/07/95........... 2,972,169
4,000,000 5.55%, due 04/10/95........... 3,938,333
------------
25,341,828
------------
Financial Serivces (4.0%)
AVCO Financial Serivces Inc.
16,000,000 6.00%, due 01/17/95........... 15,954,667
10,000,000 6.10%, due 01/31/95........... 9,947,472
7,000,000 6.12%, due 02/06/95........... 6,955,970
------------
32,858,109
------------
Food & Beverage (1.6%)
Sysco Corporation
8,500,000 6.10%, due 02/10/95........... 8,440,948
5,000,000 6.10%, due 02/17/95........... 4,959,334
------------
13,400,282
------------
Insurance (8.0%)
Marsh McLennan Company
15,000,000 6.10%, due 01/04/95........... 14,989,833
9,000,000 6.04%, due 01/20/95........... 8,969,800

</TABLE>

69<PAGE> 98
<TABLE>
MONEY MARKET FUND (CONTINUED) STATEMENT OF INVESTMENTS - DECEMBER 31, 1994
---------------------------------------------------------------------------
PRINCIPAL SECURITY VALUE (NOTE 1)
---------------------------------------------------------------------------
<S> <C> <C>
Metlife Funding Inc.
$ 6,177,000 6.00%, due 01/19/95........... $ 6,157,440
5,000,000 5.92%, due 01/24/95........... 4,980,267
Old Republic Capital Corporation
15,000,000 6.08%, due 02/07/95........... 14,903,733
5,000,000 6.08%, due 02/07/95........... 4,967,910
3,000,000 6.10%, due 02/16/95........... 2,976,108
8,000,000 6.18%, due 02/16/95........... 7,935,453
------------
65,880,544
------------
Lease Financing (4.6%)
Fleet Funding Inc.
3,000,000 6.08%, due 01/20/95........... 2,989,867
PHH Corporation
3,700,000 5.90%, due 01/09/95........... 3,694,542
6,000,000 6.02%, due 01/09/95........... 5,990,970
3,000,000 5.98%, due 01/10/95........... 2,995,017
5,000,000 6.00%, due 01/12/95........... 4,990,000
7,295,000 5.93%, due 01/17/95........... 7,274,571
10,000,000 6.03%, due 02/06/95........... 9,938,025
------------
37,872,992
------------
Office Equipment & Supplies (0.4%)
Pitney Bowes Credit Corporation
3,000,000 5.75%, due 01/23/95........... 2,988,979
------------
Oil & Gas Equipment (0.6%)
Chevron Transport Corporation
5,000,000 5.97%, due 01/05/95........... 4,995,854
------------
Packaging & Container (3.7%)
Bemis Company, Inc.
9,500,000 5.97%, due 01/10/95........... 9,484,245
3,565,000 6.05%, due 01/11/95........... 3,558,410
12,000,000 6.00%, due 01/13/95........... 11,974,000
5,964,000 6.05%, due 01/20/95........... 5,943,954
------------
30,960,609
------------
Paper & Forest Products (3.9%)
Sonoco Products Company
15,678,000 5.70%, due 01/18/95........... 15,633,318
7,000,000 5.72%, due 01/18/95........... 6,979,980
10,000,000 6.07%, due 01/23/95........... 9,961,219
------------
32,574,517
------------
Publishing (0.2%)
Donnelley (RR) & Sons Company
1,890,000 6.00%, due 01/19/95........... 1,884,015
------------
Railroads (1.2%)
Norfolk & Southern Railway Co.
$ 5,000,000 5.77%, due 02/16/95........... $ 4,962,334
5,000,000 5.80%, due 02/21/95........... 4,958,111
------------
9,920,445
------------
Utilities (5.2%)
Florida Power Corporation
10,000,000 6.00%, due 01/11/95........... 9,981,667
National Rural Utilities Coop.
9,000,000 5.73%, due 01/06/95........... 8,991,405
6,398,000 5.97%, due 01/11/95........... 6,386,329
4,000,000 5.97%, due 01/17/95........... 3,988,723
14,000,000 5.97%, due 01/19/95........... 13,955,888
------------
43,304,012
------------
Total commercial paper
(cost $742,559,117)................. 742,559,117
------------
CORPORATE NOTES (0.2%)
Morgan Guarantee Trust Co. NY
5.78%*, due 04/18/95
2,000,000 (cost $1,999,880)............. 1,999,880
------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS (6.2%)
Federal National Mortgage Assoc.
29,000,000 5.75%, due 03/24/95........... 28,615,548
U.S. Treasury Bills
2,000,000 4.11%, due 01/12/95........... 1,997,259
2,000,000 4.935%, due 02/16/95.......... 1,987,113
5,000,000 4.205%, due 03/09/95.......... 4,960,284
6,000,000 5.16%, due 06/29/95........... 5,845,200
4,000,000 5.265%, due 07/27/95.......... 3,878,320
4,000,000 5.35%, due 08/24/95........... 3,859,711
------------
Total U.S. government & agency
obligations (cost $51,143,435)...... 51,143,435
------------
Total investments
(cost $832,632,428)................. $832,632,428
============
<FN>
Cost also represents cost for Federal income tax purposes.

Portfolio holding percentages represent market value as a
percentage of net assets.

*Floating rate.

See accompanying notes to financial statements.

</TABLE>
70
<PAGE> 99
NATIONWIDE SEPARATE ACCOUNT TRUST
Financial Highlights

Selected data for each share of capital stock
outstanding throughout each period

<TABLE>
<CAPTION>
Total Return Fund
Years Ended December 31,
--------------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE -
BEGINNING OF PERIOD $10.10 9.46 9.07 6.74 7.77

Net investment income .21 .23 .25 .22 .31

Net realized gain (loss) and
unrealized appreciation (depreciation)
on investments (.10) .79 .48 2.34 (.94)
---- ---- ---- ---- ----

Total from investment operations .11 1.02 .73 2.56 (.63)
---- ---- ---- ---- ----

Dividends from net investment income (.28) (.24) (.25) (.23) (.28)

Distributions from net realized gain from
security transactions (.23) (.14) (.09) - (.12)
---- ---- ---- ---- ----

Total distributions (.51) (.38) (.34) (.23) (.40)
---- ---- ---- ---- ----

Net increase (decrease) in
net asset value (.40) .64 .39 2.33 (1.03)

NET ASSET VALUE -
END OF PERIOD $9.70 10.10 9.46 9.07 6.74
===== ===== ===== ===== =====

Total return 1.07% 10.92% 8.18% 38.49% (8.03%)

Ratio of expenses to average
net assets .52% .53% .53% .53% .54%

Ratio of net investment income
to average net assets 2.76% 2.51% 2.69% 2.74% 4.31%

Portfolio turnover 12.06% 9.79% 12.48% 14.50% 38.10%

Net assets, end of period (000) $534,821 456,243 334,917 250,701 162,661
</TABLE>

See accompanying notes to financial statements.

80<PAGE> 100

<TABLE>
NATIONWIDE SEPARATE ACCOUNT TRUST
Financial Highlights

Selected data for each share of capital stock
outstanding throughout each period
<CAPTION>
Government Bond Fund
Years Ended December 31,
-----------------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE -
BEGINNING OF PERIOD $11.26 10.92 11.24 10.40 10.31

Net investment income .69 .71 .98 .86 .88

Net realized gain (loss) and unrealized
appreciation (depreciation) on
investments (1.06) .32 (.14) .82 .06
------ ----- ----- ----- -----

Total from investment operations (.37) 1.03 .84 1.68 .94
------ ----- ----- ----- -----

Dividends from net investment income (.69) (.66) (.93) (.84) (.85)

Distributions from net realized gain
from investment transactions - (.03) (.23) - -
------ ----- ----- ----- -----
Total distributions (.69) (.69) (1.16) (.84) (.85)
------ ----- ----- ----- -----
Net increase (decrease) in
net asset value (1.06) .34 (.32) .84 .09

NET ASSET VALUE -
END OF PERIOD $10.20 11.26 10.92 11.24 10.40
====== ===== ===== ===== =====
Total return (3.23)% 9.52% 7.87% 16.70% 9.49%

Ratio of expenses to average
net assets .51% .53% .53% .55% .55%

Ratio of net investment income
to average net assets 6.46% 5.91% 8.75% 8.07% 8.70%

Portfolio turnover 111.44% 175.37% 73.75% 77.70% 127.80%

Net Assets, end of period (000) $391,253 433,584 301,841 198,769 113,399
</TABLE>

See accompanying notes to financial statements.

81<PAGE> 101

<TABLE>
NATIONWIDE SEPARATE ACCOUNT TRUST
Financial Highlights

Selected data for each share of capital stock
outstanding throughout each period
<CAPTION>
Money Market Fund
Years Ended December 31,
-----------------------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE -
BEGINNING OF PERIOD $1.00 1.00 1.00 1.00 1.00

Net investment income .04 .03 .03 .06 .08

Dividends from net investment income (.04) (.03) (.03) (.06) (.08)
---- ---- ---- ---- ----

Net increase in net asset value - - - - -

NET ASSET VALUE -
END OF PERIOD $1.00 1.00 1.00 1.00 1.00
==== ==== ==== ==== ====
Total return 3.88% 2.76% 3.40% 5.84% 8.03%

Ratio of expenses to average
net assets .54% .53% 53% .54% .55%

Ratio of net investment income
to average net assets 4.00% 2.72% 3.36% 5.65% 7.74%

Net Assets, end of period $828,027 351,798 330,011 363,502 330,586
</TABLE>

See accompanying notes to financial statements.

82
<PAGE> 102
NATIONWIDE SEPARATE ACCOUNT TRUST

Notes to Financial Statements

December 31, 1994

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nationwide Separate Account Trust (Trust) is a diversified, open-end
investment company registered under the Investment Company Act of
1940, as amended. The Trust offers shares only to life insurance
company separate accounts to fund the benefits under variable
insurance or annuity policies issued by life insurance companies.
The Trust was organized as a Massachusetts Trust effective June
30, 1981. To date, only separate accounts of Nationwide Life
Insurance Company and Financial Horizons Life Insurance Company,
which are affiliated companies, have purchased shares.

SECURITY VALUATION

(a) CAPITAL APPRECIATION, TOTAL RETURN AND GOVERNMENT BOND FUND

Securities traded on a national securities exchange are valued at
closing prices. Listed securities for which no sale was
reported on the valuation date are valued at quoted bid
prices. Short-term notes and bank certificates of deposit are
valued at amortized cost, which approximates market.

The value of a repurchase agreement generally equals the purchase
price paid by the Fund (cost) plus the interest accrued to
date. The seller, under the repurchase agreement, is required
to maintain the market value of the underlying collateral at
not less than the value of the repurchase agreement.
Securities subject to repurchase agreements are held by the
Federal Reserve/Treasury book-entry system or by the Fund's
custodian.

(b) MONEY MARKET FUND

Securities are valued at amortized cost, which approximates market
value, in accordance with Rule 2a-7 of the Investment Company
Act of 1940.

FEDERAL INCOME TAXES

The Trust's policy is to comply with the requirements of the Internal
Revenue Code that are applicable to regulated investment companies
and to distribute all its taxable income to its shareholders.
Therefore, no Federal income tax provision is required. Each Fund
of the Trust is treated as a separate taxable entity.

(Continued)

83<PAGE> 103
2

NATIONWIDE SEPARATE ACCOUNT TRUST

Notes to Financial Statements, Continued

SECURITY TRANSACTIONS AND INVESTMENT INCOME

Security transactions are recorded on the trade date. Dividend income
is recorded on an accrual basis; interest income is accrued daily.

DIVIDENDS TO SHAREHOLDERS

(a) CAPITAL APPRECIATION, TOTAL RETURN AND GOVERNMENT BOND FUND

Dividends are recorded on the ex-dividend date.

(b) MONEY MARKET FUND

Dividends are declared daily and paid monthly from the sum of net
investment income and net realized and unrealized short-term
gain or loss.

(c) Net realized capital gains for all Funds, if any, are distributed
annually after deduction of prior years' loss carryforwards.
At December 31, 1994, Capital Appreciation and Government Bond
funds had available for Federal income tax purposes unused
capital loss carryforwards. The amount in Capital
Appreciation Fund is $221,653 which will expire in 2001. The
amount in Government Bond Fund is $9,424,632 which will expire
in 2002.

INCOME EQUALIZATION

Prior to March 1, 1994, the Total Return Fund and Government Bond Fund
followed the accounting practice known as income equalization by
which a portion of the proceeds from sales and costs of
redemptions of capital shares, equivalent on a per share basis to
the amount of distributable investment income on the date of the
transaction, is credited or charged to undistributed income.

Effective March 1, 1994, income equalization for the Total Return and
Government Bond Funds was discontinued.

CHANGE IN ACCOUNTING FOR DISTRIBUTIONS TO SHAREHOLDERS

Effective January 1, 1993, the Funds adopted AICPA Statement of Position
93-2, DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT
PRESENTATION OF INCOME, CAPITAL GAINS AND RETURN OF CAPITAL
DISTRIBUTIONS BY INVESTMENT COMPANIES. As a result of this
statement, the Funds changed the classification of distributions
to shareholders to better disclose the differences between
financial statement amounts and distributions determined in
accordance with income tax regulations. Accordingly,
undistributed net investment income, undistributed net realized
capital gain and paid in surplus as of December 31, 1993 have been
adjusted by the following amounts:
<TABLE>
<CAPTION>
Undistributed
Net
Undistributed Net Realized Paid In
Investment Income Gain Surplus
----------------- ------------- -------
<S> <C> <C> <C>
Total Return Fund $(2,900,287) -- 2,900,287
Government Bond Fund (6,962,417) (51,585) 7,014,002
</TABLE>

(Continued)

84<PAGE> 104
3

NATIONWIDE SEPARATE ACCOUNT TRUST

Notes to Financial Statements, Continued

(2) TRANSACTIONS WITH AFFILIATES

As investment manager for the Trust, Nationwide Financial Services,
Inc. (NFS), an affiliated company, is allowed an annual
management fee of .5% based on the average daily net assets; this
fee would not be payable in full if the effect of such payment
would increase total expense (excluding taxes other than payroll
taxes and brokerage commissions on portfolio transactions) to an
amount exceeding 1% of average daily net assets for any fiscal
year. Such limitations on total expenses did not affect
management fees during the period covered by the financial
statements.

A subsidiary of NFS (Nationwide Investors Services, Inc.) acts as
Transfer and Dividend Disbursing Agent for the Trust.

(3) INVESTMENT TRANSACTIONS

Purchases and sales of securities (excluding short-term securities)
and U.S. government obligations for the year ended December 31,
1994 are summarized as follows:
<TABLE>
<CAPTION>
Long-term securities U.S. government obligations
-------------------- ---------------------------
Purchases Sales Purchases Sales
--------- ----- --------- -----
<S> <C> <C> <C> <C>
Cap. Apprec. Fund $ 25,978,680 4,802,325 5,886,865 5,945,762
Total Return Fund 149,852,036 50,735,087 137,698,495 135,625,463
Govt. Bond Fund 93,407,424 38,356,417 347,316,641 378,261,328
Money Market Fund - - 33,754,378 22,000,000
============ ========== =========== ===========
</TABLE>

Realized gains and losses have been computed on the first-in, first-out
basis. Included in net unrealized appreciation at December 31,
1994 are the following components:

<TABLE>
<CAPTION>
Net
unrealized
Unrealized Unrealized appreciation
gains losses (depreciation)
---------- ---------- --------------
<S> <C> <C> <C>
Capital Appreciation Fund $ 4,187,440 (2,330,707) 1,856,733
Total Return Fund 77,887,679 (19,782,592) 58,105,087
Government Bond Fund 3,084,178 (21,189,744) (18,105,566)
=========== =========== ===========
</TABLE>

85<PAGE> 105

PART C

OTHER INFORMATION

<TABLE>
<S> <C> <C>
ITEM 24. FINANCIAL STATEMENT AND EXHIBITS
(a) Financial Statements: Nationwide Separate Account Trust
--Total Return Fund
--Capital Appreciation Fund
--Government Bond Fund
--Money Market Fund
</TABLE>

(1) Financial statements and schedules included in
the Prospectus for the Funds (except the Small
Company 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 for the
Funds (except the Small Company Fund) (Part
A).

Independent Auditors' Report

Statements of Investments as of December 31,
1994.

Statements of Assets and Liabilities as of
December 31, 1994.

Statements of Operations for the year ended
December 31, 1994.

Statements of Changes in Net Assets for each of
the years ended December 31, 1994 and 1993.

Financial Highlights

Notes to Financial Statements

(b) Exhibits:

(1) Amended Declaration of Trust (Charter)-
previously filed with Post-Effective
Amendment No. 14, and herein incorporated
by reference.

(2) Amended Bylaws (Code of Regulations)-
previously filed with Registration
Statement and Post-Effective Amendments,
and herein incorporated by reference.

(3) Not applicable.

C-1

<PAGE> 106
(4) Not applicable.

(5) (a) Investment Advisory Agreement for
the Funds (except the Small Company
Fund)-previously filed with
Registration Statement and
Post-Effective Amendments, and
herein incorporated by reference.

(b) Form of Investment Advisory
Agreement for the Small Company
Fund.

(6) Underwriting Contract-previously filed
with Registration Statement and
Post-Effective Amendments, and herein
incorporated by reference.

(7) Not applicable.

(8) Custody Agreement-previously filed with
Registration Statement and Post-Effective
Amendments, and herein incorporated by
reference.

(9) Not applicable.

(10) Opinion and consent of counsel as to
the legality of the securities
being registered, indicating
whether they will, when sold,
be legally issued, fully paid
and non-assessable was filed
with the Securities and
Exchange Commission on
February 28, 1995, pursuant
to Rule 24f-2, and herein
incorporated by reference.

(11) Auditors' Consent

(12) Not applicable.

(13) Not applicable.

(14) Not applicable.

(15) Not applicable.

(16) Performance Quotation Computation
Schedule-previously filed with a
Post-Effective Amendment, and herein
incorporated by reference.

ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL
WITH REGISTRANT
No person is presently controlled by or under common
control with registrant.

C-2

<PAGE> 107
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
<TABLE>
<CAPTION>
Number of Record Holders
Title of Class as of August 1, 1995
-------------- --------------------
<S> <C>
Total Return Fund 2
Government Bond Fund 2
Money Market Fund 2
Capital Appreciation Fund 2
</TABLE>

ITEM 27. INDEMNIFICATION
Indemnification provisions for officers, directors and employees of
Registrant are set forth in Article X, Section 2 of the Declaration
of Trust. See Item 24(b)1 above.

ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
(a) Nationwide Financial Services, Inc. (NFS), the investment adviser of
the Trust, also serves as investment adviser to the Nationwide
Investing Foundation, Nationwide Investing Foundation II, and
Financial Horizons Investment Trust, and services as general
distributor to the Nationwide Multi-Flex Variable Account,
Nationwide Variable Account-II, Nationwide DC Variable Account,
Nationwide VA Separate Account-A, NACo Variable Account, Nationwide
VLI Separate Account-2, Nationwide VLI Separate Account-3,
Nationwide VL Separate Account-A and Nationwide Variable Account,
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.

DIRECTORS AND OFFICERS OF INVESTMENT ADVISER

<TABLE>
<S> <C>
Lewis J. Alphin Farm Owner and Operator, 519 Bethel
Church Road, Mount Olive, NC 28365
Director
--------
Nationwide Mutual, Nationwide Mutual Fire,
Nationwide General, Nationwide Property and
Casualty, Nationwide Life and Nationwide Life
and Annuity Insurance Companies
Employers Insurance of Wausau A Mutual Company
Nationwide Communications Inc.
Nationwide Financial Services, Inc.
Wausau Service Corporation
Wausau Business Insurance Company
Wausau General Insurance Company
Wausau Underwriters Insurance Company

Willard J. Engel General Manager-Lyon County Cooperative Oil
Company, 1100 East Main Street, Marshall, MN 56258
Director
--------
Nationwide Mutual, Nationwide Mutual Fire,
Nationwide General, Nationwide Property and
Casualty, Nationwide Life and Nationwide Life
and Annuity Insurance Companies
Employers Insurance of Wausau A Mutual Company
Farmland Mutual Insurance Company
Nationwide Agribusiness Insurance Company
Nationwide Communications Inc.
Nationwide Financial Services, Inc.
Wausau Business Insurance Company
Wausau General Insurance Company
Wausau Service Corporation
Wausau Underwriters Insurance Company
</TABLE>

C-3

<PAGE> 108
<TABLE>
<S> <C>
Fred C. Finney Owner and Operator-Melrose Fruit Farm Operator-
Melrose Orchard, 1558 West Moreland Road,
Wooster, OH 44691
Director
--------
Nationwide Mutual, Nationwide Mutual Fire,
Nationwide General, Nationwide Property and
Casualty, Nationwide Life and Nationwide Life
and Annuity Insurance Companies
Employers Insurance of Wausau A Mutual Company
Nationwide Communications Inc.
Nationwide Financial Services, Inc.
Wausau Service Corporation
Wausau Business Insurance Company
Wausau Underwriters Insurance Company
Wausau General Insurance Company

Peter F. Frenzer President and Chief Operating Officer and
-----------------------------------------
Director
--------
Nationwide Life Insurance Company and
Nationwide Life and Annuity Insurance Companies
President and Director
----------------------
California Cash Management Company
Nationwide Cash Management Company
Nationwide Corporation
Nationwide Property Management, Inc.
Executive Vice President-Investments and Director
-------------------------------------------------
Employers Insurance of Wausau A Mutual Company
Wausau Service Corporation
Farmland Mutual Insurance Company
Nationwide Agribusiness Insurance Company
Nationwide Indemnity Company
Vice Chairman. Executive Vice President-
-----------------------------------------
Investments and Director
------------------------
Nationwide Communications Inc.
Executive Vice President-Investments
------------------------------------
Nationwide Mutual Insurance Company
Nationwide Mutual Fire Insurance Company
Nationwide General Insurance Company
Nationwide Property and Casualty Insurance Company
The Beak and Wire Corporation
Colonial Insurance Company of California
Lone Star General Agency, Inc.
Colonial County Mutual Insurance Company
Scottsdale Indemnity Company
Scottsdale Insurance Company
Video Eagle Inc.
Executive Vice President-Investments and Trustee
------------------------------------------------
Nationwide Insurance Enterprise Foundation
Executive Vice President and Director
-------------------------------------
Employers Life Insurance Company of Wausau
Wausau Preferred Health Insurance Company
Vice Chairman and Director
--------------------------
Financial Horizons Distributors Agency, Inc.
Nationwide Development Company
NEA Valuebuilder Investor Services, Inc.
PEBSCO Securities Corp.
Public Employees Benefit Services Corporation
</TABLE>

C-4
<PAGE> 109
<TABLE>
<S> <C>
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
Hickey-Mitchell Insurance Agency, Inc.
InHealth Agency, Inc.
InHealth, Inc.
InHealth Management Systems, Inc.
Landmark Financial Services of New York, Inc.
MRM Investments, Inc.
National Casualty Company
National Premium & Benefit Administration Company
Nationwide Community Urban Redevelopment Corporation
Wausau Business Insurance Company
Wausau General Insurance Company
Wausau Underwriters Insurance Company
Nationwide Health Care Corporation
Nationwide Investors Services, Inc.
NWE, Inc..
Chairman of the Board and Director
----------------------------------
West Coast Life Insurance Company
Neckura Holding Company
Vice Chairman. Executive Vice President-Chief
---------------------------------------------
Investment Officer and Director
-------------------------------
Nationwide Financial Services, Inc.
Chairman and Trustee
--------------------
Financial Horizons Investment Trust
Nationwide Investing Foundation
Nationwide Investing Foundation Il
Nationwide Separate Account Trust

Charles L. Fuellgraf, Jr. Chief Executive Officer
-----------------------
Fuellgraf Electric Co., Electrical Construction and
Engineering Services, 600 S. Washington St,
Butler, PA 16001
Director
--------
Nationwide Mutual, Nationwide Mutual Fire,
Nationwide Life, Nationwide General, Nationwide
Property and Casualty and Nationwide Life and
Annuity Insurance Companies
Employers Insurance of Wausau A Mutual Company
Nationwide Financial Services, Inc.
Nationwide Property Management, Inc.
Wausau Business Insurance Company
Wausau General Insurance Company
Wausau Underwriters Insurance Company
Wausau Service Corporation
Chairman of the Board and Director
----------------------------------
Nationwide Communications Inc.
Nationwide Development Company
Trustee
-------
Nationwide Insurance Enterprise Foundation
Nationwide Investing Foundation
</TABLE>

C-5

<PAGE> 110

<TABLE>
<S> <C>
Henry S. Holloway Farm Owner and Operator
1247 Stafford Road,
Darlington, MD 21034
Director
--------
Nationwide Mutual, Nationwide Mutual Fire,
Nationwide Property and Casualty, and
Nationwide General Insurance Companies
Chairman of the Board and Director
----------------------------------
Nationwide Life Insurance Company
Nationwide Life and Annuity Insurance Company
Nationwide Corporation
Director
--------
Colonial Insurance Company of California
Employers Insurance of Wausau A Mutual Company
Farmland Mutual Insurance Company
Hickey-Mitchell Insurance Agency, Inc.
National Casualty Company
Nationwide Agribusiness Insurance Company
Nationwide Communications Inc.
Nationwide Property Management, Inc.
Nationwide Development Company
Nationwide Financial Services, Inc.
Scottsdale Indemnity Company
Scottsdale Insurance Company
Wausau Business Insurance Company
Wausau General Insurance Company
Wausau Underwriters Insurance Company
Wausau Service Corporation
West Coast Life Insurance Company
Trustee
-------
Nationwide Insurance Enterprise Foundation.

Gordon E. McCutchan Executive Vice President-Law and Corporate
------------------------------------------
Services and Secretary
----------------------
Nationwide Mutual, Nationwide Mutual Fire,
Nationwide Life, Nationwide General, Nationwide
Property and Casualty and Nationwide Life and
Annuity Insurance Companies
NEA Valuebuilder Investor Services, Inc.
Financial Horizons Distributors Agency, Inc.
Colonial Insurance Company of California
Nationwide Communications Inc.
Nationwide Community Urban Redevelopment Corporation
Nationwide Corporation
Scottsdale Indemnity Company
Scottsdale Insurance Company
West Coast Life Insurance Company
Executive Vice President-Law and Corporate Services
---------------------------------------------------
Employers Insurance of Wausau A Mutual Company
Employers Life Insurance Company of Wausau
Farmland Mutual Insurance Company
Nationwide Agribusiness Insurance Company
National Casualty Company
Pension Associations of Wausau, Inc.
PEBSCO Securities Corp.
Public Employees Benefit Services Corporation
Wausau Underwriters Insurance Company
Wausau Service Corporation
</TABLE>

C-6
<PAGE> 111
<TABLE>
<S> <C>
Wausau Preferred Health Insurance Company
Wausau Business Insurance Company
Wausau General Insurance Company
Executive Vice President and General Counsel
--------------------------------------------
Companies Agency, Inc.
Companies Agency of Alabama, Inc.
Companies Agency Insurance Services of California
Companies Agency of Idaho, Inc.
Companies Agency of Illinois, 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
Hickey-Mitchell Insurance Agency, Inc.
Nationwide Development Company
Nationwide Health Care Corporation
Nationwide Property Management Inc.
Executive Vice President General Counsel and Secretary
------------------------------------------------------
Colonial County Mutual Insurance Company
Colonial General Insurance Agency, Inc.
Lone Star General Agency, Inc.
Nationwide Insurance Enterprise Foundation
Executive Vice President-Law and Corporate
------------------------------------------
Services and Director
---------------------
Nationwide Financial Services, Inc.
Executive Vice President-Law and Corporate
------------------------------------------
Services and Secretary and Director
-----------------------------------
California Cash Management Company
Nationwide Cash Management Company
Nationwide Indemnity Company
Vice Chairman and Director
--------------------------
Neckura Insurance Company
Neckura Life
Secretary
---------
The Beak and Wire Corporation
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 Ohio, Inc.
NEA Valuebuilder Investor Services of Oklahoma, Inc.
Video Eagle, Inc.
Vice Chairman, Secretary and Director
-------------------------------------
Gates, McDonald & Company
Chairman of the Board, Secretary and Director
---------------------------------------------
Gates, McDonald & Company of Nevada
Gates, McDonald & Company of New York, Inc.
</TABLE>

C-7

<PAGE> 112
<TABLE>
<S> <C>
Executive Vice President and General Counsel and
------------------------------------------------
Director
--------
MRM Investments, Inc.
Nationwide Investor Services, Inc.
NWE, Inc.
Secretary and Director
----------------------
InHealth Agency, Inc.
InHealth, Inc.
InHealth Management Systems, Inc.
Director
--------
Leben Direkt Insurance Company
Nekura Holding Company

D. Richard McFerson President and Chief Executive Officer-Nationwide
------------------------------------------------
Insurance Enterprise and Director
---------------------------------
Nationwide Mutual, Nationwide Mutual Fire,
Nationwide General, and Nationwide Property and Casualty
Nationwide Life and Nationwide Life and Annuity
Insurance Companies
Colonial Insurance Company of California
West Coast Life Insurance Company
Nationwide Communications Inc.
Nationwide Corporation
Nationwide Development Company
Farmland Mutual Insurance Company
Nationwide Agribusiness Insurance Company
Hickey-Mitchell Insurance Agency, Inc.
National Casualty Company
Nationwide Financial Services, Inc.
Colonial General Insurance Agency, Inc.
California Cash Management Company
Nationwide Cash Management Company
Employers Insurance of Wausau A Mutual Company
Wausau Service Corporation
Wausau Business Insurance Company
Wausau Underwriters Insurance Company
Chairman, President and Chief Executive Office-
-----------------------------------------------
Nationwide Insurance Enterprise and Director
--------------------------------------------
Companies Agency, Inc.
Companies Agency of Alabama, Inc.
Companies Agency Insurance Services of California
Companies Agency of Idaho, Inc.
Companies Agency of Illinois, 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
Pension Associates of Wausau, Inc.
Wausau Preferred Health Insurance Company
Chairman, President and Chief Executive Office-
-----------------------------------------------
Nationwide Insurance Enterprise
--------------------------------
Financial Horizons Distributors Agency, Inc.
</TABLE>

C-8

<PAGE> 113
<TABLE>
<S> <C>
Chairman and Director
----------------------
PEBSCO Securities Corp.
NEA Valuebuilder Investor Services, Inc.
President and Chief Executive Officer and Director
---------------------------------------------------
Nationwide Indemnity Company
Trustee
--------
Financial Horizons Investment Trust
Nationwide Investing Foundation
Nationwide Investing Foundation II
Nationwide Separate Account Trust
Vice Chairman and Chief Executive Officer and Director
-------------------------------------------------------
Wausau General Insurance Company
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
Colonial County Mutual Insurance Company
Nationwide Property Management, Inc.
Vice Chairman, President and Chief Executive Officer-
-----------------------------------------------------
Nationwide Insurance Enterprise and Director
-------------------------------------------
Scottsdale Indemnity Company
Scottsdale Insurance Company
Chairman and Chief Executive Officer and Director
-------------------------------------------------
American Marine Underwriters, Inc.
Chairman of the Board, President and Chief
------------------------------------------
Executive Officer-Nationwide Insurance Enterprise
-------------------------------------------------
and Director
------------
Gates, McDonald & Company
Nationwide Health Care Corporation
Nationwide Investor Services, Inc.
Public Employees Benefit Services Corporation
Chief Executive Officer and Director
------------------------------------
Wausau International Underwriters
Director
--------
Gates, McDonald & Company of Nevada
Gates, McDonald & Company of New York
Chairman of the Board. President and Chief
------------------------------------------
Executive Officer-Nationwide Insurance Enterprise
-------------------------------------------------
and Trustee
-----------
Nationwide Insurance Enterprise Foundation.

David O. Miller President Owen Potato Farm, Inc. and Partner.
--------- -------
M&M Enterprises, 625 Country Club Dr.,
Apt B6, Newark, OH 43055
Director
--------
Nationwide Mutual, Nationwide Mutual Fire,
Nationwide Life, Nationwide General, Nationwide
Property and Casualty, ant Nationwide Life and
Annuity Insurance Companies
Colonial Insurance Company of California
Farmland Mutual Insurance Company
Hickey-Mitchell Insurance Agency, Inc.
National Casualty Company
Nationwide Agribusiness Insurance Company
Nationwide Communications Inc..
Nationwide Corporation
</TABLE>

C-9

<PAGE> 114
<TABLE>
<S> <C>
Nationwide Development Company
Nationwide Financial Services, Inc.
Nationwide Property Management, Inc.
Scottsdale Indemnity Company
Scottsdale Insurance Company
West Coast Life Insurance Company
Chairman of the Board and Director
----------------------------------
Employers Insurance of Wausau A Mutual Company
Wausau Business Insurance Company
Wausau General Insurance Company
Wausau Service Corporation
Wausau Underwriters Insurance Company
Trustee
-------
Nationwide Insurance Enterprise Foundation.

C. Ray Noecker Farm Owner and Operator, 2770 State Route 674
South, Ashville, Ohio 43203
Director
--------
Nationwide Mutual, Nationwide Mutual Fire,
Nationwide General, Nationwide Property and
Casualty, Nationwide Life and Nationwide Life
and Annuity Insurance Companies
Employers Insurance of Wausau A Mutual Company
Nationwide Communications Inc.
Nationwide Financial Services, Inc.
Wausau Business Insurance Company
Wausau General Insurance Company
Wausau Service Corporation
Wausau Underwriters Insurance Company

James Ferry Patterson Vice President, Pattersons Inc. - Patterson Fruit
Farm, 8765 Mulberry Road, Chesterland, OH
44026
Director
--------
Nationwide Mutual, Nationwide Life, Nationwide
General, Nationwide Property and Casualty and
Nationwide Life and Annuity Insurance Companies
Colonial Insurance Company of California
Farmland Mutual Insurance Company
Nationwide Financial Services, Inc.
Hickey-Mitchell Insurance Agency, Inc.
National Casualty Company
Nationwide Agribusiness Insurance Company
Nationwide Property Management, Inc.
Scottsdale Indemnity Company
Scottsdale Insurance Company
Nationwide Communications Inc.
Nationwide Corporation
Nationwide Development Company
Employers Insurance of Wausau A Mutual Company
Wausau Service Corporation
Wausau Underwriters Insurance Company
West Coast Life Insurance Company
Chairman of the Board and Director
----------------------------------
Nationwide Mutual Fire Insurance Company
</TABLE>

C-10

<PAGE> 115
<TABLE>
<S> <C>
Trustee
-------
Nationwide Insurance Enterprise Foundation

Robert H. Rickel Rancher, P.O. Box 157, Bayview, ID 83803
Director
--------
Nationwide Mutual, Nationwide Mutual Fire,
Nationwide Life. Nationwide Property and
Casualty and Nationwide Life and Annuity
Insurance Companies
Colonial Insurance Company of California
Employers Insurance of Wausau A Mutual Company
Nationwide Communications Inc.
Nationwide Financial Services, Inc.
Scottsdale Insurance Company
Scottsdale Indemnity Company
Wausau Business Insurance Company
Wausau General Service Company
Wausau Service Corporation
Wausau Underwriters Insurance Company
West Coast Life Insurance Company
Director and Chairman of the Board
----------------------------------
Nationwide General Insurance Company
Trustee
-------
Nationwide Investing Foundation

Arden L. Shisler Partner and Manager, Sweetwater Beef Farms
Chief Operating Officer, K&B Transport, Inc.,
2724 W. Lebanon Road, Dalton, OH 44618
Chairman of the Board and Director
----------------------------------
Nationwide Mutual Insurance Company
Director
--------
Nationwide Mutual Fire, Nationwide Life, Nationwide
General, Nationwide Property and Casualty and Nationwide
Life and Annuity Insurance Companies
Farmland Mutual Insurance Company
Nationwide Agribusiness Insurance Company
Nationwide Communications, Inc.
Nationwide Corporation
Nationwide Development Company
Hickey-Mitchell Insurance Company
National Casualty Company, Inc.
Nationwide Property Management Inc.
Scottsdale Insurance Company
Scottsdale Indemnity Company
West Coast Life Insurance Company
Nationwide Financial Services, Inc.
Colonial Insurance Company of California
Employers Insurance of Wausau A Mutual Company
Wausau Business Insurance Company
Wausau General Insurance Company
Wausau Service Corporation
Wausau Underwriters Insurance Company
Trustee
-------
Nationwide Insurance Enterprise Foundation
</TABLE>

C-11

<PAGE> 116
<TABLE>
<S> <C>
Robert Leonard Stewart Farm Owner and Operator Sunnydale Mining,
88740 Fairview Road, Jewett, OH 43986
Chairman of the Board and Director
----------------------------------
Farmland Mutual Insurance Company
Nationwide Agribusiness Insurance Company
Director
--------
Nationwide Mutual, Nationwide Mutual Fire,
Nationwide Life, Nationwide General, Nationwide
Property and Casualty and Nationwide Life and
Annuity Insurance Company
Nationwide Communications Inc.
Nationwide Financial Services Inc.
Employers Insurance of Wausau A Mutual Company
Wausau Business Insurance Company
Wausau General Insurance Company
Wausau Service Corporation
Wausau Underwriters Insurance Company.

Nancy C. Thomas Farm Owner and Operator Da-Ma-Lor Farms,
10835 Georgetown Road, NE., Louisville, Ohio
44641
Chairman of the Board and Director
----------------------------------
Nationwide Property and Casualty Insurance Company
Director
--------
Nationwide Mutual, Nationwide Mutual Fire,
Nationwide Life, Nationwide General and
Nationwide Life and Annuity Insurance Companies
Colonial Insurance Company of California
Hickey-Mitchell Insurance Agency, Inc.
National Casualty Company
Employers Insurance of Wausau A Mutual Company
Farmland Mutual Insurance Company
Nationwide Communications Inc.
Nationwide Financial Services, Inc.
Scottsdale Indemnity Company
Scottsdale Insurance Company
Wausau Business Insurance Company
Wausau General Insurance Company
Wausau Service Corporation
Wausau Underwriters Insurance Company
West Coast Life Insurance Company
Trustee
-------
Nationwide Investing Foundation.

Harold W. Weihl Farm Owner and Operator, 14282 King Road,
Bowling Green, Ohio 43402
Chairman of the Board and Director
----------------------------------
Nationwide Financial Services, Inc.
Director
--------
Nationwide Mutual, Nationwide Mutual Fire,
Nationwide Life, Nationwide General, Nationwide
Property and Casualty and Nationwide Life and
Annuity Insurance Companies
Employers Insurance of Wausau A Mutual Company
Nationwide Communications Inc.
Wausau Business Insurance Company
Wausau General Insurance Company
Wausau Service Corporation
</TABLE>

C-12

<PAGE> 117
<TABLE>
<S> <C>
Wausau Underwriters Insurance Company
Trustee
-------
Nationwide Investing Foundation.

Robert A. Oakley Senior President-Chief Financial Officer
----------------------------------------
Nationwide Mutual, Nationwide Mutual Fire,
Nationwide Life, Nationwide General, Nationwide
Property and Casualty, and Nationwide Life and
Annuity Insurance Companies
Companies Agency, Inc.
Companies Agency of Alabama, Inc.
Companies Agency of Idaho, Inc.
Companies Agency of Illinois, 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
Hickey-Mitchell Insurance Agency, Inc.
National Casualty Company
National Premium ant Benefit Administration Company
The Beak and Wire Corporation
Colonial Insurance Company of California
Employers Insurance of Wausau A Mutual Company
Farmland Mutual Insurance Company
Financial Horizons Distributors Agency, Inc.
Lone Star General Agency, Inc.
MRM Investments, Inc.
Nationwide Agribusiness Insurance Company
Nationwide Communications Inc.
Nationwide Corporation
Nationwide Development Co.
Nationwide Financial Services, Inc.
Nationwide Investor Services, Inc
Nationwide Insurance Enterprise Foundation
Nationwide Investors Services, Inc.
Nationwide Health Care Corporation
Nationwide Property Management, Inc.
NEA Valuebuilder Investor Services, Inc.
Colonial County Mutual Insurance Company
PEBSCO Securities Corp.
Public Employees Benefit Services Corporation
Scottsdale Indemnity Company
Scottsdale Insurance Company
Video Eagle Inc.
Wausau Business Insurance Company
Wausau General Insurance Company
Wausau Preferred Health Insurance Company
Wausau Service Corporation
Wausau Underwriters Insurance Company
West Coast Life Insurance Company
</TABLE>

C-13

<PAGE> 118
<TABLE>
<S> <C>
Senior Vice President-Chief Financial Officer and
-------------------------------------------------
Director
--------
California Cash Management Company
Nationwide Cash Management Company
Nationwide Community Urban Redevelopment
Corporation
Nationwide Indemnity Company
Senior Vice President
---------------------
Companies Agency Insurance Services of California
Director
--------
Auto Direkt Insurance Company
Neckura Holding Company
Wausau Insurance Company (U.K.) Limited

James F. Laird, Jr. Vice President and General Manager
----------------------------------
Nationwide Financial Services, Inc.
Nationwide Investors Services, Inc.
Treasurer
---------
Nationwide Investing Foundation
Nationwide Separate Account Trust
Nationwide Investing Foundation II
Financial Horizons Investment Trust.

Harry A. Schermer Vice President-Equity Securities
--------------------------------
Nationwide Mutual, Nationwide Mutual Fire,
Nationwide Life, Nationwide General, Nationwide
Property and Casualty and Nationwide Life and
Annuity Insurance Companies
Nationwide Indemnity Company
Vice President-Investments
--------------------------
Nationwide Financial Services, Inc.
Vice President
--------------
Nationwide Insurance Enterprise Foundation
Assistant Treasurer
-------------------
Financial Horizons Investment Trust
Nationwide Separate Account Trust
Nationwide Investing Foundation
Nationwide Investing Foundation II

W. Sidney Druen Senior Vice President and General Counsel and
---------------------------------------------
Assistant Secretary
-------------------
Nationwide Mutual, Nationwide Mutual Fire,
Nationwide Life, Nationwide General, Nationwide
Property and Casualty, and Nationwide Life and
Annuity Insurance Companies
Nationwide Financial Services, Inc.
Employers Insurance of Wausau A Mutual Company
Employers Life Insurance Company of Wausau
Wausau Preferred Health Insurance Company
Wausau Service Corporation
Senior Vice President and General Counsel
-----------------------------------------
Affiliate Agency, Inc.
Affiliate Agency of Ohio, Inc.
The Beak and Wire Corporation
California Cash Management Company
Colonial Insurance Company of California
Farmland Mutual Insurance Company
</TABLE>

C-14

<PAGE> 119
<TABLE>
<S> <C>
Nationwide Agribusiness Insurance Company
Financial Horizons 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
Landmark Financial Services of New York, Inc.
National Casualty Company
Nationwide Cash Management Company
Nationwide Communications Inc.
Nationwide Corporation
Nationwide Indemnity Company
NEA Valuebuilder Investor Services, Inc.
NEA Valuebuilder Investor Services of Alabama, Inc.
NEA Valuebuilder Investor Services of Ohio, Inc.
NEA Valuebuilder Investor Services of Oklahoma, Inc.
PEBSCO of Massachusetts Insurance Agency, Inc.
PEBSCO Securities Corp.
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
Video Eagle, Inc.
Wausau Business Insurance Company
Wausau General Insurance Company
Wausau Underwriters Insurance Company
West Coast Life Insurance Company
Senior Vice President and General Counsel and Director
------------------------------------------------------
Nationwide Community Urban Redevelopment Corporation
General Counsel
---------------
Nationwide Insurance Golf Charities, Inc.
Assistant Secretary
-------------------
Nationwide Investors Services, Inc.

Rae I. Mercer Secretary
---------
Nationwide Financial Services, Inc.
Nationwide Investors Services, Inc.
Nationwide Investing Foundation
Nationwide Separate Account Trust
Nationwide Investing Foundation II
Financial Horizons Investment Trust
</TABLE>

C-15

<PAGE> 120
<TABLE>
<S> <C>
Peter J. Neckermann Vice President - Economic and Investment Services
-------------------------------------------------
Nationwide Mutual, Nationwide Mutual Fire,
Nationwide General, Nationwide Property and
Casualty, Nationwide Life and Nationwide Life
and Annuity Insurance Companies
Nationwide Indemnity Company
Vice President
--------------
Nationwide Financial Services, Inc.
Director
--------
Nationwide Investors Services, Inc.
Assistant Secretary
-------------------
West Coast Life Insurance Company
Assistant Treasurer
-------------------
Financial Horizons Investment Trust
Hickey-Mitchell Insurance Agency, Inc.
National Casualty Company
National Premium and Benefit Administration Company
Nationwide Investing Foundation
Nationwide Investing Foundation II
Nationwide Separate Account Trust.
</TABLE>

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 California
2390 East Orangewood Avenue
P.O. Box 4347
Anaheim, California 92803-1347

Employers Insurance of Wausau A Mutual Company
2000 Westwood Drive
Wausau, Wisconsin 54401-7881

Scottsdale Insurance Company
8877 Nord Gainey Center Drive
P.O. Box 4110
Scottsdale, Arizona 85261-4110

West Coast Life Insurance Company
343 Sansome Street
San Francisco, California 94104-1303

National Casualty Company
8877 North Gainey Center Drive
P.O. Box 4110
Scottsdale, Arizona 85261-4110

Lone Star General Agency, Inc.
P.O. Box 14700
Austin, Texas 78761

C-16

<PAGE> 121
Auto Direkt Insurance Company
Columbus Service, GMBH
Neckura General Insurance Company
Neckura Holding Company
Neckura Insurance Company
Neckura Life
SVM Sales GMBH, Neckura Group
John E. Fisher Str. 1
61440 Oberursel/Ts.
Germany

Nationwide Development Company
One Nationwide Plaza
Columbus, Ohio 43215

Public Employees Benefit Services Corporation
Two Nationwide Plaza
Columbus, Ohio 43215

(b) Information for the Subsidiaries of the Small Company Fund

(1) The Dreyfus Corporation

The Dreyfus Corporation ("Dreyfus") and subsidiary companies
comprise a financial service organization whose business consists
primarily of providing investment management services as the
investment adviser, manager and distributor for sponsored investment
companies registered under the Investment Company Act of 1940 and as
an investment adviser to institutional and individual accounts.
Dreyfus also serves as sub-investment adviser to and/or
administrator of other investment companies. Dreyfus Service
Corporation, a wholly-owned subsidiary of Dreyfus, serves primarily
as a registered broker-dealer of shares of investment companies
sponsored by Dreyfus and of other investment companies sponsored by
Dreyfus and of other investment companies for which Dreyfus acts as
investment adviser, sub-investment adviser or administrator.
Dreyfus Management, Inc., another wholly-owned subsidiary, provides
investment management services to various pension plans,
institutions and individuals.

<TABLE>
DIRECTORS AND OFFICERS OF DREYFUS

<CAPTION>
NAME AND POSITION WITH
DREYFUS OTHER BUSINESS
<S> <C>
Mandell L. Berman Real Estate Consultant and Private Investor:
Director 29100 Northwestern Highway, Suite 370
Southfield, Michigan 48034;
Past Chairman of the Board of Trustees of Skillman Foundation.
Member of The Board of Vintners Intl.
</TABLE>

C-17

<PAGE> 122
<TABLE>
<S> <C>
Frank V. Cahouet Chairman of the Board, President and Chief Executive Officer:
Director Mellon Bank Corporation
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258;
Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258
Director
Avery Dennison Corporation
150 North Orange Grove Boulevard
Pasadena, California 91103;
Saint-Gobain Corporation
750 East Swedesford Road
Valley Forge, Pennsylvania 19482;
Teledyne, Inc.
1901 Avenue of the Stars
Los Angeles, California 90067

Alvin E. Friedman Senior Advisor to Dillon, Reed & Co. Inc.
Director 535 Madison Avenue
New York, New York 10022;
Director and Member of the Executive Committee of Avent, Inc.**

Lawrence M. Greene Director:
Director Dreyfus America Fund

Julian M. Smerling None
Director

David B. Truman Education Consultant;
Director Past President of the Russell Sage Foundation
230 Park Avenue
New York, New York 10017;
Past President of Mount Holyoke College
South Hadley, Massachusetts 01075;
Former Director:
Student Loan Marketing Association
1055 Thomas Jefferson Street, N.W.
Washington, D.C. 20006;
Former Trustee:
College Retirement Equities Fund
730 Third Avenue
New York, New York 10017

Howard Stein Chairman of the Board:
Chairman of the Board Dreyfus Acquisition Corporation*;
and Chief Executive Officer The Dreyfus Consumer Credit Corporation*;
Dreyfus Management, Inc.*;
Dreyfus Service Corporation*'
Chairman of the Board and Chief Executive Officer:
Major Trading Corporation*;
Director:
Avnet, Inc.**;
Dreyfus America Fund++++;
The Dreyfus Fund International Limited+++++;
World Balanced Fund+++;
Dreyfus Partnership Management Inc.*;
Dreyfus Personal Management, Inc.*;
Dreyfus Precious Metals, Inc.*;
Dreyfus Service Organization, Inc.*;
</TABLE>

C-18

<PAGE> 123
<TABLE>
<S> <C>
Seven Six Seven Agency, Inc.*;
Trustee:
Corporate Property Investors
New York, New York;

W. Keith Smith Chairman and Chief Executive Officer:
Vice Chairman of the Board The Boston Company
One Boston Place
Boston, Massachusetts 02108
Vice Chairman of the Board:
Mellon Bank Corporation
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258;
Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258
Director:
Dentsply International, Inc.
570 West College Avenue
York, Pennsylvania 17405

Robert E. Riley Director:
President, Chief Operating Dreyfus Service Corporation*;
Officer, and a Director Former Executive Vice President:
Prudential Investment Corporation
751 Board Street
Newark, New Jersey 07102

Stephen E. Canter Former Chairman and Chief Executive Officer:
Vice Chairman and Chief Kleinwort Benson Investment Management Americas Inc.*;
Investment Officer, and
a Director

Lawrence S. Kash Chairman, President and Chief Executive Officer:
Vice Chairman-Distribution The Boston Company Advisors, Inc.
And a Director 53 State Street
Exchange Place
Boston, Massachusetts 02109
Executive Vice President and Director:
Dreyfus Service Organization, Inc.*;
Director:
The Dreyfus Consumer Credit Corporation*;
The Dreyfus Trust Company++;
Dreyfus Service Corporation*;
President:
The Boston Company
One Boston Place
Boston, Massachusetts 02108;
Laurel Capital Advisors
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258;
Boston Group Holdings, Inc.
</TABLE>

C-19

<PAGE> 124
<TABLE>
<S> <C>
Executive Vice President:
Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258;
Boston Safe Deposit & Trust
One Boston Place
Boston, Massachusetts 02108

Philip L. Toia Chairman of the Board and Trust Investment Officer:
Vice Chairman-Operations The Dreyfus Trust Company+++;
and Administration Chairman of the Board and Chief Executive Officer:
Major Trading Corporation*;
Director:
The Dreyfus Security Savings Bank F.S.B.+;
Dreyfus Service Corporation*;
Seven Six Seven Agency, Inc.*;
President and Director:
Dreyfus Acquisition Corporation*;
The Dreyfus Consumer Credit Corporation*;
Dreyfus-Lincoln, Inc.*;
Dreyfus Management, Inc.*;
Dreyfus Personal Management, Inc.*;
Dreyfus Partnership Management, Inc.+;
Dreyfus Service Organization*;
The Truepenny Corporation*;
Formerly, Senior Vice President:
The Chase Manhattan Bank, N.A. and
The Chase Manhattan Capital Markets Corporation
One Chase Manhattan Plaza
New York, New York 10081

David K. Mossman First Vice President:
Interim Chief Financial Mellon Bank Corporation
Officer One Mellon Bank Center
Pittsburgh, Pennsylvania 15258

Barbara E. Casey President:
Vice President-Dreyfus Dreyfus Retirement Services Division;
Retirement Services Executive Vice President:
Boston Safe Deposit & Trust Co.
One Boston Place
Boston, Massachusetts 02108;

Diane M. Coffey None
Vice President-Corporate
Communications

Elie M. Genadry President:
Vice President-Institutional Institutional Services Division of Dreyfus Service
Sales Corporation*;
Broker-Dealer Division of Dreyfus Service Corporation*;
Group Retirement Plans Division of Dreyfus Service Corporation;
Executive Vice President:
Dreyfus Service Corporation*;
Dreyfus Service Organization, Inc.*;
Vice President:
The Dreyfus Trust Company++;
</TABLE>

C-20

<PAGE> 125
<TABLE>
<S> <C>
Henry D. Gottmann Executive Vice President:
Vice President-Retail Dreyfus Service Corporation*;
Sales and Service Vice President:
Dreyfus Precious Metals*;

Daniel C. Maclean Director, Vice President and Secretary:
Vice President and Dreyfus Precious Metals, Inc.*;
General Counsel Director and Vice President:
The Dreyfus Consumer Credit Corporation*;
Director and Secretary:
Dreyfus Partnership Management, Inc.*;
Major Trading Corporation*;
The Truepenny Corporation*;
Director:
The Dreyfus Trust Company++;
Secretary:
Seven Six Seven Agency, Inc.*;

Jeffrey N. Nachman None
Vice President-Mutual Fund
Accounting

William F. Glavin, Jr. Senior Vice President:
Vice President-Corporate The Boston Company Advisors, Inc.
Development 53 State Street
Exchange Place
Boston, Massachusetts 02109

Katherine C. Wickham Formerly, Assistant Commissioner:
Vice President-Human Department of Parks and Recreation of the City of New York
Resources 830 Fifth Avenue
New York, New York 10022

Mark N. Jacobs Vice President, Secretary and Director:
Vice President-Fund Legal Lion Management, Inc.*;
and Compliance, and Secretary:
Secretary The Dreyfus Consumer Credit Corporation*;
Dreyfus Management, Inc.*;
Assistant Secretary:
Dreyfus Service Organization, Inc.*;
Major Trading Corporation*;
The Truepenny Corporation*

Andrew S. Wasser Vice President:
Vice President-Information Mellon Bank Corporation
Services One Mellon Bank Center
Pittsburgh, Pennsylvania 15258

Maurice Bendrihem Treasurer:
Controller Dreyfus Partnership Management, Inc.*;
Dreyfus Service Organization, Inc.*;
Seven Six Seven Agency, Inc.*;
The Truepenny Corporation*;
Controller:
Dreyfus Acquisition Corporation*;
The Dreyfus Trust Company++;
The Dreyfus Consumer Credit Corporation*;
</TABLE>

C-21

<PAGE> 126
<TABLE>
<S> <C>
Assistant Treasurer:
Dreyfus Precious Metals*
Formerly, Vice President-Financial Planning, Administration and Tax:
Showtime/The Movie Channel, Inc.
1633 Broadway
New York, New York 10019

Elvira Oslapas Assistant Secretary:
Assistant Secretary Dreyfus Service Corporation*;
Dreyfus Management, Inc.*;
Dreyfus Acquisition Corporation, Inc.*;
The Truepenny Corporation+;
<FN>

-------------------------------------------------------------------------------------------------------------
* The address of the business so indicated is 200 Park Avenue, New York, New York 10166.
** The address of the business so indicated is 80 Cutter Mill Road, Great Neck, New York 11021.
+ The address of the business so indicated is Atrium Building, 80 Route 4 East, Paramus, New
Jersey 07652.
++ The address of the business so indicated is 144 Glenn Curtiss Boulevard, Uniondale, New York
11556-0144.
+++ The address of the business so indicated is One Rockefeller Plaza, New York, New York 10020.
++++ The address of the business so indicated is 2 Boulevard Royal, Luxembourg.
+++++ The address of the business so indicated is Nassau, Bahama Islands.
-------------------------------------------------------------------------------------------------------------
</TABLE>

(2) Neuberger & Berman L.P.

Neuberger & Berman, L.P. ("Neuberger & Berman") acts as subadviser to the Small
Company Fund of the Registrant and investment adviser or subadviser to a number
of other registered investment companies. The list required by this Item 28 of
officers and directors of Neuberger & Berman, together with information as to
their other business, profession, vocation or employment of a substantial nature
during the past two years, is incorporated by reference to Schedules A and D of
Form ADV filed by Neuberger & Berman (SEC File No. 801-3908).

(3) Strong Capital Management, Inc.

Strong Capital Management, Inc. ("Strong"), which began conducting business in
1974, provides continuous investment supervision for individuals and
institutional accounts, such as pension funds and profit-sharing plans. Strong
also acts as investment adviser for each of the mutual funds within the Strong
Family of Funds, as well as acting as dividend-disbursing agent and transfer
agent for the Strong Family of Funds.

Officers and Directors of Strong Other Businesses

Richard S. Strong Chairman and Director:
Chairman and Director Strong Holdings, Inc.
Strong Funds Distributors, Inc.
Heritage Reserve Development
Corporation
Strong Family of Funds

John Dragisic Vice Chairman and Director:
Vice Chairman and Director Strong Holdings, Inc.
Strong Funds Distributors, Inc.
Strong Family of Funds
President and Chief Executive Officer
(from 1987 to July 1994)
Grunau Company
Milwaukee, Wisconsin

Lawrence A. Totsky Vice President of Strong (from December
Senior Vice President 1992 to September 1994)
Vice President:
Strong Family of Funds

Thomas P. Lemke Resident Counsel for Funds Management at
Senior Vice President, Secretary J.P. Morgan & Co., Inc. (from April 1992
and General Counsel to September 1994)
Vice President:
Strong Family of Funds

Ronald A. Neville Senior Vice President and Chief
Senior Vice President and Chief Financial Officer at Twentieth Century
Financial Officer Companies, Inc. (1988 until
December 1994)
Treasurer:
Strong Family of Funds

Ann E. Oglanian Secretary:
Associate Counsel Strong Family of Funds

Thomas M. Zoeller Treasurer:
Treasurer Strong Funds Distributors, Inc.

(4) VanEck Associates Corporation

Van Eck Associates Corporation ("VEAC") acts as investment adviser to a number
of investment companies including Van Eck Worldwide Insurance Trust. Listed
below are the officers and directors of VEAC and their positions with some of
the VEAC affiliates.

Position with Position With Position With
Van Eck Worldwide Van Eck Associates Van Eck Securities
Name Insurance Trust Corporation Corporation
---- ----------------- ------------------ ------------------
<S> <C> <C> <C>

John C. van Eck Chairman of the Board Chairman of Board Chairman of Board
and President

Rodger A. Lawson Trustee President, Chief President, Chief
Executive Officer Executive Officer
and Director and Director

Fred M. van Eck Trustee Director Director

Sigrid S. van Eck -- Director, Vice Director, Vice
President & President &
Assistant Treasurer Assistant Treasurer

Derek S. van Eck Executive Vice Director, Executive Director
President Vice President,
Director - Global
Investments

Jan F. van Eck -- Director Director, Executive
Vice President

Henry J. Bingham Executive Vice Executive Managing --
President Director

Lucille Palermo -- Associate Director, --
Mining Research

William A. -- Director, Mining --
Trebilcock Research

Madis Semner Executive Vice Director, Global --
President Fixed Income

Myles London -- Director, --
Quantitative
Research

Kevin Reid -- Director, Real --
Estate Research

Charles Cameron -- Director, Trading --

Michael G. Dootley Vice President Sr. Vice President, Sr. Vice President,
Treasurer, Treasurer,
Controller & Chief Controller & Chief
Financial Officer Financial Officer

Paul DiPerna Asst. Vice Associate Manager, --
President Trading

Bruce J. Smith Vice President & Senior Managing Senior Managing
Treasurer Director, Portfolio Director, Portfolio
Accounting Accounting

Stephen Ibnitzki -- Chief Operating Chief Operating
Officer Officer

Thaddeus Leszczynski Vice President & Vice President, Vice President,
Secretary General Counsel & General Counsel &
Secretary Secretary

Karen Schwaneberg -- Director, --
Information Services
</TABLE>

(5) Pictet International Management Limited

The information concerning Pictet International Management Limited ("PIML") and
its officers and directors is incorporated by reference to the information
contained under "Management of the Fund" in the Small Company Fund's prospectus
and to Schedules A and D of Form ADV filed by PIML (SEC File No. 801-15143).

(6) Warburg, Pincus Counsellors, Inc.

Warburg, Pincus Counsellors, Inc. ("Counsellors") acts as subadviser to the
Small Company and investment adviser to a number of other registered investment
companies. Counsellors renders investment advice to a wide variety of
individual and institutional companies. The list required by this Item 28 of
officers and directors of Counsellors, together with information as to their
other business, profession, vocation or employment of a substantial nature
during the past two years, is incorporated by reference to Schedules A and D of
Form ADV filed by Counsellors (SEC File No. 801-07321).

C-22

<PAGE> 127
ITEM 29. PRINCIPAL UNDERWRITERS
(a) See Item 28 Above.
(b) NATIONWIDE FINANCIAL SERVICES, INC.
DIRECTORS

<TABLE>
<CAPTION>
NAME BUSINESS ADDRESS TITLE POSITION WITH REGISTRANT
<S> <C> <C> <C>
Harold W. Weihl 14282 King Road Chairman of Board of N/A
Bowling Green, OH 43402 Directors

Lewis J. Alphin 519 Bethel Church Road Director N/A
Mt. Olive, NC 28365

Willard J. Engel 1100 E. Main Street Director N/A
Marshall, MN 56258

Frederick C. Finney 1558 W. Moreland Road Director N/A
Wooster, OH 44691

Peter F. Frenzer One Nationwide Plaza Director and Vice Chairman of
Columbus, OH 43216 Chairman Board of Trustees

Charles L. Fuellgraf, Jr. 600 S. Washington Street Director Trustee
Butler, PA 16001

Henry S. Holloway 1247 Stafford Road Director N/A
Darlington, MD 21034

Gordon E. McCutchan One Nationwide Plaza Director N/A
Columbus, OH 43216

D. Richard McFerson One Nationwide Plaza President and Director Trustee
Columbus, OH 43216 and Chief Executive
Officer-Nationwide
Insurance Enterprise

David O. Miller 115 Sprague Drive Director N/A
Hebron, OH 43075

C. Ray Noecker 2770 St. rt. 674 Director N/A
Ashville, OH 43103

James F. Patterson 8765 Mulberry Road Director N/A
Chesterland, OH 44026

Robert H. Rickel P.O. Box 319 Director N/A
Bayview, ID 83803

Arden L. Shisler 2724 West Lebanon Road Director N/A
Dalton, OH 44618

Robert L. Stewart 88740 Fairview Road Director N/A
Jewett, OH 43986

Nancy C. Thomas 10835 Georgetown St., NE Director Trustee
Louisville, OH 44641
</TABLE>

C-23

<PAGE> 128

<TABLE>
OFFICERS

<CAPTION>
NAME BUSINESS ADDRESS TITLE POSITION WITH REGISTRANT
<S> <C> <C> <C>
Harold Weihl 14282 King Road Chairman of Board of Directors Trustee
Bowling Green, OH 43402

D. Richard McFerson One Nationwide Plaza President and Trustee
Columbus, OH 43216 Chief Executive Officer-
Nationwide Insurance
Enterprise

Peter F. Frenzer One Nationwide Plaza Vice Chairman and Executive Chairman of
Columbus, OH 43216 Vice President Board of Trustees
Chief Investment Officer

Gordon E. McCutchan One Nationwide Plaza Executive Vice President Law N/A
Columbus, OH 43216 and Corporate Services

Robert A. Oakley One Nationwide Plaza Senior Vice President N/A
Columbus, OH 43216 Chief Financial Officer

W. Sidney Druen One Nationwide Plaza Senior Vice President and Counsel
Columbus, OH 43216 General Counsel and Assistant
Secretary

Peter J. Neckermann One Nationwide Plaza Vice President Assistant Treasurer
Columbus, OH 43216

Harry A. Schermer One Nationwide Plaza Vice Prsident Assistant Treasurer
Columbus, OH 43216 Investments

James F. Laird, Jr. One Nationwide Plaza Vice President Treasurer
Columbus, OH 43216 and General Manager

Rae Mercer One Nationwide Plaza Secretary Secretary
Columbus, OH 43216

<FN>
* Not applicable.

</TABLE>

ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
James F. Laird, Jr.
Nationwide Financial Services, Inc.
One Nationwide Plaza
Columbus, OH 43216

ITEM 31. MANAGEMENT SERVICES
Not applicable.

ITEM 32. UNDERTAKINGS
(a) The Trust undertakes to file a post-effective amendment to add
financial information regarding the Small Company Fund, using
financial statements which need not be certified, within four to six
months of the effective date of the post-effective amendment to the
Registrant's Registration Statement adding the Small Company Fund.

C-24

<PAGE> 129
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements of Securities Act Rule 485(b) for effectiveness of the
Post-Effective Amendment and has duly caused this Post-Effective Amendment to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Columbus, and State of Ohio, on this 14th day of August, 1995.

NATIONWIDE SEPARATE ACCOUNT TRUST

BY: /S/ JAMES F. LAIRD, JR.
------------------------------
James F. Laird, Jr., Treasurer

PURSUANT TO THE REQUIREMENT OF THE SECURITIES ACT OF 1933, POST-EFFECTIVE
AMENDMENT TO ITS REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING
PERSONS IN THE CAPACITIES INDICATED ON THE 14th DAY OF AUGUST, 1995.

Signature & Title
-----------------

Peter F. Frenzer
------------------------------------
Peter F. Frenzer, Trustee & Chairman

PRINCIPAL ACCOUNTING
AND FINANCIAL OFFICER

James F. Laird, Jr.
--------------------------------
James F. Laird, Jr., Treasurer

John C. Bryant
--------------------------------
John C. Bryant, Trustee /s/ James F. Laird, Jr.
-------------------------------------
Robert M. Duncan James F. Laird, Jr., Attorney-in-Fact
--------------------------------
Robert M. Duncan, Trustee

Thomas J. Kerr, IV
--------------------------------
Thomas J. Kerr, IV, Trustee

D. Richard McFerson
--------------------------------
D. Richard McFerson, Trustee

<PAGE> 1
Exhibit 5(b)

INVESTMENT ADVISORY AGREEMENT

THIS AGREEMENT is made and entered into on this ____ day of October, 1995
between NATIONWIDE SEPARATE ACCOUNT TRUST (the "Trust"), a Massachusetts
business trust, and NATIONWIDE FINANCIAL 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 and administrative services, as described herein, to a newly
created portfolio of the Trust, the Nationwide Small Company Fund (the "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, in consideration of the mutual covenants and agreements
set forth in this Agreement, the Trust and Adviser do mutually agree and promise
as follows:

1. Appointment as Adviser. The Trust hereby appoints the Adviser to act as
investment adviser to the Fund during the Term (as defined in Section __ hereof)
pursuant 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) Administrative Services. The Adviser shall furnish to the Fund, at
its own expense, adequate office space, office furnishings, facilities and
equipment and clerical personnel as may be reasonably required for
managing and administering the business and operations of the Fund,
including (i) complying with the business trust, securities and tax
reporting requirements for the Fund, (ii) conducting correspondence and
other communications with the shareholders of the Fund, and (iii)
maintaining or supervising the maintenance of all internal bookkeeping,
accounting and auditing services in connection with the Fund's investment
and business activities. The Trust agrees that its shareholder
recordkeeping services and the preparation of certain of its

<PAGE> 2

records required by Section 31 of the 1940 Act and the rules adopted under
such section are maintained by the Trust's Transfer Agent or Custodian or
by a subadviser of the Fund and that with respect to those records the
Adviser's obligations under this Agreement are supervisory in nature. In
addition, the computing of net asset value and other fund accounting
functions are provided by the Adviser under a Fund Accounting Agreement
between the Adviser and the Trust; and therefore, the responsibilities of
the Adviser in relation to those services are covered by such agreement.
The Adviser shall also compensate all officers and employees of the Trust
who are officers or employees of the Adviser, or its affiliated companies.

(b) Investment Management Services. (1) Subject to the supervision of
the Trust's Board of Trustees, the Adviser will provide, or arrange for
the provision of, a continuous investment program for the Fund, including
investment research and management with respect to all securities and
investments and cash equivalents in the 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 the Fund and will
implement, or arrange for others to implement, such determinations through
the placement, in the name of the Fund, of orders for the execution of
portfolio transactions with or through such brokers or dealers as may be
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 the Fund as set forth in the 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.

(2) Subject to the provisions of this Agreement and the 1940 Act, the
Adviser intends to, and is authorized to, appoint one or more qualified
subadvisers (each a "Subadviser") to provide the Fund with certain
services required by this Agreement. Each Subadviser shall have full
investment discretion and shall make all determinations with respect to
the investment of the Fund's assets assigned to that Subadviser 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 the
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

2
<PAGE> 3

of the Fund's assets; (ii) determine the allocation of assets among the
Subadvisers; and (iii) have full investment discretion to make all
determinations with respect to the investment of Fund assets not assigned
to a Subadviser.

(4) The Adviser shall research and evaluate each Subadviser, including
(i) performing initial due diligence on prospective Subadviser 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 also provide to the Trust's Board of Trustees
such periodic reports concerning the Fund's business and investments as
the Board of Trustees shall reasonably request.

(c) 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
the Fund, including, without limitation, the 1940 Act, and the rules and
regulations thereunder, except that each Subadviser shall have liability
in connection with material information furnished by the Subadviser to the
Fund or to the Adviser.

(d) Consistent Standards. It is recognized that the Adviser will
perform various investment management and administrative services for
entities other than the Trust and the Fund; 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.

3
<PAGE> 4

(e) Brokerage. The Adviser is authorized, subject to the supervision of
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
assets not allocated to a Subadviser, with or through, such persons,
brokers or dealers as Adviser may elect and negotiate commissions to be
paid on such transactions. The Adviser shall place all orders for the
purchase and sale of such portfolio investments for the Fund's account
with brokers and dealers selected by the Adviser. In the selection of such
brokers or dealers and the placing of such orders, the Adviser shall seek
to obtain for the 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 the 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 or dealer involved, and the quality of
service rendered by the broker or dealer 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 the Fund
to pay a broker or dealer that provides brokerage and research services 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 or dealer would have charged for effecting that transaction.

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 the 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 considers to be the most equitable and consistent with
its fiduciary obligations to the Fund and to such other clients.

(f) Securities Transactions. The Adviser will not purchase securities
or other instruments from or sell securities or other instruments to the
Fund; provided,

4
<PAGE> 5

however, the Adviser may purchase securities or other instruments from or
sell securities or other instruments to the 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 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.

(g) Books and Records. Pursuant to 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 Fund 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 shall also
require that its Access Persons (as defined in subsection (e) of Rule
17j-1 under the 1940 Act) provide the Adviser with monthly reports of
their personal securities transactions. 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 Fund is
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 the
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 also reimburse
the Trust for the compensation and expenses of 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) the charges and expenses of independent certified public
accountants and of general ledger accounting and internal reporting services for
the Trust, (3) the charges and expenses of any transfer agents and registrars
appointed by the Trust, (4) the charges and expenses of dividend and capital
gain distributions, (5) the compensation and expenses of Trustees of the Trust
who are not "interested persons" of the Adviser, (6) brokerage commissions and
issue and transfer taxes chargeable to the Trust in connection with securities
transactions to which the Trust is a party, (7) all taxes and fees payable by
the Trust to Federal, State or other

5
<PAGE> 6

governmental agencies, (8) the cost of stock certificates representing shares of
the Trust, (9) all expenses of shareholders' and Trustees' meetings and of
preparing, printing and distributing prospectuses and reports to shareholders,
(10) 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, and expenses which the Trust has herein
assumed, (11) insurance and bonding premiums, (12) association membership dues,
(13) bookkeeping and the calculation of the net asset value of shares of the
Trust's funds, and (14) 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 the Fund pursuant to this Agreement, the Adviser will be entitled to
a fee, computed daily and payable monthly, calculated at the annual rate of
1.00% of the Fund's average daily net assets.

The method of determining net assets of the 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 the 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 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;

(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 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,

6
<PAGE> 7

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 the
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. In addition, in no case shall the Adviser be liable for
actions taken or not taken by it in accordance with specified information,
instructions or requests given or made to the Adviser by an officer or
Trustee of the Trust.

(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 October __, 1997 and thereafter

7
<PAGE> 8

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
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 voting securities of the Fund, or by
the Adviser, in each case, upon 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 the Fund (as required by the 1940 Act).

11. Confidentiality. Subject to the duties of the Adviser and the Fund 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 Adviser and the
Fund 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

8
<PAGE> 9

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 Financial Services, Inc.
One Nationwide Plaza, 25-T
Columbus, OH 43215
Attention: James F. Laird, Jr.
Facsimile: (614) 249-7424

(b) If to the Fund:

Nationwide Separate Account Trust
One Nationwide Plaza, 25-T
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 Commonwealth of Massachusetts 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.

18. Nationwide Separate Account Trust and its Trustees. The terms
"Nationwide Separate Account Trust" and the "Trustees of Nationwide Separate
Account Trust" refer respectively to the Trust created and the Trustees, as
trustees but not individually or personally, acting from time to time under a
Declaration of Trust dated as of June 30, 1981, as has been or may be amended
from time to time, and to which reference is hereby made and a copy of which

9
<PAGE> 10

is on file at the office of the Secretary of State of The Commonwealth of
Massachusetts and elsewhere 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 Separate Account Trust's
Trustees, representatives, or agents are not made individually, but only in
their capacities with respect to Nationwide Separate Account Trust. 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.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first written above.

ADVISER
NATIONWIDE FINANCIAL SERVICES, INC.

By:
---------------------------------
Name:
Title:

TRUST
NATIONWIDE SEPARATE ACCOUNT TRUST

By:
---------------------------------
Name:
Title:

<PAGE> 1
Exhibit 5(c)

SUBADVISORY AGREEMENT

THIS AGREEMENT is made and entered into on this ____ day of October, 1995
between NATIONWIDE FINANCIAL SERVICES, INC. (the "Adviser"), an Ohio corporation
registered under the Investment Advisers Act of 1940 (the "Advisers Act"), and
___________________ _______________ (the "Subadviser"), a ____________
corporation also registered under the Advisers Act.

W I T N E S S E T H :

WHEREAS, Nationwide Separate Account Trust, a Massachusetts business trust
(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 October __, 1995 (the "Advisory Agreement"), been retained to act as
investment adviser for the Nationwide Small Company Fund (the "Fund"), one of
the Trust's portfolios;

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 Fund'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 Adviser and Subadviser 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.

2. Duties of Subadviser.

(a) Investments. The Subadviser is hereby authorized and directed and
hereby agrees, subject to the stated

<PAGE> 2

investment policies and restrictions of the Fund as set forth in the
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 Adviser and the Fund's Board of Trustees, to
purchase, hold and sell investments for the Subadviser Assets ("Fund
Investments") and to monitor on a continuous basis the performance of such
Fund Investments.

(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") (including the requirements
for qualification as a regulated investment company) and all other
applicable federal and state laws and regulations.

In the event that the Fund's investment objectives, policies and
restrictions as stated in the Prospectus change, the Subadviser shall, in
the performance of its duties and obligations under this Agreement, manage
the Fund Investments consistent with such changes, provided the Subadviser
has received notice of such changes. For purposes of this subsection,
receipt of a modified Prospectus by the Subadviser shall constitute
notice. The Adviser acknowledges and agrees that the Trust and 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 the Fund, 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 material information
furnished by the Subadviser to the Fund or to the Adviser. The Subadviser
hereby agrees to review and modify (if necessary) disclosure contained in
the Prospectus as requested by the Adviser, on a periodic basis.

(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 the Fund or take any action
with respect thereto.

(d) 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

2
<PAGE> 3

Fund with, and place orders for the purchase and sale of the Fund
Investments with or through, such persons, brokers or dealers as
Subadviser may elect and negotiate commissions to be paid on such
transactions. The Subadviser shall place all orders for the purchase and
sale of portfolio investments for the Fund's account with brokers and
dealers selected by the Subadviser. In the selection of such brokers or
dealers and the placing of such orders, the Subadviser shall seek to
obtain for the 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 the Fund the most favorable
price and execution available, the Subadviser, 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 or dealer involved, and the quality of
service rendered by the broker or dealer 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 the Fund
to pay a broker or dealer that provides brokerage and research services 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 or dealer would have charged for effecting that transaction.

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 the 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 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
Subadviser in the manner the Subadviser considers to be the most equitable
and consistent with its fiduciary obligations to the Fund and to such
other clients.

(e) 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 the Fund; provided, however,
the

3
<PAGE> 4

Subadviser may purchase securities or other instruments from or sell
securities or other instruments to the 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 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. Pursuant to the 1940 Act and the rules and
regulations promulgated thereunder, the Subadviser shall maintain separate
books and detailed records of all matters pertaining to the Fund 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 Subadviser shall
also require that its Access Persons (as defined in subsection (e) of Rule
17j-1 under the 1940 Act) provide the Subadviser with monthly reports of
their personal securities transactions. The Fund's Books and Records shall
be available to the Adviser at any time upon request and shall be
available for telecopying without delay to the Adviser during any day that
the Fund is open for business.

(g) Information Concerning Fund Investments and Subadviser. From time
to time as the Adviser or the Fund 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 Fund may reasonably request. The Subadviser will also
inform the Adviser on a current basis of material changes in investment
strategy or tactics or in key personnel. The Subadviser will make
available its officers and employees to meet with the Trust's Board of
Trustees on due notice 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 Fund or the Adviser to comply with their respective
obligations under applicable laws, including, without limitation, the
Code, the 1940 Act, the Advisers Act, the Securities Act of 1933, as
amended (the "Securities Act") and any state securities laws, and any rule
or regulation thereunder.

(h) Custody Arrangements. The Subadviser shall on each business day
provide the Adviser and its custodian such information as the Adviser and
its custodian may reasonably request relating to all transactions
concerning the Fund Investments.

4
<PAGE> 5

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 or the Adviser in any way or
otherwise be deemed an agent of the Fund 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
Fund. 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 or Adviser's expenses. The Trust or the Adviser, as
the case may be, shall reimburse the Subadviser for any expenses of the Fund or
the Adviser as may be reasonably incurred by such Subadviser on behalf of the
Fund 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 Fund pursuant to this Agreement, the Subadviser will be entitled
to a fee, computed daily and payable monthly, from the Adviser, calculated at
the annual rate of .60% of the Subadviser Assets' average daily net assets.

In the event that the fee due from the Trust to the Adviser on behalf of
the Fund is reduced in order to meet expense limitations imposed on the Fund by
state securities laws or regulations, the subadvisory fee shall be reduced in
accordance with the mutual agreement of the Adviser and the Subadviser.

Notwithstanding any other provision of this Agreement, the Subadviser 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
Subadviser at any time.

<PAGE> 6

6. Representations and Warranties of Subadviser. The Subadviser represents
and warrants to the Adviser and the Fund 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, or is not required to file such exemption;

(c) The Subadviser is a corporation duly organized and validly existing
under the laws of the State of ___________ 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 shareholders, 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;

(e) The Form ADV of the Subadviser previously provided to the Adviser
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.

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 National Futures Association or is not
required to file such exemption;

6
<PAGE> 7

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, 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.

8. Survival of Representations and Warranties; Duty to Update Information.
All representations and warranties made by the Subadviser and the Adviser
pursuant to Sections 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.

9. Liability and Indemnification.

(a) Liability. 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 shall not be subject to any liability to
the Adviser or the Fund or any of the Fund's shareholders, and, 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 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 Fund Investments; provided, however, that nothing herein shall
relieve the Adviser and the Subadviser from any of their

7
<PAGE> 8

obligations under applicable law, including, without limitation, the
federal and state securities laws and the CEA.

(b) Indemnification. The Subadviser shall indemnify the Adviser and the
Trust, and their respective officers and directors and trustees, for any
liability and expenses, including attorneys' fees, which may be sustained
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. The Adviser shall indemnify the Subadviser and
its officers and directors, 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 or the CEA.

10. Duration and Termination.

(a) Duration. Unless sooner terminated, this Agreement shall continue
until October __, 1997 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 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:

(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 sixty (60) days' written notice to
the Subadviser;

(ii) By the Adviser immediately upon written notice to the
Subadviser if the Subadviser becomes unable to discharge its duties and
obligations under this Agreement; or

8
<PAGE> 9

(iii) By the Subadviser upon 120 days written notice to the
Adviser and the Fund.

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.

11. Duties of the Adviser. The Adviser shall continue to have
responsibility for all services to be provided to the Fund 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 Fund.

12. 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 Subadviser to the Fund, which references shall not
differ in substance from those included in the Fund's Prospectus, this Agreement
and the Advisory Agreement between the Adviser and the Trust with respect to the
Fund, 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.

13. 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 the Fund (as required by the 1940 Act).

14. Confidentiality. Subject to the duties of the Adviser, the Fund 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.

15. 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:

9
<PAGE> 10

(a) If to the Subadviser:

------------------------------------

Attention:
-------------------------
Facsimile:
-------------------------

(b) If to the Adviser:

Nationwide Financial Services, Inc.
One Nationwide Plaza, 25-T
Columbus, OH 43215
Attention: James F. Laird, Jr.
Facsimile: (614) 249-7424

Nationwide Separate Account Trust
One Nationwide Plaza, 25-T
Columbus, OH 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 Commonwealth of Massachusetts 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, "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.

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.

10
<PAGE> 11

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first written above.

ADVISER
NATIONWIDE FINANCIAL SERVICES, INC.

By:
----------------------------------
Name:
Title:

SUBADVISER

-------------------------------------

By:
----------------------------------
Name:
Title:

<PAGE> 1
Exhibit 11

AUDITORS' CONSENT
To the Trustees

Nationwide Separate Account Trust:

We consent to the use of our report dated February 17, 1995 included in the
Statement of Additional Information.

KPMG PEAT MARWICK LLP

Columbus, Ohio
August 14, 1995

WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.

<ARTICLE> 6
<CIK> 0000353905
<NAME> NATIONWIDE SEPARATE ACCOUNT TRUST
<SERIES> CAPITAL APRECIATION FUND
<NAME> SAME AS ABOVE
<MULTIPLIER> 1
<CURRENCY> US

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 60,414,480
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 530,114
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 81,779
<TOTAL-ASSETS> 62,883,106
<PAYABLE-FOR-SECURITIES> 2,059,096
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 381,910
<TOTAL-LIABILITIES> 2,441,006
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 58,805,802
<SHARES-COMMON-STOCK> 5,532,992
<SHARES-COMMON-PRIOR> 3,476,850
<ACCUMULATED-NII-CURRENT> 1,218
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 221,653
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,856,733
<NET-ASSETS> 60,442,100
<DIVIDEND-INCOME> 816,738
<INTEREST-INCOME> 288,998
<OTHER-INCOME> 0
<EXPENSES-NET> 268,254
<NET-INVESTMENT-INCOME> 837,482
<REALIZED-GAINS-CURRENT> (637)
<APPREC-INCREASE-CURRENT> (1,498,651)
<NET-CHANGE-FROM-OPS> (314,232)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 849,394
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,762,464
<NUMBER-OF-SHARES-REDEEMED> 752,522
<SHARES-REINVESTED> 46,200
<NET-CHANGE-IN-ASSETS> 21,516,234
<ACCUMULATED-NII-PRIOR> 13,130
<ACCUMULATED-GAINS-PRIOR> (568,590)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 237,838
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 268,254
<AVERAGE-NET-ASSETS> 47,567,589
<PER-SHARE-NAV-BEGIN> 11.20
<PER-SHARE-NII> .18
<PER-SHARE-GAIN-APPREC> (.28)
<PER-SHARE-DIVIDEND> .18
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.92
<EXPENSE-RATIO> .56
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.

<ARTICLE> 6
<CIK> 0000353905
<NAME> NATIONWIDE SEPARATE ACCOUNT TRUST
<SERIES> TOTAL RETURN FUND
<NAME> SAME AS ABOVE
<MULTIPLIER> 1
<CURRENCY> US

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 553,256,323
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 1,374,457
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 554,630,780
<PAYABLE-FOR-SECURITIES> 2,481,000
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 17,328,832
<TOTAL-LIABILITIES> 19,809,832
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 476,691,280
<SHARES-COMMON-STOCK> 55,150,123
<SHARES-COMMON-PRIOR> 45,178,388
<ACCUMULATED-NII-CURRENT> 24,581
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 58,105,087
<NET-ASSETS> 534,820,948
<DIVIDEND-INCOME> 13,183,002
<INTEREST-INCOME> 3,588,589
<OTHER-INCOME> 0
<EXPENSES-NET> 2,664,613
<NET-INVESTMENT-INCOME> 14,106,978
<REALIZED-GAINS-CURRENT> 12,868,879
<APPREC-INCREASE-CURRENT> (22,354,876)
<NET-CHANGE-FROM-OPS> 4,620,981
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 14,258,556
<DISTRIBUTIONS-OF-GAINS> 12,868,879
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 11,644,751
<NUMBER-OF-SHARES-REDEEMED> 2,679,189
<SHARES-REINVESTED> 1,006,173
<NET-CHANGE-IN-ASSETS> 78,578,079
<ACCUMULATED-NII-PRIOR> 176,159
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,556,764
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,664,613
<AVERAGE-NET-ASSETS> 511,352,880
<PER-SHARE-NAV-BEGIN> 10.10
<PER-SHARE-NII> .21
<PER-SHARE-GAIN-APPREC> (.10)
<PER-SHARE-DIVIDEND> .28
<PER-SHARE-DISTRIBUTIONS> .23
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.70
<EXPENSE-RATIO> .52
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.

<ARTICLE> 6
<CIK> 0000353905
<NAME> NATIONWIDE SEPARATE ACCOUNT TRUST
<SERIES> GOVERNMENT BOND FUND
<NAME> SAME AS ABOVE
<MULTIPLIER> 1
<CURRENCY> US

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 410,105,792
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 8,360,702
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 400,360,928
<PAYABLE-FOR-SECURITIES> 2,000,000
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 7,108,007
<TOTAL-LIABILITIES> 9,108,007
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 418,926,395
<SHARES-COMMON-STOCK> 38,367,227
<SHARES-COMMON-PRIOR> 38,491,544
<ACCUMULATED-NII-CURRENT> 18,541
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (9,586,449)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (18,105,566)
<NET-ASSETS> 391,252,921
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 27,934,126
<OTHER-INCOME> 0
<EXPENSES-NET> 2,061,103
<NET-INVESTMENT-INCOME> 25,873,023
<REALIZED-GAINS-CURRENT> (9,586,449)
<APPREC-INCREASE-CURRENT> (30,390,066)
<NET-CHANGE-FROM-OPS> (14,103,492)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 25,947,244
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6,207,952
<NUMBER-OF-SHARES-REDEEMED> 8,140,889
<SHARES-REINVESTED> 1,808,620
<NET-CHANGE-IN-ASSETS> (42,331,340)
<ACCUMULATED-NII-PRIOR> 92,762
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,061,103
<AVERAGE-NET-ASSETS> 400,621,840
<PER-SHARE-NAV-BEGIN> 11.26
<PER-SHARE-NII> .69
<PER-SHARE-GAIN-APPREC> (1.06)
<PER-SHARE-DIVIDEND> .69
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.20
<EXPENSE-RATIO> .51
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.

<ARTICLE> 6
<CIK> 0000353905
<NAME> NATIONWIDE SEPARATE ACCOUNT TRUST
<SERIES> MONEY MARKET FUND
<NAME> SAME AS ABOVE
<MULTIPLIER> 1
<CURRENCY> US

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 832,632,428
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 18,819,849
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 851,452,277
<PAYABLE-FOR-SECURITIES> 18,457,892
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4,967,739
<TOTAL-LIABILITIES> 23,425,631
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 828,026,025
<SHARES-COMMON-STOCK> 828,026,025
<SHARES-COMMON-PRIOR> 351,798,687
<ACCUMULATED-NII-CURRENT> 621
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 828,026,646
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 29,651,433
<OTHER-INCOME> 0
<EXPENSES-NET> 3,502,207
<NET-INVESTMENT-INCOME> 26,149,226
<REALIZED-GAINS-CURRENT> 1,195
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 26,150,421
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 26,148,730
<DISTRIBUTIONS-OF-GAINS> 548
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,245,852,351
<NUMBER-OF-SHARES-REDEEMED> 791,816,873
<SHARES-REINVESTED> 22,191,860
<NET-CHANGE-IN-ASSETS> 476,228,481
<ACCUMULATED-NII-PRIOR> 125
<ACCUMULATED-GAINS-PRIOR> (647)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,269,449
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,502,207
<AVERAGE-NET-ASSETS> 653,889,855
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .04
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .04
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .54
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>