<PAGE> 1
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SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
NATIONWIDE SEPARATE ACCOUNT TRUST
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
XXXXXXXXXXXXXXXX
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies: .......
(2) Aggregate number of securities to which transaction applies: ..........
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
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<PAGE> 2
TOTAL RETURN FUND
CAPITAL APPRECIATION FUND
GOVERNMENT BOND FUND
MONEY MARKET FUND
NATIONWIDE SMALL COMPANY FUND
PORTFOLIOS OF NATIONWIDE SEPARATE ACCOUNT TRUST
THREE NATIONWIDE PLAZA, COLUMBUS, OHIO 43215
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To the Owners of Variable Annuity Contracts or Variable Life Insurance
Policies issued by Nationwide Life Insurance Company or Nationwide Life and
Annuity Insurance Company (collectively, "Nationwide") entitled to give Voting
Instructions to the Shareholders of Nationwide Separate Account Trust, in
connection with the Separate Accounts of Nationwide:
Notice is hereby given that a Special Meeting of Shareholders of the Total
Return Fund, Capital Appreciation Fund, Government Bond Fund, Money Market Fund,
and Nationwide Small Company Fund (collectively the "Portfolios"), constituting
all of the portfolios of Nationwide Separate Account Trust, a Massachusetts
business trust (the "Trust"), will be held on Friday, September 26, 1997, at
11:15 a.m., Eastern Daylight Savings Time, at Three Nationwide Plaza, Columbus,
Ohio 43215. The purpose of the Meeting is to consider and act on the following
matters:
1. To elect a Board of Trustees;
2. To ratify the selection of KPMG Peat Marwick LLP, independent public
accountants, as auditors to be employed by the Trust for the fiscal year
ending December 31, 1997;
3. To approve a new Investment Advisory Agreement between the Trust and
Nationwide Advisory Services, Inc. ("NAS") with respect to each
Portfolio (other than the Nationwide Small Company Fund) which, among
other things, will change the fees paid by Shareholders of those
Portfolios;
4. To authorize the Board of Trustees to appoint, replace or terminate
subadvisers recommended by NAS or amend the terms of any subadvisory
agreement for the Nationwide Small Company Fund without Shareholder
approval;
5. To approve the Trust's Bylaws as proposed to be amended;
6. To approve the following matters with respect to certain fundamental
investment policies of each of Total Return Fund, Capital Appreciation
Fund, Government Bond Fund and Money Market Fund:
a. Amend such Portfolios' fundamental policy with respect to
diversification;
b. Amend such Portfolios' fundamental policy with respect to
purchasing securities on margin;
c. Amend such Portfolios' fundamental policy regarding real estate
and commodities;
<PAGE> 3
d. Reclassify such Portfolios' fundamental policy prohibiting
making short sales of securities to make such policy non-fundamental;
e. Reclassify such Portfolios' fundamental policy regarding
investments in securities which are restricted as to disposition to make
such policy non-fundamental;
f. Reclassify such Portfolios' fundamental policy limiting the
purchase of securities of other investment companies to make such policy
non-fundamental;
g. Delete such Portfolios' fundamental policy regarding investment
in companies with a record of less than three years continuous
operation;
h. Delete such Portfolios' fundamental policy regarding investment
in companies for the purpose of exercising control or management;
i. Delete such Portfolios' fundamental policy prohibiting the
writing or purchasing of any put or call options;
j. Delete such Portfolios' fundamental policy regarding purchasing
or retaining securities which may be held by the Trust's officers or
trustees or by such Portfolios' investment adviser; and
7. To consider and act upon any matters incidental to the foregoing and to
transact such other business as may properly come before the Meeting and
any adjournment or adjournments thereof.
Separate accounts of Nationwide are the only Shareholders of the Trust.
However, Nationwide hereby solicits and agrees to vote the shares of the
Portfolios at the Meeting in accordance with timely instructions received from
owners of variable annuity contracts and variable life insurance policies
("variable contracts") having contract values allocated to separate accounts
invested in such shares.
As a variable contract owner of record at the close of business on July 30,
1997, you have the right to instruct Nationwide as to the manner in which the
Fund shares attributable to your variable contract should be voted. To assist
you in giving your instructions, a Proxy/Voting Instruction Form is enclosed
that reflects the number of shares of each Portfolio of the Trust for which you
are entitled to give voting instructions. In addition, a Proxy Statement is
attached to this Notice and describes the matters to be voted on at the Meeting
or any adjournment(s) thereof.
By Order of the Trustees,
Rae M. Pollina, Secretary
August 19, 1997
YOUR VOTE IS IMPORTANT
IN ORDER TO AVOID THE ADDITIONAL EXPENSE OF A SECOND SOLICITATION, WE URGE YOU
TO COMPLETE, SIGN AND RETURN PROMPTLY THE ENCLOSED PROXY/VOTING INSTRUCTION
FORM. FOR YOUR CONVENIENCE, THE ENCLOSED ADDRESSED ENVELOPE REQUIRES NO POSTAGE.
2
<PAGE> 4
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS OF
TOTAL RETURN FUND,
CAPITAL APPRECIATION FUND,
GOVERNMENT BOND FUND,
MONEY MARKET FUND, AND
NATIONWIDE SMALL COMPANY FUND
PORTFOLIOS OF NATIONWIDE SEPARATE
ACCOUNT TRUST
TO BE HELD SEPTEMBER 26, 1997
GENERAL VOTING INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Trustees of Nationwide Separate Account Trust, a Massachusetts
business trust (the "Trust"), to be used in connection with a Special Meeting of
Shareholders (the "Meeting") of the Trust to be held on September 26, 1997. The
Trustees have fixed the close of business on July 30, 1997, as the record date
(the "Record Date") for the determination of shareholders of the Trust
("Shareholders") entitled to notice of and to vote at the Meeting.
The mailing address of the principal executive offices of the Trust is:
Three Nationwide Plaza, Columbus, Ohio 43215. The approximate date on which this
Proxy Statement and forms of proxy are first sent to Shareholders is on or about
August 19, 1997.
The Proxy Statement is being furnished in connection with the solicitation
of voting instructions by Nationwide Life Insurance Company and Nationwide Life
and Annuity Insurance Company (collectively, "Nationwide") from owners of
certain variable annuity contracts and variable insurance policies
(collectively, "variable contracts") having contract values on the record date
allocated to a subaccount of a Nationwide separate account invested in such
shares.
Shareholders of record on the Record Date are entitled to one vote for each
share and a proportionate fractional vote for any fraction of a share as to each
issue on which such Shareholders are entitled to vote. The following sets forth,
as of the Record Date, the number of shares of beneficial interest (the
"Shares"), of each of the Trust's series or funds (singly a "Portfolio" and
collectively the "Portfolios") which were outstanding and are entitled to vote
at the Meeting:
<TABLE>
<S> <C>
Total Return Fund............................. 101,547,639 Shares
Capital Appreciation Fund..................... 18,981,746 Shares
Government Bond Fund.......................... 38,914,448 Shares
Money Market Fund............................. 921,480,741 Shares
Nationwide Small Company Fund................. 16,682,511 Shares
</TABLE>
3
<PAGE> 5
At the Meeting, Shareholders will be voting either together as a group
without regard to Portfolio, or separately by Portfolio.
Only Shareholders of record at the close of business on the Record Date
will be entitled to notice of and to vote at the Meeting. However, the separate
accounts of Nationwide are the only Shareholders of the Trust. Nationwide will
vote the shares of each Portfolio at the Meeting in accordance with the timely
instructions received from persons entitled to give voting instructions under
the variable contracts. Nationwide will vote shares attributable to variable
contracts as to which no voting instructions are received in proportion (for,
against or abstain) to those for which timely instructions are received. If a
duly executed and dated Proxy/Voting Instruction Form is received that does not
specify a choice, Nationwide will consider its timely receipt as an instruction
to vote in favor of the proposal to which it relates. Variable contract owners
may revoke previously submitted voting instructions given to Nationwide at any
time prior to the Meeting by either submitting to the Trust subsequently dated
voting instructions, delivering to the Trust a written notice of revocation or
otherwise giving notice of revocation in open Meeting, in all cases prior to the
exercise of the authority granted in the proxy/voting instructions.
THE TRUST WILL FURNISH, WITHOUT CHARGE, A COPY OF THE TRUST'S MOST RECENT
ANNUAL REPORT TO SHAREHOLDERS AND THE SEMI-ANNUAL REPORT TO SHAREHOLDERS
SUCCEEDING THE ANNUAL REPORT ONCE IT IS AVAILABLE, UPON REQUEST, WHICH REQUEST
MAY BE MADE EITHER BY WRITING TO THE TRUST AT THE ADDRESS ABOVE OR BY CALLING
TOLL-FREE (800) 848-0920. THE ANNUAL REPORT AND THE SEMI-ANNUAL REPORT AS
AVAILABLE WILL BE MAILED TO YOU BY FIRST-CLASS MAIL WITHIN THREE BUSINESS DAYS
OF RECEIPT OF YOUR REQUEST.
The following table summarizes the proposals on which Shareholders are
being asked to vote (singly a "Proposal" and collectively the "Proposals") and
indicates which Shareholders are eligible to vote on each Proposal. Proposals 1,
2, and 5 relate to all Portfolios; Proposal 3 and each of the sections of
Proposal 6 only relate to the Total Return Fund, the Capital Appreciation Fund,
the Government Bond Fund and the Money Market Fund (the "Funds"); and Proposal 4
only relates to the Nationwide Small Company Fund. Shareholders of all
Portfolios will vote together as a group, without regard to Portfolio, on
Proposals 1, 2 and 5. The Shareholders of the Funds, and not those of the
Nationwide Small Company Fund, will vote on Proposal 3 and 6.a. through 6.j. on
a Fund by Fund basis, rather than together as a group. Only Shareholders of the
Nationwide Small Company Fund will vote on Proposal 4.
<TABLE>
<CAPTION>
SHAREHOLDERS WHO WILL
PROPOSAL BRIEF DESCRIPTION OF THE PROPOSAL VOTE ON THE PROPOSAL
- -------------- ---------------------------------------- -------------------------------
<S> <C> <C>
Proposal 1 To elect a Board of Trustees. Shareholders of All Portfolios
Voting Together As a Group
Proposal 2 To ratify the selection of KPMG Peat Shareholders of All Portfolios
Marwick LLP as auditors. Voting Together As a Group
</TABLE>
4
<PAGE> 6
<TABLE>
<CAPTION>
SHAREHOLDERS WHO WILL
PROPOSAL BRIEF DESCRIPTION OF THE PROPOSAL VOTE ON THE PROPOSAL
- -------------- ---------------------------------------- -------------------------------
<S> <C> <C>
Proposal 3 To approve a new Investment Advisory Shareholders of All Funds
Agreement between the Trust and Voting Separately By Fund
Nationwide Advisory Services, Inc. with
respect to each Fund (other than
Nationwide Small Company Fund) which,
among others, will change the fees paid
by Shareholders of each Fund.
Proposal 4 To authorize the Board of Trustees to Shareholders of Nationwide
appoint, replace or terminate Small Company Fund only
subadvisers recommended by Nationwide
Advisory Services, Inc. or amend the
term of any subadvisory agreement for
Nationwide Small Company Fund without
Shareholder approval.
Proposal 5 To approve the Trust's Bylaws as Shareholders of All Portfolios
proposed to be amended and restated. Voting Together As a Group
To approve the following matters with
respect to certain fundamental
investment policies of each of the Total
Return Fund, the Capital Appreciation
Fund, the Government Bond Fund and the
Money Market Fund:
Proposal 6.a. Amend such Portfolios' fundamental Shareholders of Such Funds
policy with respect to diversification. Voting Separately By Fund
Proposal 6.b. Amend such Portfolios' fundamental Shareholders of Such Funds
policy with respect to purchasing Voting Separately By Fund
securities on margin.
Proposal 6.c. Amend such Portfolios' fundamental Shareholders of Such Funds
policy regarding real estate and Voting Separately By Fund
commodities.
Proposal 6.d. Reclassify such Portfolios' fundamental Shareholders of Such Funds
policy prohibiting making short sales of Voting Separately By Fund
securities, to make such policy
non-fundamental.
Proposal 6.e. Reclassify such Portfolios' fundamental Shareholders of Such Funds
policy regarding the investment in Voting Separately By Fund
securities which are restricted as to
disposition to make such policy
non-fundamental.
Proposal 6.f. Reclassify such Portfolios' fundamental Shareholders of Such Funds
policy limiting the purchase of Voting Separately By Fund
securities of other investment companies
to make such policy non-fundamental.
Proposal 6.g. Delete such Portfolios' fundamental Shareholders of Such Funds
policy regarding investment in companies Voting Separately By Fund
with a record of less than three years
continuous operations.
Proposal 6.h. Delete such Portfolios' fundamental Shareholders of Such Funds
policy regarding investment in companies Voting Separately By Fund
for the purpose of exercising control or
management.
Proposal 6.i. Delete such Portfolios' fundamental Shareholders of Such Funds
policy prohibiting the writing or Voting Separately By Fund
purchasing of any put or call options.
</TABLE>
5
<PAGE> 7
<TABLE>
<CAPTION>
SHAREHOLDERS WHO WILL
PROPOSAL BRIEF DESCRIPTION OF THE PROPOSAL VOTE ON THE PROPOSAL
- -------------- ---------------------------------------- -------------------------------
<S> <C> <C>
Proposal 6.j. Delete such Portfolios' fundamental Shareholders of Such Funds
policy regarding purchasing or retaining Voting Separately By Fund
securities which may be held by the
Trust's officers or trustees or by such
Portfolios' investment adviser.
</TABLE>
The Trust knows of no business other than that mentioned in Proposals 1
through 6 of the Notice which will be presented for consideration at the
Meeting. If any other matters are properly presented, it is the intention of the
persons named on the enclosed Proxy/Voting Instruction Form to vote proxies in
accordance with their best judgment. In the event a quorum is present at the
Meeting but sufficient votes to approve any of the Proposals with respect to one
or more Portfolios are not received, the persons named as proxies may propose
one or more adjournments of the Meeting to permit further solicitation of
proxies, provided they determine that such an adjournment and additional
solicitation is reasonable and in the interests of Shareholders.
6
<PAGE> 8
PROPOSAL 1 -- ELECTION OF TRUSTEES
It is the present intention that the proxies will be used for the purposes
of voting in favor of the election of each of the following nominees as a
Trustee to hold office until the next meeting of Shareholders and until his or
her successor is elected and qualified. Each of the nominees, except for Messrs.
Gasper, Kridler and Woodward and Ms. Doody, presently is a Trustee of the Trust.
Pursuant to Rule 14a-4(d) under the Securities Exchange Act of 1934, as amended,
each nominee has consented to be named in this Proxy Statement and to serve if
elected. It is not expected that any of the nominees will decline or become
unavailable for election, but in case this should happen, the discretionary
power given in the proxy may be used to vote for a substitute nominee or
nominees.
<TABLE>
<CAPTION>
NAME, AGE
AND POSITION PRINCIPAL OCCUPATION(S) A TRUSTEE OF
WITH THE TRUST DURING PAST FIVE YEARS THE TRUST SINCE
- ------------------------ -------------------------------- ------------------------
<S> <C> <C>
Dr. John C. Bryant Dr. Bryant is Executive Director 1990
Age 61 of the Cincinnati Youth
Trustee Collaborative, a partnership of
business, government, schools
and social service agencies to
address the educational needs of
students.
Sue A. Doody Ms. Doody is Owner of Lindey's Not Currently a Trustee
Age 62 Restaurant, Columbus, Ohio.
Robert M. Duncan Mr. Duncan is a member of the 1987
Age 69 Ohio Elections Commission. He
Trustee was formerly Secretary to the
Board of Trustees of The Ohio
State University. Prior to that,
he was Vice President and
General Counsel of The Ohio
State University.
*Joseph J. Gasper Mr. Gasper is President and Not Currently a Trustee
Age 54 Chief Operating Officer of
Nationwide Life Insurance
Company and Nationwide Life and
Annuity Insurance Company. Prior
to that he was Executive Vice
President and Senior Vice
President for Nationwide
Insurance Enterprise.
Dr. Thomas J. Kerr, IV Dr. Kerr is President Emeritus 1982
Age 63 of Kendall College located in
Trustee Evanston, Illinois. He was
formerly President of Kendall
College.
Douglas F. Kridler Mr. Kridler is President and Not Currently a Trustee
Age 42 Executive Director of the
Columbus Association for the
Performing Arts.
*Robert J. Woodward, Jr. Mr. Woodward is Executive Vice Not Currently a Trustee
Age 55 President -- Chief Investment
Officer of the Nationwide
Insurance Enterprise and of
Nationwide Advisory Services,
Inc.
</TABLE>
- ---------------
* Messrs. Gasper and Woodward are each considered an "interested person" of the
Trust, as that term is defined in Section 2(a)(19) of the Investment Company
Act of 1940, as amended (the "1940 Act").
7
<PAGE> 9
Except for Messrs. Gasper and Woodward, each nominee for Trustee is also a
trustee of Nationwide Investing Foundation ("NIF"). Except for Messrs. Gasper,
Kridler and Woodward and Ms. Doody, the nominees are also trustees of Nationwide
Investing Foundation II ("NIF II") and Financial Horizons Investment Trust
("FHIT"). Except for Messrs. Bryant and Kerr, each of the trustees is also a
trustee of Nationwide Asset Allocation Trust ("NAAT"). NIF, NIF II, FHIT and
NAAT are registered investment companies. Mr. Gasper is a director of Nationwide
Financial Services, Inc. Mr. Duncan is a director of First Federal Savings &
Loan of Newark, Ohio and American Electric Power Co., Inc.
During the fiscal year ended December 31, 1996, no Trustee or officer
affiliated with Nationwide Advisory Services, Inc. as the Portfolios' investment
adviser ("NAS") or any subadviser for any of the Portfolios received any direct
remuneration from the Trust for serving in such capacities.
The following table sets forth information on beneficial ownership of any
outstanding voting securities in any Portfolio of the Trust held by each
Trustee, nominee or executive officer as of July 30, 1997:
<TABLE>
<CAPTION>
NUMBER OF
SHARES
BENEFICIALLY PERCENT
TITLE OF PORTFOLIO NAME AND ADDRESS OF BENEFICIAL OWNER OWNED* OF PORTFOLIO
- ------------------ ------------------------------------- ------------ ------------
<S> <C> <C> <C>
Small Company Fund Joseph J. Gasper 4,170 --
One Nationwide Plaza
Columbus, OH 43215
Small Company Fund Robert J. Woodward, Jr. 5,816 --
One Nationwide Plaza
Columbus, OH 43215
Small Company Fund James F. Laird, Jr. 1,862 --
Three Nationwide Plaza
Columbus, OH 43215
Small Company Fund Dimon R. McFerson 154 --
One National Plaza
Columbus, OH 43215
</TABLE>
- ---------------
* Shares are held by the Nationwide Insurance Enterprise Savings Plan for the
benefit of the persons shown.
As of July 30, 1997, the Trustees and officers of the Trust as a group
owned beneficially fewer than 1% of the outstanding Shares of the Trust or of
any of the current Portfolios.
During the fiscal year ended December 31, 1996, the Trust's Board of
Trustees held four meetings. Each of Messrs. Bryant, Duncan and Kerr attended at
least 75% of the meetings. Messrs. Gasper, Kridler and Woodward and Ms. Doody
were not trustees of the Trust during that period. In addition, the trustees of
the Trust
8
<PAGE> 10
authorized by unanimous written consent the creation of and filing of a
registration statement for the Nationwide Income Fund, a new portfolio which has
not yet begun operations.
A plurality of the votes cast at a meeting of Shareholders at which a
quorum is present is required for the election of Trustees.
The following table sets forth information regarding all compensation paid
by the Trust to its trustees for their services as trustees during the fiscal
year ended December 31, 1996. The Trust has no pension or retirement plans.
COMPENSATION TABLE
<TABLE>
<CAPTION>
TOTAL COMPENSATION
AGGREGATE FROM THE TRUST
NAME AND POSITION COMPENSATION AND THE FUND
WITH THE TRUST FROM THE TRUST COMPLEX*
-------------------------------------------- -------------- ------------------
<S> <C> <C>
Dr. John C. Bryant $1,000 $ 15,500
Trustee
Robert M. Duncan $1,000 $ 15,500
Trustee
Dr. Thomas J. Kerr, IV $1,000 $ 15,500
Trustee
Dimon R. McFerson(1) $ 0 $ 0
Trustee
</TABLE>
- ---------------
* For purposes of this Table, Fund Complex means one or more mutual funds which
have a common investment adviser or affiliated investment advisers or which
hold themselves out to the public as being related and means here NIF, NIF II,
NAAT and FHIT, as well as the Trust.
(1) Mr. McFerson will resign as a Trustee of the Trust effective immediately
prior to the Meeting.
9
<PAGE> 11
EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
executive officers of the Trust:
<TABLE>
<CAPTION>
NAME, AGE AND AN OFFICER
POSITION WITH PRINCIPAL OCCUPATION OF THE
THE TRUST DURING THE PAST FIVE YEARS TRUST SINCE
- ------------------------- ---------------------------- ------------------------
<S> <C> <C>
Dimon Richard McFerson Since April, 1996, Mr. May 4, 1994
Age 60 McFerson has been Chairman
Chairman and Chief Operating Officer
for the Nationwide Insurance
Enterprise. From December,
1992 to April 1996 he was
President and Chief
Executive Officer of
Nationwide Mutual Insurance
Company and Nationwide
Mutual Fire Insurance
Company.
James F. Laird, Jr. Since April, 1995, Mr Laird November 19, 1987
Age 40 has been Vice
Treasurer President -- General Manager
of Nationwide Advisory
Services, Inc. Prior to that
he was Treasurer of
Nationwide Advisory
Services, Inc.
</TABLE>
The executive officers of the Trust are elected annually by the Board of
Trustees and hold office until their respective successors are duly elected.
None of the officers of the Trust receives compensation from the Trust for
serving as an officer.
PROPOSAL 2 -- RATIFICATION OF SELECTION OF AUDITORS
The Board of Trustees of the Trust, including a majority of the Board of
Trustees who are not "interested persons" of the Trust, on March 4, 1997,
approved the selection of KPMG Peat Marwick LLP as the auditors of the Trust for
the fiscal year ending December 31, 1997. Unless instructed in the Proxy/Voting
Instruction Form to the contrary, the persons named therein intend to vote in
favor of the ratification of the selection of KPMG Peat Marwick LLP as auditors
of the Trust to serve for the fiscal year ending December 31, 1997.
Shareholders of all Portfolios of the Trust will vote jointly on the
proposal to ratify the selection of KPMG Peat Marwick LLP as auditors of the
Trust to serve for the fiscal year ending December 31, 1997. Ratification
requires the affirmative vote of a majority of the Shares of the Trust who are
present at the Meeting in person or by proxy.
10
<PAGE> 12
A representative of KPMG Peat Marwick LLP will be available by telephone
during the Meeting with an opportunity to make a statement if the representative
desires to do so and to respond to appropriate questions.
THE TRUSTEES RECOMMEND THAT YOU VOTE "FOR" PROPOSAL 2.
PROPOSAL 3 -- APPROVAL OF A NEW INVESTMENT ADVISORY AGREEMENT
The Shareholders of the Total Return Fund, Capital Appreciation Fund,
Government Bond Fund and Money Market Fund are being asked to approve a new
Investment Advisory Agreement (the "Proposed Agreement") with NAS. At a special
meeting of the Trust's Board of Trustees held on July 18, 1997, the Board of
Trustees approved a number of changes relating to the compensation for and the
manner in which certain investment advisory and administrative services are
provided to each of the Funds. In summary, the Trustees determined to revise the
investment advisory and administration fees for the Funds and to separate the
investment advisory services provided by NAS from the basic administrative
services that NAS provides. If the Shareholders of a Fund approve the Proposed
Agreement, these changes will be implemented by that Fund.
NAS currently serves as the investment adviser to the Funds pursuant to an
Investment Advisory Agreement dated as of October 22, 1981 (the "Current
Agreement"). Pursuant to the terms of the Current Agreement, NAS is responsible
for managing the investment and reinvestment of the Trust's assets in conformity
with the Funds' investment objectives, fundamental policies and restrictions as
set forth in the Trust's most recent Prospectus and Statement of Additional
Information for the Funds. Under the Current Agreement, NAS also provides
administrative services, office space, equipment and clerical personnel
necessary for servicing the investments of the Trust and maintaining its
organization. The Current Agreement was initially approved by the Trust's Board
of Trustees on October 22, 1981, was most recently approved by the Board on
August 28, 1996, and as presently constituted was approved by the Shareholders
of the Trust on May 20, 1993. The Current Agreement has not since been submitted
to Shareholders for their approval.
In addition to serving as investment adviser, NAS is paid $48,000 per year
from the Trust to provide fund accounting and daily valuation services for the
Funds. Nationwide Investors Services, Inc., a wholly owned subsidiary of NAS,
provides transfer and dividend disbursing agent services to each Portfolio for
an annual account-based fee of $16 per account for equity funds and $18 per
account for bond and money market funds. Because of the small number of omnibus
accounts in each Fund, total transfer agent and dividend disbursing agent fees
for the Funds were just $1,247 for the year ended December 31, 1996.
11
<PAGE> 13
COMPARISON OF THE CURRENT AND PROPOSED
INVESTMENT ADVISORY AGREEMENTS
Pursuant to the Proposed Agreement, NAS will continue to provide the same
types of investment advisory services that it currently provides to the Funds
under the Current Agreement. However, the fund administration services that NAS
currently provides to the Funds and is compensated for under the Current
Agreement would be provided by NAS under a separate fund administration
agreement (the "Fund Administration Agreement"). The Fund Administration
Agreement would also cover the fund accounting services, including daily
valuation and pricing, provided by NAS for the Funds. Under the terms of the
Fund Administration Agreement, NAS would receive for its services to each Fund a
fee, calculated daily and paid monthly, at an annual rate of 0.05% of a Fund's
average daily net assets on the first $1 billion of assets and 0.04% on assets
of $1 billion and more.
The 1940 Act does not require that Shareholders of a Fund vote upon or
otherwise approve the Fund Administration Agreement or any subsequent amendments
or modifications thereto, including changes in the fees charged to a Fund. If
the Proposed Agreement is approved by Shareholders of a Fund, NAS will enter
into the Proposed Agreement and the Fund Administration Agreement with the Trust
on behalf of that Fund. The Board of Trustees has unanimously approved the Fund
Administration Agreement for each Fund, subject to approval of the Proposed
Agreement by Shareholders of that Fund.
The fees to be paid to NAS by each Fund under the Proposed Agreement would
also change from those currently charged under the Current Agreement. Each Fund
is currently charged a 0.50% annual fee on such Fund's average annual daily net
assets. The proposed investment advisory fees, expressed as an annual percentage
of average daily net assets, are set forth below and are in addition to the fees
to be charged under the Fund Administration Agreement:
<TABLE>
<CAPTION>
FUND PROPOSED ADVISORY FEES
- --------------------------------- ----------------------------------------------
<S> <C>
Total Return Fund and Capital 0.60% on the first $1 billion in assets
Appreciation Fund 0.575% on assets of $1 billion and more but
less than $2 billion
0.55% on assets of $2 billion and more but
less than $5 billion
0.50% for assets of $5 billion and more
Government Bond Fund 0.50% on the first $1 billion in assets
0.475% on assets of $1 billion and more but
less than $2 billion
0.45% on assets of $2 billion and more but
less than $5 billion
0.40% for assets of $5 billion and more
Money Market Fund 0.40% on the first $1 billion in assets
0.38% on assets of $1 billion and more but
less than $2 billion
0.36% on assets of $2 billion and more but
less than $5 billion
0.34% for assets of $5 billion and more
</TABLE>
12
<PAGE> 14
Like the Current Agreement, the Proposed Agreement states that the Trust
will pay all of its other expenses. These expenses include, but are not limited
to, charges and expenses of any custodian or transfer and dividend disbursing
agent, the charges and expenses of independent certified public accountants, the
charges and expenses of dividend and capital gain distributions, the
compensation and expenses of Trustees of the Trust who are not "interested
persons" of NAS, brokerage fees and commissions, taxes, all expenses of
Shareholders' and Trustees' meetings and of preparing, printing and distributing
prospectuses and reports to Shareholders, charges and expenses of legal counsel
for the Trust, insurance and bonding premiums, charges and expenses for fund
accounting and daily valuation services, and expenses relating to the issuance,
registration and qualification of the Trust's shares.
The following chart shows the aggregate amount of the investment advisory
fee paid by each Fund during the year ended December 31, 1996, the amount NAS
would have received during the same period had the proposed fees been in effect
and the percentage difference between the two:
<TABLE>
<CAPTION>
1996 ACTUAL 1996 PRO FORMA PERCENTAGE
FUND ADVISORY FEES ADVISORY FEES DIFFERENCE
- ------------------------------------------- ------------- -------------- ----------
<S> <C> <C> <C>
Capital Appreciation Fund.................. $ 684,932 $ 821,919 20%
Total Return Fund.......................... $ 4,851,676 $5,822,011 20%
Government Bond Fund....................... $ 2,225,962 $2,225,962 --
Money Market Fund.......................... $ 4,518,925 $3,615,140 (20%)
</TABLE>
NAS also acts as investment advisor for several other regulated investment
companies. The chart below shows information for other series of open-end
investment companies for which NAS performs advisory services with investment
objectives similar to those of the Capital Appreciation, Total Return,
Government Bond and Money Market Funds:
<TABLE>
<CAPTION>
NET ASSETS NAS'
AS OF COMPENSATION AS A
FUND DECEMBER 31, 1996 % OF AVERAGE NET ASSETS
- ---------------------------------------- ----------------- ------------------------
<S> <C> <C>
Nationwide Fund (similar to Total Return
Fund)................................. $ 996 million .50%
Nationwide Growth Fund (similar to
Capital Appreciation Fund)............ $ 687 million .50%
Financial Horizons Growth Fund (similar
to Capital Appreciation Fund)......... $ 9 million .65%
Nationwide U.S. Government Income Fund
(similar to Government Bond Fund)..... $ 39 million .65% up to $250 million
.60% next $250 million
.55% next $250 million
.50% over $750 million
Nationwide Money Market Fund (similar to
Money Market Fund).................... $ 746 million .50%
Financial Horizons Cash Reserve Fund
(similar to Money Market Fund)........ $ 4 million .65%
</TABLE>
In order to provide each Fund with greater flexibility in its future
operations, the Proposed Agreement provides that NAS may appoint one or more
subadvisers to
13
<PAGE> 15
manage all or a portion of a Fund subject to Trustee and Shareholder approval as
required by Section 15 of the 1940 Act. Therefore, before any subadviser is
appointed for a Fund, Shareholders of that Fund will have to vote upon and
approve such appointment.
The Proposed Agreement, unlike the Current Agreement, also includes
provisions which would allow NAS, to the extent permitted by applicable law, to
consider brokerage and research services provided by various brokers in
determining who will execute Fund portfolio transactions. The payment for such
brokerage and research services with such Fund is commonly referred to as "soft
dollar" arrangements.
While NAS' liability under both the Current and the Proposed Agreements is
limited to situations involving its wilful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations and duties under such
agreements, the Proposed Agreement also provides that NAS will indemnify the
Trust and its officers and trustees for any liability which results from NAS'
wilful misfeasance, bad faith, gross negligence, reckless disregard of its
duties under the Proposed Agreement or violation of applicable law.
Unless sooner terminated, the Current Agreement by its terms remains in
effect for successive one-year periods ending October 22nd of each year. The
initial term of the Proposed Agreement will not be longer than two years, and
the Fund Administration Agreement will continue until it is terminated by either
or both parties upon at least 90 days' advance written notice to the other
party. Both the Current and Proposed Agreements provide that each agreement will
continue past its initial term from year to year only so long as (1) such
continuance is specifically approved at least annually by the Trust's Board of
Trustees or by a vote of a majority of the outstanding voting securities of that
Fund, and (2) such renewal has been approved by the vote of a majority of
Trustees of the Trust who are not "interested persons", as that term is defined
by the 1940 Act, of any party to such Agreement, cast in person at a meeting
called for the purpose of voting on such approval.
Both the Current and the Proposed Agreement are not assignable. The Current
Agreement may be terminated with respect to a Fund without penalty on not more
than 60 days' or less than 30 days' written notice at the option of either party
or by a vote of the Shareholders of that Fund. The Proposed Agreement as to a
Fund may be terminated by either party or by the vote of Shareholders of that
Fund on not less than 60 days' advance written notice.
REASONS FOR THE PROPOSED CHANGES
As discussed above, the primary changes proposed in the Proposed Agreement
are revisions to the compensation paid by each Fund to NAS and the removal of
administrative services from the Proposed Agreement. In the years since the
adoption of the Current Agreement, the mutual fund industry has changed
considerably, and in light of these changes, NAS has reviewed the compensation
that it receives from each of the Funds. In particular, it evaluated the amount
of compensation that it receives under the Current Agreement from each Fund and
the need to more precisely identify
14
<PAGE> 16
the investment advisory and administrative services and fees. In connection with
its analysis, NAS particularly identified the investment in professional staff,
computer systems and support that it has made, and will need to make, to ensure
continued high-quality investment management and fund administration.
The Board of Trustees, in approving the Proposed Agreement, considered
written material and information presented orally at their July 18, 1997 board
meeting. Specifically, the Trustees considered the following factors, among
others: (1) the nature, scope and quality of the services provided by NAS, (2)
the costs incurred and revenues generated by NAS in rendering such services, (3)
NAS' profitability from its mutual fund activities, (4) the compensation paid to
investment advisers of mutual funds with similar investment objectives and
policies and asset sizes, (5) the quality of personnel at NAS, (6) comparative
expense and performance information, (7) pro forma expense ratios based upon the
proposed level of investment advisory fees, (8) the need to provide NAS with
adequate financial incentives to maintain and improve its services, and (9) NAS'
planned and proposed additional expenditures in the area of fund administration
and investment advisory services.
More specifically, the Board considered the significant increases in
expenses that NAS will experience in connection with the management of the
Capital Appreciation and Total Return Funds and in the general administration
and fund accounting for each of the Funds and the fact that the total expense
ratios for each of the Funds would continue to be at least 15% lower than the
average for comparable Funds. The Board also determined that the proposed
breakpoints in the Funds' fees would allow Shareholders of those Funds to
benefit from certain economies of scale as a Fund's assets grow.
In reaching its conclusion to approve the Proposed Agreement specifically
as it relates to the Total Return and Capital Appreciation Funds, the Board
determined that the increased fees were necessary for NAS to maintain
high-quality services to those Funds, especially in today's competitive
environment where there are strong pressures to attract and retain qualified
professionals and to dedicate greater resources to the management of funds that
invest in equity securities. In determining to breakout the administrative
services provided to each of the Funds and to charge a separate fee for such
services, the Board specifically considered the increased costs of improved
technology and the need to maintain high quality compliance and administrative
services.
With respect to the Government Bond and Money Market Funds, while the
administrative and fund accounting services for those Funds will be performed
under the Fund Administration Agreement, for which NAS will receive a separate
fee, the fees paid under the Proposed Agreement, (i) for the Government Bond
Fund, at the initial level are the same as those paid under the Current
Agreement, and (ii) for the Money Market Fund, are lower that those paid under
the Current Agreement. In addition, each Fund will receive the benefit of
breakpoints in its investment advisory fees at certain asset levels which will
cause that Fund's overall investment advisory expenses, as a percentage of such
Fund's assets, to decline as such Fund's assets grow. And with respect to each
Fund, the Board determined that based on the Funds'
15
<PAGE> 17
performance and the level of the proposed fees and total expense ratios relative
to comparable funds, the proposed changes were reasonable and in the best
interests of each Fund and its Shareholders.
The tables below compare the current operating expenses based on average
net assets for the year ended December 31, 1996, including investment advisory
fees, paid by the Funds to those fees the Funds would have paid on a pro forma
basis, if the Proposed Agreement and the Fund Administration Agreement had been
in place:
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
CAPITAL TOTAL GOVERNMENT MONEY
APPRECIATION RETURN BOND MARKET
------------------ ------------------ ------------------ ------------------
CURRENT PRO FORMA CURRENT PRO FORMA CURRENT PRO FORMA CURRENT PRO FORMA
------- --------- ------- --------- ------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Advisory Fees....... .50% .60% .50% .60% .50% .50% .50% .40%
Administration
Fees.............. -- .05% -- .05% -- .05% -- .05%
All Other
Expenses.......... .02% .03% .01% .02% .01% .02% .01% .02%
--- --- --- --- --- --- --- ---
Total Fund Operating
Expenses........... .52% .68% .51% .67% .51% .57% .51% .47%
=== === === === === === === ===
</TABLE>
Example:
You would pay the following expenses on a $1,000 investment, assuming (1)
5% annual return and (2) redemption at the end of each time period:
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 year.............. $ 5 $ 7 $ 5 $ 7 $ 5 $ 6 $ 5 $ 5
3 years............. $17 $22 $16 $21 $16 $18 $16 $15
5 years............. $29 $38 $29 $37 $29 $32 $29 $26
10 years............ $65 $85 $64 $83 $64 $71 $64 $59
</TABLE>
The expenses shown in the above chart and example do not include variable
contract charges. The example should not be considered a representation of past
or future expenses. Actual expenses may be greater or less than those shown.
A copy of the Proposed Agreement is attached hereto as Exhibit A. The
Proposed Agreement with respect to each Fund was approved unanimously by the
Trust's Board of Trustees, including a majority of the Trustees who are not
parties to such Agreement or interested persons of any such party, at the
special meeting held on July 18, 1997, and is being submitted to the
Shareholders of each of the Funds for approval at the Meeting.
Approval of the Proposed Agreement with respect to each Fund requires the
affirmative vote of a majority of all outstanding Shares of that Fund, defined
as the lesser of (a) 67% or more of the outstanding shares of the Fund present
at such meeting, if holders of more than 50% of the Shares are present or
represented by proxy, or (b) more than 50% of the Shares of that Fund. If the
Proposed Agreement is not approved, NAS will continue to manage the Fund under
the Current Agreement while it explores other options.
THE TRUSTEES RECOMMEND THAT YOU VOTE "FOR" PROPOSAL 3.
16
<PAGE> 18
ADDITIONAL INFORMATION REGARDING NAS
NAS, an Ohio corporation, is a registered investment adviser and
broker-dealer which provides investment advisory and administrative services to
the Trust and four other investment company trusts. The address of NAS is Three
Nationwide Plaza, Columbus, Ohio 43215. NAS is a wholly owned subsidiary of
Nationwide Life Insurance Company ("NLIC"). NLIC is a wholly owned subsidiary of
Nationwide Financial Services, Inc., a holding company ("NFS"). NFS has two
classes of common stock outstanding with different voting rights enabling
Nationwide Corporation (the holder of all of the outstanding Class B Common
Stock) to control NFS. All of the common stock of Nationwide Corporation is held
by Nationwide Mutual Insurance Company (95.3%) and Nationwide Mutual Fire
Insurance Company (4.7%), each of which is a mutual company owned by its
policyholders.
Because the Portfolios are sold as underlying mutual fund options in
variable products, there is no principal underwriter for the Portfolios, but NAS
provides marketing and wholesaling at no additional cost for the Portfolios.
The name, address and principal occupation of the principal executive
officers and each director of NAS are as follows:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
NAME POSITION WITH NAS AND BUSINESS ADDRESS(1)
- ---------------------------- ----------------------- -----------------------
<S> <C> <C>
Dimon Richard McFerson(1) Chairman of the Board, Chairman and Chief
Chairman and Chief Executive Officer --
Executive Officer -- Nationwide Insurance
Nationwide Insurance Enterprise
Enterprise, Director
Joseph J. Gasper(1) President, Director President and Chief
Operating Officer
Nationwide Life
Insurance Company and
Nationwide Life and
Annuity Insurance
Company
Robert A. Oakley(1) Executive Vice Executive Vice
President -- Chief President -- Chief
Financial Officer, Financial Officer
Director Nationwide Insurance
Enterprise
Gordon E. McCutchan(1) Executive Vice Executive Vice
President -- Law and President -- Law and
Corporate Services, Corporate Services
Director Nationwide Insurance
Enterprise
Robert J. Woodward, Jr.(1) Executive Vice Executive Vice
President -- Chief President -- Chief
Investment Officer, Investment Officer
Director Nationwide Insurance
Enterprise
</TABLE>
17
<PAGE> 19
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
NAME POSITION WITH NAS AND BUSINESS ADDRESS(1)
- ---------------------------- ----------------------- -----------------------
<S> <C> <C>
James F. Laird, Jr. Vice Vice
Three Nationwide Plaza, President -- General President -- General
Columbus, Ohio 43215 Manager Manager Nationwide
Advisory Services. Inc.
</TABLE>
- ---------------
(1) Unless otherwise noted, the business address for each Trustee is One
Nationwide Plaza, Columbus, Ohio 43215.
PROPOSAL 4 -- AUTHORIZATION FOR THE BOARD OF TRUSTEES TO APPOINT,
REPLACE OR TERMINATE SUBADVISERS RECOMMENDED BY
NATIONWIDE ADVISORY SERVICES, INC. OR AMEND THE
TERMS OF ANY SUBADVISER AGREEMENT FOR THE NATIONWIDE
SMALL COMPANY FUND WITHOUT SHAREHOLDER APPROVAL
Section 15(a) of the 1940 Act requires that all contracts pursuant to which
persons serve as investment advisers to investment companies be approved by
Shareholders. As interpreted, this requirement would apply to the appointment of
subadvisers to the Nationwide Small Company Fund for which NAS acts as
investment adviser. The United States Securities and Exchange Commission (the
"SEC"), however, has granted conditional exemptions from the Shareholder
approval requirements for situations where a fund utilizes a multi-manager
approach to portfolio investing. NAS and the Trust have applied for such an
exemption, and if it is granted and this proposal is approved by the
Shareholders of the Nationwide Small Company Fund, the Board of Trustees would,
without further shareholder approval, be able to appoint additional or
replacement subadvisers, terminate subadvisers, rehire existing subadvisers
whose agreements have been assigned (and thus automatically terminated) and
enter into or modify subadvisory agreements.
This Proposal 4 is intended to facilitate the efficient operation of the
multi-manager structure and afford the Trust increased management flexibility.
Under the multi-manager structure, NAS, with the approval of the Board of
Trustees, would have similar authority and flexibility with respect to
subadvisers that it has for its own internal portfolio managers, namely, that
NAS can continually monitor their performance and replace them if NAS, with the
approval of the Board of Trustees, believes such action is appropriate, for
example, if the performance is not satisfactory. NAS will continuously monitor
the performance of each subadviser and may from time to time recommend that the
Board of Trustees add, replace or terminate one or more subadvisers or appoint
additional subadvisers, depending on NAS' assessment of what combination of
subadvisers it believes will optimize the Nationwide Small Company Fund's
chances of achieving its investment objective.
While there is no way of knowing exactly how often NAS may recommend, and
the Board may approve, the selection of an additional subadviser, or the
replacement or termination of an existing subadviser, each of which would
typically require a shareholder meeting, it is likely that the multi-manager
structure would result in more frequent shareholder meetings than would
otherwise be the case. However, if the SEC
18
<PAGE> 20
grants the exemption, the Trustees will not be required to call a shareholder
meeting each time a new subadviser is approved (or to reapprove a subadviser
whose subadvisory agreement is automatically terminated because it has been
purchased by another entity). Shareholder meetings entail substantial costs, and
may entail substantial delays, which could reduce the desired benefits of the
multi-manager structure. These costs and delays must be weighed against the
benefits of shareholder scrutiny of proposed contracts with additional or
replacement subadvisers; however, even in the absence of Shareholder approval,
any proposal to add or replace subadvisers would receive careful review. First,
NAS would assess the Nationwide Small Company Fund's needs and, if it believed
additional or replacement subadvisers could benefit the Nationwide Small Company
Fund, it would systematically search the relevant universe of available
investment managers. Second, any recommendations made by NAS would have to be
approved by a majority of the Trustees, including a majority of the Trustees who
are not "interested persons" of NAS within the meaning of the 1940 Act. Third,
any selections of additional subadvisers or replacement subadvisers would have
to comply with conditions contained in the SEC exemptive order, if granted.
Finally the Board of Trustees would not be able to replace NAS as investment
adviser for the Nationwide Small Company Fund without obtaining Shareholder
approval of the new investment adviser.
Subject to SEC exemptive relief, approval of this proposal requires the
affirmative vote of a majority of the outstanding voting securities of
Nationwide Small Company Fund, which is defined above under "PROPOSAL
3 -- Approval of a New Investment Advisory Agreement." If this proposal is not
approved, the Board must seek Shareholder approval to institute any of the
actions described in the proposal.
THE TRUSTEES RECOMMEND THAT YOU VOTE "FOR" PROPOSAL 4.
PROPOSAL 5 -- AMENDMENT TO BYLAWS
PROPOSED CHANGES
The Trustees propose two changes to the Trust's Amended Bylaws. The first
change would delete the existing detailed language under Article X entitled
"Custodian" and replace it with simpler language that states that the Trustees
shall employ a bank or trust company as custodian in accordance with the 1940
Act and the rules thereunder. The second proposed change would amend Article XI
entitled Amendments to delete language which requires Shareholder approval to
amend Sections 1 and 4 of Article X and the provisions of Article XI.
The proposed language for Article X regarding the custodian will give the
Trust more flexibility with respect to custody arrangements as the global
securities markets continue to expand. However, the Trust will still be subject
to the safeguards and requirements set forth in the 1940 Act. The proposed
change in Article XI deleting the requirement for Shareholder vote of certain
sections of Article X and Article XI will make Article XI consistent with the
proposed language in Article X. In addition, it will give the Trust flexibility
to change its custodial relationship in accordance with its needs, as permitted
by the 1940 Act.
19
<PAGE> 21
A copy of Articles X and XI of the Amended Bylaws, marked to show the
language which is proposed to be deleted and inserted in its place, is attached
hereto as Exhibit B. Approval of the amendments to the Trust's Bylaws requires a
majority of the votes of all Portfolios of the Trust voting together as a group.
If the proposal is not approved, Articles X and XI will remain unchanged.
THE TRUSTEES RECOMMEND THAT YOU VOTE "FOR" PROPOSAL 5.
PROPOSAL 6 -- ADOPTION OF STANDARDIZED INVESTMENT POLICIES RELATING TO
DIVERSIFICATION, PURCHASING SECURITIES ON MARGIN, PURCHASING REAL
ESTATE AND COMMODITIES, SHORT SALES OF SECURITIES, PURCHASING
SECURITIES RESTRICTED AS TO DISPOSITION, PURCHASING SECURITIES OF
OTHER INVESTMENT COMPANIES, PURCHASING SECURITIES OF COMPANIES
WITH LESS THAN THREE YEARS OPERATIONS, INVESTMENT IN COMPANIES FOR
CONTROL OR MANAGEMENT, PURCHASING OPTIONS, AND PURCHASING
SECURITIES HELD BY OFFICERS OR TRUSTEES
The primary purpose of the proposals set forth in Items 6.a . through 6.j.,
as described more fully below, is to revise several of the fundamental
investment policies for the Funds to conform to limitations which are expected
to become standard for all Funds of the Trust and for each of the Nationwide
funds advised by NAS, including those of NIF, NIF-II and FHIT (collectively, the
"Nationwide Funds"). NAS believes that increased standardization with respect to
such fundamental policies among all Nationwide Funds will help promote
operational efficiencies and facilitate monitoring compliance with fundamental
and non-fundamental policies relating to the investment techniques described
below. Although modification or elimination of these fundamental policies is not
likely to have any material impact on the investment techniques employed by any
of the Funds at this time, it will contribute to the overall objective of
standardization.
THE TRUSTEES RECOMMEND THAT YOU VOTE "FOR" EACH OF PROPOSALS 6.A. THROUGH
6.J.
PROPOSALS 6.A., 6.B AND 6.C. IF APPROVED, WILL AMEND THE FUNDS' FUNDAMENTAL
POLICY REGARDING DIVERSIFICATION, PURCHASING SECURITIES ON MARGIN AND PURCHASING
REAL ESTATE AND COMMODITIES, RESPECTIVELY.
PROPOSAL 6.A. -- AMENDMENT OF FUNDAMENTAL POLICY REGARDING DIVERSIFICATION
Each Fund's fundamental policy on portfolio diversification currently
provides that:
[No Fund may]: 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 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
20
<PAGE> 22
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.
Set forth below is the fundamental policy with respect to diversification
as proposed to be adopted by Shareholders of each Fund:
[No Fund may]: Purchase securities of any one issuer, other than
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, if, immediately after such purchase, more than 5% of the
Fund's total assets would be invested in such issuer or the Fund would hold
more than 10% of the outstanding voting securities of the issuer, except
that 25% or less of the Fund's total assets may be invested without regard
to such limitations. There is no limit to the percentage of assets that may
be invested in U.S. Treasury bills, notes, or other obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities. The
Money Market Fund will be deemed to be in compliance with this restriction
so long as it is in compliance with Rule 2a-7 under the 1940 Act, as such
Rule may be amended from time to time.
Under current policies, a Fund may not invest more than 5% of its total
assets in any one issuer ("5% issuer test"). In addition, a Fund may not invest
in an issuer if the investment would result in the Fund owning more than 10% of
the outstanding voting securities of an issuer ("10% securities test"). U.S.
Government securities and securities issued by its agencies or instrumentalities
are not included. The significant difference between the current policy and
proposed policy is that under the proposed policy, the 5% issuer test and the
10% securities test would only apply to 75% of the Fund's assets, thereby giving
the Fund the investment flexibility to exceed the 5% issuer test and the 10%
securities test for the remaining 25% of the Fund's assets. Also, the Money
Market Fund will be deemed in compliance with this restriction so long as it
complies with Rule 2a-7 under the 1940 Act. Rule 2a-7 establishes
diversification requirements that money market funds must meet in order to hold
themselves out as money market funds.
The added flexibility to make an investment resulting in more than 5% of
the Fund's assets being invested in one issuer would enable the Fund to take
advantage of potential investment opportunities where, for example, the
particular issuer appears very attractive because of its investment potential,
its high creditworthiness, or any other compelling financial reasons. In
addition, where a relatively low supply of other comparable issuers exists, the
Fund could be interested in investing more in the limited number of issuers
available. In short, circumstances can arise where the best interests
21
<PAGE> 23
of Shareholders can be served by exceeding the 5% issuer test. Similarly, as the
Fund increases in size, its portfolio purchases get larger and could from time
to time comprise more than 10% of the voting securities of a small issuer.
Accordingly, the proposed change would give a Fund flexibility in its
investments as it grows.
The Funds have no present plan to change their investment approach if the
proposal is adopted. Adoption of the proposal would simply provide helpful
flexibility for possible use under the right circumstances in the future. In
addition, the investment limitations of the proposed policy follow the
definition of a "diversified" investment company for purposes of the 1940 Act.
The Funds intend to implement and monitor the operation of the new policy
subject to market, regulatory or other developments.
Approval of the amendment to a Fund's fundamental policy with respect to
diversification requires the affirmative vote of a majority of the outstanding
voting securities of that Fund, which is defined above under "PROPOSAL
3 -- Approval of a New Investment Advisory Agreement." If the proposal is not
approved by Shareholders of a Fund, the current fundamental policy will remain
unchanged for that Fund.
PROPOSAL 6.B. -- AMENDMENT OF FUNDAMENTAL POLICY REGARDING
PURCHASING SECURITIES ON MARGIN
Each Fund's fundamental policy on purchasing securities on margin currently
provides that:
[No Fund may]: Purchase securities on margin, but the Trust may obtain
such credits as may be necessary for the clearance of purchases and sales
of securities.
Set forth below is the fundamental policy with respect to purchasing
securities on margin as proposed to be adopted by Shareholders of each Fund:
[No Fund may]: Purchase securities on margin, but the Trust may obtain such
credits as may be necessary for the clearance of purchases and sales of
securities and except as may be necessary to make margin payments in
connection with derivative securities transactions.
Margin purchases involve the purchase of securities with money borrowed
from a broker. "Margin" is the cash or eligible securities that the borrower
places with its broker as collateral against this loan. Under current policies,
the Funds may not purchase securities on margin, but may obtain such credits as
may be necessary to clear purchases and sales of securities. Under the proposed
policy the Funds may purchase securities on margin when necessary to make margin
payments in connection with derivative securities transactions, such as futures
transactions.
22
<PAGE> 24
The Funds have no present plan to change their investment approach if the
proposal is adopted. Adoption of the proposal would simply provide helpful
flexibility for possible use under the right circumstances in the future.
Approval of the amendment to a Fund's fundamental policy with respect to
purchasing securities on margin requires the affirmative vote of a majority of
the outstanding voting securities of that Fund, which is defined above under
"PROPOSAL 3 -- Approval of a New Investment Advisory Agreement." If the proposal
is not approved by Shareholders of a Fund, the current fundamental policy will
remain unchanged for that Fund.
PROPOSAL 6.C. -- AMENDMENT OF FUNDAMENTAL POLICY REGARDING
INVESTMENTS IN REAL ESTATE AND COMMODITIES
Each Fund's fundamental policy on investments in real estate and
commodities currently provides that:
[No Fund may]:Purchase or retain real estate (including limited partnership
interests, but excluding securities of companies which deal in real estate
or interest therein), mineral leases, commodities or commodity contracts.
Set forth below are the fundamental policies with respect to investment in
real estate and commodities as proposed to be adopted by Shareholders of each
Fund:
[No Fund may]: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.
Purchase or sell commodities or commodities contracts, except to the extent
disclosed in the current Prospectus of such Fund.
Under current policies, the Funds may not purchase or retain real estate,
including limited partnerships, but may invest in securities of companies which
deal in real estate. In addition, the Funds may not purchase or retain mineral
leases, commodities or commodity contracts. Under the proposed policy the Funds
may not purchase or sell real estate unless acquired as a result of ownership of
securities or investments, but the Funds may purchase or sell securities issued
by entities or investment vehicles that own or deal in real estate or in
instruments secured by real estate. In addition, the proposed policy would
permit the Funds to purchase or sell commodities or commodities contracts (such
as futures and options on futures) to the extent disclosed in the current
Prospectus of such Fund.
The 1940 Act requires that a fund state a formal fundamental investment
policy regarding investment in commodities. In addition, the Commodities Futures
Trading Commission and the SEC have general restrictions on commodities
purchases. Any financial futures contract or related option is considered to be
a commodity. Other types of financial instruments such as swaps might also be
deemed to be commodities.
23
<PAGE> 25
The amendment is being proposed to enable the Funds to invest in financial
futures contracts and related options for hedging and other permissible purposes
and to clarify that certain practices in which the Funds engage (such as when
issued securities) or might in the future engage (such as foreign currency
futures contracts and related options) are not subject to this restriction.
The Funds do not currently intend to purchase or sell commodities or
commodities contracts. In the event that the Trustees decide in the future it is
desirable for the Funds to engage in this type of investment, the Funds'
Prospectus will be revised accordingly, including the addition of appropriate
risk disclosure.
Approval of the amendments to a Fund's fundamental policy requires the
affirmative vote of a majority of the outstanding voting securities of that
Fund, which is defined above under "PROPOSAL 3 -- Approval of a New Investment
Advisory Agreement." If the proposal is not approved by Shareholders of a Fund,
the current fundamental policy will remain unchanged for that Fund.
PROPOSALS 6.D., 6.E. AND 6.F., IF APPROVED, WILL RECLASSIFY THE FUNDS'
FUNDAMENTAL POLICY ON MAKING SHORT SALES OF SECURITIES, INVESTING IN RESTRICTED
SECURITIES AND INVESTING IN OTHER INVESTMENT COMPANIES, RESPECTIVELY, AS
NON-FUNDAMENTAL POLICIES.
Fundamental investment policies are policies which may not be amended or
deleted without prior Shareholder approval. By reclassifying the following
policies as non-fundamental policies, the Trustees of the Trust will be able to
change or delete them without Shareholder approval. It is anticipated that if
Shareholders approve Proposals 6.d., 6.e. and 6.f., then the Trustees will
modify certain of the policies as described below.
PROPOSAL 6.D. -- RECLASSIFICATION OF FUNDAMENTAL POLICY
PROHIBITING MAKING SHORT SALES OF SECURITIES
Each Fund's fundamental policy on making short sales of securities
currently provides that [no Fund may]: make short sales of securities.
It is proposed that this fundamental policy be reclassified as a
non-fundamental policy if this proposal is approved by Shareholders of the
Funds.
In a short sale, an investor sells a borrowed security and has a
corresponding obligation to the lender to return the identical security. The
proposed non-fundamental investment restriction could be changed without a vote
of Shareholders. The adoption of this proposal will permit a Fund to change its
policy in the future in order to make short sales of securities.
Approval of the reclassification of a Fund's fundamental policy with
respect to making short sales of securities requires the affirmative vote of a
majority of the outstanding voting securities of that Fund, which is defined
above under "PROPOSAL 3 -- Approval of a New Investment Advisory Agreement." If
the proposal is not
24
<PAGE> 26
approved by Shareholders of a Fund, the current fundamental policy will remain
unchanged for that Fund.
PROPOSAL 6.E. -- RECLASSIFICATION OF FUNDAMENTAL POLICY REGARDING
PURCHASING SECURITIES WHICH ARE RESTRICTED AS TO
DISPOSITION
Each Fund's fundamental policy on purchasing securities which are
restricted as to disposition currently provides that:
[No Fund may]: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).
Set forth below is the non-fundamental policy with respect to investment in
illiquid securities proposed to be adopted by the Board of Trustees if this
proposal is approved by Shareholders of the Funds:
[No Fund may]:Purchase or otherwise acquire any security if, as a result,
more than 15% [10% with respect to the Money Market Fund] of its net assets
would be invested in securities that are illiquid.
The current restriction prohibits the Funds from investing in securities
whose disposition is restricted under federal securities law or in securities
with other legal or contractual restrictions on resale. The proposed restriction
would reclassify this restriction as non-fundamental and would permit each Fund
to invest up to 15% (10% for the Money Market Fund) of its net assets in
securities that are illiquid.
The proposed policy, if approved, may be changed without Shareholder vote
and complies with the current limitations in the 1940 Act. The proposed policy
will also give the Funds greater flexibility in managing their portfolios.
Approval of the reclassification of a Fund's fundamental policy requires
the affirmative vote of a majority of the outstanding voting securities of that
Fund, which is defined above under "PROPOSAL 3 -- Approval of a New Investment
Advisory Agreement." If the proposal is not approved by Shareholders of a Fund,
the current fundamental policy will remain unchanged for that Fund.
6.F. -- RECLASSIFICATION OF FUNDAMENTAL POLICY REGARDING PURCHASING
SECURITIES OF OTHER INVESTMENT COMPANIES
Each Fund's fundamental policy on purchasing securities of other investment
companies currently provides that:
[No Fund may]: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
25
<PAGE> 27
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.
Set forth below is the non-fundamental policy with respect to investment in
securities of other investment companies proposed to be adopted by the Board of
Trustees if this proposal is approved by Shareholders of the Funds:
[No Fund may:] Purchase securities of other investment companies, except
(a) in connection with a merger, consolidation, acquisition or
reorganization, and (b) to the extent permitted by the 1940 Act, or any
rules or regulations thereunder, or pursuant to any exemptions therefrom.
The current restriction prohibits the Funds from purchasing securities
issued by any other open-end registered investment companies and severely limits
a Fund's ability to invest in other types of investment companies.
This change is being proposed to provide the Funds with additional
investment flexibility. The change would permit the Funds to purchase securities
of other investment companies in connection with a merger, consolidation,
acquisition or reorganization and to the extent permitted by the 1940 Act and
any exemptions therefrom.
Approval of the reclassification of a Fund's fundamental policy requires
the affirmative vote of a majority of the outstanding voting securities of that
Fund, which is defined above under "PROPOSAL 3 -- Approval of a New Investment
Advisory Agreement." If the proposal is not approved by Shareholders of a Fund,
the current fundamental policy will remain unchanged for that Fund.
PROPOSALS 6.G., 6.H., 6.I. AND 6.J., IF APPROVED, WILL DELETE THE FUNDS'
FUNDAMENTAL POLICIES REGARDING INVESTING IN COMPANIES WITH LESS THAN THREE YEARS
CONTINUOUS OPERATIONS, INVESTING IN COMPANIES FOR THE PURPOSE OF EXERCISING
CONTROL OR MANAGEMENT, PROHIBITING THE WRITING OF PUT OR CALL OPTIONS AND
PROHIBITING PURCHASING OR RETAINING SECURITIES WHICH MAY BE HELD BY THE TRUST'S
OFFICERS OR TRUSTEES OR BY THE FUND'S INVESTMENT ADVISER, RESPECTIVELY.
Most of these requirements were required by state blue sky laws that have
now been pre-empted by federal securities law.
PROPOSAL 6.G. -- DELETION OF FUNDAMENTAL POLICY REGARDING INVESTMENT
IN COMPANIES WITH A RECORD OF LESS THAN THREE YEARS
CONTINUOUS OPERATIONS
Each Fund's fundamental policy on operating history currently provides that
no Fund may: 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
26
<PAGE> 28
continuous operation. If approved by Shareholders, the foregoing policy would be
deleted altogether as a policy of the Funds.
The 1940 Act does not impose any limitation upon investment in securities
of issuers with a limited operating history. As noted above, this requirement
was required by state blue sky laws that have now been pre-empted by Federal
securities law. The change is being proposed to permit the Funds to invest in
such securities to the extent that the Trust believes that such investment would
be beneficial to the Funds and would not involve undue risk.
Approval of the deletion of this fundamental policy for a Fund requires the
affirmative vote of a majority of the outstanding voting securities of that
Fund, which is defined above under "PROPOSAL 3 -- Approval of a New Investment
Advisory Agreement." If the proposal is not approved by Shareholders of a Fund,
the current fundamental policy will remain unchanged for that Fund.
PROPOSAL 6.H. -- DELETION OF FUNDAMENTAL POLICY REGARDING INVESTMENT
IN COMPANIES FOR PURPOSE OF EXERCISING CONTROL OR
MANAGEMENT
Each Fund's fundamental policy on investing in companies for the purpose of
exercising control currently provides that no Fund may: invest in companies for
the purpose of exercising control or management. If approved by Shareholders,
the foregoing policy would be deleted altogether as a policy of the Funds.
The 1940 Act does not impose any restriction on investment for this
purpose. The change is being proposed to permit the Funds to invest in such
securities to the extent that the Trust believes that such investment would be
beneficial to the Funds and would not involve undue risk.
Approval of the deletion of a Fund's fundamental policy with respect to
investing in companies for the purpose of exercising control or management
requires the affirmative vote of a majority of the outstanding voting securities
of that Fund, which is defined above under "PROPOSAL 3 -- Approval of a New
Investment Advisory Agreement." If the proposal is not approved by Shareholders
of a Fund, the current fundamental policy will remain unchanged for that Fund.
PROPOSAL 6.I. -- DELETION OF FUNDAMENTAL POLICY
REGARDING PURCHASING OPTIONS
Each Fund's fundamental policy on purchasing options currently provides
that no Fund may: "[w]rite or purchase any put or call options." If approved by
Shareholders, the foregoing policy would be deleted altogether as a policy of
that Fund.
If approved the deletion of the fundamental policy will allow the Funds to
write or purchase any put or call options in accordance with the 1940 Act and
will give the Funds more flexibility in managing their respective investment
portfolios.
27
<PAGE> 29
Approval of the deletion of a Fund's fundamental policy with respect to
options requires the affirmative vote of a majority of the outstanding voting
securities of that Fund, which is defined above under "PROPOSAL 3 -- Approval of
a New Investment Advisory Agreement." If the proposal is not approved by
Shareholders of a Fund, the current fundamental policy will remain unchanged for
that Fund.
PROPOSAL 6.J. -- DELETION OF FUNDAMENTAL POLICY REGARDING
PURCHASING OR RETAINING SECURITIES WHICH MAY BE
HELD BY THE TRUST'S OFFICERS OR TRUSTEES OR BY NAS
Each Fund's fundamental policy on purchasing or retaining securities which
may be held by the Trust's officers or trustees or by NAS currently provides
that:
[No Fund may]: Purchase or retain securities of any issuer, any of whose
officers, directors or security holders 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.
If approved by Shareholders, the foregoing policy would be deleted
altogether as a policy of that Fund.
The 1940 Act does not impose any restrictions on the purchase or retention
of these securities. If approved, the deletion of this restriction will allow
the Funds additional flexibility in managing their portfolios and will simplify
compliance monitoring since this restriction is difficult to monitor.
Approval of the deletion of this fundamental policy for a Fund requires the
affirmative vote of a majority of the outstanding voting securities of that
Fund, which is defined above under "PROPOSAL 3 -- Approval of a New Investment
Advisory Agreement." If the proposal is not approved by Shareholders of a Fund,
the current fundamental policy will remain unchanged for that Fund.
PRINCIPAL HOLDERS OF VOTING SECURITIES
As of July 30, 1997, Nationwide Insurance Enterprise Savings Plan had sole
voting and shared investment power over 556,620 shares (3.3%) of the Nationwide
Small Company Fund. As of that date, separate accounts of Nationwide Life
Insurance Company had shared voting and investment power over 18,394,321 shares,
(96.9%) of Capital Appreciation Fund, 94,057,229 shares (92.6%) of Total Return
Fund, 35,984,367 shares (92.5%) of Government Bond Fund, 908,257,749 shares
(98.6%) of Money Market Fund and 15,620,184 shares (93.7%) of Nationwide Small
Company Fund. Also as of that date, Nationwide Life and Annuity Insurance
Company had shared voting and investment power over 7,490,410 shares (7.4%) of
Total Return Fund and 2,930,081 shares (7.5%) of Government Bond Fund and
Nationwide Life Insurance Company had sole voting and investment power over
505,707 shares (3.0%) of Nationwide Small Company Fund. The Nationwide Insurance
Companies address is One Nationwide Plaza, Columbus, Ohio.
28
<PAGE> 30
SHAREHOLDER PROPOSALS
Any Shareholder proposal intended to be presented at any future Meeting of
Shareholders must be received by the Trust at its principal office a reasonable
time before the Trust's solicitation of proxies for such meeting in order for
such proposal to be considered for inclusion in the Trust's Proxy Statement and
form or forms of Proxy relating to such meeting.
ADDITIONAL INFORMATION
With respect to the actions to be taken by the Shareholders of the Trust on
the matters described in this Proxy Statement, (i) the presence in person or by
proxy of Shareholders entitled to cast a majority of the shares of the Trust
entitled to be cast at the Meeting on a particular matter shall constitute a
quorum for purposes of voting upon such matters at the Meeting, provided that no
action required by law or the Trust's Declaration of Trust to be taken by the
holders of a designated proportion of Shares may be authorized or taken by a
lesser proportion; and (ii) abstentions and broker non-votes, as described
below, shall be treated as votes present for purposes of determining whether a
quorum exists, but, for purposes of determining whether Proposals 1, 2 and 5
have been approved, abstentions and broker non-votes will neither be counted as
for or against the particular issue. For purposes of determining whether the
remaining Proposals have been approved, abstentions and broker non-votes will be
counted as "against" that particular proposal. As used above, broker non-votes
are Shares for which a broker holding such Shares for a beneficial owner has not
received instructions from the beneficial owner and may not exercise
discretionary voting power with respect thereto, although such broker may have
been able to vote such Shares on other matters at the Meeting for which it has
discretionary authority or instructions from the beneficial owner. The Trust
will bear all costs in connection with the solicitation of proxies from
Shareholders of the current Portfolios. It is not expected that there will be
any solicitation other than by mail.
By Order of the Trustees
Rae M. Pollina, Secretary
August 19, 1997
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<PAGE> 31
[INTENTIONALLY LEFT BLANK]
<PAGE> 32
EXHIBIT A
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT is made and entered into on this day of November, 1997
between NATIONWIDE SEPARATE ACCOUNT TRUST (the "Trust"), a Massachusetts
business trust, and NATIONWIDE ADVISORY SERVICES, INC. (the "Adviser"), an Ohio
corporation registered under the Investment Advisers Act of 1940 (the "Advisers
Act").
WITNESSETH:
WHEREAS, the Trust is registered with the Securities and Exchange
Commission (the "SEC") as an open-end management investment company under the
Investment Company Act of 1940 (the "1940 Act");
WHEREAS, the Trust desires to retain the Adviser to furnish certain
investment advisory services, as described herein, with respect to certain of
the series of the Trust, all as now are or may be hereafter listed on Exhibit A
to this Agreement (each, a "Fund"); and
WHEREAS, the Adviser represents that it is willing and possesses legal
authority to render such services subject to the terms and conditions set forth
in this Agreement.
NOW, THEREFORE, the Trust and the Adviser do mutually agree and promise as
follows:
1. APPOINTMENT AS ADVISER. The Trust hereby appoints the Adviser to act as
investment adviser to each Fund subject to the terms and conditions set forth in
this Agreement. The Adviser hereby accepts such appointment and agrees to
furnish the services hereinafter described for the compensation provided for in
this Agreement.
2. DUTIES OF ADVISER.
(a) Investment Management Services. (1) Subject to the supervision of
the Trust's Board of Trustees (and except as otherwise permitted under the
terms of any exemptive relief obtained by the Adviser from the Securities
and Exchange Commission, or by rule or regulation), the Adviser will
provide, or arrange for the provision of, a continuous investment program
and overall investment strategies for each Fund, including investment
research and management with respect to all securities and investments and
cash equivalents in each Fund. The Adviser will determine, or arrange for
others to determine, from time to time what securities and other
investments will be purchased, retained or sold by each Fund and will
implement, or arrange for others to implement, such determinations through
the placement, in the name of a Fund, of orders for the execution of
portfolio transactions with or through such brokers or dealers as may be so
selected. The Adviser will provide, or arrange for the provision of, the
services under this Agreement in accordance with the stated investment
policies and restrictions of each Fund as set forth in that Fund's current
prospectus and statement of
<PAGE> 33
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 and
any exemptions thereto, the Adviser intends to, and is authorized to,
appoint one or more qualified subadvisers (each a "Subadviser") to provide
each Fund with certain services required by this Agreement. Each Subadviser
shall have such investment discretion and shall make all determinations
with respect to the investment of a Fund's assets as shall be assigned to
that Subadviser by the Adviser and the purchase and sale of portfolio
securities with respect to those assets and shall take such steps as may be
necessary to implement its decisions. The Adviser shall not be responsible
or liable for the investment merits of any decision by a Subadviser to
purchase, hold, or sell a security for a Fund.
(3) Subject to the supervision and direction of the Trustees, the
Adviser shall (i) have overall supervisory responsibility for the general
management and investment of a Fund's assets; (ii) determine the allocation
of assets among the Subadvisers, if any; and (iii) have full investment
discretion to make all determinations with respect to the investment of
Fund assets not otherwise assigned to a Subadviser.
(4) The Adviser shall research and evaluate each Subadviser, if any,
including (i) performing initial due diligence on prospective Subadvisers
and monitoring each Subadviser's ongoing performance; (ii) communicating
performance expectations and evaluations to the Subadvisers; and (iii)
recommending to the Trust's Board of Trustees whether a Subadviser's
contract should be renewed, modified or terminated. The Adviser shall also
recommend changes or additions to the Subadvisers and shall compensate the
Subadvisers.
(5) The Adviser shall provide to the Trust's Board of Trustees such
periodic reports concerning a Fund's business and investments as the Board
of Trustees shall reasonably request.
(b) Compliance With Applicable Laws and Governing Documents. In the
performance of its duties and obligations under this Agreement, the Adviser
shall act in conformity with the Trust's Declaration of Trust and By-Laws
and the Prospectus and with the instructions and directions received from
the Trustees of the Trust and will conform to and comply with the
requirements of the 1940 Act, the Internal Revenue Code of 1986, as amended
(the "Code") (including the requirements for qualification as a regulated
investment company) and all other applicable federal and state laws and
regulations.
The Adviser acknowledges and agrees that subject to the supervision
and directions of the Trust's Board of Trustees, it shall be solely
responsible for compliance with all disclosure requirements under all
applicable federal and state laws and regulations relating to the Trust or
a Fund, including, without limitation, the 1940 Act, and the rules and
regulations thereunder, except that each
A-2
<PAGE> 34
Subadviser shall have liability in connection with information furnished by
the Subadviser to a Fund or to the Adviser.
(c) Consistent Standards. It is recognized that the Adviser will
perform various investment management and administrative services for
entities other than the Trust and the Funds; in connection with providing
such services, the Adviser agrees to exercise the same skill and care in
performing its services under this Agreement as the Adviser exercises in
performing similar services with respect to the other fiduciary accounts
for which the Adviser has investment responsibilities.
(d) Brokerage. The Adviser is authorized, subject to the supervision
of the Trust's Board of Trustees, to establish and maintain accounts on
behalf of each Fund with, and place orders for the purchase and sale of
assets not allocated to a Subadviser, with or through, such persons,
brokers or dealers ("brokers") as Adviser may select and negotiate
commissions to be paid on such transactions. In the selection of such
brokers and the placing of such orders, the Adviser shall seek to obtain
for a Fund the most favorable price and execution available, except to the
extent it may be permitted to pay higher brokerage commissions for
brokerage and research services, as provided below. In using its reasonable
efforts to obtain for a Fund the most favorable price and execution
available, the Adviser, bearing in mind the Fund's best interests at all
times, shall consider all factors it deems relevant, including price, the
size of the transaction, the nature of the market for the security, the
amount of the commission, if any, the timing of the transaction, market
prices and trends, the reputation, experience and financial stability of
the broker involved, and the quality of service rendered by the broker in
other transactions. Subject to such policies as the Trustees may determine,
the Adviser shall not be deemed to have acted unlawfully or to have
breached any duty created by this Agreement or otherwise solely by reason
of its having caused a Fund to pay a broker that provides brokerage and
research services (within the meaning of Section 28(e) of the Securities
Exchange Act of 1934) to the Adviser an amount of commission for effecting
a Fund investment transaction that is in excess of the amount of commission
that another broker would have charged for effecting that transaction if,
but only if, the Adviser determines in good faith that such commission was
reasonable in relation to the value of the brokerage and research services
provided by such broker or dealer, viewed in terms of either that
particular transaction or the overall responsibilities of the Adviser with
respect to the accounts as to which it exercises investment discretion.
It is recognized that the services provided by such brokers may be
useful to the Adviser in connection with the Adviser's services to other
clients. On occasions when the Adviser deems the purchase or sale of a
security to be in the best interests of a Fund as well as other clients of
the Adviser, the Adviser, to the extent permitted by applicable laws and
regulations, may, but shall be under no obligation to, aggregate the
securities to be sold or purchased in order to obtain the most favorable
price or lower brokerage commissions and efficient execution. In such
event, allocation of securities so sold or purchased, as well as the
expenses incurred in the transaction, will be made by the Adviser in the
manner the Adviser
A-3
<PAGE> 35
considers to be the most equitable and consistent with its fiduciary
obligations to each Fund and to such other clients.
(e) Securities Transactions. The Adviser will not purchase securities
or other instruments from or sell securities or other instruments to a
Fund; PROVIDED, HOWEVER, the Adviser may purchase securities or other
instruments from or sell securities or other instruments to a Fund if such
transaction is permissible under applicable laws and regulations,
including, without limitation, the 1940 Act and the Advisers Act and the
rules and regulations promulgated thereunder or any exemption therefrom.
The Adviser agrees to observe and comply with Rule 17j-1 under the
1940 Act and the Trust's Code of Ethics, as the same may be amended from
time to time.
(f) Books and Records. In accordance with the 1940 Act and the rules
and regulations promulgated thereunder, the Adviser shall maintain separate
books and detailed records of all matters pertaining to the Funds and the
Trust (the "Fund's Books and Records"), including, without limitation, a
daily ledger of such assets and liabilities relating thereto and brokerage
and other records of all securities transactions. The Adviser acknowledges
that the Fund's Books and Records are property of the Trust. In addition,
the Fund's Books and Records shall be available to the Trust at any time
upon request and shall be available for telecopying without delay to the
Trust during any day that the Funds are open for business.
3. EXPENSES. During the term of this Agreement, the Adviser will pay all
expenses incurred by it in connection with its activities under this Agreement
other than the cost of securities, commodities and other investments (including
brokerage commissions and other transaction charges, if any) purchased for a
Fund. The Adviser shall, at its sole expense, employ or associate itself with
such persons as it believes to be particularly fitted to assist it in the
execution of its duties under this Agreement. The Adviser shall be responsible
for the expenses and costs for the officers of the Trust and the Trustees of
Trust who are "interested persons" (as defined in the 1940 Act) of the Adviser.
It is understood that the Trust will pay all of its own expenses including,
without limitation, (1) all charges and expenses of any custodian or depository
appointed by the Trust for the safekeeping of its cash, securities and other
assets, (2) all charges and expenses paid to an administrator appointed by the
Trust to provide administrative or compliance services, (3) the charges and
expenses of any transfer agents and registrars appointed by the Trust, (4) the
charges and expenses of independent certified public accountants and of general
ledger accounting and internal reporting services for the Trust, (5) the charges
and expenses of dividend and capital gain distributions, (6) the compensation
and expenses of Trustees of the Trust who are not "interested persons" of the
Adviser, (7) brokerage commissions and issue and transfer taxes chargeable to
the Trust in connection with securities transactions to which the Trust is a
party, (8) all taxes and fees payable by the Trust to Federal, State or other
governmental
A-4
<PAGE> 36
agencies, (9) the cost of stock certificates representing shares of the Trust,
(10) all expenses of shareholders' and Trustees' meetings and of preparing,
printing and distributing prospectuses and reports to shareholders, (11) charges
and expenses of legal counsel for the Trust in connection with legal matters
relating to the Trust, including without limitation, legal services rendered in
connection with the Trust's existence, financial structure and relations with
its shareholders, (12) insurance and bonding premiums, (13) association
membership dues, (14) bookkeeping and the costs of calculating the net asset
value of shares of the Trust's Funds, and (15) expenses relating to the
issuance, registration and qualification of the Trust's shares.
4. COMPENSATION. For the services provided and the expenses assumed with
respect to a Fund pursuant to this Agreement, the Adviser will be entitled to
the fee listed for each Fund on Exhibit A. Such fees will be computed daily and
payable monthly at an annual rate based on a Fund's average daily net assets.
The method of determining net assets of a Fund for purposes hereof shall be
the same as the method of determining net assets for purposes of establishing
the offering and redemption price of the Shares as described in each Fund's
Prospectus. If this Agreement shall be effective for only a portion of a month,
the aforesaid fee shall be prorated for the portion of such month during which
this Agreement is in effect.
Notwithstanding any other provision of this Agreement, the Adviser may from
time to time agree not to impose all or a portion of its fee otherwise payable
hereunder (in advance of the time such fee or portion thereof would otherwise
accrue). Any such fee reduction may be discontinued or modified by the Adviser
at any time.
5. REPRESENTATIONS AND WARRANTIES OF ADVISER. The Adviser represents and
warrants to the Trust as follows:
(a) The Adviser is registered as an investment adviser under the
Advisers Act;
(b) The Adviser is a corporation duly organized, validly existing and
in good standing under the laws of the State of Ohio with the power to own
and possess its assets and carry on its business as it is now being
conducted;
(c) The execution, delivery and performance by the Adviser of this
Agreement are within the Adviser's powers and have been duly authorized by
all necessary action on the part of its shareholders and/or directors, and
no action by or in respect of, or filing with, any governmental body,
agency or official is required on the part of the Adviser for the
execution, delivery and performance by the Adviser of this Agreement, and
the execution, delivery and performance by the Adviser of this Agreement do
not contravene or constitute a default under (i) any provision of
applicable law, rule or regulation, (ii) the Adviser's governing
instruments, or (iii) any agreement, judgment, injunction, order, decree or
other instrument binding upon the Adviser;
(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
A-5
<PAGE> 37
any material fact necessary in order to make the statements made, in light
of the circumstances under which they were made, not misleading.
6. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; DUTY TO UPDATE INFORMATION.
All representations and warranties made by the Adviser pursuant to Section 5
shall survive for the duration of this Agreement and the parties hereto shall
promptly notify each other in writing upon becoming aware that any of the
foregoing representations and warranties are no longer true.
7. LIABILITY AND INDEMNIFICATION.
(a) Liability. In the absence of wilful misfeasance, bad faith or
gross negligence on the part of the Adviser or a reckless disregard of its
duties hereunder, the Adviser shall not be subject to any liability to a
Fund or the Trust, for any act or omission in the case of, or connected
with, rendering services hereunder or for any losses that may be sustained
in the purchase, holding or sale of Fund assets; provided, however, that
nothing herein shall relieve the Adviser from any of its obligations under
applicable law, including, without limitation, the federal and state
securities laws.
(b) Indemnification. The Adviser shall indemnify the Trust and its
officers and trustees, for any liability and expenses, including attorneys
fees, which may be sustained as a result of the Adviser's wilful
misfeasance, bad faith, gross negligence, reckless disregard of its duties
hereunder or violation of applicable law, including, without limitation,
the federal and state securities laws.
8. DURATION AND TERMINATION.
(a) Duration. Unless sooner terminated, this Agreement shall continue
until November 1, 1999, and thereafter shall continue automatically for
successive annual periods, provided such continuance is specifically
approved at least annually by the Trust's Board of Trustees or the vote of
the lesser of (a) 67% of the shares of a Fund represented at a meeting if
holders of more than 50% of the outstanding shares of the Fund are present
in person or by proxy or (b) more than 50% of the outstanding shares of the
Fund; PROVIDED that in either event its continuance also is approved by a
majority of the Trust's Trustees who are not "interested persons" (as
defined in the 1940 Act) of any party to this Agreement, by vote cast in
person at a meeting called for the purpose of voting on such approval.
(b) Termination. Notwithstanding whatever may be provided herein to
the contrary, this Agreement may be terminated at any time, without payment
of any penalty by vote of a majority of the Trust's Board of Trustees, or
by vote of a majority of the outstanding voting securities of a Fund, or by
the Adviser, in each case, not less than sixty (60) days' written notice to
the other party.
This Agreement shall not be assigned (as such term is defined in the 1940
Act) and shall terminate automatically in the event of its assignment.
9. SERVICES NOT EXCLUSIVE. The services furnished by the Adviser hereunder
are not to be deemed exclusive, and the Adviser shall be free to furnish similar
services to
A-6
<PAGE> 38
others so long as its services under this Agreement are not impaired thereby. It
is understood that the action taken by the Adviser under this Agreement may
differ from the advice given or the timing or nature of action taken with
respect to other clients of the Adviser, and that a transaction in a specific
security may not be accomplished for all clients of the Adviser at the same time
or at the same price.
10. AMENDMENT. This Agreement may be amended by mutual consent of the
parties, provided that the terms of each such amendment shall be approved by the
Trust's Board of Trustees or by a vote of a majority of the outstanding voting
securities of a Fund (as required by the 1940 Act).
11. CONFIDENTIALITY. Subject to the duties of the Adviser and the Trust to
comply with applicable law, including any demand of any regulatory or taxing
authority having jurisdiction, the parties hereto shall treat as confidential
all information pertaining to a Fund and the Trust and the actions of the
Adviser and the Funds in respect thereof.
12. NOTICE. Any notice that is required to be given by the parties to each
other under the terms of this Agreement shall be in writing, delivered, or
mailed postpaid to the other party, or transmitted by facsimile with
acknowledgment of receipt, to the parties at the following addresses or
facsimile numbers, which may from time to time be changed by the parties by
notice to the other party:
(a) If to the Adviser:
Nationwide Advisory Services, Inc.
One Nationwide Plaza, 25-T
Columbus, OH 43215
Attention: James F. Laird, Jr.
Facsimile: (614) 249-7424
(b) If to the Trust:
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 State of Ohio without reference to
choice of law principles thereof and in accordance with the 1940 Act. In the
case of any conflict, the 1940 Act shall control.
14. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, all of which shall
together constitute one and the same instrument.
15. CERTAIN DEFINITIONS. For the purposes of this Agreement, "interested
person," "affiliated person," "assignment" shall have their respective meanings
as set forth in the 1940 Act, subject, however, to such exemptions as may be
granted by the SEC.
A-7
<PAGE> 39
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 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 ADVISORY SERVICES, INC.
By:
Name:
Title:
TRUST
NATIONWIDE SEPARATE ACCOUNT TRUST
By:
Name:
Title:
A-8
<PAGE> 40
EXHIBIT A
NATIONWIDE SEPARATE ACCOUNT TRUST
INVESTMENT ADVISORY AGREEMENT
<TABLE>
<CAPTION>
FUNDS OF THE TRUST ADVISORY FEES
- ---------------------------- ----------------------------------------------------
<S> <C>
Total Return Fund 0.60% on the first $1 billion in assets
0.575% on assets of $1 billion and more but less
than $2 billion
0.55% on assets of $2 billion and more but less than
$5 billion
0.50% for assets of $5 billion and more
Capital Appreciation Fund 0.60% on the first $1 billion in assets
0.575% on assets of $1 billion and more but less
than $2 billion
0.55% on assets of $2 billion and more but less than
$5 billion
0.50% for assets of $5 billion and more
Government Bond Fund 0.50% on the first $1 billion in assets
0.475% on assets of $1 billion and more but less
than $2 billion
0.45% on assets of $2 billion and more but less than
$5 billion
0.40% for assets of $5 billion and more
Money Market Fund 0.40% on the first $1 billion in assets
0.38% on assets of $1 billion and more but less than
$2 billion
0.36% on assets of $2 billion and more but less than
$5 billion
0.34% for assets of $5 billion and more
</TABLE>
A-9
<PAGE> 41
[INTENTIONALLY LEFT BLANK]
<PAGE> 42
EXHIBIT B
ARTICLE X
CUSTODIAN
Section 1. APPOINTMENT AND DUTIES. The Trustees shall at all times employ a
bank or trust company in accordance with the 1940 Act as amended and the rules
promulgated thereunder as amended. [having a capital, surplus and undivided
profits of at least five million dollars ($5,000,000) as custodian with
authority as its agent, but subject to such restrictions, limitations and other
requirements, if any, as may be contained in the Amended Declaration, these
Amended Bylaws and the 1940 Act:
(1) to hold the securities owned by the Trust and deliver the same upon
written order,
(2) to receive and receipt for any monies due to the Trust and deposit the
same in its own banking department or elsewhere as the Trustees may
direct;
(3) to disburse such funds upon orders or vouchers;
(4) if authorized by the Trustees, to keep the books and accounts of the
Trust and furnish clerical and accounting services, and
(5) if authorized to do so by the Trustees, to compute the net income of
the Trust,
all upon such basis of compensation as may be agreed upon between the Trustees
and the custodian. If so directed by a Majority Shareholder Vote, the custodian
shall deliver and pay over all property of the Trust held by it as specified in
such vote.
The Trustees may also authorize the custodian to employ one or more sub-
custodians from time to time to perform such of the acts and services of the
custodian and upon such terms and conditions, as may be agreed upon between the
custodian and such sub-custodian and approved by the Trustees, provided that in
every case such sub-custodian shall be a bank or trust company organized under
the laws of the United States or one of the states thereof and having capital,
surplus and undivided profits of at least five million dollars ($5,000,000).
Section 2. CENTRAL CERTIFICATE SYSTEM. Subject to such rules, regulations
and orders as the Commission may adopt, the Trustees may direct the custodian to
deposit all or any part of the securities owned by the Trust in a system for the
central handling of securities established by a national securities exchange or
a national securities association registered with the Commission under the
Securities Exchange Act of 1934, or such other person as may be permitted by the
Commission, or otherwise in accordance with the 1940 Act, pursuant to which
system all securities of any particular class or series of any issuer deposited
within the system are treated as fungible and may be transferred or pledged by
bookkeeping entry without physical delivery of such securities, provided that
all such deposits shall be subject to withdrawal only upon the order of the
Trust.]
Language indicated as being shown by strike out in the typeset document is
enclosed in brackets "[" and "]" in the electronic format.
<PAGE> 43
[Section 3. ACCEPTANCE OF RECEIPTS IN LIEU OF CERTIFICATES. Subject to such
rules, regulations and orders as the Commission may adopt, the Trustees may
direct the custodian to accept written receipts or other written evidences
indicating purchases of securities held in book-entry form in the Federal
Reserve System in accordance with regulations promulgated by the Board of
Governors of the Federal Reserve System and the local Federal Reserve Banks in
lieu of receipt of certificates representing such securities.
Section 4. PROVISIONS OF CUSTODIAN CONTRACT. The following provisions shall
apply to the employment of a custodian pursuant to this Article X and to any
contract entered into with the custodian so employed:
(a) The Trustees shall cause to be delivered to the custodian all
securities owned by the Trust or to which it may become entitled, and
shall order the same to be delivered by the custodian only upon
completion of a sale, exchange, transfer, pledge, or other disposition
thereof, and upon receipt by the custodian of the consideration
therefor or a certificate of deposit or a receipt of an issuer of its
Transfer Agent, all as the Trustees may generally or from time to time
require or approve, or to a successor custodian, and the Trustees shall
cause all funds owned by the Trust or to which it may become entitled
to be paid to the custodian, and shall order the same disbursed only
for investment against delivery of the securities acquired, or in
payment of expenses, including management compensation, and liabilities
of the Trust, including distributions to Shareholders, or to a
successor custodian, provided, however, that nothing herein shall
prevent delivery of securities for examinations to the broker selling
the same in accord with the "street delivery" custom whereby such
securities are delivered to such broker in exchange for a delivery
receipt exchanged on the same day for an uncertified check of such
broker to be presented on the same day for certification.
(b) In case of the resignation, removal or inability to serve of any such
custodian, the Trust shall promptly appoint another bank or trust
company meeting the requirements of this Article X as successor
custodian. The agreement with the custodian shall provide that the
retiring custodian shall, upon receipt of notice of such appointment,
deliver the funds and property of the Trust in its possession to and
only to such successor, and that pending appointment of a successor
custodian, or a vote of the Shareholders to function without a
custodian, the custodian shall not deliver funds and property of the
Trust to the Trust, but may deliver them to a bank or trust company
doing business in Boston, Massachusetts, of its own selection, having
an aggregate capital, surplus and undivided profits (as shown in its
last published report) of at least $5,000,000 as the property of the
Trust to be held under terms similar to those on which they were held
by the retiring custodian.]
B-2
Language indicated as being shown by strike out in the typeset document is
enclosed in brackets "[" and "]" in the electronic format.
<PAGE> 44
ARTICLE XI
AMENDMENTS
These Amended Bylaws, or any of them, may be altered, amended or repealed,
or new Bylaws may be adopted (a) by Majority Shareholder Vote, or (b) by the
Trustees, provided, however that no Bylaw may be amended, adopted or repealed by
the Trustees if such amendment, adoption or repeal requires, pursuant to law,
the Amended Declaration or these Amended Bylaws, a vote of the Shareholders [or
if such amendment, adoption or repeal changes or affects the provisions of
Sections 1 and 4 of Article X, or the provisions of this Article XI.]
B-3
Language indicated as being shown by strike out in the typeset document is
enclosed in brackets "[" and "]" in the electronic format.
<PAGE> 45
NATIONWIDE SEPARATE ACCOUNT TRUST PROXY SOLICITED ON BEHALF OF
VOTING INSTRUCTION FORM THE BOARD OF TRUSTEES AT THE
SPECIAL MEETING OF SHAREHOLDERS
SEPTEMBER 26, 1997
THE UNDERSIGNED CONTRACT OWNER OF A VARIABLE ANNUITY OR VARIABLE LIFE INSURANCE
CONTRACT HEREBY INSTRUCTS NATIONWIDE LIFE INSURANCE COMPANY OR NATIONWIDE LIFE
AND ANNUITY INSURANCE COMPANY TO VOTE THE NATIONWIDE SEPARATE ACCOUNT TRUST
SHARES ATTRIBUTABLE TO HIS OR HER VARIABLE ANNUITY OR VARIABLE LIFE INSURANCE
CONTRACT AS OF JULY 30, 1997, AT THE SPECIAL MEETING OF THE NATIONWIDE SEPARATE
ACCOUNT TRUST TO BE HELD ON SEPTEMBER 26, 1997, THREE NATIONWIDE PLAZA,
COLUMBUS, OHIO 43215 AT 11:15 A.M. AND ANY ADJOURNMENTS THEREOF, AS LISTED ON
THE REVERSE SIDE OF THIS CARD.
(THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE
INSTRUCTIONS INDICATED. IF INSTRUCTIONS ARE NOT
INDICATED ON THE REVERSE SIDE, THIS PROXY WILL
BE VOTED "FOR" ALL PROPOSALS.)
NOTE: Please sign exactly as your
name appears. Please mark, sign,
date, and mail your voting
instruction form in the enclosed
postage-paid envelope.
Where contracts are registered
with joint owners ALL joint owners
should sign. Persons signing as
executors, administrators, trustees,
etc., should so indicate.
--------------------------------
SIGNATURE OF CONTRACT OWNER(S)
--------------------------------
Signature (if held jointly)
DATE , 1997
----------------------
<PAGE> 46
The Trustees recommend that Shareholders vote FOR the following proposals.
Please make your choices below in blue or black ink. Example:
Sign the form on the reverse side and return as soon as possible in the
enclosed envelope.
1. To elect seven Trustees to hold office until the next meeting of
shareholders or until their successors are duly elected and qualified.
John C. Bryant Sue A. Doody Robert M. Duncan
Joseph J. Gasper Thomas J. Kerr, IV Douglas F. Kridler
Robert J. Woodward, Jr.
IF YOU WISH TO WITHHOLD AUTHORITY FOR ANY PARTICULAR NOMINEE, MARK THE
"FOR ALL EXCEPT" BOX AND STRIKE A LINE THROUGH THE NOMINEES NAME.
FOR WITHHOLD FOR ALL EXCEPT
/ / / / / /
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
2. Ratification of the selection of KPMG / / / / / /
Peat Marwick LLP as auditors for the Trust.
3. Approval of a new Investment Advisory / / / / / /
Agreement between the Trust and
Nationwide Advisory Services, Inc.
(all Funds voting separately
except Small Company Fund).
4. Authorize the Board of Trustees to / / / / / /
appoint, replace or terminate sub-
advisers without subsequent
shareholder approval
(Small Company Fund only).
5. Approval of the Trust's Bylaws as / / / / / /
proposed to be amended.
6. Approval of the proposed changes / / / / / /
to the Fund's investment restrictions
(All Funds voting separately except
Small Company Fund.)
(To vote against one or more of the
proposed changes but approve the
others, indicate the letter(s) as set
forth in the proxy statement of the
investment restriction you do not
want changed on the line below.)
</TABLE>
--------------------------------------
7. Upon such other business as may come
before the meeting.
