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STATEMENT OF ADDITIONAL INFORMATION
NOVEMBER 1, 1997
NATIONWIDE SEPARATE ACCOUNT TRUST
--TOTAL RETURN FUND
--CAPITAL APPRECIATION FUND
--GOVERNMENT BOND FUND
--MONEY MARKET FUND
--SMALL COMPANY FUND
--INCOME FUND
This Statement of Additional Information is not a prospectus. It
contains information in addition to and more detailed than that set forth in the
Prospectuses for the above-captioned Funds and should be read in conjunction
with the Prospectuses, dated May 1, 1997, as supplemented as of November 1,
1997 for all of such Funds. The Prospectuses may be obtained from Nationwide
Life Insurance Company, One Nationwide Plaza, Columbus, Ohio 43216, or by
calling (614) 249-5134.
TABLE OF CONTENTS PAGE
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General Information and History 1
Investment Objectives and Policies 1
Investment Restrictions 25
Major Shareholders 29
Trustees and Officers of the Trust 29
Calculating Yield - The Money Market Fund 30
Calculating Yield and Total Return-Non-Money Market Funds 31
Investment Adviser and Other Services 31
Brokerage Allocations 36
Purchases, Redemptions and Pricing of Shares 38
Additional Information 40
Tax Status 41
Tax Consequences for the Small Company Fund 42
Tax Consequences to Shareholders 43
Appendix A - Bond Ratings 44
Independent Auditors' Report 54
Financial Statements 55
GENERAL INFORMATION AND HISTORY
Nationwide Separate Accounts Trust is an open-end investment company
organized under the laws of Massachusetts, by a Declaration of Trust, dated June
30, 1981, as amended October 22, 1981, September 3, 1982, April 16, 1987, May 1,
1992, August 9, 1995, November 3, 1995, and October 17, 1996. The Trust offers
shares in fifteen separate mutual funds, each with its own investment
objective. This Statement of Additional Information discussion further six of
those funds -- The Total Return Fund, The Capital Appreciation Fund, the
Government Bond Fund, the Money Market Fund, the Small Company Fund and the
Income Fund (collectively, the "Funds" and individually, a "Fund").
INVESTMENT OBJECTIVES AND POLICIES
The following information supplements the discussion of the Funds'
investment objectives and policies discussed in the Prospectuses. Defined terms
used in this Statement of Additional Information, unless otherwise defined
herein, have the meaning assigned to them in the relevant Prospectus.
The investment policies and types of permitted investments described
here may be changed without prior approval by, or notice to, the shareholders.
There is no guarantee that the objectives will be realized.
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- --TOTAL RETURN FUND
This Fund's investment objective is to obtain a reasonable, long term
total return on invested capital from a flexible combination of dividend return
and capital gains. The Fund seeks to achieve its objective through investments
in common stocks, convertible issues, money market instruments, and bonds, with
a primary emphasis on common stocks.
While it is the intention of the Fund to invest in common stocks or in
issues convertible to common stock, there are no restrictive provisions covering
the proportion of one or another class of securities that may be held, or other
restriction, other than those stated in the investment restrictions.
- --CAPITAL APPRECIATION FUND
The Fund is designed for investors who are interested in long-term
growth. The Fund seeks to meet its objectives primarily through a diversified
portfolio of the common stock of companies which the investment manager
determines have a better-than-average potential for sustained capital growth
over the long term.
While it is the intention of the Fund to invest in common stocks or in
issues convertible to common stock, there are no restrictive provisions covering
the proportion of one or another class of securities that may be held, or other
restriction, other than those stated in the investment restrictions.
The investment manager will focus mainly on a company's or industry's
potential for long term growth, with dividend and interest income being
secondary in importance. The manager's evaluation of a company or industry will
be based more on probable future earnings, relative financial strength and
competitive position. The manager believes this approach will provide a greater
return potential over the long run than simply seeking current dividend or
interest income. The Fund's portfolio will not be limited to any particular type
of company or industry.
- --GOVERNMENT BOND FUND
The investment objective of the Government Bond Fund is to provide as
high a level of income as is consistent with the preservation of capital. It
seeks to achieve its objective by investing in a diversified portfolio of
securities issued or backed by the U.S. Government, it agencies or
instrumentalities.
These securities are of varying types which include but are not limited
to:
Treasury Notes And Bonds - These are direct obligations of the U.S.
Government. New issues of notes mature in one to ten years while bonds generally
have a maturity of ten years or more.
Treasury Bills - These are direct obligations of the U.S. Government
backed by the full faith and credit of the United States and mature in one year
or less.
Securities Issued By Instrumentalities of the U.S. Government - These
securities are issued by federally-chartered instrumentalities. Some of these
securities are guaranteed by the United States Treasury or are supported by the
issuer's right to borrow from the Treasury and are backed by the credit of the
federal instrumentality itself.
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Some of these instrumentalities (listed for example purposes only) are:
Bank for Cooperatives (COOP)
Federal Home Loan Banks (FHLB)
Federal National Mortgage Association (FNMA)
Government National Mortgage Association (GNMA)
Tennessee Valley Authority (TVA)
Farmers Home Administration (FHA)
The Government Bond Fund will normally invest at least 65% of its assets in
bonds issued by the U.S. Government, and its agencies and instrumentalities.
These bonds pay interest at regular intervals, usually semi-annually, and pay
principal at maturity.
The Government Bond Fund may invest up to 35% of its assets in zero coupon
securities and up to 20% of its assets in securities purchased on a
"when-issued" or on a "delayed-delivery" basis, provided those securities are
issued or backed by the U.S. Government, its agencies or instrumentalities (for
a further description of "when-issued" or "delayed-delivery" transactions, see
"Income Fund -- When-Issued Securities and Delayed-Delivery Transactions"
below). The Government Bond Fund may also enter into repurchase agreements in
any of the securities described above (for a description of repurchase
agreements, see "Income Fund - Repurchase Agreements" below).
The Government Bond Fund may invest up to 35% of its assets in mortgage-backed
securities. Mortgage-backed securities represent direct or indirect
participation in, or are secured by and payable from, mortgage loans secured by
real property, and include single- and multi-class pass-through securities and
collateralized mortgage obligations. The securities purchased by the Government
Bond Fund are issued or guaranteed by U.S. government agencies or
instrumentalities.
Government-related entities may also create mortgage loan pools offering
pass-through investments where the mortgages underlying these securities may be
alternative mortgage instruments, that is, mortgage instruments whose principal
or interest payments may vary or whose terms to maturity may be shorter than
previously customary. As new types of mortgage-related securities are developed
and offered to investors, the Fund, consistent with its investment objective and
policies, may consider making investments in such new types of securities.
The yield characteristics of mortgage-backed securities differ from those of
traditional debt obligations. Among the principal differences are that interest
and principal payments are made more frequently on mortgage-backed securities,
usually monthly, and that principal may be prepaid at any time because the
underlying mortgage loans generally may be prepaid at any time. As a result, if
the Fund purchases these securities at a premium, a prepayment rate that is
faster than expected will reduce yield to maturity, while a prepayment rate that
is lower than expected will have the opposite effect of increasing the yield to
maturity. Conversely, if the Fund purchases these securities at a discount, a
prepayment rate that is faster than expected will increase yield to maturity,
while a prepayment rate that is slower than expected will reduce yield to
maturity. Accelerated prepayments on securities purchased by the Fund at a
premium also impose a risk of loss of principal because the premium may not have
been fully amortized at the time the principal is prepaid in full.
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The Government Bond Fund will normally invest no more than 20% of its assets in
repurchase agreements or in U.S. Government securities maturing in less than one
year. For temporary defensive purposes, however the Fund may invest up to 100%
of its assets in these securities.
There is a minimal credit risk involved in the purchase of U.S. Government or
U.S. Government guaranteed securities. Securities issued by U.S. Government
agencies or instrumentalities, while perhaps having the implicit backing of the
U.S. Government, may not have an explicit guarantee of the payment of principal
and interest.
The value of shares of the Government Bond Fund will vary inversely with changes
in interest rates. As with any fixed income investment, interest rate risk does
exist; i.e., when interest rates decline, the market value of a portfolio can be
expected to rise; conversely, when interest rates rise, the market value of the
portfolio can be expected to fall. While the Government Bond Fund will engage in
portfolio trading to manage this risk (i.e., shortening the average maturity of
the portfolio in anticipation of a rise in interest rates so as to minimize
depreciation of principal, or lengthening the portfolio in anticipation of a
decline in interest rates so as to maximize appreciation of capital) there is no
assurance that capital will be preserved. Thus, the Government Bond Fund is
designed for those willing to accept market fluctuations to obtain income.
- --MONEY MARKET FUND
The investment objective of this Fund is to seek as high a level of current
income as it considered consistent with the preservation of capital and
liquidity through investments in a portfolio of money market instruments with
remaining maturities of 397 days or less. The Fund seeks to achieve its
objective by investing primarily in instruments receiving a rating in one of the
two highest categories by the following six nationally recognized statistical
rating organizations ("NRSROs"): Duff and Phelps, Inc. ("D&P"), Fitch Investors
Services, Inc. ("Fitch"), Moody's Investors Service Inc. ("Moody's"), Standard &
Poor's Ratings Group ("Standard & Poor's"), IBCA Limited and its affiliate, IBCA
Inc. ("IBCA"), and Thomson Bank Watch ("Thomson"). See Appendix A for a further
description of the NRSRO ratings.
The Fund may invest in the following instruments:
-- obligations issued or guaranteed as to interest and
principal by the U.S. government, its agencies, or
instrumentalities, or any federally chartered corporation.
-- repurchase agreements, subject to the restrictions set
forth under "Investment Restrictions." Potential risks
associated with investment in repurchase agreements are
twofold: (a) in the event of default of an issuer and a
decrease in the value of the underlying securities below the
repurchase price, the Fund could suffer a loss, and (b) in the
event of an issuer's bankruptcy, the Fund's ability to dispose
of underlying securities could be delayed. (For a further
description, see "Income Fund --Repurchase Agreements" below.)
-- obligations of banks which at the date of investment are
rated A2 or better by IBCA or TBW1 by Thomson. Obligations of
savings and loan associations (including certificates of
deposit and bankers' acceptances) which at the date of
investment have capital, surplus, and undivided profits (as of
the date of their most recently published financial
statements) in excess of $100 million; and obligations of
other banks or savings and loan associations if such
obligations are insured by the Federal Deposit Insurance
Corporation, provided that not more than 10% of the Fund's
total assets shall be invested in such insured obligations.
-- commercial paper which at the date of investment is rated
Duff 1 or Duff 2, by D&F, F-1 or F-2 by Fitch, P-1 or P-2 by
Moody's, or A-1 or A-2 by Standard & Poor's, or if not rated,
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is issued and guaranteed as to payment of principal and
interest by companies which at the date of investment have an
outstanding debt issue rated AA or better by D&F, AA or better
by Fitch, Aa or better by Moody's, or AA or better by Standard
& Poor's.
-- up to 5% of its total assets in commercial paper which at
the date of investment is rated F-2 by Fitch, Duff 2 by D&P,
P-2 by Moody's, or A-2 by Standard and Poor's. However, the
Fund is limited as to the amount it may invest in the
commercial paper of a single issuer to the greater of 1% of
the Fund's total assets or $1 million.
-- short-term (maturity in 397 days or less) corporate
obligations which at the date of investment are rated AA or
better by D&F, AA or better by Fitch, Aa or better by Moody's,
or AA or better by Standard & Poor's.
-- bank loan participation agreements representing
corporations and banks having a short-term rating, at the date
of investment, of F-1 or F-2 by Fitch, Duff 1 or Duff 2 by
D&P, P-1 or P-2 by Moody's or A-1 or A-2 by Standard & Poor's,
under which the Fund will look to the creditworthiness of the
lender bank, which is obligated to make payments of principal
and interest on the loan, as well as to creditworthiness of
the borrower.
All the assets of the Fund will be invested generally in obligations with
remaining maturities of 397 days or less and which generally will be held to
maturity. The Fund will, to the extent feasible, make portfolio investments
primarily in anticipation of, or in response to, changing economic and financial
conditions. The Fund will attempt to maximize the return on its investments
through careful analysis of a wide range of investments available and different
yield relationships existing among various sectors of the market. The average
dollar weighted maturity of the Fund's investments may not exceed 90 days. There
can be no assurance that the Fund's investment objective will be achieved.
The Fund may invest in the securities of foreign corporate and governmental
issuers and in the securities of foreign branches of U.S. banks, such as
negotiable certificates of deposit (Eurodollars) in U.S. dollar denominations
which at the date of investment are rated A1 or A2 by IBCA or TBW1 by Thomson.
Because of this, investment in the Fund involves risks that are different in
some respects from an investment in a fund which invests only in debt
obligations of U.S. domestic issuers. Such risks may include future political
and economic developments, the possible imposition of foreign withholding taxes
on interest income payable on the securities held in the portfolio, possible
seizure or nationalization of foreign deposits, the possible establishment of
exchange controls, or the adoption of other foreign governmental restrictions
which might adversely affect the payment of principal and interest on securities
in the portfolio.
Investment Policies Relating to the Capital Appreciation Fund, the Total Return
Fund, the Government Bond Fund and the Money Market Fund.
BORROWING. Each of the Capital Appreciation Fund, the Total Return Fund, the
Government Bond Fund and the Money Market Fund may borrow money only for
temporary or emergency purposes or for the clearance of transactions. This
borrowing will be limited to an amount of 5% of the value of the Fund's total
assets (including the amount borrowed) valued at the time the borrowing is
made. In such situations, either the custodian will segregate the pledged
assets for the benefit of the lender or arrangements will be made with a
suitable subcustodian, which may include the lender.
SECURITIES OF NON-AFFILIATED INVESTMENT COMPANIES. Each of the Capital
Appreciation Fund, the Total Return Fund, the Government Bond Fund and the
Money Market Fund may invest in other investment companies. Investing through
such vehicles may involve frequent or layered fees or expenses and is subject
to limitations under the 1940 Act. Each of these Funds has adopted a policy
stating that it will not invest more than 10% of its assets in shares of
investment companies or more than 5% of its assets in any one investment
company; in addition, each Fund will not purchase more than 3% of the voting
stock of the acquired investment company.
- -- INCOME FUND
The Income Fund seeks to provide as high a level of income as is
consistent with reasonable concern for safety of principal. The Fund intends to
pursue its investment objective by investing at least 65% of its assets, under
normal market conditions, in investment grade corporate and U.S. Government debt
obligations. The Fund may invest the remainder of its portfolio in high quality
short-term money market obligations.
DEBT OBLIGATIONS. Debt obligations are subject to the risk of an issuer's
inability to meet principal and interest payments on its obligations ("credit
risk") and are subject to price volatility due to such factors as interest rate
sensitivity, market perception of the creditworthiness of the issuer, and
general market liquidity
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("market risk"). Lower-rated securities are more likely to react to developments
affecting market and credit risk than are more highly rated securities, which
react primarily to movements in the general level of interest rates.
RATINGS AS INVESTMENT CRITERIA. The Income Fund may invest in
high-quality and medium-quality debt obligations which are characterized as such
based on their ratings by nationally recognized statistical rating organizations
("NRSROs"). In general, the ratings of NRSROs represent the opinions of these
agencies as to the quality of securities that they rate. Such ratings, however,
are relative and subjective, and are not absolute standards of quality and do
not evaluate the market value risk of the securities. These ratings are used by
the Fund as initial criteria for the selection of portfolio securities, but the
Fund will also rely upon the independent advice of the Subadvisers to evaluate
potential investments. Among the factors that will be considered are the
long-term ability of the issuer to pay principal and interest and general
economic trends. The Appendix to this Statement of Additional Information
contains further information about the rating categories of NRSROs and their
significance.
Subsequent to its purchase by the Income Fund, an issue of securities may cease
to be rated or its rating may be reduced below the minimum required for purchase
by the Income Fund. In addition, it is possible that an NRSRO might not change
its rating of a particular issue to reflect subsequent events. None of these
events generally will require sale of such securities, but the Income Fund's
Subadviser will consider such events in its determination of whether the
Income Fund should continue to hold the securities. In addition, to the extent
that the ratings change as a result of changes in such organizations or their
rating systems, or due to a corporate reorganizations, the Income Fund will
attempt to use comparable ratings as standards for its investments in accordance
with its investment objective and policies.
MONEY MARKET INSTRUMENTS. The Income Fund may invest in certain types of money
market instruments which may include the following types of instruments:
-- obligations issued or guaranteed as to interest
and principal by the U.S. government, its agencies, or
instrumentalities, or any federally chartered corporation;
-- repurchase agreements;
-- certificates of deposit, time deposits and
bankers' acceptances issued by domestic banks (including their
branches located outside the United States and subsidiaries
located in Canada), domestic branches of foreign banks,
savings and loan associations and similar institutions
-- commercial paper, which are short-term unsecured
promissory notes issued by corporations in order to finance
their current operations. Generally the commercial paper will
be rated within the top two rating categories by an NRSRO, or
if not rated, is issued and guaranteed as to payment of
principal and interest by companies which at the date of
investment have a high quality outstanding debt issue;
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-- high quality short-term (maturity in 397 days or
less) corporate obligations;
-- bank loan participation agreements representing
corporations and banks having a high quality short-term
rating, at the date of investment, and under which the Fund
will look to the creditworthiness of the lender bank, which is
obligated to make payments of principal and interest on the
loan, as well as to creditworthiness of the borrower.
MORTGAGE- AND ASSET-BACKED SECURITIES - The Income Fund may purchase both
mortgage- and asset-backed securities. Mortgage-backed securities represent
direct or indirect participation in, or are secured by and payable from,
mortgage loans secured by real property, and include single- and multi-class
pass-through securities and collateralized mortgage obligations. Such securities
may be issued or guaranteed by U.S. government agencies or instrumentalities or
by private issuers, generally originators in mortgage loans, including savings
and loan associations, mortgage bankers, commercial banks, investment bankers,
and special purpose entities (collectively, "private lenders"). Mortgage-backed
securities issues by private lenders may be supported by pools of mortgage loans
or other mortgage-backed securities that are guaranteed, directly or indirectly,
by the U.S. government or one of its agencies or instrumentalities, or they may
be issued without any governmental guarantee of the underlying mortgage assets
but with some form of non-governmental credit enhancement. These credit
enhancements may include letters of credit, reserve funds,
overcollateralization, or guarantees by third parties.
Private lenders or government-related entities may also create mortgage loan
pools offering pass-through investments where the mortgages underlying these
securities may be alternative mortgage instruments, that is, mortgage
instruments whose principal or interest payments may vary or whose terms to
maturity may be shorter than previously customary. As new types of
mortgage-related securities are developed and offered to investors, the Fund,
consistent with its investment objective and policies, may consider making
investments in such new types of securities.
Asset-backed securities have structural characteristics similar to
mortgage-backed securities. However, the underlying assets are not first-lien
mortgage loans or interests therein; rather they include assets such as motor
vehicle installment sales contracts, other installment loan contracts, home
equity loans, leases of various types of property and receivables from credit
card and other revolving credit arrangements. Payments or distributions of
principal and interest on asset-backed securities may be supported by
non-governmental credit enhancements similar to those utilized in connection
with mortgage-backed securities. The credit quality of most asset-backed
securities depends primarily on the credit quality of the assets underlying such
securities, how well the entity issuing the security is insulated from the
credit risk of the originator any other affiliated entities, and the amount and
quality of any credit enhancement of the securities.
The yield characteristics of mortgage- and asset-backed securities differ from
those of traditional debt obligations. Among the principal differences are that
interest and principal payments are made more frequently on mortgage- and
asset-backed securities, usually monthly, and that principal may be prepaid at
any time because the underlying mortgage loans or other assets generally may be
prepaid at any time. As a
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result, if the Fund purchases these securities at a premium, a prepayment rate
that is faster than expected will reduce yield to maturity, while a prepayment
rate that is lower than expected will have the opposite effect of increasing the
yield to maturity. Conversely, if the Fund purchases these securities at a
discount, a prepayment rate that is faster than expected will increase yield to
maturity, while a prepayment rate that is slower than expected will reduce yield
to maturity. Accelerated prepayments on securities purchased by the Fund at a
premium also impose a risk of loss of principal because the premium may not have
been fully amortized at the time the principal is prepaid in full. The market
for privately issued mortgage- and asset-backed securities is smaller and less
liquid than the market for government sponsored mortgage-backed securities.
The Fund may invest in stripped mortgage- or asset-backed securities, which
receive differing proportions of the interest and principal payments from the
underlying assets. The market value of such securities generally is more
sensitive to changes in prepayment and interest rates than is the case with
traditional mortgage- and asset-backed securities, and in some cases the market
value may be extremely volatile. With respect to certain stripped securities,
such as interest-only ("IO") and principal-only ("PO") classes, a rate of
prepayment that is faster or slower than anticipated may result in the Fund
failing to recover all or a portion of its investment, even though the
securities are rated investment grade.
REPURCHASE AGREEMENTS. In connection with the purchase of a repurchase agreement
by the Income Fund, the Fund's custodian will have custody of, and will hold in
a segregated account, securities acquired by the Fund under a repurchase
agreement. Repurchase agreements are contracts under which the buyer of a
security simultaneously commits to resell the security to the seller at an
agreed-upon price and date. Repurchase agreements are considered by the staff of
the Securities and Exchange Commission (the "SEC") to be loans by the Fund.
Repurchase agreements may be entered into with respect to securities of the type
in which it may invest or government securities regardless of their remaining
maturities, and will require that additional securities be deposited with it if
the value of the securities purchased should decrease below the resale price.
Repurchase agreements involve certain risks in the event of default or
insolvency by the other party, including possible delays or restrictions upon
the Fund's ability to dispose of the underlying securities, the risk of a
possible decline in the value of the underlying securities during the period in
which the Fund seeks to assert its rights to them, the risk of incurring
expenses associated with asserting those rights and the risk of losing all or
part of the income from the repurchase agreement.
INVESTMENT COMPANIES. The Income Fund reserves the right to invest up to 5% of
its total assets, calculated at the time of investment, in the securities of
other open-end or closed end investment companies. No more than 5% of the Income
Fund's total assets may be invested in the securities of any one investment
company nor may it acquire more than 3% of the voting securities of any other
investment company. Investing through such vehicles may involve frequent or
layered fees or expenses and may be subject to limitation under the Investment
Company Act of 1940. The Income Fund will indirectly bear its proportionate
share of any management fees paid by an investment company in which it invests
in addition to the advisory fee paid by the Income Fund.
WHEN-ISSUED SECURITIES AND DELAYED-DELIVERY TRANSACTIONS. The Income Fund may
invest without limitation in securities purchased on a "when-issued" basis or
purchase or sell securities for delayed delivery (i.e., payment or delivery
occurs beyond the normal settlement date at a stated price and yield).
When-issued transactions normally settle within 45 days. The payment obligation
and the interest rate that will be received on when-issued securities are fixed
at the time the buyer enters into the commitment. Due to fluctuations in the
value of securities purchased or sold on a when-issued or delayed-delivery
basis, the yields obtained on such securities may be higher or lower than the
yields available in the market on the dates when the investments are actually
delivered to the buyers.
When the Fund agrees to purchase when-issued or delayed-delivery securities, its
custodian will set aside cash, or liquid securities equal to the amount of the
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commitment in a segregated account. Normally, the custodian will set aside
portfolio securities to satisfy a purchase commitment, and in such a case the
Fund may be required subsequently to place additional assets in the segregated
account in order to ensure that the value of the account remains equal to the
amount of such fund's commitment. It may be expected that the Fund's net assets
will fluctuate to a greater degree when it sets aside portfolio securities to
cover such purchase commitments than when it sets aside cash. When the Fund
engages in when-issued or delayed-delivery transactions, it relies on the other
party to consummate the trade. Failure of the seller to do so may result in a
fund incurring a loss or missing an opportunity to obtain a price considered to
be advantageous.
LENDING PORTFOLIO SECURITIES. The Income Fund may lend its portfolio securities
to brokers, dealers and other financial institutions, provided it receives cash
collateral which at all times is maintained in an amount equal to at least 100%
of the current market value of the securities loaned. By lending its portfolio
securities, the Fund can increase its income through the investment of the cash
collateral. For the purposes of this policy, the Fund considers collateral
consisting of cash, U.S. Government securities or letters of credit issued by
banks whose securities meet the standards for investment by the Fund to be the
equivalent of cash. From time to time, the Fund may return to the borrower or a
third party which is unaffiliated with it, and which is acting as a "placing
broker," a part of the interest earned from the investment of collateral
received for securities loaned.
The SEC currently requires that the following conditions must be met whenever
portfolio securities are loaned: (1) the fund must receive at least 100% cash
collateral of the type discussed in the preceding paragraph from the borrower;
(2) the borrower must increase such collateral whenever the market value of the
securities loaned rises above the level of such collateral; (3) the fund must be
able to terminate the loan at any time; (4) the fund must receive reasonable
interest on the loan, as well as any dividends, interest or other distributions
payable on the loaned securities, and any increase in market value; (5) the fund
may pay only reasonable custodian fees in connection with the loan; and (6)
while any voting rights on the loaned securities may pass to the borrower, the
fund's board of directors or trustees must be able to terminate the loan and
regain the right to vote the securities if a material event adversely affecting
the investment occurs. These conditions may be subject to future modification.
Loan agreements involve certain risks in the event of default or insolvency of
the other party including possible delays or restrictions upon the Fund's
ability to recover the loaned securities or dispose of the collateral for the
loan.
BORROWING. The Income Fund may borrow money from banks, limited by any
investment restrictions to 33 1/3% of its total assets. However, the Fund
currently intends to borrow money only for temporary or emergency purposes in an
amount of up to 5% of the value of the Fund's total asset (including the amount
borrowed) valued at the time the borrowing is made. In such situations, either
the custodian will segregate the pledged assets for the benefit of the lender or
arrangements will be made with a suitable subcustodian, which may include the
lender.
SMALL COMPANY FUND
The Small Company Fund seeks long-term growth of capital. It seeks to
achieve this objective by investing primarily in equity securities of both
domestic and foreign small market capitalization companies ("small company
stocks"). To attempt to achieve this objective, the Adviser has hired a number
of
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subadvisers to direct the day-to-day management of the Small Company Fund. The
following information supplements the discussion of the Fund's objectives,
policies and techniques that are described in the Fund's prospectus under
"INVESTMENT OBJECTIVES AND POLICIES" and "INVESTMENT TECHNIQUES, CONSIDERATIONS
AND RISK FACTORS."
Special Situation Companies. The Small Company Fund may invest in the
securities of "special situation companies," which include those involved in an
actual or prospective acquisition or consolidation; reorganization;
recapitalization; merger, liquidation or distribution of cash, securities or
other assets; a tender or exchange offer; a breakup or workout of a holding
company; or litigation which, if resolved favorably, would improve the value of
the company's stock. If the actual or prospective situation does not materialize
as anticipated, the market price of the securities of a "special situation
company" may decline significantly. The Fund believes, however, that if a
Subadviser analyzes "special situation companies" carefully and invests in the
securities of these companies at the appropriate time, the Fund may achieve
capital growth. There can be no assurance however, that a special situation that
exists at the time the Fund makes its investment will be consummated under the
terms and within the time period contemplated.
Foreign Securities. Investors in the Small Company Fund should
recognize that investing in foreign securities involves certain special
considerations which are not typically associated with investing in United
States securities. Since investments in foreign companies will frequently
involve currencies of foreign countries, and since the Fund may hold securities
and funds in foreign currencies, the Fund may be affected favorably or
unfavorably by changes in currency rates and in exchange control regulations, if
any, and may incur costs in connection with conversions between various
currencies. Most foreign stock markets, while growing in volume of trading
activity, have less volume than the New York Stock Exchange, and securities of
some foreign companies are less liquid and more volatile than securities of
comparable domestic companies. Similarly, volume and liquidity in most foreign
bond markets are less than in the United States and at times, volatility of
price can be greater than in the United States. Fixed commissions on foreign
securities exchanges are generally higher than negotiated commissions on United
States exchanges, although the Fund endeavors to achieve the most favorable net
results on their portfolio transactions. There is generally less government
supervision and regulation of securities exchanges, brokers and listed companies
in foreign countries than in the United States. In addition, with respect to
certain foreign countries, there is the possibility of exchange control
restrictions, expropriation or confiscatory taxation, and political, economic or
social instability, which could affect investments in those countries. Foreign
securities such as those purchased by the Fund may be subject to foreign
government taxes, higher custodian fees and dividend collection fees which could
reduce the yield on such securities.
Investments may be made from time to time by the Small Company Fund in
companies in developing countries as well as in developed countries. Although
there is no universally accepted definition, a developing country is generally
considered to be a country which is in the initial stages of industrialization.
Shareholders should be aware that investing in the equity and fixed income
markets of developing countries involves exposure to unstable governments,
economies based on only a few industries, and securities markets which trade a
small number of securities. Securities markets of developing countries tend to
be more volatile than the markets of developed countries; however, such markets
have in the past provided the opportunity for higher rates of return to
investors.
The value and liquidity of investments in developing countries may be
affected favorably or unfavorably by political, economic, fiscal, regulatory or
other developments in the particular countries or neighboring regions. The
extent of economic development, political stability and market depth of
different countries varies widely. Certain countries in the Asia region,
including Cambodia, China, Laos, Indonesia, Malaysia, the Philippines, Thailand,
and Vietnam are either comparatively underdeveloped or are in the process of
becoming developed. Such investments typically involve greater potential for
gain or loss than investments in securities of issuers in developed countries.
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The securities markets in developing countries are substantially
smaller, less liquid and more volatile than the major securities markets in the
United States. A high proportion of the shares of many issuers may be held by a
limited number of persons and financial institutions, which may limit the number
of shares available for investment by the fund. Similarly, volume and liquidity
in the bond markets in developing countries are less than in the United States
and, at times, price volatility can be greater than in the United States. A
limited number of issuers in developing countries' securities markets may
represent a disproportionately large percentage of market capitalization and
trading volume. The limited liquidity of securities markets in developing
countries may also affect the Fund's ability to acquire or dispose of securities
at the price and time it wishes to do so. Accordingly, during periods of rising
securities prices in the more illiquid securities markets, the Fund's ability to
participate fully in such price increases may be limited by its investment
policy of investing not more than 15% of its total net assets in illiquid
securities. Conversely, the Fund's inability to dispose fully and promptly of
positions in declining markets will cause the Fund's net asset value to decline
as the value of the unsold positions is marked to lower prices. In addition,
securities markets in developing countries are susceptible to being influenced
by large investors trading significant blocks of securities.
Political and economic structures in many of such countries may be
undergoing significant evolution and rapid development, and such countries may
lack the social, political and economic stability characteristic of the United
States. Certain of such countries have in the past failed to recognize private
property rights and have at times nationalized or expropriated the assets of
private companies. As a result, the risks described above, including the risks
of nationalization or expropriation of assets, may be heightened. In addition,
unanticipated political or social developments may affect the value of the
Fund's investments in those countries and the availability to the fund of
additional investments in those countries.
Economies of developing countries may differ favorably or unfavorably
from the United States economy in such respects as rate of growth of gross
national product, rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payments position. As export-driven economies,
the economies of countries in the Asia Region are affected by developments in
the economies of their principal trading partners. Hong Kong, Japan and Taiwan
have limited natural resources, resulting in dependence on foreign sources for
certain raw materials and economic vulnerability to global fluctuations of price
and supply.
Certain developing countries do not have comprehensive systems of laws,
although substantial changes have occurred in many such countries in this regard
in recent years. Laws regarding fiduciary duties of officers and directors and
the protection of shareholders may not be well developed. Even where adequate
law exists in such developing countries, it may be impossible to obtain swift
and equitable enforcement of such law, or to obtain enforcement of the judgment
by a court of another jurisdiction.
Trading in futures contracts traded on foreign commodity exchanges may
be subject to the same or similar risks as trading in foreign securities.
Depositary Receipts. As indicated in the Fund's prospectus, the Small
Company Fund may invest in foreign securities by purchasing depositary receipts,
including American Depositary Receipts ("ADRs") and European Depositary Receipts
("EDRs") or other securities convertible into securities of issuers based in
foreign countries. These securities may not necessarily be denominated in the
same currency as the securities into which they may be converted. Generally,
ADRs, in registered form, are denominated in U.S. dollars and are designed for
use in the U.S. securities markets, while EDRs (also referred to as Continental
Depositary Receipts ("CDRs"), in bearer form, may be denominated in other
currencies and are designed for use in European securities markets. ADRs are
receipts typically issued by a U.S. Bank or trust company evidencing ownership
of the underlying securities. EDRs are European receipts evidencing a similar
arrangement. For purposes of the Fund's investment policies, ADRs and EDRs are
deemed to have the same classification as the underlying securities they
represent. Thus, an ADR or EDR representing
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ownership of common stock will be treated as common stock. (For further
information on these instruments, see the descriptions above for the Government
Bond Fund and the Money Market Fund.)
The Small Company Fund may invest in depositary receipts through
"sponsored" or "unsponsored" facilities. A sponsored facility is established
jointly by the issuer of the underlying security and a depositary, whereas a
depositary may establish an unsponsored facility without participation by the
issuer of the deposited security. Holders of unsponsored depositary receipts
generally bear all the costs of such facilities and the depositary of an
unsponsored facility frequently is under no obligation to distribute shareholder
communications received from the issuer of the deposited security or to pass
through voting rights to the holders of such receipts in respect of the
deposited securities.
Debt Obligations. While the emphasis of the Small Company Fund's
investment is on common stocks and other equity securities (including preferred
stocks and securities convertible into or exchangeable for common stocks), it
may also invest in money market instruments, U.S. Government or Agency
securities, (for further information concerning these securities, see the
descriptions above for the Government Bond and the Money Market Funds) and
corporate bonds and debentures receiving one of the four highest ratings from an
NRSRO, or if not rated by any NRSRO, deemed comparable by a Subadviser to such
rated securities ("Comparable Unrated Securities"). The ratings of an NRSRO
represent its opinion as to the quality of securities it undertakes to rate.
Ratings are not absolute standards of quality; consequently, securities with the
same maturity, coupon, and rating may have different yields. The ratings
assigned by the NRSROS are described in Appendix A to this Statement of
Additional Information.
Fixed income securities are subject to the credit risk and market risk
as described above. Lower-rated securities are more likely to react to
developments affecting market and credit risk than are more highly rated
securities, which react primarily to movements in the general level of interest
rates. Subsequent to its purchase by the Fund, an issue of securities may cease
to be rated or its rating may be reduced, so that the securities would not be
eligible for purchase by the Fund. In such a case, the Subadviser will evaluate
whether the downgraded security should be disposed of.
High-Yield (High-Risk) Securities -- In General. The Fund has the
authority to invest up to 5% of its net assets in non-investment grade debt
securities. Non-investment grade debt securities (hereinafter referred to as
"lower-quality securities") include (i) bonds rated as low as C by Moody's,
Standard & Poor's, or Fitch, or CCC by D&P; (ii) commercial paper rated as low
as C by Standard & Poor's, Not Prime by Moody's or Fitch 4 by Fitch; and (iii)
unrated debt securities of comparable quality. Lower-quality securities, while
generally offering higher yields than investment grade securities with similar
maturities, involve greater risks, including the possibility of default or
bankruptcy. They are regarded as predominantly speculative with respect to the
issuer's capacity to pay interest and repay principal. The special risk
considerations in connection with investments in these securities are discussed
below. Refer to Appendix A of this Statement of Additional Information for a
discussion of securities ratings.
Effect of Interest Rates And Economic Changes. All interest-bearing
securities typically experience appreciation when interest rates decline and
depreciation when interest rates rise. The market values of lower-quality and
comparable unrated securities tend to reflect individual corporate developments
to a greater extent than do higher rated securities, which react primarily to
fluctuations in the general level of interest rates. Lower-quality and
comparable unrated securities also tend to be more sensitive to economic
conditions than are higher-rated securities. As a result, they generally involve
more credit risks than securities in the higher-rated categories. During an
economic downturn or a sustained period of rising interest rates, highly
leveraged issuers of lower-quality and comparable unrated securities may
experience financial stress and may not have sufficient revenues to meet their
payment obligations. The issuer's ability
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to service its debt obligations may also be adversely affected by specific
corporate developments, the issuer's inability to meet specific projected
business forecasts or the unavailability of additional financing. The risk of
loss due to default by an issuer of these securities is significantly greater
than issuers of higher-rated securities because such securities are generally
unsecured and are often subordinated to other creditors. Further, if the issuer
of a lower-quality or comparable unrated security defaulted, the Fund might
incur additional expenses to seek recovery. Periods of economic uncertainty and
changes would also generally result in increased volatility in the market prices
of these securities and thus in the Fund's net asset value.
As previously stated, the value of a lower-quality or comparable
unrated security will decrease in a rising interest rate market, and accordingly
so will the Fund's net asset value. If the Fund experiences unexpected net
redemptions in such a market, it may be forced to liquidate a portion of its
portfolio securities without regard to their investment merits. Due to the
limited liquidity of lower-quality and comparable unrated securities (discussed
below), the Fund may be forced to liquidate these securities at a substantial
discount. Any such liquidation would reduce the Fund's asset base over which
expenses could be allocated and could result in a reduced rate of return for the
Fund.
Payment Expectations. Lower-quality and comparable unrated securities
typically contain redemption, call or prepayment provisions which permit the
issuer of such securities containing such provisions to, at its discretion,
redeem the securities. During periods of falling interest rates, issuers of
these securities are likely to redeem or prepay the securities and refinance
them with debt securities at a lower interest rate. To the extent an issuer is
able to refinance the securities, or otherwise redeem them, the Fund may have to
replace the securities with a lower yielding security, which would result in a
lower return for the Fund.
Credit Ratings. Credit ratings issued by credit-rating agencies
evaluate the safety of principal and interest payments of rated securities. They
do not, however, evaluate the market value risk of lower-quality securities and,
therefore, may not fully reflect the true risks of an investment. In addition,
credit rating agencies may or may not make timely changes in a rating to reflect
changes in the economy or in the condition of the issuer that affect the market
value of the security. Consequently, credit ratings are used only as a
preliminary indicator of investment quality. Investments in lower-quality and
comparable unrated securities will be more dependent on a Subadviser's credit
analysis than would be the case with investments in investment-grade debt
securities. Each Subadviser will employ its own credit research and analysis,
which includes a study of existing debt, capital structure, ability to service
debt and to pay dividends, the issuer's sensitivity to economic conditions, its
operating history and the current trend of earnings. When investing in
lower-quality securities, each Subadviser will continually monitor the
investments in the Fund's portfolio and carefully evaluate whether to dispose of
or to retain lower-quality and comparable unrated securities whose credit
ratings or credit quality may have changed.
Liquidity And Valuation. The Fund may have difficulty disposing of
certain lower-quality and comparable unrated securities because there may be a
thin trading market for such securities. Because not all dealers maintain
markets in all lower-quality and comparable unrated securities, there is no
established retail secondary market for many of these securities. The Fund
anticipates that such securities could be sold only to a limited number of
dealers or institutional investors. To the extent a secondary trading market
does exist, it is generally not as liquid as the secondary market for
higher-rated securities. The lack of a liquid secondary market may have an
adverse impact on the market price of the security. As a result, the Fund's
asset value and ability to dispose of particular securities, when necessary to
meet the Fund's liquidity needs or in response to a specific economic event, may
be impacted. The lack of a liquid secondary market for certain securities may
also make it more difficult for the Fund to obtain accurate market quotations
for purposes of valuing the Fund's portfolio. Market quotations are generally
available on many lower-quality and comparable unrated issues only from a
limited number of dealers and may not necessarily represent firm bids of such
dealers or prices for actual sales. During periods of thin trading, the
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<PAGE> 14
spread between bid and asked prices is likely to increase significantly. In
addition, adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may decrease the values and liquidity of lower-quality and
comparable unrated securities, especially in a thinly traded market.
Proposed Legislation. From time to time proposals have been discussed,
regarding new legislation designed to limit the use of certain lower-quality and
comparable unrated securities by certain issuers. However, it is possible that
if legislation is enacted or proposed, it could have a material affect on the
value of these securities and the existence of a secondary trading market for
the securities.
Convertible Securities. Convertible securities in which the Fund may
invest, including both convertible debt and convertible preferred stock, may be
converted at either a stated price or stated rate into underlying shares of
common stock. Because of this feature, convertible securities enable an investor
to benefit from increases in the market price of the underlying common stock.
Convertible securities provide higher yields than the underlying equity
securities, but generally offer lower yields than non-convertible securities of
similar quality. Like bonds, the value of convertible securities fluctuates in
relation to changes in interest rates and, in addition, also fluctuates in
relation to the underlying common stock.
Warrants. The Small Company Fund may acquire warrants. Warrants are
securities giving the holder the right, but not the obligation, to buy the stock
of an issuer at a given price (generally higher than the value of the stock at
the time of issuance), on a specified date, during a specified period, or
perpetually. Warrants may be acquired separately or in connection with the
acquisition of securities. The Fund may purchase warrants, valued at the lower
of cost or market value, of up to 5% of the Fund's net assets. Included in that
amount, but not to exceed 2% of the Fund's net assets, may be warrants that are
not listed on any recognized U.S. or foreign stock exchange. Warrants acquired
by the Fund in units or attached to securities are not subject to these
restrictions. Warrants do not carry with them the right to dividends or voting
rights with respect to the securities that they entitle their holder to
purchase, and they do not represent any rights in the assets of the issuer. As a
result, warrants may be considered more speculative than certain other types of
investments. In addition, the value of a warrant does not necessarily change
with the value of the underlying securities, and a warrant ceases to have value
if it is not exercised prior to its expiration date.
Repurchase Agreements. The Small Company Fund's custodian or a
sub-custodian will have custody of, and will hold in a segregated account,
securities acquired by the Fund under a repurchase agreement. Repurchase
agreements are contracts under which the buyer of a security simultaneously
commits to resell the security to the seller at an agreed-upon price and date.
Repurchase agreements are considered by the staff of the Securities and Exchange
Commission to be loans by the Fund. In an attempt to reduce the risk of
incurring a loss on the repurchase agreement, the Fund will enter into
repurchase agreements with certain banks and non-bank dealers, all of whose use
has been approved by the Board of Trustees. Repurchase agreements may be entered
into with respect to securities of the type in which it may invest or government
securities regardless of their remaining maturities, and will require that
additional securities be deposited with it if the value of the securities
purchased should decrease below resale price. Each Subadviser will monitor on an
ongoing basis the value of the collateral to assure that it always equals or
exceeds the repurchase price. The Fund will consider on an ongoing basis the
creditworthiness of the institutions with which the Fund enters into repurchase
agreements. Repurchase agreements involve certain risks in the event of default
or insolvency by the other party, including possible delays or restrictions upon
the Fund's ability to dispose of the underlying securities.
Short Sales "Against The Box". In a short sale, the Small Company Fund
sells a borrowed security and has a corresponding obligation to the lender to
replace such security. The Fund may engage in short sales if at the time of the
short sale the Fund owns or has the right to obtain without additional cost an
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<PAGE> 15
equal amount of the security being sold short. This investment technique is
known as a short sale "against the box."
In a short sale, the seller does not immediately deliver the securities
sold and is said to have a short position in those securities until delivery
occurs. If the Fund engages in a short sale, the collateral for the short
position will be maintained by the Fund's custodian or qualified sub-custodian.
While the short sale against the box is open, the Fund will maintain in a
segregated account an amount of securities equal in kind and amount to the
securities sold short or securities convertible into or exchangeable for such
equivalent securities. These securities constitute the Fund's long position. Not
more than 15% of the Fund's net assets (taken at current value) may be held as
collateral for such short sales at any one time.
The Fund does not intend to engage in short sales against the box for
investment purposes. The Fund may, however, make a short sale as a hedge, when
it believes that the price of a security may decline, causing a decline in the
value of a security owned by the Fund (or a security convertible or exchangeable
for such security). In such case, any future losses in the Fund's long position
should be offset by a gain in the short position and, conversely, any gain in
the long position should be reduced by a loss in the short position. The extent
to which such gains or losses are reduced will depend upon the amount of the
security sold short relative to the amount the Fund owns. There will be certain
additional transaction costs associated with short sales against the box, but
the Fund will endeavor to offset these costs with the income from the investment
of the cash proceeds of short sales.
Restricted, Non-Publicly Traded and Illiquid Securities. The Small
Company Fund may not invest more than 15% of its net assets, in the aggregate,
in illiquid securities, including repurchase agreements which have a maturity of
longer than seven days, time deposits maturing in more than seven days and
securities that are illiquid because of the absence of a readily available
market or legal or contractual restrictions on resale. Repurchase agreements
subject to demand are deemed to have a maturity equal to the notice period.
Historically, illiquid securities have included securities subject to
contractual or legal restrictions on resale because they have not been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
securities which are otherwise not readily marketable and repurchase agreements
having a maturity of longer than seven days. Securities which have not been
registered under the Securities Act are referred to as private placements or
restricted securities and are purchased directly from the issuer or in the
secondary market. Investment companies do not typically hold a significant
amount of these restricted or other illiquid securities because of the potential
for delays on resale and uncertainty in valuation. Limitations on resale may
have an adverse effect on the marketability of portfolio securities, and an
investment company might be unable to dispose of restricted or other illiquid
securities promptly or at reasonable prices and might thereby experience
difficulty satisfying redemptions within seven days. An investment company might
also have to register such restricted securities in order to dispose of them
resulting in additional expense and delay. Adverse market conditions could
impede such a public offering of securities.
In recent years, however, a large institutional market has developed
for certain securities that are not registered under the Securities Act
including repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be readily
resold or on an issuer's ability to honor a demand for repayment. The fact that
there are contractual or legal restrictions on resale to the general public or
to certain institutions may not be indicative of the liquidity of such
investments.
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The SEC has adopted Rule 144A which allows for a broader institutional
trading market for securities otherwise subject to restriction on resale to the
general public. Rule 144A establishes a "safe harbor" from the registration
requirements of the securities act for resales of certain securities to
qualified institutional buyers. It is anticipated that the market for certain
restricted securities such as institutional commercial paper will expand further
as a result of this regulation and use of automated systems for the trading,
clearance and settlement of unregistered securities of domestic and foreign
issuers, such as the PORTAL System sponsored by the National Association of
Securities Dealers, Inc.
The Fund may sell over-the-counter ("OTC") options and, in connection
therewith, segregate assets or cover its obligations with respect to OTC options
written by the Fund. The assets used as cover for OTC options written by the
Fund will be considered illiquid unless the OTC options are sold to qualified
dealers who agree that the Fund may repurchase any OTC option it writes at a
maximum price to be calculated by a formula set forth in the option agreement.
The cover for an OTC option written subject to this procedure would be
considered illiquid only to the extent that the maximum repurchase price under
the formula exceeds the intrinsic value of the option.
Each Subadviser will monitor the liquidity of restricted securities in
the portion of the Fund it manages under the supervision of the Board of
Trustees and the Adviser. In reaching liquidity decisions, each Subadviser may
consider the following factors: (A) the unregistered nature of the security; (B)
the frequency of trades and quotes for the security; (C) the number of dealers
wishing to purchase or sell the security and the number of other potential
purchasers; (D) dealer undertakings to make a market in the security and (E) the
nature of the security and the nature of the marketplace trades (e.g., the time
needed to dispose of the security, the method of soliciting offers and the
mechanics of the transfer).
When-Issued Securities And Delayed-Delivery Transactions. The Small
Company Fund may invest without limitation in securities purchased on a
"when-issued" basis or purchase or sell securities for delayed delivery (i.e.,
payment or delivery occurs beyond the normal settlement date at a stated price
and yield). When-issued transactions normally settle within 45 days. The Fund
will enter into a when-issued transaction for the purpose of acquiring portfolio
securities and not for the purpose of leverage, but may sell the securities
before the settlement date if a Subadviser which purchased such security deems
it advantageous to do so. The payment obligation and the interest rate that will
be received on when-issued securities are fixed at the time the buyer enters
into the commitment. Due to fluctuations in the value of securities purchased or
sold on a when-issued or delayed-delivery basis, the yields obtained on such
securities may be higher or lower than the yields available in the market on the
dates when the investments are actually delivered to the buyers.
When the Fund agrees to purchase when-issued or delayed-delivery
securities, its custodian will set aside cash, U.S. government securities or
other liquid high-grade debt obligations equal to the amount of the commitment
in a segregated account. Normally, the custodian will set aside portfolio
securities to satisfy a purchase commitment, and in such a case the Fund may be
required subsequently to place additional assets in the segregated account in
order to ensure that the value of the account remains equal to the amount of the
Fund's commitment. It may be expected that the Fund's net assets will fluctuate
to a greater degree when it sets aside portfolio securities to cover such
purchase commitments than when it sets aside cash. When the Fund engages in
when-issued or delayed-delivery transactions, it relies on the other party to
consummate the trade. Failure of the seller to do so may result in the Fund
incurring a loss or missing an opportunity to obtain a price considered to be
advantageous.
Lending Portfolio Securities. The Small Company Fund may lend its
portfolio securities to brokers, dealers and other financial institutions,
provided it receives cash collateral which at all times is maintained in an
amount equal to at least 100% of the current market value of the securities
loaned. By lending its portfolio securities, the Fund can increase its income
through the investment of the cash collateral. For the purposes of this policy,
the Fund considers collateral consisting of cash, U.S.
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Government securities or letters of credit issued by banks whose securities meet
the standards for investment by the Fund to be the equivalent of cash. From time
to time, the Fund may return to the borrower or a third party which is
unaffiliated with the Fund, and which is acting as a "placing broker," a part of
the interest earned from the investment of collateral received for securities
loaned. The SEC currently requires that the following conditions must be met
whenever portfolio securities are loaned: (1) the Fund must receive at least
100% cash collateral of the type discussed in the preceding paragraph from the
borrower; (2) the borrower must increase such collateral whenever the market
value of the securities loaned rises above the level of such collateral; (3) the
Fund must be able to terminate the loan at any time; (4) the Fund must receive
reasonable interest on the loan, as well as any dividends, interest or other
distributions payable on the loaned securities, and any increase in market
value; (5) the Fund may pay only reasonable custodian fees in connection with
the loan; and (6) while any voting rights on the loaned securities may pass to
the borrower, the Trust's Trustees must be able to terminate the loan and regain
the right to vote the securities if a material event adversely affecting the
investment occurs. These conditions may be subject to future modification. Loan
agreements involve certain risks in the event of default or insolvency of the
other party including possible delays or restrictions upon the Fund's ability to
recover the loaned securities or dispose of the collateral for the loan.
Borrowing. The Small Company Fund may borrow money from banks, limited
by the Fund's fundamental investment restriction to 33-1/3% of its total assets,
and may engage in reverse repurchase agreements which may be considered a form
of borrowing. (See "INVESTMENT TECHNIQUES, CONSIDERATIONS AND RISK FACTORS -
Reverse Repurchase Agreements" in the Small Company Fund's Prospectus.) In
addition, the Fund may borrow up to an additional 5% of its total assets from
banks for temporary or emergency purposes. The Fund will not purchase securities
when bank borrowings exceed 5% of the Fund's total assets. The Fund expects that
some of its borrowings may be on a secured basis. In such situations, either the
custodian will segregate the pledged assets for the benefit of the lender or
arrangements will be made with a suitable subcustodian, which may include the
lender.
Derivative Instruments. As discussed in its Prospectus, each of the
Small Company Fund's Subadvisers may use a variety of derivative instruments,
including options, futures contracts (sometimes referred to as "futures"),
options on futures contracts, stock index options and forward currency contracts
to hedge the Fund's portfolio or for risk management.
The use of these instruments is subject to applicable regulations of
the SEC, the several options and futures exchanges upon which they may be
traded, the Commodity Futures Trading Commission ("CFTC") and various state
regulatory authorities. In addition, the Fund's ability to use these instruments
will be limited by tax considerations.
Special Risks Of Derivative Instruments. The use of derivative
instruments involves special considerations and risks as described below. Risks
pertaining to particular instruments are described in the sections that follow.
(1) Successful use of most of these instruments depends upon a
Subadviser's ability to predict movements of the overall securities and currency
markets, which requires different skills than predicting changes in the prices
of individual securities. While each Subadviser is experienced in the use of
these instruments, there can be no assurance that any particular strategy
adopted will succeed.
(2) There might be imperfect correlation, or even no correlation,
between price movements of an instrument and price movements of investments
being hedged. For example, if the value of an instrument used in a short hedge
(such as writing a call option, buying a put option, or selling a futures
contract) increased by less than the decline in value of the hedged investment,
the hedge would not be fully successful. Such a lack of correlation might occur
due to factors unrelated to the value of the investments being hedged, such as
speculative or other pressures on the markets in which these instruments are
traded.
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The effectiveness of hedges using instruments on indices will depend on the
degree of correlation between price movements in the index and price movements
in the investments being hedged.
(3) Hedging strategies, if successful, can reduce the risk of loss by
wholly or partially offsetting the negative effect of unfavorable price
movements in the investments being hedged. However, hedging strategies can also
reduce opportunity for gain by offsetting the positive effect of favorable price
movements in the hedged investments. For example, if the Fund entered into a
short hedge because a Subadviser projected a decline in the price of a security
in the Fund's portfolio, and the price of that security increased instead, the
gain from that increase might be wholly or partially offset by a decline in the
price of the instrument. Moreover, if the price of the instrument declined by
more than the increase in the price of the security, the Fund could suffer a
loss.
(4) As described below, the Fund might be required to maintain assets
as "cover," maintain segregated accounts, or make margin payments when it takes
positions in these instruments involving obligations to third parties (i.e.,
instruments other than purchased options). If the Fund were unable to close out
its positions in such instruments, it might be required to continue to maintain
such assets or accounts or make such payments until the position expired or
matured. The requirements might impair the Fund's ability to sell a portfolio
security or make an investment at a time when it would otherwise be favorable to
do so, or require that the Fund sell a portfolio security at a disadvantageous
time. The Fund's ability to close out a position in an instrument prior to
expiration or maturity depends on the existence of a liquid secondary market or,
in the absence of such a market, the ability and willingness of the other party
to the transaction ("counter party") to enter into a transaction closing out the
position. Therefore, there is no assurance that any hedging position can be
closed out at a time and price that is favorable to the Fund.
For a discussion of the federal income tax treatment of the Fund's
derivative instruments, see "Tax Status" below.
Options. The Small Company Fund may purchase or write put and call
options on securities and indices, and may purchase options on foreign currency,
and enter into closing transactions with respect to such options to terminate an
existing position. The purchase of call options serves as a long hedge, and the
purchase of put options serves as a short hedge. Writing put or call options can
enable the Fund to enhance income by reason of the premiums paid by the
purchaser of such options. Writing call options serves as a limited short hedge
because declines in the value of the hedged investment would be offset to the
extent of the premium received for writing the option. However, if the security
appreciates to a price higher than the exercise price of the call option, it can
be expected that the option will be exercised, and the Fund will be obligated to
sell the security at less than its market value or will be obligated to purchase
the security at a price greater than that at which the security must be sold
under the option. All or a portion of any assets used as cover for OTC options
written by a Fund would be considered illiquid to the extent described under
"Restricted and Illiquid Securities" above. Writing put options serves as a
limited long hedge because increases in the value of the hedged investment would
be offset to the extent of the premium received for writing the option. However,
if the security depreciates to a price lower than the exercise price of the put
option, it can be expected that the put option will be exercised, and the Fund
will be obligated to purchase the security at more than its market value.
The value of an option position will reflect, among other things, the
historical price volatility of the underlying investment, the current market
value of the underlying investment, the time remaining until expiration, the
relationship of the exercise price to the market price of the underlying
investment, and general market conditions. Options that expire unexercised have
no value. Options used by the Fund may include European-style options, which are
only exercisable at expiration. This is in contrast to American-style options
which are exercisable at any time prior to the expiration date of the option.
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The Fund may effectively terminate its right or obligation under an
option by entering into a closing transaction. For example, the Fund may
terminate its obligation under a call or put option that it had written by
purchasing an identical call or put option; this is known as a closing purchase
transaction. Conversely, the Fund may terminate a position in a put or call
option it had purchased by writing an identical put or call option; this is
known as a closing sale transaction. Closing transactions permit the fund to
realize the profit or limit the loss on an option position prior to its exercise
or expiration.
The Fund may purchase or write both OTC options and options traded on
foreign and U.S. exchanges. Exchange-traded options are issued by a clearing
organization affiliated with the exchange on which the option is listed that, in
effect, guarantees completion of every exchange-traded option transaction. OTC
options are contracts between the fund and the counter party (usually a
securities dealer or a bank) with no clearing organization guarantee. Thus, when
the Fund purchases or writes an OTC option, it relies on the counter party to
make or take delivery of the underlying investment upon exercise of the option.
Failure by the counter party to do so would result in the loss of any premium
paid by the fund as well as the loss of any expected benefit of the transaction.
The Fund's ability to establish and close out positions in
exchange-listed options depends on the existence of a liquid market. The Fund
intends to purchase or write only those exchange-traded options for which there
appears to be a liquid secondary market. However, there can be no assurance that
such a market will exist at any particular time. Closing transactions can be
made for OTC options only by negotiating directly with the counter party, or by
a transaction in the secondary market if any such market exists. Although the
Fund will enter into OTC options only with counter parties that are expected to
be capable of entering into closing transactions with the fund, there is no
assurance that the Fund will in fact be able to close out an OTC option at a
favorable price prior to expiration. In the event of insolvency of the counter
party, the Fund might be unable to close out an OTC option position at any time
prior to its expiration.
If the Fund were unable to effect a closing transaction for an option
it had purchased, it would have to exercise the option to realize any profit.
The inability to enter into a closing purchase transaction for a covered call
option written by the Fund could cause material losses because the Fund would be
unable to sell the investment used as a cover for the written option until the
option expires or is exercised.
The Fund may engage in options transactions on indices in much the same
manner as the options on securities discussed above, except that index options
may serve as a hedge against overall fluctuations in the securities markets in
general.
The writing and purchasing of options is a highly specialized activity
that involves investment techniques and risks different from those associated
with ordinary portfolio securities transactions. Imperfect correlation between
the options and securities markets may detract from the effectiveness of
attempted hedging.
To the extent required by sec guidelines, the Fund will not enter into
any such transactions unless it owns either (1) an offsetting ("covered")
position in securities, other options, or futures or (2) cash and liquid
securities with a value sufficient at all times to cover its potential
obligations to the extent not covered as provided in (1) above. The Fund will
also set aside cash and/or appropriate liquid assets in a segregated custodial
account if required to do so by the SEC and CFTC regulations. Assets used as
cover or held in a segregated account cannot be sold while the position in the
corresponding option or futures contract is open, unless they are replaced with
similar assets. As a result, the commitment of a large portion of the Fund's
assets to segregated accounts as a cover could impede portfolio management or
the Fund's ability to meet redemption requests or other current obligations.
Transactions using options (other than purchased options) also expose the Fund
to market risk. Market risk is that the price of the option will fluctuate with
the price of the underlying security. Due to the leverage effect of the option
this price fluctuation of the option will be greater than that of the underlying
security.
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Spread Transactions. The Small Company Fund may purchase covered spread
options from securities dealers. Such covered spread options are not presently
exchange-listed or exchange-traded. The purchase of a spread option gives the
Fund the right to put, or sell, a security that it owns at a fixed dollar spread
or fixed yield spread in relationship to another security that the Fund does not
own, but which is used as a benchmark. The risk to the Fund in purchasing
covered spread options it the cost of the premium paid for the spread option and
any transaction costs. In addition, there is no assurance that closing
transactions will be available. The purchase of spread options will be used to
protect the Fund against adverse changes in prevailing credit quality spreads,
i.e., the yield spread between high quality and lower quality securities. Such
protection is only provided during the life of the spread option.
Futures Contracts. The Small Company Fund may enter into futures
contracts, including interest rate, index, and currency futures and purchase and
write (sell) related options. The purchase of futures or call options thereon
can serve as a long hedge, and the sale of futures or the purchase of put
options thereon can serve as a short hedge. Writing covered call options on
futures contracts can serve as a limited short hedge, and writing covered put
options on futures contracts can serve as a limited long hedge, using a strategy
similar to that used for writing covered options in securities. The Fund's
hedging may include purchases of futures as an offset against the effect of
expected increases in securities prices or currency exchange rates and sales of
futures as an offset against the effect of expected declines in securities
prices or currency exchange rates. The Fund may write put options on futures
contracts while at the same time purchasing call options on the same futures
contracts in order to create synthetically a long futures contract position.
Such options would have the same strike prices and expiration dates. The Fund
will engage in this strategy only when a Subadviser believes it is more
advantageous to the Fund than is purchasing the futures contract.
The Fund will only enter into futures contracts that are traded on U.S.
or foreign exchanges or boards of trade approved by the CFTC and are
standardized as to maturity date and underlying financial instrument. These
transactions may be entered into for "bona fide hedging" purposes as defined in
CFTC regulations and other permissible purposes including increasing return and
hedging against changes in the value of portfolio securities due to anticipated
changes in interest rates, currency values and/or market conditions. The ability
of the Fund to trade in futures contracts may be limited by the requirements of
the code applicable to a regulated investment company.
The Fund will not enter into futures contracts and related options for
other than "bona fide hedging" purposes for which the aggregate initial margin
and premiums required to establish positions exceed 5% of the Fund's net asset
value after taking into account unrealized profits and unrealized losses on any
such contracts it has entered into. There is no overall limit on the percentage
of the Fund's assets that may be at risk with respect to futures activities.
Although techniques other than sales and purchases of futures contracts could be
used to reduce the Fund's exposure to market, currency, or interest rate
fluctuations, the Fund may be able to hedge its exposure more effectively and
perhaps at a lower cost through using futures contracts.
A futures contract provides for the future sale by one party and
purchase by another party of a specified amount of a specific financial
instrument (e.g., debt security) or currency for a specified price at a
designated date, time, and place. An index futures contract is an agreement
pursuant to which the parties agree to take or make delivery of an amount of
cash equal to a specified multiplier times the difference between the value of
the index at the close of the last trading day of the contract and the price at
which the index futures contract was originally written. Transactions costs are
incurred when a futures contract is bought or sold and margin deposits must be
maintained. A futures contract may be satisfied by delivery or purchase, as the
case may be, of the instrument, the currency, or by payment of the change in the
cash value of the index. More commonly, futures contracts are closed out prior
to delivery by entering into an offsetting transaction in a matching futures
contract. Although the value of an index might be a function of
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<PAGE> 21
the value of certain specified securities, no physical delivery of those
securities is made. If the offsetting purchase price is less than the original
sale price, the Fund realizes a gain; if it is more, the Fund realizes a loss.
Conversely, if the offsetting sale price is more than the original purchase
price, the Fund realizes a gain; if it is less, the Fund realizes a loss. The
transaction costs must also be included in these calculations. There can be no
assurance, however, that the Fund will be able to enter into an offsetting
transaction with respect to a particular futures contract at a particular time.
If the Fund is not able to enter into an offsetting transaction, the Fund will
continue to be required to maintain the margin deposits on the futures contract.
No price is paid by the Fund upon entering into a futures contract.
Instead, at the inception of a futures contract, the fund is required to deposit
in a segregated account with its custodian, in the name of the futures broker
through whom the transaction was effected, "initial margin" consisting of cash,
U.S. government securities or other liquid, high grade debt obligations, in an
amount generally equal to 10% or less of the contract value. Margin must also be
deposited when writing a call or put option on a futures contract, in accordance
with applicable exchange rules. Unlike margin in securities transactions,
initial margin on futures contracts does not represent a borrowing, but rather
is in the nature of a performance bond or good-faith deposit that is returned to
the Fund at the termination of the transaction if all contractual obligations
have been satisfied. Under certain circumstances, such as periods of high
volatility, the Fund may be required by an exchange to increase the level of its
initial margin payment, and initial margin requirements might be increased
generally in the future by regulatory action.
Subsequent "variation margin" payments are made to and from the futures
broker daily as the value of the futures position varies, a process known as
"marking to market." Variation margin does not involve borrowing, but rather
represents a daily settlement of a Fund's obligations to or from a futures
broker. When the fund purchases an option on a future, the premium paid plus
transaction costs is all that is at risk. In contrast, when the Fund purchases
or sells a futures contract or writes a call or put option thereon, it is
subject to daily variation margin calls that could be substantial in the event
of adverse price movements. If the Fund has insufficient cash to meet daily
variation margin requirements, it might need to sell securities at a time when
such sales are disadvantageous. Purchasers and sellers of futures positions and
options on futures can enter into offsetting closing transactions by selling or
purchasing, respectively, an instrument identical to the instrument held or
written. Positions in futures and options on futures may be closed only on an
exchange or board of trade on which they were entered into (or through a linked
exchange). Although the Fund intends to enter into futures transactions only on
exchanges or boards of trade where there appears to be an active market, there
can be no assurance that such a market will exist for a particular contract at a
particular time.
Under certain circumstances, futures exchanges may establish daily
limits on the amount that the price of a future or option on a futures contract
can vary from the previous day's settlement price; once that limit is reached,
no trades may be made that day at a price beyond the limit. Daily price limits
do not limit potential losses because prices could move to the daily limit for
several consecutive days with little or no trading, thereby preventing
liquidation of unfavorable positions.
If the Fund were unable to liquidate a futures or option on a futures
contract position due to the absence of a liquid secondary market or the
imposition of price limits, it could incur substantial losses. The Fund would
continue to be subject to market risk with respect to the position. In addition,
except in the case of purchased options, the Fund would continue to be required
to make daily variation margin payments and might be required to maintain the
position being hedged by the future or option or to maintain cash or securities
in a segregated account.
Certain characteristics of the futures market might increase the risk
that movements in the prices of futures contracts or options on futures
contracts might not correlate perfectly with movements in the prices of the
investments being hedged. For example, all participants in the futures and
options on futures contracts markets are subject to daily variation margin calls
and might be compelled to liquidate futures or
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options on futures contracts positions whose prices are moving unfavorably to
avoid being subject to further calls. These liquidations could increase price
volatility of the instruments and distort the normal price relationship between
the futures or options and the investments being hedged. Also, because initial
margin deposit requirements in the futures markets are less onerous than margin
requirements in the securities markets, there might be increased participation
by speculators in the future markets. This participation also might cause
temporary price distortions. In addition, activities of large traders in both
the futures and securities markets involving arbitrage, "program trading" and
other investment strategies might result in temporary price distortions.
Swap Agreements. The Small Company Fund may enter into interest rate,
securities index, commodity, or security and currency exchange rate swap
agreements for any lawful purpose consistent with the Fund's investment
objective, such as for the purpose of attempting to obtain or preserve a
particular desired return or spread at a lower cost to the Fund than if the Fund
had invested directly in an instrument that yielded that desired return or
spread. The Fund also may enter into swaps in order to protect against an
increase in the price of, or the currency exchange rate applicable to,
securities that the Fund anticipates purchasing at a later date. Swap agreements
are two-party contracts entered into primarily by institutional investors for
periods ranging from a few weeks to several years. In a standard "swap"
transaction, two parties agree to exchange the returns (or differentials in
rates of return) earned or realized on particular predetermined investments or
instruments. The gross returns to be exchanged or "swapped" between the parties
are calculated with respect to a "notional amount," i.e., the return on or
increase in value of a particular dollar amount invested at a particular
interest rate, in a particular foreign currency, or in a "basket" of securities
representing a particular index. Swap agreements may include interest rate caps,
under which, in return for a premium, one party agrees to make payments to the
other to the extent that interest rates exceed a specified rate, or "cap";
interest rate floors under which, in return for a premium, one party agrees to
make payments to the other to the extent that interest rates fall below a
specified level, or "floor"; and interest rate collars, under which a party
sells a cap and purchases a floor, or vice versa, in an attempt to protect
itself against interest rate movements exceeding given minimum or maximum
levels.
The "notional amount" of the swap agreement is the agreed upon basis
for calculating the obligations that the parties to a swap agreement have agreed
to exchange. Under most swap agreements entered into by the Fund, the
obligations of the parties would be exchanged on a "net basis." Consequently,
the Fund's obligation (or rights) under a swap agreement will generally be equal
only to the net amount to be paid or received under the agreement based on the
relative values of the positions held by each party to the agreement (the "net
amount"). The Fund's obligation under a swap agreement will be accrued daily
(offset against amounts owed to the Fund) and any accrued but unpaid net amounts
owed to a swap counterparty will be covered by the maintenance of a segregate
account consisting of cash, or liquid high grade debt obligations.
Whether the Fund's use of swap agreements will be successful in
furthering its investment objective will depend, in part, on a Subadviser's
ability to predict correctly whether certain types of investments are likely to
produce greater returns than other investments. Swap agreements may be
considered to be illiquid. Moreover, the Fund bears the risk of loss of the
amount expected to be received under a swap agreement in the event of the
default or bankruptcy of a swap agreement counterparty. Certain restrictions
imposed on the Fund by the Internal Revenue Code may limit the Fund's ability to
use swap agreements. The swaps market is largely unregulated.
The Fund will enter swap agreements only with counterparties that a
Subadviser reasonably believes are capable of performing under the swap
agreements. If there is a default by the other party to such a transaction, the
Fund will have to rely on its contractual remedies (which may be limited by
bankruptcy, insolvency or similar laws) pursuant to the agreements related to
the transaction.
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Foreign Currency-Related Derivative Strategies - Special
Considerations. The Small Company Fund may use options and futures on foreign
currencies and forward currency contracts to hedge against movements in the
values of the foreign currencies in which the Fund's securities are denominated.
The Fund may engage in currency exchange transactions to protect against
uncertainty in the level of future exchange rates and may also engage in
currency transactions to increase income and total return. Such currency hedges
can protect against price movements in a security the Fund owns or intends to
acquire that are attributable to changes in the value of the currency in which
it is denominated. Such hedges do not, however, protect against price movements
in the securities that are attributable to other causes.
The Fund might seek to hedge against changes in the value of a
particular currency when no hedging instruments on that currency are available
or such hedging instruments are more expensive than certain other hedging
instruments. In such cases, the Fund may hedge against price movements in that
currency by entering into transactions using hedging instruments on another
foreign currency or a basket of currencies, the values of which a subadviser
believes will have a high degree of positive correlation to the value of the
currency being hedged. The risk that movements in the price of the hedging
instrument will not correlate perfectly with movements in the price of the
currency being hedged is magnified when this strategy is used.
The value of derivative instruments on foreign currencies depends on
the value of the underlying currency relative to the U.S. dollar. Because
foreign currency transactions occurring in the interbank market might involve
substantially larger amounts than those involved in the use of such hedging
instruments, the Fund could be disadvantaged by having to deal in the odd lot
market (generally consisting of transactions of less than $1 million) for the
underlying foreign currencies at prices that are less favorable than for round
lots.
There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirement that quotations available through
dealers or other market sources be firm or revised on a timely basis. Quotation
information generally is representative of very large transactions in the
interbank market and thus might not reflect odd-lot transactions where rates
might be less favorable. The interbank market in foreign currencies is a global,
round-the-clock market. To the extent the U.S. options or futures markets are
closed while the markets for the underlying currencies remain open, significant
price and rate movements might take place in the underlying markets that cannot
be reflected in the markets for the derivative instruments until they reopen.
Settlement of derivative transactions involving foreign currencies
might be required to take place within the country issuing the underlying
currency. Thus, the Fund might be required to accept or make delivery of the
underlying foreign currency in accordance with any U.S. or foreign regulations
regarding the maintenance of foreign banking arrangements by U.S. residents and
might be required to pay any fees, taxes and charges associated with such
delivery assessed in the issuing country.
Permissible foreign currency options will include options traded
primarily in the OTC market. Although options on foreign currencies are traded
primarily in the OTC market, the Fund will normally purchase OTC options on
foreign currency only when a Subadviser believes a liquid secondary market will
exist for a particular option at any specific time.
Forward Currency Contracts. A forward currency contract involves an
obligation to purchase or sell a specific currency at a future date, which may
be any fixed number of days from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. These contracts are entered
into in the interbank market conducted directly between currency traders
(usually large commercial banks) and their customers.
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At or before the maturity of a forward contract, the Small Company Fund
may either sell a portfolio security and make delivery of the currency, or
retain the security and fully or partially offset its contractual obligation to
deliver the currency by purchasing a second contract. If the Fund retains the
portfolio security and engages in an offsetting transaction, the Fund, at the
time of execution of the offsetting transaction, will incur a gain or a loss to
the extent that movement has occurred in forward contract prices.
The precise matching of forward currency contract amounts and the value
of the securities involved generally will not be possible because the value of
such securities, measured in the foreign currency, will change after the foreign
currency contract has been established. Thus, the Fund might need to purchase or
sell foreign currencies in the spot (cash) market to the extent such foreign
currencies are not covered by forward contracts. The projection of short-term
currency market movements is extremely difficult, and the successful execution
of a short-term hedging strategy is highly uncertain.
Currency Hedging. While the values of forward currency contracts,
currency options, currency futures and options on futures may be expected to
correlate with exchange rates, they will not reflect other factors that may
affect the value of the Small Company Fund's investments. A currency hedge, for
example, should protect a Yen-denominated bond against a decline in the Yen, but
will not protect the Fund against price decline if the issuer's creditworthiness
deteriorates. Because the value of the Fund's investments denominated in foreign
currency will change in response to many factors other than exchange rates, a
currency hedge may not be entirely successful in mitigating changes in the value
of the Fund's investments denominated in that currency over time.
A decline in the dollar value of a foreign currency in which the Fund's
securities are denominated will reduce the dollar value of the securities, even
if their value in the foreign currency remains constant. The use of currency
hedges does not eliminate fluctuations in the underlying prices of the
securities, but it does establish a rate of exchange that can be achieved in the
future. In order to protect against such diminutions in the value of securities
it holds, the Fund may purchase put options on the foreign currency. If the
value of the currency does decline, the Fund will have the right to sell the
currency for a fixed amount in dollars and will thereby offset, in whole or in
part, the adverse effect on its securities that otherwise would have resulted.
Conversely, if a rise in the dollar value of a currency in which securities to
be acquired are denominated is projected, thereby potentially increasing the
cost of the securities, the Fund may purchase call options on the particular
currency. The purchase of these options could offset, at least partially, the
effects of the adverse movements in exchange rates. Although currency hedges
limit the risk of loss due to a decline in the value of a hedged currency, at
the same time, they also limit any potential gain that might result should the
value of the currency increase.
The Fund's currency hedging will be limited to hedging involving either
specific transactions or portfolio positions. Transaction hedging is the
purchase or sale of forward currency with respect to specific receivables or
payables of the Fund generally accruing in connection with the purchase or sale
of its portfolio securities. Position hedging is the sale of forward currency
with respect to portfolio security positions. The Fund may not position hedge to
an extent greater than the aggregate market value (at the time of making such
sale) of the hedged securities.
Securities Of Other Non-Affiliated Investment Companies. Some of the
countries in which the Small Company Fund may invest may not permit direct
investment by outside investors. investments in such countries may only be
permitted through foreign government-approved or government-authorized
investment vehicles, which may include other investment companies. Investing
through such vehicles may involve frequent or layered fees or expenses and may
also be subject to limitation under the 1940 act. Under the 1940 Act, a Fund may
invest up to 10% of its assets in shares of investment companies and up to 5% of
its assets in any one investment company as long as the investment does not
represent more than 3% of the voting stock of the acquired investment company.
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Commercial Paper. The Small Company Fund may invest in commercial paper
which is indexed to certain specific foreign currency exchange rates. The terms
of such commercial paper provide that its principal amount is adjusted upwards
or downwards (but not below zero) at maturity to reflect changes in the exchange
rate between two currencies while the obligation is outstanding. The Fund will
purchase such commercial paper with the currency in which it is denominated and,
at maturity, will receive interest and principal payments thereon in that
currency, but the amount or principal payable by the issuer at maturity will
change in proportion to the change (if any) in the exchange rate between two
specified currencies between the date the instrument is issued and the date the
instrument matures. While such commercial paper entails the risk of loss of
principal, the potential for realizing gains as a result of changes in foreign
currency exchange rate enables the Fund to hedge or cross-hedge against a
decline in the U.S. Dollar value of investments denominated in foreign
currencies while providing an attractive money market rate of return. The Fund
will purchase such commercial paper for hedging purposes only, not for
speculation. The staff of the SEC is currently considering whether the purchase
of this type of commercial paper would result in the issuance of a "senior
security" within the meaning of the 1940 Act. The Fund believes that such
investments do not involve the creation of such a senior security, but
nevertheless will establish a segregated account with respect to its investments
in this type of commercial paper and to maintain in such account cash not
available for investment or U.S. Government securities or other liquid high
quality debt securities having a value equal to the aggregate principal amount
of outstanding commercial paper of this type.
INVESTMENT RESTRICTIONS
The following are fundamental investment limitations, which cannot be
changed without the approval of the holders of a majority of the shares of the
Fund for which the change is proposed, and apply to all of the Funds of the
Trust (except the Small Company and Income Funds, whose restrictions are listed
separately below), unless otherwise stated.
The Trust may not:
1. Borrow money, except an amount equal to no more than 5% of the
value of each of the Fund's total assets (calculated when the
loan is made) for temporary, emergency purposes or for the
clearance of transactions. This limited borrowing authority
will not be used to leverage the Funds or to borrow for
extended periods of time. This authority is intended to
provide the investment manager additional flexibility in the
execution of routine daily transactions, and allow for more
efficient cash management.
2. Purchase securities on margin, but the Trust may obtain such
credits as may be necessary for the clearance of purchases and
sales of securities and except as may be necessary to make
margin payments in connection with derivative securities
transactions.
3. Make loans to other persons, except by the purchase of
obligations in which the Trust is authorized to invest. The
Trust may, however, enter into repurchase agreements, but a
Fund will not enter into repurchase agreements if, as a result
thereof, more than 10% of the Fund's total assets (taken at
current value) would be subject to repurchase agreements
maturing in more than 7 days.
4. 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% 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
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<PAGE> 26
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 as long as it
is in compliance with Rule 2a-7 under the 1940 Act, as such
Rule may be amended from time to time.
5. 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.
6. Purchase or sell commodities or commodities contracts, except
to the extent disclosed in the current Prospectus of such
Fund.
7. issue securities except as permitted by the Investment Company
Act of 1940.
The following are the non-fundamental operating policies of the Capital
Appreciation Fund, Total Return Fund, Government Bond Fund and Money Market Fund
which may be changed by the Board of Trustees of the Trust without shareholder
approval:
No Fund may:
1. Make short sales of securities.
2. Purchase or otherwise acquire any other securities 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.
3. Purchase securities of other investment companies, except(a)
in connection with a merger, consolidation, acquisition or
reorganization or (b) to the extent permitted by the 1940
Act, or any rules or regulations thereunder, or pursuant to
any exemption therefrom.
INVESTMENT RESTRICTIONS FOR THE SMALL COMPANY FUND AND THE INCOME FUND -- The
following are fundamental investment limitations for the Small Company and the
Income Fund which cannot be changed without shareholder approval:
THE SMALL COMPANY FUND AND THE INCOME FUND:
1. May (i) borrow money from banks and (ii) make other
investments or engage in other transactions permissible under
the Investment Company Act of 1940 (the "1940 Act") which may
involve a borrowing, provided that the combination of (i) and
(ii) shall not exceed 33-1/3% of the value of the Fund's total
assets (including the amount borrowed), less the Fund's
liabilities (other than borrowings), except that the Fund may
borrow up to an additional 5% of its total assets (not
including the amount borrowed) from a bank for temporary or
emergency purposes (but not for leverage or the purchase of
investments). The Fund may also borrow money from other
persons to the extent permitted by applicable law. For
purposes of this restriction, short sales, the entry into
currency transactions, options, futures contracts, options on
futures contracts, forward commitment transactions and dollar
roll transactions that are not accounted for as financings
(and the segregation of assets in connection with any of the
foregoing) shall not constitute borrowing.
2. May not issue senior securities, except as permitted under the
1940 Act.
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3. May not act as an underwriter of another issuer's securities,
except to the extent that the Fund may be deemed an
underwriter within the meaning of the Securities Act in
connection with the purchase and sale of portfolio securities.
4. May not purchase or sell physical commodities unless acquired
as a result of ownership of securities or other instruments,
but this shall not prevent the Fund from purchasing or selling
options, futures contracts, or other derivative instruments,
or from investing in securities or other instruments backed by
physical commodities.
5. May not lend any security or make any other loan if, as a
result, more than 33 1/3% of its total assets (taken at
current value) would be lent to other parties, except in
accordance with its investment objective, policies and
limitations through (i) purchase of debt securities or other
debt instruments, including loan participations, assignments
and structured securities, or (ii) by engaging in repurchase
agreements.
6. May not purchase the securities of any issuer if, as a result,
more than 25% (taken at current value) of the Fund's total
assets would be invested in the securities of issuers, the
principal activities of which are in the same industry. This
limitation does not apply to securities issued by the U.S.
government or its agencies or instrumentalities.
7. May not purchase or sell real estate unless acquired as a
result of ownership of securities or instruments, but this
restriction shall not prohibit the Fund from purchasing or
selling securities issued by entities or investment vehicles
that own or deal in real estate or interests therein or
instruments secured by real estate or interests therein.
The following are the non-fundamental operating policies of the Small Company
Fund and the Income Fund which may be changed by the Board of Trustees of the
Trust without shareholder approval:
The Small Company and the Income Fund each may not:
1. Sell securities short, unless the Fund owns or has the right
to obtain securities equivalent in kind and amount to the
securities sold short or unless it covers such short sale as
required by the current rules and positions of the SEC or its
staff, and provided that short positions in forward currency
contracts, options, futures contracts, options on futures
contracts, or other derivative instruments are not deemed to
constitute selling securities short.
2. Purchase securities on margin, except that the Fund may obtain
such short-term credits as are necessary for the clearance of
transactions; and provided that margin deposits in connection
with options, futures contracts, options on futures contracts,
transactions in currencies or other derivative instruments
shall not constitute purchasing securities on margin.
Purchase or otherwise acquire any security if, as a result,
more than 15% of its net assets would be invested in
securities that are illiquid.
3. Purchase securities of other investment companies except in
connection with a merger, consolidation, acquisition,
reorganization or offer of exchange, or as otherwise permitted
under the 1940 Act.
27
<PAGE> 28
4. Pledge, mortgage or hypothecate any assets owned by the Fund
except as may be necessary in connection with permissible
borrowings or investments and then such pledging, mortgaging,
or hypothecating may not exceed 33 1/3% of the Fund's total
assets at the time of the borrowing or investment.
INSURANCE LAW RESTRICTIONS - In connection with the Trust's agreement
to sell shares to the Accounts, the Adviser and the insurance companies may
enter into agreements, required by certain state insurance departments, under
which the Adviser may agree to use its best efforts to assure and to permit
insurance companies to monitor that each Fund of the Trust complies with the
investment restrictions and limitations prescribed by state insurance laws and
regulations applicable to the investment of separate account assets in shares of
mutual funds. If a Fund failed to comply with such restrictions or limitations,
the Accounts would take appropriate action which might include ceasing to make
investments in the Fund or withdrawing from the state imposing the limitation.
Such restrictions and limitations are not expected to have a significant impact
on the Trust's operations.
28
<PAGE> 29
MAJOR SHAREHOLDERS
As of August 31, 1997, separate accounts of Nationwide Life Insurance
Company and Nationwide Life and Annuity Insurance Company had shared voting and
investment power of 92.6% and 7.4% of the shares of the Total Return Fund, 92.5%
and 7.5% of the shares of Government Bond Fund, 98.9% and 1.1% of the shares of
Money Market Fund, and 97.0% and 3.0% of the shares of Capital Appreciation
Fund, respectively. As of August 31, 1997, Nationwide Life Insurance Company
owned beneficially 2.9% and had shared voting and investment power for 97.1% of
the shares of the Small Company Fund.
As of August 31, 1997, the Trustees and Officers of the Trust as a
group owned less than 1% of the shares of the Funds.
TRUSTEES AND EXECUTIVE OFFICERS OF THE TRUST
TRUSTEES AND EXECUTIVE OFFICERS
The principal occupations of the Trustees and Officers during the last
five years and their affiliations are:
Dr. John C. Bryant, Trustee.
44 Faculty Place, Wilmington, Ohio.
Dr. Bryant is Executive Director of the Cincinnati Youth Collaborative.
He was formerly Professor of Education, Wilmington College.
Sue A. Doody
169 East Beck Street, Columbus, Ohio.
Ms. Doody is owner of Lindey's Restaurant, Columbus, Ohio.
Robert M. Duncan, Trustee.
1397 Haddon Road, Columbus, Ohio.
Mr. Duncan is a member of the Ohio Elections Commission. He 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*
One Nationwide Plaza, Columbus, Ohio
Mr. Gasper is President and 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, Trustee
4890 Smoketalk Lane, Westerville, Ohio.
Dr. Kerr is President Emeritus of Kendall College. He was formerly
President of Grant Hospital Development Foundation.
29
<PAGE> 30
Douglas F. Kridler
55 E. State Street, Columbus, Ohio.
Mr. Kridler is President and Executive Director of the Columbus
Association for the Performing Arts.
Robert J. Woodward, Jr.*
One Nationwide Plaza, Columbus, Ohio.
Mr. Woodward is Executive Vice President - Chief Investment Officer of
Nationwide Insurance Enterprise and of Nationwide Advisory Services,
Inc.
James F. Laird, Jr., Treasurer.
Three Nationwide Plaza, Columbus, Ohio.
Mr. Laird is Vice President and General Manager of Nationwide Advisory
Services, Inc., the Distributor and Investment Adviser. He was formerly
Treasurer of Nationwide Advisory Services, Inc.
Rae Mercer Pollina, Secretary.
Three Nationwide Plaza, Columbus, Ohio.
Mrs. Pollina is Corporate Secretary of Nationwide Advisory Services,
Inc., the Distributor and Investment Adviser.
*A Trustee who is an "interested person" of the Trust as defined in the
Investment Company Act of 1940.
The Funds do not pay any fees to Officers or to Trustees who are
considered "interested persons" of the Trust. The table below lists the
aggregate compensation paid by the Trust to each disinterested Trustee during
the fiscal year ended December 31, 1996, and the aggregate compensation paid to
each disinterested Trustee during the year by all registered investment
companies to which the Adviser provides investment advisory services (the
"Nationwide Fund Complex").
The Trust does not maintain any pension or retirement plans for the
Officers or Trustees of the Trust.
FISCAL YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
TOTAL
COMPENSATION
FROM THE
AGGREGATE NATIONWIDE FUND
COMPENSATION COMPLEX INCLUDING
FROM THE TRUST THE TRUST
-------------- ---------
<S> <C> <C>
Dr. John C. Bryant $1,000 $15,500
Sue A. Doody - 0 - $ 8,500
Robert M. Duncan $1,000 $15,500
Dr. Thomas J. Kerr IV $1,000 $15,500
Douglas F. Kridler - 0 - $ 8,042
</TABLE>
30
<PAGE> 31
CALCULATING YIELD - THE MONEY MARKET FUND
Any current Fund yield quotations, subject to Rule 482 under the
Securities Act of 1933, shall consist of a seven calendar day historical yield,
carried at least to the nearest hundredth of a percent. The yield shall be
calculated by determining the net change, excluding realized and unrealized
gains and losses, in the value of a hypothetical pre-existing account having a
balance of one share at the beginning of the period, dividing the net change in
account value by the value of the account at the beginning of the base period to
obtain the base period return, and multiplying the base period return by 365/7
(or 366/7 during a leap year). For purposes of this calculation, the net change
in account value reflects the value of additional shares purchased with
dividends from the original share, and dividends declared on both the original
share and any such additional shares. As of June 30, 1997, the Fund's seven-day
current yield was 5.24%. The Fund's effective yield represents an annualization
of the current seven day return with all dividends reinvested, and for the
period ended June 30, 1997, was 5.38%.
The Fund's yield will fluctuate daily. Actual yields will depend on
factors such as the type of instruments in the Fund's portfolio, portfolio
quality and average maturity, changes in interest rates, and the Fund's
expenses. There is no assurance that the yield quoted on any given occasion will
remain in effect for any period of time and there is no guarantee that the net
asset value will remain constant. It should be noted that a shareholder's
investment in the Fund is not guaranteed or insured. Yields of other money
market funds may not be comparable if a different base period or another method
of calculation is used.
CALCULATING YIELD AND TOTAL RETURN - NON-MONEY MARKET FUNDS
The Funds may from time to time advertise historical performance,
subject to Rule 482 under the Securities Act of 1933. An investor should keep in
mind that any return or yield quoted represents past performance and is not a
guarantee of future results. The investment return and principal value of
investments will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than their original cost.
All performance advertisements shall include average annual total
return quotations for the most recent one, five, and ten year periods (or life,
if a fund has been in operation less than one of the prescribed periods).
Average annual total return represents the rate required each year for an
initial investment to equal the redeemable value at the end of the quoted
period. It is calculated in a uniform manner by dividing the ending redeemable
value of a hypothetical initial payment of $1,000 for a specified period of
time, by the amount of the initial payment, assuming reinvestment of all
dividends and distributions. The one, five, and ten year periods are calculated
based on periods that end on the last day of the calendar quarter preceding the
date on which an advertisement is submitted for publication.
The uniformly calculated average annual total returns for the one year,
five year, and ten year periods for the Total Return and Government Bond Funds,
ended June 30, 1997 are shown below.
<TABLE>
<CAPTION>
Total Government
Return Bond
------ ----
<S> <C> <C>
1 Year 34.0% 8.2%
5 Years 17.6% 7.0%
10 Years 12.6% 8.8%
</TABLE>
31
<PAGE> 32
The Capital Appreciation Fund began operations on May 1, 1992. Its
average annual total return for one year ended June 30, 1997, the five years
ended June 30, 1997 and for the period from May 1, 1992 through June 30, 1997
was 38.2%, 18.1% and 17.0%, respectively. The Small Company Fund began
operations on October 23, 1995. Its average total return for the year ended June
30, 1997 and period from October 23, 1995 through June 30, 1997 was 14.1% and
28.8%, respectively.
The Government Bond Fund may also from time to time advertise a
uniformly calculated yield quotation. This yield is calculated by dividing the
net investment income per share earned during a 30-day base period by the
maximum offering price per share on the last day of the period, assuming
reinvestment of all dividends and distributions. This yield formula uses the
average number of shares entitled to receive dividends, provides for semi-annual
compounding of interest, and includes a modified market value method for
determining amortization. The yield will fluctuate, and there is no assurance
that the yield quoted on any given occasion will remain in effect for any period
of time. The Government Bond Fund yield for the 30-day period ended June 30,
1997 was 6.68%.
INVESTMENT ADVISER AND OTHER SERVICES
The Adviser, Nationwide Advisory Services, Inc. ("NAS"), manages the
Funds (except the Small Company Fund and the Income Fund) pursuant to an
Investment Advisory Agreement (the "Agreement") dated as of November 1, 1997.
The Adviser provides the Trust with overall investment advisory services and,
subject to such policies as the Trustees may determine, makes investment
decisions for the Trust. Prior to November 1, 1997, the Adviser received a fee
computed and paid monthly at the annual rate equal to .5% of the average daily
net assets of each Fund of the Trust (except for the Small Company and Income
Funds).
Effective November 1, 1997,the advisory fees were changed (except for
Small Company and Income Fund) to the following rates, expressed as an annual
percentage of average daily net assets:
<TABLE>
<CAPTION>
Fund Advisory Fees
---- -------------
<S> <C>
Total Return Fund and 0.60% on assets up to $1 billion
Capital 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 assets up to $1 billion
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 assets up to $1 billion
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>
32
<PAGE> 33
NAS also provides fund accounting and administrative services to the Trust
(except Small Company and Income Fund) pursuant to a separate Fund
Administration Agreement dated on November 1, 1997. For these services, NAS
receives a fee, calculated daily and paid monthly at an annual rate of 0.05% for
each Fund's average net assets on the first $1 billion of assets and 0.04% on
the assets of $1 billion and more.
The Trust pays the compensation of the five Trustees who are not
affiliated with the Adviser and all expenses (other than those assumed by the
Adviser), including governmental fees, interest charges, taxes, membership dues
in the Investment Company Institute allocable to the Trust; fees and expenses of
independent certified public accountants, legal counsel, and any transfer agent,
registrar, and dividend disbursing agent of the Trust; expenses of preparing,
printing, and mailing shareholders' reports, notices, proxy statements, and
reports to governmental offices and commissions; expenses connected with the
execution, recording, and settlement of portfolio security transactions,
insurance premiums, fees and expenses of the custodian for all services to the
Trust; and expenses of calculating the net asset value of shares of the Trust,
expenses of shareholders' meetings, and expenses relating to the issuance,
registration, and qualification of shares of the Trust.
For the years ended December 31, 1996, 1995 and 1994, the Adviser
received fees in the following amounts: Total Return Fund $4,851,676,
$3,406,571, and $2,556,765, respectively; Government Bond Fund $2,225,962,
$2,088,523, and $1,997,185, respectively; Money Market Fund $4,518,925,
$3,574,486, and $3,269,449, respectively; and Capital Appreciation Fund
$684,932, $326,158, and $237,838, respectively.
NAS pays the compensation of the Trustees affiliated with the Adviser.
The officers of the Trust receive no compensation from the Trust. NAS also
furnishes all necessary administrative services, office space, equipment, and
clerical personnel for servicing the investments of the Trust and maintaining
its organization, investment advisory facilities, and executive and supervisory
personnel for managing the investments and effecting the portfolio transactions
of the Trust.
The Investment Advisory Agreement also specifically provides that the
Adviser, including its directors, officers, and employees, shall not be liable
for any error of judgment, or mistake of law, or for any loss arising out of any
investment, or for any act or omission in the execution and management of the
Trust, except for willful misfeasance, bad faith, or gross negligence in the
performance of its duties, or by reason of reckless disregard of its obligations
and duties under the Agreement. The Agreement will continue in effect only if
its continuance is specifically approved at least annually by the Trustees, or
by vote of a majority of the outstanding voting securities of the Trust, and in
either case, by a majority of the Trustees who are not parties to the Agreement
or interested persons of any such party. The Agreement terminates automatically
if it is assigned. It may be terminated without penalty by vote of a majority of
the outstanding voting securities, or by either party, on not less than 60 days
written notice. The Agreement further provides that the Adviser may render
services to others.
ADVISORY SERVICES FOR THE SMALL COMPANY FUND
The Adviser oversees the management of the Small Company Fund pursuant
to an Investment Advisory Agreement dated October 20, 1995. Subject to the
supervision and direction of the Trustees, the Adviser determines the allocation
of assets among the Subadvisers and evaluates and monitors the performance of
the Subadvisers. The Adviser is also authorized to select and place portfolio
investments on behalf of the Fund; however, the Adviser generally intends to
limit its direct portfolio management to the investment of a portion of the
Fund's assets in cash or money market instruments. The Adviser has
responsibility for communicating performance expectations and evaluations to the
Subadvisers and ultimately recommending to the Trust's Board of Trustees whether
a Subadviser's contract should be renewed, modified or terminated; however, the
Adviser does not expect to recommend frequent changes
33
<PAGE> 34
of subadvisers. The Adviser will regularly provide written reports to the Board
of Trustees regarding the results of its evaluation and monitoring functions.
The Advisory Agreement of the Small Company Fund contains termination and
indemnification provisions similar to those in the Agreement as described above.
Shareholders of the Small Company Fund approved a proposal which
authorizes the Board of Trustees to appoint, replace or terminate subadvisers
without the approval of the Fund's shareholders; the order would also allow the
Adviser to revise a subadvisory agreement without shareholder approval. This
authorization will only be utilized if an exemptive order which the Adviser and
the Trust, on behalf of the Fund, have applied for is granted by the SEC. If
the order is granted, any change in subadvisers will be communicated to
shareholders within 60 days of such changes and all changes will be approved by
the Trust's Board of Trustees, including a majority of the Trustees who are not
interested persons of the Trust or the Adviser. The order, if granted, is
intended to facilitate the efficient operation of the Fund and afford the Trust
increased management flexibility. Prior to receiving the exemptive order, the
Adviser will not appoint, replace or terminate any subadvisers or materially
amend any subadvisory agreement without obtaining the approval of shareholders.
The Fund pays to the Adviser a fee at the annual rate of 1.00% of the
Fund's average daily net assets. The Adviser has voluntarily agreed to waive all
or part of its fees in order to limit the Fund's total operating expenses to not
more than 1.25% of the Fund's average daily net assets on an annual basis. These
fee waivers are voluntary and may be terminated at any time. During the year
ended December 31, 1996 and the period from October 23, 1995 (date of
commencement of operations) through December 31, 1995, the Adviser received
advisory fees in the amount of $851,352 and $11,003, respectively, and waived
fees and reimbursed expenses in the amount of $0 and $10,495, respectively.
The Subadvisers - Pursuant to Subadvisory Agreements between each of
the Subadvisers and the Adviser, each of which are dated October 20, 1995, the
Subadvisers each manage a portion of the Fund's assets in accordance with the
Fund's investment objective and policies. With regard to the portion of the
Fund's assets allocated to it, each Subadviser shall make investment decisions
for the Fund and in connection with such decisions place purchase and sell
orders for the securities in the Fund. For the investment management services
they provide to the Fund, each Subadviser, or PIML and VEAC together, receives a
fee from the Adviser at the annual rate of .60% of the average daily net assets
of the portion of the Fund managed by that Subadviser or group of Subadvisers.
During the year ended December 31, 1996 and the period from October 23
(date of commencement of operations) through December 31, 1995, the Adviser paid
$483,572 and $11,394 in fees to the Subadvisers.
Each of the Subadvisory Agreements specifically provides that the
Subadviser, including its directors, officers, partners and employees, shall not
be liable for any error of judgment, or mistake of law, or for any loss arising
out of any investment, or for any act or omission in the execution and
management of the Small Company Fund, except for willful misfeasance, bad faith,
or gross negligence in the performance of its duties, or by reason of reckless
disregard of its obligations and duties under such Agreement. Each Subadvisory
Agreement will continue in effect for an initial period of two years and
thereafter shall continue automatically for successive annual periods provided
such continuance is specifically approved at least annually by the Trustees, or
by vote of a majority of the outstanding voting securities of the Fund, and in
either case, by a majority of the Trustees who are not parties to the Agreement
or interested persons of any such party. Each Subadvisory Agreement terminates
automatically if it is assigned. It may also be terminated without penalty by
vote of a majority of the out standing voting securities, or by either party, on
not more than 60 days nor less than 30 days written notice.
Below is a brief description of each of the Subadvisers.
The Dreyfus Corporation. Dreyfus, located at 200 Park Avenue, New York,
New York 10166, was formed in 1947 and serves as one of the Small Company Fund's
Subadvisers. Dreyfus is a wholly-owned subsidiary of Mellon Bank, N.A., which is
a wholly-owned subsidiary of Mellon Bank Corporation ("Mellon"). As of February
28, 1997, Dreyfus managed or administered approximately $86 billion in assets
for approximately 1.7 million investor accounts nationwide.
Mellon is a publicly owned multibank holding company incorporated under
Pennsylvania law in 1971 and registered under the Federal Bank Holding Company
Act of 1956, as amended. Mellon provides a comprehensive range of financial
products and services in domestic and selected international markets. Mellon is
among the twenty-five largest bank holding companies in the United States based
on total assets. Mellon's principal wholly-owned subsidiaries are Mellon Bank,
N.A., Mellon Bank (DE)
34
<PAGE> 35
National Association, Mellon Bank (MD), The Boston Company, Inc. AFCO Credit
Corporation and a number of companies known as Mellon Financial Services
Corporations. Through its subsidiaries, including Dreyfus, Mellon managed
approximately $233 billion in assets as of December 31, 1996, including
approximately $86 billion in mutual fund assets. As of December 31, 1996,
various subsidiaries of Mellon provided non-investment services, such as
custodial or administration services, for approximately $1,046 billion in assets
including approximately $57 billion in mutual fund assets.
Neuberger & Berman L.P. Neuberger & Berman, also serves as a
sub-adviser to the Fund. Neuberger & Berman and its predecessor firms have
specialized in the management of no-load mutual funds since 1950. Neuberger &
Berman and its affiliates manage securities accounts that had approximately $45
billion of assets as of December 31, 1996. Neuberger & Berman is a member firm
of the NYSE and other principal exchanges and acts as the Fund's principal
broker in the purchase and sale of their securities for that portion of the
Fund's portfolio managed by Neuberger & Berman.
Strong Capital Management, Inc. Strong, which also serves as one of the
Subadvisers for the Fund, began conducting business in 1974. Since then, its
principal business has been providing continuous investment supervision for
individuals and institutional accounts, such as pension funds and profit-sharing
plans. Strong also acts as investment advisor for each of the mutual funds
within the Strong Family of Funds. As of February 28, 1997, Strong had over $24
billion under management. Strong's principal mailing address is P.O. Box 2936,
Milwaukee, Wisconsin 53201. Mr. Richard S. Strong is the controlling shareholder
of Strong.
Pictet International Management Limited and Van Eck Associates
Corporation. PIML and VEAC will together manage a portion of the Fund. VEAC is
located at 99 Park Avenue, New York, New York 10016. PIML is located at Cutlers
Gardens, 5 Devonshire Square, London, United Kingdom EC2M 4LD. PIML is primarily
responsible for managing the portion of the Fund's assets allocated to the PIML
and VEAC. PIML determines which securities are to be bought and sold. VEAC,
however, makes recommendations to PIML regarding Hard Asset securities. VEAC
will also make recommendations regarding the allocation among each of the Hard
Asset sectors. PIML is not obligated to act on VEAC'S recommendation's and the
amount, if any, allocated to Hard Assets will be determined by PIML. VEAC will
also assist PIML on issues regarding determining the liquidity of securities,
portfolio diversification and matters involving United States federal securities
and tax law as they apply to management of the Fund.
PIML is an operating company of Pictet (London) Limited, an affiliate
of Pictet & Cie ("Pictet"). Pictet was founded in 1805 and is the largest
private Swiss Bank, as well as the leading specialist investment bank domiciled
in Europe. Pictet has a worldwide network of offices employing over 200
investment professionals in Geneva, London, Zurich, Luxembourg, Hong Kong,
Tokyo, Montreal and Nassau. PIML has access to all of Pictet's investment
infrastructure. As of March 31, 1997, total assets under management by Pictet
and its affiliates, including PIML, on behalf of all clients, was in excess of
$49 billion.
Warburg, Pincus Counsellors, Inc. The Fund also employs Warburg as a
Subadviser to the Fund. Warburg is a professional investment counselling firm
which provides investment services to investment companies, employee benefit
plans, endowment funds, foundations and other institutions and individuals. As
of March 31, 1997, Warburg managed approximately $17 billion in assets including
approximately $9.5 billion of investment company assets. Incorporated in 1970,
Warburg is a wholly owned subsidiary of Warburg, Pincus Counsellors G.P.
(Warburg G.P."), a New York general partnership which itself is controlled by
Warburg, Pincus & Co. ("W P & Co."), also a New York general partnership. Lionel
I. Pincus, the managing partner of W P & Co., may be deemed to control, both W P
& Co. and Warburg. Warburg G.P. has no business other than being a holding
company of
35
<PAGE> 36
Warburg and its subsidiaries. Warburg's address is 466 Lexington Avenue, New
York, New York 10017-3147.
ADVISORY SERVICES FOR THE INCOME FUND
The Adviser oversees the management of the Income Fund pursuant to an
Investment Advisory Agreement. Subject to the supervision and direction of the
Trustees, the Adviser determines the allocation of assets among the Subadvisers
and evaluate and monitor the performance of Subadvisers. The Adviser also is
authorized to select and place portfolio investments on behalf of the Fund;
however, the Adviser currently does not intend to do so. The Adviser is
responsible for communicating performance expectations and evaluations to the
Subadvisers and ultimately recommending to the Trust's Board of Trustees whether
a Subadviser's contract should be renewed, modified or terminated; however, the
Adviser does not expect to recommend frequent changes of subadvisers. The
Adviser will regularly provide written reports to the Board of Trustees
regarding the results of its evaluation and monitoring functions. The Advisory
Agreement of the Income Fund contains termination and indemnification provisions
similar to those in the Agreement as described above for the Small Company Fund.
The Fund pays to the Adviser a fee at the annual rate of 0.45% of
the Fund's average daily net assets. The Adviser has voluntarily agreed to waive
all or part of its fees in order to limit the Fund's total operating expenses to
not more than 0.75% of the Fund's average daily net assets on an annual basis.
These fee waivers are voluntary and may be terminated at any time.
The Subadvisers - Pursuant to Subadvisory Agreements between each of
the Subadvisers and the Adviser, the Subadvisers each will manage a portion of
the Fund's assets in accordance with the Fund's investment objective and
policies. With regard to the portion of the Fund's assets allocated to it, each
Subadviser makes investment decisions for the Fund and in connection with
such decisions place purchase and sell orders for the securities in the Fund.
For the investment management services they provide to the Fund, each Subadviser
receives an annual fee from the Adviser based on the average daily net assets
of the portion of the Fund managed by that Subadviser as specified below:
<TABLE>
<CAPTION>
Subadvisory Fees Average Daily Net Assets
---------------- ------------------------
<S> <C>
0.25% on the first $100 million
0.15% on assets in excess of $100
million
</TABLE>
The fees for each of the Subadvisers are subject to the following
annual minimum fees: $15,000 for NCM Capital and $25,000 for Smith Graham.
Below is a brief description of each of the Subadvisers.
NCM Capital Management Group, Inc. NCM Capital was founded in 1986 and serves as
one of the Fund's Subadvisers. As of September 30, 1996, NCM Capital had
approximately $3.86 billion in assets under management, of which $1.35 billion
represents fixed income management.
NCM Capital's Chairman of the Board, President and Chief Executive Officer is
Maceo K. Sloan. Other directors are Justin F. Beckett, Executive Vice President;
Peter J. Anderson, Chairman and Chief Investment Officer of IDS Advisory Group,
Inc.; and Morris Goodwin, Jr., Vice President, Corporate Treasurer, American
Express Financial Advisers Inc.
36
<PAGE> 37
NCM Capital is a wholly-owned subsidiary of Sloan Financial Group, Inc. Both NCM
Capital and Sloan Financial Group, Inc. are located at 103 West Main Street, 4th
Floor, Durham, North Carolina 27701. Sloan Financial Group, Inc. is a
corporation of which Maceo K. Sloan, CFA, Chairman, President and Chief
Executive Officer of NCM Capital, owns 43%; Justin F. Beckett, Executive Vice
President and director of NCM Capital, owns 17%; and IDS Financial Services
Inc., a wholly-owned subsidiary of American Express Company owns 40% as of
September 30, 1996.
Smith Graham & Co. Asset Managers, L.P. Smith Graham also serves as a
sub-adviser to the Fund. Its corporate offices are located at 6900 Texas
Commerce Tower, 600 Travis Street, Houston, Texas 77002-3007. Smith Graham
serves as an investment adviser to a variety of corporate, foundation, public,
Taft Hartley and mutual fund clients. The firm provides global and international
money management through its affiliate Smith Graham Robeco Global Advisers. As
of October 1, 1996, Smith Graham managed approximately $2 billion of assets.
Smith Graham is 60% owned by its Managing General Partner, Smith Graham & Co.,
Inc., while 40% of the firm is owned by the Dutch based Robeco Group. Smith
Graham & Co., Inc. is wholly owned by Gerald B. Smith, Ladell Graham and Jamie
G. House.
Each of the Subadvisory Agreements specifically provides that the
Subadviser, including its directors, officers, partners and employees, shall not
be liable for any error of judgment, or mistake of law or for any loss arising
out of any investment, or for any act or omission in the execution and
management of the Income Fund, except for willful misfeasance, bad faith, or
gross negligence in the performance of its duties, or by reason of reckless
disregard of its obligations and duties under such Agreement. Each Subadvisory
Agreement will continue in effect for an initial period of two years and
thereafter shall continue automatically for successive annual periods provided
such continuance is specifically approved at least annually by the Trustees, or
by vote of a majority of the outstanding voting securities of the Fund, and in
either case, by a majority of the Trustees who are not parties to the Agreement
or interested persons of any such party. Each Subadvisory Agreement terminates
automatically if it is assigned. It may also be terminated without penalty by
vote of a majority of the outstanding voting securities, or by either party, on
60 days written notice.
OTHER SERVICES PROVIDED BY THE ADVISER FOR THE INCOME FUND
Under the terms of an Administrative Services Agreement, the Adviser
will also provide various administrative and accounting services, including
daily valuation of the Income Fund's shares, preparation of financial
statements, taxes, and regulatory reports. For these services the Fund will pay
to the Adviser a fee at the annual rate of 0.10% of the Fund's average daily net
assets.
CUSTODIAN
The Fifth Third Bank, 38 Fountain Square Plaza, Cincinnati, OH 45263,
is the Custodian for the Funds and makes all receipts and disbursements under a
Custodian Agreement. The Custodian performs no managerial or policymaking
functions for the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Nationwide Investors Services, Inc. (NIS) is the Transfer Agent and
Dividend Disbursing Agent for the Funds. NIS is a wholly-owned subsidiary of
Nationwide Advisory Services, Inc. NISI receives a fee, calculated daily and
paid monthly at a rate of 0.01% of average daily net assets of each Fund.
Management believes the charges for the services performed are comparable to
fees charged by other companies performing similar services.
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BROKERAGE ALLOCATIONS
IN GENERAL. During the fiscal years ended December 31, 1996, 1995, and
1994, the Total Return Fund, paid brokerage commissions of $519,949, $377,463,
and $258,714, respectively, and the Capital Appreciation Fund paid brokerage
commissions of $196,526, $36,471, and $52,032, all to firms rendering
statistical services. The Money Market Fund and Government Bond Fund paid no
brokerage commissions during the periods covered by the financial statements.
The Adviser (or a Subadviser) is responsible for decisions to buy and
sell securities and other investments for the Funds, the selection of brokers
and dealers to effect the transactions and the negotiation of brokerage
commissions, if any. In transactions on stock and commodity exchanges in the
United States, these commissions are negotiated, whereas on foreign stock and
commodity exchanges these commissions are generally fixed and are generally
higher than brokerage commissions in the United States. In the case of
securities traded on the OTC markets, there is generally no commission, but the
price includes a spread between the dealer's purchase and sale price which makes
up the dealer's profit. In underwritten offerings, the price includes a
disclosed, fixed commission or discount. Most short term obligations are
normally traded on a "principal" rather than agency basis. This may be done
through a dealer (e.g. securities firm or bank) who buys or sells for its own
account rather than as an agent for another client, or directly with the issuer.
A dealer's profit, if any, is the difference, or spread, between the dealer's
purchase and sale price for the obligation.
The primary consideration in portfolio security transactions is "best
execution," i.e., execution at the most favorable prices and in the most
effective manner possible. The Adviser or Subadvisers always attempts to achieve
best execution, and it has complete freedom as to the markets in and the
broker-dealers through which it seeks this result. Subject to the requirement of
seeking best execution, securities may be bought from or sold to broker-dealers
who have furnished statistical, research, and other information or services to
the Adviser or a Subadviser. In placing orders with such broker-dealers, the
Adviser will, where possible, take into account the comparative usefulness of
such information. Such information is useful to the Adviser or a Subadviser even
though its dollar value may be indeterminable, and its receipt or availability
generally does not reduce the Adviser's or a Subadviser's normal research
activities or expenses.
Trust portfolio transactions may be effected with broker-dealers who
have assisted investors in the purchase of Policies. However, neither such
assistance nor sale of other investment company shares is a qualifying or
disqualifying factor in a broker-dealer's selection, nor is the selection of any
broker-dealer based on the volume of shares sold.
There may be occasions when portfolio transactions for the Trust are
executed as part of concurrent authorizations to purchase or sell the same
security for trusts or other accounts served by affiliated companies of the
Adviser or a Subadviser. Although such concurrent authorizations potentially
could be either advantageous or disadvantageous to the Trust, they are effected
only when the Adviser or a Subadviser believes that to do so is in the interest
of the Trust. When such concurrent authorizations occur, the executions will be
allocated in an equitable manner.
The Trustees periodically review the Adviser's and each Subadviser's
performance of its responsibilities in connection with the placement of
portfolio transactions on behalf of the Fund and review the commissions paid by
the Fund over representative periods of time to determine if they are reasonable
in relation to the benefits to the Fund.
SPECIAL BROKERAGE ALLOCATION CONSIDERATIONS RELATING TO THE SMALL
COMPANY FUND AND THE INCOME FUND. In purchasing and selling investments for
these Funds, it is the policy of each of the Subadvisers to obtain best
execution at the most favorable prices through responsible broker-dealers. In
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selecting broker-dealers, each Subadviser will consider various relevant
factors, including, but not limited to, the size and type of the transaction;
the nature and character of the markets for the security or asset to be
purchased or sold; the execution efficiency, settlement capability, and
financial condition of the broker-dealer's firm; the broker-dealer's execution
services, rendered on a continuing basis; and the reasonableness of any
commissions. During the year ended December 31, 1996 and the period ended
December 31, 1995, the Small Company Fund paid brokerage commissions of
$424,176 and $27,100, respectively.
Each Subadviser may cause the Small Company or the Income Fund to pay a
broker-dealer who furnishes brokerage and/or research services a commission that
is in excess of the commission another broker-dealer would have received for
executing the transaction if it is determined that such commission is reasonable
in relation to the value of the brokerage and/or research services as defined in
Section 28(e) of the Securities Exchange Act of 1934 which have been provided.
Such research services may include, among other things, analyses and reports
concerning issuers, industries, securities, economic factors and trends, and
portfolio strategy. Any such research and other information provided by brokers
to a Subadviser is considered to be in addition to and not in lieu of services
required to be performed by the Subadviser under its subadvisory agreement with
the Adviser. The fees to each of the Subadvisers pursuant to its subadvisory
agreement with the Adviser is not reduced by reason of its receiving any
brokerage and research services. The research services provided by
broker-dealers can be useful to a Subadviser in serving its other clients or
clients of the Subadviser's affiliates. Subject to the policy of the Subadvisers
to obtain best execution at the most favorable prices through responsible
broker-dealers, a Subadviser also may consider the broker-dealer's sale of
shares of any fund for which the Subadviser serves as investment adviser,
sub-adviser or administrator.
CONSIDERATIONS RELATING TO THE SMALL COMPANY FUND. Neuberger & Berman will act
as the principal broker in the purchase and sale of portfolio securities for the
portion of the Fund advised by Neuberger & Berman and in connection with the
writing of covered call options on their securities. Transactions in portfolio
securities for which Neuberger & Berman serves as broker will be affected in
accordance with Rule 17e-1 under the 1940 Act.
The Fund will continue to use Neuberger & Berman as its principal
broker for the portion of the Fund advised by Neuberger & Berman where, in the
judgment of Neuberger & Berman, the firm is able to obtain a price and execution
at least as favorable as that provided by other qualified brokers. To the Fund's
knowledge, however, no affiliate of Neuberger & Berman receives give-ups or
reciprocal business in connection with their securities transactions.
Under the 1940 Act, commissions paid by the Fund to Neuberger & Berman
in connection with a purchase or sale of securities offered on a securities
exchange may not exceed the usual and customary broker's commission.
Accordingly, it is the Fund's policy that the commissions to be paid to
Neuberger & Berman must, in its judgment, be (1) at least as favorable as those
that would be charged by other brokers having comparable execution capability
and (2) at least as favorable as commissions contemporaneously charged by
Neuberger & Berman on comparable transactions for its most favored unaffiliated
customers, except for accounts for which Neuberger & Berman acts as a clearing
broker for another brokerage firm and customers of Neuberger & Berman considered
by a majority of the independent trustees not to be comparable to the Fund. The
Fund does not deem it practicable and in its best interests to solicit
competitive bids for commissions on each transaction. However, consideration
regularly is given to information concerning the prevailing level of commissions
charged on comparable transactions by other brokers during comparable periods of
time. The 1940 Act generally prohibits Neuberger & Berman from acting as
principal in the purchase or sale of securities for the Fund's account, unless
an appropriate exemption is available.
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During the year ended December 31, 1996 and the period ended December
31, 1995, the Small Company Fund paid brokerage commissions to Neuberger &
Berman in the amount of $24,069 and $4,434, respectively, representing 5.7% and
16.4%, respectively, of the total commissions paid by the Fund. The aggregate
dollar amount of transactions involving the payment of commissions to Neuberger
& Berman represented .3% and 20.2%, respectively, of total transactions on which
commissions were paid by the Fund during the periods ended December 31, 1996 and
1995.
PURCHASES, REDEMPTIONS AND PRICING OF SHARES
An insurance company purchases shares of the Funds at their net asset
value using purchase payments received on Contracts issued by Accounts. These
Accounts are funded by shares of the Trust. For certain of the Funds, shares may
also be sold to affiliated Fund of Funds.
All investments in the Trust are credited to the shareholder's account
in the form of full and fractional shares of the designated Fund (rounded to the
nearest 1/1000 of a share). The Trust does not issue share certificates.
The net asset value per share of the Funds is determined once daily, as
of the close of the New York Stock Exchange (currently 4 P.M. eastern time) on
each business day the New York Stock Exchange is open and on such days as the
Board determines and on any other day during which there is a sufficient degree
of trading in each Fund's portfolio securities that the net asset value of the
Fund is materially affected by changes in the value of portfolio securities. The
Trust will not compute net asset value for the Funds on customary national
business holidays, including the following: Christmas, New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day and
Thanksgiving Day. The net asset value per share is calculated by adding the
value of all securities and other assets of a Fund, deducting its liabilities,
and dividing by the number of shares outstanding.
The offering price for orders placed before the close of the New York
Stock Exchange, on each business day the Exchange is open for trading, will be
based upon calculation of the net asset value at the close of the Exchange. For
orders placed after the close of the Exchange, or on a day on which the Exchange
is not open for trading, the offering price is based upon net asset value at the
close of the Exchange on the next day thereafter on which the Exchange is open
for trading. The net asset value of a share of each Fund on which offering and
redemption prices are based is the net asset value of that Fund, divided by the
number of shares outstanding, the result being adjusted to the nearer cent. The
net asset value of each Fund is determined by subtracting the liabilities of the
Fund from the value of its assets (chiefly composed of investment securities).
Securities of the Fund listed on national exchanges are valued at the last sales
price on the principal exchange, or if there is no sale on that day, or if the
securities are traded only in the over-the-counter market, at the quoted bid
prices. Securities and other assets, for which such market prices are
unavailable, are valued at fair value as determined by the Trustees. For the
Money Market Fund, all securities are valued at amortized cost, which
approximates market value, in accordance with Rule 2a-7 of the Investment
Company Act of 1940.
The net income of the Money Market Fund is determined once daily, as of
the close of the New York Stock Exchange (currently 4:00 P.M., New York time) on
each business day on which such Exchange is open. All the net income of the
Fund, so determined, is declared in shares as a dividend to shareholders of
record at the time of such determination. (Shares purchased become entitled to
dividends declared as of the first day following the date of investment.)
Dividends are distributed in the form of additional shares of the Fund on the
last business day of each month at the rate of one share (and fraction thereof)
of the Fund for each one dollar (and fraction thereof) of dividend income.
For this purpose, the net income of the Money Market Fund (from the
time of the immediately preceding determination thereof) shall consist of: (a)
all interest income accrued on the portfolio assets
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of the Fund, (b) less all actual and accrued expenses and (c) plus or minus net
realized gains and losses on the assets of the Fund determined in accordance
with generally accepted accounting principles. Interest income shall include
discount earned (including both original issue and market discount) on discount
paper accrued ratably to the date of maturity. Securities are valued at market
or amortized cost which approximates market, which the Trustees have determined
in good faith constitutes fair value for the purposes of complying with the
Investment Company Act of 1940.
Because the net income of the Money Market Fund is declared as a
dividend each time the net income is determined, the net asset value per share
(i.e., the value of the net assets of the Fund divided by the number of shares
outstanding) remains at one dollar per share immediately after each such
determination and dividend declaration. Any increase in the value of a
shareholder's investment in the Fund, representing the reinvestment of dividend
income, is reflected by an increase in the number of shares of the Fund in its
account.
Pursuant to its objective of maintaining a fixed one dollar share
price, the Fund will not purchase securities with a remaining maturity of more
than 397 days and will maintain a dollar weighted average portfolio maturity of
90 days or less.
An insurance company separate account redeems shares to make benefit or
surrender payments under the terms of its Policies. Redemptions are processed on
any day on which the Trust is open for business and are effected at net asset
value next determined after the redemption order, in proper form, is received by
the Trust's transfer agent, NIS.
The Trust may suspend the right of redemption for such periods as are
permitted under the 1940 Act and under the following unusual circumstances: (a)
when the New York Stock Exchange is closed (other than weekends and holidays) or
trading is restricted; (b) when an emergency exists, making disposal of
portfolio securities or the valuation of net assets not reasonably practicable;
or (c) during any period when the Securities and Exchange Commission has by
order permitted a suspension of redemption for the protection of shareholders.
ADDITIONAL INFORMATION
DESCRIPTION OF SHARES - The Declaration of Trust permits the Trustees
to issue an unlimited number of full and fractional shares of beneficial
interest of each Fund and to divide or combine such shares into a greater or
lesser number of shares without thereby exchanging the proportionate beneficial
interests in the Trust. Each share of a Fund represents an equal proportionate
interest in that Fund with each other share. The Trust reserves the right to
create and issue a number of series of shares. In that case, the shares of each
series would participate equally in the earnings, dividends, and assets of the
particular series, but shares of all series would vote together in the election
of Trustees. Upon liquidation of a Fund, shareholders are entitled to share pro
rata in the election of Trustees. Upon liquidation of a Fund, shareholders are
entitled to share pro rata in the net assets of such Fund available for
distribution to shareholders.
VOTING RIGHTS - Shareholders are entitled to one vote for each share
held. Shareholders may vote in the election of Trustees and on other matters
submitted to meetings of shareholders. No amendment may be made to the
Declaration of Trust without the affirmative vote of a majority of the
outstanding shares of the Trust. The Trustees may, however, amend the
Declaration of Trust without the vote or consent of shareholders to:
- designate series of the Trust; or
- change the name of the Trust; or
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- supply any omission, cure, correct, or supplement any
ambiguous, defective, or inconsistent provision to conform the
Declaration of Trust to the requirements of applicable federal
laws or regulations if they deem it necessary.
Shares have no pre-emptive or conversion rights. Shares are fully paid
and nonassessable, except as set forth below. In regard to termination, sale of
assets, or change of investment restrictions, the right to vote is limited to
the holders of shares of the particular Fund affected by the proposal. When a
majority is required, it means the lesser of 67% or more of the shares present
at a meeting when the holders of more than 50% of the outstanding shares are
present or represented by proxy, or more than 50% of the outstanding shares.
SHAREHOLDER INQUIRIES - All inquiries regarding the Trust should be
directed to the Trust at the telephone number or address shown on the cover page
of this Prospectus.
TAX STATUS
Nationwide Life Insurance Company and Nationwide Life and Annuity
Insurance are currently the sole shareholders of record for each Fund of the
Trust. Each Fund of the Trust is treated as a separate entity for purpose of the
regulated investment company provisions of the Internal Revenue Code, and,
therefore, the assets, income, and distributions of each Fund are considered
separately for purposes of determining whether or not the Fund qualifies as a
regulated investment company.
Each Fund of the Trust intends to qualify as a "regulated investment
company" under Subchapter M of the Code. If it qualifies as a regulated
investment company, a Fund will pay no federal income taxes on its taxable net
investment income (that is, taxable income other than net realized capital
gains) and its net realized capital gains that are distributed to shareholders.
To qualify under Subchapter M, a Fund must, among other things: (i) distribute
to its shareholders at least 90% of its taxable net investment income (for this
purpose consisting of taxable net investment income and net realized short-term
capital gains); (ii) derive at least 90% of its gross income from dividends,
interest, payments with respect to loans of securities, gains from the sale or
other disposition of securities, or other income (including, but not limited to,
gains from options, futures, and forward contracts) derived with respect to its
business of investing in securities; (iii) diversify its holdings so that, at
the end of each fiscal quarter of the Fund (a) at least 50% of the market value
of the Fund assets is represented by cash, U.S. government securities and other
securities, with those other securities limited, with respect to any one issuer,
to an amount no greater in value than 5% of the Fund's total assets and to not
more than 10% of the outstanding voting securities of the issuer, and (b) not
more than 25% of the market value of the Fund's assets is invested in the
securities of any one issuer (other than U.S. government securities or
securities of other regulated investment companies) or of two or more issuers
that the Fund controls and that are determined to be in the same or similar
trades or businesses or related trades or businesses. In meeting these
requirements, a Fund may be restricted in the selling of securities held by the
Fund for less than three months and in the utilization of certain of the
investment techniques described above and in the respective Fund's Prospectus.
As a regulated investment company, a Fund will be subject to a 4% non-deductible
excise tax measured with respect to certain undistributed amounts of ordinary
income and capital gain required to be but not distributed under a prescribed
formula. The formula requires payment to shareholders during a calendar year of
distributions representing at least 98% of the Fund's taxable ordinary income
for the calendar year and at least 98% of the excess of its capital gains over
capital losses realized during the one-year period ending October 31 during such
year, together with any undistributed, untaxed amounts of ordinary income and
capital gains from the previous calendar
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year. The Funds expect to pay the dividends and make the distributions necessary
to avoid the application of this excise tax.
In addition, each Fund intends to comply with the diversification
requirements of Section 817(h) of the Code related to the tax-deferred status of
insurance company separate accounts. To comply with regulations under Section
817(h) of the code, each Fund will be required to diversify its investments so
that on the last day of each calendar quarter no more than 55% of the value of
its assets is represented by any one investment, no more than 70% is represented
by any two investments, no more than 80% is represented by any three investments
and no more than 90% is represented by any four investments. Generally, all
securities of the same issuer are treated as a single investment. For the
purposes of Section 817(h), obligations of the United States Treasury and each
U.S. government instrumentality are treated as securities of separate issuers.
The Treasury Department has indicated that it may issue future pronouncements
addressing the circumstances in which a Policy owner's control of the
investments of a separate account may cause the Policy owner, rather than the
participating insurance company, to be treated as the owner of the assets held
by the separate account. If the Policy owner is considered the owner of the
securities underlying the separate account, income and gains produced by those
securities would be included currently in the Policy owner's gross income. It is
not known what standards will be set forth in such pronouncements or when, if at
all, these pronouncements may be issued. In the event that rules or regulations
are adopted, there can be no assurance that the Funds will be able to operate as
currently described, or that the Trust will not have to change the investment
goal or investment policies of a Fund. The board reserves the right to modify
the investment policies of a Fund as necessary to prevent any such prospective
rules and regulations from causing a Policy owner to be considered the owner of
the shares of the Fund underlying the separate account.
TAX CONSEQUENCES FOR THE SMALL COMPANY FUND
Foreign Transactions. Dividends and interest received by the Small
Company Fund may be subject to income, withholding, or other taxes imposed by
foreign countries and U.S. possessions that would reduce the yield on its
securities. Tax conventions between certain countries and the United States may
reduce or eliminate these foreign taxes, however, and many foreign countries do
not impose taxes on capital gains in respect of investments by foreign
investors. Policy holders will bear the cost of foreign tax withholding in the
form of increased expenses to the Fund but generally will not be able to claim a
foreign tax credit or deduction for foreign taxes paid by the Fund by reason of
the tax-deferred status of the policies.
The Fund's transactions, if any, in foreign currencies, forward
contracts, options and futures contracts (including options and forward
contracts on foreign currencies) will be subject to special provisions of the
Code that, among other things, may affect the character of gains and losses
recognized by the Fund (i.e., may affect whether gains or losses are ordinary or
capital), accelerate recognition of income to the Fund, defer Fund losses and
cause the fund to be subject to hyperinflationary currency rules. These rules
could therefore affect the character, amount and timing of distributions to
shareholders. These provisions also (a) will require the Fund to mark-to-market
certain types of its positions (i.e., treat them as if they were closed out) and
(b) may cause the fund to recognize income without receiving cash with which to
pay dividends or make distributions in amounts necessary to satisfy the
distribution requirements for avoiding income and excise taxes. The Fund will
monitor its transactions, will make the appropriate tax elections and will make
the appropriate entries in its books and records when it acquires any foreign
currency, forward contract, option, futures contract or hedged investment so
that (i) neither the Fund nor its shareholders will be treated as receiving a
materially greater amount of capital gains or distributions than actually
realized or received, (ii) the Fund will be able to use substantially all of its
losses for the fiscal years in which the losses actually occur, and (iii) the
Fund will continue to qualify as a regulated investment company.
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As described in the Prospectus, because shares of the Fund may only be
purchased through Policies, it is anticipated that dividends and distributions
will be exempt from current taxation if left to accumulate within the Policies.
Investment in Passive Foreign Investment Companies. If the Fund
purchases shares in certain foreign entities classified under the Code as
"passive foreign investment companies" ("PFICs"), the Fund may be subject to
federal income tax on a portion of an "excess distribution" or gain from the
disposition of the shares, even though the income may have to be distributed by
the Fund to its shareholders, the Policies. In addition, gain on the disposition
of shares in a PFIC generally is treated as ordinary income even though the
shares are capital assets in the hands of the Fund. Certain interest charges may
be imposed on the Fund with respect to any taxes arising from excess
distributions or gains on the disposition of shares in a PFIC.
The Fund may be eligible to elect to include in its gross income its
share of earnings of a PFIC on a current basis. Generally, the election would
eliminate the interest charge and the ordinary income treatment on the
disposition of stock, but such an election may have the effect of accelerating
the recognition of income and gains by the Fund compared to a fund that did not
make the election. In addition, information required to make such an election
may not be available to the Fund.
Regulations of the Internal Revenue Service (the "IRS") provide a
mark-to-market election for shares in certain PFICs held by regulated investment
companies. If the Fund makes the election, it may be able to avoid the interest
charge (but not the ordinary income treatment) on disposition of the PFIC stock
by each year marking-to-market the stock (that is, by treating it as if it were
sold for fair market value on the last day of the year). Such an election could
also result in acceleration of income to the Fund.
Derivative Instruments. The use of derivatives strategies, such as
purchasing and selling (writing) options and futures and entering into forward
currency contracts, involves complex rules that will determine for income tax
purposes the character and timing of recognition of the gains and losses the
Small Company Fund realizes in connection therewith. Gains from the disposition
of foreign currencies (except certain gains therefrom that may be excluded by
future regulations), and income from transactions in options, futures, and
forward currency contracts derived by the Fund with respect to its business of
investing in securities or foreign currencies, will qualify as permissible
income. However, income from the disposition of options and futures (other than
those on foreign currencies) will be subject to a 30% limitation if they are
held for less than three months. Income from the disposition of foreign
currencies, and options, futures, and forward contracts on foreign currencies,
that are not directly related to the Fund's principal business of investing in
securities (or options and futures with respect to securities) also will be
subject to a 30% limitation if they are held for less than three months.
If the Fund satisfies certain requirements, any increase in value of a
position that is part of a "designated hedge" will be offset by any decrease in
value (whether realized or not) for the offsetting hedging position during the
period of the hedge for purposes of determining whether the Fund satisfies the
30% limitation on the gross income that can be derived from the sale or other
disposition of securities or derivative instruments that were held for less than
three months. Thus, only the net gain (if any) from the designated hedge will be
included in gross income for purposes of that limitation. The Fund intends that,
when it engages in hedging strategies, the hedging transactions will qualify for
this treatment, but at the present time it is not clear whether this treatment
will be available for all of the Fund's hedging transactions. To the extent this
treatment is not available or is not elected by the Fund, it may be forced to
defer the closing out of certain options, futures, or forward currency contracts
beyond the time when it otherwise would be advantageous to do so, in order for
the Fund to continue to qualify as a RIC.
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TAX CONSEQUENCES TO SHAREHOLDERS
Since shareholders of the Funds will be the Accounts, no discussion is
included herein as to the Federal income tax consequences at the level of the
holders of the Contracts. For information concerning the Federal income tax
consequences to such holders, see the Prospectuses for such Contracts.
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APPENDIX A
BOND RATINGS
STANDARD & POOR'S DEBT RATINGS
A Standard & Poor's corporate or municipal debt rating is a current
assessment of the creditworthiness of an obligor with respect to a specific
obligation. This assessment may take into consideration obligors such as
guarantors, insurers, or lessees.
The debt rating is not a recommendation to purchase, sell, or hold a
security, inasmuch as it does not comment as to market price or suitability for
a particular investor. The ratings are based on current information furnished by
the issuer or obtained by Standard & Poor's from other sources it considers
reliable. Standard & Poor's does not perform an audit in connection with any
rating and may, on occasion, rely on unaudited financial information. The
ratings may be changed, suspended, or withdrawn as a result of changes in, or
unavailability of, such information, or for other circumstances.
The ratings are based, in varying degrees, on the following
considerations:
- - 1. Likelihood of default - capacity and willingness of the obligor as to the
timely payment of interest and repayment of principal in accordance with the
terms of the obligation.
- - 2. Nature of and provisions of the obligation.
Protection afforded by, and relative position of, the obligation in the
event of bankruptcy, reorganization, or other arrangement under the
laws of bankruptcy and other laws affecting creditors' rights.
INVESTMENT GRADE
AAA - Debt rated 'AAA' has the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely strong.
AA - Debt rated 'AA' has a very strong capacity to pay interest and
repay principal and differs from the highest rated issues only in small degree.
A - Debt rated 'A' has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.
BBB - Debt rated 'BBB' is regarded as having an adequate capacity to
pay interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to pay interest and repay principal
for debt in this category than in higher rated categories.
SPECULATIVE GRADE
Debt rated 'BB', 'B', 'CCC', 'CC' and 'C' is regarded as having
predominantly speculative characteristics with respect to capacity to pay
interest and repay principal. 'BB' indicates the least degree of speculation and
'C' the highest. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
46
<PAGE> 47
BB - Debt rated 'BB' has less near-term vulnerability to default than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could lead
to inadequate capacity to meet timely interest and principal payments. The 'BB'
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied 'BBB-' rating.
B - Debt rated 'B' has a greater vulnerability to default but currently
has the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The 'B' rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
'BB' or 'BB-' rating.
CCC - Debt rated 'CCC' has a currently identifiable vulnerability to
default, and is dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal. In the
event of adverse business, financial, or economic conditions, it is not likely
to have the capacity to pay interest and repay principal. The 'CCC' rating
category is also used for debt subordinated to senior debt that is assigned an
actual or implied 'B' or 'B-' rating.
CC - Debt rated 'CC' typically is applied to debt subordinated to
senior debt that is assigned an actual or implied 'CCC' rating.
C - Debt rated 'C' typically is applied to debt subordinated to senior
debt which is assigned an actual or implied 'CCC-' debt rating. The 'C' rating
may be used to cover a situation where a bankruptcy petition has been filed, but
debt service payments are continued.
CI - The rating 'CI' is reserved for income bonds on which no interest
is being paid.
D - Debt rated 'D' is in payment default. The 'D' rating category is
used when interest payments or principal payments are not made on the date due
even if the applicable grace period has not expired, unless Standard & Poor's
believes that such payments will be made during such grade period. The 'D'
rating also will be used upon the filing of a bankruptcy petition if debt
service payments are jeopardized.
MOODY'S LONG-TERM DEBT RATINGS
Aaa - Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risk appear somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium grade obligations. Factors
giving security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment some time in the
future.
Baa - Bonds which are rated Baa are considered as medium-grade
obligations (i.e., they are neither highly protected nor poorly secured).
Interest payments and principal security appear adequate for the
47
<PAGE> 48
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have speculative
characteristics as well.
Ba - Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered well-assured. Often the protection of interest
and principal payments may be very moderate, and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa - Bonds which are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with respect to
principal or interest.
Ca - Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.
C - Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
FITCH INVESTORS SERVICE, INC. BOND RATINGS
Fitch investment grade bond ratings provide a guide to investors in
determining the credit risk associated with a particular security. The ratings
represent Fitch's assessment of the issuer's ability to meet the obligations of
a specific debt issue or class of debt in a timely manner.
The rating takes into consideration special features of the issue, its
relationship to other obligations of the issuer, the current and prospective
financial condition and operating performance of the issuer and any guarantor,
as well as the economic and political environment that might affect the issuer's
future financial strength and credit quality.
Fitch ratings do not reflect any credit enhancement that may be
provided by insurance policies or financial guaranties unless otherwise
indicated.
Bonds that have the same rating are of similar but not necessarily
identical credit quality since the rating categories do not fully reflect small
differences in the degrees of credit risk.
Fitch ratings are not recommendations to buy, sell, or hold any
security. ratings do not comment on the adequacy of market price, the
suitability of any security for a particular investor, or the tax-exempt nature
or taxability of payments made in respect of any security.
Fitch ratings are based on information obtained from issuers, other
obligors, underwriters, their experts, and other sources Fitch believes to be
reliable. Fitch does not audit or verify the truth or accuracy of such
information. Ratings may be changed, suspended, or withdrawn as a result of
changes in, or the unavailability of, information or for other reasons.
AAABonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably
foreseeable events.
48
<PAGE> 49
AABonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated 'AAA'. Because
bonds rated in the 'AAA' and 'AA' categories are not significantly
vulnerable to foreseeable future developments, short-term debt of the
issuers is generally rated 'F-1+'.
ABonds considered to be investment grade and of high credit quality.
The obligor's ability to pay interest and repay principal is considered
to be strong, but may be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher ratings.
BBBBonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these
bonds, and therefore, impair timely payment. The likelihood that the
ratings of these bonds will fall below investment grade is higher than
for bonds with higher ratings.
Fitch speculative grade bond ratings provide a guide to investors in
determining the credit risk associated with a particular security. The ratings
('BB' to 'C') represent Fitch's assessment of the likelihood of timely payment
of principal and interest in accordance with the terms of obligation for bond
issues not in default. For defaulted bonds, the rating ('DDD' to 'D') is an
assessment of the ultimate recovery value through reorganization or liquidation.
The rating takes into consideration special features of the issue, its
relationship to other obligations of the issuer, the current and prospective
financial condition and operating performance of the issuer and any guarantor,
as well as the economic and political environment that might affect the issuer's
future financial strength.
Bonds that have the same rating are of similar but not necessarily
identical credit quality since the rating categories cannot fully reflect the
differences in the degrees of credit risk.
BBBonds are considered speculative. The obligor's ability to pay
interest and repay principal may be affected over time by adverse
economic changes. However, business and financial alternatives can be
identified which could assist the obligor in satisfying its debt
service requirements.
BBonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of
continued timely payment of principal and interest reflects the
obligor's limited margin of safety and the need for reasonable business
and economic activity throughout the life of the issue.
CCCBonds have certain identifiable characteristics which, if not
remedied, may lead to default. The ability to meet obligations requires
an advantageous business and economic environment.
CCBonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C Bonds are in imminent default in payment of interest or principal.
DDD, Bonds are in default on interest and/or principal payments. Such bonds are
extremely speculative, DD and should be valued on the basis of their ultimate
recovery value in liquidation or reorganization of &D the obligor. 'DDD'
represents the highest potential for recovery of these bonds, and 'D' represents
the lowest potential for recovery.
49
<PAGE> 50
DUFF & PHELPS, INC. LONG-TERM DEBT RATINGS
These ratings represent a summary opinion of the issuer's long-term
fundamental quality. Rating determination is based on qualitative and
quantitative factors which may vary according to the basic economic and
financial characteristics of each industry and each issuer. Important
considerations are vulnerability to economic cycles as well as risks related to
such factors as competition, government action, regulation, technological
obsolescence, demand shifts, cost structure, and management depth and expertise.
The projected viability of the obligor at the trough of the cycle is a critical
determination.
Each rating also takes into account the legal form of the security,
(e.g., first mortgage bonds, subordinated debt, preferred stock, etc.). The
extent of rating dispersion among the various classes of securities is
determined by several factors including relative weightings of the different
security classes in the capital structure, the overall credit strength of the
issuer, and the nature of covenant protection. Review of indenture restrictions
is important to the analysis of a company's operating and financial constraints.
The Credit Rating Committee formally reviews all ratings once per
quarter (more frequently, if necessary). Ratings of 'BBB-' and higher fall
within the definition of investment grade securities, as defined by bank and
insurance supervisory authorities.
RATING
SCALE DEFINITION
- ----- ----------
AAA Highest credit quality. The risk factors are negligible,
being only slightly more than for risk-free U.S. Treasury debt.
AA+ High credit quality. Protection factors are
AA strong. Risk is modest, but may vary slightly
AA- from time to time because of economic conditions.
A+ Protection factors are average but adequate.
A However, risk factors are more variable and
A- greater in periods of economic stress.
BBB+ Below average protection factors but still
BBB considered sufficient for prudent investment.
BBB- Considerable variability in risk during economic cycles.
BB+ Below investment grade but deemed likely to meet
BB obligations when due. Present or prospective
BB- financial protection factors fluctuate according to
industry conditions or company fortunes. Overall
quality may move up or down frequently within this category.
B+ Below investment grade and possessing risk that
B obligations will not be met when due. Financial
B- protection factors will fluctuate widely according to
economic cycles, industry conditions and/or company fortunes.
Potential exists for frequent Changes in the rating within
this category or into a higher or lower rating grade.
CCC Well below investment grade securities. Considerable
uncertainty exists as to timely payment of principal, interest or
preferred dividends. Protection factors are narrow and risk can be
substantial with unfavorable economic/industry conditions, and/or
with unfavorable company developments.
50
<PAGE> 51
DD Defaulted debt obligations. Issuer failed to meet scheduled principal
and/or interest payments.
DP Preferred stock with dividend arrearages.
SHORT-TERM RATINGS
STANDARD & POOR'S COMMERCIAL PAPER RATINGS
A Standard & Poor's commercial paper rating is a current assessment of
the likelihood of timely payment of debt considered short-term in the relevant
market.
Ratings are graded into several categories, ranging from 'A-1' for the
highest quality obligations to 'D' for the lowest. These categories are as
follows:
A-1 This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus sign (+) designation.
A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated 'A-1'.
A-3 Issues carrying this designation have adequate capacity for timely
payment. They are, however, more vulnerable to the adverse effects of changes in
circumstances than obligations carrying the higher designations.
B Issues rated 'B' are regarded as having only speculative capacity for
timely payment.
C This rating is assigned to short-term debt obligations with doubtful
capacity for payment.
D Debt rated 'D' is in payment default. the 'D' rating category is used
when interest payments or principal payments are not made on the date due, even
if the applicable grace period has not expired, unless Standard & Poor's
believes that such payments will be made during such grade period.
STANDARD & POOR'S NOTE RATINGS
An S&P note rating reflects the liquidity factors and market-access
risks unique to notes. Notes maturing in three years or less will likely receive
a note rating. Notes maturing beyond three years will most likely receive a
long-term debt rating.
The following criteria will be used in making the assessment:
- Amortization schedule - the larger the final maturity relative
to other maturities, the more likely the issue is to be
treated as a note.
- Source of payment - the more the issue depends on the market
for its refinancing, the more likely it is to be considered a
note.
51
<PAGE> 52
Note rating symbols and definitions are as follows:
SP-1 Strong capacity to pay principal and interest. Issues determined
to possess very strong characteristics are given a plus (+) designation.
SP-2 Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse financial and economic changes over the term of the
notes.
SP-3 Speculative capacity to pay principal and interest.
MOODY'S SHORT-TERM RATINGS
Moody's short-term debt ratings are opinions on the ability of issuers
to repay punctually senior debt obligations. These obligations have an original
maturity not exceeding one year, unless explicitly noted. Moody's employs the
following three designations, all judged to be investment grade, to indicate the
relative repayment capacity of rated issuers:
Issuers rated Prime-1 (or supporting institutions) have a superior
capacity for repayment of senior short-term debt obligations. Prime-1 repayment
capacity will normally be evidenced by the following characteristics: (I)
leading market positions in well established industries, (II) high rates of
return on funds employed, (III) conservative capitalization structures with
moderate reliance on debt and ample asset protection, (IV) broad margins in
earnings coverage of fixed financial charges and high internal cash generation,
and (V) well established access to a range of financial markets and assured
sources of alternative liquidity.
Issuers rated Prime-2 (or supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics cited above, but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
Issuers rated Prime-3 (or supporting institutions) have an acceptable
capacity for repayment of short-term promissory obligations. The effect of
industry characteristics and market composition may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and may require relatively high financial leverage.
Adequate alternate liquidity is maintained.
Issuers rated Not Prime do not fall within any of the prime rating
categories.
MOODY'S NOTE RATINGS
MIG 1/VMIG 1 This designation denotes best quality. There is present
strong protection by established cash flows, superior liquidity support or
demonstrated broad based access to the market for refinancing.
MIG 2/VMIG 2 This designation denotes high quality. Margins of
protection are ample although not so large as in the preceding group.
52
<PAGE> 53
MIG 3/VMIG 3 This designation denotes favorable quality. All security
elements are accounted for but there is lacking the undeniable strength of the
preceding grades. Liquidity and cash flow protection may be narrow and market
access for refinancing is likely to be less well established.
MIG 4/VMIG 4 This designation denotes adequate quality. Protection
commonly regarded as required of an investment security is present and although
not distinctly or predominantly speculative, there is specific risk.
SG This designation denotes speculative quality. Debt instruments in
this category lack margins of protection.
FITCH'S SHORT-TERM RATINGS
Fitch's short-term ratings apply to debt obligations that are payable
on demand or have original maturities of generally up to three years, including
commercial paper, certificates of deposit, medium-term notes, and municipal and
investment notes.
The short-term rating places greater emphasis than a long-term rating
on the existence of liquidity necessary to meet the issuer's obligations in a
timely manner.
F-1+ Exceptionally strong credit quality. Issues
assigned this rating are regarded as having the strongest
degree of assurance for timely payment.
F-1 Very strong credit quality. Issues assigned this
rating reflect an assurance of timely payment only slightly
less in degree than issues rated 'f-1+'.
F-2 Good credit quality. Issues assigned this rating
have a satisfactory degree of assurance for timely payment but
the margin of safety is not as great as for issues assigned
'F-1+' and 'F-1' ratings.
F-3 Fair credit quality. Issues assigned this rating
have characteristics suggesting that the degree of assurance
for timely payment is adequate, however, near-term adverse
changes could cause these securities to be rated below
investment grade.
F-S Weak credit quality. Issues assigned this rating
have characteristics suggesting a minimal degree of assurance
for timely payment and are vulnerable to near-term adverse
changes in financial and economic conditions.
D Default. Issues assigned this rating are in actual
or imminent payment default.
LOC The symbol LOC indicates that the rating is based
on a letter of credit issued by a commercial bank.
DUFF & PHELPS SHORT-TERM DEBT RATINGS
Duff & Phelps' short-term ratings are consistent with the rating
criteria utilized by money market participants. The ratings apply to all
obligations with maturities under one year, including commercial paper, the
uninsured portion of certificates of deposit, unsecured bank loans, master
notes, bankers
53
<PAGE> 54
acceptances, irrevocable letters of credit, and current maturities of long-term
debt. Asset-backed commercial paper is also rated according to this scale.
Emphasis is placed on liquidity which is defined as not only cash from
operations, but also access to alternative sources of funds including trade
credit, bank lines, and the capital markets. An important consideration is the
level of an obligor's reliance on short-term funds on an ongoing basis.
RATING SCALE DEFINITION
High Grade
D-1+ Highest certainty of timely payment. short-term
liquidity, including internal operating factors and/or access
to alternative sources of funds, is outstanding, and safety is
just below risk-free U.S. Treasury short-term obligations.
D-1 Very high certainty of timely payment. Liquidity factors
are excellent and supported by good fundamental protection
factors. Risk factors are minor.
D-1- High certainty of timely payment. Liquidity factors are
strong and supported by good fundamental protection factors.
Risk factors are very small.
Good Grade
D-2 Good certainty of timely payment. Liquidity factors and
company fundamentals are sound. Although ongoing funding needs
may enlarge total financing requirements, access to capital
markets is good. Risk factors are small.
Satisfactory Grade
D-3 Satisfactory liquidity and other protection factors
qualify issue as to investment grade. Risk factors are larger
and subject to more variation. Nevertheless, timely payment is
expected.
Non-investment Grade
D-4 Speculative investment characteristics. Liquidity is not
sufficient to insure against disruption in debt service.
Operating factors and market access may be subject to a high
degree of variation.
Default
D-5 Issuer failed to meet scheduled principal and/or interest
payments.
THOMSON'S SHORT-TERM RATINGS
The Thomson Short-Term Ratings apply, unless otherwise noted, to
specific debt instruments of the rated entities with a maturity of one year or
less. Thomson short-term ratings are intended to assess the likelihood of an
untimely or incomplete payments of principal or interest.
TBW-1 the highest category, indicates a very high likelihood that
principal and interest will be paid on a timely basis.
TBW-2 the second highest category, while the degree of safety regarding
timely repayment of principal and interest is strong, the relative degree of
safety is not as high as for issues rated "TBW-1".
TBW-3 the lowest investment-grade category; indicates that while the
obligation is more susceptible to adverse developments (both internal and
external) than those with higher ratings, the capacity to service principal and
interest in a timely fashion is considered adequate.
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<PAGE> 55
TBW-4 the lowest rating category; this rating is regarded as
non-investment grade and therefore speculative.
IBCA SHORT-TERM RATINGS
IBCA short-term ratings assess the borrowing characteristics of banks
and corporations, and the capacity for timely repayment of debt obligations. The
short-term ratings relate to debt which has a maturity of less than one year.
IBCA issues ratings and reports on the largest U.S. and international
bank holding companies, as well as major investment banks. IBCA's short-term
rating system utilizes a dual system--Individual Ratings and Legal Ratings. The
Individual Rating addresses 1) the current strength of consolidated banking
companies and their principal bank subsidiaries. A consolidated bank holding
company/bank with an "A" rating has a strong balance sheet, and a favorable
credit profile without significant problems. A "B" rating indicates sound credit
profile without significant problems. Performance is generally in line with or
better than that of its peers. The legal rating addresses the question of
whether an institution would receive support if it ran into difficulties. Issues
rated "A-1" are obligations supported by a very strong capacity for timely
repayment. Issues rated "A-2" have a very strong capacity for timely repayment
although such capacity may be susceptible to adverse changes in business,
economic or financial conditions.
A1+ Obligations supported by the highest capacity for
timely repayment and possess a particularly strong credit
feature.
A1 Obligations supported by the highest capacity for
timely repayment.
A2 Obligations supported by a good capacity for
timely repayment.
A3 Obligations supported by a satisfactory capacity
for timely repayment.
B Obligations for which there is an uncertainty as to
the capacity to ensure timely repayment.
C Obligations for which there is a high risk of
default or which are currently in default.
D Obligations which are currently in default.
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<PAGE> 56
INDEPENDENT AUDITORS' REPORT
The Shareholders and Board of Trustees of
Nationwide Separate Account Trust:
We have audited the accompanying statements of assets and liabilities, including
the statements of investments, of Nationwide Separate Account Trust (comprised
of the Small Company Fund, Capital Appreciation Fund, Total Return Fund,
Government Bond Fund, and Money Market Fund), as of December 31, 1996, and the
related statements of operations, statements of changes in net assets and the
financial highlights for each of the periods indicated herein. These financial
statements and the financial highlights are the responsibility of Nationwide
Separate Account Trust's management. Our responsibility is to express an opinion
on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included verification of securities owned as of
December 31, 1996 by confirmation with the custodian and other appropriate audit
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the aforementioned funds comprising Nationwide Separate Account Trust as of
December 31, 1996, the results of their operations, the changes in their net
assets and the financial highlights for each of the periods indicated herein, in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Columbus, Ohio
February 21, 1997
NATIONWIDE SEPARATE ACCOUNT TRUST ANNUAL REPORT 1
<PAGE> 57
NATIONWIDE SEPARATE ACCOUNT TRUST
SMALL COMPANY FUND
STATEMENT OF INVESTMENTS -- DECEMBER 31, 1996
<TABLE>
<CAPTION>
------------------------------------------------------
SHARES SECURITY VALUE
------------------------------------------------------
<S> <C> <C>
COMMON STOCK (87.6%)
AEROSPACE/DEFENSE (2.7%)
20,400 AAR Corp. $ 617,100
10,000 Atlas Converting Equipment ORD
(British Pounds) 112,100
45,300 Aviall, Inc.* 419,025
40,100 B E Aerospace, Inc.* 1,087,712
14,500 Ducommun, Inc.* 313,563
13,500 Gulfstream Aerospace Corp.* 327,375
18,000 Orbital Sciences Corp.* 310,500
29,300 Thiokol Corp, DE 1,311,175
16,000 Tracor, Inc.* 340,000
-----------
4,838,550
-----------
AUTO & AUTO PARTS (0.6%)
7,600 Donaldson, Inc. 254,600
9,820 Garphyttan Industrier (Swedish
Krona) 127,999
5,000 Meiwa Industry Co. (Japanese
Yen) 23,347
30,000 Miller Industries, Inc.* 600,000
20,900 Trinity Holdings ORD (British
Pounds) 100,870
-----------
1,106,816
-----------
BANK/SAVINGS & LOAN (4.0%)
6,000 Banco Latinoamericano de Export
SA Class E 304,500
7,300 Bancorp of Hawaii, Inc. 306,600
2,000 Bank of Iwate (Japanese Yen) 101,146
37,700 Bank United Corp. 1,008,475
1,785 Charter One Financial, Inc. 74,970
29,000 Cullen Frost Bankers, Inc. 964,250
9,600 First Commerce Corp. 373,200
9,500 First Security Corp. DE 320,625
44,600 Glendale Federal Bank Fed.
Savings Commission* 1,036,950
144,000 International Bank of Asia (Hong
Kong Dollars) 95,877
20,000 Reliance Bancorp, Inc. 390,000
13,000 St. Paul Bancorp, Inc. 381,875
10,000 TCF Financial Corp. 435,000
17,000 Texas Regal Bancshares Class A 578,000
19,000 Tokushima Bank ORD (Japanese
Yen) 150,599
10,400 Webster Financial Corp. 382,200
5,500 Zagrebacka Banka GDR* 106,739
1,700 Zions Bancorporation 176,800
-----------
7,187,806
-----------
BASIC MATERIALS (0.2%)
3,000 Denkyosha Co. (Japanese Yen) 20,729
410 Compagnie of Fives-Lille (French
Francs) 38,644
62,500 Futuris Corp. (Australian
Dollars) 85,385
<CAPTION>
------------------------------------------------------
SHARES SECURITY VALUE
------------------------------------------------------
<S> <C> <C>
BASIC MATERIALS (CONTINUED)
30,000 Harrisons Crosfield (British
Pounds) $ 67,773
25,000 Herald Resources (Australian
Dollars) 18,467
2,000 Nihon Decoluxe (Japanese Yen) 24,640
400 Reesink & Co. CVA (Netherland
Guilders) 32,607
4,000 Uehara Sei Shoji (Japanese Yen) 20,987
-----------
309,232
-----------
BUILDING MATERIALS (0.7%)
60,000 AMEC PLC (British Pounds) 94,472
7,000 BE Semiconductor Industries
(Netherland Guilders)* 89,842
5,820 Catena (Swedish Krona) 73,304
863 Deceuninck Plastics Industries
SA (Belgian Francs) 148,885
20,000 Dylex Ltd. (Canadian Dollars)* 53,699
39,000 Hardie (James) Industries
(Australian Dollars) 122,669
24,470 Keller Group ORD (British
Pounds) 76,430
8,900 Lindab AB Class B (Swedish
Krona) 110,142
7,000 Max Co. (Japanese Yen) 116,998
8,000 Nissei Build Kogyo (Japanese
Yen) 58,585
4,000 P S Corp. (Japanese Yen) 66,856
5,000 TOC (Japanese Yen) 44,370
3,000 Toyo Exterior Co. Ltd. (Japanese
Yen) 44,456
22,500 Unicem SPA (Italian Lira)* 146,498
-----------
1,247,206
-----------
BUSINESS SERVICES (2.9%)
14,500 ADT, Ltd.* 331,688
12,000 American Management Systems,
Inc.* 294,000
1,200 Assystem (French Francs) 91,407
13,000 BISYS Group, Inc.* 481,813
10,500 CDI Corp.* 297,938
5,900 Catalina Marketing Corp.* 325,238
6,300 Chodai Co. (Japanese Yen) 154,148
34,900 Christies International PLC
(British Pounds) 138,573
1,000 Content Beheer (Netherland
Guilders) 38,157
4,200 Dainippon Shigyo (Japanese Yen) 26,777
10,000 Daiseki Co. (Japanese Yen) 237,787
7,400 Daisytek International Corp.* 303,400
8,000 Decisionone Holdings Corp.* 132,000
5,000 Iberica of Autopistas SA
(Spanish Pesetas) 106,669
7,000 Kanto Biomedical Laboratory
(Japanese Yen) 108,555
25,300 Leigh Interest (British Pounds) 46,764
</TABLE>
2 NATIONWIDE SEPARATE ACCOUNT TRUST ANNUAL REPORT
<PAGE> 58
NATIONWIDE SEPARATE ACCOUNT TRUST
SMALL COMPANY FUND
STATEMENT OF INVESTMENTS -- DECEMBER 31, 1996 (CONTINUED)
<TABLE>
<CAPTION>
------------------------------------------------------
SHARES SECURITY VALUE
------------------------------------------------------
<S> <C> <C>
BUSINESS SERVICES (CONTINUED)
12,000 Meitec (Japanese Yen) $ 228,483
11,400 Outdoor Systems, Inc.* 320,625
4,410 Prosegur Comp Seguredad (Spanish
Pesetas) 40,684
9,700 Quick Response Services, Inc.* 276,450
40,100 RCO Holdings (British Pounds) 150,984
35,000 Ricardo Group (British Pounds) 67,089
22,000 Sitel Corp. 310,750
60,130 Shanks & McEwan Group (British
Pounds) 135,840
10,300 Universal Outdoor Holdings, Inc. 242,050
7,500 WPP Group PLC ADR* 322,031
-----------
5,209,900
-----------
CHEMICAL & FERTILIZER (1.4%)
27,170 Amberley Group (British Pounds) 44,175
350 Andreae Noris Zahn (German
Marks) 129,453
12,000 BTP PLC (British Pounds) 62,844
3,000 Borsodchem GDR 75,162
240 Cheminova (Danish Krone) 63,876
6,349 Delta & Pine Land Co. 203,168
56,200 Giovanni Crespi (Italian Lira) 202,180
40 Gurit - Heberlein AG Bearer
(Swiss Francs) 79,839
3,000 Kaigen (Japanese Yen) 22,486
27,100 Lawter International, Inc. 342,138
22,000 Lilly Industries, Inc. 401,500
3,000 Maezawa Kaisei Industries
(Japanese Yen) 84,001
10,300 McWhorter Technologies, Inc.* 235,613
25,500 Nylex (Malaysian Ringgit) 57,553
10,000 Osaka Organic Chemical (Japanese
Yen) 120,617
100 Siegfried AG (Swiss Francs) 93,022
60,000 Snia BPD SPA (Italian Lira) 61,953
5,000 Teikoku Hormone (Japanese Yen) 56,001
290 Tessenderlo Chemical (Belgian
Francs) 124,392
4,000 Tsurumi Soda Co. (Japanese Yen) 20,677
3,000 Werner Soderstom Class B
(Finnish Marks) 74,853
-----------
2,555,503
-----------
COMMERCIAL SERVICES (1.9%)
14,000 Amresco, Inc.* 374,500
14,060 Accustaff, Inc.* 297,018
12,000 Corestaff, Inc.* 284,250
14,000 Danka Business Systems PLC ADR 495,250
8,900 Memco Software Ltd.* 156,862
9,000 Metris Companies, Inc.* 216,000
17,000 Robert Half International, Inc.* 584,375
15,000 Romac International* 330,000
15,000 SOS Staffing Services, Inc.* 157,500
<CAPTION>
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SHARES SECURITY VALUE
------------------------------------------------------
<S> <C> <C>
COMMERCIAL SERVICES (CONTINUED)
11,000 Source Services Corp.* $ 199,375
9,600 Sungard Data Systems, Inc.* 379,200
-----------
3,474,330
-----------
COMMUNICATIONS & MEDIA (1.7%)
70 Affichage Genuss (Swiss Francs) 29,873
420 Bantex (Danish Krone) 26,344
35,000 Blagden Industries ORD (British
Pounds) 129,984
2,000 Broadcasting System of Niigata
(Japanese Yen) 19,988
3,700 Central Newspapers, Inc. 162,800
13,900 Central European Media
Enterprises Ltd.* 441,325
25,700 Chancellor Broadcasting Corp.
Class A* 610,375
26,150 Harte-Hanks Communications, Inc. 725,662
7,000 Independent Newspaper (New
Zealand Dollars) 35,116
6,300 Metro Networks, Inc.* 159,075
105 Orell Fuessli Graph (Swiss
Francs) 86,021
2,500 Schibsted A/S (Norwegian Krone) 46,004
10,000 Snyder Communications, Inc.* 270,000
1,100 UBI Soft Entertainment (French
Francs) 75,115
4,000 Univision Communications, Inc.* 148,000
1,620 Wegener NV (Netherland Guilders) 150,040
-----------
3,115,722
-----------
COMPUTER EQUIPMENT (1.5%)
48,600 Auspex Systems, Inc.* 564,975
40,200 Borland International, Inc.* 218,587
12,100 Casino Data Systems* 83,188
10,500 Citrix Systems, Inc.* 410,156
18,500 D H Technology, Inc.* 444,000
11,000 Fusion Systems Corp.* 233,750
9,100 National Instruments Corp.* 291,200
2,000 Network Appliance, Inc. 101,750
29,100 Peak Technologies Group* 349,200
-----------
2,696,806
-----------
COMPUTER SERVICES (1.2%)
13,000 Computer Data Systems, Inc.* 393,250
11,400 Computer Horizons 438,900
14,300 Keane, Inc. 454,025
15,000 National Techteam, Inc.* 300,000
14,100 Sykes Enterprises* 528,750
-----------
2,114,925
-----------
COMPUTER SOFTWARE (2.2%)
15,200 BMC Software, Inc.* 628,900
10,500 Baan Co. NV* 364,875
6,000 CBT Group PLC ADR* 325,500
</TABLE>
NATIONWIDE SEPARATE ACCOUNT TRUST ANNUAL REPORT 3
<PAGE> 59
NATIONWIDE SEPARATE ACCOUNT TRUST
SMALL COMPANY FUND
STATEMENT OF INVESTMENTS -- DECEMBER 31, 1996 (CONTINUED)
<TABLE>
<CAPTION>
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------------------------------------------------------
<S> <C> <C>
COMPUTER SOFTWARE (CONTINUED)
8,000 Clarify, Inc.* $ 384,000
10,600 Mcafee Associates* 466,400
18,000 Puma Technology, Inc.* 310,500
12,000 Pure Atria Corp.* 297,000
10,200 Rational Software Corp.* 403,538
7,000 Scopus Technology, Inc.* 325,500
7,000 Visio Corp.* 346,500
4,000 Wind River Systems* 189,500
-----------
4,042,213
-----------
CONGLOMERATES (2.7%)
1,000 Aeon Credit Service (Japanese
Yen) 62,032
10,040 Ark ASA (Norwegian Krone) 70,756
800 Azkoyen SA (Spanish Pesetas) 98,282
6,000 Banco De Valencia (Spanish
Pesetas) 116,933
41,571 Breakwater Resources (Canadian
Dollars)* 79,160
22,000 Bunka Shutter Co. Ltd. (Japanese
Yen) 125,097
4,400 CTI Engineering (Japanese Yen) 92,875
500 Cewe Color Holdings (German
Marks) 113,555
2,000 Co-Cos Nobuoka Co. (Japanese
Yen) 22,400
37,920 Crest Packaging PLC (British
Pounds) 53,216
20 Daetwyler Holding (Swiss Francs) 32,323
60 Disetronic Holding (Swiss
Francs)* 132,271
31,000 Elec & Eltek International Co.
Ltd. (Singapore Dollars) 117,800
1,400 Esselte AB (Swedish Krona) 30,961
1,800 Euro D'Extincteurs (French
Francs) 111,489
6,800 Fag Kugelfischer (German Marks) 92,440
31,310 Frontline (Swedish Krona)* 108,219
3,000 Fujix Ltd. (Japanese Yen) 23,546
830 GTI Holding (Netherland
Guilders) 104,848
380 Galencia Holding AG (Swiss
Francs) 135,280
5,700 Gerresheimer Glas AG ORD (German
Marks) 123,905
160,000 Goodwill Investment Holding
(Hong Kong Dollars) 69,813
130 Huber Suhner AG (Swiss Francs) 130,707
1,200 Huhtamaki OY (Finnish Marks) 55,717
4,000 Industria Macchine Automatic
(Italian Lira) 15,653
140 Jamo A/S (Danish Krone)* 10,917
740 Jyske Bank (Danish Krone) 55,573
630 Kansas Erhvervbeklaed Odense A/S
(Danish Krone) 44,322
11,000 Low and Bonar ORD (British
Pounds) 76,622
<CAPTION>
------------------------------------------------------
SHARES SECURITY VALUE
------------------------------------------------------
<S> <C> <C>
CONGLOMERATES (CONTINUED)
50,700 McPhersons Ltd. (Australian
Dollars)* $ 140,945
3,000 Morito Co. (Japanese Yen) 24,787
3,000 Nokian Tyres Ltd. (Finnish
Marks) 65,090
2,200 Oyo Corp. (Japanese Yen) 95,339
30,000 Perseverence Corp. (Australian
Dollars) 19,301
230 Phoenix Meccano (Swiss Francs) 119,908
10,000 Premdor, Inc. (Canadian
Dollars)* 94,119
1,000 Puleva Union (Spanish Pesetas)* 21,526
260 Saurer AG Arbon (Swiss Francs) 112,311
52,000 Savage Resources (Australian
Dollars) 56,998
12,000 Scandia Consult AB (Swedish
Krona) 82,601
4,120 Scandinavian Mobility
International (Danish Krone)* 67,748
4,000 Shaw Industries Ltd. Class A
(Canadian Dollars) 80,840
8,000 Shinki Comp. Ltd. (Japanese Yen) 184,716
65 Sig Schw Sirx (Swiss Francs) 164,110
2,310 Sol Melia SA (Spanish Pesetas)* 82,579
1,280 Synthelabo (French Francs) 138,127
6,000 Takara Standard Co. (Japanese
Yen) 49,884
60 Tecan (Swiss Francs)* 84,233
26,000 Tecnost SPA (Italian Lira) 69,766
7,350 Toolex Alpha NV (Netherland
Guilders)* 76,487
4,000 Tsutsumi Jewelry Co. (Japanese
Yen) 98,906
2,000 Van Ommeren (KON) CVA
(Netherland Guilders) 90,189
38,000 Varitronix International (Hong
Kong Dollars) 68,779
2,250 Vidrala PTA (Spanish Pesetas) 155,333
33,400 Weir Group (British Pounds) 148,622
12,300 Westburne, Inc. (Canadian
Dollars)* 110,382
-----------
4,810,338
-----------
CONSTRUCTION & HOUSING (1.8%)
2,400 Alinco (Japanese Yen) 21,091
350 Bien-Haus AG (German Marks) 93,115
58,000 Bryant Group (British Pounds) 134,999
20,400 Coachmen Industries, Inc. 578,850
200 Dyckerhoff & Widmann (German
Marks) 28,421
7,000 Gleeson (MJ) ORD (British
Pounds) 101,831
79,600 Heiton Holdings PLC (Irish
Punts) 129,343
400 Hollandsche Beton (Netherland
Guilders) 82,766
950 IHC Caland (Netherland Guilders) 54,209
5,000 Japan Airport Terminal Co.
(Japanese Yen) 61,170
</TABLE>
4 NATIONWIDE SEPARATE ACCOUNT TRUST ANNUAL REPORT
<PAGE> 60
NATIONWIDE SEPARATE ACCOUNT TRUST
SMALL COMPANY FUND
STATEMENT OF INVESTMENTS -- DECEMBER 31, 1996 (CONTINUED)
<TABLE>
<CAPTION>
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------------------------------------------------------
<S> <C> <C>
CONSTRUCTION & HOUSING (CONTINUED)
10,000 Matsuo Bridge (Japanese Yen) $ 44,801
69,930 McCarthy & Stone (British
Pounds) 113,698
8,000 Nippon Denwa Shisetsu (Japanese
Yen) 73,749
15,000 Nissei Industries (Japanese Yen) 107,263
13,500 Oakwood Homes Corp. 308,813
16,000 SXL Corp. (Japanese Yen) 114,414
1,600 Svedala Industries (Swedish
Krona) 27,065
3,000 Tanabe Industries (Japanese Yen) 28,431
18,100 Texas Industries, Inc. 916,312
39,150 Wilson (Connolly) (British
Pounds) 111,560
14,600 Wilson Bowden (British Pounds) 117,939
-----------
3,249,840
-----------
CONSUMER GOODS & SERVICES (3.7%)
12,000 Alberto Culver Co. Class A 495,000
19,500 Arbor Drugs, Inc. 338,812
10,000 Bush Industries Class A 192,500
4,400 Chofu Seisakusho (Japanese Yen) 82,640
14,200 Devry, Inc.* 333,700
3,000 Enix Corp. (Japanese Yen) 67,718
34,000 Fisher Paykel Industries (New
Zealand Dollars) 133,329
11,000 Fuji Denki Reinki ORD (Japanese
Yen) 103,300
19,000 Helen of Troy* 418,000
14,500 ITT Educational Services, Inc.* 335,312
2,640 Leica Camera (German Marks)* 82,227
15,000 Osmonics, Inc.* 330,000
8,000 Rinnai (Japanese Yen) 160,593
1,000 Sangetsu Co. (Japanese Yen) 20,849
16,000 Sola International* 608,000
12,500 TCA Cable TV, Inc. 376,562
12,000 USA Detergents, Inc.* 499,500
12,500 Warnaco Group Class A 370,312
18,000 Watts Industries, Inc 429,750
12,500 Westpoint Stevens, Inc.* 373,438
16,500 Westwood One, Inc.* 274,313
10,500 Wolverine World Wide, Inc. 304,500
14,500 York Group, Inc. 282,750
-----------
6,613,105
-----------
CONTAINERS (0.6%)
13,000 Alltrista Corp.* 334,750
6,900 Aptargroup, Inc. 243,225
11,200 Libbey, Inc. 312,200
13,800 Sealright Co., Inc. 144,900
-----------
1,035,075
-----------
DATA PROCESSING & REPRODUCTION (0.4%)
9,120 Array Printers AB Class B*
(Swedish Krona) 86,819
4,600 Enator AB (Swedish Krona)* 117,560
7,200 Frontec AB (Swedish Krona)* 124,429
<CAPTION>
------------------------------------------------------
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------------------------------------------------------
<S> <C> <C>
DATA PROCESSING & REPRODUCTION (CONTINUED)
1,900 Hummingbird Communications, Inc.
(Canadian Dollars)* $ 54,757
9,000 Intec, Inc. (Japanese Yen) 126,389
1,460 Tietithededas OY Class B
(Finnish Marks) 123,193
1,500 WM-Data AB Class B (Swedish
Krona) 129,613
-----------
762,760
-----------
ELECTRICAL EQUIPMENT (0.6%)
7,000 Chicago Miniature Lamp, Inc.* 290,500
16,100 Continental Circuits Corp.* 173,075
14,550 Holophane Corp.* 276,450
20,700 Nu Horizons Electronics Corp.* 164,306
5,000 Seiwa Electric Manufacturing Co.
(Japanese Yen) 59,447
7,100 Teradyne, Inc.* 173,063
-----------
1,136,841
-----------
ELECTRONICS (4.3%)
1,750 Allgon AB (Swedish Krona) 42,161
270 Batenburg Beheer (Netherland
Guilders) 39,024
20,500 Black Box Corp. DE* 845,625
436,000 Champion Technology (Hong Kong
Dollars) 82,861
5,150 Chemring Group PLC ORD (British
Pounds) 24,855
300 Cubic Modulsystem Class B
(Danish Krone) 24,411
1,550 Eff Eff Fritz Fuss Gmbh & Co.
(German Marks) 64,872
1,500 Electricas Reunidas de Zaragoza
SA (Spanish Pesetas) 59,965
400 Eriks Holdings NV (Netherland
Guilders) 34,572
5,000 Geomatec Co. (Japanese Yen) 128,802
17,850 Glenayre Technologies, Inc.* 384,891
11,000 Iwatsu Electric (Japanese Yen) 41,604
4,000 Jostac (Japanese Yen) 44,111
18,000 Jeol (Japanese Yen)* 104,678
15,000 KLA Instruments Corp.* 532,500
15,200 Kent Electronics* 391,400
14,200 Macro 4 PLC (British Pounds) 117,868
14,400 Marshall Industries* 441,000
14,400 Methode Electronics, Inc. Class
A 291,600
6,000 Nihon Dempa Kogyo (Japanese Yen) 97,183
6,800 Nitto Electric Works (Japanese
Yen) 114,827
28,300 Pioneer Standard Electronics,
Inc. 371,438
980 Radiall (French Francs) 92,558
2,000 Riso Kagaku Corp. (Japanese Yen) 128,198
3,000 Ryoyo Electric (Japanese Yen) 54,278
8,100 SCI Systems, Inc.* 361,463
</TABLE>
NATIONWIDE SEPARATE ACCOUNT TRUST ANNUAL REPORT 5
<PAGE> 61
NATIONWIDE SEPARATE ACCOUNT TRUST
SMALL COMPANY FUND
STATEMENT OF INVESTMENTS -- DECEMBER 31, 1996 (CONTINUED)
<TABLE>
<CAPTION>
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------------------------------------------------------
<S> <C> <C>
ELECTRONICS (CONTINUED)
1,600 Saes Getters SPA (Italian Lira) $ 24,729
45,100 Sanderson Electronic PLC
(British Pounds) 114,236
4,500 Securitas AB (Swedish Krona) 130,822
15,900 Synopsys, Inc.* 735,375
786,000 Techtronic (Hong Kong Dollars) 116,860
29,000 Tencor Instruments* 764,875
910 Twentsche Kabel Holdings
(Netherland Guilders) 47,349
8,000 Uniphase Corp.* 420,000
62,000 Venture Manufacturing (Singapore
Dollars) 154,246
1,500 Vossloh (German Marks) 53,533
8,000 Xilinx, Inc.* 294,500
-----------
7,773,270
-----------
ELECTRONICS-SEMICONDUCTOR (4.6%)
6,300 ASM Lithography Holding NV* 313,819
5,000 Actel Corp. 118,750
8,200 Altera Corp.* 596,037
32,800 Dallas Semiconductor Corp. 754,400
8,000 Dupont Photomasks, Inc.* 363,000
12,200 FSI International, Inc.* 183,000
21,100 Maxim Integrated Products, Inc.* 912,575
16,700 Microchip Technology, Inc.* 849,612
19,000 Novellus Systems, Inc.* 1,029,563
15,000 Sanmina Corp.* 847,500
46,000 Sierra Semiconductor Corp.* 690,000
14,000 Sipex Corp.* 451,500
25,000 Vitesse Semiconductor Corp.* 1,137,500
-----------
8,247,256
-----------
ENVIRONMENTAL SERVICES (0.5%)
38,500 Allied Waste Industries, Inc.* 356,125
18,000 USA Waste Services, Inc.* 573,750
-----------
929,875
-----------
FINANCIAL SERVICES (5.1%)
9,000 Aames Financial Corp. 322,875
22,000 Amerin Corp.* 566,500
3,000 Cap Volmac Group (Netherland
Guilders) 87,067
10,000 Capital RE Corp. 466,250
12,000 Capmac Holdings, Inc. 397,500
15,200 City National Corp. 328,700
25,000 D&N Financial Corp.* 418,750
11,000 Enhance Financial Services Group 401,500
8,500 Executive Risk, Inc. 314,500
8,000 First Financial Caribbean Corp. 222,000
22,500 Hibernia Corp. Class A 298,125
7,000 Ichiyoshi Securities (Japanese
Yen) 28,888
10,000 Jameson Inns, Inc. 132,500
11,000 Liberty Corp. SC 431,750
40,000 Life USA Holding, Inc.* 480,000
<CAPTION>
------------------------------------------------------
SHARES SECURITY VALUE
------------------------------------------------------
<S> <C> <C>
FINANCIAL SERVICES (CONTINUED)
25,040 London Forfaiting Co. (British
Pounds) $ 128,564
42,500 Moneygram Payment Systems, Inc.* 563,125
10,000 Nac Re Corp. 338,750
4,650 OM Gruppen AB (Swedish Krona) 139,609
12,000 Patriot American Hospitality,
Inc. 517,500
3,000 Promise Co. Ltd. (Japanese Yen) 147,325
17,500 R & G Financial Corp. 415,625
22,900 Recordati SPA (Italian Lira) 167,175
700 Shohkoh Fund (Japanese Yen) 151,977
9,100 Starwood Lodging Trust 501,638
17,500 Terra Nova (Bermuda) Holdings 376,250
24,000 Titan Holdings, Inc. 396,000
14,000 Transaction System Architects
Class A* 465,500
870 Union Financiere-France Banque
(French Francs) 93,716
-----------
9,299,659
-----------
FOOD & BEVERAGE (0.8%)
3,000 B-R 31 Ice Cream (Japanese Yen) 26,622
8,000 Bush Boake Allen, Inc.* 213,000
48,400 Email ORD Ltd. (Australian
Dollars) 156,464
8,000 Hokkaido Coca-Cola Bottling
(Japanese Yen) 98,561
71,400 Illovo Sugar Ltd. (South African
Rand) 129,751
40,100 La Doria SPA (Italian Lira) 155,600
2,520 Louis Dreifus Citrus (French
Francs) 82,405
19,000 Marudai Food Co. (Japanese Yen) 101,327
250 Nordstern Lebensmittel AG
(German Marks) 39,095
19,000 Shoei Foods Corp. (Japanese Yen) 102,473
20,000 Soken Co. Ltd. (Japanese Yen) 75,816
48,000 Thorntons PLC (British Pounds) 166,764
5,000 Yokohama Reito (Japanese Yen) 52,124
-----------
1,400,002
-----------
FOREST PRODUCTS (0.3%)
5,000 Hokuetsu Paper Mills (Japanese
Yen) 28,905
1,700 Mayr-Melnhof Karton (Austrian
Schillings)* 83,122
23,800 Meyer International (British
Pounds) 147,452
2,560 Miquel Y Costas (Spanish
Pesetas)* 84,235
10,000 Munksjoe AB (Swedish Krona) 101,054
29,000 Nippon Hi-Pack Co. (Japanese
Yen) 169,897
-----------
614,665
-----------
</TABLE>
6 NATIONWIDE SEPARATE ACCOUNT TRUST ANNUAL REPORT
<PAGE> 62
NATIONWIDE SEPARATE ACCOUNT TRUST
SMALL COMPANY FUND
STATEMENT OF INVESTMENTS -- DECEMBER 31, 1996 (CONTINUED)
<TABLE>
<CAPTION>
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<S> <C> <C>
FURNISHINGS & APPLIANCES (0.3%)
5,300 Kimball International, Inc.
Class B $ 219,288
10,400 Rival Co. 258,700
-----------
477,988
-----------
GOLDMINES (0.2%)
150,000 Black Hawk Mining (Canadian
Dollars)* 71,126
52,000 Deelkral Gold Mines (South
African Rand)* 36,131
7,700 Free State Consold. Gold Mines
Ltd. (South African Rand) 56,383
8,200 Harmony Gold Mining (South
African Rand) 67,933
4,000 Hullas Del Coto Cortes (Spanish
Pesetas) 78,724
-----------
310,297
-----------
HEALTHCARE (5.2%)
26,900 Adac Labs 642,238
15,000 Amerisource Health Corp. Class
A* 723,750
7,600 Amersham International (British
Pounds) 149,581
12,000 Bio-Rad Labs Class A* 360,000
8,000 Biofermin Pharmaceuticals
(Japanese Yen) 74,438
8,137 Block Drug, Inc. Class A 374,302
26,000 Cardiac Pathways Corp.* 308,750
20,000 Cohr, Inc.* 540,000
14,500 Corvel Corp.* 420,500
2,900 Elekta Class B (Swedish Krona) 102,995
35,900 Esaote Biomedica SPA (Italian
Lira)* 113,331
2,000 Fesil ASA (Norwegian Krone) 25,841
25,500 Healthsource, Inc.* 334,688
19,900 Incontrol, Inc.* 159,200
18,200 Kinetic Concepts, Inc. 222,950
77,200 Life Sciences International
(British Pounds) 116,269
7,100 Lincare Holdings, Inc.* 291,100
45,600 London International Group PLC
(British Pounds) 128,769
5,950 Mayborn Group PLC ORD (British
Pounds) 20,163
25,000 Mentor Corp. Minnesota 737,500
20,000 Nacional De Drogas (Mexican
Pesos) 59,705
12,200 National Surgery Centers, Inc.* 463,600
18,500 Nellcor Puritan Bennet, Inc.* 404,687
1,100 Neurosearch (Danish Krone)* 48,970
25,000 Nitinol Medical Technologies,
Inc.* 312,500
12,500 Occusystems, Inc.* 337,500
9,400 Parexel International Corp.* 485,275
15,000 Physician Sales & Service, Inc.* 215,625
15,000 Physio-Control International
Corp.* 337,500
8,000 SRL (Japanese Yen) 121,306
<CAPTION>
------------------------------------------------------
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------------------------------------------------------
<S> <C> <C>
HEALTHCARE (CONTINUED)
290 Superfos (Danish Krone) $ 36,625
8,700 Sybron International Corp.* 287,100
8,000 Toa Medical Electronics
(Japanese Yen) 130,266
18,000 VWR Scientific Products, Inc.* 301,500
-----------
9,388,524
-----------
INDUSTRIAL MFG. & PROCESSING (0.2%)
13,700 Waters Corp.* 416,138
-----------
INDUSTRIAL MISC. (1.6%)
156,000 ASM Pacific Technology (Hong
Kong Dollars) 121,010
11,400 Apogee Enterprises 453,150
32,000 BMC Industries, Inc. Minnesota 1,008,000
11,900 Brady WH Co. 293,038
48,600 Carraro SPA (Italian Lira) 223,742
810 Ecia (French Francs) 124,958
9,000 Pentair, Inc. 290,250
1,485 Semperit AG Holdings (Austrian
Schillings) 73,979
800 Sylea (French Francs) 87,560
1,000 Tenryu Saw Manufacturing Co.
(Japanese Yen) 19,643
6,490 Varlen Corp. 133,451
-----------
2,828,781
-----------
INSURANCE (1.8%)
9,000 CMAC Investment Corp. 330,750
7,000 Conseco, Inc. 446,250
1,100 E.W. Blanch Holdings Co. 22,138
14,000 Everest Reinsurance Holdings,
Inc. 402,500
4,300 FBL Financial Group, Inc. 106,962
10,000 Frontier Insurance Group 382,500
22,000 Heath (C.E.) PLC (British
Pounds) 32,004
12,000 IBEX Technologies (Canadian
Dollars)* 49,904
38,390 Lloyds Thomson PLC 124,835
9,100 MMI Companies, Inc. 293,475
31,000 New Cap Reinsurance Corp.
(Australian Dollars)* 71,406
40,000 Presidential Life Corp. 482,500
11,700 W.R. Berkley Corp. 593,775
-----------
3,338,999
-----------
LEISURE/ENTERTAINMENT (0.7%)
13,000 First Capital Corp. (Singapore
Dollars) 39,219
3,100 H I S Co. Ltd. (Japanese Yen) 149,565
816 Infogrames Entertainment (French
Francs)* 94,177
64,110 Kunick PLC (British Pounds) 28,528
10,000 Premier Parks, Inc.* 321,250
14,000 Regal Cinemas, Inc.* 430,500
</TABLE>
NATIONWIDE SEPARATE ACCOUNT TRUST ANNUAL REPORT 7
<PAGE> 63
NATIONWIDE SEPARATE ACCOUNT TRUST
SMALL COMPANY FUND
STATEMENT OF INVESTMENTS -- DECEMBER 31, 1996 (CONTINUED)
<TABLE>
<CAPTION>
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------------------------------------------------------
<S> <C> <C>
LEISURE/ENTERTAINMENT (CONTINUED)
7,000 Shingakukai Co. Ltd. (Japanese
Yen) $ 45,231
6,000 VBH Holding AG (German Marks) 133,541
110,000 Yue Yuen Industrial Holdings Co.
(Hong Kong Dollars) 41,953
-----------
1,283,964
-----------
LODGING (1.0%)
10,900 Doubletree Corp.* 490,500
6,000 Marcus Corp. 127,500
46,700 Prime Hospitality Corp.* 753,038
18,000 Wyndham Hotel Corp.* 443,250
-----------
1,814,288
-----------
MACHINERY & CAPITAL GOODS (1.5%)
12,100 Alamo Group, Inc. 207,213
10,000 Daiwa House Industry Co. Ltd.
(Japanese Yen) 79,176
10,600 Dionex Corp.* 371,000
7,000 IDEX Corp. 279,125
11,000 Kaydon Corp. 518,375
7,500 Lincoln Electric Co. Class A 226,875
13,600 Stewart & Stevenson Services,
Inc. 396,100
17,100 Wolverine Tube Co.* 602,775
-----------
2,680,639
-----------
MACHINERY & ENGINEERING (1.1%)
6,000 Asahi Diamond Industrial
(Japanese Yen) 54,277
6,090 Carclo Engineering Group ORD
(British Pounds) 21,366
3,500 Cardo AB (Swedish Krona) 96,880
122,000 Chen Hsong ORD (Hong Kong
Dollars) 74,131
400 DMW Corp. (Japanese Yen) 21,022
1,000 Duerr Beteiligungs AG (German
Marks) 31,601
18,000 FKI PLC (British Pounds) 62,536
2,000 Glory (Japanese Yen) 46,696
550 Hoek's Machine (Netherland
Guilders) 52,148
1,200 Hoganas AB (Swedish Krona) 42,004
3,000 Koito Industries (Japanese Yen) 25,330
1,500 KCI Konecranes International
(Finnish Marks)* 47,190
6,400 Laird Group ORD (British Pounds) 43,484
360 Le Carbone Lorraine (French
Francs) 68,002
114,000 MacMahon Holdings (Australian
Dollars) 101,414
820 Manitou (French Francs) 89,907
11,700 McKechnie ORD (British Pounds) 110,632
11,000 Nippon Cable System (Japanese
Yen) 97,614
<CAPTION>
------------------------------------------------------
SHARES SECURITY VALUE
------------------------------------------------------
<S> <C> <C>
MACHINERY & ENGINEERING (CONTINUED)
10,000 Odawara Engineering (Japanese
Yen) $ 104,247
5,600 Oiles Corp. (Japanese Yen) 167,899
7,000 Ricoh Elemex (Japanese Yen) 97,700
31,000 Scapa Group (British Pounds) 130,250
96,200 Senior Engineering Group
(British Pounds) 177,813
7,000 Siddons Ramset (Australian
Dollars) 37,252
20,000 Sodick (Japanese Yen)* 165,417
600 Va Technologie AG (Austrian
Schillings) 94,073
-----------
2,060,885
-----------
MATERIALS & PROCESSING (2.6%)
15,000 Applied Extrusion Technologies,
Inc.* 157,500
22,000 CFC International, Inc.* 247,500
11,000 Cambrex Corp. 360,250
25,000 Chirex, Inc.* 300,000
22,000 Crompton & Knowles Corp.* 423,500
10,500 Culligan Water Technologies,
Inc.* 425,250
19,500 Geon Corp. 382,688
20,000 Hexcel Corp.* 325,000
35,000 International Specialty
Products, Inc.* 428,750
14,800 OM Group, Inc. 399,600
22,000 Rock-Tenn Co. Class A 434,500
55,000 Strategic Distribution, Inc.* 433,125
25,000 Synthetic Industries* 406,250
-----------
4,723,913
-----------
METALS/MINING (0.2%)
14,500 Pittston Brink's Group 391,500
-----------
METAL PRODUCT & FABRICATION (0.7%)
13,600 Cook (William) PLC ORD (British
Pounds) 82,629
30,000 Croesus Mining (Australian
Dollars) 19,539
13,860 Falck Acciaierie Ferriere Lomb
(Italian Lira) 55,376
11,000 Itoki Crebio Corp. (Japanese
Yen) 73,163
15,000 Oregon Metallurgical Corp.* 483,750
3,000 Osaka Steel Co. Ltd. (Japanese
Yen) 40,062
69,600 Portman Mining Ltd. (Australian
Dollars) 130,465
4,800 Titanium Metals Corp.* 157,800
62,580 Tubacex SA (Spanish Pesetas) 106,325
2,200 Von Roll (Swiss Francs)* 37,522
-----------
1,186,631
-----------
</TABLE>
8 NATIONWIDE SEPARATE ACCOUNT TRUST ANNUAL REPORT
<PAGE> 64
NATIONWIDE SEPARATE ACCOUNT TRUST
SMALL COMPANY FUND
STATEMENT OF INVESTMENTS -- DECEMBER 31, 1996 (CONTINUED)
<TABLE>
<CAPTION>
------------------------------------------------------
SHARES SECURITY VALUE
------------------------------------------------------
<S> <C> <C>
OFFICE EQUIPMENT (0.4%)
9,000 Miller (Herman), Inc.* $ 509,625
10,700 Viking Office Products, Inc.* 285,556
-----------
795,181
-----------
OIL & GAS/ENERGY (9.6%)
16,414 Avgold Ltd. (South African
Rand)* 38,601
6,700 Barrett Resources Corp.* 285,587
1,300 Blom ASA (Norwegian Krone) 36,545
14,900 Brown (Tom), Inc.* 311,037
4,000 Cairn Energy USA, Inc.* 40,000
7,000 Caltex Australia Ltd.
(Australian Dollars) 25,798
6,500 Camco International, Inc. 299,812
13,800 Chieftain International, Inc.* 358,800
4,400 Cliffs Drilling Co.* 278,300
7,000 Cooper Cameron Corp.* 535,500
22,500 Dailey Petroleum Services, Inc.* 236,250
24,700 Dawson Production Services,
Inc.* 382,850
14,300 Dreco Energy Service Ltd. Class
A* 523,738
11,500 Drilex International, Inc.* 138,000
7,000 Energy Ventures, Inc.* 356,125
4,000 Ensco International, Inc.* 194,000
11,900 Falcon Drilling, Inc.* 467,075
19,000 Flores & Rucks, Inc.* 1,011,750
7,600 Forcenergy, Inc.* 275,500
43,000 Global Industries, Ltd.* 800,875
7,600 Global Marine, Inc.* 156,750
52,500 Gulf Canada Resources Ltd. ORD* 387,188
5,000 Lukoil Holdings ADR 224,626
16,500 Marine Drilling Companies, Inc.* 324,844
6,300 Mosenergo ADR 144A** 190,890
59,200 Nabors Industries, Inc.* 1,139,600
12,700 National-Oilwell, Inc.* 390,525
5,000 Noble Affiliates, Inc. 239,375
12,500 Nuevo Energy Co.* 650,000
28,300 Oceaneering International, Inc.* 449,263
23,200 Offshore Logistics, Inc.* 449,500
14,800 Petroleum Geo Services ADR* 577,200
64,400 Pride Petroleum Services, Inc.* 1,497,300
16,100 Production Operators Corp. 748,650
10,000 Saipem (Italian Lira) 45,906
12,000 Seitel, Inc.* 480,000
15,900 Smith International, Inc.* 713,513
12,000 Stone Energy Corp.* 358,500
42,400 Texas Meridian Resources Corp.* 726,100
55,200 Titan Exploration, Inc.* 662,400
15,000 Tuboscope Vetco International
Corp.* 232,500
5,000 Veritas DGC, Inc. 92,500
-----------
17,333,273
-----------
<CAPTION>
------------------------------------------------------
SHARES SECURITY VALUE
------------------------------------------------------
<S> <C> <C>
PHARMACEUTICALS (1.0%)
5,500 Agouron Pharmaceuticals, Inc.* $ 372,625
11,000 Dura Pharmaceuticals, Inc.* 525,250
11,100 Gilead Sciences, Inc.* 277,500
14,800 Ligand Pharmaceuticals, Inc.
Class B* 220,150
18,000 Regeneron Pharmaceuticals, Inc.* 290,250
6,200 United Drug (Irish Punts) 34,106
16,000 Yoshitomi Pharmaceutical
Industries (Japanese Yen) 126,544
-----------
1,846,425
-----------
PRODUCER DURABLES (1.8%)
48,000 Accent Color Sciences, Inc.* 408,000
20,000 Allied Products Corp. DE 595,000
20,000 Avondale Industries, Inc.* 430,000
40,000 Aztec Manufacturing Co.* 335,000
21,000 Halter Marine Group, Inc.* 288,750
23,000 Rohr, Inc.* 520,375
24,000 Special Devices, Inc.* 426,000
24,500 Titan Wheel International, Inc. 312,375
-----------
3,315,500
-----------
PUBLISHING (0.5%)
7,100 Houghton Mifflin Co. 402,037
9,333 Pulitzer Publishing Co. 432,818
-----------
834,855
-----------
REAL ESTATE (0.6%)
13,600 Bradford Property Trust PLC ORD
(British Pounds) 61,681
18,000 Cesar Co. (Japanese Yen) 93,823
100,000 Grand Hotel Holdings Class A
(Hong Kong Dollars) 42,017
39,200 Great Portland Estates (British
Pounds) 140,886
18,600 NHP, Inc.* 288,300
44,820 Regalian Properties New ORD
(British Pounds)*** 24,930
235,940 Regalian Properties (British
Pounds) 135,273
99,000 TBI PLC (British Pounds) 127,075
14,500 United Dominion Realty Trust 224,750
-----------
1,138,735
-----------
RESTAURANTS (0.6%)
5,000 Boston Chicken, Inc.* 179,375
25,000 PJ America, Inc.* 450,000
14,300 Planet Hollywood International,
Inc. Class A* 282,425
5,400 Starbucks Corp.* 154,575
-----------
1,066,375
-----------
</TABLE>
NATIONWIDE SEPARATE ACCOUNT TRUST ANNUAL REPORT 9
<PAGE> 65
NATIONWIDE SEPARATE ACCOUNT TRUST
SMALL COMPANY FUND
STATEMENT OF INVESTMENTS -- DECEMBER 31, 1996 (CONTINUED)
<TABLE>
<CAPTION>
------------------------------------------------------
SHARES SECURITY VALUE
------------------------------------------------------
<S> <C> <C>
RETAIL STORES (2.5%)
14,400 99 Cents Only Stores* $ 235,800
13,600 Borders Group, Inc.* 487,900
165,000 Budgens PLC (British Pounds) 124,251
11,250 Consolidated Products Co.* 144,844
7,875 Consolidated Stores Corp.* 253,969
2,000 Daiichi Corp. (Japanese Yen) 40,320
3,000 Dennys Japan Co. Ltd. (Japanese
Yen) 91,497
12,000 Dollar Tree Stores, Inc.* 459,000
6,300 Fast Retailing Co. (Japanese
Yen) 161,204
5,100 Groupe Zannier (French Francs) 114,975
4,000 Jeans Mate Corp. (Japanese Yen) 103,386
12,000 Just For Feet, Inc. 315,000
5,200 Kohls Corp.* 204,100
6,000 Matsuyadenki Co. (Japanese Yen) 56,345
11,550 Monro Muffler Brake, Inc.* 187,688
10,600 Payless Shoesource, Inc.* 397,500
15,200 Petsmart, Inc.* 332,500
13,000 Schultz Sav-o Stores, Inc. 182,000
12,000 Stage Stores, Inc.* 219,000
13,500 Steinmart, Inc.* 273,375
10,000 Wild Oats Markets, Inc.* 185,000
-----------
4,569,654
-----------
RETAILING & DISTRIBUTORS (0.3%)
37,200 ISA International PLC (British
Pounds) 151,525
14,050 Richfood Holdings, Inc. 340,712
-----------
492,237
-----------
TECHNOLOGY (2.4%)
5,200 Analysis International Corp. 146,900
22,700 CACI International, Inc. Class
A* 476,700
10,500 Inacom Corp.* 420,000
29,200 Reynolds & Reynolds Co. Class A 759,200
40,000 Simulation Sciences, Inc.* 595,000
18,000 VLSI Technology* 429,750
20,000 Vanstar Corp.* 490,000
10,000 Viasoft, Inc.* 472,500
7,000 Viisage Technology, Inc.* 101,500
20,000 Xircom, Inc.* 435,000
-----------
4,326,550
-----------
TELECOMMUNICATIONS (0.4%)
8,000 Brooks Fiber Properties, Inc.* 204,000
12,500 Intermedia Communications of
Florida, Inc.* 321,875
9,300 McLeod, Inc.* 237,150
-----------
763,025
-----------
<CAPTION>
------------------------------------------------------
SHARES SECURITY VALUE
------------------------------------------------------
<S> <C> <C>
TELECOMMUNICATION EQUIPMENT (1.2%)
6,300 Advanced Fibre Communications* $ 350,440
8,000 Aspect Telecommunications Corp.* 508,000
5,000 Digital Microwave Corp. 139,375
12,000 MFS Communications Co., Inc.* 654,000
15,900 Paging Network, Inc.* 242,475
3,000 Tonichi Cable Ltd. (Japanese
Yen) 25,071
13,100 West Technologies Corp. 298,025
-----------
2,217,386
-----------
TEXTILE/APPAREL (0.8%)
420 Bazar de l'Hotel de Ville
(French Francs) 35,862
1,000 Carli Gry International (Danish
Krone)* 47,806
2,000 Charle Co. (Japanese Yen) 22,400
429 Devanlay SA (French Francs) 40,848
100 Etienne Aigner AG (German Marks) 47,693
36 Gerry Weber AG (German Marks) 1,425
33,000 Gunze (Japanese Yen) 170,871
4,000 Isamu Paint Co., Ltd. (Japanese
Yen) 24,123
85,900 Just Jeans Holdings Ltd.
(Australian Dollars) 126,223
11,600 Nautica Enterprises, Inc.* 292,900
6,550 Pagnossin SPA (Italian Lira) 24,210
3,000 Sotoh Co. Ltd. (Japanese Yen) 28,690
11,200 St. John Knits, Inc. 487,200
9,000 Tokyo Style (Japanese Yen) 125,614
-----------
1,475,865
-----------
TOBACCO & GROCERY (0.3%)
16,100 First Brands Corp. 456,837
19,300 Hardys & Hanson PLC (British
Pounds) 92,487
-----------
549,324
-----------
TRANSPORTATION (0.6%)
102,000 Aerodata Holdings (Australian
Dollars) 86,688
4,540 Business Post PLC (British
Pounds) 36,907
6,000 FCC Co. Ltd. (Japanese Yen) 162,833
5,000 Isewan Terminal Services
(Japanese Yen) 26,406
200 Leonische Drahtwerke (German
Marks) 60,606
15,000 Midwest Express Holdings, Inc.* 540,000
8,280 Tamro-Yhtyma OY (Finnish Marks) 55,152
4,000 Tokyo Kisen (Japanese Yen) 24,123
-----------
992,715
-----------
</TABLE>
10 NATIONWIDE SEPARATE ACCOUNT TRUST ANNUAL REPORT
<PAGE> 66
NATIONWIDE SEPARATE ACCOUNT TRUST
SMALL COMPANY FUND
STATEMENT OF INVESTMENTS -- DECEMBER 31, 1996 (CONTINUED)
<TABLE>
<CAPTION>
------------------------------------------------------
SHARES SECURITY VALUE
------------------------------------------------------
<S> <C> <C>
UTILITIES (0.3%)
20,000 Calpine Corp.* $ 400,000
11,680 Grupo Duro-Felguer SA (Spanish
Pesetas) 118,978
1,650 Nera ASA (Norwegian Krone) 71,320
-----------
590,298
-----------
WHOLESALE & INTERNATIONAL TRADE (0.8%)
51,000 Alexon Group ORD (British
Pounds) 154,493
1,600 Bioblock Scientific (French
Francs) 104,642
65,000 Burns Philip Co. (Australian
Dollars) 115,647
1,280 But SA (French Francs) 75,096
4,000 Circle K Japan Co. (Japanese
Yen) 172,310
350 D'ieteren Trading (Belgian
Francs) 72,062
8,300 Dahl International (Swedish
Krona)* 174,436
49,000 Dickson Concept International
(Hong Kong Dollars) 183,713
4,000 Econosto (Netherland Guilders) 75,389
8,200 Joyfull Co. (Japanese Yen) 115,155
5,000 Marukyo Corp. (Japanese Yen) 65,909
29,700 The Body Shop International
(British Pounds) 101,660
-----------
1,410,512
-----------
TOTAL COMMON STOCK 158,392,152
-----------
(cost $144,041,456)
PREFERRED STOCK (0.2%)
CONSTRUCTION & HOUSING (0.0%)
250 Hans Einhell NV (German Marks) 32,444
-----------
FOOD & BEVERAGE (0.1%)
1,800 Berentzen Gruppe AG (German
Marks) 67,744
250 WMF (Wuertt Metallw) AG (German
Marks) 42,015
-----------
109,759
-----------
TEXTILE & APPAREL (0.1%)
2,556 Gerry Weber International AG
(German Marks) 104,489
-----------
TOTAL PREFERRED STOCK 246,692
-----------
(cost $267,722)
<CAPTION>
------------------------------------------------------
SHARES SECURITY VALUE
------------------------------------------------------
<S> <C> <C>
RIGHTS (0.0%)
6,200 United Drugs Rights (Irish
Punts) $ 3,147
-----------
(cost $2,762)
WARRANTS (0.0%)
3,000 Haw Par Brothers (Singapore
Dollars) 2,981
-----------
(cost $3,341)
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL ---------
---------
<S> <C> <C>
SHORT-TERM DEBT (3.9%)
$5,291,000 Merrill Lynch & Co., Inc.
6.60%, due 01/02/97 $ 5,288,968
1,830,000 J.P. Morgan & Co., Inc.
5.35%, due 01/02/97 1,829,297
------------
TOTAL SHORT-TERM DEBT 7,118,265
------------
(cost $7,119,758)
U.S. GOVERNMENT OBLIGATIONS (1.5%)
2,796,000 U.S. Treasury Bills, 4.87%
through 5.01%, due 01/09/97
through 03/13/97 2,773,164
------------
(cost $2,772,648)
REPURCHASE AGREEMENTS (9.4%)
14,212,000 Fifth Third Bank,
5.00%, due 01/02/97,
Collateralized by $14,448,000
FHLMC Pool #G10452, 7.00%, due
02/01/11, market value
$14,497,672 14,212,000
------------
2,831,000 Goldman Sachs,
6.05% due 01/02/97,
Collateralized by $2,720,000
U.S. Treasury Note, 8.875%, due
11/15/98, market value
$2,890,000 2,831,000
------------
TOTAL REPURCHASE AGREEMENTS 17,043,000
------------
(cost $17,043,000)
TOTAL INVESTMENTS $185,579,401
============
(cost $171,250,687)
</TABLE>
NATIONWIDE SEPARATE ACCOUNT TRUST ANNUAL REPORT 11
<PAGE> 67
NATIONWIDE SEPARATE ACCOUNT TRUST
SMALL COMPANY FUND
STATEMENT OF INVESTMENTS -- DECEMBER 31, 1996 (CONTINUED)
- --------------------------------------------------------------------------------
FORWARD CURRENCY CONTRACTS
<TABLE>
<CAPTION>
Contract Value Market Value
Currency Sold: (U.S. $) (U.S. $) (Depreciation) Delivery Date
- -------------- -------------- ------------ -------------- -------------
<S> <C> <C> <C> <C>
French Francs $217,436 $219,582 ($2,146) 1/2/97
Italian Lira 33,209 33,395 (186) 1/2/97
-------- -------- ------
Total currency sold $250,645 $252,977 ($2,332)
======== ======== ======
Payable for currency contracts sold ($2,332)
======
</TABLE>
SUMMARY OF INVESTMENTS BY CURRENCY
<TABLE>
<CAPTION>
% OF PORTFOLIO
<S> <C>
United States Dollars 84.64
Japanese Yen 4.55
British Pounds 2.72
Swedish Krona 1.00
French Francs 0.84
German Marks 0.72
Australian Dollars 0.71
Italian Lira 0.69
Swiss Francs 0.67
Spanish Pesetas 0.58
Netherland Guilders 0.57
Hong Kong Dollars 0.48
<CAPTION>
% OF PORTFOLIO
<S> <C>
Canadian Dollars 0.32
Danish Krone 0.23
Finnish Marks 0.23
Belgian Francs 0.19
South African Rand 0.18
Singapore Dollars 0.17
Austrian Schillings 0.14
Norwegian Krone 0.13
Irish Punts 0.09
New Zealand Dollars 0.09
Mexican Pesos 0.03
Malaysian Ringgit 0.03
</TABLE>
- ------------------------------------------------------
* Denotes a non-income producing security.
** Represents a security registered uner Rule 144-A, which limits the resale to
certain qualified buyers.
*** Security is subject to contractual or legal restrictions on its resale.
Securities denominated in foreign currencies are shown at their U.S. dollar cost
and value.
Cost of investments for Federal income tax purposes: $171,909,218.
The abbreviations in the above statement stand for the following:
<TABLE>
<S> <C>
AB Aktiebolag (Swedish stock company)
ADR American Depository Receipt
AG Aktiengesellschaft (West German stock company)
A/S Limited
ASA Limited
CVA Class A Convertible
FHLMC Federal Home Loan Mortgage Corporation
GDR Global Depository Receipt
KON Koninklijke
NV Naamloze Vennootschap (Dutch corporation)
ORD Ordinary Depository Receipt
OY Limited
PLC (British) Public Limited Company
PTA Pesetas
SA Societe Anonyme (French corporation)
SA Sociedad Anonima (Spanish corporation)
SPA Societa per Azioni (Italian corporation)
</TABLE>
Portfolio holding percentages represent market value as a percentage of net
assets.
See accompanying notes to financial statements.
12 NATIONWIDE SEPARATE ACCOUNT TRUST ANNUAL REPORT
<PAGE> 68
NATIONWIDE SEPARATE ACCOUNT TRUST
CAPITAL APPRECIATION FUND
STATEMENT OF INVESTMENTS -- DECEMBER 31, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------
SHARES SECURITY VALUE
- ------------------------------------------------------
<S> <C> <C>
COMMON STOCK (94.3%)
BROADCASTING (0.2%)
1,980 TCI Satellite Entertainment,
Inc.* $ 19,552
4,125 Tele-Communications Liberty
Media Group A* 117,820
19,800 Tele-Communications, Inc.,
Class A* 258,638
-----------
396,010
-----------
BUILDING (3.0%)
66,800 Martin Marietta Materials,
Inc. 1,553,100
39,100 Masco Corp. 1,407,600
24,100 Pulte Corp. 741,075
44,200 Vulcan Materials Company 2,690,675
-----------
6,392,450
-----------
CHEMICALS (12.1%)
63,600 Georgia Gulf Corp. 1,709,250
26,100 Gelman Sciences, Inc.* 848,250
245,400 Millipore Corp. 10,153,425
62,100 Morton International, Inc. 2,530,575
107,400 OM Group, Inc. 2,899,800
157,300 Pall Corp. 4,011,150
43,610 Raychem Corp. 3,494,251
-----------
25,646,701
-----------
COMPUTER EQUIPMENT (3.9%)
54,300 International Business
Machines 8,199,300
-----------
CONGLOMERATES (5.3%)
244,300 Corning, Inc. 11,298,875
-----------
DRUGS (13.8%)
244,900 Allergan, Inc. 8,724,563
19,400 American Home Products Corp. 1,137,325
20,000 Pfizer, Inc. 1,657,500
141,100 Schering-Plough Corp. 9,136,225
113,800 Warner-Lambert Company 8,535,000
-----------
29,190,613
-----------
ELECTRICAL EQUIPMENT (1.5%)
103,400 Black & Decker Corp. 3,114,925
-----------
ELECTRONICS (1.6%)
87,800 AMP, Inc. 3,369,325
-----------
ENTERTAINMENT (1.4%)
42,177 Walt Disney Company 2,936,574
-----------
FINANCIAL--BANKS (5.7%)
10,000 Bancorp Hawaii, Inc. 420,000
10,000 Bank of NY Company, Inc. 337,500
36,000 Barnett Banks, Inc. 1,480,500
30,240 Charter One Financial, Inc. 1,270,080
7,300 CoreStates Financial Corp. 378,687
<CAPTION>
- ------------------------------------------------------
SHARES SECURITY VALUE
- ------------------------------------------------------
<S> <C> <C>
FINANCIAL--BANKS (CONTINUED)
55,100 Mellon Bank Corp. $ 3,912,100
92,834 U.S. Bank Corp. 4,171,728
-----------
11,970,595
-----------
FINANCIAL--INSURANCE (4.9%)
62,600 Chubb Corp. 3,364,750
173,200 Horace Mann Educators Corp. 6,992,950
-----------
10,357,700
-----------
FINANCIAL--MISCELLANEOUS (3.4%)
205,400 First USA, Inc. 7,111,975
-----------
FOOD & BEVERAGE (11.3%)
40,800 Anheuser-Busch Companies, Inc. 1,632,000
273,500 Morningstar Group Inc.* 5,367,437
253,500 PepsiCo, Inc. 7,414,875
108,333 Ralcorp Holdings, Inc.* 2,288,535
97,600 Ralston-Ralston Purina Group 7,161,400
-----------
23,864,247
-----------
FURNITURE/HOME APPLIANCE (0.6%)
61,500 Singer Co. N.V., The 1,376,063
-----------
HOSPITAL SUPPLY (4.2%)
40,000 Nellcor Puritan* 875,000
187,400 St. Jude Medical* 7,987,925
-----------
8,862,925
-----------
HOUSEHOLD--PRODUCTS (1.7%)
55,400 Avon Products, Inc. 3,164,725
5,600 Gillette Company 435,400
-----------
3,600,125
-----------
MACHINERY & CAPITAL GOODS (0.1%)
33,800 Johnstown America Industries,
Inc.* 147,875
-----------
OIL & GAS (6.2%)
93,800 Texaco, Inc. 9,204,125
96,800 Unocal Corp. 3,932,500
-----------
13,136,625
-----------
PAPER & FOREST PRODUCTS (0.4%)
24,600 Bowater, Inc. 925,575
-----------
PRINTING & PUBLISHING (9.1%)
19,799 A.C. Nielsen Corp. 299,460
127,200 American Greetings Corp.
Class A 3,609,300
274,400 Cognizant Corp. 9,055,200
59,400 Dun & Bradstreet Corp. 1,410,750
3,900 Gannett Company, Inc. 292,012
65,900 Gibson Greetings, Inc.* 1,293,287
</TABLE>
NATIONWIDE SEPARATE ACCOUNT TRUST ANNUAL REPORT 13
<PAGE> 69
NATIONWIDE SEPARATE ACCOUNT TRUST
CAPITAL APPRECIATION FUND
STATEMENT OF INVESTMENTS -- DECEMBER 31, 1996 (CONTINUED)
<TABLE>
<CAPTION>
- ------------------------------------------------------
SHARES SECURITY VALUE
- ------------------------------------------------------
<S> <C> <C>
PRINTING & PUBLISHING (CONTINUED)
27,100 Tribune Company $ 2,137,513
3,400 Washington Post Co. Class B 1,139,425
-----------
19,236,947
-----------
RETAIL (1.2%)
20,000 Albertson's, Inc. 712,500
80,900 Wal-Mart Stores, Inc. 1,850,588
-----------
2,563,088
-----------
TELECOMMUNICATIONS (1.9%)
12,000 Airtouch Communications, Inc. 303,000
111,800 MCI Communications Corp. 3,654,463
-----------
3,957,463
-----------
TOYS (0.8%)
61,835 Mattel, Inc. 1,715,921
-----------
TOTAL COMMON STOCK 199,371,897
-----------
(cost $159,563,921)
- ---------
PRINCIPAL
- ---------
CONVERTIBLE DEBT (0.3%)
MACHINERY (0.3%)
$1,029,000 Consorcio G Grupo Dina, 8.00%,
08/08/04 (cost $956,985) 649,556
-----------
COMMERCIAL PAPER (3.2%)
BANKS (0.4%)
827,000 Banc One Corp., 6.15%, due
01/09/97 825,678
-----------
BROKER--DEALERS (1.8%)
604,000 Dean Witter Discover & Co.,
5.32%, due 01/06/97 603,334
3,109,000 Goldman Sachs Group, 5.58%,
due 01/07/97 3,105,045
-----------
3,708,379
-----------
<CAPTION>
- ------------------------------------------------------
PRINCIPAL SECURITY VALUE
- ------------------------------------------------------
<S> <C> <C>
ELECTRIC UTILITIES (0.2%)
$ 374,000 National Rural Utilities,
5.31%, due 01/03/97 $ 373,787
-----------
FINANCIAL--BANKS (0.8%)
1,330,000 Bear Stearns Co., Inc., 5.55%,
due 01/06/97 1,328,534
418,000 Merrill Lynch & Co., 5.62%,
due 01/21/97 416,580
-----------
1,745,114
-----------
TOTAL COMMERCIAL PAPER 6,652,958
-----------
(cost $6,655,091)
REPURCHASE AGREEMENT (2.2%)
4,710,036 MBS Tri Party, 6.60%, due
01/02/97, Collateralized by
$4,805,000 GNMA 2 M008911AR,
5.50%, due 07/20/26, market
value $4,783,099 4,710,036
-----------
(cost $4,710,036)
TOTAL INVESTMENTS $211,384,447
============
(cost $171,886,033)
</TABLE>
- ------------------------------------------------------
* Denotes a non-income producing security.
Cost also represents cost for Federal income tax purposes.
The abbreviation in the above statement stands for the following:
GNMA Government National Mortgage Association
Portfolio holding percentages represent market value as a percent of net assets.
See accompanying notes to financial statements.
14 NATIONWIDE SEPARATE ACCOUNT TRUST ANNUAL REPORT
<PAGE> 70
NATIONWIDE SEPARATE ACCOUNT TRUST
TOTAL RETURN FUND
STATEMENT OF INVESTMENTS -- DECEMBER 31, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------
SHARES SECURITY VALUE
- ------------------------------------------------------
<S> <C> <C>
COMMON STOCK (92.5%)
AEROSPACE/DEFENSE (1.0%)
108,400 The Boeing Co. $ 11,531,050
AUTO & AUTO PARTS (5.9%)
350,000 Chrysler Corp. 11,550,000
490,000 Ford Motor Co. 15,618,750
622,600 Genuine Parts Co. 27,705,700
266,400 Magna International, Inc. 14,851,800
------------
69,726,250
------------
BUSINESS SERVICES (1.8%)
1,039,250 (The) Olsten Corp. 15,718,656
153,200 Cognizant Corp. 5,055,600
------------
20,774,256
------------
CABLE (1.6%)
1,052,000 Comcast Corp. Class A 18,738,750
------------
CHEMICALS (5.4%)
110,000 Air Products & Chemicals 7,603,750
400,500 Crompton & Knowles Corp. 7,709,625
236,200 Du Pont (E.I.) De Nemours &
Co. 22,291,375
99,000 Eastman Chemical Co. 5,469,750
268,400 Lawter International, Inc. 3,388,550
446,000 Monsanto Co. 17,338,250
------------
63,801,300
------------
COMPUTER EQUIPMENT (5.1%)
200,000 Hewlett-Packard Co. 10,050,000
250,000 International Business
Machines 37,750,000
257,419 Lucent Technologies, Inc. 11,905,629
------------
59,705,629
------------
COMPUTER SOFTWARE & SERVICES (1.2%)
340,000 Electronic Data Systems 14,705,000
------------
CONGLOMERATE (5.9%)
200,000 EG&G, Inc. 4,025,000
100,000 Eastman Kodak Co. 8,025,000
305,300 Honeywell, Inc. 20,073,475
556,000 Philips Electronics N.V. 22,240,000
153,900 Premark International, Inc. 3,424,275
200,000 Rockwell International Corp. 12,175,000
------------
69,962,750
------------
CONSUMER GOODS (0.7%)
153,900 Tupperware Corp. 8,252,888
------------
DRUGS (8.0%)
400,000 Allergan, Inc. 14,250,000
90,000 Bristol-Meyers Squibb Co. 9,787,500
400,000 Glaxo Wellcome PLC ADR 12,700,000
<CAPTION>
- ------------------------------------------------------
SHARES SECURITY VALUE
- ------------------------------------------------------
<S> <C> <C>
DRUGS (CONTINUED)
80,000 Schering-Plough Corp. $ 5,180,000
700,000 Warner-Lambert Co. 52,500,000
------------
94,417,500
------------
ELECTRONICS (0.2%)
177,000 Woodhead Industries, Inc. 2,433,750
FINANCIAL (14.7%)
600,000 Allstate Corp. 34,725,000
130,000 Bankers Trust NY 11,212,500
607,752 Bear Stearns Company, Inc. 16,941,087
325,000 Chubb Corp. 17,468,750
1,478,100 Equitable Companies, Inc. 36,398,212
132,400 Mellon Bank Corp. 9,400,400
350,000 Merrill Lynch & Co., Inc. 28,525,000
140,000 Morgan J.P. & Co., Inc 13,667,500
100,000 Morgan Stanley Group, Inc. 5,712,500
------------
174,050,949
------------
FOOD & BEVERAGE (7.4%)
176,700 Grand Metropolitan ADR 5,588,138
2,000,000 Grand Metropolitan PLC 15,709,600
283,500 Heinz (H.J) Co. 10,135,125
100,100 International Flavor &
Fragrance, Inc. 4,504,500
500,000 PepsiCo, Inc. 14,625,000
303,000 Ralston-Ralston Purina 22,232,625
335,000 Seagram Co., Ltd. 12,981,250
54,100 Universal Foods Corp. 1,907,025
------------
87,683,263
------------
FOOD--GRAIN & AGRICULTURE (1.7%)
891,984 Archer-Daniels-Midland Co. 19,623,648
HEALTHCARE SERVICES (2.4%)
683,400 Columbia/HCA Healthcare
Corp. 27,848,550
MACHINERY & CAPITAL GOODS (1.5%)
155,000 Cooper Industries, Inc. 6,529,375
50,000 Deere & Company 2,031,250
60,000 Emerson Electric Co. 5,805,000
50,000 Nordson Corp. 3,187,500
------------
17,553,125
------------
OIL & GAS (15.2%)
370,000 Amoco Corp. 29,785,000
230,000 Exxon Corp. 22,540,000
458,900 Mobil Corp. 56,100,525
110,000 Royal Dutch Petroleum Co. 18,782,500
225,000 Texaco, Inc. 22,078,125
600,000 The Williams Companies, Inc. 22,500,000
263,460 Union Pacific Resources
Group, Inc. 7,706,205
------------
179,492,355
------------
</TABLE>
NATIONWIDE SEPARATE ACCOUNT TRUST ANNUAL REPORT 15
<PAGE> 71
NATIONWIDE SEPARATE ACCOUNT TRUST
TOTAL RETURN FUND
STATEMENT OF INVESTMENTS -- DECEMBER 31, 1996 (CONTINUED)
<TABLE>
<CAPTION>
- ------------------------------------------------------
SHARES SECURITY VALUE
- ------------------------------------------------------
<S> <C> <C>
PAPER AND FOREST PRODUCTS (0.1%)
62,400 Glatfelter (P.H.) Co. $ 1,123,200
--------------
POLLUTION CONTROL (1.0%)
350,000 WMX Technologies, Inc. 11,418,750
--------------
PRINTING & PUBLISHING (1.0%)
153,200 Dun & Bradstreet Corp. 3,638,500
217,600 Reader's Digest Assoc.,
Inc., Class B 7,888,000
--------------
11,526,500
--------------
RETAIL (0.1%)
56,800 Supervalu, Inc. 1,611,700
--------------
TELECOMMUNICATIONS (9.6%)
692,100 360 Communications Co.* 16,004,812
794,300 AT & T Corp. 34,552,050
700,000 MCI Communications Corp. 22,881,250
1,004,300 Sprint Corp. 40,046,462
--------------
113,484,574
--------------
TRANSPORTATION (1.0%)
193,000 Union Pacific Corp. 11,604,125
--------------
TOTAL COMMON STOCK 1,091,069,862
--------------
(cost $791,645,511)
<CAPTION>
---------
PRINCIPAL
---------
<S> <C> <C>
U.S. GOVERNMENT AGENCY (6.3%)
$22,760,000 Federal Home Loan Mortgage
Corp., Discount Notes, 5.21%
through 5.36%, due 2/03/97
through 4/01/97 22,559,490
52,220,000 Federal National Mortgage
Association, Discount Notes,
5.20% through 5.46%, due
1/23/97 through 4/29/97 51,597,866
------------
TOTAL U.S. GOVERNMENT AGENCY 74,157,356
------------
(cost $74,161,880)
<CAPTION>
------------------------------------------------------
PRINCIPAL SECURITY VALUE
------------------------------------------------------
<S> <C> <C>
U.S. TREASURY BILLS (0.7%)
$ 8,375,000 5.04% through 5.31%, due
3/06/97 through 8/21/97
(cost $8,191,817) $ 8,192,415
--------------
REPURCHASE AGREEMENT (0.4%)
5,231,951 MBS Tri Party, 6.60%, due
1/02/97, Collateralized by
$5,390,000 GNMA 2 M008911AR,
5.50%, due 07/20/26, market
value $5,339,372 5,231,951
--------------
(cost $5,231,951)
TOTAL INVESTMENTS $1,178,651,584
==============
(cost $879,231,159)
</TABLE>
- ------------------------------------------------------
* Denotes a non-income producing security.
Cost also represents cost for Federal income tax purposes.
Portfolio holding percentages represent market value as a percentage of net
assets.
The abbreviations in the above statement stand for the following:
ADR American Depository Receipt
PLC Public Limited Company
GNMA Government National Mortgage Association
See accompanying notes to financial statements.
16 NATIONWIDE SEPARATE ACCOUNT TRUST ANNUAL REPORT
<PAGE> 72
NATIONWIDE SEPARATE ACCOUNT TRUST
GOVERNMENT BOND FUND
STATEMENT OF INVESTMENTS -- DECEMBER 31, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------
PRINCIPAL SECURITY VALUE
- ------------------------------------------------------
<S> <C> <C>
MORTGAGE-BACKED SECURITIES (34.4%)
FEDERAL HOME LOAN MORTGAGE CORP., REMIC
$ 9,036,000 Series 1132-J, 8.00%,
due 08/15/06 $ 9,388,522
13,000,000 Series 1344-D, 6.00%,
due 08/15/07 12,110,280
20,000,000 Series 1415-N, 6.75%,
due 11/15/07 19,867,800
9,454,271 Series 31-E, 7.55%,
due 05/15/20 9,536,334
10,000,000 Series 94-E, 8.95%,
due 11/15/20 10,029,140
10,000,000 Series 1102-H, 8.875%,
due 06/15/21 10,734,930
14,715,163 Series 1143-Z, 7.50%,
due 10/15/21 14,616,380
3,022,412 Series 190-D, 9.20%,
due 10/15/21 3,126,994
FEDERAL NATIONAL MORTGAGE ASSOCIATION,
REMIC
3,034,320 Series 68-E, 8.35%,
due 10/25/03 3,049,128
7,849,998 Series 100-M, 5.50%,
due 09/25/01 7,689,623
5,000,000 Series 34-E, 9.85%,
due 08/25/14 5,110,215
2,002,678 Series 25-B, 9.25%,
due 10/25/18 2,102,038
14,000,000 Series 16-D, 9.00%,
due 03/25/20 14,540,260
8,846,037 Series 81-Z, 8.50%,
due 04/25/20 9,386,812
6,204,751 Series 67-Z, 9.00%,
due 06/25/22 6,507,902
3,729,426 Series 73-A, 8.00%,
due 07/25/21 3,806,413
17,000,000 Series 203- PJ, 6.50%,
due 10/25/23 16,601,860
-----------
TOTAL MORTGAGE-BACKED
SECURITIES 158,204,631
-----------
(cost $155,462,837)
U. S. GOVERNMENT AND AGENCY
LONG-TERM OBLIGATIONS (52.4%)
FEDERAL HOME LOAN BANKS
12,000,000 6.36%, due 03/21/01 12,003,900
<CAPTION>
- ------------------------------------------------------
PRINCIPAL SECURITY VALUE
- ------------------------------------------------------
<S> <C> <C>
FEDERAL HOME LOAN MORTGAGE CORPORATION
$38,000,000 6.81%, due 03/11/04 $ 37,721,954
26,000,000 7.445%, due 04/14/04 26,354,926
10,000,000 7.54%, due 05/03/04 10,209,850
FEDERAL NATIONAL MORTGAGE ASSOCIATION
22,000,000 8.25%, due 10/12/04 22,927,850
21,000,000 7.26%, due 10/05/05 20,938,155
12,310,000 7.58%, due 04/26/06 12,454,557
PRIVATE EXPORT FUNDING CORPORATION
30,000,000 6.86%, due 04/30/04 30,521,880
RESOLUTION FUNDING CORPORATION, STRIPS
54,000,000 0.00%, due 04/15/06 29,403,486
25,000,000 0.00%, due 04/15/08 11,811,975
58,000,000 0.00%, due 07/15/13 18,592,422
40,000,000 0.00%, due 07/15/20 7,735,160
------------
TOTAL U.S. GOVERNMENT AND
AGENCY LONG-TERM OBLIGATIONS 240,676,115
------------
(cost $235,133,219)
REPURCHASE AGREEMENT (12.3%)
56,674,000 UBS Securities,
6.25%, due 01/02/97,
Collateralized by $45,207,000
U.S. Treasury Notes, 8.875%,
due 02/15/19,
market value $57,808,451 56,674,000
------------
(cost $56,674,000)
TOTAL INVESTMENTS $455,554,746
============
(cost $447,270,056)
</TABLE>
- ------------------------------------------------------
The abbreviations in the above statement stand for the following:
REMIC Real Estate Mortgage Investment Conduit
Cost also represents cost for Federal income tax purposes.
Portfolio holding percentages represent market value as a percentage of net
assets.
See accompanying notes to financial statements.
NATIONWIDE SEPARATE ACCOUNT TRUST ANNUAL REPORT 17
<PAGE> 73
NATIONWIDE SEPARATE ACCOUNT TRUST
MONEY MARKET FUND
STATEMENT OF INVESTMENTS -- DECEMBER 31, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------
PRINCIPAL SECURITY VALUE
- ------------------------------------------------------
<S> <C> <C>
CANADIAN GOVERNMENT OBLIGATIONS (5.6%)
$ 1,200,000 British Columbia, Providence
of, 5.80%, due 01/22/97 $ 1,195,940
3,000,000 British Columbia, Providence
of, 5.60%, due 02/11/97 2,980,867
2,968,000 British Columbia, Providence
of, 5.28%, due 02/03/97 2,953,635
3,000,000 British Columbia, Providence
of, 5.38%, due 01/30/97 2,986,998
7,000,000 British Columbia, Providence
of, 5.50%, due 02/10/97 6,957,222
12,000,000 Canadian Wheat Board, 5.32%,
due 02/18/97 11,914,880
9,850,000 Canadian Wheat Board, 5.26%,
due 02/18/97 9,780,919
6,000,000 Canadian Wheat Board, 5.40%,
due 03/19/97 5,930,700
7,834,000 Export Development, 5.58%,
due 01/03/97 7,831,572
2,200,000 Export Development, 5.70%,
due 01/03/97 2,199,303
------------
TOTAL CANADIAN GOVERNMENT
OBLIGATIONS 54,732,036
------------
(cost $54,732,036)
COMMERCIAL PAPER (91.8%)
AGRICULTURE/FINANCE (3.0%)
9,688,000 John Deere Capital, 5.38%,
due 01/21/97 9,659,044
12,000,000 John Deere Capital, 5.32%,
due 02/07/97 11,934,387
8,000,000 John Deere Capital, 5.42%,
due 01/16/97 7,981,933
------------
29,575,364
------------
AUTO/FINANCE (1.5%)
6,112,000 Ford Motor Credit Co., 5.34%,
due 01/10/97 6,103,840
1,863,000 Ford Motor Credit Co., 5.32%,
due 01/10/97 1,860,522
7,000,000 Ford Motor Credit Co., 5.31%,
due 01/22/97 6,978,318
------------
14,942,680
------------
BANKS (11.8%)
10,000,000 Banc One Corp., 5.32%, due
02/14/97 9,934,978
9,000,000 Banc One Corp., 5.30%, due
01/14/97 8,982,775
10,000,000 Banc One Corp., 5.30%, due
01/10/97 9,986,750
10,000,000 CoreStates Capital Corp.,
5.32%, due 01/28/97 9,960,100
15,000,000 Morgan (J.P.) & Co., 5.39%,
due 01/13/97 14,973,050
8,000,000 Morgan (J.P.) & Co., 5.40%,
due 03/25/97 7,900,400
<CAPTION>
- ------------------------------------------------------
PRINCIPAL SECURITY VALUE
- ------------------------------------------------------
<S> <C> <C>
BANKS (CONTINUED)
$ 7,000,000 Morgan (J.P.) & Co., 5.34%,
due 02/11/97 $ 6,957,428
12,000,000 National City Credit Corp.,
5.29%, due 03/14/97 11,873,040
14,000,000 National City Credit Corp.,
5.39%, due 01/24/97 13,951,789
2,000,000 National City Credit Corp.,
5.30%, due 01/10/97 1,997,350
19,915,000 Norwest Corp., 5.35%, due
02/06/97 19,808,455
------------
116,326,115
------------
BROKER-DEALERS (15.4%)
5,000,000 Bear Stearns Company, 5.43%,
due 01/17/97 4,987,934
10,000,000 Bear Stearns Company, 5.33%,
due 02/06/97 9,946,700
10,000,000 Bear Stearns Company, 5.30%,
due 04/01/97 9,867,500
5,000,000 Bear Stearns Company, 5.33%,
due 03/14/97 4,946,700
2,670,000 Dean Witter Discover, 5.31%,
due 01/31/97 2,658,185
5,000,000 Dean Witter Discover, 5.31%,
due 01/08/97 4,994,838
7,850,000 Dean Witter Discover, 5.28%,
due 02/28/97 7,783,223
15,000,000 Dean Witter Discover, 5.40%,
due 01/15/97 14,968,500
10,000,000 Goldman Sachs Group, 5.43%,
due 01/14/97 9,980,392
3,800,000 Goldman Sachs Group, 5.65%,
due 01/02/97 3,799,404
10,000,000 Goldman Sachs Group, 5.31%,
due 03/21/97 9,883,475
6,000,000 Goldman Sachs Group, 5.43%,
due 01/13/97 5,989,140
5,000,000 Goldman Sachs Group, 5.42%,
due 01/24/97 4,982,686
10,000,000 Merrill Lynch & Co., 5.33%,
due 01/24/97 9,965,947
8,000,000 Merrill Lynch & Co., 5.44%,
due 01/21/97 7,975,822
5,000,000 Merrill Lynch & Co., 5.33%,
due 02/14/97 4,967,428
10,000,000 Morgan Stanley Group, 5.34%,
due 03/20/97 9,884,300
4,000,000 Morgan Stanley Group, 5.45%,
due 03/20/97 3,952,766
10,000,000 Smith Barney, Inc., 5.32%,
due 01/09/97 9,988,178
10,000,000 Smith Barney, Inc., 5.45%,
due 01/09/97 9,987,889
------------
151,511,007
------------
</TABLE>
18 NATIONWIDE SEPARATE ACCOUNT TRUST ANNUAL REPORT
<PAGE> 74
NATIONWIDE SEPARATE ACCOUNT TRUST
MONEY MARKET FUND
STATEMENT OF INVESTMENTS -- DECEMBER 31, 1996 (CONTINUED)
<TABLE>
<CAPTION>
- ------------------------------------------------------
PRINCIPAL SECURITY VALUE
- ------------------------------------------------------
<S> <C> <C>
CHEMICALS (7.4%)
$ 5,000,000 Great Lakes Chemical, 5.45%,
due 03/31/97 $ 4,932,632
5,000,000 Great Lakes Chemical, 5.37%,
due 01/17/97 4,988,067
1,857,000 Great Lakes Chemical, 5.40%,
due 01/10/97 1,854,493
6,000,000 Great Lakes Chemical, 5.42%,
due 02/28/97 5,947,607
5,000,000 Great Lakes Chemical, 5.50%,
due 01/27/97 4,980,139
11,405,000 Great Lakes Chemical, 5.40%,
due 01/22/97 11,369,074
7,500,000 Monsanto Co., 5.32%,
due 01/13/97 7,486,700
4,000,000 PPG Industries, 5.50%,
due 02/24/97 3,967,000
9,000,000 PPG Industries, 5.40%,
due 02/20/97 8,932,500
10,854,000 PPG Industries, 5.35%,
due 01/13/97 10,834,644
7,385,000 PPG Industries, 5.35%,
due 02/20/97 7,330,125
------------
72,622,981
------------
CONSUMER SALES FINANCE (12.3%)
14,000,000 American Express Credit Corp,
5.33%, due 01/23/97 13,954,400
10,000,000 American Express Credit Corp,
5.45%, due 02/24/97 9,918,250
15,000,000 Associates Corp. of N.A.,
5.43%,
due 01/17/97 14,963,800
5,000,000 Avco Financial Services,
Inc., 5.34%, due 01/09/97 4,994,067
7,000,000 Avco Financial Services,
Inc., 5.29%, due 02/25/97 6,943,426
4,854,000 Avco Financial Services,
Inc., 5.40%, due 01/17/97 4,842,350
10,000,000 Avco Financial Services,
Inc., 5.47%, due 02/12/97 9,936,183
3,000,000 Avco Financial Services,
Inc., 5.30%, due 01/28/97 2,988,075
10,675,000 Beneficial Corp., 5.42%,
due 02/21/97 10,593,034
5,000,000 Beneficial Corp., 5.38%,
due 01/24/97 4,982,814
5,000,000 Beneficial Corp., 5.47%,
due 02/24/97 4,958,975
10,000,000 Beneficial Corp., 5.31%,
due 01/14/97 9,980,825
12,000,000 Commercial Credit Co., 5.35%,
due 02/03/97 11,941,150
3,000,000 Norwest Financial, Inc.,
5.31%,
due 01/27/97 2,988,495
7,000,000 Norwest Financial, Inc.,
5.40%,
due 01/23/97 6,976,900
------------
120,962,744
------------
<CAPTION>
- ------------------------------------------------------
PRINCIPAL SECURITY VALUE
- ------------------------------------------------------
<S> <C> <C>
CORPORATE CREDIT UNIONS (1.6%)
$15,252,000 U.S. Central Credit Union,
5.30%, due 01/16/97 $ 15,218,318
------------
DIVERSIFIED FINANCE (3.0%)
1,700,000 GE Capital Corp., 5.30%, due
01/16/97 1,696,246
1,900,000 GE Capital Corp., 5.30%, due
03/03/97 1,882,937
5,000,000 GE Capital Corp., 5.31%, due
05/08/97 4,906,338
5,000,000 GE Capital Corp., 5.35%, due
05/12/97 4,902,660
5,000,000 GE Capital Corp., 5.30%, due
01/13/97 4,991,166
6,000,000 GE Capital Corp., 5.37%, due
04/24/97 5,898,865
5,000,000 GE Capital Corp., 5.46%, due
03/24/97 4,937,816
------------
29,216,028
------------
ENTERTAINMENT (0.5%)
5,000,000 Walt Disney Company, 5.45%,
due 03/10/97 4,948,527
------------
FINANCIAL SERVICES/ELECTRIC UTILITY (3.0%)
10,000,000 Natural Rural Utilities,
5.31%,
due 01/06/97 9,992,625
5,000,000 Natural Rural Utilities,
5.31%,
due 01/07/97 4,995,575
5,000,000 Natural Rural Utilities,
5.30%,
due 01/24/97 4,983,069
10,000,000 Natural Rural Utilities,
5.32%,
due 03/04/97 9,908,378
------------
29,879,647
------------
FOOD & BEVERAGE (4.8%)
7,220,000 CPC International, Inc.,
5.31%,
due 01/17/97 7,202,961
8,000,000 Campbell Soup Co., 5.39%,
due 02/26/97 7,932,924
12,000,000 Heinz ("HJ") Company, 5.37%,
due 01/24/97 11,958,830
6,500,000 Heinz ("HJ") Company, 5.42%,
due 01/29/97 6,472,599
5,890,000 Heinz ("HJ") Company, 5.40%,
due 03/03/97 5,836,107
5,000,000 Heinz ("HJ") Company, 5.65%,
due 02/07/97 4,970,965
3,000,000 Heinz ("HJ") Company, 5.40%,
due 01/28/97 2,987,850
------------
47,362,236
------------
HEAVY EQUIPMENT FINANCE (2.5%)
16,000,000 Caterpillar Financial
Services, 5.35%, due 01/02/97 15,997,622
9,000,000 Caterpillar Financial
Services, 5.30%, due 01/28/97 8,964,225
------------
24,961,847
------------
</TABLE>
NATIONWIDE SEPARATE ACCOUNT TRUST ANNUAL REPORT 19
<PAGE> 75
NATIONWIDE SEPARATE ACCOUNT TRUST
MONEY MARKET FUND
STATEMENT OF INVESTMENTS -- DECEMBER 31, 1996 (CONTINUED)
<TABLE>
<CAPTION>
- ------------------------------------------------------
PRINCIPAL SECURITY VALUE
- ------------------------------------------------------
<S> <C> <C>
HOUSEWARES (2.3%)
$ 1,000,000 Rubbermaid, Inc., 5.32%,
due 01/03/97 $ 999,705
12,000,000 Rubbermaid, Inc., 6.58%,
due 01/06/97 11,989,032
10,000,000 Rubbermaid, Inc., 5.35%,
due 03/18/97 9,887,056
------------
22,875,793
------------
INSURANCE (6.8%)
273,000 AIG Funding, Inc., 5.35%,
due 01/31/97 271,783
4,985,000 AIG Funding, Inc., 5.53%,
due 01/31/97 4,962,027
3,415,000 AIG Funding, Inc., 5.45%,
due 01/31/97 3,399,490
7,000,000 MetLife Funding, Inc., 5.32%,
due 02/04/97 6,964,829
4,000,000 MetLife Funding, Inc., 5.37%,
due 01/21/97 3,988,067
12,000,000 MetLife Funding, Inc., 5.32%,
due 02/12/97 11,925,520
5,201,000 MetLife Funding, Inc., 5.30%,
due 01/17/97 5,188,749
10,000,000 Old Republic Capital Corp.,
5.32%, due 03/06/97 9,905,421
8,128,000 Old Republic Capital Corp.,
5.33%, due 03/06/97 8,050,983
8,700,000 Old Republic Capital Corp.,
5.55%, due 01/07/97 8,691,953
3,000,000 Old Republic Capital Corp.,
5.33%, due 04/09/97 2,956,472
------------
66,305,294
------------
OFFICE EQUIPMENT AND SUPPLIES (1.3%)
5,910,000 Pitney Bowes Credit, 5.58%,
due 02/18/97 5,866,030
7,000,000 Pitney Bowes Credit Corp.,
5.42%, due 02/24/97 6,943,090
------------
12,809,120
------------
OIL & GAS (0.6%)
6,000,000 Koch Industries, Inc., 6.55%,
due 01/02/97 5,998,908
------------
OIL & GAS: EQUIPMENT & SERVICES (2.8%)
10,000,000 Chevron Transport Corp.,
5.32%,
due 01/15/97 9,979,310
5,000,000 Chevron Transport Corp.,
5.43%,
due 01/10/97 4,993,213
12,000,000 Chevron Transport, Corp.,
5.32%,
due 01/08/97 11,987,587
------------
26,960,110
------------
<CAPTION>
- ------------------------------------------------------
PRINCIPAL SECURITY VALUE
- ------------------------------------------------------
<S> <C> <C>
PACKAGING/CONTAINERS (2.2%)
$ 4,500,000 Bemis Co., Inc, 5.43%,
due 02/13/97 $ 4,470,814
7,375,000 Bemis Co., Inc, 5.40%,
due 01/14/97 7,360,619
10,000,000 Bemis Co., Inc, 5.45%,
due 01/23/97 9,966,694
------------
21,798,127
------------
PAPER AND FOREST PRODUCTS (3.0%)
10,000,000 Sonoco Products Co., 5.30%,
due 01/07/97 9,991,166
9,770,000 Sonoco Products Co., 5.35%,
due 01/14/97 9,751,125
10,000,000 Sonoco Products Co., 5.42%,
due 01/14/97 9,980,428
------------
29,722,719
------------
PHARMACEUTICALS/PERSONAL CARE (4.0%)
10,000,000 Glaxo Wellcome, 5.31%,
due 01/22/97 9,969,025
15,000,000 Pfizer Inc., 5.40%, due
04/02/97 14,795,250
15,000,000 Pfizer Inc., 5.30%, due
03/12/97 14,845,417
------------
39,609,692
------------
PREMIUM FINANCE (1.0%)
10,000,000 A.I. Credit Corp., 5.30%,
due 01/16/97 9,977,917
------------
PRINTING & PUBLISHING (1.0%)
9,740,000 Donnelley (RR) & Sons, 6.85%,
due 01/02/97 9,738,147
------------
TOTAL COMMERCIAL PAPER 903,323,321
------------
(cost $903,323,321)
U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(2.6%)
6,000,000 U.S. Treasury Bill, 5.26%,
due 04/03/97 5,919,347
20,000,000 FNMA Floating Note, 5.13%*,
due 06/20/97 19,992,362
------------
TOTAL U.S. GOVERNMENT AND
AGENCY OBLIGATIONS 25,911,709
------------
(cost $25,911,709)
TOTAL INVESTMENTS $983,967,066
============
(cost $983,967,066)
</TABLE>
- ------------------------------------------------------
Cost also represents cost for Federal income tax purposes.
The abbreviation in the above statement stands for the following:
FNMA Federal National Mortgage Association.
Portfolio holding percentages represent value as a percentage of net assets.
*Variable rate security. The rate reflected in the Statement of Investments is
the rate in effect on December 31, 1996.
See accompanying notes to financial statements.
20 NATIONWIDE SEPARATE ACCOUNT TRUST ANNUAL REPORT
<PAGE> 76
NATIONWIDE SEPARATE ACCOUNT TRUST
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMALL CAPITAL
COMPANY APPRECIATION TOTAL RETURN GOVERNMENT MONEY MARKET
FUND FUND FUND BOND FUND FUND
------------ ------------ -------------- ------------ --------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments in securities, at value
(cost $154,207,687, $167,175,997,
$873,999,208, $390,596,056, and
$983,967,066, respectively) $168,536,401 $206,674,411 $1,173,419,633 $398,880,746 $ 983,967,066
Repurchase agreements (cost $17,043,000,
$4,710,036, $5,231,951, and $56,674,000,
respectively) 17,043,000 4,710,036 5,231,951 56,674,000 --
------------ ------------ -------------- ------------ --------------
Total investments 185,579,401 211,384,447 1,178,651,584 455,554,746 983,967,066
Cash 249,665 -- 30,322 719 18,617
Accrued interest and dividends receivable 94,696 180,742 1,671,546 3,818,073 32,317
Withholding tax reclaim receivable 13,809 -- 27,872 -- --
Receivable for investment securities sold 878,803 -- -- 76,130 --
Deferred organization expenses 6,950 -- -- -- --
------------ ------------ -------------- ------------ --------------
Total assets 186,823,324 211,565,189 1,180,381,324 459,449,668 984,018,000
------------ ------------ -------------- ------------ --------------
LIABILITIES
Cash overdraft -- 433 -- -- --
Payable for foreign currency contracts 2,332 -- -- -- --
Payable for investment securities
purchased 5,792,005 -- -- -- --
Accrued management fees 145,247 86,707 492,287 194,536 410,454
Other accrued expenses 44,031 4,226 13,252 8,282 78,868
------------ ------------ -------------- ------------ --------------
Total liabilities 5,983,615 91,366 505,539 202,818 489,322
------------ ------------ -------------- ------------ --------------
NET ASSETS $180,839,709 $211,473,823 $1,179,875,785 $459,246,850 $ 983,528,678
============ ============ ============== ============ ==============
REPRESENTED BY:
Capital $167,495,493 $171,959,795 $ 880,403,344 $455,280,050 $ 983,535,282
Net unrealized appreciation on investments
and translation of assets and
liabilities in foreign currencies 14,323,871 39,498,414 299,420,425 8,284,690 --
Undistributed net realized loss from
investments and foreign currency
transactions -- -- -- (4,334,590) (6,604)
Distributions in excess of net realized
gains from investments and foreign
currency transactions (963,415) -- -- -- --
Undistributed (distributions in excess of)
net investment income (16,240) 15,614 52,016 16,700 --
------------ ------------ -------------- ------------ --------------
NET ASSETS $180,839,709 $211,473,823 $1,179,875,785 $459,246,850 $ 983,528,678
============ ============ ============== ============ ==============
Shares outstanding (unlimited number of
shares authorized) 13,017,812 12,986,552 88,894,070 41,581,018 983,538,556
============ ============ ============== ============ ==============
NET ASSET VALUE, offering and redemption
price per share $ 13.89 $ 16.28 $ 13.27 $ 11.04 $ 1.00
============ ============ ============== ============ ==============
</TABLE>
See accompanying notes to financial statements.
NATIONWIDE SEPARATE ACCOUNT TRUST ANNUAL REPORT 21
<PAGE> 77
NATIONWIDE SEPARATE ACCOUNT TRUST
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMALL CAPITAL
COMPANY APPRECIATION TOTAL RETURN GOVERNMENT MONEY MARKET
FUND FUND FUND BOND FUND FUND
----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
INCOME:
Interest $ 739,901 $ 561,758 $ 4,885,900 $ 29,989,045 $49,804,088
Dividends 827,293 2,250,264 19,471,950 -- --
Less foreign tax withheld (35,499) -- (149,119) -- --
----------- ----------- ------------ ------------ -----------
Total income 1,531,695 2,812,022 24,208,731 29,989,045 49,804,088
----------- ----------- ------------ ------------ -----------
EXPENSES:
Investment management fees 851,352 684,932 4,851,676 2,225,962 4,518,925
Custodian fees 107,000 22,000 27,000 16,500 55,812
Professional services 7,683 4,419 34,697 14,739 36,394
Trustees fees and expenses 103 194 1,436 685 1,328
Other 52,016 7,322 26,241 8,590 24,019
----------- ----------- ------------ ------------ -----------
Total expenses 1,018,154 718,867 4,941,050 2,266,476 4,636,478
----------- ----------- ------------ ------------ -----------
NET INVESTMENT INCOME $ 513,541 $ 2,093,155 $ 19,267,681 $ 27,722,569 $45,167,610
=========== =========== ============ ============ ===========
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY:
Net realized gain (loss) on
investments and foreign
currency transactions $ (10,875) $ 6,083,507 $ 44,581,276 $ 4,438,322 $ (740)
Net change in unrealized
appreciation
(depreciation) on
investments and
translation of assets
and liabilities in
foreign currencies 12,814,687 24,469,916 132,964,864 (17,097,130) --
----------- ----------- ------------ ------------ -----------
Net realized and
unrealized gain (loss)
on investments and
translation of assets
and liabilities in
foreign currencies 12,803,812 30,553,423 177,546,140 (12,658,808) (740)
----------- ----------- ------------ ------------ -----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $13,317,353 $ 32,646,578 $196,813,821 $ 15,063,761 $45,166,870
=========== =========== ============ ============ ===========
</TABLE>
See accompanying notes to financial statements.
22 NATIONWIDE SEPARATE ACCOUNT TRUST ANNUAL REPORT
<PAGE> 78
NATIONWIDE SEPARATE ACCOUNT TRUST
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMALL COMPANY FUND
---------------------------------
PERIOD FROM
OCTOBER 23, 1995
(COMMENCEMENT OF
YEAR ENDED OPERATIONS) THROUGH
DECEMBER 31, DECEMBER 31,
1996 1995
------------ -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 513,541 $ 28,283
Net realized loss on investments and foreign currencies (10,875) (103,052)
Net change in unrealized appreciation on investments and
translation of assets and liabilities in foreign
currencies 12,814,687 1,509,184
------------ -----------
Net increase in net assets resulting from operations 13,317,353 1,434,415
------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (467,602) (25,860)
In excess of net realized gain from investment
transactions and foreign currency transactions (914,090) --
Tax return of capital (58,538)
------------ -----------
Decrease in net assets from distributions to
shareholders (1,440,230) (25,860)
------------ -----------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 233,069,667 18,935,596
Net asset value of shares issued to shareholders from
reinvestment of distributions 1,440,231 25,860
Cost of shares redeemed (82,702,784) (3,214,539)
------------ -----------
Net increase in net assets derived from capital share
transactions 151,807,114 15,746,917
------------ -----------
NET INCREASE IN NET ASSETS 163,684,237 17,155,472
NET ASSETS -- BEGINNING OF PERIOD 17,155,472 --
------------ -----------
NET ASSETS -- END OF PERIOD $180,839,709 $17,155,472
============ ===========
Undistributed net realized loss on investments and foreign
currency transactions included in net assets at end of
period $ -- $ (103,052)
============ ===========
Distributions in excess of net realized gain on investments
and foreign currency transactions included in net assets
at end of period $ (963,415) $ --
============ ===========
Undistributed (distributions in excess of) net investment
income included in net assets at end of period $ (16,240) $ 2,423
============ ===========
SHARE ACTIVITY:
Shares sold 17,796,626 1,796,171
Reinvestment of distributions 104,562 2,265
Shares redeemed (6,385,454) (296,358)
------------ -----------
Net increase in number of shares 11,515,734 1,502,078
============ ===========
</TABLE>
See accompanying notes to financial statements.
NATIONWIDE SEPARATE ACCOUNT TRUST ANNUAL REPORT 23
<PAGE> 79
NATIONWIDE SEPARATE ACCOUNT TRUST
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITAL APPRECIATION FUND
---------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 2,093,155 $ 1,232,936
Net realized gain on investments 6,083,507 2,523,674
Net change in unrealized appreciation on investments 24,469,916 13,171,765
------------ ------------
Net increase in net assets resulting from operations 32,646,578 16,928,375
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (2,097,320) (1,213,046)
Net realized gain on investments (6,083,507) (2,302,021)
In excess of net realized gain on investments -- (1,329)
------------ ------------
Decrease in net assets from distributions to shareholders (8,180,827) (3,516,396)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 188,489,438 26,980,755
Net asset value of shares issued to shareholders from
reinvestment of distributions 8,180,827 3,863,870
Cost of shares redeemed (90,899,204) (23,461,693)
------------ ------------
Net increase in net assets derived from capital share
transactions 105,771,061 7,382,932
------------ ------------
NET INCREASE IN NET ASSETS 130,236,812 20,794,911
NET ASSETS -- BEGINNING OF PERIOD 81,237,011 60,442,100
------------ ------------
NET ASSETS -- END OF PERIOD $211,473,823 $ 81,237,011
============ ============
Undistributed net realized gain on investments included in net
assets at end of period $ -- $ --
============ ============
Distributions in excess of net realized gains on investments
included in net assets at end of period $ -- $ --
============ ============
Undistributed net investment income included in net assets at end
of period $ 15,614 $ 19,779
============ ============
SHARE ACTIVITY:
Shares sold 12,564,846 2,172,400
Reinvestment of distributions 511,125 299,746
Shares redeemed (6,117,513) (1,977,044)
------------ ------------
Net increase in number of shares 6,958,458 495,102
============ ============
</TABLE>
See accompanying notes to financial statements.
24 NATIONWIDE SEPARATE ACCOUNT TRUST ANNUAL REPORT
<PAGE> 80
NATIONWIDE SEPARATE ACCOUNT TRUST
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOTAL RETURN FUND
-----------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1996 1995
-------------- ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 19,267,681 $ 19,348,385
Net realized gain on investments 44,581,276 42,991,075
Net change in unrealized appreciation on investments 132,964,864 108,350,477
-------------- ------------
Net increase in net assets resulting from operations 196,813,821 170,689,937
-------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (19,350,083) (19,011,213)
Net realized gain on investments (44,581,276) (42,991,075)
In excess of net realized gain on investments - (227,335)
-------------- ------------
Decrease in net assets from distributions to
shareholders (63,931,359) (62,229,623)
-------------- ------------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 234,350,587 145,723,309
Net asset value of shares issued to shareholders from
reinvestment of distributions 63,931,358 79,264,509
Cost of shares redeemed (66,253,094) (53,304,608)
-------------- ------------
Net increase in net assets derived from capital share
transactions 232,028,851 171,683,210
-------------- ------------
NET INCREASE IN NET ASSETS 364,911,313 280,143,524
NET ASSETS -- BEGINNING OF PERIOD 814,964,472 534,820,948
-------------- ------------
NET ASSETS -- END OF PERIOD $1,179,875,785 $814,964,472
============== ============
Undistributed net realized loss on investments included in
net assets at end of period $ -- $ --
============== ============
Undistributed net investment income included in net assets
at end of period $ 52,016 $ 134,418
============== ============
SHARE ACTIVITY:
Shares sold 18,641,347 13,111,420
Reinvestment of distributions 4,890,401 7,198,362
Shares redeemed (5,275,955) (4,821,628)
-------------- ------------
Net increase in number of shares 18,255,793 15,488,154
============== ============
</TABLE>
See accompanying notes to financial statements.
NATIONWIDE SEPARATE ACCOUNT TRUST ANNUAL REPORT 25
<PAGE> 81
NATIONWIDE SEPARATE ACCOUNT TRUST
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GOVERNMENT BOND FUND
----------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1996 1995
------------ -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 27,722,569 $ 26,950,345
Net realized gain on investments 4,438,322 813,537
Net change in unrealized appreciation (depreciation) on
investments (17,097,130) 43,487,386
------------ -------------
Net increase in net assets resulting from operations 15,063,761 71,251,268
------------ -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME (27,750,527) (26,924,228)
------------ -------------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 80,750,210 90,606,931
Net asset value of shares issued to shareholders from
reinvestment of distributions 27,750,527 33,834,038
Cost of shares redeemed (90,583,178) (106,004,873)
------------ -------------
Net increase in net assets derived from capital share
transactions 17,917,559 18,436,096
------------ -------------
NET INCREASE IN NET ASSETS 5,230,793 62,763,136
NET ASSETS -- BEGINNING OF PERIOD 454,016,057 391,252,921
------------ -------------
NET ASSETS -- END OF PERIOD $459,246,850 $ 454,016,057
============ =============
Undistributed net realized loss on investments included in
net assets at end of period $ (4,334,590) $ (8,772,912)
============ =============
Undistributed net investment income included in net assets
at end of period $ 16,700 $ 44,658
============ =============
SHARE ACTIVITY:
Shares sold 7,317,309 8,275,783
Reinvestment of distributions 2,540,180 3,126,554
Shares redeemed (8,244,830) (9,801,205)
------------ -------------
Net increase in number of shares 1,612,659 1,601,132
============ =============
</TABLE>
See accompanying notes to financial statements.
26 NATIONWIDE SEPARATE ACCOUNT TRUST ANNUAL REPORT
<PAGE> 82
NATIONWIDE SEPARATE ACCOUNT TRUST
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY MARKET FUND
---------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1996 1995
--------------- ---------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 45,167,610 $ 39,361,888
Net realized loss on investments (740) (5,864)
--------------- ---------------
Net increase in net assets resulting from operations 45,166,870 39,356,024
--------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (45,170,024) (39,360,095)
Tax return of capital (3,388) --
--------------- ---------------
Decrease in net assets from distributions to shareholders (45,173,412) (39,360,095)
--------------- ---------------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 2,044,373,614 971,797,511
Net asset value of shares issued to shareholders from
reinvestment of distributions 45,202,840 43,287,489
Cost of shares redeemed (1,843,449,040) (1,105,699,769)
--------------- ---------------
Net increase (decrease) in net assets derived from
capital share transactions 246,127,414 (90,614,769)
--------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS 246,120,872 (90,618,840)
NET ASSETS -- BEGINNING OF PERIOD 737,407,806 828,026,646
--------------- ---------------
NET ASSETS -- END OF PERIOD $ 983,528,678 $ 737,407,806
=============== ===============
Undistributed net realized loss on investments included in
net assets at end of period $ (6,604) $ (5,864)
=============== ===============
Undistributed net investment income included in net assets at
end of period $ -- $ 2,414
=============== ===============
SHARE ACTIVITY:
Shares sold 2,044,373,614 971,797,397
Reinvestment of distributions 45,202,840 43,287,489
Shares redeemed (1,843,449,040) (1,105,699,769)
--------------- ---------------
Net increase (decrease) in number of shares 246,127,414 (90,614,883)
=============== ===============
</TABLE>
See accompanying notes to financial statements.
NATIONWIDE SEPARATE ACCOUNT TRUST ANNUAL REPORT 27
<PAGE> 83
NATIONWIDE SEPARATE ACCOUNT TRUST
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMALL COMPANY FUND
-------------------------------
PERIOD FROM
OCTOBER 23, 1995
(COMMENCEMENT OF
YEAR ENDED OPERATIONS) THROUGH
DECEMBER 31, DECEMBER 31,
1996 1995
----------- -----------------
<S> <C> <C>
NET ASSET VALUE -- BEGINNING OF PERIOD $ 11.42 $ 10.00
Net investment income 0.06 0.02
Net realized gain and unrealized appreciation on
investments and translation of assets and liabilities in
foreign currencies 2.55 1.42
-------- -------
Total from investment operations 2.61 1.44
-------- -------
Distributions from net investment income (0.06) (0.02)
Distributions in excess of net realized gain from
investment transactions and foreign currencies (0.08) --
-------- -------
Total distributions (0.14) (0.02)
-------- -------
Net increase in net asset value 2.47 1.42
-------- -------
NET ASSET VALUE -- END OF PERIOD $ 13.89 $ 11.42
======== =======
Total Return 22.83% 14.38%
Ratios and supplemental data:
Net Assets, end of period (000) $180,840 $17,155
Ratio of expenses to average net assets 1.20% 1.25%*
Ratio of expenses to average net assets** 1.20% 1.74%*
Ratio of net investment income to average net assets 0.60% 1.32%*
Ratio of net investment income to average net assets** 0.60% 0.83%*
Portfolio turnover 136.74% 9.03%
Average commission rate paid*** 2.8802c --
</TABLE>
- ------------------------------------------------------
* Ratios are annualized for periods less than one year.
** Ratios calculated as if no fees were waived or expenses reimbursed.
*** Represents the total amount of commissions paid in portfolio equity
transactions divided by the total number of shares purchased and sold by the
Fund for which commissions were charged.
See accompanying notes to financial statements.
28 NATIONWIDE SEPARATE ACCOUNT TRUST ANNUAL REPORT
<PAGE> 84
NATIONWIDE SEPARATE ACCOUNT TRUST
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITAL APPRECIATION FUND
-------------------------------------------------------------------
PERIOD FROM
APRIL 15, 1992
(COMMENCEMENT OF
YEARS ENDED DECEMBER 31, OPERATIONS) THROUGH
--------------------------------------------- DECEMBER 31,
1996 1995 1994 1993 1992
-------- -------- ------------ -------- -------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE -- BEGINNING OF
PERIOD $ 13.48 $ 10.92 $ 11.20 $ 10.46 $ 10.00
Net investment income 0.21 0.23 0.18 0.26 0.10
Net realized gain (loss) and
unrealized appreciation
(depreciation) on investments 3.29 2.96 (0.28) 0.74 0.48
-------- -------- -------- -------- -------
Total from investment
operations 3.50 3.19 (0.10) 1.00 0.58
-------- -------- -------- -------- -------
Distributions from net
investment income (0.22) (0.23) (0.18) (0.26) (0.10)
Distributions from net realized
gain from investment
transactions (0.48) (0.40) -- -- (0.02)
-------- -------- -------- -------- -------
Total distributions (0.70) (0.63) (0.18) (0.26) (0.12)
-------- -------- -------- -------- -------
Net increase (decrease) in
net asset value 2.80 2.56 (0.28) 0.74 0.46
-------- -------- -------- -------- -------
NET ASSET VALUE -- END OF PERIOD $ 16.28 $ 13.48 $ 10.92 $ 11.20 $ 10.46
======== ======== ======== ======== =======
Total Return 26.14% 29.35% (0.90%) 9.61% 10.92%*
Ratios and supplemental data:
Net Assets, end of period (000) $211,474 $ 81,237 $ 60,442 $ 38,926 $18,800
Ratio of expenses to average net
assets 0.52% 0.54% 0.56% 0.59% 0.69%*
Ratio of net investment income
to average net assets 1.53% 1.89% 1.76% 2.82% 1.95%*
Portfolio turnover 22.19% 20.28% 11.21% 16.87% 5.01%
Average commission rate paid** 5.8677c -- -- -- --
</TABLE>
- ------------------------------------------------------
* Ratios and total return are annualized for periods of less than one year.
** Represents the total amount of commissions paid in portfolio equity
transactions divided by the total number of shares purchased and sold by
the Fund for which commissions were charged.
See accompanying notes to financial statements.
NATIONWIDE SEPARATE ACCOUNT TRUST ANNUAL REPORT 29
<PAGE> 85
NATIONWIDE SEPARATE ACCOUNT TRUST
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOTAL RETURN FUND
------------------------------------------------------
YEARS ENDED DECEMBER 31,
------------------------------------------------------
1996 1995 1994 1993 1992
---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE -- BEGINNING OF PERIOD $ 11.54 $ 9.70 $ 10.10 $ 9.46 $ 9.07
Net investment income 0.24 0.31 0.21 0.23 0.25
Net realized gain (loss) and unrealized
appreciation (depreciation) on
investments 2.26 2.49 (0.10) 0.79 0.48
---------- -------- -------- -------- --------
Total from investment operations 2.50 2.80 0.11 1.02 0.73
---------- -------- -------- -------- --------
Distributions from net investment income (0.25) (0.31) (0.28) (0.24) (0.25)
Distributions from net realized gain from
investment transactions (0.52) (0.65) (0.23) (0.14) (0.09)
---------- -------- -------- -------- --------
Total distributions (0.77) (0.96) (0.51) (0.38) (0.34)
---------- -------- -------- -------- --------
Net increase (decrease) in net asset
value 1.73 1.84 (0.40) 0.64 0.39
---------- -------- -------- -------- --------
NET ASSET VALUE -- END OF PERIOD $ 13.27 $ 11.54 $ 9.70 $ 10.10 $ 9.46
========== ======== ======== ======== ========
Total Return 21.84% 29.09% 1.07% 10.92% 8.18%
Ratios and supplemental data:
Net Assets, end of period (000) $1,179,876 $814,964 $534,821 $456,243 $334,917
Ratio of expenses to average net assets 0.51% 0.51% 0.52% 0.53% 0.53%
Ratio of net investment income to average
net assets 1.99% 2.84% 2.76% 2.51% 2.69%
Portfolio turnover 16.18% 16.12% 12.06% 9.79% 12.48%
Average commission rate paid* 4.7577c -- -- -- --
</TABLE>
- ------------------------------------------------------
* Represents the total amount of commissions paid in portfolio equity
transactions divided by the total number of shares purchased and sold by the
Fund for which commissions were charged.
See accompanying notes to financial statements.
30 NATIONWIDE SEPARATE ACCOUNT TRUST ANNUAL REPORT
<PAGE> 86
NATIONWIDE SEPARATE ACCOUNT TRUST
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GOVERNMENT BOND FUND
----------------------------------------------------
YEARS ENDED DECEMBER 31,
----------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE -- BEGINNING OF PERIOD $ 11.36 $ 10.20 $ 11.26 $ 10.92 $ 11.24
Net investment income 0.69 0.71 0.69 0.71 0.98
Net realized gain (loss) and unrealized
appreciation (depreciation) on
investments (0.32) 1.16 (1.06) 0.32 (0.14)
-------- -------- -------- -------- --------
Total from investment operations 0.37 1.87 (0.37) 1.03 0.84
-------- -------- -------- -------- --------
Distributions from net investment income (0.69) (0.71) (0.69) (0.66) (0.93)
Distributions from net realized gain from
investment transactions -- -- -- (0.03) (0.23)
-------- -------- -------- -------- --------
Total distributions (0.69) (0.71) (0.69) (0.69) (1.16)
-------- -------- -------- -------- --------
Net increase (decrease) in net asset
value (0.32) 1.16 (1.06) 0.34 (0.32)
-------- -------- -------- -------- --------
NET ASSET VALUE -- END OF PERIOD $ 11.04 $ 11.36 $ 10.20 $ 11.26 $ 10.92
======== ======== ======== ======== ========
Total return 3.49% 18.74% (3.23)% 9.52% 7.87%
Ratios and supplemental data:
Net Assets, end of period (000) $459,247 $454,016 $391,253 $433,584 $301,841
Ratio of expenses to average net assets 0.51% 0.51% 0.51% 0.53% 0.53%
Ratio of net investment income to average
net assets 6.23% 6.45% 6.46% 5.91% 8.75%
Portfolio turnover 33.75% 97.05% 111.40% 175.37% 73.75%
</TABLE>
- ------------------------------------------------------
See accompanying notes to financial statements.
NATIONWIDE SEPARATE ACCOUNT TRUST ANNUAL REPORT 31
<PAGE> 87
NATIONWIDE SEPARATE ACCOUNT TRUST
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY MARKET FUND
----------------------------------------------------
YEARS ENDED DECEMBER 31,
----------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE -- BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net investment income 0.05 0.06 0.04 0.03 0.03
Distributions from net investment income (0.05) (0.06) (0.04) (0.03) (0.03)
-------- -------- -------- -------- --------
Net increase (decrease) in net asset value -- -- -- -- --
-------- -------- -------- -------- --------
NET ASSET VALUE -- END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total Return 5.12% 5.66% 3.88% 2.76% 3.40%
Ratios and supplemental data:
Net Assets, end of period (000) $983,529 $737,408 $828,027 $351,798 $330,011
Ratio of expenses to average net assets 0.51% 0.52% 0.54% 0.53% 0.53%
Ratio of net investment income to average 5.00% 5.51% 4.00% 2.72% 3.36%
net assets
</TABLE>
- ------------------------------------------------------
See accompanying notes to financial statements.
32 NATIONWIDE SEPARATE ACCOUNT TRUST ANNUAL REPORT
<PAGE> 88
NATIONWIDE SEPARATE ACCOUNT TRUST
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nationwide Separate Account Trust (Trust) is a diversified, open-end investment
company registered under the Investment Company Act of 1940, as amended. The
Trust offers shares only to life insurance company separate accounts to fund the
benefits under variable insurance or annuity policies issued by life insurance
companies. The Trust was organized as a Massachusetts Trust effective June 30,
1981. To date, only separate accounts of Nationwide Life Insurance Company and
Nationwide Life and Annuity Insurance Company (formerly Financial Horizons Life
Insurance Company), which are affiliated companies, have purchased shares.
The Trust offers shares in five series: Small Company Fund, Capital Appreciation
Fund, Total Return Fund, Government Bond Fund and Money Market Fund. The Trust
was amended in 1995 to create the Small Company Fund. On October 23, 1995, the
Small Company Fund was capitalized through the sale of shares to Nationwide Life
Insurance Company in the amount of $5,000,000, at which time the Small Company
Fund became effective and sales of shares commenced.
On January 4, 1997, the Nationwide Separate Account Trust Income Fund became
effective. The Fund has not commenced operations.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
SECURITY VALUATION
A) SMALL COMPANY, CAPITAL APPRECIATION, TOTAL RETURN AND GOVERNMENT BOND
Securities are valued at the closing price of the securities exchange on which
such securities are primarily traded. Listed securities for which no sale was
reported on the valuation date are valued at quoted bid prices. Securities not
listed on an exchange or for which there were no transactions are valued at
their most recent bid price, or where no prices are available, at fair market
value, using procedures authorized by the Board of Trustees. Investments
denominated in foreign currencies are translated to U.S. dollars at prevailing
exchange rates. Forward currency exchange contracts are also valued at the
prevailing exchange rates.
The value of a repurchase agreement generally equals the purchase price paid
by the Fund (cost) plus the interest accrued to date. The seller, under the
repurchase agreement, is required to maintain the market value of the
underlying collateral at not less than the value of the repurchase agreement.
Securities subject to repurchase agreements are held by the Federal
Reserve/Treasury book-entry system or by the Fund's custodian or an approved
sub-custodian.
B) MONEY MARKET
Securities are valued at amortized cost, which approximates market value, in
accordance with Rule 2a-7 of the Investment Company Act of 1940.
NATIONWIDE SEPARATE ACCOUNT TRUST ANNUAL REPORT 33
<PAGE> 89
NATIONWIDE SEPARATE ACCOUNT TRUST
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSACTIONS (SMALL COMPANY FUND)
Fluctuation in the value of investments resulting from changes in foreign
exchange rates are included with net realized and unrealized gain or loss from
investments.
Net realized foreign exchange gains or losses arise from sales of foreign
currencies, currency gains or losses realized on security transactions and the
difference between the amounts of dividends, interest and foreign withholding
taxes recorded on the Fund's books, and the U.S. dollar equivalent of amounts
actually received or paid. Net unrealized foreign exchange gains or losses arise
from changes in the value of assets and liabilities resulting from changes in
exchange rates.
The Fund enters into forward currency exchange contracts which are obligations
to purchase or sell a foreign currency at a specified rate on a certain date in
the future. A net realized gain or loss would be incurred if the value of the
contract increases or decreases between the date the contract is opened and the
date it is closed. Forward currency contracts are marked to market daily and
this change in value is reflected in the Statement of Assets and Liabilities as
a net receivable or payable for foreign currency contracts purchased.
At or before the closing of a forward contract, the Small Company Fund may
either sell a portfolio security and make delivery of the currency, or retain
the security and fully or partially offset its contractual obligation to deliver
the currency by purchasing a second contract. If the Fund retains the portfolio
security and engages in an offsetting transaction, the Fund, at the time of
execution of the offsetting transaction, will incur a gain or loss to the extent
that movement has occurred in forward contract prices.
Forward exchange contracts are used in hedging the risks associated with
commitments to purchase securities denominated in foreign currencies for agreed
amounts. The precise matching of forward currency contract amounts and the value
of the securities involved generally will not be possible because the value of
such securities, measured in the foreign currency, will change after the foreign
currency contract has been established. Thus, the Fund might need to purchase or
sell foreign currencies in the spot (cash) market to the extent such foreign
currencies are not covered by forward contracts. The Fund could be exposed to
risk if a counter party is unable to meet the terms of a forward or if the value
of the currency changes unfavorably. The projection of short-term currency
market movements is difficult, and the successful execution of a short-term
hedging strategy is highly uncertain.
FEDERAL INCOME TAXES
The Trust's policy is to comply with the requirements of the Internal Revenue
Code that are applicable to regulated investment companies and to distribute all
its taxable income to its shareholders. Therefore, no federal income tax
provision is required. To the extent net realized gains are offset through the
application of a capital loss carryover, they will not be distributed to
shareholders but will be retained by the Trust. Each Fund is treated as a
separate taxable entity.
As of December 31, 1996, the Government Bond and Money Market Funds had net
capital loss carry forwards in the amounts of $4,334,590 and $6,604,
respectively, The Government Bond Fund carry forward will expire within 6 years
and the Money Market Fund carry forward will expire within 7 to 8 years.
The Small Company Fund intends to elect for Federal income tax purposes to treat
approximately $296,817 of net capital losses that arose during the period ended
December 31, 1996, as if such losses arose on January 1, 1997.
34 NATIONWIDE SEPARATE ACCOUNT TRUST ANNUAL REPORT
<PAGE> 90
NATIONWIDE SEPARATE ACCOUNT TRUST
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
ORGANIZATION EXPENSES
Initial organization expenses of the Small Company Fund were paid by the advisor
and will be reimbursed by the Fund. Such organization costs have been deferred
and will be amortized ratably over a period of sixty months from the
commencement of operations. If any of the initial shares are redeemed before the
end of the amortization period, the proceeds of the redemption will be reduced
by the pro-rata share of the unamortized organization costs.
SECURITY TRANSACTIONS AND INVESTMENT INCOME
Security transactions are recorded on the trade date. Dividend income is
recorded on the ex-dividend date or for foreign securities, it is recorded as
soon as the information becomes available. Interest income is recorded on an
accrual basis and includes, where applicable, the pro-rata amortization of
premium or discount.
EXPENSES
Expenses directly attributed to each Fund are charged to that Fund. Expenses
applicable to all funds in the Trust are allocated based on average net assets.
DIVIDENDS TO SHAREHOLDERS
A) SMALL COMPANY, CAPITAL APPRECIATION, TOTAL RETURN AND GOVERNMENT BOND
Dividend income is recorded on the ex-dividend date. Dividends from net
investment income are paid quarterly.
B) MONEY MARKET
Dividends from net investment income are declared daily and paid monthly.
C) ALL FUNDS
Net realized gains, if any, are declared and distributed at least annually.
Dividends and distributions to shareholders are determined in accordance with
Federal income tax regulations which may differ from generally accepted
accounting principles. These "book/tax" differences are considered either
permanent or temporary in nature. In accordance with AICPA Statement of
Position 93-2, permanent differences are reclassified within the capital
accounts based on their nature for Federal income tax purposes; temporary
differences do not require reclassification. Dividends and distributions that
exceed net investment income and net realized gains for financial reporting
purposes, but not for tax purposes, are reported as distributions in excess of
net investment income and net realized gains. To the extent distributions
exceed current and accumulated earnings and profits for Federal income tax
purposes, they are reported as distributions of capital.
Accordingly, the undistributed (distributions in excess of) net investment
income, distributions in excess of net realized gain and capital have been
adjusted as of October 31, 1995 and October 31, 1996 by the following amounts:
<TABLE>
<CAPTION>
Undistributed
(distributions in excess of) Distributions in excess of
net investment net realized
10/31/95 income gain Capital
----------------------------------------------------------------- ---------------------------- ---------
<S> <C> <C> <C>
Capital Appreciation Fund $ (1,329) $ 1,329 --
Total Return Fund (227,335) 227,335 --
</TABLE>
<TABLE>
<CAPTION>
10/31/96
-------------------------------------
<S> <C> <C> <C>
Small Company Fund (64,602) 64,602 --
Small Company Fund -- 58,538 $ (58,538)
Money Market Fund 3,388 -- (3,388)
</TABLE>
NATIONWIDE SEPARATE ACCOUNT TRUST ANNUAL REPORT 35
<PAGE> 91
NATIONWIDE SEPARATE ACCOUNT TRUST
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
NOTE 2 - TRANSACTIONS WITH AFFILIATES
As investment manager for the Trust, Nationwide Advisory Services, Inc. (NAS),
an affiliated company, earns an annual management fee of .5% based on the
average daily net assets of the Capital Appreciation Fund, Total Return Fund,
Government Bond Fund and Money Market Fund; this fee would not be payable in
full if the effect of such payment would increase total expense (excluding taxes
other than payroll taxes and brokerage commissions on portfolio transactions) to
an amount exceeding 1% of average daily net assets for any fiscal year. Such
limitations on total expenses did not affect management fees during the periods
covered by the financial statements.
As investment manager for the Small Company Fund, NAS earns an annual management
fee of 1.00% of average daily net assets. From such fees pursuant to
sub-investment advisory agreements, NAS pays subadvisory fees to The Dreyfus
Corporation, Neuberger and Berman, L.P., Pictet International Management
Limited, Strong Capital Management, Inc., Van Eck Associates Corporation and
Warburg, Pincus Consellors, Inc. based on average daily net assets of the
portion of the Small Company Fund under their management. For the year ended
December 31, 1996, NAS collected $851,352 in fees from the Small Company Fund,
and paid $483,572 in fees to the sub-investment advisors.
A subsidiary of NAS (Nationwide Investors Services, Inc.) acts as Transfer and
Dividend Disbursing Agent for the Trust.
NOTE 3 - BANK LOANS
The Trust has an unsecured bank line of credit of $25,000,000. Borrowing under
this arrangement bears interest at the Federal Funds rate plus .50%. No
compensating balances are required. There were no outstanding balances at
December 31, 1996.
NOTE 4 - INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding U.S. government obligations,
short-term securities and forward currency exchange contracts) and U.S.
government obligations for the year ended December 31, 1996 are summarized as
follows:
<TABLE>
<CAPTION>
LONG-TERM SECURITIES U.S. GOVERNMENT OBLIGATIONS
--------------------------- ---------------------------
PURCHASES SALES PURCHASES SALES
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Small Company Fund $231,307,931 $ 99,827,411 $ 37,166,169 $ 35,055,079
Capital Appreciation Fund 123,666,540 28,546,220 -- --
Total Return Fund 345,941,418 142,341,368 241,988,061 262,126,878
Govt. Bond Fund 22,663,696 15,420,295 134,663,481 122,169,245
Money Market Fund -- -- 26,803,774 --
</TABLE>
Realized gains and losses have been computed on the first-in, first-out basis.
Included in net unrealized appreciation at December 31, 1996, based on cost for
Federal income tax purposes, excluding forward currency contracts for the Small
Company Fund, are the following components:
<TABLE>
<CAPTION>
GROSS GROSS NET
UNREALIZED UNREALIZED UNREALIZED
GAINS LOSSES APPRECIATION
------------ ----------- ------------
<S> <C> <C> <C>
Small Company Fund $ 19,084,551 $(5,414,368) $ 13,670,183
Capital Appreciation Fund 41,832,820 (2,334,406) 39,498,414
Total Return Fund 304,921,518 (5,501,093) 299,420,425
Government Bond Fund 11,452,611 (3,167,921) 8,284,690
</TABLE>
36 NATIONWIDE SEPARATE ACCOUNT TRUST ANNUAL REPORT
<PAGE> 92
NATIONWIDE SEPARATE ACCOUNT TRUST
SMALL COMPANY FUND
STATEMENT OF INVESTMENTS -- JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
------------------------------------------------------
SHARES SECURITY VALUE
------------------------------------------------------
<S> <C> <C>
COMMON STOCK (93.0%)
AEROSPACE/DEFENSE (3.2%)
37,500 AAR Corp. $ 1,211,719
3,200 Alliant Techsystems, Inc.* 176,000
104,600 Aviall, Inc.* 1,464,400
15,600 B E Aerospace, Inc.* 493,350
19,800 Doncasters PLC ADR* 457,875
14,800 Ducommun, Inc.* 435,675
15,000 Gulfstream Aerospace Corp.* 442,500
25,000 Loral Space & Communications* 375,000
18,000 Orbital Sciences Corp.* 285,750
29,000 Thiokol Corp. DE 2,030,000
16,000 Tracor, Inc.* 402,000
-----------
7,774,269
-----------
AIRLINE (0.4%)
20,000 Midwest Express Holdings, Inc.* 547,500
12,000 Ryanair Holdings PLC ADR* 325,500
-----------
873,000
-----------
AUTO & AUTO PARTS (1.2%)
15,000 A. O. Smith Corp. 533,438
30,900 Cascade Corp. 596,756
9,400 Donaldson, Inc. 357,200
6,600 FCC Co. Ltd. (Japanese Yen) 167,264
4,000 Isamu Paint Co. Ltd. (Japanese
Yen) 23,071
10,000 Kansei Corp. (Japanese Yen) 77,515
27,000 Lex Service PLC (British Pounds) 169,649
5,000 Meiwa Industry Co. (Japanese
Yen) 29,057
18,000 Nippon Cable System (Japanese
Yen) 188,762
1,000 Nokian Tyres Ltd. (Finnish
Marks) 26,953
25,000 Wabash National Corp. 696,875
-----------
2,866,540
-----------
BANK/SAVINGS & LOAN (5.0%)
15,000 Banco De Valencia (Spanish
Pesetas) 316,176
62,300 Bank United Corp. 2,367,400
3,520 Bank of Iwate (Japanese Yen) 199,640
14 Banque Nationale de Belgique
(Belgian Francs) 20,056
10,785 Charter One Financial, Inc. 581,042
29,300 Cullen Frost Bankers, Inc. 1,241,588
10,900 First Commerce Corp. 479,600
15,250 First Security Corp. DE 416,516
53,900 Glendale Federal Bank Federal
Savings Commission* 1,408,138
740 Jyske Bank (Danish Kroner) 63,836
7,200 Nedcor Limited (South African
Rand) 159,541
8,400 Ocean Financial Corp. 296,100
13,600 Peoples Heritage Financial
Group, Inc. 515,100
<CAPTION>
------------------------------------------------------
SHARES SECURITY VALUE
------------------------------------------------------
<S> <C> <C>
BANK/SAVINGS & LOAN (CONTINUED)
12,300 Queens County Bancorp, Inc. $ 559,650
20,000 Reliance Bancorp, Inc. 588,750
12,000 St. Paul Bancorp, Inc. 397,500
36,150 Sterling Bancshares, Inc./Texas 677,812
12,000 Texas Regal Bancshares Class A 504,000
19,000 Tokushima Bank ORD (Japanese
Yen) 156,078
16,800 WSFS Financial Corp.* 231,000
21,300 Webster Financial Corp. 969,150
-----------
12,148,673
-----------
BUILDING MATERIALS (1.1%)
22,000 Bunka Shutter Co. Ltd. (Japanese
Yen) 141,309
4,400 Chofu Seisakusho (Japanese Yen) 75,749
1,073 Deceuninck Plastics Industries
SA (Belgian Francs) 235,194
222,500 Gruppo Ceramiche Ricchetti SPA
(Italian Lire) 247,411
39,000 Hardie (James) Industries
(Australian Dollars) 124,176
79,600 Heiton Holdings PLC (Irish
Punts) 156,126
32,000 Heywood Williams Group PLC
(British Pounds) 109,188
13,000 Lindab AB Class B (Swedish
Kronor) 183,257
23,800 Meyer International (British
Pounds) 166,378
13,400 Premdor, Inc. (Canadian
Dollars)* 125,792
8,000 Rinnai (Japanese Yen) 171,983
8,400 Rinol AG (German Marks) 239,587
27,000 SIG PLC (British Pounds) 142,909
50,000 Sunway Building Technology
Berhad (Malaysian Ringgits) 168,384
6,000 Takara Standard Co. (Japanese
Yen) 52,434
12,500 Unicem SPA (Italian Lire)* 87,570
17,300 Westburne, Inc. (Canadian
Dollars)* 208,177
-----------
2,635,624
-----------
BUSINESS SERVICES (1.6%)
45,000 Adsteam Marine Ltd.* (Australian
Dollars) 94,733
182,000 Aerodata Holdings (Australian
Dollars) 79,083
995 Assystem (French Francs) 56,945
13,000 BISYS Group, Inc.* 542,750
1,300 Bellsystem 24, Inc. (Japanese
Yen) 193,131
10,500 CDI Corp.* 437,719
12,000 Daiseki Co. (Japanese Yen) 251,682
3,000 Daitec Company Limited (Japanese
Yen) 128,463
13,000 Gartner Group, Inc. Class A* 467,187
8,000 Meitec (Japanese Yen) 238,399
</TABLE>
NATIONWIDE SEPARATE ACCOUNT TRUST SEMI-ANNUAL REPORT 1
<PAGE> 93
NATIONWIDE SEPARATE ACCOUNT TRUST
SMALL COMPANY FUND
STATEMENT OF INVESTMENTS -- JUNE 30, 1997 (UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
------------------------------------------------------
SHARES SECURITY VALUE
------------------------------------------------------
<S> <C> <C>
BUSINESS SERVICES (CONTINUED)
200 Oyo Corp. (Japanese Yen) $ 7,778
2,240 Petroleum Geo-Services ASA
(Norwegian Kroner)* 108,012
40,100 RCO Holdings (British Pounds) 113,465
35,000 Ricardo Group (British Pounds) 78,645
12,000 Scandia Consult AB (Swedish
Kronor) 79,149
60,130 Shanks & McEwan Group (British
Pounds) 146,121
8,300 Technology Solutions Co.* 327,850
40,000 Tecnost SPA (Italian Lire) 72,407
8,500 WPP Group PLC ADR* 346,375
-----------
3,769,894
-----------
CHEMICALS AND FERTILIZERS (0.7%)
2,400 Cheminova (Danish Kroner) 57,550
31,200 Giovanni Crespi (Italian Lire) 78,848
1,520 Grande Paroisse SA (French
Francs)* 105,892
50,000 Holliday Chemical Holdings PLC
(British Pounds) 118,176
27,100 Lawter International, Inc. 342,137
16,400 Lilly Industries, Inc. 330,050
3,000 Maezawa Kaisei Industries
(Japanese Yen) 70,786
4,100 McWhorter Technologies, Inc.* 97,887
10,000 Osaka Organic Chemical (Japanese
Yen) 103,994
15,000 Riken Vinyl Industry Co.
(Japanese Yen) 108,276
100 Siegfried AG (Swiss Francs) 111,469
2,900 Tessenderlo Chemical (Belgian
Francs) 142,782
3,000 Werner Soderstom Class B
(Finnish Marks) 103,962
-----------
1,771,809
-----------
COMMERCIAL SERVICES (2.2%)
20,500 ABR Information Services, Inc.* 594,500
2,500 Benesse Corp. (Japanese Yen) 139,823
10,000 Computer Learning Centers, Inc. 420,000
20,000 Danka Business Systems PLC ADR 817,500
6,000 Interim Services, Inc.* 267,000
23,500 Robert Half International, Inc.* 1,105,969
27,000 Romac International* 884,250
15,000 SOS Staffing Services, Inc.* 232,500
9,000 Superior Services, Inc.* 213,750
6,500 Sylvan Learning Systems, Inc.* 221,000
7,000 U.S. Rentals, Inc.* 177,188
6,000 Valassis Communications, Inc.* 144,000
-----------
5,217,480
-----------
COMMUNICATIONS & MEDIA (3.2%)
170,000 Becker Group Ltd. (Australian
Dollars)* 161,747
<CAPTION>
------------------------------------------------------
SHARES SECURITY VALUE
------------------------------------------------------
<S> <C> <C>
COMMUNICATIONS & MEDIA (CONTINUED)
21,500 Central Newspapers, Inc. Class A $ 1,539,938
18,900 Central European Media
Enterprises Ltd.* 491,400
17,000 Chancellor Broadcasting Corp.
Class A* 680,000
161,730 Editoriale L'Expresso SPA
(Italian Lire) 537,991
32,450 Harte-Hanks Communications, Inc. 957,275
12,000 Heftel Broadcasting Corp.* 663,000
12,000 Lin Television Corp.* 529,500
10,500 Mail-Well, Inc.* 299,250
29,300 Outdoor Systems, Inc.* 1,120,725
1,100 UBI Soft Entertainment (French
Francs) 86,188
12,300 Universal Outdoor Holdings, Inc. 428,963
8,100 Wegener NV (Netherlands
Guilders) 188,103
-----------
7,684,080
-----------
COMPUTER EQUIPMENT (1.3%)
22,000 Apex PC Solutions, Inc.* 434,500
49,100 Auspex Systems, Inc.* 472,588
44,600 Borland International, Inc.* 309,413
20,400 D H Technology, Inc.* 331,500
9,000 Data General Corp.* 234,000
15,100 National Instruments Corp.* 532,275
18,000 NeoMagic Corp.* 402,750
11,000 SMART Modular Technologies,
Inc.* 371,250
-----------
3,088,276
-----------
COMPUTER SERVICE (2.3%)
525,000 Anite Group PLC (British
Pounds)* 297,104
7,300 Aris Corporation* 159,687
13,000 Computer Data Systems, Inc.* 380,250
29,750 Computer Horizons 1,018,938
6,600 Enator AB (Swedish Kronor)* 117,792
5,000 Fiserv, Inc.* 223,125
5,500 Frontec AB (Swedish Kronor)* 46,235
7,000 INES Corp. (Japanese Yen) 124,792
5,600 Ingenico (French Francs) 142,125
11,000 Micro Focus Group PLC (British
Pounds)* 330,476
4,100 National Data Corp. 177,581
12,000 National Techteam, Inc.* 256,500
5,600 Prosolvia AB Class B (Swedish
Kronor)* 86,184
14,000 RWD Technologies, Inc.* 241,500
14,500 Sterling Commerce, Inc.* 476,687
10,600 SunGard Data Systems, Inc.* 492,900
33,000 Sykes Enterprises* 858,000
-----------
5,429,876
-----------
</TABLE>
2 NATIONWIDE SEPARATE ACCOUNT TRUST SEMI-ANNUAL REPORT
<PAGE> 94
NATIONWIDE SEPARATE ACCOUNT TRUST
SMALL COMPANY FUND
STATEMENT OF INVESTMENTS -- JUNE 30, 1997 (UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
------------------------------------------------------
SHARES SECURITY VALUE
------------------------------------------------------
<S> <C> <C>
COMPUTER SOFTWARE (4.4%)
9,000 3Dlabs, Inc. Ltd.* $ 261,000
18,200 BMC Software, Inc.* 1,007,825
7,000 Baan Co. NV* 482,125
7,000 CBT Group PLC ADR* 441,875
100,000 CI Technologies Group Ltd.* 112,376
14,800 Cambridge Technology Partners,
Inc.* 473,600
6,700 Cognos, Inc.* 208,538
9,000 Compuware Corp.* 429,750
11,100 Great Plains Software, Inc.* 299,700
10,000 HNC Software, Inc.* 381,250
5,700 Hummingbird Communications, Inc.
(Canadian Dollars)* 147,303
9,000 Information Management
Resources, Inc.* 409,500
9,600 Mcafee Associates* 606,000
11,000 Medasys Digital Systems (French
Francs)* 131,155
10,000 PeopleSoft, Inc.* 527,500
22,700 Rational Software Corp.* 381,644
14,500 Remedy Corp.* 580,000
50,000 Royalblue Group PLC (British
Pounds)* 173,727
14,000 Saville System Ireland PLC ADR* 728,000
19,900 Transaction System Architects
Class A* 686,550
5,000 Vantive Corp.* 141,250
9,000 Veritas Sortware Corp.* 452,250
12,500 Visio Corp.* 881,250
17,000 Wind River Systems* 650,250
-----------
10,594,418
-----------
CONGLOMERATES (1.0%)
3,800 Asko OY-A (Finnish Marks) 70,232
1,578 Charter PLC (British Pounds) 20,946
60 Disetronic Holding (Swiss
Francs)* 121,622
550,000 Elec & Eltek International
Holdings Ltd. (Hong Kong
Dollars) 161,510
83,400 Email ORD Ltd. (Australian
Dollars) 296,161
8,600 Engil-SGPS (Portuguese Escudos) 105,182
1,400 Esselte AB (Swedish Kronor) 32,953
76,500 Futuris Corp. (Australian
Dollars) 122,074
240,000 Goodwill Investment Holding
(Hong Kong Dollars) 80,545
9,180 Grupo Duro-Felguer SA (Spanish
Pesetas) 112,979
150 Gurit-Heberlein AG Bearer (Swiss
Francs) 468,171
3,000 Haw Par Brothers (Singapore
Dollars) 2,560
1,000 Oerlikon-Buehrle Holdings AG
(Swiss Francs) 117,300
50,000 Overseas Union Enterprise Ltd.
(Singapore Dollars) 230,802
700 Sipef SA (Belgian Francs) 147,983
<CAPTION>
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------------------------------------------------------
<S> <C> <C>
CONGLOMERATES (CONTINUED)
7,410 Unitor ASA (Norwegian Kroner) $ 106,281
338,000 Wrightson Limited (New Zealand
Dollars) 215,330
-----------
2,412,631
-----------
CONSTRUCTION & HOUSING (1.5%)
37,000 AMEC PLC (British Pounds) 92,377
2,400 Alinco (Japanese Yen) 27,475
900 Bien-Haus AG (German Marks) 309,900
58,000 Bryant Group (British Pounds) 125,499
400 CTI Engineering (Japanese Yen) 5,173
6,300 Chodai Co. (Japanese Yen) 71,572
20,400 Coachmen Industries, Inc. 349,350
95,000 Countryside Properties PLC
(British Pounds) 143,891
15,000 Daiwa House Industry Co. Ltd.
(Japanese Yen) 140,260
400 Hollandsche Beton (Netherlands
Guilders) 91,400
45,470 Keller Group ORD (British
Pounds) 197,531
10,000 Laing (John) PLC 'A' N/V
(British Pounds) 62,084
10,000 Matsuo Bridge (Japanese Yen) 33,558
56,571 McAlpine (Alfred) Group PLC
(British Pounds) 129,941
69,930 McCarthy & Stone (British
Pounds) 135,018
8,000 Nissei Build Kogyo (Japanese
Yen) 48,239
10,000 Nissei Industries (Japanese Yen) 82,146
16,000 SXL Corp. (Japanese Yen) 96,618
3,000 Tanabe Industries (Japanese Yen) 23,857
45,200 Texas Industries, Inc. 1,200,625
39,150 Wilson (Connolly) (British
Pounds) 104,261
14,600 Wilson Bowden (British Pounds) 123,935
-----------
3,594,710
-----------
CONSUMER CYCLICALS (0.4%)
30,200 Westwood One, Inc.* 973,950
-----------
CONSUMER GOODS & SERVICES (3.1%)
24,000 Alberto Culver Co. Class A 559,500
29,000 Arbor Drugs, Inc. 583,625
7,500 Blyth Industries, Inc.* 253,125
6,700 CFM Majestic, Inc. (Canadian
Dollars)* 108,307
17,500 Chesapeake Corp. 590,625
34,900 Christies International PLC
(British Pounds) 174,849
25,000 DE Rigo SPA ADR* 210,938
5,500 Denny's Japan Co. Ltd. (Japanese
Yen) 165,822
14,200 Devry, Inc.* 383,400
34,000 Fisher Paykel Industries (New
Zealand Dollars) 132,497
</TABLE>
NATIONWIDE SEPARATE ACCOUNT TRUST SEMI-ANNUAL REPORT 3
<PAGE> 95
NATIONWIDE SEPARATE ACCOUNT TRUST
SMALL COMPANY FUND
STATEMENT OF INVESTMENTS -- JUNE 30, 1997 (UNAUDITED) (CONTINUED)
<TABLE>
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------------------------------------------------------
<S> <C> <C>
CONSUMER GOODS & SERVICES (CONTINUED)
350 Fotolabo SA (Swiss Francs) $ 111,641
11,550 Fuji Denki Reinki ORD (Japanese
Yen) 90,842
21,000 Helen of Troy* 538,125
17,500 ITT Educational Services, Inc.* 434,219
100,000 McPhersons Ltd. (Australian
Dollars)* 193,287
23,500 Mohawk Industries, Inc.* 534,625
175,000 Moulin International Holdings
Ltd. (Hong Kong Dollars)* 127,627
18,000 Sola International* 603,000
21,000 Watts Industries, Inc. 504,000
24,000 Westpoint Stevens, Inc.* 939,000
17,500 York Group, Inc. 328,125
-----------
7,567,179
-----------
CONTAINERS (0.7%)
30,400 Aptargroup, Inc. 1,375,600
11,200 Libbey, Inc. 392,000
-----------
1,767,600
-----------
DATA PROCESSING & REPRODUCTION (0.2%)
22,212 Array Printers AB Class B
(Swedish Kronor)* 120,653
9,000 Intec, Inc. (Japanese Yen) 120,336
2,000 Riso Kagaku Corp. (Japanese Yen) 164,293
-----------
405,282
-----------
ELECTRICAL EQUIPMENT (0.9%)
16,100 Continental Circuits Corp.* 223,388
8,250 Data Modul AG (German Marks) 241,463
13,250 Holophane Corp.* 265,000
16,400 Kent Electronics Corp.* 601,675
20,000 Nippon Chemi-Corp. (Japanese
Yen) 105,916
20,700 Nu Horizons Electronics Corp.* 169,481
5,000 Seiwa Electric Manufacturing Co.
(Japanese Yen) 54,619
8,600 Teleflex, Inc. 268,750
7,000 Teradyne, Inc.* 274,750
-----------
2,205,042
-----------
ELECTRONICS (2.4%)
10,600 Altera Corp.* 535,300
1,550 Effeff Fritz Fuss GmbH & Co.
(German Marks) 63,156
36,000 Gasonics International Corp.* 490,500
5,000 Geomatec Co. (Japanese Yen) 118,413
31,000 Iwatsu Electric (Japanese Yen)* 100,236
4,000 Jastec (Japanese Yen) 55,230
29,000 Jeol (Japanese Yen) 191,086
20,000 KLA-Tencor Corp.* 975,000
11,900 Lam Research Corp.* 441,044
1,030 Martin Gruppen 79,999
<CAPTION>
------------------------------------------------------
SHARES SECURITY VALUE
------------------------------------------------------
<S> <C> <C>
ELECTRONICS (CONTINUED)
16,300 Methode Electronics, Inc. Class
A $ 323,963
6,000 Nihon Dempa Kogyo (Japanese Yen) 109,062
7,480 Nitto Electric Works (Japanese
Yen) 133,350
18,800 Pioneer Standard Electronics,
Inc. 253,800
3,500 Pricer AB B Shares (Swedish
Kronor)* 120,404
12,000 Ricoh Elemes (Japanese Yen) 156,253
8,100 SCI Systems, Inc. 516,375
5,600 Spectra-Physics AB A Shares
(Swedish Kronor) 100,669
15,800 Synopsys, Inc.* 580,650
60 Tecan (Swiss Francs)* 114,007
62,000 Venture Manufacturing (Singapore
Dollars) 202,070
-----------
5,660,567
-----------
ELECTRONICS-SEMICONDUCTOR (3.2%)
6,000 ANADIGICS, Inc.* 186,000
6,000 ASM Lithography Holding NV* 351,000
38,500 Cypress Semiconductor Corp.* 558,250
28,200 Dallas Semiconductor Corp. 1,106,850
39,000 Elec & Eltek International Co.
Ltd. (Singapore Dollars) 218,400
15,300 Maxim Integrated Products, Inc.* 870,188
13,900 Microchip Techonology, Inc.* 413,525
8,500 Novellus Systems, Inc.* 735,250
40,000 PMC-Sierra, Inc.* 1,050,000
11,000 Photronics, Inc.* 525,250
5,000 Ryosan Co. Ltd. (Japanese Yen) 117,102
3,000 Ryoyo Electric (Japanese Yen) 59,250
6,000 Sipex Corp.* 217,500
6,000 Uniphase Corp.* 349,500
120,000 Wong's Circuits Holdings Ltd.*
(Singapore Dollars) 201,600
14,500 Xilinx, Inc.* 711,406
-----------
7,671,071
-----------
ENVIRONMENTAL SERVICES (0.9%)
36,600 Allied Waste Industries, Inc.* 635,925
19,600 Newpark Resources, Inc.* 661,500
18,100 Waste Industries, Inc.* 319,012
15,800 USA Waste Services, Inc.* 610,275
-----------
2,226,712
-----------
FINANCIAL SERVICES (5.3%)
10,600 ARM Financial Group, Inc. Class
A* 212,000
1,200 Aeon Credit Service (Japanese
Yen) 78,126
6,300 Allmerica Financial Corp. 251,213
26,000 Amerin Corp.* 630,500
20,000 AmerUs Life Holdings, Inc. Class
A 557,500
</TABLE>
4 NATIONWIDE SEPARATE ACCOUNT TRUST SEMI-ANNUAL REPORT
<PAGE> 96
NATIONWIDE SEPARATE ACCOUNT TRUST
SMALL COMPANY FUND
STATEMENT OF INVESTMENTS -- JUNE 30, 1997 (UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
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------------------------------------------------------
<S> <C> <C>
FINANCIAL SERVICES (CONTINUED)
10,000 Capital RE Corp. $ 535,000
16,600 City National Corp. 399,437
11,100 ContiFinancial Corp.* 405,150
30,000 D&N Financial Corp.* 577,500
16,000 Executive Risk, Inc. 832,000
21,500 First Financial Caribbean Corp. 701,437
20,000 Firstplus Financial Group, Inc.* 680,000
7,000 Ichiyoshi Securities (Japanese
Yen) 27,100
22,000 Imperial Credit Industries,
Inc.* 452,375
2,000 Japan Associated Finance
(Japanese Yen)* 157,301
8,000 Legg Mason, Inc. 430,500
54,000 Life USA Holding, Inc.* 769,500
25,040 London Forfeiting Co. (British
Pounds) 164,627
12,500 Nac Re Corp. 604,688
2,650 OM Gruppen AB (Swedish Kronor) 82,252
13,600 Ohio Casualty Corp. 598,400
8,300 Patriot American Hospitality,
Inc. 211,650
7,600 Price (T. Rowe) & Associates 392,350
3,000 Promise Co. Ltd. (Japanese Yen) 171,983
22,000 R & G Financial Corp. 572,000
9,600 Shinki Comp. Ltd. (Japanese Yen) 238,259
700 Shohkoh Fund (Japanese Yen) 212,270
5,500 Starwood Lodging Trust 234,781
24,000 Terra Nova (Bermuda) Holdings 504,000
27,720 Titan Holdings, Inc. 658,350
870 Union Financiere-France Banque
(French Francs) 103,436
9,000 Vesta Insurance Group, Inc. 389,250
-----------
12,834,935
-----------
FOOD & BEVERAGE (1.2%)
3,000 B-R 31 Ice Cream Co. (Japanese
Yen) 26,217
9,600 Bush Boake Allen, Inc.* 298,800
37,500 Carlsberg Brewery Malaysia
Berhad (Malaysian Ringgits) 193,146
6,800 Coca-Cola Femsa SA -- SP ADR 351,050
1,400 Corona-Lotus NV (Belgian Francs) 95,410
5,320 Ebro Agricolas, Compania de
Alimentacion SA (Spanish
Pesetas) 103,998
7,000 Fine Host Corp.* 220,500
75,000 Finlay (James) PLC (British
Pounds) 137,317
19,300 Hardys & Hanson PLC (British
Pounds) 84,807
13,000 Hokkaido Coca-Cola Bottling
(Japanese Yen) 178,362
71,400 Illovo Sugar Ltd. (South African
Rand) 163,722
2,520 Louis Dreifus Citrus (French
Francs) 94,217
12,000 Mikuni Coca-Cola Bottling
(Japanese Yen) 178,275
<CAPTION>
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SHARES SECURITY VALUE
------------------------------------------------------
<S> <C> <C>
FOOD & BEVERAGE (CONTINUED)
9,300 Nutreco Holding NV (Netherlands
Guilders)* $ 193,186
26,000 Shoei Foods Corp. (Japanese Yen) 127,467
35,000 Soken Co. Ltd. (Japanese Yen) 85,642
7,000 Suiza Foods Corp.* 287,000
22,200 Thorntons PLC (British Pounds) 72,054
-----------
2,891,170
-----------
FOREST PRODUCTS (0.2%)
4,200 Dainippon Shigyo (Japanese Yen) 23,857
6,840 Miquel Y Costas (Spanish
Pesetas)* 309,746
29,000 Nippon Hi-Pack Co. (Japanese
Yen) 169,545
-----------
503,148
-----------
FURNISHINGS & APPLIANCES (0.3%)
16,700 Sunbeam Corp., Inc. 630,425
-----------
HEALTHCARE (6.0%)
26,900 ADAC Labs 635,512
6,000 Advanced Technology Labs, Inc.* 258,000
28,000 Alpharma, Inc. Class A 446,250
6,000 Amerisource Health Corp. Class
A* 299,250
7,600 Amersham International (British
Pounds) 201,132
8,000 Arterial Vascular Engineering,
Inc.* 257,500
125,000 Australian Hospital Care Ltd. 215,388
9,237 Block Drug, Inc. Class A 404,119
49,000 Bone Care International, Inc.* 637,000
35,900 Esaote Biomedica SPA (Italian
Lire)* 94,735
11,000 Express Scripts, Inc. Class A* 459,250
11,200 Henry Schein, Inc.* 350,000
17,000 IDX Systems Corp.* 586,500
39,900 Incontrol, Inc.* 354,112
11,000 Kanto Biomedical Laboratory
(Japanese Yen) 170,148
52,000 Kinetic Concepts, Inc. 936,000
45,600 London International Group PLC
(British Pounds) 130,546
27,800 Marquette Medical Systems Class
A* 611,600
31,000 Medical Resources, Inc.* 511,500
21,000 Mentor Corp./Minn. 622,125
25,900 Mid Atlantic Medical Services,
Inc.* 403,069
3,000 Nichii Gakkan Co. (Japanese Yen) 167,788
30,000 NovaCare, Inc.* 416,250
5,000 Oxford Health Plans, Inc.* 358,750
18,000 Parexel International Corp.* 571,500
10,600 Patterson Dental Co.* 363,712
5,000 Pediatrix Medical Group, Inc.* 229,062
40,000 Physio-Control International
Corp.* 600,000
33,500 Polymer Group, Inc.* 540,187
</TABLE>
NATIONWIDE SEPARATE ACCOUNT TRUST SEMI-ANNUAL REPORT 5
<PAGE> 97
NATIONWIDE SEPARATE ACCOUNT TRUST
SMALL COMPANY FUND
STATEMENT OF INVESTMENTS -- JUNE 30, 1997 (UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
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SHARES SECURITY VALUE
------------------------------------------------------
<S> <C> <C>
HEALTHCARE (CONTINUED)
8,000 SRL (Japanese Yen) $ 123,045
22,000 Sabratek Corp.* 616,000
3,120 Scandinavian Mobility
International (Danish Kroner)* 33,644
6,600 Sofamor Danek Group, Inc.* 301,950
23,000 Sorin Biomedica Group SPA
(Italian Lire) 71,643
30,000 Sun Healthcare Group, Inc.* 624,375
17,000 Sybron International Corp.* 677,875
8,000 Toa Medical Electronics
(Japanese Yen) 139,124
-----------
14,418,641
-----------
INDUSTRIAL MISCELLANEOUS (2.3%)
45,700 Apogee Enterprises 982,550
49,500 BMC Industries, Inc. Minnesota 1,695,375
35,000 Blagden Industries ORD (British
Pounds) 83,597
11,900 Brady WH Co. 345,100
37,920 Crest Packaging PLC (British
Pounds) 50,493
5,000 Enplas Corp . (Japanese Yen) 91,322
1,880 Euro D'Extincteurs (French
Francs) 129,370
376 Euro D'Extincteurs (French
Francs)** 23,972
720 GFI Industries SA (French
Francs) 110,743
12,350 Grammer AG (German Marks) 347,288
250 Huber Suhner AG (Swiss Francs) 317,259
4,970 Koninlijke Emballage Industrie
Van Leer (Netherlands Guilders) 109,075
11,000 Low and Bonar ORD (British
Pounds) 54,927
1,700 Mayr-Melnhof Karton (Austrian
Schillings)* 87,350
7,900 Pentair, Inc. 259,712
150,000 Princedale Group PLC (British
Pounds) 89,880
830 Semperit AG Holdings (Austrian
Schillings) 70,605
4,000 Shaw Industries Ltd. Class A
(Canadian Dollars) 101,631
1,000 Tenryu Saw Manufacturing Co.
(Japanese Yen) 20,624
7,000 Vidrala SA (Spanish Pesetas) 305,569
5,750 Vossloh (German Marks) 292,037
22,000 Waddington PLC (British Pounds) 99,967
-----------
5,668,446
-----------
INSURANCE (2.3%)
3,200 Allmerica Property & Casualty
Companies, Inc. 104,800
7,000 Equitable of Iowa Companies 392,000
15,500 Everest Reinsurance Holdings,
Inc. 614,187
12,500 FBL Financial Group, Inc. 471,875
<CAPTION>
------------------------------------------------------
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------------------------------------------------------
<S> <C> <C>
INSURANCE (CONTINUED)
14,500 Fremont General Corp. $ 583,625
10,500 Frontier Insurance Group 679,875
10,000 Hartford Life, Inc. Class A* 375,000
81,000 Heath (C.E.) PLC (British
Pounds) 184,030
38,390 Jardine Lloyd Thomson Group
(British Pounds) 110,544
65,000 Lambert Fenchurch Group PLC
(British Pounds) 124,417
73,000 New Cap Reinsurance Corp.
(Australian Dollars)* 162,593
11,600 Penncorp Financial Group, Inc. 446,600
11,000 W.R. Berkley Corp. 647,625
20,000 Western National Corp. 536,250
-----------
5,433,421
-----------
LEISURE/ENTERTAINMENT (1.1%)
1,000 Azkoyen SA (Spanish Pesetas) 124,430
3,100 H I S Co. Ltd. (Japanese Yen) 163,899
816 Infogrames Entertainment (French
Francs)* 105,772
259,110 Kunick PLC (British Pounds) 94,880
30 Kuoni Reisen AG (Swiss Francs) 102,895
41,050 NCL Holdings ASA (Norwegian
Kroner)* 129,531
15,500 Premier Parks, Inc.* 571,562
6,200 Regal Cinemas, Inc.* 204,600
35,000 Rio Hotel and Casino, Inc.* 527,188
1,390 Salomon SA (French Francs) 106,093
7,000 Shingakukai Co. Ltd. (Japanese
Yen) 36,704
32,300 Vistana, Inc.* 500,650
-----------
2,668,204
-----------
LEISURE SERVICE (1.4%)
20,000 CapStar Hotel Co.* 640,000
10,900 Doubletree Corp.* 448,263
17,000 La Quinta Inns, Inc. 371,875
6,000 Marcus Corp. 153,750
46,700 Prime Hospitality Corp.* 922,325
28,000 Wyndham Hotel Corp.* 913,500
-----------
3,449,713
-----------
MACHINERY & CAPITAL GOODS (1.9%)
2,500 Agie Charmille Holding AG (Swiss
Francs) 248,662
12,100 Alamo Group, Inc. 251,831
10,600 Dionex Corp.* 543,250
5,000 Fuji Machine Manufacturing Co.
(Japanese Yen) 181,334
10,500 IDEX Corp. 346,500
30,000 JLK Direct Distribution, Inc.
Class A* 768,750
12,300 Kaydon Corp. 610,387
7,500 Lincoln Electric Co. Class A 286,875
</TABLE>
6 NATIONWIDE SEPARATE ACCOUNT TRUST SEMI-ANNUAL REPORT
<PAGE> 98
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SMALL COMPANY FUND
STATEMENT OF INVESTMENTS -- JUNE 30, 1997 (UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
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------------------------------------------------------
<S> <C> <C>
MACHINERY & CAPITAL GOODS (CONTINUED)
17,000 Miller Industries, Inc.* $ 272,000
200 Roper Industries, Inc. 10,375
26,900 Stewart & Stevenson Services,
Inc. 699,400
17,100 Wolverine Tube Co.* 476,663
-----------
4,696,027
-----------
MACHINERY & ENGINEERING (2.2%)
22,000 AIM Group PLC (British Pounds) 215,313
156,000 ASM Pacific Technology (Hong
Kong Dollars) 108,736
75,000 Adwest Group PLC (British
Pounds) 132,324
6,180 Asahi Diamond Industrial
(Japanese Yen) 57,247
7,000 BE Semiconductor Industries
(Netherlands Guilders)* 101,108
1,200 B.M.T. NV (Belgian Francs) 223,310
270 Batenburg Beheer (Netherlands
Guilders) 45,792
1,600 Bioblock Scientific (French
Francs) 79,334
58,000 Bulllough PLC (British Pounds)* 104,261
6,090 Carclo Engineering Group ORD
(British Pounds) 18,550
3,500 Cardo AB (Swedish Kronor) 103,656
28,600 Carraro SPA (Italian Lire) 146,236
122,000 Chen Hsong ORD (Hong Kong
Dollars) 70,864
40 Christ AG* (Swiss Francs) 29,359
400 DMW Corp. (Japanese Yen) 16,604
1,000 Duerr Beteiligungs AG (German
Marks) 41,320
2,000 Econosto (Netherlands Guilders) 36,850
2,000 Glory (Japanese Yen) 44,569
106,000 Graseby PLC (British Pounds) 273,469
1,200 Hoganas AB (Swedish Kronor) 39,962
780 Interroll Holding AG-Reg.*
(Swiss Francs) 130,820
500 KCI Konecranes International
(Finnish Marks)* 21,948
360 Le Carbone Lorraine (French
Francs) 87,687
250 Leonische Drahtwerke (German
Marks) 101,148
230,000 MacMahon Holdings (Australian
Dollars) 172,310
1,220 Manitou (French Francs) 151,697
11,700 McKechnie ORD (British Pounds) 82,570
1,500 Mikron Holding AG (Swiss
Francs)* 267,526
5,600 Oiles Corp. (Japanese Yen) 180,093
230 Phoenix Meccano (Swiss Francs) 119,907
120,000 Protean PLC (British Pounds) 267,643
980 Radiall (French Francs) 113,509
14,000 Sanden (Japanese Yen) 117,452
430 Saurer AG Arbon (Swiss Francs) 285,231
<CAPTION>
------------------------------------------------------
SHARES SECURITY VALUE
------------------------------------------------------
<S> <C> <C>
MACHINERY & ENGINEERING (CONTINUED)
96,200 Senior Engineering Group
(British Pounds) $ 219,364
130 Sez Holding AG Reg. A (Swiss
Francs) 257,717
65 Sig Schw Sirx (Swiss Francs) 197,301
13,000 Sodick (Japanese Yen)* 105,768
1,600 Svedala Industries (Swedish
Kronor) 33,315
28,800 Tamrock OY Corp. (Finnish
Marks)* 82,061
7,350 Toolex Alpha NV (Netherlands
Guilders)* 76,902
72,000 Trinity Holdings ORD (British
Pounds) 305,592
910 Twentsche Kabel Holdings
(Netherlands Guilders) 49,464
33,400 Weir Group (British Pounds) 137,591
-----------
5,453,480
-----------
MATERIALS & PROCESSING (1.3%)
10,500 AEP Industries, Inc.* 420,000
25,000 Crompton & Knowles Corp.* 556,250
12,000 Culligan Water Technologies,
Inc.* 537,000
4,200 Hexcel Corp.* 72,450
39,000 Jefferson Smurfit Corp.* 624,000
16,500 OM Group, Inc. 546,562
105,000 Strategic Distribution, Inc.* 400,313
-----------
3,156,575
-----------
METAL PRODUCT & FABRICATION (0.4%)
13,700 Applied Industrial Technology,
Inc. 493,200
325,000 Jiangxi Copper Company Ltd.
(Hong Kong Dollars)* 89,145
16,900 NN Ball & Roller, Inc. 211,250
3,000 Osaka Steel Co. Ltd. (Japanese
Yen) 28,839
51,580 Tubacex SA (Spanish Pesetas) 177,463
-----------
999,897
-----------
METALS/MINING (0.3%)
150,000 Black Hawk Mining (Canadian
Dollars)* 54,368
13,800 Boliden Ltd. (Canadian Dollars)* 73,527
21,571 Breakwater Resources (Canadian
Dollars)* 75,057
30,000 Croesus Mining (Australian
Dollars) 10,114
7,700 Free State Consolidated Gold
Mines Ltd. (South African Rand) 38,538
8,200 Harmony Gold Mining (South
African Rand) 37,515
89,600 Portman Mining Ltd. (Australian
Dollars) 221,516
</TABLE>
NATIONWIDE SEPARATE ACCOUNT TRUST SEMI-ANNUAL REPORT 7
<PAGE> 99
NATIONWIDE SEPARATE ACCOUNT TRUST
SMALL COMPANY FUND
STATEMENT OF INVESTMENTS -- JUNE 30, 1997 (UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
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------------------------------------------------------
<S> <C> <C>
METALS/MINING (CONTINUED)
95,000 Savage Resources (Australian
Dollars) $ 85,406
45,000 Westmin Resources Ltd. (Canadian
Dollars)* 215,295
-----------
811,336
-----------
OFFICE EQUIPMENT (0.6%)
11,000 Itoki Crebio Corp. (Japanese
Yen) 67,578
15,000 Knoll, Inc.* 356,250
7,000 Max Co. (Japanese Yen) 131,521
20,000 Miller (Herman), Inc.* 720,000
2,750 Turbon International AG (German
Marks) 84,749
-----------
1,360,098
-----------
OIL & GAS/ENERGY (7.8%)
16,400 Brown (Tom), Inc.* 348,500
54,000 Cairn Energy USA, Inc.* 708,750
13,000 Camco International, Inc. 711,750
19,200 Chieftain International, Inc.* 421,200
1,590 Cie Generale De Geophysique SA
(French Francs) 154,913
8,800 Cliffs Drilling Co.* 321,200
13,000 Cooper Cameron Corp.* 607,750
24,700 Dawson Production Services,
Inc.* 345,800
19,300 Dreco Energy Service Ltd. Class
A* 1,013,250
15,000 EDP-Electricidade de Portugal,
SA (Portuguese Escudos) 275,613
15,000 EVI, Inc.* 630,000
14,500 Falcon Drilling, Inc.* 835,562
63,100 Global Industries Ltd.* 1,473,972
60,000 Gulf Canada Resources Ltd. ORD* 498,750
59,200 Nabors Industries, Inc.* 1,480,000
22,600 National-Oilwell, Inc.* 1,299,500
19,000 Flores & Rucks, Inc.* 878,750
37,800 Oceaneering International, Inc.* 699,300
42,400 Offshore Logistics, Inc.* 800,300
14,800 Petroleum Geo Services ADR* 723,350
120,800 Pride International Inc.* 2,899,200
6,600 Smith International, Inc.* 400,950
13,200 Stone Energy Corp.* 361,350
21,700 Texas Meridian Resources Corp.* 260,400
30,500 Transmontaigne Oil Co.* 606,188
15,000 Tuboscope Vetco International
Corp.* 298,125
-----------
19,054,423
-----------
PHARMACEUTICALS (1.3%)
1,000 Andreae Noris Zahn (German
Marks) 40,746
8,000 Biofermin Pharmaceuticals
(Japanese Yen) 69,213
6,200 Dura Pharmaceuticals, Inc.* 247,225
10,000 Elan Corp. PLC ADR* 452,500
<CAPTION>
------------------------------------------------------
SHARES SECURITY VALUE
------------------------------------------------------
<S> <C> <C>
PHARMACEUTICALS (CONTINUED)
380 Galencia Holding AG (Swiss
Francs) $ 178,557
14,500 Gilead Sciences, Inc.* 400,562
3,560 Neurosearch A/S (Danish Kroner)* 224,960
4,000 OXiGENE, Inc. (Swedish Kronor)* 130,879
22,900 Recordati SPA (Italian Lire) 165,542
37,500 Sepracor, Inc.* 967,969
5,000 Teikoku Hormone (Japanese Yen) 59,862
7,750 United Drug (Irish Punts) 46,187
16,000 Yoshitomi Pharmaceutical
Industries (Japanese Yen) 116,752
-----------
3,100,954
-----------
PRODUCER DURABLES (2.0%)
28,000 Allied Products Corp. DE 927,500
40,000 DeCrane Aircraft Holdings, Inc.* 595,000
30,000 Gerber Scientific, Inc. 592,500
21,500 Greenfield Industries, Inc. 580,500
25,000 Halter Marine Group, Inc.* 600,000
55,000 Mechanical Dynamics, Inc.* 398,750
25,000 Rohr, Inc.* 548,438
35,000 Titan International, Inc. 616,875
-----------
4,859,563
-----------
PUBLISHING (0.4%)
6,600 Houghton Mifflin Co. 440,550
9,333 Pulitzer Publishing Co. 494,649
-----------
935,199
-----------
REAL ESTATE (1.2%)
100,000 Bolton Properties Berhad
(Malaysian Ringgits) 142,631
13,600 Bradford Property Trust PLC ORD
(British Pounds) 60,666
13,500 CarrAmerica Realty Corp. 388,125
18,000 Cesar Co. (Japanese Yen) 82,111
2,090 Crescent Operating, Inc. 25,080
20,900 Crescent Real Estate Equities
Company 663,575
45,472 Great Portland Estates (British
Pounds) 156,670
18,600 NHP, Inc.* 418,500
280,760 Regalian Properties (British
Pounds) 186,924
17,200 Security Capital Pacific Trust 393,450
99,000 TBI PLC (British Pounds) 143,359
5,000 TOC (Japanese Yen) 59,425
10,000 Vallehermoso SA (Spanish
Pesetas) 270,279
-----------
2,990,795
-----------
</TABLE>
8 NATIONWIDE SEPARATE ACCOUNT TRUST SEMI-ANNUAL REPORT
<PAGE> 100
NATIONWIDE SEPARATE ACCOUNT TRUST
SMALL COMPANY FUND
STATEMENT OF INVESTMENTS -- JUNE 30, 1997 (UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
------------------------------------------------------
SHARES SECURITY VALUE
------------------------------------------------------
<S> <C> <C>
RESTAURANTS (0.3%)
21,300 PJ America, Inc.* $ 362,100
9,000 Papa John's International, Inc.* 330,750
-----------
692,850
-----------
RETAIL STORES (5.2%)
40,400 99 Cents Only Stores* 1,217,050
51,000 Alexon Group ORD (British
Pounds) 158,738
24,800 Black Box Corp. DE 998,200
28,200 Borders Group, Inc.* 680,325
165,000 Budgens PLC (British Pounds) 105,734
4,800 Circle K Japan Co. (Japanese
Yen) 276,012
19,950 Consolidated Products Co.* 244,388
2,000 Deo Deo Corp. (Japanese Yen) 39,151
2,600 Dollar General Corp. 97,500
31,000 Dominick's Supermarkets, Inc.* 825,375
17,000 Dylex Ltd. (Canadian Dollars)* 87,495
18,000 Eagle Hardware & Garden, Inc.* 411,750
14,500 Family Dollar Stores, Inc. 395,125
6,300 Fast Retailing Co. (Japanese
Yen) 203,705
11,000 Foodland Associated Ltd.
(Australian Dollars) 74,168
10,600 Footstar, Inc.* 276,925
7,000 Fred Meyer, Inc.* 361,813
4,400 Jeans Mate Corp. (Japanese Yen) 69,213
165,900 Just Jeans Holdings Ltd.
(Australian Dollars) 201,347
5,200 Kohls Corp.* 275,275
31,000 Linens 'N Things, Inc.* 918,375
14,500 Mac Frugals Bargains Close-Outs,
Inc.* 395,125
46,300 Marks Brothers Jewelers, Inc.* 578,750
5,000 Marukyo Corp. (Japanese Yen) 60,736
6,000 Matsuyadenki Co. (Japanese Yen) 53,482
11,000 Michael's Stores, Inc.* 233,063
12,128 Monro Muffler Brake, Inc.* 209,199
130,000 PT Matahari Putra Prima --
Foreign (Indonesian Rupee) 203,167
11,600 Payless Shoesource, Inc.* 634,375
35,000 Racing Champions Corp.* 542,500
13,000 Schultz Sav-o Stores, Inc. 230,750
6,400 ShopKo Stores, Inc. 163,200
35,000 Somerfield PLC (British Pounds) 105,443
17,500 Staples, Inc.* 406,875
29,700 The Body Shop International
(British Pounds) 75,634
4,000 Tsutsumi Jewelry Co. (Japanese
Yen) 101,372
12,000 U.S. Office Products Co.* 366,750
7,800 Williams-Sonoma, Inc.* 333,450
5,000 Xebio Co. Ltd. (Japanese Yen) 123,219
-----------
12,734,754
-----------
<CAPTION>
------------------------------------------------------
SHARES SECURITY VALUE
------------------------------------------------------
<S> <C> <C>
RETAILING & DISTRIBUTORS (0.4%)
3,000 Denkyosha Co. (Japanese Yen) $ 22,284
37,200 ISA International PLC (British
Pounds) 118,881
29,550 Richfood Holdings, Inc. 768,300
-----------
909,465
-----------
TECHNOLOGY (1.1%)
5,200 Analysts International Corp. 174,200
22,700 CACI International, Inc. Class
A* 346,175
57,200 Reynolds & Reynolds Co. Class A 900,900
52,000 Vanstar Corp.* 734,500
12,000 Viasoft, Inc.* 609,000
-----------
2,764,775
-----------
TELECOMMUNICATIONS (1.1%)
12,340 Amper SA (Spanish Pesetas) 351,565
10,000 Billing Information Concepts* 348,750
436,000 Champion Technology (Hong Kong
Dollars) 56,278
21,000 Ericsson SPA (Italian Lire) 362,239
15,000 Intermedia Communications of
Florida, Inc.* 485,625
16,300 McLeod, Inc.* 550,125
13,200 Worldcom, Inc.* 422,400
-----------
2,576,982
-----------
TELECOMMUNICATION EQUIPMENT (1.4%)
4,200 Advanced Fibre Communications* 253,575
30,000 Anicom, Inc.* 360,000
25,000 Aspect Telecommunications Corp.* 556,250
10,000 Boston Technology, Inc.* 295,625
14,000 Brightpoint, Inc.* 455,875
5,000 Comverse Technology, Inc.* 260,000
5,000 Davox Corporation* 178,750
360,029 Kantone Holdings Ltd. (Hong Kong
Dollars)* 37,642
8,000 Nice Systems Ltd. 240,000
35,900 Paging Network, Inc.* 315,245
26,000 Radiant Systems, Inc.* 542,750
-----------
3,495,712
-----------
TEXTILE/APPAREL (1.5%)
2,000 Co-Cos Nobuoka Co. (Japanese
Yen) 17,827
106,000 Dawson International PLC
(British Pounds) 125,266
429 Devanlay SA (French Francs) 44,063
440 Deveaux SA (French Francs) 54,711
100 Etienne Aigner AG (German Marks) 45,796
900,000 First Sign International Holding
Ltd. (Hong Kong Dollars) 174,257
1,340 Gamma Holding NV (Netherland
Guilders) 72,153
</TABLE>
NATIONWIDE SEPARATE ACCOUNT TRUST SEMI-ANNUAL REPORT 9
<PAGE> 101
NATIONWIDE SEPARATE ACCOUNT TRUST
SMALL COMPANY FUND
STATEMENT OF INVESTMENTS -- JUNE 30, 1997 (UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
------------------------------------------------------
SHARES SECURITY VALUE
------------------------------------------------------
<S> <C> <C>
TEXTILE/APPAREL (CONTINUED)
33,000 Gunze (Japanese Yen) $ 150,537
5,500 Jones Apparel Group, Inc.* 262,625
630 Kansas Erhvervbeklaed Odense A/S
(Danish Kroner) 41,235
25,000 Nautica Enterprises, Inc.* 660,938
10,200 St. John Knits, Inc. 550,800
15,000 Tavex Algodonero SA (Spanish
Pesetas)* 192,765
9,000 Tokyo Style (Japanese Yen) 125,055
38,550 Wolverine World Wide, Inc. 1,170,956
-----------
3,688,984
-----------
TOBACCO & GROCERY (0.5%)
12,000 800-JR CIGAR, Inc.* 249,000
16,600 Consolidated Cigar Holdings,
Inc.* 460,650
20,600 First Brands Corp. 472,512
-----------
1,182,162
-----------
TRANSPORTATION (0.9%)
43,280 Frontline (Swedish Kronor)* 148,328
17,000 Heartland Express, Inc.* 399,500
11,700 Hvide Marine, Inc. Class A* 258,863
5,000 Isewan Terminal Services Co.
Ltd. (Japanese Yen) 22,328
5,000 Japan Airport Terminal Co.
(Japanese Yen) 60,736
19,500 M.S. Carriers, Inc.* 489,937
17,200 Swift Transportation Co., Inc.* 507,400
4,000 Tokyo Kisen (Japanese Yen) 19,925
12,400 Trico Marine Services, Inc.* 270,475
-----------
2,177,492
-----------
WHOLESALE & INTERNATIONAL TRADE (0.2%)
8,300 Dahl International AB (Swedish
Kronor)* 163,160
49,000 Dickson Concepts International
Ltd. (Hong Kong Dollars) 178,361
7,000 Inaba Denkisangyo Co. (Japanese
Yen) 125,404
200 Joyfull Co. (Japanese Yen) 2,273
-----------
469,198
-----------
TOTAL COMMON STOCK
(cost $189,013,058) 224,947,507
-----------
PREFERRED STOCK (0.1%)
AUTO & AUTO PARTS (0.1%)
800 Koegel Fahrzeugwerke AG-VORZ
(German Marks) 114,778
-----------
<CAPTION>
------------------------------------------------------
SHARES SECURITY VALUE
------------------------------------------------------
<S> <C> <C>
CONSTRUCTION & HOUSING (0.0%)
250 Hans Einhell NV (German Marks) $ 45,911
-----------
TOTAL PREFERRED STOCK
(cost $149,652) 160,689
-----------
</TABLE>
<TABLE>
<CAPTION>
- ---------
PRINCIPAL
- ---------
<S> <C> <C>
SHORT-TERM DEBT (2.2%)
$5,441,000 Merrill Lynch & Co., Inc.
6.20%, 07/01/97
(cost $5,441,000) 5,440,075
------------
U.S. GOVERNMENT OBLIGATIONS (1.1%)
2,582,000 U.S. Treasury Bills,
4.77% through 5.19%, 07/24/97
through 09/18/97
(cost $2,563,364) 2,562,770
------------
REPURCHASE AGREEMENTS (4.2%)
7,804,000 Fifth Third Bank,
5.07%, 07/01/97,
Collateralized by $7,959,000
FHLMC Pool
#G10452, 7.00%, 02/01/11,
market value $7,961,491 7,804,000
2,315,000 Goldman Sachs,
5.75%, 07/01/97,
Collateralized by $2,360,000
U.S. Treasury
Note, 5.00%, 01/31/99, market
value $2,365,900 2,315,000
------------
TOTAL REPURCHASE AGREEMENTS
(cost $10,119,000) 10,119,000
------------
TOTAL INVESTMENTS
(cost $207,286,074) $243,230,041
===========
</TABLE>
10 NATIONWIDE SEPARATE ACCOUNT TRUST SEMI-ANNUAL REPORT
<PAGE> 102
NATIONWIDE SEPARATE ACCOUNT TRUST
SMALL COMPANY FUND
STATEMENT OF INVESTMENTS -- JUNE 30, 1997 (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
FORWARD CURRENCY CONTRACTS
<TABLE>
<CAPTION>
Contract Value Market Value
Currency Sold: (U.S. $) (U.S. $) (Depreciation) Delivery Date
- --------------------- -------------- ------------ -------------- -------------
<S> <C> <C> <C> <C>
British Pounds $271,257 $272,970 ($ 1,713) 07/02/97
Netherlands Guilders 126,762 127,648 (886) 07/02/97
-------- -------- -------
Total currency sold $398,019 $400,618 ($ 2,599)
======== ======== =======
Currency Purchased:
- ---------------------
Australian Dollars $222,620 $217,731 ($ 4,889) 07/02/97
Danish Kroner 77,532 76,892 (640) 07/01/97
Italian Lire 9,627 9,556 (71) 07/02/97
Japanese Yen 14,190 14,075 (115) 07/01/97
New Zealand Dollars 7,443 7,321 (122) 07/02/97
Swiss Francs 29,060 28,900 (160) 07/02/97
-------- -------- -------
Total currency purchased $360,472 $354,475 ($ 5,997)
======== ======== =======
Net payable for forward currency contracts
purchased and sold ($ 8,596)
=======
</TABLE>
SUMMARY OF INVESTMENTS BY CURRENCY
<TABLE>
<CAPTION>
% OF PORTFOLIO
<S> <C>
United States Dollars 83.12
Japanese Yen 4.24
British Pounds 3.11
Swiss Francs 1.32
Australian Dollars 1.05
Spanish Pesetas 0.93
German Marks 0.81
French Francs 0.77
Italian Lire 0.77
Swedish Kronor 0.65
Canadian Dollars 0.49
Hong Kong Dollars 0.45
Belgian Francs 0.36
<CAPTION>
% OF PORTFOLIO
<S> <C>
Netherlands Guilders 0.34
Danish Kroner 0.24
Malaysian Ringgits 0.21
Singapore Dollars 0.18
South African Rand 0.16
Portuguese Escudos 0.16
New Zealand Dollars 0.15
Norwegian Kroner 0.14
Finnish Marks 0.13
Indonesian Rupee 0.08
Irish Punts 0.08
Austrian Schillings 0.06
</TABLE>
- ------------------------------------------------------
* Denotes a non-income producing security.
** Security is subject to contractual or legal restrictions on its resale.
Securities denominated in foreign currencies are shown at their U.S. dollar cost
and value.
Cost of investments for Federal income tax purposes: $208,671,712
The abbreviations in the above statement stand for the following:
<TABLE>
<S> <C>
AB Aktiebolag (Swedish stock company)
ADR American Depositary Receipt
AG Aktiengesellschaft (West German stock
company)
A/S Limited
ASA Limited
CVA Class A Convertible
FHLMC Federal Home Loan Mortgage Corporation
GDR Global Depositary Receipt
NV Naamloze Vennootschap (Dutch
corporation)
ORD Ordinary Depositary Receipt
OY Limited
PLC (British) Public Limited Company
SA Societe Anonyme (French corporation)
SA Sociedad Anonima (Spanish corporation)
SPA Societa per Azioni (Italian corporation)
</TABLE>
Portfolio holding percentages represent market value as a percentage of net
assets.
See accompanying notes to financial statements.
NATIONWIDE SEPARATE ACCOUNT TRUST SEMI-ANNUAL REPORT 11
<PAGE> 103
NATIONWIDE SEPARATE ACCOUNT TRUST
CAPITAL APPRECIATION FUND
STATEMENT OF INVESTMENTS -- JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
------------------------------------------------------
SHARES SECURITY VALUE
------------------------------------------------------
<S> <C> <C>
COMMON STOCK (94.0%)
AUTO & AUTO PARTS (0.7%)
55,958 Autoliv AB $ 2,189,357
-----------
BUILDING (2.6%)
66,800 Martin Marietta Materials, Inc. 2,162,650
39,100 Masco Corp. 1,632,425
44,100 Pulte Corp. 1,524,206
44,200 Vulcan Materials Co. 3,469,700
-----------
8,788,981
-----------
CHEMICALS (10.7%)
60,300 Georgia Gulf Corp. 1,752,469
255,400 Millipore Corp. 11,237,600
234,100 Morton International, Inc. 7,066,894
108,100 OM Group, Inc. 3,580,812
255,852 Pall Corp. 5,948,559
89,010 Raychem Corp. 6,620,119
-----------
36,206,453
-----------
COMPUTER EQUIPMENT (2.9%)
108,600 International Business Machines
Corp. 9,794,363
-----------
CONGLOMERATES (3.8%)
232,700 Corning, Inc. 12,943,937
-----------
DRUGS (13.4%)
248,200 Allergan, Inc. 7,895,862
19,400 American Home Products Corp. 1,484,100
20,000 Pfizer, Inc. 2,390,000
314,600 Schering-Plough Corp. 15,061,475
148,900 Warner-Lambert Co. 18,500,825
-----------
45,332,262
-----------
ELECTRICAL EQUIPMENT (1.8%)
163,800 Black & Decker Corp. 6,091,313
-----------
ENTERTAINMENT (1.0%)
42,177 Walt Disney Co. (The) 3,384,704
-----------
FINANCIAL -- BANKS (8.7%)
198,902 Banc One Corp. 9,634,342
8,800 Bank of New York Co., Inc. 382,800
34,200 Barnett Banks, Inc. 1,795,500
30,240 Charter One Financial, Inc. 1,629,180
6,400 CoreStates Financial Corp. 344,000
194,200 Mellon Bank Corp. 8,763,275
39,000 Bancorp Hawaii, Inc. 1,803,750
77,634 US Bancorp 4,978,280
-----------
29,331,127
-----------
<CAPTION>
------------------------------------------------------
SHARES SECURITY VALUE
------------------------------------------------------
<S> <C> <C>
FINANCIAL -- INSURANCE (3.8%)
62,600 Chubb Corp. $ 4,186,375
173,200 Horace Mann Educators Corp. 8,486,800
-----------
12,673,175
-----------
FINANCIAL SERVICES -- MISC. (5.1%)
346,900 Fannie Mae 15,133,512
40,000 Provident Companies 2,140,000
-----------
17,273,512
-----------
FOOD & BEVERAGE (9.4%)
40,800 Anheuser-Bush Companies, Inc. 1,711,050
256,200 Morningstar Group 7,525,875
251,900 PepsiCo, Inc. 9,461,994
112,800 Philip Morris Companies, Inc. 5,005,500
97,600 Ralston-Ralston Purina Group 8,021,500
-----------
31,725,919
-----------
HOSPITAL -- SUPPLY (6.0%)
61,075 Covance, Inc.* 1,179,511
110,000 Nellcor Puritan Bennett, Inc. 1,993,750
25,000 Physio-Control, Inc. 375,000
453,637 Quest Diagnostics, Inc.* 9,327,911
187,400 St. Jude Medical, Inc. 7,308,600
-----------
20,184,772
-----------
HOUSEHOLD -- PRODUCTS (2.1%)
94,700 Avon Products, Inc. 6,682,269
5,600 Gillette Co. (The) 530,600
-----------
7,212,869
-----------
MACHINERY & CAPITAL GOODS (1.0%)
33,800 Johnstown America Industries,
Inc.* 202,800
120,000 U.S. Rentals, Inc. 3,037,500
-----------
3,240,300
-----------
OIL & GAS (4.1%)
93,800 Texaco, Inc. 10,200,750
96,800 Unocal Corp. 3,757,050
-----------
13,957,800
-----------
PRINTING & PUBLISHING (12.6%)
108,999 ACNielsen Corp.* 2,139,105
127,200 American Greetings, Corp. Class
A 4,722,300
324,400 Cognizant Corp. 13,138,200
202,800 Dun & Bradstreet Corp. 5,323,500
3,900 Gannett Co., Inc. 385,125
65,900 Gibson Greetings, Inc.* 1,482,750
230,200 New York Times Co. Class A 11,394,900
54,200 Tribune Co. 2,604,987
3,400 Washington Post Co. Class B 1,353,200
-----------
42,544,067
-----------
</TABLE>
12 NATIONWIDE SEPARATE ACCOUNT TRUST SEMI-ANNUAL REPORT
<PAGE> 104
NATIONWIDE SEPARATE ACCOUNT TRUST
CAPITAL APPRECIATION FUND
STATEMENT OF INVESTMENTS -- JUNE 30, 1997 (UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
------------------------------------------------------
SHARES SECURITY VALUE
------------------------------------------------------
<S> <C> <C>
RESTAURANTS (0.6%)
41,600 McDonald's Corp. $ 2,009,800
-----------
RETAIL (1.7%)
40,000 Albertson's, Inc. 1,460,000
130,900 Wal-Mart Stores, Inc. 4,426,056
-----------
5,886,056
-----------
TELECOMMUNICATIONS (1.4%)
12,000 Airtouch Communications 328,500
111,800 MCI Communications Corp. 4,279,838
-----------
4,608,338
-----------
TOYS (0.6%)
61,835 Mattel, Inc. 2,094,661
-----------
TOTAL COMMON STOCK
(cost $228,450,481) 317,473,766
-----------
</TABLE>
<TABLE>
<CAPTION>
--------
PRINCIPAL
--------
<S> <C> <C>
CONVERTIBLE DEBT (0.2%)
MACHINERY (0.2%)
$ 1,029,000 Consorcio G Grupo Dina,
8.00%,
08/08/04 (cost $960,161) 829,631
------------
COMMERCIAL PAPER (6.2%)
BROKER-DEALERS (1.4%)
2,279,000 Goldman Sachs Group, 5.52%,
07/11/97 $ 2,274,921
2,390,000 Goldman Sachs Group, 5.52%,
08/04/97 2,377,113
------------
4,652,034
------------
FINANCIAL -- BANKS (1.8%)
1,858,000 Caterpillar Financial
Services, 5.52%, 07/17/97 1,852,974
4,346,000 Merrill Lynch & Co., 5.56%,
07/25/97 4,329,051
------------
6,182,025
------------
<CAPTION>
------------------------------------------------------
PRINCIPAL SECURITY VALUE
------------------------------------------------------
<S> <C> <C>
INSURANCE -- LIFE (0.7%)
$ 2,289,000 Principal Mutual Life, 5.52%,
07/07/97 $ 2,286,347
------------
MISCELLANEOUS (2.0%)
2,833,000 Bemis Co., Inc., 5.52%,
07/08/97 2,829,266
3,886,000 Bemis Co., Inc., 5.53%,
07/15/97 3,876,677
------------
6,705,943
------------
PAPER AND FOREST PRODUCTS (0.3%)
1,173,000 Ford Motor Credit, 5.53%,
07/21/97 1,169,119
------------
TOTAL COMMERCIAL PAPER
(cost $21,000,271) 20,995,468
------------
REPURCHASE AGREEMENT (0.4%)
1,293,598 MBS Tri Party, 5.93%,
07/01/97, Collateralized by
$1,990,000 GNMA 2
M00832GAR, 6.875%, 11/20/23,
market value $1,321,699
(cost $1,293,598) 1,293,598
------------
TOTAL INVESTMENTS
(cost $251,704,511) $340,592,463
============
</TABLE>
- ------------------------------------------------------
* Denotes a non-income producing security.
Cost also represents cost for Federal income tax purposes.
The abbreviations in the above statement stand for the following:
AB Aktiebolag (Swedish stock company)
GNMA Government National Mortgage Association
Portfolio holding percentages represent market value as a percent of net assets.
See accompanying notes to financial statements.
NATIONWIDE SEPARATE ACCOUNT TRUST SEMI-ANNUAL REPORT 13
<PAGE> 105
NATIONWIDE SEPARATE ACCOUNT TRUST
TOTAL RETURN FUND
STATEMENT OF INVESTMENTS -- JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
- ------------------------------------------------------
SHARES SECURITY VALUE
- ------------------------------------------------------
<S> <C> <C>
COMMON STOCK (95.5%)
AEROSPACE/DEFENSE (0.7%)
216,800 The Boeing Company $ 11,503,950
--------------
AUTO AND AUTO PARTS (5.7%)
690,000 Chrysler Corp. 22,640,625
490,000 Ford Motor Co. 18,497,500
933,900 Genuine Parts Co. 31,635,862
266,400 Magna International, Inc. 16,033,950
--------------
88,807,937
--------------
BUSINESS EQUIPMENT AND SERVICES (1.3%)
1,039,250 (The) Olsten Corp. 20,200,422
--------------
CABLE (1.4%)
1,052,000 Comcast Corp. Class A 22,486,500
--------------
CHEMICALS (6.8%)
110,000 Air Products & Chemicals 8,937,500
350,000 Crompton & Knowles Corp. 7,787,500
472,400 Du Pont (E.I.) De Nemours 29,702,150
173,800 Eastman Chemical Co. 11,036,300
268,400 Lawter International, Inc. 3,388,550
446,000 Monsanto Company 19,205,875
455,000 PPG Industries, Inc. 26,446,875
--------------
106,504,750
--------------
COMPUTER EQUIPMENT (4.3%)
400,000 Hewlett-Packard Co. 22,400,000
500,000 International Business
Machines 45,093,750
--------------
67,493,750
--------------
COMPUTER SOFTWARE SERVICES (3.0%)
570,000 Electronic Data Systems 23,370,000
550,100 First Data Corp. 24,170,019
--------------
47,540,019
--------------
CONGLOMERATES (5.7%)
200,000 EG&G, Inc. 4,500,000
305,300 Honeywell, Inc. 23,164,638
556,000 Philips Electronics N.V. 39,962,500
353,900 Premark International, Inc. 9,466,825
200,000 Rockwell International Corp. 11,800,000
--------------
88,893,963
--------------
CONSUMER GOODS (0.4%)
153,900 Tupperware Corp. 5,617,350
--------------
DRUGS (8.9%)
400,000 Allergan, Inc. 12,725,000
180,000 Bristol-Meyers Squibb Co. 14,580,000
725,000 Glaxo Wellcome PLC ADR 30,314,062
<CAPTION>
- ------------------------------------------------------
SHARES SECURITY VALUE
- ------------------------------------------------------
<S> <C> <C>
DRUGS (CONTINUED)
160,000 Schering-Plough Corp. $ 7,660,000
600,000 Warner-Lambert Co. 74,550,000
--------------
139,829,062
--------------
ELECTRONICS (0.2%)
177,000 Woodhead Industries, Inc. 3,340,875
--------------
FINANCIAL (16.2%)
600,000 Allstate Corp. 43,800,000
130,000 Bankers Trust NY, Inc. 11,310,000
638,139 Bear Stearns Co., Inc. 21,816,377
325,000 Chubb Corp. 21,734,375
1,478,100 Equitable Companies 49,146,825
200,000 Green Tree Financial Co. 7,125,000
779,800 Mellon Bank Corp. 35,188,475
700,000 Merrill Lynch & Co., Inc. 41,737,500
140,000 Morgan, J P & Co., Inc. 14,612,500
165,000 Morgan Stanley Group. Inc. 7,105,313
--------------
253,576,365
--------------
FOOD AND BEVERAGE (8.1%)
386,200 Grand Metropolitan ADR 15,134,213
795,000 Grand Metropolitan PLC 7,647,582
283,500 Heinz (H.J) Co. 13,076,437
100,100 International Flavor &
Fragrance, Inc. 5,055,050
500,000 PepsiCo, Inc. 18,781,250
400,000 Philip Morris Companies, Inc. 17,750,000
303,000 Ralston-Ralston Purina 24,902,813
225,000 Sara Lee Corp. 9,365,625
335,000 Seagram Co., Ltd. 13,483,750
54,100 Universal Foods Corp. 2,062,562
--------------
127,259,282
--------------
FOOD, GRAIN, AND AGRICULTURE (3.5%)
2,307,884 Archer Daniels-Midland Co. 54,235,274
--------------
HEALTHCARE (2.0%)
783,400 Columbia/HCA Health Care
Corp. 30,797,412
--------------
LEISURE/ENTERTAINMENT (0.1%)
31,000 Carnival Corp. Class A 1,278,750
--------------
MACHINERY AND CAPITAL GOODS (1.6%)
155,000 Cooper Industries, Inc. 7,711,250
50,000 Deere & Company 2,743,750
120,000 Emerson Electric Co. 6,607,500
130,000 Nordson Corp. 8,352,500
--------------
25,415,000
--------------
OIL & GAS (14.1%)
370,000 Amoco Corp. 32,166,875
580,000 Exxon Corp. 35,670,000
</TABLE>
14 NATIONWIDE SEPARATE ACCOUNT TRUST SEMI-ANNUAL REPORT
<PAGE> 106
NATIONWIDE SEPARATE ACCOUNT TRUST
TOTAL RETURN FUND
STATEMENT OF INVESTMENTS -- JUNE 30, 1997 (UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
- ------------------------------------------------------
SHARES SECURITY VALUE
- ------------------------------------------------------
<S> <C> <C>
OIL & GAS (CONTINUED)
917,800 Mobil Corp. $ 64,131,275
440,000 Royal Dutch Petroleum Co. 23,925,000
225,000 Texaco, Inc. 24,468,750
675,000 The Williams Companies, Inc. 29,531,250
438,460 Union Pacific Resources
Group, Inc. 10,906,693
--------------
220,799,843
--------------
PAPER AND FOREST PRODUCTS (0.1%)
62,400 Glatfelter (P.H.) Co. 1,248,000
--------------
POLLUTION CONTROL (0.7%)
350,000 Waste Management, Inc. 11,243,750
--------------
PRINTING AND PUBLISHING (2.1%)
153,200 Cognizant Corp. 6,204,600
753,200 Dun & Bradstreet Corp. 19,771,500
217,600 Reader's Digest Assoc., Inc.,
Class B 6,024,800
--------------
32,000,900
--------------
RETAIL (1.5%)
420,000 Sears Roebuck & Co. 22,575,000
--------------
TELECOMMUNICATIONS (6.2%)
1,217,100 360 degrees Communications
Co.* 20,842,837
600,000 MCI Communications Corp. 22,968,720
1,004,300 Sprint Corp. 52,851,288
--------------
96,662,845
--------------
TRANSPORTATION (0.9%)
193,000 Union Pacific Corp. 13,606,500
--------------
TOTAL COMMON STOCK
(cost $983,868,639) 1,492,917,499
--------------
- ---------
PRINCIPAL
- ---------
U.S. GOVERNMENT AGENCY (3.7%)
$ 792,000 Federal Home Loan Mortgage
Corp., Discount Notes, 5.50%
through 5.545%, 7/25/97 789,138
915,000 Federal Home Loan Mortgage
Corp., Discount Notes, 5.51%,
08/04/97 910,315
4,615,000 Federal Home Loan Mortgage
Corp., Discount Notes, 5.40%,
09/03/97 4,570,447
2,030,000 Federal Home Loan Mortgage
Corp., Discount Notes, 5.43%,
09/08/97 2,008,872
4,145,000 Federal Home Loan Mortgage
Corp., Discount Notes, 5.57%,
11/05/97 4,065,594
<CAPTION>
- --------------------------------------------------------
PRINCIPAL SECURITY VALUE
- --------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT AGENCY (CONTINUED)
$4,260,000 Federal National Mortgage
Association Discount Notes,
5.43%, 07/14/97 $ 4,251,003
1,245,000 Federal National Mortgage
Association Discount Notes,
5.51%, 07/18/97 1,241,813
1,010,000 Federal National Mortgage
Association Discount Notes,
5.27% though 5.41%, 07/24/97 1,006,501
2,645,000 Federal National Mortgage
Association Discount Notes,
5.54% though 5.55%, 08/04/97 2,631,457
4,475,000 Federal National Mortgage
Association Discount Notes,
5.29%, 08/13/97 4,446,024
350,000 Federal National Mortgage
Association Discount Notes,
5.21%, 08/25/97 347,101
6,590,000 Federal National Mortgage
Association Discount Notes,
5.47%, 09/12/97 6,517,431
1,230,000 Federal National Mortgage
Association Discount Notes,
5.44 through 5.55%, 09/24/97 1,214,229
6,560,000 Federal National Mortgage
Association Discount Notes,
5.55%, 09/25/97 6,474,897
5,755,000 Federal National Mortgage
Association Discount Notes,
5.59%, 10/14/97 5,663,852
1,735,000 Federal National Mortgage
Association Discount Notes,
5.61%, 10/20/97 1,705,951
3,210,000 Federal National Mortgage
Association Discount Notes,
5.61%, 10/30/97 3,151,411
3,410,000 Federal National Mortgage
Association Discount Notes,
5.31% through 5.54%, 10/30/97 3,370,908
3,080,000 Federal National Mortgage
Association Discount Notes,
5.43%, 12/17/97 3,001,340
--------------
TOTAL U.S. GOVERNMENT AGENCY
(cost $57,360,301) 57,368,284
--------------
U.S. TREASURY BILLS (0.2%)
3,710,000 5.04% through 5.09%, 08/21/97
(cost $3,683,511) 3,683,351
--------------
</TABLE>
NATIONWIDE SEPARATE ACCOUNT TRUST SEMI-ANNUAL REPORT 15
<PAGE> 107
NATIONWIDE SEPARATE ACCOUNT TRUST
TOTAL RETURN FUND
STATEMENT OF INVESTMENTS -- JUNE 30, 1997 (UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
------------------------------------------------------
PRINCIPAL SECURITY VALUE
------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT (0.3%)
$4,816,821 MBS Tri Party, 5.93%,
07/01/97, Collateralized by
$7,400,000 GNMA 2 M008326AR,
6.875%, 11/20/23, market
value $4,914,861 (cost
$4,816,821) $ 4,816,821
--------------
TOTAL INVESTMENTS
(cost $1,049,729,272) $1,558,785,955
==============
</TABLE>
- ------------------------------------------------------
* Denotes a non-income producing security.
Cost also represents cost for Federal income tax purposes
The abbreviations in the above statement stand for the following:
<TABLE>
<S> <C>
ADR American Depositary Receipt
PLC Public Limited Company
GNMA Government National Mortgage
Association
</TABLE>
Portfolio holding percentages represent market value as a percentage of net
assets.
See accompanying notes to financial statements.
16 NATIONWIDE SEPARATE ACCOUNT TRUST SEMI-ANNUAL REPORT
<PAGE> 108
NATIONWIDE SEPARATE ACCOUNT TRUST
GOVERNMENT BOND FUND
STATEMENT OF INVESTMENTS -- JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
- ------------------------------------------------------
PRINCIPAL SECURITY VALUE
- ------------------------------------------------------
<S> <C> <C>
MORTGAGE-BACKED SECURITIES (33.7%)
FEDERAL HOME LOAN MORTGAGE CORP., REMIC
$13,000,000 Series 1334-D, 6.00%,
08/15/07 $ 12,140,960
20,000,000 Series 1415-N, 6.75%,
11/15/07 19,803,601
15,000,000 Series 1560-PN, 7.00%,
12/15/12 14,950,800
9,036,000 Series 1132-J, 8.00%,
08/15/16 9,402,682
9,454,271 Series 31-E, 7.55%, 05/15/20 9,563,950
8,000,000 Series 1841-PA, 7.07%,
08/15/20 8,002,944
10,000,000 Series 1102-H, 8.875%,
06/15/21 10,749,100
2,718,823 Series 190-D, 9.20%, 10/15/21 2,813,913
------------
87,427,950
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION,
REMIC
6,937,229 Series 100-M, 5.50%, 09/25/01 6,787,940
856,281 Series 68-E, 8.35%, 10/25/03 854,560
11,537,792 Series 68-Z, 8.00%, 05/25/07 12,105,002
3,959,326 Series 34-E, 9.85%, 08/25/14 4,053,028
1,799,936 Series 25-B, 9.25%, 10/25/18 1,889,436
12,824,661 Series 16-D, 9.00%, 03/25/20 13,310,985
9,228,714 Series 81-Z, 8.50%, 04/25/20 9,638,478
3,410,229 Series 73-A, 8.00%, 07/25/21 3,496,951
5,594,301 Series 67-Z, 9.00%, 06/25/22 5,874,122
------------
58,010,502
------------
TOTAL MORTGAGE-BACKED
SECURITIES
(cost $143,905,598) 145,438,452
------------
U.S. GOVERNMENT AND AGENCY
LONG-TERM OBLIGATIONS (59.8%)
FEDERAL HOME LOAN BANKS
12,000,000 6.36%, 03/21/01 11,956,884
6,000,000 6.552%, 01/09/02 5,997,672
FEDERAL HOME LOAN MORTGAGE
CORPORATION
38,000,000 6.81%, 03/11/04 37,632,388
FEDERAL NATIONAL MORTGAGE
ASSOCIATION
8,000,000 6.77%, 09/01/05 8,027,264
21,000,000 7.26%, 10/05/05 20,789,202
12,310,000 7.58%, 04/26/06 12,382,567
<CAPTION>
- ------------------------------------------------------
PRINCIPAL SECURITY VALUE
- ------------------------------------------------------
<S> <C> <C>
PRIVATE EXPORT FUNDING CORPORATION
$28,000,000 6.86%, due 04/30/04 $ 28,344,596
RESOLUTION FUNDING CORPORATION
54,000,000 Principal STRIP, 04/15/06 30,086,046
58,000,000 Principal STRIP, 07/15/13 18,923,602
U.S. TREASURY NOTES
25,000,000 5.625%, 11/30/00 24,492,175
20,000,000 6.625%, 07/31/01 20,200,000
37,000,000 7.50%, 02/15/05 39,150,625
------------
TOTAL U.S. GOVERNMENT AND
AGENCY LONG-TERM OBLIGATIONS
(cost $255,480,358) 257,983,021
------------
REPURCHASE AGREEMENT (5.4%)
23,449,000 Prudential Securities, 5.80%,
07/01/97, Collateralized by
$21,740,000 U.S. Treasury
Notes, 8.75%, 08/15/00,
market value $24,158,384
(cost $23,449,000) 23,449,000
------------
TOTAL INVESTMENTS
(cost $422,834,956) $426,870,473
============
</TABLE>
- ------------------------------------------------------
Cost also represents cost for Federal income tax purposes.
The abbreviation in the above statement stands for the following:
REMIC Real Estate Mortgage Investment Conduit
Portfolio holding percentages represent market value as a percentage of net
assets.
See accompanying notes to the financial statements.
NATIONWIDE SEPARATE ACCOUNT TRUST SEMI-ANNUAL REPORT 17
<PAGE> 109
NATIONWIDE SEPARATE ACCOUNT TRUST
MONEY MARKET FUND
STATEMENT OF INVESTMENTS -- JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
- ------------------------------------------------------
PRINCIPAL SECURITY VALUE
- ------------------------------------------------------
<S> <C> <C>
COMMERCIAL PAPER (96.1%)
AGRICULTURE/FINANCE (3.1%)
$24,565,000 John Deere Capital,
5.54-5.55%, 07/25/97 $ 24,474,207
6,388,000 John Deere Capital, 5.54%,
08/11/97 6,347,695
------------
30,821,902
------------
AUTO / FINANCE (3.8%)
15,000,000 Ford Motor Credit Co.,
5.57-5.58%, 07/07/97 14,986,075
12,840,000 Ford Motor Credit Co.,
5.52-5.54%, 07/10/97 12,822,266
5,627,000 Ford Motor Credit Co.,
5.53%, 07/25/97 5,606,255
4,297,000 Ford Motor Credit Co.,
5.57%, 07/30/97 4,277,720
------------
37,692,316
------------
BANKS (14.0%)
14,000,000 Banc One Corp., 5.56%,
07/22/97 13,954,593
20,000,000 CoreStates Capital, 5.55%,
07/21/97 19,938,333
6,000,000 Morgan (J.P.) & Co., 5.51%,
07/02/97 5,999,082
10,000,000 Morgan (J.P.) & Co., 5.35%,
07/08/97 9,989,597
13,780,000 Morgan (J.P.) & Co.,
5.57-5.60%, 07/17/97 13,745,879
6,000,000 Morgan (J.P.) & Co., 5.43%,
08/11/97 5,962,895
10,000,000 National City Credit,
5.55-5.57%, 08/04/97 9,947,583
10,000,000 National City Credit, 5.57%,
08/12/97 9,935,017
7,000,000 National City Credit, 5.60%,
09/02/97 6,931,400
8,000,000 National City Credit, 5.57%,
09/15/97 7,905,929
5,000,000 Suntrust Banks, Inc., 5.56%,
07/16/97 4,988,417
15,000,000 Suntrust Banks, Inc., 5.55%,
08/06/97 14,916,750
5,840,000 Suntrust Banks, Inc., 5.55%,
09/17/97 5,769,774
10,000,000 Suntrust Banks, Inc., 5.56%,
09/25/97 9,867,178
------------
139,852,427
------------
<CAPTION>
- ------------------------------------------------------
PRINCIPAL SECURITY VALUE
- ------------------------------------------------------
<S> <C> <C>
BROKER-DEALERS (13.8%)
$ 3,000,000 Bear Stearns Company, 5.65%,
07/11/97 $ 2,995,292
5,000,000 Bear Stearns Company, 5.65%,
07/14/97 4,989,798
5,000,000 Bear Stearns Company, 5.64%,
07/15/97 4,989,033
15,000,000 Bear Stearns Company, 5.60%,
08/19/97 14,885,667
7,000,000 Bear Stearns Company, 5.62%,
09/04/97 6,928,969
10,185,000 Goldman Sachs Group, 5.50%,
07/07/97 10,175,664
5,000,000 Goldman Sachs Group, 5.60%,
09/04/97 4,949,445
10,583,000 Goldman Sachs Group, 5.60%,
09/05/97 10,474,348
10,000,000 Goldman Sachs Group,
5.56-5.57%, 09/12/97 9,887,053
8,000,000 Merrill Lynch & Co., 5.59%,
07/09/97 7,990,062
1,940,000 Merrill Lynch & Co.,
5.55-5.57%, 07/24/97 1,933,121
12,000,000 Merrill Lynch & Co., 5.57%,
07/28/97 11,949,870
12,000,000 Merrill Lynch & Co., 5.60%,
08/22/97 11,902,933
8,870,000 Smith Barney, Inc., 5.54%,
07/18/97 8,846,795
15,000,000 Smith Barney, Inc., 5.54%,
08/01/97 14,928,441
10,000,000 Smith Barney, Inc., 5.54%,
08/04/97 9,947,678
------------
137,774,169
------------
CHEMICALS (3.2%)
9,000,000 Monsanto Co.,
5.58%, 07/10/97 8,987,445
10,860,000 PPG Industries, 5.51-5.53%,
07/14/97 10,838,379
12,268,000 PPG Industries, 5.55-5.57%,
07/31/97 12,211,056
------------
32,036,880
------------
</TABLE>
18 NATIONWIDE SEPARATE ACCOUNT TRUST SEMI-ANNUAL REPORT
<PAGE> 110
NATIONWIDE SEPARATE ACCOUNT TRUST
MONEY MARKET FUND
STATEMENT OF INVESTMENTS -- JUNE 30, 1997 (UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
- ------------------------------------------------------
PRINCIPAL SECURITY VALUE
- ------------------------------------------------------
<S> <C> <C>
CONSUMER SALES FINANCE (13.7%)
$ 4,966,000 American Express Credit
Corp., 5.52-5.54%, 07/10/97 $ 4,959,147
3,827,000 American Express Credit
Corp., 5.54%, 07/31/97 3,809,332
5,030,000 Associates Corp. of N.A.,
5.53%, 07/28/97 5,009,138
9,230,000 Associates Corp. of N.A.,
5.55%, 07/29/97 9,190,157
15,367,000 Avco Financial Services,
Inc., 5.58-5.63%, 07/14/97 15,335,830
2,000,000 Avco Financial Services,
Inc., 5.57%, 08/06/97 1,988,860
6,000,000 Avco Financial Services,
Inc., 5.58%, 08/07/97 5,965,590
5,000,000 Avco Financial Services,
Inc., 5.55%, 08/26/97 4,956,833
20,000,000 Beneficial Corp., 5.52%,
07/18/97 19,947,867
10,000,000 Beneficial Corp., 5.54%,
07/31/97 9,953,833
20,000,000 Commercial Credit Co.,
5.52-5.55%, 07/11/97 19,969,250
10,000,000 Norwest Financial, 5.55%,
07/09/97 9,987,667
10,000,000 Norwest Financial, 5.55%,
08/27/97 9,912,125
16,310,000 Norwest Financial, 5.59%,
09/03/97 16,147,915
------------
137,133,544
------------
CORPORATE CREDIT UNIONS (1.0%)
10,512,000 U.S. Central Credit Union,
5.55%, 09/24/97 10,374,249
------------
DATA SERVICES (0.7%)
7,481,000 First Data Corp., 5.60%,
07/02/97 7,448,480
------------
DIVERSIFIED FINANCE (3.5%)
163,000 GE Capital Corp.,
5.53-5.57%, 07/16/97 162,624
10,000,000 GE Capital Corp., 5.57%,
07/17/97 9,975,244
10,000,000 GE Capital Corp., 5.55%,
07/23/97 9,966,083
5,172,000 GE Capital Corp., 5.63%,
08/06/97 5,142,882
10,000,000 GE Capital Corp., 5.66%,
08/18/97 9,924,533
------------
35,171,366
------------
ENTERTAINMENT (1.5%)
15,000,000 Walt Disney Company, 5.50%,
07/02/97 14,997,708
------------
<CAPTION>
- ------------------------------------------------------
PRINCIPAL SECURITY VALUE
- ------------------------------------------------------
<S> <C> <C>
FINANCIAL SERVICES/ ELECTRIC
UTILITY (3.5%)
$ 3,400,000 National Rural Utilities,
5.55%, 07/17/97 $ 3,391,613
2,900,000 National Rural Utilities,
5.55%, 07/21/97 2,891,058
20,000,000 National Rural Utilities,
5.54%, 08/25/97 19,830,722
4,397,000 National Rural Utilities,
5.54%, 09/03/97 4,353,694
5,000,000 National Rural Utilities,
5.55%, 09/04/97 4,949,896
------------
35,416,983
------------
FOOD & BEVERAGE (5.8%)
12,000,000 CPC International, 5.62%,
07/23/97 11,958,787
5,000,000 CPC International, 5.62%,
08/18/97 4,962,533
8,850,000 CPC International, 5.55%,
09/25/97 8,732,664
15,678,000 Campbell Soup Co., 5.26%,
08/21/97 15,561,173
3,050,000 Heinz (H.J.) Company,
5.52-5.60%, 07/03/97 3,049,065
10,000,000 Heinz (H.J.) Company, 5.52%,
07/14/97 9,980,067
328,000 Heinz (H.J.) Company, 5.52%,
07/17/97 327,195
3,100,000 Heinz (H.J.) Company, 5.52%,
07/22/97 3,090,018
------------
57,661,502
------------
HEAVY EQUIPMENT FINANCE (0.5%)
4,771,000 Caterpillar Financial
Services, 5.56%, 08/05/97 4,745,210
------------
INSURANCE (8.8%)
10,000,000 AIG Funding, Inc., 5.31%,
08/07/97 9,945,425
15,000,000 MetLife Funding Inc., 5.53%,
07/16/97 14,965,438
8,420,000 MetLife Funding Inc.,
5.55-5.53%, 07/22/97 8,392,791
3,712,000 MetLife Funding Inc., 5.55%,
07/29/97 3,695,977
2,308,000 MetLife Funding Inc.,
5.55-5.57%, 08/04/97 2,295,859
13,000,000 Old Republic Capital,
5.41-5.40%, 07/08/97 12,986,338
10,000,000 Old Republic Capital,
5.62-5.63%, 08/05/97 9,945,264
11,000,000 Old Republic Capital, 5.65%,
10/07/97 10,830,814
</TABLE>
NATIONWIDE SEPARATE ACCOUNT TRUST SEMI-ANNUAL REPORT 19
<PAGE> 111
NATIONWIDE SEPARATE ACCOUNT TRUST
MONEY MARKET FUND
STATEMENT OF INVESTMENTS -- JUNE 30, 1997 (UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
- ------------------------------------------------------
PRINCIPAL SECURITY VALUE
- ------------------------------------------------------
<S> <C> <C>
INSURANCE (CONTINUED)
$ 4,700,000 Principal Mutual, 5.50%,
07/08/97 $ 4,694,974
9,847,000 Principal Mutual, 5.52%,
07/09/97 9,834,921
------------
87,587,801
------------
OFFICE EQUIPMENT AND
SUPPLIES (1.9%)
9,465,000 Pitney Bowes Credit, 5.67%,
09/16/97 9,350,213
10,000,000 Pitney Bowes Credit, 5.65%,
09/23/97 9,868,166
------------
19,218,379
------------
OIL & GAS (1.9%)
19,225,000 Koch Industries, 6.15%,
07/01/97 19,225,000
------------
OIL & GAS: EQUIPMENT &
SERVICES (3.7%)
12,000,000 Chevron Transport, 5.56%,
07/24/97 11,957,373
10,000,000 Chevron Transport, 5.57%,
07/29/97 9,956,678
10,000,000 Chevron Transport, 5.57%,
07/30/97 9,955,131
5,000,000 Chevron Transport, 5.56%,
08/08/97 4,970,656
------------
36,839,838
------------
PACKAGING/CONTAINERS (3.7%)
5,000,000 Bemis Co., Inc., 5.55%,
07/07/97 4,995,375
2,523,000 Bemis Co., Inc., 5.52-5.58%,
07/09/97 2,519,905
8,530,000 Bemis Co., Inc., 5.55-5.58%,
07/14/97 8,512,904
15,000,000 Bemis Co., Inc., 5.57%,
07/15/97 14,967,508
6,038,000 Bemis Co., Inc., 5.53%,
07/24/97 6,016,667
------------
37,012,359
------------
PAPER AND FOREST PRODUCTS (0.8%)
8,000,000 Sonoco Products Co., 5.53%,
07/01/97 8,000,000
------------
<CAPTION>
- ------------------------------------------------------
PRINCIPAL SECURITY VALUE
- ------------------------------------------------------
<S> <C> <C>
PHARMACEUTICALS/ PERSONAL
CARE (6.2%)
$ 5,000,000 Becton Dickinson, 5.90%,
07/03/97 $ 4,998,361
1,472,000 Becton Dickinson, 5.55%,
07/17/97 1,468,369
10,000,000 Becton Dickinson, 5.55%,
09/26/97 9,865,875
10,000,000 Gillette Co.,
5.53%, 07/03/97 9,996,928
12,000,000 Glaxo Wellcome, 5.56%,
07/01/97 12,000,000
23,666,000 Schering Corp., 5.60-5.61%,
08/05/97 23,537,152
------------
61,866,685
------------
PREMIUM FINANCE (1.0%)
10,140,000 A.I. Credit Corp., 5.26%,
08/20/97 10,065,922
------------
TOTAL COMMERCIAL PAPER
(cost $960,942,720) 960,942,720
------------
U.S GOVERNMENT AND
AGENCY OBLIGATIONS (4.0%)
15,180,000 U.S. Treasury Bills,
5.17-5.425%, 11/13/97 14,871,182
15,000,000 Federal Home Loan Mortgage,
5.50%, 07/03/97 14,995,417
10,000,000 Federal Farm Credit,
5.35%*, Variable Rate Note,
03/03/98 10,000,000
------------
TOTAL U.S. GOVERNMENT AND
AGENCY OBLIGATIONS
(cost $39,866,599) 39,866,599
------------
TOTAL INVESTMENTS
(cost $1,000,809,319) $1,000,809,319
============
</TABLE>
- ------------------------------------------------------
Cost also represents cost for Federal income tax purposes.
Portfolio holding percentages represent value as a percentage of net assets.
* Variable rate security. The rate reflected in the Statement of Investments is
the rate in effect on June 30, 1997.
See accompanying notes to financial statements.
20 NATIONWIDE SEPARATE ACCOUNT TRUST SEMI-ANNUAL REPORT
<PAGE> 112
NATIONWIDE SEPARATE ACCOUNT TRUST
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 1997
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMALL CAPITAL GOVERNMENT
COMPANY APPRECIATION TOTAL RETURN BOND MONEY MARKET
FUND FUND FUND FUND FUND
------------ ------------ -------------- ------------ --------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments in securities, at
value
(cost $197,167,074,
$250,410,913, $1,044,912,451,
$399,385,956, and
$1,000,809,319, respectively) $233,111,041 $339,298,865 $1,553,969,134 $403,421,473 $1,000,809,319
Repurchase agreements (cost
$10,119,000, $1,293,598,
$4,816,821, and $23,449,000) 10,119,000 1,293,598 4,816,821 23,449,000 --
------------ ------------ -------------- ------------ --------------
Total investments 243,230,041 340,592,463 1,558,785,955 426,870,473 1,000,809,319
Cash -- -- -- 1,454 --
Accrued interest and dividends
receivable 180,347 269,242 1,794,604 4,863,508 52,621
Withholding tax reclaim
receivable 28,625 -- 83,111 -- --
Receivable for investment
securities sold 19,434,928 2,598,463 16,546,802 23,866,990 46,710,000
Receivable for fund shares sold 705,404 983,532 1,231,613 -- --
Receivable for translation of
assets and liabilities in
foreign currencies 153 -- -- -- --
Deferred organization expenses 6,045 -- -- -- --
------------ ------------ -------------- ------------ --------------
Total assets 263,585,543 344,443,700 1,578,442,085 455,602,425 1,047,571,940
------------ ------------ -------------- ------------ --------------
LIABILITIES
Bank loan 251,942 2,421 4,864,774 -- 1,567
Payable for foreign currency
contracts 8,596 -- -- -- --
Payable for investment
securities purchased 21,207,027 6,481,724 9,067,825 23,449,000 47,199,159
Payable for fund shares redeemed -- -- -- 384,467 64,974
Accrued management fees 189,088 134,164 623,898 177,883 402,634
Other accrued expenses 5,467 1,557 11,285 (1,713) 21,956
------------ ------------ -------------- ------------ --------------
Total liabilities 21,662,120 6,619,866 14,567,782 24,009,637 47,690,290
------------ ------------ -------------- ------------ --------------
NET ASSETS $241,923,423 $337,823,834 $1,563,874,303 $431,592,788 $ 999,881,650
============ ============ ============== ============ ==============
REPRESENTED BY:
Capital $208,048,570 $248,025,344 $1,033,347,502 $429,437,921 $ 999,887,882
Net unrealized appreciation on
investments and translation of
assets and liabilities in
foreign currencies 35,935,524 88,887,952 509,056,683 4,035,517 --
Undistributed net realized gain
(loss) from investments and
foreign currency transactions -- 880,125 21,323,092 (1,905,102) (6,542)
Distributions in excess of net
realized gains from
investments and foreign
currency transacations (2,307,347) -- -- -- --
Undistributed net investment
income 246,676 30,413 147,026 24,452 310
------------ ------------ -------------- ------------ --------------
NET ASSETS $241,923,423 $337,823,834 $1,563,874,303 $431,592,788 $ 999,881,650
============ ============ ============== ============ ==============
Shares outstanding (unlimited
number of shares authorized) 15,959,009 17,269,217 99,535,254 39,228,213 999,891,156
============ ============ ============== ============ ==============
NET ASSET VALUE, offering and
redemption price per share $ 15.16 $ 19.56 $ 15.71 $ 11.00 $ 1.00
============ ============ ============== ============ ==============
</TABLE>
See accompanying notes to financial statements.
NATIONWIDE SEPARATE ACCOUNT TRUST SEMI-ANNUAL REPORT 21
<PAGE> 113
NATIONWIDE SEPARATE ACCOUNT TRUST
STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMALL CAPITAL GOVERNMENT
COMPANY APPRECIATION TOTAL RETURN BOND MONEY MARKET
FUND FUND FUND FUND FUND
----------- ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
INCOME:
Interest $ 582,785 $ 488,980 $ 2,437,851 $ 14,966,728 $28,398,180
Dividends 817,241 1,761,466 13,070,822 -- --
Less foreign tax withheld (66,743) -- (64,308) -- --
----------- ----------- ------------ ------------ -----------
Total income 1,333,283 2,250,446 15,444,365 14,966,728 28,398,180
----------- ----------- ------------ ------------ -----------
EXPENSES:
Investment management fees 973,505 651,823 3,297,390 1,099,837 2,535,860
Custodian fees 55,819 10,784 24,174 8,181 33,054
Professional services 4,909 4,494 28,517 8,975 22,220
Trustees fees and expenses 148 206 1,150 487 1,089
Other 35,986 4,076 22,452 4,325 14,068
----------- ----------- ------------ ------------ -----------
Total expenses 1,070,367 671,383 3,373,683 1,121,805 2,606,291
----------- ----------- ------------ ------------ -----------
NET INVESTMENT INCOME $ 262,916 $ 1,579,063 $ 12,070,682 $ 13,844,923 $25,791,889
----------- ----------- ------------ ------------ -----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCY:
Net realized gain (loss) on
investments and foreign currency
transactions $(1,343,932) $ 880,125 $ 21,322,859 $ 2,429,488 $ 62
Net change in unrealized appreciation
(depreciation) on investments and
translation of assets and
liabilities in foreign currencies 21,611,653 49,389,538 209,636,258 (4,249,173) --
----------- ----------- ------------ ------------ -----------
Net realized and unrealized gain
(loss) on investements and
translation of assets and
liabilities in foreign currencies 20,267,721 50,269,663 230,959,117 (1,819,685) 62
----------- ----------- ------------ ------------ -----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $20,530,637 $ 51,848,726 $243,029,799 $ 12,025,238 $25,791,951
=========== =========== ============ ============ ===========
</TABLE>
See accompanying notes to financial statements.
22 NATIONWIDE SEPARATE ACCOUNT TRUST SEMI-ANNUAL REPORT
<PAGE> 114
NATIONWIDE SEPARATE ACCOUNT TRUST
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMALL COMPANY FUND
---------------------------
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1997 1996
------------ ------------
(UNAUDITED)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 262,916 $ 513,541
Net realized gain (loss) on investments and foreign currencies (1,343,932) (10,875)
Net change in unrealized appreciation or depreciation on investments and
translation of assets and liabilities in foreign currencies 21,611,653 12,814,687
------------ ------------
Net increase in net assets resulting from operations 20,530,637 13,317,353
------------ ------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income -- (467,602)
In excess of net realized gain from investment transactions and foreign
currency transactions -- (914,090)
Tax return of capital -- (58,538)
------------ ------------
Decrease in net assets from distributions to shareholders -- (1,440,230)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 90,691,010 233,069,667
Net asset value of shares issued to shareholders from reinvestment of
dividends -- 1,440,231
Cost of shares redeemed (50,137,933) (82,702,784)
------------ ------------
Net increase (decrease) in net assets derived from capital share
transactions 40,553,077 151,807,114
------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS 61,083,714 163,684,237
NET ASSETS -- BEGINNING OF PERIOD 180,839,709 17,155,472
------------ ------------
NET ASSETS -- END OF PERIOD $241,923,423 $180,839,709
============ ============
Distributions in excess of net realized gain on investments and foreign
currency transactions included in net assets at end of period $ (2,307,347) $ (963,415)
============ ============
Undistributed (distributions in excess of) net investment income included in
net assets at end of period $ 246,676 $ (16,240)
============ ============
SHARE ACTIVITY:
Shares sold 6,509,947 17,796,626
Shares issued to shareholders from reinvestment of dividends -- 104,562
Shares redeemed (3,568,750) (6,385,454)
------------ ------------
Net increase (decrease) in number of shares 2,941,197 11,515,734
============ ============
</TABLE>
See accompanying notes to financial statements.
NATIONWIDE SEPARATE ACCOUNT TRUST SEMI-ANNUAL REPORT 23
<PAGE> 115
NATIONWIDE SEPARATE ACCOUNT TRUST
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITAL APPRECIATION FUND
---------------------------
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1997 1996
------------ ------------
(UNAUDITED)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 1,579,063 $ 2,093,155
Net realized gain (loss) on investments 880,125 6,083,507
Net change in unrealized appreciation or depreciation on investments 49,389,538 24,469,916
------------ ------------
Net increase in net assets resulting from operations 51,848,726 32,646,578
------------ ------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (1,564,264) (2,097,320)
Net realized gain on investments -- (6,083,507)
------------ ------------
Decrease in net assets from distributions to shareholders (1,564,264) (8,180,827)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 99,660,121 188,489,438
Net asset value of shares issued to shareholders from reinvestment of
dividends 1,564,265 8,180,827
Cost of shares redeemed (25,158,837) (90,899,204)
------------ ------------
Net increase (decrease) in net assets derived from capital share
transactions 76,065,549 105,771,061
------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS 126,350,011 130,236,812
NET ASSETS -- BEGINNING OF PERIOD 211,473,823 81,237,011
------------ ------------
NET ASSETS -- END OF PERIOD $337,823,834 $211,473,823
============ ============
Undistributed net realized gain on investments included in net assets at end
of period $ 880,125 $ --
============ ============
Undistributed net investment income included in net assets at end of period $ 30,413 $ 15,614
============ ============
SHARE ACTIVITY:
Shares sold 5,636,042 12,564,846
Shares issued to shareholders from reinvestment of dividends 86,063 511,125
Shares redeemed (1,439,440) (6,117,513)
------------ ------------
Net increase (decrease) in number of shares 4,282,665 6,958,458
============ ============
</TABLE>
See accompanying notes to financial statements.
24 NATIONWIDE SEPARATE ACCOUNT TRUST SEMI-ANNUAL REPORT
<PAGE> 116
NATIONWIDE SEPARATE ACCOUNT TRUST
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOTAL RETURN FUND
--------------------------------
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1997 1996
-------------- --------------
(UNAUDITED)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 12,070,682 $ 19,267,681
Net realized gain (loss) on investments 21,322,859 44,581,276
Net change in unrealized appreciation or depreciation on investments 209,636,258 132,964,864
-------------- --------------
Net increase in net assets resulting from operations 243,029,799 196,813,821
-------------- --------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (11,975,672) (19,350,083)
Net realized gain on investments 233 (44,581,276)
-------------- --------------
Decrease in net assets from distributions to shareholders (11,975,439) (63,931,359)
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 186,291,403 234,350,587
Net asset value of shares issued to shareholders from reinvestment of
dividends 11,975,439 63,931,358
Cost of shares redeemed (45,322,684) (66,253,094)
-------------- --------------
Net increase (decrease) in net assets derived from capital share
transactions 152,944,158 232,028,851
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS 383,998,518 364,911,313
NET ASSETS -- BEGINNING OF PERIOD 1,179,875,785 814,964,472
-------------- --------------
NET ASSETS -- END OF PERIOD $1,563,874,303 $1,179,875,785
============== ==============
Undistributed net realized gain on investments included in net assets at
end of period $ 21,323,092 $ --
============== ==============
Undistributed net investment income included in net assets at end of
period $ 147,026 $ 52,016
============== ==============
SHARE ACTIVITY:
Shares sold 13,064,455 18,641,347
Shares issued to shareholders from reinvestment of dividends 825,075 4,890,401
Shares redeemed (3,248,346) (5,275,955)
-------------- --------------
Net increase (decrease) in number of shares 10,641,184 18,255,793
============== ==============
</TABLE>
See accompanying notes to financial statements.
NATIONWIDE SEPARATE ACCOUNT TRUST SEMI-ANNUAL REPORT 25
<PAGE> 117
NATIONWIDE SEPARATE ACCOUNT TRUST
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GOVERNMENT BOND FUND
---------------------------
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1997 1996
------------ ------------
(UNAUDITED)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 13,844,923 $ 27,722,569
Net realized gain (loss) on investments 2,429,488 4,438,322
Net change in unrealized appreciation or depreciation on investments (4,249,173) (17,097,130)
------------ ------------
Net increase in net assets resulting from operations 12,025,238 15,063,761
------------ ------------
DIVIDENDS TO SHAREHOLDERS FROM NET INVESTMENT INCOME (13,837,171) (27,750,527)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 29,700,553 80,750,210
Net asset value of shares issued to shareholders from reinvestment of
dividends 13,837,172 27,750,527
Cost of shares redeemed (69,379,854) (90,583,178)
------------ ------------
Net increase (decrease) in net assets derived from capital share
transactions (25,842,129) 17,917,559
------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS (27,654,062) 5,230,793
NET ASSETS -- BEGINNING OF PERIOD 459,246,850 454,016,057
------------ ------------
NET ASSETS -- END OF PERIOD $431,592,788 $459,246,850
============ ============
Undistributed net realized loss on investments included in net assets at end
of period $ (1,905,102) $ (4,334,590)
============ ============
Undistributed net investment income included in net assets at end of period $ 24,452 $ 16,700
============ ============
SHARE ACTIVITY:
Shares sold 2,693,990 7,317,309
Shares issued to shareholders from reinvestment of dividends 1,269,085 2,540,180
Shares redeemed (6,315,880) (8,244,830)
------------ ------------
Net increase (decrease) in number of shares (2,352,805) 1,612,659
============ ============
</TABLE>
See accompanying notes to financial statements.
26 NATIONWIDE SEPARATE ACCOUNT TRUST SEMI-ANNUAL REPORT
<PAGE> 118
NATIONWIDE SEPARATE ACCOUNT TRUST
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY MARKET FUND
---------------------------------
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1997 1996
--------------- ---------------
(UNAUDITED)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 25,791,889 $ 45,167,610
Net realized gain (loss) on investments 62 (740)
-------------- --------------
Net increase in net assets resulting from operations 25,791,951 45,166,870
-------------- --------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (25,791,579) (45,170,024)
Tax return of capital -- (3,388)
-------------- --------------
Decrease in net assets from distributions to shareholders (25,791,579) (45,173,412)
-------------- --------------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 1,247,436,387 2,044,373,614
Net asset value of shares issued to shareholders from reinvestment of
dividends 25,791,579 45,202,840
Cost of shares redeemed (1,256,875,366) (1,843,449,040)
-------------- --------------
Net increase (decrease) in net assets derived from capital share
transactions 16,352,600 246,127,414
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS 16,352,972 246,120,872
NET ASSETS -- BEGINNING OF PERIOD 983,528,678 737,407,806
-------------- --------------
NET ASSETS -- END OF PERIOD $ 999,881,650 $ 983,528,678
============== ==============
Undistributed net realized loss on investments included in net assets
at end of period $ (6,542) $ (6,604)
============== ==============
Undistributed net investment income included in net assets at end of
period $ 310 $ --
============== ==============
SHARE ACTIVITY:
Shares sold 1,247,436,387 2,044,373,614
Reinvestment of dividends 25,791,579 45,202,840
Shares redeemed (1,256,875,366) (1,843,449,040)
-------------- --------------
Net increase (decrease) in number of shares 16,352,600 246,127,414
============== ==============
</TABLE>
See accompanying notes to financial statements.
NATIONWIDE SEPARATE ACCOUNT TRUST SEMI-ANNUAL REPORT 27
<PAGE> 119
NATIONWIDE SEPARATE ACCOUNT TRUST
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMALL COMPANY FUND
------------------------------------------------
PERIOD FROM
OCTOBER 23, 1995
SIX MONTHS YEAR (COMMENCEMENT OF
ENDED ENDED OPERATIONS) THROUGH
JUNE 30, DECEMBER 31, DECEMBER 31,
1997 1996 1995
----------- ------------ -------------------
(UNAUDITED)
<S> <C> <C> <C>
NET ASSET VALUE -- BEGINNING OF PERIOD $ 13.89 $ 11.42 $ 10.00
Net investment income 0.02 0.06 0.02
Net realized gain (loss) and unrealized appreciation on
investments and translation of assets and liabilities in
foreign currencies 1.25 2.55 1.42
-------- -------- -------
Total from investment operations 1.27 2.61 1.44
-------- -------- -------
Dividends from net investment income -- (0.06) (0.02)
Dividends in excess of net realized gain from investment
transactions and foreign currencies -- (0.08) --
-------- -------- -------
Total distributions -- (0.14) (0.02)
-------- -------- -------
Net increase in net asset value 1.27 2.47 1.42
-------- -------- -------
NET ASSET VALUE -- END OF PERIOD $ 15.16 $ 13.89 $ 11.42
======== ======== =======
Total Return 9.14%* 22.83% 14.38%*
Ratios and supplemental data:
Net Assets, end of period (000) $ 241,923 $ 80,840 $17,155
Ratio of expenses to average net assets 1.10%* 1.20% 1.25%*
Ratio of expenses to average net assets** 1.10%* 1.20% 1.74%*
Ratio of net investment income to average net assets .27%* .60% 1.32%*
Ratio of net investment income to average net assets** .27%* .60% .83%*
Portfolio turnover 67.23%* 136.74% 9.03%*
Average commission rate paid*** 2.5800c 2.8802c --
</TABLE>
- ------------------------------------------------------
* Ratios are annualized for periods of less than one year. Total return and
portfolio turnover are not annualized.
** Ratios calculated as if no fees were waived or expenses reimbursed.
*** Represents the total amount of commissions paid in portfolio equity
transactions divided by the total number of shares purchased and sold by the
Fund for which commissions were charged.
See accompanying notes to financial statements.
28 NATIONWIDE SEPARATE ACCOUNT TRUST SEMI-ANNUAL REPORT
<PAGE> 120
NATIONWIDE SEPARATE ACCOUNT TRUST
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITAL APPRECIATION FUND
-------------------------------------------------------------------------
PERIOD FROM
APRIL 15, 1992
SIX MONTHS (COMMENCEMENT OF
ENDED YEARS ENDED DECEMBER 31, OPERATIONS) THROUGH
JUNE 30, -------------------------------------- DECEMBER 31,
1997 1996 1995 1994 1993 1992
---------- -------- ------- ------- ------- -------------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE -- BEGINNING OF PERIOD $ 16.28 $ 13.48 $ 10.92 $ 11.20 $ 10.46 $ 10.00
Net investment income 0.18 0.21 0.23 0.18 0.26 0.10
Net realized gain (loss) and
unrealized appreciation
(depreciation) on investments 3.28 3.29 2.96 (0.28) 0.74 0.48
-------- -------- ------- ------- ------- -------
Total from investment operations 3.46 3.50 3.19 (0.10) 1.00 0.58
-------- -------- ------- ------- ------- -------
Dividends from net investment income (0.18) (0.22) (0.23) (0.18) (0.26) (0.10)
Dividends from net realized gain
from investment transactions -- (0.48) (0.40) -- -- (0.02)
-------- -------- ------- ------- ------- -------
Total distributions (0.18) (0.70) (0.63) (0.18) (0.26) (0.12)
-------- -------- ------- ------- ------- -------
Net increase (decrease) in net
asset value 3.28 2.80 2.56 (0.28) 0.74 0.46
-------- -------- ------- ------- ------- -------
NET ASSET VALUE --
END OF PERIOD $ 19.56 $ 16.28 $ 13.48 $ 10.92 $ 11.20 $ 10.46
======== ======== ======= ======= ======= =======
Total Return 20.80%* 26.14% 29.35% (0.90%) 9.61% 10.92%*
Ratios and supplemental data:
Net Assets, end of period (000) $337,824 $211,474 $81,237 $60,442 $38,926 $18,800
Ratio of expenses to average net
assets .51%* .52% .54% .56% .59% .69%*
Ratio of net investment income to
average net assets 1.21%* 1.53% 1.89% 1.76% 2.82% 1.95%*
Portfolio turnover 4.65%* 22.19% 20.28% 11.21% 16.87% 5.01%*
Average commission rate paid** 5.9652c 5.8677c -- -- -- --
</TABLE>
- ------------------------------------------------------
* Ratios are annualized for periods of less than one year. Total return and
portfolio turnover are not annualized.
** Represents the total amount of commissions paid in portfolio equity
transactions divided by the total number of shares purchased and sold by the
Fund for which commissions were charged.
See accompanying notes to financial statements.
NATIONWIDE SEPARATE ACCOUNT TRUST SEMI-ANNUAL REPORT 29
<PAGE> 121
NATIONWIDE SEPARATE ACCOUNT TRUST
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOTAL RETURN FUND
-------------------------------------------------------------------
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31,
JUNE 30, ------------------------------------------------------
1997 1996 1995 1994 1993 1992
---------- ---------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE -- BEGINNING OF PERIOD $ 13.27 $ 11.54 $ 9.70 $ 10.10 $ 9.46 $ 9.07
Net investment income 0.13 0.24 0.31 0.21 0.23 0.25
Net realized gain (loss) and unrealized
appreciation (depreciation) on
investments 2.44 2.26 2.49 (0.10) 0.79 0.48
---------- ---------- -------- -------- -------- --------
Total from investment operations 2.57 2.50 2.80 0.11 1.02 0.73
---------- ---------- -------- -------- -------- --------
Dividends from net investment income (0.13) (0.25) (0.31) (0.28) (0.24) (0.25)
Dividends from net realized gain from
investment transactions -- (0.52) (0.65) (0.23) (0.14) (0.09)
---------- ---------- -------- -------- -------- --------
Total distributions (0.13) (0.77) (0.96) (0.51) (0.38) (0.34)
---------- ---------- -------- -------- -------- --------
Net increase (decrease) in net asset
value 2.44 1.73 1.84 (0.40) 0.64 0.39
---------- ---------- -------- -------- -------- --------
NET ASSET VALUE -- END OF PERIOD $ 15.71 $ 13.27 $ 11.54 $ 9.70 $ 10.10 $ 9.46
========== ========== ======== ======== ======== ========
Total Return 19.41%* 21.84% 29.09% 1.07% 10.92% 8.18%
Ratios and supplemental data:
Net Assets, end of period (000) $1,563,874 $1,179,876 $814,964 $534,821 $456,243 $334,917
Ratio of expenses to average net assets .51%* .51% .51% .52% .53% .53%
Ratio of net investment income to
average net assets 1.83%* 1.99% 2.84% 2.76% 2.51% 2.69%
Portfolio turnover 6.32%* 16.18% 16.12% 12.06% 9.79% 12.48%
Average commission rate paid** 4.3819c* 4.7577c -- -- -- --
</TABLE>
- ------------------------------------------------------
* Ratios are annualized for periods of less than one year. Total return and
portfolio turnover are not annualized.
** Represents the total amount of commissions paid in portfolio equity
transactions divided by the total number of shares purchased and sold by the
Fund for which commissions were charged.
See accompanying notes to financial statements.
30 NATIONWIDE SEPARATE ACCOUNT TRUST SEMI-ANNUAL REPORT
<PAGE> 122
NATIONWIDE SEPARATE ACCOUNT TRUST
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GOVERNMENT BOND FUND
------------------------------------------------------------------
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31,
JUNE 30, -----------------------------------------------------
1997 1996 1995 1994 1993 1992
---------- -------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE -- BEGINNING OF PERIOD $ 11.04 $ 11.36 $ 10.20 $ 11.26 $ 10.92 $ 11.24
Net investment income 0.35 0.69 0.71 0.69 0.71 0.98
Net realized gain (loss) and unrealized
appreciation (depreciation) on
investments (0.04) (0.32) 1.16 (1.06) 0.32 (0.14)
-------- -------- -------- -------- -------- --------
Total from investment operations 0.31 0.37 1.87 (0.37) 1.03 0.84
-------- -------- -------- -------- -------- --------
Dividends from net investment income (0.35) (0.69) (0.71) (0.69) (0.66) (0.93)
Dividends from net realized gain from
investment transactions -- -- -- -- (0.03) (0.23)
-------- -------- -------- -------- -------- --------
Total distributions (0.35) (0.69) (0.71) (0.69) (0.69) (1.16)
-------- -------- -------- -------- -------- --------
Net increase (decrease) in net asset
value (0.04) (0.32) 1.16 (1.06) 0.34 (0.32)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE -- END OF PERIOD $ 11.00 $ 11.04 $ 11.36 $ 10.20 $ 11.26 $ 10.92
======== ======== ======== ======== ======== ========
Total Return 2.84%* 3.49% 18.74% (3.23%) 9.52% 7.87%
Ratios and supplemental data:
Net Assets, end of period (000) $431,593 $459,247 $454,016 $391,253 $433,584 $301,841
Ratio of expenses to average net assets .51%* .51% .51% .51% .53% .53%
Ratio of net investment income to average
net assets 6.29%* 6.23% 6.45% 6.46% 5.91% 8.75%
Portfolio turnover 41.76%* 33.75% 97.05% 111.40% 175.37% 73.75%
</TABLE>
- ------------------------------------------------------
* Ratios are annualized for periods of less than one year. Total return and
portfolio turnover are not annualized.
See accompanying notes to financial statements.
NATIONWIDE SEPARATE ACCOUNT TRUST SEMI-ANNUAL REPORT 31
<PAGE> 123
NATIONWIDE SEPARATE ACCOUNT TRUST
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY MARKET FUND
-----------------------------------------------------------------
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31,
JUNE 30, ----------------------------------------------------
1997 1996 1995 1994 1993 1992
---------- -------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE -- BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net investment income 0.03 0.05 0.06 0.04 0.03 0.03
Dividends from net investment income (0.03) (0.05) (0.06) (0.04) (0.03) (0.03)
-------- -------- -------- -------- -------- --------
Net increase (decrease) in net asset value -- -- -- -- -- --
-------- -------- -------- -------- -------- --------
NET ASSET VALUE -- END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ========
Total Return 2.54%* 5.12% 5.66% 3.88% 2.76% 3.40%
Ratios and supplemental data:
Net Assets, end of period (000) $999,882 $983,529 $737,408 $828,027 $351,798 $330,011
Ratio of expenses to average net assets .51%* .51% .52% .54% .53% .53%
Ratio of net investment income to average
net assets 5.09%* 5.00% 5.51% 4.00% 2.72% 3.36%
</TABLE>
- ------------------------------------------------------
* Ratios are annualized for periods of less than one year. Total return is not
annualized.
See accompanying notes to financial statements.
32 NATIONWIDE SEPARATE ACCOUNT TRUST SEMI-ANNUAL REPORT
<PAGE> 124
NATIONWIDE SEPARATE ACCOUNT TRUST
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
- --------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nationwide Separate Account Trust (Trust) is a diversified, open-end investment
company registered under the Investment Company Act of 1940, as amended. The
Trust offers shares to other open-end investment companies created by Nationwide
Advisory Services, Inc., the Trusts investment advisor, as well as to life
insurance company separate accounts to fund the benefits under variable
insurance or annuity policies issued by life insurance companies. The Trust was
organized as a Massachusetts Trust effective June 30, 1981. To date, only
separate accounts of Nationwide Life Insurance Company and Nationwide Life and
Annuity Insurance Company (formerly Financial Horizons Life Insurance Company),
which are affiliated companies, have purchased shares.
The Trust offers shares in five series: Small Company Fund, Capital Appreciation
Fund, Total Return Fund, Government Bond Fund and Money Market Fund. The Trust
was amended in 1995 to create the Small Company Fund. On October 23, 1995, the
Small Company Fund was capitalized through the sale of shares to Nationwide Life
Insurance Company in the amount of $5,000,000, at which time the Small Company
Fund became effective and sales of shares commenced.
On January 4, 1997, the Trust's registration statement as to the Nationwide
Separate Account Trust Income Fund's shares became effective. The Fund has not
commenced operations.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
SECURITY VALUATION
A) SMALL COMPANY, CAPITAL APPRECIATION, TOTAL RETURN AND GOVERNMENT BOND
Securities traded on a national securities exchange are valued at the last
sale price on the principal exchange, or if the securities are traded only in
the over-the-counter market, they are valued at the last quoted sale price, or
if there is no sale, at the quoted bid price. Securities for which market
quotations are not readily available are valued at fair value, using
procedures authorized by the Board of Trustees. Investments denominated in
foreign currencies are translated to U.S. dollars at prevailing exchange
rates. Forward currency exchange contracts are also valued at the prevailing
exchange rates.
The value of a repurchase agreement generally equals the purchase price paid
by the Fund (cost) plus the interest accrued to date. The seller, under the
repurchase agreement, is required to maintain the market value of the
underlying collateral at not less than the value of the repurchase agreement.
Securities subject to repurchase agreements are held by the Federal
Reserve/Treasury book-entry system or by the Fund's custodian or an approved
sub-custodian.
B) MONEY MARKET
Securities are valued at amortized cost, which approximates market value, in
accordance with Rule 2a-7 of the Investment Company Act of 1940.
NATIONWIDE SEPARATE ACCOUNT TRUST SEMI-ANNUAL REPORT 33
<PAGE> 125
NATIONWIDE SEPARATE ACCOUNT TRUST
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
JUNE 30, 1997
(UNAUDITED)
- --------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSACTIONS (SMALL COMPANY FUND)
Fluctuation in the value of investments resulting from changes in foreign
exchange rates are included with net realized and unrealized gain or loss from
investments.
Net realized foreign exchange gains or losses arise from sales of foreign
currencies, currency gains or losses realized on security transactions and the
difference between the amounts of dividends, interest and foreign withholding
taxes recorded on the Fund's books, and the U.S. dollar equivalent of amounts
actually received or paid. Net unrealized foreign exchange gains or losses arise
from changes in the value of assets and liabilities resulting from changes in
exchange rates.
The Fund enters into forward currency exchange contracts which are obligations
to purchase or sell a foreign currency at a specified rate on a certain date in
the future. A net realized gain or loss would be incurred if the value of the
contract increases or decreases between the date the contract is opened and the
date it is closed. Forward currency contracts are marked to market daily and
this change in value is reflected in the Statement of Assets and Liabilities as
a net payable for foreign currency contracts purchased and sold.
At or before the closing of a forward contract, the Small Company Fund may
either sell a portfolio security and make delivery of the currency, or retain
the security and fully or partially offset its contractual obligation to deliver
the currency by purchasing a second contract. If the Fund retains the portfolio
security and engages in an offsetting transaction, the Fund, at the time of
execution of the offsetting transaction, will incur a gain or loss to the extent
that movement has occurred in forward contract prices.
Forward exchange contracts are used in hedging the risks associated with
commitments to purchase securities denominated in foreign currencies for agreed
amounts. The precise matching of forward currency contract amounts and the value
of the securities involved generally will not be possible because the value of
such securities, measured in the foreign currency, will change after the foreign
currency contract has been established. Thus, the Fund might need to purchase or
sell foreign currencies in the spot (cash) market to the extent such foreign
currencies are not covered by forward contracts. The Fund could be exposed to
risk if a counter party is unable to meet the terms of a forward or if the value
of the currency changes unfavorably. The projection of short-term currency
market movements is difficult, and the successful execution of a short-term
hedging strategy is highly uncertain.
FEDERAL INCOME TAXES
The Trust's policy is to comply with the requirements of the Internal Revenue
Code that are applicable to regulated investment companies and to distribute all
its taxable income to its shareholders. Therefore, no federal income tax
provision is required. To the extent net realized gains are offset through the
application of a capital loss carryover, they will not be distributed to
shareholders but will be retained by the Trust. Each Fund is treated as a
separate taxable entity.
As of December 31, 1996, the Government Bond and Money Market Funds had net
capital loss carry forwards in the amounts of $4,334,590 and $6,604,
respectively, The Government Bond Fund carry forward will expire within 6 years
and the Money Market Fund carry forward will expire within 7 to 8 years.
The Small Company Fund intends to elect for Federal income tax purposes to treat
approximately $296,817 of net capital losses that arose during the period ended
December 31, 1996 as if such losses arose on January 1, 1997.
34 NATIONWIDE SEPARATE ACCOUNT TRUST SEMI-ANNUAL REPORT
<PAGE> 126
NATIONWIDE SEPARATE ACCOUNT TRUST
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
JUNE 30, 1997
(UNAUDITED)
- --------------------------------------------------------------------------------
ORGANIZATION EXPENSES
Initial organization expenses of the Small Company Fund were paid by the advisor
and will be reimbursed by the Fund. Such organization costs have been deferred
and will be amortized ratably over a period of sixty months from the
commencement of operations. If any of the initial shares are redeemed before the
end of the amortization period, the proceeds of the redemption will be reduced
by the pro-rata share of the unamortized organization costs.
SECURITY TRANSACTIONS AND INVESTMENT INCOME
Security transactions are recorded on the trade date. Dividend income is
recorded on the ex-dividend date or for foreign securities, it is recorded as
soon as the information becomes available. Interest income is recorded on an
accrual basis and includes, where applicable, the pro-rata amortization of
premium or discount.
EXPENSES
Expenses directly attributed to each Fund are charged to that Fund. Expenses
applicable to all Funds in the Trust are allocated based on average net assets.
DIVIDENDS TO SHAREHOLDERS
A) SMALL COMPANY, CAPITAL APPRECIATION, TOTAL RETURN AND GOVERNMENT BOND
Dividend income is recorded on the ex-dividend date. Dividends from net
investment income are paid quarterly.
B) MONEY MARKET
Dividends from net investment income are declared daily and paid monthly.
C) ALL FUNDS
Net realized gains, if any, are declared and distributed at least annually.
Dividends and distributions to shareholders are determined in accordance with
Federal income tax regulations which may differ from generally accepted
accounting principles. These "book/tax" differences are considered either
permanent or temporary in nature. In accordance with AICPA Statement of
Position 93-2, permanent differences are reclassified within the capital
accounts based on their nature for Federal income tax purposes; temporary
differences do not require reclassification. Dividends and distributions that
exceed net investment income and net realized gains for financial reporting
purposes, but not for tax purposes, are reported as distributions in excess of
net investment income and net realized gains. To the extent distributions
exceed current and accumulated earnings and profits for Federal income tax
purposes, they are reported as distributions of capital.
NATIONWIDE SEPARATE ACCOUNT TRUST SEMI-ANNUAL REPORT 35
<PAGE> 127
NATIONWIDE SEPARATE ACCOUNT TRUST
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
JUNE 30, 1997
(UNAUDITED)
- --------------------------------------------------------------------------------
Accordingly, the undistributed (distributions in excess of) net investment
income, distributions in excess of net realized gain and capital have been
adjusted as of October 31, 1996 by the following amounts:
<TABLE>
<CAPTION>
UNDISTRIBUTED
(DISTRIBUTIONS IN EXCESS OF) DISTRIBUTIONS IN EXCESS OF
NET INVESTMENT NET REALIZED
10/31/96 INCOME GAIN CAPITAL
------------------ ---------------------------- ---------------------------- ---------
<S> <C> <C> <C>
Small Company Fund (64,602) 64,602 --
Small Company Fund -- 58,538 (58,538)
Money Market Fund 3,388 -- (3,388)
</TABLE>
NOTE 2 -- TRANSACTIONS WITH AFFILIATES
As investment manager for the Trust, Nationwide Advisory Services, Inc. (NAS),
an affiliated company, earns an annual management fee of .5% based on the
average daily net assets of the Capital Appreciation Fund, Total Return Fund,
Government Bond Fund and Money Market Fund; this fee would not be payable in
full if the effect of such payment would increase total expenses (excluding
taxes other than payroll taxes and brokerage commissions on portfolio
transactions) to an amount exceeding 1% of average daily net assets for any
fiscal year. Such limitations on total expenses did not affect management fees
during the periods covered by the financial statements.
As investment manager for the Small Company Fund, NAS earns an annual management
fee of 1.00% of average daily net assets. From such fees pursuant to
sub-investment advisory agreements, NAS pays subadvisory fees to The Dreyfus
Corporation, Neuberger and Berman, L.P., Pictet International Management
Limited, Strong Capital Management, Inc., Van Eck Associates Corporation and
Warburg, Pincus Counsellors, Inc. based on average daily net assets of the
portion of the Small Company Fund under their management. For the six months
ended June 30, 1997, NAS collected $973,505 in fees from the Small Company Fund,
and paid $568,368 in fees to the sub-investment advisors.
A subsidiary of NAS (Nationwide Investors Services, Inc.) acts as Transfer and
Dividend Disbursing Agent for the Trust.
At a meeting of the Board of Trustees on July 18, 1997, the Board of Trustees
approved the submission of several issues to shareholders of the Funds for
approval at a Special Meeting of Shareholders to be held on September 26, 1997.
These issues included approving a new Investment Advisory Agreement between the
Trust and NAS with respect to the Capital Appreciation Fund, Total Return Fund,
Government Bond Fund, and Money Market Fund, which among others, will change the
fees paid by Shareholders of these Funds. The proposed Investment Advisory
Agreement separates the investment advisory services provided by NAS from the
basic fund administration services that NAS provides. NAS is currently
compensated for these fund administration services under the current investment
advisory agreement. The proposal provides for this compensation under a separate
fund administration agreement (the "Fund Administration Agreement"). 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 each Fund's average daily net assets up to $1 billion and 0.04% on
assets of $1 billion and more.
36 NATIONWIDE SEPARATE ACCOUNT TRUST SEMI-ANNUAL REPORT
<PAGE> 128
NATIONWIDE SEPARATE ACCOUNT TRUST
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
JUNE 30, 1997
(UNAUDITED)
- --------------------------------------------------------------------------------
The following are the fees to be paid to NAS by each Fund under the proposed
Investment Advisory Agreement which change from those currently charged 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 0.60% on assets up to $1 billion
Capital Appreciation Fund 0.575% on assets over $1 billion but less than $2 billion
0.55% on assets over $2 billion but less than $5 billion
0.50% for assets over $5 billion
Government Bond Fund 0.50% on assets up to $1 billion
0.475% on assets over $1 billion but less than $2 billion
0.45% on assets over $2 billion but less than $5 billion
0.40% for assets over $5 billion
Money Market Fund 0.40% on assets up to $1 billion
0.38% on assets over $1 billion but less than $2 billion
0.36% on assets over $2 billion but less than $5 billion
0.34% for assets over $5 billion
</TABLE>
NOTE 3 -- BANK LOANS
The Trust has an unsecured bank line of credit of $25,000,000. Borrowing under
this arrangement bears interest at the Federal Funds rate plus .50%. No
compensating balances are required.
NOTE 4 -- INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding U.S. government obligations,
short-term securities and forward currency exchange contracts) and U.S.
government obligations for the six months ended June 30, 1997 are summarized as
follows:
<TABLE>
<CAPTION>
SECURITIES U.S. GOVERNMENT OBLIGATIONS
--------------------------- ---------------------------
PURCHASES SALES PURCHASES SALES
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Small Company Fund $165,030,082 $118,478,258 $ 24,582,236 $ 22,588,665
Capital Appreciation Fund 79,633,624 11,632,880 -- --
Total Return Fund 73,460,021 11,732,084 25,488,746 67,491,584
Government Bond Fund 34,998,138 47,739,279 136,128,151 118,492,744
Money Market Fund -- -- 29,456,764 --
</TABLE>
Realized gains and losses have been computed on the first-in, first-out basis.
Included in net unrealized appreciation at June 30, 1997, based on cost for
Federal income tax purposes, excluding forward currency contracts for the Small
Company Fund, are the following components:
<TABLE>
<CAPTION>
GROSS GROSS NET
UNREALIZED UNREALIZED UNREALIZED
GAINS LOSSES APPRECIATION
------------ ------------ ------------
<S> <C> <C> <C>
Small Company Fund $ 40,085,163 $ (5,526,681) $ 34,558,482
Capital Appreciation Fund 91,068,806 (2,180,854) 88,887,952
Total Return Fund 520,525,295 (11,468,612) 509,056,683
Government Bond Fund 5,564,098 (1,528,581) 4,035,517
</TABLE>
NATIONWIDE SEPARATE ACCOUNT TRUST SEMI-ANNUAL REPORT 37
<PAGE> 129
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned as Trustees and/or
as Officer of NATIONWIDE SEPARATE ACCOUNT TRUST, an open-end investment company
created pursuant to the laws of the Commonwealth of Massachusetts, which has
filed with the Securities and Exchange Commission under the provisions of the
Securities Act of 1933, as amended, and of the Investment Company Act of 1940,
as amended, a Registration Statement on Form N-1A for the registration under
said Acts of the sale of shares of Nationwide Separate Account Trust, hereby
constitute and appoint Dimon Richard McFerson, Joseph J. Gasper, James F.
Laird, Jr., W. Sidney Druen, and Joseph P. Rath his/her attorneys, and each of
them, with power to act without the others, his/her attorneys, with full power
of substitution and resubstitution, for and in his/her name, place and stead,
in any and all capacities, to approve and sign any and all amendments to such
Registration Statement, for Nationwide Separate Account Trust, and to file the
same, with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, hereby granting unto said
attorneys, and each of them, full power and authority to do and perform all and
every act and thing requisite to all intents and purposes as he or she might or
could do in person, hereby ratifying and conforming that said attorneys, or any
one of them, may lawfully do or cause to be done by virtue hereof. This
instrument may be executed in one or more counterparts.
IN WITNESS WHEREOF, the undersigneds have herewith set their names and
seals as of this 18th day of July, 1997.
/s/ Robert M. Duncan /s/ John C. Bryant
- --------------------------------- -------------------------------------
Robert M. Duncan, Trustee Dr. John C. Bryant, Trustee
Nationwide Separate Account Trust Nationwide Separate Account Trust
/s/ Thomas J. Kerr, IV /s/ Dimon R. McFerson
- --------------------------------- -------------------------------------
Dr. Thomas J. Kerr, IV, Trustee Dimon R. McFerson, Chairman & Trustee
Nationwide Separate Account Trust Nationwide Separate Account Trust
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000353905
<NAME> CAP APPREC
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 171,886,033
<INVESTMENTS-AT-VALUE> 211,384,447
<RECEIVABLES> 180,742
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 211,565,189
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 91,366
<TOTAL-LIABILITIES> 91,366
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 171,959,795
<SHARES-COMMON-STOCK> 12,986,552
<SHARES-COMMON-PRIOR> 6,028,094
<ACCUMULATED-NII-CURRENT> 15,614
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 39,498,414
<NET-ASSETS> 211,473,823
<DIVIDEND-INCOME> 2,250,264
<INTEREST-INCOME> 561,758
<OTHER-INCOME> 0
<EXPENSES-NET> 718,867
<NET-INVESTMENT-INCOME> 2,093,155
<REALIZED-GAINS-CURRENT> 6,083,507
<APPREC-INCREASE-CURRENT> 24,469,916
<NET-CHANGE-FROM-OPS> 32,646,578
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,097,320
<DISTRIBUTIONS-OF-GAINS> 6,083,507
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 12,564,846
<NUMBER-OF-SHARES-REDEEMED> 6,117,513
<SHARES-REINVESTED> 511,125
<NET-CHANGE-IN-ASSETS> 130,236,812
<ACCUMULATED-NII-PRIOR> 19,779
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 684,932
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 718,867
<AVERAGE-NET-ASSETS> 136,986,469
<PER-SHARE-NAV-BEGIN> 13.48
<PER-SHARE-NII> 0.21
<PER-SHARE-GAIN-APPREC> 3.29
<PER-SHARE-DIVIDEND> 0.22
<PER-SHARE-DISTRIBUTIONS> 0.48
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 16.28
<EXPENSE-RATIO> 0.52
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000353905
<NAME> TOTAL RETURN
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 879,231,159
<INVESTMENTS-AT-VALUE> 1,178,651,584
<RECEIVABLES> 1,699,418
<ASSETS-OTHER> 30,322
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,180,381,324
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 505,539
<TOTAL-LIABILITIES> 505,539
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 880,403,344
<SHARES-COMMON-STOCK> 88,894,070
<SHARES-COMMON-PRIOR> 70,638,277
<ACCUMULATED-NII-CURRENT> 52,016
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 299,420,425
<NET-ASSETS> 1,179,875,785
<DIVIDEND-INCOME> 19,322,831
<INTEREST-INCOME> 4,885,900
<OTHER-INCOME> 0
<EXPENSES-NET> 4,941,050
<NET-INVESTMENT-INCOME> 19,267,681
<REALIZED-GAINS-CURRENT> 44,581,276
<APPREC-INCREASE-CURRENT> 132,964,864
<NET-CHANGE-FROM-OPS> 196,813,821
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 19,350,083
<DISTRIBUTIONS-OF-GAINS> 44,581,276
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 18,641,347
<NUMBER-OF-SHARES-REDEEMED> 5,275,955
<SHARES-REINVESTED> 4,890,401
<NET-CHANGE-IN-ASSETS> 1,179,875,785
<ACCUMULATED-NII-PRIOR> 134,418
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4,851,676
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,941,050
<AVERAGE-NET-ASSETS> 970,335,189
<PER-SHARE-NAV-BEGIN> 11.54
<PER-SHARE-NII> 0.24
<PER-SHARE-GAIN-APPREC> 2.26
<PER-SHARE-DIVIDEND> 0.25
<PER-SHARE-DISTRIBUTIONS> 0.52
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 13.27
<EXPENSE-RATIO> 0.51
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000353905
<NAME> GOVT BOND
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 447,270,056
<INVESTMENTS-AT-VALUE> 455,554,746
<RECEIVABLES> 3,894,203
<ASSETS-OTHER> 719
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 459,449,668
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 202,818
<TOTAL-LIABILITIES> 202,818
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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