NATIONWIDE SEPARATE ACCOUNT TRUST, 485APOS, 1999-03-01

NATIONWIDE SEPARATE ACCOUNT TRUST
485APOS, 1999-03-01

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'33 Act File No. 2-73024
'40 Act File No. 811-3213

As filed with the Securities and Exchange Commission on March 1, 1999
-------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 28 |X|
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 29 |X|
(Check appropriate box or boxes)

NATIONWIDE SEPARATE ACCOUNT TRUST
Total Return Fund
Capital Appreciation Fund
Government Bond Fund
Money Market Fund
Nationwide Small Company Fund
Nationwide Income Fund
Nationwide Strategic Growth Fund
Nationwide Strategic Value Fund
Nationwide Equity Income Fund
Nationwide High Income Bond Fund
Nationwide Balanced Fund
Nationwide Multi Sector Bond Fund
Nationwide Select Advisers Mid Cap Fund
Nationwide Small Cap Value Fund
Nationwide Global Equity Fund
Nationwide Select Advisers Small Cap Growth Fund

(Exact Name of Registrant as Specified in Charter)

Three Nationwide Plaza
Columbus, Ohio 43215
(Address of Principal Executive Office)(Zip Code)

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

Send Copies of Communications to:

Ms. Elizabeth A. Davin Dietrich, Reynolds & Koogler
One Nationwide Plaza One Nationwide Plaza
Columbus, Ohio 43215 Columbus, Ohio 43215
(Name and Address of Agent for Service)

|X| It is proposed that this filing will become effective 60 days after filing
pursuant to paragraph (a) (1) of Rule 485.

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NATIONWIDE SEPARATE ACCOUNT TRUST

TOTAL RETURN FUND
CAPITAL APPRECIATION FUND
GOVERNMENT BOND FUND
MONEY MARKET FUND
NATIONWIDE SMALL COMPANY FUND
NATIONWIDE INCOME FUND
NATIONWIDE STRATEGIC GROWTH FUND
NATIONWIDE STRATEGIC VALUE FUND
NATIONWIDE EQUITY INCOME FUND
NATIONWIDE HIGH INCOME BOND FUND
NATIONWIDE BALANCED FUND
NATIONWIDE MULTI SECTOR BOND FUND
NATIONWIDE SELECT ADVISERS MID CAP FUND
NATIONWIDE SMALL CAP VALUE FUND
NATIONWIDE GLOBAL EQUITY FUND
NATIONWIDE SELECT ADVISERS MID CAP FUND
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CROSS REFERENCE SHEET

<TABLE>
<CAPTION>
N-1A Item No. Location
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PART A
<S> <C> <C>
Item 1. Cover Page Cover Page
Item 2. Risk/Return Summary: Investments, Risks, and Performance Objective; Principal Strategies;
Principal Risks; Performance
Item 3. Risk/Return Summary: Fee Table Fees and Expenses
Investment Objectives, Principal Investment Strategies, and Objective; Principal Strategies;
Item 4. Related Risks Principal Risks; Performance
Item 5. Management's Discussion of Fund Performance *
Item 6. Management, Organization, and Capital Structure Management
Item 7. Shareholder Information Buying and Selling Fund Shares;
Distributions and Taxes
Item 8. Distribution Arrangements *
Item 9. Financial Highlights Information Financial Highlights

PART B

Item 10. Cover Page and Table of Contents Cover Page; Table of Contents
Item 11. Fund History General Information and History
Item 12. Description of the Fund and its Investment Risks Investment Objectives and Policies
Item 13. Management of the Fund Trustees and Officers of the Trust;
Investment Advisory and Other Services
Item 14. Control Persons and Principal Holders of Securities Major Shareholders
Item 15. Investment Advisory and Other Services Investment Advisory and Other Services
Item 16. Brokerage Allocation and Other Practices Brokerage Allocation
Item 17. Capital Stock and Other Securities *
Item 18. Purchase, Redemption and Pricing of Shares Purchase, Redemption and Pricing of
</TABLE>

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<TABLE>
<S> <C> <C>
Shares
Item 19. Taxation of the Fund Tax Status; Other Tax Consequences;
Tax Consequences to Shareholders
Item 20. Underwriters *
Item 21. Calculation of Performance Data Calculating Yield and Total Return
Item 22. Financial Statements Financial Statements
</TABLE>

PART C

Information required to be included in Part C is set forth under the appropriate
item, so numbered, in Part C to this Registration Statement.

- --------------------------------------------------------------------------------
* Not applicable or negative answer

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NATIONWIDE SEPARATE ACCOUNT TRUST

TOTAL RETURN FUND
CAPITAL APPRECIATION FUND
GOVERNMENT BOND FUND
MONEY MARKET FUND

MAY 1, 1999

As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these Funds' shares as an investment or determined
whether this prospectus is complete or accurate. To state otherwise is a crime.

1
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FUND SUMMARIES

This prospectus provides information about four funds offered by Nationwide
Separate Account Trust, which include two stocks funds, a bond fund and a money
market fund (together the "Funds"). The "Stock Funds" means both of the stock
funds. "You" and "Your" refer to potential investors and current investors,
including owners of variable annuity contracts and variable life insurance
policies. "We," "Us" and "Our" refer to Nationwide Advisory Services, Inc.

TOTAL RETURN FUND

OBJECTIVE

The investment objective of the Fund is to obtain reasonable, long-term total
return on invested capital. The Fund's investment objective can be changed by
the Fund's Trustees without shareholder approval.

PRINCIPAL STRATEGIES
The Fund is slightly more conservative than the Capital Appreciation Fund, since
it seeks total return through a flexible combination of current income and
capital appreciation. To achieve its objective, the Fund invests primarily in
the common stock and convertible securities of companies with consistent
earnings performance and generally intends to be fully invested in these
securities.

The Fund generally looks for companies whose earnings are expected to
consistently grow faster than other companies in the market. It will typically
hold the securities of no more than 70 companies at any time. It usually will
sell securities if:

o the price of the security is overvalued
o the company's earnings are consistently lower than expected
o more favorable opportunities are identified.

PRINCIPAL RISKS

Because the value of your investment will fluctuate, there is the risk that you
will lose money. Your investment will decline in value if the value of the
Fund's investments decreases.

STOCK MARKET RISK. Stock market risk is the risk that the Fund could lose value
if the individual stocks in which the Fund has invested or the overall stock
market go down. Individual stocks are affected by factors such as corporate
earnings, production, management and sales. The stock market is affected by
numerous factors, including interest rates, the outlook for corporate profits,
the health of the national and world economies, national and world social and
political events, and the fluctuations of other stock markets around the world.

SMALL NUMBER OF HOLDINGS RISK. Because the Fund typically holds fewer securities
than other stock funds, the price fluctuations of any security will have a
greater impact on the Fund.

PERFORMANCE

The following bar chart and table show two aspects of the Fund: volatility and
performance. The bar chart shows the volatility--or variability--of the Fund's
annual total returns over time and that fund performance can change from year to
year. The table shows the Fund's average annual total returns for certain time
periods compared to the returns of a broad-based securities index. The bar chart
and table provide some indication of the risks of investing in the Fund.
Remember, however, that past performance does not guarantee similar results in
the future.

ANNUAL TOTAL RETURNS:

BAR CHART PLOT POINTS:

13.2% -8.0% 38.5% 8.2% 10.9% 1.1% 29.1% 21.8% 29.4% 18.1%
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998

Best qtr.: 17.0% 4th qtr. of 1998 Worst qtr.: -13.6% 3d qtr. of 1990

AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/98:

1 Year 5 Years 10 Years
------ ------- --------

The Fund 18.07% 19.43% 15.44%
The S&P 500 Index 28.58% 24.03% 19.17%

The Standard & Poor's 500 Index--an unmanaged index of 500 widely-held stocks of
large U.S. companies--gives a broad look at how the stock prices of large U.S.
companies have performed. Unlike mutual funds, the S&P 500 Index does not incur
expenses. If expenses were deducted, its actual returns would be lower.

FEES AND EXPENSES

THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.

Shareholder Fees1 (paid directly from your
investment) None

Annual Fund Operating Expenses (deducted from
Fund assets)

Management Fees 0.59%
Other Expenses 0.06%
----
Total Annual Fund Operating Expenses 0.65%
=====

- -----------
1 Sales charges may be imposed by variable annuity contracts or variable life
insurance polices if the Fund's shares are purchased by a life insurance
separate account as an investment option for these contracts or policies.

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EXAMPLE

This example shows what you could pay in expenses over time. You can also use
this example to compare the cost of this Fund with other mutual funds.

The example assumes that you invest $10,000 in the Fund for the time periods
indicated and that you sell all of your shares at the end of those time periods.
It also assumes a 5% return each year, that expenses will not change, and that
there are no fee waivers or expense reimbursements in effect. Although your
actual costs may be higher or lower, based on these assumptions your cost would
be:

1 Year 3 years 5 years 10 Years
------ ------- ------- --------

$66 $208 $362 $810

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CAPITAL APPRECIATION FUND

OBJECTIVE

The Fund is designed for investors who are interested in long-term growth. The
Fund's investment objective can be changed by the Fund's Trustees without
shareholder approval.

PRINCIPAL STRATEGIES

The Fund focuses on investments that the Fund believes will increase in value
over the long run--typically three to ten years--and not short-term gain. To
achieve its objective, the Fund primarily invests in the common stock of large
capitalization companies. Under normal market conditions, the Fund invests at
least 65% of its total assets in common stock and convertible securities and
generally intends to be fully invested in these securities.

The Fund looks for companies whose earnings are expected to consistently grow
faster than other companies in the market. It will typically hold the securities
of no more than 70 companies at any time. It generally will sell securities if:

o the price of the security is overvalued
o the company's earnings are consistently lower than expected
o more favorable opportunities are identified.

PRINCIPAL RISKS

Because the value of your investment will fluctuate, there is the risk that you
will lose money. Your investment will decline in value if the value of the
Fund's investments decreases.

STOCK MARKET RISK. Stock market risk is the risk that the Fund could lose value
if the individual stocks in which the Fund has invested or the overall stock
market goes down. Individual stocks are affected by factors such as corporate
earnings, production, management and sales. The stock market is affected by
numerous factors, including interest rates, the outlook for corporate profits,
the health of the national and world economies, national and world social and
political events, and the fluctuations of other stock markets around the world.

SMALL NUMBER OF HOLDINGS RISK. Because the Fund typically holds fewer securities
than other stock funds, the price fluctuations of any security will have a
greater impact on the Fund.

RISK RELATED TO INVESTING FOR GROWTH. Different types of stocks tend to shift
into and out of favor with stock market investors depending on market and
economic conditions. Because the Fund focuses on growth-style stocks, the Fund's
performance may at times be better or worse than the performance of stock funds
that focus on other types of stocks, or that have a broader investment style.

PERFORMANCE

ANNUAL TOTAL RETURNS:

BAR CHART PLOT POINTS:

9.6% -0.9% 29.4% 26.1% 34.5% 30.0%
1993 1994 1995 1996 1997 1998

Best qtr.: 20.5% 4th qtr. of 1998 Worst qtr.: -9.5% 3d qtr. of 1998

AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/98:

Since
1 Year 5 Years Inception*

The Fund 29.96% 23.10% 19.32%
The S&P 500 Index 28.58% 24.03% 19.88%

*The Fund commenced operations on April 15, 1992.

FEES AND EXPENSES

THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.

Shareholder Fees1 (paid directly from your
investment) None

Annual Fund Operating Expenses (deducted from
Fund assets)

Management Fees 0.60%
Other Expenses 0.07%
-----
Total Annual Fund Operating Expenses 0.67%
=====

4
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EXAMPLE

This example shows what you could pay in expenses over time. You can also use
this example to compare the cost of this Fund with other mutual funds.

1 Year 3 years 5 years 10 Years
------ ------- ------- --------

$68 $214 $373 $835

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GOVERNMENT BOND FUND

OBJECTIVE

The investment objective of the Fund is to provide as high a level of income as
is consistent with the preservation of capital. The Fund's investment objective
can be changed by the Fund's Trustees without shareholder approval.

PRINCIPAL STRATEGIES

To achieve its goal, the Fund seeks an attractive risk-adjusted total return,
with an emphasis on current income. It seeks to achieve its goal by investing at
least 65% of its total assets in U.S. Government and agency bonds, bills, and
notes. The Fund may also invest in mortgage-backed securities issued by U.S.
Government agencies. The Fund's dollar-weighted average portfolio maturity
generally will be three to seven years.

To select investments that fit the Fund's objectives, the portfolio manager uses
interest rate expectations, yield-curve analysis, economic forecasting, market
sector analysis, and other techniques. The goal is to find obligations that
present good value and pay attractive interest rates.

The Fund may also look for U.S. Government and agency securities that it
believes are undervalued, with the goal of buying them at attractive prices and
watching them increase in value. A security may be sold to take advantage of
more favorable opportunities.

The Fund's portfolio manager will consider the duration of particular debt
securities and the Fund's overall portfolio when managing the Fund. Duration is
a calculation that seeks to measure the price sensitivity of a debt security or
a mutual fund that primarily invests in debt securities to changes in interest
rates. The Fund will have a duration of three to six years.

PRINCIPAL RISKS

Because the value of your investment will fluctuate, there is the risk that you
will lose money. Your investment will decline in value if the value of the
Fund's investments decreases.

INTEREST RATE RISK. Interest rate risk is the risk that increases in market
interest rates may decrease the value of debt securities held by the Fund. In
general, the prices of debt securities fall when interest rates increase and
rise when interest rates decrease. Typically, the longer the maturity of a debt
security, the more sensitive it is to price shifts as a result of interest rate
changes. An investment in the Fund will decline in value if the value of the
Fund's investments decreases.

CREDIT RISK. Credit risk is the risk that the issuer of the debt security will
be unable to make the required payments of interest and/or repay the principal
when due. In addition, there is a risk that the rating of a debt security may be
lowered if the issuer's financial condition changes. This could lead to a
greater fluctuation in the value of the Fund.

PREPAYMENT RISK. The issuers of mortgage-backed securities held by the Fund may
be able to repay principal in advance, and are especially likely to do so when
interest rates fall. Changes in pre-payment rates can make the price and yield
of mortgage-backed securities volatile. When mortgage and other obligations are
pre-paid, the Fund may have to reinvest in securities with a lower yield. The
Fund also may fail to recover premiums paid for the securities, resulting in an
unexpected capital loss.

The Fund is also subject to inflation risk and to liquidity risk, which is the
risk that a bond cannot be sold, or cannot be sold quickly at an acceptable
price.

PERFORMANCE

ANNUAL TOTAL RETURNS:

BAR CHART PLOT POINTS:

14.0% 9.5% 16.7% 7.9% 9.5% -3.2% 18.7% 3.5% 9.7% 8.9%
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998

Best qtr.: 7.8% 2nd qtr. of 1989 Worst qtr.: -2.8% 1st qtr. of 1994

AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/98:

1 Year 5 Years 10 Years
------ ------- --------

The Fund 8.91% 7.27% 9.35%
The Merrill Lynch 9.85% 7.21% 9.16%
Government Master Index

The Merrill Lynch Government Master Index gives a broad look at how the bond
prices of U.S. government bonds have performed. These returns do not include the
effect of any sales charges or expenses. If sales charges and expenses were
deducted, the actual returns of this index would be lower.

6
<PAGE> 10

FEES AND EXPENSES

THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.

Shareholder Fees1 (paid directly from your
investment) None

Annual Fund Operating Expenses (deducted from
Fund assets)

Management Fees 0.50%
Other Expenses 0.07%
-----
Total Annual Fund Operating Expenses 0.57%
=====

EXAMPLE

This example shows what you could pay in expenses over time. You can also use
this example to compare the cost of this Fund with other mutual funds.

1 Year 3 years 5 years 10 Years
------ ------- ------- --------

$58 $183 $318 $714

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MONEY MARKET FUND

OBJECTIVE

The Fund seeks as high a level of current income as is consistent with the
preservation of capital and maintenance of liquidity. The Fund's investment
objective can be changed by the Fund's Trustees without shareholder approval.

PRINCIPAL STRATEGIES

The Fund seeks to achieve its investment objective by investing in high-quality
money market obligations maturing in 397 days or less, including corporate
obligations, U.S. Government and agency bonds, bills and notes, the obligations
of foreign governments, and the obligations of U.S. banks and U.S. branches of
foreign banks, if denominated in U.S. dollars. The Fund may also invest in
floating and adjustable rate obligations and asset-backed commercial paper. The
Fund's dollar-weighted average maturity will be 90 days or less.

The Fund invests in securities which the portfolio manager believes to have the
best return potential. Because the Fund invests in short-term securities, it
will generally sell securities only to meet liquidity needs, to maintain target
allocations and to take advantage of more favorable opportunities.

PRINCIPAL RISKS

CREDIT RISK. Credit risk is the risk that the issuer of a debt security will be
unable to make the required payments of interest and/or repay the principal when
due. This risk is significantly reduced due to the short-term nature of the debt
securities held by the Fund. In addition, there is a risk that the rating of a
debt security may be lowered if an issuer's financial condition changes. This
could lead to a greater fluctuation in the value of the Fund.

MONEY MARKET FUND RISK. Although the Fund's objective is to preserve capital,
there can be no guarantee that the Fund will be able to maintain a stable net
asset value of $1.00 per share; therefore you could lose money. Investments in
the Fund are not bank deposits and are not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency.

PERFORMANCE

ANNUAL TOTAL RETURNS:

BAR CHART PLOT POINTS:

9.1% 8.0% 5.8% 3.4% 2.8% 3.9% 5.7% 5.1% 5.3% 5.3%
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998

Best qtr.: 2.3% 1st qtr. of 1989 Worst qtr.: 0.7% 2d qtr 1993

AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/98:

1 Year 5 Years 10 Years
------ ------- --------

The Fund 5.27% 5.04% 5.42%
The Consumer Price 1.55% 2.39% 3.16%
Index

The Consumer Price Index is an index of prices that measures the change in the
cost of basic goods and services over time. The Consumer Price Index is
frequently used to measure inflation in the United States.

FEES AND EXPENSES

THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.

Shareholder Fees1 (paid directly from your
investment) None

Annual Fund Operating Expenses (deducted from
Fund assets)

Management Fees 0.40%
Other Expenses 0.06%
-----
Total Annual Fund Operating Expenses 0.46%
=====

8
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EXAMPLE

This example shows what you could pay in expenses over time. You can also use
this example to compare the cost of this Fund with other mutual funds.

1 Year 3 years 5 years 10 Years
------ ------- ------- --------

$47 $148 $258 $579

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MORE ABOUT THE FUNDS

The Funds may use the following principal investment techniques to increase
returns, protect assets or diversify investments. These techniques are subject
to certain risks. For additional information about the Fund's investment
strategies and techniques, see the Statement of Additional Information.

TEMPORARY DEFENSIVE POSITIONS

In response to economic, political or unusual market conditions, each Fund may
invest up to 100% of its assets in cash or money market obligations. Should this
occur, a Fund may not meet its investment objectives and may miss potential
market upswings.

MORE ABOUT THE STOCK FUNDS

PRINCIPAL RISKS

Generally, the Stock Funds can decrease in value when individual stocks and
other assets they own decrease in value. A company's stock can lose value for
various reasons, including poor profits, weakened finances, changes in
management, a downturn in the economy, or any other reason that leads investors
to lose faith in that stock.

STOCK MARKET RISK. The Stock Funds can also lose value if the individual stocks
in which the Funds invest or the overall stock market go down. The stock market
is affected by numerous factors, including interest rates, the outlook for
corporate profits, the health of the national and world economies, national and
world social and political events, and the fluctuations of other stock markets
around the world. There is also the risk that large capitalization companies
could fall out of favor and that investors may look to other types of
investments.

There is also risk when investing in medium-size or smaller companies. The stock
prices of these companies may be more volatile than the stock prices of larger
companies for a variety of reasons, including less domination in their markets,
fewer financial resources, and less experienced management. In other words, they
tend to be less "seasoned" than larger companies. The stock of small and
medium-size companies is usually less stable and less liquid than the stock of
larger companies.

PRINCIPAL INVESTMENT TECHNIQUES

The Stock Funds may invest in the following securities.

CONVERTIBLE SECURITIES. In addition to investing in common stocks, each of the
Stock Funds may invest in convertible securities--also known as
convertibles--including bonds, debentures, notes, preferred stocks, and other
securities. Convertibles are a hybrid bond/stock security. Like bonds, they pay
interest. Because they can be converted into common stock within a set period of
time, at a specified price or formula, convertibles also offer the chance for
capital appreciation, like common stocks.

Convertibles tend to be more stable in price than the underlying common stock,
although price changes in the underlying common stock can affect the
convertible's market value. For example, as the underlying common stock loses
value, convertibles present less opportunity for capital appreciation, and may
also lose value. Convertibles, however, may sustain their value better than the
common stock because they pay bond-like income, which tends to be higher than
common stock dividend yields.

Because of this fixed-income feature, convertibles may compete with bonds as a
good source of dependable income. Therefore, if interest rates increase and
"newer," higher-paying bonds become more attractive, the value of convertibles
may decrease. Conversely, if interest rates decline, convertibles could increase
in value.

Convertibles tend to be more secure than common stock (companies must pay
holders of convertibles before they pay holders of common stock), but they are
generally less secure than similar non-convertible securities such as bonds
(bondholders must be generally paid before holders of convertibles and common
stock). Because convertibles are generally subordinate to bonds in terms of
payment priority, convertibles typically are rated below investment grade by a
nationally recognized statistical rating organization, or they are not rated at
all.

MORE ABOUT THE GOVERNMENT BOND FUND

PRINCIPAL INVESTMENT TECHNIQUES

The Government Bond Fund may invest in the following securities.

U.S. GOVERNMENT SECURITIES. These securities include U.S. Treasury bills, U.S.
Treasury notes, bonds issued or guaranteed by the U.S. Government, and
securities issued by U.S. Government agencies. These agencies and securities
include:

o The Federal Home Loan Banks

o The Federal National Mortgage Association ("FNMA")

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<PAGE> 14

o The Student Loan Marketing Association and Federal Home Loan Mortgage
Corporation ("FHLMC")

o The Federal Farm Credit Banks

Although there is virtually no credit risk with U.S. Government securities,
neither the U.S. Government nor its agencies guarantee the market value of their
securities. Interest rate changes, prepayment rates and other factors may affect
the value of these securities.

MORTGAGE-BACKED SECURITIES. Mortgage-backed securities are bonds that are
secured by and paid from a pool of mortgage loans on real property and issued or
guaranteed by the U.S. Government or one of its agencies.

Collateralized Mortgage Obligations (CMOs) are securities that have mortgage
loans or mortgage pass-through securities, such as GNMA, FNMA or FHLMC
certificates as their collateral. CMOs purchased by the Government Bond Fund are
issued by the U.S. Government or its agencies.

These securities may be subject to interest rate risk. CMOs or other
mortgage-backed securities are also subject to prepayment risk. With respect to
prepayment risk, when interest rates fall, homeowners may refinance their loans,
and mortgage-backed securities secured by such loans will be paid off sooner
than the portfolio manager anticipated. Reinvesting the returned principal in a
lower interest rate market reduces the Government Bond Fund's income.
Mortgage-backed securities are also subject to extension risk and the
possibility of losing principal as a result of prepayments.

FLOATING AND VARIABLE RATE SECURITIES. Floating- and variable-rate securities
are securities that do not have fixed interest rates; the rates change
periodically. The interest rate on floating-rate securities varies with changes
in the underlying index (such as the Treasury bill rate), while the interest
rate on variable-rate securities changes at preset times based upon an
underlying index. Some of the floating- or variable-rate securities will be
callable by the issuer, which means they can be paid off before their maturity
date.

These securities are subject to interest rate risk like other securities. In
addition, because they may be callable, these securities are also subject to the
risk that the Government Bond Fund will be repaid prior to the stated maturity
and that the principal will be reinvested in a lower interest rate market that
reduces the Government Bond Fund's income. The Government Bond Fund will only
purchase floating-and variable-rate securities of the same quality as the bonds
it would otherwise purchase.

MATURITY AND DURATION. Every security has a stated maturity date when the issuer
must repay the security's entire principal value to the investor. However, many
securities are "callable," meaning their principal can be repaid earlier, on or
after specified call dates. Securities are most likely to be called when
interest rates are falling because the issuer can refinance at a lower rate,
just as a homeowner refinances a mortgage. In that environment, a bond's
"effective maturity" is usually its nearest call date. For example, the rate at
which homeowners pay down their mortgage principal determines the effective
maturity of mortgage-backed securities.

A bond mutual fund has no real maturity, but it does have a weighted average
maturity. This number is an average of the stated or effective maturities of the
underlying bonds, with each bond's maturity "weighted" by the percentage of fund
assets it represents. Funds that target maturities normally use the effective
rather than stated maturities of the bonds in the portfolio when computing the
average. This provides additional flexibility in portfolio management but, all
else being equal, could result in higher volatility than a fund targeting a
stated maturity or maturity range.

Duration is a calculation that seeks to measure the price sensitivity of a debt
security or a mutual fund that primarily invests in debt securities to changes
in interest rates. It measures this sensitivity more accurately than maturity
because it takes into account the time value of cash flows generated over the
life of the debt security. Future interest and principal payments are discounted
to reflect their present value and then are multiplied by the number of years
they will be received to produce a value expressed in years - the duration.
Effective duration takes into account call features and sinking fund payments
that may shorten a debt security's life.

PRINCIPAL RISKS

INTEREST RATE RISK. The Government Bond Fund is subject to interest rate risk,
which is the risk that increases in market interest rates may decrease the value
of debt securities it holds. Usually the prices of debt securities fall when
interest rates increase, and rise when interest rates decrease. Typically, the
longer the maturity of a debt security, the more sensitive it is to price shifts
as a result of interest rate changes. Likewise, the longer the Government Bond
Fund holds a debt security, the greater the chance that interest rate changes
will affect the debt security's value.

INFLATION RISK. There is also inflation risk, which affects the value of
fixed-rate investments such as debt securities. If the Government Bond Fund buys
debt securities when inflation and interest rates are low, the value of these
debt securities could fall as inflation rises. This could happen as investors
find debt securities with lower interest rates less attractive than debt
securities that pay higher interest rates. The Government Bond Fund is also
subject to liquidity risk, which is the risk that a debt security cannot be
sold, or cannot be sold quickly at an acceptable price.

PREPAYMENT RISK AND EXTENSION RISK. Prepayments of principal on mortgage-backed
securities affect the average

11
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life of a pool of these securities. Mortgage
prepayments are affected by the level of interest rates and other factors. In
periods of rising interest rates, the prepayment rate tends to decrease,
lengthening the average life of a pool of mortgage-backed securities. In periods
of falling interest rates, the prepayment rate tends to increase, shortening the
average life of a pool of mortgage-related securities. Prepayment risk is the
risk that, because prepayments generally occur when interest rates are falling,
the Fund may have to reinvest the proceeds from prepayments at lower rates.
Extension risk is the risk that anticipated payments on principal may not occur,
typically because of a rise in interest rates, and the expected maturity of the
security will increase. During periods of rapidly rising interest rates, the
anticipated maturity of a security may be extended past what the portfolio
manager anticipated, affecting the maturity and volatility of the Fund.

MORE ABOUT THE MONEY MARKET FUND

PRINCIPAL INVESTMENT TECHNIQUES

The Money Market Fund may invest in the following securities.

o U.S. Government securities with remaining maturities of 397 days or less

o commercial paper rated in one of the two highest categories of any
nationally recognized statistical rating organization ("NRSRO")

o asset-backed commercial paper whose own rating or the rating of any
guarantor is in one of the two highest categories of any NSRSO

o short-term bank obligations rated in one of the two highest categories by
any NRSRO (with respect to obligations maturing in one year or less)

o repurchase agreements relating to debt obligations that the Fund could
purchase directly

o unrated debt obligations with remaining maturities of 397 days or less that
are determined by Nationwide Advisory Services, Inc. to be of comparable
quality to the securities described above.

Generally, money market obligations will not increase in value, but they are
high quality investments that offer a fixed rate of return, as well as
liquidity.

These securities are subject to interest rate risk like other securities. In
addition, because they may be callable, these securities are also subject to the
risk that the Money Market Fund will be repaid prior to the stated maturity and
that the principal will be reinvested in a lower interest rate market that
reduces the Money Market Fund's income. The Money Market Fund will only purchase
floating-and variable-rate securities of the same quality as the debt securities
it would otherwise purchase.

REPURCHASE AGREEMENTS. When entering into a repurchase agreement, the Fund
essentially is making a short-term loan to a qualified bank or broker-dealer.
The Fund buys securities that the seller has agreed to buy back at a specific
time and at a set price that includes interest. There is a risk that the seller
will be unable to buy back the securities at the time required and the Fund
could experience delays in recovering the amounts owed to it.

The Fund may invest in asset-backed commercial paper that is secured by and paid
from a pool of assets such as installment loan contracts, leases of various
types of property and receivables from credit cards. Asset-backed commercial
paper is issued and supported by private issuers. This type of commercial paper
is also subject to interest rate risk and credit risk.

MANAGEMENT

MANAGEMENT DISCUSSION

The following is the management discussion and analysis for each Fund. The
management discussion and analysis provides an overview of the economy, its
impact on each Fund for the year ended December 31, 1998 and a look into future
prospects from the perspective of each portfolio manager. Within this section,
"We," "Us" and "Our" refer to Nationwide Advisory Services, Inc. and "I" refers
to the portfolio manager of the Fund.

TOTAL RETURN FUND

The sources of strength and weakness among the Fund's holdings did not change
much from mid-year to year- end. The drug and healthcare stocks turned in strong
performance virtually across the board, and certainly aided overall results.
This is a sector we like long term, and we made significant additions to the
Fund holdings during the second half of the year. As a result of these
additions, plus the strong appreciation, the percentage of assets invested in
drug stocks went from 8.7% at the beginning of the year, to 15.7% at year-end.
Individual stocks that did particularly well included Comcast and IBM. Sectors
that hurt results included property casualty insurers, where we have significant
positions in Allstate and Chubb, and with the exception of Exxon and Mobil, the
oil industry also performed poorly. While we continue to believe both Allstate
and Chubb are strong companies with solid long-term outlooks, the oil sector is
one where we have significantly cut back on the Fund's holdings. The long-term
outlook has deteriorated significantly due to reduction in demand growth from
developing countries, and that outlook does not justify the amounts of assets
the Fund had invested in the stocks. From 15.4% of assets at the

12
<PAGE> 16

beginning of
the year, the weighting dropped to less than 7% at year-end.

CAPITAL APPRECIATION FUND

The total return for the Fund for the year ended December 31, 1998, was 29.96%
(without sales charge), assuming all distributions were reinvested compared to
28.58% for the S&P 500 Index.

Fund continues to benefit from the outstanding performance of pharmaceutical
stocks. Warner-Lambert and Schering-Plough, two of the three largest holdings,
both gained over 75% during the year. Both companies continue to achieve
impressive and consistent growth from their drug portfolios. We feel confident
that this growth will remain strong in the future.

IBM, the Fund's largest holding, has been a strong performer. The stock returned
77% for the year. The company's services business has grown rapidly for some
time. Recently its hardware sales accelerated as well.

The market decline during the fall offered an opportunity to add quality names
in the financial sector to the portfolio. MBNA has consistently maintained
credit quality far superior to its competitors in the credit card industry. It
has continued to demonstrate a high rate of consistent earnings growth. The Fund
added shares at attractive valuations during the market decline. Associates
First Capital and Merrill Lynch are additional quality financial names added to
the Fund this year.

Another financial name added to the portfolio is SunAmerica. American
International Group (AIG) announced their acquisition of SunAmerica during
August. AIG is a very high quality multi-line insurer with attractive growth
opportunities both domestically and internationally. Purchasing shares of
SunAmerica had the effect of buying AIG at a discount to its market price.

GOVERNMENT BOND FUND

The total return for the one year period ended December 31, 1998 was 8.91% for
the Fund versus the average return of 8.14% for the peer group. The Fund is the
number one performing fund over three, ten, and fifteen year periods according
to Lipper Analytical Services, Inc.

Continued low inflation, a surprisingly large U.S. budget surplus, and turmoil
in world financial markets created a good backdrop for Treasury securities with
30 year Treasury yields falling to 5.09% from 5.92%. Intermediate Treasuries
performed even better with 2 year Treasury yields falling to 4.53% from 5.64%,
while 10 year Treasuries fell to 4.65% from 5.74%. Though Treasury securities
performed well, spread sectors in the government market lagged. Spread
instruments provide additional return over Treasury securities and include
Agency obligations and Collateralized Mortagage Obligations (CMOs).

During the year, Agency paper was purchased at levels not seen since the early
1980s. Positions in CMOs were reduced early in the year as the risk/reward
profile became unfavorable. As rates continued to fall, prepayment fears among
participants caused spreads to widen to attractive levels and some positions in
CMOs were added. Finally, positions in long Treasury bonds and zero coupon
securities were added to enhance returns in the falling interest rate
environment.

The coming year promises to be interesting. The portfolio will need to be
balanced to weather the domestic forces of growth, inflation (or deflation) and
will, of course, be impacted by equity market volatility. Further collapses in
developing countries can not be ruled out and could spark another flight to
quality and drive yields to new lows. These risks highlight the importance of
diversification for individual investors.

Current holdings include 65% in Treasury and Agency obligations, 31% in CMOs and
the remainder in repurchase agreements.

MONEY MARKET FUND

At December 31, 1998, the Fund had net assets of $1.3 billion with an average
maturity of 33 days. The average maturity is generally kept between 25-45 days.
The largest outstandings were again in those sectors which offered higher
spreads compared to other segments and included Broker/Dealers at 14% of the
portfolio, followed by Consumer/Sales Finance at 13%. Industry concentration is
kept at 25% or below. Tier 1 commercial paper accounted for 91% of the portfolio
followed by U.S. Government and Agency Securities at 8% and Canadian Government
Obligations at 1%. Outstandings are generally kept below 4% per issuer. At
December 31, 1998, the largest outstanding for any one issuer was 3.2%.

Financial markets were extremely volatile during the year due to the financial
crisis in Asia, the Japanese recession, and the Long Term Capital Management
bailout. Over a period of seven weeks the Federal Reserve cut interest rates
three times by lowering the Fed Funds rate and the Discount rate to 4.75% and
4.50%, respectively. By acting as quickly as they did, the Federal Reserve
signaled that their goal is to provide liquidity during times of market turmoil.
Economic indicators suggest that the U.S. economy continues to expand with low
inflationary pressures.

The Fund's yield remained competitive when compared to the Consumer Price Index
(CPI). At December 31, 1998, the CPI was 1.55% compared to the twelve month
return of 5.27% for the Fund. The Fund continues to invest in only first tier
money market instruments. An internal

13
<PAGE> 17

credit review is completed on every issuer
prior to investment.

MANAGEMENT

Investment Manager

Nationwide Advisory Services, Inc. ("NAS"), Three Nationwide Plaza, Columbus,
Ohio 43215, manages the investment of the assets and supervises the daily
business affairs of Nationwide Separate Account Trust (the "Trust"). NAS and its
predecessors have managed investments since 1965. As of December 31, 1998, NAS
had approximately $11.3 billion in assets under management.

Each Fund pays NAS a management fee, which is based on the Funds' average daily
net assets. The amount of this fee was as follows for the fiscal year ended
December 31, 1998.

FUND FEE

Total Return Fund 0.59%
Capital Appreciation Fund 0.60%
Government Bond Fund 0.50%
Money Market Fund 0.40%

TOTAL RETURN FUND

Portfolio Manager: John M. Schaffner is the portfolio manager for the Total
Return Fund. He has managed the Total Return Fund since 1982. He also manages
the Nationwide Growth Fund.

CAPITAL APPRECIATION FUND

Portfolio Manager: Charles Bath is the portfolio manager of the Capital
Appreciation Fund. Mr. Bath has managed the Capital Appreciation Fund since
1992. He has also managed the Nationwide Fund since 1985.

GOVERNMENT BOND FUND

Portfolio Manager: Gary Hunt is the portfolio manager for the Government Bond
Fund. Mr. Hunt joined Nationwide in 1992 as a securities analyst. Mr. Hunt has
been co-manager of the Government Bond Fund since May 1, 1997. Starting May
1999, Mr. Hunt will take over sole responsibility for the Fund. He is also
manager of the Nationwide Long-Term U.S. Government Bond Fund and Nationwide
Intermediate U.S. Government Bond Fund.

MONEY MARKET FUND

Portfolio Manager: Karen G. Mader is the portfolio manager of the Money Market
Fund. She has managed the Money Market Fund since 1987.

PERFORMANCE ADVERTISING FOR THE FUNDS

A Fund may use past performance in advertisements, sales literature, and this
Prospectus, including calculations of average annual total return for the most
recent one, five, and ten year periods (or the life of the Fund, if less).
Average annual total return represents the rate required each year for an
initial investment to equal the sale value at the end of a specific period.
Average annual total return reflects reinvestment of all distributions.

A Fund may also advertise its SEC yield. The SEC yield is based on a 30-day
period. This yield takes into account the yield to maturity on all debt
instruments and all dividends accrued on equity securities since equity
securities do not have maturity dates. The SEC yield is computed by dividing the
net investment income per share earned during the 30-day period by the maximum
offering price per share on the last day of the period.

BUYING AND SELLING FUND SHARES

Who Can Buy Shares of The Funds

An insurance company may purchase shares of a Fund at the Fund's net asset value
using purchase payments received on variable life insurance policies or variable
annuity contracts issued by life insurance company separate accounts. Fund of
Funds may also purchase shares of a Fund for their portfolios. There is no sales
charge.

Shares of a Fund are currently sold only to separate accounts of Nationwide Life
Insurance Company and its wholly owned subsidiary, Nationwide Life and Annuity
Insurance Company, to fund benefits payable under the variable life insurance
policies and variable annuity contracts. Shares of a Fund are also sold to
affiliated Fund of Funds, and may be sold to other insurance companies in the
future. The insurance companies purchase shares of a Fund in accordance with
variable account allocation instructions received from owners of the variable
annuity contracts or variable life insurance policies. The Fund then uses the
proceeds to buy securities for its portfolio. Each Fund of Funds and insurance
separate accounts, as a shareholder, has an ownership in the Fund's investments.
The Funds also offer to buy back (redeem) their shares at any time at net asset
value. The address for each of these entities is One Nationwide Plaza, Columbus,
Ohio 43215.

Since the variable annuity contracts or variable life insurance policies may
have different provisions with respect to the timing and method of purchases,
exchanges and redemptions, contract or policy owners should contact their
insurance company directly for details concerning transactions.

14
<PAGE> 18

PURCHASE PRICE

The purchase or "offering" price of each share of the Funds is its "net asset
value" or NAV. No sales charge is imposed on the purchase of the Funds' shares.
Generally, NAV is determined by dividing the total market value of the
securities owned by a Fund, less its liabilities, by the total number of its
outstanding shares. NAV is determined at the close of regular trading on the New
York Stock Exchange on each day the Exchange is open for trading (usually 4 p.m.
Eastern Time). When you purchase shares, your purchase price will be the
offering price or NAV next determined after your order is received.

The Adviser does not determine NAV on the following days:

o Christmas Day
o New Year's Day
o Martin Luther King Jr. Day
o Presidents Day
o Good Friday
o Memorial Day
o Independence Day
o Labor Day
o Thanksgiving Day
o other days when the New York Stock Exchange is not open

The Adviser reserves the right not to determine NAV when:

o the Fund has not received any orders to purchase, sell, or exchange shares o
changes in the value of the Fund's portfolios do not affect the NAV

If current prices are not available or if NAS determines a price for a security
does not represent fair value, those investments of the Fund may be valued at
fair market value in accordance with procedures adopted by the Board of
Trustees. For shares purchased by life insurance company separate accounts as
investment options for variable annuity contracts or variable life insurance
policies sales charges may be imposed by the contract or policy.

When you purchase shares, your purchase price will be the offering price or NAV
next determined after your order is received. Money Market Fund securities are
valued at amortized cost, which approximates market value in accordance with
Rule 2a-7 of the Investment Company Act of 1940.

SELLING SHARES

You can sell--also known as redeeming--your shares of the Funds at any time,
subject to certain restrictions. The price you will receive when you sell your
shares will be the NAV next determined after NAS receives the properly completed
order to sell in its offices in Columbus, Ohio. Of course, the value of the
shares sold depends upon the market value of the investments of the Fund at the
time of sale, and the value may be more or less than you paid for the shares.

RESTRICTIONS ON SALES

You may not be able to sell your shares of the Funds or we may delay paying you
the proceeds from a sale when the New York Stock Exchange is closed (other than
customary weekend and holiday closings) or if trading is restricted or if an
emergency exists.

YEAR 2000

NAS has developed a plan to address the Year 2000 issue. The issue arises
because many existing computer programs use only two digits to identify a year
(for example, the year 1998 would be represented by the digits "98"). In such
programs, the year 2000 will be represented by "00", which a computer could
interpret as the year 1900. If not corrected, many computer applications could
fail or create erroneous results. Since 1996, NAS has been evaluating its
exposure to this issue by reviewing its operating systems and outside service
provider systems we depend on. We expect all system changes and replacements
needed to achieve Year 2000 compliance to be completed by the end of the second
quarter of 1999. Compliance testing will also be completed in the second quarter
of 1999. Outside service providers and business partners will be required to
certify compliance by the end of the second quarter 1999.

DIVIDENDS AND DISTRIBUTIONS

Substantially all of a Fund's net investment income, if any, will be paid as a
dividend each quarter in the form of additional shares of the Fund. Any net
capital gains realized by a Fund from the sale of its portfolio securities will
be declared and paid to shareholders in December of each year.

TAX STATUS

Each Fund's policy is to qualify as a regulated investment company and to meet
the requirements of Subchapter M of the Internal Revenue Code (the "Code"). The
Funds intend to distribute all, or substantially all, of their taxable net
income and capital gains to shareholders each year. As a result, the Funds will
not be required to pay any federal income taxes. Because the Funds are treated
as separate entities for purposes of the regulated investment company provisions
of the Code, the assets, income, and distributions of the Funds are considered
separately from those of other Funds for purposes of determining whether or not
a Fund qualifies as a regulated investment company.

15
<PAGE> 19
In order for investors to receive the favorable tax treatment available to
holders of variable annuity contracts and variable life insurance policies, the
separate accounts underlying these contracts or policies, as well as the Funds
in which these separate accounts invest, must meet certain diversification
requirements. Each Fund also intends to comply with these requirements. If a
Fund does not meet these requirements, income allocable to the variable annuity
contracts and variable life insurance policies would be taxable currently to the
holders of these contracts or policies.

The tax treatment of payments made under a variable annuity contract or variable
life insurance policy is described in the prospectus for the contract or policy.
Generally, the owners of variable annuity contracts and variable life insurance
policies are not taxed currently on income or gains realized under contracts
until the income or gain is distributed. However, income distributions from
these contracts and policies will be taxable at ordinary income tax rates. In
addition, distributions made to an owner who is younger than 59 1/2 may be
subject to a 10% penalty tax. Investors should ask their own tax advisors for
more information on their own tax situation, including possible state or local
taxes.

Please refer to the Statement of Additional Information for more information
regarding the tax treatment of the Funds. Please refer to the prospectus of the
variable annuity contract or variable life insurance policy for a discussion of
the tax consequences of these products.

16
<PAGE> 20

INFORMATION FROM NATIONWIDE

Please read this Prospectus before you invest, and keep it with your records.
The following documents--which you can get free of charge--contain additional
information about the Fund(s):

o Statement of Additional Information (SAI) (incorporated by reference
in this Prospectus)

o Annual Report

o Semi-Annual Report

FOR ADDITIONAL INFORMATION CONTACT:

Nationwide Life Insurance Company
One Nationwide Plaza
Columbus, Ohio 43215

FOR INFORMATION AND ASSISTANCE:

1-800-848-6331 (toll free, 8 a.m. - 5 p.m. Eastern Time)

INFORMATION FROM THE SECURITIES AND EXCHANGE COMMISSION

You can obtain copies of Fund documents from the SEC as follows:

IN PERSON:

Public Reference Room in Washington, D.C. (for their hours of operation, call
1-800-SEC-0330)

BY MAIL:

Securities and Exchange Commission
Public Reference Section
Washington, D.C. 20549-6009

(The SEC charges a fee to copy any documents)

VIA THE INTERNET:

http://www.sec.gov

THE TRUST'S INVESTMENT COMPANY ACT FILE NO.: 811-3213

<PAGE> 21

Nationwide Small Company Fund

May 1, 1999

As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved this fund's shares as an investment or determined
whether this prospectus is complete or accurate. To state otherwise is a crime.

1
<PAGE> 22

Nationwide Small Company Fund

This prospectus provides information about the Nationwide Small Company Fund
offered by Nationwide Separate Account Trust. "You" and "Your" refer to
potential investors and current investors. "We," "Us" and "Our" refer to
Nationwide Advisory Services, Inc.

Objective

The Fund seeks long-term growth of capital. The Fund's investment objective can
be changed by the Fund's Trustees without shareholder approval.

Principal Strategies

The Fund invests primarily in equity securities of small capitalization
companies. Under normal market conditions, the Fund will invest at least 65% of
its total assets in equity securities of companies whose equity market
capitalizations at the time of investment are similar to the market
capitalizations of companies in the Russell 2000(R) Small Stock Index(1) (the
"Russell 2000"). These companies are known as small cap companies. The Russell
2000(R), published by The Frank Russell Company, is an index consisting of
approximately 2000 companies with small market capitalizations relative to the
market capitalizations of other U.S. companies. Market capitalization is a
common way to measure the size of a company based on the price of its common
stock; it is simply the number of outstanding shares of the company multiplied
by the current stock price. Currently, the market capitalizations for companies
in the Russell 2000(R) range from approximately $222 million to $1.4 billion.

The balance of the Fund's assets may be invested in equity securities of
companies whose market capitalizations exceed that of small companies. The Fund
may also invest in foreign securities.

Each subadviser will adhere to its own buy and sell strategy and portfolio
turnover rate will not be considered a limiting factor for the Fund, but may
result in higher transaction costs and increased volatility.

As part of its responsibilities to the Fund, Nationwide Advisory Services, Inc.
("NAS"), the Fund's investment adviser, initially selects the Fund's subadvisers
and monitors their performance on an ongoing basis. NAS has selected the
following subadvisers for the Fund: The Dreyfus Corporation, Lazard Asset
Management, Neuberger Berman, LLC, Strong Capital Management, Inc. and Warburg
Pincus Asset Management, Inc. Each subadviser manages a portion of the Fund's
investment portfolio. They have been chosen because they approach investing in
small cap securities in different ways, and NAS believes that diversification
among securities and styles will increase the potential for investment return
and potentially reduce risk and volatility. The following is a description of
the investment strategies used by each subadviser:

The Dreyfus Corporation uses a blended approach, investing in growth stocks,
value stocks or stocks that exhibit characteristics of both. Using fundamental
research and direct management contact, the subadviser seeks stocks with
superior prospects for accelerated earnings growth. They also seek special
situations, such as a corporate restructuring or management changes, that could
increase the stock price of a special situation company.

The subadviser uses a sector management approach, supervising a team of sector
managers who each make buy and sell decisions within their respective areas of
expertise. The sector weightings of this portion of the Fund typically
approximate those of the Russell 2000.

The subadviser typically sells a stock when the reasons for buying it no longer
apply, or when the company begins to show deteriorating fundamentals or poor
relative performance.

Lazard Asset Management invests primarily in equity securities of relatively
small non-U.S. companies that it believes are undervalued based on return on
total capital or equity. It will choose companies that are similar in size to
those in the Morgan Stanley Capital International Europe, Australia and Far East
Small Cap Index (the "MSCI EAFE Small Cap Index"). The MSCI EAFE Small Cap Index
is an unmanaged index of securities listed on foreign stock exchanges.

The subadviser generally invests its portion of the Fund's assets in equity
securities of companies located in at least three different foreign countries.
The allocation among geographic regions may shift from time to time based on the
subadviser's judgment. However, currently, the subadviser intends to invest
primarily in companies based in Continental Europe, the United Kingdom, the
Pacific Basin, Latin America and Canada. The subadviser chooses to buy small
non-U.S. companies that have one or more of the following characteristics:

o are undervalued relative to their earnings, cash flow or asset values;

o have an attractive price/value relationship with expectations that some
catalyst will cause the perception of value to change within two years;

o are out of favor due to circumstances which are unlikely to harm the
company's franchise or earnings power;

- ----------
(1) The Russell 2000(R) Small Stock Index is a registered service mark of the
Frank Russell Company which does not sponsor and is in no way affiliated with
the Fund.

2
<PAGE> 23

o have low projected price-to-earnnigs or price-to-cash flow multiples;

o have the potential to become a larger factor in the company's business;

o have significant debt but have high levels of free cash flow; and

o have a relatively short corporate history with the expectation that the
business may grow.

Lazard may sell a security for any of the following reasons:

o its price rises to a level where it no longer reflects value (target
valuation);

o the underlying investment assumptions are no longer valid;

o company management changes their direction;

o external events occur (e.g., changes in geo-political risk, regulations,
taxes, or competitive positions)

Neuberger Berman, LLC looks for undervalued small cap companies whose current
product lines and balance sheets are strong. Factors in identifying these
companies may include:

o above-average returns

o an established market niche

o circumstances that would make it difficult for new competitors to enter
the market

o the ability of the companies to finance their own growth

o sound future business prospects

This approach is designed to let the Fund benefit from potential increases in
stock prices while limiting the risks typically associated with small company
stocks.

At times , the subadviser may emphasize certain industries that it believes will
benefit from market or economic trends. At the time a stock is purchased,, the
subadviser will set a target price at which it will sell that security. The
managers, in fact, will begin to pare back the position when the stock is within
10% of the target price. If its analysis of a security turns out to be
incorrect, the subadviser will generally seek to liquidate the holding as soon
as possible, although it occasionally may delay selling a security in
anticipation of a better selling opportunity.

Strong Capital Management, Inc. invests in companies whose earnings it believes
to be in a relatively strong growth trend, and, to a lesser extent, in companies
in which further growth is not anticipated but which the subadviser feels are
undervalued. In seeking companies with favorable growth prospects, the
subadviser looks for factors such as:

o prospects for above-average sales and earnings growth

o high return on invested capital

o overall financial strength

o competitive advantages, including innovative products and services

o effective research, product development and marketing

o stable, capable management

The manager may choose to sell a stock if its growth prospects become less
attractive or its fundamental qualities decline.

Warburg Pincus Asset Management, Inc. seeks to identify companies with
attractive growth potential by looking for:

o companies still in the developmental stage

o older companies that appear to be entering a new stage of growth

o companies providing products or services with a high unit volume growth
rate

In selling portfolio securities, the subadviser may consider factors such as
whether a security meets the subadviser's target price, the growth prospects of
a security or sector and changes in a company's fundamentals.

The subadviser may also invest in emerging growth companies-small or medium
sized companies that have passed their start-up phase, show positive earnings,
and offer potential for accelerated earnings growth. Emerging growth companies
generally stand to benefit from new products or services, technological
developments, changes in management or other factors.

Principal Risks

Because the value of your investment in the Fund will fluctuate, there is the
risk that you will lose money.

Stock market risk. Stock market risk is the risk that the Fund could lose value
if the individual stocks in which the Fund has invested or the overall stock
market go down. Individual stocks are affected by factors such as corporate
earnings, production, management and sales. The stock market is affected by
numerous factors, including interest rates, the outlook for corporate profits,
the health of the national and world economies, national and world social and
political events, and the fluctuations of other stock markets around the world.
When the value of the Fund's securities goes down, your investment in the Fund
decreases in value. The Fund focuses on a more narrow scope of the overall stock
market by investing primarily in companies with smaller market capitalizations.
Therefore, the impact of these factors on small companies may affect the Fund
more than if the Fund invested more broadly in the overall stock market.

Mid/small cap risk. The investments in smaller, newer companies may be riskier
than investments in larger, more

3
<PAGE> 24

established companies. The stock of medium-size and small companies is usually
less stable and less liquid than the stock of larger companies.

Foreign risk. Investments in foreign securities involve risks in addition to
those of U.S. investments. These risks include political and economic risks,
currency fluctuations, higher transaction costs, and delayed settlement. In
addition, the "Euro" began serving as a new common currency for participating
European nations on January 1, 1999. It is unclear whether the newly created
accounting , clearing, settlement, and payment systems for the new currency will
be adequate.

Non-diversified risk. The Fund may invest a greater percentage of its assets in
a particular company compared with other funds. Accordingly the Fund's
securities may be more sensitive to changes in the market value of a single
company or industry.

Sector Risk. Companies with similar characteristics may be grouped together in
broad categories called sectors. Sector risk is the possibility that a certain
sector may perform differently than other sectors or the market as a whole. As
the adviser allocates more of a Fund's portfolio holdings to a particular
sector, the Fund's performance will be more susceptible to any economic,
business or other developments which generally affect that sector

Special Situation Companies Risk. Special situation companies are companies
which may be subject to actual or prospective acquisitions, consolidations,
mergers, reorganizations or other unusual developments that can affect a
company's market value. If the anticipated benefits do not materialize, the
value of the special situation company may decline.

Risks Related to Investing for Value or Growth. Different types of stocks tend
to shift into and out of favor with stock market investors depending on market
and economic conditions. To the extent the Fund focuses on value-style stocks or
growth-style stocks, the Fund's performance at times may be better or worse than
the performance of stock funds that focus on other types of stocks, or that have
a broader investment style.

Portfolio Turnover Risk. The Fund will attempt to buy securities with the intent
of holding them for investment bu the portfolio manager may buy and sell
securities if he or she believes it to be in best interest of the Fund. Although
the Fund will not consider portfolio turnover rate a limiting factor in making
investment decisions, a higher portfolio turnover rate may result in higher
transaction costs for the Fund and increase the volatility of the Fund.

For more detailed information about the Fund's investments and risks see "More
About the Fund."

Performance

Annual Total Returns:

Best qtr.: 18.0% 4th qtr. of 1998 Worst qtr.: -19.3% 3d qtr. of 1998

Average annual total returns as of 12/31/98:

<TABLE>
<CAPTION>
1 Year Since Inception*
------ ----------------
<S> <C> <C>
The Fund 1.01% 17.34%

The Russell
2000(R) Small
Stock Index -2.24% 12.75%
</TABLE>

* The Fund began operations on October 23, 1995.

The Russell 2000(R) Small Stock Index is an index consisting of approximately
2000 companies with small market capitalizations relative to the market
capitalizations of other U.S. companies. Unlike mutual funds, this index does
not incur expenses. If expenses were deducted, the actual returns of this index
would be lower.

Fees and expenses

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

<TABLE>
<S> <C>
Shareholder Fees(1) (paid directly
from your investment) None

Annual Fund Operating Expenses (deducted
from Fund assets)

Management Fees 1.00%
Other Expenses 0.07%
----
Total Annual Fund Operating Expenses 1.07%
====
</TABLE>

- --------
(1) Sales charges may be imposed by variable annuity contracts or variable life
insurance polices if the Fund's shares are purchased by a life insurance
separate account as an investment option for these contracts or policies.

4
<PAGE> 25

Example

This example shows what you could pay in expenses over time. You can also use
this example to compare the cost of this Fund with other mutual funds.

<TABLE>
<CAPTION>
1 Year 3 years 5 years 10 Years
------ ------- ------- --------
<S> <C> <C> <C>
$109 $340 $590 $1,306
</TABLE>

More About the Fund

Principal Risks and Techniques

The Fund may use the following principal investment techniques to increase
returns, protect assets or diversity investments, which are subject to certain
risks. Because the value of your investment in the Fund will fluctuate, there is
the risk that you will lose money. For additional information see the Statement
of Additional Information.

Mid/Small Cap Risk. Historically, small cap companies have been more volatile in
price than larger company securities, especially over the short term, Among the
reasons for the greater price volatility are the less certain growth prospects
of small companies, the lower degree of liquidity in the markets for such
securities, change in investor perception of value, and the greater sensitivity
of small cap companies to changing economic conditions. In addition, small cap
companies may lack depth of management, they may be unable to generate funds
necessary for growth or development, they may be developing or marketing new
products or services for which markets are not yet established and may never
become established, or their products or services may become quickly obsolete.
In particular, small cap companies in the technology and biotechnology
industries may be subject to abrupt or erratic price movements. Therefore, while
small cap companies may offer greater opportunities for capital growth than
larger, more established companies, they also involve greater risks and should
be considered speculative.

Foreign Risk

o Country. General securities market movements in any country where the Fund
has investments are likely to affect the value of the securities the Fund
owns that trade in that country. These movements will affect the Fund's
share price and the Fund's performance. The political, economic and social
structures of some countries the Fund invests in may be less stable and
more volatile than those in the U.S. The risks of investing in these
countries include the possibility of the imposition of exchange controls,
currency devaluations, foreign ownership limitations, exproporiation,
restrictions on removal of currency or other assets, nationalization of
assets, punitive taxes and certain custody and settlement risks.

o Company. Foreign companies are not subject to the same disclosure,
accounting, auditing and financial reporting standards and practices as
U.S. companies and their securities may not be as liquid as securities of
similar U.S. companies. Foreign stock exchanges, trading systems, brokers
and companies generally have less government supervision and regulation
that in the U.S. The Fund may have greater difficulty voting proxies,
exercising shareholders rights, pursuing legal remedies and obtaining
judgments with respect to foreign investments in foreign courts than with
respect to U.s. companies in U.S. courts.

o Currency. Many of the Fund's investments are denominated in foreign
currencies. Changes in foreign currency exchange rates will affect the
value of what the Fund owns and the Fund's share price. Generally, when
the U.S. dollar rises in value against a foreign currency, an investment
in that country loses value because that currency is worth fewer U.S.
dollars. Devaluation of currency by a country's government or banking
authority also has a significant impact on the value of any securities
denominated in that currency.

Risks related to Investing for Value and Growth. Due to their relatively low
valuations, value-style stocks are typically less volatile than growth-style
stocks. For instance, the price of a value-style stock may experience a smaller
increase on an analyst's upward earnings estimate revision, a positive
fundamental development, or other positive market development. Further,
value-style stocks tend to have higher dividend yields than growth-style stocks.
This means they depend less on price changes for returns. Accordingly, they
might not participate in upward market movements, but may be less adversely
affected in a down market compared to lower yielding stocks.

Other Investment Techniques

The Statement of Additional Information ("SAI") contains additional information
about the Fund, including the Fund's other investment techniques. To obtain a
copy of the SAI, see the back cover page.

5
<PAGE> 26

Temporary Defensive Positions

In response to economic, political or unusual market conditions, the Fund may
invest up to 100% of its assets in cash or money market obligations. Should this
occur, the Fund may not meet its investment objectives and may miss potential
market upswings.

Management

Management Discussion

The total return for the Fund was +1.01% for the 12 month period through
December 31, 1998. This compares to the Russell 2000 Index which was down
- -2.24%, for the same period. The small-cap stock sector for both our domestic
and foreign holdings performed very strong in the first and fourth quarters,
while the second quarter was down and third quarter was down substantially. The
fund outperformed its benchmark in all four quarters of 1998. The strongest
market sectors were Technology, Health Care, and Services. Laggards are Energy,
which continues to face a weak pricing structure, and Utilities.

At year end, the Fund held a very diversified portfolio of 450 issues. It had
14.2% of net assets in foreign stocks, as compared to 18.7% 12 months prior.
Overall, the Fund's largest sectors were: Health Care (7.2%), Computer Software
(6.8%), Computer Service (5.1%), Commercial Services (4.5%), and Banks/Savings &
Loans (3.9%).

We maintain a positive outlook for 1999. We should continue to see an economy
characterized by stable but moderate growth and very low inflation. Prospects
look good for our small-cap holdings in technology, health care, and consumer
sectors. Volatility will continue to be an issue in 1999 as valuations move back
into peak levels and uncertainties in the world economy continue to unfold. We
expect to see broader stock leadership, which includes the best growing mid and
small-cap markets. This should translate to continued improvement in performance
of our small-cap markets relative to large-caps.

Investment Manager

Nationwide Advisory Services, Inc. ("NAS"), Three Nationwide Plaza, Columbus,
Ohio 43215, manages the investment of the assets and supervises the daily
business affairs of the Nationwide Separate Account Trust (the "Trust"). Subject
to the supervision and direction of the Trustees, NAS also determines the
allocation of assets among the subadvisers and evaluates and monitors the
performance of subadvisers. NAS also selects and places money market investments
on behalf of the Fund. NAS and its predecessors have managed investment since
1965. As of December 31, 1998, NAS had approximately $11.3 billion in assets
under management.

The Fund pays NAS a management fee, which is based on the Fund's average daily
net assets. The total fee paid by the Fund for the fiscal year ended December
31, 1998--expressed as a percentage of the Fund's average daily net assets--was
as follows:

Fund Fee
---- ---
<S> <C>
The Fund 1.0%
</TABLE>

Multi-Manager Structure

NAS and the Trust have received from the Securities and Exchange Commission an
exemptive order for a multi-manager structure that allows NAS to hire, replace
or terminate subadvisers without the approval of shareholders. The order also
allows NAS to revise a subadvisory agreement with Trustee approval but without
shareholder approval. If a new subadviser is hired, you will receive information
about the new subadviser within 90 days of the change. The order allows the Fund
to operate more efficiently and with greater flexibility.

NAS provides the following oversight and evaluation services to the Fund:

o performing initial due diligence on prospective subadvisers for the Fund

o monitoring the performance of the subadvisers through ongoing analysis, as
well as periodic consultations

o communicating performance expectations and evaluations to the subadvisers

o ultimately recommending to the board of trustees whether a subadviser's
contract should be renewed, modified or terminated.

NAS does not expect to recommend frequent changes of subadvisers. NAS will
periodically provide written reports to the Board of Trustees regarding the
results of its evaluation and monitoring functions. Although NAS will monitor
the performance of the subadvisers, there is no certainty that any subadviser or
Fund will obtain favorable results at any given time.

The Subadvisers

Subject to the supervision of NAS and the Trustees, a subadviser will manage all
or a portion of the Fund's assets in accordance with tbe Fund's investment
objective and strategies. With regard to the portion of the Fund assets
allocated to it, each Subadviser makes investment decisions for the Fund and in
connection with such investment decisions places purchase and sell orders for
securities.

The following are the subadvisers for the Fund:

6
<PAGE> 27

The Dreyfus Corporation ("Dreyfus"), located at 200 Park Avenue, New York, New
York 10166, was formed in 1947. As of January 31, 1999, the Subadviser managed
or administered approximately $121 billion in assets for approximately 1.7
million investor accounts nationwide.

Portfolio Managers

The primary portfolio managers of the portion of the Fund's portfolio managed by
Dreyfus are Paul Kandel and Hilary Woods. Mr. Kandel serves as a Senior Sector
Manager for the technology and telecommunications industries in the Small
Capitalization Equity Group. Prior to joining Dreyfus in October 1994, Mr.
Kandel was a manager at Ark Asset Management where he researched and recommended
stocks and IPOs in the telecommunications, technology and selected media
industries.

Ms. Woods serves as a Senior Sector Manager for the capital goods industries in
the Small Capitalization Equity Group. She has held this position and worked in
the Dreyfus Equity Research Department since 1987.

Neuberger Berman, LLC. ("Neuberger Berman") has offices located at 605 Third
Avenue, New York, New York 10158. Neuberger Berman and its predecessor firms and
affiliates have specialized in the management of no-load mutual funds since
1950. Neuberger Berman and its affiliates manage securities accounts that had
approximately $55 billion of assets as of December 31, 1998. Neuberger Berman is
a member firm of the NYSE and other principal exchanges and acts as the Fund's
primary broker in the purchase and sale of their securities for that portion of
the Fund's portfolio managed by Neuberger Berman.

Portfolio Managers

Judith M. Vale, who has been a member of the Small Cap Group since 1992, and
Robert D'Alelio, who has been a member of the Small Cap Group since 1996, are
responsible for the day-to-date management of Neuberger Berman's advisory
activities for the Fund. Ms. Vale and Mr. D'Alelio also have primary
responsibility for the day-to-day management of the Neuberger Berman Genesis
Portfolio. Prior to joining Neuberger Berman, Mr. D'Alelio was s senior
portfolio manager at another firm.

Strong Capital Management, Inc. ("Strong"), P.O. Box 2936, Milwaukee, Wisconsin
53201, was formed in 1974. Since then its principal business has been providing
investment advice for individuals and institutional accounts. Strong provides
investment management services for mutual funds and other investment portfolios
representing assets of over $32 billion as of December 31, 1998.

Portfolio Managers

Ronald C. Ognar, a Chartered Financial Analyst with more than 30 years of
investment experience is primarily responsible for Strong's portion of the
Fund's portfolio. He also manages the Strong Growth Fund, the Strong Growth Fund
II and the Strong Growth 20 Fund; he co-manages the Strong Total Return Fund and
the Strong Mid Cap Growth Fund.

Warburg Pincus Asset Management, Inc. ("Warburg") is a professional investment
advisory firm which provides investment services to investment companies,
employee benefit plans, endowment funds, foundations and other institutions and
individuals. As of December 31, 1998, Warburg managed approximately $22 billion
of assets including approximately $11 billion of investment company assets.
Warburg's address is 466 Lexington Avenue, New York, New York 10017-3147.

Portfolio Managers

The portfolio managers for Warburg's portion of the Fund are Elizabeth B. Dater
and Stephen J. Lurito. Ms. Dater and Mr. Lurito are also co-portfolio managers
of Warburg, Pincus Emerging Growth Fund and Warburg Pincus Small Company Growth
Portfolio, a portfolio of Warburg, Pincus Trust. Ms. Dater is a managing
director of Warburg and has been a portfolio manager of Warburg since 1978. Mr.
Lurito is a managing director of Warburg and has been with Warburg since 1987.

Lazard Asset Management ("Lazard") manages approximately $70 billion in
investments for corporations, endowments, public and private pension plans and
wealthy individuals as of December 31, 1998 and is recognized as one of the
premier global investment advisory firms. Lazard, one of the world's first
global investment banks, has advised sophisticated investors for more than 150
years. Lazard has offices located at 30 Rockefeller Plaza, New York, New York,
10112 as well as in San Francisco. In addition , Lazard provides asset
management services worldwide through its affiliates in London, Paris, Tokyo,
Frankfurt, Cairo and Sydney.

Portfolio Managers

Lazard manages its portion of the Small Company Fund on a team basis. The team
is involved in all levels of the investment process. This team approach allows
for every portfolio manager to benefit from his/her peers, and for clients to
receive the firm's best thinking, not that of a single portfolio manager.
Lazard's international equity investment team operates under the guidance of
Herbert W. Gullquist, Vice Chairman, Managing Director and Chief Investment
Officer with responsibility for overall adherence to the firm's investment
principles, and John R.

7
<PAGE> 28

Reinsberg, Managing Director responsible for International/Global Equity
management, overseeing the team's day-to-day operations and monitoring the
composition of the portfolio to ensure appropriate diversification.

Performance Advertising For The Funds

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

The Fund may also advertise its SEC yield. The SEC yield is based on a 30-day
period. This yield takes into account the yields to maturity on all debt
instruments and all dividends accrued on equity securities since equity
securities do not have maturity dates. The SEC yield is computed by dividing the
net investment income per share earned during the 30-day period by the maximum
offering price per share on the last day of the period.

Buying and Selling Fund Shares

Who Can Buy Shares of The Funds

An insurance company may purchase shares of the Fund at the Fund's net asset
value using purchase payments received on variable life insurance policies or
variable annuity contracts issued by life insurance company separate accounts.
Fund of Funds may also purchase shares of the Fund for their portfolios. There
is no sales charge.

Shares of the Fund are currently sold only to separate accounts of Nationwide
Life Insurance Company and its wholly owned subsidiary, Nationwide Life and
Annuity Insurance Company, to fund benefits payable under the variable life
insurance policies and variable annuity contracts. Shares of the Fund are also
sold to affiliated Fund of Funds, and may be sold to other insurance companies
in the future. The insurance companies purchase shares of the Fund in accordance
with variable account allocation instructions received from owners of the
variable annuity contracts or variable life insurance policies. The Fund then
uses the proceeds to buy securities for its portfolio. Each Fund of Funds and
insurance separate accounts, as a shareholder, has an ownership in the Fund's
investments. The Fund also offer to buy back (redeem) its shares at any time at
net asset value.

The address for each of the separate accounts is One Nationwide Plaza, Columbus,
Ohio 43215. The address for the Fund is Three Nationwide Plaza, Columbus, Ohio
43215. Since the variable annuity contracts or variable life insurance policies
may have different provisions with respect to the timing and method of
purchases, exchanges and redemptions, contract or policy owners should contact
their insurance company directly for details concerning transactions.

Purchase Price

The purchase or "offering" price of each share of the Fund is its "net asset
value" or NAV. No sales charge is imposed on the purchase of the Fund's shares.
Generally, NAV is determined by dividing the total market value of the
securities owned by the Fund, less its liabilities, by the total number of its
outstanding shares. NAV is determined at the close of regular trading on the New
York Stock Exchange on each day the Exchange is open for trading (usually 4 p.m.
Eastern Time). When you purchase shares, your purchase price will be the
offering price or NAV next determined after your order is received.

NAS does not determine NAV on the following days:

NAS reserves the right not to determine NAV when:

o the Fund has not received any orders to purchase, sell, or exchange shares
o changes in the value of the Fund's portfolios do not affect the NAV

Selling Shares

You can sell--also known as redeeming--your shares of the Fund at any time,
subject to certain restrictions. The price you will receive when you sell your
shares will be the NAV next determined after NAS receives the properly completed
order to sell in its offices in Columbus, Ohio. Of course, the value of the
shares sold depends upon the market value of the investments of the Fund at the
time of

8
<PAGE> 29

sale, and the value may be more or less than you paid for the shares.

Restrictions on sales

You may not be able to sell your shares of the Fund or we may delay paying you
the proceeds from a sale when the New York Stock Exchange is closed (other than
customary weekend and holiday closings) or if trading is restricted or if an
emergency exists.

Year 2000

Dividends and Distributions

Substantially all of the Fund's net investment income, if any, will be paid as a
dividend each quarter in the form of additional shares of the Fund. Any net
capital gains realized by the Fund from the sale of its portfolio securities
will be declared and cause to be paid to shareholders in December of each year.

Tax Status

The Fund's policy is to qualify as a regulated investment company and to meet
the requirements of Subchapter M of the Internal Revenue Code (the "Code"). The
Fund intends to distribute all, or substantially all, of its taxable net income
and capital gains to shareholders each year. As a result, the Fund will not be
required to pay any federal income taxes.

In order for investors to receive the favorable tax treatment available to
holders of variable annuity contracts and variable life insurance policies, the
separate accounts underlying these contracts or policies, as well as the Fund in
which these separate accounts invest, must meet certain diversification
requirements. The Fund intends to comply with these requirements. If the Fund
does not meet these requirements, income allocable to the variable annuity
contracts and variable life insurance policies would be taxable currently to the
holders of these contracts or policies.

The tax treatment of payments made under a variable annuity contract or variable
life insurance policy is described in the contract or policy's prospectus.
Generally, the owners of variable annuity contracts and variable life insurance
policies are not taxed currently on income or gains realized with respect to
such contracts. However, some distributions from these contracts and policies
may be taxable at ordinary income tax rates. In addition, distributions made to
an owner who is younger than 59 1/2 may be subject to a 10% penalty tax.
Investors should ask their own tax advisors for more information on their own
tax situation, including possible state or local taxes.

Please refer to the Statement of Additional Information for more information
regarding the tax treatment of the Fund. and an investment in the Fund. Please
refer to the prospectus of the variable annuity contract or variable life
insurance policy for a discussion of the tax consequences of these products.

Financial Highlights

9
<PAGE> 30

Information from Nationwide

Please read this Prospectus before you invest, and keep it with your records.
The following documents--which you can get free of charge--contain additional
information about the Fund:

o Statement of Additional Information (SAI) (incorporated by reference in
this Prospectus)

o Annual Report

o Semi-Annual Report

For additional information contact:

Nationwide Life Insurance Company
One Nationwide Plaza
Columbus, Ohio 43215

For information and assistance:

1-800-848-6331 (toll free, 8 a.m. - 5 p.m. Eastern Time)

Information from the Securities and Exchange Commission

You can obtain copies of Fund documents from the SEC as follows:

In person:

Public Reference Room in Washington, D.C. (for their hours of operation, call
1-800-SEC-0330)

By mail:

Securities and Exchange Commission
Public Reference Section
Washington, D.C. 20549-6009

(The SEC charges a fee to copy any documents)

Via the Internet:

http://www.sec.gov

The Trust's Investment Company Act File No.: 811-3213

10
<PAGE> 31

Nationwide Income Fund

May 1, 1999

As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved this Fund's shares as an investment or determined
whether this prospectus is complete or accurate. To state otherwise is a crime.

1
<PAGE> 32

Nationwide Income Fund

This prospectus provides information about the Nationwide Small Company Fund
offered by Nationwide Separate Account Trust. "You" and "Your" refer to
potential investors and current investors, including owners of variable annuity
contracts and variable life insurance policies. "We," "Us" and "Our" refer to
Nationwide Advisory Services, Inc.

Objective

The Fund seeks to provide as high a level of income as is consistent with
reasonable concern for safety of principal. The Fund's investment objective may
be changed by the Fund's Trustees without shareholder approval.

Principal Strategies

The Fund invests at least 65% of its assets, under normal market conditions, in
investment grade corporate bonds (rated in the four highest categories by a
nationally recognized statistical rating organization ("NRSRO")) and U.S.
Government securities. The Fund also invests in mortgage-backed securities and
repurchase agreements.

As part of its responsibilities to the Fund, Nationwide Advisory Services, Inc.
("NAS") initially selects the Fund's subadvisers and monitors their performance
on an ongoing basis. NAS has chosen NCM Capital Management Group, Inc. and Smith
Graham & Co. Asset Managers, L.P. each to manage a portion of the Fund's
portfolio. These subadvisers have been chosen because they approach investing in
debt obligations in different ways, and NAS believes that diversification among
securities and styles will increase the potential for investment return and
reduce risk and volatility. The following is a description of the investment
strategies used by each subadviser:

NCM Capital Management Group, Inc. selects a diversified portfolio of investment
grade debt securities for its portion of the Fund's assets in which overall
credit risk is minimized. The subadviser will choose the average maturity and
duration of its portion of the Fund's portfolio based on the intermediate and
longer-term outlook of interest rates, the economy and financial markets rather
than short-term fluctuations in interest rates or economic statistics.

The subadviser then determines which sectors of the fixed income market offer
the highest potential for attractive returns. After analyzing current and
prospective developments in the economy and financial markets, the subadviser
chooses those securities that offer the greatest potential for higher returns
over a specific time period. The subadviser will sell securities if more
favorable opportunities are identified.

Smith Graham & Co. Asset Managers, L.P. uses an investment process centered
around maximizing stable cash flows consisting of income on fixed income
securities and prepayments from mortgage-backed securities and the reinvestment
of that cash in securities for the Fund.

The subadviser uses software models it developed to identify areas of the fixed
income market that offer the greatest potential for returns at the lowest price.
Additional return on the Fund's investments is obtained by purchasing securities
the subadviser feels are undervalued. The subadviser will sell securities if
more favorable opportunities are identified.

Principal Risks

Because the value of your investment will fluctuate, there is the risk that you
will lose money. Your investment will decline in value if the value of the
Fund's investments decreases.

Interest rate risk. Interest rate risk is the risk that increases in market
interest rates may decrease the value of debt securities held by the Fund. In
general, the prices of debt securities fall when interest rates increase and
rise when interest rates decrease. Typically, the longer the maturity of a debt
security, the more sensitive it is to price shifts as a result of interest rate
changes. An investment in the Fund will decline in value if the value of the
Fund's investments decreases.

Credit risk. Credit risk is the risk that the issuer of the debt security will
be unable to make the required payments of interest and/or repay the principal
when due. In addition, there is a risk that the rating of a debt security may be
lowered if the issuer's financial condition changes. This could lead to a
greater fluctuation in the value of the Fund.

Prepayment risk and extension risk. Prepayments of principal on mortgage-backed
securities affect the average life of a pool of such securities. Mortgage
prepayments are affected by the level of interest rates and other factors. In
periods of rising interest rates, the prepayment rate tends to decrease,
lengthening average life of a pool of mortgage-backed securities. In periods of
falling interest rates, the prepayment rate tends to increase, shortening the
average life of a pool of mortgage-related securities. Prepayment risk is the
risk that, because prepayments generally occur when interest rates are falling,
the Fund may have to reinvest the proceeds from prepayments at lower rates.
Extension risk is the risk that anticipated payments on principal may not occur,
typically because of a rise in interest rates, and the expected maturity of the
security will increase. During periods of rapidly rising interest rates, the
anticipated maturity of a security may be

2
<PAGE> 33

extended past what the portfolio manager anticipated, affecting the maturity and
volatility of the Fund.

For more detailed information about principal investment techniques and risks,
see "More About The Fund."

Performance

No performance information is provided because the Income Fund had been in
operation for less than a year as of December 31, 1998.

Fees and expenses

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

<TABLE>
<S> <C>
Shareholder Fees(1) (paid
directly from your investment) None

Annual Fund Operating Expenses
(deducted from Fund assets)

Management Fees 0.45%
Other Expenses 0.56%
----
Total Annual Fund Operating Expenses(2) 1.01%
====
</TABLE>

Example

This example shows what you could pay in expenses over time. You can also use
this example to compare the cost of this Fund with other mutual funds.

<TABLE>
<CAPTION>
1 Year 3 years 5 years 10 Years
------ ------- ------- --------
<S> <C> <C> <C>
$103 $322 $558 $1,236
</TABLE>

More About the Fund

Principal Risks and Techniques

The Fund may use the following principal investment techniques to increase
returns, protect assets or diversify investments, which are subject to certain
risks. Because the value of your investment in the Fund will fluctuate, there is
the risk that you will lose money. For additional information about the Fund's
other investment techniques, see the Statement of Additional Information.

Principal Investment Techniques

Investment Grade Debt Securities. These include U.S. Government debt securities,
corporate debt securities and municipal debt securities that have been rated
within the four highest rating categories by a NRSRO. In evaluating a debt
security, an NRSRO measures the financial condition and stability of the issuer
and assigns a rating. If an NRSRO changes a debt security's rating, it may
affect the security's value.

Mortgage-backed Securities. U.S. Government mortgage-backed securities are
securities that are secured by and paid from a pool of mortgage loans on real
property and issued or guaranteed by the U.S. Government or one of its agencies.
Mortgage-backed securities may also be issued by private issuers.

Collateralized mortgage obligations (CMOs) are securities that have mortgage
loans or mortgage pass-through securities, such as GNMA, FNMA or FHLMC
certificates as their collateral. CMOs can be issued by the U.S. Government or
its agencies or by private lenders.

These securities are subject to interest rate risk and credit risk if they are
issued by private issue. CMOs and other mortgage-backed securities are also
subject to prepayment risk. With respect to prepayment risk, when interest rates
fall, homeowners may refinance their loans and the mortgage-backed securities
secured by these loans will be paid off sooner than the portfolio manager
anticipated. Reinvesting the returned principal in a lower interest rate market
reduces the Fund's income. Mortgage-backed securities are also subject to
extension risk and the possibility of losing principal as a result of
prepayments.

U.S. Government Securities. These securities include Treasury bills, notes,
bonds and other securities issued or guaranteed by the U.S. Government and
securities issued by U.S. Government agencies, including:

- ----------
(1) Sales charges may be imposed by variable annuity contracts or variable life
insurance polices if the Fund's shares are purchased by a life insurance
separate account as an investment option for these contracts or policies.

(2) Until further notice, Nationwide Advisory Services, Inc. has agreed to waive
management fees and, if necessary, to reimburse "Other Expenses" so that Total
Annual Operating Expenses will not exceed 0.75%.

3
<PAGE> 34

o The Federal Home Loan Banks
o The Federal National Mortgage Association ("FNMA")
o The Student Loan Marketing Association and Federal Home Loan Mortgage
Corporation ("FHLMC")
o The Federal Farm Credit Banks

Although there is virtually no credit risk with U.S. Government securities,
neither the U.S. Government nor its agencies guarantee the market value of their
securities. Interest rate changes, prepayment risks, and other factors may
affect the value of these securities.

Repurchase agreements. In entering into a repurchase agreement, the Fund
essentially is making a short-term loan to a qualified bank or broker-dealer.
The Fund buys securities that the seller has agreed to buy back at a specific
time and at a set price that includes interest. There is a risk that the seller
will be unable to buy back the securities at the time required and the Fund
could experience delays in recovering the amounts owed to it.

Management

Management Discussion

[MANAGEMENT DISCUSSION AND LINE GRAPH TO BE INSERTED WITH SUBSEQUENT
POST-EFFECTIVE AMENDMENT]

Investment Manager

The annual management fee payable by the Fund to NAS, expressed as a percentage
of the Fund's average daily net assets, is as follows:

The Fund does not pay the subadvisers' management fees. Instead, these
management fees are paid by NAS out of the management fee it receives from the
Fund.

Multi-Manager Structure

NAS provides the following oversight and evaluation services to the Fund:

o performing initial due diligence on prospective subadvisers for the Fund
o monitoring the performance of the subadvisers through ongoing analysis, as
well as periodic consultations
o communicating performance expectations and evaluations to the subadvisers
o ultimately recommending to the board of trustees whether a subadviser's
contract should be renewed, modified or terminated.

The Subadvisers

The following are the subadvisers for the Fund.

NCM Capital Management Group, Inc. ("NCM Capital") was founded in 1986 and
serves as one of the Fund's Subadvisers. Its offices are located at 103 W. Main
St., Durham, NC 27701. As of December 31, 1998, NCM Capital had approximately
$____ billion in assets under management.

Portfolio Manager

The primary portfolio manager of the portion of the Fund's portfolio managed by
NCM Capital is Paul L. Van Kampen, CFA. Mr. Van Kampen joined NCM Capital as

4
<PAGE> 35

Senior Vice President and the Director of Fixed Income Research in _______.
Prior to joining NCM Capital, he was an Executive Director of Aon Advisors, Inc.

Smith Graham and Co. Asset Managers, L.P. ("Smith Graham") also serves as a
subadviser 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
December 31, 1998, Smith Graham managed approximately $___ billion of assets.

Portfolio Manager

The primary portfolio manager of the portion of the Fund's portfolio managed by
Smith Graham is Mark Delaney. Mr. Delaney joined Smith Graham in November 1994
and currently serves as a Portfolio Manager.

Performance Advertising For The Funds

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

Buying and Selling Fund Shares

Who Can Buy Shares of The Funds

The address for each of the separate accounts is One Nationwide Plaza, Columbus,
Ohio 43215. The address for the Fund is Three Nationwide Plaza, Columbus, Ohio
43215.

Purchase Price

The purchase or "offering" price of one share of a Fund is its "net asset value"
or NAV. No sales charge is imposed on the purchase of shares of the Fund.
Generally, NAV is based on the market value of the securities owned by the Fund
less its liabilities. The NAV is determined by dividing the total value of a
Fund by the total number of outstanding shares, and is determined at the close
of regular trading each day that the New York Stock Exchange is open for trading
(usually 4 p.m. Eastern Time). When you purchase shares, your purchase price
will be the offering price or NAV next determined after your order is received.

NAS does determine NAV on the following days:

NAS reserves the right not to determine an NAV when:

o we have not received any orders to purchase, sell, or exchange shares o

5
<PAGE> 36

o changes in the value of the Funds' portfolios do not affect the NAV

If current prices are not available for a security, or if NAS determines that
the price of a security does not represent its fair value, the security may be
valued at fair market value in accordance with procedures adopted by the Board
of Trustees.

Selling Shares

Restrictions on sales

Year 2000

Dividends and Distributions

Tax Status

The tax treatment of payments made under a variable annuity contract or variable
life insurance policy is described in the prospectus for the contract or policy.
Generally, the owners of variable annuity contracts and variable life insurance
policies are not taxed currently on income or gains realized under such
contracts until the income or gain is distributed. However, income distributions
from these contracts and policies will be taxable at ordinary income tax rates.
In addition, distributions made to an owner who is younger than 59 1/2 may be
subject to a 10% penalty tax. Investors should ask their own tax advisors for
more information on their own tax situation, including possible state or local
taxes.

6
<PAGE> 37

Information from Nationwide

Please read this Prospectus before you invest, and keep it with your records.
The following documents--which you can get free of charge--contain additional
information about the Fund:

o Statement of Additional Information (SAI) (incorporated by reference in
this Prospectus)

o Annual Report

o Semi-Annual Report

For additional information contact:

Nationwide Life Insurance Company
One Nationwide Plaza
Columbus, Ohio 43215

For information and assistance:

1-800-848-6331 (toll free, 8 a.m. - 5 p.m. Eastern Time)

Information from the Securities and Exchange Commission

You can obtain copies of Fund documents from the SEC as follows:

In person:

Public Reference Room in Washington, D.C. (for their hours of operation, call
1-800-SEC-0330)

By mail:

Securities and Exchange Commission
Public Reference Section
Washington, D.C. 20549-6009

(The SEC charges a fee to copy any documents)

Via the Internet:

http://www.sec.gov

Investment Company Act File No. 811-3213

7
<PAGE> 38

Nationwide Strategic Growth Fund
Nationwide Strategic Value Fund
Nationwide Select Advisers Mid Cap Fund
Nationwide Small Cap Value Fund
Nationwide Select Advisers Small Cap Growth Fund
Nationwide Global Equity Fund
Nationwide Equity Income Fund
Nationwide Balanced Fund
Nationwide Multi Sector Bond Fund
Nationwide High Income Bond Fund

May 1, 1999

1
<PAGE> 39

Fund Summaries

This prospectus provides information about ten funds offered by Nationwide
Separate Account Trust (together, the "Funds"). "You" and "Your" refer to
potential investors and current investors, including owners of variable annuity
contracts and variable life insurance policies. "We," "Us" and "Our" refer to
Nationwide Advisory Services, Inc.

Nationwide Strategic Growth Fund

Objective

The Fund seeks capital growth. The Fund's investment objective can be changed by
the Fund's Trustees without shareholder approval.

Principal Investment Strategies

Nationwide Advisory Services, Inc. ("NAS") has selected Strong Capital
Management, Inc. as a subadviser to manage the Fund's portfolio on a day-to-day
basis. The Fund focuses on common stocks of U.S. and foreign companies that the
subadviser believes are reasonably priced and have above-average growth
potential. The Fund's portfolio can include stocks of companies of any size. The
subadviser may decide to sell a stock when the company's growth prospects become
less attractive. The subadviser's buy/sell strategy is not limited by the
turnover rate of the Fund's portfolio. The subadviser may participate in
frequent portfolio transactions, which will lead to higher transaction costs.

Principal Risks

Because the value of your investment will fluctuate, there is the risk that you
will lose money. Your investment will decline in value if the value of the
Fund's investments decreases.

Portfolio turnover risk. The Fund will attempt to buy securities with the intent
of holding them for investment but the portfolio manager may buy and sell
securities if he or she believes it to be in the best interest of the Fund.
Although the Fund will not consider portfolio turnover rate a limiting factor in
making investment decisions, a higher portfolio turnover rate may result in
higher transaction costs for the Fund and increase the volatility of the Fund.

Risks related to investing for growth. Different types of stocks tend to shift
into and out of favor with stock market investors depending on market and
economic conditions. Because the Fund focuses on growth-style stocks, the Fund's
performance may at times be better or worse than the performance of stock funds
that focus on other types of stocks, or that have a broader investment style.

Mid/small cap risk. The Fund's investments in smaller, newer companies may be
riskier than investments in larger, more established companies. The stocks of
medium-size and small cap companies are usually less stable and less liquid than
the stocks of larger companies.

Foreign risk. Investments in foreign securities involve risks in addition to
those of U.S. investments. These risks include political and economic risks,
currency fluctuations, higher transaction costs, and delayed settlement. In
addition, the "Euro" began serving as a new common currency for participating
European nations on January 1, 1999. It is unclear whether the newly created
accounting, clearing, settlement and payment systems for the new currency will
be adequate.

For more detailed information about the Fund's investments and risks, see "More
About the Funds."

Performance

Annual Total Returns:

1998*: 14.6%

Best qtr.: 20.7% 4th qtr. of 1998 Worst qtr.: -14.0% 3d qtr. of 1998

Average annual total returns as of 12/31/98:

<TABLE>
<CAPTION>
1 Year Since Inception*
------ ----------------
<S> <C> <C>
The Fund 14.59% 14.59%

The S&P/Barra
Mid Cap 400
Growth Index 34.73% 31.28%
</TABLE>

* The Fund commenced operationS on October 31, 1997.

The S&P/Barra Mid Cap 400 Growth Index is an unmanaged, capitalization-weighted
(meaning that

2
<PAGE> 40

companies with larger market capitalizations have more influence on the index
than companies with smaller market capitalizations) index composed of companies
in the S&P MidCap 400 Index whose stocks have higher price-to-book ratios.
Unlike mutual funds, the S&P/Barra Mid Cap 400 Growth Index does not incur
expenses. If expenses were deducted, the actual returns of this index would be
lower.

Fees and expenses

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

<TABLE>
<S> <C>
Shareholder Fees(1) (paid
directly from your investment) None

Annual Fund Operating Expenses
(deducted from Fund assets)

Management Fees 0.90%
Other Expenses 0.65%
----
Total Annual Fund Operating Expenses(2) 1.55%
====
</TABLE>

Example

This example shows what you could pay in expenses over time. You can also use
this example to compare the cost of this Fund with other mutual funds.

<TABLE>
<CAPTION>
1 Year 3 years 5 years 10 Years
------ ------- ------- --------
<S> <C> <C> <C>
$158 $490 $845 $1,846
</TABLE>

(2) Until further notice, NAS has agreed to waive management fees and, if
necessary, to reimburse "Other Expenses" so that Total Annual Operating Expenses
will not exceed 1.00%.

3
<PAGE> 41

Nationwide Strategic Value Fund

Objective

The Fund's primary investment objective is long-term capital appreciation, and
portfolio securities are selected primarily with a view to achievement of this
objective. The Fund's investment objective can be changed by the Fund's Trustees
without shareholder approval.

Principal Strategies

NAS has selected Schafer Capital Management, Inc. as subadviser to manage the
Fund's portfolio on a day-to-day basis through a subcontract with Strong Capital
Management, Inc. The Fund invests primarily in common stocks of medium and
large-size companies. The subadviser selects stocks of companies that have
above-average growth potential, but also are inexpensive relative to market
averages. The Fund invests approximately equal amounts of its assets in each
stock in the portfolio at the time of purchase, and generally invests all of its
assets in U.S. and foreign common stock and convertible securities. The
subadviser sells holdings when they are no longer attractive based on their
growth potential or price.

Principal Risks

Because the value of your investment will fluctuate, there is the risk that you
will lose money. Your investment will decline in value if the value of the
Fund's investments decreases.

Risks related to investing for value. Different types of stocks tend to shift
into and out of favor with stock market investors depending on market and
economic conditions. Because the Fund focuses on value-style stocks, the Fund's
performance may at times be better or worse than the performance of stock funds
that focus on other types of stocks, or that have a broader investment style.

Mid/small cap risk. The Fund's investments in smaller, newer companies may be
riskier than investments in larger, more established companies. The stocks of
medium-size and small companies is usually less stable and less liquid than the
stocks of larger companies, but this is not always the case.

Foreign risk. Investments in foreign securities involve risks in addition to
those of U.S. investments. These risks include political and economic risks,
currency fluctuations, higher transaction costs, and delayed settlement. In
addition, the "Euro" began serving as a new common currency for participating
European nations on January 1, 1999. It is unclear whether the newly created
accounting, clearing, settlement and payment systems for the new currency will
be adequate.

For more detailed information about the Fund's investments and risks, see "More
About the Funds."

Performance

The following bar chart and table show two aspects of the Fund: volatility and
performance. The bar chart shows the volatility--or variability--of the Fund's
annual total returns over time and that Fund performance can change from year to
year. The table shows the Fund's average annual total returns for certain time
periods compared to the returns of a broad-based securities index. The bar chart
and table provide some indication of the risks of investing in the Fund.
Remember, however, that past performance does not guarantee similar results in
the future.

Annual Total Returns:

1998*: 0.4%

Best qtr.: 26.4% 4th qtr. of 1998 Worst qtr.: -22.9% 3d qtr. of 1998

Average annual total returns as of 12/31/98:

<TABLE>
<CAPTION>
1 Year Since Inception*
------ ----------------
<S> <C> <C>
The Fund 0.39% 1.74%

The S&P 500
Index 28.58% --
</TABLE>

* The Fund commenced operations on October 31, 1997.

The S&P 500 Index is an unmanaged, capitalization-weighted (meaning that
companies with larger market capitalizations have more influence on the index
than companies with smaller market capitalizations) index of 500 widely-held
common stocks of companies in a variety of industries. The S&P 500 Index is an
indicator of broad stock price movements. Unlike mutual funds, the S&P 500 Index
does not incur expenses. If expenses were deducted, the actual returns of this
index would be lower.

4
<PAGE> 42

Fees and expenses

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

<TABLE>
<S> <C>
Shareholder Fees(1) (paid
directly from your investment) None

Annual Fund Operating Expenses
(deducted from Fund assets)
Management Fees 0.90%
Other Expenses 0.33%
----
Total Annual Fund Operating Expenses(2) 1.23%
====
</TABLE>

Example

This example shows what you could pay in expenses over time. You can also use
this example to compare the cost of this Fund with other mutual funds.

<TABLE>
<CAPTION>
1 Year 3 years 5 years 10 Years
------ ------- ------- --------
<S> <C> <C> <C>
$125 $390 $676 $1,489
</TABLE>

(2) Until further notice, NAS has agreed to waive management fees and, if
necessary, to reimburse "Other Expenses" so that Total Annual Operating Expenses
will not exceed 1.00%.

5
<PAGE> 43

Nationwide Select Advisers Mid Cap Fund

Objective

The Fund has as its investment objective capital appreciation. The Fund's
investment objective can be changed by the Fund's Trustees without shareholder
approval.

Principal Strategies

The Fund will invest at least 65% of its total assets in equity securities of
companies with market capitalizations between $500 million and $7 billion;
however the average market capitalizations may fluctuate over time. In addition,
if these companies continue to satisfy other investment policies, the Fund may
continue to hold the securities of these companies even if their market
capitalizations grow above $7 billion. Market capitalization is a common way to
measure the size of a company based on the price of its common stock; it's
simply the number of outstanding shares of the company multiplied by the current
share price. The Fund may also invest in special situation companies.

As part of its responsibilities to the Fund, NAS initially selects the Fund's
subadvisers and monitors their performance on an ongoing basis. NAS has chosen
First Pacific Advisors, Inc., Pilgrim Baxter & Associates, Ltd. and Rice, Hall,
James & Associates each to manage a portion of the Fund. Each of them has been
chosen because they approach investing in mid cap securities in different ways.
NAS believes that diversification among securities and styles will increase the
potential for investment return and reduce risk and volatility. The following is
a description of the investment strategies used by each subadviser.

First Pacific Advisors, Inc. seeks value in all parts of a company's capital
structure, searching for securities that reflect low price/earnings ratio (P/Es)
and trade at discounts to private market value. The P/E of a stock is the price
of a stock divided by its earnings per share; it gives an investor an idea of
how much they are paying for a company's earning power. In its stock selection
process, the subadviser looks for a high return on capital, a solid balance
sheet, meaningful cash flow, active share repurchase program, insider buying,
superior management seeking to maximize shareholder value and projected earnings
growth exceeding the stock market average. In evaluating debt obligations, the
subadviser attempts to identify current interest rate trends. By investing in a
combination of stocks and debt obligations, the subadviser seeks to broaden the
universe of investment opportunities while adding diversification and lowering
portfolio volatility. The subadviser will sell a security if a more favorable
opportunity is identified.

Pilgrim Baxter & Associates, Ltd. invests in companies which it believes to have
an outlook for strong earnings growth and the potential for significant capital
appreciation. The subadviser uses a two-step investment process by starting with
a universe of rapidly growing companies with market capitalizations between $500
million and $7 billion and then creating a smaller universe of growing companies
based on analysis through proprietary software and research models that
incorporate important attributes of successful growth. Using fundamental
research, the subadviser looks at financial records and evaluates each company's
earnings quality and assesses the sustainability of the company's current growth
trends. Ultimately, the subadviser seeks to construct an investment portfolio
that possesses strong growth characteristics. The subadviser will sell a
security if it cannot sustain these growth characteristics.

Rice, Hall, James & Associates normally invests at least 65% of its portion of
the Fund's total assets in equity securities of companies with market
capitalizations of $300 million to $2.5 billion at the time of initial purchase.
The subadviser believes that there are greater pricing inefficiencies for
small/mid cap securities than larger capitalization securities because this
range of the market has less analyst coverage. The subadviser will tend to
choose from relatively underfollowed securities. The Fund will invest in
companies that the subadviser believes will increase in price within a one to
two year period because of a change that is not anticipated by the market, such
as a new product introduction, new management or new markets.

Principal Risks

Because the value of your investment will fluctuate, there is the risk that you
will lose money. Your investment will decline in value if the value of the
Fund's investments decreases.

The Fund focuses on a more narrow scope of the overall stock market by investing
primarily in companies with smaller market capitalizations. Therefore, the
impact of these factors on small companies may affect the Fund more than if the
Fund invested more broadly in the overall stock market.

Mid/small cap risk. The Fund's investments in smaller, newer companies may be
riskier than investments in larger, more established companies. The stocks of

6
<PAGE> 44

medium-size and small cap companies is usually less stable and less liquid than
the stocks of larger companies.

For more detailed information about the Fund's investments and risks, see "More
About the Funds."

Performance

Annual Total Returns:

1998*: 10.8%

Best qtr.: 18.7% 4th qtr. of 1998 Worst qtr.: -14.1% 3d qtr. of 1998

Average annual total returns as of 12/31/98:

<TABLE>
<CAPTION>
1 Year Since Inception*
------ ----------------
<S> <C> <C>
The Fund 10.81% 8.91%

The S&P 400 Mid
Cap Index 34.73% 31.28%
</TABLE>

* The Fund commenced operation on October 31, 1997.

The S&P 400 Mid Cap Index is an unmanaged, capitalization-weighted (meaning that
companies with larger market capitalizations have more influence on the index
than companies with smaller market capitalizations), index containing 400 U.S.
companies whose stocks represent the mid-range of the U.S. stock market. Unlike
mutual funds, the S&P 400 Mid Cap Index does not incur expenses. If expenses
were deducted, the actual returns of this index would be lower.

Fees and expenses

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

<TABLE>
<S> <C>
Shareholder Fees(1) (paid
directly from your investment) None

Annual Fund Operating Expenses
(deducted from Fund assets)
Management Fees 1.05%
Other Expenses 0.49%
----
Total Annual Fund Operating Expenses(2) 1.54%
====
</TABLE>

Example

This example shows what you could pay in expenses over time. You can also use
this example to compare the cost of this Fund with other mutual funds.

<TABLE>
<CAPTION>
1 Year 3 years 5 years 10 Years
------ ------- ------- --------
<S> <C> <C> <C>
$157 $486 $839 $1,835
</TABLE>

(2) Until further notice, NAS has agreed to waive management fees and, if
necessary, to reimburse "Other Expenses" so that Total Annual Operating Expenses
will not exceed 1.20%.

7
<PAGE> 45

Nationwide Small Cap Value Fund

Objective

The Fund has as its investment objective capital appreciation through investment
in a diversified portfolio of equity securities of companies with a median
market capitalization of approximately $1 billion. The Fund's investment
objective can be changed by the Fund's Trustees without shareholders approval.

Principal Strategies

NAS has selected The Dreyfus Corporation as a subadviser to manage the Fund's
portfolio on a day-to-day basis. The Fund intends to pursue its investment
objective by investing, under normal market conditions, at least 75% of the
Fund's total assets in equity securities of companies whose equity market
capitalizations at the time of investment are similar to the market
capitalizations of companies in the Russell 2000(R), known as small cap
companies. The Russell 2000, published by the Frank Russell Company, is an index
consisting of approximately 2000 companies with small market capitalizations
relative to the market capitalizations of other U.S. companies. Currently the
market capitalizations of companies in the Russell 2000 range from approximately
$222 million to $1.4 billion. The Fund may invest up to 20% of its total assets
in equity securities of foreign companies. The subadviser will sell a stock if
the subadviser no longer considers the company to be of value.

The Fund will invest in stocks of U.S. and foreign companies which the
subadviser considers to be "value" companies. The subadviser generally believes
that such companies have relatively low price to book ratios, low price to
earnings ratios or higher than average dividend payments in relation to price.

Smaller capitalization companies are often under valued for one of the following
reasons: (1) institutional investors, which currently represent a majority of
the trading volume in the shares of publicly traded companies, are often less
interested in smaller capitalization companies because of the difficulty of
acquiring a meaningful position without purchasing a large percentage of the
company's outstanding equity securities; and (2) such companies may not be
regularly researched by securities analysts, which would result in greater
discrepancies in valuation.

Principal Risks

Because the value of your investment will fluctuate, there is the risk that you
will lose money. Your investment will decline in value if the value of the
Fund's investments decreases.

Foreign risk. Investments in foreign securities involve risks in addition to
those of U.S. investments. These risks include political and economic risks,
currency fluctuations, higher transaction costs, and delayed settlement. In
addition, the "Euro" began serving as a new common currency for participating
European nations on January 1, 1999. It is unclear whether the newly created
accounting, clearing, settlement and payment systems for the new currency will
be adequate.

Risks related to investing for value. Different types of stocks tend to shift
into and out of favor with stock market investors depending on market and
economic conditions. Because the Fund focuses on value-style stocks, the Fund's
performance at times may be better or worse than the performance of stock funds
that focus on other types of stocks, or that have a broader investment style.

For more detailed information about the Fund's investments and risks, see "More
About the Funds."

8
<PAGE> 46

Performance

Annual Total Returns:

1998*: -3.1%

Best qtr.: 26.4% 4th qtr. of 1998 Worst qtr.: -26.3% 3d qtr. of 1998

Average annual total returns as of 12/31/98:

<TABLE>
<CAPTION>
1 Year Since Inception*
------ ----------------
<S> <C> <C>
The Fund -3.06% -4.00%

Russel 2000
Value Index -6.45% -1.90%
</TABLE>

* The Fund commenced operation on October 31, 1997.

The Russell 2000 Value Index is an unmanaged, capitalization-weighted (meaning
that companies with larger market capitalizations have more influence on the
index than companies with smaller market capitalizations) index containing
companies in the Russell 2000 Stock Index that have lower than average
price-to-book ratios and lower forecasted growth rates. The Russell 2000 Stock
Index contains the 2000 smallest companies in the Russell 3000 Index, an index
that contains approximately the 3000 largest companies in the U.S. Unlike mutual
funds, the Russell 2000 Value Index does not incur expenses. If expenses were
deducted, the actual returns of this index would be lower.

Fees and expenses

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

<TABLE>
<S> <C>
Shareholder Fees(1) (paid
directly from your investment) None

Annual Fund Operating Expenses
(deducted from Fund assets)
Management Fees 0.90%
Other Expenses 0.43%
----
Total Annual Fund Operating Expenses(2) 1.33%
====
</TABLE>

Example

This example shows what you could pay in expenses over time. You can also use
this example to compare the cost of this Fund with other mutual funds.

<TABLE>
<CAPTION>
1 Year 3 years 5 years 10 Years
------ ------- ------- --------
<S> <C> <C> <C>
$135 $421 $729 $1,601
</TABLE>

(2) Until further notice, NAS has agreed to waive management fees and, if
necessary, to reimburse "Other Expenses" so that Total Annual Operating Expenses
will not exceed 1.05%.

9
<PAGE> 47

Nationwide Select Advisers Small Cap Growth Fund

Objective

The Fund seeks capital growth. The Fund's investment objective can be changed
without shareholder approval.

Principal Strategies

The Fund seeks to achieve its investment objective from a broadly diversified
portfolio of equity securities issued by U.S. and foreign companies with market
capitalizations in the range of companies represented by the Russell 2000, known
as small cap companies. Under normal market conditions, the Fund will invest at
least 65% of its total assets in the equity securities of small cap companies.
The balance of the Fund's assets may be invested in equity securities of larger
cap companies. The Fund may also invest in foreign securities.

Market capitalization is a common way to measure the size of a company based on
the price of its common stock; it's simply the number of outstanding shares of
the company multiplied by the current share price. The Russell 2000, published
by The Frank Russell Company, is an index consisting of approximately 2000
companies with small market capitalizations relative to the market
capitalizations of other U.S. companies. Currently the market capitalizations
for companies in the Russell 2000 range from approximately $222 million to $1.4
billion.

As part of its responsibilities to the Fund, NAS initially selects the Fund's
subadvisers and monitors their performance on an ongoing basis. NAS has chosen
Franklin Advisers, Inc., Miller Anderson & Sherrerd, LLP and Neuberger Berman,
LLC each to manage a portion of the Fund. The subadvisors have been chosen
because they approach investing in small cap securities in different ways, and
NAS believes that diversification among securities and styles will increase the
potential for investment return and reduce risk and volatility. The following is
a description of the investment strategies used by each subadviser:

Franklin Advisers, Inc. is a research driven, "bottom-up" fundamental investor,
examining the financial history of individual companies and pursuing a
disciplined "growth at a reasonable price" strategy. Relying on a team of
analysts to provide in-depth industry expertise, the subadviser chooses small
cap companies that it believes are positioned for rapid growth in revenues,
earnings or assets, and whose common stocks are selling at reasonable prices.
The subadviser evaluates small cap companies for distinct and sustainable
competitive advantages, such as a particular marketing or product niche, proven
technology, and industry leadership - all factors the subadviser believes point
to strong, long-term growth potential. The subadviser diversifies its allocation
of the Fund's assets across many industries, and from time to time, may invest
substantially in certain sectors, including technology and biotechnology. The
subadviser will sell securities from time to time as more favorable
opportunities are identified.

Miller Anderson & Sherrerd, LLP focuses on companies that demonstrate high
earnings growth rates, growth stability, and rising profitability. In
particular, the subadviser invests in companies that appear to be capable of
producing earnings that consistently beat market expectations. The subadviser
uses computer analysis to identify stocks based on earnings' predictions and
then conducts extensive fundamental research, examining financial records and
identifying those companies with the most attractive earnings revisions.
Finally, the subadviser reviews the valuation of these stocks to eliminate the
most overvalued stocks from consideration. The subadviser also follows a strict
sell discipline and will sell stocks when their earnings revision scores fall to
unacceptable levels, fundamental research uncovers unfavorable trends, or
valuations are excessive relative to the stocks' growth prospects.

Neuberger Berman, LLC's growth equity group takes a growth approach to selecting
stocks, looking for new companies that are in the developmental stage as well as
older companies that appear poised to grow because of new products, markets or
management. Factors in identifying these firms may include financial strength, a
strong position relative to competitors and a stock price that is reasonable in
light of its growth rate.

Neuberger Berman follows a disciplined selling strategy, and may sell a stock
when it reaches a target price, fails to perform as expected, or appears
substantially less desirable than another stock.

Principal Risks

Because the value of your investment will fluctuate, there is the risk that you
will lose money. Your investment will decline in value if the value of the
Fund's investments decreases.

10
<PAGE> 48

Foreign risk. Investments in foreign securities involve risks in addition to
those of investments in U.S. companies. These risks include political and
economic risks, currency fluctuations, higher transaction costs, and delayed
settlement. In addition, the "Euro" began serving as a new common currency for
participating European nations on January 1, 1999. It is unclear whether the
newly created accounting, clearing, settlement, and payment systems for the new
currency will be adequate.

For more detailed information about the Fund's investments and risks, see "More
About the Funds."

Performance

No performance information is provided because the Select Advisers Small Cap
Growth Fund will not begin operations until about May 1, 1999.

Fees and expenses

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

<TABLE>
<S> <C>
Shareholder Fees1 (paid
directly from your investment) None

Annual Fund Operating Expenses
(deducted from Fund assets)
Management Fees %
Other Expenses2 %
---
Total Annual Fund
Operating Expenses3 %
===
</TABLE>

Example

This example shows what you could pay in expenses over time. You can also use
this example to compare the cost of this Fund with other mutual funds.

<TABLE>
<CAPTION>
1 Year 3 years
------ -------
<S> <C>
$ $
</TABLE>

(2) Because the Fund is new and does not yet have any operating history, "Other
Expenses" are based upon estimates for the current fiscal year.

(3) Until further notice, NAS has agreed to waive management fees and, if
necessary, to reimburse "Other Expenses" so that Total Annual Operating Expenses
will not exceed ___%.

11
<PAGE> 49

Nationwide Global Equity Fund

Objective

The Fund seeks to provide a high total return from a globally diversified
portfolio of equity securities. The Fund's investment objective can be changed
by the Fund's Trustees without shareholder approval.

Principal Strategies

NAS has selected J.P. Morgan Investment Management Inc. as a subadviser to
manage the Fund's portfolio on a day-to-day basis. The Fund invests in equity
securities primarily from developed countries. Normally the Fund's investments
will be from issuers in at least five different countries and will usually
include the United States. Under normal conditions, the Fund will invest at
least 65% of its assets in equity securities. The subadviser uses a disciplined
process to seek to enhance the Fund's returns and reduce its volatility relative
to the Morgan Stanley Capital International World Index (MSCI World Index), the
Fund's benchmark. The subadviser follows a three-step process that combines
country allocation, stock selection through fundamental research and currency
management.

Country Allocation. J.P. Morgan takes an in-depth look at the relative
valuations and economic prospects of different countries in order to determine
which countries to emphasize. J.P. Morgan first ranks the countries and then a
team of strategists makes country allocation decisions for the Fund. The Fund
may overweight or underweight countries relative to the MSCI World Index.

Stock Selection. In choosing stocks, the Fund emphasizes those that are
undervalued according to J.P. Morgan's proprietary research. First various
models are used to quantify J.P. Morgan's fundamental stock research, producing
a ranking of companies within each industry according to their relative value.
The Fund then buys and sells stocks using research and valuation rankings, as
well as the subadviser's assessment of other factors, including:

o Catalysts that could trigger a change in a stock's price Potential reward
o compared to potential risk
o Temporary mispricings caused by market overreactions

Currency Management. J.P. Morgan actively manages currency exposure in
conjunction with the country allocation and stock selection in an attempt to
protect and possibly enhance the Fund's returns. It manages the currency
exposure of foreign investments relative to the MSCI World Index, and may hedge
foreign currency exposure into the U.S. dollar or from one foreign currency into
another.

The Fund will use derivatives for hedging and for risk management (i.e. to
establish or adjust exposure to particular securities, markets or currencies).
Although the Fund may use derivatives that incidentally involve leverage, it
does not use them for the specific purpose of leveraging its portfolio.

Principal Risks

Because the value of your investment will fluctuate, there is the risk that you
will lose money. Your investment will decline in value if the value of the
Fund's investments decreases.

Foreign risk. Investments in foreign securities involve risks in addition to
those of U.S. investments. These risks include political and economic risks,
currency fluctuations, higher transaction costs, and delayed settlement. In
addition, the "Euro" began serving as a new common currency for participating
European nations on January 1, 1999. It is unclear whether the newly created
accounting, clearing, settlement and payment systems for the new currency will
be adequate.

Derivative risk. The Fund invests in securities that are considered to be
derivatives. The value of derivative (like futures and options) is dependent
upon the performance of underlying assets, securities or indicies. If the
underlying assets, securities or indicies do not perform as expected, the value
of the derivative and your investment in the Fund declines. Derivatives are more
volatile and are riskier than traditional investments. To the extent the Fund
enters into these transactions, their success will depend upon the subadviser's
ability to predict pertinent market movement.

For more detailed information about the Fund's investments and risks, see "More
About the Funds."

12
<PAGE> 50

Performance

Annual Total Returns:

1998*: 19.1%

Best qtr.: 19.1% 4th qtr. of 1998 Worst qtr.: -12.5% 3d qtr. of 1998

Average annual total returns as of 12/31/98:

<TABLE>
<CAPTION>
1 Year Since Inception*
------ ----------------
<S> <C> <C>
The Fund 19.14% 17.47%

Morgan Stanley
Capital
International
(MSCI) World
Index 22.78% 22.02%
</TABLE>

* The Fund commenced operation on October 31, 1997.

The Morgan Stanley Capital (MSCI) World Index is an unmanaged,
capitalization-weighted index containing companies whose securities are listed
on the stock exchanges of the U.S., Europe, Canada, Australia, and the Far East.
Unlike mutual funds, the MSCI World Index does not incur expenses. If this index
incurred expenses, the actual returns of this index would be lower.

Fees and expenses

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

<TABLE>
<S> <C>
Shareholder Fees(1) (paid
directly from your investment) None

Annual Fund Operating Expenses
(deducted from Fund assets)

Management Fees 1.00%
Other Expenses 0.46%
----
Total Annual Fund Operating Expenses(2) 1.46%
====
</TABLE>

Example

This example shows what you could pay in expenses over time. You can also use
this example to compare the cost of this Fund with other mutual funds.

<TABLE>
<CAPTION>
1 Year 3 years 5 years 10 Years
------ ------- ------- --------
<S> <C> <C> <C>
$149 $462 $797 $1,746
</TABLE>

(2) Until further notice, NAS has agreed to waive management fees and, if
necessary, to reimburse "Other Expenses" so that Total Annual Operating Expenses
will not exceed 1.20%.

13
<PAGE> 51

Nationwide Equity Income Fund

Objective

The Fund has as its investment objective above average income and capital
appreciation. The Fund's investment objective can be changed by the Fund's
Trustees without shareholder approval.

Principal Strategies

NAS has selected Federated Investment Counseling as a subadviser to manage the
Fund's portfolio on a day-to-day basis. The Fund pursues its investment
objective by investing primarily in income producing U.S. and foreign equity
securities and securities that are convertible into common stock.

The subadviser ranks the future performance potential of companies based on
valuation models which attempt to identify companies trading at low valuation
relative to their history, to the market and to their expected future growth. To
determine the timing of purchases and sales of portfolio securities, the
subadviser looks at recent stock price performance and the direction of current
fiscal year earning estimates. In addition, the subadviser performs traditional
fundamental analysis of an individual company's financial history to select the
most promising companies for the Fund's portfolio. After performing these types
of analyses on equity securities, the Fund generally will sell a security only
if a better replacement can be found. However, if the fundamental analysis
indicates problems with the security, the subadviser will sell the security.

Companies with similar characteristics may be grouped together in broad
categories called sectors. In determining the amount to invest in a security,
the subadviser limits the Fund's exposure to each sector that comprises the S&P
500 Index. The S&P 500 Index, published by Standard & Poor's Corporation, is an
index consisting of approximately 500 widely-held stocks of large U.S.
companies. In seeking to manage sector risk, the Fund's allocation to a sector
will be no more than 120% and no less than 80% of the S&P 500 Index's allocation
to that sector.

Principal Risks

Because the value of your investment will fluctuate, there is the risk that you
will lose money. Your investment will decline in value if the value of the
Fund's investments decreases.

Sector risk. Companies with similar characteristics may be grouped together in
broad categories called sectors. Sector risk is the possibility that a certain
sector may perform differently than other sectors or the market as a whole. As
the subadviser allocates more of the Fund's portfolio holdings to a particular
sector, the Fund's performance will be more susceptible to any economic,
business or other developments which generally affect that sector.

For more detailed information about the Fund's investments and risks, see "More
About the Funds."

Performance

Annual Total Returns:

1998*: 15.1%

Best qtr.: 16.2% 4th qtr. of 1998 Worst qtr.: -9.0% 3d qtr. of 1998

Average annual total returns as of 12/31/98:

<TABLE>
<CAPTION>
1 Year Since Inception*
------ ----------------
<S> <C> <C>
The Fund 15.13% 14.64%

The S&P 500
Index 28.58% --
</TABLE>

* The Fund commenced operation on October 31, 1997.

14
<PAGE> 52

Fees and expenses

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

<TABLE>
<S> <C>
Shareholder Fees(1) (paid
directly from your investment) None

Annual Fund Operating Expenses
(deducted from Fund assets)

Management Fees 0.80%
Other Expenses 0.35%

Total Annual Fund Operating Expenses(2) 1.15%
</TABLE>

Example

This example shows what you could pay in expenses over time. You can also use
this example to compare the cost of this Fund with other mutual funds.

<TABLE>
<CAPTION>
1 Year 3 years 5 years 10 Years
------ ------- ------- --------
<S> <C> <C> <C>
$117 $365 $633 $1,398
</TABLE>

(2) Until further notice, NAS has agreed to waive management fees and, if
necessary, to reimburse "Other Expenses" so that Total Annual Operating Expenses
will not exceed 0.95%.

15
<PAGE> 53

Nationwide Balanced Fund

Objective

The primary investment objective of the Fund is to obtain above average income
(compared to a portfolio entirely invested in equity securities). The Fund's
secondary objective is to take advantage of opportunities for growth of capital
and income. The Fund's investment objective can be changed by the Fund's
Trustees without shareholder approval.

Principal Strategies

NAS has selected Salomon Brothers Asset Management Inc as a subadviser to manage
the Fund's portfolio on a day-to-day basis. The Fund invests in a broad range of
equity and fixed income securities of both U.S. and foreign issuers. The Fund
varies its allocations between equity and fixed income securities depending on
the subadviser's view of economic and market conditions, fiscal and monetary
policy and security values. However, under normal market conditions, at least
40% of the Fund's total assets are invested in equity securities and at least
25% of the Fund's total assets are invested in fixed income senior securities.
The Fund may also invest in mortgage- and asset-backed securities.

Credit Quality: The Fund's investments in fixed-income securities are primarily
investment grade, rated in the four highest rating categories by a nationally
recognized statistical rating organization ("NRSRO"), but the Fund may invest up
to 20% of its assets in nonconvertible fixed income securities rated below
investment grade or in unrated securities of equivalent quality. Securities
rated below investment grade are commonly referred to as "junk bonds."

Maturity: The Fund's investments in fixed-income securities may be of any
maturity.

The subadviser considers both macroeconomic and issuer specific factors in
selecting debt securities for the Fund's portfolio. In assessing the appropriate
maturity rating and sector weighing of the Fund's portfolio, the subadviser
considers a variety of macroeconomic factors that are expected to influence
economic activity and interest rates. These factors include fundamental economic
indicators, Federal Reserve monetary policy and the relative value of the U.S.
dollar compared to other currencies. Once the subadviser determines the
preferable portfolio characteristics, the subadviser selects individual
securities based upon the terms of the securities (such as yields compared to
U.S. Treasuries or comparable issuers), liquidity and rating, and sector and
issuer diversification. The subadviser also employs fundamental research and due
diligence, examining the financial records of an issuer to assess an issuer's:

o credit quality taking into account financial condition and profitability
o future capital needs
o potential for change in rating and industry outlook the
o competitive environment and management ability

In selecting equity securities for the Fund, the subadviser applies a bottom-up
analysis, focusing on companies with:

o Large market capitalizations (market capitalization is simply the number
of outstanding shares multiplied by current share price)
o Favorable dividend yields and price to earnings ratios (price of a stock
divided by its earnings per share, which provides a measure of how much
you are paying for the company's earning power)
o Stocks that are less volatile than the market as a whole
o Strong balance sheets
o A catalyst for appreciation and restructuring potential, product
innovation or new development

The subadviser sells a security when more favorable opportunities are
identified.

Principal Risks

Because the value of your investment will fluctuate, there is the risk that you
will lose money. Your investment will decline in value if the value of the
Fund's investments decreases.

Foreign Risk. Investments in foreign securities involve risks in addition to
those of investments in U.S. companies. These risks include political and
economic risks, currency fluctuations, higher transaction costs, and delayed
settlement. In addition, the "Euro" began serving as a new common currency for
participating European nations on January 1, 1999. It is unclear whether the
newly created accounting, clearing, settlement, and payment systems for the new
currency will be adequate.

16
<PAGE> 54

will decline in value if the value of the Fund's investments decrease.

Credit risk. Credit risk is the risk that the issuer of a debt security will be
unable to make the required payments of interest and/or repay the principal when
due. In addition, there is a risk that the rating of a debt security of the Fund
may be lowered if an issuer's financial condition changes, which may lead to a
greater price fluctuation in the Fund. These risks are particularly strong for
securities rated below investment grade.

Lower Rated Securities Risk. Investment in high yield securities involves
substantial risk of loss. These securities are considered speculative with
respect to the issuer's ability to pay interest and principal when due and are
susceptible to default or decline in market value due to adverse economic and
business developments. The market values for high yield securities tends to be
very volatile and these securities are less liquid than investment grade debt
securities. For these reasons, your investment in the Fund is subject to the
following specific risks:

o increased price sensitivity to changing interest rates and to adverse
economic and business developments;
o greater likelihood that adverse economic or company specific events will
make the issuer unable to make interest and/or principal payments; and
o negative market sentiment towards high yield securities depresses the
price and liquidity of high yield securities (this negative perception
could last for a significant period of time).

For more detailed information about the Fund's investments and risks, see "More
About the Funds."

Performance

Annual Total Returns:

1998*: 8.1%

Best qtr.: 6.9% 1st qtr. of 1998 Worst qtr.: -4.8% 3d qtr. of 1998

Average annual total returns as of 12/31/98:

<TABLE>
<CAPTION>
1 Year Since Inception*
------ ----------------
<S> <C> <C>
The Fund 8.07% 8.26%

Blend of the
S&P 500 Index
(50%) and the
Lehman Brothers
Aggregate Bond
Index (50%) 18.63% 19.79%
</TABLE>

* The Fund commenced operation on October 31, 1997.

The table compares the Fund's performance to a blend of the S&P 500 Index and
the Lehman Brothers Aggregate Bond Index. Each index is weighted 50% in
determining the blended return, which approximates the weightings of the equity
and fixed income securities in the Fund's portfolio. The Standard & Poor's 500
Index--an unmanaged index of 500 widely-held stocks of large U.S.
companies--gives a broad look at how the stock prices of large U.S. companies
have performed. The Lehman Brothers Aggregate Bond Index is an unmanaged index
containing individually priced U.S. Treasury, agency, corporate, and mortgage
pass-through securities rated investment grade (BBB) or better. Unlike mutual
funds, the S&P 500 Index and the Lehman Brothers Aggregate Bond Index do not
incur expenses. If these indices incurred expenses, their returns would be
lower.

Fees and expenses

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

<TABLE>
<S> <C>
Shareholder Fees(1) (paid
directly from your investment) None

Annual Fund Operating Expenses
(deducted from Fund assets)

Management Fees 0.75%
Other Expenses 0.21%

Total Annual Fund Operating Expenses(2) 0.96%
</TABLE>

(2) Until further notice, NAS has agreed to waive management fees and, if
necessary, to reimburse "Other Expenses" so that Total Annual Operating Expenses
will not exceed 0.90%.

17
<PAGE> 55

Example

This example shows what you could pay in expenses over time. You can also use
this example to compare the cost of this Fund with other mutual funds.

<TABLE>
<CAPTION>
1 Year 3 years 5 years 10 Years
------ ------- ------- --------
<S> <C> <C> <C>
$98 $306 $530 $1,172
</TABLE>

18
<PAGE> 56

Nationwide Multi Sector Bond Fund

Objective

The primary objective of the Fund is to seek a high level of current income. The
Fund also seeks capital appreciation. The Fund's investment objective can be
changed by the Fund's Trustees without shareholder approval.

Principal Strategies

NAS has selected Salomon Brothers Asset Management, Inc. as a subadviser to
manage the Fund's portfolio on a day-to-day basis. The Fund invests primarily in
a globally diverse portfolio of fixed income securities. The subadviser has
broad discretion to allocate the Fund's assets among the following segments of
the international market for fixed income securities:

o U.S. government obligations
o Investment grade U.S. corporate debt
o Non-investment grade U.S. corporate debt
o Mortgage-and asset-backed securities
o Sovereign debt (foreign government debt)
o Brady Bonds
o Investment and non-investment grade foreign corporate obligations

Fixed income securities may have all types of interest rate payment and reset
terms, including fixed rate, adjustable rate, zero coupon, contingent deferred
payment, in kind, and auction rate features.

Credit quality: The Fund invests in fixed income securities across a range of
credit qualities and may invest a substantial portion of the Fund's assets in
obligations rated below investment grade (rated below the four highest rating
categories by a nationally recognized statistical rating organization
("NRSRO")), or, if unrated, of equivalent quality as determined by the manager.
Below investment grade securities are commonly referred to as "junk bonds".

Maturity: The Fund has no specific average portfolio maturity requirement, but
generally anticipates maintaining a range of 4.5 to 10 years. The Fund may hold
individual securities of any maturity.

The subadviser seeks to measure the relative risks and opportunities of each
market segment based upon economic, market, political, currency and technical
data and the subadviser's own assessment of economic and market conditions. The
subadviser then seeks to create an optimal risk/return allocation of the Fund's
assets among various segments of the fixed income market. After the subadviser
makes its segment allocations, the subadviser uses traditional credit analysis
to identify individual securities for the Fund's portfolio. The subadviser sells
a security to maintain its optimal risk/return allocation for the Fund.

In selecting corporate debt for investment, the subadviser considers the
issuer's:

Financial condition Sensitivity to economic conditions and trends Operating
history Experience and track record of management

In selecting foreign government debt for investment, the subadviser considers
the issuer's:

o Economic and political conditions within the issuer's country.
o Debt levels and debt service ratios outside the issuer's country.
o Access to capital markets.
o Debt service payment history.

In selecting U.S. government obligations and mortgage-backed securities for
investment, the subadviser considers the following factors:

o Yield curve shifts
o Credit quality
o Changing pre-payment patterns

Principal Risks

Because the value of your investment will fluctuate, there is the risk that you
will lose money. Your investment will decline in value if the value of the
Fund's investments decreases.

Interest rate risk. Interest rate risk is the risk that increases in market
interest rates may decrease the value of debt securities held by the Fund. In
general, the prices of debt securities fall when interest rates increase and
rise when interest rates decrease. Typically, the longer the maturity of a debt
security, the more sensitive it is to price shifts as a result of interest rate
changes. Your investment will decline in value if the value of the Fund's
investments decrease.

Credit risk. Credit risk is the risk that the issuer of a debt security will be
unable to make the required payments of interest and/or repay the principal when
due. In addition, there is a risk that the rating of a debt security may be
lowered if an issuer's financial condition changes, which may lead to a greater
price fluctuation in the Fund. These risks are particularly strong for
securities rated below investment grade.

Prepayment risk. The issuers of mortgage-backed and asset-backed securities held
by the Fund may be able to repay principal in advance. This prepayment risk
often occurs when interest rates fall. Changes in pre-payment

19
<PAGE> 57

rates can make the price and yield of mortgage- and asset-backed securities
volatile. When mortgage- and asset-backed securities are prepaid, the Fund may
have to reinvest in securities with a lower yield. The Fund also may fail to
recover premiums paid for the securities, resulting in an unexpected capital
loss.

Foreign risk. Investments in foreign securities involve risks in addition to
those of U.S. investments. These risks include political and economic risks,
currency fluctuations, higher transaction costs, and delayed settlement. In
addition, the "Euro" began serving as a new common currency for participating
European nations on January 1, 1999. It is unclear whether the newly created
accounting, clearing, settlement and payment systems for the new currency will
be adequate.

Lower-rated securities risk. Investment in lower-rated or high yield securities
involves substantial risk of loss. These securities are considered speculative
with respect to the issuer's ability to pay interest and principal and are
susceptible to default or decline in market value due to adverse economic and
business developments. The market values for high yield securities tends to be
very volatile, and these securities are less liquid than investment grade debt
securities. For these reasons, your investment in the Fund is subject to the
following specific risks:

o Increased price sensitivity to changing interest rates and to adverse
economic and business developments.
o Greater risk of loss due to default or declining credit quality.
o Greater likelihood that adverse economic or company specific events will
make the issuer unable to make interest and/or principal payments.
o Negative market sentiment towards high yield securities depresses the
price and liquidity of high yield securities. This negative perception
could last for a significant period of time.

For more detailed information about the Fund's investments and risks, see "More
About the Funds."

Performance

Annual Total Returns:

1998*: 2.6%

Best qtr.: 2.6% 4th qtr. of 1998 Worst qtr.: -2.0% 3d qtr. of 1998

Average annual total returns as of 12/31/98:

<TABLE>
<CAPTION>
1 Year Since Inception*
------ ----------------
<S> <C> <C>
The Fund 2.60% 3.16%
Lehman Brothers
Aggregate Bond
Index 8.69% 8.76%
</TABLE>

* The Fund commenced operation on October 31, 1997.

The Lehman Brothers Aggregate Bond Index is a market-weighted index containing
individually priced U.S. Treasury, agency, corporate, and mortgage pass-through
securities corporate rated investment-grade (BBB) or better. Unlike mutual
funds, the Lehman Brothers Aggregate Bond Index does not incur expenses. If this
index incurred expenses, its returns would be lower.

Fees and expenses

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

<TABLE>
<S> <C>
Shareholder Fees(1) (paid
directly from your investment) None

Annual Fund Operating Expenses
(deducted from Fund assets)
Management Fees 0.75%
Other Expenses 0.21%
----
Total Annual Fund Operating Expenses(2) 0.96%
====
</TABLE>

(2) Until further notice, NAS has agreed to waive management fees and, if
necessary, to reimburse "Other Expenses" so that Total Annual Operating Expenses
will not exceed 0.90%.

20
<PAGE> 58

Example

This example shows what you could pay in expenses over time. You can also use
this example to compare the cost of this Fund with other mutual funds.

<TABLE>
<CAPTION>
1 Year 3 years 5 years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
$98 $306 $530 $1,172
</TABLE>

21
<PAGE> 59

Nationwide High Income Bond Fund

Objective

The Fund seeks to provide high current income. The Fund's investment objective
can be changed without shareholder approval.

Principal Strategies

NAS has selected Federated Investment Counseling as a subadviser to manage the
Fund's portfolio on a day-to-day basis. The Fund provides exposure to the
high-yield, lower-rated corporate bond market. At least 65% of the Fund's total
assets are invested in these so-called "junk" bonds, which are corporate bonds
rate BB or lower. The subadviser actively manages the Fund's portfolio, seeking
to realize the potentially higher returns of high-yield bonds by minimizing
default risk and other risks through security selection and diversification.
Some of the fixed income securities may be convertible into stock of the issuer
or otherwise react more closely to movements of the stock market rather than the
bond market.

The methods by which the subadviser attempts to reduce the risks involved in
lower-rated securities include:

o Credit Research. The subadviser performs its own credit analysis in
addition to using rating organizations and other sources, and may have
discussions with the issuer's management or other investment analysts
regarding issuers. The subadviser performs a credit-intensive, fundamental
analysis of the financial records of the issuer which focuses on the
financial condition of high yield issuers. In selecting a portfolio
security, the subadviser also analyzes the issuer's business and product
strength, competitive position and responsiveness to changing business and
market conditions, management expertise, and financial condition and
anticipated cash flow and earnings to assess whether the security's risk
is commensurate with its potential return. In evaluating an issuer, the
subadviser places special emphasis on the estimated current value of the
issuer's assets rather than its historical cost.

o Diversification. The subadviser invests in securities of many different
issuers, industries, and economic sectors to reduce portfolio risk.

o Economic Analysis. The subadviser analyzes current developments and trends
in the economy and in the financial markets.

The fixed income securities that the Fund purchases include corporate debt
securities, zero coupon securities, convertible securities and preferred stocks.

Principal Risks

Because the value of your investment will fluctuate, there is the risk that you
will lose money. Your investment will decline in value if the value of the
Fund's investments decreases.

Interest rate risk. Interest rate risk is the risk that increases in market
interest rates may decrease the value of debt securities. In general, the prices
of debt securities fall when interest rates increase and rise when interest
rates decrease. Typically, the longer the maturity of a debt security, the more
sensitive it is to price shifts as a result of interest rate changes. Your
investment will decline in value if the value of the Fund's investments
decrease.

Credit risk. Credit risk is the risk that the issuer of a debt security will be
unable to make the required payments of interest and/or repay the principal when
due. In addition, there is a risk that the rating of a debt security may be
lowered if an issuer's financial condition changes, which may lead to a greater
price fluctuation in the Fund. These risks are particularly strong for debt
securities rated below investment grade.

22
<PAGE> 60

Call Risk

Call risk is the possibility that an issuer may redeem a debt security before
maturity ("call") at a price below its current market price. An increase in the
likelihood of a call may reduce the security's price. If a debt security is
called, the Fund may have to reinvest the proceeds in other debt securities with
lower interest rates, higher credit risks, or other less favorable
characteristics.

Liquidity Risk

Fixed income securities that have noninvestment grade credit ratings, that have
not been rated or that are not widely held may trade less frequently than other
securities. This may increase the price volatility of these securities.

For more detailed information about the Fund's investments and risks, see "More
About the Funds."

Performance

Annual Total Returns:

1998*: 5.8%

Best qtr.: 4.7% 4th qtr. of 1998 Worst qtr.: -3.3% 3d qtr. of 1998

Average annual total returns as of 12/31/98:

<TABLE>
<CAPTION>
1 Year Since Inception*
------ ----------------
<S> <C> <C>
The Fund 5.80% 7.04%
Lehman Brothers
High Yield Index 1.60% 2.97%
</TABLE>

* The Fund commenced operation on October 31, 1997.

The Lehman Brothers High Yield Index contains fixed-rate, publicly issued bonds
rated below investment grade. Bonds in this index are dollar-denominated and
non-convertible and have at least one year remaining to maturity and an
outstanding par value of at least $100 million. Unlike mutual funds, the Lehman
Brothers High Yield Index does not incur expenses. If this index incurred
expenses, the actual returns of this index would be lower.

Fees and expenses

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

<TABLE>
<S> <C>
Shareholder Fees(1) (paid
directly from your investment) None

Annual Fund Operating Expenses
(deducted from Fund assets)

Management Fees 0.80%
Other Expenses 0.32%
----
Total Annual Fund Operating Expenses(2) 1.12%
====
</TABLE>

Example

This example shows what you could pay in expenses over time. You can also use
this example to compare the cost of this Fund with other mutual funds.

<TABLE>
<CAPTION>
1 Year 3 years 5 years 10 Years
------ ------- ------- --------
<S> <C> <C> <C>
$114 $356 $617 $1,363
</TABLE>

(2) Until further notice, NAS has agreed to waive management fees and, if
necessary, to reimburse "Other Expenses" so that Total Annual Operating Expenses
will not exceed 0.95%.

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<PAGE> 61

More About the Funds

Principal Risks and Techniques

The Funds may use the following principal investment techniques to increase
returns, protect assets or diversify investments. These techniques are subject
to certain risks. Because the value of your investment in a Fund will fluctuate,
there is the risk that you will lose money. For additional information about the
Funds' investment strategies and techniques, see the Statement of Additional
Information.

Principal Risks

Small Cap Risk. Historically, small cap companies have been more volatile in
price than larger company securities, especially over the short term. Among the
reasons for the greater price volatility are the less certain growth prospects
of small companies, the lower degree of liquidity in the markets for such
securities, changes in investor perception of value, and the greater sensitivity
of small cap companies to changing economic conditions. In addition, small cap
companies may lack depth of management, they may be unable to generate funds
necessary for growth or development, they may be developing or marketing new
products or services for which markets are not yet established and may never
become established, or their products or services may become quickly obsolete.
In particular, small cap companies in the technology and biotechnology
industries may be subject to abrupt or erratic price movements. Therefore, while
small cap companies may offer greater opportunities for capital growth than
larger, more established companies, they also involve greater risks and should
be considered speculative.

Foreign Risk

o Country. General securities market movements in any country where a Fund
has investments are likely to affect the value of the securities the Fund
owns that trade in that country. These movements will affect a Fund's
share price and a Fund's performance. The political, economic and social
structures of some countries in which a Fund invests may be less stable
and more volatile than those in the U.S. The risks of investing in these
countries include the possibility of the imposition of exchange controls,
currency devaluations, foreign ownership limitations, expropriation,
restrictions on removal of currency or other assets, nationalization of
assets, punitive taxes and certain custody and settlement risks.

o Company. Foreign companies are not subject to the same disclosure,
accounting, auditing and financial reporting standards and practices as
U.S. companies and their securities may not be as liquid as securities of
similar U.S. companies. Foreign stock exchanges, trading systems, brokers
and companies generally have less government supervision and regulation
than in the U.S. A Fund may have greater difficulty voting proxies,
exercising shareholder rights, pursuing legal remedies and obtaining
judgments with respect to foreign investments in foreign courts than with
respect to U.S. companies in U.S. courts.

o Currency. Some of a Fund's investments may be denominated in foreign
currencies. Changes in foreign currency exchange rates will affect the
value of what the Fund owns and the Fund's share price. Generally, when
the U.S. dollar rises in value against a foreign currency, an investment
in that country loses value because that currency is worth fewer U.S.
dollars. Devaluation of currency by a country's government or banking
authority also has a significant impact on the value of any securities
denominated in that currency.

Prepayment Risk and Extension Risk. Prepayments of principal on mortgage- and
asset-backed securities affect the average life of a pool of such securities.
Prepayments are affected by the level of interest rates and other factors. In
periods of rising interest rates, the prepayment rate tends to decrease,
lengthening average life of a pool of mortgage- and asset-backed securities. In
periods of falling interest rates, the prepayment rate tends to increase,
shortening the average life of a pool of mortgage- and asset-backed securities.
Prepayment risk is the risk that, because prepayments generally occur when
interest rates are falling, a Fund may have to reinvest the proceeds from
prepayments at lower rates. Extension risk is the risk that anticipated payments
on principal may not occur, typically because of a rise in interest rates, and
the expected maturity of the security will increase. During periods of rapidly
rising interest rates, the anticipated maturity of a security may be extended
past what the portfolio manager anticipated, affecting the maturity and
volatility of a Fund.

Risks related to investing for value. Due to their relatively low valuations,
value stocks are typically less volatile than growth stocks. For instance, the
price of a value stock may experience a smaller increase on an analyst's upward
earnings estimate revision, a positive fundamental development, or other
positive market development. Further, value stocks tend to have higher dividend
yields than growth stocks. This means they depend less on price changes for
returns. Accordingly, they might not participate in upward market movements, but
may be less adversely affected in a down market compared to lower yielding
stocks.

Principal Investment Techniques

Preferred Stock. Preferred stocks, like debt obligations, are generally
fixed-income securities. Shareholders of preferred stocks normally have the
right to received dividends at a fixed rate when and as declared by the issuer's
board of directors but do not participate in other amounts available for
distribution by the issuing corporation. Dividends on preferred stock may be

24
<PAGE> 62

cumulative, and all cumulative dividends usually must be paid before common
shareholders receive any dividends. Because preferred stock dividends must be
paid before common stock dividends, preferred stocks generally entail less risk
than common stocks. Upon liquidation, preferred stocks are entitled to a
specified liquidation preference, which is generally the same as the par or
stated value, and are senior in right of payment to common stock. Preferred
stocks, however, are equity securities in the sense that they do not represent a
liability of the issuer and, therefore, do not offer as great a degree of
protection of capital or assurance of continued income as investments in
corporate debt securities. In addition, preferred stocks are subordinated in
right of payment to all debt obligations and creditors of the issuer, and
convertible securities may be subordinated to other preferred stock of the same
issuer.

Convertible Securities. Convertible securities--also known as
convertibles--include bonds. debentures, notes, preferred stocks, and other
securities. Convertibles are a hybrid bond/stock security. Like bonds, they pay
interest. Because they can be converted into common stocks (within a set period
of time, at a specified price or formula), convertibles also offer the chance
for capital appreciation, like common stock.

Convertibles tend to be more stable in price than their underlying common stock,
although price changes in the underlying common stock can affect the
convertible's market value. For example, as an underlying common stock loses
value, convertibles present less opportunity for capital appreciation, and may
also lose value. Convertibles, however, may sustain their value better than the
common stock because they pay bond-like income, which tends to be higher than
common stock dividend yields.

Because of this fixed-income feature, convertibles may compete with bonds as a
good source of dependable income. Therefore, if interest rates increase and
"newer," better-paying bonds become more attractive, the value of convertibles
may decrease. Conversely, if interest rates decline, convertibles could increase
in value.

Convertibles tend to be more secure than common stock (companies must generally
pay holders of convertibles before they pay common stock shareholders), but they
are typically less secure than similar non-convertible securities such as bonds
(bondholders must be generally paid before holders of convertibles and common
stock shareholders). Because convertibles are usually subordinate to bonds in
terms of payment priority, convertibles typically are rated below investment
grade by an NRSRO, or they are not rated at all.

Zero Coupon Securities. Zero coupon securities pay no interest during the life
of the security, and are issued by a wide variety of corporate and governmental
issuers. Certain zero coupon securities are sold at a deep discount.

Zero coupon securities may be subject to greater price changes as a result of
changing interest rates than bonds that make regular interest payments. Their
value tends to grow more during periods of falling interest rates and conversely
tends to fall more during periods of rising interest rates than bonds that make
regular interest payments. Although they are not traded on a national securities
exchange, they are widely traded by brokers and dealers, and are considered
liquid. Investors in zero coupon bonds are required by federal income tax laws
to pay interest on the payments they would have received had a payment been
made. So, to avoid federal income tax liability, a Fund may be required to make
distributions to shareholders and may have to sell some of their assets at
inappropriate times in order to generate cash to make distributions.

U.S. Government Securities. These securities include Treasury bills, notes, and
bonds, securities issued or guaranteed by the U.S. Government and securities
issued by U.S. Government agencies, including:

o The Federal Housing Administration, the Farmers Home Administration, and
the Government National Mortgage Association ("GNMA"), including GNMA
pass-through certificates, which are backed by the full faith and credit
of the United States.
o The Federal Home Loan Banks
o The Federal National Mortgage Association ("FNMA")
o The Student Loan Marketing Association and Federal Home Loan Mortgage
Corporation ("FHLMC")
o The Federal Farm Credit Banks

Although there is virtually no credit risk with these U.S. Government
Securities, neither the U.S. Government nor its agencies guarantee the market
value of their securities. Interest rate changes, prepayment and other factors
may affect the value of these securities.

Mortgage-backed and Asset-backed Securities. U.S. Government mortgage-backed
securities are securities that are secured by and paid from a pool of mortgage
of mortgage loans on real property and issued or guaranteed by the U.S.
Government or one of its agencies. Mortgage-backed securities may also be issued
by private issuers.

These securities are subject to interest rate risk and credit risk if they are
issued by private issuers. CMOs and other mortgage-backed securities are also
subject to prepayment risk. With respect to prepayment risk, when interest rates
fall, homeowners may refinance their loans and the mortgage-backed security will
be paid off sooner than the portfolio manager anticipated. Reinvesting the
returned

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<PAGE> 63

principal in a lower interest rate market reduces the Fund's income.
Mortgage-backed securities are also subject to extension risk and the
possibility of losing principal as a result of prepayments.

Derivatives. A derivative is a contract whose value is based on the performance
of an underlying financial asset, index or other investment. For example, an
option is a derivative because its value changes in relation to the performance
of an underlying stock. An option on a futures contract is where the option
value varies with the value of the underlying futures contract, which in turn
varies with the value of the underlying commodity or security. Derivatives are
available based on the performance of assets, interest rates, currency exchange
rates, and various domestic foreign indexes. Derivatives afford leverage and can
also be used in hedging portfolios.

Sovereign Debt. Sovereign debt includes:

o Fixed income securities issued or guaranteed by governments, governmental
agencies or instrumentalities and political subdivisions located in
foreign countries.
o Fixed income securities issued by government owned, controlled or
sponsored entities located in foreign countries.
o Debt securities issued by entities organized and operated for the purpose
of restructuring the investment characteristics of instruments issued by
any of the above issuers.
o Brady Bonds, which are debt securities issued under the framework of the
Brady Plan as a means for debtor nations to restructure their outstanding
external indebtedness.
o Participations in loans between foreign governments and financial
institutions.
o Fixed income securities issued by supranational entities such as the World
Bank or the European Economic Community. A supranational entity is a bank,
commission or company established or financially supported by the national
governments of one or more countries to promote reconstruction or
development.

Other Investment Techniques

The Statement of Additional Information ("SAI") contains additional information
about the Funds, including the Funds' other investment techniques. To obtain a
copy of the SAI, see the back cover page.

Temporary Defensive Positions

Management

Management Discussion

The following is the management discussion and analysis for each Fund, except
the Select Advisers Small Cap Growth Fund, from each of the subadvisers. The
management discussion and analysis provides an overview of the economy, its
impact on each Fund for the year ended October 31, 1998 and a look into future
prospects from the perspective of each subadviser. Within this section, "We,"
"Us" and "Our" refers to the subadviser of the Fund and "I" refers to the
portfolio manager of the Fund.

Nationwide Strategic Growth and Strategic Value Funds. The year began with a
broad rally in the U.S. Equity Markets as large, small, and mid cap stocks all
posted strong first quarter gains. The rally stalled in mid-April amid concerns
about corporate earnings weakness stemming from the Asian financial crisis.
April also marked the beginning of the market divergence between high-growth
large cap stocks and the rest of the market, which has punished small caps and
value stocks for much of 1998. Large cap stocks shook off the fears and
continued to climb resulting in another record high for the S&P 500 in mid-July.

Another wave of selling ensued in late summer, again on fears that the Asian
crisis would de-stabilize prices and lead to slower economic growth in the U.S.
This sparked a massive flight to Treasurys, a tightening of credit conditions,
and a near shut-down of the U.S. corporate bond markets. By early autumn, small
caps and value stocks were firmly entrenched in a bear market, and even the
Teflon large-caps flirted with -20% declines from their July peaks.

Sentiment quickly reversed when a recovery in the foreign markets and three
interest rate cuts by the Federal Reserve, including a surprise reduction
between the normally scheduled FOMC meetings, sparked a rapid recovery in U.S.
stocks. Large cap and technology-related issues led the resurgence as investors
scrambled to put their heavy cash positions back to work. Internet stocks and
IPOs were traded up to such high levels that traditional valuation measures
became pointless. Not even presidential impeachment could restrain the broad
market rally, which finally brought small and mid cap stocks out of hibernation.
Growth stocks continued to outperform value stocks in all market cap segments as
investors paid up for companies with visible earnings.

[Line Graph to be inserted]

Strategic Growth Fund. Despite a strong showing in the fourth quarter, the Fund
underperformed its benchmark, the S&P 500 in 1998. The market turned its favor
toward large cap stocks early in the year and remained focused on

26
<PAGE> 64

a handful of liquid, megacap names until the very last week of the fourth
quarter. Our slant toward small- and medium-sized companies hurt relative
performance in one of the narrowest markets since the early seventies. As of
December 31, 1998, the median market cap of the Fund was 3.6, compared with the
S&P 500, which was 60.3.

During the year, we pared our holdings in slower growing sectors such as
consumer staples, energy, and financials, and shifted to higher growth sectors,
such as technology. The Fund emphasized more technology during the period due to
the sector's high earnings visibility for the coming quarters. Healthcare
holdings were also increased marginally. In summary, areas of emphasis included
technology, healthcare, and retail. The Fund had little or no exposure to basic
materials, energy, cyclicals, or utilities.

Looking ahead to 1999, we foresee an economy characterized by stable, moderate
growth and very low inflation. Prospects for stable or rising earnings growth
should help technology, healthcare, and consumer sectors to lead the market.
Volatility will continue to be an issue in 1999 as valuations are back to peak
levels and any uncertainty can bring sudden and sharp corrections. Provided the
economy avoids a recession, corporate earnings remain positive, and the federal
reserve maintains its bias towards easing, high quality growth stocks should
outperform. We also expect to see broader stock leadership, which includes the
best growing mid and small cap stocks.

[Line Graph to be inserted]

Strategic Value Fund. Despite a strong fourth quarter finish, the Fund
underperformed its benchmark, the S&P 500 for the year. Investments in
commodities-based industries, such as steel and mining, underperformed
throughout the year as commodities prices fell precipitously. The Fund was
significantly underweight in expensive technology stocks, which further hurt
relative performance. Energy stocks continued to slump on falling oil prices due
to excess global supply. It was not until the fourth quarter that the market
began to broaden to include more small and mid cap companies, which have
struggled since April.

During the period, we were very conscientious about owning stocks that fit our
investment criteria. We now have a portfolio that trades at 12 times estimated
1999 earnings estimates, compared with the S&P 500, which trades at a multiple
over 24 times forward earnings. We reduced our commitment in basic materials,
utilities, technology, and capital equipment, and increased transportation, and
financials.

We expect that the focus of investors on a limited number of the very largest
stocks will eventually run its course and that ultimately, the general market
will trade at valuations which are reasonable when compared to the actual and
expected underlying earnings growth rates. The strong performance of small and
mid cap stocks in the fourth quarter indicates that the first step in the
broadening of the market may have begun, and we are hopeful that it will
continue.

[Line Graph to be inserted]

Nationwide Select Advisor's Mid Cap Equity Fund. The Fund returned 10.81% for
1998, as compared to 19.09% for the S&P Mid-Cap 400. Our exposure to smaller to
mid-cap companies proved to be a difficult sector. Small-caps have been under
pressure and have been trading dramatically cheaper than large-caps for an
extended period. Our benchmark is market-cap weighted. If it were equally
weighted, the results for this index in 1998 would have been up 5.0%, or about
half of the reported return. Better returns have been generated from a select
group of the largest cap stocks.

We are seeing improving relative fundamentals for this fund. As 1998 came to an
end, many of the year's problems have lost their intensity. Investors became
less concerned with the "Asian contagion" and the threat of global economic
problems. The Federal Reserve's three rate cuts, strong employment data, and an
ever-spending U.S. consumer have allayed fears of domestic recession. The year
ended on a positive note, with the Conference Board reporting that the Index of
Leading Economic Indicators rose 0.6% in November. This is the largest one-month
rise in almost two years.

Our strategy is to continue focusing on small to mid-cap companies with
improving earnings expectations. The current economic environment is
characterized by a more difficult and slowing trend for earnings. This should
especially be true for the larger-cap companies. Our focus on smaller to
mid-cap, niche-oriented companies should become more attractive to investors
looking for performance.

[Line Graph to be inserted]

Nationwide Small Cap Value Fund. For the year the Fund was down 2.1% while the
Russell 2000 Index was down 2.6%.

The continued divergence in performance between large and small stocks and
between growth and value stocks was particularly extreme in 1998. The S&P Barra
Growth Index, which includes the largest growth stocks, was up 42.2% for the
year while the Russell 2000 Value Index, a measure of performance of smaller
value stocks, was down 6.5%. We believe this dramatic spread in valuation
levels, the largest in over 25 years, has created a compelling opportunity for
long-term investors in smaller capitalization stocks.

Technology, which is the Fund's largest sector weighting, was also the best
performing sector in 1998. The Fund was overweighted in technology issues
beginning last year

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<PAGE> 65

after the stocks declined in the wake of economic problems in Southeast Asia.
Industry demand slowed, earnings were under pressure and the group
underperformed until the fourth quarter. Stock prices were up dramatically last
quarter as business started to improve, excess inventories were reduced and
pricing firmed. The major commitments are in personal computer component
manufacturers, semi-conductor capital equipment producers and software
companies. The Learning Company, Quantum, Maxtor and Symantec were all strong
contributors to 1998 performance. The Fund continues to be overweighted in
technology shares, as valuations remain attractive.

The Fund has a strong commitment to the health care sector as business momentum
is very positive and product innovation and cost containment continues to drive
performance. The focus is on services, the cheapest part of the health care
sector, and select medical products companies whose potential is not yet
reflected in their stock prices. Major contributors to 1998's performance in the
health care sector were Beckman Coulter, ConMed and Wellpoint. Many medical
product companies, rich in technology and with good earnings growth prospects,
continue to be undervalued.

The energy sector was our biggest disappointment last year. The Fund was
overweighted because many of the domestic exploration and production companies
were selling at all-time low valuations. This sector has performed poorly
because oil prices have been under pressure due to weak global demand. We have
recently reduced the exposure, but remain overweighted due to extremely
attractive valuations.

The underweighting in the financial services and utilities sectors continues.
Financial services companies are currently selling at high valuation levels
given their slowing growth prospects. Although utilities outperformed in 1998,
as investors sought a safe haven from the volatile and uncertain global markets,
they were unattractive to us before their recent gains and are even less
attractive today.

Nationwide Small Cap Growth Fund. No discussion of performance is provided
because the Small Cap Growth Fund will not begin operations until about May 1,
1999

Nationwide Global Equity Fund. The total return for the Fund was 19.14% (net of
fees) for the period vs. the MSCI World Index return of 24.34%. The Fund
outperformed the competition for the year- - the Lipper VA Global Funds Average
of 16.19%.

Global equity markets achieved a very credible return over the course of 1998,
despite a very difficult period during the summer months. European equity
markets, in particular, started the year in a strong fashion, reflecting the
continued optimism over the prospects for corporate profits. U.S. stock markets
staged an impressive rise during the fourth quarter, driving results for the
entire year to an unprecedented four years. However, the global market turmoil
in the summer months negatively impacted the U.S. and Continental European
markets as investor sentiment waned. The global market turmoil in the third
quarter turned to global market euphoria in the fourth quarter as markets
everywhere rallied strongly. Stocks were helped by moves to ease monetary policy
in the U.S. and Europe, with the Fed cutting the overnight rate twice during the
quarter, and towards year-end, the European Central Bank orchestrating a
coordinated rate cut. While many continue to worry about a slowing global
economy, the quick responses from central banks and the overreaction to negative
news during the summer provided room for pleasing equity returns.

In contrast to the U.S. and Europe, the Japanese market fell over the year,
although the strength of the Yen in the final quarter resulted in a positive
return in U.S dollars. The outlook for the Japanese economy remains gloomy with
economic growth likely to slip further into recession this year. The extreme
weakness in consumer confidence remains a major problem, as does the recent
strength of the Yen.

Throughout the year, within the U.S. and Europe, the markets have been very
focused, rewarding "growth" companies, emphasizing the very largest, but not
necessarily fundamentally better value companies. Against this backdrop, the
Fund's underweight position in the U.S. and stock picking in Continental Europe
detracted from performance. However, the Fund's underweight position in Japan
enhanced performance throughout the period. On the currency side, the Fund's
overweight U.S. dollar position, versus an underweight yen position, contributed
positively to performance.

After a strong fourth quarter, most equity markets again appear overvalued. This
is particularly true in the U.S. where corporate earnings are anticipated to
come under pressure as a result of weaker foreign demand, excess capacity and
slower domestic capital spending. European stocks are less overvalued, despite
an outlook for corporate profits that may not be as exciting as investors were
prepared to believe earlier in the year. The trend towards corporate
restructuring continues to be intact in Europe, providing support for the equity
markets. The injection of public money into the Japanese banking system is
hardly a positive force for long-term restructuring but at least the danger of
widespread banking collapse has been averted, and near term we have become less
pessimistic about the outlook for the equity market.

[line graph to be inserted]

Nationwide Equity Income Fund. The S&P 500 has just completed its fourth
consecutive year of 20%+ gains. After falling nearly 20% from its July 17 market
peak, the S&P began a dramatic recovery in early October to finish the year with
a total return of 28.58%. While this is an extremely impressive showing, it was
accompanied by

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<PAGE> 66

volatility which had been absent for a number of years. Additionally, the
advance was concentrated in a handful of companies. Specifically, 20 stocks
accounted for 59% of the market's rise, while 100 stocks accounted for 85% of
its gain. Unfortunately, the median gain for a stock in the S&P 500 was only 2%
with over 70% of the stocks lagging the index return. On an equal-weighted
basis, the S&P 500 returned 12.93%. For the fourth quarter ended 12/31/98 the
Fund returned 16.03% surpassing the 13.35% return for the average equity income
fund, as reported by Lipper Analytical Services. On a year-to-date basis, the
Fund's total return of 15.13% is ahead of the 10.89% return of the average
equity income fund.

The economic outlook for 1999 appears weak, particularly on a global basis. Only
limited signs point to a bottoming of Asian economies, while Latin American
economies continue to decelerate. The US economic picture is mixed. Industrial
production is weakening even as consumer spending and confidence remains strong,
aided by declines in energy prices and interest rates. In fact, inflation is
close to zero and deflation has become a real fear. Hardly an industry has had
any pricing power in this environment. The U.S. Federal Reserve along with
central banks around the world have attempted to prevent recessions by reducing
interest rates numerous times since the beginning of October. These efforts have
served to increase liquidity and have fueled the dramatic recovery in the stock
markets, including our own. However, as we progress through 1999, the earnings
growth of both U.S. and foreign companies will likely continue to decelerate.
Additionally, investors will become increasingly aware of potential problems
relating to Y2K compliance. This promises to bring more volatility to the
market.

In the current environment, we believe companies will be challenged to provide
consistent earnings and revenue growth. Companies successful in this regard
should see their stock prices rewarded. The Fund's focus on identifying high
quality market-leading companies with such attributes has been a core strategy
and has helped the Fund's performance. Furthermore, the Fund holds higher
yielding convertible securities and common stocks which have exhibited defensive
qualities in market downturns. Currently, 30% of the Fund's holdings are in
common stocks which have raised their dividend.

[line graph to be inserted]

Nationwide Balanced Fund. For the year 1998, the Nationwide Balanced Fund posted
a 8.07% (net of fees) return versus 18.63% for the benchmark (50% Salomon
Brothers Broad Investment Grade Bond Index and 50% S&P 500). Underperformance
was attributed to the Fund's continued conservative equity allocation and value
style. In an environment characterized by extremely momentum driven markets, we
perform less than the market due to our value style.

The equity market finished its fourth consecutive year of returns in excess of
20% with the S&P 500 returning 28.6%. Investors experienced significant
volatility during the year as the S&P 500 increased more than 20% through early
July, only to fall back into negative territory in the beginning of October.
Worldwide political and economic turmoil resulted in a loss of confidence by
U.S. equity investors late in the summer. By early Fall, however, the Federal
Reserve came to the market's rescue by cutting the federal funds rate and
discount rate. Three consecutive reductions increased investor confidence and
provided liquidity to fuel the market's strong fourth quarter performance.

By early Fall, the Federal Reserve came to the market's rescue by cutting the
federal funds rate and discount rate. As the stock and credit markets rallied
after the Federal Reserve rate cut, the need for the safety of Treasuries was
reduced. Ten year and longer Treasuries rose about 20 basis points in yield and
helped drag the Salomon Broad Investment Grade Bond Index to a -0.45% return for
the month of October. Spread sectors of the market such as mortgage backed
securities, corporate bonds and asset backed securities all did better as the
overall reduction in the global risk premium led to an improving disposition in
those markets. Two additional reductions increased investor confidence and
provided liquidity to fuel the market's strong fourth quarter performance.
Large-cap growth stocks were the only stocks that really drove performance for
the year 1998. We anticipate security markets will be more subdued in 1999.

In the equity portion of our portfolio we maintained our strategy to
significantly overweight those companies where we had the greatest conviction,
i.e. position and concentration. In light of the lack of liquidity in the
market, we took advantage of rallies to weed out our weaker holdings and raise
cash to mid single digit levels. We kept our overweight stance in the consumer
and financial sectors with such new additions as Pepsico, Avon Products,
BankAmerica, and Pharmacia & Upjohn. we were positioned conservatively for the
year, to give investors the upside potential through the Fund's exposure to
equities while limiting downside risk.

We expect value stocks to receive better valuation in the current year as well
as better performance. We believe the portfolio is in a good position to
withstand further market declines if any are experienced and to participate in
market appreciation. Presently, 42% of the portfolio is allocated to Common
Stocks, 7% to Convertible Securities, 26% to Investment Grade, 14% to High Yield
and 11% to Cash.

After seven years of uninterrupted growth, the U.S. economy faces a period of
slowing expansion and threatened instability. Although key areas of economic
activity remain buoyant, gradual slowing remains a likely scenario for 1999. The
Federal Reserve will probably condition further easing on renewed
intensification of

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<PAGE> 67

financial stress of evidence that demand pressures are receding.

We expect interest rates to generally move lower in the first few months of the
year, followed by a gradual rise through the end of 1999. With the expectation
of further Federal Reserve easing, we look for the yield curve to steepen. As
such, long-term bonds may stabilize in a range centered on 5% as long-term
inflation expectations fall.

[line graph to be inserted]

Nationwide Multi Sector Bond Fund. For the year 1998, the Fund returned 2.60%
(net of fees) versus 4.82% for the Lipper General Bond category and 8.68% for
the Lehman Brothers Aggregate Bond Index. The Fund's underperformance was
largely due to its exposure to high yield and emerging markets debt during the
unexpected credit crisis in the summer of 1998.

For bonds, 1998 was a mixture of good and bad news. The good news was that
interest rates fell approximately 1% across the yield curve. Though low
inflation did contribute to lower bond yields, exogenous factors such as equity
market fears, default fears and expectations of spreading global economic
weakness gave investors insufficient reasons to seek only the safety and
liquidity of the Treasury sector. The bad news came for any bond that wasn't a
Treasury, as yield spreads across all sectors of the domestic bond universe
widened toward unexplainable and unsustainable levels. High yield bonds and
emerging market debt suffered through their worst performances in years. This
was largely due to the global spread rout.

Early in 1998, domestic demand readings in the U.S. remained exceptionally
health, benefiting from low interest rates, generation-low unemployment rates
and sky-high consumer confidence. Lower quality high yield bonds outperformed,
so the Fund reaped the profits and upgraded into relatively higher quality
bonds. The Series maintained a neutral duration relative to the Lehman Brothers
Aggregate Bond Index and added to its over weighing in mortgage backed
securities. Discount coupon mortgages and seasoned pass through mortgages
continued to be selected as they offered a more attractive convexity profile
than higher coupon securities. The Fund ended the first quarter with 34% U.S.
Investment Grade Bonds, 24% High Yield Bonds, 15% Emerging Markets Debt, 3%
Non-U.S. Government Bonds and 24% Cash.

The Series maintained its weightings in the high yield sector throughout the
second quarter, as credit fundamentals remained favorable. We continued to seek
opportunities to upgrade credit quality and moved to a more defensive position
within the sector. In the emerging markets sector of the portfolio, we lowered
our exposure to Russia and added Bulgaria and Peru. Mexico and Argentina
continued to be core holdings as their fundamentals remained strong.

During the third quarter, heightened global market volatility caused the Series
to commit to a more defensive stance in its high yield sector and lower its
allocations to the emerging markets debt sector. We continued to decrease the
Series' exposure to Russia and increase its position in Argentina and Mexico as
fundamentals appeared more favorable. The Series continued to favor discount and
coupon mortgage backed securities (MBS) in the investment grade portion of the
portfolio. The Fund ended the third quarter with 52% U.S. Investment Grade
Bonds, 24% High Yield, 14% Emerging Market Debt, 5% Non-U.S. dollar denominated
bonds and 5% Cash.

During the fourth quarter, high yield and emerging debt markets snapped back
strongly when it became apparent to investors that the financial market crisis
was stabilizing. Bold steps taken by the Federal Reserve at lowering short-term
interest rates and restoring liquidity in the markets began to put investors at
ease. We maintained our stance in the high yield sector of the portfolio as
credit spreads had room to improve and interest rates slashed by 75 Basis
points. We have increased our allocations in the emerging markets debt sector as
the markets have recovered some 20% since their lows in early September.

[line graph to be inserted]

Nationwide High Income Fund. The 12 months ending December 31, 1998 was marked
by volatility and generally disappointing returns from a high yield bond
perspective. There were several reasons for the volatility and disappointing
returns. First, problems in the international arena and, more importantly, its
impact on the domestic economy was an area of concern for high yield investors.
At the start of the year, Asia was the main concern but this spread to Russia
and Latin America as the year progressed. Also, the stock market swoon in
mid-summer and hedge fund problems in the latter part of the year highlighted
the somewhat fragile state of the world financial system. Also, falling
commodity prices, while good for consumers, is a negative for high yield
companies in the energy, forest products, metals and mining sectors. Finally,
the economic consensus in the latter part of 1998 pointed to a slowing of the
domestic economy in 1999. These factors caused the yield spread between high
yield bonds and treasury securities, an indicator of the market's perceived
default risk, to increase by approximately 280 basis points during the year.
These factors caused high yield bonds to underperform high quality bonds. For
example, the Lehman Brothers High Yield Bond Index returned 1.87% substantially
underperforming the Lehman Brothers Aggregate Bond Index, a measure of high
quality bond performance, which returned 8.70%.

The Fund returned 5.79% for the year outperforming both the Lehman Brothers High
Yield Bond Index mentioned above as well as the Lipper High Current Yield Fund
Average, which returned -.44% during the year. Several factors positively
impacted the fund's returns during the

30
<PAGE> 68

year. First, the Fund was underweight CCC-rated securities, the lowest quality
sector of the market, which was most impacted by the spread widening that
occurred. The Fund had no direct exposure to emerging markets which negatively
impacted several of the funds in the Lipper average. The Fund was also
underweight energy and commodity related issuers which underperformed during the
year. Overweights in the telecommunications, broadcasting and cable TV sectors
aided performance as these sectors outperformed the overall market. Corporate
actions such as calls, tenders or acquisition activity involving Viacom,
Echostar, Charter Communications and Allied Waste positively impacted
performance.

As we look out into 1999, many contradicting factors are present. On the
negative side, concerns continue regarding the domestic economy's ability to
continue to grow while many of our trading partners, such as Japan, most of Asia
and parts of Latin America, experience economic problems. Falling commodity
prices continue to present problems for specific high yield issuers. The
uncertainty of Y2K and ".com mania" in the equity markets are also causes for
concern. On the plus side, the consensus economic forecast sees the domestic
economy continuing its remarkable growth for another year although at a somewhat
slower pace. Inflation remains almost non-existent and interest rates are low.
The Fed would appear ready to counteract any signs of recession with further
cuts in interest rates. Most importantly, the yield spread between high yield
bonds and treasury securities remains very wide especially in light of the
amazing resilience of the domestic economy. Overall, wide spreads and positive
economic growth should make 1999 a good year for high yield securities although
security selection will be key as slowing growth and little pricing power,
especially in the commodity area, will make for a challenging environment for
many high yield issuers. We maintain our bias toward high quality operating
companies within the high yield market, to companies in secularly growing
industries such as telecommunications and companies in sectors with stable
business profiles like food products, cable TV and broadcasting.

[line graph to be inserted]

Management

Investment Manager

Nationwide Advisory Services, Inc. ("NAS"), Three Nationwide Plaza, Columbus,
Ohio 43215, manages the investment of the assets and supervises the daily
business affairs of the Nationwide Separate Account Trust (the "Trust"). Subject
to the supervision and direction of the Trustees, NAS also determines the
allocation of Fund assets among the subadvisers and evaluates and monitors the
performance of the subadvisers. NAS is also authorized to select and place
portfolio investments on behalf of a Fund; however, NAS does not intend to do so
at this time. NAS and its predecessors have managed investments since 1965. As
of December 31, 1998, NAS had approximately $11.3 billion in assets under
management.

Each Fund pays NAS a management fee, which is based on the Funds' average daily
net assets. The total fee paid by each of the Funds (except the Small Cap
Growth Fund) for the fiscal year ended December 31, 1998--expressed as a
percentage of each Funds' average daily net assets--was as follows:

Fund Fee
---- ---

<S> <C>
Strategic Growth Fund 0.90%

Strategic Value Fund 0.90%

Select Advisers Mid Cap Fund 1.05%

Small Cap Value Fund 0.90%

Small Cap Growth Fund %(1)

Global Equity Fund 1.00%

Equity Income Fund 0.80%

Balanced Fund 0.75%

Multi Sector Bond Fund 0.75%

High Income Fund 0.80%
</TABLE>

(1) Represents the annual management fee payable to NAS, expressed as a
percentage of the Fund's average daily net assets.

Multi-Management Structure

NAS and the Trust have received from the Securities and Exchange Commission an
exemptive order for a multi-manager structure that allows NAS to hire, replace
or terminate subadvisers without the approval of shareholders. The order also
allows NAS to revise a subadvisory agreement with Trustee approval but without
shareholder approval. If a new subadviser is hired, you will receive information
about the new subadviser within 90 days of the change. The order allows the
Funds to operate more efficiently and with greater flexibility.

NAS provides the following oversight and evaluation services to the Funds:

o performing initial due diligence on prospective subadvisers for the Funds
o monitoring the performance of the subadvisers through ongoing analysis, as
well as periodic consultations
o communicating performance expectations and evaluations to the subadvisers
o ultimately recommending to the board of trustees whether a subadviser's
contract should be renewed, modified or terminated.

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<PAGE> 69

The subadvisers. Subject to the supervision of NAS and the Trustees, a
subadviser will manage all or a portion of a Fund's assets in accordance with a
Fund's investment objective and strategies. With regard to the portion of the
Fund assets allocated to it, each subadviser makes investment decisions for a
Fund and in connection with such investment decisions places purchase and sell
orders for securities.

The following are the subadvisers for the Funds offered in this Prospectus.

Strategic Growth Fund

Strong Capital Management, Inc. ("Strong"), P.O. Box 2936, Milwaukee, Wisconsin
53201, is a subadviser for the Strategic Growth Fund. Strong was formed in 1974.
Since then, its principal business has been providing investment advice for
individuals and institutional accounts. Strong provides investment management
services for mutual funds and other investment portfolios representing assets of
over $32 billion as of December 31, 1998.

Portfolio Manager: Ronald C. Ognar, a Chartered Financial Analyst with more than
30 years of investment experience, is primarily responsible for the Strategic
Growth Fund's portfolio. He also manages the Strong Growth Fund, the Strong
Growth Fund II and the Strong Growth 20 Fund; he co-manages the Strong Total
Return Fund and the Strong Mid Cap Growth Fund.

Strategic Value Fund

Schafer Capital Management, Inc. ("Schafer Capital"), 101 Carnegie Center,
Princeton, New Jersey 08540, manages the Strategic Value Fund through a
sub-contract with Strong. Schafer Capital was formed in 1984. As of December 31,
1998, Schafer had approximately $1.6 billion in assets under management. These
assets are managed for other mutual funds and pension plans.

Portfolio Manager: David K. Schafer has been in the investment management
business for more than twenty-five years. Mr. Schafer is the President of
Schafer Capital and is primarily responsible for the day-to-day management of
the Strategic Value Fund's portfolio. In 1981, Mr. Schafer founded Schafer
Capital.

Equity Income Fund and High Income Bond Fund

Federated Investment Counseling ("Federated"), a subsidiary of Federated
Investors, Inc., is the subadviser for the Equity Income Fund and High Income
Bond Fund with offices located at Federated Investors Tower, Pittsburgh, PA
15222-3779. As of December 31, 1998, Federated had approximately $140 billion in
assets under management, representing the assets of other mutual funds and
private accounts.

Equity Income Fund Portfolio Managers

Linda A. Duessel and Steven J. Lehman are primarily responsible for the
day-to-day management of the Equity Income Fund's portfolio. Ms. Duessel joined
Federated Investors in 1991 and has been a Vice President of a subsidiary of the
subadviser since 1995. From 1991 through 1995, Ms. Duessel was an Assistant Vice
President of a subsidiary of the subadviser. Mr. Lehman joined Federated
Investors in May 1997 as a Vice President. From 1985 to May 1997, Mr. Lehman
served as a Portfolio Manager, then Vice President/Senior Portfolio Manager, at
First Chicago NBD.

High Income Bond Fund Portfolio Managers

Mark E. Durbiano and Constatine Kartsonas have been primarily responsible for
the day-to-day management of the High Income Bond Fund's portfolio since its
inception. Mr. Durbiano joined Federated Investors, Inc. in 1982 and has been a
Senior Vice President of a subsidiary of the subadviser. Mr. Kartsonas joined
Federated Investors in 1994 as an Investment Analyst. Since January 1997, Mr.
Kartsonas has been an Assistant Vice President of a subsidiary of the
subadviser.

Small Cap Value Fund

The Dreyfus Corporation ("Dreyfus") is the subadviser for the Small Cap Value
Fund. Dreyfus, located at 200 Park Avenue, New York, New York 10166, was formed
in 1947. As of December 31, 1998, the subadviser managed or administered
approximately $18 billion in assets for approximately 1.8 million investor
accounts nationwide.

Portfolio Manager: Peter I. Higgins has primary day-to-day responsibility for
management of the Fund's portfolio. He has held that position since the
inception of the Fund, and has been employed by the subadviser since May 1996
pursuant to a dual employee agreement between the subadviser and The Boston
Company Asset Management, Inc. ("TBC Asset Management"), an affiliate of the
subadviser. Mr. Higgins has been employed by TBC Asset Management or its
predecessor since May 1991.

Small Cap Growth Fund

Franklin Advisers, Inc. ("Franklin") is located at 777 Mariners Island
Boulevard, P.O. Box 7777, San Mateo, California 94403-7777. Franklin and its
affiliates act as investment manager to numerous other investment companies and
accounts. Together with its affiliates, Franklin managed over $220 billion in
assets as of December 31, 1998.

Portfolio Managers: Edward Jamieson, Senior Vice President, joined the Franklin
Templeton Group in 1987. He also manages the Franklin Small Cap Fund.

32
<PAGE> 70

Michael McCarthy, Portfolio Manager, joined the Franklin Templeton Group in
1992. He also manages the Franklin Small Cap Fund.

Aidan O'Connell, Portfolio Manager, joined the Franklin Templeton Group in 1998.
Prior to joining the Franklin Templeton Group, Mr. O'Connell was with Hambrecht
& Quist. He also manages the Franklin Small Cap Fund.

Miller Anderson & Sherrerd, LLP ("MAS") is located at One Tower Bridge, West
Conshohocken, Pennsylvania 19428-0868. MAS is owned by indirect subsidiaries of
Morgan Stanley Dean Witter & Co. ("MSDW") and is a division of Morgan Stanley
Dean Witter Investment Management ("MSDW Investment Management"). MAS provides
investment advisory services to employee benefit plans, endowment funds,
foundations and other institutional investors. As of December 31, 1998, MSDW
Investment Management had in excess of $163 billion in assets under management.

Portfolio Managers: Arden C. Armstrong, Managing Director, Morgan Stanley Dean
Witter & Co., joined MAS in 1986. She joined the MAS management team for the Mid
Cap Growth portfolio in 1990, the Growth portfolio in 1993 and the Equity
portfolio in 1994.

David P. Chu, Vice President, Morgan Stanley Dean Witter & Co., joined MAS in
1998. He served as Senior Equity Analyst from 1992 to 1997 and as Co-Portfolio
Manager in 1997 for NationsBank and its subsidiary, Trade Street Investment
Associates. He joined the MAS management team for the Mid Cap Growth portfolio
in 1998.

Neuberger Berman, LLC ("Neuberger Berman") is located at 605 Third Avenue, New
York, New York 10158. Neuberger Berman and its affiliates and 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 $55
billion of assets as of December 31, 1998. Neuberger Berman is a member firm of
the New York Stock Exchange and other principal exchanges and acts as the Fund's
primary broker in the purchase and sale of their securities for that portion of
the Fund's portfolio managed by Neuberger Berman.

Portfolio Managers: Michael F. Malouf has been with Neuberger Berman since 1998
as a portfolio manager. He is also a Vice President of its affiliate, Neuberger
Berman Management Inc. From 1991 to 1998 he served as an analyst, and then as
portfolio manager at Dresdner RCM Global Investors LLC.

Jennifer K. Silver is a principal of Neuberger Berman and a Vice President of
its affiliate, Neuberger Berman Management Inc. She has been the Director of the
Growth Equity Group since 1997. From 1981 to 1997, she was an analyst and a
portfolio manager at Putnam Investments.

Global Equity Fund

J.P. Morgan Investment Management Inc. ("J.P. Morgan"), 522 Fifth Avenue, New
York, New York 10036, a wholly-owned subsidiary of J.P. Morgan & Co.
Incorporated, a bank holding company, is the subadviser for the Global Equity
Fund. The subadviser offers a wide range of investment management services and
acts as investment adviser to corporate and institutional clients. The
subadviser uses a sophisticated, disciplined, collaborative process for managing
all asset classes. As of December 31, 1998, the subadviser had assets under
management of $308 billion, including approximately $11.6 billion in global
equity portfolios.

Portfolio Managers: Paul Quinsee and Nigel Emmett are primarily responsible for
the day-to-day management of the Fund's portfolio. Paul Quinsee, Vice President,
joined the subadviser in 1992 as an international equity portfolio manager.
Nigel Emmett, Vice President, joined the subadviser in 1997 as an international
equity portfolio manager. Previously, he worked as an assistant manager for two
years at Brown Brothers Harriman & Co. in New York and as a portfolio manager
for four years at Gartmore Investment Management in London.

Balanced Fund and Multi Sector Bond Fund

Salomon Brothers Asset Management, Inc. ("SBAM") is the subadviser for the
Balanced Fund and Multi Sector Bond Fund with offices located at 7 World Trade
Center, New York, New York 10048. The subadviser, together with affiliates in
London, Frankfurt, Tokyo and Hong Kong, provides a broad range of fixed-income
and equity investment advisory services to various individuals and institutional
clients located throughout the world, and serves as investment adviser to
various investment companies. As of December 31, 1998, SBAM and its worldwide
investment advisory affiliates managed approximately $29 billion of assets.

In connection with the subadviser's service as subadviser to the Fund, SBAM has
entered into a subadvisory agreement with its London-based affiliate, Salomon
Brothers Asset Management Limited, whose business address is Victoria Plaza, 111
Buckingham Palace Road, London SW1W OSB, England, pursuant to which SBAM has
delegated responsibility for management of the Fund's investments in
non-dollar-denominated debt securities and currency transactions.

Balanced Fund Portfolio Manager

George J. Williamson is primarily responsible for the day-to-day management of
the Fund. Mr. Williamson has been a portfolio manager with SBAM and its
predecessor Lehman Management since 1979.

33
<PAGE> 71

Multi Sector Bond Fund Portfolio Managers

Roger Lavan is primarily responsible for mortgage-backed securities and U.S.
government securities portions of the Multi Sector Bond Fund. Mr. Lavan joined
the subadviser in 1990 and is a Portfolio Manager and Quantitative Fixed Income
Analyst. He is responsible for working with senior portfolio managers to monitor
and analyze market relationships and identify and implement relative value
transactions in the subadviser's investment company and institutional portfolios
which invest in mortgage-backed securities and U.S. Government securities.

David J. Scott is primarily responsible for a portion of the Multi Sector Bond
Fund relating to currency transactions and investments in non-dollar denominated
debt securities and joined SBAM Limited in April 1994.

Peter J. Wilby is primarily responsible for the high yield and sovereign bond
portions of the Multi Sector Bond Fund. Mr. Wilby, who joined the subadviser in
1989, is a Managing Director of Salomon Brothers and the subadviser and Senior
Portfolio Manager of the subadviser, responsible for the subadviser's investment
company and institutional portfolios which invest in high yield non-U.S. and
U.S. corporate debt securities and high yield foreign debt securities.

Select Advisers Mid Cap Fund

First Pacific Advisors, Inc. ("First Pacific"), located at 11400 West Olympic
Boulevard, Suite 1200, Los Angeles, California 90064, acts as one of the Fund's
subadvisers. First Pacific, together with its predecessors, has been in the
investment advisory business since 1954. As of December 31, 1998, First Pacific
managed assets of approximately $3.5 billion for seven investment companies,
including one closed-end investment company and more than 25 institutional
accounts.

Portfolio Manager

Mr. Steven Romick is responsible for management of that portion of the Fund's
assets allocated to First Pacific. Mr. Romick has 12 years of experience in the
investment management business. He is currently a Senior Vice President of First
Pacific. From 1990-1996, Mr. Romick was chairman of Crescent Management, an
investment advisory firm he founded.

Pilgrim Baxter & Associates, Ltd. ("Pilgrim Baxter"), 825 Duportail Road, Wayne,
Pennsylvania 19087 is a professional investment management firm and registered
investment adviser in business since 1982 is one of the Fund's subadvisers. As
of December 31, 1998, Pilgrim Baxter had discretionary management authority with
respect to approximately $12 billion in assets. In addition to advising a
portion of the Fund, Pilgrim Baxter provides advisory services to pension and
profit-sharing plans, charitable institutions, corporations, trusts and estates,
and other investment companies.

Portfolio Manager

Jeffrey A. Wrona serves as manager for that portion of the Fund allocated to
Pilgrim Baxter. Mr. Wrona joined Pilgrim Baxter from Munder Capital Management,
where he worked as a Senior Portfolio Manager for seven years. There, he
co-founded Munder's Mid Cap Growth product and managed both mutual fund and
separate account portfolios.

Rice, Hall, James & Associates ("Rice, Hall"), founded in 1974 and located at
600 West Broadway, Suite 1000, San Diego, California 92101 is one of the Fund's
subadvisers. Rice Hall provides investment management services to individual and
institutional investors. As of December 31, 1998, Rice, Hall had approximately
$1.3 billion in assets under management, primarily on behalf of institutional
and individual investors.

Portfolio Managers

The investment professionals of Rice Hall responsible for day-to-day management
of that portion of the Fund allocated to Rice Hall are as follows:

Samuel R. Trozzo is Partner of Rice Hall with over thirty-six years' experience
and founded Rice Hall in 1974.

Thomas W. McDowell, Jr. is President and Chief Executive Officer of Rice Hall
with over seventeen years' investment experience. Mr. McDowell joined Rice Hall
in 1984.

David P. Tessmer is Partner and Co-Director of Research of Rice Hall with over
thirty years' investment experience and joined Rice Hall in 1986.

Timothy A. Todaro is Partner and Co-Director of Research of Rice Hall with over
seventeen years' investment experience. Mr. Todaro joined Rice Hall in 1983.

Gary S. Rice is Partner of Rice Hall with fifteen years' investment experience
and joined Rice Hall in 1983.

Douglas Sheres is Partner of Rice Hall with over five years' investment
experience. Prior to joining Rice, Hall in March of 1998, he was an
Institutional Sales professional with Merrill Lynch in San Diego. Previously he
was a Research Analyst with Pacific Asset Management.

Historical Performance of the Subadvisers.

Each of the Funds, other than the Select Advisers Small Cap Growth Fund, which
will begin operations about May 1, 1999, began operations on October 31, 1997.
The following table shows the Funds' historical performance:

34
<PAGE> 72

Average Annual Returns
(for the Periods Ending December 31, 1998)

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Fund 1 Year Since Inception
- --------------------------------------------------------------------------------
<S> <C> <C>
- --------------------------------------------------------------------------------
Strategic Growth Fund
- --------------------------------------------------------------------------------
Strategic Value Fund
- --------------------------------------------------------------------------------
Select Advisers Mid Cap Fund
- --------------------------------------------------------------------------------
Small Cap Value Fund
- --------------------------------------------------------------------------------
Global Equity Fund
- --------------------------------------------------------------------------------
Equity Income Fund
- --------------------------------------------------------------------------------
Balanced Fund
- --------------------------------------------------------------------------------
Multi Sector Bond Fund
- --------------------------------------------------------------------------------
High Income Bond Fund
- --------------------------------------------------------------------------------
</TABLE>

Although the Funds have been operating for only a limited time, most of the
subadvisers have managed similar mutual funds or institutional accounts for a
longer period. These other mutual funds or institutional accounts have
investment objective and strategies that are substantially similar, but not
necessarily identical, to those of each Fund. We have included performance
information which relates to these other mutual funds or institutional accounts
for comparison purposes, but these other mutual funds and institutional accounts
are separate and distinct from each Fund. Their performance does not guarantee
similar results for a Fund and should not be viewed as a substitute for a Fund's
own performance.

If you purchase a Fund through a variable annuity contract or a variable life
insurance policy, you will also be subject to expenses relating to the insurance
contracts. Both the performance for the Funds listed above and the subadviser
performance included below do not reflect the insurance contract charges which
would reduce the your total return. Therefore, these performance figures are
only of limited use for comparative purposes.

The performance for the similar mutual funds or institutional accounts may not
be comparable to the performance of a Fund because of the following differences:

o brokerage commissions and dealer spreads
o expenses (including management fees)
o the size of the investment in a particular security in relation to the
portfolio size
o the timing of purchases and sales (including the affect of market
conditions at that time)
o the timing of cash flows into the portfolio
o the availability of cash for new investments

If the historical performance only includes the performance of institutional
accounts, the performance may also have been affected because the institutional
accounts may not be required to do the following:

o redeem share upon request
o meet the same diversification requirements as mutual funds
o follow the same tax restrictions and investment limitations as mutual
funds

In some instances the performance of the institutional accounts is calculated by
combining the performance of all similarly managed accounts into a composite.
Depending on the subadviser, the composite may or may not also contain
registered mutual funds. If the historical performance of each Subadviser had
been subject to all Fund expenses, it may have been lower. As indicated below,
the composite performance may be prepared in compliance with the Performance
Presentation Standards of the Association for Investment Management and Research
("AIMR Standards"), which are different from the performance methodology used by
registered investment companies like the Funds. AIMR has not been involved with
the preparation or review of this information.

The average annual total return represents the change over a specified period of
time in the value of an investment after reinvesting all income and capital
gains distributions.

The historical performance has been provided by each Subadviser. The Fund
believes that it is reliable, but the Fund has not independently verified it.

Strong Capital Management, Inc. Strong is subadviser for the Strategic Growth
Fund. The following chart shows the average annual total returns of the Strong
Growth Fund, which is managed by Strong in a substantially similar manner to the
Fund. The historical investment performance of the Strong Growth Fund reflects
the deduction of its total annual operating expenses of ____% as of December 31,
1998, which are higher/lower than the total operating expenses of the Strategic
Growth Fund.

Average Annual Total Return
Strong Growth Fund
For Periods Ending December 31, 1998

1 year 5 years Since Inception*

* Strong Growth Fund commenced operations on 12/31/93.

Schafer Capital Management, Inc. Through a sub-contract with Strong, Schafer
manages the Strategic Value Fund. The following chart shows the average annual
total returns of the Strong Schafer Value Fund, which is managed by Schafer in a
substantially similar manner. The historical investment performance of the
Strong Schafer Value Fund reflects the deduction of its total annual operating
expenses of ____% as of December 31, 1998, which are higher/lower than the total
operating expenses of the Strategic Value Fund.

35
<PAGE> 73

Average Annual Total Return
Strong Schafer Value Fund
For Years Ending December 31, 1998

1 year 5 years 10 years

First Pacific Advisors, Inc., Pilgrim Baxter & Associates, Ltd. and Rice, Hall,
James & Associates. First Pacific, Pilgrim Baxter and Rice Hall each manage a
portion of the Select Advisors Mid Cap Fund. Except as otherwise noted below, a
subadviser's performance is presented net of fees, either actual fees of the
historical portfolio or actual fees of the Fund, but does not reflect the
imposition of any sales charges.

Average Annual Total Return
FPA Crescent Portfolio
For Periods Ending December 31, 1998

1 year 5 years 10 years Since Inception*

* Inception date for the FPA Crescent Portfolio was June 2, 1993

First Pacific. The information in the chart above shows the average annual total
returns of the FPA Crescent Portfolio, which First Pacific manages in a
substantially similar manner to the portion of the Select Advisers Mid Cap Fund
which it manages. The historical investment performance of the FPA Crescent
Portfolio reflects the deduction of its total annual operating expenses of ____%
as of December 31, 1998, which are higher/lower than the total operating
expenses of the Select Advisers Mid Cap Fund.

Pilgrim Baxter. The information in the chart above shows the net average annual
total returns of Pilgrim Baxter Mid Cap Composite. Each of the accounts in this
composite is managed by Pilgrim Baxter in a substantially similar manner to the
portion of the Select Advisers Mid Cap Fund which it manages. The historical
investment performance of the composite reflects the deduction of a mutual
fund's total annual operating expenses and the deduction of advisory fees of the
separate accounts in the composite.

Rice Hall. The information in the chart above shows the average annual total
returns of Rice Hall Small-Mid Composite. Each of the accounts in this composite
is managed by Rice Hall in a substantially similar manner to the portion of the
Select Advisers Mid Cap Fund which it manages. The historical investment
performance of the composite reflects the deduction of the Fund's total annual
operating expenses of ___%. Since January 1, 1993, Rice Hall has prepared this
performance information in compliance with the AIMR Standards.

J.P. Morgan Investment Management Inc. J.P. Morgan is subadviser for the Global
Equity Fund. The following chart shows the average annual total returns of the
J.P. Morgan Global Equity Composite. Each of the accounts in this composite is
managed by J.P. Morgan in a substantially similar manner to the Global Equity
Fund. The historical investment performance of the composite reflects the
deduction of a ____ % advisory fee, which is the maximum fee charged by J.P.
Morgan for accounts in the composite, but does not include the deduction of
custody fees which vary by account. These fees are lower than the total annual
operating expenses of the Global Equity Fund. J.P. Morgan prepared this
performance in compliance with AIMR Standards.

Average Annual Total Return
J.P. Morgan Global Equity Composite
For the Years Ending December 31, 1998

1 year 5 years 10 years

Federated Investment Counseling. Federated is the subadviser for the Equity
Income Fund. The following chart shows the average annual total returns of the
Class A Shares of the Federated Equity Income Fund, Inc. which is managed by
Federated Advisers, an affiliate of the subadviser, in a substantially similar
manner. The historical investment performance of the Class A Shares of the
Federated Equity Income Fund, Inc. reflects the deduction of its total annual
operating expenses of ____% as of December 31, 1998, which are higher/lower than
the total operating expenses of the Equity Income Fund.

Average Annual Total Return
Federated Equity Income Fund, Inc., Class A
For the Years Ending December 31, 1998

1 year 5 years 10 years

Federated is also the subadviser for the High Income Bond Fund. The following
chart shows the average annual total returns of the Federated High Yield
Composite. Each of the portfolios in the composite is a mutual fund registered
with the SEC and is managed by Federated and its affiliates in a substantially
similar manner. The historical investment performance of the Federated High
Yield Composite reflects the deduction of the composite's average total
operating expenses of ____% as of December 31, 1998, which are higher/lower than
the total operating expenses of the High Income Bond Fund.

Average Annual Total Return
Federated High Yield Composite
For the Years Ending December 31, 1998

1 year 5 years 10 years

36
<PAGE> 74

Salomon Brothers Asset Management Inc SBAM is the subadviser for the Balanced
Fund. The following chart shows the average annual total returns of the
__________ Fund which is managed by SBAM in a substantially similar manner. The
historical investment performance of the __________ Fund reflects the deduction
of its total annual operating expenses of ____% as of December 31, 1998, which
are higher/lower than the total operating expenses of the Balanced Fund.

Average Annual Total Return
_____________Fund
For the Years Ending December 31, 1998

1 year Since Inception*

* The _______ Fund began investment operations on September 11, 1995.

SBAM is also the subadviser for the Multi Sector Bond Fund. . The following
chart shows the average annual total returns of the ________ Composite. Each of
the portfolios in the composite is a mutual fund registered with the SEC and is
managed by SBAM in a substantially similar manner. The historical investment
performance of the _______ Composite reflects the deduction of the composite's
average total operating expenses of ____% as of December 31, 1998, which are
higher/lower than the total operating expenses of the Multi Sector Bond Fund.

Average Annual Total Return
__________ Composite
For the Years Ending December 31, 1998

1 year 5 years Since Inception*

* The ________ Composite began operations on April 1, 1993.

Performance Advertising For The Funds

A Fund may use past performance in advertisements, sales literature, and the
prospectus, including calculations of average annual total return for the most
recent one, five, and ten year periods (or the life of the Fund if less).
Average annual total return represents the rate required each year for an
initial investment to equal the sale value at the end of the specific period.
Average annual total return reflects reinvestment of all distributions.

A Fund may also advertise its SEC yield. The SEC yield is based on a 30-day
period. This yield takes into account the yields to maturity on all debt
instruments and all dividends accrued on equity securities since equity
securities do not have maturity dates. The SEC yield is computed by dividing the
net investment income per share earned during the 30-day period by the maximum
offering price per share on the last day of the period.

Buying and Selling Fund Shares

Who Can Buy Shares of The Funds

In this section, "we" and "our" refer to NAS. "You" and "your" mean potential
investors and current variable annuity contract and variable life policyholders.

Shares of a Fund are currently sold only to separate accounts of Nationwide Life
Insurance Company and its wholly owned subsidiary Nationwide Life and Annuity
Insurance Company to fund the benefits under the variable life insurance
policies and variable annuity contracts and to affiliated Fund of Funds, but
they may be sold to other insurance companies in the future. The insurance
companies purchase shares of the Fund in accordance with variable account
allocation instructions received from owners of the variable annuity contracts
or variable life insurance policies. The Fund then uses the proceeds to buy
securities for its portfolio. Each Fund of Funds and insurance separate account,
as a shareholder, has an ownership in the Fund's investments. The Funds also
offer to buy back (redeem) their shares at any time at net asset value. The
address for each of these entities is One Nationwide Plaza, Columbus, Ohio
43215.

Purchase Price

The purchase or "offering" price of each share of the Funds is its "net asset
value" or NAV. No sales charge is imposed on the purchase of the Funds' shares.
Generally, NAV is determined by dividing the total market value of the
securities owned by a Fund, less its liabilities, by the total number of its
outstanding shares. NAV is determined at the close of regular trading on the New
York Stock Exchange on each day the Exchange is open for trading (usually 4 p.m.
Eastern Time). There is no sales charge. When you purchase shares, your purchase
price will be the offering price or NAV next determined after your order is
received.

NAS does not determine NAV on the following days:

o Christmas Day
o New Year's Day

37
<PAGE> 75

o Martin Luther King Jr. Day
o Presidents Day
o Good Friday
o Memorial Day
o Independence Day
o Labor Day
o Thanksgiving Day
o other days when the New York Stock Exchange is not open

NAS reserves the right not to determine NAV when:

o the Fund has not received any orders to purchase, sell, or exchange shares
o changes in the value of the Fund's portfolios do not affect the NAV

Selling Shares

You can sell--also known as redeeming--your shares of a Fund at any time,
subject to certain restrictions. The price you will receive when you sell your
shares will be the NAV next determined after NAS receives the properly completed
order to sell in its offices in Columbus, Ohio. Of course, the value of the
shares sold depends upon the market value of the investments of the Fund at the
time of sale, and the value may be more or less than you paid for the shares.

Restrictions on sales

You may not be able to sell your shares of a Fund or a Fund may delay paying you
the proceeds from a sale when the New York Stock Exchange is closed (other than
customary weekend and holiday closings) or if trading is restricted or if an
emergency exists.

Year 2000

NAS has developed a plan to address the Year 2000 issue. The problem is that
many existing computer programs use only two digits to identify a year (for
example, the year 1998 would be represented by the digits "98"). In such
programs, the year 2000 will be represented by "00", which a computer could
interpret as the year 1900. If not corrected, many computer applications could
fail or create erroneous results. Since 1996, NAS has been evaluating its
exposure to this issue by reviewing its operating systems and outside service
provider systems we depend on. NAS expects all system changes and replacements
needed to achieve Year 2000 compliance to be completed by the end of the second
quarter 1999. Compliance testing will be completed in the second quarter 1999.
Outside service providers and business partners will be required to certify
compliance by the end of the second quarter 1999.

Dividends and Distributions

Tax Status

In order for investors to receive the favorable tax treatment available to
holders of variable annuity contracts and variable life insurance policies, the
separate accounts underlying these contracts or policies, as well as the Funds
in which these separate accounts invest, must meet certain diversification
requirements. Each Fund intends to comply with these requirements. If a Fund
does not meet these requirements, income allocable to the variable annuity
contracts and variable life insurance policies would be taxable currently to the
holders of these contracts or policies.

The tax treatment of payments made under a variable annuity contract or variable
life insurance policy is described in the prospectus for the contract or policy.
Generally, the owners of variable annuity contracts and variable life insurance
policies are not taxed currently on income or gains realized under such
contracts until the income or gain is distributed. However, income distributions
from these contracts and policies will be taxable at ordinary income tax rates.
In addition, distributions made to an owner who is younger than 59 1/2 may be
subject to a 10% penalty tax. Investors should ask their own tax advisors for
more information on their own tax situation, including possible state or local
taxes.

Financial Highlights

38
<PAGE> 76

Information from Nationwide

Please read this Prospectus before you invest, and keep it with your records.
The following documents--which you can get free of charge--contain additional
information about the Fund(s):

o Statement of Additional Information (SAI) (incorporated by reference in
this Prospectus)

o Annual Report

o Semi-Annual Report

For additional information contact:

Nationwide Life Insurance Company
One Nationwide Plaza
Columbus, Ohio 43215

For information and assistance:

1-800-848-6331 (toll free, 8 a.m. - 5 p.m. Eastern Time)

Information from the Securities and Exchange Commission

You can obtain copies of Fund documents from the SEC as follows:

In person:

Public Reference Room in Washington, D.C. (for their hours of operation, call
1-800-SEC-0330)

By mail:

Securities and Exchange Commission
Public Reference Section
Washington, D.C. 20549-6009

(The SEC charges a fee to copy any documents)

Via the Internet:

http://www.sec.gov

The Trust's Investment Company Act File No. 811-3213

39
<PAGE> 77

STATEMENT OF ADDITIONAL INFORMATION

MAY 1, 1999

NATIONWIDE SEPARATE ACCOUNT TRUST

--NATIONWIDE STRATEGIC GROWTH FUND
--NATIONWIDE STRATEGIC VALUE FUND
--NATIONWIDE EQUITY INCOME FUND
--NATIONWIDE HIGH INCOME BOND FUND
--NATIONWIDE BALANCED FUND
--NATIONWIDE MULTI SECTOR BOND FUND

--NATIONWIDE SMALL CAP VALUE FUND
--NATIONWIDE SELECT ADVISERS SMALL CAP GROWTH FUND

--NATIONWIDE GLOBAL EQUITY FUND
--NATIONWIDE SELECT ADVISERS MID CAP FUND

--NATIONWIDE SMALL COMPANY FUND
--NATIONWIDE INCOME FUND
--TOTAL RETURN FUND
--CAPITAL APPRECIATION FUND
--GOVERNMENT BOND FUND
--MONEY MARKET FUND

Nationwide Separate Account Trust is a registered open-end investment
company consisting of 16 series. This Statement of Additional Information
relates to all series of the Trust (the "Mid Cap Fund") (each, a "Fund" and
collectively, the "Funds").

This Statement of Additional Information is not a prospectus. It
contains information in addition to and more detailed than that set forth in
the Prospectuses for the Funds and should be read in conjunction with the
Prospectuses, dated May 1, 1999, for the Funds. Terms not defined in this
Statement of Additional Information have the meanings assigned to them in the
Prospectuses. The Prospectuses may be obtained from Nationwide Life Insurance
Company, One Nationwide Plaza, Columbus, Ohio 43215, or by calling toll free 1
(800) 848-6331.

TABLE OF CONTENTS PAGE
- ----------------- ----
<S> <C>
General Information and History............................................. 2
Additional Information on Portfolio Instruments and Investment Policies .... 2
Investment Restrictions .................................................... 34
Major Shareholders ......................................................... 38
Trustees and Officers of the Trust ......................................... 38
Calculating Yield and Total Return ......................................... 40
Investment Advisory and Other Services ..................................... 42
Brokerage Allocations ...................................................... 52
Purchases, Redemptions and Pricing of Shares ............................... 55
Additional Information ..................................................... 56
Tax Status ................................................................. 57
Other Tax Consequences ..................................................... 58
Tax Consequences to Shareholders ........................................... 59
Financial Statements ....................................................... 59
Appendix A-Bond Ratings ................................................... 60
</TABLE>

<PAGE> 78

GENERAL INFORMATION AND HISTORY

Nationwide Separate Account Trust is an open-end investment company
organized under the laws of Massachusetts by a Declaration of Trust, dated June
30, 1981, as subsequently amended. The Trust currently offers shares in sixteen
(16) separate series, each with its own investment objective.

ADDITIONAL INFORMATION ON PORTFOLIO INSTRUMENTS AND INVESTMENT POLICIES

The Funds invest in a variety of securities and employ a number of
investment techniques, which involve certain risks. The Prospectuses for the
Funds highlight the principal investment strategies, investment techniques and
risks. The following table sets forth additional information concerning
permissible investments and techniques for each of the Funds. A "Y" in the
table indicates that the Fund may invest in or follow the corresponding
instrument or technique. An empty box indicates that the Fund does not intend
to invest in or follow the corresponding instrument or technique. The page
numbers in the table indicate where the instrument or technique is described in
detail.

<PAGE> 79

<TABLE>
<CAPTION>
Select
Select Advisers
Adviser Small Small
Capital Strategic Strategic Mid Small Cap Cap Global
TYPE OF INVESTMENT OR TECHNIQUE Appreciation Growth Value Cap Company Growth Value Equity
------------------------------- ------------ --------- --------- ------ ------- ------ ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. common stocks Y Y Y Y Y Y Y Y

Preferred stocks Y Y Y Y Y Y Y Y

Small company stocks Y Y Y Y Y Y Y

Special situation companies Y Y Y Y Y Y Y

Illiquid securities Y Y Y Y Y Y Y Y

Restricted securities Y Y Y Y Y Y Y Y

When-issued / delayed-delivery Y Y Y Y Y Y Y Y
securities

Limited liability companies

Investment companies Y Y Y Y Y Y Y Y

Real estate investment trusts Y Y Y Y Y
(REITS)

Foreign stocks Y Y Y Y Y

Depository receipts Y Y Y Y
</TABLE>

Multi High
Equity Total Government Sector Income Money
TYPE OF INVESTMENT OR TECHNIQUE Income Return Balanced Bond Income Bond Bond Market
------------------------------- ------ ------ -------- ---------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. common stocks Y Y Y

Preferred stocks Y Y Y Y

Small company stocks Y Y

Special situation companies

Illiquid securities Y Y Y Y Y Y

Restricted securities Y Y Y Y Y Y

When-issued / delayed-delivery Y Y Y Y Y Y Y Y
securities

Limited liability companies Y

Investment companies Y Y Y Y Y Y Y Y

Real estate investment trusts Y Y Y Y
(REITS)

Foreign stocks Y Y Y Y Y

Depository receipts Y Y Y Y
</TABLE>

3
<PAGE> 80

<TABLE>
<CAPTION>
Select
Select Adviser
Adviser Small Small
Capital Strategic Strategic Mid Small Cap Cap Global
TYPE OF INVESTMENT OR TECHNIQUE Appreciation Growth Value Cap Company Growth Value Equity
------------------------------- ------------ --------- --------- ------ ------- ------ ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Emerging markets securities Y Y

Convertible securities Y Y Y Y Y Y Y Y

Long-term debt Y Y Y Y Y Y Y

Short-term debt Y Y Y Y Y Y Y Y

Floating and variable rate
securities

Zero coupon securities Y Y Y Y

Step-coupon securities

Pay-in-Kind Bonds Y Y Y

Deferred payment securities Y Y Y

Brady bonds

Non-investment grade debt Y Y Y Y Y

Loan participations and assignments
</TABLE>

<TABLE>
<CAPTION>
Multi High
Equity Total Government Sector Income Money
TYPE OF INVESTMENT OR TECHNIQUE Income Return Balanced Bond Income Bond Bond Market
- ------------------------------- ------ ------ -------- ---------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Emerging markets securities Y Y Y Y

Convertible securities Y Y Y Y

Long-term debt Y Y Y Y Y Y Y

Short-term debt Y Y Y Y Y Y Y Y

Floating and variable rate Y Y Y Y Y Y
securities

Zero coupon securities Y Y Y Y Y Y

Step-coupon securities Y

Pay-in-Kind Bonds Y Y Y

Deferred payment securities Y Y Y

Brady bonds Y Y

Non-investment grade debt Y Y Y Y

Loan participations and assignments Y Y Y
</TABLE>

4
<PAGE> 81

Foreign commercial paper

Duration

U.S. Government securities Y Y Y Y Y Y Y Y

Money market instruments Y Y Y Y Y Y Y Y

Mortgage-backed securities Y Y Y Y

Stripped mortgage-backed
securities

Collateralized mortgage
obligations

Mortgage dollar rolls Y Y Y

Asset-backed securities Y Y Y

Bank obligations Y Y Y Y Y Y Y

Repurchase agreements Y Y Y Y Y Y Y Y
</TABLE>

<TABLE>
<CAPTION>
Multi High
Equity Total Government Sector Income Money
TYPE OF INVESTMENT OR TECHNIQUE Income Return Balanced Bond Income Bond Bond Market
------------------------------- ------ ------ -------- ---------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sovereign debt (foreign) Y

Foreign commercial paper Y Y Y Y

Duration Y

U.S. Government securities Y Y Y Y Y Y Y Y

Money market instruments Y Y Y Y Y Y Y Y

Mortgage-backed securities Y Y Y Y Y

Stripped mortgage-backed Y
securities

Collateralized mortgage Y Y Y Y
obligations

Mortgage dollar rolls Y Y

Asset-backed securities Y Y Y Y Y

Bank obligations Y Y Y Y Y Y Y

Repurchase agreements Y Y Y Y Y Y Y Y
</TABLE>

5
<PAGE> 82

<TABLE>
<CAPTION>
Select
Select Advisors
Advisors Small Small
Capital Strategic Strategic Mid Small Cap Cap Global
TYPE OF INVESTMENT OR TECHNIQUE Appreciation Growth Value Cap Company Growth Value Equity
------------------------------- ------------ --------- --------- ------ ------- ------ ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Reverse repurchase agreements Y Y Y Y Y Y Y

Warrants Y Y Y Y Y Y Y

Futures Y Y

Options Y Y

Swap agreements

Foreign currencies Y Y Y Y Y Y

Forward currency contracts Y Y

Borrowing money Y Y Y Y Y Y Y Y

Lending of portfolio securities Y Y Y Y Y Y Y Y

Short sales Y Y Y Y

</TABLE>

<TABLE>
<CAPTION>
Multi High
Equity Total Government Sector Income Money
TYPE OF INVESTMENT OR TECHNIQUE Income Return Balanced Bond Income Bond Bond Market
------------------------------- ------ ------ -------- ---------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Reverse repurchase agreements Y Y Y Y

Warrants Y Y Y

Futures Y Y Y Y

Options Y Y Y Y

Swap agreements

Foreign currencies

Forward currency contracts

Borrowing money Y Y Y Y Y Y Y Y

Lending of portfolio securities Y Y Y Y Y Y Y Y

Short sales
</TABLE>

6
<PAGE> 83

DESCRIPTION OF PORTFOLIO INSTRUMENTS AND INVESTMENT POLICIES

INFORMATION CONCERNING DURATION. Duration is a measure of the average life of a
fixed-income security that was developed as a more precise alternative to the
concepts of "term to maturity" or "average dollar weighted maturity" as
measures of "volatility" or "risk" associated with changes in interest rates.
Duration incorporates a security's yield, coupon interest payments, final
maturity and call features into one measure.

Most debt obligations provide interest ("coupon") payments in addition to final
("par") payment at maturity. Some obligations also have call provisions.
Depending on the relative magnitude of these payments and the nature of the call
provisions, the market values of debt obligations may respond differently to
changes in interest rates.

Traditionally, a debt security's "term-to-maturity" has been used as a
measure of the sensitivity of the security's price to changes in interest rates
(which is the "interest rate risk" or "volatility" of the security). However,
"term-to-maturity" measures only the time until a debt security provides its
final payment, taking no account of the pattern of the security's payments
prior to maturity. Average dollar weighted maturity is calculated by averaging
the terms of maturity of each debt security held with each maturity "weighted"
according to the percentage of assets that it represents. Duration is a measure
of the expected life of a debt security on a present value basis and reflects
both principal and interest payments. Duration takes the length of the time
intervals between the present time and the time that the interest and principal
payments are scheduled or, in the case of a callable security, expected to be
received, and weights them by the present values of the cash to be received at
each future point in time. For any debt security with interest payments
occurring prior to the payment of principal, duration is ordinarily less than
maturity. In general, all other factors being the same, the lower the stated or
coupon rate of interest of a debt security, the longer the duration of the
security; conversely, the higher the stated or coupon rate of interest of a
debt security, the shorter the duration of the security.

There are some situations where the standard duration calculation does
not properly reflect the interest rate exposure of a security. For example,
floating and variable rate securities often have final maturities of ten or
more years; however, their interest rate exposure corresponds the frequency of
the coupon reset. Another example where the interest rate exposure is not
properly captured by duration is the case of mortgage pass-through securities.
The stated final maturity of such securities is generally 30 years, but current
prepayment rates are more critical in determining the securities' interest rate
exposure. In these and other similar situations, NAS will use more
sophisticated analytical techniques to project the economic life of a security
and estimate its interest rate exposure. Since the computation of duration is
based on predictions of future events rather than known factors, there can be
no assurance that a Bond Fund will at all times achieve its targeted portfolio
duration.

The change in market value of U.S. Government fixed-income securities
is largely a function of changes in the prevailing level of interest rates.
When interest rates are falling, a portfolio with a shorter duration generally
will not generate as high a level of total return as a portfolio with a longer
duration. When interest rates are stable, shorter duration portfolios generally
will not generate as high a level of total return as longer duration portfolios
(assuming that long-term interest rates are higher than short-term rates, which
is commonly the case.) When interest rates are rising, a portfolio with a
shorter duration will generally outperform longer duration portfolios. With
respect to the composition of a fixed-income portfolio, the longer the duration
of the portfolio, generally, the greater the anticipated potential for total
return, with, however, greater attendant interest rate risk and price
volatility than for a portfolio with a shorter duration.

DEBT OBLIGATIONS. Debt obligations are subject to the risk of an issuer's
inability to meet principal and interest payments on its obligations ("credit
Frisk") 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.

<PAGE> 84

Lower-rated securities are more likely to react to developments affecting these
risks than are more highly rated securities, which react primarily to movements
in the general level of interest rates. Although the fluctuation in the price
of debt securities is normally less than that of common stocks, in the past
there have been extended periods of cyclical increases in interest rates that
have caused significant declines in the price of debt securities in general and
have caused the effective maturity of securities with prepayment features to be
extended, thus effectively converting short or intermediate securities (which
tend to be less volatile in price) into long term securities (which tend to be
more volatile in price).

Ratings as Investment Criteria. High-quality, medium-quality and
non-investment grade debt obligations are characterized as such based on their
ratings by nationally recognized statistical rating organizations ("NRSROs"),
such as Standard & Poor's Rating Group ("Standard & Poor's") or Moody's
Investor Services ("Moody's"). 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 a Fund as initial criteria for the selection of portfolio
securities, but the Fund will also rely upon the independent advice of NAS or
the subadvisers to evaluate potential investments. This is particularly
important for lower-quality securities. Among the factors that will be
considered are the long-term ability of the issuer to pay principal and
interest and general economic trends, as well as an issuer's capital structure,
existing debt and earnings history. 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 a Fund, an issue of securities may cease
to be rated or its rating may be reduced below the minimum required for
purchase by such 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 a Fund's
subadviser or NAS as a Fund's investment adviser will consider such events in
its determination of whether the 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
reorganization, the Fund will attempt to use comparable ratings as standards
for its investments in accordance with its investment objective and policies.

Medium-Quality Securities. Certain Funds anticipate investing in
medium-quality obligations, which are obligations rated in the fourth highest
rating category by any rating service. Medium-quality securities, although
considered investment-grade, may have some speculative characteristics and may
be subject to greater fluctuations in value than higher-rated securities. In
addition, the issuers of medium-quality securities may be more vulnerable to
adverse economic conditions or changing circumstances than issues of
higher-rated securities.

Lower Quality (High-Risk) 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/IBCA Investors
Service, Inc. ("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. There is more risk associated with these investments because of
reduced creditworthiness and increased risk of default. Under NRSRO guidelines,
lower quality securities and comparable unrated securities will likely have
some quality and protective characteristics that are outweighted by large
uncertainties or major risk exposures to adverse conditions. Lower quality
securities are considered to have extremely poor prospects of ever attaining
any real investment standing, to have a current identifiable vulnerability to
default or to be in default, to be unlikely to have the capacity to make
required interest payments and repay principal when due in the event of adverse
business, financial or economic conditions, or to be in default or not current
in the payment of interest or principal. 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.

<PAGE> 85

Effect of Interest Rates And Economic Changes. All interest-bearing
securities typically experience appreciation when interest rates decline and
depreciation when interest rates rise. The market values of lower-quality and
comparable unrated securities tend to reflect individual corporate developments
to a greater extent than do higher rated securities, which react primarily to
fluctuations in the general level of interest rates. Lower-quality and
comparable unrated securities also tend to be more sensitive to economic
conditions than are higher-rated securities. As a result, they generally
involve more credit risks than securities in the higher-rated categories.
During an economic downturn or a sustained period of rising interest rates,
highly leveraged issuers of lower-quality and comparable unrated securities may
experience financial stress and may not have sufficient revenues to meet their
payment obligations. The issuer's ability to service its debt obligations may
also be adversely affected by specific corporate developments, the issuer's
inability to meet specific projected business forecasts or the unavailability
of additional financing. The risk of loss due to default by an issuer of these
securities is significantly greater than issuers of higher-rated securities
because such securities are generally unsecured and are often subordinated to
other creditors. Further, if the issuer of a lower-quality or comparable
unrated security defaulted, the Fund might incur additional expenses to seek
recovery. Periods of economic uncertainty and changes would 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 generally decrease in a rising interest rate market, and
accordingly so will a Fund's net asset value. If a 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), a Fund may be forced to liquidate these securities at a substantial
discount which would result in a lower rate of return to 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, a Fund may have to
replace the securities with a lower yielding security, which would result in a
lower return for that Fund.

Liquidity And Valuation. A 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 may be no
established retail secondary market for many of these securities. The Funds
anticipate 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, a Fund's asset
value and ability to dispose of particular securities, when necessary to meet
such 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 a Fund to obtain accurate market quotations for
purposes of valuing that Fund's portfolio. Market quotations are generally
available on many lower-quality and comparable unrated issues only from a
limited number of dealers and may not necessarily represent firm bids of such
dealers or prices for actual sales. During periods of thin trading, the spread
between bid and asked prices is likely to increase significantly. In addition,
adverse publicity and investor perceptions, whether or not based on fundamental
analysis, may decrease the values and liquidity of lower-quality and comparable
unrated securities, especially in a thinly traded market.

Proposed Legislation. From time to time proposals have been discussed
regarding new legislation designed to limit the use of certain lower-quality
and comparable unrated securities by certain investors. 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.

<PAGE> 86

U.S. Government Securities - U.S. government securities are issued or
guaranteed by the U.S. government or its agencies or instrumentalities.
Securities issued by the U.S. government include U.S. Treasury obligations,
such as Treasury bills, notes, and bonds. Securities issued by government
agencies or instrumentalities include obligations of the following:

- - the Federal Housing Administration, Farmers Home Administration, and
the Government National Mortgage Association ("GNMA"), including GNMA
pass-through certificates, whose securities are supported by the full
faith and credit of the United States;
- - the Federal Home Loan Banks whose securities are supported by the
right of the agency to borrow from the U.S. Treasury;
- - the Federal National Mortgage Association, whose securities are
supported by the discretionary authority of the U.S. government to
purchase certain obligations of the agency or instrumentality; and
- - the Student Loan Marketing Association and the Federal Home Loan
Mortgage Corporation ("FHLMC"), whose securities are supported only by
the credit of such agencies.

Although the U.S. government provides financial support to such U.S.
government-sponsored agencies or instrumentalities, no assurance can be given
that it will always do so. The U.S. government and its agencies and
instrumentalities do not guarantee the market value of their securities;
consequently, the value of such securities will fluctuate.

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 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"). The purchase of mortgage-backed securities from private lenders may
entail greater risk than mortgage-backed securities that are issued or
guaranteed by the U.S. government, its agencies or instrumentalities.
Mortgage-backed securities issued by private lenders maybe 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, over-collateralization, or guarantees by third parties.

Since privately-issued mortgage certificates are not guaranteed by an
entity having the credit status of GNMA or FHLMC, such securities generally are
structured with one or more types of credit enhancement. Such credit
enhancement falls into two categories: (i) liquidity protection; and (ii)
protection against losses resulting from ultimate default by an obligor on the
underlying assets. Liquidity protection refers to the provisions of advances,
generally by the entity administering the pool of assets, to ensure that the
pass-through of payments due on the underlying pool occurs in a timely fashion.
Protection against losses resulting from ultimate default enhances the
likelihood of ultimate payment of the obligations on at least a portion of the
assets in the pool. Such protection may be provided through guarantees,
insurance policies or letters of credit obtained by the issuer or sponsor from
third parties, through various means of structuring the transaction or through
a combination of such approaches.

The ratings of mortgage-backed securities for which third-party credit
enhancement provides liquidity protection or protection against losses from
default are generally dependent upon the continued creditworthiness of the
provider of the credit enhancement. The ratings of such securities could be
subject to reduction in the event of deterioration in the creditworthiness of
the credit enhancement provider even in cases where the delinquency loss
experience on the underlying pool of assets is better than expected. There can
be no assurance that the private issuers or credit enhancers of mortgage-backed
securities can meet their obligations under the relevant policies or other
forms of credit enhancement.

<PAGE> 87

Examples of credit support arising out of the structure of the
transaction include "senior-subordinated securities" (multiple class securities
with one or more classes subordinate to other classes as to the payment of
principal thereof and interest thereon, with the result that defaults on the
underlying assets are borne first by the holders of the subordinated class),
creation of "reserve funds" (where cash or investments sometimes funded from a
portion of the payments on the underlying assets are held in reserve against
future losses) and "over-collateralization" (where the scheduled payments on,
or the principal amount of, the underlying assets exceed those required to make
payment of the securities and pay any servicing or other fees). The degree of
credit support provided for each issue is generally based on historical
information with respect to the level of credit risk associated with the
underlying assets. Delinquency or loss in excess of that which is anticipated
could adversely affect the return on an investment in such security.

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 was previously customary. As new types of
mortgage-related securities are developed and offered to investors, a 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 or other assets generally may be prepaid
at any time. As a result, if a 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 a 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.

Unlike fixed rate mortgage-backed securities, adjustable rate
mortgage-backed securities are collateralized by or represent interest in
mortgage loans with variable rates of interest. These variable rates of
interest reset periodically to align themselves with market rates. A Fund will
not benefit from increases in interest rates to the extent that interest rates
rise to the point where they cause the current coupon of the underlying
adjustable rate mortgages to exceed any maximum allowable annual or lifetime
reset limits (or "cap rates") for a particular mortgage. In this event, the
value of the adjustable rate mortgage-backed securities in a Fund would likely
decrease. Also, a Fund's net asset value could vary to the extent that current
yields on adjustable rate mortgage-backed securities are different than market
yields during interim periods between coupon reset dates or if the timing of
changes to the index upon which the rate for the underlying mortgage is based
lags behind changes in market rates. During periods of declining interest
rates, income to a Fund derived from adjustable rate mortgage securities which
remain in a mortgage pool will decrease in contrast to the income on fixed rate
mortgage securities, which will remain constant. Adjustable rate mortgages also
have less potential for appreciation in value as interest rates decline than do
fixed rate investments.

There are a number of important differences among the agencies and
instrumentalities of the U.S. Government that issue mortgage-backed securities
and among the securities that they issue. Mortgage-backed securities issued by
GNMA include GNMA Mortgage Pass-Through Certificates (also known as "Ginnie
Maes") which are guaranteed as to the timely payment of principal and interest
by GNMA and such guarantee is backed by the full faith and credit of the United
States. GNMA certificates also are supported by the authority of GNMA to borrow
funds from the U.S. Treasury to make payments under its guarantee.
Mortgage-backed securities issued by FNMA include FNMA Guaranteed Mortgage
Pass-Through Certificates (also known as "Fannie Maes") which are solely the
obligations of the FNMA and are not backed by or entitled to the full faith and
credit of the United States. Fannie Maes are guaranteed as to

11
<PAGE> 88

timely payment of the principal and interest by FNMA. Mortgage-backed securities
issued by the Federal Home Loan Mortgage Corporation ("FHLMC") include FHLMC
Mortgage Participation Certificates (also known as "Freddie Macs" or "PCs"). The
FHLMC is a corporate instrumentality of the United States, created pursuant to
an Act of Congress, which is owned entirely by Federal Home Loan Banks and do
not constitute a debt or obligation of the United States or by any Federal Home
Loan Bank. Freddie Macs entitle the holder to timely payment of interest, which
is guaranteed by the FHLMC. The FHLMC guarantees either ultimate collection or
timely payment of all principal payments on the underlying mortgage loans. When
the FHLMC does not guarantee timely payment of principal, FHLMC may remit the
amount due on account of its guarantee of ultimate payment of principal at any
time after default on an underlying mortgage, but in no event later than one
year after it becomes payable.

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 or any other affiliated entities, and the amount
and quality of any credit enhancement of the securities.

COLLATERALIZED MORTGAGE OBLIGATIONS AND MULTICLASS PASS-THROUGH SECURITIES.
CMOs are debt obligations collateralized by mortgage loans or mortgage
pass-through securities. Typically, CMOs are collateralized by GNMA, Fannie Mae
or Freddie Mae Certificates, but also may be collateralized by whole loans or
private pass-throughs (such collateral collectively hereinafter referred to as
"Mortgage Assets"). Multiclass pass-through securities are interests in a trust
composed of Mortgage Assets. Unless the context indicates otherwise, all
references herein to CMOs include multiclass pass-through securities. Payments
of principal and interest on the Mortgage Assets, and any reinvestment income
thereon, provide the funds to pay debt service on the CMOs or make scheduled
distributions on the multiclass pass-through securities. CMOs may be issued by
agencies or instrumentalities of the U.S. government, or by private originators
of, or investors in, mortgage loans, including savings and loan associations,
mortgage banks, commercial banks, investment banks and special purpose
subsidiaries of the foregoing.

In a CMO, a series of bonds or certificates is issued in multiple
classes. Each class of CMOs, often referred to as a "tranche," is issued at a
specified fixed or floating coupon rate and has a stated maturity or final
distribution date. Principal prepayments on the Mortgage Assets may cause the
CMOs to be retired substantially earlier than their stated maturities or final
distribution dates. Interest is paid or accrues on all classes of the CMOs on a
monthly, quarterly or semi-annual basis. The principal of and interest on the
Mortgage Assets may be allocated among the several classes of a series of a CMO
in innumerable ways. In one structure, payments of principal, including any
principal prepayments, on the Mortgage Assets are applied to the classes of a
CMO in the order of their respective stated maturities or final distribution
dates, so that no payment of principal will be made on any class of CMOs until
all other classes having an earlier stated maturity or final distribution date
have been paid in full. As market conditions change, and particularly during
periods of rapid or unanticipated changes in market interest rates, the
attractiveness of the CMO classes and the ability of the structure to provide
the anticipated investment characteristics may be significantly reduced. Such
changes can result in volatility in the market value, and in some instances
reduced liquidity, of the CMO class.

A Fund may also invest in, among others, parallel pay CMOs and Planned
Amortization Class CMOs ("PAC Bonds"). Parallel pay CMOs are structured to
provide payments of principal on each payment date to more than one class.
These simultaneous payments are taken into account in calculating the stated
maturity date or final distribution date of each class, which, as with other
CMO structures, must be retired by its stated maturity date or a final
distribution date but may be retired earlier. PAC Bonds are a type of

<PAGE> 89

CMO tranche or series designed to provide relatively predictable payments of
principal provided that, among other things, the actual prepayment experience
on the underlying mortgage loans falls within a predefined range. If the actual
prepayment experience on the underlying mortgage loans is at a rate faster or
slower than the predefined range or if deviations from other assumptions occur,
principal payments on the PAC Bond may be earlier or later than predicted. The
magnitude of the predefined range varies from one PAC Bond to another; a
narrower range increases the risk that prepayments on the PAC Bond will be
greater or smaller than predicted. Because of these features, PAC Bonds
generally are less subject to the risks of prepayment than are other types of
mortgage-backed securities.

STRIPPED MORTGAGE SECURITIES. Stripped mortgage securities are derivative
multiclass mortgage securities. Stripped mortgage securities may be issued by
agencies or instrumentalities of the U.S. government, or by private originators
of, or investors in, mortgage loans, including savings and loan associations,
mortgage banks, commercial banks, investment banks and special purpose
subsidiaries of the foregoing. Stripped mortgage securities have greater
volatility than other types of mortgage securities. Although stripped mortgage
securities are purchased and sold by institutional investors through several
investment banking firms acting as brokers or dealers, the market for such
securities has not yet been fully developed. Accordingly, stripped mortgage
securities are generally illiquid.

Stripped mortgage securities are structured with two or more classes
of securities that receive different proportions of the interest and principal
distributions on a pool of mortgage assets. A common type of stripped mortgage
security will have at least one class receiving only a small portion of the
interest and a larger portion of the principal from the mortgage assets, while
the other class will receive primarily interest and only a small portion of the
principal. In the most extreme case, one class will receive all of the interest
("IO" or interest-only), while the other class will receive all of the
principal ("PO" or principal-only class). The yield to maturity on IOs, POs and
other mortgage-backed securities that are purchased at a substantial premium or
discount generally are extremely sensitive not only to changes in prevailing
interest rates but also to the rate of principal payments (including
prepayments) on the related underlying mortgage assets, and a rapid rate of
principal payments may have a material adverse effect on such securities' yield
to maturity. If the underlying mortgage assets experience greater than
anticipated prepayments of principal, the Fund may fail to fully recoup its
initial investment in these securities even if the securities have received the
highest rating by a nationally recognized statistical rating organization.

In addition to the stripped mortgage securities described above, the
Fund may invest in similar securities such as Super POs and Levered IOs which
are more volatile than POs, IOs and IOettes. Risks associated with instruments
such as Super POs are similar in nature to those risks related to investments
in POs. Risks connected with Levered IOs and IOettes are similar in nature to
those associated with IOs. The Fund may also invest in other similar
instruments developed in the future that are deemed consistent with its
investment objective, policies and restrictions. POs may generate taxable
income from the current accrual of original issue discount, without a
corresponding distribution of cash to the Fund. See "Tax Status" in the
Prospectus and "Additional Information Concerning Taxes" in the Statement of
Additional Information.

A Fund may also purchase stripped mortgage-backed securities for
hedging purposes to protect that Fund against interest rate fluctuations. For
example, since an IO will tend to increase in value as interest rates rise, it
may be utilized to hedge against a decrease in value of other fixed-income
securities in a rising interest rate environment. With respect to IOs, if the
underlying mortgage securities experience greater than anticipated prepayments
of principal, the Fund may fail to recoup fully its initial investment in these
securities even if the securities are rated in the highest rating category by
an NRSRO. Stripped mortgage-backed securities may exhibit greater price
volatility than ordinary debt securities because of the manner in which their
principal and interest are returned to investors. The market value of the class
consisting entirely of principal payments can be extremely volatile in response
to changes in interest rates. The yields on stripped mortgage-backed securities
that receive all or most of the interest are generally higher than prevailing
market yields on other mortgage-backed obligations because their cash flow
patterns are also volatile and there is a greater risk that the initial
investment will not be fully recouped. The market for

<PAGE> 90

CMOs and other stripped mortgage-backed securities may be less liquid if these
securities lose their value as a result of changes in interest rates; in that
case, a Fund may have difficulty in selling such securities.

MONEY MARKET INSTRUMENTS. Money market instruments 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, with remaining maturities of 397 days
or less;

-- obligations of sovereign foreign governments, their agencies,
instrumentalities and political subdivisions, with remaining
maturities of 397 days or less;

-- 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, and such obligations issued by foreign branches of
foreign banks and financial institutions;

-- commercial paper (including asset-backed 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;

-- high quality short-term (maturity in 397 days or less) corporate
obligations, these obligations will be rated within the top two rating
categories by an NRSRO or if not rated, of comparable quality.

REPURCHASE AGREEMENTS. In connection with the purchase of a repurchase
agreement from member banks of the Federal Reserve System or certain non-bank
dealers by a Fund, the Fund's custodian, or a subcustodian, 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 resale price. Repurchase agreements involve certain risks in the
event of default or insolvency by the other party, including possible delays or
restrictions upon a 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 a 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. NAS or
applicable subadviser, acting under the supervision of the Board of Trustees,
reviews the creditworthiness of those banks and non-bank dealers with which the
Funds enter into repurchase agreements to evaluate these risks.

WHEN-ISSUED SECURITIES AND DELAYED-DELIVERY TRANSACTIONS. When-issued
securities are purchased on a "when-issued" basis or purchased for delayed
delivery, then payment and 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. The greater a Fund's
outstanding commitments for these securities, the greater the exposure to
potential fluctuations in the net asset value of a Fund. Purchasing when-issued
or delayed-delivery securities may

<PAGE> 91

involve the additional risk that the yield or market price available in the
market when the delivery occurs may be higher or the market price lower than
that obtained at the time of commitment.

When a Fund agrees to purchase when-issued or delayed-delivery
securities, to the extent required by the SEC, its custodian will set aside
permissible liquid assets 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 a 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. A 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) a 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) a
Fund must be able to terminate the loan at any time; (4) a 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) a 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, a Fund's board of 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.

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

SPECIAL SITUATION COMPANIES. "Special situation companies" 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. Therefore, an investment
in a Fund that invests a significant

<PAGE> 92

portion of its assets in these securities may involve a greater degree of risk
than an investment in other mutual funds that seek long-term growth of capital
by investing in better-known larger companies. The subadvisers of such Funds
believe, 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, if
it is consummated at all.

FOREIGN SECURITIES Investing in foreign securities (including through the use
of depository receipts) 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 a Fund may hold securities and funds in foreign
currencies, a 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 each
Fund endeavors to achieve the most favorable net results on its 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 a Fund, may be subject to foreign government taxes, higher
custodian fees, higher brokerage costs and dividend collection fees which could
reduce the yield on such securities.

Foreign economies may differ favorably or unfavorably from the U.S.
economy in various respects, including growth of gross domestic product, rates
of inflation, currency depreciation, capital reinvestment, resource
self-sufficiency, and balance of payments positions. Many foreign securities
are less liquid and their prices more volatile than comparable U.S. securities.
From time to time, foreign securities may be difficult to liquidate rapidly
without adverse price effects.

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

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

The securities markets in developing countries are substantially
smaller, less liquid and more volatile than the major securities markets in the
United States. A high proportion of the shares of many issuers may be held by a
limited number of persons and financial institutions, which may limit the
number of shares available for investment by a Fund. Similarly, volume and
liquidity in the bond markets in developing

<PAGE> 93

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

Depository Receipts. A Fund may invest in foreign securities by
purchasing depository receipts, including American Depository Receipts
("ADRs"), European Depository Receipts ("EDRs") and Global Depository Receipts
("GDRs") 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, GDRs, in bearer form, are issued and
designed for use outside the United States and EDRs (also referred to as
Continental Depository 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. GDRs are receipts typically issued by non-United States
banks and trust companies that evidence ownership of either foreign or domestic
securities. For purposes of a Fund's investment policies, ADRs and EDRs are
deemed to have the same classification as the underlying securities they
represent. Thus, an ADR or EDR representing ownership of common stock will be
treated as common stock.

Each Fund may invest in depository receipts through "sponsored" or
"unsponsored" facilities. While ADRs issued under these two types of facilities
are in some respects similar, there are distinctions between them relating to
the rights and obligations of ADR holders and the practices of market
participants.

<PAGE> 94

A depository may establish an unsponsored facility without
participation by (or even necessarily the acquiescence of) the issuer of the
deposited securities, although typically the depository requests a letter of
non-objection from such issuer prior to the establishment of the facility.
Holders of unsponsored ADRs generally bear all the costs of such facilities.
The depository usually charges fees upon the deposit and withdrawal of the
deposited securities, the conversion of dividends into U.S. dollars, the
disposition of non-cash distributions, and the performance of other services.
The depository of an unsponsored facility frequently is under no obligation to
pass through voting rights to ADR holders in respect of the deposited
securities. In addition, an unsponsored facility is generally not obligated to
distribute communications received from the issuer of the deposited securities
or to disclose material information about such issuer in the U.S. and thus
there may not be a correlation between such information and the market value of
the depository receipts. Unsponsored ADRs tend to be less liquid than sponsored
ADRs.

Sponsored ADR facilities are created in generally the same manner as
unsponsored facilities, except that the issuer of the deposited securities
enters into a deposit agreement with the depository. The deposit agreement sets
out the rights and responsibilities of the issuer, the depository, and the ADR
holders. With sponsored facilities, the issuer of the deposited securities
generally will bear some of the costs relating to the facility (such as
dividend payment fees of the depository), although ADR holders continue to bear
certain other costs (such as deposit and withdrawal fees). Under the terms of
most sponsored arrangements, depositories agree to distribute notices of
shareholder meetings and voting instructions, and to provide shareholder
communications and other information to the ADR holders at the request of the
issuer of the deposited securities.

Eurodollar and Yankee Obligations. Eurodollar bank obligations are
dollar-denominated certificates of deposit and time deposits issued outside the
U.S. capital markets by foreign branches of U.S. banks and by foreign banks.
Yankee bank obligations are dollar-denominated obligations issued in the U.S.
capital markets by foreign banks.

Eurodollar and Yankee bank obligations are subject to the same risks
that pertain to domestic issues, notably credit risk, market risk and liquidity
risk. Additionally, Eurodollar (and to a limited extent, Yankee) bank
obligations are subject to certain sovereign risks. One such risk is the
possibility that a sovereign country might prevent capital, in the form of
dollars, from flowing across their borders. Other risks include: adverse
political and economic developments; the extent and quality of government
regulation of financial markets and institutions; the imposition of foreign
withholding taxes, and the expropriation or nationalization of foreign issues.
However, Eurodollar and Yankee bank obligations held in a Fund will undergo the
same credit analysis as domestic issues in which the Fund invests, and will
have at least the same financial strength as the domestic issuers approved for
the Fund.

Foreign Sovereign Debt. Certain Funds may invest in sovereign debt
obligations issued by foreign governments. To the extent that if invests in
obligations issued by developing or emerging markets, these investments involve
additional risks. Sovereign obligors in developing and emerging market
countries are among the world's largest debtors to commercial banks, other
governments, international financial organizations and other financial
institutions. These obligors have in the past experienced substantial
difficulties in servicing their external debt obligations, which led to
defaults on certain obligations and the restructuring of certain indebtedness.
Restructuring arrangements have included, among other things, reducing and
rescheduling interest and principal payments by negotiation new or amended
credit agreements or converting outstanding principal and unpaid interest to
Brady Bonds, and obtaining new credit fo finance interest payments. Holders of
certain foreign sovereign debt securities may be requested to participate in
the restructuring of such obligations and to extend further loans to their
issuers. There can be no assurance that the foreign sovereign debt securities
in which a Fund may invest will not be subject to similar restructuring
arrangements or to requests for new credit which may adversely affect the
Fund's holdings. Furthermore, certain participants in the secondary market for
such debt may be directly involved in negotiating the terms of these
arrangements and may therefore have access to information not available to
other market participants.

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BRADY BONDS. Brady Bonds are debt securities, generally denominated in U.S.
dollars, issued under the framework of the Brady Plan. The Brady Plan is an
initiative announced by former U.S. Treasury Secretary Nicholas F. Brady in
1989 as a mechanism for debtor nations to restructure their outstanding
external commercial bank indebtedness. In restructuring its external debt under
the Brady Plan framework, a debtor nation negotiates with its existing bank
lenders as well as multilateral institutions such as the International Bank for
Reconstruction and Development (the "World Bank") and the International
Monetary Fund (the "IMF"). The Brady Plan framework, as it has developed,
contemplates the exchange of external commercial bank debt for newly issued
bonds known as "Brady Bonds". Brady Bonds may also be issued in respect of new
money being advanced by existing lenders in connection with the debt
restructuring. The World Bank and/or the IMF support the restructuring by
providing funds pursuant to loan agreements or other arrangements which enable
the debtor nation to collateralize the new Brady Bonds or to repurchase
outstanding bank debt at a discount. Under these arrangements with the World
Bank and/or the IMF, debtor nations have been required to agree to the
implementation of certain domestic monetary and fiscal reforms. Such reforms
have included the liberalization of trade and foreign investment, the
privatization of state-owned enterprises and the setting of targets for public
spending and borrowing. These policies and programs seek to promote the debtor
country's economic growth and development. Investors should also recognize that
the Brady Plan only sets forth general guiding principles for economic reform
and debt reduction, emphasizing that solutions must be negotiated on a
case-by-case basis between debtor nations and their creditors. NAS or a
subadviser may believe that economic reforms undertaken by countries in
connection with the issuance of Brady Bonds may make the debt of countries
which have issued or have announced plans to issue Brady Bonds an attractive
opportunity for investment. However, there can be no assurance that NAS or the
subadviser's expectations with respect to Brady Bonds will be realized.

Investors should recognize that Brady Bonds have been issued only
recently, and accordingly, do not have a long payment history. Brady Bonds
which have been issued to date are rated in the categories "BB" or "B" by
Standard & Poor's Corporation ("S&P) or "Ba" or "B" by Moody's Investors
Service, Inc. ("Moody's") or, in cases in which a rating by S&P or Moody's has
not been assigned, are generally considered by NAS or subadviser to be of
comparable quality.

Agreements implemented under the Brady Plan to date are designed to
achieve debt and debt-service reduction through specific options negotiated by
a debtor nation with its creditors. As a result, the financial packages offered
by each country differ. The types of options have included the exchange of
outstanding commercial bank debt for bonds issued at 100% of face value of such
debt which carry a below-market stated rate of interest (generally known as par
bonds), bonds issued at a discount from the face value of such debt (generally
known as discount bonds), bonds bearing an interest rate which increases over
time and bonds issued in exchange for the advancement of new money by existing
lenders. Discount bonds issued to date under the framework of the Brady Plan
have generally borne interested computed semi-annually at a rate equal to 13/16
of 1% above the then current six month London Inter-Bank Offered Rate ("LIBOR")
rate. Regardless of the stated face amount and stated interest rate of the
various types of Brady Bonds, the applicable Funds will purchase Brady Bonds in
secondary markets, as described below, in which the price and yield to the
investor reflect market conditions at the time of purchase. Brady Bonds issued
to date have traded at a deep discount from their face value. Certain sovereign
bonds are entitled to "value recovery payments" in certain circumstances, which
in effect constitute supplemental interest payments but generally are not
collateralized. Certain Brady Bonds have been collateralized as to principal
due date at maturity (typically 30 years from the date of issuance) by U.S.
Treasury zero coupon bonds with a maturity equal to the final maturity of such
Brady Bonds. Collateral purchases are financed by the IMF, the World Bank and
the debtor nations' reserves. In addition, interest payments on certain types
of Brady Bonds may be collateralized by cash or high-grade securities in
amounts that typically represent between 12 and 18 months of interest accruals
on these instruments with the balance of the interest accruals being
uncollateralized. In the event of a default with respect to collateralized
Brady Bonds as a result of which the payment obligations of the issuer are
accelerated, the U.S. Treasury zero coupon obligations held as collateral for
the payment of principal will not be distributed to investors, nor will such
obligations be sold and the proceeds distributed. The collateral will be held
by the collateral agent to the scheduled maturity of the defaulted

<PAGE> 96

Brady Bonds, which will continue to be outstanding, at which time the fact
amount of the collateral will equal the principal payments which would have
then been due on the Brady Bonds in the normal course. Based upon current
market conditions, the Fund would not intend to purchase Brady Bonds which, at
the time of investment, are in default as to payments. However, in light of the
risidual risk of the Brady Bonds and, among other factors, the history of
default with respect to commercial bank loans by public and private entities of
countries issuing Brady Bonds, investments in Brady Bonds are considered
speculative. A Fund may purchase Brady Bonds with no or limited
collateralization, and will be relying for payment of interest and (except in
the case of principal collateralized Brady Bonds) principal primarily on the
willingness and ability of the foreign government to make payment in accordance
with the terms of the Brady Bonds.

Brady Bonds issued to date are purchased and sold in secondary markets
through U.S. securities dealers and other financial institutions and are
generally maintained through European transnational securities depositories. A
substantial portion of the Brady Bonds and other sovereign debt securities in
which a Fund may invest are likely to be acquired at a discount, which involves
certain considerations discussed below under "Additional Information Concerning
Taxes."

REAL ESTATE SECURITIES - Although no Fund will invest in real estate directly,
a Fund may invest in securities of real estate investment trusts ("REITs") and
other real estate industry companies or companies with substantial real estate
investments and, as a result, such Fund may be subject to certain risks
associated with direct ownership of real estate and with the real estate
industry in general. These risks include, among others: possible declines in
the value of real estate; possible lack of availability of mortgage funds;
extended vacancies of properties; risks related to general and local economic
conditions; overbuilding; increases in competition, property taxes and
operating expenses; changes in zoning laws; costs resulting from the clean-up
of, and liability to third parties for damages resulting from, environmental
problems; casualty or condemnation losses; uninsured damages from floods,
earthquakes or other natural disasters; limitations on and variations in rents;
and changes in interest rates.

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

CONVERTIBLE SECURITIES. Convertible securities are bonds, debentures, notes,
preferred stocks, or other securities that may be converted into or exchanged
for a specified amount of common stock of the same or a different issuer within
a particular period of time at a specified price or formula. Convertible
securities have general characteristics similar to both debt obligations and
equity securities. Although to a lesser extent than with debt obligations
generally, the market value of convertible securities tends to decline as
interest rates increase and, conversely, tends to increase as interest rates
decline. In addition, because of the conversion feature, the market value of
convertible securities tends to vary with fluctuations in the market value of
the underlying common stock and therefore will react to variations in the
general market for equity securities. A unique feature of convertible
securities is that as the market price of the underlying common stock declines,
convertible securities tend to trade increasingly on a yield basis, and so may
not experience market value declines to the same extent as the underlying
common stock. When the market price of the underlying common stock increases,
the prices of the convertible securities tend to rise as a reflection of the
value of the underlying common stock. While no securities investments are
without risk, investments in convertible securities generally entail less risk
than investments in common stock of the same issuer.

A convertible security entitles the holder to receive interest
normally paid or accrued on debt or the dividend paid on preferred stock until
the convertible security matures or is redeemed, converted, or exchanged.
Convertible securities have unique investment characteristics in that they
generally (i) have higher yields than common stocks, but lower yields than
comparable non-convertible securities, (ii) are less

<PAGE> 97

subject to fluctuation in value than the underlying stock since they have fixed
income characteristics, and (iii) provide the potential for capital
appreciation if the market price of the underlying common stock increases. Most
convertible securities currently are issued by U.S. companies, although a
substantial Eurodollar convertible securities market has developed, and the
markets for convertible securities denominated in local currencies are
increasing.

The value of a convertible security is a function of its "investment
value" (determined by its yield in comparison with the yields of other
securities of comparable maturity and quality that do not have a conversion
privilege) and its "conversion value" (the security's worth, at market value,
if converted into the underlying common stock). The investment value of a
convertible security is influenced by changes in interest rates, the credit
standing of the issuer and other factors. The conversion value of a convertible
security is determined by the market price of the underlying common stock. If
the conversion value is low relative to the investment value, the price of the
convertible security is governed principally by its investment value.
Generally, the conversion value decreases as the convertible security
approaches maturity. To the extent the market price of the underlying common
stock approaches or exceeds the conversion price, the price of the convertible
security will be increasingly influenced by its conversion value. A convertible
security generally will sell at a premium over its conversion value by the
extent to which investors place value on the right to acquire the underlying
common stock while holding a fixed income security.

A convertible security may be subject to redemption at the option of
the issuer at a price established in the convertible security's governing
instrument. If a convertible security held by a Fund is called for redemption,
a Fund will be required to permit the issuer to redeem the security, convert it
into the underlying common stock, or sell it to a third party.

Convertible securities generally are subordinated to other similar but
non-convertible securities of the same issuer, although convertible bonds, as
corporate debt obligations, generally enjoy seniority in right of payment to
all equity securities, and convertible preferred stock is senior to common
stock of the same issuer. Because of the subordination feature, however,
convertible securities typically are rated below investment grade or are not
rated.

Certain Funds may also invest in zero coupon convertible securities.
Zero coupon convertible securities are debt securities which are issued at a
discount to their face amount and do not entitle the holder to any periodic
payments of interest prior to maturity. Rather, interest earned on zero coupon
convertible securities acretes at a stated yield until the security reaches its
face amount at maturity. Zero coupon convertible securities are convertible
into a specific number of shares of the issuer's common stock. In addition,
zero coupon convertible securities usually have put features that provide the
holder with the opportunity to sell the securities back to the issuer at a
stated price before maturity. Generally, the prices of zero coupon convertible
securities may be more sensitive to market interest rate fluctuations then
conventional convertible securities. Federal income tax law requires the holder
of a zero coupon convertible security to recognize income from the security
prior to the receipt of cash payments. To maintain its qualification as a
regulated investment company and avoid liability of federal income taxes, a
Fund will be required to distribute income accrued from zero coupon convertible
securities which it owns, and may have to sell portfolio securities (perhaps at
disadvantageous times) in order to generate cash to satisfy these distribution
requirements.

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. Warrants acquired by a
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.

<PAGE> 98

PREFERRED STOCK. Preferred stocks, like debt obligations, are generally
fixed-income securities. Shareholders of preferred stocks normally have the
right to receive dividends at a fixed rate when and as declared by the issuer's
board of directors, but do not participate in other amounts available for
distribution by the issuing corporation. Dividends on the preferred stock may
be cumulative, and all cumulative dividends usually must be paid prior to
common shareholders receiving any dividends. Because preferred stock dividends
must be paid before common stock dividends, preferred stocks generally entail
less risk than common stocks. Upon liquidation, preferred stocks are entitled
to a specified liquidation preference, which is generally the same as the par
or stated value, and are senior in right of payment to common stock. Preferred
stocks are, however, equity securities in the sense that they do not represent
a liability of the issuer and, therefore, do not offer as great a degree or
protection of capital or assurance of continued income as investments in
corporate debt securities. In addition, preferred stocks are subordinated in
right of payment to all debt obligations and creditors of the issuer, and
convertible preferred stocks may be subordinated to other preferred stock of
the same issuer.

SHORT SELLING OF SECURITIES. In a short sale of securities, the Fund sells
stock which it does not own, making delivery with securities "borrowed" from a
broker. The Fund is then obligated to replace the security borrowed by
purchasing it at the market price at the time of replacement. This price may or
may not be less than the price at which the security was sold by the Fund.
Until the security is replaced, the Fund is required to pay the lender any
dividends or interest which accrue during the period of the loan. In order to
borrow the security, the Fund may also have to pay a fee which would increase
the cost of the security sold. The proceeds of the short sale will be retained
by the broker, to the extent necessary to meet margin requirements, until the
short position is closed out.

The Fund will incur a loss as a result of the short sale if the price
of the security increases between the date of the short sale and the date on
which the Fund replaces the borrowed security. The Fund will realize a gain if
the security declines in price between those two dates. The amount of any gain
will be decreased and the amount of any loss will be increased by any interest
the Fund may be required to pay in connection with the short sale.

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. The Fund must deposit in a segregated account an amount of
cash or liquid assets equal to the difference between (a) the market value of
securities sold short at the time that they were sold short and (b) the value
of the collateral deposited with the broker in connection with the short sale
(not including the proceeds from the short sale). While the short position is
open, the Fund must maintain on a daily basis the segregated account at such a
level that (1) the amount deposited in it plus the amount deposited with the
broker as collateral equals the current market value of the securities sold
short and (2) the amount deposited in it plus the amount deposited with the
broker as collateral is not less than the market value of the securities at the
time they were sold short.

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

<PAGE> 99

RESTRICTED, NON-PUBLICLY TRADED AND ILLIQUID SECURITIES. A Fund may not invest
more than 15% (10% for the Money Market Fund) 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. Unless subsequently registered for sale, these securities can
only be sold in privately negotiated transactions or pursuant to an exemption
from registration. Investment companies do not typically hold a significant
amount of these restricted or other illiquid securities because of the
potential for delays on resale and uncertainty in valuation. Limitations on
resale may have an adverse effect on the marketability of portfolio securities,
and an investment company might be unable to dispose of restricted or other
illiquid securities promptly or at reasonable prices and might thereby
experience difficulty satisfying redemptions within seven days. An investment
company might also have to register such restricted securities in order to
dispose of them resulting in additional expense and delay. Adverse market
conditions could impede such a public offering of securities.

In recent years, however, a large institutional market has developed
for certain securities that are not registered under the Securities Act
including repurchase agreements, commercial paper, foreign securities,
municipal securities and corporate bonds and notes. Institutional investors
depend on an efficient institutional market in which the unregistered security
can be readily resold or on an issuer's ability to honor a demand for
repayment. The fact that there are contractual or legal restrictions on resale
to the general public or to certain institutions may not be indicative of the
liquidity of such investments.

The SEC has adopted Rule 144A which allows for a broader institutional
trading market for securities otherwise subject to restriction on resale to the
general public. Rule 144A establishes a "safe harbor" from the registration
requirements of the Securities Act for resales of certain securities to
qualified institutional buyers.

A 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 a 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.

The applicable subadviser or NAS (if there are no subadvisers) will
monitor the liquidity of restricted securities in the portion of a Fund it
manages under the supervision of the Board and NAS. In reaching liquidity
decisions, the following factors are considered: (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).

BORROWING. A Fund may borrow money from banks, limited by each Fund's
fundamental investment restriction to 33-1/3% of its total assets (including
the amount borrowed), and may engage in mortgage dollar roll and reverse
repurchase agreements which may be considered a form of borrowing. In addition,
a Fund may borrow up to an additional 5% of its total assets from banks for
temporary or emergency

<PAGE> 100

purposes. A Fund will not purchase securities when bank borrowings exceed 5% of
such Fund's total assets. Each Fund expects that its borrowings will 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. The Funds have
established a line-of-credit ("LOC") with their custodian by which they may
borrow for temporary or emergency purposes. The Funds intend to use the LOC to
meet large or unexpected redemptions that would otherwise force a Fund to
liquidate securities under circumstances which are unfavorable to a Fund's
remaining shareholders.

DERIVATIVE INSTRUMENTS. NAS and each of the 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 a Fund's portfolio or for risk
management or for any other permissible purposes consistent with that Fund's
investment objective. Derivative instruments are securities or agreements whose
value is based on the value of some underlying asset (e.g., a security,
currency or index) or the level of a reference index.

Derivatives generally have investment characteristics that are based
upon either forward contracts (under which one party is obligated to buy and
the other party is obligated to sell an underlying asset at a specific price on
a specified date) or option contracts (under which the holder of the option has
the right but not the obligation to buy or sell an underlying asset at a
specified price on or before a specified date). Consequently, the change in
value of a forward-based derivative generally is roughly proportional to the
change in value of the underlying asset. In contrast, the buyer of an
option-based derivative generally will benefit from favorable movements in the
price of the underlying asset but is not exposed to the corresponding losses
that result from adverse movements in the value of the underlying asset. The
seller (writer) of an option-based derivative generally will receive fees or
premiums but generally is exposed to losses resulting from changes in the value
of the underlying asset. Derivative transactions may include elements of
leverage and, accordingly, the fluctuation of the value of the derivative
transaction in relation to the underlying asset may be magnified.

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, and the Commodity Futures Trading Commission ("CFTC"). In addition, a
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 the NAS'
or 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. There can be no assurance that any
particular strategy adopted will succeed.

(2) There might be imperfect correlation, or even no correlation,
between price movements of an instrument and price movements of investments
being hedged. For example, if the value of an instrument used in a short hedge
(such as writing a call option, buying a put option, or selling a futures
contract) increased by less than the decline in value of the hedged investment,
the hedge would not be fully successful. Such a lack of correlation might occur
due to factors unrelated to the value of the investments being hedged, such as
speculative or other pressures on the markets in which these instruments are
traded. The effectiveness of hedges using instruments on indices will depend on
the degree of correlation between price movements in the index and price
movements in the investments being hedged, as well as, how similar the index is
to the portion of the Fund's assets being hedged in terms of securities
composition.

(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

<PAGE> 101

in the hedged investments. For example, if a Fund entered into a short hedge
because NAS or 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, a Fund could suffer a
loss.

(4) As described below, a 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 a Fund's
derivative instruments, see "Tax Status" below.

Options. A Fund may purchase or write put and call options on
securities and indices, and may purchase options on foreign currencies, 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 a 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 of the
option, 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 a Fund may include European-style
options, which can only be exercised at expiration. This is in contrast to
American-style options which can be exercised at any time prior to the
expiration date of the option.

A Fund may effectively terminate its right or obligation under an
option by entering into a closing transaction. For example, a 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, a 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.

A 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

<PAGE> 102

option is listed that, in effect, guarantees completion of every
exchange-traded option transaction. OTC options are contracts between the Fund
and the counterparty (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.

A Fund's ability to establish and close out positions in
exchange-listed options depends on the existence of a liquid market. A 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 counterparty, or
by a transaction in the secondary market if any such market exists. Although a
Fund will enter into OTC options only with counterparties that are expected to
be capable of entering into closing transactions with a Fund, there is no
assurance that such 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, a Fund might be unable to close out an OTC option position at any time
prior to its expiration.

If a Fund is 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 a 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.

A Fund may engage in options transactions on indices in much the same
manner as the options on securities discussed above, except that index options
may serve as a hedge against overall fluctuations in the securities markets in
general.

The writing and purchasing of options is a highly specialized activity
that involves investment techniques and risks different from those associated
with ordinary portfolio securities transactions. Imperfect correlation between
the options and securities markets may detract from the effectiveness of
attempted hedging.

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

Spread Transactions. A 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 a
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 a Fund in
purchasing covered spread options is 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 a 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. A 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

<PAGE> 103

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. A
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. A 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. A Fund
will engage in this strategy only when NAS or a subadviser believes it is more
advantageous to a Fund than is purchasing the futures contract.

To the extent required by regulatory authorities, a 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 a Fund to trade in
futures contracts may be limited by the requirements of the Code applicable to
a regulated investment company.

A 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 a 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 a Fund's exposure to market, currency, or interest rate
fluctuations, such Fund may be able to hedge its exposure more effectively and
perhaps at a lower cost through using futures contracts.

A futures contract provides for the future sale by one party and
purchase by another party of a specified amount of a specific financial
instrument (e.g., debt security) or currency for a specified price at a
designated date, time, and place. An index futures contract is an agreement
pursuant to which the parties agree to take or make delivery of an amount of
cash equal to a specified multiplier times the difference between the value of
the index at the close of the last trading day of the contract and the price at
which the index futures contract was originally written. Transactions costs are
incurred when a futures contract is bought or sold and margin deposits must be
maintained. A futures contract may be satisfied by delivery or purchase, as the
case may be, of the instrument, the currency, or by payment of the change in
the cash value of the index. More commonly, futures contracts are closed out
prior to delivery by entering into an offsetting transaction in a matching
futures contract. Although the value of an index might be a function of the
value of certain specified securities, no physical delivery of those securities
is made. If the offsetting purchase price is less than the original sale price,
a Fund realizes a gain; if it is more, a Fund realizes a loss. Conversely, if
the offsetting sale price is more than the original purchase price, a Fund
realizes a gain; if it is less, a Fund realizes a loss. The transaction costs
must also be included in these calculations. There can be no assurance,
however, that a Fund will be able to enter into an offsetting transaction with
respect to a particular futures contract at a particular time. If a Fund is not
able to enter into an offsetting transaction, that Fund will continue to be
required to maintain the margin deposits on the futures contract.

No price is paid by a 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 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 a Fund at the termination of the transaction if all
contractual obligations have been satisfied. Under certain circumstances, such
as periods of high volatility, a Fund may be required by an exchange to

<PAGE> 104

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 a Fund purchases an option on a future, the premium paid
plus transaction costs is all that is at risk. In contrast, when a 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 a 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 Funds intend 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 a 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, because it would
continue to be subject to market risk with respect to the position. In
addition, except in the case of purchased options, the Fund would continue to
be required to make daily variation margin payments and might be required to
maintain the position being hedged by the future or option or to maintain cash
or securities in a segregated account.

Certain characteristics of the futures market might increase the risk
that movements in the prices of futures contracts or options on futures
contracts might not correlate perfectly with movements in the prices of the
investments being hedged. For example, all participants in the futures and
options on futures contracts markets are subject to daily variation margin
calls and might be compelled to liquidate futures or options on futures
contracts positions whose prices are moving unfavorably to avoid being subject
to further calls. These liquidations could increase price volatility of the
instruments and distort the normal price relationship between the futures or
options and the investments being hedged. Also, because initial margin deposit
requirements in the futures markets are less onerous than margin requirements
in the securities markets, there might be increased participation by
speculators in the future markets. This participation also might cause
temporary price distortions. In addition, activities of large traders in both
the futures and securities markets involving arbitrage, "program trading" and
other investment strategies might result in temporary price distortions.

Swap Agreements. A Fund may enter into interest rate, securities
index, commodity, or security and currency exchange rate swap agreements for
any lawful purpose consistent with such 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. A 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

<PAGE> 105

"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 a Fund, the
obligations of the parties would be exchanged on a "net basis." Consequently, a
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"). A 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
segregated account consisting of cash or liquid assets.

Whether a Fund's use of swap agreements will be successful in
furthering its investment objective will depend, in part, on NAS' or 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, a 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 a Fund by the Internal Revenue Code may limit a Fund's ability to
use swap agreements. The swaps market is largely unregulated.

A Fund will enter swap agreements only with counterparties that NAS or
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, a
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.

Foreign Currency-Related Derivative Strategies - Special
Considerations. A Fund may use options and futures and options on futures on
foreign currencies and forward currency contracts to hedge against movements in
the values of the foreign currencies in which a Fund's securities are
denominated. A 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. The Global Equity
Fund may engage in foreign currency exchange transactions to adjust its
currency exposure relative to its benchmark, the MSCI World Equity Index. 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.

A 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, a 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, a Fund could be disadvantaged by having to deal in the odd lot
market (generally consisting of transactions

<PAGE> 106

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, a 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, a Fund will normally purchase OTC options on
foreign currency only when NAS or a subadviser believes a liquid secondary
market will exist for a particular option at any specific time.

FORWARD CURRENCY CONTRACTS. A Fund may enter into 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.

At or before the maturity of a forward contract, a 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 a 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 a Fund's investments. A currency hedge, for example, should
protect a Yen-denominated bond against a decline in the Yen, but will not
protect a Fund against price decline if the issuer's creditworthiness
deteriorates. Because the value of a 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 a Fund's investments denominated in that currency over time.

A decline in the dollar value of a foreign currency in which a 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

<PAGE> 107

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, a 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, a 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.

A Fund may enter into foreign currency exchange transactions to hedge
its currency exposure in specific transactions or portfolio positions or, in
the case of the Global Equity Fund, to adjust its currency exposure relative to
its benchmark, the MSCI World Equity Index. Transaction hedging is the purchase
or sale of forward currency with respect to specific receivables or payables of
a 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. A 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.

FOREIGN COMMERCIAL PAPER. A 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. A 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 a 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. A 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 Investment Company Act of 1940. The Funds believe 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 other liquid assets having a value equal
to the aggregate principal amount of outstanding commercial paper of this type.

SECURITIES OF INVESTMENT COMPANIES. As permitted by the Investment Company Act
of 1940, a Fund may invest up to 10% 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 a 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. A 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 Fund. Some of the countries in which a 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.

BANK OBLIGATIONS. Bank obligations that may be purchased by a Fund include
certificates of deposit, banker's acceptances and fixed time deposits. A
certificate of deposit is a short-term negotiable certificate issued by a
commercial bank against funds deposited in the bank and is either
interest-bearing or purchased on a discount basis. A bankers' acceptance is a
short-term draft drawn on a commercial bank by a borrower, usually in
connection with an international commercial transaction. The borrower is liable
for payment as is the bank, which unconditionally guarantees to pay the draft
at its face amount on the maturity date. Fixed

<PAGE> 108

time deposits are obligations of branches of U.S. banks or foreign banks which
are payable at a stated maturity date and bear a fixed rate of interest.
Although fixed time deposits do not have a market, there are no contractual
restrictions on the right to transfer a beneficial interest in the deposit to a
third party.

Bank obligations may be general obligations of the parent bank or may
be limited to the issuing branch by the terms of the specific obligations or by
government regulation.

FLOATING AND VARIABLE RATE INSTRUMENTS. Floating or variable rate obligations
bear interest at rates that are not fixed, but vary with changes in specified
market rates or indices, such as the prime rate, or at specified intervals.
Certain of the floating or variable rate obligations that may be purchased by
the Funds may carry a demand feature that would permit the holder to tender
them back to the issuer of the instrument or to a third party at par value
prior to maturity.

Some of the demand instruments purchased by a Fund may not be traded
in a secondary market and derive their liquidity solely from the ability of the
holder to demand repayment from the issuer or third party providing credit
support. If a demand instrument is not traded in a secondary market, the Fund
will nonetheless treat the instrument as "readily marketable" for the purposes
of its investment restriction limiting investments in illiquid securities
unless the demand feature has a notice period of more than seven days in which
case the instrument will be characterized as "not readily marketable" and
therefore illiquid.

Such obligations include variable rate master demand notes, which are
unsecured instruments issued pursuant to an agreement between the issuer and the
holder that permit the indebtedness thereunder to vary and to provide for
periodic adjustments in the interest rate. A Fund will limit its purchases of
floating and variable rate obligations to those of the same quality as it is
otherwise allowed to purchase. NAS or any applicable subadviser will monitor on
an ongoing basis the ability of an issuer of a demand instrument to pay
principal and interest on demand.

A Fund's right to obtain payment at par on a demand instrument could
be affected by events occurring between the date the Fund elects to demand
payment and the date payment is due that may affect the ability of the issuer
of the instrument or third party providing credit support to make payment when
due, except when such demand instruments permit same day settlement. To
facilitate settlement, these same day demand instruments may be held in book
entry form at a bank other than a Fund's custodian subject to a subcustodian
agreement approved by the Fund between that bank and the Fund's custodian.

ZERO COUPON SECURITIES, STEP-COUPON SECURITIES, PAY-IN-KIND BONDS ("PIK BONDS")
AND DEFERRED PAYMENT SECURITIES. Zero coupon securities are debt securities
that pay no cash income but are sold at substantial discounts from their value
at maturity. Step-coupon securities are debt securities that do not make
regular cash interest payments and are sold at a deep discount to their face
value. When a zero coupon security is held to maturity, its entire return,
which consists of the amortization of discount, comes from the difference
between its purchase price and its maturity value. This difference is known at
the time of purchase, so that investors holding zero coupon securities until
maturity know at the time of their investment what the expected return on their
investment will be. Zero coupon securities may have conversion features. PIK
bonds pay all or a portion of their interest in the form of debt or equity
securities. Deferred payment securities are securities that remain zero coupon
securities until a predetermined date, at which time the stated coupon rate
becomes effective and interest becomes payable at regular intervals. Deferred
payment securities are often sold at substantial discounts from their maturity
value.

Zero coupon securities, PIK bonds and deferred payment securities tend
to be subject to greater price fluctuations in response to changes in interest
rates than are ordinary interest-paying debt securities with similar
maturities. The value of zero coupon securities appreciates more during periods
of declining interest rates and depreciates more during periods of rising
interest rates than ordinary interest-paying debt securities with similar
maturities. Zero coupon securities, PIK bonds and deferred payment securities
may be issued by a wide variety of corporate and governmental issuers. Although
these instruments are generally not

<PAGE> 109

traded on a national securities exchange, they are widely traded by brokers and
dealers and, to such extent, will not be considered illiquid for the purposes
of a Fund's limitation on investments in illiquid securities.

Current federal income tax law requires the holder of a zero coupon
security, certain PIK bonds, deferred payment securities and certain other
securities acquired at a discount (such as Brady Bonds) to accrue income with
respect to these securities prior to the receipt of cash payments. Accordingly,
to avoid liability for federal income and excise taxes, a Fund may be required
to distribute income accrued with respect to these securities and may have to
dispose of portfolio securities under disadvantageous circumstances in order to
generate cash to satisfy these distribution requirements.

LOAN PARTICIPATIONS AND ASSIGNMENTS. Loan Participations typically will result
in a Fund having a contractual relationship only with the lender, not with the
borrower. A Fund will have the right to receive payments of principal, interest
and any fees to which it is entitled only from the lender selling the
Participation and only upon receipt by the lender of the payments from the
borrower. In connection with purchasing Loan Participations, a Fund generally
will have no right to enforce compliance by the borrower with the terms of the
loan agreement relating to the loan, nor any rights of set-off against the
borrower, and a Fund may not benefit directly from any collateral supporting
the loan in which it has purchased the Participation. As a result, a Fund will
assume the credit risk of both the borrower and the lender that is selling the
Participation. In the event of the insolvency of the lender selling a
Participation, a Fund may be treated as a general creditor of the lender and
may not benefit from any set-off between the lender and the borrower. A Fund
will acquire Loan Participations only if the lender interpositioned between the
Fund and the borrower is determined by the applicable subadviser to be
creditworthy. When a Fund purchases Assignments from lenders, the Fund will
acquire direct rights against the borrower on the loan, except that under
certain circumstances such rights may be more limited than those held by the
assigning lender.

A Fund may have difficulty disposing of Assignments and Loan
Participations. Because the market for such instruments is not highly liquid,
the Fund anticipates that such instruments could be sold only to a limited
number of institutional investors. The lack of a highly liquid secondary market
may have an adverse impact on the value of such instruments and will have an
adverse impact on the Fund's ability to dispose of particular Assignments or
Loan Participations in response to a specific economic event, such as
deterioration in the creditworthiness of the borrower.

In valuing a Loan Participation or Assignment held by a Fund for which
a secondary trading market exists, the Fund will rely upon prices or quotations
provided by banks, dealers or pricing services. To the extent a secondary
trading market does not exist, the Fund's Loan Participations and Assignments
will be valued in accordance with procedures adopted by the Board of Trustees,
taking into consideration, among other factors: (i) the creditworthiness of the
borrower under the loan and the lender; (ii) the current interest rate; period
until next rate reset and maturity of the loan; (iii) recent prices in the
market for similar loans; and (iv) recent prices in the market for instruments
of similar quality, rate, period until next interest rate reset and maturity.

MORTGAGE DOLLAR ROLLS AND REVERSE REPURCHASE AGREEMENTS. A Fund may engage in
reverse repurchase agreements to facilitate portfolio liquidity, a practice
common in the mutual fund industry, or for arbitrage transactions discussed
below. In a reverse repurchase agreement, a Fund would sell a security and
enter into an agreement to repurchase the security at a specified future date
and price. A Fund generally retains the right to interest and principal
payments on the security. Since a Fund receives cash upon entering into a
reverse repurchase agreement, it may be considered a borrowing (see
"Borrowing"). When required by guidelines of the SEC, a Fund will set aside
permissible liquid assets in a segregated account to secure its obligations to
repurchase the security. At the time a Fund enters into a reverse repurchase
agreement, it will establish and maintain a segregated account with an approved
custodian containing liquid securities having a value not less than the
repurchase price (including accrued interest). The assets contained in the
segregated account will be marked-to-market daily and additional assets will be
placed in such account on any day in which the assets fall below the repurchase
price (plus accrued interest). A Fund's liquidity and ability to

33
<PAGE> 110

manage its assets might be affected when it sets aside cash or portfolio
securities to cover such commitments. Reverse repurchase agreements involve the
risk that the market value of the securities retained in lieu of sale may
decline below the price of the securities the Fund has sold but is obligated to
repurchase. In the event the buyer of securities under a reverse repurchase
agreement files for bankruptcy or becomes insolvent, such buyer or its trustee
or receiver may receive an extension of time to determine whether to enforce
the Fund's obligation to repurchase the securities, and the Fund's use of the
proceeds of the reverse repurchase agreement may effectively be restricted
pending such determination. Reverse repurchase agreements are considered to be
borrowings under the Investment Company Act of 1940.

Mortgage dollar rolls are arrangements in which a Fund would sell
mortgage-backed securities for delivery in the current month and simultaneously
contract to purchase substantially similar securities on a specified future
date. While a Fund would forego principal and interest paid on the
mortgage-backed securities during the roll period, the Fund would be
compensated by the difference between the current sales price and the lower
price for the future purchase as well as by any interest earned on the proceeds
of the initial sale. A Fund also could be compensated through the receipt of
fee income equivalent to a lower forward price. At the time the Fund would
enter into a mortgage dollar roll, it would set aside permissible liquid assets
in a segregated account to secure its obligation for the forward commitment to
buy mortgage-backed securities. Mortgage dollar roll transactions may be
considered a borrowing by the Funds. (See "Borrowing")

Mortgage dollar rolls and reverse repurchase agreements may be used as
arbitrage transactions in which a Fund will maintain an offsetting position in
investment grade debt obligations or repurchase agreements that mature on or
before the settlement date on the related mortgage dollar roll or reverse
repurchase agreements. Since a Fund will receive interest on the securities or
repurchase agreements in which it invests the transaction proceeds, such
transactions may involve leverage. However, since such securities or repurchase
agreements will be high quality and will mature on or before the settlement
date of the mortgage dollar roll or reverse repurchase agreement, NAS or a
subadviser believes that such arbitrage transactions do not present the risks
to the Funds that are associated with other types of leverage. TEMPORARY
POSITIONS. In response to economic, political or unusual market conditions,
each Fund may invest up to 100% of its assets in cash or money market
obligations. In addition, a Fund may have, from time to time, significant cash
positions until suitable investment opportunities are available.

INVESTMENT RESTRICTIONS FOR THE FUNDS

THE FOLLOWING ARE FUNDAMENTAL INVESTMENT RESTRICTIONS FOR EACH OF THE
FUNDS WHICH CANNOT BE CHANGED WITHOUT SHAREHOLDER APPROVAL:

INVESTMENT RESTRICTIONS FOR: STRATEGIC VALUE FUND, EQUITY INCOME FUND, HIGH
INCOME BOND FUND, BALANCED FUND, MULTI SECTOR BOND FUND, SMALL CAP VALUE FUND,
SELECT ADVISERS SMALL CAP GROWTH FUND, GLOBAL EQUITY FUND, AND SELECT ADVISERS
MID CAP FUND

A Fund:

May not purchase securities of any one issuer, other than obligations
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, if, immediately after such purchase, more than 5%
of the Fund's total assets would be invested in such issuer or the
Fund would hold more than 10% of the outstanding voting securities of
the issuer, except that 25% or less of the Fund's total assets may be
invested without regard to such limitations. There is no limit to the
percentage of assets that may be invested in U.S. Treasury bills,
notes, or other obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.

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

<PAGE> 111

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.

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

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.

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.

May not purchase or sell commodities or commodities contracts, except
to the extent disclosed in the current Prospectus of such Fund.

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.

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.

INVESTMENT RESTRICTIONS FOR: STRATEGIC GROWTH FUND, SMALL COMPANY FUND AND
INCOME FUND

A Fund:

May (i) borrow money from banks and (ii) make other investments or
engage in other transactions permissible under 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). A 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.

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

35
<PAGE> 112

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.

INVESTMENT RESTRICTIONS FOR: TOTAL RETURN FUND, CAPITAL APPRECIATION FUND,
GOVERNMENT BOND FUND, MONEY MARKET FUND

A Fund:

May not 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.

May not 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.

May not 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.

36
<PAGE> 113

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.

May not purchase or sell commodities or commodities contracts, except
to the extent disclosed in the current Prospectus of such Fund.

May not issue securities except as permitted by the Investment Company
Act of 1940.

The following are the NON-FUNDAMENTAL operating policies of the Strategic
Growth Fund, Strategic Value Fund, Equity Income Fund, High Income Bond Fund,
Balanced Fund, Multi Sector Bond Fund, Small Cap Value Fund, Select Advisers
Small Cap Growth Fund, Global Equity Fund, Select Advisers Mid Cap Fund, Small
Company Fund and Income Fund, which MAY BE CHANGED by the Board of Trustees of
the Trust WITHOUT SHAREHOLDER APPROVAL:

Each Fund may not:

Sell securities short (except for the Mid Cap Fund), 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
sales 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. The Mid Cap Fund may only sell securities short in
accordance with the description contained in its Prospectus.

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.

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.

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.

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:

Make short sales of securities.

37
<PAGE> 114

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.

Purchase securities of other investment companies, except (a) in
connection with a merger, consolidation, acquisition or reorganization
and (b) to the extent permitted by the 1940 Act, or any rules or
regulations thereunder, or pursuant to any exemption therefrom.

PORTFOLIO TURNOVER [to be inserted]

INSURANCE LAW RESTRICTIONS - In connection with the Trust's agreement to sell
shares to the Accounts, NAS and the insurance companies may enter into
agreements, required by certain state insurance departments, under which NAS
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.

MAJOR SHAREHOLDERS

As of March 31, 1999, separate accounts of Nationwide Life Insurance
Company had shared voting and investment power over ____% of the Balanced Fund
shares, ____% of the Multi Sector Bond Fund shares, ____% of the Small Cap
Value Fund shares, ____% of the Global Equity Fund shares, ____% of the Select
Advisors Mid Cap Fund shares, ____% of the Strategic Growth Fund shares, ____%
of the Strategic Value Fund shares, ____% of the Equity Income Fund shares, and
____% of the High Income Bond Fund shares, respectively. As of March 31, 1999,
Nationwide Life Insurance Company owned beneficially ____% of the Balanced Fund
shares, ____% of the Multi Sector Bond Fund shares, ____% of the Small Cap
Value Fund shares, ____% of the Global Equity Fund shares, ____% of the Select
Advisors Mid Cap Fund shares, ____% of the Strategic Growth Fund shares, ____%
of the Strategic Value Fund shares, ____% of the Equity Income Fund shares and
____% of the High Income Bond Fund shares.

As of February 20, 1999, the Trustees and Officers of the Trust as a
group owned beneficially less than 1% of the shares of the Trust.

TRUSTEES AND OFFICERS OF THE TRUST

TRUSTEES AND OFFICERS

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

Dr. John C. Bryant, Trustee, Age 63
411 Oak Street - Suite 306
Cincinnati, Ohio

Dr. Bryant is Executive Director of the Cincinnati Youth
Collaborative, a partnership of business, government, schools and
social service agencies to address the educational needs of students.
He was formerly Professor of Education, Wilmington College.

C. Brent DeVore, Trustee, Age 58
North Walnut and West College Avenue, Westerville, Ohio

Dr. DeVore is President of Otterbein College.

38
<PAGE> 115

Sue Doody, Trustee, Age 64
169 East Beck Street
Columbus, Ohio

Ms. Doody is President of Lindey's Restaurant, Columbus, Ohio. She is
an active member of the Greater Columbus Area Chamber of Commerce
Board of Trustees.

Robert M. Duncan, Trustee, Age 71
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, Trustee*, Chairman, Age 54
One Nationwide Plaza
Columbus, Ohio

Mr. Gasper is Director, President and Chief Operating Officer for
Nationwide Life and Annuity Insurance Company and Nationwide Life
Insurance Company. Prior to that, he was Executive Vice President and
Senior Vice President for the Nationwide Insurance Enterprise.

Dr. Thomas J. Kerr, IV, Trustee, Age 65
4890 Smoketalk Lane
Westerville, Ohio

Dr. Kerr is President Emeritus of Kendall College. He was formerly
President of Grant Hospital Development Foundation.

Douglas F. Kridler, Trustee, Age 43
55 East State Street
Columbus, Ohio

Mr. Kridler is President of Columbus Association for the Performing
Arts.

Robert J. Woodward, Jr., Trustee*, Vice-Chairman, Age 56
One Nationwide Plaza
Columbus, Ohio

Mr. Woodward is Executive Vice President - Chief Investment Officer
for Nationwide Life and Annuity Insurance Company and Nationwide Life
Insurance Company.

David C. Wetmore, Trustee, Age 50
11495 Sunset Hills Rd - Suite #210, Reston, Virginia

Mr. Wetmore is the Managing Director of The Updata Capital, a venture
capital firm.

39
<PAGE> 116

James F. Laird, Jr., Treasurer, Age 42
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.

Elizabeth A. Davin, Secretary, Age 34
One Nationwide Plaza
Columbus, Ohio

Ms. Davin is a member of the Office of General Counsel of the
Nationwide Insurance Enterprise and a partner in Dietrich, Reynolds &
Koogler.

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

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, 1998, and the aggregate compensation paid to
each disinterested Trustee during the year by all twenty nine registered
investment companies to which NAS 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.

COMPENSATION TABLE
FISCAL YEAR ENDED DECEMBER 31, 1998

Total
Compensation from
Aggregate the Nationwide Fund
Compensation Fund Complex
Disinterested Trustees From the Trust Including the Trust
---------------------- -------------- -------------------
<S> <C> <C>
Dr. John C. Bryant $8,000 $24,000

C. Brent DeVore $4,500 $16,000

Sue Doody $8,000 $21,000

Robert M. Duncan $8,000 $24,000

Dr. Thomas J. Kerr, IV $8,000 $24,000

Douglas F. Kridler $8,000 $21,000

David C. Wetmore $4,500 $16,000
</TABLE>

CALCULATING YIELD AND TOTAL RETURN

CALCULATING YIELD - THE MONEY MARKET FUND

Any current yield quotations for the Money Market Fund, 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

40
<PAGE> 117

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 December 31, 1998, the Fund's
seven-day current yield was ____%. The Fund's effective yield represents an
annualization of the current seven day return with all dividends reinvested,
and for the period ended December 31, 1998, was ____%.

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 period
ended December 31, 1998 are shown below.

<PAGE> 118

<TABLE>
<CAPTION>
Since
Fund 1 Year 5 years 10 Years Inception
---- ------ ------- -------- ---------
<S> <C> <C> <C> <C>
Strategic Growth Fund % N/A N/A %*

Strategic Value Fund % N/A N/A %*

Equity Income Fund % N/A N/A %*

High Income Bond Fund % N/A N/A %*

Balanced Fund % N/A N/A %*

Multi Sector Bond Fund % N/A N/A %*

Small Cap Value Fund % N/A N/A %*

Global Equity Fund % N/A N/A %*

Select Advisers Mid Cap Growth Fund
% N/A N/A %*

Select Advisers Small Cap Growth -- -- -- --
Fund****

Small Company Fund % N/A N/A %**

Income Fund N/A N/A N/A %***

Total Return Fund % % %

Capital Appreciation Fund % % %

Government Bond Fund % % %
</TABLE>

* These Funds commeced operations on October 31, 1997.
** This Fund commenced operations on October 23, 1995.
*** This Fund commenced operations on January 20, 1998.
****Operations for the Select Advisers Small Cap Growth Fund commenced on or
about May 1, 1999.

Certain Funds 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, and annualizing the
results, assuming reinvestment of all dividends and distributions. This yield
formula uses the average number of share 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 uniformly calculated yields for the 30
day period ended December 31, 1998 were as follows:

Fund 30-day yield
---- ------------
<S> <C>
High Income Bond Fund %
Balanced Fund %
Multi Sector Bond Fund %
Government Bond Fund %
</TABLE>

INVESTMENT ADVISORY AND OTHER SERVICES

NAS oversees the management of each of the Funds pursuant to
Investment Advisory Agreements with the Trust (the "Investment Advisory
Agreements"). Pursuant to the Investment Advisory Agreements, NAS either
provides portfolio management for the Funds directly or hires and monitors the
subadvisers who are responsible for daily portfolio management. NAS pays the
compensation of the

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<PAGE> 119

Trustees affiliated with NAS. The officers of the Trust receive no compensation
from the Trust. NAS also pays all expenses incurred by it in providing service
under the Investment Advisory Agreements, other than the cost of investments
(including brokerage commissions and other transaction costs).

The Investment Advisory Agreements also provide that NAS shall not
be liable for any act or omission in providing advisory services, or for any
loss arising out of any investment, unless NAS has acted with willful
misfeasance, bad faith, or gross negligence in the performance of its duties,
or by reason of NAS' reckless disregard of its obligations and duties under the
Agreements. After an initial two-year period, the Investment Advisory
Agreements must be approved each year by the Trust's board of trustees or by
shareholders in order to continue. Each Investment Advisory Agreement
terminates automatically if it is assigned. They 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.

Subject to the supervision of NAS and the Trustees, each subadviser
manages a Fund's assets in accordance with such Fund's investment objective and
policies. Each subadviser shall make investment decisions for such Fund, and in
connection with such investment decisions, shall place purchase and sell orders
for securities.

Each subadviser provides investment advisory services to one or
more Funds pursuant to a Subadvisory Agreement. Each of the Subadvisory
Agreements specifically provides that the subadviser 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
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. After an initial two-year period,
each Subadvisory Agreement must be approved each year by the Trust's board of
trustees or by shareholders in order to continue. 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 not less than 60 days written notice.

The following is a summary of the investment advisory fees paid and
the subadvisory arrangements for each Fund.

TOTAL RETURN FUND, CAPITAL APPRECIATION FUND, GOVERNMENT BOND FUND AND MONEY
MARKET FUND. Prior to November 1, 1997, NAS received a fee computed and paid
monthly at the annual rate equal to .50% of the average daily net assets of
each Fund.

As of November 1, 1997, the following are the advisory fees
expressed as an annual percentage of average daily net assets:

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 then $2 billion
0.45% on assets of $2 billion and more but less then $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 then $5 billion
0.34% for assets of $5 billion and more
</TABLE>

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<PAGE> 120

For the years ended December 31, 1998, 1997 and 1996, NAS received
fees in the following amounts: Total Return Fund $__________, $7,903,818 and
$4,851,676, respectively; Capital Appreciation Fund, $_________, $1,759,412 and
$684,932, respectively; Government Bond Fund, $___________, $2,231,930 and
$2,225,962, respectively; and Money Market Fund $__________, $4,969,345 and
$4,518,925, respectively.

EQUITY INCOME FUND

Under the terms of its Investment Advisory Agreement, the Equity
Income Fund pays to NAS a fee at the annual rate of 0.80% of the Fund's average
daily net assets. For the fiscal year ended December 31, 1998, NAS was paid
$_________.

Federated Investment Counseling ("Federated") is the subadviser of
the Fund. For the investment management services it provides to the Fund,
Federated receives an annual fee from NAS in the amount of 0.40% on assets up
to $50 million, 0.25% on assets of $50 million and more but less than $250
million, 0.20% on assets of $250 million and more but less than $500 million,
and 0.15% on assets of $500 million and more. These fees are calculated at an
annual rate based upon the Fund's average daily net assets. For the period
October 31, 1997 (commencement of operations) through December 31, 1997, NAS
paid $842 in fees to Federated. For the fiscal year ended December 31, 1998,
NAS paid Federated $________.

Federated, a Delaware business trust organized on April 11, 1989 is
a registered investment adviser under the Investment Advisers Act of 1940. It
is a subsidiary of Federated Investors, Inc. Federated and other subsidiaries
of Federated Investors, Inc. serve as investment advisers to an open number of
investment companies and private accounts. Certain other subsidiaries also
provide administrative services to a number of investment companies.

HIGH INCOME BOND FUND

Under the terms of its Investment Advisory Agreement, the High
Income Bond Fund pays to NAS a fee at the annual rate of .80% of the Fund's
average daily net assets. For the period October 31, 1997 (commencement of
operations) through December 31, 1997, NAS waived all advisory fees in the
amount of $7,374. For the fiscal year ended December 31, 1998, NAS was paid
$_______.

Federated Investment Counseling is the subadviser of the Fund. For
the investment management services it provides to the Fund, Federated receives
an annual fee from NAS in the amount of 0.40% on assets up to $50 million,
0.25% on assets of $50 million and more but less than $250 million, 0.20% on
assets of $250 million and more but less than $500 million, and 0.15% on assets
of $500 million and more. These fees are calculated at an annual rate based
upon the Fund's average daily net assets. Additional information about
Federated is included above. For the period October 31, 1997 (commencement of
operations) through December 31, 1997, NAS paid $3,687 in fees to Federated.
For the fiscal year ended December 31, 1998, NAS paid Federated $--------.

GLOBAL EQUITY FUND

Under the terms of its Investment Advisory Agreement the Global
Equity Fund pays to NAS a fee at the annual rate of 1.00% of the Fund's average
daily net assets. For the period October 31, 1997 (commencement of operations)
through December 31, 1997, NAS waived all advisory fees in the amount of
$8,799. For the fiscal year ended December 31, 1998, NAS was paid $________.

44
<PAGE> 121

J.P. Morgan Investment Management Inc. ("J.P. Morgan") is the
subadviser of the Fund. For the investment management services it provides to
the Fund, J.P. Morgan receives an annual fee from NAS in an amount equal to
0.60% on assets up to $50 million and 0.55% on assets of $50 million and over.
These fees are calculated at an annual rate based on the Fund's average daily
net assets. For the period October 31, 1997 (commencement of operations)
through December 31, 1997, NAS paid $5,279 in fees to, J. P. Morgan. For the
fiscal year ended December 31, 1998, NAS paid J.P. Morgan $_________.

J.P. Morgan is a wholly owned subsidiary of J.P. Morgan & Co.
Incorporated, a bank holding company organized under the laws of Delaware. J.P.
Morgan offers a wide range of investment management services and acts as
investment adviser to corporate and institutional clients. J.P. Morgan uses a
sophisticated, disciplined, collaborative process for managing all asset
classes. As of December 31, 1998, J.P. Morgan and its affiliates had assets
under management of approximately $308 billion, including approximately $11.6
billion in global equity portfolios.

MID CAP FUND

Under the terms of its Investment Advisory Agreement the Fund pays
to NAS a fee at the annual rate of 1.05% of the Fund's average daily net
assets. For the period October 31, 1997 (commencement of operations) through
December 31, 1997, NAS waived all advisory fees in the amount of $5,371. For
the fiscal year ended December 31, 1998, NAS was paid $_______.

NAS has selected three subadvisers, each of whom will each manage
part of the Fund's portfolio. Each subadviser receives an annual fee from NAS
in an amount equal to 0.65% on assets up to $50 million managed by such
subadviser and 0.50% on assets of $50 million and more managed by a subadviser.
For the period October 31, 1997 (commencement of operations) through December
31, 1997, NAS paid $3,325 in fees to the subadvisers. For the fiscal year ended
December 31, 1998, NAS paid the subadvisers $________.

The Mid Cap Fund's subadvisers are:

- First Pacific Advisors, Inc. ("First Pacific")
- Pilgrim Baxter & Associates, Ltd. ("Pilgrim Baxter")
- Rice, Hall, James & Associates ("Rice Hall")

Subject to the supervision of NAS and the Trustees, the subadvisers
each manage separate portions of the Fund's assets in accordance with the
Fund's investment objective and policies. With regard to the portion of the
Fund's assets allocated to it, each subadviser shall make investment decisions
for the Fund, and in connection with such investment decisions shall place
purchase and sell orders for securities. No subadviser shall have any
investment responsibility for any portion of the Fund's assets not allocated to
it by NAS for investment management.

Each of First Pacific, Pilgrim Baxter and Rice Hall is wholly owned
by United Asset Management Corporation ("UAM"), a NYSE-listed holding company
organized to acquire and own firms that provide investment advisory services
primarily for institutional clients. First Pacific is an indirect wholly-owned
subsidiary of UAM. Pilgrim Baxter and Rice Hall are each direct wholly-owned
subsidiaries of UAM. UAM's corporate headquarters are located at One
International Place, Boston 02110.

BALANCED FUND

Under the terms of its Investment Advisory Agreement, the Balanced
Fund pays to NAS a fee at the annual rate of 0.75% of the Fund's average daily
net assets. For the period October 31, 1997 (commencement of operations)
through December 31, 1997, NAS waived all advisory fees in the amount of
$1,605. For the fiscal year ended December 31, 1998, NAS was paid $_______.

<PAGE> 122

Salomon Brothers Asset Management Inc. ("SBAM") is the subadviser
of the Fund. For the investment management services it provides to the Fund,
SBAM receives an annual fee from NAS in an amount equal to 0.35% on assets up
to $150 million, 0.30% on assets of $150 million and more but less than $500
million, and 0.25% on assets of $500 million and more. These fees are
calculated as an annual rate based upon the Fund's average daily net assets.
For the period October 31, 1997 (commencement of operations) through December
31, 1997, NAS paid $749 in fees to SBAM. For the fiscal year ended December 31,
1998, NAS paid SBAM $_______.

SBAM is a wholly owned subsidiary of Salomon Brothers Holding
Company Inc, which is in turn wholly owned by Salomon Smith Barney Holdings,
Inc. which is, in turn, wholly owned by Citigroup, Inc. SBAM was incorporated
in 1987 and together with affiliates in London, Frankfurt, Tokyo and Hong Kong,
provides a broad range of fixed-income and equity investment advisory services
to various individuals and institutional clients located throughout the world,
and serves as investment adviser to various investment companies. As of
December 31, 1998, SBAM and its worldwide investment advisory affiliates
managed approximately $29 billion of assets.

MULTI SECTOR BOND FUND

Under the terms of its Investment Advisory Agreement, the Multi
Sector Bond Fund pays to NAS a fee at the annual rate of 0.75% of the Fund's
average daily net assets. For the period October 31, 1997 (commencement of
operations) through December 31, 1997, NAS waived all advisory fees in the
amount of $1,724. For the fiscal year ended December 31, 1998, NAS was paid
$_______.

Salomon Brothers Asset Management is the subadviser of the Fund.
For the investment management services it provides to the Fund, SBAM receives
an annual fee from NAS in the amount of 0.35% on assets up to $50 million,
0.30% on assets of $50 million and more but less than $200 million, 0.25% on
assets of $200 million and more but less than $500 million, and 0.20% on assets
of $500 million and more. These fees are calculated at an annual rate based
upon the Fund's average daily net assets. For the period October 31, 1997
(commencement of operations) through December 31, 1997, NAS paid $805 in fees
to the subadviser. For the fiscal year ended December 31, 1998, NAS paid SBAM
$_______.

In connection with SBAM's service as investment manager to the
Multi Sector Bond Fund, SBAM has entered into a subadvisory agreement with its
London based affiliate Salomon Brothers Asset Management Limited ("SBAM
Limited") pursuant to which SBAM has delegated to SBAM Limited responsibility
for management of the Fund's investments in non dollar-denominated debt
securities and currency transactions. SBAM Limited is compensated by SBAM at no
additional expense to the Fund. Like SBAM, SBAM Limited is an indirect,
wholly-owned subsidiary of Citigroup, Inc.

SELECT ADVISERS SMALL CAP VALUE FUND

Under the terms of its Investment Advisory Agreement, the Small Cap
Value Fund pays to NAS a fee at the annual rate of 0.90% of the Fund's average
daily net assets. For the period October 31, 1997 (commencement of operations)
through December 31, 1997, NAS waived all advisory fees in the amount of
$2,029. For the fiscal year ended December 31, 1998, NAS was paid $_______.

The Dreyfus Corporation ("Dreyfus"). For the investment management
services it provides to the Small Cap Value Fund, Dreyfus receives an annual
fee from NAS in an amount equal to 0.50% on assets up to $200 million and 0.45%
on assets of $200 million and more. These fees are calculated at an annual rate
based on each Fund's average daily net assets. For the period October 31, 1997
(commencement of operations) through December 31, 1997, NAS paid $1,127 in fees
to the subadviser. For the fiscal year ended December 31, 1998, NAS paid
Dreyfus $_________.

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

46
<PAGE> 123

Mellon Bank, N.A., which is a wholly-owned subsidiary of Mellon Bank
Corporation ("Mellon"). As of January 31, 1999, Dreyfus managed or administered
approximately $121 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. Through its subsidiaries, including Dreyfus, Mellon managed
more than $334 billion in assets as of September 30, 1998, including
approximately $125 billion in mutual fund assets. As of September 30, 1998,
various subsidiaries of Mellon provided non-investment services, such as
custodial or administration services, for more than $1.6 trillion in assets,
including approximately $52 billion in mutual fund assets.

SMALL CAP GROWTH FUND

Under the terms of its Investment Advisory Agreement, the Fund pays
NAS a fee at the annual rate of 1.10% of the Fund's average daily net assets.
The Fund commenced operations on or around May 1, 1999 and has not incurred any
investment advisory fees prior to this date.

NAS has selected three subadvisers, each of whom will each manage
part of the Fund's portfolio. Each subadviser receives an annual fee from NAS
in an amount equal to 0.60% on assets managed by such subadviser and has not
incurred any subadvisory fees prior to May 1, 1999.

The Small Cap Growth Fund's subadvisers are:

-Franklin Advisers, Inc. ("Franklin")
-Miller Anderson & Sherred, LLP ("MAS")
-Neuberger Berman, LLC ("Neuberger Berman")

Franklin is a wholly owned subsidiary of Franklin Resources, Inc.,
one of the oldest mutual fund organizations in the U.S. Franklin and its
affiliates act as investment manager to numerous other investment companies and
accounts. Together with its affiliates, Franklin manages over $220 billion in
assets as of December 31, 1998.

MAS is wholly owned by subsidiaries of Morgan Stanley Dean Witter &
Co. and is a division of Morgan Stanley Dean Witter Investment Management
("MSDW Investment Management") and provides investment advisory services to
employee benefit plans, endowment funds, foundations and other institutional
investors. As of December 31, 1998, MSDW Investment Management managed in
excess of $163 billion in assets.

Neuberger Berman and its predecessor firms and affiliates have
specialized in the management of no-load mutual funds since 1950. Neuberger
Berman and its affiliates manage securities accounts that had approximately $55
billion of assets as of December 31, 1998. Neuberger Berman is a member 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.

47
<PAGE> 124

STRATEGIC VALUE FUND AND STRATEGIC GROWTH FUND

Under the terms of the Investment Advisory Agreement, each of the
Strategic Value Fund and Strategic Growth Fund pays to NAS a fee at the annual
rate of 0.90% of that Fund's average daily net assets. For the period October
31, 1997 (commencement of operations) through December 31, 1997, NAS waived all
advisory fees for the Strategic Value and Strategic Growth Fund in the amount
of $1,715 and $1,645, respectively. For the fiscal year ended December 31,
1998, NAS was paid $_________ for the Strategic Value Fund and $________ for
the Strategic Growth Fund.

NAS has selected Strong Capital Management, Inc. ("Strong") to be
the subadviser to the Strategic Value Fund and the Strategic Growth Fund.
Strong has subcontracted with Schafer Capital Management, Inc. ("Schafer
Capital") to subadviser the Strategic Value Fund. For the investment management
services provided to each Fund, Strong receives an annual fee from NAS in an
amount equal to 0.50% on assets of each Fund up to $500 million and 0.45% on
assets of each Fund of $500 million and more. These fees are calculated at an
annual rate based on each Fund's average daily net assets. Pursuant to its
subcontract with Schafer Capital, Strong pays Schafer's subadvisory fees. For
the period October 31, 1997 (commencement of operations) through December 31,
1997, NAS paid $953 and $914, respectively for the Strategic Value and
Strategic Growth Funds, in fees to the subadviser. For the fiscal year ended
December 31, 1998, Strong was paid $_________ and $________ for the Strategic
Value Fund and the Strategic Growth Fund, respectively.

Strong began conducting business in 1974. Since then, its principal
business has been providing continuous investment supervision for individuals
and institutional accounts. Strong also acts as investment advisor for each of
the mutual funds within the Strong Family of Funds. As of December 31, 1998,
Strong had over $32 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.

Schafer Capital's controlling person and sole shareholder is David
K. Schafer. Mr. Schafer has been in the investment management business for more
than 25 years and founded Schafer Capital in 1981.

SMALL COMPANY FUND

Under the terms of its Investment Advisory Agreement the Fund pays
NAS a fee at the annual rate of 1.00% of the Fund's average daily net assets.
NAS 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 ____% 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 fiscal years ended December 31,
1998, 1997, and 1996, NAS received advisory fees in the amount of $_________,
$2,520,540 and $851,352 respectively.

NAS has selected five subadvisers, each of whom will each manage
part of the Fund's portfolio. Each subadviser receives an annual fee from NAS
in an amount equal to 0.60% on assets managed by a subadviser. During the
fiscal years ended December 31, 1998, 1997 and 1996, the subadvisers were paid
$_______, $1,402,367 and $483,472 by NAS.

The Small Company Fund's subadvisers are:

- The Dreyfus Company
- Neuberger Berman LLC
- Strong Capital Management, Inc.
- Lazard Asset Management
- Warburg Pincus Asset Management, Inc.

48
<PAGE> 125

and in connection with such investment decisions shall place purchase and sell
orders for securities. No subadviser shall have any investment responsibility
for any portion of the Fund's assets not allocated to it by NAS for investment
management.

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
January 31, 1999, Dreyfus managed or administered approximately $121 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. Through its subsidiaries, including Dreyfus, Mellon managed more than
$334 billion in assets as of September 30, 1998, including approximately $125
billion in mutual fund assets. As of September 30, 1998, various subsidiaries
of Mellon provided non-investment services, such as custodial or administration
services, for more than $1.6 trillion in assets, including approximately $52
billion in mutual fund assets.

Neuberger Berman L.L.C. Neuberger Berman also serves as a
subadviser 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 $55
billion of assets as of December 31, 1998. 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. Strong also acts as investment adviser
for each of the mutual funds within the Strong Family of Funds. As of December
31, 1998, Strong had over $32 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.

Lazard Asset Management. Effective October 1, 1998, Lazard began
serving as one of the subadvisers to the Fund. Lazard, a division of Lazard
Freres & Co. LLC, a New York limited liability company, manages approximately
$70 billion, as of December 31, 1998, in investments for corporations,
endowments, public and private pension plans and wealthy individuals and is
recognized as one of the premier global investment advisory firms. Lazard has
offices in New York and San Francisco. In addition, Lazard provides asset
management services worldwide through its affiliates in London, Paris, Tokyo,
Sydney, Frankfurt and Cairo that extend its research worldwide. Lazard's
address is 30 Rockefeller Center, New York, New York 10112.

Warburg, Pincus Asset Management, Inc.. The Fund also employs
Warburg as a subadviser to the Fund. Warburg is a professional investment
advisory firm which provides investment services to investment companies,
employee benefit plans, endowment funds, foundations and other institutions and
individuals. As of December 31, 1998, Warburg managed approximately $22 billion
of assets, including approximately $11 billion of investment company assets.
Incorporated in 1970, Warburg is indirectly controlled by Warburg, Pincus & Co.
("WP&Co."), which has no business other than being a holding company of Warburg
and its affiliates. Lionel I. Pincus, the managing partner of WP&Co., may be
deemed to control both WP&Co. and Warburg. Warburg's address is 466 Lexington
Avenue, New York, New York 10017-3147.

<PAGE> 126

INCOME FUND

Under the terms of its Investment Advisory Agreement, the Fund pays
NAS a fee at the annual rate of 0.45% of the Fund's average daily net assets.
NAS 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 Fund commenced operations on January 20,
1998. For the period from commencement of operations to December ___, 1998, NAS
waived $_______ in fees.

NAS has selected two subadvisers, each of whom will manage part of
the Fund's portfolio. Each subadviser receives an annual fee from NAS based on
the average daily net assets of the portion of the Fund managed by that
subadviser as specified below:

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 December 31, 1998, NCM
Capital had approximately $____ billion in assets under management.

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 ___% ; Justin F. Beckett,
Executive Vice President and director of NCM Capital, owns ___%; and American
Express Asset Management owns 25.1% as of February __, 1999.

Smith Graham & Co. Asset Managers, L.P. Smith Graham also services
as a subadviser 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 Robecco
Global Advisers. As of December 31, 1998, Smith Graham managed approximately
$__ 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 Robecco
Group. Smith Graham & Co., Inc. is wholly owned by Gerald B. Smith, Ladell
Graham and Jamie G. House.

FUND ADMINISTRATION SERVICES

TOTAL RETURN FUND, CAPITAL APPRECIATION FUND, GOVERNMENT BOND FUND, MONEY MARKET
FUND. Effective November 1, 1997, NAS also provides various administration and
accounting services for these Funds. 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. During the years ended December 31, 1998 and 1997, NAS
received administration fees in the following amounts: Total Return Fund
$_______ and $135,272, Capital Appreciation Fund $_______ and $37,284,
Government Bond Fund $_______ and $39,441 and Money Market Fund $_______ and
$89,708, respectively. These services include daily valuation of each Fund's
shares and preparation of financial statements, tax returns and regulatory
reports.

50
<PAGE> 127

ALL OTHER FUNDS (EXCEPT SMALL COMPANY FUND). Under the terms of a Fund
Administration Agreement, NAS also provides various administration and
accounting services, including daily valuation of each Fund's shares and
preparation of financial statements, tax returns and regulatory reports. For
these services, each Fund pays NAS an annual fee in the amount of 0.07% of the
Fund's first $250 million of average daily net assets, 0.05% on the next $750
million and 0.04% on assets of more than $1 billion.

For the period from commencement of operations to December 31, 1997 and
the year ended December 31, 1998, NAS received and/or waived all administration
fees as follows:

1997 Administration 1998 1998
Fund Fees Waived Received Waived
---- ------------------- -------- ------
<S> <C> <C> <C>
Strategic Growth Fund $ $ $

Strategic Value Fund $ $ $

Equity Income Fund $ $ $

High Income Bond Fund $ $ $

Balanced Fund $ $ $

Multi Sector Bond Fund $ $ $

Small Cap Value Fund $ $ $

Global Equity Fund $ $ $

Select Advisers Mid Cap Fund $ $ $

Income Fund* N/A $ $
</TABLE>

*The Income Fund commenced operations on January 20, 1998 and did not incur
administration fees in 1997.

The Select Advisers Small Cap Growth Fund had not commenced operations as of
December 31, 1998 and had not incurred any administration fees as of that date.

CUSTODIAN

The Fifth Third Bank ("Fifth Third"), 38 Fountain Square Plaza,
Cincinnati, OH 45263, is the Custodian for the Funds and makes all receipts and
disbursements under a Custodian Agreement. Pursuant to the Custodian Agreement,
Fifth Third utilizes the services of the global custody network of State Street
Bank and Trust for foreign custody of the Funds' assets. The Custodian performs
no managerial or policy making functions for the Funds.

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. For these services, NIS is paid a fee by
each Fund at the annual rate of 0.01% of that Fund's average daily net assets.
Management believes the charges for the services performed are comparable to
fees charged by other companies performing similar services.

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<PAGE> 128

BROKERAGE ALLOCATIONS

NAS (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 and other
debt 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., prompt and reliable execution at the most favorable
prices and in the most effective manner possible taking into account all
considerations discussed below. NAS or a subadviser 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 NAS or a subadviser. In placing orders with such broker-dealers,
NAS or a subadviser will, where possible, take into account the comparative
usefulness of such information. Such information is useful to NAS or a
subadviser even though its dollar value may be indeterminable, it does not
directly benefit a Fund and its receipt or availability generally does not
reduce NAS' or a subadviser's normal research activities or expenses.

Fund portfolio transactions may be effected with broker-dealers who
have assisted investors in the purchase of the variable life insurance policies
or variable annuity contracts. 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 a Fund are
executed as part of concurrent authorizations to purchase or sell the same
security for trusts or other accounts served by affiliated companies of NAS or
a subadviser and their affiliates. Although such concurrent authorizations
potentially could be either advantageous or disadvantageous to a Fund, they are
effected for a Fund only when NAS or a subadviser believes that to do so is in
the best interest of the Fund. When such concurrent authorizations occur, the
executions will be allocated in an equitable manner.

In purchasing and selling investments for the Funds, it is the
policy of each of the subadvisers to obtain best execution at the most
favorable prices through responsible broker-dealers. The determination of what
may constitute best execution in a securities transaction by a broker involves
a number of considerations, including the overall direct net economic result to
the Fund (involving both price paid or received and any commissions and other
costs paid), the efficiency with which the transaction is effected, the ability
to effect the transaction at all when a large block is involved, the
availability of the broker to stand ready to execute possibly difficult
transactions in the future, and the financial strength and stability of the
broker. These considerations are judgmental and are weighed by NAS or
subadviser in determining the overall reasonableness of securities executions
and commissions paid. In selecting broker-dealers, each subadviser will
consider various relevant factors, including, but not limited to, the size and
type of the transaction; the nature and character of the markets for the
security or asset to be purchased or sold; the execution efficiency, settlement
capability, and financial condition of the broker-dealer's firm; the
broker-dealer's execution services, rendered on a continuing basis; and the
reasonableness of any commissions.

52
<PAGE> 129

Each subadviser may cause a 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
NAS. The fees to each of the subadvisers pursuant to its subadvisory agreement
with NAS 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, subadviser or administrator.

The following tables list the amount of brokerage commissions
(excluding directed brokerage) and the amount of transactions and related
commissions paid to brokers providing research and other services to the
subadvisers for the following periods:

For the year ended December 31, 1998

<TABLE>
<CAPTION>
Transactions Related to
Brokerage Services
---------------------------
Fund Commission $ Amount Commission
---- ---------- -------- ----------
<S> <C> <C> <C>
Strategic Growth Fund $ $ $

Strategic Value Fund

Equity Income Fund

High Income Bond Fund

Balanced Fund

Multi Sector Bond Fund

Small Cap Value Fund

Global Equity Fund

Select Advisers Mid Cap Fund

Small Cap Growth Fund * -- -- --

Small Company Fund

Income Fund

Total Return Fund

Capital Appreciation Fund

Government Bond Fund
</TABLE>

* Operations for the Small Cap Growth Fund commenced on or around
May 1, 1999.

53
<PAGE> 130

For the year ended December 31, 1997

Transactions Related to
Brokerage Services
------------------------------
Fund Commission $ Amount Commission
---- ---------- -------- ----------
<S> <C> <C> <C>
Strategic Growth Fund $2,117 $ --0 -- $ - 0 -

Strategic Value Fund 2,664 --0 -- -- 0 --

Equity Income Fund 1,319 1,018,166 910

High Income Bond Fund -- 0 -- -- 0 -- -- 0 --

Balanced Fund 1,038 315,101 420

Multi Sector Bond Fund -- 0 -- -- 0 -- -- 0 --

Small Cap Value Fund 2,317 3,045 30

Global Equity Fund 8,058 -- 0 -- -- 0 --

Select Advisers Mid Cap Fund 3,479 509,403 828

Small Company Fund 887,672

Total Return Fund 924,959

Capital Appreciation Fund 327,691

Government Bond Fund -- 0 --

Money Market Fund -- 0 --
</TABLE>

54
<PAGE> 131

For the year ended December 31, 1996

Transactions Related to
Brokerage Services
---------------------------
Fund Commission $ Amount Commission
---- ---------- -------- ----------
<S> <C> <C> <C>
Small Company Fund

Total Return Fund

Capital Appreciation Fund

Government Bond Fund
</TABLE>

Under the 1940 Act, "affiliated persons" of a Fund are prohibited
from dealing with it as a principal in the purchase and sale of securities
unless an exemptive order allowing such transactions is obtained from the SEC.
However, each Fund may purchase securities from underwriting syndicates of
which a subadviser or any of its affiliates as defined in the 1940 Act, is a
member under certain conditions, in accordance with Rule 10f-3 under the 1940
Act.

Certain of the Funds contemplate that, consistent with the policy
of obtaining best results, brokerage transactions may be conducted through
"affiliated broker/dealers," as defined in the 1940 Act. Under the 1940 Act,
commissions paid by a Fund to an "affiliated broker/dealer" 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
Funds' policy that the commissions to be paid to an affiliated broker-dealer
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 such
broker/dealer on comparable transactions for its most favored unaffiliated
customers, except for accounts for which the affiliated broker/dealer acts as a
clearing broker for another brokerage firm and customers of an affiliated
broker/dealer 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.

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 Funds. For certain of the Funds,
shares may also be sold to affiliated Funds 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 regular trading on the New York Stock Exchange
(generally 4 P.M. Eastern Time) on each business day the New York Stock
Exchange is open for regular trading (and on such other 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 Day, New Year's Day,
Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day and Thanksgiving Day. The net asset value per share
is calculated by adding

55
<PAGE> 132

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 regular
trading on the Exchange. For orders placed after the close of regular trading
on 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 Funds listed on national exchanges are valued at the last sales price on
the principal exchange, or if there is no sale on that day, the securities are
valued at the prior day's closing prices as provided by an independent pricing
organization. Securities traded in the over-the-counter market are valued at
the last quoted sale price, or if there is no sale on that day, the quoted bid
price as provided by an independent pricing organization. Other portfolio
securities are valued at the quoted prices obtained from an independent pricing
organization which employs a combination of methods, including among others,
the obtaining and comparison of market valuations from dealers who make markets
and deal in such securities and the comparison of valuations with those of
other comparable securities in a matrix of such securities. The pricing service
activities and results are reviewed by an officer of the Trust. Securities and
other assets, for which such market prices are unavailable or for which an
independent pricing organization does not provide a value or provides a value
that does not represent fair value in the judgement of NAS, are valued at fair
value in accordance with procedures authorized 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 under The Investment Company Act of
1940.

A separate redeems shares to make benefit or surrender payments
under the terms of its variable annuity contracts or variable life insurance
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 SEC 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 different funds and currently has
authorized 16 separate funds. Shares of each fund would participate equally in
the earnings, dividends, and assets of that particular fund. 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. Generally, amendment may be made
to the Declaration of Trust without the affirmative vote of a majority of the
outstanding voting securities of the Trust. The Trustees may, however, amend
the Declaration of Trust without the vote or consent of shareholders to:

56
<PAGE> 133

designate series of the Trust; or

change the name of the Trust; or

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

Shares have no pre-emptive or conversion rights. Shares, when
issued, are fully paid and nonassessable. 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. However,
shares of all funds vote together, and not by fund, in the election of
Trustees. If an issue must be approved by a majority as defined in the 1940
Act., a "majority of the outstanding voting securities" means the lesser of (i)
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 (ii) more
than 50% of the outstanding shares. For the election of Trustees only a
plurality is required.

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

Each Fund is treated as a separate entity for purpose of the
regulated investment company provisions of the Internal Revenue Code (the
"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 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, and (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's assets is represented by cash, U.S. Government
securities and other securities, with those other securities limited, with
respect to any one issuer, to an amount no greater in value than 5% of the
Fund's total assets and to not more than 10% of the outstanding voting
securities of the issuer, and (b) not more than 25% of the market value of the
Fund's assets is invested in the securities of any one issuer (other than U.S.
Government securities or securities of other regulated investment companies) or
of two or more issuers that the Fund controls and that are determined to be in
the same or similar trades or businesses or related trades or businesses. In
meeting these requirements, a Fund may be restricted in the selling of
securities held by the Fund for less than three months and in the utilization
of certain of the investment techniques described above and in the respective
Fund's Prospectus. As a regulated investment company, a Fund will be subject to
a 4% non-deductible excise tax measured with respect to certain undistributed
amounts of ordinary income and capital gain required to be but not distributed
under a prescribed formula. The formula requires payment to shareholders during
a calendar year of distributions representing at least 98% of the Fund's
taxable ordinary income for the calendar year and at least 98% of the excess of
its capital gains over capital losses realized during the one-year period
ending October 31 during such year, together with any undistributed, untaxed
amounts of ordinary income and capital gains from the previous calendar year.
The Funds expect to pay the dividends and make the distributions necessary to
avoid the application of this excise tax.

57
<PAGE> 134

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 of Trustees 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.

OTHER TAX CONSEQUENCES

Foreign Transactions. Dividends and interest received by a 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.

A 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 hyper inflationary currency rules. These
rules could therefore affect the character, amount and timing of distributions
to shareholders. These provisions also (a) will require a 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. A
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.

Investment in Passive Foreign Investment Companies. If a Fund
purchases shares in certain foreign entities classified under the Code as
"passive foreign investment companies" ("PFICs"), such 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 Contracts. 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.

58
<PAGE> 135

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.

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

Derivative Instruments. The use of derivatives strategies, such as
purchasing and selling (writing) options and futures and entering into forward
currency contracts, involves complex rules that will determine for income tax
purposes the character and timing of recognition of the gains and losses a 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 a 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 regulated investment company.

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.

FINANCIAL STATEMENTS

The Report of Independent Auditors and Financial Statements of the
Funds for the period ended December 31, 1998 are incorporated by reference to
the Trust's Annual Report. Copies of the Annual Report are available without
charge upon request by writing the Trust or by calling toll free 1 (800)
848-6331.

<PAGE> 136

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:

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.

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.

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.

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<PAGE> 137

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 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.

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<PAGE> 138

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/IBCA INVESTORS SERVICE, INC. BOND RATINGS

Fitch/IBCA 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.

AAA Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events.

AA Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated 'AAA'.
Because bonds rated in the 'AAA' and 'AA' categories are not
significantly vulnerable to foreseeable future developments,
short-term debt of the issuers is generally rated 'F-1+'.

A Bonds considered to be investment grade and of high credit quality.
The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes
in economic conditions and circumstances than bonds with higher
ratings.

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<PAGE> 139

BBB Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on
these bonds, and therefore, impair timely payment. The likelihood that
the ratings of these bonds will fall below investment grade is higher
than for bonds with higher ratings.

Fitch speculative grade bond ratings provide a guide to investors in
determining the credit risk associated with a particular security. The ratings
('BB' to 'C') represent Fitch's assessment of the likelihood of timely payment
of principal and interest in accordance with the terms of obligation for bond
issues not in default. For defaulted bonds, the rating ('DDD' to 'D') is an
assessment of the ultimate recovery value through reorganization or
liquidation.

Bonds that have the same rating are of similar but not necessarily
identical credit quality since the rating categories cannot fully reflect the
differences in the degrees of credit risk.

BB Bonds are considered speculative. The obligor's ability to pay
interest and repay principal may be affected over time by adverse
economic changes. However, business and financial alternatives can be
identified which could assist the obligor in satisfying its debt
service requirements.

B Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the capacity for
continued payment is contingent upon a sustained, favorable business
and economic environment.

CCC Bonds have certain identifiable characteristics which, if not
remedied, may lead to default. The ability to meet obligations
requires an advantageous business and economic environment.

CC Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.

C Bonds are in imminent default in payment of interest or principal.

DDD, Bonds are in default on interest and/or principal payments. Such bonds

DD are extremely speculative, and should be valued on the basis of their

D ultimate recovery value in liquidation or reorganization &D of the
obligor. `DDD' represents the highest potential for recovery of these
bonds, and represents the lowest potential for recovery.

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

63
<PAGE> 140

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
- ------- ----------
<S> <C>

AAA Highest credit quality. The risk factors are negligible, being
only slightly more than for risk-free U.S. Treasury debt.

AA+ High credit quality. Protection factors are strong. Risk is
AA modest, but may vary slightly from time to time because of
A- economic conditions.

A+ Protection factors are average but adequate. However, risk
A factors are more variable and greater in periods of economic
A- stress.

BBB+ Below average protection factors but still considered sufficient
BBB for prudent investment. Considerable variability in risk during
BBB- economic cycles.

BB+ Below investment grade but deemed likely to meet obligations
BB when due. Present or prospective financial protection factors
BB- 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 obligations will
B not be met when due. Financial protection factors will fluctuate
B- 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.

DD Defaulted debt obligations. Issuer failed to meet scheduled
principal and/or interest payments.

DP Preferred stock with dividend arrearages.
</TABLE>

SHORT-TERM RATINGS

STANDARD & POOR'S COMMERCIAL PAPER RATINGS

A Standard & Poor's commercial paper rating is a current assessment of
the likelihood of timely payment of debt considered short-term in the relevant
market.

64
<PAGE> 141

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.

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

65
<PAGE> 142

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.

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/IBCA SHORT-TERM RATINGS

Fitch/IBCA 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.

<PAGE> 143

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.

B Speculative. 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.

C High default risk. Default is a real possibility, Capacity for
meeting financial commitments is solely reliant upon a sustained,
favorable business and economic environment.

D Default. Issues assigned this rating are in actual or imminent
payment default.

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 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.

67
<PAGE> 144

RATING SCALE DEFINITION
- ------------ ----------

High Grade
- ----------

<S> <C>
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.

</TABLE>

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.

TBW-4 the lowest rating category; this rating is regarded as
non-investment grade and therefore speculative.

68
<PAGE> 145

PART C

OTHER INFORMATION

Item 23. Exhibits

(a) (1) Amended Declaration of Trust - previously filed with
Post-Effective Amendment and hereby incorporated by reference.
(2) Proposed Amended Declaration of Trust.

(b) Bylaws - previously filed with Post-Effective Amendment and hereby
incorporated by reference.

(d) (1) Investment Advisory Agreement for the funds (except the Small
Company Fund) previously filed with Post-Effective Amendment
to the Registration Statement,and herein incorporated by
reference.

(2) Proposed Amended Investment Advisory Agreement for the funds
(except the Small Company Fund).

(3) Investment Advisory Agreement for the Small Company Fund. -
previously filed with Post-Effective Amendment to the
Registration Statement, and herein incorporated by reference.

(4) Subadvisory Agreements for the Small Company Fund.

(a) Subadvisory Agreement with The Dreyfus Corporation. -
previously filed with Post- Effective Amendment to the
Registration Statement, and herein incorporated by
reference.

(b) Subadvisory Agreement with Neuberger Berman LLC
previously filed with Post- Effective Amendment to the
Registration Statement, and herein incorporated by
reference.

(c) Subadvisory Agreement with Strong Capital Management,
Inc. - previously filed with Post-Effective Amendment to
the Registration Statement, and herein incorporated by
reference.

(d) Subadvisory Agreement with Lazard Asset Management
previously filed with Post-Effective Amendment to the
Registration Statement, and herein incorporated by
reference.

(e) Subadvisory Agreement with Warburg, Pincus Counsellors,
Inc. - previously filed with Post-Effective Amendment to
the Registration Statement, and herein incorporated by
reference.

(5) Subadvisory Agreements for the Income Fund

(a) Subadvisory Agreement with NCM Capital Management Group,
Inc. - previously filed with Post-Effective Amendment to
the Registration Statement, and herein incorporated by
reference.

(b) Subadvisory Agreement with Smith Graham & Co. Asset
Managers, L.P. - previously filed with Post-Effective
Amendment to the Registration Statement, and herein
incorporated by reference.

(6) Subadvisory Agreements for the Balanced Fund, Strategic
Growth Fund, Strategic Value Fund, Equity Income Fund, High
Income Bond Fund, Small Cap Value Fund, Global Equity Fund,
Select Advisers Mid Cap Fund, Nationwide Select Advisers Small
Cap Growth Fund.

(a) Subadvisory Agreement with Salomon Brothers Asset
Management, Inc. for the Balanced Fund and Multi Sector
Bond Fund previously filed with Post-Effective Amendment
to the Registration Statement, and herein incorporated
by reference.

(b) Subadvisory Agreement with Strong Capital Management,
Inc. for the Strategic Growth Fund and Strategic Value
Fund previously filed with Post-Effective Amendment to
the Registration Statement, and herein incorporated by
reference.

C-1
<PAGE> 146

(c) Subadvisory Agreement with Federated Investment
Counseling for the Equity Income Fund and High Income
Bond Fund previously filed with Post-Effective Amendment
to the Registration Statement, and herein incorporated
by reference.

(d) Subadvisory Agreement with The Dreyfus Corporation for
the Small Cap Value Fund previously filed with
Post-Effective Amendment to the Registration Statement,
and herein incorporated by reference.

(e) Subadvisory Agreement with J.P. Morgan Investment
Management Inc. for the Global Equity Fund previously
filed with Post-Effective Amendment to the Registration
Statement, and herein incorporated by reference.

(f) Subadvisory Agreement with First Pacific Advisors, Inc.
for the Select Advisers Mid Cap Fund previously filed
with Post-Effective Amendment to the Registration
Statement, and herein incorporated by reference.

(g) Subadvisory Agreement with Pilgrim Baxter & Associates
for the Select Advisers Mid Cap Fund previously filed
with Post-Effective Amendment to the Registration
Statement, and herein incorporated by reference.

(h) Subadvisory Agreement with Rice, Hall, James &
Associates for the Select Advisers Mid Cap Fund
previously filed with Post-Effective Amendment to the
Registration Statement, and herein incorporated by
reference.

(i) Subadvisory Agreements with Franklin Advisers, Inc.,
Miller Anderson & Sherred and Neuberger Berman, LLC for
the Nationwide Select Advisers Small Cap Growth Fund
previously filed with Post-Effective Amendment to the
Registration Statement, and herein incorporated by
reference.

(e) Not Applicable

(f) Not applicable.

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

(h) (1) Fund Administration Agreement for the Funds (except the Small
Company Fund) previously filed with Post-Effective Amendment
to the Registration Statement and herein incorporated by
reference.

(2) Proposed Amended Fund Administration Agreement for the Funds
(except the Small Company Fund) .

(3) Transfer and Dividend Disbursing Agreement -previously filed
with the Trust's Registration Statement herein incorporated by
reference.

(4) Proposed Amendment to Transfer and Dividend Disbursing
Agreement.

(i) Opinion and consent of counsel - previously filed with
Post-Effective Amendment to the Registration Statement, and herein
incorporated by reference.

(j) Auditor's Consent to be filed by subsequent Post-Effective
Amendment.

(k) Not applicable.

(l) Not applicable.

(m) Not applicable.

(n) Financial Data Schedules to be filed by subsequent Post-Effective
Amendment.

(o) Not Applicable.

Item 24. Persons Controlled by or Under Common Control with Registrant

No person is presently controlled by or under common control with
Registrant.

Item 25. Indemnification

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

C-2
<PAGE> 147

Item 26. Business and Other Connections of Investment Adviser

(a) Nationwide Advisory Services, Inc. (NAS), the investment adviser of
the Trust, also serves as investment adviser to the Nationwide
Separate Account Trust, and Nationwide Asset Allocation Trust and
serves as general distributor to the Nationwide Multi-Flex Variable
Account, Nationwide Variable Account, Nationwide Variable
Account-II, Nationwide Variable Account-5, Nationwide Variable
Account-6, Nationwide Variable Account-8, Nationwide Variable
Account-9, Nationwide VA Separate Account-A, Nationwide VA Separate
Account-B, Nationwide VA Separate Account-C, Nationwide VLI Separate
Account-2, Nationwide VLI Separate Account-3, Nationwide VL Separate
Account-A, Nationwide VL Separate Account-B, Nationwide VL Separate
Account-C, and Nationwide VL Separate Account-D, separate accounts
of Nationwide Life Insurance Company, or its subsidiary Nationwide
Life and Annuity Insurance Company, registered as unit investment
trusts under the Investment Company Act of 1940.

Joseph J. Gasper Director and President and Chief Operating
Officer

Nationwide Life Insurance Company
Nationwide Life and Annuity Insurance
Company
Nationwide Financial Services, Inc.

Director and Chairman of the Board

Nationwide Investment Services Corporation

Director and Vice Chairman

ALLIED Group Merchant Banking Corporation
ALLIED Life Brokerage Agency, Inc.
ALLIED Life Financial Corporation
ALLIED Life Insurance Company
Nationwide Financial Institution
Distributors Agency, Inc.
Nationwide Global Holdings, Inc.
NEA Valuebuilder Investor Services, Inc.
NEA Valuebuilder Investor Services of
Arizona, Inc.
Nationwide Retirement Solutions, Inc.

Director and President

Nationwide Advisory Services, Inc.
Nationwide Investor Services, Inc.
Nationwide Financial Services (Bermuda) Ltd.

Director

Trustee and Chairman

Nationwide Asset Allocation Trust
Nationwide Separate Account Trust

C-3
<PAGE> 148

Trustee and President

Nationwide Insurance Golf Charities, Inc.

Board of Manager

Nationwide Insurance Enterprise Services,
Ltd.

Dennis W. Click Vice President and Secretary

Nationwide Mutual Insurance Company
Nationwide Mutual Fire Insurance Company
Nationwide Life Insurance Company
Nationwide General Insurance Company
Nationwide Property and Casualty Insurance
Company
Nationwide Life and Annuity Insurance
Company
Nationwide Financial Services, Inc.
Nationwide Insurance Enterprise Services,
Ltd.
Nationwide Properties, Ltd.
Nationwide Realty Investors, Ltd.
NEA Valuebuilder Investor Services, Inc.
NEA Valuebuilder Investor Services of
Arizona, Inc.
Nationwide Financial Institution
Distributors Agency, Inc.
AID Finance Services, Inc.
ALLIED General Agency Company
ALLIED Group, Inc.
ALLIED Group Information Systems, Inc.
ALLIED Group Insurance Marketing Company
ALLIED Group Mortgage Company
ALLIED Life Brokerage Agency, Inc.
ALLIED Life Financial Corporation
ALLIED Life Insurance Company
ALLIED Property and Casualty Insurance
Company
AMCO Insurance Company
Depositors Insurance Company
Midwest Printing Services, Ltd.
Premier Agency, Inc.
Western Heritage Insurance Company
Colonial County Mutual Insurance Company
California Cash Management Company
Colonial Insurance Company of Wisconsin
Gates McDonald & Company
GatesMcDonald Health Plus Inc.
Nationwide Global Holdings, Inc.
Nationwide Cash Management Company
Nationwide Indemnity Company
Nationwide Community Urban Redevelopment
Corporation
Gates, McDonald & Company of Nevada
Gates, McDonald & Company of New York, Inc.
Farmland Mutual Insurance Company
Lone Star General Agency, Inc.
Nationwide Agribusiness Insurance Company
Employers Insurance of Wausau A Mutual
Company
Nationwide Advisory Services, Inc.
Nationwide Investors Services, Inc.
Nationwide Corporation

C-4
<PAGE> 149

Nationwide Insurance Enterprise Foundation
Nationwide Investment Services Corporation
Scottsdale Indemnity Company
Scottsdale Insurance Company
Scottsdale Surplus Lines Insurance Company
Wausau Underwriters Insurance Company
Wausau Service Corporation
Wausau Business Insurance Company
Wausau General Insurance Company
Affiliate Agency, Inc.
Affiliate Agency of Ohio, Inc.
Financial Horizons Distributors Agency of
Alabama, Inc.
Financial Horizons Distributors Agency of
Ohio, Inc.
Financial Horizons Distributors Agency of
Oklahoma, Inc.
Financial Horizons Securities Corporation
Landmark Financial Services of New York,
Inc.
NEA Valuebuilder Investor Services of
Alabama, Inc.
NEA Valuebuilder Investor Services of
Montana, Inc.
NEA Valuebuilder Investor Services of
Nevada, Inc.
NEA Valuebuilder Investor Services of Ohio,
Inc.
NEA Valuebuilder Investor Services of
Oklahoma, Inc.
NEA Valuebuilder Investor Services of
Wyoming, Inc.
Nationwide Agency, Inc.
Nationwide Health Plans, Inc.
Nationwide Management Systems, Inc.
MRM Investments, Inc.
NWE, Inc.
National Premium and Benefit
Administration Company
Nationwide Insurance Company of America
Morley Financial Services, Inc.

Assistant Secretary

Pension Associates of Wausau, Inc.
Companies Agency, Inc.
Companies Agency of Alabama, Inc.
Companies Agency Insurance Services of
California
Companies Agency of Georgia, Inc.
Companies Agency of Idaho, Inc.
Companies Agency of Kentucky, Inc.
Companies Agency of New York, Inc.
Companies Agency of Pennsylvania, Inc.
Companies Agency of Phoenix, Inc.
Countrywide Services Corporation
Wausau (Bermuda) Ltd.
Wausau International Underwriters

Vice President and Assistant Secretary

National Casualty Company

Secretary

The Beak and Wire Company

Vice President and Clerk

Healthcare First, Inc.

C-5
<PAGE> 150

Clerk

NEA Valuebuilder Services Insurance
Agency, Inc.

Assistant Clerk

Companies Agency of Massachusetts, Inc.

Dimon R. McFerson Chairman and Chief Executive
Officer-Nationwide Insurance Enterprise and
Director

Chairman and Chief Executive
Officer-Nationwide Insurance Enterprise,
President and Director

Nationwide Corporation

Chairman of the Board, Chairman and Chief
Executive Officer-Nationwide Insurance
Enterprise and Director

AID Finance Services, Inc.
ALLIED General Agency Company
ALLIED Group Information Systems, Inc.
ALLIED Group Insurance Marketing Company
ALLIED Group Mortgage Company
ALLIED Property and Casualty Insurance
Company
Depositors Insurance Company
Midwest Printing Services, Ltd.

C-6
<PAGE> 151

Premier Agency, Inc.
Western Heritage Insurance Company
American Marine Underwriters, Inc.
Gates, McDonald and Company
Gates McDonald Health Plus, Inc.
Nationwide Investor Services, Inc.
Nationwide Retirement Solutions, Inc.
Companies Agency, Inc.
Companies Agency of Alabama, Inc.
Companies Agency Insurance Services of
California
Companies Agency of Georgia, Inc.
Companies Agency of Idaho, Inc.
Companies Agency of Kentucky, Inc.
Companies Agency of Massachusetts, Inc.
Companies Agency of New York, Inc.
Companies Agency of Pennsylvania, Inc.
Companies Agency of Phoenix, Inc.
Countrywide Services Corporation
Employers Life Insurance Company of
Wausau
Nationwide Advisory Services, Inc.
Nationwide Financial Institution
Distributors Agency, Inc.
Nationwide Insurance Enterprise Services,
Ltd.
Nationwide Insurance Company of America
Wausau International Underwriters
Wausau Preferred Health Insurance Company

Trustee and Chairman

Financial Horizons Investment Trust
Nationwide Investing Foundation
Nationwide Investing Foundation II
Nationwide Investing Foundation III

Chairman of the Board

Nationwide Insurance Golf Charities, Inc.

Chairman of the Board and Director

Lone Star General Agency, Inc.
Nationwide Community Urban Redevelopment
Corporation
NEA Valuebuilder Investor Services, Inc.
NEA Valuebuilder Investor Services of
Arizona, Inc
Colonial County Mutual Insurance Company

Director

Gates, McDonald & Company of Nevada
Gates, McDonald & Company of New York
Healthcare First, Inc.
Morley Financial Services, Inc.
Nationwide Agency, Inc.
Nationwide Health Plans, Inc.
Nationwide Management Systems, Inc.

Chairman of the Board, Chairman and Chief
Executive Officer-Nationwide Insurance
Enterprise and Trustee

Nationwide Insurance Enterprise Foundation

C-7
<PAGE> 152

Member-Board of Managers, Chairman of the
Board, Chairman and Chief Executive
Officer-Nationwide Insurance Enterprise

Nationwide Properties, Ltd.
Nationwide Realty Investors, Ltd.
Nationwide Insurance Enterprise Services,
Ltd.

Chairman and Chief Executive

Officer-Nationwide Insurance Enterprise
Nationwide Insurance Company of Florida

Robert A. Oakley Executive Vice President-Chief Financial
Officer

Nationwide Mutual Insurance Company
Nationwide Mutual Fire Insurance Company
Nationwide General Insurance Company
Nationwide Property and Casualty Insurance
Company
Nationwide Life Insurance Company
Nationwide Life and Annuity Insurance
Company
ALLIED Group. Inc.
ALLIED Life Financial Corporation
American Marine Underwriters, Inc.
Companies Agency, Inc.
Companies Agency of Alabama, Inc.
Companies Agency of Georgia, Inc.
Companies Agency of Idaho, Inc.
Companies Agency of Kentucky, Inc.
Companies Agency of Massachusetts, Inc.
Companies Agency of New York, Inc.
Companies Agency of Pennsylvania, Inc.
Companies Agency of Phoenix, Inc.
Countrywide Services Corporation
Employers Life Insurance Company of Wausau
National Casualty Company
National Premium and Benefit Administration
Company
The Beak and Wire Corporation
Employers Insurance of Wausau A Mutual
Company
Farmland Mutual Insurance Company
Nationwide Financial Institution
Distributors Agency, Inc.
Lone Star General Agency, Inc.
Nationwide Agribusiness Insurance Company
Nationwide Corporation
Nationwide Financial Services, Inc.
Nationwide Investment Services Corporation
Nationwide Investor Services, Inc.
Nationwide Insurance Enterprise Foundation
Nationwide Properties, Ltd.
Nationwide Realty Investors, Ltd.
NEA Valuebuilder Investor Services, Inc.
NEA Valuebuilder Investor Services of
Arizona, Inc.
Colonial County Mutual Insurance Company
Pension Associates of Wausau, Inc.
Nationwide Retirement Solutions, Inc.

C-8
<PAGE> 153

Scottsdale Indemnity Company
Scottsdale Insurance Company
Scottsdale Surplus Lines Insurance Company
Wausau Business Insurance Company
Wausau General Insurance Company
Wausau Preferred Health Insurance Company
Wausau Service Corporation
Wausau Underwriters Insurance Company

Director, Chairman of the Board

Neckura Holding Company
Neckura Insurance Company
Neckura Life Insurance Company

Executive Vice President-Chief Financial
Officer and Director

AID Finance Services, Inc.
ALLIED General Agency Company
ALLIED Group Information Systems, Inc.
ALLIED Group Insurance Marketing Company
ALLIED Group Merchant Banking Corporation
ALLIED Group Mortgage Company
ALLIED Life Brokerage Agency, Inc.
ALLIED Life Insurance Company
ALLIED Property and Casualty Insurance
Company
AMCO Insurance Company
Depositors Insurance Company
Midwest Printing Services, Ltd.
Premier Agency, Inc.
Western Heritage Insurance Company
Colonial Insurance Company of Wisconsin
Nationwide Cash Management Company
Nationwide Community Urban Redevelopment
Corporation
Nationwide Global Holdings, Inc.
Nationwide Insurance Enterprise Services,
Ltd.
MRM Investments, Inc.
Nationwide Advisory Services, Inc.
Nationwide Indemnity Company
Nationwide Insurance Company of America

Executive Vice President

Companies Agency Insurance Services of
California
Wausau International Underwriters

Director and Vice Chairman

Leben Direkt Insurance Company
Neckura General Insurance Company
Auto Direkt Insurance Company

Director

NWE, Inc.
Gates, McDonald & Company
GatesMcDonald Health Plus Inc.
Healthcare First, Inc.

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Morley Financial Services, Inc.

Board of Managers, Executive Vice
President-Chief Financial Officer

Nationwide Insurance Enterprise Services,
Ltd.

Susan A. Wolken Senior Vice President - Life Company
Operations

Nationwide Mutual Insurance Company
Nationwide Mutual Fire Insurance Company
Nationwide Property and Casualty Insurance
Company
Nationwide Life Insurance Company
Nationwide Life and Annuity Insurance
Company

Director

Affiliate Agency, Inc.
Affiliate Agency of Ohio, Inc.
Financial Horizons Distributors Agency of
Alabama, Inc.
Financial Horizons Distributors Agency of
Ohio, Inc.
Financial Horizons Distributors Agency of
Oklahoma, Inc.
Financial Horizons Securities Corporation
Landmark Financial Services of New York,
Inc.
Nationwide Advisory Services, Inc.
Nationwide Investment Services Corporation
NEA Valuebuilder Investor Services, Inc.
NEA Valuebuilder Investor Services of
Alabama, Inc.
NEA Valuebuilder Investor Services of
Arizona, Inc.
NEA Valuebuilder Investor Services of
Montana, Inc.
NEA Valuebuilder Investor Services of
Nevada, Inc.
NEA Valuebuilder Investor Services of
Ohio, Inc.
NEA Valuebuilder Investor Services of
Oklahoma, Inc.
NEA Valuebuilder Investor Services of
Wyoming, Inc.
NEA Valuebuilder Services Insurance
Agency, Inc.
Nationwide Retirement Solutions, Inc.
Nationwide Retirement Solutions, Inc. of
Massachusetts
Nationwide Retirement Solutions, Inc. of
Alabama
Nationwide Retirement Solutions, Inc. of
Arkansas
Nationwide Retirement Solutions, Inc. of
Montana
Nationwide Retirement Solutions, Inc. of
New Mexico

Robert J. Woodward, Jr. Executive Vice President-Chief Investment
Officer

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ALLIED Group Merchant Banking Corporation
ALLIED Life Brokerage Agency, Inc.
ALLIED Life Financial Corporation
ALLIED Life Insurance Company
ALLIED Property and Casualty Insurance
Company
AMCO Insurance Company
Depositors Insurance Company
Midwest Printing Services, Ltd.
Premier Agency, Inc.
Western Heritage Insurance Company
Colonial County Mutual Insurance Company
Colonial Insurance Company of Wisconsin
Employers Insurance of Wausau A Mutual
Company
Employers Life Insurance Company of Wausau
Farmland Mutual Insurance Company
Gates, McDonald & Company
GatesMcDonald Health Plus, Inc.
Lone Star General Agency, Inc.
National Casualty Company
Nationwide Financial Services, Inc.
Nationwide Agribusiness Insurance Company
Nationwide Insurance Company of America
Nationwide Corporation
Nationwide Insurance Enterprise Foundation
Nationwide Insurance Enterprise Services,
Ltd.
Nationwide Investment Services Corporation
Pension Associates of Wausau, Inc.
Nationwide Retirement Solutions, Inc.
Scottsdale Indemnity Company
Scottsdale Insurance Company
Scottsdale Surplus Lines Insurance Company
Wausau Business Insurance Company
Wausau General Insurance Company
Wausau Preferred Health Insurance Company
Wausau Service Corporation
Wausau Underwriters Insurance Company

Director

Morley Financial Services, Inc.
Nationwide Global Holdings, Inc.
Nationwide Investors Services, Inc.

Member-Board of Managers and Vice Chairman

Nationwide Properties, Ltd.
Nationwide Realty Investors, Ltd.

Director and President

California Cash Management Company
MRM Investments, Inc.
Nationwide Cash Management Company
Nationwide Community Urban Redevelopment
Corporation
NWE, Inc.

Director, Executive Vice President-Chief
Investment Officer

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Nationwide Indemnity Company
Nationwide Advisory Services, Inc.
Nationwide Insurance Company of America

Director, Vice Chairman and Executive
Vice President-Chief Investment Officer

ALLIED Group Mortgage Company

Trustee and Vice Chairman

Nationwide Asset Allocation Trust
Nationwide Separate Account Trust

James F. Laird, Jr. Vice President and General Manager

Nationwide Advisory Services, Inc.

Vice President and General Manager and
Director

Nationwide Investors Services, Inc.

Treasurer

Nationwide Investing Foundation

Nationwide Separate Account Trust
Nationwide Investing Foundation II
Financial Horizons Investment Trust
Nationwide Asset Allocation Trust
Nationwide Investing Foundation III

Christopher A. Cray Treasurer

Nationwide Advisory Services, Inc.
Nationwide Investors Services, Inc.

Assistant Treasurer

Nationwide Investing Foundation
Nationwide Separate Account Trust
Nationwide Investing Foundation III
Financial Horizons Investment Trust
Nationwide Asset Allocation Trust

Elizabeth A. Davin Secretary

Nationwide Asset Allocation Trust
Nationwide Separate Account Trust
Nationwide Investing Foundation III

Assistant Secretary

Nationwide Advisory Services, Inc.
Nationwide Investing Foundation
Nationwide Investing Foundation II
Nationwide Investors Services, Inc.

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Patricia J. Smith Assistant Secretary

Nationwide Advisory Services, Inc.
Nationwide Horizons Investment Trust
Nationwide Investing Foundation
Nationwide Investing Foundation II
Nationwide Investing Foundation III
Nationwide Investors Services, Inc.
Nationwide Separate Account Trust
Nationwide Asset Allocation Trust

Edwin P. McCausland, Sr. Vice President - Fixed Income
Jr. Securities

Nationwide Mutual Insurance Company
Nationwide Mutual Fire Insurance Company
Nationwide General Insurance Company
Nationwide Property and Casualty Insurance
Company
Nationwide Life Insurance Company
Nationwide Life and Annuity Insurance
Company
Nationwide Advisory Services, Inc.
AID Finance Services, Inc.
ALLIED General Agency Company
ALLIED Group, Inc.
ALLIED Group Information Systems, Inc.
ALLIED Group Insurance Marketing Company
ALLIED Group Merchant Banking Corporation
ALLIED Group Mortgage Company
ALLIED Life Brokerage Agency, Inc.
ALLIED Life Financial Corporation
ALLIED Life Insurance Company
ALLIED Property and Casualty Insurance
Company
AMCO Insurance Company
Depositors Insurance Company
Midwest Printing Services, Ltd.
Premier Agency, Inc.
Western Heritage Insurance Company
Colonial Insurance Company of Wisconsin
Nationwide Cash Management Company
Nationwide Indemnity Company
Nationwide Insurance Enterprise Foundation
Morley Financial Services, Inc.
Employers Insurance of Wausau A Mutual
Company
Employers Life Insurance Company of Wausau
Farmland Mutual Insurance Company Gates,
McDonald & Company GatesMcDonald Health
Plus, Inc. National Casualty Company
Nationwide Agribusiness Insurance Company
Scottsdale Indemnity Company
Scottsdale Insurance Company
Scottsdale Surplus Lines Insurance Company
Nationwide Insurance Company of America
Wausau Business Insurance Company

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Wausau General Insurance Company
Wausau Preferred Health Insurance Company
Wausau Service Corporation
Wausau Underwriters Insurance Company

Assistant Treasurer

Financial Horizons Investment Trust
Nationwide Asset Allocation Trust
Nationwide Investing Foundation
Nationwide Investing Foundation II
Nationwide Investing Foundation III
Nationwide Separate Account Trust

Joseph P. Rath Vice President - Product and Market
Compliance

Vice President-Compliance

Nationwide Advisory Services, Inc.
Nationwide Investment Services Corporation

Vice President-Chief Compliance Officer

Nationwide Financial Services, Inc.

William G. Goslee Vice President

Nationwide Advisory Services, Inc.

Except as otherwise noted, the principal business address of any company with
which any person specified above is connected in the capacity of director,
officer, employee, partner or trustee is One Nationwide Plaza, Columbus, Ohio
43215, except for the following companies:

Farmland Mutual Insurance Company
Nationwide Agribusiness Insurance Company
1963 Bell Avenue
Des Moines, Iowa 50315-1000

Colonial Insurance Company of Wisconsin
5525 Park Center Circle
Dublin, Ohio 43017

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

Scottsdale Insurance Company
8877 North Gainey Center Drive
P.O. Box 4110

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Scottsdale, Arizona 85261-4110

National Casualty Company
P.O. Box 4110
Scottsdale, Arizona 85261-4110

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

Auto Direkt Insurance Company
Columbus Insurance Brokerage and Service, GMBH
Leben Direkt Insurance Company
Neckura General Insurance Company
Neckura Holding Company
Neckura Insurance Company
Neckura Life Insurance Company
John E. Fisher Str. 1
61440 Oberursel/Ts.
Germany

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

Nationwide Advisory Services, Inc.
Nationwide Investors Services, Inc.
Three Nationwide Plaza,
Columbus, Ohio 43215

Morley Financial Services, Inc.
5665 S.W. Meadows Rd., Suite 400
Lake Oswego, Oregon 97035

(b) Information for the Subadvisers

(1) The Dreyfus Corporation

The Dreyfus Corporation ("Dreyfus") acts as subadvisor to the Small
Company Fund and the Small Cap Value Fund and as adviser or
subadviser to a number of other registered investment companies. The
list required by this Item 26 of officers and directors of Dreyfus,
together with information as to their other business, profession,
vocation or employment of a substantial nature during the past two
years, is incorporated by reference to Schedule A and D of Form ADV
filed by Dreyfus (SEC File No. 801-8147).

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(2) Neuberger Berman, LLC

Neuberger Berman, LLC ("Neuberger Berman") acts as subadviser to the
Small Company Fund and the Select Advisors Small Cap Growth Fund of
the Registrant and investment adviser or subadviser to a number of
other registered investment companies. The list required by this
Item 26 of officers and directors of Neuberger Berman, together with
information as to their other business, profession, vocation or
employment of a substantial nature during the past two years, is
incorporated by reference to Schedules A and D of Form ADV filed by
Neuberger Berman (SEC File No. 801-3908).

(3) Strong Capital Management, Inc.

Strong Capital Management, Inc. ("Strong"), acts as subadviser to
the Small Company Fund, the Strategic Growth Fund and the Strategic
Value Fund and investment adviser or subadviser to a number of other
registered investment companies. The list required by this Item 26
of officers and directors of Strong, together with information as to
their other business, profession, vocation or employment of a
substantial nature during the past two years, is incorporated by
reference to Schedules A and D of Form ADV filed by Strong (SEC File
No. 801-10724).

(4) Warburg, Pincus Asset Management, Inc.

Warburg, Pincus Asset Management, Inc. ("Warburg") acts as
subadviser to the Small Company Fund and investment adviser to a
number of other registered investment companies. Warburg renders
investment advice to a wide variety of individual and institutional
investors. The list required by this Item 26 of officers and
directors of Warburg, together with information as to their other
business, profession, vocation or employment of a substantial nature
during the past two years, is incorporated by reference to Schedules
A and D of Form ADV filed by Warburg (SEC File No. 801-07321).

(5) Lazard Asset Management

Lazard Asset Management ("Lazard") acts as subadviser to the Small
Company Fund and investment adviser to a number of other registered
investment companies. Lazard renders investment advice to a wide
variety of individual and institutional investors. The list required
by this Item 26 of officers and directors of Lazard, together with
information as to their other business, profession, vocation or
employment of a substantial nature during the past two years, is
incorporated by reference to Schedules A and D of Form ADV filed by
Lazard (SEC File No. 801-6568).

(6) NCM Capital Management Group, Inc.

NCM Capital Management Group, Inc. ("NCM") is a registered
investment adviser which provides investment advisory services to
individuals and institutional clients, including acting as
subadviser to the Income Fund. NCM also serves as subadviser to
other investment companies registered under the Investment Company
of 1940; these investment companies are unaffiliated with NCM except
as a result of these subadvisory relationships. The list required by
Item 26 of Officers and directors of NCM, together with information
as to their other business, profession, vocation or employment of a
substantial nature during the past two years is incorporated by
reference to Schedule A and D of Form ADV filed by NCM (SEC File No.
801-28196).

(7) Smith Graham & Co. Asset Managers, L.P.

Smith Graham & Co. Asset Managers, L.P. ("Smith Graham") acts as
subadviser to the Income Fund and is a registered investment adviser
which offers investment advisory services to corporations, pension
and profit sharing plans, as well as foundations, Taft Hartley
plans, banks, thrift institutions, trust, estates and/or charitable
organizations and individuals. Smith Graham also serves as
subadviser to the American Odyssey Short-Term Bond Fund, an
investment company registered under the Investment Company of 1940;
this

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<PAGE> 161

investment company is unaffiliated with Smith Graham except as a
result of this subadvisory relationship. The list required by Item
26 of Officers and directors of Smith Graham together with
information as to their other business, profession, vocation or
employment of a substantial nature during the past two years is
incorporated by reference to Schedule A and D of Form ADV filed by
Smith Graham (SEC File No. 801-36485).

(8) Schafer Capital Management , Inc.

Schafer Capital Management, Inc., acts as subadviser to the
Strategic Value Fund and as investment adviser to certain other
clients. David K. Schafer, a director and officer of Schafer Capital
Management, Inc., is also Chairman of the Board of Schafer Cullen
Capital Management, Inc., 645 Fifth Ave, New York, New York 10022.
James D. Cullen, an officer of Schafer Capital Management Inc., is
also President of Schafer Cullen Capital Management, Inc. Schafer
Cullen Capital Management , Inc. is a registered investment adviser
under the Investment Advisers Act of 1940, as amended.

(9) Federated Investment Counseling

Federated Investment Counseling, the Subadviser to Equity Income
Fund and High Income Bond Fund, is a registered investment adviser
under the Investment Advisers Act of 1940. It is a subsidiary to
Federated Investors. The Subadvisor serves as investment adviser to
a number of investment companies and private accounts. Total assets
under management or administered by the Subadviser and other
subsidiaries of Federated Investors is approximately $110 billion.
The list required by Item 26 of Officers and directors of Federated
Investment Counseling, together with information as to their other
business, profession, vocation or employment of a substantial nature
during the past two years is incorporated by reference to Schedule A
and D of Form ADV filed by Federated Investment Counseling (SEC File
No. 801-34611).

(10) Salomon Brothers Asset Management, Inc.

Salomon Brothers Asset Management, Inc. acts as subadviser to the
Balanced Fund and the Multi Sector Bond Fund. The list required by
this Item 26 of officers and directors of Salomon Brothers Asset
Management, Inc.("SBAM"), together with information as to any other
business, profession, vocation or employment of a substantial nature
engaged in by such officers and directors during the past two years
is incorporated by reference to Schedules A and D of Form ADV filed
by SBAM and SBAM Limited pursuant to the Investment Advisers Act of
1940 (SEC File No. 801-32046 and 801-43335.)

(11) J.P. Morgan Investment Management, Inc. ("JPMIM"), a registered
investment adviser, is subadviser to the Global Equity Fund, a
wholly owned subsidiary of J. P. Morgan & Co. Incorporated. JPMIM
manages employee benefit plans for corporations and unions. JPMIM
also provides investment management services for a broad spectrum of
other institutional investors, including foundations, endowments,
sovereign governments, and insurance companies.

To the knowledge of the Registrant, none of the directors or
executive officers of JPMIM is or has been in the past two fiscal
years engaged in any other business or profession, vocation or
employment of a substantial nature, except that certain officers and
directors of JPMIM also hold various positions with, and engage in
business for, J.P. Morgan & Co. Incorporated or Morgan Guaranty
Trust Company of New York, a New York trust company which is also a
wholly owned subsidiary of J.P. Morgan & Co. Incorporated.

(12) Pilgrim Baxter & Associates, Ltd. is subadviser to the Select
Advisers Mid Cap Fund. The list required by Item 26 of officers and
directors of Pilgrim Baxter & Associates, Ltd., together with
information as to their other business, profession, vocation or
employment of a substantial nature during the past two years is
incorporated by reference to Schedule A and D of Form ADV filed by
Pilgrim Baxter & Associates Ltd. (SEC File No. 801-48872).

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(13) First Pacific Advisers, Inc. is subadviser to the Select Advisers
Mid Cap Fund. During the last two fiscal years, First Pacific
Advisors, Inc., the investment subadviser to Registrant
("Subadviser"), has not engaged in any other business in a
substantial nature except as investment adviser to Source Capital,
Inc. ("Source"), a registered closed-end investment company; as
investment adviser to FPA Capital Fund, Inc. ("Capital"), FPA New
Income, Inc. ("New Income"), FPA Paramount Fund, Inc. ("Paramount"),
FPA Perennial Fund, Inc. ("Perennial"), and UAM/FPA Crescent
Portfolio, each a registered open-end investment company; and as
investment adviser to institutional accounts. The list required by
Item 26 of Officers and directors of First Pacific Advisers, Inc.,
together with information as to their other business, profession,
vocation or employment of a substantial nature during the past two
years is incorporated by reference to Schedule A and D of Form ADV
filed by First Pacific Advisers, Inc. (SEC File No. 801-39512).

(14) Rice, Hall, James & Associates is subadviser to the Select Advisers
Mid Cap Fund. The list required by Item 26 of officers and directors
of Rice, Hall, James & Associates together with information as to
their other business, profession, vocation or employment of a
substantial nature during the past two years is incorporated by
reference to Schedule A and D of Form ADV filed by Rice, Hall James
& Associates (SEC File No. 801-30441).

(15) Franklin Advisers, Inc. is subadviser to the Select Advisers Small
Cap Growth Fund. The list required by this Item 26 of the officers
and directors of Franklin Advisers, Inc.("Franklin"), together with
information as to any other business, profession, vocation or
employment of a substantial nature engaged in by such officers and
directors during the past two years is incorporated by reference to
Schedule A and D of Form ADV filed by Franklin pursuant to the
Investment Company Act of 1940 (SEC File No. 801-26292).

(16) Miller, Anderson & Sherrerd, LLP is subadviser to the Select
Advisers Small Cap Growth Fund. The list required by this Item 26 of
the officers and directors of Miller, Anderson & Sherred, LLP
("MAS"), together with information as to any other business,
profession, vocation or employment of a substantial nature engaged
in by such officers and directors during the past two years is
incorporated by reference to Schedule A and D of Form ADV filed by
MAS pursuant to the Investment Company Act of 1940 (SEC File No.
801-10437).

Item 27. Principal Underwriters

(a) Not applicable.
(b) Not applicable.
(c) Not applicable.

Item 28. Location of Accounts and Records

James F. Laird, Jr.
Nationwide Advisory Services, Inc.
Three Nationwide Plaza
Columbus, OH 43215

Item 29. Undertakings

(a) Not applicable.

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Post-Effective
Amendment No. 28 to this Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Columbus, and State
of Ohio, on this twenty sixth day of February 1999.

NATIONWIDE SEPARATE ACCOUNT TRUST

By: JAMES F. LAIRD, JR.
----------------------------
James F. Laird, Jr., Treasurer

PURSUANT TO THE REQUIREMENT OF THE SECURITIES ACT OF 1933, THIS POST-EFFECTIVE
AMENDMENT NO. 28 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE
FOLLOWING PERSONS IN THE CAPACITIES INDICATED ON THE TWENTY SIXTHDAY OF FEBRUARY
1999.

Signature & Title
- --------------------------------------------------
Principal Executive Officer

JOSEPH J. GASPER*
- --------------------------------------------------
Joseph J. Gasper, Trustee and Chairman

ROBERT J. WOODWARD, JR.*
- --------------------------------------------------
Robert J. Woodward, Jr., Trustee and Vice Chairman

Principal Accounting and Financial Officer

JAMES F. LAIRD, JR.
- --------------------------------------------------
James F. Laird, Jr., Treasurer

JOHN C. BRYANT*
- --------------------------------------------------
John C. Bryant, Trustee

C. BRENT DEVORE*
- --------------------------------------------------
C. Brent DeVore, Trustee

ROBERT M. DUNCAN*
- --------------------------------------------------
Robert M. Duncan, Trustee

THOMAS J. KERR, IV*
- --------------------------------------------------
Thomas J. Kerr, IV, Trustee

DOUGLAS F. KRIDLER*
- --------------------------------------------------
Douglas F. Kridler, Trustee

SUE DOODY*
- --------------------------------------------------
Sue Doody, Trustee

DAVID C. WETMORE*
- --------------------------------------------------
David C. Wetmore, Trustee

*By: JAMES F. LAIRD, JR.
---------------------------------------------
James F. Laird, Jr., Attorney-In-Fact

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<PAGE> 1

NATIONWIDE SEPARATE ACCOUNT TRUST

(Established June 30, 1981)

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

AMENDED DECLARATION OF TRUST

(As Amended to March 3, 1999)

<PAGE> 2

TABLE OF CONTENTS

ARTICLE I
NAME AND DEFINITIONS........................... 1

Section 1.1. Name........................................................... 1
Section 1.2. Definitions.................................................... 1

ARTICLE II
TRUSTEES................................. 2

Section 2.1. Number of Trustees............................................. 2
Section 2.2. Election and Term.............................................. 2
Section 2.3. Resignation and Removal........................................ 2
Section 2.4. Vacancies...................................................... 2
Section 2.5. Delegation of Power to Other Trustees.......................... 3

ARTICLE III
POWERS OF TRUSTEES............................ . 3

Section 3.1. General........................................................ 3
Section 3.2. Investments.................................................... 3
Section 3.3. Legal Title.................................................... 4
Section 3.4. Issuance and Repurchase of Securities.......................... 4
Section 3.5. Borrowing Money; Lending Trust Assets.......................... 4
Section 3.6. Delegation; Committees......................................... 4
Section 3.7. Collection and Payment......................................... 5
Section 3.8. Expenses....................................................... 5
Section 3.9. Manner of Action; Bylaws....................................... 5
Section 3.10. Miscellaneous Powers.......................................... 5
Section 3.11. Principal Transactions........................................ 5
Section 3.12. Trustees and Officers as Shareholders......................... 6

ARTICLE IV
INVESTMENT ADVISER, DISTRIBUTOR AND TRANSFER AGENT.............. 6

Section 4.1. Investment Adviser............................................. 6
Section 4.2. Distributor.................................................... 6
Section 4.3. Transfer Agent................................................ 7
Section 4.4. Parties to Contract............................................ 7

ARTICLE V
LIMITATIONS OF LIABILITY OF SHAREHOLDERS, TRUSTEES AND OTHERS...... 7

Section 5.1. No Personal Liability of Shareholders, Trustees, etc........... 7
Section 5.2. Non-liability of Trustees, etc................................. 7
Section 5.3. Mandatory Indemnification...................................... 8
Section 5.4. No Bond Required of Trustees................................... 9
Section 5.5. No Duty of Investigation; Notice in Trust Instruments, etc..... 9
Section 5.6. Reliance on Experts, etc....................................... 9

i
<PAGE> 3

ARTICLE VI
SHARES OF BENEFICIAL INTEREST....................... 9

Section 6.1. Beneficial Interest............................................ 9
Section 6.2. Rights of Shareholders......................................... 10
Section 6.3. Trust Only..................................................... 10
Section 6.4. Issuance of Shares............................................. 10
Section 6.5. Register of Shares............................................. 10
Section 6.6. Transfer of Shares............................................. 11
Section 6.7. Notices........................................................ 11
Section 6.8. Voting Powers.................................................. 11
Section 6.9. Series Designation............................................. 12

ARTICLE VII
REDEMPTIONS................................ 13
Section 7.1. Redemptions.................................................... 13
Section 7.2. Suspension of Right of Redemption.............................. 13
Section 7.3. Redemption of Shares; Disclosure of Holding.................... 14
Section 7.4. Redemptions of Accounts of Less than $500...................... 14
Section 7.5. Redemptions Pursuant to Constant Net Asset Value Formula....... 14

ARTICLE VIII
DETERMINATION OF NET ASSET VALUE,
NET INCOME AND DISTRIBUTIONS...................... 14

Section 8.1. Net Asset Value................................................ 14
Section 8.2. Distributions to Shareholders.................................. 15
Section 8.3. Determination of Net Income.................................... 15
Section 8.4. Power to Modify Foregoing Procedures........................... 16

ARTICLE IX
DURATION; TERMINATION OF TRUST;
AMENDMENT; MERGERS; ETC........................ 16

Section 9.1. Duration....................................................... 16
Section 9.2. Termination of Trust........................................... 16
Section 9.3. Amendment Procedure............................................ 17
Section 9.4. Merger, Consolidation and Sale of Assets....................... 17
Section 9.5. Incorporation.................................................. 17

ARTICLE X
REPORTS TO SHAREHOLDERS.......................... 18

ARTICLE XI
MISCELLANEOUS.............................. 18

Section 11.1. Filing........................................................ 18
Section 11.2. Governing Law................................................. 18
Section 11.3. Counterparts.................................................. 18

ii
<PAGE> 4

Section 11.4. Reliance by Third Parties..................................... 18
Section 11.5. Provisions in Conflict with Law or Regulations................ 19

iii
<PAGE> 5

AMENDED DECLARATION OF TRUST

NATIONWIDE SEPARATE ACCOUNT TRUST

(As Amended to March 3, 1999)

WHEREAS, a certain Declaration of Trust was formed June 30, 1981, with the
name MFS Separate Account Money Market Trust, which was subsequently amended to
NATIONWIDE SEPARATE ACCOUNT MONEY MARKET TRUST, and then NATIONWIDE SEPARATE
ACCOUNT TRUST; and

WHEREAS, the Trustees have amended the Trust and desire that the various
amendments be consolidated into this AMENDED DECLARATION OF TRUST.

NOW THEREFORE, the Trustees hereby declare this Amended Declaration of
Trust to be the effective Trust Declaration for the benefit of holders, from
time to time, of the shares of beneficial interest issued hereunder and subject
to the provisions hereof.

ARTICLE I

NAME AND DEFINITIONS

Section 1.1. Name. The name of the trust created hereby is the "Nationwide
Separate Account Trust." The names of the fifteen series of shares offered by
the Trust for the investment and reinvestment of funds are "Money Market Fund,"
"Government Bond Fund," "Capital Appreciation Fund," "Total Return Fund,"
"Nationwide Small Company Fund," "Nationwide Income Fund," Nationwide Strategic
Growth Fund, Nationwide Strategic Value Fund, Nationwide Equity Income Fund,
Nationwide High Income Bond Fund, Nationwide Balanced Fund, Nationwide Multi
Sector Bond Fund, Nationwide Small Cap Value Fund, Nationwide Global Equity
Fund, and Nationwide Select Advisers Mid Cap Fund, Nationwide Select Advisers
Small Cap Growth Fund.

Section 1.2. Definitions. Wherever they are used herein, the following
terms have the following respective meanings:

(a) "Bylaws" means the Bylaws referred to in Section 3.9 hereof, as from
time to time amended.

(b) The terms "Commission", "Interested Person", and "Majority Shareholder
Vote" (the 67% or 50% requirement of the third sentence of Section 2(a)(42) of
the 1940 Act, whichever may be applicable) have the meanings given them in the
1940 Act, except to the extent that the Trustees have otherwise defined
"Majority Shareholder Vote" in conjunction with the establishment of any series
of shares.

(c) "Declaration" or "Amended Declaration" means this Amended Declaration
of Trust as amended from time to time. Reference in this Amended Declaration of
Trust to "Declaration", "hereof", "herein" and "hereunder" shall be deemed to
refer to this Amended Declaration rather than the article or section in which
such words appear.

(d) "Distributor" means the party, other than the Trust, to the contract
described in Section 4.2 hereof.

(e) "Investment Adviser" means the party, other than the Trust, to the
contract described in Section 4.1 hereof.

(f) The "1940 Act" means the Investment Company Act of 1940 and the rules
and regulations thereunder, as amended from time to time.

1
<PAGE> 6

(g) "Person" means and includes individuals, corporations, partnerships,
trusts, associations, joint ventures and other entities, whether or not legal
entities, and governments and agencies and political subdivisions thereof.

(h) "Shareholder" means a record owner of outstanding Shares.

(i) "Shares" means the units of interest into which the beneficial
interest in the Trust shall be divided from time to time, including the shares
of any and all series which may be established by the Trustees, and includes
fractions of Shares as well as whole Shares.

(j) "Transfer Agent" means the party, other than the Trust, to the
contract described in Section 4.3 hereof.

(k) The "Trust" means the Nationwide Separate Account Trust.

(l) The "Trust Property" means any and all property, real or personal,
tangible or intangible, which is owned or held by or for the account of the
Trust or the Trustees.

(m) The "Trustees" means the persons who have signed this Amended
Declaration, so long as they shall continue in office in accordance with the
terms hereof, and all other persons who may from time to time be duly elected,
qualified and serving as Trustees in accordance with the provisions hereof, and
reference herein to a Trustee or the Trustees shall refer to such person or
persons in their capacity as trustees hereunder.

ARTICLE II
TRUSTEES

Section 2.1. Number of Trustees. The number of Trustees shall be such
number as shall be fixed from time to time by a written instrument signed by a
majority of the Trustees, provided, however, that the number of Trustees shall
in no event be less than three (3) nor more than fifteen (15).

Section 2.2. Election and Term. Except for the Trustees named herein or
appointed to fill vacancies pursuant to Section 2.4 hereof, the Trustees shall
be elected by the Shareholders at an annual meeting or at a special meeting of
Shareholders. There is no requirement that the Trustees have an annual meeting
of the Shareholders. In the event the Trustees determine to have an annual or
special meeting of the Shareholders, it shall be held at such time and place and
in such manner as the Bylaws shall provide notwithstanding anything in this
section to the contrary. Except in the event of resignations or removals
pursuant to Section 2.3 hereof, each Trustee shall hold office until the next
meeting of Shareholders and until his successor is elected and qualified to
serve at Trustee.

Section 2.3. Resignation and Removal. Any Trustee may resign his trust
(without need for prior or subsequent accounting) by an instrument in writing
signed by him and delivered to the other Trustees and such resignation shall be
effective upon such delivery, or at a later date according to the terms of the
instrument. Any of the Trustees may be removed (provided the aggregate number of
Trustees after such removal shall not be less than the number required by
Section 2.1 hereof) with cause, by the Action of two-thirds of the remaining
Trustees. Upon the resignation or removal of a Trustee, or his otherwise ceasing
to be a Trustee, he shall execute and deliver such documents as the remaining
Trustees shall require for the purpose of conveying to the Trust or the
remaining Trustees any Trust Property held in the name of the resigning or
removed Trustee. Upon the incapacity or death of any Trustee, his legal
representative shall execute and deliver on his behalf such documents as the
remaining Trustees shall require as provided in the preceding sentence.

Section 2.4. Vacancies. The term of office of a Trustee shall terminate
and a vacancy shall occur in the event of the death, resignation, removal,
bankruptcy, adjudicated incompetence or other incapacity to perform the duties
of the office of a Trustee. No such vacancy shall operate to annul

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this Amended Declaration or to revoke any existing agency created pursuant to
the terms of the Amended Declaration. In the case of an existing vacancy,
including a vacancy existing by reason of an increase in the number of Trustees,
subject to the provisions of Section 16(a) of the 1940 Act, the remaining
Trustees shall fill such vacancy by the appointment of such other person as they
in their discretion shall see fit, made by a written instrument signed by a
majority of the Trustees. Any such appointment shall not become effective,
however, until the person named in the written instrument of appointment shall
have accepted in writing such appointment and agreed in writing to be bound by
the terms of the Amended Declaration. An appointment of a Trustee may be made in
anticipation of a vacancy to occur at a later date by reason of retirement,
resignation or increase in the number of Trustees, provided that such
appointment shall not become effective prior to such retirement, resignation or
increase in the number of Trustees. Whenever a vacancy in the number of Trustees
shall occur, until such vacancy is filled as provided in this Section 2.4, the
Trustees in office, regardless of their number, shall have all the powers
granted to the Trustees and shall discharge all the duties imposed upon the
Trustees by the Amended Declaration. A written instrument certifying the
existence of such vacancy signed by a majority of the Trustees shall be
conclusive evidence of the existence of such vacancy.

Section 2.5. Delegation of Power to Other Trustees. Any Trustee may, by
power of attorney, delegate his power for a period not exceeding six (6) months
at any one time to any other Trustee or Trustees; provided that in no case shall
less than two (2) Trustees personally exercise the powers granted to the
Trustees under the Amended Declaration except as herein otherwise expressly
provided.

ARTICLE III
POWERS OF TRUSTEES

Section 3.1. General. The Trustees shall have exclusive and absolute
control over the Trust Property and over the business of the Trust to the same
extent as if the Trustees were the sole owners of the Trust Property and
business in their own right, but with such powers of delegation as may be
permitted by the Amended Declaration. The Trustees shall have power to conduct
the business of the Trust and carry on its operations in any and all of its
branches and maintain offices both within and without the Commonwealth of
Massachusetts, in any and all states of the United States of America, in the
District of Columbia, and in any and all commonwealths, territories,
dependencies, colonies, possessions, agencies or instrumentalities of the United
States of America and of foreign governments, and to do all such other things
and execute all such instruments as they deem necessary, proper or desirable in
order to promote the interests of the Trust although such things are not herein
specifically mentioned. Any determination as to what is in the interest of the
Trust made by the Trustees in good faith shall be conclusive. In construing the
provisions of the Amended Declaration, the presumption shall be in favor of a
grant of power to the Trustees.

The enumeration of any specific power herein shall not be construed as
limiting the aforesaid power. Such powers of the Trustees may be exercised
without order of or resort to any court.

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Section 3.2. Investments. The Trustees shall have the power to:

(a) conduct, operate and carry on the business of an investment
company;

(b) subscribe for, invest in, reinvest in, purchase or otherwise
acquire, hold, pledge, sell, assign, transfer, exchange, distribute, lend or
otherwise deal in or dispose of negotiable or non-negotiable instruments,
obligations, evidences of indebtedness, certificates of deposit or indebtedness,
commercial paper, repurchase agreements, and other securities of any kind,
including, without limitation, those issued, guaranteed or sponsored by any and
all Persons including, without limitation, states, territories and possessions
of the United States, the District of Columbia and any of the political
subdivisions, agencies or instrumentalities thereof, and by the United States
Government or its agencies or instrumentalities, or international
instrumentalities, or by any bank or savings institution, or by any corporation
or organization organized under the laws of the United States or of any state,
territory or possession thereof, and of corporations or organizations organized
under foreign laws, or in "when issued" contracts for any such securities, or
retain Trust assets in cash and from time to time change the investments of the
assets of the Trust; and to exercise any and all rights, powers and privileges
of ownership or interest in respect of any and all such investments of every
kind and description, including, without limitation, the right to consent and
otherwise act with respect thereto, with power to designate one or more persons,
firms, associations or corporations to exercise any of said rights, powers and
privileges in respect of any of said instruments.

The Trustees shall not be limited to investing in obligations maturing
before the possible termination of the Trust, nor shall the Trustees be limited
by any law limiting the investments which may be made by fiduciaries.

Section 3.3. Legal Title. Legal title to all the Trust Property shall be
vested in the Trustees as joint tenants except that the Trustees shall have
power to cause legal title to any Trust Property to be held by or in the name of
one or more of the Trustees, or in the name of the Trust, or in the name of any
other Person as nominee, on such terms as the Trustees may determine, provided
that the interest of the Trust therein is appropriately protected. The right,
title and interest of the Trustees in the Trust Property shall vest
automatically in each Person who may hereafter become a Trustee. Upon the
resignation, removal or death of a Trustee, he shall automatically cease to have
any right, title or interest in any of the Trust Property, and the right, title
and interest of such Trustee in the Trust Property shall vest automatically in
the remaining Trustees. Such vesting and cessation of title shall be effective
whether or not conveyancing documents have been executed and delivered.

Section 3.4. Issuance and Repurchase of Securities. The Trustees shall
have the power to issue, sell, repurchase, redeem, retire, cancel, acquire,
hold, resell, reissue, dispose of, transfer, and otherwise deal in Shares and,
subject to the provisions set forth in Articles VII, VIII, and IX and Section
6.9 hereof, to apply to any such repurchase, redemption, retirement,
cancellation or acquisition of Shares any funds or property of the Trust whether
capital or surplus or otherwise, to the full extent now or hereafter permitted
by the laws of the Commonwealth of Massachusetts governing business
corporations.

Section 3.5. Borrowing Money; Lending Trust Assets. The Trustees shall
have power to borrow money or otherwise obtain credit to secure the same by
mortgaging, pledging or otherwise subjecting as security the assets of the
Trust, to endorse, guarantee, or undertake the performance of any obligation,
contract or engagement of any other Person and to lend Trust assets.

Section 3.6. Delegation; Committees. The Trustees shall have power to
delegate from time to time to such of their number or to officers, employees or
agents of the Trust the doing of such

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things and the execution of such instruments either in the name of the Trust or
the names of the Trustees or otherwise as the Trustees may deem expedient.

Section 3.7. Collection and Payment. The Trustees shall have power to
collect all property due to the Trust; to pay all claims, including taxes,
against the Trust Property; to prosecute, defend, compromise or abandon any
claims relating to the Trust Property; to foreclose any security interest
securing any obligations, by virtue of which any property is owed to the Trust;
and to enter into releases, agreements and other instruments.

Section 3.8. Expenses. The Trustees shall have the power to incur and pay
any expenses which in the opinion of the Trustees are necessary or incidental to
carry out any of the purposes of the Declaration, and to pay reasonable
compensation from the funds of the Trust to themselves as Trustees. The Trustees
shall fix the compensation of all officers, employees and Trustees.

Section 3.9. Manner of Action; Bylaws. Except as otherwise provided herein
or in the Bylaws, any action to be taken by the Trustees may be taken by a
majority of the Trustees present at a meeting of Trustees (a quorum being
present), including any meeting held by means of a conference telephone circuit
or similar communications equipment by means of which all persons participating
in the meeting can hear each other, or by written consents of all the Trustees.
The Trustees may adopt Bylaws not inconsistent with this Declaration to provide
for the conduct of the business of the Trust and may amend or repeal such Bylaws
to the extent such power is not reserved to the Shareholders.

Section 3.10. Miscellaneous Powers. The Trustees shall have the power to:
(a) employ or contract with such Persons as the Trustees may deem desirable for
the transaction of the business of the Trust; (b) enter into joint ventures,
partnerships and any other combinations or associations; (c) remove Trustees or
fill vacancies in or add to their number, elect and remove such officers and
appoint and terminate such agents or employees as they consider appropriate, and
appoint from their own number, and terminate, any one or more committees which
may exercise some or all of the power and authority of the Trustees as the
Trustees may determine; (d) purchase, and pay for out of Trust Property,
insurance policies insuring the Shareholders, Trustees, officers, employees,
agents, investment advisers, distributors, selected dealers or independent
contractors of the Trust against all claims arising by reason of holding any
such position or by reason of any action taken or omitted by any such Person in
such capacity, whether or not constituting negligence, or whether or not the
Trust would have the power to indemnify such Person against such liability; (e)
establish pension, profit-sharing, Share purchase, and other retirement,
incentive and benefit plans for any Trustees, officers, employees and agents of
the Trust; (f) to the extent permitted by law, indemnify any person with whom
the Trust has dealings, including the Investment Adviser, Distributor, Transfer
Agent and selected dealers, to such extent as the Trustees shall determine; (g)
guarantee indebtedness or contractual obligations of others; (h) determine and
change the fiscal year of the Trust and the method by which its accounts shall
be kept; and (i) adopt a seal for the Trust, but the absence of such seal shall
not impair the validity of any instrument executed on behalf of the Trust.

Section 3.11. Principal Transactions. Except in transactions permitted by
the 1940 Act or any rule or regulation thereunder, or any order of exemption
issued by the Commission, the Trustees shall not, on behalf of the Trust, buy
any securities (other than Shares) from or sell any securities (other than
Shares) to, or lend any assets of the Trust to, any Trustee or officer of the
Trust or any firm of which any such Trustee or officer is a member acting as
principal, or have any such dealings with the Investment Adviser, Distributor or
Transfer Agent or with any Interested Person of such Person; but the Trust may
employ any such Person, or firm or company in which such Person is an

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Interested Person, as broker, legal counsel, registrar, transfer agent, dividend
disbursing agent or custodian upon customary terms.

Section 3.12. Trustees and Officers as Shareholders. Except as hereinafter
provided, no officer, Trustee or Member of the Advisory Board of the Trust, and
no member, officer, director or trustee of the Investment Adviser or of the
distributor, and no Investment Adviser or Distributor of the Trust, shall take
long or short positions in the securities issued by the Trust.

(1) The foregoing provision shall not prevent the Distributor from
purchasing from the Trust Shares if such purchases are limited (except for
reasonable allowances for clerical errors, delays and errors of transmission and
cancellation of orders) to purchases for the purpose of filling orders for
Shares received by the Distributor and provided that orders to purchase from the
Trust are entered with the Trust or the Custodian promptly upon receipt by the
Distributor of purchase orders for Shares, unless the Distributor is otherwise
instructed by its customer.

(2) The foregoing provision shall not prevent the Distributor from
purchasing Shares as agent for the account of the Trust.

(3) The foregoing provision shall not prevent the purchase from the Trust
or from the Distributor of Shares by any officer, Trustee or member of the
Advisory Board of the Trust or by any member, officer, director or trustee of
the Investment Adviser or of the Distributor at a price not lower than the net
asset value of the Shares at the moment of such purchase, provided that any such
sales are only to be made pursuant to a uniform offer described in the Trust's
current prospectus.

(4) The foregoing provision shall not prevent the Investment Adviser, the
Distributor, or any of their officers, directors or trustees from purchasing
Shares prior to the effective date of the Registration Statement relating to the
Shares under the Securities Act of 1933, as amended.

ARTICLE IV
INVESTMENT ADVISER, DISTRIBUTOR AND TRANSFER AGENT

Section 4.1. Investment Adviser. Subject to a Majority Shareholder Vote,
the Trustees may, in their discretion, from time to time enter into an
investment advisory or management contract whereby the other party to such
contract shall undertake to furnish the Trust such management, investment
advisory, statistical and research facilities and services, promotional
activities, and such other facilities and services, if any, as the Trustees
shall from time to time consider desirable and all upon such terms and
conditions as the Trustees may, in their discretion, determine. Notwithstanding
any provisions of the Declaration, the Trustees may authorize the Investment
Adviser (subject to such general or specific instructions as the Trustees may
from time to time adopt) to effect purchases, sales, loans or exchanges of
portfolio securities of the Trust on behalf of the Trustees or may authorize any
officer, employee or Trustee to effect such purchases, sales, loans or exchanges
pursuant to recommendations of the Investment Adviser (and all without further
action by the Trustees). Any such purchases, sales, loans and exchanges shall be
deemed to have been authorized by all of the Trustees.

Section 4.2. Distributor. The Trustees may, in their discretion, from time
to time enter into a contract, providing for the sale of Shares to net the Trust
not less than the net asset value per Share (as described in Article VIII
hereof), whereby the Trust may either agree to sell the Shares to the other
party to the contract or appoint such other party its sales agent for such
Shares. In either case, the contract shall be on such terms and conditions as
the Trustees may in their discretion determine not inconsistent with the
provisions of this Article IV or the Bylaws; and such contract may also provide
for the repurchase or sale of Shares of the Trust by such other party as
principal or as agent

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of the Trust and may provide that such other party may enter into selected
dealer agreements with registered securities dealers to further the purpose of
the distribution or repurchase of the Shares.

Section 4.3. Transfer Agent. The Trustees may, in their discretion, from
time to time enter into a transfer agency and shareholder service contract
whereby the other party to such contract shall undertake to furnish transfer
agency and shareholder services to the Trust. The contract shall have such terms
and conditions as the Trustees may, in their discretion, determine not
inconsistent with the Amended Declaration or the Bylaws. Such services may be
provided by one or more Persons.

Section 4.4. Parties to Contract. Any contract of the character described
in Sections 4.1, 4.2 or 4.3 of this Article IV or any Custodian contract, as
described in the Bylaws, may be entered into with any Person, although one or
more of the Trustees or officers of the Trust may be an officer, director,
trustee, shareholder, or member of such other party to the contract, and no such
contract shall be invalidated or rendered voidable by reason of the existence of
any such relationship; nor shall any Person holding such relationship be liable
merely by reason of such relationship for any loss or expense to the Trust under
or by reason of said contract or accountable for any profit realized directly or
indirectly therefrom, provided that the contract, when entered into, was not
inconsistent with the provisions of this Article IV or the Bylaws. The same
Person may be the other party to contracts entered into pursuant to Sections
4.1, 4.2 and 4.3 above or Custodian contracts, and any individual may be
financially interested or otherwise affiliated with Persons who are parties to
any or all of the contracts mentioned in this Section 4.4.

ARTICLE V
LIMITATIONS OF LIABILITY OF SHAREHOLDERS, TRUSTEES AND OTHERS

Section 5.1. No Personal Liability of Shareholders, Trustees, etc. No
Shareholder shall be subject to any personal liability whatsoever to any Persons
in connection with Trust Property or the acts, obligations or affairs of the
Trust. No Trustee, officer, employee or agent of the Trust shall be subject to
any personal liability whatsoever to any Person, other than the Trust or its
Shareholders, in connection with Trust Property or the affairs of the Trust,
save only that arising from bad faith, willful misfeasance, gross negligence or
reckless disregard for his duty to such Person; and all such Persons shall look
solely to the Trust Property for satisfaction of claims of any nature arising in
connection with the affairs of the Trust. If any Shareholder, Trustee, officer,
employee or agent, as such, of the Trust is made a party to any suit or
proceeding to enforce any such liability, he shall not, on account thereof, be
held to any personal liability. The Trust shall indemnify and hold each
Shareholder harmless from and against all claims and liabilities, to which such
Shareholder may become subject by reason of his being or having been a
Shareholder, and shall reimburse such Shareholder for all legal and other
expenses reasonably incurred by him in connection with any such claim or
liability. The rights accruing to a Shareholder under this Section 5.1 shall not
exclude any other right to which such Shareholder may be lawfully entitled, nor
shall anything herein contained restrict the right of the Trust to indemnify or
reimburse a Shareholder in any appropriate situation even though not
specifically provided herein.

Section 5.2. Non-liability of Trustees, etc. No Trustee, officer, employee
or agent of the Trust shall be liable to the Trust, its Shareholders, or to any
Shareholder, Trustee, officer, employee or agent thereof for any action or
failure to act (including without limitation the failure to compel in any way
any former or acting Trustee to redress any breach of trust) except for his own
bad faith, willful misfeasance, gross negligence or reckless disregard of his
duties.

Section 5.3. Mandatory Indemnification. (a) Subject to the exceptions and
limitations contained in paragraph (b) below:

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(i) Every person who is, or has been a Trustee or officer of the Trust
shall be indemnified by the Trust against all liability and against all expenses
reasonably incurred or paid by him in connection with any claim, action, suit or
proceeding in which he becomes involved as a party or otherwise by virtue of his
being or having been a Trustee or officer and against amounts paid or incurred
by him in the settlement thereof.

(ii) The words "claim," "action," "suit," or "proceeding" shall apply to
all claims, actions, suits or proceedings (civil, criminal, or other, including
appeals), actual or threatened; and the words "liability" and "expenses" shall
include, without limitation, attorneys' fees, costs, judgments, amounts paid in
settlement, fines, penalties and other liabilities.

(b) No indemnification shall be provided hereunder to a trustee or officer;

(i) against any liability to the Trust or the Shareholders by reason of a
final adjudication by the court or other body before which the proceeding was
brought that he engaged in willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office;

(ii)..with respect to any matter as to which he shall have been finally
adjudicated not to have acted in good faith in the reasonable belief that his
action was in the best interest of the Trust;

(iii) in the event of a settlement or other disposition not involving a
final adjudication as provided in paragraphs (b)(i) or (b)(ii) resulting in a
payment by a Trustee or officer, unless there has been either a determination
that such Trustee or officer did not engage in willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office by the court or other body approving the settlement or other
disposition or a reasonable determination, based upon a review of readily
available facts (as opposed to a full trial-type inquiry) that he did not engage
in such conduct:

(A) by vote of a majority of the Disinterested Trustees acting on the
matter (provided that a majority of the Disinterested Trustees then in office
act on the matter) or

(B) by written opinion of independent legal counsel.

(c) The rights of indemnification herein provided may be insured against by
policies maintained by the Trust, shall be severable, shall not affect any other
rights to which any Trustee or officer may now or hereafter be entitled, shall
continue as to a Person who has ceased to be such Trustee or officer and shall
inure to the benefit of the heirs, executors and administrators of such Person.
Nothing contained herein shall affect any rights to indemnification to which
personnel other than Trustees and officers may be entitled by contract or
otherwise under law.

(d) Expenses of preparation and presentation of a defense to any claim, action,
suit or proceeding of the character described in paragraph (a) of this Section
5.3 shall be advanced by the Trust prior to final disposition thereof upon
receipt of an undertaking by or on behalf of the recipient to repay such amount
if it is ultimately determined that he is not entitled to indemnification under
this Section 5.3, provided that either:

(i) such undertaking is secured by a surety bond or some other appropriate
security or the Trust shall be insured against losses arising out of any such
advances; or

(ii) a majority of the Disinterested Trustees acting on the matter
(provided that a majority of the Disinterested Trustees then in office act on
the matter) or an independent legal counsel in a written opinion, shall
determine, based upon a review of readily available facts (as opposed to a full
trial-type inquiry), that there is reason to believe that the recipient
ultimately will be found entitled to indemnification.

As used in this Section 5.3, a "Disinterested Trustee" is one (i) who is
not an "Interested Person" of the Trust (including anyone who has been exempted
from being an "Interested Person"

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by any rule, regulation or order of the Commission), and (ii) against whom none
of such actions, suits or other proceedings or another action, suit or other
proceeding on the same or similar grounds is then or had been pending.

Section 5.4. No Bond Required of Trustees. No Trustee shall be obligated
to give any bond or other security for the performance of any of his duties
hereunder.

Section 5.5. No Duty of Investigation; Notice in Trust Instruments, etc.
No purchaser, lender, Transfer Agent or other Person dealing with the Trustees
or any officer, employee or agent of the Trust shall be bound to make any
inquiry concerning the validity of any transaction purporting to be made by the
Trustees or by said officer, employee or agent or be liable for the application
of money or property paid, loaned, or delivered to or on the order of the
Trustees or of said officer, employee or agent. Every obligation, contract,
instrument, certificate, Share, other security of the Trust or undertaking, and
every other act or thing whatsoever executed in connection with the Trust shall
be conclusively presumed to have been executed or done by the executors thereof
only in their capacity as Trustees under the Declaration or in their capacity as
officers, employees or agents of the Trust. Every written obligation, contract,
instrument, certificate, Share, other security of the Trust or undertaking made
or issued by the Trustees shall recite that the same is executed or made by them
not individually, but as Trustees under the Declaration, and that the
obligations of any such instrument are not binding upon any of the Trustees or
Shareholders, individually, but bind only the trust estate, and may contain any
further recital which they or he may deem appropriate, but the omission of such
recital shall not operate to bind the Trustees individually. The Trustees shall
at all times maintain insurance for the protection of the Trust Property, its
Shareholders, Trustees, officers, employees and agents in such amount as the
Trustees shall deem adequate to cover possible tort liability, and such other
insurance as the Trustees in their sole judgment shall deem advisable.

Section 5.6. Reliance on Experts, etc. Each Trustee and officer or
employee of the Trust shall, in the performance of his duties, be fully and
completely justified and protected with regard to any act or any failure to act
resulting from reliance in good faith upon the books of account or other records
of the Trust, upon an opinion of counsel, or upon reports made to the Trust by
any of its officers or employees or by the Investment Adviser, the Distributor,
Transfer Agent, selected dealers, accountants, appraisers or other experts or
consultants selected with reasonable care by the Trustees, officers or employees
of the Trust, regardless of whether such counsel or expert may also be a
Trustee.

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ARTICLE VI
SHARES OF BENEFICIAL INTEREST

Section 6.1. Beneficial Interest. The interest of the beneficiaries
hereunder shall be divided into transferable shares of beneficial interest,
without par value, of the following classes or series, or such others as may be
authorized by the Trustees pursuant to Section 6.9:

Nationwide Separate Account Trust
- Money Market Fund
- Government Bond Fund
- Capital Appreciation Fund
- Total Return Fund
- Nationwide Small Company Fund
- Nationwide Income Fund
- Nationwide Strategic Growth Fund
- Nationwide Strategic Value Fund
- Nationwide Equity Income Fund
- Nationwide High Income Bond Fund
- Nationwide Balanced Fund
- Nationwide Multi Sector Bond Fund
- Nationwide Small Cap Value Fund
- Nationwide Global Equity Fund
- Nationwide Select Advisers Mid Cap Fund
- Nationwide Select Advisers Small Cap Growth Fund

The number of shares of beneficial interest authorized hereunder is unlimited.
All Shares issued hereunder including, without limitation, Shares issued in
connection with a dividend in Shares or a split of Shares, shall be fully paid
and non-assessable.

Section 6.2. Rights of Shareholders. The ownership of the Trust Property
of every description and the right to conduct any business hereinbefore
described are vested exclusively in the Trustees, and the Shareholders shall
have no interest therein other than the beneficial interest conferred by their
Shares, and they shall have no right to call for any partition or division of
any property, profits, rights or interests of the Trust nor can they be called
upon to assume any losses of the Trust or suffer an assessment of any kind by
virtue of their ownership of Shares. The Shares shall be personal property
giving only the rights in the Amended Declaration specifically set forth. The
Shares shall not entitle the holder to preference, preemptive, appraisal,
conversion or exchange rights, except as the Trustees may determine with respect
to any series of Shares.

Section 6.3. Trust Only. It is the intention of the Trustees to create
only the relationship of Trustee and beneficiary between the Trustees and each
Shareholder from time to time. It is not the intention of the Trustees to create
a general partnership, limited partnership, joint stock association,
corporation, bailment or any form of legal relationship other than a Trust.
Nothing in the Declaration shall be construed to make the Shareholders, either
by themselves or with the Trustees, partners or members of a joint stock
association.

Section 6.4. Issuance of Shares. The Trustees, in their discretion, may
from time to time without vote of the shareholders, issue Shares, in addition to
the then issued and outstanding Shares and Shares held in the treasury, to such
party or parties and for such amount and type of consideration, including cash
or property, at such time or times (including, without limitation, each

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business day in accordance with the determination of net asset value per Share
as set forth in Section 8.3 hereof), and on such terms as the Trustees may deem
best, and may in such manner acquire other assets (including the acquisition of
assets subject to, and in connection with the assumption of liabilities) and
businesses. In connection with any issuance of Shares, the Trustees may issue
fractional Shares. The Trustees may from time to time divide or combine the
Shares into a greater or lesser number without thereby changing the
proportionate beneficial interests in the Trust. Reductions in the number of
outstanding Money Market Fund Shares may be made if necessary to maintain the
constant net asset value per Share of the Money Market Fund. Contributions to
the Trust may be accepted for, and Shares shall be redeemed as, whole Shares
and/or 1/1,000ths of a Share or integral multiples thereof.

Section 6.5. Register of Shares. A register shall be kept at the principal
office of the Trust or at an office of the Transfer Agent which shall contain
the names and addresses of the Shareholders and the number of Shares held by
them respectively and a record of all transfers thereof. Such register shall be
conclusive as to who are the holders of the Shares and who shall be entitled to
receive dividends or distributions or otherwise to exercise or enjoy the rights
of Shareholders. No Shareholder shall be entitled to receive payment of any
dividend or distribution, nor to have notice given to him as herein or in the
Bylaws provided, until he has given his address to the Transfer Agent or such
other officer or agent of the Trustees as shall keep the said register for entry
thereon. It is not contemplated that certificates will be issued for the Shares;
however, the Trustees, in their discretion, may authorize the issuance of Share
certificates and promulgate appropriate rules and regulations as to their use.

Section 6.6. Transfer of Shares. Shares shall be transferable on the
records of the Trust only by the record holder thereof or by his agent thereunto
duly authorized in writing, upon delivery to the Trustees or the Transfer Agent
of a duly executed instrument of transfer, together with such evidence of the
genuineness of each such execution and authorization and of other matters as may
reasonably be required. Upon such delivery, the transfer shall be recorded on
the register of the Trust. Until such record is made, the Shareholder of record
shall be deemed to be the holder of such Shares for all purposes hereunder and
neither the Trustees nor any Transfer Agent or registrar nor any officer,
employee or agent of the Trust shall be affected by any notice of the proposed
transfer.

Any person becoming entitled to any Shares in consequence of the death,
bankruptcy, or incompetence of any Shareholder, or otherwise by operation of
law, shall be recorded on the register of Shares as the holder of such Shares
upon production of the proper evidence thereof to the Trustees or the Transfer
Agent, but until such record is made, the Shareholder of record shall be deemed
to be the holder of such Shares for all purposes hereunder and neither the
Trustees nor any Transfer Agent or registrar nor any officer or agent of the
Trust shall be affected by any notice of such death, bankruptcy or incompetence,
or other operation of law.

Section 6.7. Notices. Any and all notices to which any Shareholder may be
entitled and any and all communications shall be deemed duly served or given if
mailed, postage prepaid, addressed to any Shareholder of record at his last
known address as recorded on the register of the Trust.

Section 6.8. Voting Powers. The Shareholders shall have power to vote only
(i) for the election of Trustees as provided in Section 2.2 hereof or as
required by Section 16(a) of the 1940 Act; (ii) with respect to any investment
advisory or management contract as provided in Section 4.1; (iii) with respect
to termination of the Trust as provided in Section 9.2; (iv) with respect to any
amendment of the Declaration to the extent and as provided in Section 9.3; (v)
with respect to any merger, consolidation or sale of assets as provided in
Section 9.4; (vi) with respect to incorporation of the Trust to the extent and
as provided in Section 9.5.; (vii) to the same extent as the stockholders

11
<PAGE> 16

of a Massachusetts business corporation as to whether or not a court action,
proceeding or claim should not be brought or maintained derivatively or as a
class action on behalf of the Trust or the Shareholders; and (viii) with respect
to such additional matters relating to the Trust as may be required by the
Amended Declaration, the Bylaws, the 1940 Act or any registration of the Trust
with the Commission (or any successor agency) or any state, or as the Trustees
may consider necessary or desirable. Each whole Share shall be entitled to one
vote as to any matter on which it is entitled to vote and each fractional Share
shall be entitled to a proportionate fractional vote, except that Shares held in
the treasury of the Trust shall not be voted and that the Trustees may, in
conjunction with the establishment of any series of Shares, establish conditions
under which the several series shall have separate voting rights or no voting
rights. There shall be no cumulative voting in the election of Trustees. Until
Shares are issued, the Trustees may exercise all rights of Shareholders and may
take any action required by law, the Declaration or the Bylaws to be taken by
Shareholders. The Bylaws may include further provisions for Shareholders' votes
and meetings and related matters.

Section 6.9. Series Designation. The Trustees, in their discretion, may
authorize the division of Shares into additional series, and the different
series shall be established and designated, and the variations in the relative
rights and preferences as between the different series shall be fixed and
determined by the Trustees, provided, that all Shares shall be identical except
that there may be variations so fixed and determined between different series as
to investment objective, purchase price, right of redemption and the price,
terms and manner of redemption, special and relative rights as to dividends and
on liquidation, conversion rights, and conditions under which the several series
shall have separate voting rights. All references to Shares in this Amended
Declaration shall be deemed to be shares of any or all series as the context may
require.

If the Trustees shall divide the shares of the Trust into two or more
series, the following provisions shall be applicable;

(a) The number of authorized shares and the number of shares of each
series that may be issued shall be unlimited. The Trustees may classify or
reclassify any unissued shares or any shares previously issued and reacquired of
any series into one or more series that may be established and designated from
time to time. The Trustees may hold as treasury shares (of the same or some
other series), reissue for such consideration and on such terms as they may
determine, or cancel any shares of any series reacquired by the Trust at their
discretion from time to time.

(b) The power of the Trustees to invest and reinvest the Trust Property
shall be governed by Section 3.2 of this Amended Declaration with respect to the
five existing series which represents the interests in the assets of the Trust
immediately prior to the establishment of any additional series and the power of
the Trustees to invest and reinvest assets applicable to any such additional
series shall be as set forth in the instrument of the Trustees establishing such
series which is hereinafter described.

(c) All consideration received by the Trust for the issue or sale of
shares of a particular series, together with all assets in which such
consideration is invested or reinvested, all income, earnings, profits and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong to that series for all purposes, subject only to the rights
of creditors, and shall be so recorded upon the books of account of the Trust.
In the event that there are any assets, income, earnings, profits, and proceeds
thereof, funds, or payments which are not readily identifiable as belonging to
any particular series, the Trustees shall allocate them among any one or more of
the series established and designated from time to time

12
<PAGE> 17

in such manner and on such basis as they, in their sole discretion, deem fair
and equitable. Each such allocation by the Trustees shall be conclusive and
binding upon the shareholders of all series for all purposes.

(d) The assets belonging to each particular series shall be charged with
the liabilities of the Trust in respect of that series and all expenses, costs,
charges and reserves attributable to that series, and any general liabilities,
expenses, costs, charges or reserves of the Trust which are not readily
identifiable as belonging to any particular series shall be allocated and
charged by the Trustees to and among any one or more of the series established
and designated from time to time in such manner and on such basis as the
Trustees, in their sole discretion, deem fair and equitable. Each allocation of
liabilities, expenses, costs, charges and reserves by the Trustees shall be
conclusive and binding upon the holders of all series for all purposes. The
Trustees shall have full discretion, to the extent not inconsistent with the
1940 Act, to determine which items shall be treated as income and which items as
capital; and each such determination and allocation shall be conclusive and
binding upon the shareholders.

(e) The power of the Trustees to pay dividends and make distributions
shall be governed by Section 8.2 of this Trust with respect to the fifteen
existing series which represents the interests in the assets of the Trust
immediately prior to the establishment of any additional series. With respect to
any other series, dividends and distributions on shares of a particular series
may be paid with such frequency as the Trustees may determine, which may be
daily or otherwise, pursuant to a standing resolution or resolutions adopted
only once or with such frequency as the Trustees may determine, to the holders
of shares of that series, from such of the income and capital gains, accrued or
realized, from the assets belonging to that series, as the Trustees may
determine, after providing for actual and accrued liabilities belonging to that
series. All dividends and distributions on shares of a particular series shall
be distributed pro rata to the holders of that series in proportion to the
number of shares of that series held by such holders at the date and time of
record established for the payment of such dividends or distributions.

The establishment and designation of any series of shares shall be
effective upon the execution by a majority of the then Trustees of an instrument
setting forth such establishment and designation and the relative rights and
preferences of such series, or as otherwise provided in such instrument. At any
time that there are no shares outstanding of any particular series previously
established and designated, the Trustees may, by an instrument executed by a
majority of their number, abolish that series and the establishment and
designation thereof. Each instrument referred to in this paragraph shall have
the status of an amendment to this Declaration.

ARTICLE VII
REDEMPTIONS

Section 7.1. Redemptions. In case any Shareholder at any time desires to
dispose of his Shares, he may deposit his certificate or certificates therefor,
duly endorsed in blank or accompanied by an instrument of transfer executed in
blank, or if the Shareholder has no certificates, a written request or other
such form of request as the Trustees may from time to time authorize, at the
office of the Transfer Agent or at the office of any bank or trust company,
either in or outside of Massachusetts, which is a member of the Federal Reserve
System and which the said Transfer Agent has designated in writing for that
purpose, together with an irrevocable offer in writing in a form acceptable to
the Trustees to sell the Shares represented thereby to the Trust at the net
asset value thereof per Share, determined as provided in Section 8.1 hereof,
next after such deposit. Payment for said Shares shall be made to the
Shareholder within seven (7) days after the date on which the

13
<PAGE> 18

deposit is made, unless (i) the date of payment is postponed pursuant to Section
7.2 hereof, or (ii) the receipt, or verification of receipt, of the purchase
price for the Shares to be redeemed is delayed, in either of which event payment
may be delayed beyond seven (7) days.

Section 7.2. Suspension of Right of Redemption. The Trust may declare a
suspension of the right of redemption or postpone the date of payment or
redemption for the whole or any part of any period (i) during which the New York
Stock Exchange is closed other than customary weekend and holiday closings; (ii)
during which trading on the New York Stock Exchange is restricted; (iii) during
which an emergency exists as a result of which disposal by the Trust of
securities owned by it is not reasonably practicable or it is not reasonably
practicable for the Trust fairly to determine the value of its net assets; or
(iv) during any other period when the Commission may for the protection of
security holders of the Trust by order permit suspension of the right of
redemption or postponement of the date of payment or redemption; provided that
applicable rules and regulations of the Commission shall govern as to whether
the conditions prescribed in (ii), (iii) or (iv) exist. Such suspension shall
take effect at such time as the Trust shall specify but not later than the close
of business on the business day next following the declaration of suspension,
and thereafter there shall be no right of redemption or payment on redemption
until the Trust shall declare the suspension at an end, except that the
suspension shall terminate in any event on the first day on which said stock
exchange shall have reopened or the period specified in (ii) or (iii) shall have
expired (as to which, in the absence of an official ruling by the Commission,
the determination of the Trust shall be conclusive). In the case of a suspension
of the right of redemption, a Shareholder may either withdraw his request for
redemption or receive payment based on the net asset value existing after the
termination of the suspension.

Section 7.3. Redemption of Shares; Disclosure of Holding. If the Trustees
shall, at any time and in good faith, be of the opinion that direct or indirect
ownership of Shares or other securities of the Trust has or may become
concentrated in any Person to an extent which would disqualify the Trust as a
regulated investment company under the Internal Revenue Code, then the Trustees
shall have the power by lot or other means deemed equitable by them (i) to call
for redemption by any such Person of a number, or principal amount, of Shares or
other securities of the Trust sufficient to maintain or bring the direct or
indirect ownership of Shares or other securities of the Trust into conformity
with the requirements for such qualification; and (ii) to refuse to transfer or
issue Shares or other securities of the Trust to any Person whose acquisition of
the Shares or other securities of the Trust in question would result in such
disqualification. The redemption shall be effected at the redemption price and
in the manner provided in Section 7.1.

The holders of Shares or other securities of the Trust shall upon demand
disclose to the Trustees in writing such information with respect to direct and
indirect ownership of Shares or other securities of the Trust as the Trustees
deem necessary to comply with the provisions of the Internal Revenue Code, or to
comply with the requirements of any other authority.

Section 7.4. Redemptions of Accounts of Less than $500. The Trustees shall
have the power at any time to redeem Shares of any Shareholder at a redemption
price determined in accordance with Section 7.1 if at such time the aggregate
net asset value of the Shares in such Shareholder's account is less than $500. A
Shareholder will be notified that the value of his account is less than $500 and
allowed thirty (30) days to make an additional investment before redemption is
processed.

Section 7.5. Redemptions Pursuant to Constant Net Asset Value Formula. The
Trust may also reduce the number of outstanding Shares of the Money Market Fund
if necessary to maintain its constant net asset value per share.

14
<PAGE> 19

ARTICLE VIII
DETERMINATION OF NET ASSET VALUE,
NET INCOME AND DISTRIBUTIONS

Section 8.1. Net Asset Value. For all purposes under this Declaration of
Trust, the net asset value shall be determined by the Trustees as soon as
possible after the close of the New York Stock Exchange on each business day
upon which such Exchange is open, with the exception of the day after
Thanksgiving and either the day before or the day after December 25, whichever
business day, if any, the Trust declares as a business holiday, such net asset
value to remain in effect until the next determination of such net asset value
becomes effective; provided, however, that the Trustees may, in their
discretion, make a more frequent determination of the net asset value.

Such net asset value shall be determined in the following manner:

(a) All Securities listed on any recognized Exchange shall be appraised at
the quoted closing sale prices and in the event that there was no sale of any
particular security on such day the quoted closing bid price thereof shall be
used, or if any such security was not quoted on such day or if the determination
of the net asset value is being made as of a time other than the close of the
New York Stock Exchange, then the same shall be appraised in such manner as
shall be deemed by the Trustees to reflect its fair value.

All other securities and assets of the Trust, including cash, prepaid and
accrued items, and dividends receivable, shall be appraised in such manner as
shall be deemed by the Trustees to reflect their fair value.

(b) From the total value of the Trust Property as so determined shall be
deducted the liabilities of the Trust, including reserves for taxes, and such
expenses and liabilities of the Trust as may be determined by the Trustees to be
accrued liabilities.

(c) The resulting amount shall represent the net asset value of the Trust
Property. The net asset value of a share of any class shall be the result of the
division of the net asset value of the underlying assets of that class by the
number of shares of that class outstanding. The net asset value of the Trust
Property and shares as so determined shall be final and conclusive.

Section 8.2. Distributions to Shareholders. The Trustees shall from time
to time distribute ratably among the Shareholders such proportion of the net
profits, surplus (including paid-in surplus), capital, or assets held by the
Trustees as they may deem proper. Such distribution may be made in cash or
property (including without limitation any type of obligations of the Trust or
any assets thereof), and the Trustees may distribute ratably among the
Shareholders additional Shares issuable hereunder in such manner, at such times,
and on such terms as the Trustees may deem proper. Such distributions may be
among the Shareholders of record at the time of declaring a distribution or
among the Shareholders of record at such later date as the Trustees shall
determine. The Trustees may always retain from the net profits such amount as
they may deem necessary to pay the debts or expenses of the Trust or to meet the
obligations of the Trust, or as they may deem desirable to use in the conduct of
its affairs or to retain for future requirements or extensions of the business.
The Trustees may adopt and offer to Shareholders such dividend reinvestment
plans, cash dividend payout plans or related plans as the Trustees shall deem
appropriate.

Inasmuch as the computation of net income and gains for Federal income tax
purposes may vary from the computation thereof on the books, the above
provisions shall be interpreted to give the Trustees the power in their
discretion to distribute for any fiscal year as ordinary dividends and as
capital gains distributions, respectively, additional amounts sufficient to
enable the Trust to avoid or reduce liability for taxes.

15
<PAGE> 20

Section 8.3. Determination of Net Income. The term "net income" with
respect to a class of shares is hereby defined as the gross earnings of the
class, excluding gains on sales of securities and stock dividends received, less
the expenses of the Trust allocated to the class by the Trustees in such manner
as they determine to be fair and equitable or otherwise chargeable to the class.
The expenses shall include (1) taxes attributable to the income of the Trust
exclusive of gains on sales, and (2) other charges properly deductible for the
maintenance and administration of the Trust; but there shall not be deducted
from gross or net income any losses on securities, realized or unrealized. The
Trustees shall otherwise have full discretion to determine which items shall be
treated as income and which items as capital and their determination shall be
binding upon the Beneficiaries.

Section 8.4. Power to Modify Foregoing Procedures. Notwithstanding any of
the foregoing provisions of this Article VIII, the Trustees may prescribe, in
their absolute discretion, such other bases and times for determining the per
Share net asset value of the Shares or net income, or the declaration and
payment of dividends and distributions as they may deem necessary or desirable.
Without limiting the generality of the foregoing, the Trustees may establish
additional series of Shares in accordance with Section 6.9.

ARTICLE IX
DURATION; TERMINATION OF TRUST;
AMENDMENT; MERGERS; ETC.

Section 9.1. Duration. The Trust shall continue without limitation of time
but subject to the provisions of this Article IX.

Section 9.2. Termination of Trust. (a) The Trust must be terminated (i) by
the affirmative vote of the holders of not less than two-thirds of the Shares
outstanding and entitled to vote at any meeting of Shareholders, or (ii) by an
instrument in writing, without a meeting, signed by a majority of the Trustees
and consented to by the holders of not less than two-thirds of such Shares, or
by such other vote as may be established by the Trustees with respect to any
series of Shares, or (iii) by the Trustees by written notice to the
Shareholders. Upon the termination of the Trust,

(i) The Trust shall carry on no business except for the purpose of
winding up its affairs.

(ii) The Trustees shall proceed to wind up the affairs of the Trust
and all of the powers of the Trustees under this Amended Declaration shall
continue until the affairs of the Trust shall have been wound up,
including the power to fulfill or discharge the contracts of the Trust,
collect its assets, sell, convey, assign, exchange, transfer or otherwise
dispose of all or any part of the remaining Trust Property to one or more
persons at public or private sale for consideration which may consist in
whole or in part of cash, securities or other property of any kind,
discharge or pay its liabilities, and to do all other acts appropriate to
liquidate its business; provided that any sale, conveyance, assignment,
exchange, transfer or other disposition of all or substantially all the
Trust Property shall require Shareholder approval in accordance with
Section 9.4 hereof.

(iii) After paying or adequately providing for the payment of all
liabilities, and upon receipt of such releases, indemnities and refunding
agreements, as they deem necessary for their protection, the Trustees may
distribute the remaining Trust Property, in cash or in kind or partly
each, among the Shareholders according to their respective rights.

(b) After termination of the Trust and distribution to the Shareholders as
herein provided, a majority of the Trustees shall execute and lodge among the
records of the Trust an instrument in writing setting forth the fact of such
termination, and the Trustees shall thereupon be discharged

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<PAGE> 21

from all further liabilities and duties hereunder, and the rights and interests
of all Shareholders shall thereupon cease.

Section 9.3. Amendment Procedure. (a) This Amended Declaration may be
amended by a Majority Shareholder Vote or by any instrument in writing, without
a meeting, signed by a majority of the Trustees and consented to by the holders
of not less than a majority of the Shares outstanding and entitled to vote. The
Trustees may also amend this Amended Declaration without the vote or consent of
Shareholders to designate series in accordance with Section 6.9 hereof, to
change the name of the Trust, to supply any omission, to cure, correct or
supplement any ambiguous, defective or inconsistent provision hereof, or if they
deem it necessary to conform this Amended Declaration to the requirements of
applicable federal laws or regulations or the requirements of the regulated
investment company provisions of the Internal Revenue Code, but the Trustees
shall not be liable for failing so to do.

(b) No amendment may be made under this Section 9.3 which would change any
rights with respect to any Shares of the Trust by reducing the amount payable
thereon upon liquidation of the Trust or by diminishing or eliminating any
voting rights pertaining thereto, except with the vote or consent of the holders
of two-thirds of the Shares outstanding and entitled to vote, or by such other
votes as may be established by the Trustees with respect to any series of
Shares. Nothing contained in this Amended Declaration shall permit the amendment
of this Amended Declaration to impair the exemption from personal liability of
the Shareholders, Trustees, officers, employees and agents of the Trust or to
permit assessments upon Shareholders.

(c) A certificate signed by a majority of the Trustees setting forth an
amendment and reciting that it was duly adopted by the Shareholders or by the
Trustees as aforesaid or a copy of the Amended Declaration, as amended, and
executed by a majority of the Trustees, shall be conclusive evidence of such
amendment when lodged among the records of the Trust.

Section 9.4. Merger, Consolidation and Sale of Assets. The Trust may merge
or consolidate with any other corporation, association, trust or other
organization or may sell, lease or exchange all or substantially all of the
Trust Property, including its goodwill, upon such terms and conditions and for
such consideration when and as authorized at any meeting of Shareholders called
for the purpose by the affirmative vote of the holders of not less than
two-thirds of the Shares outstanding and entitled to vote, or by an instrument
or instruments in writing without a meeting, consented to by the holders of not
less than two-thirds of such Shares, or by such other vote as may be established
by the Trustees with respect to any series of Shares; provided, however, that,
if such merger, consolidation, sale, lease or exchange is recommended by the
Trustees, the vote or written consent of the holders of a majority of Shares
outstanding and entitled to vote, or by such other vote as may be established by
the Trustees with respect to any series of Shares, shall be sufficient
authorization; and any such merger, consolidation, sale, lease or exchange shall
be deemed for all purposes to have been accomplished under and pursuant to the
statutes of the Commonwealth of Massachusetts.

Section 9.5. Incorporation. With the approval of the holders of a majority
of the Shares outstanding and entitled to vote, or by such other vote as may be
established by the Trustees with respect to any series of Shares, the Trustees
may cause to be organized or assist in organizing a corporation or corporations
under the laws of any jurisdiction or any other trust, partnership, association
or other organization to take over all of the Trust Property or to carry on any
business in which the Trust shall directly or indirectly have any interest, and
to sell, convey and transfer the Trust Property to any such corporation, trust,
association or organization in exchange for the shares or securities thereof or
otherwise, and to lend money to, subscribe for the shares or securities of, and
enter into any contracts with any such corporation, trust, partnership,
association or organization in

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<PAGE> 22

which the Trust holds or is about to acquire shares or any other interest. The
Trustees may also cause a merger or consolidation between the Trust or any
successor thereto and any such corporation, trust, partnership, association or
other organization if and to the extent permitted by law, as provided under the
law then in effect. Nothing contained herein shall be construed as requiring
approval of Shareholders for the Trustees to organize or assist in organizing
one or more corporations, trusts, partnerships, associations or other
organizations and selling, conveying or transferring a portion of the Trust
Property to such organization or entities.

ARTICLE X
REPORTS TO SHAREHOLDERS

The Trustees shall at least semi-annually submit to the Shareholders a
written financial report of the transactions of the Trust, including financial
statements which shall at least annually be certified by independent public
accountants.

ARTICLE XI
MISCELLANEOUS

Section 11.1. Filing. This Amended Declaration and any amendment hereto
shall be filed in the office of the Secretary of the Commonwealth of
Massachusetts and in such other places as may be required under the laws of
Massachusetts and may also be filed or recorded in such other places as the
Trustees deem appropriate. Each amendment so filed shall be accompanied by a
certificate signed and acknowledged by a Trustee stating that such action was
duly taken in a manner provided herein, and unless such amendment or such
certificate sets forth some later time for the effectiveness of such amendment,
such amendment shall be effective upon its filing. A restated Declaration,
integrating into a single instrument all of the provisions of the Declaration
which are then in effect and operative, may be executed from time to time by a
majority of the Trustees and shall, upon filing with the Secretary of the
Commonwealth of Massachusetts, be conclusive evidence of all amendments
contained herein and may thereafter be referred to in lieu of the original
Declaration and the various amendments thereto.

Section 11.2. Governing Law. This Amended Declaration is executed by the
Trustees and delivered with reference to the laws of the Commonwealth of
Massachusetts, and the rights of all parties and the validity and construction
of every provision hereof shall be subject to and construed according to the
laws of said State.

Section 11.3. Counterparts. This Amended Declaration may be simultaneously
executed in several counterparts, each of which shall be deemed to be an
original, and such counterparts, together, shall constitute one and the same
instrument, which shall be sufficiently evidenced by any such original
counterpart.

Section 11.4. Reliance by Third Parties. Any certificate executed by an
individual who, according to the records of the Trust appears to be a Trustee
hereunder, certifying to: (a) the number or identity of Trustees or
Shareholders, (b) the due authorization of the execution of any instrument or
writing, (c) the form of any vote passed at a meeting of Trustees or
Shareholders, (d) the fact that the number of Trustees or Shareholders present
at any meeting or executing any written instrument satisfies the requirements of
this Amended Declaration, (e) the form of any Bylaws adopted by or the identity
of any officers elected by the Trustees, or (f) the existence of any fact or
facts which in any manner relate to the affairs of the Trust, shall be
conclusive evidence as to the matters so certified in favor of any Person
dealing with the Trustees and their successors.

Section 11.5. Provisions in Conflict with Law or Regulations.

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<PAGE> 23

(a) The provisions of the Amended Declaration are severable, and if the
Trustees shall determine, with the advice of counsel, that any of such
provisions is in conflict with the 1940 Act, the regulated investment company
provisions of the Internal Revenue Code or with other applicable laws and
regulations, the conflicting provisions shall be deemed never to have
constituted a part of the Amended Declaration; provided, however, that such
determination shall not affect any of the remaining provisions of the Amended
Declaration or render invalid or improper any action taken or omitted prior to
such determination.

(b) If any provision of the Amended Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction and shall not in any manner
affect such provision in any other jurisdiction or any other provision of the
Amended Declaration in any jurisdiction.

19
<PAGE> 24

WE, THE UNDERSIGNED, being all of the Trustees of Nationwide Separate
Account Trust, do hereby adopt the Amended Declaration of Trust dated March 3,
1999 as set forth above.

IN WITNESS WHEREOF, we have hereto set our hands as of the 3rd of March,
1999.

- ------------------------------------
John C. Bryant

- ------------------------------------
C. Brent DeVore

- ------------------------------------
Robert M. Duncan

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

- ------------------------------------
D. Richard McFerson

- ------------------------------------
David C. Wetmore

20
<PAGE> 25

WE, THE UNDERSIGNED, being all of the Trustees of Nationwide Separate
Account Trust, do hereby adopt the Amended Declaration of Trust dated July 19,
1997 as set forth above.

IN WITNESS WHEREOF, we have hereto set our hands as of the 19th of July,
1997.

- ------------------------------------
John C. Bryant

- ------------------------------------
Robert M. Duncan

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

- ------------------------------------
D. Richard McFerson

<PAGE> 1

INVESTMENT ADVISORY AGREEMENT

THIS AGREEMENT is made and entered into on this 1st day of November, 1997
between NATIONWIDE SEPARATE ACCOUNT TRUST (the "Trust"), a Massachusetts
business trust, and NATIONWIDE ADVISORY SERVICES, INC. (the "Adviser"), an Ohio
corporation registered under the Investment Advisers Act of 1940 (the "Advisers
Act").

W I T N E S S E T H :

WHEREAS, the Trust is registered with the Securities and Exchange
Commission (the "SEC") as an open-end management investment company under the
Investment Company Act of 1940 (the "1940 Act");

WHEREAS, the Trust desires to retain the Adviser to furnish certain
investment advisory services, as described herein, with respect to certain of
the series of the Trust, all as now are or may be hereafter listed on Exhibit A
to this Agreement (each, a "Fund"); and

WHEREAS, the Adviser represents that it is willing and possesses legal
authority to render such services subject to the terms and conditions set forth
in this Agreement.

NOW, THEREFORE, the Trust and the Adviser do mutually agree and promise as
follows:

1. Appointment as Adviser. The Trust hereby appoints the Adviser to act as
investment adviser to each Fund subject to the terms and conditions set forth in
this Agreement. The Adviser hereby accepts such appointment and agrees to
furnish the services hereinafter described for the compensation provided for in
this Agreement.

2. Duties of Adviser.

(a) Investment Management Services. (1) Subject to the supervision
of the Trust's Board of Trustees (and except as otherwise permitted under
the terms of any exemptive relief obtained by the Adviser from the
Securities and Exchange Commission, or by rule or regulation), the Adviser
will provide, or arrange for the provision of, a continuous investment
program and overall investment strategies for each Fund, including
investment research and management with respect to all securities and
investments and cash equivalents in each Fund. The Adviser will determine,
or arrange for others to determine, from time to time what securities and
other investments will be purchased, retained or sold by each Fund and
will implement, or arrange for others to implement, such determinations
through the placement, in the name of a Fund, of orders for the execution
of portfolio transactions with or through such brokers or dealers as may
be so selected. The Adviser will provide, or arrange for the provision of,
the services under this Agreement in accordance with the stated investment
policies and restrictions of each Fund as set forth in that Fund's current
prospectus and statement of additional information as currently in effect
and as supplemented or amended

<PAGE> 2

from time to time (collectively referred to hereinafter as the
"Prospectus") and subject to the directions of the Trust's Board of
Trustees.

(2) Subject to the provisions of this Agreement and the 1940 Act and
any exemptions thereto, the Adviser is authorized to appoint one or more
qualified subadvisers (each a "Subadviser") to provide each Fund with
certain services required by this Agreement. Each Subadviser shall have
such investment discretion and shall make all determinations with respect
to the investment of a Fund's assets as shall be assigned to that
Subadviser by the Adviser and the purchase and sale of portfolio
securities with respect to those assets and shall take such steps as may
be necessary to implement its decisions. The Adviser shall not be
responsible or liable for the investment merits of any decision by a
Subadviser to purchase, hold, or sell a security for a Fund.

(3) Subject to the supervision and direction of the Trustees, the
Adviser shall (i) have overall supervisory responsibility for the general
management and investment of a Fund's assets; (ii) determine the
allocation of assets among the Subadvisers, if any; and (iii) have full
investment discretion to make all determinations with respect to the
investment of Fund assets not otherwise assigned to a Subadviser.

(4) The Adviser shall research and evaluate each Subadviser, if any,
including (i) performing initial due diligence on prospective Subadvisers
and monitoring each Subadviser's ongoing performance; (ii) communicating
performance expectations and evaluations to the Subadvisers; and (iii)
recommending to the Trust's Board of Trustees whether a Subadviser's
contract should be renewed, modified or terminated. The Adviser shall also
recommend changes or additions to the Subadvisers and shall compensate the
Subadvisers.

(5) The Adviser shall provide to the Trust's Board of Trustees such
periodic reports concerning a Fund's business and investments as the Board
of Trustees shall reasonably request.

(b) Compliance with Applicable Laws and Governing Documents. In the
performance of its duties and obligations under this Agreement, the
Adviser shall act in conformity with the Trust's Declaration of Trust and
By-Laws and the Prospectus and with the instructions and directions
received from the Trustees of the Trust and will conform to and comply
with the requirements of the 1940 Act, the Internal Revenue Code of 1986,
as amended (the "Code") (including the requirements for qualification as a
regulated investment company) and all other applicable federal and state
laws and regulations.

The Adviser acknowledges and agrees that subject to the supervision
and directions of the Trust's Board of Trustees, it shall be solely
responsible for compliance with all disclosure requirements under all
applicable federal and state laws and regulations relating to the Trust or
a Fund, including, without limitation, the 1940 Act, and the rules and

2
<PAGE> 3

regulations thereunder, except that each Subadviser shall have liability
in connection with information furnished by the Subadviser to a Fund or to
the Adviser.

(c) Consistent Standards. It is recognized that the Adviser will
perform various investment management and administrative services for
entities other than the Trust and the Funds; in connection with providing
such services, the Adviser agrees to exercise the same skill and care in
performing its services under this Agreement as the Adviser exercises in
performing similar services with respect to the other fiduciary accounts
for which the Adviser has investment responsibilities.

(d) Brokerage. The Adviser is authorized, subject to the supervision
of the Trust's Board of Trustees, to establish and maintain accounts on
behalf of each Fund with, and place orders for the purchase and sale of
assets not allocated to a Subadviser, with or through, such persons,
brokers or dealers ("brokers") as Adviser may select and negotiate
commissions to be paid on such transactions. In the selection of such
brokers and the placing of such orders, the Adviser shall seek to obtain
for a Fund the most favorable price and execution available, except to the
extent it may be permitted to pay higher brokerage commissions for
brokerage and research services, as provided below. In using its
reasonable efforts to obtain for a Fund the most favorable price and
execution available, the Adviser, bearing in mind the Fund's best
interests at all times, shall consider all factors it deems relevant,
including price, the size of the transaction, the nature of the market for
the security, the amount of the commission, if any, the timing of the
transaction, market prices and trends, the reputation, experience and
financial stability of the broker involved, and the quality of service
rendered by the broker in other transactions. Subject to such policies as
the Trustees may determine, the Adviser shall not be deemed to have acted
unlawfully or to have breached any duty created by this Agreement or
otherwise solely by reason of its having caused a Fund to pay a broker
that provides brokerage and research services (within the meaning of
Section 28(e) of the Securities Exchange Act of 1934) to the Adviser an
amount of commission for effecting a Fund investment transaction that is
in excess of the amount of commission that another broker would have
charged for effecting that transaction if, but only if, the Adviser
determines in good faith that such commission was reasonable in relation
to the value of the brokerage and research services provided by such
broker or dealer, viewed in terms of either that particular transaction or
the overall responsibilities of the Adviser with respect to the accounts
as to which it exercises investment discretion.

It is recognized that the services provided by such brokers may be
useful to the Adviser in connection with the Adviser's services to other
clients. On occasions when the Adviser deems the purchase or sale of a
security to be in the best interests of a Fund as well as other clients of
the Adviser, the Adviser, to the extent permitted by applicable laws and
regulations, may, but shall be under no obligation to, aggregate the
securities to be sold or purchased in order to obtain the most favorable
price or lower brokerage commissions and efficient execution. In such
event, allocation of securities so sold or purchased, as well as the
expenses incurred in the transaction, will be made by the Adviser in the
manner the

3
<PAGE> 4

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

(e) Securities Transactions. The Adviser will not purchase
securities or other instruments from or sell securities or other
instruments to a Fund; provided, however, the Adviser may purchase
securities or other instruments from or sell securities or other
instruments to a Fund if such transaction is permissible under applicable
laws and regulations, including, without limitation, the 1940 Act and the
Advisers Act and the rules and regulations promulgated thereunder or any
exemption therefrom.

The Adviser agrees to observe and comply with Rule 17j-1 under the
1940 Act and the Trust's Code of Ethics, as the same may be amended from
time to time.

(f) Books and Records. In accordance with the 1940 Act and the rules
and regulations promulgated thereunder, the Adviser shall maintain
separate books and detailed records of all matters pertaining to the Funds
and the Trust (the "Fund's Books and Records"), including, without
limitation, a daily ledger of such assets and liabilities relating thereto
and brokerage and other records of all securities transactions. The
Adviser acknowledges that the Fund's Books and Records are property of the
Trust. In addition, the Fund's Books and Records shall be available to the
Trust at any time upon request and shall be available for telecopying
without delay to the Trust during any day that the Funds are open for
business.

3. Expenses. During the term of this Agreement, the Adviser will pay all
expenses incurred by it in connection with its activities under this Agreement
other than the cost of securities, commodities and other investments (including
brokerage commissions and other transaction charges, if any) purchased for a
Fund. The Adviser shall, at its sole expense, employ or associate itself with
such persons as it believes to be particularly fitted to assist it in the
execution of its duties under this Agreement. The Adviser shall be responsible
for the expenses and costs for the officers of the Trust and the Trustees of
Trust who are "interested persons" (as defined in the 1940 Act) of the Adviser.

It is understood that the Trust will pay all of its own expenses
including, without limitation, (1) all charges and expenses of any custodian or
depository appointed by the Trust for the safekeeping of its cash, securities
and other assets, (2) all charges and expenses paid to an administrator
appointed by the Trust to provide administrative or compliance services, (3) the
charges and expenses of any transfer agents and registrars appointed by the
Trust, (4) the charges and expenses of independent certified public accountants
and of general ledger accounting and internal reporting services for the Trust,
(5) the charges and expenses of dividend and capital gain distributions, (6) the
compensation and expenses of Trustees of the Trust who are not "interested
persons" of the Adviser, (7) brokerage commissions and issue and transfer taxes
chargeable to the Trust in connection with securities transactions to which the
Trust is a party, (8) all taxes and fees payable by the Trust to Federal, State
or other governmental agencies, (9) the cost of stock certificates representing
shares of the Trust, (10) all expenses of shareholders' and Trustees' meetings

4
<PAGE> 5

and of preparing, printing and distributing prospectuses and reports to
shareholders, (11) charges and expenses of legal counsel for the Trust in
connection with legal matters relating to the Trust, including without
limitation, legal services rendered in connection with the Trust's existence,
financial structure and relations with its shareholders, (12) insurance and
bonding premiums, (13) association membership dues, (14) bookkeeping and the
costs of calculating the net asset value of shares of the Trust's Funds, and
(15) expenses relating to the issuance, registration and qualification of the
Trust's shares.

4. Compensation. For the services provided and the expenses assumed with
respect to a Fund pursuant to this Agreement, the Adviser will be entitled to
the fee listed for each Fund on Exhibit A. Such fees will be computed daily and
payable monthly at an annual rate based on a Fund's average daily net assets.

The method of determining net assets of a Fund for purposes hereof shall
be the same as the method of determining net assets for purposes of establishing
the offering and redemption price of the Shares as described in each Fund's
Prospectus. If this Agreement shall be effective for only a portion of a month,
the aforesaid fee shall be prorated for the portion of such month during which
this Agreement is in effect.

Notwithstanding any other provision of this Agreement, the Adviser may
from time to time agree not to impose all or a portion of its fee otherwise
payable hereunder (in advance of the time such fee or portion thereof would
otherwise accrue). Any such fee reduction may be discontinued or modified by the
Adviser at any time.

5. Representations and Warranties of Adviser. The Adviser represents and
warrants to the Trust as follows:

(a) The Adviser is registered as an investment adviser under the
Advisers Act;

(b) The Adviser is a corporation duly organized, validly existing
and in good standing under the laws of the State of Ohio with the power to
own and possess its assets and carry on its business as it is now being
conducted;

(c) The execution, delivery and performance by the Adviser of this
Agreement are within the Adviser's powers and have been duly authorized by
all necessary action on the part of its shareholders and/or directors, and
no action by or in respect of, or filing with, any governmental body,
agency or official is required on the part of the Adviser for the
execution, delivery and performance by the Adviser of this Agreement, and
the execution, delivery and performance by the Adviser of this Agreement
do not contravene or constitute a default under (i) any provision of
applicable law, rule or regulation, (ii) the Adviser's governing
instruments, or (iii) any agreement, judgment, injunction, order, decree
or other instrument binding upon the Adviser;

5
<PAGE> 6

(d) The Form ADV of the Adviser previously provided to the Trust is
a true and complete copy of the form filed with the SEC and the
information contained therein is accurate and complete in all material
respects and does not omit to state any material fact necessary in order
to make the statements made, in light of the circumstances under which
they were made, not misleading.

6. Survival of Representations and Warranties; Duty to Update Information.
All representations and warranties made by the Adviser pursuant to Section 5
shall survive for the duration of this Agreement and the parties hereto shall
promptly notify each other in writing upon becoming aware that any of the
foregoing representations and warranties are no longer true.

7. Liability and Indemnification.

(a) Liability. In the absence of willful misfeasance, bad faith or
gross negligence on the part of the Adviser or a reckless disregard of its
duties hereunder, the Adviser shall not be subject to any liability to a
Fund or the Trust, for any act or omission in the case of, or connected
with, rendering services hereunder or for any losses that may be sustained
in the purchase, holding or sale of Fund assets; provided, however, that
nothing herein shall relieve the Adviser from any of its obligations under
applicable law, including, without limitation, the federal and state
securities laws.

(b) Indemnification. The Adviser shall indemnify the Trust and its
officers and trustees, for any liability and expenses, including attorneys
fees, which may be sustained as a result of the Adviser's willful
misfeasance, bad faith, gross negligence, reckless disregard of its duties
hereunder or violation of applicable law, including, without limitation,
the federal and state securities laws.

8. Duration and Termination.

(a) Duration. Unless sooner terminated, this Agreement shall
continue until May 1, 1999, and thereafter shall continue automatically
for successive annual periods, provided such continuance is specifically
approved at least annually by the Trust's Board of Trustees or the vote of
the lesser of (a) 67% of the shares of a Fund represented at a meeting if
holders of more than 50% of the outstanding shares of the Fund are present
in person or by proxy or (b) more than 50% of the outstanding shares of
the Fund; provided that in either event its continuance also is approved
by a majority of the Trust's Trustees who are not "interested persons" (as
defined in the 1940 Act) of any party to this Agreement, by vote cast in
person at a meeting called for the purpose of voting on such approval.

(b) Termination. Notwithstanding whatever may be provided herein to
the contrary, this Agreement may be terminated at any time, without
payment of any penalty by vote of a majority of the Trust's Board of
Trustees, or by vote of a majority of the

6
<PAGE> 7

outstanding voting securities of a Fund, or by the Adviser, in each case,
not less than sixty (60) days' written notice to the other party.

This Agreement shall not be assigned (as such term is defined in the 1940
Act) and shall terminate automatically in the event of its assignment.

9. Services Not Exclusive. The services furnished by the Adviser hereunder
are not to be deemed exclusive, and the Adviser shall be free to furnish similar
services to others so long as its services under this Agreement are not impaired
thereby. It is understood that the action taken by the Adviser under this
Agreement may differ from the advice given or the timing or nature of action
taken with respect to other clients of the Adviser, and that a transaction in a
specific security may not be accomplished for all clients of the Adviser at the
same time or at the same price.

10. Amendment. This Agreement may be amended by mutual consent of the
parties, provided that the terms of each such amendment shall be approved by the
Trust's Board of Trustees or by a vote of a majority of the outstanding voting
securities of a Fund (as required by the 1940 Act).

11. Confidentiality. Subject to the duties of the Adviser and the Trust to
comply with applicable law, including any demand of any regulatory or taxing
authority having jurisdiction, the parties hereto shall treat as confidential
all information pertaining to a Fund and the Trust and the actions of the
Adviser and the Funds in respect thereof.

12. Notice. Any notice that is required to be given by the parties to each
other under the terms of this Agreement shall be in writing, delivered, or
mailed postpaid to the other party, or transmitted by facsimile with
acknowledgment of receipt, to the parties at the following addresses or
facsimile numbers, which may from time to time be changed by the parties by
notice to the other party:

(a) If to the Adviser:

Nationwide Advisory Services, Inc.
Three Nationwide Plaza, 26th Floor
Columbus, OH 43215
Attention: James F. Laird, Jr.
Facsimile: (614) 249-7424

7
<PAGE> 8

(b) If to the Trust:

Nationwide Separate Account Trust
Three Nationwide Plaza, 26th Floor
Columbus, OH 43215
Attention: James F. Laird, Jr.
Facsimile: (614) 249-7424

13. Jurisdiction. This Agreement shall be governed by and construed to be
in accordance with substantive laws of the State of Ohio without reference to
choice of law principles thereof and in accordance with the 1940 Act. In the
case of any conflict, the 1940 Act shall control.

14. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, all of which shall
together constitute one and the same instrument.

15. Certain Definitions. For the purposes of this Agreement, "interested
person," "affiliated person," "assignment" shall have their respective meanings
as set forth in the 1940 Act, subject, however, to such exemptions as may be
granted by the SEC.

16. Captions. The captions herein are included for convenience of
reference only and shall be ignored in the construction or interpretation
hereof.

17. Severability. If any provision of this Agreement shall be held or made
invalid by a court decision or applicable law, the remainder of the Agreement
shall not be affected adversely and shall remain in full force and effect.

18. Nationwide Separate Account Trust and its Trustees. The terms
"Nationwide Separate Account Trust" and the "Trustees of Nationwide Separate
Account Trust" refer respectively to the Trust created and the Trustees, as
trustees but not individually or personally, acting from time to time under a
Declaration of Trust dated as of June 30, 1981, as has been or may be amended
from time to time, and to which reference is hereby made and a copy of which is
on file at the office of the Secretary of State of The Commonwealth of
Massachusetts and elsewhere as required by law, and to any and all amendments
thereto so filed or hereafter filed. The obligations of the Trust entered into
in the name or on behalf thereof by any of Nationwide Separate Account Trust's
Trustees, representatives, or agents are not made individually, but only in
their capacities with respect to Nationwide Separate Account Trust. Such
obligations are not binding upon any of the Trustees, shareholders, or
representatives of the Trust personally, but bind only the assets of the Trust.
All persons dealing with any series of Shares of the Trust must look solely to
the assets of the Trust belonging to such series for the enforcement of any
claims against the Trust.

8
<PAGE> 9

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

ADVISER
NATIONWIDE ADVISORY SERVICES, INC.

By:
----------------------------------------
Name: Christopher A. Cray
Title: Treasurer

TRUST
NATIONWIDE SEPARATE ACCOUNT TRUST

By:
----------------------------------------
Name: James F. Laird
Title: Treasurer

9
<PAGE> 10

AMENDED EXHIBIT A
NATIONWIDE SEPARATE ACCOUNT TRUST
Investment Advisory Agreement

Funds of the Trust Advisory Fees
- ------------------ -------------

Total Return Fund 0.60% on assets up to $1 billion
0.575% on assets of $1 billion and more
but less than $2 billion
0.55% on assets of $2 billion and more
but less than $5 billion
0.50% for assets of $5 billion and more

Capital Appreciation Fund 0.60% on assets up to $1 billion
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
0.24% for assets of $5 billion and more

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

Nationwide Balanced Fund 0.75% of the Fund's average daily net assets

Nationwide Equity Income Fund 0.80% of the Fund's average daily net assets

Nationwide Global Equity Fund 1.00% of the Fund's average daily net assets

Nationwide High Income Bond Fund 0.80% of the Fund's average daily net assets

10
<PAGE> 11

AMENDED EXHIBIT A
NATIONWIDE SEPARATE ACCOUNT TRUST
Investment Advisory Agreement
Page Two

Funds of the Trust Advisory Fees
- ------------------ -------------

Nationwide Multi Sector Bond Fund 0.75% of the Fund's average daily net assets

Nationwide Select Advisers Mid 1.05% of the Fund's average daily net assets
Cap Fund

Nationwide Select Advisers Small 1.10% of the Fund's average daily net assets
Cap Growth Fund

Nationwide Small Cap Value Fund 0.90% of the Fund's average daily net assets

Nationwide Strategic Growth Fund 0.90% of the Fund's average daily net assets

Nationwide Strategic Value Fund 0.90% of the Fund's average daily net assets

Nationwide Income Fund 0.45% of the Fund's average daily net assets

Dated as of May 1, 1999.

ADVISER
NATIONWIDE ADVISORY SERVICES, INC.

By:
----------------------------------------
Name: Christopher A. Cray
Title: Treasurer

TRUST
NATIONWIDE SEPARATE ACCOUNT TRUST

By:
----------------------------------------
Name: James F. Laird
Title: Treasurer

<PAGE> 1

FUND ADMINISTRATION AGREEMENT

This Fund Administration Agreement is made as of this 1st day of November, 1997,
between Nationwide Separate Account Trust, a Massachusetts business trust (the
"Trust"), and Nationwide Advisory Services, Inc., an Ohio corporation, (the
"Administrator").

WHEREAS, the Trust is a Massachusetts business trust, which operates as an
open-end management investment company and registered under the Investment
Company Act of 1940, as amended (the "Investment Company Act"); and

WHEREAS, the Trust desires to retain the Administrator to provide certain
administrative and fund accounting services described below with respect to
certain of the series of the Trust (the "Funds"), each of which as are now, or
may hereafter be, listed on Exhibit A to this Agreement, and the Administrator
is willing to render such services;

NOW, THEREFORE, in consideration of the premises and mutual covenants set forth
herein, the parties hereto agree as follows:

1. Appointment of Administrator. The Trust hereby appoints the Administrator
as administrator of the Funds on the terms and conditions set forth in
this Agreement; and the Administrator hereby accepts such appointment and
agrees to perform the services and duties set forth in Section 2 of this
Agreement in consideration of the compensation provided for in Section 4
hereof.

2. Services and Duties. As Administrator, and subject to the supervision and
control of the Trust's Board of Trustees, the Administrator will provide
facilities, equipment, and personnel to carry out the following
administrative and fund accounting services for operation of the business
and affairs of the Trust and each of the Funds covered by this Agreement:

a. prepare, file, and maintain the Trust's governing documents,
including the Declaration of Trust, the Bylaws, minutes of meetings
of Trustees and shareholders, and proxy statements for meetings of
shareholders;

b. prepare and file on a timely basis with the Securities and Exchange
Commission and the appropriate state securities authorities the
registration statements for the Trust, relating to the Funds and the
Funds' shares, and all amendments thereto, the Trust's reports
pursuant to Investment Company Act Rule 24f-2, reports to
shareholders and regulatory authorities, including form N-SAR, and
prospectuses, proxy statements, and such other documents as may be
necessary or convenient to enable the Trust to make continuous
offering of the Fund's shares and to conduct its affairs;

c. prepare, negotiate, and administer contracts on behalf of the Funds
with, among others, the Trust's custodian and transfer agent;

<PAGE> 2

d. supervise the Trust's custodian;

e. calculate performance data of the Funds;

f. prepare and file on a timely basis the Federal and State income
and other tax returns for the Funds;

g. examine and review the operations of the Trust's custodian,
transfer agent and investment adviser and the Funds' subadvisers,
if any, to promote compliance with applicable state and federal
law;

h. coordinate the layout and printing of publicly disseminated
prospectuses and reports;

i. perform internal audit examinations in accordance with procedures
to be adopted by the Administrator and the Trust;

j. assist with the design, development, and operation of the Funds;

k. provide individuals reasonably acceptable to the Trust's Board of
Trustees for nomination, appointment, or election as officers of the
Trust, who will be responsible for the management of certain of the
Trust's affairs as determined by the Trust's Board of Trustees;

l. monitor the Trust's compliance with Section 817 and Sections 851
through 855 of the Internal Revenue Code of 1986, as amended, and
the regulations promulgated thereunder, so as to enable the Trust
and each Fund to comply with the diversification requirements
applicable to investments of variable contracts and for each to
maintain its status as a "regulated investment company;"

m. advise the Trust and its Board of Trustees on matters concerning
the Funds and their affairs;

n. provide the Trust with office space and personnel; and

o. provide the Trust and each Fund with fund accounting services,
including but not limited to the following services:

1) keeping and maintaining the following books and records of the
Trust and each of the Funds pursuant to Rule 31a-1 under the
Investment Company Act, including:

<PAGE> 3

a) journals containing an itemized daily record of all
purchase and sales of securities, all receipts and
disbursements of cash and all other debit and credits,
as required by Rule 31a-1(b)(1);

b) general and auxiliary ledgers reflecting all asset,
liability, reserve, capital, income and expense
accounts, including interest accrued and interest
received, as required by Rule 31a-1(b)(2)(i);

c) separate ledger accounts required by Rule
31a-1(b)(2)(ii) and (iii); and

d) a monthly trial balance of all ledger accounts
(except shareholder accounts) as required by Rule
31a-1(b)(8).

2) performing the following accounting services on a regular
basis for each Fund, as may be reasonably requested by the
Trust:

a) calculate the net asset value per share;

b) calculate the dividend and capital gain distribution,
if any;

c) calculate a Fund's yield;

d) reconcile cash movements with the Trust's custodian;

e) affirm to the Trust's custodian all portfolio trades
and cash movements;

f) verify and reconcile with the Trust's custodian all
daily trade activity;

g) provide such reports as may be required by the Trust;

h) preparation of the Trust's financial statements,
including oversight of expense accruals and payments;

i) calculating the deviation between marked-to-market
and amortized cost valuations for any money market
fund; and

j) such other similar services with respect to a Fund as
may be reasonably requested by the Trust; and

p. assist in all aspects of the Funds' operations other than those
provided under other specific contracts.
<PAGE> 4

The foregoing, along with any additional services that the Administrator
shall agree in writing to perform for the Trust hereunder, shall hereafter
be referred to as "Administrative Services." In compliance with the
requirements of Rule 31a-3 under the Investment Company Act, the
Administrator hereby agrees that all records that it maintains for the
Trust are the property of the Trust and further agrees to surrender
promptly to the Trust any of such records upon the Trust's request. The
Administrator further agrees to preserve for the periods prescribed by
Investment Company Act Rule 31a-2 the records required to be maintained by
Investment Company Act Rule 31a-1. Administrative Services shall not
include any duties, functions, or services to be performed for the Trust
by the Trust's investment adviser, custodian, or transfer agent pursuant
to their agreements with the Trust.

The Administrator acknowledges the importance of efficient and prompt
transmission of information to the life insurance companies affiliated
with the Administrator ("Nationwide"), the purchaser of Trust shares to
fund the obligations of certain variable annuity contracts. The
Administrator agrees to use its best efforts to meet the deadline for
transmission of pricing information presently set by Nationwide and such
other time deadlines as may be established from time to time in the
future.

When performing Administrative Services to the Trust and for the Funds,
the Administrator will comply with the provisions of the Declaration of
Trust and Bylaws of the Trust, will safeguard and promote the welfare of
the Trust and the Funds, and will comply with the policies that the
Trustees may from time to time reasonably determine, provided that such
policies are not in conflict with this Agreement, the Trust's governing
documents, or any applicable statutes or regulations.

3. Expenses. The Administrator shall be responsible for expenses incurred in
providing all the Administrative Services to the Trust, including the
compensation of the Administrator's employees who serve as officers of the
Trust, except that the Trust shall reimburse the Administrator for the
cost of the pricing services that the Administer utilizes. The Trust (or
the Trust's investment adviser) shall be responsible for all other
expenses of the Trust, including without limitation: (i) investment
advisory and subadvisory fees; (ii) interest and taxes; (iii) brokerage
commissions and other costs in connection with the purchase or sale of
securities and other investment instruments; (iv) fees and expenses of the
Trust's trustees, other than those who are "interested persons" of the
Administrator or investment adviser of the Trust; (v) legal and audit
expenses; (vi) custodian and transfer and dividend disbursing agent fees
and expenses; (vii) fees and expenses related to the registration and
qualification of the Trust and the Trust's shares for distribution under
state and federal securities laws; (viii) expenses of printing and mailing
reports and notices and proxy material to beneficial shareholders of the
Trust; (ix) all other expenses incidental to holding meetings of the
Trust's shareholders, including proxy solicitations therefor; (x)
insurance premiums for fidelity and other coverage; (xi) association
membership dues; (xii) such nonrecurring or extraordinary expenses as may
arise, including those relating to actions, suits or proceedings to which
the
<PAGE> 5

Trust is a party and the legal obligation which the Trust may have to
indemnify the Trust's trustees and officers with respect thereto.

4. Compensation. For the Administrative Services provided, the Trust hereby
agrees to pay and the Administrator hereby agrees to accept as full
compensation for its services rendered hereunder the administrative fee
listed for each Fund on Exhibit A. Such fees will be computed daily and
payable monthly at an annual rate based on a Fund's average daily net
assets and will be paid monthly as soon as practicable after the last day
of each month.

In case of termination of this Agreement during any month, the
administrative fee for that month shall be reduced proportionately on the
basis of the number of business days during which it is in effect, and the
fee computed upon the average net assets for the business days it is so in
effect for that month.

5. Responsibility of Administrator.

a. The Administrator shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Trust in connection
with the matters to which this Agreement relates, except a loss
resulting from willful misfeasance, bad faith or negligence on its
part in the performance of its duties or from reckless disregard by
it of its obligations and duties under this Agreement. Any person,
even though also an officer, director, partner, employee or agent of
the Administrator, who may be or become an officer or trustee of the
Trust, shall be deemed, when rendering services to the Trust or
acting on any business of the Trust (other than services or business
in connection with the duties of the Administrator hereunder) in
accordance with his responsibilities to the Trust as such officer or
trustee, to be rendering such services to or acting solely for the
Trust and not as an officer, director, partner, employee or agent or
one under the control or direction of the Administrator even though
paid by the Administrator.

b. The Administrator shall be kept indemnified by the Trust and be
without liability for any action taken or thing done by it in
performing the Administrative Services in accordance with the above
standards; provided, however, that the Trust will not indemnify the
Administrator for the portion of any loss or claim caused, directly
or indirectly, by the negligence, wilful malfeasance or bad faith of
the Administrator or by the Administrator's reckless disregard of
its duties and obligations hereunder. In order that the
indemnification provisions contained in this Section 5 shall apply,
however, it is understood that if in any case the Trust may be asked
to indemnify or save the Administrator harmless, the Trust shall be
fully and promptly advised of all pertinent facts concerning the
situation in question, and it is further understood that the
Administrator will use all reasonable care to identify and notify
the Trust promptly concerning any situation which presents or
appears likely to present the probability of such a claim for
indemnification against the Trust. The Trust shall

<PAGE> 6

have the option to defend the Administrator against any claim which
may be the subject of this indemnification. In the event that the
Trust so elects it will so notify the Administrator and thereupon
the Trust shall take over complete defense of the claim, and the
Administrator shall in such situation initiate no further legal or
other expenses for which it shall seek indemnification under this
Section. The Administrator shall in no case confess any claim or
make any compromise or settlement in any case in which the Trust
will be asked to indemnify the Administrator except with the Trust's
written consent.

6. Duration and Termination.

a. This Agreement shall become effective as of the date first written
above. The Agreement may be terminated at any time, without payment
of any penalty, by either party upon 90 days' advance written notice
to the other party. The Agreement may also be terminated immediately
upon written notice to the other party in the event of a material
breach of any provision of this Agreement by such other party.

b. Upon the termination of this Agreement, the Trust shall pay to the
Administrator such compensation as may be payable prior to the
effective date of such termination. In the event that the Trust
designates a successor to any of the Administrator's obligations
hereunder, the Administrator shall, at the direction of the Trust,
transfer to such successor all relevant books, records and other
data established or maintained by the Administrator under the
foregoing provisions.

7. Amendment. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing
signed by the party against which an enforcement of the change, waiver,
discharge or termination is sought.

8. Nationwide Separate Account Trust and its Trustees. The terms "Nationwide
Separate Account Trust" and the "Trustees of Nationwide Separate Account
Trust" refer respectively to the Trust created and the Trustees, as
trustees but not individually or personally, acting from time to time
under a Declaration of Trust dated as of June 30, 1981, as has been or may
be amended from time to time, and to which reference is hereby made and a
copy of which is on file at the office of the Secretary of State of The
Commonwealth of Massachusetts and elsewhere as required by law, and to any
and all amendments thereto so filed or hereafter filed. The obligations of
the Trust entered into in the name or on behalf thereof by any of
Nationwide Separate Account Trust's Trustees, representatives, or agents
are not made individually, but only in their capacities with respect to
Nationwide Separate Account Trust. Such obligations are not binding upon
any of the Trustees, shareholders, or representatives of the Trust
personally, but bind only the assets of the Trust. All persons dealing
with any series of Shares of the Trust must look solely to the assets of
the Trust belonging to such series for the enforcement of any claims
against the Trust.

<PAGE> 7

9. Notices. Notices of any kind to be given to the Trust hereunder by the
Administrator shall be in writing and shall be duly given if delivered to
the Trust and to its investment adviser at the following address:

Nationwide Separate Account Trust
Three Nationwide Plaza
Columbus, Ohio 43215
Attn: James F. Laird, Treasurer

Notices of any kind to be given to the Administrator hereunder by the
Trust shall be in writing and shall be duly given if delivered to the
Administrator at:

Nationwide Advisory Services, Inc.
Three Nationwide Plaza
Columbus, Ohio 43215
Attn: James F. Laird, Vice President and General Manager

10. Miscellaneous. The captions in this Agreement are included for convenience
of reference only and in no way define or delimit any of the provisions
hereof or otherwise affect their construction or effect. If any provision
of this Agreement shall be held or made invalid by a court or regulatory
agency decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby. Subject to the provisions of
Section 5, hereof, this Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors. This
Agreement shall be governed by and construed to be in accordance with
substantive laws of the State of Ohio without reference to choice of law
principles thereof and in accordance with the 1940 Act. In the case of any
conflict, the 1940 Act shall control.

IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.

NATIONWIDE ADVISORY SERVICES, INC.

By:
----------------------------------------
Name: Christopher A. Cray
Title: Treasurer

NATIONWIDE SEPARATE ACCOUNT TRUST

By:
----------------------------------------
Name: James F. Laird
Title: Treasurer

<PAGE> 8

AMENDED EXHIBIT A
NATIONWIDE SEPARATE ACCOUNT TRUST
Fund Administration Agreement

Funds of the Trust Fund Administration Fees
- ------------------ ------------------------

Total Return Fund For each Fund,
Capital Appreciation Fund 0.05% of each Fund's average daily
Government Bond Fund net assets up to $1 billion
Money Market Fund 0.04% on assets of $1 billion and more

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

Nationwide Balanced Fund For each Fund, Nationwide Equity Income Fund 0.07% on
assets up to $250 million Nationwide Global Equity Fund 0.05% on the next $750
million Nationwide High Income Bond Fund 0.04% on assets of $1 billion and more
Nationwide Multi Sector Bond Fund Nationwide Small Cap Value Fund Nationwide
Select Advisers Mid Cap Fund Nationwide Select Advisers Small Cap Growth Fund*
Nationwide Strategic Growth Fund Nationwide Strategic Value Fund Nationwide
Income Fund

* The Nationwide Select Advisers Small Cap Growth Fund is subject to an annual
minimum fee of $75,000.

Dated as of May 1, 1999.

NATIONWIDE ADVISORY SERVICES, INC.

By:
----------------------------------------
Name: Christopher A. Cray
Title: Treasurer

NATIONWIDE SEPARATE ACCOUNT TRUST

By:
----------------------------------------
Name: James F. Laird
Title: Treasurer

<PAGE> 1

AMENDMENT TO TRANSFER AND DIVIDEND DISBURSING AGENT AGREEMENT

BETWEEN

NATIONWIDE SEPARATE ACCOUNT TRUST

AND

NATIONWIDE INVESTORS SERVICES, INC.

This amendment, made this 1st day of May, 1999, by and between NATIONWIDE
SEPARATE ACCOUNT TRUST (formerly Nationwide Separate Account Money Market
Trust), a Massachusetts business trust, hereinafter called the "Trust," and
NATIONWIDE INVESTORS SERVICES, INC. (formerly Heritage Financial Services,
Inc.), an Ohio corporation, hereinafter called the "Agent."

WITNESSETH:

WHEREAS, the Trust and the Agent have entered into a Transfer and Dividend
Disbursing Agent Agreement on November 1, 1981, which has been previously
amended; and

WHEREAS, the parties desire to amend such Agreement to change the fees paid to
Agent;

NOW, THEREFORE, in consideration of the mutual covenants and promises herein
contained, it is agreed as follows:

1. Exhibit A, Schedule of Fees, is hereby amended in the form attached hereto
effective May 1, 1999.

2. All other provisions of the Agreement shall remain in full force and
effect.

IN WITNESS WHEREOF, the parties have caused this Amendment to be signed by their
respective officers thereunto duly authorized and their respective seals to be
hereunto affixed as of the day and year first above written.

NATIONWIDE SEPARATE ACCOUNT TRUST

------------------------------------------
Name: James F. Laird
Title: Treasurer

NATIONWIDE INVESTOR SERVICES, INC.

------------------------------------------
Name: Christopher A. Cray
Title: Treasurer

<PAGE> 2

EXHIBIT A

SCHEDULE OF FEES

Effective May 1, 1999

For the services specified in the Agreement, the Trust shall pay the Agent a
fee, computed daily and payable monthly, calculated at an annual rate of 0.01%
of each of the following Fund's average daily net assets:

Total Return Fund
Capital Appreciation Fund
Government Bond Fund
Money Market Fund
Nationwide Small Company Fund
Nationwide Balanced Fund
Nationwide Equity Income Fund
Nationwide Global Equity Fund
Nationwide High Income Bond Fund
Nationwide Multi Sector Bond Fund
Nationwide Small Cap Value Fund
Nationwide Select Advisers Mid Cap Fund
Nationwide Select Advisers Small Cap Growth Fund
Nationwide Strategic Growth Fund
Nationwide Strategic Value Fund
Nationwide Income Fund

The fee listed is payable on or before the 10th day of each succeeding month.

In addition, the Trust shall pay the Agent reimbursement for the out-of-pocket
expenses, including postage, telephone, forms, supplies and counsel.

Special extraordinary projects shall be performed by the Agent at rates to be
determined and agreed upon by the parties, based on time and effort involved.