NATIONWIDE INVESTING FOUNDATION III, 497, 1998-12-22

NATIONWIDE INVESTING FOUNDATION III
497, 1998-12-22

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<PAGE> 1
PROSPECTUS
DECEMBER 21, 1998

LOCAL FUND SHARES
NATIONWIDE S&P 500 INDEX FUND
FOR INFORMATION AND ASSISTANCE
CALL TOLL FREE 1 (800) 848-0920

Nationwide S&P 500 Index Fund (the "Fund") is a non-diversified portfolio of
Nationwide Investing Foundation III (the "Trust"). The Trust is an open-end
management investment company organized as a business trust under the laws of
the State of Ohio, by a Declaration of Trust dated October 30, 1997. The Trust
currently offers shares in fourteen additional separate portfolios or series,
each with its own investment objective. The Fund offers three classes of shares:
Class R, Class Y and Local Fund Shares. This Prospectus relates only to the
Local Fund Shares of the Nationwide S&P 500 Index Fund. The Local Fund Shares of
the Fund are sold to other open-end investment companies created by Nationwide
Advisory Services, Inc. ("NAS" or the "Adviser"), the Fund's investment adviser.

The Fund's investment objective is to provide investment results that correspond
to the price and yield performance of publicly traded common stocks as
represented by the Standard & Poor's 500 Composite Stock Price Index (the
"Index"). The Fund attempts to be fully invested at all times in the stocks that
comprise the Index and stock index futures.

This Prospectus provides you with the basic information you should know before
investing in the Fund. You should read it and keep it for future reference. A
Statement of Additional Information dated December 21, 1998 has been filed with
the Securities and Exchange Commission. You may obtain a copy without charge by
calling (800) 848-0920, or writing Nationwide Advisory Services, Three
Nationwide Plaza, Columbus, Ohio 43215.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.

THE STATEMENT OF ADDITIONAL INFORMATION FOR THE TRUST DATED DECEMBER 21, 1998,
IS INCORPORATED HEREIN BY REFERENCE.

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<PAGE> 2

SALE OF FUND SHARES

Local Fund Shares of the Fund may be sold to other open-end investment companies
(each a "Fund of Funds") created by NAS. Each Fund of Funds, as a shareholder,
has an ownership interest in the Fund's investments. The Fund also offers to buy
back (redeem) its shares from the Fund of Funds at any time at net asset value.

SUMMARY OF EXPENSES

<S> <C>
Shareholder Transaction Expenses None

Annual Fund Operating Expenses
(as a percentage of average net assets)

Management Fees(1) 0.02%
12b-1 Fees 0.07%
Other Expenses (after waiver)(1)(2) 0.26%
----

Total Operating Expenses (after waiver)(1) 0.35%
<FN>

- --------

1 Until further written notice to Shareholders, the Adviser has agreed with
the Trust to waive management fees, and if necessary, reimburse expenses
incurred by the Class to the extent necessary to limit the total expense
ratio of the Local Fund Shares to a maximum of .35% of the average net
assets of such Class. Without fee waivers or expense reimbursements, it is
estimated that "Management Fees," "Other Expenses" and "Total Operating
Expenses" would be 0.13%, 0.34% and 0.54%, respectively.

2 "Other Expenses" are based upon estimates for the fiscal year ending
October 31, 1999.
</TABLE>

2
<PAGE> 3

This summary is provided to assist investors in understanding the various costs
and expenses that an investor in the Fund will bear directly or indirectly.
<TABLE>

Example:
1 year 3 years
------ -------
<S> <C> <C>
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2)
redemption at the end of each time period. $ 4 $ 11

</TABLE>

THE EXAMPLE SET FORTH ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN.

For more information on Fund expenses, see "MANAGEMENT OF THE TRUST" below.

FINANCIAL HIGHLIGHTS

The following Financial Highlights for the period from July 24, 1998 (date of
commencement of operations) through October 31, 1998 have been audited by KPMG
Peat Marwick LLP, Independent Auditors, whose report therein together with the
financial statements appear in the Statement of Additional Information.

The Fund's Statement of Additional Information and the Annual Report which
contain further information about the Fund's performance, may be obtained free
of charge by calling 1-800-848-0920.

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<PAGE> 4
FINANCIAL HIGHLIGHTS

FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED OCTOBER 31, 1998(c)

LOCAL
FUND SHARES

<S> <C>
NET ASSET VALUE - BEGINNING OF PERIOD $10.00
Net investment income 0.04
Net realized gain (loss) and unrealized appreciation (depreciation) (0.35)
Total from investment operations (0.31)
Dividends from net investment income (0.03)
Distributions from net realized gain from investment transactions --
Total distributions (0.03)
Net increase (decrease) in net asset value (0.34)
NET ASSET VALUE - END OF PERIOD $ 9.66
Total Return (a) (3.08%)
Net Assets, End of Period (000) $22,325
Ratio of expenses to average net assets (b) 0.35%
Ratio of expenses to average net assets* (b) 0.64%
Ratio of net investment income to average net assets (b) 1.55%
Ratio of net investments income to average net assets* (b) 1.26%
Portfolio turnover 3.07%
- -------------------------------------------------------------------------------------------------
<FN>

* Ratios calculated as if no expenses were reimbursed or fees waived
(a) Not annualized
(b) Annualized
(c) For the period from July 24, 1998 (commencement of operations) through October 31, 1998

</TABLE>

INVESTMENT OBJECTIVE AND POLICIES

The Fund's investment objective is to provide investment results that correspond
to the price and yield performance of publicly traded common stocks, as
represented by the Standard & Poor's 500 Composite Stock Price Index.***

The Fund attempts to duplicate the investment results of the Index, which is
composed of 500 selected common stocks, most of which are listed on the New York
Stock Exchange. Standard &

___________________
***"Standard & Poor's(R)", "S&P(R)", "S&P 500(R)", "Standard & Poor's 500", and
"500" are trademarks of The McGraw-Hill Companies, Inc. and have been licensed
for use by the Fund. The Fund is not sponsored, endorsed, sold or promoted by
Standard & Poor's and Standard & Poor's makes no representation regarding the
advisability of investing in the Fund. For further information regarding the
trademark licenses, see the Statement of Additional Information.

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<PAGE> 5

Poor's ("S&P") chooses the stocks to be included in the Index based on a number
of criteria including industry group representations, market value, economic
sector and operating/financial condition. The Fund attempts to be fully invested
at all times in the stocks that comprise the Index and stock index futures as
described below, and in any event, at least 80% of the Fund's net assets will be
invested in stocks comprising the Index. Inclusion of a stock in the Index in no
way implies an opinion by S&P as to its attractiveness as an investment. The
Fund uses the Index as the standard performance comparison because it represents
approximately 70% of the total market value of all common stocks and is well
known to investors. An investment in the Fund involves risks similar to those of
investing in stocks, i.e., the possibility that stock prices in general will
decline over short or even extended periods of time.

The weightings of stocks in the Index are based on each stock's relative total
market capitalization; that is, its market price per share times the number of
shares outstanding. Because of this weighting, as of July 14, 1998,
approximately 56% of the Index was composed of the 50 largest companies. The
Fund's subadviser generally select stocks for the Fund's portfolio in the order
of their weightings in the Index beginning with the heaviest weighted stocks.
With respect to the Fund's assets invested in the stocks in the Index, the
percentage of such assets invested in each stock is approximately the same as
the percentage it represents in the Index.

No attempt is made to manage the Fund in the traditional sense using economic,
financial and market analysis. The Fund is managed using a computer program to
determine which stocks are to be purchased or sold to replicate the Index to the
extent feasible. From time to time, administrative adjustments may be made in
the Fund's portfolio because of changes in the composition of the Index, but
such changes should be infrequent.

The Fund believes that the indexing approach described above is an effective
method of substantially duplicating percentage changes in the Index. It is a
reasonable expectation that there will be a close correlation between the Fund's
performance and that of the Index in both rising and falling markets. The Fund
will attempt to achieve a correlation between the performance of its portfolio
and that of the Index of at least 0.95, without taking into account expenses. A
correlation of 1.00 would indicate perfect correlation, which would be achieved
when the Fund's net asset value, including the value of its dividends and
capital gains distributions, increases or decreases in exact proportion to
changes in the Index. The Fund's ability to correlate its performance with the
Index, however may be affected by, among other things, changes in securities
markets, the manner in which the Index is calculated by S&P and the timing of
purchases and redemptions. In the future, the Trust's Board of Trustees may
select another index if such a standard of comparison is deemed to be more
representative of the performance of common stocks.

The Fund's ability to duplicate the performance of the Index also depends to
some extent on the size of the Fund's portfolio and the size of cash flows into
and out of the Fund. Investment changes to accommodate these cash flows are made
to maintain the similarity of the Fund's portfolio to the Index to the maximum
practicable extent.

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<PAGE> 6

From time to time to increase its income, the Fund may lend securities from its
portfolio. When the Fund has cash reserves, the Fund may invest in money market
instruments consisting of U.S. government securities, time deposits,
certificates of deposit, bankers' acceptances, high-grade commercial paper, and
repurchase agreements. See the Statement of Additional Information for a
description of these instruments. The Fund also may purchase stock index futures
in anticipation of taking a market position when, in the opinion of the Fund's
subadviser, available cash balances do not permit an economically efficient
trade in the cash market. The Fund also may sell (write) stock index futures to
terminate existing positions it may have as a result of its purchases of stock
index futures. See also "INVESTMENT TECHNIQUES, CONSIDERATIONS AND RISK FACTORS"
below.

There can be no guarantee that the Fund's objective will be achieved. The
investment objective of the Fund is fundamental and shareholder approval is
required to change the Fund's investment objective.

MANAGEMENT OF THE FUND

Nationwide Advisory Services, Inc. (the "Adviser") provides investment
management evaluation services to the Fund in initially selecting and monitoring
on an ongoing basis the performance of a subadviser to manage the Fund's
portfolio. The Adviser has selected The Dreyfus Corporation to be the subadviser
(the "Subadviser") of the Fund. See "MANAGEMENT OF THE TRUST - MANAGEMENT OF THE
FUND-THE SUBADIVSER" below for further information.

INVESTMENT TECHNIQUES, CONSIDERATIONS AND RISK FACTORS

GENERAL - The Fund's net asset value per share should be expected to fluctuate.
Investors should consider the Fund as a supplement to an overall investment
program and should invest only if they are willing to undertake the risks
involved.

EQUITY SECURITIES - Equity securities fluctuate in value, often based on factors
unrelated to the value of the issuer of the securities, and such fluctuations
can be pronounced. Changes in the value of the Fund's investments will result in
changes in the value of its shares and thus the Fund's total return to
investors.

FOREIGN SECURITIES - Since the stocks of some foreign issuers are included in
the Index, the Fund's portfolio may contain securities of such foreign issuers
which may subject the Fund to additional investment risks with respect to those
securities that are different in some respects from those incurred by a fund
which invests only in securities of domestic issuers. Such risks include
possible adverse political and economic developments, seizure or nationalization
of foreign deposits or adoption of governmental restrictions which might
adversely affect the payment of principal and interest on the foreign securities
or restrict the payment of principal and interest to investors located outside
the country of the issuer, whether from currency blockage or otherwise.

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<PAGE> 7

USE OF DERIVATIVES - The Fund may invest, to a limited extent, in derivatives
("Derivatives"). Derivatives are securities or agreements whose value is based
on the value of some underlying asset (e.g., a security or currency) or the
level of a reference index. Options, futures, and options on futures
transactions are considered derivative transactions. Derivatives generally have
investment characteristics that are based on 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 the 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 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. While Derivatives can be used effectively in furtherance of
the Fund's investment objective, under certain market conditions, they can
increase the volatility of the Fund's net asset value, can decrease the
liquidity of the Fund's portfolio and make more difficult the accurate pricing
of the Fund's portfolio.

Although the Fund will not be a commodity pool, Derivatives subject the Fund to
the rules of the Commodity Futures Trading Commission, which limit the extent to
which the Fund can invest in certain derivatives. The Fund may invest in stock
index futures contracts and related options for hedging purposes without limit,
but it is anticipated that the Fund's investments in stock index futures and
related options and other derivatives will not exceed 20% of the Fund's total
assets. However, the Fund may not invest in such contracts for other purposes if
the sum of the amount of initial margin deposits, other than for bona fide
hedging purposes, exceeds 5% of the liquidation value of the Fund's assets,
after taking into account unrealized profits and unrealized losses on such
contracts.

Derivative instruments may be exchange-traded or traded in over-the-counter
("OTC") transactions between private parties. OTC transactions are subject to
the credit risk of the counterparty to the instrument and are less liquid than
exchange-traded derivatives since they often can only be closed out with the
other party to the transaction. When required by guidelines of the Securities
and Exchange Commission, the Fund will set aside permissible liquid assets in a
segregated account to secure its obligations under derivative transactions.
Segregated assets cannot be sold or transferred unless equivalent assets are
substituted in their place or it is no longer necessary to segregate them. As a
result, there is a possibility that segregation of a large percentage of the
Fund's assets could impede portfolio management or the Fund's ability to meet
redemption requests or other current obligations. In order to maintain its
required cover for a derivative transaction, the Fund may need to sell portfolio
securities at disadvantageous prices or times, since it may not be possible to
liquidate a derivative position.

7
<PAGE> 8

The successful use of a derivative transactions by the Fund is dependent upon
the Subadviser's ability to correctly anticipate trends in the underlying asset.
Hedging transactions are subject to risks; if the Subadviser incorrectly
anticipates trends in the underlying asset, the Fund may be in a worse position
than if no hedging had occurred. In addition, there may be imperfect correlation
between the Fund's derivative transaction and the instrument being hedged.

BORROWING MONEY- The Fund is permitted to borrow money only for temporary or
emergency (not leveraging) purposes, in an amount up to 5% of the value of its
total assets (including the amount borrowed) valued at the lesser of cost or
market, less liabilities (not including the amount borrowed) at the time the
borrowing is made.

LENDING PORTFOLIO SECURITIES - The Fund may lend securities from its portfolio
to brokers, dealers and other financial institutions needing to borrow
securities to complete certain transactions. The Fund continues to be entitled
to payments in amounts equal to the interest, dividends or other distributions
payable on the loaned securities which affords the Fund an opportunity to earn
interest on the amount of the loaned and income on the loaned securities'
collateral. Loans of portfolio securities may not exceed 30% of the value of the
Fund's total assets, and the Fund will receive collateral consisting of cash,
U.S. Government securities or irrevocable letters of credit which will be
maintained at all times in an amount equal to at least 100% of the current
market value of the loaned securities. Such loans are terminable by the Fund at
any time upon specified notice. The Fund might experience risk of loss if the
institution with which it has engaged in a portfolio loan transaction breaches
its agreement with the Fund.

NON-DIVERSIFIED STATUS - The classification of the Fund as a "non-diversified"
portfolio means that the proportion of the Fund's assets that may be invested in
the securities of a single issuer is not limited by the Investment Company Act
of 1940 Act, as amended (the "1940 Act"). A "diversified" investment company is
required by the 1940 Act generally, with respect to 75% of its total assets, to
invest not more than 5% of such assets in the securities of a single issuer. The
Fund is not so limited. Since a relatively high percentage of the Fund's assets
may be invested in the securities of a limited number of issuers, some of which
may be within the same economic sector, the Fund's portfolio may be more
sensitive to the changes in market value of a single issuer or sector. However,
to meet Federal tax requirements, at the close of each quarter the Fund may not
have more than 25% of its total assets invested in any one issuer and, with
respect to 50% of total assets, not more than 5% of its total assets invested in
any one issuer. These limitations do not apply to U.S. Government Securities.

MANAGEMENT OF THE TRUST

TRUSTEES AND OFFICERS

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

The Board of Trustees sets and reviews policies regarding the operation of the
Trust, whereas the

8
<PAGE> 9

officers perform the daily functions of the Trust. Unless so required by the
Trust's Declaration of Trust or By-Laws or by Ohio law, at any given time, all
of the Trustees may not have been elected by the Shareholders of the Trust. The
Trust will be managed by the Trustees in accordance with the laws of Ohio
governing business trusts. The Trustees, in turn, elect the officers of the
Trust to supervise its day-to-day operations.

MANAGEMENT OF THE FUND

THE ADVISER - Under the terms of the Investment Advisory Agreement, the Adviser,
which is located at Three Nationwide Plaza, Columbus, Ohio 43215, oversees the
investment of the assets for the Fund and supervises the daily business affairs
of the Fund. Subject to the supervision and direction of the Trustees, the
Adviser also evaluates and monitors the performance of the Subadviser. The
Adviser is also authorized to select and place portfolio investments on behalf
of the Fund, however the Adviser does not intend to do so at this time.

The Adviser and the Trust have received from the Securities and Exchange
Commission an exemptive order for the multi-manager structure which allows the
Adviser to hire, replace or terminate subadvisers without the approval of
shareholders; the order also allows the Adviser to revise a subadvisory
agreement without shareholder approval. If a new subadviser is hired, the change
will be communicated to shareholders within 90 days of such changes, and all
changes will be approved by the Trust's Board of Trustees, including a majority
of the Trustees who are not interested persons of the Trust or the Adviser. The
order is intended to facilitate the efficient operation of the Fund and afford
the Trust increased management flexibility.

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

The Adviser, an Ohio corporation, is a wholly owned subsidiary of Nationwide
Life Insurance Company, which is owned by Nationwide Financial Services, Inc.
("NFS"). NFS, a holding company, has two classes of common stock outstanding
with different voting rights enabling Nationwide Corporation (the holder of all
the outstanding Class B Common Stock) to control NFS. Nationwide Corporation is
also a holding company in the Nationwide Insurance Enterprise. All of the common
stock of Nationwide Corporation is held by Nationwide Mutual Insurance Company
(95.3%) and Nationwide Mutual Fire Insurance Company (4.7%), each of which is a
mutual

9
<PAGE> 10

company owned by its policy holders. The Fund pays the Adviser a fee at the
annual rate of .13% of the Fund's average daily net assets.

The Adviser may from time to time waive some or all of its investment advisory
fee or other fees. The waiver of such fees will cause the total return and yield
of the Fund to be higher than they would otherwise be in the absence of such a
waiver.

THE SUBADVISER - Subject to the supervision of the Adviser and the Board of
Trustees, the Subadviser manages the Fund's assets in accordance with the Fund's
investment objective and policies. The Subadviser shall make investment
decisions for the Fund, and in connection with such investment decisions shall
place purchase and sell orders for securities. For the investment management
services it provides to the Fund, the Subadviser receives an annual fee from the
Adviser

in the following amounts:

.07% on assets up to $250 million
.06% on assets of $250 million up to $500 million
.05% on assets of $500 million up to $1 billion
.04% on assets of $1 billion and more.

Below is a brief description of the Subadviser.

THE DREYFUS CORPORATION ("DREYFUS"), 200 Park Avenue, New York, N.Y. 10166,
which was formed in 1947 and is registered under the Investment Advisers Act of
1940, serves as subadviser to the Fund pursuant to a Subadvisory Agreement dated
July 23, 1998. Dreyfus is a wholly-owned subsidiary of Mellon Bank, N.A., which
is a wholly-owned subsidiary of Mellon Bank Corporation. As of March 31, 1998,
Dreyfus managed or administered approximately $100 billion in assets for
approximately 1.7 million investor accounts nationwide.

DISTRIBUTION PLAN

The Trust has adopted a Distribution Plan (the "Plan") under Rule 12b-1 of the
1940 Act which permits the Fund to compensate the Distributor, Nationwide
Advisory Services, Inc. ("NAS") for expenses associated with distribution of its
shares. Under the Plan, the Fund pays NAS compensation accrued daily and paid
monthly at a maximum rate of .07% of the Fund's average daily net assets.
Distribution expenses paid by NAS may include the costs of printing and mailing
prospectuses and sales literature to prospective investors, advertising, and
compensation to sales personnel and broker-dealers.

OTHER SERVICES

Under the terms of the Fund Administration Agreement, the Adviser also provides
various administrative and accounting services, including daily valuation of the
Fund's shares, preparation

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<PAGE> 11

of financial statements, tax returns and regulatory reports. For these services,
the Fund pays NAS an annual fee based on the Fund's average daily net assets in
the amount of 0.05% on assets up to $1 billion and 0.04% on assets of $1 billion
and more.

The Distributor, Nationwide Advisory Services, Inc. is located at Three
Nationwide Plaza, Columbus, Ohio 43215.

The Transfer and Dividend Disbursing Agent, Nationwide Investor Services, Inc.
("NISI"), Three Nationwide Plaza, Columbus, Ohio 43215, serves as transfer agent
and dividend disbursing agent for the Trust. The Fund pays NISI a fee for such
services at the annual rate of 0.01% of the Fund's average daily net assets.
NISI is a wholly owned subsidiary of the Adviser.

INVESTMENT IN FUND SHARES

Funds of Funds may purchase shares of the Fund for their portfolios. There is no
sales charge, and all shares are sold at net asset value.

Local Fund Shares of the Fund are currently sold only to affiliated Fund of
Funds created by NAS. The addresses for each of these entities is One Nationwide
Plaza, Columbus, Ohio 43215.

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

SHARE REDEMPTION

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 orders are
received from a Fund of Funds or from Nationwide Life Insurance Company or
Nationwide Life and Annuity Company by the Trust's transfer agent, NISI. The net
asset value per share for the Fund is determined once daily, as of the close of
regular trading on the New York Stock Exchange (generally 4:00 P.M. Eastern
Time), on each business day the exchange is open for regular trading, on such
other days as the Board determines and on any other day during which there is a
sufficient degree of trading in the Fund's portfolio securities that the net
asset value of the Fund is materially affected by changes in the value of
portfolio securities. The Trust will not compute net asset value on customary
national business holidays, including the following: Christmas, New Year's Day,
Martin Luther King Jr.'s Birthday, President's Day, Good Friday, Memorial Day,
Independence Day, Labor Day, and Thanksgiving Day. The net asset value per share
is calculated by adding the value of all securities and other assets

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<PAGE> 12

of the Fund allocable to such class, deducting liabilities allocable to such
class and any other liabilities charged directly to that class, and dividing by
the number of shares outstanding in such class .

In determining net asset value, portfolio securities listed on national
exchanges are valued at the last price on the principal exchange, or if there is
no sale on that day at the quoted bid prices, or if the Securities are traded in
the over-the-counter market, including listed securities for which the primary
market is believed to be over-the-counter, shall be valued at the last quoted
sale price, or if there is no sale, the quoted bid price; all prices are
obtained from an independent pricing organization. Securities for which market
quotations are not available, or for which an independent pricing agent 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 adopted
by the Board of Trustees.

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

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

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

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

NET INCOME AND DISTRIBUTIONS

Substantially all of the net investment income, if any, of the Fund will be
declared and paid as dividends quarterly. Net realized capital gains, of the
Fund, if any, will be distributed at least annually.

ADDITIONAL INFORMATION

DESCRIPTION OF SHARES - The Declaration of Trust permits the Trustees to issue
an unlimited number of full and fractional shares of beneficial interest of the
Fund and to divide or combine such shares into a greater or lesser number of
shares without thereby changing the proportionate beneficial interests in the
Trust and you have an interest only in the assets of the fund which you own.
Shares of the Fund are offered in three separate classes. Shares of a particular
class are equal in all respects to the other shares of that class. The Trust
reserves the right to create and issue shares of a number of different
portfolios or series. In that case, the shares of each fund would participate
equally in the earnings, dividends, and assets of the particular portfolio or
series, but shares of all funds would vote together in the election of Trustees.
In the event of liquidation of a fund, shares of the same class will share in
the distribution of the net assets of such fund with all other shares of

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<PAGE> 13

that class based on the relative net asset value of each class. All shares are
without par value, and when issued and paid for, are fully paid and
nonassessable by the Trust.

VOTING RIGHTS - Shareholders of each class of shares have one vote for each
share held and a proportionate fractional vote for any proportional share held.
An annual or special meeting of shareholders to conduct necessary business is
not required in the Declaration of Trust, the 1940 Act or other authority
except, under certain circumstances, to amend the Declaration of Trust, the
Investment Advisory Agreement, fundamental investment objectives, investment
policies, investment restrictions, to elect and remove Trustees, to reorganize
the Trust or any series or class thereof and to act upon certain other business
matters. In regard to termination, sale of assets, or change of investment
objectives, policies and restrictions or the approval of an Investment Advisory
Agreement, the right to vote is limited to the holders of shares of the
particular fund affected by the proposal. To the extent that such a meeting is
not required, the Trust does not intend to have an annual or special meeting of
shareholders.

The Trust has represented to the commission that the Trustees will call a
special meeting of shareholders for purposes of considering the removal of one
or more Trustees upon written request therefor from shareholders holding not
less than 10% of outstanding votes of the Trust and the Trust will assist in
communicating with other shareholders as required by Section 16(c) of the 1940
Act. At such meeting, a quorum of shareholders (constituting a majority of votes
attributable to all outstanding shares of the Trust), by majority vote, has the
power to remove one or more Trustees.

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

PERFORMANCE ADVERTISING FOR THE FUND

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

TAX STATUS

The Trust's policy is to cause each fund 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 or substantially all, of its
taxable net investment income and capital gains to shareholders; therefore it is
expected that the Fund will not be required to pay any federal income taxes on
its investment income.

Because each portfolio or series of the Trust is treated as a separate entity
for purposes of the regulated investment company provisions of the Code, the
assets, income and distributions of the

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<PAGE> 14

Fund are considered separately for purposes of determining whether or not the
Fund qualifies as a regulated investment company. The Fund intends to comply
with the diversification requirements currently imposed by the Internal Revenue
Service on separate accounts of insurance companies as a condition of
maintaining the tax-deferred status of the Contracts. See the Statement of
Additional Information for more specific information.

The tax treatment of payments made by an Account to a Contractholder is
described in the separate account prospectus.

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<PAGE> 15

CONTENTS

Sale of Fund Shares 2
Summary of Expenses 2
Financial Highlights 3
Investment Objective and Policies 4
Management of the Fund 6
Investment Techniques, Considerations and Risk Factors 6
Management of the Trust 8
Investment in Fund Shares 11
Share Redemption 11
Net Income and Distributions 12
Additional Information 12
Performance Advertising for the Fund 13
Tax Status 13

INVESTMENT ADVISER AND ADMINISTRATOR
Nationwide Advisory Services, Inc.
Three Nationwide Plaza
Columbus, Ohio 43215

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

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

LEGAL COUNSEL
Druen, Dietrich, Reynolds & Koogler
One Nationwide Plaza
Columbus, Ohio 43215

CUSTODIAN
The Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, Ohio 45263

<PAGE> 16

PART B:
STATEMENT OF ADDITIONAL INFORMATION DECEMBER 21, 1998

NATIONWIDE INVESTING FOUNDATION III
LOCAL FUND SHARES
NATIONWIDE S&P 500 INDEX FUND

This Statement of Additional Information is not a prospectus. It
contains information in addition to and more detailed than that set forth in the
prospectus for the Local Fund Shares of the Nationwide S&P 500 Index Fund and
should be read in conjunction with the prospectus dated December 21,1998. The
prospectuses for all three classes of the S&P 500 Index Fund may be obtained
from Nationwide Advisory Services, Inc. (NAS), P.O. Box 1492, Three Nationwide
Plaza, Columbus, Ohio 43216.

Terms not defined in this Statement of Additional Information have the
meanings assigned to them in the Prospectus.

TABLE OF CONTENTS

General Information and History 1
Investment Objectives and Policies 1
Investment Restrictions 9
Trustees and Officers of the Trust 11
Investment Advisory and Other Services 13
Brokerage Allocation 19
Calculating Yield and Total Return 19
Nonstandard Returns 19
Additional Information 20
Additional General Tax Information 20
Major Shareholders 23
Financial Statements 24

GENERAL INFORMATION AND HISTORY

Nationwide Investing Foundation III (NIF III) is an open-end management
investment company, created under the laws of Ohio by a Declaration of Trust
dated as of October 30, 1997.

INVESTMENT OBJECTIVES AND POLICIES

ADDITIONAL INFORMATION ON PORTFOLIO INSTRUMENTS AND INVESTMENT POLICIES

The following information supplements the discussion of the Fund's investment
objectives and policies discussed in the Prospectus. The investment objective is
fundamental and may not be changed without shareholder approval. The investment
policy and types of permitted investments described here may be changed without
approval by the shareholders. There is no guarantee that the Fund's investment
objective will be realized.

MONEY MARKET INSTRUMENTS. The Fund may invest in certain types of money market
instruments which may include the following types of instruments:

- -- obligations with remaining maturities of 13 months or less issued or
guaranteed as to interest and principal by the U.S. Government, its agencies, or
instrumentalities, or any federally chartered corporation;

-- repurchase agreements;

-- certificates of deposit, time deposits and bankers' acceptances issued
by domestic banks (including their branches located outside the United
States

<PAGE> 17
(Eurodollars) and subsidiaries located in Canada), domestic branches of
foreign banks (Yankees dollars), savings and loan associations and similar
institutions;

-- commercial paper, which are short-term unsecured promissory notes issued
by corporations in order to finance their current operations. Generally the
commercial paper will be rated within the top two rating categories by an
NRSRO, or if not rated, is issued and guaranteed as to payment of principal
and interest by companies which at the date of investment have outstanding
debt issue with a high quality rating.

REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with
certain banks or non-bank dealers. In connection with the purchase of a
repurchase agreement by the 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 the Fund may invest or government securities
regardless of their remaining maturities. The Fund will require that additional
securities be deposited with its custodian 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 the Fund's ability to dispose of
the underlying securities, the risk of a possible decline in the value of the
underlying securities during the period in which the Fund seeks to assert its
rights to the securities, 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.

LENDING PORTFOLIO SECURITIES. The 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 U.S. Government
securities or letters of credit issued by banks whose securities meet the
standards for investment by the Fund to be the equivalent of cash. From time to
time, the Fund may return to the borrower or a third party which is unaffiliated
with it, and which is acting as a "placing broker," a part of the interest
earned from the investment of collateral received for securities loaned.

The SEC currently requires that the following conditions must be met
whenever portfolio securities are loaned: (1) the Fund must receive from the
borrower at least 100% collateral of the type discussed in the preceding
paragraph; (2) the borrower must increase such collateral whenever the market
value of the securities loaned rises above the level of such collateral; (3) the
Fund must be able to terminate the loan at any time; (4) the Fund must receive
reasonable interest on the loan, as well as any dividends, interest or other
distributions payable on the loaned securities, and any increase in market
value; (5) the Fund may pay only reasonable custodian fees in connection with
the loan; and (6) while any voting rights on the loaned securities may pass to
the borrower, the Trust's 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.

BORROWING. The Fund may borrow money from banks, limited by the Fund's
fundamental investment restriction to 33-1/3% of its total assets (including the
amount

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<PAGE> 18

borrowed). In addition, the Fund may borrow up to an additional 5% of its total
assets from banks for temporary or emergency purposes. The Fund will not
purchase securities when bank borrowings exceed 5% of the Fund's total assets.

The Fund expects that 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 Fund has established a line-of-credit ("LOC")
with its custodian by which it may borrow for temporary or emergency purposes.
The Fund intends to use the LOC to meet large or unexpected redemptions that
would otherwise force the Fund to liquidate securities under circumstances which
are unfavorable to the Fund's remaining shareholders.

DERIVATIVE INSTRUMENTS. As discussed in the Prospectuses, NAS or a Subadviser
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, but primarily stock index
futures, to hedge the Fund's portfolio or for risk management. Derivations are
financial instruments whose value and performance are based on the value and
performance of another security, financial instrument or index.

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").

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 NAS'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 in the hedged investments. For example, if the Fund entered into a
short hedge because NAS or the Subadviser projected a decline in the price of a
security in the Fund's portfolio, and the price of that security increased
instead, the gain from that increase might be wholly or partially offset by a
decline in the price of the instrument. Moreover, if the price of the instrument
declined by more than the increase in the price of the security, the Fund could
suffer a loss.

(4) As described below, the Fund might be required to maintain assets
as "cover," maintain segregated accounts, or make margin payments when it takes
positions in these instruments involving obligations to third parties (i.e.,

3
<PAGE> 19

instruments other than purchased options). If the Fund were unable to close out
its positions in such instruments, it might be required to continue to maintain
such assets or accounts or make such payments until the position expired or
matured. The requirements might impair the Fund's ability to sell a portfolio
security or make an investment at a time when it would otherwise be favorable to
do so, or require that the Fund sell a portfolio security at a disadvantageous
time. The Fund's ability to close out a position in an instrument prior to
expiration or maturity depends on the existence of a liquid secondary market or,
in the absence of such a market, the ability and willingness of the other party
to the transaction ("counter party") to enter into a transaction closing out the
position. Therefore, there is no assurance that any hedging position can be
closed out at a time and price that is favorable to the Fund.

For a discussion of the Federal income tax treatment of the Fund's
derivative instruments, see "Additional General Tax Information".

Options. The 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. A call option gives the purchaser the right to buy, and the
writer the obligation to sell, the underlying security at the agreed upon
exercise (or "strike") price during the option period. A put option gives the
purchaser the right to sell, and the writer the obligation to buy, the
underlying security at the strike price during the option period. Purchasers of
options pay an amount, known as a premium, to the option writer in exchange for
the right under the option contract. Option contracts may be written with terms
which would permit the holder of the option to purchase or sell the underlying
security only upon the expiration date of the option. The initial purchase or
sale of an option contract is an "opening transaction". In order to close out an
option position, the Fund may enter into a "closing transaction", the sale or
purchase, as the case may be, of an option contract on the same security with
the same exercise price and expiration date as the option contract originally
opened. The purchase of call options serves as a long hedge, and the purchase of
put options serves as a short hedge. Writing put or call options can enable the
Fund to enhance income by reason of the premiums paid by the purchaser of such
options. Writing call options serves as a limited short hedge because declines
in the value of the hedged investment would be offset to the extent of the
premium received for writing the option. However, if the security appreciates to
a price higher than the exercise price of the call option, it can be expected
that the option will be exercised, and the Fund will be obligated to sell the
security at less than its market value or will be obligated to purchase the
security at a price greater than that at which the security must be sold under
the option. All or a portion of any assets used as cover for OTC options written
by the 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 the 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.

The Fund may effectively terminate its right or obligation under an
option by entering into a closing transaction. For example, the Fund may
terminate its

4
<PAGE> 20

obligation under a call or put option that it had written by purchasing an
identical call or put option; this is known as a closing purchase transaction.
Conversely, the Fund may terminate a position in a put or call option it had
purchased by writing an identical put or call option; this is known as a closing
sale transaction. Closing transactions permit the Fund to realize the profit or
limit the loss on an option position prior to its exercise or expiration.

The Fund may purchase or write both OTC options and options traded on
foreign and U.S. exchanges. Exchange-traded options are issued by a clearing
organization affiliated with the exchange on which the option is listed that, in
effect, guarantees completion of every exchange-traded option transaction. OTC
options are contracts between the Fund and the 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.

The Fund's ability to establish and close out positions in
exchange-listed options depends on the existence of a liquid market. The Fund
intends to purchase or write only those exchange-traded options for which there
appears to be a liquid secondary market. However, there can be no assurance that
such a market will exist at any particular time. Closing transactions can be
made for OTC options only by negotiating directly with the counterparty, or by a
transaction in the secondary market if any such market exists. Although the Fund
will enter into OTC options only with counterparties that are expected to be
capable of entering into closing transactions with the Fund, there is no
assurance that the Fund will in fact be able to close out an OTC option at a
favorable price prior to expiration. In the event of insolvency of the counter
party, the Fund might be unable to close out an OTC option position at any time
prior to its expiration.

If the Fund 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 the Fund could cause material losses because the Fund would be unable
to sell the investment used as a cover for the written option until the option
expires or is exercised.

Transactions using OTC options expose the Fund to certain risks. To the
extent required by SEC guidelines, the Fund will not enter into any such
transactions unless it owns either (1) an offsetting ("covered") position in
securities, other options, or futures or (2) cash and liquid obligations with a
value sufficient at all times to cover its potential obligations to the extent
not covered as provided in (1) above. The Fund will also set aside cash and/or
appropriate liquid assets in a segregated custodial account if required to do so
by the SEC and CFTC regulations. Assets used as cover or held in a segregated
account cannot be sold while the position in the corresponding option or futures
contract is open, unless they are replaced with similar assets. As a result, the
commitment of a large portion of the Fund's assets to segregated accounts as a
cover could impede portfolio management or the Fund's ability to meet redemption
requests or other current obligations.

The Fund may engage in options transactions on indices in much the same
manner as the options on securities discussed above, except that index options
may serve as a hedge against overall fluctuations in the securities markets in
general. Index options (or options on securities indices) are similar in many
respects to options on securities except that an index option gives the holder
the right to receive, upon exercise, cash instead of securities, if the closing
level of the securities index upon which the option is based is greater than, in
the case of a call , or less than, in the case of a put, the exercise price of
the option. Price movements in securities in which the Fund owns or intends to
purchase probably will not

5
<PAGE> 21

correlate perfectly with movements in the level of an index and, therefore, the
Fund bears the risk of a loss on an index option that is not completely offset
by movements in the price of such securities. Because index options are settled
in cash, a call writer cannot determine the amount of its settlement obligations
in advance and, unlike call writing on specific securities, cannot provide in
advance for, or cover, its potential settlement obligations acquiring and
holding the underlying securities. The Fund will be required to segregate assets
and/or provide an initial margin to cover index options that would require it to
pay cash upon exercise.

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.

Futures Contracts. The Fund may enter into futures contracts, including
interest rate, index, and currency futures and purchase and write (sell) related
options. The purchase of futures or call options thereon can serve as a long
hedge, and the sale of futures or the purchase of put options thereon can serve
as a short hedge. Writing covered call options on futures contracts can serve as
a limited short hedge, and writing covered put options on futures contracts can
serve as a limited long hedge, using a strategy similar to that used for writing
covered options in securities. The Fund's hedging may include purchases of
futures as an offset against the effect of expected increases in securities
prices or currency exchange rates and sales of futures as an offset against the
effect of expected declines in securities prices or currency exchange rates. The
Fund may write put options on futures contracts while at the same time
purchasing call options on the same futures contracts in order to create
synthetically a long futures contract position. Such options would have the same
strike prices and expiration dates. The Fund will engage in this strategy only
when NAS or a Subadviser believes it is more advantageous to the Fund than is
purchasing the futures contract.

To the extent required by regulatory authorities, the Fund will only
enter into futures contracts that are traded on U.S. or foreign exchanges or
boards of trade approved by the CFTC and are standardized as to maturity date
and underlying financial instrument. These transactions may be entered into for
"bona fide hedging" purposes as defined in CFTC regulations and other
permissible purposes including increasing return and hedging against changes in
the value of portfolio securities due to anticipated changes in interest rates,
currency values and/or market conditions. The ability of the Fund to trade in
futures contracts may be limited by the requirements of the Code applicable to a
regulated investment company.

The Fund will not enter into futures contracts and related options for
other than "bona fide hedging" purposes for which the aggregate initial margin
and premiums required to establish positions exceed 5% of the Fund's net asset
value after taking into account unrealized profits and unrealized losses on any
such contracts it has entered into. There is no overall limit on the percentage
of the Fund's assets that may be at risk with respect to futures activities.
Although techniques other than sales and purchases of futures contracts could be
used to reduce the Fund's exposure to market, currency, or interest rate
fluctuations, the Fund may be able to hedge its exposure more effectively and
perhaps at a lower cost through using futures contracts.

A futures contract provides for the future sale by one party and
purchase by another party of a specified amount of a specific financial
instrument (e.g., debt security) or currency for a specified price at a
designated date, time, and place. An index futures contract is an agreement
pursuant to which the parties agree to take or make delivery of an amount of
cash equal to a specified multiplier times the

6
<PAGE> 22

difference between the value of the index at the close of the last trading day
of the contract and the price at which the index futures contract was originally
written. Transactions costs are incurred when a futures contract is bought or
sold and margin deposits must be maintained. A futures contract may be satisfied
by delivery or purchase, as the case may be, of the instrument, the currency, or
by payment of the change in the cash value of the index. More commonly, futures
contracts are closed out prior to delivery by entering into an offsetting
transaction in a matching futures contract. Although the value of an index might
be a function of the value of certain specified securities, no physical delivery
of those securities is made. If the offsetting purchase price is less than the
original sale price, the Fund realizes a gain; if it is more, the Fund realizes
a loss. Conversely, if the offsetting sale price is more than the original
purchase price, the Fund realizes a gain; if it is less, the Fund realizes a
loss. The transaction costs must also be included in these calculations. There
can be no assurance, however, that the Fund will be able to enter into an
offsetting transaction with respect to a particular futures contract at a
particular time. If the Fund is not able to enter into an offsetting
transaction, the Fund will continue to be required to maintain the margin
deposits on the futures contract.

No price is paid by the Fund upon entering into a futures contract.
Instead, at the inception of a futures contract, the Fund is required to deposit
in a segregated account with its custodian, in the name of the futures broker
through whom the transaction was effected, "initial margin" consisting of cash,
U.S. Government securities or other liquid obligations, in an amount generally
equal to 10% or less of the contract value. Margin must also be deposited when
writing a call or put option on a futures contract, in accordance with
applicable exchange rules. Unlike margin in securities transactions, initial
margin on futures contracts does not represent a borrowing, but rather is in the
nature of a performance bond or good-faith deposit that is returned to the Fund
at the termination of the transaction if all contractual obligations have been
satisfied. Under certain circumstances, such as periods of high volatility, the
Fund may be required by an exchange to increase the level of its initial margin
payment, and initial margin requirements might be increased generally in the
future by regulatory action.

Subsequent "variation margin" payments are made to and from the futures
broker daily as the value of the futures position varies, a process known as
"marking to market." Variation margin does not involve borrowing, but rather
represents a daily settlement of the Fund's obligations to or from a futures
broker. When the Fund purchases an option on a future, the premium paid plus
transaction costs is all that is at risk. In contrast, when the Fund purchases
or sells a futures contract or writes a call or put option thereon, it is
subject to daily variation margin calls that could be substantial in the event
of adverse price movements. If the Fund has insufficient cash to meet daily
variation margin requirements, it might need to sell securities at a time when
such sales are disadvantageous. Purchasers and sellers of futures positions and
options on futures can enter into offsetting closing transactions by selling or
purchasing, respectively, an instrument identical to the instrument held or
written. Positions in futures and options on futures may be closed only on an
exchange or board of trade on which they were entered into (or through a linked
exchange). Although the Fund intends to enter into futures transactions only on
exchanges or boards of trade where there appears to be an active market, there
can be no assurance that such a market will exist for a particular contract at a
particular time.

Under certain circumstances, futures exchanges may establish daily
limits on the amount that the price of a future or option on a futures contract
can vary from the previous day's settlement price; once that limit is reached,
no trades may be made that day at a price beyond the limit. Daily price limits
do not limit potential losses because prices could move to the daily limit for
several consecutive days with little or no trading, thereby preventing
liquidation of unfavorable positions.

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<PAGE> 23

If the Fund were unable to liquidate a futures or option on a futures
contract position due to the absence of a liquid secondary market or the
imposition of price limits, it could incur substantial losses, 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.

SPDRS

The Fund may invest in Standard & Poor's Depository Receipts ("SPDRS"). SPDRs
are interests in unit investment trusts. Such investment trusts invest in a
securities portfolio that includes substantially all of the common stocks (in
substantially the same weights) as the common stocks included in a particular
Standard & Poor's Index such as the S&P 500. SPDRs are traded on the American
Stock Exchange, but may not be redeemed. The results of SPDRs will not match the
performance of the designated S&P Index due to reductions in the SPDRs'
performance attributable to transaction and other expenses, including fees paid
by the SPDR to service providers. SPDRs distribute dividends on a quarterly
basis.

SPDRs are not actively managed. Rather, a SPDR's objective is to track the
performance of a specified index. Therefore, securities may be purchased,
retained and sold by SPDRs at times when an actively managed trust would not do
so. As a result, you can expect greater risk of loss (and a correspondingly
greater prospect of gain) from changes in the value of securities that are
heavily weighted in the index than would be the case if SPDR was not fully
invested in such securities. Because of this, a SPDRs price can be volatile, a
Fund may sustain sudden, and sometimes substantial, fluctuations in the value of
its investment in SPDRs.

INVESTMENT RESTRICTIONS

The following are fundamental investment restrictions of the Fund which cannot
be changed without the authorization of the majority of the outstanding shares
of the Fund.

THE FUND:

- May not borrow money or issue senior securities, except that the Fund
may enter into reverse repurchase agreements and may otherwise borrow
money and issue senior securities as and to the extent permitted by
the 1940 Act or any rule, order or interpretation thereunder.

- 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, except that the Fund may acquire
real estate through ownership of securities or instruments and may
purchase or sell securities issued by entities or investment vehicles
that own or deal in real estate (including interests therein) or
instruments secured by real estate (including interests therein).

- May not purchase or sell commodities or commodities contracts, except
to the extent disclosed in the current Prospectus of the Fund.

- May not lend any security or make any other loan, except that the Fund
may purchase or hold debt securities and lend portfolio securities in
accordance with its investment objective and policies, make time
deposits with financial institutions and enter into repurchase
agreements.

- May not purchase the securities of any issuer if, as a result, 25% or
more than (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

8
<PAGE> 24

industry. This limitation does not apply to securities issued by the
U.S. Government or its agencies or instrumentalities and obligations
issued by state, county or municipal governments. The following
industries are considered separate industries for purposes of this
investment restriction: electric, natural gas distribution, natural
gas pipeline, combined electric and natural gas, and telephone
utilities, captive borrowing conduit, equipment finance, premium
finance, leasing finance, consumer finance and other finance.

In addition, the Fund may not purchase securities of one issuer, other than
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, if at the end of each fiscal quarter, (a) more than 5% of the
Fund's total assets (taken at current value) would be invested in such issuer
(except that up to 50% of the Fund's total assets may be invested without regard
to such 5% limitation), and (b) more than 25% of its total assets (taken at
current value) would be invested in securities of a single issuer. There is no
limit to the percentage of assets that may be invested in U.S. Treasury bills,
notes, or other obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities.

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

The Fund may not:

- - Sell securities short, unless the Fund owns or has the right to obtain
securities equivalent in kind and amount to the securities sold short or
unless it covers such short 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.

- - 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%
(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, reorganization or offer of
exchange, or (b) to the extent permitted by the 1940 Act or any rules or
regulations thereunder or pursuant to any exemptions therefrom.

- - Pledge, mortgage or hypothecate any assets owned by the Fund in excess of
33 1/3% of the Fund's total assets at the time of such pledging, mortgaging
or hypothecating.

9
<PAGE> 25

TRUSTEES AND OFFICERS
OF THE TRUST

TRUSTEES AND OFFICERS

The principal occupation of the Trustees and Officers during the last five
years, their ages and their affiliations are:

JOHN C. BRYANT, Trustee*, Age 62
411 Oak St., Suite 306, Cincinnati, Ohio 45219
Dr. Bryant is Executive Director, 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.

SUE A. 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.

CHARLES L. FUELLGRAF, JR., Trustee*+, Age 67
600 South Washington Street, Butler, Pennsylvania
Mr. Fuellgraf is Chief Executive Officer of Fuellgraf Electric Company, an
electrical construction and engineering company. He is a Director of the
Nationwide Insurance Companies and associated companies.

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 E. State Street, Columbus, Ohio
Mr. Kridler is President of the Columbus Association of Performing Arts.

DIMON R. MCFERSON, Trustee*+, Age 61
One Nationwide Plaza, Columbus, Ohio
Mr. McFerson is President and Chief Executive Officer of the Nationwide
Insurance Enterprise.

NANCY C. THOMAS, Trustee+, Age 64
10835 Georgetown Road, NE, Louisville, Ohio
Ms. Thomas is a farm owner and operator. She is also a Director of the
Nationwide Insurance Companies and associated companies.

HAROLD W. WEIHL, Trustee+, Age 66
14282 King Road, Bowling Green, Ohio
Mr. Weihl is a owner and operator of Weihl Farms. He is also a Director of the
Nationwide Insurance Companies and associated companies.

DAVID C. WETMORE, Trustee, Age 50
11495 Sunset Hills Rd - Suite #210, Reston, Virginia

10
<PAGE> 26
Mr. Wetmore is the Managing Director of The Updata Capital, a venture capital
firm.

JAMES F. LAIRD, JR., Treasurer
Three Nationwide Plaza, Columbus, Ohio
Mr. Laird is Vice President and General Manager of Nationwide Advisory Services,
Inc., the Distributor and Investment Manager.

CHRISTOPHER A. CRAY, Assistant Treasurer
Three Nationwide Plaza, Columbus, Ohio
Mr. Cray is Treasurer of Nationwide Advisory Services, Inc., the Distributor and
Investment Manager. Prior to that he was Director - Corporate Accounting of
Nationwide Insurance Enterprise.

ELIZABETH A. DAVIN, Secretary
Three Nationwide Plaza, Columbus, Ohio
Ms. Davin is Counsel of Druen, Dietrich, Reynolds & Koogler, the Trust's legal
counsel.

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

*Members of the Executive Committee. Mr. McFerson is Chairman. Mr. Fuellgraf is
the Alternate Member. The Executive Committee has the authority to act for the
Board of Trustees except as provided by law and except as specified in the
Trust's Bylaws.

All Trustees and Officers of the Trust own less than 1% of its outstanding
shares.

The Trustees receive fees and reimbursement for expenses of attending board
meetings from the Trust. NAS reimburses the Trust for fees and expenses paid to
Trustees who are interested persons of the Trust. The Compensation Table below
sets forth the total compensation paid to the Trustees of the Trust, before
reimbursement, for the fiscal year ended October 31, 1998. In addition, the
table sets forth the total compensation to be paid to the Trustees from all
funds in the Nationwide Fund Complex, including the predecessor investment
companies to the Trust, for the fiscal year ended October 31, 1998. Trust
officers receive no compensation from the Trust in their capacity as officers.
<TABLE>
<CAPTION>

COMPENSATION TABLE
PENSION
RETIREMENT
AGGREGATE BENEFITS ANNUAL TOTAL
COMPENSATION ACCRUED AS BENEFITS COMPENSATION
NAME OF PERSON, FROM PART OF FUND UPON FROM THE FUND
POSITION THE TRUST EXPENSES RETIREMENT COMPLEX**

<S> <C> <C> <C> <C>
John C. Bryant, Trustee $ 10,000 --0-- --0-- $21,000
C. Brent DeVore, Trustee 10,000 --0-- --0-- 12,250
Sue A. Doody, Trustee 10,000 --0-- --0-- 21,000
Robert M Duncan, Trustee 10,000 --0-- --0-- 21,000
Charles L. Fuellgraf, Jr, Trustee 10,000 --0-- --0-- 10,000
Thomas J. Kerr, IV, Trustee 10,000 --0-- --0-- 21,000
Douglas F. Kridler, Trustee 10,000 --0-- --0-- 21,000
Dimon R. McFerson, Trustee --0-- --0-- --0-- --0--
Nancy C. Thomas, Trustee 10,000 --0-- --0-- 10,000
Harold W. Weihl, Trustee 10,000 --0-- --0-- 10,000
David C. Wetmore, Trustee 10,000 --0-- --0-- 12,250
<FN>

**The Fund Complex includes Trusts comprised of thirty four investment company
portfolios.
</TABLE>

INVESTMENT ADVISORY AND OTHER SERVICES

11
<PAGE> 27

Under the terms of the Investment Advisory Agreement dated May 9, 1998, as
amended as of November 1, 1998, NAS oversees the investment of the assets for
the S&P 500 Index Fund. Subject to the supervision and direction of the
Trustees, the Adviser also evaluates and monitors the performance of the
subadviser. The Adviser is also authorized to select and place portfolio
investments on behalf of the Fund, however the Adviser does not intend to do so
at this time.

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

The S&P 500 Index Fund pays the Adviser a fee at the annual rate of .13% of the
Fund's average daily net assets for investment advisory services.

The Adviser pays the compensation of the Trustees and officers affiliated with
the Adviser. The Adviser also furnishes, at its own expense, all necessary
administrative services, office space, equipment, and clerical personnel for
servicing the investments of the Trust and maintaining its investment advisory
facilities, and executive and supervisory personnel for managing the investments
and effecting the portfolio transactions of the Trust.

The Investment Advisory Agreement also specifically provides that the Adviser,
including its directors, officers, and employees, shall not be liable for any
error of judgment, or mistake of law, or for any loss arising out of any
investment, or for any act or omission in the execution and management of the
Trust, except for willful misfeasance, bad faith, or gross negligence in the
performance of its duties, or by reason of reckless disregard of its obligations
and duties under the Agreement. The Agreement will continue in effect for an
initial period of two years and thereafter shall continue automatically for
successive annual periods provided such continuance is specifically approved at
least annually by the Trustees, or by vote of a majority of the outstanding
voting securities of the Trust, and, in either case, by a majority of the
Trustees who are not parties to the Agreement or interested persons of any such
party. The Agreement terminates automatically in the event of its "assignment",
as defined under the 1940 Act. It may be terminated as to the Fund without
penalty by vote of a majority of the outstanding voting securities

12
<PAGE> 28

of that Fund, or by either party, on not less than 60 days written notice. The
Agreement further provides that the Adviser may render similar services to
others.

The Trust pays the compensation of the Trustees who are not affiliated with the
Adviser and all expenses (other than those assumed by the Adviser), including
governmental fees, interest charges, taxes, membership dues in the Investment
Company Institute allocable to the Trust; fees under the Trust's Fund
Administration Agreement; fees and expenses of independent certified public
accountants, legal counsel, and any transfer agent, registrar, and dividend
disbursing agent of the Trust; expenses of preparing, printing, and mailing
shareholders' reports, notices, proxy statements, and reports to governmental
offices and commissions; expenses connected with the execution, recording, and
settlement of portfolio security transactions, insurance premiums, fees and
expenses of the custodian for all services to the Trust; and expenses of
calculating the net asset value of shares of the Trust, expenses of
shareholders' meetings, and expenses relating to the issuance, registration, and
qualification of shares of the Trust.

For services provided under the Investment Management Agreement, NAS receives an
annual fee paid monthly based on average daily net assets of each fund in the
Nationwide Family of Funds according to the following schedule:
<TABLE>
<CAPTION>

FUND ASSETS FEE

<S> <C> <C>
Nationwide Mid Cap Growth Fund, $0 up to $250 million 0.60%
Nationwide Growth Fund, and
Nationwide Fund
$250 million up to $1 billion 0.575%
$1 billion up to $2 billion 0.55%
$2 billion up to $5 billion 0.525%
$5 Billion and more 0.50%

Nationwide Bond Fund, $0 up to $250 million 0.50%
Nationwide Tax-Free Income Fund,
Nationwide Long-Term U.S. Government
Bond Fund, and Nationwide
Intermediate U.S. Government Bond Fund

$250 million up to $1 billion 0.475%
$1 billion up to $2 billion 0.45%
$2 billion up to $5 billion 0.425%
$5 Billion and more 0.40%
Nationwide Money Market Fund $0 up to $1 billion 0.40%
$1 billion up to $2 billion 0.38%
$2 billion up to $5 billion 0.36%
$5 billion and more 0.34%

Nationwide S&P 500 Index Fund all assets 0.13%

Large Cap Value up to $100 million 0.75%
$100 million or more 0.70%

Large Cap Growth up to $150 million 0.80%
$150 million or more 0.70%

Balanced up to $100 million 0.75%
$100 million or more 0.70%

Small Cap up to $100 million 0.95%

</TABLE>

13
<PAGE> 29
<TABLE>
<CAPTION>
FUND ASSETS FEE
<S> <C> <C>
$100 million or more 0.80%

International up to $200 million 0.85%
$200 million or more 0.80%
</TABLE>

During the fiscal years ended October 31, 1998, 1997 and 1996, NAS received the
following fees for investment advisory services*:
<TABLE>
<CAPTION>
FISCAL YEARS ENDED OCTOBER 31,

NATIONWIDE FUND
1998 1997 1996

<S> <C> <C> <C>
Mid Cap Growth $61,706 $63,883 $54,053
Growth 4,894,110 3,750,599 3,212,196
Nationwide Fund 9,977,231 5,938,011 4,425,921
Bond 647,809 629,068 663,545
Tax-Free 1,505,626 1,810,070 1,855,962
Long-Term U.S. Government 254,928 343,259 414,415
Intermediate U.S. Government 266,473 256,016 255,149
Money Market** 3,857,898 3,519,727 2,969,392
<FN>

* The fees paid to NAS during the fiscal years ended October 31, 1998, 1997, and
1996 were paid by funds that were acquired by NIF III in a reorganization that
occurred on May 9, 1998. As part of the reorganization, NIF III acquired all of
the assets and assumed all of the liabilities of each of the funds in Nationwide
Investing Foundation, Nationwide Investing Foundation II, and Financial Horizons
Investment Trust.

** Net of waivers of $221,174, $389,150 and $328,076 for 1998, 1997 and 1996,
respectively.
</TABLE>

During the period from July 24, 1998 (date of commencement of operations)
through October 31, 1998, NAS waived advisory fees for the S&P 500 Index Fund in
the amount of $7,315.

The Subadviser - Subject to the supervision of the Adviser and the Trust's Board
of Trustees, The Dreyfus Corporation manages the S&P 500 Index Fund's assets in
accordance with such Fund's investment objective and policies. The Subadviser
shall make investment decisions for the S&P 500 Index Fund, and in connection
with such investment decisions shall place purchase and sell orders for
securities. For the investment management services it provides to the Fund, the
Subadviser receives an annual fee from the Adviser in the following amounts:

.07% on the first $250 million in assets
.06% on the next $250 million in assets
.05% on the next $500 million in assets
.04% over $1 billion in assets.

During the period from July 24, 1998 (date of commencement of operations)
through October 31, 1998, NAS paid $3,939 in fees to the Subadviser.

Below is a brief description of the Subadviser.

The Dreyfus Corporation ("Dreyfus"), 200 Park Avenue, New York, N.Y. 10166,
which was formed in 1947 and is registered under the Investment Advisers Act of
1940, serves as subadviser to the Fund pursuant to a Subadvisory Agreement dated
July 23,

14
<PAGE> 30

1998. Dreyfus is a wholly-owned subsidiary of Mellon Bank, N.A., which is a
wholly-owned subsidiary of Mellon Bank Corporation.

DISTRIBUTOR

NAS serves as agent for the Fund in the distribution of its Shares pursuant to
an Underwriting Agreement dated as of May 9, 1998, as amended as of November 2,
1998, (the "Underwriting Agreement"). Unless otherwise terminated, the
Underwriting Agreement will continue in effect until May 9, 2000, and year to
year thereafter for successive annual periods, if, as to each Fund, such
continuance is approved at least annually by (i) the Trust's Board of Trustees
or by the vote of a majority of the outstanding shares of that Fund, and (ii)
the vote of a majority of the Trustees of the Trust who are not parties to the
Underwriting Agreement or interested persons (as defined in the 1940 Act) of any
party to the Underwriting Agreement, cast in person at a meeting called for the
purpose of voting on such approval. The Underwriting Agreement may be terminated
in the event of any assignment, as defined in the 1940 Act.

In its capacity as Distributor, NAS solicits orders for the sale of
Shares, advertises and pays the costs of advertising, office space and the
personnel involved in such activities. NAS receives no compensation under the
Underwriting Agreement with the Trust, but may retain all or a portion of the
sales charge imposed upon sales of Shares of each of the Funds.

DISTRIBUTION PLAN

The Fund has adopted a Distribution Plan (the "Plan") under Rule 12b-1 of the
1940 Act which permits the Fund to compensate NAS as the Fund's Distributor, for
expenses associated with distribution of shares. Although actual distribution
expenses may be more or less, under the Plan the Fund shall pay an annual fee
not exceeding .07% of the average daily net assets of the Local Fund Shares of
the Nationwide S&P 500 Index Fund to NAS. Distribution expenses paid by NAS may
include the costs of marketing, printing and mailing prospectuses and sales
literature to prospective investors, advertising, and compensation to sales
personnel and broker-dealers. During the period from July 24, 1998 (date of
commencement of operations) through October 31, 1998, NAS received $3,939 in
12b-1 fees from the Fund.

As required by Rule 12b-1, the Plan was approved by the Board of Trustees,
including a majority of the Trustees who are not interested persons of the Fund
and who have no direct or indirect financial interest in the operation of the
Plan (the "Independent Trustees"). The Plan was approved by the Board of
Trustees on November 7, 1997 and amended and approved by the Board of Trustees
on May 8, 1998, September 1 1998 and November 6, 1998. The Plan may be
terminated by vote of a majority of the Independent Trustees, or by vote of
majority of the outstanding shares of the Fund. Any change in the Plan that
would materially increase the distribution cost to the Fund requires Shareholder
approval. The Trustees review quarterly a written report of such costs and the
purposes for which such costs have been incurred. The Plan may be amended by the
vote of the Trustees including a majority of Independent Trustees, cast in
person at a meeting called for that purpose. For so long as the Plan is in
effect, selection and nomination of those Trustees who are not interested
persons of the Trust shall be committed to the discretion of such disinterested
persons. All agreements with any person relating to the implementation of the
Plan may be terminated at any time on 60 days' written notice without payment of
any penalty, by vote of a majority of the Independent Trustees or by a vote of
the majority of the outstanding Shares of the Fund. The Plan will continue in
effect for successive one-year periods, provided that each such continuance is
specifically approved (i) by the vote of a majority of the Independent Trustees,
and (ii) by a vote of a majority of the entire Board of Trustees cast in person
at a meeting called for that purpose. The Board of Trustees has a duty to
request and evaluate such information as may be reasonably necessary for them to
make an informed determination of whether the Plan should be implemented or
continued. In addition the Trustees in approving the Plan must determine that

15
<PAGE> 31

there is a reasonable likelihood that the Plan will benefit the Fund and its
Shareholders.

The Board of Trustees of the Trust believes the Plan is in the best
interest of the Fund since it encourages Fund growth and maintenance of Fund
assets. As the Fund grows in size, certain expenses, and therefore total
expenses per Share, may be reduced and overall performance per Share may be
improved.

NAS may enter into, from time to time, Rule 12b-1 Agreements with
selected dealers pursuant to which such dealers will provide certain services in
connection with the distribution of the Fund's Shares including, but not limited
to, those discussed above.

The Fund has entered into a licensing agreement which authorizes the Fund to use
the trademarks of the McGraw-Hill Companies, Inc.(1)

(2) Standard & Poor's 500 and S&P 500(R) are trademarks of The McGraw-Hill
Companies, Inc. The Fund is not sponsored, endorsed, sold or promoted by
Standard & Poor's, a division of The McGraw-Hill Companies, Inc.("S&P"). S&P
makes no representation or warranty, expressed or implied, to the shareholders
of the Fund or any member of the public regarding the advisability of investing
in securities generally or in the Fund particularly or the ability of the S&P
500 Index to track general stock market performance. S&P's only relationship to
the Fund or the Adviser is the licensing of certain trademarks and trade names
of S&P and of the S&P 500 index which is determined, composed and calculated by
S&P without regard to the Fund. S&P has no obligation to take the needs of the
Fund or its shareholders into consideration in determining, composing or
calculating the S&P 500 Index. S&P is not responsible for or has not
participated in the determination of the prices and amount of the Fund shares or
the timing of the issuance or sale of Fund shares or in the determination or
calculation of the equation by which Fund shares are redeemed. S&P has no
obligation or liability in connection with the administration, marketing or
trading of the Fund. S&P does not guarantee the accuracy makes no warranty,
expressed or implied as to the results to be obtained by the Fund, shareholders
of the Fund, or any other person or entity from the use of the S&P 500 Index or
any data included therein. Without limiting any of the foregoing, in no event
shall S&P 500 Index have any liability for any special, punitive, indirect, or
consequential damages, including lost profits even if notified of the
possibility of such damages.

OTHER SERVICES FOR THE FUND

Under a separate Fund Administration Agreement dated May 9, 1998 as amended
November 2, 1998, NAS also provides various administrative and accounting
services, including daily valuation of the Fund's shares and preparation of
financial statements, tax returns and regulatory reports. For these services the
Fund pays NAS an annual fee in the amount of 0.05% on assets up to $1 billion
and 0.04% on assets of $1 billion and more. During the period from July 24, 1998
(date of commencement of operations) through October 31, 1998, NAS received
$2,814 in administrative fees from the Fund

Nationwide Investors Services, Inc. ("NISI") is the Transfer and Dividend
Disbursing Agent for all Nationwide Funds. NISI, a wholly-owned subsidiary of
NAS will receive fees for transfer agent services to the Fund in the amount of
.01% annually of average daily net assets of the S&P 500 Index Fund. Management
believes the charges for the services performed are comparable to fees charged
by other companies performing similar services. During the period from July 24,
1998 (date of commencement of operations) through October 31 1998, NISI received
$563 in transfer agent fees from the Fund.

16
<PAGE> 32

The Fifth Third Bank ("Fifth Third"), 38 Fountain Square Plaza, Cincinnati, OH
45263, is the custodian for the Fund and makes all receipts and disbursements
under a Custody Agreement. Fifth Third performs no managerial or policy making
functions for the Funds.

KPMG Peat Marwick LLP, Two Nationwide Plaza, Columbus, OH 43215, serves as the
independent auditors for the Trust.

BROKERAGE ALLOCATION

ALLOCATION OF PORTFOLIO BROKERAGE-- There is no commitment by NAS to place
orders with any particular broker/dealer or group of broker/dealers. Orders for
the purchases and sales of portfolio securities of the Fund are placed where, in
the judgment of NAS or the Subadviser, the best executions can be obtained. None
of the firms with whom orders are placed are engaged in the sale of shares of
the Fund. In allocating orders among brokers for execution on an agency basis,
in addition to price considerations, the usefulness of the brokers' overall
services is also considered. Services provided by brokerage firms include
efficient handling of orders, useful analyses of corporations, industries and
the economy, statistical reports and other related services for which no charge
is made by the broker above the negotiated brokerage commissions. The Fund and
NAS believe that these services and information, which in many cases would be
otherwise unavailable to NAS, are of significant value to NAS, but it is not
possible to place an exact dollar value thereon. NAS does not believe that the
receipt of such services and information tends to reduce materially NAS'
expense.

During the period from July 24, 1998 (date of commencement of operations)
through October 31, 1998, the Fund paid brokerage commissions in the amount of
$8,386.

In the case of securities traded in the over-the-counter market, the Fund will
normally deal with the market makers for such securities unless better prices
can be obtained through brokers.

CALCULATING YIELD AND TOTAL RETURN

The Fund may from time to time advertise historical performance, subject to Rule
482 under the Securities Act. 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
(compound) total return quotations for the most recent one, five, and ten-year
periods (or life if the Fund has been in operation less than one of the
prescribed periods). Average annual (compound) total return represents
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 minus the maximum sales charge, for a specified period of time, by the
amount of the initial payment, assuming reinvestment of all dividends and
distributions. In calculating the standard total returns, the current maximum
applicable sales charge is deducted from the initial investment. 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 Fund's average annual total return for the period from July
24, 1998 (date of commencement of operations) through October 31, 1998 was
(3.08%).

NONSTANDARD RETURNS

The Fund may also choose to show nonstandard returns including total return, and
simple average total return. Nonstandard returns may or may not reflect
reinvestment of all dividends and capital gains; in addition, sales charge
assumptions will vary. Sales charge percentages decrease as amounts invested
increase as outlined in the prospectus; therefore, returns increase as sales
charges decrease.

17
<PAGE> 33

Total return represents the cumulative percentage change in the value of an
investment over time, calculated by subtracting the initial investment from the
redeemable value and dividing the result by the amount of the initial
investment. The simple average total return is calculated by dividing total
return by the number of years in the period, and unlike average annual
(compound) total return, does not reflect compounding.

ADDITIONAL INFORMATION

DESCRIPTION OF SHARES - The Declaration of Trust permits the Trustees to issue
an unlimited number of full and fractional shares of beneficial interest of the
Fund and to divide or combine such shares into a greater or lesser number of
shares without thereby changing the proportionate beneficial interests in the
Trust. Each share of the Fund represents an equal proportionate interest in the
Fund with each other share. The Trust reserves the right to create and issue
shares of a number of different portfolios or series. In that case, the shares
of each fund would participate equally in the earnings, dividends, and assets of
the particular portfolio or series, but shares of all funds would vote together
in the election of Trustees. Upon liquidation of a portfolio or series, its
shareholders are entitled to share pro rata in the net assets of such portfolio
or series available for distribution to shareholders.

VOTING RIGHTS--Shareholders of each class of shares have one vote for each share
held and a proportionate fractional vote for any fractional share held. An
annual or special meeting of shareholders to conduct necessary business is not
required by the Declaration of Trust, the 1940 Act or other authority except,
under certain circumstances, to amend the Declaration of Trust, the Investment
Advisory Agreement, fundamental investment objectives, investment policies,
investment restrictions, to elect and remove Trustees, to reorganize the Trust
or any series or class thereof and to act upon certain other business matters.
In regard to termination, sale of assets, the change of investment objectives,
policies and restrictions or the approval of an Investment Advisory Agreement,
the right to vote is limited to the holders of shares of the particular fund
affected by the proposal.

To the extent that such a meeting is not required, the Trust does not intend to
have an annual or special meeting of shareholders. The Trust has represented to
the Commission that the Trustees will call a special meeting of shareholders for
purposes of considering the removal of one or more Trustees upon written request
therefor from shareholders holding not less than 10% of the outstanding votes of
the Trust and the Trust will assist in communicating with other shareholders as
required by Section 16(c) of the 1940 Act. At such meeting, a quorum of
shareholders (constituting a majority of votes attributable to all outstanding
shares of the Trust), by majority vote, has the power to remove one or more
Trustees.

ADDITIONAL GENERAL TAX INFORMATION

Each of the fourteen Funds of the Trust is treated as a separate entity
for Federal income tax purposes and intends to qualify as a "regulated
investment company" under the Code, for so long as such qualification is in the
best interest of that Fund's shareholders. In order to qualify as a regulated
investment company, the Fund must, among other things: diversify its investments
within certain prescribed limits; and derive at least 90% of its gross income
from dividends, interest, payments with respect to securities loans, and gains
from the sale or other disposition of securities or foreign currencies, or other
income derived with respect to its business of investing in such stock,
securities, or currencies. In addition, to utilize the tax provisions specially
applicable to regulated investment companies, the Fund must distribute to its
shareholders at least 90% of its investment company taxable income for the year.
In general, the Fund's investment company taxable income will be its taxable
income subject to certain adjustments and

18
<PAGE> 34

excluding the excess of any net long-term capital gain for the taxable year over
the net short-term capital loss, if any, for such year.

A non-deductible 4% excise tax is imposed on regulated investment
companies that do not distribute in each calendar year (regardless of whether
they otherwise have a non-calendar taxable year) an amount equal to 98% of their
ordinary income for the calendar year plus 98% of their capital gain net income
for the one-year period ending on October 31 of such calendar year. The balance
of such income must be distributed during the next calendar year. If
distributions during a calendar year were less than the required amount, the
Fund would be subject to a non-deductible excise tax equal to 4% of the
deficiency.

Although each Fund expects to qualify as a "regulated investment
company" and to be relieved of all or substantially all federal income taxes,
depending upon the extent of its activities in states and localities in which
its offices are maintained, in which its agents or independent contractors are
located, or in which it is otherwise deemed to be conducting business, the Fund
may be subject to the tax laws of such states or localities. In addition, if for
any taxable year the Fund does not qualify for the special tax treatment
afforded regulated investment companies, all of its taxable income will be
subject to federal tax at regular corporate rates (without any deduction for
distributions to its shareholders). In such event, dividend distributions would
be taxable to shareholders to the extent of earnings and profits, and would be
eligible for the dividends received deduction for corporations.

It is expected that each Fund will distribute annually to shareholders
all or substantially all of that Fund's net ordinary income and net realized
capital gains and that such distributed net ordinary income and distributed net
realized capital gains will be taxable income to shareholders for federal income
tax purposes, even if paid in additional shares of that Fund and not in cash.

Distribution by the Fund of the excess of net long-term capital gain
over net short-term capital loss, if any, is taxable to shareholders as
long-term capital gain in the year in which it is received, regardless of how
long the shareholder has held the shares. Such distributions are not eligible
for the dividends-received deduction.

Federal taxable income of individuals is subject to graduated tax rates
of 15%, 28%, 31%, 36% and 39.6%. Further, the effective marginal tax rate may be
in excess of 39.6%, because adjustments reduce or eliminate the benefit of the
personal exemption and itemized deductions for individuals with gross income in
excess of certain threshold amounts.

Long-term capital gains of individuals are subject to a maximum tax
rate of 20% (10% for individuals in the 15% ordinary income tax bracket).
Capital losses may be used to offset capital gains. In addition, individuals may
deduct up to $3,000 of net capital loss each year to offset ordinary income.
Excess net capital loss may be carried forward and deducted in future years. The
holding period for long-term capital gains is more than one year.

Federal taxable income of corporations in excess of $75,000 up to $10
million is subject to a 34% tax rate; however, because the benefit of lower tax
rates on a corporation's taxable income of less than $75,000 is phased out for
corporations with income in excess of $100,000 but lower than $335,000, a
maximum marginal tax rate of 39% may result. Federal taxable income of
corporations in excess of $10 million is subject to a tax rate of 35%. Further,
a corporation's federal taxable income in excess of $15 million is subject to an
additional tax equal to 3% of taxable income over $15 million, but not more than
$100,000.

19
<PAGE> 35

Capital gains of corporations are subject to tax at the same rates
applicable to ordinary income. Capital losses may be used only to offset capital
gains and excess net capital loss may be carried back three years and forward
five years.

Certain corporations are entitled to a 70% dividends received deduction
for distributions from certain domestic corporations. Each Fund will designate
the portion of any distributions which qualify for the 70% dividends received
deduction. The amount so designated may not exceed the amount received by that
Fund for its taxable year that qualifies for the dividends received deduction.
Because all of the Money Market Fund's and each of the Bond Fund's net
investment income is expected to be derived from earned interest and short term
capital gains, it is anticipated that no distributions from such Funds will
qualify for the 70% dividends received deduction.

Foreign taxes may be imposed on the Fund by foreign countries with
respect to its income from foreign securities. Since less than 50% in value of
the Fund's total assets at the end of its fiscal year are expected to be
invested in stocks or securities of foreign corporations, the Fund will not be
entitled under the Code to pass through to its Shareholders their pro rata share
of the foreign taxes paid by that Fund. These taxes will be taken as a deduction
by the Fund.

Under Section 1256 of the Code, gain or loss realized by the Fund from
certain financial futures and options transactions will be treated as 60%
long-term capital gain or loss and 40% short-term capital gain or loss. Gain or
loss will arise upon exercise or lapse of such futures and options as well as
from closing transactions. In addition, any such futures and options remaining
unexercised at the end of the Fund's taxable year will be treated as sold for
their then fair market value, resulting in additional gain or loss to such Fund
characterized in the manner described above.

Offsetting positions held by the Fund involving certain futures
contracts or options transactions may be considered, for tax purposes, to
constitute "straddles." Straddles are defined to include "offsetting positions"
in actively traded personal property. The tax treatment of straddles is governed
by Sections 1092 and 1258 of the Code, which, in certain circumstances,
overrides or modifies the provisions of Section 1256. As such, all or a portion
of any short or long-term capital gain from certain straddle and/or conversion
transactions may be recharacterized as ordinary income.

If the Fund were treated as entering into straddles by reason of its
engaging in futures or options transactions, such straddles would be
characterized as "mixed straddles" if the futures or options comprising a part
of such straddles were governed by Section 1256 of the Code. The Fund may make
one or more elections with respect to mixed straddles. If no election is made,
to the extent the straddle rules apply to positions established by the Fund,
losses realized by such Fund will be deferred to the extent of unrealized gain
in any offsetting positions. Moreover, as a result of the straddle and
conversion transaction rules, short-term capital losses on straddle positions
may be recharacterized as long-term capital losses and long-term capital gains
may be recharacterized as short-term capital gain or ordinary income.

Investment by the Fund in securities issued at a discount or providing
for deferred interest or for payment of interest in the form of additional
obligations could, under special tax rules, affect the amount, timing and
character of distributions to Shareholders. For example, the Fund could be
required to take into account annually a portion of the discount (or deemed
discount) at which such securities were issued and to distribute such portion in
order to maintain its qualification as a regulated investment company. In that
case, that Fund may have to dispose of securities which it might otherwise have
continued to hold in order to generate cash to satisfy these distribution
requirements.

20
<PAGE> 36

The Fund may be required by federal law to withhold and remit to the
U.S. Treasury 31% of taxable dividends, if any, and capital gain distributions
to any Shareholder, and the proceeds of redemption or the values of any
exchanges of Shares of the Fund, if such Shareholder (1) fails to furnish the
Fund with a correct taxpayer identification number, (2) under-reports dividend
or interest income, or (3) fails to certify to the Fund that he or she is not
subject to such withholding. An individual's taxpayer identification number is
his or her Social Security number.

Information set forth in the Prospectuses and this Statement of
Additional Information which relates to Federal taxation is only a summary of
some of the important Federal tax considerations generally affecting purchasers
of shares of the Funds. No attempt has been made to present a detailed
explanation of the Federal income tax treatment of the Funds or their
shareholders and this discussion is not intended as a substitute for careful tax
planning. Accordingly, potential purchasers of shares of the Fund are urged to
consult their tax advisers with specific reference to their own tax situation.
In addition, the tax discussion in the prospectuses and this Statement of
Additional Information is based on tax laws and regulations which are in effect
on the date of the prospectuses and this Statement of Additional Information;
such laws and regulations may be changed by legislative or administrative
action.

Information as to the federal income tax status of all distributions
will be mailed annually to each shareholder.

MAJOR SHAREHOLDERS

As of October 31, 1998 Nationwide Life Insurance Company and its affiliates
directly or indirectly owned, controlled or held power to vote all of the
outstanding shares of the Fund.

21
<PAGE> 37

FINANCIAL STATEMENTS

22
<PAGE> 38

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

NATIONWIDE(R) S&P 500 INDEX FUND
LOCAL FUND SHARES

ANNUAL REPORT
OCTOBER 31, 1998

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 39

NATIONWIDE(R) S&P 500 INDEX FUND
LOCAL FUND SHARES
ANNUAL REPORT
OCTOBER 31, 1998

TABLE OF CONTENTS

<TABLE>
<S> <C>
Independent Auditors' Report................................ 1
Statement of Investments.................................... 2

Statement of Assets and Liabilities......................... 9
Statement of Operations..................................... 10
Statement of Changes in Net Assets.......................... 11
Financial Highlights........................................ 12
Notes to Financial Statements............................... 13
</TABLE>
<PAGE> 40

INDEPENDENT AUDITORS' REPORT

The Shareholders and Board of Trustees of
Nationwide Investing Foundation III:

We have audited the accompanying statement of assets and liabilities of the
Nationwide Investing Foundation III -- Nationwide S&P 500 Index Fund (the Fund),
including the statement of investments, as of October 31, 1998, and the related
statement of operations, statement of changes in net assets and the financial
highlights for the period from July 24, 1998 (commencement of operations)
through October 31, 1998. These financial statements and the financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included verification of securities owned as of October 31, 1998, by
confirmation with the custodian. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe our audit
provides a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Nationwide Investing Foundation III -- Nationwide S&P 500 Index Fund at October
31, 1998, and the results of its operations, the changes in its net assets and
the financial highlights for the period from July 24, 1998 (commencement of
operations) through October 31, 1998, in conformity with generally accepted
accounting principles.

KPMG Peat Marwick LLP

Columbus, Ohio
November 20, 1998

NATIONWIDE(R) S&P 500 INDEX FUND ANNUAL REPORT 1
<PAGE> 41

NATIONWIDE(R) S&P 500 INDEX FUND

STATEMENT OF INVESTMENTS -- OCTOBER 31, 1998

<TABLE>
<CAPTION>
- ------------------------------------------------------
SHARES SECURITY VALUE
- ------------------------------------------------------
<C> <S> <C>
COMMON STOCK -- AFFILIATED (0.2%)
FINANCIAL -- BANKS
700 Mellon Bank Corp. $ 42,087
==========
TOTAL COMMON STOCK -- AFFILIATED
(cost $42,875)
COMMON STOCK -- UNAFFILIATED (99.5%)
AEROSPACE (1.1%)
100 Aeroquip-Vickers, Inc. 3,150
2,600 Boeing Co. (The) 97,500
300 General Dynamics Corp. 17,756
200 Goodrich (B.F.) Co. 7,200
500 Lockheed Martin Corp. 55,687
600 United Technologies Corp. 57,150
----------
238,443
----------
AIRLINES (0.5%)
500 AMR Corp.* 33,500
200 Delta Air Lines, Inc. 21,112
400 Federal Express Corp.* 21,025
750 Southwest Airlines 15,891
200 U.S. Airways Group, Inc.* 11,312
----------
102,840
----------
ALUMINUM (0.3%)
500 Alcan Aluminum Ltd. 12,656
500 Aluminum Co. of America 39,625
200 Reynolds Metals Co. 11,987
----------
64,268
----------
APPAREL (0.2%)
200 Fruit of the Loom, Inc.* 3,050
100 Liz Claiborne, Inc. 2,937
700 Nike, Inc. Class B 30,581
100 Reebok International Ltd.* 1,662
100 Russell Corp. 2,456
300 V F Corp. 12,544
----------
53,230
----------
BEVERAGES (2.6%)
6,200 Coca-Cola Co. 419,275
1,000 Coca-Cola Enterprises, Inc. 36,062
3,700 PepsiCo, Inc. 124,875
----------
580,212
----------
BEVERAGES -- OTHER (0.6%)
100 Adolph Coors Co. Class B 5,000
1,200 Anheuser-Busch Cos., Inc. 71,325
200 Brown-Forman Corp. Class B 13,587
400 Fortune Brands, Inc. 13,225
900 Seagram Co. Ltd. 29,587
----------
132,724
----------
</TABLE>

<TABLE>
<CAPTION>
- ------------------------------------------------------
SHARES SECURITY VALUE
- ------------------------------------------------------
<C> <S> <C>
BUSINESS MACHINERY (6.4%)
1,100 3COM Corp.* $ 39,669
300 Apple Computer, Inc.* 11,137
300 Cabletron System, Inc.* 3,412
3,850 Cisco Systems, Inc.* 242,550
4,100 Compaq Computer Corp.* 129,662
100 Data General Corp.* 1,700
3,200 Dell Computer Corp.* 209,600
1,200 EMC Corp.* 77,250
400 Gateway 2000, Inc.* 22,325
2,600 Hewlett-Packard Co.* 156,487
300 IKON Office Solutions, Inc. 2,831
2,300 International Business Machines
Corp. 341,406
700 Pitney Bowes, Inc. 38,544
500 Seagate Technology* 13,187
400 Silicon Graphics, Inc.* 4,500
900 Sun Microsystems, Inc.* 52,425
800 Xerox Corp. 77,500
----------
1,424,185
----------
CAPITAL GOODS (5.7%)
800 Applied Materials, Inc.* 27,750
100 Briggs & Stratton 4,700
200 Case Corp. 4,400
900 Caterpillar, Inc. 40,500
150 Crane Co. 4,322
100 Cummins Engine, Inc. 3,412
800 Deere & Co. 28,300
500 Dover Corp. 15,875
200 Eaton Corp. 13,537
1,100 Emerson Electric Co. 72,600
8,100 General Electric Co. 708,750
400 Genuine Parts Co. 12,600
200 Grainger (W.W.), Inc. 9,212
100 Harnischfeger Industries, Inc. 944
600 Illinois Tool Works, Inc. 38,475
400 Ingersoll-Rand Co. 20,200
300 ITT Industries, Inc. 10,725
100 McDermott International, Inc. 2,931
100 Milacron, Inc. 1,937
100 Millipore Corp. 2,462
1,000 Minnesota Mining & Manufacturing
Co. 80,000
300 Pall Corp. 7,575
300 Parker-Hannifin Corp. 10,725
100 Perkin-Elmer Corp. (The) 8,431
100 Snap-on, Inc. 3,544
200 Stanley Works (The) 6,000
400 Textron, Inc. 29,750
300 Thermo Electron Corp.* 5,981
100 Timken Co. (The) 1,781
1,652 Tyco International Ltd. 102,321
----------
1,279,740
----------
CHEMICALS (2.0%)
600 Air Products & Chemicals, Inc. 22,650
1,500 Allied-Signal, Inc. 58,406
300 Avery Dennison Corp. 12,431
</TABLE>

2 NATIONWIDE(R) S&P 500 INDEX FUND ANNUAL REPORT
<PAGE> 42
NATIONWIDE(R) S&P 500 INDEX FUND

STATEMENT OF INVESTMENTS -- OCTOBER 31, 1998 (CONTINUED)

<TABLE>
<CAPTION>
- ------------------------------------------------------
SHARES SECURITY VALUE
- ------------------------------------------------------
<C> <S> <C>
CHEMICALS (CONTINUED)
600 Dow Chemical Co. $ 56,175
2,800 Du Pont (E.I.) De Nemours & Co. 161,000
200 Eastman Chemical Co. 11,750
300 Engelhard Corp. 6,300
100 FMC Corp.* 5,106
100 Great Lakes Chemical Corp. 4,163
200 Hercules, Inc. 6,663
300 Morton International, Inc. 7,463
100 Nalco Chemical Co. 3,094
800 Occidental Petroleum Corp. 15,900
400 PPG Industries, Inc. 22,875
400 Praxair, Inc. 16,100
600 Rohm & Haas Co. 20,250
200 Sigma-Aldrich Corp. 6,181
300 Union Carbide Corp. 11,550
200 W.R. Grace & Co.* 3,475
----------
451,532
----------
CONSTRUCTION & BUILDING PRODUCTS (0.3%)
100 Armstrong World Industries, Inc. 6,200
100 Centex Corp. 3,350
200 Fluor Corp. 7,762
100 Foster Wheeler Corp. 1,587
100 Kaufman & Broad Home Corp. 2,856
1,000 Masco Corp. 28,187
100 Owens Corning 3,631
400 Sherwin Williams Co. 10,075
----------
63,648
----------
CONSUMER DURABLE (0.1%)
200 Black & Decker Corp. 10,337
200 Maytag Corp. 9,887
200 Whirlpool Corp. 10,250
----------
30,474
----------
CONSUMER -- NON CYCLICAL (3.1%)
700 Avon Products, Inc. 27,781
300 Clorox Co. 32,775
700 Colgate-Palmolive Co. 61,862
300 Ecolab, Inc. 8,962
2,800 Gillette Co. (The) 125,825
300 International Flavor and
Fragrances 11,231
1,500 Kimberly Clark Corp. 72,375
100 National Service Industries, Inc. 3,587
400 Newell Co. 17,600
3,400 Procter & Gamble Co. 302,175
700 Ralston-Ralston Purina Group 23,362
300 Rubbermaid, Inc. 9,956
100 Tupperware Corp. 1,556
----------
699,047
----------
CONTAINERS (0.3%)
100 Ball Corp. 4,219
100 Bemis, Inc. 3,712
300 Crown Cork & Seal Co., Inc. 9,562
</TABLE>

<TABLE>
<CAPTION>
- ------------------------------------------------------
SHARES SECURITY VALUE
- ------------------------------------------------------
<C> <S> <C>
CONTAINERS (CONTINUED)
400 Owens-Illinois, Inc.* $ 12,225
200 Sealed Air Corp.* 7,087
200 Stone Container Corp.* 1,912
100 Temple-Inland, Inc. 4,856
400 Tenneco, Inc. 12,150
----------
55,723
----------
DRUGS (11.1%)
3,900 Abbott Laboratories 183,056
200 Allergan, Inc. 12,487
200 Alza Corp.* 9,575
3,300 American Home Products Corp. 160,875
600 Amgen, Inc. 47,137
2,500 Bristol-Meyers Squibb Co. 276,406
400 Cardinal Health, Inc. 37,825
2,800 Eli Lilly & Co. 226,625
3,400 Johnson & Johnson Co. 277,100
3,000 Merck & Co., Inc. 405,750
1,600 Monsanto Co. 65,000
3,300 Pfizer, Inc. 354,131
1,300 Pharmacia & Upjohn, Inc. 68,819
1,800 Schering-Plough Corp. 185,175
2,000 Warner-Lambert Co. 156,750
----------
2,466,711
----------
ELECTRONICS (3.7%)
300 Advanced Micro Devices, Inc.* 6,769
500 AMP, Inc. 20,531
200 Andrew Corp.* 3,275
300 Cooper Industries, Inc. 13,237
200 Harris Corp. 7,012
300 Honeywell, Inc. 23,962
4,200 Intel Corp. 374,587
200 KLA Instruments Corp.* 7,375
300 LSI Logic Corp.* 4,537
500 Micron Technolgy, Inc.* 19,000
1,600 Motorola, Inc. 83,200
400 National Semiconductor* 5,075
1,700 Northern Telecom Ltd. 72,781
200 Northrop Grumman Corp. 15,950
200 Raychem Corp. 6,112
800 Raytheon Co. Class B 46,450
500 Rockwell International Corp. 20,531
200 Scientific-Atlanta, Inc. 2,987
100 Tektronix, Inc. 1,787
500 Tellabs, Inc.* 27,500
1,000 Texas Instruments, Inc. 63,937
100 Thomas & Betts Corp. 4,469
----------
831,064
----------
FINANCIAL -- BANKS (6.7%)
2,934 Banc One Corp. 143,399
1,800 Bank of New York Co., Inc. 56,812
4,323 BankAmerica Corp. 248,302
700 BankBoston Corp. 25,769
</TABLE>

NATIONWIDE(R) S&P 500 INDEX FUND ANNUAL REPORT 3
<PAGE> 43
NATIONWIDE(R) S&P 500 INDEX FUND

STATEMENT OF INVESTMENTS -- OCTOBER 31, 1998 (CONTINUED)

<TABLE>
<CAPTION>
- ------------------------------------------------------
SHARES SECURITY VALUE
- ------------------------------------------------------
<C> <S> <C>
FINANCIAL -- BANKS (CONTINUED)
200 Bankers Trust Corp. $ 12,562
700 BB&T Corp. 24,981
2,100 Chase Manhattan Corp. 119,306
400 Comerica, Inc. 25,800
700 Fifth Third Bancorp 46,375
2,500 First Union Corp. 145,000
1,400 Fleet Financial Group, Inc. 55,912
500 Huntington Bancshares, Inc. 14,375
1,300 Keycorp 39,406
400 Mercantile Bancorp, Inc. 18,275
800 National City Corp. 51,450
300 Northern Trust Corp. 22,125
1,900 Norwest Corp. 70,656
800 PNC Bank Corp. 40,000
600 Regions Financial Corp. 22,200
300 Republic New York Corp. 12,544
400 State Street Corp. 24,950
400 Summit Bancorp 15,175
500 Suntrust Banks, Inc. 34,844
600 Synovus Financial Corp. 13,913
300 Union Planters Corp. 13,931
1,900 US Bancorp Class A 69,350
500 Wachovia Corp. 45,437
200 Wells Fargo & Co. 74,000
----------
1,486,849
----------
FINANCIAL -- MISCELLANEOUS (4.4%)
1,100 American Express Co. 97,212
900 Associates First Capital Corp. 63,450
300 Bear Stearns Cos., Inc. 10,706
200 Capital One Financial Corp. 20,350
700 Charles Schwab Corp. (The) 33,556
5,750 Citigroup, Inc. 270,609
600 Franklin Resources, Inc. 22,688
100 Golden West Financial Corp. 9,069
1,200 Household International 43,875
300 Lehman Brothers Holding 11,381
1,850 MBNA Corp. 42,203
900 Merrill Lynch & Co., Inc. 53,325
400 Morgan (J. P.) & Co., Inc. 37,700
1,500 Morgan Stanley Dean Witter,
Discover, & Co. 97,125
900 S&P 500 Depository Receipt* 99,113
400 Student Loan Market Association 16,025
1,504 Washington Mutual, Inc. 56,306
----------
984,693
----------
FOOD (2.5%)
1,575 Archer-Daniels-Midland Co. 26,283
700 BestFoods 38,150
1,100 Campbell Soup Co. 58,644
1,100 ConAgra, Inc. 33,481
400 General Mills 29,400
900 Heinz (H.J.) Co. 52,313
400 Hershey Foods Corp. 27,125
1,000 Kellogg Co. 33,000
</TABLE>

<TABLE>
<CAPTION>
- ------------------------------------------------------
SHARES SECURITY VALUE
- ------------------------------------------------------
<C> <S> <C>
FOOD (CONTINUED)
500 Pioneer Hi Bred International,
Inc. $ 14,000
300 Quaker Oats Co. 17,719
800 RJR Nabisco Holding Corp. 22,850
1,200 Sara Lee Corp. 71,625
1,600 Unilever N.V. 120,400
300 Wrigley (Wm.) Jr. Co. 24,281
----------
569,271
----------
FOOD -- RETAIL (0.6%)
600 Albertson's, Inc. 33,338
600 American Stores Co. 19,538
100 Great Atlantic & Pacific Tea Co.,
Inc. (The) 2,350
600 Kroger Co.* 33,300
500 Supervalu, Inc. 12,000
1,000 Sysco Corp. 26,938
400 Winn-Dixie Stores, Inc. 13,575
----------
141,039
----------
GOLD (0.2%)
800 Barrick Gold Corp. 17,100
500 Battle Mountain Gold Co. 2,719
400 Freeport-McMoran Copper & Gold,
Inc. 4,925
500 Homestake Mining 5,938
300 Newmont Mining Corp. 6,375
500 Placer Dome, Inc. 7,875
----------
44,932
----------
HEALTHCARE (1.5%)
100 Bard (C.R.), Inc. 4,269
100 Bausch & Lomb, Inc. 4,169
700 Baxter International, Inc. 41,956
600 Becton, Dickinson and Co. 25,275
300 Biomet, Inc. 10,181
500 Boston Scientific, Inc.* 27,219
1,700 Columbia/HCA Healthcare Corp. 35,700
400 Guidant Corp. 30,600
300 HCR Manor Care, Inc. 9,750
1,100 HealthSouth Corp.* 13,338
400 Humana, Inc.* 7,575
200 Mallinckrodt, Inc. 5,700
1,200 Medtronic, Inc. 78,000
200 St. Jude Medical, Inc.* 5,650
700 Tenet Healthcare Corp.* 19,556
500 United HealthCare Corp. 21,781
----------
340,719
----------
HOTELS -- RESTAURANTS (0.8%)
300 Darden Restaurants, Inc. 4,950
200 Harrah's Entertainment*, Inc. 2,825
700 Hilton Hotels Corp. 14,044
600 Marriott International, Inc.
Class A 16,125
1,700 McDonald's Corp. Class A 113,688
400 Mirage Resorts, Inc.* 6,775
</TABLE>

4 NATIONWIDE(R) S&P 500 INDEX FUND ANNUAL REPORT
<PAGE> 44
NATIONWIDE(R) S&P 500 INDEX FUND

STATEMENT OF INVESTMENTS -- OCTOBER 31, 1998 (CONTINUED)

<TABLE>
<CAPTION>
- ------------------------------------------------------
SHARES SECURITY VALUE
- ------------------------------------------------------
<C> <S> <C>
HOTELS -- RESTAURANTS (CONTINUED)
400 Tricon Global Restaurants, Inc.* $ 17,400
300 Wendy's International, Inc. 6,300
----------
182,107
----------
INSURANCE (2.7%)
2,100 Allstate Corp. 90,431
2,650 American International Group,
Inc. 225,913
400 AON Corp. 24,800
400 Chubb Corp. 24,600
400 Cincinnati Financial Corp. 14,925
200 General Re Corp. 43,938
600 Hartford Financial Services Group 31,875
300 Loews Corp. 28,181
200 MBIA, Inc. 12,225
300 MGIC Investment Corp. 11,700
200 Progressive Corp. 29,450
400 Provident Cos., Inc. 11,625
400 SAFECO Corp. 17,325
600 St. Paul Cos., Inc. 19,875
300 UNUM Corp. 13,331
----------
600,194
----------
INSURANCE -- LIFE (1.2%)
400 Aetna, Inc. 29,850
600 American General Corp. 41,100
500 CIGNA Corp. 36,469
800 Conseco, Inc. 27,750
300 Jefferson-Pilot Corp. 18,225
300 Lincoln National Corp. 22,763
200 Providian Corp. 15,875
500 SunAmerica, Inc. 35,250
400 Torchmark Corp. 17,500
200 Transamerica Corp. 20,800
----------
265,582
----------
LEISURE PRODUCTS (0.2%)
200 Brunswick Corp. 3,888
300 Hasbro, Inc. 10,519
900 Mattel, Inc. 32,288
----------
46,695
----------
MEDIA (2.7%)
1,900 CBS Corp. 53,081
600 Clear Channel Communications,
Inc.* 27,338
900 Comcast Corp. Class A 44,438
300 General Instrument Corp.* 7,706
200 King World Productions, Inc.* 5,250
1,600 MediaOne Group, Inc. 67,700
1,300 Tele-Communications, Inc. Class
A* 54,763
1,500 Time Warner, Inc. 139,219
300 Tribune Co. 17,288
900 Viacom, Inc. Class B* 53,888
5,000 Walt Disney Co. (The) 134,688
----------
605,359
----------
</TABLE>

<TABLE>
<CAPTION>
- ------------------------------------------------------
SHARES SECURITY VALUE
- ------------------------------------------------------
<C> <S> <C>
METALS (0.1%)
100 Asarco, Inc. $ 2,144
200 Cyprus Amax Minerals Co. 2,488
400 Inco Ltd. 4,275
100 Phelps Dodge Corp. 5,763
----------
14,670
----------
MORTGAGE -- ASSET BACKED OBLIGATIONS (1.3%)
300 Countrywide Credit Industries,
Inc. 12,956
2,600 Fannie Mae 184,113
1,700 Federal Home Loan Mortgage Corp. 97,750
----------
294,819
----------
MOTOR VEHICLES (1.8%)
1,700 Chrysler Corp. 81,813
400 Dana Corp. 16,725
100 Fleetwood Enterprises, Inc. 3,225
3,000 Ford Motor Co. 162,750
1,600 General Motors Corp. 100,900
200 Johnson Controls, Inc. 11,250
200 Navistar International Corp.* 4,175
200 PACCAR, Inc. 8,725
300 TRW, Inc. 17,081
----------
406,644
----------
NATURAL GAS (0.6%)
200 Columbia Energy Group 11,575
200 Consolidated Natural Gas Co. 10,563
100 Eastern Enterprises 4,106
800 Enron Corp. 42,200
100 NICOR, Inc. 4,238
100 ONEOK, Inc. 3,425
100 People's Energy Corp. 3,688
500 Sempra Energy 13,000
1,100 Williams Cos. (The) 30,181
----------
122,976
----------
OIL -- DOMESTIC (0.6%)
300 Anadarko Petroleum Corp. 10,163
200 Apache Corp. 5,663
800 Atlantic Richfield Co. 55,100
400 Burlington Resources, Inc. 16,475
100 Kerr-Mcgee Corp. 3,988
100 Pennzoil Co. 3,588
600 Phillips Petroleum Co. 25,950
200 Sonat, Inc. 6,063
500 Union Pacific Resources Group,
Inc. 6,500
----------
133,490
----------
OIL -- INTERNATIONAL (3.7%)
1,600 Chevron Corp. 130,400
6,100 Exxon Corp. 434,625
2,000 Mobil Corp. 151,375
200 ORYX Energy Co.* 2,800
</TABLE>

NATIONWIDE(R) S&P 500 INDEX FUND ANNUAL REPORT 5
<PAGE> 45
NATIONWIDE(R) S&P 500 INDEX FUND

STATEMENT OF INVESTMENTS -- OCTOBER 31, 1998 (CONTINUED)

<TABLE>
<CAPTION>
- ------------------------------------------------------
SHARES SECURITY VALUE
- ------------------------------------------------------
<C> <S> <C>
OIL -- INTERNATIONAL (CONTINUED)
1,300 Texaco, Inc. $ 77,106
600 Unocal Corp. 20,363
----------
816,669
----------
OIL -- RESEARCH & DEVELOPMENT (2.1%)
200 Amerada Hess Corp. 11,050
2,400 Amoco Corp. 134,700
200 Ashland, Inc. 9,625
500 Coastal Corp. (The) 17,625
5,400 Royal Dutch Petroleum Co. 265,950
200 Sun Co., Inc. 6,863
700 USX -- Marathon Group 22,881
----------
468,694
----------
OIL -- SERVICES (0.6%)
670 Baker Hughes, Inc. 14,782
1,100 Halliburton Co. 39,531
100 Helmerich & Payne 2,381
200 Rowan Cos.* 2,913
1,400 Schlumberger Ltd. 73,500
----------
133,107
----------
PAPER & FOREST PRODUCTS (0.6%)
100 Boise Cascade Corp. 2,800
200 Champion International Corp. 6,388
600 Fort James Corp. 24,188
200 Georgia Pacific Corp. 10,350
800 International Paper Co. 37,150
200 Louisiana-Pacific Corp. 3,550
300 Mead Corp. 9,488
100 Potlatch Corp. 3,650
200 Union Camp Corp. 8,600
200 Westvaco Corp. 4,925
500 Weyerhauser Co. 23,406
200 Willamette Industries, Inc. 6,200
----------
140,695
----------
PHOTOGRAPHIC (0.3%)
800 Eastman Kodak Co. 62,000
100 Polaroid Corp. 2,656
----------
64,656
----------
POLLUTION CONTROL (0.4%)
400 Browning Ferris Industries 14,175
1,400 Waste Management, Inc. 63,175
----------
77,350
----------
PRINTING & PUBLISHING (0.7%)
200 American Greetings Corp. Class A 8,025
200 Dow Jones & Co., Inc. 9,163
700 Gannett Co., Inc. 43,313
200 Harcourt General, Inc. 9,738
100 Jostens, Inc. 2,256
200 Knight-Ridder, Inc. 10,188
</TABLE>

<TABLE>
<CAPTION>
- ------------------------------------------------------
SHARES SECURITY VALUE
- ------------------------------------------------------
<C> <S> <C>
PRINTING & PUBLISHING (CONTINUED)
300 McGraw-Hill Cos., Inc. $ 26,981
100 Meredith Corp. 3,700
200 Moore Corp. Ltd. 2,263
400 New York Times Co. Class A 11,300
300 R. R. Donnelley & Sons Co. 12,938
200 Times Mirror Co. (The) 11,088
----------
150,953
----------
RAILROADS (0.6%)
1,200 Burlington Northern Santa Fe
Corp. 37,050
500 CSX Corp. 19,625
1,000 Laidlaw, Inc. 9,438
1,100 Norfolk Southern Corp. 36,231
600 Union Pacific Corp. 28,575
----------
130,919
----------
REAL ESTATE (0.0%)
100 Pulte Corp. 2,575
----------
RETAIL (5.2%)
300 Autozone, Inc.* 7,894
300 Circuit City Stores -- Circuit
City Group 10,856
200 Consolidated Stores Corp.* 3,288
500 Costco Cos., Inc.* 28,375
1,100 CVS Corp. 50,256
1,100 Dayton Hudson Corp. 46,613
300 Dillard's, Inc. 9,319
375 Dollar General Corp.* 8,953
500 Federated Department Stores,
Inc.* 19,219
400 Fred Meyer, Inc.* 21,325
1,000 Gap, Inc. 60,125
3,700 Home Depot, Inc. 160,950
600 J. C. Penney Co., Inc. 28,500
1,100 Kmart Corp.* 15,538
400 Kohls Corp.* 19,125
500 Limited, Inc. (The) 12,813
100 Longs Drug Stores Corp. 3,906
900 Lowe's Cos. 30,319
600 May Department Stores Co. 36,600
300 Nordstrom, Inc. 8,194
100 Pep Boys -- Manny, Moe & Jack
(The) 1,563
600 Rite Aid Corp. 23,813
1,000 Sears Roebuck & Co. 44,938
700 Staples, Inc.* 22,838
300 Tandy Corp. 14,869
700 TJX Cos., Inc. 13,256
900 Toys 'R' Us, Inc.* 17,606
300 Venator Group, Inc.* 2,531
5,600 Wal-Mart Stores, Inc. 386,400
1,200 Walgreen Co. 58,425
----------
1,168,407
----------
</TABLE>

6 NATIONWIDE(R) S&P 500 INDEX FUND ANNUAL REPORT
<PAGE> 46
NATIONWIDE(R) S&P 500 INDEX FUND

STATEMENT OF INVESTMENTS -- OCTOBER 31, 1998 (CONTINUED)

<TABLE>
<CAPTION>
- ------------------------------------------------------
SHARES SECURITY VALUE
- ------------------------------------------------------
<C> <S> <C>
SERVICES (5.8%)
200 Adobe Systems, Inc. $ 7,425
100 Autodesk, Inc. 3,119
800 Automatic Data Processing, Inc. 62,250
500 BMC Software, Inc.* 24,031
2,200 Cendant Corp.* 25,163
200 Ceridian Corp.* 11,475
1,500 Computer Associates
International, Inc. 59,063
400 Computer Science Corp.* 21,100
200 Deluxe Corp. 6,475
400 Dun & Bradstreet Corp. 11,350
100 EG&G, Inc. 2,513
1,300 Electronic Data Systems Corp. 52,894
400 Equifax, Inc. 15,475
1,000 First Data Corp. 26,500
300 H&R Block, Inc. 13,444
1,100 HBO & Co. 28,875
400 IMS Health, Inc. 26,600
300 Interpublic Group Cos., Inc. 17,550
600 Marsh & McLennan Cos., Inc. 33,300
6,200 Microsoft Corp.* 656,425
800 Novell, Inc.* 11,900
400 Omnicom Group 19,775
2,500 Oracle Corp.* 73,906
600 Parametric Technology* 9,975
400 Paychex, Inc. 19,900
500 Peoplesoft, Inc.* 10,594
200 Ryder System, Inc. 4,925
600 Service Corp. International 21,375
100 Shared Medical Systems Corp. 4,988
600 Unisys Corp.* 15,975
----------
1,298,340
----------
STEEL (0.1%)
400 Allegheny Teledyne, Inc. 8,225
200 Armco, Inc.* 950
300 Bethlehem Steel Corp.* 2,700
200 Nucor Corp. 9,063
200 USX-U.S. Steel Group, Inc. 4,650
200 Worthington Industries, Inc. 2,713
----------
28,301
----------
TELECOMMUNICATIONS (9.2%)
1,400 Airtouch Communications Class A 78,400
700 Alltel Corp. 32,769
2,800 Ameritech Corp. 151,025
500 Ascend Communications, Inc.* 24,125
4,500 AT&T Corp. 280,125
3,900 Bell Atlantic Co. 207,188
2,500 Bellsouth Corp. 199,531
600 Corning, Inc. 21,788
400 Frontier Corp. 12,025
2,400 GTE Corp. 140,850
3,300 Lucent Technologies, Inc. 264,619
4,563 MCI WorldCom, Inc.* 252,128
</TABLE>

<TABLE>
<CAPTION>
- ------------------------------------------------------
SHARES SECURITY VALUE
- ------------------------------------------------------
<C> <S> <C>
TELECOMMUNICATIONS (CONTINUED)
600 Nextel Communication* $ 10,875
4,900 SBC Communications, Inc. 226,931
1,100 Sprint Corp. 84,425
1,300 U S West Communications Group 74,588
----------
2,061,392
----------
TIRE & RUBBER (0.1%)
200 Cooper Tire & Rubber Co. 3,325
400 Goodyear Tire & Rubber Co. 21,550
----------
24,875
----------
TOBACCO (1.5%)
6,100 Philip Morris Cos., Inc. 311,863
400 UST, Inc. 13,600
----------
325,463
----------
UTILITIES -- ELECTRIC (2.7%)
400 AES Corp.* 16,375
300 Ameren Corp. 11,981
500 American Electric Power Co., Inc. 24,469
400 Baltimore Gas and Electric Co. 12,550
400 Carolina Power & Light Co. 18,350
500 Central & Southwest Corp. 13,906
400 Cinergy Corp. 13,800
800 Consolidated Edison, Inc. 40,100
500 Dominion Resources, Inc. 23,094
400 DTE Energy Corp. 17,050
900 Duke Power Co. 58,219
800 Edison International 21,100
500 Entergy Corp. 14,375
500 FirstEnergy Corp. 15,000
500 FPL Group, Inc. 31,281
300 GPU, Inc. 12,938
900 Houston Industries, Inc. 27,956
400 Niagara Mohawk Power Corp.* 5,850
300 Northern States Power Co. 8,100
900 PacificCorp 17,156
600 PECO Energy Co. 23,212
1,100 PG&E Corp. 33,481
400 PP&L Resources, Inc. 10,850
600 Public Service Enterprise Group,
Inc. 22,800
1,800 Southern Co. 50,737
700 Texas Utilities Co. 30,625
500 Unicom Corp. 18,844
----------
594,199
----------
TOTAL COMMON STOCK --UNAFFILIATED 22,200,475
(cost $22,914,171) ==========
PREFERRED STOCK (0.0%)
CONSUMER NON DURABLE (0.0%)
100 Alberto Culver Co. Class B
(cost $2,833) 2,656
----------
</TABLE>

NATIONWIDE(R) S&P 500 INDEX FUND ANNUAL REPORT 7
<PAGE> 47
NATIONWIDE(R) S&P 500 INDEX FUND

STATEMENT OF INVESTMENTS -- OCTOBER 31, 1998 (CONTINUED)

<TABLE>
<CAPTION>
- -------------------------------------------------------
PRINCIPAL SECURITY VALUE
- -------------------------------------------------------
<C> <S> <C>
REPURCHASE AGREEMENT (0.2%)
$51,000 Fifth Third Bank, 5.30%,
11/02/98, Collateralized by
$53,000 FNMA, Pool #406608,
6.75%, 07/01/24, market value
$53,000 (cost $51,000) $ 51,000
-----------
TOTAL INVESTMENTS $22,296,218
(cost $23,015,214) ===========
</TABLE>

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

Cost for federal income tax purposes: $23,018,053.

The abbreviation in the above statement stands for the following:

FNMA Federal National Mortgage Association

* Denotes a non-income producing security.

Portfolio holdings represent market value as a percentage of net assets.

See accompanying notes to the financial statements.

8 NATIONWIDE(R) S&P 500 INDEX FUND ANNUAL REPORT
<PAGE> 48

NATIONWIDE(R) S&P 500 INDEX FUND

STATEMENT OF ASSETS AND LIABILITIES

OCTOBER 31, 1998
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
ASSETS
Investments in securities, affiliated, at value (cost
$42,875) $ 42,087
Investments in securities, unaffiliated, at value (cost
$22,921,339) 22,203,131
Repurchase agreement (cost $51,000) 51,000
Cash 519
Receivable from advisor 16,272
Accrued interest and dividends receivable 22,218
Prepaid assets 10,890
Withholding tax reclaim receivable 368
-----------
Total assets 22,346,485
-----------
LIABILITIES
Accrued investment management fees 4,616
Accrued administrative fees 2,814
Accrued transfer agent fees 563
Accrued distribution fees 3,939
Other accrued expenses 9,168
-----------
Total liabilities 21,100
-----------
NET ASSETS $22,325,385
===========
NET ASSETS REPRESENTED BY:
Capital $23,034,706
Net unrealized appreciation (depreciation) (718,996)
Accumulated undistributed net realized gain (loss) (8,935)
Accumulated undistributed (distributions in excess of) net
investment income 18,610
-----------
NET ASSETS $22,325,385
===========
Shares outstanding (unlimited number of shares
authorized)(a) 2,311,331
===========
NET ASSET VALUE, offering and redemption price per share(a) $ 9.66
===========
</TABLE>

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

(a) Local Fund Shares

See accompanying notes to financial statements.

NATIONWIDE(R) S&P 500 INDEX FUND ANNUAL REPORT 9
<PAGE> 49

NATIONWIDE(R) S&P 500 INDEX FUND

STATEMENT OF OPERATIONS

PERIOD FROM JULY 24, 1998 TO OCTOBER 31, 1998 (a)
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
INVESTMENT INCOME:
INCOME:
Dividends $ 87,596
Interest 19,312
---------
Total income 106,908
---------
EXPENSES:
Investment management fees 7,315
Distribution fees 3,939
Administrative fees 2,814
Transfer agent fees 563
Shareholders' reports 3,288
Professional services 3,713
Custodian fees 5,277
Trustees' fees and expenses 50
Other 9,178
---------
Total expenses before reimbursed expenses 36,137
Total reimbursed expenses (16,272)
---------
Net expenses 19,865
---------
NET INVESTMENT INCOME $ 87,043
=========
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments $ (8,935)
Net change in unrealized appreciation (depreciation) (718,996)
---------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (727,931)
---------
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS $(640,888)
=========
</TABLE>

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

(a) For the period from July 24, 1998 (commencement of operations) through
October 31, 1998.

See accompanying notes to financial statements.

10 NATIONWIDE(R) S&P 500 INDEX FUND ANNUAL REPORT
<PAGE> 50

NATIONWIDE(R) S&P 500 INDEX FUND

STATEMENT OF CHANGES IN NET ASSETS

PERIOD FROM JULY 24, 1998 TO OCTOBER 31, 1998(a)
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 87,043
Net realized gain (loss) on investments (8,935)
Net change in unrealized appreciation (depreciation) of
investments (718,996)
-----------
Net decrease in net assets resulting from operations (640,888)
-----------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS OF NET INVESTMENT
INCOME TO SHAREHOLDERS(b) (68,433)
-----------
CAPITAL SHARE TRANSACTIONS:(b)
Net proceeds from sale of shares 23,141,368
Net asset value of shares issued to shareholders from
reinvestment of dividends 68,425
Cost of shares redeemed (275,087)
-----------
Increase (decrease) in net assets derived from
capital share transactions 22,934,706
-----------
NET INCREASE (DECREASE) IN NET ASSETS 22,225,385
NET ASSETS -- BEGINNING OF PERIOD 100,000
-----------
NET ASSETS -- END OF PERIOD $22,325,385
===========
Undistributed net realized gain (loss) on investments
included in net assets at end of period $ (8,935)
===========
Undistributed (distributions in excess of) net investment
income included in net assets at end of period $ 18,610
===========
SHARE ACTIVITY:(b)
Shares sold 2,324,247
Reinvestment of dividends 7,654
Shares redeemed (30,570)
-----------
Net increase (decrease) in number of shares 2,301,331
===========
</TABLE>

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

(a) For the period from July 24, 1998 (commencement of operations) through
October 31, 1998.

(b) Local Fund Shares.

See accompanying notes to financial statements.

NATIONWIDE(R) S&P 500 INDEX FUND ANNUAL REPORT 11
<PAGE> 51

NATIONWIDE(R) S&P 500 INDEX FUND

FINANCIAL HIGHLIGHTS

PERIOD FROM JULY 24, 1998 TO OCTOBER 31, 1998(a)
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
LOCAL
FUND SHARES
-----------
<S> <C>
NET ASSET VALUE -- BEGINNING OF PERIOD $ 10.00
Net investment income 0.04
Net realized gain (loss) and unrealized appreciation
(depreciation) (0.35)
-------
Total from investment operations (0.31)
Dividends from net investment income (0.03)
-------
Net increase (decrease) in net asset value (0.34)
-------
NET ASSET VALUE -- END OF PERIOD $ 9.66
=======
Total Return(c) (3.08)%
Net Assets, End of Period (000) $22,325
Ratio of expenses to average net assets(b) 0.35%
Ratio of expenses to average net assets*(b) 0.64%
Ratio of net investment income to average net assets(b) 1.55%
Ratio of net investment income to average net assets*(b) 1.26%
Portfolio turnover(c) 3.07%
</TABLE>

- ------------------------------------------------------
* Ratios calculated as if no expenses were reimbursed
(a) For the period from July 24, 1998 (commencement of operations) through
October 31, 1998.
(b) Annualized
(c) Not annualized

See accompanying notes to financial statements.

12 NATIONWIDE(R) S&P 500 INDEX FUND ANNUAL REPORT
<PAGE> 52

NATIONWIDE(R) S&P 500 INDEX FUND

LOCAL FUND SHARES

NOTES TO FINANCIAL STATEMENTS

OCTOBER 31, 1998
- --------------------------------------------------------------------------------

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nationwide Investing Foundation III ("NIF III" or the "Trust") is an open-end
management investment company. NIF III was created under the laws of the State
of Ohio, by a Declaration of Trust dated October 30, 1997, and is registered
under the Investment Company Act of 1940, as amended. The Trust currently has
shares registered in fourteen separate portfolios or series, each with its own
investment objectives. The accompanying financial statements and financial
highlights relate only to the Nationwide S&P 500 Index Fund Local Fund Shares
(the "Fund"), a non-diversified portfolio. On December 23, 1997, the Fund was
capitalized through a sale of 10,000 Local Fund Shares to Nationwide Advisory
Services, Inc. in the amount of $100,000. The Fund commenced operations on July
24, 1998. On November 2, 1998, the Fund began to offer two additional classes of
shares, Class R and Class Y.

(a) SECURITY VALUATION

(1) Securities traded on a national securities exchange are valued at
the last quoted sale price as provided by an independent pricing agent.
Securities traded in the over-the-counter (OTC) market are valued at the
last quoted sale price, or if no sale price, the quoted bid price as
provided by an independent pricing agent. Securities for which reliable
market quotations are not available or for which an independent pricing
agent does not provide a value or provides a value that does not represent
fair value in the judgement of the Fund's investment adviser, are valued in
accordance with procedures authorized by the Board of Trustees.

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

(b) SECURITY TRANSACTIONS AND INVESTMENT INCOME

Security transactions are recorded on the trade date. Dividend income is
recorded on the ex-dividend date; interest income is recorded on an accrual
basis and includes, where applicable, the pro rata amortization of premium or
discount.

The Fund qualified as a regulated investment company under the Internal Revenue
Code during the period covered by the accompanying statements. No provision has
been made for federal income taxes as it is the intention to continue such
qualification and to distribute all taxable income to shareholders. To the
extent net realized gains are offset through the application of a capital loss
carryover, they will not be distributed to shareholders but will be retained by
the Fund. As of October 31, 1998, the Fund had a net capital loss carryover in
the amount of $6,096, which will expire within 8 years. Withholding taxes have
been paid or provided for in accordance with the applicable tax rates and rules.

(d) DIVIDENDS TO SHAREHOLDERS

Dividends are paid quarterly and are recorded on the ex-dividend date.

Distributable net realized capital gains are declared and distributed at least
annually.

NATIONWIDE(R) S&P 500 INDEX FUND ANNUAL REPORT 13
<PAGE> 53
NATIONWIDE(R) S&P 500 INDEX FUND

LOCAL FUND SHARES

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

OCTOBER 31, 1998
- --------------------------------------------------------------------------------

Dividends and distributions to shareholders are determined in accordance with
federal income tax regulations which may differ from generally accepted
accounting principles. These "book/tax" differences are considered either
permanent or temporary in nature. In accordance with AICPA (American Institute
of Certified Public Accountants) Statement of Position 93-2, permanent
differences are reclassified within the capital accounts based on their nature
for federal income tax purposes; temporary differences do not require
reclassification. Dividends and distributions that exceed net investment income
and net realized gains for financial reporting purposes but not for tax purposes
are reported as dividends in excess of net investment income and net realized
gains. To the extent distributions exceed current and accumulated earnings and
profits for federal income tax purposes, they are reported as distributions of
paid-in- capital. These reclassifications have no effect upon the net asset
value of the Fund.

(e) EXPENSES

General expenses of the Trust, not directly attributable to a specific fund, are
allocated to the funds based upon each fund's relative average net assets or an
other appropriate basis, as approved by the Board of Trustees. Direct expenses
of the Fund are paid by the Fund.

(f) USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the period. Actual results
could differ from those estimates.

2. TRANSACTIONS WITH AFFILIATES

Investment advisory services are provided to the Fund by Nationwide Advisory
Services, Inc. (NAS), an affiliated company. NAS has selected The Dreyfus
Corporation (a wholly-owned subsidiary of Mellon Bank Corporation) to be the
subadvisor of the Fund. Under the terms of the investment advisory agreement,
NAS earns an annual management fee based on a percentage of the average daily
net assets of the Fund. From such fees, and pursuant to the sub-investment
advisory agreement, NAS pays subadvisory fees to the subadvisor.

Additional information regarding investment advisory fees for NAS and the
subadvisor is as follows for the period ended October 31, 1998:

<TABLE>
<CAPTION>
TOTAL
AVERAGE DAILY ADVISORY SUBADVISORY ADVISORY NAS SUBADVISOR
NET ASSETS FEE FEE FEES FEES FEES
- ------------------- -------- ----------- -------- ------ ----------
<S> <C> <C> <C> <C> <C>
$3,376 $3,939
Up to $250 million 0.06% 0.07% 0.13%
Next $250 million 0.07% 0.06% 0.13%
Next $500 million 0.08% 0.05% 0.13%
$1 billion and more 0.09% 0.04% 0.13%
</TABLE>

NAS has voluntarily agreed to reimburse expenses of the Fund in order to limit
the Fund's operating expenses to no more than 0.35% of the average daily net
assets. During the period ended October 31, 1998, NAS voluntarily reimbursed
expenses in the amount of $16,272.

14 NATIONWIDE(R) S&P 500 INDEX FUND ANNUAL REPORT
<PAGE> 54
NATIONWIDE(R) S&P 500 INDEX FUND

LOCAL FUND SHARES

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

OCTOBER 31, 1998
- --------------------------------------------------------------------------------

NAS or an affiliated broker dealer may also receive fees on the Fund for
distribution services pursuant to a Rule 12b-1 Distribution Plan approved by the
Board of Trustees. These fees are based on average daily net assets of the Fund
at an annual rate of 0.07%. During the period ended October 31, 1998, the Fund
paid distribution fees of $3,939.

A subsidiary of NAS, Nationwide Investors Services, Inc. ("NISI"), acts as
Transfer and Dividend Disbursing Agent for the Fund and receives a fee for such
services. This fee is based on average daily net assets of the Fund at an annual
rate of 0.01%. During the period ended October 31, 1998, the Fund paid transfer
agent fees of $563.

Pursuant to the Fund Administration Agreement, NAS also receives fees from the
Fund for administrative services, calculated daily and paid monthly according to
the following schedule:

<TABLE>
<CAPTION>
ADMINISTRATION
AVERAGE DAILY NET ASSETS FEE FEES
------------------------ ---- --------------
<S> <C> <C>
Up to $1 billion...................................... 0.05% $2,814
Next $1 billion....................................... 0.04%
</TABLE>

3. BANK LOANS

The NIF III Trust has unsecured bank lines of credit of $50,000,000. Borrowings
under these arrangements bear interest at the Federal Funds rate plus .50%.
These interest costs are included in custodian fees in the Statements of
Operations. No compensating balances are required. No borrowings were made
during the period.

4. INVESTMENT TRANSACTIONS

Purchases and sales of securities for the Fund (excluding U.S. Government and
short-term securities) for the period ended October 31, 1998, are summarized
below. There were no purchases or sales of U.S. Government Obligations.

<TABLE>
<CAPTION>
SECURITIES
- -------------------------------
PURCHASES SALES
- ----------- --------
<S> <C>
$23,584,877 $620,662
</TABLE>

Realized gains and losses have been computed on the first-in, first-out basis.
Included in net unrealized depreciation at October 31, 1998, based on cost for
federal income tax purposes, are the following components:

<TABLE>
<CAPTION>
GROSS GROSS NET UNREALIZED
UNREALIZED UNREALIZED APPRECIATION
APPRECIATION (DEPRECIATION) (DEPRECIATION)
- ------------ -------------- --------------
<S> <C> <C>
$868,212 $(1,590,047) $(721,835)
</TABLE>

NATIONWIDE(R) S&P 500 INDEX FUND ANNUAL REPORT 15