NATIONWIDE INVESTING FOUNDATION III, 485APOS, 1998-03-12

NATIONWIDE INVESTING FOUNDATION III
485APOS, 1998-03-12

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<PAGE> 1
'33 ACT FILE NO.333-40455
'40 ACT FILE NO.811-08495

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION

ON MARCH 12, 1998

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933/X/

POST-EFFECTIVE AMENDMENT NO. 2

AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940/X/

AMENDMENT NO. 3

(CHECK APPROPRIATE BOX OR BOXES)
NATIONWIDE INVESTING FOUNDATION III
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)

NATIONWIDE MID CAP GROWTH FUND
NATIONWIDE GROWTH FUND
NATIONWIDE FUND
NATIONWIDE S&P 500 INDEX FUND
NATIONWIDE BOND FUND
NATIONWIDE TAX-FREE INCOME FUND
NATIONWIDE LONG-TERM U.S. GOVERNMENT BOND FUND
NATIONWIDE INTERMEDIATE U.S. GOVERNMENT BOND FUND
NATIONWIDE MONEY MARKET FUND

THREE NATIONWIDE PLAZA
COLUMBUS, OHIO 43215
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (614) 249-7855

MR. DAVID E. SIMAITIS SEND COPIES OF COMMUNICATIONS TO:
ONE NATIONWIDE PLAZA DRUEN, DIETRICH,
COLUMBUS, OHIO 43215 REYNOLDS AND KOOGLER
(NAME AND ADDRESS OF AGENT FOR SERVICE) ONE NATIONWIDE PLAZA
COLUMBUS, OHIO 43215
/X/ It is proposed that this filing will become effective 60 days after filing
pursuant to paragraph (a)(1) of Rule 485.

<PAGE> 2

NATIONWIDE INVESTING FOUNDATION III
NATIONWIDE MID CAP GROWTH FUND
NATIONWIDE GROWTH FUND
NATIONWIDE FUND
NATIONWIDE S&P 500 INDEX FUND
NATIONWIDE BOND FUND
NATIONWIDE TAX-FREE INCOME FUND
NATIONWIDE LONG-TERM U.S. GOVERNMENT BOND FUND
NATIONWIDE INTERMEDIATE U.S. GOVERNMENT BOND FUND
NATIONWIDE MONEY MARKET FUND
<TABLE>
<CAPTION>

CROSS REFERENCE SHEET

N-1A ITEM NO. LOCATION
PART A

<S> <C> <C>
Item 1. Cover Page Cover Page
Item 2. Synopsis Summary of Fund Expenses
Item 3. Condensed Financial Information Financial Highlights
Item 4. General Description of Registrant Objectives, and Management;
Investment Techniques,
Considerations and Risk
Factors
Item 5. Management of the Fund Management of the Trust
Item 6. Capital Stock and Other Securities Additional Information;
Distributions and Taxes
Item 7. Purchase of Securities Being Offered How to Purchase Shares
Item 8. Redemption or Repurchase How to Sell (Redeem) Shares
Item 9. Pending Legal Proceedings *

PART B
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information and History General Information and
History
Item 13. Investment Objectives and Policies Additional Information on
Portfolio Instruments
and Investment Policies;
Investment Restrictions
Item 14. Management of the Registrant Trustees and Officers of the Trust
Item 15. Control Persons and Principal Holders
of Securities Major Shareholders
Item 16. Investment Advisory and Other Services Investment Advisory and Other
Services
Item 17. Brokerage Allocation Brokerage Allocation
Item 18. Capital Stock and Other Securities Additional Information
Item 19. Purchase, Redemption and Pricing
of Securities Being Offered *
Item 20. Tax Status Additional General Tax Information
Item 21. Underwriters Investment Advisory and other Services
Item 22. Calculation of Yield Quotations of
Money Market Funds Calculating Money Market Fund Yield

</TABLE>

<PAGE> 3

<TABLE>
<S> <C> <C>
Item 23. Financial Statements *
</TABLE>

PART C

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

* Not applicable or negative answer.

<PAGE> 4

The Prospectus, as well as the Statement of Additional Information, for the
S&P 500 Index Fund are incorporated by reference into this filing of
Post-Effective Amendment No. 2 to the Registration Statement.

<PAGE> 5

This Prospectus provides
you with information you
should know before
investing in the Funds.
Read it and keep it for
future reference.
A Statement of Additional
Information dated March
, 1998, incorporated
herein by reference and
containing further
information about the
Funds, has been filed with
the Securities and
Exchange Commission. You
may obtain a copy without
charge by calling or
writing Nationwide
Advisory Services, Inc.
(NAS), Three Nationwide
Plaza, P.O. Box 1492,
Columbus, Ohio 43216-1492.

Nationwide Investing
Foundation III ("NIF-III"
or the "Trust") is an
open-end management
investment company.

NIF-III was created under
the laws of Ohio, as an
Ohio business trust as of
October 30, 1997. The
Trust offers shares in
nine separate mutual
funds, each with its own
investment objectives.
This Prospectus relates to
the following eight funds
(collectively, the
"Funds"):

Nationwide Mid Cap Growth
Fund
Nationwide Growth Fund
Nationwide Fund
(together referred to as
the "Stock Funds")
Nationwide Bond Fund
Nationwide Tax-Free
Income Fund
Nationwide Long-Term
U.S. Government
Bond Fund
Nationwide Intermediate
U.S. Government
Bond Fund
(together referred to as
the "Bond Funds")
Nationwide Money Market
Fund

The three different
classes of shares offered
by this prospectus are A,
B and D. For more detailed
information and specific
limitations on purchasing
shares, see "How to
Purchase Shares".
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.

AN INVESTMENT IN THE NATIONWIDE MONEY MARKET FUND IS
NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT
AND THERE CAN BE NO ASSURANCE THAT THE NATIONWIDE MONEY
MARKET FUND WILL BE ABLE TO MAINTAIN A STABLE NET ASSET
VALUE OF $1.00 PER SHARE.
Three Nationwide Plaza - P.O.
Box 1492
Columbus, Ohio 43216-1492
March , 1998

Call toll-free 1-800-848-0920
for information, assistance,
and wire orders, 8 AM-5 PM

Call toll-free 1-800-637-0012
for 24-hour account access

FAX: (614) 249-8705

CONTENTS

<TABLE>
<S> <C>
A Brief Overview of the Funds.............. 2
Summary of Fund Expenses................... 3
Which Fund Is Right for You................ 11
Objectives And Management.................. 13
Investment Techniques, Considerations and
Risk Factors............................. 18
How to Purchase Shares..................... 24
How to Sell (Redeem) Shares................ 27
Investor Strategies........................ 29
Investor Privileges........................ 30
Investor Services.......................... 31
Management of the Trust.................... 32
Distributions and Taxes.................... 34
Tax Advantages of the Tax-Free Income
Fund..................................... 35
Performance Advertising for the Funds...... 35
Additional Information..................... 36
</TABLE>

NATIONWIDE(R)
FAMILY OF
FUNDS
NATIONWIDE(R)
Mid Cap
Growth Fund
Capital Appreciation --
Mid size companies
NATIONWIDE(R)
Growth Fund
Capital Appreciation --
Companies of all sizes
NATIONWIDE(R)
Fund
Total Return --
Generally larger companies
NATIONWIDE(R)
Bond Fund
Monthly Income --
Investment grade
debt securities
NATIONWIDE(R) Tax-Free
Income Fund
Monthly Income --
Free from Federal income
taxes
NATIONWIDE(R)
Long-Term
U.S. Government
Bond Fund
Monthly Income --
U.S. Gov't securities with
long-term average
duration
NATIONWIDE(R)
Intermediate
U.S. Government
Bond Fund
Monthly Income --
U.S. Gov't securities
with intermediate
average duration

NATIONWIDE(R)
Money Market Fund
Monthly Income --
Current money market rates
<PAGE> 6

A BRIEF OVERVIEW OF THE FUNDS

WHAT ARE THE INVESTMENT OBJECTIVES OF THE FUNDS?

THE STOCK FUNDS -- The Mid Cap Growth Fund and Growth Fund each seek long-term
capital appreciation while the Nationwide Fund seeks total return from a
combination of capital appreciation and current income.

THE BOND FUNDS -- Each of the Bond Funds (except the Tax-Free Income Fund)
seeks as a high level of income as is consistent with preservation of capital.
The Tax-Free Income Fund seeks as high a level of current income exempt from
Federal income tax as is consistent with the preservation of capital through
investing in investment grade municipal obligations.

THE MONEY MARKET FUND -- The Money Market Fund seeks a high level of income
with preservation of capital and maintenance of liquidity. The Fund will attempt
to maintain a stable net asset value of $1 per share.

HOW WILL THE FUNDS ATTEMPT TO ACHIEVE THEIR INVESTMENT OBJECTIVES?

THE STOCK FUNDS -- The Stock Funds will primarily invest in equity securities,
generally common stocks. The Mid Cap Growth Fund will generally invest in equity
securities of mid cap companies, the Nationwide Fund in equity securities of
larger companies and the Growth Fund in equity securities of companies of all
sizes.

THE BOND FUNDS -- The Bond Funds will invest primarily in investment-grade
fixed income securities with various lengths of maturities or duration. The U.S.
Government Bond Funds will concentrate investments in securities of the U.S.
Government and its agencies and instrumentalities; the Bond Fund will invest
primarily in a combination of corporate and U.S. Government fixed income
securities and the Tax-Free Income Fund will invest primarily in municipal
securities.

THE MONEY MARKET FUND -- The Money Market Fund will invest primarily in
high-quality money market instruments maturing in 397 days or less.

WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUNDS?

Each of the Funds (except the Money Market Fund) involves the risk that the
value of a Fund's shares will fluctuate in response to economic conditions,
interest rates and market perception. The Stock Funds are generally more
volatile than the Bond Funds while Bond Funds tend to be affected more by
changes in interest rates.

WHAT CLASSES OF SHARES ARE AVAILABLE?

The Stock and Bond Funds currently offer Class A, B, and D shares. Class A
shares are purchased with a front-end sales charge and a 0.25% 12b-1 fee. Class
B shares are subject to a contingent deferred sales charge ("CDSC") on
redemption and a 1.00% 12b-1 fee for the Stock Funds and an 0.85% 12b-1 fee for
the Bond Funds. Class D shares are purchased with a front-end sales charge but
no 12b-1 fee. The Money Market Fund, whose shares have no class designation, has
no sales charge or 12b-1 fee and are available to only certain investors. See
"Net Asset Value Purchase Privilege." For more information about 12b-1 fees, see
"Distribution Plan."

HOW DO I PURCHASE AND REDEEM SHARES?

You can purchase or redeem shares on any day that the Funds are open for
business through a representative of Nationwide Advisory Services, Inc. ("NAS")
or directly with the Funds. See "How to Purchase Shares" and "How to Sell
(Redeem) Shares" in this Prospectus for more information.

HOW ARE DIVIDENDS PAID?

Dividends are distributed quarterly by the Stock Funds and distributed monthly
by the Bond and Money Market Funds. Capital gains, if any, are paid at least
annually by each Fund.

WHO IS THE FUNDS' INVESTMENT ADVISER?

NAS is the investment manager, administrator and distributor of the Funds. NAS
is a wholly-owned subsidiary of Nationwide Life Insurance Company.

2
<PAGE> 7

NATIONWIDE FAMILY OF FUNDS

SUMMARY OF
FUND EXPENSES

This summary helps you
understand the various
costs and expenses you
will bear, directly or
indirectly, when investing
in the Funds. The expenses
have been restated to
reflect current fees.

Nationwide Mid Cap Growth
Fund
Nationwide Growth Fund
Nationwide Fund
Nationwide Bond Fund
Nationwide Tax-Free
Income Fund
Nationwide Long-Term
U.S. Government
Bond Fund
Nationwide Intermediate
U.S. Government
Bond Fund
Nationwide Money Market
Fund

SHAREHOLDER TRANSACTION EXPENSES FOR CLASS A SHARES
(OTHER THAN MONEY MARKET FUND)
<TABLE>
<CAPTION>
MID TAX-FREE LONG-TERM INTERMEDIATE
CAP GROWTH FUND BOND INCOME U.S. GOV'T U.S. GOV'T
<S> <C> <C> <C> <C> <C> <C> <C>
Maximum Sales Charge
Imposed on
Purchases* 5.50% 5.50% 5.50% 4.50% 4.50% 4.50% 4.50%
(as a percentage of
offering price)
Redemption Fee** None None None None None None None
(as a percentage of
amount redeemed, if
applicable)

<CAPTION>
MONEY
MARKET
<S> <C>
Maximum Sales Charge
Imposed on
Purchases* None
(as a percentage of
offering price)
Redemption Fee** None
(as a percentage of
amount redeemed, if
applicable)
</TABLE>

* Lower sales charges are available as the amount of the
investment increases. To receive even greater sales charge
discounts, investors may also include the value of Class A
shares held in certain other accounts (including household
family members' accounts). See "Sales Charge Schedule and
Available Discounts for Class A and D Shares."
** A $5 fee will be deducted from the proceeds of any
redemptions wired to your bank. A fee also will be charged
if you utilize Western Union's Quick Cash service; this
fee is $9.50 per $10,000 redeemed. See "How to Sell
(Redeem) Shares" for more information.

ANNUAL FUND OPERATING EXPENSES***
(as a percentage of average net assets)
<TABLE>
<CAPTION>
MID TAX-FREE LONG-TERM INTERMEDIATE
CAP GROWTH FUND BOND INCOME U.S. GOV'T U.S. GOV'T
<S> <C> <C> <C> <C> <C> <C> <C>
Management Fees .60% .60% .60% .50% .50% .50% .50%
12b-1 Fees .25% .25% .25% .25% .25% .25% .25%
Other Expenses .38% .20% .15% .29% .19% .27% .29%
----- ----- ----- ----- ----- ----- -----
Total Fund Operating
Expenses 1.23% 1.05% 1.00% 1.04% .94% 1.02% 1.04%

<CAPTION>
MONEY
MARKET
<S> <C>
Management Fees .40%
12b-1 Fees None
Other Expenses .20%
-----
Total Fund Operating
Expenses .60%
</TABLE>

<TABLE>
<CAPTION>
MID TAX-FREE LONG-TERM INTERMEDIATE
CAP GROWTH FUND BOND INCOME U.S. GOV'T U.S. GOV'T
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 67 $ 65 $65 $55 $ 54 $ 55 $ 55
3 Years $ 92 $ 87 $85 $77 $ 74 $ 76 $ 77

<CAPTION>
MONEY
MARKET+
<S> <C>
1 Year $ 6
3 Years $19
</TABLE>

THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN.

*** For a more detailed explanation of these expenses, see
"Management of the Trust" below.

+ For 5 and 10 year examples, see page 5.

3
<PAGE> 8
NATIONWIDE FAMILY OF FUNDS

SHAREHOLDER TRANSACTION EXPENSES FOR CLASS B SHARES
(OTHER THAN MONEY MARKET FUND)
<TABLE>
<CAPTION>
MID TAX-FREE LONG-TERM INTERMEDIATE
CAP GROWTH FUND BOND INCOME U.S. GOV'T U.S. GOV'T
<S> <C> <C> <C> <C> <C> <C> <C>
Maximum Contingent
Deferred Sales
Charge on
Redemptions 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00%
Redemption Fee** None None None None None None None
(as a percentage of
amount redeemed, if
applicable)

<CAPTION>
MONEY
MARKET
<S> <C>
Maximum Contingent
Deferred Sales
Charge on
Redemptions None*
Redemption Fee** None
(as a percentage of
amount redeemed, if
applicable)
</TABLE>

* Class B shares exchanged for Money Market shares will
be charged a CDSC if the Money Market Fund shares are
subsequently redeemed. In addition, the CDSC aging
schedule will stop running during the time period that the
shares are held in the Money Market Fund. See "Exchanges
Among Funds" for further information.
** A $5 fee will be deducted from the proceeds of any
redemptions wired to your bank. A fee also will be charged
if you utilize Western Union's Quick Cash service; this
fee is $9.50 per $10,000 redeemed. See "How to Sell
(Redeem) Shares" for more information.

ANNUAL FUND OPERATING EXPENSES***
(as a percentage of average net assets)
<TABLE>
<CAPTION>
MID TAX-FREE LONG-TERM INTERMEDIATE
CAP GROWTH FUND BOND INCOME U.S. GOV'T U.S. GOV'T
<S> <C> <C> <C> <C> <C> <C> <C>
Management Fees .60% .60% .60% .50% .50% .50% .50%
12b-1 Fees 1.00% 1.00% 1.00% .85% .85% .85% .85%
Other Expenses .38% .20% .15% .29% .19% .27% .29%
----- ----- ----- ----- ----- ----- -----
Total Fund Operating
Expenses 1.98% 1.80% 1.75% 1.64% 1.54% 1.62% 1.64%

<CAPTION>
MONEY
MARKET
<S> <C>
Management Fees .40%
12b-1 Fees None
Other Expenses .20%
-----
Total Fund Operating
Expenses .60%
</TABLE>

<TABLE>
<CAPTION>
MID TAX-FREE LONG-TERM INTERMEDIATE
CAP GROWTH FUND BOND INCOME U.S. GOV'T U.S. GOV'T
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 70 $ 68 $68 $67 $ 66 $ 66 $ 67
3 Years $ 92 $ 87 $85 $82 $ 79 $ 81 $ 82

<CAPTION>
MONEY
MARKET+
<S> <C>
1 Year $ 6
3 Years $19
</TABLE>

You would pay the following expenses assuming no
redemption at the end of each time period.

<TABLE>
<CAPTION>
MID TAX-FREE LONG-TERM INTERMEDIATE
CAP GROWTH FUND BOND INCOME U.S. GOV'T U.S. GOV'T
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 20 $ 18 $18 $17 $ 16 $ 16 $ 17
3 Years $ 62 $ 57 $55 $52 $ 49 $ 51 $ 52

<CAPTION>
MONEY
MARKET+
<S> <C>
1 Year $ 6
3 Years $19
</TABLE>

THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN.

*** For a more detailed explanation of these expenses, see
"Management of the Trust" below.

+ For 5 and 10 year examples, see page 5.

4
<PAGE> 9

NATIONWIDE FAMILY OF FUNDS

SUMMARY OF

FUND EXPENSES

This summary helps you
understand the various
costs and expenses you
will bear, directly or
indirectly, when investing
in the Funds. The expenses
have been restated to
reflect current fees.

Nationwide Mid Cap Growth
Fund

Nationwide Growth Fund

Nationwide Fund

Nationwide Bond Fund

Nationwide Tax-Free

Income Fund

Nationwide Long-Term

U.S. Government

Bond Fund

Nationwide Intermediate

U.S. Government

Bond Fund

Nationwide Money Market
Fund

SHAREHOLDER TRANSACTION EXPENSES FOR CLASS D SHARES

(OTHER THAN MONEY MARKET FUND+)

<TABLE>
<CAPTION>
MID TAX-FREE LONG-TERM INTERMEDIATE
CAP GROWTH FUND BOND INCOME U.S. GOV'T U.S. GOV'T
<S> <C> <C> <C> <C> <C> <C> <C>
Maximum Sales Charge
Imposed on
Purchases* 4.50% 4.50% 4.50% 4.50% 4.50% 4.50% 4.50%
(as a percentage of
offering price)
Redemption Fee** None None None None None None None
(as a percentage of
amount redeemed, if
applicable)

<CAPTION>
MONEY
MARKET
<S> <C>
Maximum Sales Charge
Imposed on
Purchases* None
(as a percentage of
offering price)
Redemption Fee** None
(as a percentage of
amount redeemed, if
applicable)
</TABLE>

+ Money Market Fund shares have no class designation.

* Lower sales charges are available as the amount of the
investment increases. To receive even greater sales charge
discounts, investors may also include the value of Class D
shares held in certain other accounts (including household
family members' accounts). See "Sales Charge Schedule and
Available Discounts for Class A and D shares."
** A $5 fee will be deducted from the proceeds of any
redemptions wired to your bank. A fee also will be charged
if you utilize Western Union's Quick Cash service; this
fee is $9.50 per $10,000 redeemed. See "How to Sell
(Redeem) Shares" for more information.

ANNUAL FUND OPERATING EXPENSES***
(as a percentage of average net assets)
<TABLE>
<CAPTION>
MID TAX-FREE LONG-TERM INTERMEDIATE
CAP GROWTH FUND BOND INCOME U.S. GOV'T U.S. GOV'T
<S> <C> <C> <C> <C> <C> <C> <C>
Management Fees .60% .58% .57% .50% .50% .50% .50%
12b-1 Fees .None None None None None None None
Other Expenses .38% .20% .15% .29% .19% .27% .29%
----- ----- ----- ----- ----- ----- -----
Total Fund Operating
Expenses .98% .78% .72% .79% .68% .77% .79%

<CAPTION>
MONEY
MARKET
<S> <C>
Management Fees .40%
12b-1 Fees None
Other Expenses .20%
-----
Total Fund Operating
Expenses .60%
</TABLE>

Example:
The following example illustrates the expenses you would
pay on a $1,000 investment over the indicated time periods
assuming: (1) a 5% annual return, (2) redemption at the
end of each time period, and (3) payment of the maximum
applicable sales charge.
<TABLE>
<CAPTION>
MID TAX-FREE LONG-TERM INTERMEDIATE
CAP GROWTH FUND BOND INCOME U.S. GOV'T U.S. GOV'T
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 55 $ 53 $52 $53 $ 52 $ 53 $ 53
3 Years $ 75 $ 69 $67 $69 $ 66 $ 68 $ 69
5 Years $ 97 $ 86 $83 $87 $ 82 $ 86 $ 87
10 Years $160 $137 $130 $138 $128 $136 $138

<CAPTION>
MONEY
MARKET
<S> <C>
1 Year $ 6
3 Years $19
5 Years $33
10 Years $75
</TABLE>

THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN.

*** For a more detailed explanation of these expenses, see
"Management of the Trust" below.

5
<PAGE> 10

NATIONWIDE FAMILY OF FUNDS

The information set forth in the foregoing Fee Tables and examples relates to
the Class A, Class B and Class D shares (except with respect to the Money Market
Fund which only has one class of shares without designation) of the Funds. The
three classes of shares are subject to the same expenses except that the level
of 12b-1 fees paid by the holder of Class A shares and Class B shares of each
Fund differs (Class D shares pay no 12b-1 fees).

Class D shares are purchased with a front-end sales charge and are available for
purchase only by (1) shareholders receiving Class D shares or Money Market Fund
shares as a result of the Reorganization (as defined below) if the shareholder
is purchasing in the same capacity and through the same account, and (2)
shareholders entitled to purchase shares of a Fund at net asset value as
described in "Net Asset Value Purchase Privilege".

6
<PAGE> 11
FINANCIAL HIGHLIGHTS

The Funds are eight separate series of the Trust. As of March , 1998, the
Funds acquired all of the assets of one or more series of Nationwide Investing
Foundation ("NIF"), Nationwide Investing Foundation II ("NIF II") and Financial
Horizons Investment Trust ("FHIT") (collectively, the "Acquired Funds"), as
described below, in exchange for the assumption of the stated liabilities of the
Acquired Funds and a number of full and fractional Class D shares of the
applicable Fund (the Money Market Fund issued shares without class designation)
having an aggregate net asset value equal to the net assets of the Acquired
Funds as applicable (the "Reorganization").

The following chart shows the Acquired Funds and the corresponding Fund:

<TABLE>
<CAPTION>
ACQUIRED FUNDS FUNDS
-------------- -----
<S> <C>
Growth Fund of FHIT Mid Cap Growth Fund
Growth Fund of NIF Growth Fund
Nationwide Fund of NIF Nationwide Fund
Bond Fund of NIF Bond Fund
Tax-Free Income Fund of NIF II Tax-Free Income Fund
and Municipal Bond Fund of
FHIT
Government Bond Fund of FHIT Long-Term U.S. Government Bond
Fund
U.S. Government Income Fund of Intermediate U.S. Government
NIF II Bond Fund
Money Market Fund of NIF and Money Market Fund
Cash Reserve Fund of FHIT
</TABLE>

For accounting purposes, each Acquired Fund is deemed to be the survivor of the
Reorganization except that the Tax-Free Income Fund of NIF II is deemed to be
the survivor of the Tax-Free Income Fund and the Money Market Fund of NIF is
deemed to be the survivor of the Money Market Fund.

The following Financial Highlights for the Ten Year Period ended October 31,
1997 (or such shorter period as such fund had been operating) have been audited
by KPMG Peat Marwick LLP, Independent Auditors, whose reports thereon insofar as
it relates to each of the years in the five year period ended October 31, 1997,
together with the financial statements, which are incorporated by reference in
the Statement of Additional Information from the Annual Reports for NIF, NIF II
and FHIT.

The Trust's Statement of Additional Information and the Annual Reports for NIF,
NIF II and FHIT, which contain further information about the Funds' performance
including Management's Discussion of Fund Performance, may be obtained free of
charge by calling 1-800-848-0920.

7
<PAGE> 12

FINANCIAL HIGHLIGHTS

$ 13.53 $.35 $ 1.63 $ 1.98 $ (.47) $ (1.42) $ (1.89) $13.62
N ----------------------------------------------------------------------------------------------------------------------------
A 13.62 .44 2.78 3.22 (.45) (1.51) (1.96) 14.88
T ----------------------------------------------------------------------------------------------------------------------------
I 14.88 .37 (1.23) (.86) (.39) (1.31) (1.70) 12.32
O ----------------------------------------------------------------------------------------------------------------------------
N 12.32 .38 3.97 4.35 (.40) (.50) (.90) 15.77
W ----------------------------------------------------------------------------------------------------------------------------
I 15.77 .37 .98 1.35 (.36) (.45) (.81) 16.31
D ----------------------------------------------------------------------------------------------------------------------------
E 16.31 .31 .67 .98 (.33) (.41) (.74) 16.55
----------------------------------------------------------------------------------------------------------------------------
F 16.55 .37 .41 .78 (.36) (.85) (1.21) 16.12
U ----------------------------------------------------------------------------------------------------------------------------
N 16.12 .31 2.49 2.80 (.31) (1.26) (1.57) 17.35
D ----------------------------------------------------------------------------------------------------------------------------
17.35 .36 3.98 4.34 (.35) (.93) (1.28) 20.41
----------------------------------------------------------------------------------------------------------------------------
20.41 .31 7.44 7.75 (.31) (1.28) (1.59) 26.57

$ 9.28 $.88 $ .18 $ 1.06 $ (.99) -- $ (.99) $ 9.35
----------------------------------------------------------------------------------------------------------------------------
9.35 .88 (.02) .86 (.84) -- (.84) 9.37
B ----------------------------------------------------------------------------------------------------------------------------
O 9.37 .88 (.36) .52 (.90) -- (.90) 8.99
N ----------------------------------------------------------------------------------------------------------------------------
D 8.99 .85 .45 1.30 (.83) -- (.83) 9.46
----------------------------------------------------------------------------------------------------------------------------
F 9.46 .76 .23 .99 (.85) -- (.87)* 9.58
U ----------------------------------------------------------------------------------------------------------------------------
N 9.58 .74 .52 1.26 (.77) -- (.77) 10.07
D ----------------------------------------------------------------------------------------------------------------------------
10.07 .60 (1.56) (.96) (.65) -- (.65) 8.46
----------------------------------------------------------------------------------------------------------------------------
8.46 .63 1.04 1.67 (.63) -- (.63) 9.50
----------------------------------------------------------------------------------------------------------------------------
9.50 .61 (.15) .46 (.62) -- (.62) 9.34
----------------------------------------------------------------------------------------------------------------------------
9.34 .60 .15 .75 (.60) -- (.60) 9.49
----------------------------------------------------------------------------------------------------------------------------

Net
Investment Average Net Assets
Expenses Income to Commission at End of
Total to Average Average Portfolio Rate Period
Return Net Assets Net Assets Turnover Paid (000's)
<S> <C> <C> <C> <C> <C> <C> <C>

RATIOS & SUPPLEMENTAL DATA ASSETS YEAR
28.4% .67% 2.82% 40.8% -- $ 231,901 1988
G -----------------------------------------------------------------------------------------------------
R 11.2 .67 3.35 38.8 -- 252,456 1989
O ---------------------------------------------------------------------------------------------------------------
W (14.1) .68 3.86 36.2 -- 198,691 1990
T -------------------------------------------------------------------------------------------------------------------------
H
43.4 .68 2.54 12.4 -- 277,019 1991
F ----------------------------------------------------------------------------------------------------------------------------
U
N 6.9 .65 1.97 13.1 -- 330,950 1992
D ----------------------------------------------------------------------------------------------------------------------------

16.2 .68 1.63 10.2 -- 411,853 1993
----------------------------------------------------------------------------------------------------------------------------

5.7 .68 1.71 14.5 -- 464,715 1994
----------------------------------------------------------------------------------------------------------------------------

21.0 .66 1.66 27.1 -- 582,927 1995
----------------------------------------------------------------------------------------------------------------------------

12.4 .64 1.20 25.6 5.3923c 655,616 1996
----------------------------------------------------------------------------------------------------------------------------

32.1 .64 .81 45.1 4.6222c 818,124 1997

17.2% .63% 2.79% 13.3% -- $ 407,175 1988
N ----------------------------------------------------------------------------------------------------------------------------
A
T 27.1 .64 3.21 21.9 -- 469,427 1989
I ----------------------------------------------------------------------------------------------------------------------------
O
N (7.0) .63 2.69 13.4 -- 441,188 1990
W ----------------------------------------------------------------------------------------------------------------------------
I
D 36.5 .61 2.56 13.6 -- 620,113 1991
E ----------------------------------------------------------------------------------------------------------------------------

F 8.7 .61 2.32 12.8 -- 726,012 1992
U ----------------------------------------------------------------------------------------------------------------------------
N
D 6.2 .62 1.96 25.8 -- 753,239 1993
----------------------------------------------------------------------------------------------------------------------------

4.9 .63 2.26 15.4 -- 706,674 1994
----------------------------------------------------------------------------------------------------------------------------

19.2 .63 1.95 16.5 -- 795,666 1995
----------------------------------------------------------------------------------------------------------------------------

26.1 .61 1.89 16.7 5.9393c 958,590 1996
----------------------------------------------------------------------------------------------------------------------------

40.2 .60 1.32 14.9 5.8506c 1,448,422 1997

12.0% .66% 9.45% 73.1% -- $ 35,759 1988
----------------------------------------------------------------------------------------------------------------------------

9.7 .68 9.38 72.7 -- 36,430 1989
----------------------------------------------------------------------------------------------------------------------------
B
O 5.9 .68 9.62 82.1 -- 36,378 1990
N ----------------------------------------------------------------------------------------------------------------------------
D
15.1 .67 9.13 93.6 -- 54,187 1991
F ----------------------------------------------------------------------------------------------------------------------------
U
N 10.9 .65 8.63 100.8 -- 90,187 1992
D ----------------------------------------------------------------------------------------------------------------------------

13.6 .68 7.63 68.5 -- 151,090 1993
----------------------------------------------------------------------------------------------------------------------------

(9.8) .71 7.11 58.0 -- 124,455 1994
----------------------------------------------------------------------------------------------------------------------------

20.4 .71 7.04 70.4 -- 133,633 1995
----------------------------------------------------------------------------------------------------------------------------

5.1 .70 6.60 39.0 -- 133,253 1996
----------------------------------------------------------------------------------------------------------------------------

8.3 .72 6.43 70.6 -- 124,404 1997
----------------------------------------------------------------------------------------------------------------------------

</TABLE>

* Includes $.02 from Paid In Capital.

<PAGE> 13

FINANCIAL HIGHLIGHTS

For a Share Outstanding Throughout the Periods Ended October 31,
<TABLE>
<CAPTION>
Net
Realized Distributions
Net Gain (Loss) from Net Net
Asset and Total Dividends Realized Asset
Value-- Net Unrealized from from Net Gain from Value--
Beginning Investment Appreciation Investment Investment Investment Total End of
of Period Income (Depreciation) Operations Income Transactions Distributions Period
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME FROM
INVESTMENT OPERATIONS LESS DISTRIBUTIONS
T $ 8.61 $.62 $ .75 $ 1.37 $ (.62) -- $ (.62) $ 9.36
A ----------------------------------------------------------------------------------------------------------------------------
X 9.36 .62 .08 .70 (.62) -- (.62) 9.44
- ----------------------------------------------------------------------------------------------------------------------------
F 9.44 .61 (.13) .48 (.61) -- (.61) 9.31
R ----------------------------------------------------------------------------------------------------------------------------
E 9.31 .58 .50 1.08 (.58) -- (.58) 9.81
E ----------------------------------------------------------------------------------------------------------------------------
9.81 .56 .13 .69 (.56) -- (.56) 9.94
I ----------------------------------------------------------------------------------------------------------------------------
N 9.94 .54 1.10 1.64 (.54) (.09) (.63) 10.95
C ----------------------------------------------------------------------------------------------------------------------------
O 10.95 .53 (1.45) (.92) (.51) (.12) (.63) 9.40
M ----------------------------------------------------------------------------------------------------------------------------
E 9.40 .51 .84 1.35 (.53) -- (.53) 10.22
----------------------------------------------------------------------------------------------------------------------------
10.22 .51 .02 .53 (.51) -- (.51) 10.24
----------------------------------------------------------------------------------------------------------------------------
10.24 .50 .27 .77 (.50) -- (.50) 10.51
U
I S $ 10.00 $.46 $ (.03) $ .43 $ (.46) $ -- $ (.46) $ 9.97
N ----------------------------------------------------------------------------------------------------------------------------
T G 9.97 .53 .45 .98 (.53) (.16) (.69) 10.26
E O ----------------------------------------------------------------------------------------------------------------------------
R V 10.26 .54 (.96) (.42) (.55) (.07) (.62) 9.22
M E ----------------------------------------------------------------------------------------------------------------------------
E R 9.22 .59 .89 1.48 (.58) -- (.58) 10.12
D N ----------------------------------------------------------------------------------------------------------------------------
I M 10.12 .59 (.08) .51 (.59)** -- (.59) 10.04
A E ----------------------------------------------------------------------------------------------------------------------------
T N 10.04 .59 .27 .86 (.59) -- (.59) 10.31
E T

Net Net
Investment Investment Net Assets
Expenses Expenses Income to Income to at End of
Total to Average to Average Average Average Portfolio Period
Return Net Assets Net Assets* Net Assets Net Assets* Turnover (000's)
<S> <C> <C> <C> <C> <C> <C> <C> <C>

RATIOS & SUPPLEMENTAL DATA ASSETS YEAR
T 16.3% .86% 1.21% 6.82% 6.45% 117.7% $ 51,884 1988
A ----------------------------------------------------------------------------------------------------------------------------
X
- 7.7 .85 1.20 6.62 6.28 79.7 72,097 1989
F ----------------------------------------------------------------------------------------------------------------------------
R
E 5.3 .90 1.16 6.51 6.25 68.9 89,374 1990
E ----------------------------------------------------------------------------------------------------------------------------

I 11.9 1.01 1.16 6.05 5.90 45.5 122,005 1991
N ----------------------------------------------------------------------------------------------------------------------------
C
O 7.2 .98 1.13 5.62 5.47 69.8 170,650 1992
M ----------------------------------------------------------------------------------------------------------------------------
E
17.0 .98 1.13 5.07 4.92 28.4 253,042 1993
----------------------------------------------------------------------------------------------------------------------------

(8.7) .99 1.14 5.02 4.87 59.2 241,097 1994
----------------------------------------------------------------------------------------------------------------------------

14.7 .98 1.13 5.20 5.05 31.7 262,484 1995
----------------------------------------------------------------------------------------------------------------------------

5.3 .96 1.11 4.98 4.83 24.2 264,642 1996
----------------------------------------------------------------------------------------------------------------------------

7.7 .96 1.11 4.85 4.70 39.5 256,486 1997
U
I S 7.3% 1.00% 1.17% 6.38% 6.21% 157.4% $ 18,211 1992(1)
N ----------------------------------------------------------------------------------------------------------------------------
T G
E O 10.2 1.10 1.25 5.12 4.97 99.0 38,452 1993
R V ----------------------------------------------------------------------------------------------------------------------------
M E
E R (4.2) 1.09 1.24 5.62 5.47 67.5 37,749 1994
D N ----------------------------------------------------------------------------------------------------------------------------
I M
A E 16.5 1.08 1.23 5.92 5.77 25.4 39,777 1995
T N ----------------------------------------------------------------------------------------------------------------------------
E T
5.3 1.06 1.21 5.86 5.71 9.3 39,497 1996
----------------------------------------------------------------------------------------------------------------------------

8.9 1.07 1.22 5.85 5.70 26.6 41,328 1997
</TABLE>

(1) Period from February 10, 1992 (date of commencement of operations)
through October 31, 1992. Ratio percentages and total return are annualized
for periods of less than twelve months.

<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 1.00 $.07 -- $ .07 $ (.07) -- $ (.07) $ 1.00
----------------------------------------------------------------------------------------------------------------------------
1.00 .09 -- .09 (.09) -- (.09) 1.00
----------------------------------------------------------------------------------------------------------------------------
1.00 .08 -- .08 (.08) -- (.08) 1.00
M ----------------------------------------------------------------------------------------------------------------------------
O 1.00 .06 -- .06 (.06) -- (.06) 1.00
N ----------------------------------------------------------------------------------------------------------------------------
E 1.00 .03 -- .03 (.03) -- (.03) 1.00
Y ----------------------------------------------------------------------------------------------------------------------------
1.00 .03 -- .03 (.03) -- (.03) 1.00
M ----------------------------------------------------------------------------------------------------------------------------
A 1.00 .03 -- .03 (.03) -- (.03) 1.00
R ----------------------------------------------------------------------------------------------------------------------------
K 1.00 .05 -- .05 (.05) -- (.05) 1.00
E ----------------------------------------------------------------------------------------------------------------------------
T 1.00 .05 -- .05 (.05) -- (.05) 1.00
----------------------------------------------------------------------------------------------------------------------------
1.00 .05 -- .05 (.05) -- (.05) 1.00
----------------------------------------------------------------------------------------------------------------------------

<CAPTION>
6.9% .76% .76% 6.71% 6.71% -- $ 421,901 1988
<S> <C> <C> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------------------------------------------------------

M 8.9 .74 .74 8.55 8.55 -- 535,292 1989
O ----------------------------------------------------------------------------------------------------------------------------
N
E 8.0 .73 .73 7.67 7.67 -- 600,324 1990
Y ----------------------------------------------------------------------------------------------------------------------------

M 6.1 .71 .71 5.97 5.97 -- 594,988 1991
A ----------------------------------------------------------------------------------------------------------------------------
R
K 3.5 .71 .71 3.50 3.50 -- 488,998 1992
E ----------------------------------------------------------------------------------------------------------------------------
T
2.6 .70 .73 2.57 2.54 -- 418,615 1993
----------------------------------------------------------------------------------------------------------------------------

3.3 .65 .70 3.33 3.28 -- 491,737 1994
----------------------------------------------------------------------------------------------------------------------------

5.5 .62 .67 5.34 5.29 -- 604,711 1995
----------------------------------------------------------------------------------------------------------------------------

5.1 .60 .65 4.93 4.88 -- 729,500 1996
----------------------------------------------------------------------------------------------------------------------------

5.1 .59 .64 4.96 4.91 -- 820,657 1997
----------------------------------------------------------------------------------------------------------------------------

</TABLE>

*Ratios calculated as if no expenses were waived.

**Includes $.01 dividend in excess of net investment income.

9
<PAGE> 14

FINANCIAL HIGHLIGHTS

For a Share Outstanding Throughout the Periods Ended October 31,
<TABLE>
<CAPTION>
Net
Realized Distributions
Net Gain (Loss) from Net Net
Asset Net and Total Dividends Realized Asset
Value-- Investment Unrealized from from Net Gain from Value--
Beginning Income Appreciation Investment Investment Investment Total End of
of Period (Loss) (Depreciation) Operations Income Transactions Distributions Period
<S> <C> <C> <C> <C> <C> <C> <C> <C>
M INCOME FROM
I INVESTMENT OPERATIONS LESS DISTRIBUTIONS
D $ 10.00 $.25 $ .34 $ .59 $ (.11) $ -- $ (.11) $10.48
----------------------------------------------------------------------------------------------------------------------------
C 10.48 .32 (1.90) (1.58) (.25) -- (.25) 8.65
A ----------------------------------------------------------------------------------------------------------------------------
P 8.65 .17 3.72 3.89 (.30) (.25) (.55) 11.99
----------------------------------------------------------------------------------------------------------------------------
G 11.99 .22 .43 .65 (.18) -- (.18) 12.46
R ----------------------------------------------------------------------------------------------------------------------------
O 12.46 .08 1.73 1.81 (.10) -- (.10) 14.17
W ----------------------------------------------------------------------------------------------------------------------------
T 14.17 .03 .95 .98 (.04) -- (.04) 15.11
H ----------------------------------------------------------------------------------------------------------------------------
15.11 (.01) 3.23 3.22 (.01)+ (.15) (.16) 18.17
F ----------------------------------------------------------------------------------------------------------------------------
U 18.17 .01 3.28 3.29 -- (1.99) (1.99) 19.47
N ----------------------------------------------------------------------------------------------------------------------------
D 19.47 .04 4.38 4.42 (.03) (.99) (1.02) 22.87

$ 10.00 $.73 $ .41 $ 1.14 $ (.73) $ -- $ (.73) $10.41
----------------------------------------------------------------------------------------------------------------------------
G 10.41 .96 (.28) .68 (.96) -- (.96) 10.13
L O ----------------------------------------------------------------------------------------------------------------------------
O V 10.13 .90 .68 1.58 (.89) (.01) (.90) 10.81
N E ----------------------------------------------------------------------------------------------------------------------------
G R 10.81 .89 .25 1.14 (.89) (.06) (.95) 11.00
- - N ----------------------------------------------------------------------------------------------------------------------------
T M 11.00 .63 .50 1.13 (.66) (.16) (.82) 11.31
E E ----------------------------------------------------------------------------------------------------------------------------
R N 11.31 .58 (1.10) (.52) (.58) (.09) (.67) 10.12
M T ----------------------------------------------------------------------------------------------------------------------------
10.12 .68 .95 1.63 (.68) -- (.68) 11.07
F ----------------------------------------------------------------------------------------------------------------------------
U 11.07 .68 (.15) .53 (.68) -- (.68) 10.92
N ----------------------------------------------------------------------------------------------------------------------------
D 10.92 .66 .27 .93 (.66) -- (.66) 11.19
----------------------------------------------------------------------------------------------------------------------------

<CAPTION>
Net Net
Investment Investment
Expenses Income Expenses Income
to (Loss) to to (Loss) to Average Net Assets
Average Average Average Average Commission at End of
Total Net Net Net Net Portfolio Rate Period
Return Assets Assets Assets* Assets* Turnover Paid (000's)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>

RATIOS & SUPPLEMENTAL DATA ASSETS YEAR

M 6.5% 1.48% 2.62% 2.17% 1.73% 22.4% -- $ 531 1989**
I
D ----------------------------------------------------------------------------------------------------------------------------

C (15.5) 1.42 3.49 2.17 2.73 47.5 -- 526 1990
A
P ----------------------------------------------------------------------------------------------------------------------------

G 46.7 1.20 2.01 1.95 1.26 5.7 -- 1,175 1991
R
O ----------------------------------------------------------------------------------------------------------------------------
W
T 5.4 1.27 1.45 2.02 .70 12.1 -- 3,095 1992
H
----------------------------------------------------------------------------------------------------------------------------
F
U 14.6 1.44 0.63 2.03 .05 13.0 -- 5,165 1993
N
D ----------------------------------------------------------------------------------------------------------------------------

6.9 1.59 0.21 1.90 (.82) 14.1 -- 6,787 1994

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

21.6 1.47 (.05) 1.72 (.30) 29.2 -- 7,594 1995

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

19.4 1.44 .03 1.69 (.22) 17.2 5.9080c 9,095 1996

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

23.7 .96 .20 1.70 (.54) 40.7 5.8006c 9,541 1997

13.5% 1.42% 8.33% 2.11% 6.98% --% -- $ 1,119 1989**

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

6.9 -- 9.32 1.98 7.37 51.0 -- 3,150 1990

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

16.3 -- 8.22 1.73 6.49 95.3 -- 25,873 1991
G
L O ----------------------------------------------------------------------------------------------------------------------------
O V
N E 10.9 .65 8.18 1.66 7.17 87.7 -- 64,249 1992
G R
- - N ----------------------------------------------------------------------------------------------------------------------------
T M
E E 10.8 1.00 5.55 1.61 4.93 143.6 -- 84,602 1993
R N
M T ----------------------------------------------------------------------------------------------------------------------------

F (4.8) 1.28 5.42 1.58 5.12 174.4 -- 70,218 1994
U
N ----------------------------------------------------------------------------------------------------------------------------
D
16.7 .89 6.42 1.58 5.73 140.6 -- 69,190 1995

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

5.0 .84 6.26 1.59 5.51 21.0 -- 58,737 1996

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

8.8 .85 6.04 1.60 5.29 52.1 -- 48,549 1997

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

</TABLE>

*Ratios calculated as if no expenses were waived. +Distribution in
excess of net investment income.

**Period from December 19, 1988 (commencement of operations) through October
31, 1989. Total return and ratios are annualized for periods of less than
twelve months.

<PAGE> 15

NATIONWIDE FAMILY OF FUNDS

Each Fund is a separate, diversified investment fund of the Trust, which was
organized as of October 30, 1997, as an Ohio business trust. The Trust is
registered and operates as an open-end management investment company. Each Fund
was organized for the purposes of acquiring all of the assets and liabilities of
one or more separate series of NIF, NIF II and/or FHIT (together called the
"Former Trusts"), to effect a Reorganization of each series of the Former Trusts
with and into a separate series of NIF III as described above.

AVAILABLE SHARE CLASS OPTIONS

Class A shares are available for purchase with a front-end sales charge and a
0.25% 12b-1 fee. Class B shares are available for purchase with a CDSC and a
1.00% 12b-1 fee for the Stock Funds and an 0.85% 12b-1 fee for the Bond Funds.
Class D shares are purchased with a front-end sales charge but no 12b-1 fee. The
Money Market Fund, whose shares have no class designation, has no sales charge
or 12b-1 fee.

WHICH FUND IS RIGHT FOR YOU?

Long-term and short-term goals require different financial planning. Whether
you're seeking greater growth opportunity, looking for more income, or a
combination of both, Nationwide's Family of Funds, strategies, and services may
help.

While there is careful selection of securities and constant supervision of the
Funds, there can be no guarantee that a Fund's investment objective will be
achieved.

CONSIDER YOUR TIME FRAME

For long-term goals, you have the luxury of time on your side. With goals five
or more years away -- where growth of your investments is the highest
priority -- you may want to consider Nationwide's Stock Funds. These Stock Funds
provide greater long-term return potential through portfolios of common stocks
with a higher degree of risk.

If you're seeking greater income today or have intermediate to long-term
goals -- you may want to consider Nationwide's Bond Funds. These Bond Funds
invest in high-quality and investment grade bonds, providing monthly income and
normally providing greater price stability than stock funds. Plus, it is also
possible to have some capital appreciation in these Bond Funds.

For short-term goals such as saving for next year's needs, an emergency reserve,
or as a temporary "parking place" for your money, the Money Market Fund may be
more appropriate for you. This Fund provides investors with greater stability of
principal while providing current monthly income.

Most investors have a combination of long and short-term goals. By investing in
one or more of the Funds, you may be able to satisfy many of your investment
needs.

ASSESS YOUR TOLERANCE FOR RISK

Where you choose to invest depends as much on your tolerance for risk as on your
desire for reward. Opportunity and risk go hand-in-hand. Generally the greater
the potential long-term opportunity, the greater the potential risk.

The most common risk people associate with investing is short-term market
risk -- the day-to-day fluctuation of an investment's value. Although short-term
market risk cannot be eliminated, the Funds' portfolio managers seek to minimize
this risk by investing primarily in quality securities.

Investors looking for greater growth in our Stock Funds should be willing to
accept greater account value fluctuation. A wide range of factors -- corporate
earnings potential, interest rates, competition, and other economic
conditions -- can cause both downward and upward share price changes.

In the past, investors with a long-term time horizon and a tolerance for
fluctuation have typically been rewarded. Despite years when short-term returns
have not been satisfactory, over most long-term holding periods, money invested
in common stocks has grown more than money invested in fixed income securities.

Bond funds generally provide investors with greater price stability than stock
funds. More predictable investments may make an investor more comfortable, but
historically the total return in bond funds has been less than in stock funds.
Prevailing interest rates, more than any other factor, contribute to price
fluctuation in bond funds, and long-term bonds are generally affected more than
shorter-term bonds.

Investors who would prefer not to have their investment principal fluctuate
should consider the Money Market Fund. While it provides greater price stability
than the other Funds, it has less long-term return potential.

One of the biggest risks investors may face is being too conservative, thereby
not earning enough return on their investments to achieve their future goals.
Another big risk to consider is inflation. The amount of money needed to satisfy
a financial goal (after taking inflation into consideration) may dictate
investment in a Fund with the potential for greater returns. Although com-

11
<PAGE> 16

NATIONWIDE FAMILY OF FUNDS

mon stocks are generally more volatile, historically they have provided higher
returns than bonds or money market instruments and their returns have exceeded
inflation over long periods.

Procrastination is yet another risk investors must consider. Delay, and you take
the chance that there may not be enough time to attain your objective. Start
early and invest regularly in funds with growth opportunities, and you stand a
better chance to reach your financial goals.

For more information concerning the risk factors of the Funds, see "Investment
Techniques, Considerations and Risk Factors."

CONSIDER YOUR TAX BRACKET

For investors seeking to shelter their investment income from Federal income
taxes, the Tax-Free Income Fund may be an appropriate investment. The
tax-equivalent yield of this Fund can be especially appealing for investors in
the 28% or higher tax brackets. To determine if such an investment may be right
for you, see "Tax Advantages of the Tax-Free Income Fund."

12
<PAGE> 17

OBJECTIVES AND MANAGEMENT

THE MID CAP GROWTH FUND
INVESTMENT OBJECTIVE & POLICY: Seeks long-term capital appreciation. The Fund
invests primarily in equity securities of mid size companies.

- - LONG-TERM GROWTH WITH CAPITAL APPRECIATION.

- - EQUITY PORTFOLIO -- GENERALLY MID CAP COMPANIES.

RISK PROFILE: The illustration below shows a continuum of risk. The triangle
shows where the Mid Cap Growth Fund generally falls on this continuum.

++
ARROW

<TABLE>
<S> <C>
More risk; greater Less risk; lower
potential for reward. growth potential.
</TABLE>

PORTFOLIO MANAGEMENT: Major emphasis in the selection of securities is placed on
companies which have capable management, and are in fields where social and
economic trends, technological developments, and new processes or products
indicate a potential for greater-than-average growth.
Under normal market conditions, the Fund will invest at least 65% of its
total assets in equity securities of mid cap companies. The Fund defines mid cap
companies as those with market capitalization or sales in the range between $300
million and $8 billion, but will generally focus on companies between $300
million and $5 billion. The equity securities in which the Fund will invest are
generally common stocks or securities convertible into common stocks
("convertible securities").
Investments are made in equity securities of many different companies and
industries which provide diversification to help minimize risk.

THE GROWTH FUND
INVESTMENT OBJECTIVE & POLICY: Seeks long-term capital appreciation. The Fund
invests primarily in equity securities of companies of all sizes.

- - LONG-TERM GROWTH WITH CAPITAL APPRECIATION.

- - EQUITY PORTFOLIO -- COMPANIES OF ALL SIZES.

RISK PROFILE: The illustration below shows a continuum of risk. The triangle
shows where the Growth Fund generally falls on this continuum.

++
ARROW

<TABLE>
<S> <C>
More risk; greater Less risk; lower
potential for reward. growth potential.
</TABLE>

PORTFOLIO MANAGEMENT: Major emphasis in the selection of securities is placed on
companies which have capable management, and are in fields where social and
economic trends, technological developments, and new processes or products
indicate a potential for greater-than-average growth.
Under normal market conditions, the Fund will invest at least 65% of its
total assets in equity securities of companies of all sizes. Equity securities
in which the Fund will invest generally are common stocks and convertible
securities.
Investments are made in equity securities of many different companies and
industries which provide diversification to help minimize risk.

THE NATIONWIDE FUND
INVESTMENT OBJECTIVE & POLICY: Seeks total return through a flexible combination
of current income and capital appreciation. The Fund invests primarily in common
stocks, but also in convertible securities, other equity securities, bonds and
money market obligations.

- - TOTAL RETURN THROUGH CAPITAL APPRECIATION AND CURRENT INCOME.

- - COMMON STOCK PORTFOLIO -- GENERALLY LARGER COMPANIES.

RISK PROFILE: The illustration below shows a continuum of risk. The triangle
shows where the Nationwide Fund generally falls on this continuum.

++
ARROW

<TABLE>
<S> <C>
More risk; greater Less risk; lower
potential for reward. growth potential.
</TABLE>

PORTFOLIO MANAGEMENT: Major emphasis is placed on capital appreciation and
current income. The Fund seeks to maximize shareholder returns through a
diversified portfolio where the primary emphasis is given to equity securities,
especially common stocks. Although not limited to these investments, in the past
the majority of the portfolio assets of the Fund's predecessor, NIF Nationwide
Fund, normally consisted of the common stocks of well-known, larger companies.
Investments are made in securities of many different companies and
industries which provide diversification to help minimize risk.

ADDITIONAL INFORMATION CONCERNING THE STOCK FUNDS
Equity securities include common stock, preferred stock, convertible securities
and warrants, and the Stock Funds may invest in both domestic and foreign
issues. The Stock Funds may invest in foreign securities directly or through
depository receipts. In addition to investing in equity securities, the Stock
Funds may invest in index futures, options and other derivatives and securities
which are not readily marketable or are restricted as to disposition. They may
also invest in U.S. Government

13
<PAGE> 18

OBJECTIVES AND MANAGEMENT

securities, short-term fixed income securities and money market obligations
("Money Market Obligations") and shares of other investment companies. The Stock
Funds may also enter into repurchase agreements, lend portfolio securities, and
may purchase securities on a when-issued or delayed delivery basis.
As a temporary defensive position as determined by NAS each such Fund may
invest up to 100% of its total assets in cash and/or Money Market Obligations.
See "Investment Techniques, Considerations and Risk Factors" below and
"Additional Information on Portfolio Instruments and Investment Policies" in the
Statement of Additional Information for further information.

THE BOND FUND

INVESTMENT OBJECTIVE & POLICY: Seeks as high a level of income as is consistent
with preservation of capital. The Fund invests primarily in fixed-income
securities and currently focuses on corporate debt investments and U.S.
Government mortgage-backed securities. Under normal market conditions, the
dollar-weighted average portfolio maturity of the Fund will be intermediate,
which is defined by the Fund as being between six and ten years.

- - MONTHLY INCOME FROM A PORTFOLIO OF INVESTMENT GRADE CORPORATE AND GOVERNMENT
OBLIGATIONS.

- - INTERMEDIATE MATURITIES -- YIELDS AND VOLATILITY ARE USUALLY HIGHER THAN
SHORT-TERM FUNDS, BUT WITH LOWER YIELDS AND VOLATILITY THAN LONGER-TERM FUNDS.

RISK PROFILE: The illustration below shows a continuum of risk. The triangle
shows where the Bond Fund generally falls on this continuum.
++
ARROW

<TABLE>
<S> <C>
More risk; greater Less risk; lower
potential for reward. growth potential.
</TABLE>

PORTFOLIO MANAGEMENT: Under normal market conditions, the Fund will invest at
least 65% of its total assets in bonds. For purposes of this Fund's policy,
bonds are debt obligations of all types including bonds of varying maturities,
debentures and notes. Major emphasis is placed on investment grade taxable debt
securities including corporate debt securities rated within the four highest
rating categories by a nationally recognized statistical rating organization
("NRSRO") (e.g. Standard & Poor's Corporation or Moody's Investors Service,
Inc.), U.S. and Canadian Government obligations, mortgage-backed securities,
asset-backed securities and commercial paper rated in one of the two highest
rating categories by an NRSRO. The Fund may invest in zero coupon securities and
in unrated securities if NAS determines them to be of comparable quality. The
Fund may enter into repurchase agreements, purchase restricted or illiquid
securities which are not readily marketable or are restricted as to disposition,
and engage in securities lending transactions. The Fund may also purchase
securities on a when-issued or delayed delivery basis and securities of other
investment companies.
Securities rated in the fourth highest rating category by an NRSRO are
commonly referred to as medium-grade securities. Should subsequent events cause
the rating of medium-grade securities to fall NAS will consider such an event in
determining whether the Fund should continue to hold that security. In no event,
however, would the Fund be required to liquidate any portfolio security where
the Fund would suffer a loss on the sale of such security.
Certain debt securities in which the Fund may invest, such as
mortgage-backed securities and other securities subject to prepayment of
principal prior to the stated maturity date, are expected to be repaid prior to
their stated maturity dates. As a result, the effective maturity of these
securities is expected to be shorter than the stated maturity. For purposes of
calculating the Fund's average weighted portfolio maturity, the effective
maturity of such securities will generally be used.
In addition, as a temporary defensive position, the Fund may invest up to
100% of its total assets in cash and/or Money Market Obligations.
See "Investment Techniques, Considerations and Risk Factors" below and
"Additional Information on Portfolio Instruments and Investment Policies" in the
Statement of Additional Information for further information.

THE TAX-FREE INCOME FUND

INVESTMENT OBJECTIVE & POLICY: Seeks as high a level of current income exempt
from Federal income tax* as is consistent with the preservation of capital
through investing in investment grade municipal obligations.

- - MONTHLY INCOME FROM A PORTFOLIO OF INVESTMENT GRADE MUNICIPAL BONDS.

- - INCOME FREE FROM FEDERAL TAXES.*

*Investors may be subject to state and local tax.

RISK PROFILE: The illustration below shows a continuum of risk. The triangle
shows where the Tax-Free Income Fund generally falls on this continuum.
++
ARROW

<TABLE>
<S> <C>
More risk; greater Less risk; lower
potential for reward. growth potential.
</TABLE>

PORTFOLIO MANAGEMENT: The Fund has adopted a fundamental investment policy which
requires it to invest at least 80% of its net assets in securities, the interest
income from which is exempt from Federal income taxes and is not treated as a
preference item for purposes of the Federal alternative minimum tax. Major
emphasis is placed on municipal obligations rated within the four highest rating
categories (investment grade) by an NRSRO or, if not rated, are of equivalent
investment quality as determined by NAS.

14
<PAGE> 19

OBJECTIVES AND MANAGEMENT

Such obligations include: (1) municipal securities backed by the full faith
and credit of the United States; (2) municipal bonds and notes rated within the
four highest rating categories by an NRSRO; (3) other types of municipal
securities such as commercial paper, provided that such securities are rated
within the two highest rating categories by an NRSRO.
The municipal securities in which the Fund may invest may include variable
and floating rate securities, some of which may be callable. The Fund also
purchases securities on a when-issued or delayed delivery basis, zero coupon
securities and securities of other investment companies and enters into
repurchase agreements.
The Fund may, as a temporary defensive position, hold and invest up to 20%
of its assets in cash and in taxable Money Market Obligations.
See "Investment Techniques, Consideration and Risk Factors" below and
"Additional Information on Portfolio Investments and Investment Policies" in the
Statement of Additional Information for further information.

THE LONG-TERM U.S. GOVERNMENT BOND FUND

INVESTMENT OBJECTIVE & POLICY: Seeks as high a level of current income as is
consistent with the preservation of capital. The Fund invests in securities of
the U.S. Government, and its agencies and instrumentalities ("U.S. Government
Securities"). The average duration of the Fund will be greater than six years
and the dollar-weighted average portfolio maturity will be greater than 10
years.

- - MONTHLY INCOME FROM A PORTFOLIO OF U.S. GOVERNMENT SECURITIES.

- - LONG-TERM PORTFOLIO.

RISK PROFILE: The illustration below shows a continuum of risk. The triangle
shows where the Long-Term U.S. Government Bond Fund generally falls on this
continuum.

++
ARROW

<TABLE>
<S> <C>
More risk; greater Less risk; lower
potential for reward. growth potential.
</TABLE>

PORTFOLIO MANAGEMENT: While the Fund will normally invest all of its assets in
U.S. Government Securities and in repurchase agreements collateralized by these
securities, it will under normal market conditions invest at least 65% of its
total assets in bonds issued or guaranteed by the U.S. Government or its
agencies and instrumentalities. For purposes of this Fund's policy, bonds are
debt obligations of all types including bonds of varying maturities, bills and
notes.
The Fund may also invest in mortgage-related securities issued by U.S.
Government agencies. These securities include pass-through securities and
collateralized mortgage obligations (CMOs). Pass-through securities represent
part ownership in a pool of mortgage loans. These securities differ from typical
bonds because principal is repaid monthly over the term of the loan rather than
returned in a lump sum at maturity. CMOs are fully collateralized by a pool of
mortgages on which payments of principal and interest are dedicated to payment
of principal and interest on the various classes of the CMOs.
The Fund may also invest in zero coupon securities, that are direct
obligations of the U.S. Government and its agencies and instrumentalities and in
Money Market Obligations issued or guaranteed by the U.S. Government, and its
agencies or instrumentalities.
In selecting securities for the Fund, NAS utilizes interest-rate
expectations, yield-curve analysis, economic forecasting, market sector
analysis, and other security selection techniques. The Fund's investments will
be concentrated in areas of the long-term U.S. Government Securities market
(based on sector, coupon or maturity) the investment manager believes are
relatively undervalued.
The U.S. Government Securities in which the Fund may invest include variable
and floating rate securities, some of which may be callable. The Fund may also
purchase securities on a when-issued or delayed delivery basis and securities of
other investment companies and may lend portfolio securities. In addition, as a
temporary defensive position, the Fund may invest up to 100% of its total assets
in cash and/or Money Market Obligations.

THE INTERMEDIATE U.S. GOVERNMENT BOND FUND

INVESTMENT OBJECTIVE & POLICY: Seeks as high a level of current income as is
consistent with the preservation of capital. The Fund invests primarily in U.S.
Government Securities. The average duration of the Fund will be between three
and a half and six years.

- - MONTHLY INCOME FROM A PORTFOLIO OF U.S. GOVERNMENT SECURITIES.

- - INTERMEDIATE PORTFOLIO.

RISK PROFILE: The illustration below shows a continuum of risk. The triangle
shows where the Intermediate U.S. Government Bond Fund generally falls on this
continuum.

++
ARROW

<TABLE>
<S> <C>
More risk; greater Less risk; lower
potential for reward. growth potential.
</TABLE>

15
<PAGE> 20

OBJECTIVES AND MANAGEMENT

The Fund may invest in mortgage-backed securities issued by U.S. Government
agencies. These securities include pass-through securities and CMOs as described
under "The Long-Term U.S. Government Bond Fund." Pass-through securities
represent part ownership in a pool of mortgage loans. These securities differ
from typical bonds because principal is repaid monthly over the term of the loan
rather than returned in a lump sum at maturity. CMOs are fully collateralized by
a pool of mortgages on which payments of principal and interest are dedicated to
payment of principal and interest on the various classes of the CMOs.
The Fund may also invest in zero coupon securities, that are direct
obligations of the U.S. Government and its agencies and instrumentalities and in
Money Market Obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities.
In selecting securities for the Fund, NAS utilizes interest-rate
expectations, yield-curve analysis, economic forecasting, market sector
analysis, and other security selection techniques. The Fund's investments will
be concentrated in areas of the intermediate U.S. Government Securities market
(based on sector, coupon or maturity) that NAS believes are relatively
undervalued.
The U.S. Government Securities in which the Fund may invest include variable
and floating rate securities, some of which may be callable. The Fund may also
purchase securities on a when-issued or delayed delivery basis and securities of
other investment companies and may lend portfolio securities. In addition, as a
temporary defensive position, the Fund may invest up to 100% of its total
assets, in cash and/or Money Market Obligations.

ADDITIONAL INFORMATION CONCERNING THE DURATION OF THE LONG-TERM AND INTERMEDIATE
U.S. GOVERNMENT BOND FUNDS (THE "U.S. GOVERNMENT BOND FUNDS"): The Long-Term
U.S. Government Bond Fund will maintain a duration which, on a weighted average
basis and under normal market conditions, will generally be greater than six
years. The Intermediate U.S. Government Bond Fund will maintain a duration
which, on a weighted average basis and under normal market conditions, will
generally be between three and a half and six years. Duration is a measure of
the average life of a fixed-income security that was developed as a more precise
alternative to the concepts of "term to maturity" or "average dollar weighted
maturity" as measures of "volatility" or "risk" associated with changes in
interest rates. Duration incorporates a security's yield, coupon interest
payments, final maturity and call features into one measure.
Most debt obligations provide interest ("coupon") payments in addition to
final ("par") payment at maturity. Some obligations also have call provisions.
Depending on the relative magnitude of these payments and the nature of the call
provisions, the market values of debt obligations may respond differently to
changes in interest rates.
Traditionally, a debt security's "term-to-maturity " has been used as a
measure of the sensitivity of the security's price to changes in interest rates
(which is the "interest rate risk" or "volatility" of the security). However,
"term-to-maturity" measures only the time until a debt security provides its
final payment, taking no account of the pattern of the security's payments prior
to maturity. Average dollar weighted maturity is calculated by averaging the
terms to maturity of each debt security held with each maturity "weighted"
according to the percentage of assets that it represents. Duration is a measure
of the expected life of a debt security on a present value basis and reflects
both principal and interest payments. Duration takes the length of the time
intervals between the present time and the time that the interest and principal
payments are scheduled or, in the case of a callable security, expected to be
received, and weights them by the present values of the cash to be received at
each future point in time. For any debt security with interest payments
occurring prior to the payment of principal, duration is ordinarily less than
maturity. In general, all other factors being the same, the lower the stated or
coupon rate of interest of a debt security, the longer the duration of the
security; conversely, the higher the stated or coupon rate of interest of a debt
security, the shorter the duration of the security.
There are some situations where the standard duration calculation does not
properly reflect the interest rate exposure of a security. For example, floating
and variable rate securities often have final maturities of ten or more years;
however, their interest rate exposure corresponds to the frequency of the coupon
reset. Another example where the interest rate exposure is not properly captured
by duration is the case of mortgage pass-through securities. The stated final
maturity of such securities is generally 30 years, but current prepayment rates
are more critical in determining the securities' interest rate exposure. In
these and other similar situations, NAS will use more sophisticated analytical
techniques to project the economic life of a security and estimate its interest
rate exposure. Since the computation of duration is based on predictions of
future events rather than known factors, there can be no assurance that either
U.S. Government Bond Fund will at all times achieve its targeted portfolio
duration.
The change in market value of U.S. Government fixed-income securities is
largely a function of changes in the prevailing level of interest rates. When
interest rates are falling, a portfolio with a shorter duration generally will
not generate as high a level of total return as a portfolio with a longer
duration. When interest rates are flat, shorter duration portfolios generally
will not generate as high a level of total return as longer duration portfolios
(assuming that long-term interest rates are higher than short-term rates, which
is commonly the case.) When interest rates are rising, a portfolio with a
shorter duration will generally outperform longer duration portfolios. With
respect to the composition of a fixed-income portfolio, the longer the duration
of the portfolio, generally, the greater the anticipated potential for total
return, with, however, greater attendant interest rate risk and price volatility
than for a portfolio with a shorter duration.
While each U.S. Government Bond Fund intends to maintain the average
duration described above under normal market

16
<PAGE> 21

OBJECTIVES AND MANAGEMENT

conditions, there is no limit as to the maturity of any one security which each
U.S. Government Bond Fund may purchase.

THE MONEY MARKET FUND

INVESTMENT OBJECTIVE & POLICY: Seeks as high a level of current income as is
consistent with the preservation of capital and maintenance of liquidity. The
Fund invests in high-quality money market instruments maturing in 397 days or
less. Although principal is not intended to fluctuate, there can be no assurance
that the Fund will be able to maintain a stable net asset value of $1.00 per
share.

- - MONTHLY INCOME WITH QUICK LIQUIDITY THROUGH CHECK-WRITING PRIVILEGE.

- - HISTORICALLY MAINTAINED A FIXED SHARE PRICE THROUGH HIGH-QUALITY, SHORT-TERM
SECURITIES.

RISK PROFILE: The illustration below shows a continuum of risk. The triangle
shows where the Money Market Fund generally falls on this continuum.

++
ARROW

<TABLE>
<S> <C>
More risk; greater Less risk; lower
potential for reward. growth potential.
</TABLE>

PORTFOLIO MANAGEMENT: Emphasis is on a diversified portfolio having a dollar
weighted average maturity of 90 days or less. The portfolio consists of
high-quality money market instruments with a remaining maturity of 397 days or
less including, but not limited to: U.S. Government Securities; U.S. dollar
denominated obligations of foreign governments including Canadian government and
provincial obligations; obligations of commercial banks and savings associations
which have assets over $500 million and are members of the Federal Deposit
Insurance Corporation, and the 50 largest foreign banks with U.S. branches;
taxable or partly taxable obligations issued by state, county or municipal
governments; commercial paper rated within the two highest rating categories by
an NRSRO; corporate obligations and asset-backed securities rated at the time of
purchase within the two highest rating categories assigned by at least two
NRSROs; and repurchase agreements collateralized by any of the above. In
addition, the Fund may invest in variable and floating rate obligations, some of
which may have call features. The Fund may also purchase securities on a
when-issued or delayed delivery basis and securities of other investment
companies and may lend portfolio securities. See "Investment Techniques,
Considerations and Risk Factors" below and "Additional Information on Portfolio
Instruments and Investment Policies" in the Statement of Additional Information
for further information.

17
<PAGE> 22

INVESTMENT TECHNIQUES, CONSIDERATIONS AND RISK FACTORS

An investment in the Funds involves certain risks. As a general matter, an
investment in the Funds (except the Money Market Fund) involves the risk that
the net asset value of a Fund's shares will fluctuate in response to changes in
economic conditions, interest rates, and the market's perception of the
securities held by the Fund. In addition, an investment in the Stock Funds is
subject to stock market risk, which means that such an investment is subject to
the risk that stock prices in general will decline over short or extended
periods of time. Equity securities of companies with smaller capitalizations
generally are more volatile in price and may be less liquid than securities of
larger capitalized companies.
An investment in the Bond Funds is subject to bond market risk, i.e., the
risk that the market price of bonds in general will fluctuate. Bond prices
fluctuate largely in response to changes in the level of interest rates. When
interest rates rise, bond prices generally fall; conversely, when interest rates
fall, bond prices generally rise. Although the fluctuation in the price of bonds
is normally less than that of common stocks, in the past there have been
extended periods of cyclical increases in interest rates that have caused
significant declines in the price of bonds in general and have caused the
effective maturity of securities with prepayment features to be extended, thus
effectively converting short or intermediate term securities (which tend to be
less volatile in price) into longer term securities (which tend to be more
volatile in price). The value of shares of the Bond Fund and the Tax-Free Income
Fund may also be affected by the market's perception of changes in any issuer's
credit risk. As perceived credit risk increases, the value of a specific
security generally decreases, and the reverse is also true.
An investment in the Funds is subject to other risks as well, depending upon
the particular investment techniques employed by a Fund and the types of
securities in which a Fund invests. Certain of these risks are described below.

SPECIAL SITUATION COMPANIES -- The Mid Cap Growth Fund may invest in securities
of issuers in special situations. These securities may be more volatile than
other securities since the market value of these securities may decline in value
if the anticipated benefits do not materialize. Companies in "special
situations" include, but are not limited to, companies involved in an
acquisition or consolidation; reorganization; recapitalization; merger,
liquidation or distribution of cash, securities or other assets; a tender or
exchange offer; a breakup or workout of a holding company; litigation which, if
resolved favorably, would improve the value of the companies' securities; or
change in corporate control.
Although investing in securities of issuers in "special situations" offers
potential for above-average returns if the companies are successful, the risk
exists that the benefit of the "special situation" may not materialize and
therefore the prices of those companies' shares could significantly decline in
value.

WARRANTS -- Each Stock Fund may invest in warrants. A warrant is an instrument
which gives the holder the right to subscribe to a specified amount of the
issuer's securities at a set price for a specified period of time or on a
specified date. Warrants do not carry the right to dividends or voting rights
with respect to their underlying securities and do not represent any rights in
assets of the issuer. An investment in warrants may be considered speculative.
In addition, the value of a warrant does not necessarily change with the value
of the underlying securities, and a warrant ceases to have value if it is not
exercised prior to its expiration date.

CONVERTIBLE SECURITIES -- The Stock Funds may invest in convertible securities,
which are bonds, debentures, notes, preferred stocks or other securities that
may be converted into or exchanged for a specified amount of common stock of the
same or a different issuer within a particular period of time at a specified
price or formula. Convertible securities have general characteristics similar to
both debt obligations and equity securities. Although to a lesser extent than
with debt obligations generally, the market value of convertible securities
tends to decline as interest rates increase and, conversely, tends to increase
as interest rates decline. In addition, because of the conversion feature, the
market value of convertible securities tends to vary with fluctuations in the
market value of the underlying common stock and therefore will also react to
variations in the general market for equity securities. A unique feature of
convertible securities is that as the market price of the underlying common
stock declines, convertible securities tend to trade increasingly on a yield
basis and so may not experience market value declines to the same extent as the
underlying common stock. When the market price of the underlying common stock
increases, the prices of the convertible securities tend to rise as a reflection
of the value of the underlying common stock. While no securities investments are
without risk, investments in convertible securities generally entail less risk
than investments in common stock of the same issuer.
As fixed-income securities, convertible securities are investments that
provide for a stable stream of income with generally higher yields than common
stocks. Of course, like all debt obligations, there can be no assurance of
current income because the issuers of the convertible securities may default on
their obligations. Convertible securities, however, generally offer lower
interest or dividend yields than non-convertible securities of similar quality
because of the potential for capital appreciation. A convertible security, in
addition to providing

18
<PAGE> 23

INVESTMENT TECHNIQUES, CONSIDERATIONS AND RISK FACTORS

fixed income, offers the potential for capital appreciation through the
conversion feature, which enables the holder to benefit from increases in the
market price of the underlying common stock. There can be no assurance of
capital appreciation, however, because the market value of securities will
fluctuate.
Convertible securities generally are subordinated to other similar but
non-convertible securities of the same issuer, although convertible bonds, as
corporate debt obligations, enjoy seniority in right of payment to all equity
securities, and convertible preferred stock is senior to common stock of the
same issuer. Because of the subordination feature, however, convertible
securities typically are rated below investment grade or are not rated. The
Stock Funds will limit their investment in convertible securities rated below
investment grade to less than 5% of total net assets.

U.S. GOVERNMENT SECURITIES -- As discussed above, each of the Funds may invest
in U.S. Government Securities. Securities issued by the U.S. Government include
U.S. Treasury obligations, such as Treasury bills, notes, and bonds. Securities
issued by U.S. Government agencies or instrumentalities include, but are not
limited to, obligations of the following:

- - the Federal Housing Administration, Farmers Home Administration, and the
Government National Mortgage Association ("GNMA"), including GNMA pass-through
certificates, whose securities are supported by the full faith and credit of
the United States;

- - the Federal Home Loan Banks.

- - the Federal National Mortgage Association ("FNMA").

- - the Student Loan Marketing Association, Federal Home Loan Mortgage Corporation
("FHLMC").

- - the Federal Farm Credit Banks.

The U.S. Government and its agencies and instrumentalities do not guarantee
the market value of their securities; consequently, the value of such securities
will fluctuate.

STRIPPED TREASURY SECURITIES -- The Bond Funds and the Money Market Fund may
invest in Treasury securities that have been stripped of their unmatured
interest coupons (which typically provide for interest payments semi-annually);
interest coupons that have been stripped from such U.S. Treasury securities;
receipts and certificates for such stripped debt obligations and stripped
coupons (collectively, "Stripped Treasury Securities"). Stripped Treasury
Securities will include coupons that have been stripped from U.S. Treasury
bonds, which may be held through the Federal Reserve Bank's book-entry system
called "Separate Trading of Registered Interest and Principal of Securities"
("STRIPS") or through a program entitled "Coupon Under Book-Entry Safekeeping"
("CUBES").

Stripped Treasury Securities are sold at a deep discount because the buyer of
those securities receives only the right to receive a future fixed payment
(representing principal or interest) on the security and does not receive any
rights to periodic interest payments on the security.

MORTGAGE- AND ASSET-BACKED SECURITIES -- The Bond Funds (except Tax-Free Income
Fund) may purchase mortgage-backed securities. The Nationwide Bond Fund and the
Nationwide Money Market Fund may also invest in asset-backed securities.
Mortgage-backed securities represent direct or indirect participation in, or are
secured by and payable from, mortgage loans secured by real property, and
include single- and multi-class pass-through securities and CMOs. Such
securities may be issued or guaranteed by the U.S. Government, and its agencies
or instrumentalities or in the case of the Nationwide Bond Fund only, by private
issuers, generally originators of or investors in mortgage loans, including
savings and loan associations, mortgage bankers, commercial banks, investment
banks, and special purpose entities (collectively, "private lenders"). The
underlying mortgage assets may have fixed rates or adjustable rates of interest.
Mortgage-backed securities in which the Bond Funds may invest include both
fixed-rate and adjustable-rate mortgage-backed securities.
Asset-backed securities have structural characteristics similar to
mortgage-backed securities. However, the underlying assets are not first-lien
mortgage loans or interests therein; rather they include assets such as motor
vehicle installment sales contracts, other installment loan contracts, home
equity loans, leases of various types of property and receivables from credit
card and other revolving credit arrangements. Payments or distributions of
principal and interest on asset-backed securities may be supported by
non-governmental credit enhancements similar to those utilized in connection
with mortgage-backed securities.
The yield characteristics of mortgage-backed securities differ from those of
traditional debt obligations. Among the principal differences are that interest
and principal payments are made more frequently on mortgage- and asset-backed
securities, usually monthly, and that principal may be prepaid at any time
because the underlying mortgage loans or other assets generally may be prepaid
at any time. As a result, if a Fund purchases these securities at a premium, a
prepayment rate that is higher than expected will reduce yield, while a
prepayment rate that is lower than expected will have the opposite effect of
increasing the yield. Conversely, if a Fund purchases these securities at a
discount, a prepayment rate that is faster than expected will increase yield,
while a prepayment rate that is slower than expected will reduce yield.
Accelerated prepayments on securities purchased by the Fund at a premium also
impose a

19
<PAGE> 24

INVESTMENT TECHNIQUES, CONSIDERATIONS AND RISK FACTORS

risk of loss of principal because the premium may not have been fully amortized
by the time the principal is prepaid in full.
Unlike fixed rate mortgage securities, adjustable rate mortgage securities
are collateralized by or represent interest in mortgage loans with variable
rates of interest. These variable rates of interest reset periodically to align
themselves with market rates. The Fund will not benefit from increases in
interest rates to the extent that interest rates rise to the point where then
cause the current coupon of the underlying adjustable rate mortgages to exceed
any maximum allowable annual or lifetime reset limits (or "cap rates") for a
particular mortgage. In this event, the value of the adjustable rate
mortgage-backed securities in the Fund would likely decrease. Also, the Fund's
net asset value could vary to the extent that current yields on adjustable rate
mortgage-backed securities are different than market yields during interim
periods between coupon reset dates or if the timing of changes to the index upon
which the rate for the underlying mortgage is based lags behind charges in
market rates. During periods of declining interest rates, income to the Fund
derived from adjustable rate mortgages which remain in a mortgage pool will
decrease in contrast to the income on fixed rate mortgages, which will remain
constant. Adjustable rate mortgages also have less potential for appreciation in
value as interest rates decline than do fixed rate investments.
The Nationwide Bond Fund may purchase mortgage-backed securities issued by
private issuers, and therefore, the purchase of such securities may entail
greater risk than mortgage-backed securities that are guaranteed by the U.S.
Government, its agencies or instrumentalities. Mortgage-backed securities issued
by private lenders may be supported by pools of mortgage loans or other
mortgage-backed securities that are guaranteed, directly or indirectly, by the
U.S. Government or one of its agencies or instrumentalities, or they may be
issued without any governmental guarantee of the underlying mortgage assets but
with some form of non-governmental credit enhancement. Since privately-issued
mortgage certificates are not guaranteed by an entity having the credit status
of GNMA or FHLMC, such securities generally are structured with one or more
types of credit enhancement. Such credit support falls into two categories: (i)
liquidity protection; and (ii) protection against losses resulting from ultimate
default by an obligor on the underlying assets. Liquidity protection refers to
the provisions of advances, generally by the entity administering the pool of
assets, to ensure that the pass-through of payments due on the underlying pool
occurs in a timely fashion. Protection against losses resulting from ultimate
default enhances the likelihood of ultimate payment of the obligations on at
least a portion of the assets in the pool. Such protection may be provided
through guarantees, insurance policies or letters of credit obtained by the
issuer or sponsor from third parties, through various means of structuring the
transaction or through a combination of such approaches.
The ratings of mortgage-backed securities for which third-party credit
enhancement provides liquidity protection or protection against losses from
default are generally dependent upon the continued creditworthiness of the
provider of the credit enhancement. The ratings of such securities could be
subject to reduction in the event of deterioration in the creditworthiness of
the credit enhancement provider even in cases where the delinquency loss
experience on the underlying pool of assets is better than expected. There can
be no assurance that the private issuers or credit enhancers of mortgage-backed
securities can meet their obligations under the relevant policies or other forms
of credit enhancement.
Examples of credit support arising out of the structure of the transaction
include "senior-subordinated securities" (multiple class securities with one or
more classes subordinate to other classes as to the payment of principal thereof
and interest thereon, with the result that defaults on the underlying assets are
borne first by the holders of the subordinated class), creation of "reserve
funds" (where cash or investments sometimes funded from a portion of the
payments on the underlying assets are held in reserve against future losses) and
"over-collateralization" (where the scheduled payments on, or the principal
amount of, the underlying assets exceed those required to make payment of the
securities and pay any servicing or other fees). The degree of credit support
provided for each issue is generally based on historical information with
respect to the level of credit risk associated with the underlying assets.
Delinquency or loss in excess of that which is anticipated could adversely
affect the return on an investment in such security.

COLLATERALIZED MORTGAGE OBLIGATIONS -- The Bond Funds (other than the Tax-Free
Income Fund) may also acquire CMOs and stripped mortgage-backed securities. CMOs
are debt obligations collateralized by mortgage loans or mortgage pass-through
securities. Typically, CMOs are collateralized by GNMA, FNMA or FHLMC
certificates, but also may be collateralized by whole loans or private mortgage
pass-through securities (such collateral collectively referred to as "Mortgage
Assets"). Payments of principal or interest on the Mortgage Assets, and any
reinvestment income thereon, provide the income to pay debt service on the CMOs.
CMOs may be issued by agencies or instrumentalities of the U.S. Government or by
private lenders.

INTEREST ONLY AND PRINCIPAL ONLY SECURITIES -- Stripped mortgage-backed
securities are securities representing interest in a pool of mortgages the cash
flow from which has been separated into interest and principal components. "IOs"
(interest only securities) receive the interest portion of the cash flow while

20
<PAGE> 25

INVESTMENT TECHNIQUES, CONSIDERATIONS AND RISK FACTORS

"POs" (principal only securities) receive the principal portion. Stripped
mortgage-backed securities may be issued by U.S. Government agencies or by
private lenders. As interest rates rise and fall, the value of IOs tends to move
in the same direction as interest rates. The value of POs, like other debt
instruments, will tend to move in the opposite direction compared to interest
rates. POs perform best when prepayments on the underlying mortgages rise since
this increases the rate at which the investment is returned and the yield to
maturity on the PO. When payments on mortgages underlying a PO are slow, the
life of the PO is lengthened and the yield to maturity is reduced.
Each Bond Fund (other than the Tax-Free Income Fund) may purchase stripped
mortgage-backed securities for hedging purposes to protect that Fund against
interest rate fluctuations. For example, since an IO will tend to increase in
value as interest rates rise, it may be utilized to hedge against a decrease in
value of other fixed-income securities in a rising interest rate environment.
With respect to IOs, if the underlying mortgage securities experience greater
than anticipated prepayments of principal, the Fund may fail to recoup fully its
initial investment in these securities even if the securities are rated in the
highest rating category by an NRSRO. Stripped mortgage-backed securities may
exhibit greater price volatility than ordinary debt securities because of the
manner in which their principal and interest are returned to investors. The
market value of the class consisting entirely of principal payments can be
extremely volatile in response to changes in interest rates. The yields on
stripped mortgage-backed securities that receive all or most of the interest are
generally higher than prevailing market yields on other mortgage-backed
obligations because their cash flow patterns are also volatile and there is a
greater risk that the initial investment will not be fully recouped. No more
than 10% of a Bond Fund's total assets will be invested in IOs and in POs. The
market for CMOs and other stripped mortgage-backed securities may be less liquid
if these securities lose their value as a result of changes in interest rates;
in such instance, a Bond Fund may have difficulty in selling such securities.

MUNICIPAL SECURITIES -- The two principal classifications of municipal
securities which may be held by the Tax-Free Income Fund are "general
obligation" securities and "revenue" securities. General obligation securities
are secured by the issuer's pledge of its full faith, credit and taxing power
for the payment of principal and interest. Revenue securities are payable only
from the revenues derived from a particular facility or class of facilities or,
in some cases, from proceeds of a special excise tax or other specific revenue
source such as the user of the facility being financed. Private activity bonds
held by the Tax-Free Income Fund are in most cases revenue securities and are
not payable from the unrestricted revenues of the issuer. Consequently, the
credit quality of private activity bonds is usually directly related to the
credit standing of the corporate user of the facility involved.
The Tax-Free Income Fund may also invest in "moral obligation" securities,
which are normally issued by special purpose public authorities. If the issuer
of moral obligation securities is unable to meet its debt service obligations
from current revenues, it may draw on a reserve fund, the restoration of which
is a moral commitment, but not a legal obligation, of the state or municipality
which created the issuer.
Proposals to restrict or eliminate the Federal income tax exemption of
interest on municipal securities have been discussed from time to time and may
be enacted in the future.

REPURCHASE AGREEMENTS -- Each of the Funds may engage in repurchase agreement
transactions as long as the underlying securities are of the type that the Fund
would be permitted to purchase directly. Under the terms of a typical repurchase
agreement, the Fund would acquire an underlying security for a relatively short
period (usually not more than one week) subject to an obligation of the seller
to repurchase, and the Fund to resell, the obligation at an agreed upon price
and time, thereby determining the yield during the Fund's holding period. The
Fund will enter into repurchase agreements with member banks of the Federal
Reserve System or certain non-bank dealers. Under each repurchase agreement the
selling institution will be required to maintain the value of the securities
subject to the repurchase agreement at not less than their repurchase price
(including interest). Repurchase agreements could involve certain risks in the
event of default or insolvency of the other party, including possible delays or
restrictions upon a Fund's ability to dispose of the underlying securities. NAS,
acting under the supervision of the Board of Trustees of the Trust, reviews the
creditworthiness of those banks and non-bank dealers with which the Fund enters
into repurchase agreements to evaluate these risks. For additional information,
see "Repurchase Agreements" in the Statement of Additional Information.

INVESTMENT COMPANIES -- As permitted by the Investment Company Act of 1940, as
amended (the "1940 Act"), each Fund may invest up to 10% of its total assets,
calculated at the time of investment, in the securities of other investment
companies. No more than 5% of a Fund's total assets may be invested in the
securities of any one investment company nor may it acquire more than 3% of the
voting securities of any other investment company. Each Fund will indirectly
bear its proportionate share of any management fees paid by an investment
company in which it invests in addition to the advisory fee paid by the Fund.

21
<PAGE> 26

INVESTMENT TECHNIQUES, CONSIDERATIONS AND RISK FACTORS

WHEN-ISSUED SECURITIES -- Each of the Funds may invest without limitation in
securities purchased on a when-issued or delayed delivery basis. Although the
payment and interest terms of these securities are established at the time the
Fund enters into the commitment, these securities may be delivered and paid for
at a future date, generally within 45 days; for mortgage-backed securities, the
delivery date may extend to as long as 120 days. Purchasing when-issued
securities allows a Fund to lock in a fixed price or yield on a security it
intends to purchase. However, when the Fund purchases a when-issued security, it
immediately assumes the risk of ownership, including the risk of price
fluctuation until the settlement date.
The greater a Fund's outstanding commitments for these securities, the
greater the exposure to potential fluctuations in the net asset value of a Fund.
Purchasing when-issued securities may involve the additional risk that the yield
available in the market when the delivery occurs may be higher or the market
price lower than that obtained at the time of commitment. Although the Fund may
be able to sell these securities prior to the delivery date, it will purchase
when-issued securities for the purpose of actually acquiring the securities,
unless after entering into the commitment a sale appears desirable for
investment reasons. The Fund will set aside liquid assets in a segregated
account to secure its outstanding commitments for when-issued securities.

FLOATING AND VARIABLE RATE OBLIGATIONS -- The Bond Funds and the Money Market
Fund may invest in floating and variable rate obligations. Floating or variable
rate obligations bear interest at rates that are not fixed, but vary with
changes in specified market rates or indices, such as the prime rate, and at
specified intervals. Interest rates on floating rate obligations vary with
changes in an underlying index while interest rates on variable rate obligations
change at preset fixed times. Certain of the floating or variable rate
obligations that may be purchased by these Funds may be callable by the issuer
at certain dates during the term of the obligations. The dates on which they may
be called are set at the time of issuance. The obligations have the credit risks
other debt instruments have, but because the issuer may call the obligations,
these Funds are also subject to the risk that the rates at which a Fund will be
able to reinvest such assets may be less than the rate paid on the floating or
variable rate obligation. Certain of the floating or variable rate obligations
that may be purchased by these Funds may also carry a demand feature that would
permit the holder to tender them back to the issuer at par value prior to
maturity. Such obligations include variable rate master demand notes, which are
unsecured instruments issued pursuant to an agreement between the issuer and the
holder that permits the indebtedness thereunder to vary and provides for
periodic adjustments in the interest rate. The Bond Funds and the Money Market
Fund will limit their purchases of floating and variable rate obligations to
those of the same quality as they otherwise are allowed to purchase. NAS will
monitor on an ongoing basis the ability of an issuer of a demand instrument to
pay principal and interest on demand.
Although there may be no active secondary market with respect to a
particular variable or floating rate obligation purchased by a Fund, the Fund
may attempt to resell the obligation at any time to a third party. The absence
of an active secondary market, however, could make it difficult for a Fund to
dispose of a variable or floating rate obligation in the event the issuer of the
obligation defaulted on its payment obligations, and the Fund could, as a result
or for other reasons, suffer a loss to the extent of the default. Variable or
floating rate obligations may be secured by bank letters of credit.
In the event the interest rate of a variable or floating rate obligation is
established by reference to an index or an interest rate that may from time to
time lag behind other market interest rates, there is the risk that the market
value of such obligation, on readjustment of its interest rate, will not
approximate its par value or amortized cost, as the case may be.
Variable and floating rate obligations for which no readily available market
exists and which are not subject to a demand feature that will permit the Fund
to receive payment of the principal within seven days after demand by that Fund,
will be considered illiquid and therefore, together with other illiquid
securities held by such Fund, investments will not exceed such Fund's
limitations on investments in illiquid securities.
For a further discussion of floating and variable rate obligations, see
"Additional Information on Portfolio Instruments and Investment
Policies -- Floating and Variable Rate Instruments" in the Statement of
Additional Information.

ZERO COUPON SECURITIES -- The Bond Funds may invest in zero coupon securities.
Zero coupon securities are debt securities that pay no cash income but are sold
at substantial discounts from their value at maturity. When a zero coupon
security is held to maturity, its entire return, which consists of the
amortization of discount, comes from the difference between its purchase price
and its maturity value. This difference is known at the time of purchase, so
that investors holding zero coupon securities until maturity know at the time of
their investment what the expected return on their investment will be. Certain
zero coupon securities also are sold at substantial discounts from their
maturity value and provide for the commencement of regular interest payments at
a deferred date. Zero coupon securities may have conversion features.
Zero coupon securities tend to be subject to greater price fluctuations in
response to changes in interest rates than ordinary interest-paying debt
securities with similar maturities. The value of zero coupon securities
appreciates more during

22
<PAGE> 27

INVESTMENT TECHNIQUES, CONSIDERATIONS AND RISK FACTORS

periods of declining interest rates and depreciates more during periods of
rising interest rates than ordinary interest-paying debt securities with similar
maturities. Zero coupon securities may be issued by a wide variety of corporate
and governmental issuers. Although these instruments are generally not traded on
a national securities exchange, they are widely traded by brokers and dealers
and, to such extent, will not be considered illiquid for the purposes of the
Fund's limitation on investments in illiquid securities.
Current Federal income tax law requires the holder of a zero coupon security
to accrue income with respect to these securities prior to the receipt of cash
payments. Accordingly, to avoid liability for Federal income and excise taxes,
the Bond Funds may be required to distribute income accrued with respect to
these securities and may have to dispose of portfolio securities under
disadvantageous circumstances in order to generate cash to satisfy these
distribution requirements.

MONEY MARKET OBLIGATIONS -- Each of the Funds may invest its assets in
high-quality short-term money market obligations.
Money Market Obligations in which the Funds may invest include: 1) U.S.
Government Securities (as described above) with remaining maturities of one year
or less; 2) commercial paper rated in one of the two highest ratings categories
of any NRSRO; 3) short-term bank obligations that are rated in one of the two
highest categories by any NRSRO, with respect to obligations maturing in one
year or less; 4) repurchase agreements relating to debt obligations which a Fund
could purchase directly; 5) unrated debt obligations with remaining maturities
of one year or less which are determined by NAS to be of comparable quality to
securities described above; or 6) money market mutual funds.

CANADIAN AND PROVINCIAL OBLIGATIONS -- The Money Market Fund and the Bond Fund
may invest in Canadian and Provincial obligations. They are unsecured,
discounted bills and notes are issued in U.S. currency. Obligations have a final
maturity of 270 days or less from date of issue and are exempt from registration
under section 3(a)(3) of the Securities Act of 1933, as amended. Canada Bills
constitute direct, unconditional obligations of Her Majesty in right of Canada
and are a direct charge on, and payable out of the Consolidated Revenue Fund of
Canada. Export Development Company and Canadian Wheat Board are crown
corporations and agents of Her Majesty in right of Canada. Provincial
obligations have the full faith and credit of the provincial governments.

MEDIUM-GRADE OBLIGATIONS -- The Nationwide Bond and Tax-Free Income Funds may
invest in medium-grade securities. Medium-grade securities are obligations rated
in the fourth highest rating category by any NRSRO. Medium-grade securities,
although considered investment-grade, have speculative characteristics and may
be subject to greater fluctuations in value than higher-rated securities. In
addition, the issuers of medium-grade securities may be more vulnerable to
adverse economic conditions or changing circumstances than issuers of
higher-rated securities.
All ratings are determined at the time of investment. Any subsequent rating
downgrade of a debt obligation will be monitored by NAS to consider what action,
if any, a Fund should take consistent with its investment objective. There is no
requirement that any such securities must be sold if downgraded.

LENDING PORTFOLIO SECURITIES -- From time to time, each of the Funds (except the
Tax-Free Income Fund) may lend their portfolio securities to brokers, dealers
and other financial institutions who need to borrow securities to complete
certain transactions. In connection with such loans, a Fund will receive
collateral consisting of cash, U.S. Government Securities or irrevocable letters
of credit. Such collateral will be maintained at all times in an amount equal to
at least 100% of the current market value of the loaned securities. A Fund can
increase its income through the investment of such collateral and continues to
be entitled to payments in amounts equal to the interest, dividends or other
distributions payable on the loaned security and receives interest on the amount
of the loan. Such loans will be terminable at any time upon specified notice.
The Fund might experience risk of loss if the institution with which it has
engaged in a portfolio loan transaction breaches its agreement with the Fund.

DERIVATIVE INSTRUMENTS -- NAS may use a variety of derivative instruments,
including options, futures contracts ("futures"), options on futures, stock
index options and forward currency contracts to hedge a Stock Fund's portfolio
or for risk management. Derivatives are financial instruments whose value and
performance are based on the value and performance of another security,
financial instrument or index.

PORTFOLIO TURNOVER
The Funds will attempt to purchase securities with the intent of holding them
for investment but may purchase and sell portfolio securities whenever NAS
believes it to be in the best interests of a Fund. The Funds will not consider
portfolio turnover rate a limiting factor in making investment decisions
consistent with their investment objective and policies.
The annual portfolio turnover rate for each of the Funds (except the Money
Market Fund) is not expected to exceed 150% of such Fund's portfolio. For
regulatory purposes, the Money Market Fund is expected to have a 0% portfolio
turnover rate. Higher turnover rates (i.e., 100% or more) will generally result
in higher transaction costs to the Fund, as well as higher brokerage expenses
and higher levels of capital gains. The portfolio turnover rates of each Fund
may vary greatly from year to year and within a particular year.

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<PAGE> 28

NATIONWIDE FAMILY OF FUNDS

HOW TO PURCHASE SHARES

YOU MAY INVEST IN THREE CONVENIENT WAYS:

BY MAIL -- Complete the application and mail with your check or other negotiable
bank draft payable to: NATIONWIDE ADVISORY SERVICES, INC., THREE NATIONWIDE
PLAZA, P.O. BOX 1492, COLUMBUS, OHIO 43216-1492. Purchases must be made in U.S.
dollars only. The share price you receive will be determined as of the Valuation
Time (as defined below) on the day the properly completed application is
received by NAS in Columbus, Ohio. Checks or drafts drawn on non-U.S. banks are
not accepted. NAS reserves the right to refuse certain third-party checks.

BY WIRE -- To avoid mail delays on initial and subsequent investments, you can
request that your bank transmit funds (Federal Funds) by wire to the Fund's
custodian bank. In order to use this method, you must call NAS by 11 A.M.
Eastern Time, and the wire must be received by the custodian bank by 2 P.M.
Eastern Time. The share price you receive will be determined as of the next
Valuation Time (as described below) after your order is received. If NAS does
not receive Federal Funds for your order within 3 business days, your order will
be cancelled. The bank that wires your money may charge you a fee for this
service. IF YOU CHOOSE THIS METHOD TO OPEN YOUR ACCOUNT, YOU MUST CALL OUR TOLL-
FREE NUMBER BEFORE YOU WIRE YOUR INVESTMENT. If this is an initial investment,
you must then complete and mail the application.

BY TELEPHONE (NAS NOW) -- By calling 1-800-637-0012, 24 hours a day, seven days
a week you will be connected to our automated voice-response system, NAS NOW. It
gives you quick, easy access to mutual fund information. Select from a menu of
choices to conduct transactions and hear fund price information, mailing and
wiring instructions as well as other mutual fund information.

IN ORDER TO USE NAS NOW TO MAKE A PURCHASE YOU MUST COMPLETE THE APPROPRIATE
SECTION ON THE APPLICATION.

MINIMUM INVESTMENT
A minimum investment is $1,000, and minimum subsequent investments are $100 or
more for a Fund at any time. For certain shareholders, each of the Stock Funds
and the Nationwide Bond Fund have a minimum investment of $250 and minimum
subsequent investments of $25 or more. This minimum is available for
shareholders who received Class D shares or Money Market Fund shares in
connection with the Reorganization if the shareholder is purchasing in the same
capacity and through the same account, and shareholders entitled to purchase
shares of such Funds at net asset value.
You may establish an Automatic Asset Accumulation plan for as little as $50
per month. See "Investor Strategies" for more information.
Minimum investment requirements may be waived for certain retirement plans.
See "Retirement Plans" for further information.

CHOOSE A SHARE CLASS
Each Fund (except for the Money Market Fund) offers three classes of shares.
Class A shares are purchased with a front-end sales charge and a 0.25% 12b-1
fee. Class B shares are subject to a CDSC on redemption and a 1.00% 12b-1 fee
for the Stock Funds and an 0.85% 12b-1 fee for the Bond Funds. Class D shares
are purchased with a front-end sales charge but no 12b-1 fee. The Money Market
Fund, whose shares have no class designation, has no sales charge or 12b-1 fee.

PURCHASE PRICE AND SALES CHARGES

THE PURCHASE PRICES OF THE FUNDS ARE DETERMINED AS FOLLOWS:

SHARES OF THE MONEY MARKET FUND
Shares of the Money Market Fund are purchased at net asset value. You pay no
sales charge when you invest in or redeem from the Money Market Fund.

CLASS A AND D SHARES OF THE STOCK AND BOND FUNDS
Class A and D shares are purchased at the offering price. The offering price is
determined by adding the sales charge (based as a percentage of the offering
price) to the net asset value per share.

SALES CHARGE SCHEDULE AND AVAILABLE DISCOUNTS FOR CLASS A AND D SHARES
For purchases of the Class A and D shares, your sales charge percentage is
calculated according to the charts below:

<TABLE>
<CAPTION>
SALES CHARGE SCHEDULE--
Class A Shares of the Stock Funds As a percentage
of:
- -----------------------------------------------------------
If your investment plus the value Offering Amount
of other shares held is: Price Invested
- -----------------------------------------------------------
<S> <C> <C>
less than $100,000, the sales charge
is: 5.50% 5.82%
$100,000 but less than $250,000 4.25% 4.44%
$250,000 but less than $500,000 3.00% 3.09%
$500,000 but less than $1,000,000 1.75% 1.78%
$1,000,000 or more 0.50% 0.50%
</TABLE>

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<PAGE> 29

NATIONWIDE FAMILY OF FUNDS

<TABLE>
<CAPTION>
SALES CHARGE SCHEDULE--
Class A Shares of the Bond Funds
and Class D Shares As a percentage
of:
- -----------------------------------------------------------
If your investment plus the value Offering Amount
of other shares held is: Price Invested
- -----------------------------------------------------------
<S> <C> <C>
less than $100,000, the sales charge
is: 4.50% 4.71%
$100,000 but less than $250,000 3.50% 3.63%
$250,000 but less than $500,000 2.50% 2.56%
$500,000 but less than $1,000,000 1.50% 1.52%
$1,000,000 or more 0.50% 0.50%
</TABLE>

Shareholders can receive even greater discounts through the cumulative
effect of the discounts below:

LIFETIME ADDITIONAL DISCOUNT
The sales charge for Class A and D shares is computed at the rate applied to the
amount invested plus the accumulated value of Class A and D shares held in any
of the Funds (except Nationwide Money Market Fund) including shares acquired by
reinvestment of dividends and capital gains distributions.

FAMILY MEMBER DISCOUNT
In addition, all Class A and D shares held in any Fund accounts (except
Nationwide Money Market Fund) of members of the shareholder's family may be
included, provided these family members reside at the shareholder's address.

INSURANCE PROCEEDS OR BENEFITS DISCOUNT PRIVILEGE -- If the funds used to
purchase Class A and D shares come from proceeds or benefits of an insurance
policy issued by any member of the Nationwide Insurance Enterprise, the sales
charge is one-half the rate established, provided the purchase is made within 60
days after receipt of the proceeds or benefits.

LETTER OF INTENT (LOI) DISCOUNT -- This discount permits you to purchase Class A
and D shares at a reduced cost during a 13-month period if the amount invested
or the value of shares held by you and other family members of your household,
plus the amount invested (excluding investments in Nationwide Money Market
Fund), equals or exceeds $100,000. LOI is not a binding obligation upon the
investor to buy the shares. It is merely a statement of intent.
By marking the appropriate box and signing the application, you indicate
your intention to complete the appropriate LOI. The LOI will be completed when
your new investments in a particular class, together with the value of all
existing shares of such class held by you, your spouse, minor children, and
other family members of your household, total an amount equal to the amount
checked on the application. You obtain a reduced sales charge on each share
purchased during the 13-month period. The LOI may be backdated, up to 90 days,
to include previous purchases under the reduced sales charge available under the
LOI.
If the intended investment is not completed, the investor will be asked to
pay the difference between the sales charge actually paid and the sales charge
due on the amount invested according to the "Sales Charge Schedule." If the
difference is not paid within 20 days after written request, the investor
irrevocably constitutes and appoints NAS as his or her attorney-in-fact, with
full power of substitution, to redeem an appropriate number of shares from his
or her account to cover the amount due. For more details on the LOI Discount,
call 1-800-848-0920.

NET ASSET VALUE PURCHASE PRIVILEGE (CLASS A AND D SHARES ONLY). -- The sales
charge applicable to Class A and D shares may be waived for the following
purchases: (1) shares sold through institutional sales to other registered
investment companies affiliated with NAS, (2) for Class D shares, sales which
may be made (a) to any pension, profit sharing, or other employee benefit plan
for the employees of NAS, any of its affiliated companies, or investment
advisory clients and their affiliates, (b) to Trustees and retired Trustees of
NIF III (including its predecessor Trusts), (c) directors, officers, full-time
employees, sales representatives and their employees, and retired directors,
officers, employees, and sales representatives, their spouses, children of
immediate relatives, and immediate relatives of deceased employees (immediate
relatives include mother, father, brothers, sisters, grandparents, grandchildren
("Immediate Relatives")) of any member of the Nationwide Insurance Enterprise,
or any investment advisory clients of NAS and their affiliates, (d) to
directors, officers and full-time employees, their spouses, children or
Immediate Relatives and Immediate Relatives of deceased employees of any sponsor
group which may be affiliated with the Nationwide Insurance Enterprise from time
to time, which include but are not limited to Farmland Insurance Industries,
Inc., Maryland Farm Bureau, Inc., Ohio Farm Bureau Federation, Inc.,
Pennsylvania Farmers' Association, Ruralite Services, Inc., and Southern States
Cooperative, (e) any endowment or non-profit organization, (f) to any pension,
profit sharing, or deferred compensation plan which is qualified under section
401(a), 403(b) or 457 of the Internal Revenue Code of 1986 as amended, dealing
directly with NAS with no sales representative involved upon written assurance
of the purchaser that the shares are acquired for investment purposes and will
not be resold except to the Trust, (g) to any life insurance company separate
account registered as a unit investment trust, and (h) to any qualified pension
or profit sharing plan established by a Nationwide sales representative for
himself/herself and his/her employees. The sales charge applicable to Class A
shares may be waived for any person purchasing through an account with an
unaffiliated brokerage firm having an agreement with NAS to provide shareholder
servicing.

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NATIONWIDE FAMILY OF FUNDS

CLASS B SHARES OF THE STOCK AND BOND FUNDS AND CDSC
A CDSC will be imposed on any redemption of Class B shares which causes the
current value of your account to fall below the total amount of all purchases
made during the preceding six years. THE CDSC IS NEVER IMPOSED ON DIVIDENDS,
WHETHER PAID IN CASH OR REINVESTED, OR ON APPRECIATION. The CDSC applies only to
the lesser of the original investment or current market value.
Where the CDSC is imposed, the amount of the CDSC will depend on the number
of years since you made the purchase payment from which an amount is being
redeemed, according to the following table:

<TABLE>
<CAPTION>
- -----------------------------------------------------------
CONTINGENT
DEFERRED
YEAR OF REDEMPTION SALES
AFTER PURCHASE CHARGE
<S> <C>
- -----------------------------------------------------------
First................................ 5.00%
Second............................... 4.00%
Third................................ 3.00%
Fourth............................... 3.00%
Fifth................................ 2.00%
Sixth................................ 1.00%
Seventh and following................ 0.00%
</TABLE>

For purposes of calculating the CDSC, it is assumed that the oldest Class B
shares remaining in your account will be sold first. All payments during a month
will be aggregated and deemed to have been made on the last day of the preceding
month.
For the Bonds Funds your money will earn daily dividends through the date of
liquidation. If you redeem all of your shares in one of the Bond Funds, you will
receive a check representing the value of your account, less any applicable CDSC
calculated as of the date of your withdrawal, including all daily dividends
credited to your account through the date of withdrawal.
THE CDSC WILL BE WAIVED IN THE CASE OF A TOTAL OR PARTIAL REDEMPTION
FOLLOWING THE DEATH OR DISABILITY OF A SHAREHOLDER (ACCOUNTS OWNED BY AN
INDIVIDUAL OR AN INDIVIDUAL JOINTLY WITH SPOUSE) IF REDEMPTION OCCURS WITHIN ONE
YEAR OF DEATH OR INITIAL DETERMINATION OF DISABILITY).

CONVERSION FEATURES FOR CLASS B SHARES
Class B shares which have been outstanding for seven years after the end of the
month in which the shares were initially purchased will automatically convert to
Class A shares and, consequently, will no longer be subject to the higher 12b-1
fee. Such conversion will be on the basis of the relative net asset values of
the two classes, without the imposition of a sales charge or other charge except
that the 12b-1 fee applicable to Class A shares shall thereafter be applied to
such converted shares. Because the per share net asset value of the Class A
shares may be higher than that of the Class B shares at the time of the
conversion, a shareholder may receive fewer Class A shares than the number of
Class B shares converted, although the dollar value will be the same.
Reinvestments of dividends and distributions in Class B shares will not be
considered a new purchase for purposes of the conversion feature and will
convert to Class A shares in the same proportion as the number of the
shareholder's Class B shares converting to Class A shares bears to the
shareholder's total Class B shares not acquired through dividends and
distributions.
If a shareholder effects one or more exchanges among Class B shares of the
Funds during the six-year period, the holding period for shares so exchanged
will be counted toward such period.

FACTORS TO CONSIDER WHEN SELECTING A SHARE CLASS
Before purchasing Class A shares or Class B shares of a Fund, investors should
consider whether, during the anticipated life of their investment in a Fund, the
accumulated 12b-1 fee and potential CDSC on Class B shares prior to conversion
(as described above) would be less than the initial sales charge and accumulated
12b-1 fee on Class A shares purchased at the same time, and to what extent such
differential would be offset by the higher yield of Class A shares. In this
regard, to the extent that the sales charge for the Class A shares is waived or
reduced by one of the methods described above or the investment is $100,000 or
more, investments in Class A shares become more desirable. NAS may refuse a
purchase order for Class B shares of over $100,000.
Although Class A shares are subject to a 12b-1 fee, they are not subject to
the higher 12b-1 fee applicable to Class B shares. For this reason, Class A
shares can be expected to pay correspondingly higher dividends per shares.
However, because initial sales charges are deducted at the time of purchase,
purchasers of Class A shares who do not qualify for waivers of or reductions in
the initial sales charge would have less of their purchase price initially
invested in the Fund than purchasers of Class B shares.
As described above, purchasers of Class B shares will have more of their
initial purchase price invested. Any positive investment return on this
additional invested amount may partially or wholly offset the expected higher
annual expenses borne by Class B shares. Because a Fund's future returns cannot
be predicted, there can be no assurance that this will be the case. Investors in
Class B shares would, however, own shares that are subject to higher annual
expenses and, for a six-year period, such shares would be subject to a CDSC
ranging from 5.00% to 1.00% upon redemption. Investors expecting to redeem
during this six-year period should compare the cost of the CDSC plus the
aggregate annual Class B shares' 12b-1 fees to the cost of the initial sales
charge and 12b-1 fee on the Class A shares. Over

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NATIONWIDE FAMILY OF FUNDS

time the expense of the annual 12b-1 fee on the Class B shares may be equal to
or exceed the initial sales charge and annual 12b-1 fee applicable to Class A
shares. For example, if a Fund's net asset value remains constant and assuming
no waiving of any 12b-1 fees, the aggregate 12b-1 fee with respect to Class B
shares of a Fund would equal or exceed the initial sales charge and aggregate
12b-1 fee of Class A shares approximately eight years after the purchase. In
order to reduce such fees of investors that hold Class B shares for eight years
or more, Class B shares will be automatically converted to Class A shares, as
described, at the end of a seven-year period. This example assumes that the
initial purchase of Class A shares would be subject to the maximum initial sales
charge of 5.50% for the Stock Funds and 4.50% for the Bond Funds. This example
does not take into account the time value of money which reduces the impact of
the Class B shares' 12b-1 fee on the investment, the benefit of having the
additional initial purchase price invested during the period before it is
effectively paid out as a 12b-1 fee, fluctuations in net asset value, any waiver
of 12b-1 fees or the effect of different performance assumptions.
If a shareholder who owns both Class A shares and Class B shares redeems
less than his or her entire investment, then shares will be redeemed in the
following order: (a) any Class B shares that are not subject to a CDSC (e.g.,
shares acquired as a result of reinvested dividends and distributions); (b)
Class A shares; and (c) Class B shares subject to a CDSC, unless a shareholder
has made a specific election otherwise.

HOW TO SELL (REDEEM) SHARES

You can sell (redeem) all, or any part of, your shares of any Fund at any time.
Shares are redeemed at net asset value next computed after receipt of the
properly completed request by NAS, at its offices in Columbus, Ohio. Redemptions
of Class B shares may be subject to a CDSC as described above.
Requests for redemptions may be in writing or by telephone (if authorized).
Payment for shares redeemed is made within 3 business days of receipt. The value
of shares redeemed depends upon the market value of the investments of each Fund
at the time of redemption and may be more or less than the shareholders' cost.
Payment of redemption proceeds may be delayed until the check purchasing
shares has cleared or up to fifteen days from the date of purchase, whichever
occurs first. This is to assure that your check has cleared. To avoid this
possible delay, you may make your investment by wire (see "How To Purchase
Shares by Wire"). You will receive a confirmation each time a liquidation of
shares is requested. Redemptions may be suspended or the date of payment
postponed when the New York Stock Exchange is closed (other than customary
weekend and holiday closings listed in the "How To Purchase Shares" section), or
if trading is restricted or if any emergency exists.

YOU CAN REDEEM IN ANY OF THE FOLLOWING WAYS:

BY TELEPHONE

NAS NOW -- By calling 1-800-637-0012, 24 hours a day, seven days a week, you
will automatically have access to NAS NOW to make a redemption (check mailed
to address of record) unless you declined the option in your application.
Additional NAS NOW redemption options are also available, if elected. NAS NOW
also gives you quick, easy access to mutual fund information. Select from a
menu of choices to conduct transactions and hear fund price information,
mailing and wiring instructions as well as other mutual fund information.
(Redemptions through NAS NOW, the automated voice-response system, will be
limited to the following registrations: Individual, Joint, Transfer on Death,
Trust, and Uniform Gift/Transfer to Minor accounts. Western Union redemptions
are not allowed through NAS NOW.)

CUSTOMER SERVICE LINE -- A check payable to the shareholder of record can be
mailed to the address of record, unless you declined the option in your
account application. Redemptions of $1,000 or more can be wired directly to
your account at a commercial bank (voided check must be attached to the
application) or sent via Western Union, if elected in the application. For
additional information on Western Union, please see below.

Telephone redemptions for IRAs are available upon receipt of the proper
forms. These redemptions will be subject to mandatory 10% Federal income tax
withholding, unless you elect out of withholding. For further information, or
to request these forms, please call our customer service line at
1-800-848-0920.

You must call our toll-free number by Valuation Time (as defined below),
which is usually 4:00 p.m. Eastern Time, to receive that day's closing share
price.

The Funds will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. The Funds will not be liable for any
loss, injury, damage, or expense as a result of acting upon instructions
communicated by telephone reasonably believed to be genuine, and the Funds
will be held harmless from any loss, claims or liability arising from its
compliance with such instructions. These options are subject to the terms and
conditions set forth in this Prospectus and all telephone transaction calls
may be tape recorded. The Funds reserve

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the right to revoke this privilege at any time without notice to shareholders
and request the redemption in writing, signed by all shareholders.

BY BANK WIRE -- Your funds will be wired to your bank on the next business
day after your redemption order has been processed. A $5 fee will be deducted
from the proceeds for this service. Your financial institution may also
charge you a fee for receipt of the wire. (If elected, this authorization
will remain in effect until written notice of its termination is received by
NAS.)

BY ACH -- Your funds will be sent via ACH to your bank account on the second
business day after your redemption order has been received by NAS. There is
no fee to receive your funds via ACH. (If elected, this authorization will
remain in effect until written notice of its termination is received by NAS.)
Funds sent through the automated clearing house should reach your bank in two
business days.

BY WESTERN UNION -- With Western Union's Quick Cash(R) service, you can
receive your redemptions the next day across the United States or throughout
the world. If you have elected, you can phone in your request to receive
funds, next business day, at 24,000 locations - including major supermarkets
and mail-box type outlets - many open 24 hours a day, seven days a week. The
fee for the Western Union service is $9.50 per $10,000. Funds being sent
outside of The United States may be subject to a higher fee. This fee is
deducted from your account.

BY MAIL OR FAX (NO MINIMUM) -- Write or fax to Nationwide Advisory Services,
Inc., Three Nationwide Plaza, P.O. Box 1492, Columbus, Ohio 43216-1492 or FAX
(614) 249-8705. Please be sure that your letter or facsimile is signed exactly
as your account is registered and that your account number and the Fund from
which you wish to make the withdrawal are included. For example, if your account
is registered John Doe and Mary Doe, 'Joint Tenants With Right of Survivorship,'
then both John and Mary must sign the redemption request. For an IRA redemption,
you must include date of birth. Also, you must indicate whether or not you wish
Federal income tax (not less than 10%) to be withheld from the distribution. The
distribution will be processed effective the date the signed letter or fax is
received. Fax requests received after 4 P.M. Eastern time will be processed as
of the next business day. NAS reserves the right to require the original
document if you use the fax method.

BY MONEY MARKET CHECK WRITING -- Money Market Fund shareholders receive free
check writing privileges ($500 minimum). If you wish to withdraw your money this
way, please complete the appropriate section of the application. You pay no fee
for this service, but the Fund reserves the right to charge for it or to
terminate this service. For shares of the Money Market Fund exchanged from Class
B shares the check writing privilege is not available.
IF YOU HAVE MONEY MARKET CHECK WRITING PRIVILEGES, YOU SHOULD NOT ATTEMPT TO
REDEEM YOUR ENTIRE ACCOUNT BY WRITING A CHECK. This is because dividends are
accrued daily which will not be credited to your account until the end of the
month. This could result in a small remaining balance, which would be subject to
the $2 per month fee on Money Market Fund accounts below minimum requirements.

ALTERNATE METHODS -- In the event of significant market activity, it may be
difficult to reach NAS by telephone. If so, an investor may choose to use
alternate methods to contact NAS such as sending instructions by a special
delivery service, or by facsimile (FAX) machine (614-249-8705). If you use the
FAX method, NAS reserves the right to require the original document.

ACCOUNTS FALLING BELOW MINIMUM INVESTMENT REQUIREMENTS
Because of the high cost of maintaining small accounts, NAS MAY CLOSE ANY
ACCOUNT WHICH, AS A RESULT OF REDEMPTIONS, HAS A VALUE OF LESS THAN $250
(EXCLUDING AUTOMATIC ASSET ACCUMULATION ACCOUNTS). However, you will be notified
if your account value is less than the required minimum, and you will be allowed
90 days to make additional investments before the account is liquidated.
IN THE CASE OF A MONEY MARKET FUND ACCOUNT BELOW $250 ON AVERAGE FOR ANY
MONTH, A $2 MONTHLY FEE WILL BE ASSESSED. The fee is deposited into the Fund to
offset the expenses of carrying these small accounts. Shares are redeemed in the
first week of the following month to cover the fee.

SIGNATURE GUARANTEE
Based on the circumstances of each transaction, NAS reserves the right to
require that your signature be guaranteed by an authorized agent of an "eligible
guarantor institution," which include, but are not limited to, certain banks,
credit unions, savings associations, and member firms of national security
exchanges. A signature guarantee is designed to protect the shareholder by
helping to prevent an unauthorized person from redeeming shares and obtaining
the proceeds. A notary public is not an acceptable guarantor. In certain special
cases (such as corporate or fiduciary registrations), additional legal documents
may be required to ensure proper authorizations. If NAS decides to require
signature guarantees in all circumstances, shareholders will be notified in
writing prior to implementation of the policy.

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VALUATION OF SHARES
The net asset value per share for each Fund is determined as of the close of
regular trading on the New York Stock Exchange (usually 4 P.M. Eastern Time),
each day that the exchange is open and on such other days as the Board of
Trustees determines and on days in which there is sufficient trading in
portfolio securities of a Fund to materially affect the net asset value of that
Fund (the "Valuation Time").
The Funds will not compute net asset value on customary business holidays,
including Christmas, New Year's Day, Martin Luther King, Jr. Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day and Thanksgiving.
The net asset value per share of a class is computed by adding the value of
all securities and other assets in a Fund's portfolio allocable to such class,
deducting any 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 sale price on the principal exchange, or if
there is no sale on that day, or if the securities are traded only in the
over-the-counter market, at the quoted bid prices, all 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 judgment of NAS are
valued at fair value in accordance with procedures adopted by the Board of
Trustees.
In determining net asset value of the Money Market Fund, portfolio
securities are valued at amortized cost, which approximates market value, in
accordance with Rule 2a-7 of the 1940 Act. Expenses and fees are accrued daily.

INVESTOR STRATEGIES

1 MONEY MARKET PLUS GROWTH -- This strategy provides the security of principal
that the Money Market Fund offers plus the opportunity for greater long-term
capital appreciation through reinvestment of dividends into one of the Stock
Funds.
An initial investment of $5,000 or more is made in the Money Market, and
monthly dividends are then automatically invested into one or more of the Stock
Funds chosen by you at such Stock Fund's current offering price. Money Market
Plus Growth gives investors stability of principal through the Money Market's
stable share price, and its portfolio of high quality, short-term money market
investments. And the Money Market Fund offers instant liquidity through
unlimited free checking ($500 minimum), telephone redemption, or NAS NOW. NOTE:
Money Market Fund dividends reinvested into one of the Stock Funds are subject
to applicable sales charges.

2 MONEY MARKET PLUS INCOME -- This strategy provides the security of principal
that the Money Market Fund offers plus the opportunity for greater income by
reinvesting dividends into one or more of the Bond Funds.
An initial investment of $5,000 or more is made in the Money Market Fund and
monthly dividends are then reinvested into one of the Bond Funds chosen by you
at such Fund's current offering price.
When short-term interest rates increase, so do Money Market dividends. At
the same time, share prices of the Bond Funds generally decrease. So, with Money
Market Plus Income, when you earn higher Money Market dividends, you can
generally purchase more shares of one of the Bond Funds at lower prices.
Conversely, when interest rates and Money Market dividends decrease, the share
prices of the Bond Funds usually increase -- you will automatically buy fewer
shares of one of the Bond Funds at higher prices. Money Market Plus Income
provides investors with stability of principal, instant liquidity through Money
Market free checking ($500 minimum), telephone redemption, or NAS NOW, and the
opportunity for greater income. NOTE: Money Market Fund dividends reinvested
into one of the Bond Funds are subject to applicable sales charges.

3 AUTOMATIC ASSET ACCUMULATION -- This is a systematic investment strategy which
combines automatic monthly transfers from your personal checking account to your
mutual fund account with the concept of Dollar Cost Averaging. With this
strategy, you invest a fixed amount monthly over an extended period of time,
during both market highs and lows. Dollar Cost Averaging can allow you to
achieve a favorable average share cost over time since your fixed monthly
investment buys more shares when share prices fall during low markets, and fewer
shares at higher prices during market highs. Although no formula can assure a
profit or protect against loss in a declining market, systematic investing has
proven a valuable investment strategy in the past.
You can get started with Automatic Asset Accumulation for as little as $50 a
month in a Fund. Another way to take advantage of the benefits that Dollar Cost
Averaging can offer is through the Money Market Plus Growth or Money Market Plus
Income investor strategies.

4 AUTOMATIC ASSET ALLOCATION -- This strategy is for investors who want to set
up an account in more than one of our Funds. This allows you to diversify
further your portfolio to accommodate your unique needs. If you set up your
account with Automatic Asset Accumulation, additional investments can be

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automatically allocated among the Funds based upon your initial percentage. You
must satisfy the account minimum requirements (subsequent investments) of each
Fund in which you invest. Changes to your percentage allocation can be made by
calling toll-free 1-800-848-0920.

5 AUTOMATIC ASSET TRANSFER -- This systematic investment plan is designed
especially for investors who want to invest $5,000 or more in the Stock or Bond
Funds, but not all at one time. An initial investment of $5,000 or more is made
in the Money Market Fund, then a fixed amount that you predetermine is
transferred systematically monthly or quarterly into another Fund for $50 in
each Fund. The money is transferred on the 25th day of the month or on the
business day preceding the 25th day. This strategy can provide investors with
the benefits of Dollar Cost Averaging through an opportunity to achieve a
favorable average share cost over time. With this plan, your fixed monthly or
quarterly transfer from the Money Market to any Fund you select buys more shares
when share prices fall during low markets and fewer shares at higher prices
during market highs. Although no formula can assure a profit or protect against
loss in a declining market, systematic investing has proven a valuable
investment strategy in the past.
Those who have a more conservative outlook on investing can transfer smaller
sums monthly and spread the transfer of assets into another Fund over a longer
period of time, while those with a more aggressive outlook can transfer larger
sums over a shorter period. Either way, you receive the added benefits of
current rates paid on the portion of your investment in the Money Market, along
with the stability offered by the Money Market's fixed share price.

6 AUTOMATIC WITHDRAWAL PLAN ($50 OR MORE) -- You may have checks for any fixed
amount of $50 or more automatically sent bi-monthly, monthly, quarterly, three
times/year, semi-annually or annually, to you (or anyone you designate) from
your account.
NOTE: If your monthly withdrawals exceed the monthly dividends from your
account, you will be depleting principal, which will reduce your future dividend
potential.

INVESTOR PRIVILEGES

The Funds offer the following privileges to shareholders. Additional information
may be obtained by calling NAS toll-free at 1-800-848-0920.

1 NO SALES CHARGE ON REINVESTMENTS -- All dividends and capital gains will be
automatically reinvested in the form of additional shares free of charge within
the same Fund unless you have chosen to receive them in cash on your
application. Unless requested in writing by the shareholder, the Trust will not
mail checks for dividends and capital gains of less than $5 but instead they
will automatically be reinvested in the form of additional shares, and you will
receive a confirmation.

2 EXCHANGE PRIVILEGE -- The exchange privilege is a convenient way to exchange
shares from one Fund to another Fund in order to respond to changes in your
goals or in market conditions. HOWEVER, AN EXCHANGE IS A SALE AND PURCHASE OF
SHARES AND, FOR FEDERAL AND STATE INCOME TAX PURPOSES, MAY RESULT IN A CAPITAL
GAIN OR LOSS. The registration of the account to which you are making an
exchange must be exactly the same as that of the Fund account from which the
exchange is made, and the amount you exchange must meet the applicable minimum
investment of the Fund being purchased. (Shares of the Fund exchanged to must be
registered in the shareholder's state of residence).

EXCHANGES AMONG FUNDS
Exchanges may be made among any of the Funds. For exchanges of Class A shares
among the Funds, you will pay the difference between the sales charges if any.
Exchanges within Class B or Class D shares may be made without incurring a sales
charge. An exchange between classes will be subject to the applicable sales
charges of each class.
An exchange from the Money Market Fund into another Fund will be subject to
the applicable sales charge unless already paid. The CDSC aging period for Class
B shares will be stopped during the time period when shares are exchanged into
the Money Market Fund. If the Money Market Fund shares are subsequently sold, a
CDSC will be charged at the level that would have been charged had the shares
been sold at the time when they were exchanged into the Money Market Fund. If
the Money Market Fund shares are exchanged back into Class B shares, the CDSC
aging period will continue from the point in time when the shares were
originally exchanged into the Money Market Fund.
There is no administrative fee or exchange fee. The Trust reserves the right
to reject any exchange request it believes will result in excessive transaction
costs, or otherwise adversely affect other shareholders. An exchange, whether or
not subject to sales charges, is a sale and purchase of shares, and for Federal
and state income tax purposes, may result in a capital gain or loss. The
registration of the account to which you are making an exchange must be exactly
the same as that of the Fund account from which the exchange is made, and the
amount you exchange must meet the applicable minimum investment of the Fund
being purchased. For a description of CDSC see "Class B Shares of the Stock and
Bond Funds and CDSC." The Trust reserves the

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right to change the exchange privilege upon at least 60 days' written notice to
shareholders.

EXCHANGES MAY BE MADE THREE CONVENIENT WAYS:

BY TELEPHONE

NAS NOW -- You can automatically process exchanges by calling
1-800-637-0012, 24 hours a day, seven days a week. However, if you declined
the option in the application, you will not have this automatic exchange
privilege. NAS NOW also gives you quick, easy access to mutual fund
information. Select from a menu of choices to conduct transactions and hear
fund price information, mailing and wiring instructions as well as other
mutual fund information.

CUSTOMER SERVICE LINE -- By calling 1-800-848-0920, you may exchange shares
by telephone if the shares are not issued in certificate form. Requests may
be made only by the account owner(s). You must call our toll-free number by
Valuation Time, which is usually 4:00 p.m. Eastern Time, to receive that
day's closing share price.

NAS may record all instructions to exchange. NAS reserves the right at any
time without prior notice to suspend, limit or terminate the telephone
exchange privilege or its use in any manner by any person or class.

The funds will employ the same procedure described under "How to Sell
(Redeem) Shares" to confirm that the instructions are genuine.

BY MAIL -- An exchange may be made by writing to Nationwide Advisory Services,
Inc., Three Nationwide Plaza, P.O. Box 1492, Columbus, Ohio 43216-1492. Please
be sure that your letter is signed by all owners of the account and that your
account number and the Fund you wish to exchange to are included.

ALTERNATE METHODS -- In the event of significant market activity, it may be
difficult to reach NAS by telephone. If so, an investor may choose to use
alternate methods to contact NAS such as sending instructions by a special
delivery service or by facsimile (FAX) machine (614-249-8705). If you use the
FAX method, NAS reserves the right to require the original document.

3 NO SALES CHARGE ON A REPURCHASE -- If you redeem all or part of your Class A
or D shares on which you paid a front-end sales charge, you have a one-time
privilege to reinvest all or part of the redemption proceeds in any of the Class
A or D shares without a sales charge, within 30 days after the effective date of
the redemption. If you redeem Class B shares, and then reinvest the proceeds
within 30 days, NAS will reinvest an amount equal to any CDSC you paid on
redemption.
If you realize a gain on your redemption, the transaction is taxable and
reinvestment will not alter any capital gains tax payable. If you realize a loss
and you use the reinstatement privilege, some or all of the loss will not be
allowed as a tax deduction depending upon the amount reinvested.

4 FREE CHECKING ACCOUNT PRIVILEGE (MONEY MARKET FUND ONLY) -- You may request a
supply of free checks for your personal use and there is no monthly service fee.
You may use them to make withdrawals of $500 or more from your account at any
time. Your account will continue to earn daily income dividends until your check
clears your account. There is no limit on the number of checks you may write.
Cancelled checks will not be returned to you. However, your monthly statement
will provide the check number, date and amount of each check written. You will
also be able to obtain copies of cancelled checks by contacting one of our
service representatives at 1-800-848-0920.

INVESTOR SERVICES

1 NAS NOW AUTOMATED VOICE RESPONSE SYSTEM -- Our toll-free number 1-800-637-0012
will connect you 24 hours a day, seven days a week to NAS NOW, our automated
voice response system. Through a selection of menu options, you can conduct
transactions, hear fund price information, mailing and wiring instructions and
other mutual fund information.

2 TOLL-FREE INFORMATION AND ASSISTANCE -- Customer service representatives are
available to answer questions regarding the Funds and your account(s) between
the hours of 8 A.M. and 5 P.M. Eastern Time. Call toll-free: 1-800-848-0920. Or
contact NAS at our FAX telephone number (614) 249-8705.

3 RETIREMENT PLANS (NOT AVAILABLE WITH THE TAX-FREE INCOME FUND) -- Shares of
the Funds may be purchased for Self-Employed Retirement Plans, Individual
Retirement Accounts (IRAs), Roth IRAs, Educational IRAs, Simplified Employee
Pension Plans, Corporate Pension Plans, Profit Sharing Plans and Money Purchase
Plans. For a free information kit, call 1-800-848-0920.

4 MUTUAL FUND GIFT CERTIFICATES -- Gift Certificates may be purchased for
special occasions such as birthdays, graduations, weddings and as appreciation
gifts. NOTE: Respective minimum initial and subsequent purchase amounts must be
met when using gift certificates to open new accounts. Contact one of our
service representatives at 1-800-848-0920 for complete details and instructions.

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5 SHAREHOLDER CONFIRMATIONS -- You will receive a confirmation statement each
time a requested transaction is processed. However, no confirmations are mailed
on certain pre-authorized, systematic transactions. Instead, these will appear
on your next consolidated statement.

6 CONSOLIDATED STATEMENTS -- Shareholders of the Stock Funds receive quarterly
statements as of the end of March, June, September and December. Shareholders of
the Bond and Money Market Funds receive monthly statements. Please review your
statement carefully and notify us immediately if there is a discrepancy or error
in your account.
For shareholders with multiple accounts, your consolidated statement will
reflect all your current holdings in the Funds. Your accounts are consolidated
by social security number and zip code. Accounts in your household under other
social security numbers may be added to your statement at your request.
Depending on which Funds you own, your consolidated statement will be sent
either monthly or quarterly. Only transactions during the reporting period will
be reflected on the statements. An annual summary statement reflecting all
calendar-year transactions in all your Funds will be sent after year-end.

7 AVERAGE COST STATEMENT -- This statement may aid you in preparing your tax
return and in reporting capital gains and losses to the IRS. If you redeemed any
shares during the calendar year, a statement reflecting your taxable gain or
loss for the calendar year (based on the average cost you paid for the redeemed
shares) will be mailed to you following each year-end. Average cost can only be
calculated on accounts opened on or after January 1, 1984. Fiduciary accounts
and accounts with shares acquired by gift, inheritance, transfer, or by any
means other than a purchase cannot be calculated.
Average cost is one of the IRS approved methods available to compute gains
or losses. You may wish to consult a tax advisor on the other methods available.
The information on your average cost statement will not be provided to the IRS.
If you have any questions, contact one of our service representatives at
1-800-848-0920.

8 SHAREHOLDER REPORTS -- All shareholders will receive reports semi-annually
detailing the financial operations of the funds.

9 PROSPECTUSES -- Updated prospectuses will be mailed to you annually.

10 UNDELIVERABLE MAIL -- If mail from NAS to a shareholder is returned as
undeliverable on three or more consecutive occasions, NAS will not send any
future mail to the shareholder unless it receives notification of a correct
mailing address for the shareholder. Any dividends that would be payable by
check to such shareholders will be reinvested in the shareholder's account until
NAS receives notification of the shareholder's correct mailing address.

MANAGEMENT OF THE TRUST

The business and affairs of the Trust are managed under the direction of its
Board of Trustees. The Board of Trustees sets and reviews policies regarding the
operation of the Trust, whereas the officers perform the daily functions of the
Trust.

INVESTMENT MANAGEMENT

Under the terms of the Investment Advisory Agreement, NAS, Three Nationwide
Plaza, Columbus, Ohio 43215, manages the investment of the assets and supervises
the daily business affairs of the Trust. NAS, 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 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 company owned by its
policyholders.

The Funds pay NAS fees based on average daily net assets of each Fund at the
following annual rates:

<TABLE>
<CAPTION>
FUND ASSETS FEE
- ------------------------------ ----------------------- ----
<S> <C> <C>
Nationwide Mid Cap Growth, up to $250 Mill. .60%
$250 Mill. up to $1
Nationwide Growth, Nationwide Bill. .575%
Fund $1 Bill. up to $2 Bill. .55%
$2 Bill. up to $5 Bill. .525%
$5 Bill. and more .50%
Nationwide Bond, Nationwide up to $250 Mill. .50%
$250 Mill. up to $1
Tax-Free Income, Nationwide Bill. .475%
Long-Term U.S. Government $1 Bill. up to $2 Bill. .45%
Bond, Nationwide Intermediate $2 Bill. up to $5 Bill. .425%
U.S. Government Bond $5 Bill. and more .40%

Nationwide Money up to $1 Bill. .40%
Market Fund $1 Bill. up to $2 Bill. .38%
$2 Bill. up to $5 Bill. .36%
$5 Bill. and more .34%
</TABLE>

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PORTFOLIO MANAGERS FOR THE FUNDS

PORTFOLIO MANAGER: John M. Schaffner, MBA, CFA, is the portfolio manager for the
Nationwide Mid Cap Growth Fund and the Nationwide Growth Fund. He has been with
Nationwide since 1977 and managed the FHIT Growth Fund which was the predecessor
to the Mid Cap Growth Fund from June 1989 through December 1995. Mr. Schaffner
resumed managing the FHIT Growth Fund in August 1997. He also managed the NIF
Growth Fund from June 1981 to March 1998. Mr. Schaffner graduated with a
Bachelor of Arts in Economics from Occidental College. He received his Master of
Business Administration degree from the University of Michigan and is a
Chartered Financial Analyst.

PORTFOLIO MANAGER: Charles Bath, MBA, CFA, CPA, is the portfolio manager of the
Nationwide Fund. Mr. Bath joined Nationwide as a securities analyst in 1982 and
managed the NIF Nationwide Fund, predecessor to the Nationwide Fund from 1985 to
1998. He graduated with a Bachelor of Science in Accounting from Miami
University. He received his Master of Business Administration degree in Finance
from The Ohio State University and is a Certified Public Accountant and a
Chartered Financial Analyst.

PORTFOLIO MANAGER: Douglas Kitchen, CFA, is the portfolio manager of the
Nationwide Bond Fund. He joined Nationwide in 1986 as a securities analyst and
began managing the NIF Nationwide Bond Fund, the predecessor of the Nationwide
Bond Fund, on March 11, 1997. From 1992 to March 11, 1997, he managed the bond
portfolio for the Nationwide Foundation. Mr. Kitchen received a Bachelor of Arts
in Geology from Thiel College and a Bachelor of Science in Finance from The Ohio
State University and is a Chartered Financial Analyst.

PORTFOLIO MANAGER: Alpha Benson, MBA, is the portfolio manager of the Nationwide
Tax-Free Income Fund. She joined Nationwide in 1977 as a financial analyst in
the Securities Investment Department. She managed the NIF II Tax-Free Income
Fund, the predecessor of the Nationwide Tax-Free Income Fund from its inception
in March 1986 and the FHIT Municipal Bond Fund from March 1997 to March 1998.
Ms. Benson graduated with a Bachelor of Science in Accounting from Central State
University. She received her Master of Business Administration degree from the
University of Dayton.

PORTFOLIO MANAGERS FOR THE U.S. GOVERNMENT BOND FUNDS: Wayne Frisbee, CFA;
Kimberly Bingle, CFA, FLMI; and Gary Hunt, MBA, are the portfolio managers for
the U.S. Government Bond Funds. Mr. Frisbee joined Nationwide in 1981 as a
securities analyst and managed the NIF II Nationwide U.S. Government Income
Fund, predecessor to the Nationwide Intermediate U.S. Government Bond Fund, from
its inception in 1992 and the FHIT Government Bond Fund, predecessor to the
Nationwide Long-Term U.S. Government Bond Fund, from its inception in 1988. He
received a Bachelor of Science from The Ohio State University and is a Chartered
Financial Analyst.
Ms. Bingle joined Nationwide in 1986 as a securities analyst and began
co-managing the predecessors to the U.S. Government Bond Funds on March 11,
1997. Since April of 1992, she has also managed the Fixed Income Fund which is
part of the Nationwide Insurance Enterprise incentive savings plan. Prior to
April 1992, she co-managed the Nationwide Foundation bond portfolio. Ms. Bingle
received a Bachelor of Arts in Finance from The Pennsylvania State University.
She is a Chartered Financial Analyst and a Fellow of the Life Management
Institute.
Mr. Hunt joined Nationwide in 1992 as a securities analyst and began
co-managing the predecessors to the U.S. Government Bond Funds on March 11,
1997. In his career at Nationwide, Mr. Hunt has been responsible for the
analysis of agency CMOs and U.S. Treasury securities. In addition, he has
managed the commercial mortgage-backed securities sector for Nationwide Life
Insurance Company and its affiliates. Mr. Hunt received a Bachelor of Science in
Finance and a Master of Business Administration from The Ohio State University.

PORTFOLIO MANAGER: Patricia A. Mynster, Director of Short-Term Investments,
began managing the NIF Money Market Fund, the predecessor of the Nationwide
Money Market Fund, in July 1997 and has managed short-term investments for over
20 years. She received a Bachelor of Arts degree in Business Administration from
Otterbein College. She has held her current position as Director of Short-Term
Investments for the Nationwide Enterprise since 1991.

DISTRIBUTION PLAN

The Trust has adopted a Distribution Plan under Rule 12b-1 of the 1940 Act which
permits the Funds to compensate the Distributor, NAS, for expenses associated
with distribution of its shares. Under the Distribution Plan, the Funds pay NAS
compensation accrued daily and paid monthly. The Funds shall pay amounts not
exceeding an annual maximum amount of .25% of the daily net assets of Class A
shares and 1.00% of the daily net assets for the Stock Funds and .85% of the
daily net assets for the Bond Funds of Class B shares. 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 a Fund Administration Agreement, NAS also provides various
administrative and accounting services, including daily valuation of the Funds'
shares and preparation of

33
<PAGE> 38

NATIONWIDE FAMILY OF FUNDS

financial statements, tax returns, and regulatory reports. For these services,
each Fund pays NAS an annual fee based on each Fund's average daily net assets
in the amount of 0.07% up to $250 million in assets, 0.05% on the next $750
million of assets and 0.04% on assets of $1 billion and more.

TRANSFER AND DIVIDEND DISBURSING AGENT
NAS, through its wholly-owned subsidiary, Nationwide Investors Services, Inc.
(NISI), serves as transfer agent and dividend disbursing agent for the Trust.
For these services, NAS receives an annual per account fee from each of the
Funds at the following rates; $16 per Stock Fund account, $18 per Bond Fund
account and $27 per Money Market Fund account.

DISTRIBUTIONS AND TAXES

INCOME DIVIDENDS AND CAPITAL GAINS
Substantially all of the net investment income, if any, will be distributed to
shareholders quarterly by the Stock Funds and at the end of each month by the
Bond and Money Market Funds in the form of additional shares of the Fund unless
the shareholder has chosen to receive them in cash. Unless requested in writing
by the Shareholder, checks will not be mailed for dividends and capital gains of
less than $5. These dividends will be automatically reinvested in the form of
additional shares and you will receive a confirmation showing the transaction.
If a shareholder has elected to receive dividends and/or capital gains
distributions in cash, and the postal or other delivery service is unable to
deliver checks to the shareholder's address of record, or the shareholder does
not respond to mailing with regard to uncashed distribution checks, such
shareholder's distribution option will automatically be converted to having all
dividends and other distributions reinvested in additional shares. Any request
to change a distribution option must be received by NISI by the record date for
a dividend or distribution in order to be effective for that dividend or
distribution. No interest will accrue on amounts represented by uncashed
distribution or redemption checks.
In those years in which sales of a Fund's portfolio securities result in net
realized capital gains, these gains will be declared and cause to be paid to
shareholders in December.

FEDERAL TAXES
Each of the Funds intends to qualify for treatment under subchapter M of the
Internal Revenue Code of 1986, as amended, (the "Code") and, therefore, must
distribute all or substantially all net investment income and capital gains to
shareholders annually. In general, if a Fund distributes all of its net
investment income, it is not required to pay any Federal income taxes. In
addition to Federal income tax, if a Fund fails to distribute the required
portion of investment income or capital gains in any year, it will be subject to
a non-deductible 4% excise tax on the amount which it failed to distribute. Each
Fund intends to make distributions in sufficient amounts to avoid the imposition
of this excise tax.
Dividends paid by each of the Funds (with the exception of the Tax-Free
Income Fund) are taxable as income to the shareholder for Federal income tax
purposes. For corporate shareholders, a portion of each year's distribution may
be eligible for the corporate dividend received deduction.
Dividends paid by the Tax-Free Income Fund will be exempt from Federal
income tax to the extent that the income of the Fund is derived from bonds that
qualify for such exemption. Some portion of the income from the Tax-Free Income
Fund may be taxable annually. The taxable portion of each distribution will be
based on the ratio, each year, between the Fund's taxable income and total
income. This ratio shall be determined within 60 days following the close of the
taxable year. The annual ratio may differ significantly from the ratio for the
period actually covered by each distribution.
The Taxpayer Relief Act of 1997 has substantially changed the manner in
which the income tax on net long-term capital gains is computed for individuals.
For corporations, net long-term capital gains are taxed at the same rates as
ordinary income. The following is a summary of the new rules for the taxation of
net long-term capital gains, which are applicable to individuals but not
corporations for sales and exchanges after May 6, 1997.
For investments held for more than 18 months (12 months if the investment
was sold after May 6 and before July 29, 1997), the top net long-term capital
gain rate is 20%. For taxpayers who are in the 15% regular tax bracket for 1997,
the top net long-term capital gain rate is 10%.
Commencing with sales after July 28, 1997, gain from assets that are held
for more than 12 months but not more than 18 months is treated as mid-term gain.
The top tax rate for mid-term gain is 28%.
If the investor's regular tax rate is lower than the top long-term capital
gain rate, the tax is computed using the regular tax rates.
The Funds will annually report to each shareholder that shareholder's
portion of the net income and capital gain of each Fund, for inclusion in the
shareholder's income.
Individual and corporate shareholders may be subject to the Alternative
Minimum Tax ("AMT") if their Alternative Minimum Taxable Income ("AMTI") exceeds
the exemption amounts set forth in Section 55 of the Code. The AMT, at rates as
high as 28% for individuals and 20% for corporations, is reduced by the

34
<PAGE> 39

NATIONWIDE FAMILY OF FUNDS

regular tax due for the year. AMTI is the taxpayer's taxable income for the year
for regular tax purposes, increased by the tax preferences described in Section
57 of the Code and adjusted as described in Section 56 of the Code. Preferences
include interest from Specified Private Activity Bonds, as defined in Section 57
(a) (5) (C) of the Code. Bonds of this type may be held by one or more of the
Funds from time to time.
A shareholder may be subject to federal backup withholding at a rate of 31%
of each distribution if the shareholder fails to certify that the taxpayer
identification number given is correct and that the shareholder is not subject
to such withholding because of underreporting of income (or if the Internal
Revenue Service gives notice that such certifications are not accurate).

STATE AND LOCAL TAXES
Distributions to shareholders of the Funds may be subject to state and local
taxes, even if not subject to Federal income taxes. These laws vary, and you are
advised to consult a tax adviser regarding such taxes.

REDEMPTIONS OF SHARES
Redeeming shares may result in a capital gain or loss for tax purposes. For your
convenience, NAS provides a year-end statement, reflecting your taxable gain or
loss for the year based on the average cost paid for redeemed shares.

TAX ADVANTAGES OF THE
TAX-FREE INCOME FUND

The yield on taxable securities is normally higher than on tax-exempt securities
of comparable quality and maturity. However, you can determine whether a
tax-free investment provides a higher after-tax yield or return than an
investment subject to tax by using the following formula:

<TABLE>
<C> <C> <S>
Tax-Free Yield What you must earn
- ----------------------- = on a taxable investment
100%--[Your Tax Rate] to equal this tax-free yield
</TABLE>

By using current tax-free yields and your own tax rate in the formula above,
you can make an informed investment decision. This formula will not be
applicable if you are subject to the AMT.

PERFORMANCE ADVERTISING
FOR THE FUNDS

FUND PERFORMANCE ADVERTISING

The Funds may use historical performance in advertisements, sales literature,
semi-annual and annual reports and the prospectus. Such figures will include
quotations of average annual (compound) total return for the most recent one,
five, and ten-year periods (or the life of the Fund if less). Average annual
(compound) total return represents the average annual percentage change in the
value of an investment for the specified periods assuming a redemption of the
investment at the end of such periods. It reflects the changes in share price
and assumes reinvestment of all dividends and distributions at net asset value.
Average annual (compound) total return reflects the effect of maximum sales
charges. Standardized yield and total return quotations will be computed
separately for Class A, B and D shares. Because of differences in the fees
and/or expenses borne by Class A, B and D shares of the Funds, the net yields
and total returns on Class A, B and D shares can be expected, at any given time,
to differ from class to class for the same period.
The Funds 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. Initial sales charge percentages decrease as amounts
invested increase, therefore, returns increase as sales charges decrease.
Total return represents the cumulative percentage change in the value of an
investment over time, calculated by subtracting the original investment from the
redeemable value and dividing the result by the original amount of the
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.
The Bond Funds may advertise their SEC yields. The SEC yield is based on a
30-day period. This yield takes into account the yields to maturity on all debt
instruments and all dividends accrued on equity securities, since equity
securities do not have maturity dates. The SEC yield is computed by dividing the
net investment income per share earned during the 30-day period by the maximum
offering price per share on the last day of the period.
The Money Market Fund may advertise current seven-day yield quotations
computed by determining the net change, exclusive of capital changes, in the
value of a hypothetical pre-existing account having a balance of one share at
the beginning of the base period to obtain a base period return and then
multiplying the base period return by (365/7). For purposes of

35
<PAGE> 40

NATIONWIDE FAMILY OF FUNDS

this calculation, the net change in account value reflects the value of
additional shares purchased with dividends from the original share, and
dividends declared on both the original share and any such additional shares.
The Money Market's effective yield represents a compounding on an annualized
basis of the current yield quotations.

RANKINGS AND RATINGS IN FINANCIAL PUBLICATIONS
The Funds may report their performance relative to other mutual funds or
investments. The performance comparisons are made to: other mutual funds with
similar objectives; other mutual funds with different objectives; or, to other
sectors of the economy. Other investments which the Funds may be compared to
include, but are not limited to: precious metals; real estate; stocks and bonds;
closed-end funds; market indexes; fixed-rate, insured bank CDs, bank money
market deposit accounts and passbook savings; and the Consumer Price Index.
Normally these rankings and ratings are published by independent tracking
services and publications of general interest including, but not limited to:
Lipper Analytical Services, Inc., CDA/Wiesenberger, Morningstar, Donoghue's,
Schabaker Investment Management, Kanon Bloch Carre & Co.; magazines such as
Money, Fortune, Forbes, Kiplinger's Personal Finance Magazine, Smart Money,
Mutual Funds, Worth, Financial World, Consumer Reports, Business Week, Time,
Newsweek, U.S. News and World Report; and other publications such as the Wall
Street Journal, Barron's, Columbus Dispatch, Investor's Business Daily, and
Standard & Poor's Outlook.
The rankings may or may not include the effects of sales charges.

ADDITIONAL INFORMATION

DESCRIPTION OF SHARES
The Trust presently offers nine series of shares of beneficial interest, without
par value, eight of these series are the Funds. The shares of each of the Funds,
other than the Money Market Fund, are offered in three separate classes: Class
A, Class B and Class D shares, and you have an interest only in the shares of
the class which you own. Shares of a particular class are equal in all respects
to the other shares of that class. In the event of liquidation of a Fund, shares
of the same class will share pro rata in the distribution of the net assets of
such Fund with all other shares of that class. The Money Market Fund offers
shares without class designation and its shareholders have an equal
proportionate interest in the shares of that Fund. All shares are without par
value, and when issued and paid for, are fully paid and nonassessable by the
Trust. Shares may be exchanged or converted as described above but will have no
other preference, conversion, exchange or preemptive rights.

VOTING RIGHTS
Shareholders of each class of shares have one vote for each share held and a
proportionate fractional vote for any fractional shares 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, policies, and 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. In addition, holders of Class A shares or Class B shares of a Fund
will vote as a class and not with holders of any other class of that Fund with
respect to the approval of the Distribution Plan.
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 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.

SHAREHOLDER INQUIRIES
Inquiries regarding the Funds should be directed to Nationwide Advisory
Services, Inc., Three Nationwide Plaza, P.O. Box 1492, Columbus, Ohio
43216-1492, or call 1-800-848-0920.

36
<PAGE> 41

NATIONWIDE INVESTING
FOUNDATION III FUNDS:
Mid Cap Growth Fund
Growth Fund
Nationwide Fund
Bond Fund
Tax-Free Income Fund
Long-Term U.S. Government Bond Fund
Intermediate U.S. Government Bond Fund
Money Market Fund

NATIONAL DISTRIBUTOR AND
INVESTMENT MANAGER
Nationwide Advisory Services, Inc.
P.O. Box 1492
Three Nationwide Plaza
Columbus, Ohio 43216-1492

INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
Two Nationwide Plaza
Columbus, Ohio 43215-2537

TRANSFER AGENT AND DIVIDEND
DISBURSING AGENT
Nationwide Advisory Services, Inc.
(Through its wholly owned subsidiary,
Nationwide Investors Services, Inc.)

LEGAL COUNSEL
Druen, Dietrich, Reynolds & Koogler
One Nationwide Plaza
Columbus, Ohio 43215-2220

CUSTODIAN
The Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, Ohio 45263-0001

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<PAGE> 42

Nationwide(R) and LOGO are registered Federal
Service marks of the Nationwide Mutual Insurance Company.
<PAGE> 43

PART B:

STATEMENT OF ADDITIONAL INFORMATION MAY __, 1998

NATIONWIDE INVESTING FOUNDATION III
NATIONWIDE MID CAP GROWTH FUND
NATIONWIDE GROWTH FUND
NATIONWIDE FUND
(together referred to as the "Stock Funds")
NATIONWIDE BOND FUND
NATIONWIDE TAX-FREE INCOME FUND
NATIONWIDE LONG-TERM U.S. GOVERNMENT BOND FUND
NATIONWIDE INTERMEDIATE U.S. GOVERNMENT BOND FUND
(together referred to as the "Bond Funds")
NATIONWIDE MONEY MARKET FUND
(all together the "Funds")

This Statement of Additional Information is not a prospectus. It
contains information in addition to and more detailed than that set forth in the
Prospectuses for the Funds and should be read in conjunction with the
Prospectuses dated May __, 1998. The Prospectuses 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 20
Trustees and Officers of the Trust 21
Investment Advisory and Other Services 23
Brokerage Allocation 27
Calculation of Net Asset Value of the Money Market Fund 28
Calculating Money Market Fund Yield 28
Calculating Yield and Total Return--
Non-Money Market Funds 29
Nonstandard Returns 30
Additional Information 30
Additional General Tax Information 31
Major Shareholders 37
Appendix 38

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 Funds' investment
objectives and policies discussed in the Prospectuses. The investment objectives
of each Fund are fundamental and may not be changed without shareholder
approval. The investment policies and types of permitted investments described
here may be changed without approval by the shareholders. There is no guarantee
that any of the Funds' investment objectives will be realized.

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<PAGE> 44

DEBT OBLIGATIONS. Each of the Funds may invest in debt obligations. Debt
obligations are subject to the risk of an issuer's inability to meet principal
and interest payments on its obligations ("credit risk") and are subject to
price volatility due to such factors as interest rate sensitivity, market
perception of the creditworthiness of the issuer, and general market liquidity
("market risk"). Lower-rated securities are more likely to react to developments
affecting market and credit risk than are more highly rated securities, which
react primarily to movements in the general level of interest rates.

RATINGS AS INVESTMENT CRITERIA. High-grade and investment grade debt
obligations are characterized as such based on their ratings by nationally
recognized statistical rating organizations ("NRSROs"). In general, the ratings
of NRSROs represent the opinions of these agencies as to the quality of
securities that they rate. Such ratings, however, are relative and subjective,
and are not absolute standards of quality and do not evaluate the market risk of
the securities. These ratings are used by a Fund as initial criteria for the
selection of portfolio securities. Among the factors that will be considered by
NAS are the long-term ability of the issuer to pay principal and interest and
general economic trends. The Appendix to this Statement of Additional
Information contains further information about the rating categories of NRSROs
and their significance.

Subsequent to its purchase by a Fund, an issue of securities may cease
to be rated or its rating may be reduced below the minimum required for purchase
by such Fund. In addition, it is possible that an NRSRO might not change its
rating of a particular issue to reflect subsequent events. None of these events
generally will require the sale of such securities, but NAS will consider such
events in determining whether the Fund should continue to hold the securities.
In addition, to the extent that the ratings change as a result of changes in
such NRSROs or their rating systems, or due to a corporate reorganization, a
Fund will attempt to use comparable ratings as standards for its investments in
accordance with its investment objective and policies.

2
<PAGE> 45

MONEY MARKET INSTRUMENTS. Each 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,
and for the Money Market Fund's, obligations of the Canadian
government and their provinces, their agencies and instrumentalities;

-- repurchase agreements;

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

-- adjustable and variable rate instruments, including callable notes;

-- short-term (maturing in 397 days or less) corporate obligations rated
within the top two categories by an NRSRO;

-- bank loan participation agreements representing obligations of
corporations and banks having a high quality short-term rating, at the
date of investment, and under which the Fund will look to the
creditworthiness of the lender bank, which is obligated to make payments
of principal and interest on the loan, as well as to creditworthiness of
the borrower.

MORTGAGE AND ASSET-BACKED SECURITIES - The Bond Funds may each purchase
mortgage-backed securities. In addition, the Nationwide Bond Fund may invest in
asset-backed securities. Mortgage-backed securities represent direct or indirect
participation in, or are secured by and payable from, mortgage loans secured by
real property, and include single-and multi-class pass-through securities and
collateralized mortgage obligations. Such securities may be issued or guaranteed
by U.S. Government agencies or instrumentalities or, in the case of the
Nationwide Bond Fund only, by

3
<PAGE> 46

private issuers, generally originators in mortgage loans, including savings and
loan associations, mortgage bankers, commercial banks, investment bankers, and
special purpose entities (collectively, "private lenders"). Mortgage-backed
securities issued by private lenders may be supported by pools of mortgage loans
or other mortgage-backed securities that are guaranteed, directly or indirectly,
by the U.S. Government or one of its agencies or instrumentalities, or they may
be issued without any governmental guarantee of the underlying mortgage assets
but with some form of non-governmental credit enhancement. These credit
enhancements may include letters of credit, reserve funds,
overcollateralization, or guarantees by third parties.

Private lenders or government-related entities may also create mortgage
loan pools offering mortgage-backed securities where the mortgages underlying
these securities may be alternative mortgage instruments, that is, mortgage
instruments whose principal or interest payments may vary or whose terms to
maturity may be shorter than was previously customary. As new types of
mortgage-backed securities are developed and offered to investors, a Fund,
consistent with its investment objective and policies, may consider making
investments in such new types of securities. The market for privately issued
mortgage and asset-backed securities is smaller and less liquid than the market
for government sponsored mortgaged-backed securities.

Asset-backed securities have structural characteristics similar to
mortgage-backed securities. However, the underlying assets are not first-lien
mortgage loans or interest therein, rather they include assets such as motor
vehicle installment sales contracts, other installment loan contracts, home
equity loans, leases of various types of property and receivables from credit
card and other revolving credit arrangements. Payments or distributions of
principal and interest on asset-backed securities may be supported by
non-governmental credit enhancements similar to those utilized in connection
with mortgage-backed securities.

The yield characteristics of mortgage and asset-backed securities
differ from those of traditional debt obligations. Among the principal
differences are that interest and principal payments are made more frequently on
mortgage and asset-backed securities, usually monthly, and that principal may be
prepaid at any time because the underlying mortgage loans or other assets
generally may be prepaid at any time. As a result, if a Fund purchases these
securities at a premium, a prepayment rate that is faster than expected will
reduce yield to maturity, while a prepayment rate that is lower than expected
will have the opposite effect of increasing the yield to maturity. Conversely,
if a Fund purchases these securities at a discount, a prepayment rate that is
faster than expected will increase yield to maturity, while a prepayment rate
that is slower than expected will reduce yield to maturity. Accelerated
prepayments on securities purchased by the Fund at a premium also pose a risk of
loss of principal because the premium may not have been fully amortized at the
time the principal is prepaid in full.

There are a number of important differences among the agencies and
instrumentalities of the U.S. Government that issue mortgage-related securities
and among the securities that they issue. Mortgage-related securities issued by
GNMA include GNMA Mortgage Pass-Through Certificates (also known as "Ginnie
Maes") which are guaranteed as to the timely payment of principal and interest
by GNMA and such guarantee is backed by the full faith and credit of the United
States. GNMA certificates also are supported by the authority of GNMA to borrow
funds from the U.S. Treasury to make payments under its guarantee.
Mortgage-related securities issued by FNMA include FNMA Guaranteed Mortgage
Pass-Through Certificates (also known as "Fannie Maes") which are solely the
obligations of the FNMA and are not backed by or entitled to the full faith and
credit of the United States. Fannie Maes are guaranteed as to timely payment of
the principal and interest by FNMA. Mortgage-related securities issued by the
Federal Home Loan Mortgage Corporation ("FHLMC") include FHLMC Mortgage
Participation Certificates (also known as "Freddie Macs" or "PCs"). The FHLMC is
a corporate instrumentality of the United States, created pursuant to an Act of
Congress, which is owned entirely by Federal Home Loan Banks. Freddie Macs are
not guaranteed by the United States or by any Federal Home Loan Banks and do not
constitute a debt or obligation of the United States or of any Federal Home Loan
Bank. Freddie Macs entitle the holder to timely payment of interest, which is
guaranteed by the FHLMC. The FHLMC guarantees either ultimate

4
<PAGE> 47

collection or timely payment of all principal payments on the underlying
mortgage loans. When the FHLMC does not guarantee timely payment of principal,
FHLMC may remit the amount due on account of its guarantee of ultimate payment
of principal at any time after default on an underlying mortgage, but in no
event later than one year after it becomes payable.

STRIPPED MORTGAGE-BACKED SECURITIES. Each of the Bond Funds (other
than the Tax-Free Income Fund) may invest in stripped mortgage-backed
securities. Stripped mortgage-backed securities ("SMBS") are derivative
multiclass mortgage securities. SMBS may be issued by agencies or
instrumentalities of the U.S. Government or by private originators of, or
investors in, mortgage loans, including savings and loan associations, mortgage
banks, commercial banks, investment banks and special purpose entities of the
foregoing. SMBS are usually structured with two classes that receive different
proportions of the interest and principal distributions on an underlying pool
of mortgage assets. A common type of SMBS will have one class receiving some of
the interest and most of the principal from the mortgage assets, while the
other class will receive most of the interest and the remainder of the
principal. In the most extreme case, one class will receive all of the interest
(the interest-only or "IO" class), while the other class will receive all of
the principal (the principal-only or "PO" class). The yield to maturity on an
IO class is extremely sensitive to the rate of principal payments (including
prepayments) on the related underlying mortgage assets, and a rapid rate of
principal payments may have a material adverse effect on a Fund's yield to
maturity from these securities. If the underlying mortgage assets experience
greater than anticipated prepayments of principal, a Fund may fail to fully
recoup its initial investment in these securities even if the security is in
one of the highest rating categories.

Although SMBS are purchased and sold by institutional investors through
several investment banking firms acting as brokers or dealers, these securities
were only recently developed. As a result, established trading markets have not
yet developed and, accordingly, certain of these securities may be deemed
"illiquid" and subject to a Fund's limitations on investment in illiquid
securities.

The market value of such securities generally is more
sensitive to changes in prepayment and interest rates than is the case with
traditional mortgage- and asset-backed securities, and in some cases the market
value may be extremely volatile.

REPURCHASE AGREEMENTS. All of the Funds may enter into repurchase agreements
with certain banks or non-bank dealers. In connection with the purchase of a
repurchase agreement by a Fund, the Fund's custodian, or a subcustodian, will
have custody of, and will hold in a segregated account, securities acquired by
the Fund under a repurchase agreement. Repurchase agreements are contracts under
which the buyer of a security simultaneously commits to resell the security to
the seller at an agreed-upon price and date. Repurchase agreements are
considered by the staff of the Securities and Exchange Commission (the "SEC") to
be loans by a Fund. Repurchase agreements may be entered into with respect to
securities of the type in which a Fund may invest or government securities
regardless of their remaining maturities. A 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 a Fund's ability to dispose of
the underlying securities, the risk of a possible decline in the value of

5
<PAGE> 48

the underlying securities during the period in which a 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.

WHEN-ISSUED SECURITIES AND DELAYED-DELIVERY TRANSACTIONS. Each of the Funds
may purchase securities on a "when-issued" or "delayed delivery" basis (i.e.,
payment or delivery occurs beyond the normal settlement date at a stated price
and yield). When-issued transactions normally settle within 45 days. The
payment obligation and the interest rate, if applicable, that will be received
on when-issued securities are fixed at the time the fund enters into the
commitment to buy such securities. Due to fluctuations in the value of
securities purchased or sold on a when-issued or delayed-delivery basis, the
yields obtained on or prices of such securities may be higher or lower than the
yields or prices available in the market on the dates when the investments are
actually delivered to the buyers.

When a Fund agrees to purchase when-issued or delayed-delivery
securities, to the extent required by the SEC, the Funds custodian will set
aside permissible liquid assets equal to the amount of the commitment in a
segregated account. Normally, the custodian will set aside portfolio securities
to satisfy a purchase commitment, and in such a case a Fund may be required
subsequently to place additional assets in the segregated account in order to
ensure that the value of the account remains equal to the amount of such Fund's
commitment. It may be expected that the Fund's net assets will fluctuate to a
greater degree when it sets aside portfolio securities to cover such purchase
commitments than when it sets aside cash. In addition, because a Fund will set
aside cash or liquid portfolio securities to satisfy its purchase commitments in
the manner described above, such Fund's liquidity and the ability of NAS to
manage it might be affected in the event its commitments to purchase
"when-issued" securities ever exceeded 25% of the value of its total assets.
Under normal market conditions, however, a Fund's commitment to purchase
"when-issued" or "delayed-delivery" securities will not exceed 25% of the value
of its total assets. When the Fund engages in when-issued or delayed-delivery
transactions, it relies on the other party to consummate the trade. Failure of
the seller to do so may result in a Fund incurring a loss or missing an
opportunity to obtain a price considered to be advantageous.

The Funds will engage in "when-issued" or "delayed delivery" transactions only
for the purpose of acquiring portfolio securities consistent with the Funds'
investment objectives and policies and not for investment leverage. If the
Tax-Free Income Fund sells a "when-issued" or "delayed-delivery" security before
delivery, any gain would not be tax-exempt.

LENDING PORTFOLIO SECURITIES. Each Fund (except the Tax-Free Income Fund) may
lend its portfolio securities to brokers, dealers and other financial
institutions, provided it receives cash collateral which at all times is
maintained in an amount equal to at least 100% of the current market value of
the securities loaned. By lending its portfolio securities, the Fund can
increase its income through the investment of the cash collateral. For the
purposes of this policy, the Fund considers U.S. Government securities or
letters of credit issued by banks whose securities meet the standards for
investment by the Fund to be the equivalent of cash. From time to time, the Fund
may return to the borrower or a third party which is unaffiliated with it, and
which is acting as a "placing broker," a part of the interest earned from the
investment of collateral received for securities loaned.

The SEC currently requires that the following conditions must be met
whenever portfolio securities are loaned: (1) a Fund must receive from the
borrower at least

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<PAGE> 49
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) a Fund must be
able to terminate the loan at any time; (4) a Fund must receive reasonable
interest on the loan, as well as any dividends, interest or other distributions
payable on the loaned securities, and any increase in market value; (5) a Fund
may pay only reasonable custodian fees in connection with the loan; and (6)
while any voting rights on the loaned securities may pass to the borrower, 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.

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

FOREIGN SECURITIES. The Mid Cap Growth Fund, Growth Fund and Nationwide Fund may
invest, directly or indirectly through the use of depository receipts, in
foreign securities. The Money Market Fund and the Bond Fund may invest in
Canadian and Provincial obligations. Investors in such Funds should recognize
that investing in foreign securities involves certain special considerations
which are not typically associated with investing in domestic securities. Since
investments in foreign companies will frequently involve currencies of foreign
countries, and since a Fund may hold securities and funds in foreign currencies,
a Fund may be affected favorably or unfavorably by changes in currency rates and
in exchange control regulations, if any, and may incur costs in connection with
conversions between various currencies. Most foreign stock markets, while
growing in volume of trading activity, have less volume than the New York Stock
Exchange, and securities of some foreign companies are less liquid and more
volatile than securities of comparable domestic companies. As non-U.S. companies
are not generally subject to uniform accounting, auditing and financial
reporting standards and practices comparable to those applicable to domestic
issuers, there may be less publicly available information about certain foreign
securities than about domestic securities. Fixed commissions on foreign
securities exchanges are generally higher than negotiated commissions on United
States exchanges, although each such Fund endeavors to achieve the most
favorable net results on its portfolio transactions. There is generally less
government supervision and regulation of securities exchanges, brokers and
listed companies in foreign countries than in the United States. In addition,
with respect to certain foreign countries, there is the possibility of exchange
control restrictions, expropriation or confiscatory taxation, and political,
economic or social instability, which could affect investments in those
countries. Foreign securities, such as those purchased by a Fund, may be subject
to foreign government

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<PAGE> 50

taxes, higher custodian fees and dividend collection fees which could reduce the
yield on such securities.

Certain foreign governments levy withholding taxes against dividend and
interest income. Although in some countries a portion of these taxes are
recoverable, the non-recovered portion of foreign withholding taxes will reduce
the income received from investments in such countries. However, these foreign
withholding taxes are not expected to have a significant impact on those Funds
for which the investment objective is to seek long-term capital appreciation and
any income should be considered incidental.

DEPOSITORY RECEIPTS. As indicated in the Funds' Prospectus, the Stock
Funds may invest in foreign securities indirectly by purchasing depository
receipts, including American Depository Receipts ("ADRs") and European
Depository Receipts ("EDRs") or securities convertible into securities of
issuers based in foreign countries. These securities may not necessarily be
denominated in the same currency as the securities into which they may be
converted. Generally, ADRs, in registered form, are denominated in U.S. dollars
and are designed for use in the U.S. securities markets, while EDRs (also
referred to as Continental Depository Receipts ("CDRs")), in bearer form, may
be denominated in other currencies and are designed for use in European
securities markets. ADRs are receipts typically issued by a U.S. bank or trust
company evidencing ownership of the underlying securities. EDRs are European
receipts evidencing a similar arrangement. For purposes of a Fund's investment
policies, ADRs and EDRs are deemed to have the same classification as the
underlying securities they represent. Thus, an ADR or EDR representing ownership
of common stock will be treated as common stock.

The Stock Funds may invest in depository receipts through "sponsored"
or "unsponsored" facilities. While ADRs and EDRs issued under these two types
of facilities are in some respects similar, there are distinctions between them
relating to the rights and obligations of ADR and EDR holders and the practices
of market participants.

A depository may establish an unsponsored facility without
participation by (or even necessarily the acquiescence of) the issuer of the
deposited securities, although typically the depository requests a letter of
non-objection from such issuer prior to the establishment of the facility.
Holders of unsponsored ADRs and EDRs generally bear all the costs of such
facilities. The depository usually charges fees upon the deposit and withdrawal
of the deposited securities, the conversion of dividends into U.S. dollars, the
disposition of non-cash distributions, and the performance of other services.
The depository of an unsponsored facility frequently is under no obligation to
pass through voting rights to ADR and EDR holders in respect of the deposited
securities. In addition, an unsponsored facility is generally not obligated to
distribute communications received from the issuer of the deposited securities
or to disclose material information about such issuer in the U.S. and thus there
may not be a correlation between such information and the market value of the
depository receipts. Unsponsored ADRs and EDRs tend to be less liquid than
sponsored ADRs and EDRs, respectively.

Sponsored ADR and EDR facilities are created in generally the same
manner as unsponsored facilities, except that the issuer of the deposited
securities enters into a deposit agreement with the depository. The deposit
agreement sets out the rights and responsibilities of the issuer, the
depository, and the ADR and EDR holders. With sponsored facilities, the issuer
of the deposited securities generally will bear some of the costs relating to
the facility (such as dividend payment fees of the depository), although ADR and
EDR holders continue to bear

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<PAGE> 51

certain other costs (such as deposit and withdrawal fees). Under the terms of
most sponsored arrangements, depositories agree to distribute notices of
shareholder meetings and voting instructions, and to provide shareholder
communications and other information to the ADR holders at the request of the
issuer of the deposited securities.

EURODOLLAR AND YANKEE OBLIGATIONS. Eurodollar bank obligations are
dollar-denominated certificates of deposit and time deposits issued outside the
U.S. capital markets by foreign branches of U.S. banks and by foreign banks.
Yankee bank obligations are dollar-denominated obligations issued in the U.S.
capital markets by foreign banks.

Eurodollar and Yankee bank obligations are subject to the same risks
that pertain to domestic issues, notably credit risk, market risk and liquidity
risk. Additionally, Eurodollar (and to a limited extent, Yankee) bank
obligations are subject to certain sovereign risks. One such risk is the
possibility that a sovereign country might prevent capital, in the form of
dollars, from flowing across their borders. Other risks include: adverse
political and economic developments; the extent and quality of government
regulation of financial markets and institutions; the imposition of foreign
withholding taxes, and the expropriation or nationalization of foreign issuers.
However, Eurodollar and Yankee bank obligations held in the Money Market Fund
will undergo the same credit analysis as domestic issues in which the Money
Market Fund invests, and will have at least the same financial strength as the
domestic issuers approved for the Money Market Fund.

MUNICIPAL SECURITIES. As stated in the prospectus, the assets of the
Tax-Free Income Fund will be primarily invested in municipal securities.
Municipal securities include debt obligations issued by governmental entities to
obtain funds for various public purposes, such as the construction of a wide
range of public facilities, the refunding of outstanding obligations, the
payment of general operating expenses, and the extension of loans to other
public institutions and facilities. Private activity bonds that are issued by or
on behalf of public authorities to finance various privately-operated facilities
are included within the term municipal securities if the interest paid thereon
is exempt from federal taxes including the federal alternative minimum tax.

Among other types of municipal securities, the Tax-Free Income Fund may
purchase short-term General Obligation Notes, Tax Anticipation Notes, Bond
Anticipation Notes, Revenue Anticipation Notes, Project Notes, Tax-Exempt
Commercial Paper, Construction Loan Notes and other forms of short-term
tax-exempt loans. Such instruments are issued with a short-term maturity in
anticipation of the receipt of tax funds, the proceeds of bond placements or
other revenues. In addition, the Tax-Free Income Fund may invest in other types
of tax-exempt instruments, such as municipal bonds, private activity bonds, and
pollution control bonds.

Project Notes are issued by a state or local housing agency and are
sold by the Department of Housing and Urban Development. While the issuing
agency has the primary obligation with respect to its Project Notes, they are
also secured by the full faith and credit of the United States through
agreements with the issuing

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<PAGE> 52

authority which provide that, if required, the federal government will lend the
issuer an amount equal to the principal of and interest on the Project Notes.

As described in the prospectus, the two principal classifications of
municipal securities consist of "general obligation" and "revenue" issues. The
Tax-Free Income Fund may also acquire "moral obligation" issues, which are
normally issued by special purpose authorities. There are, of course, variations
in the quality of municipal securities, both within a particular classification
and between classifications, and the yields on municipal securities depend upon
a variety of factors, including the financial condition of the issuer, general
conditions of the municipal bond market, the size of a particular offering, the
maturity of the obligation and the rating of the issue. Ratings represent the
opinions of an NRSRO as to the quality of municipal securities. It should be
emphasized, however, that ratings are general and are not absolute standards of
quality, and municipal securities with the same maturity, interest rate and
rating may have different yields, while municipal securities of the same
maturity and interest rate with different ratings may have the same yield.
Subsequent to purchase, an issue of municipal securities may cease to be rated
or its rating may be reduced below the minimum rating required for purchase. NAS
will consider such an event in determining whether the Tax-Free Income Fund
should continue to hold the obligation.

An issuer's obligations under its municipal securities are subject to
the provisions of bankruptcy, insolvency, and other laws affecting the rights
and remedies of creditors, such as the federal bankruptcy code, and laws, if
any, which may be enacted by Congress or state legislatures extending the time
for payment of principal or interest, or both, or imposing other constraints
upon the enforcement of such obligations or upon the ability of municipalities
to levy taxes. The power or ability of an issuer to meet its obligations for the
payment of interest on and principal of its municipal securities may be
materially adversely affected by litigation or other conditions.

The Tax-Free Income Fund may invest in AMT bonds. An AMT bond is an
otherwise tax-exempt municipal bond whose interest is treated as a preference
item for purposes of computing the alternative minimum tax imposed on
individuals and corporations. Specifically, private activity bonds, other than
501(c)(3) bonds issued on or after August 8, 1986 that are not current
refundings of pre-1986 industrial development bonds are AMT bonds. A municipal
bond is considered to be a private activity bond if more than either 5% or $5
million of the proceeds is used to finance a loan to any person other than
a governmental unit, or 10% or more of the proceeds of the issue is used in a
trade or business of any person other than a governmental entity and more than
10% of the issue is secured by property or payments used in a private business.

Municipal bonds that are private activity bonds will not be tax-exempt
unless they fall within the category of "qualified bonds" defined in the Tax
Code. Qualified bonds include issues for certain facilities such as airport
bonds, water and sewer service bonds, qualified single and multifamily housing
bonds, certain "small" industrial development bonds and bonds for local
furnishing of gas and electricity. Qualified bonds are also bonds for water,
solid waste facility bonds, docks and wharves issues and "enterprise zone"
bonds.

In addition to the normal risks associated with bonds, there is a
slight risk of less active secondary market for AMT bonds. In general, a larger
secondary market will exist for AMT bonds when the supply of municipal bonds is
tight.

PUTS. The Tax-Free Income Fund may also acquire "puts" with respect to
municipal securities held in its portfolio. A put is a right to sell a
specified security (or securities) within a specified period of time at a
specified exercise price. The Tax-Free Income Fund may sell, transfer, or
assign a put only in conjunction with the sale, transfer, or assignment of the
underlying security or securities.

The amount payable to the Tax-Free Income Fund upon its exercise of a
"put" is normally (i) the Tax-Free Income Fund's acquisition cost of the
municipal securities (excluding any accrued interest which the Tax-Free Income
Fund paid on the acquisition), less any amortized market premium or plus any
amortized market or original issue discount during the period the Tax-Free
Income Fund owned the securities, plus (ii) all interest accrued on the
securities since the last interest payment date during that period.

Puts may be acquired by the Tax-Free Income Fund to facilitate the
liquidity of its portfolio assets. Puts may also be used to facilitate the
reinvestment of the Tax-Free Income Fund's assets at a rate of return more
favorable than that of the underlying security. Puts may, under certain
circumstances, also be used to shorten the maturity of underlying variable rate
or floating rate securities for purposes of calculating the remaining maturity
of those securities.

The Tax-Free Income Fund expects that it will generally acquire puts
only where the puts are available without the payment of any direct or indirect
consideration. However, if necessary or advisable, the Tax-Free Income Fund
may pay for puts either separately in cash or by paying a higher price for
portfolio securities which are acquired subject to the puts (thus reducing
the yield to maturity otherwise available for the same securities).

The Tax-Free Income Fund intends to enter into puts only with dealers,
banks, and broker-dealers which, in NAS's opinion, present minimal credit
risks.

CONVERTIBLE SECURITIES. The Mid Cap Growth Fund, Growth Fund and Nationwide Fund
may invest in convertible securities to the extent described in its Prospectus.
Convertible securities are bonds, debentures, notes, preferred stocks, or other
securities that may be converted into or exchanged for a specified amount of
common stock of the same or a different issuer within a particular period of
time at a specified price or formula. A convertible security entitles the holder
to receive interest normally paid or accrued on debt or the dividend paid on
preferred stock until the convertible security matures or is redeemed,
converted, or exchanged. Convertible securities have unique investment
characteristics in that they generally (i) have higher yields than common stocks
but lower yields than comparable non-convertible securities, (ii) are less
subject to fluctuation in value than the underlying stock since they have fixed
income characteristics, and (iii) provide the potential for capital appreciation
if the market price of the underlying common stock increases. Most convertible
securities currently are issued by U.S. companies, although a substantial
Eurodollar convertible securities market has developed, and the markets for
convertible securities denominated in local currencies are increasing.

The value of a convertible security is a function of its "investment
value" (determined by its yield in comparison with the yields of other
securities of comparable maturity and quality that do not have a conversion
privilege) and its "conversion value" (the security's worth, at market value, if
converted into the underlying common stock). The investment value of a
convertible security is influenced by changes in interest rates, with investment
value declining as interest rates increase and increasing as interest rates
decline. The credit standing of the issuer and other factors also may have an
effect on the convertible security's

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<PAGE> 53

investment value. The conversion value of a convertible security is determined
by the market price of the underlying common stock. If the conversion value is
low relative to the investment value, the price of the convertible security is
governed principally by its investment value. Generally, the conversion value
decreases as the convertible security approaches maturity. To the extent the
market price of the underlying common stock approaches or exceeds the conversion
price, the price of the convertible security will be increasingly influenced by
its conversion value. A convertible security generally will sell at a premium
over its conversion value by the extent to which investors place value on the
right to acquire the underlying common stock while holding a fixed income
security.

A convertible security may be subject to redemption at the option of
the issuer at a price established in the convertible security's governing
instrument. If a convertible security held by a Fund is called for redemption, a
Fund will be required to permit the issuer to redeem the security, convert it
into the underlying common stock, or sell it to a third party.

WARRANTS. The Mid Cap Growth Fund, Growth Fund, and Nationwide Fund may acquire
warrants. Warrants are securities giving the holder the right, but not the
obligation, to buy the stock of an issuer at a given price (generally higher
than the value of the stock at the time of issuance), on a specified date,
during a specified period, or perpetually. Warrants may be acquired separately
or in connection with the acquisition of securities.

Warrants do not carry with them the right to dividends or voting rights
with respect to the securities that they entitle their holder to purchase, and
they do not represent any rights in the assets of the issuer. As a result,
warrants may be considered more speculative than certain other types of
investments. In addition, the value of a warrant does not necessarily change
with the value of the underlying securities, and a warrant ceases to have value
if it is not exercised prior to its expiration date.

RESTRICTED, NON-PUBLICLY TRADED AND ILLIQUID SECURITIES. Each Fund may not
invest more than 15% (10% for the Money Market Fund) of its net assets, in the
aggregate, in illiquid securities, including repurchase agreements which have a
maturity of longer than seven days, time deposits maturing in more than seven
days and securities that are illiquid because of the absence of a readily
available market or legal or contractual restrictions on resale. At this time
none of the Funds intends to invest more than 5% of its net assets in illiquid
securities. Repurchase agreements subject to demand are deemed to have a
maturity equal to the notice period.

Historically, illiquid securities have included securities subject to
contractual or legal restrictions on resale because they have not been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
securities which are otherwise not readily marketable and repurchase agreements
having a maturity of longer than seven days. Securities which have not been
registered under the Securities Act are referred to as private placements or
restricted securities and are purchased directly from the issuer or in the
secondary market. Investment companies do not typically hold a significant
amount of these restricted or other illiquid securities because of the potential
for delays on resale and uncertainty in valuation. Limitations on resale may
have an adverse effect on the marketability of portfolio securities, and a Fund
might be unable to dispose of restricted or other illiquid securities promptly
or at reasonable prices and might thereby experience difficulty satisfying
redemptions within seven days. A Fund might also have to register such
restricted securities in order to dispose of them resulting in additional
expense and delay. Adverse market conditions could impede such a public offering
of securities.

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<PAGE> 54

In recent years, however, a large institutional market has developed
for certain securities that are not registered under the Securities Act
including foreign securities, municipal securities and corporate bonds and
notes. Institutional investors depend on an efficient institutional market in
which the unregistered security can be readily resold or on an issuer's ability
to honor a demand for repayment. The fact that there are contractual or legal
restrictions on resale to the general public or to certain institutions may not
be indicative of the liquidity of such investments.

The SEC has adopted Rule 144A under the Securities Act which allows
for a broader institutional trading market for securities otherwise subject to
restriction on resale to the general public. Rule 144A establishes a "safe
harbor" from the registration requirements of the Securities Act for resales of
certain securities to qualified institutional buyers. It is anticipated that
the market for certain restricted securities such as institutional commercial
paper will expand further as a result of this regulation and use of automated
systems for the trading, clearance and settlement of unregistered securities of
domestic and foreign issuers, such as the PORTAL System sponsored by the
National Association of Securities Dealers, Inc.

Any such restricted securities will be considered to be illiquid for
purposes of such a Fund's limitations on investments in illiquid securities
unless, pursuant to procedures adopted by the Board of Trustees of the Trust,
NAS has determined such securities to be liquid because such securities are
eligible for resale pursuant to Rule 144A and are readily saleable. To the
extent that qualified institutional buyers may become uninterested in
purchasing Rule 144A securities, a Fund's level of illiquidity may increase.

A Stock Fund may buy or sell over-the-counter ("OTC") options and, in
connection therewith, segregate assets or cover its obligations with respect to
OTC options written by the Fund. The assets used as cover for OTC options
written by a Fund will be considered illiquid unless the OTC options are sold to
qualified dealers who agree that the Fund may repurchase any OTC option it
writes at a maximum price to be calculated by a formula set forth in the option
agreement. The cover for an OTC option written subject to this procedure would
be considered illiquid only to the extent that the maximum repurchase price
under the formula exceeds the intrinsic value of the option.

NAS will monitor the liquidity of restricted securities in a Fund. In
reaching liquidity decisions, NAS may consider the following factors: (A) the
unregistered nature of the security; (B) the frequency of trades and quotes for
the security; (C) the number of dealers wishing to purchase or sell the security
and the number of other potential purchasers; (D) dealer undertakings to make a
market in the security and (E) the nature of the security and the nature of the
marketplace trades (e.g., the time needed to dispose of the security, the method
of soliciting offers and the mechanics of the transfer).

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

Each Fund expects that its borrowings will be on a secured basis. In
such situations, either the custodian will segregate the pledged assets for the
benefit of the lender or arrangements will be made with a suitable subcustodian,
which may

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<PAGE> 55

include the lender. The Funds have established a line-of-credit ("LOC") with
their custodian by which they may borrow for temporary or emergency purposes.
The Funds intend to use the LOC to meet large or unexpected redemptions that
would otherwise force a Fund to liquidate securities under circumstances which
are unfavorable to a Fund's remaining shareholders.

DERIVATIVE INSTRUMENTS. 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 to hedge a 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. At this time, none of the Funds intends to invest
more than 5% of its net assets in derivative instruments.

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 a 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, a Fund could
suffer a loss.

(4) As described below, a Fund might be required to maintain assets as
"cover," maintain segregated accounts, or make margin payments when it takes
positions in these instruments involving obligations to third parties (i.e.,
instruments other than purchased options). If the Fund were unable to close out
its positions in such instruments, it might be required to continue to maintain
such

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<PAGE> 56

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

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

OPTIONS. Each of the Stock Funds 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, a 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 a
Fund to enhance income by reason of the premiums paid by the purchaser of such
options. Writing call options serves as a limited short hedge because declines
in the value of the hedged investment would be offset to the extent of the
premium received for writing the option. However, if the security appreciates to
a price higher than the exercise price of the call option, it can be expected
that the option will be exercised, and the Fund will be obligated to sell the
security at less than its market value or will be obligated to purchase the
security at a price greater than that at which the security must be sold under
the option. All or a portion of any assets used as cover for OTC options written
by a Fund would be considered illiquid to the extent described under "Restricted
and Illiquid Securities" above. Writing put options serves as a limited long
hedge because increases in the value of the hedged investment would be offset to
the extent of the premium received for writing the option. However, if the
security depreciates to a price lower than the exercise price of the put option,
it can be expected that the put option will be exercised, and the Fund will be
obligated to purchase the security at more than its market value.

The value of an option position will reflect, among other things, the
historical price volatility of the underlying investment, the current market
value of the underlying investment, the time remaining until expiration of the
option, the relationship of the exercise price to the market price of the
underlying investment, and general market conditions. Options that expire
unexercised have no value. Options used by 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.

14
<PAGE> 57

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

A Fund may purchase or write both OTC options and options traded on
foreign and U.S. exchanges. Exchange-traded options are issued by a clearing
organization affiliated with the exchange on which the 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.

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

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

If a Fund is unable to effect a closing transaction for an option it
had purchased, it would have to exercise the option to realize any profit. The
inability to enter into a closing purchase transaction for a covered call option
written by a Fund could cause material losses because the Fund would be unable
to sell the investment used as a cover for the written option until the option
expires or is exercised.

Each Stock 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 a Fund owns or
intends to purchase probably will not correlate perfectly with movements in the
level of an index and, therefore, a 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 by acquiring and holding the underlying
securities. A 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.

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<PAGE> 58

FUTURES CONTRACTS. The Stock Funds 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. A Fund's hedging may
include purchases of futures as an offset against the effect of expected
increases in securities prices or currency exchange rates and sales of futures
as an offset against the effect of expected declines in securities prices or
currency exchange rates. A Fund may write put options on futures contracts while
at the same time purchasing call options on the same futures contracts in order
to create synthetically a long futures contract position. Such options would
have the same strike prices and expiration dates. A Fund will engage in this
strategy only when NAS or a Subadviser believes it is more advantageous to a
Fund than is purchasing the futures contract.

16
<PAGE> 59

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

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

A futures contract provides for the future sale by one party and
purchase by another party of a specified amount of a specific financial
instrument (e.g., debt security) or currency for a specified price at a
designated date, time, and place. An index futures contract is an agreement
pursuant to which the parties agree to take or make delivery of an amount of
cash equal to a specified multiplier times the difference between the value of
the index at the close of the last trading day of the contract and the price at
which the index futures contract was originally written. Transactions costs are
incurred when a futures contract is bought or sold and margin deposits must be
maintained. A futures contract may be satisfied by delivery or purchase, as the
case may be, of the instrument, the currency, or by payment of the change in the
cash value of the index. More commonly, futures contracts are closed out prior
to delivery by entering into an offsetting transaction in a matching futures
contract. Although the value of an index might be a function of the value of
certain specified securities, no physical delivery of those securities is made.
If the offsetting purchase price is less than the original sale price, a Fund
realizes a gain; if it is more, a Fund realizes a loss. Conversely, if the
offsetting sale price is more than the original purchase price, a Fund realizes
a gain; if it is less, a Fund realizes a loss. The transaction costs must also
be included in these calculations. There can be no assurance, however, that a
Fund will be able to enter into an offsetting transaction with respect to a
particular futures contract at a particular time. If a Fund is not able to enter
into an offsetting transaction, that Fund will continue to be required to
maintain the margin deposits on the futures contract.

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

17
<PAGE> 60

such as periods of high volatility, a Fund may be required by an exchange to
increase the level of its initial margin payment, and initial margin
requirements might be increased generally in the future by regulatory action.

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

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

If a Fund were unable to liquidate a futures or option on a futures
contract position due to the absence of a liquid secondary market or the
imposition of price limits, it could incur substantial losses, because it would
continue to be subject to market risk with respect to the position. In addition,
except in the case of purchased options, the Fund would continue to be required
to make daily variation margin payments and might be required to maintain the
position being hedged by the future or option or to maintain cash or securities
in a segregated account.

Certain characteristics of the futures market might increase the risk
that movements in the prices of futures contracts or options on futures
contracts might not correlate perfectly with movements in the prices of the
investments being hedged. For example, all participants in the futures and
options on futures contracts markets are subject to daily variation margin calls
and might be compelled to liquidate futures or options on futures contracts
positions whose prices are moving unfavorably to avoid being subject to further
calls. These liquidations could increase price volatility of the instruments and
distort the normal price relationship between the futures or options and the
investments being hedged. Also, because initial margin deposit requirements in
the futures markets are less onerous than margin requirements in the securities
markets, there might be increased participation by speculators in the future
markets. This participation also might cause temporary price distortions. In
addition, activities of large traders in both the futures and securities markets
involving arbitrage, "program trading" and other investment strategies might
result in temporary price distortions.

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<PAGE> 61

FORWARD CURRENCY CONTRACTS. The Mid Cap Growth Fund, Growth Fund and Nationwide
Fund may enter into forward currency contracts. A forward currency contract
involves an obligation to purchase or sell a specific currency at a future date,
which may be any fixed number of days from the date of the contract agreed upon
by the parties, at a price set at the time of the contract. These contracts are
entered into in the interbank market conducted directly between currency traders
(usually large commercial banks) and their customers.

At or before the maturity of a forward contract, a Fund may either sell
a portfolio security and make delivery of the currency, or retain the security
and fully or partially offset its contractual obligation to deliver the currency
by purchasing a second contract. If a Fund retains the portfolio security and
engages in an offsetting transaction, the Fund, at the time of execution of the
offsetting transaction, will incur a gain or a loss to the extent that movement
has occurred in forward contract prices.

The precise matching of forward currency contract amounts and the value
of the securities involved generally will not be possible because the value of
such securities, measured in the foreign currency, will change after the foreign
currency contract has been established. Thus, the Fund might need to purchase or
sell foreign currencies in the spot (cash) market to the extent such foreign
currencies are not covered by forward contracts. The projection of short-term
currency market movements is extremely difficult, and the successful execution
of a short-term hedging strategy is highly uncertain.

SECURITIES OF OTHER NON-AFFILIATED INVESTMENT COMPANIES. Some of the countries
in which a Fund may invest may not permit direct investment by outside
investors. Investments in such countries may only be permitted through foreign
government-approved or government-authorized investment vehicles, which may
include other investment companies. The Funds may also invest in shares of other
non-affiliated investment companies registered under the 1940 Act. Investing
through such vehicles may involve frequent or layered fees or expenses and may
also be subject to limitation under the 1940 Act. Under the 1940 Act, a Fund may
invest up to 10% of its assets in shares of investment companies and up to 5% of
its assets in any one investment company as long as the investment does not
represent more than 3% of the voting stock of the acquired investment company.

BANK OBLIGATIONS. As stated in a Fund's Prospectus, bank obligations that may be
purchased by a Fund include certificates of deposit, banker's acceptances and
fixed time deposits. A certificate of deposit is a short-term negotiable
certificate issued by a commercial bank against funds deposited in the bank and
is either interest-bearing or purchased on a discount basis. A bankers'
acceptance is a short-term draft drawn on a commercial bank by a borrower,
usually in connection with an international commercial transaction. The borrower
is liable for payment as is the bank, which unconditionally guarantees to pay
the draft at its face amount on the maturity date. Fixed time deposits are
obligations of branches of U.S. banks or foreign banks which are payable at a
stated maturity date and bear a fixed rate of interest. Although fixed time
deposits do not have a market, there are no contractual restrictions on the
right to transfer a beneficial interest in the deposit to a third party.

Bank obligations may be general obligations of the parent bank or may
be limited to the issuing branch by the terms of the specific obligations or by
government regulation.

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<PAGE> 62

FLOATING AND VARIABLE RATE INSTRUMENTS. The Nationwide Bond, Tax-Free Income and
Money Market Fund may invest in floating and variable rate instruments. Certain
of the floating or variable rate obligations that may be purchased by these
Funds may carry a demand feature that would permit the holder to tender them
back to the issuer of the instrument or to a third party at par value prior to
maturity. Some of the demand instruments purchased by a Fund are not traded in a
secondary market and derive their liquidity solely from the ability of the
holder to demand repayment from the issuer or third party providing credit
support. If a demand instrument is not traded in a secondary market, the Fund
will nonetheless treat the instrument as "readily marketable" for the purposes
of its investment restriction limiting investments in illiquid securities unless
the demand feature has a notice period of more than seven days in which case the
instrument will be characterized as "not readily marketable" and therefore
illiquid.

The Fund's right to obtain payment at par on a demand instrument could
be affected by events occurring between the date the Fund elects to demand
payment and the date payment is due that may affect the ability of the issuer of
the instrument or third party providing credit support to make payment when due,
except when such demand instruments permit same day settlement. To facilitate
settlement, these same day demand instruments may be held in book entry form at
a bank other than a Fund's custodian subject to a subcustodian agreement
approved by the Fund between that bank and the Fund's custodian.

ZERO COUPON SECURITIES. The Bond Funds may invest in zero coupon securities in
accordance with investment policies described in the Prospectus.

Zero coupon securities are debt securities that pay no cash income but
are sold at substantial discounts from their value at maturity. When a zero
coupon security is held to maturity, its entire return, which consists of the
amortization of discount, comes from the difference between its purchase price
and its maturity value. This difference is known at the time of purchase, so
that investors holding zero coupon securities until maturity know at the time of
their investment what the expected return on their investment will be. Zero
coupon securities may have conversion features.

Zero coupon securities tend to be subject to greater price fluctuations
in response to changes in interest rates than are ordinary interest-paying debt
securities with similar maturities. The value of zero coupon securities
appreciates more during periods of declining interest rates and depreciates more
during periods of rising interest rates than ordinary interest-paying debt
securities with similar maturities. Zero coupon securities may be issued by a
wide variety of corporate and governmental issuers. Although these instruments
are generally not traded on a national securities exchange, they are widely
traded by brokers and dealers and, to such extent, will not be considered
illiquid for the purposes of the Fund's limitation on investments in illiquid
securities.

Current federal income tax law requires the holder of a zero coupon
security acquired at a discount to accrue income with respect to these
securities prior to the receipt of cash payments. Accordingly, to avoid
liability for federal income and excise taxes, the Fund may be required to
distribute income accrued with respect to these securities and may have to
dispose of portfolio securities under disadvantageous circumstances in order to
generate cash to satisfy these distribution requirements.

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<PAGE> 63

INVESTMENT RESTRICTIONS

The following are fundamental investment restrictions of each Fund which cannot
be changed without the authorization of the majority of the outstanding shares
of the Fund for which a change is proposed.

EACH OF THE FUNDS:

- May not purchase securities of any one issuer, other than obligations
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, if, immediately after such purchase, more than 5%
of the Fund's total assets would be invested in such issuer or the
Fund would hold more than 10% of the outstanding voting securities of
the issuer, except that 25% or less of the Fund's total assets may be
invested without regard to such limitations. There is no limit to the
percentage of assets that may be invested in U.S. Treasury bills,
notes, or other obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities. The Money Market Fund
will be deemed to be in compliance with this restriction so long as it
is in compliance with Rule 2a-7 under the 1940 Act, as such Rule may
be amended from time to time.

- May not borrow money or issue senior securities, except that each 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 each 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 such Fund.

- May not lend any security or make any other loan except that each
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.

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<PAGE> 64

- May not purchase the securities of any issuer if, as a result, 25% or
more (taken at current value) of the Fund's total assets would be
invested in the securities of issuers the principal activities of
which are in the same industry. This limitation does not apply to
securities issued by the U.S. Government or its agencies or
instrumentalities 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, telephone utilities, captive borrowing conduit, equipment
finance, premium finance, leasing finance, consumer finance and other
finance.

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:

Each 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.

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:

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<PAGE> 65

JOHN C. BRYANT, Trustee*, Age -- 61
11 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 -- 57
North Walnut and West College Avenue, Westerville, Ohio
Dr. DeVore is President of Otterbein College.

SUE A. DOODY, Trustee, Age -- 63
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 -- 70
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 -- 66
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 -- 64
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 -- 42
55 E. State Street, Columbus, Ohio
Mr. Kridler is President of the Columbus Association of Performing Arts.

DIMON R. MCFERSON, Trustee*+, Age -- 60
One Nationwide Plaza, Columbus, Ohio
Mr. McFerson is President and Chief Executive Officer of the Nationwide
Insurance Enterprise.

NANCY C. THOMAS, Trustee+, Age -- 63
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 -- 65
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 -- 49
11495 Sunset Hills Rd - Suite #210, Reston, Virginia
Mr. Wetmore is the Managing Director of The Updata Capital, a venture capital
firm.

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<PAGE> 66

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.

DAVID E. SIMAITIS, Secretary
Three Nationwide Plaza, Columbus, Ohio
Mr. Simaitis 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 to be paid to the Trustees of the Trust,
before reimbursement, for the fiscal period ending 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, included 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-- 10,000
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--
</TABLE>

24
<PAGE> 67
<TABLE>

<S> <C> <C> <C> <C>
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-- 10,000

<FN>
**The Fund Complex includes Trusts comprised of twenty nine investment company
portfolios.
</TABLE>

INVESTMENT ADVISORY AND OTHER SERVICES

Under the terms of the Investment Advisory Agreement dated _________1997,
Nationwide Advisory Services, Inc. ("NAS") manages the investment of the assets
of the Funds in accordance with the policies and procedures established by the
Trustees.

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 a Fund without penalty
by vote of a majority of the outstanding voting securities 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.

NAS, 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 of
the outstanding Class B common stock) to control NFS. Nationwide Corporation, is
also a holding company in the Nationwide Insurance Enterprise.

25
<PAGE> 68

For services provided under the Investment Management Agreement, NAS receives an
annual fee paid monthly based on average daily net assets of each Fund
according to the following schedule:

FUND ASSETS FEE
---- ------ ---

<S> <C> <C>
Nationwide Mid Cap Growth, Nationwide $0 up to $250 million .60%
Growth and Nationwide Fund $250 million up to $1 billion .575%
$1 billion up to $2 billion .55%
$2 billion up to $5 billion .525%
$5 Billion and more .50%

Nationwide Bond, Nationwide Tax-Free, $0 up to $250 million .50%
Nationwide Intermediate U.S. Government $250 million up to $1 billion .475%

Bond, and Nationwide Long-Term U.S.
$1 billion up to $2 billion .45%
Government Bond Funds $2 billion up to $5 billion .425%
$5 Billion and more .40%

Nationwide Money Market Fund $0 up to $1 billion .40%
$1 billion up to $2 billion .38%
$2 billion up to $5 billion .36%
$5 Billion and more .34%
</TABLE>

During the fiscal years ended October 31, 1997, 1996 and 1995, NAS received the
following fees for investment advisory services:

ACQUIRED YEARS ENDED OCTOBER 31,
FUNDS FUNDS 1997 1996 1995
----- -------- ---- ---- ----
<S> <C> <C> <C> <C>
Mid Cap Growth Growth of FHIT $ 63,883 $ 54,053 $ 46,886
Growth Growth of NIF 3,750,599 3,212,196 2,542,155
Nationwide Fund Nationwide Fund of NIF 5,938,011 4,425,921 3,658,939
Bond Bond of NIF 629,068 663,545 635,757
Tax-Free Tax-Free of NIF II 1,688,233 1,704,966 1,629,584
LT U.S. Govt. Government of FHIT 343,259 414,415 447,894
Intermediate U.S. Govt. U.S. Govt. of NIF II 256,016 255,149 248,765
Money Market* Money Market of NIF* 3,502,716 2,952,726 2,465,549
</TABLE>

* Net of waivers of $389,150, $328,076 and $273,950 for 1997, 1996 and 1995,
respectively.

26
<PAGE> 69

DISTRIBUTOR
- -----------

NAS serves as agent for each of the Funds in the distribution of its Shares
pursuant to a Underwriting Agreement dated as of ________, 1998 (the
"Underwriting Agreement"). Unless otherwise terminated, the Underwriting
Agreement will continue in effect until _________, 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.

During the fiscal years ended October 31, 1997, 1996 and 1995, NAS received the
following commissions from the sale of shares of the Funds:

ACQUIRED YEARS ENDED OCTOBER 31,
FUNDS FUNDS 1997 1996 1995
----- -------- ---- ---- ----
<S> <C> <C> <C> <C>
Growth Growth of NIF $ 873,750 $1,029,727 $609,266
Nationwide Fund Nationwide Fund of NIF 2,037,896 1,089,371 520,812
Bond Bond of NIF 123,036 202,206 131,140
</TABLE>

From such fees, NAS paid to its own representatives $1,699,148, $1,273,701
and $645,131.

DISTRIBUTION PLAN

The Funds, other than the Money Market Fund, (the "12b-1 Funds"), have adopted a
Distribution Plan (the "Plan") under Rule 12b-1 of the 1940 Act which permits
the 12b-1 Funds to compensate NAS as such Funds' Distributor, for expenses
associated with distribution of the shares. Although actual distribution
expenses may be more or less, under the Plan the Funds shall pay an annual fee
amounts not exceeding a maximum amount of .25% of the average daily net assets
of Class A shares, 1.00% of the average daily net assets of Class B shares of
the Stock Funds, and .85% of the average daily net assets of Class B shares of
the Bond Funds, 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 fiscal years ended October 31, 1997, 1996 and 1995, NAS received
the following distribution fees:

ACQUIRED YEARS ENDED OCTOBER 31,
FUNDS FUNDS 1997 1996 1995
----- -------- ---- ---- ----
<S> <C> <C> <C> <C>
Mid Cap Growth Growth of FHIT $ 1,012 $ 41,580 $36,069
Tax-Free Tax-Free of NIF II 521,060 526,480 502,108
LT U.S. Govt. Govt. Bond of FHIT -- -- --
Intermediate U.S. Govt. U.S. Govt. of NIF II 78,778 78,507 76,543
</TABLE>

NAS also receives the proceeds of contingent deferred sales charges imposed on
certain redemptions of shares. During the fiscal years ended October 31, 1997,
1996, and 1995, NAS received the following amounts.

ACQUIRED YEARS ENDED OCTOBER 31,
FUNDS FUNDS 1997 1996 1995
----- -------- ---- ---- ----
<S> <C> <C> <C> <C>
Mid Cap Growth Growth of FHIT $ 10,832 $ 12,788 $ 28,961
Tax-Free Tax-Free of NIF II 161,441 169,310 234,339
LT U.S. Govt. Govt. of FHIT 23,417 36,566 75,240
Intermediate U.S. Govt. U.S. Govt. of NIF II 31,232 58,918 72,664
</TABLE>

As required by Rule 12b-1, the Plan was approved by the initial Shareholder of
the Funds and by the Board of Trustees, including a majority of the Trustees who
are not interested persons of a 12b-1 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 March 5, 1998. The Plan may be
terminated as to the Funds by vote of a majority of the Independent Trustees,
or by vote of majority of the outstanding Shares of that Fund. Any change in
the Plan that would materially increase the distribution cost to the Funds
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 vote of the Trustees including a majority of the
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 Funds. 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 as to a Fund must determine that there is a reasonable
likelihood that the Plan will benefit such Fund and its Shareholders.

The Board of Trustees of the Trust believes that the Plan is in the best
interests of the Funds since it encourages Fund growth and maintenance of
Fund assets. As the Funds grow 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 a Fund's Shares including, but not limited
to, those discussed above.

OTHER SERVICES FOR ALL THE FUNDS

Under a separate Fund Administration Agreement dated ____________ 1997, NAS also
provides various administrative and accounting services, including daily
valuation of each Fund's shares and preparation of financial statements, tax
returns and regulatory reports. For these services, each Fund (except the S&P
500 Index Fund) pays NAS an annual fee in the amount of 0.07% on assets up to
$250 million of average daily net assets, 0.05% on the next $750 million and
0.04% on assets of $1 billion and more.

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 in the following amounts: $16
per Stock Fund account in Class D shares per annum; $18 per Bond Fund account
in Class D shares per annum; and $27 per Money Market Fund account per annum.

The Fifth Third Bank ("Fifth Third"), 38 Fountain Square Plaza, Cincinnati, OH
45263, is the custodian for the Funds and makes all receipts and disbursements
under a 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 Funds 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 Funds. 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

27
<PAGE> 70

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 Funds 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's
expense.

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

During the fiscal year ended October 31, 1997, 1996 and 1995, the following
brokerage commissions were paid by the Funds, all to firms rendering
statistical services as described above:

ACQUIRED YEARS ENDED OCTOBER 31,
FUNDS FUNDS 1997 1996 1995
----- -------- ---- ---- ----
<S> <C> <C> <C> <C>
Mid Cap Growth Growth of FHIT $ 8,480 $ 1,928 $ 5,943
Growth Growth of NIF 742,579 376,916 290,230
Nationwide Fund Nationwide Fund of NIF 664,395 436,679 310,027
</TABLE>

CALCULATION OF NET ASSET VALUE OF THE
MONEY MARKET FUND

The Nationwide Money Market Fund's net asset value per share is
calculated by adding the value of all securities and other assets of the Fund,
deducting its liabilities, and dividing by the number of shares outstanding.

The value of portfolio securities is determined on the basis of the
amortized cost, method of valuation in accordance with Rule 2a-7 of the 1940
Act. This involves valuing a security at its cost and thereafter assuming a
constant amortization to maturity of any discount or premium, regardless of the
impact of fluctuating interest rates on the market value of the instrument.
While this method provides certainty in valuation, it may result in periods
during which value, as determined by amortized cost, is higher or lower than the
price the Fund would receive if it sold the instrument.

The Trustees have adopted procedures whereby the extent of deviation,
if any, of the current net asset value per share calculated using available
market quotations from the Money Market Fund's amortized cost price per share,
will be determined at such intervals as the Trustees deem appropriate and are
reasonable in light of current market conditions. In the event such deviation
from the Money Market Fund's amortized cost price per share exceeds 1/2 of 1
percent, the Trustees will consider appropriate action which might include a
revaluation of all or an appropriate portion of the Money Market Fund's assets
based upon current market factors.

The Trustees, in supervising the Fund's operations and delegating
special responsibilities involving portfolio management to NAS, have undertaken
as a particular responsibility within their overall duty of care owed to the
Fund's shareholders to assure to the extent reasonably practicable, taking into
account current market conditions affecting the Fund's investment objectives,
that the Fund's net asset value per share, rounded to the nearest one cent, will
not deviate from $1.

Pursuant to its objective of maintaining a stable net asset value per
share, the Money Market Fund will only purchase investments with a remaining
maturity of 397 days or less and will maintain a dollar weighted average
portfolio maturity of 90 days or less.

CALCULATING MONEY MARKET FUND YIELD

Any current Money Market Fund yield quotations, subject to Rule 482 under the
Securities Act, shall consist of a seven calendar day historical yield,
carried at least to the nearest hundredth of a percent. The yield shall be
calculated by determining the change, excluding realized and unrealized gains
and losses, in the value of a

28
<PAGE> 71
hypothetical pre-existing account having a balance of one share at the beginning
of the period, dividing the net change in account value by the value of the
account at the beginning of the base period to obtain the base period return,
and multiplying the base period return by 365/7 (or 366/7 during a leap year).
For calculation , the net change in account value reflects the
value of additional shares purchased with dividends declared on both the
original share and any such additional shares. The Fund's effective yield
represents an annualization of the current seven day return with all dividends
reinvested. As of October 31, 1997, the Money Market Funds seven day current
and effective yields were 5.00% and 5.15%, respectively.

The Money Market Fund's yield will fluctuate daily. Actual yields will
depend on factors such as the type of instruments in the Money Market Fund's
portfolio, portfolio quality and average maturity, changes in interest rates,
and the Money Market Fund's expenses.

Although the Fund determines its yield on the basis of a seven calendar
day period, it may use a different time span on occasion.

There is no assurance that the yields quoted on any given occasion will
remain in effect for any period of time and there is no guarantee that the net
asset values will remain constant. It should be noted that a shareholder's
investment in the Fund is not guaranteed or insured. Yields of other money
market funds may not be comparable if a different base period or another method
of calculation is used.

CALCULATING YIELD AND TOTAL RETURN--
NON-MONEY MARKET FUNDS

The Funds may from time to time advertise historical performance, subject to
Rule 482 under the Securities Act. 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 a 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 for Class A and D
shares, the current maximum applicable sales charge is deducted from the initial
investment. For Class B shares, the payment of the applicable CDSC is applied to
the investment result for the period shown. 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.

Standardized yield and total return quotations will be compared separately for
Class A, B and D shares. Because of differences in the fees and/or expenses
borne by Class A, B and D shares of the Funds, the net yields and total returns
on Class A, B and D shares can be expected, at any given time, to differ from
class to class for the same period.

The uniformly calculated average annual (compound) total returns for Class D
shares for the periods ended October 31, 1997 were as follows:

ACQUIRED
FUNDS FUNDS 1 YEAR 5 YEAR 10 YEAR OR LIFE
----- -------- ------ ------ ---------------
<S> <C> <C> <C> <C>
Mid Cap Growth Growth of FHIT 18.66% 16.86% 13.36%*
Growth Growth of NIF 26.17% 16.07% 14.74%
Nationwide Fund Nationwide Fund of NIF 33.87% 17.51% 16.48%
Bond Bond of NIF 3.46% 6.04% 8.32%
Tax-Free Tax-Free of NIF II 2.72% 6.63% 8.18%
LT U.S. Govt. Govt. Bond of FHIT 3.84% 6.76% 9.12%*
Intermediate U.S. Govt. U.S. Govt. of NIF II 3.86% 6.94% 7.17%**
</TABLE>

* The life of the funds is 8.8 years.

** The life of the fund is 5.7 years.

NONSTANDARD RETURNS

The Funds 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.

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

29
<PAGE> 72

years in the period, and unlike average annual (compound) total return, does not
reflect compounding.

The Nationwide Bond Fund, Nationwide Tax-Free Income Fund, Nationwide
Intermediate U.S. Government Bond Fund and Nationwide Long-Term U.S. Government
Bond Fund may also from time to time advertise a uniformly calculated yield
quotation. This yield is calculated by dividing the net investment income per
share earned during a 30-day base period by the maximum offering price per share
on the last day of the period, assuming reinvestment of all dividends and
distributions. This yield formula uses the average number of shares entitled to
receive dividends, provides for semi-annual compounding of interest, and
includes a modified market value method for determining amortization. The yield
will fluctuate, and there is no assurance that the yield quoted on any given
occasion will remain in effect for any period of time.

The following are the yields for the 30-day period ended October 31, 1997:

ACQUIRED
FUNDS FUNDS YIELD
----- -------- -----
<S> <C> <C>
Bond Bond of NIF 5.56%
Tax-Free Tax-Free of NIF II 4.26%
LT U.S. Govt. Govt. Bond of FHIT 5.93%
Intermediate U.S. Govt. U.S. Govt. of NIF II 5.76%
</TABLE>

The Tax-Free Income Fund may also advertise a tax equivalent yield computed by
dividing that portion of the uniformly calculated yield which is tax-exempt by
one minus a stated income tax rate and adding the product to that portion, if
any, of the yield that is not tax-exempt. Assuming a tax rate of 2.8%, the
tax equivalent yield for the Tax-Free Income Fund for the 30-day period ended
October 31, 1997 was 5.92%.

ADDITIONAL INFORMATION

DESCRIPTION OF SHARES--The Trust presently offers nine series of shares of
beneficial interest, without par value; eight of these series are the Funds (not
including the Nationwide S&P 500 Index Fund). The shares of each of the Funds,
other than the Money Market Fund, are offered in three separate classes: Class
A, Class B and Class D shares, and you have an interest only in the assets of
the shares of the class which you own. Shares of a particular class are equal in
all respects to the other shares of that class. In the event of liquidation of a
Fund, shares of the same class will share pro rata in the distribution of the
net assets of such Fund with all other shares of that class. The Money Market
Fund offers shares without class designation and its shareholders have an equal
proportionate interest in the shares of that Fund. All shares are without par
value and when issued and paid for, are fully paid and nonassessable by the
Trust. Shares may be exchanged or converted as described above but will have no
other preference, conversion, exchange or preemptive rights.

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 class fund affected by the proposal. In addition, holders of Class A
shares or Class B shares will vote as a class and not with holders of any other
class with respect to the approval of the Distribution Plan.

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.

30
<PAGE> 73

ADDITIONAL GENERAL TAX INFORMATION

Each of the nine 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, a Fund must, among other things: diversify its investments
within certain prescribed limits; 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; and, in taxable years beginning on or before August
5, 1997, derive less than 30% of its gross income from the sale or other
disposition of stock, securities, options, future contracts or foreign
currencies held less than three months. In addition, to utilize the tax
provisions specially applicable to regulated investment companies, a 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 excluding the
excess of any net mid-term or 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, a Fund
may be subject to the tax laws of such states or localities. In addition, if for
any taxable year a 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

31
<PAGE> 74

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 a Fund of the excess of net mid-term or net long-term
capital gain over net short-term capital loss, if any, is taxable to
shareholders as mid-term or long-term capital gain, respectively, 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).
Mid-term capital gains of individuals are subject to tax at the same rates
applicable to ordinary income; however, the tax rate on mid-term capital gains
of individuals cannot exceed 28%. 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 mid-term capital gains is
more than one year but not more than eighteen months; the holding period for
long-term capital gains is more than eighteen months.

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.

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 a Fund by foreign countries with
respect to its income from foreign securities. Since less than 50% in value of
any Fund's total assets at the end of its fiscal year are expected to be
invested in stocks or securities of foreign corporations, such 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.

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<PAGE> 75

Under Section 1256 of the Code, gain or loss realized by a 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 a 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 a 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 a 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. A 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 a 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 a 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, a 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.

Each 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 a Fund are urged to
consult their tax advisers with specific reference to their own tax situation.
In addition, the tax discussion in the

33
<PAGE> 76

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.

ADDITIONAL TAX INFORMATION WITH RESPECT TO THE TAX-FREE INCOME FUND

The Tax-Free Income Fund is not intended to constitute a balanced
investment program and is not designed for investors seeking capital
appreciation or maximum tax-exempt income irrespective of fluctuations in
principal. Shares of the Tax-Free Income Fund would not be suitable for
tax-exempt institutions and may not be suitable for retirement plans qualified
under Section 401 of the Code, H.R. 10 plans, and individual retirement
accounts, since such plans and accounts are generally tax-exempt and, therefore,
would not gain any additional benefit from all or a portion of the Tax-Free
Income Fund's dividends being tax-exempt and such dividends would be ultimately
taxable to the beneficiaries when distributed to them. In addition, the Tax-Free
Income Fund may not be an appropriate investment for entities which are
"substantial users," or "related persons" thereof, of facilities financed by
private activity bonds held by the Tax-Free Income Fund.

The Code permits a regulated investment company which invests in
municipal securities to pay to its shareholders "exempt-interest dividends,"
which are excluded from gross income for federal income tax purposes, if at the
close of each quarter of its taxable year at least 50% of its total assets
consist of municipal securities.

An exempt-interest dividend is any dividend or part thereof (other than
a capital gain dividend) paid by the Tax-Free Income Fund that is derived from
interest received by the Tax-Free Income Fund that is excluded from gross
income for federal income tax purposes, net of certain deductions, provided the
dividend is designated as an exempt-interest dividend in a written notice
mailed to shareholders not later than sixty days after the close of the
Tax-Free Income Fund's taxable year. The percentage of the total dividends paid
by the Tax-Free Income Fund during any taxable year that qualifies as
exempt-interest dividends will be the same for all shareholders of the Tax-Free
Income Fund receiving dividends during such year. Exempt-interest dividends
shall be treated by the Tax-Free Income Fund's shareholders as items of
interest excludable from their gross income for Federal income tax purposes
under Section 103(a) of the Code. However, a shareholder is advised to consult
his or her tax adviser with respect to whether exempt-interest dividends
retain the exclusion under Section 103(a) of the Code if such shareholder is a
"substantial user" or a "related person" to such user under Section 147(a) of
the Code with respect to any of the municipal securities held by the Tax-Free
Income Fund. If a shareholder receives an exempt-interest dividend with respect
to any share and such share is held by the shareholder for six months or less,
any loss on the sale or exchange of such share shall be disallowed to the
extent of the amount of such exempt-interest dividend.

In general, interest on indebtedness incurred or continued by a
shareholder to purchase or carry shares is not deductible for federal income tax
purposes if the Tax-Free Income Fund distributes exempt-interest dividends
during the shareholder's taxable year. A shareholder of the Tax-Free Income Fund
that is a financial institution may not deduct interest expense attributable to
indebtedness incurred or

34
<PAGE> 77

continued to purchase or carry shares of the Tax-Free Income Fund if the
Tax-Free Income Fund distributes exempt-interest dividends during the
shareholder's taxable year. Certain federal income tax deductions of property
and casualty insurance companies holding shares of the Tax-Free Income Fund and
receiving exempt-interest dividends may also be adversely affected. In certain
limited instances, the portion of Social Security benefits received by a
shareholder which may be subject to federal income tax may be affected by the
amount of tax-exempt interest income, including exempt-interest dividends
received by shareholders of the Tax-Free Income Fund.

In the event the Tax-Free Income Fund realizes mid-term or long-term
capital gains, the Tax-Free Income Fund intends to distribute any realized net
mid-term or net long-term capital gains annually. If the Tax-Free Income Fund
distributes such gains, the Tax-Free Income Fund will have no tax liability with
respect to such gains, and the distributions will be taxable to shareholders as
mid-term or long-term capital gains, respectively, regardless of how long the
shareholders have held their shares. Any such distributions will be designated
as a capital gain dividend in a written notice mailed by the Tax-Free Income
Fund to the shareholders not later than sixty days after the close of the
Tax-Free Income Fund's taxable year. It should be noted, however, that long-term
capital gains of individuals are subject to a maximum tax rate of 20% (or 10%
for individuals in the 15% ordinary income tax bracket) and mid-term capital
gains are taxed like ordinary income except that net capital gains of
individuals are subject to a maximum federal income tax rate of 28%. Any net
short-term capital gains are taxed at ordinary income tax rates. If a
shareholder receives a capital gain dividend with respect to any share and then
sells the share before he has held it for more than six months, any loss on the
sale of the share is treated as long-term capital loss to the extent of the
capital gain dividend received.

Interest earned on certain municipal obligations issued on or after
August 8, 1986, to finance certain private activities will be treated as a tax
preference item in computing the alternative minimum tax. Since the Tax-Free
Income Fund may invest up to 20% of its net assets in municipal securities the
interest on which may be treated as a tax preference item, a portion of the
exempt-interest dividends received by shareholders from the Tax-Free Income Fund
may be treated as tax preference items in computing the alternative minimum tax
to the extent that distributions by the Tax-Free Income Fund are attributable to
such obligations. Also, a portion of all other interest excluded from gross
income for federal income tax purposes earned by a corporation may be subject to
the alternative minimum tax as a result of the inclusion in alternative minimum
taxable income of 75% of the excess of adjusted current earnings and profits
over pre-book alternative minimum taxable income. Adjusted current earnings and
profits would include exempt-interest dividends distributed by the Tax-Free
Income Fund to corporate shareholders. For individuals the alternative minimum
tax rate is 26% on alternative minimum taxable income up to $175,000 and 28% on
the excess of $175,000; for corporations the alternative minimum tax rate is
20%.

For taxable years of corporations beginning before 1996, the Superfund
Revenue Act of 1986 imposes an additional tax (which is deductible for federal
income tax purposes) on a corporation at a rate of 0.12 of one percent on the
excess over $2,000,000 of such corporation's "modified alternative minimum
taxable income", which would include a portion of the exempt-interest dividends
distributed by the Tax-Free Income Fund to such corporation. In addition,
exempt-interest dividends distributed to certain foreign corporations doing
business in the United States could be subject to a branch profits tax imposed
by Section 884 of the Code.

35
<PAGE> 78

Distributions of exempt-interest dividends by the Tax-Free Income Fund
may be subject to state and local taxes even though a substantial portion of
such distributions may be derived from interest on obligations which, if
received directly, would be exempt from such taxes. The Tax-Free Income Fund
will report to its shareholders annually after the close of its taxable year the
percentage and source, on a state-by-state basis, of interest income earned on
municipal obligations held by the Tax-Free Income Fund during the preceding
year. Shareholders are advised to consult their tax advisers concerning the
application of state and local taxes.

As indicated in its Prospectus, the Tax-Free Income Fund may acquire
rights regarding specified portfolio securities under puts. See "INVESTMENT
OBJECTIVES AND POLICIES -- Additional Information on Portfolio Instruments -
Puts" in this Statement of Additional Information. The policy of the Tax-Free
Income Fund is to limit its acquisition of puts to those under which it will be
treated for federal income tax purposes as the owner of the Exempt Securities
acquired subject to the put and the interest on the Exempt Securities will be
tax-exempt to it. Although the Internal Revenue Service has issued a published
ruling that provides some guidance regarding the tax consequences of the
purchase of puts, there is currently no guidance available from the Internal
Revenue Service that definitively establishes the tax consequences of many of
the types of puts that the Tax-Free Income Fund could acquire under the 1940
Act. Therefore, although the Tax-Free Income Fund will only acquire a put after
concluding that it will have the tax consequences described above, the Internal
Revenue Service could reach a different conclusion.

Under Section 1256 of the Code, gain or loss realized by the Tax-Free
Income 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 Tax-Free Income Fund's taxable year will
be treated as sold for their then fair market value, resulting in additional
gain or loss to the Tax-Free Income Fund characterized in the manner described
above.

Offsetting positions held by the Tax-Free Income 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 Tax-Free Income 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 Tax-Free
Income 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 Tax-Free Income Fund, losses realized by the Tax-Free Income
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.

36
<PAGE> 79

Investment by the Tax-Free Income 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
Tax-Free Income 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, the Tax-Free Income 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.

Income itself exempt from Federal income taxation may be considered in
addition to taxable income when determining whether Social Security payments
received by a shareholder are subject to federal income taxation.

MAJOR SHAREHOLDERS

As of December 18, 1997, Nationwide Life Insurance Company had sole voting and
investment power over 5.31% of the outstanding shares of the Mid Cap Growth Fund
(Growth Fund of FHIT). As of December 18, 1997, Nationwide Life Insurance
Company and its affiliate directly or indirectly owned, controlled or held power
to vote 31.0% of the outstanding shares of the Growth Fund (Growth Fund of NIF),
24.1% of the Nationwide Fund (Nationwide Fund of NIF), 16.8% of the Bond Fund
(Bond Fund of NIF), 15.8% of the Intermediate Term U.S. Government Bond Fund
(U.S. Government Fund of NIFII) and 54.4% of the Money Market Fund (Money Market
Fund of NIF).

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<PAGE> 80

APPENDIX A

BOND RATINGS

STANDARD & POOR'S DEBT RATINGS

A Standard & Poor's corporate or municipal debt rating is a current
assessment of the creditworthiness of an obligor with respect to a specific
obligation. This assessment may take into consideration obligors such as
guarantors, insurers, or lessees.

The debt rating is not a recommendation to purchase, sell, or hold a
security, inasmuch as it does not comment as to market price or suitability for
a particular investor. The ratings are based on current information furnished by
the issuer or obtained by Standard & Poor's from other sources it considers
reliable. Standard & Poor's does not perform an audit in connection with any
rating and may, on occasion, rely on unaudited financial information. The
ratings may be changed, suspended, or withdrawn as a result of changes in, or
unavailability of, such information, or for other circumstances.

The ratings are based, in varying degrees, on the following
considerations:

1. Likelihood of default - capacity and willingness of the
obligor as to the timely payment of interest and repayment of
principal in accordance with the terms of the obligation.

2. Nature of and provisions of the obligation.

3. Protection afforded by, and relative position of, the
obligation in the event of bankruptcy, reorganization, or other
arrangement under the laws of bankruptcy and other laws affecting
creditors' rights.

INVESTMENT GRADE

AAA - Debt rated 'AAA' has the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely strong.

AA - Debt rated 'AA' has a very strong capacity to pay interest and
repay principal and differs from the highest rated issues only in small degree.

A - Debt rated 'A' has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.

BBB - Debt rated 'BBB' is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.

SPECULATIVE GRADE

Debt rated 'BB', 'B', 'CCC', 'CC' and 'C' is regarded as having
predominantly speculative characteristics with respect to capacity to pay
interest and repay principal. 'BB' indicates the least degree of speculation and
'C' the highest. While

<PAGE> 81

such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.

BB - Debt rated 'BB' has less near-term vulnerability to default than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could lead
to inadequate capacity to meet timely interest and principal payments. The 'BB'
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied 'BBB-' rating.

B - Debt rated 'B' has a greater vulnerability to default but currently
has the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The 'B' rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
'BB' or 'BB-' rating.

CCC - Debt rated 'CCC' has a currently identifiable vulnerability to
default, and is dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal. In the
event of adverse business, financial, or economic conditions, it is not likely
to have the capacity to pay interest and repay principal. The 'CCC' rating
category is also used for debt subordinated to senior debt that is assigned an
actual or implied 'B' or 'B-' rating.

CC - Debt rated 'CC' typically is applied to debt subordinated to senior
debt that is assigned an actual or implied 'CCC' rating.

C - Debt rated 'C' typically is applied to debt subordinated to senior
debt which is assigned an actual or implied 'CCC-' debt rating. The 'C' rating
may be used to cover a situation where a bankruptcy petition has been filed, but
debt service payments are continued.

CI - The rating 'CI' is reserved for income bonds on which no interest
is being paid.

D - Debt rated 'D' is in payment default. The 'D' rating category is
used when interest payments or principal payments are not made on the date due
even if the applicable grace period has not expired, unless Standard & Poor's
believes that such payments will be made during such grade period. The 'D'
rating also will be used upon the filing of a bankruptcy petition if debt
service payments are jeopardized.

MOODY'S LONG-TERM DEBT RATINGS

Aaa - Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.

Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risk appear somewhat larger than in Aaa securities.

<PAGE> 82

A - Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper-medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment some time in the future.

Baa - Bonds which are rated Baa are considered as medium-grade
obligations (i.e., they are neither highly protected nor poorly secured).
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.

Ba - Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered well-assured. Often the protection of interest
and principal payments may be very moderate, and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.

B - Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.

Caa - Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to principal
or interest.

Ca - Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.

C - Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.

MUNICIPAL BOND

Excerpts from Moody's Investors Service Inc., description of its three highest
bond ratings: Aaa--judged to be the best quality. They carry the smallest degree
of investment risk; Aa--judged to be of high quality by all standards;
A--possess favorable attributes and are considered "upper medium" grade
obligations. Note: Those bonds in the Aa, A, Baa, Ba and B groups which Moody's
believes possess the strongest investment attributes are designated by the
symbol Aa 1, A 1, Ba 1 and B 1.

Excerpts from Standard & Poor's Corporation description of its three highest
bond ratings: AAA--highest grade obligations; AA--also qualify as highgrade
obligations, and, in the majority of instances, differ from AAA issues only in
small degree; A--strong ability to pay interest and repay principle although
more susceptible to change in circumstances.

STATE AND MUNICIPAL NOTES

Excerpts from Moody's Investors Service, Inc., description of state and
municipal note ratings:

MIG-1--Notes bearing this designation are of the best quality, enjoying strong
protection from established cash flows of funds for their servicing from
established and board-based access to the market for refinancing, or both.

<PAGE> 83

MIG-2--Notes bearing this designation are of high quality, with margins of
protection ample although not so large as in the preceding group.

MIG-3--Notes bearing this designation are of favorable quality, with all
security elements accounted for but lacking the strength of the preceding grade.
Market access for refinancing, in particular, is likely to be less well
established.

FITCH INVESTORS SERVICE, INC. BOND RATINGS

Fitch investment grade bond ratings provide a guide to investors in
determining the credit risk associated with a particular security. The ratings
represent Fitch's assessment of the issuer's ability to meet the obligations of
a specific debt issue or class of debt in a timely manner.

The rating takes into consideration special features of the issue, its
relationship to other obligations of the issuer, the current and prospective
financial condition and operating performance of the issuer and any guarantor,
as well as the economic and political environment that might affect the issuer's
future financial strength and credit quality.

Fitch ratings do not reflect any credit enhancement that may be provided
by insurance policies or financial guaranties unless otherwise indicated.

Bonds that have the same rating are of similar but not necessarily
identical credit quality since the rating categories do not fully reflect small
differences in the degrees of credit risk.

Fitch ratings are not recommendations to buy, sell, or hold any
security. ratings do not comment on the adequacy of market price, the
suitability of any security for a particular investor, or the tax-exempt nature
or taxability of payments made in respect of any security.

Fitch ratings are based on information obtained from issuers, other
obligors, underwriters, their experts, and other sources Fitch believes to be
reliable. Fitch does not audit or verify the truth or accuracy of such
information. Ratings may be changed, suspended, or withdrawn as a result of
changes in, or the unavailability of, information or for other reasons.

AAA Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events.

AA Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated 'AAA'. Because
bonds rated in the 'AAA' and 'AA' categories are not significantly
vulnerable to foreseeable future developments, short-term debt of the
issuers is generally rated 'F-1+'.

A Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to
be strong, but may be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher ratings.

BBB Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are

<PAGE> 84

more likely to have adverse impact on these bonds, and therefore,
impair timely payment. The likelihood that the ratings of these bonds
will fall below investment grade is higher than for bonds with higher
ratings.

Fitch speculative grade bond ratings provide a guide to investors in
determining the credit risk associated with a particular security. The ratings
('BB' to 'C') represent Fitch's assessment of the likelihood of timely payment
of principal and interest in accordance with the terms of obligation for bond
issues not in default. For defaulted bonds, the rating ('DDD' to 'D') is an
assessment of the ultimate recovery value through reorganization or liquidation.

Bonds that have the same rating are of similar but not necessarily
identical credit quality since the rating categories cannot fully reflect the
differences in the degrees of credit risk.

BB Bonds are considered speculative. The obligor's ability to pay interest
and repay principal may be affected over time by adverse economic
changes. However, business and financial alternatives can be identified
which could assist the obligor in satisfying its debt service
requirements.

B Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of
continued timely payment of principal and interest reflects the
obligor's limited margin of safety and the need for reasonable business
and economic activity throughout the life of the issue.

CCC Bonds have certain identifiable characteristics which, if not remedied,
may lead to default. The ability to meet obligations requires an
advantageous business and economic environment.

CC Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.

C Bonds are in imminent default in payment of interest or principal.

DDD Bonds are in default on interest and/or principal payments. Such bonds
are extremely speculative,

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

DUFF & PHELPS, INC. LONG-TERM DEBT RATINGS

These ratings represent a summary opinion of the issuer's long-term
fundamental quality. Rating determination is based on qualitative and
quantitative factors which may vary according to the basic economic and
financial characteristics of each industry and each issuer. Important
considerations are vulnerability to economic cycles as well as risks related to
such factors as competition, government action,

<PAGE> 85

regulation, technological obsolescence, demand shifts, cost structure, and
management depth and expertise. The projected viability of the obligor at the
trough of the cycle is a critical determination.

Each rating also takes into account the legal form of the security,
(e.g., first mortgage bonds, subordinated debt, preferred stock, etc.). The
extent of rating dispersion among the various classes of securities is
determined by several factors including relative weightings of the different
security classes in the capital structure, the overall credit strength of the
issuer, and the nature of covenant protection. Review of indenture restrictions
is important to the analysis of a company's operating and financial constraints.

The Credit Rating Committee formally reviews all ratings once per
quarter (more frequently, if necessary). Ratings of 'BBB-' and higher fall
within the definition of investment grade securities, as defined by bank and
insurance supervisory authorities.

RATING
SCALE DEFINITION
- ----- ----------

AAA Highest credit quality. The risk factors are negligible, being
only slightly more than for risk-free U.S. Treasury debt.

AA+ High credit quality. Protection factors are
AA strong. Risk is modest, but may vary slightly
AA- from time to time because of economic conditions.

A+ Protection factors are average but adequate.
A However, risk factors are more variable and
A- greater in periods of economic stress.

BBB+ Below average protection factors but still considered sufficient
BBB for prudent investment. Considerable variability in risk during
BBB- economic cycles.

BB+ Below investment grade but deemed likely to meet
BB obligations when due. Present or prospective
BB- financial protection factors fluctuate according to
industry conditions or company fortunes. Overall
quality may move up or down frequently within this category.

B+ Below investment grade and possessing risk that
B obligations will not be met when due. Financial
B- protection factors will fluctuate widely according to
economic cycles, industry conditions and/or company fortunes.
Potential exists for frequent Changes in the rating within this
category or into a higher or lower rating grade.

CCC Well below investment grade securities. Considerable
uncertainty exists as to timely payment of principal, interest
or preferred dividends. Protection factors are narrow and
risk can be substantial with unfavorable economic/industry
conditions, and/or with unfavorable company developments.

DD Defaulted debt obligations. Issuer failed to meet scheduled
principal and/or interest payments.

DP Preferred stock with dividend arrearages.

<PAGE> 86

SHORT-TERM RATINGS

STANDARD & POOR'S COMMERCIAL PAPER RATINGS

A Standard & Poor's commercial paper rating is a current assessment of
the likelihood of timely payment of debt considered short-term in the relevant
market.

Ratings are graded into several categories, ranging from 'A-1' for the
highest quality obligations to 'D' for the lowest. These categories are as
follows:

A-1 This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus sign (+) designation.

A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated 'A-1'.

A-3 Issues carrying this designation have adequate capacity for timely
payment. They are, however, more vulnerable to the adverse effects of changes in
circumstances than obligations carrying the higher designations.

B Issues rated 'B' are regarded as having only speculative capacity for
timely payment.

C This rating is assigned to short-term debt obligations with doubtful
capacity for payment.

D Debt rated 'D' is in payment default. the 'D' rating category is used
when interest payments or principal payments are not made on the date due, even
if the applicable grace period has not expired, unless Standard & Poor's
believes that such payments will be made during such grade period.

STANDARD & POOR'S NOTE RATINGS

An S&P note rating reflects the liquidity factors and market-access
risks unique to notes. Notes maturing in three years or less will likely receive
a note rating. Notes maturing beyond three years will most likely receive a
long-term debt rating.

The following criteria will be used in making the assessment:

1. Amortization schedule - the larger the final maturity relative to
other maturities, the more likely the issue is to be treated as a
note.

2. Source of payment - the more the issue depends on the market for
its refinancing, the more likely it is to be considered a note.

Note rating symbols and definitions are as follows:

SP-1 Strong capacity to pay principal and interest. Issues determined to
possess very strong characteristics are given a plus (+) designation.

SP-2 Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse financial and economic changes over the term of the
notes.

SP-3 Speculative capacity to pay principal and interest.

<PAGE> 87

MOODY'S SHORT-TERM RATINGS

Moody's short-term debt ratings are opinions on the ability of issuers
to repay punctually senior debt obligations. These obligations have an original
maturity not exceeding one year, unless explicitly noted. Moody's employs the
following three designations, all judged to be investment grade, to indicate the
relative repayment capacity of rated issuers:

Issuers rated Prime-1 (or supporting institutions) have a superior
capacity for repayment of senior short-term debt obligations. Prime-1 repayment
capacity will normally be evidenced by the following characteristics: (I)
leading market positions in well established industries, (II) high rates of
return on funds employed, (III) conservative capitalization structures with
moderate reliance on debt and ample asset protection, (IV) broad margins in
earnings coverage of fixed financial charges and high internal cash generation,
and (V) well established access to a range of financial markets and assured
sources of alternative liquidity.

Issuers rated Prime-2 (or supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics cited above, but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.

Issuers rated Prime-3 (or supporting institutions) have an acceptable
capacity for repayment of short-term promissory obligations. The effect of
industry characteristics and market composition may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and may require relatively high financial leverage.
Adequate alternate liquidity is maintained.

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

MOODY'S NOTE RATINGS

MIG 1/VMIG 1 This designation denotes best quality. There is present
strong protection by established cash flows, superior liquidity support or
demonstrated broad based access to the market for refinancing.

MIG 2/VMIG 2 This designation denotes high quality. Margins of
protection are ample although not so large as in the preceding group.

MIG 3/VMIG 3 This designation denotes favorable quality. All security
elements are accounted for but there is lacking the undeniable strength of the
preceding grades. Liquidity and cash flow protection may be narrow and market
access for refinancing is likely to be less well established.

MIG 4/VMIG 4 This designation denotes adequate quality. Protection
commonly regarded as required of an investment security is present and although
not distinctly or predominantly speculative, there is specific risk.

SG This designation denotes speculative quality. Debt instruments in
this category lack margins of protection.

<PAGE> 88

FITCH'S SHORT-TERM RATINGS

Fitch's short-term ratings apply to debt obligations that are payable on
demand or have original maturities of generally up to three years, including
commercial paper, certificates of deposit, medium-term notes, and municipal and
investment notes.

The short-term rating places greater emphasis than a long-term rating on
the existence of liquidity necessary to meet the issuer's obligations in a
timely manner.

F-1+ Exceptionally strong credit quality. Issues assigned
this rating are regarded as having the strongest degree of
assurance for timely payment.

F-1 Very strong credit quality. Issues assigned this rating
reflect an assurance of timely payment only slightly less in
degree than issues rated 'f-1+'.

F-2 Good credit quality. Issues assigned this rating have a
satisfactory degree of assurance for timely payment but the
margin of safety is not as great as for issues assigned 'F-1+'
and 'F-1' ratings.

F-3 Fair credit quality. Issues assigned this rating have
characteristics suggesting that the degree of assurance for
timely payment is adequate, however, near-term adverse changes
could cause these securities to be rated below investment grade.

F-S Weak credit quality. Issues assigned this rating have
characteristics suggesting a minimal degree of assurance for
timely payment and are vulnerable to near-term adverse changes in
financial and economic conditions.

D Default. Issues assigned this rating are in actual or
imminent payment default.

LOC The symbol LOC indicates that the rating is based on a
letter of credit issued by a commercial bank.

DUFF & PHELPS SHORT-TERM DEBT RATINGS

Duff & Phelps' short-term ratings are consistent with the rating
criteria utilized by money market participants. The ratings apply to all
obligations with maturities under one year, including commercial paper, the
uninsured portion of certificates of deposit, unsecured bank loans, master
notes, bankers acceptances, irrevocable letters of credit, and current
maturities of long-term debt.
Asset-backed commercial paper is also rated according to this scale.

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

<PAGE> 89

RATING SCALE DEFINITION
- ------------ ----------

HIGH GRADE
----------

D-1+ Highest certainty of timely payment. short-term liquidity,
including internal operating factors and/or access to alternative
sources of funds, is outstanding, and safety is just below
risk-free U.S. Treasury short-term obligations.

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

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

GOOD GRADE
----------

D-2 Good certainty of timely payment. Liquidity factors and
company fundamentals are sound. Although ongoing funding needs
may enlarge total financing requirements, access to capital
markets is good. Risk factors are small.

SATISFACTORY GRADE
------------------

D-3 Satisfactory liquidity and other protection factors qualify
issue as to investment grade. Risk factors are larger and subject
to more variation. Nevertheless, timely payment is expected.

NON-INVESTMENT GRADE
--------------------

D-4 Speculative investment characteristics. Liquidity is not
sufficient to insure against disruption in debt service.
Operating factors and market access may be subject to a high
degree of variation.

DEFAULT
-------

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

THOMSON'S SHORT-TERM RATINGS

The Thomson Short-Term Ratings apply, unless otherwise noted, to
specific debt instruments of the rated entities with a maturity of one year or
less. Thomson short-term ratings are intended to assess the likelihood of an
untimely or incomplete payments of principal or interest.

TBW-1 the highest category, indicates a very high likelihood that
principal and interest will be paid on a timely basis.

TBW-2 the second highest category, while the degree of safety regarding
timely repayment of principal and interest is strong, the relative degree of
safety is not as high as for issues rated "TBW-1".

TBW-3 the lowest investment-grade category; indicates that while the
obligation is more susceptible to adverse developments (both internal and
external) than those with higher ratings, the capacity to service principal and
interest in a timely fashion is considered adequate.

<PAGE> 90

TBW-4 the lowest rating category; this rating is regarded as
non-investment grade and therefore speculative.

IBCA SHORT-TERM RATINGS

IBCA short-term ratings assess the borrowing characteristics of banks
and corporations, and the capacity for timely repayment of debt obligations. The
short-term ratings relate to debt which has a maturity of less than one year.

IBCA issues ratings and reports on the largest U.S. and international
bank holding companies, as well as major investment banks. IBCA's short-term
rating system utilizes a dual system--Individual Ratings and Legal Ratings. The
Individual Rating addresses 1) the current strength of consolidated banking
companies and their principal bank subsidiaries. A consolidated bank holding
company/bank with an "A" rating has a strong balance sheet, and a favorable
credit profile without significant problems. A "B" rating indicates sound credit
profile without significant problems. Performance is generally in line with or
better than that of its peers. The legal rating addresses the question of
whether an institution would receive support if it ran into difficulties. Issues
rated "A-1" are obligations supported by a very strong capacity for timely
repayment. Issues rated "A-2" have a very strong capacity for timely repayment
although such capacity may be susceptible to adverse changes in business,
economic or financial conditions.

A1+ Obligations supported by the highest capacity for timely
repayment and possess a particularly strong credit feature.

A1 Obligations supported by the highest capacity for timely
repayment.

A2 Obligations supported by a good capacity for timely
repayment.

A3 Obligations supported by a satisfactory capacity for timely
repayment.

B Obligations for which there is an uncertainty as to the
capacity to ensure timely repayment.

C Obligations for which there is a high risk of default or
which are currently in default.

D Obligations which are currently in default.

BOND RATINGS

Bonds rated AA or AAA by D&P are deemed to be high quality. Protection factors
are strong. Risk is modest but may vary slightly from time to time because of
economic conditions.

Bonds rated AA or AAA by Fitch are considered to be investment grade and of very
high credit quality. The obligor's ability to pay interest and repay principal
is very strong.

Moody's three highest bond ratings are: Aaa - judged to be the best quality -
carry the smallest degree of investment risk; Aa - judged to be high quality by
all standards; A possess favorable attributes and are considered "upper medium"
grade obligations.

S&P's three highest bond ratings are: AAA - highest grade obligations - possess
the ultimate degree of protection and indicates an extremely strong capacity to
pay

<PAGE> 91

principal and interest; AA - also qualify as high grade obligations, and in
the majority of instances differ only in small degrees from issues rated AAA; A
- - strong ability to pay interest and repay principal although more susceptible
to change in circumstances.

Bonds rated AA or AAA by IBCA indicates a very strong capacity for timely
repayment of debt. Margins of protection may not be as large as for AAA issues.

Bonds rated AA or AAA by Thomson indicates ability to repay principal and
interest on a timely basis. Bonds rated AA may have limited incremental risk
versus AAA issues.

Bonds BBB are regarded as having an adequate capacity to pay interest and repay
principal. Whereas it normally exhibits adequate protection parameters, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity to repay principal for debt in this category than in higher
rated categories.

<PAGE> 92

PART C

OTHER INFORMATION

ITEM 24. FINANCIAL STATEMENT AND EXHIBITS
(a) Financial Statements:

(1) Financial statements and schedules included in the Prospectus for the
Funds (except the S&P 500 Index Fund) (Part A):

Financial Highlights

(2) Financial statements and schedules included in Part B:

Those schedules required by Item 23 to be included in Part B have
been incorporated therein by reference to the Prospectuses (Part A).

(i) Audited Financials: (except the S&P 500 Index Fund):

Audited financial statements for the Growth Fund of FHIT, Growth Fund
of NIF, Nationwide Fund of NIF, Bond Fund of NIF, Tax-Free Fund of
NIF II, Government Bond Fund of FHIT, U.S. Government Fund of NIF II
and Money Market Fund of NIF are hereby incorporated by reference to
Forms N-30D filed by Financial Horizons Investment Trust, Nationwide
Investing Foundation and Nationwide Investing Foundation II on
January 6, 1998.

(ii) Audited Financials for the S&P 500 Index Fund:

Statement of Assets & Liabilities at December 23, 1997.

Notes to Financial Statements

Independent Auditors' Report

(b) Exhibits

(1) Amendend Declaration of Trust.
(2) Amended Bylaws.

(3) Not applicable.
(4) Certificates for shares are not issued. Articles V, VI,
VII and VIII of the Declaration of Trust, incorporated by
reference to Exhibit (1) hereto, define rights of holders
of shares.
(5) (a) Proposed Investment Advisory Agreement previously
filed in the Trust's original Registration Statement
on November 18, 1997 and is hereby incorporated by
reference.
(b) Subadvisory Agreements.

(1) Proposed Subadvisory Agreement with The
Dreyfus Corporation for S&P 500 Index Fund
previously filed in the Trust's original
Registration Statement on November 18, 1997
and is hereby incorporated by reference.

(6) Proposed Underwriting Agreement previously filed in the
Trust's original Registration Statement on November 18,
1997 and is hereby incorporated by reference.
(7) Not applicable.
(8) (a) Proposed Custody Agreement previously filed in the
Trust's original Registration Statement on
November 18, 1997 and is hereby incorporated by
reference.
(9) (a) Proposed Fund Administration Agreement previously
filed in the Trust's original Registration
Statement on November 18, 1997 and is hereby
incorporated by reference.
(b) Proposed Transfer and Dividend Disbursing Agent
Agreement previously filed in the Trust's original
Registration Statement on November 18, 1997 and is
hereby incorporated by reference.
(9) (c) Agreement and Plan of Reorganization between
Nationwide Investing Foundation and the Trust
previously filed with the Trust's Registration
Statement on Form N-14 ('33 Act File No.
333-41175) on November 24, 1997 and is hereby
incorporated by reference.
(9) (d) Agreement and Plan of Reorganization between
Nationwide Investing Foundation II and the Trust
previously filed with the Trust's Registration
Statement on Form N-14 ('33 Act File No.
333-41175) on November 24, 1997 and is hereby
incorporated by reference.
(9) (e) Agreement and Plan of Reorganization between
Financial Horizons Investment Trust and the
Trust previously filed with the Trust's
Registration Statement on Form N-14 ('33 Act
File No. 333-41175) on November 24, 1997 and is
hereby incorporated by reference.

(10) Opinion of counsel previously filed in the Trust's
original Registration Statement and is hereby incorporated
by reference.
(11) Consent of KPMG Peat Marwick LLP
(12) Not applicable.
(13) Purchase Agreement previously filed in the Trust's
pre-effective amendment and is hereby incorporated by
reference.
(14) Not applicable.

(15) Amended 12b-1 Plan and 12b-1 Agreement.

(16) Schedule for Computation of Performance Quotations.
(17) Financial Data Schedule for S&P 500 Index Fund.

(18) Amended 18f-3 Plan.

(19) Power of Attorney dated November 7, 1997 previously filed
in the Trust's pre-effective amendment and is hereby
incorporated by reference.

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

ITEM 26. NUMBER OF HOLDERS OF SECURITIES.

NUMBER OF RECORD HOLDERS AS OF NOVEMBER 30, 1997
SERIES CLASS A CLASS B CLASS D NO CLASS
------ ------- ------- ------- --------
<S> <C> <C> <C> <C>
Mid Cap Growth Fund -- -- 675 --
Growth Fund -- -- 46,377 --
Nationwide Fund -- -- 53,837 --
Bond Fund -- -- 7,832 --
Tax-Free Income Fund -- -- 7,844 --
Intermediate U.S. Govt. Bond -- -- 2,077 --
Long-Term U.S. Govt. Bond -- -- 2,030 --
Money Market Fund -- -- -- 25,852
S&P 500 Index Fund -- -- -- --
</TABLE>

ITEM 27. INDEMNIFICATION
Indemnification provisions for officers, directors and employees of
Registrant are set forth in Article V, Section 2 of the Declaration
of Trust. In addition, Section 1743.13 of the Ohio Revised Code
provides that no liability to third persons for any act, omission or
obligation shall attach to the trustees, officers, employees or
agents of a business trust organized under Ohio statutes. The
trustees are also covered by an errors and omissions policy provided
by the Trust for undertaken by the trustees in their capacity as
trustee. See Item 24(b)1 above.

ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER

(a) Nationwide Advisory Services, Inc. (NAS), the investment adviser
of the Trust, also serves as investment adviser to the
Nationwide Investing Foundation, Nationwide Investing Foundation
II, Nationwide Separate Account Trust, Financial Horizons
Investment Trust, and Nationwide Asset Allocation Trust and
serves as general distributor to the Nationwide Multi-Flex
Variable Account, Nationwide Variable Account-II, Nationwide
Variable Account-5, Nationwide Variable Account-8, Nationwide
Variable Account-9, Nationwide DC Variable Account, Nationwide
DCVA II,

C-1

<PAGE> 93

Nationwide VA Separate Account-A, Nationwide VA Separate
Account-C, NACo Variable Account, Nationwide VLI Separate
Account-2, Nationwide VLI Separate Account-3, Nationwide VL
Separate Account-A, Nationwide VL Separate Account-B, Nationwide
VA Separate Account-B and Nationwide Variable Account, separate
accounts of Nationwide Life Insurance Company, or its subsidiary
Nationwide Life and Annuity Insurance Company, registered as
unit investment trusts under the Investment Company Act of 1940.

Joseph J. Gasper DIRECTOR AND PRESIDENT AND CHIEF OPERATING OFFICER
Nationwide Life Insurance Company
Nationwide Life and Annuity Insurance Company
Nationwide Financial Services, Inc.

DIRECTOR AND CHAIRMAN OF THE BOARD
Nationwide Investment Services Corporation

DIRECTOR AND VICE CHAIRMAN
Nationwide Financial Institution
Distributors Agency, Inc.
Nationwide Global Holdings, Inc.
NEA Valuebuilder Investor Services, Inc.
NEA Valuebuilder Investor Services of Arizona, Inc.
Public Employees Benefit Services Corporation

DIRECTOR AND PRESIDENT
Nationwide Advisory Services, Inc.
Nationwide Investor Services, Inc.

DIRECTOR
Affiliate Agency, Inc.
Affiliate Agency of Ohio, Inc.
Financial Horizons Distributors Agency of Alabama,
Inc.
Financial Horizons Distributors Agency of Ohio,
Inc.
Financial Horizons Distributors Agency of Oklahoma,
Inc.
Financial Horizons Securities Corporation
Landmark Financial Services of New York, Inc.
Nationwide Indemnity Company

TRUSTEE AND CHAIRMAN
Nationwide Asset Allocation Trust
Nationwide Separate Account Trust

TRUSTEE AND PRESIDENT
Nationwide Insurance Golf Charities, Inc.

Gordon E. McCutchan EXECUTIVE VICE PRESIDENT-LAW AND
CORPORATE SERVICES AND SECRETARY
Nationwide Mutual Insurance Company
Nationwide Mutual Fire Insurance Company
Nationwide Life Insurance Company
Nationwide General Insurance Company
Nationwide Property and Casualty Insurance Company
Nationwide Life and Annuity Insurance Company
Nationwide Financial Services, Inc.

C-2
<PAGE> 94
Nationwide Properties, Ltd.
Nationwide Realty Investors, Ltd.
NEA Valuebuilder Investor Services, Inc.
NEA Valuebuilder Investor Services of Arizona, Inc.
Nationwide Financial Institution Distributors Agency, Inc.
Colonial County Mutual Insurance Company
Gates, McDonald & Company of Nevada
Gates, McDonald & Company of New York, Inc.
Farmland Mutual Insurance Company
Lone Star General Agency, Inc.
Nationwide Agribusiness Insurance Company
Nationwide Communications Inc.
Employers Insurance of Wausau A Mutual Company
National Premium and Benefit Administration Company
Nationwide Corporation
Nationwide Insurance Enterprise Foundation
Nationwide Investment Services Corporation
Scottsdale Indemnity Company
Scottsdale Insurance Company
Scottsdale Surplus Lines Insurance Company
Wausau Underwriters Insurance Company
Wausau Service Corporation
Wausau Business Insurance Company
Wausau General Insurance Company

EXECUTIVE VICE PRESIDENT-LAW AND CORPORATE SERVICES
American Marine Underwriters, Inc.
Employers Life Insurance Company of Wausau
Pension Associations of Wausau, Inc.
Public Employees Benefit Services Corporation
Wausau Preferred Health Insurance Company
Companies Agency, Inc.
Companies Agency of Alabama, Inc.
Companies Agency Insurance Services of California
Companies Agency of Idaho, Inc.
Companies Agency of Illinois, Inc.
Companies Agency of Kentucky, Inc.
Companies Agency of Massachusetts, Inc.
Companies Agency of New York, Inc.
Companies Agency of Pennsylvania, Inc.
Companies Agency of Phoenix, Inc.
Countrywide Services Corporation
Wausau International Underwriters

EXECUTIVE VICE PRESIDENT-LAW AND CORPORATE SERVICES
AND DIRECTOR
Nationwide Advisory Services, Inc.
Nationwide Investor Services, Inc.

EXECUTIVE VICE PRESIDENT-LAW AND CORPORATE
SERVICES, SECRETARY AND DIRECTOR
California Cash Management Company
Colonial Insurance Company of Wisconsin
Gates, McDonald & Company
GatesMcDonald Health Plus Inc.

C-3
<PAGE> 95

Nationwide Global Holdings, Inc.
National Casualty Company
Nationwide Cash Management Company
Nationwide Indemnity Company
Nationwide Community Urban Redevelopment Corporation

VICE CHAIRMAN AND DIRECTOR
Neckura Holding Company
Neckura Insurance Company
Neckura Life Insurance Company

SECRETARY
The Beak and Wire Corporation
Affiliate Agency, Inc.
Affiliate Agency of Ohio, Inc.
Financial Horizons Distributors Agency of Alabama, Inc.
Financial Horizons Distributors Agency of Ohio, Inc.
Financial Horizons Distributors Agency of Oklahoma, Inc.
Financial Horizons Securities Corporation
Landmark Financial Services of New York, Inc.
NEA Valuebuilder Investor Services of Alabama, Inc.
NEA Valuebuilder Investor Services of Montana, Inc.
NEA Valuebuilder Investor Services of Nevada, Inc.
NEA Valuebuilder Investor Services of Ohio, Inc.
NEA Valuebuilder Investor Services of Oklahoma, Inc.
NEA Valuebuilder Investor Services of Wyoming, Inc.

SECRETARY AND DIRECTOR
Nationwide Agency, Inc.
Nationwide HMO, Inc.
Nationwide Management Systems, Inc.

DIRECTOR
MRM Investments, Inc.
NWE, Inc.

CLERK
NEA Valuebuilder Services Insurance Agency, Inc.

Dimon R. McFerson CHAIRMAN AND CHIEF EXECUTIVE OFFICER- NATIONWIDE INSURANCE
ENTERPRISE AND DIRECTOR
Nationwide Mutual Insurance Company
Nationwide Mutual Fire Insurance Company
Nationwide General Insurance Company
Nationwide Property and Casualty Insurance Company
Nationwide Life Insurance Company
Nationwide Life and Annuity Insurance Company
Colonial Insurance Company of Wisconsin
Nationwide Communications Inc.
Farmland Mutual Insurance Company
Nationwide Agribusiness Insurance Company
National Casualty Company

C-4
<PAGE> 96

Nationwide Financial Services, Inc.
Nationwide Global Holdings, Inc.
Nationwide Indemnity Company
Nationwide Investment Services Corporation
California Cash Management Company
Nationwide Cash Management Company
Employers Insurance of Wausau A Mutual Company
Scottsdale Indemnity Company
Scottsdale Insurance Company
Scottsdale Surplus Lines Insurance Company
Wausau Service Corporation
Wausau General Insurance Company
Wausau Business Insurance Company
Wausau Underwriters Insurance Company

CHAIRMAN AND CHIEF EXECUTIVE OFFICER - NATIONWIDE INSURANCE
ENTERPRISE, PRESIDENT AND DIRECTOR
Nationwide Corporation

CHAIRMAN OF THE BOARD, CHAIRMAN AND CHIEF EXECUTIVE
OFFICER-NATIONWIDE INSURANCE ENTERPRISE AND DIRECTOR
American Marine Underwriters, Inc.
Gates, McDonald and Company
GatesMcDonald Health Plus, Inc.
Nationwide Investor Services, Inc.
Public Employees Benefit Services Corporation
Companies Agency, Inc.
Companies Agency of Alabama, Inc.
Companies Agency Insurance Services of California
Companies Agency of Idaho, Inc.
Companies Agency of Illinois, Inc.
Companies Agency of Kentucky, Inc.
Companies Agency of Massachusetts, Inc.
Companies Agency of New York, Inc.
Companies Agency of Pennsylvania, Inc.
Companies Agency of Phoenix, Inc.
Countrywide Services Corporation
Employers Life Insurance Company of Wausau
Nationwide Advisory Services, Inc.
Nationwide Financial Institution Distributors Agency, Inc.
Wausau International Underwriters
Wausau Preferred Health Insurance Company

CHAIRMAN AND DIRECTOR
NEA Valuebuilder Investor Services of Arizona, Inc.

TRUSTEE AND CHAIRMAN
Financial Horizons Investment Trust
Nationwide Investing Foundation
Nationwide Investing Foundation II

CHAIRMAN OF THE BOARD
Nationwide Insurance Golf Charities, Inc.

C-5
<PAGE> 97

CHAIRMAN OF THE BOARD AND DIRECTOR
Lone Star General Agency, Inc.
Nationwide Community Urban Redevelopment Corporation
NEA Valuebuilder Investor Services, Inc.
Colonial County Mutual Insurance Company

DIRECTOR
Gates, McDonald & Company of Nevada
Gates, McDonald & Company of New York

CHAIRMAN OF THE BOARD, CHAIRMAN AND CHIEF EXECUTIVE
OFFICER-NATIONWIDE INSURANCE ENTERPRISE AND TRUSTEE
Nationwide Insurance Enterprise Foundation

MEMBER-BOARD OF MANAGERS, CHAIRMAN OF THE BOARD,
CHAIRMAN AND CHIEF EXECUTIVE OFFICER-NATIONWIDE INSURANCE
ENTERPRISE
Nationwide Properties, Ltd.
Nationwide Realty Investors, Ltd.

Robert A. Oakley EXECUTIVE VICE PRESIDENT-CHIEF FINANCIAL OFFICER
Nationwide Mutual Insurance Company
Nationwide Mutual Fire Insurance Company
Nationwide General Insurance Company
Nationwide Property and Casualty Insurance Company
Nationwide Life Insurance Company
Nationwide Life and Annuity Insurance Company
American Marine Underwriters, Inc.
Companies Agency, Inc.
Companies Agency of Alabama, Inc.
Companies Agency of Idaho, Inc.
Companies Agency of Illinois, Inc.
Companies Agency of Kentucky, Inc.
Companies Agency of Massachusetts, Inc.
Companies Agency of New York, Inc.
Companies Agency of Pennsylvania, Inc.
Companies Agency of Phoenix, Inc.
Countrywide Services Corporation
Employers Life Insurance Company of Wausau
National Casualty Company
National Premium and Benefit Administration Company
The Beak and Wire Corporation
Employers Insurance of Wausau A Mutual Company
Farmland Mutual Insurance Company
Nationwide Financial Institution Distributors Agency, Inc.
Lone Star General Agency, Inc.
Nationwide Agribusiness Insurance Company
Nationwide Communications Inc.
Nationwide Corporation
Nationwide Financial Services, Inc.
Nationwide Investment Services Corporation
Nationwide Investor Services, Inc.

C-6
<PAGE> 98

Nationwide Insurance Enterprise Foundation
Nationwide Properties, Ltd.
Nationwide Realty Investors, Ltd.
NEA Valuebuilder Investor Services, Inc.
NEA Valuebuilder Investor Services of Arizona, Inc
Colonial County Mutual Insurance Company
Pension Associates of Wausau, Inc.
Public Employees Benefit Services Corporation
Scottsdale Indemnity Company
Scottsdale Insurance Company
Scottsdale Surplus Lines Insurance Company
Wausau Business Insurance Company
Wausau General Insurance Company
Wausau Preferred Health Insurance Company
Wausau Service Corporation
Wausau Underwriters Insurance Company

DIRECTOR, CHAIRMAN OF THE BOARD
Neckura Holding Company
Neckura Insurance Company
Neckura Life Insurance Company

EXECUTIVE VICE PRESIDENT-CHIEF FINANCIAL
OFFICER AND DIRECTOR
California Cash Management Company
Colonial Insurance Company of Wisconsin
Nationwide Cash Management Company
Nationwide Community Urban Redevelopment
Corporation
Nationwide Global Holdings, Inc.
MRM Investments, Inc.
Nationwide Advisory Services, Inc.
Nationwide Indemnity Company

EXECUTIVE VICE PRESIDENT
Companies Agency Insurance Services of
California
Wausau International Underwriters

DIRECTOR AND VICE CHAIRMAN
Leben Direkt Insurance Company
Neckura General Insurance Company
Auto Direkt Insurance Company

DIRECTOR
NWE, Inc.
Gates, McDonald & Company
GatesMcDonald Health Plus Inc.

Robert J. Woodward, Jr. EXECUTIVE VICE PRESIDENT-CHIEF INVESTMENT OFFICER
Nationwide Mutual Insurance Company
Nationwide Mutual Fire Insurance Company
Nationwide General Insurance Company
Nationwide Property and Casualty Insurance
Company

C-7
<PAGE> 99

Nationwide Life Insurance
Company Nationwide Life and
Annuity Insurance Company
Colonial County Mutual
Insurance Company Colonial
Insurance Company of
Wisconsin Employers
Insurance of Wausau A
Mutual Company Employers
Life Insurance Company of
Wausau Farmland Mutual
Insurance Company Gates,
McDonald & Company
GatesMcDonald Health Plus,
Inc. Lone Star General
Agency, Inc. National
Casualty Company Nationwide
Financial Services, Inc.
Nationwide Agribusiness
Insurance Company
Nationwide Corporation
Nationwide Insurance
Enterprise Foundation
Nationwide Investment
Services Corporation
Pension Associates of
Wausau, Inc. Public
Employees Benefit Services
Corporation Scottsdale
Indemnity Company
Scottsdale Insurance
Company Scottsdale Surplus
Lines Insurance Company
Wausau Business Insurance
Company Wausau General
Insurance Company Wausau
Preferred Health Insurance
Company Wausau Service
Corporation Wausau
Underwriters Insurance
Company

VICE CHAIRMAN AND DIRECTOR
Nationwide Communications Inc.

DIRECTOR
Nationwide Global Holdings, Inc.

MEMBER-BOARD OF MANAGERS AND VICE CHAIRMAN
Nationwide Properties, Ltd.
Nationwide Realty Investors, Ltd.

DIRECTOR AND PRESIDENT
California Cash Management Company
MRM Investments, Inc.
Nationwide Cash Management Company
Nationwide Community Urban Redevelopment
Corporation
NWE, Inc.

DIRECTOR, EXECUTIVE VICE PRESIDENT-CHIEF
INVESTMENT OFFICER
Nationwide Indemnity Company
Nationwide Advisory Services, Inc.

VICE CHAIRMAN AND DIRECTOR
Nationwide Communications Inc.

DIRECTOR
Nationwide Global Holdings, Inc.

C-8
<PAGE> 100

TRUSTEE AND VICE CHAIRMAN
Nationwide Asset Allocation Trust
Nationwide Separate Account Trust

James F. Laird, Jr. VICE PRESIDENT AND GENERAL MANAGER
AND ACTING TREASURER
Nationwide Advisory Services, Inc.

VICE PRESIDENT AND GENERAL MANAGER
AND ACTING TREASURER AND DIRECTOR
Nationwide Investors Services, Inc.

TREASURER
Nationwide Investing Foundation
Nationwide Separate Account Trust
Nationwide Investing Foundation II
Financial Horizons Investment Trust.
Nationwide Asset Allocation Trust

Christopher A. Cray TREASURER
Nationwide Advisory Services, Inc.
Nationwide Investors Services, Inc.

ASSISTANT TREASURER
Nationwide Investing Foundation
Nationwide Separate Account Trust
Nationwide Investing Foundation II
Financial Horizons Investment Trust
Nationwide Asset Allocation Trust

W. Sidney Druen SENIOR VICE PRESIDENT AND GENERAL
COUNSEL AND ASSISTANT SECRETARY
Nationwide Mutual Insurance Company
Nationwide Mutual Fire Insurance
Company
Nationwide General Insurance Company
Nationwide Property and Casualty
Insurance Company
Nationwide Life Insurance Company
Nationwide Life and Annuity Insurance
Company
Nationwide Advisory Services, Inc.
Nationwide Investors Services, Inc.
Employers Insurance of Wausau A Mutual
Company
Employers Life Insurance Company of Wausau
Wausau Business Insurance Company
Wausau General Insurance Company
Wausau Underwriters Insurance Company
Wausau Preferred Health Insurance Company
Wausau Service Corporation

SENIOR VICE PRESIDENT AND GENERAL COUNSEL
Affiliate Agency, Inc.
Affiliate Agency of Ohio, Inc.
American Marine Underwriters, Inc.
The Beak and Wire Corporation

C-9
<PAGE> 101

California Cash Management Company
Colonial County Mutual Insurance Company
Colonial Insurance Company of California
Farmland Mutual Insurance Company
Nationwide Agribusiness Insurance Company
Nationwide Financial Services, Inc.
Nationwide Financial Institution Distributors
Agency, Inc.
Financial Horizons Distributors Agency of
Alabama, Inc.
Financial Horizons Distributors Agency of
Ohio, Inc.
Financial Horizons Distributors Agency of
Oklahoma, Inc.
Financial Horizons Securities Corporation
Gates, McDonald & Company
Gates, McDonald & Company of Nevada
Gates, McDonald & Company of New York, Inc.
GatesMcDonald Health Plus, Inc.
Landmark Financial Services of New York, Inc.
National Casualty Company
Nationwide Cash Management Company
Nationwide Communications Inc.
Nationwide Corporation
Nationwide Global Holdings, Inc.
Nationwide Investment Services Corporation
Companies Agency, Inc.
Companies Agency Insurance Services of California
Companies Agency of Alabama, Inc.
Companies Agency of Idaho, Inc.
Companies Agency of Illinois, Inc.
Companies Agency of Kentucky, Inc.
Companies Agency of Massachusetts, Inc.
Companies Agency of New York, Inc.
Companies Agency of Pennsylvania, Inc.
Companies Agency of Phoenix, Inc.
Countrywide Services Corporation
Lone Star General Agency Inc.
Nationwide Insurance Enterprise Foundation
Nationwide Indemnity Company
Nationwide Properties, Ltd.
Nationwide Realty Investors, Ltd.
NEA Valuebuilder Investor Services, Inc.
NEA Valuebuilder Investor Services of Alabama, Inc.
NEA Valuebuilder Investor Services of Arizona, Inc.
NEA Valuebuilder Investor Services of Montana, Inc.
NEA Valuebuilder Investor Services of Nevada, Inc.
NEA Valuebuilder Investor Services of Ohio, Inc.
NEA Valuebuilder Investor Services of Oklahoma, Inc.
NEA Valuebuilder Investor Services of Wyoming, Inc.
NEA Valuebuilder Services Insurance Agency, Inc.
MRM Investments, Inc.
NWE, Inc.
PEBSCO of Massachusetts Insurance Agency, Inc.
Pension Associates of Wausau, Inc.
Public Employees Benefit Services Corporation
Public Employees Benefit Services Corporation of
Alabama
Public Employees Benefit Services Corporation of
Arkansas

C-10
<PAGE> 102

Public Employees Benefit Services Corporation of
Montana
Public Employees Benefit Services Corporation of
New Mexico Scottsdale Indemnity
Company Scottsdale
Insurance Company
Scottsdale Surplus Lines
insurance Company Wausau
International Underwriters

SENIOR VICE PRESIDENT AND GENERAL COUNSEL AND DIRECTOR
Nationwide Community Urban Redevelopment Corporation

GENERAL COUNSEL
Nationwide Insurance Golf Charities, Inc.

Peter J. Neckermann VICE PRESIDENT - ECONOMIC AND INVESTMENT SERVICES
Nationwide Mutual Insurance Company
Nationwide Mutual Fire Insurance Company
Nationwide General Insurance Company
Nationwide Property and Casualty Insurance Company
Nationwide Life Insurance Company
Nationwide Life and Annuity Insurance Company
Nationwide Indemnity Company

VICE PRESIDENT
Nationwide Advisory Services, Inc.

DIRECTOR
Leben Direkt Insurance Company
Nationwide Investors Services, Inc.
Neckura Holding Company

ASSISTANT TREASURER
Financial Horizons Investment Trust
National Casualty Company
National Premium and Benefit Administration Company
Nationwide Investing Foundation
Nationwide Investing Foundation II
Nationwide Separate Account Trust
Nationwide Asset Allocation Trust

Edwin P. McCausland, Jr. VICE PRESIDENT-FIXED INCOME SECURITIES
Nationwide Mutual Insurance Company
Nationwide Mutual Fire Insurance Company
Nationwide General Insurance Company

C-11
<PAGE> 103

Nationwide Property and Casualty Insurance
Company
Nationwide Life Insurance
Company Nationwide Life and
Annuity Insurance Company
California Cash Management
Company Colonial Insurance
Company of Wisconsin
Employers Insurance of
Wausau A Mutual Company
Employers Life Insurance
Company of Wausau Farmland
Mutual Insurance Company
Financial Horizons
Investment Trust Gates,
McDonald & Company
GatesMcDonald Health Plus,
Inc. National Casualty
Company Nationwide
Agribusiness Insurance
Company Nationwide Cash
Management Company
Nationwide Indemnity
Company Nationwide
Insurance Enterprise
Foundation Scottsdale
Indemnity Company
Scottsdale Insurance
Company Scottsdale Surplus
Lines Insurance Company
Wausau Business Insurance
Company Wausau General
Insurance Company Wausau
Preferred Health Insurance
Company Wausau Service
Corporation Wausau
Underwriters Insurance
Company
VICE PRESIDENT-FIXED INCOME
Nationwide Advisory
Services, Inc.

ASSISTANT TREASURER
Nationwide Asset Allocation Trust
Nationwide Investing Foundation
Nationwide Investing Foundation II
Nationwide Separate Account Trust

Joseph P. Rath VICE PRESIDENT-PRODUCT AND MARKET COMPLIANCE
Nationwide Mutual Insurance Company
Nationwide Mutual Fire Insurance Company
Nationwide Property and Casualty Insurance Company
Nationwide Life Insurance Company
Nationwide Life and Annuity Insurance Company

VICE PRESIDENT-COMPLIANCE
Nationwide Advisory Services, Inc.
Nationwide Investment Services Corporation

VICE PRESIDENT-CHIEF COMPLIANCE OFFICER
Nationwide Financial Services, Inc.

William G. Goslee VICE PRESIDENT
Nationwide Advisory Services, Inc.

C-12
<PAGE> 104

ASSISTANT TREASURER
Nationwide Asset Allocation Trust

Except as otherwise noted, the principal business address of any company with
which any person specified above is connected in the capacity of director,
officer, employee, partner or trustee is One Nationwide Plaza, Columbus, Ohio
43215, except for the following companies:

Farmland Mutual Insurance Company
Nationwide Agribusiness Insurance Company
1963 Bell Avenue
Des Moines, Iowa 50315-1000
Colonial Insurance Company of Wisconsin
3455 Mill Run Drive, 5th Floor
Hilliard, Ohio 43026

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

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

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

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

Auto Direkt Insurance Company
Columbus Insurance Brokerage and Service, GMBH
Leben Direkt Insurance Company
Neckura General Insurance Company
Neckura Holding Company
Neckura Insurance Company
Neckura Life Insurance Company
John E. Fisher Str. 1
61440 Oberursel/Ts.
Germany

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

Nationwide Advisory Services, Inc.
Nationwide Investors Services, Inc.
Three Nationwide Plaza, Columbus, Ohio 43215

C-13
<PAGE> 105

(b) Information for the Subadviser of the S&P 500 Index Fund

(1) The Dreyfus Corporation

The Dreyfus Corporation ("Dreyfus") acts as subadvisor to the S&P 500
Index Fund and as adviser or subadviser to a number of other
registered investment companies. The list required by this Item 28 of
officers and directors of Dreyfus, together with information as to
their other business, profession, vocation or employment of a
substantial nature during the past two years, is incorporated by
reference to Schedule A and D of Form ADV filed by Dreyfus (SEC File
No. 801-8147).

ITEM 29. PRINCIPAL UNDERWRITERS
(a) See Item 28 above.
(b) Nationwide Advisory Services, Inc.

Position with Position
Name Business Address Underwriter With Registrant
---- ---------------- ----------- ---------------
<S> <C> <C> <C>
Dimon R. McFerson One Nationwide Plaza Chairman and CEO Chairman of Board of
Columbus OH 43215 Trustees

Joseph J. Gasper One Nationwide Plaza President and Director Vice Chairman of Board
Columbus OH 43215 of Trustees

Gordon E. McCuthan One Nationwide Plaza Exec. VP - Law and N/A
Columbus OH 43215 Corporate Services and
Director

Robert A. Oakley One Nationwide Plaza Exec. VP - Chief Financial N/A
Columbus OH 43215 Officer and Director

Robert J. Woodward, Jr. One Nationwide Plaza Exec. VP - Chief Investment Trustee
Columbus OH 43215 Officer and Director

William S. Druen One Nationwide Plaza Sr. VP - General Counsel N/A
Columbus OH 43215 and Assistant Secretary

James F. Laird, Jr. Three Nationwide Plaza VP - General Manager Treasurer
Columbus OH 43215

Edwin P. McCausland One Nationwide Plaza VP - Fix Income Securities Assistant Treasurer
Columbus OH 43215

Joseph P. Rath One Nationwide Plaza VP - Compliance N/A
Columbus OH 43215

Peter J. Neckermann One Nationwide Plaza Vice President Assistant Treasurer
Columbus OH 43215

William G. Goslee One Nationwide Plaza Vice President N/A
Columbus OH 43215

Christopher A. Cray Three Nationwide Plaza Treasurer Assistant Treasurer
Columbus OH 43215
</TABLE>

C-14
<PAGE> 106
<TABLE>
<S> <C> <C> <C>
Rae M. Pollina Three Nationwide Plaza Secretary N/A
Columbus OH 43215
</TABLE>

ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
Christopher A. Cray
Nationwide Advisory Services, Inc.
Three Nationwide Plaza
Columbus, OH 43215

ITEM 31. MANAGEMENT SERVICES
Not applicable.

ITEM 32. UNDERTAKINGS

(1) The Trust undertakes to furnish to each person to whom a prospectus
is delivered, a copy of the Trust's Annual Report, upon request
and without charge.

(2) The Trust undertakes to hold a shareholder meeting, if requested
to do so by the holders of at least 10% of the Trust's outstanding
shares, to call a meeting of shareholders for the purpose of
voting upon the removal of a trustee or trustees and to assist
shareholders in communications with other shareholders as required
by Section 16(c) of the Investment Company Act of 1940.

C-15
<PAGE> 107

SIGNATURES

Pursuant to the requirements of the Securities Act 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Columbus, and State of Ohio, on this 2nd day of January 1998.

NATIONWIDE INVESTING FOUNDATION III

By: JAMES F. LAIRD, JR.
------------------------------
James F. Laird, Jr., Treasurer

PURSUANT TO THE REQUIREMENT OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE CAPACITIES
INDICATED ON THE 2ND DAY OF JANUARY 1998.

<TABLE>
<S> <C>
Signature & Title
- ------------------

Principal Executive Officer

DIMON R. McFERSON*
- -------------------
Dimon R. McFerson, Trustee and Chairman

Principal Accounting and Financial Officer

JAMES F. LAIRD, JR. DAVID C. WETMORE*
- ------------------ --------------------------
James F. Laird, Jr., Treasurer David C. Wetmore, Trustee

JOHN C. BRYANT* *By: JAMES F. LAIRD, JR.
- --------------- -----------------------
John C. Bryant, Trustee James F. Laird, Jr., Attorney-In-Fact

C. BRENT DEVORE
- ---------------
C. Brent Devore, Trustee

SUE A. DOODY*
- -------------
Sue A. Doody, Trustee

ROBERT M. DUNCAN*
- -----------------
Robert M. Duncan, Trustee

CHARLES L. FUELLGRAF, JR.*
- ------------------------
Charles L. Fuellgraf, Jr., Trustee

THOMAS J. KERR, IV*
- --------------------
Thomas J. Kerr, IV, Trustee

DOUGLAS F. KRIDLER*
- --------------------
Douglas F. Kridler, Trustee

NANCY C. THOMAS*
- ----------------
Nancy C. Thomas, Trustee

HAROLD W. WEIHL*
- ----------------
Harold W. Weihl, Trustee
</TABLE>

C-16

<PAGE> 1
Exhibit 1

NATIONWIDE INVESTING FOUNDATION III

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

AMENDED DECLARATION OF TRUST
FOR AN OHIO BUSINESS TRUST
(ESTABLISHED AS OF OCTOBER 30, 1997)
(AMENDED MARCH 5, 1998)

<PAGE> 2

INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I - Name, Principal Office, Definitions and Purposes of Trust 1
---------------------------------------------------------

Section 1.1. Name and Principal Office
Section 1.2. Definitions
Section 1.3. Purposes of Trust

ARTICLE II - Trustees 3
--------

Section 2.1. Initial Trustees
Section 2.2 Number of Trustees
Section 2.3. Election and Term
Section 2.4. Resignation and Removal
Section 2.5. Vacancies
Section 2.6. Delegation of Power to Other Trustees

ARTICLE III - Powers of Trustees 4
------------------

Section 3.1. General
Section 3.2. Investments
Section 3.3 Legal Title
Section 3.4. Issuance and Repurchase of Securities
Section 3.5. Borrowing Money; Lending Trust Assets
Section 3.6. Delegation; Committees
Section 3.7. Collection and Payment
Section 3.8. Expenses
Section 3.9. Manner of Acting; Bylaws
Section 3.10. Miscellaneous Powers
Section 3.11. Litigation

ARTICLE IV - Investment Advisor, Distributor,
Administrator and Transfer Agent 9

Section 4.1. Investment Advisor
Section 4.2. Distributor
Section 4.3 Administrator
Section 4.4. Transfer Agent
Section 4.5. Parties to Contract
Section 4.6. Compliance with 1940 Act

ARTICLE V - Limitations of Liability of Shareholders,
Trustees and Others 11

Section 5.1. No Personal Liability of Shareholders, Trustees, etc.
Section 5.2 Mandatory Indemnification
Section 5.3 No Bond Required of Trustees
Section 5.4 No Duty of Investigation; Notice in Trust Instruments, etc.
Section 5.5 Reliance on Experts, etc.
Section 5.6 Indemnification not Exclusive, etc.
Section 5.7 Liability of Series
</TABLE>

<PAGE> 3

<TABLE>
<S> <C> <C>
ARTICLE VI - Shares of Beneficial Interest 15
-----------------------------

Section 6.1. Beneficial Interest
Section 6.2. Establishment and Designation of Series
Section 6.3 Rights of Shareholders
Section 6.4. Trust Only
Section 6.5 Issuance of Shares
Section 6.6. Register of Shares; Share Certificates
Section 6.7. Transfer of Shares
Section 6.8. Notices
Section 6.9. Treasury Shares
Section 6.10. Investments in Trust
Section 6.11. Series or Class Designation

ARTICLE VII - Redemptions 22
-----------

Section 7.1. Redemption of Shares
Section 7.2. Price
Section 7.3. Payment
Section 7.4. Effect of Suspension of Determination of Net Asset Value
Section 7.5. Repurchase by Agreement
Section 7.6. Redemption of Shareholder's Interest
Section 7.7. Reductions in Number of Outstanding Shares Pursuant to Net Asset
Value Formula
Section 7.8. Suspension of Right of Redemption
Section 7.9. Redemption of Shares; Disclosure of Holding

ARTICLE VIII - Determination of Net Asset Value, Net 24
-------------------------------------
Income and Distributions
------------------------

Section 8.1. Net Asset Value
Section 8.2. Distribution to Shareholders
Section 8.3. Determination of Net Income
Section 8.4. Power to Modify Foregoing Procedures

ARTICLE IX - Duration; Termination and Trust; Amendment; 25
-------------------------------------------
Mergers, etc.
-------------

Section 9.1. Duration
Section 9.2. Termination of Trust
Section 9.3. Amendment Procedure
Section 9.4. Merger, Consolidation and Sale or Disposition of Assets
Section 9.5. Incorporation
Section 9.6. Absence of Dissenters' Rights

ARTICLE X - Shareholders' Voting Powers and Meetings 28
----------------------------------------

Section 10.1. Voting Powers
Section 10.2. Meetings of Shareholders
Section 10.3. Quorum and Required Vote
Section 10.4. Record Date for Meetings
Section 10.5. Proxies
Section 10.6. Action Without a Meeting
Section 10.7. Inspection of Records
Section 10.8. Additional Provisions
</TABLE>

<PAGE> 4

<TABLE>
<S> <C> <C>
ARTICLE XI - Miscellaneous 31
-------------

Section 11.1. Filing
Section 11.2. Governing Law
Section 11.3. Counterparts
Section 11.4. Reliance by Third Parties
Section 11.5. Provisions in Conflict with Law or Regulations
Section 11.6. Index and Heading for Reference Only
</TABLE>

iii

<PAGE> 5

AMENDED DECLARATION OF TRUST

NATIONWIDE INVESTING FOUNDATION III

DECLARATION OF TRUST made at Columbus, Ohio as of the 30th day of
October, 1997 and amended as of the 5th day of March, 1998 by the Trustees
hereunder, and by the holders of Shares of beneficial interest to be issued
hereunder as hereinafter provided.

WHEREAS, the Trustees desire to establish a trust for the investment
and reinvestment of funds contributed thereto; and

WHEREAS, the Trustees desire that the beneficial interest in the trust
assets be divided into transferable shares of beneficial interest; and:

WHEREAS, the Trustees have agreed to manage all property coming into
their hands as trustees of an Ohio business trust in accordance with the
provisions of Chapter 1746, Ohio Revised Code, and as hereinafter set forth.

NOW THEREFORE, the Trustees hereby declare that all money and property
contributed to the trust established hereunder shall be held and managed in
trust for the benefit of holders, from time to time, of the shares of beneficial
interest issued hereunder and subject to the provisions hereof.

ARTICLE I

NAME, PRINCIPAL OFFICE, DEFINITIONS AND PURPOSES OF TRUST

SECTION 1.1. NAME AND PRINCIPAL OFFICE. The name of the trust created
hereby is "Nationwide Investing Foundation III" and the Trustees shall conduct
the business of the Trust under that name or any other name as the Trustees may
from time to time determine. The principal office of the Trust is located in
Columbus, Ohio.

SECTION 1.2. DEFINITIONS. Wherever they are used herein, the following
terms have the following respective meanings:

(a) "ADMINISTRATOR" means the party other than the Trust, to the
contract described in Section 4.3 hereof.

(b) "BYLAWS" means the Bylaws referred to in Section 3.9 hereof, as
from time to time amended.

<PAGE> 6

(c) "CLASS" refers to one or more classes or sub-series of Shares
established and designated under or in accordance with the provisions
of Article VI.

(d) The terms "COMMISSION" and "INTERESTED PERSON" shall have the
meanings given them in the 1940 Act. The term "MAJORITY SHAREHOLDER
VOTE" shall refer to the 67% or 50% requirement in Section 2(a)(42) of
the 1940 Act, whichever may be applicable and as may be amended, except
to the extent that the Trustees have otherwise defined "Majority
Shareholder Vote" in conjunction with the establishment of any Series
of Shares.

(e) "DECLARATION" means this Declaration of Trust as amended from time
to time. Reference in this Declaration of Trust to "DECLARATION",
"HEREOF", "HEREIN" and "HEREUNDER" shall be deemed to refer to this
Declaration rather than the article or section in which such words
appear.

(f) "DISTRIBUTOR" means the party, other than the Trust, to the
contract described in Section 4.2 hereof.

(g) "INVESTMENT ADVISER" means the party, other than the Trust, to the
contract described in Section 4.1 hereof.

(h) The "1940 ACT" means the Investment Company Act of 1940 and the
rules and regulations thereunder, as amended from time to time.

(i) "PERSON" means and includes individuals, corporations,
partnerships, trusts, associations, joint ventures and other entities,
whether or not legal entities, and governments and agencies and
political subdivisions thereof.

(j) "SERIES" refers to a series of Shares established and designated
under or in accordance with the provisions of Article VI.

(k) "SHARE" or "SHARES" means the units of interest into which the
beneficial interest in the Trust shall be divided from time to time,
including the Shares of any Series or Class which may be established by
the Trustees, and includes fractions of Shares as well as whole Shares.

(l) "SHAREHOLDER" means a record owner of outstanding Shares.

(m) "TRANSFER AGENT" means the party, other than the Trust, to the
contract described in Section 4.4 hereof.

(n) The "TRUST" means Nationwide Investing Foundation III and refers to
the Ohio business trust established by this Declaration of Trust, as
amended from time to time.

(o) The "TRUST PROPERTY" means any and all property, real or personal,
tangible or intangible, which is owned or held by or for the account of
the Trust or the Trustees.

<PAGE> 7

(p) The "TRUSTEE" OR "TRUSTEES" means the person or persons who have
signed this Declaration, so long as such person or persons shall
continue in office in accordance with the terms hereof, and all other
persons who may from time to time be duly elected, qualified and
serving as Trustees in accordance with the provisions hereof, and
reference herein to a Trustee or the Trustees shall refer to such
person or persons in their capacity as trustee or trustees hereunder.

SECTION 1.3. PURPOSES OF TRUST. The purposes of the Trust are to
operate as an investment company as defined in the 1940 Act and to engage in any
lawful activity for which business trusts may be formed under Chapter 1746, Ohio
Revised Code.

ARTICLE II

TRUSTEES

SECTION 2.1. INITIAL TRUSTEES. Upon the execution of this Declaration
of Trust or a counterpart hereof or some other writing in which each of the
Trustees accepts such trusteeship and agrees to the provisions hereof, each of
the Trustees listed at the end of this Declaration of Trust shall become the
initial Trustees of the Trust.

SECTION 2.2. NUMBER OF TRUSTEES. The number of Trustees shall be such
number as shall be fixed from time to time by a written instrument signed by a
majority of the Trustees. The Trustees serving as such, whether described in
Section 2.1 above or hereafter becoming a Trustee, may increase or decrease the
number of Trustees to a number other than the number theretofore determined. A
Trustee shall qualify by accepting in writing his election or appointment and
agreeing to be bound by the Declaration of Trust. No decrease in the number of
Trustees shall have the effect of removing any Trustee from office prior to the
expiration of his or her term, but the number of Trustees may be decreased in
conjunction with the removal of a Trustee pursuant to Section 2.4.

SECTION 2.3. ELECTION AND TERM. Except for the Trustees named herein or
appointed to fill vacancies pursuant to Section 2.5 hereof, the Trustees shall
be elected by the Shareholders, who shall vote as a single class and not by
Series and shall vote at such times as the Trustees shall determine that such
election is required by the 1940 Act or is otherwise advisable. There is no
requirement that the Trustees have an annual meeting of the Shareholders. In the
event the Trustees determine to have an annual or special meeting of the
Shareholders at which Trustees will be elected, it shall be held at such time
and place and in such manner as the Bylaws shall provide notwithstanding
anything in this section to the contrary. Except in the event of death,
resignation or removal, each of the Trustees shall hold office until the next
meeting of Shareholders called for the purpose of electing Trustees and until
his successor is elected and qualified to serve as Trustee.

SECTION 2.4. RESIGNATION AND REMOVAL. Any Trustee may resign his trust
(without need for prior or subsequent accounting except to the extent required
by the 1940 Act or under circumstances that would justify the Trustee's removal
for cause and then only if required by the remaining Trustees) by an instrument
in writing signed by him and delivered to the other Trustees or to any officer
of the Trust or at a meeting of the Trustees, and such resignation shall be
effective

<PAGE> 8

upon such delivery, or at a later date according to the terms of the instrument.
Any of the Trustees may be removed with or without cause, by the written action
of two-thirds of the number of Trustees prior to such removal or by Shareholders
at any meeting called for that purpose. No Trustee shall be entitled to any
damages on account of such removal. Upon the resignation or removal of a
Trustee, or his otherwise ceasing to be a Trustee, he shall execute and deliver
such documents as the remaining Trustees shall require for the purpose of
conveying to the Trust or the remaining Trustees any Trust Property held in the
name of the resigning or removed Trustee. Upon the incapacity or death of any
Trustee, his legal representative shall execute and deliver on his behalf such
documents as the remaining Trustees shall require as provided in the preceding
sentence.

SECTION 2.5. VACANCIES. The term of office of a Trustee shall terminate
and a vacancy shall occur in the event of the death, resignation, removal,
bankruptcy, adjudicated incompetence or other incapacity to perform the duties
of the office of a Trustee. No such vacancy shall operate to annul this
Declaration or to revoke any existing agency or contract created or entered into
pursuant to the terms of the Declaration. In the case of an existing vacancy,
including a vacancy existing by reason of an increase in the number of Trustees
as set forth in Section 2.2. hereof, subject to the provisions of Section 16(a)
of the 1940 Act, the remaining Trustees may fill such vacancy by the appointment
of such other person or persons as they in their discretion shall see fit, made
by a written instrument signed by a majority of the remaining Trustees. Any such
appointment shall not become effective, however, until the person named in the
written instrument of appointment shall have accepted in writing such
appointment and agreed in writing to be bound by the terms of the Declaration.
An appointment of a Trustee may be made in anticipation of a vacancy to occur at
a later date by reason of retirement, resignation or increase in the number of
Trustees, provided that such appointment shall not become effective prior to
such retirement, resignation or increase in the number of Trustees. Whenever a
vacancy in the number of Trustees shall occur, until such vacancy is filled as
provided in this Section 2.5., the Trustees in office, regardless of their
number, shall have all the powers granted to the Trustees and shall discharge
all the duties imposed upon the Trustees by the Declaration. A written
instrument certifying the existence of such vacancy signed by a majority of the
Trustees shall be conclusive evidence of the existence of such vacancy.

Notwithstanding the foregoing, to the extent the Trust adopts and
implements a written plan pursuant to Rule 12b-1 under the 1940 Act, and so long
as required by the 1940 Act, the selection and nomination of Trustees who are
"interested persons" of the Trust as defined in the 1940 Act, shall be committed
to the discretion of the Trustees who are not "interested persons," as so
defined.

SECTION 2.6. DELEGATION OF POWER TO OTHER TRUSTEES. Any Trustee may, by
power of attorney, delegate his power for a period not exceeding six (6) months
at any one time to any other Trustee or Trustees; provided that in no case shall
less than two (2) Trustees personally exercise the powers granted to the
Trustees under the Declaration except as herein otherwise expressly provided and
except to the extent that the exercise of such power would be prohibited by the
1940 Act.

ARTICLE III

POWERS OF TRUSTEES

<PAGE> 9

SECTION 3.1. GENERAL. The Trustees shall have exclusive and absolute
control over the Trust Property and over the business of the Trust to the same
extent as if the Trustees were the sole owners of the Trust Property and
business in their own right, but with such powers of delegation as may be
permitted by the Declaration. The Trustees shall have power to conduct the
business of the Trust and carry on its operations and maintain offices both
within and without the State of Ohio, in any and all states of the United States
of America, in the District of Columbia, and in any and all commonwealths,
territories, dependencies, colonies, possessions, agencies or instrumentalities
of the United States of America and of foreign governments, and to do all such
other things and execute all such instruments as they deem necessary, proper or
desirable in order to promote the interests of the Trust although such things
are not herein specifically mentioned. Any determination as to what is in the
interest of the Trust made by the Trustees in good faith shall be conclusive. In
construing the provisions of the Declaration, the presumption shall be in favor
of a grant of power to the Trustees.

The enumeration of any specific power herein shall not be construed as
limiting the aforesaid power. Such powers of the Trustees may be exercised
without order of or resort to any court.

SECTION 3.2. INVESTMENTS. The Trustees shall have the power to:

(a) Conduct, operate and carry on the business of an investment company
and exercise all the powers necessary and appropriate for the conduct
of such operations;

(b) Invest in, hold for investment, or reinvest in, securities,
including common and preferred stocks; shares of other investment
companies; warrants; bonds; debentures; bills; time notes and all other
evidences of indebtedness; negotiable or non-negotiable instruments;
government securities, including securities of any state, municipality
or other political subdivision, or any governmental or
quasi-governmental agency or instrumentality; and money market
instruments including bank certificates of deposit, finance paper,
commercial paper, bankers' acceptances and all kinds of repurchase
agreements, of any corporation, company, trust, association, firm or
other business organization however established, and of any country,
state, municipality or other political subdivisions, or any
governmental or quasi-governmental agency or instrumentality;

(c) Acquire (by purchase, subscription or otherwise), to hold, to trade
in and deal in, to acquire or write any rights or options to purchase
or sell, to sell or otherwise dispose of, to lend, and to pledge any
such securities and repurchase agreements and forward foreign currency
exchange contracts, to purchase and sell futures contracts on
securities, securities indices and foreign currencies, to purchase or
sell options on such contracts, foreign currency contracts and foreign
currencies and to engage in all types of hedging and risk management
transactions;

(d) Exercise all rights, powers and privileges of ownership or interest
in all securities included in the Trust Property, including the right
to vote thereon and otherwise act with respect thereto, to exercise the
powers and rights of subscription, and to do all acts for the
preservation, protection, improvements and enhancement in value of all
such securities;

<PAGE> 10

(e) Join with other holders of any securities or debt instruments in
acting through a committee, depository, voting trustee or otherwise,
and in that connection to deposit any security or debt instrument
with, or transfer any security or debt instrument to, any such
committee, depository or trustee, and to delegate to them such power
and authority with relation to any security or debt instrument
(whether or not so deposited or transferred) as the Trustees shall
deem proper, and to agree to pay, and to pay, such committee,
depository or trustee as the Trustees shall deem proper;

(f) Acquire (by purchase, lease or otherwise) and to hold, use,
maintain, develop and dispose of (by sale or otherwise) any property,
real or personal, including cash, and any interest therein;

(g) Act as a distributor of shares and as underwriter of, or broker or
dealer in, securities or other property;

(h) Allocate assets, liabilities and expenses of the Trust to a
particular Series or Class of Shares or to apportion the same among two
or more Series or Classes, provided that any liabilities or expenses
incurred by a particular Series or Class of Shares shall be payable
solely out of the assets of that Series;

(i) Consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or issuer the security or
debt instrument of which is or was held in the Trust; to consent to any
contract, lease, mortgage, purchase or sale of property by such
corporation or issuer, and to pay calls or subscriptions with respect
to any security or debt instrument held in the Trust;

(j) Aid by further investment any corporation, company, trust,
association or firm, any obligation of or interest in which is included
in the Trust Property or in the affairs of which the Trustees have any
direct or indirect interest; to do all acts and things designed to
protect, preserve, improve or enhance the value of such obligation or
interest; to guarantee or become surety on any or all of the contracts,
stocks, bonds, notes, debentures and other obligations of any such
corporation, company, trust, association or firm; and

(k) In general to carry on any other business in connection with or
incidental to any of the foregoing powers, to do everything necessary,
suitable or proper for the accomplishment of any purpose or the
attainment of any object or the furtherance of any power hereinbefore
set forth, either alone or in association with others, to do every
other act or thing incidental or appurtenant to or growing out of or
connected with the aforesaid business or purposes, objects or powers,
and to engage in any other lawful act or activity in which corporations
organized under Chapter 1701, Ohio Revised Code, may engage.

The foregoing clauses shall be construed both as objects and powers,
and the foregoing enumeration of specific powers shall not be held to limit or
restrict in any manner the general powers of the Trustees.

<PAGE> 11

The Trustees shall not be limited to investing in obligations maturing
before the possible termination of the Trust, nor shall the Trustees be limited
by any law limiting the investments which may be made by fiduciaries.

SECTION 3.3. LEGAL TITLE. Legal title to all the Trust Property shall
be vested in the Trustees except that the Trustees shall have power to cause
legal title to any Trust Property to be held by or in the name of one or more of
the Trustees, or in the name of the Trust, or in the name of any other Person as
nominee, on such terms as the Trustees may determine, provided that the interest
of the Trust therein is appropriately protected. The right, title and interest
of the Trustees in the Trust Property shall vest automatically in each Person
who may hereafter become a Trustee. Upon the resignation, removal or death of a
Trustee, he shall automatically cease to have any right, title or interest in
any of the Trust Property, and the right, title and interest of such Trustee in
the Trust Property shall vest automatically in the remaining Trustees. Such
vesting and cessation of title shall be effective whether or not conveyancing
documents have been executed and delivered.

SECTION 3.4. ISSUANCE AND REPURCHASE OF SECURITIES. The Trustees shall
have the power to issue, sell, repurchase, redeem, retire, cancel, acquire,
hold, resell, reissue, dispose of, transfer, and otherwise deal in Shares and,
subject to the provisions set forth in Articles VI, VII, VIII, and IX hereof, to
apply to any such repurchase, redemption, retirement, cancellation or
acquisition of Shares any funds or property of the Trust whether capital or
surplus or otherwise, to the full extent now or hereafter permitted by the laws
of the of Ohio governing business corporations.

SECTION 3.5. BORROWING MONEY; LENDING TRUST ASSETS. The Trustees shall
have power to borrow money or otherwise obtain credit to secure the same by
mortgaging, pledging or otherwise subjecting as security the assets of the
Trust, to endorse, guarantee, or undertake the performance of any obligation,
contract or engagement of any other Person and to lend Trust assets.

SECTION 3.6. DELEGATION; COMMITTEES. The Trustees shall have power to
delegate from time to time to such of their number or to officers, employees or
agents of the Trust the doing of such things and the execution of such
instruments either in the name of the Trust or the names of the Trustees or
otherwise as the Trustees may deem expedient, to the extent such delegation is
permitted by the 1940 Act, including without implied limitation the power and
authority to act in the name of the Trust and of the Trustees, to sign documents
and to act as attorney-in-fact for the Trustees.

SECTION 3.7. COLLECTION AND PAYMENT. The Trustees shall have power to
collect all property due to the Trust; to pay all claims, including taxes,
against the Trust Property; to prosecute, defend, compromise or abandon any
claims relating to the Trust Property; to foreclose any security interest
securing any obligations, by virtue of which any property is owed to the Trust;
and to enter into releases, agreements and other instruments.

SECTION 3.8. EXPENSES. The Trustees are authorized to pay or cause to
be paid out of the principal or income of the Trust, or partly out of principal
and partly out of income, and to charge or allocate the same to, between or
among such one or more of the Series or Classes that may be established pursuant
to Article VI, as the Trustees deem fair, all expenses, fees, charges, taxes and
liabilities incurred or arising in connection with the Trust, or in connection
with the management

<PAGE> 12

thereof, including, but not limited to, the Trustees' compensation and such
expenses and charges for the services of the Trust's officers, employees,
Investment Adviser, Distributor, Administrator, Transfer Agent, auditor, counsel
and such other agents, consultants and independent contractors and such other
expenses and charges as the Trustees may deem necessary or proper to incur.
Without limiting the generality of any other provision hereof, the Trustees
shall be entitled to reasonable compensation from the Trust for their services
as Trustees and may fix the amount of such compensation.

SECTION 3.9. MANNER OF ACTION; BYLAWS. Except as otherwise provided
herein or in the Bylaws or in the 1940 Act, any action to be taken by the
Trustees may be taken by a majority of the Trustees present at a meeting of
Trustees (a quorum being present), including any meeting held by means of a
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, or by written consents
of a majority of the Trustees (unless a higher proportion is required by the
1940 Act or other applicable law). The Trustees may adopt Bylaws not
inconsistent with this Declaration to provide for the conduct of the business of
the Trust and may amend or repeal such Bylaws to the extent such power is not
reserved to the Shareholders.

Notwithstanding the foregoing provisions of this Section 3.9 and in
addition to such provisions or any other provision of this Declaration or of the
Bylaws, the Trustees may by resolution appoint a committee consisting of less
than the whole number of Trustees then in office, which committee may be
empowered to act for and bind the Trustees and the Trust, as if the acts of such
committee were the acts of all the Trustees then in office, with respect to the
institution, prosecution, dismissal, settlement, review or investigation of any
action, suit or proceeding which shall be pending or threatened to be brought
before any court, administrative agency or other adjudicatory body.

SECTION 3.10. MISCELLANEOUS POWERS. The Trustees shall have the power
to: (a) employ or contract with such Persons as the Trustees may deem desirable
for the transaction of the business of the Trust; (b) enter into joint ventures,
partnerships and any other combinations or associations; (c) remove Trustees or
fill vacancies in or add to their number, elect and remove such officers and
appoint and terminate such agents or employees as they consider appropriate, any
one or more of the foregoing of whom may be a Trustee, and appoint from their
own number, and terminate, any one or more committee which may exercise some or
all of the power and authority of the Trustees as the Trustees may determine;
(d) purchase, and pay for out of Trust Property, insurance policies insuring the
assets of the Trust and the payment of distributions and principal on its
portfolio investments and insurance policies insuring the Shareholders,
Trustees, officers, employees, agents, investment advisers, distributors,
selected dealers or independent contractors of the Trust against all claims
arising by reason of holding or having held any such position or by reason of
any action taken or omitted by any such Person in such capacity, whether or not
constituting negligence, or whether or not the Trust would have the power to
indemnify such Person against such liability; (e) establish pension,
profit-sharing, Share purchase, and other retirement, incentive and benefit
plans for any Trustees, officers, employees and agents of the Trust; (f) to the
extent permitted by law, indemnify any person with whom the Trust has dealings,
including the Investment Adviser, Distributor, Administrator, Transfer Agent and
selected dealers, to such extent the Trustees shall determine; (g)

<PAGE> 13

guarantee indebtedness or contractual obligations of others; (h) determine and
change the fiscal year of the Trust and the method by which its accounts shall
be kept; and (i) adopt a seal for the Trust, but the absence of such seal shall
not impair the validity of any instrument executed on behalf of the Trust.

SECTION 3.11. LITIGATION. The Trustees shall have the power to engage
in and to prosecute, defend, compromise, abandon, or adjust, by arbitration, or
otherwise, any actions, suits, proceedings, disputes, claims, and demands
relating to the Trust, and out of the assets of the Trust to pay or to satisfy
any debts, claims or expenses incurred in connection therewith, including those
of litigation, and such power shall include without limitation the power of the
Trustees or any appropriate committee thereof, in the exercise of their or its
good faith business judgment, to dismiss any action, suit, proceeding, dispute,
claim, or demand, derivative or otherwise, brought by any person, including a
Shareholder in its own name or the name of the Trust, whether or not the Trust
or any of the Trustees may be named individually therein or the subject matter
arises by reason of business for or on behalf of the Trust.

ARTICLE IV

INVESTMENT ADVISER, DISTRIBUTOR, ADMINISTRATOR
AND TRANSFER AGENT

SECTION 4.1. INVESTMENT ADVISER. Subject to a Majority Shareholder Vote
unless such vote is not required pursuant to the 1940 Act or Commission rule or
exemption, the Trustees may, in their discretion, from time to time enter into
one or more investment advisory or management contracts whereby the other party
to such contract shall undertake to furnish the Trust such management,
investment advisory, statistical and research facilities and services,
promotional activities, and such other facilities and services, if any, as the
Trustees shall from time to time consider desirable and all upon such terms and
conditions as the Trustees may, in their discretion, determine. Notwithstanding
any provisions of the Declaration, the Trustees may authorize the Investment
Adviser (subject to such general or specific instructions as the Trustees may
from time to time adopt) to effect purchases, sales, loans or exchanges of
portfolio securities of the Trust on behalf of the Trustees or may authorize any
officer, employee or Trustee to effect such purchases, sales, loans or exchanges
pursuant to recommendations of the Investment Adviser (and all without further
action by the Trustees). Any such purchases, sales, loans and exchanges shall be
deemed to have been authorized by all of the Trustees.

SECTION 4.2. DISTRIBUTOR. The Trustees may, in their discretion, from
time to time enter into a contract, providing for the sale of Shares to the
Trust at not less than the net asset value per Share (as described in Article
VIII hereof), whereby the Trust may either agree to sell the Shares to the other
party to the contract or appoint such other party its sales agent for such
Shares. In either case, the contract shall be on such terms and conditions as
the Trustees may in their discretion determine not inconsistent with the
provisions of this Article IV or the Bylaws; and such contract may also provide
for the repurchase or sale of Shares of the Trust by such other party as
principal or as agent of the Trust and may provide that such other party may
enter into selected dealer agreements with

<PAGE> 14

registered securities dealers or other qualified distributors to further the
purpose of the distribution or repurchase of the Shares.

SECTION 4.3. ADMINISTRATOR. The Trustees may, in their discretion, from
time to time enter into an administrative services agreement whereby the other
party to such contract shall provide facilities, equipment, and personnel to
carry out certain administrative services for the operation of the business and
affairs of the Trust and each of its separate Series, including the fund
accounting responsibilities with respect to the Trust, the Series and any
Classes. The contract shall have such terms and conditions as the Trustees may,
in their discretion, determine not inconsistent with the Declaration or the
Bylaws. Such services may be provided by one or more Persons.

SECTION 4.4. TRANSFER AGENT. The Trustees may, in their discretion,
from time to time enter into a transfer agency and shareholder service contract
whereby the other party to such contract shall undertake to furnish transfer
agency and shareholder services to the Trust. The contract shall have such terms
and conditions as the Trustees may, in their discretion, determine not
inconsistent with the Declaration or the Bylaws. Such services may be provided
by one or more Persons.

SECTION 4.5. PARTIES TO CONTRACT. Subject to compliance with the
provisions of the 1940 Act, but not withstanding any limitations of present and
future law or custom in regard to delegation of powers by trustees generally,
the Trustees may, at any time and without limiting the generality of their
powers and authority otherwise set forth herein, enter into one or more
exclusive or non-exclusive contracts with any one or more corporations, trusts,
associations, partnerships, limited partnerships, other types of organizations
or individuals ("Contracting Party") to provide for the performance and
assumption of the services, duties and responsibilities to, for or of the Trust
and/or the Trustees as described in Sections 4.1, 4.2, 4.3, and 4.4 above and to
provide for the performance and assumption of such other services, duties and
responsibilities in addition to those set forth above as the Trustees may
determine appropriate (collectively, such services, duties and responsibilities
are referred to as "Services").

The same person may be the Contracting Party for some or all of the
Services and the contracts with respect thereto may contain such terms
interpretive of or in addition to the delineation of the Services for, including
provisions (to the extent consistent with the 1940 Act) relating to the standard
of duty of and the rights to indemnification of the Contacting Party and others,
as the Trustees may determine. Subject to the 1940 Act, nothing herein shall
preclude, prevent or limit the Trust or a Contracting Party from entering into
sub-contractual arrangements for any of the Services.

Subject to the provisions of the 1940 Act, the fact that:

(a) any of the Shareholders, Trustees or officers of the Trust is a
shareholder, director, officer, partner, trustee, employee, manager,
investment adviser, distributor or agent of or for any Contracting
Party, or of or for any parent or affiliate of any Contracting Party or
that the Contracting Party or any parent or affiliate thereof is a
Shareholder or has an interest in the Trust; or

<PAGE> 15

(b) any Contracting Party may have a contract providing for the
rendering of any similar Services to one or more other corporations,
trusts, associations, partnerships, limited partnerships or other
organizations, or has other business or interests shall not affect the
validity of any contract for the performance and assumption of
Services or disqualify any Shareholder, Trustee or officer of the
Trust from voting upon or executing the same or create any liability
or accountability to the Trust or its Shareholders, provided in the
case of any relationship or interest referred to in the preceding
clause (a) on the part of on the part of any Trustee or officer of the
Trust either (i) the material facts as to such relationship of
interest have been disclosed to or are known by the Trustees not
having any such relationship or interest and the contract involved is
approved in good faith by a majority of such Trustees not having any
such relationship or interest (even though such unrelated or
disinterested Trustees are less than a quorum of all of the Trustees);
or (ii) the material facts as to such relationship or interest and as
to the contract have been disclosed to or are known by the
Shareholders entitled to vote thereon and the contract involved is
specifically approved in good faith by vote of the Shareholders; or
(iii) the specific contract involved is fair to the Trust as of the
time it is authorized, approved or ratified by the Trustees or by the
Shareholders.

SECTION 4.6. COMPLIANCE WITH 1940 ACT. Any contract entered into
pursuant to Sections 4.1 or 4.2 shall be consistent with and subject to the
requirements of Section 15 of the 1940 Act (including any amendment thereof or
other applicable Act of Congress hereafter enacted) with respect to its
continuance in effect, its termination and the method of authorization and
approval of such contract or renewal thereof.

ARTICLE V

LIMITATIONS OF LIABILITY OF SHAREHOLDERS
TRUSTEES AND OTHERS

SECTION 5.1. NO PERSONAL LIABILITY OF SHAREHOLDERS, TRUSTEES, ETC. No
Trustee, officer, employee or agent of the Trust shall be subject to any
personal liability whatsoever to any Person, other than the Trust or its
Shareholders, in connection with Trust Property or the affairs of the Trust,
except that arising from bad faith, willful misfeasance, gross negligence or
reckless disregard for his duty to such Person; and all such Persons shall look
solely to the Trust Property for satisfaction of claims of any nature arising in
connection with the affairs of the Trust.

No Shareholder as such shall be subject to any personal liability
whatsoever to any Person in connection with Trust Property or the acts,
obligations or affairs of the Trust. If any Shareholder or former Shareholder
shall be charged or held personally liable for any obligation or liability of
the Trust solely by reason of being or having been a Shareholder and not because
of such Shareholder's acts or omissions or for some other reason, the Trust
(upon proper and timely request by the Shareholder) shall assume the defense
against such charge and satisfy any judgment or settlement thereon, and the
Shareholder or former Shareholder (or his heirs, executors, administrators or
other legal representatives or in the case of a corporation or other entity, its
corporate or other general

<PAGE> 16

successor) shall be entitled out of the assets of the Trust Property to be held
harmless from and indemnified against all loss and expense arising from such
liability.

The exercise by the Trustees of their powers and discretion hereunder
shall be binding upon everyone interested. A Trustee shall be liable for his own
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the office of Trustee, and for nothing else,
and shall not be liable for errors of judgment or mistakes of fact or law.
Subject to the foregoing, (a) the Trustees shall not be responsible or liable in
any event for any neglect or wrongdoing of any officer, agent, employee,
consultant, Investment Adviser, Distributor, Administrator, or Transfer Agent of
the Trust, nor shall any Trustee be responsible for the act or omission of any
other Trustee; and (b) the Trustees may rely on the advice of counsel or experts
as described in Section 5.6 below.

SECTION 5.2. MANDATORY INDEMNIFICATION.

(a) Subject to the exceptions and limitations contained in paragraph
(b) below:

(i) Every person who is, or has been a Trustee or officer of
the Trust shall be indemnified by the Trust against all
liability and against all expenses reasonably incurred or paid
by him in connection with any claim, action, suit or
proceeding in which he becomes involved as a party or
otherwise by virtue of his being or having been a Trustee or
officer and against amounts paid or incurred by him in the
settlement thereof.

(ii) The words "claim", "action", "suit" or "proceeding" shall
apply to all claims, actions, suits or proceedings (civil,
criminal or other, including appeals), actual or threatened;
and the words "liability" and "expenses" shall include,
without limitation, attorneys' fees, costs, judgments, amounts
paid in settlement, fines, penalties and other liabilities.

(b) No indemnification shall be provided hereunder to a Trustee or
officer:

(i) against any liability to the Trust or the Shareholders by
reason of a final adjudication by the court or other body
before which the proceeding was brought that he engaged in
willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office;

(ii) with respect to any matter as to which he shall have been
finally adjudicated not to have acted in good faith or in the
reasonable belief that his action was in or not opposed to the
best interest of the Trust; or

(iii) in the event of a settlement or other disposition not
involving a final adjudication as provided in paragraphs
(b)(i) or (b)(ii) resulting in a payment by a Trustee or
officer, unless there has been either a determination that
such Trustee or officer did not engage in willful misfeasance,
bad faith, gross negligence or reckless

<PAGE> 17

disregard of the duties involved in the conduct of his
office by the court or other body approving the settlement
or other disposition or by a reasonable determination, based
upon a review of readily available facts (as opposed to a
full trial-type inquiry) that he did not engage in such
conduct:

(A) by vote of a majority of the Disinterested
Trustees acting on the matter (provided that a
majority of the Disinterested Trustees then in office
act on the matter); or

(B) by written opinion of independent legal counsel.

(c) The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable, shall
not affect any other rights to which any Trustee or officer may now or
hereafter be entitled, shall continue as to a Person who has ceased to
be such Trustee or officer and shall inure to the benefit of the heirs,
executors and administrators of such Person. Nothing contained herein
shall affect any rights to indemnification to which personnel other
than Trustees and officers may be entitled by contract or otherwise
under law.

(d) Expenses of preparation and presentation of a defense to any claim,
action, suit or proceeding of the character described in paragraph (a)
of this Section 5.2 shall be advanced by the Trust prior to final
disposition thereof upon receipt of an undertaking by or on behalf of
the recipient to repay such amount if it is ultimately determined that
he is not entitled to indemnification under this Section 5.2, provided
that either:

(i) such undertaking is secured by a surety bond or some other
appropriate security or the Trust shall be insured against
losses arising out of any such advances; or

(ii) a majority of the Disinterested Trustees acting on the
matter (provided that a majority of the Disinterested Trustees
then in office act on the matter) or an independent legal
counsel in a written opinion, shall determine, based upon a
review of readily available facts (as opposed to a full
trial-type inquiry), that there is reason to believe that the
recipient ultimately will be found entitled to
indemnification.

As used in this Section 5.2, a "Disinterested Trustee" is one (i) who
is not an "Interested Person" of the Trust (including anyone who has been
exempted from being an "Interested Person" by any rule, regulation or order of
the Commission), and (ii) against whom none of such actions, suits or other
proceedings or another action, suit or other proceeding on the same similar
grounds is then or had been pending.

Agents and employees of the Trust who are not Trustees or officers of
the Trust may be indemnified under the same standards and procedures set forth
in this Section 5.2., in the discretion of the Board.

<PAGE> 18

SECTION 5.4. NO BOND REQUIRED OF TRUSTEES. No Trustee shall be
obligated to give any bond or other security for the performance of any of his
duties hereunder.

SECTION 5.5. NO DUTY OF INVESTIGATION; NOTICE IN TRUST INSTRUMENTS,
ETC. All Persons extending credit to, contracting with or having any claim
against the Trust shall look only to the assets of the Trust for payment under
such credit, contract or claim; and neither the Shareholders nor the Trustees,
nor any of the Trust's officers, employees or agents, whether past, present or
future, shall be personally liable therefor. Every obligation, contract,
instrument, certificate, Share, other security of the Trust or undertaking, and
every other act or thing whatsoever executed in connection with the Trust shall
be conclusively presumed to have been executed or done by the executors thereof
only in their capacity as Trustees under the Declaration or in their capacity as
officers, employees or agents of the Trust and not personally. Every written
obligation, contract, instrument, certificate, Share, other security of the
Trust or undertaking made or issued by the Trustees or by any officer, employee
or agent may give notice that this Declaration of Trust is on file with the
Secretary of State of Ohio and recite that the same is executed or made by them
not individually, but as Trustee, officer, employee or agent, and that the
obligations of any such instrument are not binding upon any of the them or
Shareholders, individually, but bind only the estate of the applicable Trust,
Series or Class, as set forth in Section 1746.13(A), Ohio Revised Code, and may
contain any further recital which they or he may deem appropriate, but the
omission of such recital shall not operate to bind the Trustees individually.
The Trustees may at all times maintain insurance for the protection of the Trust
Property, its Shareholders, Trustees, officers, employees and agents in such
amount as the Trustees shall deem adequate to cover possible tort liability, and
such other insurance as the Trustees in their sole judgment shall deem
advisable.

SECTION 5.6. RELIANCE ON EXPERTS, ETC. Each Trustee and officer or
employee of the Trust shall, in the performance of his duties, be fully and
completely justified and protected with regard to any act or any failure to act
resulting from reliance in good faith upon the books of account or other records
of the Trust, upon an opinion of counsel, or upon reports made to the Trust by
any of its officers or employees or by the Investment Adviser, the Distributor,
the Administrator, Transfer Agent, selected dealers, accountants, appraisers or
other experts or consultants selected with reasonable care by the Trustees,
officers or employees of the Trust, regardless of whether such counsel or expert
may also be a Trustee.

SECTION 5.7. INDEMNIFICATION NOT EXCLUSIVE, ETC. The right of
indemnification provided by this Article V shall not be exclusive of or affect
any other rights to which any Trustee or officer may be entitled. As used in
this Article V, Trustee or officer shall include such person's heirs, executors
and administrators. Nothing contained in this Article V shall affect any rights
to indemnification to which personnel of the Trust, other than any Trustee or
officer, may be entitled, by contract or otherwise under law, nor the power of
the Trust to purchase and maintain liability insurance on behalf of any such
person.

SECTION 5.8. LIABILITY OF SERIES. Liabilities belonging to any Series
or Class of the Trust, including, without limitation, expenses, fees, charges,
taxes, and liabilities incurred or arising in connection with the management
thereof, shall be paid only from the assets belonging to that Series or Class.

<PAGE> 19

ARTICLE VI

SHARES OF BENEFICIAL INTEREST

SECTION 6.1. BENEFICIAL INTEREST. The interest of the Shareholders
hereunder shall be divided into transferable shares of beneficial interest,
without par value. The number of shares of beneficial interest authorized
hereunder, and the number of Shares of each Series or Class thereof that may be
issued hereunder, is unlimited. The Trustees shall have the exclusive authority
without the requirement of Shareholder authorization or approval to establish
and designate one or more Series of Shares and one or more Classes thereof as
the Trustees deem necessary, appropriate or desirable. Each Share of any Series
shall represent a beneficial interest only in the assets of that Series. Subject
to the provisions of Section 6.11 hereof, the Trustees may also authorize the
creation of additional Series of Shares (the proceeds of which may be invested
in separate and independent investment portfolios) and additional Classes of
Shares within any Series. All Shares issued hereunder including, without
limitation, Shares issued in connection with a dividend in Shares or a split of
Shares, shall be fully paid and non-assessable.

SECTION 6.2. ESTABLISHMENT AND DESIGNATION OF SERIES. Without limiting
the authority of the Trustees set forth above to establish and designate any
further Series or Class or to classify all or any part of the issued Shares of
any Series to make them part of an existing or newly created Class or to amend
rights and preferences of new or existing Series or Class, including the
following Series, all without Shareholder approval, there are hereby established
and designated, subject to the provisions and rights of this Declaration of
Trust, (i) initial Series of Shares designated Series A, which shall represent
interests in the Nationwide Mid Cap Growth Fund, Series B, which shall represent
interests in the Nationwide Growth Fund, Series C, which shall represent
interests in the Nationwide Fund, Series D, which shall represent interests in
the Nationwide Bond Fund, Series E, which shall represent interests in the
Nationwide Tax-Free Income Fund, Series F, which shall represent interests in
the Nationwide Long-Term U.S. Government Bond Fund, Series G, which shall
represent interests in the Nationwide Intermediate U.S. Government Bond Fund,
Series H, which shall represent interests in the Nationwide Money Market Fund
and Series I, which shall represent interests in the Nationwide S&P 500 Index
Fund, (ii) three Classes of Shares for each current Series of the Trust, other
than Series H and I, which Classes shall be known as Class A, Class B and Class
D Shares. Series H will issue Shares without any class designation. Series I
will issue Shares known as Local Fund Shares.

SECTION 6.3. RIGHTS OF SHAREHOLDERS. The ownership of the Trust
Property and the property of each Series of the Trust and the right to conduct
any business as described herein are vested exclusively in the Trustees, and the
Shareholders shall have no interest therein other than the beneficial interest
conferred by their Shares, and they shall have no right to call for any
partition or division of any property, profits, rights or interests of the Trust
nor can they be called upon to assume any losses of the Trust or suffer an
assessment of any kind by virtue of their ownership of Shares. Every Shareholder
by virtue of having become a Shareholder shall be held to have expressly
assented and agreed to the terms hereof and to have become a party hereto. The
Shares shall be personal property giving only the rights in the Declaration
specifically set forth. The Shares shall not entitle the holder to preference,
preemptive, appraisal, conversion or exchange rights, except as the Trustees

<PAGE> 20

may determine with respect to any Series or Class of Shares. The death of a
Shareholder during the continuance of the Trust shall not operate to terminate
the Trust nor entitle the representative of any deceased Shareholder to an
accounting or to take any action in court or elsewhere against the Trust or the
Trustees, but only to the rights of said decedent under this Declaration of
Trust.

SECTION 6.4. TRUST ONLY. It is the intention of the Trustees to create
only the relationship of Trustee and beneficiary between the Trustees and each
Shareholder from time to time. It is not the intention of the Trustees to create
a general partnership, limited partnership, joint stock association,
corporation, bailment or any form of legal relationship other than an Ohio
business trust. Nothing in the Declaration shall be construed to make the
Shareholders, either by themselves or with the Trustees, partners or members of
a joint stock association.

SECTION 6.5. ISSUANCE OF SHARES. The Trustees, in their discretion,
may, from time to time without vote of the Shareholders, issue Shares, in
addition to the then issued and outstanding Shares and Shares held in the
treasury, to such party or parties and for such amount and type of
consideration, including cash or property, at such time or times (including,
without limitation, each business day in accordance with the determination of
net asset value per Share as set forth in Section 8.1 hereof), and on such terms
as the Trustees may deem best, except that only Shares previously contracted to
be sold may be issued during any period when the right of redemption is
suspended, and may in such manner acquire other assets (including the
acquisition of assets subject to, and in connection with the assumption of
liabilities) and businesses. In connection with any issuance of Shares, the
Trustees may issue fractional Shares and reissue and resell full and fractional
Shares held in the treasury. Any outstanding fractional Share of any Series
shall carry proportionately all the rights and obligations of a whole Share of
that Series, including with respect to voting, receipt of dividends and
distributions, redemption of Shares, and liquidation of the Trust. Shares may
also be issued in separate Series or Classes as provided in Section 6.11 hereof.
The Trustees may from time to time divide or combine the Shares into a greater
or lesser number without thereby changing the proportionate beneficial interests
in the Trust. Contributions to the Trust may be accepted for, and Shares shall
be redeemed as, whole Shares and/or 1/1,000ths of a Share or integral multiples
thereof.

SECTION 6.6. REGISTER OF SHARES; SHARE CERTIFICATES. A register will be
kept at the principal office of the Trust or at an office of the Transfer Agent
which shall contain the names and addresses of the Shareholders and the number
of Shares held by them respectively and a record of all transfers thereof. Such
register shall be conclusive as to who are the holders of the Shares and who
shall be entitled to receive dividends or distributions or otherwise to exercise
or enjoy the rights of Shareholders. No Shareholder shall be entitled to receive
payment of any dividend or distribution, nor to have notice given to him as
herein or in the Bylaws provided, until he has given his address to the Transfer
Agent or such other officer or agent of the Trustees as shall keep the said
register for entry thereon. It is not contemplated that certificates will be
issued for the Shares; however, the Trustees, in their discretion, may authorize
the issuance of Share certificates and promulgate appropriate rules and
regulations as to their use.

SECTION 6.7. TRANSFER OF SHARES. Shares shall be transferable on the
records of the Trust only by the record holder thereof or by his agent thereunto
duly authorized in writing, upon delivery to the Trustees or the Transfer Agent
of a duly executed instrument of transfer, together with such

<PAGE> 21

evidence of the genuineness of each such execution and authorization and of
other matters as may reasonably be required. Upon such delivery, the transfer
shall be recorded on the register of the Trust. Until such record is made, the
Shareholder of record shall be deemed to be the holder of such Shares for all
purposes hereunder and neither the Trustees nor any Transfer Agent or registrar
nor any officer, employee or agent of the Trust shall be affected by any notice
of the proposed transfer.

Any person becoming entitled to any Shares in consequence of the death,
bankruptcy, or incompetence of any Shareholder, or otherwise by operation of
law, shall be recorded on the register of Shares as the holder of such Shares
upon production of the proper evidence thereof to the Trustees or the Transfer
Agent, but until such record is made, the Shareholder of record shall be deemed
to be the holder of such Shares for all purposes hereunder and neither the
Trustees nor any Transfer Agent or registrar nor any officer or agent of the
Trust shall be affected by any notice of such death, bankruptcy or incompetence,
or other operation of law.

SECTION 6.8. NOTICES. Any and all notices to which any Shareholder may
be entitled and any and all communications shall be deemed duly served or given
if mailed, postage prepaid, addressed to any Shareholder of record at his last
known address as recorded on the register of the Trust.

SECTION 6.9. TREASURY SHARES. Shares held in the treasury shall, until
reissued pursuant to Section 6.5, not confer any voting rights on the Trustees,
nor shall such Shares be entitled to any dividends or other distributions
declared with respect to the Shares.

SECTION 6.10. INVESTMENTS IN TRUST. The Trustees may accept investments
in the Trust from such persons and on such terms and for such consideration, not
inconsistent with the provisions of the 1940 Act, as they from time to time
authorize. The Trustees may authorize any Distributor, Custodian, Transfer Agent
or other Person to accept orders for the purchase of Shares that conform to such
authorized terms and to reject any purchase orders for Shares whether or not
conforming to such authorized terms.

SECTION 6.11. SERIES OR CLASS DESIGNATION. The Trustees, in their
discretion, may authorize the issuance of Shares of multiple Series or Classes,
and the different Series or Classes shall be established and designated, and the
variations in the relative rights and preferences as between the different
Series or Classes shall be fixed and determined by the Trustees, provided, that
all Shares shall be identical except that there may be variations so fixed and
determined between different Series as to investment objective, purchase price,
right of redemption and the price, terms and manner of redemption, special and
relative rights as to dividends and on liquidation, conversion rights,
conditions under which the several Series shall have separate voting rights or
no voting rights, and such other matters, as the Trustees deem appropriate. All
references to Shares in the Declaration shall be deemed to be shares of any or
all Series as the context may require.

If the Trustees shall authorize the issuance of Shares of the Trust
with multiple Series or Classes, the following provisions shall be applicable:

(a) The number of authorized shares and the number of shares of each
Series or Class that may be issued shall be unlimited. The Trustees may
classify or reclassify any unissued

<PAGE> 22

Shares or any Shares previously issued and reacquired of any Series or
Class into one or more other Series, or one or more other Classes that
may be established and designated from time to time. The Trustees may
hold as treasury shares (of the same or some other Series or Class),
reissue for such consideration and on such terms as they may
determine, or cancel any Shares of any Series or Class reacquired by
the Trust at their discretion from time to time.

(b) The power of the Trustees to invest and reinvest the Trust Property
shall be governed by Section 3.2 of this Declaration with respect to
the existing Series or Classes which represents the interests in the
assets of the Trust immediately prior to the establishment of any
additional Series or Classes and the power of the Trustees to invest
and reinvest assets applicable to any such additional Series or Classes
shall be as set forth in the instrument of the Trustees establishing
such Series or Classes which is hereinafter described.

(c) All consideration received by the Trust for the issue or sale of
Shares of a particular Series, together with all assets in which such
consideration is invested or reinvested, all income, earnings, profits
and proceeds thereof, including any proceeds derived from the sale,
exchange or liquidation of such assets, and any funds or payments
derived from any reinvestment of such proceeds in whatever form the
same may be, shall irrevocably belong to that Series for all purposes,
subject only to the rights of creditors of such Series, and shall be so
recorded upon the books of account of the Trust. In the event that
there are any assets, income, earnings, profits, and proceeds thereof,
funds, or payments which are not readily identifiable as belonging to
any particular Series, the Trustees or their delegate shall allocate
them among any one or more of the Series established and designated
from time to time in such manner and on such basis as the Trustees, in
their sole discretion, deem fair and equitable. Each such allocation by
the Trustees shall be conclusive and binding upon the shareholders of
all Series for all purposes. No holder of Shares of any Series shall
have any claim on or right to any assets allocated or belonging to any
other Series.

(d) The assets belonging to each particular Series shall be charged
with the liabilities of the Trust allocated to that Series and all
expenses, costs, charges and reserves attributable to that Series which
are not readily identifiable as belonging to any particular Class, and
any general liabilities, expenses, costs, charges or reserves of the
Trust which are not readily identifiable as belonging to any particular
Series shall be allocated and charged by the Trustees or their delegate
to and among any one or more of the Series, established and designated
from time to time in such manner and on such basis as the Trustees, in
their sole discretion, deem fair and equitable and no Series shall be
liable to any person except for its allocated share. Each allocation of
liabilities, expenses, costs, charges and reserves by the Trustees or
their delegate shall be conclusive and binding upon the Shareholders of
all Series and Classes for all purposes. The Trustees shall have full
discretion, to the extent not inconsistent with the 1940 Act, to
determine which items shall be treated as income and which items as
capital; and each such determination and allocation shall be conclusive
and binding upon the Shareholders. The assets of a particular Series of
the Trust shall, under no circumstances, be charged with liabilities,
expenses, costs, charges and reserves attributable to any other Series
thereof of the Trust. All Persons extending credit to, contracting
with,

<PAGE> 23

or having any claim against a particular Series of the Trust shall look
only to the assets of that particular Series for payment of such
credit, contract or claim.

(e) With respect to any Series, dividends and distributions on Shares
of a particular Series or Class may be paid or credited in such manner
and with such frequency as the Trustees may determine, which may be
daily or otherwise, pursuant to a standing resolution or resolutions
adopted only once or with such frequency as the Trustees may determine,
to the holders of Shares of that Series or Class, from such of the
income and capital gains, accrued or realized, from the assets
belonging to that Series, as the Trustees may determine, after
providing for actual and accrued liabilities belonging to that Series
or Class or after retaining such amounts as the Trustees may deem
desirable to use in the conduct of the Trust's current or future
business requirements. All dividends and distributions on Shares of a
particular Series or Class shall be distributed pro rata to the holders
of that Series or Class in proportion to the number of Shares of that
Series or Class held by such holders at the date and time of record
established for the payment of such dividends or distributions, except
that in connection with any dividend or distribution program or
procedure the Trustees may determine that no dividend or distribution
shall be payable on Shares as to which the Shareholder's purchase order
and/or payment have not been received by the time or times established
by the Trustees under such program or procedure. Such dividends and
distributions may be made in cash or Shares or a combination thereof as
determined by the Trustees or pursuant to any program that the Trustees
may have in effect at the time for the election by each Shareholder of
the mode of the making of such dividend or distribution to that
Shareholder. Any such dividend or distribution paid in Shares will be
paid at the net asset value thereof as determined in accordance with
Section 8.1.

The dividends and distributions of investment income and
capital gains with respect to Shares of a Class shall be in such amount
as may be declared from time to time by the Trustees, and such
dividends and distributions may vary between the Classes to reflect
differing allocations of the expenses of the Trust between the Classes
to such extent and for such purposes as the Trustees may deem
appropriate.

(f) Each Share of a Series of the Trust shall represent a beneficial
interest in the net assets of such Series. Each holder of Shares of a
Series or Class thereof shall be entitled to receive his pro rata Share
of distributions of income and capital gains made with respect to such
Series or Class net of liabilities, expenses, costs, charges and
reserves belonging and allocated to such Series or Class. Upon
redemption of his Shares or indemnification for liabilities incurred by
reason of his being or having been a Shareholder of a Series, such
Shareholder shall be paid solely out of the funds and property of such
Series or Class of the Trust. Upon liquidation or termination of a
Series or Class thereof of the Trust, a Shareholder of such Series or
Class thereof shall be entitled to receive a pro rata Share of the net
assets of such Series based on the net asset value of his Shares. A
Shareholder of a particular Series of the Trust shall not be entitled
to commence or participate in a derivative or class action on behalf of
any other Series or the Shareholders of any other Series of the Trust.

<PAGE> 24

(g) The proceeds of the redemption of a Class B Share (including a
fractional Share), except those purchased through reinvestment of a
dividend or a distribution, shall be reduced by the amount of any
applicable contingent deferred sales charge payable on such redemption
to the distributor of the Class B Shares pursuant to the terms of the
issuance of the Shares (to the extent consistent with the 1940 Act, or
regulations or exemptions thereunder), and the Trust shall promptly pay
to such distributor the amount of any such contingent deferred sales
charge.

(h)(1) Each Class B Share, other than a Share purchased through the
reinvestment of a dividend or a distribution with respect to the Class
B Share, shall be converted automatically, and without any action or
choice on the part of the holder thereof, into Class A Shares, at the
relative net asset value of each Class, at the time of the calculation
of the net asset value of such Class of Shares on the date that is the
first business day of the month after which the seventh anniversary of
the issuance of such Class B Shares occurs (which for the purpose of
calculating the holding period required for conversion, shall mean (i)
the date on which the issuance of such Class B Shares occurred or (ii)
for Class B Shares obtained through an exchange, the date on which the
issuance of the Class B Shares were exchanged directly, or through a
series of exchanges, for the Trust's Class B Shares (the "Conversion
Date")).

(h)(2) Each Class B Share purchased through the reinvestment of a
dividend or a distribution with respect to the Class B Shares and the
dividends and distributions on such Shares shall be segregated in a
separate sub-account on the share records of the Trust for each of the
holders of record thereof. On any Conversion Date, a number of the
Shares held in the sub-account of the holder of record of the Share or
Shares being converted, calculated in accordance with the next
following sentence, shall be converted automatically, and without any
action of choice on the part of the holder thereof, into Class A Shares
of the same Series. The number of Shares in the holder's sub-account so
conveyed shall bear the same relation to the total number of Shares
maintained in the sub-account on the Conversion Date as the number of
Shares of the holder converted on the Conversion Date pursuant to
subsection (h)(1) hereof bears to the total number of Class B Shares of
the holder on the Conversion Date not purchased through the automatic
reinvestment of dividends or distributions with respect to the Class B
Shares.

(h)(3) The number of Shares of Class A Shares into which a Class B
Share is converted pursuant to subsections (h)(1) and (h)(2) hereof
shall equal the number (including for this purpose fractions of a
Share) obtained by dividing the net asset value per Share of the Class
B Share for purposes of sales and redemptions thereof at the time of
the calculation of the net asset value on the Conversion Date by the
net asset value per Share of the Class A Shares for the purposes of
sales and redemptions thereof at the time of the calculation of the net
asset value on the Conversion Date.

(h)(4) On the Conversion Date, the Class B Shares converted into Class
A Shares will cease to accrue dividends and will no longer be
outstanding and the rights of the holders thereof will cease (except
the right to receive declared but unpaid dividends to the Conversion
Date).

<PAGE> 25

(h)(5) The Trustees shall have full power and authority to adopt such
other terms and conditions concerning the conversion of the Class B
Shares to Class A Shares as they deem appropriate; provided such terms
and conditions are not inconsistent with the terms contained herein and
subject to any restrictions or requirements under the 1940 Act and the
rules, regulations and interpretations thereof promulgated or issued by
the Commission or any conditions or limitations contained in an order
issued by the Commission applicable to the Trust.

(i) All Shares of all Series shall have "equal voting rights" as
provided in Section 18(i) of the 1940 Act, except as otherwise
permitted or required by the 1940 Act. The holder of each of the Shares
shall be entitled to one vote for each Share held. The Trustees shall
have full power and authority to call meetings of the Shareholders of a
particular Class or Classes of Shares or of one or more particular
Series of Shares, or otherwise call for the action of such Shareholders
on any particular matter. On each matter submitted to a vote of the
Shareholders, all Shares of all Series shall vote as a single class
("Single Class Voting"), provided, however, that (a) as to any matter
with respect to which a separate vote of any Series is required by the
1940 Act, such requirements as to a separate vote by that Series shall
apply in lieu of Single Class Voting as described above; (b) in the
event that the separate vote requirements referred to in (a) above
apply with respect to one or more Series, then, subject to (c) below,
the Shares of all other Series shall vote as a single class; and (c) as
to any matter which does not affect the interest of a particular
Series, only the holders of Shares of the one or more affected Series
shall be entitled to vote.

(j) Except as otherwise provided in this Article VI, the Trustees shall
have full power and authority to determine the designations,
preferences, privileges, sales charges, purchase prices, assets,
liabilities, expenses, costs, charges and reserves belonging or
allocated thereto, limitations and rights, including without limitation
voting, dividend, distribution and liquidation rights, of each Series
and Class of Shares. Subject to any applicable requirements of the 1940
Act, the Trustees shall have the authority to provide that the Shares
of one Class shall be automatically converted into Shares of another
Class of the same Series or that the holders of Shares of any Series or
Class shall have the right to convert or exchange such Shares into
Shares of one or more other Series or Classes of Shares, all in
accordance with such requirements, conditions and procedures as may be
established by the Trustees.

(k) The establishment and designation of any Series or Class of shares
shall be effective upon the execution by a majority of the then
Trustees of an instrument setting forth such establishment and
designation and the relative rights and preferences of such Series, or
as otherwise provided in such instrument. At any time that there are no
shares outstanding of any particular Series or Class previously
established and designated, the Trustees may, by an instrument executed
by a majority of their number, abolish that Series or Class and the
establishment and designation thereof.

<PAGE> 26

ARTICLE VII

REDEMPTIONS

SECTION 7.1. REDEMPTION OF SHARES. All Shares of the Trust shall be
redeemable, at the redemption price determined in the manner set out in this
Declaration. The Trustees shall have full power and authority to vary and change
the right of redemption applicable to the various Series and Classes of Shares.
Redeemed or repurchased Shares may be resold by the Trust.

The Trust shall redeem the Shares at the price determined as
hereinafter set forth, upon the appropriately verified written application of
the record holder thereof (or upon such other form of request as the Trustees
may determine) at such office or agency as may be designated from time to time
for that purpose by the Trustees. The Trustees may from time to time specify
additional conditions, not inconsistent with the 1940 Act, regarding the
redemption of Shares in the Trust's then effective registration statement or
prospectus under the Securities Act of 1933.

SECTION 7.2. PRICE. Shares will be redeemed at their net asset value
determined as set forth in Section 8.1 hereof as of such time as the Trustees
shall have theretofore prescribed by resolution. In the absence of such
resolution, the redemption price of Shares deposited shall be the net asset
value of such Shares next determined as set forth in Section 8.1 hereof after
receipt of such application.

SECTION 7.3. PAYMENT. Payment for such Shares shall be made in cash or
in property out of the assets of the relevant Series of the Trust to the
Shareholder of record at such time and in the manner, not inconsistent with the
1940 Act or other applicable laws, as may be specified from time to time in the
Trust's then effective registration statement or prospectus under the Securities
Act of 1933, subject to the provisions of Section 7.3 hereof. Notwithstanding
the foregoing, the Trust or its delegate may withhold from such redemption
proceeds any amount arising (i) from a liability of the redeeming Shareholder to
the Trust, or (ii) in connection with any federal or state tax withholding
requirements.

SECTION 7.4. EFFECT OF SUSPENSION OF DETERMINATION OF NET ASSET VALUE.
If, pursuant to Section 7.8 hereof, the Trustees shall declare a suspension of
the determination of net asset value with respect to Shares of the Trust or of
any Series or Class thereof, the rights of Shareholders (including those who
shall have applied for redemption pursuant to Section 7.1 hereof but who shall
not yet have received payment) to have Shares redeemed and paid for by the Trust
shall be suspended until the termination of such suspension is declared. Any
record holder who shall have his redemption right so suspended may, during the
period of such suspension, by appropriate written notice of revocation at the
office or agency where application was made, revoke any application for
redemption not honored and withdraw any certificates on deposit. The redemption
price of Shares for which redemption applications have not been revoked shall be
the net asset value of such Shares next determined as set forth in Section 8.1
after the termination of such suspension, and payment shall be made within seven
(7) days after the date upon which the application was made plus the period
after such application during which the determination of net asset value was
suspended.

<PAGE> 27

SECTION 7.5. REPURCHASE BY AGREEMENT. The Trust may repurchase Shares
directly, or through the Distributor or another agent designated for the
purpose, by agreement with the owner thereof at a price not exceeding the net
asset value per Share determined as of the time when the purchase or contract of
purchase is made or the net asset value as of any time which may be later
determined pursuant to Section 8.1 hereof, provided payment is not made for the
Shares prior to the time as of which such net asset value is determined.

SECTION 7.6. REDEMPTION OF SHAREHOLDER'S INTEREST. The Trust shall have
the right at any time without prior notice to the Shareholder to redeem Shares
of any Shareholder for their then current net asset value per Share if the
aggregate net asset value of such Shares is less than the minimum amount
established by the Trustees from time to time, subject to such terms and
conditions as the Trustees may approve, and subject to the Trust's giving
general notice to all Shareholders of its intention to avail itself of such
right, either by publication in the Trust's prospectus, if any, or by such other
means as the Trustees may determine.

SECTION 7.7. REDUCTIONS IN NUMBER OF OUTSTANDING SHARES PURSUANT TO NET
ASSET VALUE FORMULA. The Trust may also reduce the number of outstanding Shares
pursuant to the provisions of Section 8.2.

SECTION 7.8. SUSPENSION OF RIGHT OF REDEMPTION. The Trust may declare a
suspension of the right of redemption or postpone the date of payment or
redemption for the whole or any part of any period (i) during which the New York
Stock Exchange is closed other than customary weekend and holiday closings; (ii)
during which trading on the New York Stock Exchange is restricted; (iii) during
which an emergency exists as a result of which disposal by the Trust of
securities owned by it is not reasonably practicable or it is not reasonably
practicable for the Trust fairly to determine the value of its net assets; or
(iv) during any other period when the Commission may for the protection of
security holders of the Trust by order permit suspension of the right of
redemption or postponement of the date of payment or redemption; provided that
applicable rules and regulations of the Commission shall govern as to whether
the conditions prescribed in (ii), (iii), or (iv) exist. Such suspension shall
take effect at such time as the Trust shall specify, but not later than the
close of business on the business day next following the declaration of
suspension, and thereafter there shall be no right of redemption or payment on
redemption until the Trust shall declare the suspension at an end, except that
the suspension shall terminate in any event on the first day on which said stock
exchange shall have reopened or the period specified in (ii) or (iii) shall have
expired (as to which, in the absence of an official ruling by the Commission,
the determination of the Trust shall be conclusive). In the case of a suspension
of the right of redemption, a Shareholder may either withdraw his request for
redemption or receive payment based on the net asset value existing after the
termination of the suspension.

SECTION 7.9. REDEMPTION OF SHARES; DISCLOSURE OF HOLDING. If the
Trustees shall, at any time and in good faith, be of the opinion that direct or
indirect ownership of Shares or other securities of the Trust has or may become
concentrated in any Person to an extent which would disqualify the Trust as a
regulated investment company under the Internal Revenue Code, then the Trustees
shall have the power by lot or other means deemed equitable by them (i) to call
for redemption by any such Person of a number, or principal amount, of Shares or
other securities of the

<PAGE> 28

Trust sufficient to maintain or bring the direct or indirect ownership of Shares
or other securities of the Trust into conformity with the requirements for such
qualification; and (ii) to refuse to transfer or issue Shares or other
securities of the Trust to any Person whose acquisition of the Shares or other
securities of the Trust in question would result in such disqualification. The
redemption shall be effected at the redemption price and in the manner provided
in Section 7.1.

The holders of Shares or other securities of the Trust shall upon
demand disclose to the Trustees in writing such information with respect to
direct and indirect ownership of Shares or other securities of the Trust as the
Trustees deem necessary to comply with the provisions of the Internal Revenue
Code, or to comply with the requirements of any other authority.

ARTICLE VIII

DETERMINATION OF NET ASSET VALUE
NET INCOME AND DISTRIBUTIONS

SECTION 8.1. NET ASSET VALUE. For all purposes under this Declaration
of Trust, the net asset value of any Series or Class shall be determined by at
least once on each business day, as of the close of the New York Stock Exchange
or as of such other time or times as the Trustees shall determine.

The value of the assets of any Series of the Trust shall include the
appraisal of the securities allocated to such Series, such appraisal to be on
the basis of the amortized cost of money market securities or market value in
the case of other securities, or, consistent with the rules and regulations of
the Commission, by such other method as shall be deemed to reflect the fair
value thereof, determined in good faith by or under the direction of the
Trustees, together with all the other assets belonging to such Series. From the
total value of said assets, there shall be deducted all indebtedness, interest,
taxes, payable or accrued, including estimated taxes on unrealized book profits,
expenses and management charges accrued to the appraisal date, net income
determined and declared as a distribution and all other items in the nature of
liabilities attributable to such Series which shall be deemed appropriate. The
net asset value per Share of the Shares of any Series shall be the quotient
obtained by dividing the resulting amount by the total number of Shares of that
Series outstanding. The power and duty to make the daily calculations may be
delegated by the Trustees to the Investment Adviser, the Custodian, the Transfer
Agent or such other Person as the Trustees by resolution may determine. The
Trustees may suspend the daily determination of net asset value to the extent
permitted by the 1940 Act.

SECTION 8.2. DISTRIBUTIONS TO SHAREHOLDERS. As described in Section
6.11, the Trustees shall from time to time distribute ratably among the
Shareholders of the Trust or of a Series or a Class thereof such proportion of
the net profits, surplus (including paid-in surplus), capital, or assets held by
the Trustees as they may deem proper. The Trustees may adopt and offer to
Shareholders such dividend reinvestment plans, cash dividend payout plans or
related plans as the Trustees shall deem appropriate.

Inasmuch as the computation of net income and gains for Federal income
tax purposes may vary from the computation thereof on the books, the above
provisions shall be interpreted to give the

<PAGE> 29

Trustees the power in their discretion to distribute for any fiscal year as
ordinary dividends and as capital gains distributions, respectively, additional
amounts sufficient to enable the Trust or the Series to avoid or reduce
liability for taxes.

SECTION 8.3. DETERMINATION OF NET INCOME. The term "net income" with
respect to a Series or Class of shares is hereby defined as the gross earnings
of the Series or Class, excluding gains on sales of securities and stock
dividends received, less the expenses of the Trust allocated to the Series or
Class by the Trustees in such manner as they determine to be fair and equitable
or otherwise chargeable to the Series or Class. The expenses shall include (1)
taxes attributable to the income of the Trust exclusive of gains on sales, and
(2) other charges properly deductible for the maintenance and administration of
the Trust; but there shall not be deducted from gross or net income any losses
on securities, realized or unrealized. The Trustees shall otherwise have full
discretion to determine which items shall be treated as income and which items
as capital and their determination shall be binding upon the Shareholders.

SECTION 8.4. POWER TO MODIFY FOREGOING PROCEDURES. Notwithstanding any
of the foregoing provisions of this Article VIII, the Trustees may prescribe, in
their absolute discretion, such other bases and times for determining the per
Share net asset value of the Shares or net income, or the declaration and
payment of dividends and distributions as they may deem necessary or desirable.
Without limiting the generality of the foregoing, the Trustees may establish
additional Series or Classes of Shares in accordance with Section 6.11, and
declare dividends thereon in such manner as they shall determine.

ARTICLE IX

DURATION; TERMINATION OF TRUST
AMENDMENT; MERGERS; ETC.

SECTION 9.1. DURATION. The Trust shall continue without limitation of
time but subject to the provisions of this Article IX.

SECTION 9.2. TERMINATION OF TRUST.

(a) The Trust or any Series or Class of the Trust may be terminated:

(i) by the affirmative vote of the holders of a majority of
the Shares voting at any meeting of Shareholders, or

(ii) by an instrument in writing, without a meeting, signed by
a majority of the Trustees and consented to by the holders of
a majority of Shares outstanding and entitled to vote, or by
such other vote as may be established by the Trustees with
respect to any Series or Class of Shares.

Upon the termination of the Trust or any one or more Series or Class:

<PAGE> 30

(i) The Trust or the Series or Class, as applicable, shall
carry on no business except for the purpose of winding up its
affairs or the affairs of such Series or Class and that
required by the 1940 Act.

(ii) The Trustees shall proceed to wind up the affairs of the
Trust and/or the Series or Class and all of the powers of the
Trustees under this Declaration shall continue until the
affairs of the Trust or any Series or Class shall have been
wound up, including the power to fulfill or discharge the
contracts of the Trust or the Series of the Trust, collect its
assets, sell, convey, assign, exchange, transfer or otherwise
dispose of all or any part of the remaining Trust Property to
one or more persons at public or private sale for
consideration which may consist in whole or in part of cash,
securities or other property of any kind, discharge or pay its
liabilities, and to do all other acts appropriate to liquidate
its business; provided that any sale, conveyance, assignment,
exchange, transfer or other disposition of all or
substantially all the Trust Property shall require Shareholder
approval in accordance with Section 9.4 hereof.

(iii) After paying or adequately providing for the payment of
all liabilities, and upon receipt of such releases,
indemnities and refunding agreements, as they deem necessary
for their protection, the Trustees may distribute the
remaining Trust Property, in cash or in kind or partly each,
among the Shareholders according to their respective rights.

(b) After termination of the Trust or any Series or Class of the Trust
and distribution to the Shareholders as herein provided, a majority of
the Trustees shall execute and lodge among the records of the Trust an
instrument in writing setting forth the fact of such termination, and
the Trustees shall thereupon be discharged from all further liabilities
and duties hereunder, and the rights and interests of all Shareholders
thereof shall thereupon cease with regard to the Trust, Series or
Class, as applicable.

SECTION 9.3. AMENDMENT PROCEDURE.

(a) All rights granted to the Shareholders under this Declaration are
granted subject to the reservation of the right to amend this
Declaration as provided herein, except that no amendment shall repeal
the limitations on personal liability of any Shareholder or Trustee or
repeal the prohibition of assessment upon the Shareholders without the
express consent of each Shareholder or Trustee involved. Subject to the
foregoing, the Trustees may amend this Declaration without the vote or
consent of Shareholders to designate Series or Classes in accordance
with Sections 6.2 and 6.11 hereof, to change the name of the Trust or
any Series or Class thereof, to supply any omission, to cure, correct
or supplement any ambiguous, defective or inconsistent provision
hereof, or if they deem it necessary to conform this Declaration to the
requirements of applicable federal laws or regulations or the
requirements of the regulated investment company provisions of the
Internal Revenue Code, or to make any other changes in the Declaration
which do not materially adversely affect the rights of Shareholders
hereunder, but the Trustees shall not be liable for failing to do so.
In addition amendment of this Declaration of Trust as it may affect any
one or more Series may

<PAGE> 31

be effected by vote of the Trustees at any time when the Trust has no
outstanding Shares or Shareholders of such Series.

(b) No amendment may be made under this Section 9.3 which would change
any rights with respect to any Shares of the Trust by reducing the
amount payable thereon upon liquidation of the Trust or by diminishing
or eliminating any voting rights pertaining thereto, except with the
vote or consent of the holders of two-thirds of the Shares outstanding
and entitled to vote, or by such other vote as may be established by
the Trustees with respect to any Series of Shares.

(c) Amendments shall be effective upon the taking of action as provided
in this section or at such later time as shall be specified in the
applicable vote or instrument. A certificate signed by a majority of
the Trustees setting forth an amendment and reciting that it was duly
adopted by the Shareholders or by the Trustees as aforesaid or a copy
of the Declaration, as amended, and executed by a majority of the
Trustees, shall be conclusive evidence of such amendment when lodged
among the records of the Trust.

Notwithstanding any other provision hereof, until such time as a
Registration Statement under the Securities Act of 1933, as amended, covering
the first public offering of securities of the Trust shall become effective, or
at any time there are no longer outstanding any Shares of the Trust, this
Declaration may be terminated or amended in any respect by the affirmative vote
of a majority of the Trustees or by an instrument signed by a majority of the
Trustees.

SECTION 9.4. MERGER, CONSOLIDATION AND SALE OR DISPOSITION OF ASSETS.
The Trustees may sell, convey and transfer the assets of the Trust, or the
assets belonging to one or more or all Series, to another trust, partnership,
association or corporation organized under the laws of any state of the United
States, or to the Trust to be held as assets belonging to one or more Series of
the Trust, in exchange for cash, shares or other securities (including, in the
case of a transfer to another Series of the Trust, Shares of such other Series)
with such transfer being made subject to, or with the assumption by the
transferee, of the liabilities belonging to each Series the assets of which are
so transferred; provided, however, that no assets belonging to the Trust or to
any particular Series shall be so transferred unless the terms of such transfer
shall have first been approved at a meeting called for that purpose by the
affirmative vote of Shareholders holding a majority of the voting power of Trust
or of each Series affected. Following such transfer, the Trustees shall
distribute such cash, shares or other securities (giving due effect to the
assets and liabilities belonging to and any other differences among the various
Series the assets belonging to which have so been transferred) among the
Shareholders of the Series the assets belonging to which have been so
transferred; and if all the assets of the Series or Trust have been so
transferred, the Series or Trust, as the case may be, shall be terminated.

The Trust or any Series thereof may be a party, with one or more
entities (including another Series) to an agreement of merger or consolidation;
provided, however, that any such agreement of merger or consolidation shall be
approved by the Trustees, and by the affirmative vote of Shareholders holding a
majority of the voting power of the Trust or of each Series affected.

<PAGE> 32

SECTION 9.5. INCORPORATION. With the approval of the holders of a
majority of the Shares outstanding and voting, or by such other vote as may be
established by the Trustees with respect to any Series of Shares (if Shareholder
approval is required), the Trustees may cause to be organized or assist in
organizing a corporation or corporations under the laws of any jurisdiction or
any other trust, partnership, association or other organization to take over all
of the Trust Property or to carry on any business in which the Trust shall
directly or indirectly have any interest, and to sell, convey and transfer the
Trust Property to any such corporation, trust, association or organization in
exchange for the shares or securities thereof and assumption of liabilities of
the Trust or otherwise, and to lend money to, subscribe for the shares or
securities of, and enter into any contracts with any such corporation, trust,
partnership, association or organization in which the Trust holds or is about to
acquire shares or any other interest. The Trustees may also cause a merger or
consolidation between the Trust or any successor thereto and any such
corporation, trust, partnership, association or other organization if and to the
extent permitted by law, as provided under the law then in effect.

SECTION 9.6. ABSENCE OF DISSENTERS' RIGHTS. No shareholder shall be
entitled, as a matter of right, to relief as a dissenting shareholder in respect
of any proposal or action involving the Trust.

ARTICLE X

SHAREHOLDERS' VOTING POWERS AND MEETINGS

SECTION 10.1. VOTING POWERS. The Shareholders shall have power to vote
only (i) for the election of Trustees as provided in Section 2.3 hereof or as
required by Section 16 (a) of the 1940 Act; (ii) with respect to any investment
advisory or management contract as provided in Section 4.1; (iii) with respect
to termination or reorganization of the Trust or any Series or Class as provided
in Section 9.2.; (iv) with respect to any amendment of the Declaration to the
extent and as provided in Section 9.3; (v) with respect to any merger,
consolidation or sale or disposition of assets as provided in Section 9.4; (vi)
with respect to incorporation of the Trust to the extent and as provided in
Section 9.5; (vii) to the same extent as the stockholders of an Ohio business
corporation as to whether or not a court action, proceeding or claim should or
should not be brought or maintained derivatively or as a class action on behalf
of the Trust or the Shareholders; and (viii) with respect to such additional
matters relating to the Trust as may be required by the Declaration, the Bylaws,
the 1940 Act or any registration of the Trust with the Commission (or any
successor agency), or as the Trustees may consider necessary or desirable.

Each whole Share shall be entitled to one vote as to any matter on
which it is entitled to vote and each fractional Share shall be entitled to
proportionate fractional vote, except that Shares held in the treasury of the
Trust shall not be voted, that on matters relating to the Trust and governed by
specific voting requirements in the 1940 Act shall be voted in accordance with
the 1940 Act and that the Trustees may, in conjunction with the establishment of
any Series of Shares, establish conditions under which the several Series shall
have separate voting rights or no voting rights. There shall be no cumulative
voting in the election of Trustees. Until Shares are issued, the Trustees may
exercise all rights of Shareholders and may take any action required by law, the
Declaration or the Bylaws to be taken by Shareholders. The Bylaws may include
further provisions for Shareholder votes and meetings and related matters.

<PAGE> 33

SECTION 10.2. MEETINGS OF SHAREHOLDERS. A meeting of the Shareholders
shall be held at such times, on such day and at such hour as the Trustees may
from time to time determine, or at the written request of the holder or holders
of ten percent (10%) or more of the total number of Shares then issued and
outstanding of the Trust entitled to vote at such meeting or as required by law.
Any such request shall state the purpose of the proposed meeting.

Written notice of all meetings of the Shareholders, stating the time,
date, place and purpose of the meeting, shall be given by, or at the direction
of, the person calling the meeting to each Shareholder of record entitled to
vote at the meeting at his address as recorded on the register of the Trust,
mailed at least ten (10) days prior to the date named for the meeting. No notice
need be given to any Shareholder who shall have failed to inform the Trust of
his current address or if a written waiver of notice, executed before or after
the meeting by the Shareholder or his attorney thereunto authorized, is filed
with the records of the meeting.

SECTION 10.3. QUORUM AND REQUIRED VOTE. At any meeting of Shareholders,
a quorum for the transaction of business shall consist of a majority represented
in person or by proxy of all votes attributable to the outstanding Shares
(without regard to individual Series or Class) entitled to vote with respect to
a matter; provided, however, that at any meeting at which the only actions to be
taken are actions required by the 1940 Act to be taken byvote of the
Shareholders of an individual Series or Class, a quorum shall consist of a
majority of all votes attributable to the outstanding Shares of such individual
Series or Class entitled to vote thereon, and that at any meeting at which the
only action to be taken shall have been determined by the Board of Trustees to
affect the rights and interests of one or more but not all Series or Classes of
the Trust, a quorum shall consist of a majority of all votes attributable to the
outstanding Shares of the Series or Classes so affected; and provided, further,
that reasonable adjournments of such meeting until a quorum is obtained may be
made by a vote attributable to the Shares present in person or by proxy. In
addition, a meeting may adjourned and postponed for any other reason as
determined by the Trustees.

Except as otherwise provided in the Declaration or as required by the
1940 Act or other applicable law, and subject to applicable quorum requirements,
matters voted on by Shareholders must be approved by the affirmative vote of the
holders of a majority of the Shares voting at any meeting of Shareholders and
Trustees must be elected by a plurality of the Shares voting, or by an
instrument in writing, without a meeting, signed by a majority of the Trustees
and consented to by the holders of a majority of Shares outstanding and entitled
to vote, or by such other vote as may be established by the Trustees with
respect to any Series or Class of Shares, provided that the election of Trustees
(after the election by the initial sole Shareholder) must be approved by the
Shareholders at a meeting of Shareholders.

SECTION 10.4. RECORD DATE FOR MEETINGS. For the purpose of determining
the Shareholders who are entitled to notice of and to vote at any meeting, or to
participate in any distribution, or for the purpose of any other action, the
Trustees may from time to time close the transfer books for such period, not
exceeding thirty (30) days, as the Trustees may determine; or without closing
the transfer books the Trustees may fix a date not more than ninety (90) days
prior to the date of any meeting of Shareholders or distribution or other action
as a record date for the determination of the persons

<PAGE> 34

to be treated as Shareholders of record for such purposes. Only Shareholders of
record at the close of business on the record date will be entitled to notice of
and to vote at any meeting.

SECTION 10.5. PROXIES. At any meeting of Shareholders, any holder of
Shares entitled to vote thereat may vote by proxy, provided that no proxy shall
be voted at any meeting unless it shall have been placed on file with the
Secretary, or with such other officer or agent of the Trust as the Trustees may
direct, for verification prior to the time at which such vote shall be taken.
Pursuant to a resolution of a majority of the Trustees, proxies may be solicited
in the name of one or more Trustees or one or more of the officers or agents of
the Trust. Only Shareholders of record shall be entitled to vote. Each full
Share shall be entitled to one vote and fractional Shares shall be entitled to a
vote of such fraction. When any share is held jointly by several persons, any
one of them may vote at any meeting in person or by proxy in respect of such
Share, but if more than one of them shall be present at such meeting in person
or by proxy, and such joint owners or their proxies so present disagree as to
any vote to be cast, such vote shall not be received in respect of such Share. A
proxy purporting to be executed by or on behalf of a Shareholder shall be deemed
valid unless challenged at or prior to its exercise, and the burden of proving
invalidity shall rest on the challenger. If the holder of any such Share is a
minor or a person of unsound mind, and subject to guardianship or to the legal
control of any other person as regards the change or management of such Share,
he may vote by his guardian or such other person appointed or having such
control, and such vote may be given in person or by proxy.

To the extent that one or more Series are included as underlying
investment options in variable contracts issued by Nationwide Life Insurance
Company or Nationwide Life and Annuity Insurance Company (collectively,
"Nationwide"), with respect to Shares of such Series held by Nationwide in
connection with those contracts, Nationwide will vote such Shares at any meeting
in accordance with timely instructions received pursuant to the variable
contracts issued by Nationwide. Nationwide will vote shares attributable to
variable contracts as to which no voting instructions are received in proportion
(for, against or abstain) to those for which timely instructions are received.
If voting instructions are received that do not specify a choice, but have been
properly executed Nationwide will consider their timely receipt as an
instruction to vote in favor the proposal to which it relates. In certain
circumstances, Nationwide may have the right to disregard voting instructions
from certain variable contract owners. Variable contract owners may revoke
previously submitted voting instructions given to Nationwide at any time prior
to any meeting by either submitting to Nationwide subsequently dated voting
instructions, delivering to Nationwide a written notice of revocation or
otherwise giving notice of revocation in open meeting, in all cases prior to the
exercise of the authority granted in the proxy.

SECTION 10.6. ACTION WITHOUT A MEETING. Subject to the 1940 Act, any
action which may be taken by Shareholders may be taken without a meeting if a
majority of Shareholders entitled to vote on the matter (or such larger
proportion thereof as shall be required by law, the Declaration or these Bylaws
for approval of such matter) consent to the action in writing and the written
consents are filed with the records of the meetings of Shareholders. Such
consent shall be treated for all purposes as a vote taken at a meeting of
Shareholders.

<PAGE> 35

SECTION 10.7. INSPECTION OF RECORDS. The records of the Trust shall be
open to inspection by Shareholders to the same extent as is permitted
stockholders of an Ohio corporation organized under Chapter 1701, Ohio Revised
Code.

SECTION 10.8. ADDITIONAL PROVISIONS. The Bylaws may include further
provisions for Shareholders' votes and meetings and related matters not
inconsistent with the provisions hereof.

ARTICLE XI

MISCELLANEOUS

SECTION 11.1. FILING. The original or a copy of this instrument and of
each amendment hereto shall be kept at the office of the Trust where it may be
inspected by any Shareholder. This Declaration, any amendment and the report
required by Section 1746.04, Ohio Revised Code, hereto shall be filed in the
office of the Secretary of the of Ohio and in such other places as may be
required under the laws of Ohio and may also be filed or recorded in such other
places as the Trustees deem appropriate. The Declaration and each amendment
thereto shall be effective upon adoption. A restated Declaration, integrating
into a single instrument all of the provisions of the Declaration which are then
in effect and operative, may be executed from time to time by a majority of the
Trustees and shall, upon filing with the Secretary of the State of Ohio, be
conclusive evidence of all amendments contained herein and may thereafter be
referred to in lieu of the original Declaration and the various amendments
thereto.

SECTION 11.2. GOVERNING LAW. This Declaration is executed by the
Trustees and delivered with reference to the laws of the of Ohio, and the rights
of all parties and the validity and construction of every provision hereof shall
be subject to and construed according to the laws of said State.

SECTION 11.3. COUNTERPARTS. This Declaration may be simultaneously
executed in several counterparts, each of which shall be deemed to be an
original, and such counterparts, together, shall constitute one and the same
instrument, which shall sufficiently be evidenced by any such original
counterpart.

SECTION 11.4. RELIANCE BY THIRD PARTIES. Any certificate executed by an
individual who, according to the records of the Trust appears to be a Trustee
hereunder, certifying to: (a) the number or identity of Trustees or
Shareholders, (b) the due authorization of the execution of any instrument or
writing, (c) the form of any vote passed at a meeting of Trustees or
Shareholders, (d) the fact that the number of Trustees or Shareholders present
at any meeting or executing any written instrument satisfies the requirements of
this Declaration, (e) the form of any Bylaws adopted by or the identity of any
officers elected by the Trustees, or (f) the existence of any fact or facts
which in any manner relate to the affairs of the Trust, shall be conclusive
evidence as to the matters so certified in favor of any Person dealing with the
Trustees and their successors.

<PAGE> 36

SECTION 11.5. PROVISIONS IN CONFLICT WITH LAW OR REGULATIONS.

(a) The provisions of the Declaration are severable, and if the
Trustees shall determine, with the advice of counsel, that any of such
provisions is in conflict with the 1940 Act, the regulated investment
company provisions of the Internal Revenue Code or with other
applicable laws and regulations, the conflicting provisions shall be
deemed never to have constituted a part of the Declaration; provided,
however, that such determination shall not affect any of the remaining
provisions of the Declaration or render invalid or improper any action
taken or omitted prior to such determination.

(b) If any provision of the Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability
shall attach only to such provision in such jurisdiction and shall not
in any manner affect such provision in any other jurisdiction or any
other provision of the Declaration in any jurisdiction.

SECTION 11.6. INDEX AND HEADING FOR REFERENCE ONLY. The Index and
heading preceding the text, articles and sections hereof have been inserted for
convenience and reference only and shall not be construed to affect the meaning,
construction or effect of this Declaration.

IN WITNESS WHEREOF, the undersigned Trustees have hereunto set their hand this
5th day of March, 1998.

- ------------------------------------- -------------------------------------
Sue A. Doody, Trustee Douglas F. Kridler, Trustee

- ------------------------------------- -------------------------------------
Robert M. Duncan, Trustee John C. Bryant, Trustee

- ------------------------------------- -------------------------------------
Dimon R. McFerson, Trustee C. Brent DeVore, Trustee

- ------------------------------------- -------------------------------------
Nancy C. Thomas, Trustee Charles L. Fuellgraf, Jr., Trustee

- ------------------------------------- -------------------------------------
Harold W. Weihl, Trustee Thomas J. Kerr, IV, Trustee

- -------------------------------------
David C. Wetmore, Trustee

<PAGE> 37

Trust Address: Three Nationwide Plaza
26th Floor
Columbus, Ohio 43216

<PAGE> 1
Exhibit 2

NATIONWIDE INVESTING FOUNDATION III

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

AMENDED BYLAWS

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

Dated October 30, 1997
(Amended as of March 5, 1998)

<PAGE> 2

AMENDED BYLAWS

NATIONWIDE INVESTING FOUNDATION III

ARTICLE I

DEFINITIONS

The terms "Class" "Commission", "Declaration", "Distributor",
"Investment Adviser", "Majority Shareholder Vote", "1940 Act", "Series",
"Shareholder", "Shares", "Transfer Agent", "Trust", "Trust Property" and
"Trustees" have the respective meaning given them in the Declaration of Trust of
Nationwide Investing Foundation III adopted October 30, 1997, and as amended
from time to time.

ARTICLE II

OFFICES

Section 1. Principal Office. Until changed by the Trustees, the
principal office of the Trust in the State of Ohio shall be in the City of
Columbus, County of Franklin, with the principal office at Three Nationwide
Plaza, Columbus, Ohio.

Section 2. Other Offices. The Trust may have offices in such other
places within as well as without the State of Ohio, as the Trustees may from
time to time determine.

ARTICLE III

TRUSTEES

Section 1. Meetings of the Trustees. The Trustees may in their
discretion provide for regular or stated meetings of the Trustees. Notice of
regular or stated meetings need not be given. Meetings of the Trustees other
than by regular or stated meetings shall be held whenever called by the
Chairman, or by any one of the Trustees, at the time being in office. Notice of
the time and place of each meeting other than regular or stated meetings shall
be given by the Secretary or an Assistant Secretary or by the officer or Trustee
calling the meeting and shall be mailed to each Trustee at least two days before
the meeting, or shall be sent by telecopy, electronic mail or overnight delivery
to each Trustee at his business address, or personally delivered to him at least
one day before the meeting. Such notice may, however, be waived by an Trustee.
Notice of a meeting need not be given to any Trustee if a written waiver of
notice, executed by him before or after the meeting, is filed with the records
of the meeting, or to any Trustee who attends the meeting without protesting
prior thereto or at its commencement the lack of notice to him. A notice or
waiver of notice need not specify the purpose of any meeting. The Trustees may
meet by means of a telephone conference

<PAGE> 3

circuit or similar communications equipment by means of which all persons
participating in the meeting can hear each other, which telephone conference
meeting shall be deemed to have been held at a place designated by the Trustees
at the meeting. Participation in a telephone conference meeting shall constitute
presence in person at such meeting. Any action required or permitted to be taken
at any meeting of the Trustees may be taken by the Trustees without a meeting if
a majority the Trustees consent to the action in writing and the written
consents are filed with the records of the Trustees' meetings. Such consents
shall be treated as a vote for all purposes.

Section 2. Quorum and Manner of Acting. A majority of the Trustees
shall be present in person at any regular or special meeting of the Trustees in
order to constitute a quorum for the transaction of business at such meeting and
(except as otherwise required by law, the Declaration or these Bylaws) the act
of a majority of the Trustees present at any such meeting, at which a quorum is
present, shall be the act of the Trustees. In the absence of a quorum, a
majority of the Trustees present may adjourn the meeting from time to time until
a quorum shall be present. Notice of an adjourned meeting need not be given.

ARTICLE IV

COMMITTEES AND ADVISORY BOARD

Section 1. Executive and Other Committees. The Trustees by vote of a
majority of all the Trustees may elect from their own number an Executive
Committee to consist of not less than three (3) to hold office at the pleasure
of the Trustees, which shall have the power to conduct the current and ordinary
business of the Trust while the Trustees are not in session, including the
purchase and sale of securities and the designation of securities to be
delivered upon redemption of Shares of the Trust, and such other powers of the
Trustees as the Trustees may, from time to time, delegate to them except those
powers which by law, the Declaration or these Bylaws they are prohibited from
delegating. The Trustees may also elect from their own number other Committees
from time to time, the number composing such Committees and powers conferred
upon the same (subject to the same limitations with respect to the Executive
Committee) and the term of membership on such Committees to be determined by the
Trustees. The Trustees may designate a chairman of any such Committee. In the
absence of such designation, the Committee may elect its own Chairman. Any
member of a Committee may resign therefrom by a written instrument signed by him
which shall take effect upon delivery to the Trustees.

Section 2. Meeting, Quorum and Manner of Acting. The Trustees may (1)
provide for stated meetings of any Committees, (2) specify the manner of calling
and notice required for special meetings of any Committee, (3) specify the
number of members of a Committee required to constitute a quorum and the number
of members of a Committee required to exercise specified powers delegated to
such Committee, (4) authorize the making of decisions or the exercise of
specified powers by written action of the requisite number of members of a
Committee without a meeting and (5) authorize the members of a Committee to meet
by means of a telephone conference circuit.

The Executive Committee shall keep regular minutes of its meetings and
records of decisions taken without a meeting and cause them to be recorded in a
book designated for that purpose and

<PAGE> 4

kept in the offices of the Trust. In addition, the Executive Committee shall
report to the full Board of Trustees any actions taken by the Executive
Committee at the next Trustees meeting.

Section 3. Advisory Board. The Trustees may from time to time appoint
an Advisory Board to consist of not less than three (3) members. Members of such
Advisory Board shall not be Trustees or officers and need not be Shareholders.
Members of this Board shall hold office for such period as the Trustees may by
resolution provide. Any member of such Board may resign therefrom by a written
instrument signed by him which shall take effect upon delivery to the Trustees.
The Advisory Board shall have no legal powers and shall not perform the
functions of Trustees in any manner, said Board being intended merely to act in
an advisory capacity. Such Advisory Board shall meet at such times and upon such
notice as the Trustees may by resolution provide.

ARTICLE V

OFFICERS

Section 1. General Provisions. The officers of the Trust shall be a
Chairman, a Treasurer and a Secretary, who shall be elected by the Trustees. The
Trustees may, from time to time elect or appoint a Vice Chairman, one or more
Assistant Secretaries and one or more Assistant Treasurers.

Section 2. Other Officers. The Trustees may from time to time appoint
such other officers and agents as they shall deem advisable, who shall hold
their offices for such terms and shall exercise such powers and perform such
duties as shall be determined from time to time by the Trustees. The Trustees
may delegate to one or more officers or agents the power to appoint any such
subordinate officers or agents and to prescribe their respective rights, terms
of office, authorities, and duties.

Section 3. Term of Office and Qualifications. Except as otherwise
provided by law, the Declaration of Trust or the Bylaws, the Chairman, the Vice
Chairman, the Treasurer and the Secretary shall hold office until such officer's
successor shall have been duly elected and qualified, and all other officers
shall hold office at the pleasure of the Trustees.

Section 4. Removal. The Trustees, at any regular or special meeting of
the Trustees, may remove any officer with or without cause by a vote of a
majority of the Trustees. Any officer or agent appointed by any officer or
committee may be removed with or without cause by such appointing officer or
committee or by the Trustees.

Section 5. Powers and Duties of the Chairman. The Chairman may call
meetings of the Trustees and of any Committee thereof when he deems it necessary
and may preside at all meetings of the Shareholders. Subject to the control of
the Trustees and any Committees of the Trustees, within their respective
spheres, as provided by the Trustees, he shall at all times exercise a general
supervision and direction over the affairs of the Trust. He shall have the power
to employ attorneys and counsel for the Trust and to employ such subordinate
officers, agents, clerks and employees as he may find necessary to transact the
business of the Trust. He shall also have the power to grant, issue, execute or
sign such powers of attorney, proxies or other documents as may be deemed

<PAGE> 5

advisable or necessary in furtherance of the interest of the Trust. The Chairman
shall have such other powers and duties as, from time to time, may be conferred
upon or assigned to him by the Trustees.

Section 6. Powers and Duties of Vice Chairman. In the absence or
disability of the Chairman, the Vice Chairman or, if there be more than one Vice
Chairman, any Vice Chairman designated by the Trustees shall perform all the
duties and may exercise any of the powers of the Chairman, subject to the
control of the Trustees. Each Vice Chairman shall perform such other duties as
may be assigned to him from time to time by the Trustees and the Chairman.

Section 7. Powers and Duties of the Treasurer. The Treasurer shall be
the principal financial and accounting officer of the Trust. He shall deliver
all funds of the Trust which may come into his hands to such custodian as the
Trustees may employ pursuant to Article X of these Bylaws. He shall render a
statement of condition of the finances of the Trust to the Trustees as often as
they shall require the same and he shall in general perform all the duties
incident to the office of Treasurer and such other duties as from time to time
may be assigned to him by the Trustees.

Section 8. Powers and Duties of the Secretary. The Secretary shall keep
the minutes of all meetings of the Shareholders and the Trustees in proper books
provided for that purpose; he shall have charge of the Share transfer books,
lists and records unless the same are in the charge of the Transfer Agent. The
Secretary shall attend to the giving and serving of all notices by the Trust in
accordance with the provisions of these Bylaws and as required by law; and
subject to these Bylaws, he shall in general perform all duties incident to the
office of Secretary and such other duties as from time to time may be assigned
to him by the Trustees.

Section 9. Powers and Duties of the Assistant Treasurers. In the
absence or disability of the Treasurer, any Assistant Treasurer designated by
the Trustees shall perform all the duties, and may exercise any of the powers,
of the Treasurer. The Assistant Treasurers shall perform such other duties as
from time to time may be assigned to them by the Trustees. Each Assistant
Treasurer shall give a bond for the faithful discharge of his duties, if
required to so by the Trustees, in such sum and with such surety or sureties as
the Trustees shall require.

Section 10. Powers and Duties of the Assistant Secretaries. In the
absence or disability of the Secretary, any Assistant Secretary designated by
the Trustees shall perform all of the duties, and may exercise any of the
powers, of the Secretary. The Assistant Secretaries shall perform such other
duties as from time to time may be assigned to them by the Trustees.

Section 11.Compensation of Officers and Trustees and Members of the
Advisory Board. Subject to any applicable provisions of the Declaration, the
compensation of the officers and Trustees and members of the Advisory Board
shall be fixed from time to time by the Trustees or, in the case of officers, by
any Committee or officer upon whom such power may be conferred by the Trustees.
No officer shall be prevented from receiving such compensation as such officer
by reason of the fact that he is also a Trustee.

<PAGE> 6

ARTICLE VI

FISCAL YEAR

The fiscal year of the Trust shall begin on the first day of November
in each year and shall end on the last day of October in each year, provided,
however, that the Trustees may from time to time change the fiscal year.

ARTICLE VII

SEAL

The Trustees may adopt a seal which shall be in such form and shall
have such inscription thereon as the Trustees may from time to time prescribe.

ARTICLE VIII

WAIVERS OF NOTICE

Whenever any notice whatever is required to be given by law, the
Declaration or these Bylaws, a waiver thereof in writing, signed by the person
or persons entitled to said notice, whether before or after the time stated
therein, shall be deemed equivalent thereto.

ARTICLE IX

CUSTODIAN

The Trustees shall at all times employ a bank or trust company as
Custodian in accordance with the 1940 Act as amended and the rules promulgated
thereunder as amended.

ARTICLE X

AMENDMENTS

These Bylaws, or any of them, may be altered, amended or repealed, or
new Bylaws may be adopted (a) by Majority Shareholder Vote, or (b) by the
Trustees, provided, however that no Bylaw may be amended, adopted or repealed by
the Trustees if such amendment, adoption or repeal requires, pursuant to law,
the Declaration or these Bylaws, a vote of the Shareholders.

<PAGE> 1
Exhibit 15

RULE 12b-1 AGREEMENT
NATIONWIDE S&P 500 INDEX FUND
LOCAL FUND SHARES

This Agreement is made as of this ______ day of ____________, 1998,
between Nationwide Investment Services Corporation ("NISC"), and Nationwide
Advisory Service, Inc. ("NAS"), the Distributor of the Local Fund Shares
("Shares") of the Nationwide S&P 500 Index Fund (the "Fund"), a series of
Nationwide Investing Foundation III, an Ohio business trust (the "Trust"). In
consideration of the mutual covenants hereinafter contained, it is hereby agreed
by and between the parties hereto as follows:

1. NAS hereby appoints NISC to render distribution and shareholder
services to the Fund and its shareholders. Distribution and shareholder services
may include, but are not limited to, distributing prospectuses to persons other
than Shareholders of the Shares; maintaining Shareholder relations; answering
inquiries regarding the Fund; providing personnel and communication equipment
used in connection therewith; and providing such other services as the Trust, on
behalf of the Fund, or NAS may reasonably request. NISC represents that it is
willing and possesses legal authority to provide the services contemplated by
this Agreement without violation of applicable laws (including the Securities
Exchange Act of 1934 and applicable state securities laws) and regulations. Any
advertising and sales literature to be printed or distributed by NISC in
connection with the sale of Shares may not be distributed or otherwise used
except upon prior written approval by NAS unless such literature was provided to
NISC by NAS in its final form.

2. NAS shall not be liable to NISC and NISC shall not be liable to NAS
except for acts or failures to act which constitute lack of good faith or gross
negligence and for obligations expressly assumed by either party hereunder.
Nothing contained in this Agreement is intended to operate as a waiver by NAS or
by NISC of compliance with any applicable federal or state law, rule, or
regulation and the rules and regulations promulgated by the National Association
of Securities Dealers, Inc.

3. NISC will indemnify NAS and hold it harmless from any claims or
assertions relating to the lawfulness of NISC's participation in this Agreement
and the transactions contemplated hereby or relating to any activities of any
persons or entities affiliated with NISC performed in connection with the
discharge of its responsibilities under this Agreement. If any such claims are
asserted, NAS shall have the right to manage its own defense, including the
selection and engagement of legal counsel of its choosing, and all costs of such
defense shall be borne by NISC.

4. NAS will pay such fees as are set forth in Exhibit A hereto to NISC.

5. NISC shall prepare such quarterly reports for NAS as shall
reasonably be requested by NAS.

<PAGE> 2

6. For purposes of this Agreement, NISC will be deemed to be an
independent contractor, and in no transaction shall NISC have any authority
whatever to act as NAS's agent or as agent for the Fund.

7. No person is authorized to make any representations concerning the
Fund or the Shares except those contained in the current prospectus of the Fund
and any such information as may be officially designated as information
supplemental to the prospectus.

8. This Agreement is a related agreement under the Trust's Distribution
Plan (the "Plan") and is effective as of the date first written above.

9. This Agreement may be terminated by either party upon at least ten
days' prior written notice. This Agreement also may be terminated at any time as
to the Shares of the Fund, without the payment of any penalty by the vote of a
majority of the members of the Board of Trustees of the Trust who are not
interested persons of the Trust and have no direct or indirect financial
interest in the operation of the Plan or in any related agreements to the Plan
("Disinterested Trustee") or by a majority of the outstanding voting securities
of the Trust on not more than sixty (60) days written notice to the parties to
this Agreement.

10. This Agreement will terminate automatically in the event of its
assignment as defined in the Investment Company Act of 1940, or upon the
termination of the Distribution Agreement between the Trust and NAS.

Dated: Nationwide Investment Services
Corporation
Two Nationwide Plaza
Columbus, Ohio 43215

By: ___________________________________
Authorized Signature

___________________________________
Title

Dated:

Nationwide Advisory Services, Inc.
Three Nationwide Plaza
Columbus, OH 43215

By: ___________________________________
Authorized Signature

___________________________________
Title

<PAGE> 3

NATIONWIDE S&P 500 INDEX FUND
LOCAL FUND SHARES

EXHIBIT A TO RULE 12b-1 AGREEMENT WITH
NATIONWIDE ADVISORY SERVICES, INC.

With respect to the Local Fund Shares of the Nationwide S&P Index Fund,
NAS will pay to NISC a monthly fee computed at the annual rate of 0.07% of the
average aggregate net asset value of the Shares held during the period in the
accounts for which NISC provides services under the Rule 12b-1 Agreement.

For the monthly period in which the Rule 12b-1 Agreement becomes
effective or terminates, there shall be an appropriate proration on the basis of
the number of days that the Rule 12b-1 Agreement is in effect during the period.

<PAGE> 4

DISTRIBUTION PLAN OF NATIONWIDE INVESTING FOUNDATION III
(Effective March ___, 1998)

Section 1. This Distribution Plan (the "Plan") constitutes the
distribution plan for the Local Fund Shares of Nationwide S&P 500 Index Fund and
for the Class A and Class B shares of Nationwide Mid Cap Growth Fund, Nationwide
Growth Fund, Nationwide Fund, Nationwide Bond Fund, Nationwide Tax-Free Income
Fund, Nationwide Intermediate U.S. Government Bond Fund and Nationwide Long-Term
U.S. Government Bond Fund (collectively, the "Funds"), each a series of
Nationwide Investing Foundation III (the "Trust"), and is adopted pursuant to
Rule 12b-1 under the Investment Company Act of 1940, as amended (the "1940
Act").

Section 2. Subject to the limitations on the payment of asset-based
sales charges set forth in Section 2830 of the Conduct Rules of the National
Association of Securities Dealers, Inc. ("NASD"), the Funds shall pay amounts
not exceeding on an annual basis a maximum amount of:

(a) 25 basis points (.25%) of the average daily net assets of the Class A
Shares of all the Funds except the Nationwide S&P 500 Index Fund, all
of which will be a "service fee"(as described below);

(b) 100 basis points (1.00%) of the average daily net assets of the Class B
Shares of the Nationwide Mid Cap Growth Fund, Nationwide Growth Fund
and Nationwide Fund, 75 basis points (.75%) of which will be a
"distribution fee" (as described below) and 25 basis points (.25%) of
which will be a service fee;

(c) 85 basis points (.85%) of the average daily net assets of the Class B
Shares of the Nationwide Bond Fund, Nationwide Tax-Free Income Fund,
Nationwide Intermediate U.S. Government Bond Fund and Nationwide
Long-Term U.S. Government Bond Fund, 75 basis points (.75%) of which
will be a distribution fee and 10 basis points (.10%) of which will be
considered a service fee; and

(d) 7 basis points (.07%) of the average daily net assets of the Local Fund
Shares of the Nationwide S&P 500 Index Fund.

These fees will be paid to Nationwide Advisory Services, Inc. (the
"Underwriter") for activities or expenses primarily intended to result in the
sale or servicing of such Class A, Class B and Local Fund Shares, respectively
(collectively the "Class Shares"). As described above, the following types of
fees may be paid pursuant to the Plan:

(a) a distribution fee for: (i) (a) efforts of the Underwriter expended in
respect of or in furtherance of sales of Class Shares, and (b) to
enable the Underwriter to make payments to other broker/dealers and
other eligible institutions (each a "Broker/Dealer") for distribution
assistance pursuant to an agreement with the Broker/Dealer; and (ii)
reimbursement of expenses (a) incurred by the Underwriter, and (b)
incurred by a Broker/Dealer pursuant to

<PAGE> 5

an agreement in connection with distribution assistance including, but
not limited to, the reimbursement of expenses relating to printing and
distributing advertising and sales literature and reports to
shareholders for use in connection with the sales of Class Shares,
processing purchase, exchange and redemption requests from customers
and placing orders with the Underwriter or the Funds' transfer agent,
and personnel and communication equipment used in servicing shareholder
accounts and prospective shareholder inquiries; and

(b) a service fee for: (i) (a) efforts of the Underwriter expended in
servicing shareholders and (b) to enable the Underwriter to make
payments to a Broker/Dealer for shareholder services pursuant to an
agreement with the Broker/Dealer; and (ii) reimbursement of expenses
(a) incurred by the Underwriter, and (b) incurred by a Broker/Dealer
pursuant to an agreement in connection with shareholder service
including, but not limited to personal, continuing services to
investors. For purposes of the Plan, a Broker/Dealer may include any
of the Underwriter's affiliates or subsidiaries. A service fee will be
considered as such pursuant to Section 2830(b)(9) of the Conduct Rules
of the NASD.

Section 3. This Plan shall not take effect until it has been approved
by a vote of at least a majority (as defined in the 1940 Act) of the outstanding
voting securities of each of the Funds, if adopted after any public offering of
such shares, and by the vote of the Board of Trustees of the Trust, as described
in Section 4 of the Plan.

Section 4. This Plan shall not take effect with respect to the Class
Shares of a Fund until it has been approved, together with any related
agreements, by votes of the majority of both (a) the Board of Trustees of the
Trust and (b) those Trustees of the Trust who are not "interested persons" (as
defined in the 1940 Act) of the Trust and who have no direct or indirect
financial interest in the operation of this Plan or any agreements related to
this Plan (the "Rule 12b-1 Trustees"), cast in person at a meeting called for
the purpose of voting on this Plan or such agreements.

Section 5. Unless sooner terminated pursuant to Section 7 or 8, this
Plan shall continue in effect with respect to the Class Shares of a Fund for a
period of one year from the date it takes effect with respect to such Class
Shares and thereafter shall continue in effect so long as such continuance is
specifically approved at least annually in the manner provided for approval of
this Plan in Section 4.

Section 6. Any person authorized to direct the disposition of monies
paid or payable by a Fund pursuant to this Plan or any related agreement shall
provide to the Trustee's Board and the Board shall review at least quarterly a
written report of the amounts so expended and the purposes for which such
expenditures were made.

Section 7. This Plan may be terminated as to Class Shares of a Fund at
any time by vote of a majority of the Rule 12b-1 Trustees, or by vote of a
majority of the outstanding affected Class Shares of such Fund.

<PAGE> 6

Section 8. Any agreement with any person relating to the implementation
of this Plan shall be in writing, and shall provide:

A. That such agreement may be terminated at any time with respect
to a Class, without payment of any penalty, by vote of a
majority of the Rule 12b-1 Trustees or by a vote of a majority
of the outstanding Class Shares of the Fund on not more than
60 days written notice to any other party to the agreement;
and

B. That such agreement shall terminate automatically in the
event of its assignment.

Section 9. This Plan may not be amended to increase materially the
amount of distribution expenses of a Fund provided for in Section 2 hereof,
unless such amendment is approved in the manner provided in Section 3 hereof. No
material amendment to this Plan shall be made unless approved in the manner
provided for approval of this Plan in Section 4 hereof.

Section 10. The provisions of the Plan are severable for each class of
shares of the Funds and any action required hereunder must be taken separately
for each class covered hereby.

<PAGE> 1
Exhibit 18

RULE 18f-3 PLAN

WHEREAS, Nationwide Investing Foundation III, an Ohio business trust (the
"Trust"), is an open-end management investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act");

WHEREAS, Nationwide Advisory Services, Inc. ("NAS"), an Ohio corporation, serves
as investment adviser and underwriter for the Trust;

WHEREAS, The Trust has adopted a Distribution Plan ("12b-1 Plan") under Rule
12b-1 of the 1940 Act providing for: (1) in the case of Class A shares, fees of
not more than .25% per annum of average net assets, (2) in the case of Class B
shares, fees of not more than 1% per annum of average net assets, and (3) in the
case of Local Fund Shares, fees of not more than .07% per annum of average net
assets.

WHEREAS, The Trust has established a Multiple Class Distribution System enabling
the Trust, as described in its prospectuses, to offer investors the option of
purchasing shares of its series (a) with a front-end sales load (which can vary
among series and which is subject to certain reductions and waivers among groups
of purchasers) and a 12b-1 plan providing for a distribution fee (the "Class A
shares"), (b) without a front-end load, but subject to a contingent deferred
sales charge ("CDSC") (which can vary among series) and a 12b-1 plan providing
for a distribution fee ( the "Class B shares"), (c) with a front-end load (which
can vary among series and which is subject to certain reductions and waivers
among groups of purchasers), but not subject to a 12b-1 plan (the "Class D
shares"), and (d) _____ (the "Local Fund Shares"); and

WHEREAS, Rule 18f-3 under the 1940 Act permits an open-end management investment
company to issue multiple classes of voting stock representing interests in the
same portfolio notwithstanding Sections 18 (f) (1) and 18 (i) under the 1940 Act
if, among other things, such investment company adopts a written plan setting
forth the separate arrangements and expense allocation of each class and any
related conversion features or exchange privileges;

NOW, THEREFORE, the Trust, wishing to be governed by Rule 18f-3 under the 1940
Act, hereby adopts this Rule 18f-3 Plan as follows:

1. Each class of shares of a non-money market fund series will represent
interests in the same portfolio of investments of such series of the Trust, and
be identical in all respects to each other class of that series, except as set
forth below. The only differences among the various classes of shares of the
non-money market fund series of the Trust will relate solely to different
distribution or service fee payments associated with any Rule 12b-1 Plan for a
particular class of shares and any other costs relating to implementing or
amending such Plan (including obtaining shareholder approval of such Plan or any
amendment thereto), which will be borne solely by shareholders of such class.
"Other" differences listed below, such as shareholder voting and conversion
rights, will apply initially to (a) different administrative service fees, if
any; (b) different Class Expenses, which will be limited to the following
expenses determined by the Trustees to be

<PAGE> 2

attributable to a specific class of shares: (i) transfer agency fees identified
as being attributable to a specific class; (ii) printing and postage expenses
related to preparing and distributing materials such as shareholder reports,
prospectuses, and proxy statements to current shareholders of a specific class;
(iii) Blue Sky notification and/or filing fees incurred by a class of shares;
(iv) SEC registration fees incurred by a class; (v) expenses of administrative
personnel and services as required to support the shareholders of a specific
class; (vi) litigation or other legal expenses and audit or other accounting
expenses relating solely to one class; (vii) Trustee's fees or expenses incurred
as a result of issues relating to one class; and (viii) shareholder meeting
costs that relate to a specific class; (c) the voting rights related to any
12b-1 Plan affecting a specific class of shares; (d) conversion features; (e)
exchange privileges; and (f) class names or designations. Any additional
incremental expenses not specifically identified above that are subsequently
identified and determined to be properly applied to one class of shares of a
series of the Trust shall be so applied upon approval by a majority of the
Trustees of the Trust, including a majority of the Trustees who are not
interested persons of the Trust.

2. Under the Multiple Class Distribution System, certain expenses may be
attributable to the Trust, but not to a particular series or class thereof, and
income, realized gains and losses, and unrealized appreciation and depreciation.
All such expenses will be allocated among series based upon the relative
aggregate net assets of such series. Expenses that are attributable to a
particular series, but not to a particular class thereof, will be borne by each
class of such series on the basis of the relative aggregate net assets of the
classes. Notwithstanding the foregoing, the principal underwriter, the
investment adviser or other provider of services to the Trust may waive or
reimburse the expenses of a specific class or classes to the extent permitted
under Rule 18f-3 under the 1940 Act and pursuant to any applicable ruling,
procedure or regulation of the Internal Revenue Service.

A class of shares may be permitted to bear expenses that are directly
attributable to such class including: (a) any distribution/service fees
associated with any Rule 12b-1 plan for a particular class and any other costs
relating to implementing or amending such Plan (including obtaining shareholder
approval of such plan or any amendment thereto); (b) any administrative services
fees attributable to such class; and (c) any Class Expenses determined by the
Trustees to be attributable to such class.

3. To the extent exchanges are permitted, shares of any class of the Trust will
be exchangeable with shares of the same class of another series of the Trust, or
with money market fund shares of the Trust as described in the applicable
prospectus. Exchanges will comply with all applicable provisions of Rule 11a-3
under the 1940 Act.

4. Dividends paid by a series of the Trust as to each class of its shares, to
the extent any dividends are paid, will be calculated in the same manner, at the
same time, on the same day, and will be in the same amount, except that any
distribution/service fees, administrative services fees, and Class Expenses
allocated to a class will be borne exclusively by that class.

5. Any distribution arrangement of the Trust, including distribution fees and
front-end and deferred sales loads, will comply with Section 2830 of the Conduct
Rules of the National

<PAGE> 3

Association of Securities Dealers, Inc.

6. The initial adoption of, and all material amendments to this Plan must be
approved by a majority of the members of the Trust's Trustees, including a
majority of the Board members who are not interested persons of the Trust.