NATIONWIDE INVESTING FOUNDATION III, 485BPOS, 1999-03-01

NATIONWIDE INVESTING FOUNDATION III
485BPOS, 1999-03-01

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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 1, 1999

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
Post-Effective Amendment No. 12
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 13
(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
Morley Capital Accumulation Fund
Prestige Large Cap Value Fund
Prestige Large Cap Growth Fund
Prestige Small Cap Fund
Prestige Balanced Fund
Prestige International Fund

Three Nationwide Plaza
Columbus, Ohio 43216
(Address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number, including Area Code: (614) 249-7855

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

It is proposed that this filing will become effective:

[X] Immediately pursuant to paragraph (b) of Rule 485.

1
<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
Morley Capital Accumulation Fund
Prestige Large Cap Value Fund
Prestige Large Cap Growth Fund
Prestige Small Cap Fund
Prestige Balanced Fund
Prestige International Fund

CROSS REFERENCE SHEET

<TABLE>
<CAPTION>
N-1A Item No. Location
<S> <C> <C>
PART A

Item 1. Cover Page Cover Page
Item 2. Risk/Return Summary: Investments, Risks, and Performance Fund Summaries: Objective and Principal
Strategies, Principal Risks, Performance
Item 3. Risk/Return Summary: Fee Table Fund Summaries: Fees and Expenses
Item 4. Investment Objectives, Principal Investment Strategies, and Fund Summaries: Objective and Principal
Related Risks Strategies, Principal Risks, Performance
Item 5. Management's Discussion of Fund Performance *
Item 6. Management, Organization, and Capital Structure Management
Item 7. Shareholder Information Buying, Selling and Exchanging Fund
Shares; Distributions and Taxes
Item 8. Distribution Arrangements Management: Distribution Plan; Buying,
Selling and Exchanging Fund Shares
Item 9. Financial Highlights Information Financial Highlights

PART B

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

</TABLE>

2
<PAGE> 3
<TABLE>
<S> <C> <C>
Item 18. Purchase, Redemption and Pricing of Shares Additional Information on Purchases
and Sales; Valuation of Shares
Item 19. Taxation of the Fund Additional General Tax Information
Item 20. Underwriters *
Item 21. Calculation of Performance Data Fund Performance Advertising
Item 22. Financial Statements Financial Statements
</TABLE>

PART C

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

* Not applicable or negative answer.

3
<PAGE> 4
The Prospectuses as well as the Statements of Additional Information for the
Local Fund Shares and Class R and Class Y shares of the S&P 500 Index Fund, and
Morley Capital Accumulation Fund, and the Prospectus and Statement of Additional
Information for the Large Cap Value Fund, Large Cap Growth Fund, Small Cap Fund,
Balanced Fund and International Fund are incorporated by reference into this
filing of Post-Effective Amendment No. 12 to the Registration Statement.

4
<PAGE> 5
Nationwide Advisory Services, Inc.

Prospectus March 1, 1999

Nationwide Family of Funds

As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these funds' shares as an investment or determined
whether this prospectus is complete or accurate. To state otherwise is a crime.
<PAGE> 6

TABLE OF CONTENTS

FUND SUMMARIES............................................................3

FUND SUMMARIES -- THE STOCK FUNDS
NATIONWIDE(R) MID CAP GROWTH FUND.........................................4
Objective and Principal Strategies
Principal Risks
Performance
Fees and Expenses

NATIONWIDE(R) GROWTH FUND.................................................6
Objective and Principal Strategies
Principal Risks
Performance
Fees and Expenses

NATIONWIDE(R) FUND........................................................8
Objective and Principal Strategies
Principal Risks
Performance
Fees and Expenses

FUND SUMMARIES -- THE BOND FUNDS
NATIONWIDE(R) BOND FUND..................................................10
Objective and Principal Strategies
Principal Risks
Performance
Fees and Expenses

NATIONWIDE(R) TAX-FREE INCOME FUND.......................................12
Objective and Principal Strategies
Principal Risks
Performance
Fees and Expenses

NATIONWIDE(R) LONG-TERM
U.S. GOVERNMENT BOND FUND...............................................14
Objective and Principal Strategies
Principal Risks
Performance
Fees and Expenses

NATIONWIDE(R) INTERMEDIATE
U.S. GOVERNMENT BOND FUND...............................................16
Objective and Principal Strategies
Principal Risks
Performance
Fees and Expenses

FUND SUMMARY -- THE MONEY MARKET FUND
NATIONWIDE(R) MONEY MARKET FUND.........................................18
Objective and Principal Strategies
Principal Risks
Performance
Fees and Expenses

MORE ABOUT THE STOCK FUNDS..............................................20
Principal Investment Risks
Principal Investment Technique
Other Investment Techniques

MORE ABOUT THE BOND FUNDS...............................................21
Principal Investment Risks
Principal Investment Technique
Other Investment Techniques

MORE ABOUT THE MONEY MARKET FUND........................................24
Principal Investment Risks
Principal Investment Technique
Other Investment Techniques

MANAGEMENT..............................................................25
Investment Manager
Portfolio Managers

BUYING, SELLING AND EXCHANGING FUND SHARES..............................26
Choosing a Share Class
Buying Shares
Selling Shares
Distribution Plan for Class A and Class B Shares
Exchanging Shares
Year 2000

DISTRIBUTIONS AND TAXES................................................33
Distributions of Income Dividends
Distributions of Capital Gains
Reinvesting Distributions
State and Local Taxes
Selling Fund Shares
Exchanging Fund Shares

FINANCIAL HIGHLIGHTS...................................................34

ADDITIONAL INFORMATION.........................................BACK COVER

<PAGE> 7

FUND SUMMARIES

This prospectus provides information about the Nationwide(R) Mutual Funds, which
include stock funds, bond funds, and a money market fund (together the "Funds").
The "Stock Funds" means all of the stock funds, the "Bond Funds" means all of
the bond funds, and the "Money Market Fund" means the Nationwide Money Market
Fund. "You" and "your" refer to potential investors and current shareholders of
one or more of the Funds.

A QUICK NOTE ABOUT SHARE CLASSES

Each of the Stock and Bond Funds has three different share classes -- Class A,
Class B and Class D. There are two share classes of the Money Market Fund --
Prime shares and Class R shares -- but only the Prime shares are discussed in
this prospectus. The fees, sales charges and expenses for each share class are
different, but each share class of a particular fund represents an investment
in the same assets of that fund. Having different share classes simply lets you
choose the cost structure that's right for you.

The fees and expenses for each fund are set forth in the Fund Summaries. For
more information about which share class is right for you, see "Buying, Selling
and Exchanging Fund Shares -- Choosing a Share Class."
<PAGE> 8
The fees and expenses for each fund are set forth in the Fund Summaries. For
more information about which share class is right for you, see "Buying, Selling
and Exchanging Fund Shares -- Choosing a Share Class."

Fund Summaries -- The Stock Funds

This section summarizes key information about the Stock Funds. Use these
summaries to compare the Stock Funds with each other, as well as other mutual
funds. More detailed information about the risks and investment techniques of
each Fund can be found in "About the Stock Funds."

Nationwide(R) Mid Cap Growth Fund

SIDE BAR TEXT:

Measuring the size of a company
There are different ways to evaluate or measure how large a company is, or how
much it is worth. For example, market capitalization is a common way to measure
the size of a company based on the price of its common stock; it's simply the
number of outstanding shares of the company multiplied by the current share
price.

Objective and Principal Strategies

The Fund seeks long-term capital appreciation. This means it looks for
investments that it believes will increase in value over the long term
(typically three to ten years). To achieve its objective, the Fund primarily
invests in common stock. Under normal market conditions, the Fund invests at
least 65% of its total assets in the common stock and convertible securities
(securities that convert into common stock) of medium-size (also known as
mid-cap) companies and generally intends to be fully invested in these
securities. These are companies with market capitalization of between $300
million and $8 billion. The Fund looks for companies whose earnings are expected
to consistently grow faster than other companies in the market. It will
typically hold the securities of no more than 70 companies at any time. It
generally will sell securities if

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

Principal Risks

Individual stocks -- as well as the stock market as a whole -- could lose value.
Individual stocks can lose value if investors lose confidence in a company's
ability to grow or sustain profits. Investor confidence in stocks, economic
developments in the U.S. and foreign countries, interest rate changes, and other
factors can also affect the broader stock market. Typically, stocks are more
volatile than bonds.

The stocks of medium-size companies are usually less stable and less liquid than
the stocks of larger companies. Because the Fund typically holds fewer
securities than other stock funds, the price fluctuations of any security will
have a greater impact on the fund. Because the value of your investment in the
Fund will fluctuate, there is the risk that you will lose money.

Performance

<PAGE> 9

returns for certain time periods compared to the returns of a broad-based
securities index. The bar chart and table provide some indication of the risks
of investing in the Fund. Remember, however, that past performance does not
guarantee similar results in the future.

Annual returns -- Class D shares1
Bar Chart:

Best qtr.: 16.8% 4th qtr. of 1998
Worst qtr.: -14.6% 3rd qtr. of 1998

1 These annual returns do not include sales charges. If the sales charges were
included, the annual returns would be lower than those shown.

Average annual returns -- as of 12/31/981

<TABLE>
<CAPTION>
1 year 5 years 10 years
------ ------- --------
<S> <C> <C> <C>
Class A shares2 9.39% 16.47% 12.79%
------ ------ ------
Class B shares2 10.16% 17.46% 13.38%
------ ------ ------
Class D shares 10.48% 16.70% 12.91%
------ ------ ------
S&P 400 MidCap Index3 19.09% 18.82% NA
</TABLE>

1 These returns reflect performance after sales charges and expenses are
deducted, and include the performance of its predecessor fund prior to May 11,
1998.

2 These returns include performance based on the Fund's predecessor, which was
achieved prior to the creation of the class (5/11/98), and which is the same
as the performance shown for Class D shares through May 11, 1998. The returns
have been restated for sales charges but not for fees applicable to Class A
and B. Had Class A or B been in existence for the time periods presented, the
performance of Class A and B would have been lower as a result of their
additional expenses.

3 The Standard & Poor's 400 MidCap Index -- an unmanaged index of 400 stocks of
medium-size U.S. companies -- gives a broad look at how the stock prices of
medium-size U.S. companies have performed. These returns do not include the
effect of any sales charges or expenses. If sales charges and expenses were
deducted, the actual returns of this index would be lower.

<TABLE>
<CAPTION>
Fees and Expenses
Shareholder Fees Class A Class B Class D
(paid directly from your investment) shares shares shares
------- ------- -------
<S> <C> <C> <C>
Maximum Sales Charge (Load) 5.75%1 None 4.50%1
imposed on purchases
(as a percentage of offering price)
------ ------- -------
Maximum Deferred Sales Charge None 5.00%2 None
(Load) imposed on redemptions
(as a percentage of original purchase
price or sale proceeds, as applicable)
</TABLE>
<PAGE> 10
<TABLE>
<CAPTION>

Annual Fund Operating Expenses Class A Class B Class D
(deducted from Fund assets) shares shares shares
------ ------- -------
<S> <C> <C> <C>
Management Fees 0.60% 0.60% 0.60%
------ ------- -------
Distribution and/or Service 0.25% 1.00% None
(12b-1) Fees
------ ------- -------
Other Expenses 0.59% 0.59% 0.59%
------ ------- -------
Total Annual Fund 1.44% 2.19% 1.19%
</TABLE>

Operating Expenses3

1 As the amount of your investment increases, the sales charge imposed on the
purchase of Class A and Class D shares decreases. For more information, see
"Buying, Selling and Exchanging Fund Shares -- Buying Shares -- Class A and
Class D sales charges."

2 A contingent deferred sales charge (CDSC) ranging from 5% to 1% is charged
when you sell Class B shares within the first six years of purchase. Class B
shares are converted to Class A shares after you have held them for seven
years. See "Buying, Selling and Exchanging Fund Shares -- Buying Shares --
Contingent deferred sales charge (CDSC) on Class B shares."

3 Based on amounts incurred during the fiscal year ended October 31, 1998,
restated to reflect current fees. Nationwide Advisory Services, Inc. has
agreed to waive its fees or to reimburse "Other Expenses" (to the extent
necessary) so that Total Annual Fund Operating Expenses will not exceed 1.25%
for Class A shares, 2.00% for Class B shares, and 1.00% for Class D shares,
until further written notice.

Example

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

The example assumes that you invest $10,000 in the Fund for the time periods
indicated and then sell all of your shares at the end of those periods. It
assumes a 5% return each year and no changes in expenses. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:

1 year 3 years 5 years 10 years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A shares $713 $1,004 $1,317 $2,200
----- ------ ------- -------
Class B shares $722 $985 $1,375 $2,160
----- ------ ------- -------
Class D shares $566 $811 $1,075 $1,828
</TABLE>

You would pay the following expenses on the same investment if you did not sell
your shares:

<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
------ ------- ------- --------
<S> <C> <C> <C> <C>

Class B shares $222 $685 $1,175 $2,160
</TABLE>

Fund Summaries -- The Stock Funds continued

Nationwide(R) Growth Fund

SIDE BAR TEXT:

The benefits of research

Through research, the portfolio manager and analysts gather, check and analyze
information about industries and companies to determine if they are well

<PAGE> 11

positioned for long-term growth. The Fund seeks companies that have favorable
long-term growth potential and the financial resources to capitalize on growth
opportunities.

Objective and Principal Strategies

The Growth Fund -- like the Mid Cap Growth Fund -- seeks long-term capital
appreciation. Again, the focus is on investments that the Fund believes will
increase in value over the long run -- typically three to ten years -- and not
short-term gain. To achieve its objective, the Fund primarily invests in common
stock of large capitalization companies. Under normal market conditions, the
Fund invests at least 65% of its total assets in common stock and convertible
securities, and generally intends to be fully invested in these securities. The
Fund looks for companies whose earnings are expected to consistently grow faster
than other companies in the market. It will typically hold the securities of no
more than 70 companies at any time. It generally will sell securities if

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

Principal Risks

As with the Mid Cap Growth Fund, investing in stocks involves the risk that
individual stocks -- as well as the stock market as a whole -could lose value.
Again, individual stocks can lose value if investors lose confidence in a
company's ability to grow or sustain profits. Investor confidence in stocks,
economic developments in the U.S. and foreign countries, interest rate changes,
and other factors can also affect the broader stock market.

The Growth Fund seeks to spread the risk that the stocks of any particular
company will decrease in value by focusing on the highest quality long-term
growth opportunities it can find. Because the Fund typically holds fewer
securities than other stock funds, the price fluctuations of any security will
have a greater impact on the fund. Because the value of your investment will
fluctuate, there is the risk that you will lose money. For more detailed
information about the Fund's investments and risks, see"More About the Stock
Funds."

Performance

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

Annual returns -- Class D shares1

Bar Chart:

<PAGE> 12

Best qtr.: 23.0% 1st qtr. of 1997
Worst qtr.: -13.9% 3rd qtr. of 1990

1 These annual returns do not include sales charges. If the sales charges were
included, the annual returns would be lower than those shown.

Average annual returns -- as of 12/31/981

<TABLE>
<CAPTION>
1 year 5 years 10 years
------ ------- --------
<S> <C> <C> <C>
Class A shares2 16.68% 17.54% 14.39%
------ ------ ------
Class B shares2 18.39% 18.67% 15.04%
------ ------ ------
Class D shares 18.18% 17.85% 14.55%
------ ------ ------
S&P 500 Index3 28.58% 24.03% 19.17%
</TABLE>

1 These returns reflect performance after sales charges and expenses are
deducted, and include the performance of its predecessor fund prior to May 11,
1998.

3 The Standard & Poor's 500 Index -- an unmanaged index of 500 widely held
stocks of large U.S. companies -- gives a broad look at how the stock prices
of large U.S. companies have performed. These returns do not include the
effect of any sales charges. If sales charges and expenses were deducted, the
actual returns of this Index would be lower.

<TABLE>
<CAPTION>
Fees and Expenses
Shareholder Fees Class A Class B Class D
(paid directly from shares shares shares
your investment)
------- ------- -------
<S> <C> <C> <C>
Maximum Sales Charge (Load) 5.75%1 None 4.50%1
imposed on purchases
(as a percentage of offering price)
------- ------- -------
Maximum Deferred Sales Charge None 5.00%2 None
(Load) imposed on redemptions
(as a percentage of original purchase
price or sale proceeds, as applicable)
</TABLE>

<TABLE>
<CAPTION>
Annual Fund Operating Expenses Class A Class B Class D
(deducted from Fund assets) shares shares shares
------- ------- -------
<S> <C> <C> <C>
Management Fees 0.58% 0.58% 0.58%
------- ------- -------
Distribution and/or Service 0.25% 1.00% None
(12b-1) Fees
------- ------- -------
Other Expenses 0.22% 0.22% 0.22%
------- ------- -------
Total Annual Fund 1.05% 1.80% 0.80%
</TABLE>

Operating Expenses3

2 A contingent deferred sales charge (CDSC) ranging from 5% to 1% is charged

<PAGE> 13

when you sell Class B shares within the first six years of purchase. Class B
shares are converted to Class A shares after you have held them for seven
years. See "Buying, Selling and Exchanging Fund Shares -- Buying Shares --
Contingent deferred sales charge (CDSC) on Class B shares."

3 Based on amounts incurred during the fiscal year ended October 31, 1998,
restated to reflect current fees.

Example

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

1 year 3 years 5 years 10 years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A shares $676 $890 $1,121 $1,784
---- ---- ------ ------
Class B shares $683 $866 $1,175 $1,738
---- ---- ------ ------
- ---------------------------------------------------------------
Class D shares $528 $694 $ 874 $1,395
</TABLE>

You would pay the following expenses on the same investment if you did not sell
your shares:

<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class B shares $183 $566 $ 975 $1,738
</TABLE>

Fund Summaries -- The Stock Funds continued

Nationwide(R) Fund

Side Bar Text:

What is total return?

Generally, total return means a combination of income and capital appreciation.
In other words, the Fund looks for stocks and other securities that pay
dividends and other income, instead of relying solely on the security's
prospects for increasing in value. Because, in most cases, a stock is more
certain to pay its scheduled dividends than increase in value, a total return
approach can help a fund achieve more stable, dependable returns.

Objective and Principal Strategies

The Nationwide Fund is slightly more conservative than the other two Stock
Funds, since it seeks total return through a flexible combination of current
income and capital appreciation. To achieve its objective, the Fund invests
primarily in the common stock and convertible securities of companies with
consistent earnings performance, and generally intends to be fully invested in
these securities. The Fund looks for companies whose earnings are expected to
consistently grow faster than other companies in the market. It will typically
hold the securities of no more than 70 companies at any time. It usually will
sell securities if

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

Principal Risks

As with the other Stock Funds, the Nationwide Fund is subject to the risk that

<PAGE> 14

individual stocks -- or the stock market -- could lose value. The Fund seeks to
minimize risk by investing in securities that produce income; these securities
tend to be the stock of larger, more stable companies. Because the Fund
typically holds fewer securities than other stock funds, the price fluctuations
of any security will have a greater impact on the Fund. Because the value of
your investment will fluctuate, there is a risk that you will lose money. For
more detailed information about the Fund's investments and risks, see "More
About the Stock Funds."

Performance

Annual returns -- Class D shares1

Bar Chart:

Best qtr.: 18.5% 2nd qtr. of 1997
Worst qtr.: -10.6% 3rd qtr. of 1990

1 These annual returns do not include sales charges. If the sales charges were
included, the annual returns would be lower than those shown.

Average annual returns -- as of 12/31/981

<TABLE>
<CAPTION>
1 year 5 years 10 years
------ ------- --------
<S> <C> <C> <C>
Class A shares2 22.96% 22.69% 18.23%
------ ------ ------
Class B shares2 24.55% 23.82% 18.86%
------ ------ ------
Class D shares 24.48% 23.01% 18.39%
------ ------ ------
S&P 500 Index3 28.58% 24.03% 19.17%
</TABLE>

1 These returns reflect performance after sales charges and expenses are
deducted, and include the performance of its predecessor fund prior to May 11,
1998.

3 The Standard & Poor's 500 Index-- an unmanaged index of 500 widely held stocks
of large U.S. companies -- gives a broad look at how the stock prices of large
U.S. companies have performed. These returns do not include the effect of any
sales charges. If sales charges and expenses were deducted, the actual returns
of this Index would be lower.

<PAGE> 15

<TABLE>
<CAPTION>
Annual Fund Operating Expenses Class A Class B Class D
(deducted from Fund assets) shares shares shares
------- ------- -------
<S> <C> <C> <C>
Management Fees 0.56% 0.56% 0.56%
----- ----- -----
Distribution and/or Service 0.25% 1.00% None
(12b-1) Fees
----- ----- -----
Other Expenses 0.15% 0.15% 0.15%
----- ----- -----
Total Annual Fund 0.96% 1.71% 0.71%
</TABLE>

Operating Expenses3

3 Based on amounts incurred during the fiscal year ended October 31, 1998,
restated to reflect current fees.

Example

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

1 year 3 years 5 years 10 years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A shares $667 $863 $1,075 $1,685
---- ---- ------ ------
Class B shares $674 $839 $1,128 $1,638
---- ---- ------ ------
Class D shares $519 $667 $ 827 $1,293
</TABLE>

You would pay the following expenses on the same investment if you did not sell
your shares:

<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class B shares $174 $539 $ 928 $1,638
</TABLE>

<PAGE> 16

Fund Summaries -- The Bond Funds

This section summarizes key information about the Bond Funds. Use these
summaries to compare the Bond Funds with each other, as well as with other
mutual funds. For more detailed information about the risks and investment
techniques of the Bond Funds, see "More About the Bond Funds."

Nationwide(R) Bond Fund

Side Bar Text:

Investment-grade securities
The Fund focuses on "investment grade" taxable debt securities, including
corporate debt instruments that have been rated within the four highest rating
categories by a nationally recognized statistical rating organization ("NRSRO"),
such as Standard & Poor's Corporation or Moody's Investors Service, Inc. The
NRSRO evaluates a debt security, measures the issuer's financial condition and
stability, and assigns a rating to the security. By measuring the issuer's
ability to pay back the debt, ratings help investors evaluate the safety of
their bond investments.

Objective and Principal Strategies

The Fund seeks as high a level of current income as is consistent with
preservation of capital. To achieve its goal, the Fund seeks an attractive
risk-adjusted total return, with an emphasis on current income. It seeks to
achieve its goal by investing primarily in investment-grade securities, focusing
largely on corporate bonds and U.S. government securities. Under normal market
conditions, the Fund will invest at least 65% of its total assets in bonds,
which includes debentures and notes.

The Fund also invests in foreign government and corporate bonds, denominated in
U.S. dollars, and in mortgage-backed securities. It may also invest in
commercial paper rated in one of the two highest rating categories by a NRSRO.

The Fund's portfolio manager will consider the duration of particular bonds and
the Fund's overall portfolio when managing the Fund. Duration is a calculation
that seeks to measure the price sensitivity of a bond or a bond fund to changes
in interest rates. The Fund will have a duration of four to seven years. In
choosing to buy a debt security, the portfolio manager looks for value. The Fund
may sell a debt security as it gets closer to maturity in order to maintain the
Fund's target duration and achieve an attractive total return.

Principal Risks

The Bond Fund is subject to interest rate risk, which is the risk that bond
prices will change in response to changes in interest rates. Generally,
increases in market interest rates decrease the value of bonds. Bonds are also
subject to credit risk, which is the risk that the issuer of the bond will be
unable to make interest or principal payments when due. There is also the risk
that a change in a bond's rating will lower its value. Investments in foreign
securities involve risks in addition to those of U.S. investments. These risks
include political and economic risks, higher transaction costs and delayed
settlement. Mortgage-backed securities are also subject to prepayment risk when
interest rates fall, especially if the security was purchased at a premium,
which could cause the security to be paid off sooner than the portfolio manager
anticipated. If mortgage-backed securities are purchased at a discount, they may
be subject to extension risk, which would cause shorter-term securities to act
like more volatile, longer-term securities. The Fund is also subject to
inflation risk and liquidity risk, which is the risk that a bond cannot be sold,
or cannot be sold quickly at an acceptable price. Because the value of your

<PAGE> 17

investment will fluctuate, there is the risk that you will lose money.

Performance

Annual returns -- Class D shares1

Bar Chart:

Best qtr.: 8.7% 2nd qtr. of 1995
Worst qtr.: -5.0% 1st qtr. of 1994

1 These annual returns do not include sales charges. If the sales charges were
included, the annual returns would be lower than those shown. Please call
1-800-637-0012 to obtain the Fund's current 30-day yield.

Average annual returns -- as of 12/31/981

<TABLE>
<CAPTION>
1 year 5 years 10 years
------ ------- --------
<S> <C> <C> <C>
Class A shares2 3.25% 5.50% 8.15%
----- ----- -----
Class B shares2 2.79% 6.10% 8.61%
----- ----- -----
Class D shares 3.49% 5.55% 8.17%
----- ----- -----
Lehman Brothers Govt./Corp.
Bond Index3 9.47% 7.30% 9.39%
</TABLE>

1 These returns reflect performance after sales charges and expenses are
deducted, and include the performance of its predecessor fund prior to May 11,
1998.

3 The Lehman Brothers Government/Corporate Bond Index gives a broad look at how
the prices of U.S. government and corporate bonds have performed. These
returns do not include the effect of any sales charges or expenses. If sales
charges and expenses were deducted, the actual returns of this Index would be
lower.

<PAGE> 18

<TABLE>
<CAPTION>
Fees and Expenses
Shareholder Fees Class A Class B Class D
(paid directly from shares shares shares
your investment)
------- ------- -------
<S> <C> <C> <C>
Maximum Sales Charge (Load) 4.50%1 None 4.50%1
imposed on purchases
(as a percentage of offering price)
----- ------ -----
Maximum Deferred Sales Charge None 5.00%2 None
(Load) imposed on redemptions
(as a percentage of original purchase
price or sale proceeds, as applicable)
</TABLE>

<TABLE>
<CAPTION>
Annual Fund Operating Expenses Class A Class B Class D
(deducted from Fund assets) shares shares shares
------- ------- -------
<S> <C> <C> <C>
Management Fees 0.50% 0.50% 0.50%
----- ----- -----
Distribution and/or Service 0.25% 0.85% None
(12b-1) Fees
----- ----- -----
Other Expenses 0.32% 0.32% 0.32%
----- ----- -----
Total Annual Fund 1.07% 1.67% 0.82%
</TABLE>

Operating Expenses3

3 Based on amounts incurred during the fiscal year ended October 31, 1998,
restated to reflect current fees.

Example

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

1 year 3 years 5 years 10 years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A shares $554 $775 $1,014 $1,697
---- ---- ------ ------
Class B shares $670 $826 $1,107 $1,671
---- ---- ------ ------
Class D shares $530 $700 $ 885 $1,418
</TABLE>

You would pay the following expenses on the same investment if you did not sell
your shares:

<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class B shares $170 $526 $ 907 $1,671
</TABLE>

<PAGE> 19

Fund Summaries -- The Bond Funds continued

Nationwide(R) Tax-Free Income Fund

Side Bar Text:

What are municipal obligations?
Municipal obligations are issued by, or on behalf of, states, cities and other
local governmental entities, to pay for construction and other projects. They
are loans that investors make to a government or governmental entity; the
government or governmental entity gets the cash it needs to complete its project
and the lenders earn interest payments and get their principal back.

Objective and Principal Strategies

The Fund seeks as high a level of current income that is exempt from federal
income taxes as is consistent with the preservation of capital through investing
in investment-grade municipal obligations. To achieve its objective, the Fund
invests at least 80% of its net assets in securities, the interest income from
which is exempt from federal income taxes. In addition, the Fund may also invest
up to 20% of its net assets in securities, the interest income from which is
treated as a preference item for purposes of the federal alternative minimum
tax. The Fund focuses on municipal obligations that have been rated within the
four highest rating categories by a NRSRO (such as Standard & Poor's Corporation
or Moody's Investors Services, Inc.), or if not rated, are of equivalent
quality. These obligations are issued by states, U.S. territories, and their
political subdivisions.

The Fund may also invest in other types of municipal obligations, including
tax-exempt zero-coupon securities, and floating and variable-rate bonds. In
choosing to buy a security, the portfolio manager looks for value. A security
may be sold to take advantage of more favorable opportunities.

Principal Risks

Like the Bond Fund, the Tax-Free Income Fund is subject to interest rate risk
(the risk that a rise in interest rates will lower the value of existing bonds
that pay lower rates), credit risk (the risk that the bond issuer will be unable
to make interest or principal payments when due), and the risk that a change in
the bond's rating will lower its value. The Fund is also subject to inflation
risk and liquidity risk, which is the risk that a bond cannot be sold, or cannot
be sold quickly at an acceptable price. A shareholder in the Fund may also face
two types of tax risk. There is a risk that the federal income tax rate will be
reduced and the value of the tax-exemption will be less valuable. There is also
the risk that a municipal bond, which is issued as tax-exempt, will eventually
be declared taxable.

Performance

Annual returns -- Class D shares1

Bar Chart:

Best qtr.: 5.8% 2nd qtr. of 1989
Worst qtr.: -7.2%% 1st qtr. of 1994

1 These annual returns do not include sales charges. If the sales charges were
included, the annual returns would be lower than those shown. Please call
1-800-637-0012 for the Fund's current 30-day yield.

Average annual returns -- as of 12/31/981

<TABLE>
<CAPTION>
1 year 5 years 10 years
------ ------- --------
<S> <C> <C> <C>
Class A shares2 0.64% 3.89% 6.82%
----- ----- -----
Class B shares2 0.09% 4.47% 7.28%
----- ----- -----
Class D shares 0.88% 3.94% 6.85%
----- ----- -----
Lehman Brothers Municipal
Bond Index3 6.48% 6.22% 8.22%
</TABLE>

1 These returns reflect performance after sales charges and expenses are
deducted, and include the performance of its predecessor fund prior to May 11,
1998.

3 The Lehman Brothers Municipal Bond Index gives a broad look at how the bond
prices of municipal bonds have performed. These returns do not include the
effect of any sales charges or expenses. If sales charges and expenses were
deducted, the actual returns of this Index would be lower.

<TABLE>
<CAPTION>
Fees and Expenses
Shareholder Fees Class A Class B Class D
(paid directly from shares shares shares
your investment)
------- ------- -------
<S> <C> <C> <C>
Maximum Sales Charge (Load) 4.50%1 None 4.50%1
imposed on purchases
(as a percentage of offering price)
----- ----- -----
Maximum Deferred Sales Charge None 5.00%2 None
(Load) imposed on redemptions
(as a percentage of original purchase
price or sale proceeds, as applicable)
</TABLE>

<TABLE>
<CAPTION>
Annual Fund Operating Expenses Class A Class B Class D
(deducted from Fund assets) shares shares shares
------- ------- -------
<S> <C> <C> <C>
Management Fees 0.50% 0.50% 0.50%
----- ----- -----
Distribution and/or Service 0.25% 0.85% None
(12b-1) Fees
----- ----- -----
Other Expenses 0.20% 0.20% 0.20%
----- ----- -----
Total Annual Fund 0.95% 1.55% 0.70%
Operating Expenses3
</TABLE>
<PAGE> 21

3 Based on amounts incurred during the fiscal year ended October 31, 1998,
restated to reflect current fees.

Example

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

<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A shares $543 $739 $ 952 $1,564
---- ---- ------ ------
Class B shares $658 $790 $1,045 $1,536
---- ---- ------ ------
Class D shares $518 $664 $ 822 $1,281
</TABLE>

You would pay the following expenses on the same investment if you did not sell
your shares:

<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class B shares $158 $490 $ 845 $1,536
</TABLE>

Fund Summaries -- The Bond Funds continued

Nationwide(R) Long-Term U.S. Government Bond Fund

Side Bar Text:

Bond maturity

Bond maturity simply means the life of a bond before it comes due and must be
repaid. Generally, the longer the bond's maturity, the higher the interest rate.
This compensates investors for tying up their investments for longer periods.
However, as described below, bonds with longer maturities are also more
sensitive to price shifts caused by interest rate changes.

Objective and Principal Strategies

The Fund seeks as high a level of current income as is consistent with the
preservation of capital. To achieve its goal, the Fund seeks an attractive
risk-adjusted total return with an emphasis on current income. It seeks to
achieve its goal primarily by investing at least 65% of its total assets in U.S.
government and agency bonds, bills and notes. The Fund may also invest in
mortgage-backed securities issued by U.S. government agencies. The
dollar-weighted average portfolio maturity of the Fund's assets will be more

<PAGE> 22

than seven years.

To select investments that fit the Fund's objectives, the portfolio manager uses
interest rate expectations, yield-curve analysis, economic forecasting, market
sector analysis and other techniques. The Fund may also look for bonds that it
believes are undervalued, with the goal of buying them at attractive prices and
watching them increase in value. A security may be sold to take advantage of
more favorable opportunities.

Principal Risks

Generally, the Long-Term U.S. Government Bond Fund is subject to interest rate
risk (the risk that rising interest rates will lower the value of existing
bonds). Mortgage-backed securities are also subject to prepayment risk when
interest rates fall, especially if the security was purchased at a premium,
which could cause the security to be paid off sooner than the portfolio manager
anticipated. If mortgage-backed securities held by the Fund are purchased at a
discount, they may be subject to extension risk, which results in the securities
earning a return that is less than expected when purchased.

Since the Fund purchases obligations backed by the U.S. government or its
agencies, there is little credit risk and minimal chance these obligations will
default. The Fund is also subject to inflation risk and to liquidity risk, which
is the risk that a bond cannot be sold, or cannot be sold quickly at an
acceptable price. Because the value of your investment will fluctuate, there is
a risk you will lose money. For more detailed information about the Fund's
investments and risks, see "More About the Bond Funds."

Performance

Annual returns -- Class D shares1

Bar Chart:

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

1 These annual returns do not include sales charges. If the sales charges were

<PAGE> 23
included, the annual returns would be lower than those shown. Please call
1-800-637-0012 for the Fund's current 30-day yield.

Average annual returns--as of 12/31/981

<TABLE>
<CAPTION>
1 year 5 years 10 years
------ ------- --------
<S> <C> <C> <C>
Class A shares2 4.65% 6.26% 8.67%
----- ----- -----
Class B shares2 4.04% 6.83% 9.12%
----- ----- -----
Class D shares 4.80% 6.29% 8.69%
----- ----- -----
Merrill Lynch Government 9.85% 7.21% NA
Master Index3
----- ----- -----
</TABLE>

1 These returns reflect performance after sales charges and expenses are
deducted, and include the performance of its predecessor fund prior to May 11,
1998.

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

<TABLE>
<CAPTION>
Fees and Expenses
Shareholder Fees Class A Class B Class D
(paid directly from shares shares shares
your investment)
------- ------- -------
<S> <C> <C> <C>
Maximum Sales Charge (Load) 4.50%1 None 4.50%1
imposed on purchases
(as a percentage of offering price)
----- ----- -----
Maximum Deferred Sales Charge None 5.00%2 None
(Load) imposed on redemptions
(as a percentage of original purchase
price or sale proceeds, as applicable)
</TABLE>

<TABLE>
<CAPTION>
Annual Fund Operating Expenses Class A Class B Class D
(deducted from Fund assets) shares shares shares
------- ------- -------
<S> <C> <C> <C>
Management Fees 0.50% 0.50% 0.50%
----- ----- -----
Distribution and/or Service 0.25% 0.85% None
(12b-1) Fees
----- ----- -----
Other Expenses 0.33% 0.33% 0.33%
----- ----- -----
Total Annual Fund 1.08% 1.68% 0.83%
Operating Expenses3
</TABLE>

1 As the amount of your investment increases, the sales charge imposed on the
purchase of Class A and Class D shares decreases. For more information, see
"Class A and Class D sales charges."

Contingent deferred sales charge (CDSC) on Class B Shares.

3 Based on amounts incurred during the fiscal year ended October 31, 1998,
restated to reflect current fees. Nationwide Advisory Services, Inc. has
agreed to waive its fees or to reimburse "Other Expenses" (to the extent
necessary) so that Total Annual Operating Expenses will not exceed 1.04% on
Class A shares, 1.64% on Class B shares, and .79% on Class D shares, until
further written notice.

Example

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

<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A shares $555 $778 $1,019 $1,708
---- ---- ------ ------
Class B shares $671 $830 $1,113 $1,682
---- ---- ------ ------
Class D shares $531 $703 $ 890 $1,429
</TABLE>

You would pay the following expenses on the same investment if you did not sell
your shares:

<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class B shares $171 $530 $ 913 $1,682
</TABLE>

Fund Summaries -- The Bond Funds continued

Nationwide(R) Intermediate U.S. Government Bond Fund

Side Bar Text:

Finding the right bonds

To select bonds and other investments that fit the Fund's objectives, the
portfolio manager uses interest rate expectations, yield-curve analysis,
economic forecasting, market sector analysis, and other techniques. The goal is
to find obligations that present good value and pay attractive interest rates.
The Fund may also look for U.S. government and agency bonds that it believes are
undervalued, with the goal of buying them at attractive prices and watching them
increase in value. (A security may be sold to take advantage of more favorable
opportunities.)

Objective and Principal Strategies

The Fund seeks as high a level of current income as is consistent with the
preservation of capital. To achieve its goal, the Fund seeks an attractive
risk-adjusted total return, with an emphasis on current income. It seeks to
achieve its goal by investing at least 65% of its total assets in U.S.
government and agency bonds, bills and notes. The Fund may also invest in
mortgage-backed securities. The Fund's dollar-weighted average portfolio
maturity generally will be three to seven years (as compared with an average
portfolio maturity of more than seven years for the Long-Term U.S. Government
Bond Fund).

<PAGE> 25

in interest rates. The Fund will have a duration of three to six years.

Principal Risks

The Intermediate U.S. Government Bond Fund -- like the Long-Term U.S. Government
Bond Fund -- generally is less risky than the other Bond Funds because the U.S.
government securities it purchases are subject to little credit risk. With the
backing of the U.S. government and its agencies, there is minimal chance that
these obligations will default. Bonds are subject to interest rate risk (the
risk that rising interest rates will lower the value of existing bonds).
Mortgage-backed securities are also subject to prepayment risk when interest
rates fall, especially if the security was purchased at a premium, which could
cause the security to be paid off sooner than the portfolio manager anticipated.
If mortgage-backed securities are purchased at a discount, they may be subject
to extension risk, which results in the securities earning a return that is less
than expected when purchased. The Fund is also subject to inflation risk and to
liquidity risk, which is the risk that a bond cannot be sold, or cannot be sold
quickly at an acceptable price. Because the value of your investment will
fluctuate, there is the risk that you will lose money. For more detailed
information about the Fund's investments and risks, see "More About the Bond
Funds."

Performance

Annual returns -- Class D shares1
Bar Chart:

Best qtr.: 6.8% 2nd qtr. of 1995
Worst qtr.: -2.2% 1st qtr. of 1994

Average annual returns -- as of 12/31/981

<TABLE>
<CAPTION>
Since inception
1 year 5 years (2/10/92)
------ ------- ---------
<S> <C> <C> <C>
Class A shares2 3.10% 5.93% 6.56%
----- ----- -----
Class B shares2 2.54% 6.52% 7.22%
----- ----- -----
Class D shares 3.34% 5.98% 6.60%
----- ----- -----
Merrill Lynch Government 9.85% 7.21% NA
Master Index3
</TABLE>

1 These returns reflect performance after sales charges and expenses are
deducted, and include the performance of its predecessor fund prior to May 11,
1998. The predecessor to the Fund began operations on February 10, 1992.

<PAGE> 26

<TABLE>
<CAPTION>
Fees and Expenses
Shareholder Fees Class A Class B Class D
(paid directly from shares shares shares
your investment)
------- ------- -------
<S> <C> <C> <C>
Maximum Sales Charge (Load) 4.50%1 None 4.50%1
imposed on purchases
(as a percentage of offering price)
----- ----- -----
Maximum Deferred Sales Charge None 5.00%2 None
(Load) imposed on redemptions
(as a percentage of original purchase
price or sale proceeds, as applicable)
</TABLE>

<TABLE>
<CAPTION>
Annual Fund Operating Expenses Class A Class B Class D
(deducted from Fund assets) shares shares shares
------- ------- -------
<S> <C> <C> <C>
Management Fees 0.50% 0.50% 0.50%
----- ----- -----
Distribution and/or Service 0.25% 0.85% None
(12b-1) Fees
----- ----- -----
Other Expenses 0.32% 0.32% 0.32%
----- ----- -----
Total Annual Fund 1.07% 1.67% 0.82%
Operating Expenses3
</TABLE>

1 As the amount you invest increases, the sales charge imposed on the purchase
of Class A and Class D shares decreases. For more information, see "Class A
and Class D sales charges."

3 Based on amounts incurred during the fiscal year ended October 31, 1998,
restated to reflect current fees. Nationwide Advisory Services, Inc. has
agreed to waive its fees or to reimburse "Other Expenses" (to the extent
necessary) so that Total Annual Fund Operating Expenses will not exceed 1.04%
for Class A shares, 1.64% for Class B shares, and .79% for Class D shares,
until further written notice.

Example

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

<PAGE> 27

<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
---- ---- ------ ------
<S> <C> <C> <C> <C>
Class A shares $554 $775 $1,014 $1,697
---- ---- ------ ------
Class B shares $670 $826 $1,107 $1,671
---- ---- ------ ------
Class D shares $530 $700 $885 $1,355
</TABLE>

You would pay the following expenses on the same investment if you did not sell
your shares:

<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class B shares $170 $526 $ 907 $1,671
</TABLE>

Fund Summary -- The Money Market Fund

This section summarizes key information about the Prime Shares of the Money
Market Fund. Use it to compare this Fund with other mutual funds. For more
detailed information about the risks and investment techniques of this Fund, see
"More About the Money Market Fund."

Nationwide(R) Money Market Fund

Side Bar Text:

Why a money market fund?
By investing in short-term corporate and government bonds and other debt
instruments, money market funds provide current income to investors and allow
easy access to their money. Money market funds are for risk-adverse investors or
investors who want to earn competitive yields on cash they may need on short
notice. While the Money Market Fund pays dependable income, there is no
guarantee that the Fund's earnings will stay ahead of inflation or always
provide a certain level of income.

Objective and Principal Strategies

This Fund seeks as high a level of current income as is consistent with the
preservation of capital and maintenance of liquidity. It seeks to achieve this
objective by investing in high-quality money market obligations maturing in 397
days or less, including corporate obligations, U.S. government and agency bonds,
bills and notes, the obligations of foreign governments, and the obligations of
U.S. banks and U.S. branches of foreign banks if they are denominated in U.S.
dollars. The Fund may also invest in floating- and adjustable-rate obligations
and asset-backed commercial paper. Typically, the Fund's dollar-weighted average
maturity will be 90 days or less.

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

Principal Risks

The Fund is a low-risk investment, compared with stock and bond funds. While the
Fund is subject to credit risk, which is the risk that the issuer of a money
market obligation will be unable to make interest or principal payments when
due, this risk is significantly reduced due to the short-term nature of the
underlying investments. There is also the risk that a change in the money market
obligation's rating will lower its value. Although the Fund's objective is to
preserve capital, there can be no guarantee that the Fund will be able to
maintain a stable net asset value of $1.00 per share; therefore, you could lose
money. Investments in the Fund are not bank deposits and are not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other

<PAGE> 28

governmental agency.

Performance

Annual returns - Prime Shares
Bar Chart:

Best qtr.: 2.3% 2nd qtr. of 1989
Worst qtr.: 0.6% 2nd qtr. of 1993

Average annual returns--as of 12/31/981

<TABLE>
<CAPTION>
1 year 5 years 10 years
------ ------- --------
<S> <C> <C> <C>
Prime Shares 5.08% 4.89% 5.25%
----- ----- -----
Consumer Price Index2 1.55% 2.39% 3.16%
</TABLE>

1 These returns reflect performance after expenses are deducted and includes the
performance of its predecessor fund prior to May 11, 1998. Please call
1-800-637-0012 for the Fund's current 7-day yield.

2 The Consumer Price Index represents changes in prices of goods and services
purchased for consumption by urban households.

Fees and Expenses

There are no sales charges to purchase or sell Prime Shares of the Money Market
Fund.

<TABLE>
<CAPTION>
Annual Fund Operating Expenses
(deducted from Fund assets) Prime Shares
------------
<S> <C>
Management Fees 0.40%
-----
Distribution and Service (12b-1) Fees None
-----
Other Expenses 0.20%
-----
Total Annual Fund Operating Expenses1 0.60%
</TABLE>

1 Based on amounts incurred during the fiscal year ended October 31, 1998,
restated to reflect current fees.

Example

This example helps demonstrate the fees and expenses of the Fund's Prime Shares.
<PAGE> 29
You can also use this example to compare the cost of this Fund with other mutual
funds.

The example assumes that you invest $10,000 in the Prime Shares of the Fund for
the time periods indicated and then sell all of your shares at the end of those
periods. The example also assumes that your investment has a 5% return each year
and that the Fund's operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:

<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Prime Shares $60 $189 $329 $738
</TABLE>

More About the Stock Funds

Side Bar Text:

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

Principal Investment Risks

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

There is also risk when investing in medium-size or smaller companies. The stock
prices of these companies may be more volatile than the stock of larger
companies for a variety of reasons, including less domination in their markets,
fewer financial resources, and less-experienced management. In other words, they
tend to be less "seasoned" than larger companies. The stock of small and
medium-size companies is usually less stable and less liquid than the stock of
larger companies. The Mid Cap Growth Fund focuses on a more narrow scope of the
overall stock market, by investing primarily in companies with medium market
capitalizations. Therefore, the impact of these factors on medium-size companies
may affect the Mid Cap Growth Fund more than if the Fund invested more broadly
in the overall stock market.

Principal Investment Technique

The Stock Funds may use the following investment technique to increase their
returns, protect their assets or diversify their investments.

Convertible securities

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

Convertibles tend to be more stable in price than their underlying common stock,
although price changes in the underlying common stock can affect the
convertible's market value. For example, as the underlying common stock loses
value, convertibles present less opportunity for capital appreciation, and may
also lose value. Convertibles, however, may sustain their value better than

<PAGE> 30

common stock because they pay bond-like income, which tends to be higher than
common stock dividend yields.

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

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

Other Investment Techniques

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

Temporary defensive positions

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

More About the Bond Funds

Sidebar Text:

Credit risk

The Nationwide Bond Fund and Tax-Free Income Fund are subject to credit risk,
which is the risk that the issuer of the bond will be unable to make the
required payments of interest and/or repay principal. Some of the securities
purchased by the Long-Term U.S. Government Bond Fund and the Intermediate U.S.
Government Bond Fund are virtually immune to credit risk, because they are
issued and backed by the "full faith and credit" of the U.S. government and its
agencies. This means the U.S. government has the power to tax its citizens in
order to pay its debts. Some of the securities issued by U.S. government
agencies are not backed by the full faith and credit of the U.S. government, but
are backed by the implicit obligation of the agency.

Principal Investment Risks

Generally, the Bond Funds are subject to interest rate risk, which is the risk
that increases in market interest rates may decrease the value of the bonds in
their portfolios. Usually the prices of bonds fall when interest rates increase,
and rise when interest rates decrease. Typically, the longer the maturity of a
bond, the more sensitive it is to price shifts as a result of interest rate
changes. Likewise, the longer the Fund holds a bond, the greater the chance that
interest rate changes will affect the bond's value.

There is also inflation risk, which affects the value of fixed-rate investments
such as bonds. If the Funds buy bonds when inflation and interest rates are low,
the value of these bonds could fall as inflation rises and interest rates
increase. This could happen as investors find the bonds with lower interest
rates less attractive than bonds that pay higher interest rates.

Principal Investment Techniques

<PAGE> 31

The Bond Funds may use the following investment techniques to increase their
returns, protect their assets, or diversify their investments.

Investment-grade bonds

These include U.S. government bonds, corporate bonds, and municipal bonds that
have been rated within the four highest rating categories by a nationally
recognized statistical ratings organization ("NRSRO"). The bonds are evaluated
by a NRSRO that measures the financial condition and stability of the issuer and
assigns a rating. If a NRSRO changes the bond's rating, it may affect the bond's
value.

Medium-grade obligations

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 Nationwide Advisory
Services, Inc. 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.

U.S. government securities

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

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

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

Zero-coupon securities

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

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

More About the Bond Funds continued

Mortgage-backed securities

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

<PAGE> 32

by private issuers.

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

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

Floating- and variable-rate securities

Floating- and variable-rate securities do not have fixed interest rates; the
rates change periodically. The interest rate on floating-rate securities varies
with changes to another index (such as the Treasury-bill rate), but the interest
rate on variable-rate securities changes at preset times, based upon some
underlying index. Some of the floating- or variable-rate securities will be
callable by the issuer, which means they can be paid off before their maturity
date.

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

Municipal obligations

Municipal obligation interest is generally exempt from federal income taxes.

Municipal obligations include revenue bonds (which are paid from the revenue of
a specific project), general-obligation bonds (which are backed by the taxing
power of the issuer), and moral-obligation bonds (which are normally issued by
special-purpose public authorities). If the issuer of moral-obligation bonds is
unable to pay interest from current revenues, it can draw from a reserve fund,
the restoration of which is a moral commitment but not a legal obligation of
that issuer. The principal risks of municipal obligations are credit risk and
interest rate risk, although local, political and economic factors may also
adversely affect the value and liquidity of municipal securities.

Maturity

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

A bond fund has no real maturity, but it does have a weighted average maturity.
This number is an average of the stated or effective maturities of the
underlying bonds, with each bond's maturity "weighted" by the percentage of fund
assets it represents. The Funds that target maturities normally use the
effective, rather than the stated, maturities of the bonds in the portfolio when
computing the average. This provides additional flexibility in portfolio
management but, all else being equal, could result in higher volatility than a
fund targeting a stated maturity or maturity range.
<PAGE> 33

Duration

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

Other Investment Techniques

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

Temporary defensive positions

In response to economic, political or unusual market conditions, each of the
Bond Funds may adopt a temporary defensive position. The Tax-Free Income Fund
may invest up to 20% of its assets in cash and taxable money market bonds, and
the Nationwide Bond Fund, the Long-Term U.S. Government Bond Fund, and the
Intermediate U.S. Government Bond Fund may invest up to 100% of their assets in
cash or money market obligations. Should this occur, the Funds may not meet
their investment objectives and may miss potential market upswings.

More About the Money Market Fund

Principal Investment Risks

The Money Market Fund is a low-risk investment compared to most other
investments. Given its objective -- to preserve capital, generate income and
maintain liquidity -- the Fund invests in low-risk, high-quality securities. No
investment, however, is free of all risk. Any time an investor buys commercial
paper or similar obligations, there is credit risk and interest rate risk.

Principal Investment Techniques

The Money Market Fund may use the following techniques to increase its returns,
or to diversify its investments.

Money market obligations These include:

o U.S. government securities with remaining maturities of 397 days or less
o Commercial paper rated in one of the two highest categories of any NRSRO
o Asset-backed commercial paper whose own ratings or the rating of any guarantor
is in one of the two highest categories of any NSRSO
o Short-term bank obligations rated in one of the two highest categories by any
NRSRO (with respect to obligations maturing in one year or less)
o Repurchase agreements relating to debt obligations that the Fund could
purchase directly
o Unrated debt obligations with remaining maturities of one year or less that
are determined by Nationwide Advisory Services,Inc. to be of comparable
quality to the securities described above.

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

Floating- and variable-rate securities

The Fund may invest in floating- and variable-rate securities. These are
securities that do not have fixed interest rates; the rates change periodically.
The interest rate on floating-rate securities varies with changes to another
index (such as the Treasury bill rate), but the interest rate on variable-rate

<PAGE> 34

bonds changes at preset times, based upon some underlying index. Some of the
floating- or variable-rate securities will be callable by the issuer, which
means they can be paid off before their maturity date.

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

Repurchase agreements

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

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

Other Investment Techniques

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

Management

Investment Manager

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

Each Fund pays NAS a management fee as set forth below. These fees were
effective as of May 11, 1998. The management fee is based on the Fund's average
daily net assets and includes breakpoints so fees decrease as assets increase:

<TABLE>
<CAPTION>
Fund Assets Fee
- ---- ------ ---
<S> <C> <C>
The Stock Funds up to $250 million .60%
- ----------------------------------------------------------------
Mid Cap Growth, Growth, $250 million - $1 billion .575%
- ----------------------------------------------------------------
Nationwide Fund $1 billion - $2 billion ..55%
- ----------------------------------------------------------------
$2 billion - $5 billion .525%
- ----------------------------------------------------------------
$5 billion + .50%
- ----------------------------------------------------------------
The Bond Funds up to $250 million .50%
- ----------------------------------------------------------------
Bond, Tax-Free Income, $250 million - $1 billion .475%
- ----------------------------------------------------------------
Long-Term U.S. Government $1 billion - $2 billion .45%
- ----------------------------------------------------------------
Bond, Intermediate $2 billion - $5 billion .425%
- ----------------------------------------------------------------
U.S. Government Bond Fund $5 billion + .40%
</TABLE>

<PAGE> 35

<TABLE>
<S> <C> <C>
- ----------------------------------------------------------------
The Money Market Fund up to $1 billion .40%
- ----------------------------------------------------------------
$1 billion - $2 billion .38%
- ----------------------------------------------------------------
$2 billion - $5 billion .36%
- ----------------------------------------------------------------
$5 billion + .34%
</TABLE>

For the fiscal year ended October 31, 1998, each Fund paid the following
management fees, which reflect payments before and after the change in fees:

<TABLE>
<S> <C>
Mid Cap Growth Fund .63%
Growth Fund .54%
Nationwide Fund .53%
Bond Fund .50%
Tax-Free Income Fund .56%
Long-Term U.S. Government Bond Fund .58%
Intermediate U.S. Government Bond Fund .57%
Money Market Fund .45%
</TABLE>

Portfolio Managers

Mid Cap Growth Fund

Christopher Welch has managed the Mid Cap Growth Fund since January 1999. Mr.
Welch joined Nationwide in 1991 and from 1993 to 1995 worked in the Human
Resource Department. In 1995, he joined the Investment Department as a
securities analyst and has managed mid-cap equity portfolios for Nationwide
Mutual Insurance Company and Nationwide Mutual Fire Insurance Company since
January 1998.

Growth Fund

John M. Schaffner has managed the Growth Fund and its predecessor since 1981. He
managed the Financial Horizons Investment Trust ("FHIT") Growth Fund, 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 and managed
the Mid Cap Fund until January 1999.

Nationwide Fund

Charles Bath has managed the Nationwide Fund and its predecessor since 1985.

Bond Fund

Douglas Kitchen has managed the Nationwide Bond Fund and its predecessor since
March 1997. From 1992 to March 11, 1997, he managed the bond portfolio for the
Nationwide Foundation.

Tax-Free Income Fund

Alpha Benson has managed the Nationwide Tax-Free Income Fund and its predecessor
from its inception in March 1986, and managed the Financial Horizons Investment
Trust ("FHIT") Municipal Bond Fund from March 1997 to May 1998.

Long-Term U.S. Government Bond Fund and Intermediate U.S. Government Bond Fund

Gary Hunt joined Nationwide in 1992 as a securities analyst. Mr. Hunt
has been co-manager of the Government Bond Funds, and their predecessor Funds,
since March 1997. Starting May 1999, Mr. Hunt will take over sole responsibility
for the Government Bond Funds.

Money Market Fund

Patricia Mynster, Director - Securities Investments, has managed the Nationwide

<PAGE> 36

Money Market Fund and its predecessor since July 1997, and has managed
short-term investments for the Nationwide Insurance Enterprise since 1991.

Buying, Selling and Exchanging Fund Shares

In this section, "we" and "our" refer to Nationwide Advisory Services, Inc.
("NAS"). "You" and "your" mean potential investors and current shareholders.

Side Bar Text:

Who can buy Class D shares

Shareholders who received Class D shares or Prime Shares of the Money Market
Fund as a result of the May 9, 1998, reorganization of the Funds into the Trust
(described in the SAI) may buy Class D shares if purchased through the same
account. Certain other groups of investors may buy shares without a sales charge
as described under "Waiver of Class A and Class D sales charges" on page 28.

Choosing a Share Class

As noted in the Fund Summaries, we offer different share classes to give
investors different price and cost options. Class A, Class B and the Prime
Shares of the Money Market Fund are available to all investors; Class D shares
are available to a limited group of investors.

With Class A and Class D shares, you pay a sales charge (known as a front-end
sales charge) when you purchase the shares; and with Class B shares you pay a
sales charge (known as a contingent deferred sales charge, or CDSC) if you sell
your shares within six years after purchase.

If you want lower annual fund expenses, Class A shares (and Class D shares if
you are eligible to purchase them) may be right for you, particularly if you
qualify for a reduction or waiver of sales charges. If you do not want to pay an
up-front sales charge, and you anticipate holding your shares for the long term,
Class B shares may be more appropriate. NAS reserves the right to reject an
order in excess of $100,000 for Class B shares and an order for Class B shares
for Individual Retirement Accounts ("IRA accounts") for shareholders 701/2 years
old and older. When choosing a share class, consider the following:

Class A and Class D shares Class B shares
- --------------------------------------------------------------------------------
Front-end sales charge means No front-end sales charge, so your full that a
portion of your initial investment immediately goes toward investment
toward the sales goes buying shares
charge, and is not invested
- --------------------------------------------------------------------------------
Reductions and waivers of the No reductions of the contingent deferred
sales charge available sales charge available, but waivers
available
- --------------------------------------------------------------------------------
Lower expenses than Class B Higher distribution and service fees than
mean higher dividends shares Class A and Class D shares mean lower
per share dividends per share
- --------------------------------------------------------------------------------
Conversion features are After six years, Class B shares convert
not applicable into Class A shares, which reduces your
future fund expenses
- --------------------------------------------------------------------------------
No sales charge when shares Contingent deferred sales charge (CDSC)
are sold back to the Fund if shares sold within six years: 5% in the
first year, 4% in the second, 3% in the
third and fourth years, 2% in the fifth, and
1% in the sixth year

Buying Shares

<PAGE> 37

Purchase price

The purchase or "offering" price of one share of a Fund is its "net asset value"
or NAV, plus any applicable sales charge. A separate NAV is calculated for each
class of a Fund. Generally, NAV is based on the market value of the securities
owned by a Fund less its liabilities. The NAV for a class is determined by
dividing the total net asset value of a Fund allocable to a class by the total
number of that class' outstanding shares, and is determined at the close of
regular trading each day that the New York Stock Exchange is open for trading
(usually 4 p.m. Eastern Standard Time).

<TABLE>
<S> <C>
Minimum investments
To open an account (per fund) $1000
- ----------------------------------------
For Class D shareholders in $250
the Stock and Bond funds
to open an account
- ----------------------------------------
Through the Automatic Asset $25
Accumulation plan
per transaction
- ----------------------------------------
Additional investments $100
(except Class D) per fund
- ----------------------------------------
Class D $25
</TABLE>

These minimum investment requirements do not apply to certain retirement plans.
Call 1-800-848-0929 for more information.

We do not calculate NAV on the following days:

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

NAS reserves the right not to determine an NAV for a Fund when: o We have not
received any orders to purchase, sell or exchange shares o Changes in the value
of that Fund's portfolio do not affect the NAV.

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

When you open an account, your purchase price will be the offering price or NAV
next determined after your order is received, plus any applicable sales load.
The Money Market Fund's securities are valued at amortized cost, which
approximates market value in accordance with Rule 2a-7 of the Investment Company
Act of 1940.

Class A and Class D sales charges

The charts below show the Class A and Class D sales charges, which decrease as
the amount of your investment increases.

Class A shares of the Stock Funds

<PAGE> 38

<TABLE>
<CAPTION>
Sales charge as % Sales charge as %
Amount of purchase of offering price of amount invested
- -----------------------------------------------------------------------
<S> <C> <C>
less than $50,000 5.75% 6.10%
- -----------------------------------------------------------------------
$50,000 to $99,999 4.50 4.71
- -----------------------------------------------------------------------
$100,000 to $249,999 3.50 3.63
- -----------------------------------------------------------------------
$250,000 to $499,999 2.50 2.56
- -----------------------------------------------------------------------
$500,000 to $999,999 2.00 2.04
- -----------------------------------------------------------------------
$1 million to $24,999,999 0.50 0.50
- -----------------------------------------------------------------------
$25 million or more 0.25 0.25
</TABLE>

Class A shares of the Bond Funds

<TABLE>
<CAPTION>
Sales charge as % Sales charge as %
Amount of purchase of offering price of amount invested
- -----------------------------------------------------------------------
<S> <C> <C>
less than $50,000 4.50% 4.71%
- -----------------------------------------------------------------------
$50,000 to $99,999 4.00 4.17
- -----------------------------------------------------------------------
$100,000 to $249,999 3.00 3.09
- -----------------------------------------------------------------------
$250,000 to $499,999 2.50 2.56
- -----------------------------------------------------------------------
$500,000 to $999,999 2.00 2.04
- -----------------------------------------------------------------------
$1 million to $24,999,999 0.50 0.50
- -----------------------------------------------------------------------
$25 million or more 0.25 0.25
</TABLE>

Class D shares of the Stock and Bond Funds

<TABLE>
<CAPTION>
Sales charge as % Sales charge as %
Amount of purchase of offering price of amount invested
- -----------------------------------------------------------------------
<S> <C> <C>
less than $50,000 4.50% 4.71%
- -----------------------------------------------------------------------
$50,000 to $99,999 4.00 4.17
- -----------------------------------------------------------------------
$100,000 to $249,999 3.00 3.09
- -----------------------------------------------------------------------
$250,000 to $499,999 2.50 2.56
- -----------------------------------------------------------------------
$500,000 to $999,999 1.00 1.01
- -----------------------------------------------------------------------
$1 million to $24,999,999 0.50 0.50
- -----------------------------------------------------------------------
$25 million or more None None
</TABLE>

Buying, Selling and Exchanging Fund Shares continued

Reduction and Waiver of Class A and Class D sales charges

Shareholders can reduce or eliminate Class A and Class D's initial sales charge
through one or more of the discounts described below:

o Increase the amount of your investment. The preceding tables show how the
sales charge decreases as the amount of your investment increases.

o Family Member Discount. Members of your family who live at the same address
can combine investments (except purchases of the Money Market Fund), possibly
reducing the sales charge.

o Lifetime Additional Discount. You can add the value of any of the Nationwide
Mutual Funds Class A and Class D shares you already own (except the Money

<PAGE> 39

Market Fund) with the value of the shares you are purchasing, which may reduce
the applicable sales charge.

o Insurance Proceeds or Benefits Discount Privilege. If you use the proceeds of
an insurance policy issued by any member of the Nationwide Insurance
Enterprise to purchase Class A or Class D shares, you will pay one-half of the
published sales charge if you make your investment 60 days after receiving the
proceeds.

o No sales charge on a repurchase. If you sell shares from your Nationwide
account, we allow you a one-time privilege to reinvest some or all of the
proceeds in shares of the same class. You will not pay a sales charge on Class
A and Class D shares that you buy within 30 days of selling Class A or Class D
shares of an equal or lesser amount if you have already paid a sales charge.
Shareholders who received Class D shares as a result of the Reorganization may
only reinvest in Class D shares. Remember, if you realize a gain or a loss on
your sale of shares, the transaction is taxable and reinvestment will not
affect the amount of capital gains tax that is due. If you realize a loss on
your sale and you reinvest, some or all of the loss may not be allowed as a
tax deduction depending on the amount you reinvest.

o Letter of Intent Discount. State in writing that during a 13-month period you
or a group of family members will purchase or hold at least $50,000 in Class A
or Class D shares (excluding the Money Market Fund) and your sales charge will
be based on the total amount you intend to invest. Your Letter of Intent is
not a binding obligation to buy shares of the Fund; it is merely a statement
of intent. Call 1-800-848-0920 for more information.

Waiver of Class A and Class D sales charges

The Class A and Class D sales charges will be waived for the following
purchases:

Class D shares sold to:

o Trustees and retired Trustees of Nationwide Mutual Funds (including its
predecessor Trusts);

o Directors, officers, full-time employees, sales representatives and their
employees, and retired directors, officers, employees, and sales
representatives, their spouses, children or immediate relatives (including
mother, father, brothers, sisters, grandparents and grandchildren) and
immediate relatives of deceased employees of any member of the Nationwide
Insurance Enterprise, or any investment advisory clients of NAS and their
affiliates;

o Directors, officers, 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, (including, but 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).

Class A shares sold to:

o Any person purchasing through an account with an unaffiliated brokerage firm
that has an agreement with NAS;

o Directors, officers, full-time employees, sales representatives and their
employees or any investment advisory clients of a broker-dealer having a
dealer/selling agreement with NAS;

o Any person who pays for the shares with the proceeds of mutual fund shares
sold from an NAS brokerage account. To qualify, you must have paid an initial
sales charge or CDSC on the shares sold. You must purchase the Class A shares
within 60 days of the sale, and you must request the waiver when you purchase
the Class A shares (NAS may require evidence that you qualify for this
waiver).

<PAGE> 40
Conversion of Class B shares

After you have held your Class B shares for seven years, we will automatically
convert them into Class A shares (without charge), which carry the lower 12b-1
fee. We will also convert any Class B shares that you purchased with reinvested
dividends and other distributions for those shares at that time. Remember,
because the NAV of Class A shares is usually higher than the NAV of Class B
shares, you may receive fewer Class A shares than the number of Class B shares
converted, but the total dollar value will be the same. We do the conversion on
the first business day of the month following the seventh anniversary of the
date of your purchase.

How to place your purchase order

By Mail - Complete and mail the application with a check or money order made
payable to: Nationwide Advisory Services, Inc., Three Nationwide Plaza, P.O.
Box 1492, Columbus, Ohio 43216-1492. Payment must be made in U.S. dollars only
and drawn on a U.S. bank. NAS will not accept third-party checks.

By Wire - 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 Standard Time, and the wire must be received by the
custodian bank by 2 p.m. Eastern Standard Time. NAS must receive federal funds
for your order within 3 business days or your order will be cancelled. You may
be liable for any loss to the Funds. Your bank may charge a fee to wire funds.
If you choose this method to open your account, you must call our toll-free
number before you wire your investment, and you must then complete and mail the
application.

By Telephone (NAS NOW) - Call 1-800-637-0012, our automated voice-response
system, 24 hours a day, seven days a week, for easy access to mutual fund
information. You can choose from a menu of choices to conduct transactions and
hear fund price information, mailing and wiring instructions and other mutual
fund information. You must complete the appropriate section of the application
to use NAS NOW to make purchases.

Additional shareholder services

Shareholders are entitled to a wide variety of services by contacting:

NAS NOW 1-800-637-0012
Our customized voice-response system,
available 24 hours a day, seven days a week
- ----------------------------------------------------------
Nationwide Customer Service 1-800-848-0920
Representatives are available to answer
questions between 8 a.m. and 5 p.m.
Eastern Standard Time

For additional information on buying shares and shareholder services, call our
customer service number or contact your Nationwide representative.

Selling Shares

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

Your order to sell shares can be made in writing or by telephone (if you
authorized telephone transactions on your application). Generally, we will pay
you for the shares that you sell within three days after receiving your order to

<PAGE> 41

sell. Payment for shares you recently purchased by check may be delayed until
the check clears, which may take up to 12 calendar days from the date of your
purchase.

Restrictions on sales

You may not be able to sell your shares of the Funds or we may delay paying you
the proceeds from a sale when the New York Stock Exchange is closed (other than
customary weekend and holiday closings) or if trading is restricted or if an
emergency exists. For your protection, for accounts in which we have received
address or bank account changes within the past seven calendar days, we will
process, but not send the redemption amount, for seven days.

Signature guarantee

A signature guarantee is required if the redemption check is made payable to
anyone other than the registered shareholder, or if the proceeds are not sent to
a previously designated bank account or are mailed to the address of record. NAS
reserves the right to require a signature guarantee in other circumstances,
without notice.

Buying, Selling and Exchanging Fund Shares continued

Contingent deferred sales charge (CDSC) on Class B shares

You must pay a CDSC if you sell Class B shares within six years of purchase,
unless you are entitled to a waiver. The sales charge applies if your sale
causes the value of your account to fall below the total amount of all purchases
you made during the preceding six years. The sales charge is applied to your
original purchase price, or the current market value of the shares being sold,
whichever is less. The amount of the sales charge will decrease as illustrated
in the following chart:

<TABLE>
<CAPTION>
Sale 7 years
within 1 year 2 years 3 years 4 years 5 years 6 years or more
- ------ ------ ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Sales
charge 5% 4% 3% 3% 2% 1% 0%
</TABLE>

All purchases during the month are grouped together and will be treated as if
made on the last day of the preceding month.

We do not impose a CDSC on Class B shares purchased through reinvested dividends
and distributions. If you sell your Class B shares and reinvest the proceeds in
Class B shares within 30 days, NAS will deposit an amount equal to any CDSC you
paid into your account. Also, we will waive the CDSC if you sell shares
following the death or disability of a shareholder, provided the sale occurs
within one year of the shareholder's death or a determination of disability and
for mandatory withdrawals from IRA accounts after age 701/2 years. For more
information, see the Statement of Additional Information.

If you own both Class A or Class D shares and Class B shares, and sell less than
your entire investment, we will redeem your shares in the following order to
ensure that you pay the lowest possible sales charge:

o Class B shares that are not subject to a sales charge, such as shares you
acquire from reinvestment of dividends and capital gains o Class A or D shares o
Class B shares that are subject to a sales charge are sold according to age,
with shares held in your account for the longest period of time sold first.

Side Bar Text:

Capital gains taxes

If you sell Fund shares for more than you paid for them, you may have capital

<PAGE> 42

gains, which are subject to federal (and in some cases, state) income tax. For
more information, see "Distributions and Taxes -- Selling Fund Shares."

How to place your sale order

You can request the sale of your shares in any of the following ways:

By telephone (NAS NOW) - Calling 1-800-637-0012 connects you to our automated
voice-response system, available 24 hours a day, seven days a week, for easy
access to mutual fund information. You can sell shares and have the check mailed
to your address of record, unless you declined this option on your application.
Only the following types of accounts can use NAS NOW to sell shares: Individual,
Joint, Transfer on Death, Trust, and Uniform Gift/Transfer to Minor accounts. We
do not accept Western Union instructions through NAS NOW. You can call
1-800-848-0920 at 4 p.m. Eastern Standard Time to learn the day's closing share
price.

Customer service line - If you have elected to have telephone redemption
privileges, a check payable to the shareholder of record can be mailed to the
address of record, unless you declined the telephone redemption privilege on
your application. If the proceeds of your sale of shares is $1,000 or more, NAS
will wire the funds directly to your account at a commercial bank (a voided
check must be attached to your application) or send the funds to you via Western
Union, unless you declined this option on your application. For additional
information on Western Union, please see the next page. You can sell shares of
your IRA by telephone if we receive the proper forms. The distribution from an
IRA will be subject to a mandatory 10% federal withholding tax, unless you
inform us not to withhold taxes. For additional information or to request the
forms, please call the customer service line at 1-800-848-0920. The Funds will
use procedures to confirm that telephone instructions are genuine. If the Funds
act on instructions it reasonably believed were genuine, it will not be liable
for any loss, injury, damage or expense that occurs as a result, and the Funds
will be held harmless for any loss, claims or liability arising from its
compliance with the instructions. NAS may record telephone instructions to sell
shares. The Funds reserve the right to revoke this privilege at any time,
without notice to shareholders, and to request the sale in writing, signed by
all shareholders on the account.

By bank wire - Your funds will be wired to your bank on the next business day
after your order to sell shares has been processed. We will deduct a $20 fee
from the proceeds of your sale for this service. Your financial institution may
also charge you a fee for receiving the wire. (This authorization will remain in
effect until you give NAS written notice of its termination.) Funds sent outside
the U.S. may be subject to a higher fee.

By Automated Clearing House ("ACH") - Your funds can be sent to your bank via
ACH on the second business day after your order to sell has been received by
NAS. Funds sent through ACH should reach your bank in two business days. There
is no fee for this service. (This authorization will remain in effect until you
give NAS written notice of its termination.)

By Western Union - You can receive your funds the next business day across the
United States or throughout the world with Western Union's Quick Cash service.
You can phone in your request to receive funds on the next business day at
24,000 locations, including major supermarkets and mailbox-type outlets, if you
chose this option on your application. The fee for this service is $10.50 per
$10,000. Funds sent outside the United States may be subject to a higher fee.
This fee is deducted from your account (or from your redemption proceeds).

By mail or FAX (No minimum) - Write a letter to Nationwide Advisory Services,
Inc., Three Nationwide Plaza, P.O. Box 1492, Columbus, Ohio 43216-1492 or fax it
to 614-249-8705. Please be sure your letter is signed exactly as your account is
registered. Be sure to include your account number and the Fund from which you
wish to make a redemption. For a distribution from an IRA, you must include your
date of birth and indicate whether or not you want NAS to withhold federal
income tax from your proceeds. Your sale of shares will be processed on the date
NAS receives your signed letter or fax. If your fax is received after 4 p.m.
Eastern Standard Time, it will be processed the next business day. NAS reserves

<PAGE> 43

the right to require the original document if you fax your letter. A signature
guarantee may be required under certain circumstances. Please refer back to
"Signature Guarantee" on page 29.

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. There is no fee
for this service, but the Fund reserves the right to charge for it or to
terminate this service. If you acquired your Money Market Fund shares through an
exchange, the shares may be subject to a sales charge as described in
"Exchanging Shares."

Accounts with low balances

We may sell the rest of your shares and close your account if you make a sale
that reduces the value of your account to less than $250. Before the account is
closed, we will give you notice and allow you 90 days to purchase additional
shares to avoid this action. We do this because of the high cost of maintaining
small accounts. This does not apply to Automatic Asset Accumulation accounts.

If the value of your Money Market Fund account falls below an average of $250
for any month, you will be charged a $2 monthly fee, which is deposited into the
Fund to offset the expenses of small accounts. We will sell shares from your
account in the first week of the following month to cover the fee.

For additional information on selling your shares, call our customer service
line at 1-800-848-0920 or see your Nationwide representative.

Distribution Plan

In addition to the sales charges which you may pay for Class A and Class B
shares, the Trust has adopted a Distribution Plan under Rule 12b-1 of the
Investment Company Act, which permits the Funds to compensate NAS -- as
distributor -- for expenses associated with distributing its shares and
providing shareholder services.

Distribution and service fees

Under the Distribution Plan, the Funds pay NAS compensation accrued daily and
paid monthly. The Funds shall pay amounts not exceeding an annual amount of:

<TABLE>
<CAPTION>
Fund/Class As a % of daily net assets
- ---------- --------------------------
<S> <C>
Class A shares of all Funds 0.25% (service fee only)
- ------------------------------------------------------------
Stock Funds - Class B shares 1.00% (.25% service fee)
- ------------------------------------------------------------
Bond Funds - Class B shares 0.85% (.10% service fee)
</TABLE>

Class D shares and Prime Shares of the Money Market Fund pay no 12b-1 fees.

Because these fees are paid out of the Funds' assets on an ongoing basis, over
time these fees will increase the cost of your investment and may cost you more
than paying other types of sales charges.

Exchanging Shares

You can exchange the shares you own for shares of another Fund within Nationwide
Mutual Funds (except the Morley Capital Accumulation Fund) as long as they are
the same class of shares, both accounts have the same owner, and your first
purchase in the new Fund meets the Fund's minimum investment requirement. For
example, you can exchange Class A shares of one of the Bond Funds for Class A
shares of one of the Stock Funds, but you can't exchange Class A shares for
Class B or Class D shares.

Buying, Selling and Exchanging Fund Shares continued

<PAGE> 44

Side Bar Text:

Capital gains taxes

Exchanging shares is considered a sale and purchase of shares for federal and
state income tax purposes. Therefore, if the shares you exchange are worth more
than you paid for them, you may have to pay federal and/or state income taxes.
For more information, see "Distribution and Taxes -- Exchanging Fund Shares"

There is no sales charge for exchanges of Class B or Class D shares. However, if
your exchange involves certain Class A shares, you may have to pay the
difference between the sales charges if a higher sales charge applies. If you
exchange Prime Shares of the Money Market Fund into another Fund, you must pay
the applicable sales charge, unless it has already been paid. If you exchange
Class B shares for Prime Shares of the Money Market Fund, the time you hold the
shares in the Money Market Fund will not be counted for purposes of calculating
any CDSC. If you then sell your Prime Shares of the Money Market Fund, you will
pay the sales charge that would have been charged if the shares had been sold at
the time they were exchanged into the Money Market Fund. If you exchange your
Prime Shares of the Money Market Fund back into Class B shares, the time you
held Class B shares prior to the exchange will be counted for purposes of
calculating the CDSC.

How to place your exchange order

You can request an exchange of shares in writing, by fax or by phone (see
"Buying Shares -- How to place your purchase order" or the back cover for
contact information). If you make your request in writing, please be sure your
letter is signed exactly as your account is registered. Your exchange will be
processed on the date NAS receives your signed letter or fax. If your fax is
received after 4 p.m. Eastern Standard Time, it will be processed the next day.
If you fax your request, we reserve the right to ask for the original. You can
automatically request an exchange 24 hours a day, seven days a week, by calling
NAS NOW, our automated voice-response system. You will have automatic exchange
privileges unless you request not to on your application. The Trust reserves the
right to amend or discontinue these exchange privileges upon 60 days written
notice to shareholders.

Excessive trading

The Trust reserves the right to reject any exchange request it believes will
increase transaction costs, or otherwise adversely affect other shareholders. A
Fund may delay forwarding redemption proceeds for up to seven days if the
investor redeeming shares is engaged in excessive trading, or if the amount of
the redemption request otherwise would be disruptive to efficient portfolio
management, or would adversely affect the Fund.

Year 2000

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

Distributions and Taxes

The following information is provided to help you understand the income and
capital gains you can earn from owning Fund shares, as well as the federal taxes
you may have to pay on this income. For up-to-date tax advice, please speak with
your tax adviser. In this section, "we" and "our" refer to Nationwide Advisory

<PAGE> 45

Services ("NAS"). "You" and "your" mean shareholders and potential investors.

Distributions of Income Dividends

Every quarter, the Stock Funds distribute any available income dividends to
shareholders; the Bond and Money Market Funds declare dividends daily and
distribute them monthly. Income dividends are taxable to you as ordinary income
for federal income tax purposes, unless you hold your shares in a qualified
tax-deferred plan or account, or are otherwise not subject to federal income
tax. The amount of income dividends distributed to you will be reported in a
Form 1099, which we will send to you during the tax season each year (unless you
hold your shares in a qualified tax-deferred plan or account). For corporate
shareholders, a portion of each year's distributions may be eligible for the
corporate dividend-received deduction.

Tax-Free Income Fund

Generally, income from the Tax-Free Income Fund will be exempt from federal
income taxes, although it is possible that a small portion could be taxable. Any
taxable distributions will be reported in a Form 1099. Although the
distributions may be exempt from federal income taxes, they may be subject to
state and local taxes. Please be aware that income that is exempt from federal
income taxes may be considered in addition to taxable income for purposes of
determining whether Social Security payments received by a shareholder are
subject to federal income taxes. Certain income not subject to the normal
federal income tax may be subject to the federal alternative minimum tax. To
determine whether a tax-free fund is right for you, please speak with your tax
adviser.

Distributions of Capital Gains

If a Fund has net realized capital gains at the end of the year (meaning the
gains from sales of securities exceed any losses from sales), it will distribute
this capital gain to shareholders in December. You must pay federal income taxes
on any capital gains distributed to you, unless you hold your shares in a
qualified tax-deferred plan or account. On Form 1099, we will report the amount
of net short-term capital gains and net long-term capital gains distributed to
you during the year. Currently, for individuals, long-term capital gains are
taxed at a maximum rate of 20%; short-term capital gains are taxed as ordinary
income, such as interest or dividends. For the current capital gains tax rates,
speak with your tax adviser.

Reinvesting Distributions

All income and capital gains distributions will be reinvested in shares of the
Fund. You may request a payment in cash in writing if distributions are in
excess of $5. If the checks sent to you cannot be delivered, or are not cashed,
distributions will be reinvested in shares of the applicable Fund. You are
subject to tax on reinvested distributions.

You may be subject to federal backup withholding at a rate of 31% of each
distribution unless you certify that the taxpayer identification number you gave
us is correct, and that you are not subject to withholding. (We will, however,
withhold taxes if the Internal Revenue Service notifies us that such
certifications are not accurate, or as may otherwise be required under the
Internal Revenue Code.)

Side Bar Text:

Changing your distribution option
If you want to change your distribution option, you must notify us by the record
date for a dividend or distribution in order for it to be effective for that
dividend or distribution. You will not receive interest on any uncashed
distribution, dividend or redemption checks.

<PAGE> 46

State and Local Taxes

Distributions may be subject to state and local taxes, even if not subject to
federal income taxes. State and local tax laws vary; please consult your tax
adviser.

Selling Fund Shares

Selling Fund shares for more than you paid for them gives you a capital gain,
which is subject to federal income tax. The amount of the tax depends on how
long you held your shares. For individuals, long-term capital gains are taxed at
a maximum rate of 20%; and short-term capital gains are taxed as ordinary
income, such as interest or dividends. Capital gains from your sale of Fund
shares is not reported on Form 1099; you or your tax adviser should keep track
of your purchases, sales, and any resulting gain or loss. If you do sell Fund
shares for a loss, you may be able to use this capital loss to offset any
capital gains you have.

Exchanging Fund Shares

Exchanging your shares of one Fund for another Fund is considered a sale for
income tax purposes. Therefore, if the shares you exchange are worth more than
you paid for them, you have capital gains, which are subject to the federal
income taxes described above. If you exchange Fund shares for a loss, you may be
able to use this capital loss to offset any capital gains you have.

Financial Highlights

The financial highlights tables are intended to help you understand the Funds'
financial performance for the past 5 years. Certain information reflects
financial results for a single Fund share. The total returns in the tables
represent the rate that an investor would have earned [or lost] on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by KPMG Peat Marwick LLP, whose report, along with
the Fund's financial statements, are included in the annual report, which is
available upon request. Except for the Money Market Fund, information is for one
Class D share outstanding through the periods ended October 31, which includes
information for the Funds and their respective predecessors. The table for each
Fund also includes information for the Class A and Class B shares of the Fund
for the year ended October 31,1998. For the Money Market Fund, information is
for one share outstanding through the periods ended October 31, which includes
information for the Fund and its predecessor. As of October 31, 1998, all shares
of the Money Market Fund were without class designation.

<S> <C> <C> <C> <C>
Mid Cap
Growth Fund
1994 $14.17 $.03 $ .95 $ .98
1995 15.11 (.01) 3.23 3.22
1996 18.17 .01 3.28 3.29
1997 19.47 .04 4.38 4.42
1998Cl.D 22.87 (.06) 1.29 1.23
Class A 19.67 (.03) (1.97) (2.00)
Class B 19.67 (.07) (2.06) (2.13)
</TABLE>

<PAGE> 47

<TABLE>
<CAPTION>
Growth Fund
<C> <C> <C> <C> <C>
1994 11.14 .09 .53 .62
1995 11.35 .21 2.10 2.31
1996 13.22 .16 1.36 1.52
1997 13.34 .12 3.94 4.06
1998Cl.D 16.32 .03 2.32 2.35
Class A 16.51 (.02) (0.47) (0.49)
Class B 16.51 (.04) (0.49) (0.53)
</TABLE>

<TABLE>
<CAPTION>
Distributions
from net
Dividends realized gain Net asset
from net from value -
investment investment Total end of Total
Year income transactions distributions period return
- ---- ---------- ------------- ------------- --------- ------
Less distributions
<S> <C> <C> <C> <C> <C>
Mid Cap
Growth Fund
1994 ($.04) -- ($ .04) $15.11 6.92%
1995 (.01) ($ .15) ( .16) 18.17 21.57
1996 -- (1.99) (1.99) 19.47 19.41
1997 (.03) (.99) (1.02) 22.87 23.66
1998Cl.D -- (6.49) (6.49) 17.61 5.11
Class A -- -- -- 17.67 (10.17)
Class B -- -- -- 17.54 (10.83)

<CAPTION>
Growth Fund
<S> <C> <C> <C> <C> <C>
1994 (.19) ( .22) ( .41) 11.35 5.73
1995 (.20) ( .24) ( .44) 13.22 21.01
1996 (.16) (1.24) (1.40) 13.34 12.36
1997 (.12) ( .96) (1.08) 16.32 32.12
1998Cl.D (.04)* (2.61) (2.65) 16.02 15.94
Class A -- -- -- 16.02 (2.97)
Class B -- -- -- 15.98 (3.21)
</TABLE>

*Ratios are calculated as if no expenses were waived
<TABLE>
<CAPTION>
Growth Fund
<S> <C> <C> <C> <C> <C> <C>
1994 .68 1.71 -- -- 14.50 464,715
1995 .66 1.66 -- -- 27.10 582,927
1996 .64 1.20 -- -- 25.61 655,616
1997 .64 .81 -- -- 45.07 818,124
1998Cl.D .73 .19 -- -- 38.61 914,178
Class A 1.11 (.38) -- -- 38.61 2,830
Class B 1.88 (1.16) -- -- 38.61 1,557
</TABLE>

*Includes (.01) distribution in excess of net investment income

<PAGE> 48

1994 16.55 .37 .41 .78
1995 16.12 .31 2.49 2.80
1996 17.35 .36 3.98 4.34
1997 20.41 .31 7.44 7.75
1998Cl.D 26.57 .30 6.23 6.53
Class A 29.94 .06 .38 .44
Class B 29.94 -- .27 .27
<CAPTION>
Bond Fund
<S> <C> <C> <C> <C>

1994 $10.07 $.60 ($1.56) ($.96)
1995 8.46 .63 1.04 1.67
1996 9.50 .61 (.15) .46
1997 9.34 .60 .15 .75
1998Cl.D 9.49 .57 .27 .84
Class A 9.52 .26 .23 .49
Class B 9.52 .23 .23 .46
</TABLE>

1994 (.36) (.85) (1.21) 16.12 4.88
1995 (.31) (1.26) (1.57) 17.35 19.24
1996 (.35) (.93) (1.28) 20.41 26.11
1997 (.31) (1.28) (1.59) 26.57 40.17
1998Cl.D (.30) (2.54) (2.84) 30.26 25.73
Class A (.08) -- (.08) 30.30 1.48
Class B (.03) -- (.03) 30.18 .90

<CAPTION>
Bond Fund
<S> <C> <C> <C> <C> <C>
1994 ($.65) -- ($.65) $8.46 (9.81%)
1995 (.63) -- (.63) 9.50 20.41
1996 (.62) -- (.62) 9.34 5.05
1997 (.60) -- (.60) 9.49 8.33
1998Cl.D (.57) -- (.57) 9.76 9.11
Class A (.26) -- (.26) 9.75 5.18
Class B (.23) -- (.23) 9.75 4.85
</TABLE>

<PAGE> 49

<TABLE>
<CAPTION>
Net Net
investment investment
income income Net assets
Expenses (loss) to Expenses (loss) to at end
to average average to average average Portfolio of period
Year net assets net assets net assets* net assets* turnover (ooo's)
- ---- ---------- ---------- ----------- ----------- --------- ----------
Ratios & supplemental data Assets
<S> <C> <C> <C> <C> <C> <C>
Nationwide Fund
1994 .63 2.26 -- -- 15.40 706,674
1995 .63 1.95 -- -- 16.50 795,666
1996 .61 1.89 -- -- 16.71 958,590
1997 .60 1.32 -- -- 14.94 1,448,422
1998Cl.D .66 1.00 -- -- 13.47 2,172,101
Class A 1.00 .54 -- -- 13.47 19,746
Class B 1.75 (.20) -- -- 13.47 13,493
<CAPTION>
Bond Fund
<S> <C> <C> <C> <C> <C> <C>
1994 .71% 7.11% -- -- 58.00% $124,455
1995 .71 7.04 -- -- 70.40 133,633
1996 .70 6.60 -- -- 38.95 133,253
1997 .72 6.43 -- -- 70.63 124,404
1998Cl.D .78 5.93 -- -- 70.31 134,822
Class A 1.17 5.48 -- -- 70.31 1,365
Class B 1.81 4.93 -- -- 70.31 490
</TABLE>

*Ratios are calculated as if no expenses were waived

<TABLE>
<CAPTION>
Net realized
Net asset Net gain (loss)
value - investment and unrealized Total from
beginning income appreciation investment
Year of period (loss) (depreciation) operations
- ---- --------- ---------- -------------- ----------
Income from investment operations
<S> <C> <C> <C> <C>
Tax-Free
Income Fund
1994 10.95 .53 (1.45) (.92)
1995 9.40 .51 .84 1.35
1996 10.22 .51 .02 .53
1997 10.24 .50 .27 .77
1998Cl.D 10.51 .50 .23 .73
Class A 10.48 .23 .17 .40
Class B 10.48 .20 .18 .38

<CAPTION>
Long-Term
Government
Bond Fund
<S> <C> <C> <C> <C>
1994 11.31 .58 (1.10) (.52)
1995 10.12 .68 .95 1.63
1996 11.07 .68 (.15) .53
1997 10.92 .66 .27 .93
1998Cl.D 11.19 .63 .58 1.21
Class A 11.24 .28 .53 .81
Class B 11.24 .25 .52 .77
</TABLE>

<PAGE> 50

Tax-Free
Income Fund
1994 (.51) (.12) (.63) 9.40 (8.74)
1995 (.53) -- (.53) 10.22 14.66
1996 (.51) -- (.51) 10.24 5.31
1997 (.50) -- (.50) 10.51 7.72
1998Cl.D (.50) (.08) (.58) 10.66 7.09
Class A (.23) -- (.23) 10.65 3.86
Class B (.20) -- (.20) 10.66 3.66

<CAPTION>
Long-Term
Government
Bond Fund
<S> <C> <C> <C> <C> <C>
1994 (.58) (.09) (.67) 10.12 (4.75)
1995 (.68) -- (.68) 11.07 16.68
1996 (.68) -- (.68) 10.92 5.01
1997 (.66) -- (.66) 11.19 8.84
1998Cl.D (.63) -- (.63) 11.77 11.15
Class A (.28) -- (.28) 11.77 7.32
Class B (.25) -- (.25) 11.76 6.90
</TABLE>

<TABLE>
<CAPTION>
Net Net
investment investment
income income Net assets
Expenses (loss) to Expenses (loss) to at end
to average average to average average Portfolio of period
Year net assets net assets net assets* net assets* turnover (ooo's)
- ---- ---------- ---------- ----------- ----------- --------- ----------
Ratios & supplemental data Assets
<S> <C> <C> <C> <C> <C> <C>
Tax-Free
Income Fund
1994 .99 5.02 1.14 4.87 59.20 241,097
1995 .98 5.20 1.13 5.05 31.70 262,484
1996 .96 4.98 1.11 4.83 24.15 264,642
1997 .96 4.85 1.11 4.70 39.49 256,486
1998Cl.D .85 4.73 .93 4.65 28.88 263,662
Class A 1.06 4.50 -- -- 28.88 601
Class B 1.66 3.94 -- -- 28.88 1,477
<CAPTION>
Long-Term
Government
Bond Fund
<S> <C> <C> <C> <C> <C> <C>
1994 1.28 5.42 1.58 5.12 174.40 70,218
1995 .89 6.42 1.58 5.73 140.55 69,190
1996 .84 6.26 1.59 5.51 21.04 58,737
1997 .85 6.04 1.60 5.29 52.10 48,549
1998Cl.D .82 5.55 1.28 5.09 51.12 40.946
Class A 1.04 5.09 1.28 4.85 51.12 201
Class B 1.64 4.52 1.90 4.26 51.12 352
</TABLE>

<TABLE>
<CAPTION>
Net realized
Net asset Net gain (loss)
value - investment and unrealized Total from
beginning income appreciation investment
Year of period (loss) (depreciation) operations
- ---- --------- ---------- -------------- ----------
Income from investment operations
<S> <C> <C> <C> <C>
Intermediate
U.S. Government
Bond Fund
1994 $10.26 $.54 ($.96) ($.42)
1995 9.22 .59 .89 1.48
</TABLE>

<PAGE> 51

<TABLE>
<C> <C> <C> <C> <C>
1996 10.12 .59 (.08) .51
1997 10.04 .59 .27 .86
1998Cl.D 10.31 .56 .34 .90
Class A 10.24 .26 .32 .58
Class B 10.24 .23 .31 .54

Money
Market Fund
1994 $1.00 .03 -- .03
1995 1.00 .05 -- .05
1996 1.00 .05 -- .05
1997 1.00 .05 -- .05
1998 1.00 .05 -- .05
</TABLE>

<TABLE>
<CAPTION>
Distributions
from net
Dividends realized gain Net asset
from net from value -
investment investment Total end of Total
Year income transactions distributions period return
- ---- ---------- ------------- ------------- --------- ------
Less distributions
<S> <C> <C> <C> <C> <C>
Intermediate
U.S. Government
Bond Fund
1994 ($.55) ($.07) ($.62) $9.22 (4.20%)
1995 (.58) -- (.58) 10.12 16.47
1996 (.59)** -- (.59) 10.04 5.28
1997 (.59) -- (.59) 10.31 8.86
1998Cl.D (.56) (.08) (.64) 10.57 9.03
Class A (.26) -- (.26) 10.56 5.69
Class B (.23) -- (.23) 10.55 5.29

<CAPTION>
Money
Market Fund
<S> <C> <C> <C> <C> <C>
1994 (.03) -- (.03) 1.00 3.34
1995 (.05) -- (.05) 1.00 5.46
1996 (.05) -- (.05) 1.00 5.05
1997 (.05) -- (.05) 1.00 5.07
1998 (.05) -- (.05) 1.00 5.15
</TABLE>

*Ratios are calculated as if no expenses were waived
**Includes $.01 dividend in excess of net investment income
<PAGE> 52

<TABLE>
<CAPTION>
Money
Market Fund
<S> <C> <C> <C> <C> <C> <C>
1994 .65 3.33 .70 3.28 -- 491,737
1995 .62 5.34 .67 5.29 -- 604,711
1996 .60 4.93 .65 4.88 -- 729,500
1997 .59 4.96 .64 4.91 -- 820,657
1998 .59 5.03 .61 5.01 -- 1,048,689
</TABLE>

*Ratios are calculated as if no expenses were waived

Information from Nationwide

Please read this Prospectus before you invest, and keep it with your records.
The following documents contain additional information about the Funds. To
obtain a document free of charge, contact us at the address or number listed
below.

o Statement of Additional Information (SAI) (incorporated by reference in
this Prospectus)
o Annual Report (which contains a discussion of the market conditions and
investment strategies that significantly affect each Fund's performance)
o Semi-Annual Report

For additional information contact:

Nationwide Advisory Services, Inc.
P.O. Box 1492
Three Nationwide Plaza
Columbus, Ohio 43216-1492
(614) 249-8705 (fax)

For information, assistance and wire orders:

1-800-848-0920 (toll free, 8 a.m.-5 p.m. Eastern Standard Time)

For 24-hour account access:

1-800-637-0012 (toll free) Also, visit the Nationwide Advisory
Services, Inc. Web site at www.nationwidefunds.com

Information from the Securities and Exchange Commission

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

In person:

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

By mail:

Securities and Exchange Commission
Public Reference Section
Washington, D.C. 20549-6009
(The SEC charges a fee to copy any documents.)

Via the Internet:

<PAGE> 53

http://www.sec.gov

Investment Company Act File No. 811-08495

Nationwide Family of Funds
Three Nationwide Plaza
Columbus, Ohio 43215-2220

Bulk Rate
U.S. Postage
Paid
Berwyn, IL
Permit No. 150

HS-409-L

<PAGE> 54
PART B:

STATEMENT OF ADDITIONAL INFORMATION MARCH 1, 1999

NATIONWIDE MUTUAL 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 - PRIME SHARES
(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
prospectus for the Funds and should be read in conjunction with the prospectus
dated March 1, 1999 for the Funds. The prospectus may be obtained by writing to
Nationwide Advisory Services, Inc. ("NAS"), P.O. Box 1492, Three Nationwide
Plaza, Columbus, Ohio 43216 or by calling toll-free 800-848-0920.

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

The Report of Independent Auditors and Financial Statements of the Funds
for the period ended October 31, 1998 are incorporated by reference to the
Annual Report. Copies of the Annual Report are available without charge upon
request by writing the Trust or by calling 1-800-848-0920.

TABLE OF CONTENTS

<TABLE>
<S> <C>
General Information and History 1
Investment Objectives and Policies 2
Investment Restrictions 24
Trustees and Officers of the Trust 26
Investment Advisory and Other Services 28
Brokerage Allocation 33
Additional Information on Purchases and Sales 34
Valuation of Shares 37
Investor Strategies 38
Investor Privileges 39
Investor Services 41
Fund Performance Advertising 42
Additional Information 45
Additional General Tax Information 45
Major Shareholders 51
Financial Statements 51
Appendix 52
</TABLE>

GENERAL INFORMATION AND HISTORY

Nationwide Mutual Funds (the "Trust"), formerly Nationwide Investing Foundation
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.

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<PAGE> 55
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 unless otherwise
indicated. There is no guarantee that any of the Funds' investment objectives
will be realized.

TEMPORARY DEFENSIVE POSITION

In addition to investments described below and in the Funds Prospectus, each
Fund, except for the Tax-Free Income Fund, may as a temporary defensive position
invest 100% of its assets in cash or money market instruments as discussed more
fully below. The Tax-Free Income Fund may as a temporary defensive position
invest up to 20% of its assets in cash and taxable money market instruments.

INFORMATION CONCERNING THE DURATION OF THE U.S. GOVERNMENT BOND FUNDS AND
THE BOND FUND: 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. The
Bond Fund will maintain a duration, which, on a weighted average basis and under
normal market conditions, will generally be between four and seven 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

2
<PAGE> 56
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 stable, shorter duration portfolios generally
will not generate as high a level of total return as longer duration portfolios
(assuming that long-term interest rates are higher than short-term rates, which
is commonly the case.) When interest rates are rising, a portfolio with a
shorter duration will generally outperform longer duration portfolios. With
respect to the composition of a fixed-income portfolio, the longer the duration
of the portfolio, generally, the greater the anticipated potential for total
return, with, however, greater attendant interest rate risk and price volatility
than for a portfolio with a shorter duration.

While each U.S. Government Bond Fund intends to maintain the average duration
described above under normal market conditions, there is no limit as to the
maturity of any one security which each U.S. Government Bond Fund may purchase.

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. 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
securities (which tend to be less volatile in price) into long term securities
(which tend to be more volatile in price.)

Ratings as Investment Criteria. High-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

3
<PAGE> 57
comparable ratings as standards for its investments in accordance with its
investment objective and policies.

STRIPPED TREASURY SECURITIES. These are Treasury bonds that pay no interest
during the life of the bond. Interest builds up and is paid in a lump sum when
the bond matures or becomes payable. These bonds are usually sold at a deep
discount because the buyer is only purchasing the right to receive a future
payment and has no right to receive interest payments. Stripped Treasury
securities may be subject to greater price changes as a result of changing
interest rates than bonds that make regular interest payments, and rising
interest rates may leave the Funds with a low-paying investment that may be
difficult to sell.

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 397 days 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;

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

-- adjustable and variable rate instruments including callable notes;

-- short-term (maturing in 397 days or less) bank and 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.

-- unrated debt obligations with remaining maturities of one year or less
that are determined by Nationwide Advisory Services to be of comparable
quality to the securities listed above.

MORTGAGE AND ASSET-BACKED SECURITIES - The Bond Funds (except Tax-Free Income
Fund) may each purchase mortgage-backed securities. In addition, the Nationwide
Bond Fund and the Nationwide Money Market 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

4
<PAGE> 58

private issuers, generally originators in mortgage loans, including savings and
loan associations, mortgage bankers, commercial banks, investment bankers, and
special purpose entities (collectively, "private lenders"). The purchase of
mortgage-backed securities from private lenders may entail greater risk than
mortgage-backed securities that are issued or guaranteed by the U.S. Government,
its agencies or instrumentalities. Mortgage-backed securities issued by private
lenders 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.

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.

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 mortgage-backed securities.

5
<PAGE> 59

Asset-backed securities have structural characteristics similar to
mortgage-back securities. However, the underlying assets are not 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 the 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.

Unlike fixed rate mortgage-backed securities, adjustable rate
mortgage-backed securities are collateralized by or represent interest in
mortgage loans with variable rates of interest. These variable rates of interest
reset periodically to align themselves with market rates. The Fund will not
benefit from increases in interest rates to the extent that interest rates rise
to the point where they cause the current coupon of the underlying adjustable
rate mortgages to exceed any maximum allowable annual or lifetime reset limits
(or "cap rates") for a particular mortgage. In this event, the value of the
adjustable rate mortgage-backed securities in 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
changes in market rates. During periods of declining interest rates, income to
the Fund derived from adjustable rate mortgage securities which remain in a
mortgage pool will decrease in contrast to the income on fixed rate mortgage
securities, which will remain constant. Adjustable rate mortgages also have less
potential for appreciation in value as interest rates decline than do fixed rate
investments.

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

6
<PAGE> 60
interest, which is guaranteed by the FHLMC. The FHLMC guarantees either ultimate
collection or timely payment of all principal payments on the underlying
mortgage loans. When the FHLMC does not guarantee timely payment of principal,
FHLMC may remit the amount due on account of its guarantee of ultimate payment
of principal at any time after default on an underlying mortgage, but in no
event later than one year after it becomes payable.

COLLATERALIZED MORTGAGE OBLIGATIONS--The Bond Funds (other than the Tax-Free
Income Fund) may also acquire CMOs. 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.

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

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

7
<PAGE> 61

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 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. 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.

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/or yield). When-issued transactions normally settle within 45 days (for
mortgage-backed securities, the delivery date may extend to as long as 120
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.

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.

When a Fund agrees to purchase when-issued or delayed-delivery securities,
to the extent required by the SEC, the Fund's 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

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investment of the cash collateral. Investments of such collateral allows a Fund
to continue 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. 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 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.

SMALL COMPANY STOCKS. Investing in securities of small-sized companies may
involve greater risks than investing in larger, more established issuers since
these securities may have limited marketability and thus may be more volatile
than securities of larger, more established companies or the market averages in
general. Because small-sized companies normally have fewer shares outstanding
than larger companies, it may be more difficult for a Fund to buy or sell
significant numbers of such shares without an unfavorable impact on prevailing
prices. Small-sized companies may have limited product lines, markets or
financial resources and may lack management depth. In addition, small-sized
companies are typically subject to wider variations in earnings and business
prospects than are larger, more established companies. There is typically less
publicly available information concerning small-sized companies than for larger,
more established ones.

SPECIAL SITUATION COMPANIES. 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, Nationwide Fund, Bond
Fund and Money Market Fund may invest, directly or indirectly through the use of
depository receipts, in foreign securities. The Money Market Fund may invest in
such foreign securities if denominated in U.S. dollars. Investors in such Funds
should recognize that investing in foreign securities involves certain special
considerations which are not typically associated with investing in domestic

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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 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.

Canadian and Provincial Obligations. The Money Market Fund and the
Nationwide Bond Fund may also invest in Canadian and Provincial obligations.
Generally, these obligations are unsecured, discounted bills and notes issued in
U.S. dollars. These 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 is a crown corporation and agent of Her Majesty in right of
Canada. Provincial obligations are backed by the full faith and credit of the
provincial governments.

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

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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 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

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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,
pollution control bonds and money market securities.

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 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.

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. The Tax-Free Income Fund may also invest in commercial paper as long
as it is rated within the two highest rating categories by an NRSRO.

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. 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. 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

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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. 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.

Municipal bonds that are private activity bonds will not be tax-exempt
unless they fall within the category of "qualified bonds" defined in the 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 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 their
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

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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 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.

PREFERRED STOCK. The Funds may invest in preferred stocks. Preferred stocks,
like debt obligations, are generally fixed-income securities. Shareholders of
preferred stocks normally have the right to receive dividends at a fixed rate
when and as declared by the issuer's board of directors, but do not participate
in other amounts available for distribution by the issuing corporation.
Dividends on the preferred stock may be cumulative, and all cumulative dividends
usually must be paid prior to common shareholders receiving any dividends.
Because preferred stock dividends must be paid before common stock dividends,
preferred stocks generally entail less risk than common stocks. Upon
liquidation, preferred stocks are entitled to a specified liquidation
preference, which is generally the same as the par or stated value, and are
senior in right of payment to common stock. Preferred stocks are, however,
equity securities in the sense that they do not represent a liability of the
issuer, and, therefore, do not offer as great a degree or protection of capital
or assurance of continued income as investments in corporate debt securities. In
addition, preferred stocks are subordinated in right of payment to all debt
obligations and creditors of the issuer, and convertible preferred stocks may be
subordinated to other preferred stock of the same issuer.

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,

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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.

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. The market for certain
restricted securities such as institutional commercial paper has expanded
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

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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).

PRIVATE PLACEMENT COMMERCIAL PAPER 4(2). (only offered to accredited investors)
Rule 506 of Regulation D in the Securities Act of 1933 lists investment
companies as an accredited investor. This method of commercial paper issuance is
popular because proceeds may be used for any purpose and the term or maturity is
not limited to 270 days.

Section 4(2) paper not eligible for resale under Rule 144A under the Securities
Act shall be deemed liquid if (1) the Section 4(2) paper is not traded flat or
in default as to principal and interest; (2) the Section 4(2) paper is rated in
one of the two highest rating categories by at least two NRSROs, or if only one
NRSRO rates the security, it is rated in one of the two highest categories by
that NRSRO; and (3) the Adviser believes that, based on the trading markets for
such security, such security can be disposed of within seven days in the
ordinary course of business at approximately the amount at which the Fund has
valued the security.

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 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 Prospectus, NAS 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").

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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 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

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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.

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.

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Although a Fund will enter into OTC options only with counterparties that are
expected to be capable of entering into closing transactions with a Fund, there
is no assurance that such Fund will in fact be able to close out an OTC option
at a favorable price prior to expiration. In the event of insolvency of the
counter party, a Fund might be unable to close out an OTC option position at any
time prior to its expiration.

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

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.

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 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.

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

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<PAGE> 73

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 believes it is more
advantageous to a Fund than is purchasing the futures contract.

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

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

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

No price is paid by a Fund upon entering into a futures contract.
Instead, at the inception of a futures contract, the Fund is required to deposit
in a segregated account with its custodian, in the name of the futures broker
through whom the transaction was effected, "initial margin" consisting of cash,
U.S. Government securities or other liquid obligations, in an amount generally
equal to 10% or less of the contract value. Margin must also be deposited when
writing a call or put option on a futures contract, in accordance with
applicable exchange rules. Unlike

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margin in securities transactions, initial margin on futures contracts does not
represent a borrowing, but rather is in the nature of a performance bond or
good-faith deposit that is returned to a Fund at the termination of the
transaction if all contractual obligations have been satisfied. Under certain
circumstances, such as periods of high volatility, a Fund may be required by an
exchange to 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.

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

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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 U.S. 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. 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. The Money Market Fund may invest in obligations of U.S.
banks with assets over $500 million.

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 change either with
changes in specified market rates or indices, such as the prime rate, or at
specified intervals. Interest rates on floating rate obligations reset at such
times as there are changes in the underlying index while interest rates on
variable rate obligations reset at preset fixed times (such as quarterly or
monthly). Certain of the floating or variable rate obligations that may be
purchased by these Funds may

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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 credit risks like other debt instruments, 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 after a call 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
amount of 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 obligations they are otherwise 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.

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.

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.

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.

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 their 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

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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.

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.

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.

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. The vote of the majority of the
outstanding securities means the vote of (A) 67% or more of the voting
securities present at such meeting, if the holders of more than 50% of the
outstanding voting securities are present or represented by proxy or (B) a
majority of the outstanding securities, whichever is less.

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

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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.

- May not purchase the securities of any issuer if, as a result, 25% or
more than (taken at current value) of the Fund's total assets would be
invested in the securities of issuers, the principal activities of
which are in the same industry. This limitation does not apply to
securities issued by the U.S. Government or its agencies or
instrumentalities and obligations issued by state, county or municipal
governments. The following industries are considered separate
industries for purposes of this investment restriction: electric,
natural gas distribution, natural gas pipeline, combined electric and
natural gas, and telephone utilities, captive borrowing conduit,
equipment finance, premium finance, leasing finance, consumer finance
and other finance.

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.

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- - 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, their addresses and their affiliations are:

JOHN C. BRYANT, Trustee*, Age 63
411 Oak St., Suite 306, Cincinnati, Ohio 45219
Dr. Bryant is Executive Director, Cincinnati Youth Collaborative, a partnership
of business, government, schools and social service agencies to address the
educational needs of students. He was formerly Professor of Education,
Wilmington College.

C. BRENT DEVORE, Trustee, Age 58
North Walnut and West College Avenue, Westerville, Ohio
Dr. DeVore is President of Otterbein College.

SUE A. DOODY, Trustee, Age 64
169 East Beck Street, Columbus, Ohio
Ms. Doody is President of Lindey's Restaurant, Columbus, Ohio. She is an active
member of the Greater Columbus Area Chamber of Commerce Board of Trustees.

ROBERT M. DUNCAN, Trustee*, Age 71
1397 Haddon Road, Columbus, Ohio
Mr. Duncan is a member of the Ohio Elections Commission. He was formerly
Secretary to the Board of Trustees of The Ohio State University. Prior to that,
he was Vice President and General Counsel of The Ohio State University.

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

THOMAS J. KERR, IV, Trustee*, Age 65
4890 Smoketalk Lane, Westerville, Ohio
Dr. Kerr is President Emeritus of Kendall College. He was formerly President of
Grant Hospital Development Foundation.

DOUGLAS F. KRIDLER, Trustee, Age 43
55 E. State Street, Columbus, Ohio
Mr. Kridler is President of the Columbus Association of Performing Arts.

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

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<PAGE> 80
NANCY C. THOMAS, Trustee+, Age 64
10835 Georgetown Road, NE, Louisville, Ohio
Ms. Thomas is a farm owner and operator. She is also a Director of the
Nationwide Insurance Companies and associated companies.

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

DAVID C. WETMORE, Trustee, Age 50
11495 Sunset Hills Rd - Suite #210, Reston, Virginia
Mr. Wetmore is the Managing Director of The Updata Capital, a venture capital
firm.

JAMES F. LAIRD, JR., Treasurer, Age 42

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

CHRISTOPHER A. CRAY, Assistant Treasurer, age 40

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

ELIZABETH A. DAVIN, Secretary, age 34

Three Nationwide Plaza, Columbus, Ohio
Ms. Davin is Counsel of 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.

Gasper, Bryant, Doody, DeVore, Duncan, Kerr, Kridler, Wetmore, and Woodward are
also Trustees, and Laird, Cray and Davin are also Officers of Nationwide
Separate Account Trust and Nationwide Asset Allocation Trust, registered
investment companies in the Nationwide fund complex.

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 ended October 31, 1998. In addition,
the table sets forth the total compensation to be paid to the Trustees from all
funds in the Nationwide Fund Complex, including the predecessor investment
companies to the Trust, for the fiscal year ended October 31, 1998. Trust
officers receive no compensation from the Trust in their capacity as officers.

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<PAGE> 81
COMPENSATION TABLE

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

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

**The Fund Complex includes three trusts comprised of thirty five investment
company funds or series.

INVESTMENT ADVISORY AND OTHER SERVICES

Under the terms of the Investment Advisory Agreement dated May 9, 1998,
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 interested
persons of 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,

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<PAGE> 82

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; 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 reimburses
the Trust for fees and expenses paid to Trustees who are interested persons 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. 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.

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

<TABLE>
<CAPTION>
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 Income, $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>

NAS has agreed with the Trust to waive advisory fees, and if necessary,
reimburse expenses in order to limit total annual Fund operating expenses to
1.25% for Class A shares, 2.00% for Class B shares and 1.00% for Class D shares
in the Mid Cap Growth Fund; and 1.04% for Class A shares, 1.64% for Class B
shares and .79% for Class D shares in the Long-Term U.S. Government Bond Fund
and Intermediate U.S. Government Bond Fund until further written notice.

During the fiscal years ended October 31, 1998, 1997 and 1996, NAS received the
following fees for investment advisory services:

<TABLE>
<CAPTION>
Acquired Years Ended October 31,
Funds Funds* 1998 1997 1996
----- ------ ---- ---- ----

<S> <C> <C> <C> <C>
Mid Cap Growth Growth of FHIT $ 61,706 $ 63,883 $ 54,053
Growth Growth of NIF 4,894,110 3,750,599 3,212,196
Nationwide Fund Nationwide Fund of NIF 9,977,231 5,938,011 4,425,921
Bond Bond of NIF 647,809 629,068 663,545
</TABLE>

29
<PAGE> 83

<TABLE>
<S> <C> <C> <C> <C>
Tax-Free Income Tax-Free Income of NIF II and
Municipal Bond of FHIT 1,505,626 1,810,070 1,855,962
LT U.S. Govt Government of FHIT 254,928 343,259 414,415
Intermediate U.S. Govt U.S. Govt. of NIF II 266,473 256,016 255,149
Money Market** Money Market of NIF and
Cash Reserve of FHIT 3,857,898 3,519,727 2,969,392
</TABLE>

* As of May 9, 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 above, 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").

** Net of waivers of $221,174, $389,150 and $328,076 for the fiscal year ended
October 31, 1998, 1997, and 1996, respectively.

DISTRIBUTOR

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

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

During the fiscal years ended October 31, 1998, 1997 and 1996, NAS received the
following commissions from the sale of shares of the Funds:

<TABLE>
<CAPTION>
Acquired Years Ended October 31,
Funds Funds* 1998 1997 1996
----- ------ ---- ---- ----

<S> <C> <C> <C> <C>
Mid Cap Growth Growth of FHIT $ 20,296 $ -- $ --
Growth Growth of NIF 1,058,927 873,750 1,029,727
Nationwide Fund Nationwide Fund of NIF 3,502,971 2,037,896 1,089,371
Bond Bond of NIF 112,368 123,036 202,206
Tax-Free Tax-Free of NIF II and Municipal
Bond of FHIT 87,774 -- --
LT U.S. Govt Govt. Bond of FHIT 7,157 -- --
Intermediate U.S. Govt U.S. Govt. of NIF II 25,366 -- --
</TABLE>

NAS also receives the proceeds of contingent deferred sales charges
imposed on certain redemptions of shares. During the fiscal years ended October
31, 1998, 1997 and 1996, NAS received the following amounts:

30
<PAGE> 84
<TABLE>
<CAPTION>
Acquired Years Ended October 31,
Funds Funds* 1998 1997 1996
----- ------ ---- ---- ----

<S> <C> <C> <C> <C>
Mid Cap Growth Growth of FHIT $ -- $ 10,832 $ 12,788
Growth Growth of NIF -- -- --
Nationwide Fund Nationwide Fund of NIF 254 -- --
Tax-Free Tax-Free of NIF II and 111 202,973 287,599
Municipal Bond of FHIT
Bond Bond of NIF 6,107 -- --
LT U.S. Govt Govt. Bond of FHIT -- 23,417 36,566
Intermediate U.S. Govt U.S. Govt. of NIF II -- 31,232 58,918
</TABLE>

* See explanation of reorganization above.

From such fees, NAS retained $1,048,391, $1,603,988, and $1,443,474.

DISTRIBUTION PLAN

The Funds have adopted a Distribution Plan (the "Plan") under Rule
12b-1 of the 1940 Act which permits the Funds to compensate NAS as the Funds'
Distributor, for expenses associated with distribution of shares of the class.
Although actual distribution expenses may be more or less, under the Plan the
Funds shall pay an annual fee in 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 as well as payments to
broker-dealers for shareholder services.

During the fiscal year ended October 31, 1998, NAS received the following
distribution fees:

<TABLE>
<CAPTION>
Acquired Class Class Class
Funds Funds* A B D**
----- ------ - - ---

<S> <C> <C> <C> <C>
Mid Cap Growth Growth of FHIT $ 204 $ 659 $ --
Growth Fund Growth of NIF 1,838 3,518 --
Nationwide Fund Nationwide Fund of NIF 11,051 29,020 --
Tax-Free Tax-Free of NIF II and Municipal 359 2,653 266,074
Bond of FHIT
Bond Bond of NIF 717 627 --
LT U.S. Govt Govt. Bond of FHIT 113 491 --
Intermediate U.S. Govt U.S. Govt. of NIF II 236 384 46,052
</TABLE>

* See explanation of reorganization above.

** Distribution fees from the Funds prior to the May 11, 1998 reorganization,
net of waivers of $38,480 for Mid Cap Growth, $199,556 for Tax-Free, $178,777
for LT U.S. Govt. and $34,539 for Intermediate U.S. Govt.

As required by Rule 12b-1, the Plan was approved by the Board of
Trustees, including a majority of the Trustees who are not interested persons of
the Funds 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 and is amended from time to time upon approval of the
Board of Trustees. 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

31
<PAGE> 85
such costs and the purposes for which such costs have been incurred. The Plan
may be amended by the vote of the Trustees including a majority of Independent
Trustees, cast in person at a meeting called for that purpose. For so long as
the Plan is in effect, selection and nomination of those Trustees who are not
interested persons of the Trust shall be committed to the discretion of such
disinterested persons. All agreements with any person relating to the
implementation of the Plan may be terminated at any time on 60 days' written
notice without payment of any penalty, by vote of a majority of the Independent
Trustees or by a vote of the majority of the outstanding Shares of the Fund. The
Plan will continue in effect for successive one-year periods, provided that each
such continuance is specifically approved (i) by the vote of a majority of the
Independent Trustees, and (ii) by a vote of a majority of the entire Board of
Trustees cast in person at a meeting called for that purpose. The Board of
Trustees has a duty to request and evaluate such information as may be
reasonably necessary for them to make an informed determination of whether the
Plan should be implemented or continued. In addition the Trustees in approving
the Plan must determine that there is a reasonable likelihood that the Plan will
benefit the Fund and its Shareholders.

The Board of Trustees of the Trust believes the Plan is in the best
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 the Fund's Shares including, but not limited
to, those discussed above.

OTHER SERVICES FOR ALL THE FUNDS

Under a separate Fund Administration Agreement dated May 9, 1998, 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 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.

Administrative fees were not separately charged prior to May 9, 1998. During the
period ended October 31, 1998, NAS received administrative fees from the Funds
as follows:

<TABLE>
<CAPTION>
Funds Amount
----- ------

<S> <C>
Mid Cap Growth $ 3,308
Growth 248,049
Nationwide Fund 470,352
Tax-Free 88,596
Bond 44,441
LT U.S. Govt. 13,998
Intermediate U.S. Govt. 16,351
Money Market 257,123
</TABLE>

Nationwide Investors Services, Inc. ("NISI"), Three Nationwide Plaza,
Columbus, Ohio 43215, 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 per
annum; $18 per Bond Fund account per annum; and $27 per Money Market Fund Prime
class account per annum. Management believes the charges for the services
performed are comparable to fees charged by other companies performing similar
services.

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<PAGE> 86

During the fiscal years ended October 31, 1998, 1997 and 1996, NISI
received the following transfer agent fees from the Funds:

<TABLE>
<CAPTION>
Acquired Year Ended October 31,
Funds Funds* 1998 1997 1996
----- ------ ---- ---- ----

<S> <C> <C> <C> <C>
Mid Cap Growth Growth of FHIT $ 12,379 $ 11,300 $ 11,898
Growth Growth of NIF 785,969 729,500 683,043
Nationwide Fund Nationwide Fund of NIF 1,018,754 788,500 698,913
Bond Bond of NIF 142,149 149,300 161,300
Tax-Free Tax-Free of NIF II and Municipal 144,397 146,800 173,251
Bond of FHIT
LT U.S. Govt Govt. Bond of FHIT 34,092 41,500 57,100
Intermediate U.S. Govt U.S. Govt. of NIF II 38,102 37,599 40,299
Money Market Money Market of NIF and Cash Reserve 701,561 664,007 654,597
of FHIT
</TABLE>

* See explanation of reorganization above.

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 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, the best prices and 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 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 years ended October 31, 1998, 1997 and 1996, the following
brokerage commissions were paid by the Funds, all to firms rendering statistical
services as described above:

<TABLE>
<CAPTION>
Acquired Years Ended October 31,
Funds Funds* 1998 1997 1996
----- ------ ---- ---- ----

<S> <C> <C> <C> <C>
Mid Cap Growth Growth of FHIT $ 10,084 $ 8,480 $ 1,928
Growth Growth of NIF 712,200 742,579 376,916
Nationwide Fund Nationwide Fund of NIF 934,759 664,395 436,679
</TABLE>

* See explanation of reorganization above.

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<PAGE> 87

As of October 31, 1998, the Nationwide Fund and Nationwide Money Market Fund
held investments in securities of their regular broker-dealers as follows:

<TABLE>
<CAPTION>
Shares or
Fund Security Principal Amount Value
---- -------- ---------------- -----

<S> <C> <C> <C>
Nationwide Fund Merrill Lynch 237,500 $14,071,875
Money Market Fund Bear Stearns $34,000,000 $33,846,053
Goldman Sachs $22,000,000 $21,962,763
Merrill Lynch $33,501,000 $33,372,446
Salomon Brothers $35,000,000 $34,908,652
J.P. Morgan $30,241,000 $30,126,387
</TABLE>

ADDITIONAL INFORMATION
ON PURCHASES AND SALES

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 DUE TO THE REDUCED MARKETING EFFORT REQUIRED BY NAS:

(1) shares sold to other registered investment companies affiliated with NAS,

(2) shares sold:

(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 any endowment or non-profit organization;

(c) to any pension, profit sharing, or deferred compensation plan which is
qualified under Sections 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;

(d) to any life insurance company separate account registered as a unit
investment trust;

(3) for Class D shares sold:

(a) to Trustees and retired Trustees of NIF III (including its predecessor
Trusts);

(b) to directors, officers, full-time employees, sales representatives and
their employees, and retired directors, officers, employees, and sale
representatives, their spouses, children or immediate relatives
(immediate relatives include mother, father, brothers, sisters,
grandparents, grandchildren, ("Immediate Relatives")), and Immediate
Relatives of deceased employees of any member of the Nationwide
Insurance Enterprise, or any investment advisory clients of NAS and
their affiliates;

(c) 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;

34
<PAGE> 88
(d) to any qualified pension or profit sharing plan established by a
Nationwide sales representative for himself/herself and his/her
employees;

(4) Class A shares sold;

(a) to any person purchasing through an account with an unaffiliated
brokerage firm having an agreement with NAS;

(b) to any directors, officers, full-time employees, sales representatives
and their employees or any investment advisory clients of a
broker-dealer having a dealer/selling agreement with NAS;

(c) to any person who pays for such shares with the proceeds of mutual
fund shares redeemed from an NAS brokerage account; to qualify, the
person must have paid an initial sales charge or CDSC on the redeemed
shares and the purchase of Class A shares must be made within 60 days
of the redemption. This waiver must be requested when the purchase
order is placed, and NAS may require evidence of qualification for
this waiver.

(d) to any Class Member of Snyder vs. Nationwide Mutual Insurance Company
and Nationwide Life Insurance Company on the initial purchase of
shares for an amount no less than $5,000 and no more than $100,000. To
be eligible for this waiver, the purchase of Class A shares must come
from a source other than the surrender of, withdrawal from, or loan
against any existing policy, mutual fund or annuity issued by
Nationwide Mutual Insurance Company or its affiliates.

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 OVER THE INITIAL PURCHASE
PRICE. 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, plus all daily
dividends credited to your account through the date of withdrawal.

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<PAGE> 89
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 will automatically
convert to Class A shares on the first business day of the next month following
the seventh anniversary of the date on which such Class B shares were purchased.
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 lower 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 of the amount converted 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 you effect one or more exchanges among Class B shares of the Funds
during the seven-year period, the holding period for shares so exchanged will be
counted toward such period. If you exchange Class B shares into the Prime Shares
of the Money Market Fund for a period of time, the conversion aging period will
be stopped during the time period when shares are exchanged into the Money
Market Fund.

FACTORS TO CONSIDER WHEN CHOOSING A CLASS OF SHARES

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 as a result
of the lower expenses. In this regard, to the extent that the sales charge for
the Class A shares is waived or reduced 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 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 waiver of any 12b-1 fees, the aggregate 12b-1 fee with respect to Class B
shares of

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<PAGE> 90

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 for Class B Shareholders, Class B shares will be automatically
converted to Class A shares, as described above, 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 5.75% 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. For investors who are eligible to purchase Class D
shares, the purchase of Class D shares will usually be preferable to purchasing
Class A or Class B shares.

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 unless a shareholder has made a specific election otherwise:
(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, these shares are redeemed according to age,
with the shares held the longest redeemed first.

SIGNATURE GUARANTEE

A signature guarantee is required if the redemption check is made
payable to any one other than the registered shareholder. 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 includes, but is not limited to, certain banks, credit
unions, savings associations, and member firms of national securities 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.

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 at the quoted bid price, or if the securities are
traded in the over-the-counter market, at the last quoted sale price, or if no
sale price, at the quoted bid prices; all prices 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.

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<PAGE> 91

The value of portfolio securities in the Money Market Fund 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
withholding dividends or 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 Money Market 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 Money Market 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 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.

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
Fund, 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 Fund's stable share price, and its portfolio of high quality, short-term
money market investments. And the Money Market Fund offers fast 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 Fund dividends, you
can generally purchase more shares of one of the Bond Funds at lower prices.
Conversely, when interest rates and Money Market Fund 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. The Money Market Fund
provides investors with stability of principal, fast liquidity through unlimited
free checking writing ($500 minimum),

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<PAGE> 92

telephone redemption, or NAS NOW. 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
$25 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 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. Once an initial investment of $5,000 or more is
made into a Fund, then a fixed amount of $25 or more for each Fund selected is
transferred systematically monthly or quarterly into another Fund. The money is
transferred on the 25th day of the month as selected or on the preceding
business 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
Fund to any other 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. For
transfers from the Money Market Fund to another Fund, sales charges may apply if
not already paid.

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.

5 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. In addition, an Automatic Withdrawal Plan for Class B shares
will be subject to the applicable CDSC.

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 free of charge in the form of additional shares within
the same Fund and class or another specifically requested Fund (but the same
class) 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

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<PAGE> 93
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.

EXCHANGES AMONG FUNDS

Exchanges may be made among any of the Funds within the same class or among any
class in any of the Funds and Prime Shares of the Money Market Fund. For certain
exchanges of Class A shares among the Funds, you may pay the difference between
the sales charges, if a higher sales charge is applicable. Exchanges within
Class B or Class D shares may be made without incurring a sales charge.

An exchange from the Prime Shares of the Money Market Fund into another
Fund will be subject to the applicable sales charge unless already paid. For an
exchange into the Money Market Fund, the CDSC aging period for Class B shares
will be stopped during the time period such Money Market Fund shares are held.
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. For a
description of CDSC see "Class B Shares of the Stock and Bond Funds and CDSC."
The Trust reserves the 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. You must call
our toll-free number by the Valuation Time to receive that day's
closing share price. The Valuation Time is the close of regular trading
of the New York Stock Exchange, which is usually 4:00 p.m. Eastern
Time.

CUSTOMER SERVICE LINE--By calling 1-800-848-0920, you may exchange
shares by telephone. Requests may be made only by the account owner(s).
You must call our toll-free number by the Valuation Time to receive
that day's closing share price. The Valuation Time is the close of
regular trading of the New York Stock Exchange, which is usually 4:00
p.m. Eastern Time.

NAS may record all instructions to exchange shares. 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 "Buying,
Selling and Exchanging Fund Shares" in the Prospectus to confirm that
the instructions 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 the Prospectus and all telephone transaction
calls may be tape recorded. The Funds reserve the right to revoke this
privilege at any time without notice to shareholders and request the
redemption in writing, signed by all shareholders.

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<PAGE> 94

BY MAIL OR FAX-- 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 exchange 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 exchange request. The exchange 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.

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 shares of
the same class, without a sales charge, within 30 days after the effective date
of the redemption. Shareholders who receive Class D shares or Money Market Fund
shares as a result of the Reorganization and who redeem all of their Class D
shares may only reinvest in Class D through this one-time privilege, unless
otherwise eligible to purchase Class D shares. If you redeem Class B shares, and
then reinvest the proceeds in Class B shares 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 WRITING 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.
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.

5 SHAREHOLDER CONFIRMATIONS--You will receive a confirmation statement each
time a requested transaction is processed. However, no confirmations are mailed
on certain

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<PAGE> 95
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 average cost information 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.

FUND PERFORMANCE ADVERTISING

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 for each
class, 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 hypothetical pre-existing account in each class
having a balance of one share at the beginning of the period, dividing the net
change in account value by the value of the account at the beginning of the base
period to obtain the base period return, and multiplying the base period return
by 365/7 (or 366/7 during a leap year). For purposes of this calculation , the
net change in account value reflects the value of additional shares purchased
with dividends 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. The yields for each class will
differ due to different fees and expenses charged on the class. As of October
30, 1998, the seven day current and

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<PAGE> 96
effective yields for the Prime Shares of the Money Market Fund were 4.77% and
4.88%, respectively.

The Money Market Fund's yields 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 for each class 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 computed
separately for Class A, B, and D shares. Because of differences in fees and/or
expenses borne by Class A, B, and D shares, 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, 1998 were as follows:

<TABLE>
<CAPTION>
Funds 1 Year 5 Year 10 Year or Life
- ----- ------ ------ ---------------

<S> <C> <C> <C>
Mid Cap Growth .38% 14.01% 11.97%*
Growth 10.72 16.03 13.59
Nationwide Fund 20.07 21.56 17.31
Bond 4.20 5.19 8.04
Tax-Free 2.27 3.95 6.81
LT U.S. Govt. 6.15 6.16 8.82*
Intermediate U.S. Govt. 4.13 5.89 6.71**
</TABLE>

* The life of the Funds is since 12/19/88.
** The life of the Fund is since 2/10/92.

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<PAGE> 97

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 effect of sales
charges are not reflected in the calculation of the yields, therefore, a
shareholders actual yield may be less.

The following are the yields for the 30-day period ended October 30, 1998:

<TABLE>
<CAPTION>
Funds Class A Class B Class D
- ----- ------- ------- -------

<S> <C> <C> <C>
Bond 3.87% 3.46% 4.11%
Tax-Free 3.45 3.02 3.68
LT U.S. Govt. 4.49 4.16 4.65
Intermediate U.S. Govt. 4.61 4.32 4.81
</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 28%, the tax
equivalent yields for the Tax-Free Income Fund for the 30-day period ended
October 31, 1998 were 4.79% for Class A shares, 4.19% for Class B shares, and
5.11% for Class D shares.

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

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

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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 fifteen 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. The
Money Market Fund is offered in two separate classes, Prime Shares and Class R.
You have an interest only in the assets of the shares of the Fund 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. 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 in this Statement of Additional Information and in the
Prospectus 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 fundamental 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, Class B shares, or Prime 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.

ADDITIONAL GENERAL TAX INFORMATION

Each of the fifteen 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; and derive at least 90% of its gross income
from dividends, interest, payments with respect to securities loans, and gains
from the sale or other disposition of securities or foreign currencies, or other
income derived with respect to its business of investing in such stock,
securities, or currencies. In addition, to

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

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

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

Federal taxable income of corporations in excess of $75,000 up to $10
million is subject to a 34% tax rate; however, because the benefit of lower tax
rates on a corporation's taxable income of less than $75,000 is phased out for
corporations with income in excess of $100,000 but lower than $335,000, a
maximum marginal tax rate of 39% may result. Federal taxable income of
corporations in excess of $10 million is subject to a tax rate of 35%. Further,
a corporation's federal taxable

46
<PAGE> 100
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.

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

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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 Prospectus 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

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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 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 long-term capital gains,
the Tax-Free Income Fund intends to distribute any realized 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). 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

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$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.

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.

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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 February 22, 1999, Nationwide Life Insurance Company and its affiliates
directly or indirectly owned, controlled or held power to vote 5.4% of the
outstanding shares of the Mid Cap Growth Fund, 28.1% of the Growth Fund, 36.2%
of the Nationwide Fund, 23.4% of the Bond Fund, and 50.8% of the Money Market
Fund.

FINANCIAL STATEMENTS

The Report of Independent Auditors and Financial Statements of the Funds for the
period ended October 31, 1998 are incorporated by reference to the Trust's
Annual Report. Copies of the Annual Report are available without charge upon
request by writing the Trust or by calling toll-free 1-800-848-0920.

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APPENDIX A

BOND RATINGS

STANDARD & POOR'S DEBT RATINGS

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

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

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

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

2. Nature of and provisions of the obligation.

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 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

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capacity to meet timely interest and principal payments. The 'BB' rating
category is also used for debt subordinated to senior debt that is assigned an
actual or implied 'BBB-' rating.

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

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

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

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

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

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

MOODY'S LONG-TERM DEBT RATINGS

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

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

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

Baa - Bonds which are rated Baa are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the 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.

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<PAGE> 107
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.

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/IBCA, 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/IBCA's assessment of the issuer's ability to meet the
obligations of a specific debt issue or class of debt in a timely manner.

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<PAGE> 108
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/IBCA 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/IBCA ratings are based on information obtained from issuers,
other obligors, underwriters, their experts, and other sources Fitch/IBCA
believes to be reliable. Fitch/IBCA 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 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/IBCA 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/IBCA's assessment of the likelihood
of timely payment of principal and interest in accordance with the terms of
obligation for bond issues not in default. For defaulted bonds, the rating
('DDD' to 'D') is an assessment of the ultimate recovery value through
reorganization or liquidation.

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

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

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<PAGE> 109
BB Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes.
However, business and financial alternatives can be identified which could
assist the obligor in satisfying its debt service requirements.

B Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the capacity for continued
payment is contingent upon a sustained, favorable business and economic
environment.

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

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

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

DDD, Bonds are in default on interest and/or principal payments. Such bonds are
DD & extremely speculative, and should be valued on the basis of their
D ultimate recovery value in liquidation or reorganization of 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, 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 strong. Risk is modest,
AA but may vary slightly

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AA- from time to time because of economic conditions.

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

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

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

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

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

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

DP Preferred stock with dividend arrearages.

SHORT-TERM RATINGS

STANDARD & POOR'S COMMERCIAL PAPER RATINGS

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

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

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

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

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

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

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

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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.

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.

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MOODY'S NOTE RATINGS

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

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

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

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

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

FITCH/IBCA, INC. SHORT-TERM RATINGS

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

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.

F1+ Exceptionally strong credit quality. Issues assigned this
rating are regarded as having the strongest degree of assurance for
timely payment.

F1 Very strong credit quality. Issues assigned this rating
reflect an assurance of timely payment only slightly less in degree
than issues rated 'F1+'.

F2 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 'F1+' and 'F1' ratings.

F3 Fair credit quality. Issues assigned this rating have
characteristics suggesting that the degree of assurance for timely
payment is adequate, however, near-term adverse changes could cause
these securities to be rated below investment grade.

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

C High default risk. Default is a real possibility. Capacity for
meeting financial commitments is solely reliant upon a sustained,
favorable business and economic environment.

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

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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.

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.

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

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

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

BOND RATINGS

Bonds rated AA or AAA by Duff & Phelps 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.

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

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PART C

OTHER INFORMATION

ITEM 23. EXHIBITS

(a) Amended Declaration of Trust previously filed with the Trust's
Registration Statement on January 5, 1999, and is hereby incorporated
by reference.

(b) Amended Bylaws previously filed with the Trust's Registration Statement
on August 7, 1998, and is hereby incorporated by reference.

(c) 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.

(d) (1)Investment Advisory Agreement (except for the Morley Capital
Accumulation Fund) previously filed with the Trust's Registration
Statement on January 5, 1999, and is hereby incorporated by reference.

(2)Investment Advisory Agreement for the Morley Capital Accumulation Fund
previously filed with the Trust's Registration Statement on January 5,
1999, and is hereby incorporated by reference.

(3)Subadvisory Agreements.
(a) Subadvisory Agreement with the Dreyfus Corporation for S & P
500 Index fund previously filed with the Trust's original
Registration Statement on November 18, 1997, and is hereby
incorporated by reference.

(b) Subadvisory Agreement for the Prestige Large Cap Value Fund
previously filed with the Trust's Registration Statement on
January 5, 1999, and is hereby incorporated by reference.

(c) Subadvisory Agreement for the Prestige Large Cap Growth Fund
previously filed with the Trust's Registration Statement on
January 5, 1999, and is hereby incorporated by reference.

(d) Subadvisory Agreement for the Prestige Small Cap Fund
previously filed with the Trust's Registration Statement on
January 5, 1999, and is hereby incorporated by reference.

(e) Subadvisory Agreement for the Prestige International Fund
previously filed with the Trust's Registration Statement on
January 5, 1999, and is hereby incorporated by reference.

(f) Subadvisory Agreement for the Prestige Balanced Fund
previously filed with the Trust's Registration Statement on
January 5, 1999, and is hereby incorporated by reference.

(e) (1) Underwriting Agreement previously filed with the Trust's
Registration Statement on January 5, 1999, and is hereby incorporated
by reference.

(2) Model Dealer Agreement for the Morley Capital Accumulation Fund
previously filed with the Trust's Registration Statement on January 5,
1999, and is hereby incorporated by reference.

(f) Not applicable.

(g) Custody Agreement previously filed with the Trust's original
Registration Statement on November 18, 1997, and is hereby
incorporated by reference.

(h) (1) Fund Administration Agreement previously filed with the Trust's
Registration Statement on January 5, 1999, and is hereby incorporated
by reference.

(2) Transfer and Dividend Disbursing Agent. previously filed with the
Trust's Registration Statement on January 5, 1999, and is hereby
incorporated by reference.

(3) 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.

(4) 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.

(5) 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.

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(6) Administrative Services Plan and Services Agreement previously filed
on January 5, 1999, and is hereby incorporated by reference.

(i) Opinion of Counsel, previously filed with the Trust's Registration
Statement on November 5, 1998, and hereby incorporated by reference.

(j) Consent of KPMG LLP, Independent Auditors.

(k) Not applicable.

(l) Purchase Agreement previously filed with Trust's Registration Statement
on January 2, 1998, and hereby incorporated by reference.

(m)(1) Amended Distribution Plan previously filed with the Trust's Registration
Statement on January 5, 1999, and is hereby incorporated by reference.

(2) Dealer Agreement for Morley Capital Accumulation Fund (see Exhibit 6(b))
previously filed with the Trust's Registration Statement on January 5,
1999, and is hereby incorporated by reference.

(3) Rule 12b-1 Agreement (except Morley Capital Accumulation Fund) previously
filed with the Trust's Registration Statement on January 5, 1999, and is
hereby incorporated by reference.

(n) Financial Data Schedules previously filed with the Trust's Registration
Statement on January 5, 1999, and is hereby incorporated by reference.

(o) Amended 18f-3 Plan previously filed with the Trust's Registration
Statement on January 5, 1999, and is hereby incorporated by reference.

Power of Attorney dated November 7, 1997 previously filed in the Trust's
Pre-Effective Amendment and is hereby incorporated by reference.

ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL
WITH REGISTRANT
No person is presently controlled by or under common control with
Registrant.

ITEM 25. INDEMNIFICATION
Indemnification provisions for officers, directors and employees of
Registrant are set forth in Article V, Section 5.2 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 covering actions taken by the trustees in their capacity
as trustee. See Item 24(b)1 above.

ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER

(a)Nationwide Advisory Services, Inc. (NAS), the investment adviser
of the Trust, also serves as investment adviser to the Nationwide
Separate Account Trust, and Nationwide Asset Allocation Trust and
serves as general distributor to the Nationwide Multi-Flex
Variable Account, Nationwide Variable Account, Nationwide Variable
Account-II, Nationwide Variable Account-5, Nationwide Variable
Account-6, Nationwide Variable Account-8, Nationwide Variable
Account-9, Nationwide VA Separate Account-A, Nationwide VA
Separate Account-B, Nationwide VA Separate Account-C, Nationwide
VLI Separate Account-2, Nationwide VLI Separate Account-3,
Nationwide VL Separate Account-A, Nationwide VL Separate
Account-B, Nationwide VL Separate Account-C, and Nationwide VL
Separate Account-D, separate accounts of Nationwide Life Insurance
Company, or its subsidiary Nationwide Life and Annuity Insurance
Company, registered as unit investment trusts under the Investment
Company Act of 1940.

<TABLE>
<S> <C>
Joseph J. Gasper Director and President and Chief Operating Officer
--------------------------------------------------
Nationwide Life Insurance Company
</TABLE>

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<TABLE>
<S> <C>

Nationwide Life and Annuity Insurance Company
Nationwide Financial Services, Inc.

Director and Chairman of the Board
-----------------------------------
Nationwide Investment Services Corporation

Director and Vice Chairman
--------------------------
ALLIED Group Merchant Banking Corporation
ALLIED Life Brokerage Agency, Inc.
ALLIED Life Financial Corporation
ALLIED Life Insurance Company
Nationwide Financial Institution Distributors Agency, Inc.
Nationwide Global Holdings, Inc.
NEA Valuebuilder Investor Services, Inc.
NEA Valuebuilder Investor Services of Arizona, Inc.
Nationwide Retirement Solutions, Inc.

Director and President
-----------------------
Nationwide Advisory Services, Inc.
Nationwide Investor Services, Inc.
Nationwide Financial Services (Bermuda) Ltd.

Director
---------
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.
Morley Financial Services, Inc.
Nationwide Indemnity Company

Trustee and Chairman
--------------------
Nationwide Asset Allocation Trust
Nationwide Separate Account Trust

Trustee and President
---------------------
Nationwide Insurance Golf Charities, Inc.

Board of Manager
----------------
Nationwide Insurance Enterprise Services, Ltd.

Dennis W. Click Vice President and Secretary
----------------------------
Nationwide Mutual Insurance Company
Nationwide Mutual Fire Insurance Company
Nationwide Life Insurance Company
Nationwide General Insurance Company
Nationwide Property and Casualty Insurance Company
Nationwide Life and Annuity Insurance Company
Nationwide Financial Services, Inc.
Nationwide Insurance Enterprise Services, Ltd.
Nationwide Properties, Ltd.
Nationwide Realty Investors, Ltd.
NEA Valuebuilder Investor Services, Inc.
</TABLE>

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<TABLE>
<S> <C>
NEA Valuebuilder Investor Services of Arizona, Inc.
Nationwide Financial Institution Distributors Agency, Inc.
AID Finance Services, Inc.
ALLIED General Agency Company
ALLIED Group, Inc.
ALLIED Group Information Systems, Inc.
ALLIED Group Insurance Marketing Company
ALLIED Group Mortgage Company
ALLIED Life Brokerage Agency, Inc.
ALLIED Life Financial Corporation
ALLIED Life Insurance Company
ALLIED Property and Casualty Insurance Company
AMCO Insurance Company
Depositors Insurance Company
Midwest Printing Services, Ltd.
Premier Agency, Inc.
Western Heritage Insurance Company
Colonial County Mutual Insurance Company
California Cash Management Company
Colonial Insurance Company of Wisconsin
Gates McDonald & Company
GatesMcDonald Health Plus Inc.
Nationwide Global Holdings, Inc.
Nationwide Cash Management Company
Nationwide Indemnity Company
Nationwide Community Urban Redevelopment Corporation
Gates, McDonald & Company of Nevada
Gates, McDonald & Company of New York, Inc.
Farmland Mutual Insurance Company
Lone Star General Agency, Inc.
Nationwide Agribusiness Insurance Company
Employers Insurance of Wausau A Mutual Company
Nationwide Advisory Services, Inc.
Nationwide Investors Services, Inc.
Nationwide Corporation
Nationwide Insurance Enterprise Foundation
Nationwide Investment Services Corporation
Scottsdale Indemnity Company
Scottsdale Insurance Company
Scottsdale Surplus Lines Insurance Company
Wausau Underwriters Insurance Company
Wausau Service Corporation
Wausau Business Insurance Company
Wausau General Insurance Company
Affiliate Agency, Inc.
Affiliate Agency of Ohio, Inc.
Financial Horizons Distributors Agency of Alabama, Inc.
Financial Horizons Distributors Agency of Ohio, Inc.
Financial Horizons Distributors Agency of Oklahoma, Inc.
Financial Horizons Securities Corporation
Landmark Financial Services of New York, Inc.
NEA Valuebuilder Investor Services of Alabama, Inc.
NEA Valuebuilder Investor Services of Montana, Inc.
NEA Valuebuilder Investor Services of Nevada, Inc.
NEA Valuebuilder Investor Services of Ohio, Inc.
NEA Valuebuilder Investor Services of Oklahoma, Inc.
NEA Valuebuilder Investor Services of Wyoming, Inc.
</TABLE>

C-4
<PAGE> 119
<TABLE>
<S> <C>
Nationwide Agency, Inc.
Nationwide Health Plans, Inc.
Nationwide Management Systems, Inc.
MRM Investments, Inc.
NWE, Inc.
National Premium and Benefit Administration Company
Nationwide Insurance Company of America
Morley Financial Services, Inc.

Assistant Secretary
-------------------
Pension Associates of Wausau, Inc.
Companies Agency, Inc.
Companies Agency of Alabama, Inc.
Companies Agency Insurance Services of California
Companies Agency of Georgia, Inc.
Companies Agency of Idaho, Inc.
Companies Agency of Kentucky, Inc.
Companies Agency of New York, Inc.
Companies Agency of Pennsylvania, Inc.
Companies Agency of Phoenix, Inc.
Countrywide Services Corporation
Wausau (Bermuda) Ltd.
Wausau International Underwriters

Vice President and Assistant Secretary
--------------------------------------
National Casualty Company

Secretary
---------
The Beak and Wire Company

Vice President and Clerk
------------------------
Healthcare First, Inc.

Clerk
-----
NEA Valuebuilder Services Insurance Agency, Inc.

Assistant Clerk
---------------
Companies Agency of Massachusetts, Inc.

Dimon R. McFerson Chairman and Chief Executive Officer-Nationwide Insurance
---------------------------------------------------------
Enterprise and Director
-----------------------
Nationwide Mutual Insurance Company
Nationwide Mutual Fire Insurance Company
Nationwide General Insurance Company
Nationwide Property and Casualty Insurance Company
Nationwide Life Insurance Company
Nationwide Life and Annuity Insurance Company
ALLIED Group, Inc.
ALLIED Group Merchant Banking Corporation
ALLIED Life Brokerage Agency, Inc.
ALLIED Life Financial Corporation
ALLIED Life Insurance Company
Colonial Insurance Company of Wisconsin
Farmland Mutual Insurance Company
Nationwide Agribusiness Insurance Company
National Casualty Company
</TABLE>

C-5
<PAGE> 120
<TABLE>
<S> <C>
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
----------------------------------------------------
AID Finance Services, Inc.
ALLIED General Agency Company
ALLIED Group Information Systems, Inc.
ALLIED Group Insurance Marketing Company
ALLIED Group Mortgage Company
ALLIED Property and Casualty Insurance Company
Depositors Insurance Company
Midwest Printing Services, Ltd.
Premier Agency, Inc.
Western Heritage Insurance Company
American Marine Underwriters, Inc.
Gates, McDonald and Company
Gates McDonald Health Plus, Inc.
Nationwide Investor Services, Inc.
Nationwide Retirement Solutions, Inc.
Companies Agency, Inc.
Companies Agency of Alabama, Inc.
Companies Agency Insurance Services of California
Companies Agency of Georgia, Inc.
Companies Agency of Idaho, Inc.
Companies Agency of Kentucky, Inc.
Companies Agency of Massachusetts, Inc.
Companies Agency of New York, Inc.
Companies Agency of Pennsylvania, Inc.
Companies Agency of Phoenix, Inc.
Countrywide Services Corporation
Employers Life Insurance Company of Wausau
Nationwide Advisory Services, Inc.
Nationwide Financial Institution Distributors Agency, Inc.
Nationwide Insurance Enterprise Services, Ltd.
Nationwide Insurance Company of America
Wausau International Underwriters
Wausau Preferred Health Insurance Company

Trustee and Chairman
--------------------
Financial Horizons Investment Trust
</TABLE>

C-6
<PAGE> 121
<TABLE>
<S> <C>
Nationwide Investing Foundation
Nationwide Investing Foundation II
Nationwide Investing Foundation III

Chairman of the Board
---------------------
Nationwide Insurance Golf Charities, Inc.

Chairman of the Board and Director
----------------------------------
Lone Star General Agency, Inc.
Nationwide Community Urban Redevelopment Corporation
NEA Valuebuilder Investor Services, Inc.
NEA Valuebuilder Investor Services of Arizona, Inc
Colonial County Mutual Insurance Company

Director
--------
Gates, McDonald & Company of Nevada
Gates, McDonald & Company of New York
Healthcare First, Inc.
Morley Financial Services, Inc.
Nationwide Agency, Inc.
Nationwide Health Plans, Inc.
Nationwide Management Systems, Inc.

Chairman of the Board, Chairman and Chief Executive
---------------------------------------------------
Officer-Nationwide Insurance Enterprise and Trustee
---------------------------------------------------
Nationwide Insurance Enterprise Foundation

Member-Board of Managers, Chairman of the Board,
------------------------------------------------
Chairman and Chief Executive Officer-Nationwide Insurance
---------------------------------------------------------
Enterprise
----------
Nationwide Properties, Ltd.
Nationwide Realty Investors, Ltd.
Nationwide Insurance Enterprise Services, Ltd.

Chairman and Chief Executive Officer-Nationwide Insurance Enterprise
--------------------------------------------------------------------
Nationwide Insurance Company of Florida

Robert A. Oakley Executive Vice President-Chief Financial Officer
------------------------------------------------
Nationwide Mutual Insurance Company
Nationwide Mutual Fire Insurance Company
Nationwide General Insurance Company
Nationwide Property and Casualty Insurance Company
Nationwide Life Insurance Company
Nationwide Life and Annuity Insurance Company
ALLIED Group. Inc.
ALLIED Life Financial Corporation
American Marine Underwriters, Inc.
Companies Agency, Inc.
Companies Agency of Alabama, Inc.
Companies Agency of Georgia, Inc.
Companies Agency of Idaho, Inc.
Companies Agency of Kentucky, Inc.
Companies Agency of Massachusetts, Inc.
Companies Agency of New York, Inc.
Companies Agency of Pennsylvania, Inc.
</TABLE>

C-7
<PAGE> 122
<TABLE>
<S> <C>
Companies Agency of Phoenix, Inc.
Countrywide Services Corporation
Employers Life Insurance Company of Wausau
National Casualty Company
National Premium and Benefit Administration Company
The Beak and Wire Corporation
Employers Insurance of Wausau A Mutual Company
Farmland Mutual Insurance Company
Nationwide Financial Institution Distributors Agency, Inc.
Lone Star General Agency, Inc.
Nationwide Agribusiness Insurance Company
Nationwide Corporation
Nationwide Financial Services, Inc.
Nationwide Investment Services Corporation
Nationwide Investor Services, Inc.
Nationwide Insurance Enterprise Foundation
Nationwide Properties, Ltd.
Nationwide Realty Investors, Ltd.
NEA Valuebuilder Investor Services, Inc.
NEA Valuebuilder Investor Services of Arizona, Inc.
Colonial County Mutual Insurance Company
Pension Associates of Wausau, Inc.
Nationwide Retirement Solutions, Inc.
Scottsdale Indemnity Company
Scottsdale Insurance Company
Scottsdale Surplus Lines Insurance Company
Wausau Business Insurance Company
Wausau General Insurance Company
Wausau Preferred Health Insurance Company
Wausau Service Corporation
Wausau Underwriters Insurance Company

Director, Chairman of the Board
-------------------------------
Neckura Holding Company
Neckura Insurance Company
Neckura Life Insurance Company

Executive Vice President-Chief Financial Officer and
----------------------------------------------------
Director
--------
AID Finance Services, Inc.
ALLIED General Agency Company
ALLIED Group Information Systems, Inc.
ALLIED Group Insurance Marketing Company
ALLIED Group Merchant Banking Corporation
ALLIED Group Mortgage Company
ALLIED Life Brokerage Agency, Inc.
ALLIED Life Insurance Company
ALLIED Property and Casualty Insurance Company
AMCO Insurance Company
Depositors Insurance Company
Midwest Printing Services, Ltd.
Premier Agency, Inc.
Western Heritage Insurance Company
Colonial Insurance Company of Wisconsin
Nationwide Cash Management Company
Nationwide Community Urban Redevelopment Corporation
Nationwide Global Holdings, Inc.
</TABLE>

C-8
<PAGE> 123

<TABLE>
<S> <C>
Nationwide Insurance Enterprise Services, Ltd.
MRM Investments, Inc.
Nationwide Advisory Services, Inc.
Nationwide Indemnity Company
Nationwide Insurance Company of America

Executive Vice President
------------------------
Companies Agency Insurance Services of California
Wausau International Underwriters

Director and Vice Chairman
--------------------------
Leben Direkt Insurance Company
Neckura General Insurance Company
Auto Direkt Insurance Company

Director
--------
NWE, Inc.
Gates, McDonald & Company
GatesMcDonald Health Plus Inc.
Healthcare First, Inc.
Morley Financial Services, Inc.

Board of Managers, Executive Vice President-Chief Financial Officer
-------------------------------------------------------------------
Nationwide Insurance Enterprise Services, Ltd.

Susan A. Wolken Senior Vice President - Life Company Operations
-----------------------------------------------
Nationwide Mutual Insurance Company
Nationwide Mutual Fire Insurance Company
Nationwide Property and Casualty Insurance Company
Nationwide Life Insurance Company
Nationwide Life and Annuity Insurance Company

Director
--------
Affiliate Agency, Inc.
Affiliate Agency of Ohio, Inc.
Financial Horizons Distributors Agency of Alabama, Inc.
Financial Horizons Distributors Agency of Ohio, Inc.
Financial Horizons Distributors Agency of Oklahoma, Inc.
Financial Horizons Securities Corporation
Landmark Financial Services of New York, Inc.
Nationwide Advisory Services, Inc.
Nationwide Investment Services Corporation
NEA Valuebuilder Investor Services, Inc.
NEA Valuebuilder Investor Services of Alabama, Inc.
NEA Valuebuilder Investor Services of Arizona, Inc.
NEA Valuebuilder Investor Services of Montana, Inc.
NEA Valuebuilder Investor Services of Nevada, Inc.
NEA Valuebuilder Investor Services of Ohio, Inc.
NEA Valuebuilder Investor Services of Oklahoma, Inc.
NEA Valuebuilder Investor Services of Wyoming, Inc.
NEA Valuebuilder Services Insurance Agency, Inc.
Nationwide Retirement Solutions, Inc.
Nationwide Retirement Solutions, Inc. of Massachusetts
Nationwide Retirement Solutions, Inc. of Alabama
</TABLE>

C-9
<PAGE> 124
<TABLE>
<S> <C>
Nationwide Retirement Solutions, Inc. of Arkansas
Nationwide Retirement Solutions, Inc. of Montana
Nationwide Retirement Solutions, Inc. of New Mexico

Robert J. Woodward, Jr. Executive Vice President-Chief Investment Officer
------------------------------------------------
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
AID Finance Services, Inc.
ALLIED General Agency Company
ALLIED Group, Inc.
ALLIED Group Information Systems, Inc.
ALLIED Group Insurance Marketing Company
ALLIED Group Merchant Banking Corporation
ALLIED Life Brokerage Agency, Inc.
ALLIED Life Financial Corporation
ALLIED Life Insurance Company
ALLIED Property and Casualty Insurance Company
AMCO Insurance Company
Depositors Insurance Company
Midwest Printing Services, Ltd.
Premier Agency, Inc.
Western Heritage Insurance Company
Colonial County Mutual Insurance Company
Colonial Insurance Company of Wisconsin
Employers Insurance of Wausau A Mutual Company
Employers Life Insurance Company of Wausau
Farmland Mutual Insurance Company
Gates, McDonald & Company
GatesMcDonald Health Plus, Inc.
Lone Star General Agency, Inc.
National Casualty Company
Nationwide Financial Services, Inc.
Nationwide Agribusiness Insurance Company
Nationwide Insurance Company of America
Nationwide Corporation
Nationwide Insurance Enterprise Foundation
Nationwide Insurance Enterprise Services, Ltd.
Nationwide Investment Services Corporation
Pension Associates of Wausau, Inc.
Nationwide Retirement Solutions, Inc.
Scottsdale Indemnity Company
Scottsdale Insurance Company
Scottsdale Surplus Lines Insurance Company
Wausau Business Insurance Company
Wausau General Insurance Company
Wausau Preferred Health Insurance Company
Wausau Service Corporation
Wausau Underwriters Insurance Company

Director
--------
Morley Financial Services, Inc.
Nationwide Global Holdings, Inc.
</TABLE>

C-10
<PAGE> 125
<TABLE>
<S> <C>
Nationwide Investors Services, Inc.

Member-Board of Managers and Vice Chairman
------------------------------------------
Nationwide Properties, Ltd.
Nationwide Realty Investors, Ltd.

Director and President
----------------------
California Cash Management Company
MRM Investments, Inc.
Nationwide Cash Management Company
Nationwide Community Urban Redevelopment Corporation
NWE, Inc.

Director, Executive Vice President-Chief Investment Officer
-----------------------------------------------------------
Nationwide Indemnity Company
Nationwide Advisory Services, Inc.
Nationwide Insurance Company of America

Director, Vice Chairman and Executive Vice President-Chief
----------------------------------------------------------
Investment Officer
------------------
ALLIED Group Mortgage Company

Trustee and Vice Chairman
-------------------------
Nationwide Asset Allocation Trust
Nationwide Separate Account Trust

James F. Laird, Jr. Vice President and General Manager
----------------------------------
Nationwide Advisory Services, Inc.

Vice President and General Manager and Director
-----------------------------------------------
Nationwide Investors Services, Inc.

Treasurer
---------
Nationwide Investing Foundation
Nationwide Separate Account Trust
Nationwide Investing Foundation II
Financial Horizons Investment Trust
Nationwide Asset Allocation Trust
Nationwide Investing Foundation III

Christopher A. Cray Treasurer
---------
Nationwide Advisory Services, Inc.
Nationwide Investors Services, Inc.

Assistant Treasurer
-------------------
Nationwide Investing Foundation
Nationwide Separate Account Trust
Nationwide Investing Foundation III
Financial Horizons Investment Trust
Nationwide Asset Allocation Trust

Elizabeth A. Davin Secretary
---------
Nationwide Asset Allocation Trust
</TABLE>

C-11
<PAGE> 126
<TABLE>
<S> <C>
Nationwide Separate Account Trust
Nationwide Investing Foundation III

Assistant Secretary
-------------------
Nationwide Advisory Services, Inc.
Nationwide Investing Foundation
Nationwide Investing Foundation II
Nationwide Investors Services, Inc.

Patricia J. Smith Assistant Secretary
-------------------
Nationwide Advisory Services, Inc.
Nationwide Horizons Investment Trust
Nationwide Investing Foundation
Nationwide Investing Foundation II
Nationwide Investing Foundation III
Nationwide Investors Services, Inc.
Nationwide Separate Account Trust
Nationwide Asset Allocation Trust

Edwin P. McCausland, Jr. Sr. Vice President - Fixed Income Securities
--------------------------------------------
Nationwide Mutual Insurance Company
Nationwide Mutual Fire Insurance Company
Nationwide General Insurance Company
Nationwide Property and Casualty Insurance Company
Nationwide Life Insurance Company
Nationwide Life and Annuity Insurance Company
Nationwide Advisory Services, Inc.
AID Finance Services, Inc.
ALLIED General Agency Company
ALLIED Group, Inc.
ALLIED Group Information Systems, Inc.
ALLIED Group Insurance Marketing Company
ALLIED Group Merchant Banking Corporation
ALLIED Group Mortgage Company
ALLIED Life Brokerage Agency, Inc.
ALLIED Life Financial Corporation
ALLIED Life Insurance Company
ALLIED Property and Casualty Insurance Company
AMCO Insurance Company
Depositors Insurance Company
Midwest Printing Services, Ltd.
Premier Agency, Inc.
Western Heritage Insurance Company
Colonial Insurance Company of Wisconsin
Nationwide Cash Management Company
Nationwide Indemnity Company
Nationwide Insurance Enterprise Foundation
Morley Financial Services, Inc.
Employers Insurance of Wausau A Mutual Company
Employers Life Insurance Company of Wausau
Farmland Mutual Insurance Company
Gates, McDonald & Company
</TABLE>

C-12
<PAGE> 127
<TABLE>
<S> <C>
GatesMcDonald Health Plus, Inc.
National Casualty Company
Nationwide Agribusiness Insurance Company
Scottsdale Indemnity Company
Scottsdale Insurance Company
Scottsdale Surplus Lines Insurance Company
Nationwide Insurance Company of America
Wausau Business Insurance Company
Wausau General Insurance Company
Wausau Preferred Health Insurance Company
Wausau Service Corporation
Wausau Underwriters Insurance Company

Assistant Treasurer
Financial Horizons Investment Trust
Nationwide Asset Allocation Trust
Nationwide Investing Foundation
Nationwide Investing Foundation II
Nationwide Investing Foundation III
Nationwide Separate Account Trust

Joseph P. Rath Vice President - Product and Market Compliance
----------------------------------------------
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.
</TABLE>

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

Farmland Mutual Insurance Company
Nationwide Agribusiness Insurance Company
1963 Bell Avenue
Des Moines, Iowa 50315-1000

Colonial Insurance Company of Wisconsin
5525 Park Center Circle
Dublin, Ohio 43017

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

C-13
<PAGE> 128
Scottsdale Insurance Company
8877 North Gainey Center Drive
P.O. Box 4110
Scottsdale, Arizona 85261-4110

National Casualty Company
P.O. Box 4110
Scottsdale, Arizona 85261-4110

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

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

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

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

Morley Financial Services, Inc.
5665 S. W. Meadows Rd. , Suite 400
Lake Oswego, Oregon 97035

(b) UBT serves as investment adviser to the Morley Capital
Accumulation Fund. UBT, a trust company organized under the laws
of the State of Oregon, is a wholly owned subsidiary of
Nationwide Life Insurance Company. UBT conducts a variety of
trust activities.

To the knowledge of the Trust, none of the directors or officers
of UBT, except as set forth below, is or has been at any time
during the past two fiscal years engaged in any other business,
profession, vocation or employment of a substantial nature,
except that certain directors and officers also hold various
positions with and engage in business for Morley Financial
Services, Inc. The directors except as noted below may be
contacted C/O UBT, 5665 SW Meadows Rd., Suite 400, Lake Oswego,
Oregon 97035.

Donald C. Burdick, 434 Ridgeway Road, Lake Oswego, OR 97034
Mr. Burdick has been an independent consultant and investor
for the past 10 years. Prior to that he was President of
Investcorp Financial Services.

Harold H. Morley, President, CEO and Director of UBT. Mr.
Morley is Chairman and Chief Executive Officer of Morley
Financial Services, Inc.

Joan K. Hall, Senior Vice President, Corporate Secretary,
Financial Officer and Director of UBT. Ms. Hall is Senior Vice
President and Financial Officer of Morley Financial Services.

C-14
<PAGE> 129
David Fallow, Executive Vice President of UBT. Mr. Fallow is
President and Chief Investment Officer of Morley Financial
Services, Inc.

(1) The Dreyfus Corporation

The Dreyfus Corporation ("Dreyfus") acts as
subadviser 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 fiscal years, is
incorporated by reference to Schedule A and D of Form
ADV filed by Dreyfus (SEC file No. 801-8147).

(d) Information for the Subadviser of the Prestige Large Cap
Value Fund

(1) Brinson Partners, Inc.

Brinson Partners, Inc. ("Brinson") acts as a subadviser
to the Prestige Large Cap Value 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 Brinson, together with
information as to their other business, profession,
vocation or employment of a substantial nature during
the past two fiscal years, is incorporated by reference
to Schedule A and D of Form ADV filed by Brinson (SEC
file No. 801-34910.)

(e) Information for the Subadviser of the Prestige Large Cap
Growth Fund

(1) Goldman Sachs Asset Management

Goldman Sachs Asset Management ("Goldman") acts as a
subadviser to the Large Cap Growth 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 Goldman, together with information as to
their other business, profession, vocation or employment
of a substantial nature during the past two fiscal years,
is incorporated by reference to Schedule A and D of Form
ADV filed by Goldman (SEC file No. 801-16048.)

(f) Information for the Subadviser of the Prestige Balanced Fund

(1) J. P. Morgan Investment Management

J. P. Morgan Investment Management, Inc. ("JPMIM"), a
registered investment adviser, is a wholly owned
subsidiary of J. P. Morgan & Co. Incorporated. JPMIM
manages employee benefit plans for corporations and
unions. JPMIM also provides investment management
services for a broad spectrum of other institutional
investors, including foundations, endowments, sovereign
governments, and insurance companies.

To the knowledge of the Registrant, none of the directors
or executive officers of JPMIM is or has been in the past
two fiscal years engaged in any other business or
profession, vocation or employment of a substantial
nature, except that certain officers and directors of
JPMIM also hold various positions with, and engage in
business for, J.P. Morgan & Co. Incorporated or Morgan
Guaranty Trust Company of New York, a New York trust
company which is also a wholly owned subsidiary of J. P.
Morgan & Co. Incorporated.

(g) Information for the Subadviser of the Prestige Small Cap
Fund

(1) Institutional Trust Company

C-15
<PAGE> 130
Institutional Trust Company ("ITC") acts as a
subadviser to the Small Cap 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 ITC, together with
information as to their other business, profession,
vocation or employment of a substantial nature during
the past two fiscal years, is incorporated by reference
to Schedule A and D of Form ADV filed by ITC (SEC file
No. 801-12389.)

(2) Invesco Management & Research, Inc.

Invesco Management & Research, Inc. ("INVESCO") acts as
a subadviser to the Small Cap 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 INVESCO, together with
information as to their other business, profession,
vocation or employment of a substantial nature during
the past two fiscal years, is incorporated by reference
to Schedule A and D of Form ADV filed by INVESCO (SEC
file No. 801-01596.)

(h) Information for the Subadviser of the Prestige
International Fund

(1) Lazard Asset Management

Lazard Asset Management ("Lazard") acts as subadviser
to the International Fund and as adviser or subadviser
to a number of other registered investment companies as
well as to separate institutional investors. The list
required by this Item 26 of officers and directors of
Lazard, together with information as to their other
business, profession, vocation or employment of a
substantial nature during the past 2 years, is
incorporated by reference to Schedules A and D of Form
ADV filed by Lazard (SEC File No. 801-6568).

ITEM 27. PRINCIPAL UNDERWRITERS

(a) See Item 26 above.
(b) Nationwide Advisory Services, Inc.
<TABLE>
<CAPTION>
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

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

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

C-16
<PAGE> 131
<TABLE>
<S> <C> <C> <C>
Edwin P. McCausland One Nationwide Plaza Senior VP - Fixed Income Assistant Treasurer
Columbus OH 43215 Securities

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

Susan A. Wolken Three Nationwide Plaza Director N/A
Columbus OH 43215

Dennis W. Click One Nationwide Plaza Vice President and Secretary N/A
Columbus OH 43215

Patricia J. Smith Three Nationwide Plaza Assistant Secretary Assistant Secretary
Columbus OH 43215

Elizabeth A. Davin One Nationwide Plaza Assistant Secretary Assistant Secretary
Columbus OH 43215
</TABLE>

ITEM 28. LOCATION OF ACCOUNTS AND RECORDS

Christopher A. Cray
Nationwide Advisory Services, Inc.
Three Nationwide Plaza
Columbus, OH 43215

ITEM 29. MANAGEMENT SERVICES

Not applicable.

ITEM 30. UNDERTAKINGS

Not applicable

C-17
<PAGE> 132
SIGNATURES

Pursuant to the requirements of the Securities Act 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Post-Effective
Amendment No.12 to this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Columbus, and State of
Ohio, on this twenty sixth day of February 1999.

NATIONWIDE 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 TWENTY SIXTH DAY OF FEBRUARY 1999.

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

C-18

<PAGE> 1
Exhibit (j)

INDEPENDENT AUDITORS' CONSENT

The Board of Trustees of
Nationwide Investing Foundation III:

We consent to use of our report dated December 11, 1998 for the Nationwide
Investing Foundation III as incorporated by reference herein and to the
reference to our firm under the headings "Financial Highlights" in the
Prospectus and "Other Services for all the Funds" in the Statement of
Additional Information included herein.

KPMG LLP

Columbus, Ohio
February 24, 1999