Nationwide Advisory Services, Inc.
Annual Report
98
Nationwide(R) Family of Funds
Photos: Mother & Child, Leaves & Watch.
LOGO: Nationwide
<PAGE>
Photos: Compass, Hand Shake, Building.
Contents
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1 Message to Our Shareholders
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2 Fund Highlights
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6 Mid Cap Growth Fund
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8 Growth Fund
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10 Nationwide Fund
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13 Bond Fund
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16 Tax-Free Income Fund
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22 Intermediate U.S. Government Bond Fund
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24 Long-Term U.S. Government Bond Fund
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26 Money Market Fund
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30 Statement of Assets and Liabilities
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32 Statement of Operations
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34 Statement of Changes in Net Assets
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37 Notes to Financial Statements
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48 Financial Highlights
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56 Independent Auditors' Report
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57 Trustees and Officers
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ABOUT PERFORMANCE+
The performance of the funds, as reflected on pages 2-26, includes performance
of their respective predecessor funds prior to reorganization. In addition, the
performance of the class A and B shares prior to such date has been restated for
sales charges but not for fees applicable to class A and B. The reorganization
of the funds took place on May 11, 1998. The predecessor to the Mid Cap Growth
Fund was the Financial Horizons Investment Trust Growth Fund. The predecessor to
the Long-Term U.S. Government Bond Fund was the Financial Horizons Investment
Trust Government Bond Fund. The Nationwide Investing Foundation III funds were
preceded by funds of the Nationwide Investing Foundation or Nationwide Investing
Foundation II. Inception-to-date class-specific total returns can be found in
the Financial Highlights, which start on page 48.
This report is for the information of shareholders of the Nationwide(R) Family
of Funds. It may be used as sales literature only when preceded or accompanies
by a current prospectus, which gives further details about the funds.
Nationwide(R) is a registered Federal Service mark of Nationwide Mutual
Insurance Company.
<PAGE>
Message to Shareholders October 31, 1998
In today's restless financial market, patience for the long term pays off. The
third quarter of this year demonstrated this investing truism.
The Dow Jones Industrial Average drop of 15.13 percent in August 1998 was the
biggest monthly percentage decrease in over a decade. However, investors who
remained in the market throughout the turbulent summer and fall reaped benefits
this past October when the index jumped to 8592, a 9.56 percent increase. This
was the best monthly percentage gain in more than 11 years and the biggest point
gain ever.
As for the future, we feel U.S. stocks will continue to face some hurdles, due
in part to unrest in overseas markets. Our economy is, more than ever before,
globally linked. Because of abrupt changes in the international economic
environment and financial markets, the U.S. economy is now more vulnerable to
external shocks. If Asia fails to revive and the U.S. and European economies
slow more than currently anticipated, the global economy may barely grow next
year. In addition, growth expectations in our country have been dampened. The
gross domestic product (GDP) growth for 1999 is expected to be less than two
percent -- smaller than the current three percent rate.
The U.S. remains an unrivaled haven for international, as well as domestic,
investments. This is primarily due to the quality of our products, the
productivity of our workforce, and confidence in our financial markets.
PortfolioSelect
To provide investors with an easy way of customizing a portfolio of mutual
funds, PortfolioSelect(SM) by Nationwide was introduced earlier this year. This
product offers 21 funds from leading money manage ment companies -- Nationwide,
Fidelity, Dreyfus and Oppenheimer -- and gives shareholders more choices, a
central location for their investments, portfolio diversification, and
consolidated investment statements.
The Nationwide Fund -- A Strong Financial Presence
One of the stars among Nationwide's mutual funds is the Nationwide Fund. Chuck
Bath has managed the Nationwide Fund for more than 13 years. Bath follows a
time-tested strategy of researching stocks and selecting investments for their
consistency, steady growth and ability to earn solid returns over the long term.
He discussed his investment philosophy and stock market observations during the
August downturn on "Wall $treet Week With Louis Rukeyser." Bath and the
Nationwide Fund also have been mentioned in many national publications including
"Smart Money," "Financial Planning," "Barron's Online," "Barron's," "Dollar
Signs," "USA Today" and "The Wall Street Journal."
The Nationwide Fund's assets have doubled since December 1996 to $2.2 billion.
For one-, three-, five- and 10-year periods, the Fund has outpaced S&P 500
returns -- some thing which fewer than 10% of all stock mutual funds can boast.
The Nationwide Fund is consis tently grouped among top performers in its
growth-and-income category.
Experienced Fund Managers
In today's volatile stock market, it is important to have portfolio managers
with experience -- managers who have been through some ups and downs. Many
investors will be hard pressed to find a fund managed by someone with as much as
four years of experience. In fact, out of the more than 9,000 stock and bond
funds in existence today, managers of these funds have an average of 3.6 years
of experience. Their experience does not extend as far back as the slump of
1990, let alone the crash of 1987.
At Nationwide, we believe our fund managers' solid experience is a major
reason for the stability and success of our fund family. On average, each of
them has been actively involved in investment management at Nationwide for at
least 15 years. During this time, their tenure at the helm of a Nationwide fund
has averaged more than 11 years.
Thank you for giving Nationwide Advisory Services, Inc. the opportunity to
help meet your investment needs. For more information about the Nationwide funds
or PortfolioSelect, please call 1-800-848-0920 or visit us on the Internet at
www.nationwidefunds.com.
/S/ Dimon R. McFerson
Chairman
October 1998
Photo of: Dimon R. McFerson
<PAGE>
Nationwide Stock Fund Highlights
Mid Cap Growth Fund+
Fund Performance
$10,000 Lump Sum Investment
Value of
Value reinvested dividends
of initial including capital
Date investment gains
12/88 9550 9550
1989 10107 10008
1990 8541 8261
1991 12528 11450
1992 13208 11899
1993 15134 13532
1994 16182 14430
1995 19672 17352
1996 23490 18594
1997 29047 21841
1998 30531 16818
The value of a long-term investment in the Mid Cap Growth Fund is illustrated in
the chart above. A net investment of $10,000 made on 12/19/88 (the Fund's
inception date) would have earned an average annual compound total return of
11.97% (including sales charge) for the period ended October 31, 1998. The chart
above illustrates the growth of this investment to $30,531. Investment return
and principal value will fluctuate, and when redeemed, shares may be worth more
or less than original cost. Past performance is no guarantee of future results.
o The Mid Cap Growth Fund focuses on mid-size companies with prospects for
greater-than-average earnings growth potential.
o The Fund seeks long-term capital appreciation by investing primarily in equity
securities of mid-size companies.
o Investors should consider this Fund if they are looking to maximize
the growth of their capital; can accept short-term price fluctuations in
exchange for long-term growth potential; and appreciate the portfolio
diversification of mid-cap stocks, which do not always perform in line with
large-cap equities.
o John M. Schaffner, the Fund's portfolio manager, defines the mid-cap universe
as "consisting of stock with between $300 million and $8 billion in market
capitalization. As a group, they don't always move in sync with large-cap
stocks, which makes the Mid Cap Growth Fund an attractive diversification tool
for many equity investors," he said.
o The Fund pays annual capital gain distributions, and quarterly dividends,
if any.
Top Five Holdings
(Composition Subject to Change)
Value %
- -------------------------------------------------------
Schering-Plough Corp. $823,000 8.6%
- -------------------------------------------------------
ABR Information Services $604,000 6.3%
- -------------------------------------------------------
Advent Software, Inc. $597,700 6.2%
- -------------------------------------------------------
MCI WorldCom, Inc. $497,250 5.2%
- -------------------------------------------------------
Gartner Group, Inc. $486,937 5.1%
- -------------------------------------------------------
+ See legend on Table of Contents.
Growth Fund+
Fund Performance
$10,000 Lump Sum Investment
Value of
Value reinvested dividends
of initial including capital
Date investment gains
1988 9550 9550
1989 10615 9985
1990 9118 7984
1991 13070 10409
1992 13977 10812
1993 16235 12117
1994 17166 12345
1995 20772 14379
1996 23340 14510
1997 30836 17751
1998 35750 17425
The value of a long-term investment in the Growth Fund is illustrated in the
chart above. Over a 10-year period ended October 31, 1998, a net investment of
$10,000 would have earned an average annual compound total return of 13.59%
(including sales charge). The chart above illustrates the growth of this
investment to $35,750. Investment return and principal value will fluctuate, and
when redeemed, shares may be worth more or less than original cost. Past
performance is no guarantee of future results.
o The Growth Fund targets industry leaders with strong earnings growth potential
and seeks long-term capital appreciation by investing primarily in equity
securities of companies of all sizes.
o Investors should consider this Fund if they would like to maximize the growth
of their capital; can accept short-term price fluctuations in exchange for
long-term growth potential; and hold a long-term investment outlook for a
portion of their portfolio, even if they are approaching or have
reached retirement.
o John M. Schaffner, the Fund's portfolio manager, says of the Fund's strategy:
"We think of ourselves as running a different kind of growth fund. We don't
chase the latest fad or `hot stock'; we are long-term investors who take the
time to carefully analyze a company before we buy its stock. We also don't jump
in and out of market sectors, taking excessive risks in the hope of making quick
profits. Our turnover is much lower than that of the average growth fund."
o The Fund pays annual capital gain distributions, and quarterly dividends, if
any.
Top Five Holdings (Composition Subject to Change)
Value %
- -------------------------------------------------------
MCI WorldCom, Inc. $66,300,000 7.2%
- -------------------------------------------------------
ABR Information Services $54,007,038 5.9%
- -------------------------------------------------------
EMC Corp. $48,126,750 5.2%
- -------------------------------------------------------
Warner-Lambert Co. $47,025,000 5.1%
- -------------------------------------------------------
Gartner Group, Inc. $42,474,863 4.6%
- -------------------------------------------------------
+ See legend on Table of Contents.
<PAGE>
Nationwide Stock and Income Fund Highlights
Nationwide Fund+
Fund Performance
$10,000 Lump Sum Investment
Value of
Value reinvested dividends
of initial including capital
Date investment gains
1988 9550 9550
1989 12137 10433
1990 11285 8638
1991 15400 11058
1992 16736 11436
1993 17766 11604
1994 18633 11303
1995 22217 12165
1996 28017 14311
1997 39273 18630
1998 49377 21218
The value of a long-term investment in the Nationwide Fund is illustrated in the
chart above. Over a 10-year period ended October 31, 1998, a net investment of
$10,000 would have earned an average annual compound total return of 17.31%
(including sales charge). The chart above illustrates the growth of this
investment to $49,377. Investment return and principal value will fluctuate, and
when redeemed, shares may be worth more or less than original cost. Past
performance is no guarantee of future results.
o The Nationwide Fund seeks to obtain a total return from a flexible combination
of current income and capital appreciation.
o Chuck Bath, the Fund's portfolio manager, says of the Fund's strategy: "We
like to think of our investment style as buying superior companies at average
prices. While many other stock funds hold hundreds of different securities in
their portfolios, we generally carry far fewer -- perhaps 50-60 stocks. And for
good reason: It's difficult to come up with good ideas, and when we do come up
with one, we want it to have a positive impact on our portfolio and
performance."
o On October 31, 1998, the Fund held the highest rating possible, five stars,
from Morningstar for all rating periods -- overall, three-, five- and
10-year periods.
Fund rated as of 10/31/98 for the overall and 3-year period among 2,719 domestic
equity stock funds; for the 5-year period among 1,622 domestic equity stock
funds; and for the 10-year period among 728 domestic equity stock funds.
Morningstar proprietary ratings reflect risk-adjusted performance and are
subject to change every month. These ratings are calculated from the Fund's 3-,
5- and 10-year average annual total returns in excess of 90-day Treasury bill
returns, with appropriate fee adjustments and a risk factor reflecting Fund
performance below 90-day Treasury bill returns. The top 10% of the funds in an
investment category received 5 stars.
o The Fund pays annual capital gain distributions, and quarterly dividends, if
any.
Top Five Holdings
(Composition Subject to Change)
Value %
- -------------------------------------------------------
Warner-Lambert Co. $205,170,075 9.3%
- -------------------------------------------------------
Schering-Plough Corp. $167,089,575 7.6%
- -------------------------------------------------------
Wells Fargo & Co. $93,351,000 4.2%
- -------------------------------------------------------
Black & Decker Corp. $89,739,837 4.1%
- -------------------------------------------------------
Mellon Bank Corp. $82,786,113 3.8%
- -------------------------------------------------------
+ See legend on Table of Contents.
Bond Fund+
Fund Performance
$10,000 Lump Sum Investment
Value of
Value reinvested dividends
of initial including capital
Date investment gains
1988 9550 9550
1989 10478 9570
1990 11092 9182
1991 12764 9662
1992 14149 9785
1993 16074 10285
1994 14497 8641
1995 17456 9703
1996 18337 9540
1997 19865 9693
1998 21674 9968
The value of a long-term investment in the Bond Fund is illustrated in the chart
above. Over a 10-year period ended October 31, 1998, a net investment of $10,000
would have earned an average annual compound total return of 8.04% (including
sales charge). The chart above illustrates the growth of this investment to
$21,674. Investment return and principal value will fluctuate, and when
redeemed, shares may be worth more or less than original cost. Past performance
is no guarantee of future results.
o The Bond Fund seeks as high a level of income as is consistent with the
preservation of capital.
o Investors should consider this Fund if they seek high monthly income; are
uncomfortable with the risks associated with stocks; desire relative price
stability; and appreciate the diversification that can be realized by adding an
investment-grade bond fund to a portfolio invested mostly in equities.
o Douglas E. Kitchen, the Fund's portfolio manager, says of the Fund's buying
strategy: "We look for bonds that could help the portfolio pick up yield, reduce
overall credit risk or take a more favorable position on the yield curve. We
search for new issues that are priced inefficiently, to our advantage."
o NAS NOW, Nationwide Advisory Services' automated voice-response system, is
your source for instant information about your NAS mutual fund investments. You
can check the balance of your account(s), purchase, exchange, redeem and more,
24 hours a day, seven days a week. Call NAS NOW at 1-800-637-0012.
o The Fund pays annual capital gain distributions, and monthly dividends,
if any.
Top Five Holdings
(Composition Subject to Change)
Value %
- -------------------------------------------------------
U.S. Treasury Bonds $6,696,875 4.9%
- -------------------------------------------------------
AMBAC, Inc. $5,285,864 3.9%
- -------------------------------------------------------
Armstrong World
Industries, Inc. $5,013,244 3.7%
- -------------------------------------------------------
Loews Corp. $4,949,896 3.6%
- -------------------------------------------------------
Becton Dickinson $4,717,932 3.5%
- -------------------------------------------------------
+ See legend on Table of Contents.
<PAGE>
Nationwide Income Fund Highlights
Tax-Free Income Fund+
Fund Performance
$10,000 Lump Sum Investment
Value of
Value reinvested dividends
of initial including capital
Date investment gains
1988 9550 9550
1989 10289 9632
1990 10833 9499
1991 12124 10009
1992 12994 10142
1993 15198 11172
1994 13870 9591
1995 15903 10427
1996 16747 10448
1997 18041 10723
1998 19321 10876
The value of a long-term investment in the Tax-Free Income Fund is illustrated
in the chart above. Over a 10-year period ended October 31, 1998, a net
investment of $10,000 would have earned an average annual compound total return
of 6.81% (including sales charge). The chart above illustrates the growth of
this investment to $19,321. Investment return and principal value will
fluctuate, and when redeemed, shares may be worth more or less than original
cost. Past performance is no guarantee of future results.
o The Tax-Free Income Fund lets shareholders enjoy high monthly income free
from Federal income tax.*
o Investors should consider this Fund if they are in higher Federal tax
brackets; seek high monthly income free from Federal income tax*; and desire
relative safety of principal.
o Take full advantage of your investing dollars by utilizing investor strategies
offered by Nationwide Advisory Services. Practice Dollar Cost Averaging through
the Automatic Asset Accumulation or Automatic Asset Transfer plans. Or have
dividends automatically reinvested from the Money Market Fund into this Fund
or any other Nationwide fund through the Money Market Plus Income plan.
Refer to your prospectus, or contact your Nationwide registered representative
for more information about these and other investing strategies available.
o The Fund pays annual capital gain distributions, and monthly dividends, if
any.
* Investors may be subject to state and local tax and the Federal alternative
minimum tax.
Top Five Holdings by State
(Composition Subject to Change)
Value %
- -------------------------------------------------------
Texas $45,222,500 17.0%
- -------------------------------------------------------
North Carolina $39,454,061 14.8%
- -------------------------------------------------------
Virginia $21,064,976 8.0%
- -------------------------------------------------------
Illinois $19,082,756 7.2%
- -------------------------------------------------------
South Carolina $18,285,181 6.9%
- -------------------------------------------------------
+ See legend on Table of Contents.
<PAGE>
Intermediate U.S. Government Bond Fund+
Fund Performance
$10,000 Lump Sum Investment
Value of
Value reinvested dividends
of initial including capital
Date investment gains
2/92 9550 9550
1992 10041 9627
1993 11060 9907
1994 10596 8903
1995 12341 9772
1996 12992 9695
1997 14143 9956
1998 15421 10207
The value of a long-term investment in the Intermediate U.S. Government Bond
Fund is illustrated in the chart above. A net investment of $10,000 made on
2/10/92 (the Fund's inception date) would have earned an average annual compound
total return of 6.71% (including sales charge) for the period ended October 31,
1998. The chart above illustrates the growth of this investment to $15,421.
Investment return and principal value will fluctuate, and when redeemed, shares
may be worth more or less than original cost. Past performance is no guarantee
of future results.
o The Intermediate U.S. Government Bond Fund seeks as high a level of current
income as is consistent with the preservation of capital.
o Investors should consider this Fund if they seek high monthly income; desire
relative safety of principal; and wish to add the diversification of
fixed-income securities to their portfolios.
o Wayne T. Frisbee and Gary R. Hunt, the Fund's portfolio managers, believe
that "many investors would find it beneficial to have at least some of their
portfolio allocated to the type of fixed-income securities held in the Fund.
Not only because we provide relatively high monthly income, but also
because, historically, diversifying into a U.S. government bond fund such as
ours can smooth out short-term fluctuations while providing competitive,
long-term returns. And because we don't invest in riskier corporate paper, the
Fund is designed to offer more potential stability than many other types of bond
funds."
o The Fund pays annual capital gain distributions, and monthly dividends,
if any.
Top Five Holdings by Type
(Composition Subject to Change)
Value %
- -------------------------------------------------------
FHLMC REMICS $17,374,050 33.8%
- -------------------------------------------------------
Federal National
Mortgage Association $9,093,822 17.7%
- -------------------------------------------------------
Federal Home Loan
Mortgage Corp. $6,238,725 12.1%
- -------------------------------------------------------
Resolution Funding $5,471,267 10.6%
- -------------------------------------------------------
Federal Farm Credit $4,128,153 8.0%
- -------------------------------------------------------
+ See legend on Table of Contents.
<PAGE>
Nationwide Income Fund Highlights
Long-Term U.S. Government Bond Fund+
Fund Performance
$10,000 Lump Sum Investment
Value of
Value reinvested dividends
of initial including capital
Date investment gains
12/88 9550 9550
1989 10678 9942
1990 11418 9674
1991 13272 10324
1992 14723 10505
1993 16307 10801
1994 15532 9665
1995 18123 10572
1996 19031 10429
1997 20712 10686
1998 23023 11240
The value of a long-term investment in the Long-Term U.S. Government Bond Fund
is illustrated in the chart above. A net investment of $10,000 made on 12/19/88
(the Fund's inception date) would have earned an average annual compound total
return of 8.82% (including sales charge) for the period ended October 31, 1998.
The chart above illustrates the growth of this investment to $23,023. Investment
return and principal value will fluctuate, and when redeemed, shares may be
worth more or less than original cost. Past performance is no guarantee of
future results.
o The Long-Term U.S. Government Bond Fund seeks to provide high monthly income
by investing in U.S. government securities.
o Investors should consider this Fund if they seek high monthly income; desire
relative safety of principal; and wish to add the diversification of
fixed-income securities to their portfolios.
o Wayne T. Frisbee and Gary R. Hunt, the Fund's portfolio managers, say of the
Fund's strategy: "Historically, investors have been well served by having at
least part of their portfolio allocated to long-term U.S. government securities.
Yield-conscious shareholders have enjoyed receiving current income that
typically is higher than what they could realize from shorter-term investments.
And shareholders looking to balance the equity portion of their portfolio have
discovered that income produced by the Fundholdings can 'smooth out' short-term
fluctuations while still providing some capital appreciation in favorable
interest-rate environments."
o The Fund pays annual capital gain distributions, and monthly dividends,
if any.
Top Five Holdings by Type
(Composition Subject to Change)
Value %
- -------------------------------------------------------
Resolution Funding $11,455,060 27.6%
- -------------------------------------------------------
FHLMC REMICS $5,953,488 14.3%
- -------------------------------------------------------
FNMA REMICS $5,006,187 12.1%
- -------------------------------------------------------
Federal Home Loan
Mortgage Global $4,378,208 10.6%
- -------------------------------------------------------
Federal Home Loan Mortgage $4,376,444 10.5%
- -------------------------------------------------------
+ See legend on Table of Contents.
Money Market Fund+
Fund Performance
30-Day Yield Trend
Avg. yields
Money of bank
Market Fund money market
Date yields accounts
10/97 5.00 3.47
11/97 5.07 3.45
12/97 5.17 3.45
1/98 5.16 3.46
2/98 5.06 3.42
3/98 5.03 3.30
4/98 5.03 3.40
5/98 5.03 3.45
6/98 5.05 3.50
7/98 5.02 3.48
8/98 5.02 3.45
9/98 4.98 3.42
10/98 4.97 3.31
The chart above shows the Money Market Fund yield trend during the year ended
October 31, 1998, as compared to the average yields of money market accounts
offered by leading banks in the United States over the same period. The Money
Market Fund 30-day current yield at 10/31/98 was 4.79%, and the seven-day
current yield was 4.77%. Past performance is no guarantee of future results.
Source: BanxQuote
o The Money Market Fund is a convenient place to "park" your extra cash and earn
solid interest.
o Investors should consider this Fund if they seek monthly income at competitive
market rates; a fixed and stable share price; and checkwriting privileges.
o Two Dollar Cost Averaging investing strategies are available utilizing this
Fund. The Money Market Plus Growth strategy requires a $5,000 or more initial
investment into this Fund, then monthly dividends are automatically invested
into one or more of the Nationwide stock funds. The Money Market Plus Income
strategy works the same way, except the dividends are reinvested into one or
more of the Nationwide bond funds. These strategies offer investors the
stability of principal, instant liquidity (in the Money Market Fund), the
advantages of Dollar Cost Averaging and more. Refer to your prospectus, or
contact your Nationwide registered representative for more information.
o The Fund pays monthly dividends.
Top Five Holdings by Issuer
(Composition Subject to Change)
Value %
- ------------------------------------------------------
General Motors Acceptance Corp. $40,804,224 3.9%
- ------------------------------------------------------
Ford Motor Credit Co. $40,555,333 3.9%
- ------------------------------------------------------
General Electric Capital Corp. $40,315,046 3.8%
- ------------------------------------------------------
American Express Credit Corp. $39,899,718 3.8%
- ------------------------------------------------------
Norwest Corp. $39,768,161 3.8%
- ------------------------------------------------------
+ See legend on Table of Contents.
<PAGE>
Nationwide(R) Investing Foundation
Mid Cap Growth Fund
Management Discussion of Fund Performance
For the year ended October 31, 1998, the Mid Cap Growth Fund (Class D) had a
total return of 5.11%, without sales charge and assuming all dividends were
reinvested, compared to a 6.69% return for the Fund's benchmark, the S&P 400
Midcap Index.
There have been tremendous swings in the performance of mid-cap stocks during
the six months since the last report, and it has certainly been reflected in the
performance of the Fund. From a year-to-date gain of 15.8% at June 30, 1998, the
Fund went to a loss of (0.95)% at September 30, 1998, before finishing at 3.2%
on October 31, 1998. For the year ended October 31, 1998, the Fund was in the
top quartile (out of 210 funds) of its peer group (Mid Cap Blend), according to
Morningstar.
The selling in the mid-cap sector during this period has often seemed
irrational, and related primarily to fear. Many quality stocks were sold down to
extreme valuation levels, even though there had been no significant change in
their favorable long-term prospects. The selling often fed on itself, as
declines led to redemptions in mutual funds that specialize in mid-cap stocks,
forcing more selling into an already depressed market. Tax-loss selling also
exerted a negative influence. Certainly, many of the Fund's holdings were hit
hard by this pressure. However, some stocks performed relatively well, including
the drug and healthcare issues, and most of the Fund's technology stocks.
While the decline provided many opportunities, I tried to focus the Fund on
moving into companies with very solid long-term prospects, and strong finances
and management. I added to Fund holdings of Gartner Group, ABR Information
Services, Advent Software and Sterling Commerce. New names added included Herman
Miller, Quaker Oats, KLA-Tencor and Dollar General. With a few exceptions, there
were not any fundamental issues regarding stocks sold. Rather, the stocks sold
were not as well-positioned as the purchases in terms of growth prospects and
quality. In some cases, the stocks sold no longer fit into the capitalization
range the Fund focuses on. I feel that the quality of the Fund's holdings has
been significantly upgraded during this period. I should also point out that the
Fund is focusing on its best ideas, which has led to concentration in a fairly
small number of stocks -- 34, as of this writing. While this may lead to
increased volatility, I believe it will benefit long-term results.
John M. Schaffner, MBA, CFA - Portfolio Manager
Fund Value $9,578,284
Portfolio Composition
(Subject to Change)
PIE CHART:
Common Stock 98.6%
U.S. Government 1.0%
Average Annual (Compound) Total Return+
(For Periods Ended October 31, 1998)
Class A* Class B* Class D
Years w/o SC** w/SC(1) w/o SC** w/SC(2) w/o SC** w/SC(3)
- -----------------------------------------------------------
1 5.46% -0.34% 4.69% 0.85% 5.11% 0.38%
- -----------------------------------------------------------
5 15.15% 13.85% 14.98% 14.75% 15.07% 14.01%
- -----------------------------------------------------------
Life 12.53% 11.89% 12.45% 12.45% 12.50% 11.97%
- -----------------------------------------------------------
Life of the Fund is since 12/19/88.
All figures showing the effect of a sales charge reflect the maximum charge
possible, because it has the most dramatic effect on performance data.
* These returns represent performance achieved prior to the creation of the
class (5/11/98), excluding a 0.25% (Class A) or 1.00% (Class B) 12b-1 fee.
Had class A or B been in existence for the time periods presented, the
Fund's performance would have been higher or lower as a result of the
additional expenses.
** These returns do not reflect the effects of a sales charge.
1 A 5.50% front-end sales charge was paid.
2 A 5.00% contingent deferred sales charge (CDSC) was paid. The CDSC declines
to 0 after 6 years.
3 A 4.50% front-end sales charge was paid.
+ See legend on Table of Contents.
Investment return and principal value will fluctuate, and when redeemed, shares
may be worth more or less than original cost. Past performance is no guarantee
of future results.
Fund Performance - Class D
LINE CHART:
Fund S&P 400 CPI
1988 9550 10000 10000
1989 10107 12804 10389
1990 8541 11088 11051
1991 12528 18124 11366
1992 13208 12111 11738
1993 15134 22026 12061
1994 16182 22550 12384
1995 19672 27550 12724
1996 23490 32075 13104
1997 29047 42554 13377
1998 30531 45400 13576
Comparative performance of $10,000 invested in the Mid Cap Growth Fund, the S&P
400 Midcap Index* and the Consumer Price Index (CPI)** since inception
(12/19/88) to 10/31/98. Unlike our Fund, these indices do not reflect any fees,
expenses or sales charges.
* The S&P 400 Midcap Index consists of 400 domestic stocks comprised of
industrials, utlities, financials and transportation, in size order. The
stocks are chosen for their market size liquidity and industry group
representation.
** The CPI represents changes in prices of all goods and services purchased
for consumption by urban households.
<PAGE>
Statement of Investments Nationwide(R) Mid Cap Growth Fund
October 31, 1998
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
Common Stock (98.6%)
- -----------------------------------------------------------------------
<S> <C> <C>
Business Equipment (1.6%)
7,000 Herman Miller, Inc. $ 154,438
--------
- -----------------------------------------------------------------------
Business Services (19.8%)
32,000 ABR Information Services* 604,000
8,700 Covance, Inc.* 242,512
5,000 Envoy Corp.* 147,500
24,500 Gartner Group, Inc.* 486,937
5,500 Manpower, Inc. 132,688
8,000 Sterling Commerce, Inc.* 282,000
--------
1,895,637
--------
- -----------------------------------------------------------------------
Chemicals (2.6%)
5,200 Millipore Corp. 128,050
4,000 Sigma-Aldrich Corp. 123,625
--------
251,675
--------
- -----------------------------------------------------------------------
Computer Equipment (1.8%)
4,000 American Power Conversion Corp.* 169,750
--------
- -----------------------------------------------------------------------
Computer Software & Services (17.7%)
17,200 Advent Software, Inc.* 597,700
8,000 BMC Software, Inc.* 384,500
12,000 HBO & Co. 315,000
10,000 SPSS, Inc.* 191,250
6,000 Sungard Data Systems, Inc.* 202,500
--------
1,690,950
--------
- -----------------------------------------------------------------------
Consumer Products (1.9%)
4,000 Newell Co. 176,000
--------
- -----------------------------------------------------------------------
Dental (1.6%)
6,000 Dentsply International, Inc. 154,500
--------
- -----------------------------------------------------------------------
Distribution (3.0%)
5,906 Bergen Brunswig Corp. Class A 288,287
--------
- -----------------------------------------------------------------------
Drugs (14.4%)
4,000 Allergan, Inc. 249,750
3,800 Eli Lilly & Co. 307,563
8,000 Schering-Plough Corp. 823,000
--------
1,380,313
--------
- -----------------------------------------------------------------------
Electronics (1.7%)
6,000 Microchip Technology, Inc.* 162,375
--------
- -----------------------------------------------------------------------
Financial (7.5%)
4,500 Capital One Financial Corp. 457,875
6,000 Silicon Valley Bancshares* 123,000
6,000 TCF Financial Corp. 141,375
--------
722,250
--------
- -----------------------------------------------------------------------
Food & Beverage (4.0%)
6,500 Quaker Oats Co. 383,906
--------
<CAPTION>
SHARES SECURITY VALUE
Common Stock (continued)
- -----------------------------------------------------------------------
Machinery & Capital Goods (7.2%)
<S> <C> <C>
11,000 Cognex Corp.* $ 170,500
7,900 KLA Tencor Corp.* 291,313
7,000 Zebra Technologies Corp.* 229,250
--------
691,063
--------
- -----------------------------------------------------------------------
Medical Products & Supplies (1.8%)
5,000 Biomet, Inc. 169,687
--------
- -----------------------------------------------------------------------
Oil & Gas (3.5%)
10,000 Anadarko Petroleum Corp. 338,750
--------
- -----------------------------------------------------------------------
Publishing & Broadcasting (1.6%)
8,200 Belo, (AH) Corp. Series A 149,137
--------
- -----------------------------------------------------------------------
Retail (1.7%)
7,000 Dollar General Corp. 167,125
--------
- -----------------------------------------------------------------------
Telecommunications (5.2%)
9,000 MCI WorldCom, Inc.* 497,250
--------
Total common stock (cost $7,062,394) 9,443,093
========
<CAPTION>
PRINCIPAL SECURITY VALUE
U.S. Government Obligations (1.0%)
- -----------------------------------------------------------------------
<S> <C> <C>
$100,000 U.S. Treasury Bill, 4.40%, 11/12/98
(cost $99,865) 99,894
--------
Total investments (cost $7,162,259) $9,542,987
==========
- -----------------------------------------------------------------------
* Denotes a non-income producing security.
Cost also represents cost for Federal income tax purposes.
Portfolio holding percentages represent market value as a percentage of net
assets.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Nationwide(R) Investing Foundation
Growth Fund
Management Discussion of Fund Performance
For the year ended October 31, 1998, the Nationwide Growth Fund (Class D)
posted a total return of 15.94%, without sales charge and assuming all dividends
were reinvested, compared to a 21.99% return for the benchmark, the S&P 500.
For the six-month period since the last report, the drivers of the Growth
Fund's performance divided fairly cleanly into sectors. The drug and healthcare
related issues, which represent over 16% of the Fund's assets, were strong
almost across the board. Some of the technology holdings were strong as well,
with EMC Corp. providing the best price gain in the Fund over the period. On the
negative side, financial stocks were quite weak. This was especially true of
brokerage and stock-market related issues, where the Fund holds a position in
Merrill Lynch. The reason for the weakness had been fear of deflation in Asia,
and recession in the United States, and fear of resulting loss potential in
financial instruments, which led to severe declines in most financial stocks.
Healthcare issues however, were perceived as being insulated from that sort of
turmoil, and performed relatively well. Another drag on performance was the
weakness that occurred in the small- and mid-cap market sectors over the period.
Many quality stocks were sold down to extremely low levels, despite the apparent
lack of significant change in their long-term prospects. This happened to
several of the Fund's holdings, including Gartner Group and ABR Information
Services.
The activity for the period was focused mainly on adding to current holdings
that had sold down to attractive levels. I added some new names to the Fund's
holdings in packaged food, including Campbell Soup, Heinz and Sara Lee. Many of
the stocks in the packaged food group came down to attractive valuations
relative to their growth prospects and quality, and gave me a chance to boost
the Fund holdings in an area where it previously had little exposure. Stocks
that were eliminated to fund purchases, for the most part, did not have
fundamental problems, but were simply not as attractive in terms of future
growth potential or quality, as the buys.
John M. Schaffner, MBA, CFA - Portfolio Manager
Fund Value $918,565,271
Portfolio Composition
(Subject to Change)
Pie Chart:
Common Stock 97.8%
U.S. Government 1.0%
Average Annual (Compound) Total Return+
(For Years Ended October 31, 1998)
Class A* Class B* Class D
Years w/o SC** w/SC(1) w/o SC** w/SC(2) w/o SC** w/SC(3)
- -----------------------------------------------------------
1 15.94% 9.56% 15.65% 10.75% 15.94% 10.72%
- -----------------------------------------------------------
5 17.10% 15.78% 17.04% 16.83% 17.10% 16.03%
- -----------------------------------------------------------
10 14.11% 13.47% 14.08% 14.08% 14.11% 13.59%
- -----------------------------------------------------------
All figures showing the effect of a sales charge reflect the maximum charge
possible, because it has the most dramatic effect on performance data.
* These returns represent performance achieved prior to the creation of the
class (5/11/98), excluding a 0.25% (Class A) or 1.00% (Class B) 12b-1 fee.
Had class A or B been in existence for the time periods presented, the
Fund's performance would have been higher or lower as a result of the
additional expenses.
** These returns do not reflect the effects of a sales charge.
1 A 5.50% front-end sales charge was paid.
2 A 5.00% contingent deferred sales charge (CDSC) was paid. The CDSC
declines to 0 after 6 years.
3 A 4.50% front-end sales charge was paid.
+ See legend on Table of Contents.
Investment return and principal value will fluctuate, and when redeemed, shares
may be worth more or less than original cost. Past performance is no guarantee
of future results.
Fund Performance - Class D
Line Chart:
Fund S&P 500 CPI
1988 9550 10000 10000
1989 10615 12640 10458
1990 9118 11695 11125
1991 13070 15612 11442
1992 13977 17167 11817
1993 16235 19732 12142
1994 17166 20496 12467
1995 20772 25915 12808
1996 23340 32160 13192
1997 30836 42487 13467
1998 35750 51829 13667
Comparative performance of $10,000 invested in the Growth Fund, the S&P 500* and
the Consumer Price Index (CPI)** over a 10-year period ended 10/31/98. Unlike
our Fund, these indices do not reflect any fees, expenses or sales charges.
* The S&P 500 is a capitalization-weighted index of 500 stocks designed to
measure performance of the broad domestic economy through changes in the
aggregate market value of these 500 stocks which represent all major
industries.
** The CPI represents changes in prices of all goods and services purchased
for consumption by urban households.
<PAGE>
<TABLE>
Statement of Investments Nationwide(R) Growth Fund
October 31, 1998
SHARES SECURITY VALUE
Common Stock (97.8%)
- -----------------------------------------------------------------------
Business Services (6.7%)
<S> <C> <C>
2,861,300 ABR Information Services* $ 54,007,038
250,000 Covance, Inc.* 6,968,750
---------
60,975,788
---------
- -----------------------------------------------------------------------
Cable (3.2%)
600,000 Comcast Corp. 29,475,000
---------
- -----------------------------------------------------------------------
Chemicals (3.0%)
500,000 Monsanto Co. 20,312,500
244,000 Sigma-Aldrich Corp. 7,541,113
---------
27,853,613
---------
- -----------------------------------------------------------------------
Computer Equipment (7.4%)
747,600 EMC Corp.* 48,126,750
325,000 Hewlett-Packard Co. 19,560,938
---------
67,687,688
---------
- -----------------------------------------------------------------------
Computer Software & Services (15.8%)
400,000 Automatic Data Processing, Inc. 31,125,000
650,000 BMC Software, Inc.* 31,240,625
900,000 First Data Corp. 23,850,000
2,137,100 Gartner Group, Inc.* 42,474,863
625,000 HBO & Co. 16,406,250
---------
145,096,738
---------
- -----------------------------------------------------------------------
Consumer Products (4.9%)
800,000 Avon Products, Inc. 31,750,000
300,000 Newell Co. 13,200,000
---------
44,950,000
---------
- -----------------------------------------------------------------------
Distribution (1.9%)
350,000 Bergen Brunswig Corp. Class A 17,084,375
---------
- -----------------------------------------------------------------------
Drugs (14.4%)
300,000 Allergan, Inc. 18,731,250
325,000 Glaxo Wellcome PLC ADR 20,231,250
100,000 Merck & Co., Inc. 13,525,000
320,000 Schering-Plough Corp. 32,920,000
600,000 Warner-Lambert Co. 47,025,000
---------
132,432,500
---------
- -----------------------------------------------------------------------
Electronics (2.3%)
150,000 Microchip Technology, Inc.* 4,059,375
183,103 Molex, Inc. 6,534,488
248,215 Molex, Inc. Class A 8,113,528
189,000 Woodhead Industries, Inc. 2,244,375
---------
20,951,766
---------
- -----------------------------------------------------------------------
Financial (14.9%)
900,000 Allstate Corp. 38,756,250
151,875 American International Group, Inc. 12,947,342
739,000 Equitable Companies, Inc. 36,211,000
200,000 Mellon Bank Corp. 12,025,000
450,000 Merrill Lynch & Co., Inc. 26,662,500
150,000 SunAmerica, Inc. 10,575,000
---------
137,177,092
---------
<PAGE>
<CAPTION>
SHARES SECURITY VALUE
Common Stock (continued)
- -----------------------------------------------------------------------
<S> <C> <C>
Food & Beverage (7.1%)
200,000 Campbell Soup Co. $ 10,662,500
150,000 Heinz (H.J.) Co. 8,718,750
200,000 PepsiCo, Inc. 6,750,000
300,000 Quaker Oats Co. 17,718,750
350,000 Sara Lee Corp. 20,890,625
---------
64,740,625
---------
- -----------------------------------------------------------------------
Machinery & Capital Goods (4.4%)
200,000 Applied Materials, Inc.* 6,937,500
120,000 Emerson Electric Co. 7,920,000
100,000 KLA Instruments Corp.* 3,687,500
337,500 Lindsay Manufacturing Co. 5,484,375
492,600 Zebra Technologies Corp.* 16,132,650
---------
40,162,025
---------
- -----------------------------------------------------------------------
Medical Products (2.5%)
200,000 Biomet, Inc. 6,787,500
200,000 Johnson & Johnson Co. 16,300,000
---------
23,087,500
---------
- -----------------------------------------------------------------------
Oil & Gas (1.8%)
500,000 Anadarko Petroleum Corp.* 16,937,500
---------
- -----------------------------------------------------------------------
Printing & Publishing (0.3%)
160,000 Reader's Digest Association, Inc. Class B 3,120,000
---------
- -----------------------------------------------------------------------
Telecommunications (7.2%)
1,200,000 MCI WorldCom, Inc.* 66,300,000
---------
Total common stock (cost $568,512,879) 898,032,210
===========
<CAPTION>
PRINCIPAL SECURITY VALUE
U.S. Government Obligations (1.0%)
- -----------------------------------------------------------------------
$9,875,000 Federal Home Loan Bank 5.40%, 11/02/98 9,871,050
---------
(cost $9,873,519)
Total investments (cost $578,386,398) $907,903,260
============
- -----------------------------------------------------------------------
* Denotes a non-income producing security.
Cost also represents cost for Federal income tax purposes.
Portfolio holding percentages represent market value as a percentage of net
assets.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Nationwide(R) Investing Foundation
Nationwide Fund
Management Discussion of Fund Performance
The total return for the Nationwide Fund (Class D) for the year ended October
31, 1998, was 25.73%, without sales charge and assuming all dividends were
reinvested, compared to 21.99% for the Fund's benchmark, the S&P 500.
The Nationwide Fund continues to benefit from the outstanding performance of
pharmaceutical stocks. Warner-Lambert and Schering-Plough, the two largest
holdings, both gained over 60% during the year. Both companies continue to
achieve impressive and consistent growth from their drug portfolios. I feel
confident that this growth will remain strong in the future.
The market decline during the fall offered an opportunity to add quality
names in the financial sector to the portfolio. MBNA has consistently maintained
credit quality far superior to its competitors in the credit card industry. It
has continued to demonstrate a high rate of consistent earnings growth. The Fund
added shares at attractive valuations during the market decline. Associates
First Capital and Merrill Lynch are additional quality financial names added to
the Fund this year.
IBM has been a strong performer, returning in excess of 50% for the year. The
company's services business has grown rapidly for some time. Recently its
hardware sales accelerated as well. This continues to be a large holding for the
Fund.
I have concentrated portfolio holdings in high quality names in recent years.
The market has not differentiated significantly between such quality companies
and higher risk businesses. As a result of investors' heightened risk-aversion,
recently some more cyclical companies have held increased investment attraction.
One such name I added to the portfolio is Brunswick Corporation. Brunswick makes
a variety of recreational equipment, but is best known for its boating and
bowling franchises. After being punished due to recession fears, Brunswick
shares appeared to offer worthwhile appreciation potential.
Charles S. Bath, MBA, CFA - Portfolio Manager
Fund Value $2,205,339,935
Portfolio Composition
(Subject to Change)
Pie Chart:
Common Stock 98.6%
U.S. Government 1.3%
Average Annual (Compound) Total Return+
(For Years Ended October 31, 1998)
Class A* Class B* Class D
Years w/o SC** w/SC(1) w/o SC** w/SC(2) w/o SC** w/SC(3)
- ------------------------------------------------------------
1 25.82% 18.90% 25.10% 20.10% 25.73% 20.07%
- ------------------------------------------------------------
5 22.70% 21.32% 22.56% 22.38% 22.68% 21.56%
- ------------------------------------------------------------
10 17.86% 17.20% 17.80% 17.80% 17.86% 17.31%
- ------------------------------------------------------------
All figures showing the effect of a sales charge reflect the maximum charge
possible, because it has the most dramatic effect on performance data.
* These returns represent performance achieved prior to the creation of the
class (5/11/98), excluding a 0.25% (Class A) or 1.00% (Class B) 12b-1 fee.
Had class A or B been in existence for the time periods presented, the
Fund's performance would have been higher or lower as a result of the
additional expenses.
** These returns do not reflect the effects of a sales charge.
1 A 5.50% front-end sales charge was paid.
2 A 5.00% contingent deferred sales charge (CDSC) was paid. The CDSC declines
to 0 after 6 years.
3 A 4.50% front-end sales charge was paid.
+ See legend on Table of Contents.
Investment return and principal value will fluctuate, and when redeemed, shares
may be worth more or less than original cost. Past performance is no guarantee
of future results.
Fund Performance - Class D
Line Chart:
1988 Fund S&P 500 CPI
1989 9550 10000 10000
1990 10615 12640 10458
1991 9118 11695 11125
1992 13070 15612 11442
1993 13977 17167 11817
1994 16235 19732 12142
1995 17166 20496 12467
1996 20772 25915 12808
1997 23340 32160 13192
1998 30836 42487 13467
1999 35750 51829 13667
Comparative performance of $10,000 invested in the Nationwide Fund, the S&P 500*
and the Consumer Price Index (CPI)** over a 10-year period ended 10/31/98.
Unlike our Fund, these indices do not reflect any fees, expenses or sales
charges.
* The S&P 500 is a capitalization-weighted index of 500 stocks designed to
measure performance of the broad domestic economy through changes in the
aggregate market value of these 500 stocks which represent all major
industries.
** The CPI represents changes in prices of all goods and services purchased
for consumption by urban households.
<PAGE>
<TABLE>
Statement of Investments Nationwide(R) Fund
October 31, 1998
<CAPTION>
SHARES SECURITY VALUE
Common Stock (98.6%)
- -----------------------------------------------------------------------
<S> <C> <C>
Auto & Auto Parts (2.1%)
857,900 Ford Motor Co. $46,541,075
---------
- -----------------------------------------------------------------------
Building (3.5%)
436,300 Martin Marietta Materials, Inc. 21,405,969
675,000 Masco Corp. 19,026,563
302,200 Vulcan Materials Co. 35,848,475
---------
76,281,007
---------
- -----------------------------------------------------------------------
Chemicals (3.8%)
544,400 Millipore Corp. 13,405,850
593,700 Morton International, Inc. 14,768,288
335,400 OM Group, Inc. 10,942,425
806,893 Pall Corp. 20,374,048
756,150 Raychem Corp. 23,109,834
---------
82,600,445
---------
- -----------------------------------------------------------------------
Computer Equipment (2.7%)
400,000 International Business Machines Corp. 59,375,000
---------
- -----------------------------------------------------------------------
Conglomerates (0.8%)
498,700 Corning, Inc. 18,109,044
---------
- -----------------------------------------------------------------------
Drugs (20.6%)
564,700 Allergan, Inc. 35,258,456
298,000 American Home Products Corp. 14,527,500
297,000 Pfizer, Inc. 31,871,813
1,624,200 Schering-Plough Corp. 167,089,575
2,617,800 Warner-Lambert Co. 205,170,075
---------
453,917,419
---------
- -----------------------------------------------------------------------
Electrical Equipment (5.3%)
1,736,200 Black & Decker Corp. 89,739,837
553,900 Maytag Corp. 27,383,431
---------
117,123,268
---------
- -----------------------------------------------------------------------
Entertainment (0.9%)
738,795 Walt Disney Co. (The) 19,901,290
---------
- -----------------------------------------------------------------------
Financial-Banks (13.4%)
1,446,808 Banc One Corp. 70,712,741
500,600 Bank of New York Co., Inc. 15,800,187
1,376,900 Mellon Bank Corp. 82,786,113
480,200 Pacific Century Financial Corp. 9,784,075
606,531 US Bancorp Class A 22,138,382
252,300 Wells Fargo & Co. 93,351,000
---------
294,572,498
---------
- -----------------------------------------------------------------------
Financial-Insurance (5.0%)
410,200 Chubb Corp. 25,227,300
1,031,500 Horace Mann Educators Corp. 29,526,688
1,028,400 Provident Cos., Inc. 29,887,875
347,600 SunAmerica, Inc. 24,505,800
---------
109,147,663
---------
<PAGE>
<CAPTION>
SHARES SECURITY VALUE
Common Stock (continued)
- -----------------------------------------------------------------------
<S> <C> <C>
Financial Services-Other (7.9%)
749,042 Associates First Capital Corp. $52,807,461
838,600 Fannie Mae 59,383,363
237,500 Merrill Lynch & Co., Inc. 14,071,875
120,800 MBIA, Inc. 7,383,900
1,812,500 MBNA Corp. 41,347,656
---------
174,994,255
---------
- -----------------------------------------------------------------------
Food & Beverage (10.5%)
594,800 Anheuser-Busch Cos., Inc. 35,353,425
1,050,200 PepsiCo, Inc. 35,444,250
927,900 Philip Morris Cos., Inc. 47,438,888
1,012,800 Quaker Oats Co. 59,818,500
1,593,000 Ralston-Ralston Purina Group 53,166,375
---------
231,221,438
---------
- -----------------------------------------------------------------------
Hospital Supply (1.7%)
647,700 Quest Diagnostics, Inc.* 10,768,012
973,500 St. Jude Medical, Inc.* 27,501,375
---------
38,269,387
---------
- -----------------------------------------------------------------------
Household Products (0.8%)
200,000 Procter & Gamble Co. 17,775,000
---------
- -----------------------------------------------------------------------
Leisure Products (1.9%)
2,116,700 Brunswick Corp. 41,143,356
---------
- -----------------------------------------------------------------------
Machinery & Capital Goods (0.1%)
222,400 Johnstown America Industries, Inc.* 3,141,400
---------
- -----------------------------------------------------------------------
Oil & Gas (2.5%)
953,400 Texaco, Inc. 56,548,537
---------
- -----------------------------------------------------------------------
Printing & Publishing (9.1%)
760,000 American Greetings Corp. Class A 30,495,000
298,200 Belo, (AH) Corp. Series A 5,423,512
653,100 Dun & Bradstreet Corp. 18,531,713
747,700 E.W. Scripps Co. 33,085,725
315,800 Gannett Co., Inc. 19,540,125
270,300 Gibson Greetings, Inc.* 2,821,256
301,800 IMS Health, Inc. 20,069,700
1,532,400 New York Times Co. Class A 43,290,300
112,000 Tribune Co. 6,454,000
40,700 Washington Post Co. Class B 21,611,700
---------
201,323,031
---------
- -----------------------------------------------------------------------
Restaurants (1.7%)
558,400 McDonald's Corp. Class A 37,343,000
---------
- -----------------------------------------------------------------------
Retail (2.0%)
681,000 Tiffany & Co. 22,004,812
325,300 Wal-Mart Stores, Inc. 22,445,700
---------
44,450,512
---------
<PAGE>
Statement of Investments Nationwide(R) Fund continued
October 31, 1998
<CAPTION>
SHARES SECURITY VALUE
Common Stock (continued)
- -----------------------------------------------------------------------
Telecommunications (0.9%)
422,688 Alltel Corp. $ 19,787,082
-----------
- -----------------------------------------------------------------------
Toys (1.4%)
848,840 Mattel, Inc. 30,452,135
-----------
Total common stock (cost $1,237,298,884) 2,174,017,842
-----------
<CAPTION>
PRINCIPAL SECURITY VALUE
Convertible Bonds (0.2%)
- -----------------------------------------------------------------------
<S> <C> <C>
$7,826,000 Consorcio G Grupo Dina, (a)
8.00%, 08/08/04 (cost $7,312,034) 3,208,660
-----------
Repurchase Agreement (1.1%)
- -----------------------------------------------------------------------
25,131,000 MBS Tri-Party Repo, 5.23%, 11/02/98,
Collateralized by $31,129,939
FHLMC ARM, market value $25,634,329
(cost $25,131,000) 25,131,000
-----------
Total investments (cost $1,269,741,918) $2,202,357,502
==============
- -----------------------------------------------------------------------
The abbreviations in the above statement stand for the following:
FHLMC Federal Home Loan Mortgage Corp.
ARM Adjustable Rate Mortgage
* Denotes a non-income producing security.
Cost also represents cost for Federal income tax purposes.
Portfolio holding percentages represent market value as a percentage of net
assets.
(a) Denominated in U.S. dollars.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Nationwide(R) Investing Foundation
Bond Fund
Management Discussion of Fund Performance
The Nationwide Bond Fund's total return, without sales charge
and assuming the reinvestment of all dividends, for the year ended October 31,
1998, was 9.11% (Class D). This compares to the 10.28% return for its benchmark,
the Lehman Brothers Government/Corporate Bond Index. After outperforming the
index for the first seven months of the year, relative returns began slipping in
June and this trend continued through the end of October. This five-month period
was by far the worst of the decade for Corporate bonds and other spread assets
in terms of relative performance. The Fund did manage a 3.98% return during this
difficult period, while the 153 other A-rated corporate bond funds (my
competition) averaged only a 3.25% return, according to Lipper, Inc.
Russia's collapse and the troubles of a number of hedge funds, including
Long-Term Capital, touched off a flight to quality that bypassed everything
except Treasury bonds. Rates plummeted and are near yearly lows, with the
30-year Treasury bond yielding 5.15%, one full percentage point below levels a
year ago. Two-year Treasury bonds are at 4.10%, well below the Federal funds
rate of 5.00%, as the market is expecting multiple reductions in the Federal
funds rate to 3.50% or lower in 12 months' time.
With the Federal Reserve's unexpected second cut in the Federal fund's rate,
yield spreads were able to stabilize during the last two weeks of October at
historically wide margins. Corporate bond spreads are now about 1 1/2 percentage
points more than Treasury bonds -- nearly twice their level at the end of May.
BBB-rated bonds are yielding about two percentage points over U.S. Treasury
bonds.
During the year, I took advantage of the wider spreads by reducing Treasury
bonds from 18% to 5% of the portfolio. Corporate bonds of Becton Dickinson,
Computer Associates, Kimberly-Clark, May Department Stores and Tenneco were some
of the more significant purchases. Mortgage-backed securities are approximately
2% of the portfolio as fast prepayments continue to reduce our position.
Looking ahead to next year, I am expecting excellent relative performance
from our Corporate bonds. Spreads are the widest of the decade and, I believe,
fully reflect expectations of a mild recession. Yet, I am anticipating nothing
worse than an economic slowing into the 1-2% GDP range next year. The Federal
Reserve is easing along with central bankers around the world. Commodity prices
have stabilized, the dollar has weakened somewhat, and equity markets have had a
sharp recovery. These signs all point to continued growth for the foreseeable
future.
Douglas E. Kitchen CFA - Portfolio Manager
Fund Value $136,676,668
Portfolio Composition
(Subject to Change)
Canadian Bonds 2.4%
Short-Term Debt 4.2%
Mortgage-Backed Securities 1.8%
U.S. Government 4.9%
Corporate Bonds 88.8%
Average Annual (Compound) Total Return+
(For Years Ended October 31, 1998)
Class A* Class B* Class D
Years w/o SC** w/SC(1) w/o SC** w/SC(2) w/o SC** w/SC(1)
- -----------------------------------------------------------
1 8.91% 4.00% 8.57% 3.57% 9.11% 4.20%
- -----------------------------------------------------------
5 6.12% 5.15% 6.06% 5.75% 6.16% 5.19%
- -----------------------------------------------------------
10 8.52% 8.02% 8.49% 8.49% 8.54% 8.04%
- -----------------------------------------------------------
All figures showing the effect of a sales charge reflect the maximum charge
possible, because it has the most dramatic effect on performance data.
* These returns represent performance achieved prior to the creation of the
class (5/11/98), excluding a 0.25% (Class A) or 0.85% (Class B) 12b-1 fee.
Had class A or B been in existence for the time periods presented, the
Fund's performance would have been higher or lower as a result of the
additional expenses.
** These returns do not reflect the effects of a sales charge.
1 A 4.50% front-end sales charge was paid.
2 A 5.00% contingent deferred sales charge (CDSC) was paid. The CDSC declines
to 0 after 6 years.
+ See legend on Table of Contents.
Investment return and principal value will fluctuate, and when redeemed, shares
may be worth more or less than original cost. Past performance is no guarantee
of future results.
Fund Performance - Class D
Line Chart:
Fund LBG/CBI CPI
1988 9550 10000 10000
1989 10478 11214 10458
1990 11092 11831 11125
1991 12764 13637 11442
1992 14149 15148 11817
1993 16074 17217 12142
1994 14497 16418 12467
1995 17456 19071 12808
1996 18337 20099 13192
1997 19865 21869 13467
1998 21674 24117 13667
Comparative performance of $10,000 invested in the Bond Fund, the Lehman
Brothers Government/Corporate Bond Index (LBG/CBI)* and the Consumer Price Index
(CPI)** over a 10-year period ended 10/31/98. Unlike our Fund, these indices do
not reflect any fees, expenses or sales charges.
* The LBG/CBI consists of U.S. government and corporate bonds with maturities
of one year or more and outstanding par value of at least $100 million. All
returns are market value-weighted inclusive of accrued interest.
** The CPI represents changes in prices of all goods and services purchased for
consumption by urban households.
<PAGE>
Statement of Investments Nationwide(R) Bond Fund
October 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL SECURITY VALUE
Canadian Bonds (2.4%)
- -----------------------------------------------------------------------
<S> <C> <C>
Government (0.8%)
$1,000,000 Quebec (Province of), 8.625%, 01/19/05 $ 1,146,510
--------
- -----------------------------------------------------------------------
Oil & Gas (1.6%)
2,000,000 Petro-Canada, 8.60%, 10/15/01 2,146,260
--------
Total Canadian bonds (cost $3,201,293) 3,292,770
--------
Corporate Bonds (88.8%)
- -----------------------------------------------------------------------
Aerospace Defense (1.1%)
1,500,000 Lockheed Corp., 7.875%, 03/15/23 1,521,047
--------
- -----------------------------------------------------------------------
Airlines (1.3%)
1,500,000 American Airlines, 10.33%, 03/04/05 1,826,511
--------
- -----------------------------------------------------------------------
Auto Parts (after market) (2.4%)
3,000,000 Tenneco, Inc., 10.075%, 02/01/01 3,302,673
--------
- -----------------------------------------------------------------------
Broker-Dealers (2.5%)
2,000,000 Bear Stearns Companies, Inc.,
8.75%, 03/15/04 2,212,510
1,000,000 Lehman Brothers Holdings, Inc.,
11.625%, 05/15/05 1,221,747
--------
3,434,257
--------
- -----------------------------------------------------------------------
Building Materials (6.0%)
4,000,000 Armstrong World Industries, Inc.,
9.75%, 04/15/08 5,013,244
3,000,000 Hanson Overseas, 6.75%, 09/15/05 3,164,415
--------
8,177,659
--------
- -----------------------------------------------------------------------
Chemicals (7.1%)
2,500,000 Hercules, Inc., 6.60%, 08/01/27 2,597,140
3,000,000 ICI Wilmington, Inc., 7.50%, 01/15/02 3,143,094
2,000,000 Praxair, Inc., 6.625%, 10/15/07 2,017,034
2,000,000 Witco Corp., 6.125%, 02/01/06 1,959,956
--------
9,717,224
--------
- -----------------------------------------------------------------------
Communication Equipment (1.6%)
2,000,000 Motorola, Inc., 6.50%, 09/01/25 2,114,664
--------
- -----------------------------------------------------------------------
Computer Software & Services (2.2%)
3,000,000 Computer Associates, 6.375%, 04/15/05 2,981,397
--------
- -----------------------------------------------------------------------
Consumer Products (2.4%)
3,000,000 Kimberly-Clark, 7.875%, 02/01/23 3,308,031
--------
- -----------------------------------------------------------------------
Electronics (1.5%)
2,000,000 Avnet Inc., 6.45%, 08/15/03 2,095,078
--------
- -----------------------------------------------------------------------
Financial (0.8%)
1,000,000 General Electric Capital Corp.,
8.75%, 09/25/00 1,066,800
--------
- -----------------------------------------------------------------------
Healthcare (1.8%)
2,000,000 Kaiser Foundation, 9.55%, 07/15/05 2,427,864
--------
<CAPTION>
PRINCIPAL SECURITY VALUE
Corporate Bonds (continued)
- -----------------------------------------------------------------------
<S> <C> <C>
Hotels-Motels (2.2%)
3,000,000 Hilton Hotels Corp., 7.375%, 06/01/02 $ 2,981,160
--------
- -----------------------------------------------------------------------
Insurance (9.2%)
4,000,000 AMBAC, Inc., 9.375%, 08/01/11 5,285,864
2,000,000 Equitable of Iowa Cos.,
8.50%, 02/15/05 2,269,236
4,000,000 Loews Corp., 8.875%, 04/15/11 4,949,896
--------
12,504,996
--------
- -----------------------------------------------------------------------
Lease-Rental (1.7%)
2,260,000 Ryder System, Inc., 7.56%, 08/15/00 2,323,289
--------
- -----------------------------------------------------------------------
Leisure Time (3.9%)
3,000,000 Bass America, Inc., 8.125%, 03/31/02 3,249,042
2,000,000 Rank Group Finance, 6.75%, 11/30/04 2,044,702
--------
5,293,744
--------
- -----------------------------------------------------------------------
Machinery & Capital Goods (2.4%)
1,000,000 Clark Equipment, 8.00%, 05/01/23 1,121,309
2,000,000 Worthington Industries, 7.125%, 05/15/06 2,170,796
--------
3,292,105
--------
- -----------------------------------------------------------------------
Medical Products (3.5%)
4,000,000 Becton Dickinson, 8.70%, 01/15/25 4,717,932
--------
- -----------------------------------------------------------------------
Miscellaneous (7.0%)
2,000,000 CSR America, 6.875%, 07/21/05 2,157,072
4,000,000 English China Clays Delaware, Inc.,
7.375%, 10/01/02 4,286,016
3,000,000 Mayne Nickless, 6.25%, 02/01/06 3,067,905
--------
9,510,993
--------
- -----------------------------------------------------------------------
Natural Gas (5.6%)
2,000,000 Consolidated Natural Gas,
7.375%, 04/01/05 2,199,568
2,000,000 K.N. Energy, Inc., 6.67%, 11/01/27 2,139,082
2,000,000 Northwest National Gas, 9.75%, 07/01/15 2,209,570
1,000,000 Transcontinental Pipeline, 8.875%, 09/15/02 1,106,539
--------
7,654,759
--------
- -----------------------------------------------------------------------
Oil & Gas Exploration and Products (3.0%)
1,000,000 Texaco Capital, 7.75 %, 02/15/33 1,069,191
1,000,000 Union Pacific Resources Group,
6.75%, 05/15/08 989,226
2,000,000 Vastar Resources, 6.95%, 11/08/06 2,090,524
--------
4,148,941
--------
- -----------------------------------------------------------------------
Paper & Forest Products (5.8%)
1,500,000 International Paper, 8.125%, 06/15/24 1,505,381
3,000,000 ITT Rayonier, Inc., 7.50%, 10/15/02 3,221,193
1,000,000 Temple-Inland, Inc., 7.25%, 09/15/04 1,074,692
2,000,000 Willamette Industries, 7.35%, 07/01/26 2,181,548
--------
7,982,814
--------
- -----------------------------------------------------------------------
Pollution Control (2.9%)
3,500,000 Waste Management, Inc., 8.75%, 05/01/18 3,947,895
--------
<PAGE>
Statement of Investments Nationwide(R) Bond Fund continued
October 31, 199
<CAPTION>
PRINCIPAL SECURITY VALUE
Corporate Bonds (continued)
- -----------------------------------------------------------------------
<S> <C> <C>
Railroads (1.5%)
2,000,000 CSX Corp., 7.25%, 05/01/27 $ 2,104,816
---------
- -----------------------------------------------------------------------
Retail (6.2%)
1,000,000 Dayton Hudson Co., 8.50%, 12/01/22 1,028,109
2,000,000 Dillards, Inc., 6.69%, 08/01/07 2,024,616
3,000,000 May Department Stores, 8.30%, 07/15/26 3,310,992
2,000,000 J.C.Penny, 7.40%, 04/01/37 2,210,110
---------
8,573,827
---------
- -----------------------------------------------------------------------
Telecommunications (3.2%)
1,000,000 Nynex Capital Funding Corp.,
8.24%, 10/17/01 1,083,616
3,000,000 Rochester Telephone Corp.,
8.77%, 04/16/01 3,259,800
---------
4,343,416
---------
Total corporate bonds (cost $116,357,138) 121,353,891
---------
Government Obligations (4.9%)
- -----------------------------------------------------------------------
$5,000,000 U.S. Treasury Bond, 8.125%, 08/15/19 6,696,875
---------
(cost $6,509,169)
Mortgage-backed Securities (1.8%)
- -----------------------------------------------------------------------
134,072 FHLMC-GNMA 29X, 6.75%, 02/25/23 135,434
268,145 FHLMC-GNMA 29Z, 6.75%, 04/25/24 261,132
633,850 FNMA REMIC G1992-15G,
7.00%, 04/25/20 641,428
1,176,376 FNMA REMIC S G93-10E,
5.00%, 04/25/20 1,171,129
220,734 FNMA REMIC G1992-64M,
7.00%, 11/25/22 220,117
---------
Total mortgage-backed securities (cost $2,378,583) 2,429,240
---------
Short-term Debt (4.2%)
- -----------------------------------------------------------------------
2,000,000 FHLB, 5.40%, 11/02/98 1,999,200
3,774,000 Gillette Co., 5.62%, 11/02/98 3,772,317
--------
Total short-term debt (cost $5,773,111) 5,771,517
---------
Total investments (cost $134,219,294) $139,544,293
============
- -----------------------------------------------------------------------
The abbreviations in the above statement stand for the following:
FHLB Federal Home Loan Bank
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
GNMA Government National Mortgage Association
REMIC Real Estate Mortgage Investment Conduit
- --------------------------------------------------------------------------------
Cost also represents cost for Federal income tax purposes. Portfolio holding
percentages represent market value as a percentage of net assets. See
accompanying notes to financial statements.
</TABLE>
<PAGE>
Nationwide(R) Investing Foundation
Tax-Free Income Fund
Management Discussion of Fund Performance
The Nationwide Tax-Free Income Fund's total return for the year ended October
31, l998, was 7.09% (Class D), without sales charge and assuming all dividends
were reinvested, while the Fund's benchmark, the Lehman Brothers Municipal Bond
Index, returned 8.02%.
The Municipal bond market experienced another active and volatile year.
Interest rates reached historical lows and issuance remained heavy. For the
period, the Bond-Buyer 11-General Obligation Municipal Index declined 0.35% from
5.28 % to 4.93%. However, during the first week of October, the index closed at
4.75%, the lowest level seen for the index since the late '60s. The yield on the
most current U.S. Treasury 30-year bond declined 1.07% from 6.15% to 5.08% for
the period, and also reached another low not seen in the last three decades
during that same week of October when it closed at 4.87%. Municipal bonds
performed well, according to the Bond-Buyer 11-General Obligation Municipal
Index, but failed to keep pace with the run-away gains posted by Treasury
securities in response to investor concerns about potential global economic
weakness.
During the latter part of the fiscal year, global economic turbulence sparked
a flight to quality. Investors, fearing the economic weakness in Asia and
Eastern Europe might spread to the United States, began to dump stocks and
high-yield bonds. They switched these assets into safer investments, such as
U.S. government securities. In late September, the Federal Reserve, in a
preemptive move against the risk of a deteriorating U.S. economy, reduced the
Federal funds rate by 0.25%. The cut was intended to pacify financial markets
and ease the anxieties of the U.S. consumer and investor. The financial markets
expected more, and continued to seek liquidity. The Federal Reserve surprised
investors with another 0.25% drop in rates on October 15, and the markets
rallied instantly.
The Municipal market benefited from this turmoil. The market had been
suffering from a glut of issuance. Municipal bond issuance was on pace to top
l993's $293 billion record. Volume through the first 10 months of the calendar
year is up 32% over the comparable period of last year. Supply overwhelmed
investors and hurt Municipal bond prices, making their tax-free yields look very
attractive when compared with taxable Treasury bonds. Yields on long-term
Municipal bonds -- around 95% of comparable taxable Treasury bonds -- is much
higher than the 84% level seen historically.
The volatility is expected to continue in the financial markets. However, the
Federal Reserve has demonstrated it will move aggressively if developments
require actions. I will continue to maintain a long-term view and seek to take
advantage of opportunities to increase return for shareholders.
The average quality of the Fund is AA and the average maturity is
approximately 17.5 years.
Alpha L. Benson, MBA - Portfolio Manager
Fund Value $265,739,922
Portfolio Composition
(Subject to Change)
Pie Chart:
Municipal Securities 99.6%
Average Annual (Compound) Total Return+
(For Years Ended October 31, 1998)
Class A* Class B* Class D
Years w/o SC** w/SC(1) w/o SC** w/SC(2) w/o SC** w/SC(1)
- -----------------------------------------------------------
1 6.87% 2.07% 6.67% 1.67% 7.09% 2.27%
- -----------------------------------------------------------
5 4.87% 3.91% 4.83% 4.51% 4.92% 3.95%
- -----------------------------------------------------------
10 7.28% 6.79% 7.26% 7.26% 7.30% 6.81%
- -----------------------------------------------------------
All figures showing the effect of a sales charge reflect the maximum charge
possible, because it has the most dramatic effect on performance data.
* These returns represent performance achieved prior to the creation of the
class (5/11/98), excluding a 0.25% (Class A) or 0.85% (Class B) 12b-1 fee.
Had class A or B been in existence for the time periods presented, the
Fund's performance would have been higher or lower as a result of the
additional expenses.
** These returns do not reflect the effects of a sales charge.
1 A 4.50% front-end sales charge was paid.
2 A 5.00% contingent deferred sales charge (CDSC) was paid. The CDSC
declines to 0 after 6 years.
+ See legend on Table of Contents.
Investment return and principal value will fluctuate, and when redeemed, shares
may be worth more or less than original cost. Past performance is no guarantee
of future results.
Fund Performance - Class D
Line Chart:
Fund LBMBI CPI
1988 9550 10000 10000
1989 10289 10809 10458
1990 10833 11612 11125
1991 12124 13025 11442
1992 12994 14119 11817
1993 15198 16105 12142
1994 13870 15404 12467
1995 15903 17691 12808
1996 16747 18699 13192
1997 18041 20287 13467
1998 19321 21913 13667
Comparative performance of $10,000 invested in the Tax-Free Income Fund, the
Lehman Brothers Municipal Bond Index (LBMBI)* and the Consumer Price Index
(CPI)** over a 10-year period ended 10/31/98. Unlike our Fund, these indices do
not reflect any fees, expenses or sales charges.
* The LBMBI consists of investment-grade tax-exempt bonds and includes
securities with at least one year to maturity and at least $100 million in
par value outstanding.
** The CPI represents changes in prices of all goods and services purchased
for consumption by urban households.
<PAGE>
<TABLE>
Statement of Investments Nationwide(R) Tax-Free Income Fund
October 31, 1998
<CAPTION>
PRINCIPAL SECURITY VALUE
Long-term Municipal Securities (99.6%)
- -----------------------------------------------------------------------
Alabama (4.5%)
<S> <C> <C>
$2,915,000 Alabama Housing Finance Authority Single-
Family Mortgage Revenue Bonds
(Collateralized Home Mortgage Revenue
Bond Program),1996 Series D,
6.00%, 2016 $ 3,093,544
2,000,000 Birmingham, Alabama General Obligation
Unlimited Tax Refunding Revenue, Series
1992 B, 6.25%, 2016 2,157,500
1,100,000 Birmingham, Alabama General Obligation
Unlimited Tax Parking Warrants, Series
1995 A, 5.90%, 2018 1,205,875
2,480,000 Birmingham, Alabama Water Works & Sewer
Board Refunding Revenue, Series 1992,
6.125%, 2012 2,653,600
2,500,000 Huntsville, Alabama General Obligation
Limited Tax Warrants, Series 1992 A,
6.00%, 2012 2,712,500
--------
11,823,019
--------
- -----------------------------------------------------------------------
Arizona (1.0%)
2,500,000 Salt River Project Agricultural Improvement
& Power District, Arizona Electric System
Revenue Bonds, Series 1992 C,
6.20%, 2012 2,693,750
- -----------------------------------------------------------------------
Colorado (0.7%)
1,500,000 Colorado Health Facilities, Authority Revenue
Bonds Series 1994A (Kaiser Permanente),
5.35%, 2016 1,515,000
340,000 Colorado Housing Finance Authority Single-
Family Housing Revenue Refunding Bonds,
Series 1991-A, 7.15%, 2014 362,525
--------
1,877,525
--------
- -----------------------------------------------------------------------
Connecticut (2.8%)
4,115,000 Connecticut Housing Finance Authority, Housing
Mortgage Finance Program Bonds,
Series 1992-B, 6.70%, 2012 4,449,344
3,085,000 Connecticut State General Obligation Bonds,
Unlimited Tax 1998 Series B, 5.00%, 2017 3,100,425
--------
7,549,769
--------
- -----------------------------------------------------------------------
Florida (1.6%)
2,400,000 Jacksonville, Florida Electric Authority Bulk
Power Revenue Bonds, (Scherer 4 Project,
Issue One, Series 1991 A), 7.00%, 2012 2,586,000
1,760,000 Orlando, Florida Capital Improvement, Special
Revenue Refunding Bonds 1998A,
5.00%, 2019 1,746,800
--------
4,332,800
--------
- -----------------------------------------------------------------------
Georgia (2.4%)
1,250,000 Columbus, Georgia Building Authority Lease
Revenue Bonds, Series 1997 A,
5.65%, 2017 1,350,000
2,750,000 Georgia Municipal Electric Authority, Power
Revenue Bonds, Series 1991-V,
6.60%, 2018 3,224,375
<CAPTION>
PRINCIPAL SECURITY VALUE
Long-term Municipal Securities (continued)
- -----------------------------------------------------------------------
Georgia (continued)
<S> <C> <C>
$820,000 Georgia Residential Financial Authority, Home
Ownership Mortgage Revenue Bonds,
Series A, 7.50%, 2017 $ 864,075
1,000,000 Georgia Local Government, Certificates of
Participation, Grantor Trust, Series 1998A,
4.75%, 2028 972,500
--------
6,410,950
--------
- -----------------------------------------------------------------------
Illinois (7.2%)
3,050,000 Chicago Park District, Illinois General
Obligation Unlimited Tax Park Bonds,
Series 1996, 5.60%, 2021 3,191,062
2,185,000 Illinois Educational Facility Authority Revenue
Bonds, Series 1991-A, Loyola University,
7.125%, 2021 2,411,694
1,000,000 Illinois Housing Development Authority
Revenue, Homeowner Mortgage Revenue
Bonds, Series 1994-A-1, 6.45%, 2017 1,068,750
1,000,000 Illinois Regional Transportation Authority,
General Obligation Refunding Bonds,
Series 1996, 5.40%, 2015 1,033,750
2,500,000 Illinois State Build, Illinois Bonds Sales
Tax Revenue, Series V, 6.375%, 2017 2,806,250
3,000,000 Illinois State General Obligation Unlimited
Tax Bonds, Series of March 1994,
5.80%, 2019 3,228,750
4,000,000 Illinois State General Obligation Unlimited
Tax Bonds, Series of May 1996,
5.75%, 2017 4,255,000
1,000,000 Palatine, Illinois Corporate Purpose General
Obligation, Unlimited Tax Bonds,
Series 1985, 9.90%, 2016 1,087,500
--------
19,082,756
--------
- -----------------------------------------------------------------------
Indiana (2.9%)
5,335,000 Indiana State Toll Road Commission East-
West Toll Road Revenue Bonds,
Series 1980, 9.00%, 2015 7,669,062
--------
- -----------------------------------------------------------------------
Kentucky (1.3%)
3,250,000 Jefferson County, Kentucky Jewish Hospital
Healthcare Services Health Facilities,
(Jewish Hospital, Inc.) Revenue Bonds,
Series 1995, 6.50%, 2015 3,542,500
--------
- -----------------------------------------------------------------------
Massachusetts (1.4%)
2,525,000 Massachusetts State General Obligation
Unlimited Tax Bonds Consolidated Loan,
Series 1992 B, 6.50%, 2013 2,786,969
1,000,000 Massachusetts State Special Obligation
Revenue Bonds, Consolidated Loan,
Series A, 5.00%, 2017 998,750
--------
3,785,719
--------
- -----------------------------------------------------------------------
Michigan (4.1%)
3,500,000 Cheboygan, Michigan Area Schools General
Obligation Unlimited Tax, 5.60%, 2021 3,675,000
<PAGE>
Statement of Investments Nationwide(R) Tax-Free Income Fund continued
October 31, 1998
<CAPTION>
PRINCIPAL SECURITY VALUE
Long-term Municipal Securities (continued)
- -----------------------------------------------------------------------
Michigan (continued)
<S> <C> <C>
$2,000,000 Grand Rapids, Michigan Building Authority
Revenue Bonds, 5.00%, 2018 $ 2,012,500
3,500,000 Michigan State General Obligation Unlimited
Tax Bonds, Environmental Protection
Program, Series 1992, 6.25%, 2012 4,151,875
1,150,000 University of Michigan Higher Education
Housing Revenue Bonds, Series 1996 A,
5.125%, 2015 1,168,687
--------
11,008,062
--------
- -----------------------------------------------------------------------
Minnesota (2.3%)
2,030,000 Minnesota Housing Finance Agency Rental
Housing Revenue Bonds, Series 1995 D,
5.90%, 2015 2,141,650
3,580,000 Minnesota State Housing Finance Agency
Single Family Mortgage Revenue Bonds,
Series 1994 K, 6.40%, 2015 3,812,700
--------
5,954,350
--------
- -----------------------------------------------------------------------
Missouri (1.9%)
2,000,000 Missouri State Environmental Improvement
& Energy Resources Authority Water
Pollution Control Revenue Bonds,
6.55%, 2014 2,187,500
3,000,000 Missouri State Health and Educational
Facilities, Authority Revenue Bonds,
(SSM Health Care System) Series A,
5.00%, 2018 2,977,500
--------
5,165,000
--------
- -----------------------------------------------------------------------
Nebraska (2.1%)
5,000,000 Nebraska Public Power District Power Supply
System Revenue Bonds, Series 1993,
6.125%, 2015 5,518,750
--------
- -----------------------------------------------------------------------
Nevada (0.4%)
1,000,000 Nevada General Obligation Limited Tax Bonds
Municipal Bond Bank Project Numbers
49 & 50, Series 1995A, 5.50%, 2016 1,042,500
--------
- -----------------------------------------------------------------------
New Jersey (0.4%)
1,000,000 New Jersey Turnpike Authority, Turnpike Revenue
Bonds, Series 1991-C, 6.50%, 2016 1,171,250
--------
- -----------------------------------------------------------------------
New York (1.2%)
2,000,000 New York City Transitional Finance Authority,
Future Tax Section D, Revenue Bonds,
Series A5.125%, 2021 2,017,500
1,000,000 New York Local Government Assistance
Corporation, Revenue Refunding Bonds,
Series 1993 E, 6.00%, 2014 1,151,250
--------
3,168,750
--------
- -----------------------------------------------------------------------
North Carolina (14.8%)
1,000,000 Appalachian State University, North Carolina
Revenue Refunding Bonds, Utilities System,
Series 1998, 5.00%, 2018 1,005,000
<CAPTION>
PRINCIPAL SECURITY VALUE
Long-term Municipal Securities (continued)
- -----------------------------------------------------------------------
<S> <C> <C>
North Carolina (continued)
$1,000,000 Appalachian State University, North Carolina
Revenue Refunding Bonds, Utilities System,
Series 1998, 5.00%, 2024 $ 992,500
425,000 Charlotte-Mecklenberg Hospital Authority,
North Carolina, Health Care Systems
Revenue Bond, Series 1992, 6.25%, 2020 453,156
5,000,000 Charlotte-Mecklenburg Hospital Authority,
North Carolina, Health Care Systems,
Health Care Revenue Bonds,
Series 1997 A, 5.125%, 2022 5,006,250
1,000,000 Davidson County, North Carolina Certificates
of Participation, Grantors Trust Series 1998A,
Davidson County Public Facilities
Corporation, 5.00%, 2018 986,250
1,000,000 North Carolina Educational Facilities Finance
Agency Revenue Bonds (Wake Forest
University), Series 1997, 5.00%, 2017 1,002,500
2,000,000 North Carolina Medical Care Commission
Hospital Revenue Refunding Bonds (North
Carolina Baptist Hospitals Project),
Series 1992 A, 6.375%, 2014 2,150,000
1,995,000 North Carolina Medical Care Commission
Health Care Revenue Refunding Bonds
(Novant Health Project), Series 1998 A,
5.00%, 2018 1,980,037
1,000,000 North Carolina Medical Care Commission
Hospital Revenue Bonds (Duke University
Hospital Project), Series C, 5.25%, 2017 1,011,250
4,105,000 North Carolina Medical Care Commission
Hospital Revenue Bonds (Pitt County
Memorial Hospital), Series 1998 B,
4.75%, 2028 3,838,175
1,000,000 North Carolina Medical Care Commission
Hospital Revenue Bonds, (Pitt County
Memorial Hospital), Series 1998 A,
5.00%, 2018 981,250
3,250,000 North Carolina Medical Care Commission
Hospital Revenue Bonds (Rex Healthcare),
Series 1998, 5.00%, 2017 3,233,750
1,985,000 North Carolina Housing Finance Agency
Single-Family Revenue Bonds,
Series AA, 6.25%, 2017 2,121,469
1,611,000 North Carolina Housing Finance Agency
Single-Family Revenue Bonds,
Series J, 7.40%, 2022 1,669,399
1,490,000 North Carolina Housing Finance Agency
Single-Family Revenue Bonds,
Series N, 7.40%, 2028 1,564,500
2,185,000 North Carolina Housing Finance Agency
Single-Family Revenue Bonds,
Series GG, 5.90%, 2013 2,316,100
3,460,000 North Carolina Housing Finance Agency
Multi-Family Revenue Refunding Bonds
Series H, 5.95%, 2021 3,658,950
1,140,000 University of North Carolina at Chapel Hill
Dining System Revenue Bonds,
Series 1997, 5.40%, 2017 1,199,850
<PAGE>
Statement of Investments Nationwide(R) Tax-Free Income Fund continued
October 31, 1998
<CAPTION>
PRINCIPAL SECURITY VALUE
Long-term Municipal Securities (continued)
- -----------------------------------------------------------------------
<S> <C> <C>
North Carolina (continued)
$2,000,000 University of North Carolina at Greensboro
Student Facilities System Revenue Bonds,
Series 1997 C, 5.125%, 2018 $ 2,035,000
2,210,000 University of North Carolina at Wilmington
Student Fee Revenue Bonds (Student
Recreation Center), Series 1998,
5.15%, 2019 2,248,675
--------
39,454,061
--------
- -----------------------------------------------------------------------
Ohio (1.8%)
1,100,000 Franklin County, Ohio Hospital Refunding
& Improvement Revenue Bonds, The
Children's Hospital Project,
Series 1996 A, 5.75%, 2020 1,177,000
1,220,000 Ohio Housing Finance Agency Mortgage
Revenue Bonds, Residential Mortgage
Backed Securities, Series A-1,
5.70%, 2017 1,276,425
2,000,000 Ohio Turnpike Commission Turnpike Turnpike
Revenue Bonds, Series 1996 A,
5.70%, 2017 2,242,500
--------
4,695,925
--------
- -----------------------------------------------------------------------
Pennsylvania (5.3%)
4,500,000 Pennsylvania Higher Educational Facilities
Authority, The University of Pennsylvania
Health Service Revenue Bonds,
Series1996 A, 5.875%, 2015 4,815,000
1,500,000 Pennsylvania Housing Finance Agency Rental
Housing Refunding Revenue Bonds,
Issue 1992, 6.25%, 2007 1,595,625
4,055,000 Pennsylvania Housing Finance Agency Rental
Housing Refunding Revenue Bonds,
Issue 1992, 6.40%, 2012 4,328,712
2,000,000 Pennsylvania State Turnpike Commission
Oil Franchise Tax Revenue Bonds,
Series A, 6.00%, 2014 2,250,000
1,000,000 Pennsylvania State Turnpike Commission
Oil Franchise Tax Revenue Bonds,
Series 1998A 5.00%, 2023 985,000
--------
13,974,337
--------
- -----------------------------------------------------------------------
South Carolina (6.9%)
4,980,000 Charleston, South Carolina Waterworks
& Sewer System Refunding & Capital
Improvement Revenue Bonds,
Series 1991, 6.00%, 2018 5,266,350
1,500,000 Charleston, South Carolina Waterworks
& Sewer System Refunding & Capital
Improvement Revenue Bonds,
Series 1998, 4.50%, 2024 1,387,500
3,610,000 Greenville, South Carolina Hospital System
Revenue Bonds Hospital Facilities,
Series B, 5.25%, 2017 3,673,175
2,000,000 Greenwood County, South Carolina Hospital
Facilities Revenue Bonds, Self Memorial
Hospital, Series 1998A, 5.00%, 2023 1,972,500
<PAGE>
<CAPTION>
PRINCIPAL SECURITY VALUE
Long-term Municipal Securities (continued)
- -----------------------------------------------------------------------
<S> <C> <C>
South Carolina (continued)
$3,075,000 South Carolina State Housing Finance &
Development Authority Homeownership
Mortgage Purchase Bonds,
Series 1994 A, 6.375%, 2016 $ 3,255,656
1,500,000 South Carolina State Housing Finance
& Development Authority Multi-Family
Development Revenue Refunding,
Series 1992 A, 6.875%, 2023 1,593,750
1,000,000 Spartanburg, South Carolina Water System
Revenue Bonds, Series 1996,
6.10%, 2021 1,136,250
--------
18,285,181
--------
- -----------------------------------------------------------------------
South Dakota (0.6%)
1,500,000 South Dakota Health and Educational Facilities
Authority Revenue Refunding Bonds, Rapid
City Regional Hospital Issue, Series,
5.00%, 2022 1,479,375
--------
- -----------------------------------------------------------------------
Tennessee (1.5%)
1,500,000 Knox County, Tennessee Public Improvement
General Obligations Unlimited Tax Bonds,
4.75%, 2019 1,456,875
1,285,000 Nashville & Davidson County, Tennessee
Health & Educational Facilities Revenue
Bonds, (Meharry Medical College HEW
Collateralized), Series 1979,
7.875%, 2004 1,444,019
1,000,000 Shelby County, Tennessee General Obligation
Unlimited Tax Bonds, Public Improvement
Bonds, 1996 Series A, 5.85%, 2017 1,116,250
--------
4,017,144
--------
- -----------------------------------------------------------------------
Texas (17.0%)
1,140,000 Arlington, Texas Certificates of General
Obligation Limited Tax Bonds,
5.00%, 2019 1,138,575
1,000,000 Arlington, Texas Independent School District,
Refunding General Obligation Unlimited
Tax Bonds, 5.00%, 2016 1,005,000
2,325,000 Beaumont Independent School District, Texas,
General Obligation Unlimited Tax School
Building Bonds, Series 1996,
5.00%, 2016 2,333,719
2,030,000 Beaumont Independent School District, Texas,
General Obligation Unlimited Tax School
Building Bonds, Series 1997,
4.75%, 2017 1,976,712
3,465,000 Dayton Independent School District, Texas,
General Obligation Unlimited Tax School
Building and Refunding Bonds,
Series 1996, 5.375%, 2017 3,568,950
2,300,000 Fort Bend Independent School District, Texas
General Obligation Unlimited Tax Bonds,
Series 1996, 5.00%, 2018 2,302,875
1,350,000 Fort Worth, Texas General Obligation Limited
Tax Bonds, 5.625%, 2017 1,417,500
<PAGE>
Statement of Investments Nationwide(R) Tax-Free Income Fund continued
October 31, 1998
<CAPTION>
PRINCIPAL SECURITY VALUE
Long-term Municipal Securities (continued)
- -----------------------------------------------------------------------
<S> <C> <C>
Texas (continued)
$1,000,000 Grand Prairie Independent School District,
Texas General Obligation Unlimited Tax
School Building and Refunding Bonds,
Series 1996, 5.00%, 2018 $ 1,013,750
5,325,000 Harris County, Texas Health Facilities
Development Corporation Revenue School
Health Care Systems, Series B,
5.75%, 2027 5,624,531
2,500,000 Houston Independent School District, Texas,
General Obligation Limited Tax School
House Refunding Bonds Series 1997,
5.375%, 2017 2,575,000
1,000,000 Houston, Texas Water and Sewer Junior Lien
Revenue Refunding Bonds, Series 1991 C,
6.375%, 2017 1,080,000
1,245,000 Lower Colorado River Authority, Texas Junior
Lien Refunding Revenue Bonds, Escrowed
Series 1992, 6.00%, 2017 1,409,962
1,165,000 Lower Colorado River Authority, Texas Junior
Lien Refunding Revenue Bonds,
Unrefunded Series 1992, 6.00%, 2017 1,220,338
4,000,000 San Antonio, Texas General Obligation Limited
Tax Improvement and Refunding Bonds,
Series 1996 A, 5.00%, 2016 4,015,000
2,000,000 Texas A&M University System Board of Regents
Revenue Financing System Bonds,
Series 1996, 5.375%, 2014 2,075,000
2,810,000 Texas State Water Development Board State
Revolving Fund Senior Lien Revenue
Bonds, Program Series 1997 A,
5.25%, 2019 2,852,150
3,175,000 Texas State Water Development Bonds,
General Obligation Limited Tax,
Series 1994, 6.90%, 2017 3,587,750
1,500,000 Travis County, Texas Health Facilities
Development Corporation, Hospital Revenue
Bonds, Charity Obligated Group Bonds,
Daughters of Charity National Health
System, Series 1998 B, 5.00%, 2013 1,509,375
1,500,000 Travis County, Texas Health Facilities
Development Corporation, Hospital Revenue
Bonds, Charity Obligated Group Bonds,
Daughters of Charity National Health
System, Series 1998 A, 5.125%, 2024 1,496,250
2,655,000 Weatherford, Independent School District, Texas,
General Obligation Unlimited Tax School
Building and Refunding Bonds,
Series 1994, 6.50%, 2015 3,020,063
--------
45,222,500
--------
- -----------------------------------------------------------------------
Utah (0.4%)
1,000,000 Utah State Housing Finance Agency, Multi-
family Housing Revenue Refunding Bonds,
Cottonwoods Apartment Project,
Issue 1995, 6.30%, 2015 1,056,250
--------
<CAPTION>
PRINCIPAL SECURITY VALUE
Long-term Municipal Securities (continued)
- -----------------------------------------------------------------------
<S> <C> <C>
Virginia (8.0%)
$940,000 Fairfax County, Virginia Water Authority Water
Refunding Revenue Series 1992,
6.00%, 2022 $ 1,031,650
4,250,000 Henrico County, Virginia Water and Sewer
System Refunding Revenue Bonds, Series
1994, 5.875%, 2014 4,590,000
1,000,000 Virginia Housing Development Authority
Commonwealth Mortgage Revenue
Bonds, Series B, Subseries B-2,
6.50%, 2010 1,091,250
1,080,000 Virginia Housing Development Authority
Commonwealth Mortgage Revenue
Bonds, Series 1995 D Subseries D-1,
5.95%, 2013 1,127,250
2,900,000 Virginia Housing Development Authority
Commonwealth Mortgage Revenue
Bonds, Subseries C-7, 6.30%, 2015 3,041,375
1,000,000 Virginia Housing Development Authority
Commonwealth Mortgage Revenue
Bonds, Series 1995 B, Subseries B-3,
6.35%, 2015 1,071,250
1,930,000 Virginia Housing Development Authority
Commonwealth Mortgage Revenue
Bonds, Series 1995 B, Subseries B-3,
6.35%, 2016 2,067,513
2,000,000 Virginia Housing Development Authority
Commonwealth Mortgage Revenue
Bonds, Series 1992 A, 7.10%, 2022 2,115,000
2,000,000 Virginia Public School Authority School Financing
Revenue Bonds (1991 Resolution),
Series 1994 A, 6.20%, 2013 2,230,000
2,650,000 Virginia Public School Authority School Financing
Revenue Bonds (1991 Resolution),
Series 1996 B, 5.125%, 2017 2,699,688
--------
21,064,976
--------
- -----------------------------------------------------------------------
Washington (2.3%)
1,500,000 King County, Washington General Obligation
Limited Tax Refunding Bonds,
Series 1996 C, 5.25%, 2021 1,530,000
1,000,000 Seattle, Washington General Obligation
Limited Tax Series 1995, 5.125%, 2015 1,016,250
3,500,000 Washington State Motor Vehicle Fuel Tax
General Obligation Unlimited Tax
Bonds, Series 1997 D, 5.375%, 2022 3,578,750
--------
6,125,000
--------
- -----------------------------------------------------------------------
Wisconsin (2.8%)
1,000,000 Wisconsin Housing and Economic Development
Authority Home Ownership Revenue
Bonds, Series A, 5.65%, 2010 1,065,000
2,000,000 Wisconsin State General Obligation Unlimited
Tax Bonds, Series 1992 A, 6.30%, 2011 2,170,000
1,500,000 Wisconsin State Transportation Revenue
Bonds, Series A, 5.50%, 2011 1,612,500
<PAGE>
Statement of Investments Nationwide(R) Tax-Free Income Fund continued
October 31, 1998
<CAPTION>
PRINCIPAL SECURITY VALUE
Long-term Municipal Securities (continued)
- -----------------------------------------------------------------------
<S> <C> <C>
Wisconsin (continued)
$2,500,000 Wisconsin State Transportation Revenue
Bonds, Series A, 5.50%, 2012 $ 2,687,500
---------
7,535,000
---------
Total long-term municipal securities $264,706,261
============
(cost $247,517,837)
- -----------------------------------------------------------------------
Cost also represents cost for Federal income tax purposes.
Portfolio holding percentages represent market value as a percentage of net
assets.
See accompanying notes to financial statements.
Distribution of investments, as a percentage of total investment in securities
at value, is as follows:
- --------------------------------------------------------------------------------
Industry Market Value
County/City/School District $ 23,595,894
Education 19,068,594
Electric Utilities 14,022,875
Healthcare/Medical Products 9,167,031
Hospitals 34,473,687
Housing 56,258,486
Miscellaneous 9,336,063
Political Subdivisions - City/County 24,193,375
State Territories and Possessions 29,034,094
Transportation 19,651,562
Water, Sewer and Combined Utilities 25,904,600
------------
$264,706,261
============
</TABLE>
<PAGE>
Nationwide(R) Investing Foundation
Intermediate U.S. Government
Bond Fund
Management Discussion of Fund Performance
The total return for the year ended October 31, 1998, was 9.03% for the
Nationwide Intermediate U.S. Government Bond Fund (Class D), without sales
charge and assuming all dividends were reinvested, versus the average return of
8.53% for other funds in the Intermediate U.S. Government Bond Fund category,
according to Lipper, Inc.
Continued low inflation, a surprisingly large U.S. budget surplus, and
turmoil in world financial markets created a good backdrop for Treasury
securities with 30-year Treasury bond yields falling to 5.15% from 6.15%.
Intermediate Treasury bonds performed even better with two-year Treasury bond
yields falling to 4.10% from 5.61%, while 10-year Treasury securities fell to
4.60% from 5.83%. Though Treasury bonds performed well, spread sectors in the
Government market lagged. Spread instruments provide additional return over
Treasury bonds and include Agency Obligations and Collateralized Mortgage
Obligations (CMOs).
During the year, Agency paper was purchased at levels not seen by the
Industry since the 1980s. Positions in CMOs were reduced early in the year as
the risk/reward profile became unfavorable. As rates continued to fall,
prepayment fears among participants caused yield spreads to widen to attractive
levels and some positions in CMOs were added. Finally, positions in long-term
Treasury bonds and Zero Coupon securities were added to enhance returns in the
falling interest rate environment.
The coming year promises to be an interesting one for investors as the
turmoil in world markets continues to make an uncertain impact on the U.S.
economy. The recent decline in equity markets highlights the importance of
diversification, and we feel good quality bond funds should be a part of any
investor's portfolio.
Current holdings include 53% in Treasury and Agency Obligations. CMOs account
for 44% of the portfolio, and the remainder is in Repurchase Agreements. Many of
the Agency and CMO holdings appear to be undervalued by the marketplace and
should outperform Treasury bonds.
Wayne T. Frisbee, CFA; Gary R. Hunt, MBA, CFA
Portfolio Managers
Fund Value $51,477,637
Portfolio Composition
(Subject to Change)
Mortgage-Backed Securities 43.5%
Repurchase Agreements 3.3%
U.S. Government 52.5%
Average Annual (Compound) Total Return+
(For Periods Ended October 31, 1998)
Class A* Class B* Class D
Years w/o SC** w/SC(1) w/o SC** w/SC(2) w/o SC** w/SC(1)
- -----------------------------------------------------------
1 8.82% 3.92% 8.41% 3.41% 9.03% 4.13%
- -----------------------------------------------------------
5 6.83% 5.85% 6.75% 6.44% 6.87% 5.89%
- -----------------------------------------------------------
Life 7.42% 6.68% 7.36% 7.36% 7.45% 6.71%
- -----------------------------------------------------------
Life of the Fund is since 2/10/92.
All figures showing the effect of a sales charge reflect the maximum charge
possible, because it has the most dramatic effect on performance data.
* These returns represent performance achieved prior to the creation of the
class (5/11/98), excluding a 0.25% (Class A) or 0.85% (Class B) 12b-1 fee.
Had class A or B been in existence for the time periods presented, the
Fund's performance would have been higher or lower as a result of the
additional expenses.
** These returns do not reflect the effects of a sales charge.
1 A 4.50% front-end sales charge was paid.
2 A 5.00% contingent deferred sales charge (CDSC) was paid. The CDSC declines
to 0 after 6 years.
+ See legend on Table of Contents.
Investment return and principal value will fluctuate, and when redeemed, shares
may be worth more or less than original cost. Past performance is no guarantee
of future results.
Fund Performance - Class D
Line Chart:
Fund MLGMI CPI
2/92 9550 10000 10000
1992 10041 10695 10224
1993 11060 12086 10505
1994 10596 11563 10786
1995 12341 13345 11081
1996 12992 14015 11413
1997 14143 15234 11651
1998 15421 16961 11824
Comparative performance of $10,000 invested in the Intermediate U.S. Government
Bond Fund, the Merrill Lynch Government Master Index (MLGMI)* and the Consumer
Price Index (CPI)** since inception (2/10/92) to 10/31/98. Unlike our Fund,
these indices do not reflect any fees, expenses or sales charges.
* The MLGMI consists of U.S. Treasury notes and bonds with one or more years
remaining to final maturity and at least $1 billion in face value
outstanding, and U.S. agencies with one or more years remaining to final
maturity and at least $100 million in face value outstanding.
** The CPI represents changes in prices of all goods and services purchased for
consumption by urban households.
<PAGE>
<TABLE>
Statement of Investments Nationwide(R) Intermediate U.S. Government Bond Fund
October 31, 1998
<CAPTION>
PRINCIPAL SECURITY VALUE
Mortgage-backed Securities (43.5%)
- -----------------------------------------------------------------------
<S> <C> <C>
$4,328,105 FHLMC REMIC Series 1462, Class PT,
7.50%, 01/15/03 $ 4,465,687
3,000,000 FHLMC REMIC Series 1313, Class G,
7.25%, 06/15/07 3,093,729
1,000,000 FHLMC REMIC Series 1512, Class HB,
6.50%, 02/15/08 1,030,852
5,000,000 FHLMC REMIC Series 1560, Class PN,
7.00%, 12/15/12 5,195,195
3,437,917 FHLMC REMIC Series 31, Class E,
7.55%, 05/15/20 3,588,587
958,773 FNMA Pool 73341, 6.31%, 01/01/06 996,283
997,247 FNMA Pool 380488, 6.10%, 07/01/08 1,022,375
1,173,718 FNMA REMIC Series 92-126, Class VB,
8.00%, 07/25/02 1,222,697
237,707 FNMA REMIC Series 1988-25, Class B,
9.25%, 10/25/18 254,723
1,442,227 FNMA REMIC Series 1990-7, Class B,
8.50%, 01/25/20 1,527,831
--------
Total mortgage-backed securities (cost $21,514,747) 22,397,959
--------
U.S. Government and Agency
Long-term Obligations (52.5%)
- -----------------------------------------------------------------------
3,000,000 Federal Home Loan Mortgage Corp.,
5.98%, 12/08/05 3,145,035
3,000,000 Federal Home Loan Mortgage Corp.,
5.75%, 04/15/08 3,093,690
1,475,000 Federal National Mortgage Association,
5.73%, 01/06/03 1,515,414
4,000,000 Federal National Mortgage Association,
7.35%, 03/28/05 4,469,388
1,000,000 Federal National Mortgage Association,
6.77%, 09/01/05 1,090,362
2,950,000 Federal Farm Credit, 5.68%, 03/12/01 3,012,398
1,000,000 Federal Farm Credit, 7.16%, 05/15/06 1,115,755
2,000,000 Resolution Funding STRIPS,
0.00%, 07/15/07 1,313,556
2,000,000 Resolution Funding STRIPS,
0.00%, 07/15/13 887,576
7,500,000 Resolution Funding STRIPS,
0.00%, 10/15/13 3,270,135
1,000,000 U.S. Treasury Bond, 7.50%, 11/15/16 1,247,500
2,500,000 U.S. Treasury Note, 7.00%, 07/15/06 2,876,563
--------
Total U.S. government and agency long-term obligations
(cost $25,863,179) 27,037,372
--------
<CAPTION>
PRINCIPAL SECURITY VALUE
Repurchase Agreement (3.3%)
- -----------------------------------------------------------------------
<S> <C> <C>
$1,683,000 Fifth Third Bank 5.30%, 11/02/98,
Collateralized by $1,673,000
FHLMC Pool #G10657, 7.50%, 02/01/12,
market value $1,717,000
(cost $1,683,000) $ 1,683,000
-----------
Total investments (cost $49,060,926) $51,118,331
===========
- --------------------------------------------------------------------------------
The abbreviations in the above statement stand for the following:
FHLMC Federal Home Loan Mortgage Corp.
REMIC Real Estate Mortgage Investment Conduit
FNMA Federal National Mortgage Association
STRIPS Separate Trading of Registered Interest
and Principal Securities
Cost also represents cost for Federal income tax purposes.
Portfolio holding percentages represent market value as a percentage of net
assets.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Nationwide(R) Investing Foundation
Long-Term U.S. Government
Bond Fund
Management Discussion of Fund Performance
The total return for the year ended October 31, 1998, was 11.15% for the
Nationwide Long-Term U.S. Government Bond Fund (Class D), without sales charge
and assuming all dividends were reinvested. This compares favorably to the
average return of 9.08% for other funds in the U.S. Government Bond category.
The Fund was one of the top 15 performing funds in the General U.S. Government
Bond category this year (out of 187), according to Lipper, Inc.
Continued low inflation, a surprisingly large U.S. budget surplus, and
turmoil in world financial markets created a good backdrop for Treasury
securities with 30-year Treasury bond yields falling to 5.15% from 6.15%.
Intermediate Treasuries performed even better with two-year Treasury bond yields
falling to 4.10% from 5.61%, while 10-year Treasury bond yields fell to 4.60%
from 5.83%. Though Treasury securities performed well, spread sectors in the
Government market lagged. Spread instruments provide additional return over
Treasury securities and include Agency Obligations and Collateralized Mortgage
Obligations (CMOs).
During the year, Agency paper was purchased at levels not seen by the
Industry since the 1980s. Positions in CMOs were reduced early in the year as
the risk/reward profile became unfavorable. As rates continued to fall,
prepayment fears among participants caused yield spreads to widen to attractive
levels and some positions in CMOs were added. Finally, positions in long
Treasury bonds and Zero Coupon securities were added to enhance returns in the
falling interest rate environment.
The coming year promises to be an interesting one for investors as the
turmoil in world markets continues to make an uncertain impact on the U.S.
economy. The recent decline in equity markets highlights the importance of
diversification and we feel good quality bond funds should be a part of any
investor's portfolio.
Current holdings include 66% in Treasury and Agency Obligations. CMOs account
for 31% of the holdings, and the remainder are in Repurchase Agreements. Many of
the Agency and CMO holdings appear to be undervalued by the marketplace and
should outperform Treasury securities.
Wayne T. Frisbee, CFA; and Gary R. Hunt, MBA, CFA
Portfolio Managers
Fund Value $41,498,502
Portfolio Composition
(Subject to Change)
Pie Chart:
Mortgage-Backed Securities 31.3%
Repurchase Agreements 2.3%
U.S. Government 65.7%
Average Annual (Compound) Total Return+
(For Periods Ended October 31, 1998)
Class A* Class B* Class D
Years w/o SC** w/SC(1) w/o SC** w/SC(2) w/o SC** w/SC(1)
- -----------------------------------------------------------
1 11.04% 6.04% 10.62% 5.62% 11.15% 6.15%
- -----------------------------------------------------------
5 7.12% 6.14% 7.04% 6.73% 7.14% 6.16%
- -----------------------------------------------------------
Life 9.31% 8.80% 9.27% 9.27% 9.32% 8.82%
- -----------------------------------------------------------
Life of the Fund is since 12/19/88.
All figures showing the effect of a sales charge reflect the maximum charge
possible, because it has the most dramatic effect on performance data.
* These returns represent performance achieved prior to the creation of the
class (5/11/98), excluding a 0.25% (Class A) or 0.85% (Class B)
12b-1 fee. Had class A or B been in existence for the time periods
presented, the Fund's performance would have been higher or lower
as a result of the additional expenses.
** These returns do not reflect the effects of a sales charge.
1 A 4.50% front-end sales charge was paid.
2 A 5.00% contingent deferred sales charge (CDSC) was paid. The CDSC declines
to 0 after 6 years.
+ See legend on Table of Contents.
Investment return and principal value will fluctuate, and when redeemed, shares
may be worth more or less than original cost. Past performance is no guarantee
of future results.
Fund Performance - Class D
Line Chart:
Fund MLGMI CPI
1988 9550 10000 10000
1989 10678 10693 10389
1990 11418 11329 11051
1991 13272 12987 11366
1992 14723 14330 11738
1993 16307 16194 12061
1994 15532 15493 12384
1995 18123 17880 12724
1996 19031 18783 13104
1997 20712 20412 13377
1998 23023 22726 13576
Comparative performance of $10,000 invested in the Long-Term U.S. Government
Bond Fund, the Merrill Lynch Government Master Index (MLGMI)* and the Consumer
Price Index (CPI)** since inception (12/19/88) to 10/31/98. Unlike our Fund,
these indices do not reflect any fees, expenses or sales charges.
* The MLGMI consists of U.S. Treasury notes and bonds with one or more years
remaining to final maturity and at least $1 billion in face value
outstanding, and U.S. agencies with one or more years remaining to final
maturity and at least $100 million in face value outstanding.
** The CPI represents changes in prices of all goods and services purchased
for consumption by urban households.
<PAGE>
<TABLE>
Statement of Investments Nationwide(R) Long-Term U.S. Government Bond Fund
October 31, 1998
<CAPTION>
PRINCIPAL SECURITY VALUE
Mortgage-backed Securities (31.3%)
- -----------------------------------------------------------------------
<S> <C> <C>
$2,000,000 FHLMC REMIC Series 1313, Class G,
7.25%, 06/15/07 $ 2,062,486
2,000,000 FHLMC REMIC Series 2053, Class VB,
6.50%, 05/15/12 2,110,182
1,289,219 FHLMC REMIC Series 31, Class E,
7.55%, 05/15/20 1,345,720
410,098 FHLMC REMIC Series 190-D,
9.20%, 10/15/21 435,100
1,994,494 FNMA Pool 380488, 6.10%, 07/01/08 2,044,751
3,129,914 FNMA REMIC Series 92-126, Class VB,
8.00%, 07/25/02 3,260,525
222,682 FNMA REMIC Series 1989-86,
8.75%, 11/25/19 235,587
961,485 FNMA REMIC Series 1990-7, Class B,
8.50%, 01/25/20 1,018,554
476,276 FNMA REMIC Series 1991-73A,
8.00%, 07/25/21 491,521
--------
Total mortgage-backed securities (cost $12,429,679) 13,004,426
--------
U.S. Government and Agency
Long-term Obligations (65.7%)
- -----------------------------------------------------------------------
4,000,000 Federal Home Loan Mortgage Corp.
Debenture 6.80%, 08/22/05 4,376,444
4,000,000 Federal Home Loan Mortgage Corp. Global
Notes 6.75%, 05/30/06 4,378,208
3,000,000 Federal National Mortgage Association,
7.65%, 03/10/05 3,402,408
10,000,000 Resolution Funding STRIPS,
0.00%, 04/15/06 7,017,180
10,000,000 Resolution Funding STRIPS,
0.00%, 07/15/13 4,437,880
2,000,000 U.S. Treasury Bond, 7.50%, 11/15/16 2,495,000
1,000,000 U.S. Treasury Note, 7.00%, 07/15/06 1,150,625
--------
Total U.S. government and agency long-term obligations
(cost $24,397,760) 27,257,745
--------
<CAPTION>
PRINCIPAL SECURITY VALUE
Repurchase Agreement (2.3%)
- -----------------------------------------------------------------------
<S> <C> <C>
$951,000 Fifth Third Bank 5.30%, 11/02/98,
Collateralized by $971,000
Federal National Mortgage Association
Pool #406608, 6.75%, 07/01/24,
market value $971,000 (cost $951,000) $ 951,000
--------
Total investments (cost $37,778,439) $41,213,171
===========
- --------------------------------------------------------------------------------
The abbreviations in the above statement stand for the following:
FHLMC Federal Home Loan Mortgage Corp.
REMIC Real Estate Mortgage Investment Conduit
FNMA Federal National Mortgage Association
STRIPS Separate Trading of Registered Interest
and Principal Securities
Cost also represents cost for Federal income tax purposes.
Portfolio holding percentages represent market value as a percentage of net
assets.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Nationwide(R) Investing Foundation
Money Market Fund
Management Discussion of Fund Performance
The net assets of Nationwide Money Market Fund were $1,048.7 million at
October 31, 1998. The Fund has performed better than its benchmark, the Consumer
Price Index, for the past 10 years. The one-year performance (as of October 31,
1998) for the Consumer Price Index was 1.43% versus 5.15% for the Fund. The
10-year performance (for the same period) for the Consumer Price Index was 3.18%
versus 5.30% for the Fund. There is no sales charge on the Money Market fund.
The Federal funds rate was lowered twice this year. Both decreases were
0.25%. The rate changes occurred in September and October of this year. The
current Federal funds rate is 5.00%; This is the rate banks charge depository
institutions for loans. These moves provided the securities markets with an
indication the Federal Reserve is committed to preserving liquidity in the
financial system.
Although the Fund is permitted to hold up to 5% per issuer and 25% per
industry, the actual holdings are lower. Only issuers with at least two ratings
in the highest rating category from a nationally recognized statistical rating
organization are eligible for investment. A determination of minimal credit risk
is required by Rule 2a-7, Investment Company Act of 1940, for all issuers
approved for investment by the Fund.
Patricia A. Mynster - Portfolio Manager
Fund Value $1,048,688,841
Portfolio Composition
(Subject to Change)
Pie Chart:
Commercial Paper 95.1%
U.S. Government Obligations 5.4%
Average Annual (Compound) Total Return+
(For Years Ended October 31, 1998)
Years
- ----------------------
1 5.15%
- ----------------------
5 4.81%
- ----------------------
10 5.30%
- ----------------------
There is no sales charge on the Money Market Fund.
+ See legend on Table of Contents.
An investment in the Money Market Fund is neither insured nor guaranteed by the
FDIC or any other government agency. Although the Fund seeks to preserve the
value of your investment at $1.00 per share, it is possible to lose money by
investing in the Fund.
Fund Performance
Line Chart:
Fund CPI
1988 10000 10000
1989 10889 10458
1990 11754 11125
1991 12476 11442
1992 12916 11817
1993 13251 12142
1994 13694 12467
1995 14442 12808
1996 15171 13192
1997 15941 13467
1998 16762 13667
Comparative performance of $10,000 invested in the Money Market Fund and the
Consumer Price Index (CPI)* over a 10-year period ended 10/31/98. Unlike our
Fund, the CPI does not reflect any fees or expense.
* The CPI represents changes in prices of all goods and services purchased for
consumption by urban households.
<PAGE>
<TABLE>
Statement of Investments Nationwide(R) Money Market Fund
October 31, 1998
<CAPTION>
PRINCIPAL SECURITY VALUE
<S> <C> <C>
Commercial Paper (95.1%)
- -----------------------------------------------------------------------
Agriculture/Finance (1.0%)
Deere, John Capital
$10,000,000 5.40%, 11/05/98 $ 9,993,989
--------
- -----------------------------------------------------------------------
Agriculture/Supplies (1.4%)
Deere & Co.
8,000,000 5.27%, 11/10/98 7,989,460
7,000,000 5.16%, 11/18/98 6,982,943
--------
14,972,403
--------
- -----------------------------------------------------------------------
Auto/Finance (7.8%)
Ford Motor Credit Co.
10,000,000 5.25-5.45%, 11/04/98 9,995,458
8,000,000 5.08%, 11/12/98 7,987,582
10,000,000 5.25%, 11/13/98 9,982,500
4,000,000 5.48%, 11/20/98 3,988,431
4,000,000 5.20%, 11/23/98 3,987,289
4,630,000 5.16%, 11/25/98 4,614,073
General Motors Acceptance Corp.
14,500,000 5.28%, 11/17/98 14,465,973
11,000,000 5.20%, 11/27/98 10,958,689
7,000,000 5.09-5.25%, 12/10/98 6,960,187
3,500,000 5.16%, 01/05/99 3,467,392
5,000,000 5.16%, 01/07/99 4,951,983
--------
81,359,557
--------
- -----------------------------------------------------------------------
Banks (9.4%)
J.P. Morgan & Co.
4,000,000 5.32%, 11/06/98 3,997,044
10,000,000 5.42%, 11/16/98 9,977,417
5,000,000 5.48%, 11/25/98 4,981,934
5,000,000 5.48%, 12/02/98 4,976,405
6,241,000 5.47%, 12/21/98 6,193,586
National City Credit Corp.
10,000,000 5.05%, 01/04/99 9,910,222
Norwest Corp.
15,000,000 5.19%, 12/14/98 14,907,013
SunTrust Banks, Inc.
4,000,000 5.09-5.17%, 11/17/98 3,990,809
3,000,000 5.07%, 12/03/98 2,986,480
7,000,000 5.40%, 12/07/98 6,964,510
15,000,000 5.40%, 12/08/98 14,916,750
Toronto-Dominion USA
15,000,000 5.10%, 11/30/98 14,938,375
--------
98,740,545
--------
- -----------------------------------------------------------------------
Broker/Dealers (11.8%)
Bear Stearns Cos., Inc.
11,000,000 5.22%, 11/24/98 10,963,008
8,000,000 5.30%, 12/01/98 7,964,667
5,000,000 5.14%, 12/03/98 4,977,156
10,000,000 5.29%, 12/11/98 9,941,222
Goldman Sachs Group
5,000,000 5.43%, 11/02/98 4,999,246
7,000,000 5.10%, 11/03/98 6,998,017
5,000,000 5.36%, 11/16/98 4,988,833
5,000,000 5.25%, 12/03/98 4,976,667
<CAPTION>
PRINCIPAL SECURITY VALUE
Commercial Paper (continued)
- -----------------------------------------------------------------------
<S> <C> <C>
Broker/Dealers (continued)
Merrill Lynch & Co.
$18,000,000 5.25-5.39%, 11/13/98 $17,968,600
2,000,000 5.23%, 11/19/98 1,994,770
1,436,000 5.09%, 11/23/98 1,431,533
7,506,000 5.07-5.08%, 11/30/98 7,475,284
4,559,000 5.15%, 01/27/99 4,502,259
Salomon Smith Barney, Inc.
5,000,000 5.28%, 11/09/98 4,994,133
17,000,000 5.25%, 11/17/98 16,960,333
10,000,000 5.22%, 11/23/98 9,968,100
3,000,000 5.06%, 12/04/98 2,986,085
---------
124,089,913
---------
- -----------------------------------------------------------------------
Consumer Sales Finance (17.4%)
American Express Credit Corp.
6,000,000 5.40%, 11/03/98 5,998,200
7,000,000 5.16%, 11/10/98 6,990,970
10,000,000 5.25%, 11/20/98 9,972,292
12,000,000 5.10%, 11/25/98 11,959,200
5,000,000 5.20%, 11/30/98 4,979,056
American General Finance
12,000,000 5.27%, 11/06/98 11,991,217
5,000,000 5.30%, 11/18/98 4,987,486
14,700,000 5.08-5.11%, 12/08/98 14,622,941
5,000,000 5.16%, 12/10/98 4,972,050
Associates Corp. of North America
12,000,000 5.42%, 11/06/98 11,990,967
10,000,000 5.33%, 11/16/98 9,977,792
5,000,000 5.16%, 01/19/99 4,943,383
Commercial Credit Corp.
11,000,000 5.26%, 11/20/98 10,969,463
4,000,000 5.09%, 11/23/98 3,987,558
12,000,000 5.29%, 11/24/98 11,959,443
6,000,000 5.08-5.11%, 12/07/98 5,969,340
6,000,000 5.10%, 12/17/98 5,960,900
Household Finance Co.
10,000,000 5.28%, 11/17/98 9,976,533
6,000,000 5.09-5.23%, 11/23/98 5,981,337
Norwest Financial, Inc.
10,682,000 5.50%, 11/05/98 10,675,472
5,000,000 5.07%, 12/01/98 4,978,875
9,326,000 5.17%, 01/29/99 9,206,801
---------
183,051,276
---------
- -----------------------------------------------------------------------
Data Services (1.0%)
First Data Corp.
5,000,000 5.11%, 12/01/98 4,979,354
5,000,000 5.35%, 01/12/99 4,946,500
---------
9,925,854
---------
<PAGE>
Statement of Investments Nationwide(R) Money Market Fund continued
October 31, 1998
<CAPTION>
PRINCIPAL SECURITY VALUE
<S> <C> <C>
Commercial Paper (continued)
- -----------------------------------------------------------------------
Diversified Finance (10.9%)
CIT Group, Inc.
$16,000,000 5.23%, 11/12/98 $15,974,431
5,000,000 5.25%, 11/20/98 4,986,146
18,093,000 5.42%, 12/08/98 17,992,212
Finova Capital Corp.
8,000,000 5.48%, 11/06/98 7,993,911
10,000,000 5.47%, 11/13/98 9,981,767
13,966,000 5.47-5.44%, 11/20/98 13,926,469
3,226,000 5.40%, 02/04/99 3,180,029
General Electric Capital Corp.
5,000,000 5.23%, 11/04/98 4,997,821
5,000,000 5.51%, 11/12/98 4,992,132
2,500,000 5.06%, 11/20/98 2,493,324
3,000,000 5.09%, 12/04/98 2,986,003
7,000,000 5.20%, 12/07/98 6,963,600
9,000,000 5.08-5.11%, 12/09/98 8,951,740
7,000,000 5.13%, 12/18/98 6,953,117
2,000,000 5.17-5.12%, 01/19/99 1,977,309
---------
114,350,011
---------
- -----------------------------------------------------------------------
Financial Services/Utilities (2.3%)
National Rural Utilities
Cooperative Finance Corp.
1,150,000 5.15%, 12/03/98 1,144,736
4,000,000 5.40%, 12/10/98 3,976,600
1,000,000 5.22%, 12/14/98 993,765
13,000,000 5.14%, 01/14/99 12,862,648
5,000,000 5.05%, 01/22/99 4,942,486
---------
23,920,235
---------
- -----------------------------------------------------------------------
Food & Beverage (1.8%)
Campbell Soup Co.
17,500,000 5.36%, 11/19/98 17,453,100
Heinz H.J. Co.
1,000,000 5.18%, 11/24/98 996,691
445,000 5.17%, 12/02/98 443,019
---------
18,892,810
---------
- -----------------------------------------------------------------------
Heavy Equipment/Finance (0.5%)
Caterpillar Financial Services, Inc.
4,715,000 5.03-5.05%, 01/08/99 4,670,024
- -----------------------------------------------------------------------
Insurance (8.3%)
AIG Funding, Inc.
7,000,000 5.07%, 01/05/99 6,935,921
Americal General Corp.
2,000,000 5.11%, 12/09/98 1,989,212
Lincoln National Corp. (Private Placement*)
10,000,000 5.47%, 11/02/98 9,998,480
MetLife Funding, Inc.
10,614,000 5.23%, 11/04/98 10,609,374
13,346,000 5.23%, 11/05/98 13,338,245
9,405,000 5.08%, 11/17/98 9,383,766
Old Republic Capital Corp.
(Private Placement*)
10,000,000 5.50%, 11/10/98 9,986,250
<CAPTION>
PRINCIPAL SECURITY VALUE
Commercial Paper (continued)
- -----------------------------------------------------------------------
<S> <C> <C>
Insurance (continued)
Principal Mutual Life Co.
$9,807,000 5.12-5.15%, 11/03/98 $ 9,804,200
13,382,000 5.13%, 11/10/98 13,364,838
2,302,000 5.30-5.27%, 11/13/98 2,297,933
---------
87,708,219
---------
- -----------------------------------------------------------------------
Lease/ Finance (2.0%)
IBM Credit Corp.
10,268,000 5.17%, 11/05/98 10,262,102
3,234,000 5.26%, 11/17/98 3,226,440
4,569,000 5.05%, 11/19/98 4,557,463
3,156,000 5.17%, 11/24/98 3,145,576
---------
21,191,581
---------
- -----------------------------------------------------------------------
Miscellaneous Manufacturing (3.6%)
Illinois Tool Works, Inc.
17,000,000 5.25%, 11/03/98 16,995,042
10,000,000 5.06%, 01/12/99 9,898,800
7,147,000 5.05%, 01/19/99 7,067,797
3,969,000 5.07%, 02/02/99 3,917,016
--------
37,878,655
--------
- -----------------------------------------------------------------------
Oil & Gas (2.1%)
Chevron Transportation Corp.
(Private Placement)
5,000,000 5.29%, 11/06/98 4,996,326
7,000,000 5.09%, 11/19/98 6,982,185
Koch Industries, Inc.
(Private Placement*)
10,000,000 5.21%, 11/18/98 9,975,397
--------
21,953,908
--------
- -----------------------------------------------------------------------
Packaging/Containers (2.3%)
Bemis Co., Inc.
9,992,000 5.30-5.32%, 11/06/98 9,984,617
14,500,000 5.08-5.20%, 12/03/98 14,434,524
--------
24,419,141
--------
- -----------------------------------------------------------------------
Pharmaceuticals/Personal Care (5.0%)
Abbott Laboratories
35,000,000 5.03%, 11/17/98 34,921,756
Glaxo Wellcome, Inc. (Private Placement*)
10,000,000 5.03%, 01/22/99 9,885,428
Pfizer, Inc. (Private Placement*)
8,000,000 5.00%, 11/25/98 7,973,333
--------
52,780,517
--------
- -----------------------------------------------------------------------
Premium Finance (2.3%)
A.I. Credit Corp.
14,000,000 5.38-5.37%, 11/02/98 13,997,909
10,000,000 5.44%, 11/09/98 9,987,911
--------
23,985,820
--------
<PAGE>
Statement of Investments Nationwide(R) Money Market Fund continued
October 31, 1998
<CAPTION>
PRINCIPAL SECURITY VALUE
Commercial Paper (continued)
- -----------------------------------------------------------------------
<S> <C> <C>
Printing & Publishing (4.2%)
E.W. Scripps Co. (Private Placement*)
$4,000,000 5.50%, 11/16/98 $ 3,990,833
5,000,000 5.49%, 11/24/98 4,982,463
4,000,000 5.41%, 12/10/98 3,976,812
4,570,000 5.35%, 12/11/98 4,542,834
5,000,000 5.05%, 01/14/99 4,948,097
3,000,000 4.80%, 03/16/99 2,946,000
McGraw Hill, Inc.
4,000,000 5.35-5.48%, 11/05/98 3,997,564
3,300,000 5.50%, 11/06/98 3,297,479
11,262,000 5.34%, 12/18/98 11,183,485
---------
43,865,567
---------
Total commercial paper (cost $997,750,025) 997,750,025
---------
U.S. Government and Agency
Obligations (5.4%)
- -----------------------------------------------------------------------
U.S. Treasury Bills
$5,000,000 4.24%, 02/18/99 $ 4,935,811
5,000,000 3.90%, 03/04/99 4,933,375
Federal Home Loan Mortgage Corp.
15,641,000 5.12%, 11/09/98 15,623,204
6,117,000 5.06%, 12/02/98 6,090,347
Federal National Mortgage Association
4,000,000 5.30%, 12/04/98 3,980,567
15,902,000 5.06%, 01/07/99 15,752,247
Federal National Mortgage
Association Variable
5,000,000 5.44%, 7/28/99 4,996,925
--------
Total U.S. government and agency obligations
(cost $56,312,476) 56,312,476
--------
Total investments (cost $1,054,062,501) $1,054,062,501
==============
- --------------------------------------------------------------------------------
Cost also represents cost for Federal income tax purposes.
Portfolio holding percentages represent market value as a
percentage of net assets.
* Restricted Securities issued pursuant to Section 4(2) of the Securities Act of
1933. These securities were deemed liquid pursuant to procedures approved by the
Board of Trustees.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Statement of Assets and Liabilities
October 31, 1998
<CAPTION>
Nationwide
Mid Cap Nationwide Nationwide Nationwide
Growth Fund Growth Fund Fund Bond Fund
<S> <C> <C> <C> <C>
Assets
Investments in securities, at value (cost $7,162,259, $ 9,542,987 $ 907,903,260 $2,177,226,502 $ 139,544,293
$578,386,398, $1,244,610,918, $134,219,294)
Repurchase agreements (cost $25,131,000) -- -- 25,131,000 --
Cash 9,464 1,731 -- --
Receivable for Fund shares sold 78 178,116 5,513,464 47,826
Receivable from advisor 25,351 -- -- --
Receivable for investment securities sold -- 11,128,841 -- --
Accrued interest and dividends receivable 1,353 188,250 2,202,589 2,185,711
Other receivables 229 12,860 -- --
Prepaid asset 13,560 -- -- --
-------------- -------------- -------------- --------------
Total assets 9,593,022 919,413,058 2,210,073,555 141,777,830
-------------- -------------- -------------- --------------
Liabilities
Bank loan -- -- 9,585 102,107
Payable for Fund shares redeemed -- 173,662 753,992 53,621
Payable for investment securities purchased -- -- 2,613,427 4,748,433
Accrued management fees 4,486 420,790 975,886 58,194
Accrued administrative fees 523 40,375 81,885 8,147
Accrued transfer agent fees 1,238 77,152 99,495 14,932
Accrued distribution fees, Class A shares 58 518 3,710 264
Accrued distribution fees, Class B shares 190 1,157 9,822 296
Dividends payable 23 18,118 10,460 86,630
Other accrued expenses 8,220 116,015 175,358 28,538
-------------- -------------- -------------- --------------
Total liabilities 14,738 847,787 4,733,620 5,101,162
-------------- -------------- -------------- --------------
Net assets $ 9,578,284 $ 918,565,271 $2,205,339,935 $ 136,676,668
============== ============== ============== ==============
Net assets represented by:
Capital $ 7,068,988 $ 571,681,000 $1,235,786,138 $ 138,078,895
Net unrealized appreciation (depreciation) 2,380,728 329,516,862 932,615,584 5,324,999
Accumulated undistributed net realized gain (loss) 128,568 17,662,293 36,081,993 (6,803,271)
Accumulated undistributed (distributions in excess of)
net investment income -- (294,884) 856,220 76,045
-------------- -------------- -------------- --------------
Net assets $ 9,578,284 $ 918,565,271 $2,205,339,935 $ 136,676,668
============== ============== ============== ==============
Net assets:
Class A Shares 304,949 2,829,770 19,745,523 1,364,787
Class B Shares 251,048 1,557,220 13,493,030 490,147
Class D Shares 9,022,287 914,178,281 2,172,101,382 134,821,734
-------------- -------------- -------------- --------------
Total $ 9,578,284 $ 918,565,271 $2,205,339,935 $ 136,676,668
============== ============== ============== ==============
Shares outstanding (unlimited number of shares authorized)
Class A Shares 17,262 176,628 651,575 140,049
Class B Shares 14,313 97,462 447,040 50,249
Class D Shares 512,457 57,055,310 71,782,127 13,815,053
-------------- -------------- -------------- --------------
Total 544,032 57,329,400 72,880,742 14,005,351
============== ============== ============== ==============
Net asset value per share:
Class A Shares $ 17.67 $ 16.02 $ 30.30 $ 9.75
Class B Shares $ 17.54 $ 15.98 $ 30.18 $ 9.75
Class D Shares $ 17.61 $ 16.02 $ 30.26 $ 9.76
Offering price (100%/(100%-Maximum Sales Charge) of net
asset value adjusted to nearest cent) per share*
Class A Shares $ 18.70 $ 16.95 $ 32.06 $ 10.21
Class B Shares $ 17.54 $ 15.98 $ 30.18 $ 9.75
Class D Shares $ 18.44 $ 16.77 $ 31.69 $ 10.22
-------------- -------------- -------------- --------------
Maximum sales charge 5.50% 5.50% 5.50% 4.50%
============== ============== ============== ==============
* Class A shares include a front-end sales charge
* For Class B Shares, the redemption price per share varies by length of time
shares are held
* Class D shares include a front-end sales charge
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Statement of Assets and Liabilities continued
October 31, 1998
<CAPTION>
Nationwide Nationwide
Nationwide Intermediate Long-Term Nationwide
Tax-Free U.S. Government U.S. Government Money Market
Income Fund Bond Fund Bond Fund Fund
<S> <C> <C> <C> <C>
Assets
Investments in securities, at value (cost $247,517,837, $ 264,706,261 $ 49,435,331 $ 40,262,171 $ 1,054,062,501
$47,377,926, $36,827,439, $1,054,062,501)
Repurchase agreements (cost $1,683,000, $951,000) -- 1,683,000 951,000 --
Cash 1,650,172 189 461 282,347
Receivable for Fund shares sold 9,404 32,852 2,479 4,510,254
Receivable for investment securities sold -- -- -- --
Receivable from Advisor -- 18,009 24,359 --
Accrued interest and dividends receivable 4,620,219 417,673 363,148 2,150
Other receivables -- -- 15,386 --
Withholding tax reclaim receivable -- -- -- --
--------------- --------------- --------------- ---------------
Total assets 270,986,056 51,587,054 41,619,004 1,058,857,252
--------------- --------------- --------------- ---------------
Liabilities
Payable for Fund shares redeemed 28,388 36,721 3,959 9,428,787
Payable for investment securities purchased 4,729,781 -- -- --
Accrued management fees 112,966 22,436 17,628 357,892
Accrued administrative fees 15,579 3,141 2,468 48,625
Accrued transfer agent fees 16,269 4,259 3,328 74,770
Accrued distribution fees, Class A shares 128 71 41 --
Accrued distribution fees, Class B shares 906 163 178 --
Accrued distribution fees, Class D shares -- -- -- --
Dividends payable 297,436 38,873 82,777 167,395
Other accrued expenses 44,681 3,753 10,123 90,942
--------------- --------------- --------------- ---------------
Total liabilities 5,246,134 109,417 120,502 10,168,411
--------------- --------------- --------------- ---------------
Net assets $ 265,739,922 $ 51,477,637 $ 41,498,502 $ 1,048,688,841
=============== =============== =============== ===============
Net assets represented by:
Capital $ 247,834,447 $ 49,159,032 $ 38,285,008 $ 1,048,687,113
Net unrealized appreciation (depreciation) 17,188,424 2,057,405 3,434,732 --
Accumulated undistributed net realized gain (loss) 716,165 261,200 (222,676) 1,822
Accumulated undistributed (distributions in excess of)
net investment income 886 -- 1,438 (94)
--------------- --------------- --------------- ---------------
Net assets $ 265,739,922 $ 51,477,637 $ 41,498,502 $ 1,048,688,841
=============== =============== =============== ===============
Net assets:
Class A Shares 600,996 331,998 200,879 N/A
Class B Shares 1,476,527 296,845 351,846 N/A
Class D Shares 263,662,399 50,848,794 40,945,777 N/A
--------------- --------------- --------------- ---------------
Total $ 265,739,922 $ 51,477,637 $ 41,498,502 $ N/A
=============== =============== =============== ===============
Shares outstanding (unlimited number of shares authorized) 1,048,687,226
Class A Shares 56,416 31,452 17,069 N/A
Class B Shares 138,501 28,129 29,927 N/A
Class D Shares 24,736,565 4,811,502 3,478,944 N/A
--------------- --------------- --------------- ---------------
Total 24,931,482 4,871,083 3,525,940 1,048,687,226
=============== =============== =============== ===============
Net asset value per share: $ 1.00
Class A Shares $ 10.65 $ 10.56 $ 11.77 N/A
Class B Shares $ 10.66 $ 10.55 $ 11.76 N/A
Class D Shares $ 10.66 $ 10.57 $ 11.77 N/A
Offering price (100%/(100%-Maximum Sales Charge) of net
asset value adjusted to nearest cent) per share* $ 1.00
Class A Shares $ 11.15 $ 11.06 $ 12.32 N/A
Class B Shares $ 10.66 $ 10.55 $ 11.76 N/A
Class D Shares $ 11.16 $ 11.07 $ 12.32 N/A
--------------- --------------- --------------- ---------------
Maximum sales charge 4.50% 4.50% 4.50% 0.00%
=============== =============== =============== ===============
* Class A shares include a front-end sales charge
* For Class B Shares, the redemption price per share varies by length of time
shares are held
* Class D shares include a front-end sales charge
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Statement of Operations
For the Period Ended October 31, 1998
<CAPTION>
Nationwide
Mid Cap Nationwide Nationwide Nationwide
Growth Fund Growth Fund Fund Bond Fund
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Income:
Dividends $ 50,266 $ 7,006,647 $ 27,209,199 $ --
Interest 11,562 1,293,240 3,768,510 8,698,102
------------ ------------ ------------ ------------
Total Income 61,828 8,299,887 30,977,709 8,698,102
------------ ------------ ------------ ------------
Expenses:
Investment management fees 61,706 4,894,110 9,977,231 647,809
Distribution fees, Class A shares 204 1,838 11,051 717
Distribution fees, Class B shares 659 3,518 29,020 627
Distribution fees, Class D shares* 38,480 -- -- --
Administrative fees 3,308 248,049 470,352 44,441
Transfer agent fees 12,379 785,969 1,018,754 142,149
Shareholders' reports 2,638 311,930 385,979 85,620
Registration fees 20,225 35,107 93,261 20,096
Professional services 6,872 30,575 48,190 10,870
Custodian fees 4,120 52,621 74,323 22,020
Trustees' fees and expenses 1,542 14,920 34,635 2,910
Other 3,860 216,262 252,825 37,441
------------ ------------ ------------ ------------
Total expenses before waived or reimbursed expenses 155,993 6,594,899 12,395,621 1,014,700
Total waived or reimbursed expenses (63,830) -- -- --
------------ ------------ ------------ ------------
Net expenses 92,163 6,594,899 12,395,621 1,014,700
------------ ------------ ------------ ------------
Net investment income (loss) $ (30,335) $ 1,704,988 $ 18,582,088 $ 7,683,402
============ ============ ============ ============
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain (loss) on investments $ 1,160,626 $ 50,781,085 $111,188,022 $ 2,719,870
Net change in unrealized appreciation (depreciation) (673,832) 75,659,903 261,994,601 822,095
------------ ------------ ------------ ------------
Net realized and unrealized gain (loss) on investments 486,794 126,440,988 373,182,623 3,541,965
------------ ------------ ------------ ------------
NET INCREASE IN ASSETS RESULTING FROM OPERATIONS: $ 456,459 $128,145,976 $391,764,711 $ 11,225,367
============ ============ ============ ============
* Distribution fees for the Fund prior to Reorganization
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Statement of Operations continued
For the Period Ended October 31, 1998
<CAPTION>
Nationwide Nationwide
Nationwide Intermediate Long-Term Nationwide
Tax-Free U.S. Government U.S. Government Money Market
Income Fund Bond Fund Bond Fund Fund
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Income:
Interest $ 14,622,152 $ 2,943,271 $ 2,791,626 $ 51,202,060
------------ ------------ ------------ ------------
Expenses
Investment management fees 1,505,626 266,473 254,928 4,079,072
Distribution fees, Class A shares 359 236 113 --
Distribution fees, Class B shares 2,563 384 491 --
Distribution fees, Class D shares* 465,630 80,591 178,777 --
Administrative fees 88,596 16,351 13,998 257,123
Transfer agent fees 144,397 38,102 34,092 701,561
Shareholders' reports 91,451 24,359 16,925 32,800
Registration fees 36,559 28,298 22,142 34,772
Professional services 10,997 6,550 13,610 26,568
Custodian fees 25,061 6,252 10,891 64,051
Trustees' fees and expenses 3,947 730 5,281 19,561
Other 51,899 10,616 10,503 412,817
------------ ------------ ------------ ------------
Total expenses before waived or reimbursed expenses 2,427,085 478,942 561,751 5,628,325
Total waived or reimbursed expenses (199,556) (52,548) (203,136) (221,174)
------------ ------------ ------------ ------------
Net expenses 2,227,529 426,394 358,615 5,407,151
------------ ------------ ------------ ------------
Net investment income $ 12,394,623 $ 2,516,877 $ 2,433,011 $ 45,794,909
============ ============ ============ ============
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain (loss) on investments $ 4,159,256 $ 1,085,732 $ 988,155 $ 724
Net change in unrealized appreciation (depreciation) 1,599,094 389,936 1,145,175 --
------------ ------------ ------------ ------------
Net realized and unrealized gain (loss) on investments 5,758,350 1,475,668 2,133,330 724
------------ ------------ ------------ ------------
NET INCREASE IN ASSETS RESULTING FROM OPERATIONS: $ 18,152,973 $ 3,992,545 $ 4,566,341 $ 45,795,633
============ ============ ============ ============
* Distribution fees for the Fund prior to Reorganization
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Statement of Changes in Net Assets
October 31, 1998
<CAPTION>
Nationwide Nationwide Nationwide
Mid Cap Growth Fund Growth Fund Fund
Year ended Year ended Year ended Year ended Year ended Year ended
October 31, October 31, October 31, October 31, October 31, October 31,
1998 1997 1998 1997 1998 1997
<S> <C> <C> <C> <C> <C> <C>
Increase (Decrease) in Net Assets:
Operations:
Net investment income (loss) $ (30,335) $ 19,747 $ 1,704,988 $ 5,769,105 $ 18,582,088 $ 15,679,007
Net realized gain (loss) on investments 1,160,626 1,768,865 50,781,085 102,060,567 111,188,022 76,009,135
Net change in unrealized appreciation
(depreciation) of investments (673,832) 366,366 75,659,903 95,167,674 261,994,601 296,992,877
---------- ---------- ------------ ------------- -------------- --------------
Net increase in net assets resulting
from operations 456,459 2,154,978 128,145,976 202,997,346 391,764,711 388,681,019
---------- ---------- ------------ ------------- -------------- --------------
Distribution to Class A shareholders from:
Net investment income -- -- -- -- (35,853) --
---------- ---------- ------------ ------------- -------------- --------------
Distribution to Class B shareholders from:
Net investment income -- -- -- -- (7,101) --
---------- ---------- ------------ ------------- -------------- --------------
Distribution to Class D shareholders
from: (a)
Net investment income -- (14,409) (1,711,836) (6,066,772) (18,866,799) (15,825,647)
In excess of net investment income -- -- (412,306) -- -- --
Net realized gain from
investment transactions (2,807,319) (455,746) (134,550,850) (46,087,353) (151,115,164) (59,238,908)
---------- ---------- ------------ ------------- -------------- --------------
Decrease in net assets from shareholder
distributions (2,807,319) (470,155) (136,674,992) (52,154,125) (170,024,917) (75,064,555)
Capital share transactions:*
Net proceeds from sale of shares 1,360,213 509,644 141,145,310 72,950,910 666,962,584 258,190,771
Net asset value of shares issued to
shareholders from
reinvestment of dividends 2,767,469 464,389 134,704,429 51,457,653 161,657,080 70,531,213
Cost of shares redeemed (1,739,245) (2,213,453) (166,879,567) (112,743,374) (293,441,427) (152,506,314)
---------- ---------- ------------ ------------- -------------- --------------
Increase (decrease) in net assets
derived from capital
share transactions 2,388,437 1,239,420) 108,970,172 11,665,189 535,178,237 176,215,670
---------- ---------- ------------ ------------- -------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS 37,577 445,403 100,441,156 162,508,410 756,918,031 489,832,134
NET ASSETS--BEGINNING OF PERIOD 9,540,707 9,095,304 818,124,115 655,615,705 1,448,421,904 958,589,770
---------- ---------- ------------ ------------- -------------- --------------
NET ASSETS--END OF PERIOD $9,578,284 $9,540,707 $918,565,271 $ 818,124,115 $2,205,339,935 $1,448,421,904
========== ========== ============ ============= ============== ==============
Undistributed net realized gain (loss) on investments
included in net assets at
end of period $ 128,568 $1,768,865 $ 17,662,293 $ 101,432,058 $ 36,081,993 $ 76,009,135
========== ========== ============ ============= ============== ==============
Undistributed (distributions in excess of) net investment
income included in net assets at
end of period $ -- $ 3,325 $ (294,884) $ -- $ 856,220 $ 1,183,885
========== ========== ============ ============= ============== ==============
Share Activity:*
Shares sold 71,220 24,523 8,740,819 4,900,859 22,743,520 10,843,635
Reinvestment of dividends 144,592 24,012 8,931,831 3,793,570 5,738,483 3,363,376
Shares redeemed (88,913) (98,638) (10,469,110) (7,721,538) (10,115,134) (6,650,915)
---------- ---------- ------------ ------------- -------------- --------------
Net increase (decrease) in number
of shares 126,899 (50,103) 7,203,540 972,891 18,366,869 7,556,096
========== ========== ============ ============= ============== ==============
* Both the Capital Transactions and Share Activity sections represent Classes A,
B, and D
(a) Combined data from Fund prior to and after Reorganization
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Statement of Changes in Net Assets continued
October 31, 1998
<CAPTION>
Nationwide Nationwide Nationwide Intermediate
Bond Fund Tax-Free Income Fund U.S. Government Bond Fund
Year ended Year ended Year ended Year ended Year ended Year ended
October 31, October 31, October 31, October 31, October 31, October 31,
1998 1997 1998 1997 1998 1997
<S> <C> <C> <C> <C> <C> <C>
Increase (Decrease) in Net Assets:
Operations:
Net investment income $ 7,683,402 $ 8,088,836 $ 12,394,623 $ 12,646,632 $ 2,516,877 $ 2,306,288
Net realized gain (loss) on investments 2,719,870 2,142 4,159,256 2,342,626 1,085,732 (81,299)
Net change in unrealized appreciation
(depreciation) of investments 822,095 1,831,074 1,599,094 4,275,526 389,936 1,146,999
------------ ------------ ------------ ------------ ------------ ------------
Net increase in net assets resulting
from operations 11,225,367 9,922,052 18,152,973 19,264,784 3,992,545 3,371,988
------------ ------------ ------------ ------------ ------------ ------------
Distribution to Class A
shareholders from:
Net investment income (16,370) -- (6,390) -- (4,837) --
------------ ------------ ------------ ------------ ------------ ------------
Distribution to Class B
shareholders from:
Net investment income (3,631) -- (11,930) -- (2,079) --
------------ ------------ ------------ ------------ ------------ ------------
Distribution to Class D
shareholders from: (a)
Net investment income (7,657,828) (8,085,400) (12,376,537) (12,646,632) (2,509,961) (2,306,288)
In excess of net investment income -- -- -- (87) -- --
Net realized gain from
investment transactions -- -- (1,813,545) -- (341,559) (437)
------------ ------------ ------------ ------------ ------------ ------------
Decrease in net assets from shareholder
distributions (7,677,829) (8,085,400) (14,208,402) (12,646,719) (2,858,436) (2,306,725)
Capital share transactions:*
Net proceeds from sale of shares 33,695,932 14,913,782 16,799,406 16,022,089 30,536,170 5,663,442
Net proceeds from Reorganization -- -- 16,007,718 -- -- --
Net asset value of shares issued
to shareholders
from reinvestment of dividends 6,457,902 6,679,886 10,158,526 8,939,393 2,280,605 1,727,803
Cost of shares redeemed (31,429,116) (32,278,640) (37,656,601) (39,735,005) (23,801,033) (6,625,927)
------------ ------------ ------------ ------------ ------------ ------------
Increase (decrease) in net assets
derived from
capital share transactions 8,724,718 (10,684,972) 5,309,049 (14,773,523) 9,015,742 765,318
------------ ------------ ------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS 12,272,256 (8,848,320) 9,253,620 (8,155,458) 10,149,851 1,830,581
NET ASSETS--BEGINNING OF PERIOD 124,404,412 133,252,732 256,486,302 264,641,760 41,327,786 39,497,205
------------ ------------ ------------ ------------ ------------ ------------
NET ASSETS--END OF PERIOD $136,676,668 $124,404,412 $265,739,922 $256,486,302 $ 51,477,637 $ 41,327,786
============ ============ ============ ============ ============ ============
Undistributed net realized gain
(loss) on investments
included in net assets
at end of period $ (6,803,271) $ (9,523,141) $ 716,165 $ (903,745)$ 261,200 $ (482,973)
============ ============ ============ ============ ============ ============
Undistributed (distributions in
excess of) net investment
income included in net assets
at end of period $ 76,045 $ 70,472 $ 886 $ -- $ -- $ --
============ ============ ============ ============ ============ ============
Share Activity:*
Shares sold 3,489,490 1,606,337 1,582,608 1,554,772 2,924,042 562,553
Shares from Reorganization -- -- 1,527,760 -- -- --
Reinvestment of dividends 670,864 719,798 958,777 865,550 219,528 171,768
Shares redeemed (3,264,319) (3,480,898) (3,549,937) (3,850,987) (2,280,392) (658,930)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in
number of shares 896,035 (1,154,763) 519,208 (1,430,665) 863,178 75,391
============ ============ ============ ============ ============ ============
* Both the Capital Transactions and Share Activity sections represent Classes A,
B, and D.
(a) Combined data from Fund prior to and after Reorganization
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Statement of Changes in Net Assets continued
October 31, 1998
<CAPTION>
Nationwide Long-Term Nationwide
U.S. Government Bond Fund Money Market Fund
Year ended Year ended Year ended Year ended
October 31, October 31, October 31, October 31,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Assets:
Operations:
Net investment income $ 2,433,011 $ 3,192,002 $ 45,794,909 $ 38,645,269
Net realized gain (loss) on investments 988,155 90,839 724 1,103
Net change in unrealized appreciation (depreciation)
of investments 1,145,175 1,031,295 -- --
------------- -------------- --------------- ---------------
Net increase in net assets resulting from operations 4,566,341 4,314,136 45,795,633 38,646,372
------------- -------------- --------------- ---------------
Distribution to shareholders from: (a)
Net investment income N/A N/A (45,795,350) (38,644,882)
In excess of net investment income N/A N/A -- --
Net realized gain from investment transactions N/A N/A -- --
Distribution to Class A shareholders from:
Net investment income (2,306) -- N/A N/A
In excess of net investment income -- -- N/A N/A
Net realized gain from investment transactions -- -- N/A N/A
------------- -------------- --------------- ---------------
Distribution to Class B shareholders from:
Net investment income (2,607) -- N/A N/A
In excess of net investment income -- -- N/A N/A
Net realized gain from investment transactions -- -- N/A N/A
------------- -------------- --------------- ---------------
Distribution to Class D shareholders from: (c)
Net investment income (2,427,797) (3,191,909) N/A N/A
In excess of net investment income -- -- N/A N/A
Net realized gain from investment transactions -- -- N/A N/A
------------- -------------- --------------- ---------------
Decrease in net assets from shareholder distributions (2,432,710) (3,191,909) (45,795,350) (38,644,882)
Capital share transactions: (b)
Net proceeds from sale of shares 1,585,748 362,854 1,471,783,844 1,058,258,745
Net proceeds from Reorganization -- -- 4,130,470 --
Net asset value of shares issued to shareholders from
reinvestment of dividends 1,258,888 1,610,983 43,764,561 36,945,028
Cost of shares redeemed (12,028,646) (13,283,912) (1,291,647,722) (1,004,047,620)
------------- -------------- --------------- ---------------
Increase (decrease) in net assets derived from
capital share transactions (9,184,010) (11,310,075) 228,031,153 91,156,153
------------- -------------- --------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS (7,050,379) (10,187,848) 228,031,436 91,157,643
NET ASSETS--BEGINNING OF PERIOD 48,548,881 58,736,729 820,657,405 729,499,762
------------- -------------- --------------- ---------------
NET ASSETS--END OF PERIOD $ 41,498,502 $ 48,548,881 $ 1,048,688,841 $ 820,657,405
============= ============== =============== ===============
Undistributed net realized gain (loss) on investments
included in net assets at end of period $ (222,676) $ (1,210,831) $ 1,822 $ 1,103
============= ============== =============== ===============
Undistributed (distributions in excess of) net investment
income included in net assets at end of period $ 1,438 $ 1,137 $ (94) $ (935)
============= ============== =============== ===============
Share Activity:*
Shares sold 136,143 33,267 1,471,783,848 1,058,258,745
Shares from Reorganization -- -- 4,129,302 --
Reinvestment of dividends 110,525 147,681 43,764,561 36,945,028
Shares redeemed (1,059,585) (1,218,791) (1,291,647,722) (1,004,047,620)
------------- -------------- --------------- ---------------
Net increase (decrease) in number of shares (812,917) (1,037,843) 228,029,989 91,156,153
============= ============== =============== ===============
(a) Money Market Fund only.
(b) Both the Capital Transactions and Share Activity sections represent Classes
A, B, and D (except for the Money Market Fund which has no Classes).
(c) Combined data from Fund prior to and after Reorganization
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to Financial Statements
1. Summary of Significant Accounting Policies
Nationwide Investing Foundation III ("NIF III" or the "Trust") is a diversified,
open-end management investment company. NIF III was created under the laws of
Ohio as an Ohio business trust pursuant to a declaration of Trust as of October
30, 1997, and is registered under the Investment Company Act of 1940, as
amended. The Trust offers shares in nine separate mutual funds, each with its
own investment objectives. The accompanying financial statements and financial
highlights relate to the following eight 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 Intermediate U.S. Government Bond Fund
- Nationwide Long-Term U.S. Government Bond Fund
(together referred to as the "Bond Funds")
- Nationwide Money Market Fund
The Stock and Bond Funds currently offer Class A, B, and D shares. Class A
shares are purchased with a front-end sales load and a .25% 12b-1 fee. Class B
shares are subject to a contingent deferred sales charge (CDSC) on redemption
and a 1.00% 12b-1 fee for the Stock Funds and an .85% 12b-1 fee for the Bond
Funds. Class D shares are purchased with a front-end sales load but no 12b-1 fee
and are only offered to certain investors. The Money Market Fund, whose shares
currently have no class designation, has no sales charge or 12b-1 fee.
(a) Security Valuation
(1)Mid Cap Growth, Growth, Fund, Bond, Tax-Free Income, Intermediate and
Long-Term U.S. Government Bond Funds: Securities traded on a national
securities exchange are valued at the last quoted sale price as provided
by an independent pricing agent. Securities traded in the
over-the-counter (OTC) market are valued at the last quoted sale price,
or if no sale price, the last quoted bid price as provided by an
independent pricing agent. U.S Government securities are quoted at the
quoted bid price as provided by an independent pricing agent. Bonds are
valued by a combination of daily quotes and matrix evaluations.
Securities for which reliable market quotations are not available or for
which an independent pricing agent does not provide a value or provides
a value that does not represent fair value in the judgement of the
Fund's investment adviser are valued in accordance with procedures
authorized by the Board of Trustees.
(2) Money Market Fund:
Securities are valued at amortized cost, which approximates market
value, in accordance with Rule 2a-7 of the Investment Company Act of
1940, as amended.
(3)All Funds:
The value of a repurchase agreement generally equals the purchase price
paid by the Fund (cost) plus the interest accrued to date. The seller,
under the repurchase agreement, is required to maintain the market value
of the underlying collateral at not less than the value of the
repurchase agreement. Securities subject to repurchase agreements are
held by the Federal Reserve/Treasury book-entry system or by the Fund's
custodian or an approved sub-custodian.
(b)Security Transactions and Investment Income
Security transactions are recorded on the trade date. Dividend income is
recorded on the ex-dividend date; interest income is recorded on an accrual
basis and may include, where applicable, the pro rata amortization of
premium or discount.
(c)Federal Income Taxes
Each of the funds in NIF III qualified as a regulated investment company
under the Internal Revenue Code during the periods covered by the
accompanying statements. No provision has been made for federal income
taxes as it is the intention of such funds to continue such qualification
and to distribute all taxable income to shareholders. To the extent net
realized gains are offset through the application of a capital loss
carryover, they will not be distributed to shareholders but will be
retained by the applicable fund. Withholding taxes have been paid or
provided for in accordance with the applicable tax rates and rules.
As of October 31, 1998, the Bond, Tax-free Income and Long-Term U.S.
Government Bond Fund's had net capital loss carry forwards in the amounts
of $6,803,271, $339,989 and $222,676, respectively. If unused, the Bond
Fund carry forwards will expire within 3 to 6 years, the Tax-free Income
Fund carry forwards will expire within 5 years, and the Long Term U.S.
Government Bond Fund's carry forwards will expire within 4 to 5 years.
(d)Dividends to Shareholders
(1) Mid Cap Growth, Growth, and Fund:
Dividend income is declared and paid quarterly and is recorded on the
ex-dividend date.
(2) Bond, Tax-Free Income, Intermediate and Long-Term U.S. Government Bond,
and Money Market:
Dividend income is declared and recorded daily and paid monthly.
<PAGE>
(3) All Funds
Distributable net realized capital gains, if any, are declared and
distributed at least annually.
Dividends and distributions to shareholders are determined in accordance
with federal income tax regulations which may differ from generally
accepted accounting principles. These "book/tax" differences are
considered either permanent or temporary in nature. In accordance with
AICPA (American Institute of Certified Public Accountants) Statement of
Position 93-2, permanent differences are reclassified within the capital
accounts based on their nature for federal income tax purposes;
temporary differences do not require reclassification. Dividends and
distributions that exceed net investment income and net realized gains
for financial reporting purposes but not for tax purposes are reported
as dividends in excess of net investment income and net realized gains.
To the extent distributions exceed current and accumulated earnings and
profits for federal income tax purposes, they are reported as
distributions of paid-in-capital. These reclassifications have no effect
upon the net asset value of the respective funds.
Accordingly, as of October 31, 1998, undistributed net investment
income, undistributed net realized gains and capital paid in excess of
par value have been adjusted. Negative amounts represent credits and
positive amounts represent debits. The adjustments are as follows:
<TABLE>
<CAPTION>
Capital Paid Undistributed Undistributed
In Excess of Net Investment Capital
Par Value Income Gain
<S> <C> <C> <C>
Mid Cap Growth $ 33,406 $ (27,010) $(6,396)
Growth Fund 124,270 (124,270) --
Fund -- -- --
Bond Fund -- -- --
Tax-Free Income Fund 6,327 (2,340) (3,987)
Interm. U.S. Gv't
Bond Fund -- -- --
Long-Term U.S. Gv't
Bond Fund -- -- --
</TABLE>
(e)Expenses
General expenses of the Trust, not directly attributable to a Fund or to
any class of shares, are allocated to the Funds based upon each Fund's
relative average net assets or an other appropriate basis, as approved by
the Board of Trustees. Once these expenses are allocated to the Fund, they
are sub-allocated to the classes based on total settled shares outstanding,
for Bond funds, and total shares outstanding, for Stock funds. The Money
Market Fund currently has no specific classes of shares. Direct expenses of
a Fund are allocated to that Fund and thus sub-allocated to the classes in
the methods mentioned above, with the exception of the Money Market Fund.
Direct expenses of a class are allocated to that class unless otherwise
directed by the Board of Trustees. Distribution fees are borne by the
specific class of shares to which they apply.
(f)Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the period. Actual results could differ from those estimates.
<PAGE>
Notes to Financial Statements
October 31, 1998
<TABLE>
(g)Capital Share Transactions
Transactions in class level shares of the Funds were as follows:
<CAPTION>
Mid Cap Growth Growth
May 11, 1998 Year ended May 11, 1998 Year ended
to October 31, October 31, to October 31, October 31,
CAPITAL TRANSACTIONS: 1998(a) 1997 1998(a) 1997
<S> <C> <C> <C> <C>
Class A Shares:
Proceeds from shares issued $ 344,800 $ -- $ 3,029,677 $ --
Dividends reinvested -- -- -- --
Cost of shares redeemed (18,755) -- (178,907) --
------------- ------------ ------------- -------------
Change in net assets $ 326,045 $ -- $ 2,850,770 $ --
============= ============ ============= =============
Class B Shares:
Proceeds from shares issued $ 281,397 $ -- $ 1,649,716 $ --
Dividends reinvested -- -- -- --
Cost of shares redeemed (17,090) -- (97,466) --
------------- ------------ ------------- -------------
Change in net assets $ 264,307 $ -- $ 1,552,250 $ --
============= ============ ============= =============
Year ended Year ended Year ended Year ended
October 31, October 31, October 31, October 31,
1998(b) 1997 1998(b) 1997
Class D Shares:
Proceeds from shares issued $ 734,016 $ 509,644 $ 136,465,917 $ 72,950,910
Dividends reinvested 2,767,469 464,389 134,704,429 51,457,653
Cost of shares redeemed (1,703,400) (2,213,453) (166,603,194) (112,743,374)
------------- ------------ ------------- -------------
Change in net assets $ 1,798,085 $ (1,239,420) $ 104,567,152 $ 11,665,189
============= ============ ============= =============
May 11, 1998 Year ended May 11, 1998 Year ended
to October 31, October 31, to October 31, October 31,
SHARE TRANSACTIONS: 1998(a) 1997 1998(a) 1997
Class A Shares:
Issued 18,405 -- 188,025 --
Reinvested -- -- --
Redeemed (1,143) -- (11,397) --
------------- ------------ ------------- -------------
Change in shares 17,262 -- 176,628 --
============= ============ ============= =============
Class B Shares:
Issued 15,253 -- 103,812 --
Reinvested -- -- --
Redeemed (940) -- (6,350) --
------------- ------------ ------------- -------------
Change in shares 14,313 -- 97,462 --
============= ============ ============= =============
Year ended Year ended Year ended Year ended
October 31, October 31, October 31, October 31,
1998(b) 1997 1998(b) 1997
Class D Shares:
Issued 37,562 24,523 8,448,982 4,900,859
Reinvested 144,592 24,012 8,931,831 3,793,570
Redeemed (86,830) (98,638) (10,451,363) (7,721,538)
------------- ------------ ------------- -------------
Change in shares 95,324 (50,103) 6,929,450 972,891
============= ============ ============= =============
(a) First offered to the public on May 11, 1998
(b) Combined data for Fund (Pre-Reorganization) and Class D (after
Regoranization).
</TABLE>
<PAGE>
Notes to Financial Statements
October 31, 1998
<TABLE>
<CAPTION>
Fund Bond
May 11, 1998 Year ended May 11, 1998 Year ended
to October 31, October 31, to October 31, October 31,
<S> <C> <C> <C> <C>
CAPITAL TRANSACTIONS: 1998(a) 1997 1998(a) 1997
Class A Shares:
Proceeds from shares issued $ 20,601,894 $ -- $ 1,409,285 $ --
Dividends reinvested 34,351 -- 13,581 --
Cost of shares redeemed (1,354,138) -- (64,710) --
------------- ------------ ------------- -------------
Change in net assets $ 19,282,107 $ -- $ 1,358,156 $ --
============= ============ ============= =============
Class B Shares:
Proceeds from shares issued $ 13,522,175 $ -- $ 505,043 $ --
Dividends reinvested 6,932 -- 3,572 --
Cost of shares redeemed (411,234) -- (17,744) --
------------- ------------ ------------- -------------
Change in net assets $ 13,117,873 $ -- $ 490,871 $ --
============= ============ ============= =============
Year ended Year ended Year ended Year ended
October 31, October 31, October 31, October 31,
1998(b) 1997 1998(b) 1997
Class D Shares:
Proceeds from shares issued $ 632,838,515 $258,190,771 $ 31,781,604 $ 14,913,782
Dividends reinvested 161,615,797 70,531,213 6,440,749 6,679,886
Cost of shares redeemed (291,676,055) (152,506,314) (31,346,662) (32,278,640)
------------- ------------ ------------- -------------
Change in net assets $ 502,778,257 $176,215,670 $ 6,875,691 $ (10,684,972)
============= ============ ============= =============
May 11, 1998 Year ended May 11, 1998 Year ended
to October 31, October 31, to October 31, October 31,
SHARE TRANSACTIONS: 1998(a) 1997 1998(a) 1997
Class A Shares:
Issued 696,756 -- 145,277 --
Reinvested 1,217 -- 1,388 --
Redeemed (46,398) -- (6,616) --
------------- ------------ ------------- -------------
Change in shares 651,575 -- 140,049 --
============= ============ ============= =============
Class B Shares:
Issued 461,348 -- 51,705 --
Reinvested 245 -- 365 --
Redeemed (14,553) -- (1,821) --
------------- ------------ ------------- -------------
Change in shares 447,040 -- 50,249 --
============= ============ ============= =============
Year ended Year ended Year ended Year ended
October 31, October 31, October 31, October 31,
1998(b) 1997 1998(b) 1997
Class D Shares:
Issued 21,585,416 10,843,635 3,292,508 1,606,337
Reinvested 5,737,021 3,363,376 669,111 719,798
Redeemed (10,054,183) (6,650,915) (3,255,882) (3,480,898)
------------- ------------ ------------- -------------
Change in shares 17,268,254 7,556,096 705,737 (1,154,763)
============= ============ ============= =============
(a) First offered to the public on May 11, 1998
(b) Combined data for Fund (Pre-Reorganization) and Class D (after
Regoranization).
</TABLE>
<PAGE>
Notes to Financial Statements
October 31, 1998
<TABLE>
<CAPTION>
Tax-Free Income Intermediate U.S. Gov't Bond
May 11, 1998 Year ended May 11, 1998 Year ended
to October 31, October 31, to October 31, October 31,
CAPITAL TRANSACTIONS: 1998(a) 1997 1998(a) 1997
<S> <C> <C> <C> <C>
Class A Shares:
Proceeds from shares issued $ 628,673 $ -- $ 371,555 $ --
Dividends reinvested 5,219 -- 4,611 --
Cost of shares redeemed (35,694) -- (48,761) --
------------ ------------ ------------ ------------
Change in net assets $ 598,198 $ -- $ 327,405 $ --
============ ============ ============ ============
Class B Shares:
Proceeds from shares issued $ 1,461,484 $ -- $ 298,918 $ --
Dividends reinvested 10,353 -- 1,475 --
Cost of shares redeemed -- -- (5,496) --
------------ ------------ ------------ ------------
Change in net assets $ 1,471,837 $ -- $ 294,897 $ --
============ ============ ============ ============
Year ended Year ended Year ended Year ended
October 31, October 31, October 31, October 31,
1998(b) 1997 1998(b) 1997
Class D Shares:
Proceeds from shares issued $ 14,709,249 $ 16,022,089 $ 29,865,697 $ 5,663,442
Proceeds from Reorganization 16,109,654 -- -- --
Dividends reinvested 10,142,954 8,939,393 2,274,519 1,727,803
Cost of shares redeemed (37,620,907) (39,735,005) (23,746,776) (6,625,927)
------------ ------------ ------------ ------------
Change in net assets $ 3,340,950 $(14,773,523) $ 8,393,440 $ 765,318
============ ============ ============ ============
May 11, 1998 Year ended May 11, 1998 Year ended
to October 31, October 31, to October 31, October 31,
SHARE TRANSACTIONS: 1998(a) 1997 1998(a) 1997
Class A Shares:
Issued 59,311 -- 35,666 --
Reinvested 490 -- 438 --
Redeemed (3,385) -- (4,652) --
------------ ------------ ------------ ------------
Change in shares 56,416 -- 31,452 --
============ ============ ============ ============
Class B Shares:
Issued 137,530 -- 28,512 --
Reinvested 971 -- 140 --
Redeemed -- -- (523) --
------------ ------------ ------------ ------------
Change in shares 138,501 -- 28,129 --
============ ============ ============ ============
Year ended Year ended Year ended Year ended
October 31, October 31, October 31, October 31,
1998(b) 1997 1998(b) 1997
Class D Shares:
Issued 1,385,767 1,554,772 2,859,864 562,553
Issued from Reorganization 1,527,760 -- -- --
Reinvested 957,316 865,550 218,950 171,768
Redeemed (3,546,552) (3,850,987) (2,275,217) (658,930)
------------ ------------ ------------ ------------
Change in shares 324,291 (1,430,665) 803,597 75,391
============ ============ ============ ============
(a) First offered to the public on May 11, 1998
(b) Combined data for Fund (Pre-Reorganization) and Class D (after
Regoranization).
</TABLE>
<PAGE>
Notes to Financial Statements
October 31, 1998
<TABLE>
Long-Term U.S. Gov't Bond
May 11, 1998 Year ended
to October 31, October 31,
CAPITAL TRANSACTIONS: 1998(a) 1997
<S> <C> <C>
Class A Shares:
Proceeds from shares issued $ 194,674 $ --
Dividends reinvested 2,221 --
Cost of shares redeemed (570) --
------------ ------------
Change in net assets $ 196,325 $ --
============ ============
Class B Shares:
Proceeds from shares issued $ 360,886 $ --
Dividends reinvested 1,906 --
Cost of shares redeemed (16,822) --
------------ ------------
Change in net assets $ 345,970 $ --
============ ============
Year ended Year ended
October 31, October 31,
1998(b) 1997
Class D Shares:
Proceeds from shares issued $ 1,030,188 $ 362,854
Proceeds from Reorganization -- --
Dividends reinvested 1,254,761 1,610,983
Cost of shares redeemed (12,011,254) (13,283,912)
------------ ------------
Change in net assets $ (9,726,305) $(11,310,075)
============ ============
May 11, 1998 Year ended
to October 31, October 31,
SHARE TRANSACTIONS: 1998(a) 1997
Class A Shares:
Issued 16,928 --
Reinvested 190 --
Redeemed (49) --
------------ ------------
Change in shares 17,069 --
============ ============
Class B Shares:
Issued 31,226 --
Reinvested 163 --
Redeemed (1,462) --
------------ ------------
Change in shares 29,927 --
============ ============
Year ended Year ended
October 31, October 31,
1998(b) 1997
Class D Shares:
Issued 87,989 33,267
Issued from Reorganization -- --
Reinvested 110,172 147,681
Redeemed (1,058,074) (1,218,791)
------------ ------------
Change in shares (859,913) (1,037,843)
============ ============
(a) First offered to the public on May 11, 1998
(b) Combined data for Fund (Pre-Reorganization) and Class D (after
Regoranization).
</TABLE>
<PAGE>
Notes to Financial Statements
October 31, 1998
2. Transaction With Affiliates
Mid Cap Growth, Growth, Fund, Bond, Tax-Free Income, Intermediate and Long Term
U.S. Government Bond Funds and Money Market Funds Investment advisory services
are provided to the NIF III Funds by Nationwide Advisory Services, Inc. (NAS),
an affiliated company. Under the terms of the investment advisory agreement, NAS
is entitled to receive fees based on a percentage of the average daily net
assets of the Funds.
See management fee schedule in the following table.
Fees may be voluntarily waived or reimbursed to the Funds in order to maintain
expense ratios at or below stated expense caps. For the Intermediate and
Long-Term Government Bond Funds' expenses were limited to 1.04% for Class A,
1.64% for Class B, and 0.79% for Class D. The Mid Cap Growth Fund's expenses
were limited to 1.25% for Class A, 2.00% for Class B, and 1.00% for Class D.
During the period ended October 31, 1998, NAS voluntarily reduced expenses for
Mid Cap Growth, Tax-Free Income, Intermediate and Long-Term U.S. Government, and
the Money Market Funds in its amounts of $63,830, $199,556, $52,548, $203,136
and $211,174 respectively. These fees would not be payable in full if the effect
of such payment would increase total expense (excluding taxes other than payroll
taxes and brokerage commissions on portfolio transactions) to an amount
exceeding 1% of average daily net assets for any fiscal year. Such limitations
on total expenses did not affect management fees during the periods covered by
the financial statements.
During the period ended October 31, 1998, NAS voluntarily waived advisory fees
for the Money Market Fund in the amount of $221,174. Additional information
regarding investment advisory fees paid or payable for NAS is as follows for the
period ended October 31, 1998:
<TABLE>
<CAPTION>
Average Daily Advisory NAS Advisory
Fund Net Assets (a) Fee (a) Fees (b)
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Mid Cap Growth $ 61,706
Growth $4,894,110
Fund $9,977,231
Up to $250 million 0.60%
Next $750 million 0.575%
Next $1 billion 0.55%
Next $3 billion 0.525%
$5 billion and more 0.50%
- -------------------------------------------------------------------------------------
Bond $ 647,809
Tax-Free Income $1,505,626
Intermediate U.S. Gov't $ 266,473
Long-Term U.S. Gov't $ 254,928
Up to $250 million 0.50%
Next $750 million 0.475%
Next $1 billion 0.45%
Next $3 billion 0.425%
$5 billion and more 0.40%
- -------------------------------------------------------------------------------------
Money Market $4,079,072
Up to $1 billion 0.40%
Next $1 billion 0.38%
Next $3 billion 0.36%
$5 billion and more 0.34%
</TABLE>
(a) Current fee structure after the May 11, 1998, Reorganization for the Stock
Funds, Bond Funds, and Money Market Fund.
(b) Combined data from Fund prior to and after Reorganization.
<PAGE>
Notes to Financial Statements
October 31, 1998
Per the Fund Administration Agreement, NAS also receives fees from the Funds for
administrative services calculated daily and paid monthly according to the
following schedule:
Average Daily Administration Administration
Fund Net Assets Fee Fee
- ---- ---------- ----------- -----------
Mid Cap Growth $ 3,308
Growth 248,049
Fund 470,352
Bond 44,441
Tax-Free Income 88,596
Intermediate U.S. Gov't 16,351
Long-Term U.S. Gov't 13,998
Money Market 257,123
Up to $250 million 0.07%
Next $750 million 0.05%
$1 billion and more 0.04%
NAS also receives fees for services as principal underwriter in the form of
front-end sales loads. Such fees are deducted from and are not included in
proceeds from sales of capital shares for Class A and D shares. From such fees,
NAS pays sales commissions, salaries, and other expenses. For the period ended
October 31, 1998, the fees were as follows:
Fund Class A shares Class D Shares
- ---- ----------- -----------
Mid Cap Growth $ 12,869 $ 7,427
Growth 118,773 940,154
Fund 780,701 2,722,270
Bond 37,435 74,933
Tax-Free Income 18,151 69,623
Intermediate U.S. Gov't 9,755 15,611
Long-Term U.S. Gov't 4,602 2,555
NAS also receives fees for services as principal underwriter in the form of
contingent deferred sales charges (CDSC's) for the Class B shares. Such fees
range from 5% to 1% imposed on redemptions which cause the current value of an
account to fall below the total purchase payments made during the past five
years. CDSC's collected on for the period ended October 31, 1998, on redemptions
of Class B Shares were as follows:
Fund Class B shares
- ---- -----------
Mid Cap Growth $ --
Growth --
Fund 254
Bond 6,107
Tax-Free Income 111
Intermediate U.S. Gov't --
Long-Term U.S. Gov't --
NAS may also receive fees on the NIF III Funds for distribution pursuant to a
Rule 12b-1 Distribution Plan approved by the Board of Trustees. These fees are
based on average daily net assets of each class at an annual rate of 0.25% for
Class A Shares of each Fund, 1.00% for Class B shares of the Stock Funds, and
0.85% for Class B shares of the Bond Funds. For the period ended October 31,
1998, the fees were as follows:
Fund Class A shares Class B Shares Class D Shares (a)
---- ----------- ----------- -------------
Mid Cap Growth $ 204 $ 659 $38,480
Growth 1,838 3,518 --
Fund 11,051 29,020 --
Bond 717 627 --
Tax-Free Income 359 2,653 465,630
Intermediate U.S. Gov't 236 384 80,591
Long-Term U.S. Gov't 113 491 178,777
During the period ended October 31, 1998, NAS voluntarily waived distribution
fees for the Mid Cap Growth, Tax-Free Income, Intermediate and Long Term U.S.
Government Bond Funds in the amounts of $38,480, $199,556, $34,539, and
$178,777.
(a) Distribution Fees from the Funds prior to the May 11, 1998, Reorganization.
<PAGE>
Notes to Financial Statements
October 31, 1998
Nationwide Investors Services, Inc. (NISI), a subsidiary of NAS, acts as
Transfer and Dividend Disbursing Agent for the Funds.
3. Reorganization
At a meeting on November 7, 1997, the Boards of Trustees for the Nationwide
Investing Foundation (NIF), Nationwide Investing Foundation II (NIF II), and
Financial Horizons Investment Trust (FHIT) approved the submission of an issue
for shareholders of the NIF, NIF II and FHIT Funds, respectively. The issue to
be considered was an Agreement and Plan of Reorganization and Liquidation (the
"Reorganization") between the NIF, NIF II, FHIT respectively and Nationwide
Investing Foundation III (the "New Trust"). At a Special Meeting of the NIF, NIF
II, and FHIT Shareholders, held on February 18, 1998, the Reorganization was
approved. The Reorganization, which qualified as a tax-free exchange for federal
income tax purposes, was completed on May 11, 1998. The following transactions
occurred:
(a)The transfer of the net assets of the NIF Growth, NIF Fund, NIF Bond, and
NIF II Tax-Free Income Funds to a series of the New Trust which bear the
same names, in exchange for Class D shares which were distributed to
shareholders for each of their respective Funds.
(b)The transfer of the net assets of the NIF Money Market Fund to a series of
the New Trust which bears the same name, in exchange for shares of the new
series in the New Trust, which were distributed to the shareholders of the
NIF Money Market Fund.
(c)The transfer of the net assets of the NIF II U.S. Government Income Fund
to a series of the New Trust which bears the name Nationwide Intermediate
U.S. Government Bond Fund, in exchange for Class D shares of the Nationwide
Intermediate U.S. Government Bond Fund, which were distributed to
shareholders of the NIF II U.S. Government Income Fund.
(d)The transfer of the net assets of the FHIT Cash Reserve Fund to a series
of the New Trust which bears the name Nationwide Money Market Fund, in
exchange for shares of the Nationwide Market Fund, which were distributed
to shareholders of the FHIT Cash Reserve Fund.
(e)The transfer of the net assets of the FHIT Growth Fund to a series of the
New Trust which bears the name Nationwide Mid Cap Growth Fund, in exchange
for Class D shares of the Nationwide Mid Cap Growth Fund, which were
distributed to shareholders of the FHIT Growth Fund.
(f)The transfer of the net assets of the FHIT U.S. Government Bond Fund to a
series of the New Trust which bears the name Nationwide Long-Term U.S.
Government Bond Fund, in exchange for Class D shares of the Nationwide
Long-Term U.S. Government Bond Fund, which were distributed to the
shareholders of the FHIT U.S. Government Bond Fund.
(g)The transfer of the net assets of the FHIT Municipal Bond Fund to a series
of the New Trust which bears the name Nationwide Tax-Free Income Fund, in
exchange for Class D shares of the Nationwide Tax-Free Income Fund, which
were distributed to the shareholders of the FHIT Municipal Bond Fund.
The following is a summary of shares outstanding, net asset value per share and
unrealized appreciation immediately before and after the Reorganization:
<TABLE>
<CAPTION>
Before Reorganization After Reorganization
FHIT Growth Nationwide Mid Cap Growth Fund
Fund* (Class D Shares)
<S> <C> <C>
Shares 529,244 529,244
Net assets $ 10,412,104 $ 10,412,104
Net asset value: $ 19.67 $ 19.67
Unrealized appreciation $ (7,267) $ (7,267)
<CAPTION>
Before Reorganization After Reorganization
Nationwide Growth Nationwide Growth Fund
Fund* (Class D Shares)
<S> <C> <C>
Shares 58,974,459 58,974,459
Net assets $ 973,860,861 $ 973,860,861
Net asset value: $ 16.51 $ 16.51
Unrealized appreciation $ 376,996,601 $ 376,996,601
*Denotes surviving accounting entity
</TABLE>
<PAGE>
Notes to Financial Statements
October 31, 1998
<TABLE>
<CAPTION>
Before Reorganization After Reorganization
Nationwide Nationwide Fund
Fund* (Class D Shares)
<S> <C> <C>
Shares 66,709,378 66,709,378
Net assets $1,997,239,223 $1,997,239,223
Net asset value: $ 29.94 $ 29.94
Unrealized appreciation $ 947,678,171 $ 947,678,171
<CAPTION>
Before Reorganization After Reorganization
Nationwide Bond Nationwide Bond Fund
Fund* (Class D Shares)
<S> <C> <C>
Shares 13,439,756 13,439,756
Net assets $ 128,008,745 $ 128,008,745
Net asset value: $ 9.52 $ 9.52
Unrealized appreciation $ 3,510,206 $ 3,510,206
<CAPTION>
Before Reorganization After Reorganization
Nationwide FHIT Nationwide
Tax-Free Income Municipal Bond Tax-Free Income
Fund* Fund (Class D Shares)
<S> <C> <C> <C>
Shares 24,143,180 1,430,808 25,670,940
Net assets $252,969,806 $ 16,007,718 $ 268,977,524
Net asset value: $ 10.48 $ 11.19 $ 10.48
Unrealized appreciation $ 13,424,189 $ 629,072 $ 14,053,261
<CAPTION>
Before Reorganization After Reorganization
FHIT Nationwide U.S. Long-
Government Bond Term Government Bond
Fund* (Class D Shares)
<S> <C> <C>
Shares 3,845,833 3,845,833
Net assets $ 43,241,040 $ 43,241,040
Net asset value: $ 11.24 $ 11.24
Unrealized appreciation $ 1,902,379 $ 1,902,379
<CAPTION>
Before Reorganization After Reorganization
Nationwide U.S. Nationwide U.S. Intermediate
Government Income Government Bond
Fund* (Class D Shares)
<S> <C> <C>
Shares 4,424,094 4,424,094
Net assets $ 45,297,552 $ 45,297,552
Net asset value: $ 10.24 $ 10.24
Unrealized appreciation $ 924,514 $ 924,514
<CAPTION>
Before Reorganization After Reorganization
Nationwide FHIT Nationwide
Money Market Cash Reserve Money Market
Fund* Fund Fund
<S> <C> <C> <C>
Shares 888,109,330 4,129,302 892,238,632
Net assets $888,109,008 $ 4,130,470 $ 892,239,478
Net asset value: $ 1.00 $ 1.00 $ 1.00
Unrealized appreciation $ -- $ -- $ --
*Denotes surviving accounting entity
</TABLE>
<PAGE>
Notes to Financial Statements
October 31, 1998
4. Bank Loans
The NIF III Trust has unsecured bank line of credit of $50,000,000. Borrowings
under this arrangement bears interest at the Federal Funds rate plus .50%. These
interest costs are included in custodian fees in the Statements of Operations.
No compensating balances are required.
5. Investment Transactions
Purchases and sales of securities (excluding U.S. Government and short-term
securities), and purchases and sales of U.S. Government Obligations for the year
ended October 31, 1998, are summarized as follows:
NON U.S. GOVERNMENT SECURITIES
Purchases Sales
Mid Cap Growth $ 4,401,713 $ 4,681,507
Growth 337,761,279 360,130,198
Fund 571,388,679 204,812,608
Bond 63,418,457 39,391,550
Tax-Free Income 75,898,014 86,961,795
Interm Gov't Bond -- --
Long-Term Gov't Bond -- --
Money Market -- --
U.S. GOVERNMENT OBLIGATIONS
Purchases Sales
Mid Cap Growth $ 2,451,568 $ 2,726,960
Growth 232,400,460 43,961,959
Fund 40,427,344 42,668,438
Bond 33,253,359 50,022,461
Tax-Free Income -- --
Interm Gov't Bond 34,421,067 25,882,620
Long-Term Gov't Bond 22,013,108 31,646,083
Money Market 183,217,033 156,481,133
Realized gains and losses have been computed on the first-in, first-out basis.
Included in net unrealized appreciation at October 31, 1998, are the following
components:
<TABLE>
<CAPTION>
GROSS GROSS NET
UNREALIZED UNREALIZED UNREALIZED
APPRECIATION DEPRECIATION APPRECIATION
<S> <C> <C> <C>
Mid Cap Growth $ 2,998,647 $ (617,919) $ 2,380,728
Growth 368,046,106 (38,529,244) 329,516,862
Fund 973,308,692 (40,693,108) 932,615,584
Bond 5,623,718 (298,719) 5,324,999
Tax-Free Income 17,352,197 (163,773) 17,188,424
Interm Gov't Bond 2,113,446 (56,041) 2,057,405
Long-Term
Gov't Bond 3,434,732 -- 3,434,732
Money Market -- -- --
</TABLE>
5. Federal Income Tax Information (unaudited)
For corporate shareholders, 100% of the Growth Fund and 100% of the Fund income
dividends and short-term capital gain distributions in the fiscal year ended
October 31, 1998, qualify for the corporate dividend received deduction. All of
the distributions paid by the Tax-Free Income Fund during the fiscal year are
exempt from federal income tax.
<PAGE>
<TABLE>
Financial Highlights
October 31, 1998
<CAPTION>
Nationwide Mid Cap Growth Fund
Periods ended October 31, 1998 1998 1998
Class A Class B
Shares(a) Shares(a)
<S> <C> <C>
NET ASSET VALUE--BEGINNING OF PERIOD $19.67 $19.67
Net investment income (0.03) (0.07)
Net realized gain (loss) and unrealized appreciation (depreciation) (1.97) (2.06)
------ ------
Total from investment operations (2.00) (2.13)
Dividends from net investment income -- --
Distributions from net realized gain from investment transactions -- --
------ ------
Total distributions -- --
------ ------
Net increase (decrease) in net asset value (2.00) (2.13)
------ ------
NET ASSET VALUE--END OF PERIOD $17.67 $17.54
====== ======
Total Return (excluding sales charges) (c) (10.17%) (10.83%)
Net Assets, End of Period (000) $ 305 $ 251
Ratio of expenses to average net assets (d) 1.23% 2.00%
Ratio of expenses to average net assets* (d) 2.21% 2.98%
Ratio of net investment income to average net assets (d) (0.70%) (1.47%)
Ratio of net investment income to average net assets* (d) (1.68%) (2.45%)
Portfolio turnover (c) 46.33% 46.33%
<CAPTION>
Nationwide Mid Cap Growth Class D
Years ended October 31, Class D
Shares (b)
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE--BEGINNING OF PERIOD $22.87 $19.47 $18.17 $15.11 $14.17
Net investment income (0.06) 0.04 0.01 (0.01) 0.03
Net realized gain (loss) and unrealized
appreciation (depreciation) 1.29 4.38 3.28 3.23 0.95
------ ------ ------ ------ ------
Total from investment operations 1.23 4.42 3.29 3.22 0.98
Dividends from net investment income -- (0.03) -- -- (0.04)
Distributions in excess of net investment income -- -- -- (0.01) --
Distributions from net realized gain from
investment transactions (6.49) (0.99) (1.99) (0.15) --
------ ------ ------ ------ ------
Total distributions (6.49) (1.02) (1.99) (0.16) (0.04)
------ ------ ------ ------ ------
Net increase (decrease) in net asset value (5.26) 3.40 1.30 3.06 0.94
NET ASSET VALUE--END OF PERIOD $17.61 $22.87 $19.47 $18.17 $15.11
====== ====== ====== ====== ======
Total Return (excluding sales charges) 5.11% 23.66% 19.41% 21.57% 6.92%
Net Assets, End of Period (000) $9,022 $9,541 $9,095 $7,594 $6,787
Ratio of expenses to average net assets 0.93% 0.96% 1.44% 1.47% 1.59%
Ratio of expenses to average net assets* 1.57% 1.70% 1.69% 1.72% 1.90%
Ratio of net investment income to average
net assets (0.30%) 0.20% 0.03% (0.05%) 0.21%
Ratio of net investment income to average
net assets* (0.94%) (0.54%) (0.22%) (0.30%) (0.82%)
Portfolio Turnover 46.33% 40.69% 17.19% 29.19% 14.14%
(a) Period from May 11, 1998 to October 31, 1998
(b) Combined data from Fund prior to and after Reorganization
(c) Not annualized
(d) Annualized
* Ratios calculated as if no expenses were waived or reimbursed
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Financial Highlights
October 31, 1998
<CAPTION>
Nationwide Growth Fund
Periods ended October 31, 1998 1998 1998
Class A Class B
Shares(a) Shares(a)
<S> <C> <C>
NET ASSET VALUE--BEGINNING OF PERIOD $16.51 $ 16.51
Net investment income (0.02) (0.04)
Net realized gain (loss) and unrealized appreciation (depreciation) (0.47) (0.49)
------ ------
Total from investment operations (0.49) (0.53)
Dividends from net investment income -- --
Distributions from net realized gain from investment transactions -- --
------ ------
Total distributions -- --
------ ------
Net increase (decrease) in net asset value (0.49) (0.53)
------ ------
NET ASSET VALUE--END OF PERIOD $16.02 $15.98
====== ======
Total Return (excluding sales charges) (c) (2.97%) (3.21%)
Net Assets, End of Period (000) $2,830 $1,557
Ratio of expenses to average net assets (d) 1.11% 1.88%
Ratio of net investment income to average net assets (d) (0.38%) (1.16%)
Portfolio turnover (c) 38.61% 38.61%
<CAPTION>
Nationwide Growth Fund Class D
Years ended October 31, Class D
Shares (b)
1998 1997 1996 1995 1994
NET ASSET VALUE--BEGINNING OF PERIOD $16.32 $13.34 $13.22 $11.35 $11.14
Net investment income 0.03 0.12 0.16 0.21 0.09
Net realized gain (loss) and unrealized
appreciation (depreciation) 2.32 3.94 1.36 2.10 0.53
------ ------ ------ ------ ------
Total from investment operations 2.35 4.06 1.52 2.31 0.62
Dividends from net investment income (0.03) (0.12) (0.16) (0.20) (0.19)
Dividends in excess of net investment income (0.01) -- -- -- --
Distributions from net realized gain from
investment transactions (2.61) (0.96) (1.24) (0.24) (0.22)
------ ------ ------ ------ ------
Total distributions (2.65) (1.08) (1.40) (0.44) (0.41)
------ ------ ------ ------ ------
Net increase (decrease) in net asset value (0.30) 2.98 0.12 1.87 0.21
------ ------ ------ ------ ------
NET ASSET VALUE--END OF PERIOD $16.02 $16.32 $13.34 $13.22 $11.35
====== ====== ====== ====== ======
Total Return (excluding sales charges) 15.94% 32.12% 12.36% 21.01% 5.73%
Net Assets, End of Period (000) $914,178 $818,124 $655,616 $582,927 $464,715
Ratio of expenses to average net assets 0.73% 0.64% 0.64% 0.66% 0.68%
Ratio of net investment income to average
net assets 0.19% 0.81% 1.20% 1.66% 1.71%
Portfolio turnover 38.61% 45.07% 25.61% 27.10% 14.50%
(a) Period from May 11, 1998 to October 31, 1998
(b) Combined data from Fund prior to and after Reorganization
(c) Not annualized
(d) Annualized
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Financial Highlights
October 31, 1998
<CAPTION>
Nationwide Fund
Periods ended October 31, 1998 1998 1998
Class A Class B
Shares(a) Shares(a)
<S> <C> <C>
NET ASSET VALUE--BEGINNING OF PERIOD $29.94 $29.94
Net investment income 0.06 --
Net realized gain (loss) and unrealized appreciation (depreciation) 0.38 0.27
------ ------
Total from investment operations 0.44 0.27
Dividends from net investment income (0.08) (0.03)
Distributions from net realized gain from investment transactions -- --
------ ------
Total distributions (0.08) (0.03)
------ ------
Net increase (decrease) in net asset value 0.35 0.23
------ ------
NET ASSET VALUE--END OF PERIOD $30.30 $30.18
====== ======
Total Return (excluding sales charges) (c) 1.48% 0.90%
Net Assets, End of Period (000) $19,746 $13,493
Ratio of expenses to average net assets (d) 1.00% 1.75%
Ratio of net investment income to average net assets (d) 0.54% (0.20%)
Portfolio turnover (c) 13.47% 13.47%
<CAPTION>
Nationwide Fund Class D
Years ended October 31, Class D
Shares (b)
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE--BEGINNING OF PERIOD $26.57 $20.41 $17.35 $16.12 $16.55
Net investment income 0.30 0.31 0.36 0.31 0.37
Net realized gain (loss) and unrealized
appreciation (depreciation) 6.23 7.44 3.98 2.49 0.41
------- ------- ------ ------ ------
Total from investment operations 6.53 7.75 4.34 2.80 0.78
Dividends from net investment income (0.30) (0.31) (0.35) (0.31) (0.36)
Distributions from net realized gain from
investment transactions (2.54) (1.28) (0.93) (1.26) (0.85)
------- ------- ------ ------ ------
Total distributions (2.84) (1.59) (1.28) (1.57) (1.21)
------- ------- ------ ------ ------
Net increase (decrease) in net asset value 3.69 6.16 3.06 1.23 (0.43)
------- ------- ------ ------ ------
NET ASSET VALUE--END OF PERIOD $ 30.26 $ 26.57 $20.41 $17.35 $16.12
======= ======= ====== ====== ======
Total Return (excluding sales charges) 25.73% 40.17% 26.11% 19.24% 4.88%
Net Assets, End of Period (000) $2,172,101 $1,448,422 $958,590 $795,666 $706,674
Ratio of expenses to average net assets 0.66% 0.60% 0.61% 0.63% 0.63%
Ratio of net investment income to average
net assets 1.00% 1.32% 1.89% 1.95% 2.26%
Portfolio turnover 13.47% 14.94% 16.71% 16.50% 15.40%
(a) Period from May 11, 1998 to October 31, 1998
(b) Combined data from Fund prior to and after Reorganization
(c) Not annualized
(d) Annualized
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Financial Highlights
October 31, 1998
<CAPTION>
Nationwide Bond Fund
Periods ended October 31, 1998 1998 1998
Class A Class B
Shares(a) Shares(a)
<S> <C> <C>
NET ASSET VALUE--BEGINNING OF PERIOD $ 9.52 $ 9.52
Net investment income 0.26 0.23
Net realized gain (loss) and unrealized appreciation (depreciation) 0.23 0.23
------ ------
Total from investment operations 0.49 0.46
Dividends from net investment income (0.26) (0.23)
Distributions from net realized gain from investment transactions -- --
------ ------
Total distributions (0.26) (0.23)
------ ------
Net increase (decrease) in net asset value 0.23 0.23
------ ------
NET ASSET VALUE--END OF PERIOD $ 9.75 $ 9.75
====== ======
Total Return (excluding sales charges) (c) 5.18% 4.85%
Net Assets, End of Period (000) $1,365 $ 490
Ratio of expenses to average net assets (d) 1.17% 1.81%
Ratio of net investment income to average net assets (d) 5.48% 4.93%
Portfolio turnover (c) 70.31% 70.31%
<CAPTION>
Nationwide Bond Fund Class D
Years ended October 31, Class D
Shares (b)
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE--BEGINNING OF PERIOD $ 9.49 $ 9.34 $ 9.50 $ 8.46 $10.07
Net investment income 0.57 0.60 0.61 0.63 0.60
Net realized gain (loss) and unrealized
appreciation (depreciation) 0.27 0.15 (0.15) 1.04 (1.56)
------ ------ ------ ------ ------
Total from investment operations 0.84 0.75 0.46 1.67 (0.96)
Dividends from net investment income (0.57) (0.60) (0.62) (0.63) (0.65)
Distributions from net realized gain from
investment transactions -- -- -- -- --
------ ------ ------ ------ ------
Total distributions (0.57) (0.60) (0.62) (0.63) (0.65)
------ ------ ------ ------ ------
Net increase (decrease) in net asset value 0.27 0.15 (0.16) 1.04 (1.61)
------ ------ ------ ------ ------
NET ASSET VALUE--END OF PERIOD $ 9.76 $ 9.49 $ 9.34 $ 9.50 $ 8.46
====== ====== ====== ====== ======
Total Return (excluding sales charges) 9.11% 8.33% 5.05% 20.41% (9.81%)
Net Assets, End of Period (000) $134,822 $124,404 $133,253 $133,633 $124,455
Ratio of expenses to average net assets 0.78% 0.72% 0.70% 0.71% 0.71%
Ratio of net investment income to average
net assets 5.93% 6.43% 6.60% 7.04% 7.11%
Portfolio turnover 70.31% 70.63% 38.95% 70.40% 58.00%
(a) Period from May 11, 1998 to October 31, 1998
(b) Combined data from Fund prior to and after Reorganization
(c) Not annualized
(d) Annualized
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Financial Highlights
October 31, 1998
<CAPTION>
Nationwide Tax-Free Income Fund
Periods ended October 31, 1998 1998 1998
Class A Class B
Shares(a) Shares(a)
<S> <C> <C>
NET ASSET VALUE--BEGINNING OF PERIOD $10.48 $10.48
Net investment income 0.23 0.20
Net realized gain (loss) and unrealized appreciation (depreciation) 0.17 0.18
------ ------
Total from investment operations 0.40 0.38
Dividends from net investment income (0.23) (0.20)
Distributions from net realized gain from investment transactions -- --
------ ------
Total distributions (0.23) (0.20)
------ ------
Net increase (decrease) in net asset value 0.17 0.18
------ ------
NET ASSET VALUE--END OF PERIOD $10.65 $10.66
====== ======
Total Return (excluding sales charges) (c) 3.86% 3.66%
Net Assets, End of Period (000) $ 601 $1,477
Ratio of expenses to average net assets (d) 1.06% 1.66%
Ratio of net investment income to average net assets (d) 4.50% 3.94%
Portfolio turnover (c) 28.88% 28.88%
<CAPTION>
Nationwide Tax-Free Income Fund Class D
Years ended October 31, Class D
Shares (b)
1998 1997 1996 1995 1994
NET ASSET VALUE--BEGINNING OF PERIOD $10.51 $10.24 $10.22 $ 9.40 $10.95
Net investment income 0.50 0.50 0.51 0.51 0.53
Net realized gain (loss) and unrealized
appreciation (depreciation) 0.23 0.27 0.02 0.84 (1.45)
------ ------ ------ ------ ------
Total from investment operations 0.73 0.77 0.53 1.35 (0.92)
Dividends from net investment income (0.50) (0.50) (0.51) (0.53) (0.51)
Distributions from net realized gain from
investment transactions (0.08) -- -- -- (0.12)
------ ------ ------ ------ ------
Total distributions (0.58) (0.50) (0.51) (0.53) (0.63)
------ ------ ------ ------ ------
Net increase (decrease) in net asset value 0.15 0.27 0.02 0.82 (1.55)
------ ------ ------ ------ ------
NET ASSET VALUE--END OF PERIOD $10.66 $10.51 $10.24 $10.22 $ 9.40
====== ====== ====== ====== ======
Total Return (excluding sales charges) 7.09% 7.72% 5.31% 14.66% (8.74%)
Net Assets, End of Period (000) $263,662 $256,486 $264,642 $262,484 $241,097
Ratio of expenses to average net assets 0.85% 0.96% 0.96% 0.98% 0.99%
Ratio of expense to average net assets* 0.93% 1.11% 1.11% 1.13% 1.14%
Ratio of net investment income to average
net assets 4.73% 4.85% 4.98% 5.20% 5.02%
Ratio of net investment income to average
net assets* 4.65% 4.70% 4.83% 5.05% 4.87%
Portfolio turnover 28.88% 39.49% 24.15% 31.70% 59.20%
(a) Period from May 11, 1998 to October 31, 1998
(b) Combined data from Fund prior to and after Reorganization
(c) Not annualized
(d) Annualized * Ratios calculated as if no expenses were waived
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Financial Highlights
October 31, 1998
<CAPTION>
Nationwide Intermediate U.S. Government Fund
Periods ended October 31, 1998 1998 1998
Class A Class B
Shares(a) Shares(a)
NET ASSET VALUE--BEGINNING OF PERIOD $10.24 $10.24
Net investment income 0.26 0.23
Net realized gain (loss) and unrealized appreciation (depreciation) 0.32 0.31
------ ------
Total from investment operations 0.58 0.54
Dividends from net investment income (0.26) (0.23)
Distributions from net realized gain from investment transactions -- --
------ ------
Total distributions (0.26) (0.23)
------ ------
Net increase (decrease) in net asset value 0.32 0.31
------ ------
NET ASSET VALUE--END OF PERIOD $10.56 $10.55
====== ======
Total Return (excluding sales charges) (c) 5.69% 5.29%
Net Assets, End of Period (000) $ 332 $ 297
Ratio of expenses to average net assets (d) 1.04% 1.64%
Ratio of expenses to average net assets* (d) 1.17% 1.86%
Ratio of net investment income to average net assets (d) 5.10% 4.59%
Ratio of net investment income to average net assets* (d) 4.97% 4.37%
Portfolio turnover (c) 59.52% 59.52%
<CAPTION>
Nationwide Intermediate U.S. Government
Class D Class D
Years ended October 31, Shares (b)
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE--BEGINNING OF PERIOD $10.31 $10.04 $10.12 $ 9.22 $10.26
Net investment income 0.56 0.59 0.59 0.59 0.54
Net realized gain (loss) and unrealized
appreciation (depreciation) 0.34 0.27 (0.08) 0.89 (0.96)
------ ------ ------ ------ ------
Total from investment operations 0.90 0.86 0.51 1.48 (0.42)
Dividends from net investment income (0.56) (0.59) (0.58) (0.58) (0.55)
Dividends in excess of net investment income -- -- (0.01) -- --
Distributions from net realized gain from
investment transactions (0.08) -- -- -- (0.07)
------ ------ ------ ------ ------
Total distributions (0.64) (0.59) (0.59) (0.58) (0.62)
------ ------ ------ ------ ------
Net increase (decrease) in net asset value 0.26 0.27 (0.08) 0.90 (1.04)
------ ------ ------ ------ ------
NET ASSET VALUE--END OF PERIOD $10.57 $10.31 $10.04 $10.12 $ 9.22
====== ====== ====== ====== ======
Total Return (excluding sales charges) 9.03% 8.86% 5.28% 16.47% (4.20%)
Net Assets, End of Period (000) $50,849 $41,328 $39,497 $39,777 $37,749
Ratio of expenses to average net assets 0.92% 1.07% 1.06% 1.08% 1.09%
Ratio of expense to average net assets* 1.03% 1.22% 1.21% 1.23% 1.24%
Ratio of net investment income to average
net assets 5.43% 5.85% 5.86% 5.92% 5.62%
Ratio of net investment income to average
net assets* 5.32% 5.70% 5.71% 5.77% 5.47%
Portfolio turnover 59.52% 26.58% 9.30% 25.40% 67.50%
(a) Period from May 11, 1998 to October 31, 1998
(b) Combined data from Fund prior to and after Reorganization
(c) Not annualized
(d) Annualized
* Ratios calculated as if no expenses were waived or reimbursed
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Financial Highlights
October 31, 1998
<CAPTION>
Nationwide Long-Term U.S. Government Fund
Periods ended October 31, 1998 1998 1998
Class A Class B
Shares(a) Shares(a)
<S> <C> <C>
NET ASSET VALUE--BEGINNING OF PERIOD $11.24 $11.24
Net investment income 0.28 0.25
Net realized gain (loss) and unrealized appreciation (depreciation) 0.53 0.52
------ ------
Total from investment operations 0.81 0.77
Dividends from net investment income (0.28) (0.25)
Distributions from net realized gain from investment transactions -- --
------ ------
Total distributions (0.28) (0.25)
------ ------
Net increase (decrease) in net asset value 0.53 0.52
------ ------
NET ASSET VALUE--END OF PERIOD $11.77 $11.76
====== ======
Total Return (excluding sales charges) (c) 7.32% 6.90%
Net Assets, End of Period (000) $ 201 $ 352
Ratio of expenses to average net assets (d) 1.04% 1.64%
Ratio of expenses to average net assets* (d) 1.28% 1.90%
Ratio of net investment income to average net assets (d) 5.09% 4.52%
Ratio of net investment income to average net assets* (d) 4.85% 4.26%
Portfolio turnover (c) 51.12% 51.12%
<CAPTION>
Nationwide Long-Term U.S. Government
Class D Class D
Years ended October 31, Shares (b)
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE--BEGINNING OF PERIOD $11.19 $10.92 $11.07 $10.12 $11.31
Net investment income 0.63 0.66 0.68 0.68 0.58
Net realized gain (loss) and unrealized
appreciation (depreciation) 0.58 0.27 (0.15) 0.95 (1.10)
------ ------ ------ ------ ------
Total from investment operations 1.21 0.93 0.53 1.63 (0.52)
Dividends from net investment income (0.63) (0.66) (0.68) (0.68) (0.58)
Distributions from net realized gain from
investment transactions -- -- -- -- (0.09)
------ ------ ------ ------ ------
Total distributions (0.63) (0.66) (0.68) (0.68) (0.67)
------ ------ ------ ------ ------
Net increase (decrease) in net asset value 0.58 0.27 (0.15) 0.95 (1.19)
------ ------ ------ ------ ------
NET ASSET VALUE--END OF PERIOD $11.77 $11.19 $10.92 $11.07 $10.12
====== ====== ====== ====== ======
Total Return (excluding sales charges) 11.15% 8.84% 5.01% 16.68% (4.75%)
Net Assets, End of Period (000) $40,946 $48,549 $58,737 $69,190 $70,218
Ratio of expenses to average net assets 0.82% 0.85% 0.84% 0.89% 1.28%
Ratio of expenses to average net assets* 1.28% 1.60% 1.59% 1.58% 1.58%
Ratio of net investment income to average
net assets 5.55% 6.04% 6.26% 6.42% 5.42%
Ratio of net investment income to average
net assets* 5.09% 5.29% 5.51% 5.73% 5.12%
Portfolio turnover 51.12% 52.10% 21.04% 140.55% 174.40%
(a) Period from May 11, 1998 to October 31, 1998
(b) Combined data from Fund prior to and after Reorganization
(c) Not annualized
(d) Annualized
* Ratios calculated as if no expenses were waived or reimbursed
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Financial Highlights
October 31, 1998
<CAPTION>
Nationwide Money Market Fund
Years ended October 31,
1998 (a) 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE--BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net investment income 0.05 0.05 0.05 0.05 0.03
Dividends from net investment income (0.05) (0.05) (0.05) (0.05) (0.03)
-------- ------ ------ ------ ------
NET ASSET VALUE--END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ====== ====== ====== ======
Total Return (excluding sales charges) 5.15% 5.07% 5.05% 5.46% 3.34%
Net Assets, End of Period (000) $1,048,689 $820,657 $729,500 $604,711 $491,737
Ratio of expenses to average net assets 0.59% 0.59% 0.60% 0.62% 0.65%
Ratio of expenses to average net assets* 0.61% 0.64% 0.65% 0.67% 0.70%
Ratio of net investment income to average
net assets 5.03% 4.96% 4.93% 5.34% 3.33%
Ratio of net investment income to average
net assets* 5.01% 4.91% 4.88% 5.29% 3.28%
(a) Combined data from Reorganization
* Ratios calculated as if no expenses were waived
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Independent Auditors' Report
The Shareholders and Board of Trustees
of Nationwide Investing Foundation III:
We have audited the accompanying statements of assets and liabilities of
Nationwide Investing Foundation III (comprised of Nationwide Mid Cap Growth
Fund, Nationwide Growth Fund, Nationwide Fund, Nationwide Bond Fund, Nationwide
Tax-Free Income Fund, Nationwide Intermediate U.S. Government Bond Fund,
Nationwide Long-Term U.S. Government Bond Fund and Nationwide Money Market Fund,
collectively the Funds), including the statements of investments, as of October
31, 1998, and the related statements of operations, statements of changes in net
assets and the financial highlights for each of the periods indicated herein.
These financial statements and the financial highlights are the responsibility
of the Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included verification of securities owned as of
October 31, 1998, by confirmation with the custodian and brokers and other
appropriate audit procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the aforementioned funds comprising Nationwide Investing Foundation III at
October 31, 1998, and the results of their operations, the changes in their net
assets and the financial highlights for each of the periods indicated herein, in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Columbus, Ohio
December 11, 1998
<PAGE>
Trustees
Dimon R. McFerson
Chairman
Columbus, Ohio
Dr. John C. Bryant
Cincinnati, Ohio
Dr. C. Brent DeVore
Westerville, Ohio
Sue A. Doody
Columbus, Ohio
Robert M. Duncan
Columbus, Ohio
Charles L. Fuellgraf, Jr.
Butler, Pennsylvania
Dr. Thomas J. Kerr, IV
Westerville, Ohio
Douglas F. Kridler
Columbus, Ohio
Nancy C. Thomas
Louisville, Ohio
Harold W. Weihl
Bowling Green, Ohio
David C. Wetmore
Reston, Virginia
Officers
James F. Laird, Jr. - Treasurer
Elizabeth A. Davin - Secretary
Patricia J. Smith - Assistant Secretary
Charles S. Bath - Assistant Treasurer
Craig A. Carver - Assistant Treasurer
Christopher A. Cray - Assistant Treasurer
Scott A. Englehart - Assistant Treasurer
H. Carl Juckett - Assistant Treasurer
Edwin P. McCausland, Jr. - Assistant Treasurer
Karen R. Tackett - Assistant Treasurer
Transfer Agent
Nationwide Investors Services, Inc.
P.O. Box 1492
Columbus, Ohio 43216-1492
Custodian
The Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, Ohio 45263-0001
Legal Counsel
Druen, Dietrich, Reynolds & Koogler
One Nationwide Plaza
Columbus, Ohio 43215-2220
Independent Auditors
KPMG Peat Marwick LLP
Two Nationwide Plaza
Columbus, Ohio 43215-2537
Distributor
Nationwide Advisory Services, Inc.
Three Nationwide Plaza
Columbus, Ohio 43215-2220
<PAGE>
LOGO:
NATIONWIDE ADVISORY SERVICES, INC.
Columbus, OH 43216-1492 1-800-848-0920
Nationwide Advisory Services, Inc.
Three Nationwide Plaza
Columbus, OH 43215-2220
Photos: Watch, Leaves
Nationwide Family of Funds
Photos: Compass & Building
Toll-Free Telephone Assistance - General Account Service and Exchanges:
1-800-848-0920
NAS NOW - Fund Information Available 24 Hours a Day, Seven Days a Week:
1-800-637-0012
Internet Site - www.nationwidefunds.com
Nationwide Family of Funds
Three Nationwide Plaza
Columbus, Ohio 43215-2220
October 1998
Annual Report
Bulk Rate
U.S. Postage
Paid
Berwyn, IL
Permit No. 150
HS-402-M
