Annual Report
October 31, 1997
Nationwide(R) Family Of Funds
Nationwide Investing Foundation
Nationwide Investing Foundation II
Photo of: 5 children.
<PAGE>
MESSAGE TO SHAREHOLDERS
OCTOBER 31, 1997
PHOTO OF: DIMON R. MCFERSON
CHAIRMAN
THE CONTINUED STRENGTH OF THE MARKET REINFORCES ... A LONG-TERM INVESTMENT
STRATEGY. SINCE THE 1987 CRASH, FOR EXAMPLE, THE DOW JONES HAS RISEN MORE THAN
5,500 POINTS.
The year 1997 will be remembered as an exciting one for investors and our
shareholders.
Consumer confidence in the U.S. economy remains strong. The proportion of
customers rating business conditions as "good" rose, while the number of people
believing jobs are difficult to find fell.
A strong job market and wage gains helped consumers feel secure in handling a
mortgage, and record loan rates made them more affordable. As a result, August
marked the twentieth consecutive month of home sales above the 700,000 level,
the longest run in almost two decades.
In short, low inflation, high employment and strong levels of consumer
confidence have produced a strong market with record levels of consumer savings.
The third calendar quarter saw a change in market leadership -- dependable
blue-chip multinationals weakened while thousands of small and
mid-capitalization companies, long overlooked, made strong gains. Eighty percent
of diversified U.S. stock mutual funds outperformed the large-cap S&P 500 in the
third quarter.
The period also was highlighted by volatility in the Asian markets, which caused
a brief drop in all international markets, but eventually demonstrated the U.S.
to be the most sought after investment arena.
The economy grew at an annual rate of 3.5% while inflation remained low.
The Dow Jones Industrial Average broke through the 8,000 mark and continued to
reach more all-time highs during the third quarter. A correction toward the end
of the quarter caused the market to close at 7,442.08 on October 31.
The continued strength of the market overall reinforces the importance of
realistic expectations and a long-term investment strategy. Since the 1987
crash, for example, the Dow Jones has risen more than 5,500 points.
FUND PERFORMANCE
For the year ended October 31, 1997, the Nationwide Growth Fund gained 32.12%
and the Nationwide Fund increased 40.17%. Total return of the S&P 500 for the
same period was 32.10%.
Returns on long-term taxable bonds were also strong. For the year ended October
31, 1997, the Nationwide Bond Fund returned 8.33% as compared to 8.81% for its
new benchmark index, the Lehman Brothers Government/Corporate Bond Index. The
index was changed because it better represents the investment policies of the
Bond Fund for comparison purposes.
For the year ended October 31, 1997, the Nationwide Tax-Free Income Fund total
return was 7.72%, compared to 8.49% for its benchmark index, the Lehman Brothers
Municipal Bond Index.
For the year ended October 31, 1997, the Nationwide U.S. Government Income Fund
returned 8.86% compared to 8.67% for its new benchmark index, the Merrill Lynch
Government Master Index. The index was changed because the new one better
represents the investment policies of the Fund for comparison purposes.
The returns for the funds discussed above do not reflect sales charges.
The Nationwide Money Market Fund continues to post consistent yields. Total
return for the Fund was 5.07% for the year ended October 31, 1997. (There are no
sales charges in the Money Market Fund.)
<PAGE>
SPECIAL SHAREHOLDERS' MEETING
The Board of Trustees has scheduled a special meeting of shareholders for
February 16, 1998, to consider an important proposal affecting your funds. The
Board unanimously approved this proposal, which is described in detail in the
Combined Prospectus/Proxy Statements which you will soon receive.
The proposal would reorganize the Nationwide Investing Foundation (NIF), which
includes the Growth, Fund, Bond and Money Market funds; and the Nationwide
Investing Foundation II (NIF II), which includes the Tax-Free Income and U.S.
Government Income funds, into a new Ohio business trust, the Nationwide
Investing Foundation III ("New Trust"), along with several other
Nationwide-managed funds. The New Trust will provide for a revised fee
structure, which includes changes in the investment advisory fees of the funds,
the establishment of a separate fee for fund administration, and the
implementation of a schedule under which these fees, as a percentage of assets,
decrease as assets increase.
Your vote is very important to us.
Thank you for giving Nationwide Advisory Services, Inc. the opportunity to meet
your needs.
SINCERELY,
DIMON R. MCFERSON, CHAIRMAN
<PAGE>
ANNUAL REPORT - 1997
CONTENTS
FUND HIGHLIGHTS...........................................................1 - 3
NATIONWIDE(R) GROWTH FUND ...............................................4 - 5
NATIONWIDE(R) FUND ......................................................6 - 7
NATIONWIDE(R) BOND FUND ..................................................8 - 10
NATIONWIDE(R) TAX-FREE INCOME FUND .....................................11 - 15
NATIONWIDE(R) U.S. GOVERNMENT INCOME FUND ...............................16 - 17
NATIONWIDE(R) MONEY MARKET FUND .........................................18 - 20
FINANCIAL STATEMENTS ....................................................21 - 24
FINANCIAL HIGHLIGHTS ....................................................25 - 27
NOTES TO FINANCIAL STATEMENTS............................................28 - 30
INDEPENDENT AUDITORS' REPORT..................................................31
TRUSTEES
Dimon R. McFerson - Na tion wide Investing Foundation (NIF) & Nationwide
Investing Foundation II (NIF II)
Chairman
Columbus, Ohio
Dr. John C. Bryant - NIF & NIF II
Cincinnati, Ohio
Dr. C. Brent DeVore - NIF
Westerville, Ohio
Sue A. Doody - NIF
Columbus, Ohio
Robert M. Duncan - NIF & NIF II
Columbus, Ohio
Charles L. Fuellgraf, Jr. - NIF
Butler, Pennsylvania
Dr. Thomas J. Kerr, IV - NIF & NIF II
Westerville, Ohio
Douglas F. Kridler - NIF
Columbus, Ohio
Nancy C. Thomas - NIF
Louisville, Ohio
Harold W. Weihl - NIF
Bowling Green, Ohio
David C. Wetmore - NIF
Reston, Virginia
OFFICERS
James F. Laird, Jr. - Treasurer
Rae M. Pollina - Secretary
Craig A. Alvey - Assistant Treasurer
Charles S. Bath - Assistant Treasurer
Craig A. Carver - Assistant Treasurer
Christopher A. Cray - Assistant Treasurer
Edwin P. McCausland, Jr. - Assistant Treasurer
Peter Neckermann - Assistant Treasurer
Karen R. Tackett - Assistant Treasurer
TRANSFER AGENT
Nationwide Investors Services, Inc.
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
AUDITORS
KPMG Peat Marwick LLP
Two Nationwide Plaza
Columbus, Ohio 43215-2537
DISTRIBUTOR
Nationwide Advisory Services, Inc.
Three Nationwide Plaza
Columbus, Ohio 43215-2220
This report is for the information of shareholders of the Nationwide Family of
Funds. It may be used as sales literature only when preceded or accompanied by a
current prospectus which gives further details about the funds.
Nationwide(R) and its logo are registered Federal Service marks of
Nationwide Mutual Insurance Company.
<PAGE>
NATIONWIDE(R) STOCK FUND HIGHLIGHTS
GROWTH FUND
FUND PERFORMANCE
$10,000 LUMP SUM INVESTMENT
<TABLE>
$10,000 Lump Sum Investment Graph:
VALUE OF REINVESTED DIVIDENDS INCLUDING CAPITAL GAINS
<CAPTION>
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9550 12260 13628 11705 16779 17943 20843 22038 26668 29964 39588
<CAPTION>
VALUE OF INITIAL INVESTMENT
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9550 10053 10511 8404 10958 11382 12756 12996 15138 15275 18687
</TABLE>
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, 1997, a net investment of
$10,000 would have earned an average annual compound total return of 14.74.%,
including sales charge. The chart above illustrates the growth of this
investment to $39,588. 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.
| The Nationwide(R) Growth Fund's portfolio manager emphasizes a
"buy-and-hold" strategy, which means he is investing for the long term. The
Fund's manager is not a market timer -- he does not try to predict a market
correction by shifting assets. This "buy-and-hold" strategy also keeps
brokerage expenses down because portfolio turnover is low. For example,
based on data as of October 31, 1997, from Morningstar, a leading
publication of the mutual fund industry, the average turnover for all equity
funds with growth objectives was 94%. The Growth Fund's turnover was 45% in
1997, which was itself an unusually high figure, compared to its average
turnover of 24% over the past five years.
| The Growth Fund's portfolio consists of high-quality stocks that seek to
provide greater safety through diversification than if an investor owned
just one company's stock. The Fund invests in the securities of many quality
companies among different industries.
TOP FIVE HOLDINGS
(COMPOSITION SUBJECT TO CHANGE)
Value %
WorldCom Inc. $40,350,000 4.9%
CUC International, Inc. $35,400,000 4.3%
Merrill Lynch & Co., Inc. $33,812,500 4.1%
Equitable Companies, Inc. $30,437,563 3.7%
Allstate Corp. $29,028,125 3.5%
NATIONWIDE(R) FUND
FUND PERFORMANCE
$10,000 LUMP SUM INVESTMENT
<TABLE>
$10,000 Lump Sum Investment Graph:
<CAPTION>
VALUE OF REINVESTED DIVIDENDS INCLUDING CAPITAL GAINS
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9550 11193 14225 13226 18049 19615 20822 21838 26039 32837 46029
<CAPTION>
VALUE OF INITIAL INVESTMENT
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9550 9613 10502 8695 11131 11152 11681 11378 12246 14406 18754
</TABLE>
The value of a long-term investment in the Nationwide(R) Fund is illustrated in
the chart above. Over a 10-year period ended October 31, 1997, a net investment
of $10,000 would have earned an average annual compound total return of 16.48%,
including sales charge. The chart above illustrates the growth of this
investment to $46,029. 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.
| Our flagship fund, the Nationwide(R) Fund, was started in 1933 and is one of
the oldest mutual funds in the country. It is designed for investors who
seek to maximize total return through a flexible selection of investments,
usually containing the common stocks of well-known, larger companies.
| The Fund's portfolio manager's investment strategy has been very successful.
He attributes part of this success to the fact that he normally has between
50-60 holdings in the portfolio, as opposed to the nearly 150 for his peer
group. Generally, about 40% of the Fund's total assets are invested in the
Fund's top 10 holdings so an attractive situation can have a positive impact
on the overall portfolio.
| The Nationwide(R)Fund was honored in the May 1997 issue of Money Magazine
for having 20 consecutive years of positive performance.
TOP FIVE HOLDINGS
(COMPOSITION SUBJECT TO CHANGE)
Value %
Warner-Lambert Co. $124,945,412 8.6%
Schering-Plough Corp. $91,056,712 6.3%
Mellon Bank Corp. $73,213,594 5.1%
Black & Decker Corp. $54,939,412 3.8%
Texaco, Inc. $54,284,212 3.7%
<PAGE>
NATIONWIDE(R) INCOME FUND HIGHLIGHTS
BOND FUND
FUND PERFORMANCE
$10,000 LUMP SUM INVESTMENT
<TABLE>
$10,000 Lump Sum Investment Graph:
<CAPTION>
VALUE OF REINVESTED DIVIDENDS INCLUDING CAPITAL GAINS
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9550 10695 11734 12420 14293 15844 18001 16234 19547 20534 22245
<CAPTION>
VALUE OF INITIAL INVESTMENT
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9550 9662 9642 9251 9735 9858 10362 8706 9776 9611 9766
</TABLE>
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, 1997, a net investment of $10,000
would have earned an average annual compound total return of 8.32%, including
sales charge. The chart above illustrates the growth of this investment to
$22,245. 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.
| The Nationwide(R)Bond Fund has consistently provided a steady stream of
income for its shareholders-- paying dividends every month since inception
(March 1, 1980).
| The Bond Fund is for investors seeking monthly income from high-quality
bonds and other fixed-income securities. The Fund strives to provide safety
through investing in only investment-grade securities, including corporate
bonds, U.S. and Canadian government obligations, mortgage-backed securities,
and investment-grade commercial paper.
| The chart above shows the difference reinvesting dividends can have on
investors' money. Over a 10-year period, reinvesting dividends, shareholders
would have more than doubled their initial investment.
TOP FIVE HOLDINGS
(COMPOSITION SUBJECT TO CHANGE)
Value %
U.S. Treasury Bond $18,311,250 14.7%
AMBAC Inc. $4,996,248 4.0%
Armstrong World Industries, Inc. $4,980,704 4.0%
English China Clays Delaware, Inc. $4,169,792 3.4%
Loews Corp. $4,156,480 3.3%
TAX-FREE INCOME FUND
FUND PERFORMANCE
$10,000 LUMP SUM INVESTMENT
<TABLE>
$10,000 Lump Sum Investment Graph:
<CAPTION>
VALUE OF REINVESTED DIVIDENDS INCLUDING CAPITAL GAINS
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10000 11629 12529 13191 14763 15823 18507 16890 19366 20393 21969
<CAPTION>
VALUE OF INITIAL INVESTMENT
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10000 10871 10964 10813 11393 11544 12717 10917 11869 11893 12206
</TABLE>
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, 1997, an investment
of $10,000 would have earned an average annual compound total return of 8.18%,
including sales charge. The chart above illustrates the growth of this
investment to $21,969. 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.
| The Nationwide(R) Tax-Free Income Fund has consistently paid tax-free
dividends on a monthly basis since its inception (March 17, 1986). For
certain shareholders, a portion of income may be subject to state, local or
federal alternative minimum tax.
| By investing in the Tax-Free Income Fund, you can earn Federally tax-free
dividends from municipal bonds carefully selected for their relative safety
and security.
| Taxable securities may provide higher yields, but the Tax-Free Income Fund
offers tax-exempt income. An investor could earn $8,000 annually from a
fully taxable investment, assuming an 8% rate of return, or $7,000 in a
tax-free investment, assuming a 7% rate of return. After taxes, an investor
in the 36% tax bracket would keep just $5,120. The investor in the tax-free
investment keeps all of the $7,000 federally tax-exempt income -- a
difference of $1,880.
TOP FIVE HOLDINGS BY STATE
(COMPOSITION SUBJECT TO CHANGE)
Value %
Texas $47,421,631 18.5%
Virginia $29,148,325 11.4%
Illinois $25,862,131 10.1%
North Carolina $21,858,150 8.5%
Pennsylvania $16,201,013 6.3%
<PAGE>
NATIONWIDE(R) INCOME FUND HIGHLIGHTS
U.S. GOVERNMENT INCOME FUND
FUND PERFORMANCE
$10,000 LUMP SUM INVESTMENT
<TABLE>
$10,000 Lump Sum Investment Graph:
<CAPTION>
VALUE OF REINVESTED DIVIDENDS INCLUDING CAPITAL GAINS
1991 1992 1993 1994 1995 1996 1997
<C> <C> <C> <C> <C> <C> <C>
10000 10513 11581 11094 12922 13604 14809
<CAPTION>
VALUE OF INITIAL INVESTMENT
1991 1992 1993 1994 1995 1996 1997
<C> <C> <C> <C> <C> <C> <C>
10000 10080 10374 9322 10232 10151 10424
</TABLE>
The value of a long-term investment in the U.S. Government Income Fund is
illustrated in the chart above. A $10,000 investment made on 2/10/92 (the Fund's
inception date) would have earned an average annual compound total return of
7.17% for the period ended October 31, 1997, including sales charge. The chart
above illustrates the growth of this investment to $14,809. 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.
| Share prices will always fluctuate. It is important to remember that when
share prices are down, reinvesting your dividends in the Nationwide(R) U.S.
Government Income Fund will buy more shares than when share prices are at
higher levels. This increases your potential for additional future dividend
income and growth of principal.
| Monthly income is paid by the U.S. Government Income Fund from a
high-quality portfolio of government securities. These securities are
generally considered among the safest with respect to credit risk, though
they are not specifically rated by the credit rating agencies.
| To limit the risk of share price fluctuation, the U.S. Government Income
Fund maintains an average portfolio maturity in the intermediate-term range
(3-10 years). Of course, all bond prices (U.S. government, municipal and
corporate) are affected by interest rates.
TOP FIVE HOLDINGS
(COMPOSITION SUBJECT TO CHANGE)
Value %
FHLMC (REMIC) Series 1560, Class PN $5,182,150 12.5%
FHLMC (REMIC) Series 1462, Class PT $5,140,900 12.4%
Federal National Mortgage Association $4,296,524 10.4%
FNMA (REMIC) Series 92-151, Class H $3,903,240 9.4%
FHLMC (REMIC) Series 1344, Class D $3,900,720 9.4%
MONEY MARKET FUND
FUND PERFORMANCE
30-DAY YIELD TREND
<TABLE>
30-Day Yield Trend Graph:
<CAPTION>
MONEY MARKET FUND YIELD TREND
OCT-96 NOV-96 DEC-96 JAN-97 FEB-97 MAR-97 APR-97 MAY-97 JUN-97 JUL-97 AUG-97 SEP-97 OCT-97
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
4.87 4.85 4.83 4.83 4.87 4.87 4.94 5.05 5.09 5.05 5.03 5.01 5
<CAPTION>
AVERAGE YIELDS OF BANK MONEY MARKET ACCOUNTS
OCT-96 NOV-96 DEC-96 JAN-97 FEB-97 MAR-97 APR-97 MAY-97 JUN-97 JUL-97 AUG-97 SEP-97 OCT-97
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
3.47 3.46 3.47 3.47 3.45 3.45 3.49 3.5 3.5 3.51 3.48 3.47 3.46
</TABLE>
The chart above shows the Money Market Fund yield trend during the year ended
October 31, 1997, as compared to the average yields of money market accounts
offered by leading banks in the United States over the same period. For the year
ended October 31, 1997, the Money Market Fund 30-day current yield was 5.00%.
Past performance is no guarantee of future results.
| Due to daily dividend compounding from a high-quality portfolio, the
Nationwide(R) Money Market Fund offers current market rates -- plus
stability of principal since the Fund seeks to maintain a constant $1.00 per
share net asset value. During the Fund's life, its share price has always
been $1.00. However, an investment in the Money Market Fund is neither
insured nor guaranteed by the U.S. government, and there can be no assurance
that the Fund will be able to maintain a stable net asset value of $1.00 per
share.
| The Money Market Fund offers liquidity without penalty, competitive current
money market rates, daily compounding, security of principal, and free check
writing privileges ($500 minimum). The Fund also offers a big yield edge
over insured bank money market accounts, which were returning an average
30-day current yield of 3.48% (according to BanxQuote, Inc., a privately
held financial information company), compared to the Fund's average 30-day
current yield of 5.00% at October 31, 1997. The seven-day effective yield at
October 31, 1997, was 5.15%.
TOP FIVE HOLDINGS BY ISSUER
(COMPOSITION SUBJECT TO CHANGE)
Value %
Abbott Laboratories $34,614,115 4.2%
National City Credit $33,871,478 4.1%
Monsanto Co. $32,057,103 3.9%
Caterpillar Financial Services, Inc. $31,441,725 3.8%
General Motors Acceptance Corp. $31,223,829 3.8%
<PAGE>
NATIONWIDE(R) INVESTING FOUNDATION
NATIONWIDE(R) GROWTH FUND
MANAGEMENT DISCUSSION
OF FUND PERFORMANCE
For the year ended October 31, 1997, the Nationwide Growth Fund had a total
return of 32.12% without sales charge, compared to a 32.10% total return for the
S&P 500 Index.
During the second half of the fiscal year, the Growth Fund continued to find
greater opportunities in growth stocks, and took advantage of them to shift its
portfolio mix in this direction, at the same time reducing the level of
value-oriented holdings. For example, com pared to its portfolio as of October
31, 1996, the Growth Fund's investment in the Computer Services and Software
sector increased from 2.2% to a current level of 12.8%. The main sectors that
saw declines in investment were Financial stocks, which went from 17.3% to
14.8%, Healthcare, which went from 4.5% to 0%, and Food and Beverage, which went
from 4.3% to 0%. In the process of buying the growth stocks which we found
attractive, and funding those purchases with sales of less-attractive stocks, we
also tried to con cen trate on the best ideas. As a result, the Fund's top 10
holding as of this fiscal year-end represent nearly 37% of assets, compared to a
figure of about 30.5% as of October 31, 1996.
Although growth stocks have been the current focus, the stock selection process
is essentially unchanged. We still want to own companies that benefit from
strong, long-term growth drivers which are clearly visible. We want to own
companies with both the management and financial resources to take full ad van
tage of their business opportunities. We also favor companies that derive and/or
purvey benefits from advancing technology.
The strongest performance over the past 12 months has come from two of our
technology holdings: Applied Materials and EMC Corporation. Both Warner-Lam bert
and Schering-Plough in the drug group, and Merrill Lynch and Equitable in the
financial sector, have also had outstanding gains. Our most significant loss
came in the Computer Service sector, in First Data Corp. This is a company we
think is extremely well positioned for long-term growth. The stock has come down
because its current growth rate, though still good, has been less than expected.
The positive results this year have been primarily due to gains in stocks we
have held for over a year, rather than from ones that have been added this year.
As we go forward, we expect that the more recent additions will help sustain
this progress.
JOHN M. SCHAFFNER, MBA, CFA - PORTFOLIO MANAGER
PORTFOLIO VALUE $818,674,086
FUND COMPOSITION
(SUBJECT TO CHANGE)
PIE CHART:
U.S. government agency obligations and other assets less liabilities 3.0%
Common stock 97.0%
<TABLE>
AVERAGE ANNUAL (COMPOUND) TOTAL RETURN
FOR PERIODS ENDED OCTOBER 31, 1997
<CAPTION>
$1,000 $100 $1,000
LUMP SUM MONTHLY LUMP SUM
INVESTMENT INVESTMENT INVESTMENT
YEARS W/O SC* W/O SC* W/SC**
<S> <C> <C> <C>
1 32.12% 26.80% 26.17%
5 17.15% 19.58% 16.07%
10 15.26% 15.70% 14.74%
<FN>
* These returns do not reflect the effects of sales charges.
** Assumes a 4.5% sales charge was paid, which has the most dramatic effect on
one-year performance figures.
</FN>
</TABLE>
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
<TABLE>
BAR CHART:
<CAPTION>
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CPI 10000 10425 10903 11598 11925 12319 12658 12997 13353 13753 14014
FUND 9550 12260 13628 11705 16779 17943 20843 22038 26668 29964 39588
S&P 500 10000 11475 14498 13415 17898 19679 22608 23481 29683 36812 48596
<FN>
Comparative performance of $10,000 invested in the Na tion wide(R) Growth Fund,
the S&P 500* and the Consumer Price Index (CPI)** over a 10-year period ended
10/31/97. 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.
</FN>
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF INVESTMENTS - NATIONWIDE(R) GROWTH FUND - OCTOBER 31, 1997
<CAPTION>
SHARES SECURITY VALUE
<S> <C> <C>
COMMON STOCK (97.0%)
BUSINESS SERVICES (3.3%)
300,000 Manpower, Inc. $ 11,512,500
401,800 Cognizant Corp. 15,745,537
------------
27,258,037
------------
CABLE (2.0%)
600,000 Comcast Corp., Class A 16,350,000
------------
CHEMICALS (3.7%)
500,000 Monsanto Co. 21,375,000
244,000 Sigma-Aldrich Corp. 8,570,500
------------
29,945,500
------------
COMPUTER EQUIPMENT (6.8%)
286,300 EMC Corp.* 16,032,800
325,000 Hewlett-Packard Co. 20,048,437
200,000 International Business
Machines Corp. 19,612,500
------------
55,693,737
------------
COMPUTER SOFTWARE & SERVICES (12.8%)
200,000 Automatic Data Processing, Inc. 10,225,000
325,000 BMC Software, Inc.* 19,621,875
500,000 Electronic Data Systems Corp. 19,343,750
900,000 First Data Corp. 26,156,250
281,600 Gartner Group, Inc.* 7,955,200
600,000 Oracle Corporation* 21,468,720
------------
104,770,795
------------
CONGLOMERATES (1.6%)
300,000 Corning, Inc. 13,537,500
------------
CONSUMER PRODUCTS (4.6%)
400,000 Avon Products, Inc. 26,200,000
300,000 Newell Co. 11,512,500
------------
37,712,500
------------
DISTRIBUTION (2.0%)
410,156 Bergen Brunswig Corp., Class A 16,431,875
------------
DRUGS (9.1%)
419,200 Allergan, Inc. 13,807,400
325,000 Glaxo Wellcome, PLC ADR 13,914,062
320,000 Schering-Plough Corp. 17,940,000
200,000 Warner-Lambert Co. 28,637,500
------------
74,298,962
------------
ELECTRONICS (2.1%)
146,483 Molex, Inc. 5,493,112
238,572 Molex, Inc., Class A 8,364,931
189,000 Woodhead Industries, Inc. 3,685,500
------------
17,543,543
------------
FINANCIAL (14.8%)
350,000 Allstate Corp. 29,028,125
101,250 American International Group, Inc. 10,333,828
400,000 Conseco, Inc. 17,450,000
739,000 Equitable Companies, Inc. 30,437,563
500,000 Merrill Lynch & Co., Inc. 33,812,500
------------
121,062,016
------------
FOOD-GRAIN & AGRICULTURE (3.0%)
1,085,984 Archer Daniels Midland Co. 24,163,144
------------
<PAGE>
<CAPTION>
SHARES SECURITY VALUE
<S> <C> <C>
MACHINERY & CAPITAL (5.4%)
200,000 Applied Materials, Inc.* $ 6,675,000
96,600 BMC Industries 3,109,313
120,000 Emerson Electric Co. 6,292,500
225,000 Lindsay Manufacturing Co. 9,759,375
60,000 Nordson Corp. 2,977,500
492,600 Zebra Technologies Corp.* 15,393,750
------------
44,207,438
------------
MEDICAL PRODUCTS (2.0%)
200,000 Biomet, Inc. 4,987,500
250,000 Boston Scientific Corp.* 11,375,000
------------
16,362,500
------------
OIL & GAS (7.5%)
215,000 Amoco Corp. 19,712,812
250,000 Exxon Corp. 15,359,375
360,000 Mobil Corp. 26,212,500
------------
61,284,687
------------
PRINTING & PUBLISHING (0.5%)
160,000 Reader's Digest Association, Inc.,
Class B 3,720,000
------------
RETAIL (7.0%)
1,200,000 CUC International, Inc.* 35,400,000
265,000 Smart & Final, Inc. 5,349,688
350,000 Staples, Inc.* 9,187,500
200,000 Tiffany & Co. 7,900,000
------------
57,837,188
TELECOMMUNICATIONS (8.8%)
400,000 Cincinnati Bell, Inc. 10,800,000
977,500 360(degree)Communications Co.* 20,649,688
1,200,000 WorldCom, Inc.* 40,350,000
------------
71,799,688
------------
TOTAL COMMON STOCK (cost $540,128,248) 793,979,110
------------
<CAPTION>
PRINCIPAL SECURITY VALUE
<S> <C> <C>
U.S. AGENCY (3.0%)
$10,597,000 Federal Home Loan Mortgage
Corp Notes, 5.43%, 11/17/97 10,574,322
1,932,000 Federal Home Loan Mortgage
Corp Notes, 5.47%, 11/24/97 1,924,902
2,432,000 Federal Home Loan Mortgage
Corp Notes, 5.45%, 12/03/97 2,420,852
1,458,000 Federal Home Loan Mortgage
Corp Notes, 5.41%, 11/12/97 1,455,994
8,324,000 Federal Home Loan Mortgage
Corp Notes, 5.39% - 5.42%,
11/07/97 8,318,906
------------
TOTAL U.S. AGENCY (cost $24,688,879) 24,694,976
------------
TOTAL INVESTMENTS (cost $564,817,127) $818,674,086
============
<FN>
- ---------------
The abbreviations in the above statement stand for the following:
PLC Public Limited Company
ADR American Depository Receipt
* 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.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
NATIONWIDE(R) INVESTING FOUNDATION
NATIONWIDE(R) FUND
MANAGEMENT DISCUSSION
OF FUND PERFORMANCE
The total return for the Nationwide(R) Fund for the year ended October 31, 1997,
was 40.17% without sales charge and assuming all distributions were reinvested,
compared to 32.10% for the S&P 500.
The excellent performance of the Nationwide Fund was mainly attributable to
large investments in the pharmaceutical and financial services industries.
Warner-Lambert and Schering-Plough are the Fund's two largest holdings and they
have continued to per form very well. Solid revenue growth combined with new
products have allowed these two companies to outperform the market and their
peers. The financial services companies have performed well due to steady
earnings performance, combined with benefits from consolidation. First USA,
Barnett Banks and U.S. Bancorp were all acquired at significant premiums to
their market prices. These takeouts, combined with excellent performance from
Mellon Bank, Horace Mann and CoreStates Financial, led to the Financial Services
sector providing excellent performance for Nationwide Fund shareholders. These
companies remain significant holdings in the portfolio and should be important
contributors to the future performance of the Fund.
The New York Times is a significant new investment currently ranked in the top
10 holdings of the portfolio. This company in many ways epitomizes what I am
looking for in an investment. The shares are in ex pen sive ly priced compared
to private market value, yet the business franchise is one of the best in its
industry. The company recently completed a major capital spending program so
cash flow will be available in the future to reward shareholders. I am
optimistic this should be a successful investment for the Nationwide Fund.
The Fund also has two new holdings in the cellular telephone industry. These are
small holdings because the securities appreciated in price before a larger
position could be purchased. However, I am optimistic the worst of the fears
regarding competition will not be realized and the attractive purchase prices
will provide excellent appreciation potential.
CHARLES S. BATH, MBA, CFA, CPA - PORTFOLIO MANAGER
PORTFOLIO VALUE $1,457,399,757
FUND COMPOSITION
(SUBJECT TO CHANGE)
PIE CHART:
Debt obligations and other assets less liabilities 1.0%
Common stock 99.0%
<TABLE>
AVERAGE ANNUAL (COMPOUND) TOTAL RETURN
FOR PERIODS ENDED 10/31/97
<CAPTION>
$1,000 $100 $1,000
LUMP SUM MONTHLY LUMP SUM
INVESTMENT INVESTMENT INVESTMENT
YEARS W/O SC* W/O SC* W/SC**
<S> <C> <C> <C>
1 40.17% 36.71% 33.87%
5 18.60% 24.82% 17.51%
10 17.01% 18.19% 16.48%
<FN>
* These returns do not reflect the effects of sales charges.
** Assumes a 4.5% sales charge was paid, which has the most dramatic effect on
one-year performance figures.
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.
</FN>
</TABLE>
FUND PERFORMANCE
<TABLE>
BAR CHART:
<CAPTION>
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CPI 10000 10425 10903 11598 11925 12319 12658 12997 13353 13753 14014
FUND 9550 11193 14225 13226 18049 19615 20822 21838 26039 32837 46029
S&P 500 10000 11475 14498 13415 17898 19679 22608 23481 29683 36812 48596
<FN>
Comparative performance of $10,000 invested in the Nationwide(R) Fund, the S&P
500* and the Consumer Price Index (CPI)** over a 10-year period ended 10/31/97.
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.
</FN>
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF INVESTMENTS - NATIONWIDE(R)FUND - OCTOBER 31, 1997
<CAPTION>
SHARES SECURITY VALUE
<S> <C> <C>
COMMON STOCK (99.0%)
AUTOMOBILES (3.2%)
202,451 Autoliv, Inc. $ 7,984,161
857,900 Ford Motor Company 37,479,506
--------------
45,463,667
--------------
BUILDING (3.9%)
436,300 Martin Marietta Materials, Inc. 15,215,963
337,500 Masco Corp. 14,807,813
302,200 Vulcan Materials Co. 26,839,137
--------------
56,862,913
--------------
CHEMICALS (6.6%)
544,400 Millipore Corp. 21,299,650
593,700 Morton International, Inc. 19,592,100
335,400 OM Group, Inc. 12,661,350
401,743 Pall Corp. 8,311,058
378,075 Raychem Corp. 34,239,417
--------------
96,103,575
--------------
COMPUTER EQUIPMENT (2.7%)
400,000 International Business
Machines, Corp. 39,225,000
--------------
CONGLOMERATES (1.6%)
498,700 Corning, Inc. 22,503,838
--------------
DRUGS (18.4%)
564,700 Allergan, Inc. 18,599,806
149,000 American Home Products, Inc. 11,044,625
302,400 Pfizer, Inc. 21,394,800
1,624,200 Schering-Plough Corp. 91,056,712
872,600 Warner-Lambert Co. 124,945,412
--------------
267,041,355
--------------
ELECTRICAL EQUIPMENT (3.8%)
1,443,400 Black & Decker Corp. 54,939,412
--------------
ENTERTAINMENT (1.4%)
246,265 Walt Disney Company 20,255,296
--------------
FINANCIAL-BANKS (13.6%)
244,139 Banc One Corp. 12,725,745
250,300 Bank of New York Co., Inc. 11,779,744
505,900 Barnett Banks, Inc. 34,907,100
217,000 CoreStates Financial Corp. 15,786,750
1,419,900 Mellon Bank Corp. 73,213,594
240,100 Pacific Century Financial Corp. 12,095,037
202,177 U.S. Bancorp 20,558,874
56,300 Wells Fargo & Company 16,404,413
--------------
197,471,257
--------------
FINANCIAL-MISCELLANEOUS (2.6%)
788,600 Fannie Mae 38,197,813
--------------
FOOD & BEVERAGE (8.3%)
594,800 Anheuser-Busch Companies, Inc. 23,754,825
1,050,200 PepsiCo, Inc. 38,660,488
632,900 Philip Morris Companies, Inc. 25,078,662
364,200 Ralston-Ralston Purina Group 32,686,950
--------------
120,180,925
--------------
HOSPITAL-SUPPLY (2.1%)
125,000 Covance, Inc.* 2,210,938
647,700 Quest Diagnostics, Inc.* 10,808,494
557,400 St. Jude Medical, Inc. * 16,896,187
--------------
29,915,619
--------------
<CAPTION>
SHARES SECURITY VALUE
<S> <C> <C>
HOUSEHOLD-PRODUCTS (4.0%)
684,800 Avon Products, Inc. $ 44,854,400
200,000 Proctor & Gamble Co. 13,600,000
--------------
58,454,400
--------------
INSURANCE (5.2%)
632,500 Chubb Corp. 41,903,125
404,700 Horace Mann Educators Corp. 22,764,375
331,400 Provident Companies, Inc. 11,060,475
--------------
75,727,975
--------------
MACHINERY & CAPITAL GOODS (0.3%)
342,400 Johnstown America Industries, Inc.* 4,044,600
--------------
OIL & GAS (6.7%)
323,800 Mobil Corp. 23,576,688
953,400 Texaco, Inc. 54,284,212
465,100 Unocal Corp. 19,185,375
--------------
97,046,275
--------------
PRINTING & PUBLISHING (10.2%)
100,599 ACNielsen Corp.* 2,301,202
760,000 American Greetings Corp., Class A 26,362,500
301,800 Cognizant Corp. 11,826,788
653,100 Dun & Bradstreet Corp. 18,654,169
315,800 Gannett Co., Inc. 16,599,237
277,300 Gibson Greetings, Inc.* 6,828,512
766,200 New York Times Co., Class A 41,949,450
112,000 Tribune Co. 6,174,000
40,700 Washington Post Co., Class B 17,663,800
--------------
148,359,658
--------------
RESTAURANTS (0.9%)
277,500 McDonald's Corp. 12,435,469
--------------
RETAIL (0.8%)
325,300 Wal-Mart Stores, Inc. 11,426,163
--------------
TELECOMMUNICATIONS (0.6%)
202,100 360(degree) Communications Company * 4,269,363
106,600 AirTouch Communications, Inc.* 4,117,425
--------------
8,386,788
--------------
TOYS (2.1%)
778,840 Mattel, Inc. 30,277,405
--------------
TOTAL COMMON STOCK (cost $762,887,357) 1,434,319,403
--------------
<CAPTION>
PRINCIPAL SECURITY VALUE
<S> <C> <C>
CONVERTIBLE BONDS (0.5%)
$ 7,826,000 Consorcio G Grupo Dina,
8.00%, 2004
(cost $7,306,643) 6,495,580
--------------
COMMERCIAL PAPER (1.2%)
16,590,000 Walt Disney Company, 5.67%, 11/03/97
(cost $16,584,774) 16,584,774
--------------
TOTAL INVESTMENTS (cost $786,778,774) $1,457,399,757
==============
<FN>
- ----------------
* 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.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
NATIONWIDE(R) INVESTING FOUNDATION
NATIONWIDE(R) BOND FUND
MANAGEMENT DISCUSSION
OF FUND PERFORMANCE
The Nationwide Bond Fund's total return with reinvestment of all distributions
for the year ended October 31, 1997, was 8.33% without sales charge. This
compares to the 8.81% return of our new benchmark, the Lehman Brothers
Government/Corporate Bond Index, which is more reflective of our investment
policies. In retrospect, it would have improved our comparative performance to
the Lehman Brothers Long-Term Government/Corporate Index if the change to this
new index had been at the beginning of the year rather than in the middle. For
the last six months of the fiscal year, the Bond Fund's total return was 7.37%,
little different than the 7.41% return for the new benchmark.
Interest rates declined substantially in the second half of the year. This
completely reversed the increase that followed the March increase in the Federal
funds rate. Rates ended at yearly lows, with the 30-year Treasury note yielding
6.15% and the two-year Treasury note yielding 5.61%. Inflationary pressures
remain remarkably subdued given the strength in the economy and as a result,
expectations of future inflation have declined. The economic weakness seen in
some of the Asian countries has spread throughout the region and could have an
effect on our economy in 1998. Inflation could drop below 2% with enough of a
slowdown.
In the corporate and mortgage-backed market, spreads were historically narrow
for virtually the entire year and few opportunities to improve returns were
available. Spreads did widen substantially at the fiscal-year end, but it
happened too suddenly to affect our returns. Turmoil in the Asian markets and
the fear that corporate profitability in 1998 will be hurt were the primary
cause. Mortgage-backed securities widened in sympathy, with the rationale of
lower interest rates sparking a wave of prepayments.
Restructuring the Fund from long-term to intermediate required a significant
change in composition. Approximately $50 million of long-term corporates were
sold, including large positions in Banc One, W.R. Berkley, Prudential and
Seagrams. New names added in the intermediate part of the curve included Hanson,
Hilton Hotels, McGraw-Hill and ITT Rayonier among others. Because of the
narrowness of spreads and increasing risk, positions in corporates and
mortgage-backed securities were reduced. U.S. Treasuries now comprise 18% of the
portfolio. The recent widening in spreads appears to present an opportunity for
the Fund, but I intend to wait for some signs of stability in the Asian markets
and a clearer picture of how much of a slowdown can be expected in 1998.
DOUGLAS E. KITCHEN, CFA - PORTFOLIO MANAGER
PORTFOLIO VALUE $124,335,565
FUND COMPOSITION
(SUBJECT TO CHANGE)
PIE CHART:
Other assets less liabilities 0.7%
Corporate bonds 72.2%
U.S. government obligations 17.9%
Canadian bonds 4.8%
Mortgage-backed securities 4.4%
<TABLE>
AVERAGE ANNUAL (COMPOUND) TOTAL RETURN
FOR PERIODS ENDED 10/31/97
<CAPTION>
$1,000 $100 $1,000
LUMP SUM MONTHLY LUMP SUM
INVESTMENT INVESTMENT INVESTMENT
YEARS W/O SC* W/O SC* W/SC**
<S> <C> <C> <C>
1 8.33% 11.22% 3.46%
5 7.02% 7.67% 6.04%
10 8.81% 8.28% 8.32%
<FN>
* These returns do not reflect the effects of sales charges.
** Assumes a 4.5% sales charge was paid, which has the most dramatic effect on
the one-year performance figures.
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.
</FN>
</TABLE>
FUND PERFORMANCE
<TABLE>
BAR CHART:
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CPI 10000 10425 10903 11598 11925 12319 12658 12997 13353 13753 14014
LBLTG/CBI 10000 11163 12916 13114 15591 17405 21274 18986 23955 25007 28058
LBG/CBI 10000 11062 12406 13088 15100 16772 19063 18179 21116 22254 24216
FUND 9550 10695 11734 12420 14293 15844 18001 16234 19547 20534 22245
<FN>
Comparative performance of $10,000 invested in the Nationwide(R) Bond Fund,
the Lehman Brothers Long-Term Government/Corporate Bond Index*, the Lehman
Brothers Government/Corporate Bond Index**, and the Consumer Price Index***
(CPI) over a 10-year period ended 10/31/97. Unlike our Fund, these indices do
not reflect any fees, expenses or sales charges.
* The Lehman Brothers Long-Term Gov't./Corp. Bond Index consists of U.S.
government and corporate bonds with maturities of 10 years or more and
outstanding par value of at least $100 million. All returns are market
value-weighted inclusive of accrued interest.
** The Lehman Brothers Gov't./Corp. Bond Index is the new index for the Fund.
It is the same as the above index except maturities of the securities are one
year and greater.
*** The CPI represents changes in prices of all goods and services purchased
for consumption by urban households.
</FN>
</TABLE>
<PAGE>
STATEMENT OF INVESTMENTS - NATIONWIDE(R)BOND FUND - OCTOBER 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL SECURITY VALUE
<S> <C> <C>
CANADIAN GOVERNMENT BONDS (4.8%)
GOVERNMENT (4.8%)
$2,000,000 Hydro-Quebec, 8.05%, 07/07/24 $ 2,270,060
1,000,000 Quebec (Prov. of), 8.625%, 01/19/05 1,124,637
2,250,000 Quebec (Prov. of), 8.625%, 01/19/05 2,574,468
------------
TOTAL CANADIAN GOVERNMENT BONDS
(cost $5,550,902) 5,969,165
------------
CORPORATE BONDS (72.2%)
BANKS (2.5%)
3,000,000 Toronto-Dominion Bank,
7.875%, 08/15/04 3,092,556
------------
BROKER-DEALERS (5.8%)
2,000,000 Bear Stearns Companies, Inc.,
8.750%, 03/15/04 2,230,346
1,000,000 Lehman Brothers Holdings, Inc.,
11.625%, 05/15/05 1,286,294
3,000,000 Morgan Stanley Group, Inc.,
10.00%, 06/15/08 3,748,467
------------
7,265,107
------------
BUILDING MATERIALS (6.4%)
4,000,000 Armstrong World Industries, Inc.,
9.75%, 04/15/08 4,980,704
3,000,000 Hanson Overseas Sr. Note,
6.75%, 09/15/05 3,026,925
------------
8,007,629
------------
CHEMICALS (2.5%)
3,000,000 ICI Wilmington, Inc., 7.50%, 01/15/02 3,137,112
------------
DIVERSIFIED FINANCE (5.8%)
4,000,000 Alco Capital Resources, Inc.,
5.51%, 02/22/99 3,977,656
2,000,000 Ford Capital BV Notes,
10.125%, 11/15/00 2,217,884
1,000,000 General Electric Capital Corp.,
8.75%, 09/25/00 1,064,765
------------
7,260,305
------------
HEALTH CARE (1.9%)
2,000,000 Kaiser Foundation, 9.55%, 07/15/05 2,380,152
------------
HOTELS/MOTELS (2.5%)
3,000,000 Hilton Hotels Corp.,
7.375%, 06/01/02 3,076,665
------------
INSURANCE (9.1%)
4,000,000 AMBAC Inc., 9.375%, 08/01/11 4,996,248
2,000,000 Equitable of Iowa Companies,
8.50%, 02/15/05 2,200,064
3,515,000 Loews Corp., 8.875%, 04/15/11 4,156,480
------------
11,352,792
------------
OIL & GAS (0.9%)
1,000,000 Petro-Canada Notes,
8.60%, 10/15/01 1,080,870
------------
PAPER AND FOREST PRODUCTS (4.7%)
3,000,000 ITT Rayonier Inc., 7.50%, 10/15/02 3,142,902
2,500,000 Temple-Inland Inc., 9.00%, 05/01/01 2,720,585
------------
5,863,487
------------
<PAGE>
<CAPTION>
PRINCIPAL SECURITY VALUE
<S> <C> <C>
PUBLISHING (2.6%)
$ 3,000,000 McGraw-Hill Inc.,
9.43%, 09/01/00 $ 3,241,347
------------
RETAIL TRADE (3.7%)
2,000,000 Dayton Hudson Co.,
9.25%, 08/15/11 2,439,554
2,000,000 J.C. Penney, 7.40%, 04/01/37 2,113,916
------------
4,553,470
------------
TELECOMMUNICATIONS (3.5%)
1,000,000 Nynex Capital Funding Corp.,
8.24%, 10/17/01 1,069,817
3,000,000 Rochester Telephone Corp.,
8.77%, 04/16/01 3,240,930
------------
4,310,747
------------
TRANSPORTATION (3.2%)
1,500,000 American Airlines, 10.33%, 03/04/05 1,785,762
2,000,000 CSX Corp., 7.25%, 05/01/27 2,151,484
------------
3,937,246
------------
UTILITIES (4.5%)
2,000,000 Equitable Resources,
7.50%, 07/01/99 2,042,784
2,000,000 Northwest National Gas,
9.75%, 07/01/15 2,221,714
1,250,000 Pacific Gas & Electric Co.,
8.75%, 01/01/01 1,341,890
------------
5,606,388
------------
OTHER (12.6%)
4,000,000 English China Clays Delaware,
Inc., 7.375%, 10/01/02 4,169,792
3,000,000 Mayne Nickless Notes,
6.25%, 02/01/06 2,935,560
2,260,000 Ryder System, Inc.,
7.56%, 08/15/00 2,343,810
2,000,000 VF Corporation,
9.50%, 05/01/01 2,210,472
3,500,000 Waste Management, Inc.,
8.75%, 05/01/18 3,962,606
------------
15,622,240
------------
TOTAL CORPORATE BONDS (cost $86,347,107) 89,788,113
------------
MORTGAGE-BACKED SECURITIES (4.4%)
500,000 FHLMC REMIC 1360-VK,
7.500%, 08/15/07 506,224
156,366 FHLMC-GNMA 29X,
6.75%, 02/25/23 157,839
312,731 FHLMC-GNMA 29Z, 6.75%, 04/25/24 305,443
1,119,000 FNMA REMIC 1992-145E,
7.00%, 08/25/22 1,124,356
646,000 FNMA REMIC G1992-15G,
7.00%, 04/25/20 654,208
389,016 FNMA REMIC G1992-64M,
7.00%, 11/25/22 385,137
2,396,000 FNMA REMIC S G93-10E,
5.00%, 04/25/20 2,332,961
------------
TOTAL MORTGAGE-BACKED SECURITIES (cost $5,352,061) 5,466,168
------------
U.S. GOVERNMENT OBLIGATIONS (17.9%)
14,250,000 U.S. Treasury Bond, 8.75%, 05/15/17 18,311,250
4,000,000 U.S. Treasury Note,
5.625%, 11/30/98 4,001,248
------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(cost $21,832,843) 22,312,498
------------
<PAGE>
<CAPTION>
PRINCIPAL SECURITY VALUE
<S> <C> <C>
COMMERCIAL PAPER (0.6%)
$800,000 Koch Industries Private Placement,
5.68%, 11/03/1997
(cost $799,748) $ 799,621
------------
TOTAL INVESTMENTS (cost $119,832,661) $124,335,565
============
<FN>
- ----------------
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
Cost also represents cost for federal income tax purposes.
Portfolio holding percentages represent market value as a percentage of net
assets.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
NATIONWIDE(R) INVESTING FOUNDATION II
NATIONWIDE(R) TAX-FREE INCOME FUND
MANAGEMENT DISCUSSION
OF FUND PERFORMANCE
The Nationwide Tax-Free Income Fund's total return for the year ended October
31, 1997, was 7.72% without sales change and assuming all distributions were
reinvested, while the Lehman Brothers Municipal Bond Index returned 8.49%.
The Municipal Bond Market experienced an active yet volatile year characterized
by a combination of declining interest rates and a large level of issuance. The
Bond-Buyer 11 General Obligation Municipal Bond Index fell from 5.60% to 5.28%,
a 0.32% decline. The decline wasn't a smooth one as the index rose as high as
5.79% in early April and saw a low of 5.15% by the end of July. The yield on the
most current U.S. Treasury 30-year bond also fell from 6.65% to 6.15%, a 0.50%
decline. The most current U.S. Treasury 30-year bond saw its highest yield of
7.11% during April as well and its low of 6.15% in late October. Municipal bonds
underperformed U.S. Treasuries during the period.
As 1997 began, a Democratic President and a Republican Majority were
returned to Washington and the economy was growing at a slow, manageable,
noninflationary pace. The markets reacted favorably to these events with stable
to declining interest rates. However, during the first quarter of the calendar
year, economic statistics began to show signs of an economy that may be
overheating, and on March 25, in a preemptive move against inflationary
concerns, the Federal Reserve raised the Federal funds rate 0.25%. The move
appeared to be justified as during the following months inflationary measures
remained remarkably tame. In late April, the announcement of a balanced budget
agreement also overshadowed concerns about the growth rate.
During the latter part of October, the Equity markets experienced a
sell-off that prompted investors to a flight to quality in U.S. Treasury
securities. This movement helped to sustain the lower yields and higher prices
in the bond markets. This volatility in the worldwide financial markets,
however, has significantly reduced the threat of another preemptive rate hike
from the Federal Reserve to slow the growth in U.S. economy.
Municipal issuers continued to take advantage of the lower interest rates
and propelled municipal volume up 17% for the first 10 months of the calendar
year. This increased supply has kept municipal securities from fully
participating in the bond market rally. As a consequence, particularly in the
long end, municipals have cheapened when compared to Treasury securities.
The management of the Fund will continue to monitor developments in the
market and to look for opportunities that will produce positive performance in
the long-run. The average credit quality of the Fund is "AA," average coupon is
6.08% and the average weighted maturity is approximately 18 years.
ALPHA L. BENSON, MBA - PORTFOLIO MANAGER
PORTFOLIO VALUE $254,071,756
FUND COMPOSITION
(SUBJECT TO CHANGE)
PIE CHART:
Other assets less liabilities 1.0%
Municipal securities 99.0%
<TABLE>
AVERAGE ANNUAL (COMPOUND) TOTAL RETURN
FOR PERIODS ENDED 10/31/97
<CAPTION>
$1,000 $100 $1,000
LUMP SUM MONTHLY LUMP SUM
INVESTMENT INVESTMENT INVESTMENT
YEARS W/O SC* W/O SC* W/SC**
<S> <C> <C> <C>
1 7.72% 8.71% 2.72%
5 6.78% 6.46% 6.63%
10 8.18% 7.16% 8.18%
<FN>
* These returns do not reflect the effects of sales charges.
** Assumes the applicable contingent deferred sales charge (CDSC) was paid on
withdrawals, which has the most dramatic effect on the one-year performance
figures. The CDSC declines from 5% in the first year to 0% after 5 years.
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.
</FN>
</TABLE>
FUND PERFORMANCE
<TABLE>
BAR CHART:
<CAPTION>
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CPI 10000 10425 10903 11598 11928 12319 12658 12997 13353 13753 14014
FUND 10000 11629 12529 13191 14763 15823 18507 16890 19366 20393 21969
LBMBI 10000 11456 12383 13302 14921 16174 18450 17646 20266 21421 23241
<FN>
Comparative performance of $10,000 invested in the Nationwide(R) Tax-Free
Income Fund, the Lehman Brothers Municipal Bond Index* (LBMBI) and the Consumer
Price Index (CPI)** over a 10-year period ended 10/31/97. 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.
</FN>
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF INVESTMENTS - NATIONWIDE(R)TAX-FREE INCOME FUND - OCTOBER 31, 1997
<CAPTION>
PRINCIPAL SECURITY VALUE
<S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES (99.0%)
ALABAMA (4.8%)
$3,000,000 Alabama Housing Finance Authority
Single-Family Mortgage
Revenue Bonds (Collateralized
Home Mortgage Revenue
Bond Program), 1996 Series D,
6.00%, 2016 $ 3,142,500
1,100,000 Birmingham, Alabama General
Obligation Parking Warrants,
Series 1995-A, 5.90%, 2018 1,139,875
2,500,000 Birmingham, Alabama General
Obligation Refunding
Revenue, Series 1992 B,
6.25%, 2016 2,653,125
2,480,000 Birmingham, Alabama Water Works
& Sewer Board Refunding
Revenue, Series 1992,
6.125%, 2012 2,604,000
2,500,000 Huntsville, Alabama General
Obligation Limited Tax
Warrants, Series 1992 A,
6.00%, 2012 2,650,000
------------
12,189,500
------------
ARIZONA (1.0%)
2,500,000 Salt River Project Agricultural
Improvement & Power District,
Arizona Electric System Revenue
Bonds, Series 1992 C,
6.20%, 2012 2,662,500
------------
COLORADO (0.1%)
340,000 Colorado Housing Finance Authority
Single-Family Housing Revenue
Refunding Bonds, Series 1991-A,
7.15%, 2014 364,225
------------
CONNECTICUT (1.8%)
4,220,000 Connecticut Housing Finance Authority
Housing Mortgage Finance Program
Bonds, Series 1992-B,
6.70%, 2012 4,547,050
------------
FLORIDA (1.0%)
2,400,000 Jacksonville, Florida Electric Authority
Bulk Power Revenue Bonds, (Scherer 4
Project, Issue One, Series 1991-A),
7.00%, 2012 2,622,000
------------
GEORGIA (2.6%)
1,250,000 Columbus, Georgia Building Authority
Lease Revenue Bonds, Series 1997A,
5.65%, 2017 1,282,812
1,210,000 Dekalb County, Georgia General
Obligation Refunding Bonds,
6.00%, 2012 1,278,062
2,750,000 Georgia Municipal Electric Authority
Power Revenue Bonds,
Series 1991-V, 6.60%, 2018 3,162,500
955,000 Georgia Residential Financial
Authority Revenue Bonds,
Series A, 7.50%, 2017 1,013,494
------------
6,736,868
------------
<PAGE>
<CAPTION>
PRINCIPAL SECURITY VALUE
<S> <C> <C>
ILLINOIS (10.1%)
$2,050,000 Chicago Park District, Illinois General
Obligation Unlimited Tax Park Bonds,
Series 1996, 5.60%, 2021 $ 2,075,625
2,185,000 Illinois Educational Facility Authority
Revenue, Series 1991-A, Loyola
University, 7.125%, 2021 2,439,006
2,500,000 Illinois State Build Illinois Bonds Sales
Tax Revenue, Series V,
6.375%, 2017 2,703,125
7,500,000 Illinois State Build Illinois Bonds Sales
Tax Revenue, Series O,
6.00%, 2018 7,818,750
1,000,000 Palatine, Illinois Corporate Purpose
General Obligation Bonds,
Series 1985, 9.90%, 2016 1,128,750
2,500,000 Illinois State General Obligation Bonds,
Series of December 1995,
5.125%, 2017 2,459,375
4,000,000 Illinois State General Obligation Bonds,
Series of May 1996, 5.75%, 2017 4,155,000
3,000,000 Illinois State General Obligation Bonds,
Series of March 1994, 5.80%, 2019 3,082,500
------------
25,862,131
------------
INDIANA (2.9%)
5,335,000 Indiana State Toll Road Commission
East-West Toll Road Revenue Bonds,
Series 1980, 9.00%, 2015 7,475,669
------------
KENTUCKY (1.4%)
3,250,000 Jefferson County, Kentucky Jewish
Hospital Healthcare Services Health
Facilities Revenue Bonds, Series 1995,
6.50%, 2015 3,522,187
------------
MASSACHUSETTS (2.4%)
2,525,000 Massachusetts State General Obligation
Bonds Consolidated Loan,
Series 1992-B, 6.50%, 2013 2,780,656
3,000,000 Massachusetts State General Obligation
Refunding Bonds, 1997 Series A,
5.75%, 2010 3,262,500
------------
6,043,156
------------
MICHIGAN (3.4%)
3,500,000 Cheboygan, Michigan Area Schools
General Obligation Unlimited Tax,
5.60%, 2021 3,561,250
3,500,000 Michigan State General Obligation
Bonds, Environmental Protection
Program, Series 1992,
6.25%, 2012 4,007,500
1,150,000 University of Michigan Higher
Education Housing Revenue Bonds,
Series 1996A, 5.125%, 2015 1,151,438
------------
8,720,188
------------
MINNESOTA (2.4%)
2,095,000 Minnesota Housing Finance Agency
Rental Housing Revenue Bonds,
Series 1995 D, 5.90%, 2015 2,173,563
3,790,000 Minnesota State Housing Finance
Agency Single Family Mortgage
Revenue Bonds, Series 1994 K,
6.40%, 2015 4,022,137
------------
6,195,700
------------
<PAGE>
<CAPTION>
PRINCIPAL SECURITY VALUE
<S> <C> <C>
MISSOURI (0.8%)
$2,000,000 Missouri State Environmental
Improvement & Energy Resources
Authority Water Pollution Control
Revenue Bonds, 6.55%, 2014 $ 2,162,500
------------
NEBRASKA (2.0%)
5,000,000 Nebraska Public Power District Power
Supply System Revenue Bonds,
Series 1993, 6.125%, 2015 5,331,250
------------
NORTH CAROLINA (8.5%)
5,000,000 Charlotte-Mecklenburg Hospital
Authority, North Carolina, Carolinas
Healthcare System, Health Care
Revenue Bonds, Series 1997A,
5.125%, 2022 4,800,000
3,460,000 North Carolina Housing Finance
Agency Multi-Family Revenue
Refunding Bonds, Series H,
5.95%, 2021 3,611,375
2,185,000 North Carolina Housing Finance
Agency Single-Family Revenue
Bonds, Series GG, 5.90%, 2013 2,283,325
2,020,000 North Carolina Housing Finance
Agency Single-Family Revenue Bonds,
Series AA, 6.25%, 2017 2,153,825
1,745,000 North Carolina Housing Finance
Agency Single-Family Revenue Bonds,
Series J, 7.40%, 2022 1,821,344
1,695,000 North Carolina Housing Finance Agency
Single-Family Revenue Bonds,
Series N, 7.40%, 2028 1,794,581
2,000,000 North Carolina Medical Care
Commission Hospital Revenue
Refunding Bonds, Series 1992 A
(North Carolina Baptist Hospitals
Project), 6.375%, 2014 2,135,000
1,000,000 North Carolina Medical Care Commission
Hospital Revenue Bonds, Duke
University Hospital Project, Series C,
5.25%, 2017 985,000
1,080,000 University of North Carolina at Chapel
Hill Dining System Revenue Bonds,
Series 1997, 5.40%, 2016 1,113,750
1,140,000 University of North Carolina at Chapel
Hill Dining System Revenue Bonds,
Series 1997, 5.40%, 2017 1,159,950
------------
21,858,150
------------
OHIO (2.6%)
1,760,000 Columbus, Ohio General Obligation
Various Purpose Bonds,
8.125%, 2006 2,204,400
1,100,000 Franklin County, Ohio Hospital
Refunding and Improvement
Revenue Bonds (The Children's
Hospital Project), 1996 Series A,
5.75%, 2020 1,122,000
1,225,000 Ohio Housing Finance Agency
Mortgage Revenue Bonds
Residential Mortgage Backed
Securities, Series A-1, 5.70%, 2017 1,252,563
2,000,000 Ohio Turnpike Commission Turnpike
Revenue Bonds, 1996 Series A,
5.70%, 2017 2,067,500
------------
6,646,463
------------
<PAGE>
<CAPTION>
PRINCIPAL SECURITY VALUE
PENNSYLVANIA (6.3%)
$2,000,000 Pennsylvania General Obligation
Bonds, Second Series of 1995,
5.00%, 2012 $ 1,990,000
4,500,000 Pennsylvania Higher Educational
Facilities Authority, The University of
Pennsylvania Health Services
Revenue Bonds, Series A of 1996,
5.875%, 2015 4,708,125
1,500,000 Pennsylvania Housing Finance Agency
Rental Housing Refunding Revenue
Bonds, Issue 1992, 6.25%, 2007 1,591,875
4,055,000 Pennsylvania Housing Finance Agency
Rental Housing Refunding Revenue
Bonds, Issue 1992, 6.40%, 2012 4,267,888
2,000,000 Pennsylvania State Turnpike Commission
Oil Franchise Tax Revenue, Series A,
6.00%, 2014 2,122,500
1,500,000 Pittsburgh, Pennsylvania Water and
Sewer Authority, Water and Sewer
System First Lien Revenue Bonds,
Series A of 1995, 5.50%, 2015 1,520,625
------------
16,201,013
------------
SOUTH CAROLINA (5.1%)
4,980,000 Charleston, South Carolina Waterworks
& Sewer System Refunding & Capital
Improvement Revenue Bonds,
Series 1991, 6.00%, 2018 5,210,325
1,400,000 Greenville, South Carolina Hospital
System Revenue Bonds Hospital
Facilities, Series B, 5.25%, 2017 1,379,000
1,500,000 South Carolina State Housing Finance
& Development Authority Multi-Family
Development Revenue Refunding,
Series 1992-A, 6.875%, 2023 1,588,125
2,075,000 South Carolina State Housing Finance
& Development Authority Homeownership
Mortgage Purchase Bonds, Series
1994 A, 6.375%, 2016 2,176,156
1,500,000 Spartanburg, South Carolina Water
System Improvement & Refunding
Revenue Bonds, Series 1992,
6.25%, 2017 1,626,519
1,000,000 Spartanburg, South Carolina Water
System Revenue Bonds, Series 1996,
6.10%, 2021 1,112,500
------------
13,092,625
------------
TENNESSEE (1.4%)
1,430,000 Nashville & Davidson County,
Tennessee Health & Educational
Facilities Revenue Bonds, Series
1979, 7.875%, 2004 1,605,175
1,000,000 Nashville & Davidson County,
Tennessee General Obligation
Multi-Purpose Improvement Bonds,
Series 1994, 6.125%, 2014 1,091,250
1,000,000 Shelby County, Tennessee General
Obligation Public Improvement Bonds,
1996 Series A, 5.85%, 2017 1,038,750
------------
3,735,175
------------
<PAGE>
<CAPTION>
PRINCIPAL SECURITY VALUE
<S> <C> <C>
TEXAS (18.5%)
$2,325,000 Beaumont Independent School District,
Texas Unlimited Tax School Building,
Series 1996, 5.00%, 2016 $ 2,258,156
1,000,000 Carrollton-Farmers Branch Independent
School District, Texas General
Obligation Permanent School Fund
Guarantee, Series 1996,
5.70%, 2017 1,026,250
1,100,000 Cypress-Fairbanks Independent School
District, Texas General Obligation
Permanent School Fund Guarantee,
Series 1996, 5.375%, 2019 1,097,250
2,300,000 Fort Bend Independent School District,
Texas General Obligation Permanent
School Fund Guarantee, Series 1996,
5.00%, 2018 2,205,125
1,350,000 Fort Worth, Texas General Obligation
Limited Tax Bonds, 5.625%, 2017 1,383,750
5,325,000 Harris County, Texas Health Facilities
Development Corporation Revenue
School Health Care Systems, Series B,
5.75%, 2027 5,451,469
2,500,000 Houston Independent School District,
Texas Limited Tax School House
Refunding Bonds, Series 1997,
5.375%, 2017 2,506,250
7,720,000 Houston, Texas Water & Sewer Junior
Lien Revenue Refunding, Series 1991-C,
6.375%, 2017 8,327,600
490,000 Lower Colorado River Authority Texas
Junior Lien Refunding Revenue Bonds,
Series 1992 (ETM), 6.00%, 2017 539,000
2,630,000 Lower Colorado River Authority Texas
Junior Lien Refunding Revenue Bonds,
Series 1992 (Unrefunded),
6.00%, 2017 2,695,750
4,000,000 San Antonio, Texas General Obligation
General Improvement and Refunding
Bonds, Series 1996A, 5.00%, 2016 3,895,000
2,000,000 Texas A&M University System Board of
Regents Revenue Financing System
Bonds, Series 1996, 5.375%, 2014 2,040,000
3,175,000 Texas State Water Development Bonds,
Series 1994, 6.90%, 2017 3,544,094
2,810,000 Texas State Water Development Board
State Revolving Fund Senior Lien
Revenue Bonds, Program Series 1997A,
5.25%, 2019 2,781,900
1,000,000 Texas State Public Finance Authority
General Obligation Refunding Bonds,
Series 1995A, 6.00%, 2014 1,056,250
2,000,000 University of Texas System Permanent
University Fund Bonds, Series 1992B,
6.25%, 2013 2,162,500
1,090,000 Weatherford, Texas Independent School
District Unlimited Tax School Building
and Refunding Bonds, Series 1994,
6.40%, 2012 1,181,287
3,000,000 Weatherford, Texas Independent School
District Unlimited Tax School Building
and Refunding Bonds, Series 1994,
6.50%, 2015 3,270,000
------------
47,421,631
------------
UTAH (0.4%)
1,080,000 Intermountain Power Agency, Utah
Power Supply Revenue Refunding
Bonds, Series 1993-A,
5.50%, 2020 1,069,200
------------
<PAGE>
<CAPTION>
PRINCIPAL SECURITY VALUE
<S> <C> <C>
VIRGINIA (11.4%)
$1,500,000 Fairfax County, Virginia Water Authority
Water Refunding Revenue
Series 1992, 6.00%, 2022 $ 1,628,775
4,250,000 Henrico County, Virginia Water and
Sewer System Refunding Revenue
Bonds, Series 1994, 5.875%, 2014 4,372,188
1,985,000 Newport News, Virgina General
Improvement Bonds, Series 1993 E,
5.20%, 2013 2,017,256
3,000,000 Richmond, Virginia General Obligation
Public Improvement Refunding Bonds,
Series 1991-B, 6.25%, 2018 3,157,500
1,000,000 Virginia Housing Development Authority
Commonwealth Mortgage Bonds,
Series B Subseries B-2,
6.50%, 2010 1,100,000
1,080,000 Virginia Housing Development Authority
Commonwealth Mortgage Bonds,
Series 1995-D, Subseries D-1,
5.95%, 2013 1,125,900
2,000,000 Virginia Housing Development Authority
Commonwealth Mortgage Bonds,
Series 1992 C Subseries C-7,
6.30%, 2015 2,087,500
1,000,000 Virginia Housing Development Authority
Commonwealth Mortgage Bonds,
Series 1995 B Subseries B-3,
6.35%, 2015 1,065,000
1,930,000 Virginia Housing Development Authority
Commonwealth Mortgage Bonds,
Series 1995 B Subseries B-3,
6.35%, 2016 2,055,450
5,500,000 Virginia Housing Development Authority
Commonwealth Mortgage Bonds,
Series 1992 A, 7.10%, 2022 5,864,375
2,000,000 Virginia Public School Authority School
Financing Bonds (1991 Resolution),
Series 1994 A, 6.20%, 2013 2,147,500
2,595,000 Virginia Public School Authority School
Financing Bonds (1991 Resolution),
Series 1995 C, 5.00%, 2016 2,526,881
------------
29,148,325
------------
WASHINGTON (4.4%)
1,500,000 King County, Washington Limited Tax
General Obligation Refunding Bonds,
1996 Series C, 5.25%, 2021 1,501,875
6,150,000 Seattle, Washington Water System
and Refunding Revenue Bonds,
1993, 5.50%, 2018 6,196,125
3,500,000 Washington State Motor Vehicle Fuel
Tax General Obligation Bonds,
Series 1997 D, 5.375%, 2022 3,513,125
------------
11,211,125
------------
<PAGE>
<CAPTION>
PRINCIPAL SECURITY VALUE
WISCONSIN (3.6%)
$1,000,000 Wisconsin Housing and Economic
Development Authority Home
Ownership Revenue Bonds,
Series A, 5.65%, 2010 $ 1,051,250
2,000,000 Wisconsin State General Obligation,
Series 1992-A, 6.30%, 2011 2,162,500
2,000,000 Wisconsin State General Obligation
Bonds of 1994, Series A,
5.00%, 2014 1,970,000
1,500,000 Wisconsin State Transportation
Revenue Bonds,1994 Series A,
5.50%, 2011 1,522,500
2,500,000 Wisconsin State Transportation Revenue
Bonds, Series A, 5.50%, 2012 2,546,875
------------
9,253,125
------------
TOTAL LONG-TERM MUNICIPAL SECURITIES
(cost $239,111,498) $254,071,756
============
<FN>
- ---------------
Cost also represents cost for federal income tax purposes.
Portfolio holding percentages represent market value as a percentage of net
assets.
</FN>
See accompanying notes to financial statements.
</TABLE>
Distribution of investments by industry, as a percentage of total investment in
securities at value, is as follows:
<TABLE>
<CAPTION>
INDUSTRY MARKET VALUE PERCENT
<S> <C> <C>
County/City/School Districts $ 17,105,568 6.7%
Education 14,741,025 5.8
Electric Utilities 14,847,450 5.8
Healthcare/Medical Products 8,973,656 3.5
Hospitals 16,734,300 6.6
Housing 53,436,314 21.0
Miscellaneous 15,816,250 6.2
Political Subdivisions - City/County 23,637,718 9.3
State Territories and Possessions 32,927,250 13.0
Transportation 15,735,044 6.2
Water, Sewer, and Combined Utilities 40,117,181 15.9
------------ -----
$254,071,756 100.0%
============ =====
</TABLE>
<PAGE>
NATIONWIDE(R) INVESTING FOUNDATION II
NATIONWIDE(R) U.S. GOVERNMENT INCOME FUND
MANAGEMENT DISCUSSION
OF FUND PERFORMANCE
The Nationwide U.S. Government Income Fund's total return for the year ended
October 31, 1997, was 8.86% without sales charge and assuming all distributions
were reinvested, while its new index, the Merrill Lynch Government Master Index,
returned 8.67%. The new index is more reflective of our investment policies.
Shareholders who stayed in the Fund for the entire period were rewarded after a
difficult first six months when intermediate-term interest rates rose 0.4%-0.5%.
The second half of the period was more favorable as intermediate interest rates
dropped 0.5%-0.9% and longer rates dropped by approximately 0.8%.
The higher prices for bonds in the second half was the result of several
factors. The most notable factor was the continued release of favorable
inflation reports in spite of low unemployment and significant growth in the
overall economy. Another important factor is the perception that the Federal
Reserve will not act to raise rates until clear signs of inflationary pressures
are present. The Federal Reserve's stance combined with favorable inflation
reports has led to a significantly flatter yield curve. Finally, the U.S.
government market has been the beneficiary of a flight to quality as the result
of increased turmoil in world equity markets.
The U.S. Government Income Fund benefited from its weighting in the
Collateralized Mortgage Obligation (CMO) market during the period and the shift
out of callable into non-callable Agency notes. Approximately 77% of portfolio
assets are invested in the CMO market, and 19% of Fund assets are invested in
U.S. government and agency obligations. The remainder of Fund assets are held in
repurchase agreements.
PORTFOLIO MANAGERS:
KIMBERLY A. BINGLE, CFA, FLMI
WAYNE T. FRISBEE, CFA
GARY R. HUNT, MBA
PORTFOLIO VALUE $41,268,812
FUND COMPOSITION
(SUBJECT TO CHANGE)
PIE CHART:
Other assets less liabilities 4.9%
Mortgage-backed securities 76.4%
U.S. government and agency long-term obligations 18.7%
<TABLE>
AVERAGE ANNUAL (COMPOUND) TOTAL RETURN
FOR PERIODS ENDED 10/31/97
<CAPTION>
$1,000 $100 $1,000
LUMP SUM MONTHLY LUMP SUM
INVESTMENT INVESTMENT INVESTMENT
YEARS W/O SC* W/O SC* W/SC**
<S> <C> <C> <C>
1 8.86% 11.36% 3.86%
5 7.09% 7.77% 6.94%
Life 7.17% 7.60% 7.17%
(5 years, 8 months)
<FN>
* These returns do not reflect the effects of sales charges.
** Assumes the applicable contingent deferred sales charge (CDSC) was paid on
withdrawals, which has the most dramatic effect on the one-year performance
figures. The CDSC declines from 5% in the first year to 0% after 5 years.
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.
</FN>
</TABLE>
FUND PERFORMANCE
BAR CHART:
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C>
CPI 10000 10223 10504 10785 11081 11413 11629
FUND 10000 10513 11581 11094 12922 13604 14809
LBIGBI 10000 10669 11653 11453 12806 13532 14524
MLGMI 10000 10692 12083 11560 13341 14015 15231
<FN>
Comparative performance of $10,000 invested in the Nationwide(R) U.S.
Government Income Fund, the Lehman Brothers Intermediate Government Bond Index*
(LBIGBI), the Merrill Lynch Government Master Index** (MLGMI) and the Consumer
Price Index (CPI)*** since inception (2/10/92) to 10/31/97. Unlike our Fund,
these indices do not reflect any fees, expenses or sales charges.
* The LBIGBI is comprised of U.S. government securities with par values of at
least $100 million and maturities of at least one year and up to 10 years.
** The MLGMI is the new index for the Fund. It 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.
</FN>
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF INVESTMENTS - NATIONWIDE(R) U.S. GOVERNMENT INCOME FUND -
OCTOBER 31, 1997
<CAPTION>
PRINCIPAL SECURITY VALUE
<S> <C> <C>
MORTGAGE-BACKED SECURITIES (76.4%)
$5,000,000 FHLMC REMIC Series 1462,
Class PT, 7.50%, 01/15/03 $ 5,140,900
3,000,000 FHLMC REMIC Series 1313,
Class G, 7.25%, 06/15/07 3,078,597
4,000,000 FHLMC REMIC Series 1344,
Class D, 6.00%, 08/15/07 3,900,720
5,000,000 FHLMC REMIC Series 1560,
Class PN, 7.00%, 12/15/12 5,182,150
3,437,917 FHLMC REMIC Series 31,
Class E, 7.55%, 05/15/20 3,570,404
1,435,713 FNMA REMIC Series 92-126,
Class VB, 8.00%, 07/25/02 1,494,764
4,000,000 FNMA REMIC Series 92-151,
Class H, 6.00%, 08/25/07 3,903,240
334,190 FNMA REMIC Series 1988-25,
Class B, 9.25%, 10/25/18 357,775
2,166,449 FNMA REMIC Series 1990-7,
Class B, 8.50%, 01/25/20 2,275,177
2,373,246 FNMA REMIC Series 1992-81,
Class Z, 8.50%, 04/25/22 2,665,968
-----------
TOTAL MORTGAGE-BACKED SECURITIES
(cost $30,165,251) 31,569,695
-----------
U.S GOVERNMENT AND AGENCY
LONG-TERM OBLIGATIONS (18.7%)
4,000,000 Federal National Mortgage
Association, 7.35%, 03/28/05 4,296,524
1,550,000 Federal National Mortgage
Association, 7.26%, 10/05/05 1,558,337
2,000,000 Resolution Funding STRIPS,
0.00%, 07/15/07 1,110,738
2,000,000 Resolution Funding STRIPS,
0.00%, 07/15/13 743,518
-----------
TOTAL U.S. GOVERNMENT AND AGENCY LONG-TERM
OBLIGATIONS (cost $7,446,092) 7,709,117
-----------
<PAGE>
<CAPTION>
PRINCIPAL SECURITY VALUE
<S> <C> <C>
REPURCHASE AGREEMENT (4.8%)
$1,990,000 UBS Securities 5.63%, 11/03/97,
Collateralized by $1,964,000
U.S. Treasury Note,
6.375%, 01/15/00, market value
$2,030,285 (cost $1,990,000) $ 1,990,000
-----------
TOTAL INVESTMENTS (cost $39,601,343) $41,268,812
===========
<FN>
- -----------------
The abbreviations in the above statement stand for the following:
FNMA Federal National Mortgage Association
FHLMC Federal Home Loan Mortgage Corporation
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.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
NATIONWIDE(R) INVESTING FOUNDATION
NATIONWIDE(R) MONEY MARKET FUND
MANAGEMENT DISCUSSION
OF FUND PERFORMANCE
The net assets of Nationwide Money Market Fund ended the fiscal year at $820.7
million. They were $729.5 million a year ago. Mutual fund assets have seen
consistent growth during the year. Much of the growth is attributed to an
increase in individual retirement savings utilizing payroll deductions. The
average annual total return for the year ended October 31, 1997, was 5.07%
versus 2.08% for the Consumer Price Index; the seven-day effective yield for the
Fund was 5.15%.
The Fund met its investment objective of providing a high level of current
income consistent with capital preservation and maintenance of liquidity. This
was achieved by careful investment selection and constant attention to the
compliance objectives and policies outlined in the prospectus.
The investment portfolio is well diversified and a laddered approach to
maturities was followed. The dollar-weighted average maturity of the Fund
remained between approximately 35-45 days. Prime commercial paper provided the
best risk/return profile, accounting for its dominant portfolio weighting. The
trading range for 30-day prime commercial paper (dealer placed) was between
5.24% and 5.61% for the year.
PATRICIA A. MYNSTER - PORTFOLIO MANAGER
PORTFOLIO VALUE $821,976,286
FUND COMPOSITION
(SUBJECT TO CHANGE)
PIE CHART:
Canadian obligations 3.4%
Commercial paper 92.7%
U.S. government and agency obligations and other assets less liabilities 3.9%
<TABLE>
AVERAGE ANNUAL (COMPOUND) TOTAL RETURN
FOR PERIODS ENDED 10/31/97
<CAPTION>
$1,000 $100
LUMP SUM MONTHLY
INVESTMENT INVESTMENT
YEARS W/O SC* W/O SC*
<S> <C> <C>
1 5.07% 5.13%
5 4.30% 4.83%
10 5.47% 4.86%
<FN>
* There are no sales charges in the Nationwide(R) Money Market Fund.
An investment in the Money Market Fund is neither insured nor guaranteed by
the U.S. Government and there can be no assurance that it will be able to
maintain a stable net asset value of $1.00 per share.
</FN>
</TABLE>
FUND PERFORMANCE
<TABLE>
Bar Chart:
<CAPTION>
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CPI 10000 10425 10903 11598 11925 12319 12658 12997 13353 13753 14014
FUND 10000 10693 11644 12569 13341 13811 14170 14643 15443 16222 17045
<FN>
Comparative performance of $10,000 invested in the Nationwide(R) Money Market
Fund, and the Consumer Price Index (CPI)* over a 10-year period ended
10/31/97. Unlike our Fund, the CPI does not reflect any fees or expenses.
* The CPI represents changes in prices of all goods and services purchased for
consumption by urban households.
</FN>
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF INVESTMENTS - NATIONWIDE(R)MONEY MARKET FUND - OCTOBER 31, 1997
<CAPTION>
PRINCIPAL SECURITY VALUE
<S> <C> <C>
CANADIAN OBLIGATIONS (3.4%)
British Columbia (Providence Of)
$ 8,325,000 5.47%, 01/26/98 $ 8,216,215
Canadian Treasury Bills
7,714,000 5.43%, 11/14/97 7,698,874
Canadian Wheat Board
2,900,000 5.50%, 12/15/97 2,880,506
5,000,000 5.50%, 12/16/97 4,965,625
Export Development Corp.
4,500,000 5.56%, 01/22/98 4,443,010
------------
TOTAL CANADIAN OBLIGATIONS
(cost $28,204,230) 28,204,230
------------
COMMERCIAL PAPER (92.7%)
AGRICULTURE/SUPPLIES (0.9%)
Deere & Co.
7,029,000 5.51%, 11/05/97 7,024,697
------------
AUTO/FINANCE (7.1%)
Ford Motor Credit Co.
1,995,000 5.49-5.52%, 11/04/97 1,994,087
4,000,000 5.50%, 11/21/97 3,987,778
3,000,000 5.48%, 11/26/97 2,988,583
10,000,000 5.51%, 01/06/98 9,898,983
3,000,000 5.53%, 01/13/98 2,966,359
5,500,000 5.56%, 01/20/98 5,432,044
General Motors Acceptance Corp.
6,060,000 5.55%, 11/19/97 6,043,184
6,497,000 5.54%, 11/25/97 6,473,004
13,908,000 5.54%, 12/12/97 13,820,248
4,923,000 5.54%, 12/18/97 4,887,393
------------
58,491,663
------------
BANKS (9.7%)
Banc One Corp.
10,000,000 5.50%, 11/21/97 9,969,444
1,930,000 5.51%, 11/26/97 1,922,615
7,140,000 5.51%, 12/02/97 7,106,123
2,114,000 5.53%, 12/18/97 2,098,738
CoreStates Capital Corp.
5,000,000 5.51%, 11/03/97 4,998,470
J.P. Morgan & Co.
5,000,000 5.50%, 11/14/97 4,990,070
National City Credit Corp.
3,000,000 5.51%, 11/04/97 2,998,623
8,000,000 5.51%, 11/10/97 7,988,980
3,000,000 5.52%, 11/12/97 2,994,940
10,000,000 5.53-5.55%, 12/01/97 9,953,917
5,000,000 5.51%, 12/08/97 4,971,685
5,000,000 5.50%, 12/19/97 4,963,333
SunTrust Banks, Inc.
5,000,000 5.57%, 01/08/98 4,947,394
Toronto-Dominion USA
10,000,000 5.52-5.54%, 01/07/98 9,897,267
------------
79,801,599
------------
BROKER/DEALERS (11.0%)
Bear Stearns Company
5,000,000 5.52%, 11/03/97 4,998,467
14,000,000 5.51-5.52%, 11/26/97 13,946,368
4,000,000 5.50%, 12/09/97 3,977,152
2,603,000 5.52%, 12/16/97 2,585,039
5,000,000 5.60%, 01/09/98 4,946,333
Goldman Sachs Group
6,221,000 5.49-5.52%, 11/17/97 6,205,778
15,053,000 5.50%, 11/18/97 15,013,904
<PAGE>
<CAPTION>
PRINCIPAL SECURITY VALUE
<S> <C> <C>
BROKER/DEALERS (CONTINUED)
Merrill Lynch & Co., Inc.
$ 4,000,000 5.53%, 11/19/97 $ 3,988,940
5,500,000 5.50-5.53%, 12/12/97 5,465,361
5,000,000 5.53%, 01/05/98 4,950,076
8,000,000 5.57-5.61%, 01/12/98 7,910,640
4,400,000 5.60%, 01/16/98 4,347,982
2,000,000 5.55%, 02/05/98 1,970,400
Smith Barney, Inc.
10,000,000 5.51%, 11/12/97 9,983,164
------------
90,289,604
------------
CHEMICALS (4.1%)
Monsanto Co.
3,000,000 5.50-5.53%, 11/05/97 2,998,167
2,000,000 5.51%, 11/12/97 1,996,633
10,000,000 5.50%, 12/03/97 9,951,111
13,450,000 5.48-5.49%, 12/04/97 13,382,390
3,750,000 5.50%, 12/08/97 3,728,802
PPG Industries, Inc.
1,374,000 5.47-5.55%, 11/24/97 1,369,198
------------
33,426,301
------------
CONSUMER SALES FINANCE (14.3%)
American Express Credit Corp.
10,000,000 5.51%, 11/06/97 9,992,347
5,469,000 5.51%, 11/14/97 5,458,118
1,291,000 5.53%, 12/18/97 1,281,679
Associates Corp. of North America
6,010,000 5.48%, 11/04/97 6,007,256
5,000,000 5.51%, 11/05/97 4,996,939
5,000,000 5.51%, 01/05/98 4,950,257
3,915,000 5.55%, 01/09/98 3,873,354
Avco Financial Services, Inc.
9,060,000 5.57%, 02/05/98 8,925,429
Beneficial Corp.
14,737,000 5.51%, 12/01/97 14,669,333
7,000,000 5.49%, 12/17/97 6,950,895
Commercial Credit Corp.
10,000,000 5.50%, 11/20/97 9,970,972
3,042,000 5.49%, 11/24/97 3,031,330
10,000,000 5.48%, 12/09/97 9,942,156
6,000,000 5.50%, 12/24/97 5,951,417
Norwest Financial Inc.
6,412,000 5.51%, 11/03/97 6,410,037
10,000,000 5.48%, 11/19/97 9,972,600
5,000,000 5.50-5.54%, 12/17/97 4,964,861
------------
117,348,980
------------
CORPORATE CREDIT UNIONS (2.4%)
U.S. Central Credit Union
15,000,000 5.49%, 12/15/97 14,900,388
5,000,000 5.495%, 01/16/98 4,941,997
------------
19,842,385
------------
DATA SERVICES (3.6%)
First Data Corp.
12,652,000 5.51%, 11/25/97 12,605,525
7,000,000 5.51%, 12/09/97 6,959,287
2,000,000 5.55%, 01/13/98 1,977,492
8,000,000 5.59%, 02/24/98 7,857,144
------------
29,399,448
------------
<PAGE>
<CAPTION>
PRINCIPAL SECURITY VALUE
<S> <C> <C>
DIVERSIFIED FINANCE (3.7%)
General Electric Capital Corp.
$ 7,000,000 5.52%, 11/07/97 $ 6,993,560
5,000,000 5.52%, 11/12/97 4,991,567
4,000,000 5.49%, 11/19/97 3,989,020
5,115,000 5.53-5.57%, 11/21/97 5,099,172
3,000,000 5.55%, 01/13/98 2,966,238
3,000,000 5.56-5.54%, 01/09/98 2,968,145
3,000,000 5.60%, 03/19/98 2,935,600
------------
29,943,302
------------
ENTERTAINMENT (0.5%)
Walt Disney Company
3,814,000 5.52%, 01/02/98 3,777,742
------------
FINANCIAL SERVICE/UTILITIES (2.6%)
National Rural Utilities Cooperative Finance Corp.
5,000,000 5.48%, 11/10/97 4,993,150
7,887,000 5.53%, 12/02/97 7,849,714
5,000,000 5.51%, 12/05/97 4,973,981
2,800,000 5.52-5.58%, 01/08/98 2,770,488
1,000,000 5.54-5.58%, 01/12/98 988,840
------------
21,576,173
------------
FOOD & BEVERAGES (10.1%)
CPC International, Inc.
5,000,000 5.52%, 11/10/97 4,993,176
9,000,000 5.49-5.50%, 11/13/97 8,983,506
7,000,000 5.50%, 12/11/97 6,957,222
Campbell Soup 144-A *
5,000,000 5.46%, 12/22/97 4,961,325
Campbell Soup Co.
4,000,000 5.49%, 11/04/97 3,998,170
1,540,000 5.51%, 12/09/97 1,531,043
10,000,000 5.48%, 12/19/97 9,926,933
5,000,000 5.52%, 01/07/98 4,948,633
Heinz H.J. Co.
4,000,000 5.48%, 11/17/97 3,990,258
10,990,000 5.48%, 11/18/97 10,961,560
5,000,000 5.50%, 11/24/97 4,982,431
1,300,000 5.52%, 12/05/97 1,293,223
McDonalds Corp.
10,000,000 5.52%, 11/04/97 9,995,400
Sysco Corp. Private Placement
5,000,000 5.52%, 11/18/97 4,986,967
------------
82,509,847
------------
HEAVY EQUIPMENT/FINANCE (3.8%)
Caterpillar Financial Services, Inc.
12,000,000 5.52%, 11/07/97 11,988,960
2,500,000 5.53%, 11/14/97 2,495,008
12,000,000 5.49-5.52%, 11/17/97 11,970,720
5,000,000 5.49-5.50%, 11/18/97 4,987,038
------------
31,441,726
------------
INSURANCE (4.2%)
MetLife Funding, Inc.
4,000,000 5.49%, 11/05/97 3,997,560
8,000,000 5.50%, 11/06/97 7,993,889
3,000,000 5.51%, 11/21/97 2,990,817
3,000,000 5.48%, 12/02/97 2,985,843
10,000,000 5.48%, 12/05/97 9,948,244
Old Republic Capital Corp.
7,000,000 5.50%, 12/11/97 6,957,870
------------
34,874,223
------------
<PAGE>
<CAPTION>
PRINCIPAL SECURITY VALUE
<S> <C> <C>
MISCELLANEOUS MANUFACTURING (1.2%)
Illinois Tool Works Inc.
$10,000,000 5.70%, 11/03/97 $ 9,996,833
------------
OFFICE EQUIPMENT AND SUPPLIES (1.2%)
Pitney Bowes Credit
10,000,000 5.59-5.65%, 11/04/97 9,995,317
------------
OIL & GAS (1.4%)
Chevron Transport Corp.
2,000,000 5.50%, 11/17/97 1,995,111
5,000,000 5.51-5.52%, 12/02/97 4,976,276
5,000,000 5.52%, 12/16/97 4,965,500
------------
11,936,887
------------
PACKAGING/CONTAINERS (1.1%)
Bemis Co., Inc,
3,975,000 5.49-5.55%, 11/04/97 3,973,181
5,000,000 5.50%, 12/03/97 4,975,556
------------
8,948,737
------------
PAPER AND FOREST PRODUCTS (1.3%)
Sonoco Products Co.
10,500,000 5.49-5.68%, 11/04/97 10,495,196
------------
PHARMACEUTICALS/PERSONAL CARE (5.7%)
Abbott Laboratories
19,758,000 5.45-5.46%, 11/13/97 19,722,074
14,935,000 5.45%, 11/20/97 14,892,041
Glaxo Wellcome Private Placement
1,300,000 5.52%, 11/05/97 1,299,203
6,000,000 5.49%, 11/24/97 5,978,955
5,000,000 5.50%, 12/11/97 4,970,101
------------
46,862,374
------------
PREMIUM FINANCE (2.1%)
A.I. Credit Corp.
15,267,000 5.50%, 12/08/97 15,180,699
2,416,000 5.51%, 01/14/98 2,388,636
------------
17,569,335
------------
PRINTING & PUBLISHING (0.7%)
McGraw-Hill, Inc.
5,500,000 5.49%, 11/24/97 5,480,709
------------
TOTAL COMMERCIAL PAPER (cost $761,033,078) 761,033,078
------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (4.0%)
Federal Farm Credit Bank
10,000,000 5.35%, variable rate, 03/03/98 10,000,000
Federal National Mortgage Association
8,000,000 5.50%, 11/13/97 7,985,333
5,000,000 5.47%, 01/29/98 4,932,385
U.S. Treasury Bills
4,900,000 5.20%, 12/11/97 4,871,689
5,000,000 4.895%, 01/15/98 4,949,571
------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(cost $32,738,978) 32,738,978
------------
TOTAL INVESTMENTS
(cost $821,976,286) $821,976,286
============
<FN>
- --------------
*Security is subject to contractual or legal restrictions on its resale. Cost
also represents cost for federal tax purposes. Portfolio holding percentages
represent value as a percentage of net assets.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF ASSETS AND LIABILITIES
OCTOBER 31, 1997
<CAPTION>
NATIONWIDE(R) NATIONWIDE(R)
GROWTH NATIONWIDE(R) BOND
FUND FUND FUND
<S> <C> <C> <C>
ASSETS
Investments in securities, at value
(cost $564,817,127, $786,778,774, $119,832,661,
$239,111,498, $39,601,343 and $821,976,286,
respectively) $ 818,674,086 $1,457,399,757 $124,335,565
Cash 78,967 425,652 34,021
Receivable for Fund shares sold 400,362 555,703 47,217
Receivable for investment securities sold -- -- --
Accrued interest and dividends receivable 283,810 1,810,424 2,579,004
Withholding tax reclaim receivable 29,110 -- --
-------------- -------------- ------------
Total assets 819,466,335 1,460,191,536 126,995,807
-------------- -------------- ------------
LIABILITIES
Bank loan -- -- --
Payable for Fund shares redeemed 852,251 1,564,979 302,748
Payable for investment securities purchased -- 9,411,659 2,095,007
Accrued management fees 362,869 623,227 52,403
Accrued transfer agent fees 61,311 69,184 13,181
Accrued distribution fees -- -- --
Dividends payable 5,213 5,040 104,157
Other accrued expenses 60,576 95,543 23,899
-------------- -------------- ------------
Total liabilities 1,342,220 11,769,632 2,591,395
-------------- -------------- ------------
NET ASSETS $ 818,124,115 $1,448,421,904 $124,404,412
============== ============== ============
NET ASSETS REPRESENTED BY:
Capital Shares, $1 par value outstanding $ 50,125,860 $ 54,513,873 $ 13,109,316
Capital paid in excess of par value 412,709,238 646,094,028 116,244,861
Net unrealized appreciation 253,856,959 670,620,983 4,502,904
Accumulated undistributed net realized gain (loss) 101,432,058 76,009,135 (9,523,141)
Accumulated undistributed (distributions in excess of)
net investment income -- 1,183,885 70,472
-------------- -------------- ------------
NET ASSETS $ 818,124,115 $1,448,421,904 $124,404,412
============== ============== ============
Shares outstanding (unlimited number of
shares authorized) 50,125,860 54,513,873 13,109,316
============== ============== ============
Net asset value per share $ 16.32 $ 26.57 $ 9.49
============== ============== ============
Offering price (100%/(100%-Maximum Sales Charge)
of net asset value adjusted to nearest cent) per share* $ 17.09 $ 27.82 $ 9.94
============== ============== ============
Maximum sales charge 4.50% 4.50% 4.50%
============== ============== ============
<PAGE>
<CAPTION>
STATEMENTS OF ASSETS AND LIABILITIES
OCTOBER 31, 1997
NATIONWIDE(R)
NATIONWIDE(R) NATIONWIDE(R) MONEY
TAX-FREE U.S. GOV'T MARKET
INCOME FUND INCOME FUND FUND
<S> <C> <C> <C>
ASSETS
Investments in securities, at value
(cost $564,817,127, $786,778,774, $119,832,661,
$239,111,498, $39,601,343 and $821,976,286,
respectively) $ 254,071,756 $ 41,268,812 $ 821,976,286
Cash -- 6,985 --
Receivable for Fund shares sold 26,658 25,300 2,665,412
Receivable for investment securities sold 1,255,406 -- --
Accrued interest and dividends receivable 4,872,882 219,884 90,653
Withholding tax reclaim receivable -- -- --
------------- ------------- -------------
Total assets 260,226,702 41,520,981 824,732,351
------------- ------------- -------------
LIABILITIES
Bank loan 490,255 -- 329,061
Payable for Fund shares redeemed 746,841 100,717 3,162,284
Payable for investment securities purchased 1,969,091 -- --
Accrued management fees 141,411 22,477 310,704
Accrued transfer agent fees 12,614 3,547 56,030
Accrued distribution fees 43,581 6,920 --
Dividends payable 290,851 47,727 142,739
Other accrued expenses 45,756 11,807 74,128
------------- ------------- -------------
Total liabilities 3,740,400 193,195 4,074,946
------------- ------------- -------------
NET ASSETS $ 256,486,302 $ 41,327,786 $ 820,657,405
============= ============= =============
NET ASSETS REPRESENTED BY:
Capital Shares, $1 par value outstanding $ 24,412,274 $ 4,007,905 $ 820,657,237
Capital paid in excess of par value 218,017,515 36,135,385 --
Net unrealized appreciation 14,960,258 1,667,469 --
Accumulated undistributed net realized gain (loss) (903,745) 1,103
Accumulated undistributed (distributions in excess of)
net investment income -- -- (935)
-------------- ------------- -------------
NET ASSETS $ 256,486,302 $ 41,327,786 $ 820,657,405
============= ============= =============
Shares outstanding (unlimited number of
shares authorized) 24,412,274 4,007,905 820,657,237
============= ============= =============
Net asset value per share $ 10.51 $ 10.31 $ 1.00
============= ============= =============
Offering price (100%/(100%-Maximum Sales Charge)
of net asset value adjusted to nearest cent) per share* $ 10.51 $ 10.31 $ 1.00
============= ============= =============
Maximum sales charge -- -- --
============= ============= =============
<FN>
*For Nationwide Tax-Free Income Fund and U.S. Government Income Fund,
redemption price per share varies by length of time shares are held.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1997
<CAPTION>
NATIONWIDE(R) NATIONWIDE(R)
GROWTH NATIONWIDE(R) BOND
FUND FUND FUND
<S> <C> <C> <C>
INVESTMENT INCOME:
INCOME:
Dividends $ 8,661,922 $ 21,046,785 $ --
Interest 1,941,514 1,813,722 8,992,427
------------ ------------ ------------
Total income 10,603,436 22,860,507 8,992,427
------------ ------------ ------------
EXPENSES:
Investment management fees 3,750,599 5,938,011 629,068
Distribution fees -- -- --
Transfer agent fees 729,500 788,500 149,300
Shareholders' reports 243,000 288,001 84,300
Registration fees -- -- --
Professional services 30,110 46,301 5,542
Custodian fees 41,000 60,000 28,000
Trustees' fees and expenses 18,922 29,711 3,250
Other 21,200 30,976 4,131
------------ ------------ ------------
Total expenses before waived expenses 4,834,331 7,181,500 903,591
Total waived expenses -- -- --
------------ ------------ ------------
Net expenses 4,834,331 7,181,500 903,591
------------ ------------ ------------
NET INVESTMENT INCOME $ 5,769,105 $ 15,679,007 $ 8,088,836
============ ============ ============
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain (loss) on investments $102,060,567 $ 76,009,135 $ 2,142
Net change in unrealized appreciation 95,167,674 296,992,877 1,831,074
------------ ------------ ------------
Net realized and unrealized gain on investments 197,228,241 373,002,012 1,833,216
------------ ------------ ------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $202,997,346 $388,681,019 $ 9,922,052
============ ============ ============
<PAGE>
<CAPTION>
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1997
NATIONWIDE(R)
NATIONWIDE(R) NATIONWIDE(R) MONEY
TAX-FREE U.S. GOV'T MARKET
INCOME FUND INCOME FUND FUND
<S> <C> <C> <C>
INVESTMENT INCOME:
INCOME:
Dividends $ -- $ -- $ --
Interest 15,160,450 2,727,941 43,228,323
------------ ------------ ------------
Total income 15,160,450 2,727,941 43,228,323
------------ ------------ ------------
EXPENSES:
Investment management fees 1,688,233 256,016 3,891,866
Distribution fees 911,855 137,861 --
Transfer agent fees 135,800 37,599 663,006
Shareholders' reports 97,996 22,500 287,309
Registration fees 23,453 15,000 --
Professional services 19,428 2,953 32,169
Custodian fees 17,001 6,000 54,656
Trustees' fees and expenses 2,740 409 19,798
Other 8,107 2,398 23,400
------------ ------------ ------------
Total expenses before waived expenses 2,904,613 480,736 4,972,204
Total waived expenses (390,795) (59,083) (389,150)
------------ ------------ ------------
Net expenses 2,513,818 421,653 4,583,054
------------ ------------ ------------
NET INVESTMENT INCOME $ 12,646,632 $ 2,306,288 $ 38,645,269
============ ============ ============
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain (loss) on investments $ 2,342,626 $ (81,299) $ 1,103
Net change in unrealized appreciation 4,275,526 1,146,999 --
------------ ------------ ------------
Net realized and unrealized gain on investments 6,618,152 1,065,700 1,103
------------ ------------ ------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 19,264,784 $ 3,371,988 $ 38,646,372
============ ============ ============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
NATIONWIDE(R) GROWTH FUND NATIONWIDE(R) FUND
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 5,769,105 $ 7,703,939 $ 15,679,007 $ 16,691,422
Net realized gain (loss) on investments 102,060,567 45,484,621 76,009,135 59,251,910
Net change in unrealized appreciation (depreciation)
of investments 95,167,674 20,001,960 296,992,877 127,452,048
------------- ------------- -------------- ------------
Net increase in net assets resulting from operations 202,997,346 73,190,520 388,681,019 203,395,380
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (6,066,772) (7,521,249) (15,825,647) (16,077,181)
Net realized gain from investment transactions (46,087,353) (55,130,738) (59,238,908) (42,514,603)
------------- ------------- -------------- ------------
Decrease in net assets from distributions to shareholders (52,154,125) (62,651,987) (75,064,555) (58,591,784)
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 72,950,910 91,753,548 258,190,771 100,830,600
Net asset value of shares issued to shareholders
from reinvestment of dividends 51,457,653 61,359,336 70,531,213 51,530,171
Cost of shares redeemed (112,743,374) (90,962,567) (152,506,314)
------------- ------------- -------------- ------------
Increase (decrease) in net assets derived from
capital share transactions 11,665,189 62,150,317 176,215,670 18,119,831
------------- ------------- -------------- ------------
NET INCREASE (DECREASE) IN NET ASSETS 162,508,410 72,688,850 489,832,134 162,923,427
NET ASSETS-BEGINNING OF PERIOD 655,615,705 582,926,855 958,589,770 795,666,343
------------- ------------- -------------- ------------
NET ASSETS-END OF PERIOD $ 818,124,115 $ 655,615,705 $1,448,421,904 $958,589,770
============= ============= ============== ============
Undistributed net realized gain (loss) on investments
included in net assets at end of period $ 101,432,058 $ 45,458,844 $ 76,009,135 $ 59,191,383
============= ============= ============== ============
Undistributed (distributions in excess of) net investment
income included in net assets at end of period $ -- $ 297,667 $ 1,183,885 $ 1,378,050
============= ============= ============== ============
SHARE ACTIVITY:
Shares sold 4,900,859 7,069,963 10,843,635 5,349,375
Reinvestment of dividends 3,793,570 4,952,188 3,363,376 2,874,632
Shares redeemed (7,721,538) (6,978,391) (6,650,915) (7,129,736)
------------- ------------- -------------- ------------
Net increase (decrease) in number of shares 972,891 5,043,760 7,556,096 1,094,271
============= ============= ============== ============
<PAGE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
NATIONWIDE(R) BOND FUND
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1997 1996
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 8,088,836 $ 8,759,058
Net realized gain (loss) on investments 2,142 (171,239)
Net change in unrealized appreciation (depreciation)
of investments 1,831,074 (2,045,242)
------------- -------------
Net increase in net assets resulting from operations 9,922,052 6,542,577
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (8,085,400) (8,801,481)
Net realized gain from investment transactions -- --
------------- -------------
Decrease in net assets from distributions to shareholders (8,085,400) (8,801,481)
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 14,913,782 17,666,533
Net asset value of shares issued to shareholders
from reinvestment of dividends 6,679,886 7,287,372
Cost of shares redeemed (32,278,640) (23,074,853)
------------- -------------
Increase (decrease) in net assets derived from
capital share transactions (10,684,972) 1,879,052
------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS (8,848,320) (379,852)
NET ASSETS-BEGINNING OF PERIOD 133,252,732 133,632,584
------------- -------------
NET ASSETS-END OF PERIOD $ 124,404,412 $ 133,252,732
============= =============
Undistributed net realized gain (loss) on investments
included in net assets at end of period $ (9,523,141) $ (9,525,283)
============= =============
Undistributed (distributions in excess of) net investment
income included in net assets at end of period $ 70,472 $ 67,036
============= =============
SHARE ACTIVITY:
Shares sold 1,606,337 1,897,464
Reinvestment of dividends 719,798 784,086
Shares redeemed (3,480,898) (2,486,318)
------------- -------------
Net increase (decrease) in number of shares (1,154,763) 195,232
============= =============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
NATIONWIDE(R) NATIONWIDE(R)
TAX-FREE INCOME FUND U.S. GOV'T INCOME FUND
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 12,646,632 $ 13,117,546 $ 2,306,288 $ 2,301,535
Net realized gain (loss) on investments 2,342,626 2,055,736 (81,299) 34,406
Net change in unrealized appreciation (depreciation)
of investments 4,275,526 (1,473,376) 1,146,999 (277,059)
------------- ------------- ------------- -------------
Net increase in net assets resulting from operations 19,264,784 13,699,906 3,371,988 2,058,882
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (12,646,632) (13,122,781) (2,306,288) (2,301,535)
In excess of net investment income (87) (11,029) -- (34,406)
Net realized gain from investment transactions -- -- -- --
Paid in capital -- -- (437) (10)
------------- ------------- ------------- -------------
Decrease in net assets from distributions to shareholders (12,646,719) (13,133,810) (2,306,725) (2,335,951)
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 16,022,089 20,245,316 5,663,442 4,773,320
Net asset value of shares issued to shareholders
from reinvestment of dividends 8,939,393 9,330,442 1,727,803 1,753,068
Cost of shares redeemed (39,735,005) (27,983,697) (6,625,927) (6,529,084)
------------- ------------- ------------- -------------
Increase (decrease) in net assets derived from
capital share transactions (14,773,523) 1,592,061 765,318 (2,696)
------------- ------------- ------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS (8,155,458) 2,158,157 1,830,581 (279,765)
NET ASSETS--BEGINNING OF PERIOD 264,641,760 262,483,603 39,497,205 39,776,970
------------- ------------- ------------- -------------
NET ASSETS--END OF PERIOD $ 256,486,302 $ 264,641,760 $ 41,327,786 $ 39,497,205
============= ============= ============= =============
Undistributed net realized gain (loss) on investments
included in net assets at end of period $ (903,745) $ (3,251,345) $ (482,973) $ (401,674)
============= ============= ============= =============
Undistributed (distributions in excess of) net investment
income included in net assets at end of period $ -- $ (11,029) $ -- $ (34,406)
============= ============= ============= =============
SHARE ACTIVITY:
Shares sold 1,554,772 1,986,252 562,553 482,073
Reinvestment of dividends 865,550 914,259 171,768 175,851
Shares redeemed (3,850,987) (2,748,350) (658,930) (655,486)
------------- ------------- ------------- -------------
Net increase (decrease) in number of shares (1,430,665) 152,161 75,391 2,438
============= ============= ============= =============
<PAGE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
NATIONWIDE(R)
MONEY MARKET FUND
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1997 1996
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 38,645,269 $ 32,364,472
Net realized gain (loss) on investments 1,103 --
Net change in unrealized appreciation (depreciation)
of investments -- --
--------------- ---------------
Net increase in net assets resulting from operations 38,646,372 32,364,472
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (38,644,882) (32,359,207)
In excess of net investment income -- --
Net realized gain from investment transactions -- (4,106)
Paid in capital -- --
--------------- ---------------
Decrease in net assets from distributions to shareholders (38,644,882) (32,363,313)
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 1,058,258,745 746,407,569
Net asset value of shares issued to shareholders
from reinvestment of dividends 36,945,028 30,963,908
Cost of shares redeemed (1,004,047,620) (652,583,762)
--------------- ---------------
Increase (decrease) in net assets derived from
capital share transactions 91,156,153 124,787,715
--------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS 91,157,643 124,788,874
NET ASSETS--BEGINNING OF PERIOD 729,499,762 604,710,888
--------------- ---------------
NET ASSETS--END OF PERIOD $ 820,657,405 $ 729,499,762
=============== ===============
Undistributed net realized gain (loss) on investments
included in net assets at end of period $ 1,103 $ --
=============== ===============
Undistributed (distributions in excess of) net investment
income included in net assets at end of period $ (935) $ (1,322)
=============== ===============
SHARE ACTIVITY:
Shares sold 1,058,258,745 746,407,569
Reinvestment of dividends 36,945,028 30,963,908
Shares redeemed (1,004,047,620) (652,583,762)
--------------- ---------------
Net increase (decrease) in number of shares 91,156,153 124,787,715
=============== ===============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING
<CAPTION>
NATIONWIDE(R) GROWTH FUND
YEARS ENDED OCTOBER 31,
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE--BEGINNING OF PERIOD $ 13.34 $ 13.22 $ 11.35 $ 11.14 $ 9.94
Net investment income 0.12 0.16 0.21 0.09 0.17
Net realized gain (loss) and unrealized
appreciation (depreciation) 3.94 1.36 2.10 0.53 1.41
-------- -------- -------- -------- --------
Total from investment operations 4.06 1.52 2.31 0.62 1.58
Dividends from net investment income (0.12) (0.16) (0.20) (0.19) (0.17)
Distributions from net realized gain from
investment transactions (0.96) (1.24) (0.24) (0.22) (0.21)
-------- -------- -------- -------- --------
Total distributions (1.08) (1.40) (0.44) (0.41) (0.38)
-------- -------- -------- -------- --------
Net increase in net asset value 2.98 0.12 1.87 0.21 1.20
-------- -------- -------- -------- --------
NET ASSET VALUE--END OF PERIOD $ 16.32 $ 13.34 $ 13.22 $ 11.35 $ 11.14
======== ======== ======== ======== ========
Total return (excluding sales charges) 32.12% 12.36% 21.01% 5.73% 16.16%
Net assets, end of period (000) $818,124 $655,616 $582,927 $464,715 $411,853
Ratio of expenses to average net assets 0.64% 0.64% 0.66% 0.68% 0.68%
Ratio of net investment income to average net assets 0.81% 1.20% 1.66% 1.71% 1.63%
Portfolio turnover 45.07% 25.61% 27.10% 14.50% 10.20%
Average commission rate paid* 4.6222(cent) 5.3923(cent) -- -- --
<CAPTION>
NATIONWIDE(R) FUND
YEARS ENDED OCTOBER 31,
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE--BEGINNING OF PERIOD $ 20.41 $ 17.35 $ 16.12 $ 16.55 $ 16.31
Net investment income 0.31 0.36 0.31 0.37 0.31
Net realized gain (loss) and unrealized
appreciation (depreciation) 7.44 3.98 2.49 0.41 0.67
--------- -------- -------- -------- --------
Total from investment operations 7.75 4.34 2.80 0.78 0.98
Dividends from net investment income (0.31) (0.35) (0.31) (0.36) (0.33)
Distributions from net realized gain from
investment transactions (1.28) (0.93) (1.26) (0.85) (0.41)
--------- -------- -------- -------- --------
Total distributions (1.59) (1.28) (1.57) (1.21) (0.74)
--------- -------- -------- -------- --------
Net increase (decrease) in net asset value 6.16 3.06 1.23 (0.43) 0.24
--------- -------- -------- -------- --------
NET ASSET VALUE--END OF PERIOD $ 26.57 $ 20.41 $ 17.35 $ 16.12 $ 16.55
========= ======== ======== ======== ========
Total return (excluding sales charges) 40.17% 26.11% 19.24% 4.88% 6.16%
Net assets, end of period (000) $1,448,422 $958,590 $795,666 $706,674 $753,239
Ratio of expenses to average net assets 0.60% 0.61% 0.63% 0.63% 0.62%
Ratio of net investment income to average net assets 1.32% 1.89% 1.95% 2.26% 1.96%
Portfolio turnover 14.94% 16.71% 16.50% 15.40% 25.80%
Average commission rate paid* 5.8506(cent) 5.9393(cent) -- -- --
<FN>
- -----------
*Represents the total amount of commissions paid in portfolio equity
transactions divided by the total number of shares purchased and sold by the
Fund for which commissions were charged.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING
<CAPTION>
NATIONWIDE(R) BOND FUND
YEARS ENDED OCTOBER 31,
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE--BEGINNING OF PERIOD $ 9.34 $ 9.50 $ 8.46 $ 10.07 $ 9.58
Net investment income 0.60 0.61 0.63 0.60 0.74
Net realized gain (loss) and unrealized
appreciation (depreciation) 0.15 (0.15) 1.04 (1.56) 0.52
-------- -------- -------- -------- --------
Total from investment operations 0.75 0.46 1.67 (0.96) 1.26
Dividends from net investment income (0.60) (0.62) (0.63) (0.65) (0.77)
-------- -------- -------- -------- --------
Total distributions (0.60) (0.62) (0.63) (0.65) (0.77)
-------- -------- -------- -------- --------
Net increase (decrease) in net asset value 0.15 (0.16) 1.04 (1.61) 0.49
-------- -------- -------- -------- --------
NET ASSET VALUE--END OF PERIOD $ 9.49 $ 9.34 $ 9.50 $ 8.46 $ 10.07
======== ======== ======== ======== ========
Total return (excluding sales charges) 8.33% 5.05% 20.41% (9.81%) 13.61%
Net assets, end of period (000) $124,404 $133,253 $133,633 $124,455 $151,090
Ratio of expenses to average net assets 0.72% 0.70% 0.71% 0.71% 0.68%
Ratio of net investment income to average net assets 6.43% 6.60% 7.04% 7.11% 7.63%
Portfolio turnover 70.63% 38.95% 70.40% 58.00% 68.50%
<CAPTION>
NATIONWIDE(R) TAX-FREE INCOME FUND
YEARS ENDED OCTOBER 31,
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE--BEGINNING OF PERIOD $ 10.24 $ 10.22 $ 9.40 $ 10.95 $ 9.94
Net investment income 0.50 0.51 0.51 0.53 0.54
Net realized gain (loss) and unrealized
appreciation (depreciation) 0.27 0.02 0.84 (1.45) 1.10
-------- -------- -------- -------- ---------
Total from investment operations 0.77 0.53 1.35 (0.92) 1.64
Dividends from net investment income (0.50) (0.51) (0.53) (0.51) (0.54)
Distributions from net realized gain from
investment transactions -- -- -- (0.12) (0.09)
-------- -------- -------- -------- ---------
Total distributions (0.50) (0.51) (0.53) (0.63) (0.63)
-------- -------- -------- -------- ---------
Net increase (decrease) in net asset value 0.27 0.02 0.82 (1.55) 1.01
-------- -------- -------- -------- ---------
NET ASSET VALUE--END OF PERIOD $ 10.51 $ 10.24 $ 10.22 $ 9.40 $ 10.95
======== ======== ======== ======== =========
Total return (excluding sales charge) 7.72% 5.31% 14.66% (8.74%) 16.97%
Net assets, end of period (000) $256,486 $264,642 $262,484 $241,097 $253,042
Ratio of expenses to average net assets 0.96% 0.96% 0.98% 0.99% 0.98%
Ratio of expenses to average net assets* 1.11% 1.11% 1.13% 1.14% 1.13%
Ratio of net investment income to average net assets 4.85% 4.98% 5.20% 5.02% 5.07%
Ratio of net investment income to average net assets* 4.70% 4.83% 5.05% 4.87% 4.92%
Portfolio turnover 39.49% 24.15% 31.70% 59.20% 28.40%
<FN>
Ratios calculated as if no expenses were waived.
</FN>
See Accompanying Notes To Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING
<CAPTION>
NATIONWIDE(R) U.S. GOV'T INCOME FUND
YEARS ENDED OCTOBER 31,
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE--BEGINNING OF PERIOD $ 10.04 $ 10.12 $ 9.22 $ 10.26 $ 9.97
Net investment income 0.59 0.59 0.59 0.54 0.53
Net realized gain (loss) and unrealized
appreciation (depreciation) 0.27 (0.08) 0.89 (0.96) 0.45
------- ------- ------- ------- -------
Total from investment operations 0.86 0.51 1.48 (0.42) 0.98
Dividends from net investment income (0.59) (0.58) (0.58) (0.55) (0.53)
In excess of net investment income -- (0.01) -- -- --
Distributions from net realized gain from
investment transactions -- -- -- (0.07) (0.16)
------- ------- ------- ------- -------
Total distributions (0.58) (0.59) (0.58) (0.62) (0.69)
------- ------- ------- ------- -------
Net increase (decrease) in net asset value 0.27 (0.08) 0.90 (1.04) 0.29
------- ------- ------- ------- -------
NET ASSET VALUE--END OF PERIOD $ 10.31 $ 10.04 $ 10.12 $ 9.22 $ 10.26
======= ======= ======= ======= =======
Total return (excluding sales charge) 8.86% 5.28% 16.47% (4.20%) 10.15%
Net assets, end of period (000) $41,328 $39,497 $39,777 $37,749 $38,452
Ratio of expenses to average net assets 1.07% 1.06% 1.08% 1.09% 1.10%
Ratio of expenses to average net assets* 1.22% 1.21% 1.23% 1.24% 1.25%
Ratio of net investment income to average net assets 5.85% 5.86% 5.92% 5.62% 5.12%
Ratio of net investment income to average net assets* 5.70% 5.71% 5.77% 5.47% 4.97%
Portfolio turnover 26.58% 9.30% 25.40% 67.50% 99.00%
<CAPTION>
NATIONWIDE(R) MONEY MARKET FUND
YEARS ENDED OCTOBER 31,
1997 1996 1995 1994 1993
<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 0.03 0.03
Dividends from net investment income (0.05) (0.05) (0.05) (0.03) (0.03)
-------- -------- -------- -------- --------
Net increase (decrease) in net asset value -- -- -- -- --
-------- -------- -------- -------- --------
NET ASSET VALUE--END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total return 5.07% 5.05% 5.46% 3.34% 2.60%
Net assets, end of period (000) $820,657 $729,500 $604,711 $491,737 $418,615
Ratio of expenses to average net assets 0.59% 0.60% 0.62% 0.65% 0.70%
Ratio of expenses to average net assets* 0.64% 0.65% 0.67% 0.70% 0.73%
Ratio of net investment income to average net assets 4.96% 4.93% 5.34% 3.33% 2.57%
Ratio of net investment income to average net assets* 4.91% 4.88% 5.29% 3.28% 2.54%
<FN>
- ---------------
*Ratios calculated as if no expenses were waived.
</FN>
See Accompanying Notes To Financial Statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nationwide Investing Foundation (NIF) and Nationwide Investing Foundation II
(NIF II) are diversified, open-end investment companies. NIF was created under
the laws of Michigan by an Indenture of Trust dated May 5, 1933. NIF II was
created under the laws of Massachusetts as a Massachusetts Business Trust on
October 5, 1985. The Trusts, which are registered under the Investment Company
Act of 1940, as amended, offer shares in six separate mutual funds.
(A) SECURITY VALUATION
(1) Growth, Fund, Bond, Tax-Free Income, and U.S. Government Income Funds:
Securities traded on a national securities exchange are valued at the
last quoted sale price, or if no sale, at the prior day's valuation 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, the quoted bid price. U.S. Government securities are
valued at the quoted bid price. 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 judgment of the Fund's investment
adviser, are valued at fair value in accordance with procedures
authorized by the Boards 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. The value of a repurchase agreement generally equals
the purchase price paid by the Fund (cost) plus the interest accrued to
date. The seller, under the repurchase agreement, is required to
maintain the market value of the underlying collateral at not less than
the value of the repurchase agreement. Securities subject to repurchase
agreements are held by the Federal Reserve/Treasury book-entry system
or by the Fund's custodian or an approved sub-custodian.
(B) SECURITY TRANSACTIONS AND INVESTMENT INCOME
Security transactions are recorded on the trade date. Dividend income is
recorded on the ex-dividend date; interest income is recorded on an
accrual basis and includes, where applicable, the amortization of premium
or discount.
(C) FEDERAL INCOME TAXES
Each series of NIF and NIF II qualifies 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 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.
As of October 31, 1997, the Nationwide Bond, Tax-Free Income, and U.S.
Government Income Funds had net capital loss carry forwards in the
amounts of $9,523,141, $908,719, and $482,973, respectively. The Bond
Fund carry forwards will expire within 4 to 6 years, the Tax-Free Income
Fund's carry forwards will expire within 5 to 6 years, and the U.S.
Government Income Fund's carry forwards will expire within 5 to 8 years.
(D) DIVIDENDS TO SHAREHOLDERS
(1) Growth and Nationwide Funds:
Dividends are paid quarterly and are recorded on the ex-dividend date.
(2) Bond, Tax-Free Income, U.S. Government Income, and Money Market Funds:
Dividends are declared daily and paid monthly from net investment
income.
Distributable net realized capital gains are declared and distributed
at least annually for all funds.
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 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.
<PAGE>
Accordingly, as of October 31, 1997, undistributed net investment
income 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>
UNDISTRIBUTED CAPITAL PAID IN
UNDISTRIBUTED NET NET REALIZED EXCESS OF
INVESTMENT INCOME GAIN PAR VALUE
<S> <C> <C> <C>
NW Fund $47,525 $(47,525) $ --
Tax-Free Income Fund (11,116) (4,974) 16,090
U.S. Government Income Fund (34,406) -- 34,406
</TABLE>
(E) EXPENSES
Direct expenses of a fund are allocated to that fund. General expenses of
a Trust are allocated to the funds of that Trust based upon each fund's
relative average net assets.
(F) USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the period. Actual results could differ from those estimates.
2. TRANSACTION WITH AFFILIATES
(A) GROWTH, FUND, BOND, AND MONEY MARKET FUNDS
As investment manager for the NIF Funds, Nationwide Advisory Services,
Inc. (NAS), (formerly Nationwide Financial Services, Inc.), an affiliated
company, earns an annual fee of .5% based on the average daily net assets;
this fee would not be payable in full if the effect of such payment would
increase total expenses (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.
NAS voluntarily waived annual fees totaling .05% of average daily net
assets in the Money Market Fund for the year ended October 31, 1997, or
$389,150 representing $.0005 per average share outstanding.
NAS also receives fees for services as principal underwriter. Such fees
are deducted from and are not included in proceeds from sales of
capital shares. From such fees, NAS pays sales commissions, salaries, and
other expenses. Such fees aggregated $873,750 on Growth Fund shares,
$2,037,896 on Fund Shares, and $123,036 on Bond Fund shares for the year
ended October 31, 1997.
(B) TAX-FREE INCOME, AND U.S. GOVERNMENT INCOME FUNDS
As investment manager for each NIF II Fund, NAS earns an annual fee based
on average daily net assets of each Fund at the rate of .65% on the first
$250 million, .60% on the next $250 million, .55% on the next $250
million, and .50% on the average daily net assets in excess of $750
million.
NAS may also receive fees on the NIF II 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 Fund at
an annual rate of .35%. During the year ended October 31, 1997, each Fund
paid distribution fees at the annual rate of .20% of average daily net
assets, with the distributor voluntarily waiving the remaining .15%.
During the year ended October 31, 1997, NAS waived $390,795 and $59,083
for both the Tax-Free Income and U.S. Government Income Funds,
respectively, representing $.0015 per average share outstanding for each
fund.
NAS also receives fees for services as principal underwriter. Such
fees are contingent deferred sales charges for the NIF II Funds ranging
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. Contingent deferred sales charges aggregated $161,441 on the
Tax-Free Income Fund shares and $31,232 on the U.S. Government Income Fund
for the year ended October 31, 1997.
A subsidiary of NAS (Nationwide Investors Services, Inc.) acts as
Transfer and Dividend Disbursing Agent for the Funds.
<PAGE>
3. BANK LOANS
Both NIF and NIF II Trusts have unsecured bank lines of credit of $25,000,000
for overdraft protection and temporary emergency borrowing purposes. Borrowings
under these arrangements bear interest at the Federal Funds rate plus .50%.
These interest costs are included in custodian fees in the Statements of
Operations. No compensating balances are required.
4. 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, 1997, are summarized as follows:
<TABLE>
<CAPTION>
U.S. GOVT.
SECURITIES OBLIGATIONS
PURCHASES SALES PURCHASES SALES
<S> <C> <C> <C> <C>
Growth $324,335,527 $319,632,432 $177,077,883 $214,625,654
Fund 288,441,794 174,259,918 -- --
Bond 49,619,280 72,277,347 35,886,778 19,250,781
Tax-Free Income 101,886,039 114,827,517 -- --
U.S. Gov't. Income 5,040,732 5,395,393 5,255,700 5,039,529
Money Market -- -- 46,605,348 7,986,133
</TABLE>
Realized gains and losses have been computed on a specific identification basis
Included in net unrealized appreciation at October 31, 1997, are the following
components:
<TABLE>
<CAPTION>
GROSS GROSS NET
UNREALIZED UNREALIZED UNREALIZED
APPRECIATION DEPRECIATION APPRECIATION
<S> <C> <C> <C>
Growth $268,987,896 $(15,130,937) $253,856,959
Fund 680,054,632 (9,433,649) 670,620,983
Bond 4,524,877 (21,973) 4,502,904
Tax-Free Income 15,020,374 (60,116) 14,960,258
U.S. Gov't. Income 1,667,469 -- 1,667,469
</TABLE>
5. FEDERAL INCOME TAX INFORMATION (UNAUDITED)
For corporate shareholders, 100% of the Growth Fund and 100% of the Fund income
dividends and distributions in the fiscal year ended October 31, 1997, 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.
6. SUBSEQUENT EVENT
At a meeting of the Board of Trustees on November 7, 1997, the Board authorized
a Special Meeting of Shareholders to be held on February 16, 1998. At this
Special Meeting, shareholders are being asked to approve an Agreement and Plan
of Reorganization between Nationwide Investing Foundation, Nationwide Investing
Foundation II and Nationwide Investing Foundation III ("New Trust"), at which
time Financial Horizons Investment Trust will also reorganize into the New
Trust.
The transactions contemplated thereby pending shareholder approval include the
following:
(a) The transfer of the net assets of the Nationwide Growth, Fund, Bond
and Tax-Free Income Funds to the series of the New Trust which bear
the same names, in exchange for Class D shares which will be
distributed to shareholders for each of their respective Funds.
(b) The transfer of the net assets of the Nationwide Money Market Fund
to a series of the New Trust which bears the same name, in exchange
for shares of the series in the New Trust which will be distributed
to the shareholders of the Nationwide Money Market Fund.
(c) The transfer of the net assets of the Nationwide 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 which will be distributed to the shareholders of the
Nationwide U.S. Government Income Fund.
The Boards of Trustees of the Trusts have fixed the close of business on
December 18, 1997, as the record date for the determination of shareholders of
the Trusts entitled to receive notice of and to vote at the meeting. The
Combined Prospectus/Proxy Statements contain further information regarding the
meeting and the proposals to be considered, including the revised fee structure,
and will be mailed to shareholders in early January 1998.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Shareholders and Board of Trustees
The Nationwide Investing Foundation
The Nationwide Investing Foundation II:
We have audited the accompanying statements of assets and liabilities, including
the statements of investments, of The Nationwide Investing Foundation --
Nationwide Growth Fund, Nationwide Fund, Nationwide Bond Fund, Nationwide Money
Market Fund, and of The Nationwide Investing Foundation II -- Nationwide
Tax-Free Income Fund and Nationwide U.S. Government Income Fund, as of October
31, 1997, 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, 1997, by confirmation with the custodian 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 The Nationwide Investing Foundation and
The Nationwide Investing Foundation II as of October 31, 1997, 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 5, 1997
<PAGE>
Nationwide(R) Family Of Funds
Toll-Free Telephone Assistance
General Account Service And Exchanges:
1-800-848-0920
LOGO: NATIONWIDE ADVISORY SERVICES, INC.
Nationwide Advisory Services, Inc.
Three Nationwide Plaza
Columbus, OH 43215
Nationwide(R) is a registered federal service mark
of Nationwide Mutual Insurance Company.
HS-402-L (97)
NATIONWIDE FAMILY OF FUNDS BULK RATE
THREE NATIONWIDE PLAZA U.S. POSTAGE
COLUMBUS OHIO 43215-2220 PAID
BERWYN, IL
PERMIT NO. 150
October 1997
ANNUAL REPORT
