<PAGE> 1
'33 ACT FILE NO. 33-896
'40 ACT FILE NO. 811-04436
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 15
AND/ OR /X/
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 16
(Check appropriate box or boxes)/x/
NATIONWIDE INVESTING FOUNDATION II
(Exact Name of Registrant as Specified in Charter)
Nationwide Tax Free Income Fund
Nationwide U.S. Government Income Fund
One Nationwide Plaza
Columbus, Ohio 43216
(Address of Principal Executive Offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (614) 249-7855
Mr. Dave Simaitis Send Copies of Communications to:
One Nationwide Plaza Druen, Dietrich Reynolds
Columbus, Ohio 43215 & Koogle
(Name and Address of Agent for Service) One Nationwide Plaza
Columbus, Ohio 43215
/X/ It is proposed that this filing will become effective on February 27, 1998
pursuant to paragraph (b) of Rule 485
<PAGE> 2
SUPPLEMENT DATED FEBRUARY 27, 1998
TO PROSPECTUS DATED FEBRUARY 28, 1997
NATIONWIDE FAMILY OF FUNDS
-- GROWTH FUND
-- FUND
-- BOND FUND
-- MONEY MARKET FUND
-- U.S. GOVERNMENT INCOME FUND
-- TAX-FREE INCOME FUND
1) The date at the top of page 2 of the Prospectus is hereby amended to read
"February 27, 1998."
2) Nationwide Investing Foundation ("NIF") and Nationwide Investing Foundation
II ("NIF II") have entered into an Agreement and Plan of Reorganization, dated
November 24, 1997 (collectively the "Plan"), with Nationwide Investing
Foundation III ("NIF III"), an Ohio business trust; on February 16, 1998,
shareholders of each series of both NIF and NIF II approved the Plan. Pursuant
to the Plan and as listed in the chart below, a series of NIF III (each, an
"Acquiring Fund") will acquire all of the assets of each current series of NIF
and NIF II (each, a "Fund") in exchange for the assumption of all of the Fund's
liabilities and a number of full and fractional shares of the Acquiring Fund
having an aggregate net asset value equal to the Fund's net assets (the
transactions which have been approved by shareholders are hereafter referred as
the "Reorganization"). The Plan also requires the distribution of the shares of
the Acquiring Fund received to the shareholders of each of the Funds. For each
of the Funds, except the NIF Money Market Fund, the shareholders will receive
Class D shares of the Acquiring Fund. The shareholders of the NIF Money Market
Fund will receive shares of the NIF III Money Market Fund which are without
class designation.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THE ACQUIRING FUNDS (NIF III) THE FUNDS
- ----------------------------- ---------
<S> <C>
Nationwide Growth Fund Nationwide Growth Fund of NIF
Nationwide Fund Nationwide Fund of NIF
Nationwide Bond Fund Nationwide Bond Fund of NIF
Nationwide Tax-Free Income Fund Nationwide Tax-Free Income Fund of NIF II
Nationwide Intermediate Nationwide U.S. Government Income Fund of NIF II
U. S. Government Bond Fund
Nationwide Money Market Fund Nationwide Money Market Fund of NIF
</TABLE>
- --------------------------------------------------------------------------------
Completion of the Reorganization is planned for on or about May 9, 1998;
however, the Reorganization may be effected on such earlier or later date as may
be determined. When the Reorganization is completed, all shareholders will
receive a new prospectus for the Acquiring Funds of NIF III.
3) The first sentence in the second paragraph in the left hand column on page
2 of the Prospectus is hereby amended to read as follows: "Statements of
Additional Information dated February 27, 1998, incorporated herein by reference
and containing further information about the Funds, have been filed with the
Securities and Exchange Commission.
<PAGE> 3
4) The second sentence in the second paragraph in the left hand column on page
3 of the Prospectus is deleted and replaced with the following:
The expenses and fees in the following table and the example that follows are
based on actual fees and expenses incurred for the fiscal year ended October 31,
1997:
5) The information under the heading "SUMMARY OF FUND EXPENSES -- ANNUAL FUND
OPERATING
EXPENSES" on page 3 of the Prospectus is deleted in its entirety and is replaced
with the following:
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS, AFTER EXPENSE REIMBURSEMENTS)
<TABLE>
<CAPTION>
TAX-FREE U.S. GOV'T MONEY
GROWTH FUND BOND INCOME INCOME MARKET
------ ---- ---- -------- ---------- ------
<S> <C> <C> <C> <C> <C> <C>
Management Fees 0.50% 0.50% 0.50% 0.65% 0.65% 0.45%*
12b-1 Fees 0% 0% 0% 0.20%+ 0.20%+ 0%
Other Expenses 0.14% 0.10% 0.22% 0.11% 0.21% 0.14%
---- ---- ---- ---- ---- ----
Total Fund Operating Expenses 0.64% 0.60% 0.72% 0.96%+ 1.06%+ 0.59%*
==== ==== ==== ==== ==== ====
</TABLE>
+ For the Tax-Free and U.S. Government Income Funds, the distributor will charge
a 12b-1 fee of .20% rather than the .35% allowed and waive the remaining .15%
until further written notice.
* The investment manager will waive .05% of the .50% management fee until
further written notice.
EXAMPLE:
The following example illustrates the expenses you would pay on a $1,000
investment over various time periods assuming: (1) a 5% annual return, (2)
redemption at the end of each time period, and (3) payment of the maximum
applicable sales charge. Contingent deferred sales charges apply to redemptions
of shares held 5 years or less in the Tax-Free and U.S. Government Income Funds.
For more information see page 18.
<TABLE>
<CAPTION>
TAX-FREE U.S. GOV'T MONEY
GROWTH FUND BOND INCOME INCOME MARKET
------ ---- ---- ------------ ------------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 51 $ 51 $ 52 $ 60 $ 10* $ 61 $ 11* $ 6
3 Years $ 65 $ 63 $ 67 $ 61 $ 31* $ 64 $ 34* $19
5 Years $ 79 $ 77 $ 83 $ 63 $ 53* $ 69 $ 59* $33
10 Years $121 $117 $130 $118 $118* $131 $131* $74
</TABLE>
* Tax-Free Income and U.S. Government Income expenses assuming no redemption.
The expenses and fees in the following table and example that follows have
been restated to reflect fees shareholders of the Funds' will bear after
completion of the Reorganization:
2
<PAGE> 4
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
TAX-FREE U.S. GOV'T MONEY
GROWTH FUND BOND INCOME INCOME MARKET
------ ---- ---- -------- ---------- ------
<S> <C> <C> <C> <C> <C> <C>
Maximum Sales Charge Imposed on Purchase 4.5% 4.5% 4.5% 4.5% 4.5% None
Maximum Contingent Deferred Sales Charge on
Redemptions None None None None None None
Maximum Sales Charge Imposed on Reinvested
Dividends None None None None None None
Redemption Fees None None None None None None
Exchange Fees None None None None None None
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF NET ASSETS)
<TABLE>
<CAPTION>
TAX-FREE U.S. GOV'T MONEY
GROWTH FUND BOND INCOME INCOME MARKET
------ ---- ---- -------- ---------- ------
<S> <C> <C> <C> <C> <C> <C>
Management Fees 0.58% 0.57% 0.50% 0.50% 0.50% 0.40%
12b-1 Fees None None None None None None
Other Expenses 0.20% 0.15% 0.29% 0.19% 0.29% 0.20%
---- ---- ---- ---- ---- ----
Total Fund Operating Expenses 0.78% 0.72% 0.79% 0.69% 0.79% 0.60%
==== ==== ==== ==== ==== ====
</TABLE>
EXAMPLE:
The following example illustrates the expense you would pay on a $1,000
investment over various time periods assuming: (1) a 5% annual return, (2)
redemption at the end of each time period, and (3) payment of the maximum
applicable sales charge. There are no contingent deferred sales charges imposed
on Class D or Money Market shares of NIF III.
<TABLE>
<CAPTION>
TAX-FREE U.S. GOV'T MONEY
GROWTH FUND BOND INCOME INCOME MARKET
------ ---- ---- -------- ---------- ------
<S> <C> <C> <C> <C> <C> <C>
1 Year $ 53 $ 52 $ 53 $ 52 $ 53 $ 6
3 Years $ 69 $ 67 $ 69 $ 66 $ 69 $19
5 Years $ 86 $ 83 $ 87 $ 82 $ 87 $33
10 Years $137 $130 $138 $128 $138 $75
</TABLE>
The above examples should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those shown.
3
<PAGE> 5
6) The information under "FINANCIAL HIGHLIGHTS" on pages 4 and 5 of the
Prospectus is hereby updated as to each Fund for the fiscal year ended October
31, 1997 with the following:
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED OCTOBER 31, 1997)
<TABLE>
<CAPTION>
TAX-FREE U.S. GOV'T MONEY
GROWTH FUND BOND INCOME INCOME MARKET
-------- ---------- -------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value -- Beginning of
Period $ 13.34 $ 20.41 $ 9.34 $ 10.24 $ 10.04 $ 1.00
-------- ---------- -------- -------- ------- --------
Net investment Income .12 .31 .60 .50 .59 .05
Net realized gain (loss) and
unrealized appreciation
(depreciation) 3.94 7.44 .15 .27 .27 --
-------- ---------- -------- -------- ------- --------
Total from investment operations 4.06 7.75 .75 .77 .86 .05
-------- ---------- -------- -------- ------- --------
Dividends from net investment Income (.12) (.31) (.60) (.50) (.59) (.05)
Distributions from net realized
gains from investment transactions (.96) (1.28) -- -- -- --
-------- ---------- -------- -------- ------- --------
Total distributions (1.08) (1.59) (.60) (.50) (.59) (.05)
-------- ---------- -------- -------- ------- --------
Net Asset Value -- End of Period $ 16.32 $ 26.57 $ 9.49 $ 10.51 $ 10.31 $ 1.00
Total Return (excluding sales
charge) 32.12% 40.17% 8.33% 7.72% 8.86% 5.07%
Expenses to average net assets .64% .60% .72% .96% 1.07% .59%
Expenses to average net assets* .64% .60% .72% 1.11% 1.22% .64%
Net investment income to average net
assets .81% 1.32% 6.43% 4.85% 5.85% 4.96%
Net investment income to average net
assets* .81% 1.32% 6.43% 4.70% 5.70% 4.91%
Portfolio turnover 45.07% 14.94% 70.63% 39.49% 26.58% --
Average commission rate paid** 4.6222c 5.8506c -- -- -- --
Net assets at end of period (000's) $818,124 $1,448,422 $124,404 $256,486 $41,328 $820,657
</TABLE>
* Ratios calculated as if no expense were waived.
** 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.
The information in the Financial Highlights has been audited by KPMG Peat
Marwick LLP, independent auditors whose report thereon together with the
financial statements are incorporated by reference in the Statement of
Additional Information from the Annual Report. The Statement of Additional
Information and the Annual Report for the Funds which contain further
information about the Funds' performance including Managements Discussion of
Fund Performance may be obtained free of charge by calling 1 (800) 848-0920.
4
<PAGE> 6
7) The "Performance" section on pages 7-8 is hereby deleted in its entirety.
8) The information beginning with "Calendar Year Total Returns" through "Top
10 Holdings" with respect to each Fund on pages 9-14 is hereby deleted in its
entirety.
9) The following is added as a separate paragraph under the section entitled
"RETIREMENT PLANS" under INVESTOR SERVICES on page 23 of the Prospectus:
Beginning January 1, 1998, Shares of the Funds may be purchased for
Roth IRAs and for Education IRAs. For more information, please call NAS at
1(800) 848-0920.
10) The paragraph under the heading "EXPENSES" on page 24 of the Prospectus is
deleted in its entirety and is replaced with the following:
For the fiscal year ended October 31, 1997, the ratio of operating
expenses to average net assets was .64% for the Growth Fund, .60% of
Nationwide Fund, .72% for the Bond Fund, .96% for the Tax-Free Income Fund,
1.07% for the U.S. Government Income Fund and .59% for the Money Market
Fund. The Growth, Nationwide, Bond and Money Market Funds will not bear
expenses in excess of 1% of average daily net assets. Such limitations did
not affect any of those Funds during the year ended October 31, 1997.
11) On page 25 of the Prospectus under the section entitled "DISTRIBUTIONS AND
TAXES FEDERAL TAXES", the fourth paragraph is hereby deleted in its entirety and
is replaced by the following:
The Taxpayer Relief Act of 1997 has substantially changed the manner
in which the income tax on net long-term capital gains is computed for
individuals. For corporations, net long-term capital gains are taxed at the
same rates as ordinary income. The following is a summary of the new rules
for the taxation of net long-term capital gains, which are applicable to
individuals but not corporations, for sales and exchanges after May 6,
1997.
For investments held for more than 18 months (12 months if the
investment was sold after May 6 and before July 29, 1997), the top net
long-term capital gain rate is 20%. For taxpayers who are in the 15%
regular tax bracket for 1997, the top long-term capital gain rate is 10%.
Commencing with sales after July 28, 1997, gain from assets that are
held for more than 12 months but not more than 18 months is treated as
mid-term gain. The top rate for mid-term gains is 28%.
If the investor's regular tax rate is lower than the top long-term
capital gain rate, the tax is computed using the regular tax rates.
12) The "TAX ADVANTAGES OF THE TAX-FREE INCOME FUND" section on pages 26-27 is
hereby deleted in its entirety.
13) The information pertaining to LEGAL COUNSEL on page 30 of the Prospectus
should read "Druen, Dietrich, Reynolds & Koogler, One Nationwide Plaza,
Columbus, Ohio 43215.
14) This supplement supersedes in their entirety the prospectus Supplements
dated November 28, 1997, December 8, 1997 and December 23, 1997.
THIS SUPPLEMENT SHOULD BE RETAINED WITH
THE PROSPECTUS FOR FUTURE REFERENCE.
HS-409-10
5
<PAGE> 7
PART B:
STATEMENT OF ADDITIONAL INFORMATION FEBRUARY 27, 1998
NATIONWIDE INVESTING FOUNDATION II:
NATIONWIDE TAX-FREE INCOME FUND
NATIONWIDE U.S. GOVERNMENT INCOME FUND
This Statement of Additional Information is not a prospectus. It contains
information in addition to and more detailed than that set forth in the
prospectus and should be read in conjunction with the Funds' prospectus dated
February 28, 1997 as supplemented February 27, 1998. The prospectus may be
obtained from Nationwide Advisory Services, Inc. (NAS), P.O. Box 1492, Three
Nationwide Plaza, Columbus, Ohio 43216.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
General Information and History 1
Investment Objectives and Policies 1
Descriptions of Securities 3
Investment Restrictions 6
Trustees and Officers of the Trust 8
Investment Management Agreement 9
Distribution Agreement 10
Pricing of Shares 11
Redemption of Shares 12
Contingent Deferred Sales Charge 12
Fund Performance Advertising 13
Shareholders' Rights 15
Custodian 16
Brokerage Allocation 16
Tax Status 17
Financial Statements 18
Independent Auditors' Report 30
Appendix 31
</TABLE>
GENERAL INFORMATION AND HISTORY
Nationwide Investing Foundation II is a diversified, open-end management
investment company, created under the laws of Massachusetts by a Declaration of
Trust dated October 8, 1985.
The trust contains two Funds, the Nationwide U.S. Government Income
Fund and the Nationwide Tax-Free Income Fund.
INVESTMENT OBJECTIVES AND POLICIES
The following information supplements the discussion of the Funds' investment
objectives and policies discussed on pages 12 and 13 of the prospectus. Certain
of the investment policies and types of permitted investments may be changed
without approval of shareholders.
NATIONWIDE TAX-FREE INCOME FUND
1
<PAGE> 8
The Nationwide Tax-Free Income Fund is designed to provide as high a level of
current income exempt from federal tax as is consistent with the preservation of
capital through investing in a diversified portfolio of high quality municipal
obligations.
As stated in the prospectus, the Fund may purchase securities on a
"when-issued" basis and "forward delivery" basis, for payment and delivery at a
later date, generally within one month for when-issued and longer periods for
forward commitments. The price and yield are generally fixed on the date of
commitment to purchase, and the value of the security is reflected in the Fund's
net asset value. Failure of an issuer to deliver the security may result in the
Fund incurring a loss or missing an opportunity to make an alternative
investment. At the time of settlement, the market value of the security may be
more or less than the purchase price, resulting in an unrealized appreciation or
depreciation to the Fund. The Fund maintains in a segregated account cash, U.S.
government securities, or other liquid securities in an amount equal to the
purchase price as long as the obligation to purchase continues.
The Fund may purchase municipal bonds on a "forward delivery" basis at
fixed purchase terms. The purchase will be recorded on the date the Fund enters
into the commitment and the value of the security will thereafter be reflected
in the calculation of the portfolio's net asset value. The value of the security
on the delivery date may be more or less than its purchase price resulting in
unrealized appreciation or depreciation to the Fund. A separate account of the
portfolio will be established with its Custodian consisting of cash or liquid
municipal bonds having a market value at all times at least equal to the amount
of the forward commitment.
The types of instruments in which the Fund may invest are described in
the prospectus. For more information on ratings of municipal obligations from
Standard & Poor's Corporation (Standard & Poor's) and Moody's Investors Service,
Inc. (Moody's), see the Appendix. For purposes of the restrictions set forth
below, the Fund will regard the entity which has the ultimate responsibility for
the payment of interest and principal as the issuer.
From time to time the Fund may invest less than the 25% of its total
assets in the securities of issuers in the same industry, state or similar type
project where such securities are related in such a way that economic, business
and political developments or changes that affect one such security could affect
the other securities.
NATIONWIDE U.S. GOVERNMENT INCOME FUND
The Nationwide U.S. Government Income Fund is designed to provide as high a
level of income as is consistent with the preservation of capital through a
portfolio consisting of securities from the U.S. government, and its agencies
and instrumentalities. The intermediate average dollar-weighted maturity of the
portfolio (between 3 and 10 years) should generally provide higher yields than a
money market fund while producing greater price stability than other bond
portfolios with longer maturities.
As stated in the prospectus, the U.S. Government Income Fund will
normally invest all of its net assets in securities issued by the U.S.
government, its agencies and instrumentalities (see U.S. Government Securities),
and in repurchase agreements in these securities (see Repurchase Agreements, p.
6).
The Fund may invest up to 80% of its net assets in mortgage-related
securities (see Mortgage-Related Securities, p. 4) which represent part
ownership of a pool of mortgage loans. This would include investments in
collateralized mortgage obligations
2
<PAGE> 9
(CMOs). The Fund may also invest up to 20% in zero-coupon securities (see
Zero-Coupon Securities p. 4).
There is minimal default risk involved in the purchase of U.S.
government or U.S. government guaranteed securities. Securities issued by U.S.
government agencies or instrumentalities, while perhaps having the implicit
backing of the U.S. government, may not have an explicit guarantee of the
payment of principal and interest (see U.S. Government Securities, below).
The value of shares of the U.S. Government Income Fund will vary
inversely with changes in interest rates. As with any fixed income investment,
interest rate risk (when interest rates decline, the market value of a portfolio
invested at higher yields can be expected to rise; conversely, when interest
rates rise, the market value of a portfolio invested at lower yields can be
expected to fall) does exist. While the U.S. Government Income Fund will engage
in portfolio trading (shortening the average maturity of the portfolio in
anticipation of a rise in interest rates so as to minimize depreciation of
principal or lengthening the portfolio in anticipation of a decline in interest
rates so as to maximize appreciation of capital) to manage this risk, there is
no assurance that capital will be preserved.
Generally, debt securities with shorter maturities are less subject to
market fluctuation as a result of a change in interest rates. Thus, though there
will be share price fluctuation of the U.S. Government Income Fund, the average
maturity of the portfolio will be between 3 and 10 years (intermediate-term),
which should result in less fluctuation than longer-term maturities.
DESCRIPTION OF SECURITIES
U.S. GOVERNMENT SECURITIES
U.S. government securities include obligations issued (1) by the U.S. Treasury
and (2) by agencies and instrumentalities of the United States government. U.S.
government agencies are government-sponsored organizations acting under
authority of Congress, such as Federal Land Banks, Central Banks for
Cooperatives, Federal Home Loan Banks, the Farmers Home Administration, and the
Federal Farm Credit System. U.S. government instrumentalities are organized by
Congress under a federal charter and supervised and regulated by the U.S.
government, such as the Federal National Mortgage Association and the Student
Loan Marketing Association. A distinction must be made between these obligations
since some are supported by the full faith and credit of the U.S. Treasury,
others by the discretionary authority of the U.S. government, and still others
only by the credit of the issuer.
Securities guaranteed by the U.S. government include: (1) direct
obligations of the U.S. Treasury (such as Treasury bills, notes and bonds) and
(2) federal agency obligations guaranteed as to principal and interest by the
U.S. Treasury (such as securities issued by the Farmers Home Association, the
Federal Financing Bank, the Government National Mortgage Association, the
Maritime Administration Guaranteed Ship Financing Bonds issued after 1972 and
the Small Business Administration). In these securities, the payment of
principal and interest is unconditionally guaranteed by the U.S. government;
thus, they are of the highest possible credit quality.
Securities issued by U.S. government instrumentalities and certain
federal agencies are neither direct obligations of, nor guaranteed by, the
Treasury. However, they involve federal sponsorship in one way or another: some
are backed by the issuer's right to borrow from the U.S. Treasury (such as
securities issued by the Farm Credit System and the Tennessee Valley Authority);
some are supported by the authority of the U.S. Treasury to purchase obligations
issued by agencies or
3
<PAGE> 10
instrumentalities (such as the Federal National Mortgage Association, Student
Loan Marketing Association, and the Tennessee Valley Authority). Some are
supported only by the credit of the issuing government agency or instrumentality
(such as securities issued by the Financing Corporation, FICO).
ZERO-COUPON SECURITIES
Zero-coupon securities are securities that make no periodic interest payments
but instead are sold at a deep discount from their face value. The buyer of such
a bond receives the rate of return by the gradual appreciation of the security,
which is redeemed at face value on a specified maturity date. For tax purposes,
the Internal Revenue Service maintains that the holder of a zero-coupon bond
owes income tax on the interest that has accrued each year, even though the
bondholder does not actually receive the cash until maturity.
The U.S. Government Income Fund will only invest in zero-coupon securities which
are direct obligations of the U.S. Treasury or agencies of the U.S. government.
No zero-coupon securities issued by brokerage firms will be purchased by the
U.S. Government Income Fund.
To the extent that the U.S. Government Income Fund utilizes portfolio cash to
distribute zero coupon income to shareholders, it will forego the purchase of
additional income-producing assets with these funds.
MORTGAGE-RELATED SECURITIES
Mortgage-related securities include GNMA certificates, FNMA and FHLMC
mortgage-based obligations.
GNMA certificates are mortgage-backed securities representing part
ownership of a pool of mortgage loans on which timely payment of interest and
principal is guaranteed by the full faith and credit of the U.S. government.
GNMA certificates differ from typical bonds because principal is repaid monthly
over the term of the loan rather than returned in a lump sum at maturity.
Because both interest and principal payments (including prepayments) on the
underlying mortgage loans are passed through to the holder of the certificate,
GNMA certificates are called "pass-through" securities.
Although the mortgage loans in a GNMA pool will have maturities of up
to 30 years, the actual average life of the GNMA certificates typically will be
substantially less because the mortgages will be subject to normal principal
amortization and may be prepaid prior to maturity. Prepayment rates vary widely
and may be affected by changes in market interest rates. In periods of falling
interest rates, the rate of prepayment tends to increase, thereby shortening the
actual average life of the GNMA certificates. Conversely, when interest rates
are rising, the rate of prepayment tends to decrease, thereby lengthening the
actual average life of the GNMA certificates. Accordingly, it is not possible to
accurately predict the average life of a particular pool. Reinvestment of
prepayments may occur at higher or lower rates than the original yield on the
certificates. Due to the prepayment feature and the need to reinvest prepayments
of principal at current rates, GNMA certificates can be less effective than
typical bonds of similar maturities at "locking in" yields during periods of
declining interest rates, although they may have comparable risks of decline in
value during periods of rising interest rates.
Because prepayments are made at par value, losses could be sustained on
prepayments of GNMA certificates which had been purchased at prices above their
par values.
4
<PAGE> 11
The Federal National Mortgage Association ("FNMA"), a federally
chartered and privately-owned corporation, issues pass-through securities
representing interests in a pool of conventional mortgage loans. FNMA guarantees
the timely payment of principal and interest but this guarantee is not backed by
the full faith and credit of the U.S. government.
The Federal Home Loan Mortgage Corporation ("FHLMC"), a corporate
instrumentality of the U.S. government, issues participation certificates which
represent an interest in a pool of conventional mortgage loans. FHLMC guarantees
the timely payment of interest and the ultimate collection of principal and
maintains reserves to protect holders against losses due to default, but the
certificates are not backed by the full faith and credit of the U.S. government.
As is the case with GNMA certificates, the actual maturity of and realized
return on particular FNMA and FHLMC pass-through securities will vary based on
the prepayment experience of the underlying pool of mortgages.
FNMA and FHLMC also issue collateralized mortgage obligations
("CMO's"). CMO's are obligations fully collateralized directly or indirectly by
a pool of mortgages on which payments of principal and interest are dedicated to
payment of principal and interest on the CMO's. Payments are passed through to
the holders although not necessarily on a pro rata basis on the same schedule as
they are received. Accordingly, a change in the rate of prepayments on the pool
of mortgages could change the effective maturity of a CMO.
WHEN-ISSUED SECURITIES
In order to help ensure the availability of suitable securities for its
portfolio, the U.S. Government Income Fund and the Tax-Free Income Fund may
purchase securities on a "when-issued" or on a "forward delivery" basis which
means that the obligations will be delivered to the Fund making the purchase at
a future date beyond customary settlement time. It is expected that, under
normal circumstances, a Fund purchasing securities on a "when-issued" or
"forward delivery" basis will take delivery of such securities. In general, a
Fund does not pay for the securities or start earning interest on them until the
obligations are scheduled to be settled. While awaiting delivery of the
obligations purchased on such basis, a Fund will establish a segregated account
consisting of cash or liquid securities equal to the amount of the commitments
to purchase "when-issued" securities.
To the extent a Fund engages in "when-issued" or "forward delivery"
transactions, it will do so for the purpose of acquiring portfolio securities
consistent with the Fund's investment objectives and policies and not for the
purpose of investment leverage or to speculate in interest rate changes. The
U.S. Government Income Fund and the Tax-Free Income Fund will make commitments
to purchase securities on a "when-issued" or "forward delivery" basis only with
the intention of actually acquiring the securities, but the Funds reserve the
right to sell these securities before the settlement date if deemed advisable.
Because a Fund must set aside cash or liquid high grade securities to
satisfy its commitments to purchase "when-issued" or "forward delivery"
securities, management of a Fund's investments may be limited by commitments to
purchase "when-issued" or "forward delivery" securities.
When a Fund commits to purchase a security on a "when-issued" or on a
"forward-delivery" basis, it follows procedures consistent with Securities and
Exchange Commission policies. Since those policies currently recommend that an
amount of a Fund's assets equal to the amount of the purchase be held aside or
segregated to be used to pay for the commitment, a Fund will always have cash or
liquid
5
<PAGE> 12
securities sufficient to cover any commitments or to limit any potential risk.
However, although neither of the Funds intends to make such purchases for
speculative purposes and each Fund intends to adhere to the provisions of
Securities and Exchange Commission policies, purchases of securities on such
bases may involve more risk than other types of purchases. For example, a Fund
may have to sell assets which have been set aside in order to meet redemptions.
Also, if a Fund determines it is advisable as a matter of investment strategy to
sell the "when-issued" or "forward delivery" securities before delivery, that
Fund may incur a loss because of market fluctuations since the time the
commitment to purchase such securities was made and any gain or loss would not
be tax-exempt. When the time comes to pay for "when-issued" or "forward
delivery" securities, a Fund will meet its obligations from the then available
cash flow or the sale of securities, or, although it would not normally expect
to do so, from the sale of the "when-issued" or "forward delivery" securities
themselves (which may have a value greater or less than a Fund's payment
obligation).
REPURCHASE AGREEMENTS
The U.S. Government Income Fund may enter into Repurchase Agreements
(Repos) with banks and securities dealers. Under Repurchase Agreements, the U.S.
Government Income Fund buys a security and obtains a simultaneous commitment
from the seller to repurchase the security at a specified time and price. Repos,
also called RPs or buybacks, are widely used both as a money market investment
vehicle and as an instrument of Federal Reserve Monetary Policy. Where a
repurchase agreement is used as a short-term investment, a government securities
dealer borrows from an investor (for instance, a mutual fund) with excess cash,
to finance its inventory, using the securities as collateral. Such RPs may have
a fixed maturity date or be Open Repos, callable at any time. Rates are
negotiated directly by the parties involved, but are generally lower than rates
on collateralized loans made by New York banks. The attraction of repos is the
flexibility of maturities that makes them an ideal place to invest excess funds
on a temporary basis. The Trust will only invest in repurchase agreements which
are fully collateralized and monitored on a continuous basis by the Investment
Adviser and have been affirmed by the Board of Trustees. Repurchase agreements
permit the Fund to maintain liquidity and earn income over periods of time as
short as overnight. The seller must maintain with the Fund's Custodian
securities equal to at least 102% of the acquired security's market value as
monitored daily by the Investment Adviser (see "Management" below). The U.S.
Government Income Fund will only enter into repurchase agreements involving
securities in which it could otherwise invest and with selected banks and
securities dealers whose financial condition is monitored by the Investment
Adviser, subject to review by the Board of Trustees. If the seller under the
repurchase agreement defaults, the Fund may incur a loss if the value of the
collateral securing the repurchase agreement has declined, and may incur
disposition costs in connection with liquidating the collateral. If bankruptcy
proceedings are commenced with respect to the seller, realization of the
collateral by the Fund may be delayed or limited.
INVESTMENT RESTRICTIONS
The Funds have adopted the following restrictions which are fundamental
policies. These fundamental policies, as well as the investment objective of the
Funds, cannot be changed without approval of the holders of a majority of the
outstanding shares of the Fund. All percentage limitations expressed in the
following investment restrictions are measured immediately after the relevant
transaction is made.
RESTRICTIONS FOR BOTH FUNDS
The Funds may not:
6
<PAGE> 13
1 Enter into any repurchase agreement if, as a result, more than 10% of the
Fund's total assets would be subject to repurchase agreements maturing in more
than seven days;
2 Make loans to others except for the purchase of the debt securities listed
above or entering into repurchase agreement listed above;
3 Borrow money, except under the following circumstances: (a) A Fund may borrow
an amount not in excess of 33 1/3% of the value of the Fund's total assets
(calculated when the loan is made) from banks for temporary purposes to
facilitate the orderly sale of portfolio securities to accommodate unusually
heavy redemption requests, if they should occur. This borrowing provision is not
intended for investment purposes, nor will the Funds purchase portfolio
securities during periods of borrowings outstanding;
(b) A Fund may borrow an amount equal to no more than 5% of the value of
each of the Funds' total assets (calculated when the loan is made) for
temporary, emergency purposes, or for the clearance of transactions, to provide
the Investment Manager additional flexibility in the execution of routine daily
transactions, and allow for more efficient cash management. This borrowing
provision will not be used to leverage the funds or to borrow for extended
periods of time.
4 Act as underwriter except to the extent that in conjunction with the
disposition of portfolio securities, the Fund may be deemed an underwriter under
certain federal securities laws;
5 Pledge more than 10% of its assets and then only to secure temporary
borrowings from banks;
6 Sell securities short or purchase securities restricted under federal
securities laws;
7 Write, purchase, or sell puts, calls, straddles, spreads or any
combination thereof;
8 Purchase or sell securities of other investment companies (except in
connection with a merger, consolidation, acquisition or reorganization), real
estate, real estate mortgage loans, commodities or futures contracts;
9 Issue any senior securities;
10 Purchase securities on margin, but the Fund may obtain such credits as
may be necessary for the clearance of purchases and sales of securities;
11 Purchase any illiquid or unmarketable securities;
12 Invest for the purpose of making short-term trading profits or for the
purpose of exercising control of management or deal with the Trustees in the
purchase and sale of securities.
RESTRICTIONS FOR TAX-FREE INCOME FUND ONLY
The Fund may not:
7
<PAGE> 14
1 Invest more than 20% of its assets in securities whose interest is
subject to federal income taxes;
2 Invest more than 5% of its total assets (excluding cash and cash items)
in the securities of any one issuer, except the U. S. government, its agencies
and instrumentalities;
3 Invest 25% or more of the Fund's total assets in the securities of
issuers in the same industry, except that the Fund may invest more than 25% of
the value of its total assets in municipal bonds and obligations issued or
guaranteed by the U.S. government, its agencies or instrumentalities;
4 Invest more than 5% of its total assets taken at cost in securities whose
issuer or guarantor of principal and interest, including any predecessors, has
been in operation for less than three years.
TRUSTEES AND OFFICERS
OF THE TRUST
TRUSTEES AND OFFICERS
The principal occupation of the Trustees and Officers during the last five years
and their affiliations are:
JOHN C. BRYANT, TRUSTEE, Age 61.
44 Faculty Place, Wilmington, Ohio.
Dr. Bryant is Executive Director of the Cincinnati Youth Collaborative. He was
formerly Professor of Education, Wilmington College.
ROBERT M. DUNCAN, TRUSTEE, Age 70.
1397 Haddon Road, Columbus, Ohio.
Mr. Duncan is Vice President & Secretary Emeritus of The Ohio State University.
He was formerly a partner in the law firm of Jones, Day, Reavis & Pogue in
Columbus, Ohio. He was formerly a U.S. District Court Judge, Southern District
of Ohio.
THOMAS J. KERR, IV, TRUSTEE, Age 64.
4890 Smoketalk Lane, Westerville, Ohio.
Dr. Kerr is President Emeritus of Kendall College. He was formerly President of
Grant Hospital Development Foundation.
DIMON R. MCFERSON*, TRUSTEE, Age 60
One Nationwide Plaza, Columbus, Ohio
Mr. McFerson is President and Chief Executive Officer of the Nationwide
Insurance Enterprise.
JAMES F. LAIRD, JR., TREASURER.
Three Nationwide Plaza, Columbus, Ohio.
Mr. Laird is Vice President-General Manager of Nationwide Advisory Services,
Inc., the
8
<PAGE> 15
Distributor and Investment Manager.
CHRISTOPHER D. CRAY, ASSISTANT TREASURER.
Three Nationwide Plaza, Columbus, Ohio.
Mr. Cray is Treasurer of Nationwide Advisory Services, Inc., the Distributor
and Investment Manager. Prior to that he was Director - Corporate Accounting
of Nationwide Insurance Enterprise.
* A Trustee who is an "interested person" of the Fund as defined in the
Investment Company Act of 1940.
The Trustees receive fees and reimbursement for expenses of attending Board
meetings of the Trust. The Compensation Table below sets forth the total
compensation to the Trustees from the Trust and from all funds in the Nationwide
Fund Complex during the fiscal year ended October 31, 1997. Trust officers
receive no compensation from the Trust in their capacity as officers. All
Trustees and Officers of the Trust own less than 1% of its outstanding shares.
COMPENSATION TABLE
<TABLE>
<CAPTION>
PENSION OR RETIREMENT ESTIMATED
AGGREGATE BENEFITS ACCRUED ANNUAL BENEFITS TOTAL COMPENSA-
NAME OF PERSON, COMPENSATION AS PART OF FUND UPON RETIRE- TION FROM THE
POSITION FROM THE TRUST EXPENSES MENT FUND COMPLEX*
<S> <C> <C> <C> <C>
John C. Bryant,
Trustee $1,000 --0-- --0-- $16,000
Robert M. Duncan,
Trustee $1,000 --0-- --0-- $16,000
Thomas J. Kerr, IV,
Trustee $1,000 --0-- --0-- $16,000
Dimon R. McFerson,
Trustee --0-- --0-- --0-- --0--
</TABLE>
* The Fund Complex includes six business trusts comprised of thirty-one
investment company portfolios.
INVESTMENT MANAGEMENT
AGREEMENT
Under the terms of the Investment Management Agreement, Nationwide Advisory
Services, Inc., (NAS) manages the investment of the assets of the Funds in
accordance with the policies and procedures established by the Trustees,
administers and manages the affairs of the Trust and furnishes office
facilities, equipment and personnel to the Funds. The Agreement also provides
that NAS shall reimburse the Trust for the compensation of the Trustees who are
"interested persons" of NAS.
9
<PAGE> 16
Each Fund pays the Investment Manager a fee based on its average daily net
assets at the rate of .65% of the first $250 million of average daily net
assets, .60% of the next $250 million, .55% on the next $250 million, and .50%
on the average daily net assets in excess of $750 million. The Funds also pays
the custodial, transfer agents, federal and state share registrations, brokerage
and legal fees; taxes; printing costs; and the compensation and expenses of the
Trustees who are not interested persons of the Trust.
During the fiscal years ended October 31, 1997, 1996, and 1995, the Investment
Manager earned management fees for the Tax-Free Income Fund of $1,688,233,
$1,704,966, and $1,629,584, respectively, and $256,016, $255,149, and $248,765,
respectively for the U.S. Government Income Fund. Neither the Investment
Manager nor any company affiliated with it receives any brokerage commissions
from the Funds.
NAS, an Ohio corporation, is a wholly owned subsidiary of Nationwide Life
Insurance Company, which is owned by Nationwide Financial Services, Inc. (NFS).
NFS, a holding company, has two classes of common stock outstanding with
different voting rights enabling Nationwide Corporation (the holder of all of
the outstanding Class B common stock) to control NFS. Nationwide Corporation is
also a holding company in the Nationwide Insurance Enterprise.
DISTRIBUTION AGREEMENT
Nationwide Advisory Services, Inc. also acts as Distributor of the Funds' shares
pursuant to the Distribution Agreement with the Funds. Pursuant to the
Distribution Agreement, NAS is responsible for distributing the Funds Securities
in a continuous offering. The Distributor pays commissions to salespersons, the
cost of printing and mailing prospectuses to potential investors, and any sales
promotional expenses incurred in connection with the distribution of Fund
shares.
The Distribution Agreement provides that it shall terminate automatically
if assigned and that it may be terminated without penalty by either party upon
not more than 60 days' nor less than 30 days' written notice.
To compensate the Distributor for the services it provides and for the
expenses it bears under the Distribution Agreement, the Funds have adopted a
Plan of Distribution (the "Plan") under Rule 12b-1 under the Investment Company
Act. Under the Plan, the Funds pays the Distributor compensation accrued daily
and paid monthly at the annual rate of .35% of the average daily net assets
of the Funds.
For the Tax-Free Income Fund, these fees were waived from the inception of
the Fund through February 28, 1990. For the period from March 1, 1990 through
August 31, 1990 the Fund accrued distribution fees at the annual rate of .10% of
average daily net assets. For the period from September 1, 1990 through October
31, 1996, the Fund accrued distribution fees at the annual rate of .20% of
average daily net assets.
During the fiscal years ended October 31, 1997, 1996, and 1995, the
Tax-Free Income Fund accrued distribution fees totalling $911,855, $921,340, and
$878,689, respectively, and $137,861, $137,388, and $133,950 for the U.S.
Government Income Fund. During the years ended October 31, 1997, 1996, and
1995, the Distributor waived Plan fees for the Tax-Free Income Fund totaling
$390,745, $394,860, and $376,581 respectively, and $59,083, $58,881 and $57,407
respectively for the U.S. Government Income Fund.
The Distributor also receives the proceeds of contingent deferred sales
charges imposed on certain redemptions of shares (see "Contingent Deferred Sales
Charge").
During the years ended October 31, 1997, 1996, and 1995, such charges for the
Tax-Free Income Fund aggregated $161,441, $169,310, and $234,339 respectively,
and $31,232, $58,918, and $72,664, respectively for the U.S. Government Income
Fund.
10
<PAGE> 17
Pursuant to the Plan, at least quarterly, the Distributor shall provide the
Fund a written report for review by the Trustees of the amounts expended under
the Plan and the purpose for which such expenditures were made.
The Plan shall remain in effect until the earlier of one year after the
respective date of execution or the first meeting of shareholders after the
effective date of the Funds' prospectus. If approved at such meeting by a vote
of a majority of the outstanding voting securities of the Fund, the Plan shall
continue in effect thereafter, provided such continuance is approved annually by
a vote of the Trustees of the Fund, including a majority of the Trustees who are
not interested persons of the Fund and who have no direct or indirect financial
interest in the operation of the Plan, cast in person at a meeting called for
the purpose of voting on such Plan. The Plan may not be amended to increase
materially the amount to be spent for the services described therein without
approval of the shareholders, and all material amendments of the Plan must also
be approved by the Trustees in the manner described above. The Plan may be
terminated at any time, without payment of any penalty, by vote of a majority of
the Trustees who are not interested persons of the Fund and who have no direct
or indirect financial interest in the operations of the Plan or by a vote of a
majority of the outstanding voting securities of the Fund (as defined in the
Investment Company Act) on not more than 60 days' written notice to any other
party to the Plan. The Plan will automatically terminate in the event of its
assignment (as defined in the Investment Company Act). The Trustees have
determined that, in their judgment, there is a reasonable likelihood that the
Plan will benefit the Fund and its shareholders. In the Trustees' review of the
Plan, they will consider the continued appropriateness and the level of
compensation provided therein. So long as the Plan is in effect, the election
and nomination of Trustees who are not interested persons of the Fund shall be
at the discretion of the Trustees who are not such interested persons.
PRICING OF SHARES
The net asset value per share of the Fund is determined once daily as of
the close of the New York Stock Exchange (usually 4 P.M. Eastern Time) on days
when the New York Stock Exchange is open or on any other day during which there
is a sufficient degree of trading in the Funds' portfolio securities that the
net asset value of the Fund is materially affected by changes in the value of
portfolio securities. The Fund will not compute net asset value on customary
national business holidays, including the following: Christmas, New Year's Day,
Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, and Thanksgiving.
The net asset value per share is calculated by adding the value of all
securities and other assets of the Fund, deducting its liabilities, and dividing
by the number of shares outstanding.
Portfolio securities for which market quotations are readily available are
valued at their bid quotations. Securities for which market quotations are not
readily available are valued at fair value in accordance with procedures adopted
by the Board of Trustees. Under these procedures the Fund values municipal
securities on the basis of valuations provided by an independent pricing service
which uses information with respect to transactions in bonds, quotations from
bond dealers, market transactions in comparable securities and various
relationships between securities in determining value.
REDEMPTION OF SHARES
CONTINGENT DEFERRED
SALES CHARGE
11
<PAGE> 18
A contingent deferred sales charge will be imposed on an investor's redemption
which reduces the current value of the investor's shares in the Fund to an
amount which is lower than the amount of all payments by the shareholder for the
purchase of shares during the preceding five years. However, such a charge will
be imposed only to the extent that the net asset value of the shares redeemed
exceeds (a) the current net asset value of shares purchased more than five years
prior to the redemption, plus (b) the current net asset value of shares
purchased through reinvestment of dividends or distributions, plus (c) increases
in the net asset value of the investor's shares above the total amount of
payments for the purchase of shares made during the preceding five years. The
amount of any contingent deferred sales charge will be paid to and retained by
the Distributor.
In determining the applicability of a contingent deferred sales charge to each
redemption, the amount which represents an increase in the net asset value of
the investor's shares above the amount of the total payments for the purchase of
shares within the last five years will be deemed to be redeemed first. In the
event that the redemption amount exceeds such increase in value, the next
portion of the amount redeemed will be deemed to be the amount which represents
the net asset value of the investor's shares purchased more than five years
prior to the redemption and/or shares purchased through reinvestment of
dividends or distributions. Any portion of the amount redeemed which exceeds an
amount representing both such increase in value and the value of shares
purchased more than five years prior to the redemption and/or shares purchased
through reinvestment of dividends or distributions will be subject to contingent
deferred sales charge.
The amount of the contingent deferred sales charge, if any, will vary depending
on the number of months from the time of payment for the purchase of shares
until the time of redemption of such shares. Solely for purposes of determining
the number of months from the time of any payment for the purchases of shares,
all payments during a month will be aggregated and deemed to have been made on
the last day of the preceding month. The following table sets forth the rates of
the contingent deferred sales charge:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Months since purchase 0- 13- 25- 37- 49- 61 &
payment was made 12 24 36 48 60 over
Contingent deferred
sales charge percentage 5% 4% 3% 2% 1% none
</TABLE>
In determining the rate of any applicable contingent deferred sales charge, it
will be assumed that a redemption is made of shares held by the investor for the
longest period of time within the applicable 60-month period. This will result
in any such charge being imposed at the lowest possible rate.
Accordingly, shareholders may redeem, without incurring any contingent deferred
sales charge, amounts equal to any net increase in the value of their shares
above the amount of their purchase payments made within the past five years, and
amounts equal to the current value of shares purchased through reinvestment of
dividends or distributions. The contingent deferred sales charge will be
imposed, in accordance with the table above, on any redemptions within five
years of purchase which are in excess of these amounts. For federal income tax
purposes, the amount of the contingent deferred sales charge will reduce the
gain or increase the loss, as the case may be, on the amount recognized on the
redemption or repurchase of shares.
The contingent deferred sales charge will be waived in the case of a redemption
following death or disability of a shareholder(including either spouse on joint
12
<PAGE> 19
spousal accounts) if the redemption is made within one year of death or initial
determination of disability. The waiver is available for total or partial
redemptions of shares owned by an individual or an individual jointly with his
or her spouse, but only for redemptions of shares held at the time of death or
initial determination of disability. The charge will also be waived on
redemptions effected by: (i) shares held by other registered investment
companies affiliated with Nationwide Advisory Services, Inc., (ii) shares
redeemed that were acquired as a result of a transfer of investments from the
Nationwide Tax-Free Income Fund, U.S. Government Income Fund, Nationwide Growth
Fund, Nationwide Fund, or Nationwide Bond Fund, (iii) shares redeemed by (a) any
pension, profit-sharing or other employee benefit plan for the employees of NAS,
any of its affiliated companies or investment advisory clients and their
affiliates, (b) Trustees and retired Trustees of NIF and NIF II; directors,
officers, full-time employees employed for not less than 90 days, sales
representatives and their employees, and retired directors, officers, employees,
and sales representatives, their spouses, children or immediate relatives, and
immediate relatives of deceased employees (immediate relatives include mother,
father, brothers, sisters, grandparents, grandchildren) of any of the Nationwide
Group of Insurance Companies or their affiliates, or any investment advisory
clients of the Funds' advisor and their affiliates, (c) directors, officers and
full-time employees, their spouses, children or immediate relatives, and
immediate relatives of deceased employees (immediate relatives include mother,
father, brothers, sisters, grandparents, grandchildren) of any sponsor group
which may be affiliated with the Nationwide Group of Insurance Companies from
time to time, which include but are not limited to Farmland Industries, Inc.,
Maryland Farm Bureau, Inc., Ohio Farm Bureau Federation, Inc., Pennsylvania
Farmers' Association, Ruralite Services, Inc., and Southern States Cooperative
(d) any endowment or pension, profit sharing, or deferred compensation plan
which is qualified under Section 401(a) of the Internal Revenue Code of 1986 as
amended, dealing directly with the Distributor with no sales representative
involved, at net asset value upon written assurance of the purchaser that the
shares are acquired for investment purposes and will not be resold except to the
Trust, and (e) any life insurance company separate account registered as a unit
investment trust, (f) any qualified pension or profit sharing plan established
by a Nationwide sales representative for himself/herself and his/her employees.
The shareholder must notify the Funds' Transfer Agent either directly or
indirectly or through the Distributor, at the time of redemption, that the
shareholder is entitled to waiver of the contingent deferred sales charge.
Redemptions of shares which were recently purchased may be delayed in order to
permit a determination to be made that the purchase check will be honored. Such
determination may be made upon the passage of a reasonable period of time (not
to exceed 12 days) from the time of receipt of the check by Nationwide Investors
Services, Inc.
FUND PERFORMANCE
ADVERTISING
The Funds may use historical performance in advertisements, sales literature,
and the prospectus. Performance figures reflect the maximum 5% deferred sales
charge, which decreases to zero at the end of year five. It also includes
reinvestment of all dividends and capital gains distributions. Performance
figures will include quotations of average annual (compound) total return for
the most recent one, five, and ten-year periods (or, as the case may be, the
life of the Fund). Average annual (compound) total return represents the rate
required each year for an initial investment to equal the redeemable value at
the end of the specified period.
NATIONWIDE TAX-FREE INCOME FUND
AVERAGE ANNUAL (COMPOUND) TOTAL RETURNS
13
<PAGE> 20
FOR PERIODS ENDED OCTOBER 31, 1997
(REFLECT MAXIMUM SALES CHARGES)
<TABLE>
<CAPTION>
<S> <C>
1 year 2.72%
5 year 6.63%
10 year 8.18%
</TABLE>
NATIONWIDE U.S. GOVERNMENT INCOME FUND
AVERAGE ANNUAL (COMPOUND) TOTAL RETURNS
FOR PERIODS ENDED OCTOBER 31, 1997
(REFLECT MAXIMUM SALES CHARGES)
<TABLE>
<CAPTION>
<S> <C>
1 year 3.36%
5 year 6.94%
Life** 7.17%
</TABLE>
The Funds may also choose to show nonstandard returns including total
return and simple average total return, over various time periods based on
lump-sum or periodic investments. Nonstandard returns may or may not reflect
reinvestment of all dividends and capital gains.
Total return represents the cumulative percentage change in the value
of an investment over a time, calculated by subtracting the initial investment
from the redeemable value and dividing the result by the amount of the initial
investment. The simple average total return equals the total return (or
cumulative total return) divided by the number of years in the period and,
unlike average annual (compound) total return, does not reflect compounding.
** Life of the U.S. Government Income Fund since commencement of operations
2/10/92.
14
<PAGE> 21
The Funds may also from time to time advertise a uniformly calculated yield
quotation. This yield is calculated by dividing the net investment income per
share earned during a 30-day base period by the maximum offering price per share
on the last day of the 30-day period, assuming reinvestment of all dividends and
distributions. This yield formula uses the average number of shares entitled to
receive dividends, provides for semi-annual compounding of interest, and
includes a modified market value method for determining amortization. The yield
will fluctuate, and there can be no assurance that the yield quoted on any given
occasion will remain in effect for any period of time. For the 30-day period
ended October 31, 1997, the Tax-Free Income Fund's yield was 4.26% and the U.S.
Government Income Fund's yield was 5.76%.
Additionally, the Nationwide Tax-Free Income Fund may show tax-equivalent yield
which is computed by dividing yield by one minus a stated income tax rate. The
tax-equivalent yields for the 15%, 28%, 31%, 36%, and 39.6% federal tax rates
are shown below:
NATIONWIDE TAX-FREE INCOME FUND
TAX EQUIVALENT 30-DAY YIELDS
FOR THE PERIOD ENDED OCTOBER 31, 1997
<TABLE>
<CAPTION>
Tax Rate Yield
<S> <C>
15% 5.01%
28% 5.92%
31% 6.17%
36% 6.66%
39.6% 7.05%
</TABLE>
SHAREHOLDERS' RIGHTS
It is the Trust's belief that no shareholder shall be subject to any personal
liability to any person in connection with Fund property or the acts,
obligations or affairs of the Fund. No Trustee, officer, employee or agent of
the Fund shall be subject to any personal liability whatsoever to any person,
other than the Fund or its shareholders, in connection with Fund property or the
affairs of the Fund, save only that arising from bad faith, willful misfeasance,
gross negligence or reckless disregard for his duty to such person; and all such
persons shall look solely to the Fund property for satisfaction of claims of any
nature arising in connection with the affairs of the Fund. If any shareholder of
the Fund is made a party to any suit or proceeding to enforce any such
liability, he shall not, on account thereof, be held to any personal liability.
The Fund shall indemnify and hold each shareholder harmless from and against all
claims and liabilities, to which such shareholder may become subject by reason
of his being or having been a shareholder, and shall reimburse such
15
<PAGE> 22
shareholder for all legal and other expenses reasonably incurred by him in
connection with any such claim or liability. Such rights accruing to a
shareholder shall not exclude any other right to which such shareholder may be
lawfully entitled, nor shall anything herein contained restrict the right of the
Fund to indemnify or reimburse a shareholder in any appropriate situation even
though not specifically provided herein.
CUSTODIAN
The Fifth Third Bank, 38 Fountain Square Plaza, Cincinnati, OH 45263, is the
Custodian for the Funds and makes all receipts and disbursements under a
Custodian agreement. The Custodian performs no managerial or policymaking
functions of the Fund.
TRANSFER AGENT AND
DIVIDEND DISBURSEMENT
Nationwide Investors Services, Inc. (NIS) is the Transfer and Dividend
Disbursing Agent for all Nationwide Funds. NIS, a wholly-owned subsidiary of
Nationwide Advisory Services, Inc. received fees for transfer agent services
during the fiscal year ended October 31, 1997, 1996, and 1995 of $135,800,
$159,115 and $163,259 from the Nationwide Tax-Free Income Fund and $37,599,
$40,299, and $40,489 from the Nationwide U. S. Government Income Fund.
Management believes the charges for the services performed are comparable to
fees charged by other companies performing similar services.
BROKERAGE ALLOCATION
There is no commitment to place orders with any particular broker/dealer or
group of broker/dealers. Orders for the purchases and sales of portfolio
securities of the Funds are placed where, in the judgment of the Investment
Manager, the best executions can be obtained. None of the firms with whom orders
are placed are engaged in the sale of shares of the Funds. In allocating orders
among brokers for execution on an agency basis, in addition to price
considerations, the usefulness of the brokers' overall services is also
considered. Services provided by brokerage firms include efficient handling of
orders, useful analyses of corporations, industries and the economy, statistical
reports and other related services for which no charge is made by the broker
over and above negotiated brokerage commissions. The Fund and the Investment
Manager believe that these services and information, which in many cases would
be otherwise unavailable to the Investment Manager, are of significant value to
the Investment Manager, but it is not possible to place an exact dollar value
thereon. The Investment Manager does not believe that the receipt of such
services and information tends to reduce materially the Investment Manager's
expense.
No formula, method or criteria other than as stated above was used in the
allocation of orders among any such firms. In the case of securities traded in
the over-the-counter market, the Funds normally deal with the market makers for
such securities unless better prices can be obtained through brokers.
TAX STATUS
FEDERAL TAXES--The Funds intend to qualify for treatment under subchapter M of
the Internal Revenue Code of 1986, as amended, and, therefore, must distribute
substantially all of its net investment income and capital gains to shareholders
16
<PAGE> 23
annually. In general, if a Fund distributes all of its net investment income, it
is not required to pay any federal income taxes. In addition to federal income
tax, if a Fund fails to distribute the required portion of such investment
income or capital gains in any year, it will be subject to a non-deductible 4%
excise tax on the amount which it has failed to distribute. The Funds intend to
make distributions in amounts sufficient to avoid the imposition of this excise
tax.
Dividends paid by the Tax-Free Income Fund will be exempt from federal income
tax to the extent that the income of the Fund is derived from bonds which
qualify for such exemption. Some portion of the income from the Tax-Free Income
Fund may be taxable annually. The taxable portion of each distribution will be
based on the ratio, each year, between the Fund's taxable income and total
income. Such ratio shall be determined within 60 days following the close of the
taxable year. The annual ratio may differ significantly from the ratio for the
period actually covered by each distribution.
Dividends paid by the Nationwide U.S. Government Income Fund are taxable as
income to the shareholder for federal income tax purposes. For corporate
shareholders, the appropriate portion of each year's distribution is eligible
for the corporate dividend received deduction.
Income itself exempt from Federal income taxation may be considered in
addition to the taxable income when determining whether Social Security
payments received by a shareholder are subject to Federal income taxation.
Shareholders not subject to tax on their income will not have to pay tax on
amounts distributed to them.
The Funds will annually report to each shareholder that shareholder's portion of
the net income and capital gain of the Funds for inclusion in the shareholder's
income.
Individual and corporate shareholders may be subject to the Alternative Minimum
Tax ("AMT") if their Alternative Minimum Taxable Income ("AMTI") exceeds the
exemption amounts set forth in Section 55 of the Code. The AMT, at rates as high
as 28% for individuals and 20% for corporations, is reduced by the regular tax
due for the year. AMTI is the taxpayer's taxable income for the year for regular
tax purposes, increased by the tax preferences described in Section 57 of the
Code and adjusted as described in Section 56 of the Code. Preferences include
interest from Specified Private Activity Bonds, a type of state or local
government bond described in Section 57 (a) (5) (C) of the Code. Bonds of this
type may be held for one or more of the Funds from time to time.
A shareholder may be subject to federal backup withholding at a rate of 31% of
each distribution if the shareholder fails to certify that the taxpayer
identification number given is correct and that the shareholder is not subject
to such withholding because of underreporting of income (or if the Internal
Revenue Service gives notice that such certifications are not accurate).
STATE AND LOCAL TAXES--Distributions to shareholders of the Funds may
be subject to state and local taxes, even if not subject to federal income
taxes. These laws vary, and you are advised to consult a tax adviser regarding
such taxes.
FINANCIAL STATEMENTS
The Report of Independent Auditors and Financial Statements of the Funds for
the period ended October 31, 1997 are incorporated herein by reference to the
Trust's Annual Report. Copies of the Annual Report are available without charge
upon request by writing the Trust or by calling 1-800-848-0920.
17
<PAGE> 24
APPENDIX
MUNICIPAL BONDS
Excerpts from Moody's Investors Service Inc., description of its three highest
bond ratings: Aaa--judged to be the best quality. They carry the smallest degree
of investment risk; Aa--judged to be of high quality by all standards;
A--possess favorable attributes and are considered "upper medium" grade
obligations. Note: Those bonds in the Aa, A, Baa, Ba and B groups which Moody's
believes possess the strongest investment attributes are designated by the
symbol Aa 1, A 1, Baa 1, Ba 1 and B 1.
Excerpts from Standard & Poor's Corporation description of its three highest
bond ratings: AAA--highest grade obligations; they possess the ultimate degree
of protection as to principal and interest; AA--also qualify as high grade
obligations, and, in the majority of instances, differ from AAA issues only in a
small degree;
A--strong ability to pay interest and repay principal although more susceptible
to change in circumstances.
COMMERCIAL PAPER
Excerpts from Standard & Poor's Corporation description of its two highest
commercial paper ratings:
A-1--judged to be the highest investment grade category possessing the highest
relative strength;
A-2--investment grade category possessing less relative strength than the
highest rating.
Excerpts from Moody's Investors Service, Inc., description of its two highest
commercial paper ratings:
P-1--the highest grade possessing greatest relative strength;
P-2--second highest grade possessing less relative strength than the highest
grade.
STATE AND MUNICIPAL NOTES
Excerpts from Moody's Investors Service, Inc., description of state and
municipal note ratings:
MIG-1--Notes bearing this designation are of the best quality, enjoying strong
protection from established cash flows of funds for their servicing or from
established and broad-based access to the market for refinancing, or both.
MIG-2--Notes bearing this designation are of high quality, with margins of
protection ample although not so large as in the preceding group.
MIG-3--Notes bearing this designation are of favorable quality, with all
security elements accounted for but lacking the strength of the preceding grade.
Market access for refinancing, in particular, is likely to be less well
established.
18
<PAGE> 25
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENT AND EXHIBITS
(a) Financial Statements:
(1) Financial statements and schedules included in the Prospectus for the
Funds (Part A):
Financial Highlights
(2) Financial statements and schedules included in Part B:
Those schedules required by Item 23 to be included in Part B have
been incorporated therein by reference to the Prospectuses (Part A).
(i) Audited Financials:
Audited financial statements for the Tax-Free Fund and U.S.
Government Fund are hereby incorporated by reference to Forms N-30D
filed by Nationwide Investing Foundation II on January 6, 1998.
(b) Exhibits:
(1) Amended Declaration of Trust (Charter), previously filed
with Registration Statement and Post-Effective Amendments,
and herein incorporated by reference.
(2) Amended Bylaws, previously filed with Registration
Statement and Post-Effective Amendments, and herein
incorporated by reference.
(3) Not applicable.
(4) Not applicable.
(5) Restated Investment Management Agreement, previously filed
with Registration Statement and Post-Effective Amendments,
and herein incorporated by reference.
(6) Restated Underwriting Contract, previously filed with
Registration Statement and Post-Effective Amendments, and
herein incorporated by reference.
(7) Not applicable.
(8) Restated Mutual Fund Custody Agreement, previously filed
with Registration Statement and Post- Effective Amendments,
and herein incorporated by reference.
(9) Agreement and Plan of Reorganization between Nationwide
Investing Foundation II and Nationwide Investing Foundation
III (NIF III) previously filed with NIF III's Registration
Statement on N-14 (33 Act File No. 333-41175) on November
24,1997, and is hereby incorporated by reference.
(10) Opinion and consent of counsel previously filed with
Registration Statement and Post-Effective Amendments, and
herein incorporated by reference.
(11) Independent Auditors' Consent.
(12) Not applicable.
(13) Not applicable.
(14) Not applicable.
(15) Restated Distribution Plan of Nationwide Investing
Foundation II, previously filed with Registration Statement
and Post-Effective Amendments and herein incorporated by
reference.
(16) Performance Quotation Computation Schedule previously filed
with Registration Statement and Post-Effective Amendments,
and herein incorporated by reference.
(17) Not applicable.
(18) Not applicable.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
No person is presently controlled by or under common control with
Registrant.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
<TABLE>
<CAPTION>
NUMBER OF RECORD
HOLDERS AS OF
TITLE OF CLASS DECEMBER 31, 1997
<S> <C>
Nationwide Tax-Free Income Fund 7,807
Nationwide U.S. Government Income Fund 2,068
</TABLE>
ITEM 27. INDEMNIFICATION
Indemnification provisions for officers, directors and employees of
Registrant are set forth in Article X, Section 2 of the Trust Indenture. Each
person who is or has been a Trustee, Officer or Beneficiary of the Trust shall
be indemnified by the Trust against expenses reasonably incurred by him in
connection with any claim or in connection with any action, suit or proceeding,
civil or criminal, to which he may be a party by reason of his being or having
been a Trustee, Officer or Beneficiary of the Trust, if he acted (i) in good
faith in a manner he reasonably believed to be in or not opposed to the best
interests of the Trust and with respect to any criminal action or proceeding had
no reasonable cause to believe that his conduct was unlawful and (ii) without
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office. The term "expenses"
shall include, without limitation, attorneys' fees, costs, judgments, fines,
penalties, amounts paid in settlement or to secure termination of litigation,
and other liabilities, other than amounts paid to the Trust itself.
Any indemnification under subsection (a) shall be made by the Trust only
upon the determination that indemnification is proper in the circumstances
because the Trustee, Officer or Beneficiary has met the applicable standards of
conduct set forth herein. The determination provided for herein shall be made
(1) by the Trustees of a majority vote of a quorum consisting of Trustees who
were not parties to such claim, action, suit or proceeding, or (2) if such a
quorum is not obtainable, or, even if obtainable, a quorum of disinterested
Trustees so directs, by independent legal counsel in a written opinion, or (3)
by a majority vote of a quorum of the Beneficiaries at any regular or special
meeting of said Beneficiaries.
The foregoing right of indemnification shall be in addition to any other
rights to which such Trustee, Officer or Beneficiary may be entitled under any
regulation, agreement, insurance purchased by the Trust, vote of Beneficiaries
or disinterested Trustees or otherwise.
Anything to the contrary notwithstanding, nothing herein shall protect any
Trustee or Officer against any liability to the Trust or its Beneficiaries to
which he would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
(a) Nationwide Advisory Services, Inc. (NAS), the investment adviser
of the Trust, also serves as investment adviser to the
Nationwide Investing Foundation, Nationwide Investing Foundation
II, Nationwide Separate Account Trust, Financial Horizons
Investment Trust, and Nationwide Asset Allocation Trust and
serves as general distributor to the Nationwide Multi-Flex
Variable Account, Nationwide Variable Account-II, Nationwide
Variable Account-5, Nationwide Variable Account-8, Nationwide
Variable Account-9, Nationwide DC Variable Account, Nationwide
DCVA II,
C-1
<PAGE> 26
Nationwide VA Separate Account-A, Nationwide VA Separate
Account-C, NACo Variable Account, Nationwide VLI Separate
Account-2, Nationwide VLI Separate Account-3, Nationwide VL
Separate Account-A, Nationwide VL Separate Account-B, Nationwide
VA Separate Account-B and Nationwide Variable Account, separate
accounts of Nationwide Life Insurance Company, or its subsidiary
Nationwide Life and Annuity Insurance Company, registered as
unit investment trusts under the Investment Company Act of 1940.
Joseph J. Gasper DIRECTOR AND PRESIDENT AND CHIEF OPERATING OFFICER
Nationwide Life Insurance Company
Nationwide Life and Annuity Insurance Company
Nationwide Financial Services, Inc.
DIRECTOR AND CHAIRMAN OF THE BOARD
Nationwide Investment Services Corporation
DIRECTOR AND VICE CHAIRMAN
Nationwide Financial Institution
Distributors Agency, Inc.
Nationwide Global Holdings, Inc.
NEA Valuebuilder Investor Services, Inc.
NEA Valuebuilder Investor Services of Arizona, Inc.
Public Employees Benefit Services Corporation
DIRECTOR AND PRESIDENT
Nationwide Advisory Services, Inc.
Nationwide Investor Services, Inc.
DIRECTOR
Affiliate Agency, Inc.
Affiliate Agency of Ohio, Inc.
Financial Horizons Distributors Agency of Alabama,
Inc.
Financial Horizons Distributors Agency of Ohio,
Inc.
Financial Horizons Distributors Agency of Oklahoma,
Inc.
Financial Horizons Securities Corporation
Landmark Financial Services of New York, Inc.
Nationwide Indemnity Company
TRUSTEE AND CHAIRMAN
Nationwide Asset Allocation Trust
Nationwide Separate Account Trust
TRUSTEE AND PRESIDENT
Nationwide Insurance Golf Charities, Inc.
Gordon E. McCutchan EXECUTIVE VICE PRESIDENT-LAW AND
CORPORATE SERVICES AND SECRETARY
Nationwide Mutual Insurance Company
Nationwide Mutual Fire Insurance Company
Nationwide Life Insurance Company
Nationwide General Insurance Company
Nationwide Property and Casualty Insurance Company
Nationwide Life and Annuity Insurance Company
Nationwide Financial Services, Inc.
C-2
<PAGE> 27
Nationwide Properties, Ltd.
Nationwide Realty Investors, Ltd.
NEA Valuebuilder Investor Services, Inc.
NEA Valuebuilder Investor Services of Arizona, Inc.
Nationwide Financial Institution Distributors Agency, Inc.
Colonial County Mutual Insurance Company
Gates, McDonald & Company of Nevada
Gates, McDonald & Company of New York, Inc.
Farmland Mutual Insurance Company
Lone Star General Agency, Inc.
Nationwide Agribusiness Insurance Company
Nationwide Communications Inc.
Employers Insurance of Wausau A Mutual Company
National Premium and Benefit Administration Company
Nationwide Corporation
Nationwide Insurance Enterprise Foundation
Nationwide Investment Services Corporation
Scottsdale Indemnity Company
Scottsdale Insurance Company
Scottsdale Surplus Lines Insurance Company
Wausau Underwriters Insurance Company
Wausau Service Corporation
Wausau Business Insurance Company
Wausau General Insurance Company
EXECUTIVE VICE PRESIDENT-LAW AND CORPORATE SERVICES
American Marine Underwriters, Inc.
Employers Life Insurance Company of Wausau
Pension Associations of Wausau, Inc.
Public Employees Benefit Services Corporation
Wausau Preferred Health Insurance Company
Companies Agency, Inc.
Companies Agency of Alabama, Inc.
Companies Agency Insurance Services of California
Companies Agency of Idaho, Inc.
Companies Agency of Illinois, Inc.
Companies Agency of Kentucky, Inc.
Companies Agency of Massachusetts, Inc.
Companies Agency of New York, Inc.
Companies Agency of Pennsylvania, Inc.
Companies Agency of Phoenix, Inc.
Countrywide Services Corporation
Wausau International Underwriters
EXECUTIVE VICE PRESIDENT-LAW AND CORPORATE SERVICES
AND DIRECTOR
Nationwide Advisory Services, Inc.
Nationwide Investor Services, Inc.
EXECUTIVE VICE PRESIDENT-LAW AND CORPORATE
SERVICES, SECRETARY AND DIRECTOR
California Cash Management Company
Colonial Insurance Company of Wisconsin
Gates, McDonald & Company
GatesMcDonald Health Plus Inc.
C-3
<PAGE> 28
Nationwide Global Holdings, Inc.
National Casualty Company
Nationwide Cash Management Company
Nationwide Indemnity Company
Nationwide Community Urban Redevelopment Corporation
VICE CHAIRMAN AND DIRECTOR
Neckura Holding Company
Neckura Insurance Company
Neckura Life Insurance Company
SECRETARY
The Beak and Wire Corporation
Affiliate Agency, Inc.
Affiliate Agency of Ohio, Inc.
Financial Horizons Distributors Agency of Alabama, Inc.
Financial Horizons Distributors Agency of Ohio, Inc.
Financial Horizons Distributors Agency of Oklahoma, Inc.
Financial Horizons Securities Corporation
Landmark Financial Services of New York, Inc.
NEA Valuebuilder Investor Services of Alabama, Inc.
NEA Valuebuilder Investor Services of Montana, Inc.
NEA Valuebuilder Investor Services of Nevada, Inc.
NEA Valuebuilder Investor Services of Ohio, Inc.
NEA Valuebuilder Investor Services of Oklahoma, Inc.
NEA Valuebuilder Investor Services of Wyoming, Inc.
SECRETARY AND DIRECTOR
Nationwide Agency, Inc.
Nationwide HMO, Inc.
Nationwide Management Systems, Inc.
DIRECTOR
MRM Investments, Inc.
NWE, Inc.
CLERK
NEA Valuebuilder Services Insurance Agency, Inc.
Dimon R. McFerson CHAIRMAN AND CHIEF EXECUTIVE OFFICER- NATIONWIDE INSURANCE
ENTERPRISE AND DIRECTOR
Nationwide Mutual Insurance Company
Nationwide Mutual Fire Insurance Company
Nationwide General Insurance Company
Nationwide Property and Casualty Insurance Company
Nationwide Life Insurance Company
Nationwide Life and Annuity Insurance Company
Colonial Insurance Company of Wisconsin
Nationwide Communications Inc.
Farmland Mutual Insurance Company
Nationwide Agribusiness Insurance Company
National Casualty Company
C-4
<PAGE> 29
Nationwide Financial Services, Inc.
Nationwide Global Holdings, Inc.
Nationwide Indemnity Company
Nationwide Investment Services Corporation
California Cash Management Company
Nationwide Cash Management Company
Employers Insurance of Wausau A Mutual Company
Scottsdale Indemnity Company
Scottsdale Insurance Company
Scottsdale Surplus Lines Insurance Company
Wausau Service Corporation
Wausau General Insurance Company
Wausau Business Insurance Company
Wausau Underwriters Insurance Company
CHAIRMAN AND CHIEF EXECUTIVE OFFICER - NATIONWIDE INSURANCE
ENTERPRISE, PRESIDENT AND DIRECTOR
Nationwide Corporation
CHAIRMAN OF THE BOARD, CHAIRMAN AND CHIEF EXECUTIVE
OFFICER-NATIONWIDE INSURANCE ENTERPRISE AND DIRECTOR
American Marine Underwriters, Inc.
Gates, McDonald and Company
GatesMcDonald Health Plus, Inc.
Nationwide Investor Services, Inc.
Public Employees Benefit Services Corporation
Companies Agency, Inc.
Companies Agency of Alabama, Inc.
Companies Agency Insurance Services of California
Companies Agency of Idaho, Inc.
Companies Agency of Illinois, Inc.
Companies Agency of Kentucky, Inc.
Companies Agency of Massachusetts, Inc.
Companies Agency of New York, Inc.
Companies Agency of Pennsylvania, Inc.
Companies Agency of Phoenix, Inc.
Countrywide Services Corporation
Employers Life Insurance Company of Wausau
Nationwide Advisory Services, Inc.
Nationwide Financial Institution Distributors Agency, Inc.
Wausau International Underwriters
Wausau Preferred Health Insurance Company
CHAIRMAN AND DIRECTOR
NEA Valuebuilder Investor Services of Arizona, Inc.
TRUSTEE AND CHAIRMAN
Financial Horizons Investment Trust
Nationwide Investing Foundation
Nationwide Investing Foundation II
CHAIRMAN OF THE BOARD
Nationwide Insurance Golf Charities, Inc.
C-5
<PAGE> 30
CHAIRMAN OF THE BOARD AND DIRECTOR
Lone Star General Agency, Inc.
Nationwide Community Urban Redevelopment Corporation
NEA Valuebuilder Investor Services, Inc.
Colonial County Mutual Insurance Company
DIRECTOR
Gates, McDonald & Company of Nevada
Gates, McDonald & Company of New York
CHAIRMAN OF THE BOARD, CHAIRMAN AND CHIEF EXECUTIVE
OFFICER-NATIONWIDE INSURANCE ENTERPRISE AND TRUSTEE
Nationwide Insurance Enterprise Foundation
MEMBER-BOARD OF MANAGERS, CHAIRMAN OF THE BOARD,
CHAIRMAN AND CHIEF EXECUTIVE OFFICER-NATIONWIDE INSURANCE
ENTERPRISE
Nationwide Properties, Ltd.
Nationwide Realty Investors, Ltd.
Robert A. Oakley EXECUTIVE VICE PRESIDENT-CHIEF FINANCIAL OFFICER
Nationwide Mutual Insurance Company
Nationwide Mutual Fire Insurance Company
Nationwide General Insurance Company
Nationwide Property and Casualty Insurance Company
Nationwide Life Insurance Company
Nationwide Life and Annuity Insurance Company
American Marine Underwriters, Inc.
Companies Agency, Inc.
Companies Agency of Alabama, Inc.
Companies Agency of Idaho, Inc.
Companies Agency of Illinois, Inc.
Companies Agency of Kentucky, Inc.
Companies Agency of Massachusetts, Inc.
Companies Agency of New York, Inc.
Companies Agency of Pennsylvania, Inc.
Companies Agency of Phoenix, Inc.
Countrywide Services Corporation
Employers Life Insurance Company of Wausau
National Casualty Company
National Premium and Benefit Administration Company
The Beak and Wire Corporation
Employers Insurance of Wausau A Mutual Company
Farmland Mutual Insurance Company
Nationwide Financial Institution Distributors Agency, Inc.
Lone Star General Agency, Inc.
Nationwide Agribusiness Insurance Company
Nationwide Communications Inc.
Nationwide Corporation
Nationwide Financial Services, Inc.
Nationwide Investment Services Corporation
Nationwide Investor Services, Inc.
C-6
<PAGE> 31
Nationwide Insurance Enterprise Foundation
Nationwide Properties, Ltd.
Nationwide Realty Investors, Ltd.
NEA Valuebuilder Investor Services, Inc.
NEA Valuebuilder Investor Services of Arizona, Inc
Colonial County Mutual Insurance Company
Pension Associates of Wausau, Inc.
Public Employees Benefit Services Corporation
Scottsdale Indemnity Company
Scottsdale Insurance Company
Scottsdale Surplus Lines Insurance Company
Wausau Business Insurance Company
Wausau General Insurance Company
Wausau Preferred Health Insurance Company
Wausau Service Corporation
Wausau Underwriters Insurance Company
DIRECTOR, CHAIRMAN OF THE BOARD
Neckura Holding Company
Neckura Insurance Company
Neckura Life Insurance Company
EXECUTIVE VICE PRESIDENT-CHIEF FINANCIAL
OFFICER AND DIRECTOR
California Cash Management Company
Colonial Insurance Company of Wisconsin
Nationwide Cash Management Company
Nationwide Community Urban Redevelopment
Corporation
Nationwide Global Holdings, Inc.
MRM Investments, Inc.
Nationwide Advisory Services, Inc.
Nationwide Indemnity Company
EXECUTIVE VICE PRESIDENT
Companies Agency Insurance Services of
California
Wausau International Underwriters
DIRECTOR AND VICE CHAIRMAN
Leben Direkt Insurance Company
Neckura General Insurance Company
Auto Direkt Insurance Company
DIRECTOR
NWE, Inc.
Gates, McDonald & Company
GatesMcDonald Health Plus Inc.
Robert J. Woodward, Jr. EXECUTIVE VICE PRESIDENT-CHIEF INVESTMENT OFFICER
Nationwide Mutual Insurance Company
Nationwide Mutual Fire Insurance Company
Nationwide General Insurance Company
Nationwide Property and Casualty Insurance
Company
C-7
<PAGE> 32
Nationwide Life Insurance
Company Nationwide Life and
Annuity Insurance Company
Colonial County Mutual
Insurance Company Colonial
Insurance Company of
Wisconsin Employers
Insurance of Wausau A
Mutual Company Employers
Life Insurance Company of
Wausau Farmland Mutual
Insurance Company Gates,
McDonald & Company
GatesMcDonald Health Plus,
Inc. Lone Star General
Agency, Inc. National
Casualty Company Nationwide
Financial Services, Inc.
Nationwide Agribusiness
Insurance Company
Nationwide Corporation
Nationwide Insurance
Enterprise Foundation
Nationwide Investment
Services Corporation
Pension Associates of
Wausau, Inc. Public
Employees Benefit Services
Corporation Scottsdale
Indemnity Company
Scottsdale Insurance
Company Scottsdale Surplus
Lines Insurance Company
Wausau Business Insurance
Company Wausau General
Insurance Company Wausau
Preferred Health Insurance
Company Wausau Service
Corporation Wausau
Underwriters Insurance
Company
VICE CHAIRMAN AND DIRECTOR
Nationwide Communications Inc.
DIRECTOR
Nationwide Global Holdings, Inc.
MEMBER-BOARD OF MANAGERS AND VICE CHAIRMAN
Nationwide Properties, Ltd.
Nationwide Realty Investors, Ltd.
DIRECTOR AND PRESIDENT
California Cash Management Company
MRM Investments, Inc.
Nationwide Cash Management Company
Nationwide Community Urban Redevelopment
Corporation
NWE, Inc.
DIRECTOR, EXECUTIVE VICE PRESIDENT-CHIEF
INVESTMENT OFFICER
Nationwide Indemnity Company
Nationwide Advisory Services, Inc.
VICE CHAIRMAN AND DIRECTOR
Nationwide Communications Inc.
DIRECTOR
Nationwide Global Holdings, Inc.
C-8
<PAGE> 33
TRUSTEE AND VICE CHAIRMAN
Nationwide Asset Allocation Trust
Nationwide Separate Account Trust
James F. Laird, Jr. VICE PRESIDENT AND GENERAL MANAGER
AND ACTING TREASURER
Nationwide Advisory Services, Inc.
VICE PRESIDENT AND GENERAL MANAGER
AND ACTING TREASURER AND DIRECTOR
Nationwide Investors Services, Inc.
TREASURER
Nationwide Investing Foundation
Nationwide Separate Account Trust
Nationwide Investing Foundation II
Financial Horizons Investment Trust.
Nationwide Asset Allocation Trust
Christopher A. Cray TREASURER
Nationwide Advisory Services, Inc.
Nationwide Investors Services, Inc.
ASSISTANT TREASURER
Nationwide Investing Foundation
Nationwide Separate Account Trust
Nationwide Investing Foundation II
Financial Horizons Investment Trust
Nationwide Asset Allocation Trust
W. Sidney Druen SENIOR VICE PRESIDENT AND GENERAL
COUNSEL AND ASSISTANT SECRETARY
Nationwide Mutual Insurance Company
Nationwide Mutual Fire Insurance
Company
Nationwide General Insurance Company
Nationwide Property and Casualty
Insurance Company
Nationwide Life Insurance Company
Nationwide Life and Annuity Insurance
Company
Nationwide Advisory Services, Inc.
Nationwide Investors Services, Inc.
Employers Insurance of Wausau A Mutual
Company
Employers Life Insurance Company of Wausau
Wausau Business Insurance Company
Wausau General Insurance Company
Wausau Underwriters Insurance Company
Wausau Preferred Health Insurance Company
Wausau Service Corporation
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
Affiliate Agency, Inc.
Affiliate Agency of Ohio, Inc.
American Marine Underwriters, Inc.
The Beak and Wire Corporation
C-9
<PAGE> 34
California Cash Management Company
Colonial County Mutual Insurance Company
Colonial Insurance Company of California
Farmland Mutual Insurance Company
Nationwide Agribusiness Insurance Company
Nationwide Financial Services, Inc.
Nationwide Financial Institution Distributors
Agency, Inc.
Financial Horizons Distributors Agency of
Alabama, Inc.
Financial Horizons Distributors Agency of
Ohio, Inc.
Financial Horizons Distributors Agency of
Oklahoma, Inc.
Financial Horizons Securities Corporation
Gates, McDonald & Company
Gates, McDonald & Company of Nevada
Gates, McDonald & Company of New York, Inc.
GatesMcDonald Health Plus, Inc.
Landmark Financial Services of New York, Inc.
National Casualty Company
Nationwide Cash Management Company
Nationwide Communications Inc.
Nationwide Corporation
Nationwide Global Holdings, Inc.
Nationwide Investment Services Corporation
Companies Agency, Inc.
Companies Agency Insurance Services of California
Companies Agency of Alabama, Inc.
Companies Agency of Idaho, Inc.
Companies Agency of Illinois, Inc.
Companies Agency of Kentucky, Inc.
Companies Agency of Massachusetts, Inc.
Companies Agency of New York, Inc.
Companies Agency of Pennsylvania, Inc.
Companies Agency of Phoenix, Inc.
Countrywide Services Corporation
Lone Star General Agency Inc.
Nationwide Insurance Enterprise Foundation
Nationwide Indemnity Company
Nationwide Properties, Ltd.
Nationwide Realty Investors, Ltd.
NEA Valuebuilder Investor Services, Inc.
NEA Valuebuilder Investor Services of Alabama, Inc.
NEA Valuebuilder Investor Services of Arizona, Inc.
NEA Valuebuilder Investor Services of Montana, Inc.
NEA Valuebuilder Investor Services of Nevada, Inc.
NEA Valuebuilder Investor Services of Ohio, Inc.
NEA Valuebuilder Investor Services of Oklahoma, Inc.
NEA Valuebuilder Investor Services of Wyoming, Inc.
NEA Valuebuilder Services Insurance Agency, Inc.
MRM Investments, Inc.
NWE, Inc.
PEBSCO of Massachusetts Insurance Agency, Inc.
Pension Associates of Wausau, Inc.
Public Employees Benefit Services Corporation
Public Employees Benefit Services Corporation of
Alabama
Public Employees Benefit Services Corporation of
Arkansas
C-10
<PAGE> 35
Public Employees Benefit Services Corporation of
Montana
Public Employees Benefit Services Corporation of
New Mexico Scottsdale Indemnity
Company Scottsdale
Insurance Company
Scottsdale Surplus Lines
insurance Company Wausau
International Underwriters
SENIOR VICE PRESIDENT AND GENERAL COUNSEL AND DIRECTOR
Nationwide Community Urban Redevelopment Corporation
GENERAL COUNSEL
Nationwide Insurance Golf Charities, Inc.
Peter J. Neckermann VICE PRESIDENT - ECONOMIC AND INVESTMENT SERVICES
Nationwide Mutual Insurance Company
Nationwide Mutual Fire Insurance Company
Nationwide General Insurance Company
Nationwide Property and Casualty Insurance Company
Nationwide Life Insurance Company
Nationwide Life and Annuity Insurance Company
Nationwide Indemnity Company
VICE PRESIDENT
Nationwide Advisory Services, Inc.
DIRECTOR
Leben Direkt Insurance Company
Nationwide Investors Services, Inc.
Neckura Holding Company
ASSISTANT TREASURER
Financial Horizons Investment Trust
National Casualty Company
National Premium and Benefit Administration Company
Nationwide Investing Foundation
Nationwide Investing Foundation II
Nationwide Separate Account Trust
Nationwide Asset Allocation Trust
Edwin P. McCausland, Jr. VICE PRESIDENT-FIXED INCOME SECURITIES
Nationwide Mutual Insurance Company
Nationwide Mutual Fire Insurance Company
Nationwide General Insurance Company
C-11
<PAGE> 36
Nationwide Property and Casualty Insurance
Company
Nationwide Life Insurance
Company Nationwide Life and
Annuity Insurance Company
California Cash Management
Company Colonial Insurance
Company of Wisconsin
Employers Insurance of
Wausau A Mutual Company
Employers Life Insurance
Company of Wausau Farmland
Mutual Insurance Company
Financial Horizons
Investment Trust Gates,
McDonald & Company
GatesMcDonald Health Plus,
Inc. National Casualty
Company Nationwide
Agribusiness Insurance
Company Nationwide Cash
Management Company
Nationwide Indemnity
Company Nationwide
Insurance Enterprise
Foundation Scottsdale
Indemnity Company
Scottsdale Insurance
Company Scottsdale Surplus
Lines Insurance Company
Wausau Business Insurance
Company Wausau General
Insurance Company Wausau
Preferred Health Insurance
Company Wausau Service
Corporation Wausau
Underwriters Insurance
Company
VICE PRESIDENT-FIXED INCOME
Nationwide Advisory
Services, Inc.
ASSISTANT TREASURER
Nationwide Asset Allocation Trust
Nationwide Investing Foundation
Nationwide Investing Foundation II
Nationwide Separate Account Trust
Joseph P. Rath VICE PRESIDENT-PRODUCT AND MARKET COMPLIANCE
Nationwide Mutual Insurance Company
Nationwide Mutual Fire Insurance Company
Nationwide Property and Casualty Insurance Company
Nationwide Life Insurance Company
Nationwide Life and Annuity Insurance Company
VICE PRESIDENT-COMPLIANCE
Nationwide Advisory Services, Inc.
Nationwide Investment Services Corporation
VICE PRESIDENT-CHIEF COMPLIANCE OFFICER
Nationwide Financial Services, Inc.
William G. Goslee VICE PRESIDENT
Nationwide Advisory Services, Inc.
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ASSISTANT TREASURER
Nationwide Asset Allocation Trust
Except as otherwise noted, the principal business address of any company with
which any person specified above is connected in the capacity of director,
officer, employee, partner or trustee is One Nationwide Plaza, Columbus, Ohio
43215, except for the following companies:
Farmland Mutual Insurance Company
Nationwide Agribusiness Insurance Company
1963 Bell Avenue
Des Moines, Iowa 50315-1000
Colonial Insurance Company of Wisconsin
3455 Mill Run Drive, 5th Floor
Hilliard, Ohio 43026
Employers Insurance of Wausau A Mutual Company
2000 Westwood Drive
Wausau, Wisconsin 54401-7881
Scottsdale Insurance Company
8877 North Gainey Center Drive
P.O. Box 4110
Scottsdale, Arizona 85261-4110
National Casualty Company
8877 North Gainey Center Drive
P.O. Box 4110
Scottsdale, Arizona 85261-4110
Lone Star General Agency, Inc.
P.O. Box 14700
Austin, Texas 78761
Auto Direkt Insurance Company
Columbus Insurance Brokerage and Service, GMBH
Leben Direkt Insurance Company
Neckura General Insurance Company
Neckura Holding Company
Neckura Insurance Company
Neckura Life Insurance Company
John E. Fisher Str. 1
61440 Oberursel/Ts.
Germany
Public Employees Benefit Services Corporation
Two Nationwide Plaza
Columbus, Ohio 43215
Nationwide Advisory Services, Inc.
Nationwide Investors Services, Inc.
Three Nationwide Plaza, Columbus, Ohio 43215
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ITEM 29. PRINCIPAL UNDERWRITERS
(a) See Item 28 above.
(b) Nationwide Advisory Services, Inc.
<TABLE>
<CAPTION>
Position with Position
Name Business Address Underwriter With Registrant
---- ---------------- ----------- ---------------
<S> <C> <C> <C>
Dimon R. McFerson One Nationwide Plaza Chairman and CEO Chairman of Board of
Columbus OH 43215 Trustees
Joseph J. Gasper One Nationwide Plaza President and Director Vice Chairman of Board
Columbus OH 43215 of Trustees
Gordon E. McCuthan One Nationwide Plaza Exec. VP - Law and N/A
Columbus OH 43215 Corporate Services and
Director
Robert A. Oakley One Nationwide Plaza Exec. VP - Chief Financial N/A
Columbus OH 43215 Officer and Director
Robert J. Woodward, Jr. One Nationwide Plaza Exec. VP - Chief Investment Trustee
Columbus OH 43215 Officer and Director
William S. Druen One Nationwide Plaza Sr. VP - General Counsel N/A
Columbus OH 43215 and Assistant Secretary
James F. Laird, Jr. Three Nationwide Plaza VP - General Manager Treasurer
Columbus OH 43215
Edwin P. McCausland One Nationwide Plaza VP - Fix Income Securities Assistant Treasurer
Columbus OH 43215
Joseph P. Rath One Nationwide Plaza VP - Compliance N/A
Columbus OH 43215
Peter J. Neckermann One Nationwide Plaza Vice President Assistant Treasurer
Columbus OH 43215
William G. Goslee One Nationwide Plaza Vice President N/A
Columbus OH 43215
Christopher A. Cray Three Nationwide Plaza Treasurer Assistant Treasurer
Columbus OH 43215
</TABLE>
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<PAGE> 39
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
Christopher A. Cray
Nationwide Advisory Services, Inc.
Three Nationwide Plaza
Columbus, OH 43215
ITEM 31. MANAGEMENT SERVICES
Not applicable.
ITEM 32. UNDERTAKINGS
(1) The Trust undertakes to furnish to each person to whom a prospectus
is delivered, a copy of the Trust's Annual Report, upon request
and without charge.
(2) The Trust undertakes to hold a shareholder meeting, if requested
to do so by the holders of at least 10% of the Trust's outstanding
shares, to call a meeting of shareholders for the purpose of
voting upon the removal of a trustee or trustees and to assist
shareholders in communications with other shareholders as required
by Section 16(c) of the Investment Company Act of 1940.
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<PAGE> 40
SIGNATURES
Pursuant to the requirements of the Securities Act 1933 and the Investment
Company Act of 1940, the Registrant certifies that they meet all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Columbus, and State of Ohio, on this 27th day of
February 1998.
NATIONWIDE INVESTING FOUNDATION II
By: JAMES F. LAIRD, JR.
------------------------------
James F. Laird, Jr., Treasurer
PURSUANT TO THE REQUIREMENT OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE CAPACITIES
INDICATED ON THE 27TH DAY OF FEBRUARY 1998.
<TABLE>
<S> <C>
Signature & Title
- ------------------
Principal Executive Officer
DIMON R. McFERSON*
- -------------------
Dimon R. McFerson, Trustee and Chairman
Principal Accounting and Financial Officer
JAMES F. LAIRD, JR. DAVID C. WETMORE*
- ------------------ --------------------------
James F. Laird, Jr., Treasurer David C. Wetmore, Trustee
JOHN C. BRYANT* *By: JAMES F. LAIRD, JR.
- --------------- -----------------------
John C. Bryant, Trustee James F. Laird, Jr., Attorney-In-Fact
C. BRENT DEVORE
- ---------------
C. Brent Devore, Trustee
SUE A. DOODY*
- -------------
Sue A. Doody, Trustee
ROBERT M. DUNCAN*
- -----------------
Robert M. Duncan, Trustee
CHARLES L. FUELLGRAF, JR.*
- ------------------------
Charles L. Fuellgraf, Jr., Trustee
THOMAS J. KERR, IV*
- --------------------
Thomas J. Kerr, IV, Trustee
DOUGLAS F. KRIDLER*
- --------------------
Douglas F. Kridler, Trustee
NANCY C. THOMAS*
- ----------------
Nancy C. Thomas, Trustee
HAROLD W. WEIHL*
- ----------------
Harold W. Weihl, Trustee
</TABLE>
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Exhibit 11
INDEPENDENT AUDITORS' CONSENT
The Board of Trustees of
Nationwide Investing Foundation II:
We consent to the use of our report dated December 5, 1997 for the Nationwide
Investing Foundation II incorporated by reference herein and to the references
to our firm under the headings "Financial Highlights" in the Prospectus and
"Other Services For All The Funds" in the Statement of Additional Information.
KPMG Peat Marwick LLP
Columbus, Ohio
February 27, 1998
