[Federal Register Volume 66, Number 240 (Thursday, December 13, 2001)]
[Notices]
[Pages 64481-64485]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-30808]


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SECURITIES AND EXCHANGE COMMISSION

[Rel. No. IC-25312; File No. 812-12280]


Nationwide Life Insurance Company, et al.; Notice

December 7, 2001.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of application for an order pursuant to section 26(c) of 
the Investment Company Act of 1940 (``1940 Act'').

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

    Applicants: Nationwide Life Insurance Company (``Nationwide''); 
Nationwide Variable Account-4 (the ``Separate Account''); and Salomon 
Smith Barney (``SSB'') (all collectively, the ``Applicants'').
    Summary of the Application: Applicants seek an order pursuant to 
section 26(c) of the 1940 Act to permit the substitution of shares of 
the Smith Barney Variable Account Funds--Income and Growth Portfolio 
and the Smith Barney Variable Account Funds--Reserve Account Portfolio 
(collectively, the ``Existing Funds''), with shares of the Travelers 
Series Fund, Inc.--Smith Barney Large Cap Value Portfolio and the 
Travelers Series Fund, Inc.--Smith Barney Money Market Portfolio, 
respectively, (collectively, the ``Replacement Funds'').
    Filing Date: The Application was filed on September 28, 2000, and 
amended on December 5, 2001.
    Hearing or Notification of Hearing: An Order granting the 
Application will be issued unless the Commission orders a hearing. 
Interested persons may request a hearing by writing to the Secretary of 
the Commission and serving Applicants with a copy of the request, 
personally or by mail. Hearing requests should be received by the 
Commission by 5:30 p.m. on December 28, 2001, and should be accompanied 
by proof of service on Applicants in the form of an affidavit, or, for 
lawyers, a certificate of service. Hearing requests should state the 
nature of the requester's interest, the reason for the request, and the 
issues contested. Persons may request notification of a hearing by 
writing to the Secretary of the Commission.

Addresses: Secretary, Securities and Exchange Commission, 450 Fifth 
Street NW., Washington, DC 20549-0609. Applicants, Jamie Casto, 
Nationwide Life Insurance Company, One Nationwide Plaza 1-09-V3, 
Columbus, Ohio 43215.

For Further Information Contact: Martha Atkins, Attorney, at (202) 942-
0668, or Keith Carpenter, Branch Chief, at (202) 942-0679, Office of 
Insurance Products, Division of Investment Management.

Supplementary Information: The following is a summary of the 
Application. The complete Application is available for a fee from the 
Public Reference Branch of the Commission, 450 Fifth Street, NW., 
Washington, DC 20549-0102 (tel. (202) 942-8090).

Applicants' Representations

    1. Nationwide is a stock life insurance company organized under the 
laws of the State of Ohio. Nationwide is wholly owned by Nationwide 
Financial Services, Inc. (``NFS''). NFS, a Delaware corporation, is a 
publicly traded holding company with two classes of common stock 
outstanding, each with different voting rights. This enables Nationwide 
Corporation (the holder of all the outstanding Class B Common Stock) to 
control NFS. Nationwide Corporation stock is held by Nationwide Mutual 
Insurance Company (95.24%) and Nationwide Mutual Fire Insurance Company 
(4.76%), the ultimate controllers of Nationwide.
    2. The Separate Account was established on October 7, 1987 by 
Nationwide for the purpose of funding variable annuity contracts. The 
Separate Account is registered under the 1940 Act as a unit investment 
trust (File No. 811-5701). The Separate Account supports two deferred 
variable annuity contracts (collectively, the ``contracts'') that are 
registered under the Securities Act of 1933 (``1933 Act'') (File Nos. 
33-25734 and 33-26454).
    3. The Separate Account maintains separate sub-accounts for each 
underlying mutual fund available under the contracts. Contract owners 
may currently choose to have purchase payments allocated to one or more 
sub-accounts which invest in the following underlying mutual funds:

Federated Insurance Series, Federated Quality Bond Fund II
Greenwich Street Series Fund, Intermediate High Grade Portfolio, Total 
Return Portfolio
Smith Barney Variable Account Funds, Income and Growth Portfolio, 
Reserve Account Portfolio, U.S. Government/High Quality Securities 
Portfolio
Travelers Series Fund, Inc., Smith Barney Large Cap Value Portfolio, 
Smith Barney International Equity Portfolio, Smith Barney Money Market 
Portfolio

    4. The prospectus portion of the registration statements for the 
contracts contain provisions stipulating Nationwide's right to 
substitute shares of one underlying mutual fund for shares of another 
underlying mutual fund already purchased or to be purchased in the 
future with purchase payments or premiums made under the contracts in 
the event that: (i) The underlying mutual fund options currently 
available under the contracts are no longer available for investment by 
the Separate Account; or (ii) in the judgment of Nationwide's 
management, further investment in such underlying mutual fund shares is 
inappropriate in view of the purposes of the contracts.
    5. Applicants seek an Order pursuant to section 26(c) of the 1940 
Act to permit the substitution of shares of the Replacement Funds in 
Column B for shares of the Existing Funds in Column A in the following 
table.

------------------------------------------------------------------------
      Column A, existing funds           Column B, replacement funds
------------------------------------------------------------------------
Smith Barney Variable Account        Travelers Series Fund, Inc.--Smith
 Funds--Income and Growth Portfolio.  Barney Large Cap Value Variable
                                      Portfolio.
Smith Barney Variable Account        Travelers Series Fund, Inc.--Smith
 Funds--Reserve Account Portfolio.    Barney Money Market Portfolio.
------------------------------------------------------------------------


[[Page 64482]]

    6. Each of the Existing Funds and Replacement Funds is part of an 
open-end, diversified management investment company established to fund 
benefits under variable life insurance policies and variable annuity 
contracts.
    7. Nationwide is not affiliated with any of the Replacement Funds, 
nor is Nationwide affiliated with the adviser to the Replacement Funds 
(SSB Citi Fund Management LLC).
    8. Salomon Smith Barney Inc. (``SSB''), which serves as general 
distributor-principal underwriter of the contracts issued by the 
Separate Account, is affiliated with the adviser to the Existing Funds 
and the Replacement Funds (SSB Citi Fund Management LLC).
    9. Information about the Existing Funds and Replacement Funds, in 
addition to the rationale for each replacement proposed is provided 
below.
    10. Smith Barney Variable Account Funds--Income and Growth 
Portfolio to be replaced with Travelers Series Fund, Inc.--Smith Barney 
Large Cap Value Portfolio.

------------------------------------------------------------------------
           Existing fund                       Replacement fund
------------------------------------------------------------------------
Smith Barney Variable Account        Travelers Series Fund Inc.,
 Funds, Smith Barney Variable         Travelers Series Fund Inc. was
 Account Funds was organized as a     incorporated in Maryland on
 Massachusetts business trust on      February 22, 1994, and is an open-
 December 18, 1986, is an open-end,   end, diversified, management
 diversified, management investment   investment company. Travelers
 company. Smith Barney Variable       Series Fund, Inc. is managed by
 Account Funds is managed by SSB      SSB Citi Fund Management LLC, a
 Citi Fund Management LLC, a          subsidiary of Citigroup Inc.
 subsidiary of Citigroup.
The Income and Growth Portfolio,     Smith Barney Large Cap Value
 Investment Objective: To seek        Portfolio, Investment Objective:
 current income and long-term         To seek current income and long-
 growth of income and capital by      term growth of income and capital
 investing primarily in common        by investing primarily in common
 stocks. Specifically, the            stocks. Specifically, the
 Portfolio invests primarily in       Portfolio invests primarily in
 common stocks of U.S. companies      common stocks of U.S. companies
 having market capitalizations of     having market capitalizations of
 at least $5 billion at the time of   at least $5 billion at the time of
 investment.                          investment.
------------------------------------------------------------------------


 
                                                       Replacement fund--
                                     Existing fund--        Travelers
                                       Smith Barney       Series Fund,
                                     variable account     Inc.,--Smith
                                    funds--income and   Barney large cap
                                     growth portfolio   value portfolio
                                        (percent)          (percent)
------------------------------------------------------------------------
Adviser...........................    SSB Citi Fund      SSB Citi Fund
                                      Management LLC     Management LLC
Subadviser........................                N/A                N/A
With reimbursements/waivers (as of
 07/01/01):
    Management fees...............               0.59               0.65
    Other expenses................               0.41               0.02
    12b-1 fees....................               0.00               0.00
------------------------------------------------------------------------
        Total expenses............               1.00               0.67
                                   =====================================
Without reimbursements/waivers (as
 of 07/01/01):
    Management fees...............               0.60               0.65
    Other Expenses................               0.41               0.02
    12b-1 fees....................               0.00               0.00
                                   -------------------------------------
        Total expenses............               1.01               0.67
------------------------------------------------------------------------

    Specific asset and performance information as of 07/01/01 is as 
follows (performance represents average annual total returns):

------------------------------------------------------------------------
                                                       Replacement fund--
                                     Existing fund--        Travelers
                                       Smith Barney       Series Fund,
                                     variable account     Inc.--Smith
                                    funds--income and   Barney large cap
                                     growth portfolio   value portfolio
------------------------------------------------------------------------
Inception Date....................          July 1989          June 1994
Fund Assets.......................         $7,654,000       $573,337,000
1 Year............................              9.43%             11.15%
3 Year............................              2.33%              2.86%
5 Year............................             11.27%             10.89%
Inception to 07/01/01.............             11.64%             13.21%
------------------------------------------------------------------------

    11. Smith Barney Variable Account Funds and Travelers Series Fund 
Inc., are affiliates, each supporting different distribution channels. 
Accordingly, both trusts use the same investment adviser, SSB Citi Fund 
Management LLC (``SSB Citi Fund''). Nationwide is the primary 
shareholder (approximately 95%) in the Smith Barney Variable Account 
Funds--Income and Growth Portfolio. SSB Citi Fund has informed 
Nationwide that it wishes to terminate operation of the Smith Barney 
Variable Account Funds, including the Income and Growth Portfolio, and 
that upon moving all assets out of the Smith Barney Variable Account 
Funds, it will file a form N-8F, Application for Deregistration of 
Certain Registered Investment Companies.

[[Page 64483]]

    12. Applicants propose to move the assets currently located in the 
Smith Barney Variable Account Funds--Income and Growth Portfolio into 
the Travelers Series Fund, Inc.--Smith Barney Large Cap Value 
Portfolio. The proposed substitution will enable SSB Citi Fund to 
liquidate the Smith Barney Variable Account Funds by moving the assets 
located in the Income and Growth Portfolio to a comparable fund of an 
affiliate, Travelers Series Fund Inc. Both funds have the same 
investment manager (SSB Citi Fund), the same investment objective 
(current income and long-term growth of income and capital), and 
comparable short- and long-term performance. Additionally, the expenses 
associated with the replacement fund are 33 basis points lower than the 
expenses of the existing fund.
    13. Assets in the Travelers Series Fund, Inc.--Smith Barney Large 
Cap Value Portfolio are substantially larger and more actively managed, 
making it more likely that it will meet its stated investment 
objectives while maintaining lower expenses to the contract owners as 
compared to the Smith Barney Variable Account Funds--Income and Growth 
Portfolio.
    14. Neither Nationwide nor any of its affiliates currently 
receives, and will not receive for a period of three years from the 
date of the Order requested herein, any direct or indirect benefit from 
the Travelers Series Fund, Inc.--Smith Barney Large Cap Value 
Portfolio, its adviser, and/or the adviser's affiliates, including, 
without limitation, 12b-1, shareholder service, administrative or other 
service fees, revenue sharing or other arrangement, either with 
specific reference to the Travelers Series Fund, Inc.--Smith Barney 
Large Cap Value Portfolio or as part of an overall business 
arrangement.
    15. The proposed substitution would enable investors to enjoy the 
economies of scale associated with a larger fund, without changing the 
investment objective or fund manager originally contemplated when 
allocations were originally made to the Smith Barney Variable Account 
Funds--Income and Growth Portfolio. Furthermore, the underlying mutual 
fund expenses would decrease. Consequently, it is believed that by 
substituting assets out of the Smith Barney Variable Account Funds--
Income and Growth Portfolio and into the Travelers Series Fund, Inc.--
Smith Barney Large Cap Value Portfolio, contract owners will be better 
served.
    16. Smith Barney Variable Account Funds--Reserve Account Portfolio 
to be replaced with Travelers Series Fund, Inc.--Smith Barney Money 
Market Portfolio.

------------------------------------------------------------------------
           Existing fund                       Replacement fund
------------------------------------------------------------------------
Smith Barney Variable Account Funds  Travelers Series Fund Inc.
 Smith Barney Variable Account        Travelers Series Fund Inc. was
 Funds was organized as a             incorporated in Maryland on
 Massachusetts business trust on      February 22, 1994, and is an open-
 December 18, 1986, and is an open-   end, diversified, management
 end, diversified, management         investment company. Travelers
 investment company. Smith Barney     Series Fund, Inc. is managed by
 Variable Account Funds is managed    SSB Citi Fund Management LLC, a
 by SSB Citi Fund Management LLC, a   subsidiary of Citigroup Inc.
 subsidiary of Citigroup.
The Reserve Account Portfolio        Smith Barney Money Market Portfolio
 Investment Objective: To seek        Investment Objective: To seek
 current income by investing          maximum current income consistent
 exclusively in money market          with preservation of capital. The
 instruments and other high quality   Portfolio seeks to maintain a
 fixed income obligations with        stable $1 share price. The
 limited maturities. Currently, the   Portfolio invests in high quality
 Portfolio has insufficient assets    U.S. dollar denominated short term
 to invest in accordance with the     debt securities, including
 above stated investment objective.   commercial paper, corporate and
 Consequently, assets in the          municipal obligations, obligations
 Portfolio are actually being         of U.S. and foreign banks,
 invested in repurchase agreements    securities of the U.S. government,
 and U.S. treasury bills.             its agencies or instrumentalities
                                      and related repurchase agreements.
------------------------------------------------------------------------


 
                                                       Replacement fund--
                                     Existing fund--        Travelers
                                       Smith Barney       Series Fund,
                                     variable account     Inc.--Smith
                                      funds--reserve      Barney money
                                    account portfolio   market portfolio
                                        (percent)          (percent)
------------------------------------------------------------------------
Adviser...........................      SSB Citi Fund      SSB Citi Fund
                                       Management LLC     Management LLC
Subadviser........................                N/A                N/A
With reimbursements/waivers (as of
 07/01/01):
    Management Fees...............               0.00               0.50
    Other Expenses................               1.00               0.03
    12b-1 Fees....................               0.00               0.00
                                   -------------------------------------
        Total Expenses............               1.00               0.53
                                   =====================================
Without reimbursements/waivers (as
 of 07/01/01):
    Management Fees...............               0.45               0.50
    Other Expenses................              86.14               0.03
    12b-1 Fees....................               0.00               0.00
                                   -------------------------------------
        Total Expenses............              86.59               0.53
------------------------------------------------------------------------

    Specific asset and performance information as of 07/01/01 is as 
follows (performance represents average annual total returns):

[[Page 64484]]



------------------------------------------------------------------------
                                                       Replacement fund--
                                     Existing fund--        Travelers
                                       Smith Barney       Series Fund,
                                     variable account     Inc.--Smith
                                      funds--reserve      Barney money
                                    account portfolio   market portfolio
------------------------------------------------------------------------
Inception Date....................        August 1989          June 1994
Fund Assets.......................            $26,915       $471,084,000
1 Year............................              4.49%              5.59%
3 Year............................              3.30%              5.24%
5 Year............................              2.13%              5.16%
Inception to 07/01/01.............              4.54%              5.14%
------------------------------------------------------------------------

    17. Smith Barney Variable Account Funds and Travelers Series Fund 
Inc. are affiliates, each supporting different distribution channels. 
Accordingly, both trusts use the same investment adviser, SSB Citi Fund 
Management LLC (``SSB Citi Fund''). Nationwide is the primary 
shareholder (approximately 85%) in the Smith Barney Variable Account 
Funds--Reserve Account Portfolio. SSB Citi Fund has informed Nationwide 
that it wishes to terminate operation of the Smith Barney Variable 
Account Funds, including the Reserve Account Portfolio, and that upon 
moving all assets out of the Smith Barney Variable Account Funds, it 
will file a form N-8F, Application for Deregistration of Certain 
Registered Investment Companies.
    18. Applicants propose to move the assets currently located in the 
Smith Barney Variable Account Funds--Reserve Account Portfolio into the 
Travelers Series Fund, Inc.--Smith Barney Money Market Portfolio. The 
proposed substitution will enable SSB Citi Fund to liquidate the Smith 
Barney Variable Account Funds by moving the assets located in the 
Reserve Account Portfolio to a comparable fund of an affiliate, 
Travelers Series Fund Inc. Both funds have the same investment manager 
(SSB Citi Fund) and similar investment objectives (current income). 
Furthermore, the replacement fund has slightly better performance, both 
in the short and long term.
    19. As reflected in the Reserve Account Portfolio's prospectus, 
this fund currently has insufficient assets to invest in accordance 
with the stated fund objective. Furthermore, the total expenses 
associated with this fund, prior to reimbursements and waivers, is 
86.59%. Taking into account the reimbursements and waivers, total 
expenses are 1.00%, still 47 basis points higher than the replacement 
fund. Although performance of the Smith Barney Variable Account Funds--
Reserve Account Portfolio is comparable to, although slightly lower 
than, the replacement fund, it is unlikely that such performance would 
have been sustained had the existing fund not waived such a large 
portion of their actual expenses. Furthermore, the fact that such a 
large portion of the existing fund's expenses are not being recouped 
further jeopardizes the existing fund's ability to maintain assets. 
This depletion of assets only further undermines the fund's ability to 
invest according to the stated fund objectives.
    20. Assets in the Travelers Series Fund, Inc.--Smith Barney Money 
Market Portfolio are substantially larger and more actively managed, 
making it more likely that it will meet its stated investment 
objectives while maintaining lower expenses as compared to the Reserve 
Account Portfolio. Furthermore, as stated previously, SSB Citi Fund has 
indicated that the assets in the Smith Barney Variable Account Funds--
Reserve Account Portfolio are insufficient to invest according to the 
stated investment objective.
    21. Neither Nationwide nor any of its affiliates currently 
receives, and will not receive for a period of three years from the 
date of the Order requested herein, any direct or indirect benefit from 
the Travelers Series Fund, Inc.--Smith Barney Money Market Portfolio, 
its adviser, and/or the adviser's affiliates, including, without 
limitation, 12b-1, shareholder service, administrative or other service 
fees, revenue sharing or other arrangement, either with specific 
reference to the Travelers Series Fund, Inc.--Smith Barney Money Market 
Portfolio or as part of an overall business arrangement.
    22. The proposed substitution would enable investors to have their 
allocations invested as originally intended, without changing the fund 
manager or incurring increased expenses. Therefore, by substituting 
assets out of the Smith Barney Variable Account Funds--Reserve Account 
Portfolio and into the Travelers Series Fund, Inc.--Smith Barney Money 
Market Portfolio, it is believed that contract owners will be more 
likely to achieve their original investment objective while being 
better served.
    23. Applicants represent that the investment objectives of the 
Existing Funds and corresponding Replacement Funds are closely 
comparable. When viewed in the context of the wide spectrum (most 
conservative to most aggressive) of investment objectives reflected in 
contemporary mutual fund offerings, the Existing Funds and 
corresponding Replacement Funds are closely comparable.
    24. For these reasons, Applicants assert that the substitution of 
the Replacement Funds for the Existing Funds will not create 
circumstances in which contract owners will be forced to surrender 
their contracts and purchase alternative investments (incurring 
deferred sales charges on the contracts or new sales charges on new 
investments) in order to maintain an investment strategy contemplated 
when making their original purchase.
    25. Applicants state that the proposed substitution will take place 
on a date designated by Nationwide (the ``Exchange Date''). In 
addition, the Applicants state that the proposed substitution will 
occur at the relative net asset values of the Replacement Funds and the 
Existing Funds on the Exchange Date and that no charges will be 
assessed in connection with the substitution transaction. Nationwide 
will bear all of the costs (including legal, accounting, brokerage, and 
other expenses) associated with the substitution. Accordingly, contract 
owners' contract values will not be affected in any way by the 
substitution. The proposed substitution will not impose any tax 
liability on contract owners and will not cause the fees and charges 
currently being paid by existing contract owners to be greater after 
the proposed substitution than before the proposed substitution. 
Applicants also represent that the proposed substitution will not be 
treated as a transfer for the purposes of transfer limitations. 
Nationwide has informed contract owners that it will not exercise any 
rights it may have under the contracts to impose restrictions on 
transfers or eliminate the transfer privilege under the contracts from 
the date contract owners are informed of the Exchange

[[Page 64485]]

Date until at least thirty (30) days following the substitution.
    26. Existing and prospective contract owners have been provided 
with current prospectuses for the Replacement Funds.
    27. Contract owners will be notified of the impending Exchange 
Date. Contract owners with interests remaining in the Existing Funds 
will be advised that the Existing Funds will be replaced with the 
Replacement Funds on the Exchange Date. Contract owners will be given 
notice prior to the substitutions and will have thirty (30) days after 
the Exchange Date to reallocate unit values among other sub-accounts 
without imposition of any transfer charge or limitation, or the 
transfer counting against any limit on the number of transfers each 
year. All necessary forms and other information necessary for contract 
owners to effectuate exchanges among investment options will continue 
to be provided.
    28. On the Exchange Date, all shares held by the Separate Account 
in the Existing Funds will be redeemed in cash, resulting in a complete 
liquidation of the sub-accounts. Contemporaneously with this 
redemption, cash proceeds received from the Existing Funds will be used 
to purchase shares in the corresponding Replacement Funds. All shares 
will be purchased and redeemed at prices based on the current net asset 
value per share next computed after receipt of the redemption request 
and in a manner consistent with Rule 22c-1 under the 1940 Act.
    29. Nationwide asserts that it is likely that unit values (which 
include both accumulation unit values and annuity unit values) of the 
Existing Funds and the Replacement Funds will be different on the 
Exchange Date. In order to keep each contract owner's contract value 
the same after the Exchange Date as immediately prior to the Exchange 
Date, the number of units held by beneficial shareholders in the 
Existing Funds are likely to be different than the number of units held 
by beneficial shareholders in the corresponding Replacement Funds when 
the exchange takes place.
    30. Within five (5) days of the Exchange Date, all contract owners 
affected by the transaction will receive a written confirmation of the 
transaction in accordance with Rule 10b-10 under the Securities 
Exchange Act of 1934. The confirmation will state that contract owners 
may transfer all cash value under an annuity contract in the affected 
sub-accounts to any other available sub-accounts. The notice will also 
reiterate that Nationwide will not exercise any right reserved by it 
under the contracts to impose any restrictions or fees on transfers 
until at least thirty (30) days after the Exchange Date.

Applicants' Legal Analysis

    1. Section 26(c) of the 1940 Act requires the depositor or trustee 
of a registered unit investment trust holding the securities of a 
single issuer to obtain Commission approval before substituting 
securities held by the trust. The section further provides that the 
Commission shall issue an order approving such substitution if the 
evidence establishes that the substitution is consistent with the 
protection of investors and the purposes fairly intended by the policy 
and provisions of the 1940 Act.
    2. Applicants represent that the proposed substitution, in 
accordance with the standards set forth under section 26(c) of the 1940 
Act, is in the best interest of contract owners. With respect to 
management and fund objectives, the Replacement Funds, as has been 
demonstrated, are closely comparable to the corresponding Existing 
Fund. Accordingly, the proposed substitution should not create 
incentives for contract owners to surrender contracts and seek out 
other investment opportunities (incurring additional sales charges) in 
order to maintain a desired investment strategy. On the contrary, the 
close comparability of the funds proposed as a substitute for the 
Existing Funds ensures that investment strategies currently employed by 
contract owners may be maintained after the substitution.
    3. Each of the Replacement Funds currently has greater assets than 
the Existing Fund being substituted into it. This will create the 
opportunity for better performance between the Existing Funds and 
Replacement Funds, which have similar management and investment 
objectives. The benefits of economies of scale will be passed to 
contract owners.
    4. The Applicants maintain that the substitutions will not result 
in the type of costly forced redemption that section 26(c) was intended 
to guard against and, for the following reasons, are consistent with 
the protection of investors and the purposes fairly intended by the 
1940 Act:
    a. Each Replacement Fund has investment objectives that are similar 
to those of the corresponding Existing Fund, and permits contract 
owners continuity of their investment objectives and expectations;
    b. The costs of the substitutions, including any brokerage costs, 
will be borne by Nationwide and will not be borne by contract owners 
and no charges will be assessed to effect the substitutions.
    c. The substitutions will be effected at the net asset value of the 
respective sub-accounts of the Existing Funds and Replacements Funds in 
conformity with section 22(c) of the 1940 Act and Rule 22c-1 
thereunder, without the imposition of any transfer or similar charge by 
Applicants, and with no change in the amount of any contract owner's 
contract value or in the dollar value of his or her investment in such 
contract.
    d. The substitutions will not cause the fees and charges under the 
contracts currently being paid by contract owners to be greater after 
the substitutions than before the substitutions.
    e. The contract owners will be given notice prior to the 
substitutions and will have an opportunity to reallocate unit values 
among other sub-accounts without imposition of any transfer charge or 
limitation, or the transfer counting against any limit on the number of 
transfers each year, for thirty (30) days after the Exchange Date.
    f. Within five (5) days after the substitutions, Nationwide will 
send to the affected contract owners written confirmation that the 
substitutions have occurred.
    g. The substitutions will in no way alter the insurance benefits to 
contract owners or the contractual obligations of Nationwide.
    h. The substitutions will have no adverse tax consequences to 
contract owners and will in no way alter the tax benefits to contract 
owners.
    5. Applicants assert, for the reasons stated above, that the 
proposed substitution is consistent with the protection of investors 
and the purposes fairly intended by the policy and provisions of the 
1940 Act and the requested Order approving the substitution should be 
granted.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-30808 Filed 12-12-01; 8:45 am]
BILLING CODE 8010-01-P