[Federal Register Volume 65, Number 110 (Wednesday, June 7, 2000)]
[Notices]
[Pages 36178-36180]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-14247]


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SECURITIES AND EXCHANGE COMMISSION

[Rel. No. IC-24485; File 812-11666]


Nationwide Life Insurance Company, et al.

May 31, 2000.
AGENCY: The Securities and Exchange Commission (the ``Commission'').

ACTION: Notice of Application for an Order of Approval pursuant to 
Section 26(b) of the Investment Company Act of 1940 (the ``1940 Act'').

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    Summary of the Applicant: Applicants seek an Order approving the 
proposed substitution of the American Century VP Balanced Portfolio 
(``VP Balanced''), a series fund of American Century Variable 
Portfolios, Inc. (``ACVP, Inc.''), for another fund of ACVP, Inc., the 
American Century VP Advantage Portfolio (``VP Advantage''), currently 
held in the separate accounts.
    Applicants: Nationwide Life Insurance Company (``NWL'') and 
Nationwide Life and Annuity Insurance Company (``NWLAIC'') 
(collectively the ``Companies''); Nationwide Multi-Flex Variable 
Account, Nationwide VA Separate Account-A, Nationwide Variable Account-
5, Nationwide VL Separate Account-A, Nationwide VLI Separate Account-3 
(collectively the ``Separate Accounts''); and Nationwide Advisory 
Services, Inc. (NAS) (all collectively the ``Applicants'').
    Filing Date: The application was filed on June 18, 1999, and was 
amended on March 30, 2000.
    Hearing or Notification of Hearing: An Order granting the 
Application will be

[[Page 36179]]

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 
June 26, 2000, 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, Elizabeth A. Davin, Nationwide Life Insurance Company, One 
Nationwide Plaza, 1-35-10, Columbus, OH 43215.

FOR FURTHER INFORMATION CONTACT: Lorna MacLeod, Senior Attorney, or 
Keith Carpenter, Branch Chief, Office of Insurance Products, Division 
of Investment Management, at (202) 942-0670.

SUPPLEMENTARY INFORMATION: 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. NWL, a stock life insurance company organized under Ohio law, is 
a wholly owned subsidiary of Nationwide Financial Services, Inc. 
(``NFS''). NFS is ultimately controlled by Nationwide Mutual Insurance 
Company (95.24%) and Nationwide Mutual Fire Insurance Company (4.76%). 
NWL is the depositor and sponsor of the Nationwide Multi-Flex Variable 
Account, Nationwide Variable Account-5 and Nationwide VLI Separate 
Account-3.
    2. NWLAIC, a stock life insurance company organized under Ohio law, 
is a wholly owned subsidiary of NWL. NWLAIC is the depositor and 
sponsor of Nationwide VA Separate Account-A and Nationwide VL Separate 
Account-A.
    3. Each of the Separate Accounts is registered under the 1940 Act 
as a unit investment trust (File Nos. 811-3338, 811-8692, 811-6140, 
811-5606 and 811-6137). Nationwide Multi-Flex Variable Account, 
Nationwide Variable Account-5 and Nationwide VA Separate Account-A 
issue flexible premium variable annuity contracts that are registered 
under the Securities Act of 1933 (the ``1933 Act'') on Form N-4 (File 
Nos. 2-75174, 33-71440 and 33-22940). Nationwide VL Separate Account-3 
and Nationwide VL Separate Account-A issue flexible premium and single 
premium variable life insurance contracts. Nationwide VL Separate 
Account-A also issues multiple payment variable life insurance 
contracts. The contracts issued by both separate accounts are 
registered under the 1933 Act on Form S-6 (File Nos. 33-44296, 33-
44790, 33-44300, 33-44792 and 33-35775).
    4. Each Separate Account maintains multiple sub-accounts each of 
which invests exclusively in the shares of a single portfolio that is a 
series of an open-end management investment company registered on Form 
N-1A. All Separate Accounts maintain sub-accounts that invest in shares 
of VP Advantage and VP Balanced. The two sub-accounts are included 
among the investment options available under all contracts issued by 
any of the Separate Accounts (the ``Contracts'').
    5. The Contracts reserve to NWL and NWLAIC, as relevant, the right, 
subject to Commission approval, to substitute shares of another open-
end management investment company for the shares of an open-end 
management investment company held by any sub-account. The reservation 
is disclosed in the prospectus for the Contracts.
    6. Although the Contracts reserve to Nationwide the right to 
restrict transfer privileges, Contract Owners currently may make 
transfers among the sub-accounts once per business day without the 
imposition of any transfer charge. The substitution will not count as a 
transfer among the sub-accounts for the purpose of the daily transfer 
limit.
    7. Within 45 days of receiving the Order of Approval requested by 
the application, Applicants propose to substitute shares of VP Balanced 
for shares of VP Advantage. On the date that the substitution is 
effected (the ``Exchange Date''), all shares held by the Separate 
Accounts in VP Advantage will be redeemed and, contemporaneously with 
the redemption, the Separate Accounts will purchase shares in VP 
Balanced. All shares will be purchased and redeemed at prices based on 
the current net asset values per share in a manner consistent with Rule 
22c-1 under the 1940 Act.
    8. The investment objective of VP Advantage is to seek long-term 
growth and current income. The fund achieves its objective by investing 
approximately 40% of its assets in equity securities, 40% in fixed 
income securities and the remaining 20% in cash and cash equivalents.
    9. The investment objective of VP Balanced is to seek long-term 
growth and current income. The fund achieves its objectives by 
investing approximately 60% of its assets in equity securities and the 
remainder in bonds and other fixed income securities.
    10. American Century Investment Management, Inc., the adviser VP 
Advantage and VP Balanced, has informed Applicants that its wishes to 
halt all management and operations associated with VP Advantage because 
the fund, since its inception on June 4, 1987, has not attracted 
sufficient assets to grow to an efficient size. Furthermore, because VP 
Advantage is not being actively marketed, it is not expected to attain 
economies of scale. American Century Investment Management, Inc. has 
informed Applicants that as of January 10, 2000, VP Advantage had 
assets totaling $21,832,751.26. As of the same date, VP Balanced had 
assets of $281,394,733.05.
    11. The following table shows the average annual total returns for 
VP Advantage and VP Balanced for periods of one, three and five years 
and since inception as well as expense ratios for the funds for the 
year ended December 31, 1999.

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                                                                Average annual total returns (performance) \1\
                                     Management     Other    ---------------------------------------------------
                                        fees       expenses                                             Since
                                                                 1 year       3 year       5 year     inception
----------------------------------------------------------------------------------------------------------------
VP Advantage (in                           1.00         0.00         14.5         12.3         12.0          9.4
 percent)(inception: 8/1/91)......
VP Balanced \2\ (in percent)               0.99         0.00         11.4         12.4         13.3        10.8
 (inception: 5/1/91)..............
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\1\ Performance as of September 30, 1999.
\2\ With expense reimbursement, the management fees and other expenses were 0.97% and 0.00% respectively.


[[Page 36180]]

    12. On September 27, 1999, Nationwide supplemented the separate 
account prospectuses informing all existing and prospective Contract 
Owners that it is the process of applying for approval from the 
Commission to effect a substitution of VP Balanced for VP Advantage. In 
addition, the prospectus supplements state that Nationwide will not 
exercise any right reserved by it under the Contracts to impose an 
restriction or fee on transfers until at least 30 days after the 
proposed substitutions.
    13. All Contract Owners have received a copy of the prospectus for 
VP Balanced because the portfolio is currently offered as an investment 
option under all contracts issued through the Separate Accounts.
    14. Following the establishment of the Exchange Date, Contract 
Owners with interests remaining VP Advantage will be advised that the 
fund will be replaced on the Exchanged Date and that they are free to 
make any allocation change changes among the available investment 
options in advance of the Exchange Date.
    15. Within five days of the Exchange Date, all Contract Owners 
affected by the substitution will receive a written confirmation of the 
substitution. The confirmation will state that Contract Owners may 
transfer all cash value in the affected sub-account to any other 
available sub-account(s). The confirmation will reiterate that 
Nationwide will not exercise any right reserved by it under the 
Contracts to impose any restriction or fee on transfers until at least 
30 days after the proposed substitution.
    16. The proposed substitution will take place at relative net asset 
value with no increase or decrease in the amount of any Contract 
Owner's policy value. The substitution will not result in any 
additional fees for Contract Owners nor will current charges increased. 
Contract Owners will not bear any added cost or expense, including any 
additional brokerage costs or expenses, associated with the proposed 
substitution. None of the contractual obligations currently assumed by 
Nationwide will in any way be abridged or modified as a result of the 
substitution. The proposed substitution will in no way alter a Contract 
Owner's right to surrender the contract at any time prior to or after 
the substitution in accordance with the terms of the contract. Finally, 
the substitution should in no way affect whatever tax benefits Contract 
Owners currently enjoy and will not engender any adverse tax 
consequences.

Applicants' Legal Analysis

    1. Section 26(b) of the 1940 Act requires the depositor of a 
registered unit investment trust holding the securities of a single 
issuer to obtain Commission approval before substitution of the 
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 
policies and provisions of the 1940 Act.
    2. Applicants assert that the proposed substitution meets the 
standards that the Commission has applied to past substitutions.
    3. Applicants assert that the investment objectives and policies of 
VP Advantage and VP Balanced are sufficiently comparable that the 
investment strategies currently employed by Contract Owners may be 
maintained after the substitution. Both funds seek to provide investors 
with the benefits of a balanced portfolio of fixed income and equity 
securities that serves as a more conservative alternative to 
traditional growth funds and as a more aggressive alternative to 
traditional bond funds.
    4. Applicants further assert that Contract Owners will benefit from 
the proposed substitution because VP Balanced has greater assets than 
VP Advantage. Accordingly, VP Balanced should continue to have lower 
expenses as a percentage of net asset than does VP Advantage, creating 
the opportunity for better performance.

Conclusion

    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. 00-14247 Filed 6-6-00; 8:45 am]
BILLING CODE 8010-01-M