VIA EDGAR AND EMAIL
June 8, 2007
The United States Securities
And Exchange Commission
SEC Headquarters
100 F Street NE
Washington, D.C. 25049-0506
Subject: Nationwide Life Insurance Company
Nationwide Variable Account- II
Pre-Effective Amendment No. 1
File Number 333-140621
Dear Ms. Marquigny:
On behalf of Nationwide Life Insurance Company (“Nationwide”) and its Nationwide Variable Account-II (the “Variable Account”), we are filing this correspondence in response to your comments to the Registration Statement on Form N-4 for the registration of Deferred Variable Annuity Contracts (“Contract”) to be offered through the Variable Account.
This filing is being made electronically via EDGAR in accordance with Regulation S-T.
On February 12, 2007, Nationwide filed am initial registration statement for Flexible Premium Deferred Variable Annuity Contracts to be offered through Nationwide Variable Account –II (File No. 333-140621). We have reviewed your letter dated April 10, 2007 and have the following responses to the staff’s comments below. The enclosed Exhibit A (Draft of Pre-Effective Amendment No. 1) reflects red-lining of changes made to address the comments. Page number references below are to the original courtesy copy. Other changes to the registration statement are non-material changes intended to improve overall disclosure.
Should the Staff find these changes acceptable, Nationwide will make the changes in Pre-Effective Amendment No. 1.
1. 1933 Act file number and Contract Name
COMMENT: Because Nationwide offers several variable contracts through its separate accounts, it may be difficult for investors to find the documents relating to a specific filing on the SEC website. Therefore, please disclose the 1933 Act file number for the contract. In addition, please state the contract name prominently on the cover page.
RESPONSE: We have added the 1933 Act file number to the cover page of the registration statement and the contract name has been added the top of page 1 of the prospectus.
2. Cover Page
COMMENT: The page reference for the SA1 table of contents is incorrect. Please correct it.
RESPONSE: We have amended our disclosure by correcting the pagination.
3. Glossary
3a. NCUSIF Definition:
COMMENT: We note that Nationwide Credit Union Share Insurance Fund is only mentioned on the cover page and in the glossary, but nowhere else in the filing. Please explain to the Staff how NCUSIF is related to the filing and amend the registration statement accordingly. If NCUSIF has no role, please delete the references.
RESPONSE: Historically, Nationwide has referenced the NCUSIF and FDIC, which appears on both the marketing cover and page 1 of the prospectus to disclose to potential contract owners that Nationwide lacks federal deposit insurance.
3b. Net Asset Value Definition
COMMENT: Please define "market day." Also, in your response letter, please identify the underlying funds that do not determine NAV based on share value at the close of the NYSE and identify when they price. If any underlying funds price more frequently than once a day, please specify the fund and its pricing times. In addition, please describe how contract level transactions involving such underlying funds will be treated under the contract.
RESPONSE: We have amended our disclosure by deleting the words “at the end of a market day” from the definition of net asset value. The definition will now state: “Net asset value- The value of one share of an underlying mutual fund at the close of the New York Stock Exchange.” In addition, Nationwide represents that none of the underlying funds currently price more than once a day.
3c. Valuation Date
COMMENT: In the definition of “Valuation Date," please delete the reference to Nationwide to clarify that accumulation unit value is determined each day that the NYSE is open other than the holidays identified in the narrative on page 31. See Rule 22c- l (b)(1)(iii).
RESPONSE: We have amended our disclosure by deleting “and Nationwide’s home office” from the definition of Valuation date. We have also added to the definition of “Valuation Date” the following sentence: “Values of the variable account are determined as of the close of the New York Stock Exchange which generally closes at 4:00 p.m. Eastern Time, but may close earlier on certain days and as conditions warrant.”
We have also amended our disclosure by amending the language in our “Pricing” section. The third paragraph of our pricing section now begins with this sentence:
“Except on the days listed below and on weekends, purchase payments, transfers and surrenders are priced every day. Purchase payments will not be priced when the New York Stock Exchange is closed or on the following nationally recognized holidays:…”
3d. Additional Terms
COMMENT: Either here or the first time it is used in the text (page indicated), please define the following terms: "Guaranteed Term Option" (p. 2), "Target Term Option" (p. 7), and "Lifetime Withdrawal Base" (p. 21).
RESPONSE: We have amended our disclosure by adding definitions of “Guaranteed Term Option” and “Target Term Option” to the Glossary of Special Terms. “Lifetime Withdrawal Base” is not a capitalized defined term and thus should not be listed in the Glossary of Special Terms. “Lifetime Withdrawal Base” is currently defined and explained in the Capital Preservation Plus Lifetime Income Option, Terminating the CPP Lifetime Income Option, Withdrawal Phase of the CPP Lifetime Income Option as follows:
“At the beginning the of the withdrawal phase of the CPP Lifetime Income Option. Nationwide will determine the lifetime withdrawal base, which is equal to the contract value as of the end of the CPP program period (including any amounts credited under the principal guarantee).”
4. Fee Tables (pp. 6-8)
4a. Footnotes
COMMENT: Please present all of the footnotes together after the underlying fund fee tables so they do not break up the presentation of the required tables.
RESPONSE: The instructions for Form N-4 require, in part, “the Registrant may include in a footnote to the table a tabular, narrative, or other presentation providing further detail regarding variations in the charge.” We believe that it is in the best interest of the investor to leave the clarifying footnotes on the same page as the relevant fee table, so the investor can more readily locate information pertinent to a particular charge rather than having to navigate through multiple pages of fee tables to locate endnotes.
4b. Footnotes
COMMENT: Much of the footnote text is or can be covered more appropriately with the Item 6 disclosure further back in the prospectus. Wherever possible, please limit the footnotes to the required Item 3 disclosure or cross-references to descriptions in the text.
RESPONSE: We have amended our disclosure by removing footnotes containing information that is redundant to disclosure found in the body of the prospectus.
4c. Capital Preservation Plus Option
COMMENT: It appears this option will never be offered based on the stated availability dates. Please delete all references to this option throughout the prospectus or amend the references to its dates of availability.
RESPONSE: Nationwide reserves the right to open the availability the Capital Preservation Plus (“CPP”) Option at a future date. We have amended our disclosure by stating that the CPP Option is not available for contracts issued on or after August 1, 2007.
4d. Lifetime Income Option
COMMENT: For the Lifetime Income Option and the Spousal Continuation Benefit, please modify the presentation so the table clearly shows the charge as a percentage of the income benefit base rather than defining the percentage in the footnotes. Also, where the tables present Total Variable Account Charges including either option, please add a footnote explaining how the total was
calculated and what assumptions applied.
RESPONSE: We have amended our disclosure by adding to the “Recurring Contract Expenses” chart the following:
Under the Lifetime Income Option, the chart now includes the following, “The fee for the Lifetime Income Option will be assessed on the current income benefit base and will be charged on each anniversary.”
Under the Spousal Continuation Benefit, the chart now includes the following, “The fee for the Lifetime Income Option and Spousal Continuation Benefit" will be assessed on the current income benefit base and will be charged on each anniversary.”
The last footnote pertaining to The Spousal Continuation Benefit has been revised to add the following: “The total charge for the Lifetime Income Option and the Spousal Continuation Benefit is 1.15% of the current income benefit base.
4e. Summary of Maximum Contract Expenses
COMMENT: The table showing maximum contract expenses reflects two mutually exclusive options, the C Schedule Option and the Lifetime Income Option. Please
reflect the highest total fee a contract owner could be assessed taking into account mutual exclusivity restrictions and revise the corresponding example figures as well.
RESPONSE: We have amended our disclosure to list only the highest combination of mutually exclusive options.
4f. Short-Term Trading Fees
COMMENT: The short-term trading fees are reflected in the Separate Account Transaction Fee table. Consequently, the reference to these fees in the portfolio fee table preamble and the related footnote are confusing. Please clarify the portfolio preamble and move the footnote information to the Appendix A fund disclosure or a similarly appropriate place in the prospectus.
RESPONSE: The underlying mutual funds listed in Appendix A include disclosure which states that short-term trading fees are assessed for those funds. Additional clarifying disclosure for Short-term trading fees is included within the Short-Term Trading Fees subsection of the Standard Charges and Deductions Section. Additionally, the maximum Short-term trading fee is disclosed in the Contract Owner Transaction Expenses of the Contract Expenses Fee Table.
5. Ten Day Free-Look (pp. 11, 34)
COMMENT: Please clarify whether the post-mark or actual date of the insurance company's receipt of the returned contract determines eligibility for a free-look refund.
RESPONSE: We have amended our disclosure by stating “Nationwide’s actual date of receipt of the contract determines the eligibility of the free-look privilege.
6. Voting Rights (pp. 11-12)
COMMENT: Please disclose that with proportional voting, a small number of contract owners may determine the outcome of the vote. The disclosure should also indicate any minimum number of votes that must be received to have a quorum.
RESPONSE: The Voting Rights subsection of the Investing in the Contract Section has been amended to include the following language: “What this means to you is that when only a small number of contract owners vote, each vote has a greater impact on the outcome”. As quorum requirements are established by the mutual funds and vary by mutual fund company, additional disclosure may be misleading and such requirements may be disclosed in the mutual funds’ prospectuses.
7. Guaranteed Term Options (pp. 12-13)
COMMENT: Please confirm that the market value adjustment associated with certain Guaranteed Term Options has been separately registered pursuant to the Securities Act of 1933 "1933 Act") and provide the file number for its registration statement.
RESPONSE: Nationwide Life Insurance Company’s Multiple Maturity Variable Account has been separately registered with the SEC and the 1933 Act number is 333-133163.
8. Extra Value Option Credits (p. 13)
COMMENT: Please delete references to Extra Value Option credits in the Fixed Account section and throughout the prospectus; Registrant has not offered this option.
RESPONSE: We have amended our disclosure by removing all references to the Extra Value Option.
9. USA Patriot Act (p. 14)
COMMENT: Please revise this disclosure to state that as a service provider to the funds
Nationwide has established procedures in compliance with its responsibilities under Rule 38a-1 of the Investment Company Act. See Release IC-26299 at Footnotes 91 & 92.
RESPONSE: We have amended the language in “the Contract in General” section of the prospectus to reflect past tense. Accordingly the disclosure now reads: “In order to comply with the USA Patriot Act and rules promulgated thereunder, Nationwide has implemented procedures designed to prevent contracts described in this prospectus from being used to facilitate money laundering or the financing of terrorist activities.”
10. Features with Restricted Investment Options
COMMENT: Please clarify whether the list of restricted investment options associated with the Capital Preservation Plus Option feature also applies to the Lifetime Income and the Capital Preservation Plus Lifetime Income Options. If not, separately identify the underlying investment options permitted under each of those features.
RESPONSE: We have added a cross reference under each benefit option for a new table in the prospectus titled “Income Benefit Investment Options” which lists the investment options available
under each benefit option.
11. Capital Preservation Plus Lifetime Income ("CPPL1") Option (pp. 21-27)
11a. Immediate Withdrawals (p. 21)
COMMENT: Because immediate withdrawals are permitted during both the Preservation and Withdrawal Phases, the first two paragraphs under this heading are confusing. Please revise the disclosure to distinguish between electing the immediate withdrawal benefit and electing to begin the Withdrawal Phase.
RESPONSE: We have amended our disclosure by breaking this text into two subsections, one entitled “Immediate Withdrawals- Preservation Phase” and other entitled “Immediate Withdrawals – Withdrawal Phase.”
11b. Preservation Phase (pp. 22-23)
COMMENT: If correct, please clarify that the term "CPP program period" marks the time remaining until the maturity date for the Preservation Phase. Alternatively, please explain the relationship between the Preservation Phase, the CPP program period, and the maturity date.
RESPONSE: We have amended our disclosure by adding the following, “The CPP program period marks the time remaining until the end of the preservation phase.”
11c. Required Minimum Distribution Privilege (pp. 23, 26, 29)
COMMENT: Please indicate whether a change to the required minimum distribution ("RMD") privilege would be applied prospective or to prior surrenders under the contract and whether a contract owner will be notified if the policy is changed.
RESPONSE: The language in the “Required Minimum Distribution Privilege” subsection of the “Capital Preservation Plus Lifetime Income Option” section of the prospectus has been amended as follows: “We will notify you if we discontinue or eliminate the required minimum distribution privilege.”
11d. Succession of Rights and Termination... (p. 24)
COMMENT: Please clarify the meaning of “full surrender of the death benefit proceeds." (Emphasis added.) If the option continues following a partial surrender of death benefit proceeds, describe the surrender and how the situation could arise.
RESPONSE: We have amended our disclosure by changing this bulleted item to read as follows, “payment of the death benefit proceeds.” (Emphasis added.)
11e. Determining Immediate Withdrawal Base (p. 25)
COMMENT: Please provide an example showing what happens to the guarantee amount and the immediate withdrawal base if a contract owner takes a surrender during the Preservation Phase before invoking the immediate withdrawal benefit.
RESPONSE: We have amended our disclosure to by adding an example showing the immediate withdrawal base with a surrender during the CPP program period. The disclosure is as follows:
Example with Surrenders during the CPP program period
If the contract owner's initial investment at the beginning of the CPP program period was$100,000, and there was a surrender request of $10,000, the CPP guarantee
amount at the endof the CPP program period would be calculated as follows:
CPP guarantee amount = $100,000
Contract value = $40,000
Gross surrender request = $10,000
| CPP guarantee amount after withdrawal = $100,000*(1-$10,000/$40,000) = $75,000 |
If the contract owner invokes the immediate withdrawal benefit after a withdrawal has taken place, the immediate withdrawal base becomes the new CPP guarantee amount (i.e., $75,000). The contract value will not be credited with any CPP guarantee amount at the end of the program period.
11f. Impact of CDSC Charge (p. 26)
COMMENT: Please clarify whether a contract owner who withdraws the full benefit amount plus the CDSC charge is considered to have taken an "excess withdrawal" equal to the CDSC charge. If so, disclose that the CDSC charge may cause contract value to fall below zero and trigger the related consequences.
RESPONSE: This situation is currently addressed in the CPPLI Section, “Impact of Withdrawals in Excess of 6%,” Contingent Deferred Sales Charges subsection. The language is as follows:
Contingent Deferred Sales Charges
A withdrawal under the benefit may cause a CDSC to apply (see "Contingent Deferred Sales Charges" earlier in this prospectus). Application of a CDSC could result in the gross surrender being greater than 6%. For example, the amount of the surrender request plus the applicable CDSC could exceed the 6% limit. If applicable, contract owners can request to receive a specific dollar amount of withdrawal (i.e., Nationwide will gross up the withdrawal to include the CDSC amount) or to receive the withdrawal net of the CDSC amount. In either case, the gross amount of the surrender (i.e., including the CDSC) is the amount used to determine whether the withdrawal exceeds the 6% limit. A reduction to the immediate withdrawal base will be applied as described in the "Impact of Withdrawals in Excess of 6%" provision if the gross surrender exceeds the 6% limit.
The contract permits a percentage of purchase payments to be withdrawn free of CDSC each year (see "Waiver of Contingent Deferred Sales Charge" earlier in this prospectus). The total free withdrawal amount permitted (a percentage of purchase payments), however, may result in annual surrenders greater than the 6% limit permitted by this benefit (i.e., 6% of the immediate withdrawal base). In such case, the reduction described in the "Impact of Withdrawals in Excess of 6%" provision will apply.
11g. Succession of Rights and Immediate Withdrawal Benefit (p. 27)
COMMENT: Per the last sentence under this heading, are there situations when the contract owner's death would not terminate the CPPLI Option? If so, please describe.
RESPONSE: We have amended our disclosure by adding the following to this section, “If by the terms of the contract, the death of the contract owner results in the contract being continued, i.e., does not result in payment of the death benefit proceeds, the CPP Lifetime Income Option will continue in force with the immediate withdrawal benefit invoked (see the “Required Distributions” section in Appendix C: Contract Types and Tax Information.)
12. Lifetime Income Option (LIO) & Related Provisions (pp. 27-29)
12a. Subsequent Payments (p. 28)
COMMENT: Please state whether a contract owner will be notified if Registrant exercises the right to limit subsequent purchase payments under this option.
RESPONSE: The language in the Lifetime Income Option Section does not include a contract owner notice provision because the contract requires prior approval by Nationwide for subsequent purchase payments.
12b. Lifetime Income Surrenders (p. 28)
COMMENT: Please distinguish between the impact of the first surrender under this option and under the CPPLI Option.
RESPONSE: We believe that it would be confusing to our investors to discuss surrenders in the CPPLI Option in the Lifetime Income Option section. We believe the impact of the first surrender is clearly addressed in the “Lifetime Income Surrenders” subsection of the Lifetime Income Option which states:
At any time after the Lifetime Income Option is elected, the contract owner may begin taking the lifetime income benefit by taking a surrender from the contract. Nationwide will surrender accumulation units proportionally from the sub-accounts as of the date of the surrender request. As with any surrender, lifetime income surrenders reduce the contract value and consequently, the amount available for annuitization.
At the time of the first surrender, the income benefit base is locked in and will not change unless the contract owner takes excess surrenders, elects a reset opportunity (both discussed later in this provision), or submits additional purchase payments. Additional purchase payments submitted after the first surrender from the contract will increase the income benefit base.
Simultaneously, the lifetime income percentage is determined based on the age of the contract owner as indicated in the following table:
Contract Owner’s Age (at time of first surrender) | Lifetime Income Percentage |
| 45 up to 59½ | 4% |
| 59½ through 66 | 5% |
| 67 through 71 | 5.5% |
| 72 through 80 | 6% |
| 81 and older | 7% |
At the time of the first surrender and on each L.Inc anniversary thereafter, the lifetime income percentage is multiplied by the income benefit base to determine the benefit amount for that year. The benefit amount is the maximum amount that can be surrendered from the contract before the next L.Inc anniversary without reducing the income benefit base. The ability to surrender the current benefit amount will continue until the earlier of the contract owner’s death or annuitization.
Although surrenders up to the benefit amount do not reduce the lifetime benefit base, they do reduce the contract value and the death benefit, and are subject to the CDSC provisions of the contract.
12c. Taxation of Surrenders under the LIO (p. 29)
COMMENT: The disclosure describing the calculation of the taxable distribution amount is difficult to understand. Please clarify what "excess" refers to and what "over the remaining investment in the contract" modifies. Please consider presenting the calculation as a mathematical equation rather than a narrative.
RESPONSE: Although this disclosure language has not changed since the inception of this option, and is identical to disclosure under the Capital Preservation Plus Lifetime Income Option, we have revised the disclosure related to surrenders under both optional benefits to more clearly state:
“While the tax treatment for surrenders for benefits such as the Lifetime Income Option are not clear under federal tax law, Nationwide currently treats these surrenders as taxable to the extent that the cash value of the contract exceeds the contract owner’s investment at the time of the surrender. Please consult a qualified tax advisor.”
13. Pricing (p. 31)
13a. Accumulation Unit Value
COMMENT: Please substitute the word "determined" for "available" in the phrase "next available accumulation unit value after the payment is received." The current language could be read to mean that a transfer is priced at the accumulation unit value existing when the transaction request was received.
RESPONSE: We have amended our disclosure by revising the sentence to read, “Subsequent purchase payments allocated to sub-accounts will be priced at the accumulation unit value next computed after the payment is received.
13b: Account Value
COMMENT: The last sentence of the Pricing section implies a causal relationship between
changes in account value and a contract owner's inability to access his/her account. Please revise or delete the phrase "since the contract owner will not have access to their account."
RESPONSE: We have amended our disclosure by revising the sentence to read,“On those days when the New York Stock Exchange is open and Nationwide is closed, contract value may change and contract owners will not have access to their accounts.
14. Transfers Among the Sub-Accounts (p. 34)
COMMENT: The disclosure indicating that transfer requests are "subject to terms and conditions imposed by the contract and the underlying mutual funds" suggests that a contract owner's rights as described in the prospectus may be limited by the language contained in the annuity contract. Please revise this disclosure or delete the statement so contract owners will not be misled as to their rights under the securities laws.
RESPONSE: We have amended our disclosure by deleting the words “subject to terms and conditions imposed by the contract and the underlying mutual funds.”
15. Surrender (Redemption) Prior to Annuitization (p. 34):
COMMENT: In your response letter, please explain the circumstances under which Nationwide may postpone payment of policy Proceeds because it is "unable to price Accumulation Units." Please note that any suspension or postponement of payment must be consistent with Section 22(e) of the 1940 Act and that pricing of redemption requests must comply with Rule 22c-1.
RESPONSE: Nationwide will only suspend or postpone a good order payment in accordance with Rule 22c-1. Accordingly, we have cross-referenced our “Pricing” section to make our “Surrender (Redemption)” section clearer.
16. Systematic Withdrawals (pp. 38-39)
COMMENT: Please revise the language in ¶ (1) at the bottom of page 38. The phrase "the net difference of” and "10% of” appears to be reversed.
RESPONSE: We respectfully believe the current disclosure accurately reflects the calculation. By way of an example:
Premium = 100,000 and the initial free withdrawal = 10,000
Withdrawal in year 1 15,000
Less free withdrawal 10,000
Premium w/d subject to CDSC 5,000
Withdrawal in year 2 15,000
Less free withdrawal 9,500 = 0.10* (100, 000 – 5,000)
Premium w/d subject to CDSC 5,500
Since the withdrawal exceeded the free withdrawal amount, the free withdrawal amount available decreases.
17. Custom Portfolio Asset Rebalancing Service (pp. 40-41)
COMMENT: It is unclear how this program differs from an asset allocation program and how the program is administered. Please describe the program in greater detail. The disclosure states that Registrant provides a contract owner with a list of the program rules after the contract owner enrolls. Please indicate how to obtain the rules prior to enrollment or explain why they are not made available in advance.
RESPONSE: We respectfully believe the program is described in sufficient detail. However, we have amended our disclosure by adding that “Prior to enrollment in the Custom Portfolio Asset Rebalancing Service, a complete list of the program rules will be given to you.”
18. Combination Enhanced Death Benefit Option (pp. 42-43):
18a. 200% Limitation
COMMENT: Please provide examples showing situations in which the option would and would not be affected by the 200% limit described on page 43).
RESPONSE: We have amended our disclosure by adding the following examples:
For example, assume Joe purchases a contract in 2007 for 100,000.
In year 2021:
Purchase Payment $100,000
Contract Value $120,000
Highest anniversary contract value $125,000
5% interest anniversary value $197,933
If Joe dies in 2021, his death benefit would be $197,933.
However if he dies the next year, his death benefit would be $200,000 instead of $207,829 (105% X 197,933) since the 5% interest anniversary value is limited to 200% of his initial purchase payment of $100,000.
The impact of a withdrawal during his life will be calculated as follows:
In year 2015
Purchase Payment $100,000
Contract Value $120,000
Highest anniversary contract value $120,000
5% interest anniversary value $155,133
Contract withdrawal in 2016 $60,000
After his withdrawal, the highest contract anniversary value is $60,000 (120,000-60,000) and the 5% interest anniversary value is $77,566 (60,000/120,000 X 155,133). After the date of the withdrawal, the 5% interest anniversary value is limited to $100,000 (200,000% (100,000 -50,000)).
18b. 30% Fixed Account Allocation Limitation
COMMENT: 30% Fixed Account Allocation Limitation: Please clarify how the 30% threshold is
applied. Specifically, if the fixed account allocation percentage is affected by contract owner transactions and market performance, what determines if the 30% limit applies?
RESPONSE: The 30% threshold will come into effect only as a result of an action or actions by the contract owner (additional purchase payment, surrender or transfers). If the 30% threshold is reached because of a combination of market performance and contract owner actions, and would not have been reached but for the market performance, interest will continue to accrue at the 5%.
19a. Annuity Payment Options (pp. 45-46)
COMMENT: For annuity options that do not include a guarantee period, disclose that it is possible that only one payment may be made.
RESPONSE: We have added disclosure language to the Single Life and Standard Joint and Survivor subsections to explain that it is possible that only one payment will be made in the event of the death of the annuitant after the first payment.
19b. Annuity Payment Options (pp. 45-46)
COMMENT: Please indicate whether the Allocation Architect program models described on pages 39-41 are available as investment options during the payout period.
RESPONSE: The NAA models are not available to annuitants during the payout period, given there are no apparent benefit to the annuitant owner after annuitization. The underlying mutual funds available under the contract are available once annuitization has taken place. As stated in the Variable Annuity Payments subsection of “Annuitizing the Contract,” variable annuity payments will vary depending on the performance of the underlying mutual funds selected.
We have amended our disclosure by adding “Prior to annuitization” at the beginning of the “Nationwide Allocation Architect” section.
20. Appendix B: Condensed Financial Information (p. 56)
COMMENT: Please wait to include the preliminary paragraph until there are accumulation unit values to report.
RESPONSE: We have updated our disclosure by removing the preliminary paragraph until there are accumulation unit values to report.
21. Part C
21a. Items Incorporated by Reference
COMMENT: For each exhibit Registrant seeks to include through incorporation by reference, please identify the date of the filing containing the incorporated document and the exhibit number of the document within that filing.
RESPONSE: We have amended Part C by including the dates the exhibits were filed along with applicable exhibit number.
21b. Item 24(b)(8)
COMMENT: Pursuant to Item 24(b)(8) of Form N-4, please file as exhibits to the pre-effective amendment the contracts reflecting those services described under "Underlying Mutual Funds" on pages 14 and 15 of the prospectus. Similarly, please file copies of the individual fund participation agreements or other contracts relating to the investment by the Registrant in a Portfolio Company as exhibits as well.
RESPONSE: Item 24(b)(8) of Form N-4 states that Nationwide shall provide “copies of all other material contracts not made in the ordinary course of business which are to be performed in whole or in part on or after the date of filing the Registration Statement” (emphasis added). We respectfully believe that any such fund agreements are contracts made in the ordinary course of business. Therefore, fund agreements fall outside the scope of Item 24(b)(8).
22. Miscellaneous
COMMENT: Any exhibits, financial statements and any other required disclosure not included in this registration statement must be filed in a pre-effective amendment to the registration statement.
RESPONSE: We will include all exhibits, financial statements and other required disclosure in the pre-effective amendment to the registration statement.
Nationwide acknowledges all of the following:
| · | that the Separate Account is responsible for the adequacy and accuracy of the disclosure in the Pre-Effective Amendment; |
| · | that comments by the staff of the Securities and Exchange Commission ("SEC"), or changes to the disclosure in response to SEC staff comments in the filings reviewed by the SEC staff, do not foreclose the SEC from taking any action with respect to the filing; and |
| · | that the Separate Account may not assert SEC staff comments or any related changes in disclosure as a defense in any proceeding initiated by the SEC or any person under the federal securities laws of the United States. |
Should you have any questions regarding this filing, please contact me directly at (614) 249-5276.
Sincerely,
Lisa A. Chatterton, Esq.
Nationwide Life Insurance Company
cc: Ms. Rebecca Marquigny
Stop 5-6
Office of Insurance Products and Legal Compliance
Enclosure: Exhibit A (Draft of Pre-effective amendment No. 1)
Exhibit A
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 File No. 333-140621
| Pre-Effective Amendment No. 1 | þ |
| Post-Effective Amendment No. | o |
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 File No. 811- 3330
(Check appropriate box or boxes.)
NATIONWIDE VARIABLE ACCOUNT – II
(Exact Name of Registrant)
NATIONWIDE LIFE INSURANCE COMPANY
(Name of Depositor)
One Nationwide Plaza, Columbus, Ohio 43215
(Address of Depositor's Principal Executive Offices) (Zip Code)
| Depositor's Telephone Number, including Area Code | (614) 249-7111 |
Thomas E. Barnes, VP and Secretary, One Nationwide Plaza, Columbus, Ohio 43215
(Name and Address of Agent for Service)
| Approximate Date of Proposed Public Offering | August 1, 2007 |
| Title of Securities Being Registered | Flexible Premium Deferred Variable Annuity Contract |
The Registrant hereby agrees to amend this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall therefore become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
Nationwide® Traditions Annuitysm
Nationwide Life Insurance Company
Flexible Premium Deferred Variable Annuity Contracts
Issued by Nationwide Life Insurance Company through its Nationwide Variable Account-II
The date of this prospectus is August 1, 2007.
This prospectus contains basic information you should understand about the contracts before investing – the annuity contract is the legally binding instrument governing the relationship between you and Nationwide should you choose to invest. Please read this prospectus carefully and keep it for future reference. Variable annuities are complex investment products with unique benefits and advantages that may be particularly useful in meeting long-term savings and retirement needs. There are costs and charges associated with these benefits and advantages - costs and charges that are different, or do not exist at all, within other investment products. With help from financial consultants and advisers, investors are encouraged to compare and contrast the costs and benefits of the variable annuity described in this prospectus against those of other investment products, especially other variable annuity and variable life insurance products offered by Nationwide and its affiliates. Nationwide offers a wide array of such products, many with different charges, benefit features and underlying investment options. This process of comparison and analysis should aid in determining whether the purchase of the contract described in this prospectus is consistent with your investment objectives, risk tolerance, investment time horizon, marital status, tax situation and other personal characteristics and needs. The Statement of Additional Information (dated August 1, 2007) which contains additional information about the contracts and the variable account, has been filed with the Securities and Exchange Commission ("SEC") and is incorporated herein by reference. The table of contents for the Statement of Additional Information is on page 51. For general information or to obtain free copies of the Statement of Additional Information, call 1-800-848-6331 (TDD 1-800-238-3035) or write: Nationwide Life Insurance Company 5100 Rings Road, RR1-04-F4 Dublin, Ohio 43017-1522 The Statement of Additional Information and other material incorporated by reference can be found on the SEC website at: www.sec.gov. Information about this and other Best of America products can be found at: www.nationwide.com. Before investing, understand that annuities and/or life insurance products are not insured by the FDIC, NCUSIF, or any other Federal government agency, and are not deposits or obligations of, guaranteed by, or insured by the depository institution where offered or any of its affiliates. Annuities that involve investment risk may lose value. These securities have not been approved or disapproved by the SEC, nor has the SEC passed upon the accuracy or adequacy of the prospectus. Any representation to the contrary is a criminal offense. |
The following is a list of the underlying mutual funds available under the contract.
AIM Variable Insurance Funds
| | AIM V.I. Basic Value Fund: Series II Shares |
| | AIM V.I. Capital Appreciation Fund: Series II Shares |
| | AIM V.I. Capital Development Fund: Series II Shares |
American Century Variable Portfolios II, Inc.
| | American Century VP Inflation Protection Fund: Class II |
American Century Variable Portfolios, Inc.
| | American Century VP International Fund: Class IV † |
| | American Century VP Mid Cap Value Fund: Class II |
| | American Century VP Value Fund: Class II |
| | American Century VP Vista Fund: Class II |
Dreyfus
| | Dreyfus Investment Portfolios - Small Cap Stock Index Portfolio: Service Shares |
| | Dreyfus Stock Index Fund, Inc.: Service Shares |
| | Dreyfus Variable Investment Fund - Appreciation Portfolio: Service Shares |
Federated Insurance Series
| | Federated Market Opportunity Fund II: Service Shares |
| | Federated Quality Bond Fund II: Service Shares |
Fidelity Variable Insurance Products Fund
| | VIP Contrafund® Portfolio: Service Class 2 |
| | VIP Energy Portfolio: Service Class 2 † |
| | VIP Equity-Income Portfolio: Service Class 2 |
| | VIP Freedom 2010 Portfolio: Service Class 2 |
| | VIP Freedom 2020 Portfolio: Service Class 2 |
| | VIP Freedom 2030 Portfolio: Service Class 2 |
| | VIP Growth Portfolio: Service Class 2 |
| | VIP Investment Grade Bond Portfolio: Service Class 2 |
| | VIP Mid Cap Portfolio: Service Class 2 |
| | VIP Overseas Portfolio: Service Class 2R † |
Franklin Templeton Variable Insurance Products Trust
| | Franklin Income Securities Fund: Class 2 |
| | Franklin Small Cap Value Securities Fund: Class 2 |
| | Templeton Developing Markets Securities Fund: Class 3 † |
| | Templeton Foreign Securities Fund: Class 3 † |
| | Templeton Global Income Securities Fund: Class 3 † |
Janus Aspen Series
| | Forty Portfolio: Service Shares |
| | INTECH Risk-Managed Core Portfolio: Service Shares |
| | International Growth Portfolio: Service II Shares † |
Lehman Brothers Advisers Management Trust
| | AMT Short Duration Bond Portfolio: I Class |
MFS® Variable Insurance Trust
| | MFS Value Series: Service Class |
Nationwide Variable Insurance Trust ("NVIT")
| | American Funds NVIT Asset Allocation Fund: Class II |
| | American Funds NVIT Bond Fund: Class II |
| | American Funds NVIT Global Growth Fund: Class II |
| | American Funds NVIT Growth Fund: Class II |
| | American Funds NVIT Growth-Income Fund: Class II |
| | Federated NVIT High Income Bond Fund: Class III † |
| | Gartmore NVIT Emerging Markets Fund: Class VI † |
| | Nationwide Multi-Manager NVIT Small Cap Growth Fund: Class II |
| | Nationwide Multi-Manager NVIT Small Cap Value Fund: Class II |
| | Nationwide Multi-Manager NVIT Small Company Fund: Class II |
| | Nationwide NVIT Global Health Sciences Fund: Class VI† |
| | Nationwide NVIT Global Technology and Communications Fund: Class VI † |
| | Nationwide NVIT Government Bond Fund: Class I |
| | Nationwide NVIT Investor Destinations Funds: Class II |
| | Nationwide NVIT Investor Destinations Conservative Fund: Class II |
| | Nationwide NVIT Investor Destinations Moderately Conservative Fund: Class II |
| | Nationwide NVIT Investor Destinations Moderate Fund: Class II |
| | Nationwide NVIT Investor Destinations Moderately Aggressive Fund: Class II |
| | Nationwide NVIT Investor Destinations Aggressive Fund: Class II |
| | Nationwide NVIT Mid Cap Growth Fund: Class II |
| | Nationwide NVIT Money Market Fund: Class I |
| | Nationwide NVIT U.S. Growth Leaders Fund: Class II |
| | NVIT International Index Fund: Class VIII † |
| | NVIT International Value Fund: Class VI † |
| | NVIT Mid Cap Index Fund: Class I |
| | NVIT Nationwide® Fund: Class II |
| | Van Kampen NVIT Comstock Value Fund: Class II |
| | Van Kampen NVIT Multi Sector Bond Fund: Class I |
Neuberger Berman Advisers Management Trust
| | AMT Fasciano Portfolio: S Class |
| | AMT International Portfolio: S Class † |
| | AMT Regency Portfolio: S Class |
| | AMT Socially Responsive Portfolio: I Class |
Oppenheimer Variable Account Funds
| | Oppenheimer Capital Appreciation Fund/VA: Service Shares |
| | Oppenheimer Global Securities Fund/VA: Class 4 † |
| | Oppenheimer High Income Fund/VA: Class 4 † |
| | Oppenheimer Main Street Fund®/VA: Service Shares |
| | Oppenheimer Main Street Small Cap Fund®/VA: Service Shares |
T. Rowe Price Equity Series, Inc.
| | T. Rowe Price Blue Chip Growth Portfolio: Class II |
| | T. Rowe Price Equity Income Portfolio: Class II |
| | T. Rowe Price Limited Term Bond Portfolio: Class II |
Van Kampen
The Universal Institutional Funds, Inc.
| | Core Plus Fixed Income Portfolio: Class II |
| | Global Real Estate Portfolio: Class II |
*These underlying mutual funds may invest in lower quality debt securities commonly referred to as junk bonds.
| †These underlying mutual funds assess a short-term trading fee. |
Purchase payments not invested in the underlying mutual funds of the Nationwide Variable Account-II ("variable account") may be allocated to the fixed account or the Guaranteed Term Options (Guaranteed Term Options may not be available in every jurisdiction – refer to your contract for specific information).
Accumulation unit- An accounting unit of measure used to calculate the contract value allocated to the variable account before the annuitization date.
Annuitization date- The date on which annuity payments begin.
Annuity commencement date- The date on which annuity payments are scheduled to begin.
Annuity unit- An accounting unit of measure used to calculate the value of variable annuity payments.
Contract value- The value of all accumulation units in a contract plus any amount held in the fixed account, any amount held under Guaranteed Term Options, and any amounts transferred as a loan to the collateral fixed account.
Contract year- Each year the contract is in force beginning with the date the contract is issued.
FDIC– Federal Deposit Insurance Corporation.
Fixed account- An investment option that is funded by Nationwide's general account.
General account- All assets of Nationwide other than those of the variable account or in other separate accounts that have been or may be established by Nationwide.
Guaranteed Term Option– Investment options that are part of the Multiple Maturity Separate Account providing a guaranteed interest rate paid over certain periods of time (or terms), if certain conditions are met.
Individual Retirement Account- An account that qualifies for favorable tax treatment under Section 408(a) of the Internal Revenue Code, but does not include Roth IRAs.
Individual Retirement Annuity or IRA- An annuity contract that qualifies for favorable tax treatment under Section 408(b) of the Internal Revenue Code, but does not include Roth IRAs.
Investment-Only Contract- A contract purchased by a qualified pension, profit-sharing or stock bonus plan as defined by Section 401(a) of the Internal Revenue Code.
Nationwide- Nationwide Life Insurance Company.
NCUSIF– National Credit Union Share Insurance Fund.
Net asset value- The value of one share of an underlying mutual fund at the close of the New York Stock Exchange.
Non-Qualified Contract- A contract which does not qualify for favorable tax treatment as a Qualified Plan, IRA, Roth IRA, SEP IRA, Simple IRA, or Tax Sheltered Annuity.
Qualified Plan- A retirement plan that receives favorable tax treatment under Section 401 of the Internal Revenue Code, including Investment-Only Contracts. In this prospectus, all provisions applicable to Qualified Plans also apply to Investment-Only Contracts unless specifically stated otherwise.
Roth IRA- An annuity contract which qualifies for favorable tax treatment under Section 408A of the Internal Revenue Code.
SEC– Securities and Exchange Commission.
SEP IRA- An annuity contract which qualifies for favorable tax treatment under Section 408(k) of the Internal Revenue Code.
Simple IRA- An annuity contract which qualifies for favorable tax treatment under Section 408(p) of the Internal Revenue Code.
Sub-accounts- Divisions of the variable account for which accumulation units and annuity units are separately maintained – each sub-account corresponds to a single underlying mutual fund.
Target Term Option– Investment options that are part of the Multiple Maturity Separate Account providing a target interest rate paid over certain periods of time (or terms), if certain conditions are met.
Tax Sheltered Annuity- An annuity that qualifies for favorable tax treatment under Section 403(b) of the Internal Revenue Code. The Tax Sheltered Annuities sold under this prospectus not available in connection with investment plans that are subject to the Employee Retirement Income Security Act of 1974, as amended ("ERISA").
Valuation date- Each day the New York Stock Exchange is open for business, or any other day during which there is a sufficient degree of trading of underlying mutual fund shares such that the current net asset value of accumulation units or annuity units might be materially affected. Values of the variable account are determined as of the close of the New York Stock Exchange which generally closes at 4:00 p.m. Eastern Time, but may close earlier on certain days and as conditions warrant.
Valuation period- The period of time commencing at the close of a valuation date and ending at the close of business for the next succeeding valuation date.
Variable account- Nationwide Variable Account-II, a separate account of Nationwide that contains variable account allocations. The variable account is divided into sub-accounts, each of which invests in shares of a separate underlying mutual fund.
Table of Contents | Page |
Glossary of Special Terms | 3 |
Contract Expenses | 6 |
Underlying Mutual Fund Annual Expenses | 7 |
Example | 9 |
Synopsis of the Contracts | 9 |
Purpose of the Contract | |
Minimum Initial and Subsequent Purchase Payments | |
Charges and Expenses | |
Annuity Payments | |
Taxation | |
Ten Day Free-look | |
Condensed Financial Information | 11 |
Financial Statements | 11 |
Nationwide Life Insurance Company | 11 |
Nationwide Investment Services Corporation | 11 |
Investing in the Contract | 11 |
The Variable Account and Underlying Mutual Funds | |
Guaranteed Term Options | |
The Fixed Account | |
The Contract in General | 14 |
Distribution, Promotional and Sales Expenses | |
Underlying Mutual Fund Payments | |
Profitability | |
Standard Charges and Deductions | 16 |
Variable Account Charge | |
Contract Maintenance Charge | |
Contingent Deferred Sales Charge | |
Premium Taxes | |
Short-Term Trading Fees | |
Optional Contract Benefits, Charges and Deductions | 18 |
CDSC Option | |
Death Benefit Options | |
Capital Preservation Plus Option | |
Capital Preservation Plus Lifetime Income Option | |
Lifetime Income Option | |
Spousal Continuation Benefit | |
Income Benefit Investment Options | |
Ownership and Interests in the Contract | 34 |
Contract Owner | |
Joint Owner | |
Contingent Owner | |
Annuitant | |
Contingent Annuitant | |
Co-Annuitant | |
Joint Annuitant | |
Beneficiary and Contingent Beneficiary | |
Changes to the Parties to the Contract | |
Operation of the Contract | 35 |
Minimum Initial and Subsequent Purchase Payments | |
Pricing | |
Allocation of Purchase Payments | |
Determining the Contract Value | |
Transfer Requests | |
Table of Contents (continued) | Page |
Transfer Restrictions | |
Transfers Prior to Annuitization | |
Transfers After Annuitization | |
Right to Examine and Cancel | 38 |
Surrender (Redemption) Prior to Annuitization | 39 |
Partial Surrenders (Partial Redemptions) | |
Full Surrenders (Full Redemptions) | |
Surrender (Redemption) After Annuitization | 39 |
Surrenders Under Certain Plan Types | 39 |
Surrenders Under a Tax Sheltered Annuity | |
Surrenders Under a Texas Optional Retirement Program or a Louisiana Optional Retirement Plan | |
Loan Privilege | 40 |
Minimum and Maximum Loan Amounts | |
Maximum Loan Processing Fee | |
How Loan Requests are Processed | |
Loan Interest | |
Loan Repayment | |
Distributions and Annuity Payments | |
Transferring the Contract | |
Grace Period and Loan Default | |
Assignment | 41 |
Contract Owner Services | 42 |
Asset Rebalancing | |
Dollar Cost Averaging | |
Enhanced Fixed Account Dollar Cost Averaging | |
Fixed Account Interest Out Dollar Cost Averaging | |
Systematic Withdrawals | |
Nationwide Allocation Architect | |
| Custom Portfolio Asset Rebalancing Service | |
Death Benefits | 45 |
Death of Contract Owner | |
Death of Annuitant | |
Death of Contract Owner/Annuitant | |
Death Benefit Payment | |
Death Benefit Calculations | |
Spousal Protection Feature | |
Annuity Commencement Date | 48 |
Annuitizing the Contract | 48 |
Annuitization Date | |
Annuitization | |
Fixed Annuity Payments | |
Variable Annuity Payments | |
Frequency and Amount of Annuity Payments | |
Annuity Payment Options | 49 |
Annuity Payment Options for Contracts with Total Purchase Payments Less Than or Equal to $2,000,000 | |
Annuity Payment Options for Contracts with Total Purchase Payments Greater Than $2,000,000 | |
Statements and Reports | 50 |
Legal Proceedings | 51 |
Table of Contents of Statement of Additional Information | 53 |
Appendix A: Underlying Mutual Funds | 54 |
Appendix B: Condensed Financial Information | 61 |
Appendix C: Contract Types and Tax Information | 62 |
The following tables describe the fees and expenses that a contract owner will pay when buying, owning, or surrendering the contract.
The first table describes the fees and expenses a contract owner will pay at the time the contract is purchased, surrendered, or when cash value is transferred between investment options.
Contract Owner Transaction Expenses |
Maximum Contingent Deferred Sales Charge ("CDSC") (as a percentage of purchase payments surrendered) | |
Maximum Loan Processing Fee | |
Maximum Premium Tax Charge | |
Maximum Short-Term Trading Fee (as a percentage of transaction amount) | 1% |
The next table describes the fees and expenses that a contract owner will pay periodically during the life of the contract (not including underlying mutual fund fees and expenses).
Recurring Contract Expenses |
Maximum Annual Contract Maintenance Charge | |
Annual Loan Interest Charge | |
Variable Account Annual Expenses (annualized rate of total variable account charges as a percentage of the daily net assets) | |
Variable Account Charge | 1.00% |
CDSC Option No CDSC Option ("C Schedule Option") Total Variable Account Charges (including this option only) | 1.30% |
Death Benefit Options (eligible applicants may purchase one) | |
One-Year Enhanced Death Benefit Option Total Variable Account Charges (including this option only) | 0.20% 1.20% |
Combination Enhanced Death Benefit Option Total Variable Account Charges (including this option only) | 0.45% 1.45% |
Capital Preservation Plus Lifetime Income Option | |
| Total Variable Account Charges (including this option only) | 2.00% |
In addition to the charge assessed to variable account allocations, allocations made to the Guaranteed Term Options or Target Term Options will be assessed a fee of 1.00% by decreasing the interest we credit to amounts allocated to the fixed account or the Guaranteed Term Options.8 | |
1Range of CDSC over time:
Number of Completed Years from Date of Purchase Payment | 0 | 1 | 2 | 3 | 4 | 5 | 6 | |
CDSC Percentage | 7% | 7% | 6% | 5% | 4% | 3% | 0% | |
The Internal Revenue Code may impose restrictions on surrenders from contracts issued as Tax Sheltered Annuities.
2Nationwide may assess a loan processing fee at the time each new loan is processed. Currently, Nationwide does not assess a loan processing fee.
3Nationwide will charge between 0% and 5% of purchase payments for premium taxes levied by state or other government entities.
4The Contract Maintenance Charge is deducted annually from all contracts containing less than $50,000 on each contract anniversary. This charge is permanently waived for any contract valued at $50,000 or more on any contract anniversary.
5The loan interest rate is determined, based on market conditions, at the time of loan application or issuance. The loan balance in the collateral fixed account is credited with interest at 2.25% less than the loan interest rate. Thus, the net loan interest charge is an annual rate of 2.25%, which is applied against the outstanding loan balance.
6Election of the C Schedule Option provides no CDSC will be assessed upon surrenders from the contract.
7 Currently, the variable account charge associated with the Capital Preservation Plus Lifetime Income Option is equal to an annualized rate of 0.60% of the daily net assets of the variable account.
8 Currently, the Guaranteed Term Option/Target Term Option charge assocaited with the Capital Preservation Plus Lifetime Income Option is equal to a reduction in crediting rates of 0.60%.
Capital Preservation Plus Option Total Variable Account Charges (including this option only) In addition to the charge assessed to variable account allocations, allocations made to the Guaranteed Term Options or Target Term Options will be assessed a fee of 0.50% by decreasing the interest we credit to amounts allocated to the fixed account or the Guranteed Term Options. | 0.50% 1.50% |
Lifetime Income Option Total Variable Account Charges (including this option only) The fee for the Lifetime Income Option will be assessed on the current income benefit base and will be charged on each anniversary. | 1.00%1 2.00% |
Spousal Continuation Benefit Total Variable Account Charges (including this option and the Lifetime Income Option only) The fee for the Lifetime Income Option and Spousal Continuation Benefit will be assessed on the current income benefit base and will be charged on each anniversary. | 2.15% |
The next table shows the fees and expenses that a contract owner would pay if he/she elected all of the optional benefits available under the contract (and the most expensive of mutually exclusive optional benefits).
Summary of Maximum Contract Expenses |
| Variable Account Charge (applicable to all contracts) | 1.00% |
| Combination Enhanced Death Benefit Option | 0.45% |
| Lifetime Income Option | 1.00% |
| Spousal Continuation Benefit | 0.15% |
Maximum Possible Total Variable Account Charges | 2.60% |
The next table shows the minimum and maximum total operating expenses as of December 31, 2006, charged by the underlying mutual funds periodically during the life of the contract. The table does not reflect Short-Term Trading Fees. More detail concerning each underlying mutual fund's fees and expenses is contained in the prospectus for each underlying mutual fund.
| Total Annual Underlying Mutual Fund Operating Expenses | Minimum | Maximum |
| | | |
| (expenses that are deducted from underlying mutual fund assets, including management fees, distribution (12b-1) fees, and other expenses, as a percentage of average underlying mutual fund assets) | 0.25% | 11.49% |
The minimum and maximum underlying mutual fund operating expenses indicated above do not reflect voluntary or contractual reimbursements and/or waivers applied to some underlying mutual funds. Therefore, actual expenses could be lower. Refer to the underlying mutual fund prospectuses for specific expense information.
The following underlying mutual funds assess a short-term trading fee in connection with transfers from an underlying mutual fund sub-account that occur within 60 days after the date of allocation to that sub-account (see "Short-Term Trading Fees"):
| | American Century Variable Portfolios, Inc. - American Century VP International Fund: Class IV |
| | Fidelity Variable Insurance Products Fund - VIP Energy Portfolio: Service Class 2 |
| | Fidelity Variable Insurance Products Fund - VIP Overseas Portfolio: Service Class 2R |
| | Franklin Templeton Variable Insurance Products Trust - Templeton Developing Markets Securities Fund: Class 3 |
| | Franklin Templeton Variable Insurance Products Trust - Templeton Foreign Securities Fund: Class 3 |
| | Franklin Templeton Variable Insurance Products Trust - Templeton Global Income Securities Fund: Class 3 |
| | Janus Aspen Series - International Growth Portfolio: Service II Shares |
| | Nationwide Variable Insurance Trust - Federated NVIT High Income Bond Fund: Class III |
| | Nationwide Variable Insurance Trust - Gartmore NVIT Emerging Markets Fund: Class VI |
| | Nationwide Variable Insurance Trust - Nationwide NVIT Global Health Sciences Fund: Class VI |
| | Nationwide Variable Insurance Trust - Nationwide NVIT Global Technology and Communications Fund: Class VI |
| | Nationwide Variable Insurance Trust - NVIT International Index Fund: Class VIII |
| | Nationwide Variable Insurance Trust - NVIT International Value Fund: Class VI |
1 The maximum charge associated with the Lifetime Income Option is 1.00% of the current income benefit base. Currently, the charge associated with the Lifetime Income Option is equal to 0.60% of the current income benefit base.
2 The Spousal Continuation Benefit is only available for election if the Lifetime Income Option is elected. The total charge for the Lifetime Income Option and the Spousal Continuation Benefit is 1.15% of the current income benefit base.
| | Neuberger Berman Advisers Management Trust - AMT International Portfolio: S Class |
| | Oppenheimer Variable Account Funds - Oppenheimer Global Securities Fund/VA: Class 4 |
| | Oppenheimer Variable Account Funds - Oppenheimer High Income Fund/VA: Class 4 |
This Example is intended to help contract owners compare the cost of investing in the contract with the cost of investing in other variable annuity contracts. These costs include contract owner transaction expenses, contract fees, variable account annual expenses, and underlying mutual fund fees and expenses. The Example does not reflect premium taxes or Short-Term Trading Fees which, if reflected, would result in higher expenses.
The Example assumes:
| | a $10,000 investment in the contract for the time periods indicated; |
| | the maximum and the minimum fees and expenses of any of the underlying mutual funds; |
| | Contingent Deferred Sales Charges; |
| | A $30 Contract Maintenance Charge expressed as a percentage of the average contract account size; and |
| | the total variable account charges associated with the most expensive combination of optional benefits (2.60%). |
For those contracts that do not elect the most expensive combination of optional benefits, the expenses would be lower.
| | If you surrender your contract at the end of the applicable time period | If you do not surrender your contract | If you annuitize your contract at the end of the applicable time period |
| | 1 Yr. | 3 Yrs. | 5 Yrs. | 10 Yrs. | 1 Yr. | 3 Yrs. | 5 Yrs. | 10 Yrs. | 1 Yr. | 3 Yrs. | 5 Yrs. | 10 Yrs. |
| Maximum Total Underlying Mutual Fund Operating Expenses (11.49%) | 2,211 | 4,590 | 6,474 | 9,798 | 1,511 | 4,090 | 6,174 | 9,798 | * | 4,090 | 6,174 | 9,798 |
| Minimum Total Underlying Mutual Fund Operating Expenses (0.25%) | 1,031 | 1,509 | 2,011 | 3,571 | 331 | 1,009 | 1,711 | 3,571 | * | 1,009 | 1,711 | 3,571 |
*The contracts sold under this prospectus do not permit annuitization during the first two contract years.
The contracts described in this prospectus are individual flexible purchase payment contracts.
The contracts can be categorized as:
| | Charitable Remainder Trusts; |
| | Individual Retirement Annuities ("IRAs"); |
| | Investment-Only Contracts (Qualified Plans); |
| | Non-Qualified Contracts; |
| | Simplified Employee Pension IRAs ("SEP IRAs"); |
| | Tax Sheltered Annuities (Non-ERISA). |
For more detailed information with regard to the differences in contract types, please see Appendix C: Contract Types and Tax Information later in this prospectus.
Purpose of the Contract
The annuity described in this prospectus is intended to provide benefits to a single individual and his/her beneficiaries. It is not intended to be used:
| | by institutional investors; |
| | in connection with other Nationwide contracts that have the same annuitant; or |
| | in connection with other Nationwide contracts that have different annuitants, but the same contract owner. |
By providing these annuity benefits, Nationwide assumes certain risks. If Nationwide determines that the risks it intended to assume in issuing the contract have been altered by misusing the contract as described above, Nationwide reserves the right to take any action it deems necessary to reduce or eliminate the altered risk, including, but not limited to, rescinding the contract and returning the contract value (less any applicable Contingent Deferred Sales Charge and/or market value adjustment). Nationwide also reserves the right to take any action it deems necessary to reduce or eliminate altered risk resulting from materially false, misleading, incomplete or otherwise deficient information provided by the contract owner.
Minimum Initial and Subsequent Purchase Payments
Contract Type | Minimum Initial Purchase Payment* | Minimum Subsequent Payments** |
| Charitable Remainder Trust | $5,000 | $500 |
| IRA | $3,000 | $500 |
| Investment-Only | $3,000 | $500 |
| Non-Qualified | $5,000 | $500 |
| Roth IRA | $3,000 | $500 |
| SEP IRA | $3,000 | $500 |
| Simple IRA | $3,000 | $500 |
| Tax Sheltered Annuity | $3,000 | $500 |
| *A contract owner will meet the minimum initial purchase payment requirement by making purchase payments equal to the required minimum over the course of the first contract year. |
| **For subsequent purchase payments sent via electronic deposit, the minimum subsequent purchase payment is $50. |
Subsequent purchase payments may not be permitted in all states.
Guaranteed Term Options
Guaranteed Term Options are separate investment options under the contract. The minimum amount that may be allocated to a Guaranteed Term Option is $1,000.
Charges and Expenses
Variable Account Charge
Nationwide deducts a Variable Account Charge equal to an annualized rate of 1.00% of the daily net assets of the variable account. Nationwide assesses this charge to offset expenses incurred in the day to day business of issuing, distributing and maintaining variable annuity contracts.
Contract Maintenance Charge
A $30 Contract Maintenance Charge is assessed on each contract anniversary and upon full surrender of the contract. If, on any contract anniversary (or on the date of a full surrender) the contract value is $50,000 or more, Nationwide will waive the Contract Maintenance Charge from that point forward.
Contingent Deferred Sales Charge
Nationwide does not deduct a sales charge from purchase payments upon deposit into the contract. However, Nationwide may deduct a Contingent Deferred Sales Charge ("CDSC") if any amount is withdrawn from the contract. This CDSC reimburses Nationwide for sales expenses. The amount of the CDSC will not exceed 7% of purchase payments surrendered.
CDSC Option
If the contract owner elects the C Schedule Option, Nationwide will assess a charge equal to an annualized rate of 0.30% of the daily net assets of the variable account in exchange for elimination of CDSC under the contract.
Death Benefit Options
In lieu of the standard death benefit, an applicant may elect a death benefit option at the time of application, as follows:
Death Benefit Options | Charges* |
One-Year Enhanced Death Benefit Option1 | 0.20% |
Combination Enhanced Death Benefit Option2 | 0.45% |
*The charges shown are the annualized rates charged as a percentage of the daily net assets of the variable account.
1The One-Year Enhanced Death Benefit Option is only available for contracts with annuitants age 80 or younger at the time of application.
2The Combination Enhanced Death Benefit Option is only available for contracts with annuitants age 75 or younger at the time of application.
For more information about the standard and optional death benefits, please see the "Death Benefit Calculations" provision.
Capital Preservation Plus Option
The Capital Preservation Plus Option is not available for contracts issued on or after August 1, 2007. The Capital Preservation Plus Option may not be elected if the Capital Preservation Plus Lifetime Income Option or the Lifetime Income Option is elected.
If the contract owner or applicant elects the Capital Preservation Plus Option, Nationwide will deduct an additional charge at an annualized rate not to exceed 0.50% of the daily net assets of the variable account. Additionally, allocations made to the Guaranteed Term Options or Target Term Options will be assessed a fee of not more than 0.50%. Consequently, the interest rate of return for assets in the Guaranteed Term Option/Target Term Option will be lowered due to the assessment of this charge.
Capital Preservation Plus Lifetime Income Option
The Capital Preservation Plus Lifetime Income Option may only be elected at the time of application. The primary contract owner (or the primary annuitant in the case of a non-natural contract owner) must be age 35 or older at the time of application. The Capital Preservation Plus Lifetime Income Option may not be elected if either of the following optional benefits is elected: the Lifetime Income Option or the Capital Preservation Plus Option.
If the contract owner or applicant elects the Capital Preservation Plus Lifetime Income Option, Nationwide will deduct an additional charge at an annualized rate not to exceed 1.00% of the daily net assets of the variable account. Currently, the variable account charge is an annualized rate of 0.60% of the daily net assets of the variable account. Additionally, the interest rate of return credited to allocations made to the Guaranteed Term Options or Target Term Options will be reduced by not more than 1.00%. Currently, the interest rate deduction is 0.60%.
Lifetime Income Option
The Lifetime Income Option may only be elected at the time of application. The primary contract owner (or the primary annuitant in the case of a non-natural contract owner) must be between age 45 and 85 at the time the option is elected. The Lifetime Income Option may not be elected if either of the following optional benefits is elected: Capital Preservation Plus Option or the Capital Preservation Plus Lifetime Income Option.
If the contract owner or applicant elects the Lifetime Income Option, Nationwide will deduct an annual charge not to exceed 1.00% of the current income benefit base, which is the amount upon which the annual benefit is based. Currently, the charge for the Lifetime Income Option is 0.60% of the current income benefit base. The charge is deducted on each anniversary of the election of the Lifetime Income Option and is taken from
the sub-accounts proportionally based on contract allocations at the time the charge is deducted.
Spousal Continuation Benefit
The Spousal Continuation Benefit is only available for election if the Lifetime Income Option is elected. The contract owner’s spouse (or the primary annuitant’s spouse in the case of a non-natural contract owner) must be between age 45 and 85 at the time the option is elected. If the contract owner or applicant elects the Spousal Continuation Benefit, Nationwide will deduct an annual charge of 0.15% of the current income benefit base. The charge is deducted at the same time and in the same manner as the Lifetime Income Option charge.
Charges for Optional Benefits
The charges associated with optional benefits are generally only assessed prior to annuitization. However, the charge associated with the C Schedule Option will be assessed both before and after annuitization.
Annuity Payments
Annuity payments begin on the annuitization date and will be based on the annuity payment option chosen prior to annuitization. Annuity payments will generally be received within 7 to 10 days after each annuity payment date.
Taxation
How a contract is taxed depends on the type of contract issued and the purpose for which the contract is purchased. Nationwide will charge against the contract any premium taxes levied by any governmental authority (see "Federal Tax Considerations" in Appendix C: Contract Types and Tax Information and "Premium Taxes").
Ten Day Free-look
Contract owners may return the contract for any reason within ten days of receipt and Nationwide will refund the contract value or other amount required by law (see "Right to Examine and Cancel"). Nationwide's actual date of receipt of the contract determines the eligibility of the free-look privilege.
The value of an accumulation unit is determined on the basis of changes in the per share value of the underlying mutual funds and the assessment of variable account charges which may vary from contract to contract (for more information on the calculation of accumulation unit values, see "Determining Variable Account Value – Valuing an Accumulation Unit"). Please refer to Appendix B for information regarding the minimum and maximum class of accumulation unit values. All classes of accumulation unit values may be obtained, free of charge, by contacting Nationwide’s home office at the telephone number listed on page 1 of this prospectus.
Financial statements for the variable account and consolidated financial statements for Nationwide are located in the Statement of Additional Information. A current Statement of Additional Information may be obtained, without charge, by contacting Nationwide's home office at the telephone number listed on page 1 of this prospectus.
Nationwide is a stock life insurance company organized under Ohio law in March 1929, with its home office at One Nationwide Plaza, Columbus, Ohio 43215. Nationwide is a provider of life insurance, annuities and retirement products. It is admitted to do business in all states, the District of Columbia and Puerto Rico.
Nationwide is a member of the Nationwide group of companies. Nationwide Mutual Insurance Company and Nationwide Mutual Fire Insurance Company (the "Companies") are the ultimate controlling persons of the Nationwide group of companies. The Companies were organized under Ohio law in December 1925 and 1933 respectively. The Companies engage in a general insurance and reinsurance business, except life insurance.
The contracts are distributed by the general distributor, Nationwide Investment Services Corporation ("NISC"), One Nationwide Plaza, Columbus, Ohio 43215. NISC is a wholly owned subsidiary of Nationwide.
The Variable Account and Underlying Mutual Funds
Nationwide Variable Account-II is a variable account that invests in the underlying mutual funds listed in Appendix A. Nationwide established the variable account on October 7, 1981 pursuant to Ohio law. Although the variable account is registered with the SEC as a unit investment trust pursuant to the Investment Company Act of 1940 ("1940 Act"), the SEC does not supervise the management of Nationwide or the variable account.
Income, gains, and losses credited to, or charged against, the variable account reflect the variable account's own investment experience and not the investment experience of Nationwide's other assets. The variable account's assets are held separately from Nationwide's assets and are not chargeable with liabilities incurred in any other business of Nationwide. Nationwide is obligated to pay all amounts promised to contract owners under the contracts.
The variable account is divided into sub-accounts, each corresponding to a single underlying mutual fund. Nationwide uses the assets of each sub-account to buy shares of the underlying mutual funds based on contract owner instructions.
Each underlying mutual fund's prospectus contains more detailed information about that fund. Prospectuses for the underlying mutual funds should be read in conjunction with this prospectus.
Underlying mutual funds in the variable account are NOT publicly traded mutual funds. They are only available as investment options in variable life insurance policies or
variable annuity contracts issued by life insurance companies, or in some cases, through participation in certain qualified pension or retirement plans.
The investment advisers of the underlying mutual funds may manage publicly traded mutual funds with similar names and investment objectives. However, the underlying mutual funds are NOT directly related to any publicly traded mutual fund. Contract owners should not compare the performance of a publicly traded fund with the performance of underlying mutual funds participating in the variable account. The performance of the underlying mutual funds could differ substantially from that of any publicly traded funds.
The particular underlying mutual funds available under the contract may change from time to time. Specifically, underlying mutual funds or underlying mutual fund share classes that are currently available may be removed or closed off to future investment. New underlying mutual funds or new share classes of currently available underlying mutual funds may be added. Contract owners will receive notice of any such changes that affect their contract. Additionally, not all of the underlying mutual funds are available in every state.
In the future, additional underlying mutual funds managed by certain financial institutions, brokerage firms or their affiliates may be added to the variable account. These additional underlying mutual funds may be offered exclusively to purchasing customers of the particular financial institution or brokerage firm, or through other exclusive distribution arrangements.
Voting Rights
Contract owners who have allocated assets to the underlying mutual funds are entitled to certain voting rights. Nationwide will vote contract owner shares at special shareholder meetings based on contract owner instructions. However, if the law changes and Nationwide is allowed to vote in its own right, it may elect to do so.
Contract owners with voting interests in an underlying mutual fund will be notified of issues requiring the shareholders' vote as soon as possible before the shareholder meeting. Notification will contain proxy materials and a form with which to give Nationwide voting instructions. Nationwide will vote shares for which no instructions are received in the same proportion as those that are received. What this means to you is that when only a small number of contract owners vote, each vote has a greater impact on the outcome.
The number of shares which a contract owner may vote is determined by dividing the cash value of the amount they have allocated to an underlying mutual fund by the net asset value of that underlying mutual fund. Nationwide will designate a date for this determination not more than 90 days before the shareholder meeting.
Material Conflicts
The underlying mutual funds may be offered through separate accounts of other insurance companies, as well as through other separate accounts of Nationwide. Nationwide does not anticipate any disadvantages to this. However, it is possible that a conflict may arise between the interests of the variable account and one or more of the other separate accounts in which these underlying mutual funds participate.
Material conflicts may occur due to a change in law affecting the operations of variable life insurance policies and variable annuity contracts, or differences in the voting instructions of the contract owners and those of other companies. If a material conflict occurs, Nationwide will take whatever steps are necessary to protect contract owners and variable annuity payees, including withdrawal of the variable account from participation in the underlying mutual fund(s) involved in the conflict.
Substitution of Securities
Nationwide may substitute, eliminate, or combine shares of another underlying mutual fund for shares already purchased or to be purchased in the future if either of the following occurs:
| (1) | shares of a current underlying mutual fund are no longer available for investment; or |
| (2) | further investment in an underlying mutual fund is inappropriate. |
No substitution, elimination, or combination of shares may take place without the prior approval of the SEC.
Guaranteed Term Options
Guaranteed Term Options ("GTOs") are separate investment options under the contract. The minimum amount that may be allocated to a GTO is $1,000. Allocations to a GTO are held in a separate account, established by Nationwide pursuant to Ohio law, to aid in the reserving and accounting for Guaranteed Term Option obligations. The separate account's assets are held separately from Nationwide's other assets and are not chargeable with liabilities incurred in any other business of Nationwide. However, the general assets of Nationwide are available for the purpose of meeting the guarantees of any GTO, subject to Nationwide's claims-paying ability. A GTO prospectus should be read along with this prospectus.
Guaranteed Term Options provide a guaranteed rate of interest over four different maturity durations: three (3), five (5), seven (7) or ten (10) years. Note: The guaranteed term may last for up to 3 months beyond the 3, 5, 7, or 10 year period since every guaranteed term will end on the final day of a calendar quarter.
For the duration selected, Nationwide will declare a guaranteed interest rate. The guaranteed interest rate will be credited to amounts allocated to the GTO(s) unless a distribution is taken before the maturity date. If a distribution occurs before the maturity date, the amount distributed will be subject to a market value adjustment. A market value adjustment can increase or decrease the amount distributed depending on fluctuations in swap rates. No market value adjustment will be applied if GTO allocations are held to maturity.
Because a market value adjustment can affect the value of a distribution, its effects should be carefully considered before surrendering or transferring from GTOs. Please refer to the prospectus for the GTOs for further information.
Guaranteed Term Options are available only during the accumulation phase of a contract. They are not available after the annuitization date. In addition, GTOs are not available for use with Asset Rebalancing, Dollar Cost Averaging, or Systematic Withdrawals.
Guaranteed Term Options may not be available in every state.
GTO Charges Assessed for Certain Optional Benefits
For contract owners that elect the following optional benefits, allocations made to the GTOs will be assessed a fee as indicated:
Optional Benefit | GTO Charge |
| Capital Preservation Plus Option | 0.50% |
| Capital Preservation Plus Lifetime Income Option | up to 1.00%* |
*Currently, the GTO charge associated with this option is 0.60%.
The GTO charges are assessed by decreasing the interest rate of return credited to assets allocated to the Guranteed Term Options.
Due to certain state requirements, in some state jurisdictions, Nationwide uses Target Term Options ("TTOs") instead of GTOs in connection with the Capital Preservation Plus Option and the Capital Preservation Plus Lifetime Income Option. Target Term Options are not available separate from these options.
For all material purposes, GTOs and TTOs are the same. Target Term Options are managed and administered identically to GTOs. The distinction is that the interest rate associated with TTOs is not guaranteed as it is in GTOs. However, because the options are managed and administered identically, the result to the investor is the same.
All references in this prospectus to GTOs in connection with the Capital Preservation Plus Option and the Capital Preservation Plus Lifetime Income Option will also mean TTOs (in applicable jurisdictions). Please refer to the prospectus for the Guaranteed Term Options/Target Term Options for more information.
The Fixed Account
The fixed account is an investment option that is funded by assets of Nationwide's general account. The general account contains all of Nationwide's assets other than those in this and other Nationwide separate accounts and is used to support Nationwide's annuity and insurance obligations. The general account is not subject to the same laws as the variable account and the SEC has not reviewed material in this prospectus relating to the fixed account.
Purchase payments will be allocated to the fixed account by election of the contract owner. Nationwide reserves the right to limit or refuse purchase payments allocated to the fixed account at its sole discretion. Generally, Nationwide will invoke this right when interest rates are low by historical standards.
The investment income earned by the fixed account will be allocated to the contracts at varying guaranteed interest rate(s) depending on the following categories of fixed account allocations:
| | New Money Rate– The rate credited on the fixed account allocation when the contract is purchased or when subsequent purchase payments are made. Subsequent purchase payments may receive different New Money Rates than the rate when the contract was issued, since the New Money Rate is subject to change based on market conditions. |
| | Variable Account to Fixed Rate– Allocations transferred from any of the underlying investment options in the variable account to the fixed account may receive a different rate. The rate may be lower than the New Money Rate. There may be limits on the amount and frequency of movements from the variable account to the fixed account. |
| | Renewal Rate– The rate available for maturing fixed account allocations which are entering a new guarantee period. The contract owner will be notified of this rate in a letter issued with the quarterly statements when any of the money in the contract owner's fixed account matures. At that time, the contract owner will have an opportunity to leave the money in the fixed account and receive the Renewal Rate or the contract owner can move the money to any of the other underlying mutual fund options. |
| | Dollar Cost Averaging Rate– From time to time, Nationwide may offer a more favorable rate for an initial purchase payment into a new contract when used in conjunction with a dollar cost averaging program. |
All of these rates are subject to change on a daily basis; however, once applied to the fixed account, the interest rates are guaranteed until the end of the calendar quarter during which the 12 month anniversary of the fixed account allocation occurs.
Credited interest rates are annualized rates – the effective yield of interest over a one-year period. Interest is credited to each contract on a daily basis. As a result, the credited interest rate is compounded daily to achieve the stated effective yield.
The guaranteed rate for any purchase payment will be effective for not less than twelve months. Nationwide guarantees that the rate will not be less than the minimum interest rate required by applicable state law.
Any interest in excess of the minimum interest rate required by applicable state law will be credited to fixed account allocations at Nationwide's sole discretion. The contract owner assumes the risk that interest credited to fixed account allocations may not exceed the minimum interest rate required by applicable state law for any given year.
Nationwide guarantees that the fixed account contract value will not be less than the amount of the purchase payments allocated to the fixed account, plus interest credited as described above, less any surrenders and any applicable
charges including CDSC. Additionally, Nationwide guarantees that interest credited to fixed account allocations will not be less than the minimum interest required by applicable state law.
Fixed Account Interest Rate Guarantee Period
The fixed account interest rate guarantee period is the period of time that the fixed account interest rate is guaranteed to remain the same. During a fixed account interest rate guarantee period, transfers cannot be made from the fixed account, and amounts transferred to the fixed account must remain on deposit. If contract value is allocated to the fixed account and the contract owner subsequently elects the Capital Preservation Plus Option or the Capital Preservation Plus Lifetime Income Option, the current fixed account interest rate guarantee period will terminate. If such contract owner allocates all or part of the Non-Guaranteed Term Option component of the Capital Preservation Plus Option or the Capital Preservation Plus Lifetime Income Option to the fixed account, the allocation will be credited interest at the then current Renewal Rate and a new fixed account interest rate guarantee period will begin
For new purchase payments allocated to the fixed account and transfers to the fixed account, the fixed account interest rate guarantee period begins on the date of deposit or transfer and ends on the one year anniversary of the deposit or transfer. The guaranteed interest rate period may last for up to 3 months beyond the 1 year anniversary because guaranteed terms end on the last day of a calendar quarter.
The fixed account interest rate guarantee period is distinct from the maturity durations associated with Guaranteed Term Options.
Variable annuities are complex investment products with unique benefits and advantages that may be particularly useful in meeting long-term savings and retirement needs. There are costs and charges associated with these benefits and advantages – costs and charges that are different, or do not exist at all, within other investment products. With help from financial consultants and advisers, investors are encouraged to compare and contrast the costs and benefits of the variable annuity described in this prospectus against those of other investment products, especially other variable annuity and variable life insurance products offered by Nationwide and its affiliates.
Nationwide offers a wide array of such products, many with different charges, benefit features and underlying investment options. This process of comparison and analysis should aid in determining whether the purchase of the contract described in this prospectus is consistent with your investment objectives, risk tolerance, investment time horizon, marital status, tax situation and other personal characteristics and needs. Not all benefits, programs, features and investment options described in this prospectus are available or approved for use in every state.
In order to comply with the USA Patriot Act and rules promulgated thereunder, Nationwide has implemented procedures designed to prevent contracts described in this prospectus from being used to facilitate money laundering or the financing of terrorist activities.
If this contract is purchased to replace another variable annuity, be aware that the mortality tables used to determine the amount of annuity payments may be less favorable than those in the contract being replaced.
These contracts are offered to customers of various financial institutions and brokerage firms. The individual financial institution or brokerage firm may limit the availability of certain features or optional benefits in accordance with their internal policies. No financial institution or brokerage firm is responsible for the guarantees under the contracts. Guarantees under the contracts are the sole responsibility of Nationwide.
In general, deferred variable annuities are long-term investments; they are not intended as short-term investments. Accordingly, Nationwide has designed the contract to offer features, pricing, and investment options that encourage long-term ownership. It is very important that contract owners and prospective contract owners understand all the costs associated with owning a contract, and if and how those costs change during the lifetime of the contract. Contract and optional charges may not be the same in later contract years as they are in early contract years. The various contract and optional benefit charges are assessed in order to compensate Nationwide for administrative services, distribution and operational expenses, and assumed actuarial risks associated with the contract.
Following is a discussion of some relevant factors that may be of particular interest to prospective investors.
Distribution, Promotional and Sales Expenses
Nationwide pays commissions to the firms that sell the contracts. The maximum gross commission that Nationwide will pay on the sale of the contracts is 7.00% of purchase payments. Note that the individual registered representatives typically receive only a portion of this amount; the remainder is retained by the firm. Nationwide may also, instead of a premium-based commission, pay an asset-based commission (sometimes referred to as "trails" or "residuals"), or a combination of the two.
In addition to or partially in lieu of commission, Nationwide may also pay the selling firms a marketing allowance, which is based on the firm’s ability and demonstrated willingness to promote and market Nationwide's products. How any marketing allowance is spent is determined by the firm, but generally will be used to finance firm activities that may contribute to the promotion and marketing of Nationwide's products. For more information on the exact compensation arrangement associated with this contract, please consult your registered representative.
Underlying Mutual Fund Payments
Nationwide’s Relationship with the Underlying Mutual Funds
The underlying mutual funds incur expenses each time they sell, administer, or redeem their shares. The variable account aggregates contract owner purchase, redemption, and transfer requests and submits net or aggregated purchase/redemption
requests to each underlying mutual fund daily. The variable account (not the contract owners) is the underlying mutual fund shareholder. When the variable account aggregates transactions, the underlying mutual fund does not incur the expense of processing individual transactions it would normally incur if it sold its shares directly to the public. Nationwide incurs these expenses instead.
Nationwide also incurs the distribution costs of selling the contract (as discussed above), which benefit the underlying mutual funds by providing contract owners with sub-account options that correspond to the underlying mutual funds.
An investment adviser or subadviser of an underlying mutual fund or its affiliates may provide Nationwide or its affiliates with wholesaling services that assist in the distribution of the contract and may pay Nationwide or its affiliates to participate in educational and/or marketing activities. These activities may provide the adviser or subadviser (or their affiliates) with increased exposure to persons involved in the distribution of the contract.
Types of Payments Nationwide Receives
In light of the above, the underlying mutual funds and their affiliates make certain payments to Nationwide or its affiliates (the “payments”). The amount of these payments is typically based on a percentage of assets invested in the underlying mutual funds attributable to the contracts and other variable contracts Nationwide and its affiliates issue, but in some cases may involve a flat fee. These payments may be used by us for any corporate purpose, which include reducing the prices of the contracts, paying expenses that Nationwide or its affiliates incur in promoting, marketing, and administering the contracts and the underlying mutual funds, and achieving a profit.
Nationwide or its affiliates receive the following types of payments:
| | Underlying mutual fund 12b-1 fees, which are deducted from underlying mutual fund assets; |
| | Sub-transfer agent fees or fees pursuant to administrative service plans adopted by the underlying mutual fund, which may be deducted from underlying mutual fund assets; and |
| | Payments by an underlying mutual fund’s adviser or subadviser (or its affiliates). Such payments may be derived, in whole or in part, from the advisory fee, which is deducted from underlying mutual fund assets and is reflected in mutual fund charges. |
Furthermore, Nationwide benefits from assets invested in Nationwide’s affiliated underlying mutual funds (i.e., Nationwide Variable Insurance Trust) because its affiliates also receive compensation from the underlying mutual funds for investment advisory, administrative, transfer agency, distribution, and/or other services. Thus, Nationwide may receive more revenue with respect to affiliated underlying mutual funds than unaffiliated underlying mutual funds.
Nationwide took into consideration the anticipated payments from the underlying mutual funds when we determined the charges imposed under the contracts (apart from fees and expenses imposed by the underlying mutual funds). Without these payments, Nationwide would have imposed higher charges under the contract.
Amount of Payments Nationwide Receives
For the year ended December 31, 2006, the underlying mutual fund payments Nationwide and its affiliates received from the underlying mutual funds did not exceed 0.65% (as a percentage of the average daily net assets invested in the underlying mutual funds) offered through this contract or other variable contracts that Nationwide and its affiliates issue. Payments from investment advisers or subadvisers to participate in educational and/or marketing activities have not been taken into account in this percentage.
Most underlying mutual funds or their affiliates have agreed to make payments to Nationwide or its affiliates, although the applicable percentages may vary from underlying mutual fund to underlying mutual fund and some may not make any payments at all. Because the amount of the actual payments Nationwide and its affiliates receive depends on the assets of the underlying mutual funds attributable to the contract, Nationwide and its affiliates may receive higher payments from underlying mutual funds with lower percentages (but greater assets) than from underlying mutual funds that have higher percentages (but fewer assets).
For additional information related to amount of payments Nationwide receives, go to www.nationwide.com.
Identification of Underlying Mutual Funds
Nationwide may consider several criteria when identifying the underlying mutual funds, including some or all of the following: investment objectives, investment process, investment performance, risk characteristics, investment capabilities, experience and resources, investment consistency, and fund expenses. Another factor Nationwide considers during the identification process is whether the underlying mutual fund’s adviser or subadviser is one of our affiliates or whether the underlying mutual fund, its adviser, its subadviser(s), or an affiliate will make payments to us or our affiliates.
There may be underlying mutual funds with lower fees, as well as other variable contracts that offer underlying mutual funds with lower fees. You should consider all of the fees and charges of the contract in relation to its features and benefits when making your decision to invest. Please note that higher contract and underlying mutual fund fees and charges have a direct effect on your investment performance.
Profitability
Nationwide does consider profitability when determining the charges in the contract. In early contract years, Nationwide does not anticipate earning a profit, since that is a time when administrative and distribution expenses are typically higher. Nationwide does, however, anticipate earning a profit in later contract years. In general, Nationwide's profit will be greater the higher the investment return and the longer the contract is held.
Variable Account Charge
Nationwide deducts a Variable Account Charge from the variable account. This amount is computed on a daily basis and is equal to an annualized rate of 1.00% of the daily net assets of the variable account. This fee compensates Nationwide for expenses incurred in the day to day business of distributing, issuing and maintaining annuity contracts. If the Variable Account Charge is insufficient to cover actual expenses, the loss is borne by Nationwide. Nationwide may realize a profit from this charge.
Contract Maintenance Charge
Nationwide deducts a Contract Maintenance Charge of $30 on each contract anniversary that occurs before annuitization and upon full surrender of the contract. This charge reimburses Nationwide for administrative expenses involved in issuing and maintaining the contract.
If, on any contract anniversary (or on the date of a full surrender), the contract value is $50,000 or more, Nationwide will waive the Contract Maintenance Charge from that point forward.
The deduction of the Contract Maintenance Charge will be taken proportionately from each sub-account, the fixed account and the Guaranteed Term Options based on the value in each option as compared to the total contract value.
Nationwide will not increase the Contract Maintenance Charge. Nationwide will not reduce or eliminate the Contract Maintenance Charge where it would be discriminatory or unlawful.
Contingent Deferred Sales Charge
No sales charge deduction is made from purchase payments upon deposit into the contracts. However, if any part of the contract is surrendered, Nationwide may deduct a CDSC. The CDSC will not exceed 7% of purchase payments surrendered.
The CDSC is calculated by multiplying the applicable CDSC percentage (noted below) by the amount of purchase payments surrendered.
For purposes of calculating the CDSC, surrenders are considered to come first from the oldest purchase payment made to the contract, then the next oldest purchase payment, and so forth. Earnings are not subject to the CDSC, but may not be distributed prior to the distribution of all purchase payments. (For tax purposes, a surrender is usually treated as a withdrawal of earnings first.)
The CDSC applies as follows:
Number of Completed Years from Date of Purchase Payment | CDSC Percentage |
| 0 | 7% |
| 1 | 7% |
| 2 | 6% |
| 3 | 5% |
| 4 | 4% |
| 5 | 3% |
| 6 | 0% |
Some state jurisdictions may require a lower CDSC schedule. Please refer to your contract for state specific information.
The CDSC is used to cover sales expenses, including commissions, production of sales material, and other promotional expenses. If expenses are greater than the CDSC, the shortfall will be made up from Nationwide's general assets, which may indirectly include portions of the variable account charges, since Nationwide may generate a profit from these charges.
All or a portion of any withdrawal may be subject to federal income taxes. Contract owners taking withdrawals before age 59½ may be subject to a 10% penalty tax.
Waiver of Contingent Deferred Sales Charge
Each contract year, the contract owner may withdraw without a CDSC the greater of:
| (1) | 10% of the net difference of purchase payments that are subject to CDSC minus purchase payments surrendered that were subject to CDSC; or |
| (2) | any amount withdrawn to meet minimum distribution requirements under the Internal Revenue Code. |
This CDSC-free withdrawal privilege is non-cumulative. Free amounts not taken during any given contract year cannot be taken as free amounts in a subsequent contract year.
Purchase payments surrendered under the CDSC-free withdrawal privilege are not, for purposes of other calculations under the contract, considered a surrender of purchase payments.
In addition, no CDSC will be deducted:
| (1) | upon the annuitization of contracts which have been in force for at least 2 years; |
| (2) | upon payment of a death benefit. However, additional purchase payments made to the contract after receiving the benefit of a spousal protection option are subject to the CDSC provisions of the contract; or |
| (3) | from any values which have been held under a contract for at least 6 years. |
No CDSC applies to transfers among sub-accounts or between or among the Guaranteed Term Options, the fixed account, or the variable account.
A contract held by a Charitable Remainder Trust (within the meaning of Internal Revenue Code Section 664) may withdraw CDSC-free the greater of the amount that would otherwise be available for withdrawal without a CDSC; and the difference between:
| (a) | the contract value at the close of the day prior to the date of the withdrawal; and |
| (b) | the total purchase payments made to the contract (less an adjustment for amounts surrendered). |
This contract is not designed for and does not support active trading strategies. In order to protect investors in this contract that do not utilize such strategies, Nationwide may initiate certain exchange offers intended to provide contract owners
that meet certain criteria with an alternate variable annuity designed to accommodate active trading. If this contract is exchanged as part of an exchange offer, the exchange will be made on the basis of the relative net asset values of the exchanged contract. Furthermore, no CDSC will be assessed on the exchanged assets and Nationwide will "tack" the contract’s CDSC schedule onto the new contract. This means that the CDSC schedule will not start anew on the exchanged assets in the new contract; rather, the CDSC schedule from the exchanged contract will be applied to the exchanged assets both in terms of percentages and the number of completed contract years. This enables the contract owner to exchange into the new contract without having to start a new CDSC schedule on exchanged assets. However, if subsequent purchase payments are made to the new contract, they will be subject to any applicable CDSC schedule that is part of the new contract.
The CDSC will not be eliminated if to do so would be unfairly discriminatory or prohibited by state law.
The waiver of CDSC only applies to partial surrenders. If the contract owner elects to surrender the contract in full, where permitted by state law, Nationwide will assess a CDSC on the entire amount surrendered. For purposes of the CDSC free withdrawal privilege, a full surrender is:
| | multiple surrenders taken within a one-year period that deplete the entire contract value; or |
| | any single surrender of 90% or more of the contract value. |
Long-Term Care/Nursing Home and Terminal Illness Waiver
The contract includes a Long-Term Care/Nursing Home and Terminal Illness waiver at no additional charge.
Under this provision, no CDSC will be charged if:
| (1) | the third contract anniversary has passed; and |
| (2) | the contract owner has been confined to a long-term care facility or hospital for a continuous 90-day period that began after the contract issue date; or |
| (3) | the contract owner has been diagnosed by a physician, at any time after contract issuance, to have a terminal illness; and |
| (4) | Nationwide receives and records such a letter from that physician indicating such diagnosis. |
Written notice and proof of terminal illness or confinement for 90 days in a hospital or long term care facility must be received in a form satisfactory to Nationwide and recorded at Nationwide's home office prior to waiver of the CDSC.
In the case of joint ownership, the waivers will apply if either joint owner meets the qualifications listed above.
For those contracts that have a non-natural person as contract owner as an agent for a natural person, the annuitant may exercise the right of the contract owner for purposes described in this provision. If the non-natural contract owner does not own the contract as an agent for a natural person (e.g., the contract owner is a corporation or a trust for the benefit of an entity), the annuitant may not exercise the rights described in this provision.
Premium Taxes
Nationwide will charge against the contract value any premium taxes levied by a state or other government entity. Premium tax rates currently range from 0% to 5%. This range is subject to change. The method used to assess premium tax will be determined by Nationwide at its sole discretion in compliance with state law.
If applicable, Nationwide will deduct premium taxes from the contract either at:
| (1) | the time the contract is surrendered; |
| (3) | such earlier date as Nationwide becomes subject to premium taxes. |
Premium taxes may be deducted from death benefit proceeds.
Short-Term Trading Fees
Some underlying mutual funds may assess (or reserve the right to assess) a short-term trading fee in connection with transfers from a sub-account that occur within 60 days after the date of allocation to the sub-account.
Short-term trading fees are intended to compensate the underlying mutual fund (and contract owners with interests allocated in the underlying mutual fund) for the negative impact on fund performance that may result from frequent, short-term trading strategies. Short-term trading fees are not intended to affect the large majority of contract owners not engaged in such strategies.
Any short-term trading fee assessed by any underlying mutual fund available in conjunction with the contracts described in this prospectus will equal 1% of the amount determined to be engaged in short-term trading. Short-term trading fees will only apply to those sub-accounts corresponding to underlying mutual funds that charge such fees (see the underlying mutual fund prospectus). Any short-term trading fees paid are retained by the underlying mutual fund, not by Nationwide, and are part of the underlying mutual fund’s assets. Contract owners are responsible for monitoring the length of time allocations are held in any particular underlying mutual fund. Nationwide will not provide advance notice of the assessment of any applicable short-term trading fee.
For a complete list of the underlying mutual funds offered under the contract that assess (or reserve the right to assess) a short-term trading fee, please see "Underlying Mutual Fund Annual Expenses" earlier in this prospectus.
If a short-term trading fee is assessed, the underlying mutual fund will charge the variable account 1% of the amount determined to be engaged in short-term trading. The variable account will then pass the short-term trading fee on to the specific contract owner that engaged in short-term trading by deducting an amount equal to the short-term trading fee from that contract owner’s sub-account value. All such fees will be remitted to the underlying mutual fund; none of the fee
proceeds will be retained by Nationwide or the variable account.
When multiple purchase payments (or exchanges) are made to a sub-account that is subject to short-term trading fees, transfers will be considered to be made on a first in/first out (FIFO) basis for purposes of determining short-term trading fees. In other words, units held the longest time will be treated as being transferred first, and units held for the shortest time will be treated as being transferred last.
Some transactions are not subject to the short-term trading fees. Transactions that are not subject to short-term trading fees include:
| | scheduled and systematic transfers, such as Dollar Cost Averaging, Asset Rebalancing, and Systematic Withdrawals; |
| | contract loans or surrenders, including CDSC-free withdrawals; |
| | surrenders of annuity units to make annuity payments; |
| | surrenders of accumulation units to pay the annual Contract Maintenance Charge; |
| | surrenders of accumulation units to pay a death benefit; or |
| | transfers made upon annuitization of the contract. |
New share classes of certain currently available underlying mutual funds may be added as investment options under the contracts. These new share classes may require the assessment of short-term trading or redemption fees. When these new share classes are added, new purchase payment allocations and exchange reallocations to the underlying mutual funds in question may be limited to the new share class.
For an additional charge, the following optional benefits are available to contract owners. Not all optional benefits are available in every state. Unless otherwise indicated:
| (1) | optional benefits must be elected at the time of application; |
| (2) | optional benefits, once elected, may not be terminated; and |
| (3) | the charges associated with the optional benefits will be assessed until annuitization. |
The charges associated with optional benefits are generally only assessed prior to annuitization. However, the charge associated with the C Schedule Option will be assessed both before and after annuitization.
CDSC Option
C Schedule Option
For an additional charge at an annualized rate of 0.30% of the daily net assets of the variable account, an applicant may elect the C Schedule Option, under which no CDSC will be assessed on surrenders from the contract.
Additionally, election of the C Schedule Option:
| | eliminates the Lifetime Income Option as an optional benefit; |
| | eliminates the Capital Preservation Plus Lifetime Income Option as an optional benefit; |
| | eliminates the fixed account as an investment option under the contract; and |
| | eliminates Enhanced Fixed Account Dollar Cost Averaging as a contract owner service. |
The charge associated with the C Schedule Option will be assessed for the life of the contract. Nationwide may realize a profit from the charge assessed for this option.
Death Benefit Options
For an additional charge, the contract owner may elect a death benefit option. The charge associated with each option will be assessed until annuitization and are assessed on variable account allocations only.
One-Year Enhanced Death Benefit Option
Applicants with annuitants age 80 or younger at the time of application can elect the One-Year Enhanced Death Benefit Option for an additional charge at an annualized rate of 0.20% of the daily net assets of the variable account. Nationwide may realize a profit from the charge assessed for this option.
For contracts that have elected this option, if the total of all purchase payments made to the contract is $3,000,000 or less, the death benefit will be the greatest of:
| (1) | the contract value as of the date that Nationwide receives all the information necessary to pay the death benefit; |
| (2) | the total of all purchase payments, less an adjustment for amounts surrendered; or |
| (3) | the highest contract value on any contract anniversary prior to the annuitant's 86th birthday, less an adjustment for amounts subsequently surrendered, plus purchase payments received after that contract anniversary. |
For contracts that have elected this option, if the total of all purchase payments made to the contract is greater than $3,000,000, the death benefit will be adjusted as described in the "Death Benefit Calculations" provision on page 46.
The One-Year Enhanced Death Benefit Option also includes the Spousal Protection Feature, which allows a surviving spouse to continue the contract while receiving the economic benefit of the death benefit upon the death of the other spouse. Please see “Spousal Protection Feature” later in this prospectus.
Combination Enhanced Death Benefit Option
Applicantswith annuitants age 75 or younger at the time of application can elect the Combination Enhanced Death Benefit Option for an additional charge at an annualized rate of 0.45% of the daily net assets of the variable account. Nationwide may realize a profit from the charge assessed for this option.
For contracts that have elected this option, if the total of all purchase payments made to the contract is $3,000,000 or less, the death benefit will be the greatest of:
| (1) | the contract value as of the date that Nationwide receives all the information necessary to pay the death benefit; |
| (2) | the total of all purchase payments, less an adjustment for amounts surrendered; |
| (3) | the highest contract value on any contract anniversary before the annuitant's 81st birthday, less an adjustment for amounts subsequently surrendered, plus purchase payments received after that contract anniversary; or |
| (4) | the 5% interest anniversary value. |
For contracts that have elected this option, if the total of all purchase payments made to the contract is greater than $3,000,000, the death benefit will be adjusted as described in the "Death Benefit Calculations" provision on page 46.
The Combination Enhanced Death Benefit Option also includes the Spousal Protection Feature, which allows a surviving spouse to continue the contract while receiving the economic benefit of the death benefit upon the death of the other spouse. Please see “Spousal Protection Feature” later in this prospectus.
Capital Preservation Plus Option
The Capital Preservation Plus ("CPP") Option provides a "return of principal" guarantee over an elected period of time (5, 7, or 10 years -- the "program period"). Contract value at the end of the CPP program period will be no less than contract value at the beginning of the period, regardless of market performance. Note, however, that surrenders or contract maintenance charges that are deducted from the contract after this option is elected will reduce the value of the guarantee proportionally.
The guarantee is conditioned upon the allocation of contract value between two investment components:
| (1) | A Guaranteed Term Option corresponding to the length of the elected program period; and |
| (2) | Non-Guaranteed Term Option allocations, which consist of the fixed account and certain underlying mutual funds that are available under the program. This investment component is allocated according to contract owner instructions. |
If contract value is allocated to the fixed account and the contract owner subsequently elects the Capital Preservation Plus Option, the current fixed account interest rate guarantee period will terminate. If such contract owner allocates all or part of the Non-Guaranteed Term Option component of the Capital Preservation Plus Option to the fixed account, the allocation will be credited interest at the then current Renewal Rate and a new fixed account interest rate guarantee period will begin.
When the CPP Option is elected, Nationwide will specify the percentage of the contract value that must be allocated to each of the two general components described above. Generally, when interest rates are higher, a greater portion of the contract value will be made available for allocation among underlying mutual funds; when interest rates are lower, lesser portions may be made available for allocation among underlying mutual funds. Also, longer program periods will typically permit greater allocations to the underlying mutual funds. Other general economic factors and market conditions may affect these determinations as well.
Charges
The CPP Option is provided for an additional charge at an annualized rate not to exceed 0.50% of the daily net assets of the variable account. This charge will be assessed against the GTO through a reduction in credited interest rates (not to exceed 0.50%).
All charges associated with the CPP Option will remain the same for the duration of the program period. When the CPP program period ends or an elected CPP Option is terminated, the charges associated with the option will no longer be assessed. Nationwide may realize a profit from this charge.
The Advantage of the Capital Preservation Plus Option
Without electing the option, contract owners may be able to approximate (without replicating) the benefits of the CPP Option. To do this, contract owners would have to determine how much of their contract value would need to be allocated to a GTO so that the amount at maturity (principal plus interest attributable to the GTO allocation) would approximate the original total investment. The balance of the contract value would be available to be allocated among underlying funds or the fixed account. This represents an investment allocation strategy aimed at capital preservation.
Election of the CPP Option, however, generally permits a higher percentage of the contract value to be allocated outside of the GTO among underlying mutual funds and/or the fixed account. This provides contract owners with a greater opportunity to benefit from market appreciation that is reflected in the underlying mutual fund performance, while preserving the return of principal guarantee.
Availability
The CPP Option is not available for contracts issued on or after August 1, 2007. The CPP Option may not be elected if the Capital Preservation Plus Lifetime Income Option or the Lifetime Income Option is elected.
Additionally, at the end of any CPP program period or after terminating a CPP Option, and if the CPP Option is still available in the applicable jurisdiction, the contract owner may elect to participate in a new CPP Option at the charges, rates and allocation percentages in effect at that point in time. If the contract owner elects to participate in a new CPP Option, such election and complete instructions must be received by Nationwide within 60 days before the end of the preceding CPP program period or within 60 days before the CPP Option termination, whichever is applicable.
Enhanced Capital Preservation Plus Option
From time to time, Nationwide may offer an enhanced version of the CPP Option. The Enhanced CPP Option costs the same as the standard CPP Option and operates similarly. The
distinction between the two options is that the enhanced version provides contract owners with a larger Non-Guaranteed Term Option component than would be available under the standard CPP Option in exchange for stricter allocation restrictions on the Non-Guarnateed Term Option component. For the list of investment options available under this benefit please see "Income Benefit Investment Options" later in this prospectus. It is possible, under certain enhanced versions of the option, for a contract owner to have 100% of their investment allocated to the Non-Guaranteed Term Option component.
Conditions Associated with the Capital Preservation Plus Option
A contract owner with an outstanding loan may not elect the CPP Option.
During the CPP program period, the following conditions apply:
| | If surrenders or contract maintenance charges are deducted from the contract subsequent to electing this option, the value of the guarantee will be reduced proportionally. |
| | Only one CPP Option program may be in effect at any given time. |
| | No new purchase payments may be applied to the contract. |
| | Enhanced Fixed Account Dollar Cost Averaging is not available as a contract owner service. |
| | Nationwide will not permit loans to be taken from the contract. |
| | No optional benefit that assesses a charge to the GTOs may be added to the contract. |
| | If, while the CPP Option is elected, the annuitant dies and the annuitant's spouse elects to continue the contract, the option will remain in effect and will continue until the end of the original program period. |
If the contract is annuitized, surrendered or liquidated for any reason prior to the end of the program period, all guarantees are terminated. A market value adjustment may apply to amounts transferred from a GTO due to annuitization. A market value adjustment may apply to amounts surrendered or liquidated from a GTO and the surrender will be subject to the CDSC provisions of the contract.
After the end of the program period, or after termination of the option, the above conditions will no longer apply.
Investments During the Program Period
When the CPP option is elected and after Nationwide receives all required information, Nationwide will declare the amount of the contract value that is available for allocation to the fixed account and/or the available underlying mutual funds. The remainder of the contract value must be allocated to a Guaranteed Term Option, the length of which corresponds to the length of the CPP program period elected by the contract owner.
Nationwide makes only certain underlying mutual funds available when a contract owner elects the Capital Preservation Plus Option. Nationwide selected the available underlying mutual funds on the basis of certain risk factors associated with the underlying mutual fund's investment objective. The underlying mutual funds not made available in conjunction with the Capital Preservation Plus Option were excluded on the basis of similar risk considerations.
During the CPP program period, the following investment options are available for the Non-Guaranteed Term Option component:
| 1. | the fixed account; and/or |
| 2. | a variable investment option, which could be one of the following: |
| a. | if the Nationwide Allocation Architect service is available, one of the models available through that service (see "Contract Owner Services"); or the Static Asset Allocation Models; or |
| b. | if the Custom Portfolios are available, one of the models available through that service (see "Contract Owner Services”); or |
| c. | any combination of the underlying mutual funds listed under the section "Income Benefit Investment Options" found later in this prospectus. |
Election of the CPP Option will not be effective unless and until Nationwide receives sub-account allocation instructions based on the preceding list of available underlying mutual funds. Allocations to underlying mutual funds other than those listed above are not permitted during the program period.
Nationwide reserves the right to modify the list of available underlying mutual funds upon written notice to contract owners. If an underlying mutual fund is deleted from the list of available underlying mutual funds, such deletion will not affect CPP Option programs already in effect.
Surrenders During the CPP Program Period
If, during the CPP program period, the contract owner takes a partial surrender from the contract, Nationwide will surrender accumulation units from the sub-accounts and an amount from the fixed account and GTO. The amount surrendered from each investment option will be in proportion to the value in each investment option at the time of the surrender request, unless Nationwide is instructed otherwise. Surrenders may not be taken exclusively from the GTO. In conjunction with the surrender, the value of the guarantee will be adjusted proportionally. A market value adjustment may apply to amounts surrendered from GTO and the surrender will be subject to the CDSC provisions of the contract.
Transfers During the CPP Program Period
Transfers to and from the Guaranteed Term Option are not permitted during the CPP program period.
Transfers between the fixed account and the variable account, and among sub-accounts are subject to the terms and conditions in the "Transfers Prior to Annuitization" provision.
During the CPP program period, transfers to underlying mutual funds that are not included in the CPP Option program are not permitted.
If the Nationwide Allocation Architect Service and/or the Custom Portfolio Asset Rebalancing Service are available as a Non-Guaranteed Term Option, the contract owner may move the variable portion of the Non-Guaranteed Term Option component back and forth between the Nationwide Allocation Architect service, the Custom Portfolio Asset Rebalancing Service and the CPP investment options at any time during the CPP program period. Whenever the contract owner elects to move the variable portion of the Non-Guaranteed Term Option component from the Nationwide Allocation Architect service or the Custom Portfolio Asset Rebalancing Service to the CPP investment options, all sub-account value allocated to underlying mutual funds that are not part of the CPP investment options must be reallocated to one or more CPP investment options. While the contract owner elects to participate in the Nationwide Allocation Architect service or the Custom Portfolio Asset Rebalancing Service, the terms and conditions associated with that service apply.
For those contracts that have elected an Enhanced CPP Option, transfers may be further limited during the program period.
Terminating the Capital Preservation Plus Option
Once elected, the CPP Option cannot be revoked, except as provided below.
If the contract owner elected a CPP program period matching a 7 year Guaranteed Term Option, upon reaching the 5th anniversary of the program, the contract owner may terminate the CPP Option. Any termination instructions must be received at Nationwide's home office within 60 days after the option's 5th anniversary.
If the contract owner elected a CPP program period matching a 10 year Guaranteed Term Option, upon reaching the 7th anniversary of the program, the contract owner may terminate the CPP Option. Any termination instructions must be received at Nationwide's home office within 60 days after the option's 7th anniversary.
If the contract owner terminates the CPP Option as described above, the charges associated with the CPP Option will no longer be assessed, all guarantees associated with the option will terminate, the contract's investment allocations will remain the same as when the program was in effect (unless Nationwide is instructed otherwise), and all conditions associated with the CPP Option are removed.
Fulfilling the Return of Principal Guarantee
At the end of the CPP program period, if the contract value is less than the guaranteed amount, Nationwide will credit an amount to the contract so that the contract value equals the guaranteed amount. Amounts credited under the CPP Option are considered, for the purposes of other benefits under this contract, earnings, not purchase payments. If the contract owner does not elect to begin a new CPP Option program, the amount previously allocated to the GTO and any amounts credited under the guarantee will be allocated to the money market sub-account.
Capital Preservation Plus Lifetime Income Option
The Capital Preservation Plus Lifetime Income Option is an extension of the CPP Option. The Capital Preservation Plus Lifetime Income Option may not be elected if the C Schedule Option is elected.
The CPP Lifetime Income Option is a two-phase option. The first phase (the "preservation phase") is substantially the same as the CPP Option (see "Capital Preservation Plus Option"). Part of the contract value is allocated to a GTO and the remainder is allocated to available non-GTO investment options. At the end of the CPP program period, if the contract value is less than the contract value at the time the CPP program period began, Nationwide will credit the contract with an amount sufficient to equal the guaranteed amount.
Immediate Withdrawals – Preservation Phase
Contract owners who are in the preservation phase of the option can elect the immediate withdrawal benefit and begin taking withdrawals of up to 6% of the guaranteed amount annually. Election of this benefit changes some of the terms of the CPP Lifetime Income Option. Refer to the "Immediate Withdrawal Benefit" subsection later in this provision.
Immediate Withdrawals – Withdrawal Phase
The second phase of the CPP Lifetime Income Option (the "withdrawal phase") begins with establishing the lifetime withdrawal base. Thereafter, the contract owner may take surrenders from the contract equal to a certain percentage of that lifetime withdrawal base for the remainder of his/her life, regardless of the actual contract value. This essentially provides the contract owner with an available lifetime stream of income. Note, however, that this lifetime income stream is distinct from the annuitization phase of the contract.
In short, the preservation phase gives the contract owner the assurance of a principal guarantee and the withdrawal phase gives the contract owner the opportunity for a consistent lifetime income stream. The preservation phase and withdrawal phase are discussed more thoroughly later in this provision.
Charges
The CPP Lifetime Income Option is provided for an additional charge at an annualized rate not to exceed 1.00% of the daily net assets of the variable account. Additionally, rates credited to the Guaranteed Term Option will be reduced by an amount not to exceed 1.00%. Currently, the charge associated with the CPP Lifetime Income Option is 0.60% of the daily net assets of the variable account and a 0.60% reduction in the Guaranteed Term Option crediting rate. Nationwide may realize a profit from the charge assessed for this option. All charges associated with the CPP Lifetime Income Option will be assessed until annuitization and the charge will remain the same (unless the contract owner elects a new CPP program or invokes the reset opportunity, discussed herein).
Availability
The Capital Preservation Plus Lifetime Income Option may only be elected at the time of application. The person's life upon which the benefit depends (the "determining life") must be age 35 or older at the time of election. For most contracts, the determining life is that of the primary contract owner. For those contracts where the contract owner is a non-natural person, for purposes of this option, the determining life is that of the primary annuitant, and all references in this option to "contract owner" shall mean primary annuitant. The CPP Lifetime Income Option is not available if either of the following optional benefits is elected: Lifetime Income Option or the CPP Option. Additionally, the CPP Lifetime Income Option may not be revoked or terminated except as described herein.
The CPP Lifetime Income Option may also be elected by contract owners who previously elected the CPP Option. Thus, the contract owner would be switching from the CPP Option to the CPP Lifetime Income Option. Any such election to switch must occur at the end of a CPP program period or after terminating a CPP Option as described in the "Capital Preservation Plus Option" provision. The CPP Lifetime Income Option is not available if the CPP Option is elected. Any election to switch from the CPP Option to the CPP Lifetime Income Option and complete instructions must be received by Nationwide within 60 days before the end of the CPP program period or within 60 days before the CPP Option termination, whichever is applicable.
Enhanced Capital Preservation Plus Lifetime Income Option
From time to time, Nationwide may offer an enhanced version of the CPP Lifetime Income Option. The Enhanced CPP Lifetime Income Option costs the same as the standard CPP Lifetime Income Option and operates similarly. The distinction between the two options lies in the preservation phase of the option. During the preservation phase of the Enhanced CPP Lifetime Income Option, contract owners will have a larger Non-GTO component than would be available during the preservation phase of the standard CPP Lifetime Income Option. In exchange for this benefit, Nationwide will impose stricter allocation restrictions on the Non-GTO component. For the list of investment options available under this benefit please see "Income Benefit Investment Options" later in this prospectus. It is possible, under certain enhanced versions of the option, for a contract owner to have 100% of their investment allocated to the Non-GTO component during the preservation phase. Any Enhanced CPP Lifetime Income Option that Nationwide offers will be subject to the rates, conditions, and allocation percentages in effect at that point in time.
Preservation Phase of the CPP Lifetime Income Option
The first phase of the CPP Lifetime Income Option, the preservation phase, is similar to the CPP Option. It enables the contract owner to allocate part of his/her contract value to the fixed account and/or certain underlying mutual funds in order to benefit from possible market appreciation, while preserving a return of principal guarantee. The preservation phase of the CPP Lifetime Income Option generally operates the same as the CPP Option. The CPP program period marks the time remaining until the end of the preservation phase.
| | All of the terms and conditions associated with the CPP Option also apply to the preservation phase of the CPP Lifetime Income Option except that contract owners may not terminate the CPP Lifetime Income Option prior to the end of the CPP program period (see "Terminating the Capital Preservation Plus Option"). |
| | Market conditions determine the availability and allocation percentages of the various CPP program periods. |
| | Surrenders or contract maintenance charges that are deducted from the contract during the preservation phase will reduce the value of the guarantee proportionally. |
| | If at the end of any CPP program period the contract value is less than the guaranteed amount, Nationwide will credit an amount to the contract so that the contract value equals the guaranteed amount. |
| | Amounts credited to fulfill the principal guarantee are considered, for purposes of other benefits under this contract, earnings, not purchase payments. |
During the preservation phase, for purposes of this option, Nationwide will consider a change in contract owner as a death of contract owner.
Options at the End of the Preservation Phase
Approximately 90 days before the end of a CPP program period, Nationwide will communicate the ensuing CPP program period end to the contract owner. The communication will inform the contract owner of his/her options relating to the CPP Lifetime Income Option and will instruct him/her to elect how the contract should continue. The contract owner must elect to: remain in the preservation phase of the option by electing a new CPP program; move into the withdrawal phase of the option; or terminate the option. The contract owner's election is irrevocable. Each of the options is discussed more thoroughly below.
Remaining in the preservation phase of the CPP Lifetime Income Option. After Nationwide applies any credit that may be due on the maturing CPP program, the contract owner may elect to remain in the preservation phase of the CPP Lifetime Income Option by beginning a new CPP program. If the contract owner elects this option, the new CPP program will be subject to the rates and conditions that are in effect at that point in time, and the guaranteed amount corresponding to the new CPP program will be the contract value as of the beginning of that CPP program period. The charge, from that point forward, will be the then current charge for the CPP Lifetime Income Option.
Moving into the withdrawal phase of the CPP Lifetime Income Option. After Nationwide applies any credit that may be due on the maturing CPP program, the contract owner may elect to begin the withdrawal phase of the CPP Lifetime Income Option (see "Withdrawal Phase of the CPP Lifetime Income Option" below). During the withdrawal phase, Nationwide will continue to assess the same charge that was assessed during the prior CPP program.
Terminating the CPP Lifetime Income Option. After Nationwide applies any credit that may be due on the maturing CPP program, the contract owner may elect to terminate the CPP Lifetime Income Option. Upon such an election, Nationwide will no longer assess the charge associated with the option, all benefits associated the option will terminate, and all conditions associated with the option are removed. The contract's variable investment allocations will remain the same as they were prior to the termination (unless Nationwide is instructed otherwise) and the contract value previously allocated to the GTO and any amounts credited under the principal guarantee will be allocated to the money market sub-account.
If Nationwide does not receive the contract owner's instructions as to how the option/contract should continue prior to the end of the CPP program period, upon such CPP program period end, Nationwide will assume that the contract owner intends to terminate the CPP Lifetime Income Option.
Withdrawal Phase of the CPP Lifetime Income Option
Upon electing to begin the withdrawal phase, the contract owner must instruct Nationwide how to allocate their contract value among a select group of investment options. A list of the investment options available during the withdrawal phase will be included in the election notice. The contract owner may reallocate only among the limited investment options for the remainder of the withdrawal phase.
During the withdrawal phase of the option, Nationwide will not permit any additional purchase payments to the contract and Nationwide will not permit a change in contract owner (unless the change would result in using the same determining life).
At the beginning of the withdrawal phase of the CPP Lifetime Income Option, Nationwide will determine the lifetime withdrawal base, which is equal to the contract value as of the end of the CPP program period (including any amounts credited under the principal guarantee).
At any point in the withdrawal phase, the contract owner may begin taking the lifetime income stream by requesting a surrender from the contract. All surrenders taken from the contract during the withdrawal phase will be taken from each investment option in proportion to the value in each investment option at the time of the surrender request.
At the time the first surrender is requested during the withdrawal phase, Nationwide will determine the benefit amount under this option, referred to as the "lifetime withdrawal amount." The lifetime withdrawal amount is determined by multiplying the lifetime withdrawal base by the corresponding lifetime withdrawal percentage in the chart that follows.
Age of determining life: | Lifetime withdrawal percentage: |
| age 35 up to age 59½ | 4% |
| age 59½ through 66 | 5% |
| age 67 through 71 | 6% |
| age 72 or older | 7% |
The lifetime withdrawal percentage is based on the age of the determining life as of the date of the first surrender during the withdrawal phase and will not change, except as described in the "Lifetime Withdrawal Base Reset Opportunity."
Thereafter, on each anniversary of the beginning of the withdrawal phase, the contract owner is entitled to surrender an amount equal to the lifetime withdrawal amount without reducing the lifetime withdrawal base. The contract owner may continue to take annual surrenders that do not exceed the lifetime withdrawal amount until the earlier of the contract owner's death or annuitization regardless of the actual value of the contract. Thus, it is possible for the contract owner to take annual surrenders equal to the lifetime withdrawal amount after the contract value is zero. After the contract value falls to zero, the contract owner can continue to take annual surrenders of no more than the lifetime withdrawal amount. Surrender requests may be submitted systematically or directly by the contract owner.
Although surrenders of the lifetime income amount do not reduce the lifetime withdrawal base, they do reduce the contract value and death benefit, and are subject to the CDSC provisions of the contract. Lifetime withdrawal amounts not surrendered in a given year are forfeited and may not be claimed in subsequent years.
Contract owners are permitted to take surrenders in excess of the lifetime withdrawal amount (provided that the contract value is greater than zero). However, to the extent that a surrender exceeds that year's lifetime withdrawal amount, Nationwide will proportionally reduce the lifetime withdrawal base, which will result in lower lifetime withdrawal amounts in subsequent years. The proportionate reduction will be equal to the amount withdrawn in excess of the lifetime withdrawal amount, divided by the contract value (after it is reduced by the lifetime withdrawal amount). Once the contract value falls to zero, the contract owner is no longer permitted to take surrenders in excess of the lifetime withdrawal amount.
Surrenders taken before the contract owner is age 59½ may be subject to additional tax penalties.
Required Minimun Distribution Privilege
If you surrender an amount greater than your benefit amount for the sole purpose of satisfying Internal Revenue Code minimum distribution requirements for this contract, we will not reduce your income benefit base. Nationwide reserves the right to modify or eliminate this required minimum distribution privilege. We will notify you if we discontinue or eliminate the required minimum distribution privelege.
Lifetime Withdrawal Base Reset Opportunity
On each 5-year anniversary of the beginning of the withdrawal phase, if the contract value exceeds the lifetime withdrawal base, the contract owner will have the opportunity to instruct Nationwide to reset the lifetime withdrawal base to equal the current contract value.
Nationwide will provide the contract owner with advance notice of any reset opportunity and will provide the contract value information necessary for the contract owner to decide whether or not to invoke the reset opportunity. If Nationwide
does not receive and record a contract owner's election to reset the lifetime withdrawal base by the date stipulated in the notice, Nationwide will assume that the contract owner does not wish to reset the lifetime withdrawal base.
If the contract owner chooses to reset the lifetime withdrawal base, the following terms and conditions will apply:
| | The contract owner will be assessed the charge for the CPP Lifetime Income Option that is in effect as of the date of the election to reset the lifetime withdrawal base. |
| | The lifetime withdrawal percentages that are in effect as of the date of the election to reset the lifetime withdrawal base will apply. |
| | The lifetime withdrawal percentage applicable to the contract will continue to be based on the age of the determining life as of the date of the first surrender during the withdrawal phase. |
Nationwide reserves the right to limit the number of reset opportunities to one.
Annuitization and the CPP Lifetime Income Option
Election of the CPP Lifetime Income Option does not restrict the contract owner's right to annuitize the contract.
If the contract owner elects to annuitize during the preservation phase, the contract owner must transfer the entire GTO allocation to another investment option (GTOs are not available during annuitization), and the transfer may result in a market value adjustment. All guarantees associated with the preservation phase are terminated, the charge is removed, and the conditions associated with the CPP program are no longer applicable. The amount to be annuitized will be the contract value after any market value adjustment has been applied.
If the contract owner elects to annuitize during the withdrawal phase, the charge is removed and the investment restrictions associated with the withdrawal phase are no longer applicable. The amount to be annuitized will be the contract value. Since surrenders from the contract during the withdrawal phase of the option reduce the contract value, and consequently, the amount to be annuitized, the contract owner should carefully weigh the option of annuitization against continuing with the lifetime income stream associated with the CPP Lifetime Income Option.
Succession of Rights and Termination of the CPP Lifetime Income Option
The following events will trigger an automatic termination of the CPP Lifetime Income Option:
| | a full surrender of the contract; |
| | payment of the death benefit proceeds; or |
| | an election to annuitize the contract. |
If any of the events listed above occur, the CPP Lifetime Income Option will terminate and Nationwide will no longer be obligated to fulfill the principal guarantee or to provide the lifetime withdrawal benefit.
The death of the determining life has complex consequences that are unique to the CPP Lifetime Income Option. For specific information about rights of succession, please consult with your registered representative or call Nationwide’s service center.
Immediate Withdrawal Benefit
During the preservation phase of the CPP Lifetime Income Option, the contract owner can invoke the immediate withdrawal benefit. This benefit permits the contract owner to take immediate withdrawals of up to 6% annually of the guaranteed amount until the benefit is exhausted. The benefit may only be invoked during the preservation phase, specifically during the current CPP program period, but once it is invoked, withdrawals will be permitted both during the current CPP program period and after its maturity date, until the guaranteed amount is exhausted. After the benefit is invoked, the contract owner's current CPP program period will remain in effect until its regular maturity date. The CPP program period's ending does not automatically terminate the option. However, the contract owner will receive notice that the contract value must be reallocated in order to continue the option (see “Options at the end of the CPP Program Period” later in this subsection). As long as the contract owner reallocates the contract value upon the maturity of the current CPP program period, the contract owner will remain in the preservation phase of the option (subject to the limitations herein) and continue to receive immediate withdrawals for the duration of the option. The investment options available upon the maturity of the CPP program period will be limited and may not include GTO options.
Invoking the immediate withdrawal benefit changes some of the conditions associated with the CPP Lifetime Income option, as indicated below:
| | Invoking the immediate withdrawal benefit changes the nature of the guarantee associated with the preservation phase. Nationwide will not credit an amount to the contract so that the contract value equals the guaranteed amount at the end of the applicable CPP program period. Instead, the CPP guarantee amount (as determined on the day the benefit is invoked) becomes the basis for determining the amount of the withdrawals permitted under the immediate withdrawal benefit. This amount is referred to as the "immediate withdrawal base" and is guaranteed not to change as long as the option is not terminated or total annual withdrawals do not exceed the 6% limit (see "Determining the Immediate Withdrawal Base" and "Termination (of the CPP Lifetime Income Option) with Immediate Withdrawals" later in this subsection). |
| | For purposes of the immediate withdrawal benefit, the CPP program period (during which the benefit is invoked) will remain in effect until its regular maturity date. At the CPP program period's end, the contract owner will not be permitted to begin a new CPP program period. Instead, the contract owner will be required to reallocate the contract value into certain limited investment options. The contract owner will lose the value of remaining withdrawals if the contract |
value is not reallocated (see "Options at the End of the CPP Program Period").
| | The contract owner will remain in the preservation phase for the duration of the CPP Lifetime Income option once the immediate withdrawal benefit is invoked. The contract owner will not be permitted to enter the lifetime withdrawal phase of the option. |
| | The "Succession of Rights and Termination of the CPP Lifetime Income Option" provision no longer applies once the immediate withdrawal benefit is invoked (see instead, "Termination (of the CPP Lifetime Income Option) with Immediate Withdrawals" in this subsection). |
| | Immediate withdrawals in excess of 6% annually will reduce the value of future immediate withdrawals (see "Impact of Withdrawals in Excess of 6%" later in this subsection). |
| | No additional purchase payments are permitted once the immediate withdrawal benefit is invoked. |
| | The immediate withdrawal benefit is non-cumulative. Withdrawals not taken in one contract year cannot be carried over to the following contract year. |
| | Nationwide may discontinue offering the immediate withdrawal benefit. If the benefit is discontinued, contract owners who have elected the CPP Lifetime Income Option will be permitted to invoke the benefit (subject to the conditions herein). |
Immediate withdrawals are subject to the applicable CDSC provisions of the contract. If taken prior to age 59½, the withdrawals could incur a penalty tax. Minimum required distributions could cause annual withdrawals to exceed 6% (see "Impact of an Immediate Withdrawal (within the 6% limit)" in this subsection).
Invoking the Immediate Withdrawal Benefit. A contract owner wishing to take an immediate withdrawal must affirmatively elect to invoke the benefit using a form approved by Nationwide. Upon receipt of this affirmative election, Nationwide will determine the immediate withdrawal base. Note: A surrender request alone will not initiate the immediate withdrawal benefit, but will, instead, be treated as an ordinary surrender under the contract.
In addition, since the contract owner may only invoke the benefit during the preservation phase of the option, the CPP program period that is in effect at the time of the election will continue in effect until the program period ends. In other words, invoking the immediate withdrawal benefit does not have any affect on the current CPP program period.
Options at the End of the CPP Program Period
For purposes of the immediate withdrawal benefit, the CPP program period (during which the benefit is invoked) will remain in effect until its regular maturity date. The CPP program period is chosen by the contract owner and generally corresponds to the duration of any GTO option chosen by the contract owner. Upon the CPP program period end, the contract owner will have two options:
| | reallocate the contract value among the limited available investment options; or |
| | let the CPP Lifetime Income Option terminate. |
Nationwide will communicate the ensuing CPP program period end to the contract owner approximately 90 days before the end of the period. An additional notice will be sent (approximately 60 days before the periods end) that will include a list of the limited investment options available. The contract owner must reallocate the contract value, including amounts allocated to the GTO, among the limited investment options available in order to continue receiving immediate withdrawals under the benefit. If Nationwide does not receive the contract owner’s instructions prior to the end of the program period, Nationwide will assume that the contract owner intends to terminate the CPP Lifetime Income Option. Note: If the option is terminated, the contract owner will lose the value of the remaining immediate withdrawal base, i.e., lose any remaining payments (see "Termination (of the CPP Lifetime Income Option) with Immediate Withdrawals").
Determining the Immediate Withdrawal Base
The immediate withdrawal base is the dollar amount that Nationwide will use as the basis for determining how much the contract owner can withdraw under the benefit. The immediate withdrawal base will be equal to the CPP guarantee amount (as determined on the day the benefit is invoked). The immediate withdrawal base will not change unless the contract owner takes withdrawals in excess of 6% each year (i.e., the total amount of withdrawals in one year may not exceed 6% of the immediate withdrawal base).
Example with no Surrenders during the CPP program period
If the contract owner's initial investment at the beginning of the CPP program period was $100,000, assuming no surrenders are made during the CPP program period, the CPP guarantee amount at the end of the CPP program period will be $100,000. If the contract owner invokes the immediate withdrawal benefit, the immediate withdrawal base becomes the CPP guarantee amount (i.e., $100,000). The contract value will not be credited with any CPP guarantee amount at the end of the program period.
Example with Surrenders during the CPP program period
If the contract owner's initial investment at the beginning of the CPP program period was $100,000, and there was a surrender requestof $10,000, the CPP guarantee amount at the end of the CPP program period would be calculated as follows:
CPP guarantee amount = $100,000
Contract value = $40,000
Gross surrender request = $10,000
| CPP guarantee amount after withdrawal = $100,000*(1-$10,000/$40,000) = $75,000 |
If the contract owner invokes the immediate withdrawal benefit after a withdrawal has taken place, the immediate withdrawal base becomes the new CPP guarantee amount (i.e., $75,000). The contract value will not be credited with any CPP guarantee amount at the end of the program period.
Taking an Immediate Withdrawal. After the affirmative election to invoke the benefit has been made and received in good order by Nationwide, in order to take an immediate withdrawal, the contract owner must submit a surrender request to Nationwide. Nationwide will process the request based upon the election of the withdrawal benefit. Nationwide will surrender accumulation units from the sub-accounts and an amount from the fixed account and GTO when an immediate withdrawal is requested. The amount surrendered from each investment option will be in proportion to the value in each investment option at the time of the surrender request. Immediate withdrawals cannot be taken exclusively from the GTO. Amounts surrendered from the GTO could incur a market value adjustment. Market value adjustments are applied to the contract value and not the amount of the withdrawal request. Contract owners can request that accumulation units not be surrendered from the GTO in order to avoid application of a market value adjustment. Please refer to the GTO prospectus for examples of how market value adjustments are calculated.
Impact of Immediate Withdrawals (within the 6% limit). The impact of an immediate withdrawal on the contract will depend on the immediate withdrawal base, the remaining immediate withdrawal base, and the amount of the gross surrender request. Annual gross surrenders include required minimum distributions pursuant to the Internal Revenue Code and any applicable CDSC.
Remaining Immediate Withdrawal Base
The amount available or remaining for withdrawal under the benefit is referred to as the "remaining immediate withdrawal base." This figure is used to track how much the contract owner has withdrawn and how much the contract owner has left to withdraw.
For example assume the following:
Immediate Withdrawal Base = $100,000
Contract Value = $31,000
Remaining Immediate Withdrawal Base = $56,000
Gross Surrender Request = $6,000
In the above example, the contract owner has already taken immediate withdrawals that have reduced the remaining immediate withdrawal base to $56,000. Contract value also includes any market value adjustments. The impact of the gross surrender request is:
Immediate Withdrawal Base = $100,000
Contract Value = $25,000
Remaining Immediate Withdrawal Base = $50,000
Impact of Withdrawals in Excess of 6%. Withdrawals in excess of 6% will reduce the immediate withdrawal base (based on the formula described below), thereby reducing the amount of future immediate withdrawals available under the benefit. This reduction could be significant. Therefore, requesting surrenders in excess of 6% should be carefully considered.
The reduction to the immediate withdrawal base will be the greater of (i) the dollar amount of the surrender in excess of the 6% withdrawal or (ii) a proportionate reduction based on the ratio of the dollar amount of the excess surrender to the contract value (already adjusted for any applicable market value adjustment and the amount of the surrender request up to 6%) multiplied by the immediate withdrawal base. The remaining immediate withdrawal base will also be reduced by this same amount.
For example:
Immediate Withdrawal Base = $100,000
Contract Value = $31,000
Remaining Immediate Withdrawal Base = $56,000
Gross Surrender Request = $11,000
The impact of the full surrender request will be calculated in two steps:
| 1) | The impact of the request up to 6% would be (6% of $100,000 = $6,000): |
Permissible 6% Withdrawal = $6,000
Immediate Withdrawal Base = $100,000
Contract Value = $25,000
Remaining Immediate Withdrawal Base = $50,000
and
| 2) | Because the total request exceeded the allowable 6% by $5,000 ($11,000 - $6,000 = $5,000), the proportionate reduction (described above) is applied as follows: |
5,000/25,000*100,000 = $20,000.
Therefore, the full impact of the request on the contract would be:
Immediate Withdrawal Base = $80,000
Contract Value = $20,000
Remaining Immediate Withdrawal Base = $30,000
The contract value is reduced by the dollar amount of the excess surrender request ($5,000).
Surrenders in excess of 6% will not be permitted if contract value is zero.
Contingent Deferred Sales Charges
A withdrawal under the benefit may cause a CDSC to apply (see "Contingent Deferred Sales Charges" earlier in this prospectus). Application of a CDSC could result in the gross surrender being greater than 6%. For example, the amount of the surrender request plus the applicable CDSC could exceed the 6% limit. If applicable, contract owners can request to receive a specific dollar amount of withdrawal (i.e., Nationwide will gross up the withdrawal to include the CDSC amount) or to receive the withdrawal net of the CDSC amount. In either case, the gross amount of the surrender (i.e., including the CDSC) is the amount used to determine whether the withdrawal exceeds the 6% limit. A reduction to the immediate withdrawal base will be applied as described in the "Impact of Withdrawals in Excess of 6%" provision if the gross surrender exceeds the 6% limit.
The contract permits a percentage of purchase payments to be withdrawn free of CDSC each year (see "Waiver of Contingent Deferred Sales Charge" earlier in this prospectus). The total free withdrawal amount permitted (a percentage of purchase
payments), however, may result in annual surrenders greater than the 6% limit permitted by this benefit (i.e., 6% of the immediate withdrawal base). In such case, the reduction described in the "Impact of Withdrawals in Excess of 6%" provision will apply.
Minimum Required Distributions
Withdrawals taken pursuant to minimum required distribution rules under the Internal Revenue Code could also cause gross surrender requests to exceed 6% annually if the rules require a distribution greater than the 6% limit be distributed from the contract. The reduction to the immediate withdrawal base will be applied as described in the "Impact of Withdrawals in Excess of 6%" provision if distributions result in gross surrenders in excess of 6% annually.
How long will the immediate withdrawals last? A contract owner can continue to take immediate withdrawals as long as there is remaining immediate withdrawal base value. The number of years will depend on the amount and frequency of the withdrawals taken. For example, it would take approximately 16 and 2/3 years for a $100,000 remaining immediate withdrawal base to be exhausted if immediate withdrawals did not exceed 6% annually.
Immediate withdrawals that do not exceed 6% annually reduce the remaining immediate withdrawal base by the dollar amount of each immediate withdrawal until the base reaches zero. Once the remaining immediate withdrawal base reaches zero, the immediate withdrawal benefit is exhausted.
What happens if there is Contract Value but the Remaining Immediate Withdrawal Base is Zero? If there is contract value left after the remaining immediate withdrawal base is exhausted, the contract owner can no longer take withdrawals under the immediate withdrawal benefit. Surrenders can still be taken subject to the CDSC provisions of the contract. The charge associated with the CPP Lifetime Income option will continue to be assessed until the contract is terminated or annuitized.
What happens if the Contract Value is Zero, but there is Remaining Immediate Withdrawal Base Value? If contract value reaches zero before the remaining immediate withdrawal base is zero, Nationwide will continue to pay the contract owner 6% of the immediate withdrawal base each contract year until the remaining immediate withdrawal base is zero. Additionally, if the contract owner has invoked the benefit but has not requested regular or systematic withdrawals, Nationwide will automatically begin paying the contract owner the value of 6% of the current immediate withdrawal base until the remaining immediate withdrawal base is zero. Once the remaining immediate withdrawal base reaches zero, the contract will automatically terminate.
Termination (of the CPP Lifetime Income Option) with Immediate Withdrawals
The CPP Lifetime Income Option can be terminated at the end of a CPP program period. Note: Termination of the option will cause the contract owner to lose any remaining immediate withdrawal base value, i.e., lose any remaining payments.
The option will automatically terminate if, at the end of the CPP program period during which the immediate withdrawal benefit is invoked, the contract owner does not instruct Nationwide how to reallocate the contract value (see, "Options at the End of the CPP Program Period"). Such automatic termination of the option will result in the contract owner losing any remaining immediate withdrawal base value.
If terminated, the contract's variable investment allocations will remain the same as they were prior to the termination (unless Nationwide is instructed otherwise) and the contract value previously allocated to the GTO will be allocated to the money market sub-account. Nationwide will no longer assess the charge associated with the option, all benefits associated the option will terminate, and all conditions associated with the option will be removed.
Some contract events will trigger an automatic termination of the CPP Lifetime Income option, including:
| | A full surrender of the contract value; |
| | Payment of the death benefit proceeds; or |
| | An election to annuitize the contract (see, "Annuitization and the CPP Lifetime Income Option" in the "Capital Preservation Plus Lifetime Income Option" provision). |
Automatic termination of the option will result in the contract owner losing any remaining immediate withdrawal base value.
Succession of Rights and the Immediate Withdrawal Benefit
Any remaining immediate withdrawal base value is guaranteed for as long as the CPP Lifetime Income Option is in force. If by the terms of the contract, the death of the contract owner results in the contract being continued, i.e. does not result in payment of the death benefit proceeds, the CPP Lifetime Income Option will continue in force with the immediate withdrawal benefit invoked (see "Required Distributions" section in Appendix C: Contract Types and Tax Information). The values of the immediate withdrawal base and the remaining immediate withdrawal base remain the same as they were prior to the contract owner's death, i.e., the new owner will continue receiving withdrawals until the remaining immediate withdrawal base is zero. If death of the contract owner occurs during the CPP program period, the new contract owner will be required to reallocate the contract value no sooner than the expiration of the corresponding GTO, in order to continue to receive the withdrawals and retain the benefit.
If the death of the contract owner results in the CPP Lifetime Income Option being terminated, the termination will result in the loss of any remaining immediate withdrawal base value.
Taxation of Surrenders under the CPP Lifetime Income Option
While the tax treatment for surrenders for benefits such as CPP Lifetime Income Option are not clear under federal tax law, Nationwide currently treats these surrenders as taxable to the extent that the cash value of the contract exceeds the contract owner's investment at the time of the surrender. Please consult a qualified tax advisor.
Lifetime Income Option
The Lifetime Income Option provides for lifetime withdrawals, up to a certain amount each year, even after the contract value is zero. The person’s life upon which the benefit depends (the “determining life”) must be between 45 and 85 years old at the time the Lifetime Income Option is elected. For most contracts, the determining life is that of the primary contract owner. For those contracts where the contract owner is a non-natural person, for purposes of this option, the determining life is that of the primary annuitant, and all references in this option to “contract owner” shall mean primary annuitant. The determining life may not be changed.
The Lifetime Income Option may only be elected at the time of application. This option may not be elected if a loan is outstanding on the contract or if either of the following optional benefits is elected: Capital Preservation Plus Option or the Capital Preservation Plus Lifetime Income Option. Once this option is elected, the contract owner may not participate in any of the dollar cost averaging programs otherwise available under the contract.
In exchange for this lifetime withdrawal benefit, Nationwide will assess an annual charge not to exceed 1.00% of the current income benefit base. Currently, the charge associated with this option is 0.60% of the current income benefit base. (Once the option is elected, the charge percentage will not change, except, possibly, upon the contract owner’s election to reset the benefit base, as discussed herein.) The charge will be assessed on each anniversary of the date the Lifetime Income Option was added to the contract (the “L.Inc anniversary”) and will be deducted via redemption of accumulation units. A prorated charge will also be deducted upon full surrender of the contract. Accumulation units will be redeemed proportionally from each sub-account in which the contract owner is invested at the time the charge is taken. Amounts redeemed as the Lifetime Income Option charge will not negatively impact calculations associated with other benefits elected or available under the contract, will not be subject to a CDSC, and will not reduce amounts available under the CDSC-free withdrawal privilege.
Election of the Lifetime Income Option requires that the contract owner, from that point forward (until annuitization), allocate the entire contract value to a limited set of investment options currently available in the contract. For the list of investment options available under this benefit please see "Income Benefit Investment Options" later in this prospectus. Allocation to a GTO and/or the fixed account is not permitted. The contract owner may reallocate the contract value among the limited set of investment options in accordance with the “Transfers Prior to Annuitization” provision. Once this option is elected, contract loans are unavailable.
Currently, subsequent purchase payments are permitted under the Lifetime Income Option as long as the contract value is greater than zero. There may be instances where a subsequent purchase payment creates a financial risk that Nationwide is unwilling to bear. If this occurs Nationwide may exercise its right to refuse subsequent purchase payments. If Nationwide excercises this right to refuse a purchase payment the contract owner will be notified and the purchase payment will be returned.
Determination of the Income Benefit Base Prior to the First Surrender
At the time the Lifetime Income Option is added to the contract, the original income benefit base is equal to the contract value. For the first 10 years after the Lifetime Income Option is elected (provided no surrenders are taken from the contract), the income benefit base will equal the greater of:
| (1) | the highest contract value on any L.Inc anniversary plus purchase payments submitted and credits applied after that L.Inc anniversary; or |
| (2) | the sum of the following (the “5% simple interest calculation”): |
| (a) | the original income benefit base, plus 5% of the original income benefit base for each attained L.Inc anniversary; and |
| (b) | purchase payments submitted and credits applied after the Lifetime Income Option is elected, plus 5% of such purchase payments or credits, prorated based on the number of days from the date of such purchase payment or credit to the most recent L.Inc anniversary. |
After the 10th L.Inc anniversary (provided no surrenders are taken from the contract), the income benefit base will equal the greater of:
| (1) | the highest contract value on any L.Inc anniversary plus purchase payments submitted and credits applied after that L.Inc anniversary; or |
| (2) | the 5% simple interest calculation calculated on the 10th L.Inc anniversary plus any purchase payments submitted and credits applied after the 10th L.Inc anniversary. |
However, if at any time prior to the first surrender the contract value equals zero, no further income benefit base calculations will be made. The income benefit base will be set equal to the income benefit base calculated on the most recent L.Inc anniversary, and the annual benefit amount will be based on that income benefit base.
Lifetime Income Surrenders
At any time after the Lifetime Income Option is elected, the contract owner may begin taking the lifetime income benefit by taking a surrender from the contract. Nationwide will surrender accumulation units proportionally from the sub-accounts as of the date of the surrender request. As with any surrender, lifetime income surrenders reduce the contract value and consequently, the amount available for annuitization.
At the time of the first surrender, the income benefit base is locked in and will not change unless the contract owner takes excess surrenders, elects a reset opportunity (both discussed later in this provision), or submits additional purchase payments. Additional purchase payments submitted after the first surrender from the contract will increase the income benefit base.
Simultaneously, the lifetime income percentage is determined based on the age of the contract owner as indicated in the following table:
Contract Owner’s Age (at time of first surrender) | Lifetime Income Percentage |
| 45 up to 59½ | 4% |
| 59½ through 66 | 5% |
| 67 through 71 | 5.5% |
| 72 through 80 | 6% |
| 81 and older | 7% |
At the time of the first surrender and on each L.Inc anniversary thereafter, the lifetime income percentage is multiplied by the income benefit base to determine the benefit amount for that year. The benefit amount is the maximum amount that can be surrendered from the contract before the next L.Inc anniversary without reducing the income benefit base. The ability to surrender the current benefit amount will continue until the earlier of the contract owner’s death or annuitization.
Although surrenders up to the benefit amount do not reduce the lifetime benefit base, they do reduce the contract value and the death benefit, and are subject to the CDSC provisions of the contract.
Contingent Deferred Sales Charges
A withdrawal under the benefit may cause a CDSC to apply (see "Contingent Deferred Sales Charges" earlier in this prospectus). Application of a CDSC could result in the gross surrender being greater than the Lifetime Income percentage limit. For example, the amount of the surrender request plus the applicable CDSC could exceed the Lifetime Income percentage limit. If applicable, contract owners can request to receive a specific dollar amount of withdrawal (i.e., Nationwide will gross up the withdrawal to include the CDSC amount) or to receive the withdrawal net of the CDSC amount. In either case, the gross amount of the surrender (i.e., including CDSC) is the amount used to determine whether the withdrawal exceeds the Lifetime Income Percentage limit. A reduction to the income benefit base will be applied as described in the "Impact of Withdrawals in Excess of the Lifetime Income Percentage Limit" provision if the gross surrender exceeds the Lifetime Income percentage limit.
The contract permits a percentage of purchase payments to be withdrawn free of CDSC each year (see "Waiver of Contingent Deferred Sales Charge" earlier in this prospectus). The total free withdrawal amount permitted (a percentage of purchase payments), however, may result in annual surrenders greater than the Lifetime Income percentage limit permitted by this benefit. In such case, the reduction described in the "Impact of Withdrawals in Excess of the Lifetime Income Percentage Limit" provision will apply.
Impact of Withdrawals in Excess of Lifetime Income Percentage Limit
The contract owner is permitted to surrender contract value in excess of that year’s benefit amount provided that the contract value is greater than zero. Surrenders in excess of the benefit amount will reduce the income benefit base, and consequently, the benefit amount calculated for subsequent years. In the event of excess surrenders, the income benefit base will be reduced by the greater of:
| (1) | the dollar amount of the surrender in excess of the benefit amount; or |
| (2) | the ratio of the dollar amount of the excess surrender to the contract value (which has been reduced by the amount of the benefit amount surrendered), multiplied by the income benefit base. |
In situations where the contract value exceeds the current income benefit base, excess surrenders will typically result in a dollar amount reduction to the income benefit base. In situations where the contract value is less than the current income benefit base, excess surrenders will typically result in a proportional reduction to the income benefit base.
Currently, Nationwide allows for an “RMD privilege” whereby Nationwide permits a contract owner to surrender contract value in excess of the benefit amount without reducing the income benefit base if such excess surrender is for the sole purpose of meeting Internal Revenue Code required minimum distributions for this contract. In order to qualify for the RMD privilege, the contract owner must participate in Nationwide’s required minimum distribution program. Nationwide reserves the right to modify or eliminate the RMD privilege if there is any change to the Internal Revenue Code or IRS rules relating required minimum distributions, including the issuance of relevant IRS guidance.
Once the contract value falls to zero, the contract owner is no longer permitted to submit additional purchase payments or take surrenders in excess of the benefit amount.
Reset Opportunities
On each L.Inc anniversary after the first surrender from the contract, if the contract value exceeds the income benefit base, the contract owner will have the opportunity to instruct Nationwide to reset the income benefit base to equal the current contract value. Nationwide will provide the contract owner with the contract value and income benefit base information, and will provide instructions on how to communicate an election to reset the benefit base. If the contract owner elects to reset the income benefit base, it will be at the then current terms and conditions of the option. If Nationwide does not receive a contract owner’s election to reset the income benefit base within 60 days after the L.Inc anniversary, Nationwide will assume that the contract owner does not wish to reset the income benefit base.
Nationwide permits contract owners to elect to automatically reset the income benefit base on each L.Inc anniversary. A contract owner’s election to automatically reset the income benefit base will cease anytime the charge for the L.Inc option changes. Nationwide will notify you anytime the charge for the L.Inc option changes, and provide you with an opportunity to confirm whether you would like to continue the reset to the income benefit base under the updated L.Inc option charge. Upon notification, if you decline to reset your income benefit base, your income benefit base and L.Inc charges will not change. Contract owners may cancel the election to automatically reset the income benefit base at any time.
Nationwide reserves the right to modify or cancel the contract owners’ ability to automatically reset the income benefit base.
Termination of Benefit
Upon annuitization of the contract, the charge associated with this option will no longer be assessed and all benefits associated with the Lifetime Income Option will terminate. Additionally, upon the contract owner’s death the benefits associated with the option terminate (unless the Spousal Continuation Benefit was also elected).
Taxation of Surrenders under the Lifetime Income Option
While the tax treatment for surrenders for benefits such as the Lifetime Income Option are not clear under federal tax law, Nationwide currently treats these surrenders as taxable to the extent that the cash value of the contract exceeds the contract owner’s investment at the time of the surrender. Please consult a qualified tax advisor.
Spousal Continuation Benefit
For an additional charge of 0.15% of the income benefit base, the contract owner can elect, at the time the Lifetime Income Option is elected, to add a Spousal Continuation Benefit (not available for contracts issued as Charitable Remainder Trusts). The Spousal Continuation Benefit allows a surviving spouse to continue to receive, for the duration of his/her lifetime, the benefit associated with the Lifetime Income Option, provided that the following conditions are satisfied:
| (1) | The Spousal Continuation Benefit must be elected at the time the Lifetime Income Option is elected, and both spouses must be between 45 and 85 years old at that time. |
| (2) | Once the Spousal Continuation Benefit is elected, it may not be removed from the contract, except as provided below. |
| (3) | The lifetime income percentage will be based on the age of the younger spouse as of the date of the first surrender from the contract. |
| (4) | One or both spouses (or a revocable trust of which either or both of the spouses is/are grantor(s)) must be named as the contract owner. For contracts issued as IRAs and Roth IRAs, only the person for whom the IRA or Roth IRA was established may be named as the contract owner. |
| (5) | Both spouses must be named as beneficiaries. For contracts with non-natural owners, both spouses must be named as annuitants. |
| (6) | No person other than the spouse may be named as contract owner, annuitant or primary beneficiary. |
| (7) | If both spouses are alive upon annuitization, the contract owner must specify which spouse is the annuitant upon whose continuation of life any annuity payments involving life contingencies depend (for IRA and Roth IRA contracts, this person must be the contract owner). |
If, prior to taking any surrenders from the contract, the marriage terminates due to divorce, dissolution, or annulment, the contract owner may remove the Continuation Benefit from the contract. Nationwide will remove the benefit and the associated charge upon the contract owner’s written request and evidence of the marriage termination satisfactory to Nationwide. Once the Spousal Continuation Benefit is removed from the contract, the benefit may not be re-elected or added to cover a subsequent spouse.
If, after taking any surrender from the contract, the marriage terminates due to divorce, dissolution, or annulment, the contract owner may not remove the Spousal Continuation Benefit from the contract.
Income Benefit Investment Options
| Investment Option | Available in: |
| | | | Enhanced CPP & | |
AIM Variable Insurance Funds |
| AIM V.I. Basic Value Fund: Series II Shares | X | X | | |
| AIM V.I. Capital Appreciation Fund: Series II Shares | X | X | | |
| AIM V.I. Capital Development Fund: Series II Shares | X | X | | |
American Century Variable Portfolios, Inc. |
| American Century VP Mid Cap Value Fund: Class II | X | X | | |
| American Century VP Value Fund: Class II | X | X | | |
| American Century VP Vista Fund: Class II | X | X | | |
American Century Variable Portfolios II, Inc.. |
| American Century VP Inflation Protection Fund: Class II | X | X | | |
Dreyfus |
| Dreyfus Stock Index Fund, Inc.: Service Shares | X | X | | |
| Dreyfus Variable Investment Fund- Appreciation Portfolio: Service Shares | X | X | | |
Federated Insurance Series |
| Federated Quality Bond Fund II: Service Shares | X | X | | |
Fidelity Variable Insurance Products Fund |
| VIP Contrafund® Portfolio Service Class 2 | X | X | | |
| VIP Equity-Income Portfolio: Service Class 2 | X | X | | |
| VIP Freedom 2010 Portfolio: Service Class 2 | X | X | | X |
| VIP Freedom 2020 Portfolio: Service Class 2 | X | X | | X |
| VIP Freedom 2030 Portfolio: Service Class 2 | X | X | X6 | |
| VIP Growth Portfolio: Service Class 2 | X | X | | |
| VIP Investment Grade Bond Portfolio: Service Class 2 | X | X | | |
| VIP Mid Cap Portfolio: Service Class 2 | X | X | | |
Franklin Templeton Variable Insurance Products Trust |
| Franklin Income Securities Fund: Class 2 | X | X | | |
Janus Aspen Series |
| Forty Portfolio: Service Shares | X | X | | |
| INTECH Risk-Managed Core Portfolio: Service Shares | X | X | | |
Lehman Brothers Advisers Management Trust |
| AMT Short Duration Bond Portfolio: I Class | X | X | | |
MFS® Variable Insurance Trust | X | X | | |
| MFS Value Series: Service Class | X | X | | |
Nationwide Variable Insurance Trust (NVIT) |
| American Funds NVIT Asset Allocation Fund: Class II | X | X | X6 | X |
| American Funds NVIT Bond Fund: Class II | X | X | | |
| American Funds NVIT Growth Fund: Class II | X | X | | |
| American Funds NVIT Growth-Income Fund: Class II | X | X | | |
1 Capital Preservation Plus Option
2 Capital Preservation Plus Lifetime Income Option
3 Enhanced Capital Preservation Plus and Enhanced Capital Preservation Plus Lifetime Income Option
5 The five year program duration is not available with this investment option.
6 The five and seven year program durations are not available with this investment option.
| Investment Option | Available in: |
| | | | Enhanced CPP & | |
Nationwide Variable Insurance Trust (NVIT) (continued) |
| Nationwide NVIT Government Bond Fund: Class I | X | X | | |
| Nationwide NVIT Investor Destinations Funds: |
| Nationwide NVIT Investor Destinations Conservative Fund: Class II | X | X | X | X |
| Nationwide NVIT Investor Destinations. Moderately Conservative Fund: Class II | X | X | X | X |
| Nationwide NVIT Investor Destinations Moderate Fund: Class II | X | X | | X |
| Nationwide NVIT Investor Destinations Moderately Aggressive Fund: Class II | X | X | | X |
| Nationwide NVIT Investor Destinations Aggressive Fund: Class II | X | X | X6 | |
| Nationwide NVIT Mid Cap Growth Fund: Class II | X | X | | |
| Nationwide NVIT Money Market Fund: Class I | X | X | | |
| Nationwide NVIT U.S. Growth Leaders Fund: Class II | X | X | | |
| NVIT Mid Cap Index Fund: Class I | X | X | | |
| NVIT Nationwide® Fund: Class II | X | X | | |
| Van Kampen NVIT Comstock Value Fund: Class II | X | X | | |
Neuberger Berman Advisers Management Trust |
| AMT Regency Portfolio: S Class | X | X | | |
| AMT Socially Responsive Portfolio: I Class | X | X | | |
Oppenheimer Variable Account Funds |
| Oppenheimer Capital Appreciation Fund/VA: Service Shares | X | X | | |
| Oppenheimer Main Street Fund® /VA: Service Shares | X | X | | |
T. Rowe Price Equity Series, Inc. |
| T. Rowe Price Blue Chip Growth Portfolio: Class II | X | X | | |
| T. Rowe Price Equity Income Portfolio: Class II | X | X | | |
| T. Rowe Price Limited Term Bond Portfolio: Class II | X | X | | |
Van Kampen |
| The Universal Institutional Funds, Inc. Core Plus Fixed Income Portfolio: Class II | X | X | | |
Static Asset Allocation Models |
| American Funds Option (33% American Funds NVIT Asset Allocation Fund, 33% American Funds NVIT Bond Fund and 34% American Funds NVIT Growth-Income Fund) | | X | X | X |
| Balanced Option (50% Nationwide NVIT Investor Dest. Moderate Fund and 50% Nationwide NVIT Investor Dest. Moderately Conservative Fund) | X | X | X | X |
| Capital Appreciation Option (50% Nationwide NVIT Investor Dest. Moderate Fund and 50% Nationwide NVIT Investor Dest. Moderately Aggressive Fund) | X | X | X5 | X |
1 Capital Preservation Plus Option
2 Capital Preservation Plus Lifetime Income Option
3 Enhanced Capital Preservation Plus and Enhanced Capital Preservation Plus Lifetime Income Option
5 The five year program duration is not available with this investment option.
6 The five and seven year program durations are not available with this investment option.
Contract Owner
Prior to the annuitization date, the contract owner has all rights under the contract, unless a joint owner is named. If a joint owner is named, each joint owner has all rights under the contract. Purchasers who name someone other than themselves as the contract owner will have no rights under the contract.
On the annuitization date, the annuitant becomes the contract owner, unless the contract owner is a Charitable Remainder Trust. If the contract owner is a Charitable Remainder Trust, the Charitable Remainder Trust continues to be the contract owner after annuitization.
Contract owners of Non-Qualified Contracts may name a new contract owner at any time before the annuitization date. Any change of contract owner automatically revokes any prior contract owner designation. Changes in contract ownership may result in federal income taxation and may be subject to state and federal gift taxes.
Joint Owner
Joint owners each own an undivided interest in the contract.
Non-Qualified contract owners can name a joint owner at any time before annuitization. However, joint owners must be spouses at the time joint ownership is requested, unless state law requires Nationwide to allow non-spousal joint owners.
Generally, the exercise of any ownership rights under the contract must be in writing and signed by both joint owners. However, if a written election, signed by both contract owners, authorizing Nationwide to allow the exercise of ownership rights independently by either joint owner is submitted, Nationwide will permit joint owners to act independently. If such an authorization is submitted, Nationwide will not be liable for any loss, liability, cost, or expense for acting in accordance with the instructions of either joint owner.
If either joint owner dies before the annuitization date, the contract continues with the surviving joint owner as the remaining contract owner.
Contingent Owner
The contingent owner succeeds to the rights of a contract owner if a contract owner who is not the annuitant dies before the annuitization date, and there is no surviving joint owner.
If a contract owner who is the annuitant dies before the annuitization date, the contingent owner will not have any rights under the contract, unless such contingent owner is also the beneficiary.
The contract owner may name a contingent owner at any time before the annuitization date.
Annuitant
The annuitant is the person who will receive annuity payments and upon whose continuation of life any annuity payment involving life contingencies depends. This person must be age 85 or younger at the time of contract issuance, unless Nationwide approves a request for an annuitant of greater age.
Only Non-Qualified Contract owners may name someone other than himself/herself as the annuitant.
The contract owner may not name a new annuitant without Nationwide's consent.
Contingent Annuitant
If the annuitant dies before the annuitization date, the contingent annuitant becomes the annuitant. The contingent annuitant must be age 85 or younger at the time of contract issuance, unless Nationwide approves a request for a contingent annuitant of greater age.
If a contingent annuitant is named, all provisions of the contract that are based on the annuitant's death prior to the annuitization date will be based on the death of the last survivor of the annuitant and contingent annuitant.
Co-Annuitant
A co-annuitant, if named, must be the annuitant's spouse. The co-annuitant may be named at any time prior to annuitization and will receive the benefit of the Spousal Protection Feature (subject to the conditions set forth in the “Spousal Protection Feature” provision).
If either co-annuitant dies before the annuitization date, the surviving co-annuitant may continue the contract and will receive the benefit of the Spousal Protection Feature.
Joint Annuitant
The joint annuitant is designated as a second person (in addition to the annuitant) upon whose continuation of life any annuity payment involving life contingencies depend. This person must be age 85 or younger at the time of contract issuance, unless Nationwide approves a request for a joint annuitant of greater age.
The contract owner may name a joint annuitant at any time before the annuitization date.
Beneficiary and Contingent Beneficiary
The beneficiary is the person who is entitled to the death benefit if the annuitant dies before the annuitization date and there is no joint owner. The contract owner can name more than one beneficiary. Multiple beneficiaries will share the death benefit equally, unless otherwise specified.
A contingent beneficiary will succeed to the rights of the beneficiary if no beneficiary is alive when a death benefit is paid. The contract owner can name more than one contingent beneficiary. Multiple contingent beneficiaries will share the death benefit equally, unless otherwise specified.
Changes to the Parties to the Contract
Prior to the annuitization date (and subject to any existing assignments), the contract owner may request to change the following:
| | contract owner (Non-Qualified Contracts only); |
| | joint owner (must be the contract owner's spouse); |
| | annuitant (subject to Nationwide's underwriting and approval); |
| | contingent annuitant (subject to Nationwide's underwriting and approval); |
| | co-annuitant (must be the annuitant's spouse); |
| | joint annuitant (subject to Nationwide's underwriting and approval); |
The contract owner must submit the request to Nationwide in writing and Nationwide must receive the request at its home office before the annuitization date. Once Nationwide receives and records the change request, the change will be effective as of the date the written request was signed, whether or not the contract owner or annuitant is living at the time it was recorded. The change will not affect any action taken by Nationwide before the change was recorded.
In addition to the above requirements, any request to change the contract owner must be signed by the existing contract owner and the person designated as the new contract owner. Nationwide may require a signature guarantee.
If the contract owner is not a natural person and there is a change of the annuitant, distributions will be made as if the contract owner died at the time of the change, regardless of whether the contract owner named a contingent annuitant.
Nationwide reserves the right to reject any change request that would alter the nature of the risk that Nationwide assumed when it originally issued the contract (see "Purpose of the Contract" earlier in this prospectus).
Minimum Initial and Subsequent Purchase Payments
Contract Type | Minimum Initial Purchase Payment* | Minimum Subsequent Payments** |
| Charitable Remainder Trust | $5,000 | $500 |
| IRA | $3,000 | $500 |
| Investment-Only | $3,000 | $500 |
| Non-Qualified | $5,000 | $500 |
| Roth IRA | $3,000 | $500 |
| SEP IRA | $3,000 | $500 |
| Simple IRA | $3,000 | $500 |
| Tax Sheltered Annuity | $3,000 | $500 |
| *A contract owner will meet the minimum initial purchase payment requirement by making purchase payments equal to the required minimum over the course of the first contract year. |
| **For subsequent purchase payments sent via electronic deposit, the minimum subsequent purchase payment is $50. |
Subsequent purchase payments may not be permitted in all states.
The cumulative total of all purchase payments under contracts issued by Nationwide on the life of any one annuitant cannot exceed $1,000,000 without Nationwide's prior consent. Nationwide's consent is contingent on a risk analysis that may involve a medical evaluation.
Guaranteed Term Options
Guaranteed Term Options are separate investment options under the contract. The minimum amount that may be allocated to a Guaranteed Term Option is $1,000.
Pricing
Initial purchase payments allocated to sub-accounts will be priced at the accumulation unit value determined no later than 2 business days after receipt of an order to purchase if the application and all necessary information are complete. If the application is not complete, Nationwide may retain a purchase payment for up to 5 business days while attempting to complete it. If the application is not completed within 5 business days, the prospective purchaser will be informed of the reason for the delay. The purchase payment will be returned unless the prospective purchaser specifically allows Nationwide to hold the purchase payment until the application is completed.
Subsequent purchase payments allocated to sub-accounts will be priced at the accumulation unit value next computed after the payment is received.
Except on the days listed below and on weekends, purchase payments, transfers and surrenders are priced every day. Purchase payments will not be priced when the New York Stock Exchange is closed or on the following nationally recognized holidays:
| New Year's Day | Independence Day |
| Martin Luther King, Jr. Day | Labor Day |
| Presidents' Day | Thanksgiving |
| Good Friday | Christmas |
| Memorial Day | |
Nationwide also will not price purchase payments, surrenders or transfers if:
| (1) | trading on the New York Stock Exchange is restricted; |
| (2) | an emergency exists making disposal or valuation of securities held in the variable account impracticable; or |
| (3) | the SEC, by order, permits a suspension or postponement for the protection of security holders. |
Rules and regulations of the SEC will govern as to when the conditions described in (2) and (3) exist. On those days when the New York Stock Exchange is open and Nationwide is closed, contract value may change and contract owners will not have access to their accounts.
Allocation of Purchase Payments
Nationwide allocates purchase payments to sub-accounts, the fixed account and/or Guaranteed Term Options as instructed by the contract owner. Shares of the underlying mutual funds allocated to the sub-accounts are purchased at net asset value, then converted into accumulation units. Nationwide reserves
the right to limit or refuse purchase payments allocated to the fixed account at its sole discretion.
Contract owners can change future allocations to the sub-accounts, fixed account or Guaranteed Term Options. However, no change may be made that would result in an amount less than 1% of the purchase payments being allocated to any sub-account. Certain transactions may be subject to conditions imposed by the underlying mutual funds, as well as those set forth in the contract.
Determining the Contract Value
The contract value is the sum of:
| (1) | the value of amounts allocated to the sub-accounts of the variable account; and |
| (2) | amounts allocated to the fixed account; and |
| (3) | amounts allocated to a Guaranteed Term Option. |
If charges are assessed against the whole contract value, Nationwide will deduct a proportionate amount from each sub-account, the fixed account and any Guaranteed Term Option based on current cash values.
Determining Variable Account Value – Valuing an Accumulation Unit
Sub-account allocations are accounted for in accumulation units. Accumulation unit values (for each sub-account) are determined by calculating the net investment factor for the underlying mutual funds for the current valuation period and multiplying that result with the accumulation unit values determined on the previous valuation period.
Nationwide uses the net investment factor as a way to calculate the investment performance of a sub-account from valuation period to valuation period. For each sub-account, the net investment factor shows the investment performance of the underlying mutual fund in which a particular sub-account invests, including the charges assessed against that sub-account for a valuation period.
The net investment factor for any particular sub-account is determined by dividing (a) by (b), and then subtracting (c) from the result, where:
| (1) | the net asset value of the underlying mutual fund as of the end of the current valuation period; and |
| (2) | the per share amount of any dividend or income distributions made by the underlying mutual fund (if the date of the dividend or income distribution occurs during the current valuation period). |
| (b) | is the net asset value of the underlying mutual fund determined as of the end of the preceding valuation period. |
| (c) | is a factor representing the daily total variable account charges, which may include charges for optional benefits elected by the contract owner. The factor is equal to an annualized rate ranging from 1.00% to 2.60% of the daily net assets of the variable account, depending on which optional benefits the contract owner elects. |
Based on the change in the net investment factor, the value of an accumulation unit may increase or decrease. Changes in the net investment factor may not be directly proportional to changes in the net asset value of the underlying mutual fund shares because of the deduction of variable account charges.
Though the number of accumulation units will not change as a result of investment experience, the value of an accumulation unit may increase or decrease from valuation period to valuation period.
Determining Fixed Account Value
Nationwide determines the value of the fixed account by:
| (1) | adding all amounts allocated to the fixed account, minus amounts previously transferred or surrendered; |
| (2) | adding any interest earned on the amounts allocated to the fixed account; and |
| (3) | subtracting charges deducted in accordance with the contract. |
Determining the Guaranteed Term Option Value
Nationwide determines the value of a Guaranteed Term Option by:
| (1) | adding all amounts allocated to the Guaranteed Term Options, minus amounts previously transferred or surrendered (including any market value adjustment); |
| (2) | adding any interest earned on the amounts allocated to the Guaranteed Term Options; and |
| (3) | subtracting charges deducted in accordance with the contract. |
Transfer Requests
Contract owners may submit transfer requests in writing, over the telephone, or via the internet. Nationwide will use reasonable procedures to confirm that instructions are genuine and will not be liable for following instructions that it reasonably determined to be genuine. Nationwide may restrict or withdraw the telephone and/or internet transfer privilege at any time.
Generally, sub-account transfers will receive the accumulation unit value next determined after the transfer request is received. However, if a contract that is limited to submitting transfer requests via U.S. mail submits a transfer request via the internet or telephone pursuant to Nationwide's one-day delay policy, the transfer will be executed on the next business day after the exchange request is received by Nationwide (see "Managers of Multiple Contracts").
Transfer Restrictions
Neither the contracts described in this prospectus nor the underlying mutual funds are designed to support active trading strategies that require frequent movement between or among sub-accounts (sometimes referred to as "market-timing" or "short-term trading"). A contract owner who intends to use an active trading strategy should consult his/her registered representative and request information on other Nationwide variable annuity contracts that offer underlying mutual funds
that are designed specifically to support active trading strategies.
Nationwide discourages (and will take action to deter) short-term trading in this contract because the frequent movement between or among sub-accounts may negatively impact other investors in the contract. Short-term trading can result in:
| | the dilution of the value of the investors’ interests in the underlying mutual fund; |
| | underlying mutual fund managers taking actions that negatively impact performance (keeping a larger portion of the underlying mutual fund assets in cash or liquidating investments prematurely in order to support redemption requests); and/or |
| | increased administrative costs due to frequent purchases and redemptions. |
To protect investors in this contract from the negative impact of these practices, Nationwide has implemented, or reserves the right to implement, several processes and/or restrictions aimed at eliminating the negative impact of active trading strategies. Nationwide makes no assurances that all risks associated with short-term trading will be completely eliminated by these process and/or restrictions.
Nationwide cannot guarantee that its attempts to deter active trading strategies will be successful. If we are unable to deter active trading strategies, the performance of the sub-accounts that are actively trade may be adversely impacted.
Redemption Fees
Some underlying mutual funds assess a short-term trading fee in connection with transfers from a sub-account that occur within 60 days after the date of the allocation to the sub-account. The fee is assessed against the amount transferred and is paid to the underlying mutual fund. Redemption fees compensate the underlying mutual fund for any negative impact on fund performance resulting from short-term trading. For more information on short-term trading fees, please see the "Short-Term Trading Fees" provision.
U.S. Mail Restrictions
Nationwide monitors transfer activity in order to identify those who may be engaged in harmful trading practices. Transaction reports are produced and examined. Generally, a contract may appear on these reports if the contract owner (or a third party acting on their behalf) engages in a certain number of "transfer events" in a given period. A "transfer event" is any transfer, or combination of transfers, occurring on a given trading day (valuation period). For example, if a contract owner executes multiple transfers involving 10 underlying mutual funds in one day, this counts as one transfer event. A single transfer occurring on a given trading day and involving only 2 underlying mutual funds (or one underlying mutual fund if the transfer is made to or from the fixed account or a Guaranteed Term Option) will also count as one transfer event.
As a result of this monitoring process, Nationwide may restrict the method of communication by which transfer orders will be accepted.
In general, Nationwide will adhere to the following guidelines:
Trading Behavior | Nationwide's Response |
| 6 or more transfer events in one calendar quarter | Nationwide will mail a letter to the contract owner notifying them that: (1)they have been identified as engaging in harmful trading practices; and (2)if their transfer events exceed 11 in 2 consecutive calendar quarters or 20 in one calendar year, the contract owner will be limited to submitting transfer requests via U.S. mail. |
More than 11 transfer events in 2 consecutive calendar quarters OR More than 20 transfer events in one calendar year | Nationwide will automatically limit the contract owner to submitting transfer requests via U.S. mail. |
Each January 1st, Nationwide will start the monitoring anew, so that each contract starts with 0 transfer events each January 1. See, however, the "Other Restrictions" provision below.
Managers of Multiple Contracts
Some investment advisers/representatives manage the assets of multiple Nationwide contracts pursuant to trading authority granted or conveyed by multiple contract owners. These multi-contract advisers will generally be required by Nationwide to submit all transfer requests via U.S. mail.
Nationwide may, as an administrative practice, implement a "one-day delay" program for these multi-contract advisers, which they can use in addition to or in lieu of submitting transfer requests via U.S. mail. The one-day delay option permits multi-contract advisers to continue to submit transfer requests via the internet or telephone. However, transfer requests submitted by multi-contract advisers via the internet or telephone will not receive the next available accumulation unit value. Rather, they will receive the accumulation unit value that is calculated on the following business day. Transfer requests submitted under the one-day delay program are irrevocable. Multi-contract advisers will receive advance notice of being subject to the one-day delay program.
Other Restrictions
Nationwide reserves the right to refuse or limit transfer requests, or take any other action it deems necessary, in order to protect contract owners, annuitants, and beneficiaries from the negative investment results that may result from short-term trading or other harmful investment practices employed by some contract owners (or third parties acting on their behalf). In particular, trading strategies designed to avoid or take advantage of Nationwide's monitoring procedures (and other measures aimed at curbing harmful trading practices) that are nevertheless determined by Nationwide to constitute harmful trading practices, may be restricted.
Any restrictions that Nationwide implements will be applied consistently and uniformly.
Underlying Mutual Fund Restrictions and Prohibitions
Pursuant to regulations adopted by the SEC, Nationwide is required to enter into written agreements with the underlying mutual funds which allow the underlying mutual funds to:
| (1) | request the taxpayer identification number, international taxpayer identification number, or other government issued identifier of any Nationwide contract owner; |
| (2) | request the amounts and dates of any purchase, redemption, transfer or exchange request (“transaction information”); and |
| (3) | instruct Nationwide to restrict or prohibit further purchases or exchanges by contract owners that violate policies established by the underlying mutual fund (whose policies may be more restrictive than Nationwide’s policies). |
Nationwide is required to provide such transaction information to the underlying mutual funds upon their request. In addition, Nationwide is required to restrict or prohibit further purchases or requests to exchange into an underlying mutual fund upon instruction from the underlying mutual fund. Nationwide and any affected contract owner may not have advance notice of such instructions from an underlying mutual fund to restrict or prohibit further purchases or requests to exchange into an underlying mutual fund. If an underlying mutual fund refuses to accept a purchase or request to exchange into the underlying mutual fund submitted by Nationwide, Nationwide will keep any affected contract owner in their current underlying mutual fund allocation.
Transfers Prior to Annuitization
Transfers from the Fixed Account
A contract owner may request to transfer allocations from the fixed account to the sub-accounts or a Guaranteed Term Option only upon reaching the end of a fixed account interest rate guarantee period. Fixed account transfers must be made within 45 days after the end of the interest rate guarantee period. The fixed account interest rate guarantee period is the period of time that the fixed account interest rate is guaranteed to remain the same.
Normally, Nationwide will permit 100% of the maturing fixed account allocations to be transferred. However, Nationwide may limit the amount that can be transferred from the fixed account. Nationwide will determine the amount that may be transferred and will declare this amount at the end of the fixed account interest rate guarantee period. The maximum transferable amount will never be less than 10% of the fixed account allocation reaching the end of a fixed account interest rate guarantee period.
Contract owners who use Dollar Cost Averaging may transfer from the fixed account under the terms of that program.
Nationwide reserves the right to limit the number of transfers from the fixed account to the Guaranteed Term Options to one per calendar year.
Nationwide is required by state law to reserve the right to postpone the transfer of assets from the fixed account for a period of up to 6 months from the date of the transfer request.
If there is contract value allocated to the fixed account at the time the Capital Preservation Plus Option or the Capital Preservation Plus Lifetime Income Option is elected, the fixed account interest rate guarantee period will end and that contract value may be transferred according to the terms of the option elected.
Transfers from a Guaranteed Term Option
A contract owner may request to transfer allocations from a Guaranteed Term Option to the sub-accounts and/or the fixed account at any time. Transfers from a Guaranteed Term Option prior to maturity are subject to a market value adjustment.
Nationwide reserves the right to limit or refuse transfers to the fixed account and to limit the number of transfers out of the Guaranteed Term Options to one per calendar year.
Nationwide is required by state law to reserve the right to postpone the transfer of assets from the Guaranteed Term Options for a period of up to 6 months from the date of the transfer request.
Transfers from the Sub-Accounts
A contract owner may request to transfer allocations from the sub-accounts to the fixed account or a Guaranteed Term Option at any time, subject to terms and conditions imposed by the contract and the underlying mutual funds.
Nationwide reserves the right to limit or refuse transfers to the fixed account and to limit the number of transfers from the sub-accounts to the Guaranteed Term Options to one per calendar year.
Transfers Among the Sub-Accounts
A contract owner may request to transfer allocations among the sub-accounts at any time.
Transfers After Annuitization
After annuitization, the portion of the contract value allocated to fixed annuity payments and the portion of the contract value allocated to variable annuity payments may not be changed.
After annuitization, transfers among sub-accounts may only be made on the anniversary of the annuitization date. Guaranteed Term Options are not available after annuitization.
Contract owners have a ten day "free-look" to examine the contract. The contract may be returned to Nationwide's home office for any reason within ten days of receipt and Nationwide will refund the contract value or another amount required by law. Nationwide's actual date of receipt of the contract determines the eligibilty of the "free-look" privilege. The refunded contract value will reflect the deduction of any contract charges, unless otherwise required by law. All IRA, SEP IRA, Simple IRA and Roth IRA refunds will be a return of purchase payments. State and/or federal law may provide additional free-look privileges.
Liability of the variable account under this provision is limited to the contract value in each sub-account on the date of revocation. Any additional amounts refunded to the contract owner will be paid by Nationwide.
Prior to annuitization and before the annuitant's death, contract owners may generally surrender some or all of their contract value. Surrenders from the contract may be subject to federal income tax and/or a tax penalty. See "Federal Income Taxes" in Appendix C: Contract Types and Tax Information. Surrender requests must be in writing and Nationwide may require additional information. When taking a full surrender, the contract must accompany the written request. Nationwide may require a signature guarantee.
Nationwide will pay any amounts surrendered from the sub-accounts within 7 days (See “Pricing”). However, Nationwide may suspend or postpone payment when it is unable to price a purchase payment or transfer.
Nationwide is required by state law to reserve the right to postpone payment of assets in the fixed account and Guaranteed Term Options for a period of up to 6 months from the date of the surrender request.
Partial Surrenders (Partial Redemptions)
If a contract owner requests a partial surrender, Nationwide will surrender accumulation units from the sub-accounts and an amount from the fixed account and the Guaranteed Term Options. The amount withdrawn from each investment option will be in proportion to the value in each option at the time of the surrender request.
Partial surrenders are subject to the CDSC provisions of the contract. If a CDSC is assessed, the contract owner may elect to have the CDSC deducted from either:
| (a) | the amount requested; or |
| (b) | the contract value remaining after the contract owner has received the amount requested. |
If the contract owner does not make a specific election, any applicable CDSC will be deducted from the amount requested by the contract owner.
The CDSC deducted is a percentage of the amount requested by the contract owner. Amounts deducted for CDSC are not subject to subsequent CDSC.
Partial Surrenders to Pay Investment Advisory Fees
Some contract owners utilize an investment advisor(s) to manage their assets, for which the investment advisor assesses a fee. Investment advisors are not endorsed or affiliated with Nationwide and Nationwide makes no representation as to their qualifications. The fees for these investment advisory services are specified in the respective account agreements and are separate from and in addition to the contract fees and expenses described in this prospectus. Some contract owners authorize their investment advisor to take a partial surrender(s) from the contract in order to collect investment advisory fees. Surrenders taken from this contract to pay advisory or investment management fees are subject to the CDSC provisions of the contract and may be subject to income tax and/or tax penalties.
Full Surrenders (Full Redemptions)
Upon full surrender, the contract value may be more or less than the total of all purchase payments made to the contract. The contract value will reflect:
| | variable account charges; |
| | underlying mutual fund charges; |
| | a $30 Contract Maintenance Charge (this charge will be waived upon full surrender if the contract value is equal to or greater than $50,000 at the time of the full surrender or on any contract anniversary prior to the full surrender); |
| | the investment performance of the underlying mutual funds; |
| | amounts allocated to the fixed account and any interest credited; and |
| | amounts allocated to the Guaranteed Term Options, plus or minus any market value adjustment. |
Full surrenders are subject to the CDSC provisions of the contract, where permitted by state law. The CDSC-free withdrawal privilege does not apply to full surrenders of the contract. For purposes of the CDSC free withdrawal privilege, a full surrender is:
| | multiple surrenders taken within a contract year that deplete the entire contract value; or |
| | any single net surrender of 90% or more of the contract value. |
After the annuitization date, surrenders other than regularly scheduled annuity payments are not permitted.
Surrenders Under a Tax Sheltered Annuity
Contract owners of a Tax Sheltered Annuity may surrender part or all of their contract value before annuitant's death, except as provided below:
| (A) | Contract value attributable to contributions made under a qualified cash or deferred arrangement (within the meaning of Internal Revenue Code Section 402(g)(3)(A)), a salary reduction agreement (within the meaning of Internal Revenue Code Section 402(g)(3)(C)), or transfers from a Custodial Account (described in Section 403(b)(7) of the Internal Revenue Code), may be surrendered only: |
| (1) | when the contract owner reaches age 59½, separates from service, dies, or becomes disabled (within the meaning of Internal Revenue Code Section 72(m)(7)); or |
| (2) | in the case of hardship (as defined for purposes of Internal Revenue Code Section 401(k)), provided that any such hardship surrender may not include any income earned on salary reduction contributions. |
| (B) | The surrender limitations described in Section A also apply to: |
| (1) | salary reduction contributions to Tax Sheltered Annuities made for plan years beginning after December 31, 1988; |
| (2) | earnings credited to such contracts after the last plan year beginning before January 1, 1989, on amounts attributable to salary reduction contributions; and |
| (3) | all amounts transferred from 403(b)(7) Custodial Accounts (except that earnings and employer contributions as of December 31, 1988 in such Custodial Accounts may be withdrawn in the case of hardship). |
| (C) | Any distribution other than the above, including a ten day free-look cancellation of the contract (when available) may result in taxes, penalties, and/or retroactive disqualification of a Tax Sheltered Annuity. |
In order to prevent disqualification of a Tax Sheltered Annuity after a ten day free-look cancellation, Nationwide will transfer the proceeds to another Tax Sheltered Annuity upon proper direction by the contract owner.
These provisions explain Nationwide's understanding of current withdrawal restrictions. These restrictions may change.
Distributions pursuant to Qualified Domestic Relations Orders will not violate the restrictions stated above.
Surrenders Under a Texas Optional Retirement Program or a Louisiana Optional Retirement Plan
Redemption restrictions apply to contracts issued under the Texas Optional Retirement Program or the Louisiana Optional Retirement Plan.
The Texas Attorney General has ruled that participants in contracts issued under the Texas Optional Retirement Program may only take withdrawals if:
| | the participant retires; |
| | the participant terminates employment due to total disability; or |
| | the participant that works in a Texas public institution of higher education terminates employment. |
A participant under a contract issued under the Louisiana Optional Retirement Plan may only take distributions from the contract upon retirement or termination of employment. All retirement benefits under this type of plan must be paid as lifetime income; lump sum cash payments are not permitted, except for death benefits.
Due to the restrictions described above, a participant under either of these plans will not be able to withdraw cash values from the contract unless one of the applicable conditions is met. However, contract value may be transferred to other carriers, subject to any sales charges.
Nationwide issues this contract to participants in the Texas Optional Retirement Program in reliance upon and in compliance with Rule 6c-7 of the Investment Company Act of 1940. Nationwide issues this contract to participants in the Louisiana Optional Retirement Plan in reliance upon and in compliance with an exemptive order that Nationwide received from the SEC on August 22, 1990.
The loan privilege is only available to contract owners of Tax Sheltered Annuities. Contract owners of Tax Sheltered Annuities may take loans from the contract value beginning 30 days after the contract is issued up to the annuitization date. Loans are subject to the terms of the contract, the plan, and the Internal Revenue Code. Nationwide may modify the terms of a loan to comply with changes in applicable law.
Minimum and Maximum Loan Amounts
Contract owners may borrow a minimum of $1,000, unless Nationwide is required by law to allow a lesser minimum amount. Each loan must individually satisfy the contract minimum amount.
Nationwide will calculate the maximum non-taxable loan amount based on information provided by the participant or the employer. Loans may be taxable if a participant has additional loans from other plans.
The total of all outstanding loans must not exceed the following limits:
Contract Values | Maximum Outstanding Loan Balance Allowed |
| Up to $20,000 | up to 80% of contract value (not more than $10,000) |
| $20,000 and over | up to 50% of contract value (not more than $50,000*) |
| *The $50,000 limit will be reduced by the highest outstanding balance owed during the previous 12 months. |
For salary reduction Tax Sheltered Annuities, loans may be secured only by the contract value.
Maximum Loan Processing Fee
Nationwide may charge a loan processing fee at the time each new loan is processed. The loan processing fee, if assessed, will not exceed $25 per loan processed. This fee compensates Nationwide for expenses related to administering and processing loans. Loans are not available in all states. In addition, some states may not allow Nationwide to assess a loan processing fee.
The fee is taken from the sub-accounts, fixed account, and Guaranteed Term Options in proportion to the contract value at the time the loan is processed.
How Loan Requests are Processed
All loans are made from the collateral fixed account. Nationwide transfers accumulation units in proportion to the assets in each sub-account to the collateral fixed account until the requested amount is reached.
If there are not enough accumulation units available in the contract to reach the requested loan amount, Nationwide next transfers contract value from the fixed account. Contract value transferred from the fixed account to meet the requested loan amount is not subject to the fixed account transfer limitations otherwise applicable under the contract.
Any remaining required collateral will be transferred from the Guaranteed Term Options. Transfers from the Guaranteed Term Options may be subject to a market value adjustment.
No CDSC will be deducted on transfers related to loan processing.
Loan Interest
The outstanding loan balance in the collateral fixed account is credited with interest until the loan is repaid in full. The credited interest rate will be 2.25% less than the loan interest rate fixed by Nationwide. The credited interest rate is guaranteed never to fall below the minimum interest rate required by applicable state law.
Specific loan terms are disclosed at the time of loan application or issuance.
Loan Repayment
Loans must be repaid in five years. However, if the loan is used to purchase the contract owner's principal residence, the contract owner has 15 years to repay the loan.
Contract owners must identify loan repayments as loan repayments or they will be treated as purchase payments and will not reduce the outstanding loan. Loan repayments must be substantially level and made at least quarterly.
Loan repayments will consist of principal and interest in amounts set forth in the loan agreement. Repayments are allocated to the sub-accounts in accordance with the contract, unless Nationwide and the contract owner have agreed to amend the contract at a later date on a case by case basis.
Loan repayments to the Guaranteed Term Options must be at least $1,000. If the proportional share of the repayment to the Guaranteed Term Options is less than $1,000, that portion of the repayment will be allocated to the money market sub-account unless the contract owner directs otherwise and will be subject to any variable account charges applicable under the contract.
Distributions and Annuity Payments
Distributions made from the contract while a loan is outstanding will be reduced by the amount of the outstanding loan plus accrued interest if:
| | the contract owner takes a full surrender of the contract; |
| | the contract owner/annuitant dies; |
| | the contract owner who is not the annuitant dies prior to annuitization; or |
| | the contract owner annuitizes the contract. |
Transferring the Contract
Nationwide reserves the right to restrict any transfer of the contract while the loan is outstanding.
Grace Period and Loan Default
If a loan payment is not made when due, interest will continue to accrue. A grace period may be available (please refer to the terms of the loan agreement). If a loan payment is not made by the end of the applicable grace period, the entire loan will be treated as a deemed distribution and will be taxable to the borrower. This deemed distribution may also be subject to an early withdrawal tax penalty by the Internal Revenue Service.
After default, interest will continue to accrue on the loan. Defaulted amounts, plus interest, are deducted from the contract value when the participant is eligible for a distribution of at least that amount. Additional loans are not available while a previous loan is in default.
Contract rights are personal to the contract owner and may not be assigned without Nationwide's written consent. Nationwide reserves the right to refuse to recognize assignments that alter the nature of the risks that Nationwide assumed when it originally issued the contract.
A Non-Qualified Contract owner may assign some or all rights under the contract. An assignment must occur before annuitization while the annuitant is alive. Once proper notice of assignment is recorded by Nationwide's home office, the assignment will become effective.
Investment-Only Contracts, IRAs, Roth IRAs, SEP IRAs, Simple IRAs, and Tax Sheltered Annuities may not be assigned, pledged or otherwise transferred except where allowed by law.
Nationwide is not responsible for the validity or tax consequences of any assignment. Nationwide is not liable for any payment or settlement made before the assignment is recorded. Assignments will not be recorded until Nationwide receives sufficient direction from the contract owner and the assignee regarding the proper allocation of contract rights.
Amounts pledged or assigned will be treated as distributions and will be included in gross income to the extent that the cash value exceeds the investment in the contract for the taxable year in which it was pledged or assigned. Amounts assigned may be subject to a tax penalty equal to 10% of the amount included in gross income.
Assignment of the entire contract value may cause the portion of the contract value exceeding the total investment in the contract and previously taxed amounts to be included in gross income for federal income tax purposes each year that the assignment is in effect.
Asset Rebalancing
Asset Rebalancing is the automatic reallocation of contract values to the sub-accounts on a predetermined percentage basis. Asset Rebalancing is not available for assets held in the fixed account or the Guaranteed Term Options. Requests for Asset Rebalancing must be on a Nationwide form. Once Asset Rebalancing is elected, it will only be terminated upon specific instruction from the contract owner; manual transfers will not automatically terminate the program.
Asset Rebalancing occurs every three months or on another frequency if permitted by Nationwide. If the last day of the three-month period falls on a Saturday, Sunday, recognized holiday, or any other day when the New York Stock Exchange is closed, Asset Rebalancing will occur on the next business day. Each Asset Rebalancing reallocation is considered a transfer event.
Asset Rebalancing may be subject to employer limitations or restrictions for contracts issued to a Tax Sheltered Annuity plan. Contract owners should consult a financial adviser to discuss the use of Asset Rebalancing.
Nationwide reserves the right to stop establishing new Asset Rebalancing programs.
Dollar Cost Averaging
Dollar Cost Averaging is a long-term transfer program that allows you to make regular, level investments over time. It involves the automatic transfer of a specified amount from the fixed account and/or certain sub-accounts into other sub-accounts. Nationwide does not guarantee that this program will result in profit or protect contract owners from loss.
Contract owners direct Nationwide to automatically transfer specified amounts from the fixed account and the
Federated Insurance Series – Federated Quality Bond Fund II: Service Shares, Fidelity Variable Insurance Products Fund – VIP Investment Grade Bond Portfolio: Service Class 2, Lehman Brothers Advisers Management Trust – AMT Short Duration Bond Portfolio: I Class, NVIT – Nationwide NVIT Government Bond Fund: Class I, NVIT – Nationwide NVIT Investor Destinations Conservative Fund: Class II, and NVIT – Nationwide NVIT Money Market Fund: Class I,to any other underlying mutual fund(s). Dollar Cost Averaging transfers may not be directed to the fixed account or the Guaranteed Term Options.
Transfers occur monthly or on another frequency if permitted by Nationwide. Dollar Cost Averaging transfers are not considered transfer events. Nationwide will process transfers until either the value in the originating investment option is exhausted, or the contract owner instructs Nationwide in writing to stop the transfers.
Transfers from the fixed account must be equal to or less than 1/30th of the fixed account value at the time the program is requested. Contract owners that wish to utilize Dollar Cost Averaging from the fixed account should first inquire whether any Enhanced Fixed Account Dollar Cost Averaging programs are available.
Nationwide reserves the right to stop establishing new Dollar Cost Averaging programs.
Nationwide is required by state law to reserve the right to postpone transfer of assets from the fixed account for a period of up to 6 months from the date of the transfer request.
Enhanced Fixed Account Dollar Cost Averaging
Nationwide may, periodically, offer Enhanced Fixed Account Dollar Cost Averaging programs. Only new purchase payments to the contract are eligible for Enhanced Fixed Account Dollar Cost Averaging.
Enhanced Fixed Account Dollar Cost Averaging involves the automatic transfer of a specific amount from the enhanced fixed account into other sub-accounts. Enhanced Fixed Account Dollar Cost Averaging transfers may not be directed to the fixed account or the Guaranteed Term Options. Amounts allocated to the enhanced fixed account earn a higher rate of interest than assets allocated in the standard fixed account. Each enhanced interest rate is guaranteed for as long as the corresponding program is in effect.
Transfers occur monthly or on another frequency if permitted by Nationwide. Enhanced Fixed Account Dollar Cost Averaging transfers are not considered transfer events. Nationwide will process transfers until either amounts allocated to the enhanced fixed account are exhausted or the contract owner instructs Nationwide in writing to stop the transfers. For Enhanced Fixed Account Dollar Cost Averaging, when a contract owner instructs Nationwide to stop the transfers, Nationwide will automatically transfer any amount remaining in the enhanced fixed account to the money market sub-account.
Nationwide reserves the right to stop establishing new Enhanced Fixed Account Dollar Cost Averaging programs.
Nationwide is required by state law to reserve the right to postpone transfer of assets from the fixed account, including an enhanced fixed account, for a period of up to 6 months from the date of the transfer request.
Fixed Account Interest Out Dollar Cost Averaging
Nationwide may, periodically, offer Fixed Account Interest Out Dollar Cost Averaging programs. Fixed Account Interest Out Dollar Cost Averaging involves the automatic transfer of the interest earned on fixed account allocations into any other sub-accounts. Fixed Account Interest Out Dollar Cost Averaging transfers may not be directed to the fixed account or the Guaranteed Term Options.
Transfers occur monthly or on another frequency if permitted by Nationwide. Fixed Account Interest Out Dollar Cost Averaging transfers are not considered transfer events. Nationwide will continue to process transfers until the contract owner instructs Nationwide in writing to stop the transfers.
Nationwide reserves the right to stop establishing new Fixed Account Interest Out Dollar Cost Averaging programs.
Nationwide is required by state law to reserve the right to postpone transfer of assets from the fixed account for a period of up to 6 months from the date of the transfer request.
Systematic Withdrawals
Systematic Withdrawals allow contract owners to receive a specified amount (of at least $100) on a monthly, quarterly, semi-annual, or annual basis. Requests for Systematic Withdrawals and requests to discontinue Systematic Withdrawals must be in writing.
The withdrawals will be taken from the sub-accounts and the fixed account proportionately unless Nationwide is instructed otherwise. Systematic Withdrawals are not available from the Guaranteed Term Options.
Nationwide will withhold federal income taxes from Systematic Withdrawals unless otherwise instructed by the contract owner. The Internal Revenue Service may impose a 10% penalty tax if the contract owner is under age 59½ unless the contract owner has made an irrevocable election of distributions of substantially equal payments.
A CDSC may apply to amounts taken through systematic withdrawals.
If the contract owner takes Systematic Withdrawals, the maximum amount that can be withdrawn annually without a CDSC is the greatest of:
| (1) | 10% of the net difference of purchase payments that are subject to CDSC minus purchase payments surrendered that were subject to CDSC; |
| (2) | an amount withdrawn to meet minimum distribution requirements under the Internal Revenue Code; or |
| (3) | a percentage of the contract value based on the contract owner's age, as shown in the table below: |
Contract Owner's Age | Percentage of Contract Value |
| Under age 59½ | 5% |
| Age 59½ through age 61 | 7% |
| Age 62 through age 64 | 8% |
| Age 65 through age 74 | 10% |
| Age 75 and over | 13% |
The contract owner's age is determined as of the date the request for Systematic Withdrawals is recorded by Nationwide's home office. For joint owners, the older joint owner's age will be used.
If total amounts withdrawn in any contract year exceed the CDSC-free amount described above, those amounts will only be eligible for the CDSC-free withdrawal privilege described in the CDSC provision. The total amount of CDSC for that contract year will be determined in accordance with that provision.
The CDSC-free withdrawal privilege for Systematic Withdrawals is non-cumulative. Free amounts not taken during any contract year cannot be taken as free amounts in a subsequent contract year.
Nationwide reserves the right to stop establishing new Systematic Withdrawal programs. Systematic Withdrawals are not available before the end of the ten-day free-look period.
Nationwide Allocation Architect
Prior to annuitization, Nationwide may make available for use by contract owners the Nationwide Allocation Architect, an asset allocation service that enables contract owners to have their variable account allocations invested according to an investment model. The models diversify among asset classes to achieve specific investment goals and are based on different profiles of an investor's willingness to accept investment risk. Participants in the program may elect one of 5 available models:
| | Moderately Aggressive; and |
Each model is comprised of sub-accounts of underlying funds that are currently available as investment options in this contract. The sub-accounts within each model and their weightings are selected according to each model's risk tolerance and investment goal. More information about the program and the models is available in the brochure for the program.
Nationwide Investment Advisors, LLC as Investment Adviser
For those contracts that elect to use the Nationwide Allocation Architect, Nationwide Investment Advisors, LLC ("NIA") will serve as investment adviser to each participating contract owner for the sole purposes of developing and maintaining the models. In this capacity, NIA will act as a fiduciary. Contract owners will receive a copy of NIA's Form ADV at the time of application, which contains more information about NIA's role as investment adviser.
Evaluating and Updating the Models
At least twice each calendar year, NIA will evaluate the models to assess whether the combination and allocation percentages of the sub-accounts within each model optimizes the return potential for that model. If deemed necessary by NIA, NIA will update the models, with such updates taking effect on or about January 1 and July 1 of each year. NIA may evaluate and update the models more frequently at its sole discretion.
Updating the models could entail adding or removing one or more sub-accounts from a model, or changing the allocation percentages among existing sub-accounts. Currently, NIA updates the models based on information received from an independent third-party firm. NIA reserves the right to change the third-party firm (where permitted by law) upon 30 days' written notice to contract owners. NIA takes sole responsibility for monitoring and updating the models.
Nationwide will send contract owners written notice of model updates approximately 30 days before the model changes are to be implemented. Contract owners should review these notices carefully. If the contract owner is comfortable with the model changes, the contract owner need not take any action. If the contract owner is not comfortable with the model changes,
the contract owner may switch to a different model or terminate their participation in the service.
On or about each January 1 and July 1 (or any other day that NIA updates the models), Nationwide will reallocate the variable account contract value of contracts participating in the service pursuant to the discretionary authority granted to Nationwide as a requirement to participate in the service. The reallocation will rebalance the variable account contract allocations to the updated model allocations. If the scheduled date for the reallocation is a Saturday, Sunday, recognized holiday, or any other day that the New York Stock Exchange is closed, the reallocation will occur on the next business day. Each reallocation is considered a transfer event. However, the automatic reallocation transfers within the Nationwide Allocation Architect are not subject to Short-Term Trading Fees.
Quarterly Rebalancing
In addition to reallocating the variable account contract value when the models change, Nationwide will also reallocate the variable account contract value at the end of each calendar quarter, referred to as quarterly rebalancing. If the end of a calendar quarter is a Saturday, Sunday, recognized holiday, or any other day that the New York Stock Exchange is closed, the quarterly rebalancing will occur on the next business day. Each quarterly rebalancing is considered a transfer event. However, quarterly rebalancing transfers within the Nationwide Allocation Architect are not subject to Short-Term Trading Fees.
Election of the Nationwide Allocation Architect
There is no additional charge for participating in the Nationwide Allocation Architect. If the service is available, a contract owner may elect to begin participating at any time by communicating the election to Nationwide in writing to Nationwide's service center. Once the election is received and processed, Nationwide will allocate the entire contract value that is allocated to the variable account in accordance with the elected model. Allocations to the fixed account or the GTO will remain so invested. Only one model may be elected at any given time.
While the Nationwide Allocation Architect is in effect, the contract owner will not be permitted to transfer contract value among the sub-accounts or out of the sub-accounts (to the fixed account or a GTO) without first terminating their participation in the service. Contract owners may transfer maturing fixed account contract value into the variable account (and thus, the elected model) only at the end of the guarantee term. Any subsequent payments submitted that are to be allocated to the sub-accounts will also be allocated according to the currently elected model. Any surrenders taken from the contract while the Nationwide Allocation Architect is in effect will be taken proportionally from all investments in the contract. Any charges assessed to the contract will be taken proportionally from all investments in the contract. A contract owner participating in the Nationwide Allocation Architect may not participate in Asset Rebalancing or Dollar Cost Averaging.
When electing a model, please consult a qualified financial adviser to determine the most appropriate model based on the contract owner's particular financial needs, time horizon, and willingness to accept investment risk. The investment adviser may use tools to make this determination that are either independently acquired or provided by Nationwide. However, Nationwide bears no responsibility for the investment decision.
Changing Models
Contract owners participating in the Nationwide Allocation Architect may elect to change models at any time. An election to change models must be communicated to Nationwide in writing or over the telephone to Nationwide's service center. An election to change models will be immediate and will not be subject to Short-Term Trading Fees.
Nationwide reserves the right to limit the number of times a contract owner can change models each year.
Terminating Participation in the Nationwide Allocation Architect
Once participation in the service has begun, it may only be terminated upon the specific written request of the contract owner. Once a contract owner's participation in the service is terminated, the contract value will remain invested as it was on the last day of participation in the program unless and until Nationwide is instructed otherwise. Additionally, please be aware that the terms of the "Transfer Restrictions" provision apply.
Nationwide reserves the right to terminate the availability of this service at any time.
Risks Associated with the Nationwide Allocation Architect
The models are designed to optimize returns based on different risk tolerances. However, neither Nationwide nor NIA guarantees that participation in the Nationwide Allocation Architect will result in a profit or protect against a loss.
NIA may be subject to competing interests that may affect its decisions as to the sub-accounts offered in the models. Specifically, some of the sub-accounts correspond to underlying mutual funds owned by a NIA affiliate, some underlying mutual funds may pay more revenue to NISC (NIA's affiliate) than others, and some underlying mutual funds may pay more revenue to Nationwide (NIA's parent company) than others. However, NIA believes that its fiduciary responsibilities to the contract owners that elect a model outweigh any conflict that may exist relating to the underlying mutual funds, enabling it to make substantially unbiased choices as to the sub-accounts within the models.
Custom Portfolio Asset Rebalancing Service
Nationwide may make the Custom Portfolio Asset Rebalancing Service available for use by contract owners who have elected the CPP Lifetime Income Option or the Lifetime Income Option. This service is an asset rebalancing program with pre-selected asset categories determined by an independent third party from which you can choose underlying funds.
Election of the Custom Portfolio Asset Rebalancing Program
There is no additional charge for participation in the Custom Portfolio Asset Rebalancing Service. You may elect this program by submitting the Nationwide Custom Portfolio Asset Rebalancing Program administrative form to the Nationwide home office. You cannot participate in Asset Rebalancing or Dollar Cost Averaging while enrolled in the Custom Portfolio Asset Rebalancing Service.
You should consult a qualified financial adviser to help you determine your allocation based on your financial needs, time horizon, and willingness to accept investment risk.
Prior to enrollment in the Custom Portfolio Asset Rebalancing Service, a complete list of the program rules will be given to you.
Changing Asset Categories
You may elect to change asset categories at any time. An election to change asset categories must be communicated to Nationwide in writing to the Nationwide home office by way of a Custom Portfolio Asset Rebalancing Service administrative form. Changes made in accordance with an election to change asset categories will be immediate, will be subject to Short-Term Trading Fees and will count as a “transfer event” as specified under the Transfer Restrictions section.
Nationwide reserves the right to limit the number of times you can change asset categories each year.
Quarterly Rebalancing
At the end of each quarter we will reallocate the variable account contract value according to your current Custom Portfolio allocation. If the end of a calendar quarter is a Saturday, Sunday, recognized holiday, or any other day that the New York Stock Exchange is closed, the quarterly rebalancing will occur on the next business day. Each quarterly rebalancing is considered a transfer event. However, quarterly rebalancing transfers within your Custom Portfolio is not subject to Short-Term Trading Fees.
Terminating Participation in the Nationwide Custom Portfolio
Participation in the Custom Portfolio service may be terminated upon your written request. You must reallocate your contract value to the investment options available under the CPP Lifetime Income Option or to the Lifetime Income Option.
Nationwide reserves the right to terminate or modify the Custom Portfolio Asset Rebalancing Service at any time.
Death of Contract Owner
If a contract owner (including a joint owner) who is not the annuitant dies before the annuitization date, no death benefit is payable and the surviving joint owner becomes the contract owner.
If no joint owner is named, the contingent owner becomes the contract owner.
If no contingent owner is named, the beneficiary becomes the contract owner.
If no beneficiary survives the contract owner, the last surviving contract owner's estate becomes the contract owner.
Distributions will be made pursuant to the "Required Distributions for Non-Qualified Contracts" in Appendix C: Contract Types and Tax Information.
Death of Annuitant
If the annuitant who is not a contract owner dies before the annuitization date, the contingent annuitant becomes the annuitant and no death benefit is payable. If no contingent annuitant is named, a death benefit is payable to the beneficiary. Multiple beneficiaries will share the death benefit equally unless otherwise specified.
If no beneficiaries survive the annuitant, the contingent beneficiary receives the death benefit. Multiple contingent beneficiaries will share the death benefit equally unless otherwise specified.
If no beneficiaries or contingent beneficiaries survive the annuitant, the contract owner or the last surviving contract owner’s estate will receive the death benefit.
If the contract owner is a Charitable Remainder Trust and the annuitant dies before the annuitization date, the death benefit will accrue to the Charitable Remainder Trust. Any designation in conflict with the Charitable Remainder Trust's right to the death benefit will be void.
If the annuitant dies after the annuitization date, any benefit that may be payable will be paid according to the selected annuity payment option.
Death of Contract Owner/Annuitant
If a contract owner (including a joint owner) who is also the annuitant dies before the annuitization date, a death benefit is payable to the surviving joint owner.
If there is no surviving joint owner, the death benefit is payable to the beneficiary. Multiple beneficiaries will share the death benefit equally unless otherwise specified.
If no beneficiaries survive the contract owner/annuitant, the contingent beneficiary receives the death benefit. Multiple contingent beneficiaries will share the death benefit equally unless otherwise specified.
If no contingent beneficiaries survive the contract owner/annuitant, the last surviving contract owner's estate will receive the death benefit.
If the contract owner/annuitant dies after the annuitization date, any benefit that may be payable will be paid according to the selected annuity payment option.
Death Benefit Payment
The recipient of the death benefit may elect to receive the death benefit:
| (3) | in any other manner permitted by law and approved by Nationwide. |
Nationwide will pay (or will begin to pay) the death benefit upon receiving proof of death and the instructions as to the payment of the death benefit. If the recipient of the death benefit does not elect the form in which to receive the death benefit payment, Nationwide will pay the death benefit in a lump sum. Contract value will continue to be allocated according to the most recent allocation instructions until the death benefit is paid.
If the contract has multiple beneficiaries entitled to receive a portion of the death benefit, the contract value will continue to be allocated according to the most recent allocation instructions until the first beneficiary is paid. After the first beneficiary is paid, remaining contract value will be allocated to the available money market sub-account until instructions are received from the remaining beneficiary(ies
Death Benefit Calculations
An applicant may elect either the standard death benefit or an available death benefit option under the contract for an additional charge. If no election is made at the time of application, the death benefit will be the standard death benefit.
The value of each component of the applicable death benefit calculation will be determined as of the date of the annuitant's death, except for the contract value component, which will be determined as of the date described in the applicable death benefit calculation.
Standard Death Benefit
If the annuitant dies before the annuitization date, the standard death benefit will be the greatest of:
| (1) | the contract value as of the date that Nationwide receives all the information necessary to pay the death benefit; or |
| (2) | the total of all purchase payments, less an adjustment for amounts surrendered. |
The contract value in item (1) above may include a market value adjustment for any amounts allocated to a Guaranteed Term Option.
The adjustment for amounts surrendered will reduce item (2) above in the same proportion that the contract value was reduced on the date(s) of the partial surrender(s).
One-Year Enhanced Death Benefit Option
For an additional charge at an annualized rate of 0.20% of the daily net assets of the variable account, an applicant can elect the One-Year Enhanced Death Benefit Option at the time of application. This One-Year Enhanced Death Benefit Option is only available for contracts with annuitants age 80 or younger at the time of application.
If the annuitant dies prior to the annuitization date and the total of all purchase payments made to the contract is less than or equal to $3,000,000, the death benefit will be the greatest of:
| (1) | the contract value as of the date that Nationwide receives all the information necessary to pay the death benefit; |
| (2) | the total of all purchase payments, less an adjustment for amounts surrendered; or |
| (3) | the highest contract value on any contract anniversary prior to the annuitant's 86th birthday, less an adjustment for amounts subsequently surrendered, plus purchase payments received after that contract anniversary. |
The contract value in items (1) and (3) above may include a market value adjustment for any amounts allocated to a Guaranteed Term Option.
The adjustment for amounts surrendered will reduce items (2) and (3) above in the same proportion that the contract value was reduced on the date(s) of the partial surrender(s).
If Nationwide does not receive all information necessary to pay the death benefit within one year of the annuitant's death, the death benefit will be the greater of (1) or (2) above.
If the annuitant dies prior to the annuitization date and the total of all purchase payments made to the contract is greater than $3,000,000, the death benefit will be determined using the following formula:
(A x F) + B(1 - F), where
A = the greatest of:
| (1) | the contract value as of the date that Nationwide receives all the information necessary to pay the death benefit; |
| (2) | the total of all purchase payments, less an adjustment for amounts surrendered; or |
| (3) | the highest contract value on any contract anniversary prior to the annuitant's 81st birthday, less an adjustment for amounts subsequently surrendered, plus purchase payments received after that contract anniversary. |
The contract value in items (1) and (3) above may include a market value adjustment for any amounts allocated to a Guaranteed Term Option.
The adjustment for amounts surrendered will reduce items (2) and (3) above in the same proportion that the contract value was reduced on the date(s) of the partial surrender(s).
If Nationwide does not receive all information necessary to pay the death benefit within one year of the annuitant's death, the calculation for A above will be the greater of (1) or (2) above.
| B = the contract value as of the date that Nationwide receives all the information necessary to pay the death benefit; and |
| F = the ratio of $3,000,000 to the total of all purchase payments made to the contract. |
The practical effect of this formula is that the beneficiary recovers a lesser percentage of purchase payments in excess of $3,000,000 that for purchase payments up to $3,000,000. In no event will the beneficiary receive less than the contract value.
The One-Year Enhanced Death Benefit Option also includes the Spousal Protection Feature, which allows a surviving spouse to continue the contract while receiving the economic benefit of the death benefit upon the death of the other spouse.
Combination Enhanced Death Benefit Option
For an additional charge at an annualized rate of 0.45% of the daily net assets of the variable account, an applicant can elect the Combination Enhanced Death Benefit Option at the time of application. The Combination Enhanced Death Benefit Option is only available for contracts with annuitants age 75 or younger at the time of application.
If the annuitant dies prior to the annuitization date and the total of all purchase payments made to the contract is less than or equal to $3,000,000, the death benefit will be the greatest of:
| (1) | the contract value as of the date that Nationwide receives all the information necessary to pay the death benefit; |
| (2) | the total of all purchase payments, less an adjustment for amounts surrendered; |
| (3) | the highest contract value on any contract anniversary before the annuitant's 81st birthday, less an adjustment for amounts subsequently surrendered, plus purchase payments received after that contract anniversary; or |
| (4) | the 5% interest anniversary value. |
The contract value in items (1) and (3) above may include a market value adjustment for any amounts allocated to a Guaranteed Term Option.
The adjustment for amounts surrendered will reduce items (2) and (3) above in the same proportion that the contract value was reduced on the date(s) of the partial surrender(s).
If Nationwide does not receive all information necessary to pay the death benefit within one year of the annuitant's death, the death benefit will be the greater of (1) or (2) above.
The 5% interest anniversary value is equal to purchase payments, accumulated at 5% annual compound interest until the last contract anniversary prior to the annuitant's 81st birthday, proportionately adjusted for amounts surrendered. The adjustment for amounts surrendered will reduce the accumulated value as of the most recent contract anniversary prior to each partial surrender in the same proportion that the contract value was reduced on the date of the partial surrender. Such total accumulated amount, after the surrender adjustment, shall not exceed 200% of purchase payments adjusted for amounts surrendered.
For example, assume Joe purchases a contract in 2007 for $100,000.
In year 2021:
Purchase payment $100,000
Contract value $120,000
Highest anniversary contract value $125,000
5% interest anniversary value $197,933
If Joe dies in 2021, his death benefit would be $197,933.
However if he dies the next year, his death benefit would be $200,000 instead of $207,829 (105% X 197,933) since the 5% interest anniversary value is limited to 200% of his initial purchase payment of $100,000.
The impact of a withdrawal during his life will be calculated as follows:
In year 2015
Purchase payment $100,000
Contract value $120,000
Highest anniversary contract value $120,000
5% interest anniversary value $155,133
Contract withdrawal in 2016 $60,000
After his withdrawal, the highest contract anniversary value is $60,000 (120,000-60,000) and the 5% interest anniversary value is $77,566 (60,000/120,000 X 155,133). After the date of the withdrawal, the 5% interest anniversary value is limited to $100,000 (200,000% (100,000 -50,000)).
If, after the first contract anniversary, the fixed account allocation becomes greater than 30% of the contract value due to the application of additional purchase payments, additional surrenders, or transfers among investment options, then for purposes of calculating the 5% interest anniversary value, 0% will accrue for that year. If the fixed account allocation becomes greater than 30% as a result of market performance, interest will continue to accrue at 5% for the interest anniversary value.
If the annuitant dies prior to the annuitization date and the total of all purchase payments made to the contract is greater than $3,000,000, the death benefit will be determined using the following formula:
(A x F) + B(1 - F), where
A = the greatest of:
| (1) | the contract value as of the date that Nationwide receives all the information necessary to pay the death benefit; |
| (2) | the total of all purchase payments, less an adjustment for amounts surrendered; |
| (3) | the highest contract value on any contract anniversary before the annuitant's 81st birthday, less an adjustment for amounts subsequently surrendered, plus purchase payments received after that contract anniversary; or |
| (4) | the 5% interest anniversary value. |
The contract value in items (1) and (3) above may include a market value adjustment for any amounts allocated to a Guaranteed Term Option.
The adjustment for amounts surrendered will reduce items (2) and (3) above in the same proportion that the contract value was reduced on the date(s) of the partial surrender(s).
If Nationwide does not receive all information necessary to pay the death benefit within one year of the annuitant's death, the calculation for A above will be the greater of (1) or (2) above.
| B = the contract value as of the date that Nationwide receives all the information necessary to pay the death benefit; and |
| F = the ratio of $3,000,000 to the total of all purchase payments made to the contract. |
The practical effect of this formula is that the beneficiary recovers a lesser percentage of purchase payments in excess of $3,000,000 that for purchase payments up to $3,000,000. In no event will the beneficiary receive less than the contract value.
Spousal Protection Feature
The death benefit options include a Spousal Protection Feature at no additional charge. The Spousal Protection Feature is not available for contracts issued as Charitable Remainder Trusts. The Spousal Protection Feature allows a surviving spouse to continue the contract while receiving the economic benefit of the death benefit upon the death of the other spouse, provided the conditions described below are satisfied:
| (1) | One or both spouses (or a revocable trust of which either or both of the spouses is/are grantor(s)) must be named as the contract owner. For contracts issued as IRAs and Roth IRAs, only the person for whom the IRA or Roth IRA was established may be named as the contract owner; |
| (2) | The spouses must be co-annuitants; |
| (3) | (a) Both spouses must be age 80 or younger at the time the contract is issued for the One-Year Enhanced Death Benefit Option: or |
(b) Both Spouses must be age 75 or younger at the time the contract is issued for the Combination Enhanced Death Benefit Option;
| (4) | Both spouses must be named as beneficiaries; |
| (5) | No person other than the spouse may be named as contract owner, annuitant or primary beneficiary; |
| (6) | If both spouses are alive upon annuitization, the contract owner must specify which spouse is the annuitant upon whose continuation of life any annuity payments involving life contingencies depend (for IRA and Roth IRA contracts, this person must be the contract owner); and |
| (7) | If the contract owner requests to add a co-annuitant after contract issuance, the date of marriage must be after the contract issue date and Nationwide will require the contract owner to provide a copy of the marriage certificate. |
If a co-annuitant dies before the annuitization date, the surviving spouse may continue the contract as its sole contract owner. Additionally, if the death benefit value is higher than the contract value at the time of the first co-annuitant’s death, Nationwide will adjust the contract value to equal the death benefit value. The surviving co-annuitant may then name a new beneficiary but may not name another co-annuitant.
Additional purchase payments made to the contract after receiving the benefit of the Spousal Protection Feature are subject to the CDSC provisions of the contract.
The annuity commencement date is the date on which annuity payments are scheduled to begin. Generally, the contract owner designates the annuity commencement date at the time of application. If no annuity commencement date is designated at the time of application, Nationwide will establish the annuity commencement date as the date the annuitant reaches age 90 for Non-Qualified Contracts and the date the contract owner reaches age 70 ½ for all other contract types.
The contract owner may change the annuity commencement date before annuitization. This change must be in writing and approved by Nationwide. The annuity commencement date may not be later than the first day of the first calendar month after the annuitant's 90th birthday unless approved by Nationwide.
Annuitization Date
The annuitization date is the date on which annuity payments begin. The annuitization date will be the first day of a calendar month unless otherwise agreed. The annuitization date must be at least 2 years after the contract is issued, but may not be later than either:
| | the age (or date) specified in your contract; or |
| | the age (or date) specified by state law, where applicable. |
If the contract is issued to fund a Tax Sheltered Annuity, annuitization may occur during the first 2 years subject to Nationwide's approval.
On the annuitization date, the annuitant becomes the contract owner unless the contract owner is a Charitable Remainder Trust.
The Internal Revenue Code may require that distributions be made prior to the annuitization dates specified above see "Required Distributions" in Appendix C: Contract Types and Tax Information.
Annuitization
Annuitization is the period during which annuity payments are received. It is irrevocable once payments have begun. Upon arrival of the annuitization date, the annuitant must choose:
| (1) | an annuity payment option; and |
| (2) | either a fixed payment annuity, variable payment annuity, or an available combination. |
Any allocations in the fixed account that are to be annuitized as a variable payment annuity must be moved to the variable account prior to the annuitization date. There are no restrictions on fixed account transfers made in anticipation of annuitization.
Nationwide guarantees that each payment under a fixed payment annuity will be the same throughout annuitization. Under a variable payment annuity, the amount of each payment will vary with the performance of the underlying mutual funds chosen by the contract owner.
Fixed Annuity Payments
Fixed annuity payments provide for level annuity payments. Premium taxes are deducted prior to determining fixed annuity payments. The fixed annuity payments will remain level unless the annuity payment option provides otherwise.
VariableAnnuity Payments
Variable annuity payments will vary depending on the performance of the underlying mutual funds selected.
First Variable Annuity Payment
The following factors determine the amount of the first variable annuity payment:
| | the portion of purchase payments allocated to provide variable annuity payments; |
| | the variable account value on the annuitization date; |
| | the adjusted age and sex of the annuitant (and joint annuitant, if any) in accordance with the contract; |
| | the annuity payment option elected; |
| | the frequency of annuity payments; |
| | the assumed investment return (the net investment return required to maintain level variable annuity payments); |
| | the deduction of applicable premium taxes; and |
| | the date the contract was issued. |
Subsequent Variable Annuity Payments
Variable annuity payments after the first will vary with the performance of the underlying mutual funds chosen by the contract owner after the investment performance is adjusted by the assumed investment return factor.
The dollar amount of each subsequent variable annuity payment is determined by taking the portion of the first annuity payment funded by a particular sub-account divided by the annuity unit value for that sub-account as of the annuitization date. This establishes the number of annuity units provided by each sub-account for each variable annuity payment after the first.
The number of annuity units for each sub-account will remain constant, unless the contract owner transfers value from one underlying mutual fund to another. After annuitization, transfers among sub-accounts may only be made on the anniversary of the annuitization date.
The number of annuity units for each sub-account is multiplied by the annuity unit value for that sub-account for the valuation period for which the payment is due. The sum of these results for all the sub-accounts in which the contract owner invests establishes the dollar amount of the variable annuity payment.
Subsequent variable annuity payments may be more or less than the previous variable annuity payment, depending on whether the net investment performance of the elected underlying mutual funds is greater or lesser than the assumed investment return.
Assumed Investment Return
An assumed investment return is the net investment return required to maintain level variable annuity payments. Nationwide uses a 3.5% assumed investment return factor. Therefore, if the net investment performance of each sub-account in which the contract owner invests exactly equals 3.5% for every payment period, then each payment will be the same amount. To the extent that investment performance is not equal to 3.5% for given payment periods, the amount of the payments in those periods will not be the same. Payments will increase from one payment date to the next if the annualized net rate of return is greater than 3.5% during that time. Conversely, payments will decrease from one payment to the next if the annualized net rate of return is less than 3.5% during that time.
Nationwide uses the assumed investment rate of return to determine the amount of the first variable annuity payment.
Value of an Annuity Unit
Annuity unit values for sub-accounts are determined by:
| (1) | multiplying the annuity unit value for each sub-account for the immediately preceding valuation period by the net investment factor for the sub-account for the subsequent valuation period (see "Determining the Contract Value – Determining Variable Account Value – Valuing an Accumulation Unit"); and then |
| (2) | multiplying the result from (1) by a factor to neutralize the assumed investment return factor. |
Frequency and Amount of Annuity Payments
Annuity payments are based on the annuity payment option elected.
If the net amount to be annuitized is less than $2,000, Nationwide reserves the right to pay this amount in a lump sum instead of periodic annuity payments.
Nationwide reserves the right to change the frequency of payments if the amount of any payment becomes less than $20. The payment frequency will be changed to an interval that will result in payments of at least $20.
Annuity payments will generally be received within 7 to 10 days after each annuity payment date.
The annuitant must elect an annuity payment option before the annuitization date. If the annuitant does not elect an annuity payment option, a variable payment life annuity with a guarantee period of 240 months will be assumed as the automatic form of payment upon annuitization. Once elected or assumed, the annuity payment option may not be changed.
Not all of the annuity payment options may be available in all states. Additionally, the annuity payment options available may be limited based on the annuitant's age (and the joint annuitant's age, if applicable) or requirements under the Internal Revenue Code.
Annuity Payment Options for Contracts with Total Purchase Payments Less Than or Equal to $2,000,000
If, at the annuitization date, the total of all purchase payments made to the contract is less than or equal to $2,000,000, the annuity payment options available are:
| | Standard Joint and Survivor; and |
| | Single Life with a 10 or 20 Year Term Certain. |
Each of the annuity payment options is discussed more thoroughly below.
Single Life
The Single Life annuity payment option provides for annuity payments to be paid during the lifetime of the annuitant.
Payments will cease with the last payment before the annuitant's death. For example, if the annuitant dies before the second annuity payment date, the annuitant will receive only one payment. The annuitant will only receive two annuity payments if he or she dies before the third payment date, and so on. No death benefit will be paid.
No withdrawals other than the scheduled annuity payments are permitted.
Standard Joint and Survivor
The Standard Joint and Survivor annuity payment option provides for annuity payments to continue during the joint lifetimes of the annuitant and joint annuitant. After the death of either the annuitant or joint annuitant, payments will continue for the life of the survivor.
Payments will cease with the last payment due prior to the death of the last survivor of the annuitant and joint annuitant. As is the case of the Single Life annuity payment option, there is no guaranteed number of payments. Therefore, it is possible that if the annuitant dies before the second annuity payment date, the annuitant will receive only one annuity payment. No death benefit will be paid.
No withdrawals other than the scheduled annuity payments are permitted.
Single Life with a 10 or 20 Year Term Certain
The Single Life with a 10 or 20 Year Term Certain annuity payment option provides that monthly annuity payments will be paid during the annuitant's lifetime or for the term selected, whichever is longer. The term may be either 10 or 20 years.
If the annuitant dies before the end of the 10 or 20 year term, payments will be paid to the beneficiary for the remainder of the term.
No withdrawals other than the scheduled annuity payments are permitted.
Any Other Option
Annuity payment options not set forth in this provision may be available. Any annuity payment option not set forth in this provision must be approved by Nationwide.
Annuity Payment Options for Contracts with Total Purchase Payments Greater Than $2,000,000
If, at the annuitization date, the total of all purchase payments made to the contract is greater than $2,000,000, Nationwide may limit the annuity payment option to the longer of:
| (1) | a Fixed Life Annuity with a 20 Year Term Certain; or |
| (2) | a Fixed Life Annuity with a Term Certain to Age 95. |
Additionally, Nationwide will limit the amount that may be annuitized on a single life to $5,000,000. If the total amount to be annuitized is greater than $5,000,000, then, for the purpose of annuitization only, Nationwide will permit additional annuitants to be named.
Nationwide will mail contract owners statements and reports. Therefore, contract owners should promptly notify Nationwide of any address change.
These mailings will contain:
| | statements showing the contract's quarterly activity; |
| | confirmation statements showing transactions that affect the contract's value. Confirmation statements will not be sent for recurring transactions (i.e., Dollar Cost Averaging or salary reduction programs). Instead, confirmation of recurring transactions will appear in the contract's quarterly statements; and |
| | semi-annual and annual reports of allocated underlying mutual funds. |
Contract owners can receive information from Nationwide faster and reduce the amount of mail they receive by signing up for Nationwide’s eDelivery program. Nationwide will notify contract owners by email when important documents (statements, prospectuses and other documents) are ready for a contract owner to view, print, or download from Nationwide’s secure server. To choose this option, go to www.nationwide.com/login.
Contract owners should review statements and confirmations carefully. All errors or corrections must be reported to Nationwide immediately to assure proper crediting to the contract. Unless Nationwide is notified within 30 days of receipt of the statement, Nationwide will assume statements and confirmation statements are correct.
IMPORTANT NOTICE REGARDING DELIVERY OF SECURITY HOLDER DOCUMENTS
When multiple copies of the same disclosure document(s), such as prospectuses, supplements, proxy statements and semi-annual and annual reports are required to be mailed to multiple contract owners in the same household, Nationwide will mail only one copy of each document, unless notified otherwise by the contract owner(s). Household delivery will continue for the life of the contracts. Please call 1-866-223-0303 to resume regular delivery. Please allow 30 days for regular delivery to resume.
Nationwide is a party to litigation and arbitration proceedings in the ordinary course of its business. It is often not possible to determine the ultimate outcome of the pending investigations and legal proceedings or to provide reasonable ranges of potential losses with any degree of certainty. Some matters, including certain of those referred to below, are in very preliminary stages, and Nationwide does not have sufficient information to make an assessment of the plaintiffs’ claims for liability or damages. In some of the cases seeking to be certified as class actions, the court has not yet decided whether a class will be certified or (in the event of certification) the size of the class and class period. In many of the cases, the plaintiffs are seeking undefined amounts of damages or other relief, including punitive damages and equitable remedies, which are difficult to quantify and cannot be defined based on the information currently available. Nationwide does not believe, based on information currently known by management, that the outcomes of such pending investigations and legal proceedings are likely to have a material adverse effect on Nationwide’s consolidated financial position. However, given the large and/or indeterminate amounts sought in certain of these matters and inherent unpredictability of litigation, it is possible that an adverse outcome in certain matters could have a material adverse effect on Nationwide’s consolidated financial results in a particular quarterly or annual period.
In recent years, life insurance companies have been named as defendants in lawsuits, including class action lawsuits relating to life insurance and annuity pricing and sales practices. A number of these lawsuits have resulted in substantial jury awards or settlements against life insurers other than Nationwide.
The financial services industry, including mutual fund, variable annuity, life insurance and distribution companies, has also been the subject of increasing scrutiny by regulators, legislators and the media over the past few years. Numerous regulatory agencies, including the SEC, the National Association of Securities Dealers and the New York State Attorney General, have commenced industry-wide investigations regarding late trading and market timing in connection with mutual funds and variable insurance contracts, and have commenced enforcement actions against some mutual fund and life insurance companies on those issues. Nationwide has been contacted by or received subpoenas from the SEC and the New York State Attorney General, who are investigating market timing in certain mutual funds offered in insurance products sponsored by Nationwide. Nationwide has cooperated with these investigations. Information requests from the New York State Attorney General and the SEC with respect to investigations into late trading and market timing were last responded to by Nationwide and its affiliates in December 2003 and June 2005, respectively, and no further information requests have been received with respect to these matters.
In addition, state and federal regulators have commenced investigations or other proceedings relating to compensation and bidding arrangements and possible anti-competitive activities between insurance producers and brokers and issuers of insurance products, and unsuitable sales and replacements by producers on behalf of the issuer. Also under investigation are compensation and revenue sharing arrangements between the issuers of variable insurance contracts and mutual funds or their affiliates, the use of side agreements and finite reinsurance agreements, funding agreements issued to back MTN programs, recordkeeping and retention compliance by broker/dealers, and supervision of former registered representatives. Related investigations and proceedings may be commenced in the future. Nationwide and/or its affiliates have been contacted by or received subpoenas from state and federal regulatory agencies, state securities law regulators and state attorneys general for information relating to certain of these investigations, including those relating to compensation, revenue sharing and bidding arrangements, anti-competitive activities, unsuitable sales or replacement practices, the use of side agreements and finite reinsurance agreements, and funding agreements backing the Nationwide’s MTN program. Nationwide is cooperating with regulators in connection with these inquiries and will cooperate with Nationwide Mutual Insurance Company (NMIC) in responding to these inquiries to the extent that any inquiries encompass NMIC’s operations.
These proceedings are expected to continue in the future and could result in legal precedents and new industry-wide legislation, rules and regulations that could significantly affect the financial services industry, including life insurance and annuity companies. These proceedings also could affect the outcome of one or more of Nationwide’s litigation matters. There can be no assurance that any such litigation or regulatory actions will not have a material adverse effect on Nationwide in the future.
On November 15, 2006, Nationwide was named in a lawsuit filed in the United States District Court for the Southern District of Ohio entitled Kevin Beary, Sheriff of Orange County, Florida, In His Official Capacity, Individually and On Behalf of All Others Similarly Situated v. Nationwide Life Insurance Co., Nationwide Retirement Solutions, Inc. and Nationwide Financial Services, Inc. The plaintiff seeks to represent a class of all sponsors of 457(b) deferred compensation plans in the United States that had variable annuity contracts with the defendants at any time during the class period, or in the alternative, all sponsors of 457(b) deferred compensation plans in Florida that had variable annuity contracts with the defendants during the class period. The Class Period is from January 1, 1996 until the Class Notice is provided. The plaintiff alleges that the defendants breached their fiduciary duties by arranging for and retaining service payments from certain mutual funds. The complaint seeks an accounting, a declaratory judgment, a permanent injunction and disgorgement or restitution of the service fee payments allegedly received by the defendants, including interest. On January 25, 2007, Nationwide filed a motion to dismiss. Nationwide intends to defend this lawsuit vigorously.
On February 11, 2005, Nationwide was named in a class action lawsuit filed in Common Pleas Court, Franklin County, Ohio entitled Michael Carr v. Nationwide Life Insurance Company. The complaint seeks recovery for breach of contract, fraud by omission, violation of the Ohio Deceptive Trade Practices Act and unjust enrichment. The complaint also seeks unspecified compensatory damages, disgorgement of all
amounts in excess of the guaranteed maximum premium and attorneys’ fees. On February 2, 2006, the Court granted the plaintiff’s motion for class certification on the breach of contract and unjust enrichment claims. The Court certified a class consisting of all residents of the United States and the Virgin Islands who, during the Class Period, paid premiums on a modal basis to Nationwide for term life insurance policies issued by Nationwide during the Class Period that provide for guaranteed maximum premiums, excluding certain specified products. Excluded from the class are Nationwide; any parent, subsidiary or affiliate of Nationwide; all employees, officers and directors of Nationwide; and any justice, judge or magistrate judge of the State of Ohio who may hear the case. The Class Period is from February 10, 1990 through February 2, 2006, the date the class was certified. On January 26, 2007, the plaintiff filed a motion for summary judgment. Nationwide continues to defend this lawsuit vigorously.
On April 13, 2004, Nationwide was named in a class action lawsuit filed in Circuit Court, Third Judicial Circuit, Madison County, Illinois, entitled Woodbury v. Nationwide Life Insurance Company. Nationwide removed this case to the United States District Court for the Southern District of Illinois on June 1, 2004. On December 27, 2004, the case was transferred to the United States District Court for the District of Maryland and included in the multi-district proceeding entitled In Re Mutual Funds Investment Litigation. In response, on May 13, 2005, the plaintiff filed a First Amended Complaint purporting to represent, with certain exceptions, a class of all persons who held (through their ownership of a Nationwide annuity or insurance product) units of any Nationwide sub-account invested in mutual funds that included foreign securities in their portfolios and that experienced market timing or stale price trading activity. The First Amended Complaint purports to disclaim, with respect to market timing or stale price trading in Nationwide’s annuities sub-accounts, any allegation based on Nationwide’s untrue statement, failure to disclose any material fact, or usage of any manipulative or deceptive device or contrivance in connection with any class member’s purchases or sales of Nationwide annuities or units in annuities sub-accounts. The plaintiff claims, in the alternative, that if Nationwide is found with respect to market timing or stale price trading in its annuities sub-accounts, to have made any untrue statement, to have failed to disclose any material fact or to have used or employed any manipulative or deceptive device or contrivance, then the plaintiff purports to represent a class, with certain exceptions, of all persons who, prior to Nationwide’s untrue statement, omission of material fact, use or employment of any manipulative or deceptive device or contrivance, held (through their ownership of an Nationwide annuity or insurance product) units of any Nationwide sub-account invested in mutual funds that included foreign securities in their portfolios and that experienced market timing activity. The First Amended Complaint alleges common law negligence and seeks to recover damages not to exceed $75,000 per plaintiff or class member, including all compensatory damages and costs. On June 1, 2006, the District Court granted Nationwide’s motion to dismiss the plaintiff’s complaint. On November 29, 2006, the plaintiff filed its appellate brief with the Fourth Circuit Court of Appeals contesting the District Court’s dismissal. Nationwide continues to defend this lawsuit vigorously.
On January 21, 2004, Nationwide was named in a lawsuit filed in the United States District Court for the Northern District of Mississippi entitled United Investors Life Insurance Company v. Nationwide Life Insurance Company and/or Nationwide Life Insurance Company of America and/or Nationwide Life and Annuity Insurance Company and/or Nationwide Life and Annuity Company of America and/or Nationwide Financial Services, Inc. and/or Nationwide Financial Corporation, and John Does A-Z. In its complaint, the plaintiff alleges that Nationwide and/or its affiliated life insurance companies caused the replacement of variable insurance policies and other financial products issued by United Investors with policies issued by the Companies. The plaintiff raises claims for (1) violations of the Federal Lanham Act, and common law unfair competition and defamation; (2) tortious interference with the plaintiff’s contractual relationship with Waddell & Reed, Inc. and/or its affiliates, Waddell & Reed Financial, Inc., Waddell & Reed Financial Services, Inc. and W&R Insurance Agency, Inc., or with the plaintiff’s contractual relationships with its variable policyholders; (3) civil conspiracy; and (4) breach of fiduciary duty. The complaint seeks compensatory damages, punitive damages, pre- and post-judgment interest, a full accounting, a constructive trust and costs and disbursements, including attorneys’ fees. On December 30, 2005,Nationwide filed a motion for summary judgment. On June 15, 2006, the District Court granted Nationwide’s motion for summary judgment on all grounds and dismissed the plaintiff’s entire case with prejudice. The plaintiff appealed the District Court’s decision to the Fifth Circuit Court of Appeals. The appeal has been fully briefed, and Nationwide is awaiting a decision. Nationwide continues to defend this lawsuit vigorously.
On August 15, 2001, Nationwide was named in a lawsuit filed in the United States District Court for the District of Connecticut entitled Lou Haddock, as trustee of the Flyte Tool & Die, Incorporated Deferred Compensation Plan, et al v. Nationwide Financial Services, Inc. and Nationwide Life Insurance Company. Currently, the plaintiffs’ fifth amended complaint, filed March 21, 2006, purports to represent a class of qualified retirement plans under ERISA that purchased variable annuities from Nationwide. The plaintiffs allege that they invested ERISA plan assets in their variable annuity contracts and that Nationwide breached ERISA fiduciary duties by allegedly accepting service payments from certain mutual funds. The complaint seeks disgorgement of some or all of the payments allegedly received by Nationwide, other unspecified relief for restitution, declaratory and injunctive relief, and attorneys’ fees. To date, the District Court has rejected the plaintiffs’ request for certification of the alleged class. Nationwide’s motion to dismiss the plaintiffs’ fifth amended complaint is currently pending before the court. Nationwide continues to defend this lawsuit vigorously.
The general distributor, NISC, is not engaged in any litigation of any material nature.
| Page |
| General Information and History | 1 |
| Services | 1 |
| Purchase of Securities Being Offered | 2 |
| Underwriters | 2 |
| Advertising | 2 |
| Annuity Payments | 2 |
| Condensed Financial Information | 2 |
| Financial Statements | 3 |
The underlying mutual funds listed below are designed primarily as investments for variable annuity contracts and variable life insurance policies issued by insurance companies. There is no guarantee that the investment objectives will be met.
Please refer to the prospectus for each underlying mutual fund for more detailed information.
AIM Variable Insurance Funds - AIM V.I. Basic Value Fund: Series II Shares
| Investment Adviser: | AIM Advisors, Inc. |
| Investment Objective: | Long-term growth of capital. |
AIM Variable Insurance Funds - AIM V.I. Capital Appreciation Fund: Series II Shares
| Investment Adviser: | AIM Advisors, Inc. |
| Investment Objective: | Growth of capital. |
AIM Variable Insurance Funds - AIM V.I. Capital Development Fund: Series II Shares
| Investment Adviser: | AIM Advisors, Inc. |
| Investment Objective: | Long-term capital growth. |
American Century Variable Portfolios II, Inc. - American Century VP Inflation Protection Fund: Class II
| Investment Adviser: | American Century Investment Management, Inc. |
| Investment Objective: | Long-term total return using a strategy that seeks to protect against U.S. inflation. |
American Century Variable Portfolios, Inc. - American Century VP International Fund: Class IV
| Investment Adviser: | American Century Global Investment Management, Inc. |
| Investment Objective: | Capital growth. |
This underlying mutual fund assesses a short-term trading fee (please see "Short-Term Trading Fees" earlier in this
prospectus).
American Century Variable Portfolios, Inc. - American Century VP Mid Cap Value Fund: Class II
| Investment Adviser: | American Century Investment Management, Inc. |
| Investment Objective: | Long-term capital growth. |
American Century Variable Portfolios, Inc. - American Century VP Value Fund: Class II
| Investment Adviser: | American Century Investment Management, Inc. |
| Investment Objective: | Long-term capital growth with income as a secondary objective. |
American Century Variable Portfolios, Inc. - American Century VP Vista Fund: Class II
| Investment Adviser: | American Century Investment Management, Inc. |
| Investment Objective: | Long-term capital growth. |
Dreyfus Investment Portfolios - Small Cap Stock Index Portfolio: Service Shares
| Investment Adviser: | The Dreyfus Corporation |
| Investment Objective: | To match performance of the S&P SmallCap 600 Index®. |
Dreyfus Stock Index Fund, Inc.: Service Shares
| Investment Adviser: | The Dreyfus Corporation |
| Investment Objective: | To match performance of the S&P 500. |
Dreyfus Variable Investment Fund - Appreciation Portfolio: Service Shares
| Investment Adviser: | The Dreyfus Corporation |
| Investment Objective: | Long-term capital growth consistent with the preservation of capital. |
Federated Insurance Series - Federated Market Opportunity Fund II: Service Shares
| Investment Adviser: | Federated Equity Management Company of Pennsylvania |
| Sub-adviser: | Federated Investment Management Company |
| Investment Objective: | To provide moderate capital appreciation and high current income. |
Federated Insurance Series - Federated Quality Bond Fund II: Service Shares
| Investment Adviser: | Federated Investment Management Company |
| Investment Objective: | Current income. |
Fidelity Variable Insurance Products Fund - VIP Contrafund® Portfolio: Service Class 2
| Investment Adviser: | FMR |
| Sub-adviser: | Fidelity Research & Analysis Company |
| Investment Objective: | Long-term capital appreciation. |
Fidelity Variable Insurance Products Fund - VIP Energy Portfolio: Service Class 2
| Investment Adviser: | Fidelity Management & Research Company |
| Sub-adviser: | FMR Co., Inc. |
| Investment Objective: | Capital appreciation. |
This underlying mutual fund assesses a short-term trading fee (please see "Short-Term Trading Fees" earlier in this
prospectus).
Fidelity Variable Insurance Products Fund - VIP Equity-Income Portfolio: Service Class 2
| Investment Adviser: | Fidelity Management & Research Company |
| Sub-adviser: | FMR Co., Inc. |
| Investment Objective: | Reasonable income. |
Fidelity Variable Insurance Products Fund - VIP Freedom 2010 Portfolio: Service Class 2
| Investment Adviser: | Fidelity Management & Research Company |
| Investment Objective: | High total return with a secondary objective of principal preservation as the fund approaches its target date and beyond. |
The assets of each Fidelity VIP Freedom Fund are invested in a combination of other Fidelity VIP funds: domestic and
international equity funds, investment-grade and high yield fixed-income funds, and money market/short-term funds
(underlying Fidelity funds). Each Fidelity VIP Freedom Fund, as a shareholder in an underlying Fidelity fund, will
indirectly bear its pro rata share of the fees and expenses incurred by the underlying Fidelity fund. Please refer to the
prospectus for the Fidelity VIP Freedom Funds for more information.
Fidelity Variable Insurance Products Fund - VIP Freedom 2020 Portfolio: Service Class 2
| Investment Adviser: | Fidelity Management & Research Company |
| Investment Objective: | High total return with a secondary objective of principal preservation as the fund approaches its target date and beyond. |
The assets of each Fidelity VIP Freedom Fund are invested in a combination of other Fidelity VIP funds: domestic and
international equity funds, investment-grade and high yield fixed-income funds, and money market/short-term funds
(underlying Fidelity funds). Each Fidelity VIP Freedom Fund, as a shareholder in an underlying Fidelity fund, will
indirectly bear its pro rata share of the fees and expenses incurred by the underlying Fidelity fund. Please refer to the
prospectus for the Fidelity VIP Freedom Funds for more information.
Fidelity Variable Insurance Products Fund - VIP Freedom 2030 Portfolio: Service Class 2
| Investment Adviser: | Fidelity Management & Research Company |
| Investment Objective: | High total return with a secondary objective of principal preservation as the fund approaches its target date and beyond. |
The assets of each Fidelity VIP Freedom Fund are invested in a combination of other Fidelity VIP funds: domestic and
international equity funds, investment-grade and high yield fixed-income funds, and money market/short-term funds
(underlying Fidelity funds). Each Fidelity VIP Freedom Fund, as a shareholder in an underlying Fidelity fund, will
indirectly bear its pro rata share of the fees and expenses incurred by the underlying Fidelity fund. Please refer to the
prospectus for the Fidelity VIP Freedom Funds for more information.
Fidelity Variable Insurance Products Fund - VIP Growth Portfolio: Service Class 2
| Investment Adviser: | Fidelity Management & Research Company |
| Sub-adviser: | FMR Co., Inc. |
| Investment Objective: | Capital appreciation. |
Fidelity Variable Insurance Products Fund - VIP Investment Grade Bond Portfolio: Service Class 2
| Investment Adviser: | FMR |
| Sub-adviser: | Fidelity Investments Money Management, Inc. |
| Investment Objective: | High level of current income. |
Fidelity Variable Insurance Products Fund - VIP Mid Cap Portfolio: Service Class 2
| Investment Adviser: | FMR |
| Sub-adviser: | Fidelity Research & Analysis Company |
| Investment Objective: | Long-term growth of capital. |
Fidelity Variable Insurance Products Fund - VIP Overseas Portfolio: Service Class 2R
| Investment Adviser: | FMR |
| Sub-adviser: | Fidelity Research & Analysis Company |
| Investment Objective: | Long-term capital growth. |
This underlying mutual fund assesses a short-term trading fee (please see "Short-Term Trading Fees" earlier in this
prospectus).
Franklin Templeton Variable Insurance Products Trust - Franklin Income Securities Fund: Class 2
| Investment Adviser: | Franklin Advisors, Inc. |
| Investment Objective: | Maximum income while maintaining prospects for capital appreciation. |
Franklin Templeton Variable Insurance Products Trust - Franklin Small Cap Value Securities Fund: Class 2
| Investment Adviser: | Franklin Advisory Services, LLC |
| Investment Objective: | Long-term total return. |
Franklin Templeton Variable Insurance Products Trust - Templeton Developing Markets Securities Fund: Class 3
| Investment Adviser: | Templeton Asset Management, Ltd. |
| Investment Objective: | Long-term capital appreciation. |
This underlying mutual fund assesses a short-term trading fee (please see "Short-Term Trading Fees" earlier in this
prospectus).
Franklin Templeton Variable Insurance Products Trust - Templeton Foreign Securities Fund: Class 3
| Investment Adviser: | Templeton Investment Counsel, LLC |
| Investment Objective: | Long-term capital growth. |
This underlying mutual fund assesses a short-term trading fee (please see "Short-Term Trading Fees" earlier in this
prospectus).
Franklin Templeton Variable Insurance Products Trust - Templeton Global Income Securities Fund: Class 3
| Investment Adviser: | Franklin Advisors, Inc. |
| Investment Objective: | High current income, with preservation of capital. Capital appreciation is a secondary consideration. |
This underlying mutual fund assesses a short-term trading fee (please see "Short-Term Trading Fees" earlier in this
prospectus).
Janus Aspen Series - Forty Portfolio: Service Shares
| Investment Adviser: | Janus Capital Management LLC |
| Investment Objective: | Long-term growth of capital. |
Janus Aspen Series - INTECH Risk-Managed Core Portfolio: Service Shares
| Investment Adviser: | Janus Capital Management LLC |
| Sub-adviser: | Enhanced Investment Technologies, LLC |
| Investment Objective: | Long-term growth of capital. |
Janus Aspen Series - International Growth Portfolio: Service II Shares
| Investment Adviser: | Janus Capital Management LLC |
| Investment Objective: | Long-term capital growth. |
This underlying mutual fund assesses a short-term trading fee (please see "Short-Term Trading Fees" earlier in this
prospectus).
Lehman Brothers Advisers Management Trust - AMT Short Duration Bond Portfolio: I Class
| Investment Adviser: | Neuberger Berman Management Inc. |
| Sub-adviser: | Neuberger Berman, LLC |
| Investment Objective: | Highest available current income consistent with liquidity and low risk to principal and, secondarily, total return. |
MFS® Variable Insurance Trust - MFS Value Series: Service Class
| Investment Adviser: | Massachusetts Financial Services Company |
| Investment Objective: | Capital appreciation and reasonable income. |
Nationwide Variable Insurance Trust - American Funds NVIT Asset Allocation Fund: Class II
| Investment Adviser: | Capital Research and Management Company |
| Investment Objective: | Seeks to provide high total return (including income and capital gains) consistent with the preservation of capital. |
Nationwide Variable Insurance Trust - American Funds NVIT Bond Fund: Class II
| Investment Adviser: | Capital Research and Management Company |
| Investment Objective: | Income and more price stability than stocks, and capital preservation over the long term. Seeks to maximize an investor’s level of current income and preserve the investor’s capital. |
Nationwide Variable Insurance Trust - American Funds NVIT Global Growth Fund: Class II
| Investment Adviser: | Capital Research and Management Company |
| Investment Objective: | Capital appreciation through stocks. |
Nationwide Variable Insurance Trust - American Funds NVIT Growth Fund: Class II
| Investment Adviser: | Capital Research and Management Company |
| Investment Objective: | Capital appreciation principally through investment in stocks. |
Nationwide Variable Insurance Trust - American Funds NVIT Growth- Income Fund: Class II
| Investment Adviser: | Capital Research and Management Company |
| Investment Objective: | Seeks returns from both capital gains as well as income generated by dividends paid by stock issuers. |
Nationwide Variable Insurance Trust - Federated NVIT High Income Bond Fund: Class III
| Investment Adviser: | Gartmore Mutual Fund Capital Trust |
| Sub-adviser: | Federated Investment Management Company |
| Investment Objective: | High current income. |
This underlying mutual fund assesses a short-term trading fee (please see "Short-Term Trading Fees" earlier in this
prospectus).
Nationwide Variable Insurance Trust - Gartmore NVIT Emerging Markets Fund: Class VI
| Investment Adviser: | Gartmore Mutual Fund Capital Trust |
| Sub-adviser: | Gartmore Global Partners |
| Investment Objective: | Long-term capital growth by investing primarily in equity securities of companies located in emerging market countries. |
This underlying mutual fund assesses a short-term trading fee (please see "Short-Term Trading Fees" earlier in this
prospectus).
Nationwide Variable Insurance Trust - Nationwide Multi-Manager NVIT Small Cap Growth Fund: Class II
| Investment Adviser: | Gartmore Mutual Fund Capital Trust |
| Sub-adviser: | Oberweis Asset Management, Inc.; Waddell & Reed Investment Management Company |
| Investment Objective: | Capital growth. |
Nationwide Variable Insurance Trust - Nationwide Multi-Manager NVIT Small Cap Value Fund: Class II
| Investment Adviser: | Gartmore Mutual Fund Capital Trust |
| Sub-adviser: | Epoch Investment Partners, Inc.; J.P. Morgan Investment Management Inc. |
| Investment Objective: | Capital appreciation. |
Nationwide Variable Insurance Trust - Nationwide Multi-Manager NVIT Small Company Fund: Class II
| Investment Adviser: | Gartmore Mutual Fund Capital Trust |
| Sub-adviser: | American Century Investment Management Inc.; Franklin Portfolio Associates LLC; Gartmore Global Partners; Morgan Stanley Investment Management Inc.; Neuberger Berman, LLC; Waddell & Reed Investment Management Company |
| Investment Objective: | Long-term growth of capital. |
Nationwide Variable Insurance Trust - Nationwide NVIT Global Health Sciences Fund: Class VI
| Investment Adviser: | Gartmore Mutual Fund Capital Trust |
| Investment Objective: | Long-term capital appreciation. |
This underlying mutual fund assesses a short-term trading fee (please see "Short-Term Trading Fees" earlier in this
prospectus).
Nationwide Variable Insurance Trust - Nationwide NVIT Global Technology and Communications Fund: Class VI
| Investment Adviser: | Gartmore Mutual Fund Capital Trust |
| Investment Objective: | Long-term capital appreciation. |
This underlying mutual fund assesses a short-term trading fee (please see "Short-Term Trading Fees" earlier in this
prospectus).
Nationwide Variable Insurance Trust - Nationwide NVIT Government Bond Fund: Class I
| Investment Adviser: | Gartmore Mutual Fund Capital Trust |
| Investment Objective: | To provide a high level of income as is consistent with the preservation of capital. |
Nationwide Variable Insurance Trust - Nationwide NVIT Investor Destinations Aggressive Fund: Class II
| Investment Adviser: | Gartmore Mutual Fund Capital Trust |
| Investment Objective: | To maximize growth of capital consistent with a more aggressive level of risk as compared to the other Investor Destinations Funds. |
The Nationwide NVIT Investor Destinations Funds are designed to provide diversification and asset allocation across
several types of investments and asset classes, primarily by investing in underlying funds. Therefore, a proportionate
share of the fees and expenses of the underlying funds are indirectly borne by investors. Please refer to the prospectus
for Nationwide NVIT Investor Destinations Funds for more information.
Nationwide Variable Insurance Trust - Nationwide NVIT Investor Destinations Conservative Fund: Class II
| Investment Adviser: | Gartmore Mutual Fund Capital Trust |
| Investment Objective: | High level of return consistent with a conservative level of risk compared to the other Investor Destinations Funds. |
The Nationwide NVIT Investor Destinations Funds are designed to provide diversification and asset allocation across
several types of investments and asset classes, primarily by investing in underlying funds. Therefore, a proportionate
share of the fees and expenses of the underlying funds are indirectly borne by investors. Please refer to the prospectus
for Nationwide NVIT Investor Destinations Funds for more information.
Nationwide Variable Insurance Trust - Nationwide NVIT Investor Destinations Moderate Fund: Class II
| Investment Adviser: | Gartmore Mutual Fund Capital Trust |
| Investment Objective: | High level of total return consistent with a moderate level of risk as compared to other Investor Destinations Funds. |
The Nationwide NVIT Investor Destinations Funds are designed to provide diversification and asset allocation across
several types of investments and asset classes, primarily by investing in underlying funds. Therefore, a proportionate
share of the fees and expenses of the underlying funds are indirectly borne by investors. Please refer to the prospectus
for Nationwide NVIT Investor Destinations Funds for more information.
Nationwide Variable Insurance Trust - Nationwide NVIT Investor Destinations Moderately Aggressive Fund: Class II
| Investment Adviser: | Gartmore Mutual Fund Capital Trust |
| Investment Objective: | Growth of capital, but also seeks income consistent with a moderately aggressive level of risk as compared to the other Investor Destinations |
The Nationwide NVIT Investor Destinations Funds are designed to provide diversification and asset allocation across
several types of investments and asset classes, primarily by investing in underlying funds. Therefore, a proportionate
share of the fees and expenses of the underlying funds are indirectly borne by investors. Please refer to the prospectus
for Nationwide NVIT Investor Destinations Funds for more information.
Nationwide Variable Insurance Trust - Nationwide NVIT Investor Destinations Moderately Conservative Fund: Class II
| Investment Adviser: | Gartmore Mutual Fund Capital Trust |
| Investment Objective: | High level of total return consistent with a moderately conservative level of risk. |
The Nationwide NVIT Investor Destinations Funds are designed to provide diversification and asset allocation across
several types of investments and asset classes, primarily by investing in underlying funds. Therefore, a proportionate
share of the fees and expenses of the underlying funds are indirectly borne by investors. Please refer to the prospectus
for Nationwide NVIT Investor Destinations Funds for more information.
Nationwide Variable Insurance Trust - Nationwide NVIT Mid Cap Growth Fund: Class II
| Investment Adviser: | Gartmore Mutual Fund Capital Trust |
| Investment Objective: | Long-term capital appreciation. |
Nationwide Variable Insurance Trust - Nationwide NVIT Money Market Fund: Class I
| Investment Adviser: | Gartmore Mutual Fund Capital Trust |
| Investment Objective: | High level of current income as is consistent with the preservation of capital and maintenance of liquidity. |
Nationwide Variable Insurance Trust - Nationwide NVIT U.S. Growth Leaders Fund: Class II
| Investment Adviser: | Gartmore Mutual Fund Capital Trust |
| Investment Objective: | Long-term growth of capital. |
Nationwide Variable Insurance Trust - NVIT International Index Fund: Class VIII
| Investment Adviser: | Gartmore Mutual Fund Capital Trust |
| Sub-adviser: | Fund Asset Management, LP |
| Investment Objective: | To match the performance of the Morgan Stanley Capital International Europe, Australasia and Far East Index ("MSCI EAFE® Index") as closely as possible before the deduction of Fund expenses. |
This underlying mutual fund assesses a short-term trading fee (please see "Short-Term Trading Fees" earlier in this
prospectus).
Nationwide Variable Insurance Trust - NVIT International Value Fund: Class VI
| Investment Adviser: | Gartmore Mutual Fund Capital Trust |
| Sub-adviser: | The Boston Company Asset Management LLC |
| Investment Objective: | Long-term capital appreciation. |
This underlying mutual fund assesses a short-term trading fee (please see "Short-Term Trading Fees" earlier in this
prospectus).
Nationwide Variable Insurance Trust - NVIT Mid Cap Index Fund: Class I
| Investment Adviser: | Gartmore Mutual Fund Capital Trust |
| Sub-adviser: | Fund Asset Management, LP |
| Investment Objective: | Capital appreciation. |
Nationwide Variable Insurance Trust - NVIT Nationwide® Fund: Class II
| Investment Adviser: | Gartmore Mutual Fund Capital Trust |
| Investment Objective: | Total return through a flexible combination of capital appreciation and current income. |
Nationwide Variable Insurance Trust - Van Kampen NVIT Comstock Value Fund: Class II
| Investment Adviser: | Gartmore Mutual Fund Capital Trust |
| Sub-adviser: | Van Kampen Asset Management |
| Investment Objective: | Seeks capital growth and income through investments in equity securities, including common stocks and securities convertibles into common stocks. |
Nationwide Variable Insurance Trust - Van Kampen NVIT Multi Sector Bond Fund: Class I
| Investment Adviser: | Gartmore Mutual Fund Capital Trust |
| Sub-adviser: | Van Kampen Asset Management |
| Investment Objective: | Above average total return over a market cycle of three to five years. |
Neuberger Berman Advisers Management Trust - AMT Fasciano Portfolio: S Class
| Investment Adviser: | Neuberger Berman Management Inc. |
| Sub-adviser: | Neuberger Berman, LLC |
| Investment Objective: | Long-term capital growth. |
Neuberger Berman Advisers Management Trust - AMT International Portfolio: S Class
| Investment Adviser: | Neuberger Berman Management Inc. |
| Sub-adviser: | Neuberger Berman, LLC |
| Investment Objective: | Long-term growth of capital by investing primarily in common stocks of foreign companies. |
This underlying mutual fund assesses a short-term trading fee (please see "Short-Term Trading Fees" earlier in this
prospectus).
Neuberger Berman Advisers Management Trust - AMT Regency Portfolio: S Class
| Investment Adviser: | Neuberger Berman Management Inc. |
| Sub-adviser: | Neuberger Berman, LLC |
| Investment Objective: | Growth of capital. |
Neuberger Berman Advisers Management Trust - AMT Socially Responsive Portfolio: I Class
| Investment Adviser: | Neuberger Berman Management Inc. |
| Sub-adviser: | Neuberger Berman, LLC |
| Investment Objective: | Long-term capital growth by investing primarily in securities of companies that meet certain financial criteria and social policy. |
Oppenheimer Variable Account Funds - Oppenheimer Capital Appreciation Fund/VA: Service Shares
| Investment Adviser: | OppenheimerFunds, Inc. |
| Investment Objective: | Capital appreciation by investing in securities of well-known established companies. |
Oppenheimer Variable Account Funds - Oppenheimer Global Securities Fund/VA: Class 4
| Investment Adviser: | OppenheimerFunds, Inc. |
| Investment Objective: | Long-term capital appreciation by investing a substantial portion of its assets in securities of foreign issuers, "growth-type" companies, cyclical industries and special situations that are considered to have appreciation |
This underlying mutual fund assesses a short-term trading fee (please see "Short-Term Trading Fees" earlier in this
prospectus).
Oppenheimer Variable Account Funds - Oppenheimer High Income Fund/VA: Class 4
| Investment Adviser: | OppenheimerFunds, Inc. |
| Investment Objective: | High level of current income. |
This underlying mutual fund assesses a short-term trading fee (please see "Short-Term Trading Fees" earlier in this
prospectus).
Oppenheimer Variable Account Funds - Oppenheimer Main Street Fund®/VA: Service Shares
| Investment Adviser: | OppenheimerFunds, Inc. |
| Investment Objective: | High total return which includes growth in the value of its shares as well as current income from equity and debt securities. |
Oppenheimer Variable Account Funds - Oppenheimer Main Street Small Cap Fund®/VA: Service Shares
| Investment Adviser: | OppenheimerFunds, Inc. |
| Investment Objective: | Capital appreciation. |
T. Rowe Price Equity Series, Inc. - T. Rowe Price Blue Chip Growth Portfolio: Class II
| Investment Adviser: | T. Rowe Price Investment Services |
| Investment Objective: | Long-term capital growth and, secondarily, income. |
T. Rowe Price Equity Series, Inc. - T. Rowe Price Equity Income Portfolio: Class II
| Investment Adviser: | T. Rowe Price Investment Services |
| Investment Objective: | Substantial dividend income as well as long-term growth of capital through investments in the common stocks of established companies. |
T. Rowe Price Equity Series, Inc. - T. Rowe Price Limited Term Bond Portfolio: Class II
| Investment Adviser: | T. Rowe Price Investment Services |
| Investment Objective: | High level of income consistent with moderate price fluctuation. |
The Universal Institutional Funds, Inc. - Core Plus Fixed Income Portfolio: Class II
| Investment Adviser: | Morgan Stanley Investment Management Inc. |
| Investment Objective: | Above-average total return over a market cycle of three to five years by investing primarily in a diversified portfolio of fixed income securities. |
The Universal Institutional Funds, Inc. - Global Real Estate Portfolio: Class II
| Investment Adviser: | Morgan Stanley Investment Management Inc. |
| Investment Objective: | The Portfolio seeks to provide current income and capital appreciation. |
There is no information available for the sub-accounts because as of December 31, 2006, the sub-accounts had not commenced operations.
Types of Contracts
The contracts described in this prospectus are classified according to the tax treatment to which they are subject under the Internal Revenue Code. Following is a general description of the various contract types. Eligibility requirements, tax benefits (if any), limitations, and other features of the contracts will differ depending on contract type.
Charitable Remainder Trusts
Charitable Remainder Trusts are trusts that meet the requirements of Section 664 of the Internal Revenue Code. Non-Qualified Contracts that are issued to Charitable Remainder Trusts will differ from other Non-Qualified Contracts in three respects:
| (1) | Waiver of CDSC. In addition to the CDSC-free withdrawal privilege available to all contracts, Charitable Remainder Trusts may also withdraw the difference between: |
| (a) | the contract value on the day before the withdrawal; and |
| (b) | the total amount of purchase payments made to the contract (less an adjustment for amounts surrendered). |
| (2) | Contract ownership at annuitization. On the annuitization date, if the contract owner is a Charitable Remainder Trust, the Charitable Remainder Trust will continue to be the contract owner and the annuitant will NOT become the contract owner. |
| (3) | Recipient of death benefit proceeds. With respect to the death benefit proceeds, if the contract owner is a Charitable Remainder Trust, the death benefit is payable to the Charitable Remainder Trust. Any designation in conflict with the Charitable Remainder Trust’s right to the death benefit will be void. |
While these provisions are intended to facilitate a Charitable Remainder Trust's ownership of this contract, the rules governing Charitable Remainder Trusts are numerous and complex. A Charitable Remainder Trust that is considering purchasing this contract should seek the advice of a qualified tax and/or financial adviser prior to purchasing the contract. An annuity that has a Charitable Remainder Trust endorsement is not a charitable remainder trust; the endorsement is merely to facilitate ownership of the contract by a Charitable Remainder Trust.
Investment Only (Qualified Plans)
Contracts that are owned by Qualified Plans are not intended to confer tax benefits on the beneficiaries of the plan; they are used as investment vehicles for the plan. The income tax consequences to the beneficiary of a Qualified Plan are controlled by the operation of the plan, not by operation of the assets in which the plan invests.
Beneficiaries of Qualified Plans should contact their employer and/or trustee of the plan to obtain and review the plan, trust, summary plan description and other documents for the tax and other consequences of being a participant in a Qualified Plan.
Individual Retirement Annuities (IRAs)
IRAs are contracts that satisfy the provisions of Section 408(b) of the Internal Revenue Code, including the following requirements:
| | the contract is not transferable by the owner; |
| | the premiums are not fixed; |
| | if the contract owner is younger than age 50, the annual premium cannot exceed $4,000; if the contract owner is age 50 or older, the annual premium cannot exceed $5,000 (although rollovers of greater amounts from qualified plans, Tax Sheltered Annuities and other IRAs can be received); |
| | certain minimum distribution requirements must be satisfied after the owner attains the age of 70½; |
| | the entire interest of the owner in the contract is nonforfeitable; and |
| | after the death of the owner, additional distribution requirements may be imposed to ensure distribution of the entire balance in the contract within the statutory period of time. |
Depending on the circumstance of the owner, all or a portion of the contributions made to the account may be deducted for federal income tax purposes.
Failure to make the mandatory distributions can result in an additional penalty tax of 50% of the excess of the amount required to be distributed over the amount that was actually distributed.
IRAs may receive rollover contributions from other Individual Retirement Accounts, other Individual Retirement Annuities, Tax Sheltered Annuities, certain 457 governmental plans and qualified retirement plans (including 401(k) plans).
When the owner of an IRA attains the age of 70½, the Internal Revenue Code requires that certain minimum distributions be made. In addition, upon the death of the owner of an IRA, mandatory distribution requirements are imposed by the Internal Revenue Code to ensure distribution of the entire contract value within the required statutory period. Due to recent changes in Treasury Regulations, the amount used to compute the mandatory distributions may exceed the contract value.
For further details regarding IRAs, please refer to the disclosure statement provided when the IRA was established.
Non-Qualified Contracts
A Non-Qualified Contract is a contract that does not qualify for certain tax benefits under the Internal Revenue Code, and which is not an IRA, a Roth IRA, a SEP IRA, a Simple IRA, or a Tax Sheltered Annuity.
Upon the death of the owner of a Non-Qualified Contract, mandatory distribution requirements are imposed to ensure distribution of the entire balance in the contract within a required period.
Non-Qualified contracts that are owned by natural persons allow the deferral of taxation on the income earned in the contract until it is distributed or deemed to be distributed. Non-Qualified contracts that are owned by nonnatural persons, such as trusts, corporations and partnerships are generally subject to current income tax on the gain earned inside the contract, unless the nonnatural person owns the contract as an “agent” of a natural person.
Roth IRAs
Roth IRA contracts are contracts that satisfy the provisions of Section 408A of the Internal Revenue Code, including the following requirements:
| | the contract is not transferable by the owner; |
| | the premiums are not fixed; |
| | if the contract owner is younger than age 50, the annual premium cannot exceed $4,000; if the contract owner is age 50 or older, the annual premium cannot exceed $5,000 (although rollovers of greater amounts from other Roth IRAs and IRAs can be received); |
| | the entire interest of the owner in the contract is nonforfeitable; and |
| | after the death of the owner, certain distribution requirements may be imposed to ensure distribution of the entire balance in the contract within the statutory period of time. |
A Roth IRA can receive a rollover from an IRA; however, the amount rolled over from the IRA to the Roth IRA is required to be included in the owner's federal gross income at the time of the rollover, and will be subject to federal income tax.
There are income limitations on eligibility to participate in a Roth IRA and additional income limitations for eligibility to roll over amounts from an IRA to a Roth IRA.
For further details regarding Roth IRAs, please refer to the disclosure statement provided when the Roth IRA was established.
Simplified Employee Pension IRAs (SEP IRA)
A SEP IRA is a written plan established by an employer for the benefit of employees which permits the employer to make contributions to an IRA established for the benefit of each employee.
An employee may make deductible contributions to a SEP IRA subject to the same restrictions and limitations as an IRA. In addition, the employer may make contributions to the SEP IRA, subject to dollar and percentage limitations imposed by both the Internal Revenue Code and the written plan.
A SEP IRA plan must satisfy:
| | minimum participation rules; |
| | top-heavy contribution rules; |
| | nondiscriminatory allocation rules; and |
| | requirements regarding a written allocation formula. |
In addition, the plan cannot restrict withdrawals of non-elective contributions, and must restrict withdrawals of elective contributions before March 15th of the following year.
When the owner of SEP IRA attains the age of 70½, the Internal Revenue Code requires that certain minimum distributions be made. Due to recent changes in Treasury Regulations, the amount used to compute the minimum distributions may exceed the contract value. In addition, upon the death of the owner of a SEP IRA, mandatory distribution requirements are imposed by the Internal Revenue Code to ensure distribution of the entire contract value within the required statutory period.
Simple IRAs
A Simple IRA is an individual retirement annuity that is funded exclusively by a qualified salary reduction arrangement and satisfies:
| | participation requirements; and |
| | administrative requirements. |
The funds contributed to a Simple IRA cannot be commingled with funds in IRAs or SEP IRAs.
A Simple IRA cannot receive rollover distributions except from another Simple IRA.
When the owner of Simple IRA attains the age of 70½, the Internal Revenue Code requires that certain minimum distributions be made. Due to recent changes in Treasury Regulations, the amount used to compute the minimum distributions may exceed the contract value.
In addition, upon the death of the owner of a Simple IRA, mandatory distribution requirements are imposed by the Internal Revenue Code to ensure distribution of the entire contract value within the required statutory period.
Tax Sheltered Annuities
Certain tax-exempt organizations (described in section 501(c)(3) of the Internal Revenue Code) and public school systems may establish a plan under which annuity contracts can be purchased for their employees. These annuity contracts are often referred to as Tax Sheltered Annuities.
Purchase payments made to Tax Sheltered Annuities are excludable from the income of the employee, up to statutory maximum amounts. These amounts should be set forth in the plan adopted by the employer.
Tax Sheltered Annuities may receive rollover contributions from Individual Retirement Accounts, Individual Retirement Annuities, other Tax Sheltered Annuities, certain 457 governmental plans, and qualified retirement plans (including 401(k) plans).
The owner's interest in the contract is nonforfeitable (except for failure to pay premiums) and cannot be transferred.
When the owner of a Tax Sheltered Annuity attains the age of 70½, the Internal Revenue Code requires that certain minimum distributions be made. Due to recent changes in Treasury Regulations, the amount used to compute the minimum distributions may exceed the contract value. In addition, upon the death of the owner of a Tax Sheltered Annuity, mandatory distribution requirements are imposed by the Internal Revenue Code to ensure distribution of the entire contract value within the required statutory period.
Federal Tax Considerations
Federal Income Taxes
The tax consequences of purchasing a contract described in this prospectus will depend on:
| | the type of contract purchased; |
| | the purposes for which the contract is purchased; and |
| | the personal circumstances of individual investors having interests in the contracts. |
Existing tax rules are subject to change, and may affect individuals differently depending on their situation. Nationwide does not guarantee the tax status of any contracts or any transactions involving the contracts.
Representatives of the Internal Revenue Service have informally suggested, from time to time, that the number of underlying mutual funds available or the number of transfer opportunities available under a variable product may be relevant in determining whether the product qualifies for the desired tax treatment. In 2003, the Internal Revenue Service issued formal guidance, in Revenue Ruling 2003-91, that indicates that if the number of underlying mutual funds available in a variable insurance product does not exceed 20, the number of underlying mutual funds alone would not cause the contract to not qualify for the desired tax treatment. The Internal Revenue Service has also indicated that exceeding 20 investment options may be considered a factor, along with other factors including the number of transfer opportunities available under the contract, when determining whether the contract qualifies for the desired tax treatment. The revenue ruling did not indicate the actual number of underlying mutual funds that would cause the contract to not provide the desired tax treatment. Should the U.S. Secretary of the Treasury issue additional rules or regulations limiting the number of underlying mutual funds, transfers between underlying mutual funds, exchanges of underlying mutual funds or changes in investment objectives of underlying mutual funds such that the contract would no longer qualify for tax deferred treatment under Section 72 of the Internal Revenue Code, Nationwide will take whatever steps are available to remain in compliance.
If the contract is purchased as an investment of certain retirement plans (such as qualified retirement plans, Individual Retirement Accounts, and custodial accounts as described in Sections 401, 408(a), and 403(b)(7) of the Internal Revenue Code), tax advantages enjoyed by the contract owner and/or annuitant may relate to participation in the plan rather than ownership of the annuity contract. Such plans are permitted to purchase investments other than annuities and retain tax-deferred status.
The following is a brief summary of some of the federal income tax considerations related to the contracts. In addition to the federal income tax, distributions from annuity contracts may be subject to state and local income taxes. The tax rules across all states and localities are not uniform and therefore will not be discussed in this prospectus. Tax rules that may apply to contracts issued in U.S. territories such as Puerto Rico and Guam are also not discussed. Nothing in this prospectus should be considered to be tax advice. Contract owners and prospective contract owners should consult a financial consultant, tax adviser or legal counsel to discuss the taxation and use of the contracts.
IRAs, SEP IRAs and Simple IRAs
Distributions from IRAs, SEP IRAs and Simple IRAs are generally taxed as ordinary income when received. If any of the amount contributed to the Individual Retirement Annuity was nondeductible for federal income tax purposes, then a portion of each distribution is excludable from income.
If distributions of income from an IRA are made prior to the date that the owner attains the age of 59½ years, the income is subject to both the regular income tax and an additional penalty tax of 10% is generally applicable. (For Simple IRAs, the 10% penalty is increased to 25% if the distribution is made during the 2-year period beginning on the date that the individual first participated in the Simple IRA.) The 10% penalty tax can be avoided if the distribution is:
| | made to a beneficiary on or after the death of the owner; |
| | attributable to the owner becoming disabled (as defined in the Internal Revenue Code); |
| | part of a series of substantially equal periodic payments made not less frequently than annually made for the life (or life expectancy) of the owner, or the joint lives (or joint life expectancies) of the owner and his or her designated beneficiary; |
| | used for qualified higher education expenses; or |
| | used for expenses attributable to the purchase of a home for a qualified first-time buyer. |
If the contract owner dies before the contract is completely distributed, the balance will be included in the contract owner’s gross estate for tax purposes.
Roth IRAs
Distributions of earnings from Roth IRAs are taxable or nontaxable depending upon whether they are "qualified distributions" or "non-qualified distributions." A "qualified distribution" is one that satisfies the five-year rule and meets one of the following requirements:
| | it is made on or after the date on which the contract owner attains age 59½; |
| | it is made to a beneficiary (or the contract owner’s estate) on or after the death of the contract owner; |
| | it is attributable to the contract owner’s disability; or |
| | it is used for expenses attributable to the purchase of a home for a qualified first-time buyer. |
The five-year rule generally is satisfied if the distribution is not made within the five year period beginning with the first taxable year in which a contribution is made to any Roth IRA established for the owner.
A qualified distribution is not included in gross income for federal income tax purposes.
A non-qualified distribution is not includable in gross income to the extent that the distribution, when added to all previous distributions, does not exceed the total amount of contributions made to the Roth IRA. Any non-qualified distribution in excess of total contributions is includable in the contract owner’s gross income as ordinary income in the year that it is distributed to the contract owner.
Special rules apply for Roth IRAs that have proceeds received from an IRA prior to January 1, 1999 if the owner elected the special 4-year income averaging provisions that were in effect for 1998.
If non-qualified distributions of income from a Roth IRA are made prior to the date that the owner attains the age of 59½ years, the income is subject to both the regular income tax and an additional penalty tax of 10%. The penalty tax can be avoided if the distribution is:
| | made to a beneficiary on or after the death of the owner; |
| | attributable to the owner becoming disabled (as defined in the Internal Revenue Code); |
| | part of a series of substantially equal periodic payments made not less frequently than annually made for the life (or life expectancy) of the owner, or the joint lives (or joint life expectancies) of the owner and his or her designated beneficiary; |
| | for qualified higher education expenses; or |
| | used for expenses attributable to the purchase of a home for a qualified first-time buyer. |
If the contract owner dies before the contract is completely distributed, the balance will be included in the contract owner’s gross estate for tax purposes.
Tax Sheltered Annuities
Distributions from Tax Sheltered Annuities are generally taxed when received. A portion of each distribution after the annuitization date is excludable from income based on a formula established pursuant to the Internal Revenue Code. The formula excludes from income the amount invested in the contract divided by the number of anticipated payments until the full investment in the contract is recovered. Thereafter all distributions are fully taxable.
If a distribution of income is made from a Tax Sheltered Annuity prior to the date that the owner attains the age of 59½ years, the income is subject to both the regular income tax and an additional penalty tax of 10%. The penalty tax can be avoided if the distribution is:
| | made to a beneficiary on or after the death of the owner; |
| | attributable to the owner becoming disabled (as defined in the Internal Revenue Code); |
| | part of a series of substantially equal periodic payments made not less frequently than annually made for the life (or life expectancy) of the owner, or the joint lives (or joint life expectancies) of the owner and his or her designated beneficiary; or |
| | made to the owner after separation from service with his or her employer after age 55. |
A loan from a Tax Sheltered Annuity generally is not considered to be a distribution, and is therefore generally not taxable. However, if the loan is not repaid in accordance with the repayment schedule, the entire balance of the loan would be treated as being in default, and the defaulted amount would be treated as being distributed to the participant as a taxable distribution.
If the contract owner dies before the contract is completely distributed, the balance will be included in the contract owner’s gross estate for tax purposes.
Non-Qualified Contracts - Natural Persons as Contract Owners
Generally, the income earned inside a Non-Qualified Annuity Contract that is owned by a natural person is not taxable until it is distributed from the contract.
Distributions before the annuitization date are taxable to the contract owner to the extent that the cash value of the contract exceeds the contract owner’s investment in the contract at the time of the distribution. In general, the investment in the contract is equal to the purchase payment made with after-tax dollars. Distributions, for this purpose, include full and partial surrenders, any portion of the contract that is assigned or pledged, amounts borrowed from the contract, or any portion of the contract that is transferred by gift. For these purposes, a transfer by gift may occur upon annuitization if the contract owner and the annuitant are not the same individual.
With respect to annuity distributions on or after the annuitization date, a portion of each annuity payment is excludable from taxable income. The amount excludable is based on the ratio between the contract owner’s investment in the contract and the expected return on the contract. Once the entire investment in the contract is recovered, all distributions are fully includable in income. The maximum amount excludable from income is the investment in the contract. If the annuitant dies before the entire investment in the contract has been excluded from income, and as a result of the annuitant's death no more payments are due under the contract, then the unrecovered investment in the contract may be deducted on his or her final tax return.
In determining the taxable amount of a distribution, all annuity contracts issued after October 21, 1988 by the same company to the same contract owner during the same calendar year will be treated as one annuity contract.
A special rule applies to distributions from contracts that have investments that were made prior to August 14, 1982. For those contracts, distributions that are made prior to the
annuitization date are treated first as a recovery of the investment in the contract as of that date. A distribution in excess of the amount of the investment in the contract as of August 14, 1982, will be treated as taxable income.
The Internal Revenue Code imposes a penalty tax if a distribution is made before the contract owner reaches age 59½. The amount of the penalty is 10% of the portion of any distribution that is includable in gross income. The penalty tax does not apply if the distribution is:
| | the result of a contract owner’s death; |
| | the result of a contract owner’s disability, (as defined in the Internal Revenue Code); |
| | one of a series of substantially equal periodic payments made over the life (or life expectancy) of the contract owner or the joint lives (or joint life expectancies) of the contract owner and the beneficiary selected by the contract owner to receive payment under the annuity payment option selected by the contract owner; or |
| | is allocable to an investment in the contract before August 14, 1982. |
If the contract owner dies before the contract is completely distributed, the balance will be included in the contract owner’s gross estate for tax purposes.
Non-Qualified Contracts - Non-Natural Persons as Contract Owners
The previous discussion related to the taxation of Non-Qualified Contracts owned by individuals. Different rules (the so-called "non-natural persons" rules) apply if the contract owner is not a natural person.
Generally, contracts owned by corporations, partnerships, trusts, and similar entities are not treated as annuity contracts under the Internal Revenue Code. Therefore, income earned under a Non-Qualified Contract that is owned by a non-natural person is taxed as ordinary income during the taxable year that it is earned. Taxation is not deferred, even if the income is not distributed out of the contract. The income is taxable as ordinary income, not capital gain.
The non-natural persons rules do not apply to all entity-owned contracts. For purposes of the rule that annuity contracts that are owned by non-natural persons are not treated as annuity contracts for tax purposes, a contract that is owned by a non-natural person as an agent of an individual is treated as owned by the individual. This would cause the contract to be treated as an annuity under the Internal Revenue Code, allowing tax deferral. However, this exception does not apply when the non-natural person is an employer that holds the contract under a non-qualified deferred compensation arrangement for one or more employees.
The non-natural persons rules also do not apply to contracts that are:
| | acquired by the estate of a decedent by reason of the death of the decedent; |
| | issued in connection with certain qualified retirement plans and individual retirement plans; |
| | purchased by an employer upon the termination of certain qualified retirement plans; or |
| | immediate annuities within the meaning of Section 72(u) of the Internal Revenue Code. |
If the annuitant dies before the contract is completely distributed, the balance may be included in the annuitant’s gross estate for tax purposes, depending on the obligations that the non-natural owner may have owed to the annuitant.
GMWB Rider. Although the tax treatment is not clear, if you purchase the GMWB rider and you take a withdrawal from your Contract before the annuitization date, we intend to treat the following amount of the withdrawal as a taxable distribution: the excess of the greater of (a) your account value immediately before the distribution or (b) your Guaranteed Lifetime Amount immediately before the distribution, over (c) the remaining investment in the Contract. In certain circumstances, this treatment with respect to the GMWB rider could result in your account value being less than your investment in the Contract after such a withdrawal. If you subsequently surrender your contract under such circumstances, you would have a loss that may be deductible. If you purchase the GMWB rider in an IRA or Tax Sheltered Annuity, additional distributions may be required to satisfy the minimum distribution requirements. Please consult your tax advisor.
Withholding
Pre-death distributions from the contracts are subject to federal income tax. Nationwide will withhold the tax from the distributions unless the contract owner requests otherwise. If the distribution is from a Tax Sheltered Annuity, it will be subject to mandatory 20% withholding that cannot be waived, unless:
| | the distribution is made directly to another Tax Sheltered Annuity, qualified pension or profit-sharing plan described in section 401(a), an eligible deferred compensation plan described in section 457(b) which is maintained by an eligible employer described in section 457(e)(1)(A) or IRA; or |
| | the distribution satisfies the minimum distribution requirements imposed by the Internal Revenue Code. |
In addition, under some circumstances, the Internal Revenue Code will not permit contract owners to waive withholding. Such circumstances include:
| | if the payee does not provide Nationwide with a taxpayer identification number; or |
| | if Nationwide receives notice from the Internal Revenue Service that the taxpayer identification number furnished by the payee is incorrect. |
If a contract owner is prohibited from waiving withholding, as described above, the distribution will be subject to mandatory back-up withholding. The mandatory back-up withholding rate is established by Section 3406 of the Internal Revenue Code and is applied against the amount of income that is distributed.
Non-Resident Aliens
Generally, a pre-death distribution from a contract to a non-resident alien is subject to federal income tax at a rate of 30% of the amount of income that is distributed. Nationwide is required to withhold this amount and send it to the Internal Revenue Service. Some distributions to non-resident aliens may be subject to a lower (or no) tax if a treaty applies. In order to obtain the benefits of such a treaty, the non-resident alien must:
| (1) | provide Nationwide with a properly completed withholding certificate claiming the treaty benefit of a lower tax rate or exemption from tax; and |
| (2) | provide Nationwide with an individual taxpayer identification number. |
If the non-resident alien does not meet the above conditions, Nationwide will withhold 30% of income from the distribution.
Another exemption from the 30% withholding is for the non-resident alien to provide Nationwide with sufficient evidence that:
| (1) | the distribution is connected to the non-resident alien’s conduct of business in the United States; |
| (2) | the distribution is includable in the non-resident alien’s gross income for United States federal income tax purposes; and |
| (3) | provide Nationwide with a properly completed withholding certificate claiming the exemption. |
Note that these distributions would be subject to the same withholding rules that are applicable to payments to United States persons, including back-up withholding, which is currently at a rate of 28%, if a correct taxpayer identification number is not provided.
Federal Estate, Gift and Generation Skipping Transfer Taxes
The following transfers may be considered a gift for federal gift tax purposes:
| | a transfer of the contract from one contract owner to another; or |
| | a distribution to someone other than a contract owner. |
Upon the contract owner’s death, the value of the contract may be subject to estate taxes, even if all or a portion of the value is also subject to federal income taxes.
Section 2612 of the Internal Revenue Code may require Nationwide to determine whether a death benefit or other distribution is a "direct skip" and the amount of the resulting generation skipping transfer tax, if any. A direct skip is when property is transferred to, or a death benefit or other distribution is made to:
| a) | an individual who is two or more generations younger than the contract owner; or |
| b) | certain trusts, as described in Section 2613 of the Internal Revenue Code (generally, trusts that have no beneficiaries who are not 2 or more generations younger than the contract owner). |
If the contract owner is not an individual, then for this purpose only, "contract owner" refers to any person:
| | who would be required to include the contract, death benefit, distribution, or other payment in his or her federal gross estate at his or her death; or |
| | who is required to report the transfer of the contract, death benefit, distribution, or other payment for federal gift tax purposes. |
If a transfer is a direct skip, Nationwide will deduct the amount of the transfer tax from the death benefit, distribution or other payment, and remit it directly to the Internal Revenue Service.
Charge for Tax
Nationwide is not required to maintain a capital gain reserve liability on Non-Qualified Contracts. If tax laws change requiring a reserve, Nationwide may implement and adjust a tax charge.
Diversification
Internal Revenue Code Section 817(h) contains rules on diversification requirements for variable annuity contracts. A variable annuity contract that does not meet these diversification requirements will not be treated as an annuity, unless:
| | the failure to diversify was accidental; |
| | the failure is corrected; and |
| | a fine is paid to the Internal Revenue Service. |
The amount of the fine will be the amount of tax that would have been paid by the contract owner if the income, for the period the contract was not diversified, had been received by the contract owner.
If the violation is not corrected, the contract owner will be considered the owner of the underlying securities and will be taxed on the earnings of his or her contract. Nationwide believes that the investments underlying this contract meet these diversification requirements.
Tax Changes
The foregoing tax information is based on Nationwide’s understanding of federal tax laws. It is NOT intended as tax advice. All information is subject to change without notice. You should consult with your personal tax and/or financial adviser for more information.
In 2001, the Economic Growth and Tax Relief Reconciliation Act (EGTRRA) was enacted. EGTRRA made numerous changes to the Internal Revenue Code, including the following:
generally lowering federal income tax rates;
| | increasing the amounts that may be contributed to various retirement plans, such as IRAs, Tax Sheltered Annuities and Qualified Plans; |
| | increasing the portability of various retirement plans by permitting IRAs, Tax Sheltered Annuities, Qualified Plans |
and certain governmental 457 plans to "roll" money from one plan to another;
| | eliminating and/or reducing the highest federal estate tax rates; |
| | increasing the estate tax credit; and |
| | for persons dying after 2009, repealing the estate tax. |
In 2006, the Pension Protection Act of 2006 made permanent the EGTRRA provisions noted above that increase the amounts that may be contributed to various retirement plans and that increase the portability of various retirement plans. However, all of the other changes resulting from EGTRRA are scheduled to "sunset," or become ineffective, after December 31, 2010 unless they are extended by additional legislation. If changes resulting from EGTRRA are not extended, beginning January 1, 2011, the Internal Revenue Code will be restored to its pre-EGTRRA form.
This creates uncertainty as to future tax requirements and implications. Please consult a qualified tax or financial adviser for further information relating to EGTRRA and other tax issues.
Required Distributions
Any distribution paid that is NOT due to payment of the death benefit may be subject to a CDSC.
The Internal Revenue Code requires that certain distributions be made from the contracts issued in conjunction with this prospectus. Following is an overview of the required distribution rules applicable to each type of contract. Please consult a qualified tax or financial adviser for more specific required distribution information.
Required Distributions – General Information
In general, a beneficiary is an individual or other entity that the contract owner designates to receive death proceeds upon the contract owner’s death. The distribution rules in the Internal Revenue Code make a distinction between "beneficiary" and "designated beneficiary" when determining the life expectancy that may be used for payments that are made from IRAs, SEP IRAs, Simple IRAs, Roth IRAs and Tax Sheltered Annuities after the death of the annuitant, or that are made from Non-Qualified Contracts after the death of the contract owner. A designated beneficiary is a natural person who is designated by the contract owner as the beneficiary under the contract. Non-natural beneficiaries (e.g. charities or certain trusts) are not designated beneficiaries for the purpose of required distributions and the life expectancy of such a beneficiary is zero.
Life expectancies and joint life expectancies will be determined in accordance with the relevant guidance provided by the Internal Revenue Service and the Treasury Department, including but not limited to Treasury Regulation 1.72-9 and Treasury Regulation 1.401(a)(9)-9.
Required distributions paid upon the death of the contract owner are paid to the beneficiary or beneficiaries stipulated by the contract owner. How quickly the distributions must be made may be determined with respect to the life expectancies of the beneficiaries. For Non-Qualified Contracts, the beneficiaries used in the determination of the distribution period are those in effect on the date of the contract owner’s death. For contracts other than Non-Qualified Contracts, the beneficiaries used in the determination of the distribution period do not have to be determined until December 31 of the year following the contract owner’s death. If there is more than one beneficiary, the life expectancy of the beneficiary with the shortest life expectancy is used to determine the distribution period. Any beneficiary that is not a designated beneficiary has a life expectancy of zero.
Required Distributions for Non-Qualified Contracts
Internal Revenue Code Section 72(s) requires Nationwide to make certain distributions when a contract owner dies. The following distributions will be made in accordance with the following requirements:
| (1) | If any contract owner dies on or after the annuitization date and before the entire interest in the contract has been distributed, then the remaining interest must be distributed at least as rapidly as the distribution method in effect on the contract owner's death. |
| (2) | If any contract owner dies before the annuitization date, then the entire interest in the contract (consisting of either the death benefit or the contract value reduced by charges set forth elsewhere in the contract) will be distributed within 5 years of the contract owner’s death, provided however: |
| (a) | any interest payable to or for the benefit of a designated beneficiary may be distributed over the life of the designated beneficiary or over a period not longer than the life expectancy of the designated beneficiary. Payments must begin within one year of the contract owner's death unless otherwise permitted by federal income tax regulations; and |
| (b) | if the designated beneficiary is the surviving spouse of the deceased contract owner, the spouse can choose to become the contract owner instead of receiving a death benefit. Any distributions required under these distribution rules will be made upon that spouse’s death. |
In the event that the contract owner is not a natural person (e.g., a trust or corporation), for purposes of these distribution provisions:
| (a) | the death of the annuitant will be treated as the death of a contract owner; |
| (b) | any change of annuitant will be treated as the death of a contract owner; and |
| (c) | in either case, the appropriate distribution will be made upon the death or change, as the case may be. |
These distribution provisions do not apply to any contract exempt from Section 72(s) of the Internal Revenue Code by reason of Section 72(s)(5) or any other law or rule.
Required Distributions for Tax Sheltered Annuities, IRAs, SEP IRAs, Simple IRAs and Roth IRAs
Distributions from a Tax Sheltered Annuity, IRA, SEP IRA or Simple IRA must begin no later than April 1 of the calendar year following the calendar year in which the contract owner reaches age 70½. Distributions may be paid in a lump sum or in substantially equal payments over:
| (a) | the life of the contract owner or the joint lives of the contract owner and the contract owner’s designated beneficiary; or |
| (b) | a period not longer than the period determined under the table in Treasury Regulation 1.401(a)(9)-9, which is the deemed joint life expectancy of the contract owner and a person 10 years younger than the contract owner. If the designated beneficiary is the spouse of the contract owner, the period may not exceed the longer of the period determined under such table or the joint life expectancy of the contract owner and the contract owner’s spouse, determined in accordance with Treasury Regulation 1.72-9, or such additional guidance as may be provided pursuant to Treasury Regulation 1.401(a)(9)-9. |
For Tax Sheltered Annuities, required distributions do not have to be withdrawn from this contract if they are being withdrawn from another Tax Sheltered Annuity of the contract owner.
For IRAs, SEP IRAs and Simple IRAs, required distributions do not have to be withdrawn from this contract if they are being withdrawn from another IRA, SEP IRA or Simple IRA of the contract owner.
If the contract owner’s entire interest in a Tax Sheltered Annuity, IRA, SEP IRA or Simple IRA will be distributed in equal or substantially equal payments over a period described in (a) or (b) above, the payments must begin on or before the required beginning date. The required beginning date is April 1 of the calendar year following the calendar year in which the contract owner reaches age 70½. The rules for Roth IRAs do not require distributions to begin during the contract owner’s lifetime, therefore, the required beginning date is not applicable to Roth IRAs.
Due to recent changes in Treasury Regulations, the amount used to compute the minimum distribution requirement may exceed the contract value.
If the contract owner dies before the required beginning date (in the case of a Tax Sheltered Annuity, IRA, SEP IRA or Simple IRA) or before the entire contract value is distributed (in the case of Roth IRAs), any remaining interest in the contract must be distributed over a period not exceeding the applicable distribution period, which is determined as follows:
| (a) | if the designated beneficiary is the contract owner’s spouse, the applicable distribution period is the surviving spouse’s remaining life expectancy using the surviving spouse’s birthday for each distribution calendar year after the calendar year of the contract owner’s death. For calendar years after the death of the contract owner’s surviving spouse, the applicable distribution period is the spouse’s remaining life expectancy using the spouse’s age in the calendar year of the spouse’s death, reduced by one for each calendar year that elapsed since the calendar year immediately following the calendar year of the spouse’s death; |
| (b) | if the designated beneficiary is not the contract owner’s surviving spouse, the applicable distribution period is the designated beneficiary’s remaining life expectancy using the designated beneficiary’s birthday in the calendar year immediately following the calendar year of the contract owner’s death, reduced by one for each calendar year that elapsed thereafter; and |
| (c) | if there is no designated beneficiary, the entire balance of the contract must be distributed by December 31 of the fifth year following the contract owner’s death. |
If the contract owner dies on or after the required beginning date, the interest in the Tax Sheltered Annuity, IRA, SEP IRA or Simple IRA must be distributed over a period not exceeding the applicable distribution period, which is determined as follows:
| (a) | if the designated beneficiary is the contract owner’s spouse, the applicable distribution period is the surviving spouse’s remaining life expectancy using the surviving spouse’s birthday for each distribution calendar year after the calendar year of the contract owner’s death. For calendar years after the death of the contract owner’s surviving spouse, the applicable distribution period is the spouse’s remaining life expectancy using the spouse’s age in the calendar year of the spouse’s death, reduced by one for each calendar year that elapsed since the calendar year immediately following the calendar year of the spouse’s death; |
| (b) | if the designated beneficiary is not the contract owner’s surviving spouse, the applicable distribution period is the designated beneficiary’s remaining life expectancy using the designated beneficiary’s birthday in the calendar year immediately following the calendar year of the contract owner’s death, reduced by one for each calendar year that elapsed thereafter; and |
| (c) | if there is no designated beneficiary, the applicable distribution period is the contract owner’s remaining life expectancy using the contract owner’s birthday in the calendar year of the contract owner’s death, reduced by one for each year thereafter. |
If distribution requirements are not met, a penalty tax of 50% is levied on the difference between the amount that should have been distributed for that year and the amount that actually was distributed for that year.
For IRAs, SEP IRAs and Simple IRAs, all or a portion of each distribution will be included in the recipient’s gross income and taxed at ordinary income tax rates. The portion of a distribution that is taxable is based on the ratio between the amount by which non-deductible purchase payments exceed prior non-taxable distributions and total account balances at the time of the distribution. The owner of an IRA, SEP IRA or Simple IRA must annually report the amount of non-deductible purchase payments, the amount of any distribution, the amount by which non-deductible purchase payments for all
years exceed non taxable distributions for all years, and the total balance of all IRAs, SEP IRAs or Simple IRAs.
Distributions from Roth IRAs may be either taxable or nontaxable, depending upon whether they are "qualified distributions" or "non-qualified distributions."
As noted above, if you purchase the GMWB, additional distributions may be required to satisfy the minimum distribution requirements. Please consult your tax advisor
STATEMENT OF ADDITIONAL INFORMATION
August 1, 2007
Flexible Premium Deferred Variable Annuity Contracts
Issued by Nationwide Life Insurance Company
through its Nationwide Variable Account-II
This Statement of Additional Information is not a prospectus. It contains information in addition to and more detailed than set forth in the prospectus and should be read in conjunction with the prospectus dated August 1, 2007. The prospectus may be obtained from Nationwide Life Insurance Company by writing 5100 Rings Road, RR1-04-F4, Dublin, Ohio 43017-1522, or calling 1- 800-848-6331, TDD 1-800-238-3035.
Table of Contents of Statement of Additional Information | Page |
| General Information and History | 1 |
| Services | 1 |
| Purchase of Securities Being Offered | 2 |
| Underwriters | 2 |
| Advertising | 2 |
| Annuity Payments | 2 |
| Condensed Financial Information | 2 |
| Financial Statements | 3 |
The Nationwide Variable Account-II is a separate investment account of Nationwide Life Insurance Company ("Nationwide"). Nationwide is a member of the Nationwide group of companies. All of Nationwide's common stock is owned by Nationwide Financial Services, Inc. ("NFS"), a holding company. NFS 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 a holding company, as well. All of its common stock is held by Nationwide Mutual Insurance Company (95.2%) and Nationwide Mutual Fire Insurance Company (4.8%), the ultimate controlling persons of the Nationwide group of companies. The Nationwide group of companies is one of America's largest insurance and financial services family of companies, with combined assets of over $160 billion as of December 31, 2006 (to be filed by Amendment).
Nationwide, which has responsibility for administration of the contracts and the variable account, maintains records of the name, address, taxpayer identification number, and other pertinent information for each contract owner and the number and type of contract issued to each contract owner and records with respect to the contract value.
The custodian of the assets of the variable account is Nationwide. Nationwide will maintain a record of all purchases and redemptions of shares of the underlying mutual funds. Nationwide, or its affiliates, may have entered into agreements with the underlying mutual funds and/or their affiliates. The agreements relate to services furnished by Nationwide or an affiliate of Nationwide. Some of the services provided include distribution of underlying fund prospectuses, semi-annual and annual fund reports, proxy materials and fund communications, as well as maintaining the websites and voice response systems necessary for contract owners to execute trades in the funds. Nationwide also acts as a limited agent for the fund for purposes of accepting the trades.
See “Underlying Mutual Fund Payments” located in the prospectus.
Distribution, Promotional, and Sales Expenses
In addition to or partially in lieu of commission, Nationwide may pay the selling firms a marketing allowance, which is based on the firm’s ability and demonstrated willingness to promote and market Nationwide's products. How any marketing allowance is spent is determined by the firm, but generally will be used to finance firm activities, such as training and education, that may contribute to the promotion and marketing of Nationwide's products. Nationwide makes certain assumptions about the amount of marketing allowance it will pay and takes these assumptions into consideration when it determines the charges that will be assessed under the contracts. For the contracts described in the prospectus, Nationwide assumed 0.10% (of the purchase payment amount) for marketing allowance when determining the charges for the contracts. The actual amount of the marketing allowance may be higher or lower than this assumption. If the actual amount of marketing allowance paid is more than what was assumed, Nationwide will fund the difference. Nationwide generally does not profit from any excess marketing allowance if the amount assumed was higher than what is actually paid. Any excess would be spent on additional marketing for the contracts. For more information about marketing allowance or how a particular selling firm uses marketing allowances, please consult with your registered representative.
Independent Registered Public Accounting Firm
The financial statements of Nationwide Variable Account-II and the consolidated financial statements and schedules of Nationwide Life Insurance Company and subsidiaries for the periods indicated have been included herein in reliance upon the reports of KPMG LLP, independent registered public accounting firm, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing. The audit report of KPMG LLP covering the December 31, 2006 consolidated financial statements and schedules of Nationwide Life Insurance Company and subsidiaries contains an explanatory paragraph that states that Nationwide Life Insurance Company and subsidiaries adopted the American Institute of Certified Public Accountants' Statement of Position 03-1, Accounting and Reporting by Insurance Enterprises for Certain Nontraditional Long-Duration Contracts and for Separate Accounts, in 2004. KPMG LLP is located at 191 West Nationwide Blvd., Columbus, Ohio 43215
The contracts will be sold by licensed insurance agents in the states where the contracts may be lawfully sold. Such agents will be registered representatives of broker-dealers registered under the Securities Exchange Act of 1934 who are members of the National Association of Securities Dealers, Inc. ("NASD").
The contracts, which are offered continuously, are distributed by Nationwide Investment Services Corporation ("NISC"), One Nationwide Plaza, Columbus, Ohio 43215, a wholly owned subsidiary of Nationwide. For contracts issued in Michigan, all references to NISC will mean Nationwide Investment Svcs. Corporation. During the fiscal years ended December 31, 2006, 2005 and 2004, no underwriting commissions were paid by Nationwide to NISC.
Money Market Yields
Nationwide may advertise the "yield" and "effective yield" for the money market sub-account. Yield and effective yield are annualized, which means that it is assumed that the underlying mutual fund generates the same level of net income throughout a year.
Yield is a measure of the net dividend and interest income earned over a specific seven-day period (which period will be stated in the advertisement) expressed as a percentage of the offering price of the underlying mutual fund’s units. The effective yield is calculated similarly, but reflects assumed compounding, calculated under rules prescribed by the SEC. Thus, effective yield will be slightly higher than yield, due to the compounding.
Historical Performance of the Sub-Accounts
Nationwide will advertise historical performance of the sub-accounts in accordance with SEC prescribed calculations. Performance information is annualized. However, if a sub-account has been available in the variable account for less than one year, the performance information for that sub-account is not annualized.
Performance information is based on historical earnings and is not intended to predict or project future results.
Standardized performance will reflect the maximum variable account charges possible under the contract, the Contract Maintenance Charge, and the standard CDSC schedule. Non-standardized performance, which will be accompanied by standardized performance, will reflect other expense structures contemplated under the contract. The expense assumptions will be stated in the advertisement.
Additional Materials
Nationwide may provide information on various topics to contract owners and prospective contract owners in advertising, sales literature or other materials.
Performance Comparisons
Each sub-account may, from time to time, include in advertisements the ranking of its performance figures compared with performance figures of other annuity contracts' sub-accounts with the same investment objectives which are created by Lipper Analytical Services, Morningstar, Inc. or other recognized ranking services.
See "Frequency and Amount of Annuity Payments" located in the prospectus.
There is no information available for the sub-accounts because as of December 31, 2006, the sub-accounts have not commenced operations.
To be filed by Pre-Effective Amendment.
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
Nationwide Variable Account-II:
Report of Independent Registered Public Accounting Firm.
Statement of Assets, Liabilities and Contract
Owners' Equity as of December 31, 2006.
Statements of Operations for the year
ended December 31, 2006.
Statements of Changes in Contract
Owners' Equity for the years
ended December 31, 2006 and 2005.
Notes to Financial Statements.
Nationwide Life Insurance Company and subsidiaries:
Report of Independent Registered Public Accounting Firm.
Consolidated Balance Sheets as of December
31, 2006 and 2005.
Consolidated Statements of Income for the
years ended December 31, 2006, 2005 and
2004.
Consolidated Statements of Shareholder’s
Equity for the years ended December 31,
2006, 2005 and 2004.
Consolidated Statements of Cash Flows for
the years ended December 31, 2006, 2005
and 2004.
Notes to Consolidated Financial Statements.
Financial Statement Schedules
Item 24. (b) Exhibits
| (1) | Resolution of the Depositor’s Board of Directors authorizing the establishment of the Registrant – Filed with Post-Effective Amendment No. 16 on April 19, 2007 (File No. 333-103093) as exhibit number 1 and hereby incorporated by reference. |
| (3) | Underwriting or Distribution of Contracts between the Depositor and NISC as Principal Underwriter – Filed with Post-Effective Amendment No. 16 on April 19, 2007 (File No. 333-103093) as exhibit number 3 and hereby incorporated by reference. |
| (4) | The form of the variable annuity contract – Filed previously with the initial Registration Statement (File No. 333-140621) on February 12, 2007as exhibit number 4 and hereby incorporated by reference. |
| (5) | Variable Annuity Application – Filed previously with the initial Registration Statement (File No. 333-140621) on February 12, 2007as exhibit number 5 and hereby incorporated by reference. |
| (6) | Articles of Incorporation of Depositor – Filed with Post-Effective Amendment No. 16 on April 19, 2007 (File No. 333-103093) as exhibit number 6 and hereby incorporated by reference. |
| (9) | Opinion of Counsel – Filed previously with the initial Registration Statement (File No. 333-140621) on February 12, 2007 as exhibit number 9 and hereby incorporated by reference. |
| (10) | Consent of Independent Registered Public Accounting Firm – To be filed by Pre-Effective Amendment. |
| (99) | Power of Attorney – To be filed by Pre-Effective Amendment. |
| Item 25. | Directors and Officers of the Depositor |
| Chairman of the Board and Director | Arden L. Shisler |
| Chief Executive Officer and Director | W. G. Jurgensen |
| President and Chief Operating Officer | Mark R. Thresher |
| Executive Vice President and Chief Legal and Governance Officer | Patricia R. Hatler |
| Executive Vice President-Chief Administrative Officer | Terri L. Hill |
| Executive Vice President-Chief Information Officer | Michael C. Keller |
| Executive Vice President-Chief Marketing Officer | James R. Lyski |
| Executive Vice President-Financial, Investments and Strategy | Robert A. Rosholt |
| Senior Vice President and Treasurer | Harry H. Hallowell |
| Senior Vice President-Chief Compliance Officer | Carol Baldwin Moody |
| Senior Vice President-Chief Financial Officer | Timothy G. Frommeyer |
| Senior Vice President-Chief Investment Officer | Gail G. Snyder |
| Senior Vice President-CIO Strategic Investments | Gary I. Siroko |
| Senior Vice President-Corporate Relations | Gregory S. Lashutka |
| Senior Vice President-Corporate Strategy | J. Stephen Baine |
| Senior Vice President-Division General Counsel | Thomas W. Dietrich |
| Senior Vice President-Enterprise Chief Risk Officer | Brian W. Nocco |
| Senior Vice President-Health and Productivity | Holly R. Snyder |
| Senior Vice President-In Retirement Business Head | Keith I. Millner |
| Senior Vice President-Individual Protection Business Head | Peter A. Golato |
| Senior Vice President-Information Technology | Srinivas Koushik |
| Senior Vice President-Internal Audits | Kelly A. Hamilton |
| Senior Vice President-NF Marketing | Gordon E. Hecker |
| Senior Vice President-NF Systems | R. Dennis Noice |
| Senior Vice President-Non-Affiliated Sales | John Laughlin Carter |
| Senior Vice President-NW Retirement Plans | William S. Jackson |
| Senior Vice President-President - Nationwide Bank | Anne L. Arvia |
| Senior Vice President-Property and Casualty Claims | David R. Jahn |
| Senior Vice President-Property and Casualty Commercial/Farm Product Pricing | W. Kim Austen |
| Senior Vice President-Property and Casualty Commercial/Farm Product Pricing | James R. Burke |
| Senior Vice President-Property and Casualty Human Resources | Gale V. King |
| Senior Vice President-Property and Casualty Personal Lines Product Pricing | J. Lynn Greenstein |
| Vice President-Assistant to the CEO and Secretary | Thomas E. Barnes |
| Director | Joseph A. Alutto |
| Director | James G. Brocksmith, Jr. |
| Director | Keith W. Eckel |
| Director | Lydia M. Marshall |
| Director | Donald L. McWhorter |
| Director | David O. Miller |
| Director | Martha Miller de Lombera |
| Director | James F. Patterson |
| Director | Gerald D. Prothro |
| Director | Alex Shumate |
| The business address of the Directors and Officers of the Depositor is: |
| One Nationwide Plaza, Columbus, Ohio 43215 |
Item 26. Persons Controlled by or Under Common Control with the Depositor or Registrant.
* | Subsidiaries for which separate financial statements are filed |
** | Subsidiaries included in the respective consolidated financial statements |
*** | Subsidiaries included in the respective group financial statements filed for unconsolidated subsidiaries |
**** | Other subsidiaries |
COMPANY | STATE/COUNTRY OF ORGANIZATION | NO. VOTING SECURITIES (see attached chart unless otherwise indicated) | PRINCIPAL BUSINESS |
| 1717 Advisory Services, Inc. | Pennsylvania | | The company was formerly registered as an investment advisor and is currently inactive. |
| 1717 Brokerage Services, Inc. | Pennsylvania | | The company is a multi-state licensed insurance agency. |
| 1717 Capital Management Company* | Pennsylvania | | The company is registered as a broker-dealer and investment advisor. |
| 1717 Insurance Agency of Massachusetts, Inc. | Massachusetts | | The company is established to grant proper licensing to the Nationwide Life Insurance Company of America affiliates in Massachusetts. |
| 1717 Insurance Agency of Texas, Inc. | Texas | | The company is established to grant proper licensing to the Nationwide Life Insurance Company of America affiliates in Texas. |
| AGMC Reinsurance, Ltd. | Turks & Caicos Islands | | The company is in the business of reinsurance of mortgage guaranty risks. |
| AID Finance Services, Inc. | Iowa | | The company operates as a holding company. |
| ALLIED General Agency Company | Iowa | | The company acts as a general agent and surplus lines broker for property and casualty insurance products. |
| ALLIED Group, Inc. | Iowa | | The company is a property and casualty insurance holding company. |
| ALLIED Property and Casualty Insurance Company | Iowa | | The company underwrites general property and casualty insurance. |
| ALLIED Texas Agency, Inc. | Texas | | The company acts as a managing general agent to place personal and commercial automobile insurance with Colonial County Mutual Insurance Company for the independent agency companies. |
| Allnations, Inc. | Ohio | | The company engages in promoting, extending, and strengthening cooperative insurance organizations throughout the world. |
| AMCO Insurance Company | Iowa | | The company underwrites general property and casualty insurance. |
| American Marine Underwriters, Inc. | Florida | | The company is an underwriting manager for ocean cargo and hull insurance. |
| Atlantic Floridian Insurance Company (f.k.a Nationwide Atlantic Insurance Company) | Ohio | | The company writes personal lines residential property insurance in the State of Florida. |
| Audenstar Limited | England and Wales | | The company is an investment holding company. |
| BlueSpark, LLC | Ohio | | The company is currently inactive. |
| Cal-Ag Insurance Services, Inc. | California | | The company is an insurance agency. |
| CalFarm Insurance Agency | California | | The company is an insurance agency. |
COMPANY | STATE/COUNTRY OF ORGANIZATION | NO. VOTING SECURITIES (see attached chart unless otherwise indicated) | PRINCIPAL BUSINESS |
| Colonial County Mutual Insurance Company* | Texas | | The company underwrites non-standard automobile and motorcycle insurance and other various commercial liability coverages in Texas. |
| Corviant Corporation | Delaware | | The purpose of the company is to create a captive distribution network through which affiliates can sell multi-manager investment products, insurance products and sophisticated estate planning services. |
| Crestbrook Insurance Company* (f.k.a. CalFarm Insurance Company) | Ohio | | The company is an Ohio-based multi-line insurance corporation that is authorized to write personal, automobile, homeowners and commercial insurance. |
| Depositors Insurance Company | Iowa | | The company underwrites general property and casualty insurance. |
| DVM Insurance Agency, Inc. | California | | This company places pet insurance business not written by Veterinary Pet Insurance Company outside of California with National Casualty Company. |
| F&B, Inc. | Iowa | | The company is an insurance agency that places business with carriers other than Farmland Mutual Insurance Company and its affiliates. |
| Farmland Mutual Insurance Company | Iowa | | The company provides property and casualty insurance primarily to agricultural businesses. |
| Financial Settlement Services Agency, Inc. | Ohio | | The company is an insurance agency in the business of selling structured settlement products. |
| FutureHealth Corporation | Maryland | | The company is a wholly-owned subsidiary of FutureHealth Holding Company, which provides population health management. |
| FutureHealth Holding Company | Maryland | | The company provides population health management. |
| FutureHealth Technologies Corporation | Maryland | | The company is a wholly-owned subsidiary of FutureHealth Holding Company, which provides population health management. |
| Gartmore Distribution Services, Inc.* | Delaware | | The company is a limited purpose broker-dealer. |
| Gartmore Investor Services, Inc. | Ohio | | The company provides transfer and dividend disbursing agent services to various mutual fund entities. |
| Gartmore Morley Capital Management, Inc. | Oregon | | The company is an investment advisor and stable value money manager. |
| Gartmore Mutual Fund Capital Trust | Delaware | | The trust acts as a registered investment advisor. |
| Gartmore S.A. Capital Trust | Delaware | | The trust acts as a registered investment advisor. |
| Gates, McDonald & Company | Ohio | | The company provides services to employers for managing workers' compensation matters and employee benefits costs. |
| Gates, McDonald & Company of New York, Inc. | New York | | The company provides workers' compensation and self-insured claims administration services to employers with exposure in New York. |
COMPANY | STATE/COUNTRY OF ORGANIZATION | NO. VOTING SECURITIES (see attached chart unless otherwise indicated) | PRINCIPAL BUSINESS |
| GatesMcDonald DTAO, LLC | Ohio | | The company provides disability tax reporting services. |
| GatesMcDonald DTNHP, LLC | Ohio | | The company provides disability tax reporting services. |
| GatesMcDonald DTC, LLC | Ohio | | The company provides disability tax reporting services. |
| GatesMcDonald Health Plus Inc.* | Ohio | | The company provides medical management and cost containment services to employers. |
| GVH Participacoes e Empreedimientos Ltda. | Brazil | | The company acts as a holding company. |
| Insurance Intermediaries, Inc. | Ohio | | The company is an insurance agency and provides commercial property and casualty brokerage services. |
| Life REO Holdings, LLC | Ohio | | The company serves as a holding company for foreclosure entities. |
| Lone Star General Agency, Inc. | Texas | | The company acts as general agent to market automobile and motorcycle insurance for Colonial County Mutual Insurance Company. |
| Morely & Associates, Inc. (f.k.a. Gartmore Morley & Associates, Inc.) | Oregon | | The company brokers or places book-value maintenance agreements (wrap contracts) and guarantee investment contracts for collective investment trusts and accounts. |
| Morley Financial Services, Inc. (f.k.a. Gartmore Morley Financial Services, Inc.) | Oregon | | The company is a holding company. |
| Mullen TBG Insurance Agency Services, LLC | Delaware | | The company is a joint venture between TBG Insurance Services Corporation and MC Insurance Agency Services LLC. The Company provides financial products and services to executive plan participants. |
| National Casualty Company | Wisconsin | | The company underwrites various property and casualty coverage, as well as individual and group accident and health insurance. |
| National Casualty Company of America, Ltd. | England | | This is a limited liability company organized for profit under the Companies Act of 1948 of England for the purpose of carrying on the business of insurance, reinsurance, indemnity, and guarantee of various kinds. This company is currently inactive. |
| Nationwide Advantage Mortgage Company* | Iowa | | The company makes residential mortgage loans. |
| Nationwide Affinity Insurance Company of America* | Ohio | | The company provides property and casualty insurance products. |
| Nationwide Agribusiness Insurance Company | Iowa | | The company provides property and casualty insurance primarily to agricultural businesses. |
| Nationwide Arena, LLC* | Ohio | | The purpose of the company is to develop Nationwide Arena and to engage in related development activity. |
| Nationwide Asset Management Holdings | England and Wales | | The company operates as a holding company. |
COMPANY | STATE/COUNTRY OF ORGANIZATION | NO. VOTING SECURITIES (see attached chart unless otherwise indicated) | PRINCIPAL BUSINESS |
| Nationwide Global Asset Management, Inc. (f.k.a. Gartmore Global Asset Management , Inc.) | Delaware | | The company operates as a holding company. |
| Nationwide Assurance Company | Wisconsin | | The company underwrites non-standard automobile and motorcycle insurance. |
| Nationwide Bank | | | This is a federal savings bank chartered by the Office of Thrift Supervision in the United States Department of Treasury to exercise deposit, lending agency custody and fiduciary powers and to engage in activities permissible for federal savings banks under the Home Owners’ Loan act of 1933. |
| Nationwide Better Health, Inc. | Ohio | | The company is a holding company for the health and productivity operations of Nationwide. |
| Nationwide Cash Management Company* | Ohio | | The company buys and sells investment securities of a short-term nature as the agent for other Nationwide corporations, foundations, and insurance company separate accounts. |
| Nationwide Community Development Corporation, LLC | Ohio | | The company holds investments in low-income housing funds. |
| Nationwide Corporation | Ohio | | The company acts primarily as a holding company for entities affiliated with Nationwide Mutual Insurance Company and Nationwide Mutual Fire Insurance Company. |
| Nationwide Document Solutions, Inc. (f.k.a. ALLIED Document Solutions, Inc.) | Iowa | | The company provides general printing services to its affiliated companies as well as to certain unaffiliated companies. |
| Nationwide Emerging Managers, LLC (f.k.a. Gartmore Emerging Managers, LLC) | Delaware | | The company acquires and holds interests in registered investment advisors and provides investment management services. |
| Nationwide Exclusive Agent Risk Purchasing Group, LLC | Ohio | | The company's purpose is to provide a mechanism for the purchase of group liability insurance for insurance agents operating nationwide. |
| Nationwide Financial Assignment Company | Ohio | | The company is an administrator of structured settlements. |
| Nationwide Financial Institution Distributors Agency, Inc. | Delaware | | The company is an insurance agency. |
| Nationwide Financial Institution Distributors Insurance Agency, Inc. of Massachusetts | Massachusetts | | The company is an insurance agency. |
| Nationwide Financial Institution Distributors Insurance Agency, Inc. of New Mexico | New Mexico | | The company is an insurance agency. |
| Nationwide Financial Services Capital Trust | Delaware | | The trust's sole purpose is to issue and sell certain securities representing individual beneficial interests in the assets of the trust. |
COMPANY | STATE/COUNTRY OF ORGANIZATION | NO. VOTING SECURITIES (see attached chart unless otherwise indicated) | PRINCIPAL BUSINESS |
| Nationwide Financial Services, Inc.* | Delaware | | The company acts primarily as a holding company for companies within the Nationwide organization that offer or distribute long-term savings and retirement products. |
| Nationwide Financial Sp. Zo.o | Poland | | The company is currently inactive. |
| Nationwide Financial Structured Products, LLC | Ohio | | The company captures and reports the results of the structured products business unit. |
| Nationwide Foundation* | Ohio | | The company contributes to non-profit activities and projects. |
| Nationwide General Insurance Company | Ohio | | The company transacts a general insurance business, except life insurance, and primarily provides automobile and fire insurance to select customers. |
| Nationwide Global Finance, LLC | Ohio | | The company acts as a support company for Nationwide Global Holdings, Inc. in its international capitalization efforts. |
| Nationwide Global Funds | Luxembourg | | This company issues shares of mutual funds. |
| Nationwide Global Holdings, Inc. | Ohio | | The company is a holding company for the international operations of Nationwide. |
| Nationwide Global Ventures, Inc. (f.k.a. Gartmore Global Ventures, Inc.) | Delaware | | The company acts as a holding company. |
| Nationwide Indemnity Company* | Ohio | | The company is involved in the reinsurance business by assuming business from Nationwide Mutual Insurance Company and other insurers within the Nationwide Insurance organization. |
| Nationwide Insurance Company of America | Wisconsin | | The company underwrites general property and casualty insurance. |
| Nationwide Insurance Company of Florida* | Ohio | | The company transacts general insurance business except life insurance. |
| Nationwide International Underwriters | California | | The company is a special risk, excess and surplus lines underwriting manager. |
| Nationwide Investment Advisors, LLC | Ohio | | The company provides investment advisory services. |
| Nationwide Investment Services Corporation** | Oklahoma | | This is a limited purpose broker-dealer and acts as an investment advisor. |
| Nationwide Life and Annuity Company of America** | Delaware | | The company provides individual life insurance products. |
| Nationwide Life and Annuity Insurance Company** | Ohio | | The company engages in underwriting life insurance and granting, purchasing, and disposing of annuities. |
| Nationwide Life Insurance Company* | Ohio | | The company provides individual life insurance, group life and health insurance, fixed and variable annuity products, and other life insurance products. |
| Nationwide Life Insurance Company of America* | Pennsylvania | | The company provides individual life insurance and group annuity products. |
COMPANY | STATE/COUNTRY OF ORGANIZATION | NO. VOTING SECURITIES (see attached chart unless otherwise indicated) | PRINCIPAL BUSINESS |
| Nationwide Life Insurance Company of Delaware* | Delaware | | The company insures against personal injury, disability or death resulting from traveling, sickness or other general accidents, and every type of insurance appertaining thereto. |
| Nationwide Lloyds | Texas | | The company markets commercial and residential property insurance in Texas. |
| Nationwide Management Systems, Inc. | Ohio | | The company offers a preferred provider organization and other related products and services. |
| Nationwide Mutual Capital, LLC | Ohio | | The company acts as a private equity fund investing in companies for investment purposes and to create strategic opportunities for Nationwide. |
| Nationwide Mutual Capital I, LLC* | Delaware | | The business of the company is to achieve long term capital appreciation through a portfolio of primarily domestic equity investments in financial service and related companies. |
| Nationwide Mutual Fire Insurance Company | Ohio | | The company engages in a general insurance and reinsurance business, except life insurance. |
| Nationwide Mutual Insurance Company* | Ohio | | The company engages in a general insurance and reinsurance business, except life insurance. |
| Nationwide Private Equity Fund, LLC | Ohio | | The company invests in private equity funds. |
| Nationwide Properties, Ltd. | Ohio | | The company is engaged in the business of developing, owning and operating real estate and real estate investments. |
| Nationwide Property and Casualty Insurance Company | Ohio | | The company engages in a general insurance business, except life insurance. |
| Nationwide Property Protection Services, LLC | Ohio | | The company provides alarm systems and security guard services. |
| Nationwide Provident Holding Company* | Pennsylvania | | The company is a holding company for non-insurance subsidiaries. |
| Nationwide Realty Investors, Ltd.* | Ohio | | The company is engaged in the business of developing, owning and operating real estate and real estate investment. |
| Nationwide Retirement Solutions, Inc.* | Delaware | | The company markets and administers deferred compensation plans for public employees. |
| Nationwide Retirement Solutions, Inc. of Arizona | Arizona | | The company markets and administers deferred compensation plans for public employees. |
| Nationwide Retirement Solutions, Inc. of Ohio | Ohio | | The company provides retirement products, marketing and education and administration to public employees. |
| Nationwide Retirement Solutions, Inc. of Texas | Texas | | The company markets and administers deferred compensation plans for public employees. |
| Nationwide Retirement Solutions, Insurance Agency, Inc. | Massachusetts | | The company markets and administers deferred compensation plans for public employees. |
| Nationwide Sales Solutions, Inc. | Iowa | | The company engages in direct marketing of property and casualty insurance products. |
COMPANY | STATE/COUNTRY OF ORGANIZATION | NO. VOTING SECURITIES (see attached chart unless otherwise indicated) | PRINCIPAL BUSINESS |
| Nationwide Securities, Inc.* | Ohio | | The company is a registered broker-dealer and provides investment management and administrative services. |
| Nationwide Separate Accounts, LLC (f.k.a. Gartmore Separate Accounts, LLC) | Delaware | | The company acts as a registered investment advisor. |
| Nationwide Services Company, LLC | Ohio | | The company performs shared services functions for the Nationwide organization. |
| Nationwide Services For You, LLC | Ohio | | The company provides consumer services that are related to the business of insurance, including services that help consumers prevent losses and mitigate risks. |
| Nationwide Services Sp. Zo.o. | Poland | | The company is currently inactive. |
| Newhouse Capital Partners, LLC | Delaware | | The company invests in financial services companies that specialize in e-commerce and promote distribution of financial services. |
| Newhouse Capital Partners II, LLC | Delaware | | The company invests in financial services companies that specialize in e-commerce and promote distribution of financial services. |
| Newhouse Special Situations Fund I, LLC | Delaware | | The company owns and manages contributed securities in order to achieve long-term capital appreciation from the contributed securities and through investments in a portfolio of other equity investments in financial service and other related companies. |
| NF Reinsurance Ltd.* | Bermuda | | The company serves as a captive reinsurer for Nationwide Life Insurance Company’s universal life, term life and annuity business. |
| NFS Distributors, Inc. | Delaware | | The company acts primarily as a holding company for Nationwide Financial Services, Inc.'s distribution companies. |
| NGH UK, Ltd.* | United Kingdom | | The company is currently inactive. |
| NMC CPC WT Investment, LLC | Delaware | | The business of the company is to hold and exercise rights in a specific private equity investment. |
| NorthPointe Capital LLC | Delaware | | The company acts as a registered investment advisor. |
| NWD Investment Management, Inc. (f.k.a. Gartmore Global Investments, Inc.) | Delaware | | The company acts as a holding company and provides other business services for the NWD Investments group of companies. |
| NWD Management & Research Trust (f.k.a. Gartmore Global Asset Management Trust) | Delaware | | The company acts as a holding company for the NWD Investments group of companies and as a registered investment advisor. |
| NWD MGT, LLC (f.k.a. GGI MGT LLC) | Delaware | | The company is a passive investment holder in Newhouse Special Situations Fund I, LLC for the purpose of allocation of earnings to the NWD Investments management team as it relates to the ownership and management of Newhouse Special Situations Fund I, LLC. |
COMPANY | STATE/COUNTRY OF ORGANIZATION | NO. VOTING SECURITIES (see attached chart unless otherwise indicated) | PRINCIPAL BUSINESS |
| Pension Associates, Inc. | Wisconsin | | The company provides pension plan administration and record keeping services, and pension plan and compensation consulting. |
| Premier Agency, Inc. | Iowa | | This company is an insurance agency. |
| Provestco, Inc. | Delaware | | The company serves as a general partner in certain real estate limited partnerships invested in by Nationwide Life Insurance Company of America. |
| Quick Sure Auto Agency, Inc. | Texas | | The company is an insurance agency and operates as an employee agent "storefront" for Titan Insurance Services. |
| RCMD Financial Services, Inc. | Delaware | | The company is a holding company. |
| Registered Investment Advisors Services, Inc. | Texas | | The company facilitates third-party money management services for plan providers. |
| Retention Alternatives, Ltd.* | Bermuda | | The company is a captive insurer and writes first dollar insurance policies in workers’ compensation, general liability and automobile liability for its affiliates in the United States. |
| Riverview Alternative Investment Advisors, LLC (f.k.a. Gartmore Riverview, LLC) | Delaware | | The company provides investment management services to a limited number of institutional investors. |
| Riverview Alternative Investment Advisors II LLC (f.k.a. Gartmore riverview II, LLC) | Delaware | | The company is a holding company. |
| Riverview International Group, Inc. | Delaware | | The company is a holding company. |
| RP&C International, Inc. | Ohio | | The company is an investment-banking firm that provides specialist advisory services and innovative financial solutions to public and private companies internationally. |
| Scottsdale Indemnity Company | Ohio | | The company is engaged in a general insurance business, except life insurance. |
| Scottsdale Insurance Company | Ohio | | The company primarily provides excess and surplus lines of property and casualty insurance. |
| Scottsdale Surplus Lines Insurance Company | Arizona | | The company provides excess and surplus lines coverage on a non-admitted basis. |
| TBG Advisory Services Corporation (d.b.a. TBG Advisors) | California | | The company is an investment advisor. |
| TBG Aviation, LLC | California | | The company holds an investment in a leased airplane and maintains an operating agreement with Flight Options. |
| TBG Danco Insurance Services Corporation | California | | The corporation provides life insurance and individual executive estate planning. |
COMPANY | STATE/COUNTRY OF ORGANIZATION | NO. VOTING SECURITIES (see attached chart unless otherwise indicated) | PRINCIPAL BUSINESS |
| TBG Financial & Insurance Services Corporation* | California | | The company consults with corporate clients and financial institutions on the development and implementation of proprietary and/or private placement insurance products for the financing of executive benefit programs and individual executive's estate planning requirements. As a broker dealer, TBG Financial & Insurance Services Corporation provides access to institutional insurance investment products. |
| TBG Financial & Insurance Services Corporation of Hawaii | Hawaii | | The corporation consults with corporate clients and financial institutions on the development and implementation of proprietary, private placement and institutional insurance products. |
| TBG Insurance Services Corporation* | Delaware | | The company markets and administers executive benefit plans. |
| THI Holdings (Delaware), Inc.* | Delaware | | The company acts as a holding company for subsidiaries of the Nationwide group of companies. |
| Titan Auto Agency, Inc. (d.b.a. Arlans Agency) | Michigan | | The company is an insurance agency that primarily sells non-standard automobile insurance for Titan Insurance Company in Michigan. |
| Titan Auto Insurance of New Mexico, Inc. | New Mexico | | The company is an insurance agency that operates employee agent storefronts. |
| Titan Holdings Service Corporation | Texas | | The company is currently inactive. |
| Titan Indemnity Company | Texas | | The company is a multi-line insurance company and is operating primarily as a property and casualty insurance company. |
| Titan Insurance Company | Michigan | | This is a property and casualty insurance company. |
| Titan Insurance Services, Inc. | Texas | | The company is a Texas grandfathered managing general agency. |
| Titan National Auto Call Center, Inc. | Texas | | The company is licensed as an insurance agency that operates as an employee agent "call center" for Titan Indemnity Company. |
| Union Bond & Trust Company (f.k.a. Gartmore Trust Company) | Oregon | | The company is an Oregon state bank with trust powers. |
| Veterinary Pet Insurance Company* | California | | The company provides pet insurance. |
| Victoria Automobile Insurance Company | Indiana | | The company is a property and casualty insurance company. |
| Victoria Financial Corporation | Delaware | | The company acts as a holding company specifically for holding insurance companies of Victoria group of companies. |
| Victoria Fire & Casualty Company | Ohio | | The company is a property and casualty insurance company. |
| Victoria Insurance Agency, Inc. | Ohio | | The company is an insurance agency that acts as a broker for independent agents appointed with the Victoria companies in the State of Ohio. |
| Victoria National Insurance Company | Ohio | | The company is a property and casualty insurance company. |
COMPANY | STATE/COUNTRY OF ORGANIZATION | NO. VOTING SECURITIES (see attached chart unless otherwise indicated) | PRINCIPAL BUSINESS |
| Victoria Select Insurance Company | Ohio | | The company is a property and casualty insurance company. |
| Victoria Specialty Insurance Company | Ohio | | The company is a property and casualty insurance company. |
| Vida Seguradora SA | Brazil | | The company operates as a licensed insurance company in the categories of life and unrestricted private pension plan in Brazil. |
| VPI Services, Inc. | California | | The company operates as a nationwide pet registry service for holders of Veterinary Pet Insurance Company policies, including pet indemnification and a lost pet recovery program. |
| Washington Square Administrative Services, Inc. | Pennsylvania | | The company provides administrative services to Nationwide Life and Annuity Company of America. |
| Western Heritage Insurance Company | Arizona | | The company underwrites excess and surplus lines of property and casualty insurance. |
| Whitehall Holdings, Inc. | Texas | | The company acts as a holding company for the Titan group of agencies. |
| W.I. of Florida (d.b.a. Titan Auto Insurance) | Florida | | The company is an insurance agency and operates as an employee agent storefront for Titan Indemnity Company in Florida. |
| | COMPANY | STATE/COUNTRY OF ORGANIZATION | NO. VOTING SECURITIES (see attached chart unless otherwise indicated) | PRINCIPAL BUSINESS |
* | MFS Variable Account | Ohio | | Issuer of Annuity Contracts |
* | Nationwide Multi-Flex Variable Account | Ohio | | Issuer of Annuity Contracts |
* | Nationwide VA Separate Account-A | Ohio | | Issuer of Annuity Contracts |
* | Nationwide VA Separate Account-B | Ohio | | Issuer of Annuity Contracts |
* | Nationwide VA Separate Account-C | Ohio | | Issuer of Annuity Contracts |
* | Nationwide VA Separate Account-D | Ohio | | Issuer of Annuity Contracts |
* | Nationwide Variable Account | Ohio | | Issuer of Annuity Contracts |
* | Nationwide Variable Account-II | Ohio | | Issuer of Annuity Contracts |
* | Nationwide Variable Account-3 | Ohio | | Issuer of Annuity Contracts |
* | Nationwide Variable Account-4 | Ohio | | Issuer of Annuity Contracts |
* | Nationwide Variable Account-5 | Ohio | | Issuer of Annuity Contracts |
* | Nationwide Variable Account-6 | Ohio | | Issuer of Annuity Contracts |
* | Nationwide Variable Account-7 | Ohio | | Issuer of Annuity Contracts |
* | Nationwide Variable Account-8 | Ohio | | Issuer of Annuity Contracts |
* | Nationwide Variable Account-9 | Ohio | | Issuer of Annuity Contracts |
* | Nationwide Variable Account-10 | Ohio | | Issuer of Annuity Contracts |
* | Nationwide Variable Account-11 | Ohio | | Issuer of Annuity Contracts |
* | Nationwide Variable Account-12 | Ohio | | Issuer of Annuity Contracts |
* | Nationwide Variable Account-13 | Ohio | | Issuer of Annuity Contracts |
* | Nationwide Variable Account-14 | Ohio | | Issuer of Annuity Contracts |
| | Nationwide Variable Account-15 | Ohio | | Issuer of Annuity Contracts |
| | Nationwide Variable Account-16 | Ohio | | Issuer of Annuity Contracts |
| | Nationwide Variable Account-17 | Ohio | | Issuer of Annuity Contracts |
* | Nationwide Provident VA Separate Account 1 | Pennsylvania | | Issuer of Annuity Contracts |
* | Nationwide Provident VA Separate Account A | Delaware | | Issuer of Annuity Contracts |
| | Nationwide VL Separate Account-A | Ohio | | Issuer of Life Insurance Policies |
| | Nationwide VL Separate Account-B | Ohio | | Issuer of Life Insurance Policies |
* | Nationwide VL Separate Account-C | Ohio | | Issuer of Life Insurance Policies |
| * | Nationwide VL Separate Account-D | Ohio | | Issuer of Life Insurance Policies |
| * | Nationwide VL Separate Account-G | Ohio | | Issuer of Life Insurance Policies |
* | Nationwide VLI Separate Account | Ohio | | Issuer of Life Insurance Policies |
* | Nationwide VLI Separate Account-2 | Ohio | | Issuer of Life Insurance Policies |
* | Nationwide VLI Separate Account-3 | Ohio | | Issuer of Life Insurance Policies |
* | Nationwide VLI Separate Account-4 | Ohio | | Issuer of Life Insurance Policies |
* | Nationwide VLI Separate Account-5 | Ohio | | Issuer of Life Insurance Policies |
* | Nationwide VLI Separate Account-6 | Ohio | | Issuer of Life Insurance Policies |
* | Nationwide VLI Separate Account-7 | Ohio | | Issuer of Life Insurance Policies |
* | Nationwide Provident VLI Separate Account 1 | Pennsylvania | | Issuer of Life Insurance Policies |
* | Nationwide Provident VLI Separate Account A | Delaware | | Issuer of Life Insurance Policies |
ORG CHART
To be filed by Pre-Effective Amendment.
Item 27. Number of Contract Owners
Not applicable.
Item 28. Indemnification
Provision is made in Nationwide's Amended and Restated Code of Regulations and expressly authorized by the General Corporation Law of the State of Ohio, for indemnification by Nationwide of any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative by reason of the fact that such person is or was a director, officer or employee of Nationwide, against expenses, including attorneys fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding, to the extent and under the circumstances permitted by the General Corporation Law of the State of Ohio.
Insofar as indemnification for liabilities arising under the Securities Act of 1933 ("Act") may be permitted to directors, officers or persons controlling Nationwide pursuant to the foregoing provisions, Nationwide has been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
Item 29. Principal Underwriter
| (a) | Nationwide Investment Services Corporation ("NISC") serves as principal underwriter and general distributor for the following separate investment accounts of Nationwide or its affiliates: |
| Multi-Flex Variable Account | Nationwide VLI Separate Account-2 |
| Nationwide Variable Account | Nationwide VLI Separate Account-3 |
| Nationwide Variable Account-II | Nationwide VLI Separate Account-4 |
| Nationwide Variable Account-4 | Nationwide VLI Separate Account-6 |
| Nationwide Variable Account-5 | Nationwide VLI Separate Account-7 |
| Nationwide Variable Account-6 | Nationwide VL Separate Account-C |
| Nationwide Variable Account-7 | Nationwide VL Separate Account-D |
| Nationwide Variable Account-8 | Nationwide VL Separate Account-G |
| Nationwide Variable Account-9 | |
| Nationwide Variable Account-10 | |
| Nationwide Variable Account-11 | |
| Nationwide Variable Account-13 | |
| Nationwide Variable Account-14 | |
| Nationwide VA Separate Account-A | |
| Nationwide VA Separate Account-B | |
| Nationwide VA Separate Account-C | |
| (b) | Directors and Officers of NISC: |
| President | Keith J. Kelly |
| Senior Vice President, Treasurer and Director | James D. Benson. |
| Vice President | Karen R. Colvin |
| Vice President | Scott A. Englehart |
| Vice President | Charles E. Riley |
| Vice President | Trey Rouse |
| Vice President and Assistant Secretary | Thomas E. Barnes |
| Vice President-Chief Compliance Officer | James J. Rabenstine |
| Associate Vice President and Secretary | Glenn W. Soden |
| Assistant Treasurer | Terry C. Smetzer |
| Director | John Laughlin Carter |
| Director | Keith I. Millner |
The business address of the Directors and Officers of Nationwide Investment Services Corporation is:
One Nationwide Plaza, Columbus, Ohio 43215
(c)
Name of Principal Underwriter | Net Underwriting Discounts and Commissions | Compensation on Redemption or Annuitization | Brokerage Commissions | Compensation |
| Nationwide Investment Services Corporation | N/A | N/A | N/A | N/A |
Item 30. Location of Accounts and Records
Timothy G. Frommeyer
Nationwide Life Insurance Company
One Nationwide Plaza
Columbus, OH 43215
Item 31. Management Services
Not Applicable
Item 32. Undertakings
The Registrant hereby undertakes to:
| (a) | file a post-effective amendment to this registration statement as frequently as is necessary to ensure that the audited financial statements in the registration statement are never more than 16 months old for so long as payments under the variable annuity contracts may be accepted; |
| (b) | include either (1) as part of any application to purchase a contract offered by the prospectus, a space that an applicant can check to request a Statement of Additional Information, or (2) a post card or similar written communication affixed to or included in the prospectus that the applicant can remove to send for a Statement of Additional Information; and |
| (c) | deliver any Statement of Additional Information and any financial statements required to be made available under this form promptly upon written or oral request. |
The Registrant represents that any of the contracts which are issued pursuant to Section 403(b) of the Internal Revenue Code, are issued by Nationwide through the Registrant in reliance upon, and in compliance with, a no-action letter issued by the Staff of the Securities and Exchange Commission to the American Council of Life Insurance (publicly available November 28, 1988) permitting withdrawal restrictions to the extent necessary to comply with Section 403(b)(11) of the Internal Revenue Code.
Nationwide represents that the fees and charges deducted under the contract in the aggregate are reasonable in relation to the services rendered, the expenses expected to be incurred and risks assumed by Nationwide.
SIGNATURES
As required by the Securities Act of 1933, and the Investment Company Act of 1940, the Registrant, NATIONWIDE VARIABLE ACCOUNT-II, has caused this Registration Statement to be signed on its behalf in the City of Columbus, and State of Ohio, on this ___ day of June, 2007.
| NATIONWIDE VARIABLE ACCOUNT-II |
(Registrant)
| NATIONWIDE LIFE INSURANCE COMPANY |
(Depositor)
| By /s/ W. MICHAEL STOBART |
W. Michael Stobart
As required by the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities indicated on the ___ day of June, 2007.
| | |
| W. G. JURGENSEN | |
| W. G. Jurgensen, Director and Chief Executive Officer | |
| ARDEN L. SHISLER | |
| Arden L. Shisler, Chairman of the Board | |
| JOSEPH A. ALUTTO | |
| Joseph A. Alutto, Director | |
| JAMES G. BROCKSMITH, JR. | |
| James G. Brocksmith, Jr., Director | |
| KEITH W. ECKEL | |
| Keith W. Eckel, Director | |
| LYDIA M. MARSHALL | |
| Lydia M. Marshall, Director | |
| DONALD L. MCWHORTER | |
| Donald L. McWhorter, Director | |
| MARTHA JAMES MILLER DE LOMBERA | |
| Martha James Miller de Lombera, Director | |
| DAVID O. MILLER | |
| David O. Miller, Director | |
| JAMES F. PATTERSON | |
| James F. Patterson, Director | |
| GERALD D. PROTHRO | |
| Gerald D. Prothro, Director | |
| ALEX SHUMATE | |
| Alex Shumate, Director | |
| | By /s/ W. MICHAEL STOBART |
| | W. Michael Stobart |
| | Attorney-in-Fact |
| | |
