Please read this prospectus before investing, and keep it on file for future
reference. It contains important information about the Perspective Fixed and
Variable Annuity that you ought to know before investing.
To learn more about the Perspective Fixed and Variable Annuity contract, you can
obtain a free copy of the Statement of Additional Information (SAI) dated April
1, 1998, by calling Jackson National NY at (800) 599-5651 or by writing Jackson
National NY at: Annuity Service Center, P.O. Box 378002, Denver, Colorado
80237-8002. The SAI has been filed with the Securities and Exchange Commission
(SEC) and is legally a part of this prospectus. The Table of Contents of the SAI
appears at the end of this prospectus. The SEC maintains a website
(http://www.sec.gov) that contains the SAI, material incorporated by reference
and other information regarding registrants that file electronically with the
SEC.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC NOR HAS THE
SEC PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
THE PERSPECTIVE
FIXED AND VARIABLE ANNUITY
Issued by Jackson National Life Insurance Company of New York and JNLNY Separate
Account I
The fixed and variable annuity contract is an individual, flexible premium
deferred annuity with 4 guaranteed accounts which offer an interest rate that is
guaranteed by Jackson National Life Insurance Company of New York (Jackson
National NY) and 14 investment portfolios. You can put your money in any of the
guaranteed accounts and/or the investment portfolios.
The investment portfolios purchase shares of the following series of the JNL
Series Trust:
JNL Aggressive Growth Series JNL Capital Growth Series JNL Global Equities
Series JNL/Alger Growth Series JNL/Putnam Growth Series JNL/Putnam Value
Equity Series PPM America/JNL Balanced Series
PPM America/JNL High Yield Bond Series
PPM America/JNL Money Market Series
Salomon Brothers/JNL Global Bond Series
Salomon Brothers/JNL U.S. Government
& Quality Bond Series
T. Rowe Price/JNL Established Growth Series
T. Rowe Price/JNL International Equity
Investment Series
T. Rowe Price/JNL Mid-Cap Growth Series
April 1, 1998
<PAGE>
TABLE OF CONTENTS
Key Facts
Fee Table
The Annuity Contract
The Company
The Guaranteed Accounts
The Separate Account
Investment Portfolios
Contract Charges
Purchases
Transfers
Access to Your Money
Income Payments (The Income Phase)
Death Benefit
Taxes
Other Information
Table of Contents of the Statement of Additional Information
<PAGE>
KEY FACTS
Annuity Service Center: 1 (800) 599-5651
Mail Address: P.O. Box 378002, Denver, Colorado 80237-8002
Delivery Address: 8055 East Tufts Avenue, Second Floor,
Denver, Colorado 80237
Institutional Marketing Group
Service Center: 1 (800) 777-7779
Mail Address: P.O. Box 30386, Lansing, Michigan 48909-9692
Delivery Address: 5901 Executive Drive,
Lansing, Michigan 48911 Attn: IMG
Home Office: 2900 Westchester Avenue,
Purchase, New York 10577
The Annuity Contract The fixed and variable annuity contract
offered by Jackson National NY provides a
means for investing on a tax-deferred
basis in the guaranteed accounts of
Jackson National NY and the investment
portfolios. The contract is intended
for retirement savings or other long-term
investment purposes and provides for a
death benefit and income options.
The contract has two phases: the
accumulation phase and the income phase.
During the accumulation phase, earnings
accumulate on a tax-deferred basis and are
taxed as income when you make a withdrawal.
The income phase occurs when you begin
receiving regular payments from your
contract. The amount of money you accumulate
in your contract during the accumulation
phase will determine the amount of income
payments during the income phase.
Investment Options You can put money into any of the
guaranteed accounts and/or the investment
portfolios but you may not put your money in
more than eighteen of the investment options
during the life of your contract.
The guaranteed accounts offer an interest
rate that is guaranteed by Jackson National
NY. While your money is in a guaranteed
account, the interest your money earns and
your principal are guaranteed by Jackson
National NY.
The investment portfolios purchase shares of
series of mutual funds. These series are
described in the attached JNL Series Trust
prospectus. The value of the investment
portfolios will vary in accordance with the
investment performance of the series. You
bear the investment risk under the contract
for all amounts allocated to the investment
portfolios.
Expenses The contract has insurance features and
investment features, and there are costs
related to each.
Jackson National NY makes a deduction for
its insurance charges which is equal to
1.40% of the daily value of the contracts
invested in the investment portfolios.
During the accumulation phase, Jackson
National NY deducts a $30 annual contract
maintenance charge from your contract.
If you take your money out of the contract,
Jackson National NY may assess a withdrawal
charge. The withdrawal charge starts at 7%
in the first year and declines 1% a year to
0% after 7 years.
There are also investment charges which
range from .75% to 1.25% of the average
daily value of the series, depending on the
series.
Jackson National NY may assess a state
premium tax charge which ranges from 0-4%,
depending upon the state, when you begin
receiving regular income payments from your
contract, when you make a withdrawal or, in
states where required, at the time premium
payments are made.
Purchases Under most circumstances, you can buy a
contract for $5,000 or more ($2,000 or more
for a qualified plan contract). You can add
$500 ($50 under the automatic payment plan)
or more at any time during the accumulation
phase.
Access to Your Money You can take money out of your contract
during the accumulation phase. At any
time during the accumulation phase, you
may withdraw premiums which are not subject
to a withdrawal charge (premiums in your
annuity for seven years or longer and not
previously withdrawn). Once every year, you
may withdraw the greater of earnings or 10%
of premiums paid (not yet withdrawn).
Withdrawals in excess of that will be
charged a withdrawal charge. You may also
have to pay income tax and a tax penalty on
any money you take out.
Income Payments If you want to receive regular income from
your annuity, you can choose one of four
options: (1) monthly payments for the
annuitant's life; (2) monthly payments for
the annuitant's life and the life of another
person (usually the annuitant's spouse);
(3) monthly payments for the annuitant's
life, but with payments continuing to you or
your designated beneficiary for 10 or 20
years if the annuitant dies before the end
of the selected period; and (4) payments
for a period of 5 to 30 years.
During the income phase, you have the same
investment choices you had during the
accumulation phase. You can choose to have
payments come from the guaranteed accounts,
the investment portfolios or both. If you
choose to have any part of your payments
come from the investment portfolios, the
dollar amount of your payments may go up or
down. If you choose a variable income
option, you may make transfers between
investment portfolios but you may not make
transfers in to or out of the guaranteed
accounts.
Death Benefit If you die before moving to the income
phase, the person you have chosen as your
beneficiary will receive a death benefit.
The death benefit equals: (a) current
contract value or (b) the total premiums
(less withdrawals, withdrawal charges and
premium taxes) or (c) the contract value at
the end of the 7th contract year PLUS all
premiums made since the 7th year (less
withdrawals, withdrawal charges and premium
taxes) -- whichever is GREATEST. The death
benefit under (c) will never exceed 250% of
premiums paid, less partial withdrawals.
Free Look You may return your contract to the selling
agent or to Jackson National NY within
twenty days after receiving it. Jackson
National NY will return the contract value
in the investment portfolios plus any fees
and expenses deducted from the premium
allocated to the investment portfolios plus
the full amount of premium you allocated to
the guaranteed accounts. We will determine
the contract value in the investment
portfolios as of the date you mail the
contract to us or the date you return it to
the selling agent.
<PAGE>
Taxes The Internal Revenue Code provides that you
will not be taxed on the earnings on the
money held in your contract until you take
money out (this is referred to as
tax-deferral). There are different rules as
to how you will be taxed depending on how
you take the money out and the type of
contract you have (non-qualified or
qualified).
Owner Transaction Expenses
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Withdrawal Charge (as a percentage of premium payments):
Contribution Year of Premium Payment 1 2 3 4 5 6 7 Thereafter
Charge 7% 6% 5% 4% 3% 2% 1% 0%
</TABLE>
Transfer Fee:
No charge for first 15 transfers in a contract year; thereafter, the
fee is $25 per transfer.
Contract Maintenance Charge:
$30 per contract per year
Separate Account Annual Expenses (as a percentage of average account value)
Mortality and Expense Risk Charges 1.25%
Administration Charge .15%
Total Separate Account Annual Expenses 1.40%
Series Annual Expenses
(as a percentage of series average net assets)
<TABLE>
<CAPTION>
Other Expenses Total
Management (After Series
JNL Series Trust Fee Reimbursement) Annual
Expenses
- ----------------------------------------------------------------- ------------- ----------------- ------------
<S> <C> <C> <C>
JNL Aggressive Growth Series .95% .15% 1.10%
JNL Capital Growth Series .95% .15% 1.10%
JNL Global Equities Series 1.00% .15% 1.15%
JNL/Alger Growth Series .975% .15% 1.125%
JNL/Putnam Growth Series .90% .15% 1.05%
JNL/Putnam Value Equity Series .90% .15% 1.05%
PPM America/JNL Balanced Series .75% .15% .90%
PPM America/JNL High Yield Bond Series .75% .15% .90%
PPM America/JNL Money Market Series .60% .15% .75%
Salomon Brothers/JNL Global Bond Series .85% .15% 1.00%
Salomon Brothers/JNL U.S. Government & Quality Bond Series .70% .15% .85%
T. Rowe Price/JNL Established Growth Series .85% .15% 1.00%
T. Rowe Price/JNL International Equity Investment Series 1.10% .15% 1.25%
T. Rowe Price/JNL Mid-Cap Growth Series .95% .15% 1.10%
- --------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Currently, the adviser reimburses each of the Series for certain annual
expenses. These reimbursements are voluntary and may be modified or discontinued
at any time. The adviser may be entitled to a refund of reimbursements made on
or after April 1, 1998. See the attached JNL Series Trust prospectus for
additional information.
Currently, the adviser voluntarily reimburses each of the Series for annual
expenses (excluding management fees) in excess of .15% of average daily net
assets. Prior to reimbursement, total Series annual expenses as a percentage of
net assets for the period ended December 31, 1997, were: JNL Aggressive Growth
Series -- 1.17%; JNL Capital Growth Series -- 1.11%; JNL Global Equities Series
- -- 1.37%; JNL/Alger Growth Series -- 1.10%; JNL/Putnam Growth Series -- 1.05%;
JNL/Putnam Value Equity Series -- 1.09%; PPM America/JNL Balanced Series --
0.94%; PPM America/JNL High Yield Bond Series -- 0.90%; PPM America/JNL Money
Market Series -- 0.76%; Salomon Brothers/JNL Global Bond Series -- 1.07%;
Salomon Brothers/JNL U.S. Government & Quality Bond Series -- 0.96%; T. Rowe
Price/JNL Established Growth Series -- 0.98%; T. Rowe Price/JNL International
Equity Investment Series -- 1.32%; and T. Rowe Price/JNL Mid-Cap Growth Series
- -- 1.06%. Voluntary reimbursements to these Series may be modified or
discontinued at any time.
Examples
You would pay the following expenses on a $1,000 investment, assuming a 5%
annual return on assets:
(a) upon surrender at the end of each time period;
(b) if the contract is not surrendered.
<TABLE>
<CAPTION>
Time Periods
- ------------------------------------------------------------------------------------------------------------
1 3
year years
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
JNL Aggressive Growth Portfolio (a) $96 $129
(b) 26 79
JNL Capital Growth Portfolio (a) 96 129
(b) 26 79
JNL Global Equities Portfolio (a) 96 131
(b) 26 81
JNL/Alger Growth Portfolio (a) 96 130
(b) 26 80
JNL/Putnam Growth Portfolio (a) 95 128
(b) 25 78
JNL/Putnam Value Equity Portfolio (a) 95 128
(b) 25 78
PPM America/JNL Balanced Portfolio (a) 94 123
(b) 24 73
PPM America/JNL High Yield Bond Portfolio (a) 94 123
(b) 24 73
PPM America/JNL Money Market Portfolio (a) 92 118
(b) 22 68
Salomon Brothers/JNL Global Bond Portfolio (a) 95 126
(b) 25 76
Salomon Brothers/JNL U.S. Government & Quality Bond Portfolio (a) 93 122
(b) 23 72
T. Rowe Price/JNL Established Growth Portfolio (a) 95 126
(b) 25 76
T. Rowe Price/JNL International Equity Investment Portfolio (a) 97 134
(b) 27 84
T. Rowe Price/JNL Mid-Cap Growth Portfolio (a) 96 129
(b) 26 79
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Explanation of Fee Table and Examples
The purpose of the Fee Table and Examples is to assist you in understanding the
various costs and expenses that you will bear directly or indirectly. The Fee
Table reflects the expenses of the separate account and the series underlying
the investment portfolios. Premium taxes may also apply.
The Examples reflect the contract maintenance charge which is determined by
dividing the total amount of such charges expected to be collected during the
year by the total estimated average net assets of the investment portfolios.
THE EXAMPLE DOES NOT REPRESENT PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE
GREATER OR LESS THAN THOSE SHOWN.
Financial Statements
The financial statements of Jackson National Life Insurance Company of New York
for the years ended December 31, 1997 and December 31, 1996, and the applicable
auditor's reports thereon are contained in the SAI.
<PAGE>
THE ANNUITY CONTRACT
The fixed and variable annuity contract offered by Jackson National NY is a
contract between you, the owner, and Jackson National Life Insurance Company of
New York, an insurance company. The contract provides a means for investing on a
tax-deferred basis in guaranteed accounts and investment portfolios. The
contract is intended for retirement savings or other long-term investment
purposes and provides for a death benefit and guaranteed income options.
The contract, like all deferred annuity contracts, has two phases: the
accumulation phase and the income phase. During the accumulation phase, earnings
accumulate on a tax-deferred basis and are taxed as income when you make a
withdrawal.
The contract offers guaranteed accounts. The guaranteed accounts offer an
interest rate that is guaranteed by Jackson National NY for the duration of the
guaranteed account period. While your money is in a guaranteed account, the
interest your money earns and your principal are guaranteed by Jackson National
NY. The value of a guaranteed account may be reduced if you make a withdrawal
prior to the end of the guaranteed account period, but will never be less than
the premium payments accumulated at 3% per year. If you choose to have your
annuity payments come from the guaranteed accounts, your payments will remain
level throughout the entire income phase.
The contract also offers investment portfolios. The investment portfolios are
designed to offer a higher return than the guaranteed accounts. HOWEVER, THIS IS
NOT GUARANTEED. IT IS POSSIBLE FOR YOU TO LOSE YOUR MONEY. If you put money in
the investment portfolios, the amount of money you are able to accumulate in
your contract during the accumulation phase depends upon the performance of the
investment portfolios you select. The amount of the income payments you receive
during the income phase also will depend, in part, on the performance of the
investment portfolios you choose for the income phase.
As the owner, you can exercise all the rights under the contract. You and your
spouse can be joint owners. You can assign the contract at any time during your
lifetime but Jackson National NY will not be bound until we receive written
notice of the assignment.
THE COMPANY
Jackson National NY is a stock life insurance company organized under the laws
of the state of New York in July 1995. Its legal domicile and principal business
address is 2900 Westchester Avenue, Purchase, New York 10577. Jackson National
NY is admitted to conduct life insurance and annuity business in the states of
New York and Michigan. Jackson National NY is ultimately a wholly-owned
subsidiary of Prudential Corporation plc (London, England).
THE GUARANTEED ACCOUNTS
If you select a guaranteed account, your money will be placed with Jackson
National NY's other assets. The guaranteed accounts are not registered with the
SEC and the SEC does not review the information we provide to you about the
guaranteed accounts. Your contract contains a more complete description of the
guaranteed accounts.
THE SEPARATE ACCOUNT
The JNLNY Separate Account I was established by Jackson National NY on September
12, 1997, pursuant to the provisions of New York law, as a segregated asset
account of the company. The separate account meets the definition of a "separate
account" under the federal securities laws and is registered with the SEC as a
unit investment trust under the Investment Company Act of 1940, as amended.
The assets of the separate account legally belong to Jackson National NY and the
obligations under the contracts are obligations of Jackson National NY. However,
the contract assets in the separate account are not chargeable with liabilities
arising out of any other business Jackson National NY may conduct. All of the
income, gains and losses resulting from these assets are credited to or charged
against the contracts and not against any other contracts Jackson National NY
may issue.
The separate account is divided into investment portfolios. Jackson National NY
does not guarantee the investment performance of the separate account or the
investment portfolios.
INVESTMENT PORTFOLIOS
You can put money in any or all of the investment portfolios. The investment
portfolios purchase shares of the following series of the JNL Series Trust:
JNL Aggressive Growth Series JNL Capital Growth Series JNL Global Equities
Series JNL/Alger Growth Series JNL/Putnam Growth Series JNL/Putnam Value Equity
Series PPM America/JNL Balanced Series
PPM America/JNL High Yield Bond Series
PPM America/JNL Money Market Series
Salomon Brothers/JNL Global Bond Series
Salomon Brothers/JNL U.S. Government & Quality Bond Series
T. Rowe Price/JNL Established Growth Series
T. Rowe Price/JNL International Equity Investment Series
T. Rowe Price/JNL Mid-Cap Growth Series
The series are described in the attached JNL Series Trust prospectus. Jackson
National Financial Services, Inc. serves as investment adviser for all of the
series. Janus Capital Corporation serves as sub-adviser for the JNL Aggressive
Growth, JNL Capital Growth and JNL Global Equities Series; Fred Alger
Management, Inc. serves as sub-adviser for the JNL/Alger Growth Series; Putnam
Investment Management, Inc. serves as sub-adviser for the JNL/Putnam Growth and
JNL/Putnam Value Equity Series; PPM America, Inc. serves as sub-adviser for the
PPM America/JNL Balanced, PPM America/JNL High Yield Bond and PPM America/JNL
Money Market Series; Salomon Brothers Asset Management Inc serves as sub-adviser
for the Salomon Brothers/JNL Global Bond and Salomon Brothers/JNL U.S.
Government & Quality Bond Series; T. Rowe Price Associates, Inc. serves as
sub-adviser for the T. Rowe Price/JNL Established Growth and T. Rowe Price/JNL
Mid-Cap Growth Series; and Rowe Price-Fleming International, Inc. serves as
sub-adviser for the T. Rowe Price/JNL International Equity Investment Series.
Depending on market conditions, you can make or lose money in any of the
investment portfolios. You should read the prospectus for the series carefully
before investing. Additional investment portfolios may be available in the
future.
Voting Rights
To the extent required by law, Jackson National NY will obtain from you and
other owners of the contracts instructions as to how to vote when the series
solicits proxies in conjunction with a vote of shareholders. When Jackson
National NY receives instructions, we will vote all the shares Jackson National
NY owns in proportion to those instructions.
Substitution
Jackson National NY may be required to substitute an investment portfolio with
another portfolio. We will not do this without the prior approval of the SEC.
Jackson National NY will give you notice of our intent to do this.
CONTRACT CHARGES
There are charges and other expenses associated with the contracts that reduce
the return on your investment in the contract. These charges may be a lesser
amount where required by state law or as described below, but will not be
increased. These charges and expenses are:
Insurance Charges
Each day Jackson National NY makes a deduction for its insurance charges. We do
this as part of our calculation of the value of the accumulation units and
annuity units. On an annual basis, this charge equals 1.40% of the daily value
of the contracts invested in an investment portfolio, after expenses have been
deducted. This charge is for the mortality risks, expense risks and
administrative expenses assumed by Jackson National NY.
Contract Maintenance Charge
During the accumulation phase, Jackson National NY deducts a $30 annual contract
maintenance charge on each anniversary of the date on which your contract was
issued. If you make a complete withdrawal from your contract, the contract
maintenance charge will also be deducted. This charge is for administrative
expenses.
Jackson National NY will not deduct this charge, if when the deduction is to be
made, the value of your contract is $50,000 or more. Jackson National NY may
discontinue this practice at any time.
Transfer Fee
A transfer fee of $25 will apply to transfers in excess of 15 in a contract
year. Jackson National NY may waive the transfer fee in connection with
pre-authorized automatic transfer programs, or may charge a lesser fee where
required by state law.
Withdrawal Charge
During the accumulation phase, you can make withdrawals from your contract. At
any time during the accumulation phase, you may withdraw premiums which are not
subject to a withdrawal charge (premiums in your annuity for seven years or
longer and not previously withdrawn). Once every year, you may withdraw the
greater of earnings or 10% of premiums paid (not yet withdrawn). Withdrawals in
excess of that will be charged a withdrawal charge starting at 7% in the first
year and declining 1% a year to 0% after 7 years. The withdrawal charge
compensates us for costs associated with selling the contracts.
For purposes of the withdrawal charge, Jackson National NY treats withdrawals as
coming from the oldest premium payment first. If you make a full withdrawal, the
withdrawal charge is based on premiums remaining in the contract. If you
withdraw only part of the value of your contract, we deduct the withdrawal
charge from the remaining value in your contract.
NOTE: For tax purposes, withdrawals are considered to have come from the last
money into the contract. Thus, for tax purposes, earnings are considered to come
out first.
Jackson National NY does not assess the withdrawal charge on any payments paid
out as (1) income payments, (2) death benefits or (3) withdrawals necessary to
satisfy the minimum distribution requirements of the Internal Revenue Code.
Jackson National NY may reduce or eliminate the amount of the withdrawal charge
when the contract is sold under circumstances which reduce its sales expense.
Some examples are: the purchase of a contract by a large group of individuals or
an existing relationship between Jackson National NY and a prospective
purchaser. Jackson National NY will not deduct a withdrawal charge under a
contract issued to an officer, director, agent or employee of Jackson National
NY or any of its affiliates.
Other Expenses
Jackson National NY pays the operating expenses of the Separate Account.
There are deductions from and expenses paid out of the assets of the series.
These expenses are described in the attached JNL Series Trust prospectus.
Premium Taxes
Some states and other governmental entities charge premium taxes or other
similar taxes. Jackson National NY is responsible for the payment of these taxes
and may make a deduction from the value of the contract for them.
Premium taxes generally range from 0% to 4% depending on the state.
Income Taxes
Jackson National NY will make a deduction from the contract for any income taxes
which it incurs because of the contract. Currently, we are not making any such
deduction.
Distribution of Contracts
Jackson National Financial Services, Inc. is located at 5901 Executive Drive,
Lansing, Michigan 48911 and serves as the distributor of the contracts. Jackson
National Financial Services, Inc. and Jackson National NY are wholly-owned
subsidiaries of Jackson National Life Insurance Company.
Commissions will be paid to broker-dealers who sell the contracts. While
commissions may vary, they are not expected to exceed 8% of any premium payment.
Under certain circumstances, Jackson National NY may pay persistency bonuses, in
addition to the standard commissions. Jackson National NY may use any of its
corporate assets to cover the cost of distribution, including any profit from
the contract insurance charges.
PURCHASES
You can buy a contract for $5,000 or more under most circumstances ($2,000 or
more for a qualified plan contract). The maximum we accept without our prior
approval is $1 million.
You can add $500 ($50 under the automatic payment plan) at any time during the
accumulation phase.
The minimum that you may allocate to a guaranteed account or investment
portfolio is $100. There is a $100 minimum balance requirement for each
guaranteed account and investment portfolio.
When you purchase a contract, Jackson National NY will allocate your premium to
one or more of the guaranteed accounts and/or the investment portfolios you have
selected. Your allocations must be in whole percentages ranging from 0% to 100%.
Jackson National NY will allocate additional premiums in the same way unless you
tell us otherwise.
Jackson National NY will issue your contract and allocate your first premium
within 2 business days after we receive your complete application and first
premium. If your application is not complete, we will contact you to get the
necessary information. If for some reason Jackson National NY is unable to
complete this process within 5 business days, we will either return your money
or get your permission to keep it until we receive all of the necessary
information.
The Jackson National NY business day closes when the New York Stock Exchange
closes, usually 4:00 p.m. Eastern time.
Accumulation Units
The contract value allocated to the investment portfolios will go up or down
depending on the performance of the portfolios. In order to keep track of the
value of your contract, Jackson National NY uses a unit of measure called an
accumulation unit. (An accumulation unit is similar to a share of a mutual
fund.) During the income phase it is called an annuity unit.
Every business day Jackson National NY determines the value of an accumulation
unit for each of the investment portfolios. This is done by:
1. determining the total amount of money invested in the particular
investment portfolio;
2. subtracting any insurance charges and any other charges, such as
taxes;
3. dividing this amount by the number of outstanding accumulation units.
The value of an accumulation unit may go up or down from day to day.
When you make a premium payment, Jackson National NY credits your contract with
accumulation units. The number of accumulation units credited is determined at
the close of Jackson National NY's business day by dividing the amount of the
premium allocated to any investment portfolio by the value of the accumulation
unit for that investment portfolio.
TRANSFERS
You can transfer money between guaranteed accounts and investment portfolios
during the accumulation phase. During the income phase, you can transfer money
between investment portfolios.
You can make 15 transfers every year during the accumulation phase without
charge. The minimum amount that you can transfer is $100 (unless the transfer is
made under a pre-authorized automatic transfer program). If the remaining value
in a guaranteed account or investment portfolio would be less than $100 after a
transfer, you must transfer the entire value or you may not make the transfer.
Telephone Transactions
If you elect the telephone transfer privilege on your application, you may make
transfers by telephone. You must complete your telephone call authorizing a
transfer by the close of Jackson National NY's business day (usually 4:00 p.m.
Eastern time) in order to receive that day's accumulation unit value for a
investment portfolio.
Jackson National NY has procedures which are designed to provide reasonable
assurance that telephone authorizations are genuine. Our procedures include
requesting identifying information and tape recording telephone communications.
Jackson National NY and its affiliates disclaim all liability for any claim,
loss or expense resulting from any alleged error or mistake in connection with a
telephone transfer which was not properly authorized by you. However, if Jackson
National NY fails to employ reasonable procedures to ensure that all telephone
transfers are properly authorized, we may be held liable for such losses.
Jackson National NY reserves the right to modify or discontinue at any time and
without notice the acceptance of instructions from someone other than you and/or
the telephone transfer privilege.
ACCESS TO YOUR MONEY
You can have access to the money in your contract: (1) by making either a
partial or complete withdrawal or (2) by electing to receive income payments.
Your beneficiary can have access to the money in your contract when a death
benefit is paid.
When you make a complete withdrawal you will receive the value of the contract
on the day you made the withdrawal less any premium tax, less any contract
maintenance charge, and less any withdrawal charge. Except in connection with
the systematic withdrawal program, you must withdraw at least $500 or, if less,
the entire amount in the guaranteed account or investment portfolio from which
you are making the withdrawal. After your withdrawal, you must have at least
$100 left in the guaranteed account or investment portfolio.
INCOME TAXES, TAX PENALTIES AND CERTAIN RESTRICTIONS MAY APPLY TO ANY WITHDRAWAL
YOU MAKE.
There are limitations on withdrawals from a qualified plan referred to as a
403(b) annuity. See "Taxes."
Systematic Withdrawal Program
You can arrange to have money automatically sent to you periodically while your
contract is still in the accumulation phase. You will have to pay taxes on money
you receive and withdrawals you make before you reach 59 1/2 may be subject to a
10% tax penalty.
We reserve the right to charge a fee for participation or to discontinue
offering this program in the future.
Suspension of Withdrawals
Jackson National NY may be required to suspend or delay withdrawals from a
contract when:
1. the New York Stock Exchange is closed (other than customary weekend
and holiday closings);
2. trading on the New York Stock Exchange is restricted;
3. an emergency exists so that it is not reasonably practicable to
dispose of shares of the investment portfolios or determine investment
portfolio values;
4. the SEC, by order, may permit for the protection of owners.
Jackson National NY has reserved the right to defer payment for a withdrawal or
transfer from the guaranteed accounts for the period permitted by law, but not
more than six months.
INCOME PAYMENTS (THE INCOME PHASE)
The income phase occurs when you begin receiving regular payments from your
contract. The income date is the month and year in which those payments begin.
The income date must be at least one year after your contract is issued. You can
choose the income date and an income option. The income options are described
below.
If you do not choose an income option, we will assume that you selected Option 3
which provides a life annuity with 120 months of guaranteed payments.
You can change the income date or income option at any time before the income
date. You must give us 7 days notice. Income payments must begin by your 90th
birthday under a non-qualified contract (or an earlier date under a qualified
contract if required by law).
At the income date, you can choose whether payments will come from the
guaranteed accounts, the investment portfolios or both. Unless you tell us
otherwise, your income payments will be based on the investment allocations that
were in place on the income date.
If you choose to have any portion of your annuity payments come from the
investment portfolio(s), the dollar amount of your payment will depend upon
three things: 1) the value of your contract in the investment portfolio(s) on
the income date, 2) the 3% assumed investment rate used in the annuity table for
the contract, and 3) the performance of the investment portfolios you selected.
If the actual performance exceeds the 3% assumed rate, your income payments will
increase. Similarly, if the actual rate is less than 3%, your income payments
will decrease.
You can choose to have income payments made monthly, quarterly, semi-annually,
or annually. However, if you have less than $2,000 to apply toward an income
option and state law permits, Jackson National NY may provide your payment in a
single lump sum. Likewise, if your first income payment would be less than $20
and state law permits, Jackson National NY may set the frequency of payments so
that the first payment would be at least $20.
Income Options
The annuitant is the person whose life we look to when we make income payments.
(Each description assumes that you are the owner and annuitant.)
OPTION 1 - Life Income. This income option provides monthly payments for your
life.
OPTION 2 - Joint and Survivor Annuity. This income option provides monthly
payments for your life and for the life of another person (usually your spouse)
selected by you.
OPTION 3 - Life Annuity With 120 or 240 Monthly Payments Guaranteed. This income
option provides monthly payments for your life, but with payments continuing to
your beneficiary for the remainder of 10 or 20 years (as you select) if you die
before the end of the selected period.
OPTION 4 - Income for a Specified Period. This income option provides monthly
payments for any number of years from 5 to 30.
ADDITIONAL OPTIONS - Other income options may be made available by Jackson
National NY.
If you choose an income option for which payments are based on life expectancy,
you cannot make a withdrawal during the income phase.
DEATH BENEFIT
Death of Owner Before the Income Date
If you die before moving to the income phase, the person you have chosen as your
beneficiary will receive a death benefit. If you have a joint owner, the death
benefit will be paid when the first joint owner dies and the surviving joint
owner will be treated as the beneficiary. Any other beneficiary designated will
be treated as a contingent beneficiary.
The death benefit equals: (a) current contract value or (b) the total premiums
(less withdrawals, withdrawal charges and premium taxes) or (c) the contract
value at the end of the 7th contract year PLUS all premiums made since the 7th
year (less withdrawals, withdrawal charges and premium taxes) -- whichever is
GREATEST. The death benefit under (c) will never exceed 250% of premiums paid,
less partial withdrawals.
The entire death benefit must be paid within 5 years of the date of death unless
the beneficiary elects to have the death benefit payable under an income option.
The death benefit payable under an income option must be paid over the
beneficiary's lifetime or for a period not extending beyond the beneficiary's
life expectancy. Payments must begin within one year of the date of death.
Unless the beneficiary chooses to receive the death benefit in a single sum, the
beneficiary must elect an income option within the 60 day period beginning with
the date Jackson National NY receives proof of death. If the beneficiary chooses
to receive the death benefit in a single sum and all the necessary requirements
are met, Jackson National NY will pay the death benefit within 7 days. If the
beneficiary is your spouse, he/she can continue the contract in his/her own name
at the then current contract value.
Death of Owner After the Income Date
If you or a joint owner die after moving to the income phase, any remaining
payments under the income option elected will continue at least as rapidly as
under the method of distribution in effect at the date of death.
Death of Annuitant
If the annuitant is not an owner or joint owner and the annuitant dies before
the income date, you can name a new annuitant. If you do not name a new
annuitant within 30 days of the death of the annuitant, you will become the
annuitant. However, if the owner is a non-natural person (for example, a
corporation), then the death of the annuitant will be treated as the death of
the owner, and a new annuitant may not be named.
If the annuitant dies after the income date, the death benefit, if any, will be
as provided for in the income option selected. Death benefits will be paid at
least as rapidly as under the method of distribution in effect at the
annuitant's death.
TAXES
The following is general information and is not intended as tax advice to any
individual. You should consult your own tax adviser.
The Internal Revenue Code (Code) provides that you will not be taxed on the
earnings on the money held in your contract until you take money out (this is
referred to as tax - deferral). There are different rules as to how you will be
taxed depending on how you take the money out and the type of contract you have
(non-qualified or qualified).
Non-Qualified Contracts - General Taxation
You will not be taxed on increases in the value of your contract until a
distribution (either as a withdrawal or as an income payment) occurs. When you
make a withdrawal you are taxed on the amount of the withdrawal that is
earnings. For income payments, a portion of each income payment is treated as a
partial return of your premium and will not be taxed. The remaining portion of
the income payment will be treated as ordinary income. How the income payment is
divided between taxable and non-taxable portions depends on the period over
which income payments are expected to be made. Income payments received after
you have received all of your premium are treated as income.
If a non-qualified contract is owned by a non-natural person (e.g., corporation
or certain other entities other than tax-qualified trusts), the contract will
generally not be treated as an annuity for tax purposes.
Qualified and Non-Qualified Contracts
If you purchase the contract as an individual and not under any pension plan,
specially sponsored program or an individual retirement annuity, your contract
is referred to as a non-qualified contract.
If you purchase the contract under a pension plan, specially sponsored program,
or an individual retirement annuity, your contract is referred to as a qualified
contract. Examples of qualified plans are: Individual Retirement Annuities
(IRAs), Tax-Sheltered Annuities (sometimes referred to as 403(b) contracts),
H.R. 10 Plans (sometimes referred to as Keogh Plans), and pension and
profit-sharing plans, which include 401(k) plans.
Withdrawals - Non-Qualified Contracts
If you make a withdrawal from your contract, the Code treats the withdrawal as
first coming from earnings and then from your premium payments. Withdrawn
earnings are includible in income.
The Code also provides that any amount received under an annuity contract which
is included in income may be subject to a 10% penalty. Some withdrawals will be
exempt from the penalty. They include any amounts: (1) paid on or after the
taxpayer reaches age 59 1/2; (2) paid after you die; (3) paid if the taxpayer
becomes totally disabled (as that term is defined in the Code); (4) paid in a
series of substantially equal payments made annually (or more frequently) under
a lifetime annuity; (5) paid under an immediate annuity; or (6) which come from
premiums made prior to August 14, 1982.
Withdrawals - Qualified Contracts
There are special rules that govern qualified contracts. We have provided
additional discussion in the Statement of Additional Information.
Withdrawals - Tax-Sheltered Annuities
The Code limits the withdrawal of premiums from certain Tax-Sheltered Annuities.
Withdrawals can only be made when an owner: (1) reaches age 59 1/2; (2) leaves
his/her job; (3) dies; (4) becomes disabled (as that term is defined in the
Code); or (5) in the case of hardship. However, in the case of hardship, the
owner can only withdraw the premium and not any earnings.
Withdrawals - Roth IRAs
Beginning in 1998, individuals may purchase a new type of non-deductible IRA,
known as a Roth IRA. Qualified distributions from Roth IRAs are entirely tax
free. A qualified distribution requires that the individual has held the Roth
IRA for at least five years and, in addition, that the distribution is made
either after the individual reaches age 59 1/2, on account of the individual's
death or disability, or as qualified first-time home purchase, subject to
$10,000 lifetime maximum, for the individual, or for a spouse, child,
grandchild, or ancestor.
Withdrawals - Investment Adviser Fees
The Internal Revenue Service has, through a series of Private Letter Rulings,
held that the payment of investment adviser fees from an IRA or a Tax-Sheltered
Annuity is permissible under certain circumstances and will not be considered a
distribution for income tax purposes. The Rulings require that in order to
receive this favorable tax treatment, the annuity contract must, under a written
agreement, be solely liable (not jointly with the contract owner) for payment of
the adviser's fee and the fee must actually be paid from the annuity contract to
the adviser. Withdrawals from non-qualified contracts for the payment of
investment adviser fees will be considered distributions from the contract.
Assignment
An assignment may be a taxable event. If the contract is issued pursuant to a
qualified plan, there may be limitations on your ability to assign the contract.
Diversification
The Code provides that the underlying investments for a variable annuity must
satisfy certain diversification requirements in order to be treated as an
annuity contract. Jackson National NY believes that the underlying investments
are being managed so as to comply with these requirements.
Neither the Code nor the Internal Revenue Service Regulations issued to date
provide guidance as to the circumstances under which you, because of the degree
of control you exercise over the underlying investments, and not Jackson
National NY would be considered the owner of the shares of the investment
portfolios. If this occurs, it will result in the loss of the favorable tax
treatment for the contract.
It is unknown to what extent owners are permitted to select investment
portfolios, to make transfers among the investment portfolios or the number and
type of investment portfolios from which owners may select. If any guidance is
provided which is considered a new position, then the guidance would generally
be applied prospectively. However, if such guidance is considered not to be a
new position, it may be applied retroactively. This would mean that you, as the
owner of the contract, could be treated as the owner of the investment
portfolios. Due to the uncertainty in this area, Jackson National NY reserves
the right to modify the contract in an attempt to maintain favorable tax
treatment.
OTHER INFORMATION
Dollar Cost Averaging
You can arrange to automatically have a regular amount of money periodically
transferred into the investment portfolios. This theoretically gives you a lower
average cost per unit over time than you would receive if you made a one time
purchase.
To participate in this program, you must have a total contract value of at least
$15,000 (unless we waive this requirement). Certain other restrictions may
apply.
Jackson National NY does not currently charge for participation in this program.
We may do so in the future.
Rebalancing
You can arrange to have Jackson National NY automatically reallocate money
between investment portfolios periodically to keep the blend you select.
Jackson National NY does not currently charge for participation in this program.
We may do so in the future.
Free Look
You may return your contract to the selling agent or to Jackson National NY
within twenty days after receiving it. Jackson National NY will return the
contract value in the investment portfolios plus any fees and expenses deducted
from the premium allocated to the investment portfolios plus the full amount of
premium you allocated to the guaranteed accounts. We will determine the contract
value in the investment portfolios as of the date you mail the contract to us or
the date you return it to the selling agent.
Advertising
From time to time, Jackson National NY may advertise several types of
performance for the investment portfolios. Total return is the overall change in
the value of an investment in an investment portfolio over a given period of
time. Standardized average annual total return is calculated in accordance with
SEC guidelines. Non-standardized total return may be for periods other than
those required or may otherwise differ from standardized average annual total
return. Yield refers to the income generated by an investment over a given
period of time.
Performance will be calculated by determining the percentage change in the value
of an accumulation unit by dividing the increase (decrease) for that unit by the
value of the accumulation unit at the beginning of the period. Performance will
reflect the deduction of the insurance charges and may reflect the deduction of
the contract maintenance charge and withdrawal charge. The deduction of the
contract maintenance and/or the withdrawal charge would reduce the percentage
increase or make greater any percentage decrease.
If a series has been in existence for a longer period than the investment
portfolio, performance will be based upon the period quoted.
Market Timing and Asset Allocation Services
Market timing and asset allocation services offered by third parties must comply
with Jackson National NY's administrative systems, rules and procedures.
Modification of the Contract
Only the President, Vice President, Secretary or Assistant Secretary of Jackson
National NY may approve a change to or waive a provision of the contract. Any
change or waiver must be in writing. Jackson National NY may change the terms of
the contract in order to comply with changes in applicable law, or otherwise as
deemed necessary by Jackson National NY.
Legal Proceedings
There are no material legal proceedings, other than ordinary routine litigation
incidental to the business, to which Jackson National Life Insurance Company of
New York, Jackson National Financial Services, Inc., and the JNLNY Separate
Account I are parties.
Questions
If you have questions about your contract, you may call or write to us at:
Jackson National Life NY Annuity Service Center(800) 599-5651, P.O. Box 378002,
Denver, Colorado 80237-8002 or Institutional Marketing Group Service Center:
(800) 777-7779, P.O. Box 30386, Lansing, Michigan 48909-9692.
<PAGE>
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
General Information and History ............................................ 2
Services ................................................................... 2
Purchase of Securities Being Offered ....................................... 2
Underwriters ............................................................... 2
Calculation of Performance ................................................. 3
Additional Tax Information ................................................. 6
Income Payments; Net Investment Factor .....................................15
Financial Statements .......................................................16
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
April 1, 1998
INDIVIDUAL DEFERRED FIXED AND VARIABLE ANNUITY CONTRACTS
ISSUED BY THE JNLNY SEPARATE ACCOUNT I
OF JACKSON NATIONAL LIFE INSURANCE COMPANY OF NEW YORK
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 April 1, 1998. The
Prospectus may be obtained from Jackson National Life Insurance Company of New
York by writing P.O. Box 378002, Denver, Colorado 80237-8002, or calling
1-800-599-5651.
TABLE OF CONTENTS
Page
----
General Information and History...........................................2
Services..................................................................2
Purchase of Securities Being Offered......................................2
Underwriters..............................................................2
Calculation of Performance................................................3
Additional Tax Information............................................... 6
Income Payments; Net Investment Factor ................................. 15
Financial Statements ................................................... 16
<PAGE>
General Information and History
JNLNY Separate Account I (Separate Account) is a separate investment
account of Jackson National Life Insurance Company of New York (Jackson National
NY). In September 1997, the company changed its name from First Jackson National
Life Insurance Company to its present name. Jackson National NY is a
wholly-owned subsidiary of Jackson National Life Insurance Company, and is
ultimately a wholly-owned subsidiary of Prudential Corporation plc, London,
England, the largest life insurance company in the United Kingdom.
Services
Jackson National NY has responsibility for administration of the contracts
and the Separate Account. We maintain records of the name, address, taxpayer
identification number and other pertinent information for each contract owner
and the number and type of contracts issued to each contract owner, and records
with respect to the value of each contract.
Jackson National NY is also the custodian of the assets of the Separate
Account.
Price Waterhouse LLP, 100 East Wisconsin Avenue, Milwaukee, Wisconsin
53202, audits and reports on Jackson National NY's financial statements,
including the financial statements of the Separate Account, and performs other
professional accounting, auditing and advisory services when engaged to do so by
Jackson National NY.
Blazzard, Grodd & Hasenauer, P.C. of Westport, Connecticut has provided
advice on certain matters relating to the federal securities and income tax laws
in connection with the contracts described in the Prospectus.
Purchase of Securities Being Offered
The contracts will be sold by licensed insurance agents in states where the
contracts may be lawfully sold. The agents will be registered representatives of
broker-dealers that are registered under the Securities Exchange Act of 1934 and
members of the National Association of Securities Dealers, Inc. (NASD).
Underwriters
The contracts are offered continuously and are distributed by Jackson
National Financial Services, Inc. (JNFSI), 5901 Executive Drive, Lansing,
Michigan 48911. JNFSI is a subsidiary of Jackson National Life Insurance
Company.
<PAGE>
Calculation of Performance
When Jackson National NY advertises performance for an investment portfolio
(except the PPM America/JNL Money Market Portfolio), we will include quotations
of standardized average annual total return to facilitate comparison with
standardized average annual total return advertised by other variable annuity
separate accounts. Standardized average annual total return for an investment
portfolio will be shown for periods beginning on the date the investment
portfolio first invested in the corresponding series. We will calculate average
annual standardized average annual total return according to the standard
methods prescribed by rules of the Securities and Exchange Commission.
Standardized average annual total return for a specific period is calculated by
taking a hypothetical $1,000 investment in an investment portfolio at the
offering on the first day of the period ("initial investment"), and computing
the ending redeemable value ("redeemable value") of that investment at the end
of the period. The redeemable value is then divided by the initial investment
and expressed as a percentage, carried to at least the nearest hundredth of a
percent. Standardized average annual total return is annualized and reflects the
deduction of the insurance charges and the contract maintenance charge. The
redeemable value also reflects the effect of any applicable withdrawal charge
that may be imposed at the end of the period. No deduction is made for premium
taxes which may be assessed by certain states.
Jackson National NY may also advertise non-standardized total return.
Non-standardized total return may be for periods other than those required to be
presented or may otherwise differ from standardized average annual total return.
Because the contract is designed for long term investment, non-standardized
total return that does not reflect the deduction of any applicable withdrawal
charge may be advertised. Reflecting the deduction of the withdrawal charge
decreases the level of performance advertised. Non-standardized total return may
also assume a larger initial investment which more closely approximates the size
of a typical contract.
The non-standardized average annual total returns that each investment
portfolio (except the PPM America/JNL Money Market Portfolio) would have
achieved if it had been invested in the corresponding series for the periods
indicated, calculated in a manner similar to standardized average annual total
return but assuming a hypothetical initial investment of $10,000 and without
deducting the withdrawal charge, are as follows:
<PAGE>
<TABLE>
<CAPTION>
One Year Period Commencement of
Ended December Operations to
31, 1997 December 31, 1997
-------- -----------------
<S> <C> <C>
JNL Aggressive Growth Portfolio* 11.03% 19.59%
JNL Capital Growth Portfolio* 13.40% 23.08%
JNL Global Equities Portfolio* 17.40% 28.81%
JNL/Alger Growth Portfolio** 24.44% 15.11%
JNL/ Putnam Growth Portfolio* 20.15% 27.49%
JNL/ Putnam Value Equity Portfolio* 20.11% 24.71%
PPM America/JNL Balanced Portfolio 16.77% 15.48%
PPM America/JNL High Yield Bond Portfolio* 13.31% 11.42%
Salomon Brothers/JNL Global Bond Portfolio* 9.07% 10.68%
Salomon Brothers/JNL U.S. Government & Quality
Bond Portfolio* 7.63% 5.61%
T. Rowe Price/JNL Established Growth Portfolio* 27.63% 26.49%
T. Rowe Price/JNL International Equity Investment Portfolio* 1.30% 7.48%
T. Rowe Price/JNL Mid-Cap Growth Portfolio* 16.55% 25.44%
</TABLE>
* Corresponding series commenced operations on May 15, 1995.
** Corresponding series commenced operations on October 16, 1995.
Standardized average annual total return quotations will be current to the
last day of the calendar quarter preceding the date on which an advertisement is
submitted for publication. Both standardized average annual total return
quotations and non-standardized total return quotations will be based on rolling
calendar quarters and will cover at least periods of one, five, and ten years,
or a period covering the time the investment portfolio has been in existence, if
it has not been in existence for one of the prescribed periods. If the
corresponding series has been in existence for longer than the investment
portfolio, the non-standardized total return quotations will show the investment
performance the investment portfolio would have achieved (reduced by the
applicable charges) had it been held in the series for the period quoted.
Standardized average annual total return is not available for periods before the
investment portfolio was in existence.
Quotations of standardized average annual total return and non-standardized
total return are based upon historical earnings and will fluctuate. Any
quotation of performance should not be considered a guarantee of future
performance. Factors affecting the performance of a series include general
market conditions, operating expenses and investment management. An owner's
withdrawal value upon surrender of a contract may be more or less than original
cost.
<PAGE>
Jackson National NY may advertise the current annualized yield for a 30-day
period for an investment portfolio. The annualized yield of an investment
portfolio refers to the income generated by the investment portfolio over a
specified 30-day period. Because this yield is annualized, the yield generated
by an investment portfolio during the 30-day period is assumed to be generated
each 30-day period. The yield is computed by dividing the net investment income
per accumulation unit earned during the period by the price per unit on the last
day of the period, according to the following formula:
a-b 6
YIELD = 2[(---+1) -1]
cd
Where:
a = net investment income earned during the
period by the Series attributable to shares
owned by the investment portfolio.
b = expenses for the investment portfolio
accrued for the period (net of
reimbursements).
c = the average daily number of accumulation
units outstanding during the period.
d = the maximum offering price per
accumulation unit on the last day of the
period.
Net investment income will be determined in accordance with rules
established by the Securities and Exchange Commission. Accrued expenses will
include all recurring fees that are charged to all contracts.
Because of the charges and deductions imposed by the Separate Account, the
yield for an investment portfolio will be lower than the yield for the
corresponding series. The yield on amounts held in the investment portfolios
normally will fluctuate over time. Therefore, the disclosed yield for any given
period is not an indication or representation of future yields or rates of
return. An investment portfolio's actual yield will be affected by the types and
quality of portfolio securities held by the series and the series operating
expenses.
Any current yield quotations of the PPM America/JNL Money Market Portfolio,
subject to Rule 482 of the Securities Act of 1933, will consist of a seven
calendar day historical yield, carried at least to the nearest hundredth of a
percent. We may advertise yield for the Portfolio based on different time
periods, but we will always accompany it with a yield quotation based on a seven
day calendar period.
The PPM America/JNL Money Market Portfolio's yield will be calculated by
determining the net change, exclusive of capital changes, in the value of a
hypothetical pre-existing account having a balance of one accumulation unit at
the beginning of the base period, subtracting a hypothetical charge reflecting
deductions from contracts, and dividing the net change in account value by the
value of the account at the beginning of the period to obtain a base period
return and multiplying the base period return by (365/7). The PPM America/JNL
Money Market Portfolio's effective yield is computed similarly but includes the
effect of assumed compounding on an annualized basis of the current yield
quotations of the Portfolio.
The PPM America/JNL Money Market Portfolio's yield and effective yield will
fluctuate daily. Actual yields will depend on factors such as the type of
instruments in the series' portfolio, portfolio quality and average maturity,
changes in interest rates, and the series' expenses. Although the investment
portfolio determines its yield on the basis of a seven calendar day period, it
may use a different time period on occasion. The yield quotes may reflect the
expense limitations described in the series' Prospectus or Statement of
Additional Information. There is no assurance that the yields quoted on any
given occasion will be maintained for any period of time and there is no
guarantee that the net asset values will remain constant. It should be noted
that neither a contract owner's investment in the PPM America/JNL Money Market
Portfolio nor that Portfolio's investment in the PPM America/JNL Money Market
Series, is guaranteed or insured. Yields of other money market funds may not be
comparable if a different base or another method of calculation is used.
Additional Tax Information
NOTE: INFORMATION CONTAINED HEREIN SHOULD NOT BE SUBSTITUTED FOR THE ADVICE
OF A PERSONAL TAX ADVISER. JACKSON NATIONAL NY DOES NOT MAKE ANY GUARANTEE
REGARDING THE TAX STATUS OF ANY CONTRACT OR ANY TRANSACTION INVOLVING THE
CONTRACTS. PURCHASERS BEAR THE COMPLETE RISK THAT THE CONTRACTS MAY NOT BE
TREATED AS "ANNUITY CONTRACTS" UNDER FEDERAL INCOME TAX LAWS. IT SHOULD BE
FURTHER UNDERSTOOD THAT THE FOLLOWING DISCUSSION IS NOT EXHAUSTIVE AND THAT
SPECIAL RULES NOT DESCRIBED IN THIS PROSPECTUS MAY BE APPLICABLE IN CERTAIN
SITUATIONS. MOREOVER, NO ATTEMPT HAS BEEN MADE TO CONSIDER ANY APPLICABLE STATE
OR OTHER TAX LAWS.
General
Section 72 of the Internal Revenue Code of 1986, as amended (the "Code"),
governs taxation of annuities in general. An individual owner is not taxed on
increases in the value of a contract until distribution occurs, either in the
form of a withdrawal or as annuity payments under the annuity option elected.
For a withdrawal received as a total surrender (total redemption or a death
benefit), the recipient is taxed on the portion of the payment that exceeds the
cost basis of the contract. For a payment received as a partial withdrawal,
federal tax liability is determined on a last-in, first-out basis, meaning
taxable income is withdrawn before the cost basis of the contract is withdrawn.
For contracts issued in connection with non-qualified plans, the cost basis is
generally the premiums, while for contracts issued in connection with qualified
plans there may be no cost basis. The taxable portion of a withdrawal is taxed
at ordinary income tax rates. Tax penalties may also apply.
For annuity payments, a portion of each payment in excess of an exclusion
amount is includable in taxable income. The exclusion amount for payments based
on a fixed annuity option is determined by multiplying the payment by the ratio
that the cost basis of the contract (adjusted for any period certain or refund
feature) bears to the expected return under the contract. The exclusion amount
for payments based on a variable annuity option is determined by dividing the
cost basis of the contract (adjusted for any period certain or refund guarantee)
by the number of years over which the annuity is expected to be paid. Payments
received after the investment in the contract has been recovered (i.e. when the
total of the excludable amounts equals the investment in the contract) are fully
taxable. The taxable portion is taxed at ordinary income tax rates. For certain
types of qualified plans there may be no cost basis in the contract within the
meaning of Section 72 of the Code. Owners, annuitants and beneficiaries under
the contracts should seek competent financial advice about the tax consequences
of distributions.
Jackson National NY is taxed as a life insurance company under the Code.
For federal income tax purposes, the Separate Account is not a separate entity
from Jackson National NY and its operations form a part of Jackson National NY.
Withholding Tax on Distributions
The Code generally requires Jackson National NY (or, in some cases, a plan
administrator) to withhold tax on the taxable portion of any distribution or
withdrawal from a contract. For "eligible rollover distributions" from contracts
issued under certain types of qualified plans, 20% of the distribution must be
withheld, unless the payee elects to have the distribution "rolled over" to
another eligible plan in a direct transfer. This requirement is mandatory and
cannot be waived by the owner.
An "eligible rollover distribution" is the estimated taxable portion of any
amount received by a covered employee from a plan qualified under Section 401(a)
or 403(a) of the Code, or from a tax sheltered annuity qualified under Section
403(b) of the Code (other than (1) a series of substantially equal annuity
payments for the life (or life expectancy) of the employee, or joint lives (or
joint life expectancies) of the employee, and his or her designated beneficiary,
or for a specified period of ten years or more; and (2) minimum distributions
required to be made under the Code). Failure to "rollover" the entire amount of
an eligible rollover distribution (including an amount equal to the 20% portion
of the distribution that was withheld) could have adverse tax consequences,
including the imposition of a penalty tax on premature withdrawals, described
later in this section.
Withdrawals or distributions from a contract other than eligible rollover
distributions are also subject to withholding on the estimated taxable portion
of the distribution, but the owner may elect in such cases to waive the
withholding requirement. If not waived, withholding is imposed (1) for periodic
payments, at the rate that would be imposed if the payments were wages, or (2)
for other distributions, at the rate of 10%. If no withholding exemption
certificate is in effect for the payee, the rate under (1) above is computed by
treating the payee as a married individual claiming 3 withholding exemptions.
Generally, the amount of any payment of interest to a non-resident alien of
the United States shall be subject to withholding of a tax equal to thirty (30%)
percent of such amount or, if applicable, a lower treaty rate. A payment may not
be subject to withholding where the recipient sufficiently establishes that such
payment is effectively connected to the recipient's conduct of a trade or
business in the United States and such payment is included in recipient's gross
income.
Diversification -- Separate Account Investments
Section 817(h) of the Code imposes certain diversification standards on the
underlying assets of variable annuity contracts. The Code provides that a
variable annuity contract will not be treated as an annuity contract for any
period (and any subsequent period) for which the investments are not adequately
diversified, in accordance with regulations prescribed by the United States
Treasury Department ("Treasury Department"). Disqualification of the contract as
an annuity contract would result in imposition of federal income tax to the
owner with respect to earnings allocable to the contract prior to the receipt of
payments under the contract. The Code contains a safe harbor provision which
provides that annuity contracts such as the contracts meet the diversification
requirements if, as of the close of each calendar quarter, the underlying assets
meet the diversification standards for a regulated investment company, and no
more than 55% of the total assets consist of cash, cash items, U.S. government
securities and securities of other regulated investment companies.
The Treasury Department has issued Regulations establishing diversification
requirements for the investment portfolios underlying variable contracts. The
Regulations amplify the diversification requirements for variable contracts set
forth in the Code and provide an alternative to the safe harbor provision
described above. Under the Regulations, an investment portfolio will be deemed
adequately diversified if (1) no more than 55% of the value of the total assets
of the portfolio is represented by any one investment; (2) no more than 70% of
the value of the total assets of the portfolio is represented by any two
investments; (3) no more than 80% of the value of the total assets of the
portfolio is represented by any three investments; and (4) no more than 90% of
the value of the total assets of the portfolio is represented by any four
investments.
Jackson National NY intends that each series of the JNL Series Trust will
be managed by its respective investment adviser in such a manner as to comply
with these diversification requirements.
<PAGE>
The Treasury Department has indicated that the diversification Regulations
do not provide guidance regarding the circumstances in which contract owner
control of the investments of the Separate Account will cause the contract owner
to be treated as the owner of the assets of the Separate Account, thereby
resulting in the loss of favorable tax treatment of the contract. At this time
it cannot be determined whether additional guidance will be provided and what
standards may be contained in such guidance.
The amount of owner control which may be exercised under the contract is
different in some respects from the situations addressed in published rulings
issued by the Internal Revenue Service in which it was held that the policy
owner was not the owner of the assets of the separate account. It is unknown
whether these differences, such as the owner's ability to transfer among
investment choices or the number and type of investment choices available, would
cause the owner to be considered as the owner of the assets of the Separate
Account resulting in the imposition of federal income tax to the owner with
respect to earnings allocable to the contract prior to receipt of payments under
the contract.
In the event any forthcoming guidance or ruling is considered to set forth
a new position, such guidance or ruling will generally be applied only
prospectively. However, if such ruling or guidance was not considered to set
forth a new position, it may be applied retroactively resulting in the owner
being retroactively determined to be the owner of the assets of the Separate
Account.
Due to the uncertainty in this area, Jackson National NY reserves the right
to modify the contract in an attempt to maintain favorable tax treatment.
Multiple Contracts
The Code provides that multiple annuity contracts which are issued within a
calendar year to the same contract owner by one company or its affiliates are
treated as one annuity contract for purposes of determining the tax consequences
of any distribution. Such treatment may result in adverse tax consequences
including more rapid taxation of the distributed amounts from such multiple
contracts. Owners should consult a tax adviser prior to purchasing more than one
annuity contract in any calendar year.
Contracts Owned by Other than Natural Persons
Under Section 72(u) of the Code, the investment earnings on premiums for
contracts will be taxed currently to the owner if the owner is a non-natural
person, e.g., a corporation or certain other entities. Such contracts generally
will not be treated as annuities for federal income tax purposes. However, this
treatment is not applied to contracts held by a trust or other entity as an
agent for a natural person nor to contracts held by certain qualified plans.
Purchasers should consult their own tax counsel or other tax adviser before
purchasing a contract to be owned by a non-natural person.
Tax Treatment of Assignments
An assignment or pledge of a contract may have tax consequences, and may
also be prohibited by ERISA in some circumstances. Owners should, therefore,
consult competent legal advisers should they wish to assign or pledge their
contracts.
Qualified Plans
The contracts offered by the Prospectus are designed to be suitable for use
under various types of qualified plans. Taxation of owners in each qualified
plan varies with the type of plan and terms and conditions of each specific
plan. Owners, annuitants and beneficiaries are cautioned that benefits under a
qualified plan may be subject to the terms and conditions of the plan,
regardless of the terms and conditions of the contracts issued to fund the plan.
Tax Treatment of Withdrawals
Non-Qualified Plans
Section 72 of the Code governs treatment of distributions from annuity
contracts. It provides that if the contract value exceeds the aggregate Premiums
made, any amount withdrawn not in the form of an annuity payment will be treated
as coming first from the earnings and then, only after the income portion is
exhausted, as coming from the principal. Withdrawn earnings are included in a
taxpayer's gross income. Section 72 further provides that a 10% penalty will
apply to the income portion of any distribution. The penalty is not imposed on
amounts received: (1) after the taxpayer reaches 59 1/2; (2) upon the death of
the owner; (3) if the taxpayer is totally disabled as defined in Section
72(m)(7) of the Code; (4) in a series of substantially equal periodic payments
made at least annually for the life (or life expectancy) of the taxpayer or for
the joint lives (or joint life expectancies) of the taxpayer and his
beneficiary; (5) under an immediate annuity; or (6) which are allocable to
premium payments made prior to August 14, 1982.
Qualified Plans
In the case of a withdrawal under a qualified contract, a ratable portion
of the amount received is taxable, generally based on the ratio of the
individual's cost basis to the individual's total accrued benefit under the
retirement plan. Special tax rules may be available for certain distributions
from a qualified contract. Section 72(t) of the Code imposes a 10% penalty tax
on the taxable portion of any distribution from qualified retirement plans,
including contracts issued and qualified under Code Sections 401 (H.R. 10 and
Corporate Pension and Profit Sharing plans), 403(b) (tax-sheltered annuities)
and 408(b) (IRAs). To the extent amounts are not included in gross income
because they have been rolled over to an IRA or to another eligible qualified
plan, no tax penalty will be imposed.
The tax penalty will not apply to the following distributions: (1) if
distribution is made on or after the date on which the owner or annuitant (as
applicable) reaches age 59 1/2; (2) distributions following the death or
disability of the owner or annuitant (as applicable) (for this purpose
"disability" is defined in Section 72(m)(7) of the Code); (3) after separation
from service, distributions that are part of substantially equal periodic
payments made not less frequently than annually for the life (or life
expectancy) of the owner or annuitant (as applicable) or the joint lives (or
joint life expectancies) of such owner or annuitant (as applicable) and his or
her designated beneficiary; (4) distributions to an owner or annuitant (as
applicable) who has separated from service after he has attained age 55; (5)
distributions made to the owner or annuitant (as applicable) to the extent such
distributions do not exceed the amount allowable as a deduction under Code
Section 213 to the owner or annuitant (as applicable) for amounts paid during
the taxable year for medical care; (6) distributions made to an alternate payee
pursuant to a qualified domestic relations order; (7) distributions from an IRA
for the purchase of medical insurance (as described in Section 213(d)(1)(D) of
the Code) for the contract owner or annuitant (as applicable) and his or her
spouse and dependents if the contract owner or annuitant (as applicable) has
received unemployment compensation for at least 12 weeks(this exception will no
longer apply after the contract owner or annuitant (as applicable) has been
re-employed for at least 60 days); (8) distributions from an Individual
Retirement Annuity made to the owner or annuitant (as applicable) to the extent
such distributions do not exceed the qualified higher education expenses (as
defined in Section 72(t)(7) of the Code) of the owner or annuitant (as
applicable) for the taxable year; and (9) distributions from an Individual
Retirement Annuity made to the owner or annuitant (as applicable) which are
qualified first-time home buyer distributions (as defined in Section 72(t)(8) of
the Code). The exception stated in items (4) and (6) above do not apply in the
case of an IRA. The exception stated in (3) above applies to an IRA without the
requirement that there be a separation from service.
Withdrawals of amounts attributable to contributions made pursuant to a
salary reduction agreement (in accordance with Section 403(b)(11) of the Code)
are limited to the following: when the owner attains age 59 1/2, separates from
services, dies, becomes disabled (within the meaning of Section 72(m)(7) of the
Code), or in the case of hardship. Hardship withdrawals do not include any
earnings on salary reduction contributions. These limitations on withdrawals
apply to: (1) salary reduction contributions made after December 31, 1988; (2)
income attributable to such contributions; and (3) income attributable to
amounts held as of December 31, 1988. The limitations on withdrawals do not
affect rollovers or exchanges between certain qualified plans. Tax penalties may
also apply. While the foregoing limitations only apply to certain contracts
issued in connection with Section 403(b) qualified plans, all owners should seek
competent tax advice regarding any withdrawals or distributions.
The taxable portion of a withdrawal or distribution from contracts issued
under certain types of plans may, under some circumstances, be "rolled over"
into another eligible plan so as to continue to defer income tax on the taxable
portion. Effective January 1, 1993, such treatment is available for an "eligible
rollover distribution" made by certain types of plans (as described above under
"Taxes -- Withholding Tax on Distributions") that is transferred within 60 days
of receipt into another eligible plan or an IRA, or an individual retirement
account described in section 408(a) of the Code. Plans making such eligible
rollover distributions are also required, with some exceptions specified in the
Code, to provide for a direct transfer of the distribution to the transferee
plan designated by the recipient.
Amounts received from IRAs may also be rolled over into other IRAs,
individual retirement accounts or certain other plans, subject to limitations
set forth in the Code.
Generally, distributions from a qualified plan must commence no later than
April 1 of the calendar year following the year in which the employee attains
the later of age 70 1/2 or the date of retirement. In the case of an IRA,
distribution must commence no later than April 1 of the calendar year following
the year in which the owner attains age 70 1/2. Required distributions must be
over a period not exceeding the life or life expectancy of the individual or the
joint lives or life expectancies of the individual and his or her designated
beneficiary. If the required minimum distributions are not made, a 50% penalty
tax is imposed as to the amount not distributed.
Types of Qualified Plans
The following are general descriptions of the types of qualified plans with
which the contracts may be used. Such descriptions are not exhaustive and are
for general information purposes only. The tax rules regarding qualified plans
are very complex and will have differing applications depending on individual
facts and circumstances. Each purchaser should obtain competent tax advice prior
to purchasing a contract issued under a qualified plan.
Contracts issued pursuant to qualified plans include special provisions
restricting contract provisions that may otherwise be available and described in
this Prospectus. Generally, contracts issued pursuant to qualified plans are not
transferable except upon surrender or annuitization. Various penalty and excise
taxes may apply to contributions or distributions made in violation of
applicable limitations. Furthermore, certain withdrawal penalties and
restrictions may apply to surrenders from qualified plan contracts.
(a) H.R. 10 Plans
Section 401 of the Code permits self-employed individuals to
establish qualified plans for themselves and their employees, commonly
referred to as "H.R. 10" or "Keogh" Plans. Contributions made to the
plan for the benefit of the employees will not be included in the gross
income of the employees until distributed from the plan. The tax
consequences to owners may vary depending upon the particular plan
design. However, the Code places limitations and restrictions on all
plans on such items as: amounts of allowable contributions; form,
manner and timing of distributions; transferability of benefits;
vesting and non-forfeitability of interests; nondiscrimination in
eligibility and participation; and the tax treatment of distributions,
withdrawals and surrenders. Purchasers of contracts for use with an
H.R. 10 Plan should obtain competent tax advice as to the tax treatment
and suitability of such an investment.
(b) Tax-Sheltered Annuities
Section 403(b) of the Code permits the purchase of
"tax-sheltered annuities" by public schools and certain charitable,
educational and scientific organizations described in Section 501(c)
(3) of the Code. These qualifying employers may make contributions to
the contracts for the benefit of their employees. Such contributions
are not included in the gross income of the employee until the employee
receives distributions from the contract. The amount of contributions
to the tax-sheltered annuity is limited to certain maximums imposed by
the Code. Furthermore, the Code sets forth additional restrictions
governing such items as transferability, distributions,
non-discrimination and withdrawals. Employee loans are not allowed
under these contracts. Any employee should obtain competent tax advice
as to the tax treatment and suitability of such an investment.
(c) Individual Retirement Annuities
Section 408(b) of the Code permits eligible individuals to
contribute to an individual retirement program known as an "Individual
Retirement Annuity" ("IRA"). Under applicable limitations, certain
amounts may be contributed to an IRA which will be deductible from the
individual's gross income. These IRAs are subject to limitations on
eligibility, contributions, transferability and distributions. Sales of
contracts for use with IRAs are subject to special requirements imposed
by the Code, including the requirement that certain informational
disclosure be given to persons desiring to establish an IRA. Purchasers
of contracts to be qualified as IRAs should obtain competent tax advice
as to the tax treatment and suitability of such an investment.
(d) Corporate Pension and Profit-Sharing Plans
Sections 401(a) and 401(k) of the Code permit corporate
employers to establish various types of retirement plans for employees.
These retirement plans may permit the purchase of the contracts to
provide benefits under the plan. Contributions to the plan for the
benefit of employees will not be included in the gross income of the
employee until distributed from the plan. The tax consequences to
owners may vary depending upon the particular plan design. However, the
Code places limitations on all plans on such items as amount of
allowable contributions; form, manner and timing of distributions;
vesting and non-forfeitability of interests; nondiscrimination in
eligibility and participation; and the tax treatment of distributions,
transferability of benefits, withdrawals and surrenders. Purchasers of
contracts for use with corporate pension or profit sharing plans should
obtain competent tax advice as to the tax treatment and suitability of
such an investment.
(e) Non-Qualified Deferred Compensation Plans -- Section 457
Under Section 457 of the Code, governmental and certain other
tax-exempt employers may establish, for the benefit of their employees,
deferred compensation plans which may invest in annuity contracts. The
Code, as in the case of qualified plans, establishes limitations and
restrictions on eligibility, contributions and distributions. Under
these plans, contributions made for the benefit of the employees will
not be included in the employees' gross income until distributed from
the plan.
(f) Roth IRAs
Beginning in 1998, individuals may purchase a new type of
non-deductible IRA, known as a Roth IRA. Purchase payments for a Roth
IRA are limited to a maximum of $2,000 per year. Lower maximum
limitations apply to individuals with adjusted gross incomes between
$95,000 and $110,000 in the case of single taxpayers, between $150,000
and $160,000 in the case of married taxpayers filing joint returns, and
between $0 and $15,000 in the case of married taxpayers filing
separately. An overall $2,000 annual limitation continues to apply to
all of a taxpayer's IRA contributions, including Roth IRAs and non-Roth
IRAs.
Qualified distributions from Roth IRAs are entirely tax free.
A qualified distribution requires that the individual has held the Roth
IRA for at least five years and, in addition, that the distribution is
made either after the individual reaches age 59 1/2, on the
individual's death or disability, or as a qualified first-time home
purchase, subject to a $10,000 lifetime maximum, for the individual, a
spouse, child, grandchild, or ancestor. Any distribution which is not a
qualified distribution is taxable to the extent of earnings in the
distribution. Distributions are treated as made from contributions
first and therefore no distributions are taxable until distributions
exceed the amount of contributions to the Roth IRA. The 10% penalty tax
and the regular IRA exceptions to the 10% penalty tax apply to taxable
distributions from a Roth IRA.
Amounts may be rolled over from one Roth IRA to another Roth
IRA. Furthermore, an individual may make a rollover contribution from a
non-Roth IRA to a Roth IRA, unless the individual has adjusted gross
income over $100,000 or the individual is a married taxpayer filing a
separate return. The individual must pay tax on any portion of the IRA
being rolled over that represents income or a previously deductible IRA
contribution. However, for rollovers in 1998, the individual may pay
that tax ratably over the four taxable year periods beginning with the
tax year 1998. There are no similar limitations on rollovers from a
Roth IRA to another Roth IRA.
<PAGE>
Income Payments; Net Investment Factor
See "Income Payments (The Income Phase)" in the Prospectus.
The net investment factor is an index applied to measure the net investment
performance of an investment portfolio from one valuation date to the next.
Since the net investment factor may be greater or less than or equal to one, and
the factor that offsets the 3% investment rate assumed is slightly less than
one, the value of an annuity unit (which changes with the product of that
factor) and the net investment may increase, decrease or remain the same.
The net investment factor for any investment portfolio for any valuation
period is determined by dividing (a) by (b) and then subtracting (c) from the
result where:
(a) is the net result of:
(1) the net asset value of a series share held in the
investment portfolio determined as of the valuation
date at the end of the valuation period, plus
(2) the per share amount of any dividend or other
distribution declared by the series if the
"ex-dividend" date occurs during the valuation
period, plus or minus
(3) a per share credit or charge with respect to any
taxes paid or reserved for by Jackson National NY
during the valuation period which are determined by
Jackson National NY to be attributable to the
operation of the investment portfolio (no federal
income taxes are applicable under present law);
(b) is the net asset value of the series share held in the
investment portfolio determined as of the valuation date at
the end of the preceding valuation period; and
(c) is the asset charge factor determined by Jackson National NY
for the valuation period to reflect the charges for assuming
the mortality and expense risks and the administration charge.
<PAGE>
Jackson National Life Insurance
Company of New York
[LOGO](R)
Financial Statements
December 31, 1997
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Board of Directors and Stockholder of
Jackson National Life Insurance Company of New York
In our opinion, the accompanying balance sheet and the related income statement
and statements of stockholder's equity and of cash flows present fairly, in all
material respects, the financial position of Jackson National Life Insurance
Company of New York (the "Company") (a wholly-owned subsidiary of Jackson
National Life Insurance Company) at December 31, 1997 and 1996, and the results
of its operations and its cash flows for the year ended December 31, 1997, and
for the period May 22, 1996 (commencement of operations) through December 31,
1996, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ Price Waterhouse LLP
February 17, 1998
<PAGE>
Jackson National Life Insurance Company of New York
(a wholly owned subsidiary of Jackson National Life Insurance Company)
Financial Statements
Balance Sheet
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31,
Assets 1997 1996
------------------- ------------------
<S> <C> <C>
Investments:
Fixed maturities available for sale (amortized
cost: 1997, $8,242,773; 1996, $504,794) .... $8,344,128 $500,420
Cash and short-term investments ................ 93,886 7,719,490
---------- ----------
Total investments .......................... 8,438,014 8,219,910
Accrued investment income ...................... 68,991 40,606
Furniture and equipment ........................ 59,643 --
Deferred income taxes .......................... -- 1,531
State tax recoverable .......................... -- 3,500
Federal income tax recoverable ................. 8,393 22,600
---------- ----------
Total assets ............................... 8,575,041
8,288,147
========== ==========
Liabilities
General expenses payable .................... 15,000 1,000
State taxes payable ......................... 4,150 --
Deferred income taxes ....................... 35,474 --
Payable to parent ........................... 108,520 140,102
---------- ----------
Total liabilities ....................... 163,144 141,102
========== ==========
Stockholder's equity
Capital stock, $1,000 par value; 2,000 shares
issued and outstanding .................. 2,000,000 2,000,000
Additional paid-in capital .................. 6,000,000 6,000,000
Net unrealized gain (loss) on investments,
net of tax of $35,474 and $(1,531) ...... 65,881 (2,843)
Retained earnings ........................... 346,016 149,888
---------- ----------
Total stockholder's equity .................. 8,411,897 8,147,045
----------
----------
Total liabilities and stockholder's equity $8,575,041 $8,288,147
========== ==========
</TABLE>
See accompanying financial documents.
<PAGE>
Income Statement
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Period Ended
December 31, December 31,
1997 1996 (1)
------------------- -------------------
<S> <C> <C>
Revenues
Net investment income ......................... $ 469,601 $ 263,890
---------- ----------
Total revenues .............................. 469,601 263,890
Benefits and Expenses
General and administrative expenses ........... 116,215 10,000
Taxes, licenses and fees ...................... 51,651 23,102
----------
----------
Total benefits and expenses ................. 167,866 33,102
---------- ----------
Pretax income ............................... 301,735 230,788
Income tax expense ............................ 105,607 80,900
----------
----------
Net income .................................. $ 196,128 $149,888
========== ==========
</TABLE>
(1) Since commencement of operations May 22, 1996.
See accompanying financial documents.
<PAGE>
Statement of Stockholder's Equity
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Period Ended
December 31, December 31,
1997 1996 (1)
------------------- -------------------
<S> <C> <C>
Capital stock
Beginning of year ................................ $2,000,000 $ --
----------
Stock issuance ................................ -- 2,000,000
---------- ----------
End of year ...................................... 2,000,000 2,000,000
---------- ----------
Additional paid-in capital
Beginning of year ................................ 6,000,000 --
Capital contributions ......................... -- 6,000,000
---------- ----------
End of year ...................................... 6,000,000 6,000,000
---------- ----------
Net unrealized gain (loss) on investments
Beginning of year ................................ (2,843) --
Change in market value of investments
available for sale, net of taxes ............ 68,724 (2,843)
---------- ----------
End of year ...................................... 65,881 (2,843)
---------- ----------
Retained earnings
Beginning of year ................................ 149,888 --
Net income .................................... 196,128 149,888
---------- ----------
End of year ...................................... 346,016 149,888
---------- ----------
Total stockholder's equity ....................... $8,411,897 $8,147,045
========== ==========
</TABLE>
(1) Since commencement of operations May 22, 1996.
See accompanying financial documents.
<PAGE>
Statement of Cash Flows
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Period Ended
December 31, December 31,
1997 1996 (1)
------------------- -------------------
<S> <C> <C>
Cash flows from operating activities:
Net income .................................... $196,128 $149,888
Adjustments to reconcile net income
to net cash provided by operating
activities:
Amortization of discount and premium on investmen 1,155 128
Change in:
Accrued investment income ............... (28,385) (40,606)
Income taxes recoverable ................ 14,207 (22,600)
Other assets and liabilities, net ....... (69,575) 137,602
----------
----------
Net cash provided by operating activities ... 113,530 224,412
---------- ----------
Cash flows from investing activities:
Purchases of:
Fixed maturities available for sale ......... (7,739,134) (504,922)
----------
----------
Net cash used by investing activities ....... (7,739,134) (504,922)
---------- ----------
Cash flows from financing activities:
Capital stock issued .......................... -- 2,000,000
Capital contribution from Parent .............. -- 6,000,000
----------
----------
Net cash provided by financing activities ... -- 8,000,000
---------- ----------
Net increase (decrease) in cash
and short-term investments ................ (7,625,604) 7,719,490
Cash and short-term investments, beginning of period 7,719,490 --
---------- ----------
Cash and short-term investments, end of period ... $ $7,719,490
93,886
========== ==========
</TABLE>
(1) Since commencement of operations May 22, 1996.
See accompanying financial documents.
<PAGE>
Jackson National Life Insurance Company of New York
Notes to Financial Statements
December 31, 1997
- --------------------------------------------------------------------------------
1. Nature of Operations
Jackson National Life Insurance Company of New York, (the "Company" or
"JNL/NY") is wholly owned by Jackson National Life Insurance Company,
("JNL" or the "Parent") a wholly owned subsidiary of Brooke Life Insurance
Company ("Brooke") which is ultimately a wholly owned subsidiary of
Prudential Corporation, plc ("Prudential"), London, England. JNL/NY is
licensed to sell individual annuity products, including immediate and
deferred annuities, guaranteed investment contracts, variable annuities,
and individual life insurance products in the state of New York.
The Company was capitalized with an $8,000,000 capital contribution on May 22,
1996 and licensed to transact business in New York effective August 16, 1996.
However, there have been no product sales since this date.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles ("GAAP").
The preparation of the financial statements in conformity with generally
accepted accounting principles requires the use of estimates and
assumptions that affect the amounts reported in the financial statements
and the accompanying notes. Actual results may differ from those estimates.
Investments
Cash and short-term investments primarily include cash, commercial paper,
and money market instruments. All such investments are carried at cost,
which approximates fair value. These investments have maturities of three
months or less, and are considered cash equivalents for reporting cash
flows.
Fixed maturities include bonds and mortgage-backed securities. All fixed
maturities are considered available for sale and are carried at aggregate
market value. The Company has no securities classified as held to maturity.
Acquisition premiums and discounts on investments are amortized to
investment income using call or maturity dates. The changes in unrealized
gains or losses of investments classified as available for sale, net of tax
are excluded from income and credited or charged directly to stockholder's
equity.
Federal Income Taxes
The Company provides deferred income taxes on the temporary differences
between the tax and financial statement basis of assets and liabilities.
JNL/NY currently files a federal income tax return on a separate company
basis. Income tax expense is calculated on a separate company basis.
Revenue and Expense Recognition
Revenues consist primarily of investment income earned. Expenses consist
primarily of costs related to establishing operations.
3. Fair Value of Financial Instruments
The following summarizes the basis used by the Company in estimating its
fair value disclosures for financial instruments:
Cash and Short-Term Investments:
Carrying value is considered to be a reasonable estimate of fair value.
<PAGE>
Jackson National Life Insurance Company of New York
Notes to Financial Statements
December 31, 1997
- --------------------------------------------------------------------------------
3. Fair Value of Financial Instruments (cont'd)
Fixed Maturities:
Fair values are based on quoted market prices.
4. Investments
Investments are comprised of fixed-interest securities, primarily
publicly-traded industrial, mortgage-backed, and government bonds. The
Company's investments resulted from the original capital investment by its
parent.
Debt Securities
The Company's fixed maturity investments are all rated "AAA" by nationally
recognized statistical rating organizations. The amortized cost and
estimated market value of fixed maturity investments available for sale
were as follows:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Market
December 31, 1997 Cost Gains Losses Value
---------------- ---------------- --------------- ----------------
<S> <C> <C> <C>
U.S. Treasury securities $ 1,010,546 $ 6,484 - $ 1,017,030
Mortgaged-backed securities 7,232,227 94,871 - 7,327,098
---------------- ---------------- --------------- ----------------
Total $ 8,242,773 $ 101,355 - $ 8,344,128
================ ================ =============== ================
Gross Gross Estimated
Amortized Unrealized Unrealized Market
December 31, 1996 Cost Gains Losses Value
---------------- ---------------- --------------- ----------------
U.S. Treasury securities $ $ $ $ 500,420
504,794 - 4,374
---------------- ---------------- --------------- ----------------
Total $ $ $ $
504,794 - 4,374 500,420
================ ================ =============== ================
</TABLE>
The amortized cost and estimated market value of fixed maturities at
December 31, 1997, by contractual maturity, are shown below. Expected
maturities will differ from contractual maturities because borrowers may
have the right to call or prepay obligations with or without call or
prepayment penalties.
Fixed maturities available for sale:
<TABLE>
<CAPTION>
Amortized Estimated
December 31, 1997 Cost Market Value
--------------------- ---------------------
<S> <C> <C>
Due after 1 year through 5 years $ 1,010,546 $ 1,017,030
Mortgage-backed securities 7,232,227 7,327,098
===================== =====================
Total $ 8,242,773 $ 8,344,128
===================== =====================
</TABLE>
<PAGE>
Jackson National Life Insurance Company of New York
Notes to Financial Statements
December 31, 1997
- --------------------------------------------------------------------------------
4. Investments (cont'd)
<TABLE>
<CAPTION>
Amortized Estimated
December 31, 1996 Cost Market Value
--------------------- ---------------------
<S> <C> <C>
Due after 1 year through 5 years $ 504,794 $ 500,420
===================== =====================
Total $ 504,794 $ 500,420
===================== =====================
</TABLE>
Discounts and premiums on collateralized mortgage obligations are amortized
over the estimated redemption period using the effective interest method.
Yields which are used to calculate premium/discount amortization are
adjusted periodically for prepayments.
Fixed maturities with a carrying value of $1,017,000 and $500,000 were on
deposit with the State of New York at December 31, 1997 and 1996,
respectively, as required by laws governing insurance company operations.
5. Investment Income and Realized Gains and Losses
All investment income for 1997 and 1996 was interest income on fixed
maturities. No realized gains or losses were recognized in 1997 or 1996.
6. Federal Income Taxes
The federal income tax provisions for 1997 and 1996 were computed using the
tax rates and regulations in effect during each year.
Federal income taxes paid were $91,400 and $103,500 in 1997 and 1996,
respectively.
The tax effects of temporary differences that give rise to deferred tax
assets and liabilities were as follows:
<TABLE>
<CAPTION>
December 31
1997 1996
-------------- -------------
Gross deferred tax asset
<S> <C> <C>
Net unrealized loss on available for sale securities - $ 1,531
Gross deferred tax liability
Net unrealized gains on available for sale securities $ (35,474) -
-------------- -------------
Net deferred tax asset (liability) $ (35,474) $ 1,531
============== =============
</TABLE>
7. Contingencies
The Company is involved in no litigation that would have a material adverse
affect on the Company's financial condition or results of operations.
8. Stockholder's Equity
The amount of dividends which can be paid by the Company is limited by the
State of New York Insurance Regulations and depends on the amount of
statutory surplus and net gain from operations. No dividends were paid to
JNL in 1997 or 1996.
<PAGE>
Jackson National Life Insurance Company of New York
Notes to Financial Statements
December 31, 1997
- --------------------------------------------------------------------------------
9. Lease Obligation
The Company entered into a cancelable operating lease agreement under which
it occupies office space. The rent expense was $18,080 during 1997. The
future lease obligations relating to this lease are as follows:
1998 $ 108,480
1999 108,480
2000 108,932
2001 111,192
2002 112,096
Thereafter 579,916
-------
Total $1,129,096
==========
10. Related Party Transactions
The Company's investment portfolio is managed by PPM America, Inc. ("PPM"),
a registered investment advisor and a wholly owned subsidiary of Prudential
The Company has a service agreement with its parent, JNL, under which JNL
provides certain administrative services. There were no product sales
during 1997 or 1996, therefore no cost allocation was made.
