DEAR SHAREHOLDER:
This report relates to the operations of the Jackson National Life Defined
Strategies Variable Annuity for the period ended December 31, 1999. The
following Money Manager commentaries, graphs and tables provide you with
information regarding each Series' performance during the period.
[FIRST TRUST LOGO] JNL/FIRST TRUST THE DOW(SM) TARGET 5 SERIES
FIRST TRUST ADVISORS L.P.
TEAM MANAGEMENT
OBJECTIVE:
The investment objective of the JNL/First Trust The Dow(SM) Target 5 Series is a
high total return through a combination of capital appreciation and dividend
income.
MONEY MANAGER COMMENTARY:
Despite a rising interest rate environment, the second half of 1999 was
generally positive for U.S. stocks. Initially, the stock market suffered through
a correction lasting from mid-July through mid-October as investors digested a
couple of Federal Reserve interest rate hikes and their potential impact of
slowing corporate earnings growth. But the stock market staged an impressive
rally through the end of the year led by technology shares as the nation's
economy remained strong and investors' fears of Y2K subsided. The trading during
the latter part of this period was characterized by heavy investor demand for
early stage growth companies, particularly technology and communications-related
shares, at the expense of value stocks.
The Series returned -22.10% for the period from inception on July 2, 1999
through December 31, 1999 as compared to 4.01% for its benchmark, the Dow Jones
Industrial Average. The Series has been hurt in recent months by substantial
weakness in three of its five components. Philip Morris has been hit hard (down
41%) due to concerns about the tobacco industry's mounting legal battles.
Caterpillar retreated (down 20%) after announcing significantly lower year over
year third quarter profits and repeatedly warning analysts about 1999 full year
earnings. Goodyear Tire (down 50%) has been punished due to disappointment over
its fourth straight quarter of declining earnings. In addition, Goodyear was
removed from the Dow Jones Index effective November 1, 1999. The two remaining
holdings, Du Pont and General Motors, have also lagged the index contributing to
the Series' disappointing showing during the second half of 1999.
The outlook for U.S. stocks remains bullish as we enter 2000 due in large part
to the booming U.S. economy. While negative factors such as the likelihood of
further Federal Reserve interest rate hikes, lofty valuation levels and the
perceived narrowness of the market may result in a correction sometime during
the next year, the expected continuing strength in U.S. corporate earnings
should ultimately result in higher stock prices.
The Series identifies strong, established companies that are currently out of
favor on Wall Street and likely to rebound. We believe these companies are well
positioned to benefit from either a broadening of the current market rally, or a
rotation out of the speculative, high-tech names that have been leading the
market. Therefore, we expect the Series to perform well going forward and reward
the patient, value-oriented investor.
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
JNL/FIRST TRUST THE DOW(SM) TARGET 5 SERIES AND THE
DOW JONES INDUSTRIAL AVERAGE
[LINE GRAPH]
<TABLE>
<CAPTION>
JNL/FIRST TRUST THE DOW TARGET 5
SERIES DOW JONES INDUSTRIAL AVERAGE
-------------------------------- ----------------------------
<S> <C> <C>
7/02/1999 10000 10000
7/31 9340 9571
8/31 9320 9750
9/30 8720 9318
10/31 8420 9678
11/30 7870 9830
12/31/1999 7790 10401
</TABLE>
TOTAL RETURN
FOR THE PERIOD
FROM JULY 2, 1999* TO
DECEMBER 31, 1999....-22.10%
Past performance is not
predictive of future
performance. Investment
return and principal
value will fluctuate so
that an investor's
shares, when redeemed,
may be more or less than
their original cost.
Performance numbers are
net of all Series
operating expenses, but
do not reflect the
deduction of insurance
charges.
- ---------------
* Commencement of operations.
1
<PAGE>
JNL/FIRST TRUST THE DOW TARGET 5 SERIES
FINANCIAL STATEMENTS
(in thousands, except net asset value per share)
Statement of Assets and Liabilities
December 31, 1999
ASSETS
Investments (cost $ 4,479) $ 4,214
Receivables:
Dividends and interest 12
Fund shares sold 8
--------------
TOTAL ASSETS 4,234
--------------
LIABILITIES
Cash overdraft 286
Payables:
Advisory fees 3
Investment securities purchased 93
--------------
TOTAL LIABILITIES 382
--------------
NET ASSETS $ 3,852
==============
NET ASSETS CONSIST OF:
Paid-in capital $ 4,336
Undistributed net investment income 29
Accumulated net realized loss
on investments (248)
Net unrealized depreciation on investments (265)
==============
$ 3,852
==============
SHARES OUTSTANDING (NO PAR VALUE),
UNLIMITED SHARES AUTHORIZED 494
==============
NET ASSET VALUE PER SHARE $ 7.79
==============
Statement of Operations
For the Period Ended December 31, 1999*
INVESTMENT INCOME
Dividends $ 34
Interest 4
--------------
TOTAL INVESTMENT INCOME 38
--------------
EXPENSES
Advisory fees 8
Administrative fees 1
--------------
TOTAL EXPENSES 9
--------------
NET INVESTMENT INCOME 29
--------------
REALIZED AND UNREALIZED LOSS
Net realized loss on investments (248)
Net change in unrealized depreciation
on investments (265)
--------------
NET REALIZED AND UNREALIZED LOSS (513)
--------------
NET DECREASE IN NET ASSETS FROM OPERATIONS $ (484)
==============
- ------------------------------------------------------------
* For the period beginning July 2, 1999 (commencement of operations).
See notes to the financial statements.
2
<PAGE>
JNL/FIRST TRUST THE DOW TARGET 5 SERIES
Statement of Changes in Net Assets
(in thousands)
PERIOD FROM
JULY 2,
1999* TO
DECEMBER 31,
1999
--------------
OPERATIONS
Net investment income $ 29
Net realized loss on investments (248)
Net change in unrealized depreciation
on investments (265)
--------------
NET DECREASE IN NET ASSETS FROM OPERATIONS (484)
--------------
SHARE TRANSACTIONS(1)
Proceeds from the sale of shares 5,278
Cost of shares redeemed (942)
--------------
NET INCREASE IN NET ASSETS FROM
SHARE TRANSACTIONS 4,336
--------------
NET INCREASE IN NET ASSETS 3,852
NET ASSETS BEGINNING OF PERIOD -
--------------
NET ASSETS END OF PERIOD $ 3,852
==============
UNDISTRIBUTED NET INVESTMENT INCOME $ 29
==============
Financial Highlights
PERIOD FROM
JULY 2,
1999* TO
DECEMBER 31,
1999
---------------
SELECTED PER SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
---------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income 0.06
Net realized and unrealized loss
on investments (2.27)
---------------
Total loss from operations (2.21)
---------------
NET ASSET VALUE, END OF PERIOD $ 7.79
===============
TOTAL RETURN (A) (22.10)%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $ 3,852
Ratio of expenses to average net
assets (b) 0.85%
Ratio of net investment income to
average net assets (b) 2.83%
Portfolio turnover 40.15%
- --------------------------------------------------------------------------------
(1)SHARE TRANSACTIONs:
Shares sold 617
Shares redeemed (123)
--------------
Net increase 494
==============
- --------------------------------------------------------------------------------
PURCHASES AND SALES OF INVESTMENT
SECURITIES
(EXCLUDING SHORT-TERM SECURITIES):
Purchases of securities $ 5,112
Proceeds from sales of securities 765
- --------------------------------------------------------------------------------
* Commencement of operations.
(a) Assumes investment at net asset value at the beginning of the period and a
complete redemption of the investment at the net asset value at the end of
the period. Total Return is not annualized for periods less than one year.
(b) Annualized for periods less than one year.
See notes to the financial statements.
3
<PAGE>
JNL/FIRST TRUST THE DOW TARGET 5 SERIES
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1999
SHARES OR MARKET
PRINCIPAL VALUE
AMOUNT (000'S)
- ---------------------------------------------------------------
COMMON STOCKS - 90.98%
AUTO MANUFACTURERS - 26.17%
General Motors Corp. 15,177 $ 1,103
AUTO PARTS & EQUIPMENT - 11.30%
Goodyear Tire & Rubber Co. 16,900 476
CHEMICALS - 22.40%
E. I. du Pont de Nemours & Co. 14,321 944
MACHINERY - 17.77%
Caterpillar Inc. 15,916 749
TOBACCO - 13.34%
Philip Morris Cos. Inc. 24,222 562
--------------
Total Common Stocks
(cost $ 4,099) 3,834
--------------
SHARES OR MARKET
PRINCIPAL VALUE
AMOUNT (000'S)
- ---------------------------------------------------------------
SHORT TERM INVESTMENTS - 9.02%
MONEY MARKET FUNDS - 9.02%
Dreyfus Cash Management Plus,
5.53% (a) 189,992 $ 190
Dreyfus Government Cash
Management, 5.08% (a) 189,992 190
--------------
Total Short Term Investments
(cost $380) 380
--------------
TOTAL INVESTMENTS - 100%
(cost $ 4,479) $ 4,214
==============
- --------------------------------------------------------------------------------
(a) Dividend yield changes daily to reflect current market conditions. Rate is
the quoted yield as of December 31, 1999.
See notes to the financial statements.
4
<PAGE>
[FIRST TRUST LOGO] JNL/FIRST TRUST THE DOW(SM) TARGET 10 SERIES
FIRST TRUST ADVISORS L.P.
TEAM MANAGEMENT
OBJECTIVE:
The investment objective of the JNL/First Trust The Dow(SM) Target 10 Series is
a high total return through a combination of capital appreciation and dividend
income.
MONEY MANAGER COMMENTARY:
Despite a rising interest rate environment, the second half of 1999 was
generally positive for U.S. stocks. Initially, the stock market suffered through
a correction lasting from mid-July through mid-October as investors digested a
couple of Federal Reserve interest rate hikes and their potential impact of
slowing corporate earnings growth. But the stock market staged an impressive
rally through the end of the year led by technology shares as the nation's
economy remained strong and investors' fears of Y2K subsided. The trading during
the latter part of this period was characterized by heavy investor demand for
early stage growth companies, particularly technology and communications-related
shares, at the expense of value stocks.
The Series returned -12.70% for the period from inception on July 2, 1999
through December 31, 1999 as compared to 4.01% for its benchmark, the Dow Jones
Industrial Average. The Series has been hurt in recent months by substantial
weakness in three of its ten components. Philip Morris has been hit hard (down
41%) due to concerns about the tobacco industry's mounting legal battles.
Caterpillar retreated (down 20%) after announcing significantly lower year over
year third quarter profits and repeatedly warning analysts about 1999 full year
earnings. Goodyear Tire (down 50%) has been punished due to disappointment over
its fourth straight quarter of declining earnings. In addition, Goodyear was
removed from the Dow Jones Index effective November 1, 1999. Of the remaining
seven components of the Series, three posted positive returns for the period,
and only one, Minnesota Mining (up 9%), beat the index.
The outlook for U.S. stocks remains bullish as we enter 2000 due in large part
to the booming U.S. economy. While negative factors such as the likelihood of
further Federal Reserve interest rate hikes, lofty valuation levels and the
perceived narrowness of the market may result in a correction sometime during
the next year, the expected continuing strength in U.S. corporate earnings
should ultimately result in higher stock prices.
The Series identifies strong, established companies that are currently out of
favor on Wall Street and likely to rebound. We believe these companies are well
positioned to benefit from either a broadening of the current market rally, or a
rotation out of the speculative, high-tech names that have been leading the
market. Therefore, we expect the Series to perform well going forward and reward
the patient, value-oriented investor.
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
JNL/FIRST TRUST THE DOW(SM) TARGET 10 SERIES AND THE
DOW JONES INDUSTRIAL AVERAGE
[LINE GRAPH]
<TABLE>
<CAPTION>
JNL/FIRST TRUST THE DOW TARGET
10 SERIES DOW JONES INDUSTRIAL AVERAGE
------------------------------ ----------------------------
<S> <C> <C>
7/02/1999 10000 10000
7/31 9420 9571
8/31 9600 9750
9/30 9160 9318
10/31 9020 9678
11/30 8720 9830
12/31/1999 8730 10401
</TABLE>
TOTAL RETURN
FOR THE PERIOD
FROM JULY 2, 1999* TO
DECEMBER 31, 1999....-12.70%
Past performance is not
predictive of future
performance. Investment
return and principal
value will fluctuate so
that an investor's
shares, when redeemed,
may be more or less than
their original cost.
Performance numbers are
net of all Series
operating expenses, but
do not reflect the
deduction of insurance
charges.
- ---------------
* Commencement of operations.
5
<PAGE>
JNL/FIRST TRUST THE DOW TARGET 10 SERIES
FINANCIAL STATEMENTS
(in thousands, except net asset value per share)
Statement of Assets and Liabilities
December 31, 1999
ASSETS
Investments (cost $8,514) $ 8,148
Receivables:
Dividends and interest 23
Fund shares sold 7
--------------
TOTAL ASSETS 8,178
--------------
LIABILITIES
Cash overdraft 151
Payables:
Advisory fees 5
Administrative fees 1
Fund shares redeemed 4
Investment securities purchased 231
--------------
TOTAL LIABILITIES 392
--------------
NET ASSETS $ 7,786
==============
NET ASSETS CONSIST OF:
Paid-in capital $ 8,263
Undistributed net investment income 49
Accumulated net realized loss on
on investments (160)
Net unrealized depreciation on investments (366)
==============
$ 7,786
==============
SHARES OUTSTANDING (NO PAR VALUE),
UNLIMITED SHARES AUTHORIZED 892
==============
NET ASSET VALUE PER SHARE $ 8.73
==============
Statement of Operations
For the Period Ended December 31, 1999*
INVESTMENT INCOME
Dividends $ 60
Interest 6
--------------
TOTAL INVESTMENT INCOME 66
--------------
EXPENSES
Advisory fees 15
Administrative fees 2
--------------
TOTAL EXPENSES 17
--------------
NET INVESTMENT INCOME 49
--------------
REALIZED AND UNREALIZED LOSS
Net realized loss on investments (160)
Net change in unrealized depreciation
on investments (366)
--------------
NET REALIZED AND UNREALIZED LOSS (526)
--------------
NET DECREASE IN NET ASSETS FROM OPERATIONS $ (477)
==============
- ------------------------------------------------------------
* For the period beginning July 2, 1999 (commencement of operations).
See notes to the financial statements.
6
<PAGE>
JNL/FIRST TRUST THE DOW TARGET 10 SERIES
Statement of Changes in Net Assets
(in thousands)
PERIOD FROM
JULY 2,
1999* TO
DECEMBER 31,
1999
--------------
OPERATIONS
Net investment income $ 49
Net realized loss on investments (160)
Net change in unrealized depreciation
on investments (366)
--------------
NET DECREASE IN NET ASSETS FROM OPERATIONS (477)
--------------
SHARE TRANSACTIONS(1)
Proceeds from the sale of shares 9,749
Cost of shares redeemed (1,486)
--------------
NET INCREASE IN NET ASSETS FROM
SHARE TRANSACTIONS 8,263
--------------
NET INCREASE IN NET ASSETS 7,786
NET ASSETS BEGINNING OF PERIOD -
--------------
NET ASSETS END OF PERIOD $ 7,786
==============
UNDISTRIBUTED NET INVESTMENT INCOME $ 49
==============
Financial Highlights
PERIOD FROM
JULY 2,
1999* TO
DECEMBER 31,
1999
---------------
SELECTED PER SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
---------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income 0.05
Net realized and unrealized loss
on investments (1.32)
---------------
Total loss from operations (1.27)
---------------
NET ASSET VALUE, END OF PERIOD $ 8.73
===============
TOTAL RETURN (A) (12.70%)
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $ 7,786
Ratio of expenses to average net
assets (b) 0.85%
Ratio of net investment income to
average net assets (b) 2.53%
Portfolio turnover 23.32%
- --------------------------------------------------------------------------------
(1)SHARE TRANSACTIONs:
Shares sold 1,064
Shares redeemed (172)
--------------
Net increase 892
==============
- --------------------------------------------------------------------------------
PURCHASES AND SALES OF INVESTMENT
SECURITIES
(EXCLUDING SHORT-TERM SECURITIES):
Purchases of securities $ 9,117
Proceeds from sales of securities 877
- --------------------------------------------------------------------------------
* Commencement of operations.
(a) Assumes investment at net asset value at the beginning of the period and a
complete redemption of the investment at the net asset value at the end of
the period. Total Return is not annualized for periods less than one year.
(b) Annualized for periods less than one year.
See notes to the financial statements.
7
<PAGE>
JNL/FIRST TRUST THE DOW TARGET 10 SERIES
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1999
SHARES OR MARKET
PRINCIPAL VALUE
AMOUNT (000'S)
- ---------------------------------------------------------------
COMMON STOCKS - 94.7%
AUTO MANUFACTURERS - 12.1%
General Motors Corp. 13,943 $ 981
AUTO PARTS & EQUIPMENT - 5.2%
Goodyear Tire & Rubber Co. 15,014 423
BANKS - 9.9%
J.P. Morgan & Co. Inc. 6,374 807
CHEMICALS - 10.3%
E. I. du Pont de Nemours & Co. 12,726 838
MACHINERY - 20.1%
Caterpillar Inc. 14,157 666
Minnesota Mining & Manufacturing 9,938 973
Co.
--------------
1,639
MANUFACTURING - 10.1%
Eastman Kodak Co. 12,454 825
OIL & GAS PRODUCERS - 20.9%
Chevron Corp. 9,204 797
Exxon Mobil Corp. 11,245 906
--------------
1,703
TOBACCO - 6.1%
Philip Morris Cos. Inc. 21,474 498
--------------
Total Common Stocks
(cost $8,080) 7,714
--------------
SHARES OR MARKET
PRINCIPAL VALUE
AMOUNT (000'S)
- ---------------------------------------------------------------
SHORT TERM INVESTMENTS - 5.3%
MONEY MARKET FUNDS - 5.3%
Dreyfus Cash Management Plus,
5.53% (a) 381,923 $ 382
Dreyfus Government Cash
Management, 5.08% (a) 51,886 52
--------------
Total Short Term Investments
(cost $434) 434
--------------
TOTAL INVESTMENTS - 100%
(cost $8,514) $ 8,148
==============
- --------------------------------------------------------------------------------
(a) Dividend yield changes daily to reflect current market conditions. Rate is
the quoted yield as of December 31, 1999.
See notes to the financial statements.
8
<PAGE>
[FIRST TRUST LOGO] JNL/FIRST TRUST THE S&P(R) TARGET 10 SERIES
FIRST TRUST ADVISORS L.P.
TEAM MANAGEMENT
OBJECTIVE:
The investment objective of the JNL/First Trust The S&P(R) Target 10 Series is a
high total return through a combination of capital appreciation and dividend
income.
MONEY MANAGER COMMENTARY:
Despite a rising interest rate environment, the second half of 1999 was
generally positive for U.S. stocks. Initially, the stock market suffered through
a correction lasting from mid-July through mid-October as investors digested a
couple of Federal Reserve interest rate hikes and their potential impact of
slowing corporate earnings growth. But the stock market staged an impressive
rally through the end of the year led by technology shares as the nation's
economy remained strong and investors' fears of Y2K subsided. The trading during
the latter part of this period was characterized by heavy investor demand for
early stage growth companies, particularly technology and communications-related
shares, at the expense of value stocks.
The Series returned 10.60% for the period from inception on July 2, 1999 through
December 31, 1999. The Series handily beat the S&P 500 Index for this period,
benefiting from an ability to detect undervalued stocks with current momentum.
This provided the Series with significant weightings in technology stocks that
were beginning to appreciate. In particular, the Series included Motorola (up
51%), Solectron (up 40%), and Hewlett Packard (up 13%). In addition, the market
also realized the value of two non-tech names driving Alcoa (up 30%) and Sprint
(Fon Group) (up 34%) to solid gains.
The outlook for U.S. stocks remains bullish as we enter 2000 due in large part
to the booming U.S. economy. While negative factors such as the likelihood of
further Federal Reserve interest rate hikes, lofty valuation levels and the
perceived narrowness of the market may result in a correction sometime during
the next year, the expected continuing strength in U.S. corporate earnings
should ultimately result in higher stock prices.
The Series should continue to perform well relative to the S&P 500 in 2000 no
matter what sectors lead the market. The Series' slight over-weighting in
technology issues should allow it to outperform the index if technology
continues to lead the market. Additionally, the Series holds diverse positions
in industries such as basic materials, energy, transportation, and retailing,
which should help to offset any weakness in technology issues.
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
JNL/FIRST TRUST THE S&P(R) TARGET 10 SERIES AND THE S&P 500 INDEX
[LINE GRAPH]
<TABLE>
<CAPTION>
JNL/FIRST TRUST THE S&P TARGET
10 SERIES S&P 500 INDEX
------------------------------ -------------
<S> <C> <C>
7/02/1999 10000 10000
7/31 9610 9558
8/31 9540 9511
9/30 9250 9250
10/31 9780 9836
11/30 10520 10036
12/31/1999 11060 10627
</TABLE>
TOTAL RETURN
FOR THE PERIOD
FROM JULY 2, 1999* TO
DECEMBER 31, 1999.....10.60%
Past performance is not
predictive of future
performance. Investment
return and principal
value will fluctuate so
that an investor's
shares, when redeemed,
may be more or less than
their original cost.
Performance numbers are
net of all Series
operating expenses, but
do not reflect the
deduction of insurance
charges.
- ---------------
* Commencement of operations.
9
<PAGE>
JNL/FIRST TRUST THE S&P TARGET 10 SERIES
FINANCIAL STATEMENTS
(in thousands, except net asset value per share)
Statement of Assets and Liabilities
December 31, 1999
ASSETS
Investments (cost $ 8,646) $ 9,559
Receivables:
Dividends and interest 5
Fund shares sold 2
--------------
TOTAL ASSETS 9,566
--------------
LIABILITIES
Cash overdraft 201
Payables:
Advisory fees 5
Administrative fees 1
Investment securities purchased 167
--------------
TOTAL LIABILITIES 374
--------------
NET ASSETS $ 9,192
==============
NET ASSETS CONSIST OF:
Paid-in capital $ 8,235
Undistributed net investment income 3
Accumulated net realized gain
on investments 41
Net unrealized appreciation on investments 913
==============
$ 9,192
==============
SHARES OUTSTANDING (NO PAR VALUE),
UNLIMITED SHARES AUTHORIZED 831
==============
NET ASSET VALUE PER SHARE $ 11.06
==============
Statement of Operations
For the Period Ended December 31, 1999*
INVESTMENT INCOME
Dividends $ 13
Interest 6
--------------
TOTAL INVESTMENT INCOME 19
--------------
EXPENSES
Advisory fees 14
Administrative fees 2
--------------
TOTAL EXPENSES 16
--------------
NET INVESTMENT INCOME 3
--------------
REALIZED AND UNREALIZED GAIN
Net realized gain on investments 41
Net change in unrealized appreciation
on investments 913
--------------
NET REALIZED AND UNREALIZED GAIN 954
--------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 957
==============
- ------------------------------------------------------------
* For the period beginning July 2, 1999 (commencement of operations).
See notes to the financial statements.
10
<PAGE>
JNL/FIRST TRUST THE S&P TARGET 10 SERIES
Statement of Changes in Net Assets
(in thousands)
PERIOD FROM
JULY 2,
1999* TO
DECEMBER 31,
1999
--------------
OPERATIONS
Net investment income $ 3
Net realized gain on investments 41
Net change in unrealized appreciation
on investments 913
--------------
NET INCREASE IN NET ASSETS FROM OPERATIONS 957
--------------
SHARE TRANSACTIONS(1)
Proceeds from the sale of shares 9,627
Cost of shares redeemed (1,392)
--------------
NET INCREASE IN NET ASSETS FROM
SHARE TRANSACTIONS 8,235
--------------
NET INCREASE IN NET ASSETS 9,192
NET ASSETS BEGINNING OF PERIOD -
--------------
NET ASSETS END OF PERIOD $ 9,192
==============
UNDISTRIBUTED NET INVESTMENT INCOME $ 3
==============
Financial Highlights
PERIOD FROM
JULY 2,
1999* TO
DECEMBER 31,
1999
---------------
SELECTED PER SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
---------------
INCOME FROM OPERATIONS:
Net investment income 0.01
Net realized and unrealized gains
on investments 1.05
---------------
Total income from operations 1.06
---------------
NET ASSET VALUE, END OF PERIOD $ 11.06
===============
TOTAL RETURN (A) 10.60%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $ 9,192
Ratio of expenses to average net
assets (b) 0.85%
Ratio of net investment income to
average net assets (b) 0.16%
Portfolio turnover 27.91%
- --------------------------------------------------------------------------------
(1)SHARE TRANSACTIONs:
Shares sold 965
Shares redeemed (134)
--------------
Net increase 831
==============
PURCHASES AND SALES OF INVESTMENT
SECURITIES
(EXCLUDING SHORT-TERM SECURITIES):
Purchases of securities $ 9,336
Proceeds from sales of securities 1,038
- --------------------------------------------------------------------------------
* Commencement of operations.
(a) Assumes investment at net asset value at the beginning of the period and a
complete redemption of the investment at the net asset value at the end of
the period. Total Return is not annualized for periods less than one year.
(b) Annualized for periods less than one year.
See notes to the financial statements.
11
<PAGE>
JNL/FIRST TRUST THE S&P TARGET 10 SERIES
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1999
SHARES OR MARKET
PRINCIPAL VALUE
AMOUNT (000'S)
- ---------------------------------------------------------------
COMMON STOCKS - 96.79%
COMPUTERS - 9.77%
Hewlett-Packard Co. 8,200 $ 934
ELECTRONICS - 12.34%
Solectron Corp. (a) 12,391 1,179
MACHINERY - 7.20%
Ingersoll-Rand Co. 12,497 688
METALS & MINING - 10.96% 12,627 1,048
Alcoa Inc.
OIL & GAS PRODUCERS - 9.33%
Enron Corp. 20,099 892
RETAIL - 17.49%
Circuit City Stores 18,728 844
Tandy Corp. 16,844 828
--------------
1,672
SEMICONDUCTORS - 13.39%
Motorola Inc. 8,694 1,280
TELECOMMUNICATIONS - 10.14%
Sprint Corp. 14,390 969
TRANSPORTATION - 6.17%
FDX Corp. (a) 14,419 590
--------------
Total Common Stocks
(cost $ 8,339) 9,252
--------------
SHARES OR MARKET
PRINCIPAL VALUE
AMOUNT (000'S)
- ---------------------------------------------------------------
SHORT TERM INVESTMENTS - 3.21%
MONEY MARKET FUND - 3.21%
Dreyfus Cash Management Plus,
5.53% (b) 306,640 $ 307
--------------
Total Short Term Investments
(cost $ 307) 307
--------------
TOTAL INVESTMENTS - 100%
(cost $ 8,646) $ 9,559
==============
- --------------------------------------------------------------------------------
(a).Non-income producing security.
(b) Dividend yield changes daily to reflect current market conditions. Rate is
the quoted yield as of December 31, 1999.
See notes to the financial statements.
12
<PAGE>
[FIRST TRUST LOGO] JNL/FIRST TRUST GLOBAL TARGET 15 SERIES
FIRST TRUST ADVISORS L.P.
TEAM MANAGEMENT
OBJECTIVE:
The investment objective of the JNL/First Trust Global Target 15 Series is a
high total return through a combination of capital appreciation and dividend
income.
MONEY MANAGER COMMENTARY:
Despite a rising interest rate environment, the second half of 1999 was
generally positive for U.S. and Global stocks. Initially, the stock market
suffered through a correction lasting from mid-July through mid-October as
investors digested a couple of Federal Reserve interest rate hikes and their
potential impact of slowing corporate earnings growth. But the stock market
staged an impressive rally through the end of the year led by technology shares
as the nation's economy remained strong and investors' fears of Y2K subsided.
The trading during the latter part of this period was characterized by heavy
investor demand for early stage growth companies, particularly technology and
communications-related shares, at the expense of value stocks.
The Series returned -10.10% for the period from inception on July 2, 1999
through December 31, 1999. The U.S. portion of the Series has been hurt in
recent months by substantial weakness in three of its five components. Of note
was Philip Morris (down 41%) which came under pressure due to concerns about the
tobacco industry's mounting legal battles, and Goodyear Tire (down 50%) which
has been punished due to disappointment over its fourth straight quarter of
declining earnings. Globally, the Hong Kong and London portions of the Series
have also suffered due to weakness in the international real estate,
construction and retail sectors which are currently heavily weighted in the
Series. The Series' one big winner was Henderson Investment (up 47%) which has
appreciated significantly since an analyst commented favorably on the likely
prospects of a strong recovery in the Asian real estate markets.
The outlook for U.S. and Global stocks remains bullish as we enter 2000 due in
large part to the booming U.S. and recovering international economies. While
negative factors such as the likelihood of further Federal Reserve interest rate
hikes, lofty valuation levels and the perceived narrowness of the market may
result in a correction sometime during the next year, the expected continuing
strength in U.S. corporate earnings should ultimately result in higher stock
prices. A number of factors could help the Series to rebound in 2000. Chief
among them would be a much anticipated broadening of the current market rally, a
rotation out of the speculative, high-tech names that have been leading the
market, and the benefits of improving international economies, especially those
in Asia.
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
JNL/FIRST TRUST GLOBAL TARGET 15 SERIES, DOW JONES INDUSTRIAL AVERAGE,
HANG SENG STOCK INDEX AND THE LONDON STOCK MARKET FT30
[LINE GRAPH]
<TABLE>
<CAPTION>
JNL/FIRST TRUST
GLOBAL TARGET 15 DOW JONES INDUSTRIAL HANG SENG STOCK LONDON STOCK MARKET
SERIES AVERAGE INDEX FT30
---------------- -------------------- --------------- -------------------
<S> <C> <C> <C> <C>
7/02/1999 10000 10000 10000 10000
7/31 9420 9571 9297 9775
8/31 9450 9750 9547 9852
9/30 8630 9318 9028 9221
10/31 8160 9678 9446 9146
11/30 8350 9830 10995 9547
12/31/1999 8990 10401 12134 10160
</TABLE>
TOTAL RETURN
FOR THE PERIOD
FROM JULY 2, 1999* TO
DECEMBER 31, 1999....-10.10%
Past performance is not
predictive of future
performance. Investment
return and principal
value will fluctuate so
that an investor's
shares, when redeemed,
may be more or less than
their original cost.
Performance numbers are
net of all Series
operating expenses, but
do not reflect the
deduction of insurance
charges.
- ---------------
* Commencement of operations.
13
<PAGE>
JNL/FIRST TRUST GLOBAL TARGET 15 SERIES
FINANCIAL STATEMENTS
(in thousands, except net asset value per share)
Statement of Assets and Liabilities
December 31, 1999
ASSETS
Investments (cost $ 1,905) $ 2,001
Cash 4
Foreign currency 6
Receivables:
Dividends and interest 10
Fund shares sold 6
Investment securities sold 9
--------------
TOTAL ASSETS 2,036
--------------
LIABILITIES
Payable:
Advisory fees 2
--------------
TOTAL LIABILITIES 2
--------------
NET ASSETS $ 2,034
==============
NET ASSETS CONSIST OF:
Paid-in capital $ 2,063
Undistributed net investment income 23
Accumulated net realized loss on (148)
investments
Net unrealized appreciation on investments 96
==============
$ 2,034
==============
SHARES OUTSTANDING (NO PAR VALUE),
UNLIMITED SHARES AUTHORIZED 226
==============
NET ASSET VALUE PER SHARE $ 8.99
==============
Statement of Operations
For the Period Ended December 31, 1999*
INVESTMENT INCOME
Dividends $ 27
Interest 3
Foreign tax withheld (1)
--------------
TOTAL INVESTMENT INCOME 29
--------------
EXPENSES
Advisory fees 5
Administrative fees 1
--------------
TOTAL EXPENSES 6
--------------
NET INVESTMENT INCOME 23
--------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized loss on investments (148)
Net change in unrealized appreciation
on investments 96
--------------
NET REALIZED AND UNREALIZED LOSS (52)
--------------
NET DECREASE IN NET ASSETS FROM OPERATIONS $ (29)
==============
- ------------------------------------------------------------
* For the period beginning July 2, 1999 (commencement of operations).
See notes to the financial statements.
14
<PAGE>
JNL/FIRST TRUST GLOBAL TARGET 15 SERIES
Statement of Changes in Net Assets
(in thousands)
PERIOD FROM
JULY 2,
1999* TO
DECEMBER 31,
1999
--------------
OPERATIONS
Net investment income $ 23
Net realized loss on investments (148)
Net change in unrealized appreciation
on investments 96
--------------
NET DECREASE IN NET ASSETS FROM OPERATIONS (29)
--------------
SHARE TRANSACTIONS(1)
Proceeds from the sale of shares 3,056
Cost of shares redeemed (993)
--------------
NET INCREASE IN NET ASSETS FROM
SHARE TRANSACTIONS 2,063
--------------
NET INCREASE IN NET ASSETS 2,034
NET ASSETS BEGINNING OF PERIOD -
--------------
NET ASSETS END OF PERIOD $ 2,034
==============
UNDISTRIBUTED NET INVESTMENT INCOME $ 23
==============
Financial Highlights
PERIOD FROM
JULY 2,
1999* TO
DECEMBER 31,
1999
---------------
SELECTED PER SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
---------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income 0.11
Net realized and unrealized loss
on investments (1.12)
---------------
Total loss from operations (1.01)
---------------
NET ASSET VALUE, END OF PERIOD $ 8.99
===============
TOTAL RETURN (A) (10.10)%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $ 2,034
Ratio of expenses to average net
assets (b) 0.90%
Ratio of net investment income to
average net assets (b) 3.44%
Portfolio turnover 80.54%
- --------------------------------------------------------------------------------
(1)SHARE TRANSACTIOns
Shares sold 341
Shares redeemed (115)
--------------
Net increase 226
==============
PURCHASES AND SALES OF INVESTMENT
SECURITIES
(EXCLUDING SHORT-TERM SECURITIES):
Purchases of securities $ 2,843
Proceeds from sales of securities 939
- --------------------------------------------------------------------------------
* Commencement of operations.
(a) Assumes investment at net asset value at the beginning of the period and a
complete redemption of the investment at the net asset value at the end of
the period. Total Return is not annualized for periods less than one year.
(b) Annualized for periods less than one year.
See notes to the financial statements.
15
<PAGE>
JNL/FIRST TRUST THE GLOBAL TARGET 15 SERIES
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1999
SHARES OR MARKET
PRINCIPAL VALUE
AMOUNT (000'S)
- ---------------------------------------------------------------
COMMON STOCKS - 92.55%
AIRLINES - 6.25%
British Airways Plc 19,167 $ 125
AUTO MANUFACTURERS - 7.70%
General Motors Corp. 2,122 154
AUTO PARTS & EQUIPMENT - 3.35%
Goodyear Tire & Rubber Co. 2,366 67
BUILDING MATERIALS - 5.70%
Blue Circle Industries Plc 19,631 114
CHEMICALS - 6.59%
E.I. du Pont de Nemours & Co. 2,002 132
FOOD - 6.79%
Tate & Lyle Plc 21,181 136
INSURANCE - 5.60%
Royal & Sun Alliance Insurance
Group Plc 14,821 112
MACHINERY - 5.25%
Caterpillar Inc. 2,225 105
REAL ESTATE - 28.28%
Amoy Properties Ltd. 141,116 119
Great Eagle Holdings Ltd. 75,598 134
Hysan Development Co. Ltd. 90,709 115
Henderson Investment Ltd. 190,509 198
--------------
566
SHARES OR MARKET
PRINCIPAL VALUE
AMOUNT (000'S)
- ---------------------------------------------------------------
RETAIL - 5.65%
Marks & Spencer Plc 23,775 $ 113
TOBACCO - 3.90%
Philip Morris Cos. Inc. 3,385 78
TELECOMMUNICATIONS - 7.49%
Cable & Wireless HKT Ltd. 51,809 150
--------------
Total Common Stocks
(cost $1,756) 1,852
--------------
SHORT TERM INVESTMENTS - 7.45%
MONEY MARKET FUNDS - 7.45%
Dreyfus Cash Management Plus,
5.53% (a) 98,034 98
Dreyfus Government Cash
Management, 50,655 51
5.08% (a)
--------------
Total Short Term Investments
(cost $149) 149
--------------
TOTAL INVESTMENTS - 100%
(cost $1,905) $ 2,001
==============
- --------------------------------------------------------------------------------
SUMMARY OF INVESTMENTS BY COUNTRY, DECEMBER 31, 1999:
% OF INVESTMENT MARKET VALUE
COUNTRY SECURITIES (000'S)
- -------------------------------------------------------- ------------------
Hong Kong 35.8 % $ 716
United Kingdom 30.0 % 600
United States 34.2 % 685
------------------- ------------------
TOTAL 100.0 % $ 2,001
=================== ==================
- --------------------------------------------------------------------------------
(a) Dividend yield changes daily to reflect current market conditions. Rate is
the quoted yield as of December 31, 1999.
See notes to the financial statements.
16
<PAGE>
[FIRST TRUST LOGO] JNL/FIRST TRUST TARGET 25 SERIES
FIRST TRUST ADVISORS L.P.
TEAM MANAGEMENT
OBJECTIVE:
The investment objective of the JNL/First Trust Target 25 Series is a high total
return through a combination of capital appreciation and dividend income.
MONEY MANAGER COMMENTARY:
Despite a rising interest rate environment, the second half of 1999 was
generally positive for U.S. stocks. Initially, the stock market suffered through
a correction lasting from mid-July through mid-October as investors digested a
couple of Federal Reserve interest rate hikes and their potential impact of
slowing corporate earnings growth. But the stock market staged an impressive
rally through the end of the year led by technology shares as the nation's
economy remained strong and investors' fears of Y2K subsided. The trading during
the latter part of this period was characterized by heavy investor demand for
early stage growth companies, particularly technology and communications-related
shares, at the expense of value stocks.
The Series returned -17.00% for the period from inception on July 2, 1999
through December 31, 1999 as compared to -3.37% for its benchmark, the S&P Mid
400 Barra Value Index. The Series has suffered recently due to the fact that as
a value strategy it focuses on mid-capitalization dividend paying issues trading
on the New York Stock Exchange, and not in technology issues trading on the
NASDAQ which have been leading the market higher. The market's disdain for value
issues is so extreme at this point that only two stocks (8%) in the Series
managed to beat the index over this period. They were Weis Markets (up 13%) and
Weyerhaeuser (up 10%). Unfortunately, the Series avoided technology and was
instead heavily concentrated in basic materials, capital goods, and consumer
staples, three sectors which lagged the market during the second half of 1999.
Holdings that were particularly troublesome to the Series included Lockheed
Martin (down 42%) and Dana Corp (down 36%).
The outlook for U.S. stocks remains bullish as we enter 2000 due in large part
to the booming U.S. economy. While negative factors such as the likelihood of
further Federal Reserve interest rate hikes, lofty valuation levels and the
perceived narrowness of the market may result in a correction sometime during
the next year, the expected continuing strength in U.S. corporate earnings
should ultimately result in higher stock prices.
The Series identifies established companies that are likely to provide a
combination of capital appreciation and current dividend income, a strategy
which has currently fallen out of vogue on Wall Street. However, we believe
these companies are well positioned to benefit from either a broadening of the
current market rally, or a rotation out of the speculative, high-tech names that
have been leading the market. Therefore, we expect the Series to perform well
going forward and reward the patient value-oriented investor.
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
JNL/FIRST TRUST TARGET 25 SERIES AND THE S&P MID 400 BARRA VALUE INDEX
[LINE GRAPH]
<TABLE>
<CAPTION>
JNL/FIRST TRUST TARGET 25 SERIES S&P MID 400 BARRA VALUE INDEX
-------------------------------- -----------------------------
<S> <C> <C>
7/02/1999 10000 10000
7/31 9430 9846
8/31 9000 9473
9/30 8520 9007
10/31 8190 9186
11/30 8120 9373
12/31/1999 8300 9663
</TABLE>
TOTAL RETURN
FOR THE PERIOD
FROM JULY 2, 1999* TO
DECEMBER 31, 1999....-17.00%
Past performance is not
predictive of future
performance. Investment
return and principal
value will fluctuate so
that an investor's
shares, when redeemed,
may be more or less than
their original cost.
Performance numbers are
net of all Series
operating expenses, but
do not reflect the
deduction of insurance
charges.
- ---------------
* Commencement of operations.
17
<PAGE>
JNL/FIRST TRUST TARGET 25 SERIES
FINANCIAL STATEMENTS
(in thousands, except net asset value per share)
Statement of Assets and Liabilities
December 31, 1999
ASSETS
Investments (cost $ 1,987) $ 1,983
Cash 4
Receivable:
Dividends and interest 4
--------------
TOTAL ASSETS 1,991
--------------
LIABILITIES
Payables:
Advisory fees 1
Investment securities purchased 132
--------------
TOTAL LIABILITIES 133
--------------
NET ASSETS $ 1,858
==============
NET ASSETS CONSIST OF:
Paid-in capital $ 2,063
Undistributed net investment income 17
Accumulated net realized loss
on investments (218)
Net unrealized depreciation on investments (4)
==============
$ 1,858
==============
SHARES OUTSTANDING (NO PAR VALUE),
UNLIMITED SHARES AUTHORIZED 224
==============
NET ASSET VALUE PER SHARE $ 8.30
==============
Statement of Operations
For the Period Ended December 31, 1999*
INVESTMENT INCOME
Dividends $ 21
Interest 2
--------------
TOTAL INVESTMENT INCOME 23
--------------
EXPENSES
Advisory fees 5
Administrative fees 1
--------------
TOTAL EXPENSES 6
--------------
NET INVESTMENT INCOME 17
--------------
REALIZED AND UNREALIZED LOSS
Net realized loss on investments (218)
Net change in unrealized depreciation
on investments (4)
--------------
NET REALIZED AND UNREALIZED LOSS (222)
--------------
NET DECREASE IN NET ASSETS FROM OPERATIONS $ (205)
==============
- ------------------------------------------------------------
* For the period beginning July 2, 1999 (commencement of operations).
See notes to the financial statements.
18
<PAGE>
JNL/FIRST TRUST TARGET 25 SERIES
Statement of Changes in Net Assets
(in thousands)
PERIOD FROM
JULY 2,
1999* TO
DECEMBER 31,
1999
--------------
OPERATIONS
Net investment income $ 17
Net realized loss on investments (218)
Net change in unrealized depreciation
on investments (4)
--------------
NET DECREASE IN NET ASSETS FROM OPERATIONS (205)
--------------
SHARE TRANSACTIONS(1)
Proceeds from the sale of shares 2,893
Cost of shares redeemed (830)
--------------
NET INCREASE IN NET ASSETS FROM
SHARE TRANSACTIONS 2,063
--------------
NET INCREASE IN NET ASSETS 1,858
NET ASSETS BEGINNING OF PERIOD -
--------------
NET ASSETS END OF PERIOD $ 1,858
==============
UNDISTRIBUTED NET INVESTMENT INCOME $ 17
==============
Financial Highlights
PERIOD FROM
JULY 2,
1999* TO
DECEMBER 31,
1999
---------------
SELECTED PER SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
---------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income 0.08
Net realized and unrealized loss
on investments (1.78)
---------------
Total loss from operations (1.70)
---------------
NET ASSET VALUE, END OF PERIOD $ 8.30
===============
TOTAL RETURN (A) (17.00)%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $ 1,858
Ratio of expenses to average net
assets (b) 0.85%
Ratio of net investment income to
average net assets (b) 2.48%
Portfolio turnover 66.31%
- --------------------------------------------------------------------------------
(1)SHARE TRANSACTIONs:
Shares sold 328
Shares redeemed (104)
--------------
Net increase 224
==============
PURCHASES AND SALES OF INVESTMENT
SECURITIES
(EXCLUDING SHORT-TERM SECURITIES):
Purchases of securities $ 2,833
Proceeds from sales of securities 799
- --------------------------------------------------------------------------------
* Commencement of operations.
(a) Assumes investment at net asset value at the beginning of the period and a
complete redemption of the investment at the net asset value at the end of
the period. Total Return is not annualized for periods less than one year.
(b) Annualized for periods less than one year.
See notes to the financial statements.
19
<PAGE>
JNL/FIRST TRUST TARGET 25 SERIES
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1999
SHARES OR MARKET
PRINCIPAL VALUE
AMOUNT (000'S)
- ---------------------------------------------------------------
COMMON STOCKS - 91.38%
AEROSPACE & DEFENSE - 10.99%
B.F. Goodrich Co. 2,155 $ 59
GenCorp Inc. 3,539 35
Lockheed Martin Corp. 2,400 53
Northrop Grumman Corp. 1,313 71
--------------
218
AUTO PARTS & EQUIPMENT - 6.91%
Dana Corp. 1,826 55
TRW Inc. 1,579 82
--------------
137
CHEMICALS - 5.90%
Dow Chemical Co. 675 90
Omnova Solutions Inc. 3,542 27
--------------
117
COMMERCIAL SERVICES - 2.88%
Wallace Computer Services Inc. 3,420 57
ELECTRONICS - 3.03%
Thomas & Betts Corp. 1,886 60
FOOD - 15.78%
ConAgra Inc. 3,245 73
Flowers Industries Inc. 4,172 66
General Mills Inc. 2,153 77
Weis Markets Inc. 2,223 97
--------------
313
FOREST PRODUCTS & PAPER - 16.74%
Abitibi Consolidated Inc. 7,590 90
Lanier Worldwide, Inc. (a) 2,252 9
Louisiana-Pacific Corp. 3,785 54
Rayonier Inc. 1,760 85
Weyerhaeuser Co. 1,309 94
--------------
332
SHARES OR MARKET
PRINCIPAL VALUE
AMOUNT (000'S)
- ---------------------------------------------------------------
HAND & MACHINE TOOLS - 7.36%
Snap-On Inc. 2,372 $ 63
Stanley Works 2,749 83
--------------
146
MANUFACTURING - 11.90%
Cooper Industries Inc. 1,653 67
Dexter Corp. 2,064 82
PPG Industries Inc. 1,394 87
--------------
236
OIL & GAS PRODUCTS - 3.38%
USX-Marathon Group 2,707 67
RETAIL - 3.48%
American Greetings Corp - Class A 2,917 69
TELECOMMUNICATIONS - 3.03%
Harris Corp. 2,267 60
--------------
Total Common Stocks
(cost $ 1,816) 1,812
--------------
SHORT TERM INVESTMENTS - 8.62%
MONEY MARKET FUNDS - 8.62%
Dreyfus Cash Management Plus,
5.53% (b) 89,980 90
Dreyfus Government Cash
Management, 5.08% (b) 80,640 81
--------------
Total Short Term Investments
(cost $ 171) 171
--------------
TOTAL INVESTMENTS - 100%
(cost $ 1,987) $ 1,983
==============
- --------------------------------------------------------------------------------
(a) Non-income producing security.
(b) Dividend yield changes daily to reflect current market conditions. Rate is
the quoted yield as of December 31, 1999.
See notes to the financial statements.
20
<PAGE>
[FIRST TRUST LOGO] JNL/FIRST TRUST TARGET SMALL-CAP SERIES
FIRST TRUST ADVISORS L.P.
TEAM MANAGEMENT
OBJECTIVE:
The investment objective of the JNL/First Trust Target Small-Cap Series is a
high total return through capital appreciation.
MONEY MANAGER COMMENTARY:
Despite a rising interest rate environment, the second half of 1999 was
generally positive for U.S. stocks. Initially, the stock market suffered through
a correction lasting from mid-July through mid-October as investors digested a
couple of Federal Reserve interest rate hikes and their potential impact of
slowing corporate earnings growth. But the stock market staged an impressive
rally through the end of the year led by technology shares as the nation's
economy remained strong and investors' fears of Y2K subsided. The trading during
the latter part of this period was characterized by heavy investor demand for
early stage growth companies, particularly technology and communications-related
shares, at the expense of value stocks.
The Series returned 23.80% for the period from inception on July 2, 1999 through
December 31, 1999 and convincingly beat its benchmark, the Russell 2000 Index,
as well as both the S&P 500 and Dow Jones Industrial Average for this period.
This can be attributed to the Series' current heavy technology (40% of issues)
weighting. Leading the Series higher were two software firms, Micromuse (up
233%) and Project Software and Development (up 184%). Ironically the worst
performers were also technology issues with Aeroflex (down 45%) and American
XTAL Technology (down 40%) both having significant declines.
The outlook for U.S. stocks remains bullish as we enter 2000 due in large part
to the booming U.S. economy. While negative factors such as the likelihood of
further Federal Reserve interest rate hikes, lofty valuation levels and the
perceived narrowness of the market may result in a correction sometime during
the next year, the expected continuing strength in U.S. corporate earnings
should ultimately result in higher stock prices.
The Series' ability to identify solid companies, which haven't already had
significant upward price moves, should continue to work well going forward. The
Series' current heavy technology weighting should continue to do well given the
current market conditions. In addition, its exposure to consumer cyclicals,
capital goods, and healthcare should benefit from either a broadening of the
current market rally, or a rotation out of the technology issues that have been
leading the market higher.
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
JNL/FIRST TRUST TARGET SMALL-CAP SERIES AND THE RUSSELL 2000 INDEX
[LINE GRAPH]
<TABLE>
<CAPTION>
JNL/FIRST TRUST TARGET SMALL-CAP
SERIES RUSSELL 2000 INDEX
-------------------------------- ------------------
<S> <C> <C>
7/02/1999 10000 10000
7/31 9780 9749
8/31 9310 9390
9/30 9560 9390
10/31 9650 9430
11/30 10770 10004
12/31/1999 12380 11137
</TABLE>
TOTAL RETURN
FOR THE PERIOD
FROM JULY 2, 1999* TO
DECEMBER 31, 1999.....23.80%
Past performance is not
predictive of future
performance. Investment
return and principal
value will fluctuate so
that an investor's
shares, when redeemed,
may be more or less than
their original cost.
Performance numbers are
net of all Series
operating expenses, but
do not reflect the
deduction of insurance
charges.
- ---------------
* Commencement of operations.
21
<PAGE>
JNL/FIRST TRUST TARGET SMALL-CAP SERIES
FINANCIAL STATEMENTS
(in thousands, except net asset value per share)
Statement of Assets and Liabilities
December 31, 1999
ASSETS
Investments (cost $1,830) $ 2,200
Cash 11
Receivables:
Dividends and interest 1
Fund shares sold 7
--------------
TOTAL ASSETS 2,219
--------------
LIABILITIES
Payables:
Advisory fees 2
Investment securities purchased 117
--------------
TOTAL LIABILITIES 119
--------------
NET ASSETS $ 2,100
==============
NET ASSETS CONSIST OF:
Paid-in capital $ 1,581
Accumulated net investment loss (3)
Accumulated net realized gain on
investments 152
Net unrealized appreciation on investments 370
==============
$ 2,100
==============
SHARES OUTSTANDING (NO PAR VALUE),
UNLIMITED SHARES AUTHORIZED 170
==============
NET ASSET VALUE PER SHARE $ 12.38
==============
Statement of Operations
For the Period Ended December 31, 1999*
INVESTMENT INCOME
Dividends $ 1
Interest 2
--------------
TOTAL INVESTMENT INCOME 3
--------------
EXPENSES
Advisory fees 5
Administrative fees 1
--------------
TOTAL EXPENSES 6
--------------
NET INVESTMENT LOSS (3)
--------------
REALIZED AND UNREALIZED GAIN
Net realized gain on investments 152
Net change in unrealized appreciation
on investments 370
--------------
NET REALIZED AND UNREALIZED GAIN 522
--------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 519
==============
- ------------------------------------------------------------
* For the period beginning July 2, 1999 (commencement of operations).
See notes to the financial statements.
22
<PAGE>
JNL/FIRST TRUST TARGET SMALL-CAP SERIES
Statement of Changes in Net Assets
(in thousands)
PERIOD FROM
JULY 2,
1999* TO
DECEMBER 31,
1999
--------------
OPERATIONS
Net investment loss $ (3)
Net realized gain on investments 152
Net change in unrealized appreciation
on investments 370
--------------
NET INCREASE IN NET ASSETS FROM OPERATIONS 519
--------------
SHARE TRANSACTIONS(1)
Proceeds from the sale of shares 2,874
Cost of shares redeemed (1,293)
--------------
NET INCREASE IN NET ASSETS FROM
SHARE TRANSACTIONS 1,581
--------------
NET INCREASE IN NET ASSETS 2,100
NET ASSETS BEGINNING OF PERIOD -
--------------
NET ASSETS END OF PERIOD $ 2,100
==============
ACCUMULATED NET INVESTMENT LOSS $ (3)
==============
Financial Highlights
PERIOD FROM
JULY 2,
1999* TO
DECEMBER 31,
1999
---------------
SELECTED PER SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
---------------
INCOME (LOSS) FROM OPERATIONS:
Net investment loss (0.02)
Net realized and unrealized gains
on investments 2.40
---------------
Total income from operations 2.38
---------------
NET ASSET VALUE, END OF PERIOD $ 12.38
===============
TOTAL RETURN (A) 23.80%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $ 2,100
Ratio of expenses to average net
assets (b) 0.85%
Ratio of net investment loss to average
net assets (b) (0.39)%
Portfolio turnover 102.50%
- --------------------------------------------------------------------------------
(1)SHARE TRANSACTIONs:
Shares sold 283
Shares redeemed (113)
---------------
Net increase 170
===============
- --------------------------------------------------------------------------------
PURCHASES AND SALES OF INVESTMENT
SECURITIES
(EXCLUDING SHORT-TERM SECURITIES):
Purchases of securities $ 2,890
Proceeds from sales of securities 1,330
- --------------------------------------------------------------------------------
* Commencement of operations.
(a) Assumes investment at net asset value at the beginning of the period and a
complete redemption of the investment at the net asset value at the end of
the period. Total Return is not annualized for periods less than one year.
(b) Annualized for periods less than one year
See notes to the financial statements.
23
<PAGE>
JNL/FIRST TRUST TARGET SMALL-CAP SERIES
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1999
SHARES OR MARKET
PRINCIPAL VALUE
AMOUNT (000'S)
- -----------------------------------------------------------
COMMON STOCKS - 94.64%
AEROSPACE & DEFENSE - 2.18%
REMEC Inc. (a) 1,867 $ 48
AUTOMOBILE - 0.77%
Sonic Automotive Inc. (a) 1,756 17
BUILDING MATERIALS - 2.00%
Elcor Corp. 1,469 44
CHEMICALS - 0.91%
Geon Co. 626 20
COMMERCIAL SERVICES - 8.45%
NCO Group Inc. (a) 1,485 45
Plexus Corp. (a) 801 35
Workflow Management Inc. (a) 3,689 106
-----------
186
COMPUTERS - 10.91%
Bell & Howell Co. (a) 1,373 44
Black Box Corp. (a) 1,055 71
InterVoice-Brite Inc. (a) 5,392 125
-----------
240
DIVERSIFIED FINANCIAL SERVICES -
2.05%
Investment Technology Group Inc. 503 14
Investors Financial Services 664 31
Corp.
-----------
45
ELECTRONICS - 9.50%
Aeroflex Inc. (a) 1,470 15
Artesyn Technologies Inc. (a) 1,782 37
KEMET Corp. (a) 2,404 108
Methode Electronics Inc. - Class 1,519 49
A
-----------
209
ENGINEERING & CONSTRUCTION - 3.09%
Granite Construction Inc. 1,147 21
Insituform Technologies
Inc. - Class A (a) 1,646 47
-----------
68
FOOD - 1.36%
Performance Food Group Co. (a) 1,229 30
SHARES OR MARKET
PRINCIPAL VALUE
AMOUNT (000'S)
- -----------------------------------------------------------
HEALTHCARE - 5.45%
Abbott Laboritories 1,324 $ 48
CONMED Corp. (a) 779 20
ResMed Inc. (a) 1,239 52
-----------
120
MANUFACTURING - 3.55%
Dionex Corp. (a) 1,493 61
Manitowoc Co. Inc. 513 17
-----------
78
MEDIA - 2.18%
Playboy Enterprises - Class B (a) 1,989 48
PHARMACEUTICALS - 1.82%
Advance Paradigm Inc. (a) 1,364 29
Alpharma Inc. - Class A 357 11
-----------
40
RETAIL - 8.96%
Cheesecake Factory Inc. (a) 1,050 37
Insight Enterprises Inc. (a) 2,235 91
Sunglass Hut International Inc.(a) 1,922 22
Urban Outfitters Inc. (a) 1,612 47
-----------
197
SEMICONDUCTORS - 1.96%
American Xtal Technology Inc. (a) 2,439 43
SOFTWARE - 21.68%
Advent Software Inc. (a) 867 56
Ardent Software Inc. (a) 1,772 69
Kronos Inc. (a) 845 51
Micromuse Inc. (a) 1,153 196
Project Software & Development
Inc. (a) 1,899 105
-----------
477
TELECOMMUNICATIONS - 7.82%
AVT Corp. (a) 581 27
Concord Communications Inc. (a) 1,381 61
Nortel Networks Corp. 834 84
-----------
172
-----------
Total Common Stocks
(cost $1,712) 2,082
-----------
See notes to the financial statements.
24
<PAGE>
JNL/FIRST TRUST TARGET SMALL-CAP SERIES
SCHEDULE OF INVESTMENTS (CONTINUED)
SHARES OR MARKET
PRINCIPAL VALUE
AMOUNT (000'S)
- -----------------------------------------------------------
SHORT TERM INVESTMENTS - 5.36%
MONEY MARKET FUNDS - 5.36%
Dreyfus Cash Management Plus,
5.53% (b) $ 101,069 $ 101
Dreyfus Government Cash
Management 16,554 17
5.08% (b)
-----------
Total Short Term Investments
(cost $ 118) 118
-----------
TOTAL INVESTMENTS - 100%
(cost $ 1,830) $
2,200
===========
- --------------------------------------------------------------------------------
(a) Non-income producing security.
(b) Dividend yield changes daily to reflect current market conditions. Rate is
the quoted yield as of December 31, 1999.
See notes to the financial statements.
25
<PAGE>
[FIRST TRUST LOGO] JNL/FIRST TRUST TECHNOLOGY SECTOR SERIES
FIRST TRUST ADVISORS L.P.
TEAM MANAGEMENT
OBJECTIVE:
The investment objective of the JNL/First Trust Technology Sector Series is a
high total return through capital appreciation.
MONEY MANAGER COMMENTARY:
Despite a rising interest rate environment, the second half of 1999 was
generally positive for U.S. stocks. Initially, the stock market suffered through
a correction lasting from mid-July through mid-October as investors digested a
couple of Federal Reserve interest rate hikes and their potential impact of
slowing corporate earnings growth. But the stock market staged an impressive
rally through the end of the year led by technology shares as the nation's
economy remained strong and investors' fears of Y2K subsided. The trading during
the latter part of this period was characterized by heavy investor demand for
early stage growth companies, particularly technology and communications-related
shares, at the expense of value stocks.
The total return for the Series was 53.90% from its inception on July 2, 1999
through December 31, 1999. Its performance slightly lagged the 55.91% returned
by its benchmark, the Morgan Stanley High Tech Index, but greatly outperformed
the S&P 500. Leading the Series higher were impressive gains by the shares of
Check Point Software Technologies, Oracle and Nortel Networks. Holding back the
performance of Series were declines in the share prices of IBM, which blamed Y2K
for a temporary decline in the demand for its products, and ECI Telecom.
We believe that the outlook for U.S. stocks remains bullish as we enter 2000 due
in large part to the booming U.S. economy. While negative factors such as the
likelihood of further Federal Reserve interest rate hikes, lofty valuation
levels and the perceived narrowness of the market may result in a correction
sometime during the next year, the expected continuing strength in U.S.
corporate earnings should ultimately result in higher stock prices. Despite the
potential for near-term volatility, the long-term outlook for technology stocks
remains positive as companies in an increasingly competitive environment
continue to invest heavily in technology to increase productivity and reduce
operating costs.
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
JNL/FIRST TRUST TECHNOLOGY SECTOR SERIES
AND THE MORGAN STANLEY HIGH TECH INDEX
[LINE GRAPH]
<TABLE>
<CAPTION>
JNL/FIRST TRUST TECHNOLOGY SECTOR
SERIES MORGAN STANLEY HIGH TECH INDEX
--------------------------------- ------------------------------
<S> <C> <C>
7/02/1999 10000 10000
7/31 9840 9571
8/31 10410 10108
9/30 10720 10425
10/31 11680 11091
11/30 13030 12997
12/31/1999 15390 15591
</TABLE>
TOTAL RETURN
FOR THE PERIOD
FROM JULY 2, 1999* TO
DECEMBER 31, 1999.....53.90%
Past performance is not
predictive of future
performance. Investment
return and principal
value will fluctuate so
that an investor's
shares, when redeemed,
may be more or less than
their original cost.
Performance numbers are
net of all Series
operating expenses, but
do not reflect the
deduction of insurance
charges.
- ---------------
* Commencement of operations.
26
<PAGE>
JNL/FIRST TRUST TECHNOLOGY SECTOR SERIES
FINANCIAL STATEMENTS
(in thousands, except net asset value per share)
Statement of Assets and Liabilities
December 31, 1999
ASSETS
Investments (cost $7,250) $ 8,548
Receivables:
Dividends and interest 2
Fund shares sold 55
--------------
TOTAL ASSETS 8,605
--------------
LIABILITIES
Cash overdraft 534
Payables:
Advisory fees 4
Administrative fees 1
Fund shares redeemed 46
Investment securities purchased 186
--------------
TOTAL LIABILITIES 771
--------------
NET ASSETS $ 7,834
==============
NET ASSETS CONSIST OF:
Paid-in capital $ 6,062
Accumulated net investment loss (6)
Accumulated net realized gain on 480
investments
Net unrealized appreciation on investments 1,298
==============
$ 7,834
==============
SHARES OUTSTANDING (NO PAR VALUE),
UNLIMITED SHARES AUTHORIZED 509
==============
NET ASSET VALUE PER SHARE $ 15.39
==============
Statement of Operations
For the Period Ended December 31, 1999*
INVESTMENT INCOME
Dividends $ 1
Interest 5
--------------
TOTAL INVESTMENT INCOME 6
--------------
EXPENSES
Advisory fees 11
Administrative fees 1
--------------
TOTAL EXPENSES 12
--------------
NET INVESTMENT LOSS (6)
--------------
REALIZED AND UNREALIZED GAIN
Net realized gain on investments 480
Net change in unrealized appreciation
on investments 1,298
--------------
NET REALIZED AND UNREALIZED GAIN 1,778
--------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 1,772
==============
- ------------------------------------------------------------
* For the period beginning July 2, 1999 (commencement of operations).
See notes to the financial statements.
27
<PAGE>
JNL/FIRST TRUST TECHNOLOGY SECTOR SERIES
Statement of Changes in Net Assets
(in thousands)
PERIOD FROM
JULY 2,
1999* TO
DECEMBER 31,
1999
--------------
OPERATIONS
Net investment loss $ (6)
Net realized gain on investments 480
Net change in unrealized appreciation
on investments 1,298
--------------
NET INCREASE IN NET ASSETS FROM OPERATIONS 1,772
--------------
SHARE TRANSACTIONS(1)
Proceeds from the sale of shares 7,758
Cost of shares redeemed (1,696)
--------------
NET INCREASE IN NET ASSETS FROM
SHARE TRANSACTIONS 6,062
--------------
NET INCREASE IN NET ASSETS 7,834
NET ASSETS BEGINNING OF PERIOD -
--------------
NET ASSETS END OF PERIOD $ 7,834
==============
ACCUMULATED NET INVESTMENT LOSS $ (6)
==============
Financial Highlights
PERIOD FROM
JULY 2,
1999* TO
DECEMBER 31,
1999
---------------
SELECTED PER SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
---------------
INCOME (LOSS) FROM OPERATIONS:
Net investment loss (0.01)
Net realized and unrealized gains
on investments 5.40
---------------
Total income from operations 5.39
---------------
NET ASSET VALUE, END OF PERIOD $ 15.39
===============
TOTAL RETURN (A) 53.90%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $ 7,834
Ratio of expenses to average net
assets (b) 0.85%
Ratio of net investment loss to average
net assets (b) (0.40)%
Portfolio turnover 55.71%
- --------------------------------------------------------------------------------
(1)SHARE TRANSACTIONs:
Shares sold 623
Shares redeemed (114)
--------------
Net increase 509
==============
- --------------------------------------------------------------------------------
PURCHASES AND SALES OF INVESTMENT
SECURITIES
(EXCLUDING SHORT-TERM SECURITIES):
Purchases of securities $ 7,594
Proceeds from sales of securities 1,591
- --------------------------------------------------------------------------------
* Commencement of operations.
(a) Assumes investment at net asset value at the beginning of the period and a
complete redemption of the investment at the net asset value at the end of
the period. Total Return is not annualized for periods less than one year.
(b) Annualized for periods less than one year.
See notes to the financial statements.
28
<PAGE>
JNL/FIRST TRUST TECHNOLOGY SECTOR SERIES
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1999
SHARES OR MARKET
PRINCIPAL VALUE
AMOUNT (000'S)
- ---------------------------------------------------------------
COMMON STOCKS - 91.03%
COMPUTERS - 36.28%
Check Point Software
Technologies Ltd. (a) 3,553 $ 706
Cisco Systems Inc. (a) 3,097 332
Dell Computer Corp. (a) 4,775 243
EMC Corp. (a) 3,385 370
Gateway Inc. (a) 5,916 426
Hewlett-Packard Co. 1,850 211
International Business Machines
Corp. 1,466 158
Sun Microsystems Inc. (a) 5,495 426
Synopsys Inc. (a) 3,434 229
--------------
3,101
ELECTRONICS - 6.43%
Maxim Integrated Products Inc. (a) 5,817 274
Solectron Corp. (a) 2,902 276
--------------
550
SEMICONDUCTORS - 16.65%
Altera Corp. (a) 4,615 229
Applied Materials Inc. (a) 2,785 353
Intel Corp. 3,093 255
Texas Instruments Inc. 2,762 268
Vitesse Semiconductor Corp. (a) 6,066 318
--------------
1,423
SOFTWARE - 19.57%
BMC Software Inc. (a) 3,567 285
Compuware Corp. (a) 6,327 236
Microsoft Corp. (a) 2,160 252
Oracle Corp. (a) 5,224 585
SAP AG - ADR 6,049 315
--------------
1,673
SHARES OR MARKET
PRINCIPAL VALUE
AMOUNT (000'S)
- ---------------------------------------------------------------
TELECOMMUNICATIONS - 12.10%
ECI Telecom Ltd. 5,615 $ 178
Lucent Technologies Inc. 2,780 208
Nortel Networks Corp. 4,505 455
Tellabs Inc. (a) 3,011 193
--------------
1,034
--------------
Total Common Stocks
(cost $6,483) 7,781
--------------
SHORT TERM INVESTMENTS - 8.97%
MONEY MARKET FUNDS - 8.97%
Dreyfus Cash Management Plus,
5.53% (b) 383,602 383
Dreyfus Government Cash
Management, 383,602 384
5.08% (b)
--------------
Total Short Term Investments
(cost $767) 767
--------------
TOTAL INVESTMENTS - 100%
(cost $7,250) $ 8,548
==============
- --------------------------------------------------------------------------------
(a) Non-income producing security.
(b) Dividend yield changes daily to reflect current market conditions. Rate is
the quoted yield as of December 31, 1999.
See notes to the financial statements.
29
<PAGE>
[FIRST TRUST LOGO] JNL/FIRST TRUST PHARMACEUTICAL/HEALTHCARE
SECTOR SERIES
FIRST TRUST ADVISORS L.P.
TEAM MANAGEMENT
OBJECTIVE:
The investment objective of the JNL/First Trust Pharmaceutical/Healthcare Sector
Series is a high total return through capital appreciation and dividend income.
MONEY MANAGER COMMENTARY:
Despite a rising interest rate environment, the second half of 1999 was
generally positive for U.S. stocks. Initially, the stock market suffered through
a correction lasting from mid-July through mid-October as investors digested a
couple of Federal Reserve interest rate hikes and their potential impact of
slowing corporate earnings growth. But the stock market staged an impressive
rally through the end of the year led by technology shares as the nation's
economy remained strong and investors' fears of Y2K subsided. The trading during
the latter part of this period was characterized by heavy investor demand for
early stage growth companies, particularly technology and communications-related
shares, at the expense of value stocks.
The Series declined 2.60% since its inception on July 2, 1999 through December
31, 1999, narrowly beating the 2.71% decline of the Morgan Stanley Health Care
Product Index. The pharmaceutical sector fell out of favor with investors in the
second half of the year with valuations dampened by rising interest rates and
concern surrounding the political environment in Washington. Potential changes
in the Medicare reimbursement system have created concern within the industry
that indirect price controls in the U.S. may be the result of direct
reimbursement for Medicare recipients. Gains from Jones Pharma and biotech firms
Amgen and Biogen aided the Series' results while losses from American Home
Products, Cardinal Health and Healthsouth hindered the Series' performance.
We believe that the outlook for U.S. stocks remains bullish as we enter 2000 due
in large part to the booming U.S. economy. While negative factors such as the
likelihood of further Federal Reserve interest rate hikes, lofty valuation
levels and the perceived narrowness of the market may result in a correction
sometime during the next year, the expected continuing strength in U.S.
corporate earnings should ultimately result in higher stock prices. We continue
to believe that the long-term outlook for pharmaceutical and healthcare stocks
remains highly favorable due to an aging baby boomer generation, improving
access to physicians and patient services and the rapid pace of scientific
discoveries. In particular, shares of medical devices, medical supplies and
pharmaceutical companies should benefit as consumers and health insurance
providers continue to search for cost effective methods of health improvement.
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
JNL/FIRST TRUST PHARMACEUTICAL/HEALTHCARE SECTOR SERIES AND THE
MORGAN STANLEY HEALTH CARE PRODUCT INDEX
[LINE GRAPH]
<TABLE>
<CAPTION>
JNL/FIRST TRUST
PHARMACEUTICAL/HEALTHCARE SECTOR MORGAN STANLEY HEALTH CARE
SERIES PRODUCT INDEX
-------------------------------- --------------------------
<S> <C> <C>
7/02/1999 10000 10000
7/31 9500 9818
8/31 9590 9975
9/30 9080 9117
10/31 9370 9477
11/30 9880 9773
12/31/1999 9740 9729
</TABLE>
TOTAL RETURN
FOR THE PERIOD
FROM JULY 2, 1999* TO
DECEMBER 31, 1999.....-2.60%
Past performance is not
predictive of future
performance. Investment
return and principal
value will fluctuate so
that an investor's
shares, when redeemed,
may be more or less than
their original cost.
Performance numbers are
net of all Series
operating expenses, but
do not reflect the
deduction of insurance
charges.
- ---------------
* Commencement of operations.
30
<PAGE>
JNL/FIRST TRUST PHARMACEUTICAL/HEALTHCARE SECTOR SERIES
FINANCIAL STATEMENTS
(in thousands, except net asset value per share)
Statement of Assets and Liabilities
December 31, 1999
ASSETS
Investments (cost $4,248) $ 4,360
Receivables:
Dividends and interest 3
Fund shares sold 21
--------------
TOTAL ASSETS 4,384
--------------
LIABILITIES
Cash overdraft 206
Payables:
Advisory fees 3
Fund shares redeemed 5
Investment securities purchased 124
--------------
TOTAL LIABILITIES 338
--------------
NET ASSETS $ 4,046
==============
NET ASSETS CONSIST OF:
Paid-in capital $ 4,013
Undistributed net investment income 1
Accumulated net realized loss
on investments (80)
Net unrealized appreciation on investments 112
==============
$ 4,046
==============
SHARES OUTSTANDING (NO PAR VALUE),
UNLIMITED SHARES AUTHORIZED 415
==============
NET ASSET VALUE PER SHARE $ 9.74
==============
Statement of Operations
For the Period Ended December 31, 1999*
INVESTMENT INCOME
Dividends $ 6
Interest 4
--------------
TOTAL INVESTMENT INCOME 10
--------------
EXPENSES
Advisory fees 8
Administrative fees 1
--------------
TOTAL EXPENSES 9
--------------
NET INVESTMENT INCOME 1
--------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized loss on investments (80)
Net change in unrealized appreciation
on investments 112
--------------
NET REALIZED AND UNREALIZED GAIN 32
--------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 33
==============
- ------------------------------------------------------------
* For the period beginning July 2, 1999 (commencement of operations).
See notes to the financial statements.
31
<PAGE>
JNL/FIRST TRUST PHARMACEUTICAL/HEALTHCARE SECTOR SERIES
Statement of Changes in Net Assets
(in thousands)
PERIOD FROM
JULY 2,
1999* TO
DECEMBER 31,
1999
--------------
OPERATIONS
Net investment income $ 1
Net realized loss on investments (80)
Net change in unrealized appreciation
on investments 112
--------------
NET INCREASE IN NET ASSETS FROM OPERATIONS 33
--------------
SHARE TRANSACTIONS(1)
Proceeds from the sale of shares 5,116
Cost of shares redeemed (1,103)
--------------
NET INCREASE IN NET ASSETS FROM
SHARE TRANSACTIONS 4,013
--------------
NET INCREASE IN NET ASSETS 4,046
NET ASSETS BEGINNING OF PERIOD -
--------------
NET ASSETS END OF PERIOD $ 4,046
==============
UNDISTRIBUTED NET INVESTMENT INCOME $ 1
==============
Financial Highlights
PERIOD FROM
JULY 2,
1999* TO
DECEMBER 31,
1999
---------------
SELECTED PER SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
---------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income -
Net realized and unrealized loss
on investments (0.26)
---------------
Total loss from operations (0.26)
---------------
NET ASSET VALUE, END OF PERIOD $ 9.74
===============
TOTAL RETURN (A) (2.60)%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $ 4,046
Ratio of expenses to average net
assets (b) 0.85%
Ratio of net investment income to
average net assets (b) 0.15%
Portfolio turnover 58.91%
- --------------------------------------------------------------------------------
(1)SHARE TRANSACTIONs:
Shares sold 532
Shares redeemed (117)
--------------
Net increase 415
==============
- --------------------------------------------------------------------------------
PURCHASES AND SALES OF INVESTMENT
SECURITIES
(EXCLUDING SHORT-TERM SECURITIES):
Purchases of securities $ 5,109
Proceeds from sales of securities 1,127
- --------------------------------------------------------------------------------
* Commencement of operations.
(a) Assumes investment at net asset value at the beginning of the period and a
complete redemption of the investment at the net asset value at the end of
the period. Total Return is not annualized for periods less than one year.
(b) Annualized for periods less than one year.
See notes to the financial statements.
32
<PAGE>
JNL/FIRST TRUST PHARMACEUTICAL/HEALTHCARE SECTOR SERIES
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1999
SHARES OR MARKET
PRINCIPAL VALUE
AMOUNT (000'S)
- ---------------------------------------------------------------
COMMON STOCKS - 92.06%
BIOTECHNOLOGY - 15.39%
Amgen Inc. (a) 5,292 $ 318
Biogen Inc. (a) 2,583 218
Genzyme Corp. (a) 3,009 135
--------------
671
HEALTHCARE - 12.04%
Becton, Dickinson and Co. 5,046 135
HealthSouth Corp. (a) 10,542 57
Health Management Associates
Inc. (a) 13,629 182
Medtronic Inc. 4,150 151
--------------
525
PHARMACEUTICALS - 64.63%
Abbott Laboratories 3,494 127
American Home Products Corp. 3,007 119
Bristol-Myers Squibb Co. 2,254 145
Cardinal Health Inc. 2,559 123
Elan Corp. Plc. - ADR (a) 5,758 170
Eli Lilly and Co. 2,360 157
Glaxo Wellcome Plc - ADR 2,776 155
Johnson & Johnson 1,695 158
Jones Pharma Inc. 6145 267
Merck & Co. Inc. 2,199 147
Mylan Laboratories Inc. 6,084 153
Novartis AG - ADR 2,080 152
Pfizer Inc. 4,574 148
Roche Holdings AG - ADR 1,479 175
Schering-Plough Corp. 3,167 134
SmithKline Beecham Plc - ADR 2,334 150
Warner-Lambert Co. 2,454 201
Watson Pharmaceuticals Inc. (a) 3,832 137
--------------
2,818
--------------
Total Common Stocks
(cost $3,902) 4,014
--------------
SHARES OR MARKET
PRINCIPAL VALUE
AMOUNT (000'S)
- ---------------------------------------------------------------
SHORT TERM INVESTMENTS - 7.94%
MONEY MARKET FUNDS - 7.94%
Dreyfus Cash Management Plus,
5.53% (b) 198,414 $ 199
Dreyfus Government Cash
Management, 147,232 147
5.08% (b)
--------------
Total Short Term Investments
(cost $346) 346
--------------
TOTAL INVESTMENTS - 100%
(cost $4,248) $ 4,360
==============
- --------------------------------------------------------------------------------
(a) Non-income producing security.
(b) Dividend yield changes daily to reflect current market conditions. Rate is
the quoted yield as of December 31, 1999.
See notes to the financial statements.
33
<PAGE>
[FIRST TRUST LOGO] JNL/FIRST TRUST FINANCIAL SECTOR SERIES
FIRST TRUST ADVISORS L.P.
TEAM MANAGEMENT
OBJECTIVE:
The investment objective of the JNL/First Trust Financial Sector Series is a
high total return through capital appreciation and dividend income.
MONEY MANAGER COMMENTARY:
Despite a rising interest rate environment, the second half of 1999 was
generally positive for U.S. stocks. Initially, the stock market suffered through
a correction lasting from mid-July through mid-October as investors digested a
couple of Federal Reserve interest rate hikes and their potential impact of
slowing corporate earnings growth. But the stock market staged an impressive
rally through the end of the year led by technology shares as the nation's
economy remained strong and investors' fears of Y2K subsided. The trading during
the latter part of this period was characterized by heavy investor demand for
early stage growth companies, particularly technology and communications-related
shares, at the expense of value stocks.
The rising interest rate environment that prevailed over the second half of 1999
did not favor financial services stocks. Three successive interest rate hikes by
the Federal Reserve, done to preempt inflationary pressures, drove investors
away from interest-rate sensitive stocks. Bank shares in particular slumped as
investors feared that a higher cost of funds would soon squeeze earnings and
that nine years into economic expansion, asset quality might begin to suffer.
Insurance stocks slumped in a difficult competitive environment, leaving many
property/casualty companies trading below book value. Conversely, investment
services shares performed well, supported by solid fundamentals as equity
underwriting and equity trading levels were extremely strong.
The Series returned -10.30% versus -9.23% for its benchmark, the S&P Financials
Index for the period from inception on July 2, 1999 through December 31, 1999. A
bias in the market toward the largest capitalization financial issues favored
the capitalization-weighted index while the Series began the period equally
weighted. Among individual stocks in the Series, mortgage insurer MGIC
Investment Corporation was the top performer, buoyed by quarterly earnings that
exceeded expectations. Investment banks Morgan Stanley Dean Witter and Lehman
Brothers also performed well amidst strong business conditions. Mortgage lender
Countrywide Credit Industries did not fare well, however, as a slowing housing
market hurt its earnings.
We believe that the outlook for U.S. stocks remains bullish as we enter 2000 due
in large part to the booming U.S. economy. While negative factors such as the
likelihood of further Federal Reserve interest rate hikes, lofty valuation
levels and the perceived narrowness of the market may result in a correction
sometime during the next year, the expected continuing strength in U.S.
corporate earnings should ultimately result in higher stock prices. We are
positive on the outlook for financial stocks as there are presently exceptional
values within the industry relative to the broader market. The new Financial
Services Modernization bill (HR10), which replaces the old Glass-Steagall laws,
may accelerate the pace of consolidation within the industry. Also, the Internet
is making its impact felt in financial services, revolutionizing marketing and
distribution practices. Finally, demographic trends are expected to increase
demand for financial services over time.
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
JNL/FIRST TRUST FINANCIAL SECTOR SERIES AND THE S&P FINANCIALS INDEX
[LINE GRAPH]
<TABLE>
<CAPTION>
JNL/FIRST TRUST FINANCIAL SECTOR
SERIES S&P FINANCIALS INDEX
-------------------------------- --------------------
<S> <C> <C>
7/02/1999 10000 10000
7/31 9050 9238
8/31 8510 8813
9/30 8160 8347
10/31 9650 9724
11/30 9040 9260
12/31/1999 8970 9077
</TABLE>
TOTAL RETURN
FOR THE PERIOD
FROM JULY 2, 1999* TO
DECEMBER 31, 1999....-10.30%
Past performance is not
predictive of future
performance. Investment
return and principal
value will fluctuate so
that an investor's
shares, when redeemed,
may be more or less than
their original cost.
Performance numbers are
net of all Series
operating expenses, but
do not reflect the
deduction of insurance
charges.
- ---------------
* Commencement of operations.
34
<PAGE>
JNL/FIRST TRUST FINANCIAL SECTOR SERIES
FINANCIAL STATEMENTS
(in thousands, except net asset value per share)
Statement of Assets and Liabilities
December 31, 1999
ASSETS
Investments (cost $ 2,640) $ 2,666
Receivables:
Dividends and interest 3
Fund shares sold 17
--------------
TOTAL ASSETS 2,686
--------------
LIABILITIES
Cash overdraft 98
Payables:
Advisory fees 2
Investment securities purchased 90
--------------
TOTAL LIABILITIES 190
--------------
NET ASSETS $ 2,496
==============
NET ASSETS CONSIST OF:
Paid-in capital $ 2,604
Undistributed net investment income 6
Accumulated net realized loss
on investments (140)
Net unrealized appreciation on investments 26
==============
$ 2,496
==============
SHARES OUTSTANDING (NO PAR VALUE),
UNLIMITED SHARES AUTHORIZED 278
==============
NET ASSET VALUE PER SHARE $ 8.97
==============
Statement of Operations
For the Period Ended December 31, 1999*
INVESTMENT INCOME
Dividends $ 10
Interest 3
--------------
TOTAL INVESTMENT INCOME 13
--------------
EXPENSES
Advisory fees 6
Administrative fees 1
--------------
TOTAL EXPENSES 7
--------------
NET INVESTMENT INCOME 6
--------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized loss on investments (140)
Net change in unrealized appreciation
on investments 26
--------------
NET REALIZED AND UNREALIZED LOSS (114)
--------------
NET DECREASE IN NET ASSETS FROM OPERATIONS $ (108)
==============
- ------------------------------------------------------------
* For the period beginning July 2, 1999 (commencement of operations).
See notes to the financial statements.
35
<PAGE>
JNL/FIRST TRUST FINANCIAL SECTOR SERIES
Statement of Changes in Net Assets
(in thousands)
PERIOD FROM
JULY 2,
1999* TO
DECEMBER 31,
1999
--------------
OPERATIONS
Net investment income $ 6
Net realized loss on investments (140)
Net change in unrealized appreciation
on investments 26
--------------
NET DECREASE IN NET ASSETS FROM OPERATIONS (108)
--------------
SHARE TRANSACTIONS(1)
Proceeds from the sale of shares 3,555
Cost of shares redeemed (951)
--------------
NET INCREASE IN NET ASSETS FROM
SHARE TRANSACTIONS 2,604
--------------
NET INCREASE IN NET ASSETS 2,496
NET ASSETS BEGINNING OF PERIOD -
--------------
NET ASSETS END OF PERIOD $ 2,496
==============
UNDISTRIBUTED NET INVESTMENT INCOME $ 6
==============
Financial Highlights
PERIOD FROM
JULY 2,
1999* TO
DECEMBER 31,
1999
---------------
SELECTED PER SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
---------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income 0.02
Net realized and unrealized loss
on investments (1.05)
---------------
Total loss from operations (1.03)
---------------
NET ASSET VALUE, END OF PERIOD $ 8.97
===============
TOTAL RETURN (A) (10.30)%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $ 2,496
Ratio of expenses to average net
assets (b) 0.85%
Ratio of net investment income to
average net assets (b) 0.73%
Portfolio turnover 61.54%
- --------------------------------------------------------------------------------
(1)SHARE TRANSACTIONs:
Shares sold 387
Shares redeemed (109)
--------------
Net increase 278
==============
PURCHASES AND SALES OF INVESTMENT
SECURITIES
(EXCLUDING SHORT-TERM SECURITIES):
Purchases of securities $ 3,434
Proceeds from sales of securities 868
- --------------------------------------------------------------------------------
* Commencement of operations.
(a) Assumes investment at net asset value at the beginning of the period and a
complete redemption of the investment at the net asset value at the end of
the period. Total Return is not annualized for periods less than one year.
(b) Annualized for periods less than one year.
See notes to the financial statements.
36
<PAGE>
JNL/FIRST TRUST FINANCIAL SECTOR SERIES
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1999
SHARES OR MARKET
PRINCIPAL VALUE
AMOUNT (000'S)
- ---------------------------------------------------------------
COMMON STOCKS - 91.97%
BANKS - 16.39%
Bank of America Corp. 1,209 $ 61
Chase Manhattan Corp. 1,063 83
Fleet Boston Corp. 2,021 70
State Street Corp. 1,062 78
U.S. Bancorp 2,665 63
Wells Fargo Co. 2,036 82
--------------
437
DIVERSIFIED FINANCIAL SERVICES -
53.30%
American Express Co. 657 109
Capital One Financial Corp. 1,721 83
Charles Schwab Corp. 1,820 70
Citigroup Inc. 1,880 104
Countrywide Credit Industries
Inc. 2,118 53
Freddie Mac 1,623 76
Fannie Mae 1,388 87
Franklin Resources Inc. 2,297 74
Household International Inc. 1,911 71
Lehman Brothers Holdings Inc. 1,299 110
MBNA Corp. 2,866 78
MGIC Investment Corp. 1,924 116
Merrill Lynch & Co. Inc. 1,156 97
Morgan Stanley Dean Witter & Co. 777 111
Providian Financial Corp. 1,031 94
T. Rowe Price Associates Inc. 2,373 88
--------------
1,421
SHARES OR MARKET
PRINCIPAL VALUE
AMOUNT (000'S)
- ---------------------------------------------------------------
INSURANCE - 17.48%
AFLAC Inc. 1,905 $ 90
AXA Financial Inc. 2,648 90
Allstate Corp. 2,467 59
American International Group Inc. 908 98
Chubb Corp. 1,233 69
Progressive Corp. 815 60
--------------
466
SAVINGS & LOANS - 4.80%
Charter One Financial Inc. 3,430 66
Washington Mutual Inc. 2,393 62
--------------
128
--------------
Total Common Stocks
(cost $ 2,426) 2,452
--------------
SHORT TERM INVESTMENTS - 8.03%
MONEY MARKET FUNDS - 8.03%
Dreyfus Cash Management Plus,
5.53% (a) 118,585 118
Dreyfus Government Cash
Management, 5.08% (a) 95,800 96
--------------
Total Short Term Investments
(cost $ 214) 214
--------------
TOTAL INVESTMENTS - 100%
(cost $ 2,640) $ 2,666
==============
- --------------------------------------------------------------------------------
(a) Dividend yield changes daily to reflect current market conditions. Rate is
the quoted yield as of December 31, 1999.
See notes to the financial statements.
37
<PAGE>
[FIRST TRUST LOGO] JNL/FIRST TRUST ENERGY SECTOR SERIES
FIRST TRUST ADVISORS L.P.
TEAM MANAGEMENT
OBJECTIVE:
The investment objective of the JNL/First Trust Energy Sector Series is a high
total return through capital appreciation and dividend income.
MONEY MANAGER COMMENTARY:
Despite a rising interest rate environment, the second half of 1999 was
generally positive for U.S. stocks. Initially, the stock market suffered through
a correction lasting from mid-July through mid-October as investors digested a
couple of Federal Reserve interest rate hikes and their potential impact of
slowing corporate earnings growth. But the stock market staged an impressive
rally through the end of the year led by technology shares as the nation's
economy remained strong and investors' fears of Y2K subsided. The trading during
the latter part of this period was characterized by heavy investor demand for
early stage growth companies, particularly technology and communications-related
shares, at the expense of value stocks.
From its inception on July 2, 1999, through December 31, 1999, the total return
for the Series was 2.70%, compared to 0.64% for its benchmark, the AMEX Deutsche
Bank Energy Index. Despite improving fundamentals due to rising energy prices,
shares of energy-related companies traded relatively flat during the second half
of the year. Energy prices continued to rise during the second half of 1999 with
the price of crude oil increasing from under $20 a barrel at the beginning of
the third quarter to over $25 a barrel at the end of the fourth quarter due to
sustained production cuts from OPEC members.
We believe that the outlook for U.S. stocks remains bullish as we enter 2000 due
in large part to the booming U.S. economy. While negative factors such as the
likelihood of further Federal Reserve interest rate hikes, lofty valuation
levels and the perceived narrowness of the market may result in a correction
sometime during the next year, the expected continuing strength in U.S.
corporate earnings should ultimately result in higher stock prices. The outlook
for the energy sector appears solid with the 3rd quarter likely marking the
trough for earnings for energy companies. Profits for energy companies are
expected to increase going forward as the recent increases in energy prices are
felt throughout the industry through increased activity in exploration and
drilling.
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
JNL/FIRST TRUST ENERGY SECTOR SERIES AND THE AMEX DEUTSCHE BANK ENERGY INDEX
[LINE GRAPH]
<TABLE>
<CAPTION>
JNL/FIRST TRUST ENERGY SECTOR AMEX DEUTSCHE BANK ENERGY
SERIES INDEX
----------------------------- -------------------------
<S> <C> <C>
7/02/1999 10000 10000
7/31 10220 10358
8/31 10720 10626
9/30 9950 10154
10/31 9730 9933
11/30 9830 10097
12/31/1999 10270 10064
</TABLE>
TOTAL RETURN
FOR THE PERIOD
FROM JULY 2, 1999* TO
DECEMBER 31, 1999......2.70%
Past performance is not
predictive of future
performance. Investment
return and principal
value will fluctuate so
that an investor's
shares, when redeemed,
may be more or less than
their original cost.
Performance numbers are
net of all Series
operating expenses, but
do not reflect the
deduction of insurance
charges.
- ---------------
* Commencement of operations.
38
<PAGE>
JNL/FIRST TRUST ENERGY SECTOR SERIES
FINANCIAL STATEMENTS
(in thousands, except net asset value per share)
Statement of Assets and Liabilities
December 31, 1999
ASSETS
Investments (cost $798) $ 837
Cash 6
Receivable:
Dividends and interest 1
--------------
TOTAL ASSETS 844
--------------
LIABILITIES
Payables:
Advisory fees 1
Investment securities purchased 81
--------------
TOTAL LIABILITIES 82
--------------
NET ASSETS $ 762
==============
NET ASSETS CONSIST OF:
Paid-in capital $ 767
Undistributed net investment income 3
Accumulated net realized loss
on investments (47)
Net unrealized appreciation on investments 39
==============
$ 762
==============
SHARES OUTSTANDING (NO PAR VALUE),
UNLIMITED SHARES AUTHORIZED 74
==============
NET ASSET VALUE PER SHARE $ 10.27
==============
Statement of Operations
For the Period Ended December 31, 1999*
INVESTMENT INCOME
Dividends $ 6
Interest 2
--------------
TOTAL INVESTMENT INCOME 8
--------------
EXPENSES
Advisory fees 4
Administrative fees 1
--------------
TOTAL EXPENSES 5
--------------
NET INVESTMENT INCOME 3
--------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized loss on investments (47)
Net change in unrealized appreciation
on investments 39
--------------
NET REALIZED AND UNREALIZED LOSS (8)
--------------
NET DECREASE IN NET ASSETS FROM OPERATIONS $ (5)
==============
- ------------------------------------------------------------
* For the period beginning July 2, 1999 (commencement of operations).
See notes to the financial statements.
39
<PAGE>
JNL/FIRST TRUST ENERGY SECTOR SERIES
Statement of Changes in Net Assets
(in thousands)
PERIOD FROM
JULY 2,
1999* TO
DECEMBER 31,
1999
--------------
OPERATIONS
Net investment income $ 3
Net realized loss on investments (47)
Net change in unrealized appreciation
on investments 39
--------------
NET DECREASE IN NET ASSETS FROM OPERATIONS (5)
--------------
SHARE TRANSACTIONS(1)
Proceeds from the sale of shares 1,747
Cost of shares redeemed (980)
--------------
NET INCREASE IN NET ASSETS FROM
SHARE TRANSACTIONS 767
--------------
NET INCREASE IN NET ASSETS 762
NET ASSETS BEGINNING OF PERIOD -
--------------
NET ASSETS END OF PERIOD $ 762
==============
UNDISTRIBUTED NET INVESTMENT INCOME $
3
==============
Financial Highlights
PERIOD FROM
JULY 2,
1999* TO
DECEMBER 31,
1999
---------------
SELECTED PER SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
---------------
INCOME FROM OPERATIONS:
Net investment income 0.04
Net realized and unrealized gain
on investments 0.23
---------------
Total income from operations 0.27
---------------
NET ASSET VALUE, END OF PERIOD $ 10.27
===============
TOTAL RETURN (A) 2.70%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $ 762
Ratio of expenses to average net
assets (b) 0.85%
Ratio of net investment income to
average net assets (b) 0.47%
Portfolio turnover 103.06%
- --------------------------------------------------------------------------------
(1)SHARE TRANSACTIONs:
Shares sold 176
Shares redeemed (102)
--------------
Net increase 74
==============
- --------------------------------------------------------------------------------
PURCHASES AND SALES OF INVESTMENT
SECURITIES
(EXCLUDING SHORT-TERM SECURITIES):
Purchases of securities $ 1,733
Proceeds from sales of securities 964
- --------------------------------------------------------------------------------
* Commencement of operations.
(a) Assumes investment at net asset value at the beginning of the period and a
complete redemption of the investment at the net asset value at the end of
the period. Total Return is not annualized for periods less than one year.
(b) Annualized for periods less than one year.
See notes to the financial statements.
40
<PAGE>
JNL/FIRST TRUST ENERGY SECTOR SERIES
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1999
SHARES OR MARKET
PRINCIPAL VALUE
AMOUNT (000'S)
- ---------------------------------------------------------------
COMMON STOCKS - 90.92%
OIL FIELD SERVICES - 24.13%
BJ Services Co. (a) 978 $ 41
Baker Hughs Inc. 883 19
Cooper Cameron Corp. (a) 775 38
Global Industries Ltd. (a) 2,301 20
Halliburton Co. 648 26
Petroleum Geo-Services ASA - ADR (a) 1,798 32
Schlumberger Ltd. 457 26
--------------
202
OIL & GAS PRODUCERS - 66.79%
BP Amoco Plc - ADR 499 30
Barrett Resources Corp. (a) 737 22
Chevron Corp. 302 26
Diamond Offshore Drilling Inc. 1,036 32
ENI SpA- ADR 440 24
EL Paso Energy Corp. 758 29
Enron Corp. 679 30
Exxon Mobil Corp. 359 29
Global Marine Inc. (a) 1,879 31
Nabors Industries Inc. (a) 1,246 38
Noble Drilling Corp. 1,515 50
Royal Dutch Petroleum Co. - NY
Shares 461 28
Santa Fe International Corp. 1,251 32
Texaco Inc. 448 24
Tidewater Inc. 967 35
Total Fina SA - ADR 430 30
Transocean Sedco Forex Inc. 1,172 39
Vastar Resources Inc. 512 30
--------------
559
--------------
Total Common Stocks
(cost $ 722) 761
--------------
SHARES OR MARKET
PRINCIPAL VALUE
AMOUNT (000'S)
- ---------------------------------------------------------------
SHORT TERM INVESTMENTS - 9.08%
MONEY MARKET FUNDS - 9.08%
Dreyfus Cash Management Plus,
5.53% (b) 37,783 $ 38
Dreyfus Government Cash
Management, 37,783 38
5.08% (b)
--------------
Total Short Term Investments
(cost $ 76) 76
--------------
TOTAL INVESTMENTS - 100%
(cost $ 798) $ 837
==============
- --------------------------------------------------------------------------------
(a) Non-income producing security.
(b) Dividend yield changes daily to reflect current market conditions. Rate is
the quoted yield as of December 31, 1999.
See notes to the financial statements.
41
<PAGE>
[FIRST TRUST LOGO] JNL/FIRST TRUST LEADING BRANDS SECTOR SERIES
FIRST TRUST ADVISORS L.P.
TEAM MANAGEMENT
OBJECTIVE:
The investment objective of the JNL/First Trust Leading Brands Sector Series is
a high total return through capital appreciation and dividend income.
MONEY MANAGER COMMENTARY:
Despite a rising interest rate environment, the second half of 1999 was
generally positive for U.S. stocks. Initially, the stock market suffered through
a correction lasting from mid-July through mid-October as investors digested a
couple of Federal Reserve interest rate hikes and their potential impact of
slowing corporate earnings growth. But the stock market staged an impressive
rally through the end of the year led by technology shares as the nation's
economy remained strong and investors' fears of Y2K subsided. The trading during
the latter part of this period was characterized by heavy investor demand for
early stage growth companies, particularly technology and communications-related
shares, at the expense of value stocks.
From its inception on July 2, 1999 through December 31, 1999, the total return
for the Series was -4.50%, compared to -4.15% for its benchmark, the Morgan
Stanley Consumer Index. The second half of 1999 was a difficult period for
consumer growth stocks such as leading brands companies as investors rotated
away from their consistent earnings growth toward the greater growth prospects
of technology and communications-related shares. Also, higher long-term interest
rates took a toll on leading brand companies. Hindering the Series' performance
were losses in food processors, H.J. Heinz and Sara Lee; apparel manufacturer,
Tommy Hilfiger; and pharmaceutical giant, Bristol-Myers Squibb. The Series
benefited from the relative strength of apparel retailer, The Gap, and household
products companies including Clorox, Colgate-Palmolive, Kimberly-Clark and
Procter & Gamble.
We believe that the outlook for U.S. stocks remains bullish as we enter 2000 due
in large part to the booming U.S. economy. While negative factors such as the
likelihood of further Federal Reserve interest rate hikes, lofty valuation
levels and the perceived narrowness of the market may result in a correction
sometime during the next year, the expected continuing strength in U.S.
corporate earnings should ultimately result in higher stock prices. We remain
confident that both growth and value investors will be attracted to the
relatively stable earnings streams of the best leading brands companies
particularly if the nation's economy slows to more a historic growth rate.
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
JNL/FIRST TRUST LEADING BRANDS SECTOR SERIES AND THE
MORGAN STANLEY CONSUMER INDEX
[LINE GRAPH]
<TABLE>
<CAPTION>
JNL/FIRST TRUST LEADING BRANDS
SECTOR SERIES MORGAN STANLEY CONSUMER INDEX
------------------------------ -----------------------------
<S> <C> <C>
7/02/1999 10000 10000
7/31 9730 9657
8/31 9640 9528
9/30 8820 8885
10/31 9540 9652
11/30 9660 9716
12/31/1999 9550 9585
</TABLE>
TOTAL RETURN
FOR THE PERIOD
FROM JULY 2, 1999* TO
DECEMBER 31, 1999.....-4.50%
Past performance is not
predictive of future
performance. Investment
return and principal
value will fluctuate so
that an investor's
shares, when redeemed,
may be more or less than
their original cost.
Performance numbers are
net of all Series
operating expenses, but
do not reflect the
deduction of insurance
charges.
- ---------------
* Commencement of operations.
42
<PAGE>
JNL/FIRST TRUST LEADING BRANDS SECTOR SERIES
FINANCIAL STATEMENTS
(in thousands, except net asset value per share)
Statement of Assets and Liabilities
December 31, 1999
ASSETS
Investments (cost $1,702) $ 1,733
Receivables:
Dividends and interest 3
Fund shares sold 1
--------------
TOTAL ASSETS 1,737
--------------
LIABILITIES
Payables:
Advisory fees 2
Investment securities purchased 62
--------------
TOTAL LIABILITIES 64
--------------
NET ASSETS $ 1,673
==============
NET ASSETS CONSIST OF:
Paid-in capital $ 1,708
Undistributed net investment income 5
Accumulated net realized loss
on investments (71)
Net unrealized appreciation on investments 31
==============
$ 1,673
==============
SHARES OUTSTANDING (NO PAR VALUE),
UNLIMITED SHARES AUTHORIZED 175
==============
NET ASSET VALUE PER SHARE $ 9.55
==============
Statement of Operations
For the Period Ended December 31, 1999*
INVESTMENT INCOME
Dividends $ 9
Interest 2
--------------
TOTAL INVESTMENT INCOME 11
--------------
EXPENSES
Advisory fees 5
Administrative fees 1
--------------
TOTAL EXPENSES 6
--------------
NET INVESTMENT INCOME 5
--------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized loss on investments (71)
Net change in unrealized appreciation
on investments 31
--------------
NET REALIZED AND UNREALIZED LOSS (40)
--------------
NET DECREASE IN NET ASSETS FROM OPERATIONS $ (35)
==============
- ------------------------------------------------------------
* For the period beginning July 2, 1999 (commencement of operations).
See notes to the financial statements.
43
<PAGE>
JNL/FIRST TRUST LEADING BRANDS SECTOR SERIES
Statement of Changes in Net Assets
(in thousands)
PERIOD FROM
JULY 2,
1999* TO
DECEMBER 31,
1999
--------------
OPERATIONS
Net investment income $ 5
Net realized loss on investments (71)
Net change in unrealized appreciation
on investments 31
--------------
NET DECREASE IN NET ASSETS FROM OPERATIONS (35)
--------------
SHARE TRANSACTIONS(1)
Proceeds from the sale of shares 2,722
Cost of shares redeemed (1,014)
--------------
NET INCREASE IN NET ASSETS FROM
SHARE TRANSACTIONS 1,708
--------------
NET INCREASE IN NET ASSETS 1,673
NET ASSETS BEGINNING OF PERIOD -
--------------
NET ASSETS END OF PERIOD $ 1,673
==============
UNDISTRIBUTED NET INVESTMENT INCOME $ 5
==============
Financial Highlights
PERIOD FROM
JULY 2,
1999* TO
DECEMBER 31,
1999
---------------
SELECTED PER SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
---------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income 0.03
Net realized and unrealized loss
on investments (0.48)
---------------
Total loss from operations (0.45)
---------------
NET ASSET VALUE, END OF PERIOD $ 9.55
===============
TOTAL RETURN (A) (4.50)%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $ 1,673
Ratio of expenses to average net
assets (b) 0.85%
Ratio of net investment income to
average net assets (b) 0.76%
Portfolio turnover 98.23%
- --------------------------------------------------------------------------------
(1)SHARE TRANSACTIONs:
Shares sold 282
Shares redeemed (107)
--------------
Net increase 175
==============
- --------------------------------------------------------------------------------
PURCHASES AND SALES OF INVESTMENT
SECURITIES
(EXCLUDING SHORT-TERM SECURITIES):
Purchases of securities $ 2,856
Proceeds from sales of securities 1,168
- --------------------------------------------------------------------------------
* Commencement of operations.
(a) Assumes investment at net asset value at the beginning of the period and a
complete redemption of the investment at the net asset value at the end of
the period. Total Return is not annualized for periods less than one year.
(b) Annualized for periods less than one year.
See notes to the financial statements.
44
<PAGE>
JNL/FIRST TRUST LEADING BRANDS SECTOR SERIES
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1999
SHARES OR MARKET
PRINCIPAL VALUE
AMOUNT (000'S)
- ---------------------------------------------------------------
COMMON STOCKS - 95.10%
AUTO MANUFACTURERS - 3.58%
Ford Motor Co. 1,160 $ 62
BEVERAGES - 11.48%
Anheuser-Busch Cos. Inc. 893 63
Coca-Cola Co. 1,217 71
PepsiCo Inc. 1,832 65
--------------
199
COMPUTERS - 4.10%
Dell Computer Corp. (a) 1,386 71
COSMETICS & PERSONAL CARE - 16.73%
Colgate-Palmolive Co. 1,182 77
Gillette Co. 1,661 68
Kimberly-Clark Corp. 1,154 75
Procter & Gamble Co. 643 70
--------------
290
FOOD - 9.69%
H.J. Heinz Co. 1,358 54
Hershey Foods Corp. 1,240 59
Sara Lee Corp. 2,472 55
--------------
168
HOUSEHOLD PRODUCTS - 8.25%
Clorox Co. 1,557 78
Dial Corp. 2,683 65
--------------
143
LEISURE TIME - 8.02%
Carnival Corp. 1,483 71
Harley-Davidson Inc. 1,060 68
--------------
139
SHARES OR MARKET
PRINCIPAL VALUE
AMOUNT (000'S)
- ---------------------------------------------------------------
MEDIA - 4.16%
Walt Disney Co. 2,467 $ 72
PHARMACEUTICALS - 9.93%
Bristol-Myers Squibb Co. 834 53
Johnson & Johnson 650 61
Schering-Plough Corp. 1,385 58
--------------
172
RETAIL - 15.18%
Gap Inc. 1,782 82
McDonald's Corp. 1,480 60
Starbucks Corp. (a) 2,717 66
Tommy Hilfiger Corp. (a) 2,350 55
--------------
263
SEMICONDUCTORS - 3.98%
Intel Corp. 837 69
--------------
Total Common Stocks
(cost $ 1,617) 1,648
--------------
SHORT TERM INVESTMENTS - 4.90%
MONEY MARKET FUNDS - 4.90%
Dreyfus Cash Management Plus,
5.53% (b) 83,125 83
Dreyfus Government Cash
Management, 5.08% (b) 1,951 2
--------------
Total Short Term Investments
(cost $ 85) 85
--------------
TOTAL INVESTMENTS - 100%
(cost $ 1,702) $ 1,733
==============
- --------------------------------------------------------------------------------
(a) Non-income producing security.
(b) Dividend yield changes daily to reflect current market conditions. Rate is
the quoted yield as of December 31, 1999.
See notes to the financial statements.
45
<PAGE>
[FIRST TRUST LOGO] JNL/FIRST TRUST COMMUNICATIONS
SECTOR SERIES
FIRST TRUST ADVISORS L.P.
TEAM MANAGEMENT
OBJECTIVE:
The investment objective of the JNL/First Trust Communications Sector Series is
a high total return through capital appreciation and dividend income.
MONEY MANAGER COMMENTARY:
Despite a rising interest rate environment, the second half of 1999 was
generally positive for U.S. stocks. Initially, the stock market suffered through
a correction lasting from mid-July through mid-October as investors digested a
couple of Federal Reserve interest rate hikes and their potential impact of
slowing corporate earnings growth. But the stock market staged an impressive
rally through the end of the year led by technology shares as the nation's
economy remained strong and investors' fears of Y2K subsided. The trading during
the latter part of this period was characterized by heavy investor demand for
early stage growth companies, particularly technology and communications-related
shares, at the expense of value stocks.
The Series returned 50.90% for the period from inception on July 2, 1999 through
December 31, 1999, surpassing the 30.1% return of its benchmark, the AMEX North
American Telecommunications Index. Stocks of both communications equipment and
communications services companies surged in the final quarter of the year,
driven by brisk merger activity in the sector and market euphoria over the
outlook for both wireless communications and the Internet. The Series
particularly benefited from its positions in wireless technology company
Qualcomm Inc., communications chipmakers Broadcom Corporation and Applied Micro
Circuits Corporation, and wireless phone maker Nokia.
We believe that the outlook for U.S. stocks remains bullish as we enter 2000 due
in large part to the booming U.S. economy. While negative factors such as the
likelihood of further Federal Reserve interest rate hikes, lofty valuation
levels and the perceived narrowness of the market may result in a correction
sometime during the next year, the expected continuing strength in U.S.
corporate earnings should ultimately result in higher stock prices. Despite the
potential for near-term volatility, the long-term outlook for communications
stocks is positive in light of two undeniable trends. First, the increasing
availability of low-cost wireless services continues to support the adoption of
wireless phones, particularly in the U.S. and Europe. Second, global
communications networks originally designed as voice-only are being feverishly
overhauled to enable speedy delivery of many forms of information on demand.
Supported by expanding global markets for their products and services,
communications-related companies should deliver superior earnings growth over
the next several years.
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
JNL/FIRST TRUST COMMUNICATIONS SECTOR SERIES AND THE
AMEX NORTH AMERICAN TELECOMMUNICATIONS INDEX
[LINE GRAPH]
<TABLE>
<CAPTION>
JNL/FIRST TRUST COMMUNICATIONS AMEX NORTH AMERICAN
SECTOR SERIES TELECOMMUNICATIONS INDEX
------------------------------ ------------------------
<S> <C> <C>
7/02/1999 10000 10000
7/31 9660 9965
8/31 9310 9321
9/30 9740 10098
10/31 10890 11361
11/30 12150 12010
12/31/1999 15090 13010
</TABLE>
TOTAL RETURN
FOR THE PERIOD
FROM JULY 2, 1999* TO
DECEMBER 31, 1999.....50.90%
Past performance is not
predictive of future
performance. Investment
return and principal
value will fluctuate so
that an investor's
shares, when redeemed,
may be more or less than
their original cost.
Performance numbers are
net of all Series
operating expenses, but
do not reflect the
deduction of insurance
charges.
- ---------------
* Commencement of operations.
46
<PAGE>
JNL/FIRST TRUST COMMUNICATIONS SECTOR SERIES
FINANCIAL STATEMENTS
(in thousands, except net asset value per share)
Statement of Assets and Liabilities
December 31, 1999
ASSETS
Investments (cost $4,485) $ 5,539
Receivables:
Dividends and interest 3
Fund shares sold 19
--------------
TOTAL ASSETS 5,561
--------------
LIABILITIES
Cash overdraft 407
Payables:
Advisory fees 3
Fund shares redeemed 23
Investment securities purchased 79
--------------
TOTAL LIABILITIES 512
--------------
NET ASSETS $ 5,049
==============
NET ASSETS CONSIST OF:
Paid-in capital $ 3,581
Accumulated net investment loss (1)
Accumulated net realized gain
on investments 415
Net unrealized appreciation on investments 1,054
==============
$ 5,049
==============
SHARES OUTSTANDING (NO PAR VALUE),
UNLIMITED SHARES AUTHORIZED 335
==============
NET ASSET VALUE PER SHARE $ 15.09
==============
Statement of Operations
For the Period Ended December 31, 1999*
INVESTMENT INCOME
Dividends $ 4
Interest 4
--------------
TOTAL INVESTMENT INCOME 8
--------------
EXPENSES
Advisory fees 8
Administrative fees 1
--------------
TOTAL EXPENSES 9
--------------
NET INVESTMENT LOSS (1)
--------------
REALIZED AND UNREALIZED GAIN
Net realized gain on investments 415
Net change in unrealized appreciation
on investments 1,054
--------------
NET REALIZED AND UNREALIZED GAIN 1,469
--------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 1,468
==============
- ------------------------------------------------------------
* For the period beginning July 2, 1999 (commencement of
operations).
See notes to the financial statements.
47
<PAGE>
JNL/FIRST TRUST COMMUNICATIONS SECTOR SERIES
Statement of Changes in Net Assets
(in thousands)
PERIOD FROM
JULY 2,
1999* TO
DECEMBER 31,
1999
--------------
OPERATIONS
Net investment loss $ (1)
Net realized gain on investments 415
Net change in unrealized appreciation
on investments 1,054
--------------
NET INCREASE IN NET ASSETS FROM OPERATIONS 1,468
--------------
SHARE TRANSACTIONS(1)
Proceeds from the sale of shares 5,143
Cost of shares redeemed (1,562)
--------------
NET INCREASE IN NET ASSETS FROM
SHARE TRANSACTIONS 3,581
--------------
NET INCREASE IN NET ASSETS 5,049
NET ASSETS BEGINNING OF PERIOD -
--------------
NET ASSETS END OF PERIOD $ 5,049
==============
ACCUMULATED NET INVESTMENT LOSS $ (1)
==============
Financial Highlights
PERIOD FROM
JULY 2,
1999* TO
DECEMBER 31,
1999
---------------
SELECTED PER SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
---------------
INCOME FROM OPERATIONS:
Net investment loss -
Net realized and unrealized gains
on investments 5.09
---------------
Total income from operations 5.09
---------------
NET ASSET VALUE, END OF PERIOD $ 15.09
===============
TOTAL RETURN (A) 50.90%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $ 5,049
Ratio of expenses to average net
assets (b ) 0.85%
Ratio of net investment loss to average
net assets (b) (0.08%)
Portfolio turnover 85.74%
- --------------------------------------------------------------------------------
(1)SHARE TRANSACTIONs:
Shares sold 446
Shares redeemed (111)
--------------
Net increase 335
==============
- --------------------------------------------------------------------------------
PURCHASES AND SALES OF INVESTMENT
SECURITIES
(EXCLUDING SHORT-TERM SECURITIES):
Purchases of securities $ 5,324
Proceeds from sales of securities 1,741
- --------------------------------------------------------------------------------
* Commencement of operations.
(a) Assumes investment at net asset value at the beginning of the period and a
complete redemption of the investment at the net asset value at the end of
the period. Total Return is not annualized for periods less than one year.
(b) Annualized for periods less than one year.
See notes to the financial statements.
48
<PAGE>
JNL/FIRST TRUST COMMUNICATIONS SECTOR SERIES
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1999
SHARES OR MARKET
PRINCIPAL VALUE
AMOUNT (000'S)
- ---------------------------------------------------------------
COMMON STOCKS - 91.21%
SEMICONDUCTORS - 17.30%
Applied Micro Circuits Corp. (a) 2,300 $ 293
Broadcom Corp. - Class A (a) 1,157 315
PMC-Sierra Inc. (a) 1,632 262
Vitesse Semiconductor Corp. (a) 1,681 88
--------------
958
TELECOMMUNICATIONS - 32.68%
AT&T Corp. 3,025 153
ALLTEL Corp. 1,882 156
Bell Atlantic Corp. 2,129 131
BellSouth Corp. 3,120 146
Cable & Wireless Plc - ADR 3,999 212
Deutsche Telekom AG - ADR 3,099 220
MCI WorldCom Inc. (a) 2,708 144
Qwest Communications
International Inc. (a) 3,857 166
SBC Communications Inc. 2,632 128
Telefonica SA - ADR (a) 2,752 217
Vodafone AirTouch Plc - ADR 2,768 137
--------------
1,810
SHARES OR MARKET
PRINCIPAL VALUE
AMOUNT (000'S)
- ---------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT - 41.23%
ADC Telecommunications Inc. 3,005 $ 218
Cisco Systems Inc. (a) 1,945 208
Comverse Technology Inc. (a) 1,409 204
ECI Telecom Limited 4,509 143
Lucent Technologies Inc. 2,182 163
Motorola Inc. 1,457 214
Nokia Corp. - ADR 1,416 269
Nortel Networks Corp. 2,463 249
QUALCOMM Inc. (a) 2,648 467
Tellabs Inc. (a) 2,327 149
--------------
2,284
--------------
Total Common Stocks
(cost $ 3,998) 5,052
--------------
SHORT TERM INVESTMENTS - 8.79%
MONEY MARKET FUNDS - 8.79%
Dreyfus Cash Management Plus,
5.53% (b) 243,741 244
Dreyfus Government Cash
Management, 5.08% (b) 243,741 243
--------------
Total Short Term Investments
(cost $ 487) 487
--------------
TOTAL INVESTMENTS - 100%
(cost $ 4,485) $ 5,539
==============
- --------------------------------------------------------------------------------
(a) Non-income producing security.
(b) Dividend yield changes daily to reflect current market conditions. Rate is
the quoted yield as of December 31, 1999.
See notes to the financial statements.
49
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1. ORGANIZATION
JNL Variable Fund LLC (the "Fund") is a limited liability company organized
under the laws of Delaware, by a Formation and Operating Agreement dated
February 11, 1999. The Fund is registered with the Securities and Exchange
Commission as a non-diversified fund under the Investment Company Act of 1940
(the "1940 Act"). The Fund includes the following separate Series, each
subadvised by First Trust Advisors L.P. ("First Trust"): JNL/First Trust The Dow
Target 5 Series, JNL/First Trust The Dow Target 10 Series, JNL/First Trust The
S&P Target 10 Series, JNL/First Trust Global Target 15 Series, JNL/First Trust
Target 25 Series, JNL/First Trust Target Small-Cap Series, JNL/First Trust
Technology Sector Series, JNL/First Trust Pharmaceutical/Healthcare Sector
Series, JNL/First Trust Financial Sector Series, JNL/First Trust Energy Sector
Series, JNL/First Trust Leading Brands Sector Series and JNL/First Trust
Communications Sector Series. The shares of the Fund are sold primarily to life
insurance company separate accounts to fund the benefits of variable annuity
policies.
Jackson National Financial Services, LLC ("JNFS"), a wholly-owned
subsidiary of Jackson National Life Insurance Company ("Jackson National"),
serves as investment adviser ("Adviser") for all the Series.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
each Series in the preparation of its financial statements.
USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts and disclosures in
the financial statements. Actual results could differ from those estimates.
SECURITY VALUATION -- Stocks listed on a national or foreign stock exchange
are valued at the final quoted sale price, or final bid price in absence of a
sale. Stocks not listed on a national or foreign stock exchange are valued at
the closing bid price on the over-the-counter market. Short-term securities
maturing within 60 days are valued at amortized cost, which approximates market
value. American Depository Receipts ("ADRs"), which are certificates
representing shares of foreign securities deposited in domestic and foreign
banks, are traded and valued in U.S. dollars.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
recorded on the trade date. Dividend income, net of applicable withholding
taxes, is recorded on the ex-dividend date. Interest income, including
level-yield amortization of discounts and premiums, is accrued daily. Realized
gains and losses are determined on the specific identification basis.
FOREIGN CURRENCY TRANSLATIONS -- The accounting records of each Series are
maintained in U.S. dollars. Investment securities and other assets and
liabilities de-nominated in a foreign currency are translated into U.S. dollars
using exchange rates in effect as of noon Eastern Standard Time. Purchases and
sales of investment securities, income receipts, and expense payments are
translated into U.S. dollars at the exchange rates prevailing on the respective
dates of such transactions.
Realized and unrealized gains and losses on investments which result from
changes in foreign currency exchange rates are included in net realized gains
(losses) on investments and net unrealized appreciation (depreciation) on
investments.
REPURCHASE AGREEMENTS -- A Series may invest in repurchase agreements. A
repurchase agreement involves the purchase of a security by a Series and a
simultaneous agreement (generally by a bank or broker-dealer) to repurchase that
security back from the Series at a specified price and date or upon demand.
Securities pledged as collateral for repurchase agreements are held by the
Series custodian bank until the maturity of the repurchase agreement. Procedures
for all repurchase agreements have been designed to assure that the daily market
value of the collateral is in excess of the repurchase agreement in the event of
default.
DISTRIBUTIONS TO SHAREHOLDERS --For all Series, no distributions of net
investment income or realized capital gains are required.
FEDERAL INCOME TAXES -- The JNL Variable Fund LLC is a limited liability
company with all of its interests owned by a single interest, Jackson National
Separate Account-I. Accordingly, the Fund is not considered a separate entity
for income tax purposes, and therefore is taxed as part of the operations of
Jackson National and is not taxed separately. Under current tax law, interest
and dividend income and capital gains of the Fund are not currently taxable when
left to accumulate within a variable annuity contract.
50
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
NOTE 3. INVESTMENT MANAGEMENT FEES AND TRANSACTIONS WITH AFFILIATES
Each Series has an investment advisory agreement with JNFS whereby JNFS
provides investment management and transfer agency services. Each Series pays
JNFS a fee, computed daily and payable monthly, based on a specified percentage
of the average daily net assets of each Series as follows:
ASSETS FEES
$0 to $500 million .75%
$500 million to $1 billion .70%
Over $1 billion .65%
As compensation for their services, the subadviser, First Trust, receives
fees from JNFS, calculated on the basis of the average daily net assets of each
Series as follows:
ASSETS FEES
$0 to $500 million .35%
$500 million to $1 billion .30%
Over $1 billion .25%
ADMINISTRATIVE FEE -- In addition to the investment advisory fee, each
Series pays to JNFS an Administrative Fee of .10% of the average daily net
assets. Each Series, except the JNL/First Trust Global Target 15 Series, pays
JNFS an Administrative Fee of .10% of the average daily net assets of the
Series. The JNL/First Trust Global Target 15 Series pays JNFS an Administrative
Fee of .15% of the average daily net assets of the Series. In return for the
fee, JNFS provides or procures all necessary administrative functions and
services for the operations of each Series. In accordance with the agreement,
JNFS is responsible for payment of expenses related to legal, audit, fund
accounting, custody, printing and mailing, trustee fees, and all other services
necessary for the operation of each Series. Each Series is responsible for
trading expenses including brokerage commissions, interest and taxes, and other
non-operating expenses.
NOTE 4. FOREIGN SECURITIES
Investing in securities of foreign companies and foreign governments
involves special risks and considerations not typically associated with
investing in U.S. companies and the U.S. Government. These risks include
revaluation of currencies and future adverse political and economic
developments. Moreover, securities of many foreign companies and foreign
governments and their markets may be less liquid and their prices more volatile
than those of securities of comparable U.S. companies and the U.S. Government.
51
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and the Board of Managers of JNL Variable Fund LLC
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of each of the twelve (12) Series of
the JNL Variable Fund LLC listed in Note 1 of the financial statements
(hereafter collectively referred to as the "Series") at December 31, 1999, and
the results of each of their operations, changes in each of their net assets and
the financial highlights for the periods indicated in conformity with accounting
principles generally accepted in the United States. These financial statements
and financial highlights (hereafter referred to as "financial statements") are
the responsibility of the Series' management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States, 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, which included confirmation of securities at December
31, 1999, by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
/s/PricewaterhouseCoopers LLP
Chicago, Illinois
January 14, 2000
