As filed with the Securities and Exchange Commission on May 22, 2000
1933 Act Registration No.
1940 Act Registration No.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
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Post-Effective Amendment No. [ ]
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and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. [ ]
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JNLNY VARIABLE FUND II LLC
(Exact Name of Registrant as Specified in Charter)
225 WEST WACKER DRIVE, SUITE 1200, CHICAGO, ILLINOIS 60606 (Address of
Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (312) 338-5801
Thomas J. Meyer, Esq. with a copy to:
JNL Series Trust
Vice President & Counsel Blazzard, Grodd & Hasenauer P.C.
5901 Executive Drive P.O. Box 5108
Lansing, Michigan 48911 Westport, Connecticut 06881
(Name and Address of Agent for Service)
Approximate date of proposed public offering: Upon the effective date of this
Registration Statement.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
JNLNY VARIABLE FUND II LLC
REFERENCE TO ITEMS REQUIRED BY FORM N-1A
Caption in Prospectus or
Statement of Additional
Information relating to
N-1A Item each Item
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Part A. Information Required in a Prospectus Prospectus
1. Front and Back Cover Pages Front and Back Cover Pages
2. Risk/Return Summary: Investments, About the Series of the Fund
Risks, and Performance
3. Risk/Return Summary: Fee Table Not Applicable
4. Investment Objectives, Principal About the Series of the Fund
Investment Strategies, and Related Risks
5. Management's Discussion of Fund Not Applicable
Performance
6. Management, Organization and Capital Management of the Fund;
Structure Investment in Fund Interests
7. Shareholder Information Investment in Fund Interests;
Redemption of Fund Interests;
Tax Status
8. Distribution Arrangements Not Applicable
9. Financial Highlights Information Financial Highlights
Information Required in a Statement Statement of
Part B. of Additional Information Additional Information
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10. Cover Page and Table Of Contents Cover Page and Table of
Contents
11. Fund History General Information and History
12. Description of the Fund and Its Common Types of Investments and
Investments and Risks Management Practices;
Additional Risk Considerations;
Investment Restrictions
Applicable to All Series
13. Management of the Fund Management of the Fund
14. Control Persons and Principal Holders Management of the Fund
of Securities
15. Investment Advisory and Other Services Investment Advisory and Other
Services
16. Brokerage Allocation and Other Practices Investment Advisory and Other
Services
17. Capital Stock and Other Securities Purchases, Redemptions and
Pricing of Interests;
Additional Information
18. Purchase, Redemption and Pricing of Purchases, Redemptions and
Shares Pricing of Interests
19. Taxation of the Fund Tax Status
20. Underwriters Not Applicable
21. Calculation of Performance Data Performance
22. Financial Statements Financial Statements
Part C.
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Information required to be included in Part C is set forth under the appropriate
item, so numbered, in Part C of this Amendment to the Registration Statement.
<PAGE>
PROSPECTUS
___________, 2000
JNLNY VARIABLE FUND II LLC
225 West Wacker Drive o Chicago, Illinois 60606
This Prospectus provides you with the basic information you should know before
investing in the JNLNY Variable Fund II LLC (Fund).
The interests of the Fund are sold to JNLNY Separate Account II to fund the
benefits of variable annuity contracts. The Fund currently offers interests in
the following Series:
JNL/First Trust The DowSM Target 10 Series
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THE
FUND'S SECURITIES, OR DETERMINED WHETHER THIS PROSPECTUS IS ACCURATE OR
COMPLETE. IT IS A CRIMINAL OFFENSE TO STATE OTHERWISE.
For more detailed information about the Fund and the Series, see the Fund's
Statement of Additional Information (SAI), which is incorporated by reference
into this Prospectus.
<PAGE>
"Dow Jones", "Dow Jones Industrial AverageSM", "DJIASM", and "The Dow 10SM" are
service marks of Dow Jones & Company, Inc. (Dow Jones) Dow Jones has no
relationship to the Fund, other than the licensing of the Dow Jones Industrial
Average (DJIA) and its service marks for use in connection with the JNL/First
Trust The Dow Target 10 Series.
DOW JONES DOES NOT:
o Sponsor, endorse, sell or promote the JNL/First Trust The Dow Target 10
Series.
o Recommend that any person invest in the JNL/First Trust The Dow Target 10
Series or any other securities.
o Have any responsibility or liability for or make any decisions about the
timing, amount or pricing of the JNL/First Trust The Dow Target 10 Series.
o Have any responsibility or liability for the administration, management or
marketing of the JNL/First Trust The Dow Target 10 Series.
o Consider the needs of the JNL/First Trust The Dow Target 10 Series or the
owners of the JNL/First Trust The Dow Target 10 Series in determining,
composing or calculating the DJIA or have any obligation to do so.
- --------------------------------------------------------------------------------
DOW JONES WILL NOT HAVE ANY LIABILITY IN CONNECTION WITH THE JNL/FIRST TRUST THE
DOW TARGET 10 SERIES.
SPECIFICALLY,
o DOW JONES DOES NOT MAKE ANY WARRANTY, EXPRESS OR IMPLIED, AND DOW JONES
DISCLAIMS ANY WARRANTY ABOUT:
o THE RESULTS TO BE OBTAINED BY THE JNL/FIRST TRUST THE DOW TARGET 10
SERIES, THE OWNERS OF THE JNL/FIRST TRUST THE DOW TARGET 10 SERIES OR
ANY OTHER PERSON IN CONNECTION WITH THE USE OF THE DJIA AND THE DATA
INCLUDED IN THE DJIA;
o THE ACCURACY OR COMPLETENESS OF THE DJIA AND ITS DATA;
o THE MERCHANTABILITY AND THE FITNESS FOR A PARTICULAR PURPOSE OR USE OF
THE DJIA AND ITS DATA;
o DOW JONES WILL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS OR INTERRUPTIONS
IN THE DJIA OR ITS DATA;
o UNDER NO CIRCUMSTANCES WILL DOW JONES BE LIABLE FOR ANY LOST PROFITS OR
INDIRECT, PUNITIVE, SPECIAL OR CONSEQUENTIAL DAMAGES OR LOSSES, EVEN IF DOW
JONES KNOWS THAT THEY MIGHT OCCUR.
THE LICENSING AGREEMENT BETWEEN FIRST TRUST ADVISORS L.P. AND DOW JONES IS
SOLELY FOR THEIR BENEFIT AND NOT FOR THE BENEFIT OF THE OWNERS OF THE JNL/FIRST
TRUST THE DOW TARGET 10 SERIES OR ANY OTHER THIRD PARTIES.
- --------------------------------------------------------------------------------
"JNL(R)", "Jackson National(R)" and "Jackson National Life(R)" are trademarks of
Jackson National Life Insurance Company.
<PAGE>
TABLE OF CONTENTS
About the JNL/First Trust The DowSM Target 10 Series.........................1
Investment Objective................................................1
Principal Investment Strategies.....................................1
Principal Risks of Investing in The Dow Target 10 Series............1
Additional Information About the Principal Investment
Strategies, Other Investment and
Risks of The Dow Target 10 Series...................................1
Management of the Fund.......................................................3
Investment Adviser..................................................3
Investment Sub-Adviser..............................................4
Portfolio Management................................................4
Administrative Fee...........................................................4
Investment in Fund Interests.................................................4
Redemption of Fund Interests.................................................5
Tax Status...................................................................5
General.............................................................5
Internal Revenue Services Diversification Requirements..............5
Hypothetical Performance Data for Target Strategy............................6
Financial Highlights.........................................................7
<PAGE>
ABOUT THE JNL/FIRST TRUST THE DOWSM TARGET 10 SERIES
INVESTMENT OBJECTIVE. The investment objective of the JNL/First Trust The DowSM
Target 10 Series (The Dow Target 10 Series) is a high total return through a
combination of capital appreciation and dividend income.
PRINCIPAL INVESTMENT STRATEGIES. The Dow Target 10 Series seeks to achieve its
objective by investing approximately equal amounts in the common stock of the
ten companies included in the Dow Jones Industrial AverageSM (DJIA) which have
the highest dividend yields on or about the business day before each Stock
Selection Date. The ten companies will be selected annually, beginning July 1,
1999, and on each one year anniversary thereof (Stock Selection Date). The
sub-adviser generally uses a buy and hold strategy, trading only on each Stock
Selection Date and when cash flow activity occurs in the Series.
PRINCIPAL RISKS OF INVESTING IN THE DOW TARGET 10 SERIES. An investment in The
Dow Target 10 Series is not guaranteed. As with any mutual fund, the value of
The Dow Target 10 Series' shares will change and you could lose money by
investing in this Series. A variety of factors may influence its investment
performance, such as:
o Market risk. Because The Dow Target 10 Series invests in
U.S.-traded equity securities, it is subject to stock market risk.
Stock prices typically fluctuate more than the values of other
types of securities, typically in response to changes in a
particular company's financial condition and factors affecting the
market in general. For example, unfavorable or unanticipated poor
earnings performance of a company may result in a decline in its
stock's price, and a broad-based market drop may also cause a
stock's price to fall.
o Non-diversification. The Dow Target 10 Series is "non-diversified"
as such term is defined in the Investment Company Act of 1940, as
amended, which means that the Series may hold a smaller number of
issuers than if it were "diversified." With a smaller number of
different issuers, The Dow Target 10 Series is subject to more
risk than another fund holding a larger number of issuers, since
changes in the financial condition or market status of a single
issuer may cause greater fluctuation in The Dow Target 10 Series'
total return and share price.
o Limited management. The Dow Target 10 Series' strategy of
investing in ten companies according to criteria determined on a
Stock Selection Date prevents The Dow Target 10 Series from
responding to market fluctuations. As compared to other funds,
this could subject The Dow Target 10 Series to more risk if one of
the selected stocks declines in price or if certain sectors of the
market, or the United States economy, experience downturns. The
investment strategy may also prevent The Dow Target 10 Series from
taking advantage of opportunities available to other funds.
In addition, the performance of The Dow Target 10 Series depends on the
sub-adviser's ability to effectively implement the investment strategies of this
Series.
PERFORMANCE. The performance of the Series will vary from year to year. The
Series' performance figures will not reflect the deduction of any charges that
are imposed under a variable annuity contract.
Performance for the Series has not been included because the Series had not been
in operation for a full fiscal year as of December 31, 1999.
ADDITIONAL INFORMATION ABOUT THE PRINCIPAL INVESTMENT STRATEGIES, OTHER
INVESTMENTS AND RISKS OF THE DOW TARGET 10 SERIES.
The Dow Target 10 Series invests in the common stock of ten companies included
in The DJIA. The ten common stocks will be chosen on or about the business day
before each Stock Selection Date as follows:
o the sub-adviser will determine the dividend yield on each common
stock in The DJIA on or about the business day before the Stock
Selection Date;
o the sub-adviser will allocate approximately equal amounts of The
Dow Target 10 Series to the ten companies in The DJIA that have
the highest dividend yield;
o the sub-adviser will determine the percentage relationship between
the number of shares of each of the ten common stocks selected.
Between Stock Selection Dates, The Dow Target 10 Series will purchase and sell
common stocks approximately according to the percentage relationship among the
common stocks established on the prior Stock Selection Date.
The stocks in The Dow Target 10 Series are not expected to reflect the entire
DJIA nor track the movements of The DJIA.
It is generally not possible for the sub-adviser to purchase round lots (usually
100 shares) of stocks in amounts that will precisely duplicate the prescribed
mix of securities. Also, it usually will be impossible for The Dow Target 10
Series to be 100% invested in the prescribed mix of securities at any time. To
the extent that The Dow Target 10 Series is not fully invested, the interests of
the interest holders may be diluted and total return may not directly track the
investment results of the prescribed mix of securities. To minimize this effect,
the sub-adviser will generally try, as much as practicable, to maintain a
minimum cash position at all times. Normally, the only cash items held by The
Dow Target 10 Series will be amounts expected to be deducted as expenses and
amounts too small to purchase additional round lots of the securities.
The sub-adviser will attempt to replicate the percentage relationship of
securities when selling securities for The Dow Target 10 Series. The percentage
relationship among the number of securities in The Dow Target 10 Series should
therefore remain relatively stable. However, given the fact that the market
price of such securities will vary throughout the year, the value of the
securities of each of the companies as compared to the total assets of The Dow
Target 10 Series will fluctuate during the year, above and below the proportion
established on the annual Stock Selection Date. At the Stock Selection Date for
The Dow Target 10 Series, new securities will be selected and a new percentage
relationship will be established among the number of securities for the Series.
The sub-adviser may, but will not necessarily, utilize derivative instruments,
such as options, futures contracts, forward contracts, warrants, indexed
securities and repurchase agreements, for hedging and risk management.
Derivative instruments involve special risks. The Series sub-adviser must
correctly predict price movements, during the life of the derivative, of the
underlying asset in order to realize the desired results from the investment.
The value of derivatives may rise or fall more rapidly than other investments,
which may increase the volatility of the Series depending on the nature and
extent of the derivatives in the Series' portfolio. Additionally, if the
sub-adviser uses derivatives in attempting to manage or "hedge" the overall risk
of the Series' portfolio, the strategy might not be successful, for example, due
to changes in the value of the derivatives that do not correlate with price
movements in the rest of the portfolio.
The investment objectives and policies of The Dow Target 10 Series are not
fundamental and may be changed by the Board of Managers of the Fund, without
interest holder approval.
Certain provisions of the Investment Company Act of 1940 limit the ability of
the Series to invest more than 5% of the Series' total assets in the stock of
any company that derives more than 15% of its gross revenues from securities
related activities (Securities Related Companies). The Fund has been granted by
the Securities and Exchange Commission (SEC) an exemption from this limitation
so that The Dow Target 10 Series may invest up to 10.5% of the Series' total
assets in the stock of Securities Related Companies. The SAI has more
information about The Dow Target 10 Series' authorized investments and
strategies, as well as the risks and restrictions that may apply to them.
DESCRIPTION OF INDEX. The stocks included in The Dow Jones Industrial AverageSM
(DJIA) are chosen by the editors of The Wall Street Journal as representative of
the broad market and of American industry. The companies are major factors in
their industries and their stocks are widely held by individuals and
institutional investors.
The portfolio of The Dow Target 10 Series consists of the common stocks of
companies listed on the DJIA. Except as previously described, the publisher of
the DJIA has not granted the Fund or the Fund's investment adviser a license to
use its index. The Dow Target 10 Series is not designed or intended to result in
prices that parallel or correlate with the movements in the DJIA and it is
expected that its prices will not parallel or correlate with such movements. The
publishers of the DJIA has not participated in any way in the creation of the
Fund or the Series or in the selection of stocks in the Series.
LEGISLATION. At any time after the date of the Prospectus, legislation may be
enacted that could negatively affect the common stock in The Dow Target 10
Series or the issuers of such common stock. Further, changing approaches to
regulation may have a negative impact on certain companies represented in The
Dow Target 10 Series. There can be no assurance that future legislation,
regulation or deregulation will not have a material adverse effect on the Series
or will not impair the ability of the issuers of the common stock held in the
Series to achieve their business goals.
MANAGEMENT OF THE FUND
INVESTMENT ADVISER
Under Delaware law and the Fund's Certificate of Formation and Operating
Agreement, the management of the business and affairs of the Fund is the
responsibility of the Board of Managers of the Fund.
Jackson National Financial Services, LLC (JNFS), 5901 Executive Drive, Lansing,
Michigan 48911, is the investment adviser to the Fund and provides the Fund with
professional investment supervision and management. JNFS is a wholly owned
subsidiary of Jackson National Life Insurance Company (JNL), which is in turn
wholly owned by Prudential plc, a life insurance company in the United Kingdom.
JNFS is a successor to Jackson National Financial Services, Inc. which served as
an investment adviser to the JNL Series Trust, a registered investment company,
from its inception until July 1, 1998, when it transferred its duties as
investment adviser to JNFS.
JNFS has selected First Trust Advisors L.P. as sub-adviser to manage the
investment and reinvestment of the assets of the Series of the Fund. JNFS
monitors the compliance of the sub-adviser with the investment objectives and
related policies of The Dow Target 10 Series and reviews the performance of the
sub-adviser and reports periodically on such performance to the Board of
Managers of the Fund.
As compensation for its services, JNFS receives a fee from the Series. The fee
is stated as an annual percentage of the net assets of the Series. The fee,
which is accrued daily and payable monthly, is calculated on the basis of the
average net assets of The Dow Target 10 Series. Once the average net assets of
the Series exceed specified amounts, the fee is reduced with respect to such
excess.
The Dow Target 10 Series is obligated to pay JNFS the following fee:
ASSETS FEES
$0 to $500 million.................................................. .75%
$500 million to $1 billion.......................................... .70%
Over $1 billion..................................................... .65%
INVESTMENT SUB-ADVISER
First Trust Advisors L.P. (First Trust), an Illinois limited partnership formed
in 1991 and an investment adviser registered with the SEC under the Investment
Advisers Act of 1940, is the sub-adviser for The Dow Target 10 Series. First
Trust's address is 1001 Warrenville Road, Lisle, Illinois 60532. First Trust is
a limited partnership with one limited partner, Grace Partners of Dupage L.P.,
and one general partner, Nike Securities Corporation. Grace Partners of Dupage
L.P. is a limited partnership with one general partner, Nike Securities
Corporation, and a number of limited partners. Nike Securities Corporation is an
Illinois corporation controlled by the Robert Donald Van Kampen family.
As of the date of this Prospectus, the Series had not commenced investment
operations. However, First Trust is also the portfolio supervisor of certain
unit investment trusts sponsored by Nike Securities L.P. (Nike Securities) which
are substantially similar to the Series in that they have the same investment
objectives as the Series but have a life of approximately one year. Nike
Securities specializes in the underwriting, trading and distribution of unit
investment trusts and other securities. Nike Securities, an Illinois limited
partnership formed in 1991, acts as sponsor for successive series of The First
Trust Combined Series, The First Trust Special Situations Trust, The First Trust
Insured Corporate Trust, The First Trust of Insured Municipal Bonds and The
First Trust GNMA.
Under the terms of the Sub-Advisory Agreement between First Trust and JNFS,
First Trust manages the investment and reinvestment of the assets of The Dow
Target 10 Series, subject to the oversight and supervision of JNFS and the Board
of Managers of the Fund. First Trust formulates a continuous investment program
for the Series consistent with its investment objectives and policies outlined
in this Prospectus. First Trust implements such programs by purchases and sales
of securities and regularly reports to JNFS and the Board of Managers of the
Fund with respect to the implementation of such programs.
As compensation for its services, First Trust receives a fee from JNFS, stated
as an annual percentage of the net assets of The Dow Target 10 Series. The SAI
contains a schedule of the management fees JNFS currently is obligated to pay
First Trust out of the advisory fee it receives from The Dow Target 10 Series.
PORTFOLIO MANAGEMENT
There is no one individual primarily responsible for portfolio management
decisions for the Series. Investments are made under the direction of a
committee.
ADMINISTRATIVE FEE
In addition to the investment advisory fee, The Dow Target 10 Series pays to
JNFS an Administrative Fee of .10% 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 operation of the Series. In
accordance with the Administration Agreement, JNFS is responsible for payment of
expenses related to legal, audit, fund accounting, custody, printing and
mailing, managers fees and all other services necessary for the operation of the
Series. The Series is responsible for trading expenses including brokerage
commissions, interest and taxes, and other non-operating expenses.
INVESTMENT IN FUND INTERESTS
Interests in the Fund are currently sold to JNLNY Separate Account II, a
separate account of JNL, 5901 Executive Drive, Lansing, Michigan 48911, to fund
the benefits under certain variable annuity contracts (Contracts). The Separate
Account purchases interests in the Series at net asset value using premiums
received on Contracts issued by JNL. Purchases are effected at net asset value
next determined after the purchase order, in proper form, is received by the
Fund's transfer agent. There is no sales charge.
Interests in the Fund are not available to the general public directly. The Dow
Target 10 Series is managed by a sub-adviser who manages publicly available unit
investment trusts having similar names and investment objectives. While the
Series may be similar to, and may in fact be modeled after publicly available
unit investment trusts, Contract purchasers should understand that the Series is
not otherwise directly related to any publicly available unit investment trusts.
Consequently, the investment performance of publicly available unit investment
trusts and the Series may differ substantially.
The net asset value per interest of The Dow Target 10 Series is determined at
the close of regular trading on the New York Stock Exchange (normally 4:00 p.m.,
Eastern time) each day that the New York Stock Exchange is open. The net asset
value per interest is calculated by adding the value of all securities and other
assets of the Series, deducting its liabilities, and dividing by the number of
interests outstanding. Generally, the value of exchange-listed or -traded
securities is based on their respective market prices, bonds are valued based on
prices provided by an independent pricing service and short-term debt securities
are valued at amortized cost, which approximates market value.
All investments in the Fund are credited to the interest holder's account in the
form of full and fractional shares of the Series (rounded to the nearest 1/1000
of a share). The Fund does not issue interest certificates.
REDEMPTION OF FUND INTERESTS
JNLNY Separate Account II redeems shares to make benefit or withdrawal payments
under the terms of its Contracts. Redemptions are processed on any day on which
the Fund is open for business and are effected at net asset value next
determined after the redemption order, in proper form, is received.
The Fund may suspend the right of redemption only under the following unusual
circumstances:
o when the New York Stock Exchange is closed (other than weekends
and holidays) or trading is restricted;
o when an emergency exists, making disposal of portfolio securities
or the valuation of net assets not reasonably practicable; or
o during any period when the SEC has by order permitted a
suspension of redemption for the protection of shareholders.
TAX STATUS
GENERAL
The Fund is a limited liability company with all of its interests owned by a
single entity, JNLNY Separate Account II. Accordingly, the Fund is taxed as part
of the operations of JNL and is not taxed separately. Under current tax law,
interest, dividend income and capital gains of the Fund are not currently
taxable when left to accumulate within a variable annuity contract. For a
discussion of the tax status of the variable annuity policy, please refer to the
prospectus for JNLNY Separate Account II.
INTERNAL REVENUE SERVICE DIVERSIFICATION REQUIREMENTS
The Series intend to comply with the diversification requirements currently
imposed by the Internal Revenue Service on separate accounts of insurance
companies as a condition of maintaining the tax deferred status of the variable
annuity policies issued by JNLNY Separate Account II. The Sub-Advisory Agreement
requires the Series to be operated in compliance with these diversification
requirements. First Trust, as sub-adviser, reserves the right to depart from the
investment strategy of The Dow Target 10 Series in order to meet these
diversification requirements. See the SAI for more specific information.
HYPOTHETICAL PERFORMANCE DATA FOR THE TARGET STRATEGY
As of the date of this Prospectus, The Dow Target 10 Series has not commenced
investment operations. However, certain aspects of the investment strategy for
The Dow Target 10 Series can be demonstrated using historical data. The
following table illustrates the hypothetical performance of the investment
strategy used by The Dow Target 10 Series and the actual performance of the
DJIA. The table also shows how performance varies from year to year.
The information for the Target Strategy assumes that the Strategy was fully
invested as of the beginning of each year and that each Stock Selection Date was
the first of the year. In addition, the performance information does not take
into consideration any sales charges, commissions, insurance fees or charges
imposed on the sale of the variable annuity policies, expenses or taxes. Any of
such charges will lower the returns shown.
The returns shown below for the Target Strategy does not represent the results
of actual trading using client assets but were achieved by means of the
retroactive application of a strategy that was designed with the benefit of
hindsight. These returns should not be considered indicative of the skill of the
sub-adviser. The returns may not reflect the impact that any material market or
economic factors might have had if the Strategy had been used during the periods
shown to actually manage client assets. During a portion of the period shown in
the table below, the sub-adviser acted as the portfolio supervisor of certain
unit investment trusts which employed strategies similar to the hypothetical
strategy shown below.
The returns shown below for the Target Strategy are not a guarantee of future
performance and should not be used to predict the expected returns on the Target
Strategy. In fact, the hypothetical Target Strategy underperformed its
respective index in certain years.
HYPOTHETICAL COMPARISON OF TOTAL RETURN
Year Target 10 DJIA
Strategy
1980 27.90% 21.90%
1981 7.46% -3.61%
1982 27.12% 26.85%
1983 39.07% 25.82%
1984 6.22% 1.29%
1985 29.54% 33.28%
1986 35.63% 27.00%
1987 5.59% 5.66%
1988 24.75% 16.03%
1989 26.97% 32.09%
1990 -7.82% -0.73%
1991 34.20% 24.19%
1992 7.69% 7.39%
1993 27.08% 16.87%
1994 4.21% 5.03%
1995 36.85% 36.67%
1996 28.35% 28.71%
1997 21.68% 24.82%
1998 10.59% 18.03%
1999 5.06% 27.06%
(1) The Target 10 Strategy for any given period was selected by applying the
respective strategy as of the close of the prior period.
(2) The total return shown does not take into consideration any sales charges,
commissions, expenses or taxes. Total return assumes that all dividends are
reinvested semi-annually, and all returns are stated in terms of the United
States dollar. Based on the year-by-year returns contained in the table, over
the 20 full years listed above, the Target 10 Strategy achieved an average
annual total return of 19.13%. In addition, over this period, the Strategy
achieved a greater average annual total return than that of the DJIA, which was
18.10%. Although the Strategy seeks to achieve a better performance than the
DJIA as a whole, there can be no assurance that the Strategy will achieve a
better performance.
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights information for the Fund is not included in the
prospectus because the Fund had not commenced operations as of the effective
date of this prospectus.
<PAGE>
PROSPECTUS
May 1, 2000
JNLNY VARIABLE FUND II LLC
You can find more information about the Fund in:
o The Fund's STATEMENT OF ADDITIONAL INFORMATION (SAI) dated May 1,
2000, which contains further information about the Fund and the
Series, particularly their investment practices and restrictions.
The current SAI is on file with the Securities and Exchange
Commission (SEC) and is incorporated into the Prospectus by
reference (which means the SAI is legally part of the Prospectus).
o The Fund's ANNUAL AND SEMI-ANNUAL REPORTS to shareholders, which
show the Series' actual investments and include financial
statements as of the close of the particular annual or semi-annual
period. The Annual Report also discusses the market conditions and
investment strategies that significantly affected each Series'
performance during the year covered by the report.
You may obtain a copy of the current SAI or the most recent Annual and
Semi-Annual Reports without charge, or make other inquiries, by calling (800)
766-4683, or writing the JNLNY Variable Fund II LLC Service Center, P.O.
Box 378002, Denver, Colorado 80237-8002.
You may also obtain information about the Fund (including its current SAI and
most recent Annual and Semi-Annual Reports) from the SEC's Internet site
(http://www.sec.gov), by electronic request ([email protected]) or by writing
the SEC's Public Reference Section in Washington, D.C., 20549-0102. You can find
out about the operation of the Public Reference Section and copying charges by
calling 1-202-942-8090.
File No.: 811-______
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
_________, 2000
JNLNY VARIABLE FUND II LLC
This Statement of Additional Information (the "SAI") is not a prospectus. It
contains information in addition to and more detailed than set forth in the
Prospectus and should be read in conjunction with the JNLNY Variable Fund II LLC
Prospectus, dated ________, 2000 (the "Prospectus"). The Prospectus may be
obtained at no charge by calling (800) 766-4683, or writing P.O. Box 378002,
Denver, Colorado 80237-8002.
TABLE OF CONTENTS
General Information and History........................................... 2
Common Types of Investments and Management Practices...................... 2
Additional Risk Considerations............................................ 7
Investment Restrictions................................................... 9
Management of the Fund.................................................... 10
Performance............................................................... 13
Investment Advisory and Other Services.................................... 14
Purchases, Redemptions and Pricing of Interests........................... 18
Additional Information.................................................... 19
Tax Status................................................................ 20
Financial Statements ..................................................... 21
<PAGE>
GENERAL INFORMATION AND HISTORY
JNLNY Variable Fund II LLC (the "Fund") is a non-diversified, open-end
management company organized as a Delaware limited liability company on January
26, 1999. The Fund offers interests in the JNL/First Trust The DowSM Target 10
Series (the "Series").
COMMON TYPES OF INVESTMENTS AND MANAGEMENT PRACTICES
This section describes some of the types of securities the Series may hold in
its portfolio and the various kinds of investment practices that may be used in
day-to-day portfolio management. The Series may invest in the following
securities or engage in the following practices to the extent that such
securities and practices are consistent with the Series' investment objective(s)
and policies described in the Prospectus and in this SAI.
BANK OBLIGATIONS. The Series may invest in bank obligations, which include
certificates of deposit, bankers' acceptances, and other short-term debt
obligations. Certificates of deposit are short-term obligations of commercial
banks. A bankers' acceptance is a time draft drawn on a commercial bank by a
borrower, usually in connection with international commercial transactions.
Certificates of deposit may have fixed or variable rates. The Series may invest
in U.S. banks, foreign branches of U.S. banks, U.S. branches of foreign banks,
and foreign branches of foreign banks.
BORROWING AND LENDING. The Series may borrow money from banks for temporary or
emergency purposes in amounts up to 25% of its total assets. To secure
borrowings, the Series may mortgage or pledge securities in amounts up to 15% of
its net assets.
CASH POSITION. The Series may hold a certain portion of its assets in repurchase
agreements and money market securities maturing in one year or less that are
rated in one of the two highest rating categories by a nationally recognized
statistical rating organization. For temporary, defensive purposes, the Series
may invest without limitation in such securities. This reserve position provides
flexibility in meeting redemptions, expenses, and the timing of new investments,
and serves as a short-term defense during periods of unusual market volatility.
COMMERCIAL PAPER. The Series may invest in commercial paper. Commercial paper
are short-term promissory notes issued by corporations primarily to finance
short-term credit needs. Such notes may have fixed or variable rates.
COMMON AND PREFERRED STOCKS. The Series may invest in common and/or preferred
stocks. Stocks represent shares of ownership in a company. Generally, preferred
stock has a specified dividend and ranks after bonds and before common stocks in
its claim on income for dividend payments and on assets should the company be
liquidated. After other claims are satisfied, common stockholders participate in
company profits on a pro rata basis; profits may be paid out in dividends or
reinvested in the company to help it grow. Increases and decreases in earnings
are usually reflected in a company's stock price, so common stocks generally
have the greatest appreciation and depreciation potential of all corporate
securities. While most preferred stocks pay a dividend, the Series may purchase
preferred stock where the issuer has omitted, or is in danger of omitting,
payment of its dividend. Such investments would be made primarily for their
capital appreciation potential. Although common and preferred stocks have a
history of long-term growth in value, their prices tend to fluctuate in the
short term, particularly those of smaller companies.
FUTURES AND OPTIONS. Futures contracts are often used to manage risk, because
they enable the investor to buy or sell an asset in the future at an agreed upon
price. Options give the investor the right, but not the obligation, to buy or
sell an asset at a predetermined price in the future. The Series may buy and
sell futures contracts (and options on such contracts) to manage its exposure to
changes in securities prices and foreign currencies and as an efficient means of
adjusting overall exposure to certain markets. The Series may purchase or sell
call and put options on securities and financial indices, and may invest in
futures contracts on financial indices, including interest rates or an index of
U.S. Government securities, or equity or fixed-income securities.
Futures contracts and options may not always be successful hedges; their prices
can be highly volatile; using them could lower the Series' total return; and the
potential loss from the use of futures can exceed the Series' initial investment
in such contracts. These instruments may also be used for non-hedging purposes
such as increasing the Series' income.
The Series' use of commodity futures and commodity options trading should not be
viewed as providing a vehicle for interest holder participation in a commodity
pool. Rather, in accordance with regulations adopted by the Commodity Futures
Trading Commission (CFTC), the Series will employ such techniques only for (1)
hedging purposes, or (2) otherwise, to the extent that aggregate initial margin
and required premiums do not exceed 5 percent of the Series' net assets.
HYBRID INSTRUMENTS. The Series may purchase hybrid instruments, which combine
the elements of futures contracts or options with those of debt, preferred
equity or a depository instrument. Often these hybrid instruments are indexed to
the price of a commodity, a particular currency, or a domestic debt or common
stock index. Hybrid instruments may take a variety of forms, including, but not
limited to, debt instruments with interest or principal payments or redemption
terms determined by reference to the value of a currency or commodity or
securities index at a future point in time, preferred stock with dividend rates
determined by reference to the value of a currency, or convertible securities
with the conversion terms related to a particular commodity.
ILLIQUID SECURITIES. The Series may hold illiquid investments. Illiquid
investments are investments that cannot be sold or disposed of in the ordinary
course of business within seven days at approximately the price at which they
are valued. Illiquid investments generally include: repurchase agreements not
terminable within seven days; securities for which market quotations are not
readily available; restricted securities not determined to be liquid in
accordance with guidelines established by the Fund's Board of Managers;
over-the-counter (OTC) options and, in certain instances, their underlying
collateral; and securities involved in swap, cap, collar and floor transactions.
MONEY MARKET FUNDS. The Series may invest in shares of money market funds to the
extent permitted by the Investment Company Act of 1940, as amended.
PORTFOLIO TURNOVER. To a limited extent, the Series may engage in short-term
transactions if such transactions further its investment objective. The Series
may sell one security and simultaneously purchase another of comparable quality
or simultaneously purchase and sell the same security to take advantage of
short-term differentials in bond yields or otherwise purchase individual
securities in anticipation of relatively short-term price gains. The rate of
portfolio turnover will not be a determining factor in the purchase and sale of
such securities. Increased portfolio turnover necessarily results in
correspondingly higher costs including brokerage commissions, dealer mark-ups
and other transaction costs on the sale of securities and reinvestment in other
securities, and may result in the acceleration of taxable gains.
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS. The Series may invest
in repurchase or reverse repurchase agreements. A repurchase agreement involves
the purchase of a security by the Series and a simultaneous agreement (generally
by a bank or dealer) to repurchase that security from the Series at a specified
price and date or upon demand. This technique offers a method of earning income
on idle cash. A repurchase agreement may be considered a loan collateralized by
the underlying security. The Series must take physical possession of the
security or receive written confirmation of the purchase and a custodial or
safekeeping receipt from a third party or be recorded as the owner of the
security through the Federal Reserve Book Entry System.
The Series may invest in open repurchase agreements which vary from the typical
agreement in the following respects: (1) the agreement has no set maturity, but
instead matures upon 24 hours' notice to the seller; and (2) the repurchase
price is not determined at the time the agreement is entered into, but is
instead based on a variable interest rate and the duration of the agreement. In
addition, the Series, together with other registered investment companies having
management agreements with a common investment adviser or its affiliates, may
transfer uninvested cash balances into a single joint account, the daily
aggregate balance of which will be invested in one or more repurchase
agreements.
When the Series invests in a reverse repurchase agreement, it sells a portfolio
security to another party, such as a bank or a broker-dealer, in return for
cash, and agrees to buy the security back at a future date and price. Reverse
repurchase agreements may be used to provide cash to satisfy unusually heavy
redemption requests or for other temporary or emergency purposes without the
necessity of selling portfolio securities or to earn additional income on
portfolio securities, such as Treasury bills and notes.
SECURITIES LENDING. The Series may also lend common stock to broker-dealers and
financial institutions to realize additional income. As a fundamental policy,
the Series will not lend common stock or other assets, if as a result, more than
33 1/3% of the Series' total assets would be lent to other parties. Under
applicable regulatory requirements (which are subject to change), the following
conditions apply to securities loans: (a) the loan must be continuously secured
by liquid assets maintained on a current basis in an amount at least equal to
the market value of the securities loaned; (b) the Series must receive any
dividends or interest paid by the issuer on such securities; (c) the Series must
have the right to call the loan and obtain the securities loaned at any time
upon notice of not more than five business days, including the right to call the
loan to permit voting of the securities; and (d) the Series must receive either
interest from the investment of collateral or a fixed fee from the borrower. The
Series might experience a loss if the borrowing broker-dealer or financial
institution breaches its agreement with the Series.
Securities lending, as with other extensions of credit, involves the risk that
the borrower may default. Although securities loans will be fully collateralized
at all times, the Series may experience delays in, or be prevented from,
recovering the collateral. During the period that the Series seeks to enforce
its rights against the borrower, the collateral and the securities loaned remain
subject to fluctuations in market value. The Series does not have the right to
vote securities on loan, but would terminate the loan and regain the right to
vote if it were considered important with respect to the investment. The Series
may also incur expenses in enforcing its rights. If the Series has sold a loaned
security, it may not be able to settle the sale of the security and may incur
potential liability to the buyer of the security on loan for its costs to cover
the purchase.
SECURITY-RELATED ISSUERS. The Fund has been granted exemptive relief from the
Securities and Exchange Commission to allow the Series to invest more than 5% of
their assets in the securities of any issuer that derives more than 15 percent
of its gross revenue from "securities related activities" (as defined in rule
12d3-1 under the Investment Company Act of 1940).
SHORT SALES. The Series may sell securities short. A short sale is the sale of a
security the Series does not own. It is "against the box" if at all times when
the short position is open the Series owns an equal amount of the securities or
securities convertible into, or exchangeable without further consideration for,
securities of the same issue as the securities sold short. To the extent that
the Series engages in short sales that are not "against the box," it must
maintain asset coverage in the form of assets determined to be liquid by the
sub-adviser in accordance with procedures established by the Board of Managers,
in a segregated account, or otherwise cover its position in a permissible
manner. If the value of the security goes up, the Series will have to buy it
back at a loss to make good on the borrowing.
U.S. GOVERNMENT SECURITIES. U.S. Government securities are issued or guaranteed
as to principal and interest by U.S. Government agencies or instrumentalities.
These include securities issued by the Federal National Mortgage Association
(Fannie Mae), Government National Mortgage Association (Ginnie Mae), Federal
Home Loan Bank, Federal Land Banks, Farmers Home Administration, Banks for
Cooperatives, Federal Intermediate Credit Banks, Federal Financing Bank, Farm
Credit Banks, the Small Business Association, Student Loan Marketing
Association, and the Tennessee Valley Authority. Some of these securities, such
as those issued by Ginnie Mae, are supported by the full faith and credit of the
U.S. Treasury; others, such as those of Fannie Mae, are supported by the
discretionary authority of the U.S. Government to purchase the agency's
obligations; and still others, such as those of the Student Loan Marketing
Association, are supported only by the credit of the instrumentality. No
assurance can be given that the U.S. Government will provide financial support
to U.S. Government agencies or instrumentalities in the future, other than as
set forth above, since it is not obligated to do so by law.
U.S. GOVERNMENT OBLIGATIONS. U.S. Government obligations include bills, notes,
bonds, and other debt securities issued by the U.S. Treasury. These are direct
obligations of the U.S. Government and differ mainly in the length of their
maturities.
WARRANTS. The Series may invest in warrants. Warrants have no voting rights, pay
no dividends and have no rights with respect to the assets of the corporation
issuing them. Warrants basically are options to purchase common stock at a
specific price valid for a specific period of time. They do not represent
ownership of the securities, but only the right to buy them. Warrants differ
from call options in that warrants are issued by the issuer of the security
which may be purchased on their exercise, whereas call options may be written or
issued by anyone. The prices of warrants do not necessarily move parallel to the
prices of the underlying securities.
WRITING COVERED OPTIONS ON SECURITIES. The Series may write covered call options
and covered put options on optionable securities of the types in which it is
permitted to invest from time to time as the sub-adviser determines is
appropriate in seeking to attain the Series' investment objective. Call options
written by the Series give the holder the right to buy the underlying security
from the Series at a stated exercise price; put options give the holder the
right to sell the underlying security to the Series at a stated price.
The Series may only write call options on a covered basis or for cross-hedging
purposes and will only write covered put options. A put option would be
considered "covered" if the Series owns an option to sell the underlying
security subject to the option having an exercise price equal to or greater than
the exercise price of the "covered" option at all times while the put option is
outstanding. A call option is covered if the Series owns or has the right to
acquire the underlying securities subject to the call option (or comparable
securities satisfying the cover requirements of securities exchanges) at all
times during the option period. A call option is for cross-hedging purposes if
it is not covered, but is designed to provide a hedge against another security
which the Series owns or has the right to acquire. In the case of a call written
for cross-hedging purposes or a put option, the Series will maintain in a
segregated account at the Series' custodian bank cash or short-term U.S.
government securities with a value equal to or greater than the Series'
obligation under the option. The Series may also write combinations of covered
puts and covered calls on the same underlying security.
The Series will receive a premium from writing an option, which increases the
Series' return in the event the option expires unexercised or is terminated at a
profit. The amount of the premium will reflect, among other things, the
relationship of the market price of the underlying security to the exercise
price of the option, the term of the option, and the volatility of the market
price of the underlying security. By writing a call option, the Series will
limit its opportunity to profit from any increase in the market value of the
underlying security above the exercise price of the option. By writing a put
option, the Series will assume the risk that it may be required to purchase the
underlying security for an exercise price higher than its then current market
price, resulting in a potential capital loss if the purchase price exceeds the
market price plus the amount of the premium received.
The Series may terminate an option which it has written prior to its expiration
by entering into a closing purchase transaction in which it purchases an option
having the same terms as the option written. The Series will realize a profit
(or loss) from such transaction if the cost of such transaction is less (or
more) than the premium received from the writing of the option. Because
increases in the market price of a call option will generally reflect increases
in the market price of the underlying security, any loss resulting from the
repurchase of a call option may be offset in whole or in part by unrealized
appreciation of the underlying security owned by the Series.
ADDITIONAL RISK CONSIDERATIONS
FUTURES, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS. The use of futures, options,
forward contracts, and swaps (derivative instruments) exposes the Series to
additional investment risks and transaction costs. If the sub-adviser seeks to
protect the Series against potential adverse movements in the securities,
foreign currency or interest rate markets using these instruments, and such
markets do not move in a direction adverse to the Series, the Series could be
left in a less favorable position than if such strategies had not been used.
Risks inherent in the use of futures, options, forward contracts and swaps
include: (1) the risk that interest rates, securities prices and currency
markets will not move in the directions anticipated; (2) imperfect correlation
between the price of derivative instruments and movements in the prices of the
securities, interest rates or currencies being hedged; (3) the fact that skills
needed to use these strategies are different from those needed to select
portfolio securities; (4) the possible absence of a liquid secondary market for
any particular instrument at any time; and (5) the possible need to defer
closing out certain hedged positions to avoid adverse tax consequences.
HYBRID INSTRUMENTS. The risks of investing in hybrid instruments reflect a
combination of the risks of investing in securities, options, futures and
currencies, including volatility and lack of liquidity. Reference is made to the
discussion of "Futures, Options, and Other Derivative Instruments" herein for a
discussion of these risks. Further, the prices of the hybrid instrument and the
related commodity or currency may not move in the same direction or at the same
time. Hybrid instruments may bear interest or pay preferred dividends at below
market (or even relatively nominal) rates. Alternatively, hybrid instruments may
bear interest at above market rates but bear an increased risk of principal
loss. In addition, because the purchase and sale of hybrid instruments could
take place in an over-the-counter or in a private transaction between the Series
and the seller of the hybrid instrument, the creditworthiness of the
counter-party to the transaction would be a risk factor which the Series would
have to consider. Hybrid instruments also may not be subject to regulation of
the Commodity Futures Trading Commission, which generally regulates the trading
of commodity futures by U.S. persons, the Securities and Exchange Commission,
which regulates the offer and sale of securities by and to U.S. persons, or any
other governmental regulatory authority.
INSURANCE LAW RESTRICTIONS. In connection with the Fund's agreement to sell
interests in the Fund to JNLNY Separate Account II (Separate Account), Jackson
National Financial Services, LLC (JNFS) and Jackson National Life Insurance
Company (JNL) may enter into agreements with the Fund, required by certain state
insurance departments, under which JNFS may agree to use its best efforts to
assure and to permit JNL to monitor that the Series complies with the investment
restrictions and limitations prescribed by state insurance laws and regulations
applicable to the investment of separate account assets in shares of mutual
funds. If the Series failed to comply with such restrictions or limitations, JNL
would take appropriate action, which might include ceasing to make investments
in the Fund and/or Series or withdrawing from the state imposing the limitation.
Such restrictions and limitations are not expected to have a significant impact
on the Fund's operations.
INVESTMENT STRATEGY RISKS. The common stock selected for the Series generally
share attributes that have caused them to have lower prices or higher yields
relative to other stocks in their respective index or exchange. The common stock
may, for example, be experiencing financial difficulty, or be out of favor in
the market because of weak performance, poor earnings forecasts or negative
publicity; or they may be reacting to general market cycles. There can be no
assurance that the market factors that caused the relatively low prices and high
dividend yields of the common stock will or will not change, that any negative
conditions adversely affecting the stock prices will not deteriorate, that the
dividend rates on the common stock will be maintained or that share prices will
not decline further during the life of the Series, or that the common stock will
continue to be included in the respective indices or exchanges. Investing in
stocks with the highest dividend yields amounts to a contrarian strategy because
these shares are often out of favor. Such strategy may be effective in achieving
the Series' investment objective because regular dividends are common for
established companies and dividends have often accounted for a substantial
portion of the total return on stocks of the index as a group. However, there is
no guarantee that either the Series' objective will be achieved or that the
Series will provide for capital appreciation in excess of the Series' expenses.
Because of the contrarian nature of the Series and the attributes of the common
stock which caused inclusion in the portfolio, the Series may not be appropriate
for investors seeking either preservation of capital or high current income. In
addition, the strategy for the Series has underperformed its index in certain
years.
LITIGATION. Certain of the issuers of common stock may be involved in the
manufacture, distribution and sale of tobacco products. Pending litigation
proceedings against such issuers in the United States and abroad cover a wide
range of matters including product liability and consumer protection. Damages
claimed in such litigation alleging personal injury (both individual and class
actions), and in health cost recovery cases brought by governments, labor unions
and similar entities seeking reimbursement for health case expenditures,
aggregate many billions of dollars.
In November 1998, certain companies in the U.S. tobacco industry, including
Philip Morris, entered into a negotiated settlement with several states which
would result in the resolution of significant litigation and regulatory issues
affecting the tobacco industry generally. The proposed settlement, while
extremely costly to the tobacco industry, would significantly reduce
uncertainties facing the industry and increase stability in business and capital
markets. Future litigation and/or legislation could adversely affect the value,
operating revenues and financial position of tobacco companies and could
adversely affect the Series.
The Dow Target 10 Series may include the common stock of Microsoft Corporation
in its portfolio. Microsoft Corporation is currently engaged in litigation with
Sun Microsystems, Inc., the U.S. Department of Justice and several state
Attorneys General. The complaints against Microsoft include copyright
infringement, unfair competition and anti-trust violations. The claims seek
injunctive relief and monetary damages. In the action brought against Microsoft
by the U.S. Department of Justice, the United States District Court for the
District of Columbia issued findings of fact that included a finding that
Microsoft possesses and exercised monopoly power. The court also recently
entered an order finding that Microsoft exercised this power in violation of the
Sherman Antitrust Act and various state antitrust laws. The next step in the
litigation will be for the court to determine the penalties against Microsoft.
The possible remedies that could potentially be considered by the court,
according to industry experts, range from a possible breakup of Microsoft to
remedies such as ordering the company to surrender its blueprint, or "source
code," for its Windows operating software. Microsoft has stated that it will
appeal this ruling following the penalties phase and final decree. It is
possible that any remedy could have a material adverse impact on Microsoft,
however, it is impossible to predict the impact that any penalty may have on
Microsoft's business in the future or on the Series.
At any time, litigation may be instituted on a variety of grounds with respect
to the common stock held in the Series portfolio. The Fund is unable to predict
whether any litigation including the above-described litigation, that has been
or will be instituted, might have a material adverse effect on the Fund.
INVESTMENT RESTRICTIONS
FUNDAMENTAL POLICIES. The following fundamental policies may not be changed
without the affirmative vote of the majority of the outstanding voting
securities of the Fund. The Investment Company Act of 1940 (1940 Act) defines a
majority vote as the vote of the lesser of (i) 67% of the Fund interests
represented at a meeting at which more than 50% of the outstanding interests are
represented or (ii) more than 50% of the outstanding voting interests.
(1) The Series may not issue senior securities.
(2) The Series will not borrow money, except for temporary or
emergency purposes, from banks. The aggregate amount borrowed
shall not exceed 25% of the value of the Series' assets. In
the case of any borrowing, the Series may pledge, mortgage or
hypothecate up to 15% of its assets.
(3) The Series will not underwrite the securities of other issuers
except to the extent the Fund may be considered an underwriter
under the Securities Act of 1933 when selling portfolio
securities.
(4) The Series will not purchase or sell real estate or interests
therein.
(5) The Series will not lend any security or make any other loan
if, as a result, more than 33 1/3% of the Series' total assets
would be lent to other parties (but this limitation does not
apply to purchases of commercial paper, debt securities or
repurchase agreements).
(6) The Series may invest in repurchase agreements and warrants
and engage in futures and options transactions and securities
lending.
The Series is not a "diversified company," as that term is defined in the
Investment Company Act of 1940, as amended. There are no limitations on the
concentration of the investments held by the Series in any particular industry
or group of industries.
MANAGEMENT OF THE FUND
The officers of the Fund manage its day to day operations and are responsible to
the Fund's Board of Managers. The Board of Managers of the Fund sets broad
policies for the Series and chooses the Fund's officers. The following is a list
of the Managers and officers of the Fund and a statement of their present
positions and principal occupations during the past five years.
For purposes of this section, the term "Fund Complex" includes each of the
following investment companies: JNL Series Trust, JNL Variable Fund LLC, JNL
Variable Fund III LLC, JNL Variable Fund V LLC, JNLNY Variable Fund I LLC, and
JNLNY Variable Fund II LLC. Each of the Fund's Managers is also a Trustee or
Manager of each of the other funds in the Fund Complex and each of the Fund's
officers is also an officer of one or more of the funds in the Fund Complex.
ANDREW B. HOPPING* (Age 41), 5901 Executive Drive, Lansing, Michigan 48911
Member of the Board of Managers of the Fund and each of the other funds in the
Fund Complex
President and Chief Executive Officer of the Fund and each of the other funds
in the Fund Complex
JNL Series Trust, Vice President (8/96 to 8/97)
JNL Series Trust, Treasurer (8/96 to 8/97)
JNL Series Trust, Chief Financial Officer (8/96 to 8/97)
Jackson National Life Distributors, Inc., Treasurer (1/98 to present)
Jackson National Financial Services, LLC, President and Managing Board Member
(3/98 to present)
Jackson National Life Insurance Company, Executive Vice President
(7/98 to present)
Jackson National Life Insurance Company, Chief Financial Officer
(12/97 to present)
Jackson National Life Insurance Company, Senior Vice President (6/94 to 7/98)
Jackson National Life Insurance Company of New York, Director (9/97 to present)
Jackson National Life Insurance Company of New York, Chief Financial Officer
(3/98 to present)
Jackson National Life Insurance Company of New York, Executive Vice President
(7/98 to present)
Jackson National Life Insurance Company of New York, Treasurer (3/98 to 7/98)
Jackson National Life Insurance Company of New York, Senior Vice President
(11/95 to 7/98)
National Planning Corporation, Vice President (5/98 to 7/98)
Jackson National Life Distributors, Inc., Chief Financial Officer and Vice
President (7/97 to present)
National Planning Corporation, Director (6/97 to present)
Jackson National Financial Services, Inc., CEO and President (7/97 to 5/98)
Countrywide Credit, Executive Vice President (3/92 to 6/94)
MICHAEL BOUCHARD** (Age 44), 344 Fairfax, Birmingham, MI 48009
Member of the Board of Managers of the Fund and each of the other funds in the
Fund Complex
Sheriff, Oakland County, Michigan (1/99 to present)
Senator State of Michigan (1991 to 1999)
DOMINIC D'ANNUNZIO** (Age 62), 100 Siena Way, Unit 1204, Naples, FL 34119
Member of the Board of Managers of the Fund and each of the other funds in
the Fund Complex
Acting Commissioner of Insurance for the State of Michigan, (8/97 to 5/98)
Acting Commissioner of Insurance for the State of Michigan, (1/90 to 5/90)
Acting Manager of Michigan State Accident Fund (9/89 to 12/89)
Deputy Commissioner of the Office of Financial Analysis and Examinations
(4/89 to 8/97)
Deputy Commissioner of the Office of Market Standards (1/87 to 4/89)
MICHELLE ENGLER** (Age 42), 2520 Oxford Drive, Lansing, MI 48911
Member of the Board of Managers of the Fund and each of the other funds in the
Fund Complex
First Lady of the State of Michigan (1991 to present)
Chair, Michigan Community Service Commission (1991 to present)
ROBERT A. FRITTS* (Age 51) 5901 Executive Drive, Lansing, Michigan 48911
Member of the Board of Managers of the Fund and each of the other funds in the
Fund Complex
Vice President, Treasurer and Chief Financial Officer of the Fund and each of
the other funds in the Fund Complex
JNL Series Trust, Assistant Treasurer (2/96 to 8/97)
JNL Series Trust, Assistant Secretary (12/94 to 2/96)
Jackson National Life Insurance Company, Vice President and Controller
(8/82 to present)
Jackson National Life Insurance Company of New York, Vice President and
Controller - Financial Operations (11/95 to present)
Jackson National Life Insurance Company of New York, Assistant Secretary
(11/95 to 3/98)
THOMAS J. MEYER (Age 53) 5901 Executive Drive, Lansing, Michigan 48911
Vice President, Secretary and Counsel of the Fund and each of the other funds in
the Fund Complex
Jackson National Life Insurance Company, Senior Vice President (7/98 to present)
Jackson National Life Insurance Company, Secretary (9/94 to present)
Jackson National Life Insurance Company, General Counsel (3/85 to present)
Jackson National Life Insurance Company, Vice President (3/85 to 7/98)
Jackson National Life Insurance Company of New York, Director (7/95 to present)
Jackson National Life Insurance Company of New York, General Counsel (11/95 to
present)
Jackson National Life Insurance Company of New York, Secretary
(11/95 to present)
Jackson National Life Insurance Company of New York, Senior Vice President
(7/98 to present)
Jackson National Life Insurance Company of New York, Vice President
(11/95 to 7/98)
MARK D. NERUD (Age 33) 225 West Wacker Drive, Suite 1200, Chicago, IL 60606
Vice President and Assistant Treasurer of the Fund and each of the other funds
in the Fund Complex
Jackson National Financial Services, LLC, Chief Financial Officer
(3/98 to present)
Jackson National Financial Services, LLC, Managing Board Member
(3/98 to present)
National Planning Corporation, Vice President (5/98 to present)
Jackson National Life Distributors, Inc., Chief Operating Officer
(7/97 to present)
Jackson National Life Distributors, Inc., Vice President, Assistant Treasurer
(1/98 to present)
Jackson National Financial Services, Inc., Director (1/98 to 5/98)
Jackson National Financial Services, Inc., Chief Operating Officer
(6/97 to 5/98)
Jackson National Financial Services, Inc., Treasurer (6/97 to 5/98)
Jackson National Life Insurance Company, Vice President - Fund Accounting &
Administration (1/00 to present)
Jackson National Life Insurance Company, Assistant Vice President - Mutual Fund
Operations (5/97 to 12/99)
Jackson National Life Insurance Company, Assistant Vice President
(10/96 to 4/97)
Jackson National Life Insurance Company, Assistant Controller (10/96 to 4/97)
Jackson National Life Insurance Company, Senior Manager - Mutual Fund Operations
(4/96 to 10/96)
Voyageur Asset Management Company, Manager - Mutual Fund Accounting
(5/93 to 4/96)
SUSAN MIN (Age 28) 5901 Executive Drive, Lansing, MI 48911
Assistant Secretary of the Fund and each of the other funds in the Fund Complex
Jackson National Financial Services, LLC, Secretary (1/00 to present)
Jackson National Life Insurance Company, Senior Attorney (1/00 to present)
Goldman, Sachs & Co., Associates (10/99 to 12/99)
Van Eck Associates Corporation, Staff Attorney (9/97 to 10/99)
*Managers who are interested persons as defined in the 1940 Act.
**New member of the Board of Managers as of May 11, 2000.
The officers of the Fund and the Managers who are "interested persons" as
designated above receive no compensation from the Fund. Disinterested Managers
will be paid $5,000 for each meeting of a fund in the Fund Complex that they
attend. The disinterested Managers received the following compensation for
services as a Manager during the fiscal year ended December 31, 1999:
AGGREGATE COMPENSATION PENSION OR RETIREMENT
FROM ADVISER BENEFITS ACCRUED AS PART OF
MANAGER FUND EXPENSES
Joseph Frauenheim* $16,000 0
Richard McLellan* 16,000 0
Peter McPherson* 16,000 0
*Member of the Board of Managers that served on the Board until May 11, 2000.
As of April 1, 2000, the officers and Managers of the Fund, as a group, owned
less than 1% of the then outstanding interests of the Fund. To the extent
required by applicable law, JNL will solicit voting instructions from owners of
variable insurance or variable annuity contracts. All interests of the Series
will be voted by JNL in accordance with voting instructions received from such
variable contract owners. JNL will vote all of the interests which it is
entitled to vote in the same proportion as the voting instructions given by
variable contract owners, on the issues presented, including interests which are
attributable to JNL's interest in the Fund.
PERFORMANCE
The Series' historical performance may be shown in the form of total return.
This performance measure is described below. Performance advertised for the
Series may or may not reflect the effect of any charges that are imposed under a
variable annuity contract (Contract) that is funded by the Fund. Such charges,
described in the prospectus for the Contract, will have the effect of reducing
the Series' performance.
Standardized average annual total return and non-standardized total return
measure both the net investment income generated by, and the effect of any
realized and unrealized appreciation or depreciation of, the underlying
investments of the Series. The Series' standardized average annual total return
quotation is computed in accordance with a standardized method prescribed by
rules of the Securities and Exchange Commission (SEC). Standardized average
annual total return shows the percentage rate of return of a hypothetical
initial investment of $1,000 for the most recent one-, five- and ten-year
periods, or for a period covering the time the Series has been in existence if
the Series has not been in existence for one of the prescribed periods. Because
average annual total returns tend to smooth out variations in the Series'
returns, you should recognize that they are not the same as actual year-by-year
results. The standardized average annual total return for the Series for a
specific period is found by first taking a hypothetical $1,000 investment
(initial investment) in the Series' shares on the first day of the period,
adjusting to deduct the applicable charges, if any, and computing the redeemable
value of that investment at the end of the period. The redeemable value is then
divided by the initial investment, and the quotient is taken to the Nth root (N
representing the number of years in the period) and 1 is subtracted from the
result, which is then expressed as a percentage. The calculation assumes that
all income and capital gains dividends paid by the Series have been reinvested
at net asset value on the reinvestment dates during the period.
The standardized average annual total return will be based on rolling calendar
quarters and will cover at least periods of one, five and ten years, or a period
covering the time the Series has been in existence, if it has not been in
existence for one of the prescribed periods.
Non-standardized total return may also be advertised. Non-standardized total
return may be for periods other than those required to be presented or may
otherwise differ from standardized average annual total return. Non-standardized
total return for a specific period is calculated by first taking an investment
(initial investment) in the Series on the first day of the period and computing
the end value of that investment at the end of the period. The total return
percentage is then determined by subtracting the initial investment from the
ending value and dividing the remainder by the initial investment and expressing
the result as a percentage. The calculation assumes that all income and capital
gains dividends paid by the Series have been reinvested at net asset value on
the reinvestment dates during the period. Non-standardized total return may also
be shown as the increased dollar value of the hypothetical investment over the
period.
Quotations of standardized average annual total return and non-standardized
total return are based upon historical earnings and will fluctuate. Any
quotation of performance, therefore, should not be considered a guarantee of
future performance. Factors affecting the performance of the Series include
general market conditions, operating expenses and investment management.
The Series' performance quotations are based upon historical results and are not
necessarily representative of future performance. The Series' interests are sold
at net asset value. Returns and net asset value will fluctuate. Shares of the
Series are redeemable at the then current net asset value, which may be more or
less than original cost.
INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISER. Jackson National Financial Services, LLC ("JNFS"), 5901
Executive Drive, Lansing, Michigan 48911, is the investment adviser to the Fund.
As investment adviser, JNFS provides the Fund with professional investment
supervision and management. JNFS is a wholly owned subsidiary of Jackson
National Life Insurance Company ("JNL"), which is in turn wholly owned by
Prudential plc, a life insurance company in the United Kingdom.
JNFS acts as investment adviser to the Series pursuant to an Investment Advisory
and Management Agreement. The Investment Advisory and Management Agreement
continues in effect for the Series from year to year after its initial two-year
term so long as its continuation is approved at least annually by (i) a majority
of the Managers who are not parties to such agreement or interested persons of
any such party except in their capacity as Managers of the Fund, and (ii) the
interest holders of the Series or the Board of Managers. It may be terminated at
any time upon 60 days notice by either party, or by a majority vote of the
outstanding interests of the Series, and will terminate automatically upon
assignment. Additional Series may be subject to a different agreement. The
Investment Advisory and Management Agreement provides that JNFS shall not be
liable for any error of judgment, or for any loss suffered by the Series in
connection with the matters to which the agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on the part of
JNFS in the performance of its obligations and duties, or by reason of its
reckless disregard of its obligations and duties under the agreement. The Series
is obligated to pay JNFS the following fees:
ASSETS FEES
$0 to $500 million ........................................ .75%
$500 million to $1 billion ................................ .70%
Over $1 billion ........................................... .65%
SUB-ADVISER. JNFS has entered into a Sub-Advisory Agreement with First Trust
Advisors L.P. (First Trust) to manage the investment and reinvestment of the
assets of the Series, subject to JNFS' supervision.
First Trust, an Illinois limited partnership formed in 1991 and an investment
adviser registered with the SEC under the Investment Advisers Act of 1940, is
the sub-adviser for the Series. First Trust's address is 1001 Warrenville Road,
Lisle, Illinois 60532. First Trust is a limited partnership with one limited
partner, Grace Partners of Dupage L.P., and one general partner, Nike Securities
Corporation. Grace Partners of Dupage L.P. is a limited partnership with one
general partner, Nike Securities Corporation, and a number of limited partners.
Nike Securities Corporation is an Illinois corporation controlled by the Robert
Donald Van Kampen family. Pursuant to a Sub-Advisory Agreement with JNFS, First
Trust is responsible for selecting the investments of the Series consistent with
the investment objectives and policies of the Series, and will conduct
securities trading for the Series. First Trust discharges its responsibilities
subject to the policies of the Board of Managers of the Fund and the oversight
and supervision of JNFS, which pays First Trust's sub-advisory fees.
Under the Sub-Advisory Agreement, First Trust provides the Series with
discretionary investment services. Specifically, First Trust is responsible for
supervising and directing the investments of the Series in accordance with the
Series' investment objective, program, and restrictions as provided in the
Prospectus and this Statement of Additional Information. First Trust is also
responsible for effecting all security transactions on behalf of the Series.
As compensation for its services, First Trust receives a fee, which is paid by
JNFS. The Sub-Advisory Agreement also provides that First Trust, its directors,
officers, employees, and certain other persons performing specific functions for
the Series will only be liable to the Series for losses resulting from willful
misfeasance, bad faith, gross negligence, or reckless disregard of duty.
The Sub-Advisory Agreement continues in effect for the Series from year to year
after its initial two-year term so long as its continuation is approved at least
annually by a majority of the Managers who are not parties to such agreement or
interested persons of any such party except in their capacity as Managers of the
Series and by the interest holders of the Series or the Board of Managers. It
may be terminated at any time upon 60 days' notice by either party, or by a
majority vote of the outstanding interests of the Series, and will terminate
automatically upon assignment or upon the termination of the investment
management agreement between JNFS and the Series. Additional Series may be
subject to a different agreement. The Sub-Advisory Agreement also provides that
First Trust is responsible for compliance with the provisions of Section 817(h)
of the Internal Revenue Code of 1986, as amended (Code), applicable to the
Series (relating to the diversification requirements applicable to investments
in underlying variable annuity contracts). JNFS is obligated to pay First Trust
out of the advisory fee it receives from the Series the following fees:
ASSETS FEES
$0 to $500 million .......................................... .35%
$500 million to $1 billion .................................. .30%
Over $1 billion ............................................. .25%
LICENSE AGREEMENTS. JNFS, JNL and the Fund have entered into a Sub-License
Agreement with First Trust under the terms of which the Fund and JNL are
permitted to use and refer to certain copyright, trademark and proprietary
rights and trade secrets of Dow Jones & Company.
ADMINISTRATIVE FEE. The Series pays to JNFS an Administrative Fee of .10% 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 operation
of the Series. In accordance with the Administration Agreement, JNFS is
responsible for payment of expenses related to legal, audit, fund accounting,
custody, printing and mailing, managers fees and all other services necessary
for the operation of the Series. The Series is responsible for trading expenses
including brokerage commissions, interest and taxes, and other non-operating
expenses.
CUSTODIAN AND TRANSFER AGENT. Boston Safe Deposit & Trust Company, One Boston
Place, Boston, Massachusetts 02108, acts as custodian for the Series. In
general, the custodian is responsible for holding the Series' cash and
securities and attends to the collection of principal and income and payment for
and collection of proceeds of securities bought and sold by the Series.
JNFS is the transfer agent and dividend-paying agent for the Series.
INDEPENDENT ACCOUNTANTS. The Series' independent accountants,
PricewaterhouseCoopers LLP, 203 North LaSalle, Chicago, Illinois 60601, audit
and report on the Series' annual financial statements, and perform other
professional accounting, auditing and advisory services when engaged to do so by
the Series.
SERIES TRANSACTIONS AND BROKERAGE. Pursuant to the Sub-advisory Agreement, First
Trust is responsible for placing all orders for the purchase and sale of
portfolio securities of the Fund. First Trust has no formula for the
distribution of the Fund's brokerage business, its intention being to place
orders for the purchase and sale of securities with the primary objective of
obtaining the most favorable overall results for the Fund. The cost of
securities transactions for each portfolio will consist primarily of brokerage
commissions or dealer or underwriter spreads. Bonds and money market instruments
are generally traded on a net basis and do not normally involve either brokerage
commissions or transfer taxes.
Occasionally, securities may be purchased directly from the issuer. For
securities traded primarily in the over-the-counter market, First Trust will,
where possible, deal directly with dealers who make a market in the securities
unless better prices and execution are available elsewhere. Such dealers usually
act as principals for its own account.
In selecting brokers and dealers through whom to effect transactions,
First Trust will give consideration to a number of factors, including price,
dealer spread or commission, if any, the reliability, integrity and financial
condition of the broker-dealer, size of the transaction and difficulty of
execution. Consideration of these factors by First Trust, either in terms of a
particular transaction or First Trust's overall responsibilities with respect to
the Fund and any other accounts managed by First Trust, could result in the Fund
paying a commission or spread on a transaction that is in excess of the amount
of commission or spread another broker-dealer might have charged for executing
the same transaction. In selecting brokers and dealers, First Trust will also
give consideration to the value and quality of any research, statistical,
quotation or valuation services provided by the broker or dealer. In placing a
purchase or sale order, First Trust may use a broker whose commission in
effecting the transaction is higher than that of some other broker if First
Trust determines in good faith that the amount of the higher commission is
reasonable in relation to the value of the brokerage and research services
provided by such broker, viewed in terms of either the particular transaction or
First Trust's overall responsibilities with respect to the Fund and any other
accounts managed by First Trust. Brokerage and research services provided by
brokers and dealers include advice, either directly or through publications or
writings, as to the value of securities, the advisability of purchasing or
selling securities, the availability of securities or purchasers or sellers of
securities, and analyses and reports concerning issuers, industries, securities,
economic factors and trends and portfolio strategy. Consistent with the
foregoing considerations and the Conduct Rules of the NASD, First Trust may
consider the sale of shares of the Series or variable insurance products that
use the Series as investment vehicles, or may consider or follow recommendations
of JNFS that take such sales into account, as factors in the selection of
brokers to effect portfolio transactions for a Series, subject to the
requirements of best net price available and most favorable execution. In this
regard, JNFS may direct First Trust to try to effect a portion of a Series'
transactions through broker-dealers that give prominence to variable insurance
products using the Series as investment vehicles, to the extent consistent with
best net price available and most favorable execution.
To the extent research services are used by First Trust in rendering
investment advice to the Fund, such services would tend to reduce First Trust'
expenses. However, First Trust does not believe that an exact dollar value can
be assigned to these services. Research services received by First Trust from
brokers or dealers executing transactions for the Fund will be available also
for the benefit of other portfolios managed by First Trust.
The Managers periodically review the Adviser's performance of its
responsibilities in connection with the placement of portfolio transactions on
behalf of the Series and review commissions paid by the Series over a period of
time to determine if they are reasonable in relation to the benefit to the
Series.
Any portfolio transaction for a Series may be executed through brokers
that are affiliated with the Fund, JNFS and/or First Trust, if, in First Trust's
judgment, the use of such affiliated brokers is likely to result in price and
execution at least as favorable as those of other qualified brokers, and if, in
the transaction, the affiliated broker charges the Series a commission rate
consistent with those charged by the affiliated broker to comparable
unaffiliated customers in similar transactions. All transactions with affiliated
brokers will comply with Rule 17e-1 under the 1940 Act.
There may be occasions when portfolio transactions for the Fund are
executed as part of concurrent authorizations to purchase or sell the same
security for trusts or other accounts served by affiliated companies of JNFS or
First Trust. Although such concurrent authorizations potentially could be either
advantageous or disadvantageous to the Fund, they are effected only when JNFS
and First Trust believe that to do so is in the interest of the Fund. When such
concurrent authorizations occur the executions will be allocated in an equitable
manner.
CODE OF ETHICS. To mitigate the possibility that the Series will be adversely
affected by personal trading of employees, the Fund, JNFS and First Trust have
adopted Codes of Ethics under Rule 17j-1 of the 1940 Act. These codes contain
policies restricting securities trading in personal accounts of the portfolio
managers and others who normally come into possession of information on
portfolio transactions. JNFS' Code complies, in all material respects, with the
recommendations of the Investment Company Institute. Employees subject to the
Code of Ethics may invest in securities for their own investment accounts,
including securities that may be purchased or held by the Trust.
PURCHASES, REDEMPTIONS AND PRICING OF INTERESTS
The Separate Account may purchase interests of the Series at their net asset
value. Interests are purchased using premiums received on policies issued by
JNL. The Separate Account is funded by interests of the Fund.
All investments in the Fund are credited to the interest holder's account in the
form of full and fractional interests of the Series (rounded to the nearest
1/1000 of an interest). The Fund does not issue interest certificates.
As stated in the Prospectus, the net asset value (NAV) of Series' interests is
determined once each day on which the New York Stock Exchange (NYSE) is open
(Business Day) at the close of the regular trading session of the Exchange
(normally 4:00 p.m., Eastern Time, Monday through Friday). The NAV of Series'
interests is not determined on the days the NYSE is closed, which days generally
are New Year's Day, Martin Luther King Jr. holiday, President's Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas.
The per interest NAV of the Series is determined by dividing the total value of
the securities and other assets, less liabilities, by the total number of
interests outstanding. In determining NAV, securities listed on the national
securities exchanges, the NASDAQ National Market and foreign markets are valued
at the closing prices on such markets, or if such price is lacking for the
trading period immediately preceding the time of determination, such securities
are valued at their current bid price. Securities that are traded on the
over-the-counter market are valued at their closing bid prices. Foreign
securities and currencies are converted to U.S. dollars using exchange rates in
effect at the time of valuation. The Series will determine the market value of
individual securities held by it, by using prices provided by one or more
professional pricing services which may provide market prices to other funds,
or, as needed, by obtaining market quotations from independent broker-dealers.
Short-term securities maturing within 60 days are valued on the amortized cost
basis. Securities for which quotations are not readily available, and other
assets, are valued at fair values determined in good faith under procedures
established by and under the supervision of the Managers.
The Fund may suspend the right of redemption for the Series only under the
following unusual circumstances: (a) when the New York Stock Exchange is closed
(other than weekends and holidays) or trading is restricted; (b) when an
emergency exists, making disposal of portfolio securities or the valuation of
net assets not reasonably practicable; or (c) during any period when the
Securities and Exchange Commission has by order permitted a suspension of
redemption for the protection of interest holders.
ADDITIONAL INFORMATION
DESCRIPTION OF INTERESTS. The Fund may issue an unlimited number of full and
fractional interests of the Series and divide or combine such interests into a
greater or lesser number of interests without thereby changing the proportionate
interests in the Fund. Each interest of the Series represents an equal
proportionate interest in the Series with each other interest. The Fund reserves
the right to create and issue any number of series of interests. In that case,
the interests of each series would participate equally in the earnings,
dividends, and assets of the particular Series. Upon liquidation of the Series,
interest holders are entitled to share pro rata in the net assets of the Series
available for distribution to interest holders. Each issued and outstanding
interest in the Series is entitled to participate equally in dividends and
distributions declared by the Series, and in the net assets of the Series
remaining upon liquidations or dissolution after outstanding liabilities are
satisfied. The interests of the Series, when issued, are fully paid and
nonassessable. They have no preemptive, conversion, cumulative dividend or
similar rights. They are freely transferable. Interests in the Series do not
have cumulative rights. This means that owners of more than half of the Fund's
interests voting for election of Managers can elect all the Managers if they so
choose. Then, the remaining interest owners would not be able to elect any
Managers.
VOTING RIGHTS. Interest holders are entitled to one vote for each interest held.
Interest holders may vote on the election of Managers and on other matters
submitted to meetings of interest holders. In regard to termination, sale of
assets, or change of investment restrictions, the right to vote is limited to
the holders of interests of the Series affected by the proposal. When a majority
is required under the Investment Company Act of 1940, as amended, it means the
lesser of 67% or more of the interests present at a meeting when the holders of
more than 50% of the outstanding interests are present or represented by proxy,
or more than 50% of the outstanding interests.
INTERESTHOLDER INQUIRIES. All inquiries regarding the Fund should be directed to
the Fund at the telephone number or address shown on the cover page of the
Prospectus.
TAX STATUS
The Fund is not a "regulated investment company" under Subchapter M of the
Internal Revenue Code of 1986, as amended (Code). The Fund nonetheless does not
pay federal income tax on its interest, dividend income or capital gains. As a
limited liability company whose interests are sold only to the Separate Account,
the Fund is disregarded as an entity for purposes of federal income taxation.
Jackson National Life, through the Separate Account, is treated as owning the
assets of the Series directly and its tax obligations thereon are computed
pursuant to Subchapter L of the Code (which governs the taxation of insurance
companies). Under current tax law, interest, dividend income and capital gains
of the Fund are not taxable to the Fund, and are not currently taxable to JNL or
to policy owners, when left to accumulate within a variable annuity policy. Tax
disclosure relating to the variable annuity policies that offer the Fund as an
investment alternative is contained in the prospectuses for those policies.
Section 817(h) of the Code imposes certain diversification standards on the
underlying assets of segregated asset accounts that fund contracts such as the
variable annuity policies (that is, the assets of the Series). Failure to
satisfy those standards would result in imposition of Federal income tax on a
variable annuity policy owner with respect to the increase in the value of the
variable annuity policy. Section 817(h)(2) provides that a segregated asset
account that funds contracts such as the variable annuity policies is treated as
meeting the diversification standards if, as of the close of each calendar
quarter, the assets in the account meet the diversification requirements for a
regulated investment company and no more than 55% of those assets consist of
cash, cash items, U.S. Government securities and securities of other regulated
investment companies.
The Treasury Regulations amplify the diversification standards set forth in
Section 817(h) and provide an alternative to the provision described above.
Under the regulations, an investment portfolio will be deemed adequately
diversified if (i) no more than 55% of the value of the total assets of the
portfolio is represented by any one investment; (ii) no more than 70% of such
value is represented by any two investments; (iii) no more than 80% of such
value is represented by any three investments; and (iv) no more than 90% of such
value is represented by any four investments. For purposes of these regulations
all securities of the same issuer are treated as a single investment, but each
United States government agency or instrumentality shall be treated as a
separate issuer.
The Series will be managed with the intention of complying with these
diversification requirements. It is possible that, in order to comply with these
requirements, less desirable investment decisions may be made which could affect
the investment performance of the Series.
FINANCIAL STATEMENTS
No financial statements for the Fund are included in the prospectus or in this
Statement of Additional Information because the Fund had not commenced
operations as of the effective date of this prospectus and Statement of
Additional Information.
<PAGE>
JNLNY VARIABLE FUND II LLC
PART C
OTHER INFORMATION
Note: Items 23-30 have been answered with respect to all investment portfolios
(Series) of the Registrant.
Item 23. Exhibits
(a) Certificate of Formation of Registrant dated January 26, 1999, attached
hereto.
(b) Operating Agreement of Registrant, attached hereto.
(c) Not Applicable
(d) (1) Investment Advisory and Management Agreement between
Registrant and Jackson National Financial Services, LLC dated
May 14, 1999, attached hereto.
(2) Investment Sub-Advisory Agreement between Jackson National
Financial Services, LLC and First Trust Advisors L.P. dated
May 26, 1999, attached hereto.
(e) Fund Participation Agreement between Registrant, Jackson National Life
Insurance Company of New York and JNLNY Separate Account II dated May
14, 1999, attached hereto.
(f) Not Applicable
(g) Delegation, Custody and Information Services Agreement between the
Registrant and Boston Safe Deposit and Trust Company dated May 14,
1999, attached hereto.
(h) Administration Agreement between Registrant and Jackson National
Financial Services, LLC dated May 14, 1999, attached hereto.
(i) Opinion of Counsel, attached hereto.
(j) Not Applicable
(k) Not Applicable
(l) Not Applicable
(m) Not Applicable
(n) Not Applicable
(o) Not Applicable
(p) (1) The Registrant's Code of Ethics, attached hereto.
(2) First Trust Advisors, L.P. Code of Ethics, attached hereto.
Item 24. Persons controlled by or under Common Control with Registrant.
Jackson National Separate Account I Jackson National Separate
Account III Jackson National Separate Account V Jackson
National Separate Account VI JNLNY Separate Account I JNLNY
Separate Account II
Item 25. Indemnification.
Article IV of the Registrant's Operating Agreement provides
that each of its Managers and Officers (including persons who
serve at the Registrant's request as managers, directors,
officers or trustees of another organization in which the
Registrant has any interest as a shareholder, creditor or
otherwise) (each, a "Covered Person") shall be indemnified by
the Registrant against all liabilities and expenses that may
be incurred by reason of being or having been such a Covered
Person, except that no Covered Person shall be indemnified
against any liability to the Registrant or its shareholders to
which such Covered Person would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of
such Covered Person's office.
The foregoing indemnification arrangements are subject to the
provisions of Section 17(h) of the Investment Company Act of
1940.
Insofar as indemnification by the Registrant for liabilities
arising under the Securities Act of 1933 may be permitted to
managers, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a
manager, officer or controlling person of the Registrant in
the successful defense of any action, suit or proceeding) is
asserted against the Registrant by such manager, officer or
controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final
adjudication of such issue.
In addition to the above indemnification, Jackson National
Life Insurance Company extends its indemnification of its own
officers, directors and employees to cover such persons'
activities as officers, managers or employees of the
Registrant, and by separate agreement Jackson National Life
Insurance Company has agreed to indemnify managers of the
Registrant who are not interested persons of the Registrant or
its investment adviser.
Item 26. Business and Other Connections of Investment Adviser.
Incorporated herein by reference from the Prospectus and
Statement of Additional Information relating to the Fund are
the following: the description of the business of Jackson
National Financial Services, LLC (JNFS) contained in the
section entitled "Management of the Fund" of the Prospectus,
and the biographical information pertaining to Messrs.
Hopping, Meyer, Fritts and Nerud and Ms. Min, contained in the
section entitled "Management of the Fund" and the description
of JNFS contained in the section entitled "Investment Advisory
and Other Services" of the Statement of Additional
Information.
First Trust Advisors L.P., file No. 801-39950, the sub-adviser
of the series of the Fund, is primarily engaged in the
business of rendering investment advisory services. Reference
is made to the most recent Form ADV and schedules thereto on
file with the Commission for a description of the names and
employment of the directors and officers of the sub-adviser
and other required information
Item 27. Principal Underwriters.
Not Applicable.
Item 28. Location of Accounts and Records
Certain accounts, books and other documents required to be
maintained pursuant to Rule 31a-1(b)(4), (5), (6), (7), (9),
(10), and (11) are in the physical possession of the
Registrant at 5901 Executive Drive, Lansing, Michigan 48911;
certain accounts, books and other documents required to be
maintained pursuant to Rule 31a-1(b)(4), (5), (6), (7), (9),
(10), and (11) are in the physical possession of the
Registrant at 225 West Wacker Drive, Suite 1200, Chicago,
Illinois 60606; all other books, accounts and other documents
required to be maintained under Section 31(a) of the
Investment Company Act of 1940 and the Rules promulgated
thereunder are in the physical possession of Boston Safe
Deposit and Trust Company, One Boston Place, Boston,
Massachusetts 02108.
Item 21. Management Services.
Not Applicable.
Item 30. Undertakings.
(a) Not Applicable.
(b) Not Applicable.
(c) Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest annual
report to shareholders upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act and the Investment
Company Act, the Fund has duly caused this Registration Statement to be signed
on its behalf by the undersigned, duly authorized, in the City of Lansing and
the State of Michigan on the 22nd day of May, 2000.
JNLNY VARIABLE FUND II LLC
By: /s/ Andrew B. Hopping*
------------------------------------
Andrew B. Hopping
President, CEO and Manager
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons in the capacities and
on the date indicated.
/s/ Andrew B. Hopping * President, CEO and May 22, 2000
- -------------------------- Manager --------------
Andrew B. Hopping
/s/ Robert A. Fritts * Vice President, CFO, May 22, 2000
- --------------------------- Treasurer and Manager --------------
Robert A. Fritts
/s/ Michelle Engler * Manager May 22, 2000
- --------------------------- --------------
Michelle Engler
/s/ Michael Bouchard * Manager May 22, 2000
- --------------------------- --------------
Michael Bouchard
/s/ Dominic D'Annunzio * Manager May 22, 2000
- --------------------------- --------------
Dominic D'Annunzio
/s/ Thomas J. Meyer May 22, 2000
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Thomas J. Meyer
*Attorney in Fact
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned as managers of
JNLNY VARIABLE FUND II LLC, a Delaware limited liability company, which has
filed or will file with the Securities and Exchange Commission under the
provisions of the Securities Act of 1933 and Investment Company Act of 1940, as
amended, various Registration Statements and amendments thereto for the
registration under said Acts of the sale of shares of beneficial interest of
JNLNY Variable Fund II LLC, hereby constitute and appoint Andrew B. Hopping,
Thomas J. Meyer and Robert P. Saltzman, his attorney, with full power of
substitution and re-substitution, for and in his name, place and stead, in any
and all capacities to approve and sign such Registration Statements and any and
all amendments thereto and to file the same, with all exhibits thereto and other
documents, granting unto said attorneys, each of them, full power and authority
to do and perform all and every act and thing requisite to all intents and
purposes as he might or could do in person, hereby ratifying and confirming that
which said attorneys, or any of them, may lawfully do or cause to be done by
virtue hereof. This instrument may be executed in one or more counterparts.
IN WITNESS WHEREOF, the undersigned have herewith set their names as of the
dates set forth below.
/s/ Andrew B. Hopping May 19, 2000
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Andrew B. Hopping Date
/s/ Robert A. Fritts May 19, 2000
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Robert A. Fritts Date
/s/ Michelle Engler May 19, 2000
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Michelle Engler Date
/s/ Michael Bouchard May 19, 2000
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Michael Bouchard Date
/s/ Dominic D'Annunzio May 19, 2000
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Dominic D'Annunzio Date
<PAGE>
EXHIBIT LIST
Exhibit
Number Description
23. (a) Certificate of Formation of Registrant dated January 26, 1999,
attached hereto as EX-99.a CHARTER.
23. (b) Operating Agreement of Registrant, attached hereto as EX-99.b
BYLAWS.
23. (d)(1) Investment Advisory and Management Agreement between
Registrant and Jackson National Financial Services, LLC dated
May 14, 1999, attached hereto as EX-99.d1 ADVSR CONT.
23. (d)(2) Investment Sub-Advisory Agreement between Jackson National
Financial Services, LLC and First Trust Advisors L.P. dated
May 26, 1999, attached hereto as EX-99.d2 ADVSR CONT.
23. (e) Fund Participation Agreement between Registrant, Jackson
National Life Insurance Company of New York and JNLNY Separate
Account II dated May 14, 1999, attached hereto as EX-99.e UNDR
CONTR.
23. (g) Delegation, Custody and Information Services Agreement between
the Registrant and Boston Safe Deposit and Trust Company dated
May 14, 1999, attached hereto as EX-99.g CUST AGREEMT.
23. (h) Administration Agreement between Registrant and Jackson
National Financial Services, LLC dated May 14, 1999, attached
hereto as EX-99.h ADMIN AGRMT.
23. (i) Opinion of Counsel, attached hereto as EX-99.i LEGAL OPININ.
23. (j) Opinion of Auditors, attached hereto as EX-99.j AUDIT OPININ.
23. (p)(1) The Registrant's Code of Ethics, attached hereto as EX-99.p1
CODE ETH.
23. (p)(2) First Trust Advisor's L.P. Code of Ethics, attached hereto as
EX-99.p1 CODE ETH.
CERTIFICATE OF FORMATION
OF
JNLNY VARIABLE FUND II LLC
The undersigned, an authorized natural person, for the purpose of
forming a limited liability company, under the provisions and subject to the
requirements of the State of Delaware (particularly Chapter 18, Title 6 of the
Delaware Code and the acts amendatory thereof and supplemental thereto, and
known, identified, and referred to as the "Delaware Limited Liability Company
Act"), hereby certifies that:
FIRST, The name of the limited liability company (hereinafter called
the "limited liability company") is: JNLNY VARIABLE FUND II LLC.
SECOND, The address of the registered office and the name and address
of the registered agent of the limited liability company required to be
maintained by Section 18-104 of the Delaware Limited Liability Company Act are
The Corporation Trust Copmany, Corporation Trust Center, 1209 Orange Street,
Wilmington, Delaware 19801.
Executed on January 26, 1999
/s/ James L. Hughes
James L. Hughes
Authorized Person
JNLNY VARIABLE FUND II LLC
OPERATING AGREEMENT
ARTICLE I
GENERAL
Section 1. NAME. The name of this limited liability company shall be
JNLNY Variable Fund II LLC (the "Fund"). This limited liability company is
established and maintained under the laws of the State of Delaware.
Section 2. OFFICE. The principal office of the Fund shall be at 225
West Wacker Drive, Suite 1200, Chicago, Illinois. The Fund also shall have
offices at such other locations as the Board of Managers of the Fund, from time
to time, may determine.
Section 3. PURPOSES. The Fund is a no-load mutual fund consisting of
one or more separate investment portfolios as the Board of Managers of the Fund,
from time to time, may determine (each "a Series", collectively "the Series").
ARTICLE II
BOARD OF MANAGERS
Section 1. MANAGEMENT OF THE FUND. The Board shall have power to
conduct the business of the Fund and carry on the Fund's operations in any and
all of its branches and maintain offices both within and without the State of
Delaware, and in any and all other States of the United States of America, in
any and all commonwealths, territories, dependencies, colonies, or possessions
of the United States of America, and in any foreign jurisdiction, and to do all
such other things and execute all such instruments as the Board deems necessary,
proper, or desirable in order to promote the interests of the Fund although such
things are not herein specifically mentioned. Any determination as to what is in
the interests of the Fund made by the Board in good faith shall be conclusive.
The powers of the Board may be exercised without order of or resort to any
court.
Section 2. POWERS. The Board shall have the following duties,
responsibilities, and power:
a. To select and approve annually an independent public
accountant.
b. To authorize and approve agreements providing for investment
management and advisory services, and related matters, and to
approve the continuance of such an agreement.
c. To authorize and approve agreements providing for sales and
administrative services, and related matters, and to approve
the continuance of such an agreement.
d. To authorize and approve agreements providing for
administrative services for a Series, and related matters, and
to approve the continuance of such an agreement.
e. To authorize and approve agreements providing for custodian
services, and related matters, and to approve the continuance
of such an agreement.
f. To authorize and approve agreements providing for accounting
services for a Series, and related matters, and to approve the
continuance of such an agreement.
g. To authorize and approve agreements providing for underwriting
services, and related matters, and to approve the continuance
of such an agreement.
h. To authorize and approve any and all other material agreements
or contracts pertaining to the operation of the Fund,
including, but not limited to, fidelity bond premium
allocation agreements and joint account agreements to permit
the Series to deposit their daily uninvested cash balances
into a single joint account to be used in order to enter into
joint repurchase agreements, and to approve the continuance of
such agreements or contracts.
i. To recommend from time to time any changes deemed appropriate
in the fundamental investment objective or fundamental
investment policies, practices, or limitations of the Fund or
any Series of the Fund, and to make such changes in those
investment policies, practices, and limitations of the Fund or
any Series not requiring approval by the interest holders as
the Board deems appropriate.
j. To supervise the investment of the assets of the Fund and any
Series in accordance with the investment objectives, policies,
practices, and limitations of the Fund and Series, and to
review periodically the investment portfolios of the Fund and
the Series to ascertain that these investment portfolios are
being managed in accordance with the investment objectives,
policies, practices, and limitations of the Fund and the
Series, as appropriate, and the interests of the interest
holders, and to take such corrective action as may be
necessary.
k. To enter into such other agreements and to take any and all
actions necessary or proper in connection with the operation
and management of the Fund and the Series and the assets
thereof.
l. To delegate such authority as the Board considers desirable to
any officers of the Fund and to any investment adviser,
manager, administrator, custodian, underwriter, or other agent
or independent contractor.
m. To create and establish, and to change in any manner, separate
and distinct Series with separately defined investment
objectives and policies and distinct investment purposes, and
to fix the preferences, voting powers, rights, and privileges
of these Series, in accordance with the provisions of the
Investment Company Act of 1940, as amended (the "1940 Act"),
and other federal securities laws, and to establish classes of
such Series having relative rights, powers, and duties as the
Board may provide consistent with applicable law.
n. In general, to carry on any other business in connection with
or incidental to any of the foregoing powers, to do everything
necessary, suitable, or proper for the accomplishment of any
purpose or the attainment of any object or the furtherance of
any power hereinbefore set forth, either alone or in
association with others, and to do every other act or thing
incidental or appurtenant to or growing out of or connected
with the aforesaid business or purposes, objects or powers.
Any action by one or more of the members of the Board in their capacity
as such hereunder shall be deemed an action on behalf of the Fund or the
applicable Series, and not an action in an individual capacity.
Section 3. NUMBER AND TENURE. The initial Board shall consist of Andrew
B. Hopping. The number of members of the Board which thereafter shall constitute
the entire Board may be increased or decreased by a vote of a majority of the
entire Board from time to time; provided, that this number shall not be less
than three or more than nine. Each member of the Board shall hold office until
his or her successor is elected and qualified or until his or her earlier death,
resignation, or removal. Members of the Board need not be interest holders.
Section 4. VACANCIES. Vacancies in the Board for any cause, including
an increase in the authorized number of members of the Board, may be filled by a
majority of the members of the Board then in office, subject to any requirements
under the 1940 Act or other applicable law.
Section 5. PLACE OF MEETINGS. Meetings of the Board may be held at any
place within or without the State of Illinois, or as the Board may determine.
Section 6. REGULAR MEETINGS. Regular meetings of the Board shall be
held at any time and place fixed by the Board. Notice of a meeting shall be
given by mail, personal delivery, telephone, telefax, telegram, or other means
at any time preceding the meeting. Notice of a meeting of the Board may be
waived before or after any meeting by signed written waiver. Neither the
business to be transacted at, nor the purpose of, any meeting of the Board need
be stated in the notice or waiver of notice of such meeting, and no notice need
be given of action proposed to be taken by written consent. The attendance of a
member at a meeting shall constitute a waiver of notice of such meeting, except
where a member attends a meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting has not been lawfully
called or convened.
Section 7. SPECIAL MEETINGS. Special meetings of the Board may be
called at any time by one or more members of the Board.
Section 8. QUORUM. A majority of the total number of members of the
Board shall constitute a quorum for the transaction of business, provided that a
quorum shall in no case be less than three members. If at any meeting of the
Board there shall be less than a quorum present, a majority of those present may
adjourn the meeting until a quorum shall have been obtained. Except as otherwise
provided by law, or any contract or agreement to which the Fund is a party, the
act of a majority of the members of the Board present at any meeting at which
there is a quorum shall be the act of the Board.
Section 9. COMMITTEES. The Board may, by resolution, designate an
executive committee and other committees composed of two or more members, and
the members thereof, to the extent permitted by law, and each subcommittee shall
have the powers, authority, and duties specified in the resolution creating the
same and permitted by law. Each committee may make rules for the notice and
conduct of its meetings and the keeping of the records thereof. The term of any
member of any committee shall be fixed by the Board.
Section 10. COMPENSATION OF MANAGERS. The Board may authorize
reasonable compensation to members for their services as members of the Board
and as members of the committees of the Board and may authorize the
reimbursement of reasonable expenses incurred by members in connection with
rendering those services.
Section 11. RESIGNATIONS. Any member of the Board may resign his or her
membership at any time by mailing or delivering his or her resignation in
writing to the Chairman of the Board or to a meeting of the Board. No member of
the board who resigns shall have any right to compensation for any period
following his or her resignation. Any resignation shall take effect at the time
specified therein or, if the time be not specified, upon receipt thereof.
Section 12. ACTION WITHOUT MEETING. Any action required or permitted to
be taken at any meeting of the Board or of any committee thereof may be taken
without a meeting if all the members of the Board or committee thereof, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of the proceedings of the Board or committee thereof.
Section 13. ACTION BY THE BOARD. Any meeting of the Board conducted by
telephone shall be deemed to take place at the principal office of the Fund or
any other place, as determined by the Board. Subject to the requirements of the
1940 Act, the Board by majority vote may delegate to any one or more of the
Board's members the authority of the Board to approve particular matters or take
particular actions on behalf of the Fund. Written consents or waivers of the
Board may be executed in one or more counterparts. Execution of a written
consent or wavier and delivery thereof to the Fund may be accomplished by
telefax.
Section 13. LIMITATION OF LIABILITY. The members of the Board shall not
be responsible or liable in any event for any neglect or wrongdoing of any
officer, agent, employee, adviser or principal underwriter of the Fund, nor
shall any member be responsible for the act or omission of any other member, but
nothing herein contained shall protect any member against any liability to which
he or she would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his or her office.
Every note, bond, contract, instrument, certificate, share or
undertaking and every other act or thing whatsoever executed or done by on
behalf of the Fund or the Board or any of them in connection with the Fund shall
be conclusively deemed to have been executed or done only in or with respect to
their or his or her capacity as members or a member, and such members or member
shall not be personally liable thereon.
ARTICLE III
OFFICERS
Section 1. OFFICERS. The officers of the Fund shall consist of a
president, a secretary, a treasurer, and such other officers or assistant
officers, including vice-presidents, as may be elected by the Board. Any two or
more of the offices may be held by the same person, except that the same person
may not be both president and secretary. The Board may designate a
vice-president as an executive vice-president and may designate the order in
which the other vice-presidents may act. The Board shall appoint and terminate
such officers as the Board shall consider appropriate.
Section 2. ELECTION AND TENURE. At the initial organizational meeting
and at least once a year thereafter, the Board shall elect the President,
Secretary, Treasurer, and other such officers as the Board shall deem necessary
or appropriate in order to carry out the business of the Fund. Each officer
shall hold the office until his or her successors have been duly elected and
qualified.
Section 3. PRESIDENT AND VICE-PRESIDENTS. The President shall be the
chief executive officer of the Fund and, subject to the control of the Board,
shall have general supervision, direction, and control of the business of the
Fund and shall exercise such general powers of management as are usually vested
in the office of President of a corporation or a business trust. The President
shall preside at all meetings of the Board, and, in the absence of the
President, the next-highest ranking officer shall preside or such other person
designated by the members. Subject to the direction of the Board, the President
shall have power in the name and of behalf of the Fund to execute any and all
loan documents, contracts, agreements, deeds, mortgages, applications for
Commission orders, and other instruments in writing, and to employ and discharge
employees and agents of the Fund. The President shall have such further
authorities and duties as the Board shall from time to time determine. In the
absence or disability of the President, the Vice-Presidents in order of their
rank as fixed by the Board or, if more than one and not ranked, the
Vice-Presidents designated by the Board, or, if not so designated, designated by
the President, shall perform all the duties of the President, and when so acting
shall have all of the powers of and be subject to all of the restrictions upon
the President. Subject to the direction of the name and on behalf of the Fund to
execute any and all loan documents, contracts, agreements, deeds, mortgages, and
other instruments in writing, and, in addition, shall have such other duties and
powers as shall be designated from time to time by the Board or by the
President.
Section 4. SECRETARY. The Board may select a Secretary and an Assistant
Secretary who need not be members of the Board. The Secretary and the Assistant
Secretary shall have the power to certify the minutes of the proceedings of the
Board and portions thereof and shall perform such duties and have such other
powers as these Rules and Regulations or the Board shall designate from time to
time. In the absence of the Secretary and Assistant Secretary, an appointee of
the Board shall perform such duties and have such powers.
Section 5. TREASURER. Except as otherwise directed by the Board, the
Treasurer shall have the general supervision of the monies, funds, securities,
notes receivable, and other valuable papers and documents of the Fund, and shall
have and exercise under the supervision of the Board and of the President all
powers and duties incident to his office. The Treasurer may endorse for deposit
or collection all notes, checks, and other instruments payable to the Fund or to
its order. The Treasurer shall deposit all funds of the Fund in such
depositories as the Board shall designate. The Treasurer shall be responsible
for such disbursement of the funds of the Fund as may be ordered by the Board or
the President. The Treasurer shall keep accurate separate account of the books
of the Fund's transactions, which shall be the property of the Fund and,
together with all other property in his possession, shall be subject at all
times to the inspection and control of the Board. Unless the Board shall
otherwise determine, the Treasurer shall be the principal accounting officer of
the Fund and shall also be the principal financial officer of the Fund. The
Treasurer shall have such other duties and authorities as the Board shall from
time to time determine. Notwithstanding anything to the contrary herein
contained, the Board may authorize any adviser, administrator, manager, or agent
to maintain bank accounts and deposit and disburse funds of the Fund or any
Series thereof.
Section 6. VACANCIES AND REMOVAL. The Board may fill any vacancy which
may occur in any office. Officers shall hold office at the pleasure of the Board
and any officer may be removed from office at any time with or without cause by
the vote of a majority of the entire Board whenever, in the judgment of the
Board, the best interests of the Fund will be served thereby.
Section 7. RESIGNATIONS. Any officer may resign his office at any time
by mailing or delivering his or her resignation in writing to a meeting of the
Board. No officer of the Fund who resigns shall have any right to compensation
for any period following his or her resignation. Any resignation shall take
effect at the time specified therein or, if the time be not specified, upon
receipt thereof.
ARTICLE IV
INDEMNIFICATION
Section 1. MEMBERS OF THE BOARD, OFFICERS, ETC. The Fund shall
indemnify each member of its Board and each of its officers (including persons
who serve at the Fund's request as directors, officers or trustees of another
organization in which the Fund has any interest as a shareholder, creditor or
otherwise) (hereinafter referred to as a "Covered Person") against all
liabilities and expenses, including but not limited to amounts paid in
satisfaction of judgments, in compromise or as fines and penalties, and counsel
fees reasonably incurred by any Covered Person in connection with the defense or
disposition of any action, suit or other proceeding, whether civil, criminal,
administrative or investigative, and any appeal therefrom, before any court or
adminstrative or legislative body, in which such Covered Person may be or may
have been involved as a party or otherwise or with which such person may be or
may have been threatened, while in office or thereafter, by reason of being or
having been such a Covered Person, except that no Covered Person shall be
indemnified against any liability to the Fund or its Interest holders to which
such Covered Person would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of such Covered Person's office.
Expenses, including counsel fees so incurred by any such Covered Person
(but excluding amounts paid in satisfaction of judgments, in compromise or as
fines or penalties), may be paid from time to time by the Fund in advance of the
final disposition of any such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such Covered Person to repay amounts so paid to
the Fund if it is ultimately determined that indemnification of such expenses is
not authorized under this Article, provided that (a) such Covered Person shall
provide security for his undertaking, (b) the Fund shall be insured against
losses arising by reason of such Covered Person's failure to fulfill his
undertaking or (c) a majority of the members of the Board who are disinterested
persons and who are not Interested Persons (provided that a majority of such
members of the Board then in office act on the matter), or independent legal
counsel in a written opinion, shall determine, based on a review of readily
available facts (but not a full trial-type inquiry), that there is reason to
believe such Covered Person ultimately will be entitled to indemnification.
Section 2. COMPROMISE PAYMENT. As to any matter disposed of (whether by
a compromise payment, pursuant to a consent decree or otherwise) without an
adjudication in a decision on the merits by a court, or by any other body before
which the proceeding was brought, that such Covered Person is liable to the Fund
or holders of Fund interests by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of such
Covered Person's office, indemnification shall be provided if (a) approved as in
the best interest of the Fund, after notice that it involves such
indemnification, by at least a majority of the members of the Board who are
disinterested persons and are not Interested Persons (provided that a majority
of such members of the Board then in office act on the matter), upon a
determination, based upon a review of readily available facts (but not a full
trial-type inquiry) that such Covered Person is not liable to the Fund or
holders of Fund interests by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of such
Covered Person's office, or (b) there has been obtained an opinion in writing of
independent legal counsel, based upon a review of readily available facts (but
not a full-trial type inquiry) to the effect that such indemnification would not
protect such Covered Person against any liability to the Fund to which such
Covered Person would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office.
Any approval pursuant to this Section shall not prevent the recovery
from any Covered Person of any amount paid to such Covered Person in accordance
with this Section as jurisdiction to have been liable to the Fund or its
Interest holders by reason of willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of such Covered
Person's office.
Section 3. INDEMNIFICATION NOT EXCLUSIVE; DEFINITIONS. The right of
indemnification hereby provided shall not be exclusive of or affect any other
rights to which any such Covered Person may be entitled. As used in this
Article, the term "Covered Person" shall include such person's heirs, executors
and administrators, and a "disinterested person" is a person against whom none
of the actions, suits or other proceedings in question or another action, suit
or other proceeding on the same or similar grounds is then or has been pending.
Nothing contained in this Article shall affect any rights to indemnification to
which personnel of the Fund, other than members of the Board and officers, and
other persons may be entitled by contract or otherwise under law, not the power
of the Fund to purchase and maintain liability insurance on behalf of such
persons.
Section 4. INTEREST HOLDERS. In case any holder of Fund interests or
former holder of Fund interests shall be held to be personally liable solely by
reason of his or her being or having been a holder of Fund interests and not
because of his or her acts or omissions or for some other reason, the holder of
Fund interests or former holder of Fund interests (or his or her heirs,
executors, administrators or other legal representative or, in the case of a
corporation or other entity, its corporate or other general successor) shall be
entitled to be held harmless from and indemnified against all loss and expense
arising from such liability, but only out of the assets of the particular series
of which he or she is or was a holder.
Section 5. TRUSTEES, INTEREST HOLDERS, ETC. NOT PERSONALLY LIABLE;
NOTICE. All persons extending credit to, contracting with or having any claim
against the Fund or a particular series shall look only to the assets of the
Fund or the assets of that particular Series for payment under such credit,
contract or claim; and neither the holder of Fund interests nor the members of
the Board, nor any of the Fund's officers, employees or agents, whether past,
present or future, shall be personally liable therefor. Nothing in this
Operating Agreement shall protect any members of the Board against any liability
to which such members of the Board would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the office of member of the Board.
Every note, bond, contract, instrument, certificate or undertaking made
or issued by the members of the Board or by any officers or officer shall recite
that the same was executed or made by or on behalf of the Fund or by them as a
member of the Board or members of the Board or as officers or officer and not
individually and that the obligations of such instrument are not binding upon
any of them or the holders of Fund interests individually but are binding only
upon the assets and property of the Fund, and may contain such further recital
as he or she or they may deem appropriate, but the omission thereof shall not
operate to bind any members of the Board or member of the Board or officers or
officer or holder or holders of Fund interests individually.
Section 6. GOOD FAITH ACTION BY MEMBERS OF THE BOARD, EXPERT ADVICE, NO
BOND OR SURETY. The exercise by the members of the Board of their powers and
discretions hereunder shall be binding upon everyone interested. A member of the
Board shall be liable for his or her own willful misfeasance, bad faith, gross
negligence of reckless disregard of the duties involved in the conduct of the
office of member of the Board, and for nothing else, and shall not be liable for
errors of judgment or mistakes of fact or law. The members of the Board may take
advice of counsel or other experts with respect to the meaning and operation of
this Operating Agreement, and shall be under no liability for any act or
omission in accordance with such advice or for failing to follow such advice.
The members of the Board shall not be required to give any bond as such, nor any
surety if a bond is required.
Section 7. LIABILITY OF THIRD PERSONS DEALING WITH MEMBERS OF THE
BOARD. No person dealing with the members of the Board shall be bound to make
any inquiry concerning the validity of any transaction made or to be made by the
members of the Board or to see to the application of any payments made or
property transferred to the Fund or upon its order.
ARTICLE V
CUSTODY OF ASSETS
Securities comprising the Fund's portfolios and cash representing the
proceeds from sales of portfolio securities and of payment of principal and
interest upon portfolio securities shall be held by a custodian or trustee which
shall be a bank or trust company having the qualifications prescribed in the
1940 Act. The Fund shall, upon the resignation or inability to serve of the
custodian or trustee, (1) use its best efforts to obtain a successor custodian
or trustee, and (2) require that the cash and securities owned by the Fund be
delivered to the successor custodian or trustee.
ARTICLE VI
FISCAL YEAR
The fiscal year of the Fund shall end on such date as the members of
the Board from time to time shall determine.
ARTICLE VII
AMENDMENTS
Except as otherwise provided by law, the Operating Agreement of the
Fund may be amended or repealed by the Board.
The provisions of this Operating Agreement are intended to satisfy the
requirements of the 1940 Act. In the event that federal law should be amended or
rules, regulations, rulings, or exemptions thereunder should be adopted, with
the result that any or all of the provisions of the Operating Agreement shall
not be required by federal law, such provisions of the Operating Agreement may
be amended or repealed by the Board of the Fund or by any committee thereof so
authorized by such Board.
Adopted: February 11, 1999
INVESTMENT ADVISORY
AND
MANAGEMENT AGREEMENT
This INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT is dated as of May
14, 1999 between JNLNY Variable Fund II LLC, a Delaware limited liability
company, (the "Fund") and Jackson National Financial Services, LLC, a Michigan
limited liability company (the "Adviser").
WHEREAS, the Fund is authorized to issue separate series, each series
having its own investment objective or objectives, policies and limitations; and
WHEREAS, the Fund on behalf of its investment series listed on Schedule
A hereto ("Series") desires to retain Adviser to perform investment advisory
services, on the terms and conditions set forth herein; and
WHEREAS, the Adviser agrees to serve as the investment adviser and
business manager for the Series on the terms and conditions set forth herein.
NOW THEREFORE, in consideration of the mutual covenants contained
herein and for other good and valuable consideration, the Fund and the Adviser
agree as follows:
1. APPPOINTMENT
The Fund hereby appoints the Adviser to provide certain investment
advisory services to the Series for the period and on the terms set forth in
this Agreement. The Adviser accepts such appointment and agrees to furnish the
services herein set forth for the compensation herein provided.
In the event the Fund designates one or more series other than the
Series with respect to which the Fund wishes to retain the Adviser to render
investment advisory services hereunder, it shall notify the Adviser in writing.
If the Adviser is willing to render such services, it shall notify the Fund in
writing, whereupon such series shall become a Series hereunder, and be subject
to this Agreement.
2. DUTIES
The Adviser shall manage the affairs of the Fund including, but not
limited to, continuously providing the Fund with investment advice and business
management, including investment research, advice and supervision, determining
which securities shall be purchased or sold by each Series, effecting purchases
and sales of securities on behalf of each Series (and determining how voting and
other rights with respect to securities owned by each Series shall be
exercised). The management of the Series by the Adviser shall be subject to the
control of the Board of Managers of the Fund (the "Board of Managers") and in
accordance with the objectives, policies and principles for each Series set
forth in the Fund's Registration Statement and its current Prospectus and
Statement of Additional Information, as amended from time to time, the
requirements of the Investment Company Act of 1940, as amended (the "Act") and
other applicable law, as well as to the factors affecting the status of variable
contracts under the diversification requirements set forth in Section 817(h) of
the Internal Revenue Code of 1986, as amended, (the "Code") and the regulations
thereunder. In performing such duties, the Adviser shall (i) provide such office
space, bookkeeping, accounting, clerical, secretarial, and administrative
services (exclusive of, and in addition to, any such service provided by any
others retained by the Fund or any of its Series) and such executive and other
personnel as shall be necessary for the operations of each Series, (ii) be
responsible for the financial and accounting records required to be maintained
by each Series (including those maintained by the Fund's custodian), and (iii)
oversee the performance of Services provided to each Series by others, including
the custodian, transfer agent, shareholder servicing agent and sub-adviser, if
any. The Fund acknowledges that the Adviser also acts as the investment adviser
of other investment companies.
The Adviser may delegate certain of its duties under this Agreement
with respect to a Series to a sub-adviser or sub-advisers, subject to the
approval of the Board of Managers and a Series' interest holders, as required by
the Act. The Adviser is solely responsible for payment of any fees or other
charges arising from such delegation and the Fund shall have no liability
therefore.
To the extent required by the laws of any state in which the Fund is
subject to an expense guarantee limitation, if the aggregate expenses of any
Series in any fiscal year exceed the specified expense limitation ratios for
that year (calculated on a daily basis), Adviser agrees to waive such portion of
its advisory fee in excess of the limitation, but such waiver shall not exceed
the full amount of the advisory fee for such year except as may be elected by
Adviser and all other normal expenses and charges, but shall exclude interest,
taxes, brokerage fees on Series transactions, fees and expenses incurred in
connection with the distribution of Fund shares, and extraordinary expenses
including litigation expenses. In the event any amounts are so contributed by
Adviser to the Fund, the Fund agrees to reimburse Adviser, provided that such
reimbursement does not result in increasing the Fund's aggregate expenses above
the aforementioned expense limitation ratios.
3. EXPENSES
The Adviser shall pay all if its expenses arising from the performance
of its obligations under this Agreement and shall pay any salaries, fees and
expenses of the Board of Managers and any officers of the Fund who are employees
of the Adviser. The Adviser shall not be required to pay any other expenses of
the Fund, including, but not limited to direct charges relating to the purchase
and sale of Series securities, interest charges, fees and expenses of
independent attorneys and auditors, taxes and governmental fees, cost of stock
certificates and any other expenses (including clerical expenses) of issue, sale
repurchase or redemption of shares, expenses of registering and qualifying
shares for sale, expenses of printing and distributing reports and notices to
interest holders, expenses of data processing and related services, interest
holder recordkeeping and interest holder account service, expenses of printing
and filing reports and other documents filed with governmental agencies,
expenses of printing and distributing Prospectuses, fees and disbursements of
transfer agents and custodians, expenses of disbursing dividends and
distributions, fees and expenses of members of the Board of Managers who are not
employees of the Adviser or its affiliates, membership dues in the investment
company trade association, insurance premium and extraordinary expenses such as
litigation expenses.
4. COMPENSATION
As compensation for services performed and the facilities and personnel
provided by the Adviser under this Agreement, the Fund will pay to the Adviser,
a fee, accrued daily and payable monthly on the average daily net assets in the
Series, in accordance with Schedule B.
Upon any termination of this Agreement on a day other than the last day
of the month, the fee for the period from the beginning of the month in which
termination occurs to the date of termination shall be prorated according to the
proportion which such period bears to the full month.
5. PURCHASE AND SALE OF SECURITIES
The Adviser shall purchase securities from or through and sell
securities to or through such persons, brokers or dealers as the Adviser shall
deem appropriate to carry out the policies with respect to Series transactions
as set forth in the Fund's Registration Statement and its current Prospectus or
Statement of Additional Information, as amended from time to time, or as the
Board of Managers may direct from time to time.
Nothing herein shall prohibit the Board of Managers from approving the
payment by the Fund of additional compensation to others for consulting
services, supplemental research and security, and economic analysis.
6. TERM OF AGREEMENT
This Agreement will become effective as to a Series upon execution or,
if later, the date that initial capital for such Series is first provided to it.
If approved by the affirmative vote of a majority of the outstanding voting
securities (as defined by the Act) of a Series with respect to such Series,
voting separately from any other Series of the Fund, this Agreement shall
continue in full force and effect with respect to such Series for two years from
the date thereof and thereafter from year to year, provided such continuance is
approved at least annually (i) by the Board of Managers by vote cast in person
at a meeting called for the purpose of voting on such renewal, or by the vote of
a majority of the outstanding voting securities (as defined by the Act) of such
Series with respect to which renewal is effected, and (ii) by a majority of the
non-interested members of the Board of Managers by a vote cast in person at a
meeting called for the purpose of voting on such renewal. Any approval of this
Agreement or the renewal thereof with respect to a Series by the vote of a
majority of the outstanding voting securities of that Series, or by the Board of
Managers which shall include a majority of the non-interested members of the
Board of Managers, shall be effective to continue this Agreement with respect to
that Series notwithstanding (a) that this Agreement or the renewal thereof has
not been so approved as to any other Series, or (b) that this Agreement or the
renewal thereof has not been so approved by the vote of a majority of the
outstanding voting securities of the Fund as a whole.
7. TERMINATION
This Agreement may be terminated at any time as to a Series, without
payment of any penalty, by the Board of Managers or by the vote of a majority of
the outstanding voting securities (as defined in the Act) of such Series on
sixty (60) days' written notice to the Adviser. Similarly, the Adviser may
terminate this Agreement without penalty on like notice to the Fund provided,
however, that this Agreement may not be terminated by the Adviser unless another
investment advisory agreement has been approved by the Fund in accordance with
the Act, or after six months' written notice, whichever is earlier. This
Agreement shall automatically terminate in the event of its assignment (as
defined in the Act).
8. REPORTS
The Adviser shall report to the Board of Managers, or to any committee
or officers of the Fund acting pursuant to the authority of the Board of
Managers, at such times and in such detail as shall be reasonable and as the
Board of Managers may deem appropriate in order to enable the Board of Managers
to determine that the investment policies of each Series are being observed and
implemented and that the obligations of the Adviser under this Agreement are
being fulfilled. Any investment program undertaken by the Adviser pursuant to
this Agreement and any other activities undertaken by the Adviser on behalf of
the Fund shall at all times be subject to any directives of the Board of
Managers or any duly constituted committee or officer of the Fund acting
pursuant to the authority of the Board of Managers.
The Adviser shall furnish all such information as may reasonably be
necessary for the Board of Managers to evaluate the terms of this Agreement.
9. RECORDS
The Fund is responsible for maintaining and preserving for such period
or periods as the Securities and Exchange Commission may prescribe by rules and
regulations, such accounts, books and other documents that constitute the
records forming the basis for all reports, including financial statements
required to be filed pursuant to the Act and for the Fund's auditor's
certification relating thereto. The Fund and the Adviser agree that in
furtherance of the recordkeeping responsibilities of the Fund under Section 31
of the Act and the rules thereunder, the Adviser will maintain records and
ledgers and will preserve such records in the form and for the period prescribed
in Rule 31a-2 of the Act for each Series.
The Adviser and the Fund agree that all accounts, book and other
records maintained and reserved by each as required hereby shall be subject at
any time, and from time to time, to such reasonable periodic, special and other
examinations by the Securities and Exchange Commission, the Fund's auditors, the
Fund or any representative of the Fund, or any governmental agency or other
instrumentality having regulatory authority over the Fund. It is expressly
understood and agreed that the books and records maintained by the Adviser on
behalf of each Series shall, at all times, remain the property of the Fund.
10. LIABILITY AND INDEMNIFICATION
In the absence of willful misfeasance, bad faith, gross negligence or
reckless disregard of obligations or duties ("disabling conduct") hereunder on
the part of the Adviser (and its officers, directors, agents, employees,
controlling persons, interest holders and any other person or entity affiliated
with Adviser), Adviser shall not be subject to liability to the Fund or to any
interest holder of the Fund for any act or omission in the course of, or
connected with, rendering services hereunder including, without limitation, any
error of judgment or mistake of law or for any loss suffered by any of them in
connection with the matters to which this Agreement relates, except to the
extent specified in Section 36(b) of the Act concerning loss resulting from a
breach of fiduciary duty with respect to the receipt of compensation for
services. Except for such disabling conduct or liability incurred under Section
36(b) of the Act, the Fund shall indemnify Adviser (and its officer, directors,
agents, employees, controlling person, interest holders and any other person or
entity affiliated with Adviser) from any liability arising from Adviser's
conduct under this Agreement.
Indemnification to Adviser or any of its personnel or affiliates shall
be made when (i) a final decision on the merits is rendered by a court or other
body before whom the proceeding was brought, that the person to be indemnified
was not liable by reason of disabling conduct or Section 36(b) or, (ii) in the
absence of such a decision, a reasonable determination, based upon a review of
the facts, that the person to be indemnified was not liable by reason of
disabling conduct, by (a) the vote of a majority of a quorum of Board of
Managers who are neither "interested persons" of the Fund as defined in Section
2(a)(19) of the Act nor parties to the proceeding ("disinterested, non-party
members of the Board of Managers"), or (b) an independent legal counsel in a
written opinion. The Fund may, by vote of a majority of the disinterested,
non-party members of the Board of Managers, advance attorneys' fees or other
expenses incurred by officers, members of the Board of Managers, investment
advisers or principal underwriters, in defending a proceeding upon the
undertaking by or on behalf of the person to be indemnified to repay the advance
unless it is ultimately determined that such person is entitled to
indemnification. Such advance shall be subject to at least one of the following:
(1) the person to be indemnified shall provide a security for the undertaking,
(2) the Fund shall be insured against losses arising by reason of any lawful
advances, or (3) a majority of a quorum of the disinterested, non-party members
of the Board of Managers, or an independent legal counsel in a written opinion
shall determine, based on a review of readily available facts, that there is
reason to believe that the person to be indemnified ultimately will be found
entitled to indemnification.
11. MISCELLANEOUS
Anything herein to the contrary notwithstanding, this Agreement shall
not be construed to require, or to impose any duty upon either of the parties,
to do anything in violation of any applicable laws or regulations.
A copy of the Certificate of Formation of the Fund is on file with the
Secretary of the State of Delaware, and notice is hereby given that this
instrument is executed on behalf of the members of the Board of Managers as
members of the Board of Managers, and is not binding upon any of the members of
the Board of Managers, officers, or interest holders of the Fund individually
but binding only upon the assets and property of the Fund. With respect to any
claim by the Adviser for recovery of that portion of the investment management
fee (or any other liability of the Fund arising hereunder) allocated to a
particular Series, whether in accordance with the express terms hereof or
otherwise, the Adviser shall have recourse solely against the assets of that
Series to satisfy such claim and shall have no recourse against the asset of any
other Series for such purpose.
IN WITNESS WHEREOF, the Fund and the Adviser have caused this Agreement
to be executed by their duly authorized officers as of the date first above
written.
JNLNY VARIABLE FUND II LLC
Attest: /s/ Thomas J. Meyer By: /s/ Andrew B. Hopping
----------------------- -------------------------
Thomas J. Meyer Andrew B. Hopping
Secretary President
JACKSON NATIONAL FINANCIAL
SERVICES, LLC
Attest: /s/ Amy D. Eisenbeis By: /s/ Mark D. Nerud
--------------------- -------------------------
Amy D. Eisenbeis Mark D. Nerud
Secretary Chief Financial Officer
<PAGE>
SCHEDULE A
DATED MAY 14, 1999
(Series)
JNL/First Trust The DowSM Target 10 Series
<PAGE>
SCHEDULE B
DATED MAY 14, 1999
(Compensation)
JNL/FIRST TRUST THE DOWSM TARGET 10 SERIES
Average Daily Net Assets Annual Rate
$0 to $500 million .75%
$500 million to $1 billion .70%
Over $1 billion .65%
INVESTMENT SUB-ADVISORY AGREEMENT
This AGREEMENT is dated as of May 26, 1999, by and between JACKSON
NATIONAL FINANCIAL SERVICES, LLC., a Michigan limited liability company and
registered investment adviser ("Adviser"), and FIRST TRUST ADVISORS L.P., an
Illinois limited partnership and registered investment adviser ("Sub-Adviser").
WHEREAS, Adviser is the investment manager for the JNLNY Variable Fund
II LLC (the "Fund"), an open-end management investment company registered under
the Investment Company Act of 1940, as amended ("1940 Act"); and
WHEREAS, the Fund is authorized to issue separate series, each series
having its own investment objective or objectives, policies and limitations;
WHEREAS, Adviser desires to retain Sub-Adviser as Adviser's agent to
furnish investment advisory services to the series of the Fund listed on
Schedule A hereto ("Series").
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
1. Appointment. Adviser hereby appoints Sub-Adviser to provide certain
sub-investment advisory services to the Series for the period and on
the terms set forth in this Agreement. Sub-Adviser accepts such
appointment and agrees to furnish the services herein set forth for the
compensation herein provided.
In the event the Adviser designates one or more series other than the
Series with respect to which the Adviser wishes to retain the
Sub-Adviser to render investment advisory services hereunder, it shall
notify the Sub-Adviser in writing. If the Sub-Adviser is willing to
render such services, it shall notify the Adviser in writing, whereupon
such series shall become a Series hereunder, and be subject to this
Agreement.
2. Delivery of Documents. Adviser has or will furnish Sub-Adviser with
copies properly certified or authenticated of each of the following:
a) the Fund's Certificate of Formation, as filed with the
Secretary of the State of Delaware on October 13, 1998, and
all amendments thereto or restatements thereof (such
Certificate of Formation, as presently in effect and as it
shall from time to time be amended or restated, is herein
called the "Certificate of Formation");
b) the Fund's Operating Agreement and amendments thereto;
c) resolutions of the Fund's Board of Managers authorizing the
appointment of Sub-Adviser and approving this Agreement;
d) the Fund's Notification of Registration on Form N-8A under the
1940 Act as filed with the Securities and Exchange Commission
(the "SEC") and all amendments thereto;
e) the Fund's Registration Statement on Form N-1A under the
Securities Act of 1933, as amended ("1933 Act") and under the
1940 Act as filed with the SEC and all amendments thereto
insofar as such Registration Statement and such amendments
relate to the Series; and
f) the Fund's most recent prospectus and Statement of Additional
Information (collectively called the "Prospectus").
Adviser will furnish the Sub-Adviser from time to time with copies of
all amendments of or supplements to the foregoing.
3. Management. Subject always to the supervision of Fund's Board of
Managers and the Adviser, Sub-Adviser will furnish an investment
program in respect of, and make investment decisions for, all assets of
the Series and place all orders for the purchase and sale of
securities, all on behalf of the Series. In the performance of its
duties, Sub-Adviser will satisfy its fiduciary duties to the Series (as
set forth below), and will monitor the Series' investments, and will
comply with the provisions of Fund's Certificate of Formation and
Operating Agreement, as amended from time to time, and the stated
investment objectives, policies and restrictions of the Series.
Sub-Adviser and Adviser will each make its officers and employees
available to the other from time to time at reasonable times to review
investment policies of the Series and to consult with each other
regarding the investment affairs of the Series. Sub-Adviser will report
to Board of Managers and to Adviser with respect to the implementation
of such program. Sub-Adviser is responsible for compliance with the
provisions of Section 817(h) of the Internal Revenue Code of 1986, as
amended, applicable to the Series.
The Sub-Adviser further agrees that it:
a) will use the same skill and care in providing such services as
it uses in providing services to fiduciary accounts for which
it has investment responsibilities;
b) will conform with all applicable Rules and Regulations of the
SEC in all material respects and in addition will conduct its
activities under this Agreement in accordance with any
applicable regulations of any governmental authority
pertaining to its investment advisory activities;
c) will place orders pursuant to its investment determinations
for the Series either directly with the issuer or with any
broker or dealer, including an affiliated broker-dealer which
is a member of a national securities exchange as permitted in
accordance with guidelines established by the Board of
Managers. In placing orders with brokers and dealers, the
Sub-Adviser will attempt to obtain the best combination of
prompt execution of orders in an effective manner and at the
most favorable price. Consistent with this obligation, when
the execution and price offered by two or more brokers or
dealers are comparable Sub-Adviser may, in its discretion,
purchase and sell portfolio securities to and from brokers and
dealers who provide the Sub-Adviser with research advice and
other services. In no instance will portfolio securities be
purchased from or sold to the Adviser, Sub-Adviser or any
affiliated person of either the Fund, Adviser, or Sub-Adviser,
except as may be permitted under the 1940 Act;
d) will report regularly to Adviser and to the Board of Managers
and will make appropriate persons available for the purpose of
reviewing with representatives of Adviser and the Board of
Managers on a regular basis at reasonable times the management
of the Series, including, without limitation, review of the
general investment strategies of the Series, the performance
of the Series in relation to standard industry indices,
interest rate considerations and general conditions affecting
the marketplace and will provide various other reports from
time to time as reasonably requested by Adviser;
e) will prepare and maintain such books and records with respect
to the Series' securities transactions and will furnish
Adviser and Fund's Board of Managers such periodic and special
reports as the Board of Managers or Adviser may request;
f) will act upon instructions from Adviser not inconsistent with
the fiduciary duties hereunder;
g) will treat confidentially and as proprietary information of
Fund all such records and other information relative to Fund
maintained by the Sub-Adviser, and will not use such records
and information for any purpose other than performance of its
responsibilities and duties hereunder, except after prior
notification to and approval in writing by Fund, which
approval shall not be unreasonably withheld and may not be
withheld where the Sub-Adviser may be exposed to civil or
criminal contempt proceedings for failure to comply, when
requested to divulge such information by duly constituted
authorities, or when so requested by Fund; and
h) will vote proxies received in connection with securities held
by the Series consistent with its fiduciary duties hereunder.
4. Expenses. During the term of this Agreement, Sub-Adviser will pay all
expenses incurred by it in connection with its activities under this
Agreement other than the cost of securities (including brokerage
commission, if any) purchased for the Series.
5. Books and Records. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Sub-Adviser hereby agrees that all records
which it maintains for the Fund are the property of the Fund and
further agrees to surrender promptly to the Fund any of such records
upon the Fund's request. Sub-Adviser further agrees to preserve for the
periods prescribed by Rule 31a-2 under the 1940 Act the records
required to be maintained by Rule 31a-1 under the 1940 Act.
6. Compensation. For the services provided and the expenses assumed
pursuant to this Agreement, Adviser will pay the Sub-Adviser, and the
Sub-Adviser agrees to accept as full compensation therefor, a
sub-advisory fee, accrued daily and payable monthly on the average
daily net assets in the Series, excluding the net assets representing
capital contributed by JNLNY Separate Account II, in accordance with
Schedule B hereto. From time to time, the Sub-Adviser may agree to
waive or reduce some or all of the compensation to which it is entitled
under this Agreement.
The Sub-Adviser represents and warrants that in no event shall the
Sub-Adviser provide similar investment advisory services to any client
comparable to the Series being managed under this Agreement at a
composite rate of compensation less than that provided for herein.
<PAGE>
7. Services to Others. Adviser understands, and has advised the Fund's
Board of Managers, that Sub-Adviser now acts, or may in the future act,
as an investment adviser to fiduciary and other managed accounts, and
as investment adviser or sub-investment adviser to other investment
companies. Adviser has no objection to Sub-Adviser acting in such
capacities, provided that whenever the Series and one or more other
investment advisory clients of Sub-Adviser have available funds for
investment, investments selected for each will be allocated in a manner
believed by Sub-Adviser to be equitable to each. Adviser recognizes,
and has advised Fund's Board of Managers, that in some cases this
procedure may adversely affect the size of the position that the
participating Series may obtain in a particular security. In addition,
Adviser understands, and has advised Fund's Board of Managers, that the
persons employed by Sub-Adviser to assist in Sub-Adviser's duties under
this Agreement will not devote their full time to such service and
nothing contained in this Agreement will be deemed to limit or restrict
the right of Sub-Adviser or any of its affiliates to engage in and
devote time and attention to other businesses or to render services of
whatever kind or nature.
8. Standard of Care and Limitation of Liability. The Sub-Adviser shall
exercise its best judgment and shall act in good faith in rendering the
services pursuant to this Agreement.
9. Indemnification. The Sub-Adviser agrees to indemnify and hold harmless
the Adviser, any affiliated person of the Adviser, and each person, if
any, who, within the meaning of Section 15 of the 1933 Act, controls
("controlling person") the Adviser (all of such persons being referred
to as "Adviser Indemnified Persons") against any and all losses,
claims, damages, liabilities, or litigation (including reasonable legal
and other expenses) to which an Adviser Indemnified Person may become
subject under the 1933 Act, 1940 Act, the Investment Advisers Act of
1940, the Internal Revenue Code, under any other statute, at common law
or otherwise, arising out of the Sub-Adviser's responsibilities as
Sub-Adviser to the Series and to the Fund which (1) may be based upon
any misfeasance, malfeasance, or nonfeasance by the Sub-Adviser, any of
its employees or representatives, or any affiliate of or any person
acting on behalf of the Sub-Adviser, (2) may be based upon a failure to
comply with Section 3 of this Agreement, or (3) may be based upon any
untrue statement or alleged untrue statement of a material fact
contained in the Prospectus, or any amendment or supplement thereto, or
the omission or alleged omission to state therein a material fact known
or which should have been known to the Sub-Adviser and was required to
be stated therein or necessary to make the statements therein not
misleading, if such a statement or omission was made in reliance upon
information furnished to the Adviser, the Fund, or any affiliated
person of the Adviser or Fund by the Sub-Adviser or any affiliated
person of the Sub-Adviser; provided, however, that in no case shall the
indemnity in favor of an Adviser Indemnified Person be deemed to
protect such person against any liability to which any such person
would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence in the performance of its duties, or by reason of its
reckless disregard of its obligations and duties under this Agreement.
10. Duration and Termination. This Agreement will become effective as to a
Series upon execution or, if later, the date that initial capital for
such Series is first provided to it and, unless sooner terminated as
provided herein, will continue in effect for two years from such date.
Thereafter, if not terminated as to a Series, this Agreement will
continue in effect as to a Series for successive periods of 12 months,
provided that such continuation is specifically approved at least
annually by the Fund's Board of Managers or by vote of a majority of
the outstanding voting securities of such Series, and in either event
approved also by a majority of the Members of the Fund's Board of
Managers who are not interested persons of the Fund, or of the Adviser,
or of the Sub-Adviser. Notwithstanding the foregoing, this Agreement
may be terminated as to a Series at any time, without the payment of
any penalty, on sixty days' written notice by the Fund or Adviser, or
on ninety days' written notice by the Sub-Adviser. This Agreement will
immediately terminate in the event of its assignment. (As used in this
Agreement, the terms "majority of the outstanding voting securities",
"interested persons" and "assignment" have the same meanings of such
terms in the 1940 Act.)
11. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally; but only by an
instrument in writing signed by the party against which enforcement of
the change, waiver, discharge or termination is sought.
12. Notice. Any notice under this Agreement shall be in writing, addressed
and delivered or mailed, postage prepaid, to the other party at such
address as such other party may designate for the receipt of such
notice.
13. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of
the provisions hereof or otherwise affect their construction or effect.
If any provision of this Agreement is held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement
will be binding upon and shall inure to the benefit of the parties
hereto.
The name "JNLNY Variable Fund II LLC" and "Members of the JNLNY
Variable Fund II LLC's Board of Managers" refer respectively to the
Fund created by, and the Members of the Board of Managers, as members
but not individually or personally, acting from time to time under, the
Operating Agreement, to which reference is hereby made, and to any and
all amendments thereto. The obligations of the JNLNY Variable Fund II
LLC entered in the name or on behalf thereof by any of the Members of
the JNLNY Variable Fund II LLC Board of Managers, representatives or
agents are made not individually but only in such capacities and are
not binding upon any of the Members, interest holders or
representatives of the Fund personally, but bind only the assets of the
Fund, and persons dealing with the Series must look solely to the
assets of the Fund belonging to such Series for the enforcement of any
claims against Fund.
14. Representations and Warranties of the Sub-Adviser.
The Sub-Adviser hereby represents that this Agreement does not violate
any existing agreements between the Sub-Adviser and any other party.
The Sub-Adviser further represents and warrants that it is a duly
registered investment adviser under the Investment Advisers Act of
1940, as amended and has provided to the Adviser a copy of its most
recent Form ADV as filed with the Securities and Exchange Commission.
The Sub-Adviser further represents that is has reviewed the
post-effective amendment to the Registration Statement for the Fund
filed with the Securities and Exchange Commission that contains
disclosure about the Sub-Adviser, and represents and warrants that,
with respect to the disclosure about the Sub-Adviser or information
relating, directly or indirectly, to the Sub-Adviser, such Registration
Statement contains, as of the date hereof, no untrue statement of any
material fact and does not omit any statement of a material fact which
was required to be stated therein or necessary to make the statements
contained therein not misleading.
15. Applicable Law. This Agreement shall be construed in accordance with
applicable federal law and the laws of the State of Michigan.
IN WITNESS WHEREOF, the Adviser and the Sub-Adviser have caused this
Agreement to be executed as of this 26th day of May, 1999
JACKSON NATIONAL FINANCIAL
SERVICES, LLC
By: /s/ Andrew B. Hopping
Name: Andrew B. Hopping
Title: President
FIRST TRUST ADVISORS L.P.
By: /s/ Ronald McAlister
Name: Ronald McAlister
Title: President
<PAGE>
SCHEDULE A
Dated May 26, 1999
(Series)
JNL/First Trust The DowSM Target 10 Series
<PAGE>
SCHEDULE B
Dated May 26, 1999
(Compensation)
JNL/FIRST TRUST THE DOWSM TARGET 10 SERIES
Average Daily Net Assets Annual Rate
$0 to $500 million .35%
$500 million to $1 billion .30%
Over $1 billion .25%
FUND PARTICIPATION AGREEMENT
This FUND PARTICIPATION AGREEMENT, made on this the 14th day of May,
1999, among JNLNY Variable Fund II LLC (the "Fund"), a limited liability company
organized under the laws of the State of Delaware, and Jackson National Life
Insurance Company of New York (the "Company"), a life insurance company
organized under the laws of the State of New York, on behalf of itself and on
behalf of JNLNY Separate Account II ("Separate Account"), a separate account of
the Company existing pursuant to the New York Insurance Code.
WITNESSETH:
WHEREAS, the Fund is an open-end management investment company, which
is divided into various investment series ("Series"), each Series being subject
to separate investment objectives and restrictions. (See Schedule A for
available Series); and
WHEREAS, the Company, by resolution, has established the Separate
Account on its books of account for the purpose of funding certain variable
contracts ("Contracts"); and
WHEREAS, the Separate Account, registered with the Securities and
Exchange Commission as a unit investment trust under the Investment Company Act
of 1940, as amended ("1940 Act"), is divided into various "Portfolios" under
which the income, gains and losses, whether or not realized, from assets
allocated to each such Portfolio are, in accordance with the Contracts, credited
to or charged against such Portfolio without regard to any other income, gains
or losses of other Portfolios or separate accounts or of the Company; and
WHEREAS, the Separate Account desires to purchase interests of the
Fund; and
WHEREAS, the Fund agrees to make its interests available to serve as
underlying investment media for the various Portfolios of the Separate Account
with each Series of the Fund serving as the underlying investment medium for the
corresponding Portfolio of the Separate Account; and
WHEREAS, the Fund has undertaken that its Board of Managers ("Board")
will monitor the Fund for the existence of any material irreconcilable conflicts
that may arise between the Contract owners of the Separate Account for the
purpose of identifying and remedying any such conflict.
NOW, THEREFORE, in consideration of the foregoing and of mutual
covenants and conditions set forth herein and for other good and valuable
consideration, the Fund and the Company (on behalf of itself and the Separate
Account) hereby agree as follows:
ARTICLE I
SALE OF FUND INTERESTS
1.1 The Contracts funded by the Separate Account will provide for the
allocation of net amounts among the various Portfolios of the Separate Account
for investment in the interests of the particular Series of the Fund underlying
each Portfolio. The selection of a particular Portfolio is to be made (and such
selection may be changed) in accordance with the terms of the Contract.
1.2 Fund interests to be made available to the respective Portfolios of
the Separate Account shall be sold by each of the respective Series of the Fund
and purchased by the Company for that Portfolio at the net asset value next
computed after receipt of each order, as established in accordance with the
provisions of the then current prospectus of the Fund. Interests of a particular
Series of the Fund shall be ordered in such quantities and at such times as
determined by the Company to be necessary to meet the requirements of those
Contracts having amounts allocated to the Portfolio for which the Fund Series
interests serve as the underlying investment medium. Orders and payments for
interests purchased will be sent promptly to the Fund and will be made payable
in the manner established from time to time by the Fund for the receipt of such
payments. Notwithstanding the foregoing, the Board of the Fund may refuse to
sell interests of any Series to any person or suspend or terminate the offering
of interests of any Series if such action is required by law or by regulatory
authority having jurisdiction over the Fund or is, in the sole discretion of the
Board acting in good faith and in light of its fiduciary duties under federal
and any applicable state laws, necessary in the best interests of the interest
holders of such Series.
1.3 The Fund will redeem the interests of the various Series when
requested by the Company on behalf of the corresponding Portfolio of the
Separate Account at the net asset value next computed after receipt of each
request for redemption, as established in accordance with the provisions of the
then current prospectus of the Fund. The Fund will make payment in the manner
established from time to time by the Fund for the receipt of such redemption
requests, but in no event shall payment be delayed for a greater period than is
permitted by the 1940 Act.
1.4 For purposes of paragraphs 1.2 and 1.3 above, the Company shall be
the agent of the Fund for the receipt of (1) orders to purchase, and (2)
requests to redeem, interests of the Series of the Fund on behalf of the
Separate Account, and receipt of such orders and requests by such agent shall
constitute receipt thereof by the Fund, provided that the Fund receives actual
notice of such order or request by 12:00 noon (at the Fund's offices) on the
next following Business Day. "Business Day" shall mean any day on which the New
York Stock Exchange is open for trading and on which the Fund calculates its net
asset value pursuant to the rules of the Securities and Exchange Commission.
1.5 Transfer of the Fund's interests will be by book entry only. No
stock certificates will be issued to the Separate Account. Interests ordered
from a particular Series of the Fund will be recorded in an appropriate title
for the corresponding Portfolio of the Separate Account.
1.6 The Fund shall furnish same day notice to the Company of any
dividend or distribution payable on its interests. All of such dividends and
distributions as are payable on each of the Series interests in the title for
the corresponding Portfolio of the Separate Account shall be automatically
reinvested in additional interests of that Series of the Fund. The Fund shall
notify the Company of the number of interests so issued.
1.7 The Fund shall make the net asset value per interest of each Series
available to the Company on a daily basis as soon as reasonably practical after
the net asset value per interest is calculated and shall use its best efforts to
make such net asset value per interest available by 6:00 p.m. Eastern time.
ARTICLE II
SALES MATERIAL AND INFORMATION
2.1 The Company shall furnish to the Fund each piece of sales
literature or other promotional material in which the Fund or its investment
adviser is named at least ten business days prior to its use. No such material
shall be used if the Fund objects to such use within five business days after
receipt of such material.
2.2 The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Fund interests, as such documents may be amended or supplemented from time to
time, or in reports or proxy statements for the Fund, or in sales literature or
other promotional material approved by the Fund, except with the permission of
the Fund.
2.3 The Fund shall furnish to the Company each piece of sales
literature or other promotional material in which the Company or the Separate
Account is named at least ten business days prior to its use. No such material
shall be used if the Company objects to such use within five business days after
receipt of such material.
2.4 The Fund shall not give any information or make any representations
on behalf of the Company or concerning the Company, the Separate Account, or the
Contracts other than the information or representations contained in the
registration statement or prospectus for the Contracts, as such registration
statement and prospectus may be amended or supplemented from time to time, or in
published reports for the Separate Account which are in the public domain or
approved by the Company for distribution to Contract owners, or in sales
literature or other promotional material approved by the Company, except with
the permission of the Company.
2.5 The Fund will provide to the Company at least one complete copy of
all registration statements, prospectuses, statements of additional information,
reports, proxy statements, sales literature and other promotional materials,
applications for exemptions, requests for no-action letters, and all amendments
to any of the above that relate to the Fund or its interests, contemporaneously
with the filing of such document with the Securities and Exchange Commission or
other regulatory authorities.
2.6 The Company will provide to the Fund at least one complete copy of
all registration statements, prospectuses, statements of additional information,
reports, solicitations for voting instructions, sales literature and other
promotional materials, applications for exemptions, requests for no-action
letters, and all amendments to any of the above, that relate to the Contracts or
the Separate Account, contemporaneously with the filing of such documents with
the Securities and Exchange Commission or other regulatory authorities.
2.7 For purposes of this Article II, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, and registration statements,
prospectuses, statements of additional information, interest holder reports, and
proxy materials.
ARTICLE III
EXPENSES
3.1 The Fund shall pay no fee or other compensation to the Company
under this Agreement. All expenses incident to performance by the Fund under
this Agreement shall be paid by the Fund. The Fund shall bear the expenses for:
the cost of registration of the Fund's interests; preparation and filing of the
Fund's prospectus and registration statement; preparation and filing of proxy
materials and reports; setting the prospectus in type; setting in type the proxy
materials and reports to interest holders; the preparation of all statements and
notices required of the Fund by any federal or state law; and all taxes on the
issuance or transfer of the Fund's interests.
3.2 The Fund's prospectus shall state that the statement of additional
information for the Fund is available from the Fund, and the Fund, at its
expense, shall provide such statement free of charge to the Company and to any
Contract owner or prospective Contract owner who requests such statement.
3.3 The Fund, at its expense, shall provide the Company with copies of
its proxy material, reports to interest holders and other communications to
interest holders in such quantities as the Company shall reasonably require for
distribution to Contract owners.
ARTICLE IV
VOTING
4.1 The Company shall provide pass-through voting privileges to all
Contract owners so long as the Securities and Exchange Commission continues to
interpret the 1940 Act to require pass-through voting privileges for variable
contract owners. The Company shall be responsible for assuring that the Separate
Account calculates voting privileges in a manner consistent with standards
provided by the Fund. To the extent required by law, the Company will vote
interests for which it has not received voting instructions as well as interests
attributable to the Company in the same proportion as it votes interests for
which it has received instructions.
4.2 The Fund will comply with all provisions of the 1940 Act requiring
voting by interest holders and, in particular, the Fund will either provide for
annual meetings or comply with Section 16(c) of the 1940 Act (although the Fund
is not one of the trusts described in Section 16(c) of that Act) as well as with
Sections 16(a) and, if and when applicable, 16(b). Further, the Fund will act in
accordance with the Securities and Exchange Commission's interpretation of the
requirements of Section 16(a) with respect to periodic elections of directors
and with whatever rules the Commission may promulgate with respect thereto.
ARTICLE V
POTENTIAL CONFLICTS
5.1 The Board of the Fund will monitor the Fund for the existence of
any material irreconcilable conflict between the interests of the Contract
owners of the Separate Account. The Company will report to the Board any
potential or existing conflicts of which it is or becomes aware between any of
its Contract owners. The Company will be responsible for assisting the Board in
carrying out its responsibilities to identify and resolve material conflicts by
providing the Board with all information available to it that is reasonably
necessary for the Board to consider any issues raised, including information as
to a decision by the Company to disregard voting instructions of its Contract
owners.
5.2 The Board's determination of the existence of any irreconcilable
material conflict and its implications shall be made known promptly by it to the
Company. An irreconcilable material conflict may arise for a variety of reasons,
including: (a) an action by any state insurance regulatory authority; (b) a
change in applicable federal or state insurance tax, or securities laws or
regulations, or a public ruling, private letter ruling, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Series are being managed; or (e) a decision by the Company to
disregard the voting instructions of its variable contract owners.
5.3 If it is determined by a majority of the Board or a majority of its
disinterested Members of the Board that a material irreconcilable conflict
exists that affects the interests of the Contract owners, the Company shall, to
the extent reasonably practicable (as determined by a majority of the
disinterested Members), take whatever steps are necessary to remedy or eliminate
the irreconcilable material conflict, which steps could include: (a) withdrawing
the assets allocable to the Separate Account from the Fund or any Series and
reinvesting such assets in a different investment medium, including another
Series of the Fund, or offering to the affected Contract owners the option of
making such a change; and (b) establishing a new registered management
investment company or managed separate account. If a material irreconcilable
conflict arises because of the Company's decision to disregard Contract owner
voting instructions and that decision represents a minority position or would
preclude a majority vote, the Company may be required, at the Fund's election,
to withdraw the investment of the Separate Account in the Fund, and no charge or
penalty will be imposed as a result of such a withdrawal. The Company agrees to
take such remedial action as may be required under this paragraph 5.3 with a
view only to the interests of its Contract owners. For purposes of this
paragraph 5.3, a majority of the disinterested members of the Fund's Board shall
determine whether or not any proposed action adequately remedies any
irreconcilable conflict, but in no event will Fund be required to establish a
new funding medium for any variable contract. The Company shall not be required
by this paragraph 5.3 to establish a new funding medium if any offer to do so
has been declined by vote of a majority of Contract owners materially and
adversely affected by the irreconcilable material conflict.
Notwithstanding the foregoing, if the Company is required under this
paragraph 5.3 to withdraw the investment of the Separate Account in the Fund,
such withdrawal may take place within six (6) months after the Fund gives
written notice that this paragraph 5.3 is being implemented, provided that the
Fund may require that such withdrawal must take place within a shorter period of
time after such notice if a majority of the disinterested members of the Fund's
Board determines that such shorter period is necessary to avoid irreparable harm
to its interest holders; and further provided that until the end of such six
month (or shorter) period the Fund shall continue to accept and implement orders
by the Company for the purchase and redemption of Fund interests. The Company
will not be required to withdraw investments in the Separate Account of the Fund
until all regulatory approval is obtained.
5.4 In discharging its responsibilities under this Article V, the
Company will cooperate and coordinate, to the extent necessary, with the Board.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
6.1 The Company represents and warrants that the Contracts are or will
be registered under the Securities Act of 1933 ("1933 Act"), that the Contracts
will be issued and sold in compliance in all material respects with all
applicable federal and state laws, and that the sale of the Contracts shall
comply in all material respects with state insurance suitability requirements.
The Company further represents and warrants that it is an insurance company duly
organized and in good standing under applicable laws and that it has legally and
validly established the Separate Account prior to any issuance or sale thereof
as a segregated asset account under the New York Insurance Code and has
registered or, prior to any issuance or sale of the Contracts, will register the
Separate Account as a unit investment trust in accordance with the provisions of
the 1940 Act to serve as a segregated investment account for the Contracts.
6.2 The Fund represents and warrants that Fund interests sold pursuant
to this Agreement shall be registered under the 1933 Act, shall be duly
authorized for issuance and sold in compliance with the laws of the State of
Delaware and all applicable federal and state securities laws and that the Fund
is and shall remain registered under the 1940 Act. The Fund shall amend the
Registration Statement for its interests under the 1933 Act and the 1940 Act
from time to time as required in order to effect the continuous offering of its
interests. The Fund represents that it is lawfully organized and validly
existing under the laws of the State of Delaware and that it does and will
comply in all material respects with the 1940 Act.
6.3 The Fund represents and warrants that it will at all times invest
money from the Contracts in such a manner as to ensure that the Contracts will
be treated as variable contracts under the Code and the regulations issued
thereunder. Without limiting the scope of the foregoing, the Fund will at all
times comply with Section 817(h) of the Code and the Regulations thereunder,
relating to the diversification requirements for annuity contracts and any
amendments or other modifications to such Section or Regulation.
6.4 The Company represents that the Contracts are to be treated as
annuity contracts, under applicable provisions of the Code, and that it will
make every effort to maintain such treatment and that it will notify the Fund
immediately upon having a reasonable basis for believing that the Contracts have
ceased to be so treated or that they might not be so treated in the future.
6.5 The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states
except that the Fund represents that its investment policies, fees and expenses
are and shall at all times remain in compliance with the laws of the State of
Delaware and the Fund represents that its operations are and shall at all times
remain in material compliance with the 1940 Act.
6.6 The Fund represents and warrants that all of the Members of its
Board, its officers, employees, investment advisers, and other persons dealing
with the money or securities of the Fund are and shall continue to be at all
times covered by a blanket fidelity bond or similar coverage for the benefit of
the Fund in an amount not less that the minimal coverage as required currently
by Section 17(g) of the 1940 Act or related provisions as may be promulgated
from time to time. The aforesaid bond shall include coverage for larceny and
embezzlement and shall be issued by a reputable bonding company.
6.7 The Company represents and warrants that all of its directors,
officers, employees, and other persons who are directly dealing with the money
or securities of the Fund are and shall continue to be at all times covered by a
blanket fidelity bond or similar coverage in amounts which shall comply with
Rule 17g-1 under the 1940 Act.
6.8 The Fund represents and warrants that interests of the Fund will be
sold only to the Separate. No interests of any Series will be sold to the
general public.
6.9 The Company represents and warrants that it will make reasonable
efforts to market those Contracts it determines from time to time to offer for
sale and, although it is not required to offer for sale new Contracts in all
cases, will accept payments and otherwise service existing Contracts funded in
the Separate Account. No representation is made as to the number or amount of
such Contracts to be sold.
ARTICLE VII
INDEMNIFICATION
7.1 The Company agrees to indemnify and hold harmless the Fund and each
of the Members of the Fund's Board and officers and each person, if any, who
controls the Fund within the meaning of Section 15 of the 1933 Act against any
and all losses, claims, damages, liabilities or litigation (including legal and
other expenses), arising out of the acquisition of any interests of the Fund by
any person, to which the Fund or such Members, officers or controlling person
may become subject under the 1933 Act, under any other statute, at common law or
otherwise, which (i) may be based upon any wrongful act by the Company, any of
its employees or representatives, any affiliate of or any person acting on
behalf of the Company or a principal underwriter of its insurance products, or
(ii) may be based upon any untrue statement or alleged untrue statement of a
material fact contained in a registration statement or prospectus covering
interests of the Fund or any amendment thereof or supplement thereto or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading if
such a statement or omission was made in reliance upon information furnished to
the Fund by the Company, or (iii) may be based on any untrue statement or
alleged untrue statement of a material fact contained in a registration
statement or prospectus covering the Contracts, or any amendments or supplement
thereto, or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statement or statements
therein not misleading, unless such statement or omission was made in reliance
upon information furnished to the Company or such affiliate by or on behalf of
the Fund; provided, however, that in no case (i) is the Company's indemnity in
favor of a Member or officer or any other person deemed to protect such Member
or officer or other person against any liability to which any such person would
otherwise be subject by reason of willful misfeasance, bad faith, or gross
negligence in the performance of his or her duties or by reason of his or her
reckless disregard of obligations and duties under this Agreement or (ii) is the
Company to be liable under its indemnity agreement contained in this Paragraph
7.1 with respect to any claim made against the Fund or any person indemnified
unless the Fund or such person, as the case may be, shall have notified the
Company in writing pursuant to Paragraph 10 of this Agreement within a
reasonable time after the summons or other first legal process giving
information of the nature of the claims shall have been served upon the Fund or
upon such person (or after the Fund or such person shall have received notice of
such service on any designated agent), but failure to notify the Company of any
such claim shall not relieve the Company from any liability which it has to the
Fund or any person against whom such action is brought otherwise than on account
of its indemnity agreement contained in this Paragraph 7.1. The Company shall be
entitled to participate, at its own expense, in the defense, or, if it so
elects, to assume the defense of any suit which could result in liability to it
under this Paragraph 7.1, but, if it elects to assume the defense, such defense
shall be conducted by counsel chosen by it and satisfactory to the Fund and to
such of its officers, Members and controlling person or persons as may be
defendants in the suit. In the event that the Company elects to assume the
defense of any such suit and retain such counsel, the Fund, such officers,
Members and controlling person or persons shall bear the fees and expenses of
any additional counsel retained by them, but, in case the Company does not elect
to assume the defense of any such suit, the Company will reimburse the Fund,
such officers, Members and controlling person or persons for the reasonable fees
and expenses of any counsel retained by them. The Company agrees promptly to
notify the Fund pursuant to Paragraph 10 of this Agreement of the commencement
of any litigation or proceedings against it in connection with the issue and
sale of any interests of the Fund.
7.2 The Fund agrees to indemnify and hold harmless the Company and its
affiliated principal underwriter of the Contracts and each of the Company's
Directors and officers and each person, if any, who controls the Company within
the meaning of Section 15 of the 1933 Act against any and all losses, claims,
damages, liabilities or litigation (including legal and other expenses) to which
it or such directors, officers or controlling person may become subject under
the 1933 Act, under any other statute, at common law or otherwise, arising out
of the acquisition of any interests of the Fund by any person which (i) may be
based upon any wrongful act by the Fund or any of its employees or
representatives, or (ii) may be based upon any untrue statement or alleged
untrue statement of a material fact contained in a registration statement or
prospectus covering interests of the Fund or any amendment thereof or supplement
thereto or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading unless such statement or omission was made in reliance upon
information furnished to the Fund by the Company, or (iii) may be based on any
untrue statement or alleged untrue statement of a material fact contained in a
registration statement or prospectus covering the Contracts, or any amendment or
supplement thereto, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statement
or statements therein not misleading, if such statement or omission was made in
reliance upon information furnished to the Company by or on behalf of the Fund;
provided, however, that in no case (i) is the Fund's indemnity in favor of a
Director or officer or any other person deemed to protect such Director or
officer or other person against any liability to which any such person would
otherwise be subject by reason of willful misfeasance, bad faith, or gross
negligence in the performance of his or her duties or by reason of his or her
reckless disregard of obligations and duties under this Agreement or (ii) is the
Fund to be liable under its indemnity agreement contained in this Paragraph 7.2
with respect to any claims made against the Company or any such Director,
officer or controlling person unless it, Director, officer or controlling
person, as the case may be, shall have notified the Fund in writing pursuant to
Paragraph 10 of this Agreement within a reasonable time after the summons or the
first legal process giving information of the nature of the claim shall have
been served upon it or upon such Director, officer or controlling person (or
after the Company or such Director, officer or controlling person shall have
received notice of such service on any designated agent), but failure to notify
the Fund of any claim shall not relieve it from any liability which it may have
to the person against whom such action is brought otherwise than on account of
its indemnity agreement contained in this Paragraph 7.2. The Fund will be
entitled to participate, at its own expense, in the defense, or, if it so
elects, to assume the defense of any suit which could result in liability to it
under this Paragraph 7.2, but, if the Fund elects to assume the defense, such
defense shall be conducted by counsel chosen by it and satisfactory to the
Company and to such of its Directors, officers and controlling person or persons
as may be defendants in the suit. In the event that the Fund elects to assume
the defense of any such suit and retain such counsel, the Company, such
Directors, officers and controlling person or persons shall bear the fees and
expenses of any additional counsel retained by them, but, in case the Fund does
not elect to assume the defense of any such suit, it will reimburse the Company,
such Directors, officers and controlling person or persons for the reasonable
fees and expenses of any counsel retained by them. The Fund agrees promptly to
notify the Company pursuant to Paragraph 10 of this Agreement of the
commencement of any litigation or proceedings against it or any of its officers
or Members in connection with the issue and sale of any of its interests.
ARTICLE VIII
CONFIDENTIALITY
8. Subject to the requirements of legal process and regulatory
authority, each party shall treat as confidential all information reasonably
identified as confidential in writing by any other party hereto and, except as
permitted by this Agreement, shall not disclose, disseminate or utilize
confidential information without the express written consent of the affected
party until such time as it may come into the public domain.
ARTICLE IX
TERMINATION
9.1 This Agreement shall terminate:
(a) at the option of the Company or the Fund upon 90
days' advance written notice to all other parties to
this Agreement, provided, however, such notice shall
not be given earlier than twenty four months
following the date of this Agreement; or
(b) at the option of the Company if any of the Fund's
interests are not reasonably available to meet the
requirements of the Contracts funded in the Separate
Account as determined by the Company; or
(c) at the option of any party to this Agreement upon
institution of formal proceedings against any other
party to this Agreement by the Securities and
Exchange Commission or any other regulatory body; or
(d) upon the vote of Contract owners having an interest
in a particular Portfolio of the Separate Account.
The Company will give 30 days' prior written notice
to the Fund of the date of any proposed action to
replace the Fund's interests; or
(e) at the option of the Company if the Fund's interests
are not registered, issued or sold in accordance with
applicable state and/or federal law or such law
precludes the use of such interests as the underlying
investment medium of the Contracts funded in the
Separate Account; or
(f) at the option of the Company if any Series of the
Fund fails to meet the diversification requirements
specified in paragraph 6.4 hereof.
9.2 Prompt notice of election to terminate under subparagraphs (b),
(c), (e), (f) and (g) of paragraph 9.1 shall be furnished by the electing party.
9.3 Notwithstanding any termination of this Agreement, the Fund shall,
at the option of the Company, continue to make available additional interests of
the Fund pursuant to the terms and conditions of this Agreement for all
Contracts in effect on the effective date of termination of this Agreement
(hereinafter referred to as "Existing Contracts"). Specifically, without
limitation, the owners of the Existing Contracts shall be permitted to
reallocate investments in the Fund, redeem investments in the Fund or invest in
the Fund upon the making of additional purchase payments under the Existing
Contracts. The parties agree that this paragraph 9.3 shall not apply to any
terminations under Article V and the effect of such Article V terminations shall
be governed by Article V of this Agreement.
9.4 Notwithstanding Article V and the foregoing provisions of this
Article IX, the provisions of Article VII (Indemnification) and Article VIII
(Confidentiality) shall survive any termination of this Agreement.
ARTICLE X
NOTICES
10. Any notice shall be sufficiently given when sent by registered or
certified mail to each other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to the Fund:
JNLNY Variable Fund II LLC
ATTN: Andrew B. Hopping
President
5901 Executive Drive
Lansing, MI 48911
If to the Company or the Separate Account:
Jackson National Life Insurance Company of New York
ATTN: Thomas J. Meyer
Senior Vice President
5901 Executive Drive
Lansing, MI 48911
ARTICLE XI
APPLICABLE LAW
11. This Agreement shall be construed in accordance with the laws of
the State of New York.
ARTICLE XII
MISCELLANEOUS
12.1 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
12.2 If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
12.3 The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to under
state and federal laws.
12.4 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5 The Fund and the Company agree that the obligations of the Fund
under this Agreement shall not be binding upon any of the Managers, interest
holders, nominees, officers, employees or agents, whether past, present or
future, of the Fund individually, but are binding only upon the assets and
property of the Fund or of the appropriate Series thereof, as provided in the
Operating Agreement of the Fund. The execution and delivery of this Agreement
has been authorized by the Board of Managers of the Fund, and signed by an
authorized officer of the Fund, acting as such, and neither such authorization
by such Board of Managers nor such execution and delivery by such officer shall
be deemed to have been made by any of them or any interest holder of the Fund
individually or to impose any liability on any of them or any interest holder of
the Fund personally, but shall bind only the assets and property of the Fund or
of the appropriate Series thereof as provided in the Operating Agreement of the
Fund.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
Attest: JNLNY Variable Fund II LLC
/s/ Amy D. Eisenbeis By: /s/ Andrew B. Hopping
Andrew B. Hopping
President
Attest: Jackson National Life Insurance Company of
New York
/s/ Amy D. Eisenbeis By: /s/ Thomas J. Meyer
Thomas J. Meyer
Senior Vice President
JNLNY Separate Account II
Attest: By: Jackson National Life Insurance Company
of New York
/s/ Amy D. Eisenbeis
By: /s/ Thomas J. Meyer
Thomas J. Meyer
Senior Vice President
<PAGE>
SCHEDULE A
DATED MAY 14, 1999
JNL/First Trust The DowSM Target 10 Series
DELEGATION, CUSTODY AND INFORMATION SERVICES AGREEMENT
AGREEMENT dated as of May 14, 1999 between JNLNY Variable Fund II LLC
("Fund"), a Delaware Limited Liability Company organized under the laws of
Delaware having its principal office and place of business at 225 West Wacker
Drive, Suite 1200, Chicago, IL 60606, Boston Safe Deposit and Trust Company
("Custodian"), a Massachusetts trust company with its principal place of
business at One Boston Place, Boston, Massachusetts 02108.
W I T N E S S E T H:
WHEREAS, The Fund is authorized to issue shares in separate series with
each such series representing interests in a separate portfolio of securities
and other assets, and the Fund has made the Series listed on Appendix D subject
to this Agreement (each such series, together with all other series subsequently
established by the Fund and made subject to the Agreement in accordance with the
terms hereof, shall be referred to as a Fund" and collectively as the "Funds");
WHEREAS, The Board desires to delegate certain of its responsibilities
for performing the services set forth in paragraphs (c)(1), (c)(2) and (c)(3) of
Rule 17f-5 to the Custodian;
WHEREAS, The Custodian agrees to accept such delegation with respect to
Assets held by Eligible Foreign Custodians in the jurisdictions listed on
Appendix B as set forth in Article II;
WHEREAS, The Fund desires to hire the Custodian as a vendor to provide
certain information available to the Custodian with respect to foreign
jurisdictions, Securities Depositories and Foreign Custodians not listed on
Appendix B for which the Board or a delegatee other than the Custodian has the
responsibilities described in paragraphs (c)(1), (c)(2) and (c)(3) of Rule
17f-5; and
WHEREAS, The Custodian agrees to provide, as a vendor, the information
described in Article IV if, and when available in accordance with the terms and
conditions of Article IV.
WHEREAS, The Fund and the Custodian desire to set forth their agreement
with respect to the custody of the Funds' Assets and other property and the
processing of securities transactions;
NOW THEREFORE, in consideration of the mutual promises hereinafter set
forth, the Fund and the Custodian agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS
Whenever used in this Agreement or in any Appendices to this Agreement,
the following words and phrases, unless the context otherwise requires, shall
have the following meanings:
(a) "Affiliated Person" shall have the meaning of the term within
Section 2(a) 3 of the 1940 Act.
(b) "Agreement" shall mean this Delegation, Custody and
Information Services Agreement.
(c) "Articles" shall mean the Articles of Formation of the Fund as
may be amended from time to time.
(d) "Assets" shall mean any of the Funds' investments and such
cash and cash equivalents as are reasonably necessary to
effect the Funds' transactions in such investments.
(e) "Authorized Person" shall be deemed to include the President,
and any Vice President, the Secretary, the Treasurer or any
other person, whether or not any such person is an officer or
employee of the Fund, duly authorized by the Board to add or
delete jurisdictions pursuant to Article II and to give Oral
Instructions and Written Instructions on behalf of a Fund and
listed in the certification annexed hereto as Appendix A , as
may be amended from time to time.
(f) "Board" shall mean the Board of Managers of the Fund.
(g) "Book-Entry System" shall mean the Federal Reserve/Treasury
book-entry system for United States and federal agency
securities, its successor or successors and its nominee or
nominees.
(h) "Business Day" shall mean any day on which the Fund, the
Custodian, the Book-Entry System and appropriate clearing
corporation(s) are open for business.
(i) "Certificate" shall mean any notice, instruction or other
instrument in writing, authorized or required by this
Agreement to be given to the Custodian, which is actually
received by the Custodian and signed on behalf of a Fund by
any two Authorized Persons.
(j) "Country Risk" means all factors reasonably related to the
systematic risk of holding assets in a particular country
including, but not limited to, such country's financial
infrastructure (including any Securities Depositories
operating in such country), prevailing custody and settlement
practices and laws applicable to the safekeeping and recovery
of Assets held in custody.
(k) "Custodian" shall mean Boston Safe Deposit and Trust Company
in its capacity as delegate, custodian or information services
provider as required under the terms of each Article.
(l) "Custody Agreement" shall mean the provisions of Articles I,
III nd V of this Agreement and any Appendices referenced
therein and attached to this Agreement.
(m) "Information Services Agreement" shall mean the provisions of
Articles I and IV and V of this Agreement and any Appendices
referenced therein and attached to this Agreement.
(n) "Foreign Custodian" shall mean: (a) a banking institution or
trust company incorporated or organized under the laws of a
country other than the United States, that is regulated as
such by the country's government or an agency of the country's
government; (b) a majority-owned direct or indirect subsidiary
of a U.S. Bank or bank-holding company; or (c) any entity
other than a Securities Depository with respect to which
exemptive or no-action relief has been granted by the U. S.
Securities and Exchange Commission. For the avoidance of
doubt, the term "Foreign Custodian" shall not include
Euroclear, Cedel, First Chicago Clearing Centre or any other
transnational system for the central handling of securities or
equivalent book-entries regardless of whether or not such
entities are acting in a custodial capacity with respect to
Assets or other property of the Fund.
(o) "Delegation Agreement" shall mean the provisions of Articles
I, II and V of this Agreement and any Appendices referenced
theein and attached to this Agreement.
(p) "Money Market Security" shall be deemed to include, without
limitation, debt obligations issued or guaranteed as to
interest and principal by the government of the United States
or agencies or instrumentalities thereof ("U.S. government
securities"), commercial paper, bank certificates of deposit,
bankers' acceptances and short-term corporate obligations,
where the purchase or sale of such securities normally
requires settlement in federal funds on the same day as such
purchase or sale, and repurchase and reverse repurchase
agreements with respect to any of the foregoing types of
securities.
(q) "Oral Instructions" shall mean verbal instructions actually
received by the Custodian from a person reasonably believed by
the Custodian to be an Authorized Person or Senior Authorized
Person.
(r) "Prospectus" shall mean a Fund's current prospectus and
statement of additional information relating to the
registration of the Fund's Shares under the Securities Act of
1933, as amended.
(s) "Rule 17f-5" shall mean Rule 17f-5 promulgated under Section
17(f) of the 1940 Act as such rule (and any successor
regulation) may be amended from time to time.
(t) "Selected Countries" means the jurisdictions listed on
Appendix B as such may be amended from time to time in
accordance with Article II.
(u) "Senior Authorized Person" shall be such individuals so
designated on Appendix A.
(v) "Shares" refers to shares of beneficial interest of each Fund.
(w) "Securities Depository" shall mean any entity described in
subparagraph (a)(1)(ii) or paragraph (a)(6) of Rule 17f-5 or
any other recognized foreign or domestic clearing facility,
book-entry system, centralized custodial depository or similar
organization. For the avoidance of doubt, the term "Securities
Depository" shall include Euroclear, Cedel, First Chicago
Clearing Centre or any other transnational system for the
central handling of securities or equivalent book-entries
regardless of whether or not such entities are acting in a
custodial capacity with respect to Assets or other property of
the Funds.
(x) "Transfer Agent" shall mean the person which performs the
transfer agent, dividend disbursing agent and shareholder
servicing agent functions for a Fund.
(y) "Written Instructions" shall mean a written communication
actually received by the Custodian from a person reasonably
believed by the Custodian to be an Authorized Person or Senior
Authorized Person by any system, including, without
limitation, electronic transmissions, facsimile and telex.
(z) The "1940 Act" refers to the Investment Company Act of 1940,
and the Rules and Regulations thereunder, all as amended from
time to time.
<PAGE>
ARTICLE II
DELEGATION AGREEMENT
1. REPRESENTATIONS.
(a) Status of Custodian. The Custodian represents that it is a
U.S. Bank within the meaning of paragraph (a)(7) of Rule 17f-5
and a "Securities Intermediary" as that term is defined in
Section 8-102 (A)(4) of Article 8 of the Massachusetts Uniform
Commercial Code.
(b) Fund Determinations and Authorizations. The Board represents
that it has determined that it is reasonable to rely on
Custodian to perform the responsibilities delegated pursuant
to this Delegation Agreement and that it has made the
delegations set forth below, subject to the acceptance of such
delegation by the Custodian on the terms and conditions set
forth in this Delegation Agreement.
(c) Fund Responsibilities. The Fund acknowledges and agrees that,
except as expressly set forth in this Delegation Agreement,
the Fund is solely responsible to assure that the maintenance
of each Fund's Assets hereunder complies with applicable laws
and regulations, including without limitation the 1940 Act and
the rules and regulations promulgated thereunder and
applicable interpretations thereof or exemptions therefrom.
2. DELEGATION AND CUSTODIAN'S SERVICES.
(a) Delegation. Subject to the provisions of this Delegation
Agreement and the requirements of Rule 17f-5, the Board hereby
delegates to, and the Custodian hereby agrees to accept the
responsibility for selecting, contracting with and monitoring
Foreign Custodians in Selected Countries in accordance with
paragraphs (c)(1), (c)(2) and (c)(3) of Rule 17f-5. Pursuant
to this delegation, the Board authorizes the Custodian to
place and maintain Assets in the care of any Foreign
Custodian(s) in the Selected Countries and to enter into, on
behalf of a Fund, such written contracts governing the Fund's
foreign custody arrangements with such Foreign Custodian(s) as
the Custodian deems reasonably appropriate.
(b) Scope of Delegation. The delegation contained in Section 2(a)
applies only to the selection of, contracting with and
monitoring of Foreign Custodians located in Selected Countries
and only with respect to Assets held by such Foreign
Custodians in Selected Countries. The Board and the Custodian
agree that nothing in this Delegation Agreement or this
Agreement as a whole shall cause or be deemed to cause any
delegation to the Custodian of any of the Board's
responsibilities with respect to Assets or other property held
in Securities Depositories or Assets held by Foreign
Custodians in jurisdictions other than Selected Countries.
(c) Additions to Appendix B. Appendix B may be amended from time
to time to add jurisdictions by an instrument in writing
signed by an Authorized Person and the Custodian, provided
that with respect to any amendment that adds a jurisdiction to
Appendix B, the Custodian's responsibility and authority with
respect to any jurisdiction so added will commence at the
later of (i) the time that the Custodian and the Authorized
Person have both executed such amendment, or (ii) the time
that the Custodian receives a copy of such executed amendment.
(d) Deletions from Appendix B. The Board may withdraw its
delegation with respect to any jurisdiction listed in Appendix
B upon written notice to the Custodian. The Custodian shall
withdraw its acceptance of delegated authority with respect to
any jurisdiction listed in Appendix B upon written notice to
the Board. Upon receipt of such notice by the party to whom
such notice is given, the Custodian shall have no further
responsibilities under this Delegation Agreement with respect
to the selecting, contracting with, and monitoring of any
Foreign Custodian holding Assets in the removed jurisdiction.
(e) Reports to Board. Custodian shall provide written reports
notifying Board of the placement of Assets with a particular
Foreign Custodian and of any material change in a Fund's
foreign custody arrangements. Such reports shall be provided
to Board initially within 30 days after the execution of this
Agreement and thereafter quarterly, except as otherwise agreed
by the Custodian and the Fund.
(f) Monitoring System. In each case in which the Custodian has
exercised the authority delegated under this Article II,
Section 2 to place Assets with an Foreign Custodian, the
Custodian is authorized to, and shall, on behalf of a Fund,
establish a system to re-assess or re-evaluate, at least
annually (i) the appropriateness of maintaining Assets with
such Foreign Custodian and (ii) the contract governing the
Fund's arrangements with such Foreign Custodian.
3. GUIDELINES AND PROCEDURES.
(a) Country Risk. In exercising its delegated authority under
Article II, Section 2, the Custodian may assume, for all
purposes, that the Board (or the Fund's investment adviser,
pursuant to authority delegated by the Board) has considered,
and, pursuant to its fiduciary duties to the Funds and the
Fund's shareholders, determined to accept, Country Risk. In
exercising its delegated authority under Article II, Section
2, the Custodian may also assume that the Board (or the Fund's
investment adviser, pursuant to authority delegated by the
Board) has, and will continue to, monitor such Country Risk to
the extent the Board deems necessary or appropriate. Nothing
in this Delegation Agreement shall require the Custodian to
make any selection or to engage in any monitoring on behalf of
a Fund (i) that would entail consideration of Country Risk or
(ii) otherwise in connection with any Securities Depository or
Foreign Custodians in jurisdictions other than Selected
Countries.
(b) Standard of Care for Selection of Eligible Foreign Custodians.
In exercising the authority delegated under Article II,
Section 2, to place Assets with a Foreign Custodian in a
Selected Country, the Custodian shall determine that Assets
will be subject to reasonable care, based on the standards
applicable to custodians in the Selected Country in which the
Assets will be held, after considering all factors relevant to
the safekeeping of such assets, including the factors set
forth in Rule 17f-5(c)(1)(i)-(iv).
(c) Standard for Contracting with Eligible Foreign Custodians. In
exercising the authority delegated under Article II, Section
2, to enter into a written contract governing a Fund's foreign
custody arrangements with a Foreign Custodian in a Selected
Country, the Custodian shall determine that such contract
provides reasonable care for Assets based on the standards
applicable to Foreign Custodians in the Selected Country. In
making this determination, the Custodian shall consider the
provisions of Rule 17f-5(c)(2).
(d) Standard of Care for Delegated Authority. In exercising the
authority delegated under Article II, Section 2, the Custodian
agrees to exercise reasonable care, prudence and diligence
such as a person having direct responsibility for the
safekeeping of the Assets would exercise.
<PAGE>
ARTICLE III
CUSTODY PROVISIONS
1. APPOINTMENT OF CUSTODIAN.
(a) The Board hereby constitutes and appoints the Custodian as
custodian of all the Assets and monies at the time owned by or
in the possession of the Funds during the period of this
Agreement.
(b) The Custodian hereby accepts appointment as such custodian and
agrees to perform the duties thereof as hereinafter set forth
2. CUSTODY OF CASH AND SECURITIES.
(a) Receipt and Holding of Assets. The Funds will deliver or cause
to be delivered to the Custodian all Assets and monies owned
by them at any time during the period of this Custody
Agreement. The Custodian will not be responsible for such
Assets and monies until actually received by it. The Board
hereby specifically authorizes the Custodian to hold Assets or
other property of the Funds with any domestic subcustodian,
Foreign Custodian or Securities Depository. Assets and monies
of the Funds deposited in a Securities Depository will be
represented in accounts which include only assets held by the
Custodian for customers, including but not limited to accounts
for which the Custodian acts in a fiduciary or representative
capacity.
(b) Accounts and Disbursements. The Custodian shall establish and
maintain a separate account in the name of each Fund and shall
credit to such separate accounts all monies, Assets and other
property received by it for the account of each Fund and shall
disburse the same only:
1. In payment for Securities purchased for the
applicable Fund;
2. In payment of dividends or distributions with respect
to the Shares;
3. In payment of original issue or other taxes with
respect to the Shares;
4. In payment for Shares which have been redeemed by the
applicable Fund;
5. Pursuant to Written Instructions received by a Senior
Authorized Person setting forth the name and address
of the person to whom the payment is to be made, the
amount to be paid and the purpose for which payment
is to be made, provided that in the event of
disbursements pursuant to this sub-section 2(b), the
Fund shall indemnify and hold the Custodian harmless
from any claims or losses arising out of such
disbursements in reliance on such Written
Instructions which it, reasonably and in good faith,
believes to be received from Senior Authorized
Persons; or
6. In payment of fees and in reimbursement of the
reasonable expenses and liabilities of the Custodian
attributable to the applicable Fund, as provided in
Article III, Section 9(I) and Article V, Section 1.
(c) Confirmation and Statements. Promptly after the close of
business on each day, the Custodian shall furnish by Facsimile
each Fund with confirmations and a summary of all transfers to
or from the account of the Fund during said Business Day.
Where securities purchased by a Fund are in a fungible bulk of
securities registered in the name of the Custodian (or its
nominee) or shown on the Custodian's account on the books of a
Securities Depository, the Custodian shall by book-entry or
otherwise identify the quantity of those securities belonging
to that Fund. At least monthly, the Custodian shall furnish
each Fund with a detailed statement of the Assets and monies
held for the Fund under this Custody Agreement.
(d) Registration of Securities and Physical Separation. The
Custodian is authorized to hold all Assets, or other property
of each Fund in nominee name, in bearer form or in book-entry
form. The Custodian may register any Assets or other property
of each Fund in the name of the Trust or the Fund, in the name
of the Custodian, any domestic subcustodian, or Foreign
Custodian, in the name of any duly appointed registered
nominee of such entity, or in the name of a Securities
Depository or its successor or successors, or its nominee or
nominees. The Custodian will credit to each Fund's Account at
the Custodian such Assets or other property of the respective
Fund. The Custodian is hereby authorized to deposit with, and
hold Assets or other property of the applicable Fund with any
Securities Depository. The Fund agrees to furnish to the
Custodian appropriate instruments to enable the Custodian to
hold or deliver in proper form for transfer, or to register in
the name of its registered nominee or in the name of a
Securities Depository, any Assets which it may hold for the
account of the applicable Fund and which may from time to time
be registered in the name of the Trust or the applicable Fund.
The Custodian shall hold all such Assets specifically
allocated to the applicable Fund which are not held in a
Securities Depository in a separate account for the Fund in
the name of the Fund physically segregated at all times from
those of any other person or persons.
(e) Segregated Accounts. Upon receipt of a Written Instruction,
the Custodian will establish segregated accounts on behalf of
the applicable Fund to hold liquid or other assets as it shall
be directed by a Written Instruction and shall increase or
decrease the assets in such segregated account only as it
shall be directed by subsequent Written Instruction.
(f) Collection of Income and Other Matters Affecting Securities.
Unless otherwise instructed to the contrary by a Written
Instruction, the Custodian by itself, or through the use of a
Securities Depository with respect to Securities therein
deposited, shall with respect to all Securities held for the
Funds in accordance with this Agreement:
1. Collect all income due or payable, provided that the
Custodian shall not be responsible for the failure to
receive payment of (or late payment of) distributions
with respect to Assets held in the account;
2. Present for payment and collect the amount payable
upon all Securities which may mature or be called,
redeemed, retired or otherwise become payable.
Notwithstanding the foregoing, the Custodian shall
have no responsibility to the Funds for monitoring or
ascertaining any call, redemption or retirement dates
with respect to put bonds which are owned by the
Funds and held by the Custodian or its nominees. Nor
shall the Custodian have any responsibility or
liability to the Funds for any loss by the Funds for
any missed payments or other defaults resulting
therefrom, unless the Custodian received timely
notification from the Funds specifying the time,
place and manner for the presentment of any such put
bond owned by the Funds and held by the Custodian or
its nominee. The Custodian shall not be responsible
and assumes no liability for the accuracy or
completeness of any notification the Custodian may
furnish to the Funds with respect to put bonds,
unless the Custodian has not acted in a reasonably
prudent manner in transmitting information with
respect to the accuracy, completeness or furnishings
of such notice;
3. Surrender Securities in temporary form for definitive
Securities;
4. Promptly execute any necessary declarations or
certificates of ownership under the Federal income
tax laws or the laws or regulations of any other
taxing authority now or hereafter in effect; and
5. Hold directly, or through a Securities Depository
with respect to Securities therein deposited, for the
account of the applicable Fund all rights and similar
Securities issued with respect to any Securities held
by the Custodian hereunder for that Fund.
(g) Delivery of Securities and Evidence of Authority. Upon receipt
of a Written Instruction and not otherwise, except for
subparagraphs 5, 6, 7, and 8 of this section 2(g) which may be
effected by Oral or Written Instructions, the Custodian,
directly or through the use of a Securities Depository, shall:
1. Execute and promptly deliver or cause to be executed
and delivered to such persons as may be designated in
such Written Instructions, proxies, consents,
authorizations, and any other instruments whereby the
authority of the applicable Fund as owner of any
Securities may be exercised;
2. Deliver or cause to be delivered any Securities held
for the applicable Fund in exchange for other
Securities or cash issued or paid in connection with
the liquidation, reorganization, refinancing, merger,
consolidation or recapitalization of any corporation,
or the exercise of any conversion privilege;
3. Deliver or cause to be delivered any Securities held
for the applicable Fund to any protective committee,
reorganization committee or other person in
connection with the reorganization, refinancing,
merger, consolidation or recapitalization or sale of
assets of any corporation, and receive and hold under
the terms of this Custody Agreement in the separate
account for the Fund such certificates of deposit,
interim receipts or other instruments or documents as
may be issued to it to evidence such delivery;
4. Make or cause to be made such transfers or exchanges
of the assets specifically allocated to the separate
account of the applicable Fund and take such other
steps as shall be stated in Written Instructions to
be for the purpose of effectuating any duly
authorized plan of liquidation, reorganization,
merger, consolidation or recapitalization of the
Fund;
5. Deliver Securities upon sale of such Securities for
the account of the applicable Fund pursuant to
Section 3;
6. Deliver Securities upon the receipt of payment in
connection with any repurchase agreement related to
such Securities entered into by the applicable Fund;
7. Deliver Securities owned by the applicable Fund to
the issuer thereof or its agent when such Securities
are called, redeemed, retired or otherwise become
payable; provided, however, that in any such case the
cash or other consideration is to be delivered to the
Custodian. Notwithstanding the foregoing, the
Custodian shall have no responsibility to the Fund
for monitoring or ascertaining any call, redemption
or retirement dates with respect to the put bonds
which are owned by the Fund and held by the Custodian
or its nominee. Nor shall the Custodian have any
responsibility or liability to the Fund for any loss
by the Fund for any missed payment or other default
resulting therefrom unless the Custodian received
timely notification from the Fund specifying the
time, place and manner for the presentment of any
such put bond owned by the Fund and held by the
Custodian or its nominee. The Custodian shall not be
responsible and assumes no liability to the Fund for
the accuracy or completeness of any notification the
Custodian may furnish to the Fund with respect to put
bonds;
8. Deliver Securities in connection with any loans of
Securities made by the Funds but only against receipt
of adequate collateral as agreed upon from time to
time by the Custodian and the Funds, which may be in
the form of cash or U.S. government securities or a
letter of credit;
9. Deliver Securities as security in connection with any
borrowings by the Funds requiring a pledge of the
applicable Fund's assets, but only against receipt of
amounts borrowed;
10. Deliver Securities upon receipt of Written
Instructions from a Fund for delivery to the Transfer
Agent or to the holders of Shares in connection with
distributions in kind, as may be described from time
to time in the Fund's Prospectus, in satisfaction of
requests by holders of Shares for repurchase or
redemption;
11. Deliver Securities as collateral in connection with
short sales by a Fund of common stock for which the
Fund owns the stock or owns preferred stocks or debt
securities convertible or exchangeable, without
payment or further consideration, into shares of the
common stock sold short;
12. Deliver Securities for any purpose expressly
permitted by and in accordance with procedures
described in the Fund's Prospectus; and
13. Deliver Securities for any other proper business
purpose, but only upon receipt of, in addition to
Written Instructions, a certified copy of a
resolution of the Board signed by an Authorized
Person and certified by the Secretary of the Funds,
specifying the Securities to be delivered, setting
forth the purpose for which such delivery is to be
made, declaring such purpose to be a proper business
purpose, and naming the person or persons to whom
delivery of such Securities shall be made.
Notwithstanding anything in this Agreement to the
contrary, the Custodian shall not be liable for the
acts or omissions of any agent appointed under
paragraph (f) of Section 9 pursuant to Oral or
Written Instructions including, but not limited to,
any broker-dealer or other entity designated by a
Fund or its investment advisor to hold any Securities
or other property of the Fund as collateral or
otherwise pursuant to any investment strategy.
(h) Endorsement and Collection of Checks, Etc. The Custodian is
hereby authorized to endorse and collect all checks, drafts or
other orders for the payment of money received by the
Custodian for the account of the applicable Fund.
3. SETTLEMENT OF FUNDS TRANSACTIONS.
(a) Customary Practices. Notwithstanding anything to the contrary
in this Agreement, the Custodian is authorized to settle
transactions in accordance with trading and processing
practices customary in the jurisdiction or market where the
transaction occurs. The Fund acknowledges that this may, in
certain circumstances, require the delivery of cash or
Securities (or other property) without the concurrent receipt
of Securities (or other property) or cash and, in such
circumstances, the Fund shall have responsibility for
nondelivery of Securities or other property (or late delivery)
or nonreceipt of payments of monies (or late payment) by the
counterparty, provided, however, that in such an event, the
Custodian agrees to provide reasonable assistance to the Fund
in order to consummate such incomplete transaction(s) .
(b) Contractual Income. The Custodian shall credit the applicable
Fund with income and maturity proceeds on securities on
contractual payment date net of any taxes or upon actual
receipt as agreed between the Custodian and the Fund. To the
extent the Fund and the Custodian have agreed to credit income
on contractual payment date, the Custodian may reverse such
accounting entries with back value to the contractual payment
date if the Custodian reasonably believes that it will not
receive such amount.
(c) Contractual Settlement. The Custodian will attend to the
settlement of securities transactions on the basis of either
contractual settlement date accounting or actual settlement
date accounting as agreed between the Fund and the Custodian.
To the extent the Fund and the Custodian have agreed to settle
certain securities transactions on the basis of contractual
settlement date accounting, the Custodian may reverse with
back value to the contractual settlement date any entry
relating to such contractual settlement where the related
transaction remains unsettled in accordance with established
procedures.
4. LENDING OF SECURITIES.
The Custodian may lend the assets of the Funds in accordance with the
terms and conditions of a separate securities lending agreement,
approved by the Fund.
5. PAYMENT OF DIVIDENDS OR DISTRIBUTIONS.
(a) The Fund shall furnish to the Custodian the vote of the Board
certified by the Secretary (i) authorizing the declaration of
distributions on a specified periodic basis and authorizing
the Custodian to rely on Oral or Written Instructions
specifying the date of the declaration of such distribution,
the date of payment thereof, the record date as of which
shareholders entitled to payment shall be determined, the
amount payable per share to the shareholders of record as of
the record date and the total amount payable to the Transfer
Agent on the payment date, or (ii) setting forth the date of
declaration of any distribution by the Funds, the date of
payment thereof, the record date as of which shareholders
entitled to payment shall be determined, the amount payable
per share to the shareholders of record as of the record date
and the total amount payable to the Transfer Agent on the
payment date.
(b) Upon the payment date specified in such vote, Oral
Instructions or Written Instructions, as the case may be, the
Custodian shall pay out the total amount payable to the
Transfer Agent of the Fund.
6. SALE AND REDEMPTION OF SHARES OF THE FUNDS.
(a) Whenever a Fund shall sell any Shares, that Fund shall deliver
or cause to be delivered to the Custodian a Written
Instruction duly specifying:
1. The number of Shares sold, trade date, and price; and
2. The amount of money to be received by the Custodian
for the sale of such Shares.
The Custodian understands and agrees that Written Instructions
may be furnished subsequent to the purchase of Shares and that
the information contained therein will be derived from the
sales of Shares as reported to the Fund by the Transfer Agent.
(b) Upon receipt of money from the Transfer Agent, the Custodian
shall credit such money to the separate account of the
applicable Fund.
(c) Upon issuance of any Shares in accordance with the foregoing
provisions of this Section 6, the Custodian shall pay all
original issue or other taxes required to be paid in
connection with such issuance upon the receipt of a Written
Instruction specifying the amount to be paid.
(d) Except as provided hereafter, whenever any Shares are
redeemed, a Fund shall cause the Transfer Agent to promptly
furnish to the Custodian Written Instructions, specifying:
1. The number of Shares redeemed; and
2. The amount to be paid for the Shares redeemed.
The Custodian further understands that the information
contained in such Written Instructions will be derived from
the redemption of Shares as reported to the Fund by the
Transfer Agent.
(e) Upon receipt from the Transfer Agent of advice setting forth
the number of Shares received by the Transfer Agent for
redemption and that such Shares are valid and in good form for
redemption, the Custodian shall make payment to the Transfer
Agent of the total amount specified in a Written Instruction
issued pursuant to paragraph (d) of this Section 6.
(f) Notwithstanding the above provisions regarding the redemption
of Shares, whenever such Shares are redeemed pursuant to any
check redemption privilege which may from time to time be
offered by the Funds, the Custodian, unless otherwise
instructed by a Written Instruction shall, upon receipt of
advice from the Funds or its agent stating that the redemption
is in good form for redemption in accordance with the check
redemption procedure, honor the check presented as part of
such check redemption privilege out of the monies specifically
allocated to the Funds in such advice for such purpose.
7. INDEBTEDNESS.
(a) The Fund will cause to be delivered to the Custodian by any
bank (excluding the Custodian) from which the a Fund borrows
money for temporary administrative or emergency purposes using
Securities as collateral for such borrowings, a notice or
undertaking in the form currently employed by any such bank
setting forth the amount which such bank will loan to the Fund
against delivery of a stated amount of collateral. The Fund
shall promptly deliver to the Custodian Written Instructions
stating with respect to each such borrowing: (1) the name of
the bank; (2) the amount and terms of the borrowing, which may
be set forth by incorporating by reference an attached
promissory note, duly endorsed by the Funds, or other loan
agreement; (3) the time and date, if known, on which the loan
is to be entered into (the "borrowing date"); (4) the date on
which the loan becomes due and payable; (5) the total amount
payable to the Funds on the borrowing date; (6) the market
value of Securities to be delivered as collateral for such
loan, including the name of the issuer, the title and the
number of shares or the principal amount of any particular
Securities; (7) whether the Custodian is to deliver such
collateral through a Securities Depository; and (8) a
statement that such loan is in conformance with the 1940 Act
and the Fund's Prospectus.
(b) Upon receipt of the Written Instruction referred to in
subparagraph (a) above, the Custodian shall deliver on the
borrowing date the specified collateral and the executed
promissory note, if any, against delivery by the lending bank
of the total amount of the loan payable, provided that the
same conforms to the total amount payable as set forth in the
Written Instruction. The Custodian may, at the option of the
lending bank, keep such collateral in its possession, but such
collateral shall be subject to all rights therein granted to
the lending bank by virtue of any promissory note or loan
agreement. The Custodian shall deliver as additional
collateral in the manner directed by the Fund from time to
time such Securities as may be specified in Written
Instruction to collateralize further any transaction described
in this Section 7. The Fund shall cause all Securities
released from collateral status to be returned directly to the
Custodian, and the Custodian shall receive from time to time
such return of collateral as may be tendered to it. In the
event that the Fund fails to specify in Written Instruction
all of the information required by this Section 7, the
Custodian shall not be under any obligation to deliver any
Securities. Collateral returned to the Custodian shall be held
hereunder as it was prior to being used as collateral.
8. PERSONS HAVING ACCESS TO ASSETS OF THE FUNDS.
(a) No trustee or agent of the Fund, and no officer, director,
employee or agent of the Fund's investment adviser, of any
sub-investment adviser of the Fund, or of the Fund's
administrator, shall have physical access to the assets of the
Funds held by the Custodian or be authorized or permitted to
withdraw any investments of the Funds, nor shall the Custodian
deliver any assets of the Funds to any such person. No
officer, director, employee or agent of the Custodian who
holds any similar position with the Fund's investment adviser,
with any sub-investment adviser of the Fund or with the Fund's
administrator shall have access to the assets of the Funds.
(b) Nothing in this Section 8 shall prohibit any duly authorized
officer, employee or agent of the Fund, including the Fund's
independent public accountants or any duly authorized officer,
director, employee or agent of the investment adviser, of any
sub-investment adviser of the Funds or of the Fund's
administrator, from giving Oral Instructions or Written
Instructions to the Custodian or executing a Certificate so
long as it does not result in delivery of or access to assets
of the Funds prohibited by paragraph (a) of this Section 8.
9. CONCERNING THE CUSTODIAN.
(a) Standard of Conduct. Notwithstanding any other provision of
this Custody Agreement, the Custodian shall not be liable for
any loss or damage, including counsel fees, resulting from its
action or omission to act or otherwise, except for any such
loss or damage arising out of the negligence, recklessness, or
willful misconduct of the Custodian or its breach of this
Agreement. The Custodian will use reasonable care in the
performance of its duties under this contract. The Custodian
may, with respect to questions of law, apply for and obtain
the advice and opinion of counsel to the Fund or of its own
counsel with substantial experience in the subject matter
concerning such questions of the law, at the expense of the
Fund, and shall be fully protected with respect to anything
done or omitted by it reasonably and in good faith in
conformity with such advice or opinion.
(b) Limit of Duties. Without limiting the generality of the
foregoing, the Custodian shall be under no duty or obligation
to inquire into, and shall not be liable for:
1. The validity of the issue of any Securities purchased
by the Funds, the legality of the purchase thereof,
or the propriety of the amount paid therefor;
2. The legality of the sale of any Securities by the
Funds or the propriety of the amount for which the
same are sold;
3. The legality of the issue or sale of any Shares, or
the sufficiency of the amount to be received
therefor;
4. The legality of the redemption of any Shares, or the
propriety of the amount to be paid therefor;
5. The legality of the declaration or payment of any
distribution of the Funds;
6. The legality of any borrowing for temporary
administrative or emergency purposes.
(c) No Liability Until Receipt. The Custodian shall not be liable
for, or considered to be the Custodian of, any money, whether
or not represented by any check, draft, or other instrument
for the payment of money, received by it on behalf of the
Funds until the Custodian actually receives and collects such
money.
(d) Amounts Due from Transfer Agent. The Custodian shall not be
under any duty or obligation to take action to effect
collection of any amount due to the Funds from the Transfer
Agent nor to take any action to effect payment or distribution
by the Transfer Agent of any amount paid by the Custodian to
the Transfer Agent in accordance with this Custody Agreement.
(e) Collection Where Payment Refused. The Custodian shall not be
under any duty or obligation to take action to effect
collection of any amount, if the Securities upon which such
amount is payable are in default, or if payment is refused
after due demand or presentation, unless and until (i) it
shall be directed to take such action by a Certificate and
(ii) it shall be assured to its satisfaction of reimbursement
of its costs and expenses in connection with any such action.
(f) Appointment of Subcustodians. (i) The Custodian is hereby
authorized to appoint one or more domestic subcustodians
(which may be an affiliate of the Custodian) to hold
Securities and monies at any time owned by the Funds.The
Custodian is also hereby authorized to place Assets with any
Foreign Custodian located in a jurisdiction which is not a
Selected Country and with Euroclear, Cedel, First Chicago
Clearing Centre or any other transnational depository.
(g) No Duty to Ascertain Authority. The Custodian shall not be
under any duty or obligation to ascertain whether any
Securities at any time delivered to or held by it for the
Funds are such as may properly be held by the Funds under the
provisions of the Articles and the Prospectus.
(h) Reliance on Certificates and Instructions. The Custodian shall
be entitled to rely upon any Certificate, notice or other
instrument in writing received by the Custodian and reasonably
believed by the Custodian to be genuine and to be signed by an
officer or Authorized Person or a Senior Authorized Person.
The Custodian shall be entitled to rely upon any Written
Instructions or Oral Instructions actually received by the
Custodian pursuant to the applicable Sections of this
Agreement and reasonably believed by the Custodian to be
genuine and to be given by such person. The Funds agree to
forward to the Custodian Written Instructions from an
Authorized Person or Senior Authorized Person confirming such
Oral Instructions in such manner so that such Written
Instructions are received by the Custodian, whether by hand
delivery, telex or otherwise, by the close of business on the
same day that such Oral Instructions are given to the
Custodian. The Funds agree that the fact that such confirming
instructions are not received by the Custodian shall in no way
affect the validity of the transactions or enforceability of
the transactions hereby authorized by the Funds. The Funds
agree that the Custodian shall incur no liability to the Funds
in acting upon Oral Instructions given to the Custodian
hereunder concerning such transactions provided such
instructions reasonably appear to have been received from a
duly Authorized Person or Senior Authorized Person. The
Custodian shall be under no duty to question any direction of
an Authorized Person or a Senior Authorized Person with
respect to the portion of the account over which such person
has authority, to review any property held in the account, to
make any suggestions with respect to the investment and
reinvestment of the assets in the account, or to evaluate or
question the performance of any Authorized Person or Senior
Authorized Person. The Custodian shall not be responsible or
liable for any diminution of value of any securities or other
property held by the Custodian.
(i) Overdraft Facility and Security for Payment. In the event that
the Custodian is directed by Written Instruction (or Oral
Instructions confirmed in writing in accordance with Section
9(h) hereof) to make any payment or transfer of monies on
behalf of the Funds for which there would be, at the close of
business on the date of such payment or transfer, insufficient
monies held by the Custodian on behalf of the Funds, the
Custodian may, in its sole discretion, provide an overdraft
(an "Overdraft") to the Funds in an amount sufficient to allow
the completion of such payment or transfer. The Custodian
shall promptly notify the Funds (an "Overdraft Notice") of any
Overdraft by facsimile transmission or in such other manner as
the Funds and the Custodian may agree. Any Overdraft provided
hereunder: (a) shall be payable on the next Business Day after
receipt of an Overdraft Notice, unless otherwise agreed by the
Funds and the Custodian; and (b) shall accrue interest from
the date of the Overdraft to the date of payment in full by
the Funds at a rate agreed upon from time to time, by the
Custodian and the Funds. The Custodian and the Funds
acknowledge that the purpose of such Overdraft is to
temporarily finance the purchase of Securities for prompt
delivery in accordance with the terms hereof, to meet
unanticipated or unusual redemptions, to allow the settlement
of foreign exchange contracts or to meet other emergency
expenses not reasonably foreseeable by the Funds. To secure
payment of any Overdraft, the Funds hereby grant to the
Custodian a continuing security interest in and right of
setoff against the Securities and cash in the Fund's accounts
from time to time in the full amount of such Overdraft. Should
the Funds fail to pay promptly any amounts owed hereunder, the
Custodian shall be entitled to use available cash in the
applicable Fund's account and to liquidate Securities in the
account as is necessary to meet the Fund's obligations under
the Overdraft. In any such case, and without limiting the
foregoing, the Custodian shall be entitled to take such other
actions(s) or exercise such other options, powers and rights
as the Custodian now or hereafter has as a secured creditor
under the Massachusetts Uniform Commercial Code or any other
applicable law. =
ARTICLE IV
INFORMATION SERVICES AGREEMENT
The following sets forth our agreement with respect to the delivery of certain
information to the Board or its agents as requested by the Board from time to
time.
1. PROVISIONS OF INFORMATION
In accordance with the provisions of this Information Services Agreement,
the Custodian agrees to provide to the Board, or at the direction of the
Board, to the Fund's investment advisers, the information set forth in
Article IV, Section 2 with respect to Foreign Custodians and Securities
Depositories which hold Securities, Assets, or other property of the Funds
and the systems and environment for securities processing in the
jurisdiction in which such Foreign Custodians or Securities Depositories
are located. The Custodian shall provide only that portion of such
information as is reasonably available to it.
2. INFORMATION TO BE PROVIDED
COUNTRY INFORMATION
o Settlement Environment
o Depository
o Settlement Period
o Trading
o Security Registration
o Currency
o Foreign Investment Restrictions
o Entitlements
o Proxy Voting
o Foreign Taxation
<PAGE>
Depository Information (if applicable to the Country)
o Name
o Information relative to Determining Compulsory or Voluntary Status
of the Facility
o Type of Entity
o Ownership Structure
o Operating History
o Eligible Instruments
o Security Form
o Financial Data
o Regulator
o External Auditor
SUBCUSTODIAN INFORMATION
o Financial Information
o Regulator
o External Auditor
o How Securities are Held
o Operational Capabilities
o Insurance Coverage
INFORMATION ON THE FOLLOWING LEGAL QUESTIONS
o Would the applicable foreign law restrict the access afforded the
independent public accountants of the Funds to books and records kept
by a foreign custodian?
o Would the applicable foreign law restrict the ability of the Funds to
recover teir assets in the event of bankruptcy of the foreign
custodian?
o Would the applicable foreign law restrict the ability of the Funds to
recover assets that are lost while under the control or in the custody
of the foreign custodian?
o What are the foreseeable difficulties in converting the Fund's cash
from the relevant foreign currency into U.S. dollars?
3. LIABILITY AND WARRANTIES
The Custodian will use reasonable best efforts to ensure that the information
provided pursuant to Article IV, Section 1 is accurate and current as of time of
provision. However, due to the nature and source of this information, and the
necessity of relying on various information sources, most of which are external
to the Custodian, the Custodian shall have no liability for direct or indirect
use of such information if the Custodian acted reasonably. The Custodian makes
no other warranty or condition, either express or implied, as to the
merchantability or fitness for any particular purpose of the information
provided under this Article IV.
ARTICLE V
ADDITIONAL PROVISIONS
1. COMPENSATION.
(a) The Custodian shall be entitled to receive, and the Fund
agrees to pay to the Custodian, such reasonable compensation
as may be agreed upon from time to time between the Custodian
and the Fund. The Custodian may charge against any monies held
on behalf of the Funds pursuant to this Agreement such
reasonable compensation and any reasonable expenses incurred
by the Custodian in the performance of its duties pursuant to
this Agreement. The Custodian shall also be entitled to charge
against any money held on behalf of the Funds pursuant to this
Agreement the amount of any loss, damage, liability or expense
incurred with respect to the Funds, including counsel fees,
for which it shall be entitled to reimbursement under the
provisions of this Agreement. The expenses which the Custodian
may charge against such account include, but are not limited
to, the expenses of domestic subcustodians and Foreign
Custodians incurred in settling transactions outside of
Boston, Massachusetts or New York City, New York involving the
purchase and sale of Securities.
(b) The Fund will compensate the Custodian for its services
rendered under this Agreement in accordance with the fees set
forth in a separate Fee Schedule which schedule may be
modified by the Custodian upon not less than sixty days prior
written notice to the Fund.
(c) Any compensation agreed to hereunder may be adjusted from time
to time by a revised Fee Schedule, dated and signed by a
Senior Authorized Person or authorized representative of each
party hereto.
(d) The Custodian will bill the Fund for services rendered
hereunder as soon as practicable after the end of each
calendar month but in no event later than the 15th day of the
month following the month in which such services were
rendered. The Fund will promptly pay to the Custodian the
amount of such billing unless such fees have been previously
debited under Section 1(a). In making payments to service
providers pursuant to Written Instructions, the Fund
acknowledges that the Custodian is acting as a paying agent
and not as the payor, for tax information reporting and
withholding purposes.
2. INSOLVENCY OF ELIGIBLE FOREIGN CUSTODIANS.
The Custodian shall not be responsible or liable for any losses or
damages suffered by the Funds arising as a result of the insolvency of
any Foreign Custodian except with respect to any Foreign Custodian in
any Selected Country which the Custodian appointed in accordance with
the provisions of Article II but only to the extent that the Custodian
failed to comply with the standard of care set forth in Article II with
respect to the selection and monitoring of such Foreign Custodian.
3. LIABILITY FOR DEPOSITORIES.
The Custodian shall not be responsible for any losses resulting from
the deposit or maintenance of Securities, Assets or other property of
the Funds with any Securities Depository.
4. DAMAGES.
Under no circumstances shall the Custodian be liable for any indirect,
consequential or special damages with respect to its role as Delegate,
Custodian or information vendor.
5. LIMITATION OF LIABILITY.
The Funds and the Custodian agree that the obligations of the Fund
under this Agreement shall not be binding upon any of the Trustees,
shareholders, nominees, officers, employees or agents, whether past,
present or future, of the Funds, individually, but are binding only
upon the assets and property of the Fund, as provided in the Articles.
The execution and delivery of this Agreement have been authorized by
the Trustees of the Fund, and signed by an authorized officer of the
Fund, acting as such. Neither such authorization by such Trustees nor
such execution and delivery by such officer shall be deemed to have
been made by any of them or any shareholder of the Funds individually
or to impose any liability on any of them or any shareholder of the
Funds personally, but shall bind only the assets and property of the
Fund as provided in the Master Trust Agreement.
6. TERM AND TERMINATION.
(a) This Agreement and any portion thereof shall become effective
on the date first set forth above (the "Effective Date") and
shall continue in effect thereafter until such time as this
Agreement may be terminated in accordance with the provisions
hereof.
(b) Either of the parties hereto may terminate this Agreement as a
whole or may terminate either the Delegation Agreement or the
Information Services Agreement individually or the Delegation
Agreement collectively by giving to the other party a notice
in writing specifying the date and scope of such termination,
which shall be not less than 60 days after the date of receipt
of such notice. In the event such notice is given by the Fund,
it shall be accompanied by a certified vote of the Board,
electing to terminate this Agreement or the applicable portion
thereof .
In the event such notice is given by the Custodian of any
termination which includes the Custody Agreement, the Fund
shall, on or before the termination date, deliver to the
Custodian a certified vote of the Board, designating a
successor custodian or custodians. In the absence of such
designation by the Fund, the Custodian may designate a
successor custodian, which shall be a person qualified to so
act under the 1940 Act. If the Fund fails to designate a
successor custodian, the Fund shall upon the date specified in
the notice of termination of this Agreement and upon the
delivery by the Custodian of all Securities and monies then
owned by the Funds, be deemed to be its own custodian and the
Custodian shall thereby be relieved of all duties and
responsibilities pursuant to this Agreement or the portion so
terminated, other than the duty with respect to Securities
held in the Book-Entry System which cannot be delivered to the
Funds.
(c) Upon the date set forth in such notice under paragraph (b) of
this Section 6, this Agreement or portion thereof shall
terminate to the extent specified in such notice, and if the
Custody Agreement is terminated the Custodian shall upon
receipt of a notice of acceptance by the successor custodian
on that date deliver directly to the successor custodian all
Securities and monies then held by the Custodian on behalf of
the Funds, after deducting all fees, expenses and other
amounts for the payment or reimbursement of which it shall
then be entitled as set forth in this Agreement.
(d) If there is a material default in the Agreement by either
party, the non-defaulting party may immediately terminate the
Agreement pursuant to the procedures set forth in Section 6(b)
and the non-defaulting party shall be entitled to reasonable
attorney's fees.
7. FORCE MAJEURE.
Notwithstanding anything in this Agreement to the contrary, neither the
Custodian nor the Fund shall be liable for any losses resulting from or
caused by events or circumstances beyond its reasonable control,
including, but not limited to, losses resulting from nationalization,
strikes, expropriation, devaluation, revaluation, confiscation,
seizure, cancellation, destruction or similar action by any
governmental authority, de facto or de jure; or enactment,
promulgation, imposition or enforcement by any such governmental
authority of currency restrictions, exchange controls, taxes, levies or
other charges affecting the Fund's property; or the breakdown, failure
or malfunction of any utilities or telecommunications systems; or any
order or regulation of any banking or securities industry including
changes in market rules and market conditions affecting the execution
or settlement of transactions; or acts of war, terrorism, insurrection
or revolution; or any other similar or third-party event. This Section
shall survive the termination of this Agreement.
8. INSPECTION OF BOOKS AND RECORDS.
The books and records of the Custodian shall be open to inspection and
audit at reasonable times by officers and auditors employed by the Fund
at its own expense and with prior written notice to the Custodian, and
by the appropriate staff of the Securities and Exchange Commission.
9. MISCELLANEOUS.
(a) Annexed hereto as Appendix C is a certification signed by the
Secretary of the Fund setting forth the names and the
signatures of the present Authorized and Senior Authorized
Persons. The Fund agrees to furnish to the Custodian a new
certification in similar form in the event that any such
present person ceases to be such an Authorized Person or
Senior Authorized Person or in the event that other or
additional persons are elected or appointed. Until such new
certification shall be received, the Custodian shall be fully
protected in acting under the provisions of this Agreement
upon Oral Instructions or signatures of the present Authorized
and Senior Authorized Persons as set forth in the last
delivered certification.
(b) Annexed hereto as Appendix A is a certification signed by the
Secretary of the Fund setting forth the names and the
signatures of the present officers of the Fund. The Fund
agrees to furnish to the Custodian a new certification in
similar form in the event any such present officer ceases to
be an officer of the Fund or in the event that other or
additional officers are elected or appointed. Until such new
certification shall be received, the Custodian shall be fully
protected in acting under the provisions of this Agreement
upon the signature of an officer as set forth in the last
delivered certification.
(c) Any notice or other instrument in writing, authorized or
required by this Agreement to be given to the Custodian, shall
be sufficiently given if actually received by the Custodian at
its offices at One Boston Place, Boston, Massachusetts 02108
or at such other place as the Custodian may from time to time
designate in writing.
(d) Any notice or other instrument in writing, authorized or
required by this Agreement to be given to the Fund, shall be
sufficiently given if actually received by the Fund at its
offices at 225 West Wacker Drive, Suite 1200, Chicago, IL
60606 or at such other place as the Fund may from time to time
designate in writing.
(e) Except as provided in Article II, Section 2 this Agreement may
not be amended or modified in any manner except by a written
agreement executed by both parties with the same formality as
this Agreement (i) authorized, or ratified and approved by a
vote of the Board of Trustees of the Fund, including a
majority of the members of the Board of Trustees of the Fund
who are not "interested persons" of the Fund (as defined in
the 1940 Act), or (ii) authorized, or ratified and approved by
such other procedures as may be permitted or required by the
1940 Act.
(f) This Agreement shall extend to and shall be binding upon the
parties hereto, and their respective successors and assigns;
provided, however, that this Agreement shall not be assignable
by the Fund without the written consent of the Custodian, or
by the Custodian without the written consent of the Fund
authorized or approved by a vote of the Board of Trustees of
the Fund provided, however, that the Custodian may assign the
Agreement to an Affiliated Person and any attempted assignment
without such written consent shall be null and void. Nothing
in this Agreement shall give or be construed to give or confer
upon any third party any rights hereunder.
(g) The Fund represents that a copy of the Master Trust Agreement
is on file with the Secretary of the Commonwealth of
Massachusetts and with the Boston City Clerk.
(h) This Agreement shall be construed in accordance with the laws
of The Commonwealth of Massachusetts.
(i) The captions of this Agreement are included for convenience of
reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or
effect.
(j) This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one instrument.
(k) Each party represents to the other that it has all necessary
power and authority, and has obtained any consent or approval
necessary to permit it, to enter into and perform under this
Agreement and that this Agreement does not violate, breach,
give rise to a default or right of termination under or
otherwise conflict with any applicable law, regulation,
ruling, decree or other governmental authorization or any
contract to which it is a party or by which any of its assets
is bound.
(l) Custodian convenants that it will maintain financial insurance
coverage for its operations, including errors and omissions,
directors and officers and Fidelity bond insurance.
(m) The parties agree that information disclosed between the
parties, including but not limited to information learned by
one party from the other party's employees, agents or through
inspection of its property, that relates to it or its
affiliates' (which includes any entity controlling or under
the common control of such party) products, designs, business
plans, business opportunities, finances, research,
development, know-how, personnel, third-party confidential
information, the terms and conditions of this Agreement,
information regarding either party's or its affiliates'
customers and the existence of the discussion between the
parties will be considered and referred to collectively in
this Agreement as "Confidential Information," provided that
information disclosed by the disclosing party (the
"discloser") will be considered Confidential Information by
the receiving party (the "recipient"). Confidential
Information, however, does not include information that: (1)
is now or subsequently becomes generally available to the
public through no fault or breach on the part of the
recipient; (2) the recipient can demonstrate to have had
rightfully in its possession free of any obligation of
Confidentiality; (3) is independently developed by the
recipient without the use of any Confidential Information; or
(4) the recipient rightfully obtains from a third party who
has the right to transfer or disclose it or if such party does
not have such right, then the recipient had no reason to know
of such circumstance and no actual knowledge of such
circumstance.
The recipient will not disclose, publish, or disseminate
Confidential Information to anyone other than those of its
employees or consultant (or its affiliates' or subsidiaries'
employees or consultants) with a need to know, and the
recipient agrees to take reasonable precautions to prevent any
unauthorized use, disclosure, publication, or dissemination of
Confidential Information. The recipient agrees to accept
Confidential Information for the sole purpose of the
performance of its duties in connection with this Agreement.
The recipient agrees not to use Confidential Information
otherwise for its own or any third party's benefit without the
prior written approval of an authorized representative of the
discloser in each instance.
All Confidential Information, and any Derivative thereof,
whether created by the recipient or the discloser, remains the
property of the discloser and no license or other rights to
Confidential Information is granted or implied hereby. For
purposes of this Agreement, "Derivatives" shall mean: (1) for
copyrightable or copyrighted material, any translation,
abridgment, revision or other form in which an existing work
may be recast, transformed or adapted; (2) for patentable or
patented material, or any improvement thereon; and (3) for
material which is protected by trade secret, any new material
derived from such existing trade secret material, including
any new material which may be protected by copyright, patent
and/or trade secret.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective representatives duly authorized as of the day and
year first above written.
JNLNY VARIABLE FUND II LLC
By: /s/ Andrew B. Hopping
Name: Andrew B. Hopping
Title: President
BOSTON SAFE DEPOSIT AND TRUST COMPANY
By: /s/ Christopher Healy
Name: Christopher Healy
Title: Vice President
<PAGE>
APPENDIX A
I, Thomas J. Meyer, the Secretary of the JNLNY Variable Fund II LLC, a
Delaware Limited Liability Company organized under the laws of the State of
Delaware (the "Fund"), do hereby certify that:
The following individuals have been duly authorized as Authorized
Persons to give Oral Instructions and Written Instructions on behalf of the Fund
and each Fund thereof and the specimen signatures set forth opposite their
respective names are their true and correct signatures:
NAME POSITION SIGNATURE
Andrew B. Hopping President and Chief
Executive Officer /s/ Andrew B. Hopping
Robert A. Fritts Vice President, /s/ Robert A. Fritts
Treasurer and Chief
Financial Officer
Thomas J. Meyer Vice President, Counsel /s/ Thomas J. Meyer
and Secretary
Mark D. Nerud Vice President and /s/ Mark D. Nerud
Assistant Treasurer
Amy D. Eisenbeis Vice President and /s/ Amy D. Eisenbeis
Assistant Secretary
William V. Simon Employee of Jackson /s/ William V. Simon
National Financial
Services, LLC
Elsa Chessani Employee of Jackson /s/ Elsa Chessani
National Financial
Services, LLC
By: /s/ Thomas J. Meyer
Secretary
Dated
<PAGE>
APPENDIX B
SELECTED COUNTRIES
ARGENTINA KOREA, REPULBIC OF
AUSTRALIA LUXEMBOURG
AUSTRIA MALAYSIA
BANGLADESH MAURITIUS
BELGIUM MEXICO
BERMUDA NAMIBIA
BOSTWANA THE NETHERLANDS
BRAZIL NEW ZEALAND
CANADA NORWAY
CHILE PAKISTAN
CHINA, PEOPLES' REPUBLIC OF PERU
COLOMBIA THE PHILIPPINES
CYPRUS POLAND
THE CZECH REPUBLIC PORTUGAL
DENMARK SINGAPORE
EGYPT SLOVAK REPUBLIC
FINLAND SOUTH AFRICA
FRANCE SPAIN
GERMANY SRI LANKA
GHANA SWEDEN
GREECE SWITZERLAND
HONG KONG TAIWAN
HUNGARY TURKEY
INDIA UNITED KINGDOM
INDONESIA URUGUAY
IRELAND VENEZUELA
ISRAEL ZAMBIA
ITALY ZIMBABWE
JAPAN
KENYA
<PAGE>
APPENDIX C
I, Thomas J. Meyer, the Secretary of the JNLNY Variable Fund II LLC, a
Delaware Limited Liability Company organized under the laws of the State of
Delaware (the "Fund"), do hereby certify that:
The following individuals serve in the following positions with the Fund
and each individual has been duly elected or appointed to each such position and
qualified therefor in conformity with the Fund's Master Trust Agreement and the
specimen signatures set forth opposite their respective names are their true and
correct signatures:
NAME POSITION SIGNATURE
Andrew B. Hopping President and Chief /s/ Andrew B. Hopping
Executive Officer
Robert A. Fritts Vice President, /s/ Robert A. Fritts
Treasurer and Chief
Financial Officer
Thomas J. Meyer Vice President, Counsel /s/ Thomas J. Meyer
and Secretary
Mark D. Nerud Vice President and /s/ Mark D. Nerud
Assistant Treasurer
Amy D. Eisenbeis Vice President and /s/ Amy D. Eisenbeis
Assistant Secretary
By: /s/ Thomas J. Meyer
Secretary
Dated
<PAGE>
APPENDIX D
SERIES:
JNL/First Trust The DowSM Target 10 Series
ADMINISTRATION AGREEMENT
This Agreement is made as of May 14, 1999, between JNLNY Variable Fund II LLC, a
Delaware limited liability company ("Fund"), and Jackson National Financial
Services, LLC, a Michigan limited liability company ("Administrator").
WHEREAS, the Fund is registered under the Investment Company Act of 1940, as
amended ("1940 Act"), as an open-end management investment company and has
established several separate series of shares ("Series"), with each Series
having its own assets and investment policies; and
WHEREAS, the Fund desires to retain the Administrator to furnish administrative
services to each Series listed in Schedule A attached hereto, and to such other
Series of the Fund hereinafter established as agreed to from time to time by the
parties, evidenced by an addendum to Schedule A (hereinafter "Series" shall
refer to each Series which is subject to this Agreement and all agreements and
actions described herein to be made or taken by a Series shall be made or taken
by the Fund on behalf of the Series), and the Administrator is willing to
furnish such services,
NOW, THEREFORE, in consideration of the premises and mutual covenants herein
contained, the parties agree as follows:
1. SERVICES OF THE ADMINISTRATOR
1.1 Administrative Services. The Administrator shall supervise each
Series' business and affairs and shall provide such services required for
effective administration of such Series as are not provided by employees or
other agents engaged by such Series; provided, that the Administrator shall not
have any obligation to provide under this Agreement any direct or indirect
services to a Series' shareholders, any services related to the distribution of
a Series' shares, or any other services that are the subject of a separate
agreement or arrangement between a Series and the Administrator. Subject to the
foregoing, in providing administrative services hereunder, the Administrator
shall:
1.1.1 Office Space, Equipment and Facilities. Furnish without cost to
each Series, or pay the cost of, such office space, office equipment and office
facilities as are adequate for the Series' needs;
1.1.2 Personnel. Provide, without remuneration from or other cost to
each Series, the services of individuals competent to perform all of the Series'
executive, administrative and clerical functions that are not performed by
employees or other agents engaged by the Series or by the Administrator acting
in some other capacity pursuant to a separate agreement or arrangement with the
Series;
1.1.3 Agents. Assist each Series in selecting and coordinating the
activities of the other agents engaged by the Series, including the Series'
custodian, independent auditors and legal counsel;
1.1.4 Board of Managers and Officers. Authorize and permit the
Administrator's directors, officers or employees who may be elected or appointed
as trustees or officers of the Fund to serve in such capacities, without
remuneration from or other cost to the Fund or any Series;
1.1.5 Books and Records. Ensure that all financial, accounting and
other records required to be maintained and preserved by each Series are
maintained and preserved by it or on its behalf in accordance with applicable
laws and regulations; and
1.1.6 Reports and Filings. Assist in the preparation of all periodic
reports by each Series to shareholders of such Series and all reports and
filings required to maintain the registration and qualification of the Series
and the Series' shares, or to meet other regulatory or tax requirements
applicable to the Series, under federal and state securities and tax laws.
2. EXPENSES OF EACH SERIES
2.1 Expenses to Be Paid by the Administrator. If the Administrator pays
or assumes any expenses of the Fund or a Series not required to be paid or
assumed by the Administrator under this Agreement, the Administrator shall not
be obligated hereby to pay or assume the same or any similar expense in the
future; provided, that nothing herein contained shall be deemed to relieve the
Administrator of any obligation to the Fund or to a Series under any separate
agreement or arrangement between the parties.
2.1.1 Custody. All charges of depositories, custodians, and other
agents for the transfer, receipt, safekeeping, and servicing of its cash,
securities, and other property;
2.1.2 Shareholder Servicing. All expenses of maintaining and servicing
shareholder accounts, including, but not limited to, the charges of any
shareholder servicing agent, dividend disbursing agent or other agent engaged by
a Series to service shareholder accounts;
2.1.3 Shareholder Reports. All expenses of preparing, setting type,
printing and distributing reports and other communications to shareholders of a
Series;
2.1.4 Prospectuses. All expenses of preparing, setting in type,
printing and mailing annual or more frequent revisions of a Series' Prospectus
and SAI and any supplements thereto and of supplying them to shareholders of the
Series and Account holders;
2.1.5 Pricing and Series Valuation. All expenses of computing a Series'
NAV per share, including any equipment or services obtained for the purpose of
pricing shares or valuing the Series' investment series;
2.1.6 Communications. All charges for equipment or services used for
communications between the Administrator or the Series and any custodian,
shareholder servicing agent, series accounting services agent, or other agent
engaged by a Series;
2.1.7 Legal and Accounting Fees. All charges for services and expenses
of a Series' legal counsel and independent auditors;
2.1.8 Trustees' Fees and Expenses. All compensation of Board of
Managers, all expenses incurred in connection with such Trustees' services as
Board of Managers, and all other expenses of meetings of the Board of Managers
or committees thereof;
2.1.9 Shareholder Meetings. All expenses incidental to holding meetings
of shareholders, including the printing of notices and proxy materials, and
proxy solicitation therefor;
2.1.10 Bonding and Insurance. All expenses of bond, liability, and
other insurance coverage required by law or regulation or deemed advisable by
the Board of Managers, including, without limitation, such bond, liability and
other insurance expense that may from time to time be allocated to the Series in
a manner approved by the Board of Managers;
2.1.11 Trade Association Fees. Its proportionate share of all fees,
dues and other expenses incurred in connection with the Trust's membership in
any trade association or other investment organization;
2.1.12 Salaries. All salaries, expenses and fees of the officers,
trustees, or employees of the Fund who are officers, directors or employees of
the Administrator.
2.2 Expenses to Be Paid by the Series. Each Series shall bear all
expenses of its operation, except those specifically allocated to the
Administrator under this Agreement or under any separate agreement between such
Series and the Administrator. Expenses to be borne by such Series shall include
both expenses directly attributable to the operation of that Series and the
offering of its shares, as well as the portion of any expenses of the Fund that
is properly allocable to such Series in a manner approved by the Board of
Managers of the Fund ("Board of Managers"). Subject to any separate agreement or
arrangement between the Fund of a Series and the Administrator, the expenses
hereby allocated to each Series, and not to the Administrator, include, but are
not limited to:
2.2.1 Federal Registration Fees. All fees and expenses of registering
and maintaining the registration of the Fund and each Series under the 1940 Act
and the registration of each Series' shares under the Securities Act of 1933
(the "1933 Act");
2.2.2 State Registration Fees. All fees and expenses of qualifying and
maintaining the qualification of the Fund and each Series and of each Series'
shares for sale under securities laws of various states or jurisdictions, and of
registration and qualification of each Series under all other laws applicable to
a Series or its business activities (including registering the Series as a
broker-dealer, or any officer of the Series or any person, as agent or salesman
of the Series in any state), if applicable;
2.2.3 Brokerage Commissions. All brokers' commissions and other charges
incident to the purchase, sale or lending of a Series' securities;
2.2.4 Taxes. All taxes or governmental fees payable by or with respect
to a Series to federal, state or other governmental agencies, domestic or
foreign, including stamp or other transfer taxes;
2.2.5 Nonrecurring and Extraordinary Expenses. Such nonrecurring and
extraordinary expenses as may arise, including the costs of actions, suits, or
proceedings to which the Series is a party and the expenses a Series may incur
as a result of its legal obligation to provide indemnification to the Trust's
officers, Board of Managers and agents;
2.2.6 Investment Advisory Services. Any fees and expenses for
investment advisory services that may be incurred or contracted for by a Series.
3. ADMINISTRATION FEE
3.1 Fee. As compensation for all services rendered, facilities provided and
expenses paid or assumed by the Administrator to or for each Series under this
Agreement, such Series shall pay the Administrator an annual fee as set out in
Schedule B to this Agreement.
3.2 Computation and Payment of Fee. The administration fee shall accrue on each
calendar day; and shall be payable monthly on the first business day of the next
succeeding calendar month. The daily fee accruals for each Series shall be
computed by multiplying the fraction of one divided by the number of days in the
calendar year by the applicable annual administration fee rate (as set forth in
Schedule B hereto), and multiplying the product by the NAV of such Series,
determined in the manner set forth in such Series' then-current Prospectus, as
of the close of business on the last preceding business day on which such
Series' NAV was determined.
4. OWNERSHIP OF RECORDS
All records required to be maintained and preserved by each Series pursuant to
the provisions or rules or regulations of the Securities and Exchange Commission
("SEC") under section 31(a) of the 1940 Act and maintained and preserved by the
Administrator on behalf of such Series are the property of such Series and shall
be surrendered by the Administrator promptly on request by the Series; provided,
that the Administrator may at its own expense make and retain copies of any such
records.
5. REPORTS TO ADMINISTRATOR
Each Series shall furnish or otherwise make available to the Administrator such
copies of that Series' Prospectus, SAI, financial statements, proxy statements,
reports, and other information relating to its business and affairs as the
Administrator may, at any time or from time to time, reasonably require in order
to discharge its obligations under this Agreement.
6. REPORTS TO EACH SERIES
The Administrator shall prepare and furnish to each Series such reports,
statistical data and other information in such form and at such intervals as
such Series may reasonably request.
7. OWNERSHIP OF SOFTWARE AND RELATED MATERIALS
All computer programs, written procedures and similar items developed or
acquired and used by the Administrator in performing its obligations under this
Agreement shall be the property of the Administrator, and no Series will acquire
any ownership interest therein or property rights with respect thereto.
8. CONFIDENTIALITY
The Administrator agrees, on its own behalf and on behalf of its employees,
agents and contractors, to keep confidential any and all records maintained and
other information obtained hereunder which relate to any Series or to any of a
Series' former, current or prospective shareholders, except that the
Administrator may deliver records or divulge information (a) when requested to
do so by duly constituted authorities after prior notification to and approval
in writing by such Series (which approval will not be unreasonably withheld and
may not be withheld by such Series where the Administrator advises such Series
that it may be exposed to civil or criminal contempt proceeding or other
penalties for failure to comply with such request) or (b) whenever requested in
writing to do so by such Series.
9. THE ADMINISTRATOR'S ACTIONS IN RELIANCE ON SERIES' INSTRUCTIONS, LEGAL
OPINIONS, ETC.; SERIES' COMPLIANCE WITH LAWS.
9.1 The Administrator may at any time apply to an officer of the Fund for
instructions, and may consult with legal counsel for a Series or with the
Administrator's own legal counsel, in respect of any matter arising in
connection with this Agreement; and the Administrator shall not be liable for
any action taken or omitted to be taken in good faith and with due care in
accordance with such instructions or with the advice or opinion of such legal
counsel. The Administrator shall be protected in acting upon any such
instructions, advice, or opinion and upon any other paper or document delivered
by a Series or such legal counsel which the Administrator believes to be genuine
and to have been signed by the proper person or persons, and the Administrator
shall not be held to have notice of any change of status or authority of any
officer or representative of the Fund, until receipt of written notice thereof
from the Fund.
9.2 Except as otherwise provided in this Agreement or in any separate agreement
between the parties and except for the accuracy of information furnished to each
Series by the Administrator, each Series assumes full responsibility for the
preparation, contents, filing and distribution of its Prospectus and SAI, and
full responsibility for other documents or actions required for compliance with
all applicable requirements of the 1940 Act, the Securities Exchange Act of
1934, the 1933 Act, and any other applicable laws, rules and regulations of
governmental authorities having jurisdiction over such Series.
10. SERVICES TO OTHER CLIENTS
Nothing herein contained shall limit the freedom of the Administrator or any
affiliated person of the Administrator to render administrative or shareholder
services to other investment companies, to act as administrator to other
persons, firms, or corporations, or to engage in other business activities.
11. LIMITATION OF LIABILITY REGARDING THE TRUST
The Administrator shall look only to the assets of each Series for performance
of this Agreement by the Fund on behalf of such Series, and neither the Board of
Managers of the Fund nor any of the Trust's officers, employees or agents,
whether past, present or future shall be personally liable therefor.
12. INDEMNIFICATION BY SERIES
Each Series shall indemnify the Administrator and hold it harmless from and
against any and all losses, damages and expenses, including reasonable
attorneys' fees and expenses, incurred by the Administrator that result from (i)
any claim, action, suit or proceeding in connection with the Administrator's
entry into or performance of this Agreement with respect to such Series; or (ii)
any action taken or omission to act committed by the Administrator in the
performance of its obligations hereunder with respect to such Series; or (iii)
any action of the Administrator upon instructions believed in good faith by it
to have been executed by a duly authorized officer or representative of the Fund
with respect to such Series; provided, that the Administrator shall not be
entitled to such indemnification in respect of actions or omissions constituting
negligence or misconduct on the part of the Administrator or its employees,
agents or contractors. Before confessing any claim against it which may be
subject to indemnification by a Series hereunder, the Administrator shall give
such Series reasonable opportunity to defend against such claim in its own name
or in the name of the Administrator.
13. INDEMNIFICATION BY THE ADMINISTRATOR
The Administrator shall indemnify each Series and hold it harmless from and
against any and all losses, damages and expenses, including reasonable
attorneys' fees and expenses, incurred by such Series which result form (i) the
Administrator's failure to comply with the terms of this Agreement with respect
to such Series; or (ii) the Administrator's lack of good faith in performing its
obligations hereunder with respect to such Series; or (iii) the Administrator's
negligence or misconduct or its employees, agents or contractors in connection
herewith with respect to such Series. A Series shall not be entitled to such
indemnification in respect of actions or omissions constituting negligence or
misconduct on the part of that series or its employees, agents or contractors
other than the Administrator, unless such negligence or misconduct results from
or is accompanied by negligence or misconduct on the part of the Administrator,
any affiliated person of the Administrator, or any affiliated person of an
affiliated person of the Adminsitrator.. Before confessing any claim against it
which may be subject to indemnification hereunder, a Series shall give the
Administrator reasonable opportunity to defend against such claim in its own
name or the name of the Series.
14. EFFECT OF AGREEMENT
Nothing herein contained shall be deemed to require the Fund or any Series to
take any action contrary to the Fund Instrument or By-laws of the Fund or any
applicable law, regulation or order to which it is subject or by which it is
bound, or to relieve or deprive the Board of Managers of their responsibility
for and control of the conduct of the business and affairs of the Series or the
Fund.
15. TERM OF AGREEMENT
The term of this Agreement shall begin on the date first above written with
respect to each Series listed in Schedule A on the date hereof and, unless
sooner terminated as hereinafter provided, this Agreement shall remain in effect
through January 4, 2001. With respect to each Series added by execution of an
Addendum to Schedule A, the term of this Agreement shall begin on the date of
such execution and, unless sooner terminated as hereinafter provided, this
Agreement shall remain in effect to the date two years after such execution.
Thereafter, in each case this Agreement shall continue in effect with respect to
each Series from year to year, subject to the termination provisions and all
other terms and conditions hereof; provided, such continuance with respect to a
Series is approved at least annually by vote or written consent of the Board of
Managers, including a majority of the Board of Managers who are not interested
persons of either party hereto ("Disinterested Board of Managers"); and provided
further, that neither party has terminated the Agreement in accordance with
Section 17. The Administrator shall furnish any Series, promptly upon its
request, such information as may reasonably be necessary to evaluate the terms
of this Agreement or any extension, renewal or amendment thereof.
16. AMENDMENT OR ASSIGNMENT OF AGREEMENT
Any amendment to this Agreement shall be in writing signed by the parties
hereto; provided, that no such amendment shall be effective unless authorized on
behalf of any Series (i) by resolution of the Board of Managers, including the
vote or written consent of a majority of the Disinterested Board of Managers, or
(ii) by vote of a majority of the outstanding voting securities of such Series.
This Agreement shall terminate automatically and immediately in the event of its
assignment; provided, that with the consent of a Series, the Administrator may
subcontract to another person any of its responsibilities with respect to such
Series.
17. TERMINATION OF AGREEMENT
This Agreement may be terminated at any time by either party hereto, without the
payment of any penalty, upon at least sixty days' prior written notice to the
other party; provided, that in the case of termination by any Series, such
action shall have been authorized (i) by resolution of the Board of Managers,
including the vote or written consent of the Disinterested Board of Managers, or
(ii) by vote of a majority of the outstanding voting securities of such Series.
18. USE OF NAME
Each Series hereby agrees that if the Administrator shall at any time for any
reason cease to serve as administrator to a Series, such Series shall, if and
when requested by the Administrator, thereafter refrain from using the name
"Jackson National Financial Services, LLC" or the initials "JNFS" in connection
with its business or activities, and the foregoing agreement of each Series
shall survive any termination of this Agreement and any extension or renewal
thereof.
19. INTERPRETATION AND DEFINITION OF TERMS
Any question of interpretation of any term or provision of this Agreement having
a counterpart in or otherwise derived from a term or provision of the 1940 Act
shall be resolved by reference to such term or provision of the 1940 Act and to
interpretation thereof, if any, by the United States courts or, in the absence
of any controlling decision of any such court, by rules, regulations or orders
of the SEC validly issued pursuant to the 1940 Act. Specifically, the terms
"vote of a majority of the outstanding voting securities," "interested persons,"
"assignment" and affiliated person," as used in this Agreement shall have the
meanings assigned to them by section 2(a) of the 1940 Act. In addition, when the
effect of a requirement of the 1940 Act reflected in any provision of this
Agreement is modified, interpreted or relaxed by rule, regulation or order of
the SEC, whether of special or general application, such provision shall be
deemed to incorporate the effect of such rule, regulation or order.
20. CHOICE OF LAW
This Agreement is made and to be principally performed in the State of Illinois,
and except insofar as the 1940 Act or other federal laws and regulations may be
controlling, this Agreement shall be governed by, and construed and enforced in
accordance with, the internal laws of the State of Illinois.
21. CAPTIONS
The captions in this Agreement are included for convenience of reference only
and in no way define or delineate nay of the provisions hereof or otherwise
affect their construction or effect.
22. EXECUTION ON COUNTERPARTS
This Agreement may be executed simultaneously in counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed
by their respective officers thereunto duly authorized and their respective
seals to be hereunto affixes, as of the day and year first above written.
JNLNY VARIABLE FUND II LLC
Attest: /s/ Thomas J. Meyer By: /s/ Andrew B. Hopping
---------------------------------- --------------------------
Thomas J. Meyer Andrew B. Hopping
Secretary President
JACKSON NATIONAL FINANCIAL SERVICES, LLC
Attest: /s/ Amy D. Eisenbeis By: /s/ Andrew B. Hopping
---------------------------------- ---------------------------
Amy D. Eisenbeis Mark D. Nerud
Secretary Chief Financial Officer
<PAGE>
SCHEDULE A
DATED MAY 14, 1999
JNL/First Trust The DowSM Target 10 Series
<PAGE>
SCHEDULE B
DATED MAY 14, 1999
Series Fee
JNL/First Trust The DowSM Target 10 Series .10%
[LETTERHEAD OF BLAZZARD, GRODD & HASENAUER]
April 3, 2000
Board of Managers
JNLNY Variable Fund II LLC
5901 Executive Drive
Lansing, MI 48911
Re: Opinion of Counsel - JNLNY Variable Fund II LLC
Gentlemen:
You have requested our Opinion of Counsel in connection with the filing with the
Securities and Exchange Commission of a Registration Statement on Form N-1A with
respect to JNLNY Variable Fund II LLC.
We have made such examination of the law and have examined such records and
documents as in our judgment are necessary or appropriate to enable us to render
the opinions expressed below.
We are of the following opinions:
1. JNLNY Variable Fund II LLC ("Fund") is an open-end management
investment company.
2. The Fund is created and validly existing pursuant to the
Delaware Laws.
3. All of the prescribed Fund procedures for the issuance of the
interests have been followed, and, when such interests are
issued in accordance with the Prospectus contained in the
Registration Statement for such interests, all state
requirements relating to such Fund interests will have been
complied with.
<PAGE>
Board of Managers
JNLNY Variable Fund II LLC
Page 2
4. Upon the acceptance of purchase payments made by interest
holders in accordance with the Prospectus contained in the
Registration Statement and upon compliance with applicable
law, such interest holders will have legally-issued, fully
paid, non-assessable interests of the Fund.
You may use this opinion letter, or a copy thereof, as an exhibit to the
Registration.
Sincerely,
BLAZZARD, GRODD & HASENAUER, P.C.
By: /s/ Raymond A. O'Hara III
-------------------------
Raymond A. O'Hara III
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the reference to us under the heading "Independent
Accountants" in this Registration Statement on Form N-1A for JNLNY Variable Fund
II LLC.
PricewaterhouseCoopers LLP
203 North Lasalle Street
Chicago, Illinois 60601
April 7, 2000
CODE OF ETHICS
JACKSON NATIONAL FINANCIAL SERVICES, LLC
JNL SERIES TRUST
JNL VARIABLE FUND LLC
JNL VARIABLE FUND III LLC
JNL VARIABLE FUND V LLC
JNLNY VARIABLE FUND I LLC
JNLNY VARIABLE FUND II LLC
PURPOSE
The Board of Directors of Jackson National Financial Services, LLC, the
Board of Trustees of the JNL Series Trust (the "Trust"), and the Board
of Managers of each of the JNL Variable Fund LLC, the JNL Variable Fund
III LLC, the JNL Variable Fund V LLC, the JNLNY Variable Fund I LLC,
and the JNLNY Variable Fund II LLC (each a "Fund", collectively the
"Funds") have adopted this Code of Ethics ("Code") in accordance with
the provisions of Rule 17j-1 under the Investment Company Act of 1940
("Act"). Its purpose is to govern the personal investment activities of
those persons who are involved in, or who are in a position to gain
information regarding, investment recommendations and decisions with
respect to the portfolio activities of the Trust or a Fund. Each such
person is hereby required to conduct his or her personal securities
transactions in accordance with this Code and in such a manner as to
avoid any actual or potential conflict of interest or any abuse of such
person's position of trust and responsibility. Further, no such person
shall take inappropriate advantage of his or her position with the
Trust or a Fund; and each such person shall be under a duty at all
times to place the interests of the shareholders of the Trust or a
Fund, as applicable, before his or her own interests.
SECTION 1 - DEFINITIONS
(a) "Access person" means any trustee, officer, or advisory person of the
Trust or a Fund; and any employee of the Trust or a Fund or of any
company in a control relationship to the Trust or a Fund, who, in
connection with his regular functions or duties, obtains information
regarding the purchase or sale of a Security by the Trust or a Fund,
and any natural person in a control relationship to the Trust or a Fund
who obtains information concerning recommendations made to the Trust or
a Fund with regard to the purchase or sale of a Security.
However, a person does not become an Access person simply by virtue of
the following:
(i) normally assisting in the preparation of public reports, or
receiving public reports, but not receiving information about
current recommendations or trading; or
(ii) a single instance of obtaining knowledge of current
recommendations or trading activity, or infrequently and
inadvertently obtaining such knowledge.
The Compliance officer shall determine those persons who are Access
persons of the Trust or a Fund.
(b) "Advisory person" means any employee of the Trust or a Fund or of any
company in a control relationship to the Trust or a Fund, or any
natural person in a control relationship to the Trust or a Fund, who,
in connection with his or her regular functions or duties makes or
participates in the purchase or sale of a Security by the Trust or a
Fund, or whose functions relate to the making of any recommendations or
providing information or advice to the Trust or a Fund with respect to
such purchases or sales.
(c) A "Security held or to be acquired" by the Trust or a Fund means any
Security which, within the most recent 15 days, (i) is or has been held
by the Trust or a Fund, as applicable, or (ii) is being or has been
considered by the Trust or a Fund, as applicable.
(d) "Beneficial ownership" shall be interpreted in the same manner as it
would be in determining whether a person is subject to the provisions
of Section 16 of the Securities Exchange Act of 1934 and the rules and
regulations thereunder, except that the determination of direct or
indirect beneficial ownership shall apply to all Securities which an
Access person has or acquires.
(e) "Control" means the power to exercise a controlling influence over the
management or policies of the Trust or a Fund, unless such power is
solely the result of an official position with the Trust or a Fund.
(f) "Disinterested person" means a trustee of the Trust or a member of the
Board of Managers of a Fund who is not an "interested person" of the
Trust or Fund, as applicable, within the meaning of Section 2(a)(19) of
the Act.
(g) "Purchase or sale of a Security" includes, inter alia, the writing of
an option to purchase or sell a Security.
(h) "Security" shall have the meaning set forth in Section 2(a)(36) of the
Act, except that it shall not include shares of registered open-end
investment companies, Securities issued by the Government of the United
States, short term debt Securities which are "Government Securities"
within the meaning of Section 2(a)(16) of the Act, bankers'
acceptances, bank certificates of deposit, commercial paper, and such
other money market instruments as may be designated by the applicable
Board.
(i) A security is "being considered for purchase or sale" when a
recommendation to purchase or sell a security has been made and
communicated and, with respect to the person making the recommendation,
when such person seriously considers making such a recommendation.
(j) "Personal investment transaction" means a transaction by an Access
person for the direct or indirect purchase or sale of a Security in
which such Access person has, or by reason of such transaction
acquires, any direct or indirect beneficial ownership.
(k) "Compliance officer" means an officer of the Trust or a Fund, as
applicable, responsible for administering this Code.
SECTION 2 - PROHIBITED PURCHASES AND SALES
(a) It is a policy of the Trust and each Fund that information with respect
to current portfolio transactions of the Trust or Fund, as applicable,
be kept confidential. No Access person shall take personal advantage of
any information concerning prospective or actual portfolio transactions
in any manner which might prove detrimental to the interests of the
Trust or Fund.
(b) No Access person shall use his position to gain personal benefit
through work relationships. No such person shall attempt to cause the
Trust or a Fund to purchase, sell or hold a particular security when
that action may reasonably be expected to create a personal benefit to
the Access person.
(c) No Access person shall, in connection with the purchase or sale,
directly or indirectly, by such person of a Security held or to be
acquired by the Trust or a Fund:
(i) Employ any device, scheme or artifice to defraud the Trust or
a Fund;
(ii) Make to the Trust or a Fund any untrue statement of a material
fact or omit to state to the Trust or a Fund a material fact
necessary in order to make the statements made, in light of
the circumstances under which they are made, not misleading;
(iii) Engage in act, practice, or course of business which operates
or would operate as a fraud or deceit upon the Trust or a
Fund; or
(iv) Engage in any manipulative practice with respect to the Trust or a
Fund.
(d) No Access person shall engage in a Personal investment transaction with
respect to any Security which to his or her actual knowledge at the
time of such transaction:
(i) is being considered for purchase or sale by the Trust or a
Fund, as applicable, or any other investment company for whom
the investment adviser to the Trust or a Fund or any of its
sub-advisers serves as investment adviser; or
(ii) is the subject of a pending buy or sell order by the Trust or
a Fund or any other investment company for which the
investment adviser or any of its sub-advisers serves as
investment adviser.
(e) No Advisory person shall:
(i) engage in any Personal investment transaction for the
acquisition of a Security in an initial public offering;
(ii) profit from the purchase and sale, or sale and purchase, of
the same (or equivalent) Securities within 60 calendar days.
Any profits realized on such short term trades shall be
disgorged to the appropriate Series of the Trust or Fund, or
as otherwise determined by the appropriate Board;
(iii) receive any gift or other thing of more than de minimis value
from any person or entity that does business with or on behalf
of the Trust or a Fund;
(iv) serve on the board of directors of any publicly traded
company, unless prior authorization therefor by the applicable
Board has been given after a determination by the Board that
such service is consistent with the interests of the Trust or
a Fund and its shareholders. Where such approval is given,
such Advisory person is prohibited, during the period of such
service and for a 6 month period thereafter from (1) engaging
in any communication regarding such company with any other
Advisory person, and (2) causing any Series with respect to
which he or she is an Advisory person to purchase any security
issued by such company; or
(v) participate in any consideration of whether the Trust or a
Fund should invest in securities of an issuer in which such
Advisory person has invested through a private placement
without disclosing such investment of the Advisory person to
the other participants. Under such circumstances, the decision
to purchase securities of the issuer by the Trust or a Fund
shall be subject to the independent review by appropriate
Advisory persons (or corresponding personnel of the investment
adviser or appropriate sub-adviser) having no personal
interest in the matter.
SECTION 3 - EXEMPTED TRANSACTIONS
(a) The prohibitions of Sections 2(d) and 2(e) of this Code shall not apply to:
(i) Purchases or sales effected in any account over which the
Access person has no direct or indirect influence or control.
(ii) Purchases or sales of Securities which are non-volitional on
the part of either the Access person or the Trust or a Fund,
as applicable.
(iii) Purchases which are part of an automatic dividend reinvestment
plan.
(iv) Purchases effected upon the exercise of rights issued by an
issuer pro rata to all holders of a class of its Securities,
to the extent such rights were acquired from such issuer, and
sales of such rights so acquired.
(v) Purchases or sales which are only remotely potentially harmful
to the Trust or a Fund because they would be very unlikely to
affect a highly institutional market, or clearly are not
related economically to the Securities to be purchased, sold
or held by the Trust, as determined by the Board of Trustees.
(b) The prohibitions of Sections 2(d), 2(e)(iii), 2(e)(iv), and 2(e)(v) of this
Code shall not apply to:
(i) Purchases or sales of Securities which are not eligible for
purchase or sale by the Trust or a Fund.
SECTION 4 - COMPLIANCE PROCEDURES
(a) No Access person, except a Disinterested person, shall engage in a
Personal investment transaction unless such transaction has been
submitted to, and approved by, the Compliance officer in advance of the
transaction. The Compliance officer shall make all such approvals only
after making a determination that the proposed transaction would not be
inconsistent with this Code. For purposes of the preceding sentence,
the prohibitions of Section 2(d) shall be applied without regard to the
requirement of actual knowledge contained in such Section. In the case
of a proposed Personal investment transaction for the acquisition by an
Advisory person of a Security in a private placement, the Compliance
officer shall confer with appropriate representatives of the investment
adviser to determine whether such investment opportunity should be
reserved for the Trust or a Fund, as applicable; and the Compliance
officer shall not approve such transaction if it appears to him or her,
after appropriate inquiry, that (1) the opportunity should be reserved
for the Trust or a Fund; or (2) such opportunity has been offered to
the Advisory person by virtue of his or her position with the Trust or
a Fund.
(b) Every Access person, other than a Disinterested person, shall direct
each broker through whom he or she engages in any Personal investment
transaction to supply the Compliance officer with duplicate copies of
(1) all confirmations of such transactions, and (2) periodic statements
of all securities accounts. Such directives shall require the broker to
transmit such duplicate copies within five days after the original has
been transmitted to such Access person.
(c) Every Access person, other than a Disinterested person, shall report to
the Compliance officer the information described in Section 4(e) of
this Code with respect to every Personal investment transaction engaged
in by such Access persons provided, however, that an Access person
shall not be required to make a report with respect to transactions
effected for any account over which such person does not have any
direct or indirect influence, or Security transactions which are not
eligible for purchase or sale by the Trust or a Fund, as applicable.
(d) A Disinterested person need only report a transaction in a Security if
such Disinterested person, at the time of that transaction, knew or, in
the ordinary course of fulfilling his official duties as a trustee of
the Trust or member of the Board of Mangers of a Fund, should have
known that, during the 15-day period immediately preceding or after the
date of the transaction, such Security was purchased or sold by the
Trust or a Fund or was being considered by the Trust or a Fund or its
investment adviser for purchase or sale by the Trust or a Fund, as
applicable.
(e) Every report shall be made not later than 10 days after the end of the
calendar quarter in which the transaction to which the report relates
was effected, and shall contain the following information:
(i) The date of the transaction, the title and the number of
shares, and the principal amount of each Security involved;
(ii) The nature of the transaction (i.e., purchase, sale or any
other type of acquisition or disposition);
(iii) The price at which the transaction was effected; and,
(iv) The name of the broker, dealer or bank with or through whom
the transaction was effected.
(f) Any such report may contain a statement that the report shall not be
construed as an admission by the person making such report that he has
any direct or indirect beneficial ownership in the Security to which
the report relates.
(g) Each Advisory person shall disclose all securities holdings in which he
or she has a direct or indirect beneficial ownership to the Compliance
officer (1) upon commencement of employment, and (2) thereafter on an
annual basis.
(h) Each Access person shall certify annually that such Access person:
(i) has read and understands this Code;
(ii) recognizes that he or she is subject thereto;
(iii) has complied with all requirements thereof; and
(iv) has disclosed or reported all Personal investment transactions
required to be disclosed or reported pursuant to the
requirements thereof.
(i) The Compliance officer shall formulate and implement procedures to
carry out the provisions of this Code, including the adoption of
appropriate questionnaires and reporting forms reasonably designed to
provide sufficient information to determine whether any provisions of
this Code are violated. Such procedures shall include procedures
reasonably necessary to monitor the Securities trading activities of
Access persons after approval of Personal investment transactions
pursuant to Section 4(a) of this Code. The Compliance officer shall
prepare an annual report to the Board of Trustees (1) summarizing the
existing procedures concerning personal investing by Access persons,
including any changes made to such procedures during the period covered
by the report; (2) identifying any violations requiring significant
remedial action during such period; and (3) identifying any recommended
changes in existing procedures based upon the Trust's experience under
this Code, evolving industry practices, or developments in applicable
laws or regulations.
(j) Any person becoming aware of a violation or an apparent violation of
this Code of Ethics shall report such matter to the appropriate Board.
SECTION 5 - SANCTIONS
The Board shall review any violation or apparent violation of this Code of
Ethics and may adopt and apply whatever sanctions it may determine appropriate
in respect of such violation, including, inter alia, a letter of censure or
suspension or termination of the employment of the violator.
SECTION 6 - RECORD MAINTENANCE
The Trust shall, at its principal place of business, maintain records in the
following manner:
(a) A copy of this Code of Ethics and any Code of Ethics adopted pursuant
to Rule 17j-1 under the Act which within the past five years has been
in effect, shall be preserved in an easily accessible place;
(b) A record of any violation of this Code of Ethics, and of any action
taken as a result of such violation, shall be preserved in an easily
accessible place for a period of not less than five years following the
end of the fiscal year in which the violation occurs;
(c) A copy of each report made by an Access person pursuant to this Code of
Ethics shall be preserved for a period of not less than five years from
the end of the fiscal year in which it is made, the first two years in
an easily accessible place;
(d) A list of all persons who are, or within the past five years have been,
required to make reports pursuant to this Code of Ethics shall be
maintained in an easily accessible place; and
(e) A copy of such prior clearance procedure for securities transactions as
the Compliance officer shall from time to time determine.
SECTION 7 - INVESTMENT ADVISERS
Personnel of the Investment Adviser or any Investment Sub-Adviser of the Trust
or a Fund who are "Access persons" may, as an alternative to complying with the
foregoing provisions of this Code, comply with the requirements of a code of
ethics adopted pursuant to Rule 17j-1 under the Act by such Investment Adviser
or Investment Sub-Adviser; provided that:
(a) Such code of ethics meets the requirements of Rule 17j-1 under the Act;
(b) Such code of ethics applies to the activities of the Access person as
they relate to the Trust; and
(c) Such Investment Adviser or Investment Sub-Adviser submits a report to
the appropriate Board on a quarterly basis, which report shall (1)
identify the Access persons associated with it that are relying on this
Section 7; (2) certify that the conditions of Section 7(a) and 7(b)
have been met at all times during the period covered by the report; and
(3) either certify that no violation of such code of ethics by any such
Access person has occurred during the period covered by the report, or
identify all such violations. The report shall be accompanied by
appropriate documentation.
Rev. 2-99
FIRST TRUST ADVISORS L.P.
INVESTMENT COMPANY CODE OF ETHICS
I. STATEMENT OF GENERAL PRINCIPLES
This Code of Ethics is being adopted by First Trust Advisors L.P. (the
"Company"), in recognition of the fact that the Company owes a duty at
all times to place the interests of investors in investment companies
for which the Company provides investment advisory services first. In
recognition of such duty it is the Company's policy that the personal
securities transactions and other activities of Company personnel be
conducted consistent with this Code of Ethics and in such a manner as
to avoid any actual or potential conflict of interest or any abuse of
an individual's position of trust and responsibility that could occur
through such activities as "insider trading" or "frontrunning"
investment company securities trades. It is also the Company's policy
that Company personnel should not take inappropriate advantage of their
position with respect to investment companies for which the Company
provides investment advisory services and that such personnel should
avoid any situation that might compromise, or call into question, their
exercise of fully independent judgment in the interest of investors in
investment companies for which the Company provides investment advisory
services.
II. DEFINITIONS
For Purposes of this Code of Ethics:
A. "Company" shall mean First Trust Advisors L.P.
B. "Investment Company" shall mean any investment company for which the
Company provides investment advisory services.
C. "Investor" shall mean any investor of any Investment Company.
D. "Access Person" shall mean any partner, officer or employee of the
Company who makes, participates in or obtains information regarding the
purchase or sale of securities for an Investment Company's portfolio or
whose functions or duties as part of the ordinary course of his
business relate to the making of any recommendation regarding the
purchase or sale of securities for an Investment Company and includes
all personnel listed in the Company's form ADV.
E. "Investment Person" shall mean any officer or employee of the
Company who makes, participates in or executes decisions regarding the
purchase or sale of securities for an Investment Company's portfolio.
III. PROHIBITED PRACTICES
In furtherance of the policies set forth in paragraph I above, the
following practices shall be prohibited:
A. No Investment Person shall purchase any security during the initial
public offering of such security.
B. No Investment Person shall purchase any security in a private
placement transaction unless the purchase has been approved in writing
and in advance by the Compliance Department. In considering whether to
approve any such transaction, the Compliance Department shall take into
account, among other factors, whether the investment opportunity should
be reserved for any existing or proposed Investment Company and its
Investors and whether the opportunity is being offered to an individual
by virtue of his position. Any Investment Person who has been
authorized to acquire securities in a private placement shall disclose
that investment to the Compliance Department before he takes part in a
subsequent consideration of any Investment Company's investment in that
issuer, and the decision to include securities of such issuer in an
Investment Company shall be subject to independent review by General
Counsel of the Company.
C. No Access Person shall purchase or sell any security on a day during
which there is "buy" or a "sell" order from an Investment Company for
that security until such order is executed or withdrawn. No Investment
Person shall purchase or sell a security within seven days before or
after that security is bought or sold by an Investment Company. Any
profits realized on transactions prohibited by this Section shall be
disgorged.
D. No Investment Person shall profit from the purchase and sale, or
sale and purchase, of the same (or equivalent) securities within 30
days. Any profits realized on transactions prohibited by this Section
shall be disgorged.
E. No Investment Person shall serve on the Board of Directors of a
publicly traded company absent prior authorization of the Compliance
Department upon a determination that board service would be consistent
with the interests of Investment Companies and their investors and the
establishment of appropriate "Chinese wall" procedures by the
Compliance Department.
F. Any provision of this Code of Ethics prohibiting any transaction by
an Access Person or Investment Person shall prohibit any transaction in
which such person has, obtains or disposes of any beneficial ownership
interest.
IV. COMPLIANCE PROCEDURES
In order to effectuate and monitor the foregoing policies and
prohibitions, all Access Persons and Investment Persons shall be
required to comply with the following procedures:
A. The securities trading personnel of the Company shall provide the
Compliance Department with a daily summary of buy and sell orders
entered by, on behalf of, or with respect to Investment Companies.
B. Each Access Person shall direct any firms at which he maintains
brokerage accounts to provide on a timely basis duplicate copies of
confirmations of all personal securities transactions and periodic
statements for all securities accounts to the Compliance Department.
The Compliance Department shall date stamp all duplicate copies of
personal securities transactions and account statements upon receipt.
C. Each Access Person shall disclose all personal securities holdings
to the Compliance Department both upon commencement of employment with
the Company and within 15 days of the end of each calendar year by
submitting the form attached to this Code of Ethics as Exhibit A.
D. Within 15 days following the end of each calendar year, each Access
Person shall certify to the Company that he has read and understands
this Code of Ethics and recognizes that he is subject to it and that he
has complied with the requirements of this Code of Ethics by submitting
the form attached hereto as Exhibit B.
E. Within 10 days following the end of each calendar quarter, each
Access Person shall report to the Compliance Department all personal
securities transactions effected during such quarter by submitting the
form attached hereto as Exhibit C.
F. Any provision of this Code of Ethics requiring an Access Person or
Investment Person to report securities transactions or securities
positions to the Company shall require the reporting of any transaction
or position in which such person has, acquires or disposes of any
beneficial ownership interest.
G. The requirements of Section IV(B), IV(C), IV(D) and IV(E) shall be
deemed to be complied with by any Access Person who complies with
substantially similar requirements contained in the Nike Securities
L.P. Unit Investment Trust Code of Ethics.
V. EXEMPTIONS
The following transactions shall be exempted from the provisions of
Article III and, in the case of paragraph A and C, Article IV of this
Code of Ethics:
A. The purchase or sale of U.S. government securities, money market
instruments or mutual funds.
B. The purchase or sale of shares of issuers whose shares are traded on
a national or foreign securities exchange and which have a market
capitalization of at least $1 billion.
C. Purchases which are part of an automatic dividend reinvestment plan
or which involve no investment decision by the purchaser.
VI. SANCTIONS
Upon discovery of a violation of this Code of Ethics, including either
violations of the enumerated provisions or the general principles
provided, the Company may impose such sanctions as it deems
appropriate, including, inter alia, a fine, letter of censure or
suspension or termination of the employment of the violator.
<PAGE>
EXHIBIT A
FIRST TRUST ADVISORS L.P.
ACCESS/INVESTMENT PERSON
SECURITIES HOLDINGS REPORT
Name of Access/Investment Person:
-------------------------------------
Date:
-------------------------------------------------
I hereby certify that as of , I had a
beneficial ownership interest in no securities other than those
set forth below.
Issuer # of shares/principal amount Market Value
OR
I hereby certify that as of , I had a
beneficial ownership interest in no securities other than
those set forth on the attached brokerage account statements.
OR
I hereby certify that as of , I had a
beneficial interest in no securities.
--------------------------------------
Signature
<PAGE>
EXHIBIT B
FIRST TRUST ADVISORS L.P.
ACCESS/INVESTMENT PERSON
CODE OF ETHICS CERTIFICATION
I, , hereby certify that I have read, and
understand the FIRST TRUST ADVISORS L.P. Code of Ethics. Furthermore, I
certify that I have complied with its provisions during the preceding
year.
----------------------------------- ------------------
Signature Date
<PAGE>
EXHIBIT C
FIRST TRUST ADVISORS L.P.
ACCESS/INVESTMENT PERSON
QUARTERLY TRANSACTION REPORT
Name of Access/Investment Person:
------------------------------------------
Date:
---------------------------------
I hereby certify that during the calendar quarter ended
, I had a beneficial ownership interest in the following
securities transactions:
Type Type Issuer # of shares/ $ amount
of Transaction of Security principal amount
OR
I hereby certify that during the calendar quarter ended , I
had a beneficial ownership interest in no securities transactions
other that those set forth on the attached brokerage account
confirmations.
OR
I hereby certify that during the calendar quarter ended , I
had a beneficial ownership interest in no securities transactions.
