As filed with the Securities and Exchange Commission on April 17, 2000
1933 Act Registration No. 333-79529
1940 Act Registration No. 811-09367
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
---
Post-Effective Amendment No. 1 [X]
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and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 2 [X]
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JNL VARIABLE FUND V LLC
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(Exact Name of Registrant as Specified in Charter)
225 WEST WACKER DRIVE, SUITE 1200, CHICAGO, ILLINOIS 60606
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (312) 338-5801
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Thomas J. Meyer, Esq. with a copy to:
JNL Variable Fund III LLC
Vice President & Counsel Blazzard, Grodd & Hasenauer, P.C.
5901 Executive Drive P.O. Box 5108
Lansing, Michigan 48911 Westport, CT 06881
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(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box)
immediately upon filing pursuant to paragraph (b)
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X on May 1, 2000 pursuant to paragraph (b) 60 days after filing pursuant
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to paragraph (a)(1) on (date)pursuant to paragraph (a)(1)
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75 days after filing pursuant to paragraph (a)(2) on (date) pursuant to
- --- paragraph (a)(2) of Rule 485.
This post-effective amendment designates a new effective date for a
- --- previously filed post-effective amendment.
<PAGE>
JNL VARIABLE FUND V 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
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1. Front and Back Cover Pages Front and Back Cover Pages
2. Risk/Return Summary: Investments, About the JNL/First Trust The
Risks, and Performance Target 10 Series
3. Risk/Return Summary: Fee Table Not Applicable
4. Investment Objectives, Principal About the JNL/First Trust The
Investment Strategies, and Related Risks Dow Target 10 Series
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
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>
JNL(R) VARIABLE FUND V LLC
<PAGE>
PROSPECTUS
May 1, 2000
JNL(R) VARIABLE FUND V LLC
225 West Wacker Drive o Chicago, Illinois 60606
This Prospectus provides you with the basic information you should know before
investing in the JNL Variable Fund V LLC (Fund).
The interests of the Fund are sold to Jackson National Separate Account V to
fund the benefits of variable annuity contracts. The Fund currently offers
interests in the following Series:
JNL/First Trust The Dow(SM) 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 Average(SM)", "DJIA(SM)", and "The Dow
10(SM)" 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.
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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.
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"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 Dow(SM) Target 10 Series
Investment Objective
Principal Investment Strategies
Principal Risks of Investing in The Dow Target 10 Series
Additional Information About the Principal Investment Strategies, Other
Investments and Risks of The Dow Target 10 Series
Management of the Fund
Investment Adviser
Investment Sub-Adviser
Portfolio Management
Administrative Fee
Investment in Fund Interests
Redemption of Fund Interests
Tax Status
General
Internal Revenue Services Diversification Requirements
Hypothetical Performance Data for Target Strategy
Financial Highlights
<PAGE>
ABOUT THE JNL/FIRST TRUST THE DOW(SM) TARGET 10 SERIES
INVESTMENT OBJECTIVE
The investment objective of the JNL/First Trust The Dow(SM) 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 Average(SM) (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
commenced operations 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 assets 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
Average(SM) 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
publisher 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.
<PAGE>
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. UPDATE
AFTER S/H MEETING]
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,, JNFSis responsible for payment of
expenses related to legal, audit, fund accounting, custody, printing and
mailing, manager 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 Jackson National Separate Account V,
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 trust.
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
Jackson National Separate Account V 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, Jackson National Separate Account V. 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 Jackson National Separate Account V.
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 Jackson National Separate Account V. 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.
<PAGE>
HYPOTHETICAL PERFORMANCE DATA FOR THE TARGET STRATEGY
As of the date of this Prospectus, The Dow Target 10 Series has not been in
operation for a full fiscal year. 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 ranking the
dividend yields for each of the stocks as of the close of the prior period and
dividing by the stock's market value on the last trading day on the exchange
where that stock principally trades in the given 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 December 31,
1999.
<PAGE>
PROSPECTUS
May 1, 2000
JNL(R) VARIABLE FUND V LLC
You can find more information about the Trust 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 JNL Variable Fund V 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.: 811-09367
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 2000
JNL VARIABLE FUND V 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 JNL Variable Fund V LLC
Prospectus, datedMay 1, 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................................................................ 12
Investment Advisory and Other Services..................................... 14
Purchases, Redemptions and Pricing of Interests............................ 18
Additional Information..................................................... 19
Tax Status................................................................. 20
Financial Statements ...................................................... 21
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GENERAL INFORMATION AND HISTORY
JNL Variable Fund V 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 Dow(SM) 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 Jackson National Separate Account V (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 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.
To the best of the Fund's knowledge, other than tobacco litigation, there is no
litigation pending as of the date of this Statement of Additional Information
with respect to any common stock which might reasonably be expected to have a
material adverse effect on the Series. At any time after the date of this
Statement of Additional Information, 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 such litigation will be instituted, or if
instituted, whether such litigation 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)
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)
JOSEPH FRAUENHEIM (Age65), 1405 Cambridge, Lansing, MI 48911
Member of the Board of Managers of the Fund and each of the other funds in the
Fund Complex
Consultant (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 August 1997)
JNL Series Trust, Assistant Secretary (12/94 to 2/96)
Jackson National Life Insurance Company, Vice President and Controller (8/82 to
present)
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)
RICHARD MCLELLAN (Age 58), 1191 Carriageway North, East Lansing, MI 48823
Member of the Board of Managers of the Fund and each of the other funds in the
Fund Complex
Dykema Gossett PLLC, Attorney
PETER MCPHERSON (Age 59), 1 Abbott Road, East Lansing, MI 48824
Member of the Board of Managers of the Fund and each of the other funds in the
Fund Complex
Michigan State University, President (10/93 to present)
MARK D. NERUD (Age33) 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.
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 FROM PENSION OR RETIREMENT
ADVISER BENEFITS ACCRUED AS PART OF
MANAGER FUND EXPENSES
Joseph Frauenheim $16,000 0
Richard McLellan 16,000 0
Peter McPherson 16,000 0
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.
Thisperformance 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 Series have entered into a Sub-License
Agreement with First Trust under the terms of which the Series 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. Purchases and sales of newly issued portfolio
securities are usually principal transactions without brokerage commissions
effected directly with the issuer or with an underwriter acting as principal.
Other purchases and sales may be effected on a securities exchange or
over-the-counter, depending on where it appears that the best price or execution
will be obtained. The purchase price paid by the Series to underwriters of newly
issued securities usually includes a concession paid by the issuer to the
underwriter, and purchases of securities from dealers, acting as either
principals or agents in the after market, are normally executed at a price
between the bid and asked price, which includes a dealer's mark-up or mark-down.
Transactions on U.S. stock exchanges and some foreign stock exchanges involve
the payment of negotiated brokerage commissions. On exchanges on which
commissions are negotiated, the cost of transactions may vary among different
brokers. On most foreign exchanges, commissions are generally fixed. There is
generally no stated commission in the case of securities traded in domestic or
foreign over-the-counter markets, but the price of securities traded in
over-the-counter markets includes an undisclosed commission or mark-up. U.S.
Government Securities are generally purchased from underwriters or dealers,
although certain newly issued U.S. Government Securities may be purchased
directly from the U.S. Treasury or from the issuing agency or instrumentality.
No brokerage commissions are typically paid on purchases and sales of U.S.
Government Securities.
Transactions for the Series may be effected on foreign securities exchanges. In
transactions for securities not actively traded on a foreign securities
exchange, the Series will deal directly with the dealers who make a market in
the securities involved, except in those circumstances where better prices and
execution are available elsewhere. Such dealers usually are acting as principal
for their own account. On occasion, securities may be purchased directly from
the issuer. Such portfolio securities are generally traded on a net basis and do
not normally involve brokerage commissions. Securities firms may receive
brokerage commissions on certain portfolio transactions, including options,
futures and options on futures transactions and the purchase and sale of
underlying securities upon exercise of options.
The Series may participate, if and when practicable, in bidding for the purchase
of securities for the Series' portfolio directly from an issuer in order to take
advantage of the lower purchase price available to members of such a group. The
Series will engage in this practice, however, only when the sub-adviser, in its
sole discretion, believes such practice to be otherwise in the Series' interest.
The primary consideration in portfolio security transactions is "best
execution," i.e., execution at the most favorable prices and in the most
effective manner possible. JNFS and First Trust always attempt to achieve best
execution and have complete freedom as to the markets in and the broker/dealers
through which they seek this result. Subject to the requirement of seeking best
execution, securities may be bought from or sold to broker/dealers who have
furnished statistical, research, and other information or services to JNFS or
First Trust. In placing orders with such broker/dealers, JNFS and First Trust
will, where possible, take into account the comparative usefulness of such
information. Such information is useful to JNFS and First Trust even though its
dollar value may be indeterminable and its receipt or availability generally
does not reduce JNFS's or First Trust's normal research activities or expenses.
JNFS and First Trust are authorized, consistent with Section 28(e) of the
Securities Exchange Act of 1934, as amended, when placing portfolio transactions
for the Series with a broker to pay a brokerage commission (to the extent
applicable) in excess of that which another broker might have charged for
effecting the same transaction on account of the receipt of research, market or
statistical information. The term "research, market or statistical information"
includes (a) advice as to (i) the value of securities, (ii) the advisability of
investing in, purchasing or selling securities, and (iii) the availability of
securities or purchasers or sellers of securities and (b) furnishing analysis
and reports concerning issuers, industries, securities, economic factors and
trends, portfolio strategy and the performance of accounts. Higher commissions
may be paid to firms that provide research services to the extent permitted by
law. JNFS and First Trust may use this research information in managing the
Fund's assets, as well as the assets of other clients.
Any portfolio transaction for the Series may be executed through brokers that
are affiliated with the Fund, investment adviser and/or sub-adviser, if, in the
investment adviser'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.
Fund portfolio transactions may be effected with broker/dealers who have
assisted investors in the purchase of policies. Subject to best execution,
broker/dealers may be selected based on the volume of interests sold.
There may be occasions when portfolio transactions for the Series 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.
INTEREST HOLDER 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 Series had not commenced
operations as of December 31, 1999.
<PAGE>
JNL VARIABLE FUND V 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,
incorporated by reference to Registrant's Registration Statement filed
with the Securities and Exchange Commission on May 28, 1999.
(b) Operating Agreement of Registrant, incorporated by reference to
Registrant's Registration Statement filed with the Securities and
Exchange Commission on May 28, 1999.
(c) Not Applicable
(d) (1) Investment Advisory and Management Agreement between Registrant and
Jackson National Financial Services, LLC dated May 14, 1999,
incorporated by reference to Registrant's Registration Statement filed
with the Securities and Exchange Commission on May 28, 1999.
(2) Investment Sub-Advisory Agreement between Jackson National
Financial Services, LLC and First Trust Advisors L.P. dated May 26,
1999, incorporated by reference to Pre-Effective Amendment No. 1 to
Registrant's Registration Statement filed with the Securities and
Exchange Commission on July 22, 1999.
(e) Fund Participation Agreement between Registrant, Jackson National Life
Insurance Company and Jackson National Separate Account V dated May 14,
1999, incorporated by reference to Registrant's Registration Statement
filed with the Securities and Exchange Commission on May 28, 1999.
(f) Not Applicable
(g) Delegation, Custody and Information Services Agreement between the
Registrant and Boston Safe Deposit and Trust Company dated May 14,
1999, incorporated by reference to Registrant's Registration Statement
filed with the Securities and Exchange Commission on May 28, 1999.
(h) Administration Agreement between Registrant and Jackson National
Financial Services, LLC dated May 14, 1999, incorporated by reference
to Registrant's Registration Statement filed with the Securities and
Exchange Commission on May 28, 1999.
(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 Life Separate Account I
Jackson National Life 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 Trust 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,Frauenheim, Meyer, Fritts, McLellan, McPherson 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.
Directors and Officers of JNFSLLC:
Name Address Principal Occupation
Andrew B. Hopping 5901 Executive Drive President, Managing
Lansing, MI 48911 Board Member
(3/98 to Present)
Mark D. Nerud 5901 Executive Drive Chief Financial Officer,
Lansing, MI 48911 Managing Board Member
(3/98 to Present)
Susan S. Min 5901 Executive Drive Secretary
Lansing, MI 48911 (1/00 to Present)
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 Post-Effective Amendment to the 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 17th day of April, 2000.
JNL VARIABLE FUND V LLC
By: /s/ Andrew B. Hopping by Thomas J. Meyer*
-----------------------------------------
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 by Thomas J. Meyer* President, April 17, 2000
- ----------------------------------------- CEO and Manager -------------
Andrew B. Hopping
/s/ Robert A. Fritts by Thomas J. Meyer* Vice President, April 17, 2000
- ----------------------------------------- Treasurer, -------------
Robert A. Fritts CFO and Manager
/s/ Joseph Frauenheim by Thomas J. Meyer* Manager April 17, 2000
- ----------------------------------------- -------------
Joseph Frauenheim
/s/ Richard McLellan by Thomas J. Meyer* Manager April 17, 2000
- ----------------------------------------- -------------
Richard McLellan
/s/ Peter McPherson by Thomas J. Meyer* Manager April 17, 2000
- ----------------------------------------- -------------
Peter McPherson
/s/ Thomas J. Meyer April 17, 2000
- -------------------------------------------- -------------
* Attorney In Fact
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned as managers of JNL
VARIABLE FUND V 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 JNL Variable
Fund V LLC, hereby constitute and appoint Andrew B. Hopping, Thomas J. Meyer and
Robert P. Saltzman, his attorney, with full power of substitution and
resubstitution, 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 April 4, 2000
- ----------------------------------- -----------------
Andrew B. Hopping Date
/s/ Robert A. Fritts April 4, 2000
- ----------------------------------- -----------------
Robert A. Fritts Date
/s/ Joseph Frauenheim April 4, 2000
- ----------------------------------- -----------------
Joseph Frauenheim Date
/s/ Richard McLellan April 4, 2000
- ----------------------------------- -----------------
Richard McLellan Date
/s/ Peter McPherson April 4, 2000
- ----------------------------------- -----------------
Peter McPherson Date
<PAGE>
EXHIBIT LIST
Exhibit
Number Description
23. (i) Opinion of Counsel, attached hereto as EX-99.i LEGAL OPININ.
23.(p)(1) The Registrant's Code of Ethics, attached hereto as EX-99.p 1
CODE ETH
23.(p)(2) First Trust Advisors, L.P. Code of Ethics, attached hereto as
EX-99.p 2 CODE ETH
April 3, 2000
Board of Managers
JNL Variable Fund V LLC
5901 Executive Drive
Lansing, MI 48911
Re: Opinion of Counsel - JNL Variable Fund V LLC
Gentlemen:
You have requested our Opinion of Counsel in connection with the filing with the
Securities and Exchange Commission of Post-Effective Amendment No. 1 to a
Registration Statement on Form N-1A with respect to JNL Variable Fund V 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. JNL Variable Fund V 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
JNL Variable Fund V 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
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.
-----------------------------------------
Signature
<PAGE>
CODE OF ETHICS DISTRIBUTION LIST
ACCESS PERSONS
MARK BRADLEY
W. SCOTT JARDINE
WILLIAM WEBB
RICHARD OLSON
CODE OF ETHICS DISTRIBUTION LIST
INVESTMENT PERSONS
JAMES BOWEN
CHARLES BRADLEY
ROBERT BREDEMEIER
SUSAN BRIX
ROBERT CAREY
JON ERICKSON
FRANK FICHERA
DAVID FIELD
SCOTT HALL
RON MCALISTER
DAVE MCGAREL
CARLOS NARDO
JOHN PHILLIPS
PETER SHANNON
RICHARD SWAITEK
