<PAGE> 1
THE PERSPECTIVE
FIXED AND VARIABLE ANNUITY
ISSUED BY JACKSON NATIONAL LIFE INSURANCE
COMPANY
AND JACKSON NATIONAL SEPARATE ACCOUNT -- I
The fixed and variable annuity contract is an
individual, flexible premium deferred annuity
with 4 guaranteed accounts which offer an
interest rate that is guaranteed by Jackson
National Life Insurance Company (Jackson
National) and 14 investment portfolios. You
can put your money in any of the guaranteed
accounts and/or the investment portfolios.
The investment portfolios purchase shares of
the following series of the JNL Series Trust:
JNL Aggressive Growth Series
JNL Capital Growth Series
JNL Global Equities Series
JNL/Alger Growth Series
JNL/Putnam Growth Series
JNL/Putnam Value Equity Series
PPM America/JNL Balanced Series
PPM America/JNL High Yield Bond Series
PPM America/JNL Money Market Series
Salomon Brothers/JNL Global Bond Series
Salomon Brothers/JNL U.S. Government & Quality
Bond Series
T. Rowe Price/JNL Established Growth Series
T. Rowe Price/JNL International Equity
Investment Series
T. Rowe Price/JNL Mid-Cap Growth Series
Please read this prospectus before investing, and keep it on file for future
reference. It contains important information about the Perspective Fixed and
Variable Annuity that you ought to know before investing.
To learn more about the Perspective Fixed and Variable Annuity contract, you can
obtain a free copy of the Statement of Additional Information (SAI) dated
January 2, 1998, by calling Jackson National at (800) 766-4683 or by writing
Jackson National at: Annuity Service Center, 8055 East Tufts Avenue, Second
Floor, Denver, Colorado 80237. The SAI has been filed with the Securities and
Exchange Commission (SEC) and is legally a part of this prospectus. The Table of
Contents of the SAI is in this prospectus. The SEC maintains a website
(http://www.sec.gov) that contains the SAI, material incorporated by reference
and other information regarding registrants that file electronically with the
SEC.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC NOR HAS THE
SEC PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
NOT FDIC INSURED
1
MAY LOSE VALUE
NO BANK GUARANTEE
JANUARY 2, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
Key Facts................................................... 3
Fee Table................................................... 6
The Annuity Contract........................................ 10
The Company................................................. 10
The Guaranteed Accounts..................................... 10
The Separate Account........................................ 10
Investment Portfolios....................................... 11
Contract Charges............................................ 11
Purchases................................................... 13
Transfers................................................... 14
Access to Your Money........................................ 14
Income Payments (The Income Phase).......................... 15
Death Benefit............................................... 15
Taxes....................................................... 16
Other Information........................................... 18
Table of Contents of the Statement of Additional
Information............................................... 20
Appendix A.................................................. 21
</TABLE>
2
<PAGE> 3
KEY FACTS
Annuity Service Center: 1 (800) 766-4683
Mail Address: P.O. Box 378002, Denver, Colorado 80237-8002
Delivery Address: 8055 East Tufts Avenue, Second Floor, Denver,
Colorado 80237
Home Office: 5901 Executive Drive, Lansing, Michigan 48911
The Annuity Contract The fixed and variable annuity contract offered by
Jackson National provides a means for investing on a
tax-deferred basis in the guaranteed accounts of
Jackson National and the investment portfolios. The
contract is intended for retirement savings or other
long-term investment purposes and provides for a
death benefit and income options.
The contract has two phases: the accumulation phase
and the income phase. During the accumulation phase,
earnings accumulate on a tax-deferred basis and are
taxed as income when you make a withdrawal. The
income phase occurs when you begin receiving regular
payments from your contract. The amount of money you
accumulate in your contract during the accumulation
phase will determine the amount of income payments
during the income phase.
Investment Options You can put money into any or all of the guaranteed
accounts and/or the investment portfolios but you may
not put your money in more than eighteen of the
investment options during the life of your contract.
The guaranteed accounts offer an interest rate that
is guaranteed by Jackson National. While your money
is in a guaranteed account, the interest your money
earns and your principal are guaranteed by Jackson
National.
The investment portfolios purchase shares of series
of mutual funds. These series are described in the
attached JNL Series Trust prospectus. The value of
the investment portfolios will vary in accordance
with the investment performance of the series. You
bear the investment risk under the contract for all
amounts allocated to the investment portfolios.
Expenses The contract has insurance features and investment
features, and there are costs related to each.
Jackson National makes a deduction for its insurance
charges which is equal to 1.40% of the daily value of
the contracts invested in the investment portfolios.
During the accumulation phase, Jackson National
deducts a $35 annual contract maintenance charge from
your contract.
If you take your money out of the contract, Jackson
National may assess a withdrawal charge. The
withdrawal charge starts at 7% in the first year and
declines 1% a year to 0% after 7 years.
3
<PAGE> 4
Expenses (cont'd) Jackson National may assess a state premium tax
charge which ranges from 0-4%, depending upon the
state, when you begin receiving regular income
payments from your contract, when you make a
withdrawal or, in states where required, at the time
premium payments are made.
There are also investment charges which range from
.75% to 1.25% of the average daily value of the
series, depending on the series.
Purchases Under most circumstances, you can buy a contract for
$5,000 or more ($2,000 or more for a qualified plan
contract). You can add $500 ($50 under the automatic
payment plan) or more at any time during the
accumulation phase.
Access to Your Money You can take money out of your contract during the
accumulation phase. At any time during the
accumulation phase, you may withdraw premiums which
are not subject to a withdrawal charge (premiums in
your annuity for seven years or longer and not
previously withdrawn). Once every year, you may
withdraw the greater of earnings or 10% of premiums
paid (not yet withdrawn). Withdrawals in excess of
that will be charged a withdrawal charge. You may
also have to pay income tax and a tax penalty on any
money you take out.
Income Payments If you want to receive regular income from your
annuity, you can choose one of four options: (1)
monthly payments for the annuitant's life; (2)
monthly payments for the annuitant's life and the
life of another person (usually the annuitant's
spouse); (3) monthly payments for the annuitant's
life, but with payments continuing to you or your
designated beneficiary for 10 or 20 years if the
annuitant dies before the end of the selected period;
and (4) payments for a period of 5 to 30 years.
During the income phase, you have the same investment
choices you had during the accumulation phase. You
can choose to have payments come from the guaranteed
accounts, the investment portfolios or both. If you
choose to have any part of your payments come from
the investment portfolios, the dollar amount of your
payments may go up or down. If you choose a variable
income option, you may make transfers between
investment portfolios but you may not make transfers
in to or out of the guaranteed accounts.
Death Benefit If you die before moving to the income phase, the
person you have chosen as your beneficiary will
receive a death benefit. The death benefit equals:
(a) current contract value OR (b) the total premiums
(less withdrawals, withdrawal charges and premium
taxes) compounded annually at 5% (4% if you are over
age 70 at the date of issue) OR (c) the contract
value at the end of the 7th contract year PLUS all
premiums made since the 7th year (less withdrawals,
withdrawal charges and premium taxes) compounded
annually at 5% (4% if you are over age 70 at the date
of issue) -- whichever is GREATEST. The death benefit
under (c) will never exceed 250% of premiums paid,
less partial withdrawals. The death benefit under (b)
and (c) is not available in all states.
4
<PAGE> 5
Free Look If you cancel your contract within twenty days after
receiving it (or whatever period is required in your
state), Jackson National will return the amount your
contract is worth on the day we receive your request.
This may be more or less than your original payment.
If required by law, Jackson National will return your
premium.
Taxes The Internal Revenue Code provides that you will not
be taxed on the earnings on the money held in your
contract until you take money out (this is referred
to as tax-deferral). There are different rules as to
how you will be taxed depending on how you take the
money out and the type of contract you have
(non-qualified or qualified).
5
<PAGE> 6
FEE TABLE
OWNER TRANSACTION EXPENSES
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Withdrawal Charge (as a percentage of premium payments):
Years Since Premium Payment 0 1 2 3 4 5 6 7+
Charge 7% 6% 5% 4% 3% 2% 1% 0%
</TABLE>
Transfer Fee:
No charge for first 15 transfers in a contract year; thereafter, the fee
is $25 per transfer.
Contract Maintenance Charge:
$35 per contract per year
SEPARATE ACCOUNT ANNUAL EXPENSES (as a percentage of average account value)
Mortality and Expense Risk
Charges 1.25%
Administration Charge .15%
----
Total Separate Account Annual
Expenses 1.40%
SERIES EXPENSES
(as an annual percentage of the average net assets of the series underlying an
investment portfolio)
<TABLE>
<CAPTION>
Other Expenses Total Series
Management (After Annual
JNL Series Trust Fee Reimbursement) Expenses
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
JNL Aggressive Growth Series................................ .95% .15% 1.10%
JNL Capital Growth Series................................... .95% .15% 1.10%
JNL Global Equities Series.................................. 1.00% .15% 1.15%
JNL/Alger Growth Series..................................... .975% .15% 1.125%
JNL/Putnam Growth Series *.................................. .90% .15% 1.05%
JNL/Putnam Value Equity Series *............................ .90% .15% 1.05%
PPM America/JNL Balanced Series *........................... .75% .15% .90%
PPM America/JNL High Yield Bond Series...................... .75% .15% .90%
PPM America/JNL Money Market Series......................... .60% .15% .75%
Salomon Brothers/JNL Global Bond Series..................... .85% .15% 1.00%
Salomon Brothers/JNL U.S. Government & Quality Bond
Series.................................................... .70% .15% .85%
T. Rowe Price/JNL Established Growth Series................. .85% .15% 1.00%
T. Rowe Price/JNL International Equity Investment Series.... 1.10% .15% 1.25%
T. Rowe Price/JNL Mid-Cap Growth Series..................... .95% .15% 1.10%
- --------------------------------------------------------------------------------------------------------
</TABLE>
* Prior to May 1, 1997, the management fee for the JNL/Putnam Growth Series was
.90%, the management fee for the JNL/Putnam Value Equity Series was .75%, and
the management fee for the PPM America/JNL Balanced Series was .90%.
6
<PAGE> 7
Currently, the adviser voluntarily reimburses each of the Series for annual
expenses (excluding management fees) in excess of .15% of average daily net
assets. Prior to reimbursement, total series annual expenses as a percentage of
net assets for the period ended December 31, 1996, were: JNL Aggressive Growth
Series -- 1.40%; JNL Capital Growth Series -- 1.27%; JNL Global Equities Series
- -- 1.63%; JNL/Alger Growth Series -- 1.19%; JNL/Putnam Growth Series -- 1.27%;
JNL/Putnam Value Equity Series -- 1.53%; PPM America/JNL Balanced Series --
1.22%; PPM America/JNL High Yield Bond Series -- 1.21%; PPM America/JNL Money
Market Series -- .85%; Salomon Brothers/JNL Global Bond Series -- 1.44%; Salomon
Brothers/JNL U.S. Government & Quality Bond Series -- 1.37%; T. Rowe Price/JNL
Established Growth Series -- 1.11%; T. Rowe Price/JNL International Equity
Investment Series -- 1.29%; and T. Rowe Price/JNL Mid-Cap Growth Series --
1.14%. Voluntary reimbursements to these Series may be modified or discontinued
at any time.
7
<PAGE> 8
EXAMPLES
You would pay the following expenses on a $1,000 investment, assuming a 5%
annual return on assets:
(a) upon surrender at the end of each time period;
(b) if the contract is not surrendered or is annuitized after the first year.
<TABLE>
<CAPTION>
Time-Periods
- ------------------------------------------------------------------------------------------------------
1 3 5 10
year years years years
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
JNL Aggressive Growth Portfolio............................. (a) $96 $129 $165 $288
(b) 26 79 135 288
JNL Capital Growth Portfolio................................ (a) 96 129 165 288
(b) 26 79 135 288
JNL Global Equities Portfolio............................... (a) 96 131 168 293
(b) 26 81 138 293
JNL/Alger Growth Portfolio.................................. (a) 96 130 167 291
(b) 26 80 137 291
JNL/Putnam Growth Portfolio................................. (a) 95 128 163 283
(b) 25 78 133 283
JNL/Putnam Value Equity Portfolio........................... (a) 95 128 163 283
(b) 25 78 133 283
PPM America/JNL Balanced Portfolio.......................... (1) 94 123 155 268
(b) 24 73 125 268
PPM America/JNL High Yield Bond Portfolio................... (a) 94 123 155 268
(b) 24 73 125 268
PPM America/JNL Money Market Portfolio...................... (a) 92 119 148 253
(b) 22 69 118 253
Salomon Brothers/JNL Global Bond Portfolio.................. (a) 95 126 160 278
(b) 25 76 130 278
Salomon Brothers/JNL U.S. Government & Quality Bond
Portfolio................................................. (a) 93 122 153 263
(b) 23 72 123 263
T. Rowe Price/JNL Established Growth Portfolio.............. (a) 95 126 160 278
(b) 25 76 130 278
T. Rowe Price/JNL International Equity Investment
Portfolio................................................. (a) 97 134 173 303
(b) 27 84 143 303
T. Rowe Price/JNL Mid-Cap Growth Portfolio.................. (a) 96 129 165 288
(b) 26 79 135 288
- ------------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE> 9
EXPLANATION OF FEE TABLE AND EXAMPLES
The purpose of the Fee Table and Examples is to assist you in understanding the
various costs and expenses that you will bear directly or indirectly. The Fee
Table reflects the expenses of the separate account and the series. Premium
taxes may also apply.
The Examples reflect the contract maintenance charge which is determined by
dividing the total amount of such charges expected to be collected during the
year by the total estimated average net assets of the investment portfolios.
A withdrawal charge is imposed on income payments which occur within one year of
the date the contract is issued.
THE EXAMPLE DOES NOT REPRESENT PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE
GREATER OR LESS THAN THOSE SHOWN.
FINANCIAL STATEMENTS
An accumulation unit value history is contained in Appendix A.
The full financial statements of the Separate Account for the period ended
September 30, 1997, and the year ended December 31, 1996; the financial
statements of Jackson National for the years ended December 31, 1996, and
December 31, 1995; and the applicable auditor's reports thereon are contained in
the SAI.
9
<PAGE> 10
THE ANNUITY CONTRACT
The fixed and variable annuity contract offered by Jackson National is a
contract between you, the owner, and Jackson National Life Insurance Company, an
insurance company. The contract provides a means for investing on a tax-deferred
basis in guaranteed accounts and investment portfolios. The contract is intended
for retirement savings or other long-term investment purposes and provides for a
death benefit and guaranteed income options.
The contract, like all deferred annuity contracts, has two phases: the
accumulation phase and the income phase. During the accumulation phase, earnings
accumulate on a tax-deferred basis and are taxed as income when you make a
withdrawal.
The contract offers guaranteed accounts. The guaranteed accounts offer an
interest rate that is guaranteed by Jackson National for the duration of the
guaranteed account period. While your money is in a guaranteed account, the
interest your money earns and your principal are guaranteed by Jackson National.
The value of a guaranteed account may be reduced if you make a withdrawal prior
to the end of the guaranteed account period, but will never be less than the
premium payments accumulated at 3% per year. If you choose to have your annuity
payments come from the guaranteed accounts, your payments will remain level
throughout the entire income phase.
The contract also offers investment portfolios. The investment portfolios are
designed to offer a higher return than the guaranteed accounts. HOWEVER, THIS IS
NOT GUARANTEED. IT IS POSSIBLE FOR YOU TO LOSE YOUR MONEY. If you put money in
the investment portfolios, the amount of money you are able to accumulate in
your contract during the accumulation phase depends upon the performance of the
investment portfolios you select. The amount of the income payments you receive
during the income phase also will depend, in part, on the performance of the
investment portfolios you choose for the income phase.
As the owner, you can exercise all the rights under the contract. You and your
spouse can be joint owners. You can assign the contract at any time during your
lifetime but Jackson National will not be bound until we receive written notice
of the assignment.
THE COMPANY
Jackson National is a stock life insurance company organized under the laws of
the state of Michigan in June 1961. Its legal domicile and principal business
address is 5901 Executive Drive, Lansing, Michigan 48911. Jackson National is
admitted to conduct life insurance and annuity business in the District of
Columbia and all states except New York. Jackson National is ultimately a
wholly-owned subsidiary of Prudential Corporation plc (London, England).
THE GUARANTEED ACCOUNTS
If you select a guaranteed account, your money will be placed with Jackson
National's other assets. The guaranteed accounts are not registered with the SEC
and the SEC does not review the information we provide to you about the
guaranteed accounts. Your contract contains a more complete description of the
guaranteed accounts.
THE SEPARATE ACCOUNT
The Jackson National Separate Account -- I was established by Jackson National
on June 14, 1993, pursuant to the provisions of Michigan law, as a segregated
asset account of the company. The separate account meets the definition of a
"separate account" under the federal securities laws and is registered with the
SEC as a unit investment trust under the Investment Company Act of 1940, as
amended.
The assets of the separate account legally belong to Jackson National and the
obligations under the contracts are obligations of Jackson National. However,
the contract assets in the separate account are not chargeable with liabilities
arising out of any other business Jackson National may conduct. All of the
income, gains and losses resulting from these assets are credited to or charged
against the contracts and not against any other contracts Jackson National may
issue.
10
<PAGE> 11
The separate account is divided into investment portfolios. Jackson National
does not guarantee the investment performance of the separate account or the
investment portfolios.
INVESTMENT PORTFOLIOS
You can put money in any or all of the investment portfolios. The investment
portfolios purchase shares of the following series of the JNL Series Trust:
JNL Aggressive Growth Series
JNL Capital Growth Series
JNL Global Equities Series
JNL/Alger Growth Series
JNL/Putnam Growth Series*
JNL/Putnam Value Equity Series*
PPM America/JNL Balanced Series*
PPM America/JNL High Yield Bond Series
PPM America/JNL Money Market Series
Salomon Brothers/JNL Global Bond Series
Salomon Brothers/JNL U.S. Government & Quality Bond Series
T. Rowe Price/JNL Established Growth Series
T. Rowe Price/JNL International Equity Investment Series
T. Rowe Price/JNL Mid-Cap Growth Series
* Prior to May 1, 1997, the JNL/Putnam Growth Series was the JNL/Phoenix
Investment Counsel Growth Series, the JNL/Putnam Value Equity Series was the PPM
America/JNL Value Equity Series, and the PPM America/JNL Balanced Series was the
JNL/Phoenix Investment Counsel Balanced Series.
The series are described in the attached JNL Series Trust prospectus. Jackson
National Financial Services, Inc. serves as investment adviser for all of the
series. Janus Capital Corporation serves as sub-adviser for the JNL Aggressive
Growth, JNL Capital Growth and JNL Global Equities Series; Fred Alger
Management, Inc. serves as sub-adviser for the JNL/Alger Growth Series; Putnam
Investment Management, Inc. serves as sub-adviser for the JNL/Putnam Growth and
JNL/Putnam Value Equity Series (prior to May 1, 1997, the sub-adviser for the
JNL/Putnam Growth Series was Phoenix Investment Counsel, Inc. and the
sub-adviser for the JNL/Putnam Value Equity Series was PPM America, Inc.); PPM
America, Inc. serves as sub-adviser for the PPM America/JNL Balanced, PPM
America/JNL High Yield Bond and PPM America/JNL Money Market Series (prior to
May 1, 1997, the sub-adviser for the PPM America/JNL Balanced Series was Phoenix
Investment Counsel, Inc.); Salomon Brothers Asset Management Inc serves as
sub-adviser for the Salomon Brothers/JNL Global Bond and Salomon Brothers/JNL
U.S. Government & Quality Bond Series; T. Rowe Price Associates, Inc. serves as
sub-adviser for the T. Rowe Price/JNL Established Growth and T. Rowe Price/JNL
Mid-Cap Growth Series; and Rowe Price-Fleming International, Inc. serves as
sub-adviser for the T. Rowe Price/JNL International Equity Investment Series.
Depending on market conditions, you can make or lose money in any of the
investment portfolios. You should read the prospectus for the series carefully
before investing. Additional investment portfolios may be available in the
future.
Voting Rights
To the extent required by law, Jackson National will obtain from you and other
owners of the contracts instructions as to how to vote when the series solicits
proxies in conjunction with a vote of shareholders. When Jackson National
receives instructions, we will vote all the shares Jackson National owns in
proportion to those instructions.
Substitution
Jackson National may be required to substitute an investment portfolio with
another portfolio. We will not do this without the prior approval of the SEC.
Jackson National will give you notice of our intent to do this.
CONTRACT CHARGES
There are charges and other expenses associated with the contracts that reduce
the return on your investment in the contract. These charges may be a lesser
amount where required by state law or as
11
<PAGE> 12
described below, but will not be increased. These charges and expenses are:
Insurance Charges
Each day Jackson National makes a deduction for its insurance charges. We do
this as part of our calculation of the value of the accumulation units and
annuity units. On an annual basis, this charge equals 1.40% of the daily value
of the contracts invested in an investment portfolio, after expenses have been
deducted. This charge is for the mortality risks, expense risks and
administrative expenses assumed by Jackson National.
Contract Maintenance Charge
During the accumulation phase, Jackson National deducts a $35 ($30 in
Washington) annual contract maintenance charge on each anniversary of the date
on which your contract was issued. If you make a complete withdrawal from your
contract, the contract maintenance charge will also be deducted. This charge is
for administrative expenses.
Jackson National will not deduct this charge, if when the deduction is to be
made, the value of your contract is $50,000 or more. Jackson National may
discontinue this practice at any time.
Transfer Fee
A transfer fee of $25 will apply to transfers in excess of 15 in a contract
year. Jackson National may waive the transfer fee in connection with
pre-authorized automatic transfer programs, or may charge a lesser fee where
required by state law.
Withdrawal Charge
During the accumulation phase, you can make withdrawals from your contract. At
any time during the accumulation phase, you may withdraw premiums which are not
subject to a withdrawal charge (premiums in your annuity for seven years or
longer and not previously withdrawn). Once every year, you may withdraw the
greater of earnings or 10% of premiums paid (not yet withdrawn). Withdrawals in
excess of that will be charged a withdrawal charge starting at 7% in the first
year and declining 1% a year to 0% after 7 years. The withdrawal charge
compensates us for costs associated with selling the contracts.
For purposes of the withdrawal charge, Jackson National treats withdrawals as
coming from the oldest premium payment first. If you make a full withdrawal, the
withdrawal charge is based on premiums remaining in the contract. If you
withdraw only part of the value of your contract, we deduct the withdrawal
charge from the remaining value in your contract.
NOTE: For tax purposes, withdrawals are considered to have come from the last
money into the contract. Thus, for tax purposes, earnings are considered to come
out first.
Jackson National does not assess the withdrawal charge on any payments paid out
as (1) income payments after the first year, (2) death benefits or (3)
withdrawals necessary to satisfy the minimum distribution requirements of the
Internal Revenue Code. Withdrawals for terminal illness or other specified
conditions as defined by Jackson National may not be subject to a withdrawal
charge. These provisions are not available in all states.
Jackson National may reduce or eliminate the amount of the withdrawal charge
when the contract is sold under circumstances which reduce its sales expense.
Some examples are: the purchase of a contract by a large group of individuals or
an existing relationship between Jackson National and a prospective purchaser.
Jackson National will not deduct a withdrawal charge under a contract issued to
an officer, director, agent or employee of Jackson National or any of its
affiliates.
Other Expenses
Jackson National pays the operating expenses of the Separate Account.
There are deductions from and expenses paid out of the assets of the series.
These expenses are described in the attached JNL Series Trust prospectus.
12
<PAGE> 13
Premium Taxes
Some states and other governmental entities charge premium taxes or other
similar taxes. Jackson National is responsible for the payment of these taxes
and may make a deduction from the value of the contract for them. Premium taxes
generally range from 0% to 4% depending on the state.
Income Taxes
Jackson National will make a deduction from the contract for any income taxes
which it incurs because of the contract. Currently, we are not making any such
deduction.
Distribution of Contracts
Jackson National Financial Services, Inc., a wholly-owned subsidiary of Jackson
National, is located at 5901 Executive Drive, Lansing, Michigan 48911 and serves
as the distributor of the contracts.
Commissions will be paid to broker-dealers who sell the contracts. While
commissions may vary, they are not expected to exceed 8% of any premium payment.
Under certain circumstances, Jackson National may pay persistency bonuses, in
addition to the standard commissions. Jackson National may use any of its
corporate assets to cover the cost of distribution, including any profit from
the contract insurance charges.
PURCHASES
You can buy a contract for $5,000 or more under most circumstances ($2,000 or
more for a qualified plan contract). The maximum we accept without our prior
approval is $1 million.
You can add $500 ($50 under the automatic payment plan) at any time during the
accumulation phase.
The minimum that you may allocate to a guaranteed account or investment
portfolio is $100. There is a $100 minimum balance requirement for each
guaranteed account and investment portfolio.
When you purchase a contract, Jackson National will allocate your premium to one
or more of the guaranteed accounts and/or the investment portfolios you have
selected. Your allocations must be in whole percentages ranging from 0% to 100%.
Jackson National will allocate additional premiums in the same way unless you
tell us otherwise.
There may be more than eighteen investment options available under the contract;
however, you may not allocate your money to more than eighteen investment
options during the life of your contract.
Jackson National will issue your contract and allocate your first premium within
2 business days after we receive your complete application and first premium. If
your application is not complete, we will contact you to get the necessary
information. If for some reason Jackson National is unable to complete this
process within 5 business days, we will either return your money or get your
permission to keep it until we receive all of the necessary information.
The Jackson National business day closes when the New York Stock Exchange
closes, usually 4:00 p.m. Eastern time.
Accumulation Units
The contract value allocated to the investment portfolios will go up or down
depending on the performance of the portfolios. In order to keep track of the
value of your contract, Jackson National uses a unit of measure called an
accumulation unit. (An accumulation unit is similar to a share of a mutual
fund.) During the income phase it is called an annuity unit.
Every business day Jackson National determines the value of an accumulation unit
for each of the investment portfolios. This is done by:
1. determining the total amount of money invested in the particular
investment portfolio;
2. subtracting any insurance charges;
3. dividing this amount by the number of outstanding accumulation units.
The value of an accumulation unit may go up or down from day to day.
When you make a premium payment, Jackson National credits your contract with
accumulation
13
<PAGE> 14
units. The number of accumulation units credited is determined at the close of
Jackson National's business day by dividing the amount of the premium allocated
to any investment portfolio by the value of the accumulation unit for that
investment portfolio.
TRANSFERS
You can transfer money between guaranteed accounts and investment portfolios
during the accumulation phase. During the income phase, you can transfer money
between investment portfolios.
You can make 15 transfers every year during the accumulation phase without
charge. The minimum amount that you can transfer is $100 (unless the transfer is
made under a pre-authorized automatic transfer program). If the remaining value
in a guaranteed account or investment portfolio would be less than $100 after a
transfer, you must transfer the entire value or you may not make the transfer.
Telephone Transactions
If you elect the telephone transfer privilege on your application, you may make
transfers by telephone. You must complete your telephone call authorizing a
transfer by the close of Jackson National's business day in order to receive
that day's value for an accumulation unit of an investment portfolio.
Jackson National has procedures which are designed to provide reasonable
assurance that telephone authorizations are genuine. Our procedures include
requesting identifying information and tape recording telephone communications.
Jackson National and its affiliates disclaim all liability for any claim, loss
or expense resulting from any alleged error or mistake in connection with a
telephone transfer which was not properly authorized by you. However, if Jackson
National fails to employ reasonable procedures to ensure that all telephone
transfers are properly authorized, we may be held liable for such losses.
Jackson National reserves the right to modify or discontinue at any time and
without notice the acceptance of instructions from someone other than you and/or
the telephone transfer privilege.
ACCESS TO YOUR MONEY
You can have access to the money in your contract: (1) by making either a
partial or complete withdrawal or (2) by electing to receive income payments.
Your beneficiary can have access to the money in your contract when a death
benefit is paid.
When you make a complete withdrawal you will receive the value of the contract
on the day you made the withdrawal less any premium tax, less any contract
maintenance charge, and less any withdrawal charge. Except in connection with
the systematic withdrawal program, you must withdraw at least $500 or, if less,
the entire amount in the guaranteed account or investment portfolio from which
you are making the withdrawal. After your withdrawal, you must have at least
$100 left in the guaranteed account or investment portfolio.
INCOME TAXES, TAX PENALTIES AND CERTAIN RESTRICTIONS MAY APPLY TO ANY WITHDRAWAL
YOU MAKE.
There are limitations on withdrawals from a qualified plan referred to as a
403(b) annuity. See "Taxes."
Systematic Withdrawal Program
You can arrange to have money automatically sent to you periodically while your
contract is still in the accumulation phase. You will have to pay taxes on money
you receive and withdrawals you make before you reach 59 1/2 may be subject to a
10% tax penalty.
We reserve the right to charge a fee for participation or to discontinue
offering this program in the future.
Suspension of Withdrawals
Jackson National may be required to suspend or delay withdrawals from a contract
when:
1. the New York Stock Exchange is closed (other than customary weekend and
holiday closings);
2. trading on the New York Stock Exchange is restricted;
3. an emergency exists so that it is not reasonably practicable to dispose
of shares of
14
<PAGE> 15
the investment portfolios or determine investment portfolio values;
4. the SEC, by order, may permit for the protection of owners.
Jackson National has reserved the right to defer payment for a withdrawal or
transfer from the guaranteed accounts for the period permitted by law, but not
more than six months.
INCOME PAYMENTS (THE INCOME PHASE)
The income phase occurs when you begin receiving regular payments from your
contract. The income date is the month and year in which those payments begin.
You can choose the income date and an income option. The income options are
described below.
If you do not choose an income option, we will assume that you selected Option 3
which provides a life annuity with 120 months of guaranteed payments.
You can change the income date or income option at any time before the income
date. You must give us 7 days notice. Income payments must begin by your 90th
birthday under a non-qualified contract (or an earlier date under a qualified
contract if required by law). Jackson National will assess a withdrawal charge
on income payments which occur within one year of the date the contract is
issued.
At the income date, you can choose whether payments will come from the
guaranteed accounts, the investment portfolios or both. Unless you tell us
otherwise, your income payments will be based on the investment allocations that
were in place on the income date.
If you choose to have any portion of your annuity payments come from the
investment portfolio(s), the dollar amount of your payment will depend upon
three things: 1) the value of your contract in the investment portfolio(s) on
the income date, 2) the 3% assumed investment rate used in the annuity table for
the contract, and 3) the performance of the investment portfolios you selected.
If the actual performance exceeds the 3% assumed rate, your income payments will
increase. Similarly, if the actual rate is less than 3%, your income payments
will decrease.
You can choose to have income payments made monthly, quarterly, semi-annually,
or annually. However, if you have less than $5,000 to apply toward an income
option and state law permits, Jackson National may provide your payment in a
single lump sum. Likewise, if your first income payment would be less than $50
and state law permits, Jackson National may set the frequency of payments so
that the first payment would be at least $50.
Income Options
The annuitant is the person whose life we look to when we make income payments.
(Each description assumes that you are the owner and annuitant.)
OPTION 1 -- Life Income. This income option provides monthly payments for your
life.
OPTION 2 -- Joint and Survivor Annuity. This income option provides monthly
payments for your life and for the life of another person (usually your spouse)
selected by you.
OPTION 3 -- Life Annuity With 120 or 240 Monthly Payments Guaranteed. This
income option provides monthly payments for your life, but with payments
continuing to your beneficiary for the remainder of 10 or 20 years (as you
select) if you die before the end of the selected period.
OPTION 4 -- Income for a Specified Period. This income option provides monthly
payments for any number of years from 5 to 30.
ADDITIONAL OPTIONS -- Other income options may be made available by Jackson
National.
If you choose an income option for which payments are based on life expectancy,
you cannot make a withdrawal during the income phase.
DEATH BENEFIT
Death of Owner Before the Income Date
If you die before moving to the income phase, the person you have chosen as your
beneficiary will receive a death benefit. If you have a joint owner, the
15
<PAGE> 16
death benefit will be paid when the first joint owner dies. Joint owners must be
spouses. The surviving joint owner will be treated as the beneficiary. Any other
beneficiary designated will be treated as a contingent beneficiary.
The death benefit equals: (a) current contract value OR (b) the total premiums
(less withdrawals, withdrawal charges and premium taxes) compounded at 5%1 OR
(c) the contract value at the end of the 7th contract year PLUS all premiums
made since the 7th year (less withdrawals, withdrawal charges and premium taxes)
compounded at 5%** -- whichever is GREATEST. The death benefit under (c) will
never exceed 250% of premiums paid, less partial withdrawals. The death benefit
under (b) and (c) may not be available in all states.
The entire death benefit must be paid within 5 years of the date of death unless
the beneficiary elects to have the death benefit payable under an income option.
The death benefit payable under an income option must be paid over the
beneficiary's lifetime or for a period not extending beyond the beneficiary's
life expectancy. Payments must begin within one year of the date of death.
Unless the beneficiary chooses to receive the death benefit in a single sum, the
beneficiary must elect an income option within the 60 day period beginning with
the date Jackson National receives proof of death. If the beneficiary chooses to
rece#Ave the death benefit in a single sum and all the necessary requirements
are met, Jackson National will pay the death benefit within 7 days. If the
beneficiary is your spouse, he/she can continue the contract in his/her own name
at the then current contract value.
Death of Owner After the Income Date
If you or a joint owner die after moving to the income phase, any remaining
payments under the income option elected will continue at least as rapidly as
under the method of distribution in effect at the date of death. If you die, the
beneficiary becomes the owner. If the joint owner dies, the surviving joint
owner, if any, will be the designated beneficiary. Any other beneficiary
designation on record at the time of death will be treated as a contingent
beneficiary.
Death of Annuitant
If the annuitant is not an owner or joint owner and the annuitant dies before
the income date, you can name a new annuitant. If you do not name a new
annuitant within 30 days of the death of the annuitant, you will become the
annuitant. However, if the owner is a non-natural person (for example, a
corporation), then the death of the annuitant will be treated as the death of
the owner, and a new annuitant may not be named.
If the annuitant dies after the income date, the death benefit, if any, will be
as provided for in the income option selected. Death benefits will be paid at
least as rapidly as under the method of distribution in effect at the
annuitant's death.
TAXES
THE FOLLOWING IS GENERAL INFORMATION AND IS NOT INTENDED AS TAX ADVICE TO ANY
INDIVIDUAL. YOU SHOULD CONSULT YOUR OWN TAX ADVISER.
The Internal Revenue Code (Code) provides that you will not be taxed on the
earnings on the money held in your contract until you take money out (this is
referred to as tax deferral). There are different rules as to how you will be
taxed depending on how you take the money out and the type of contract you have
(non-qualified or qualified).
Non-Qualified Contracts -- General Taxation
You will not be taxed on increases in the value of your contract until a
distribution (either as a withdrawal or as an income payment) occurs. When you
make a withdrawal you are taxed on the amount of the withdrawal that is
earnings. For income payments, a portion of each income payment is treated as a
partial return of your premium and will not be taxed. The remaining portion of
the income
- ---------------
* (4% if the owner is over age 70 at the date of issue)
16
<PAGE> 17
payment will be treated as ordinary income. How the income payment is divided
between taxable and non-taxable portions depends on the period over which income
payments are expected to be made. Income payments received after you have
received all of your premium are treated as income.
If a non-qualified contract is owned by a non-natural person (e.g., corporation
or certain other entities other than tax-qualified trusts), the contract will
generally not be treated as an annuity for tax purposes.
Qualified and Non-Qualified Contracts
If you purchase the contract as an individual and not under any pension plan,
specially sponsored program or an individual retirement annuity, your contract
is referred to as a non-qualified contract.
If you purchase the contract under a pension plan, specially sponsored program,
or an individual retirement annuity, your contract is referred to as a qualified
contract. Examples of qualified plans are: Individual Retirement Annuities
(IRAs), Tax-Sheltered Annuities (sometimes referred to as 403(b) contracts),
H.R. 10 Plans (sometimes referred to as Keogh Plans), and pension and profit-
sharing plans, which include 401(k) plans.
Withdrawals -- Non-Qualified Contracts
If you make a withdrawal from your contract, the Code treats the withdrawal as
first coming from earnings and then from your premium payments. Withdrawn
earnings are includible in income.
The Code also provides that any amount received under an annuity contract which
is included in income may be subject to a 10% penalty. Some withdrawals will be
exempt from the penalty. They include any amounts: (1) paid on or after the
taxpayer reaches age 59 1/2; (2) paid after you die; (3) paid if the taxpayer
becomes totally disabled (as that term is defined in the Code); (4) paid in a
series of substantially equal payments made annually (or more frequently) under
a lifetime annuity; (5) paid under an immediate annuity; or (6) which come from
premiums made prior to August 14, 1982.
Withdrawals -- Qualified Contracts
There are special rules that govern qualified contracts. We have provided
additional discussion in the Statement of Additional Information.
Withdrawals -- Tax-Sheltered Annuities
The Code limits the withdrawal of premiums from certain Tax-Sheltered Annuities.
Withdrawals can only be made when an owner: (1) reaches age 59 1/2; (2) leaves
his/her job; (3) dies; (4) becomes disabled (as that term is defined in the
Code); or (5) in the case of hardship. However, in the case of hardship, the
owner can only withdraw the premium and not any earnings.
Withdrawals -- Roth IRAs
Beginning in 1998, individuals may purchase a new type of non-deductible IRA,
known as a Roth IRA. Qualified distributions from Roth IRAs are entirely tax
free. A qualified distribution requires that the individual has held the Roth
IRA for at least five years and, in addition, that the distribution is made
either after the individual reaches age 59 1/2, on the individual's death or
disability, or as qualified first-time home purchase, subject to $10,000
lifetime maximum, for the individual, a spouse, child, grandchild, or ancestor.
Withdrawals -- Investment Adviser Fees
The Internal Revenue Service has, through a series of Private Letter Rulings,
held that the payment of investment adviser financial planner fees from an IRA
or a Tax-Sheltered Annuity is permissible under certain circumstances and will
not be considered a distribution for income tax purposes. The Rulings require
that in order to receive this favorable tax treatment, the annuity contract
must, under a written agreement, be solely liable (not jointly with the contract
owner) for payment of the adviser's fee and the fee must actually be paid from
the annuity contract to the adviser. Withdrawals from non-qualified contracts
for the payment of investment fees will be considered distributions from the
contract.
17
<PAGE> 18
Restrictions Under the Texas Optional Retirement Program (ORP)
Contracts issued to participants in ORP contain restrictions required under the
Texas Administrative Code. In accordance with those restrictions, a participant
in ORP will not be permitted to make withdrawals prior to such participant's
retirement, death, attainment of age 70 1/2 year or termination of employment in
a Texas public institution of higher education. The restrictions on withdrawal
do not apply in the event a participant in ORP transfers the contract value to
another approved contract or vendor during the period of ORP participation.
Assignment
An assignment may be a taxable event. If the contract is issued pursuant to a
qualified plan, there may be limitations on your ability to assign the contract.
Diversification
The Code provides that the underlying investments for a variable annuity must
satisfy certain diversification requirements in order to be treated as an
annuity contract. Jackson National believes that the underlying investments are
being managed so as to comply with these requirements.
Neither the Code nor the Internal Revenue Service Regulations issued to date
provide guidance as to the circumstances under which you, because of the degree
of control you exercise over the underlying investments, and not Jackson
National would be considered the owner of the shares of the investment
portfolios. If this occurs, it will result in the loss of the favorable tax
treatment for the contract.
It is unknown to what extent owners are permitted to select investment
portfolios, to make transfers among the investment portfolios or the number and
type of investment portfolios from which owners may select. If any guidance is
provided which is considered a new position, then the guidance would generally
be applied prospectively. However, if such guidance is considered not to be a
new position, it may be applied retroactively. This would mean that you, as the
owner of the contract, could be treated as the owner of the investment
portfolios. Due to the uncertainty in this area, Jackson National reserves the
right to modify the contract in an attempt to maintain favorable tax treatment.
OTHER INFORMATION
Dollar Cost Averaging
You can arrange to automatically have a regular amount of money periodically
transferred into the investment portfolios. This theoretically gives you a lower
average cost per unit over time than you would receive if you made a one time
purchase.
To participate in this program, you must have a total contract value of at least
$15,000 (unless we waive this requirement).
Jackson National does not currently charge for participation in this program. We
may do so in the future.
Rebalancing
You can arrange to have Jackson National automatically reallocate money between
investment portfolios periodically to keep the blend you select.
Jackson National does not currently charge for participation in this program. We
may do so in the future.
Free Look
If you cancel the contract within twenty days after receiving it (or whatever
period is required in your state), Jackson National will return the amount your
contract is worth on the day we receive your request. This may be more or less
than your original payment. If required by law, Jackson National will return
your premium.
Advertising
From time to time, Jackson National may advertise several types of performance
for the investment portfolios. Total return is the overall change in the value
of an investment in an investment portfolio over
18
<PAGE> 19
a given period of time. Standardized average annual total return is calculated
in accordance with SEC guidelines. Non-standardized total return may be for
periods other than those required or may otherwise differ from standardized
average annual total return. Yield refers to the income generated by an
investment over a given period of time.
Performance will be calculated by determining the percentage change in the value
of an accumulation unit by dividing the increase (decrease) for that unit by the
value of the accumulation unit at the beginning of the period. Performance will
reflect the deduction of the insurance charges and may reflect the deduction of
the contract maintenance charge and withdrawal charge. The deduction of the
contract maintenance and/or the withdrawal charge would reduce the percentage
increase or make greater any percentage decrease.
If a series has been in existence for a longer period than the investment
portfolio, performance will be based upon the period quoted.
Market Timing and Asset Allocation Services
Market timing and asset allocation services offered by third parties must comply
with Jackson National's administrative systems, rules and procedures.
Modification of the Contract
Only the President, Vice President, Secretary or Assistant Secretary of Jackson
National may approve a change to or waive a provision of the contract. Any
change or waiver must be in writing. Jackson National may change the terms of
the contract in order to comply with changes in applicable law, or otherwise as
deemed necessary by Jackson National.
Legal Proceedings
There are no material legal proceedings, other than ordinary routine litigation
incidental to the business, to which Jackson National Life Insurance Company,
Jackson National Financial Services, Inc., and the Jackson National Separate
Account -- I are parties.
Questions
If you have questions about your contract, you may call us at (800) 766-4683, or
write to us at: Jackson National Life Annuity Service Center, 8055 E. Tufts
Avenue, Second Floor, Denver, Colorado 80237.
19
<PAGE> 20
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<S> <C>
General Information and History............................. 2
Services.................................................... 2
Purchase of Securities Being Offered........................ 2
Underwriters................................................ 2
Calculation of Performance.................................. 3
Additional Tax Information.................................. 7
Income Payments; Net Investment Factor...................... 15
Financial Statements........................................ 17
</TABLE>
20
<PAGE> 21
APPENDIX A
CONDENSED FINANCIAL INFORMATION
Accumulation Unit Values
The following table shows accumulation unit values at the beginning and end of
the periods indicated as well as the number of accumulation units outstanding
for each portfolio as of September 30, 1997, December 31, 1996, and December 31,
1995. This information has been taken from the Separate Account's financial
statements. The Separate Account's financial statements for the periods ended
December 31, 1996, and December 31, 1995, have been audited by Price Waterhouse
LLP, independent accountants. This information should be read together with the
Separate Account's financial statements and related notes which are in the SAI.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
PORTFOLIOS 1997 1996 1995(A)
- -------------------------------------------------------------------
<S> <C> <C> <C>
JNL Aggressive Growth
Portfolio
Accumulation unit
value:
Beginning of period $11.95 $10.20 $10.00
End of period $13.79 $11.95 $10.20
Accumulation units
outstanding at the
end of period 4,815,480 2,355,530 4,008
JNL Capital Growth
Portfolio
Accumulation unit
value:
Beginning of period $11.87 $10.34 $10.00
End of period $13.25 $11.87 $10.34
Accumulation units
outstanding at the
end of period 4,900,267 2,985,668 1,587
JNL Global Equities
Portfolio
Accumulation unit
value:
Beginning of period $13.57 $10.48 $10.00
End of period $16.71 $13.57 $10.48
Accumulation units
outstanding at the
end of period 8,138,352 3,090,234 4,778
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
PORTFOLIOS 1997 1996 1995(A)
- -------------------------------------------------------------------
<S> <C> <C> <C>
JNL/Alger Growth
Portfolio
Accumulation unit
value:
Beginning of period $11.11 $9.93 $10.00
End of period $14.34 $11.11 $9.93
Accumulation units
outstanding at the
end of period 5,158,975 3,310,810 12,285
JNL/Putnam Growth
Portfolio(b)
Accumulation unit
value:
Beginning of period $13.22 $10.58 $10.00
End of period $15.43 $13.22 $10.58
Accumulation units
outstanding at the
end of period 4,323,083 1,682,604 571
JNL/Putnam Value
Equity Portfolio(b)
Accumulation unit
value:
Beginning of period $12.98 $10.59 $10.00
End of period $15.69 $12.98 $10.59
Accumulation units
outstanding at the
end of the period 5,099,068 1,330,288 3,944
</TABLE>
(a) The Separate Account commenced operation on October 16, 1995.
(b) Prior to May 1, 1997, the JNL/Putnam Growth Series was the JNL/Phoenix
Investment Counsel Growth Series and
the management fee was .90%, the JNL/Putnam Value Equity Series was the PPM
America/JNL Value Equity Series
and the management fee was .75%; and the PPM America/JNL Balanced Series was
the JNL/Phoenix Investment
Counsel Balanced Series and the management fee was .90%
21
<PAGE> 22
<TABLE>
<CAPTION>
PPM America/JNL
Balanced
Portfolio(b)
Accumulation unit
value:
- -------------------------------------------------------------------
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
PORTFOLIOS 1997 1996 1995(A)
- -------------------------------------------------------------------
<S> <C> <C> <C>
Beginning of period $11.29 $10.34 $10.00
End of period $12.94 $11.29 $10.34
Accumulation units
outstanding at the
end of period 3,846,253 2,120,529 12,871
PPM America/JNL High
Yield Bond Portfolio
Accumulation unit
value:
Beginning of period $11.26 $10.11 $10.00
End of period $12.54 $11.26 $10.11
Accumulation units
outstanding at the
end of period 3,593,849 1,147,840 100
PPM America/JNL Money
Market Portfolio
Accumulation unit
value:
Beginning of period $10.37 $10.03 $10.00
End of period $10.65 $10.37 $10.03
Accumulation units
outstanding at the
end of period 3,111,164 2,193,176 14,608
Salomon Brothers/JNL
Global Bond
Portfolio
Accumulation unit
value:
Beginning of period $11.74 $10.41 $10.00
End of period $12.72 $11.74 $10.41
Accumulation units
outstanding at the
end of the period 2,236,757 911,885 3,128
Salomon Brothers/JNL
U.S. Government &
Quality Bond
Portfolio
Accumulation unit
value:
Beginning of period $10.33 $10.21 $10.00
End of period $10.81 $10.33 $10.21
Accumulation units
outstanding at the
end of period 1,611,680 902,055 1,275
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
PORTFOLIOS 1997 1996 1995(A)
- -------------------------------------------------------------------
<S> <C> <C> <C>
T. Rowe Price/JNL
Established
Growth Portfolio
Accumulation unit
value:
Beginning of period $12.53 $10.36 $10.00
End of period $15.59 $12.53 $10.36
Accumulation units
outstanding at the
end of period 6,170,389 2,500,896 10,564
T. Rowe Price/JNL
International
Equity Investment
Portfolio
Accumulation unit
value:
Beginning of period $11.78 $10.49 $10.00
End of period $12.95 $11.78 10.49
Accumulation units
outstanding at the
end of period 4,028,438 2,039,430 3,096
T. Rowe Price/JNL
Mid-Cap
Growth Portfolio
Accumulation unit
value:
Beginning of period $12.59 $10.37 $10.00
End of period $14.76 $12.59 $10.37
Accumulation units
outstanding at the
end of period 7,149,711 3,585,051 5,120
</TABLE>
(a) The Separate Account commenced operation on October 16, 1995.
(b) Prior to May 1, 1997, the JNL/Putnam Growth Series was the JNL/Phoenix
Investment Counsel Growth Series and
the management fee was .90%, the JNL/Putnam Value Equity Series was the PPM
America/JNL Value Equity Series
and the management fee was .75%; and the PPM America/JNL Balanced Series was
the JNL/Phoenix Investment
Counsel Balanced Series and the management fee was .90%
22
<PAGE> 23
THE PERSPECTIVE PLUS
FIXED AND VARIABLE ANNUITY
ISSUED BY JACKSON NATIONAL LIFE INSURANCE
COMPANY
AND JACKSON NATIONAL SEPARATE ACCOUNT -- I
The fixed and variable annuity contract is an
individual, flexible premium deferred annuity
with 4 guaranteed accounts which offer an
interest rate that is guaranteed by Jackson
National Life Insurance Company (Jackson
National) and 15 investment portfolios. You
can put your money in any of the guaranteed
accounts and/or the investment portfolios.
The investment portfolios purchase shares of
the following series of the JNL Series Trust:
JNL Aggressive Growth Series
JNL Capital Growth Series
JNL Global Equities Series
JNL/Alger Growth Series
JNL/Eagle Core Equity Series
JNL/Eagle SmallCap Equity Series
JNL/Putnam Growth Series
JNL/Putnam Value Equity Series
PPM America/JNL Balanced Series
PPM America/JNL Money Market Series
Salomon Brothers/JNL Global Bond Series
Salomon Brothers/JNL U.S. Government & Quality
Bond Series
T. Rowe Price/JNL Established Growth Series
T. Rowe Price/JNL International Equity
Investment Series
T. Rowe Price/JNL Mid-Cap Growth Series
Please read this prospectus before investing, and keep it on file for future
reference. It contains important information about the Perspective Plus Fixed
and Variable Annuity that you ought to know before investing.
To learn more about the Perspective Plus Fixed and Variable Annuity contract,
you can obtain a free copy of the Statement of Additional Information (SAI)
dated January 2, 1998, by calling Jackson National at (800) 539-9034 or by
writing Jackson National at: Annuity Service Center, 8055 East Tufts Avenue,
Second Floor, Denver, Colorado 80237. The SAI has been filed with the Securities
and Exchange Commission (SEC) and is legally a part of this prospectus. The
Table of Contents of the SAI is in this prospectus. The SEC maintains a website
(http://www.sec.gov) that contains the SAI, material incorporated by reference
and other information regarding registrants that file electronically with the
SEC.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC NOR HAS THE
SEC PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
JANUARY 2, 1998
1
<PAGE> 24
TABLE OF CONTENTS
<TABLE>
<S> <C>
Key Facts................................................... 3
Fee Table................................................... 6
The Annuity Contract........................................ 10
The Company................................................. 10
The Guaranteed Accounts..................................... 10
The Separate Account........................................ 10
Investment Portfolios....................................... 11
Contract Charges............................................ 11
Purchases................................................... 13
Transfers................................................... 14
Access to Your Money........................................ 14
Income Payments (The Income Phase).......................... 15
Death Benefit............................................... 15
Taxes....................................................... 16
Other Information........................................... 18
Table of Contents of the Statement of Additional
Information............................................... 20
Appendix A.................................................. 21
</TABLE>
2
<PAGE> 25
KEY FACTS
Annuity Service Center: 1 (800) 539-9034
Mail Address: P.O. Box 378002, Denver, Colorado 80237-8002
Delivery Address: 8055 East Tufts Avenue, Second Floor, Denver,
Colorado 80237
Home Office: 5901 Executive Drive, Lansing, Michigan 48911
The Annuity Contract The fixed and variable annuity contract offered by
Jackson National provides a means for investing on a
tax-deferred basis in the guaranteed accounts of
Jackson National and the investment portfolios. The
contract is intended for retirement savings or other
long-term investment purposes and provides for a
death benefit and income options.
The contract has two phases: the accumulation phase
and the income phase. During the accumulation phase,
earnings accumulate on a tax-deferred basis and are
taxed as income when you make a withdrawal. The
income phase occurs when you begin receiving regular
payments from your contract. The amount of money you
accumulate in your contract during the accumulation
phase will determine the amount of income payments
during the income phase.
Investment Options You can put money into any or all of the guaranteed
accounts and/or the investment portfolios but you may
not put your money in more than eighteen of the
investment options during the life of your contract.
The guaranteed accounts offer an interest rate that
is guaranteed by Jackson National. While your money
is in a guaranteed account, the interest your money
earns and your principal are guaranteed by Jackson
National.
The investment portfolios purchase shares of series
of mutual funds. These series are described in the
attached JNL Series Trust prospectus. The value of
the investment portfolios will vary in accordance
with the investment performance of the series. You
bear the investment risk under the contract for all
amounts allocated to the investment portfolios.
Expenses The contract has insurance features and investment
features, and there are costs related to each.
Jackson National makes a deduction for its insurance
charges which is equal to 1.40% of the daily value of
the contracts invested in the investment portfolios.
During the accumulation phase, Jackson National
deducts a $35 annual contract maintenance charge from
your contract.
If you take your money out of the contract, Jackson
National may assess a withdrawal charge. The
withdrawal charge starts at 7% in the first year and
declines 1% a year to 0% after 7 years.
3
<PAGE> 26
Expenses (cont'd) Jackson National may assess a state premium tax
charge which ranges from 0-4%, depending upon the
state, when you begin receiving regular income
payments from your contract, when you make a
withdrawal or, in states where required, at the time
premium payments are made.
There are also investment charges which range from
.75% to 1.25% of the average daily value of the
series, depending on the series.
Purchases Under most circumstances, you can buy a contract for
$5,000 or more ($2,000 or more for a qualified plan
contract). You can add $500 ($50 under the automatic
payment plan) or more at any time during the
accumulation phase.
Access to Your Money You can take money out of your contract during the
accumulation phase. At any time during the
accumulation phase, you may withdraw premiums which
are not subject to a withdrawal charge (premiums in
your annuity for seven years or longer and not
previously withdrawn). Once every year, you may
withdraw the greater of earnings or 10% of premiums
paid (not yet withdrawn). Withdrawals in excess of
that will be charged a withdrawal charge. You may
also have to pay income tax and a tax penalty on any
money you take out.
Income Payments If you want to receive regular income from your
annuity, you can choose one of four options: (1)
monthly payments for the annuitant's life; (2)
monthly payments for the annuitant's life and the
life of another person (usually the annuitant's
spouse); (3) monthly payments for the annuitant's
life, but with payments continuing to you or your
designated beneficiary for 10 or 20 years if the
annuitant dies before the end of the selected period;
and (4) payments for a period of 5 to 30 years.
During the income phase, you have the same investment
choices you had during the accumulation phase. You
can choose to have payments come from the guaranteed
accounts, the investment portfolios or both. If you
choose to have any part of your payments come from
the investment portfolios, the dollar amount of your
payments may go up or down. If you choose a variable
income option, you may make transfers between
investment portfolios but you may not make transfers
in to or out of the guaranteed accounts.
Death Benefit If you die before moving to the income phase, the
person you have chosen as your beneficiary will
receive a death benefit. The death benefit equals:
(a) current contract value OR (b) the total premiums
(less withdrawals, withdrawal charges and premium
taxes) compounded annually at 5% (4% if you are over
age 70 at the date of issue) OR (c) the contract
value at the end of the 7th contract year PLUS all
premiums made since the 7th year (less withdrawals,
withdrawal charges and premium taxes) compounded
annually at 5% (4% if you are over age 70 at the date
of issue) -- whichever is GREATEST. The death benefit
under (c) will never exceed 250% of premiums paid,
less partial withdrawals. The death benefit under (b)
and (c) is not available in all states.
4
<PAGE> 27
Free Look If you cancel your contract within twenty days after
receiving it (or whatever period is required in your
state), Jackson National will return the amount your
contract is worth on the day we receive your request.
This may be more or less than your original payment.
If required by law, Jackson National will return your
premium.
Taxes The Internal Revenue Code provides that you will not
be taxed on the earnings on the money held in your
contract until you take money out (this is referred
to as tax-deferral). There are different rules as to
how you will be taxed depending on how you take the
money out and the type of contract you have
(non-qualified or qualified).
5
<PAGE> 28
FEE TABLE
OWNER TRANSACTION EXPENSES
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Withdrawal Charge (as a percentage of premium payments):
Years Since Premium Payment 0 1 2 3 4 5 6 7+
Charge 7% 6% 5% 4% 3% 2% 1% 0%
</TABLE>
Transfer Fee:
No charge for first 15 transfers in a contract year; thereafter, the fee
is $25 per transfer.
Contract Maintenance Charge:
$35 per contract per year
SEPARATE ACCOUNT ANNUAL EXPENSES (as a percentage of average account value)
Mortality and Expense Risk
Charges 1.25%
Administration Charge .15%
----
Total Separate Account Annual
Expenses 1.40%
SERIES EXPENSES
(as an annual percentage of the average net assets of the series underlying an
investment portfolio)
<TABLE>
<CAPTION>
Other Expenses Total Series
Management (After Annual
JNL Series Trust Fee Reimbursement) Expenses
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
JNL Aggressive Growth Series................................ .95% .15% 1.10%
JNL Capital Growth Series................................... .95% .15% 1.10%
JNL Global Equities Series.................................. 1.00% .15% 1.15%
JNL/Alger Growth Series..................................... .975% .15% 1.125%
JNL/Eagle Core Equity Series................................ .90% .15%* 1.05%
JNL/Eagle SmallCap Equity Series............................ .95% .15%* 1.10%
JNL/Putnam Growth Series **................................. .90% .15% 1.05%
JNL/Putnam Value Equity Series **........................... .90% .15% 1.05%
PPM America/JNL Balanced Series **.......................... .75% .15% .90%
PPM America/JNL Money Market Series......................... .60% .15% .75%
Salomon Brothers/JNL Global Bond Series..................... .85% .15% 1.00%
Salomon Brothers/JNL U.S. Government & Quality Bond
Series.................................................... .70% .15% .85%
T. Rowe Price/JNL Established Growth Series................. .85% .15% 1.00%
T. Rowe Price/JNL International Equity Investment Series.... 1.10% .15% 1.25%
T. Rowe Price/JNL Mid-Cap Growth Series..................... .95% .15% 1.10%
- --------------------------------------------------------------------------------------------------------
</TABLE>
* The JNL/Eagle Core Equity Series and the JNL/Eagle SmallCap Equity Series
commenced operations on September 16, 1996. Estimated expenses for the first
fiscal year of operation are shown. Actual expenses may be greater or lesser
than those shown.
** Prior to May 1, 1997, the management fee for the JNL/Putnam Growth Series was
.90%, the management fee for the JNL/Putnam Value Equity Series was .75%, and
the management fee for the PPM America/JNL Balanced Series was .90%.
6
<PAGE> 29
Currently, the adviser voluntarily reimburses each of the Series for annual
expenses (excluding management fees) in excess of .15% of average daily net
assets. Prior to reimbursement, total series annual expenses as a percentage of
net assets for the period ended December 31, 1996, were: JNL Aggressive Growth
Series -- 1.40%; JNL Capital Growth Series -- 1.27%; JNL Global Equities Series
- -- 1.63%; JNL/Alger Growth Series -- 1.19%; JNL/Putnam Growth Series -- 1.27%;
JNL/Putnam Value Equity Series -- 1.53%; PPM America/JNL Balanced Series --
1.22%; PPM America/JNL Money Market Series -- .85%; Salomon Brothers/JNL Global
Bond Series -- 1.44%; Salomon Brothers/JNL U.S. Government & Quality Bond Series
- -- 1.37%; T. Rowe Price/JNL Established Growth Series -- 1.11%; T. Rowe
Price/JNL International Equity Investment Series -- 1.29%; and T. Rowe Price/JNL
Mid-Cap Growth Series -- 1.14%; and are expected to be: JNL/Eagle Core Equity
Series -- 4.57% and JNL/Eagle SmallCap Equity Series -- 4.77%. Voluntary
reimbursements to these Series may be modified or discontinued at any time.
7
<PAGE> 30
EXAMPLES
You would pay the following expenses on a $1,000 investment, assuming a 5%
annual return on assets:
(a) upon surrender at the end of each time period;
(b) if the contract is not surrendered or is annuitized after the first year.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------Time-Periods----------
1 3 5 10
year years years years
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
JNL Aggressive Growth Portfolio............................. (a) $96 $129 $165 $288
(b) 26 79 135 288
JNL Capital Growth Portfolio................................ (a) 96 129 165 288
(b) 26 79 135 288
JNL Global Equities Portfolio............................... (a) 96 131 168 293
(b) 26 81 138 293
JNL/Alger Growth Portfolio.................................. (a) 96 130 167 291
(b) 26 80 137 291
JNL/Eagle Core Equity Portfolio............................. (a) 95 128 163 283
(b) 25 78 133 283
JNL/Eagle SmallCap Equity Portfolio......................... (a) 96 129 165 288
(b) 26 79 135 288
JNL/Putnam Growth Portfolio................................. (a) 95 128 163 283
(b) 25 78 133 283
JNL/Putnam Value Equity Portfolio........................... (a) 95 128 163 283
(b) 25 78 133 283
PPM America/JNL Balanced Portfolio.......................... (1) 94 123 155 268
(b) 24 73 125 268
PPM America/JNL Money Market Portfolio...................... (a) 92 119 148 253
(b) 22 69 118 253
Salomon Brothers/JNL Global Bond Portfolio.................. (a) 95 126 160 278
(b) 25 76 130 278
Salomon Brothers/JNL U.S. Government & Quality Bond
Portfolio................................................. (a) 93 122 153 263
(b) 23 72 123 263
T. Rowe Price/JNL Established Growth Portfolio.............. (a) 95 126 160 278
(b) 25 76 130 278
T. Rowe Price/JNL International Equity Investment
Portfolio................................................. (a) 97 134 173 303
(b) 27 84 143 303
T. Rowe Price/JNL Mid-Cap Growth Portfolio.................. (a) 96 129 165 288
(b) 26 79 135 288
- ------------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE> 31
EXPLANATION OF FEE TABLE AND EXAMPLES
The purpose of the Fee Table and Examples is to assist you in understanding the
various costs and expenses that you will bear directly or indirectly. The Fee
Table reflects the expenses of the separate account and the series. Premium
taxes may also apply.
The Examples reflect the contract maintenance charge which is determined by
dividing the total amount of such charges expected to be collected during the
year by the total estimated average net assets of the investment portfolios.
A withdrawal charge is imposed on income payments which occur within one year of
the date the contract is issued.
THE EXAMPLE DOES NOT REPRESENT PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE
GREATER OR LESS THAN THOSE SHOWN.
FINANCIAL STATEMENTS
An accumulation unit value history is contained in Appendix A.
The full financial statements of the Separate Account for the period ended
September 30, 1997, and the year ended December 31, 1996; the financial
statements of Jackson National for the years ended December 31, 1996, and
December 31, 1995; and the applicable auditor's reports thereon are contained in
the SAI.
9
<PAGE> 32
THE ANNUITY CONTRACT
The fixed and variable annuity contract offered by Jackson National is a
contract between you, the owner, and Jackson National Life Insurance Company, an
insurance company. The contract provides a means for investing on a tax-deferred
basis in guaranteed accounts and investment portfolios. The contract is intended
for retirement savings or other long-term investment purposes and provides for a
death benefit and guaranteed income options.
The contract, like all deferred annuity contracts, has two phases: the
accumulation phase and the income phase. During the accumulation phase, earnings
accumulate on a tax-deferred basis and are taxed as income when you make a
withdrawal.
The contract offers guaranteed accounts. The guaranteed accounts offer an
interest rate that is guaranteed by Jackson National for the duration of the
guaranteed account period. While your money is in a guaranteed account, the
interest your money earns and your principal are guaranteed by Jackson National.
The value of a guaranteed account may be reduced if you make a withdrawal prior
to the end of the guaranteed account period, but will never be less than the
premium payments accumulated at 3% per year. If you choose to have your annuity
payments come from the guaranteed accounts, your payments will remain level
throughout the entire income phase.
The contract also offers investment portfolios. The investment portfolios are
designed to offer a higher return than the guaranteed accounts. HOWEVER, THIS IS
NOT GUARANTEED. IT IS POSSIBLE FOR YOU TO LOSE YOUR MONEY. If you put money in
the investment portfolios, the amount of money you are able to accumulate in
your contract during the accumulation phase depends upon the performance of the
investment portfolios you select. The amount of the income payments you receive
during the income phase also will depend, in part, on the performance of the
investment portfolios you choose for the income phase.
As the owner, you can exercise all the rights under the contract. You and your
spouse can be joint owners. You can assign the contract at any time during your
lifetime but Jackson National will not be bound until we receive written notice
of the assignment.
THE COMPANY
Jackson National is a stock life insurance company organized under the laws of
the state of Michigan in June 1961. Its legal domicile and principal business
address is 5901 Executive Drive, Lansing, Michigan 48911. Jackson National is
admitted to conduct life insurance and annuity business in the District of
Columbia and all states except New York. Jackson National is ultimately a
wholly-owned subsidiary of Prudential Corporation plc (London, England).
THE GUARANTEED ACCOUNTS
If you select a guaranteed account, your money will be placed with Jackson
National's other assets. The guaranteed accounts are not registered with the SEC
and the SEC does not review the information we provide to you about the
guaranteed accounts. Your contract contains a more complete description of the
guaranteed accounts.
THE SEPARATE ACCOUNT
The Jackson National Separate Account -- I was established by Jackson National
on June 14, 1993, pursuant to the provisions of Michigan law, as a segregated
asset account of the company. The separate account meets the definition of a
"separate account" under the federal securities laws and is registered with the
SEC as a unit investment trust under the Investment Company Act of 1940, as
amended.
The assets of the separate account legally belong to Jackson National and the
obligations under the contracts are obligations of Jackson National. However,
the contract assets in the separate account are not chargeable with liabilities
arising out of any other business Jackson National may conduct. All of the
income, gains and losses resulting from these assets are credited to or charged
against the contracts and not against any other contracts Jackson National may
issue.
10
<PAGE> 33
The separate account is divided into investment portfolios. Jackson National
does not guarantee the investment performance of the separate account or the
investment portfolios.
INVESTMENT PORTFOLIOS
You can put money in any or all of the investment portfolios. The investment
portfolios purchase shares of the following series of the JNL Series Trust:
JNL Aggressive Growth Series
JNL Capital Growth Series
JNL Global Equities Series
JNL/Alger Growth Series
JNL/Eagle Core Equity Series
JNL/Eagle SmallCap Equity Series
JNL/Putnam Growth Series*
JNL/Putnam Value Equity Series*
PPM America/JNL Balanced Series*
PPM America/JNL Money Market Series
Salomon Brothers/JNL Global Bond Series
Salomon Brothers/JNL U.S. Government & Quality Bond Series
T. Rowe Price/JNL Established Growth Series
T. Rowe Price/JNL International Equity Investment Series
T. Rowe Price/JNL Mid-Cap Growth Series
* Prior to May 1, 1997, the JNL/Putnam Growth Series was the JNL/Phoenix
Investment Counsel Growth Series, the JNL/Putnam Value Equity Series was the PPM
America/JNL Value Equity Series, and the PPM America/JNL Balanced Series was the
JNL/Phoenix Investment Counsel Balanced Series.
The series are described in the attached JNL Series Trust prospectus. Jackson
National Financial Services, Inc. serves as investment adviser for all of the
series. Janus Capital Corporation serves as sub-adviser for the JNL Aggressive
Growth, JNL Capital Growth and JNL Global Equities Series; Fred Alger
Management, Inc. serves as sub-adviser for the JNL/Alger Growth Series; Eagle
Asset Management, Inc. serves as sub-adviser for the JNL/Eagle Core Equity and
JNL/Eagle SmallCap Equity Series; Putnam Investment Management, Inc. serves as
sub-adviser for the JNL/Putnam Growth and JNL/Putnam Value Equity Series (prior
to May 1, 1997, the sub-adviser for the JNL/Putnam Growth Series was Phoenix
Investment Counsel, Inc. and the sub-adviser for the JNL/Putnam Value Equity
Series was PPM America, Inc.); PPM America, Inc. serves as sub-adviser for the
PPM America/JNL Balanced and PPM America/JNL Money Market Series (prior to May
1, 1997, the sub-adviser for the PPM America/JNL Balanced Series was Phoenix
Investment Counsel, Inc.); Salomon Brothers Asset Management Inc serves as
sub-adviser for the Salomon Brothers/JNL Global Bond and Salomon Brothers/JNL
U.S. Government & Quality Bond Series; T. Rowe Price Associates, Inc. serves as
sub-adviser for the T. Rowe Price/JNL Established Growth and T. Rowe Price/JNL
Mid-Cap Growth Series; and Rowe Price-Fleming International, Inc. serves as
sub-adviser for the T. Rowe Price/JNL International Equity Investment Series.
Depending on market conditions, you can make or lose money in any of the
investment portfolios. You should read the prospectus for the series carefully
before investing. Additional investment portfolios may be available in the
future.
Voting Rights
To the extent required by law, Jackson National will obtain from you and other
owners of the contracts instructions as to how to vote when the series solicits
proxies in conjunction with a vote of shareholders. When Jackson National
receives instructions, we will vote all the shares Jackson National owns in
proportion to those instructions.
Substitution
Jackson National may be required to substitute an investment portfolio with
another portfolio. We will not do this without the prior approval of the SEC.
Jackson National will give you notice of our intent to do this.
CONTRACT CHARGES
There are charges and other expenses associated with the contracts that reduce
the return on your investment in the contract. These charges may be a lesser
amount where required by state law or as
11
<PAGE> 34
described below, but will not be increased. These charges and expenses are:
Insurance Charges
Each day Jackson National makes a deduction for its insurance charges. We do
this as part of our calculation of the value of the accumulation units and
annuity units. On an annual basis, this charge equals 1.40% of the daily value
of the contracts invested in an investment portfolio, after expenses have been
deducted. This charge is for the mortality risks, expense risks and
administrative expenses assumed by Jackson National.
Contract Maintenance Charge
During the accumulation phase, Jackson National deducts a $35 ($30 in
Washington) annual contract maintenance charge on each anniversary of the date
on which your contract was issued. If you make a complete withdrawal from your
contract, the contract maintenance charge will also be deducted. This charge is
for administrative expenses.
Jackson National will not deduct this charge, if when the deduction is to be
made, the value of your contract is $50,000 or more. Jackson National may
discontinue this practice at any time.
Transfer Fee
A transfer fee of $25 will apply to transfers in excess of 15 in a contract
year. Jackson National may waive the transfer fee in connection with
pre-authorized automatic transfer programs, or may charge a lesser fee where
required by state law.
Withdrawal Charge
During the accumulation phase, you can make withdrawals from your contract. At
any time during the accumulation phase, you may withdraw premiums which are not
subject to a withdrawal charge (premiums in your annuity for seven years or
longer and not previously withdrawn). Once every year, you may withdraw the
greater of earnings or 10% of premiums paid (not yet withdrawn). Withdrawals in
excess of that will be charged a withdrawal charge starting at 7% in the first
year and declining 1% a year to 0% after 7 years. The withdrawal charge
compensates us for costs associated with selling the contracts.
For purposes of the withdrawal charge, Jackson National treats withdrawals as
coming from the oldest premium payment first. If you make a full withdrawal, the
withdrawal charge is based on premiums remaining in the contract. If you
withdraw only part of the value of your contract, we deduct the withdrawal
charge from the remaining value in your contract.
NOTE: For tax purposes, withdrawals are considered to have come from the last
money into the contract. Thus, for tax purposes, earnings are considered to come
out first.
Jackson National does not assess the withdrawal charge on any payments paid out
as (1) income payments after the first year, (2) death benefits or (3)
withdrawals necessary to satisfy the minimum distribution requirements of the
Internal Revenue Code. Withdrawals for terminal illness or other specified
conditions as defined by Jackson National may not be subject to a withdrawal
charge. These provisions are not available in all states.
Jackson National may reduce or eliminate the amount of the withdrawal charge
when the contract is sold under circumstances which reduce its sales expense.
Some examples are: the purchase of a contract by a large group of individuals or
an existing relationship between Jackson National and a prospective purchaser.
Jackson National will not deduct a withdrawal charge under a contract issued to
an officer, director, agent or employee of Jackson National or any of its
affiliates.
Other Expenses
Jackson National pays the operating expenses of the Separate Account.
There are deductions from and expenses paid out of the assets of the series.
These expenses are described in the attached JNL Series Trust prospectus.
12
<PAGE> 35
Premium Taxes
Some states and other governmental entities charge premium taxes or other
similar taxes. Jackson National is responsible for the payment of these taxes
and may make a deduction from the value of the contract for them. Premium taxes
generally range from 0% to 4% depending on the state.
Income Taxes
Jackson National will make a deduction from the contract for any income taxes
which it incurs because of the contract. Currently, we are not making any such
deduction.
Distribution of Contracts
Jackson National Financial Services, Inc., a wholly-owned subsidiary of Jackson
National, is located at 5901 Executive Drive, Lansing, Michigan 48911 and serves
as the distributor of the contracts.
Commissions will be paid to broker-dealers who sell the contracts. While
commissions may vary, they are not expected to exceed 8% of any premium payment.
Under certain circumstances, Jackson National may pay persistency bonuses, in
addition to the standard commissions. Jackson National may use any of its
corporate assets to cover the cost of distribution, including any profit from
the contract insurance charges.
PURCHASES
You can buy a contract for $5,000 or more under most circumstances ($2,000 or
more for a qualified plan contract). The maximum we accept without our prior
approval is $1 million.
You can add $500 ($50 under the automatic payment plan) at any time during the
accumulation phase.
The minimum that you may allocate to a guaranteed account or investment
portfolio is $100. There is a $100 minimum balance requirement for each
guaranteed account and investment portfolio.
When you purchase a contract, Jackson National will allocate your premium to one
or more of the guaranteed accounts and/or the investment portfolios you have
selected. Your allocations must be in whole percentages ranging from 0% to 100%.
Jackson National will allocate additional premiums in the same way unless you
tell us otherwise.
There may be more than eighteen investment options available under the contract;
however, you may not allocate your money to more than eighteen investment
options during the life of your contract.
Jackson National will issue your contract and allocate your first premium within
2 business days after we receive your complete application and first premium. If
your application is not complete, we will contact you to get the necessary
information. If for some reason Jackson National is unable to complete this
process within 5 business days, we will either return your money or get your
permission to keep it until we receive all of the necessary information.
The Jackson National business day closes when the New York Stock Exchange
closes, usually 4:00 p.m. Eastern time.
Accumulation Units
The contract value allocated to the investment portfolios will go up or down
depending on the performance of the portfolios. In order to keep track of the
value of your contract, Jackson National uses a unit of measure called an
accumulation unit. (An accumulation unit is similar to a share of a mutual
fund.) During the income phase it is called an annuity unit.
Every business day Jackson National determines the value of an accumulation unit
for each of the investment portfolios. This is done by:
1. determining the total amount of money invested in the particular
investment portfolio;
2. subtracting any insurance charges;
3. dividing this amount by the number of outstanding accumulation units.
The value of an accumulation unit may go up or down from day to day.
When you make a premium payment, Jackson National credits your contract with
accumulation
13
<PAGE> 36
units. The number of accumulation units credited is determined at the close of
Jackson National's business day by dividing the amount of the premium allocated
to any investment portfolio by the value of the accumulation unit for that
investment portfolio.
TRANSFERS
You can transfer money between guaranteed accounts and investment portfolios
during the accumulation phase. During the income phase, you can transfer money
between investment portfolios.
You can make 15 transfers every year during the accumulation phase without
charge. The minimum amount that you can transfer is $100 (unless the transfer is
made under a pre-authorized automatic transfer program). If the remaining value
in a guaranteed account or investment portfolio would be less than $100 after a
transfer, you must transfer the entire value or you may not make the transfer.
Telephone Transactions
If you elect the telephone transfer privilege on your application, you may make
transfers by telephone. You must complete your telephone call authorizing a
transfer by the close of Jackson National's business day in order to receive
that day's value for an accumulation unit of an investment portfolio.
Jackson National has procedures which are designed to provide reasonable
assurance that telephone authorizations are genuine. Our procedures include
requesting identifying information and tape recording telephone communications.
Jackson National and its affiliates disclaim all liability for any claim, loss
or expense resulting from any alleged error or mistake in connection with a
telephone transfer which was not properly authorized by you. However, if Jackson
National fails to employ reasonable procedures to ensure that all telephone
transfers are properly authorized, we may be held liable for such losses.
Jackson National reserves the right to modify or discontinue at any time and
without notice the acceptance of instructions from someone other than you and/or
the telephone transfer privilege.
ACCESS TO YOUR MONEY
You can have access to the money in your contract: (1) by making either a
partial or complete withdrawal or (2) by electing to receive income payments.
Your beneficiary can have access to the money in your contract when a death
benefit is paid.
When you make a complete withdrawal you will receive the value of the contract
on the day you made the withdrawal less any premium tax, less any contract
maintenance charge, and less any withdrawal charge. Except in connection with
the systematic withdrawal program, you must withdraw at least $500 or, if less,
the entire amount in the guaranteed account or investment portfolio from which
you are making the withdrawal. After your withdrawal, you must have at least
$100 left in the guaranteed account or investment portfolio.
INCOME TAXES, TAX PENALTIES AND CERTAIN RESTRICTIONS MAY APPLY TO ANY WITHDRAWAL
YOU MAKE.
There are limitations on withdrawals from a qualified plan referred to as a
403(b) annuity. See "Taxes."
Systematic Withdrawal Program
You can arrange to have money automatically sent to you periodically while your
contract is still in the accumulation phase. You will have to pay taxes on money
you receive and withdrawals you make before you reach 59 1/2 may be subject to a
10% tax penalty.
We reserve the right to charge a fee for participation or to discontinue
offering this program in the future.
Suspension of Withdrawals
Jackson National may be required to suspend or delay withdrawals from a contract
when:
1. the New York Stock Exchange is closed (other than customary weekend and
holiday closings);
2. trading on the New York Stock Exchange is restricted;
3. an emergency exists so that it is not reasonably practicable to dispose
of shares of
14
<PAGE> 37
the investment portfolios or determine investment portfolio values;
4. the SEC, by order, may permit for the protection of owners.
Jackson National has reserved the right to defer payment for a withdrawal or
transfer from the guaranteed accounts for the period permitted by law, but not
more than six months.
INCOME PAYMENTS (THE INCOME PHASE)
The income phase occurs when you begin receiving regular payments from your
contract. The income date is the month and year in which those payments begin.
You can choose the income date and an income option. The income options are
described below.
If you do not choose an income option, we will assume that you selected Option 3
which provides a life annuity with 120 months of guaranteed payments.
You can change the income date or income option at any time before the income
date. You must give us 7 days notice. Income payments must begin by your 90th
birthday under a non-qualified contract (or an earlier date under a qualified
contract if required by law). Jackson National will assess a withdrawal charge
on income payments which occur within one year of the date the contract is
issued.
At the income date, you can choose whether payments will come from the
guaranteed accounts, the investment portfolios or both. Unless you tell us
otherwise, your income payments will be based on the investment allocations that
were in place on the income date.
If you choose to have any portion of your annuity payments come from the
investment portfolio(s), the dollar amount of your payment will depend upon
three things: 1) the value of your contract in the investment portfolio(s) on
the income date, 2) the 3% assumed investment rate used in the annuity table for
the contract, and 3) the performance of the investment portfolios you selected.
If the actual performance exceeds the 3% assumed rate, your income payments will
increase. Similarly, if the actual rate is less than 3%, your income payments
will decrease.
You can choose to have income payments made monthly, quarterly, semi-annually,
or annually. However, if you have less than $5,000 to apply toward an income
option and state law permits, Jackson National may provide your payment in a
single lump sum. Likewise, if your first income payment would be less than $50
and state law permits, Jackson National may set the frequency of payments so
that the first payment would be at least $50.
Income Options
The annuitant is the person whose life we look to when we make income payments.
(Each description assumes that you are the owner and annuitant.)
OPTION 1 -- Life Income. This income option provides monthly payments for your
life.
OPTION 2 -- Joint and Survivor Annuity. This income option provides monthly
payments for your life and for the life of another person (usually your spouse)
selected by you.
OPTION 3 -- Life Annuity With 120 or 240 Monthly Payments Guaranteed. This
income option provides monthly payments for your life, but with payments
continuing to your beneficiary for the remainder of 10 or 20 years (as you
select) if you die before the end of the selected period.
OPTION 4 -- Income for a Specified Period. This income option provides monthly
payments for any number of years from 5 to 30.
ADDITIONAL OPTIONS -- Other income options may be made available by Jackson
National.
If you choose an income option for which payments are based on life expectancy,
you cannot make a withdrawal during the income phase.
DEATH BENEFIT
Death of Owner Before the Income Date
If you die before moving to the income phase, the person you have chosen as your
beneficiary will receive a death benefit. If you have a joint owner, the
15
<PAGE> 38
death benefit will be paid when the first joint owner dies. Joint owners must be
spouses. The surviving joint owner will be treated as the beneficiary. Any other
beneficiary designated will be treated as a contingent beneficiary.
The death benefit equals: (a) current contract value OR (b) the total premiums
(less withdrawals, withdrawal charges and premium taxes) compounded at 5%* OR
(c) the contract value at the end of the 7th contract year PLUS all premiums
made since the 7th year (less withdrawals, withdrawal charges and premium taxes)
compounded at 5%* -- whichever is GREATEST. The death benefit under (c) will
never exceed 250% of premiums paid, less partial withdrawals. The death benefit
under (b) and (c) may not be available in all states.
The entire death benefit must be paid within 5 years of the date of death unless
the beneficiary elects to have the death benefit payable under an income option.
The death benefit payable under an income option must be paid over the
beneficiary's lifetime or for a period not extending beyond the beneficiary's
life expectancy. Payments must begin within one year of the date of death.
Unless the beneficiary chooses to receive the death benefit in a single sum, the
beneficiary must elect an income option within the 60 day period beginning with
the date Jackson National receives proof of death. If the beneficiary chooses to
receive the death benefit in a single sum and all the necessary requirements are
met, Jackson National will pay the death benefit within 7 days. If the
beneficiary is your spouse, he/she can continue the contract in his/her own name
at the then current contract value.
Death of Owner After the Income Date
If you or a joint owner die after moving to the income phase, any remaining
payments under the income option elected will continue at least as rapidly as
under the method of distribution in effect at the date of death. If you die, the
beneficiary becomes the owner. If the joint owner dies, the surviving joint
owner, if any, will be the designated beneficiary. Any other beneficiary
designation on record at the time of death will be treated as a contingent
beneficiary.
Death of Annuitant
If the annuitant is not an owner or joint owner and the annuitant dies before
the income date, you can name a new annuitant. If you do not name a new
annuitant within 30 days of the death of the annuitant, you will become the
annuitant. However, if the owner is a non-natural person (for example, a
corporation), then the death of the annuitant will be treated as the death of
the owner, and a new annuitant may not be named.
If the annuitant dies after the income date, the death benefit, if any, will be
as provided for in the income option selected. Death benefits will be paid at
least as rapidly as under the method of distribution in effect at the
annuitant's death.
TAXES
THE FOLLOWING IS GENERAL INFORMATION AND IS NOT INTENDED AS TAX ADVICE TO ANY
INDIVIDUAL. YOU SHOULD CONSULT YOUR OWN TAX ADVISER.
The Internal Revenue Code (Code) provides that you will not be taxed on the
earnings on the money held in your contract until you take money out (this is
referred to as tax deferral). There are different rules as to how you will be
taxed depending on how you take the money out and the type of contract you have
(non-qualified or qualified).
Non-Qualified Contracts -- General Taxation
You will not be taxed on increases in the value of your contract until a
distribution (either as a withdrawal or as an income payment) occurs. When you
make a withdrawal you are taxed on the amount of the withdrawal that is
earnings. For income payments, a portion of each income payment is treated as a
partial return of your premium and will not be taxed. The remaining portion of
the income
- ---------------
* (4% if the owner is over age 70 at the date of issue)
16
<PAGE> 39
payment will be treated as ordinary income. How the income payment is divided
between taxable and non-taxable portions depends on the period over which income
payments are expected to be made. Income payments received after you have
received all of your premium are treated as income.
If a non-qualified contract is owned by a non-natural person (e.g., corporation
or certain other entities other than tax-qualified trusts), the contract will
generally not be treated as an annuity for tax purposes.
Qualified and Non-Qualified Contracts
If you purchase the contract as an individual and not under any pension plan,
specially sponsored program or an individual retirement annuity, your contract
is referred to as a non-qualified contract.
If you purchase the contract under a pension plan, specially sponsored program,
or an individual retirement annuity, your contract is referred to as a qualified
contract. Examples of qualified plans are: Individual Retirement Annuities
(IRAs), Tax-Sheltered Annuities (sometimes referred to as 403(b) contracts),
H.R. 10 Plans (sometimes referred to as Keogh Plans), and pension and profit-
sharing plans, which include 401(k) plans.
Withdrawals -- Non-Qualified Contracts
If you make a withdrawal from your contract, the Code treats the withdrawal as
first coming from earnings and then from your premium payments. Withdrawn
earnings are includible in income.
The Code also provides that any amount received under an annuity contract which
is included in income may be subject to a 10% penalty. Some withdrawals will be
exempt from the penalty. They include any amounts: (1) paid on or after the
taxpayer reaches age 59 1/2; (2) paid after you die; (3) paid if the taxpayer
becomes totally disabled (as that term is defined in the Code); (4) paid in a
series of substantially equal payments made annually (or more frequently) under
a lifetime annuity; (5) paid under an immediate annuity; or (6) which come from
premiums made prior to August 14, 1982.
Withdrawals -- Qualified Contracts
There are special rules that govern qualified contracts. We have provided
additional discussion in the Statement of Additional Information.
Withdrawals -- Tax-Sheltered Annuities
The Code limits the withdrawal of premiums from certain Tax-Sheltered Annuities.
Withdrawals can only be made when an owner: (1) reaches age 59 1/2; (2) leaves
his/her job; (3) dies; (4) becomes disabled (as that term is defined in the
Code); or (5) in the case of hardship. However, in the case of hardship, the
owner can only withdraw the premium and not any earnings.
Withdrawals -- Roth IRAs
Beginning in 1998, individuals may purchase a new type of non-deductible IRA,
known as a Roth IRA. Qualified distributions from Roth IRAs are entirely tax
free. A qualified distribution requires that the individual has held the Roth
IRA for at least five years and, in addition, that the distribution is made
either after the individual reaches age 59 1/2, on the individual's death or
disability, or as qualified first-time home purchase, subject to $10,000
lifetime maximum, for the individual, a spouse, child, grandchild, or ancestor.
Withdrawals -- Investment Adviser Fees
The Internal Revenue Service has, through a series of Private Letter Rulings,
held that the payment of investment adviser financial planner fees from an IRA
or a Tax-Sheltered Annuity is permissible under certain circumstances and will
not be considered a distribution for income tax purposes. The Rulings require
that in order to receive this favorable tax treatment, the annuity contract
must, under a written agreement, be solely liable (not jointly with the contract
owner) for payment of the adviser's fee and the fee must actually be paid from
the annuity contract to the adviser. Withdrawals from non-qualified contracts
for the payment of investment fees will be considered distributions from the
contract.
17
<PAGE> 40
Restrictions Under the Texas Optional Retirement Program (ORP)
Contracts issued to participants in ORP contain restrictions required under the
Texas Administrative Code. In accordance with those restrictions, a participant
in ORP will not be permitted to make withdrawals prior to such participant's
retirement, death, attainment of age 70 1/2 year or termination of employment in
a Texas public institution of higher education. The restrictions on withdrawal
do not apply in the event a participant in ORP transfers the contract value to
another approved contract or vendor during the period of ORP participation.
Assignment
An assignment may be a taxable event. If the contract is issued pursuant to a
qualified plan, there may be limitations on your ability to assign the contract.
Diversification
The Code provides that the underlying investments for a variable annuity must
satisfy certain diversification requirements in order to be treated as an
annuity contract. Jackson National believes that the underlying investments are
being managed so as to comply with these requirements.
Neither the Code nor the Internal Revenue Service Regulations issued to date
provide guidance as to the circumstances under which you, because of the degree
of control you exercise over the underlying investments, and not Jackson
National would be considered the owner of the shares of the investment
portfolios. If this occurs, it will result in the loss of the favorable tax
treatment for the contract.
It is unknown to what extent owners are permitted to select investment
portfolios, to make transfers among the investment portfolios or the number and
type of investment portfolios from which owners may select. If any guidance is
provided which is considered a new position, then the guidance would generally
be applied prospectively. However, if such guidance is considered not to be a
new position, it may be applied retroactively. This would mean that you, as the
owner of the contract, could be treated as the owner of the investment
portfolios. Due to the uncertainty in this area, Jackson National reserves the
right to modify the contract in an attempt to maintain favorable tax treatment.
OTHER INFORMATION
Dollar Cost Averaging
You can arrange to automatically have a regular amount of money periodically
transferred into the investment portfolios. This theoretically gives you a lower
average cost per unit over time than you would receive if you made a one time
purchase.
To participate in this program, you must have a total contract value of at least
$15,000 (unless we waive this requirement).
Jackson National does not currently charge for participation in this program. We
may do so in the future.
Rebalancing
You can arrange to have Jackson National automatically reallocate money between
investment portfolios periodically to keep the blend you select.
Jackson National does not currently charge for participation in this program. We
may do so in the future.
Free Look
If you cancel the contract within twenty days after receiving it (or whatever
period is required in your state), Jackson National will return the amount your
contract is worth on the day we receive your request. This may be more or less
than your original payment. If required by law, Jackson National will return
your premium.
Advertising
From time to time, Jackson National may advertise several types of performance
for the investment portfolios. Total return is the overall change in the value
of an investment in an investment portfolio over
18
<PAGE> 41
a given period of time. Standardized average annual total return is calculated
in accordance with SEC guidelines. Non-standardized total return may be for
periods other than those required or may otherwise differ from standardized
average annual total return. Yield refers to the income generated by an
investment over a given period of time.
Performance will be calculated by determining the percentage change in the value
of an accumulation unit by dividing the increase (decrease) for that unit by the
value of the accumulation unit at the beginning of the period. Performance will
reflect the deduction of the insurance charges and may reflect the deduction of
the contract maintenance charge and withdrawal charge. The deduction of the
contract maintenance and/or the withdrawal charge would reduce the percentage
increase or make greater any percentage decrease.
If a series has been in existence for a longer period than the investment
portfolio, performance will be based upon the period quoted.
Market Timing and Asset Allocation Services
Market timing and asset allocation services offered by third parties must comply
with Jackson National's administrative systems, rules and procedures.
Modification of the Contract
Only the President, Vice President, Secretary or Assistant Secretary of Jackson
National may approve a change to or waive a provision of the contract. Any
change or waiver must be in writing. Jackson National may change the terms of
the contract in order to comply with changes in applicable law, or otherwise as
deemed necessary by Jackson National.
Legal Proceedings
There are no material legal proceedings, other than ordinary routine litigation
incidental to the business, to which Jackson National Life Insurance Company,
Jackson National Financial Services, Inc., and the Jackson National Separate
Account -- I are parties.
Questions
If you have questions about your contract, you may call us at (800) 539-9034, or
write to us at: Jackson National Life Annuity Service Center, 8055 E. Tufts
Avenue, Second Floor, Denver, Colorado 80237.
19
<PAGE> 42
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<S> <C>
General Information and History............................. 2
Services.................................................... 2
Purchase of Securities Being Offered........................ 2
Underwriters................................................ 2
Calculation of Performance.................................. 3
Additional Tax Information.................................. 7
Income Payments; Net Investment Factor...................... 15
Financial Statements........................................ 17
</TABLE>
20
<PAGE> 43
APPENDIX A
CONDENSED FINANCIAL INFORMATION
Accumulation Unit Values
The following table shows accumulation unit values at the beginning and end of
the periods indicated as well as the number of accumulation units outstanding
for each portfolio as of September 30, 1997, December 31, 1996, and December 31,
1995. This information has been taken from the Separate Account's financial
statements. The Separate Account's financial statements for the periods ended
December 31, 1996, and December 31, 1995, have been audited by Price Waterhouse
LLP, independent accountants. This information should be read together with the
Separate Account's financial statements and related notes which are in the SAI.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
PORTFOLIOS 1997 1996 1995(A)
- -------------------------------------------------------------------
<S> <C> <C> <C>
JNL Aggressive Growth
Portfolio
Accumulation unit
value:
Beginning of period $11.95 $10.20 $10.00
End of period $13.79 $11.95 $10.20
Accumulation units
outstanding at the
end of period 4,815,480 2,355,530 4,008
JNL Capital Growth
Portfolio
Accumulation unit
value:
Beginning of period $11.87 $10.34 $10.00
End of period $13.25 $11.87 $10.34
Accumulation units
outstanding at the
end of period 4,900,267 2,985,668 1,587
JNL Global Equities
Portfolio
Accumulation unit
value:
Beginning of period $13.57 $10.48 $10.00
End of period $16.71 $13.57 $10.48
Accumulation units
outstanding at the
end of period 8,138,352 3,090,234 4,778
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
PORTFOLIOS 1997 1996 1995(A)
- -------------------------------------------------------------------
<S> <C> <C> <C>
JNL/Alger Growth
Portfolio
Accumulation unit
value:
Beginning of period $11.11 $9.93 $10.00
End of period $14.34 $11.11 $9.93
Accumulation units
outstanding at the
end of period 5,158,975 3,310,810 12,285
JNL/Eagle Core Equity
Portfolio
Accumulation unit
value:
Beginning of period $10.52 $10.00 N/A(b)
End of period $13.38 $10.52 N/A(b)
Accumulation units
outstanding at the
end of period 651,921 84,895 N/A(b)
JNL/Eagle SmallCap
Equity Portfolio
Accumulation unit
value:
Beginning of period $11.12 $10.00 N/A(b)
End of period $15.39 $11.12 N/A(b)
Accumulation units
outstanding at the
end of period 690,712 71,014 N/A(b)
</TABLE>
(a) The Separate Account commenced operation on October 16, 1995.
(b) The JNL/Eagle Core Equity Portfolio and the JNL/Eagle SmallCap Equity
Portfolio commenced operations on
September 16, 1996.
(c) Prior to May 1, 1997, the JNL/Putnam Growth Series was the JNL/Phoenix
Investment Counsel Growth Series and
the management fee was .90%, the JNL/Putnam Value Equity Series was the PPM
America/JNL Value Equity Series
and the management fee was .75%; and the PPM America/JNL Balanced Series was
the JNL/Phoenix Investment
Counsel Balanced Series and the management fee was .90%
21
<PAGE> 44
<TABLE>
<CAPTION>
JNL/Putnam Growth
Portfolio(c)
Accumulation unit
value:
- -------------------------------------------------------------------
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
PORTFOLIOS 1997 1996 1995(A)
- -------------------------------------------------------------------
<S> <C> <C> <C>
Beginning of period $13.22 $10.58 $10.00
End of period $15.43 $13.22 $10.58
Accumulation units
outstanding at the
end of period 4,323,083 1,682,604 571
JNL/Putnam Value
Equity Portfolio(c)
Accumulation unit
value:
Beginning of period $12.98 $10.59 $10.00
End of period $15.69 $12.98 $10.59
Accumulation units
outstanding at the
end of the period 5,099,068 1,330,288 3,944
PPM America/JNL
Balanced
Portfolio(c)
Accumulation unit
value:
Beginning of period $11.29 $10.34 $10.00
End of period $12.94 $11.29 $10.34
Accumulation units
outstanding at the
end of period 3,846,253 2,120,529 12,871
PPM America/JNL Money
Market Portfolio
Accumulation unit
value:
Beginning of period $10.37 $10.03 $10.00
End of period $10.65 $10.37 $10.03
Accumulation units
outstanding at the
end of period 3,111,164 2,193,176 14,608
Salomon Brothers/JNL
Global Bond
Portfolio
Accumulation unit
value:
Beginning of period $11.74 $10.41 $10.00
End of period $12.72 $11.74 $10.41
Accumulation units
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
PORTFOLIOS 1997 1996 1995(A)
- -------------------------------------------------------------------
<S> <C> <C> <C>
outstanding at the
end of the period 2,236,757 911,885 3,128
Salomon Brothers/JNL
U.S. Government &
Quality Bond
Portfolio
Accumulation unit
value:
Beginning of period $10.33 $10.21 $10.00
End of period $10.81 $10.33 $10.21
Accumulation units
outstanding at the
end of period 1,611,680 902,055 1,275
T. Rowe Price/JNL
Established
Growth Portfolio
Accumulation unit
value:
Beginning of period $12.53 $10.36 $10.00
End of period $15.59 $12.53 $10.36
Accumulation units
outstanding at the
end of period 6,170,389 2,500,896 10,564
T. Rowe Price/JNL
International
Equity Investment
Portfolio
Accumulation unit
value:
Beginning of period $11.78 $10.49 $10.00
End of period $12.95 $11.78 10.49
Accumulation units
outstanding at the
end of period 4,028,438 2,039,430 3,096
T. Rowe Price/JNL
Mid-Cap
Growth Portfolio
Accumulation unit
value:
Beginning of period $12.59 $10.37 $10.00
End of period $14.76 $12.59 $10.37
Accumulation units
outstanding at the
end of period 7,149,711 3,585,051 5,120
</TABLE>
(a) The Separate Account commenced operation on October 16, 1995.
(b) The JNL/Eagle Core Equity Portfolio and the JNL/Eagle SmallCap Equity
Portfolio commenced operations on
September 16, 1996.
(c) Prior to May 1, 1997, the JNL/Putnam Growth Series was the JNL/Phoenix
Investment Counsel Growth Series and
the management fee was .90%, the JNL/Putnam Value Equity Series was the PPM
America/JNL Value Equity Series
and the management fee was .75%; and the PPM America/JNL Balanced Series was
the JNL/Phoenix Investment
Counsel Balanced Series and the management fee was .90%
22
<PAGE> 45
STATEMENT OF ADDITIONAL INFORMATION
JANUARY 2, 1998
INDIVIDUAL DEFERRED FIXED AND VARIABLE ANNUITY CONTRACTS
ISSUED BY THE JACKSON NATIONAL SEPARATE ACCOUNT - I
OF JACKSON NATIONAL LIFE INSURANCE COMPANY
This Statement of Additional Information is not a prospectus. It contains
information in addition to and more detailed than set forth in the Prospectus
and should be read in conjunction with the Prospectus dated January 2, 1998.
The Prospectus may be obtained from Jackson National Life Insurance Company by
writing P. O. Box 30389, Lansing, MI 48909-7889, or calling 1-800-766-4683.
TABLE OF CONTENTS
PAGE
General Information and History.........................................2
Services................................................................2
Purchase of Securities Being Offered....................................2
Underwriters............................................................2
Calculation of Performance..............................................3
Additional Tax Information..............................................7
Income Payments; Net Investment Factor.................................15
Financial Statements...................................................17
1
<PAGE> 46
GENERAL INFORMATION AND HISTORY
Jackson National Separate Account - I (Separate Account) is a separate
investment account of Jackson National Life Insurance Company (Jackson
National). Jackson National is a wholly-owned subsidiary of Brooke Life
Insurance Company, and is ultimately a wholly-owned subsidiary of Prudential
Corporation plc, London, England the largest life insurance company in the
United Kingdom.
SERVICES
Jackson National has responsibility for administration of the contracts
and the Separate Account. We maintain records of the name, address, taxpayer
identification number and other pertinent information for each contract owner
and the number and type of contracts issued to each contract owner, and records
with respect to the value of each contract.
Jackson National is also the custodian of the assets of the Separate
Account. As custodian, we maintain a record of all purchases and redemptions
of shares of the series underlying the investment portfolios.
Price Waterhouse LLP, 100 East Wisconsin Avenue, Milwaukee, Wisconsin
53202, audits and reports on Jackson National's financial statements,
including the financial statements of the Separate Account, and performs other
professional accounting, auditing and advisory services when engaged to do so
by Jackson National.
Blazzard, Grodd & Hasenauer, P.C. of Westport, Connecticut has provided
advice on certain matters relating the federal securities and income tax laws
in connection with the contracts described in the Prospectus.
PURCHASE OF SECURITIES BEING OFFERED
The contracts will be sold by licensed insurance agents in states where
the contracts may be lawfully sold. The agents will be registered
representatives of broker-dealers that are registered under the Securities
Exchange Act of 1934 and members of the National Association of Securities
Dealers, Inc. (NASD).
UNDERWRITERS
The contracts are offered continuously and are distributed by Jackson
National Financial Services, Inc. (JNFSI), 5901 Executive Drive, Lansing,
Michigan 48911. JNFSI is a subsidiary of Jackson National.
CALCULATION OF PERFORMANCE
2
<PAGE> 47
When Jackson National advertises performance for an investment portfolio
(except the PPM America/JNL Money Market Portfolio), we will include quotations
of standardized average annual total return to facilitate comparison with
standardized average annual total return advertised by other variable annuity
separate accounts. We will calculate standardized average annual total return
according to the standard methods prescribed by rules of the Securities and
Exchange Commission. Standardized average annual total return for a specific
period is calculated by taking a hypothetical $1,000 investment in an
investment portfolio at the offering on the first day of the period ("initial
investment"), and computing the ending redeemable value ("redeemable value") of
that investment at the end of the period. The redeemable value is then divided
by the initial investment and expressed as a percentage, carried to at least
the nearest hundredth of a percent. Standardized total return is annualized
and reflects the deduction of the insurance charges and the contract
maintenance charge. The redeemable value also reflects the effect of any
applicable withdrawal charge that may be imposed at the end of the period. No
deduction is made for premium taxes which may be assessed by certain states.
The standardized average annual total returns for each investment portfolio
(except the PPM America/JNL Money Market Portfolio) for the periods indicated
are as follows:
<TABLE>
<CAPTION>
Date of Initial
Investment in
One Year Corresponding
Period Ended Series to
September 30, September 30,
1997 1997
------------ ---------------
<S> <C> <C>
JNL Aggressive Growth Portfolio 8.63% 15.83%
JNL Capital Growth Portfolio -1.59% 13.69%
JNL Global Equities Portfolio 21.86% 28.74%
JNL/Alger Growth Portfolio 25.70% 18.30%
JNL/Eagle Core Equity Portfolio 27.27 26.84%*
JNL/Eagle SmallCap Equity Portfolio 46.48 46.88%*
JNL/Putnam Growth Portfolio 13.53% 23.52%
JNL/Putnam Value Equity Portfolio 24.61% 24.29%
</TABLE>
3
<PAGE> 48
<TABLE>
<S> <C> <C>
PPM America/JNL Balanced Portfolio 11.71% 11.75%
PPM America/JNL High Yield Bond Portfolio 9.50% 10.16%
Salomon Brothers/JNL Global Bond Portfolio 3.96% 10.82%
Salomon Brothers/JNL U.S. Government & Quality
Bond Portfolio -0.15% 1.10%
T. Rowe Price/JNL Established Growth Portfolio 24.06% 23.81%
T. Rowe Price/JNL International Equity Investment Portfolio 6.69% 11.86%
T. Rowe Price/JNL Mid-Cap Growth Portfolio 14.34% 20.27%
</TABLE>
*Not Annualized.
Prior to May 1, 1997, the PPM America/JNL Balanced Portfolio was the
JNL/Phoenix Investment Counsel Balanced Portfolio and the corresponding series
was sub-advised by Phoenix Investment Counsel, Inc., the JNL/Putnam Growth
Portfolio was the JNL/Phoenix Investment Counsel Growth Portfolio and the
corresponding series was sub-advised by Phoenix Investment Counsel, Inc., and
the JNL/Phoenix Value Equity Portfolio was the PPM America/JNL Value Equity
Portfolio and the corresponding series was sub-advised by PPM America, Inc.
Jackson National may also advertise non-standardized total return.
Nonstandardized total return may be for periods other than those required to be
presented or may otherwise differ from standardized total return. Because the
contract is designed for long term investment, non-standardized total return
that does not reflect the deduction of any applicable withdrawal charge may be
advertised. Reflecting the deduction of the withdrawal charge decreases the
level of performance advertised. Non-standardized total return may also assume
a larger initial investment which more closely approximates the size of a
typical contract. The non-standardized total returns that each investment
portfolio (except the PPM America/JNL Money Market Portfolio) would have
achieved if it had been invested in the corresponding series for the periods
indicated, calculated in a manner similar to standardized average annual total
return but assuming a hypothetical initial investment of $10,000, deducting a
maximum $35 contract maintenance charge, and without deducting the withdrawal
charge, are as follows:
One Year Commencement
4
<PAGE> 49
<TABLE>
<CAPTION>
of Operations of
Corresponding
Period Ended Series to
September 30, September 30,
1997 1997
------------ ---------------
<S> <C> <C>
JNL Aggressive Growth Portfolio* 16.30% 23.89%
JNL Capital Growth Portfolio* 6.24% 24.98%
JNL Global Equities Portfolio* 29.72% 34.99%
JNL/Alger Growth Portfolio** 33.43% 19.42%
JNL/Eagle Core Equity Portfolio*** 34.67% 33.41%
JNL/Eagle SmallCap Equity Portfolio*** 53.79% 56.03%
JNL/ Putnam Growth Portfolio* 21.03% 29.24%
JNL/ Putnam Value Equity Portfolio* 32.03% 27.99%
PPM America/JNL Balanced Portfolio 19.06% 16.31%
PPM America/JNL High Yield Bond Portfolio* 16.57% 11.91%
Salomon Brothers/JNL Global Bond Portfolio* 11.16% 11.59%
Salomon Brothers/JNL U.S. Government & Quality
Bond Portfolio* 6.99% 4.97%
T. Rowe Price/JNL Established Growth Portfolio* 31.71% 28.31%
T. Rowe Price/JNL International Equity
Investment Portfolio* 14.22% 12.09%
T. Rowe Price/JNL Mid-Cap Growth Portfolio* 22.31% 28.79%
</TABLE>
* Corresponding series commenced operations on May 15, 1995.
** Corresponding series commenced operations on October 16, 1995.
***Corresponding series commenced operations on September 16, 1996.
Prior to May 1, 1997, the PPM America/JNL Balanced Portfolio was the
JNL/Phoenix Investment Counsel Balanced Portfolio and the corresponding series
was sub-advised by Phoenix Investment Counsel, Inc., the JNL/Putnam Growth
Portfolio was the JNL/Phoenix Investment Counsel Growth Portfolio and the
corresponding series was
5
<PAGE> 50
sub-advised by Phoenix Investment Counsel, Inc., and the JNL/Phoenix Value
Equity Portfolio was the PPM America/JNL Value Equity Portfolio and the
corresponding series was sub-advised by PPM America, Inc.
Standardized total return quotations will be current to the last day of
the calendar quarter preceding the date on which an advertisement is submitted
for publication. Both standardized total return quotations and nonstandardized
total return quotations will be based on rolling calendar quarters and will
cover at least periods of one, five, and ten years, or a period covering the
time the investment portfolio has been in existence, if it has not been in
existence for one of the prescribed periods. If the corresponding series has
been in existence for longer than the investment portfolio, the
nonstandardized total return quotations will show the investment performance
the investment partfolio would have achieved (reduced by the applicable
charges) had it been held in the series for the period quoted.
Quotations of standardized total return and non-standardized total return
are based upon historical earnings and will fluctuate. Any quotation of
performance should not be considered a guarantee of future performance.
Factors affecting the performance of a series include general market
conditions, operating expenses and investment management. An owner's
withdrawal value upon surrender of a contract may be more or less than original
cost.
Jackson National may advertise the current annualized yield for a 30-day
period for the PPM America/JNL Balanced Portfolio, the PPM America/JNL High
Yield Bond Portfolio, the Salomon Brothers/JNL Global Bond Portfolio and the
Salomon Brothers/JNL U.S. Government & Quality Bond Portfolio. The annualized
yield of an investment portfolio refers to the income generated by the
investment portfolio over a specified 30-day period. Because this yield is
annualized, the yield generated by an investment portfolio during the 30-day
period is assumed to be generated each 30-day period. The yield is computed by
dividing the net investment income per accumulation unit earned during the
period by the price per unit on the last day of the period, according to the
following formula:
a-b 6
YIELD = 2[( ------ + 1) - 1]
cd
Where:
a = net investment income earned during the period by the series
attributable to shares owned by the investment portfolio.
b = expenses for the investment portfolio accrued for the period (net
of reimbursements).
6
<PAGE> 51
c = the average daily number of accumulation units outstanding during
the period.
d = the maximum offering price per accumulation unit on the last day
of the period.
Net investment income will be determined in accordance with rules
established by the Securities and Exchange Commission. Accrued expenses will
include all recurring fees that are charged to all contracts.
The yield for the 30-day period ended September 30, 1997 for each of the
above-referenced investment portfolios is as follows:
<TABLE>
<S> <C>
PPM America/JNL Balanced Portfolio 1.22%
PPM America/JNL High Yield Bond Portfolio 6.50%
Salomon Brothers/JNL Global Bond Portfolio 5.93%
Salomon Brothers/JNL U.S. Government & Quality Bond Portfolio 4.51%
</TABLE>
Prior to May 1, 1997, the PPM America/JNL Balanced Portfolio was the
JNL/Phoenix Investment Counsel Balanced Portfolio and the corresponding series
was sub-advised by Phoenix Investment Counsel, Inc.
Because of the charges and deductions imposed by the Separate Account, the
yield for an investment portfolio will be lower than the yield for the
corresponding series. The yield on amounts held in the investment portfolios
normally will fluctuate over time. Therefore, the disclosed yield for any
given period is not an indication or representation of future yields or rates
of return. An investment portfolio's actual yield will be affected by the
types and quality of portfolio securities held by the series and the series
operating expenses.
Any current yield quotations of the PPM America/JNL Money Market
Portfolio, subject to Rule 482 of the Securities Act of 1933, will consist of a
seven calendar day historical yield, carried at least to the nearest hundredth
of a percent. The yield will be calculated by determining the net change,
exclusive of capital changes, in the value of a hypothetical pre-existing
account having a balance of one accumulation unit at the beginning of the base
period, subtracting a hypothetical charge reflecting deductions from contracts,
and dividing the net change in account value by the value of the account at the
beginning of the period to obtain a base period return and multiplying the base
period return by (365/7). The PPM America/JNL Money Market Portfolio's
effective yield is computed similarly but includes the effect of assumed
compounding on an annualized basis of the current yield quotations of the
Portfolio. The PPM America/JNL Money Market Portfolio's yield and effective
yield for the seven day period ended September 30, 1997 were 3.56% and 3.65%,
respectively.
7
<PAGE> 52
The PPM America/JNL Money Market Portfolio's yield and effective yield
will fluctuate daily. Actual yields will depend on factors such as the type of
instruments in the series' portfolio, portfolio quality and average maturity,
changes in interest rates, and the series' expenses. Although the investment
portfolio determines its yield on the basis of a seven calendar day period, it
may use a different time period on occasion. The yield quotes may reflect the
expense limitations described in the series' Prospectus or Statement of
Additional Information. There is no assurance that the yields quoted on any
given occasion will be maintained for any period of time and there is no
guarantee that the net asset values will remain constant. It should be noted
that neither a contract owner's investment in the PPM America/JNL Money Market
Portfolio nor that Portfolio's investment in the PPM America/JNL Money Market
Series, is guaranteed or insured. Yields of other money market funds may not
be comparable if a different base or another method of calculation is used.
ADDITIONAL TAX INFORMATION
NOTE: INFORMATION CONTAINED HEREIN SHOULD NOT BE SUBSTITUTED FOR THE
ADVICE OF A PERSONAL TAX ADVISER. JACKSON NATIONAL DOES NOT MAKE ANY
GUARANTEE REGARDING THE TAX STATUS OF ANY CONTRACT OR ANY TRANSACTION INVOLVING
THE CONTRACTS. PURCHASERS BEAR THE COMPLETE RISK THAT THE CONTRACTS MAY NOT BE
TREATED AS "ANNUITY CONTRACTS" UNDER FEDERAL INCOME TAX LAWS. IT SHOULD BE
FURTHER UNDERSTOOD THAT THE FOLLOWING DISCUSSION IS NOT EXHAUSTIVE AND THAT
SPECIAL RULES NOT DESCRIBED IN THIS PROSPECTUS MAY BE APPLICABLE IN CERTAIN
SITUATIONS. MOREOVER, NO ATTEMPT HAS BEEN MADE TO CONSIDER ANY APPLICABLE
STATE OR OTHER TAX LAWS.
General
Section 72 of the Internal Revenue Code of 1986, as amended (the "Code")
governs taxation of annuities in general. An individual owner is not taxed on
increases in the value of a contract until distribution occurs, either in the
form of a withdrawal or as annuity payments under the annuity option elected.
For a withdrawal received as a total surrender (total redemption or a death
benefit), the recipient is taxed on the portion of the payment that exceeds the
cost basis of the contract. For a payment received as a partial withdrawal,
federal tax liability is determined on a last-in, first-out basis, meaning
taxable income is withdrawn before the cost basis of the contract is withdrawn.
For contracts issued in connection with non-qualified plans, the cost basis is
generally the premiums, while for contracts issued in connection with qualified
plans there may be no cost basis. The taxable portion of a withdrawal is taxed
at ordinary income tax rates. Tax penalties may also apply.
For annuity payments, a portion of each payment in excess of an exclusion
amount is includable in taxable income. The exclusion amount for payments
based on a fixed annuity option is determined by multiplying the payment by the
ratio that the cost basis of the contract
8
<PAGE> 53
(adjusted for any period certain or refund feature) bears to the expected
return under the contract. The exclusion amount for payments based on a
variable annuity option is determined by dividing the cost basis of the
contract (adjusted for any period certain or refund guarantee) by the number of
years over which the annuity is expected to be paid. Payments received after
the investment in the contract has been recovered (i.e. when the total of the
excludable amounts equal the investment in the contract) are fully taxable.
The taxable portion is taxed at ordinary income tax rates. For certain types
of qualified plans there may be no cost basis in the contract within the
meaning of Section 72 of the Code. Owners, annuitants and beneficiaries under
the contracts should seek competent financial advice about the tax consequences
of distributions.
Jackson National is taxed as a life insurance company under the Code.
For federal income tax purposes, the Separate Account is not a separate entity
from Jackson National and its operations form a part of Jackson National.
Withholding Tax on Distributions
The Code generally requires Jackson National (or, in some cases, a plan
administrator) to withhold tax on the taxable portion of any distribution or
withdrawal from a contract. For "eligible rollover distributions" from
contracts issued under certain types of qualified plans, 20% of the
distribution must be withheld, unless the payee elects to have the distribution
"rolled over" to another eligible plan in a direct transfer. This requirement
is mandatory and cannot be waived by the owner.
An "eligible rollover distribution" is the estimated taxable portion of
any amount received by a covered employee from a plan qualified under Section
401(a) or 403(a) of the Code, or from a tax sheltered annuity qualified under
Section 403(b) of the Code (other than (1) a series of substantially equal
payments for the life (or life expectancy) of the employee, or joint lives (or
joint life expectancies) of the employee, and his or her designated
beneficiary, or for a specified period of ten years or more; and (2) minimum
distributions required to be made under the Code). Failure to "rollover" the
entire amount of an eligible rollover distribution including an amount equal to
the 20% portion of the distribution that was withheld) could have adverse tax
consequences, including the imposition of a penalty tax on premature
withdrawals, described later in this section.
Withdrawals or distributions from a contract other than eligible rollover
distributions are also subject to withholding on the estimated taxable portion
of the distribution, but the owner may elect in such cases to waive the
withholding requirement. If not waived, withholding is imposed (1) for
periodic payments, at the rate that would be imposed if the payments were
wages, or (2) for other distributions, at the rate of 10%. If no withholding
exemption certificate is in effect for the payee, the rate under (1) above is
computed by treating the payee as a married individual claiming 3 withholding
exemptions.
9
<PAGE> 54
Generally, the amount of any payment of interest to a non-resident alien
of the United States shall be subject to withholding of a tax equal to thirty
(30%) percent of such amount or, if applicable, a lower treaty rate. A payment
may not be subject to withholding where the recipient sufficiently establishes
that such payment is effectively connected to the recipient's conduct of a
trade or business in the United States and such payment is included in
recipient's gross income.
Diversification -- Separate Account Investments
Section 817(h) of the Code imposes certain diversification standards on
the underlying assets of variable annuity contracts. The Code provides that a
variable annuity contract will not be treated as an annuity contract for any
period (and any subsequent period) for which the investments are not adequately
diversified, in accordance with regulations prescribed by the United States
Treasury Department ("Treasury Department"). Disqualification of the contract
as an annuity contract would result in imposition of federal income tax to the
owner with respect to earnings allocable to the contract prior to the receipt
of payments under the contract. The Code contains a safe harbor provision
which provides that annuity contracts such as the contracts meet the
diversification requirements if, as of the close of each calendar quarter, the
underlying assets meet the diversification standards for a regulated investment
company, and no more than 55% of the total assets consist of cash, cash items,
U.S. government securities and securities of other regulated investment
companies.
The Treasury Department has issued Regulations establishing
diversification requirements for the investment portfolios underlying variable
contracts. The Regulations amplify the diversification requirements for
variable contracts set forth in the Code and provide an alternative to the safe
harbor provision described above. Under the Regulations, an investment
portfolio will be deemed adequately diversified if (1) no more than 55% of the
value of the total assets of the portfolio is represented by any one
investment; (2) no more than 70% of the value of the total assets of the
portfolio is represented by any two investments; (3) no more than 80% of the
value of the total assets of the portfolio is represented by any three
investments; and (4) no more than 90% of the value of the total assets of the
portfolio is represented by any four investments.
Jackson National intends that each series of the JNL Series Trust will be
managed by its respective investment adviser in such a manner as to comply with
these diversification requirements.
The Treasury Department has indicated that the diversification Regulations
do not provide guidance regarding the circumstances in which contract owner
control of the investments of the Separate Account will cause the contract
owner to be treated as the owner of the assets of the Separate Account, thereby
resulting in the loss of favorable tax treatment of the contract. At this time
it cannot be determined whether additional guidance will be provided and what
standards may be contained in such guidance.
10
<PAGE> 55
The amount of owner control which may be exercised under the contract is
different in some respects from the situations addressed in published rulings
issued by the Internal Revenue Service in which it was held that the policy
owner was not the owner of the assets of the separate account. It is unknown
whether these differences, such as the owner's ability to transfer among
investment choices or the number and type of investment choices available,
would cause the owner to be considered as the owner of the assets of the
Separate Account resulting in the imposition of federal income tax to the owner
with respect to earnings allocable to the contract prior to receipt of payments
under the contract.
In the event any forthcoming guidance or ruling is considered to set forth
a new position, such guidance or ruling will generally be applied only
prospectively. However, if such ruling or guidance was not considered to set
forth a new position, it may be applied retroactively resulting in the owner
being retroactively determined to be the owner of the assets of the Separate
Account.
Due to the uncertainty in this area, Jackson National reserves the right
to modify the contract in an attempt to maintain favorable tax treatment.
Multiple Contracts
The Code provides that multiple non-qualified annuity contracts which are
issued within a calendar year to the same contract owner by one company or its
affiliates are treated as one annuity contract for purposes of determining the
tax consequences of any distribution. Such treatment may result in adverse tax
consequences including more rapid taxation of the distributed amounts from such
multiple contracts. Owners should consult a tax adviser prior to purchasing
more than one non-qualified annuity contract in any calendar year.
Contracts Owned by Other than Natural Persons
Under Section 72(u) of the Code, the investment earnings on premiums for
the contracts will be taxed currently to the owner if the owner is a
non-natural person, e.g., a corporation or certain other entities. Such
contracts generally will not be treated as annuities for federal income tax
purposes. However, this treatment is not applied to contracts held by a trust
or other entity as an agent for a natural person nor to contracts held by
certain qualified plans. Purchasers should consult their own tax counsel or
other tax adviser before purchasing a contract to be owned by a non-natural
person.
Tax Treatment of Assignments
An assignment or pledge of a contract may have tax consequences, and may
also be prohibited by ERISA in some circumstances. Owners should, therefore,
consult competent legal advisers should they wish to assign or pledge their
contracts.
11
<PAGE> 56
Qualified Plans
The contracts offered by this Prospectus are designed to be suitable for
use under various types of qualified plans. Taxation of owners in each
qualified plan varies with the type of plan and terms and conditions of each
specific plan. Owners, annuitants and beneficiaries are cautioned that
benefits under a qualified plan may be subject to the terms and conditions of
the plan, regardless of the terms and conditions of the contracts issued to
fund the plan.
Tax Treatment of Withdrawals
Non-Qualified Plans
Section 72 of the Code governs treatment of distributions from annuity
contracts. It provides that if the contract value exceeds the aggregate
Premiums made, any amount withdrawn not in the form of an annuity payment will
be treated as coming first from the earnings and then, only after the income
portion is exhausted, as coming from the principal. Withdrawn earnings are
included in a taxpayer's gross income. Section 72 further provides that a 10%
penalty will apply to the income portion of any distribution. The penalty is
not imposed on amounts received: (1) after the taxpayer reaches 59 1/2; (2)
upon the death of the owner; (3) if the taxpayer is totally disabled as defined
in Section 72(m)(7) of the Code; (4) in a series of substantially equal
periodic payments made at least annually for the life (or life expectancy) of
the taxpayer or for the joint lives (or joint life expectancies) of the
taxpayer and his Beneficiary; (5) under an immediate annuity; or (6) which are
allocable to premium payments made prior to August 14, 1982.
Qualified Plans
In the case of a withdrawal under a qualified contract, a ratable portion
of the amount received is taxable, generally based on the ratio of the
individual's cost basis to the individual's total accrued benefit under the
retirement plan. Special tax rules may be available for certain distributions
from a qualified contract. Section 72(t) of the Code imposes a 10% penalty tax
on the taxable portion of any distribution from qualified retirement plans,
including contracts issued and qualified under Code Sections 401 (H.R.
10 and Corporate Pension and Profit Sharing plans), 403(b) (tax-sheltered
annuities) and 408(b) (IRAs). To the extent amounts are not included in gross
income because they have been rolled over to an IRA or to another eligible
qualified plan, no tax penalty will be imposed.
The tax penalty will not apply to the following distributions: (1) if
distribution is made on or after the date on which the owner or annuitant (as
applicable) reaches age 59 1/2; (2) distributions following the death or
disability of the owner or annuitant (as applicable) (for this purpose
"disability" is defined in Section 72(m)(7) of the Code); (3) after separation
from service, distributions that are part of substantially equal periodic
payments made not less frequently than annually for the life (or life
expectancy) of the owner or annuitant (as applicable)
12
<PAGE> 57
or the joint lives (or joint life expectancies) of such owner or annuitant (as
applicable) and his or her designated beneficiary; (4) distributions to an
owner or annuitant (as applicable) who has separated from service after he has
attained age 55; (5) distributions made to the owner or annuitant (as
applicable) to the extent such distributions do not exceed the amount allowable
as a deduction under Code Section 213 to the owner or annuitant (as applicable)
for amounts paid during the taxable year for medical care; (6) distributions
made to an alternate payee pursuant to a qualified domestic relations order;
(7) distributions from an IRA for the purchase of medical insurance (as
described in Section 213(d)(1)(D) of the Code) for the contract owner or
annuitant (as applicable) and his or her spouse and dependents if the contract
owner or annuitant (as applicable) has received unemployment compensation for
at least 12 weeks. This exception will no longer apply after the contract
owner or annuitant (as applicable) has been re-employed for at least 60 days.
(8) distributions from an Individual Retirement Annuity made to the owner to
the extent such distributions do not exceed the qualified higher education
expenses (as defined in Section 72(t)(7) of the Code) of the owner for the
taxable year; and (9) distributions from an Individual Retirement Annuity made
to the owner which are qualified first-time home buyer distributions (as
defined in Section 72(t)(8) of the Code). The exception stated in items (4) and
(6) above do not apply in the case of an IRA. The exception stated in (3)
above applies to an IRA without the requirement that there be a separation
from service.
Withdrawals of amounts attributable to contributions made pursuant to a
salary reduction agreement (in accordance with Section 403(b)(11) of the Code)
are limited to the following: when the owner attains age 59 1/2, separates from
services, dies, becomes disabled (within the meaning of Section 72(m)(7) of the
Code), or in the case of hardship. Hardship withdrawals do not include any
earnings on salary reduction contributions. These limitations on withdrawals
apply to: (1) salary reduction contributions made after December 31, 1988; (2)
income attributable to such contributions; and (3) income attributable to
amounts held as of December 31, 1988. The limitations on withdrawals do not
affect rollovers or exchanges between certain qualified plans. Tax penalties
may also apply. While the foregoing limitations only apply to certain
contracts issued in connection with Section 403(b) qualified plans, all owners
should seek competent tax advice regarding any withdrawals or distributions.
The taxable portion of a withdrawal or distribution from contracts issued
under certain types of plans may, under some circumstances, be "rolled over"
into another eligible plan so as to continue to defer income tax on the taxable
portion. Effective January 1, 1993, such treatment is available for an
"eligible rollover distribution" made by certain types of plans (as described
above under "Taxes -- Withholding Tax on Distributions") that is transferred
within 60 days of receipt into another qualified plan or an IRA, or an
individual retirement account described in section 408(a) of the Code.
plans making such eligible rollover distributions are also required, with some
exceptions specified in the Code, to provide for a direct transfer of the
distribution to the transferee plan designated by the recipient.
Amounts received from IRAs may also be rolled over into other IRAs,
individual retirement accounts or certain other plans, subject to limitations
set forth in the Code.
Generally, distributions from a qualified plan generally must commence no
later than April 1 of the calendar year following the year in which the
employee attains the later of age
13
<PAGE> 58
70 1/2 or the date of retirement. In the case of an IRA, distribution must
commence no later than April 1 of the calendar year following the year in which
the owner attains age 70 1/2. Required distributions must be over a period not
exceeding the life or life expectancy of the individual or the joint lives or
life expectancies of the individual and his or her designated beneficiary. If
the required minimum distributions are not made, a 50% penalty tax is imposed
as to the amount not distributed.
Types of Qualified Plans
The following are general descriptions of the types of qualified plans
with which the contracts may be used. Such descriptions are not exhaustive and
are for general information purposes only. The tax rules regarding qualified
plans are very complex and will have differing applications depending on
individual facts and circumstances. Each purchaser should obtain competent tax
advice prior to purchasing a contract issued under a qualified plan.
Contracts issued pursuant to qualified plans include special provisions
restricting contract provisions that may otherwise be available and described
in this Prospectus. Generally, contracts issued pursuant to qualified plans are
not transferable except upon surrender or annuitization. Various penalty and
excise taxes may apply to contributions or distributions made in violation of
applicable limitations. Furthermore, certain withdrawal penalties and
restrictions may apply to surrenders from qualified plan contracts.
(a) H.R. 10 Plans
Section 401 of the Code permits self-employed individuals to
establish qualified plans for themselves and their employees, commonly
referred to as "H.R. 10" or "Keogh" Plans. Contributions made to the
plan for the benefit of the employees will not be included in the gross
income of the employees until distributed from the plan. The tax
consequences to owners may vary depending upon the particular plan
design. However, the Code places limitations and restrictions on all
plans on such items as: amounts of allowable contributions; form, manner
and timing of distributions; transferability of benefits; vesting and
non-forfeitability of interests; nondiscrimination in eligibility and
participation; and the tax treatment of distributions, withdrawals and
surrenders. Purchasers of contracts for use with an H.R. 10 Plan should
obtain competent tax advice as to the tax treatment and suitability of
such an investment.
(b) Tax-Sheltered Annuities
Section 403(b) of the Code permits the purchase of "tax-sheltered
annuities" by public schools and certain charitable, educational and
scientific organizations described in Section 501(c) (3) of the Code.
These qualifying employers may make contributions to the contracts for
the benefit of their employees. Such contributions are not included in
the gross income of the employee until the employee receives
distributions from the
14
<PAGE> 59
contract. The amount of contributions to the tax-sheltered annuity is
limited to certain maximums imposed by the Code. Furthermore, the Code
sets forth additional restrictions governing such items as
transferability, distributions, non-discrimination and withdrawals.
Employee loans are not allowed under these contracts. Any employee
should obtain competent tax advice as to the tax treatment and
suitability of such an investment.
(c) Individual Retirement Annuities
Section 408(b) of the Code permits eligible individuals to
contribute to an individual retirement program known as an "Individual
Retirement Annuity" ("IRA"). Under applicable limitations, certain amounts
may be contributed to an IRA which may be deductible from the individual's
gross income. These IRAs are subject to limitations on eligibility,
contributions, transferability and distributions. Sales of contracts for
use with IRAs are subject to special requirements imposed by the Code,
including the requirement that certain informational disclosure be given to
persons desiring to establish an IRA. Purchasers of contracts to be
qualified as IRAs should obtain competent tax advice as to the tax
treatment and suitability of such an investment.
(d) Corporate Pension and Profit-Sharing Plans
Sections 401(a) and 401(k) of the Code permit corporate employers to
establish various types of retirement plans for employees. These
retirement plans may permit the purchase of the contracts to provide
benefits under the plan. Contributions to the plan for the benefit of
employees will not be included in the gross income of the employee until
distributed from the plan. The tax consequences to owners may vary
depending upon the particular plan design. However, the Code places
limitations on all plans on such items as amount of allowable
contributions; form, manner and timing of distributions; transferability
of benefits; vesting and non-forfeitability of interests;
nondiscrimination in eligibility and participation; and the tax treatment
of distributions, withdrawals and surrenders. Purchasers of contracts
for use with corporate pension or profit sharing plans should obtain
competent tax advice as to the tax treatment and suitability of such an
investment.
(e) Non-Qualified Deferred Compensation Plans -- Section 457
Under Section 457 of the Code, governmental and certain other
tax-exempt employers may establish, for the benefit of their employees,
deferred compensation plans which may invest in annuity contracts. The
Code, as in the case of qualified plans, establishes limitations and
restrictions on eligibility, contributions and distributions. Under these
plans, contributions made for the benefit of the employees will not be
included in the employees' gross income until distributed from the plan.
(f) Roth IRAs
Beginning in 1998, individuals may purchase a new type of
non-deductible IRA, known as a Roth IRA. Purchase payments for a Roth
IRA are limited to $2,000 per year. This limitation is phased out for
adjusted gross income between a $95,000 and $110,000 in the case of single
taxpayers, between $150,000 and $160,000 in the case of married taxpayers
filing joint returns, and between $0 and $15,000 in the case of married
taxpayers filing separately. An overall $2,000 annual limitation
continues to apply to all of a taxpayer's IRA contributions,
including Roth IRAs and non-Roth IRAs.
Qualified distributions from Roth IRAs are entirely tax free. A
qualified distribution requires that the individual has held the Roth IRA
for at least five years and, in addition, that the distribution is made
either after the individual reaches age 59 1/2, on the individual's death
or disability, or as qualified first-time home purchase, subject to
$10,000 lifetime maximum, for the individual, a spouse, child,
grandchild, or ancestor.
An individual may make ar rollover contribution from a non-Roth IRA
to a Roth IRA, unless the individual has adjusted gross income over
$100,000 or the individual is a married taxpayer filing a separate
return. The individual must pay tax on any portion of the IRA being
rolled over that represents income or a previously deductible IRA
contribution. For rollovers in 1998, the individual may pay that tax
ratably in 1998 and over the succeeding three years. There are no
similar limitations on rollovers from a Roth IRA to another Roth IRA.
15
<PAGE> 60
INCOME PAYMENTS; NET INVESTMENT FACTOR
See "Income Payments (The Income Phase)" in the Prospectus.
The net investment factor is an index applied to measure the net
investment performance of an investment portfolio from one valuation date to
the next. Since the net investment factor may be greater or less than or equal
to one, and the factor that offsets the 3% investment rate assumed is slightly
less than one, the value of an annuity unit (which changes with the product of
that factor) and the net investment may increase, decrease or remain the same.
The net investment factor for any investment portfolio for any valuation
period is determined by dividing (a) by (b) and then subtracting (c) from the
result where:
(a) is the net result of:
(1) the net asset value of a series share held in the
investment portfolio determined as of the valuation date at
the end of the valuation period, plus
(2) the per share amount of any dividend or other
distribution declared by the series if the "ex-dividend" date
occurs during the valuation period, plus or minus
(3) a per share credit or charge with respect to any
taxes paid or reserved for by Jackson National during the
valuation period which are determined by Jackson National to
be attributable to the operation of the investment portfolio
(no federal income taxes are applicable under present law );
(b) is the net asset value of the series share held in the
investment portfolio determined as of the valuation date at the end
of the preceding valuation period; and
(c) is the asset charge factor determined by Jackson National for
the valuation period to reflect the charges for assuming the
mortality and expense risks and the administration charge.
16
<PAGE> 61
JACKSON NATIONAL LIFE INSURANCE COMPANY
[JACKSON NATIONAL LIFE INSURANCE COMPANY LOGO]
SEPARATE ACCOUNT - I
FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 1997
<PAGE> 62
JACKSON NATIONAL LIFE INSURANCE COMPANY
INDEX TO FINANCIAL STATEMENTS, SEPARATE ACCOUNT - I
SEPTEMBER 30, 1997
<TABLE>
<S> <C>
Statement of Assets and Liabilities 2-3
Statement of Operations 4-5
Statements of Changes in Net Assets 6-10
Schedule of Investments 11
Notes to Financial Statements 12-21
</TABLE>
<PAGE> 63
JACKSON NATIONAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT - I
Statement of Assets and Liabilities (Unaudited)
September 30, 1997
<TABLE>
<CAPTION>
PORTFOLIOS
------------------------------------------------------------------------
JNL JNL JNL
AGGRESSIVE CAPITAL GLOBAL JNL/ALGER
GROWTH GROWTH EQUITIES GROWTH
------ ------ -------- ------
<S> <C> <C> <C> <C>
ASSETS:
Investments in JNL Series Trust,
at market value
(See Schedule of Investments)............. $66,421,744 $64,917,102 $135,980,117 $73,986,052
Due from Jackson National Life
Insurance Company....................... 51,583 11,289 488,901 225,783
Receivable for investments sold........... 109,561 49,369 56,040 9,624
----------- ----------- ------------ -----------
Total Assets............................ 66,582,888 64,977,760 136,525,058 74,221,459
LIABILITIES:
Payable for investments purchased 51,583 11,289 488,901 225,783
Due to Jackson National Life
Insurance Company....................... 109,561 49,369 56,040 9,624
----------- ----------- ------------ -----------
Total Liabilities......................... 161,144 60,658 544,941 235,407
----------- ----------- ------------ -----------
NET ASSETS................................ $66,421,744 $64,917,102 $135,980,117 $73,986,052
=========== =========== ============ ===========
TOTAL NET ASSETS REPRESENTED BY:
Number of units outstanding............... 4,815,480 4,900,267 8,138,352 5,158,975
=========== =========== ============ ===========
Unit value (net assets divided by
units outstanding)........................ $ 13.79 $ 13.25 $ 16.71 $ $14.34
=========== =========== ============ ===========
</TABLE>
<TABLE>
<CAPTION>
PORTFOLIOS
----------------------------------------------------
JNL/EAGLE JNL/EAGLE
CORE SMALLCAP JNL/PUTNAM
EQUITY EQUITY GROWTH
------ ------- ------
<S> <C> <C> <C>
ASSETS:
Investments in JNL Series Trust,
at market value
(See Schedule of Investments).............. $ 8,725,442 $10,628,808 $66,708,908
Due from Jackson National Life
Insurance Company........................ 72,342 60,792 206,415
Receivable for investments sold............ 332 405 47,974
----------- ----------- -----------
Total Assets............................. 8,798,116 10,690,005 66,963,297
LIABILITIES:
Payable for investments purchased 72,342 60,792 206,415
Due to Jackson National Life
Insurance Company........................ 332 405 47,974
----------- ----------- -----------
Total Liabilities.......................... 72,674 61,197 254,389
----------- ----------- -----------
NET ASSETS................................. $ 8,725,442 $10,628,808 $66,708,908
=========== =========== ===========
TOTAL NET ASSETS REPRESENTED BY:
Number of units outstanding................ 651,921 690,712 4,323,083
=========== =========== ===========
Unit value (net assets divided by
units outstanding)......................... $ 13.38 $ 15.39 $ 15.43
=========== =========== ===========
</TABLE>
See accompanying Notes to Financial Statements
2
<PAGE> 64
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
PPM PPM
JNL/PUTNAM PPM AMERICA/JNL AMERICA/JNL SALOMON
VALUE AMERICA/JNL HIGH YIELD MONEY BROTHERS/JNL
EQUITY BALANCED BOND MARKET GLOBAL BOND
------ -------- ---- ------ -----------
<S> <C> <C> <C> <C>
$79,986,398 $49,759,235 $45,077,232 $33,121,157 $28,461,458
288,489 31,491 31,833 36,044 30,626
5,453 3,478 4,476 1,723 6,731
----------- ----------- ----------- ----------- -----------
80,280,340 49,794,204 45,113,541 33,158,924 28,498,815
288,489 31,491 31,833 36,044 30,626
5,453 3,478 4,476 1,723 6,731
----------- ----------- ----------- ----------- -----------
293,942 34,969 36,309 37,767 37,357
----------- ----------- ----------- ----------- -----------
$79,986,398 $49,759,235 $45,077,232 $33,121,157 $28,461,458
=========== =========== =========== =========== ===========
5,099,068 3,846,253 3,593,849 3,111,164 2,236,757
=========== =========== =========== =========== ===========
$ 15.69 $ 12.94 $ 12.54 $ 10.65 $ 12.72
=========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
T. ROWE
SALOMON T. ROWE PRICE/JNL T. ROWE
BROTHERS/JNL PRICE/JNL INTERNATIONAL PRICE/JNL
U.S. GOVERNMENT ESTABLISHED EQUITY MID-CAP
& QUALITY BOND GROWTH INVESTMENT GROWTH
--------------- ----------- ---------- -------------
<S> <C> <C> <C>
$ 17,428,926 $96,187,670 $ 52,186,834 $ 105,536,769
-------------- ----------- ------------- -------------
7,417 350,473 35,313 127,104
3,739 10,031 4,125 113,950
17,440,082 96,548,174 52,226,272 105,777,823
7,417 350,473 35,313 127,104
3,739 10,031 4,125 113,950
11,156 360,504 39,438 241,054
$ 17,428,926 $96,187,670 $ 52,186,834 $ 105,536,769
============== =========== ============= =============
1,611,680 6,170,389 4,028,438 7,149,711
============== =========== ============= =============
$ 10.81 $ 15.59 $ 12.95 $14.76
============== =========== ============= =============
</TABLE>
3
<PAGE> 65
JACKSON NATIONAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT - I
Statement of Operations (Unaudited)
For the Nine Months Ended September 30, 1997
<TABLE>
<CAPTION>
PORTFOLIOS
---------------------------------------------------------------------------------------
JNL JNL JNL JNL/EAGLE
AGGRESSIVE CAPITAL GLOBAL JNL/ALGER CORE
GROWTH GROWTH EQUITIES GROWTH EQUITY
------ ------ -------- ------ ------
<S> <C> <C> <C> <C> <C>
NET REALIZED GAIN FROM SALES
OF INVESTMENTS
Proceeds from sales............... $8,037,434 $9,372,275 $ 7,715,218 $ 7,627,676 $ 170,433
Cost of investments sold.......... 7,509,413 9,469,709 6,875,841 6,602,436 154,722
---------- ---------- ----------- ----------- ----------
Net realized gain from sales
of investments.................... 528,021 (97,434) 839,377 1,025,240 15,711
NET UNREALIZED GAIN ON INVESTMENTS
Unrealized gain beginning of year. 1,151,235 375,378 2,911,351 2,302,486 12,728
Unrealized gain end of year....... 9,345,672 8,304,405 21,222,920 15,955,562 1,091,333
---------- ---------- ----------- ----------- ----------
Net unrealized gain on investments 8,194,437 7,929,027 18,311,569 13,653,076 1,078,605
---------- ---------- ----------- ----------- ----------
NET GAIN ON INVESTMENTS........... 8,722,458 7,831,593 19,150,946 14,678,316 1,094,316
EXPENSES:
Administrative charge............. 52,621 55,374 98,127 60,321 4,806
Mortality and expense charge...... 438,513 461,452 817,720 502,671 40,052
---------- ---------- ----------- ----------- ----------
INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS................... $8,231,324 $7,314,767 $18,235,099 $14,115,324 $1,049,458
========== ========== =========== =========== ==========
<CAPTION>
PORTFOLIOS
----------------------------
JNL/EAGLE
SMALLCAP JNL/PUTNAM
EQUITY GROWTH
------ ------
<S> <C> <C>
NET REALIZED GAIN FROM SALES
OF INVESTMENTS
Proceeds from sales............... $1,150,987 $4,581,613
Cost of investments sold.......... 1,043,105 4,263,667
---------- ----------
Net realized gain from sales
of investments.................... 107,882 317,946
NET UNREALIZED GAIN ON INVESTMENTS
Unrealized gain beginning of year. 48,839 1,086,316
Unrealized gain end of year....... 2,046,952 8,470,448
---------- ----------
Net unrealized gain on investments 1,998,113 7,384,132
---------- ----------
NET GAIN ON INVESTMENTS........... 2,105,995 7,702,078
EXPENSES:
Administrative charge............. 5,049 48,919
Mortality and expense charge...... 42,074 407,655
---------- ----------
INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS................... $2,058,872 $7,245,504
========== ==========
</TABLE>
See accompanying Notes to Financial Statements
4
<PAGE> 66
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
T. ROWE
PPM PPM SALOMON T. ROWE PRICE/JNL T. ROWE
JNL/PUTNAM PPM AMERICA/JNL AMERICA/JNL SALOMON BROTHERS/JNL PRICE/JNL INTERNATIONAL PRICE/JNL
VALUE AMERICA/JNL HIGH YIELD MONEY BROTHERS/JNL U.S. GOVERNMENT ESTABLISHED EQUITY MID-CAP
EQUITY BALANCED BOND MARKET GLOBAL BOND & QUALITY BOND GROWTH INVESTMENT GROWTH
- ------------- ----------- ----------- ----------- ------------ --------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 3,375,226 $ 3,594,525 $ 4,336,754 $53,812,827 $ 2,180,552 $ 3,316,938 $ 7,356,937 $ 4,618,492 $ 8,291,821
3,030,442 3,297,157 4,082,000 53,096,442 2,065,758 3,217,043 6,404,525 4,294,059 7,760,150
- ------------- ----------- ----------- ----------- ------------ --------------- ----------- ------------- -----------
344,784 297,368 254,754 716,385 114,794 99,895 952,412 324,433 531,671
1,518,174 1,374,742 741,120 263,414 497,123 271,639 2,490,988 1,273,843 3,539,268
9,970,765 6,718,989 4,431,724 718,905 2,304,221 1,022,161 16,287,483 5,012,102 18,559,142
- ------------- ----------- ----------- ----------- ------------ --------------- ----------- ------------- -----------
8,452,591 5,344,247 3,690,604 455,491 1,807,098 750,522 13,796,495 3,738,259 15,019,874
- ------------- ----------- ----------- ----------- ------------ --------------- ----------- ------------- -----------
8,797,375 5,641,615 3,945,358 1,171,876 1,921,892 850,417 14,748,907 4,062,692 15,551,545
48,260 41,309 32,620 36,112 21,943 15,370 70,406 42,674 81,539
402,165 344,239 271,830 300,937 182,856 182,856 586,713 355,615 679,493
- ------------- ----------- ----------- ----------- ------------ --------------- ----------- ------------- -----------
$ 8,346,950 $ 5,256,067 $ 3,640,908 $ 834,827 $ 1,717,093 $ 652,191 $14,091,788 $ 3,664,403 $14,790,513
============= =========== =========== =========== ============ =============== =========== ============= ===========
</TABLE>
5
<PAGE> 67
JACKSON NATIONAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT - I
Statements of Changes in Net Assets
For the Periods ended September 30, 1997 and December 31, 1996
<TABLE>
PORTFOLIOS
---------------------------------------------------------------------------------------------
JNL AGGRESSIVE JNL CAPITAL JNL GLOBAL
GROWTH GROWTH EQUITIES
---------------------------- ---------------------------- -----------------------------
NINE MONTHS NINE MONTHS NINE MONTHS
ENDED ENDED ENDED
SEPTEMBER 30, YEAR ENDED SEPTEMBER 30, YEAR ENDED SEPTEMBER 30, YEAR ENDED
1997 DECEMBER 31, 1997 DECEMBER 31, 1997 DECEMBER 31,
(UNAUDITED) 1996 (UNAUDITED) 1996 (UNAUDITED) 1996
------------- ------------ ------------- ------------ -------------- --------------
OPERATIONS:
<S> <C> <C> <C> <C> <C> <C>
Net realized gain (loss) from sales
of investments..................... $ 528,021 $ 30,996 $ (97,434) $ 34,343 $ 839,377 $ 92,148
Net unrealized gain on investments. 8,194,437 1,150,615 7,929,027 374,824 18,311,569 2,910,460
Administrative charge.............. (52,621) (15,954) (55,374) (19,253) (98,127) (20,934)
Mortality and expense charge....... (438,513) (132,954) (461,452) (160,441) (817,720) (174,451)
------------ ----------- ----------- ----------- ----------- -----------
INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS.................... 8,231,324 1,032,703 7,314,767 229,473 18,235,099 2,807,223
NET DEPOSITS INTO SEPARATE ACCOUNT
(NOTE 6)........................... 30,048,410 27,068,440 22,162,839 35,193,609 75,823,495 39,064,248
------------ ----------- ----------- ----------- ----------- -----------
Increase in net assets............. 38,279,734 28,101,143 29,477,606 35,423,082 94,058,594 41,871,471
NET ASSETS:
Beginning of Period................ 28,142,010 40,867 35,439,496 16,414 41,921,523 50,052
------------ ----------- ----------- ----------- ----------- -----------
End of Period...................... $ 66,421,744 $28,142,010 $64,917,102 $35,439,496 $135,980,117 $41,921,523
============ =========== =========== =========== ============ ===========
</TABLE>
See accompanying Notes to Financial Statements
6
<PAGE> 68
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
JNL/ALGER JNL/EAGLE
GROWTH CORE EQUITY
- -------------------------------- ----------------------------------
NINE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, YEAR ENDED SEPTEMBER 30, YEAR ENDED
1997 DECEMBER 31, 1997 DECEMBER 31,
(UNAUDITED) 1996 (UNAUDITED) 1996
- ------------ ------------ ------------ -----------
<S> <C> <C> <C>
$ 1,025,240 $ 43,208 $ 15,711 $ 2,565
13,653,076 2,299,934 1,078,605 12,728
(60,321) (25,410) (4,806) (187)
(502,671) (211,746) (40,052) (1,561)
- ----------- ----------- ----------- -----------
14,115,324 2,105,986 1,049,458 13,545
23,093,921 34,548,799 6,783,289 879,150
- ----------- ----------- ----------- -----------
37,209,245 36,654,785 7,832,747 892,695
36,776,807 122,022 892,695 -
- ----------- ----------- ----------- -----------
$73,986,052 $36,776,807 $ 8,725,442 $ 892,695
=========== =========== =========== ===========
<CAPTION>
- --------------------------------------------------------------------------
JNL/EAGLE JNL/PUTNAM
SMALLCAP EQUITY GROWTH
- -------------------------------- ----------------------------------
NINE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, YEAR ENDED SEPTEMBER 30, YEAR ENDED
1997 DECEMBER 31, 1997 DECEMBER 31,
(UNAUDITED) 1996 (UNAUDITED) 1996
- ------------ ------------ ------------ -----------
<S> <C> <C> <C>
$ 107,882 $ 302 $ 317,946 $ 54,944
1,998,113 48,839 7,384,132 1,086,015
(5,049) (130) (48,919) (11,492)
(42,074) (1,085) (407,655) (95,771)
- ----------- ----------- ----------- -----------
2,058,872 47,926 7,245,504 1,033,696
7,780,061 741,949 37,223,202 21,200,464
- ----------- ----------- ----------- -----------
9,838,933 789,875 44,468,706 22,234,160
789,875 - 22,240,202 6,042
- ----------- ----------- ----------- -----------
$10,628,808 $ 789,875 $66,708,908 $22,240,202
=========== =========== =========== ===========
</TABLE>
7
<PAGE> 69
JACKSON NATIONAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT - I
Statements of Changes in Net Assets (continued)
<TABLE>
<CAPTION>
PORTFOLIOS
--------------------------------------------------------------------------
JNL/PUTNAM PPM AMERICA/JNL
VALUE EQUITY BALANCED
------------ --------
NINE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, YEAR ENDED SEPTEMBER 30, YEAR ENDED
1997 DECEMBER 31, 1997 DECEMBER 31,
(UNAUDITED) 1996 (UNAUDITED) 1996
----------- ---- ----------- ----
<S> <C> <C> <C> <C>
OPERATIONS:
Net realized gain (loss) from sales
of investments..................... $ 344,784 $ 34,088 $ 297,368 $ 77,178
Net unrealized gain on investments. 8,452,591 1,517,075 5,344,247 1,373,102
Administrative charge.............. (48,260) (8,763) (41,309) (15,595)
Mortality and expense charge....... (402,165) (73,025) (344,239) (129,959)
----------- ----------- ----------- -----------
INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS.................... 8,346,950 1,469,375 5,256,067 1,304,726
NET DEPOSITS INTO SEPARATE ACCOUNT
(NOTE 6)........................... 54,372,584 15,755,729 20,554,570 22,510,825
----------- ----------- ----------- -----------
Increase in net assets............. 62,719,534 17,225,104 25,810,637 23,815,551
NET ASSETS:
Beginning of Period................ 17,266,864 41,760 23,948,598 133,047
----------- ----------- ----------- -----------
End of Period...................... $79,986,398 $17,266,864 $49,759,235 $23,948,598
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
PORTFOLIOS
-----------------------------
PPM AMERICA/JNL
HIGH YIELD BOND
---------------
NINE MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED
1997 DECEMBER 31,
(UNAUDITED) 1996
----------- ----
<S> <C> <C>
OPERATIONS:
Net realized gain (loss) from sales
of investments..................... $ 254,754 30,686
Net unrealized gain on investments. 3,690,604 741,108
Administrative charge.............. (32,620) (6,480)
Mortality and expense charge....... (271,830) (53,997)
----------- -----------
INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS.................... 3,640,908 711,317
NET DEPOSITS INTO SEPARATE ACCOUNT
(NOTE 6)........................... 28,515,991 12,208,005
----------- -----------
Increase in net assets............. 32,156,899 12,919,322
NET ASSETS:
Beginning of Period................ 12,920,333 1,011
----------- -----------
End of Period...................... $45,077,232 $12,920,333
=========== ===========
</TABLE>
See accompanying Notes to Financial Statements
8
<PAGE> 70
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
SALOMON BROTHERS/JNL
PPM AMERICA/JNL SALOMON BROTHERS/JNL U.S. GOVERNMENT
MONEY MARKET GLOBAL BOND & QUALITY BOND
- --------------------------------- --------------------------------- ------------------------------------------
NINE MONTHS NINE MONTHS NINE MONTHS
ENDED ENDED ENDED
SEPTEMBER 30, YEAR ENDED SEPTEMBER 30, YEAR ENDED SEPTEMBER 30, YEAR ENDED
1997 DECEMBER 31, 1997 DECEMBER 31, 1997 DECEMBER 31,
(UNAUDITED) 1996 (UNAUDITED) 1996 (UNAUDITED) 1996
- ---------------- ----------------- ------------------ ----------------- ------------------ -------------------
<S> <C> <C> <C> <C> <C>
$ 716,385 $ 186,518 $ 114,794 $ 20,380 $ 99,895 $ 9,430
455,491 263,021 1,807,098 496,629 750,522 271,528
(36,112) (14,235) (21,943) (5,606) (15,370) (5,581)
(300,937) (118,627) (182,856) (46,718) (182,856) (46,511)
----------- ----------- ----------- ----------- ----------- ----------
834,827 316,677 1,717,093 464,685 652,191 228,866
9,533,638 22,289,436 16,040,767 10,206,357 7,457,220 9,077,627
----------- ----------- ----------- ----------- ----------- ----------
10,368,465 22,606,113 17,757,860 10,671,042 8,109,411 9,306,493
22,752,692 146,579 10,703,598 32,556 9,319,515 13,022
----------- ----------- ----------- ----------- ----------- ----------
$33,121,157 $22,752,692 $28,461,458 $10,703,598 $17,428,926 $9,319,515
=========== =========== =========== =========== =========== ==========
<CAPTION>
T. ROWE PRICE/JNL
ESTABLISHED GROWTH
- ------------------------------------
NINE MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED
1997 DECEMBER 31,
(UNAUDITED) 1996
- ---------------- -----------------
<S> <C>
$ 952,412 $ 60,034
13,796,495 2,487,976
(70,406) (17,198)
(586,713) (143,319)
----------- -----------
14,091,788 2,387,493
50,769,278 28,829,643
----------- -----------
64,861,066 31,217,136
31,326,604 109,468
----------- -----------
$96,187,670 $31,326,604
=========== ===========
</TABLE>
9
<PAGE> 71
JACKSON NATIONAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT - I
Statements of Changes in Net Assets (continued)
<TABLE>
<CAPTION>
PORTFOLIOS
------------------------------------------------------------------------
T. ROWE PRICE/JNL
INTERNATIONAL EQUITY T. ROWE PRICE/JNL
INVESTMENT MID-CAP GROWTH
------------------------------- ----------------------------------
NINE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, YEAR ENDED SEPTEMBER 30, YEAR ENDED
1997 DECEMBER 31, 1997 DECEMBER 31,
(UNAUDITED) 1996 (UNAUDITED) 1996
------------- ------------ -------------- ---------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net realized gain (loss) from sales
of investments..................... $ 324,433 $ 30,872 $ 531,671 $ 103,159
Net unrealized gain on investments. 3,738,259 1,273,172 15,019,874 3,538,229
Administrative charge.............. (42,674) (14,785) (81,539) (26,466)
Mortality and expense charge....... (355,615) (123,213) (679,493) (220,554)
------------- ------------ -------------- ---------------
INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS.................... 3,664,403 1,166,046 14,790,513 3,394,368
NET DEPOSITS INTO SEPARATE ACCOUNT
(NOTE 6)........................... 24,488,142 22,835,756 45,599,196 41,699,598
------------- ------------ -------------- ---------------
Increase in net assets............. 28,152,545 24,001,802 60,389,709 45,093,966
NET ASSETS:
Beginning of Period................ 24,034,289 32,487 45,147,060 53,094
------------- ------------ -------------- ---------------
End of Period...................... $ 52,186,834 $ 24,034,289 $ 105,536,769 $ 45,147,060
============= ============ ============== ===============
</TABLE>
See accompanying Notes to Financial Statements
10
<PAGE> 72
JACKSON NATIONAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT - I
Schedule of Investments (Unaudited)
September 30, 1997
<TABLE>
NUMBER MARKET
JNL SERIES TRUST OF SHARES COST VALUE
- ---------------- --------------- -------------------- -------------------
<S> <C> <C> <C>
JNL Aggressive Growth.......................................... 4,252,352 $ 57,076,072 $ 66,421,744
JNL Capital Growth............................................. 3,980,202 56,612,697 64,917,102
JNL Global Equities............................................ 7,183,313 114,757,197 135,980,117
JNL/Alger Growth............................................... 5,081,460 58,030,490 73,986,052
JNL/Eagle Core Equity.......................................... 638,759 7,634,109 8,725,442
JNL/Eagle SmallCap Equity...................................... 659,355 8,581,856 10,628,808
JNL/Putnam Growth.............................................. 3,977,872 58,238,460 66,708,908
JNL/Putnam Value Equity........................................ 4,516,454 70,015,633 79,986,398
PPM America/JNL Balanced....................................... 3,605,742 43,040,246 49,759,235
PPM America/JNL High Yield Bond................................ 3,747,068 40,645,508 45,077,232
PPM America/JNL Money Market................................... 33,121,157 32,402,252 33,121,157
Salomon Brothers/JNL Global Bond............................... 2,443,044 26,157,237 28,461,458
Salomon Brothers/JNL U.S. Government & Quality Bond............ 1,615,285 16,407,765 17,428,926
T. Rowe Price/JNL Established Growth........................... 6,087,827 79,900,187 96,187,670
T. Rowe Price/JNL International Equity Investment.............. 3,888,736 47,174,732 52,186,834
T. Rowe Price/JNL Mid-Cap Growth............................... 5,982,810 86,977,627 105,536,769
</TABLE>
11
<PAGE> 73
JACKSON NATIONAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT - I
Notes to Financial Statements (Unaudited)
September 30, 1997
NOTE 1 - ORGANIZATION
Jackson National Life Insurance Company ("JNL") established Jackson
National Separate Account - I (the "Separate Account") on June 14,
1993. The Separate Account commenced operations on October 16,
1995, and is registered under the Investment Company Act of 1940 as
a unit investment trust. The Separate Account receives and invests
net premiums for individual flexible premium variable annuity
contracts issued by JNL. The contracts can be purchased on a
non-tax qualified basis or in connection with certain plans
qualifying for favorable federal income tax treatment. The Separate
Account currently contains sixteen Portfolios, each of which invests
in the following series of the JNL Series Trust:
JNL Aggressive Growth Series
JNL Capital Growth Series
JNL Global Equities Series
JNL/Alger Growth Series
JNL/Eagle Core Equity Series
JNL/Eagle SmallCap Equity Series
JNL/Putnam Growth Series
JNL/Putnam Value Equity Series
PPM America/JNL Balanced Series
PPM America/JNL High Yield Bond Series
PPM America/JNL Money Market Series
Salomon Brothers/JNL Global Bond Series
Salomon Brothers/JNL U.S. Government & Quality Bond Series
T. Rowe Price/JNL Established Growth Series
T. Rowe Price/JNL International Equity Investment Series
T. Rowe Price/JNL Mid-Cap Growth Series
Effective May 1, 1997, the JNL/Phoenix Investment Counsel Balanced
Series is the PPM America/JNL Balanced Series and is managed by PPM
America, Inc., the JNL/Phoenix Investment Counsel Growth Series is
the JNL/Putnam Growth Series and is managed by Putnam Investment
Management, Inc., and the PPM America/JNL Value Equity Series is the
JNL/Putnam Value Equity Series and is managed by Putnam Investment
Management, Inc.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies
followed by the Separate Account in the preparation of its financial
statements. The policies are in conformity with generally accepted
accounting principles.
12
<PAGE> 74
JACKSON NATIONAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT - I
Notes to Financial Statements (Unaudited) (continued)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Investments
The Separate Account's investments in the series of the JNL
Series Trust are stated at the net asset values of the
respective series. The average cost method is used in
determining the cost of the shares sold on withdrawals by the
Separate Account. Fund share transactions are recorded on
trade date (same as settlement date). The series follow the
accounting practice known as consent dividending, whereby all
of the its net investment income and realized gains are
treated as being distributed daily to the Separate Account and
are immediately reinvested in the series.
Federal Income Taxes
The operations of the Separate Account are included in the
federal income tax return of JNL, which is taxed as a "life
insurance company" under the provisions of the Internal
Revenue Code. JNL anticipates no tax liability resulting from
the operations of the Separate Account. Therefore, no federal
income tax has been provided.
NOTE 3 - POLICY CHARGES
Charges are deducted from the Separate Account to compensate JNL for
providing the insurance benefits set forth in the contracts,
administering the contracts, distributing the contracts, and
assuming certain risks in connection with the contract.
Contract Maintenance Charge
An annual contract maintenance charge of $35 is charged
against each contract to reimburse JNL for expenses incurred
in establishing and maintaining records relating to the
contract. The contract maintenance charge is assessed on each
anniversary of the contract date that occurs on or prior to
the annuity date. The charge is deducted by redeeming units.
For the nine months ended September 30, 1997, $159,121 in
contract maintenance charges were assessed.
13
<PAGE> 75
JACKSON NATIONAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT - I
Notes to Financial Statements (Unaudited) (continued)
NOTE 3 - POLICY CHARGES (CONTINUED)
Transfer Fee Charge
A transfer fee of $25 will apply to transfers in excess of 15
transfers in a contract year. JNL may waive the transfer fee
in connection with pre-authorized automatic transfer programs,
or in those states where a lesser fee is required.
This fee will be deducted from contract values which remain in
the portfolio(s) from which the transfers were made. If such
remaining contract value is insufficient to pay the transfer
fee, then the fee will be deducted from transferred contract
values. For the nine months ended September 30, 1997, $75 in
transfer fees were assessed.
Surrender or Contingent Deferred Sales Charge
During the first contract years, certain contracts include a
provision for a charge upon the surrender or partial surrender
of the contract. The amount assessed under the contract
terms, if any, depends upon the cost associated with
distributing the particular contracts. The amount, if any,
depends on a number of factors, including the amount
withdrawn, the contract year of surrender, or the number and
amount of withdrawals in a calendar year. For the nine months
ended September 30, 1997, $324,643 in surrender charges were
assessed.
Administration Charge
JNL deducts a daily charge for administrative expenses from
the net assets of the Separate Account equivalent to an annual
rate of 0.15%. The administration charge is designed to
reimburse JNL for administrative expenses related to the
Separate Account and the issuance and maintenance of
contracts.
Mortality and Expense Charge
A daily charge is made for the mortality and expense risks
assumed by JNL. JNL deducts a daily charge from the assets of
the Separate Account equivalent to an annual rate of 1.25% for
the assumption of mortality and expense risks. The mortality
risk assumed by JNL is that the insured may receive benefits
greater than those anticipated by JNL. The expense risk
assumed by JNL is that the costs of administering the
contracts of the Separate Account will exceed the amount
received from the Administration Charge and the Contracts
Maintenance Charge.
14
<PAGE> 76
JACKSON NATIONAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT - I
Notes to Financial Statements (Unaudited) (continued)
NOTE 4 - PURCHASES AND SALES OF INVESTMENTS
For the period ended September 30, 1997, purchases and proceeds from
sales of investments in the JNL Series Trust were as follows:
<TABLE>
<CAPTION>
PROCEEDS
JNL SERIES TRUST PURCHASES FROM SALES
- ---------------- ---------------- ------------
<S> <C> <C>
JNL Aggressive Growth.............................. $ 37,594,710 $ 8,037,434
JNL Capital Growth................................. 31,018,288 9,372,275
JNL Global Equities................................ 82,622,866 7,715,218
JNL/Alger Growth................................... 30,158,605 7,627,676
JNL/Eagle Core Equity.............................. 6,908,864 170,433
JNL/Eagle SmallCap Equity.......................... 8,883,925 1,150,987
JNL/Putnam Growth.................................. 41,348,241 4,581,613
JNL/Putnam Value Equity............................ 57,297,385 3,375,226
PPM America/JNL Balanced........................... 23,763,547 3,594,525
PPM America/JNL High Yield Bond.................... 32,548,295 4,336,754
PPM America/JNL Money Market....................... 63,009,416 53,812,827
Salomon Brothers/JNL Global Bond................... 18,016,521 2,180,552
Salomon Brothers/JNL U.S. Government & Quality Bond 10,576,932 3,316,938
T. Rowe Price/JNL Established Growth............... 57,469,096 7,356,937
T. Rowe Price/JNL International Equity Investment.. 28,708,345 4,618,492
T. Rowe Price/JNL Mid-Cap Growth................... 53,129,985 8,291,821
</TABLE>
15
<PAGE> 77
JACKSON NATIONAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT - I
Notes to Financial Statements (Unaudited) (continued)
NOTE 5 - ACCUMULATION OF UNIT ACTIVITY
The following is a reconciliation of unit activity for the periods ended
September 30, 1997, and December 31, 1996:
<TABLE>
<CAPTION>
UNITS UNITS UNITS
OUTSTANDING UNITS UNITS OUTSTANDING UNITS UNITS OUTSTANDING
PORTFOLIO: AT 12/31/95 ISSUED REDEEMED AT 12/31/96 ISSUED REDEEMED AT 9/30/97
----------- ------ -------- ----------- ------ -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
JNL Aggressive Growth................. 4,008 2,489,793 (138,271) 2,355,530 3,065,840 (605,890) 4,815,480
JNL Capital Growth.................... 1,587 3,099,665 (115,584) 2,985,668 2,688,484 (773,885) 4,900,267
JNL Global Equities................... 4,778 3,207,085 (121,629) 3,090,234 5,498,784 (450,666) 8,138,352
JNL/Alger Growth...................... 12,285 3,610,116 (311,591) 3,310,810 2,416,315 (568,150) 5,158,975
JNL/Eagle Core Equity................. - 99,222 (14,327) 84,895 577,235 (10,209) 651,921
JNL/Eagle SmallCap Equity............. - 72,877 (1,863) 71,014 707,481 (87,783) 690,712
JNL/Putnam Growth..................... 571 1,763,677 (81,644) 1,682,604 2,933,890 (293,411) 4,323,083
JNL/Putnam Value Equity............... 3,944 1,375,629 (49,285) 1,330,288 3,972,928 (204,148) 5,099,068
PPM America/JNL Balanced.............. 12,871 2,271,164 (163,506) 2,120,529 1,995,877 (270,153) 3,846,253
PPM America/JNL High Yield Bond....... 100 1,238,600 (90,860) 1,147,840 2,790,776 (344,767) 3,593,849
PPM America/JNL Money Market.......... 14,608 4,391,649 (2,213,081) 2,193,176 5,939,287 (5,021,299) 3,111,164
Salomon Brothers/JNL Global Bond...... 3,128 963,549 (54,792) 911,885 1,488,042 (163,170) 2,236,757
Salomon Brothers/JNL U.S. Government &
Quality Bond.......................... 1,275 960,739 (59,959) 902,055 1,014,155 (304,530) 1,611,680
T. Rowe Price/JNL Established Growth.. 10,564 2,609,100 (118,768) 2,500,896 4,140,515 (471,022) 6,170,389
T. Rowe Price/JNL International Equity
Investment............................ 3,096 2,162,647 (126,313) 2,039,430 2,332,437 (343,429) 4,028,438
T. Rowe Price/JNL Mid-Cap Growth...... 5,120 3,846,339 (266,408) 3,585,051 4,159,721 (595,061) 7,149,711
</TABLE>
16
<PAGE> 78
JACKSON NATIONAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT - I
Notes to Financial Statements (continued)
NOTE 6 - RECONCILIATION OF GROSS AND NET DEPOSITS INTO THE SEPARATE ACCOUNT
Deposits into the Separate Account purchase shares of the JNL Series
Trust. Net deposits represent the amounts available for investment
in such shares after the deduction of applicable policy charges.
The following is a summary of net deposits made for the periods
ended September 30, 1997, and December 31, 1996:
<TABLE>
<CAPTION>
PORTFOLIOS
--------------------------------------------------------------------------------------------------
JNL AGGRESSIVE JNL CAPITAL JNL GLOBAL
GROWTH GROWTH EQUITIES
------------------------------- ------------------------------- ----------------------------
NINE MONTHS NINE MONTHS NINE MONTHS
ENDED ENDED ENDED
SEPTEMBER 30, YEAR ENDED SEPTEMBER 30, YEAR ENDED SEPTEMBER 30, YEAR ENDED
1997 DECEMBER 31, 1997 DECEMBER 31, 1997 DECEMBER 31,
(UNAUDITED) 1996 (UNAUDITED) 1996 (UNAUDITED) 1996
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Proceeds from units issued..... $34,927,620 $27,543,128 $31,431,538 $35,519,102 $71,097,210 $39,106,636
Value of units redeemed........ (7,504,324) (1,145,314) (8,811,255) (975,072) (6,752,400) (1,240,848)
Transfers between funds and
general account................ 2,667,090 676,383 (413,250) 653,800 11,525,657 1,204,468
Total gross deposits net of
transfers to general account... 30,090,386 27,074,197 22,207,033 35,197,830 75,870,467 39,070,256
------------- ------------- ------------- ------------- ------------- -------------
DEDUCTIONS:
Policyholder charges........... 41,976 5,757 44,194 4,221 46,972 6,008
------------- ------------- ------------- ------------- ------------- -------------
Net deposits from policyholders $30,048,410 $27,068,440 $22,162,839 $35,193,609 $75,823,495 $39,064,248
============= ============= ============== ============= ============= ===========
</TABLE>
17
<PAGE> 79
JACKSON NATIONAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT - I
Notes to Financial Statements (continued)
NOTE 6 - RECONCILIATION OF GROSS AND NET DEPOSITS INTO THE SEPARATE ACCOUNT
(CONTINUED)
<TABLE>
<CAPTION>
PORTFOLIOS
--------------------------------------------------------------------------------------------------
JNL/ALGER JNL/EAGLE JNL/EAGLE
GROWTH CORE EQUITY SMALLCAP EQUITY
------------------------------- ------------------------------- ----------------------------
NINE MONTHS NINE MONTHS NINE MONTHS
ENDED ENDED ENDED
SEPTEMBER 30, YEAR ENDED SEPTEMBER 30, PERIOD ENDED SEPTEMBER 30, PERIOD ENDED
1997 DECEMBER 31, 1997 DECEMBER 31, 1997 DECEMBER 31,
(UNAUDITED) 1996 (UNAUDITED) 1996 (UNAUDITED) 1996
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Proceeds from units issued..... $26,670,820 $36,756,292 $6,160,418 $1,021,518 $7,420,576 $750,702
Value of units redeemed........ (7,010,505) (2,573,647) (125,421) (148,208) (1,103,644) (18,081)
Transfers between funds and
general account................ 3,487,784 376,063 748,446 5,840 1,463,350 9,328
------------- ------------- ------------- ------------- ------------- -------------
Total gross deposits net of
transfers to general account... 23,148,099 34,558,708 6,783,443 879,150 7,780,282 741,949
DEDUCTIONS:
Policyholder charges........... 54,178 9,909 154 - 221 -
------------- ------------- ------------- ------------- ------------- -------------
Net deposits from policyholders $23,093,921 $34,548,799 $6,783,289 $879,150 $7,780,061 $741,949
============= ============= ============== ============= ============= ===========
</TABLE>
18
<PAGE> 80
JACKSON NATIONAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT - I
Notes to Financial Statements (continued)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
JNL/PUTNAM JNL/PUTNAM PPM AMERICA/JNL
GROWTH VALUE EQUITY BALANCED
- ------------------------------ -------------------------------- ----------------------------------
ENDED ENDED ENDED
SEPTEMBER 30, YEAR ENDED SEPTEMBER 30, YEAR ENDED SEPTEMBER 30, YEAR ENDED
1997 DECEMBER 31, 1997 DECEMBER 31, 1997 DECEMBER 31,
(UNAUDITED) 1996 (UNAUDITED) 1996 (UNAUDITED) 1996
- -------------- -------------- ---------------- --------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
$ 35,802,573 $21,442,640 $ 46,305,688 15,632,015 $ 20,783,802 $ 23,509,961
(4,093,589) (796,160) (2,896,056) (411,373) (3,174,361) (1,217,837)
5,545,668 560,800 10,991,697 537,691 2,979,745 227,388
------------ ----------- ------------ ----------- ------------ ------------
37,254,652 21,207,280 54,401,329 15,758,333 20,589,186 22,519,512
31,450 6,816 28,745 2,604 34,616 8,687
------------ ----------- ------------ ----------- ------------ ------------
$ 37,223,202 $21,200,464 $ 54,372,584 $15,755,729 $ 20,554,570 $ 22,510,825
============ =========== ============ =========== ============ ============
<CAPTION>
- ---------------------------------
PPM AMERICA/JNL
HIGH YIELD BOND
NINE MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED
1997 DECEMBER 31,
(UNAUDITED) 1996
- --------------- ----------------
<S> <C>
$ 30,524,684 $12,260,162
(4,014,574) (815,925)
2,023,611 766,118
------------ -----------
28,533,721 12,210,355
17,730 2,350
------------ -----------
$ 28,515,991 $12,208,005
============ ===========
</TABLE>
19
<PAGE> 81
JACKSON NATIONAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT - I
Notes to Financial Statements (continued)
NOTE 6 - RECONCILIATION OF GROSS AND NET DEPOSITS INTO THE SEPARATE ACCOUNT
(CONTINUED)
<TABLE>
<CAPTION>
PORTFOLIOS
----------------------------------------------------------------------------------------------
PPM AMERICA/JNL SALOMON BROTHERS/JNL. SALOMON BROTHERS/JNL U.S.
MONEY MARKET GLOBAL BOND GOVERNMENT & QUALITY BOND
------------------------------ ---------------------------- -----------------------------
NINE MONTHS NINE MONTHS NINE MONTHS
ENDED ENDED ENDED
SEPTEMBER 30, YEAR ENDED SEPTEMBER 30, YEAR ENDED SEPTEMBER 30, YEAR ENDED
1997 DECEMBER 31, 1997 DECEMBER 31, 1997 DECEMBER 31,
(UNAUDITED) 1996 (UNAUDITED) 1996 (UNAUDITED) 1996
------------- ------------ ------------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Proceeds from units issued......... $ 96,199,424 $ 43,127,416 $ 16,144,804 $ 10,448,311 $ 11,254,167 $ 9,278,322
Value of units redeemed............ (53,453,888) (14,310,306) (1,961,578) (486,567) (3,107,727) (469,196)
Transfers between funds and
general account.................... (33,190,008) (6,523,796) 1,871,716 246,760 (678,234) 271,425
------------ ------------ ------------ ------------ ------------ ------------
Total gross deposits net of
transfers to general account....... 9,555,528 22,293,314 16,054,942 10,208,504 7,468,206 9,080,551
DEDUCTIONS:
Policyholder charges............... 21,890 3,878 14,175 2,147 10,986 2,924
------------ ------------ ------------ ------------ ------------ ------------
Net deposits from policyholders.... $ 9,533,638 $ 22,289,436 $ 16,040,767 $ 10,206,357 $ 7,457,220 $ 9,077,627
============ ============ ============ ============ ============ ============
</TABLE>
20
<PAGE> 82
JACKSON NATIONAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT - I
Notes to Financial Statements (continued)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
T. ROWE PRICE/JNL T. ROWE PRICE/JNL T.ROWE PRICE/JNL
ESTABLISHED GROWTH INTERNATIONAL EQUITY MID-CAP GROWTH
- ------------------------------- -------------------------------- ----------------------------------
NINE MONTHS NINE MONTHS NINE MONTHS
ENDED ENDED ENDED
SEPTEMBER 30, YEAR ENDED SEPTEMBER 30, YEAR ENDED SEPTEMBER 30, YEAR ENDED
1997 DECEMBER 31, 1997 DECEMBER 31, 1997 DECEMBER 31,
(UNAUDITED) 1996 (UNAUDITED) 1996 (UNAUDITED) 1996
- -------------- --------------- ---------------- -------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
$50,343,620 $29,052,257 $25,127,729 $23,348,962 $47,699,161 $43,089,505
(6,649,901) (1,202,924) (4,189,163) (1,329,874) (7,475,195) (2,671,376)
7,125,476 988,000 3,580,617 820,933 5,430,823 1,288,321
----------- ----------- ----------- ----------- ----------- -----------
50,819,195 28,837,333 24,519,183 22,840,021 45,654,789 41,706,450
49,917 7,690 31,041 4,265 55,593 6,852
----------- ----------- ----------- ----------- ----------- -----------
$50,769,278 $28,829,643 $24,488,142 $22,835,756 $45,599,196 $41,699,598
=========== =========== =========== =========== =========== ===========
</TABLE>
21
<PAGE> 83
REPORT OF INDEPENDENT ACCOUNTANTS
To Jackson National Life Insurance Company and
Contract Owners of Jackson National Separate Account - I
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets present fairly, in all material respects, the financial
position of Jackson National Separate Account - I and the JNL Aggressive Growth
Portfolio, JNL Capital Growth Portfolio, JNL Global Equities Portfolio,
JNL/Alger Growth Portfolio, JNL/Eagle Core Equity Portfolio, JNL/Eagle SmallCap
Equity Portfolio, JNL/Phoenix Investment Counsel Balanced Portfolio,
JNL/Phoenix Investment Counsel Growth Portfolio, PPM America/JNL High Yield
Bond Portfolio, PPM America/JNL Money Market Portfolio, PPM America/JNL Value
Equity Portfolio, Salomon Brothers/JNL Global Bond Portfolio, Salomon
Brothers/JNL U.S. Government & Quality Bond Portfolio, T. Rowe Price/JNL
Established Growth Portfolio, T. Rowe Price/JNL International Equity Investment
Portfolio and T. Rowe Price/JNL Mid-Cap Growth Portfolio at December 31, 1996,
the results of each of their operations and the changes in each of their net
assets for each of the periods indicated, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of
Jackson National Life Insurance Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
Milwaukee, Wisconsin
February 14, 1997
<PAGE> 84
JACKSON NATIONAL SEPARATE ACCOUNT - I
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
<TABLE>
<CAPTION> Portfolios
----------------------------------------------------------------------------
JNL JNL JNL
Aggressive Capital Global JNL/Alger JNL/Eagle
Growth Growth Equities Growth Core Equity
------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments in JNL Series Trust,
at market value
(See schedule of investments) $ 28,142,010 $ 35,439,496 $ 41,921,523 $ 36,776,807 $ 892,695
Due from Jackson National Life
Insurance Company 277,666 273,586 300,349 167,463 -
Receivable for Investments Sold 9,911 3,665 6,582 2,127 34
------------ ------------ ------------ ------------ -------------
Total Assets 28,429,587 35,716,747 42,228,454 36,946,397 892,729
LIABILITIES:
Payable for Investments Purchased 277,666 273,586 300,349 167,463 -
Due to Jackson National Life
Insurance Company 9,911 3,665 6,582 2,127 34
------------ ------------ ------------ ------------ -------------
Total Liabilities 287,577 277,251 306,931 169,590 34
------------ ------------ ------------ ------------ -------------
NET ASSETS $ 28,142,010 $ 35,439,496 $ 41,921,523 $ 36,776,807 $ 892,695
============ ============ ============ ============ =============
TOTAL NET ASSETS REPRESENTED BY:
Number of units outstanding 2,355,530 2,985,668 3,090,234 3,310,810 84,895
============ ============ ============ ============ =============
Unit value (net assets divided by
units outstanding) $ 11.95 $ 11.87 $ 13.57 $ 11.11 $ 10.52
============ ============ ============ ============ =============
<CAPTION>
Portfolios
----------------------------------------------------------------------------
JNL/Phoenix JNL/Phoenix PPM PPM
JNL/Eagle Investment Investment America/JNL America/JNL
SmallCap Counsel Counsel High Yield Money
Equity Balanced Growth Bond Market
------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments in JNL Series Trust,
at market value
(See schedule of investments) $ 789,875 $ 23,948,598 $ 22,240,202 $ 12,920,333 $ 22,752,692
Due from Jackson National Life
Insurance Company - 104,931 256,232 253,885 783,413
Receivable for Investments Sold 30 1,099 912 1,691 843
------------ ------------ ------------ ------------ -------------
Total Assets 789,905 24,054,628 22,497,346 13,175,909 23,536,948
LIABILITIES:
Payable for Investments Purchased - 104,931 256,232 253,885 783,413
Due to Jackson National Life
Insurance Company 30 1,099 912 1,691 843
------------ ------------ ------------ ------------ -------------
Total Liabilities 30 106,030 257,144 255,576 784,256
------------ ------------ ------------ ------------ -------------
NET ASSETS $ 789,875 $ 23,948,598 $ 22,240,202 $ 12,920,333 $ 22,752,692
============ ============ ============ ============ =============
TOTAL NET ASSETS REPRESENTED BY:
Number of units outstanding 71,014 2,120,529 1,682,604 1,147,840 2,193,176
============ ============ ============ ============ =============
Unit value (net assets divided by
units outstanding) $ 11.12 $ 11.29 $ 13.22 $ 11.26 $ 10.37
============ ============ ============ ============ =============
<CAPTION>
Portfolios
----------------------------------------------------------------------------
T. Rowe
PPM Salomon Salomon T. Rowe Price/JNL T. Rowe
America/JNL Brothers/JNL Brothers/JNL Price/JNL International Price/JNL
Value Global U.S. Gov't & Established Equity Mid-Cap
Equity Bond Quality Bond Growth Investment Growth
------------ ------------ ------------ ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments in JNL Series Trust,
at market value
(See schedule of investments) $17,266,864 $10,703,598 $ 9,319,515 $ 31,326,604 $ 24,034,289 $ 45,147,060
Due from Jackson National Life
Insurance Company 110,290 58,862 26,556 212,122 170,174 280,259
Receivable for Investments Sold 39,394 4,501 3,845 28,431 4,756 2,647
----------- ----------- ----------- ------------ ------------ ------------
Total Assets 17,416,548 10,766,961 9,349,916 31,567,157 24,209,219 45,429,966
LIABILITIES:
Payable for Investments Purchased 110,290 58,862 26,556 212,122 170,174 280,259
Due to Jackson National Life
Insurance Company 39,394 4,501 3,845 28,431 4,756 2,647
----------- ----------- ----------- ------------ ------------ ------------
Total Liabilities 149,684 63,363 30,401 240,553 174,930 282,906
----------- ----------- ----------- ------------ ------------ ------------
NET ASSETS $17,266,864 $10,703,598 $ 9,319,515 $ 31,326,604 $ 24,034,289 $ 45,147,060
=========== =========== =========== ============ ============ ============
TOTAL NET ASSETS REPRESENTED BY:
Number of units outstanding 1,330,288 911,885 902,055 2,500,896 2,039,430 3,585,051
=========== =========== =========== ============ ============ ============
Unit value (net assets divided by
units outstanding) $ 12.98 $ 11.74 $ 10.33 $ 12.53 $ 11.78 $ 12.59
=========== =========== =========== ============ ============ ============
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE> 85
JACKSON NATIONAL SEPARATE ACCOUNT-I
STATEMENT OF OPERATIONS
For the Year ended December 31, 1996
<TABLE>
<CAPTION>
Portfolios
--------------------------------------------------------------------------------------
JNL JNL JNL JNL/Eagle
Aggressive Capital Global JNL/Alger JNL/Eagle SmallCap
Growth Growth Equities Growth Core Equity* Equity*
----------- ----------- ----------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
NET REALIZED GAIN FROM
SALES OF INVESTMENTS:
Proceeds from sales $1,725,784 $1,519,646 $ 1,727,384 $3,495,535 $ 149,997 $ 20,263
Cost of investments sold 1,694,788 1,485,303 1,635,236 3,452,327 147,432 19,961
---------- ---------- ---------- ---------- ---------- ----------
Net realized gain from 30,996 34,343 92,148 43,208 2,565 302
sales of investments
NET UNREALIZED GAIN
ON INVESTMENTS:
Unrealized gain beginning of year 620 554 891 2,552 - -
Unrealized gain end of year 1,151,235 375,378 2,911,351 2,302,486 12,728 48,839
---------- ---------- ---------- ---------- ---------- ----------
Net unrealized gain on
investments 1,150,615 374,824 2,910,460 2,299,934 12,728 48,839
---------- ---------- ---------- ---------- ---------- ----------
NET GAIN ON INVESTMENTS 1,181,611 409,167 3,002,608 2,343,142 15,293 49,141
EXPENSES:
Administrative charge 15,954 19,253 20,934 25,410 187 130
Mortality and expense charge 132,954 160,441 174,451 211,746 1,561 1,085
---------- ---------- ---------- ---------- ---------- ----------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $1,032,703 $ 229,473 $2,807,223 $2,105,986 $ 13,545 $ 47,926
========== ========== ========== ========== ========== ==========
<CAPTION>
Portfolios
---------------------------------------------------------------------------------------
JNL/Phoenix JNL/Phoenix PPM PPM PPM Salomon
Investment Investment America/JNL America/JNL America/JNL Brothers/JNL
Counsel Counsel High Yield Money Value Global
Balanced Growth Bond Market Equity Bond
------------ ------------ ----------- ------------ ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
NET REALIZED GAIN FROM
SALES OF INVESTMENTS:
Proceeds from sales $1,932,806 $1,153,436 $1,028,968 $ 22,904,119 $ 677,432 $ 670,512
Cost of investments sold 1,855,628 1,098,492 998,282 22,717,601 643,344 650,132
---------- ---------- ---------- ------------ ----------- ------------
Net realized gain from 77,178 54,944 30,686 186,518 34,088 20,380
sales of investments
NET UNREALIZED GAIN
ON INVESTMENTS:
Unrealized gain beginning of year 1,640 301 12 393 1,099 494
Unrealized gain end of year 1,374,742 1,086,316 741,120 263,414 1,518,174 497,123
---------- ---------- ---------- ------------ ----------- ------------
Net unrealized gain on
investments 1,373,102 1,086,015 741,108 263,021 1,517,075 496,629
---------- ---------- ---------- ------------ ----------- ------------
NET GAIN ON INVESTMENTS 1,450,280 1,140,959 771,794 449,539 1,551,163 517,009
EXPENSES:
Administrative charge 15,595 11,492 6,480 14,235 8,763 5,606
Mortality and expense charge 129,959 95,771 53,997 118,627 73,025 46,718
---------- ---------- ---------- ------------ ----------- ------------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $1,304,726 $1,033,696 $ 711,317 $ 316,677 $1,469,375 $ 464,685
========== ========== ========== ============ ========== ============
<CAPTION>
Portfolios
---------------------------------------------------------------
T. Rowe
Salomon T. Rowe Price/JNL T. Rowe
Brothers/JNL Price/JNL International Price/JNL
U.S. Gov't & Established Equity Mid-Cap
Quality Bond Growth Investment Growth
------------ ----------- -------------- -------------
<S> <C> <C> <C> <C>
NET REALIZED GAIN FROM
SALES OF INVESTMENTS:
Proceeds from sales $ 657,699 $ 1,530,489 $ 1,561,059 $ 3,355,426
Cost of investments sold 648,269 1,470,455 1,530,187 3,252,267
----------- ------------ -------------- -------------
Net realized gain from 9,430 60,034 30,872 103,159
sales of investments
NET UNREALIZED GAIN
ON INVESTMENTS:
Unrealized gain beginning of year 111 3,012 671 1,039
Unrealized gain end of year 271,639 2,490,988 1,273,843 3,539,268
----------- ------------ -------------- -------------
Net unrealized gain on
investments 271,528 2,487,976 1,273,172 3,538,229
----------- ------------ -------------- -------------
NET GAIN ON INVESTMENTS 280,958 2,548,010 1,304,044 3,641,388
EXPENSES:
Administrative charge 5,581 17,198 14,785 26,466
Mortality and expense charge 46,511 143,319 123,213 220,554
----------- ------------ -------------- -------------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 228,866 $ 2,387,493 $ 1,166,046 $ 3,394,368
=========== ============ ============== =============
</TABLE>
*For the period from September 16, 1996 (commencement of operations) through
December 31, 1996.
See accompanying Notes to Financial Statements.
<PAGE> 86
JACKSON NATIONAL SEPARATE ACCOUNT - I
STATEMENTS OF CHANGES IN NET ASSETS
For the Periods ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
Portfolios
-------------------------------------------------------------------------
JNL Aggressive JNL Capital
Growth Growth
-------------------------------- ---------------------------------
Period from Period from
October 16, October 16,
Year Ended 1995* to Year Ended 1995* to
December 31, December 31, December 31, December 31,
1996 1995 1996 1995
-------------- -------------- --------------- --------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net realized gain/(loss) from sales
of investments $ 30,996 $ 216 $ 34,343 $ -
Net unrealized gain on investments 1,150,615 620 374,824 554
Administrative charge (15,954) (3) (19,253) (1)
Mortality and expense charge (132,954) (25) (160,441) (5)
------------- ------------- ------------- ------------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS 1,032,703 808 229,473 548
NET DEPOSITS INTO SEPARATE ACCOUNT (NOTE 6) 27,068,440 40,059 35,193,609 15,866
------------- ------------- ------------- ------------
Increase in net assets 28,101,143 40,867 35,423,082 16,414
NET ASSETS:
BEGINNING OF PERIOD 40,867 - 16,414 -
------------- ------------- ------------- ------------
END OF PERIOD $ 28,142,010 $ 40,867 $ 35,439,496 $ 16,414
============= ============= ============= ============
<CAPTION>
Portfolios
-------------------------------------------------------------------------------
JNL Global JNL/Alger JNL/Eagle
Equities Growth Core Equity
--------------------------------- ------------------------------- -------------
Period from Period from Period
October 16, October 16, September 16,
Year Ended 1995* to Year Ended 1995* to 1996* to
December 31, December 31, December 31, December 31, December 31,
1996 1995 1996 1995 1996
-------------- -------------- --------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net realized gain/(loss) from sales
of investment $ 92,148 $ 1 $ 43,208 $ 201 $ 2,565
Net unrealized gain on investments 2,910,460 891 2,299,934 2,552 12,728
Administrative charge (20,934) (3) (25,410) (6) (187)
Mortality and expense charge (174,451) (22) (211,746) (49) (1,561)
------------- --------- ------------ --------- -----------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS 2,807,223 867 2,105,986 2,698 13,545
NET DEPOSITS INTO SEPARATE ACCOUNT (NOTE 6) 39,064,248 49,185 34,548,799 119,324 879,150
------------- --------- ------------ --------- -----------
Increase in net assets 41,871,471 50,052 36,654,785 122,022 892,695
NET ASSETS:
BEGINNING OF PERIOD 50,052 - 122,022 - -
------------- --------- ------------ --------- -----------
END of period $ 41,921,523 $ 50,052 $ 36,776,807 $ 122,022 $ 892,695
============= ========= ============ ========= ===========
<CAPTION>
Portfolios
-------------------------------------------------------------------------------
JNL/Eagle JNL/Phoenix Investment JNL/Phoenix Investment
SmallCap Equity Counsel Balanced Counsel Growth
--------------- ------------------------------- ----------------------------
Period from Period from Period from
September 16, October 16, October 16,
1996* to [B Year Ended 1995* to Year Ended 1995* to
December 31, December 31, December 31, December 31, December 31,
1996 1996 1996 1995 1995
-------------- -------------- ---------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net realized gain/(loss) from sales of
investments $ 302 $ 77,178 $ (5) $ 54,944 $ -
Net unrealized gain on investments 48,839 1,373,102 1,640 1,086,015 301
Administrative charge (130) (15,595) (5) (11,492) (1)
Mortality and expense charge (1,085) (129,959) (46) (95,771) (7)
------------ ------------- ---------- -------------- ----------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS 47,926 1,304,726 1,584 1,033,696 293
NET DEPOSITS INTO SEPARATE ACCOUNT (NOTE 6) 741,949 22,510,825 131,463 21,200,464 5,749
------------ ------------- ---------- -------------- ----------
Increase in net assets 789,875 23,815,551 133,047 22,234,160 6,042
NET ASSETS:
BEGINNING OF PERIOD - 33,047 - 6,042 -
------------ ------------- ---------- -------------- ----------
END OF PERIOD $ 789,875 $ 23,948,598 $ 133,047 $ 22,240,202 $ 6,042
============ ============= ========== ============== ==========
</TABLE>
*Commencement of operations.
See accompanying Notes to Financial Statements.
<PAGE> 87
JACKSON NATIONAL SEPARATE ACCOUNT - 1
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
For the Periods ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
Portfolios
-------------------------------------------------------------------------------------------
PPM America/JNL PPM America/JNL PPM America/JNL
High Yield Bond Money Market Value Equity
---------------- ---------------- ----------------
Period from Period from Period from
October 16, October 16, October 16,
Year Ended 1995* to Year Ended 1995* to Year Ended 1995* to
December 31, December 31, December 31, December 31, December 31, December 31,
1996 1995 1996 1995 1996 1995
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net realized gain/(loss) from sales $ 30,686 $ - $ 186,518 $ - $ 34,088 $ 6
of investments 741,108 12 263,021 393 1,517,075 1,099
Net unrealized gain on investments (6,480) - (14,235) (11) (8,763) (4)
Administration charge (53,997) (1) (118,627) (90) (73,025) (34)
Mortality and expense charge ------------ ----------- ----------- -------- ----------- --------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS 711,317 11 316,677 292 1,469,375 1,067
NET DEPOSITS INTO SEPARATE ACCOUNT 12,208,005 1,000 146,579 146,287 15,755,729 40,693
(NOTE 6) ----------- ----------- ----------- -------- ----------- --------
Increase in net assets 12,919,322 1,011 22,606,113 146,579 17,225,104 41,760
NET ASSETS:
Beginning of period 1,011 - 22,289,436 - 41,760 -
----------- ----------- ----------- -------- ----------- --------
End of period $12,920,333 $ 1,011 $22,752,692 $146,579 $17,266,864 $ 41,760
=========== =========== =========== ======== =========== ========
<CAPTION>
Portfolios
-------------------------------------------------------------------------------------------
Salmon Brothers/JNL Salomon Brothers/JNL T. Rowe Price/JNL
Global Bond U.S. Gov't & Quality Bond Established Growth
------------------- ------------------------- ------------------
Period from Period from Period from
October 16, October 16, October 16,
Year Ended 1995* to Year Ended 1995* to Year Ended 1995* to
December 31, December 31, December 31, December 31, December 31, December 31
1996 1995 1996 1995 1996 1995
------------ ------------ ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net realized gain/(loss) from sales $ 20,380 $ 12 $ 9,430 $ - $ 60,034 $ 4
of investments
Net unrealized gain on investments 496,629 494 271,528 111 2,487,976 3,012
Administration charge (5,606) (2) (5,581) (1) (17,198) (8)
Mortality and expense charge (46,718) (13) (46,511) (9) (143,319) (68)
------------ ------------ ----------- ----------- ------------- --------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS 464,685 491 228,866 101 2,387,493 2,940
NET DEPOSITS INTO SEPARATE ACCOUNT 10,206,357 32,065 9,077,627 12,921 28,829,643 106,528
(NOTE 6) ------------ ------------ ----------- ----------- ------------- --------
Increase in net assets 10,671,042 32,556 9.306,493 13,022 31,217,136 109,468
NET ASSETS: 32,556 - 13,022 - 109,468 -
BEGINNING OF PERIOD ------------ ------------ ----------- ----------- ------------- --------
END OF PERIOD $ 10,703,598 $ 32,556 $ 9,319,515 $ 13,022 $ 31,326,604 $109,468
============ ============ =========== =========== ============= ========
<CAPTION>
Portfolios
------------------------------------------------------------
Period from Period from
October 16, October 16,
Year Ended 1995* to Year Ended 1995* to
December 31, December 31, December 31, December 31,
1996 1995 1995 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net realized gain/(loss) from sales $ 30,872 $ - $ 103,159 $ -
of investments
Net unrealized gain on investments 1,273,172 671 3,538,229 1,039
Administration charge (14,785) (2) (26,466) (3)
Mortality and expense charge (123,213) (19) (220,554) (26)
----------- ------------ ------------ ------------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS 1,166,046 650 3,394,368 1,010
NET DEPOSITS INTO SEPARATE ACCOUNT 22,835,756 31,837 41,699,598 52,084
(NOTE 6) ----------- ------------ ------------ ------------
Increase in net assets
NET ASSETS:
BEGINNING OF PERIOD 32,487 - 53,094 -
----------- ------------ ------------ ------------
END OF PERIOD $24,034,289 $ 32,487 $ 45,147,060 $ 53,094
=========== ============ ============ ============
</TABLE>
<PAGE> 88
JACKSON NATIONAL SEPARATE ACCOUNT - I
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 4 - PURCHASES AND SALES OF INVESTMENTS
For the period ended December 31, 1996, purchases and proceeds from sales of
investments in the JNL Series Trust were as follows:
<TABLE>
<CAPTION>
PROCEEDS
PURCHASES FROM SALES
JNL SERIES TRUST: ---------------- ----------------
- -----------------
<S> <C> <C>
JNL Aggressive Growth $ 28,647,165 $ 1,725,784
JNL Capital Growth 36,535,310 1,519,646
JNL Global Equities 40,596,245 1,727,384
JNL/Alger Growth 37,807,173 3,495,535
JNL/Eagle Core Equity 1,027,399 149,997
JNL/Eagle SmallCap Equity 760,997 20,263
JNL/Phoenix Investment Counsel Balanced 24,298,072 1,932,806
JNL/Phoenix Investment Counsel Growth 22,246,637 1,153,436
PPM America/JNL High Yield Bond 13,176,496 1,028,968
PPM America/JNL Money Market 45,097,949 22,904,119
PPM America/JNL Value Equity 16,351,371 677,432
Salomon Brothers/JNL Global Bond 10,824,543 670,512
Salomon Brothers/JNL U.S. Government & Quality Bond 9,683,233 657,699
T. Rowe Price/JNL Established Growth 30,199,611 1,530,489
T. Rowe Price/JNL International Equity Investment 24,258,816 1,561,059
T. Rowe Price/JNL Mid-Cap Growth 44,811,602 3,355,426
</TABLE>
<PAGE> 89
JACKSON NATIONAL SEPARATE ACCOUNT - I
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 5 - ACCUMULATION OF UNIT ACTIVITY
The following is a reconciliation of the accumulation of unit activity for the
periods ended December 31, 1996 and 1995:
<TABLE>
<CAPTION>
UNITS UNITS UNITS
OUTSTANDING UNITS UNITS OUTSTANDING UNITS UNITS OUTSTANDING
AT 10/16/95 ISSUED REDEEMED AT 12/31/95 ISSUED REDEEMED AT 12/31/96
---------- ------ -------- ----------- ------ -------- -----------
PORTFOLIO:
<S> <C> <C> <C> <C> <C> <C> <C>
JNL Aggressive Growth - 4,794 (786) 4,008 2,489,793 (138,271) 2,355,530
JNL Capital Growth - 1,587 - 1,587 3,099,665 (115,584) 2,985,668
JNL Global Equities - 4,778 - 4,778 3,207,085 (121,629) 3,090,234
JNL/Alger Growth - 13,268 (983) 12,285 3,610,116 (311,591) 3,310,810
JNL/Eagle Core Equity - - - - 99,222 (14,327) 84,895
JNL/Eagle SmallCap Equity - - - - 72,877 (1,863) 71,014
JNL/Phoenix Investment Counsel Balanced - 13,361 (490) 12,871 2,271,164 (163,506) 2,120,529
JNL/Phoenix Investment Counsel Growth - 572 (1) 571 1,763,677 (81,644) 1,682,604
PPM America/JNL High Yield Bond - 100 - 100 1,238,600 (90,860) 1,147,840
PPM America/JNL Money Market - 19,600 (4,992) 14,608 4,391,649 (2,213,081) 2,193,176
PPM America/JNL Value Equity - 4,064 (120) 3,944 1,375,629 (49,285) 1,330,288
Salomon Brothers/JNL Global Bond - 3,226 (98) 3,128 963,549 (54,792) 911,885
Salomon Brothers/JNL U.S. Government & Quality Bond - 1,275 - 1,275 960,739 (59,959) 902,055
T. Rowe Price/JNL Established Growth - 10,866 (302) 10,564 2,609,100 (118,768) 2,500,896
T. Rowe Price/JNL International Equity Investment - 3,096 - 3,096 2,162,647 (126,313) 2,039,430
T. Rowe Price/JNL Mid-Cap Growth - 5,120 - 5,120 3,846,339 (266,408) 3,585,051
</TABLE>
<PAGE> 90
JACKSON NATIONAL SEPARATE ACCOUNT - I
Notes to Financial Statements (continued)
NOTE 6 - RECONCILIATION OF GROSS AND NET DEPOSITS INTO THE SEPARATE ACCOUNT
Deposits into the Separate Account purchase shares of the JNL Series Trust.
Net deposits represent the amounts available for investment in such shares
after the deduction of applicable policy charges. The following is a
summary of net deposits made for the periods ended, December 31, 1996 and 1995:
<TABLE>
<CAPTION>
Portfolios
--------------------------------------------------------------------------------------------------
JNL Aggressive JNL Capital JNL Global JNL/Alger
Growth Growth Equities Growth
---------------------------- ---------------------------- ------------------------- --------------
Period from Period from Period from
October 16, October 16, October 16,
Year Ended 1995* to Year Ended 1995* to Year Ended 1995* to Year Ended
December 31, December 31, December 31, December 31, December 31, December 31, December 31,
1996 1995 1996 1995 1996 1995 1996
-------------- ------------ ------------ ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Proceeds from units issue $ 27,543,128 $ 48,063 $ 35,519,102 $ 15,872 $ 39,106,636 $ 49,185 $36,756,292)
Value of units redeemed (1,145,314) (8,004) (975,072) (6) (1,240,848) - (2,573,647)
Transfers between funds and
general account 676,383 - 653,800 - 1,204,468 - 376,063
------------- --------- ------------- --------- ------------- -------- -----------
Total gross deposits net of
transfers to general account 27,074,197 40,059 35,197,830 15,866 39,070,256 49,185 34,558,708
DEDUCTIONS:
Policyholder charges 5,757 - 4,221 - 6,008 - 9,909
------------- --------- ------------- --------- ------------- -------- -----------
Net deposits from policyholders $ 27,068,440 $ 40,059 $ 35,193,609 $ 15,866 $ 39,064,248 $ 49,185 $34,548,799
============= ========= ============= ========= ============= ======== ===========
<CAPTION>
Portfolios
--------------------------------------------------------------------------------------------------
JNL/Alger JNL/Eagle JNL/Eagle JNL/Phoenix Investment JNL/Phoenix Investment
Growth Core Equity SmallCap Equity Counsel Balanced Counsel Growth
------------ ------------ ---------------- ---------------------- ------------------------
Period from Period from Period from Period from Period from
October 16, September 16, September 16, October 16, October 16,
1995* to 1996* to 1996* to Year Ended 1995* to Year Ended 1995* to
December 31, December 31, December 31, December 31, December 31, December 31, December 31,
1995 1996 1996 1996 1995 1996 1995
------------ ------------ ------------ ------------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Proceeds from units issue $ 129,147 $1,021,518 $ 750,702 $23,509,961 $ 136,362 $21,442,640 $ 5,756
Value of units redeemed (9,823) (148,208) (18,081) (1,217,837) (4,899) (796,160) (7)
Transfers between funds and
general account - 5,840 9,328 227,388 - 560,800 -
------------- ---------- ------------- ----------- ------------- ----------- --------
Total gross deposits net of 119,324 879,150 741,949 22,519,512 131,463 21,207,280 5,749
transfers to general account
DEDUCTIONS:
Policyholder charges - - - 8,687 - 6,816 -
------------- ---------- ------------- ----------- ------------- ----------- --------
Net deposits from policyholders $ 119,324 $ 879,150 $ 741,949 $22,510,825 $ 131,463 $21,200,464 $ 5,749
============= ========== ============= =========== ============= =========== ========
</TABLE>
* Commencement of operations
<PAGE> 91
JACKSON NATIONAL SEPARATE ACCOUNT - 1
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 6 - RECONCILIATION OF GROSS AND NET DEPOSITS INTO THE SEPARATE ACCOUNT
(CONTINUED)
<TABLE>
<CAPTION>
Portfolios
---------------------------------------------------------------------------------------
PPM America/JNL PPM America/JNL PPM America/JNL
High Yield Bond Money Market Value Equity
--------------------------- --------------------------- ---------------------------
Period from Period from Period from
October 16, October 16, October 16,
Year Ended 1995* to Year Ended 1995* to Year Ended 1995* to
December 31, December 31, December 31, December 31, December 31, December 31,
1996 1995 1996 1995 1996 1995
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Proceeds from units issued $ 12,260,162 $ 1,000 $ 43,127,416 $ 196,208 $ 15,632,015 $ 41,909
Value of units redeemed (815,925) - (14,310,306) (49,921) (411,373) (1,216)
Transfers between funds and
general account 766,118 - (6,523,796) - 537,691 -
------------- ------- ------------- ---------- ------------- ---------
Total gross deposits net of
transfers to general account 12,210,355 1,000 22,293,314 146,287 15,758,333 40,693
DEDUCTION:
Policyholder charges 2,350 - 3,878 - 2,604 -
------------- ------- ------------- ---------- ------------- ---------
Net deposits from policyholders $ 12,208,005 $ 1,000 $ 22,289,436 $ 146,287 $ 15,755,729 $ 40,693
============= ======= ============= ========== ============= =========
<CAPTION>
Portfolios
---------------------------------------------------------------------------------------
Salomon Brothers/JNL Salomon Brothers/JNL T. Rowe Price/JNL
Global Bond U.S. Gov't & Quality Bond Established Growth
--------------------------- --------------------------- ----------------------------
Period from Period from Period from
October 16, October 16, October 16,
Year Ended 1995* to Year Ended 1995* to Year Ended 1995* to
December 31, December 31, December 31, December 31, December 31, December 31,
1996 1995 1996 1995 1996 1995
-------------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Proceeds from units issued $ 10,448,311 $33,080 $ 9,278,322 $ 12,921 $ 29,052,257 $ 109,565
Value of units redeemed (486,567) 91,015 (469,196) - (1,202,924) (3,037)
Transfers between funds and
general account 246,760 - 271,425 - 988,000 -
------------ ------- ------------ ---------- ------------- ---------
Total gross deposits net of
transfers to general account 10,208,504 32,065 9,080,551 12,921 28,837,333 106,528
DEDUCTION:
Policyholder charges 2,147 - 2,924 - 7,690 -
------------ ------- ------------ ---------- ------------- ---------
Net deposits from policyholders $ 10,206,357 $32,065 $ 9,077,627 $ 12,921 $ 28,829,643 $ 106,528
============ ======= ============ ========== ============= =========
<CAPTION>
Portfolios
----------------------------------------------------------
T. Rowe Price/JNL T. Rowe Price/JNL
International Equity Mid-Cap Growth
---------------------------- ---------------------------
Period from Period from
October 16, October 16,
Year Ended 1995* to Year Ended 1995* to
December 31, December 31, December 31, December 31,
1996 1995 1996 1995
-------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Proceeds from units issued $ 23,348,962 $31,837 $ 43,089,505 $ 52,084
Value of units redeemed (1,329,874) - (2,671,376) -
Transfers between funds and
general account 820,933 - 1,288,321 -
------------- ------- ------------ ----------
Total gross deposits net of
transfers to general account 22,840,021 31,837 41,706,450 52,084
DEDUCTION:
Policyholder charges 4,265 - 6,852 -
------------- ------- ------------ ----------
Net deposits from policyholders $ 22,835,756 $31,837 $ 41,699,598 $ 52,084
============= ======= ============ ==========
</TABLE>
*Commencement of operations
<PAGE> 92
JACKSON NATIONAL SEPARATE ACCOUNT - I
SCHEDULE OF INVESTMENTS
December 31, 1996
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES COST VALUE
JNL SERIES TRUST: ---------- ------------ ------------
- -----------------
<S> <C> <C> <C>
JNL Aggressive Growth 2,103,289 $ 26,990,775 $ 28,142,010
JNL Capital Growth 2,450,864 35,064,118 35,439,496
JNL Global Equities 2,757,995 39,010,172 41,921,523
JNL/Alger Growth 3,295,413 34,474,321 36,776,807
JNL/Eagle Core Equity 84,058 879,967 892,695
JNL/Eagle SmallCap Equity 68,506 741,036 789,875
JNL/Phoenix Investment Counsel Balanced 2,009,111 22,573,856 23,948,598
JNL/Phoenix Investment Counsel Growth 1,565,109 21,153,886 22,240,202
PPM America/JNL High Yield Bond 1,210,903 12,179,213 12,920,333
PPM America/JNL Money Market 22,752,692 22,489,278 22,752,692
PPM America/JNL Value Equity 1,190,818 15,748,690 17,266,864
Salomon Brothers/JNL Global Bond 1,006,924 10,206,474 10,703,598
Salomon Brothers/JNL U.S. Government & Quality Bond 913,678 9,047,876 9,319,515
T. Rowe Price/JNL Established Growth 2,494,156 28,835,616 31,326,604
T. Rowe Price/JNL International Equity Investment 1,989,593 22,760,446 24,034,289
T. Rowe Price/JNL Mid-Cap Growth 3,032,039 41,607,792 45,147,060
</TABLE>
See accompanying Notes to Financial Statements
<PAGE> 93
JACKSON NATIONAL SEPARATE ACCOUNT - I
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 1 - ORGANIZATION
Jackson National Life Insurance Company ("JNL") established Jackson
National Separate Account - I (the "Separate Account") on June 14, 1993.
The Separate Account commenced operations on October 16, 1995 and is
registered under the Investment Company Act of 1940 as a unit investment
trust. The Separate Account receives and invests net premiums for
individual flexible premium variable annuity contracts issued by JNL.
The contracts can be purchased on a non-tax qualified basis or in
connection with certain plans qualifying for favorable federal income tax
treatment. The Separate Account currently contains sixteen Portfolios,
each of which invests in the following series of the JNL Series Trust:
JNL Aggressive Growth Series
JNL Capital Growth Series
JNL Global Equities Series
JNL/Alger Growth Series
JNL/Eagle Core Equity Series
JNL/Eagle SmallCap Equity Series
JNL/Phoenix Investment Counsel Balanced Series
JNL/Phoenix Investment Counsel Growth Series
PPM America/JNL High Yield Bond Series
PPM America/JNL Money Market Series
PPM America/JNL Value Equity Series
Salomon Brothers/JNL Global Bond Series
Salomon Brothers/JNL U.S. Government & Quality Bond Series
T. Rowe Price/JNL Established Growth Series
T. Rowe Price/JNL International Equity Investment Series
T. Rowe Price/JNL Mid-Cap Growth Series
NOTE - 2 SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Separate Account in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
<PAGE> 94
JACKSON NATIONAL SEPARATE ACCOUNT - I
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Investments
The Separate Account's investments in the series of the JNL Series
Trust are stated at the net asset values of the respective series.
The average cost method is used in determining the cost of the shares
sold on withdrawals by the Separate Account. Fund share transactions
are recorded on trade date (same as settlement date). The series
follow the accounting practice known as consent dividending, whereby
all of its net investment income and realized gains are treated as
being distributed daily to the Separate Account and are immediately
reinvested in the series.
Federal Income Taxes
The operations of the Separate Account are included in the federal
income tax return of JNL, which is taxed as a "life insurance
company" under the provisions of the Internal Revenue Code. JNL
anticipates no tax liability resulting from the operations of the
Separate Account. Therefore, no federal income tax has been
provided.
NOTE 3 - POLICY CHARGES
Charges are deducted from the Separate Account to compensate JNL for
providing the insurance benefits set forth in the contracts,
administering the contracts, distributing the contracts, and assuming
certain risks in connection with the contract.
Contract Maintenance Charge
An annual contract maintenance charge of $35 is charged against each
contract to reimburse JNL for expenses incurred in establishing and
maintaining records relating to the contract. The contract
maintenance charge is assessed on each anniversary of the contract
date that occurs on or prior to the annuity date. The charge is
deducted by redeeming units. For the year ended December 31, 1996,
$2,400 in contract maintenance charges were assessed.
Transfer Fee Charge
A transfer fee of $25 will apply to transfers in excess of 15
transfers in a contract year. JNL may waive the transfer fee in
connection with pre-authorized automatic transfer programs, or in
those states where a lesser fee is required.
This fee will be deducted from contract values which remain in the
portfolio(s) from which the transfers were made. If such remaining
contract value is insufficient to pay the transfer fee, then the fee
will be deducted from transferred contract values. For the year
ended December 31, 1996, no transfer fees were assessed.
<PAGE> 95
JACKSON NATIONAL SEPARATE ACCOUNT - I
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 3 - POLICY CHARGES - CONTINUED
Surrender or Contingent Deferred Sales Charge
During the first contract years, certain contracts include a
provision for a charge upon the surrender or partial surrender of the
contract. The amount assessed under the contract terms, if any,
depends upon the cost associated with distributing the particular
contracts. The amount, if any, depends on a number of factors,
including the amount withdrawn, the contract year of surrender, or
the number and amount of withdrawals in a calendar year. For the
year ended December 31, 1996, $71,709 in surrender charges were
assessed.
Administration Charge
JNL deducts a daily charge for administrative expenses from the net
assets of the Separate Account equivalent to an annual rate of
0.15%. The administration charge is designed to reimburse JNL for
administrative expenses related to the Separate Account and the
issuance and maintenance of contracts.
Mortality and Expense Charge
A daily charge is made for the mortality and expense risks assumed by
JNL. JNL deducts a daily charge from the net assets of the Separate
Account equivalent to an annual rate of 1.25% for the assumption of
mortality and expense risks. The mortality risk assumed by JNL is
that the insured may receive benefits greater than those anticipated
by JNL. The expense risk assumed by JNL is that the costs of
administering the contracts of the Separate Account will exceed the
amount received from the Administration Charge and the Contract
Maintenance Charge.
<PAGE> 96
CONSOLIDATED BALANCE SHEET
(In thousands)
<TABLE>
<CAPTION>
December 31, 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
INVESTMENTS:
Cash and short-term investments $ 660,246 $ 88,088
Fixed maturities held to maturity, at amortized cost
(market value: 1996, $4,160,485; 1995, $4,199,528) 4,168,277 4,118,883
Investments available for sale, at market value:
Fixed maturities (amortized cost: 1996, $19,796,064; 1995, $18,248,600) 20,225,507 19,252,534
Equities (cost: 1996, $156,767; 1995, $191,908) 202,442 236,095
Mortgage loans 843,860 174,463
Policy loans 594,962 527,041
Other invested assets 118,662 45,567
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS 26,813,956 24,442,671
- ------------------------------------------------------------------------------------------------------------------------------------
Accrued investment income 338,099 327,022
Deferred acquisition costs 1,231,388 891,355
Variable annuity assets 369,569 761
Reinsurance recoverable 155,451 145,333
Value of acquired insurance in force 183,284 196,563
Deferred income taxes 131,470 63,287
Other assets 75,373 67,862
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 29,298,590 $ 26,134,854
====================================================================================================================================
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES
Policy reserves and liabilities:
Reserves for future policy benefits $ 624,733 $ 612,636
Deposits on investment contracts 24,021,621 22,836,811
Guaranteed investment contracts 1,464,010 100,080
Other policyholder funds 16,098 20,215
Claims payable 139,617 130,067
Variable annuity liabilities 369,569 761
Liability for guaranty fund assessments 89,104 94,853
Income taxes currently payable to Parent 140,364 102,047
Other liabilities 419,523 344,149
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 27,284,639 24,241,619
- ------------------------------------------------------------------------------------------------------------------------------------
STOCKHOLDER'S EQUITY
Capital stock, $1.15 par value; authorized 50,000 shares;
outstanding 12,000 shares 13,800 13,800
Additional paid-in capital 648,982 603,982
Net unrealized gain on debt and equity securities
available for sale, net of tax of $97,155 in 1996
and $209,937 in 1995 180,432 389,883
Retained earnings 1,170,737 885,570
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDER'S EQUITY 2,013,951 1,893,235
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 29,298,590 $ 26,134,854
====================================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
25
<PAGE> 97
CONSOLIDATED INCOME STATEMENT
(IN THOUSANDS)
<TABLE>
<CAPTION>
Years Ended December 31, 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES
Premiums and other considerations $ 292,448 $ 310,231 $ 303,759
Net investment income 1,997,032 1,836,372 1,617,557
Net realized investment gains (losses) 18,573 84,626 (18,820)
Fee income:
Mortality charges 123,245 128,695 115,460
Surrender charges 64,933 54,380 42,168
Expense charges 20,641 20,308 20,349
Variable annuity fees 4,063 -- --
- ---------------------------------------------------------------------------------------------------------------
Total fee income 212,882 203,383 177,977
Other income 28,741 8,768 8,542
- ---------------------------------------------------------------------------------------------------------------
TOTAL REVENUES 2,549,676 2,443,380 2,089,015
- ---------------------------------------------------------------------------------------------------------------
BENEFITS AND EXPENSES
Death benefits 282,973 281,011 247,310
Interest credited on deposit liabilities 1,449,852 1,379,435 1,266,497
Increase in reserves, net of reinsurance recoverables 3,568 43,680 62,206
Other policyholder benefits 14,446 17,511 11,496
Commissions 232,901 214,060 229,261
General and administrative expenses 147,644 127,020 95,042
Taxes, licenses and fees 23,535 56,472 45,334
Deferral of acquisition costs (262,351) (227,093) (220,633)
Amortization of acquisition costs 175,062 142,308 144,506
Amortization of insurance in force 13,279 12,379 11,464
- ---------------------------------------------------------------------------------------------------------------
TOTAL BENEFITS
AND EXPENSES 2,080,909 2,046,783 1,892,483
- ---------------------------------------------------------------------------------------------------------------
Pretax income 468,767 396,597 196,532
Income tax expense (164,100) (140,000) (41,450)
- ---------------------------------------------------------------------------------------------------------------
NET INCOME $ 304,667 $ 256,597 $ 155,082
===============================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
26
<PAGE> 98
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
(In thousands)
<TABLE>
<CAPTION>
December 31, 1996 1995 1994
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CAPITAL STOCK
Beginning and end of year $ 13,800 $ 13,800 $ 13,800
- --------------------------------------------------------------------------------------------------
ADDITIONAL PAID-IN CAPITAL
Beginning of year 603,982 603,982 603,982
Capital contributions 45,000 -- --
- --------------------------------------------------------------------------------------------------
End of year 648,982 603,982 603,982
- --------------------------------------------------------------------------------------------------
UNREALIZED GAIN (LOSS) ON INVESTMENTS
Beginning of year 389,883 (353,692) 22,027
Net effect of adoption of SFAS 115 (See Note 2) -- -- 321,547
Change in market value of investments
available for sale, net of taxes and
related deferred acquisition costs (209,451) 743,575 (697,266)
- --------------------------------------------------------------------------------------------------
End of year 180,432 389,883 (353,692)
- --------------------------------------------------------------------------------------------------
RETAINED EARNINGS
Beginning of year 885,570 648,473 512,891
Net income 304,667 256,597 155,082
Dividends paid to stockholder (19,500) (19,500) (19,500)
- --------------------------------------------------------------------------------------------------
End of year 1,170,737 885,570 648,473
- --------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDER'S EQUITY $ 2,013,951 $ 1,893,235 $ 912,563
==================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
27
<PAGE> 99
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Years Ended December 31, 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 304,667 $ 256,597 $ 155,082
Adjustments to reconcile net income to net cash
provided by operating activities:
Net realized investment (gains) losses (18,573) (84,626) 18,820
Interest credited on deposit liabilities 1,449,852 1,379,435 1,266,497
Other charges (212,882) (203,383) (177,977)
Amortization of discount and premium on investments (55,808) (32,261) (32,411)
Change in:
Deferred income taxes 44,600 (364) 6,105
Accrued investment income (11,077) (15,469) (12,634)
Deferred acquisition costs (87,289) (84,785) (76,127)
Value of acquired insurance in force 13,279 12,379 11,464
Income taxes currently payable to Parent 38,317 58,672 (52,997)
Other assets and liabilities, net (90,724) 91,116 71,962
- ----------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,374,362 1,377,311 1,177,784
- ----------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sales of:
Fixed maturities and equities available for sale 3,281,105 2,994,755 4,438,513
Mortgage loans 16,360 3,840 4,690
Principal repayments, maturities, calls and redemptions:
Available for sale 1,052,506 257,793 1,725,628
Held to maturity 465,862 289,266 211,878
Purchases of:
Fixed maturities and equities available for sale (5,716,350) (4,782,081) (6,947,423)
Fixed maturities held to maturity (557,749) (1,050,039) (1,666,176)
Mortgage loans (685,938) (140,379) (2,040)
- ----------------------------------------------------------------------------------------------------------------
NET CASH USED BY INVESTING ACTIVITIES (2,144,204) (2,426,845) (2,234,930)
- ----------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Policyholders' account balances:
Deposits 4,198,094 2,589,863 2,491,506
Withdrawals (2,540,112) (1,713,037) (1,159,070)
Net transfers to separate accounts (341,482) (748) --
Payment of cash dividends to Parent (19,500) (19,500) (19,500)
Capital contribution from Parent 45,000 -- --
- ----------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,342,000 856,578 1,312,936
- ----------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH
AND SHORT-TERM INVESTMENTS 572,158 (192,956) 255,790
CASH AND SHORT-TERM INVESTMENTS, BEGINNING OF PERIOD 88,088 281,044 25,254
- ----------------------------------------------------------------------------------------------------------------
CASH AND SHORT-TERM INVESTMENTS, END OF PERIOD $ 660,246 $ 88,088 $ 281,044
================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
28
<PAGE> 100
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. NATURE OF OPERATIONS
Jackson National Life Insurance Company, Inc. (the "Company" or "JNL") is a
wholly owned subsidiary of Brooke Life Insurance Company ("Brooke Life" or the
"Parent") and is ultimately a wholly owned subsidiary of Prudential Corporation
plc ("Prudential"), London, England. JNL is licensed to sell individual annuity
products, including immediate and deferred annuities, variable annuities,
guaranteed investment contracts ("GICs"), and individual life insurance
products in 49 states and the District of Columbia.
The accompanying consolidated financial statements include JNL and its wholly
owned subsidiaries, First Jackson National Life Insurance Company, an insurance
company; Chrissy Corporation, an advertising agency; Jackson National Financial
Services, Inc., an investment advisor and broker dealer, and Jackson National
Life Distributors, Inc., a limited broker dealer. The Company also consolidates
Jackson National Compania De Seguros De Vida S.A. ("Argentina"), a life
insurance company of which the Company retains 90% of the common stock.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles ("GAAP"). All
significant intercompany accounts and transactions are eliminated in
consolidation. Certain 1995 and 1994 amounts have been reclassified to conform
with the current year presentation.
The preparation of the financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions
that affect the amounts reported in the financial statements and the
accompanying notes. Actual results may differ from those estimates.
INVESTMENTS
Cash and short-term investments primarily include cash, commercial paper, and
money market instruments. All such investments are carried at cost plus
accrued interest, which approximates fair value, have maturities of three
months or less, and are considered cash equivalents for reporting cash flows.
Fixed maturities (including bonds, notes, redeemable preferred stocks, and
mortgage-backed securities) available for sale and common stocks and
non-redeemable preferred stocks are carried at aggregate market value, with
changes in unrealized gains or losses, net of tax and the effect on deferred
acquisition costs, credited or charged directly to stockholder's equity. Fixed
maturities which the Company has the intent and ability to hold to maturity are
reported at amortized cost. The Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in
Debt and Equity Securities," as of January 1, 1994. The cumulative effect of
implementing SFAS 115 was to record appreciation on available for sale fixed
maturities of $887,174, less the effect on related deferred acquisition costs
of $392,486 and deferred income taxes of $173,141, for a net increase to
stockholder's equity of $321,547.
Fixed maturities, whether available for sale or held to maturity, are reduced
to estimated net realizable value for declines in market value considered to be
other than temporary.
Mortgage loans are carried at the unpaid principal balances, net of unamortized
discounts and premiums. Policy loans are carried at the unpaid principal
balances. Real estate is carried at the lower of cost or fair value.
Limited partnership investments are accounted for using the equity method.
Realized gains and losses on the sale of investments are recognized in
operations at the date of sale and are determined using the specific cost
identification method. Premiums and discounts on investments are amortized to
investment income using call or maturity dates.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company enters into financial derivative transactions, including swaps,
put-swaptions, and futures to reduce and manage business risks. These
transactions are used to manage the risk of a change in the value, yield,
price, cash flows, or quantity of, or a degree of exposure with respect to
assets, liabilities, or future cash flows, which the Company has acquired or
incurred. Hedge accounting practices are supported by cash flow matching,
duration matching or scenario testing.
Swap agreements generally involve the exchange of fixed and floating payments
over the life of the agreement without an exchange of the underlying principal
amount. All swap agreements outstanding at December 31, 1996, hedge available
for sale securities and are carried at fair value with the change in value
reflected in stockholder's equity. Amounts paid or received on swap contracts,
if any, are included in investment income. Accrued amounts payable to or
receivable from counterparties are included in other liabilities or other
assets. Realized gains and losses from the settlement or termination of the
interest rate swaps are deferred and amortized over the life of the specific
hedged assets as an adjustment to the yield.
Put-swaptions purchased provide the Company with the right, but not the
obligation, to require the writers to pay the Company the present value of a
ten year interest rate swap at future exercise dates. These put-swaptions are
entered into as a hedge against significant upward fluctuations in interest
rates. Premiums paid for put-swaption contracts are included in other invested
assets and are being amortized to investment income over the remaining terms of
the contracts of one to four years. Put-swaptions, designated as a hedge of
available for sale securities, are carried at fair value with the change in
value reflected in stockholder's equity.
Equity index futures contracts are used in conjunction with equity index-linked
immediate and deferred annuities offered by the Company. The futures contracts
are accounted for as hedges of the associated annuity liabilities.
Financial derivative contracts are primarily held for hedging purposes.
High-yield swaps and equity swaps were held for investment purposes during
1996.
The Company manages the potential credit exposure for over-the-counter
derivative contracts through careful evaluation of the counterparty credit
standing, collateral agreements, and master netting agreements. The Company is
exposed to credit loss in the event of nonperformance by counterparties,
however, the Company does not anticipate nonperformance.
DEFERRED ACQUISITION COSTS
Certain costs of acquiring new business, principally commissions and certain
costs associated with policy issue and underwriting which vary with, and are
primarily related to the production of new business, have been capitalized as
deferred acquisition costs. Deferred acquisition costs are increased by
interest thereon and amortized in proportion to anticipated premium revenues
for traditional life policies and in proportion to estimated gross profits for
annuities and interest-sensitive life products. As certain debt and equity
securities available for sale are carried at aggregate fair value, an
adjustment is made to deferred acquisition costs equal to the change in
amortization that would have occurred if such securities had been sold at their
stated aggregate fair value and the proceeds reinvested at current yields. The
change in this adjustment is included with the change in market value of
investments, net of tax, on debt and equity securities available for sale that
is credited or charged directly to stockholder's equity. At December 31, 1996
and 1995, deferred acquisition costs have been decreased by $188.1 million and
$440.8 million, respectively, to reflect this change.
VALUE OF ACQUIRED INSURANCE IN FORCE
The value of acquired insurance in force at acquisition date ("value of
business" or "VOB") represents the present value of anticipated profits of the
business in force on November 25, 1986 (the date the Company was acquired by
Prudential) net of amortization. The VOB is being amortized in proportion to
anticipated premium revenues for traditional life insurance contracts and
estimated gross profits for annuities and interest-sensitive life products over
a period of 20 years.
29
<PAGE> 101
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
FEDERAL INCOME TAXES
The Company provides deferred income taxes on the temporary differences between
the tax and financial statement basis of assets and liabilities as required by
SFAS No. 109, "Accounting for Income Taxes."
JNL files a consolidated federal income tax return with Brooke Life. The
non-life insurance company subsidiaries file separate federal income tax
returns. Income tax expense is calculated on a separate company basis.
POLICY RESERVES AND LIABILITIES
For traditional life insurance contracts, reserves for future policy benefits
are determined using the net level premium method and assumptions as of the
issue date as to mortality, interest, policy lapsation and expenses plus
provisions for adverse deviations. Mortality assumptions range from 59% to 90%
of the 1975-1980 Basic Select and Ultimate tables depending on underwriting
classification and policy duration. Interest rate assumptions range from 6.0%
to 9.5%. Lapse and expense assumptions are based on Company experience.
For the Company's interest-sensitive life contracts, reserves approximate the
policyholder's accumulation account. For deferred annuity, variable annuity,
and other investment contracts, the reserve is the policyholder's account
value.
VARIABLE ANNUITY ASSETS AND LIABILITIES
The assets and liabilities resulting from the receipt of variable annuity
premiums are segregated in a separate account. The Company receives
administrative fees for managing the funds and other fees for assuming
mortality and certain expense risks. Such fees are recorded as earned and
included in variable annuity fees in the consolidated income statement.
REVENUE AND EXPENSE RECOGNITION
Premiums for traditional life insurance are reported as revenues when due.
Benefits, claims and expenses are associated with earned revenues in order to
recognize profit over the lives of the contracts. This association is
accomplished by provisions for future policy benefits and the deferral and
amortization of deferred acquisition costs.
Deposits on interest-sensitive life products and investment contracts,
principally deferred annuities and guaranteed investment contracts, are treated
as policyholder deposits and excluded from revenue. Revenues consist primarily
of the investment income earned on those deposits. Revenues also consist of
amounts assessed against the policyholder's account value, including mortality,
contract initiation and administration (expense charges) and surrender charges.
Surrender benefits are treated as repayments of the policyholder account.
Benefit payments are treated as reductions to the policyholder account. Death
benefits, net of the policyholder account, are recognized as an expense when
incurred. Expenses consist primarily of the interest credited to the
policyholder deposit. Underwriting expenses are associated with gross profit
in order to recognize profit over the life of the business. This is
accomplished by deferral and amortization of deferred acquisition costs.
3. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following summarizes the basis used by the Company in estimating its fair
value disclosures for financial instruments:
CASH AND SHORT-TERM INVESTMENTS
Carrying value is considered to be a reasonable estimate of fair value.
FIXED MATURITIES AND EQUITY SECURITIES
Fair values are based principally on quoted market prices, if available. For
securities that are not actively traded, fair values are estimated using
independent pricing services or analytically determined values.
MORTGAGE LOANS
Fair values are determined by discounting the future cash flows to the present
at current market rates. At December 31, 1996, the fair value approximated
$846.6 million.
POLICY LOANS
The carrying value approximates fair value, since policy loans reduce the
amount payable at death or surrender of the contract.
DERIVATIVES
The fair value of derivatives is based on estimates received from financial
institutions.
VARIABLE ANNUITY ASSETS
Variable annuity assets are carried at the market value of the underlying
securities.
ANNUITY RESERVES
Fair values for immediate and deferred annuities, without mortality features,
are derived by discounting the future estimated cash flows using current
interest rates with similar maturities. At December 31, 1996, the carrying
value and fair value of such annuities approximated $19.5 billion and $18.5
billion, respectively, and $18.2 billion and $17.2 billion, respectively, at
December 31, 1995.
RESERVES FOR GUARANTEED INVESTMENT CONTRACTS
Fair value is based on the present value of future cash flows at current
pricing rates. At December 31, 1996, the fair value approximated $1,465.3
million.
VARIABLE ANNUITY LIABILITIES
Fair value of contracts in the accumulation phase are based on net surrender
values. Fair values of contracts in the payout phase are based on the present
value of future cash flows at assumed investment rates. At December 31, 1996,
the fair value approximated $345.0 million.
4. INVESTMENTS
Investments are comprised primarily of fixed-interest securities, primarily
publicly-traded industrial, mortgage-backed, utility and government bonds. The
Company generates the vast majority of its deposits from interest-sensitive
individual annuity and life insurance products, on which it has committed to
pay a declared rate of interest. The Company's strategy of investing in
fixed-interest securities aims to ensure matching of the asset yield with the
interest-sensitive insurance liabilities and to earn a stable return on its
investments.
DEBT SECURITIES
The following table sets forth fixed maturity investments at December 31, 1996,
classified by rating categories as assigned by nationally recognized
statistical rating organizations or, if not rated by such firms, the rating
assigned by the National Association of Insurance Commissioners ("NAIC"). For
purposes of the table, NAIC Class 1 is included in the "A" rating; Class 2,
"BBB"; Class 3, "BB" and Classes 4-6, "B and below."
Percent of Total
Investment Rating Assets
------------------------------------------------
AAA 41.1%
AA 2.3
A 15.9
BBB 16.6
------------------------------------------------
Investment grade 75.9
------------------------------------------------
BB 5.3
B and below 2.1
------------------------------------------------
Below investment grade 7.4
------------------------------------------------
Total fixed maturities 83.3
------------------------------------------------
Other assets 16.7
------------------------------------------------
Total assets 100.0%
================================================
30
<PAGE> 102
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
4. INVESTMENTS (CONTINUED)
The amortized cost and estimated market value of fixed maturity investments
held to maturity are as follows (in thousands):
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
DECEMBER 31, 1996 COST GAINS LOSSES VALUE
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Corporate securities $ 886,250 $ 7,931 $ 7,766 $ 886,415
Mortgage-backed securities 3,282,027 32,945 40,902 3,274,070
- --------------------------------------------------------------------------------------------
TOTAL $4,168,277 $ 40,876 $ 48,668 $4,160,485
============================================================================================
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
DECEMBER 31, 1995 COST GAINS LOSSES VALUE
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Corporate securities $ 809,925 $ 15,108 $ 3,028 $ 822,005
Mortgage-backed securities 3,308,958 77,201 8,636 3,377,523
- --------------------------------------------------------------------------------------------
TOTAL $4,118,883 $ 92,309 $ 11,664 $4,199,528
============================================================================================
</TABLE>
The amortized cost and estimated market value of fixed maturity
investments available for sale are as follows (in thousands):
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
DECEMBER 31, 1996 COST GAINS LOSSES VALUE
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury securities $ 5,461 $ 118 $ -- $ 5,579
U.S. Government agencies
and foreign governments 227,307 14,109 91 241,325
Public utilities 748,841 26,708 13,710 761,839
Corporate securities 9,902,242 435,905 59,060 10,279,087
Mortgage-backed securities 8,912,213 150,619 125,155 8,937,677
- --------------------------------------------------------------------------------------------
TOTAL $19,796,064 $ 627,459 $ 198,016 $20,225,507
============================================================================================
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
DECEMBER 31, 1995 COST GAINS LOSSES VALUE
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury securities $ 354,506 $ 3,136 $ 2 $ 357,640
U.S. Government agencies
and foreign governments 1,543,055 68,360 940 1,610,475
Public utilities 954,297 59,767 5,441 1,008,623
Corporate securities 9,013,057 699,519 27,386 9,685,190
Mortgage-backed securities 6,383,685 239,881 32,960 6,590,606
- --------------------------------------------------------------------------------------------
TOTAL $18,248,600 $ 1,070,663 $ 66,729 $19,252,534
============================================================================================
</TABLE>
31
<PAGE> 103
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
Gross unrealized gains pertaining to equity securities at December 31, 1996 and
1995 were $48.2 million and $51.2 million, respectively. Gross unrealized
losses at December 31, 1996 and 1995 were $2.5 million and $7.0 million,
respectively.
The amortized cost and estimated market value of fixed maturities at December
31, 1996, by contractual maturity, are shown below. Expected maturities will
differ from contractual maturities because borrowers may have the right to call
or prepay obligations with or without call or prepayment penalties.
FIXED MATURITIES HELD TO MATURITY (IN THOUSANDS):
<TABLE>
<CAPTION>
AMORTIZED ESTIMATED
COST MARKET VALUE
- -----------------------------------------------------------------
<S> <C> <C>
Due after 1 year through 5 years $ 319,458 $ 322,776
Due after 5 years through 10 years 510,859 506,549
Due after 10 years through 20 years 29,950 31,107
Due after 20 years 25,983 25,983
Mortgage-backed securities 3,282,027 3,274,070
- -----------------------------------------------------------------
TOTAL $ 4,168,277 $ 4,160,485
=================================================================
FIXED MATURITIES AVAILABLE FOR SALE (IN THOUSANDS):
<CAPTION>
AMORTIZED ESTIMATED
COST MARKET VALUE
- -----------------------------------------------------------------
<S> <C> <C>
Due within 1 year or less $ 206,459 $ 247,299
Due after 1 year through 5 years 2,335,443 2,406,666
Due after 5 years through 10 years 4,033,081 4,144,217
Due after 10 years through 20 years 1,902,431 1,978,856
Due after 20 years 2,406,437 2,510,792
Mortgage-backed securities 8,912,213 8,937,677
- -----------------------------------------------------------------
TOTAL $19,796,064 $20,225,507
=================================================================
</TABLE>
Discounts and premiums on collateralized mortgage obligations are amortized
over the estimated redemption period using the effective interest method.
Yields which are used to calculate premium/discount amortization are adjusted
periodically for prepayments.
At December 31, 1996, fixed maturities with a carrying value of $4.7 million
were on deposit with regulatory authorities as required by law in various
states in which the insurance operations conduct business.
Investments (all of which are actively managed fixed maturities) in any single
entity in excess of 10 percent of stockholder's equity at December 31, 1996,
other than investments issued or guaranteed by the United States Government or
a United States Government agency are as follows:
<TABLE>
<CAPTION>
AMORTIZED ESTIMATED
INVESTMENT (IN MILLIONS) COST FAIR VALUE
- -----------------------------------------------------------------
<S> <C> <C>
Hermitage CBO LLC (see Note 12) $ 633.5 $ 633.7
USX Corporation 224.0 244.0
- -----------------------------------------------------------------
</TABLE>
MORTGAGE LOANS
Mortgage loans consist of the following at December 31, 1996
(in thousands):
<TABLE>
<S> <C>
Single family $ 1,057
Commercial 842,803
- -----------------------------------------------------------------
TOTAL $ 843,860
=================================================================
</TABLE>
At December 31, 1996, mortgage loans were collateralized by properties located
in 28 states. Approximately 17% of the aggregate carrying value of the
portfolio is secured by properties located in Texas.
DERIVATIVES
The fair value of derivatives reflects the estimated amounts that the Company
would receive or pay upon termination of the contracts at the reporting date.
A summary of the aggregate notional or contractual amounts and estimated fair
values of these financial instruments at December 31, 1996 and 1995 are
presented below (in millions):
<TABLE>
<CAPTION>
1996 1995
- --------------------------------------------------------------------------
CONTRACTUAL/ CONTRACTUAL/
NOTIONAL ESTIMATED NOTIONAL ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest rate swaps $ 1,255 $ 39 $ 1,000 $ 68
Put-swaptions 24,500 11 12,000 7
Futures 16 -- -- --
==========================================================================
</TABLE>
During 1996, the Company recorded $24.3 million in net investment income from
derivative instruments, including $12.6 million from investment activity. The
average notional amount of swaps outstanding during 1996 was $1.3 billion,
including $255 million notional amount of high yield and equity swaps.
SECURITIES LENDING
The Company has entered into a securities lending agreement whereby blocks of
securities are loaned to third parties, primarily major brokerage firms. As of
December 31, 1996, the estimated fair value of loaned securities was $287.0
million. The agreement requires a minimum of 102 percent of the fair value of
the loaned securities as collateral, calculated on a daily basis. To further
minimize the credit risks related to this program, the financial condition of
counterparties is monitored on a regular basis.
5. INVESTMENT INCOME AND REALIZED GAINS
AND LOSSES
Major categories of investment income are summarized below
(in thousands):
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31, 1996 1995 1994
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Fixed maturities $ 1,872,820 $ 1,766,654 $ 1,550,367
Other investment income 140,717 82,614 79,802
- ------------------------------------------------------------------------
Total investment income 2,013,537 1,849,268 1,630,169
Less investment expenses (16,505) (12,896) (12,612)
- ------------------------------------------------------------------------
NET INVESTMENT INCOME $ 1,997,032 $ 1,836,372 $ 1,617,557
========================================================================
</TABLE>
Net realized investment gains and losses are as follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31, 1996 1995 1994
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Sales of fixed maturities:
Gross gains $ 78,099 $ 101,682 $ 131,620
Gross losses (36,624) (27,897) (200,135)
Sales of equity securities:
Gross gains 20,886 47,883 58,270
Gross losses (5,329) (1,576) (6,082)
Impairment losses (29,500) (29,824) (123)
Other invested assets, net (8,959) (5,642) (2,370)
- --------------------------------------------------------------------------
TOTAL $ 18,573 $ 84,626 $ (18,820)
==========================================================================
</TABLE>
32
<PAGE> 104
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
6. VALUE OF ACQUIRED INSURANCE IN FORCE
The VOB was determined by using assumptions as to interest, persistency and
mortality. Profits were then discounted to arrive at the value of the
insurance in force.
The balances and amortization of insurance in force are summarized as follows
(in thousands):
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31, 1996 1995
- ----------------------------------------------------------
<S> <C> <C>
Balance, beginning of year $ 196,563 $ 208,942
Amortization, net of interest (13,279) (12,379)
- ----------------------------------------------------------
Balance, end of year $ 183,284 $ 196,563
==========================================================
</TABLE>
The VOB is expected to be amortized as follows (in thousands):
<TABLE>
<S> <C>
1997 $ 14,000
1998 15,000
1999 16,000
2000 17,000
Thereafter 121,284
- ------------------------------------------------
TOTAL $183,284
================================================
</TABLE>
7. POLICY RESERVES AND LIABILITIES
A summary of the components of policy reserves and liabilities is as follows
(in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1996 1995
- -----------------------------------------------------------------------
<S> <C> <C>
Term life and other traditional life $ 624,733 $ 612,636
Interest-sensitive life 4,502,912 4,332,780
Deferred and immediate annuities 19,518,709 18,504,031
Guaranteed investment contracts 1,464,010 100,080
- -----------------------------------------------------------------------
SUBTOTAL 26,110,364 23,549,527
=======================================================================
Claims payable and other
policyholder funds 155,715 150,282
- -----------------------------------------------------------------------
TOTAL $ 26,266,079 $ 23,699,809
=======================================================================
</TABLE>
8. REINSURANCE
The Company assumes and cedes reinsurance from and to other insurance companies
in order to limit losses from large exposures; however, if the reinsurer is
unable to meet its obligations, the originating issuer of the coverage assumes
the liability. The maximum amount of life insurance risk retained by the
Company on any one life is generally $1.5 million. Amounts not retained are
ceded to other companies on a yearly renewable-term or a coinsurance basis.
The effect of reinsurance on premiums is as follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31, 1996 1995 1994
- ------------------------------------------------------------------
<S> <C> <C> <C>
Direct premiums $ 358,533 $ 367,937 $ 366,964
Assumed premiums 10,961 4,763 1,544
Less reinsurance ceded (77,046) (62,469) (64,749)
- ------------------------------------------------------------------
TOTAL NET PREMIUMS $ 292,448 $ 310,231 $ 303,759
==================================================================
</TABLE>
Components of the reinsurance recoverable asset as of December 31, are as
follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1996 1995
- ---------------------------------------------------
<S> <C> <C>
Ceded reserves $ 139,998 $ 131,469
Ceded claims liability 9,192 8,721
Ceded -- other 6,261 5,143
- ---------------------------------------------------
TOTAL $ 155,451 $ 145,333
===================================================
</TABLE>
At December 31, 1996, and 1995, $87.4 million and $91.6 million, respectively,
of ceded reserves was reinsured through Brooke Life.
9. FEDERAL INCOME TAXES
The components of the provision for federal income taxes as computed in
accordance with SFAS 109 are as follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31, 1996 1995 1994
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Current tax expense $ 119,500 $ 152,480 $ 26,835
Deferred tax expense (benefit) 44,600 (12,480) 14,615
- --------------------------------------------------------------------------
Provision for income taxes $ 164,100 $ 140,000 $ 41,450
==========================================================================
</TABLE>
The federal income tax provisions differ from the amounts determined by
multiplying pretax income by the statutory federal income tax rate of 35% for
1996, 1995 and 1994 as follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31, 1996 1995 1994
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Income taxes at statutory rate $ 164,069 $ 138,809 $ 68,786
Reduction in taxes resulting from
release of accrued federal tax
due to IRS settlement -- -- (27,000)
Other 31 1,191 (336)
- -----------------------------------------------------------------------------
Provision for income taxes $ 164,100 $ 140,000 $ 41,450
=============================================================================
Effective tax rate 35.0% 35.3% 21.1%
=============================================================================
</TABLE>
The Company made income tax payments of $81.2 million in 1996, $116.1 million in
1995 and $79.9 million in 1994.
33
<PAGE> 105
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
Significant temporary differences included in the deferred tax asset as of
December 31, 1996 and 1995 are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1996 1995
- --------------------------------------------------------------------------
<S> <C> <C>
GROSS DEFERRED TAX ASSET
Policy reserves and other insurance items $ 643,237 $ 669,247
Difference between financial reporting
and the tax basis of:
Assets acquired 12,444 17,483
Insolvency fund assessments 30,970 32,483
Other, net 14,481 12,688
- --------------------------------------------------------------------------
TOTAL DEFERRED TAX ASSET 701,132 731,901
==========================================================================
GROSS DEFERRED TAX LIABILITY
Deferred acquisition costs (324,157) (216,636)
Difference between financial reporting
and the tax basis of the value of the
insurance in-force (64,149) (68,797)
Difference between financial reporting and
the tax basis of other assets (5,546) (7,468)
Net unrealized gains on available
for sale securities (162,989) (364,116)
Other, net (12,821) (11,597)
- --------------------------------------------------------------------------
TOTAL DEFERRED TAX LIABILITY (569,662) (668,614)
- --------------------------------------------------------------------------
NET DEFERRED TAX ASSET $ 131,470 $ 63,287
==========================================================================
</TABLE>
10. CONTINGENCIES
The Company and its subsidiaries are involved in litigation arising in the
ordinary course of business including litigation relating to allegations of
improper sales practices. It is the opinion of management that the ultimate
disposition of such litigation will not have a material adverse effect on the
Company's financial condition or results of operations.
State guaranty funds provide payments for policyholders of insolvent life
insurance companies. These guaranty funds are financed by assessments to
solvent insurance companies based on location, volume, and types of business.
The Company estimated its reserve for future state guaranty fund assessments
based on data received from the National Organization of Life and Health
Insurance Guaranty Associations. Based on data received at the end of 1996, the
Company's reserve for future state guaranty fund assessments is $89.1 million.
The Company believes the reserve is adequate for all anticipated payments for
known insolvencies.
The Company offers synthetic GIC contracts to group customers including pension
funds and other institutional organizations. The synthetic GIC contract is an
off-balance-sheet fee-based product where the customer retains ownership of the
assets related to these contracts and JNL guarantees the customer's obligation
to meet withdrawal requirements. The book value of off-balance-sheet
guarantees at December 31, 1996, and market value of related assets, was $122
million.
11. STOCKHOLDER'S EQUITY
Under Michigan State Insurance Law, dividends on capital stock can only be
distributed out of earned surplus. Furthermore, without the prior approval of
the Commissioner, dividends cannot be declared or distributed which exceed the
greater of 10% of the Company's statutory surplus as of December 31 next
preceding or the Company's statutory net gain from operations for such period.
On January 1, 1997, the maximum amount of dividends that can be paid by the
Company without prior approval of the Commissioner under this limitation
approximated $272.2 million.
Statutory capital and surplus of the Company at December 31, 1996, and 1995 was
$1,501.0 million and $1,196.1 million, respectively. Statutory net income of
the Company was $272.2 million, $156.6 million and $125.3 million in 1996, 1995
and 1994, respectively.
12. RELATED PARTY TRANSACTIONS
The Company's investment portfolio is managed by PPM America ("PPM"), a
registered investment advisor and a wholly owned subsidiary of Prudential. The
Company paid $8.7 million, $6.8 million and $5.8 million to PPM for investment
advisory services during 1996, 1995, and 1994, respectively.
On August 26, 1987, Brooke Life issued $180 million of 12% notes due August 26,
1997 to Prudential as part of an exchange whereby 100% of the common stock of
JNL was transferred to Brooke Life. On December 28, 1988, Brooke Life issued
an additional $20 million of 12% notes due December 28, 1998, to Prudential.
On October 31, 1991, Brooke Life issued $200 million of 9.75% notes due October
31, 2001, to Prudential Finance BV, a Prudential subsidiary.
On November 8, 1996, Brooke Life issued $388 million of 8.50% notes due December
31, 2006 to Brooke Finance, Inc. ("Brooke Finance"), a wholly owned subsidiary
of Brooke Holdings, Inc., ultimately a wholly owned subsidiary of Prudential.
These proceeds were used to extinguish principal and accrued interest on both
the $180 million note due in 1997 and the $20 million note due in 1998. On
December 31, 1996, Brooke Life issued $45 million of 8.51% notes due December
31, 2006 to Brooke Finance. These proceeds were used by Brooke Life to
contribute an additional $45 million of capital to JNL. In 1996, 1995, and
1994, JNL made annual dividend payments to Brooke Life of $19.5 million to pay
the accrued interest on the notes. At December 31, 1996, the aggregate amount
outstanding on the Brooke Life notes was as follows (in millions):
Principal $ 633.0
Accrued interest 3.4
-----------------------------------
Total $ 636.4
===================================
On December 18, 1996, the Company established the Hermitage CBO Limited
Liability Corporation ("Hermitage") for the purpose of securitizing certain of
its holdings in below investment grade bonds. The Company contributed $657.4
million of non-investment grade securities to Hermitage and in exchange
received $616.2 million of subordinated notes, $13.0 million in cash, and 46.4%
of the equity in Hermitage. The Company's ultimate parent, Prudential,
obtained the remaining 53.6% equity interest in Hermitage in exchange for $19.9
million in cash.
13. BENEFIT PLANS
The Company has a defined contribution plan covering substantially all
employees. To be eligible, an employee must have attained the age of 21 and
completed at least 1,000 hours of service in a 12-month period. The Company's
annual contributions, as declared by the board of directors, are based on a
percentage of covered compensation paid to participating employees during the
year. The Company expensed $2.4 million related to this plan during 1996, $2.3
million in 1995 and $2.2 million in 1994.
34
<PAGE> 106
REPORT OF INDEPENDENT ACCOUNTANTS
[PRICE WATERHOUSE LLP LETTERHEAD]
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder of
Jackson National Life Insurance Company
In our opinion, the accompanying consolidated balance sheet and the related
consolidated income statement and consolidated statements of stockholder's
equity and of cash flows present fairly, in all material respects, the
financial position of Jackson National Life Insurance Company and its
subsidiaries (the "Company") at December 31, 1996 and 1995, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
Price Waterhouse LLP
February 7, 1997
[End of GAAP Consolidated Financial Statements]
35
<PAGE> 107
CONSOLIDATED STATUTORY SUMMARY OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996 1995
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
PREMIUMS AND OTHER REVENUE:
Life and annuity premiums $ 3,042,939 $ 2,760,774
Deposit-type funds 1,412,694 100,000
Net investment income 2,006,777 1,837,978
Other income 61,752 10,222
- ----------------------------------------------------------------------------------------------
TOTAL PREMIUMS AND OTHER REVENUE 6,524,162 4,708,974
==============================================================================================
BENEFITS AND EXPENSES:
Death benefits 325,600 314,867
Annuity benefits 2,144,748 1,457,050
Other benefits 394,838 210,726
Net transfers to/from separate accounts 349,921 748
Increase in aggregate reserves 1,278,129 1,982,094
Increase in liability for premium and other deposit funds 1,318,071 100,000
Increase (decrease) in reserves for supplementary contracts
without life contingencies and for dividend
and coupon accumulations (383) 488
- ----------------------------------------------------------------------------------------------
TOTAL BENEFITS AND RESERVES 5,810,924 4,065,973
==============================================================================================
OTHER OPERATING COSTS AND EXPENSES:
Commissions 232,820 212,476
General expenses 139,518 125,097
Taxes, licenses and fees excluding federal
income tax 28,692 53,082
Increase in loading and cost of collection in excess
of loading on deferred and uncollected premiums (4,918) (12,193)
- ----------------------------------------------------------------------------------------------
TOTAL BENEFITS AND EXPENSES 6,207,036 4,444,435
==============================================================================================
Operating gain before dividends and federal
income taxes 317,126 264,539
Dividends to policyholders 19 19
- ----------------------------------------------------------------------------------------------
Net operational gain before federal income taxes 317,107 264,520
Federal income taxes incurred 41,172 104,200
- ----------------------------------------------------------------------------------------------
Net operational gain before net realized capital losses 275,935 160,320
Net realized capital losses (3,739) (3,742)
- ----------------------------------------------------------------------------------------------
NET INCOME $ 272,196 $ 156,578
==============================================================================================
</TABLE>
36
<PAGE> 108
STATUTORY BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1996 1995
- --------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
INVESTMENTS:
Bonds $ 23,976,036 $ 22,382,717
Stocks 215,685 249,964
Mortgage loans 843,311 173,863
Real estate 13,720 15,070
Policy loans 594,710 527,041
Short-term investments 618,092 62,478
Other investments 114,363 51,437
- --------------------------------------------------------------------------------------
TOTAL INVESTMENTS 26,375,917 23,462,570
======================================================================================
Cash 28,758 23,248
Deferred and uncollected premiums 181,490 246,386
Accounts receivable reinsurance 6,261 5,143
Accrued investment income 338,009 326,724
EDP equipment 14,925 11,000
Other receivables 2,549 460
Other assets 39,241 23,524
Separate account assets 369,569 761
- --------------------------------------------------------------------------------------
TOTAL ASSETS $ 27,356,719 $ 24,099,816
======================================================================================
LIABILITIES, CAPITAL AND SURPLUS
LIABILITIES:
Future policy benefits $ 22,966,463 $ 21,783,791
Policy contract claims 135,058 126,845
Policyholder funds:
Premium deposit funds 10,458 14,570
Guaranteed investment contracts 1,464,010 100,080
Other 5,372 5,658
Interest maintenance reserve 126,138 119,188
Federal income taxes due and accrued 9,600 50,473
Cost of collection on deferred premiums 13,210 15,800
Asset Valuation Reserve 313,188 290,917
Remittances not allocated 25,693 31,280
Other liabilities 416,958 364,305
Separate account liabilities 369,569 761
- --------------------------------------------------------------------------------------
TOTAL LIABILITIES 25,855,717 22,903,668
======================================================================================
CAPITAL AND SURPLUS:
Capital 13,800 13,800
Paid-in surplus 648,982 603,982
Unassigned surplus 838,220 578,366
- --------------------------------------------------------------------------------------
TOTAL CAPITAL AND SURPLUS 1,501,002 1,196,148
======================================================================================
TOTAL LIABILITIES, CAPITAL AND SURPLUS $ 27,356,719 $ 24,099,816
======================================================================================
</TABLE>
37
<PAGE> 109
STATUTORY FIVE YEAR PERFORMANCE HISTORY
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
LIFE INSURANCE IN FORCE (000's)
Whole Life $ 29,767,348 $ 30,642,130 $ 30,856,323 $ 30,796,616 $ 28,972,425
Term 116,637,142 115,785,746 117,308,939 113,727,920 109,637,091
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL LIFE INSURANCE IN FORCE $ 146,404,490 $ 146,427,876 $ 148,165,262 $ 144,524,536 $ 138,609,516
=================================================================================================================================
NEW BUSINESS ISSUED (000's)
Whole Life $ 1,637,196 $ 2,190,761 $ 1,591,322 $ 2,821,444 $ 5,508,301
Term 13,353,191 10,151,326 15,826,645 15,871,396 17,529,889
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL NEW BUSINESS ISSUED $ 14,990,387 $ 12,342,087 $ 17,417,967 $ 18,692,840 $ 23,038,190
=================================================================================================================================
PREMIUM INCOME
First-year Life $ 51,422,556 $ 62,370,257 $ 82,319,688 $ 121,752,363 $ 140,789,246
Renewal Life 590,801,488 610,258,912 612,555,127 582,246,754 543,784,250
Annuity 2,400,714,546 2,088,145,187 2,066,204,059 1,548,433,989 2,323,604,123
Deposit-type funds 1,412,693,672 100,000,000 - - -
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL PREMIUM INCOME $4,455,632,262 $2,860,774,356 $2,761,078,874 $ 2,252,433,106 $3,008,177,619
=================================================================================================================================
TOTAL ASSETS (BILLIONS) $ 27.36 $ 24.10 $ 21.63 $ 19.07 $ 16.67
PERCENTAGE DISTRIBUTION OF ASSETS
Bonds 90.7% 95.3% 95.2% 96.2% 95.0%
Stocks 0.8% 1.1% 0.9% 1.2% 1.5%
Mortgage Loans on Real Estate 3.2% 0.7% 0.2% 0.2% 0.3%
Real Estate 0.1% 0.1% 0.1% 0.1% 0.2%
Policy Loans 2.3% 2.2% 2.1% 2.0% 1.8%
Cash and Short-term Investments 2.6% 0.4% 1.3% 0.1% 1.0%
Other Invested Assets 0.3% 0.2% 0.2% 0.2% 0.2%
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL CASH AND INVESTED ASSETS 100.0% 100.0% 100.0% 100.0% 100.0%
=================================================================================================================================
INVESTMENT DATA
Return on Invested Assets 8.27% 8.36% 8.39% 9.06% 9.53%
Net Investment Income $2,006,777,135 $1,837,977,663 $1,617,963,852 $1,527,755,190 $1,357,612,701
Realized Capital Gains (Losses) 7,767,438 41,291,556 (104,455,727) 95,495,906 12,888,698
Unrealized Capital Gains (Losses) (4,316,823) 35,918,127 50,024,949 26,354,396 44,685,525
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL $2,010,227,750 $1,915,187,346 $1,563,533,074 $1,649,605,492 $1,415,186,924
=================================================================================================================================
BENEFITS AND RESERVE INCREASES
Total Policy Benefits $2,803,593,717 $1,967,038,988 $1,373,175,823 $1,076,579,746 $ 953,267,071
Increase in Life Reserves 242,902,882 309,542,000 392,340,506 421,691,797 422,779,698
Dividends to Policyowners 19,237 18,718 19,095 27,658 27,466
OPERATING RATIOS
Expense/Commissions Ratio 11.3% 11.5% 11.6% 12.4% 11.1%
Expense Ratio 4.1% 6.7% 5.0% 5.9% 4.1%
Lapse Ratio 9.9% 9.1% 9.1% 9.3% 10.8%
- ---------------------------------------------------------------------------------------------------------------------------------
NET GAIN FROM OPERATIONS
AFTER FEDERAL INCOME TAXES $ 275,934,538 $ 160,319,596 $ 139,373,164 $ 155,902,977 $ 212,149,257
=================================================================================================================================
</TABLE>
All amounts and calculations in the above table reflect consolidated statutory
amounts.
38
<PAGE> 110
FOOTNOTES
1. For complete information about The Perspective Fixed and Variable Annuity (VA
200), including charges and expenses, get a prospectus by calling 800/766-4683.
Read it carefully before you invest or send money. The Perspective is a
long-term investment vehicle and is subject to a maximum deferred sales charge
of 7% in the first year, declining 1% each year through year seven. There may
be a 10% IRS tax penalty for early withdrawals prior to age 591/2. The
Perspective Fixed and Variable Annuity is available through Jackson National
Financial Services, Inc., an NASD member.
2. For ELI products, S&P 500 and S&P MidCap 400 are trademarks of The
McGraw-Hill Companies, Inc. and have been licensed for use by Jackson National
Life. The product is not sponsored, endorsed, sold or promoted by Standard and
Poor's, and Standard and Poor's makes no representation regarding the
advisability of purchasing the product.
The Nasdaq 100(R), Nasdaq 100 Index(R), and Nasdaq(R) are registered trademarks
of the Nasdaq Stock Market, Inc. (which, with its affiliates, are the
"Corporations") and are licensed for use by Jackson National Life. The
product(s) have not been passed on by the Corporations as to their legality or
suitability. The product(s) are not issued, endorsed, sold, or promoted by the
Corporations. THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH
RESPECT TO THE PRODUCT(S).
The Nikkei Newspaper Corporation has granted Jackson National Life the
non-exclusive use of the Nikkei 225(R) Average. The Nikkei Newspaper
Corporation reserves the right to modify the content of and to cease publishing
the Nikkei Average. The Nikkei Newspaper Corporation accepts no liability
regarding this product offering.
The FTSE 100(R) is calculated by FTSE International Limited in conjunction with
the Institute of Actuaries. FTSE International Limited accepts no liability in
connection with the trading of any products on the index.
DAX(R) is a registered trademark of Deutsche Borse AG.
"CAC40(R)" is a registered trademark of the SBF-Paris Bourse, which designates
the index that the SBF-Paris Bourse calculates and publishes. Authorization to
use the index and the "CAC40" trademark in connection with this product has
been granted by license. The SBF-Paris Bourse does not sponsor, endorse or
participate in the marketing of this product.
The IRS may impose a 10% penalty on all withdrawals from fixed annuities before
age 59 1/2. See your tax adviser for details. This contract has certain
restrictions and limitations. For costs and complete details about JNL Equity
Linked Index Annuity and the Index Options, please ask your JNL Representative.
Policy form numbers ELI-DA500, ELI-IA100, and ELI-IA 200. May not be available
in all states; state variations of the contract may apply. JNL reserves the
right to add or delete an Index at any time.
Contract values in an Indexed Option may be reduced if amounts are transferred,
annuitized or withdrawn prior to the end of the Indexed Option period. Talk to
your JNL Representative for complete details.
3. For JNL Products, corresponding policy form numbers: JNL Select A500;
Lifeline Ultimate L1000; Lifeline Term L1667; 10-, 15- and 20-Year R&C L1665;
JNL Survivorship UL UL2003.
All products and product features may not be available in all states. The
contracts have restrictions and limitations. For costs and complete details,
contact your Jackson National Representative, or call 800/USE-JNLI (873-5654).
4. May be subject to an interest rate adjustment. Withdrawals within the
policy's first seven years (most states) will be adjusted -- downward when
interest rates are rising, upward when they're falling -- to reflect the market
price of the policy's underlying bond investments.
39
