<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 14, 1997
1933 ACT REGISTRATION NO. 33-87244
1940 ACT REGISTRATION NO. 811-8894
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM N-1A
------------------------
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
PRE-EFFECTIVE AMENDMENT NO. __ [ ]
POST-EFFECTIVE AMENDMENT NO. 8 [X]
AND/OR
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 9 [X]
JNL SERIES TRUST
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
5901 EXECUTIVE DRIVE, LANSING, MICHIGAN 48911
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES) (ZIP CODE)
(517) 394-3400
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
<TABLE>
<C> <C>
THOMAS J. MEYER, ESQ. WITH A COPY TO:
JNL SERIES TRUST
VICE PRESIDENT & COUNSEL BLAZZARD, GRODD & HASENAUER P.C.
5901 EXECUTIVE DRIVE P.O. BOX 5108
LANSING, MICHIGAN 48911 WESTPORT, CONNECTICUT 06881
</TABLE>
(NAME AND ADDRESS OF AGENT FOR SERVICE)
------------------------
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE
BOX)
<TABLE>
<S> <C>
[ ] IMMEDIATELY UPON FILING PURSUANT TO PARAGRAPH (B)
[ ] ON (DATE) PURSUANT TO PARAGRAPH (B)
[ ] 60 DAYS AFTER FILING PURSUANT TO PARAGRAPH (A)(1)
[ ] ON (DATE) PURSUANT TO PARAGRAPH (A)(1)
[ ] 75 DAYS AFTER FILING PURSUANT TO PARAGRAPH (A)(2)
[X] ON MAY 1, 1997 PURSUANT TO PARAGRAPH (A)(2) OF RULE 485.
[ ] THIS POST-EFFECTIVE AMENDMENT DESIGNATES A NEW EFFECTIVE
DATE FOR A PREVIOUSLY FILED POST-EFFECTIVE AMENDMENT.
</TABLE>
DECLARATION PURSUANT TO RULE 24F-2
THE REGISTRANT HAS REGISTERED AN INDEFINITE NUMBER OF SECURITIES IN
ACCORDANCE WITH RULE 24F-2 UNDER THE INVESTMENT COMPANY ACT OF 1940.
REGISTRANT'S RULE 24F-2 NOTICE FOR ITS FISCAL YEAR ENDED MARCH 31, 1996, WAS
FILED ON OR ABOUT MAY 30, 1996.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
JNL SERIES TRUST
CROSS-REFERENCE SHEET
(AS REQUIRED BY RULE 495)
<TABLE>
<CAPTION>
CAPTION IN PROSPECTUS OR STATEMENT OF
N-1A ITEM NO. ADDITIONAL INFORMATION RELATING TO EACH SERIES
- ------------- ----------------------------------------------
<S> <C> <C>
PART A
- --------- PROSPECTUS
----------
Item 1. Cover Page.............................................. Front Cover Page
Item 2. Synopsis................................................ Trust Expenses
Item 3. Financial Highlights.................................... Financial Highlights; Performance Advertising for the
Series
Item 4. General Description of Registrant....................... Front Cover Page; Investment Objectives and Policies;
Common Types of Securities and Management Practices
Item 5. Management of the Fund.................................. Management of the Trust
Item 5A Management's Discussion of Fund Performance............. Not Applicable
Item 6. Capital Stock and Other Securities...................... Additional Information; Performance Advertising for the
Series
Item 7. Purchase of Securities Being Offered.................... Investment in Trust Shares; Share Redemption
Item 8. Redemption or Repurchase................................ Share Redemption
Item 9. Pending Legal Proceedings............................... Not Applicable
PART B
- --------- STATEMENT OF ADDITIONAL INFORMATION
-----------------------------------
Item
10. Cover Page.............................................. Front Cover Page
Item
11. Table of Contents....................................... Table of Contents
Item
12. General Information and History......................... General Information and History
Item
13. Investment Objectives and Policies...................... Investment Restrictions Applicable to All Series; Common
Types of Securities
Item
14. Management of the Fund.................................. Trustees and Officers of the Trust
Item
15. Control Persons and Principal Holders of Securities..... Trustees and Officers of the Trust
Item
16. Investment Advisory and Other Services.................. Investment Adviser and Other Services
Item
17. Brokerage Allocation and Other Practices................ Investment Adviser and Other Services
Item
18. Capital Stock and Other Securities...................... Additional Information
Item
19. Purchase, Redemption and Pricing of Securities Being
Offered............................................... Purchases, Redemptions and Pricing of Shares
Item
20. Tax Status.............................................. Tax Status
Item
21. Underwriters............................................ Not Applicable
Item
22. Calculation of Performance Data......................... Performance
Item
23. Financial Statements.................................... Financial Statements
PART C
- ---------
Information required to be included in Part C is set forth under the appropriate item, so numbered, in Part C of this
Amendment to Registration Statement.
</TABLE>
<PAGE> 3
JNL(R) SERIES TRUST
MAY 1, 1997
<PAGE> 4
PROSPECTUS
May 1, 1997
JNL(R) SERIES TRUST
- --------------------------------------------------------------------------------
5901 Executive Drive - Lansing, Michigan 48911
JNL Series Trust ("Trust") is an open-end management investment company
organized under the laws of Massachusetts, by a Declaration of Trust, dated June
1, 1994. The Trust currently offers shares in separate Series, each with its own
investment objective. The shares of the Trust are sold to life insurance company
separate accounts to fund the benefits of variable annuity policies.
JNL AGGRESSIVE GROWTH SERIES is a non-diversified Series that seeks as its
investment objective long-term growth of capital by investing primarily in
common stocks of issuers of any size, including larger, well-established
companies and smaller, emerging growth companies.
JNL CAPITAL GROWTH SERIES is a non-diversified Series that seeks as its
investment objective long-term growth of capital by emphasizing investments in
common stocks of medium-sized companies. Although the Series expects to
emphasize such securities, it may also invest in smaller or larger companies.
JNL GLOBAL EQUITIES SERIES seeks as its investment objective long-term
growth of capital by investing primarily in common stocks of foreign and
domestic issuers of any size. This Series normally invests in issuers from at
least five different countries including the United States.
JNL/ALGER GROWTH SERIES seeks as its investment objective long-term capital
appreciation by investing in a diversified, actively managed portfolio of equity
securities, primarily of companies with total market capitalization of $1
billion or greater.
JNL/EAGLE CORE EQUITY SERIES seeks as its investment objective long-term
capital appreciation and, secondarily, current income by investing primarily in
a diversified portfolio of common stocks which the sub-adviser believes offers
above-average potential for long-term capital appreciation.
JNL/EAGLE SMALLCAP EQUITY SERIES seeks as its investment objective
long-term capital appreciation by investing primarily in equity securities of
smaller companies which the sub-adviser believes offer potential for rapid
growth.
PPM AMERICA/JNL BALANCED SERIES seeks as its investment objective
reasonable income, long-term capital growth and preservation of capital. It is
intended that this Series will invest in common stocks and fixed income
securities, with emphasis on income-producing securities which appear to have
some potential for capital enhancement.
PPM AMERICA/JNL HIGH YIELD BOND SERIES seeks as its investment objective a
high level of current income; its secondary investment objective is capital
appreciation by investing in fixed income securities, with emphasis on higher-
yielding, higher-risk, lower-rated or unrated corporate bonds.
PPM AMERICA/JNL MONEY MARKET SERIES seeks as its investment objective as
high a level of current income as is consistent with the preservation of capital
and maintenance of liquidity by investing in high-quality, short-term money
market instruments.
JNL/PUTNAM GROWTH SERIES seeks as its investment objective long-term growth
of capital. Since income is not an objective, any income generated by the
investment of this Series' assets will be incidental to its objective. It is
intended that this Series will invest primarily in the common stocks of
companies believed by the sub-adviser to have opportunity for capital growth.
JNL/PUTNAM VALUE EQUITY SERIES seeks as its investment objective capital
growth, with income as a secondary objective by investing primarily in common
stocks which the sub-adviser believes to be undervalued relative to underlying
asset value or earnings potential at the time of purchase.
1
<PAGE> 5
JNL/PUTNAM WORLD OPPORTUNITIES SERIES seeks as its investment objective
long-term capital appreciation by investing in securities principally traded in
securities markets outside the United States of companies that have above-
average growth prospects due to the fundamental growth of their money sector.
SALOMON BROTHERS/JNL GLOBAL BOND SERIES seeks as its investment objective a
high level of current income. As a secondary objective, the Series will seek
capital appreciation. The Series seeks to achieve its objectives by investing in
a globally diverse portfolio of fixed income investments and by giving the
sub-adviser broad discretion to deploy the Series' assets among certain segments
of the fixed income market that the sub-adviser believes will best contribute to
achievement of the Series' investment objectives. In pursuing its investment
objectives, the Series reserves the right to invest predominantly in securities
rated in medium or lower rating categories or as determined by the sub-adviser
to be of comparable quality. Although the Series has the ability to invest up to
100% of the Series' assets in lower-rated securities, the Series' sub-adviser
does not anticipate investing in excess of 75% of the Series' assets in such
securities.
SALOMON BROTHERS/JNL U.S. GOVERNMENT & QUALITY BOND SERIES seeks as its
investment objective a high level of current income, by investing primarily in
debt obligations and mortgage-backed securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities including collateralized mortgage
obligations backed by such securities. The Series may also invest a portion of
its assets in investment-grade bonds.
T. ROWE PRICE/JNL ESTABLISHED GROWTH SERIES seeks as its investment
objective long-term growth of capital and increasing dividend income through
investment primarily in common stocks of well-established growth companies.
T. ROWE PRICE/JNL INTERNATIONAL EQUITY INVESTMENT SERIES seeks as its
investment objective long-term growth of capital through investments primarily
in common stocks of established, non-U.S. companies.
T. ROWE PRICE/JNL MID-CAP GROWTH SERIES seeks as its investment objective
long-term growth of capital by investing primarily in the common stock of
companies with medium-sized market capitalizations ("mid-cap") and the potential
for above average growth.
As a result of the market risk inherent in any investment, there is no
assurance that the investment objective of any of the Series will be realized.
Investments in a Series are neither insured nor guaranteed by the U.S.
Government or any other entity or person, and there can be no assurance that the
PPM America/JNL Money Market Series will be able to maintain a stable net asset
value of $1.00 per share.
THE PPM AMERICA/JNL HIGH YIELD BOND SERIES INVESTS PREDOMINANTLY IN, AND
THE JNL AGGRESSIVE GROWTH SERIES, JNL CAPITAL GROWTH SERIES, JNL GLOBAL EQUITIES
SERIES, JNL/EAGLE CORE EQUITY SERIES, JNL/EAGLE SMALLCAP EQUITY SERIES, PPM
AMERICA/JNL BALANCED SERIES, JNL/PUTNAM WORLD OPPORTUNITIES SERIES AND SALOMON
BROTHERS/JNL GLOBAL BOND SERIES MAY INVEST IN HIGH YIELD, HIGH RISK BONDS. BONDS
OF THIS TYPE ARE TYPICALLY SUBJECT TO GREATER MARKET FLUCTUATIONS AND RISK OF
LOSS OF INCOME AND PRINCIPAL DUE TO DEFAULT BY THE ISSUER THAN ARE INVESTMENTS
IN LOWER YIELDING, HIGHER RATED BONDS. (SEE INVESTMENT RISKS SECTION OF
PROSPECTUS.)
Prior to May 1, 1997, the PPM America/JNL Balanced Series was the
JNL/Phoenix Investment Counsel Balanced Series, the JNL/Putnam Growth Series was
the JNL/Phoenix Growth Series and the JNL/Putnam Value Equity Series was the PPM
America/JNL Value Equity Series.
This Prospectus provides you with the basic information you should know
before investing in the Series. You should read it and keep it for future
reference. A Statement of Additional Information, dated May 1, 1997, has been
filed with the Securities and Exchange Commission. You can obtain a copy without
charge by calling (800) 322-8257, or writing the JNL Series Trust Service
Center, P.O. Box 25127, Lansing, MI 48909.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
------------------------
THE STATEMENT OF ADDITIONAL INFORMATION, DATED MAY 1, 1997, IS INCORPORATED
HEREIN BY REFERENCE.
2
<PAGE> 6
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOPIC PAGE
----- ----
<S> <C>
TRUST EXPENSES.............................................. 4
FINANCIAL HIGHLIGHTS........................................ 6
INVESTMENT OBJECTIVES AND POLICIES.......................... 8
MANAGEMENT OF THE TRUST..................................... 31
INVESTMENT IN TRUST SHARES.................................. 37
ADDITIONAL INFORMATION...................................... 37
TAX STATUS.................................................. 39
</TABLE>
3
<PAGE> 7
- --------------------------------------------------------------------------------
TRUST EXPENSES
- --------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<S> <C>
MAXIMUM SALES LOAD IMPOSED ON PURCHASES NONE
MAXIMUM SALES LOAD IMPOSED ON REINVESTED DIVIDENDS NONE
DEFERRED SALES LOAD NONE
REDEMPTION FEES NONE
EXCHANGE FEE NONE
</TABLE>
ANNUAL SERIES OPERATING EXPENSES
(As a percentage of average net assets.)
<TABLE>
<CAPTION>
OTHER
MANAGEMENT EXPENSES(AFTER TOTAL SERIES
FEE REIMBURSEMENT) OPERATING 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%
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%
JNL/Putnam Growth Series**.................................. .90% .15% 1.05%
JNL/Putnam Value Equity Series**............................ .90% .15% 1.05%
JNL/Putnam World Opportunities Series***.................... 1.40% .15%* 1.55%
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>
*Estimated expenses for the first fiscal year of operation. Actual
expenses may be greater or lesser than those shown.
**Prior to May 1, 1997, the management fee for the PPM America/JNL
Balanced Series was .90%, the management fee for the JNL/Putnam Growth Series
was .90%, and the management fee for the JNL/Putnam Value Equity Series was
.75%.
***The JNL/Putnam World Opportunities Series commenced operations on
, 1997.
Currently, Jackson National Financial Services, Inc. will reimburse each of
the Series for annual expenses (excluding Management Fees) in excess of .15% of
average daily net assets. Voluntary reimbursements to these Series may be
modified or discontinued at any time. Prior to reimbursement, Total Series
Operating Expenses as a percentage of net assets for the period ended December
31, 1996, were: JNL Aggressive Growth Series -- %; JNL Capital Growth Series
- -- %; JNL Global Equities Series -- %; JNL/Alger Growth Series -- %;
PPM America/JNL Balanced Series -- %; PPM America/JNL High Yield Bond Series
- -- 1.50%; PPM America/JNL Money Market Series -- 1.30%; JNL/Putnam Growth Series
- -- %; JNL/Putnam 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 -- %; and T. Rowe Price/JNL
Mid-Cap Growth Series -- %; and are expected to be: JNL/Eagle Core Equity
Series -- %; JNL/Eagle SmallCap Equity Series -- %; and JNL/Putnam World
Opportunities Series -- %.
4
<PAGE> 8
EXAMPLE -
The following example illustrates the expenses you would incur on a $1,000
investment, assuming (1) 5% annual return and (2) redemption at the end of each
time period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
JNL Aggressive Growth Series................................ $11 $35 $61 $135
JNL Capital Growth Series................................... $11 $35 $61 $135
JNL Global Equities Series.................................. $12 $37 $64 $140
JNL/Alger Growth Series..................................... $12 $36 $ $
JNL/Eagle Core Equity Series................................ $11 $34 N/A N/A
JNL/Eagle SmallCap Equity Series............................ $11 $35 N/A N/A
PPM America/JNL Balanced Series............................. $11 $34 $58 $129
PPM America/JNL High Yield Bond Series...................... $ 9 $29 $50 $111
PPM America/JNL Money Market Series......................... $ 8 $24 $42 $93
JNL/Putnam Growth Series.................................... $ $ $ $
JNL/Putnam Value Equity Series.............................. $ 9 $29 $50 $111
JNL/Putnam World Opportunities Series....................... $ $ N/A N/A
Salomon Brothers/JNL Global Bond Series..................... $10 $32 $55 $123
Salomon Brothers/JNL U.S. Government & Quality Bond
Series.................................................... $ 9 $27 $47 $105
T. Rowe Price/JNL Established Growth Series................. $10 $32 $55 $123
T. Rowe Price/JNL International Equity Investment Series.... $13 $40 $69 $152
T. Rowe Price/JNL Mid-Cap Growth Series..................... $11 $35 $61 $135
</TABLE>
The purpose of this table is to assist you in understanding the various
costs and expenses that you will bear directly or indirectly. The example
assumes a 5% annual rate of return pursuant to the requirements of the
Securities and Exchange Commission. This hypothetical rate of return is not
intended to be representative of past or future performance of the Series.
5
<PAGE> 9
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following table provides selected per share data for one share of each
Series. The information does not reflect any charges imposed by a separate
account investing in shares of the Series. You should refer to the appropriate
separate account prospectus for additional information regarding such charges.
The information has been audited by Price Waterhouse LLP, independent
accountants, and should be read in conjunction with the financial statements and
notes thereto, together with the report of Price Waterhouse LLP included in the
Statement of Additional Information.
JNL SERIES TRUST
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
JNL/PHOENIX
JNL INVESTMENT
AGGRESSIVE JNL CAPITAL JNL GLOBAL JNL/ALGER COUNSEL
GROWTH GROWTH EQUITIES GROWTH BALANCED
SERIES SERIES SERIES SERIES SERIES
---------- ----------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD..................
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.................................
Net realized and unrealized gains on investments and
foreign currency related items......................
Total income from investment operations...............
LESS DISTRIBUTIONS:
From net investment income............................
From net realized gains on investment transactions....
Total distributions...................................
Net increase..........................................
NET ASSET VALUE, END OF PERIOD........................
TOTAL RETURN(A).......................................
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands)..............
Ratio of net expenses to average net assets(b)(c).....
Ratio of net investment income (loss) to average net
assets(b)(c)........................................
Portfolio turnover rate...............................
RATIO INFORMATION ASSUMING NO EXPENSE REIMBURSEMENT OR
FEES PAID INDIRECTLY
Ratio of expenses to average net assets(b)............
Ratio of net investment income to average net
assets(b)...........................................
</TABLE>
- -------------------------
6
<PAGE> 10
<TABLE>
<CAPTION>
T. ROWE
JNL/PHOENIX PPM SALOMON T. ROWE PRICE/JNL
INVESTMENT PPM AMERICA/JNL PPM SALOMON BROTHERS/JNL PRICE/JNL INTERNATIONAL
COUNSEL AMERICA/JNL MONEY AMERICA/JNL BROTHERS/JNL U.S. GOVERNMENT ESTABLISHED EQUITY
GROWTH HIGH YIELD MARKET VALUE EQUITY GLOBAL BOND & QUALITY BOND GROWTH INVESTMENT
SERIES BOND SERIES SERIES SERIES SERIES SERIES SERIES SERIES
----------- ----------- ----------- ------------ ------------ --------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
<CAPTION>
T. ROWE
PRICE/JNL
MID-CAP
GROWTH
SERIES
---------
<S> <C>
</TABLE>
Each Series' recent performance and holdings will be detailed twice a year
in the Trust's annual and semi-annual reports, which are sent to all
shareholders.
7
<PAGE> 11
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES AND POLICIES
- --------------------------------------------------------------------------------
Investments in each Series are made in many different securities which
provide diversification to minimize risk. While there is careful selection of
portfolio securities and constant supervision by a team of professional
investment managers, there can be no guarantee that the Series' objectives will
be achieved. Because of differences in investment objectives and policies, as
well as acceptable degrees of risk, the performance of a Series may differ even
though more than one Series may utilize the same securities selection.
Unless otherwise stated, the investment objectives and policies set forth
in this Prospectus are not fundamental and may be changed by the Trustees
without shareholder approval. Each Series is subject to additional investment
policies and restrictions described in the Statement of Additional Information,
some of which are fundamental and may not be changed without shareholder
approval.
Currently, shares of the Trust are sold to life insurance company separate
accounts ("Accounts") to fund the benefits of variable annuity policies
("Policies") issued by life insurance companies. The Accounts purchase shares of
the Trust in accordance with variable account allocation instructions received
from owners of the Policies. The Trust then uses the proceeds to buy securities
for its Series. The investment adviser manages the Series from day to day to
accomplish the Trust's investment objectives. The kinds of investments and the
way they are managed depends on what is happening in the economy and the
financial marketplaces. Each of the Accounts, as a shareholder, has an ownership
in the Trust's investments. The Trust also offers to buy back (redeem) shares of
the Trust from the Accounts at any time at net asset value.
Jackson National Financial Services, Inc. ("JNFSI"), a wholly owned
subsidiary of Jackson National Life Insurance Company, serves as investment
adviser for all the Series of the Trust. Janus Capital Corporation serves as
sub-adviser for the JNL Capital Growth, JNL Aggressive 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 Series and JNL/Eagle SmallCap Equity Series; PPM
America, Inc. serves as sub-adviser for the PPM America/JNL Balanced, PPM
America/JNL Money Market and PPM America/JNL High Yield Bond Series; Putnam
Investment Management, Inc. serves as sub-adviser for the JNL/Putnam Growth,
JNL/Putnam Value Equity and JNL/Putnam World Opportunities Series; Salomon
Brothers Asset Management Inc serves as sub-adviser for the Salomon Brothers/JNL
U.S. Government & Quality Bond and Salomon Brothers/JNL Global 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.
Reference is made herein to ratings assigned to certain types of securities
by Standard & Poor's Ratings Group ("S&P"), Moody's Investors Service, Inc.
("Moody's"), Fitch Investors Service, Inc. ("Fitch"), Duff & Phelps, Inc. ("Duff
& Phelps") and Thomson BankWatch, Inc., recognized independent securities
ratings institutions. A description of the ratings categories assigned by S&P
and Moody's is contained in Appendix A.
DIVERSIFICATION
Each of the Series except the JNL Capital Growth and JNL Aggressive Growth
Series qualifies as a diversified investment company under the Investment
Company Act of 1940 (the "1940 Act"). As a fundamental policy, a diversified
fund will not purchase a security of any issuer (except cash items and U.S.
Government securities) if a) it would cause the Series to own more than 10% of
the outstanding voting securities of that issuer or b) it would cause the
Series' holdings of that issuer to amount to more than 5% of the Series' total
assets (as applied in each case to 75% of the Series' total assets). As a
fundamental policy, the JNL Capital Growth and JNL Aggressive Growth Series also
will not purchase more than 10% of the outstanding voting securities of any
issuer; however, only 50% of total assets are subject to the 5% test. The JNL
Capital Growth and JNL Aggressive Growth Series may invest up to 50% of total
assets in the securities of as few as two issuers (not to exceed 25% in any one
issuer) while the other Series may invest up to 25% of their total assets in the
securities of one issuer. Neither the JNL Capital Growth nor the JNL Aggressive
Growth Series anticipates concentrating its holdings in so few issuers unless
its sub-adviser believes a security has the potential for substantial capital
appreciation consistent with a Series' investment policies and goals. To the
extent that any Series invests more than 5% of its assets in a particular
issuer, its exposure to credit risks and/or market risks associated with that
issuer increases. As an additional fundamental policy, no Series will invest
more than 25% of its total
8
<PAGE> 12
assets in any particular industry (other than U.S. Government securities),
except that the PPM America/JNL Money Market Series may invest a greater percent
of its assets in the domestic banking industry.
INTERNAL REVENUE SERVICE (IRS) LIMITATIONS
In addition to the diversification requirements stated above, each Series
intends to comply with the diversification requirements currently imposed by the
IRS on separate accounts of insurance companies as a condition of maintaining
the tax-deferred status of variable contracts. More specific information may be
contained in the participating insurance company's separate account prospectus.
- --------------------------------------------------------------------------------
JNL AGGRESSIVE GROWTH SERIES
- --------------------------------------------------------------------------------
The investment objective of the JNL Aggressive Growth Series is long-term
growth of capital. It is a non-diversified Series that pursues its investment
objective by investing primarily in common stocks of issuers of any size,
including larger, well-established companies and smaller, emerging growth
companies. The smaller or newer a company is, the more likely it may be to
suffer more significant losses as well as realize more substantial growth than
larger or more established issuers.
- --------------------------------------------------------------------------------
JNL CAPITAL GROWTH SERIES
- --------------------------------------------------------------------------------
The investment objective of the JNL Capital Growth Series is long-term
growth of capital in a manner consistent with the preservation of capital. It is
a non-diversified Series that pursues its investment objective by normally
investing at least 50% of its equity assets in securities issued by medium-sized
companies. Medium-sized companies are those whose market capitalizations fall
within the range of companies in the S&P MidCap 400 Index (the "MidCap Index").
Companies whose capitalization falls outside this range after the Series'
initial purchase continue to be considered medium-sized companies for the
purpose of this policy. As of December 30, 1996, the MidCap Index included
companies with capitalizations between approximately $192 million and $6.5
billion. The range of the MidCap Index is expected to change on a regular basis.
Subject to the above policy, the Series may also invest in smaller or larger
issuers.
- --------------------------------------------------------------------------------
JNL GLOBAL EQUITIES SERIES
- --------------------------------------------------------------------------------
The investment objective of the JNL Global Equities Series is long-term
growth of capital in a manner consistent with the preservation of capital. It is
a diversified Series that pursues its investment objective primarily through
investments in common stocks of foreign and domestic issuers. The Series is
permitted to invest on a worldwide basis in companies and other organizations of
any size, regardless of country of organization or place of principal business
activity, as well as domestic and foreign governments, government agencies and
other governmental entities. The Series normally invests in securities of
issuers from at least five different countries, including the United States,
although the Series may at times invest all of its assets in fewer than five
countries. The JNL Global Equities Series may not be suitable for investors that
are not able to bear the additional risks associated with the Series' more
extensive holdings of foreign securities.
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JNL AGGRESSIVE GROWTH SERIES, JNL CAPITAL GROWTH SERIES,
JNL GLOBAL EQUITIES SERIES
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Each of the JNL Aggressive Growth, JNL Capital Growth, and JNL Global
Equities Series invests substantially all of its assets in common stocks when
its sub-adviser believes that the relevant market environment favors profitable
investing in those securities. Common stock investments are selected in
industries and companies that the sub-adviser believes are experiencing
favorable demand for their products and services, and which operate in a
favorable competitive environment and regulatory climate. The sub-adviser's
analysis and selection process focuses on stocks with earnings growth potential
that may not be recognized by the market. Such securities are selected primarily
for their capital growth potential; investment income is not a consideration.
These selection criteria apply equally to stocks of foreign issuers. In
addition, factors such as expected levels of inflation, government policies
influencing business conditions, the outlook for currency relationships, and
prospects for relative economic growth among countries, regions or geographic
areas may warrant greater consideration in selecting foreign stocks.
Each of the JNL Aggressive Growth, JNL Capital Growth and JNL Global
Equities Series invests primarily in common stocks of foreign and domestic
companies. Each Series may invest to a lesser degree in other types of
securities, including preferred stock, warrants, convertible securities and debt
securities. Debt securities that the Series may purchase include corporate bonds
and debentures (not to exceed 35% of net assets in high-yield/high-risk bonds)
(See "Investment Risks -- High Yield/High Risk Bonds"); government securities;
mortgage- and asset-backed securities (not to exceed 25% of assets); zero coupon
bonds (not to exceed 10% of assets); indexed/structured notes; high-grade
commercial paper; certificates of deposit; and repurchase agreements. Such
securities may offer growth potential because of anticipated changes in interest
rates, credit standing, currency relationships or other factors. Each of these
Series may also invest in short-term debt securities as a means of receiving a
return on idle cash.
When the Series' sub-adviser believes that market conditions are not
favorable for profitable investing or when the sub-adviser is otherwise unable
to locate favorable investment opportunities, the Series' investments may be
hedged to a greater degree and/or its cash or similar investments may increase.
In other words, the Series do not always stay fully invested in stocks and
bonds. Cash or similar investments are residual -- they represent the assets
that remain after the sub-adviser has committed available assets to desirable
investment opportunities. When a Series' cash position increases, it may not
participate in stock market advances or declines to the extent that it would if
it remained more fully invested in common stocks.
Although JNL Global Equities Series is committed to foreign investing, each
of these Series may invest without limit in equity and debt securities of
foreign issuers. The Series may invest directly in foreign securities
denominated in a foreign currency and not publicly traded in the United States.
Other ways of investing in foreign securities include depositary receipts or
shares, and passive foreign investment companies. Each of these Series may use
futures, options and other derivatives for hedging purposes or as a means of
enhancing return. Some securities that these Series may purchase may be issued
on a when-issued, delayed delivery or forward commitment basis.
Each of JNL Aggressive Growth, JNL Capital Growth and JNL Global Equities
Series may invest in "special situations" from time to time. A special situation
arises when, in the opinion of the sub-adviser, the securities of a particular
issuer will be recognized and appreciate in value due to a specific development
with respect to that issuer. Developments creating special situations might
include, among others, a new product or process, a technological breakthrough, a
management change or other extraordinary corporate event, or differences in
market supply of and demand for the security. Investment in special situations
may carry an additional risk of loss in the event that the anticipated
development does not occur or does not attract the expected attention. The
impact of this strategy on a Series will depend on the Series' size and the
extent of its holdings of special situation issuers relative to total net
assets.
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JNL/ALGER GROWTH SERIES
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The investment objective of the JNL/Alger Growth Series is long-term
capital appreciation. It is a diversified Series that seeks to achieve its
objective by investing in equity securities, such as common or preferred stocks
that are listed on a national securities exchange, or securities convertible
into or exchangeable for equity securities, including warrants and rights.
Except during temporary defensive periods, the Series invests at least 85
percent of its net assets in equity securities and at least 65 percent of its
total assets in equity securities of companies that, at the time of purchase of
the securities, have total market capitalization of $1 billion or greater.
It is anticipated that the Series will invest primarily in companies whose
securities are traded on domestic stock exchanges or in the over-the-counter
market. These companies may still be in the developmental stage, may be older
companies that appear to be entering a new stage of growth progress owing to
factors such as management changes or development of new technology, products or
markets or may be companies providing products or services with a high unit
volume growth rate. The Series may invest up to 35 percent of its total assets
in equity securities of companies that, at the time of purchase, have total
market capitalization of less than $1 billion. In order to afford the Series the
flexibility to take advantage of new opportunities for investments in accordance
with its investment objective, the Series may hold up to 15 percent of its net
assets in money market instruments and repurchase agreements. During temporary
defensive periods, the Series may invest up to 100% of its assets in debt
securities, money market instruments and/or repurchase agreements. The Portfolio
may also purchase restricted securities (subject to a limit on all illiquid
securities of 10 percent of net assets), lend its securities and enter into
"short sales against the box." See "Common Types of Securities and Management
Practices."
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JNL/EAGLE CORE EQUITY SERIES
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The investment objective of the JNL/Eagle Core Equity Series is long-term
capital appreciation and, secondarily, current income. It is a diversified
Series that seeks to achieve its objective by investing in common stocks that
the sub-adviser believes meet the criteria for one of three individual equity
strategies. The investment strategies which the sub-adviser utilizes to pursue
the Series' objective are the growth equity strategy, the value equity strategy
and the equity income strategy. In pursuing the growth equity strategy, the
sub-adviser will invest in securities which it believes have sufficient growth
potential to offer above-average long-term capital appreciation. Securities
which meet the criteria for the growth equity strategy will have at least one of
the following characteristics:
- expected earnings-per-share growth greater than the average of the S&P
500 Composite Stock Price Index ("S&P 500"); or
- return on equity greater than the average of the S&P 500.
In pursuing the value equity strategy, the sub-adviser will invest in
securities which it believes indicate above-average financial soundness and high
intrinsic value relative to price. Securities which meet the criteria for the
value equity strategy will have at least one of the following characteristics at
the time of purchase:
- price-to-earnings ratio or price-to-book value ratio of less than or
approximately equal to 75% of that of the broader equity market (as
measured by the S&P 500); or
- yield that approximates at least 50% of the prevailing average yield to
maturity of the long-term U.S. Government bond, as measured by the Lehman
Brothers Long Treasury Bond Index (or other similar index if this index
is not available); or
- per share going concern value (as estimated by the sub-adviser) that
exceeds book value and market value; or
- long-term debt below, or approximately equivalent to, tangible net worth.
In pursuing the equity income strategy, the sub-adviser will invest in
income producing securities.
Under normal market conditions, at least 65% of the Series' total assets
will be invested in U.S. common stocks. With respect to the other 35% of its
total assets, the Series may invest in income-producing securities that the sub-
adviser believes are consistent with the Series' investment objective, common
stocks of foreign issuers, American Depositary Receipts ("ADRs"), foreign
currency transactions with respect to underlying common stock, preferred
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<PAGE> 15
stock, convertible securities, corporate debt obligations, obligations of the
U.S. Government, its agencies and instrumentalities, repurchase agreements,
money market instruments, real estate investment trusts, futures contracts,
options, rights or warrants to subscribe for or purchase common stocks, and
securities that track the performance of a broad-based securities index, such as
S&P Depository Receipts. The Series may also loan its portfolio securities and
engage in short sales "against the box."
The Series will emphasize investments in securities rated investment grade
and unrated securities deemed by the sub-adviser to be of comparable quality,
but may invest up to 35% of its assets in securities rated below investment
grade and unrated securities deemed by the sub-adviser to be of comparable
quality. The Series, at the discretion of the sub-adviser, may retain a security
that has been downgraded below the initial investment criteria. (See "Investment
Risks -- High Yield/High Risk Bonds"). The Series may invest up to 25% of its
total assets in securities of foreign issuers, including ADRs. (See "Investment
Risks -- Foreign Securities").
For temporary defensive purposes during anticipated periods of general
market decline, the Series may invest up to 100% of its assets in money market
instruments, including securities issued or guaranteed by the U.S. Government,
its agencies or instrumentalities and repurchase agreements secured thereby,
bank certificates of deposit and banker's acceptances issued by banks having net
assets of at least $1 billion as of the end of their most recent fiscal year,
high grade commercial paper, and other long- and short-term debt instruments
that are rated A or higher by Moody's or S&P. It is impossible to predict when,
or for how long, such alternative strategies may be utilized.
In selecting common stocks to pursue the growth equity strategy, the
sub-adviser makes selections in part based on its opinion regarding the
sustainability of the company's competitive advantage in the marketplace as well
as the sub-adviser's opinion of the company's management team. The sub-adviser
will invest in companies that, in its opinion, will have long-term returns
greater than the average for the S&P 500. The sub-adviser normally will
reevaluate a security if it underperforms the S&P 500 by 15% or more during a
three-month period. At that time, a decision will be made to sell or hold the
security. If a particular stock appreciates to over 5% of the total assets of
the portfolio, the sub-adviser generally will reduce the position to less than
5%. If the stock price appreciates to a level that is not sustainable in the
opinion of the sub-adviser, the position generally will be sold to realize the
existing profits and avoid a potential price correction. If the sub-adviser
identifies a security that it considers to be a better investment than a current
holding, the sub-adviser generally will consider selling the current holding to
add the new security.
In selecting common stocks to pursue the value equity strategy, the
sub-adviser screens a universe of over 2500 companies. From this universe, the
sub-adviser anticipates that only a few hundred companies will meet one or more
of these investment criteria. Each of the companies is analyzed individually in
terms of its past and present competitive position within its perspective
industry. The sub-adviser makes selections based on its projections of the
companies' growth in earnings and dividends, earnings momentum, and
undervaluation based on a dividend discount model. The sub-adviser develops
target prices and value ranges from this analysis and makes portfolio selection
from among the top-rated securities. The sub-adviser periodically monitors the
Series' holdings of securities meeting these criteria to assure that they
continue to meet the selection criteria. A security normally will be sold once
it reaches its target price, when negative changes occur with respect to the
company or its industry, or when there is a significant change in the security
with respect to one or more of the four selection criteria listed above. The
Series may at times continue to hold equity securities that no longer meet the
criteria but that the sub-adviser deems suitable investments in view of the
Series' investment objective.
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JNL/EAGLE SMALLCAP EQUITY SERIES
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The investment objective of the JNL/Eagle Small Cap Equity Series is
long-term capital appreciation. It is a diversified Series that seeks to achieve
its objective by investing primarily in the equity securities of companies, most
of which have a total market capitalization of less than $1 billion ("small
capitalization companies"). Market capitalization is the total value of a
company's outstanding common stock. The Series will invest in securities of
companies that appear to the sub-adviser to be undervalued in relation to their
long-term earning power or the asset value of their issuers and that have
significant future growth potential. Securities may be undervalued because of
many factors, including market decline, poor economic conditions, tax-loss
selling or actual or anticipated unfavorable developments affecting the issuer
of the security. Any or all of these factors may provide buying opportunities
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<PAGE> 16
at attractive prices relative to the long-term prospects for the companies in
question.
The Series invests primarily in common stocks, but also may invest in
preferred stocks, investment grade securities convertible into common stocks,
and warrants. The Series may purchase securities traded on recognized securities
exchanges and in the over-the-counter market. The Series normally invests at
least 65% of its total assets in the equity securities of companies each of
which, at the time of purchase, has a total market capitalization of less than
$1 billion. The Series may invest its remaining assets in ADRs, U.S. Government
securities, repurchase agreements or other short-term money market instruments.
The Series will emphasize investments in securities rated investment grade
and unrated securities deemed by the sub-adviser to be of comparable quality,
but may invest up to 5% of its assets in securities rated below investment grade
and unrated securities deemed by the sub-adviser to be of comparable quality.
The Series, at the discretion of the sub-adviser, may retain a security that has
been downgraded below the initial investment criteria. (See "Investment Risks --
High Yield/High Risk Bonds").
The sub-adviser currently believes that investments in small capitalization
companies may offer greater opportunities for growth of capital than investments
in larger, more established companies. Investing in smaller, newer issuers
generally involves greater risks than investing in larger, more established
issuers. Companies in which the Series is likely to invest may have limited
product lines, markets or financial resources and may be subject to more abrupt
or erratic market movements than securities of larger, more established
companies or the market averages in general. In addition, many small
capitalization companies may be in the early stages of development. Accordingly,
an investment in the Series may not be appropriate for all investors.
For temporary defensive purposes during anticipated periods of general
market decline, the Series may invest up to 100% of its assets in money market
instruments, including securities issued or guaranteed by the U.S. Government,
its agencies or instrumentalities and repurchase agreements secured thereby, as
well as bank certificates of deposit and banker's acceptances issued by banks
having net assets of at least $1 billion as of the end of their most recent
fiscal year, high-grade commercial paper, and other long- and short-term debt
instruments that are rated A or higher by Moody's or S&P. It is impossible to
predict when, or for how long, such alternative strategies may be utilized.
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PPM AMERICA/JNL BALANCED SERIES
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The investment objective of the PPM America/JNL Balanced Series is to seek
reasonable income, long-term capital growth and preservation of capital. It is a
diversified Series that intends to invest based on combined consideration of
risk, income, capital enhancement, and protection of capital value. The Series
may invest in any type or class of security. Normally, the Series will invest in
common stocks and fixed income securities; however, it may also invest in
securities convertible into common stocks. At least 25% of the value of its
assets will be invested in fixed income senior securities.
The Series may also engage in certain options transactions and enter into
financial futures contracts and related options for hedging purposes and may
invest in deferred or zero coupon debt obligations. In implementing the
investment objectives of this Series, the sub-adviser will select securities
believed to have potential for the production of current income, with emphasis
on securities that also have potential for capital enhancement. For temporary
defensive purposes when the sub-adviser believes that adverse market conditions
warrant, the Series may actively pursue a policy of retaining cash or investing
part or all of its assets in cash equivalents, such as government securities and
high grade commercial paper.
The Series will emphasize investments in investment grade fixed income
securities which are rated within the four highest categories by recognized
rating agencies, e.g., S&P and Moody's. However, the Series may take a modest
position in lower or non-rated fixed income securities, but the Series will not
invest more than 35% of its net assets, determined at the time of investment, in
high yield, high risk fixed income securities. The Series may invest in bonds
rated as low as Ca by Moody's or CC by S&P. A fixed income securities issue may
have its ratings reduced below the minimum permitted for purchase by the Series.
In that event the sub-adviser will determine whether the Series should continue
to hold such issue in its portfolio. If, in the sub-adviser's opinion, market
conditions warrant, the Series may increase its position in lower or non-rated
securities from time to time. The lower rated and non-rated convertible
securities are predominantly speculative with respect to the issuer's capacity
to repay principal and pay interest. Investment in lower rated and non-rated
convertible fixed income securities normally involves a
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<PAGE> 17
greater degree of market and credit risk than does investment in securities
having higher ratings. The price of these fixed income securities will generally
move in inverse proportion to interest rates. In addition, non-rated securities
are often less marketable than rated securities. To the extent that the Series
holds any lower rated or non-rated securities, it may be negatively affected by
adverse economic developments, increased volatility and lack of liquidity. (See
"Investment Risks -- High Yield/High Risk Bonds").
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PPM AMERICA/JNL HIGH YIELD BOND SERIES
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The primary investment objective of the PPM America/JNL High Yield Bond
Series is a high level of current income; its secondary investment objective is
capital appreciation by investing in fixed income securities, with emphasis on
higher-yielding, higher-risk, lower-rated or unrated corporate bonds. It is a
diversified Series.
Under normal market conditions, the Series will be invested substantially
in long-term (over 10 years to maturity) and intermediate-term (3 to 10 years to
maturity) fixed income securities, with emphasis on higher-yielding,
higher-risk, lower-rated or unrated corporate bonds. These high risk, high yield
bonds typically are subject to greater market fluctuations and risk of loss of
income and principal due to default by the issuer than are investments in
lower-yielding, higher-rated bonds. (See "Investment Risks -- High Yield/High
Risk Bonds").
High risk, high yield bonds generally include any bonds that are rated Ba
or below by Moody's or BB or below by S&P or that are unrated but considered by
the sub-adviser to be of equivalent credit quality. Bonds rated Ba or BB or
below are considered speculative. The Series may invest without limitation in
bonds rated as low as Ca by Moody's or C by S&P (or unrated but considered by
the sub-adviser to be of equivalent quality). In addition, the Series may invest
up to 10% of its total assets in bonds rated C by Moody's or D by S&P (or
unrated but considered by the sub-adviser to be of equivalent quality).
High-yield bonds are riskier than lower-yielding, higher-rated bonds.
In pursuing its secondary investment objective of capital appreciation, the
Series may purchase high yield bonds that are expected by the sub-adviser to
increase in value due to improvements in their credit quality or ratings or
anticipated declines in interest rates. In addition, the Series may invest for
this purpose up to 25% of its assets in equity securities, such as common
stocks, or other securities having common stock characteristics. Securities
designated as having common stock characteristics include, but are not limited
to, securities convertible into or exchangeable for common stock.
Treating high current income as its primary investment objective means that
the Series may forego opportunities that would result in capital gains and may
accept prudent risks to capital value, in each case to take advantage of
opportunities for higher current income.
Up to 25% of the Series' assets may be invested in securities of foreign
issuers, which are generally denominated in currencies other than the U.S.
dollar. The Series also has the ability to hold a portion of its assets in
foreign currencies and to enter into forward foreign currency exchange
contracts, currency options, currency and financial futures contracts, and
options on such futures contracts. The Series may enter into repurchase
agreements and firm commitment agreements and may purchase securities on a
when-issued basis. Investment in foreign securities also involves special risks.
Under normal market conditions, the Series will invest at least 65% of its
total assets in high risk, high yield bonds as described above. Subject to this
requirement, the Series may maintain assets in cash or cash equivalents,
including commercial bank obligations (certificates of deposit, which are
interest-bearing time deposits; bankers' acceptances, which are time drafts on a
commercial bank for which the bank accepts an irrevocable obligation to pay at
maturity; and demand or time deposits), commercial paper (short-term notes
issued by corporations or governmental bodies) and obligations issued or
guaranteed by the U.S. Government. The Series may adopt temporary defensive
position investment policies during adverse market, economic or other
circumstances that require immediate action to avoid losses. During periods when
and to the extent that the Series has assumed a temporary defensive position,
the Series may not be pursuing its investment objective.
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<PAGE> 18
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PPM AMERICA/JNL MONEY MARKET SERIES
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The investment objective of the PPM America/JNL Money Market Series is to
achieve as high a level of current income as is consistent with the preservation
of capital and maintenance of liquidity by investing in high quality, short-term
money market instruments. It is a diversified Series that pursues its investment
objective by investing mainly in debt, but the Series shall retain maximum
flexibility in the management of its portfolio.
The PPM America/JNL Money Market Series invests in high quality money
market instruments. These instruments are considered to be among the safest
investments available because of their short maturities, liquidity and high
quality ratings.
This Series will invest exclusively in the following types of high quality,
U.S. dollar denominated money market instruments that mature in 397 days or
less:
- Obligations issued or guaranteed as to principal and interest by the U.S.
Government, its agencies and instrumentalities.
- Obligations, such as time deposits, certificates of deposit and bankers
acceptances, issued by U.S. banks and savings banks that are members of
the Federal Deposit Insurance Corporation, including their foreign
branches and foreign subsidiaries, and issued by domestic and foreign
branches of foreign banks.
- Corporate obligations, including commercial paper, of domestic and
foreign issuers.
- Obligations issued or guaranteed by one or more foreign governments or
any of their political subdivisions, agencies or instrumentalities,
including obligations of supranational entities.
- Repurchase agreements on obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.
Investments are managed to meet the quality and diversification
requirements of the 1940 Act. Under Rule 2a-7 under the 1940 Act, the Series
must maintain a dollar-weighted average portfolio maturity of 90 days or less
and may only purchase U.S. dollar denominated instruments that are determined to
present minimal credit risks and that at the time of acquisition are rated in
the top two rating categories by the required number of nationally recognized
statistical rating organizations (at least two or, if only one rating agency has
rated the security, that one agency) or, if unrated, are deemed comparable in
quality. Determination of credit risks and quality will be made by the
sub-adviser in accordance with procedures adopted by the Trust's Board of
Trustees. The diversification requirements of Rule 2a-7 provide generally that
the Series may not at the time of acquisition invest more than 5% of its assets
in securities of any one issuer or invest more than 5% of its assets in
securities that have not been rated in the highest category by the required
number of rating agencies or, if unrated, have not been deemed comparable,
except U.S. Government securities and repurchase agreements on such securities.
A more complete description of the rating categories is set forth under Appendix
A.
The PPM America/JNL Money Market Series may invest more than 25% of its
total assets in the domestic banking industry, which would cause the Series to
be more exposed to the risks of such industry. Bank obligations held by the
Series do not benefit materially from insurance from the Federal Deposit
Insurance Corporation. The 25% limitation does not apply to U.S. Government
securities, including obligations issued or guaranteed by its agencies or
instrumentalities.
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JNL/PUTNAM GROWTH SERIES
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The investment objective of the JNL/Putnam Growth Series is to seek
long-term capital growth. It is a diversified Series that pursues its investment
objective by retaining maximum flexibility in the management of the Series
consisting mainly of common stocks. Since income is not an objective, any income
generated by the investment of the Series' assets will be incidental to its
objective.
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<PAGE> 19
The JNL/Putnam Growth Series intends to invest primarily in the common
stocks of companies believed by the sub-adviser to have opportunities for
capital growth. However, since no one class or type of security at all times
necessarily affords the greatest promise for capital appreciation, the Series
may invest any amount or proportion of its assets in any class or type of
security believed by the sub-adviser to offer potential for capital appreciation
over both the intermediate and long term. Normally, of course, its investment
will consist largely of common stocks selected for the promise they offer of
appreciation of capital. However, the Series may also invest in preferred
stocks, bonds, convertible preferred stocks and convertible debentures if, in
the judgment of the sub-adviser, the investment would further its investment
objectives. The Series may invest up to 20% of its net assets in foreign
securities. The Series may also engage in certain options transactions and enter
into financial futures contracts and related options. Each security held will be
monitored to determine whether it is contributing to the basic objective of
long-term growth of capital.
The sub-adviser believes that a portfolio of such securities provides the
most effective way to obtain capital appreciation, but when, for temporary
defensive purposes (as when market conditions for growth stocks are adverse),
other types of investments appear advantageous on the basis of combined
considerations of risk and the protection of capital values, investments may be
made in fixed income securities with or without warrants or conversion features.
In addition, for such temporary defensive purposes, the Series may pursue a
policy of retaining cash or investing part or all of its assets in cash
equivalents.
To the extent that the Series holds bonds, it may be negatively affected by
adverse interest rate movements and credit quality. Generally, when interest
rates rise it may be expected that the value of bonds may decrease.
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JNL/PUTNAM VALUE EQUITY SERIES
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The investment objective of the JNL/Putnam Value Equity Series is capital
growth, with income as a secondary objective by investing primarily in common
stocks which the sub-adviser believes to be undervalued relative to underlying
asset value or earnings potential at the time of purchase. It is a diversified
Series that seeks superior market cycle total returns. The Series invests
primarily in the common stocks of large capitalization companies mainly
domiciled in the United States. Common stocks for this purpose include common
stocks and equivalents, such as securities convertible into common stocks and
securities having common stock characteristics, such as rights and warrants to
purchase common stocks. Under normal circumstances, the Series will invest at
least 65% of the value of its total assets in equity securities.
Companies considered attractive generally will have the following
characteristics: 1) stocks typically will have distinctly above average dividend
yields, and 2) the market prices of the stocks will be undervalued relative to
the normal earning power of the company. The thrust of this approach is to seek
investments where current investor enthusiasm is low, as reflected in their
valuations. Exposure is reduced when the investment community's perceptions
improve and the company approaches fair valuation.
The sub-adviser takes a long-term investment approach by placing a strong
emphasis on its ability to determine attractive values and does not try to
determine short-term changes in the general market level. It is anticipated that
the annual turnover rate of the Series will not exceed 100% in normal
circumstances. The Series may invest up to 25% of its total assets in the common
stocks of foreign issuers, including ADRs.
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JNL/PUTNAM WORLD OPPORTUNITIES SERIES
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The investment objective of the JNL/Putnam World Opportunities Series is to
seek long-term capital appreciation. It is a diversified Series that pursues its
investment objective by investing in companies that have above-average growth
prospects due to the fundamental growth of their market sector.
Under normal market conditions, the Series expects to invest substantially
all of its total assets, other than cash
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<PAGE> 20
or short-term investments held pending investment, in common stocks, preferred
stocks, convertible preferred stocks, convertible bonds and other equity
securities principally traded in securities markets outside the United States.
The Series will normally diversify its investment among a number of different
countries and, except when investing for defensive purposes, will invest at
least 65% of its assets in at least three different countries other than the
United States.
The sub-adviser believes that different market sectors in different
countries will experience different rates of growth depending on the state of
economic development of each country. As a result, the sub-adviser seeks to
identify those market sectors which will experience above-average growth in
three broad categories of economies: less developed economies, developing
economies that have experienced sustained growth over the recent past, and
mature economies. Within the identified growth sectors of each type of economy,
the sub-adviser seeks to invest in particular companies that offer above-average
growth prospects. The sectors in which the Series will invest are likely to
change over time and may include a variety of industries. Subject to the Series'
investment restrictions, the Series may invest up to one-half of its assets in
any one particular sector. The Series' emphasis on particular sectors may make
the value of the Series' shares more susceptible to any single economic,
political or regulatory development than the shares of an investment company
which is more widely diversified. As a result, the value of the Series' shares
may fluctuate more than the value of the shares of such an investment company.
The Series may also invest a portion of its assets in market sectors other than
those that the sub-adviser believes will experience above-average growth if the
sub-adviser believes that such investments are consistent with the Series'
investment objective of long-term capital appreciation.
The securities markets of less developed economies and many developing
economies are sometimes referred to as "emerging securities markets." Although
the amount of the Series' assets invested in emerging securities markets will
vary over time, the sub-adviser currently expects that a substantial portion of
the Series' assets will be invested in emerging securities markets. These
markets are generally characterized by limited trading volume and greater
volatility and, as a result, the Series may be subject to greater risks to the
extent of its investments in such markets.
Companies in the Series' portfolio may include small, rapidly growing
companies with equity market capitalizations of less than $1 billion. These
companies may present greater opportunities for capital appreciation, but may
also involve greater risk. They may have limited product lines, markets or
financial resources, or may depend on a limited management group. Their
securities may trade less frequently and in limited volume, and only in the
over-the-counter market or on a regional securities exchange. As a result, these
securities may fluctuate in value more than those of larger, more established
companies. Because the sub-adviser evaluates securities for the Series based on
their long-term potential for capital appreciation, the Series' investments may
not appreciate or yield significant income over the shorter term, and, as a
result, the Series' total return over certain periods may be less than that of
other equity mutual funds.
The Series invests primarily in common stocks and other equity securities
but may also invest up to 10% of its total assets in non-convertible debt
securities if the sub-adviser believes they would help achieve the Series'
objective of long-term capital appreciation. The Series may invest in securities
in the lower-rated categories. Securities in the lower-rated categories are
considered to be predominantly speculative and may be in default. (See
"Investment Risks -- High Yield/High Risk Bonds"). The Series may also hold a
portion of its assets in cash or high-quality money market instruments.
The Series may invest without limit in securities principally traded in
foreign markets. The Series may also engage in foreign currency exchange
transactions to protect against uncertainty in the level of future exchange
rates. The Series may buy and sell financial futures contracts on stock indexes
and foreign currencies and may buy and sell call and put options on futures
contracts or on stock indexes.
At times, the sub-adviser may judge that conditions in the securities
markets make pursuing the Series' basic investment strategy inconsistent with
the best interests of its shareholders. At such times, the sub-adviser may
temporarily use alternative strategies, primarily designed to reduce
fluctuations in the value of Series assets. In implementing these defensive
strategies, the Series may invest without limit in cash or money market
instruments, preferred stocks, debt securities issued by the U.S. government or
any foreign government or their agencies or instrumentalities, or securities
primarily traded in the U.S. markets, or in any other securities the sub-adviser
considers consistent with such defensive strategies.
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SALOMON BROTHERS/JNL GLOBAL BOND SERIES
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The primary investment objective of the Salomon Brothers/JNL Global Bond
Series is to seek a high level of current income. As a secondary objective, the
Series will seek capital appreciation. It is a diversified Series. The Series
seeks to achieve its objectives by investing in a globally diverse portfolio of
fixed income investments and by giving the sub-adviser broad discretion to
deploy the assets among certain segments of the fixed income market that the
sub-adviser believes will best contribute to the achievement of the Series'
objectives. At any point in time, the sub-adviser will deploy the Series' assets
based on its analysis of current economic and market conditions and the relative
risks and opportunities present in the following market segments: U.S.
Government obligations, investment grade domestic corporate debt, high yield
domestic corporate debt securities, mortgage-backed securities and investment
grade and high yield foreign corporate and sovereign debt securities. The
sub-adviser has entered into an agreement with its London-based affiliate,
Salomon Brothers Asset Management Limited ("SBAM Limited") pursuant to which
SBAM Limited will provide certain advisory services to the sub-adviser relating
to currency transactions and investments in non-dollar denominated debt
securities for the benefit of the Series.
The sub-adviser will determine the amount of assets to be allocated to each
type of security in which it invests based on its assessment of the maximum
level of income and capital appreciation that can be achieved from a portfolio
which is invested in these securities. In making this determination, the
sub-adviser will rely in part on quantitative analytical techniques that measure
relative risks and opportunities of each type of security based on current and
historical economic, market, political and technical data for each type of
security, as well as on its own assessment of economic and market conditions
both on a global and local (country) basis. In performing quantitative analysis,
the sub-adviser will employ prepayment analysis and option adjusted spread
technology to evaluate mortgage securities, mean variance optimization models to
evaluate foreign debt securities, and total rate of return analysis to measure
relative risks and opportunities in other fixed income markets. Economic factors
considered will include current and projected levels of growth and inflation,
balance of payments, status and monetary policy. The allocation of assets to
foreign debt securities will further be influenced by current and expected
currency relationships and political and sovereign factors. The sub-adviser will
continuously review this allocation of assets and make such adjustments as it
deems appropriate. The Series does not plan to establish a minimum or a maximum
percentage of the assets which it will invest in any particular type of fixed
income security.
In addition, the sub-adviser will have discretion to select the range of
maturities of the various fixed income securities in which the Series invests.
The sub-adviser anticipates that under current market conditions the Series'
portfolio securities will have a weighted average life of 6 to 10 years.
However, the weighted average life of the portfolio securities may vary
substantially from time to time depending on economic and market conditions. The
Series may adopt temporary defensive position investment policies during adverse
market, economic or other circumstances that require immediate action to avoid
losses. During periods when and to the extent that the Series has assumed a
temporary defensive position, the Series may not be pursuing its investment
objective.
The investment grade corporate debt securities and the investment grade
foreign debt securities to be purchased by the Series are domestic and foreign
debt securities rated within the four highest bond ratings of either Moody's or
S&P, or, if unrated, deemed to be of equivalent quality in the sub-adviser's
judgment. While debt securities carrying the fourth highest quality rating (Baa
by Moody's or BBB by S&P) are considered investment grade and are viewed to have
adequate capacity for payment of principal and interest, investments in such
securities involve a higher degree of risk than that associated with investments
in debt securities in the higher rating categories and such debt securities lack
outstanding investment characteristics and in fact have speculative
characteristics as well. For example, changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than is the case with higher grade debt securities.
The types and characteristics of the U.S. Government obligations and
mortgage-backed securities to be purchased by the Series are set forth below in
the discussion of investment objectives and policies for the Salomon
Brothers/JNL U.S. Government & Quality Bond Series. In addition, the Series may
purchase privately issued mortgage securities which are not guaranteed by the
U.S. Government or its agencies or instrumentalities and may purchase stripped
mortgage securities, including interest-only and principal-only securities.
Additional information with respect to securities to be purchased by the Series
is set forth below under the section entitled "Common Types
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<PAGE> 22
of Securities and Management Practices" and "Investment Risks."
The Series may invest in debt obligations issued or guaranteed by a foreign
sovereign government or one of its agencies or political subdivisions and debt
obligations issued or guaranteed by supranational organizations. Supranational
entities include international organizations designated or supported by
governmental entities to promote economic reconstruction or development and
international banking institutions and related government agencies. Examples
include the International Bank for Reconstruction and Development (the "World
Bank"), the European Coal and Steel Community, the Asian Development Bank and
the Inter-American Development Bank. Such supranational issued instruments may
be denominated in multi-national currency units.
In pursuing the Series' investment objectives, the Series reserves the
right to invest predominantly in medium or lower-rated securities. Although the
Series has the ability to invest up to 100% of its assets in lower-rated
securities, the Series' subadviser does not anticipate investing in excess of
75% of the Series' assets in such securities. Investments of this type involve
significantly greater risks, including price volatility and risk of default in
the payment of interest and principal, than higher-quality securities. The
sub-adviser anticipates that under current market conditions, a significant
portion of the Series assets will be invested in such high risk, high yield
securities. By investing a portion of the Series' assets in securities rated
below investment grade as well as through investments in mortgage securities and
foreign debt securities, the sub-adviser expects to provide investors with a
higher yield than a high-quality domestic corporate bond fund. Certain of the
debt securities in which the Series may invest may be rated as low as C by
Moody's or D by S&P or may be considered comparable to securities having such
ratings. Medium and lower-rated securities are considered to be predominantly
speculative with respect to the issuer's capacity to pay interest and repay
principal.
In light of the risks associated with high yield corporate and sovereign
debt securities, the sub-adviser will take various factors into consideration in
evaluating the creditworthiness of an issuer. For corporate debt securities,
these will typically include the issuer's financial resources, its sensitivity
to economic conditions and trends, the operating history of the issuer, and the
experience and track record of the issuer's management. For sovereign debt
instruments, these will typically include the economic and political conditions
within the issuer's country, the issuer's overall and external debt levels and
debt service ratios, the issuer's access to capital markets and other sources of
funding, and the issuer's debt service payment history. The sub-adviser will
also review the ratings, if any, assigned to the security by any recognized
rating agencies, although the sub-adviser's judgment as to the quality of a debt
security may differ from that suggested by the rating published by a rating
service. The Series' ability to achieve its investment objective may be more
dependent on the sub-adviser's credit analysis than would be the case if it
invested in higher quality debt securities.
The high yield sovereign debt securities in which the Series may invest are
U.S. dollar-denominated debt securities, including Brady Bonds, and non-dollar
denominated debt securities that are issued or guaranteed by governments or
governmental entities of developing and emerging countries. The sub-adviser
expects that these countries will consist primarily of those which have issued
or have announced plans to issue Brady Bonds, but the portfolio is not limited
to investing in the debt of such countries. Brady Bonds are debt securities
issued under the framework of the Brady Plan, an initiative announced by former
U.S. Treasury Secretary Nicholas F. Brady in 1989 as a mechanism for debtor
nations to restructure their outstanding external indebtedness. (See "Investment
Risks -- High Yield/ High Risk Bonds"). The sub-adviser anticipates that the
Series' initial investments in sovereign debt will be concentrated in Latin
American countries, including Mexico and Central and South American and
Caribbean countries. The sub-adviser expects to take advantage of additional
opportunities for investment in the debt of North African countries, such as
Nigeria and Morocco, Eastern European countries, such as Poland and Hungary, and
Southeast Asian countries, such as the Philippines. Sovereign governments may
include national, provincial, state, municipal or other foreign governments with
taxing authority. Governmental entities may include the agencies and
instrumentalities of such governments, as well as state-owned enterprises. For a
more detailed discussion of high yield sovereign debt securities, see
"Investment Risks -- High Yield/ High Risk Bonds" section.
The Series will be subject to special risks as a result of its ability to
invest up to 100% of its assets in foreign securities (including emerging market
securities). Such securities may be non-U.S. dollar denominated and there is no
limit on the percentage of the Series' assets that can be invested in non-dollar
denominated securities. The sub-adviser anticipates that, under current market
conditions, a significant portion of the Series' assets will be invested in
foreign securities. These risks are described under the caption "Investment
Risks." The ability to spread its investments among the fixed income markets in
a number of different countries may, however, reduce the overall level or market
risk to the extent it may reduce the Series' exposure to a single market.
The Series may invest in zero coupon securities and pay-in-kind bonds. (See
"Common Types of Securities and Management Practices"). In addition, the Series
may invest
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<PAGE> 23
in fixed and floating rate loans ("Loans") arranged through private negotiations
between a corporate borrower or a foreign sovereign entity and one or more
financial institutions ("Lenders"). The Series may invest in such Loans in the
form of participations in Loans ("Participations") and assignments of all or a
portion of Loans from third parties ("Assignments"). The Series considers these
investments to be investments in debt securities for purposes of this
Prospectus. Participations typically will result in the Series having a
contractual relationship only with the Lender, not with the borrower. The Series
will have the right to receive payments of principal, interest and any fees to
which it is entitled only from the Lender selling the Participation and only
upon receipt by the Lender of the payments from the borrower. In connection with
purchasing Participations, the Series generally will have no right to enforce
compliance by the borrower with the terms of the loan agreement relating to the
Loan, nor any rights of set-off against the borrower, and the Series may not
benefit directly from any collateral supporting the Loan in which it has
purchased the Participation. As a result, the Series will assume the credit risk
of both the borrower and the Lender that is selling the Participation. In the
event of the insolvency of the Lender selling a Participation, the Series may be
treated as a general creditor of the Lender and may not benefit from any set-off
between the Lender and the borrower. The Series will acquire Participations only
if the Lender interpositioned between the Series and the borrower is determined
by the sub-adviser to be creditworthy. When the Series purchases Assignments
from Lenders, the Series will acquire direct rights against the borrower on the
Loan, except that under certain circumstances such rights may be more limited
than those held by the assigning Lender.
The Series may have difficulty disposing of Assignments and Participations.
Because the market for such instruments is not highly liquid, the Series
anticipates that such instruments could be sold only to a limited number of
institutional investors. The lack of a highly liquid secondary market may have
an adverse impact on the value of such instruments and will have an adverse
impact on the Series' ability to dispose of particular Assignments or
Participations in response to a specific economic event, such as deterioration
in the creditworthiness of the borrower. The Series currently treats investments
in Participations and Assignments as illiquid for purposes of its limitation on
investment in illiquid securities. However, the Trustees may in the future adopt
policies and procedures for the purpose of determining whether Assignments and
Loan Participations are liquid or illiquid. Pursuant to such policies and
procedures, the Trustees would delegate to the sub-adviser the determination as
to whether a particular Loan Participation or Assignment is liquid or illiquid,
requiring that consideration be given to, among other things, the frequency of
quotes, the number of dealers willing to sell and the number of potential
purchasers, the nature of the Loan Participation or Assignment and the time
needed to dispose of it and the contractual provisions of the relevant
documentation. The Trustees would periodically review purchases and sales of
Assignments and Loan Participations. To the extent that liquid Assignments and
Loan Participations that the Series held became illiquid, due to the lack of
sufficient buyers or market or other conditions, the percentage of the Series'
assets invested in illiquid assets would increase.
The Series may invest up to 20% of its assets in common stock, convertible
securities, warrants, preferred stock or other equity securities when consistent
with the Series' objectives. The Series will generally hold such equity
investments as a result of purchases of unit offerings of fixed income
securities which include such securities or in connection with an actual or
proposed conversion or exchange of fixed income securities, but may also
purchase equity securities not associated with fixed income securities when, in
the opinion of the sub-adviser, such purchase is appropriate.
The Series currently intends to invest substantially all of its assets in
fixed income securities. In order to maintain liquidity, however, the Series may
invest up to 20% of its assets in high-quality short-term money market
instruments. If at some future date, in the opinion of the sub-adviser, adverse
conditions prevail in the market for fixed income securities, the Series for
temporary defensive purposes may invest its assets without limit in high-quality
short-term money market instruments. The types and characteristics of the money
market securities to be purchased by the Series are set forth in the discussion
of investment objectives and policies of PPM America/JNL Money Market Series.
The Series may enter into repurchase and reverse repurchase agreements,
purchase securities on a firm commitment basis, including when-issued
securities, enter into mortgage "dollar rolls" and lend portfolio securities.
The Series will not make loans of portfolio securities with a value in excess of
25% of the Series' total assets. The Series may also enter into options, futures
and currency transactions, although with the exception of currency transactions,
it is not presently anticipated that any of these strategies will be utilized to
a significant degree by the Series. For a description of these investment
practices and the risks associated with them, see "Common Types of Securities
and Management Practices" and "Investment Risks." The Series' ability to pursue
certain of these strategies may be limited by applicable regulations of the
Securities and Exchange Commission ("SEC"), the Commodity Futures Trading
Commission ("CFTC") and the federal income tax requirements applicable to
regulated investment companies.
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SALOMON BROTHERS/JNL U.S. GOVERNMENT & QUALITY BOND SERIES
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The investment objective of the Salomon Brothers/JNL U.S. Government &
Quality Bond Series is to obtain a high level of current income. It is a
diversified Series that seeks to attain its objective by investing primarily in
debt obligations and mortgage-backed securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities including collateralized mortgage
obligations backed by such securities. The Series may also invest a portion of
its assets in investment grade bonds.
At least 65% of the total assets of the Series will be invested in:
(1) U.S. Treasury obligations;
(2) obligations issued or guaranteed by agencies or instrumentalities of
the U.S. Government which are backed by their own credit and may not be
backed by the full faith and credit of the U.S. Government;
(3) mortgage-backed securities guaranteed by the Government National
Mortgage Association that are supported by the full faith and credit of
the U.S. Government. Such securities entitle the holder to receive all
interest and principal payments due whether or not payments are
actually made on the underlying mortgages;
(4) mortgage-backed securities guaranteed by agencies or instrumentalities
of the U.S. Government which are supported by their own credit but not
the full faith and credit of the U.S. Government, such as the Federal
Home Loan Mortgage Corporation and the Federal National Mortgage
Association; and
(5) collateralized mortgage obligations issued by private issuers for which
the underlying mortgage-backed securities serving as collateral are
backed (i) by the credit alone of the U.S. Government agency or
instrumentality which issues or guarantees the mortgage-backed
securities, or (ii) by the full faith and credit of the U.S.
Government.
Any guarantee of the securities in which the Series invests runs only to
the principal and interest payments on the securities and not to the market
value of such securities or to the principal and interest payments on the
underlying mortgages. In addition, the guarantee only runs to the portfolio
securities held by the Series and not the purchase of shares of the Series.
The Series may invest in securities of any maturity or effective duration
and, accordingly, the composition and weighted average maturity of the Series'
portfolio will vary from time to time, based upon the sub-adviser's
determination of how best to achieve the Series' investment objective. With
respect to mortgage-backed securities in which the Series invests, average
maturity and duration are determined by using mathematical models that
incorporate prepayment assumptions and other factors that involve estimates of
future economic parameters. These estimates may vary from actual results,
particularly during periods of extreme market volatility. In addition, the
average maturity and duration of mortgage-backed derivative securities may not
accurately reflect the price volatility of such securities under certain market
conditions.
A significant portion of the Series' assets may from time to time be
invested in mortgage-backed securities. The mortgage-backed securities in which
the Series invests represent participating interests in pools of fixed rate and
adjustable rate residential mortgage loans issued or guaranteed by agencies or
instrumentalities of the U.S. Government. Mortgage-backed securities are issued
by lenders such as mortgage bankers, commercial banks, and savings and loan
associations. Mortgage-backed securities generally provide monthly payments
which are, in effect, a "pass-through" of the monthly interest and principal
payments (including any prepayments) made by the individual borrowers on the
pooled mortgage loans. Principal prepayments result from the sale of the
underlying property or the refinancing or foreclosure of underlying mortgages.
The yield of mortgage-backed securities is based upon the prepayment rates
experienced over the life of the security. Prepayments tend to increase during
periods of falling interest rates, while during periods of rising interest rates
prepayments will most likely decline. Reinvestment by the Series of scheduled
principal payments and unscheduled prepayments may occur at higher or lower
rates than the original investment, thus affecting the yield of the Series.
Monthly interest payments received by the Series have a compounding effect which
will increase the yield to shareholders as compared to debt obligations that pay
interest semi-annually. Because of the reinvestment of prepayments of principal
at current rates, mortgage-backed securities may be less effective than Treasury
bonds of similar maturity at maintaining yields during periods of declining
interest rates. Also, although the value of debt securities may increase as
interest rates decline, the value of these pass-through type of securities may
not increase as much due to the prepayment feature.
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While the Series seeks a high level of current income, it cannot invest in
instruments such as lower grade corporate obligations which offer higher yields
but are subject to greater credit risks. The Series will not knowingly invest in
a high risk "mortgage security," generally defined as any mortgage security that
exhibits significantly greater price volatility than a benchmark security, the
Federal National Mortgage Association current coupon 30-year mortgage-backed
pass through security. Shares of the Series are neither insured nor guaranteed
by the U.S. Government, its agencies or instrumentalities. Neither the issuance
by nor the guarantee of a U.S. Government agency for a security constitutes
assurance that the security will not significantly fluctuate in value or that
the Series will receive the originally anticipated yield on the security.
The Series may also invest up to 35% of its assets in U.S.
dollar-denominated securities rated AAA, AA, A or BBB by S&P or Aaa, Aa, A or
Baa by Moody's, or if unrated, determined to be of comparable quality to
securities in those ratings categories by the sub-adviser. The Series may not
invest more than 10% of total assets in obligations of foreign issuers.
Investments in foreign securities will subject the Series to special
considerations related to political, economic and legal conditions outside of
the U.S., as discussed under the "Investment Risks" section. These
considerations include the possibility of expropriation, nationalization,
withholding taxes on income and difficulties in enforcing judgments. Foreign
securities may be less liquid and more volatile than comparable U.S. securities.
The Series may enter into repurchase and reverse repurchase agreements,
purchase securities on a firm commitment basis, including when-issued
securities, and lend portfolio securities. The Series will not make loans of
portfolio securities with a value in excess of 25% of the value of its total
assets. The Series may also enter into mortgage "dollar rolls." For a
description of these investment practices and the risks associated with them,
see "Common Types of Securities and Management Practices" and "Investment
Risks."
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T. ROWE PRICE/JNL ESTABLISHED GROWTH SERIES
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The investment objective of the T. Rowe Price/JNL Established Growth Series
is to seek long-term growth of capital and increasing dividend income through
investment primarily in common stocks of well-established growth companies. A
growth company is defined as one which: (1) has demonstrated historical growth
of earnings faster than the growth of inflation and the economy in general; and
(2) has indications of being able to continue this growth pattern in the future.
Total return will consist primarily of capital appreciation or depreciation and
secondarily of dividend income.
It is a diversified Series that will invest primarily in the common stock
of a diversified group of well-established growth companies. While current
dividend income is not a prerequisite in the selection of a growth company, the
companies in which the Series will invest normally have a record of paying
dividends and are generally expected to increase the amounts of such dividends
in future years as earnings increase. Although the Series will invest primarily
in U.S. common stocks, it may also purchase other types of securities, for
example, convertible securities, warrants, hybrid instruments, restricted
securities, futures and options, when considered consistent with the Series'
investment objective and program. The Series may invest up to 30% of its total
assets (excluding reserves) in foreign securities, including ADRs.
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T. ROWE PRICE/JNL INTERNATIONAL EQUITY INVESTMENT SERIES
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The investment objective of the T. Rowe Price/JNL International Equity
Investment Series is to seek long-term growth of capital through investments
primarily in common stocks of established, non-U.S. companies. Total return
consists of capital appreciation or depreciation, dividend income, and currency
gains or losses.
Over the last 30 years, many foreign economies have grown faster than the
United States' economy, and the return from equity investments in these
countries has often exceeded the return on similar investments in the United
States. Moreover, there has normally been a wide and largely unrelated variation
in performance between international equity markets over this period. Although
there can be no assurance that these conditions will continue, the Series'
sub-adviser, within the framework of diversification, seeks to identify and
invest in companies participating in the faster growing foreign economies and
markets. The sub-adviser believes that investment in foreign securities offers
significant potential for long-term
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capital appreciation and an opportunity to achieve investment diversification.
The Series may also purchase other types of securities, for example, common and
preferred stocks, convertible securities, fixed income securities, hybrid
instruments, restricted securities, foreign currency transactions, futures and
options.
In analyzing companies for investment, the sub-adviser ordinarily looks for
one or more of the following characteristics: an above-average earnings growth
per share; high return on invested capital; healthy balance sheet; sound
financial and accounting policies and overall financial strength; strong
competitive advantages; effective research and product development and
marketing; efficient service; pricing flexibility; strength of management; and
general operating characteristics which will enable the companies to compete
successfully in their market place. While current dividend income is not a
prerequisite in the selection of portfolio companies, the companies in which the
Series invests, normally will have a record of paying dividends, and will
generally be expected to increase the amounts of such dividends in future years
as earnings increase.
It is a diversified Series that intends to diversify investments broadly
among countries and to normally have at least three different countries
represented in the Series. The Series may invest in countries of the Far East
and Europe, as well as South Africa, Australia, Canada and other areas
(including developing countries). Under unusual circumstances, however, the
Series may invest substantially all of its assets in one or two countries.
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T. ROWE PRICE/JNL MID-CAP GROWTH SERIES
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The investment objective of the T. Rowe Price/JNL Mid-Cap Growth Series is
to provide long-term growth of capital by investing primarily in the common
stock of companies with medium-sized market capitalizations ("mid-cap") and the
potential for above-average growth.
It is a diversified Series that will invest at least 65% of its total
assets in a diversified portfolio of mid-cap common stocks with above-average
growth potential. A mid-cap company is defined as one whose market
capitalization falls within the capitalization range of companies included in
the S&P 400 Mid-Cap Index. Mid-cap growth companies are often still in the
early, more dynamic phase of a company's life cycle, but have enough corporate
history that they are no longer considered new or emerging. By focusing their
activities, mid-cap companies may be more responsive and better able to adapt to
the changing needs of their markets. They are usually mature enough to have
established organizational structures and the depth of management needed to
expand their operations. In addition, these companies generally have sufficient
financial resources and access to capital to finance their growth.
While investing in mid-cap growth companies generally entails greater risk
and volatility than investing in large, well-established companies, mid-cap
companies are expected to offer the potential for more rapid growth. They may
also offer greater potential for capital appreciation because of their higher
growth rates. In addition, the stocks of such companies are less actively
followed by securities analysts and may, therefore, be undervalued by investors.
The sub-adviser will rely on its proprietary research to identify mid-cap
companies with attractive growth prospects. The Series will seek to invest
primarily in companies which: 1) offer proven products or services, 2) have a
historical record of earnings growth that is above average, 3) demonstrate the
potential to sustain earnings growth, 4) operate in industries experiencing
increasing demand, and/or 5) are believed to be reasonably valued in the
marketplace. There is, of course, no guarantee the Series will be able to
identify such companies or that its investment in them will be successful.
Although the Series will invest primarily in U.S. common stocks, it may
also purchase other types of securities, for example, convertible securities,
restricted securities, hybrid instruments, warrants, futures and options, when
considered consistent with the Series' investment objective and program. The
Series may invest up to 25% of its assets (excluding reserves) in foreign
securities, including ADRs.
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COMMON TYPES OF SECURITIES AND MANAGEMENT PRACTICES
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SECURITIES AND MANAGEMENT PRACTICES
This section describes some of the types of securities a Series may hold in
its portfolio and the various kinds of investment practices that may be used in
day-to-day portfolio management. A Series may invest in the following securities
or engage in the following practices to the extent that such securities and
practices are consistent with the Series' investment objective(s) and policies
described herein. Each Series' investment program is subject to further
restrictions described in the Statement of Additional Information.
BORROWING AND LENDING. A Series may borrow money from banks for temporary
or emergency purposes in amounts up to 25% of its total assets. To secure
borrowings a Series may mortgage or pledge securities in amounts up to 15% of
its net assets. As a fundamental policy, a Series will not lend securities or
other assets if, as a result, more than 25% of its total assets would be lent to
other parties.
CASH POSITION. A Series may hold a certain portion of its assets in
repurchase agreements and money market securities rated in one of the two
highest rating categories by a nationally recognized statistical rating
organization, maturing in one year or less. For temporary, defensive purposes, a
Series may invest without limitation in such securities. This reserve position
provides flexibility in meeting redemptions, expenses, and the timing of new
investments, and serves as a short-term defense during periods of unusual market
volatility.
COMMON AND PREFERRED STOCKS. Stocks represent shares of ownership in a
company. Generally, preferred stock has a specified dividend and ranks after
bonds and before common stocks in its claim on income for dividend payments and
on assets should the company be liquidated. After other claims are satisfied,
common stockholders participate in company profits on a pro rata basis; profits
may be paid out in dividends or reinvested in the company to help it grow.
Increases and decreases in earnings are usually reflected in a company's stock
price, so common stocks generally have the greatest appreciation and
depreciation potential of all corporate securities. While most preferred stocks
pay a dividend, a Series may purchase preferred stock where the issuer has
omitted, or is in danger of omitting, payment of its dividend. Such investments
would be made primarily for their capital appreciation potential. Although
common and preferred stocks have a history of long-term growth in value, their
prices tend to fluctuate in the short term, particularly those of smaller
companies.
CONVERTIBLE SECURITIES AND WARRANTS. A Series may invest in debt or
preferred equity securities convertible into or exchangeable for equity
securities. Traditionally, convertible securities have paid dividends or
interest at rates higher than common stocks but lower than non-convertible
securities. They generally participate in the appreciation or depreciation of
the underlying stock into which they are convertible, but to a lesser degree. In
recent years, convertibles have been developed which combine higher or lower
current income with options and other features. Warrants are options to buy a
stated number of shares of common stock at a specified price any time during the
life of the warrants (generally, two or more years).
FIXED INCOME SECURITIES. A Series may invest in fixed income securities of
companies which meet the investment criteria for the Series. The price of fixed
income securities fluctuates with changes in interest rates, generally rising
when interest rates fall and falling when interest rates rise. Prices of
longer-term securities generally increase or decrease more sharply than those of
shorter-term securities in response to interest rate changes.
FOREIGN CURRENCY TRANSACTIONS. A Series will normally conduct its foreign
currency exchange transactions either on a spot (i.e., cash), basis at the spot
rate prevailing in the foreign currency exchange market, or through entering
into forward contracts to purchase or sell foreign currencies. A Series will
generally not enter into a forward contract with a term of greater than one
year.
There are certain markets where it is not possible to engage in effective
foreign currency hedging. This may be true, for example, for the currencies of
various countries where the foreign exchange markets are not sufficiently
developed to permit hedging activity to take place.
FOREIGN SECURITIES. A Series may invest in foreign securities. These
include non-dollar denominated securities traded principally outside the U.S.
and dollar denominated securities traded in the U.S. (such as ADRs). Such
investments increase a Series' diversification and may enhance return, but they
also involve some special risks such as exposure to potentially adverse local
political and economic developments; nationalization and exchange controls;
potentially lower liquidity and higher volatility; possible problems arising
from accounting, disclosure, settlement, and regulatory practices that differ
from U.S. standards; and the chance that fluctuations in foreign exchange rates
will decrease the investment's value (favorable changes can increase its value).
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FUTURES AND OPTIONS. Futures are often used to manage risk, because they
enable the investor to buy or sell an asset in the future at an agreed upon
price. Options give the investor the right, but not the obligation, to buy or
sell an asset at a predetermined price in the future. A Series may buy and sell
futures contracts (and options on such contracts) to manage its exposure to
changes in securities prices and foreign currencies and as an efficient means of
adjusting overall exposure to certain markets. Subject to certain limits
described in the Statement of Additional Information, a Series may purchase or
sell call and put options on securities, financial indices, and foreign
currencies, and may invest in futures contracts on foreign currencies and
financial indices, including interest rates or an index of U.S. Government
securities, foreign government securities or equity or fixed income securities.
Futures contracts and options may not always be successful hedges; their
prices can be highly volatile; using them could lower a Series' total return;
and the potential loss from the use of futures can exceed the Series' initial
investment in such contracts. These instruments may also be used for non-hedging
purposes such as increasing a Series' income.
The Series' use of commodity futures and commodity options trading should
not be viewed as providing a vehicle for shareholder participation in a
commodity pool. Rather, in accordance with regulations adopted by the CFTC, a
Series will employ such techniques only for (1) hedging purposes, or (2)
otherwise, to the extent that aggregate initial margin and required premiums do
not exceed 5 percent of the Series' net assets.
ILLIQUID SECURITIES. Each Series may invest up to 15% of its net assets
(10% in the case of the PPM America/JNL Money Market Series and the JNL/Alger
Growth Series) in securities that are considered illiquid. Illiquid investments
include repurchase agreements not terminable within seven days, securities for
which market quotations are not readily available and certain restricted
securities. Illiquid investments may be difficult to sell promptly at an
acceptable price. Difficulty in selling securities may result in a loss or may
be costly to a Series. Certain restricted securities may be determined to be
liquid in accordance with guidelines adopted by the Trust's Board of Trustees.
HIGH YIELD BONDS. A Series may invest its assets in fixed income securities
offering high current income that are in the lower rating categories of
recognized rating agencies or are non-rated. These lower-rated fixed income
securities are considered on balance, as predominantly speculative with respect
to capacity to pay interest and repay principal in accordance with the terms of
the obligation and generally will involve more credit risk than securities in
the higher rating categories.
DEBT HOLDINGS BY RATINGS. During the period ended December 31, 1996, the
percentage of the assets of the following Series invested in debt securities in
each of the rating categories of S&P and the debt securities not rated by an
established rating service, determined on a dollar weighted average, were:
JNL Aggressive Growth Series
JNL Capital Growth Series
JNL Global Equities Series
JNL/Eagle Core Equity Series
PPM America/JNL Balanced Series
PPM America/JNL High Yield Bond Series
JNL/Putnam World Opportunities Series
Salomon Brothers/JNL Global Bond Series
HYBRID INSTRUMENTS. These instruments can combine the characteristics of
securities, futures and options. For example, the principal amount, redemption
or conversion terms of a security could be related to the market price of some
commodity, currency or securities index. Such securities may bear interest or
pay dividends at below market (or even relatively nominal) rates. Under certain
conditions, the redemption value of such an investment could be zero. Hybrids
can have volatile prices and limited liquidity and their use by a Series may not
be successful.
MORTGAGE- AND ASSET-BACKED SECURITIES. A Series may invest in mortgage- and
asset-backed securities. These securities are subject to prepayment risk, that
is, the possibility that prepayments on the underlying mortgages or other loans
will cause the principal and interest on the mortgage- and asset-backed
securities to be paid prior to their stated maturities. A sub-adviser will
consider estimated prepayment rates in calculating the average weighted
maturities of the Series. Unscheduled prepayments are more likely to accelerate
during periods of declining long-term interest rates. In the event of a
prepayment during a period of declining interest rates, a Series may be required
to invest the unanticipated proceeds at a lower interest rate. Prepayments
during such periods will also limit a Series' ability to participate in as large
a market gain as may be experienced with a comparable security not subject to
prepayment.
The Salomon Brothers/JNL Global Bond Series may purchase stripped
mortgage-backed securities, which may be considered derivative mortgage-backed
securities, which may be issued by agencies or instrumentalities of the U.S.
Government or by private entities. Stripped mortgage-backed securities have
greater volatility than other types of mortgage-backed securities. Stripped
mortgage-backed securities are structured with two or more
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classes that receive different proportions of the interest and principal
distributions on a pool of mortgage assets. In the most extreme case, one class
will receive all of the interest, while the other class will receive all of the
principal. The yield to maturity of such mortgage backed securities that are
purchased at a substantial discount or premium are extremely sensitive to
changes in interest rates as well as to the rate of principal payments
(including prepayments) on the related underlying mortgage assets.
MORTGAGE DOLLAR ROLLS. Certain Series may enter into mortgage "dollar
rolls" in which a Series sells mortgage-backed securities for delivery in the
current month and simultaneously contracts to repurchase substantially similar
(same type, coupon and maturity) securities on a specified future date. During
the roll period, a Series foregoes principal and interest paid on the
mortgage-backed securities. A Series is compensated by the interest earned on
the cash proceeds of the initial sale and from negotiated fees paid by brokers
offered as an inducement to the Series to "roll over" its purchase commitments.
A Series may only enter into covered rolls. A "covered roll" is a specific type
of dollar roll for which there is an offsetting cash position which matures on
or before the forward settlement date of the dollar roll transaction. At the
time a Series enters into a mortgage "dollar roll", it will establish a
segregated account with its custodian bank in which it will maintain cash, U.S.
Government securities or other liquid high grade debt obligations equal in value
to its obligations in respect of dollar rolls, and accordingly, such dollar
rolls will not be considered borrowings. Mortgage dollar rolls involve the risk
that the market value of the securities the Series is obligated to repurchase
under the agreement may decline below the repurchase price. In the event the
buyer of securities under a mortgage dollar roll files for bankruptcy or becomes
insolvent, the Series' use of proceeds of the dollar roll may be restricted
pending a determination by the other party, or its trustee or receiver, whether
to enforce the Series' obligation to repurchase the securities.
COLLATERALIZED MORTGAGE OBLIGATIONS (CMOS). A Series may invest in CMOs.
CMOs are bonds that are collateralized by whole loan mortgages or mortgage pass-
through securities. In recent years, new types of CMO structures have evolved.
These include floating rate CMOs, planned amortization classes, accrual bonds,
and CMO residuals. Under certain of these new structures, given classes of CMOs
have priority over others with respect to the receipt of prepayments on the
mortgages. Therefore, depending on the type of CMOs in which the Series invests,
the investment may be subject to a greater or lesser risk of prepayment than
other types of mortgage-related securities.
The primary risk of any mortgage security is the uncertainty of the timing
of cash flows. For CMOs, the primary risk results from the rate of prepayments
on the underlying mortgages serving as collateral. An increase or decrease in
prepayment rates (resulting primarily from a decrease or increase in mortgage
interest rates) will affect the yield, average life, and price of CMOs. The
prices of certain CMOs, depending on their structure and the rate of
prepayments, can be volatile. Some CMOs may also not be as liquid as other
securities.
REAL ESTATE INVESTMENT TRUSTS ("REITS"). The REITs in which a Series may
invest include equity REITs, which own real estate properties, and mortgage
REITs, which make construction, development and long-term mortgage loans. The
value of an equity REIT may be affected by changes in the value of the
underlying property, while a mortgage REIT may be affected by the quality of the
credit extended. The performance of both types of REITs depends upon conditions
in the real estate industry, management skills and the amount of cash flow. The
risks associated with REITs include defaults by borrowers, self-liquidation,
failure to qualify as a "pass-through" entity under the Federal tax law, failure
to qualify as an exempt entity under the 1940 Act, and the fact that REITs are
not diversified.
PORTFOLIO TURNOVER. To a limited extent, a Series may engage in short-term
transactions if such transactions further its investment objective. A Series may
sell one security and simultaneously purchase another of comparable quality or
simultaneously purchase and sell the same security to take advantage of
short-term differentials in bond yields or otherwise purchase individual
securities in anticipation of relatively short-term price gains. The rate of
portfolio turnover will not be a determining factor in the purchase and sale of
such securities. However, certain tax rules may restrict the Series' ability to
sell securities in some circumstances when the security has been held for less
than three months. Increased portfolio turnover necessarily results in
correspondingly higher costs including brokerage commissions, dealer mark-ups
and other transaction costs on the sale of securities and reinvestment in other
securities, and may result in the acceleration of taxable gains.
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS. A Series may
invest in repurchase or reverse repurchase agreements. A repurchase agreement
involves the purchase of a security by a Series and a simultaneous agreement
(generally by a bank or dealer) to repurchase that security from the Series at a
specified price and date or upon demand. This technique offers a method of
earning income on idle cash. The repurchase agreement is effectively secured by
the value of the underlying security. A risk associated with repurchase
agreements is the failure
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of the seller to repurchase the securities as agreed, which may cause a Series
to suffer a loss if the market value of such securities declines before they can
be liquidated on the open market. In the event of bankruptcy or insolvency of
the seller, a Series may encounter delays and incur costs in liquidating the
underlying security.
When a Series invests in a reverse repurchase agreement, it sells a
portfolio security to another party, such as a bank or a broker-dealer, in
return for cash, and agrees to buy the security back at a future date and price.
Reverse repurchase agreements may be used to provide cash to satisfy unusually
heavy redemption requests or for other temporary or emergency purposes without
the necessity of selling portfolio securities or to earn additional income on
portfolio securities, such as Treasury bills and notes.
SHORT SALES. Each Series may sell securities "short against the box." While
a short sale is the sale of a security the Series does not own, it is "against
the box" if at all times when the short position is open the Series owns an
equal amount of the securities or securities convertible into, or exchangeable
without further consideration for, securities of the same issue as the
securities sold short.
U.S. GOVERNMENT SECURITIES AND CUSTODIAL RECEIPTS. Obligations issued or
guaranteed as to principal and interest by the U.S. Government, its agencies or
instrumentalities include Treasury bills, notes and bonds and Government
National Mortgage Association ("GNMA") certificates which are supported by the
full faith and credit of the United States; others, such as those of the Federal
Home Loan Banks, are supported by the right of the issuer to borrow from the
Treasury; others, such as those of the Federal National Mortgage Association
("FNMA"), are supported by the discretionary authority of the U.S. Government to
purchase the agency's obligations; and still others, such as those of the
Student Loan Marketing Association, are supported only by the credit of the
instrumentality. No assurance can be given that the U.S. Government will provide
financial support to U.S. Government agencies or instrumentalities in the
future, other than as set forth above, since it is not obligated to do so by
law.
WHEN-ISSUED SECURITIES. A Series may purchase securities on a when-issued,
delayed delivery or forward commitment basis. Actual payment for and delivery of
such securities does not take place until some time in the future -- i.e.,
beyond normal settlement. The Series does not earn interest on such securities
until settlement and bears the risk of market value fluctuations during the
period between the purchase and settlement dates. The series segregate and
maintain at all times cash, cash equivalents, or other high quality liquid debt
securities in an amount at least equal to the amount of outstanding commitments
for when-issued securities.
ZERO COUPON AND PAY-IN-KIND BONDS. A Series may invest up to 10% of its
assets in zero coupon bonds or strips. Zero coupon bonds do not make regular
interest payments; rather, they are sold at a discount from face value.
Principal and accreted discount (representing interest accrued but not paid) are
paid at maturity. Strips are debt securities that are stripped of their interest
after the securities are issued, but otherwise are comparable to zero coupon
bonds. The market value of strips and zero coupon bonds generally fluctuates in
response to changes in interest rates to a greater degree than interest-paying
securities of comparable term and quality. A Series may also purchase
pay-in-kind bonds. Pay-in-kind bonds pay all or a portion of their interest in
the form of debt or equity securities.
Zero coupon and pay-in-kind bonds tend to be subject to greater price
fluctuations in response to changes in interest rates than are ordinary
interest-paying debt securities with similar maturities. The value of zero
coupon securities appreciates more during periods of declining interest rates
and depreciates more during periods of rising interest rates than ordinary
interest-paying debt securities with similar maturities. Zero coupon securities
and pay-in-kind bonds may be issued by a wide variety of corporate and
governmental issuers.
Current federal income tax law requires the holder of a zero coupon
security, certain pay-in-kind bonds and certain other securities acquired at a
discount (such as Brady Bonds) to accrue income with respect to these securities
prior to the receipt of cash payments. Accordingly, to avoid liability for
federal income and excise taxes, a Series may be required to distribute income
accrued with respect to these securities and may have to dispose of portfolio
securities under disadvantageous circumstances in order to generate cash to
satisfy these distribution requirements.
INVESTMENT RISKS
FOREIGN SECURITIES
Investments in foreign securities, including those of foreign governments,
involve risks that are different in some respects from investments in securities
of U.S. issuers, such as the risk of fluctuations in the value of the currencies
in which they are denominated, a heightened risk of adverse political and
economic developments and, with respect to certain countries, the possibility of
expropriation, nationalization or confiscatory taxation or limitations on the
removal of funds or other assets of a Series. Securities of some foreign issuers
in many cases are less liquid and more volatile than securities of comparable
domestic issuers. There also may be less publicly available information about
foreign issuers than domestic issuers,
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and foreign issuers generally are not subject to the uniform accounting,
auditing and financial reporting standards, practices and requirements
applicable to domestic issuers. Certain markets may require payment for
securities before delivery. A Series may have limited legal recourse against the
issuer in the event of a default on a debt instrument. Delays may be encountered
in settling securities transactions in certain foreign markets and a Series will
incur costs in converting foreign currencies into U.S. dollars. Bank custody
charges are generally higher for foreign securities. JNL Global Equities,
Salomon Brothers/JNL Global Bond, and T. Rowe Price/JNL International Equity
Investment Series are particularly susceptible to such risks. ADRs do not
involve the same direct currency and liquidity risks as foreign securities.
The considerations noted above may be intensified in the case of
investments in developing countries or countries with limited or developing
capital markets. In particular, developing countries may have relatively
unstable governments, economies based on only a few industries, and securities
markets that trade a small number of securities. Securities of issuers located
in developing countries may have limited marketability and may be subject to
more abrupt or erratic price fluctuations.
At times, securities held by a Series may be listed on foreign exchanges or
traded in foreign markets which are open on days (such as Saturday) when a
Series does not compute its price or accept orders for the purchase, redemption
or exchange of its shares. As a result, the net asset value of a Series may be
significantly affected by trading on days when shareholders cannot make
transactions.
The share price of a Series that invests in foreign securities will reflect
the movements of both the prices of the portfolio securities and the currencies
in which such securities are denominated. A Series' foreign investments may
cause changes in a Series' share price that have a low correlation with movement
in the U.S. markets. Because most of the foreign securities in which a Series
invests will be denominated in foreign currencies, or otherwise will have values
that depend on the performance of foreign currencies relative to the U.S.
dollar, the relative strength of the U.S. dollar may be an important factor in
the performance of a Series, depending on the extent of the Series' foreign
investments.
A Series may employ certain strategies in order to manage exchange rate
risks. For example, a Series may hedge some or all of its investments
denominated in or exposed to a foreign currency against a decline in the value
of that currency. A Series may enter into contracts to sell that foreign
currency for U. S. dollars (not exceeding the value of a Series' assets
denominated in or exposed to that currency) or by participating in options or
futures contracts with respect to such currency ("position hedge"). A Series
could also hedge that position by selling a second currency, which is expected
to perform similarly to the currency in which portfolio investments are
denominated, for U.S. dollars ("proxy hedge"). A Series may also enter into a
forward contract to sell the currency in which the security is denominated for a
second currency that is expected to perform better relative to the U.S. dollar
if the sub-adviser believes there is a reasonable degree of correlation between
movements in the two currencies ("cross hedge"). In addition, when a Series
anticipates purchasing securities denominated in or exposed to a particular
currency, the Series may enter into a forward contract to purchase or sell such
currency in exchange for the dollar or another currency ("anticipatory hedge").
These strategies minimize the effect of currency appreciation as well as
depreciation, but do not protect against a decline in the underlying value of
the hedged security. In addition, such strategies may reduce or eliminate the
opportunity to profit from increases in the value of the original currency and
may adversely impact a Series' performance if the sub-adviser's projection of
future exchange rates is inaccurate.
FUTURES, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS
The use of futures, options, forward contracts, and swaps ("derivative
instruments") exposes a Series to additional investment risks and transaction
costs. If a sub-adviser seeks to protect a Series against potential adverse
movements in the securities, foreign currency or interest rate markets using
these instruments, and such markets do not move in a direction adverse to the
Series, that Series could be left in a less favorable position than if such
strategies had not been used. Risks inherent in the use of futures, options,
forward contracts and swaps include (1) the risk that interest rates, securities
prices and currency markets will not move in the directions anticipated; (2)
imperfect correlation between the price of derivative instruments and movements
in the prices of the securities, interest rates or currencies being hedged; (3)
the fact that skills needed to use these strategies are different from those
needed to select portfolio securities; (4) the possible absence of a liquid
secondary market for any particular instrument at any time; and (5) the possible
need to defer closing out certain hedged positions to avoid adverse tax
consequences.
HIGH YIELD/HIGH RISK BONDS
Lower rated bonds involve a higher degree of credit risk, which is the risk
that the issuer will not make interest or principal payments when due. In the
event of an unanticipated default, a Series would experience a reduction in its
income, a decline in the market value of the
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securities so affected and a decline in the value of its shares. More careful
analysis of the financial condition of issuers of lower rated securities is
therefore necessary. During an economic downturn or substantial period of rising
interest rates, highly leveraged issuers may experience financial stress which
could adversely affect their ability to service principal and interest payment
obligations, to meet projected business goals and to obtain additional
financing.
The market prices of lower rated securities are generally less sensitive to
interest rate changes than higher rated investments, but more sensitive to
adverse economic or political changes, or individual developments specific to
the issuer. Periods of economic or political uncertainty and change can be
expected to result in volatility of prices of these securities. Since the last
major economic recession, there has been a substantial increase in the use of
high-yield debt securities to fund highly leveraged corporate acquisitions and
restructurings, so past experience with high-yield securities in a prolonged
economic downturn may not provide an accurate indication of future performance
during such periods. Lower rated securities also may have less liquid markets
than higher rated securities, and their liquidity as well as their value may be
more severely affected by adverse economic conditions. Many high-yield bonds do
not trade frequently. When they do trade, their price may be substantially
higher or lower than had been expected. A lack of liquidity also means that
judgment may play a bigger role in valuing the securities. Adverse publicity and
investor perceptions as well as new or proposed laws may also have a greater
negative impact on the market for lower rated bonds.
A Series may also invest in unrated debt securities of foreign and domestic
issuers. Unrated debt, while not necessarily of lower quality than rated
securities, may not have as broad a market. Sovereign debt of foreign
governments is generally rated by country, because these ratings do not take
into account individual factors relevant to each issue and may not be updated
regularly. Because of the size and perceived demand of the issue, among other
factors, certain municipalities may not incur the costs of obtaining a rating.
The sub-adviser will analyze the credit-worthiness of the issuer, as well as any
financial institution or other party responsible for payments on the security,
in determining whether to purchase unrated municipal bonds. See Appendix A for a
description of bond rating categories.
HIGH YIELD FOREIGN SOVEREIGN DEBT SECURITIES
Investing in fixed and floating rate high yield foreign sovereign debt
securities will expose the Series investing in such securities to the direct or
indirect consequences of political, social or economic changes in the countries
that issue the securities. See "-- Foreign Securities" above. The ability and
willingness of sovereign obligors in developing and emerging market countries or
the governmental authorities that control repayment of their external debt to
pay principal and interest on such debt when due may depend on general economic
and political conditions within the relevant country. Countries such as those in
which a Series may invest have historically experienced, and may continue to
experience, high rates of inflation, high interest rates, exchange rate trade
difficulties and extreme poverty and unemployment. Many of these countries are
also characterized by political uncertainty or instability. Additional factors
which may influence the ability or willingness to service debt include, but are
not limited to, a country's cash flow situation, the availability of sufficient
foreign exchange on the date a payment is due, the relative size of its debt
service burden to the economy as a whole, and its government's policy towards
the International Monetary Fund, the World Bank and other international
agencies.
HYBRID INSTRUMENTS
The risks of investing in hybrid instruments reflect a combination of the
risks of investing in securities, options, futures and currencies, including
volatility and lack of liquidity. Reference is made to the discussion of
futures, options, and forward contracts herein for a discussion of these risks.
Further, the prices of the hybrid instrument and the related commodity or
currency may not move in the same direction or at the same time. Hybrid
instruments may bear interest or pay preferred dividends at below market (or
even relatively nominal) rates. Alternatively, hybrid instruments may bear
interest at above market rates but bear an increased risk of principal loss. In
addition, because the purchase and sale of hybrid instruments could take place
in an over-the-counter or in a private transaction between the Series and the
seller of the hybrid instrument, the creditworthiness of the counter-party to
the transaction would be a risk factor which the Series would have to consider.
Hybrid instruments also may not be subject to regulation of the CFTC, which
generally regulates the trading of commodity futures by U.S. persons, the SEC,
which regulates the offer and sale of securities by and to U.S. persons, or any
other governmental regulatory authority.
MUNICIPAL OBLIGATIONS
In addition to the usual risks associated with income investing, the value
of municipal obligations can be affected by changes in the actual or perceived
credit quality of municipal obligations held by a Series. The credit quality of
a municipal obligation can be affected by, among other factors, the financial
condition of the issuer or guarantor, the issuer's future borrowing plans and
sources of revenue,
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the economic feasibility of the revenue bond project or general borrowing
purpose, political or economic developments in the region where the security is
issued, and the liquidity of the security. Because municipal obligations are
generally traded over-the-counter, the liquidity of a particular issue often
depends on the willingness of dealers to make a market in the security. The
liquidity of some municipal issues may be enhanced by demand features, which
enable a Series to demand payment on short notice from the issuer or a financial
intermediary.
WHEN-ISSUED SECURITIES
The price of such securities, which may be expressed in yield terms, is
fixed at the time the commitment to purchase is made, but delivery and payment
take place at a later date. Normally, the settlement date occurs within 90 days
of the purchase for when-issued securities, but may be substantially longer for
forward commitments. During the period between purchase and settlement, no
payment is made by the Series to the issuer and no interest accrues to the
Series. The purchase of these securities will result in a loss if their value
declines prior to the settlement date. This could occur, for example, if
interest rates increase prior to settlement. The longer the period between
purchase and settlement, the greater the risks. At the time the Series makes the
commitment to purchase these securities, it will record the transaction and
reflect the value of the security in determining its net asset value. The Series
will segregate for these securities by maintaining cash and/or liquid debt
securities with its custodian bank equal in value to commitments for them during
the time between the purchase and the settlement. Therefore, the longer this
period, the longer the period during which alternative investment options are
not available to the Series (to the extent of the securities used for cover).
Such securities either will mature or, if necessary, be sold on or before the
settlement date.
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MANAGEMENT OF THE TRUST
- --------------------------------------------------------------------------------
INVESTMENT ADVISER
Under Massachusetts law and the Trust's Declaration of Trust and By-Laws,
the management of the business and affairs of the Trust is the responsibility of
the Trustees.
JNFSI, 5901 Executive Drive, Lansing, Michigan 48911, is the investment
adviser of each Series and provides each Series with professional investment
supervision and management. JNFSI is a wholly owned subsidiary of Jackson
National Life Insurance Company, which is in turn wholly owned by Prudential
Corporation plc, the largest life insurance company in the United Kingdom. JNFSI
provides preparation of financial statements, tax services, and regulatory
reports to the Trust.
In addition to providing the services described above, JNFSI selects,
contracts with and compensates sub-advisers to manage the investment and
reinvestment of the
assets of the Series of the Trust. JNFSI monitors the compliance of such
sub-advisers with the investment objectives and related policies of each Series
and reviews the performance of such sub-advisers and reports periodically on
such performance to the Trustees of the Trust.
As compensation for its services, JNFSI receives a fee from the Trust
computed separately for each Series. The fee for each Series is stated as an
annual percentage of the current value of the net assets of the Series. The
fees, which are accrued daily and payable monthly, are calculated on the basis
of the average of all valuations of net assets of each Series made at the close
of business on each business day of the Trust during the period for which such
fees are paid through the date of calculation. Once the average net assets of a
Series exceed specified amounts, the fee is reduced with respect to such excess.
The following is a schedule of the fees each Series currently is obligated to
pay JNFSI.
<TABLE>
<CAPTION>
$0 TO $50 TO $150 TO $300 TO OVER
(*M -- MILLION) $50 M $150 M $300 M $500 M $500 M
--------------- ----- ------ ------- ------- ------
<S> <C> <C> <C> <C> <C>
JNL Aggressive Growth Series................................ .95% .95% .90% .85% .85%
JNL Capital Growth Series................................... .95% .95% .90% .85% .85%
JNL Global Equities Series.................................. 1.00% 1.00% .95% .90% .90%
JNL/Alger Growth Series..................................... .975% .975% .975% .95% .90%
JNL/Eagle Core Equity Series................................ .90% .85% .85% .75% .75%
JNL/Eagle SmallCap Equity Series............................ .95% .95% .90% .90% .85%
PPM America/JNL Balanced Series*............................ .75% .70% .675% .65% .625%
PPM America/JNL High Yield Bond Series...................... .75% .70% .675% .65% .625%
PPM America/JNL Money Market Series......................... .60% .60% .575% .55% .525%
JNL/Putnam Growth Series**.................................. .90% .90% .85% .80% .80%
JNL/Putnam Value Equity Series***........................... .90% .90% .85% .80% .80%
JNL/Putnam World Opportunities Series....................... 1.40% 1.40% 1.35% 1.25% 1.25%
Salomon Brothers/JNL Global Bond Series..................... .85% .85% .80% .80% .75%
Salomon Brothers/JNL U.S. Government & Quality Bond
Series.................................................... .70% .70% .65% .60% .55%
T. Rowe Price/JNL Established Growth Series................. .85% .85% .80% .80% .80%
T. Rowe Price/JNL International Equity Investment Series.... 1.10% 1.05% 1.00% .95% .90%
T. Rowe Price/JNL Mid-Cap Growth Series..................... .95% .95% .90% .90% .90%
</TABLE>
- -------------------------
* Prior to May 1, 1997, the fee for the PPM America/JNL Balanced Series was
.90%, .80%, .75%, .70% and .65%, respectively.
** Prior to May 1, 1997, the fee for the JNL/Putnam Growth Series was .90%,
.85%, .80%, .75%, and .70%, respectively.
*** Prior to May 1, 1997, the fee for the JNL/Putnam Value Equity Series was
.75%, .70%, .675%, .65% and .625%, respectively.
INVESTMENT SUB-ADVISERS
The organizations described below act as sub-advisers to the Trust and
certain of its Series pursuant to Sub-Advisory Agreements with JNFSI. Under the
Sub-Advisory Agreements, the sub-advisers manage the investment and reinvestment
of the assets of the respective Series for which they are responsible. Each of
the sub-advisers discharges its responsibilities subject to the policies of the
31
<PAGE> 35
Trustees and the oversight and supervision of JNFSI, which pays the
sub-advisers' fees.
Fred Alger Management, Inc., ("Alger Management") which is located at
75 Maiden Lane, New York, New York 10038, serves as sub-adviser to the
JNL/Alger Growth Series. Alger Management is generally engaged in the business
of rendering investment advisory services to institutions and, to a lesser
extent, individuals. Alger Management has been engaged in the business of
rendering investment advisory services since 1964 and, as of December 31, 1996,
had approximately $7.1 billion under management, $5.2 billion in mutual fund
accounts and $1.9 billion in other advisory accounts. Alger Management is a
wholly owned subsidiary of Fred Alger & Company, Inc. which in turn is a wholly
owned subsidiary of Alger Associates, Inc., a financial services holding
company. Fred M. Alger III and his brother, David D. Alger are majority
shareholders of Alger Associates, Inc. and may be deemed to control that
company and its subsidiaries.
Eagle Asset Management, Inc. ("Eagle"), 880 Carillion Parkway, St.
Petersburg, Florida 33716, serves as sub-adviser to the JNL/Eagle Core Equity
Series and the JNL/Eagle SmallCap Equity Series. Eagle is a wholly-owned
subsidiary of Raymond James Financial, Inc., which, together with its
subsidiaries, provides a wide range of financial services to retail and
institutional clients. Eagle manages client accounts with net assets totaling
approximately $2.0 billion as of December 31, 1995.
Janus Capital Corporation ("Janus Capital"), a Colorado corporation with
principal offices at 100 Fillmore Street, Denver, Colorado 80206, serves as
sub-adviser to the JNL Capital Growth Series, the JNL Aggressive Growth Series
and the JNL Global Equities Series. Janus Capital is an investment adviser with
approximately $50 billion in assets under management. Kansas City Southern
Industries, Inc. ("KCSI") owns approximately 83% of the outstanding voting stock
of Janus Capital, most of which it acquired in 1984. KCSI is a publicly-traded
holding company whose primary subsidiaries are engaged in transportation and
financial services. Thomas H. Bailey, President and Chairman of the Board of
Janus Capital, owns approximately 12% of its voting stock and, by agreement with
KCSI, selects a majority of Janus Capital's Board.
PPM America, Inc. ("PPM"), which is located at 225 West Wacker Drive,
Chicago, Illinois 60606, serves as sub-adviser to the PPM America/JNL Balanced
Series*, the PPM America/JNL Money Market Series, and the PPM America/JNL High
Yield Bond Series. PPM, an affiliate of JNFSI, is a wholly owned subsidiary of
Prudential Portfolio Managers Ltd., ("PPM Ltd.") an investment management
company engaged in global money management, which is in turn wholly owned by
Prudential Corporation plc. PPM Ltd. and its subsidiaries manage over $120
billion in various currencies and markets. PPM currently manages over $24
billion of Jackson National Life Insurance Company assets. Additionally, PPM
manages assets of over $4.2 billion for other affiliated companies and over $900
million for non-affiliated entities.
Putnam Investment Management, Inc. ("Putnam"), located at One Post Office
Square, Boston, Massachusetts 02109, serves as sub-adviser to the JNL/Putnam
Growth Series*, JNL/Putnam Value Equity Series* and JNL/Putnam World
Opportunities Series. Putnam has been managing mutual funds since 1937. Putnam
and its affiliates had approximately $173 billion in assets under management as
of December 31, 1996. Putnam is a subsidiary of Putnam Investment, Inc., which
is wholly owned by Marsh & McLennan Companies, Inc., a publicly-owned holding
company whose principal business are international insurance and reinsurance
brokerage, employee benefit consulting and investment management.
Rowe Price-Fleming International, Inc. ("Price-Fleming"), located at 100
East Pratt Street, Baltimore, Maryland 21202, serves as sub-adviser to the T.
Rowe Price/JNL International Equity Investment Series. Price-Fleming was founded
in 1979 as a joint venture between T. Rowe Price Associates, Inc. and Robert
Fleming Holdings Limited. Price-Fleming is one of America's largest
international mutual fund asset managers with approximately $18 billion under
management in its offices in Baltimore, London, Tokyo, Hong Kong and Singapore.
Salomon Brothers Asset Management Inc ("SBAM") serves as sub-adviser to the
Salomon Brothers/JNL Global Bond Series and the Salomon Brothers/JNL U.S.
Government & Quality Bond Series. SBAM is an indirect, wholly owned subsidiary
of Salomon Brothers Holding Company Inc. which is, in turn, wholly owned by
Salomon Inc. ("SI"). SBAM was incorporated in 1987, and, together with
affiliates in London, Frankfurt, Tokyo and Hong Kong, SBAM provides a broad
range of fixed income and equity investment advisory services to various
individual and institutional clients located throughout the world and serves as
sub-advisor to various investment companies. In providing such investment
advisory services, SBAM has access to SI's more than 400 economists, mortgage
bond, sovereign and equity analysts. As of December 31, 1996, SBAM and its
worldwide investment
- ---------------
*Prior to May 1, 1997, Phoenix Investment Counsel, Inc. served as
sub-adviser to the PPM America/JNL Balanced Series and the JNL/Putnam Growth
Series, and PPM served as sub-adviser to the JNL/Putnam Value Equity Series.
32
<PAGE> 36
affiliates managed approximately $17.8 billion. SBAM's business offices are
located at 7 World Trade Center, New York, New York 10048.
In connection with SBAM's service as sub-adviser to the Salomon
Brothers/JNL Global Bond Series, SBAM Limited, whose business address is
Victoria Plaza, 111 Buckingham Palace Road, London SW1W OSB, England, provides
certain sub-advisory services to SBAM relating to currency transactions and
investments in non-dollar denominated debt securities for the benefit of the
Series. SBAM Limited is compensated by SBAM at no additional expense to the
Trust. Like SBAM, SBAM Limited is an indirect, wholly-owned subsidiary of
Salomon Brothers Holding Company Inc. SBAM Limited is a member of the Investment
Management Regulatory Organization Limited in the United Kingdom and is
registered as an investment adviser in the United States pursuant to the
Investment Advisers Act of 1940, as amended.
T. Rowe Price Associates, Inc. ("T. Rowe"), located at 100 East Pratt
Street, Baltimore, Maryland 21202, serves as sub-adviser to the T. Rowe
Price/JNL Established Growth Series and the T. Rowe Price/JNL Mid-Cap Growth
Series. T. Rowe was founded in 1937 by the late Thomas Rowe Price, Jr. T. Rowe
and its affiliates manage over $95 billion for approximately 4.5 million
individual and institutional investor accounts, including limited and real
estate partnerships and other mutual funds.
PORTFOLIO MANAGEMENT
The following individuals are primarily responsible for the day-to-day
management of the particular Series as indicated below.
JNL GLOBAL EQUITIES SERIES
Helen Young Hayes is responsible for the day-to-day management of the JNL
Global Equities Series. Ms. Hayes joined Janus Capital in 1987. She holds a
Bachelor of Arts in Economics from Yale University and is a Chartered Financial
Analyst.
JNL CAPITAL GROWTH SERIES
James P. Goff is responsible for the day-to-day management of the JNL
Capital Growth Series. Mr. Goff joined Janus Capital in 1988. He holds a
Bachelor of Arts in Economics from Yale University and is a Chartered Financial
Analyst.
JNL AGGRESSIVE GROWTH SERIES
Warren B. Lammert is responsible for the day-to-day management of the JNL
Aggressive Growth Series. Mr. Lammert joined Janus Capital in 1987. He holds a
Bachelor of Arts in Economics from Yale University and a Master of Science in
Economic History from the London School of Economics. He is a Chartered
Financial Analyst.
JNL/ALGER GROWTH SERIES
David D. Alger, President and Chief Investment Officer of Alger
Management, is primarily responsible for the day-to-day management of the
JNL/Alger Growth Series. He has been employed by Alger Management as Executive
Vice President and Director of Research since 1971 and he serves as portfolio
manager for other mutual funds and investment accounts managed by Alger
Management. Also participating in the management of the Series are Ronald
Tartaro and Seilai Khoo. Mr. Tartaro has been employed by Alger Management
since 1990 and he serves as a senior research analyst. Prior to 1990, he was a
member of the technical staff at AT&T Bell Laboratories. Ms. Khoo has been
employed by Alger Management since 1989 and she serves as a senior research
analyst.
JNL/EAGLE CORE EQUITY SERIES
In its capacity as sub-adviser, Eagle supervises and manages the investment
portfolio of the JNL/Eagle Core Equity Series. Eagle utilizes a team of senior
portfolio managers acting together to manage the assets of the Series. The team
meets regularly to review portfolio holdings and to discuss purchase and sale
activity. The team adjusts holdings in the portfolio as it deems appropriate in
the pursuit of the Series' investment objective.
JNL/EAGLE SMALLCAP EQUITY SERIES
Bert L. Boksen, Senior Vice President and Portfolio Manager of Eagle, is
responsible for the day-to-day management of the JNL/Eagle SmallCap Equity
Series. Mr. Boksen joined Eagle in April 1995 and has portfolio management
responsibilities for its small cap equity accounts. Prior to joining Eagle, Mr.
Boksen was employed for 16 years by Raymond James & Associates, Inc. in its
institutional research and sales department. While employed by Raymond James &
Associates, Inc., Mr. Boksen served as co-head of Research, Chief Investment
Officer and Chairman of the Raymond James & Associates, Inc. Focus List
Committee.
PPM AMERICA/JNL BALANCED SERIES
PPM AMERICA/JNL MONEY MARKET SERIES
PPM AMERICA/JNL HIGH YIELD BOND SERIES
In its capacity as sub-adviser, PPM supervises and manages the investment
portfolios of the PPM America/
33
<PAGE> 37
JNL Balanced Series, the PPM America/JNL Money Market Series, and the PPM
America/JNL High Yield Bond Series and directs the purchase and sale of each
Series' investment securities. PPM utilizes teams of investment professionals
acting together to manage the assets of the Series. The teams meet regularly to
review portfolio holdings and to discuss purchase and sale activity. The teams
adjust holdings in the portfolios as they deem appropriate in the pursuit of the
Series' investment objectives. PPM has supervised and managed the investment
portfolio of the PPM America/JNL Balanced Series since May 1, 1997, and has
supervised and managed the investment portfolios of the PPM America/JNL Money
Market Series and the PPM America/JNL High Yield Bond Series since the
commencement of operations of each Series.
JNL/PUTNAM GROWTH SERIES
Carol C. McMullen has responsibility for the day-to-day management of the
JNL/Putnam Value Equity Series. Ms. McMullen has been a Managing Director of
Putnam since 1995. Prior to joining Putnam, Ms. McMullen was Senior Vice
President of Baring Asset Management.
JNL/PUTNAM VALUE EQUITY SERIES
Anthony I. Kreisel a Managing Director of Putnam, has responsibility for
the day-to-day management of the JNL/Putnam Value Equity Series. Mr. Kreisel has
been an investment professional at Putnam since 1986.
JNL/PUTNAM WORLD OPPORTUNITIES SERIES
The JNL/Putnam World Opportunities Series has an investment advisory group
that has primary responsibility for the day-to-day management of the Series'
portfolio. The Series' advisory group is composed of the following officers of
Putnam: Justin M. Scott, J. Peter Grant, Robert Swift and Ami T. Kuan. Each of
the members of the Series' advisory group have had responsibility for the
management of the Series' portfolio since commencement of operations of the
Series.
Justin M. Scott has been employed as an investment professional by Putnam
since 1988. J. Peter Grant has been employed as an investment professional by
Putnam since 1973. Robert Swift has been employed as an investment professional
by Putnam since 1995. Prior to August 1995, Mr. Swift was Director and Senior
Portfolio Manager at IAI International/Hill Samuel Investment Advisors. Ami T.
Kuan has been employed as an investment professional by Putnam since 1993. Prior
to April 1993 Ms. Kuan attended the MIT Sloan School of Management.
SALOMON BROTHERS/JNL GLOBAL BOND SERIES
SALOMON BROTHERS/JNL U.S. GOVERNMENT & QUALITY BOND SERIES
Steven Guterman is primarily responsible for the day-to-day management of
the Salomon Brothers/JNL U.S. Government & Quality Bond Series and the mortgage-
backed securities and U.S. Government securities portions of the Salomon
Brothers/JNL Global Bond Series. Mr. Guterman co-manages the Salomon
Brothers/JNL U.S. Government & Quality Bond Series with Roger Lavan.
Mr. Guterman, who joined SBAM in 1990, is a Managing Director of Salomon
Brothers Inc and a Managing Director and currently a Senior Portfolio Manager of
SBAM responsible for SBAM's investment company and institutional portfolios
which invest primarily in mortgage-backed securities and U.S. Government issues.
Mr. Guterman also serves as portfolio manager for two offshore mortgage funds
and a number of institutional clients. Mr. Guterman joined Salomon Brothers Inc
in 1983, working initially in the mortgage research group where he became a
Research Director and later traded derivative mortgage-backed securities.
Mr. Lavan joined SBAM in 1990 and is a Portfolio Manager and Quantitative
Analyst, responsible for working for senior portfolio managers to monitor and
analyze market relationships and identify and implement relative value
transactions in SBAM's investment company and institutional portfolios which
invest in mortgage-backed securities and U.S. Government securities. Prior to
joining SBAM, Mr. Lavan spent four years analyzing portfolios for Salomon
Brothers Inc's Fixed Income Sales Group and Product Support Divisions.
Peter J. Wilby is primarily responsible for the day-to-day management of
the high yield and emerging market debt securities portions of the Salomon
Brothers/JNL Global Bond Series. Beth Semmel assists Mr. Wilby in the day-to-day
management of the Salomon Brothers/JNL Global Bond Series. Mr. Wilby, who joined
SBAM in 1989, is a Managing Director of Salomon Brothers Inc and SBAM and Senior
Portfolio Manager of SBAM, responsible for investment company and institutional
portfolios which invest in high yield non-U.S. and U.S. corporate debt
securities and high yield foreign sovereign debt securities. From 1984 to 1989,
Mr. Wilby was employed by Prudential Capital Management Group ("Prudential")
where he served as Director of Prudential's credit research unit and as a
corporate and sovereign credit analyst with Prudential. Mr. Wilby also managed
high yield bonds and leveraged equities in the mutual funds and institutional
portfolios at Prudential. Ms. Semmel joined SBAM and Salomon Brothers in May of
1983, where she
34
<PAGE> 38
continues to manage. Prior to joining SBAM, Ms. Semmel spent four years as a
high yield bond analyst at Morgan Stanley Asset Management.
David J. Scott is primarily responsible for currency transactions and
investments in non-dollar denominated debt securities of the Salomon
Brothers/JNL Global Bond Series. Prior to joining SBAM Limited in April 1994,
Mr. Scott worked for four years at JP Morgan Investment Management where he was
responsible for global and non-dollar portfolios for clients including
departments of various governments, pension funds and insurance companies.
Before joining JP Morgan Investment Management, Mr. Scott worked for three years
at Mercury Asset Management where he was responsible for captive insurance
portfolios and products.
T. ROWE PRICE/JNL ESTABLISHED GROWTH SERIES
The T. Rowe Price/JNL Established Growth Series has an Investment Advisory
Committee composed of the following members: John D. Gillespie, Chairman,
Charles A. Morris, Larry J. Puglia, Robert W. Smith, and Daniel Theriault. The
Committee Chairman has day-to-day responsibility for managing the Series and
works with the Committee in developing and executing the Series' investment
program.
John Gillespie joined T. Rowe in 1986 and has been managing investments
since 1989. Charles Morris joined T. Rowe in 1987. Larry Puglia joined T. Rowe
in 1990. Prior to joining T. Rowe, Mr. Puglia was a Senior Manager with Peat
Marwick Main & Co. specializing in banking. Robert Smith joined Price-Fleming in
1996. Prior to joining Price-Fleming, Mr. Smith was with T. Rowe for three years
and was an Investment Analyst for Massachusetts Financial Services for five
years. Daniel Theriault joined T. Rowe in 1995. Prior to joining T. Rowe, Mr.
Theriault was a Securities Analyst for John A. Levin & Company.
T. ROWE PRICE/JNL INTERNATIONAL EQUITY INVESTMENT SERIES
The T. Rowe Price/JNL International Equity Investment Series has an
investment advisory group that has day-to-day responsibility for managing the
Series and developing and executing the Series' investment program. The Series'
advisory group is composed of the following members: Martin G. Wade, Christopher
D. Alderson, Peter B. Askew, Mark J.T. Edward, John R. Ford, James B.M. Seddon,
Benedict R.F. Thomas, and David J.J. Warren.
Martin Wade joined Price-Fleming in 1979 and has 26 years of experience
with the Fleming Group in research, client service, and investment management.
(Fleming Group includes Robert Fleming and/or Jardine Fleming Group Limited).
Christopher Alderson joined Price-Fleming in 1988 and has nine years of
experience with the Fleming Group in research and portfolio management. Peter
Askew joined Price-Fleming in 1988 and has 20 years of experience managing
multi-currency fixed income portfolios. Mark Edwards joined Price-Fleming in
1986 and has 14 years of experience in financial analysis. John Ford joined
Price-Fleming in 1982 and has 15 years of experience with the Fleming Group in
research and portfolio management. James Seddon joined Price-Fleming in 1987 and
has eight years of experience in investment management. Benedict Thomas joined
Price-Fleming in 1988 and has six years of portfolio management experience.
David Warren joined Price-Fleming in 1984 and has 15 years of experience in
equity research, fixed income research and portfolio management.
T. ROWE PRICE/JNL MID-CAP GROWTH SERIES
The T. Rowe Price/JNL Mid-Cap Growth Series has an Investment Advisory
Committee composed of the following members: Brian W. Berghuis, Chairman, James
A.C. Kennedy, and John F. Wakeman. The Committee Chairman has day to day
responsibility for managing the Series and works with the Committee in
developing and executing the Series' investment program. Mr. Berghuis has been
managing investments since joining T. Rowe in 1985.
SUB-ADVISORY ARRANGEMENTS
Under the terms of each of the Sub-Advisory Agreements, the sub-adviser
manages the investment and reinvestment of the assets of the assigned Series,
subject to the supervision of the Trustees of the Trust. The sub-adviser
formulates a continuous investment program for each such Series consistent with
its investment objectives and policies outlined in this Prospectus. Each
sub-adviser implements such programs by purchases and sales of securities and
regularly reports to JNFSI and the Trustees of the Trust with respect to the
implementation of such programs.
As compensation for their services, the sub-advisers receive fees from
JNFSI computed separately for each Series. The fee for each Series is stated as
an annual percentage of the current value of the net assets of such Series. The
fees are calculated on the basis of the average of all valuations of net assets
of each Series made at the close of business on each business day of the Trust
during the period for which such fees are paid through the date of calculation.
Once the average net assets of a Series exceed specified amounts, the fee is
reduced with respect to such
35
<PAGE> 39
excess. The following is a schedule of the management fees JNFSI currently is
obligated to pay the sub-advisers out of the advisory fee it receives from each
Series as specified above:
<TABLE>
<CAPTION>
$0 TO $50 TO $100 TO $150 TO $300 TO OVER
(*M - MILLION) $50 M $100 M $150 M $300 M $500 M $500 M
-------------- ----- ------ ------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
JNL Aggressive Growth Series*.......................... .55% .55% .50% .50% .50% .45%
JNL Capital Growth Series*............................. .55% .55% .50% .50% .50% .45%
JNL Global Equities Series*............................ .55% .55% .50% .50% .50% .45%
JNL/Alger Growth Series................................ .55% .55% .55% .55% .50% .45%
JNL/Eagle Core Equity Series........................... .45% .40% .40% .40% .30% .30%
JNL/Eagle SmallCap Equity Series....................... .50% .50% .50% .45% .45% .40%
PPM America/JNL Balanced Series**...................... .25% .20% .20% .175% .15% .125%
PPM America/JNL High Yield Bond Series................. .25% .20% .20% .175% .15% .125%
PPM America/JNL Money Market Series.................... .20% .15% .15% .125% .10% .075%
JNL/Putnam Growth Series**............................. .50% .50% .50% .45% .35% .35%
JNL/Putnam Value Equity Series***...................... .50% .50% .50% .45% .35% .35%
JNL/Putnam World Opportunities Series.................. 1.00% 1.00% 1.00% .95% .85% .85%
Salomon Brothers/JNL Global Bond Series................ .375% .35% .35% .30% .30% .25%
Salomon Brothers/JNL U.S. Government & Quality Bond
Series............................................... .225% .225% .225% .175% .15% .10%
</TABLE>
<TABLE>
<CAPTION>
$0 TO $20 TO $50 TO
$20 M $50 M $200 M $200 M+
----- ------ ------ -------
<S> <C> <C> <C> <C>
T. Rowe Price/JNL Established Growth Series................. .45% .40% .40%**** .40%
T. Rowe Price/JNL International Equity Investment Series.... .75% .60% .50% .50%****
T. Rowe Price/JNL Mid-Cap Growth Series..................... .60% .50% .50%**** .50%
</TABLE>
* Prior to September 16, 1996, the sub-advisory fees payable to Janus for
these Series were: $0 to $50 million -- .60%; $50 to $150 million -- .55%;
$150 to $300 million -- .45%; $300 to $500 million -- .40%; over $500
million -- .40%.
** Prior to May 1, 1997, the sub-advisory fees for these Series were payable
to Phoenix Investment Counsel, Inc. and were: $0 to $50 million -- .50%;
$50 to $150 million -- .40%; $150 to $300 million -- .30%; $300 to $500
million -- .25%; over $500 million -- .20%.
*** Prior to May 1, 1997, the sub-advisory fee for this Series was payable to
PPM and was: $0 to $50 million -- .25%; $50 to $150 million -- .20%; $150
to $300 million -- .175%; $300 to $500 million -- .15%; over $500 million
-- .125%.
**** When average assets exceed this amount, the sub-advisory fee asterisked is
applicable to all amounts in this Series.
With respect to the Salomon Brothers/JNL Global Bond Series and in
connection with the advisory consulting agreement between Salomon Brothers and
SBAM Limited, Salomon Brothers will pay SBAM Limited, as full compensation for
all services provided under the advisory consulting agreement, a portion of its
investment management fee. The amount payable to SBAM Limited will be equal to
the fee payable under Salomon Brothers' sub-advisory agreement multiplied by the
portion of the assets of the Series that SBAM Limited has been delegated to
manage divided by the current value of the net assets of the Series.
OTHER TRUST EXPENSES
In addition to the investment advisory fee, the Trust incurs expenses,
including legal, auditing and accounting expenses, Trustees' fees and expenses,
insurance premiums, brokers' commissions, taxes and governmental fees, expenses
of issue or redemption of shares, expenses of registering or qualifying shares
for sale, reports and notices to shareholders, and fees and disbursements of
custodians, transfer agents, registrars, shareholder servicing agents and
dividend disbursing agents, and certain expenses with respect to membership fees
of industry associations.
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<PAGE> 40
- --------------------------------------------------------------------------------
INVESTMENT IN TRUST SHARES
- --------------------------------------------------------------------------------
An insurance company purchases the shares of the Series at their net asset
value using premiums received on Policies issued by Accounts. These Accounts are
funded by shares of the Trust. There is no sales charge. All shares are sold at
net asset value.
The net asset value per share of each Series is determined at the close of
regular trading on the New York Stock Exchange (normally 4:00 p.m., Eastern
time) each day that the New York Stock Exchange is open. The net asset value per
share is calculated by adding the value of all securities and other assets of a
Series, deducting its liabilities, and dividing by the number of shares
outstanding.
Shares of the Trust are currently sold primarily to separate accounts of
Jackson National Life Insurance Company, 5901 Executive Drive, Lansing, Michigan
48911 to fund the benefits under variable insurance or annuity Policies.
Further, it is anticipated that shares of the Trust will be sold to certain
qualified retirement plans.
All investments in the Trust are credited to the shareholder's account in
the form of full and fractional shares of the designated Series (rounded to the
nearest 1/1000 of a share). The Trust does not issue share certificates.
- --------------------------------------------------------------------------------
SHARE REDEMPTION
- --------------------------------------------------------------------------------
An insurance company separate account redeems shares to make benefit or
surrender payments under the terms of its Policies. Redemptions are processed on
any day on which the Trust is open for business and are effected at net asset
value next determined after the redemption order, in proper form, is received by
the Trust's transfer agent.
The Trust may suspend the right of redemption only under the following
unusual circumstances:
- when the New York Stock Exchange is closed (other than weekends and
holidays) or trading is restricted;
- when an emergency exists, making disposal of portfolio securities or the
valuation of net assets not reasonably practicable; or
- during any period when the SEC has by order permitted a suspension of
redemption for the protection of shareholders.
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
DESCRIPTION OF SHARES -- The Declaration of Trust permits the Trustees to
issue an unlimited number of full and fractional shares of beneficial interest
of each Series and to divide or combine such shares into a greater or lesser
number of shares without thereby changing the proportionate beneficial interests
in the Trust. Each share of a Series represents an equal proportional interest
in that Series with each other share. The Trust reserves the right to create a
number of different Series. In that case, the shares of each Series would
participate equally in the earnings, dividends, and assets of the particular
Series. Upon liquidation of a Series, its shareholders are entitled to share pro
rata in the net assets of such Series available for distribution to
shareholders.
As of April 11, 1997, Jackson National Life Insurance Company owned %
of the outstanding shares of the Trust.
SERIES TRANSACTIONS -- The Trust's portfolio transactions are executed
through brokers who are considered by the appropriate sub-adviser as able to
provide execution at the most favorable prices and in the most effective manner.
Portfolio security transactions may be executed through brokers who are
affiliated with the Trust, JNFSI or a sub-adviser. In addition, brokers may be
selected taking into account such brokers' assistance in the purchase of
variable annuity contracts funded by the Trust (although such assistance or
absence thereof is neither a qualifying nor a disqualifying factor in such
selection). See the Statement of Additional Information for more detailed
information.
VOTING RIGHTS -- Except for matters affecting a particular Series, as
described below, all shares of the Trust have equal voting rights and may be
voted in the election of Trustees and on other matters submitted to the vote of
the shareholders. Shareholders' meetings ordinarily
37
<PAGE> 41
will not be held unless required by the 1940 Act. As permitted by Massachusetts
law, there normally will be no shareholders' meetings for the purpose of
electing Trustees unless and until such time as fewer than a majority of the
Trustees holding office have been elected by shareholders. At that time, the
Trustees then in office will call a shareholders' meeting for the election of
Trustees. The Trustees must call a meeting of shareholders for the purpose of
voting upon the removal of any Trustee when requested to do so by the record
holders of 10% of the outstanding shares of the Trust. A Trustee may be removed
after the holders of record of not less than two-thirds of the outstanding
shares have declared that the Trustee be removed either by declaration in
writing or by votes cast in person or by proxy. Except as set forth above, the
Trustees shall continue to hold office and may appoint successor Trustees,
provided that immediately after the appointment of any successor Trustee, at
least two-thirds of the Trustees have been elected by the shareholders. Shares
do not have cumulative voting rights. Thus, holders of a majority of the shares
voting for the election of Trustees can elect all the Trustees. No amendment may
be made to the Declaration of Trust without the affirmative vote of a majority
of the outstanding shares of the Trust, except that amendments to conform the
Declaration to the requirements of applicable federal laws or regulations or the
regulated investment company provisions of the Code may be made by the Trustees
without the vote or consent of shareholders. If not terminated by the vote or
written consent of a majority of its outstanding shares, the Trust will continue
indefinitely.
In matters affecting only a particular Series, the matter shall have been
effectively acted upon by a majority vote of that Series even though: (1) the
matter has not been approved by a majority vote of any other Series; or (2) the
matter has not been approved by a majority vote of the Trust.
Shareholders of a Massachusetts business trust may, under certain
circumstances, be held personally liable as partners for the obligations of the
Trust. The risk of a shareholder incurring any financial loss on account of
shareholder liability is limited to circumstances in which the Trust itself
would be unable to meet its obligations. The Declaration of Trust contains an
express disclaimer of shareholder liability for acts or obligations of the Trust
and provides that notice of the disclaimer must be given in each agreement,
obligation or instrument entered into or executed by the Trust or Trustees. The
Declaration of Trust provides for indemnification of any shareholder held
personally liable for the obligations of the Trust and also provides for the
Trust to reimburse the shareholder for all legal and other expenses reasonably
incurred in connection with any such claim or liability.
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PERFORMANCE ADVERTISING FOR THE SERIES
- --------------------------------------------------------------------------------
The Trust may from time to time advertise several types of historical
performance for the Series. The performance advertised will be based on
historical results and is not intended to indicate future performance. The
performance figures advertised for a Series may or may not reflect the effect of
any charges that are imposed under a variable annuity or variable life contract
that is funded by the Trust. Such charges, described in the variable annuity or
variable life prospectus, will have the effect of reducing the performance
described below.
Each Series may advertise standardized average annual total return,
calculated in a manner prescribed by the Securities and Exchange Commission, and
non-standardized total return. Standardized average annual total return will
show the percentage rate of return of a hypothetical initial investment of
$1,000 for the most recent one, five and ten year periods, or for a period
covering the time the Series has been in existence if the Series has not been in
existence for one of the prescribed periods. Because average annual total
returns tend to smooth out variations in the Series' returns, you should
recognize that they are not the same as actual year-by-year results. Non-
standardized total return may be for periods other than those required to be
presented or may otherwise differ from standardized average annual total return.
Each Series may also advertise yield, and the PPM America/JNL Money Market
Series may also advertise effective yield. Yield, as calculated by each Series
other than the PPM America/JNL Money Market Series, refers to the annualized
income generated by an investment in the Series over a specified thirty-day
period. The yield is calculated by assuming that the income generated by the
investment during that thirty-day period is generated each thirty-day period
over a twelve-month period and is shown as a percentage of the investment.
Yield, as calculated by the PPM America/JNL Money Market Series, is a measure of
the net dividend and interest income earned over a specific seven-day period
expressed as a percentage of the offering price of the Series. The yield is an
annualized figure, which means that it is assumed that the Series generates the
same level of net income over a 52-week period. Effective yield is calculated
under rules prescribed by the Securities and Exchange Commission and assumes a
weekly reinvestment of income earned. The effective
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<PAGE> 42
yield will be slightly higher than the yield due to this compounding effect.
Because yield accounting methods differ from the methods used for financial
reporting and tax accounting purposes, a Series' yield may not equal its
distribution rate, the income paid to a shareholder's account, or the income
reported in the Series' financial statements.
The performance of the Series may be compared to the performance of other
mutual funds or mutual fund indices with similar objectives and policies as
reported by Lipper Analytical Services, Inc. ("Lipper"), CDA Investment
Technologies, Inc. ("CDA") or Donoghue's Money Fund Report. Lipper and CDA
performance calculations are based upon changes in net asset value with all
dividends reinvested and do not include the effect of any sales charges. The
Series' performance may also be compared to that of the Consumer Price Index or
various unmanaged stock and bond indices including, but not limited to, Salomon
Brothers Broad Investment Grade Index, Lehman Brothers High Yield Index, Lehman
Brothers Aggregate Bond Index, Salomon Brothers Treasury Index, S&P Mid-Cap 400
Index, Morgan Stanley Capital International World Index, Morgan Stanley Europe
and Austral-asia, Far East Equity Index, Russell 2000 Index, and S&P 500
Composite Stock Price Index.
From time to time, a Series also may quote information from publications
including, but not limited to, the following: Morningstar, Inc., The Wall Street
Journal, Money Magazine, Forbes, Barron's, The New York Times, USA Today,
Institutional Investor and Registered Representative. Also, investors may want
to compare the historical returns of various investments, performance indices of
those investments or economic indicators, including but not limited to stocks,
bonds, certificates of deposit and other bank products, money market funds and
U.S. Treasury obligations. Certain of these alternative investments may offer
fixed rates of return and guaranteed principal, and may be insured. Economic
indicators may include, without limitation, indicators of market rate trends and
cost of funds, such as Federal Home Loan Bank Board 11th District Cost of Funds
Index (COFI).
Each Series' shares are sold at net asset value. Each Series' returns will
fluctuate. Shares of a Series are redeemable by an investor at the then current
net asset value, which may be more or less than original cost. Additional
information concerning each Series' performance appears in the Statement of
Additional Information, and in the Trust's Annual Report to Shareholders which
may be obtained, without charge, by writing or calling the Trust.
SHAREHOLDER INQUIRIES -- All inquiries regarding the Trust should be
directed to the Trust at the telephone number or address shown on the cover page
of this Prospectus.
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TAX STATUS
- --------------------------------------------------------------------------------
The Trust's policy is to meet the requirements of Subchapter M of the
Internal Revenue Code. Each Series intends to distribute all its taxable net
investment income and capital gains to shareholders, and therefore, will not be
required to pay any federal income taxes.
Each Series of the Trust is treated as a separate entity for purposes of
the regulated investment company provisions of the Internal Revenue Code, and,
therefore, the assets, income, and distributions of each Series are considered
separately for purposes of determining whether or not the Series qualifies as a
regulated investment company.
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<PAGE> 43
CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
100 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
LEGAL COUNSEL
Blazzard, Grodd & Hasenauer, P.C.
943 Post Road East
Westport, CT 06881
INVESTMENT ADVISER
Jackson National Financial Services, Inc.
5901 Executive Drive
Lansing, Michigan 48911
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APPENDIX A -- RATINGS OF INVESTMENTS
- --------------------------------------------------------------------------------
COMMERCIAL PAPER RATINGS
A-1, A-2 AND PRIME-1, PRIME-2 COMMERCIAL PAPER RATINGS
Commercial paper rated by Standard & Poor's Ratings Group has the following
characteristics: Liquidity ratios are adequate to meet cash requirements.
Long-term senior debt is rated "A" or better. The issuer has access to at least
two additional channels of borrowing. Basic earnings and cash flow have an
upward trend with allowance made for unusual circumstances. Typically, the
issuer's industry is well established and the issuer has a strong position
within the industry. The reliability and quality of management are unquestioned.
Relative strength or weakness of the above factors determine whether the
issuer's commercial paper is rated A-1 or A-2.
The ratings Prime-1 and Prime-2 are the two highest commercial paper
ratings assigned by Moody's Investors Service, Inc. Among the factors considered
by it in assigning ratings are the following: (1) evaluation of the management
of the issuer; (2) economic evaluation of the issuer's industry or industries
and an appraisal of speculative-type risks which may be inherent in certain
areas; (3) evaluation of the issuer's products in relation to competition and
customer-acceptance; (4) liquidity; (5) amount and quality of long-term debt;
(6) trend of earnings over a period of ten years; (7) financial strength of a
parent company and the relationships which exist with the issuer; and (8)
recognition by the management of obligations which may be present or may arise
as a result of public interest questions and preparations to meet such
obligations. Relative strength or weakness of the above factors determines
whether the issuer's commercial paper is rated Prime-1 or 2.
CORPORATE BONDS
STANDARD & POOR'S RATINGS GROUP BOND RATINGS
AAA. Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA. Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issued only in small degree.
A. Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB. Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB, B, CCC, CC, C. Debt rated BB, B, CCC, CC, and C is regarded, on
balance, as predominantly speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB indicates
the lowest degree of speculation and C the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
CI. The rating CI is reserved for income bonds on which no interest is
being paid.
D. Debt rated D is in default, and payment of interest and/or repayment of
principal is in arrears.
MOODY'S INVESTORS SERVICE, INC. BOND RATINGS
Aaa. Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt-edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa. Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A. Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
A-1
<PAGE> 45
Baa. Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time.
Such bonds lack outstanding investment characteristics and, in fact, have
speculative characteristics as well.
Ba. Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B. Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa. Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal and
interest.
Ca. Bonds which are rated Ca represent obligations which are speculative in
a high degree. Such issues are often in default or have other marked
shortcomings.
C. Bonds which are rated C are the lowest rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
MUNICIPAL BONDS
STANDARD & POOR'S RATINGS GROUP MUNICIPAL BOND RATINGS
AAA. Bonds rated AAA have the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA. Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the higher rated issues only in small degree.
A. Bonds which are rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.
BBB. Bonds which are rated BBB are regarded as having an adequate capacity
to pay interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to pay interest and repay principal
for bonds in this category than for bonds in higher rated categories.
Plus (+) or Minus (-): The ratings from "AA" to "B" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
MOODY'S INVESTORS SERVICE, INC. MUNICIPAL BOND RATINGS
Aaa. Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt-edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa. Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A. Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa. Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and, in
fact, have speculative characteristics as well.
NOTE: Moody's applies numerical modifiers, 1, 2 AND 3 in each generic
rating classification from "AA" through "B" in its corporate bond rating system.
The modifier 1 indicates that the security ranks in the higher end of its
generic rating category; the modifier 2 indicates a mid-range ranking; and the
modifier indicates that the issue ranks in the lower end of its generic rating
category.
A-2
<PAGE> 46
VC2440
<PAGE> 47
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1997
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
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 JNL Series Trust Prospectus, dated
May 1, 1997. Not all Series described in the Statement of Additional
Information may be available for investment. The Prospectus may be obtained by
calling (800) 322-8257, or writing P.O. Box 25127, Lansing, Michigan 48909.
TABLE OF CONTENTS
<TABLE>
<S> <C>
General Information and History 2
Investment Restrictions Applicable to all Series 2
Common Types of Securities 4
Trustees and Officers of the Trust 10
Performance 12
Investment Adviser and Other Services 15
Purchases, Redemptions and Pricing of Shares 19
Additional Information 21
Tax Status 21
Financial Statements 23
</TABLE>
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GENERAL INFORMATION AND HISTORY
The JNL Series Trust ("Trust") is an open-end management investment
company organized under the laws of Massachusetts, by a Declaration of Trust,
dated June 1, 1994. The Trust offers shares in 16 separate Series, each with
its own investment objective.
INVESTMENT RESTRICTIONS APPLICABLE TO ALL SERIES
As indicated in the Prospectus, each Series is subject to certain
fundamental policies and restrictions that may not be changed without
shareholder approval. Shareholder approval means approval by the lesser of (i)
more than 50% of the outstanding voting securities of the Trust (or a
particular Series if a matter affects just that Series), or (ii) 67% or more of
the voting securities present at a meeting if the holders of more than 50% of
the outstanding voting securities of the Trust (or a particular Series) are
present or represented by proxy. Unless otherwise indicated, all restrictions
apply at the time of investment. As fundamental policies, no Series may:
(1) Own more than 10% of the outstanding voting securities of any one
issuer and, as to fifty percent (50%) of the value of the total assets for JNL
Capital Growth and JNL Aggressive Growth Series, and as to seventy-five percent
(75%) of the value of the total assets of the other Series, purchase the
securities of any one issuer (except cash items and "government securities" as
defined under the Investment Company Act of 1940, as amended (the "1940 Act")),
if immediately after and as a result of such purchase, the value of the
holdings of a Series in the securities of such issuer exceeds 5% of the value
of such Series' total assets. With respect to the other 50% of the value of
its total assets, JNL Capital Growth and JNL Aggressive Growth Series may
invest in the securities of as few as two issuers (not to exceed 25% in any one
issuer).
(2) Invest more than 25% of the value of their respective assets in any
particular industry (other than U.S. Government securities); except the PPM
America/JNL Money Market Series.
(3) Invest directly in real estate or interests in real estate; however,
the Series may own debt or equity securities issued by companies engaged in
those businesses.
(4) Purchase or sell physical commodities other than foreign currencies
unless acquired as a result of ownership of securities (but this limitation
shall not prevent the Series from purchasing or selling options, futures, swaps
and forward contracts or from investing in securities or other instruments
backed by physical commodities).
(5) Lend any security or make any other loan if, as a result, more than
25% of a Series' total assets would be lent to other parties (but this
limitation does not apply to purchases of commercial paper, debt securities or
repurchase agreements).
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<PAGE> 49
(6) Act as an underwriter of securities issued by others, except to the
extent that a Series may be deemed an underwriter in connection with the
disposition of portfolio securities of such Series.
(7) Invest more than 15% of a Series' net assets (10% in the case of the
PPM America/JNL Money Market Series and the JNL/Alger Growth Series) in
securities that are restricted as to disposition under federal securities law,
or securities with other legal or contractual restrictions on resale. This
limitation does not apply to securities eligible for resale pursuant to Rule
144A of the Securities Act of 1933 or Commercial Paper issued in reliance upon
the exemption from registration contained in Section 4(2) of that Act, which
have been determined to be liquid in accordance with guidelines established by
the Board of Trustees.
(8) Purchase or retain the securities of any issuer if any of the
officers, trustees or directors of all Series or the investment adviser or
sub-adviser owns beneficially more than 1/2 of 1% of the securities of such
issuer and together they own more than 5% of the securities of such issuer.
(9) The Series will not issue senior securities except that they may
borrow money for temporary or emergency purposes (not for leveraging or
investment) in an amount not exceeding 25% of the value of their respective
total assets (including the amount borrowed) less liabilities (other than
borrowings). If borrowings exceed 25% of the value of a Series' total assets
by reason of a decline in net assets, the Series will reduce its borrowings
within three business days to the extent necessary to comply with the 25%
limitation. This policy shall not prohibit reverse repurchase agreements,
deposits of assets to margin or guarantee positions in futures, options, swaps
and forward contracts, or the segregation of assets in connection with such
contracts.
The Trustees have adopted additional investment restrictions for the
Series. These restrictions are operating policies of the Series and may be
changed by the Trustees without shareholder approval. The additional
investment restrictions adopted by the Trustees to date include the following:
(a) Each Series' investments in warrants, valued at the lower of cost or
market, may not exceed 5% of the value of its net assets. Included within that
amount, but not to exceed 2% of the value of a Series' net assets, may be
warrants that are not listed on the New York or American Stock Exchanges.
Warrants acquired by a Series in units or attached to securities shall be
deemed to be without value for the purpose of monitoring this policy.
(b) The Series do not currently intend to sell securities short, unless
they own or have the right to obtain securities equivalent in kind and amount
to the securities sold short without the payment of any additional
consideration therefor, and provided that transactions in futures, options,
swaps and forward contracts are not deemed to constitute selling securities
short.
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<PAGE> 50
(c) The Series do not currently intend to purchase securities on margin,
except that the Series may obtain such short-term credits as are necessary for
the clearance of transactions, and provided that margin payments and other
deposits in connection with transactions in futures, options, swaps and forward
contracts shall not be deemed to constitute purchasing securities on margin.
(d) The Series do not currently intend to (i) purchase securities of
other investment companies, except in the open market where no commission
except the ordinary broker's commission is paid, or (ii) purchase or retain
securities issued by other open-end investment companies. Limitations (i) and
(ii) do not apply to money market funds or to securities received as dividends,
through offers of exchange, or as a result of a reorganization, consolidation,
or merger.
(e) The Series do not currently intend to invest directly in oil, gas, or
other mineral development or exploration programs or leases; however, the
Series may own debt or equity securities of companies engaged in those
businesses.
(f) The Series intend to comply with the Commodity Futures Trading
Commission ("CFTC") regulations limiting a Series' investments in futures and
options for non-hedging purposes.
INSURANCE LAW RESTRICTIONS. In connection with the Trust's agreement to sell
shares to the separate accounts, Jackson National Financial Services, Inc.
("JNFSI") and the insurance companies may enter into agreements, required by
certain state insurance departments, under which JNFSI may agree to use its
best efforts to assure and to permit insurance companies to monitor that each
Series of the Trust complies with the investment restrictions and limitations
prescribed by state insurance laws and regulations applicable to the investment
of separate account assets in shares of mutual funds. If a Series failed to
comply with such restrictions or limitations, the insurance company would take
appropriate action which might include ceasing to make investments in the
Series or withdrawing from the state imposing the limitation. Such
restrictions and limitations are not expected to have a significant impact on
the Trust's operations.
COMMON TYPES OF SECURITIES
ASSET-BACKED SECURITIES. The credit quality of most asset-backed securities
depends primarily on the credit quality of the assets underlying such
securities, how well the entity issuing the security is insulated from the
credit risk of the originator or any other affiliated entities, and the amount
and quality of any credit support provided to the securities. The rate of
principal payment on asset-backed securities generally depends on the rate of
principal payments received on the underlying assets which in turn may be
affected by a variety of economic and other factors. As a result, the yield on
any asset-backed security is difficult to predict with precision and actual
yield to maturity may be more or less than the anticipated yield to maturity.
Asset-backed securities may be classified as pass-through certificates or
collateralized obligations.
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<PAGE> 51
Pass-through certificates are asset-backed securities which represent an
undivided fractional ownership interest in an underlying pool of assets.
Pass-through certificates usually provide for payments of principal and
interest received to be passed through to their holders, usually after
deduction for certain costs and expenses incurred in administering the pool.
Because pass-through certificates represent an ownership interest in the
underlying assets, the holders thereof bear directly the risk of any defaults
by the obligors on the underlying assets not covered by any credit support.
Asset-backed securities issued in the form of debt instruments, also known
as collateralized obligations, are generally issued as the debt of a special
purpose entity organized solely for the purpose of owning such assets and
issuing such debt. Such assets are most often trade, credit card or automobile
receivables. The assets collateralizing such asset-backed securities are
pledged to a trustee or custodian for the benefit of the holders hereof. Such
issuers generally hold no assets other than those underlying the asset-backed
securities and any credit support provided. As a result, although payments on
such asset-backed securities are obligations of the issuers, in the event of
defaults on the underlying assets not covered by any credit support, the
issuing entities are unlikely to have sufficient assets to satisfy their
obligations on the related asset-backed securities.
BANK OBLIGATIONS. Bank obligations include certificates of deposit, bankers'
acceptances, and other short-term debt obligations. Certificates of deposit
are short-term obligations of commercial banks. A bankers' acceptance is a
time draft drawn on a commercial bank by a borrower, usually in connection with
international commercial transactions. Certificates of deposit may have fixed
or variable rates. The Series may invest in U.S. banks, foreign branches of
U.S. banks, U.S. branches of foreign banks, and foreign branches of foreign
banks.
COLLATERALIZED MORTGAGE OBLIGATIONS (CMOS). CMOs are bonds that are
collateralized by whole loan mortgages or mortgage pass-through securities.
The bonds issued in a CMO transaction are divided into groups, and each group
of bonds is referred to as a "tranche." Under the traditional CMO structure,
the cash flows generated by the mortgages or mortgage pass-through securities
in the collateral pool are used to first pay interest and then pay principal to
the CMO bondholders. The bonds issued under a CMO structure are retired
sequentially as opposed to the pro rata return of principal found in
traditional pass-through obligations. Subject to the various provisions of
individual CMO issues, the cash flow generated by the underlying collateral (to
the extent it exceeds the amount required to pay the stated interest) is used
to retire the bonds. Under the CMO structure, the repayment of principal among
the different tranches is prioritized in accordance with the terms of the
particular CMO issuance. The "fastest-pay" tranche of bonds, as specified in
the prospectus for the issue, would initially receive all principal payments.
When that tranche of bonds is retired, the next tranche, or tranches, in the
sequence, as specified in the prospectus, receive all of the principal payments
until they are retired. The
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<PAGE> 52
sequential retirement of bonds groups continues until the last tranche, or
group of bonds, is retired. Accordingly, the CMO structure allows the issuer
to use cash flows of long maturity, monthly-pay collateral to formulate
securities with short, intermediate and long final maturities and expected
average lives.
COMMERCIAL PAPER. Commercial paper are short-term promissory notes issued by
corporations primarily to finance short-term credit needs. Certain notes may
have floating or variable rates.
FOREIGN GOVERNMENT SECURITIES. Foreign government securities are issued or
guaranteed by a foreign government, province, instrumentality, political
subdivision or similar unit thereof.
HIGH YIELD BONDS. High Yield Bonds are fixed income securities offering high
current income that are in the lower rated categories of recognized rating
agencies or not rated. These lower-rated fixed income securities are
considered, on balance, as predominantly speculative with respect to capacity
to pay interest and repay principal in accordance with the terms of the
obligation and generally will involve more credit risk than securities in the
higher rated categories.
High yield securities frequently are issued by corporations in the growth
stage of their development. They may also be issued in connection with a
corporate reorganization or a corporate takeover. Companies that issue such
high yielding securities often are highly leveraged and may not have available
to them more traditional methods of financing. Therefore, the risk associated
with acquiring the securities of such issuers generally is greater than is the
case with higher rated securities. For example, during an economic downturn or
recession, highly leveraged issuers of high yield securities may experience
financial stress. During such periods, such issuers may not have sufficient
revenues to meet their interest payment obligations. The issuer's ability to
service its debt obligations may also be adversely affected by specific
corporate developments, or the issuer's inability to meet specific projected
business forecasts, or the unavailability of additional financing. Adverse
publicity and investor perceptions regarding lower rated bonds, whether or not
based upon fundamental analysis, may also depress the price for such
securities. The risk of loss from default by the issuer is significantly
greater for the holders of high yield securities because such securities are
generally unsecured and are often subordinated to other creditors of the
issuer.
HYBRID INSTRUMENTS. Hybrid instruments have recently been developed and
combine the elements of futures contracts or options with those of debt,
preferred equity or a depository instrument. Often these hybrid instruments
are indexed to the price of commodity, a particular currency, or a domestic or
foreign debt or equity securities index. Hybrid instruments may take a variety
of forms, including, but not limited to, debt instruments with interest or
principal payments or redemption terms determined by reference to the value of
a currency or commodity or securities index at a future point in time,
preferred stock with dividend rates determined by reference to the value of a
currency, or convertible securities with the conversion terms related to a
particular commodity.
6
<PAGE> 53
MORTGAGE-BACKED SECURITIES. Mortgage-backed securities are securities
representing an interest in a pool of mortgages. The mortgages may be of a
variety of types, including adjustable rate, conventional 30-year fixed rate,
graduated payment, and 15-year. Principal and interest payments made on the
mortgages in the underlying mortgage pool are passed through to the Series.
This is in contrast to traditional bonds where principal is normally paid back
at maturity in a lump sum. Unscheduled prepayments of principal shorten the
securities' weighted average life and may lower their total return. (When a
mortgage in the underlying mortgage pool is prepaid, an unscheduled principal
prepayment is passed through to the Series. This principal is returned to the
Series at par. As a result, if a mortgage security were trading at a discount,
its total return would be increased by prepayments). The value of these
securities also may change because of changes in the market's perception of the
creditworthiness of the federal agency that issued them. In addition, the
mortgage securities market in general may be adversely affected by
changes in governmental regulation or tax policies.
MUNICIPAL OBLIGATIONS. Municipal Obligations include debt obligations issued
to obtain funds for various public purposes, including the construction of a
wide range of public facilities such as bridges, highways, housing, hospitals,
mass transportation, schools, streets and water and sewer works. Other public
purposes for which Municipal Obligations may be issued include refunding
outstanding obligations, obtaining funds for general operating expenses, and
obtaining funds to loan to other public institutions and facilities. In
addition, certain types of industrial development bonds are issued by or on
behalf of public authorities to obtain funds to provide privately-operated
housing facilities, sports facilities, convention or trade show facilities,
airport, mass transit, port or parking facilities, air or water pollution
control facilities for water supply, gas, electricity or sewage or solid waste
disposal. Such obligations are included with the term Municipal Obligations if
the interest paid thereon qualifies as exempt from federal income tax.
Other types of industrial development bonds, the proceeds of which are used for
the construction, equipment, repair or improvement of privately operated
industrial or commercial facilities, may constitute Municipal Obligations,
although the current federal tax laws place substantial limitations on the size
of such issues.
REPURCHASE AGREEMENTS. A Repurchase Agreement may be considered a loan
collateralized by securities. The Series must take physical possession of the
security or receive written confirmation of the purchase and a custodial or
safekeeping receipt from a third party or be recorded as the owner of the
security through the Federal Reserve Book Entry System. The Series may invest
in open repurchase agreements which vary from the typical agreement in the
following respects: (1) the agreement has no set maturity, but instead matures
upon 24 hours' notice to the seller; and (2) the repurchase price is not
determined at the time the agreement is entered into, but is instead based on a
variable interest rate and the duration of the agreement.
SAVINGS AND LOAN OBLIGATIONS. Savings and loan obligations include negotiable
certificates of deposit and other short-term debt obligations of savings and
loan associations.
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<PAGE> 54
SHORT-TERM CORPORATE DEBT SECURITIES. Short-term corporate debt securities are
outstanding non-convertible corporate debt securities (e.g., bonds and
debentures) which have one year or less remaining to maturity. Corporate notes
may have fixed, variable, or floating rates.
STRIPPED AGENCY MORTGAGE-BACKED SECURITIES. Stripped Agency Mortgage-Backed
Securities represent interests in a pool of mortgages, the cash flow of
which has been separated into its interest and principal components. "IOs"
(interest only securities) receive the interest portion of the cash flow
while "POs" (principal only securities) receive the principal portion.
Stripped Agency Mortgage-Backed Securities may be issued by U.S. Government
agencies or by private issuers similar to those described with respect to CMOs
and privately-issued mortgage-backed certificates. As interest rates rise
and fall, the value of IOs tends to move in the same direction as interest
rates. The value of the other mortgage-backed securities described herein,
like other debt instruments, will tend to move in the opposite direction
compared to interest rates. Under the Internal Revenue Code of 1986, as
amended (the "Code"), POs may generate taxable income from the current accrual
of original issue discount, without a corresponding distribution of cash to
the Series.
The cash flows and yields on IO and PO classes are extremely sensitive to
the rate of principal payments (including prepayments) on the related
underlying mortgage assets. For example, a rapid or slow rate of principal
payments may have a material adverse effect on the prices of IOs or POs,
respectively. If the underlying mortgage assets experience greater than
anticipated prepayments of principal, an investor may fail to recoup fully its
initial investment in an IO class of a stripped mortgage-backed security, even
if the IO class is rated AAA or Aaa or is derived from a full faith and credit
obligation. Conversely, if the underlying mortgage assets experience slower
than anticipated prepayments of principal, the price on a PO class will be
affected more severely than would be the case with a traditional
mortgage-backed security.
SUPRANATIONAL AGENCY SECURITIES. Supranational Agency Securities are
securities issued or guaranteed by certain supranational entities, such as the
International Development Bank.
U.S. GOVERNMENT AGENCY SECURITIES. U.S. Government Agency Securities are
issued or guaranteed by U.S. Government sponsored enterprises and federal
agencies. These include securities issued by the Federal National Mortgage
Association, Government National Mortgage Association, Federal Home Loan Bank,
Federal Land Banks, Farmers Home Administration, Banks for Cooperatives,
Federal Intermediate Credit Banks, Federal Financing Bank, Farm Credit Banks,
the Small Business Association, Student Loan Marketing Association, and the
Tennessee Valley Authority. Some of these securities are supported by the
full faith and credit of the U.S. Treasury; the remainder are supported only by
the credit of the instrumentality, which may or may not include the right of
the issuer to borrow from the Treasury.
U.S. GOVERNMENT OBLIGATIONS. U.S. Government Obligations include bills, notes,
bonds, and other debt securities issued by the U.S. Treasury. These are direct
obligations of the U.S. Government and differ mainly in the length of their
maturities.
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<PAGE> 55
VARIABLE RATE SECURITIES. Variable Rate Securities provide for a periodic
adjustment in the interest rate paid on the obligations. The terms of such
obligations must provide that interest rates are adjusted periodically based
upon some appropriate interest rate adjustment index as provided in the
respective obligations. The adjustment intervals may be regular and range from
daily up to annually, or may be event based, such as on a change in the prime
rate. Variable Rate Securities that cannot be disposed of promptly within
seven days and in the usual course of business without taking a reduced price
will be treated as illiquid and subject to the limitation on investments in
illiquid securities.
WARRANTS. The Series may invest in warrants. Warrants have no voting rights,
pay no dividends and have no rights with respect to the assets of the
corporation issuing them. Warrants basically are options to purchase equity
securities at a specific price valid for a specific period of time. They do
not represent ownership of the securities, but only the right to buy them.
Warrants differ from call options in that warrants are issued by the issuer of
the security which may be purchased on their exercise, whereas call options may
be written or issued by anyone. The prices of warrants do not necessarily move
parallel to the prices of the underlying securities.
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENT CONTRACTS. The Series may
purchase securities on a when-issued or delayed delivery basis ("When-Issueds")
and may purchase securities on a forward commitment basis ("Forwards"). Any or
all of the Series' investments in debt securities may be in the form of
When-Issueds and Forwards. The price of such securities, which may be
expressed in yield terms, is fixed at the time the commitment to purchase is
made, but delivery and payment take place at a later date. Normally, the
settlement date occurs within 90 days of the purchase for When-Issueds, but may
be substantially longer for Forwards. During the period between purchase and
settlement, no payment is made by the Series to the issuer and no interest
accrues to the Series. The purchase of these securities will result in a loss
if their value declines prior to the settlement date. This could occur, for
example, if interest rates increase prior to settlement. The longer the period
between purchase and settlement, the greater the risks. At the time the Series
makes the commitment to purchase these securities, it will record the
transaction and reflect the value of the security in determining its net asset
value. The Series will segregate for these securities by maintaining cash
and/or liquid debt securities with its custodian bank equal in value to
commitments for them during the time between the purchase and the settlement.
Therefore, the longer this period, the longer the period during which
alternative investment options are not available to the Series (to the extent
of the securities used for cover). Such securities either will mature or, if
necessary, be sold on or before the settlement date.
ZERO COUPON BONDS. A Series may invest up to 10% of its assets in zero coupon
bonds or strips. Zero coupon bonds do not make regular interest payments;
rather, they are sold at a discount from face value. Principal and accreted
discount (representing interest accrued but not
9
<PAGE> 56
paid) are paid at maturity. Strips are debt securities that are stripped of
their interest after the securities are issued, but otherwise are comparable to
zero coupon bonds. The market value of strips and zero coupon bonds generally
fluctuates in response to changes in interest rates to a greater degree than
interest-paying securities of comparable term and quality.
TRUSTEES AND OFFICERS OF THE TRUST
The officers of the Trust manage its day to day operations and are
responsible to the Trust's Board of Trustees. The trustees set broad policies
for each Series and choose the Trust's officers. The following is a list of
the trustees and officers of the Trust and a statement of their present
positions and principal occupations during the past five years. The mailing
address of the officers and trustees, unless otherwise noted, is 5901 Executive
Drive, Lansing, Michigan 48911.
JOHN A. KNUTSON* (Age 57), Trustee, Chairman of the Board, President and Chief
Executive Officer, June 1994 to present; President, August 1993 to present,
Chief Financial Officer, February 1992 to present, Director, November 1991 to
present, Jackson National Financial Services, Inc.; President, June 1993 to
February 1994, Senior Vice President, September 1987 to June 1993 and February
1994 to present, Chief Financial Officer, September 1987 to June 1994, Chief
Operating Officer, September 1992 to present, Jackson National Life Insurance
Company.
JOSEPH FRAUENHEIM (Age 62), 1405 Cambridge, Lansing, MI 48911, Trustee,
December 1994 to present; Consultant, 1991 to present; President & CEO,
Manufacturers Bank of Lansing.
ANDREW B. HOPPING* (Age 38), Trustee, Vice President, Treasurer & Chief
Financial Officer, August 1996 to present; Senior Vice President, June 1994 to
present, Jackson National Life Insurance Company; Executive Vice President,
1991 to June 1994, Countrywide Credit.
THOMAS J. MEYER (Age 50), Vice President, Counsel and Secretary, December 1994
to present; Secretary and Chief Legal Officer, November 1991 to present,
Director, June 1995 to present, Jackson National Financial Services, Inc.;
Secretary, September 1994 to present, Vice President, and General Counsel,
March 1985 to present, Jackson National Life Insurance Company.
LARRY C. JORDAN (Age 53), Vice President, December 1994 to present, Assistant
Secretary, February 1996 to present, Assistant Treasurer, December 1994 to
February 1996; Treasurer and Assistant Secretary, November 1991 to present,
Chief Operating Officer, September 1992 to present, Director June 1993 to
present, Jackson National Financial Services, Inc.; Treasurer, October 1980 to
September 1994, Vice President, October 1980 to present, Jackson National Life
Insurance Company.
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<PAGE> 57
RICHARD MCLELLAN (Age 54), 1191 Carriageway North, East Lansing, MI 48823,
Trustee, December 1994 to present; Attorney, Dykema Gossett PLLC.
PETER MCPHERSON (Age 56), 1 Abbott Road, East Lansing, MI 48824, Trustee,
December 1994 to present; President, October 1993 to present, Michigan State
University; Group Executive Vice President, November 1990 to October 1993, Bank
of America.
ROBERT A. FRITTS (Age 48), Vice President, December 1994 to present, Assistant
Treasurer, February 1996 to present, Assistant Secretary, December 1994 to
February 1996; Assistant Treasurer, Vice President, Jackson National Life
Insurance Company.
*Trustees who are interested persons as defined in the Investment Company Act
of 1940.
On____________, 1997, the officers and trustees of the Trust, as a group,
owned less than 1% of the then outstanding shares of the Trust. As of that
date, Jackson National Life Insurance Company, a Michigan corporation, through
its initial investment of capital into each Series, owned ______% of the
outstanding shares of the Trust. To the extent required by applicable law,
Jackson National Life Insurance Company will solicit voting instructions from
owners of variable insurance or variable annuity contracts. All shares of each
Series of the Trust will be voted by Jackson National Life Insurance Company in
accordance with voting instructions received from such variable contract
owners. Jackson National Life Insurance Company will vote all of the shares
which it is entitled to vote in the same proportion as the voting instructions
given by variable contract owners, on the issues presented, including shares
which are attributable to Jackson National Life Insurance Company's interest in
the Trust.
The trustees who are "interested persons" and officers as designated above
receive no compensation from the Trust. Disinterested Trustees will be paid
$2,500 for each meeting they attend. For the period ended December 31, 1996,
the Disinterested Trustees received the following fees for service as Trustee
(this includes fees paid for service prior to the Series' commencement date):
<TABLE>
<CAPTION>
PENSION OR
AGGREGATE RETIREMENT BENEFITS TOTAL COMPENSATION
COMPENSATION FROM ACCRUED AS PART OF FROM TRUST AND FUND
TRUSTEE TRUST TRUST EXPENSES COMPLEX
<S> <C> <C> <C>
Joseph Frauenheim $ 0 $
Richard McLellan 0
Peter McPherson 0
</TABLE>
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<PAGE> 58
PERFORMANCE
As described in the Prospectus, a Series' historical performance may be
shown in the form of total return and yield. These performance measures are
described below. Performance advertised for a Series may or may not reflect the
effect of any charges that are imposed under a variable annuity or variable
life contract that is funded by the Trust. Such charges, described in the
variable annuity or variable life prospectus, will have the effect of reducing
a Series' performance.
Standardized average annual total return and non-standardized total return
measure both the net investment income generated by, and the effect of any
realized and unrealized appreciation or depreciation of, the underlying
investments of a Series. Yield is a measure of the net investment income per
share earned over a specific one month or 30-day period (seven-day period for
the PPM America/JNL Money Market Series) expressed as a percentage of the net
asset value.
A Series' standardized average annual total return quotation is computed
in accordance with a standardized method prescribed by rules of the Securities
and Exchange Commission. The standardized average annual total return for a
Series for a specific period is found by first taking a hypothetical $1,000
investment ("initial investment") in the Series' shares on the first day of the
period, adjusting to deduct the applicable charges, if any, and computing the
"redeemable value" of that investment at the end of the period. The redeemable
value is then divided by the initial investment, and this quotient is taken to
the Nth root (N representing the number of years in the period) and 1 is
subtracted from the result, which is then expressed as a percentage. The
calculation assumes that all income and capital gains dividends paid by the
Series have been reinvested at net asset value on the reinvestment dates during
the period.
The standardized total return for each Series (except the PPM America/JNL
Money Market Series and except for the JNL/Putnam World Opportunities Series
which commenced operations on May 1, 1997) for the period from commencement of
operations of the Series to December 31, 1996 is as follows:
<TABLE>
<S> <C>
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*** %
PPM America/JNL Balanced Series* %
PPM America/JNL High Yield Bond Series* %
</TABLE>
12
<PAGE> 59
13
<PAGE> 60
JNL/Putnam Growth Series* %
JNL/Putnam Value Equity Series* %
Salomon Brothers/JNL Global Bond Series* %
Salomon Brothers/JNL U.S. Government and 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* %
* Commenced operations on May 15, 1995.
**Commenced operations on October 16, 1995.
***Commenced operations on September 16, 1996.
Prior to May 1, 1997, the PPM America/JNL Balanced Series was the JNL/Phoenix
Investment Counsel Balanced Series and was sub-advised by Phoenix Investment
Counsel Inc., the JNL/Putnam Growth Series was the JNL/Phoenix Investment
Counsel Growth Series and was sub-advised by Phoenix Investment Counsel, Inc.,
and the JNL/Putnam Value Equity Series was the PPM America/JNL Value Equity
Series and was sub-advised by PPM America, Inc.
The standardized average annual total return quotations will be current to
the last day of the calendar quarter preceding the date on which an
advertisement is submitted for publication. The standardized average annual
total return will be based on rolling calendar quarters and will cover at least
periods of one, five and ten years, or a period covering the time the Series
has been in existence, if it has not been in existence for one of the
prescribed periods.
Non-standardized total return may also be advertised. Non-standardized
total return may be for periods other than those required to be presented or
may otherwise differ from standardized average annual total return.
Non-standardized total return for a specific period is calculated by first
taking an investment ("initial investment") in the Series' shares on the first
day of the period and computing the "end value" of that investment at the end
of the period. The total return percentage is then determined by subtracting
the initial investment from the ending value and dividing the remainder by the
initial investment and expressing the result as a percentage. The calculation
assumes that all income and capital gains dividends paid by the Series have
been reinvested at net asset value on the reinvestment dates during the period.
Non-standardized total return may also be shown as the increased dollar value
of the hypothetical investment over the period.
Quotations of standardized average annual total return and
non-standardized total return are based upon historical earnings and will
fluctuate. Any quotation of performance, therefore, should not be considered a
guarantee of future performance. Factors affecting the performance of a Series
include general market conditions, operating expenses and investment
management.
The yield for a Series other than the PPM America/JNL Money Market Series
is computed in accordance with a standardized method prescribed by the rules of
the SEC. Under that method, yield is computed by dividing the net investment
income per share earned during
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<PAGE> 61
the specified one month or 30-day period by the offering price per share on the
last day of the period, according to the following formula:
6
[( A-B ) ]
YIELD = 2 |( ----- +1) -1 |
|( CD ) |
[ ]
Where:
a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends
d = the offering price (net asset value) per share on the last day of the
period.
The yield for the 30-day period ended December 31, 1996, for each of the
referenced Series was as follows:
<TABLE>
<S> <C>
PPM America/JNL Balanced Series %
PPM America/JNL High Yield Bond Series %
Salomon Brothers/JNL Global Bond Series %
Salomon Brothers/JNL U.S. Government and Quality Bond Series %
</TABLE>
Prior to May 1, 1997, the PPM America/JNL Balanced Series was the JNL/Phoenix
Investment Counsel Balanced Series and was sub-advised by Phoenix Investment
Counsel Inc.
In computing the foregoing yield, the Series follow certain standardized
accounting practices specified by SEC rules. These practices are not
necessarily consistent with those that the Series use to prepare annual and
interim financial statements in accordance with generally accepted accounting
principles.
The PPM America/JNL Money Market Series' yield is also computed in
accordance with a standardized method prescribed by rules of the SEC. Under
that method, the current yield quotation is based on a seven-day period and is
computed as follows. The first calculation is net investment income per share;
which is accrued interest on portfolio securities, plus or minus amortized
discount or premium, less accrued expenses. This number is then divided by the
price per share (expected to remain constant at $1.00) at the beginning of the
period ("base period return"). The result is then divided by 7 and multiplied
by 365 and the resulting yield figure is carried to the nearest one-hundredth
of one percent. Realized capital gains or losses and unrealized appreciation
or depreciation of investments are not included in the calculation. The PPM
America/JNL Money Market Series' yield for the seven-day period ended December
31, 1996 was %.
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<PAGE> 62
The PPM America/JNL Money Market Series' effective yield is determined by
taking the base period return (computed as described above) and calculating the
effect of assumed compounding. The formula for the effective yield is: (base
period return + 1)365/7 - 1. The PPM America/JNL Money Market Series'
effective yield for the seven-day period ended December 31, 1996 was %.
A Series' performance quotations are based upon historical results and are
not necessarily representative of future performance. The Series' shares are
sold at net asset value. Returns and net asset value will fluctuate, except
that the PPM America/JNL Money Market Series seeks to maintain a $1.00 net
asset value per share. Factors affecting a Series' performance include general
market conditions, operating expenses and investment management. Shares of a
Series are redeemable at the then current net asset value, which may be more or
less than original cost.
The performance of the Series may be compared to various other selected
recognized market indicators. There are differences and similarities between
the investments which a Series may purchase and the investments measured by the
market indicators. Each Series may compare its performance to one or more of
the Consumer Price Index, the Standard & Poor's 500 Composite Price Index, the
Standard & Poor's MidCap 400 Index, the Morgan Stanley Capital International
World Index, the Lehman Brothers Aggregate Bond Index, the Lehman Brothers High
Yield Index, the Salomon Brothers Broad Investment Grade Index, the Salomon
Brothers Treasury Index, the Russell 2000 Index, or the Morgan Stanley Europe
and Australasia, Far East Equity Index. The foregoing bond indexes are
unmanaged. The market prices and yields of corporate and government bonds will
fluctuate. Lipper and CDA are widely recognized independent mutual fund
reporting services. Lipper and CDA indexes are weighted performance averages
of other mutual funds with similar investment objectives. The net asset values
and returns of the Series will also fluctuate. No adjustments are made for
taxes payable on dividends.
A Series may periodically advertise tax-deferred compounding charts and
other hypothetical illustrations.
INVESTMENT ADVISER AND OTHER SERVICES
JNFSI, 5901 Executive Drive, Lansing, Michigan 48911, is the investment
adviser of each Series and provides each Series with professional investment
supervision and management. JNFSI is a wholly-owned subsidiary of Jackson
National Life Insurance Company, which is in turn wholly-owned by Prudential
Corporation plc, the largest life insurance company in the United Kingdom.
JNFSI provides preparation of financial statements, tax services and
regulatory reports.
Pursuant to an Amended Investment Advisory and Management Agreement, JNFSI
acts as the Trust's investment adviser, administers its business affairs,
furnishes office facilities and equipment, provides clerical, bookkeeping and
administrative services, and permits any of its officers or employees to serve
without compensation as trustees or officers of the Trust if elected
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<PAGE> 63
to such positions. The Amended Investment Advisory and Management Agreement
continues in effect for each Series from year to year after its initial
two-year term so long as its continuation is approved at least annually by (i)
a majority of the Trustees who are not parties to such agreement or interested
persons of any such party except in their capacity as Trustees of the Trust,
and (ii) the shareholders of each Series or the Board of Trustees. It may be
terminated at any time upon 60 days notice by either party, or by a majority
vote of the outstanding shares of a Series with respect to that Series, and
will terminate automatically upon assignment. Additional Series may be subject
to a different agreement. The Investment Advisory and Management Agreement
provides that JNFSI shall not be liable for any error of judgment, or for any
loss suffered by the Series in connection with the matters to which the
agreement relates, except a loss resulting from willful misfeasance, bad faith
or gross negligence on the part of JNFSI in the performance of its obligations
and duties, or by reason of its reckless disregard of its obligations and
duties under the agreement. As compensation for its services, the Trust pays
JNFSI a fee as described in the Prospectus. The fees paid by the Trust to
JNFSI pursuant to the Amended Investment Advisory and Management Agreement
during the Trust's fiscal year ended December 31, 1996 were $ .
In addition to providing the services described above JNFSI selects,
contracts with and compensates sub-advisers to manage the investment and
reinvestment of the assets of the Series of the Trust. JNFSI monitors the
compliance of such sub-advisers with the investment objectives and related
policies of each Series and reviews the performance of such sub-advisers and
reports periodically on such performance to the Trustees of the Trust.
Janus Capital Corporation ("Janus Capital") serves as sub-adviser for the
JNL Capital Growth, JNL Aggressive Growth and JNL Global Equities Series; Fred
Alger Management, Inc. ("Alger Management") serves as sub-adviser for the
JNL/Alger Growth Series; Eagle Asset Management, Inc. ("Eagle") serves as
sub-adviser to the JNL/Eagle Core Equity Series and the JNL/Eagle SmallCap
Equity Series; PPM America, Inc. ("PPM") serves as sub-adviser for the PPM
America/JNL Balanced, PPM America/JNL Money Market and PPM America/JNL High
Yield Bond Series; Putnam Investment Management, Inc. serves as sub-adviser to
the JNL/Putnam Growth, JNL/Putnam Value Equity and JNL/Putnam World
Opportunities Series; Salomon Brothers Asset Management Inc ("SBAM Salomon
Brothers") serves as sub-adviser for the Salomon Brothers/JNL U.S.
Government & Quality Bond and Salomon Brothers/JNL Global Bond Series; T. Rowe
Price Associates, Inc. ("T. Rowe") 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. ("Price-Fleming") serves as sub-adviser
for the T. Rowe Price/JNL International Equity Investment Series. Prior to May
1, 1997, the PPM America/JNL Balanced Series was the JNL/Phoenix Investment
Counsel Balanced Series and was sub-advised by Phoenix Investment Counsel Inc.,
the JNL/Putnam Growth Series was the JNL/Phoenix Investment Counsel Growth
Series and was sub-advised by Phoenix Investment Counsel, Inc., and the
JNL/Putnam Value Equity Series was the PPM America/JNL Value Equity Series and
was sub-advised by PPM America, Inc.
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<PAGE> 64
Subject to the supervision of JNFSI and the Trustees pursuant to
investment sub-advisory agreements entered into between JNFSI and each of the
sub-advisers, respectively, the sub-advisers invest and reinvest the Series'
assets consistent with the Series' respective investment objectives and
policies. The investment sub-advisory agreement continues in effect for each
Series from year to year after its initial two-year term so long as its
continuation is approved at least annually by a majority of the Trustees who
are not parties to such agreement or interested persons of any such party
except in their capacity as Trustees of the Series and by the shareholders of
each Series or the Board of Trustees. It may be terminated at any time upon 60
days notice by either party, or by a majority vote of the outstanding shares of
a Series with respect to that Series, and will terminate automatically upon
assignment or upon the termination of the investment management agreement
between JNFSI and the Series. Additional Series may be subject to a different
agreement. The sub-advisers are responsible for compliance with or have agreed
to use their best efforts to manage the Series to comply with the provisions of
Section 817(h) of the Internal Revenue Code of 1986, as amended, applicable to
each Series (relating to the diversification requirements applicable to
investments in underlying variable annuity contracts).
The Trust pays the compensation of the Trustees who are not affiliated
with JNFSI and all expenses (other than those assumed by JNFSI), including
governmental fees, interest charges, taxes, membership dues in certain industry
associations allocable to the Trust, fees and expenses of independent certified
public accountants, legal counsel, and any transfer agent, registrar, and
dividend disbursing agent of the Trust, expenses of preparing, printing, and
mailing shareholders' reports, notices, proxy statements, and reports to
governmental offices and commissions, expenses connected with the execution,
recording, and settlement of portfolio security transactions, insurance
premiums, fees and expenses of the custodian for all services to the Trust and
expenses of calculating the net asset value of shares of the Trust, and
expenses relating to the issuance, registration, and qualification of shares of
the Trust.
CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company ("State Street"), 1776 Heritage Drive,
North Quincy, Massachusetts 02171, acts as custodian for each Series of the
Trust. The custodian has custody of all securities and cash of the Trust
maintained in the United States and attends to the collection of principal and
income and payment for and collection of proceeds of securities bought and sold
by the Trust.
State Street is the transfer agent and dividend-paying agent for each
Series of the Trust
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<PAGE> 65
INDEPENDENT ACCOUNTANTS
The Series' independent accountants, Price Waterhouse LLP, 100 East
Wisconsin Avenue, Milwaukee, Wisconsin 53202, audit and report on the Series'
annual financial statements, prepare the Series' federal income and excise tax
returns, and perform other professional accounting, auditing and advisory
services when engaged to do so by the Series.
SERIES TRANSACTIONS AND BROKERAGE
The primary consideration in portfolio security transactions is "best
execution," i.e., execution at the most favorable prices and in the most
effective manner possible. JNFSI and the sub-advisers always attempt to
achieve best execution and have complete freedom as to the markets in and the
broker/dealers through which they seek this result. Subject to the requirement
of seeking best execution, securities may be bought from or sold to
broker/dealers who have furnished statistical, research, and other information
or services to JNFSI or the sub-advisers. In placing orders with such
broker/dealers, JNFSI and the sub-advisers will, where possible, take into
account the comparative usefulness of such information. Such information is
useful to JNFSI and the sub-advisers even though its dollar value may be
indeterminable and its receipt or availability generally does not reduce
JNFSI's or the sub-advisers' normal research activities or expenses.
Trust portfolio transactions may be effected with broker/dealers who have
assisted investors in the purchase of policies. However, neither such
assistance nor sale of other investment company shares is a qualifying or
disqualifying factor in a broker/dealer's selection, nor is the selection of
any broker/dealer based on the volume of shares sold.
There may be occasions when portfolio transactions for the Trust are
executed as part of concurrent authorizations to purchase or sell the same
security for trusts or other accounts served by affiliated companies of JNFSI
or the sub-advisers. Although such concurrent authorizations potentially could
be either advantageous or disadvantageous to the Trust, they are effected only
when JNFSI and the sub-advisers believe that to do so is in the interest of the
Trust. When such concurrent authorizations occur the executions will be
allocated in an equitable manner.
During the Trust's fiscal year ended December 31, 1996, the Series (except
for the JNL/Putnam World Opportunities Series which commenced operations on May
1, 1997) paid the following amounts in brokerage commissions:
19
<PAGE> 66
<TABLE>
<S> <C>
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
PPM America/JNL Balanced Series
PPM America/JNL High Yield Bond Series
PPM America/JNL Money Market Series
JNL/Putnam Growth Series
JNL/Putnam Value Equity Series
Salomon Brothers/JNL Global Bond Series
Salomon Brothers/JNL U.S. Government and 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
</TABLE>
Prior to May 1, 1997, the PPM America/JNL Balanced Series was the JNL/Phoenix
Investment Counsel Balanced Series and was sub-advised by Phoenix Investment
Counsel Inc., the JNL/Putnam Growth Series was the JNL/Phoenix Investment
Counsel Growth Series and was sub-advised by Phoenix Investment Counsel, Inc.,
and the JNL/Putnam Value Equity Series was the PPM America/JNL Value Equity
Series and was sub-advised by PPM America, Inc.
As of December 31, 1997, the Series owned $ in securities
of , one of the Trust's regular broker/dealers.
PURCHASES, REDEMPTIONS AND PRICING OF SHARES
An insurance company or certain tax qualified retirement plans may
purchase shares of the Series at their net asset value. For an insurance
company, shares are purchased using premiums received on policies issued by
separate accounts. These separate accounts are funded by shares of the Trust.
All investments in the Trust are credited to the shareholder's account in
the form of full and fractional shares of the designated Series (rounded to the
nearest 1/1000 of a share). The Trust does not issue share certificates.
As stated in the Prospectus, the net asset value ("NAV") of Series shares
is determined once each day on which the New York Stock Exchange (the "NYSE")
is open ("Business Day") at the close of the regular trading session of the
Exchange (normally 4:00 p.m., Eastern Time,
20
<PAGE> 67
Monday through Friday). The NAV of Series shares is not determined on the days
the NYSE is closed, which days generally are New Year's Day, President's Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas. The per share NAV of a Series is determined by dividing the total
value of the securities and other assets, less liabilities, by the total number
of shares outstanding. In determining NAV, securities listed on the national
securities exchanges, the NASDAQ National Market and foreign markets are valued
at the closing prices on such markets, or if such price is lacking for the
trading period immediately preceding the time of determination, such securities
are valued at their current bid price. Securities that are traded on the
over-the-counter market are valued at their closing bid prices. Foreign
securities and currencies are converted to U.S. dollars using exchange rates in
effect at the time of valuation. A Series will determine the market value of
individual securities held by it, by using prices provided by one or more
professional pricing services which may provide market prices to other funds,
or, as needed, by obtaining market quotations from independent broker-dealers.
Short-term money market securities maturing within 60 days are valued on the
amortized cost basis. Securities for which quotations are not readily
available, and other assets, are valued at fair values determined in good faith
under procedures established by and under the supervision of the Trustees.
Trading in securities on European and Far Eastern securities exchanges and
over-the-counter markets is normally completed well before the close of
business on each Business Day. In addition, European and Far Eastern
securities trading generally or in a particular country or countries may not
take place on all Business Days. Furthermore, trading takes place in Japanese
markets on certain Saturdays and in various foreign markets on days which are
not Business Days and on which a Series' net asset value is not calculated. A
Series calculates net asset value per share, and therefore effects sales,
redemptions and repurchases of its shares, as of the close
21
<PAGE> 68
of the NYSE once on each day on which the NYSE is open. Such calculation does
not take place contemporaneously with the determination of the prices of the
majority of the foreign portfolio securities used in such calculation.
For the PPM America/JNL Money Market Series, securities are valued at
amortized cost, which approximates market value, in accordance with Rule 2a-7
under the Investment Company Act of 1940. The net income of the PPM
America/JNL Money Market Series is determined once each day, on which the NYSE
is open, at the close of the regular trading session of the NYSE (normally 4:00
p.m., Eastern time, Monday through Friday). All the net income of the Series,
so determined, is declared in shares as a dividend to shareholders of record at
the time of such determination. Shares purchased become entitled to dividends
declared as of the first day following the date of investment. Dividends are
distributed in the form of additional shares of the Series on the last business
day of each month at the rate of one share (and fraction thereof) of the Series
for each one dollar (and fraction thereof) of dividend income.
For this purpose, the net income of the PPM America/JNL Money Market
Series (from the time of the immediately preceding determination thereof) shall
consist of: (a) all interest income accrued on the portfolio assets of the
Series, (b) less all actual and accrued expenses, and (c) plus or minus net
realized gains and losses on the assets of the Series determined in accordance
with generally accepted accounting principles. Interest income shall include
discount earned (including both original issue and market discount) on discount
paper accrued ratably to the date of maturity. Securities are valued at market
or amortized cost which approximates market, which the Trustees have determined
in good faith constitutes fair value for the purposes of complying with the
Investment Company Act of 1940.
Because the net income of the PPM America/JNL Money Market Series is
declared as a dividend each time the net income is determined, the net asset
value per share (i.e., the value of the net assets of the Series divided by the
number of shares outstanding) remains at one dollar per share immediately after
each such determination and dividend declaration. Any increase in the value of
a shareholder's investment in the Series, representing the reinvestment of
dividend income, is reflected by an increase in the number of shares of the
Series in its account. Pursuant to its objective of maintaining a fixed one
dollar share price, the Series will not purchase securities with a remaining
maturity of more than 397 days and will maintain a dollar weighted average
portfolio maturity of 90 days or less.
The Trust may suspend the right of redemption for any Series only under
the following unusual circumstances: (a) when the New York Stock Exchange is
closed (other than weekends and holidays) or trading is restricted; (b) when an
emergency exists, making disposal of portfolio
securities or the valuation of net assets not reasonably practicable; or (c)
during any period when the Securities and Exchange Commission has by order
permitted a suspension of redemption for the protection of shareholders.
22
<PAGE> 69
ADDITIONAL INFORMATION
DESCRIPTION OF SHARES - The Declaration of Trust permits the Trustees to
issue an unlimited number of full and fractional shares of beneficial interest
of each Series and to divide or combine such shares into a greater or lesser
number of shares without thereby changing the proportionate beneficial
interests in the Trust. Each share of a Series represents an equal
proportionate interest in that Series with each other share. The Trust
reserves the right to create and issue a number of Series of shares. In that
case, the shares of each Series would participate equally in the earnings,
dividends, and assets of the particular Series. Upon liquidation of a Series,
shareholders are entitled to share pro rata in the net assets of such Series
available for distribution to shareholders.
VOTING RIGHTS - Shareholders are entitled to one vote for each share held.
Shareholders may vote in the election of Trustees and on other matters
submitted to meetings of shareholders. No amendment may be made to the
Declaration of Trust without the affirmative vote of a majority of the
outstanding shares of the Trust. The Trustees may, however, amend the
Declaration of Trust without the vote or consent of shareholders to:
o designate Series of the Trust; or
o change the name of the Trust; or
o supply any omission, cure, correct, or supplement any ambiguous,
defective, or
inconsistent provision to conform the Declaration of Trust to the
requirements
of applicable federal or state regulations if they deem it necessary.
Shares have no pre-emptive or conversion rights. Shares are fully paid
and non-assessable, except as set forth in the prospectus. In regard to
termination, sale of assets, or change of investment restrictions, the right to
vote is limited to the holders of shares of the particular Series affected by
the proposal. When a majority is required, it means the lesser of 67% or more
of the shares present at a meeting when the holders of more than 50% of the
outstanding shares are present or represented by proxy, or more than 50% of the
outstanding shares.
SHAREHOLDER INQUIRIES - All inquiries regarding the Trust should be
directed to the Trust at the telephone number or address shown on the cover
page of the Prospectus.
TAX STATUS
The Trust's policy is to meet the requirements of Subchapter M of the
Internal Revenue Code. Each Series intends to distribute taxable net
investment income and capital gains to shareholders in amounts that will avoid
federal income or excise tax. In addition, each Series intends to comply with
the diversification requirements of Code Section 817(h) related to the
tax-deferred status of insurance company separate accounts.
23
<PAGE> 70
All income, dividends, and capital gains distributions, if any, on Series
shares are reinvested automatically in additional shares of the Series at the
NAV determined on the first Business Day following the record date, unless
otherwise requested by a shareholder.
Each Series of the Trust is treated as a separate entity for purpose of
the regulated investment company provisions of the Internal Revenue Code and,
therefore, the assets, income, and distributions of each Series are considered
separately for purposes of determining whether or not the Series qualifies as a
regulated investment company.
24
<PAGE> 71
JNL SERIES TRUST
FINANCIAL STATEMENTS
25
<PAGE> 72
JNL SERIES TRUST
PART C
OTHER INFORMATION
Note: Items 24-32 have been answered with respect to all sixteen investment
portfolios (Series) of the Registrant.
Item 24. Financial Statements and Exhibits.
(a) Financial Statements
(i) Financial statements included in Part A of the
Registration Statement: Financial Highlights
(ii) Financial statements included in Part B of the
Registration Statement:
None
(b) Exhibits
Exhibit
Number Description
- ------- -----------
1. Agreement and Declaration of Trust of Registrant dated June 1, 1994,
incorporated by reference to Registrant's Post-Effective Amendment No. 5 filed
with the Securities and Exchange Commission on June 28, 1996.
2. Amended and Restated By-laws of Registrant, incorporated by reference to
Registrant's Post-Effective Amendment No. 7 filed with the Securities and
Exchange Commission on September 13, 1996.
3. Not Applicable
4. Not Applicable
5. (a) Amended Investment Advisory and Management Agreement between
Registrant and Jackson National Financial Services, Inc. dated
August 17, 1995, incorporated by reference to Registrant's
Post-Effective Amendment No. 5 filed with the Securities and Exchange
Commission on June 28, 1996.
(b) Investment Sub-Advisory Agreement between Jackson National
Financial Services, Inc. and Fred Alger Management, Inc. dated
August 16, 1995, incorporated by reference to Registrant's
Post-Effective Amendment No. 5 filed with the Securities and
Exchange Commission on June 28, 1996.
(c) Investment Sub-Advisory Agreement between Jackson National
Financial Services, Inc. and Janus Capital Corporation dated
February 28, 1995, incorporated by reference to Registrant's Post-
<PAGE> 73
Effective Amendment No. 5 filed with the Securities and Exchange
Commission on June 28, 1996.
(d) Investment Sub-Advisory Agreement between Jackson National
Financial Services, Inc. and Phoenix Investment Counsel, Inc. dated
February 23, 1995, incorporated by reference to Registrant's
Post-Effective Amendment No. 5 filed with the Securities and
Exchange Commission on June 28, 1996.
(e) Investment Sub-Advisory Agreement between Jackson National
Financial Services, Inc. and PPM America, Inc. dated February 17,
1995, incorporated by reference to Registrant's Post-Effective
Amendment No. 5 filed with the Securities and Exchange Commission on
June 28, 1996.
(f) Investment Sub-Advisory Agreement between Jackson National
Financial Services, Inc. and Rowe Price-Fleming International, Inc.
dated February 20, 1995, incorporated by reference to Registrant's
Post-Effective Amendment No. 5 filed with the Securities and
Exchange Commission on June 28, 1996.
(g) Investment Sub-Advisory Agreement between Jackson National
Financial Services, Inc. and Salomon Brothers Asset Management Inc
dated February 8, 1995, incorporated by reference to Registrant's
Post-Effective Amendment No. 5 filed with the Securities and
Exchange Commission on June 28, 1996.
(h) Investment Sub-Advisory Agreement between Jackson National
Financial Services, Inc. and T. Rowe Price Associates, Inc. dated
February 20, 1995, incorporated by reference to Registrant's
Post-Effective Amendment No. 5 filed with the Securities and
Exchange Commission on June 28, 1996.
(i) Investment Sub-Advisory Agreement between Jackson National
Financial Services, Inc. and Salomon Brothers Asset Management
Limited, incorporated by reference to Registrant's Post-Effective
Amendment No. 5 filed with the Securities and Exchange Commission on
June 28, 1996.
(j) Amendment dated August 7, 1996 to Amended Investment Advisory
and Management Agreement between Registrant and Jackson National
Financial Services, Inc. dated August 17, 1995, incorporated by
reference to Registrant's Post-Effective Amendment No. 7 filed with
the Securities and Exchange Commission on September 13, 1996.
(k) Investment Sub-Advisory Agreement between Jackson National
Financial Services, Inc. and Eagle Asset Management, Inc. dated
August 9, 1996, incorporated by reference to Registrant's
Post-Effective Amendment No. 7 filed with the Securities and
Exchange Commission on September 13, 1996.
(l) Amendment dated August 21, 1996 to Investment Sub-Advisory
Agreement between Jackson National Financial Services, Inc. and
<PAGE> 74
Janus Capital Corporation dated February 28, 1995, incorporated by
reference to Registrant's Post-Effective Amendment No. 7 filed with
the Securities and Exchange Commission on September 13, 1996.
6. (a) Amended Fund Participation Agreement between Registrant and Jackson
National Life Insurance Company dated September 19, 1995,
incorporated by reference to Registrant's Post-Effective Amendment
No. 5 filed with the Securities and Exchange Commission on
June 28, 1996.
(b) Amendment dated August 7, 1996 to Amended Fund Participation
Agreement between JNL Series Trust, Jackson National Life Insurance
Company and Jackson National Separate Account I dated September 19,
1995, incorporated by reference to Registrant's Post-Effective
Amendment No. 7 filed with the Securities and Exchange Commission on
September 13, 1996.
7. Not Applicable
8. Custodian Contract between Registrant and State Street Bank and Trust
Company dated September 16, 1996, attached hereto
9. Transfer Agency and Service Agreement between Registrant State Street Bank
and Trust Company dated September 16, 1996, attached hereto
10. Opinion of Blazzard, Grodd & Hasenauer, PC, attached hereto
11. Not Applicable
12. Not Applicable
13. Not Applicable
14. Not Applicable
15. Not Applicable
16. Computation of Performance Quotations, incorporated by reference to
Registrant's Post-Effective Amendment No. 5 filed with the Securities and
Exchange Commission on June 28, 1996.
17. Not Applicable
18. Not Applicable
Item 25. Persons controlled by or under Common Control with Registrant.
As of February 12, 1997, Jackson National Life Insurance Company, a
Michigan corporation, through its initial investment of capital
into each Series, owns 6.96% of the outstanding shares of the
Trust.
Item 26. Number of Holders of Securities.
<PAGE> 75
NUMBER OF
HOLDERS AS OF
SERIES FEBRUARY 12, 1997
JNL Aggressive Growth Series 2
JNL Capital Growth Series 2
JNL Global Equities Series 2
JNL/Alger Growth Series 2
JNL/Eagle Core Equity Series 2
JNL/Eagle Small Cap Series 2
JNL/Phoenix Investment Counsel Balanced Series 2
JNL/Phoenix Investment Counsel Growth Series 2
PPM America/JNL High Yield Bond Series 2
PPM America/JNL Money Market Series 2
PPM America/JNL Value Equity Series 2
Salomon Brothers/JNL Global Bond Series 2
Salomon Brothers/JNL U.S. Government & Quality Bond Series 2
T. Rowe Price/JNL Established Growth Series 2
T. Rowe Price/JNL International Equity Investment Series 2
T. Rowe Price/JNL Mid-Cap Growth Series 2
Item 27. Indemnification.
Article VIII of the Registrant's Agreement and Declaration of Trust
provides that each of its Trustees and Officers (including persons
who serve at the Registrant's request as directors, officers or
trustees of another organization in which the Registrant has any
interest as a shareholder, creditor or otherwise) (each, a "Covered
Person") shall be indemnified by the Registrant against all
liabilities and expenses that may be incurred by reason of being or
having been such a Covered Person, except that no Covered Person
shall be indemnified against any liability to the Registrant or its
shareholders to which such Covered Person would otherwise be subject
by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of such
Covered Person's office.
The foregoing indemnification arrangements are subject to the
provisions of Section 17(h) of the Investment Company Act of 1940.
Insofar as indemnification by the Registrant for liabilities
arising under the Securities Act of 1933 may be permitted to
directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is
asserted against the Registrant by such director, officer or
<PAGE> 76
controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
In addition to the above indemnification, Jackson National Life
Insurance Company extends its indemnification of its own officers,
directors and employees to cover such persons' activities as
officers, trustees or employees of the Registrant, and by separate
agreement Jackson National Life Insurance Company has agreed to
indemnify trustees of the Registrant who are not interested persons
of the Registrant or its investment adviser.
Item 28. Business and Other Connections of Investment Adviser.
Incorporated herein by reference from the Prospectus and Statement
of Additional Information relating to the Trust are the following:
the description of the business of Jackson National Financial
Services, Inc. ("JNFSI") contained in the sections entitled
"Management of the Trust" and "Investment Adviser and Other
Services" and the biographical information pertaining to Messrs.
Jordan, Hopping, Knutson, Meyer and Fritts, contained in the
section entitled "Trustees and Officers of the Trust" of the
Statement of Additional Information.
Eagle Asset Management, Inc., Fred Alger Management, Inc., Janus
Capital Corporation, Phoenix Investment Counsel, PPM America, Inc.,
Putnam Investment Management, Inc., Salomon Brothers Asset
Management Inc., Salomon Brothers Asset Management Limited, T. Rowe
Price Associates, Inc., and Rowe Price-Fleming International, Inc.,
the sub-advisers of certain series of the Trust, are primarily
engaged in the business of rendering investment advisory services.
Reference is made to the most recent Form ADV and schedules thereto
on file with the Commission for a description of the names and
employment of the directors and officers of the sub-advisers and
other required information:
File No.
---------
Eagle Asset Management, Inc. 801-21343
Fred Alger Management, Inc. 801-06709
Janus Capital Corporation 801-13991
Phoenix Investment Counsel, Inc. 801-5995
PPM America, Inc. 801-40783
Putnam Investment Management, Inc. 801-7974
Salomon Brothers Asset Management Inc. 801-32046
T. Rowe Price Associates, Inc. 801-856
Rowe Price-Fleming International, Inc. 801-14713
Salomon Brothers Asset Management Limited 801-43335
Item 29. Principal Underwriters.
<PAGE> 77
Not Applicable.
Item 30. Location of Accounts and Records
Accounts, books and other documents required to be maintained
pursuant to Rule 31a-1(b)(4), (5), (6), (7), (9), (10), and (11)
are in the physical possession of the Registrant at 5901 Executive
Drive, Lansing, Michigan 48911; all other books, accounts and
other documents required to be maintained under Section 31(a) of
the Investment Company Act of 1940 and the Rules promulgated
thereunder are in the physical possession of State Street Bank and
Trust Company, 1776 Heritage Drive, North Quincy, Massachusetts
02171.
Item 31. Management Services.
Not Applicable.
Item 32. Undertakings.
(a) Not Applicable
(b) Registrant hereby undertakes to file an amendment to the
Registration Statement, using unaudited financial statements,
within four to six months of the effective date of this
Post-Effective Amendment.
(c) Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest
annual report to shareholders upon request and without charge.
<PAGE> 78
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940 the Registrant has duly caused this
Post-Effective Amendment to be signed on its behalf by the undersigned, thereto
duly authorized, in the City of Lansing and the State of Michigan on the 13th
day of February, 1997.
JNL SERIES TRUST
By: /s/ John A. Knutson
John A. Knutson
President, CEO and
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment has been signed below by the following persons in the
capacities and on the date indicated.
/s/ John A. Knutson President, CEO and February 13, 1997
John A. Knutson Chairman of the Board
/s/ Andrew B. Hopping Vice President, February 13, 1997
Andrew B. Hopping Treasurer, CFO and Trustee
/s/ Joseph Frauenheim Trustee February 13, 1997
Joseph Frauenheim
Trustee
- --------------------- ------------------
Richard McLellan
/s/ Peter McPherson Trustee February 13, 1997
Peter McPherson
<PAGE> 79
EXHIBIT LIST
Exhibit
Number Description
- ------- -----------
8. Custodian Contract between Registrant and State Street Bank and Trust
Company dated September 16, 1996, attached hereto as EX-99.B8-custody
9. Transfer Agency and Service Agreement between Registrant and State Street
Bank and Trust Company dated September 16, 1996, attached hereto as EX-99.B9-ta
10. Opinion of Blazzard, Grodd & Hasenauer, PC, attached hereto as
EX-99.B10-bgh
<PAGE> 1
EX-99.B8-custody
CUSTODIAN CONTRACT
Between
JNL SERIES TRUST
and
STATE STREET BANK AND TRUST COMPANY
1
<PAGE> 2
TABLE OF CONTENTS
Page
1. Employment of Custodian and Property to be Held By
It.............................................................. 1
2. Duties of the Custodian with Respect to Property
of the Fund Held by the Custodian in the United States.......... 2
2.1 Holding Securities...................................... 2
2.2 Delivery of Securities.................................. 2
2.3 Registration of Securities.............................. 4
2.4 Bank Accounts........................................... 4
2.5 Availability of Federal Funds........................... 5
2.6 Collection of Income.................................... 5
2.7 Payment of Fund Monies.................................. 5
2.8 Liability for Payment in Advance of Receipt of
Securities Purchased.................................... 6
2.9 Appointment of Agents................................... 6
2.10 Deposit of Fund Assets in U.S. Securities System........ 7
2.11 Fund Assets Held in the Custodian's Direct
Paper System............................................ 8
2.12 Segregated Account...................................... 8
2.13 Ownership Certificates for Tax Purposes................. 9
2.14 Proxies................................................. 9
2.15 Communications Relating to Portfolio
Securities.............................................. 9
2.16 Uninvested Cash......................................... 10
3. Duties of the Custodian with Respect to Property of
the Fund Held Outside of the United States...................... 10
3.1 Appointment of Foreign Sub-Custodians................... 10
3.2 Assets to be Held....................................... 10
3.3 Foreign Securities Systems.............................. 10
3.4 Holding Securities...................................... 10
3.5 Agreements with Foreign Banking Institutions............ 11
3.6 Access of Independent Public Accountants of the Fund.... 11
3.7 Reports by Custodian.................................... 11
3.8 Transactions in Foreign Custody Account................. 11
3.9 Liability of Foreign Sub-Custodians..................... 12
3.10 Liability of Custodian.................................. 12
3.11 Reimbursement for Advances.............................. 12
3.12 Monitoring Responsibilities............................. 12
3.13 Branches of U.S. Banks.................................. 13
3.14 Tax Law................................................. 13
2
<PAGE> 3
4. Payments for Sales or Repurchases or Redemptions
of Shares of the Fund.......................................... 13
5. Proper Instructions............................................ 14
6. Actions Permitted Without Express Authority.................... 14
7. Evidence of Authority.......................................... 15
8. Duties of Custodian With Respect to the Books of Account
and Calculation of Net Asset Value and Net Income.............. 15
9. Records........................................................ 15
10. Opinion of Fund's Independent Public Accountants............... 15
11. Reports to Fund by Independent Public Accountants.............. 16
12. Compensation of Custodian...................................... 16
13. Responsibility of Custodian.................................... 16
14. Effective Period, Termination and Amendment.................... 17
15. Successor Custodian............................................ 18
16. Interpretive and Additional Provisions......................... 19
17. Additional Funds............................................... 19
18. Massachusetts Law to Apply..................................... 19
19. Prior Contracts................................................ 19
20. Shareholder Communications Election............................ 19
3
<PAGE> 4
CUSTODIAN CONTRACT
This Contract between JNL Series Trust, a business trust organized and
existing under the laws of Massachusetts with its principal place of business
at 5901 Executive Drive, Lansing, Michigan 48911, hereinafter called the
"Fund", and State Street Bank and Trust Company, a Massachusetts trust company
with its principal place of business at 225 Franklin Street, Boston,
Massachusetts 02110, hereinafter called the "Custodian",
WITNESSETH:
WHEREAS, the Fund is authorized to issue shares in separate series, with
each such series representing interests in a separate portfolio of securities
and other assets; and
WHEREAS, the Fund intends to initially offer shares the sixteen (16)
series set forth on Attachment A hereto (such series together with all other
series subsequently established by the Fund and made subject to this Contract
in accordance with paragraph 17, being herein referred to as the
"Portfolio(s)");
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It
The Fund hereby employs the Custodian as the custodian of the assets of
the Portfolios of the Fund, including securities which the Fund, on behalf of
the applicable Portfolio desires to be held in places within the United States
("domestic securities") and securities it desires to be held outside the
United States ("foreign securities") pursuant to the provisions of the
Declaration of Trust. The Fund on behalf of the Portfolio(s) agrees to deliver
to the Custodian all securities and cash of the Portfolios, and all payments of
income, payments of principal or capital distributions received by it with
respect to all securities owned by the Portfolio(s) from time to time, and the
cash consideration received by it for such new or treasury shares of beneficial
interest of the Fund representing interests in the Portfolios, ("Shares") as
may be issued or sold from time to time. The Custodian shall not be responsible
for any property of a Portfolio held or received by the Portfolio and not
delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Article 5),
the Custodian shall on behalf of the applicable Portfolio(s) from time to time
employ one or more sub-custodians, located in the United States but only in
accordance with an applicable vote by the Board of Trustees of the Fund on
behalf of the applicable Portfolio(s), and provided that the Custodian shall
have no more or less responsibility or liability to the Fund on account of any
actions or omissions of any sub-custodian so employed than any such
sub-custodian has to the Custodian. The Custodian may employ as sub-custodian
for the Fund's foreign securities on behalf of the applicable Portfolio(s) the
<PAGE> 5
foreign banking institutions and foreign securities depositories designated in
Schedule A hereto but only in accordance with the provisions of Article 3.
2. Duties of the Custodian with Respect to Property of the Fund Held By the
Custodian in the United States
2.1 Holding Securities. The Custodian shall hold and physically segregate for
the account of each Portfolio all non-cash property, to be held by it in
the United States including all domestic securities owned by such
Portfolio, other than (a) securities which are maintained pursuant to
Section 2.10 in a clearing agency which acts as a securities depository or
in a book-entry system authorized by the U.S. Department of the Treasury
and certain federal agencies (each, a "U.S. Securities System") and (b)
commercial paper of an issuer for which State Street Bank and Trust
Company acts as issuing and paying agent ("Direct Paper") which is
deposited and/or maintained in the Direct Paper System of the Custodian
(the "Direct Paper System") pursuant to Section 2.11.
2.2 Delivery of Securities. The Custodian shall release and deliver domestic
securities owned by a Portfolio held by the Custodian or in a U.S.
Securities System account of the Custodian or in the Custodian's Direct
Paper book entry system account ("Direct Paper System Account") only upon
receipt of Proper Instructions from the Fund on behalf of the applicable
Portfolio, which may be continuing instructions when deemed appropriate by
the parties, and only in the following cases:
1) Upon sale of such securities for the account of the Portfolio and
receipt of payment therefor;
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the Portfolio;
3) In the case of a sale effected through a U.S. Securities System, in
accordance with the provisions of Section 2.10 hereof;
4) To the depository agent in connection with tender or other similar
offers for securities of the Portfolio;
5) To the issuer thereof or its agent when such securities are called,
redeemed, retired or otherwise become payable; provided that, in any
such case, the cash or other consideration is to be delivered to the
Custodian;
6) To the issuer thereof, or its agent, for transfer into the name of
the Portfolio or into the name of any nominee or nominees of the
Custodian or into the name or nominee name of any agent appointed
pursuant to Section 2.9 or into the name or nominee name of any
sub-custodian appointed pursuant to Article 1; or for exchange for a
different number of bonds, certificates or other evidence
representing the same
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<PAGE> 6
aggregate face amount or number of units; provided that, in any
such case, the new securities are to be delivered to the Custodian;
7) Upon the sale of such securities for the account of the Portfolio,
to the broker or its clearing agent, against a receipt, for
examination in accordance with "street delivery" custom; provided
that in any such case, the Custodian shall have no responsibility or
liability for any loss arising from the delivery of such securities
prior to receiving payment for such securities except as may arise
from the Custodian's own negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of
the securities of the issuer of such securities, or pursuant to
provisions for conversion contained in such securities, or pursuant
to any deposit agreement; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the Custodian;
9) In the case of warrants, rights or similar securities, the surrender
thereof in the exercise of such warrants, rights or similar
securities or the surrender of interim receipts or temporary
securities for definitive securities; provided that, in any such
case, the new securities and cash, if any, are to be delivered to
the Custodian;
10) For delivery in connection with any loans of securities made by the
Portfolio, but only against receipt of adequate collateral as agreed
upon from time to time by the Custodian and the Fund on behalf of
the Portfolio, which may be in the form of cash or obligations
issued by the United States government, its agencies or
instrumentalities, except that in connection with any loans for
which collateral is to be credited to the Custodian's account in the
book-entry system authorized by the U.S. Department of the Treasury,
the Custodian will not be held liable or responsible for the
delivery of securities owned by the Portfolio prior to the receipt
of such collateral;
11) For delivery as security in connection with any borrowings by the
Fund on behalf of the Portfolio requiring a pledge of assets by the
Fund on behalf of the Portfolio, but only against receipt of amounts
borrowed;
12) For delivery in accordance with the provisions of any agreement
among the Fund on behalf of the Portfolio, the Custodian and a
broker-dealer registered under the Securities Exchange Act of 1934
(the "Exchange Act") and a member of The National Association of
Securities Dealers, Inc. ("NASD"), relating to compliance with the
rules of The Options Clearing Corporation and of any registered
national securities exchange, or of any similar organization or
organizations, regarding escrow or other arrangements in connection
with transactions by the Portfolio of the Fund;
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<PAGE> 7
13) For delivery in accordance with the provisions of any agreement
among the Fund on behalf of the Portfolio, the Custodian, and a
Futures Commission Merchant registered under the Commodity Exchange
Act, relating to compliance with the rules of the Commodity Futures
Trading Commission and/or any Contract Market, or any similar
organization or organizations, regarding account deposits in
connection with transactions by the Portfolio of the Fund;
14) Upon receipt of instructions from the transfer agent ("Transfer
Agent") for the Fund, for delivery to such Transfer Agent or to the
holders of shares in connection with distributions in kind, as may
be described from time to time in the currently effective prospectus
and statement of additional information of the Fund, related to the
Portfolio ("Prospectus"), in satisfaction of requests by holders of
Shares for repurchase or redemption; and
15) For any other proper corporate purpose, but only upon receipt of, in
addition to Proper Instructions from the Fund on behalf of the
applicable Portfolio, a certified copy of a resolution of the Board
of Trustees or of the Executive Committee signed by an officer of
the Fund and certified by the Secretary or an Assistant Secretary,
specifying the securities of the Portfolio to be delivered, setting
forth the purpose for which such delivery is to be made, declaring
such purpose to be a proper corporate purpose, and naming the person
or persons to whom delivery of such securities shall be made.
2.3 Registration of Securities. Domestic securities held by the Custodian
(other than bearer securities) shall be registered in the name of the
Portfolio or in the name of any nominee of the Fund on behalf of the
Portfolio or of any nominee of the Custodian which nominee shall be
assigned exclusively to the Portfolio, unless the Fund has authorized in
writing the appointment of a nominee to be used in common with other
registered investment companies having the same investment adviser as the
Portfolio, or in the name or nominee name of any agent appointed pursuant
to Section 2.9 or in the name or nominee name of any sub-custodian
appointed pursuant to Article 1. All securities accepted by the Custodian
on behalf of the Portfolio under the terms of this Contract shall be in
"street name" or other good delivery form. If, however, the Fund directs
the Custodian to maintain securities in "street name", the Custodian shall
utilize its best efforts only to timely collect income due the Fund on
such securities and to notify the Fund on a best efforts basis only of
relevant corporate actions including, without limitation, pendency of
calls, maturities, tender or exchange offers.
2.4 Bank Accounts. The Custodian shall open and maintain a separate bank
account or accounts in the United States in the name of each Portfolio of
the Fund, subject only to draft or order by the Custodian acting pursuant
to the terms of this Contract, and shall hold in such account or accounts,
subject to the provisions hereof, all cash received by it from or for the
account of the Portfolio, other than cash maintained by the Portfolio in a
bank account established and used in accordance with Rule 17f-3 under the
Investment Company Act of
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<PAGE> 8
1940. Funds held by the Custodian for a Portfolio may be deposited by it
to its credit as Custodian in the Banking Department of the Custodian or
in such other banks or trust companies as it may in its discretion deem
necessary or desirable; provided, however, that every such bank or trust
company shall be qualified to act as a custodian under the Investment
Company Act of 1940 and that each such bank or trust company and the
funds to be deposited with each such bank or trust company shall on
behalf of each applicable Portfolio be approved by vote of a majority of
the Board of Trustees of the Fund. Such funds shall be deposited by the
Custodian in its capacity as Custodian and shall be withdrawable by the
Custodian only in that capacity.
2.5 Availability of Federal Funds. Upon mutual agreement between the Fund on
behalf of each applicable Portfolio and the Custodian, the Custodian
shall, upon the receipt of Proper Instructions from the Fund on behalf of
a Portfolio, make federal funds available to such Portfolio as of
specified times agreed upon from time to time by the Fund and the
Custodian in the amount of checks received in payment for Shares of such
Portfolio which are deposited into the Portfolio's account.
2.6 Collection of Income. Subject to the provisions of Section 2.3, the
Custodian shall collect on a timely basis all income and other payments
with respect to registered domestic securities held hereunder to which
each Portfolio shall be entitled either by law or pursuant to custom in
the securities business, and shall collect on a timely basis all income
and other payments with respect to bearer domestic securities if, on the
date of payment by the issuer, such securities are held by the Custodian
or its agent thereof and shall credit such income, as collected, to such
Portfolio's custodian account. Without limiting the generality of the
foregoing, the Custodian shall detach and present for payment all coupons
and other income items requiring presentation as and when they become due
and shall collect interest when due on securities held hereunder. Income
due each Portfolio on securities loaned pursuant to the provisions of
Section 2.2 (10) shall be the responsibility of the Fund. The Custodian
will have no duty or responsibility in connection therewith, other than to
provide the Fund with such information or data as may be necessary to
assist the Fund in arranging for the timely delivery to the Custodian of
the income to which the Portfolio is properly entitled.
2.7 Payment of Fund Monies. Upon receipt of Proper Instructions from the Fund
on behalf of the applicable Portfolio, which may be continuing
instructions when deemed appropriate by the parties, the Custodian shall
pay out monies of a Portfolio in the following cases only:
1) Upon the purchase of domestic securities, options, futures contracts
or options on futures contracts for the account of the Portfolio but
only (a) against the delivery of such securities or evidence of
title to such options, futures contracts or options on futures
contracts to the Custodian (or any bank, banking firm or trust
company doing business in the United States or abroad which is
qualified under the Investment Company Act of 1940, as amended, to
act as a custodian and has been designated by the Custodian as its
agent for this purpose) registered in the name of the Portfolio or
in the name of a nominee of the Custodian referred to in Section 2.3
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<PAGE> 9
hereof or in proper form for transfer; (b) in the case of a
purchase effected through a U.S. Securities System, in accordance
with the conditions set forth in Section 2.10 hereof; (c) in the
case of a purchase involving the Direct Paper System, in accordance
with the conditions set forth in Section 2.11; (d) in the case of
repurchase agreements entered into between the Fund on behalf of
the Portfolio and the Custodian, or another bank, or a
broker-dealer which is a member of NASD, (i) against delivery of
the securities either in certificate form or through an entry
crediting the Custodian's account at the Federal Reserve Bank with
such securities or (ii) against delivery of the receipt evidencing
purchase by the Portfolio of securities owned by the Custodian
along with written evidence of the agreement by the Custodian to
repurchase such securities from the Portfolio or (e) for transfer
to a time deposit account of the Fund in any bank, whether domestic
or foreign; such transfer may be effected prior to receipt of a
confirmation from a broker and/or the applicable bank pursuant to
Proper Instructions from the Fund as defined in Article 5;
2) In connection with conversion, exchange or surrender of securities
owned by the Portfolio as set forth in Section 2.2 hereof;
3) For the redemption or repurchase of Shares issued by the Portfolio
as set forth in Article 4 hereof;
4) For the payment of any expense or liability incurred by the
Portfolio, including but not limited to the following payments for
the account of the Portfolio: interest, taxes, management,
accounting, transfer agent and legal fees, and operating expenses of
the Fund whether or not such expenses are to be in whole or part
capitalized or treated as deferred expenses;
5) For the payment of any dividends on Shares of the Portfolio declared
pursuant to the governing documents of the Fund;
6) For payment of the amount of dividends received in respect of
securities sold short;
7) For any other proper purpose, but only upon receipt of, in addition
to Proper Instructions from the Fund on behalf of the Portfolio, a
certified copy of a resolution of the Board of Trustees or of the
Executive Committee of the Fund signed by an officer of the Fund and
certified by its Secretary or an Assistant Secretary, specifying the
amount of such payment, setting forth the purpose for which such
payment is to be made, declaring such purpose to be a proper
purpose, and naming the person or persons to whom such payment is to
be made.
2.8 Liability for Payment in Advance of Receipt of Securities Purchased.
Except as specifically stated otherwise in this Contract, in any and every
case where payment for purchase of domestic securities for the account of
a Portfolio is made by the Custodian in advance of
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<PAGE> 10
receipt of the securities purchased in the absence of specific written
instructions from the Fund on behalf of such Portfolio to so pay in
advance, the Custodian shall be absolutely liable to the Fund for such
securities to the same extent as if the securities had been received by
the Custodian.
2.9 Appointment of Agents. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or trust
company which is itself qualified under the Investment Company Act of
1940, as amended, to act as a custodian, as its agent to carry out such of
the provisions of this Article 2 as the Custodian may from time to time
direct; provided, however, that the appointment of any agent shall not
relieve the Custodian of its responsibilities or liabilities hereunder.
2.10 Deposit of Fund Assets in U.S. Securities Systems. The Custodian may
deposit and/or maintain securities owned by a Portfolio in a clearing
agency registered with the Securities and Exchange Commission under
Section 17A of the Securities Exchange Act of 1934, which acts as a
securities depository, or in the book-entry system authorized by the U.S.
Department of the Treasury and certain federal agencies, collectively
referred to herein as "U.S. Securities System" in accordance with
applicable Federal Reserve Board and Securities and Exchange Commission
rules and regulations, if any, and subject to the following provisions:
1) The Custodian may keep securities of the Portfolio in a U.S.
Securities System provided that such securities are represented in
an account ("Account") of the Custodian in the U.S. Securities
System which shall not include any assets of the Custodian other
than assets held as a fiduciary, custodian or otherwise for
customers;
2) The records of the Custodian with respect to securities of the
Portfolio which are maintained in a U.S. Securities System shall
identify by book-entry those securities belonging to the Portfolio;
3) The Custodian shall pay for securities purchased for the account of
the Portfolio upon (i) receipt of advice from the U.S. Securities
System that such securities have been transferred to the Account,
and (ii) the making of an entry on the records of the Custodian to
reflect such payment and transfer for the account of the Portfolio.
The Custodian shall transfer securities sold for the account of the
Portfolio upon (i) receipt of advice from the U.S. Securities
System that payment for such securities has been transferred to the
Account, and (ii) the making of an entry on the records of the
Custodian to reflect such transfer and payment for the account of
the Portfolio. Copies of all advices from the U.S. Securities
System of transfers of securities for the account of the Portfolio
shall identify the Portfolio, be maintained for the Portfolio by the
Custodian and be provided to the Fund at its request. Upon request,
the Custodian shall furnish the Fund on behalf of the Portfolio
confirmation of each transfer to or from the account of the
Portfolio in the form of a written advice or
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<PAGE> 11
notice and shall furnish to the Fund on behalf of the Portfolio
copies of daily transaction sheets reflecting each day's
transactions in the U.S. Securities System for the account of the
Portfolio;
4) The Custodian shall provide the Fund for the Portfolio with any
report obtained by the Custodian on the U.S. Securities System's
accounting system, internal accounting control and procedures for
safeguarding securities deposited in the U.S. Securities System;
5) The Custodian shall have received from the Fund on behalf of the
Portfolio the initial or annual certificate, as the case may be,
required by Article 14 hereof;
6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Fund for the benefit of the
Portfolio for any loss or damage to the Portfolio resulting from use
of the U.S. Securities System by reason of any negligence,
misfeasance or misconduct of the Custodian or any of its agents or
of any of its or their employees or from failure of the Custodian or
any such agent to enforce effectively such rights as it may have
against the U.S. Securities System; at the election of the Fund, it
shall be entitled to be subrogated to the rights of the Custodian
with respect to any claim against the U.S. Securities System or any
other person which the Custodian may have as a consequence of any
such loss or damage if and to the extent that the Portfolio has not
been made whole for any such loss or damage.
2.11 Fund Assets Held in the Custodian's Direct Paper System. The Custodian
may deposit and/or maintain securities owned by a Portfolio in the Direct
Paper System of the Custodian subject to the following provisions:
1) No transaction relating to securities in the Direct Paper System
will be effected in the absence of Proper Instructions from the Fund
on behalf of the Portfolio;
2) The Custodian may keep securities of the Portfolio in the Direct
Paper System only if such securities are represented in an account
("Account") of the Custodian in the Direct Paper System which shall
not include any assets of the Custodian other than assets held as a
fiduciary, custodian or otherwise for customers;
3) The records of the Custodian with respect to securities of the
Portfolio which are maintained in the Direct Paper System shall
identify by book-entry those securities belonging to the Portfolio;
4) The Custodian shall pay for securities purchased for the account of
the Portfolio upon the making of an entry on the records of the
Custodian to reflect such payment and transfer of securities to the
account of the Portfolio. The Custodian shall transfer securities
sold for the account of the Portfolio upon the making of an entry
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<PAGE> 12
on the records of the Custodian to reflect such transfer and
receipt of payment for the account of the Portfolio;
5) The Custodian shall furnish the Fund on behalf of the Portfolio
confirmation of each transfer to or from the account of the
Portfolio, in the form of a written advice or notice, of Direct
Paper on the next business day following such transfer and shall
furnish to the Fund on behalf of the Portfolio copies of daily
transaction sheets reflecting each day's transaction in the U.S.
Securities System for the account of the Portfolio;
6) The Custodian shall provide the Fund on behalf of the Portfolio with
any report on its system of internal accounting control as the Fund
may reasonably request from time to time.
2.12 Segregated Account. The Custodian shall upon receipt of Proper
Instructions from the Fund on behalf of each applicable Portfolio
establish and maintain a segregated account or accounts for and on behalf
of each such Portfolio, into which account or accounts may be transferred
cash and/or securities, including securities maintained in an account by
the Custodian pursuant to Section 2.10 hereof, (i) in accordance with the
provisions of any agreement among the Fund on behalf of the Portfolio, the
Custodian and a broker-dealer registered under the Exchange Act and a
member of the NASD (or any futures commission merchant registered under
the Commodity Exchange Act), relating to compliance with the rules of The
Options Clearing Corporation and of any registered national securities
exchange (or the Commodity Futures Trading Commission or any registered
contract market), or of any similar organization or organizations,
regarding escrow or other arrangements in connection with transactions by
the Portfolio, (ii) for purposes of segregating cash or government
securities in connection with options purchased, sold or written by the
Portfolio or commodity futures contracts or options thereon purchased or
sold by the Portfolio, (iii) for the purposes of compliance by the
Portfolio with the procedures required by Investment Company Act Release
No. 10666, or any subsequent release or releases of the Securities and
Exchange Commission relating to the maintenance of segregated accounts by
registered investment companies and (iv) for other proper corporate
purposes, but only, in the case of clause (iv), upon receipt of Proper
Instructions on behalf of the applicable Portfolio from a person
authorized to give same setting forth the purpose or purposes of such
segregated account and declaring such purposes to be proper corporate
purposes.
2.13 Ownership Certificates for Tax Purposes. The Custodian shall execute
ownership and other certificates and affidavits for all federal and state
tax purposes in connection with receipt of income or other payments with
respect to domestic securities of each Portfolio held by it and in
connection with transfers of securities.
2.14 Proxies. The Custodian shall, with respect to the domestic securities
held hereunder, cause to be promptly executed by the registered holder of
such securities, if the securities are
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<PAGE> 13
registered otherwise than in the name of the Portfolio or a nominee of
the Portfolio, all proxies, without indication of the manner in which
such proxies are to be voted, and shall promptly deliver to the Portfolio
such proxies, all proxy soliciting materials and all notices relating to
such securities.
2.15 Communications Relating to Portfolio Securities. Subject to the
provisions of Section 2.3, the Custodian shall transmit promptly to the
Fund for each Portfolio all written information (including, without
limitation, pendency of calls and maturities of domestic securities and
expirations of rights in connection therewith and notices of exercise of
call and put options written by the Fund on behalf of the Portfolio and
the maturity of futures contracts purchased or sold by the Portfolio)
received by the Custodian from issuers of the securities being held for
the Portfolio. With respect to tender or exchange offers, the Custodian
shall transmit promptly to the Portfolio all written information received
by the Custodian from issuers of the securities whose tender or exchange
is sought and from the party (or his agents) making the tender or exchange
offer. If the Portfolio desires to take action with respect to any tender
offer, exchange offer or any other similar transaction, the Portfolio
shall notify the Custodian at least three business days prior to the date
on which the Custodian is to take such action.
2.16 Uninvested Cash.
Upon receipt of "Proper Instructions " (within the
meaning of Article 5) from the Fund with respect to a Portfolio (which
may be continuing instructions when deemed appropriate by the parties),
the Custodian shall sweep the available cash held by the Custodian for
the account of such Portfolio in accordance with such Proper
Instructions. The Fund acknowledges that the Custodian, acting pursuant
to such Proper Instructions, is not acting as an investment advisor with
respect to such Portfolio.
3. Duties of the Custodian with Respect to Property of the Fund Held Outside
of the United States
3.1 Appointment of Foreign Sub-Custodians. The Fund hereby authorizes and
instructs the Custodian to employ as sub-custodians for the Portfolio's
securities and other assets maintained outside the United States the
foreign banking institutions and foreign securities depositories
designated on Schedule A hereto ("foreign sub-custodians"). Upon receipt
of "Proper Instructions", as defined in Section 5 of this Contract,
together with a certified resolution of the Fund's Board of Trustees, the
Custodian and the Fund may agree to amend Schedule A hereto from time to
time to designate additional foreign banking institutions and foreign
securities depositories to act as sub-custodian. Upon receipt of Proper
Instructions, the Fund may instruct the Custodian to cease the employment
of any one or more such sub-custodians for maintaining custody of the
Portfolio's assets.
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<PAGE> 14
3.2 Assets to be Held. The Custodian shall limit the securities and other
assets maintained in the custody of the foreign sub-custodians to: (a)
"foreign securities", as defined in paragraph (c)(1) of Rule 17f-5 under
the Investment Company Act of 1940, and (b) cash and cash equivalents in
such amounts as the Custodian or the Fund may determine to be reasonably
necessary to effect the Portfolio's foreign securities transactions. The
Custodian shall identify on its books as belonging to the Fund, the
foreign securities of the Fund held by each foreign sub-custodian.
3.3 Foreign Securities Systems. Except as may otherwise be agreed upon in
writing by the Custodian and the Fund, assets of the Portfolios shall be
maintained in a clearing agency which acts as a securities depository or
in a book-entry system for the central handling of securities located
outside the United States (each a "Foreign Securities System") only
through arrangements implemented by the foreign banking institutions
serving as sub-custodians pursuant to the terms hereof (Foreign Securities
Systems and U.S. Securities Systems are collectively referred to herein as
the "Securities Systems"). Where possible, such arrangements shall
include entry into agreements containing the provisions set forth in
Section 3.5 hereof.
3.4 Holding Securities. The Custodian may hold securities and other non-cash
property for all of its customers, including the Fund, with a foreign
sub-custodian in a single account that is identified as belonging to the
Custodian for the benefit of its customers, provided however, that (i) the
records of the Custodian with respect to securities and other non-cash
property of the Fund which are maintained in such account shall identify
by book-entry those securities and other non-cash property belonging to
the Fund and (ii) the Custodian shall require that securities and other
non-cash property so held by the foreign sub-custodian be held separately
from any assets of the foreign sub-custodian or of others.
3.5 Agreements with Foreign Banking Institutions. Each agreement with a
foreign banking institution shall provide that: (a) the assets of each
Portfolio will not be subject to any right, charge, security interest,
lien or claim of any kind in favor of the foreign banking institution or
its creditors or agent, except a claim of payment for their safe custody
or administration; (b) beneficial ownership for the assets of each
Portfolio will be freely transferable without the payment of money or
value other than for custody or administration; (c) adequate records will
be maintained identifying the assets as belonging to each applicable
Portfolio; (d) officers of or auditors employed by, or other
representatives of the Custodian, including to the extent permitted under
applicable law the independent public accountants for the Fund, will be
given access to the books and records of the foreign banking institution
relating to its actions under its agreement with the Custodian; and (e)
assets of the Portfolios held by the foreign sub-custodian will be subject
only to the instructions of the Custodian or its agents.
3.6 Access of Independent Public Accountants of the Fund. Upon request of the
Fund, the Custodian will use its best efforts to arrange for the
independent public accountants of the Fund to be afforded access to the
books and records of any foreign banking institution
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<PAGE> 15
employed as a foreign sub-custodian insofar as such books and records
relate to the performance of such foreign banking institution under its
agreement with the Custodian.
3.7 Reports by Custodian. The Custodian will supply to the Fund from time to
time, as mutually agreed upon, statements in respect of the securities and
other assets of the Portfolio(s) held by foreign sub-custodians, including
but not limited to an identification of entities having possession of the
Portfolio(s) securities and other assets and advices or notifications of
any transfers of securities to or from each custodial account maintained
by a foreign banking institution for the Custodian on behalf of each
applicable Portfolio indicating, as to securities acquired for a
Portfolio, the identity of the entity having physical possession of such
securities.
3.8 Transactions in Foreign Custody Account. (a) Except as otherwise provided
in paragraph (b) of this Section 3.8, the provision of Sections 2.2 and
2.7 of this Contract shall apply, mutatis mutandis to the foreign
securities of the Fund held outside the United States by foreign
sub-custodians.
(b) Notwithstanding any provision of this Contract to the contrary,
settlement and payment for securities received for the account of each
applicable Portfolio and delivery of securities maintained for the
account of each applicable Portfolio may be effected in accordance with
the customary established securities trading or securities processing
practices and procedures in the jurisdiction or market in which the
transaction occurs, including, without limitation, delivering securities
to the purchaser thereof or to a dealer therefor (or an agent for such
purchaser or dealer) against a receipt with the expectation of receiving
later payment for such securities from such purchaser or dealer. (c)
Securities maintained in the custody of a foreign sub-custodian may be
maintained in the name of such entity's nominee to the same extent as set
forth in Section 2.3 of this Contract, and the Fund agrees to hold any
such nominee harmless from any liability as a holder of record of such
securities.
3.9 Liability of Foreign Sub-Custodians. Each agreement pursuant to which the
Custodian employs a foreign banking institution as a foreign sub-custodian
shall require the institution to exercise reasonable care in the
performance of its duties and to indemnify, and hold harmless, the
Custodian and the Fund from and against any loss, damage, cost, expense,
liability or claim arising out of or in connection with the institution's
performance of such obligations. At the election of the Fund, it shall be
entitled to be subrogated to the rights of the Custodian with respect to
any claims against a foreign banking institution as a consequence of any
such loss, damage, cost, expense, liability or claim if and to the extent
that the Fund has not been made whole for any such loss, damage, cost,
expense, liability or claim.
3.10 Liability of Custodian. The Custodian shall be liable for the acts or
omissions of a foreign banking institution to the same extent as set forth
with respect to sub-custodians generally in this Contract and, regardless
of whether assets are maintained in the custody of a foreign
12
<PAGE> 16
banking institution, a foreign securities depository or a branch of a
U.S. bank as contemplated by paragraph 3.13 hereof, the Custodian shall
not be liable for any loss, damage, cost, expense, liability or claim
resulting from nationalization, expropriation, currency restrictions, or
acts of war or terrorism or any loss where the sub-custodian has
otherwise exercised reasonable care. Notwithstanding the foregoing
provisions of this paragraph 3.10, in delegating custody duties to State
Street London Ltd., the Custodian shall not be relieved of any
responsibility to the Fund for any loss due to such delegation, except
such loss as may result from (a) political risk (including, but not
limited to, exchange control restrictions, confiscation, expropriation,
nationalization, insurrection, civil strife or armed hostilities) or (b)
other losses (excluding a bankruptcy or insolvency of State Street London
Ltd. not caused by political risk) due to Acts of God, nuclear incident
or other losses under circumstances where the Custodian and State Street
London Ltd. have exercised reasonable care.
3.11 Reimbursement for Advances. If the Fund requires the Custodian to advance
cash or securities for any purpose for the benefit of a Portfolio
including the purchase or sale of foreign exchange or of contracts for
foreign exchange, or in the event that the Custodian or its nominee shall
incur or be assessed any taxes, charges, expenses, assessments, claims or
liabilities in connection with the performance of this Contract, except
such as may arise from its or its nominee's own negligent action,
negligent failure to act or willful misconduct, any property at any time
held for the account of the applicable Portfolio shall be security
therefor and should the Fund fail to repay the Custodian promptly, the
Custodian shall be entitled to utilize available cash and to dispose of
such Portfolio's assets to the extent necessary to obtain reimbursement.
3.12 Monitoring Responsibilities. The Custodian shall furnish annually to the
Fund, during the month of June, information concerning the foreign
sub-custodians employed by the Custodian. Such information shall be
similar in kind and scope to that furnished to the Fund in connection with
the initial approval of this Contract. In addition, the Custodian will
promptly inform the Fund in the event that the Custodian learns of a
material adverse change in the financial condition of a foreign
sub-custodian or any material loss of the assets of the Fund or in the
case of any foreign sub-custodian not the subject of an exemptive order
from the Securities and Exchange Commission is notified by such foreign
sub-custodian that there appears to be a substantial likelihood that its
shareholders' equity will decline below $200 million (U.S. dollars or the
equivalent thereof) or that its shareholders' equity has declined below
$200 million (in each case computed in accordance with generally accepted
U.S. accounting principles).
3.13 Branches of U.S. Banks. (a) Except as otherwise set forth in this
Contract, the provisions hereof shall not apply where the custody of the
Portfolios assets are maintained in a foreign branch of a banking
institution which is a "bank" as defined by Section 2(a)(5) of the
Investment Company Act of 1940 meeting the qualification set forth in
Section 26(a) of said Act. The appointment of any such branch as a
sub-custodian shall be governed by paragraph 1 of this Contract.
13
<PAGE> 17
(b) Cash held for each Portfolio of the Fund in the United Kingdom shall
be maintained in an interest bearing account established for the Fund
with the Custodian's London branch, which account shall be subject to the
direction of the Custodian, State Street London Ltd. or both.
3.14 Tax Law. The Custodian shall have no responsibility or liability for any
obligations now or hereafter imposed on the Fund or the Custodian as
custodian of the Fund by the tax law of the United States of America or
any state or political subdivision thereof. It shall be the
responsibility of the Fund to notify the Custodian of the obligations
imposed on the Fund or the Custodian as custodian of the Fund by the tax
law of jurisdictions other than those mentioned in the above sentence,
including responsibility for withholding and other taxes, assessments or
other governmental charges, certifications and governmental reporting.
The sole responsibility of the Custodian with regard to such tax law shall
be to use reasonable efforts to assist the Fund with respect to any claim
for exemption or refund under the tax law of jurisdictions for which the
Fund has provided such information.
4. Payments for Sales or Repurchases or Redemptions of Shares of the Fund
The Custodian shall receive from the distributor for the Shares or from
the Transfer Agent of the Fund and deposit into the account of the appropriate
Portfolio such payments as are received for Shares of that Portfolio issued or
sold from time to time by the Fund. The Custodian will provide timely
notification to the Fund on behalf of each such Portfolio and the Transfer
Agent of any receipt by it of payments for Shares of such Portfolio.
From such funds as may be available for the purpose but subject to the
limitations of the Declaration of Trust and any applicable votes of the Board
of Trustees of the Fund pursuant thereto, the Custodian shall, upon receipt of
instructions from the Transfer Agent, make funds available for payment to
holders of Shares who have delivered to the Transfer Agent a request for
redemption or repurchase of their Shares. In connection with the redemption or
repurchase of Shares of a Portfolio, the Custodian is authorized upon receipt
of instructions from the Transfer Agent to wire funds to or through a
commercial bank designated by the redeeming shareholders. In connection with
the redemption or repurchase of Shares of the Fund, the Custodian shall honor
checks drawn on the Custodian by a holder of Shares, which checks have been
furnished by the Fund to the holder of Shares, when presented to the Custodian
in accordance with such procedures and controls as are mutually agreed upon
from time to time between the Fund and the Custodian.
14
<PAGE> 18
5. Proper Instructions
Proper Instructions as used throughout this Contract means a writing
signed or initialed by one or more person or persons as the Board of Trustees
shall have from time to time authorized. Each such writing shall set forth the
specific transaction or type of transaction involved, including a specific
statement of the purpose for which such action is requested. Oral instructions
will be considered Proper Instructions if the Custodian reasonably believes
them to have been given by a person authorized to give such instructions with
respect to the transaction involved. The Fund shall cause all oral
instructions to be confirmed in writing. Upon receipt of a certificate of the
Secretary or an Assistant Secretary as to the authorization by the Board of
Trustees of the Fund accompanied by a detailed description of procedures
approved by the Board of Trustees, Proper Instructions may include
communications effected directly between electro-mechanical or electronic
devices provided that the Board of Trustees and the Custodian are satisfied
that such procedures afford adequate safeguards for the Portfolios' assets.
For purposes of this Section, Proper Instructions shall include instructions
received by the Custodian pursuant to any three - party agreement which
requires a segregated asset account in accordance with Section 2.12.
6. Actions Permitted without Express Authority
The Custodian may in its discretion, without express authority from the
Fund on behalf of each applicable Portfolio:
1) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under this
Contract, provided that all such payments shall be accounted for to
the Fund on behalf of the Portfolio;
2) surrender securities in temporary form for securities in definitive
form;
3) endorse for collection, in the name of the Portfolio, checks, drafts
and other negotiable instruments; and
4) in general, attend to all non-discretionary details in connection
with the sale, exchange, substitution, purchase, transfer and other
dealings with the securities and property of the Portfolio except as
otherwise directed by the Board of Trustees of the Fund.
7. Evidence of Authority
The Custodian shall be protected in acting upon any instructions, notice,
request, consent, certificate or other instrument or paper believed by it to be
genuine and to have been properly executed by or on behalf of the Fund. The
Custodian may receive and accept a certified copy of a vote of the Board of
Trustees of the Fund as conclusive evidence (a) of the authority of any person
15
<PAGE> 19
to act in accordance with such vote or (b) of any determination or of any
action by the Board of Trustees pursuant to the Declaration of Trust as
described in such vote, and such vote may be considered as in full force and
effect until receipt by the Custodian of written notice to the contrary.
8. Duties of Custodian with Respect to the Books of Account and Calculation
of Net Asset Value and Net Income
The Custodian shall cooperate with and supply necessary information to the
entity or entities appointed by the Board of Trustees of the Fund to keep the
books of account of each Portfolio and/or compute the net asset value per share
of the outstanding shares of each Portfolio or, if directed in writing to do so
by the Fund on behalf of the Portfolio, shall itself keep such books of account
and/or compute such net asset value per share. If so directed, the Custodian
shall also calculate daily the net income of the Portfolio as described in the
Fund's currently effective prospectus related to such Portfolio and shall
advise the Fund and the Transfer Agent daily of the total amounts of such net
income and, if instructed in writing by an officer of the Fund to do so, shall
advise the Transfer Agent periodically of the division of such net income among
its various components. The calculations of the net asset value per share and
the daily income of each Portfolio shall be made at the time or times described
from time to time in the Fund's currently effective prospectus related to such
Portfolio.
9. Records
The Custodian shall with respect to each Portfolio create and maintain all
records relating to its activities and obligations under this Contract in such
manner as will meet the obligations of the Fund under the Investment Company
Act of 1940, with particular attention to Section 31 thereof and Rules 31a-1
and 31a-2 thereunder. All such records shall be the property of the Fund and
shall at all times during the regular business hours of the Custodian be open
for inspection by duly authorized officers, employees or agents of the Fund and
employees and agents of the Securities and Exchange Commission. The Custodian
shall, at the Fund's request, supply the Fund with a tabulation of securities
owned by each Portfolio and held by the Custodian and shall, when requested to
do so by the Fund and for such compensation as shall be agreed upon between the
Fund and the Custodian, include certificate numbers in such tabulations.
10. Opinion of Fund's Independent Public Accountants
The Custodian shall take all reasonable action, as the Fund on behalf of
each applicable Portfolio may from time to time request, to obtain from year to
year favorable opinions from the Fund's independent accountants with respect to
its activities hereunder in connection with the preparation of the Fund's Form
N-1A, and Form N-SAR or other annual reports to the Securities and Exchange
Commission and with respect to any other requirements of such Commission.
16
<PAGE> 20
11. Reports to Fund by Independent Public Accountants
The Custodian shall provide the Fund, on behalf of each of the Portfolios
at such times as the Fund may reasonably require, with reports by independent
public accountants on the accounting system, internal accounting control and
procedures for safeguarding securities, futures contracts and options on
futures contracts, including securities deposited and/or maintained in a
Securities System, relating to the services provided by the Custodian under
this Contract; such reports, shall be of sufficient scope and in sufficient
detail, as may reasonably be required by the Fund to provide reasonable
assurance that any material inadequacies would be disclosed by such
examination, and, if there are no such inadequacies, the reports shall so
state.
12. Compensation of Custodian
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon in writing from time to time
between the Fund on behalf of each applicable Portfolio and the Custodian.
13. Responsibility of Custodian
So long as and to the extent that it is in the exercise of reasonable
care, the Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received by it or
delivered by it pursuant to this Contract and shall be held harmless in acting
upon any notice, request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper party or parties,
including any futures commission merchant acting pursuant to the terms of a
three-party futures or options agreement. The Custodian shall be held to the
exercise of reasonable care in carrying out the provisions of this Contract,
but shall be kept indemnified by and shall be without liability to the Fund for
any action taken or omitted by it in good faith without negligence. It shall
be entitled to rely on and may act upon advice of counsel (who may be counsel
for the Fund) on all matters, and shall be without liability for any action
reasonably taken or omitted pursuant to such advice.
Except as may arise from the Custodian's own negligence or willful
misconduct or the negligence or willful misconduct of a sub-custodian or agent,
the Custodian shall be without liability to the Fund for any loss, liability,
claim or expense resulting from or caused by; (i) events or circumstances
beyond the reasonable control of the Custodian or any sub-custodian or
Securities System or any agent or nominee of any of the foregoing, including,
without limitation, nationalization or expropriation, imposition of currency
controls or restrictions, the interruption, suspension or restriction of
trading on or the closure of any securities market, power or other mechanical
or technological failures or interruptions, computer viruses or communications
disruptions, acts of war or terrorism, riots, revolutions, work stoppages,
natural disasters or other similar events or acts; (ii) errors by the Fund or
the Investment Advisor in their instructions to the
17
<PAGE> 21
Custodian provided such instructions have been in accordance with this
Contract; (iii) the insolvency of or acts or omissions by a Securities System;
(iv) any delay or failure of any broker, agent or intermediary, central bank or
other commercially prevalent payment or clearing system to deliver to the
Custodian's sub-custodian or agent securities purchased or in the remittance or
payment made in connection with securities sold; (v) any delay or failure of
any company, corporation, or other body in charge of registering or
transferring securities in the name of the Custodian, the Fund, the Custodian's
sub-custodians, nominees or agents or any consequential losses arising out of
such delay or failure to transfer such securities including non-receipt of
bonus, dividends and rights and other accretions or benefits; (vi) delays or
inability to perform its duties due to any disorder in market infrastructure
with respect to any particular security or Securities System; and (vii) any
provision of any present or future law or regulation or order of the United
States of America, or any state thereof, or any other country, or political
subdivision thereof or of any court of competent jurisdiction.
The Custodian shall be liable for the acts or omissions of a foreign
banking institution to the same extent as set forth with respect to
sub-custodians generally in this Contract.
If the Fund on behalf of the Portfolio requires the Custodian to take any
action with respect to securities, which action involves the payment of money
or which action may, in the opinion of the Custodian, result in the Custodian
or its nominee assigned to the Fund or the Portfolio being liable for the
payment of money or incurring liability of some other form, the Fund on behalf
of the Portfolio, as a prerequisite to requiring the Custodian to take such
action, shall provide indemnity to the Custodian in an amount and form
satisfactory to it.
If the Fund requires the Custodian, its affiliates, subsidiaries or
agents, to advance cash or securities for any purpose (including but not
limited to securities settlements, foreign exchange contracts and assumed
settlement) or in the event that the Custodian or its nominee shall incur or be
assessed any taxes, charges, expenses, assessments, claims or liabilities in
connection with the performance of this Contract, except such as may arise from
its or its nominee's own negligent action, negligent failure to act or willful
misconduct, any property at any time held for the account of the applicable
Portfolio shall be security therefor and should the Fund fail to repay the
Custodian promptly, the Custodian shall be entitled to utilize available cash
and to dispose of such Portfolio's assets to the extent necessary to obtain
reimbursement.
In no event shall the Custodian be liable for indirect, special or
consequential damages.
14. Effective Period, Termination and Amendment
This Contract shall become effective as of its execution, shall continue
in full force and effect until terminated as hereinafter provided, may be
amended at any time by mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take effect not sooner
than sixty (60) days after the date of such delivery or mailing; provided,
however that the Custodian shall not with
18
<PAGE> 22
respect to a Portfolio act under Section 2.10 hereof in the absence of receipt
of an initial certificate of the Secretary or an Assistant Secretary that the
Board of Trustees of the Fund has approved the initial use of a particular
Securities System by such Portfolio, as required by Rule 17f-4 under the
Investment Company Act of 1940, as amended and that the Custodian shall not
with respect to a Portfolio act under Section 2.11 hereof in the absence of
receipt of an initial certificate of the Secretary or an Assistant Secretary
that the Board of Trustees has approved the initial use of the Direct Paper
System by such Portfolio ; provided further, however, that the Fund shall not
amend or terminate this Contract in contravention of any applicable federal or
state regulations, or any provision of the Declaration of Trust, and further
provided, that the Fund on behalf of one or more of the Portfolios may at any
time by action of its Board of Trustees (i) substitute another bank or trust
company for the Custodian by giving notice as described above to the Custodian,
or (ii) immediately terminate this Contract in the event of the appointment of
a conservator or receiver for the Custodian by the Comptroller of the Currency
or upon the happening of a like event at the direction of an appropriate
regulatory agency or court of competent jurisdiction.
Upon termination of the Contract, the Fund on behalf of each applicable
Portfolio shall pay to the Custodian such compensation as may be due as of the
date of such termination and shall likewise reimburse the Custodian for its
costs, expenses and disbursements.
15. Successor Custodian
If a successor custodian for the Fund, of one or more of the Portfolios
shall be appointed by the Board of Trustees of the Fund, the Custodian shall,
upon termination, deliver to such successor custodian at the office of the
Custodian, duly endorsed and in the form for transfer, all securities of each
applicable Portfolio then held by it hereunder and shall transfer to an account
of the successor custodian all of the securities of each such Portfolio held in
a Securities System.
If no such successor custodian shall be appointed, the Custodian shall, in
like manner, upon receipt of a certified copy of a vote of the Board of
Trustees of the Fund, deliver at the office of the Custodian and transfer such
securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Trustees shall have been delivered to
the Custodian on or before the date when such termination shall become
effective, then the Custodian shall have the right to deliver to a bank or
trust company, which is a "bank" as defined in the Investment Company Act of
1940, doing business in Boston, Massachusetts, of its own selection, having an
aggregate capital, surplus, and undivided profits, as shown by its last
published report, of not less than $25,000,000, all securities, funds and other
properties held by the Custodian on behalf of each applicable Portfolio and all
instruments held by the Custodian relative thereto and all other property held
by it under this Contract on behalf of each applicable Portfolio and to
transfer to an account of such successor custodian all of the securities of
each such Portfolio held in any Securities System. Thereafter, such bank or
trust company shall be the successor of the Custodian under this Contract.
19
<PAGE> 23
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred to or of
the Board of Trustees to appoint a successor custodian, the Custodian shall be
entitled to fair compensation for its services during such period as the
Custodian retains possession of such securities, funds and other properties and
the provisions of this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.
16. Interpretive and Additional Provisions
In connection with the operation of this Contract, the Custodian and the
Fund on behalf of each of the Portfolios, may from time to time agree on such
provisions interpretive of or in addition to the provisions of this Contract as
may in their joint opinion be consistent with the general tenor of this
Contract. Any such interpretive or additional provisions shall be in a writing
signed by both parties and shall be annexed hereto, provided that no such
interpretive or additional provisions shall contravene any applicable federal
or state regulations or any provision of the Declaration of Trust of the Fund.
No interpretive or additional provisions made as provided in the preceding
sentence shall be deemed to be an amendment of this Contract.
17. Additional Portfolios
In the event that the Fund establishes one or more series of Shares in
addition to the Portfolios set forth on Attachment A hereto with respect to
which it desires to have the Custodian render services as custodian under the
terms hereof, it shall so notify the Custodian in writing, and if the Custodian
agrees in writing to provide such services, such series of Shares shall become
a Portfolio hereunder.
18. Massachusetts Law to Apply
This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of The Commonwealth of Massachusetts.
19. Prior Contracts
This Contract supersedes and terminates, as of the date hereof, all prior
contracts between the Fund on behalf of each of the Portfolios and the
Custodian relating to the custody of the Fund's assets.
20. Shareholder Communications Election
20
<PAGE> 24
Securities and Exchange Commission Rule 14b-2 requires banks which hold
securities for the account of customers to respond to requests by issuers of
securities for the names, addresses and holdings of beneficial owners of
securities of that issuer held by the bank unless the beneficial owner has
expressly objected to disclosure of this information. In order to comply with
the rule, the Custodian needs the Fund to indicate whether it authorizes the
Custodian to provide the Fund's name, address, and share position to requesting
companies whose securities the Fund owns. If the Fund tells the Custodian
"no", the Custodian will not provide this information to requesting companies.
If the Fund tells the Custodian "yes" or does not check either "yes" or "no"
below, the Custodian is required by the rule to treat the Fund as consenting to
disclosure of this information for all securities owned by the Fund or any
funds or accounts established by the Fund. For the Fund's protection, the Rule
prohibits the requesting company from using the Fund's name and address for any
purpose other than corporate communications. Please indicate below whether the
Fund consents or objects by checking one of the alternatives below.
YES [X] The Custodian is authorized to release the Fund's name,
address, and share positions.
NO [ ] The Custodian is not authorized to release the Fund's name,
address, and share positions.
THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK
21
<PAGE> 25
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of September 16, 1996.
JNL SERIES TRUST
By: /s/ John A. Knutson
---------------------------
President
STATE STREET BANK AND TRUST COMPANY
By: /s/
----------------------------
Executive Vice President
<PAGE> 26
ATTACHMENT A
PORTFOLIOS OF 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
<PAGE> 27
FEE SCHEDULE FOR
CUSTODIAN CONTRACT
BETWEEN STATE STREET BANK & TRUST COMPANY
AND JNL SERIES TRUST
The following Fee Schedule shall be effective as of September 16, 1996, with
respect to the JNL/Eagle Core Equity Series and the JNL/Eagle SmallCap Equity
Series, and shall be effective as of October 1, 1996, for the remaining
Portfolios of the Fund.
I. CUSTODY SERVICES
DOMESTIC
- Provide custody for $US assets.
- Settle trades, collect income, monitor corporate actions, money movements.
- Provide electronic access to account information through GlobalQuest.
- Provide daily reporting of holdings, investable cash,
transaction activity, and marketing pricing.
GLOBAL
- Maintain custody of Fund assets.
- Settle Portfolio purchases and sales.
- Report buy and sell fails.
- Determine and collect Portfolio income.
- Make cash disbursements and report cash transactions in local and base
currency.
- Withhold foreign taxes.
- File foreign tax reclaims.
- Monitor corporate actions.
- Report Portfolio positions.
The fee shown below is an annual charge, billed and payable monthly, based
on average monthly net assets.
<PAGE> 28
ANNUAL FEE PER PORTFOLIO
A. ASSET-BASED ACCOUNT MAINTENANCE CHARGE
Domestic Securities
0 - $100 Million 1 bps
$100 - $200 Million .75 bps
Over $200 Million .5 bps
Monthly minimum charge per Portfolio: $1,000
Global Securities Holding Charges in Basis Points (Annual Fee)
Country Grouping
Group A Group B Group C Group D Group E
USA Australia Austria Botswana Argentina
Canada Belgium Brazil Bangladesh
Euroclear Denmark China Bolivia**
France Finland Czech Republic Chile
Germany Hong Kong Ecuador** Colombia
Japan Indonesia Egypt Cyprus
New Zealand Ireland Ghana Greece
South Africa Italy Israel Hungary
Switzerland Malaysia Kenya India
U.K. Mexico Luxembourg Jamaica**
Netherlands Morocco Jordan
Norway Sri Lanka Mauritius
Philippines Taiwan Namibia
Portugal Trinidad and Pakistan
Singapore Tobago** Peru
Spain Turkey Poland
Sweden Zambia Slovakia**
Thailand Zimbabwe South Korea
Tunisia**
Uruguay
Venezuela
<PAGE> 29
**Not 17f-5 eligible at this time.
Group A Group B Group C Group D Group E
See Domestic Custody
Fee Schedule 3.5 7.5 20.0 35.0
Asset charge is based upon net asset value of total Portfolio on a monthly
basis.
B. TRANSACTION FEE - (by settlement location)
For all Purchases, Sales, and Maturities
Domestic Transaction Charges
Book Entry Trades (FBE,DTC,PTC) $6.50/transaction
Physical Trades $20.00/transaction
Maturities $10.00/transaction
Euroclear $25.00/transaction
All Other Trades $25.00/transaction
Global Transaction Charges
Group A Group B Group C Group D Group E
See Domestic Group $25 $50 $100 $125
Fee Schedule All Trades All Trades All Trades All Trades
II. FUTURES, OPTIONS AND FOREIGN EXCHANGE
Option charge for each option written or
closing, contract, per issue, per broker $25.00
Option expiration or exercised charge, per issue, per broker $15.00
Futures transactions -- no security movement $ 8.00
Interest rate and index futures -- no security movement $10.00
Foreign Exchange at State Street No Charge
Foreign Exchange with third party $50/transaction
<PAGE> 30
III. ACCOUNTING SERVICES
PORTFOLIO AND FUND ACCOUNTING
- Maintain investment ledgers, provide selected Portfolio
transactions, position and income reports.
- Maintain general ledger and capital stock accounts.
- Prepare daily trial balance.
- Calculate net asset value daily.
- Provide selected general ledger reports.
- Securities yield or market value quotations will be provided to Fund
via State Street's Automated Pricing System.
Monthly Charge Per Portfolio*
Domestic Funds $2,000
Global Funds $3,500
* .5 basis points for assets over $100 million per Portfolio
IV. SYSTEMS
A. GLOBALQUEST
Custodian will deliver, install, and train users on the GlobalQuest
electronic information system.
Administrative Charge $200/month
<PAGE> 31
V. OUT-OF-POCKET
A billing for the recovery of applicable out-of-pocket expenses will be
made as of the end of each month. Out-of-pocket expenses include, but
are not limited to the following:
- Telephone - Transfer Fees
- Wire Charges ($5.25 in and $5 out) - Sub-custodian Charges
- Postage and Insurance - Price Waterhouse Audit Letter
- Courier Service - Federal Reserve Fee for Return
- Duplicating Check items over $2,500
- Legal Fees ($4.25 each)
- Supplies Related to Fund Records - GNMA Transfer ($15 each)
- Rush Transfer ($8 each) - PTC Deposit/Withdrawal for
- Items held in Street name over same day turnaround ($50 each)
record date at the request of traders
($50 each)
VI. WAIVERS
Custodian waives the following fees for the periods indicated:
- monthly minimum charge per Portfolio for Custody Services and
monthly charge per Portfolio for Accounting Services for calendar
year 1996; and
- monthly minimum charges per Portfolio for Custody Services for
calendar year 1997. This waiver is contingent on Custodian
acquiring business, that will generate future revenue in excess of
the Custodian acquiring further business, that will generate future
revenue in excess of the concession amount, from Jackson National
Life Insurance Company, its subsidiaries or affiliates, prior to
December 31, 1997. If the Custodian does not receive further
business by December 31, 1997, the monthly minimum charge per
Portfolio for Custody Services for calendar year 1997 will apply and
will be billed in 1998.
VII. TERM OF THE CONTRACT
The parties agree that the Fee Schedule shall remain in effect while a
Custodian Contract between the parties is in effect for three full years
from October 1, 1996 and from year to year thereafter until it is revised
by written agreement signed by both parties as a result of
<PAGE> 32
negotiations initiated by either party. In the event that the Fund
terminates the Custodian Contract prior to the end of the initial three
year term of this Fee Schedule, any amounts waived during the calendar
year 1996 become payable to the Custodian.
VIII. PAYMENT
The above fees will be charged against the Fund's custodian checking
account five (5) days after the invoice is mailed to the Fund's offices.
JNL SERIES TRUST STATE STREET BANK &
TRUST COMPANY
By /s/ John A. Knutson By /s/
--------------------------- -----------------------------
Title President Title Executive Vice President
------------------------ --------------------------
Date 09/12/96 Date 09/13/96
------------------------ --------------------------
<PAGE> 1
EX-99.B9-ta
TRANSFER AGENCY AND SERVICE AGREEMENT
between
JNL SERIES TRUST
and
STATE STREET BANK AND TRUST COMPANY
<PAGE> 2
TABLE OF CONTENTS
Page
----
1. Terms of Appointment; Duties of the Bank................... 1
2. Fees and Expenses.......................................... 3
3. Representations and Warranties of the Bank................. 4
4. Representations and Warranties of the Fund................. 4
5. Data Access and Proprietary Information.................... 5
6. Indemnification............................................ 6
7. Standard of Care........................................... 8
8. Covenants of the Fund and the Bank......................... 8
9. Termination of Agreement................................... 9
10. Additional Funds........................................... 9
11. Assignment................................................. 9
12. Amendment.................................................. 9
13. Massachusetts Law to Apply................................. 10
14. Force Majeure.............................................. 10
15. Consequential Damages...................................... 10
16. Merger of Agreement........................................ 10
17. Limitations of Liability of the Trustees
or Shareholders............................................ 10
18. Counterparts............................................... 10
<PAGE> 3
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of September 16, 1996, by and between JNL SERIES TRUST,
a Massachusetts business trust with its principal office and place of business
at 5901 Executive Drive, Lansing, Michigan 48911 (the "Fund"), and STATE
STREET BANK AND TRUST COMPANY, a Massachusetts trust company with its principal
office and place of business at 225 Franklin Street, Boston, Massachusetts
02110 (the "Bank").
WHEREAS, the Fund is authorized to issue shares in separate series, with
each such series representing interests in a separate portfolio of securities
and other assets; and
WHEREAS, the Fund intends to initially offer shares the sixteen (16)
series set forth on Attachment A hereto (each such series, together with all
other series subsequently established by the Fund and made subject to this
Contract in accordance with Article 10, being herein referred to as a
"Portfolio, and collectively as the "Portfolios");
WHEREAS, the Fund on behalf of the Portfolios desires to appoint the Bank
as its transfer agent, dividend disbursing agent and agent in connection with
certain other activities, and the Bank desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
l. Terms of Appointment; Duties of the Bank
1.1 Subject to the terms and conditions set forth in this Agreement, the Fund,
on behalf of the Portfolios, hereby employs and appoints the Bank to act
as, and the Bank agrees to act as its transfer agent for the Fund's
authorized and issued shares of its common stock ("Shares"), dividend
disbursing agent and agent in connection with any accumulation,
open-account or similar plans provided to the shareholders of each of the
respective Portfolios of the Fund ("Shareholders") and set out in the
currently effective prospectus and statement of additional information
("prospectus") of the Fund on behalf of the applicable Portfolio,
including without limitation any periodic investment plan or periodic
withdrawal program.
1.2 The Bank agrees that it will perform the following services:
(a) In accordance with procedures established from time to time by
agreement between the Fund on behalf of each of the Portfolios, as
applicable and the Bank, the Bank shall:
(i) Receive for acceptance, orders for the purchase of Shares,
and promptly deliver payment and appropriate documentation
thereof to the Custodian of
<PAGE> 4
the Fund authorized pursuant to the Declaration of Trust of
the Fund (the "Custodian");
(ii) Pursuant to purchase orders, issue the appropriate number of
Shares and hold such Shares in the appropriate Shareholder
account;
(iii) Receive for acceptance redemption requests and redemption
directions and deliver the appropriate documentation thereof
to the Custodian;
(iv) In respect to the transactions in items (i), (ii) and (iii)
above, the Bank shall execute transactions directly with
broker-dealers authorized by the Fund who shall thereby be
deemed to be acting on behalf of the Fund;
(v) At the appropriate time as and when it receives monies paid
to it by the Custodian with respect to any redemption, pay
over or cause to be paid over in the appropriate manner such
monies as instructed by the redeeming Shareholders;
(vi) Effect transfers of Shares by the registered owners thereof
upon receipt of appropriate instructions;
(vii) Prepare and transmit payments for dividends and distributions
declared by the Fund on behalf of the applicable Portfolio;
(viii) Issue replacement certificates for those certificates
alleged to have been lost, stolen or destroyed upon receipt
by the Bank of indemnification satisfactory to the Bank and
protecting the Bank and the Fund, and the Bank at its option,
may issue replacement certificates in place of mutilated
stock certificates upon presentation thereof and without such
indemnity;
(ix) Maintain records of account for and advise the Fund and its
Shareholders as to the foregoing; and
(x) Record the issuance of shares of the Fund and maintain
pursuant to SEC Rule 17Ad-10(e) a record of the total number
of shares of the Fund which are authorized, based upon data
provided to it by the Fund, and issued and outstanding. The
Bank shall also provide the Fund on a regular basis with the
total number of shares which are authorized and issued and
outstanding and shall have no obligation, when recording the
issuance of shares, to monitor the issuance of such shares or
to take cognizance of any laws relating to the issue or sale
of such Shares, which functions shall be the sole
responsibility of the Fund.
2
<PAGE> 5
(b) In addition to and neither in lieu nor in contravention of the
services set forth in the above paragraph (a), the Bank
shall: (i) perform the customary services of a transfer agent,
dividend disbursing agent and, as relevant, agent in
connection with accumulation, open-account or similar plans
(including without limitation any periodic investment plan or
periodic withdrawal program), including but not limited to:
maintaining all Shareholder accounts, preparing Shareholder
meeting lists, mailing proxies, mailing Shareholder reports
and prospectuses to current Shareholders, withholding taxes on
U.S. resident and non-resident alien accounts, preparing and
filing U.S. Treasury Department Forms 1099 and other
appropriate forms required with respect to dividends and
distributions by federal authorities for all Shareholders,
preparing and mailing confirmation forms and statements of
account to Shareholders for all purchases and redemptions of
Shares and other confirmable transactions in Shareholder
accounts, preparing and mailing activity statements for
Shareholders, and providing Shareholder account information
and (ii) provide a system which will enable the Fund to
monitor the total number of Shares sold in each State.
(c) In addition, the Fund shall (i) identify to the Bank in
writing those transactions and assets to be treated as exempt
from blue sky reporting for each State and (ii) verify the
establishment of transactions for each State on the system
prior to activation and thereafter monitor the daily activity
for each State. The responsibility of the Bank for the Fund's
blue sky State registration status is solely limited to the
initial establishment of transactions subject to blue sky
compliance by the Fund and the reporting of such transactions
to the Fund as provided above.
(d) Procedures as to who shall provide certain of these services in
Section 1 may be established from time to time by agreement
between the Fund on behalf of each Portfolio and the Bank per
the attached service responsibility schedule. The Bank may
at times perform only a portion of these services and the
Fund or its agent may perform these services on the Fund's
behalf.
(e) The Bank shall provide additional services on behalf of the
Fund (i.e., escheatment services) which may be agreed upon in
writing between the Fund and the Bank.
2. Fees and Expenses
2.1 For the performance by the Bank pursuant to this Agreement, the Fund
agrees on behalf of each of the Portfolios to pay the Bank an annual
maintenance fee for each Shareholder account as set out in the
initial fee schedule attached hereto. Such fees and out-of-pocket
expenses and advances identified under Section 2.2 below may be
changed from time to time subject to mutual written agreement
between the Fund and the Bank.
3
<PAGE> 6
2.2 In addition to the fee paid under Section 2.1 above, the Fund agrees
on behalf of each of the Portfolios to reimburse the Bank for
reasonable out-of-pocket expenses, including but not limited to
confirmation production, postage, forms, telephone, microfilm,
microfiche, tabulating proxies, records storage, or advances incurred
by the Bank for the items set out in the fee schedule attached
hereto. In addition, any other expenses incurred by the Bank at the
request or with the consent of the Fund, will be reimbursed by the
Fund on behalf of the applicable Portfolio.
2.3 The Fund agrees on behalf of each of the Portfolios to pay all fees
and reimbursable expenses within five days following the receipt of
the respective billing notice. Postage for mailing of dividends,
proxies, Fund reports and other mailings to all shareholder accounts
shall be advanced to the Bank by the Fund at least seven (7) days
prior to the mailing date of such materials.
3. Representations and Warranties of the Bank
The Bank represents and warrants to the Fund that:
3.1 It is a trust company duly organized and existing and in good standing
under the laws of The Commonwealth of Massachusetts.
3.2 It is duly qualified to carry on its business in the Commonwealth of
Massachusetts.
3.3 It is empowered under applicable laws and by its Charter and By-Laws
to enter into and perform this Agreement.
3.4 All requisite corporate proceedings have been taken to authorize it to
enter into and perform this Agreement.
3.5 It has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under
this Agreement.
4. Representations and Warranties of the Fund
The Fund represents and warrants to the Bank that:
4.1 It is a business trust duly organized and existing and in good
standing under the laws of The Commonwealth of Massachusetts.
4.2 It is empowered under applicable laws and by its Declaration of
Trust and By-Laws to enter into and perform this Agreement.
4
<PAGE> 7
4.3 All corporate proceedings required by said Declaration of Trust and
By-Laws have been taken to authorize it to enter into and perform this
Agreement.
4.4 It is an open-end diversified management investment company registered
under the Investment Company Act of 1940, as amended.
4.5 A registration statement under the Securities Act of 1933, as
amended, on behalf of each of the Portfolios is pending
effectiveness or currently effective and will remain effective with
respect to all Shares of the Fund being offered for sale.
5. Data Access and Proprietary Information
5.1 The Fund acknowledges that the data bases, computer programs, screen
formats, report formats, interactive design techniques, and
documentation manuals furnished to the Fund by the Bank as part of
the Fund's ability to access certain Fund-related data ("Customer
Data") maintained by the Bank on data bases under the control and
ownership of the Bank or other third party ("Data Access Services")
constitute copyrighted, trade secret, or other proprietary
information (collectively, "Proprietary Information") of the Bank or
other third party. In no event shall Proprietary Information be
deemed Customer Data. Proprietary Information shall not be deemed to
include knowledge, information, documents or materials which (i) have
entered the public domain, (ii) become known to the Fund prior to
disclosure of same by the Bank, (iii) the Bank, in writing, permits
to be disclosed by the Fund, (iv) become known to the Fund from a
source other than the Bank, provided that such source is not, by
making such disclosure, in breach of a confidentiality agreement with
respect thereto, (v) are disclosed by the Bank to a third party
without restriction, or (vi) are independently developed by the Fund
without breach of this Agreement. The Fund agrees to treat all
Proprietary Information as proprietary to the Bank and further agrees
that it shall not divulge any Proprietary Information to any person
or organization except as may be provided hereunder. Without
limiting the foregoing, the Fund agrees for itself and its employees
and agents:
(a) to access Customer Data solely from locations as may be
designated in writing by the Bank and solely in accordance with
the Bank's applicable user documentation;
(b) to refrain from copying or duplicating in any way the Proprietary
Information;
(c) to refrain from obtaining unauthorized access to any portion of
the Proprietary Information, and if such access is inadvertently
obtained, to inform in a timely manner of such fact and dispose
of such information in accordance with the Bank's instructions;
5
<PAGE> 8
(d) to refrain from causing or allowing the data acquired hereunder
from being retransmitted to any other computer facility or other
location, except with the prior written consent of the Bank;
(e) that the Fund shall have access only to those authorized
transactions agreed upon by the parties;
(f) to honor all reasonable written requests made by the Bank to
protect at the Bank's expense the rights of the Bank in
Proprietary Information at common law, under federal copyright
law and under other federal or state law.
Each party shall take reasonable efforts to advise its employees of their
obligations pursuant to this Section 5. The obligations of this Section shall
survive any earlier termination of this Agreement.
5.2 If the Fund notifies the Bank that any of the Data Access Services do not
operate in material compliance with the most recently issued user
documentation for such services, the Bank shall endeavor in a timely
manner to correct such failure. Organizations from which the Bank may
obtain certain data included in the Data Access Services are solely
responsible for the contents of such data and the Fund agrees to make no
claim against the Bank arising out of the contents of such third-party
data, including, but not limited to, the accuracy thereof. DATA ACCESS
SERVICES AND ALL COMPUTER PROGRAMS AND SOFTWARE SPECIFICATIONS USED IN
CONNECTION THEREWITH ARE PROVIDED ON AN AS IS, AS AVAILABLE BASIS. THE
BANK EXPRESSLY DISCLAIMS ALL WARRANTIES EXCEPT THOSE EXPRESSLY STATED
HEREIN INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
5.3 If the transactions available to the Fund include the ability to
originate electronic instructions to the Bank in order to (i) effect the
transfer or movement of cash or Shares or (ii) transmit Shareholder
information or other information, then in such event the Bank shall be
entitled to rely on the validity and authenticity of such instruction
without undertaking any further inquiry as long as such instruction is
undertaken in conformity with security procedures established by the Bank
from time to time.
6. Indemnification
6.1 The Bank shall not be responsible for, and the Fund shall on behalf of the
applicable Portfolio indemnify and hold the Bank harmless from and
against, any and all losses, damages, costs, charges, counsel fees,
payments, expenses and liability arising out of or attributable to:
6
<PAGE> 9
(a) All actions of the Bank or its agents or subcontractors required to
be taken pursuant to this Agreement, provided that such actions are
taken in good faith and without negligence or willful misconduct.
(b) The Fund's lack of good faith, negligence or willful misconduct
which arise out of the breach of any representation or warranty of
the Fund hereunder.
(c) The reasonable reliance on or use by the Bank or its agents or
subcontractors of information, records, documents or services which
(i) are received by the Bank or its agents or subcontractors, and
(ii) have been prepared, maintained or performed by the Fund or any
other person or firm on behalf of the Fund including but not
limited to any previous transfer agent or registrar.
(d) The reliance on, or the carrying out by the Bank or its agents or
subcontractors of any instructions or requests of the Fund on
behalf of the applicable Portfolio.
(e) The offer or sale of Shares in violation of any requirement under
the federal securities laws or regulations or the securities laws
or regulations of any state that such Shares be registered in such
state or in violation of any stop order or other determination or
ruling by any federal agency or any state with respect to the offer
or sale of such Shares in such state.
(f) The negotiation and processing by the Bank of checks not made
payable to the order of the Bank, the Fund, the Fund's management
company, transfer agent or distributor or the retirement account
custodian or trustee for a plan account investing in Shares, which
checks are tendered to the Bank for the purchase of Shares (i.e.,
checks made payable to prospective or existing Shareholders, such
checks are commonly known as "third party checks").
6.2 At any time the Bank may apply to any officer of the Fund for
instructions, and may consult with reputable legal counsel with respect to
any matter arising in connection with the services to be performed by the
Bank under this Agreement, and the Bank and its agents or subcontractors
shall not be liable and shall be indemnified by the Fund on behalf of the
applicable Portfolio for any action taken or omitted by it in reliance
upon such instructions or upon the opinion of such counsel. The Bank, its
agents and subcontractors shall be protected and indemnified in acting
upon any paper or document furnished by or on behalf of the Fund,
reasonably believed to be genuine and to have been signed by the proper
person or persons, or upon any instruction, information, data, records or
documents provided the Bank or its agents or subcontractors by machine
readable input, telex, CRT data entry or other similar means authorized by
the Fund, and shall not be held to have notice of any change of authority
of any person, until receipt of written notice thereof from the Fund. The
Bank, its agents and subcontractors shall also be protected and
indemnified in recognizing stock certificates which are reasonably
believed to bear the proper manual
7
<PAGE> 10
or facsimile signatures of the officers of the Fund, and the proper
countersignature of any former transfer agent or former registrar, or
of a co-transfer agent or co-registrar.
6.3 In order that the indemnification provisions contained in this Section 6
shall apply, upon the assertion of a claim for which the Fund may be
required to indemnify the Bank, the Bank shall promptly notify the Fund of
such assertion, and shall keep the Fund advised with respect to all
developments concerning such claim. The Fund shall have the option to
participate with the Bank in the defense of such claim or to defend
against said claim in its own name or in the name of the Bank. The Bank
shall in no case confess any claim or make any compromise in any case in
which the Fund may be required to indemnify the Bank except with the
Fund's prior written consent.
7. Standard of Care
The Bank shall at all times act in good faith and agrees to use its best
efforts within reasonable limits to insure the accuracy of all services
performed under this Agreement, but assumes no responsibility and shall
not be liable for loss or damage due to errors unless said errors are
caused by its negligence, bad faith, or willful misconduct or that of
its employees.
8. Covenants of the Fund and the Bank
8.1 The Fund shall on behalf of each of the Portfolios promptly furnish to the
Bank the following:
(a) A certified copy of the resolution of the Board of Trustees of the
Fund authorizing the appointment of the Bank and the execution and
delivery of this Agreement.
(b) A copy of the Declaration of Trust and By-Laws of the Fund and all
amendments thereto.
8.2 The Bank hereby agrees to establish and maintain facilities and procedures
reasonably acceptable to the Fund for safekeeping of stock certificates,
check forms and facsimile signature imprinting devices, if any; and for
the preparation or use, and for keeping account of, such certificates,
forms and devices.
8.3 The Bank shall keep records relating to the services to be performed
hereunder, in the form and manner as it may deem advisable. To the extent
required by Section 31 of the Investment Company Act of 1940, as amended,
and the Rules thereunder, the Bank agrees that all such records prepared
or maintained by the Bank relating to the services to be performed by the
Bank hereunder are the property of the Fund and will be preserved,
8
<PAGE> 11
maintained and made available in accordance with such Section and Rules,
and will be surrendered promptly to the Fund on and in accordance with
its request.
8.4 The Bank and the Fund agree that all books, records, information and data
pertaining to the business of the other party which are exchanged or
received pursuant to the negotiation or the carrying out of this Agreement
shall remain confidential, and shall not be voluntarily disclosed to any
other person, except as may be required by law.
8.5 In case of any requests or demands for the inspection of the Shareholder
records of the Fund, the Bank will endeavor to notify the Fund and to
secure instructions from an authorized officer of the Fund as to such
inspection. The Bank reserves the right, however, to exhibit the
Shareholder records to any person whenever it is advised by its counsel
that it may be held liable for the failure to exhibit the Shareholder
records to such person.
9. Termination of Agreement
9.1 This Agreement may be terminated by either party upon sixty (60) days
written notice to the other.
9.2 Should the Fund exercise its right to terminate, all out-of-pocket
expenses associated with the movement of records and material will be
borne by the Fund on behalf of the applicable Portfolio(s). Additionally,
the Bank reserves the right to charge for any other reasonable expenses
associated with such termination.
10. Additional Funds
In the event that the Fund establishes one or more series of Shares in
addition to the Portfolios set forth on Attachment A hereto with respect
to which it desires to have the Bank render services as transfer agent
under the terms hereof, it shall so notify the Bank in writing, and if
the Bank agrees in writing to provide such services, such series of
Shares shall become a Portfolio hereunder.
11. Assignment
11.1 Except as provided in Section 11.3 below, neither this Agreement nor any
rights or obligations hereunder may be assigned by either party without
the written consent of the other party.
9
<PAGE> 12
11.2 This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
11.3 The Bank may, without further consent on the part of the Fund, subcontract
for the performance hereof with (i) Boston Financial Data Services, Inc.,
a Massachusetts corporation ("BFDS") which is duly registered as a
transfer agent pursuant to Section 17A(c)(2) of the Securities Exchange
Act of 1934, as amended ("Section 17A(c)(2)"), (ii) a BFDS subsidiary
duly registered as a transfer agent pursuant to Section 17A(c)(2) or (iii)
a BFDS affiliate; provided, however, that the Bank shall be as fully
responsible to the Fund for the acts and omissions of any subcontractor as
it is for its own acts and omissions.
12. Amendment
This Agreement may be amended or modified by a written agreement
executed by both parties and authorized or approved by a resolution of
the Board of Trustees of the Fund.
13. Massachusetts Law to Apply
This Agreement shall be construed and the provisions thereof interpreted
under and in accordance with the laws of the Commonwealth of
Massachusetts.
14. Force Majeure
In the event either party is unable to perform its obligations under the
terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage reasonably beyond its control, or other
causes reasonably beyond its control, such party shall not be liable for
damages to the other for any damages resulting from such failure to
perform or otherwise from such causes.
15. Consequential Damages
Neither party to this Agreement shall be liable to the other party for
consequential damages under any provision of this Agreement or for any
consequential damages arising out of any act or failure to act
hereunder.
16. Merger of Agreement
10
<PAGE> 13
This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement with respect to the subject
matter hereof whether oral or written.
17. Limitations of Liability of the Trustees and Shareholders
A copy of the Declaration of Trust of the Trust is on file with the
Secretary of the Commonwealth of Massachusetts, and notice is hereby
given that this instrument is executed on behalf of the Trustees of the
Trust as Trustees and not individually and that the obligations of this
instrument are not binding upon any of the Trustees or Shareholders
individually but are binding only upon the assets and property of the
Fund.
18. Counterparts
This Agreement may be executed by the parties hereto on any number of
counterparts, and all of said counterparts taken together shall be
deemed to constitute one and the same instrument.
11
<PAGE> 14
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf by and through their duly
authorized officers, as of the day and year first above written.
JNL SERIES TRUST
By: /s/ John A. Knuston
--------------------------
President
STATE STREET BANK AND TRUST COMPANY
By: /s/
---------------------------------
Executive Vice President
<PAGE> 15
ATTACHMENT A
PORTFOLIOS OF 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
<PAGE> 16
STATE STREET BANK & TRUST COMPANY
FUND SERVICE RESPONSIBILITIES*
Service Performed Responsibility
- ----------------- --------------
Bank Fund
---- ----
1. Receives orders for the purchase X
of Shares.
2. Issue Shares and hold Shares in
Shareholders accounts. X
3. Receive redemption requests. X
4. Effect transactions 1-3 above
directly with broker-dealers. X
5. Pay over monies to redeeming
Shareholders. X
6. Effect transfers of Shares. X
7. Prepare and transmit dividends
and distributions. X
8. Issue Replacement Certificates. X
9. Reporting of abandoned property.
10. Maintain records of account. X
11. Maintain and keep a current and
accurate control book for each
issue of securities. X
12. Mail proxies. X
13. Mail Shareholder reports. X
14. Mail prospectuses to current
Shareholders. X
15. Withhold taxes on U.S. resident
and non-resident alien accounts. X
<PAGE> 17
Service Performed Responsibility
- ----------------- --------------
Bank Fund
---- ----
16. Prepare and file U.S. Treasury
Department forms. X
17. Prepare and mail account and
confirmation statements for
Shareholders. X
18. Provide Shareholder account
information. X
19. Blue sky reporting. X
*Such services are more fully described in Section 1.2 (a), (b) and (c) of
the Agreement.
JNL SERIES TRUST
By: /s/ John A. Knuston
President
STATE STREET BANK AND TRUST COMPANY
By: /s/
Executive Vice President
<PAGE> 18
FEE SCHEDULE FOR
TRANSFER AGENCY AND SERVICE AGREEMENT
BETWEEN STATE STREET BANK AND TRUST COMPANY
AND JNL SERIES TRUST
This Fee Schedule dated September 12, 1996, shall be effective as of September
16, 1996, with respect to the JNL/Eagle Core Equity Series and the JNL/Eagle
SmallCap Equity Series and shall be effective as of October 1, 1996, with
respect to the remaining Series of the JNL Series Trust.
I. ACCOUNT SERVICE FEE
Monthly Maintenance Fee per Complex
0 - 20 Funds $2,500
20+ Funds $5,000
II. ACTIVITY BASED FEES
A. Trade processing (per trade)
All transactions including purchases, redemptions, exchanges, transfers and
dividends
Manual $4.80
Automated $2.00
B. Wires (per wire)
Incoming $6.25
Outgoing $6.00
III. OUT-OF-POCKET EXPENSES
Out-of-pocket expenses include, but are not limited to: custom systems
enhancements, telephone, mailing costs, and expenses incurred at the
specific direction of the Fund.
JNL SERIES TRUST STATE STREET BANK & TRUST COMPANY
By: ___________________ By: ___________________
Title: ________________ Title: ________________
Date: _________________ Date: _________________
<PAGE> 1
EX-99.B10-bgh
BLAZZARD, GRODD & HASENAUER, P.C.
943 POST ROAD EAST
WESTPORT, CONNECTICUT 06881-5108
February 13, 1997
Board of Trustees
JNL Series Trust
5901 Executive Drive
Lansing, MI 48911
RE: Opinion of Counsel - JNL Series Trust
Gentlemen:
You have requested our Opinion of Counsel in connection with the filing
with the Securities and Exchange Commission of a Post-Effective Amendment No. 8
to the Registration Statement on Form N-1A with respect to the JNL Series
Trust.
We have made such examination of the law and have examined such records
and documents as in our judgment are necessary or appropriate to enable us to
render the opinions expressed below.
We are of the following opinions:
1. JNL Series Trust ("Trust") is a valid and existing unincorporated
voluntary association, commonly known as a business trust.
2. The Trust is a business Trust created and validly existing pursuant
to the Massachusetts Laws.
3. All of the prescribed Trust procedures for the issuance of the
shares have been followed, and, when such shares are issued in
accordance with the Prospectus contained in the Registration
Statement for such shares, all state requirements relating to such
Trust shares will have been complied with.
<PAGE> 2
Board of Trustees
JNL Series Trust
February 13, 1997
Page 2
4. Upon the acceptance of purchase payments made by shareholders in
accordance with the Prospectus contained in the Registration
Statement and upon compliance with applicable law, such shareholders
will have legally-issued, fully paid, non-assessable shares of the
Trust.
You may use this opinion letter, or a copy thereof, as an exhibit to the
Registration.
We consent to the reference to our Firm contained in the Prospectus which
forms a part of the Registration Statement.
Sincerely,
BLAZZARD, GRODD & HASENAUER, P.C.
By: /s/ Raymond A. O'Hara III
-------------------------------
Raymond A. O'Hara III
