<PAGE> 1
As filed with the Securities and Exchange Commission on January 16, 1998
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. 12 [X]
---
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 13 [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)
Registrant's Telephone Number, including Area Code: (517) 394-3400
Thomas J. Meyer, Esq. with a copy to:
JNL Series Trust
Vice President & Counsel Blazzard, Grodd & Hasenauer P.C.
5901 Executive Drive P.O. Box 5108
Lansing, Michigan 48911 Westport, Connecticut 06881
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box)
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 April 1, 1998 pursuant to paragraph (a)(2) of
- ------------------------- Rule 485.
This post-effective amendment designates a new
effective date for a previously filed
- ------------------------- post-effective amendment.
Title of Securities Being Registered: Shares of beneficial interest
<PAGE> 2
JNL SERIES TRUST
CROSS-REFERENCE SHEET
(as required by Rule 495)
<TABLE>
<CAPTION>
Caption in Prospectus or Statement of
Additional Information relating to
N-1A Item No. each Series
- ------------- -------------------------------------
Part A Prospectus
- ------ ----------
<S> <C>
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 Additional Information;
Securities Performance Advertising for the Series
Item 7. Purchase of Securities Investment in Trust Shares;
Being Offered Share Redemption
Item 8. Redemption or Repurchase Share Redemption
Item 9. Pending Legal Proceedings Not Applicable
<CAPTION>
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 Investment Restrictions Applicable to
and Policies 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
</TABLE>
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.
<PAGE> 3
[JNL(R) SERIES TRUST]
APRIL 1, 1998
<PAGE> 4
PROSPECTUS
April 1, 1998
JNL(R) SERIES TRUST
- --------------------------------------------------------------------------------
5901 Executive Drive - Lansing, Michigan 48911
This Prospectus provides you with the basic information you should know
before investing in the JNL Series Trust ("Trust"). You should read it and keep
it for future reference. A Statement of Additional Information, dated April 1,
1998, 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. The Securities and Exchange
Commission maintains a Web site (http://www.sec.gov) that contains the Statement
of Additional Information, material incorporated by reference, and other
information regarding registrants that file electronically with the Commission.
The 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/ALLIANCE GROWTH SERIES seeks long-term growth of capital by investing
primarily in common stocks or securities with common stock characteristics which
demonstrate the potential for appreciation.
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.
JNL/JPM INTERNATIONAL & EMERGING MARKETS SERIES seeks to provide high total
return by investing in a portfolio of equity securities of foreign companies in
developed and, to a lesser extent, developing markets.
1
<PAGE> 5
JNL/PIMCO TOTAL RETURN BOND SERIES seeks to realize maximum total return,
consistent with preservation of capital and prudent investment management
through investment in a diversified portfolio of fixed income securities of
varying maturities. The average portfolio duration will normally vary within a
three- to six-year time frame based on the sub-adviser's forecast for interest
rates.
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.
JNL/S&P CONSERVATIVE GROWTH SERIES I seeks capital growth and current
income by investing in a diversified group of underlying Series of the JNL
Series Trust.
JNL/S&P MODERATE GROWTH SERIES I seeks capital growth. Current income is a
secondary objective. The Series seeks to achieve its objectives by investing in
a diversified group of underlying Series of the JNL Series Trust.
JNL/S&P AGGRESSIVE GROWTH SERIES I seeks capital growth by investing in a
diversified group of underlying Series of the JNL Series Trust.
JNL/S&P VERY AGGRESSIVE GROWTH SERIES I seeks capital growth by investing
in a diversified group of underlying Series of the JNL Series Trust.
JNL/S&P EQUITY GROWTH SERIES I seeks capital growth by investing in a
diversified group of underlying Series of the JNL Series Trust.
JNL/S&P EQUITY AGGRESSIVE GROWTH SERIES I seeks capital growth by investing
in a diversified group of underlying Series of the JNL Series Trust.
JNL/S&P CONSERVATIVE GROWTH SERIES II seeks capital growth and current
income by investing in a diversified group of underlying Series of the JNL
Series Trust.
JNL/S&P MODERATE GROWTH SERIES II seeks capital growth. Current income is a
secondary objective. The Series seeks to achieve its objectives by investing in
a diversified group of underlying Series of the JNL Series Trust.
JNL/S&P AGGRESSIVE GROWTH SERIES II seeks capital growth by investing in a
diversified group of underlying Series of the JNL Series Trust.
JNL/S&P VERY AGGRESSIVE GROWTH SERIES II seeks capital growth by investing
in a diversified group of underlying Series of the JNL Series Trust.
JNL/S&P EQUITY GROWTH SERIES II seeks capital growth by investing in a
diversified group of underlying Series of the JNL Series Trust.
JNL/S&P EQUITY AGGRESSIVE GROWTH SERIES II seeks capital growth by
investing in a diversified group of underlying Series of the JNL Series Trust.
GOLDMAN SACHS/JNL GROWTH & INCOME SERIES seeks long-term growth of capital
and growth of income through investments in equity securities that are
considered to have favorable prospects for capital appreciation and/or dividend
paying ability.
LAZARD/JNL SMALL CAP VALUE SERIES seeks capital appreciation by investing
primarily in equity securities of companies with market capitalizations under $1
billion that are believed by the sub-adviser to be inexpensively priced relative
to the return on total capital or equity.
2
<PAGE> 6
LAZARD/JNL MID CAP VALUE SERIES seeks capital appreciation by investing
primarily in equity securities of companies with market capitalizations in the
range of companies represented in the Russell Midcap Index that the sub-adviser
considers inexpensively priced relative to the return on total capital or
equity.
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.
SALOMON BROTHERS/JNL BALANCED SERIES seeks to obtain above-average income
(compared to a portfolio entirely invested in equity securities). As a secondary
objective, the Series seeks to take advantage of opportunities for growth of
capital and income. The Series seeks to achieve its objectives primarily through
investments in a broad variety of securities, including equity securities,
fixed-income securities and short-term obligations.
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 HIGH YIELD BOND SERIES seeks to maximize current
income. As a secondary objective, the Series seeks capital appreciation. The
Series seeks to achieve its objectives by investing primarily in a diversified
portfolio of high yield fixed-income securities that offer a yield above that
generally available on debt securities in the four highest rating categories of
the recognized rating services.
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.
3
<PAGE> 7
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 AND SALOMON BROTHERS/JNL HIGH
YIELD BOND SERIES INVEST 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, JNL/PIMCO TOTAL RETURN BOND SERIES,
GOLDMAN SACHS/JNL GROWTH & INCOME SERIES, PPM AMERICA/JNL BALANCED SERIES,
SALOMON BROTHERS/ JNL BALANCED SERIES AND SALOMON BROTHERS/JNL GLOBAL BOND
SERIES MAY INVEST IN HIGH YIELD, HIGH RISK BONDS. THE JNL/S&P CONSERVATIVE
GROWTH SERIES I, JNL/S&P MODERATE GROWTH SERIES I, JNL/S&P AGGRESSIVE GROWTH
SERIES I, JNL/S&P VERY AGGRESSIVE GROWTH SERIES I, JNL/S&P EQUITY GROWTH SERIES
I, JNL/S&P EQUITY AGGRESSIVE GROWTH SERIES I, JNL/S&P CONSERVATIVE GROWTH SERIES
II, JNL/S&P MODERATE GROWTH SERIES II, JNL/S&P AGGRESSIVE GROWTH SERIES II,
JNL/S&P VERY AGGRESSIVE GROWTH SERIES II, JNL/S&P EQUITY GROWTH SERIES II, AND
JNL/S&P EQUITY AGGRESSIVE GROWTH SERIES II MAY INVEST IN UNDERLYING SERIES OF
THE JNL SERIES TRUST WHOSE ASSETS MAY CONSIST OF 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".)
S&P is a registered trademark of the McGraw Hill Companies, Inc.
------------------------
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 APRIL 1, 1998, IS INCORPORATED
HEREIN BY REFERENCE.
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOPIC PAGE
----- ----
<S> <C>
TRUST EXPENSES.............................................. 5
FINANCIAL HIGHLIGHTS........................................ 8
INVESTMENT OBJECTIVES AND POLICIES.......................... 16
COMMON TYPES OF SECURITIES AND MANAGEMENT PRACTICES......... 52
MANAGEMENT OF THE TRUST..................................... 61
INVESTMENT IN TRUST SHARES.................................. 73
SHARE REDEMPTION............................................ 73
ADDITIONAL INFORMATION...................................... 73
PERFORMANCE ADVERTISING FOR THE SERIES...................... 74
TAX STATUS.................................................. 76
</TABLE>
4
<PAGE> 8
- --------------------------------------------------------------------------------
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/Alliance Growth Series................................ .775% .15%* .925%
JNL/Eagle Core Equity Series.............................. .90% .15% 1.05%
JNL/Eagle SmallCap Equity Series.......................... .95% .15% 1.10%
JNL/JPM International & Emerging Markets Series........... .975% .15%* 1.125%
JNL/PIMCO Total Return Bond Series........................ .70% .15%* .85%
JNL/Putnam Growth Series.................................. .90% .15% 1.05%
JNL/Putnam Value Equity Series............................ .90% .15% 1.05%
JNL/S&P Conservative Growth Series I**.................... .20% 0%* .20%
JNL/S&P Moderate Growth Series I**........................ .20% 0%* .20%
JNL/S&P Aggressive Growth Series I**...................... .20% 0%* .20%
JNL/S&P Very Aggressive Growth Series I**................. .20% 0%* .20%
JNL/S&P Equity Growth Series I**.......................... .20% 0%* .20%
JNL/S&P Equity Aggressive Growth Series I**............... .20% 0%* .20%
JNL/S&P Conservative Growth Series II**................... .20% 0%* .20%
JNL/S&P Moderate Growth Series II**....................... .20% 0%* .20%
JNL/S&P Aggressive Growth Series II**..................... .20% 0%* .20%
JNL/S&P Very Aggressive Growth Series II**................ .20% 0%* .20%
JNL/S&P Equity Growth Series II**......................... .20% 0%* .20%
JNL/S&P Equity Aggressive Growth Series II**.............. .20% 0%* .20%
Goldman Sachs/JNL Growth & Income Series.................. .925% .15%* 1.075%
Lazard/JNL Small Cap Value Series......................... 1.05% .15%* 1.20%
Lazard/JNL Mid Cap Value Series........................... .975% .15%* 1.125%
PPM America/JNL Balanced Series........................... .75% .15% .90%
PPM America/JNL High Yield Bond Series.................... .75% .15% .90%
PPM America/JNL Money Market Series....................... .60% .15% .75%
Salomon Brothers/JNL Balanced Series...................... .80% .15%* .95%
Salomon Brothers/JNL Global Bond Series................... .85% .15% 1.00%
Salomon Brothers/JNL High Yield Bond Series............... .80% .15%* .95%
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>
5
<PAGE> 9
*The JNL/Alliance Growth Series, JNL/JPM International & Emerging Markets
Series, JNL/PIMCO Total Return Bond Series, Goldman Sachs/JNL Growth & Income
Series, Lazard/JNL Small Cap Value Series, Lazard/JNL Mid Cap Value Series,
Salomon Brothers/JNL Balanced Series and Salomon Brothers/JNL High Yield Bond
Series commenced operations on , 1998 and the JNL/S&P
Conservative Growth Series I, JNL/S&P Moderate Growth Series I, JNL/S&P
Aggressive Growth Series I, JNL/S&P Very Aggressive Growth Series I, JNL/S&P
Equity Growth Series I, JNL/S&P Equity Aggressive Growth Series I, JNL/S&P
Conservative Growth Series II, JNL/S&P Moderate Growth Series II, JNL/S&P
Aggressive Growth Series II, JNL/S&P Very Aggressive Growth Series II, JNL/S&P
Equity Growth Series II, and JNL/S&P Equity Aggressive Growth Series II
commenced operations on April 1, 1998. These are estimated expenses for the
first fiscal year of operation. Actual expenses may be greater or lesser than
those shown.
**In addition to the expenses shown, these Series will indirectly bear
their pro rata share of fees and expenses of the underlying Series and the
investment return of these Series will be net of the expenses of the underlying
Series. Based on a hypothetical mix of investments in underlying Series, the
average weighted expense ratio for these Series would be:
<TABLE>
<S> <C>
JNL/S&P Conservative Growth Series I........................ 1.015%
JNL/S&P Moderate Growth Series I............................ 1.053%
JNL/S&P Aggressive Growth Series I.......................... 1.069%
JNL/S&P Very Aggressive Growth Series I..................... 1.085%
JNL/S&P Equity Growth Series I.............................. 1.063%
JNL/S&P Equity Aggressive Growth Series I................... 1.085%
JNL/S&P Conservative Growth Series II....................... 1.019%
JNL/S&P Moderate Growth Series II........................... 1.059%
JNL/S&P Aggressive Growth Series II......................... 1.086%
JNL/S&P Very Aggressive Growth Series II.................... 1.054%
JNL/S&P Equity Growth Series II............................. 1.081%
JNL/S&P Equity Aggressive Growth Series II.................. 1.078%
</TABLE>
Currently, Jackson National Financial Services, Inc. will reimburse each of
the following Series for annual expenses (excluding Management Fees) in excess
of .15% of average daily net assets. Prior to reimbursement, Total Series
Operating Expenses as a percentage of net assets for the period ended December
31, 1997, were: JNL Aggressive Growth Series -- %; JNL Capital Growth Series
- -- %; JNL Global Equities Series -- %; JNL/Alger Growth Series -- %;
JNL/Eagle Core Equity Series -- %; JNL/Eagle SmallCap Equity Series -- %;
JNL/Putnam Growth Series -- %; JNL/Putnam Value Equity Series -- %; PPM
America/JNL Balanced Series -- %; PPM America/JNL High Yield Bond Series --
%; PPM America/JNL Money Market Series -- %; Salomon Brothers/JNL Global
Bond Series -- %; Salomon Brothers/JNL U.S. Government & Quality Bond Series
- -- %; T. Rowe Price/JNL Established Growth Series -- %; T. Rowe Price/JNL
International Equity Investment Series -- %; and T. Rowe Price/JNL Mid-Cap
Growth Series -- %; and are expected to be: JNL/Alliance Growth Series -- %;
JNL/JPM International & Emerging Markets Series -- %; JNL/PIMCO Total Return
Bond Series -- %; Goldman Sachs/JNL Growth & Income Series -- %; Lazard/JNL
Small Cap Value Series -- %; Lazard/JNL Mid Cap Value Series -- %; Salomon
Brothers/JNL Balanced Series -- %; and Salomon Brothers/JNL High Yield Bond
Series -- %.
Currently, Jackson National Financial Services, Inc. will reimburse each of
the following series for all annual expenses (excluding Management Fees and the
Series' pro rata share of underlying Series expenses): JNL/S&P Conservative
Growth Series I -- %; JNL/S&P Moderate Growth Series I -- %; JNL/S&P
Aggressive Growth Series I -- %; JNL/S&P Very Aggressive Growth Series I --
%; JNL/S&P Equity Growth Series I -- %; JNL/S&P Equity Aggressive Growth
Series I -- %; JNL/S&P Conservative Growth Series II -- %; JNL/S&P Moderate
Growth Series II -- %; JNL/S&P Aggressive Growth Series II -- %; JNL/S&P
Very
6
<PAGE> 10
Aggressive Growth Series II -- %; JNL/S&P Equity Growth Series II -- %;
JNL/S&P Equity Aggressive Growth Series II -- %. Voluntary reimbursements to
these Series may be modified or discontinued at any time.
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 $134
JNL Capital Growth Series................................... $11 $35 $61 $134
JNL Global Equities Series.................................. $12 $37 $63 $140
JNL/Alger Growth Series..................................... $11 $36 $62 $137
JNL/Alliance Growth Series.................................. $ 9 $29 N/A N/A
JNL/Eagle Core Equity Series................................ $11 $33 N/A N/A
JNL/Eagle SmallCap Equity Series............................ $11 $35 N/A N/A
JNL/JPM International & Emerging Markets Series............. $11 $36 N/A N/A
JNL/PIMCO Total Return Bond Series.......................... $ 9 $27 N/A N/A
JNL/Putnam Growth Series.................................... $11 $33 $58 $128
JNL/Putnam Value Equity Series.............................. $11 $33 $58 $128
JNL/S&P Conservative Growth Series I........................ $ $ N/A N/A
JNL/S&P Moderate Growth Series I............................ $ $ N/A N/A
JNL/S&P Aggressive Growth Series I.......................... $ $ N/A N/A
JNL/S&P Very Aggressive Growth Series I..................... $ $ N/A N/A
JNL/S&P Equity Growth Series I.............................. $ $ N/A N/A
JNL/S&P Equity Aggressive Growth Series I................... $ $ N/A N/A
JNL/S&P Conservative Growth Series II....................... $ $ N/A N/A
JNL/S&P Moderate Growth Series II........................... $ $ N/A N/A
JNL/S&P Aggressive Growth Series II......................... $ $ N/A N/A
JNL/S&P Very Aggressive Growth Series II.................... $ $ N/A N/A
JNL/S&P Equity Growth Series II............................. $ $ N/A N/A
JNL/S&P Equity Aggressive Growth Series II.................. $ $ N/A N/A
Goldman Sachs/JNL Growth & Income Series.................... $11 $34 N/A N/A
Lazard/JNL Small Cap Value Series........................... $12 $38 N/A N/A
Lazard/JNL Mid Cap Value Series............................. $11 $36 N/A N/A
PPM America/JNL Balanced Series............................. $ 9 $29 $50 $111
PPM America/JNL High Yield Bond Series...................... $ 9 $29 $50 $111
PPM America/JNL Money Market Series......................... $ 8 $24 $42 $93
Salomon Brothers/JNL Balanced Series........................ $10 $30 N/A N/A
Salomon Brothers/JNL Global Bond Series..................... $10 $32 $55 $122
Salomon Brothers/JNL High Yield Bond Series................. $10 $30 N/A N/A
Salomon Brothers/JNL U.S. Government & Quality Bond
Series.................................................... $ 9 $27 $47 $105
T. Rowe Price/JNL Established Growth Series................. $10 $32 $55 $122
T. Rowe Price/JNL International Equity Investment Series.... $13 $40 $69 $151
T. Rowe Price/JNL Mid-Cap Growth Series..................... $11 $35 $61 $134
</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.
7
<PAGE> 11
- --------------------------------------------------------------------------------
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 thereon, in the
Annual Report included in the Statement of Additional Information.
JNL SERIES TRUST
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
JNL AGGRESSIVE GROWTH SERIES
------------------------------------------
PERIOD FROM PERIOD FROM
FISCAL YEAR APRIL 1, MAY 15,
ENDED 1996 TO 1995*
DECEMBER 31, DECEMBER 31, TO MARCH 31,
1997 1996 1996
------------ ------------ ------------
<S> <C> <C> <C>
SELECTED PER SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD........................ $ $13.13 $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)................................ 0.05 0.01
Net realized and unrealized gains on investments and foreign
currency related items.................................... 1.10 3.53
------- ------- ------
Total income from investment operations..................... 1.15 3.54
------- ------- ------
LESS DISTRIBUTIONS:
From net investment income.................................. (0.05) --
From net realized gains on investment transactions.......... (0.71) (0.41)
Return of capital........................................... (0.14) --
------- ------- ------
Total distributions......................................... (0.90) (0.41)
------- ------- ------
Net increase................................................ 0.25 3.13
------- ------- ------
NET ASSET VALUE, END OF PERIOD.............................. $ $13.38 $13.13
======= ======= ======
TOTAL RETURN(A)............................................. % 8.72% 35.78%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ $29,555 $8,527
Ratio of net operating expenses to average net
assets(b)(c).............................................. % 1.09% 1.09%
Ratio of net investment income to average net
assets(b)(c).............................................. % 0.77% 0.27%
Ratio of interest expense and dividends on short positions
to average net assets(b).................................. -- --
Portfolio turnover.......................................... % 85.22% 163.84%
Average commission rate paid(d)............................. $ $0.0242 n/a
RATIO INFORMATION ASSUMING NO EXPENSE REIMBURSEMENT OR FEES
PAID INDIRECTLY
Ratio of expenses to average net assets(b).................. % 1.40% 2.77%
Ratio of net investment income to average net assets(b)..... % 0.46% (1.41)%
</TABLE>
- -------------------------
* Commencement of operations.
(a) Assumes investment at net asset value at the beginning of the period,
reinvestment of all distributions, and a complete redemption of the
investment at the net asset value at the end of the period. Total return is
not annualized.
(b) Annualized.
(c) Computed after giving effect to the Advisor's expense reimbursement and fees
paid indirectly.
(d) Disclosure required for fiscal years beginning after September 1, 1995.
See notes to the financial statements.
8
<PAGE> 12
<TABLE>
<CAPTION>
JNL CAPITAL GROWTH SERIES JNL GLOBAL EQUITIES SERIES
------------------------------------------ ------------------------------------------
PERIOD FROM PERIOD FROM PERIOD FROM PERIOD FROM
FISCAL YEAR APRIL 1, MAY 15, FISCAL YEAR APRIL 1, MAY 15,
ENDED 1996 TO 1995* ENDED 1996 TO 1995*
DECEMBER 31, DECEMBER 31, TO MARCH 31, DECEMBER 31, DECEMBER 31, TO MARCH 31,
1997 1996 1996 1997 1996 1996
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
$ $13.86 $10.00 $ $13.75 $10.00
0.06 -- 0.03 0.10
0.70 4.70 2.72 4.02
------- ------- ------ -------- ------- -------
0.76 4.70 2.75 4.12
------- ------- ------ -------- ------- -------
-- -- (0.08) --
(0.16) (0.84) (0.90) (0.37)
-- -- (0.32) --
------- ------- ------ -------- ------- -------
(0.16) (0.84) (1.30) (0.37)
------- ------- ------ -------- ------- -------
0.60 3.86 1.45 3.75
------- ------- ------ -------- ------- -------
$ $14.46 $13.86 $ $15.20 $13.75
======= ======= ====== ======== ======= =======
% 5.45% 47.94% 19.99% 41.51%
$ $36,946 $9,578 $ $48,638 $16,141
% 1.09% 1.09% % 1.14% 1.15%
% 0.91% (0.49)% % 0.37% 0.39%
-- -- % -- --
% 115.88% 128.56% % 52.02% 142.36%
$ $0.0196 n/a $ $0.0162 n/a
% 1.27% 2.08% % 1.63% 2.25%
% 0.73% (1.48)% % (0.12)% (0.71)%
<CAPTION>
JNL/ALGER GROWTH SERIES
------------------------------------------
PERIOD FROM PERIOD FROM
FISCAL YEAR APRIL 1, OCTOBER 16,
ENDED 1996 TO 1995*
DECEMBER 31, DECEMBER 31, TO MARCH 31,
1997 1996 1996
------------ ------------ ------------
<S> <C> <C>
$ $10.38 $10.00
-- --
0.78 0.38
------- ------- ------
0.78 0.38
------- ------- ------
-- --
-- --
-- --
------- ------- ------
-- --
------- ------- ------
0.78 0.38
------- ------- ------
$11.16 $10.38
======= ======= ======
% 7.51% 3.80%
$ $38,252 $8,649
% 1.07% 1.03%
% (0.02)% (0.17)%
% -- --
% 59.92% 50.85%
$ $0.0441 n/a
% 1.19% 1.89%
% (0.14)% (1.03)%
</TABLE>
9
<PAGE> 13
JNL SERIES TRUST
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
JNL/EAGLE CORE JNL/EAGLE SMALLCAP
EQUITY SERIES EQUITY SERIES
----------------------------- -----------------------------
PERIOD FROM PERIOD FROM
FISCAL YEAR SEPTEMBER 16, FISCAL YEAR SEPTEMBER 16,
ENDED 1996* TO ENDED 1996* TO
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1997 1996
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
SELECTED PER SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD.................. $ $10.00 $ $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss).......................... 0.03 (0.01)
Net realized and unrealized gains on investments and
foreign currency related items...................... 0.62 1.55
------- ------- ------- -------
Total income from investment operations............... 0.65 1.54
------- ------- ------- -------
LESS DISTRIBUTIONS:
From net investment income............................ (0.03) --
From net realized gains on investment transactions.... -- --
Return of capital..................................... -- --
------- ------- ------- -------
Total distributions................................... (0.03) --
------- ------- ------- -------
Net increase.......................................... 0.62 1.54
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD........................ $ % $10.62 $ $11.54
======= ======= ======= =======
TOTAL RETURN(A)....................................... % 6.47% % 15.40%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).............. $ $ 1,954 $ $ 1,944
Ratio of net operating expenses to average net
assets(b)(c)(e)..................................... % 1.05% % 1.10%
Ratio of net investment income to average net
assets(b)(c)........................................ % 1.10% % (0.26)%
Ratio of interest expense and dividends on short
positions to average net assets(b).................. -- --
Portfolio turnover.................................... % 1.36% % 28.01%
Average commission rate paid(d)....................... $ $0.0452 $ $0.0264
RATIO INFORMATION ASSUMING NO EXPENSE REIMBURSEMENT OR
FEES PAID INDIRECTLY
Ratio of expenses to average net assets(b)(f)......... % 4.57% % 4.77%
Ratio of net investment income to average net
assets(b)........................................... % (2.42)% % (3.93)%
</TABLE>
- -------------------------
* Commencement of operations.
(a) Assumes investment at net asset value at the beginning of the period,
reinvestment of all distributions, and a complete redemption of the
investment at the net asset value at the end of the period. Total return is
not annualized.
(b) Annualized.
(c) Computed after giving effect to the Advisor's expense reimbursement and fees
paid indirectly.
(d) Disclosure required for fiscal years beginning after September 1, 1995.
(e) For the JNL/Putnam Growth Series during the six months ended June 30, 1997,
the net operating expense ratio excludes interest expense and dividends on
short positions. The ratio including interest expense and dividends on short
positions during the six months ended June 30, 1997 was 1.25%.
(f) For the JNL/Putnam Growth Series during the six months ended June 30, 1997,
the expense ratio excludes interest expense and dividends on short
positions. The ratio including interest expense and dividends on short
positions during the six months ended June 30, 1997 was 1.30%.
See notes to the financial statements.
10
<PAGE> 14
<TABLE>
<CAPTION>
JNL/PUTNAM GROWTH SERIES JNL/PUTNAM VALUE EQUITY SERIES
------------------------------------------ ------------------------------------------
PERIOD FROM PERIOD FROM PERIOD FROM PERIOD FROM
FISCAL YEAR APRIL 1, MAY 15, FISCAL YEAR APRIL 1, MAY 15,
ENDED 1996 TO 1995* ENDED 1996 TO 1995*
DECEMBER 31, DECEMBER 31, TO MARCH 31, DECEMBER 31, DECEMBER 31, TO MARCH 31,
1997 1996 1996 1997 1996 1996
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
$ $12.50 $10.00 $ $12.77 $10.00
0.04 0.01 0.10 0.23
2.12 3.66 1.97 2.86
------- ------- ------ ------- ------- ------
2.16 3.67 2.07 3.09
------- ------- ------ ------- ------- ------
(0.05) -- (0.15) (0.17)
(0.40) (1.17) (0.19) (0.15)
-- -- -- --
------- ------- ------ ------- ------- ------
(0.45) (1.17) (0.34) (0.32)
------- ------- ------ ------- ------- ------
1.71 2.50 1.73 2.77
------- ------- ------ ------- ------- ------
$ $14.21 $12.50 $ $14.50 $12.77
======= ======= ====== ======= ======= ======
% 17.28% 37.69% % 16.25% 31.14%
$ $22,804 $2,518 $ $17,761 $3,365
% 1.04% 0.95% % 0.85% 0.87%
% 0.94% 0.28% % 2.29% 2.33%
-- -- -- --
% 184.33% 255.03% % 13.71% 30.12%
$ $0.0175% n/a $ $0.0259 n/a
% 1.27% 5.38% % 1.53% 2.28%
% 0.71% (4.15)% % 1.61% 0.91%
</TABLE>
11
<PAGE> 15
JNL SERIES TRUST
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
PPM AMERICA/JNL BALANCED SERIES
------------------------------------------
PERIOD FROM PERIOD FROM
FISCAL YEAR APRIL 1, MAY 15,
ENDED 1996 TO 1995*
DECEMBER 31, DECEMBER 31, TO MARCH 31,
1997 1996 1996
------------ ------------ ------------
<S> <C> <C> <C>
SELECTED PER SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD........................ $ $11.17 $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)................................ 0.10 0.25
Net realized and unrealized gains on investments and foreign
currency related items.................................... 0.98 1.40
------- ------- ------
Total income from investment operations..................... 1.08 1.65
------- ------- ------
LESS DISTRIBUTIONS:
From net investment income.................................. (0.15) (0.19)
From net realized gains on investment transactions.......... (0.18) (0.29)
Return of capital........................................... -- --
------- ------- ------
Total distributions......................................... (0.33) (0.48)
------- ------- ------
Net increase................................................ 0.75 1.17
------- ------- ------
NET ASSET VALUE, END OF PERIOD.............................. $ $11.92 $11.17
======= ======= ======
TOTAL RETURN(A)............................................. % 9.72% 16.60%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ $24,419 $4,761
Ratio of net operating expenses to average net
assets(b)(c)(e)........................................... % 1.04% 1.01%
Ratio of net investment income to average net
assets(b)(c).............................................. % 2.39% 2.99%
Ratio of interest expense and dividends on short positions
to average net assets(b).................................. -- --
Portfolio turnover.......................................... % 158.15% 115.84%
Average commission rate paid(d)............................. $ $0.0494 n/a
RATIO INFORMATION ASSUMING NO EXPENSE REIMBURSEMENT OR FEES
PAID INDIRECTLY
Ratio of expenses to average net assets(b)(f)............... % 1.22% 3.71%
Ratio of net investment income to average net assets(b)..... % 2.21% 0.29%
</TABLE>
- -------------------------
* Commencement of operations.
(a) Assumes investment at net asset value at the beginning of the period,
reinvestment of all distributions, and a complete redemption of the
investment at the net asset value at the end of the period. Total return is
not annualized.
(b) Annualized.
(c) Computed after giving effect to the Advisor's expense reimbursement and fees
paid indirectly.
(d) Disclosure required for fiscal years beginning after September 1, 1995.
(e) For the JNL/Putnam Growth Series during the six months ended June 30, 1997,
the net operating expense ratio excludes interest expense and dividends on
short positions. The ratio including interest expense and dividends on short
positions during the six months ended June 30, 1997 was 1.25%.
(f) For the JNL/Putnam Growth series during the six months ended June 30, 1997,
the expense ratio excludes interest expense and dividends on short
positions. The ratio including interest expense and dividends on short
positions during the six months ended June 30, 1997 was 1.30%.
See notes to the financial statements.
12
<PAGE> 16
<TABLE>
<CAPTION>
PPM AMERICA/JNL PPM AMERICA/
HIGH YIELD BOND SERIES JNL MONEY MARKET SERIES
------------------------------------------ ------------------------------------------
PERIOD FROM PERIOD FROM PERIOD FROM PERIOD FROM
FISCAL YEAR APRIL 1, MAY 15, FISCAL YEAR APRIL 1, MAY 15,
ENDED 1996 TO 1995* ENDED 1996 TO 1995*
DECEMBER 31, DECEMBER 31, TO MARCH 31, DECEMBER 31, DECEMBER 31, TO MARCH 31,
1997 1996 1996 1997 1996 1996
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
$ $ 10.23 $10.00 $ $ 1.00 $ 1.00
0.51 0.73 0.04 0.04
0.64 0.04 -- --
------- ------- ------ ------- ------- ------
1.15 0.77 0.04 0.04
------- ------- ------ ------- ------- ------
(0.69) (054) (0.04) (0.04)
(0.02) -- -- --
-- -- -- --
------- ------- ------ ------- ------- ------
(0.71) (0.54) (0.04) (0.04)
------- ------- ------ ------- ------- ------
0.44 0.23 -- --
------- ------- ------ ------- ------- ------
$ $ 10.67 $10.23 $ $ 1.00 $ 1.00
======= ======= ====== ======= ======= ======
% 11.24% 7.82% % 3.61% 4.59%
$ $13,396 $6,156 $ $23,752 $6,816
% 0.88% 0.88% % 0.75% 0.75%
% 8.64% 8.34% % 4.75% 5.06%
-- -- -- --
% 113.08% 186.21% % -- --
$ n/a n/a $ n/a n/a
% 1.21% 1.50% % 0.85% 1.30%
% 8.31% 7.72% % 4.65% 4.51%
<CAPTION>
SALOMON BROTHERS/
JNL GLOBAL BOND SERIES
------------------------------------------
PERIOD FROM PERIOD FROM
FISCAL YEAR APRIL 1, MAY 15,
ENDED 1996 TO 1995*
DECEMBER 31, DECEMBER 31, TO MARCH 31,
1997 1996 1996
------------ ------------ ------------
<S> <C> <C>
$ $ 10.46 $10.00
0.42 0.81
------- ------- ------
------- ------- ------
(0.69) (0.56)
(0.26) (0.03)
------- ------- ------
======= ======= ======
======= ======= ======
% 10.68% 10.74%
$ $12,483 $6,380
% 0.99% 1.00%
% 7.52% 9.01%
-- --
% 109.85% 152.89%
$ n/a n/a
% 1.44% 2.14%
% 7.07% 7.87%
</TABLE>
13
<PAGE> 17
JNL SERIES TRUST
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
SALOMON BROTHERS/JNL U.S.
GOVERNMENT & QUALITY BOND SERIES
--------------------------------------------
PERIOD FROM PERIOD FROM
FISCAL YEAR APRIL 1, MAY 15,
ENDED 1996 TO 1995*
DECEMBER 31, DECEMBER 31, TO MARCH 31,
1997 1996 1996
------------ ------------ ------------
<S> <C> <C> <C>
SELECTED PER SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD........................ $ $10.09 $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)................................ 0.24 0.45
Net realized and unrealized gains on investments and foreign
currency related items.................................... 0.24 0.02
------- ------ ------
Total income from investment operations..................... 0.48 0.47
------- ------ ------
LESS DISTRIBUTIONS:
From net investment income.................................. (0.34) (0.34)
From net realized gains on investment transactions.......... (0.03) (0.04)
Return of capital........................................... -- --
------- ------ ------
Total distributions......................................... (0.37) (0.38)
------- ------ ------
Net increase................................................ 0.11 0.09
------- ------ ------
NET ASSET VALUE, END OF PERIOD.............................. $ $10.20 $10.09
======= ====== ======
TOTAL RETURN(A)............................................. % 4.82% 4.65%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $ $9,832 $3,007
Ratio of net operating expenses to average net
assets(b)(c).............................................. % 0.84% 0.84%
Ratio of net investment income to average net
assets(b)(c).............................................. % 5.72% 5.41%
Ratio of interest expense and dividends on short positions
to average net assets(b).................................. -- --
Portfolio turnover.......................................... % 218.50% 253.37%
Average commission rate paid(d)............................. $ n/a n/a
RATIO INFORMATION ASSUMING NO EXPENSE REIMBURSEMENT OR FEES
PAID INDIRECTLY
Ratio of expenses to average net assets(b).................. % 1.37% 2.53%
Ratio of net investment income to average net assets(b)..... % 5.19% 3.72%
</TABLE>
- -------------------------
* Commencement of operations.
(a) Assumes investment at net asset value at the beginning of the period,
reinvestment of all distributions, and a complete redemption of the
investment at the net asset value at the end of the period. Total return is
not annualized.
(b) Annualized.
(c) Computed after giving effect to the Advisor's expense reimbursement and fees
paid indirectly.
(d) Disclosure required for fiscal years beginning after September 1, 1995.
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.
See notes to the financial statements.
14
<PAGE> 18
<TABLE>
<CAPTION>
T. ROWE PRICE/JNL T. ROWE PRICE/JNL INTERNATIONAL
ESTABLISHED GROWTH SERIES EQUITY INVESTMENT SERIES
------------------------------------------ ------------------------------------------
PERIOD FROM PERIOD FROM PERIOD FROM PERIOD FROM
FISCAL YEAR APRIL 1, MAY 15, FISCAL YEAR APRIL 1, MAY 15,
ENDED 1996 TO 1995* ENDED 1996 TO 1995*
DECEMBER 31, DECEMBER 31, TO MARCH 31, DECEMBER 31, DECEMBER 31, TO MARCH 31,
1997 1996 1996 1997 1996 1996
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
$ $11.36 $10.00 $ $11.25 $10.00
0.03 0.07 0.06 0.04
1.81 2.68 0.90 1.21
------- ------- ------ ------- ------- -------
1.84 2.75 0.96 1.25
------- ------- ------ ------- ------- -------
(0.04) (0.06) (0.12) --
(0.09) (1.33) (0.01) --
(0.51) -- -- --
------- ------- ------ ------- ------- -------
(0.64) (1.39) (0.13) --
------- ------- ------ ------- ------- -------
1.20 1.36 0.83 1.25
------- ------- ------ ------- ------- -------
$ $12.56 $11.36 $ $12.08 $11.25
======= ======= ====== ======= ======= =======
% 16.12% 28.23% % 8.54% 12.50%
$ $32,291 $8,772 $ $48,204 $24,211
% 1.00% 1.00% % 1.25% 1.25%
% 0.59% 0.75% % 1.09% 0.78%
-- -- -- --
% 36.41% 101.13% % 5.93% 16.45%
$ $0.0288 n/a $ $0.0257 n/a
% 1.11% 1.11% % 1.29% 2.14%
% 0.48% 0.48% % 1.05% (0.11)%
<CAPTION>
T. ROWE PRICE/JNL
MID-CAP GROWTH SERIES
- ------------------------------------------
PERIOD FROM PERIOD FROM
FISCAL YEAR APRIL 1, MAY 15,
ENDED 1996 TO 1995*
DECEMBER 31, DECEMBER 31, TO MARCH 31,
1997 1996 1996
- ------------ ------------ ------------
<S> <C> <C>
$ $13.43 $10.00
(0.05) 0.06
------- ------- -------
------- ------- -------
(0.05) --
(0.36) (0.53)
------- ------- -------
------- ------- -------
------- ------- -------
======= ======= =======
% 13.91% 40.06%
$ $47,104 $10,545
% 1.10% 1.10%
% (0.81)% 0.82%
-- --
% 25.05% 66.04%
$ $0.0326 n/a
% 1.14% 2.10%
% (0.22)% (0.18)%
</TABLE>
15
<PAGE> 19
- --------------------------------------------------------------------------------
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; Alliance Capital Management L.P. serves as sub-adviser
for the JNL/Alliance Growth Series; Eagle Asset Management, Inc. serves as
sub-adviser for the JNL/Eagle Core Equity Series and JNL/Eagle SmallCap Equity
Series; J.P. Morgan Investment Management Inc. serves as sub-adviser for the
JNL/JPM International & Emerging Markets Series; Pacific Investment Management
Company serves as sub-adviser for the JNL/PIMCO Total Return Bond Series; Putnam
Investment Management, Inc. serves as sub-adviser for the JNL/Putnam Growth and
JNL/Putnam Value Equity Series; Standard & Poor's Investment Advisory Services,
Inc. serves as sub-adviser for the JNL/S&P Conservative Growth Series I, JNL/S&P
Moderate Growth Series I, JNL/S&P Aggressive Growth Series I, JNL/S&P Very
Aggressive Growth Series I, JNL/S&P Equity Growth Series I, JNL/S&P Equity
Aggressive Growth Series I, JNL/S&P Conservative Growth Series II, JNL/S&P
Moderate Growth Series II, JNL/S&P Aggressive Growth Series II, JNL/S&P Very
Aggressive Growth Series II, JNL/S&P Equity Growth Series II, and JNL/S&P Equity
Aggressive Growth Series II; Goldman Sachs Asset Management serves as
sub-adviser for the Goldman Sachs/JNL Growth & Income Series; Lazard Asset
Management serves as sub-adviser for the Lazard/JNL Small Cap Value and
Lazard/JNL Mid Cap Value Series; PPM America, Inc. serves as sub-adviser for the
PPM America/JNL Balanced, PPM America/JNL High Yield Bond and PPM America/JNL
Money Market Series; Salomon Brothers Asset Management Inc serves as sub-adviser
for the Salomon Brothers/JNL Balanced, Salomon Brothers/JNL Global Bond, Salomon
Brothers/JNL High Yield Bond and Salomon Brothers/JNL U.S. Government & Quality
Bond Series; T. Rowe Price Associates, Inc. serves as sub-adviser for the T.
Rowe Price/JNL Established Growth and T. Rowe Price/JNL Mid-Cap Growth Series;
and Rowe Price-Fleming International, Inc. serves as sub-adviser for the T. Rowe
Price/JNL International Equity Investment Series.
16
<PAGE> 20
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, JNL Aggressive Growth,
Lazard/JNL Small Cap Value and Lazard/JNL Mid Cap Value Series qualifies as a
diversified investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"). As a fundamental policy, the JNL Global Equities
Series, JNL/Alger Growth Series, JNL/Alliance Growth Series, JNL/Eagle Core
Equity Series, JNL/Eagle SmallCap Equity Series, JNL/JPM International &
Emerging Markets Series, JNL/PIMCO Total Return Bond Series, JNL/Putnam Growth
Series, JNL/Putnam Value Equity Series, Goldman Sachs/JNL Growth & Income
Series, PPM America/JNL Balanced Series, PPM America/JNL High Yield Bond Series,
PPM America/JNL Money Market Series, Salomon Brothers/JNL Balanced Series,
Salomon Brothers/JNL Global Bond Series, Salomon Brothers/JNL High Yield 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 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, JNL Aggressive Growth, Lazard/JNL Small Cap Value and Lazard/JNL
Mid Cap Value 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, JNL Aggressive Growth, Lazard/JNL Small
Cap Value and Lazard/JNL Mid Cap Value 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 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.
INVESTING IN UNDERLYING SERIES
Each of the JNL/S&P Conservative Growth Series I, JNL/S&P Moderate Growth
Series I, JNL/S&P Aggressive Growth Series I, JNL/S&P Very Aggressive Growth
Series I, JNL/S&P Equity Growth Series I, JNL/S&P Equity Aggressive Growth
Series I, JNL/S&P Conservative Growth Series II, JNL/S&P Moderate Growth Series
II, JNL/S&P Aggressive Growth Series II, JNL/S&P Very Aggressive Growth Series
II, JNL/S&P Equity Growth Series II, and JNL/S&P Equity Aggressive Growth Series
II concentrates its investments in the shares of Underlying Series, so each
Series' investment performance is directly related to the investment performance
of the Underlying Series in which it is invested. The ability of
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<PAGE> 21
each Series to meet its investment objective is directly related to the ability
of the Underlying Series to meet their objectives as well as the allocation
among those Underlying Series. There can be no assurance that the investment
objective of any of the Series or the Underlying Series will be achieved.
As a shareholder of an Underlying Series, a Series will bear its pro rata
share of the Underlying Series expenses, which could result in duplication of
certain fees, including management and administrative fees. Although a Series
may invest in a number of Underlying Series, this investment strategy does not
eliminate investment risk. Investment decisions by the sub-advisers of the
Underlying Series are made independently of the investment decisions of Standard
& Poor's Investment Advisory Services, Inc.
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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.
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JNL CAPITAL GROWTH SERIES
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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 31, 1997, the MidCap Index included
companies with capitalizations between approximately $213 million and $13.7
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.
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JNL GLOBAL EQUITIES SERIES
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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.
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<PAGE> 23
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/ALLIANCE GROWTH SERIES
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The investment objective of the JNL/Alliance Growth Series is to seek
long-term growth of capital. Whatever current income is generated by the Series
is incidental to the objective of capital growth. It is a diversified Series
that seeks to achieve its objective by investing primarily in common stocks or
securities with common stock characteristics. Securities designated as having
"common stock" characteristics include, but are not limited to, securities
convertible into or exchangeable for common stock. The potential for
appreciation of capital is the basis for investment decisions. The Series'
sub-adviser considers the factors that it believes affect potential for capital
appreciation, including an issuer's current and projected revenue, earnings,
cash flow and assets, as well as general market conditions.
When the outlook for common stocks is not considered promising, for
temporary defensive purposes, a substantial portion of the assets may be
invested in securities of the U.S. Government, its agencies and
instrumentalities, cash and cash equivalents (such as commercial bank and
savings association obligations, commercial paper and short-term corporate bonds
and notes) and repurchase agreements.
Because the securities purchased by this Series in pursuing its investment
objective are selected for
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<PAGE> 24
growth potential rather than production of income, the market values of such
securities (and therefore, to a large extent, the net asset value per share of
the Series) will tend to be more volatile in response to market changes than
they would be if income-producing securities were sought for investment by the
Series. Up to 25% of the Series' total assets may be invested in foreign
securities. (See "Investment Risks -- Foreign Securities").
The Series may write covered call and put options on any securities in
which it may invest. The Series may also write call and put options on any
securities index composed of securities in which it may invest. The Series may
purchase put and call options on any securities in which it may invest or
options on any securities index composed of securities in which it may invest.
The Series may purchase and write covered options on the yield "spread," or
yield differential between two securities. Such transactions are referred to as
"yield curve" options. The Series may purchase and sell options that are traded
(i) on U.S. exchanges, (ii) on foreign exchanges and (iii) over-the-counter with
broker-dealers who make markets in these options. The Series may engage in
futures transactions and options thereon on securities, securities indices,
foreign currencies and other financial instruments and indices. The Series may
engage in futures transactions for hedging purposes or, subject to regulations
promulgated by the Commodity Futures Trading Commission, for non-hedging
purposes.
The Series may hold a portion of its assets in foreign currencies and enter
into forward foreign currency exchange contracts. The Series may also purchase
and sell exchange-traded futures contracts relating to foreign currency and
purchase and sell put and call options on currencies and futures contracts. A
significant portion of the Series' currency transactions will be
over-the-counter transactions. The Series may enter into forward foreign
currency exchange contracts to reduce the risks of fluctuations in exchange
rates. The Series may purchase and write put and call options on currencies for
the purpose of protecting against declines in the U.S. dollar value of foreign
portfolio securities and against increases in the U.S. dollar cost of foreign
securities to be acquired. The Series will not speculate in currency contracts
or options. The Series may use currency contracts and options to cross-hedge.
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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
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<PAGE> 25
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, foreign currency
transactions with respect to underlying common stock, preferred 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 American Depositary
Receipts. (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
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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 SmallCap 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 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 American Depositary
Receipts, 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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JNL/JPM INTERNATIONAL & EMERGING MARKETS SERIES
- --------------------------------------------------------------------------------
The investment objective of the JNL/JPM International & Emerging Markets
Series is to provide high total return from a portfolio of equity securities of
foreign companies in developed and, to a lesser extent, developing markets.
Total return consists of realized and unrealized capital gains and losses plus
income. It is a diversified Series that seeks to achieve its investment
objective by investing primarily in common stocks and other equity securities of
non-U.S. companies in developed markets and, to a lesser extent, companies in
developing markets.
In normal circumstances, substantially all and at least 65% of the value of
the Series' total assets are invested in equity securities of foreign issuers.
Equity securities include common stocks, preferred stocks, warrants, rights,
convertible securities, trust certificates, limited partnership interests and
equity participations. The Series' assets are invested in securities of issuers
located in at least three foreign countries. The Series' equity investments may
or may not pay dividends or carry voting rights. The Series' primary equity
investments are common stocks of established companies based in developed
countries outside the United States. However, the Series will also invest in
equity securities of issuers located in developing countries or "emerging
markets." The Series invests in securities listed on foreign or domestic
securities exchanges and securities traded in foreign or domestic
over-the-counter markets, and may invest in certain restricted or unlisted
securities.
The sub-adviser considers "emerging markets" to be any country which is
generally considered to be an emerging or developing country by the World Bank,
the International Finance Corporation, the United Nations or its authorities.
The Series will focus its emerging market investments in those countries which
it believes have strongly developing economies and in which the markets are
becoming more sophisticated. An issuer in an emerging market is one that: (i)
has its principal securities trading market in an emerging market country; (ii)
is organized under the laws of an emerging market; (iii) derives 50% or more of
its total revenue from either goods produced, sales made or services performed
in emerging markets; or (iv) has at least 50% of its assets located in emerging
markets.
The Series' investments are primarily quoted in foreign currencies but it
may also invest in securities quoted in the U.S. dollar or multinational
currency units such as the ECU. Through the use of forward foreign currency
exchange contracts, the sub-adviser actively manages the Series' currency
exposure in developed countries.
The Series may also invest in money market instruments denominated in U.S.
dollars and other currencies, purchase securities on a when-issued or delayed
delivery basis, enter into repurchase and reverse repurchase agreements, loan
its portfolio securities and purchase certain privately placed securities.
The Series is permitted to invest in money market instruments denominated
in U.S. dollars and other currencies although it intends to stay invested in
equity securities to the extent practical in light of its objective. Under
normal circumstances, the Series will purchase money market instruments to
invest temporary cash balances or to maintain liquidity to meet redemptions.
However, the Series may also invest in money market instruments without
limitation as a temporary defensive measure taken in the sub-adviser's judgment
during, or in anticipation of, adverse market conditions.
The Series may purchase and sell exchange traded and over-the-counter put
and call options on securities and securities indexes, purchase and sell futures
contracts on securities and securities indexes and purchase and sell put and
call options on futures contracts on securities and securities indexes.
The Series may invest up to 10% of its total assets in shares of investment
companies and up to 5% of its total assets in any one investment company as long
as that investment does not represent more than 3% of the total voting stock of
the acquired investment company. Investments in the securities of other
investment companies may involve duplication of advisory fees and other
expenses. Certain emerging markets are closed to
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investment by foreigners. The Series may be able to invest in issuers in certain
emerging markets primarily through specifically authorized investment funds.
The Series seeks to achieve its investment objective through a combination
of country allocation, stock selection and currency management. The sub-adviser
uses a disciplined portfolio construction process to seek to enhance returns and
reduce volatility in the market value of the Series. To allocate the Series
within developed and developing markets, the sub-adviser uses fundamental
research, quantitative valuation techniques and experienced judgment to identify
those countries whose equity prices appear most attractive relative to future
earnings prospects. Based on this analysis, the sub-adviser allocates the
Series' assets among countries, emphasizing those countries with the highest
expected returns consistent with overall portfolio liquidity. Under normal
circumstances, the sub-adviser expects that approximately 75% of the value of
the Series' equity investments will be in companies in developed markets and 25%
in companies in emerging markets. The sub-adviser may vary this allocation in a
manner consistent with the Series' investment objective and current market
conditions. (See "Investment Risks -- Foreign Securities" and "Investment Risks
- --Emerging Markets").
Using a variety of quantitative valuation techniques and based on analysts'
industry expertise, issuers in each country are ranked within industrial sectors
according to their relative value. Based on this valuation, the sub-adviser
selects the issuers which appear the most attractive for the Series. The Series
will be diversified across industrial sectors in each country.
The sub-adviser manages the Series actively in pursuit of its investment
objective. The Series does not expect to trade in securities for short-term
profits; however, when circumstances warrant, securities may be sold without
regard to the length of time held. To the extent the Series engages in
short-term trading, it may incur increased transaction costs.
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JNL/PIMCO TOTAL RETURN BOND SERIES
- --------------------------------------------------------------------------------
The investment objective of the JNL/PIMCO Total Return Bond Series is to
seek to realize maximum total return, consistent with preservation of capital
and prudent investment management. It is a diversified Series that seeks to
achieve its investment objective by investing under normal circumstances at
least 65% of its assets in a diversified portfolio of fixed income securities of
varying maturities. The average portfolio duration of this Series will normally
vary within a three- to six-year time frame based on the sub-adviser's forecast
for interest rates. The Series may invest up to 10% of its assets in fixed
income securities that are rated below investment grade but rated B or higher by
Moody's or S&P (or, if unrated, determined by the sub-adviser to be of
comparable quality). The Series may also invest up to 20% of its assets in
securities denominated in foreign currencies, and may invest beyond this limit
in U.S. dollar-denominated securities of foreign issuers. The Series will
concentrate its foreign investments in securities of issuers based in developed
countries, but may invest up to 10% of its assets in securities of issuers based
in emerging market countries. Portfolio holdings will be concentrated in areas
of the bond market (based on quality, sector, coupon or maturity) which the
sub-adviser believes to be relatively undervalued. (See "Investment Risks --
Foreign Securities" and "Investment Risks -- Emerging Markets").
The Series may invest in convertible securities. It may invest in fixed-
and floating-rate loans arranged through private negotiations between an issuer
of debt instruments and one or more financial institutions. Generally, the
Series' investments in loans are expected to take the form of loan
participations and assignments of portions of loans from third parties. The
Series may engage in credit spread trades and invest in floating rate debt
instruments. The Series may also invest in inverse floating rate debt
instruments. The Series will not invest more than 5% of its net assets in any
combination of
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inverse floater, interest only, or principal only securities. The Series may
invest all of its assets in mortgage- or other asset-backed securities. The
Series may invest in repurchase agreements, reverse repurchase agreements,
dollar rolls and may purchase or sell securities on a when-issued, delayed
delivery, or forward commitment basis.
The Series may invest in Brady Bonds and may invest in sovereign debt
(other than Brady Bonds) issued by governments, their agencies or
instrumentalities, or other government-related entities located in emerging
market countries. The Series may buy and sell foreign currencies on a spot and
forward basis to reduce the risks of adverse changes in foreign exchange rates.
The Series may invest in options on foreign currencies and foreign currency
futures and options thereon. The Series also may invest in foreign currency
exchange-related securities, such as foreign currency warrants and other
instruments whose return is linked to foreign currency exchange rates. The
Series will use these techniques to hedge at least 75% of its exposure to
foreign currency.
The Series may purchase and write call and put options on securities,
securities indexes and foreign currencies, and enter into futures contracts and
use options on futures contracts. The Series also may enter into swap agreements
with respect to foreign currencies, interest rates, and securities indexes. The
Series may use these techniques to hedge against changes in interest rates,
foreign currency exchange rates or securities prices or as part of its overall
investment strategies. The Series may also purchase and sell options relating to
foreign currencies for purposes of increasing exposure to a foreign currency or
to shift exposure to foreign currency fluctuations from one country to another.
The Series will not enter into a swap agreement with any single party if the net
amount owed or to be received under existing contracts with that party would
exceed 5% of the Series' assets.
The Series does not expect to trade in securities for short-term profits;
however, when circumstances warrant, securities may be sold without regard to
the length of time held. To the extent the Series engages in short-term trading,
it may incur increased transaction costs.
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JNL/PUTNAM GROWTH SERIES
- --------------------------------------------------------------------------------
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.
The 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
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<PAGE> 30
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
- --------------------------------------------------------------------------------
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.
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JNL/S&P CONSERVATIVE GROWTH SERIES I
- --------------------------------------------------------------------------------
The investment objective of the JNL/S&P Conservative Growth Series I is to
seek capital growth and current income. In pursuit of this objective, the Series
invests in a diversified group of Series of the JNL Series Trust ("Underlying
Series"). The Underlying Series in which the JNL/S&P Conservative Growth Series
I may invest are the JNL Aggressive Growth Series, JNL Capital Growth Series,
JNL Global Equities Series, JNL/Alger Growth Series, JNL/Eagle Core Equity
Series, JNL/Eagle SmallCap Equity Series, JNL/Putnam Growth Series, JNL/Putnam
Value Equity Series, PPM America/JNL Balanced Series, PPM America/JNL High Yield
Bond Series, PPM America/JNL Money Market Series, Salomon Brothers/JNL Global
Bond Series, Salomon Brothers/ JNL U.S. Government & Quality Bond Series, T.
Rowe Price/JNL Established Growth Series, T. Rowe Price/JNL International Equity
Investment Series, and T. Rowe Price/JNL Mid-Cap Growth Series.
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<PAGE> 31
Under normal circumstances, the Series allocates approximately 55% to 65%
of its assets to Underlying Series that invest primarily in equity securities,
30% to 40% to Underlying Series that invest primarily in fixed-income securities
and 0% to 10% to Underlying Series that invest primarily in money market funds.
Within these three asset classes, the Series remains flexible with respect to
the percentage it will allocate among particular Underlying Series. When the
sub-adviser believes that a temporary defensive position is desirable, the
Series may invest up to 100% of its assets in cash or cash equivalents.
The Series seeks to achieve capital growth through its investments in
Underlying Series that invest primarily in equity securities. Such investments
may include Series that invest in stocks of large established companies as well
as those that invest in stocks of smaller companies with above-average growth
potential.
The Series seeks to achieve current income through its investment in
Underlying Series that invest primarily in fixed-income securities. Such
investments may include Underlying Series that invest in foreign bonds
denominated in currencies other than U.S. dollars as well as Underlying Series
that invest exclusively in bonds of U.S. issuers. The Series may invest in
Underlying Series that invest exclusively in investment-grade securities, as
well as Underlying Series that invest in high-yield bonds.
The allocation of assets in the Series is expected to result in less risk
than that incurred by JNL/S&P Moderate Growth Series I, JNL/S&P Aggressive
Growth Series I, JNL/S&P Very Aggressive Growth Series I, JNL/S&P Equity Growth
Series I or JNL/S&P Equity Aggressive Growth Series I.
- --------------------------------------------------------------------------------
JNL/S&P MODERATE GROWTH SERIES I
- --------------------------------------------------------------------------------
The investment objective of the JNL/S&P Moderate Growth Series I is to seek
capital growth. Current income is a secondary objective. In pursuit of these
objectives, the Series invests in a diversified group of Series of the JNL
Series Trust ("Underlying Series"). The Underlying Series in which the JNL/S&P
Moderate Growth Series I may invest are the JNL Aggressive Growth Series, JNL
Capital Growth Series, JNL Global Equities Series, JNL/Alger Growth Series,
JNL/Eagle Core Equity Series, JNL/Eagle SmallCap Equity Series, JNL/Putnam
Growth Series, JNL/Putnam Value Equity Series, PPM America/ JNL Balanced Series,
PPM America/JNL High Yield Bond Series, PPM America/JNL Money Market Series,
Salomon Brothers/JNL Global Bond Series, Salomon Brothers/JNL U.S. Government &
Quality Bond Series, T. Rowe Price/JNL Established Growth Series, T. Rowe
Price/JNL International Equity Investment Series, and T. Rowe Price/JNL Mid-Cap
Growth Series.
Under normal circumstances, the Series allocates approximately 70% to 80%
of its assets to Underlying Series that invest primarily in equity securities
and 20% to 30% to Underlying Series that invest primarily in fixed-income
securities. Within these asset classes, the Series remains flexible with respect
to the percentage it will allocate among particular Underlying Series. When the
sub-adviser believes that a temporary defensive position is desirable, the
Series may invest up to 100% of its assets in cash or cash equivalents.
The Series seeks to achieve capital growth through its investments in
Underlying Series that invest primarily in equity securities. Such investments
may include Underlying Series that invest in stocks of large established
companies as well as those that invest in stocks of smaller companies with
above-average growth potential.
The Series seeks to achieve current income through its investment in
Underlying Series that invest
28
<PAGE> 32
primarily in fixed-income securities. Such investments may include Underlying
Series that invest in foreign bonds denominated in currencies other than U.S.
dollars as well as Underlying Series that invest exclusively in bonds of U.S.
issuers. The Series may invest in Underlying Series that invest exclusively in
investment-grade securities, as well as Underlying Series that invest in
high-yield bonds.
The allocation of assets in the Series is expected to result in less risk
than that incurred by JNL/S&P Aggressive Growth Series I, JNL/S&P Very
Aggressive Growth Series I, JNL/S&P Equity Growth Series I or JNL/S&P Equity
Aggressive Growth Series I, but more risk than JNL/S&P Conservative Growth
Series I.
- --------------------------------------------------------------------------------
JNL/S&P AGGRESSIVE GROWTH SERIES I
- --------------------------------------------------------------------------------
The primary investment objective of the JNL/S&P Aggressive Growth Series I
is to seek capital growth. In pursuit of this objective, the Series invests in a
diversified group of Series of the JNL Series Trust ("Underlying Series"). The
Underlying Series in which the JNL/S&P Aggressive Growth Series I may invest are
the JNL Aggressive Growth Series, JNL Capital Growth Series, JNL Global Equities
Series, JNL/Alger Growth Series, JNL/Eagle Core Equity Series, JNL/Eagle
SmallCap Equity Series, JNL/Putnam Growth Series, JNL/Putnam Value Equity
Series, PPM America/JNL Balanced Series, PPM America/JNL High Yield Bond Series,
PPM America/JNL Money Market Series, Salomon Brothers/ JNL Global Bond Series,
Salomon Brothers/ JNL U.S. Government & Quality Bond Series, T. Rowe Price/JNL
Established Growth Series, T. Rowe Price/JNL International Equity Investment
Series, and T. Rowe Price/JNL Mid-Cap Growth Series.
Under normal circumstances, the Series allocates approximately 85% to 95%
of its assets to Underlying Series that invest primarily in equity securities
and 5% to 15% to Underlying Series that invest primarily in fixed-income
securities. Within these asset classes, the Series remains flexible with respect
to the percentage it will allocate among particular Underlying Series. When the
sub-adviser believes that a temporary defensive position is desirable, the
Series may invest up to 100% of its assets in cash or cash equivalents.
The Series seeks to achieve capital growth primarily through its
investments in Underlying Series that invest primarily in equity securities.
Such investments may include Underlying Series that invest in stocks of large
established companies as well as those that invest in stocks of smaller
companies with above-average growth potential.
The Series seeks to achieve capital growth secondarily through its
investment in Underlying Series that invest primarily in fixed-income
securities. Such investments may include Underlying Series that invest in
foreign bonds denominated in currencies other than U.S. dollars as well as
Underlying Series that invest exclusively in bonds of U.S. issuers. The Series
may invest in Underlying Series that invest exclusively in investment-grade
securities, as well as Underlying Series that invest in high-yield bonds.
The allocation of assets in the Series is expected to result in less risk
than that incurred by JNL/S&P Very Aggressive Growth Series I, JNL/S&P Equity
Growth Series I or JNL/S&P Equity Aggressive Growth Series I, but more risk than
JNL/S&P Conservative Growth Series I or JNL/S&P Moderate Growth Series I.
29
<PAGE> 33
- --------------------------------------------------------------------------------
JNL/S&P VERY AGGRESSIVE GROWTH SERIES I
- --------------------------------------------------------------------------------
The investment objective of the JNL/S&P Very Aggressive Growth Series I is
to seek capital growth. In pursuit of this objective, the Series invests in a
diversified group of Series of the JNL Series Trust ("Underlying Series"). The
Underlying Series in which the JNL/S&P Very Aggressive Growth Series I may
invest are the JNL Aggressive Growth Series, JNL Capital Growth Series, JNL
Global Equities Series, JNL/Alger Growth Series, JNL/Eagle Core Equity Series,
JNL/Eagle SmallCap Equity Series, JNL/Putnam Growth Series, JNL/Putnam Value
Equity Series, PPM America/JNL Balanced Series, PPM America/JNL High Yield Bond
Series, PPM America/JNL Money Market Series, Salomon Brothers/ JNL Global Bond
Series, Salomon Brothers/JNL U.S. Government & Quality Bond Series, T. Rowe
Price/JNL Established Growth Series, T. Rowe Price/JNL International Equity
Investment Series, and T. Rowe Price/JNL Mid-Cap Growth Series.
Under normal circumstances, the Series allocates up to 100% of its assets
to Underlying Series that invest primarily in equity securities. The Series
remains flexible with respect to the percentage it will allocate among
particular Underlying Series. When the sub-adviser believes that a temporary
defensive position is desirable, the Series may invest up to 100% of its assets
in cash or cash equivalents.
The Series seeks to achieve capital growth through its investments in
Underlying Series that invest primarily in equity securities. Such investments
may include Underlying Series that invest in stocks of large established
companies as well as those that invest in stocks of smaller companies with
above-average growth potential.
The allocation of assets in the Series is expected to result in more risk
than that incurred by JNL/S&P Conservative Growth Series I, JNL/S&P Moderate
Growth Series I, JNL/S&P Aggressive Growth Series I, JNL/S&P Equity Growth
Series I or JNL/ S&P Equity Aggressive Growth Series I.
- --------------------------------------------------------------------------------
JNL/S&P EQUITY GROWTH SERIES I
- --------------------------------------------------------------------------------
The investment objective of the JNL/S&P Equity Growth Series I is to seek
capital growth. In pursuit of this objective, the Series invests in a
diversified group of Series of the JNL Series Trust ("Underlying Series"). The
Underlying Series in which the JNL/S&P Equity Growth Series I may invest are the
JNL Aggressive Growth Series, JNL Capital Growth Series, JNL Global Equities
Series, JNL/Alger Growth Series, JNL/Eagle Core Equity Series, JNL/Eagle
SmallCap Equity Series, JNL/Putnam Growth Series, JNL/Putnam Value Equity
Series, PPM America/ JNL Balanced Series, PPM America/JNL High Yield Bond
Series, PPM America/JNL Money Market Series, Salomon Brothers/JNL Global Bond
Series, Salomon Brothers/JNL U.S. Government & Quality Bond Series, T. Rowe
Price/JNL Established Growth Series, T. Rowe Price/JNL International Equity
Investment Series, and T. Rowe Price/JNL Mid-Cap Growth Series.
Under normal circumstances, the Series allocates 100% of its assets to
Underlying Series that invest primarily in equity securities. The Series remains
flexible with respect to the percentage it will allocate among particular
Underlying Series. When the sub-adviser believes that a temporary defensive
position is desirable, the Series may invest up to 100% of its assets in cash or
cash equivalents.
The Series invests in Underlying Series that invest primarily in equity
securities. Such investments may include Underlying Series that invest in stocks
of large established companies as well as those that invest in stocks of smaller
companies with above-average growth potential.
30
<PAGE> 34
The allocation of assets in the Series is expected to result in more risk
than that incurred by JNL/S&P Conservative Growth Series I, JNL/S&P Moderate
Growth Series I and JNL/S&P Aggressive Growth Series I, but less risk than
JNL/S&P Equity Aggressive Growth Series I or JNL/S&P Very Aggressive Growth
Series I.
- --------------------------------------------------------------------------------
JNL/S&P EQUITY AGGRESSIVE GROWTH SERIES I
- --------------------------------------------------------------------------------
The investment objective of the JNL/S&P Equity Aggressive Growth Series I
is to seek capital growth. In pursuit of this objective, the Series invests in a
diversified group of Series of the JNL Series Trust ("Underlying Series"). The
Underlying Series in which the JNL/S&P Equity Aggressive Growth Series I may
invest are the JNL Aggressive Growth Series, JNL Capital Growth Series, JNL
Global Equities Series, JNL/Alger Growth Series, JNL/Eagle Core Equity Series,
JNL/Eagle SmallCap Equity Series, JNL/Putnam Growth Series, JNL/Putnam Value
Equity Series, PPM America/JNL Balanced Series, PPM America/JNL High Yield Bond
Series, PPM America/JNL Money Market Series, Salomon Brothers/JNL Global Bond
Series, Salomon Brothers/ JNL U.S. Government & Quality Bond Series, T. Rowe
Price/JNL Established Growth Series, T. Rowe Price/JNL International Equity
Investment Series, and T. Rowe Price/JNL Mid-Cap Growth Series.
Under normal circumstances, the Series allocates 100% of its assets to
Underlying Series that invest primarily in equity securities. The Series remains
flexible with respect to the percentage it will allocate among particular
Underlying Series. When the sub-adviser believes that a temporary defensive
position is desirable, the Series may invest up to 100% of its assets in cash or
cash equivalents.
The Series invests in Underlying Series that invest primarily in equity
securities. Such investments may include Underlying Series that invest in stocks
of large established companies as well as those that invest in stock of smaller
companies with above-average growth potential.
The allocation of assets in the Series is expected to result in more risk
than that incurred by JNL/S&P Conservative Growth Series I, JNL/S&P Moderate
Growth Series I, JNL/S&P Aggressive Growth Series I or JNL/S&P Equity Growth
Series I, but less risk than JNL/S&P Very Aggressive Growth Series I.
- --------------------------------------------------------------------------------
JNL/S&P CONSERVATIVE GROWTH SERIES II
- --------------------------------------------------------------------------------
The investment objective of the JNL/S&P Conservative Growth Series II is to
seek capital growth and current income. In pursuit of this objective, the Series
invests in a diversified group of Series of the JNL Series Trust ("Underlying
Series"). The Underlying Series in which the JNL/S&P Conservative Growth Series
II may invest are the JNL Aggressive Growth Series, JNL Global Equities Series,
JNL/Alliance Growth Series, JNL/JPM International & Emerging Markets Series,
JNL/PIMCO Total Return Bond Series, JNL/Putnam Growth Series, JNL/Putnam Value
Equity Series, Goldman Sachs/JNL Growth & Income Series, Lazard/ JNL Small Cap
Value Series, Lazard/JNL Mid Cap Value Series, PPM America/JNL Money Market
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<PAGE> 35
Series, Salomon Brothers/JNL Balanced Series, Salomon Brothers/JNL Global Bond
Series, Salomon Brothers/ JNL High Yield Bond Series, T. Rowe Price/JNL
International Equity Investment Series, and T. Rowe Price/JNL Mid-Cap Growth
Series.
Under normal circumstances, the Series allocates approximately 60% to 70%
of its assets to Underlying Series that invest primarily in equity securities
and 30% to 40% to Underlying Series that invest primarily in fixed-income
securities. Within these asset classes, the Series remains flexible with respect
to the percentage it will allocate among particular Underlying Series. When the
sub-adviser believes that a temporary defensive position is desirable, the
Series may invest up to 100% of its assets in cash or cash equivalents.
The Series seeks to achieve capital growth through its investments in
Underlying Series that invest primarily in equity securities. Such investments
may include Underlying Series that invest in stocks of large established
companies as well as those that invest in stocks of smaller companies with
above-average growth potential.
The Series seeks to achieve current income through its investment in
Underlying Series that invest primarily in fixed-income securities. Such
investments may include Underlying Series that invest in foreign bonds
denominated in currencies other than U.S. dollars as well as Underlying Series
that invest exclusively in bonds of U.S. issuers. The Series may invest in
Underlying Series that invest exclusively in investment-grade securities, as
well as Underlying Series that invest in high-yield bonds.
The allocation of assets in the Series is expected to result in less risk
than that incurred by JNL/S&P Moderate Growth Series II, JNL/S&P Aggressive
Growth Series II, JNL/S&P Very Aggressive Growth Series II, JNL/S&P Equity
Growth Series II or JNL/S&P Equity Aggressive Growth Series II.
- --------------------------------------------------------------------------------
JNL/S&P MODERATE GROWTH SERIES II
- --------------------------------------------------------------------------------
The investment objective of the JNL/S&P Moderate Growth Series II is to
seek capital growth. Current income is a secondary objective. In pursuit of
these objectives, the Series invests in a diversified group of Series of the JNL
Series Trust ("Underlying Series"). The Underlying Series in which the JNL/S&P
Moderate Growth Series II may invest are the JNL Aggressive Growth Series, JNL
Global Equities Series, JNL/Alliance Growth Series, JNL/JPM International &
Emerging Markets Series, JNL/PIMCO Total Return Bond Series, JNL/Putnam Growth
Series, JNL/Putnam Value Equity Series, Goldman Sachs/ JNL Growth & Income
Series, Lazard/JNL Small Cap Value Series, Lazard/JNL Mid Cap Value Series, PPM
America/JNL Money Market Series, Salomon Brothers/JNL Balanced Series, Salomon
Brothers/ JNL Global Bond Series, Salomon Brothers/JNL High Yield Bond Series,
T. Rowe Price/JNL International Equity Investment Series, and T. Rowe Price/JNL
Mid-Cap Growth Series.
Under normal circumstances, the Series allocates approximately 70% to 80%
of its assets to Underlying Series that invest primarily in equity securities
and 20% to 30% to Underlying Series that invest primarily in fixed-income
securities. Within these asset classes, the Series remains flexible with respect
to the percentage it will allocate among particular Underlying Series. When the
sub-adviser believes that a temporary defensive position is desirable, the
Series may invest up to 100% of its assets in cash or cash equivalents.
The Series seeks to achieve capital growth through its investments in
Underlying Series that invest primarily in equity securities. Such investments
may include Underlying Series that invest in stocks of large established
companies as well as those that invest in stocks of smaller companies with
above-average growth potential.
The Series seeks to achieve current income through its investment in
Underlying Series that invest primarily in fixed-income securities. Such
investments
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<PAGE> 36
may include Underlying Series that invest in foreign bonds denominated in
currencies other than U.S. dollars as well as Underlying Series that invest
exclusively in bonds of U.S. issuers. The Series may invest in Underlying Series
that invest exclusively in investment-grade securities, as well as Underlying
Series that invest in high-yield bonds.
The allocation of assets in the Series is expected to result in less risk
than that incurred by JNL/S&P Aggressive Growth Series II, JNL/S&P Very
Aggressive Growth Series II, JNL/S&P Equity Growth Series II or JNL/S&P Equity
Aggressive Growth Series II, but more risk than JNL/S&P Conservative Growth
Series II.
- --------------------------------------------------------------------------------
JNL/S&P AGGRESSIVE GROWTH SERIES II
- --------------------------------------------------------------------------------
The primary investment objective of the JNL/S&P Aggressive Growth Series II
is to seek capital growth. In pursuit of this objective, the Series invests in a
diversified group of Series of the JNL Series Trust ("Underlying Series"). The
Underlying Series in which the JNL/S&P Aggressive Growth Series II may invest
are the JNL Aggressive Growth Series, JNL Global Equities Series, JNL/Alliance
Growth Series, JNL/JPM International & Emerging Markets Series, JNL/PIMCO Total
Return Bond Series, JNL/Putnam Growth Series, JNL/Putnam Value Equity Series,
Goldman Sachs/JNL Growth & Income Series, Lazard/ JNL Small Cap Value Series,
Lazard/JNL Mid Cap Value Series, PPM America/JNL Money Market Series, Salomon
Brothers/JNL Balanced Series, Salomon Brothers/JNL Global Bond Series, Salomon
Brothers/ JNL High Yield Bond Series, T. Rowe Price/JNL International Equity
Investment Series, and T. Rowe Price/ JNL Mid-Cap Growth Series.
Under normal circumstances, the Series allocates approximately 85% to 95%
of its assets to Underlying Series that invest primarily in equity securities
and 5% to 15% to Underlying Series that invest primarily in fixed-income
securities. Within these asset classes, the Series remains flexible with respect
to the percentage it will allocate among particular Underlying Series. When the
sub-adviser believes that a temporary defensive position is desirable, the
Series may invest up to 100% of its assets in cash or cash equivalents.
The Series seeks to achieve capital growth primarily through its
investments in Underlying Series that invest primarily in equity securities.
Such investments may include Underlying Series that invest in stocks of large
established companies as well as those that invest in stocks of smaller
companies with above-average growth potential.
The Series seeks to achieve capital growth secondarily through its
investment in Underlying Series that invest primarily in fixed-income
securities. Such investments may include Underlying Series that invest in
foreign bonds denominated in currencies other than U.S. dollars as well as
Underlying Series that invest exclusively in bonds of U.S. issuers. The Series
may invest in Underlying Series that invest exclusively in investment-grade
securities, as well as Underlying Series that invest in high-yield bonds.
The allocation of assets in the Series is expected to result in less risk
than that incurred by JNL/S&P Very Aggressive Growth Series II, JNL/S&P Equity
Growth Series II or JNL/S&P Equity Aggressive Growth Series II, but more risk
than JNL/S&P Conservative Growth Series II or JNL/S&P Moderate Growth Series II.
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<PAGE> 37
- --------------------------------------------------------------------------------
JNL/S&P VERY AGGRESSIVE GROWTH SERIES II
- --------------------------------------------------------------------------------
The investment objective of the JNL/S&P Very Aggressive Growth Series II is
to seek capital growth. In pursuit of this objective, the Series invests in a
diversified group of Series of the JNL Series Trust ("Underlying Series"). The
Underlying Series in which the JNL/S&P Very Aggressive Growth Series II may
invest are the JNL Aggressive Growth Series, JNL Global Equities Series,
JNL/Alliance Growth Series, JNL/JPM International & Emerging Markets Series,
JNL/PIMCO Total Return Bond Series, JNL/Putnam Growth Series, JNL/Putnam Value
Equity Series, Goldman Sachs/JNL Growth & Income Series, Lazard/JNL Small Cap
Value Series, Lazard/JNL Mid Cap Value Series, PPM America/JNL Money Market
Series, Salomon Brothers/JNL Balanced Series, Salomon Brothers/JNL Global Bond
Series, Salomon Brothers/JNL High Yield Bond Series, T. Rowe Price/JNL
International Equity Investment Series, and T. Rowe Price/JNL Mid-Cap Growth
Series.
Under normal circumstances, the Series allocates up to 100% of its assets
to Underlying Series that invest primarily in equity securities. The Series
remains flexible with respect to the percentage it will allocate among
particular Underlying Series. When the sub-adviser believes that a temporary
defensive position is desirable, the Series may invest up to 100% of its assets
in cash or cash equivalents.
The Series seeks to achieve capital growth through its investments in
Underlying Series that invest primarily in equity securities. Such investments
may include Underlying Series that invest in stocks of large established
companies as well as those that invest in stocks of smaller companies with
above-average growth potential.
The allocation of assets in the Series is expected to result in more risk
than that incurred by JNL/S&P Conservative Growth Series II, JNL/S&P Moderate
Growth Series II, JNL/S&P Aggressive Growth Series II, JNL/S&P Equity Growth
Series II or JNL/S&P Equity Aggressive Growth Series II.
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JNL/S&P EQUITY GROWTH SERIES II
- --------------------------------------------------------------------------------
The investment objective of the JNL/S&P Equity Growth Series II is to seek
capital growth. In pursuit of this objective, the Series invests in a
diversified group of Series of the JNL Series Trust ("Underlying Series"). The
Underlying Series in which the JNL/S&P Equity Growth Series II may invest are
the JNL Aggressive Growth Series, JNL Global Equities Series, JNL/Alliance
Growth Series, JNL/JPM International & Emerging Markets Series, JNL/PIMCO Total
Return Bond Series, JNL/Putnam Growth Series, JNL/Putnam Value Equity Series,
Goldman Sachs/JNL Growth & Income Series, Lazard/JNL Small Cap Value Series,
Lazard/JNL Mid Cap Value Series, PPM America/JNL Money Market Series, Salomon
Brothers/JNL Balanced Series, Salomon Brothers/JNL Global Bond Series, Salomon
Brothers/JNL High Yield Bond Series, T. Rowe Price/JNL International Equity
Investment Series, and T. Rowe Price/JNL Mid-Cap Growth Series.
Under normal circumstances, the Series allocates 100% of its assets to
Underlying Series that invest primarily in equity securities. The Series remains
flexible with respect to the percentage it will allocate among particular
Underlying Series. When the sub-adviser believes that a temporary defensive
position is desirable, the Series may invest up to 100% of its assets in cash or
cash equivalents.
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The Series invests in Underlying Series that invest primarily in equity
securities. Such investments may include Underlying Series that invest in stocks
of large established companies as well as those that invest in stocks of smaller
companies with above-average growth potential.
The allocation of assets in the Series is expected to result in more risk
than that incurred by JNL/S&P Conservative Growth Series II, JNL/S&P Moderate
Growth Series II and JNL/S&P Aggressive Growth Series II, but less risk than
JNL/S&P Equity Aggressive Growth Series II or JNL/S&P Very Aggressive Growth
Series II.
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JNL/S&P EQUITY AGGRESSIVE GROWTH SERIES II
- --------------------------------------------------------------------------------
The investment objective of the JNL/S&P Equity Aggressive Growth Series II
is to seek capital growth. In pursuit of this objective, the Series invests in a
diversified group of Series of the JNL Series Trust ("Underlying Series"). The
Underlying Series in which the JNL/S&P Equity Aggressive Growth Series II may
invest are the JNL Aggressive Growth Series, JNL Global Equities Series,
JNL/Alliance Growth Series, JNL/JPM International & Emerging Markets Series,
JNL/PIMCO Total Return Bond Series, JNL/Putnam Growth Series, JNL/Putnam Value
Equity Series, Goldman Sachs/JNL Growth & Income Series, Lazard/JNL Small Cap
Value Series, Lazard/ JNL Mid Cap Value Series, PPM America/JNL Money Market
Series, Salomon Brothers/JNL Balanced Series, Salomon Brothers/JNL Global Bond
Series, Salomon Brothers/JNL High Yield Bond Series, T. Rowe Price/JNL
International Equity Investment Series, and T. Rowe Price/JNL Mid-Cap Growth
Series.
Under normal circumstances, the Series allocates 100% of its assets to
Underlying Series that invest primarily in equity securities. The Series remains
flexible with respect to the percentage it will allocate among particular
Underlying Series. When the sub-adviser believes that a temporary defensive
position is desirable, the Series may invest up to 100% of its assets in cash or
cash equivalents.
The Series invests in Underlying Series that invest primarily in equity
securities. Such investments may include Underlying Series that invest in stocks
of large established companies as well as those that invest in stocks of smaller
companies with above-average growth potential.
The allocation of assets in the Series is expected to result in more risk
than that incurred by JNL/S&P Conservative Growth Series II, JNL/S&P Moderate
Growth Series I, JNL/S&P Aggressive Growth Series II or JNL/S&P Equity Growth
Series I, but less risk than JNL/S&P Very Aggressive Growth Series II.
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GOLDMAN SACHS/JNL GROWTH & INCOME SERIES
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The investment objectives of the Goldman Sachs/JNL Growth & Income Series
are to provide investors with long-term growth of capital and growth of income.
It is a diversified Series that invests, under normal circumstances, at least
65% of its total assets in equity securities that the sub-adviser considers to
have favorable prospects for capital appreciation and/or dividend-paying
ability.
The Series may invest up to 35% of its total assets in fixed income
securities that, in the opinion of the sub-adviser, offer the potential to
further the Series' investment objectives. In addition, although the Series will
invest primarily in publicly traded U.S. securities, it may invest up to 25% of
its total assets in foreign securities, including securities of issuers in
emerging markets and countries and securities quoted in foreign currencies. (See
"Investment Risks -- Foreign Securities" and "Investment Risks -- Emerging
Markets").
The Series is managed using a value oriented approach. The sub-adviser
evaluates securities using fundamental analysis and intends to purchase equity
securities that are, in its view, underpriced relative to a combination of such
companies' long-term earnings prospects, growth rate, free cash flow and/or
dividend-paying ability. Consideration will be given to the business quality of
the issuer. Factors positively affecting the sub-adviser's view of that quality
include the competitiveness and degree of regulation in the markets in which the
company operates, the existence of a management team with a record of success,
the position of the company in the markets in which it operates, the level of
the company's financial leverage and the sustainable return on capital invested
in the business. The Series may also purchase securities of companies that have
experienced difficulties and that, in the opinion of the sub-adviser, are
available at attractive prices.
In choosing the Series' securities, the sub-adviser utilizes first-hand
fundamental research, including visiting company facilities to assess operations
and to meet decision-makers. The sub-adviser may also use macro analysis of
numerous economic and valuation variables to anticipate changes in company
earnings and the overall investment climate. The sub-adviser is able to draw on
the research and market expertise of its affiliates as well as information
provided by other securities dealers. Equity securities in the Series' portfolio
will generally be sold when the sub-adviser believes that the market price fully
reflects or exceeds the securities' fundamental valuation or when other more
attractive investments are identified.
The Series may invest in common stocks, preferred stocks, U.S. Government
securities, convertible debt obligations, convertible preferred stocks,
mortgage- and asset-backed securities, corporate debt obligations, structured
securities, limited liability companies, equity interests in trusts,
partnerships, joint ventures and similar enterprises, interests in real estate
investment trusts, warrants and stock purchase rights. The Series may purchase
when-issued securities and may purchase securities on a forward commitment
basis.
The Series may invest in securities of foreign issuers, including sponsored
and unsponsored American Depositary Receipts, Global Depositary Receipts and
European Depositary Receipts or other similar instruments representing
securities of foreign issuers. The Series may, to the extent it invests in
foreign securities, purchase or sell forward foreign currency exchange contracts
for hedging purposes and to seek to protect against anticipated changes in
future foreign currency exchange rates. The Series may hold foreign currency
received in connection with investments in foreign securities when, in the
judgment of the sub-adviser, it would be beneficial to convert such currency
into U.S. dollars at a later date, based on anticipated changes in the relevant
exchange rate.
The Series may invest in debt securities rated at least investment grade at
the time of investment and may invest up to 10% of its total assets in debt
securities which are unrated or rated in the lowest rating categories by S&P or
Moody's, including securities rated D by S&P or Moody's. The lower-rated bonds
in which the Series may invest are commonly referred to as "junk
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<PAGE> 40
bonds." (See "Investment Risks -- High Yield/High Risk Bonds").
The Series may write (sell) covered call and put options and purchase call
and put options on any securities in which it may invest or on any securities
index composed of securities in which it may invest. The Series may, to the
extent it invests in foreign securities, purchase and sell call and put options
on foreign currencies for the purpose of protecting against declines in the U.S.
dollar value of foreign portfolio securities and anticipated dividends on such
securities and against increases in the U.S. dollar cost of foreign securities
to be acquired. The Series may purchase and sell various kinds of futures
contracts, and purchase and write call and put options on any of such futures
contracts to seek to increase total return or to hedge against changes in
interest rates, securities prices or currency exchange rates. The Series may
also enter into closing purchase and sale transactions with respect to any such
contracts and options. The futures contracts may be based on various securities,
foreign currencies, securities indices and other financial instruments and
indices.
The Series may, for temporary defensive purposes, invest up to 100% of its
total assets in U.S. Government securities, repurchase agreements collateralized
by U.S. Government securities, commercial paper rated at least A-2 by S&P or P-2
by Moody's, certificates of deposit, bankers' acceptances, repurchase
agreements, non-convertible preferred stocks, non-convertible corporate bonds
with a remaining maturity of less than one year or, subject to certain tax
restrictions, foreign currencies. When the Series' assets are invested in such
instruments, the Series may not be achieving its investment objective.
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LAZARD/JNL SMALL CAP VALUE SERIES
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The investment objective of the Lazard/JNL Small Cap Value Series is to
seek capital appreciation. It is a non-diversified Series that seeks to achieve
its investment objective through investing primarily in equity securities of
United States companies with market capitalizations under $1 billion that are
believed by the sub-adviser to be inexpensively priced relative to the return on
total capital or equity. The equity securities in which the Series may invest
include common stocks, preferred stocks, securities convertible into or
exchangeable for common stocks, rights and warrants listed on national or
regional securities exchanges or traded over-the-counter, real estate investment
trusts and American and Global Depositary Receipts. Investments are generally
made in equity securities of companies which in the sub-adviser's opinion have
one or more of the following characteristics: (i) are undervalued relative to
their earnings power, cash flow, and/or asset values; (ii) have an attractive
price/value relationship, i.e. have high returns on equity and/or assets with
correspondingly low price-to-book and/or price-to-asset value as compared to the
market generally or the companies' industry groups in particular, with
expectations that some catalyst will cause the perception of value to change
within a 24-month time horizon; (iii) have experienced significant relative
underperformance and are out of favor due to a set of circumstances which are
unlikely to harm a company's franchise or earnings power over the longer term;
(iv) have low projected price-to-earnings or price-to-cash-flow multiples
relative to their industry peer group and/or the market in general; (v) have the
prospect, or the industry in which the company operates has the prospect, to
allow it to become a larger factor in the business and receive a higher
valuation as such; (vi) have significant financial leverage but have high levels
of free cash flow used to reduce leverage and enhance shareholder value; and
(vii) have a relatively short corporate history with the expectation that the
business may grow to generate meaningful cash flow and earnings over a
reasonable investment horizon.
Under normal market conditions, the Series will invest at least 80% of the
value of its total assets in the small capitalization equity securities
described above.
The sub-adviser believes that the issuers of small capitalization stocks
often have sales and earnings growth rates which exceed those of larger
companies,
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<PAGE> 41
and that such growth rates may in turn be reflected in more rapid share price
appreciation, however, investing in smaller capitalization stocks can involve
greater risk than is customarily associated with larger, more established
companies. For example, smaller capitalization companies often have limited
product lines, markets or financial resources. They may be dependent for
management on one or a few key persons, and can be more susceptible to losses
and risks of bankruptcy. Also, securities in the small capitalization sector may
be thinly traded (and therefore have to be sold at a discount from current
market prices or sold in small lots over an extended period of time), may be
followed by fewer investment research analysts and may be subject to wider price
swings and thus may create a greater chance of loss than investing in securities
of large capitalization companies.
The sub-adviser continually evaluates the securities owned by the Series,
and changes may be made whenever the sub-adviser determines such securities no
longer meet the Series' investment objective. Portfolio changes also may be made
to increase or decrease investments in anticipation of changes in securities
prices in general or to provide funds required for redemptions, distributions to
shareholders or other corporate purposes.
The Series may at any time invest funds awaiting investment or held as
reserves for the purposes of satisfying redemption requests, payment of
dividends or making other distributions, in cash and short-term money market
instruments; provided, however, that such investments will not ordinarily exceed
5% of the total assets of the Series. The Series may purchase floating and
variable rate obligations of the same quality as it otherwise is allowed to
purchase. The Series may purchase securities on a when-issued basis. The Series
may invest in securities of companies that have operated for less than three
years, including the operations of predecessors. It will not make investments
that will result in more than 10% of its total assets being invested in the
securities of unseasoned companies. The Series may invest in warrants.
In addition, the Series may engage in various investment techniques, such
as options and futures transactions, foreign currency transactions, leveraging,
short-selling and lending portfolio securities.
When, in the judgment of the sub-adviser, business or financial conditions
warrant, the Series may assume a temporary defensive position and invest without
limitation in large capitalization companies or short-term money market
instruments or hold its assets in cash.
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LAZARD/JNL MID CAP VALUE SERIES
- --------------------------------------------------------------------------------
The investment objective of the Lazard/JNL Mid Cap Value Series is to seek
capital appreciation. It is a non-diversified Series that seeks to achieve its
investment objective by investing primarily in equity securities of United
States companies with market capitalizations in the range of companies
represented in the Russell Midcap Index that the sub-adviser considers
inexpensively priced relative to the return on total capital or equity. Market
capitalization of a company's stock is its market price per share times the
number of shares outstanding. The Russell Midcap Index is composed of the 800
smallest companies in the Russell 1000 Index. As of the latest reconstitution,
the Russell Midcap Index had a dollar-weighted average market capitalization of
approximately $4.8 billion and a median capitalization of approximately $2.7
billion. The equity securities in which the Series may invest include common
stocks, preferred stocks, securities convertible into or exchangeable for common
stocks, rights and warrants, real estate investment trusts and American and
Global Depositary Receipts.
Under normal market conditions, the Series will invest at least 80% of the
value of its total assets in the equity securities of undervalued medium
capitalization issuers. Assets not invested in such equity securities generally
will be invested in the equity securities of larger capitalization issuers or
debt securities, including cash equivalents. The Series also may invest up to
15% of its total assets in foreign equity or debt securities.
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<PAGE> 42
When, in the sub-adviser's judgment, business or financial conditions
warrant, the Series may assume a temporary defensive position and invest without
limitation in large capitalization companies or short-term money market
instruments.
In addition, the Series may engage in various investment techniques, such
as options and futures transactions, foreign currency transactions, leveraging,
short-selling and lending portfolio securities.
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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 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
- --------------------------------------------------------------------------------
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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PPM AMERICA/JNL MONEY MARKET SERIES
- --------------------------------------------------------------------------------
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 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 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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SALOMON BROTHERS/JNL BALANCED SERIES
- --------------------------------------------------------------------------------
The investment objective of the Salomon Brothers/JNL Balanced Series is to
seek to obtain above-average income (compared to a portfolio entirely invested
in equity securities). The Series' secondary objective is to take advantage of
opportunities for growth of capital and income. It is a diversified Series that
seeks to achieve its investment objectives by investing in a broad variety of
securities, including equity securities, fixed-income securities and short-term
obligations. The Series may vary the percentage of assets invested in any one
type of security in accordance with the sub-adviser's view of existing and
anticipated economic and market conditions, fiscal and monetary policy and
underlying security values. Under normal market conditions, it is anticipated
that at least 40% of the Series' total assets will be invested in equity
securities.
Equity securities in which the Series may invest include common and
preferred stock (including convertible preferred stock), bonds, notes and
debentures convertible into common or preferred stock, stock purchase warrants
and rights, equity interests in trusts, partnerships, joint ventures or similar
enterprises and American, Global or other types of Depositary Receipts. Most of
the equity securities purchased by the Series are expected to be traded on a
stock exchange or in an over-the-counter market.
The sub-adviser will have discretion to invest in the full range of
maturities of fixed-income securities. Generally, most of the Series' long-term
debt investments will consist of "investment grade" securities; that is,
securities rated Baa or better by Moody's or BBB or better by S&P or Fitch or
determined by the sub-adviser to be of comparable quality to securities so
rated. Up to 20% of the Series' net assets may be invested in nonconvertible
fixed income securities that are rated Ba or lower by Moody's or BB or lower by
S&P or Fitch or determined by the sub-adviser to be of comparable quality. These
securities are commonly known as "junk bonds." There is no limit on the amount
of the Series' assets that can be invested in convertible securities rated below
investment grade. (See "Investment Risks -- High Yield/High Risk Bonds").
In addition to corporate debt securities, the Series may invest in U.S.
Government securities and mortgage-backed securities. The U.S. Government
securities in which the Series may invest include (i) U.S. Treasury obligations;
(ii) 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; (iii) mortgage-backed
securities guaranteed by the Government National Mortgage Association that are
supported by the full faith and credit of the U.S. Government; (iv)
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 (v)
collateralized mortgage obligations issued by private issuers for which the
underlying mortgage-backed securities serving as collateral are backed by the
credit alone of the U.S. Government agency or instrumentality which issues or
guarantees the mortgage-backed securities or by the full faith and credit of the
U.S. Government. The mortgage-backed securities in which the Series may invest
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. The Series may also purchase privately issued mortgage
securities which are not guaranteed by the U.S. Government or its agencies or
instrumentalities.
The Series may invest in corporate asset-backed securities that have
thirteen months or less remaining to maturity and are rated in the highest
rating category by at least two nationally recognized statistical rating
organizations ("NRSROs") or by one NRSRO if only one NRSRO has rated the
security or, if not rated, deemed by the sub-adviser to be of comparable
quality.
Other fixed income securities in which the Series may invest include zero
coupon bonds, deferred interest bonds and bonds on which the interest is payable
in kind. The Series may invest up to 20% (and generally
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expects to invest between 10% and 20%) of its total assets in foreign
securities (including American Depositary Receipts). (See "Investment Risks --
Foreign Securities"). The Series may invest a portion of its assets in loan
participations and assignments. The Series may enter into repurchase agreements
and reverse repurchase agreements, may purchase securities on a firm commitment
basis, including when-issued securities, and may lend portfolio securities. The
Series will not invest more than 10% of its assets in repurchase agreements
maturing in more than seven days.
The Series may purchase securities for which there is a limited trading
market or which are subject to restrictions on resale to the public. The Series
will not invest more than 15% of the value of its total assets in illiquid
securities, such as "restricted securities" which are illiquid, and securities
that are not readily marketable.
The Series may use the following investment strategies to hedge market
risks, to manage the effective maturity or duration of debt instruments held by
the Series, or to seek to increase the Series' income or gains: purchase and
sell interest rate, stock or bond index futures contracts; purchase and sell
exchange listed and over-the-counter put and call options on securities, futures
contracts, indices and other financial instruments; and enter into interest rate
transactions, equity swaps and related transactions, invest in indexed debt
securities and other similar transactions which may be developed to the extent
the sub-adviser determines that they are consistent with the Series' investment
objective and policies and applicable regulatory requirements. The Series'
interest rate transactions may take the form of swaps, caps, floors and collars.
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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
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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 sections entitled "Common Types 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' sub-adviser 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
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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").
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. (See "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 in fixed and floating rate loans arranged through private
negotiations between a corporate borrower or a foreign sovereign entity and one
or more financial institutions. The Series may invest in such loans in the form
of participations in loans and assignments of all or a portion of loans from
third parties. The Series considers these investments to be investments in debt
securities for purposes of this Prospectus.
The Series may invest up to 20% of its assets in common stock, convertible
securities, warrants, preferred stock or other equity securities when consistent
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<PAGE> 49
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 the 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. (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, the Commodity Futures Trading Commission and
the federal income tax requirements applicable to regulated investment
companies.
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SALOMON BROTHERS/JNL HIGH YIELD BOND SERIES
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The investment objective of the Salomon Brothers/JNL High Yield Bond Series
is to maximize current income. As a secondary objective, the Series will seek
capital appreciation. It is a diversified Series that seeks to achieve its
objectives by investing primarily in a diversified portfolio of high yield
fixed-income securities rated in medium or lower rating categories or determined
by the sub-adviser to be of comparable quality. The Series intends to invest,
under normal market conditions, at least 80% of its total assets in non-
investment grade fixed-income securities (e.g., bonds, debentures, notes,
equipment lease certificates, equipment trust certificates, conditional sales
contracts, commercial paper and other obligations and preferred stock).
The debt obligations in which the Series will invest generally will be
rated, at the time of investment, "Ba" or "B" or lower by Moody's or "BB" or "B"
or lower by S&P, or determined by the sub-adviser to be of comparable quality.
Debt securities rated by both Moody's and S&P need only satisfy the foregoing
ratings standards with respect to either the Moody's or the S&P rating. The
Series is not required to dispose of a debt security if its credit rating or
credit quality declines. Medium and low-rated and comparable unrated securities
offer yields that fluctuate over time, but generally are superior to the yields
offered by higher rated securities. However, such securities also involve
significantly greater risks, including price volatility and risk of default in
the payment of interest and principal, than higher rated securities. Certain of
the debt securities purchased by the Series may be rated as low as C by Moody's
or D by S&P or may be comparable to securities so rated. The lower-rated bonds
in which the Series may invest are commonly referred to as "junk bonds." An
investment in the Series should not be considered as a complete investment
program. (See "Investment Risks -- High Yield/High Risk Bonds").
In light of the risks associated with high yield debt securities, the
sub-adviser will take various factors into consideration in evaluating the
creditworthiness of an
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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 investment manager will also review
the ratings, if any, assigned to the security by any recognized rating
agencies, although the investment manager'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 objectives 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 sub-adviser will have discretion to select the range of maturities of
the fixed-income securities in which the Series may invest. The sub-adviser
anticipates that under current market conditions, the Series will have an
average portfolio maturity of 10 to 15 years. However, the average portfolio
maturity may vary substantially from time to time depending on economic and
market conditions.
The Series may invest up to 10% of its total assets in securities of
foreign issuers and up to 5% of its total assets in foreign governmental issuers
in any one country. The foreign securities in which the Series may invest, all
or a portion of which may be non-U.S. dollar denominated, include: (a) debt
obligations issued or guaranteed by foreign national, provincial, state,
municipal or other governments with taxing authority or by their agencies or
instrumentalities, including Brady Bonds; (b) debt obligations of supranational
entities; (c) debt obligations of the U.S. Government issued in non-dollar
securities; (d) debt obligations and other fixed-income securities of foreign
corporate issuers; and (e) U.S. corporate issuers. There is no minimum rating
criteria for the Series' investments in such securities.
The Series may also invest in zero coupon securities; pay-in-kind bonds and
deferred payment securities, which involve special risk considerations. The
Series may invest in fixed and floating rate loans arranged through private
negotiations between a corporate borrower or a foreign sovereign entity and one
or more financial institutions. The Series may invest in such loans in the form
of participations in loans and assignments of all or a portion of loans from
third parties. (See "Securities and Management Practices -- Participations and
Assignments").
The Series may invest up to 10% of its total assets in either (1) equipment
lease certificates, equipment trust certificates and conditional sales contracts
or (2) limited partnership interests. The Series may invest up to 10% of its
total assets in common stock, convertible securities, warrants or other equity
securities (other than preferred stock for which there is no limit) when
consistent with the Series' objective. 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.
In order to maintain liquidity, the Series may hold and/or invest up to 20%
of its total assets in cash and/or U.S. dollar denominated debt securities
including: (1) short-term (less than 12 months to maturity) and medium-term (not
greater than five years to maturity) obligations issued or guaranteed by (a) the
U.S. Government or the government of a developed country, their agencies or
instrumentalities or (b) international organizations designed or supported by
multiple foreign governmental entities to promote economic reconstruction or
development ("supranational entities"); (2) finance company obligations,
corporate commercial paper and other short-term commercial obligations, in each
case rated or issued by companies with similar securities outstanding that are
rated 'Prime-1" or "A" or better by Moody's or "A-1" or "A" or better by S&P or,
if unrated, of comparable quality as determined by the sub-adviser; (3)
obligations (including certificates of deposit, time deposits, demand deposits
and bankers' acceptances) of banks; and (4) repurchase agreements with respect
to securities in which the Series may invest. If at some future date, in the
opinion of the sub-adviser, adverse
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conditions prevail in the securities markets which makes the Series' investment
strategy inconsistent with the best interest of the Series' shareholders, then
for defensive purposes, the Series may temporarily invest its assets without
limit in such instruments.
If at some future date, in the sub-adviser's opinion, adverse conditions
prevail in the securities markets which makes the Series' investment strategy
inconsistent with the best interests of the Series' shareholders, the Series may
invest its assets without limit in high-quality short-term money market
instruments.
The Series may enter into repurchase agreements and reverse repurchase
agreements, may purchase securities on a firm commitment basis including when-
issued securities and may lend portfolio securities.
The Series may purchase securities for which there is a limited trading
market or which are subject to restrictions on resale to the public. The Series
will not invest more than 15% of the value of its total assets in illiquid
securities, such as "restricted securities" which are illiquid, and securities
that are not readily marketable.
The Series may use the following investment strategies to hedge market
risks, to manage the effective maturity or duration of debt instruments held by
the Series, or to seek to increase the Series' income or gains. The Series may
purchase and sell interest rate, currency or stock or bond index futures
contracts and enter into currency forward contracts and currency swaps; purchase
and sell exchange listed and over-the-counter put and call options on
securities, currencies, futures contracts, indices and other financial
instruments, and enter into interest rate transactions, equity swaps and related
transactions, invest in indexed debt securities and other similar transactions
which may be developed to the extent the sub-adviser determines that they are
consistent with the Series' investment objective and policies and applicable
regulatory requirements. The Series' interest rate transactions may take the
form of swaps, caps, floors and collars, and the Series' currency transactions
may take the form of currency forward contracts, currency futures contracts,
currency swaps and options on currencies.
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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
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(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.
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
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considerations related to political, economic and legal conditions outside of
the U.S. (See "Investment Risks"). 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 American Depositary
Receipts.
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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 capital appreciation and an opportunity to
achieve investment diversification. The Series may also purchase other types of
securities, for example, preferred stocks, convertible securities, fixed income
securities, hybrid instruments, restricted securities, foreign currency
transactions, futures and options.
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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 MidCap 400 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 undervalued 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 American Depositary Receipts.
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COMMON TYPES OF SECURITIES AND MANAGEMENT PRACTICES
- --------------------------------------------------------------------------------
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.
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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 American
Depositary Receipts). 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).
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 JNL/Alger Growth Series and the PPM America/JNL Money
Market 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, 1997, 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
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not rated by an established rating service, determined
on a dollar weighted average, were:
<TABLE>
<CAPTION>
S&P RATING PERCENTAGE OF NET ASSETS
---------- ------------------------
<S> <C>
AAA........................
AA.........................
A..........................
BBB........................
BB.........................
B..........................
CCC........................
CC.........................
C..........................
D..........................
Not Rated..................
</TABLE>
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.
A 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 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. A 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 assets 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
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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. 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. (See "Series
Transactions and Brokerage").
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 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. A Series may sell securities short. A short sale is the sale
of a security the Series does not own. It is "against the box" if at all times
when the short position is open the Series owns an equal amount of the
securities or securities convertible into, or
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exchangeable without further consideration for, securities of the same issue as
the securities sold short. To the extent that a Series engages in short sales
that are not "against the box," it must maintain asset coverage in the form of
assets determined to be liquid by the sub-adviser in accordance with procedures
established by the Board of Trustees, in a segregated account, or otherwise
cover its position in a permissible manner.
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 liquid assets 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. The JNL/PIMCO Total Return Bond Series
and the Salomon Brothers/JNL High Yield Bond Series may invest in such
securities without limit. 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.
PASSIVE FOREIGN INVESTMENT COMPANIES. A Series may purchase the securities
of certain foreign investment funds or trusts called passive foreign investment
companies. Such trusts have been the only or primary way to invest in certain
countries. In addition to bearing their proportionate share of the trust's
expenses (management fees and operating expenses), shareholders will also
indirectly bear similar expenses of such trusts.
INFLATION INDEXED BONDS. A Series may purchase inflation-indexed bonds.
Inflation-indexed bonds are fixed income securities whose principal value is
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periodically adjusted according to the rate of inflation.
Such bonds generally are issued at an interest rate lower than typical bonds,
but are expected to retain their principal value over time. The interest rate on
these bonds is fixed at issuance, but over the life of the bond the interest may
be paid on an increasing principal value, which has been adjusted for inflation.
While these securities are expected to be protected from long-term inflationary
trends, short-term increases in inflation may lead to a decline in value. If
interest rates rise due to reasons other than inflation (for example, due to
changes in currency exchange rates), investors in these securities may not be
protected to the extent that the increase is not reflected in the bond's
inflation measure.
PARTICIPATIONS AND ASSIGNMENTS. A Series may invest 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"). A 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"). Participations typically will result in a Series having
a contractual relationship only with the Lender, not with the borrower. A 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, a 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 a Series may not
benefit directly from any collateral supporting the Loan in which it has
purchased the Participation. As a result, a 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, a 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. A Series will acquire Participations only
if the Lender interpositioned between a Series and the borrower is determined by
the sub-adviser to be creditworthy. When a Series purchases Assignments from
Lenders, a 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.
A Series may have difficulty disposing of Assignments and Participations.
Because the market for such instruments is not highly liquid, a 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 a 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. A 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 a 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.
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,
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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, 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. The JNL Global
Equities, JNL/JPM International & Emerging Markets, Salomon Brothers/JNL Global
Bond, and T. Rowe Price/JNL International Equity Investment Series are
particularly susceptible to such risks. American Depositary Receipts do not
involve the same direct currency and liquidity risks as foreign securities.
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"). A Series may also enter into a
forward contract to sell a currency in which portfolio securities are
denominated in exchange for a second currency in order to manage its currency
exposure to selected countries. 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.
EMERGING MARKETS. The considerations noted above under "Foreign Securities"
may be intensified in the case of investment in developing countries.
Investments in securities of issuers in emerging markets countries may involve a
high degree of risk and many may be considered speculative. These investments
carry all of the risks of investing in securities of foreign issuers to a
heightened degree. These heightened risks include (i) greater risks of
expropriation, confiscatory taxation, nationalization, and less social,
political and
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economic stability; (ii) limitations on daily price changes and the small
current size of the markets for securities of emerging markets issuers and the
currently low or nonexistent volume of trading, resulting in lack of liquidity
and in price volatility; (iii) certain national policies which may restrict a
Series' investment opportunities including limitations on aggregate holdings by
foreign investors and restrictions on investing in issuers or industries deemed
sensitive to relevant national interests; and (iv) the absence of developed
legal structures governing private or foreign investment and private property.
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
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
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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"). 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 Commodity
Futures Trading Commission, which generally regulates the trading of commodity
futures by U.S. persons, the Securities and Exchange Commission, which regulates
the offer and sale of securities by and to U.S. persons, or any other
governmental regulatory authority.
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, 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 assets 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).
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Such securities either will mature or, if necessary, be
sold on or before the settlement date.
- --------------------------------------------------------------------------------
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
has been providing investment advisory services to management investment
companies since 1992 and as of December 31, 1997, had approximately $1 billion
under management.
JNFSI provides preparation of financial statements, tax services, and
regulatory reports to the Trust. JNFSI also 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 net assets of each Series. 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. The Series managed by Standard & Poor's Investment Advisory Services,
Inc. will indirectly bear their pro rata share of fees of the underlying Series
in addition to the fees shown for such Series.
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<TABLE>
<CAPTION>
(M -- MILLION) $ 0 TO $50 M TO $100 M TO $150 M TO $200 M TO $250 M TO $300 M TO $350 M TO OVER
-------------- $50 M $100 M $150 M $200 M $250 M $300 M $350 M $500 M $500 M
SERIES % % % % % % % % %
------ ------ -------- --------- --------- --------- --------- --------- --------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
JNL Aggressive Growth..... .95 .95 .95 .90 .90 .90 .85 .85 .85
JNL Capital Growth........ .95 .95 .95 .90 .90 .90 .85 .85 .85
JNL Global Equities....... 1.00 1.00 1.00 .95 .95 .95 .90 .90 .90
JNL/Alger Growth.......... .975 .975 .975 .975 .975 .975 .95 .95 .90
JNL/Alliance Growth....... .775 .775 .775 .775 .775 .70 .70 .70 .70
JNL/Eagle Core Equity..... .90 .85 .85 .85 .85 .85 .75 .75 .75
JNL/Eagle SmallCap
Equity.................. .95 .95 .95 .90 .90 .90 .90 .90 .85
JNL/JPM International &
Emerging Markets........ .975 .95 .95 .95 .90 .90 .90 .85 .85
JNL/PIMCO Total Return
Bond.................... .70 .70 .70 .70 .70 .70 .70 .70 .70
JNL/Putnam Growth......... .90 .90 .90 .85 .85 .85 .80 .80 .80
JNL/Putnam Value Equity... .90 .90 .90 .85 .85 .85 .80 .80 .80
JNL/S&P Conservative
Growth I................ .20 .20 .20 .20 .20 .20 .20 .20 .15
JNL/S&P Moderate
Growth I................ .20 .20 .20 .20 .20 .20 .20 .20 .15
JNL/S&P Aggressive Growth
I....................... .20 .20 .20 .20 .20 .20 .20 .20 .15
JNL/S&P Very Aggressive
Growth I................ .20 .20 .20 .20 .20 .20 .20 .20 .15
JNL/S&P Equity Growth I... .20 .20 .20 .20 .20 .20 .20 .20 .15
JNL/S&P Equity Aggressive
Growth I................ .20 .20 .20 .20 .20 .20 .20 .20 .15
JNL/S&P Conservative
Growth II............... .20 .20 .20 .20 .20 .20 .20 .20 .15
JNL/S&P Moderate
Growth II............... .20 .20 .20 .20 .20 .20 .20 .20 .15
JNL/S&P Aggressive Growth
II...................... .20 .20 .20 .20 .20 .20 .20 .20 .15
JNL/S&P Very Aggressive
Growth II............... .20 .20 .20 .20 .20 .20 .20 .20 .15
JNL/S&P Equity Growth
II...................... .20 .20 .20 .20 .20 .20 .20 .20 .15
JNL/S&P Equity Aggressive
Growth II............... .20 .20 .20 .20 .20 .20 .20 .20 .15
Goldman Sachs/JNL Growth &
Income.................. .925 .90 .90 .90 .85 .85 .85 .80 .80
Lazard/JNL Small
Cap Value............... 1.05 1.00 1.00 .975 .975 .975 .925 .925 .925
Lazard/JNL Mid Cap
Value................... .975 .975 .975 .925 .925 .925 .90 .90 .90
PPM America/JNL
Balanced................ .75 .70 .70 .675 .675 .675 .65 .65 .625
PPM America/JNL High Yield
Bond.................... .75 .70 .70 .675 .675 .675 .65 .65 .625
PPM/America JNL Money
Market.................. .60 .60 .60 .575 .575 .575 .55 .55 .525
Salomon Brothers/JNL
Balanced................ .80 .75 .70 .70 .70 .70 .70 .70 .70
Salomon Brothers/JNL
Global Bond............. .85 .85 .85 .80 .80 .80 .80 .80 .75
Salomon Brothers/JNL High
Yield Bond.............. .80 .75 .70 .70 .70 .70 .70 .70 .70
Salomon Brothers/JNL
U.S. Government &
Quality Bond............ .70 .70 .70 .65 .65 .65 .60 .60 .55
T. Rowe Price/JNL
Established Growth...... .85 .85 .85 .80 .80 .80 .80 .80 .80
T. Rowe Price/JNL
International Equity
Investment.............. 1.10 1.05 1.05 1.00 1.00 1.00 .95 .95 .90
T. Rowe Price/JNL Mid-Cap
Growth.................. .95 .95 .95 .90 .90 .90 .90 .90 .90
</TABLE>
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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
Trustees and the oversight and supervision of JNFSI, which pays the
sub-advisers' fees.
Alliance Capital Management L.P. ("Alliance"), with principal offices at
1345 Avenue of the Americas, New York, New York 10105, serves as sub-adviser to
the JNL/Alliance Growth Series. Alliance is a major international investment
manager, supervising client accounts with assets totaling over $199 billion as
of September 30, 1997. Alliance serves its clients, who primarily are major
corporate employee benefit funds, investment companies, foundations, endowment
funds and public employee retirement systems, with a staff of more than 1,500
employees. Alliance has five U.S. offices and its subsidiaries have nine offices
outside the U.S. The 54 registered investment companies managed by Alliance,
comprising 116 separate investment portfolios, currently have over 1 million
shareholders. As of September 30, 1997, Alliance was retained as an investment
manager of employee benefit fund assets for 29 of the Fortune 100 companies.
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 $2.7 billion as of December 31, 1996.
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 November 30, 1997, had
approximately $7.7 billion under management: $5.5 billion in mutual fund
accounts and $2.2 billion in other advisory accounts. Alger Management is a
wholly owned subsidiary of Fred Alger & Company, Incorporated 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.
Goldman Sachs Asset Management ("Goldman Sachs"), One New York Plaza, New
York, New York 10004, serves as sub-adviser to the Goldman Sachs/JNL Growth &
Income Series. Goldman Sachs is a separate operating division of Goldman, Sachs
& Co. Goldman Sachs provides a wide range of fully discretionary investment
advisory services including quantitatively driven and actively managed U.S. and
international equity portfolios, U.S. and global fixed income portfolios,
commodity and currency products, and money markets. Goldman Sachs is responsible
for more than $100 billion in assets as of January 1997.
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 $67 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.
J.P. Morgan Investment Management Inc. ("JPM"), with principal offices at
522 Fifth Avenue, New York, New York 10236, serves as sub-adviser to the JNL/JPM
International & Emerging Markets Series. JPM is a wholly-owned subsidiary of
J.P. Morgan & Co. Incorporated, a bank holding
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<PAGE> 67
company that also owns Morgan Guaranty Trust Company, J.P. Morgan Securities
Inc. and J.P. Morgan Futures Inc. JPM and its affiliates offer a wide range of
services to governmental, institutional, corporate and individual customers and
act as investment advisor to individual and institutional customers with
combined assets under management of $234 billion as of June 30, 1997.
Lazard Asset Management ("Lazard"), 30 Rockefeller Plaza, New York, New
York 10112, serves as sub-adviser to the Lazard/JNL Small Cap Value Series and
the Lazard/JNL Mid Cap Value Series. Lazard is a division of Lazard Freres & Co.
("Lazard Freres"), a New York limited liability company, which is registered as
an investment adviser with the SEC and is a member of the New York, American and
Midwest Stock Exchanges. Lazard Freres provides its clients with a wide variety
of investment banking, brokerage and related services. Lazard provides
investment management services to client discretionary accounts with assets
totaling approximately $53 billion as of June 30, 1997. Its clients are both
individuals and institutions.
Pacific Investment Management Company ("PIMCO"), located at 840 Newport
Center Drive, Suite 360, Newport Beach, California 92660, serves as sub-adviser
to the JNL/PIMCO Total Return Bond Series. PIMCO is an investment counseling
firm founded in 1971, and had approximately $92 billion in assets under
management as of March 31, 1997. PIMCO is a subsidiary partnership of PIMCO
Advisors L.P. A majority interest in PIMCO Advisors L.P. is held by PIMCO
Partners, G.P., a general partnership between Pacific Investment Management
Company, a California corporation and indirect wholly owned subsidiary of
Pacific Mutual Life Insurance Company, and PIMCO Partners, LLC, a limited
liability company controlled by the PIMCO Managing Directors.
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 High Yield Bond Series and the PPM America/JNL
Money Market 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 approximately
$190 billion in various currencies and markets. PPM currently manages over $32
billion of Jackson National Life Insurance Company assets. Additionally, PPM
manages assets of over $8 billion for other affiliated companies and over $1
billion 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* and the JNL/Putnam Value Equity Series*. Putnam has been managing
mutual funds since 1937. Putnam and its affiliates had approximately $235
billion in assets under management as of December 31, 1997. Putnam is a
subsidiary of Putnam Investment, Inc., which is owned by Marsh & McLennan
Companies, Inc., a publicly-owned holding company whose principal businesses are
international insurance and reinsurance brokerage, employee benefit consulting
and investment management.
Salomon Brothers Asset Management Inc ("SBAM") serves as sub-adviser to the
Salomon Brothers/JNL Balanced Series, the Salomon Brothers/JNL Global Bond
Series, the Salomon Brothers/JNL High Yield Bond Series and the Salomon
Brothers/JNL U.S. Government & Quality Bond Series. SBAM is a wholly owned
subsidiary of Smith Barney Holdings Inc. which is, in turn, wholly owned by
Travelers Group Inc. 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. As of October 31, 1997, SBAM and
SBAM's investment affiliates managed approximately $26.6 billion. SBAM's
business offices
- ---------------
*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.
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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 a subsidiary of Salomon Smith Barney Holdings
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.
Standard & Poor's Investment Advisory Services, Inc. ("SPIAS"), located at
25 Broadway, New York, New York 10004, serves as sub-adviser to the JNL/S&P
Conservative Growth Series I, JNL/S&P Moderate Growth Series I, JNL/S&P
Aggressive Growth Series I, JNL/S&P Very Aggressive Growth Series I, JNL/S&P
Equity Growth Series I, JNL/S&P Equity Aggressive Growth Series I, JNL/S&P
Conservative Growth Series II, JNL/S&P Moderate Growth Series II, JNL/S&P
Aggressive Growth Series II, JNL/S&P Very Aggressive Growth Series II, JNL/S&P
Equity Growth Series II, and JNL/S&P Equity Aggressive Growth Series II. SPIAS
was established in 1995 to provide investment advice to the financial community.
SPIAS is a subsidiary of The McGraw Hill Companies, Inc. and is affiliated with
S&P. SPIAS operates independently of and has no access to ratings, analysis or
other information supplied by S&P in connection with its ratings business,
except to the extent such information is made available by S&P to the general
public.
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 $125 billion as of September 30, 1997 for
approximately 6 million individual and institutional investor accounts,
including limited and real estate partnerships and other mutual funds.
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 $33 billion under
management as of September 30, 1997 in its offices in Baltimore, London, Tokyo,
Hong Kong and Singapore.
T. Rowe provides certain administrative support to Price-Fleming for a fee
of .15% of the market value of all assets in equity accounts, .15% of the market
value of all assets in active fixed income accounts, and .035% of the market
value of all assets in passive fixed income accounts under Price-Fleming's
management. Additional investment research and administrative support for equity
investments in provided to Price-Fleming by Fleming Investment Management
Limited ("FIM") and Jardine Fleming International Holdings Limited ("JFIH"), for
which each receives from Price-Fleming a fee of .075% of the market value of all
assets in equity accounts under Price-Fleming's management. Fleming
International Asset Management Limited ("FIAM") and JFIH provide research and
administration support for fixed income accounts for which each receive a fee of
.075% of the market value of all assets in active fixed income accounts and
.0175% of such market value in passive fixed income accounts under
Price-Fleming's management. FIM and JFIH are wholly owned subsidiaries of
Flemings and Jardine Fleming, respectively, and FIAM is an indirect subsidiary
of Flemings.
PORTFOLIO MANAGEMENT
The following individuals are primarily responsible for the day-to-day
management of the particular Series as indicated below.
JNL AGGRESSIVE GROWTH SERIES
Warren B. Lammert is responsible for the day-to-day management of the JNL
Aggressive Growth
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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 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 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/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 as President since 1995. 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 as a
senior research analyst since 1990 and as a Senior Vice President since 1995.
Ms. Khoo has been employed by Alger Management as a senior research analyst
since 1989 and as a Senior Vice President since 1995.
JNL/ALLIANCE GROWTH SERIES
James G. Reilly, Senior Vice President of Alliance, is responsible for the
day-to-day management of the JNL/Alliance Growth Series. Mr. Reilly joined
Alliance in 1984.
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.
JNL/JPM INTERNATIONAL & EMERGING MARKETS SERIES
Paul A. Quinsee, Vice President of JPM, and Rudi Leuthold, Managing
Director of JPM, share the responsibility for the day-to-day management of the
JNL/JPM International & Emerging Markets Series. Mr. Quinsee has been employed
by JPM since February 1992 as a portfolio manager of international equity
investments. Mr. Leuthold has been employed by JPM since prior to 1992 as a
portfolio manager of international equity investments.
JNL/PIMCO TOTAL RETURN BOND SERIES
William H. Gross, Managing Director of PIMCO, is responsible for the
day-to-day management of the JNL/PIMCO Total Return Bond Series. A Fixed Income
Portfolio Manager, Mr. Gross is one of the founders of PIMCO.
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JNL/PUTNAM GROWTH SERIES
C. Beth Cotner has responsibility for the day-to-day management of the
JNL/Putnam Growth Series. Ms. Cotner, Senior Vice President, has been employed
as a Senior Portfolio Manager by Putnam since September 1995. Prior to that, Ms.
Cotner was Executive Vice President of Kemper Financial Services. Ms. Cotner has
had responsibility for the day-to-day management of the JNL/Putnam Growth Series
since May 1, 1997.
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. Mr. Kreisel has had
responsibility for the day-to-day management of the JNL/Putnam Value Equity
Series since May 1, 1997.
GOLDMAN SACHS/JNL GROWTH & INCOME SERIES
G. Lee Anderson, Vice President of Goldman Sachs, Eileen A. Aptman, Vice
President of Goldman Sachs, and Ronald E. Gutfleish, Vice President of Goldman
Sachs, share the responsibility for the day-to-day management of the Goldman
Sachs/JNL Growth & Income Series. Mr. Anderson joined Goldman Sachs in 1992.
Prior to 1992, he was a research analyst in the Investment Research Department
of Goldman, Sachs & Co. Ms. Aptman joined the Investment Adviser in 1993. Prior
to 1993, she was an equity analyst at Delphi Management. Mr. Gutfleish joined
Goldman Sachs in 1993. Prior to 1993, he was a principal of Sanford C. Bernstein
& Co. in its Investment Management Research Department.
LAZARD/JNL SMALL CAP VALUE SERIES
Herbert W. Gullquist and Eileen Alexanderson share primary responsibility
for the day-to-day management of the Lazard/JNL Small Cap Value Series. Mr.
Gullquist has been with Lazard since 1982. He has been a Managing Director of
Lazard since January 1994; prior thereto, he was Vice President of Lazard. Ms.
Alexanderson has been with Lazard since 1979. She has been a Managing Director
since January 1997; prior thereto, Ms. Alexanderson was a Vice President of
Lazard.
LAZARD/JNL MID CAP VALUE SERIES
Herbert W. Gullquist and Eileen Alexanderson share primary responsibility
for the day to day management of the JNL/Lazard Mid Cap Value Series. Mr.
Gullquist has been with Lazard since 1982. He has been a Managing Director of
Lazard since January 1994; prior thereto, Mr. Gullquist was Vice President of
Lazard. Ms. Alexanderson has been with Lazard since 1979. She has been a
Managing Director since January 1997; prior thereto, Ms. Alexanderson was a Vice
President of Lazard.
PPM AMERICA/JNL BALANCED SERIES
PPM AMERICA/JNL HIGH YIELD BOND SERIES
PPM AMERICA/JNL MONEY MARKET SERIES
In its capacity as sub-adviser, PPM supervises and manages the investment
portfolios of the PPM America/JNL Balanced Series, the PPM America/JNL High
Yield Bond Series and the PPM America/JNL Money Market 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 High Yield Bond Series and the PPM America/JNL
Money Market Series since the commencement of operations of each Series.
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SALOMON BROTHERS/JNL BALANCED SERIES
SALOMON BROTHERS/JNL GLOBAL BOND SERIES
SALOMON BROTHERS/JNL HIGH YIELD BOND SERIES
SALOMON BROTHERS/JNL U.S. GOVERNMENT & QUALITY BOND SERIES
Richard E. Dahlberg is primarily responsible for the day-to-day management
of the Salomon Brothers/JNL Balanced Series. Prior to joining SBAM in July 1995,
Mr. Dahlberg was employed by Massachusetts Financial Services Company since
1968. Mr. Dahlberg had been primarily responsible for the day-to-day management
of the MFS Total Return Fund for ten years prior to joining SBAM.
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 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
Fixed Income 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 Salomon Brothers/JNL High Yield Bond Series and 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, is 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 is a Director and Portfolio Manager of SBAM and a
Director of Salomon Brothers Inc. Ms. Semmel joined SBAM in May of 1993, where
she manages high yield portfolios. 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 for 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 ("JP Morgan")
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, Mr. Scott worked for three years at Mercury
Asset Management where he was responsible for captive insurance portfolios and
products.
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JNL/S&P CONSERVATIVE GROWTH SERIES I
JNL/S&P MODERATE GROWTH SERIES I
JNL/S&P AGGRESSIVE GROWTH SERIES I
JNL/S&P VERY AGGRESSIVE GROWTH SERIES I
JNL/S&P EQUITY GROWTH SERIES I
JNL/S&P EQUITY AGGRESSIVE GROWTH SERIES I
JNL/S&P CONSERVATIVE GROWTH SERIES II
JNL/S&P MODERATE GROWTH SERIES II
JNL/S&P AGGRESSIVE GROWTH SERIES II
JNL/S&P VERY AGGRESSIVE GROWTH SERIES II
JNL/S&P EQUITY GROWTH SERIES II
JNL/S&P EQUITY AGGRESSIVE GROWTH SERIES II
David M. Blitzer, Robert S. Natale and Elizabeth Koo share the
responsibility for the day to day management of the JNL/S&P Conservative Growth
Series I, the JNL/S&P Moderate Growth Series I, the JNL/S&P Aggressive Growth
Series I, the JNL/S&P Very Aggressive Growth Series I, the JNL/S&P Equity Growth
Series I, the JNL/S&P Equity Aggressive Growth Series I, the JNL/S&P
Conservative Growth Series II, the JNL/S&P Moderate Growth Series II, the
JNL/S&P Aggressive Growth Series II, the JNL/S&P Very Aggressive Growth Series
II, the JNL/S&P Equity Growth Series II, and the JNL/S&P Equity Aggressive
Growth Series II. Mr. Blitzer has been Vice President of SPIAS since 1995 and
has been an economist with Standard & Poor's Equity Services Group (which
operates independently of S&P Rating's Group) since 1982. Mr. Natale has been
President of SPIAS since 1995 and has been a securities analyst, editor and
research director with Standard & Poor's Equity Services Group since 1979. Ms.
Koo has been an investment officer in the Quantitative Services department of
Standard & Poor's Financial Information Services since 1996. Prior to 1996, Ms.
Koo was an international tax associate for Coopers & Lybrand.
T. ROWE PRICE/JNL ESTABLISHED GROWTH SERIES
Robert W. Smith is responsible for the day-to-day management of the T. Rowe
Price/JNL Established Growth Series. Mr. Smith is a Vice President and Equity
Portfolio Manager for T. Rowe and Price-Fleming. He is also responsible for the
North American component of other investment company and institutional client
portfolios. Prior to joining T. Rowe in 1992, Mr. Smith was employed as an
Investment Analyst for Massachusetts Financial Services. He earned a BS (finance
and economics) from the University of Delaware and an MBA (finance) from the
Darden Graduate School of Business Administration, University of Virginia. Mr.
Smith has had responsibility for the day-to-day management of the T. Rowe
Price/JNL Established Growth Series since February 21, 1997.
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. Edwards, John R. Ford, James B.M. Seddon,
Benedict R.F. Thomas, and David J.L. 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
1987 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.
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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 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 management fees JNFSI currently
is obligated to pay the sub-advisers out of the advisory fee it receives from
each Series as specified above:
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<TABLE>
<CAPTION>
(M -- MILLION) $0 TO $50 M TO $100 M TO $150 M TO $200 M TO $250 M TO $300 M TO $350 M TO OVER
-------------- $50 M $100 M $150 M $200 M $250 M $300 M $350 M $500 M $500 M
SERIES % % % % % % % % %
------ ----- -------- --------- --------- --------- --------- --------- --------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
JNL Aggressive Growth...... .55 .55 .50 .50 .50 .50 .50 .50 .45
JNL Capital Growth......... .55 .55 .50 .50 .50 .50 .50 .50 .45
JNL Global Equities........ .55 .55 .50 .50 .50 .50 .50 .50 .45
JNL/Alger Growth........... .55 .55 .55 .55 .55 .55 .50 .50 .45
JNL/Alliance Growth........ .35 .35 .35 .35 .35 .25 .25 .25 .25
JNL/Eagle Core Equity...... .45 .40 .40 .40 .40 .40 .30 .30 .30
JNL/Eagle SmallCap
Equity................... .50 .50 .50 .45 .45 .45 .45 .45 .40
JNL/JPM International &
Emerging Markets......... .55 .50 .50 .50 .45 .45 .45 .40 .40
JNL/PIMCO Total Return
Bond..................... .25 .25 .25 .25 .25 .25 .25 .25 .25
JNL/Putnam Growth.......... .50 .50 .50 .45 .45 .45 .35 .35 .35
JNL/Putnam Value Equity.... .50 .50 .50 .45 .45 .45 .35 .35 .35
JNL/S&P Conservative Growth
I........................ .10 .10 .10 .10 .10 .10 .10 .10 .075
JNL/S&P Moderate Growth
I........................ .10 .10 .10 .10 .10 .10 .10 .10 .075
JNL/S&P Aggressive Growth
I........................ .10 .10 .10 .10 .10 .10 .10 .10 .075
JNL/S&P Very Aggressive
Growth I................. .10 .10 .10 .10 .10 .10 .10 .10 .075
JNL/S&P Equity Growth I.... .10 .10 .10 .10 .10 .10 .10 .10 .075
JNL/S&P Equity Aggressive
Growth I................. .10 .10 .10 .10 .10 .10 .10 .10 .075
JNL/S&P Conservative Growth
II....................... .10 .10 .10 .10 .10 .10 .10 .10 .075
JNL/S&P Moderate Growth
II....................... .10 .10 .10 .10 .10 .10 .10 .10 .075
JNL/S&P Aggressive Growth
II....................... .10 .10 .10 .10 .10 .10 .10 .10 .075
JNL/S&P Very Aggressive
Growth II................ .10 .10 .10 .10 .10 .10 .10 .10 .075
JNL/S&P Equity Growth II... .10 .10 .10 .10 .10 .10 .10 .10 .075
JNL/S&P Equity Aggressive
Growth II................ .10 .10 .10 .10 .10 .10 .10 .10 .075
Goldman Sachs/JNL Growth &
Income................... .50 .45 .45 .45 .40 .40 .40 .35 .35
Lazard/JNL Small Cap
Value.................... .625 .575 .575 .525 .525 .525 .475 .475 .475
Lazard/JNL Mid Cap Value... .55 .525 .525 .475 .475 .475 .45 .45 .45
PPM America/JNL Balanced... .25 .20 .20 .175 .175 .175 .15 .15 .125
PPM America/JNL High Yield
Bond..................... .25 .20 .20 .175 .175 .175 .15 .15 .125
PPM America/JNL Money
Market................... .20 .15 .15 .125 .125 .125 .10 .10 .075
Salomon Brothers/JNL
Balanced................. .35 .30 .25 .25 .25 .25 .25 .25 .25
Salomon Brothers/JNL Global
Bond..................... .375 .35 .35 .30 .30 .30 .30 .30 .25
Salomon Brothers/JNL High
Yield Bond............... .35 .30 .25 .25 .25 .25 .25 .25 .25
Salomon Brothers/JNL U.S.
Government & Quality
Bond..................... .225 .225 .225 .175 .175 .175 .15 .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>
* When average net assets exceed this amount, the sub-advisory fee asterisked is
applicable to all amounts in this Series.
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The sub-advisory fees payable to a sub-adviser may be reduced as agreed to
by the parties from time to time. 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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- --------------------------------------------------------------------------------
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.
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
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<PAGE> 77
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 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.
- --------------------------------------------------------------------------------
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.
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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 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 MidCap 400
Index, Morgan Stanley Capital International World Index, Morgan Stanley Europe
and Australasia, Far East Equity Index, Russell 2000 Index, Russell Midcap
Index, and S&P 500 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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CUSTODIAN
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 06880
INVESTMENT ADVISER AND TRANSFER AGENT
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.
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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.
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
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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-3
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STATEMENT OF ADDITIONAL INFORMATION
APRIL 1, 1998
JNL SERIES TRUST
JNL Aggressive Growth Series
JNL Capital Growth Series
JNL Global Equities Series
JNL/Alger Growth Series
JNL/Alliance Growth Series
JNL/Eagle Core Equity Series
JNL/Eagle SmallCap Equity Series
JNL/JPM International & Emerging Markets Series
JNL/PIMCO Total Return Bond Series
JNL/Putnam Growth Series
JNL/Putnam Value Equity Series
JNL/S&P Conservative Growth Series I
JNL/S&P Moderate Growth Series I
JNL/S&P Aggressive Growth Series I
JNL/S&P Very Aggressive Growth Series I
JNL/S&P Equity Growth Series I
JNL/S&P Equity Aggressive Growth Series I
JNL/S&P Conservative Growth Series II
JNL/S&P Moderate Growth Series II
JNL/S&P Aggressive Growth Series II
JNL/S&P Very Aggressive Growth Series II
JNL/S&P Equity Growth Series II
JNL/S&P Equity Aggressive Growth Series II
Goldman Sachs/JNL Growth & Income Series
Lazard/JNL Small Cap Value Series
Lazard/JNL Mid Cap Value Series
PPM America/JNL Balanced Series
PPM America/JNL High Yield Bond Series
PPM America/JNL Money Market Series
Salomon Brothers/JNL Balanced Series
Salomon Brothers/JNL Global Bond Series
Salomon Brothers/JNL High Yield 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
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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
April 1, 1998. 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
General Information and History
Investment Restrictions Applicable to all Series
Common Types of Securities
Trustees and Officers of the Trust
Performance
Investment Adviser and Other Services
Purchases, Redemptions and Pricing of Shares
Additional Information
Tax Status
Financial Statements
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 36 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. To the extent that the underlying Series in
which the JNL/S&P Conservative Growth Series I, JNL/S&P Moderate Growth Series
I, JNL/S&P Aggressive Growth Series I, JNL/S&P Very Aggressive Growth Series I,
JNL/S&P Equity Growth Series I, JNL/S&P Equity Aggressive Growth Series I,
JNL/S&P Conservative Growth Series II, JNL/S&P Moderate Growth Series II,
JNL/S&P Aggressive Growth Series II, JNL/S&P Very Aggressive Growth Series II,
JNL/S&P Equity Growth Series II, and JNL/S&P Equity Aggressive Growth Series II
invest comply with such restrictions, the JNL/S&P Conservative Growth Series I,
JNL/S&P Moderate Growth Series I, JNL/S&P Aggressive Growth Series I, JNL/S&P
Very Aggressive Growth Series I, JNL/S&P Equity Growth Series I, JNL/S&P Equity
Aggressive Growth Series I, JNL/S&P Conservative Growth Series II, JNL/S&P
Moderate Growth Series II,
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JNL/S&P Aggressive Growth Series II, JNL/S&P Very Aggressive Growth Series II,
JNL/S&P Equity Growth Series II, and JNL/S&P Equity Aggressive Growth Series II
will be considered to comply with such restrictions. As fundamental policies:
(1) The JNL Aggressive Growth Series, JNL Capital Growth Series, JNL
Global Equities Series, JNL/Alger Growth Series, JNL/Alliance Growth Series,
JNL/Eagle Core Equity Series, JNL/Eagle SmallCap Equity Series, JNL/JPM
International & Emerging Markets Series, JNL/PIMCO Total Return Bond Series,
JNL/Putnam Growth Series, JNL/Putnam Value Equity Series, Goldman Sachs/JNL
Growth & Income Series, Lazard JNL/Small Cap Value Series, Lazard/JNL Mid Cap
Value Series, PPM America/JNL Balanced Series, PPM America/JNL High Yield Bond
Series, PPM America/JNL Money Market Series, Salomon Brothers/JNL Balanced
Series, Salomon Brothers/JNL Global Bond Series, Salomon Brothers/JNL High
Yield 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 may not
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, JNL Aggressive Growth, Lazard/JNL Small Cap Value and Lazard/JNL Mid
Cap Value 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, JNL Aggressive Growth, Lazard/JNL Small Cap Value and Lazard/JNL Mid
Cap Value Series may invest in the securities of as few as two issuers (not to
exceed 25% in any one issuer).
(2) No Series may 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) No Series may 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) No Series may 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) No Series may 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).
(6) No Series may 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) No Series may 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.
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(8) Except for the JNL/Alliance Growth Series, JNL/JPM International &
Emerging Markets Series, JNL/PIMCO Total Return Bond Series, JNL/S&P
Conservative Growth Series I, JNL/S&P Moderate Growth Series I, JNL/S&P
Aggressive Growth Series I, JNL/S&P Very Aggressive Growth Series I, JNL/S&P
Equity Growth Series I, JNL/S&P Equity Aggressive Growth Series I, JNL/S&P
Conservative Growth Series II, JNL/S&P Moderate Growth Series II, JNL/S&P
Aggressive Growth Series II, JNL/S&P Very Aggressive Growth Series II, JNL/S&P
Equity Growth Series II, and JNL/S&P Equity Aggressive Growth Series II Goldman
Sachs/JNL Growth & Income Series, Lazard/JNL Small Cap Value Series, Lazard/JNL
Mid Cap Value Series, Salomon Brothers/JNL Balanced Series and Salomon
Brothers/JNL High Yield Bond Series, a Series will not 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) Except for the JNL/S&P Conservative Growth Series I, JNL/S&P Moderate
Growth Series I, JNL/S&P Aggressive Growth Series I, JNL/S&P Very Aggressive
Growth Series I, JNL/S&P Equity Growth Series I, JNL/S&P Equity Aggressive
Growth Series I, JNL/S&P Conservative Growth Series II, JNL/S&P Moderate Growth
Series II, JNL/S&P Aggressive Growth Series II, JNL/S&P Very Aggressive Growth
Series II, JNL/S&P Equity Growth Series II, and JNL/S&P Equity Aggressive
Growth Series II, 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) Except for the JNL/S&P Conservative Growth Series I, JNL/S&P Moderate
Growth Series I, JNL/S&P Aggressive Growth Series I, JNL/S&P Very Aggressive
Growth Series I, JNL/S&P Equity Growth Series I, JNL/S&P Equity Aggressive
Growth Series I, JNL/S&P Conservative Growth Series II, JNL/S&P Moderate Growth
Series II, JNL/S&P Aggressive Growth Series II, JNL/S&P Very Aggressive Growth
Series II, JNL/S&P Equity Growth Series II,
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and JNL/S&P Equity Aggressive Growth Series II , 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.
(c) Except for the JNL/S&P Conservative Growth Series I, JNL/S&P Moderate
Growth Series I, JNL/S&P Aggressive Growth Series I, JNL/S&P Very Aggressive
Growth Series I, JNL/S&P Equity Growth Series I, JNL/S&P Equity Aggressive
Growth Series I, JNL/S&P Conservative Growth Series II, JNL/S&P Moderate Growth
Series II, JNL/S&P Aggressive Growth Series II, JNL/S&P Very Aggressive Growth
Series II, JNL/S&P Equity Growth Series II, and JNL/S&P Equity Aggressive
Growth Series II, 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) Except for the JNL/JPM International & Emerging Markets Series,
JNL/S&P Conservative Growth Series I, JNL/S&P Moderate Growth Series I, JNL/S&P
Aggressive Growth Series I, JNL/S&P Very Aggressive Growth Series I, JNL/S&P
Equity Growth Series I, JNL/S&P Equity Aggressive Growth Series I, JNL/S&P
Conservative Growth Series II, JNL/S&P Moderate Growth Series II, JNL/S&P
Aggressive Growth Series II, JNL/S&P Very Aggressive Growth Series II, JNL/S&P
Equity Growth Series II, and JNL/S&P Equity Aggressive Growth Series II, 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) Except for the JNL/S&P Conservative Growth Series I, JNL/S&P Moderate
Growth Series I, JNL/S&P Aggressive Growth Series I, JNL/S&P Very Aggressive
Growth Series I, JNL/S&P Equity Growth Series I, JNL/S&P Equity Aggressive
Growth Series I, JNL/S&P Conservative Growth Series II, JNL/S&P Moderate Growth
Series II, JNL/S&P Aggressive Growth Series II, JNL/S&P Very Aggressive Growth
Series II, JNL/S&P Equity Growth Series II, and JNL/S&P Equity Aggressive
Growth Series II, 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
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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.
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.
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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 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.
PASSIVE FOREIGN INVESTMENT COMPANIES. Some foreign countries limit, or
prohibit, all direct foreign investment in the securities of their companies.
However, the governments of some countries have authorized the organization of
investment funds to permit indirect foreign investment in such securities. For
tax purposes these funds may be known as Passive Foreign Investment Companies.
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
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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.
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.
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<PAGE> 92
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.
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.
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<PAGE> 93
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.
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. A 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. A 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
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<PAGE> 94
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 assets 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 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.
INFLATION INDEXED BONDS. Inflation-indexed bonds are fixed income securities
whose principal value is periodically adjusted according to the rate of
inflation. Such bonds generally are issued at an interest rate lower than
typical bonds, but are expected to retain their principal value over time. The
interest rate on these bonds is fixed at issuance, but over the life of the
bond the interest may be paid on an increasing principal value, which has been
adjusted for inflation.
Inflation-indexed securities issued by the U.S. Treasury will initially
have maturities of ten years, although it is anticipated that securities with
other maturities will be issued in the future. The securities will pay
interest on a semi-annual basis, equal to a fixed percentage of the
inflation-adjusted principal amount. For example, if a Series purchased an
inflation-indexed bond with a par value of $1,000 and a 3% real rate of return
coupon (payable 1.5% semi-annually), and inflation over the first six months
were 1%, the mid-year par value of the bond would be $1,010 and the first
annual interest payment would be %15.15 ($1,010 times 1.5%). If inflation
during the second half of the year reached 3%, the end-of-year par value of the
bond would be $1,030 and the second semi-annual interest payment would be
$15.45 ($1,030 times 1.5%).
If the periodic adjustment rate measuring inflation falls, the principal
value of inflation-indexed bonds will be adjusted downward, and consequently
the interest payable on these securities (calculated with respect to a smaller
principal amount) will be reduced. Repayment of the original bond principal
upon maturity (as adjusted for inflation) is guaranteed in the case of U.S.
Treasury inflation-indexed bonds, even during a period of deflation. However,
the current market value of the bonds is not guaranteed, and will fluctuate.
The Series may also invest in other inflation related bonds which may or may
not provide a similar guarantee. If a guarantee of principal is not provided,
the adjusted principal value of the bond repaid at maturity may be less than
the original principal.
The value of inflation-indexed bonds is expected to change in response to
changes in real interest rates. Real interest rates in turn are tied to the
relationship between nominal interest rates
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<PAGE> 95
and the rate of inflation. Therefore, if inflation were to rise at a faster
rate than nominal interest rates, real interest rates might decline, leading to
an increase in value of inflation-indexed bonds. In contract, if nominal
interest rates increased at a faster rate than inflation, real interest rates
might rise, leading to a decrease in value of inflation-indexed bonds.
The U.S. Treasury has only recently begun issuing inflation-indexed bonds.
As such, there is no trading history of these securities, and there can be no
assurance that a liquid market in these instruments will develop, although one
is expected. Lack of a liquid market may impose the risk of higher transaction
costs and the possibility that a Series may be forced to liquidate positions
when it would not be advantageous to do so. These also can be no assurance
that the U.S. Treasury will issue any particular amount of inflation-indexed
bonds. Certain foreign governments, such as the United Kingdom, Canada and
Australia, have a longer history of issuing inflation-indexed bonds, and there
may be a more liquid market in certain of these countries for these securities.
The periodic adjustment of U.S. inflation-index bonds is tied to the
Consumer Price-Index for Urban Consumers ("CPI-U"), which is calculated monthly
by the U.S. Bureau of Labor Statistics. The CPI-U is a measurement of changes
in the cost of living, made up of components such as housing, food,
transportation and energy. Inflation-indexed bonds issued by a foreign
government are generally adjusted to reflect a comparable inflation index,
calculated by that government. There can be no assurance that the CPI-U or any
foreign inflation index will accurately measure the real rate of inflation in
the prices of goods and services. Moreover, there can be no assurance that the
rate of inflation in a foreign country will be correlated to the rate of
inflation in the United States.
Any increase in the principal amount of an inflation-indexed bond will be
considered taxable ordinary income, even though investors do not receive their
principal until maturity.
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.
ANDREW B. HOPPING* (Age 39), Trustee, President and Chief Executive Officer,
August 1997 to present, Vice President, Treasurer & Chief Financial Officer,
August 1996 to August 1997; Director, June 1997 to present, President and Chief
Executive Officer, July 1997 to present, Jackson National Financial Services,
Inc.; Senior Vice President, June 1994 to present, Jackson National Life
Insurance Company; Executive Vice President, 1991 to June 1994, Countrywide
Credit.
JOSEPH FRAUENHEIM (Age 63), 1405 Cambridge, Lansing, MI 48911, Trustee,
December 1994 to present; Consultant, 1991 to present; President & CEO,
Manufacturers Bank of Lansing.
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<PAGE> 96
ROBERT A. FRITTS* (Age 49), Treasurer and Chief Financial Officer,
August 1997 to present, Vice President, December 1994 to present, Assistant
Treasurer, February 1996 to August 1997, Assistant Secretary, December 1994 to
February 1996; Assistant Treasurer, Vice President, Jackson National Life
Insurance Company.
THOMAS J. MEYER (Age 51), Vice President, Counsel and Secretary, December 1994
to present; Secretary and Chief Legal Officer, November 1991 to present, Vice
President September 1994 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.
RICHARD MCLELLAN (Age 55), 1191 Carriageway North, East Lansing, MI 48823,
Trustee, December 1994 to present; Attorney, Dykema Gossett PLLC.
PETER MCPHERSON (Age 57), 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.
MARK D. NERUD (Age 31), Vice President and Assistant Treasurer, August 1997 to
present; Chief Operating Officer and Treasurer, July 1997 to present, Jackson
National Financial Services, Inc.; Assistant Vice President - Mutual Fund
Operations, October 1997 to present, Assistant Vice President, March 1997 to
October 1997, Assistant Controller, October 1996 to October 1997, Senior
Manager - Mutual Fund Operations, April 1996 to October 1996, Jackson National
Life Insurance Company; Manager - Mutual Fund Accounting, May 1993 to April
1996, Voyageur Asset Management Company; Manager - Financial Services, June
1988 to May 1993, KPMG Peat Marwick.
AMY D. EISENBEIS (Age 33), Vice President and Assistant Secretary, August 1997
to present; Assistant Secretary, June 1997 to present, Jackson National
Financial Services, Inc.; Associate General Counsel, July 1995 to present,
Jackson National Life Insurance Company; Staff Attorney, January 1994 to July
1995, Waddell & Reed, Inc.; Staff Attorney, October 1991 to January 1994,
Security Benefit Life Insurance Company.
___________
*Trustees who are interested persons as defined in the Investment Company Act
of 1940.
On January 12, 1998, the officers and trustees of the Trust, as a group,
owned less than 1% of the then 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
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<PAGE> 97
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
$4,000 for each meeting they attend. For the year ended December 31, 1997,
the Disinterested Trustees received the following fees for service as Trustee:
<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 $23,500 0 $23,500
Richard McLellan 23,500 0 23,500
Peter McPherson 10,500 0 10,500
</TABLE>
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 average annual total return for each Series (except the
PPM America/JNL Money Market Series) for the periods indicated was as follows:
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<PAGE> 98
<TABLE>
<CAPTION>
Commencement
One Year Period of Operations
Ended to
December 31, 1997 December 31, 1997
<S> <C> <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*** % %
JNL/Putnam Growth Series* % %
JNL/Putnam Value Equity Series* % %
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* % %
T. Rowe Price/JNL Established Growth Series* % %
T. Rowe Price/JNL International Equity
Investment Series* % %
T. Rowe Price/JNL Mid-Cap Growth Series* % %
</TABLE>
*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
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<PAGE> 99
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 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
YIELD = 2[(a-b/cd+1) -1]
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, 1997, 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>
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
16
<PAGE> 100
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, 1997, was __________%.
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, 1997, 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 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, the Russell Midcap 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.
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<PAGE> 101
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 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 Amended 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 from the
commencement of operations to March 31, 1996 were $701,004, from April 1, 1996
to December 31, 1996 were $1,884,328, and for the fiscal year ended December
31, 1997 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; Alliance Capital Management L.P. ("Alliance") serves
as sub-adviser for the JNL/Alliance 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; Goldman Sachs Asset Management ("Goldman
Sachs") serves as sub-adviser for the Goldman Sachs/JNL Growth & Income Series;
J.P. Morgan
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<PAGE> 102
Investment Management Inc. ("JPM") serves as sub-adviser for the JNL/JPM
International & Emerging Markets Series; Pacific Investment Management Company
("PIMCO") serves as sub-adviser for the JNL/PIMCO Total Return Bond Series;
Lazard Asset Management ("Lazard") serves as sub-adviser for the Lazard/JNL
Small Cap Value and Lazard/JNL Mid Cap Value Series, PPM America, Inc. ("PPM")
serves as sub-adviser for the PPM America/JNL Balanced, PPM America/JNL High
Yield Bond, and PPM America/JNL Money Market Series; Putnam Investment
Management, Inc. ("Putnam") serves as sub-adviser to the JNL/Putnam Growth and
JNL/Putnam Value Equity Series; Salomon Brothers Asset Management Inc ("SBAM")
serves as sub-adviser for the Salomon Brothers/JNL Balanced, Salomon
Brothers/JNL U.S. Government & Quality Bond, Salomon Brothers/JNL High Yield
Bond and Salomon Brothers/JNL Global Bond Series; Standard & Poor's Investment
Advisory Services, Inc. ("SPIAS") serves as sub-adviser for the JNL/S&P
Conservative Growth Series I, JNL/S&P Moderate Growth Series I, JNL/S&P
Aggressive Growth Series I, JNL/S&P Very Aggressive Growth Series I, JNL/S&P
Equity Growth Series I, JNL/S&P Equity Aggressive Growth Series I, JNL/S&P
Conservative Growth Series II, JNL/S&P Moderate Growth Series II, JNL/S&P
Aggressive Growth Series II, JNL/S&P Very Aggressive Growth Series II, JNL/S&P
Equity Growth Series II, and JNL/S&P Equity Aggressive Growth Series II; 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.
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
19
<PAGE> 103
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.
JNFSI is the transfer agent and dividend-paying agent for each Series of
the Trust.
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, and perform other professional accounting,
auditing and advisory services when engaged to do so by the Series.
__________ prepare the Series' federal income and excise tax returns.
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
20
<PAGE> 104
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 periods indicated, the Series paid the following amounts in
brokerage commissions:
<TABLE>
<CAPTION>
Fiscal year April 1,
ended 1996 to Commencement
December 31, December of Operations to
1997 31, 1996* March 31, 1996
------------ -------------- ----------------
<S> <C> <C> <C>
JNL Aggressive Growth Series** $16,981 $19,654
JNL Capital Growth Series** 34,515 16,905
JNL Global Equities Series** 47,800 72,359
JNL/Alger Growth Series*** 22,155 9,414
JNL/Eagle Core Equity Series**** 1,785 N/A
JNL/Eagle SmallCap Equity Series**** 4,389 N/A
JNL/Putnam Growth Series** 33,185 8,008
JNL/Putnam Value Equity Series** 3,587 2,888
PPM America/JNL Balanced Series** 17,054 5,077
PPM America/JNL High Yield Bond Series** 500 0
PPM America/JNL Money Market Series** 0 0
Salomon Brothers/JNL Global Bond Series** 0 1,399
Salomon Brothers/JNL U.S. Government and
Quality Bond Series** 0 0
T. Rowe Price/JNL Established Growth
Series** 5,706 20,293
T. Rowe Price/JNL International Equity
Investment Series** 17,105 63,341
T. Rowe Price/JNL Mid-Cap Growth Series** 19,868 25,663
</TABLE>
*The JNL Series Trust changed its fiscal year end from March 31 to December 31.
**Commenced operations on May 15, 1995.
***Commenced operations on October 16, 1995.
****Commenced operations on September 16, 1996.
21
<PAGE> 105
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.
As of December 31, 1997, the following Series owned securities of one of
the Trust's regular broker/dealers:
<TABLE>
<CAPTION>
Series Broker/Dealer Amount of Securities Owned
- ------ ------------- ---------------------------------------------------------
<S> <C> <C>
</TABLE>
CODE OF ETHICS
To mitigate the possibility that a Series will be adversely affected by
personal trading of employees, the Trust, the Adviser and the Sub-Advisers have
adopted Codes of Ethics under Rule 17j-1 of the 1940 Act. These Codes contain
policies restricting securities trading in personal accounts of the portfolio
managers and others who normally come into possession of information on
portfolio transactions. These Codes comply, in all material respects, with the
recommendations of the Investment Company Institute.
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, 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, Martin Luther King Jr. holiday, President's Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas. The per share
22
<PAGE> 106
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 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 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 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
amortized cost which approximates market, which the Trustees have
23
<PAGE> 107
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.
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:
<TABLE>
<S> <C>
- - designate Series of the Trust; or
- - change the name of the Trust; or
- - 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.
</TABLE>
24
<PAGE> 108
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.
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.
25
<PAGE> 109
JNL SERIES TRUST
FINANCIAL STATEMENTS
26
<PAGE> 110
JNL SERIES TRUST
PART C
OTHER INFORMATION
Note: Items 24-32 have been answered with respect to all 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:
To be filed by Amendment
(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> 111
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 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.
(e) 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.
(f) 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.
(g) 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.
(h) 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.
(i) 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.
(j) 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.
(k) Amendment dated August 21, 1996 to 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-Effective Amendment No. 7 filed with
the Securities and Exchange Commission on September 13, 1996.
(l) Amendment dated April 18, 1997 to Amended Investment Advisory
and Management Agreement between Registrant and Jackson National
<PAGE> 112
Financial Services, Inc. dated August 17, 1995, incorporated by
reference to Registrant's Post-Effective Amendment No. 11 filed
with the Securities and Exchange Commission on October 16, 1997.
(m) Amendment dated April 18, 1997 to 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. 11 filed with the
Securities and Exchange Commission on October 16, 1997.
(n) Sub-Advisory Agreement between Jackson National Financial
Services, Inc. and Putnam Investment Management, Inc. dated April
22, 1997, incorporated by reference to Registrant's Post-Effective
Amendment No. 11 filed with the Securities and Exchange Commission
on October 16, 1997.
(o) Amendment dated December 17, 1997 to Amended Investment
Advisory and Management Agreement between Registrant and Jackson
National Financial Services, Inc. dated August 17, 1995, attached
hereto.
(p) Sub-Advisory Agreement between Jackson National Financial
Services, Inc. and Alliance Capital Management L.P. dated December
17, 1997, attached hereto.
(q) Form of Sub-Advisory Agreement between Jackson National
Financial Services, Inc. and Goldman Sachs Asset Management,
incorporated by reference to Registrant's Post-Effective Amendment
No. 11 filed with the Securities and Exchange Commission on October
16, 1997.
(r) Sub-Advisory Agreement between Jackson National Financial
Services, Inc. and J.P. Morgan Investment Management Inc. dated
December 17, 1997, attached hereto.
(s) Sub-Advisory Agreement between Jackson National Financial
Services, Inc. and Lazard Asset Management dated December 17, 1997,
attached hereto.
(t) Sub-Advisory Agreement between Jackson National Financial
Services, Inc. and Pacific Investment Management Company dated
December 17, 1997, attached hereto.
(u) Amendment dated December 17, 1997 to Investment Sub-Advisory
Agreement between Jackson National Financial Services, Inc. and
Salomon Brothers Asset Management Inc dated February 8, 1995,
attached hereto.
(v) Form of Sub-Advisory Agreement between Jackson National
Financial Services, Inc. and Standard & Poor's Investment Advisory
Services, Inc., attached hereto.
6. (a) Amended Fund Participation Agreement between Registrant, Jackson
National Life Insurance Company and Jackson National Separate
Account I dated September 19, 1995, incorporated by reference to
<PAGE> 113
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.
(c) Amendment dated April 18, 1997 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. 11 filed with the Securities and Exchange Commission
on October 16, 1997.
(d) Form of Fund Participation Agreement between Registrant,
Jackson National Life Insurance Company and Jackson National
Separate Account III, incorporated by reference to Registrant's
Post-Effective Amendment No. 11 filed with the Securities and
Exchange Commission on October 16, 1997.
7. Not Applicable
8. Custodian Contract between Registrant and State Street Bank and Trust
Company dated September 16, 1996, incorporated by reference to Registrant's
Post-Effective Amendment No. 10 filed with the Securities and Exchange
Commission on April 15, 1997.
9. Transfer Agency and Service Agreement between Registrant State Street Bank
and Trust Company dated September 16, 1996, incorporated by reference to
Registrant's Post-Effective Amendment No. 10 filed with the Securities and
Exchange Commission on April 15, 1997.
10. Opinion of Blazzard, Grodd & Hasenauer, PC, to be filed by Amendment.
11. Consent of Price Waterhouse LLP, to be filed by Amendment.
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. Financial Data Schedule, to be filed by Amendment.
<PAGE> 114
18. Not Applicable
Item 25. Persons controlled by or under Common Control with Registrant.
Not Applicable.
Item 26. Number of Holders of Securities.
NUMBER OF
HOLDERS AS OF
SERIES JANUARY 12, 1998
------ ------------------
JNL Aggressive Growth Series 3
JNL Capital Growth Series 3
JNL Global Equities Series 3
JNL/Alger Growth Series 3
JNL/Alliance Growth Series 0
JNL/Eagle Core Equity Series 2
JNL/Eagle SmallCap Equity Series 3
JNL/JPM International & Emerging Markets Series 0
JNL/PIMCO Total Return Bond Series 0
JNL/Putnam Growth Series 3
JNL/Putnam Value Equity Series 2
JNL/S&P Conservative Growth Series I 0
JNL/S&P Moderate Growth Series I 0
JNL/S&P Aggressive Growth Series I 0
JNL/S&P Very Aggressive Growth Series I 0
JNL/S&P Equity Only-Growth Series I 0
JNL/S&P Equity Only-Aggressive Growth Series I 0
JNL/S&P Conservative Growth Series II 0
JNL/S&P Moderate Growth Series II 0
JNL/S&P Aggressive Growth Series II 0
JNL/S&P Very Aggressive Growth Series II 0
JNL/S&P Equity Only-Growth Series II 0
JNL/S&P Equity Only-Aggressive Growth Series II 0
Goldman Sachs/JNL Growth & Income Series 0
Lazard/JNL Small Cap Value Series 0
Lazard/JNL Mid Cap Value Series 0
PPM America/JNL Balanced Series 2
PPM America/JNL High Yield Bond Series 3
PPM America/JNL Money Market Series 3
Salomon Brothers/JNL Balanced Series 0
Salomon Brothers/JNL Global Bond Series 3
Salomon Brothers/JNL High Yield Bond Series 0
Salomon Brothers/JNL U.S. Government & Quality Bond Series 3
T. Rowe Price/JNL Established Growth Series 3
T. Rowe Price/JNL International Equity Investment Series 3
T. Rowe Price/JNL Mid-Cap Growth Series 3
Item 27. Indemnification.
Article VIII of the Registrant's Agreement and Declaration of Trust
provides that each of its Trustees and Officers (including persons
<PAGE> 115
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
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.
Hopping, Meyer, Fritts and Nerud and Ms. Eisenbeis, contained in
<PAGE> 116
the section entitled "Trustees and Officers of the Trust" of the
Statement of Additional Information.
Alliance Capital Management L.P., Eagle Asset Management, Inc.,
Fred Alger Management, Inc., Goldman Sachs Asset Management, Janus
Capital Corporation, J.P. Morgan Investment Management Inc., Lazard
Asset Management, Pacific Investment Management Company, PPM
America, Inc., Putnam Investment Management, Inc., Salomon Brothers
Asset Management Inc, Salomon Brothers Asset Management Limited,
Standard & Poor's Investment Advisory Services, Inc., 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.
---------
Alliance Capital Management L.P. 801-32361
Eagle Asset Management, Inc. 801-21343
Fred Alger Management, Inc. 801-06709
Goldman Sachs Asset Management 801-16048
Janus Capital Corporation 801-13991
J.P. Morgan Investment Management Inc. 801-21011
Lazard Asset Management 801-6568
Pacific Investment Management Company 801-48187
PPM America, Inc. 801-40783
Putnam Investment Management, Inc. 801-7974
Salomon Brothers Asset Management Inc 801-32046
Standard & Poor's Investment Advisory
Services, Inc. 801-51431
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.
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.
<PAGE> 117
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> 118
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 16th
day of January, 1998.
JNL SERIES TRUST
By: /s/ Andrew B. Hopping
by Thomas J. Meyer*
-------------------
Andrew B. Hopping
President, CEO and
Trustee
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/ Andrew B. Hopping President, CEO and January 16, 1998
----------------
by Thomas J. Meyer* Trustee
- ------------------------
Andrew B. Hopping
/s/ Joseph Frauenheim Trustee January 16, 1998
----------------
by Thomas J. Meyer*
- ------------------------
Joseph Frauenheim
/s/ Richard McLellan Trustee January 16, 1998
----------------
by Thomas J. Meyer*
- ------------------------
Richard McLellan
/s/ Peter McPherson Trustee January 16, 1998
----------------
by Thomas J. Meyer*
- ------------------------
Peter McPherson
* Attorney In Fact
<PAGE> 119
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned as directors of
JNL SERIES TRUST, a Massachusetts business trust, which has filed or will file
with the Securities and Exchange Commission under the provisions of the
Securities Act of 1933 and Investment Company Act of 1940, as amended, various
Registration Statements and amendments thereto for the registration under said
Acts of the sale of shares of beneficial interest of JNL Series Trust, hereby
constitute and appoint Andrew B. Hopping, Thomas J. Meyer and Robert P.
Saltzman, his attorney, with full power of substitution and resubstitution, for
and in his name, place and stead, in any and all capacities to approve and sign
such Registration Statements and any and all amendments thereto and to file the
same, with all exhibits thereto and other documents, granting unto said
attorneys, each of them, full power and authority to do and perform all and
every act and thing requisite to all intents and purposes as he might or could
do in person, hereby ratifying and confirming that which said attorneys, or any
of them, may lawfully do or cause to be done by virtue hereof. This instrument
may be executed in one or more counterparts.
IN WITNESS WHEREOF, the undersigned have herewith set their names as of the
dates set forth below.
/s/ Andrew B. Hopping 9/12/97
- --------------------- ------------------
Andrew B. Hopping Date
/s/ Robert A. Fritts 9-12-97
- --------------------- ------------------
Robert A. Fritts Date
/s/ Joseph Frauenheim September 15, 1997
- --------------------- ------------------
Joseph Frauenheim Date
/s/ Richard McLellan September 15, 1997
- --------------------- ------------------
Richard McLellan Date
/s/ Peter McPherson Sept 15, 97
- --------------------- ------------------
Peter McPherson Date
<PAGE> 120
EXHIBIT LIST
Exhibit
Number Description
- ------- -----------
5.(o) Amendment dated December 17, 1997 to Amended Investment Advisory and
Management Agreement between Registrant and Jackson National Financial
Services, Inc. dated August 17, 1995, attached hereto as EX-99.B5-o
5.(p) Sub-Advisory Agreement between Jackson National Financial Services,
Inc. and Alliance Capital Management L.P. dated December 17, 1997, attached
hereto as EX-99.B5-p
5.(r) Sub-Advisory Agreement between Jackson National Financial Services,
Inc. and J.P. Morgan Investment Management Inc. dated December 17, 1997,
attached hereto as EX-99.B5-r
5.(s) Sub-Advisory Agreement between Jackson National Financial Services,
Inc. and Lazard Asset Management dated December 17, 1997, attached hereto as
EX-99.B5-s
5.(t) Sub-Advisory Agreement between Jackson National Financial Services,
Inc. and Pacific Investment Management Company dated December 17, 1997, attached
hereto as EX-99.B5-t
5.(u) Amendment dated December 17, 1997 to Investment Sub-Advisory
Agreement between Jackson National Financial Services, Inc. and Salomon
Brothers Asset Management Inc, attached hereto as EX-99.B5-u
5.(v) Form of Sub-Advisory Agreement between Jackson National Financial
Services, Inc. and Standard & Poor's Investment Advisory Services, Inc.,
attached hereto as EX-99.B5-t
<PAGE> 1
EX-99.B5-o
AMENDMENT
TO
AMENDED INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT
BETWEEN
JNL SERIES TRUST
AND
JACKSON NATIONAL FINANCIAL SERVICES, INC.
This AMENDMENT is by and between JNL Series Trust, a Massachusetts
business trust (the "Trust") and Jackson National Financial Services, Inc., a
Delaware corporation (the "Adviser").
WHEREAS, the Trust and the Adviser entered into an Amended Investment
Advisory and Management Agreement dated August 17, 1995 (the "Agreement"),
whereby the Trust retained the Adviser to perform investment advisory and
management services for the Series of the Trust enumerated in the Agreement;
and
WHEREAS, twenty new Series will be added to the Trust and the Trust
desires the Adviser to perform investment advisory and management services for
these Series of the Trust; and
WHEREAS, the Adviser agrees to serve as the investment adviser and
business manager for the above-referenced Series of the Trust on the terms and
conditions set forth in the Agreement.
NOW THEREFORE, in consideration of the mutual covenants contained herein
and for other good and valuable consideration, the Trust and the Adviser agree
as follows:
1. Effective with respect to a Series upon capitalization of such Series,
the Adviser shall serve as the investment adviser and business manager for the
JNL/Alliance Growth Series, JNL/JPM International & Emerging Markets Series,
JNL/PIMCO Total Return Bond Series, JNL/S&P Conservative Growth Series I,
JNL/S&P Moderate Growth Series I, JNL/S&P Aggressive Growth Series I, JNL/S&P
Very Aggressive Growth Series I, JNL/S&P Equity Growth Series I, JNL/S&P Equity
Aggressive Growth Series I, JNL/S&P Conservative Growth Series II, JNL/S&P
Moderate Growth Series II, JNL/S&P Aggressive Growth Series II, JNL/S&P Very
Aggressive Growth Series II, JNL/S&P Equity Growth Series II, JNL/S&P Equity
Aggressive Growth Series II, Goldman Sachs/JNL Growth & Income Series,
Lazard/JNL Small Cap Value Series, Lazard/JNL Mid Cap Value Series, Salomon
Brothers/JNL Balanced Series and Salomon Brothers/JNL High Yield Bond Series.
1
<PAGE> 2
2. As compensation for services performed and the facilities and
personnel provided by the Adviser under the Agreement, the Trust will pay to
the Adviser, promptly after the end of each month for the services rendered by
the Adviser during the preceding month, the sum of the following amounts:
(*M = Million)
<TABLE>
<CAPTION>
Series $0 to $50 to $100 to $150 to $200 to $250 to $300 to $350 to Over
$50 M $100 M $150 M $200 M $250 M $300 M $350 M $500 M $500 M
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
JNL/Alliance Growth
Series .775% .775% .775% .775% .775% .70% .70% .70% .70%
JNL/JPM
International &
Emerging Markets
Series .975% .95% .95% .95% .90% .90% .90% .85% .85%
JNL/PIMCO Total
Return Bond Series .70% .70% .70% .70% .70% .70% .70% .70% .70%
JNL/S&P
Conservative Growth
Series I .20% .20% .20% .20% .20% .20% .20% .20% .15%
JNL/S&P Moderate
Growth Series I .20% .20% .20% .20% .20% .20% .20% .20% .15%
JNL/S&P Aggressive
Growth Series I .20% .20% .20% .20% .20% .20% .20% .20% .15%
JNL/S&P Very
Aggressive Growth
Series I .20% .20% .20% .20% .20% .20% .20% .20% .15%
JNL/S&P Equity
Growth Series I .20% .20% .20% .20% .20% .20% .20% .20% .15%
JNL/S&P Equity
Aggressive Growth
Series I .20% .20% .20% .20% .20% .20% .20% .20% .15%
</TABLE>
2
<PAGE> 3
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
JNL/S&P
Conservative Growth
Series II .20% .20% .20% .20% .20% .20% .20% .20% .15%
JNL/S&P Moderate
Growth Series II .20% .20% .20% .20% .20% .20% .20% .20% .15%
JNL/S&P Aggressive
Growth Series II .20% .20% .20% .20% .20% .20% .20% .20% .15%
JNL/S&P Very
Aggressive Growth
Series II .20% .20% .20% .20% .20% .20% .20% .20% .15%
JNL/S&P Equity
Growth Series II .20% .20% .20% .20% .20% .20% .20% .20% .15%
JNL/S&P Equity
Aggressive Growth
Series II .20% .20% .20% .20% .20% .20% .20% .20% .15%
Goldman Sachs/JNL
Growth & Income
Series .925% .90% .90% .90% .85% .85% .85% .80% .80%
Lazard/JNL Small
Cap Value Series 1.05% 1.00% 1.00% .975% .975% .975% .925% .925% .925%
Lazard/JNL Mid Cap
Value Series .975% .975% .975% .925% .925% .925% .90% .90% .90%
Salomon
Brothers/JNL
Balanced Series .80% .75% .70% .70% .70% .70% .70% .70% .70%
Salomon
Brothers/JNL High
Yield Bond Series .80% .75% .70% .70% .70% .70% .70% .70% .70%
</TABLE>
3. The Trust and the Adviser agree to abide and be bound by all of the
terms and conditions set forth in the Agreement.
3
<PAGE> 4
IN WITNESS WHEREOF, the Trust and the Adviser have caused this Agreement
to be executed by their duly authorized officers as of the 17th day of
December, 1997.
JNL SERIES TRUST
By: /s/ Andrew B. Hopping
--------------------------------
Name: Andrew B. Hopping
------------------------------
Title: President
-----------------------------
JACKSON NATIONAL FINANCIAL
SERVICES, INC.
By: /s/ Thomas J. Meyer
--------------------------------
Name: Thomas J. Meyer
------------------------------
Title: Vice President
-----------------------------
4
<PAGE> 1
EX-99.B5-p
INVESTMENT SUB-ADVISORY AGREEMENT
This AGREEMENT is effective this 17th day of December, 1997, by and
between JACKSON NATIONAL FINANCIAL SERVICES, INC., a Delaware Corporation and
registered investment adviser ("Adviser"), and Alliance Capital Management
L.P., a Delaware limited partnership and registered investment adviser
("Sub-Adviser").
WHEREAS, Adviser is the investment manager for the JNL Series Trust (the
"Trust"), an open-end management investment company registered under the
Investment Company Act of 1940, as amended ("1940 Act"); and
WHEREAS, the Trust is authorized to issue separate series, each series
having its own investment objective or objectives, policies and limitations;
WHEREAS, Adviser desires to retain Sub-Adviser as Adviser's agent to
furnish investment advisory services to the series of the Trust listed on
Schedule A hereto ("Fund").
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
1. Appointment. Adviser hereby appoints Sub-Adviser to provide certain
sub-investment advisory services to the Fund for the period and on the
terms set forth in this Agreement. Sub-Adviser accepts such appointment
and agrees to furnish the services herein set forth for the compensation
herein provided.
In the event the Adviser designates one or more series other than the
Fund with respect to which the Adviser wishes to retain the Sub-Adviser
to render investment advisory services hereunder, it shall notify the
Sub-Adviser in writing. If the Sub-Adviser is willing to render such
services, it shall notify the Adviser in writing, whereupon such series
shall become a Fund hereunder, and be subject to this Agreement.
2. Delivery of Documents. Adviser has or will furnish Sub-Adviser with
copies properly certified or authenticated of each of the following:
a) the Trust's Agreement and Declaration of Trust, as filed with
the Secretary of State of The Commonwealth of Massachusetts on June
1, 1994, and all amendments thereto or restatements thereof (such
Declaration, as presently in effect and as it shall from time to
time be amended or restated, is herein called the "Declaration of
Trust");
b) the Trust's By-Laws and amendments thereto;
c) resolutions of the Trust's Board of Trustees authorizing the
appointment of Sub-Adviser and approving this Agreement;
<PAGE> 2
d) the Trust's Notification of Registration on Form N-8A under
the 1940 Act as filed with the Securities and Exchange Commission
(the "SEC") and all amendments thereto;
e) the Trust's Registration Statement on Form N-1A under the
Securities Act of 1933, as amended ("1933 Act") and under the 1940
Act as filed with the SEC and all amendments thereto insofar as such
Registration Statement and such amendments relate to the Fund; and
f) the Trust's most recent prospectus and Statement of
Additional Information (collectively called the "Prospectus").
Adviser will furnish the Sub-Adviser from time to time with copies
of all amendments of or supplements to the foregoing.
3. Management. Subject always to the supervision of Trust's Board of
Trustees and the Adviser, Sub-Adviser will furnish an investment program
in respect of, and make investment decisions for, all assets of the Fund
and place all orders for the purchase and sale of securities, all on
behalf of the Fund. In the performance of its duties, Sub-Adviser will
satisfy its fiduciary duties to the Fund (as set forth below), and will
monitor the Fund's investments, and will comply with the provisions of
Trust's Declaration of Trust and By-Laws, as amended from time to time,
and the stated investment objectives, policies and restrictions of the
Fund. Sub-Adviser and Adviser will each make its officers and employees
available to the other from time to time at reasonable times to review
investment policies of the Fund and to consult with each other regarding
the investment affairs of the Fund. Sub-Adviser will report to the Board
of Trustees and to Adviser with respect to the implementation of such
program. Sub-Adviser is responsible for compliance with the provisions of
Section 817(h) of the Internal Revenue Code of 1986, as amended,
applicable to the Fund.
The Sub-Adviser further agrees that it:
a) will use the same skill and care in providing such services
as it uses in providing services to fiduciary accounts for which it
has investment responsibilities;
b) will conform with all applicable Rules and Regulations of the
Securities and Exchange Commission in all material respects and in
addition will conduct its activities under this Agreement in
accordance with any applicable regulations of any governmental
authority pertaining to its investment advisory activities;
c) will place orders pursuant to its investment determinations
for the Fund either directly with the issuer or with any broker or
dealer, including an affiliated broker-dealer which is a member of a
national securities exchange as permitted in accordance with
guidelines established by the Board of Trustees. In placing orders
with brokers and dealers, the Sub-Adviser will attempt to obtain the
best combination of prompt execution of orders in an effective
manner and at the most favorable price. Consistent with this
obligation, Sub-Adviser may, in its discretion, purchase and sell
portfolio securities to and from brokers and dealers who provide the
Sub-Adviser with research advice and other services. In no instance
will
2
<PAGE> 3
portfolio securities be purchased from or sold to the Adviser,
Sub-Adviser or any affiliated person of either the Trust, Adviser,
or Sub-Adviser, except as may be permitted under the 1940 Act;
d) will report regularly to Adviser and to the Board of Trustees
and will make appropriate persons available for the purpose of
reviewing with representatives of Adviser and the Board of Trustees
on a regular basis at reasonable times the management of the Fund,
including, without limitation, review of the general investment
strategies of the Fund, the performance of the Fund in relation to
standard industry indices, interest rate considerations and general
conditions affecting the marketplace and will provide various other
reports from time to time as reasonably requested by Adviser;
e) will prepare and maintain such books and records with respect
to the Fund's securities transactions and will furnish Adviser and
Trust's Board of Trustees such periodic and special reports as the
Board or Adviser may request;
f) will act upon instructions from Adviser not inconsistent with
the fiduciary duties hereunder;
g) will treat confidentially and as proprietary information of
Trust all such records and other information relative to Trust
maintained by the Sub-Adviser, and will not use such records and
information for any purpose other than performance of its
responsibilities and duties hereunder, except after prior
notification to and approval in writing by Trust, which approval
shall not be unreasonably withheld and may not be withheld where the
Sub-Adviser may be exposed to civil or criminal contempt proceedings
for failure to comply, when requested to divulge such information by
duly constituted authorities, or when so requested by Trust; and
h) will vote proxies received in connection with securities held
by the Fund consistent with its fiduciary duties hereunder.
4. Expenses. During the term of this Agreement, Sub-Adviser will pay all
expenses incurred by it in connection with its activities under this
Agreement other than the cost of securities (including brokerage
commission, if any) purchased for the Fund.
5. Books and Records. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Sub-Adviser hereby agrees that all records which
it maintains for the Trust are the property of the Trust and further
agrees to surrender promptly to the Trust any of such records upon the
Trust's request. Sub-Adviser further agrees to preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act the records required to be
maintained by Rule 31a-1(b)(5), (6), (7), (9) and (10) under the 1940 Act.
6. Compensation. For the services provided and the expenses assumed
pursuant to this Agreement, Adviser will pay the Sub-Adviser, and the
Sub-Adviser agrees to accept as full compensation therefor, a sub-advisory
fee, accrued daily and payable monthly on the average daily net assets in
the Fund or Funds excluding the net assets representing organizational
capital contributed by Jackson
3
<PAGE> 4
National Life Insurance Company in accordance with Schedule B hereto.
From time to time, the Sub-Adviser may agree to waive or reduce some or
all of the compensation to which it is entitled under this Agreement.
The Sub-Adviser represents and warrants that in no event shall the
Sub-Adviser provide similar investment advisory services to any client
comparable to the Fund being managed under this Agreement at a composite
rate of compensation less than that provided for herein.
7. Services to Others. Adviser understands, and has advised the Trust's
Board of Trustees, that Sub-Adviser now acts, or may in the future act, as
an investment adviser to fiduciary and other managed accounts, and as
investment adviser or sub-investment adviser to other investment
companies. Adviser has no objection to Sub-Adviser acting in such
capacities, provided that whenever the Fund and one or more other
investment advisory clients of Sub-Adviser have available funds for
investment, investments selected for each will be allocated in a manner
believed by Sub-Adviser to be equitable to each. Adviser recognizes, and
has advised Trust's Board of Trustees, that in some cases this procedure
may adversely affect the size of the position that the participating Fund
may obtain in a particular security. In addition, Adviser understands, and
has advised Trust's Board of Trustees, that the persons employed by
Sub-Adviser to assist in Sub-Adviser's duties under this Agreement will
not devote their full time to such service and nothing contained in this
Agreement will be deemed to limit or restrict the right of Sub-Adviser or
any of its affiliates to engage in and devote time and attention to other
businesses or to render services of whatever kind or nature.
8. Standard of Care and Limitation of Liability. The Sub-Adviser shall
exercise its best judgment and shall act in good faith in rendering the
services pursuant to this Agreement.
Sub-Adviser, its officers, directors, employees, agents or affiliates
will not be subject to any liability to the Adviser or the Fund or their
directors, officers, employees, agents or affiliates for any error of
judgment or mistake of law or for any loss suffered by the Fund in
connection with the performance of Sub-Adviser's duties under this
Agreement, except for a loss resulting from Sub-Adviser's willful
misfeasance, bad faith, or gross negligence in the performance of its
duties or by reason of its reckless disregard of its obligations and
duties under this Agreement.
9. Indemnification. Notwithstanding Section 8 of this Agreement, the
Sub-Adviser agrees to indemnify and hold harmless the Adviser, any
affiliated person of the Adviser, and each person, if any, who, within the
meaning of Section 15 of the 1933 Act, controls ("controlling person") the
Adviser (all of such persons being referred to as "Adviser Indemnified
Persons") against any and all losses, claims, damages, liabilities, or
litigation (including reasonable legal and other expenses) to which an
Adviser Indemnified Person may become subject under the 1933 Act, 1940
Act, the Investment Advisers Act of 1940, the Internal Revenue Code, under
any other statute, at common law or otherwise, arising out of the
Sub-Adviser's responsibilities as Sub-Adviser to the Fund and to the Trust
which (1) may be based upon any misfeasance, malfeasance, or nonfeasance
by the Sub-Adviser, any of its employees or representatives, or any
affiliate of or any person acting on behalf of the Sub-Adviser, (2) may be
based upon a failure to comply with Section 3 of this Agreement, or (3)
may be based upon any untrue
4
<PAGE> 5
statement or alleged untrue statement of a material fact contained in the
Prospectus, or any amendment or supplement thereto, or the omission or
alleged omission to state therein a material fact known or which should
have been known to the Sub-Adviser and was required to be stated therein or
necessary to make the statements therein not misleading, if such a
statement or omission was made in reliance upon information furnished to
the Adviser, the Trust, or any affiliated person of the Adviser or Trust
by the Sub-Adviser or any affiliated person of the Sub-Adviser; provided,
however, that in no case shall the indemnity in favor of an Adviser
Indemnified Person be deemed to protect such person against any liability
to which any such person would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence in the performance of its
duties, or by reason of its reckless disregard of its obligations and
duties under this Agreement.
10. Duration and Termination. This Agreement will become effective as to a
Fund upon execution or, if later, the date that initial capital for such
Fund is first provided to it and, unless sooner terminated as provided
herein, will continue in effect for two years from such date. Thereafter,
if not terminated as to a Fund, this Agreement will continue in effect as
to a Fund for successive periods of 12 months, provided that such
continuation is specifically approved at least annually by the Trust's
Board of Trustees or by vote of a majority of the outstanding voting
securities of such Fund, and in either event approved also by a majority
of the Trustees of the Trust who are not interested persons of the Trust,
or of the Adviser, or of the Sub-Adviser. Notwithstanding the foregoing,
this Agreement may be terminated as to a Fund at any time, without the
payment of any penalty, on sixty days' written notice by the Trust or
Adviser, or on ninety days' written notice by the Sub-Adviser. This
Agreement will immediately terminate in the event of its assignment. (As
used in this Agreement, the terms "majority of the outstanding voting
securities", "interested persons" and "assignment" have the same meanings
of such terms in the 1940 Act.) The Sub-Adviser agrees that it will
notify the Adviser of any changes in the membership of the general
partners of the Sub-Adviser within a reasonable time after such change.
11. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally; but only by an
instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought.
12 Notice. Any notice under this Agreement shall be in writing, addressed
and delivered or mailed, postage prepaid, to the other party at such
address as such other party may designate for the receipt of such notice.
13. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement is held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement will be
binding upon and shall inure to the benefit of the parties hereto.
The name "JNL Series Trust" and "Trustees of JNL Series Trust" refer
respectively to the Trust created by, and the Trustees, as trustees but
not individually or personally, acting from time to time under, the
Declaration of Trust, to which reference is hereby made and a copy of
which is on file at the office of the Secretary of State of the
Commonwealth of Massachusetts and
5
<PAGE> 6
elsewhere as required by law, and to any and all amendments thereto so
filed or hereafter filed. The obligations of the "JNL Series Trust"
entered in the name or on behalf thereof by any of the Trustees,
representatives or agents are made not individually but only in such
capacities and are not binding upon any of the Trustees, Shareholders or
representatives of the Trust personally, but bind only the assets of the
Trust, and persons dealing with the Fund must look solely to the assets
of the Trust belonging to such Fund for the enforcement of any claims
against Trust.
14. Representations and Warranties of the Sub-Adviser.
The Sub-Adviser hereby represents that this Agreement does not violate
any existing agreements between the Sub-Adviser and any other party.
The Sub-Adviser further represents and warrants that it is a duly
registered investment adviser under the Investment Advisers Act of 1940,
as amended and has provided to the Adviser a copy of its most recent Form
ADV as filed with the Securities and Exchange Commission.
The Sub-Adviser further represents that is has reviewed the
post-effective amendment to the Registration Statement for the Trust
filed with the Securities and Exchange Commission that contains
disclosure about the Sub-Adviser, and represents and warrants that, with
respect to the disclosure about the Sub-Adviser or information relating,
directly or indirectly, to the Sub-Adviser, such Registration Statement
contains, as of the date hereof, no untrue statement of any material fact
and does not omit any statement of a material fact which was required to
be stated therein or necessary to make the statements contained therein
not misleading.
15. Applicable Law. This Agreement shall be construed in accordance with
applicable federal law and the laws of the State of Michigan.
IN WITNESS WHEREOF, the Adviser and the Sub-Adviser have caused this
Agreement to be executed as of this 17th day of December, 1997.
JACKSON NATIONAL FINANCIAL
SERVICES, INC.
By: /s/ Andrew B. Hopping
-------------------------------
Name: Andrew B. Hopping
-----------------------------
Title: President
----------------------------
6
<PAGE> 7
ALLIANCE CAPITAL MANAGEMENT L.P.
By: Alliance Capital Management
Corporation, its general partner
By: /s/ Mark R. Manley
----------------------------
Name: Mark R. Manley
-----------------------
Title: Assistant Secretary
----------------------------
7
<PAGE> 8
SCHEDULE A
(Fund)
JNL/ALLIANCE GROWTH SERIES
8
<PAGE> 9
SCHEDULE B
(Compensation)
JNL/ALLIANCE GROWTH SERIES
Average Daily Net Assets Annual Rate
---------------------------------------------
0 to $250 Million: .35%
Amounts over $250 Million: .25%
9
<PAGE> 1
EX-99.B5-r
INVESTMENT SUB-ADVISORY AGREEMENT
This AGREEMENT is effective this 17th day of December, 1997, by and between
JACKSON NATIONAL FINANCIAL SERVICES, INC., a Delaware Corporation and registered
investment adviser ("Adviser"), and J.P. Morgan Investment Management Inc., a
Delaware corporation and registered investment adviser ("Sub-Adviser").
WHEREAS, Adviser is the investment manager for the JNL Series Trust (the
"Trust"), an open-end management investment company registered under the
Investment Company Act of 1940, as amended ("1940 Act"); and
WHEREAS, the Trust is authorized to issue separate series, each series
having its own investment objective or objectives, policies and limitations;
WHEREAS, Adviser desires to retain Sub-Adviser as Adviser's agent to
furnish investment advisory services to the series of the Trust listed on
Schedule A hereto ("Fund").
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
1. Appointment. Adviser hereby appoints Sub-Adviser to provide certain
sub-investment advisory services to the Fund for the period and on the
terms set forth in this Agreement. Sub-Adviser accepts such appointment
and agrees to furnish the services herein set forth for the
compensation herein provided.
In the event the Adviser designates one or more series other than the
Fund with respect to which the Adviser wishes to retain the Sub-Adviser
to render investment advisory services hereunder, it shall notify the
Sub-Adviser in writing. If the Sub-Adviser is willing to render such
services, it shall notify the Adviser in writing, whereupon such series
shall become a Fund hereunder, and be subject to this Agreement.
2. Delivery of Documents. Adviser has or will furnish Sub-Adviser with
copies properly certified or authenticated of each of the following:
a) the Trust's Agreement and Declaration of Trust, as filed with
the Secretary of State of The Commonwealth of Massachusetts on
June 1, 1994, and all amendments thereto or restatements
thereof (such Declaration, as presently in effect and as it
shall from time to time be amended or restated, is herein
called the "Declaration of Trust");
b) the Trust's By-Laws and amendments thereto;
c) resolutions of the Trust's Board of Trustees authorizing the
appointment of Sub-Adviser and approving this Agreement;
<PAGE> 2
d) the Trust's Notification of Registration on Form N-8A under
the 1940 Act as filed with the Securities and Exchange
Commission (the "SEC") and all amendments thereto;
e) the Trust's Registration Statement on Form N-1A under the
Securities Act of 1933, as amended ("1933 Act") and under the
1940 Act as filed with the SEC and all amendments thereto
insofar as such Registration Statement and such amendments
relate to the Fund; and
f) the Trust's most recent prospectus and Statement of Additional
Information (collectively called the "Prospectus").
Adviser will furnish the Sub-Adviser from time to time with
copies of all amendments of or supplements to the foregoing.
3. Management. Subject always to the supervision of Trust's Board of
Trustees and the Adviser, Sub-Adviser will furnish an investment program in
respect of, and make investment decisions for, all assets of the Fund
and place all orders for the purchase and sale of securities, all on
behalf of the Fund. In the performance of its duties, Sub-Adviser will
satisfy its fiduciary duties to the Fund (as set forth below), and
will monitor the Fund's investments, and will comply with the
provisions of Trust's Declaration of Trust and By-Laws, as amended
from time to time, and the stated investment objectives, policies and
restrictions of the Fund. Sub-Adviser and Adviser will each make its
officers and employees available to the other from time to time at
reasonable times to review investment policies of the Fund and to
consult with each other regarding the investment affairs of the Fund.
Sub-Adviser will report to the Board of Trustees and to Adviser with
respect to the implementation of such program. Sub-Adviser is
responsible for compliance with the provisions of Section 817(h) of
the Internal Revenue Code of 1986, as amended, applicable to the Fund.
The Adviser agrees on-going basis to provide or cause to be provided
to the Sub-Adviser guidelines ("Guidelines") setting forth the
limitations imposed upon the Fund as a result of relevant requirements
under state law pertaining to insurance products. The Sub-Adviser
shall be permitted to rely on the most recent Guidelines delivered to
it. The Trust and the Adviser agree that the Sub-Adviser may rely on
the Guidelines without independent verification of their accuracy.
The Sub-Adviser further agrees that it:
a) will use the same skill and care in providing such services as
it uses in providing services to fiduciary accounts for which it
has investment responsibilities;
b) will conform with all applicable Rules and Regulations of the
Securities and Exchange Commission in all material respects
and in addition will conduct its activities under this
Agreement in accordance with any applicable regulations of any
governmental authority pertaining to its investment advisory
activities;
c) will place orders pursuant to its investment determinations for
the Fund either directly with the issuer or with any broker or
dealer, including an affiliated broker-dealer which is a member
of a national securities exchange, as permitted in accordance
with guidelines established by the
2
<PAGE> 3
Board of Trustees. In placing orders with brokers and
dealers, the Sub-Adviser will attempt to obtain the best
combination of prompt execution of orders in an effective manner
and at the most favorable price. Consistent with this obligation,
when the execution and price offered by two or more brokers or
dealers are comparable Sub-Adviser may, in its discretion,
purchase and sell portfolio securities to and from brokers and
dealers who provide the Sub-Adviser with research advice and
other services. In no instance will portfolio securities be
purchased from or sold to the Adviser, Sub-Adviser or any
affiliated person of either the Fund, Adviser, or Sub-Adviser,
except as may be permitted under the 1940 Act;
d) will report regularly to Adviser and to the Board of Trustees
and will make appropriate persons available for the purpose of
reviewing with representatives of Adviser and the Board of
Trustees on a regular basis at reasonable times the management
of the Fund, including, without limitation, review of the
general investment strategies of the Fund, the performance of
the Fund in relation to standard industry indices, interest
rate considerations and general conditions affecting the
marketplace and will provide various other reports from time
to time as reasonably requested by Adviser;
e) will prepare and maintain such books and records with respect
to the Fund's securities transactions and will furnish Adviser
and Trust's Board of Trustees such periodic and special
reports as the Board or Adviser may request;
f) will act upon instructions from Adviser not inconsistent with the
fiduciary duties hereunder;
g) will treat confidentially and as proprietary information of
Trust all such records and other information relative to Trust
maintained by the Sub-Adviser, and will not use such records
and information for any purpose other than performance of its
responsibilities and duties hereunder, except after prior
notification to and approval in writing by Trust, which
approval shall not be unreasonably withheld and may not be
withheld where the Sub-Adviser may be exposed to civil or
criminal contempt proceedings for failure to comply, when
requested to divulge such information by duly constituted
authorities, or when so requested by Trust; and
h) will vote proxies received in connection with securities held
by the Fund consistent with its fiduciary duties hereunder.
4. Expenses. During the term of this Agreement, Sub-Adviser will pay all
expenses incurred by it in connection with its activities under this
Agreement other than the cost of securities (including brokerage
commission, if any) purchased for the Fund.
5. Books and Records. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Sub-Adviser hereby agrees that all records
which it maintains for the Trust are the property of the Trust and
further agrees to surrender promptly to the Trust any of such records
upon the Trust's request. Sub-Adviser further agrees to preserve for
the periods prescribed by Rule 31a-2 under the 1940 Act the records
required to be maintained by Rule 31a-1 under the 1940 Act.
3
<PAGE> 4
6. Compensation. For the services provided and the expenses assumed
pursuant to this Agreement, Adviser will pay the Sub-Adviser, and the
Sub-Adviser agrees to accept as full compensation therefor, a
sub-advisory fee, accrued daily and payable monthly on the average
daily net assets in the Fund or Funds in accordance with Schedule B
hereto. From time to time, the Sub-Adviser may agree to waive or reduce
some or all of the compensation to which it is entitled under this
Agreement.
7. Services to Others. Adviser understands, and has advised the
Trust's Board of Trustees, that Sub-Adviser now acts, or may in the future
act, as an investment adviser to fiduciary and other managed accounts, and
as investment adviser or sub-investment adviser to other investment
companies. Adviser has no objection to Sub-Adviser acting in such
capacities, provided that whenever the Fund and one or more other
investment advisory clients of Sub-Adviser have available funds for
investment, investments selected for each will be allocated in a manner
believed by Sub-Adviser to be equitable to each. Adviser recognizes, and
has advised Trust's Board of Trustees, that in some cases this procedure
may adversely affect the size of the position that the participating Fund
may obtain in a particular security. In addition, Adviser understands, and
has advised Trust's Board of Trustees, that the persons employed by
Sub-Adviser to assist in Sub-Adviser's duties under this Agreement will not
devote their full time to such service and nothing contained in this
Agreement will be deemed to limit or restrict the right of Sub-Adviser or
any of its affiliates to engage in and devote time and attention to other
businesses or to render services of whatever kind or nature.
8. Standard of Care and Limitation of Liability. The Sub-Adviser shall
exercise its best judgment and shall act in good faith in rendering the
services pursuant to this Agreement.
Sub-Adviser, its officers, directors, employees, agents or affiliates
will not be subject to any liability to the Adviser or the Fund or
their directors, officers, employees, agents or affiliates for any
error of judgment or mistake of law or for any loss suffered by the
Fund in connection with the performance of Sub-Adviser's duties under
this Agreement, except for a loss resulting from Sub-Adviser's willful
misfeasance, bad faith, or gross negligence in the performance of its
duties or by reason of its reckless disregard of its obligations and
duties under this Agreement.
9. Indemnification. Adviser and Sub-Adviser each agree to indemnify the
other against any claim, loss or liability to such other party
(including reasonable attorneys' fees) arising out of any action on the
part of the indemnifying party which constitutes willful misfeasance,
bad faith or gross negligence.
10. Duration and Termination. This Agreement will become effective as to a
Fund upon execution or, if later, the date that initial capital for such
Fund is first provided to it and, unless sooner terminated as provided
herein, will continue in effect for two years from such date. Thereafter,
if not terminated as to a Fund, this Agreement will continue in effect as
to a Fund for successive periods of 12 months, provided that such
continuation is specifically approved at least annually by the Trust's
Board of Trustees or by vote of a majority of the outstanding voting
securities of such Fund, and in either event approved also by a majority of
the Trustees of the Trust who are not interested persons of the Trust, or
of the
4
<PAGE> 5
Adviser, or of the Sub-Adviser. Notwithstanding the foregoing, this
Agreement may be terminated as to a Fund at any time, without the payment
of any penalty, on sixty days' written notice by the Trust or Adviser, or
on ninety days' written notice by the Sub-Adviser. This Agreement will
immediately terminate in the event of its assignment. (As used in this
Agreement, the terms "majority of the outstanding voting securities",
"interested persons" and "assignment" have the same meanings of such terms
in the 1940 Act.)
11. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally; but only by an
instrument in writing signed by the party against which enforcement of
the change, waiver, discharge or termination is sought.
12 Notice. Any notice under this Agreement shall be in writing, addressed
and delivered or mailed, postage prepaid, to the other party at such
address as such other party may designate for the receipt of such
notice.
13. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of
the provisions hereof or otherwise affect their construction or effect.
If any provision of this Agreement is held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement
will be binding upon and shall inure to the benefit of the parties
hereto.
The name "JNL Series Trust" and "Trustees of JNL Series Trust" refer
respectively to the Trust created by, and the Trustees, as trustees but
not individually or personally, acting from time to time under, the
Declaration of Trust, to which reference is hereby made and a copy of
which is on file at the office of the Secretary of State of the
Commonwealth of Massachusetts and elsewhere as required by law, and to
any and all amendments thereto so filed or hereafter filed. The
obligations of the "JNL Series Trust" entered in the name or on behalf
thereof by any of the Trustees, representatives or agents are made not
individually but only in such capacities and are not binding upon any
of the Trustees, Shareholders or representatives of the Trust
personally, but bind only the assets of the Trust, and persons dealing
with the Fund must look solely to the assets of the Trust belonging to
such Fund for the enforcement of any claims against Trust.
14. Disclosure. Neither the Trust, the Fund or the Adviser shall, without
the prior written consent of the Sub-Adviser, make representations
regarding or reference to the Sub-Adviser or any affiliates in any
disclosure document, advertisement, sales literature or other
promotional materials.
15. Representations and Warranties of the Sub-Adviser.
The Sub-Adviser hereby represents that this Agreement does not violate any
existing agreements between the Sub-Adviser and any other party.
The Sub-Adviser further represents and warrants that it is a duly
registered investment adviser under the Investment Advisers Act of 1940, as
amended and has provided to the Adviser a copy of its most recent Form ADV
as filed with the Securities and Exchange Commission.
5
<PAGE> 6
The Sub-Adviser further represents that is has reviewed the post-effective
amendment to the Registration Statement for the Trust filed with the
Securities and Exchange Commission that contains disclosure about the
Sub-Adviser, and represents and warrants that, with respect to the
disclosure about the Sub-Adviser or information relating, directly or
indirectly, to the Sub-Adviser, such Registration Statement contains, as of
the date hereof, no untrue statement of any material fact and does not omit
any statement of a material fact which was required to be stated therein or
necessary to make the statements contained therein not misleading.
Under the United Kingdom Financial Services Act 1986, the Sub-Adviser is a
member of the Investment Management Regulatory Organization Limited
("IMRO") and as such is regulated by IMRO in the conduct of its investment
business in the United Kingdom and is subject to IMRO's delegation rules.
All services provided by the Sub-Adviser under this Agreement are provided
on the basis that the Trust and the Fund are a non-private customer as that
term is defined in IMRO's rules."
16. Applicable Law. This Agreement shall be construed in accordance with
applicable federal law and the laws of the State of Michigan.
IN WITNESS WHEREOF, the Adviser and the Sub-Adviser have caused this
Agreement to be executed as of this 17th day of December, 1997.
JACKSON NATIONAL FINANCIAL
SERVICES, INC.
By: /s/ Andrew B. Hopping
------------------------------------------
Name: Andrew B. Hopping
----------------------------------------
Title: President
----------------------------------------
J.P. MORGAN INVESTMENT MANAGEMENT INC.
By: /s/
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
6
<PAGE> 7
SCHEDULE A
(Fund)
JNL/JPM INTERNATIONAL & EMERGING MARKETS SERIES
7
<PAGE> 8
SCHEDULE B
(Compensation)
JNL/JPM INTERNATIONAL & EMERGING MARKETS SERIES
Average Daily Net Assets Annual Rate
----------------------------------------------
0 to $50 Million: .55%
$50 Million to $200 Million: .50%
$200 Million to $350 Million: .45%
Amounts over $350 Million: .40%
8
<PAGE> 1
EX-99.B5-s
INVESTMENT SUB-ADVISORY AGREEMENT
This AGREEMENT is effective this 17th day of December, 1997, by and
between JACKSON NATIONAL FINANCIAL SERVICES, INC., a Delaware Corporation and
registered investment adviser ("Adviser"), and LAZARD ASSET MANAGEMENT, a
division of Lazard Freres & Co. LLC, a New York limited liability company, and
registered investment adviser ("Sub-Adviser").
WHEREAS, Adviser is the investment manager for the JNL Series Trust (the
"Trust"), an open-end management investment company registered under the
Investment Company Act of 1940, as amended ("1940 Act"); and
WHEREAS, the Trust is authorized to issue separate series, each series
having its own investment objective or objectives, policies and limitations;
WHEREAS, Adviser desires to retain Sub-Adviser as Adviser's agent to
furnish investment advisory services to the series of the Trust listed on
Schedule A hereto ("Fund").
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
1. Appointment. Adviser hereby appoints Sub-Adviser to provide certain
sub-investment advisory services to the Fund for the period and on the
terms set forth in this Agreement. Sub-Adviser accepts such appointment
and agrees to furnish the services herein set forth for the compensation
herein provided.
In the event the Adviser designates one or more series other than the
Fund with respect to which the Adviser wishes to retain the Sub-Adviser
to render investment advisory services hereunder, it shall notify the
Sub-Adviser in writing. If the Sub-Adviser is willing to render such
services, it shall notify the Adviser in writing, whereupon such series
shall become a Fund hereunder, and be subject to this Agreement.
2. Delivery of Documents. Adviser has or will furnish Sub-Adviser with
copies properly certified or authenticated of each of the following:
a) the Trust's Agreement and Declaration of Trust, as filed with
the Secretary of State of The Commonwealth of Massachusetts on June
1, 1994, and all amendments thereto or restatements thereof (such
Declaration, as presently in effect and as it shall from time to
time be amended or restated, is herein called the "Declaration of
Trust");
b) the Trust's By-Laws and amendments thereto;
c) resolutions of the Trust's Board of Trustees authorizing the
appointment of Sub-Adviser and approving this Agreement;
<PAGE> 2
d) the Trust's Notification of Registration on Form N-8A under
the 1940 Act as filed with the Securities and Exchange Commission
(the "SEC") and all amendments thereto;
e) the Trust's Registration Statement on Form N-1A under the
Securities Act of 1933, as amended ("1933 Act") and under the 1940
Act as filed with the SEC and all amendments thereto insofar as such
Registration Statement and such amendments relate to the Fund; and
f) the Trust's most recent prospectus and Statement of
Additional Information (collectively called the "Prospectus").
Adviser will furnish the Sub-Adviser from time to time with copies
of all amendments of or supplements to the foregoing.
3. Management. Subject always to the supervision of Trust's Board of
Trustees and the Adviser, Sub-Adviser will furnish an investment program
in respect of, and make investment decisions for, all assets of the Fund
and place all orders for the purchase and sale of securities, all on
behalf of the Fund. In the performance of its duties, Sub-Adviser will
satisfy its fiduciary duties to the Fund (as set forth below), and will
monitor the Fund's investments, and will comply with the provisions of
Trust's Declaration of Trust and By-Laws, as amended from time to time,
and the stated investment objectives, policies and restrictions of the
Fund. Sub-Adviser and Adviser will each make its officers and employees
available to the other from time to time at reasonable times to review
investment policies of the Fund and to consult with each other regarding
the investment affairs of the Fund. Sub-Adviser will report to the Board
of Trustees and to Adviser with respect to the implementation of such
program. Sub-Adviser is responsible for compliance with the provisions of
Section 817(h) of the Internal Revenue Code of 1986, as amended,
applicable to the Fund.
The Sub-Adviser further agrees that it:
a) will use the same skill and care in providing such services
as it uses in providing services to fiduciary accounts for which it
has investment responsibilities;
b) will conform with all applicable Rules and Regulations of the
Securities and Exchange Commission in all material respects and in
addition will conduct its activities under this Agreement in
accordance with any applicable regulations of any governmental
authority pertaining to its investment advisory activities;
c) will place orders pursuant to its investment determinations
for the Fund either directly with the issuer or with any broker or
dealer, including an affiliated broker-dealer which is a member of a
national securities exchange as permitted in accordance with
guidelines established by the Board of Trustees. In placing orders
with brokers and dealers, the Sub-Adviser will attempt to obtain the
best combination of prompt execution of orders in an effective
manner and at the most favorable price. Consistent with this
obligation, when the execution and price offered by two or more
brokers or dealers are comparable Sub-Adviser may, in its
discretion, purchase and sell portfolio securities to and from
brokers and dealers who
2
<PAGE> 3
provide the Sub-Adviser with research advice and other services. In
no instance will portfolio securities be purchased from or sold to
the Adviser, Sub-Adviser or any affiliated person of either the
Trust, Adviser, or Sub-Adviser, except as may be permitted under
the 1940 Act;
d) will report regularly to Adviser and to the Board of Trustees
and will make appropriate persons available for the purpose of
reviewing with representatives of Adviser and the Board of Trustees
on a regular basis at reasonable times the management of the Fund,
including, without limitation, review of the general investment
strategies of the Fund, the performance of the Fund in relation to
standard industry indices, interest rate considerations and general
conditions affecting the marketplace and will provide various other
reports from time to time as reasonably requested by Adviser;
e) will prepare and maintain such books and records with respect
to the Fund's securities transactions and will furnish Adviser and
Trust's Board of Trustees such periodic and special reports as the
Board or Adviser may request;
f) will act upon instructions from Adviser not inconsistent with
the fiduciary duties hereunder;
g) will treat confidentially and as proprietary information of
Trust all such records and other information relative to Trust
maintained by the Sub-Adviser, and will not use such records and
information for any purpose other than performance of its
responsibilities and duties hereunder, except after prior
notification to and approval in writing by Trust, which approval
shall not be unreasonably withheld and may not be withheld where the
Sub-Adviser may be exposed to civil or criminal contempt proceedings
for failure to comply, when requested to divulge such information by
duly constituted authorities, or when so requested by Trust; and
h) will vote proxies received in connection with securities held
by the Fund consistent with its fiduciary duties hereunder.
4. Expenses. During the term of this Agreement, Sub-Adviser will pay all
expenses incurred by it in connection with its activities under this
Agreement other than the cost of securities (including brokerage
commission, if any) purchased for the Fund.
5. Books and Records. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Sub-Adviser hereby agrees that all records which
it maintains for the Trust are the property of the Trust and further
agrees to surrender promptly to the Trust any of such records upon the
Trust's request. Sub-Adviser further agrees to preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act the records required to be
maintained by Rule 31a-1 under the 1940 Act.
6. Compensation. For the services provided and the expenses assumed
pursuant to this Agreement, Adviser will pay the Sub-Adviser, and the
Sub-Adviser agrees to accept as full compensation therefor, a sub-advisory
fee, accrued daily and payable monthly on the average daily net assets in
the Fund or Funds in
3
<PAGE> 4
accordance with Schedule B hereto. From time to time the Sub-Adviser may
agree to waive or reduce some or all of the compensation to which it is
entitled under this Agreement.
The Sub-Adviser represents and warrants that the Sub-Adviser shall not
enter into a subadvisory agreement with a new mutual fund specifically
designed for variable insurance products with total relationship assets
under management less than the Trust to provide substantially similar
investment management services subject to substantially similar mandate,
guidelines and restrictions at a fee rate which produces a fee less than
the fee produced by the rate set forth in schedule B for the level of
assets in the Trust. This provision shall not apply to any accounts of
the Sub-Adviser, its employees or members or any client that has a
personal or familial relationship with the Sub-Adviser or its employees
or members.
7. Services to Others. Adviser understands, and has advised the Trust's
Board of Trustees, that Sub-Adviser now acts, or may in the future act, as
an investment adviser to fiduciary and other managed accounts, and as
investment adviser or sub-investment adviser to other investment
companies. Adviser has no objection to Sub-Adviser acting in such
capacities, provided that whenever the Fund and one or more other
investment advisory clients of Sub-Adviser have available funds for
investment, investments selected for each will be allocated in a manner
believed by Sub-Adviser to be equitable to each. Adviser recognizes, and
has advised Trust's Board of Trustees, that in some cases this procedure
may adversely affect the size of the position that the participating Fund
may obtain in a particular security. In addition, Adviser understands, and
has advised Trust's Board of Trustees, that the persons employed by
Sub-Adviser to assist in Sub-Adviser's duties under this Agreement will
not devote their full time to such service and nothing contained in this
Agreement will be deemed to limit or restrict the right of Sub-Adviser or
any of its affiliates to engage in and devote time and attention to other
businesses or to render services of whatever kind or nature.
8. Standard of Care and Limitation of Liability. The Sub-Adviser shall
exercise its best judgment and shall act in good faith in rendering the
services pursuant to this Agreement.
Sub-Adviser, its officers, directors, employees, agents or affiliates
will not be subject to any liability to the Adviser or the Fund or their
directors, officers, employees, agents or affiliates for any error of
judgment or mistake of law or for any loss suffered by the Fund in
connection with the performance of Sub-Adviser's duties under this
Agreement, except for a loss resulting from Sub-Adviser's willful
misfeasance, bad faith, or gross negligence in the performance of its
duties or by reason of its reckless disregard of its obligations and
duties under this Agreement.
9. Indemnification. Notwithstanding Section 8 of this Agreement, the
Sub-Adviser agrees to indemnify and hold harmless the Adviser, any
affiliated person of the Adviser, and each person, if any, who, within the
meaning of Section 15 of the 1933 Act, controls ("controlling person") the
Adviser (all of such persons being referred to as "Adviser Indemnified
Persons") against any and all losses, claims, damages, liabilities, or
litigation (including reasonable legal and other expenses) to which an
Adviser Indemnified Person may become subject under the 1933 Act, 1940
Act, the Investment Advisers Act of 1940, the Internal Revenue Code,
4
<PAGE> 5
under any other statute, at common law or otherwise, arising out of the
Sub-Adviser's responsibilities as Sub-Adviser to the Fund and to the Trust
which (1) may be based upon any misfeasance, malfeasance, or nonfeasance
by the Sub-Adviser, any of its employees or representatives, or any
affiliate of or any person acting on behalf of the Sub-Adviser, (2) may
be based upon a failure to comply with Section 3 of this Agreement, or
(3) may be based upon any untrue statement or alleged untrue statement of
a material fact contained in the Prospectus, or any amendment or
supplement thereto, or the omission or alleged omission to state therein
a material fact known or which should have been known to the Sub-Adviser
and was required to be stated therein or necessary to make the statements
therein not misleading, if such a statement or omission was made in
reliance upon information furnished to the Adviser, the Trust, or any
affiliated person of the Adviser or Trust by the Sub-Adviser or any
affiliated person of the Sub-Adviser; provided, however, that in no case
shall the indemnity in favor of an Adviser Indemnified Person be deemed
to protect such person against any liability to which any such person
would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence in the performance of its duties, or by reason of its
reckless disregard of its obligations and duties under this Agreement.
Notwithstanding the foregoing in Sections 8 and 9 the Sub-Adviser may be
liable to the Adviser and the Trust for Acts of good faith under law and
nothing contained herein shall constitute a waiver or limitation of
rights that the Adviser or Trust may have under federal or state
securities laws.
10. Duration and Termination. This Agreement will become effective as to a
Fund upon execution, or if later, the date that initial capital for such
Fund is first provided, to it and, unless sooner terminated as provided
herein, will continue in effect for two years from such date. Thereafter,
if not terminated as to a Fund, this Agreement will continue in effect as
to a Fund for successive periods of 12 months, provided that such
continuation is specifically approved at least annually by the Trust's
Board of Trustees or by vote of a majority of the outstanding voting
securities of such Fund, and in either event approved also by a majority
of the Trustees of the Trust who are not interested persons of the Trust,
or of the Adviser, or of the Sub-Adviser. Notwithstanding the foregoing,
this Agreement may be terminated as to a Fund at any time, without the
payment of any penalty, on sixty days' written notice by the Trust or
Adviser, or on ninety days' written notice by the Sub-Adviser. This
Agreement will immediately terminate in the event of its assignment. (As
used in this Agreement, the terms "majority of the outstanding voting
securities", "interested persons" and "assignment" have the same meanings
of such terms in the 1940 Act.)
11. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally; but only by an
instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought.
12 Notice. Any notice under this Agreement shall be in writing, addressed
and delivered or mailed, postage prepaid, to the other party at such
address as such other party may designate for the receipt of such notice.
13. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement is held or made invalid by a court decision,
statute, rule or otherwise, the remainder
5
<PAGE> 6
of this Agreement will be binding upon and shall inure to the benefit of
the parties hereto.
The name "JNL Series Trust" and "Trustees of JNL Series Trust" refer
respectively to the Trust created by, and the Trustees, as trustees but
not individually or personally, acting from time to time under, the
Declaration of Trust, to which reference is hereby made and a copy of
which is on file at the office of the Secretary of State of the
Commonwealth of Massachusetts and elsewhere as required by law, and to
any and all amendments thereto so filed or hereafter filed. The
obligations of the "JNL Series Trust" entered in the name or on behalf
thereof by any of the Trustees, representatives or agents are made not
individually but only in such capacities and are not binding upon any of
the Trustees, Shareholders or representatives of the Trust personally,
but bind only the assets of the Trust, and persons dealing with the Fund
must look solely to the assets of the Trust belonging to such Fund for
the enforcement of any claims against Trust.
14. Representations and Warranties of the Sub-Adviser.
The Sub-Adviser hereby represents that this Agreement does not violate
any existing agreements between the Sub-Adviser and any other party.
The Sub-Adviser further represents and warrants that it is a duly
registered investment adviser under the Investment Advisers Act of 1940,
as amended and has provided to the Adviser a copy of its most recent Form
ADV as filed with the Securities and Exchange Commission.
The Sub-Adviser further represents that is has reviewed the
post-effective amendment to the Registration Statement for the Trust
filed with the Securities and Exchange Commission that contains
disclosure about the Sub-Adviser, and represents and warrants that, with
respect to the disclosure about the Sub-Adviser or information relating,
directly or indirectly, to the Sub-Adviser, such Registration Statement
contains, as of the date hereof, no untrue statement of any material fact
and does not omit any statement of a material fact which was required to
be stated therein or necessary to make the statements contained therein
not misleading.
15. Proprietary Rights. Adviser and the Trust represent, and the Sub-Adviser
acknowledges, that Adviser, the Trust and/or an affiliated party of the
Adviser or the Trust are the sole owner(s) of the names "JNL Series
Trust", "Jackson National Financial Services, Inc.", "Jackson National
Life Insurance Company", "JNL" and certain logos associated with such
names (the "JNL Marks"). Sub-Adviser represents, and the Trust and the
Adviser acknowledge, that Sub-Adviser is the sole owner of the names
"Lazard Asset Management" and certain logos associated with such name
(the "Lazard Marks").
The use by the Sub-Adviser, or its affiliates of any JNL Marks or any
representations regarding Adviser, the Trust or any affiliates thereof in
any disclosure document, advertisement, sales literature or other
materials shall remain subject to the approval of Adviser; provided,
however, that (i) Adviser's review of any material pursuant to this
Agreement shall be conducted in a reasonable and timely manner; (ii)
Adviser's approval under this Agreement shall not be unreasonably
withheld; and (iii) Adviser's approval under this Agreement shall not be
required with respect to any use which has been
6
<PAGE> 7
previously approved by Adviser. Sub-Adviser acknowledges and agrees
that it will not use the names Lazard/JNL Small Cap Value Series or
Lazard/JNL Mid Cap Value Series on its own behalf, or in relation to any
investment company for which Sub-Adviser or its successors and any
subsidiary or affiliate thereof acts as investment adviser, without the
express written permission of the Trust or the Adviser, respectively,
except that Sub-Adviser may state that it acts as a sub-advisor to the
Trust and the Adviser.
The use by the Trust and the Adviser, or their affiliates, on their own
behalf or on behalf of the Lazard/JNL Small Cap Value Series or
Lazard/JNL Mid Cap Value Series, of any Lazard Marks or any
representations regarding Sub-Adviser in any disclosure document,
advertisement, sales literature or other materials promoting the
Lazard/JNL Small Cap Value Series or Lazard/JNL Mid Cap Value Series
shall remain subject to the approval of Sub-Adviser; provided, however,
that (i) Sub-Adviser's review of any material pursuant to this Agreement
shall be conducted in a reasonable and timely manner; (ii) Sub-Adviser's
approval under this Agreement shall not be unreasonably withheld; and
(iii) Sub-Adviser's approval under this Agreement shall not be required
with respect to any use which has been previously approved by
Sub-Adviser, including, but not limited to, any use which has been
derived from disclosure contained in the Trust's or the Adviser's most
recent Prospectus and/or Statement of Additional Information, or any
supplements thereto.
The parties hereby acknowledge that the Trust has adopted the names
"Lazard/JNL Small Cap Value Series" and "Lazard/JNL Mid Cap Value Series"
through the permission of Sub-Adviser.
16. Applicable Law. This Agreement shall be construed in accordance with
applicable federal law and the laws of the State of Michigan.
IN WITNESS WHEREOF, the Adviser and the Sub-Adviser have caused this
Agreement to be executed as of this 17th day of December, 1997.
JACKSON NATIONAL FINANCIAL
SERVICES, INC.
By: /s/ Andrew B. Hopping
-----------------------
Name: Andrew B. Hopping
----------------------
Title: President
----------------------
LAZARD ASSET MANAGEMENT
By: /s/
------------------------
Name:
-----------------------
Title:
-----------------------
7
<PAGE> 8
SCHEDULE A
(Fund)
LAZARD/JNL SMALL CAP VALUE SERIES
LAZARD/JNL MID CAP VALUE SERIES
8
<PAGE> 9
SCHEDULE B
(Compensation)
LAZARD/JNL SMALL CAP VALUE SERIES
Average Daily Net Assets Annual Rate
---------------------------- -----------
0 to $50 Million: .625%
$50 Million to $150 Million: .575%
$150 Million to $300 Million: .525%
Amounts over $300 Million: .475%
LAZARD/JNL MID CAP VALUE SERIES
Average Daily Net Assets Annual Rate
---------------------------- -----------
0 to $50 Million: .55%
$50 Million to $150 Million: .525%
$150 Million to $300 Million: .475%
Amounts over $300 Million: .45%
9
<PAGE> 1
EX-99.B5-t
INVESTMENT SUB-ADVISORY AGREEMENT
This AGREEMENT is effective this 17th day of December, 1997, by and
between JACKSON NATIONAL FINANCIAL SERVICES, INC., a Delaware Corporation and
registered investment adviser ("Adviser"), and PACIFIC INVESTMENT MANAGEMENT
COMPANY, a Delaware general partnership and registered investment adviser
("Sub-Adviser").
WHEREAS, Adviser is the investment manager for the JNL Series Trust (the
"Trust"), an open-end management investment company registered under the
Investment Company Act of 1940, as amended ("1940 Act"); and
WHEREAS, the Trust is authorized to issue separate series, each series
having its own investment objective or objectives, policies and limitations;
WHEREAS, Adviser desires to retain Sub-Adviser as Adviser's agent to
furnish investment advisory services to the series of the Trust listed on
Schedule A hereto ("Fund").
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
1. Appointment. Adviser hereby appoints Sub-Adviser to provide certain
sub-investment advisory services to the Fund for the period and on the
terms set forth in this Agreement. Sub-Adviser accepts such appointment
and agrees to furnish the services herein set forth for the compensation
herein provided.
In the event the Adviser designates one or more series other than the Fund
with respect to which the Adviser wishes to retain the Sub-Adviser to
render investment advisory services hereunder, it shall notify the
Sub-Adviser in writing. If the Sub-Adviser is willing to render such
services, it shall notify the Adviser in writing, whereupon such series
shall become a Fund hereunder, and be subject to this Agreement.
2. Delivery of Documents. Adviser has or will furnish Sub-Adviser with
copies properly certified or authenticated of each of the following:
a) the Trust's Agreement and Declaration of Trust, as filed with
the Secretary of State of The Commonwealth of Massachusetts on June
1, 1994, and all amendments thereto or restatements thereof (such
Declaration, as presently in effect and as it shall from time to time
be amended or restated, is herein called the "Declaration of Trust");
b) the Trust's By-Laws and amendments thereto;
c) resolutions of the Trust's Board of Trustees authorizing the
appointment of Sub-Adviser and approving this Agreement;
<PAGE> 2
d) the Trust's Notification of Registration on Form N-8A under
the 1940 Act as filed with the Securities and Exchange Commission
(the "SEC") and all amendments thereto;
e) the Trust's Registration Statement on Form N-1A under the
Securities Act of 1933, as amended ("1933 Act") and under the 1940
Act as filed with the SEC and all amendments thereto insofar as such
Registration Statement and such amendments relate to the Fund; and
f) the Trust's most recent prospectus and Statement of
Additional Information (collectively called the "Prospectus").
Adviser will furnish the Sub-Adviser from time to time with copies
of all amendments of or supplements to the foregoing.
3. Management. Subject always to the supervision of Trust's Board of
Trustees and the Adviser, Sub-Adviser will furnish an investment program
in respect of, and make investment decisions for, all assets of the Fund
and place all orders for the purchase and sale of securities, all on
behalf of the Fund. In the performance of its duties, Sub-Adviser will
satisfy its fiduciary duties to the Fund (as set forth below), and will
monitor the Fund's investments, and will comply with the provisions of
Trust's Declaration of Trust and By-Laws, as amended from time to time,
and the stated investment objectives, policies and restrictions of the
Fund. Sub-Adviser and Adviser will each make its officers and employees
available to the other from time to time at reasonable times to review
investment policies of the Fund and to consult with each other regarding
the investment affairs of the Fund. Sub-Adviser will report to the Board
of Trustees and to Adviser with respect to the implementation of such
program. Sub-Adviser is responsible for compliance with the provisions of
Section 817(h) of the Internal Revenue Code of 1986, as amended,
applicable to the Fund.
The Sub-Adviser further agrees that it:
a) will use the same skill and care in providing such services
as it uses in providing services to fiduciary accounts for which it
has investment responsibilities;
b) will conform with all applicable Rules and Regulations of the
Securities and Exchange Commission in all material respects and in
addition will conduct its activities under this Agreement in
accordance with any applicable regulations of any governmental
authority pertaining to its investment advisory activities;
c) will place orders pursuant to its investment determinations
for the Fund either directly with the issuer or with any broker or
dealer, including an affiliated broker-dealer which is a member of a
national securities exchange as permitted in accordance with
guidelines established by the Board of Trustees. In placing orders
with brokers and dealers, the Sub-Adviser will attempt to obtain the
best combination of prompt execution of orders in an effective
manner and at the most favorable price. Consistent with this
obligation, when the execution and price offered by two or more
brokers or dealers are comparable Sub-Adviser may, in its
discretion, purchase and sell portfolio securities to and from
brokers and dealers who
2
<PAGE> 3
provide the Sub-Adviser with research advice and other services. In
no instance will portfolio securities be purchased from or sold to
the Adviser, Sub-Adviser or any affiliated person of either the
Trust, Adviser, or Sub-Adviser, except as may be permitted under the
1940 Act;
d) will report regularly to Adviser and to the Board of Trustees
and will make appropriate persons available for the purpose of
reviewing with representatives of Adviser and the Board of Trustees
on a regular basis at reasonable times the management of the Fund,
including, without limitation, review of the general investment
strategies of the Fund, the performance of the Fund in relation to
standard industry indices, interest rate considerations and general
conditions affecting the marketplace and will provide various other
reports from time to time as reasonably requested by Adviser;
e) will prepare and maintain such books and records with respect
to the Fund's securities transactions and will furnish Adviser and
Trust's Board of Trustees such periodic and special reports as the
Board or Adviser may request;
f) will act upon instructions from Adviser not inconsistent with
the fiduciary duties hereunder;
g) will treat confidentially and as proprietary information of
Trust all such records and other information relative to Trust
maintained by the Sub-Adviser, and will not use such records and
information for any purpose other than performance of its
responsibilities and duties hereunder, except after prior
notification to and approval in writing by Trust, which approval
shall not be unreasonably withheld and may not be withheld where the
Sub-Adviser may be exposed to civil or criminal contempt proceedings
for failure to comply, when requested to divulge such information by
duly constituted authorities, or when so requested by Trust; and
h) will vote proxies received in connection with securities held
by the Fund consistent with its fiduciary duties hereunder.
4. Aggregation of Orders. Provided the investment objectives of the Fund
are adhered to, the Adviser agrees that the Sub-Adviser may aggregate
sales and purchase orders of securities held in the Fund with similar
orders being made simultaneously for other accounts managed by the
Sub-Adviser or with accounts of the affiliates of the Sub-Adviser, if in
the Sub-Adviser's reasonable judgment such aggregation shall result in an
overall economic benefit to the Fund, taking into consideration the
advantageous selling or purchase price, brokerage commission and other
expenses. The Adviser acknowledges that the determination of such
economic benefit to the Fund by the Sub-Adviser is subjective and
represents the Sub-Adviser's evaluation that the Fund is benefited by
relatively better purchase or sales prices, lower commission expenses and
beneficial timing of transactions or a combination of these and other
factors.
5. Futures and Options. Provided the investment objectives of the Fund are
adhered to, the Sub-Adviser's investment authority shall include the
authority to purchase, sell, cover open positions, and generally to deal
in financial futures contracts and options thereon.
3
<PAGE> 4
The Adviser will (i) open and maintain brokerage accounts for financial
futures and options (such accounts hereinafter referred to as "brokerage
accounts") on behalf of and in the name of the Fund and (ii) execute for
and on behalf of the Fund, standard customer agreements with a broker or
brokers. The Sub-Adviser may, using such of the securities and other
property in the Fund as the Sub-Adviser deems necessary or desirable,
direct the Adviser to deposit on behalf of the Fund, original and
maintenance brokerage deposits and otherwise direct payments of cash, cash
equivalents and securities and other property into such brokerage accounts
and to such brokers as the Sub-Adviser deems desirable or appropriate.
Upon the solicitation of the Adviser, the Sub-Adviser delivered to the
Adviser a copy of its Disclosure Document, as amended, dated July 3,
1997, on file with the Commodity Futures Trading Commission. The Adviser
hereby acknowledges receipt of such copy.
6. Expenses. During the term of this Agreement, Sub-Adviser will pay all
expenses incurred by it in connection with its activities under this
Agreement other than the cost of securities (including brokerage
commission, if any) purchased for the Fund.
7. Books and Records. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Sub-Adviser hereby agrees that all records which
it maintains for the Trust are the property of the Trust and further
agrees to surrender promptly to the Trust any of such records upon the
Trust's request. Sub-Adviser further agrees to preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act the records required to be
maintained by Rule 31a-1 under the 1940 Act.
8. Compensation. For the services provided and the expenses assumed
pursuant to this Agreement, Adviser will pay the Sub-Adviser, and the
Sub-Adviser agrees to accept as full compensation therefor, a sub-advisory
fee, accrued daily and payable monthly on the average daily net assets in
the Fund or Funds excluding the net assets representing capital
contributed by Jackson National Life Insurance Company in accordance with
Schedule B hereto. From time to time, the Sub-Adviser may agree to waive
or reduce some or all of the compensation to which it is entitled under
this Agreement.
The Sub-Adviser represents and warrants that in no event shall the
Sub-Adviser provide similar investment advisory services to any client
comparable to the Fund being managed under this Agreement at a composite
rate of compensation less than that provided for herein.
9. Services to Others. Adviser understands, and has advised the Trust's
Board of Trustees, that Sub-Adviser now acts, or may in the future act, as
an investment adviser to fiduciary and other managed accounts, and as
investment adviser or sub-investment adviser to other investment
companies. Adviser has no objection to Sub-Adviser acting in such
capacities, provided that whenever the Fund and one or more other
investment advisory clients of Sub-Adviser have available funds for
investment, investments selected for each will be allocated in a manner
believed by Sub-Adviser to be equitable to each. Adviser recognizes, and
has advised Trust's Board of Trustees, that in some cases this procedure
may adversely affect the size of the position that the participating Fund
may obtain in
4
<PAGE> 5
a particular security. In addition, Adviser understands, and has advised
Trust's Board of Trustees, that the persons employed by Sub-Adviser to
assist in Sub-Adviser's duties under this Agreement will not devote their
full time to such service and nothing contained in this Agreement will be
deemed to limit or restrict the right of Sub-Adviser or any of its
affiliates to engage in and devote time and attention to other businesses
or to render services of whatever kind or nature.
10. Standard of Care and Limitation of Liability. The Sub-Adviser shall
exercise its best judgment and shall act in good faith in rendering the
services pursuant to this Agreement.
Sub-Adviser, its officers, directors, employees, agents or affiliates will
not be subject to any liability to the Adviser or the Fund or their
directors, officers, employees, agents or affiliates for any error of
judgment or mistake of law or for any loss suffered by the Fund in
connection with the performance of Sub-Adviser's duties under this
Agreement, except for a loss resulting from Sub-Adviser's willful
misfeasance, bad faith, or gross negligence in the performance of its
duties or by reason of its reckless disregard of its obligations and
duties under this Agreement.
11. Indemnification. Notwithstanding Section 10 of this Agreement, the
Sub-Adviser agrees to indemnify and hold harmless the Adviser, any
affiliated person of the Adviser, and each person, if any, who, within the
meaning of Section 15 of the 1933 Act, controls ("controlling person") the
Adviser (all of such persons being referred to as "Adviser Indemnified
Persons") against any and all losses, claims, damages, liabilities, or
litigation (including reasonable legal and other expenses) to which an
Adviser Indemnified Person may become subject under the 1933 Act, 1940
Act, the Investment Advisers Act of 1940, the Internal Revenue Code, under
any other statute, at common law or otherwise, arising out of the
Sub-Adviser's responsibilities as Sub-Adviser to the Fund and to the Trust
which is based upon the willful misfeasance, bad faith or negligence or
breach of this Agreement by Sub-Adviser or its agents, or may be based
upon any untrue statement of a material fact provided in writing by the
Sub-Adviser specifically for inclusion in the Prospectus, or any amendment
or supplement thereto, or the omission to state therein a material fact
known or which should have been known to the Sub-Adviser and was required
to be stated therein or necessary to make the statements therein not
misleading; provided, however, that in no case shall the indemnity in
favor of an Adviser Indemnified Person be deemed to protect such person
against any liability to which any such person would otherwise be subject
by reason of willful misfeasance, bad faith, negligence in the performance
of its duties, or by reason of its breach of this Agreement.
12. Duration and Termination. This Agreement will become effective as to a
Fund upon execution or, if later, on the date that initial capital for
such Fund is first provided to it and, unless sooner terminated as
provided herein, will continue in effect for two years from such date.
Thereafter, if not terminated as to a Fund, this Agreement will continue
in effect as to a Fund for successive periods of 12 months, provided that
such continuation is specifically approved at least annually by the
Trust's Board of Trustees or by vote of a majority of the outstanding
voting securities of such Fund, and in either event approved also by a
majority of the Trustees of the Trust who are not interested persons of
the Trust, or of the Adviser, or of the Sub-Adviser. Notwithstanding the
foregoing, this Agreement may be terminated as to a Fund at any time,
without the payment of any penalty,
5
<PAGE> 6
on sixty days' written notice by the Trust or Adviser, or on sixty days'
written notice by the Sub-Adviser. This Agreement will immediately
terminate in the event of its assignment. (As used in this Agreement, the
terms "majority of the outstanding voting securities", "interested
persons" and "assignment" have the same meanings of such terms in the 1940
Act.)
13. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally; but only by an
instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought.
14. Notice. Any notice under this Agreement shall be in writing, addressed
and delivered or mailed, postage prepaid, to the other party at such
address as such other party may designate for the receipt of such notice.
15. Proprietary Rights. Sub-Adviser represents, and the Trust and the
Adviser acknowledge, that Sub-Adviser is the sole owner of the names
"Pacific Investment Management Company" and "PIMCO" and certain logos
associated with such names (the "PIMCO Marks").
The use by the Trust and the Adviser, or their affiliates, on their own
behalf or on behalf of the JNL/PIMCO Total Return Bond Series, of any
PIMCO Marks or any representations regarding Sub-Adviser in any disclosure
document, advertisement, sales literature or other materials promoting the
JNL/PIMCO Total Return Bond Series shall remain subject to the approval of
Sub-Adviser; provided, however, that (i) Sub-Adviser's review of any
material pursuant to this Agreement shall be conducted in a reasonable and
timely manner; (ii) Sub-Adviser's approval under this Agreement shall not
be unreasonably withheld; and (iii) Sub-Adviser's approval under this
Agreement shall not be required with respect to any use which has been
previously approved by Sub-Adviser, including, but not limited to, any use
which has been derived from disclosure contained in the Trust's or the
Adviser's most recent Prospectus and/or Statement of Additional
Information, or any supplements thereto, regarding any PIMCO Marks, PIMCO,
or the JNL/PIMCO Total Return Bond Series, which has been previously
approved by Sub-Adviser.
Sub-Adviser acknowledges and agrees that it will not use the name the
JNL/PIMCO Total Return Bond Series on its own behalf, or in relation to
any investment company for which Sub-Adviser or its successors and any
subsidiary or affiliate thereof acts as investment adviser, without the
express written permission of the Trust or the Adviser, respectively,
except that Sub-Adviser may state that it acts as a sub-advisor to the
Trust and the Adviser.
The parties hereby acknowledge that the Trust has adopted the name the
"JNL/PIMCO Total Return Bond Series" through the permission of
Sub-Adviser.
16. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement is held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement will be
binding upon and shall inure to the benefit of the parties hereto.
6
<PAGE> 7
The name "JNL Series Trust" and "Trustees of JNL Series Trust" refer
respectively to the Trust created by, and the Trustees, as trustees but
not individually or personally, acting from time to time under, the
Declaration of Trust, to which reference is hereby made and a copy of
which is on file at the office of the Secretary of State of the
Commonwealth of Massachusetts and elsewhere as required by law, and to any
and all amendments thereto so filed or hereafter filed. The obligations of
the "JNL Series Trust" entered in the name or on behalf thereof by any of
the Trustees, representatives or agents are made not individually but only
in such capacities and are not binding upon any of the Trustees,
Shareholders or representatives of the Trust personally, but bind only the
assets of the Trust, and persons dealing with the Fund must look solely to
the assets of the Trust belonging to such Fund for the enforcement of any
claims against Trust.
17. Representations and Warranties of the Sub-Adviser.
The Sub-Adviser hereby represents that this Agreement does not violate
any existing agreements between the Sub-Adviser and any other party.
The Sub-Adviser further represents and warrants that it is a duly
registered investment adviser under the Investment Advisers Act of 1940,
as amended and has provided to the Adviser a copy of its most recent Form
ADV as filed with the Securities and Exchange Commission.
The Sub-Adviser further represents that is has reviewed the post-effective
amendment to the Registration Statement for the Trust filed with the
Securities and Exchange Commission that contains disclosure about the
Sub-Adviser, and represents and warrants that, with respect to the
disclosure about the Sub-Adviser or information relating, directly or
indirectly, to the Sub-Adviser, such Registration Statement contains, as
of the date hereof, no untrue statement of any material fact and does not
omit any statement of a material fact which was required to be stated
therein or necessary to make the statements contained therein not
misleading.
18. Applicable Law. This Agreement shall be construed in accordance with
applicable federal law and the laws of the State of Michigan.
7
<PAGE> 8
IN WITNESS WHEREOF, the Adviser and the Sub-Adviser have caused this
Agreement to be executed as of this 17th day of December, 1997.
JACKSON NATIONAL FINANCIAL
SERVICES, INC.
By: /s/ Andrew B. Hopping
-----------------------------------
Name: Andrew B. Hopping
--------------------------------
Title: President
-------------------------------
PACIFIC INVESTMENT MANAGEMENT COMPANY
By: PIMCO Management, Inc., a general
partner
By: /s/ James F. Muzzy
----------------------------------
Name: James F. Muzzy
-----------------------------
Title: Managing Director
-----------------------------
8
<PAGE> 9
SCHEDULE A
(Fund)
JNL/PIMCO TOTAL RETURN BOND SERIES
9
<PAGE> 10
SCHEDULE B
(Compensation)
JNL/PIMCO TOTAL RETURN BOND SERIES
Average Daily Net Assets Annual Rate
-------------------------------------
Amounts over $0: .25%
10
<PAGE> 1
EX-99.B5-u
AMENDMENT TO INVESTMENT SUB-ADVISORY AGREEMENT
BETWEEN JACKSON NATIONAL FINANCIAL SERVICES, INC.
AND SALOMON BROTHERS ASSET MANAGEMENT INC
AMENDMENT effective as of February 2, 1998, by and between JACKSON
NATIONAL FINANCIAL SERVICES, INC., a Delaware corporation and registered
investment adviser ("Adviser"), and SALOMON BROTHERS ASSET MANAGEMENT INC, a
Delaware corporation and registered investment adviser ("Sub-Adviser").
WHEREAS, Adviser and Sub-Adviser entered into an Investment Sub-Advisory
Agreement executed as of February 8, 1995 ("Agreement"), whereby Adviser
retained Sub-Adviser to provide certain sub-investment advisory services to the
investment portfolios of the JNL Series Trust; and
WHEREAS, the Agreement provides that the Adviser will pay the Sub-Adviser
for the services provided and the expenses assumed pursuant to the Agreement a
sub-advisory fee as set forth on Schedule B to the Agreement and the
Sub-Adviser agrees to accept such sub-advisory fee as full compensation for
such services and expenses; and
WHEREAS, effective February 2, 1998, the Adviser desires to retain
Sub-Adviser to provide and Sub-Adviser agrees to provide sub-investment
advisory services to additional investment portfolios of the JNL Series Trust.
NOW THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereby agree to amend the Agreement as follows:
1. Schedule A to the Agreement shall be amended and replaced with
Schedule A dated February 2, 1998, attached hereto.
2. Schedule B to the Agreement shall be amended and replaced with
Schedule B dated February 2, 1998, attached hereto.
IN WITNESS WHEREOF, the Adviser and the Sub-Adviser have caused this
Amendment to be executed as of this 17th day of December, 1997.
JACKSON NATIONAL FINANCIAL SALOMON BROTHERS ASSET
SERVICES, INC. MANAGEMENT INC
By: /s/ Andrew B. Hopping By: /s/ Michael S. Hyland
---------------------------- ---------------------------
Name: Andrew B. Hopping Name: Michael S. Hyland
-------------------------- --------------------------
Title: President Title: President
------------------------- -------------------------
<PAGE> 2
SCHEDULE A
DATED FEBRUARY 2, 1998
TO
INVESTMENT SUB-ADVISORY AGREEMENT
BETWEEN
JACKSON NATIONAL FINANCIAL SERVICES, INC.
AND
SALOMON BROTHERS ASSET MANAGEMENT INC
Salomon Brothers/JNL U. S. Government & Quality Bond Series
Salomon Brothers/JNL Global Bond Series
Salomon Brothers/JNL High Yield Bond Series
Salomon Brothers/JNL Balanced Series
<PAGE> 3
SCHEDULE B
DATED FEBRUARY 2, 1998
TO
INVESTMENT SUB-ADVISORY AGREEMENT
BETWEEN
JACKSON NATIONAL FINANCIAL SERVICES, INC.
AND
SALOMON BROTHERS ASSET MANAGEMENT INC
SALOMON BROTHERS/JNL U. S. GOVERNMENT & QUALITY BOND SERIES
<TABLE>
Average Daily Net Assets Annual Rate
----------------------------------------------
<S> <C>
0 to $50 Million: .225%
$50 Million to $150 Million: .225%
$150 Million to $300 Million: .175%
$300 Million to $500 Million: .150%
Amounts over $500 Million: .100%
SALOMON BROTHERS/JNL GLOBAL BOND SERIES
Average Daily Net Assets Annual Rate
----------------------------------------------
0 to $50 Million: .375%
$50 Million to $150 Million: .350%
$150 Million to $300 Million: .300%
$300 Million to $500 Million: .300%
Amounts over $500 Million: .250%
SALOMON BROTHERS/JNL HIGH YIELD BOND SERIES
Average Daily Net Assets Annual Rate
-----------------------------------------
0 to $50 Million: .35%
$50 Million to $100 Million: .30%
Amounts over $100 Million: .25%
SALOMON BROTHERS/JNL BALANCED SERIES
Average Daily Net Assets Annual Rate
-----------------------------------------
0 to $50 Million: .35%
$50 Million to $100 Million: .30%
Amounts over $100 Million: .25%
</TABLE>
<PAGE> 1
EX-99.B5-v
INVESTMENT SUB-ADVISORY AGREEMENT
This AGREEMENT is effective this ____ day of _____________, 1997, by
and between JACKSON NATIONAL FINANCIAL SERVICES, INC., a Delaware corporation
and registered investment adviser ("Adviser"), and STANDARD & POOR'S INVESTMENT
ADVISORY SERVICES, INC., a Delaware corporation and registered investment
adviser ("Sub-Adviser").
WHEREAS, Adviser is the investment manager for the JNL Series Trust
(the "Trust"), an open-end management investment company registered under the
Investment Company Act of 1940, as amended ("1940 Act"); and
WHEREAS, the Trust is authorized to issue separate series, each series
having its own investment objective or objectives, policies and limitations;
WHEREAS, Adviser desires to retain Sub-Adviser as Adviser's agent to
furnish investment advisory services to the series of the Trust listed on
Schedule A hereto ("Fund").
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
1. Appointment. Adviser hereby appoints Sub-Adviser to provide certain
sub-investment advisory services to the Fund for the period and on the
terms set forth in this Agreement. Sub-Adviser accepts such appointment
and agrees to furnish the services herein set forth for the
compensation herein provided.
In the event the Adviser designates one or more series other than the
Fund with respect to which the Adviser wishes to retain the Sub-Adviser
to render investment advisory services hereunder, it shall notify the
Sub-Adviser in writing. If the Sub-Adviser is willing to render such
services, it shall notify the Adviser in writing, whereupon such series
shall become a Fund hereunder, and be subject to this Agreement.
2. Delivery of Documents. Adviser has or will furnish Sub-Adviser with
copies properly certified or authenticated of each of the following:
a) the Trust's Agreement and Declaration of Trust, as filed with
the Secretary of State of The Commonwealth of Massachusetts on
June 1, 1994, and all amendments thereto or restatements
thereof (such Declaration, as presently in effect and as it
shall from time to time be amended or restated, is herein
called the "Declaration of Trust");
b) the Trust's By-Laws and amendments thereto;
c) resolutions of the Trust's Board of Trustees authorizing the
appointment of Sub-Adviser and approving this Agreement;
<PAGE> 2
d) the Trust's Notification of Registration on Form N-8A under
the 1940 Act as filed with the Securities and Exchange
Commission (the "SEC") and all amendments thereto;
e) the Trust's Registration Statement on Form N-1A under the
Securities Act of 1933, as amended ("1933 Act") and under the
1940 Act as filed with the SEC and all amendments thereto
insofar as such Registration Statement and such amendments
relate to the Fund; and
f) the Trust's most recent prospectus and Statement of Additional
Information (collectively called the "Prospectus").
Adviser will furnish the Sub-Adviser from time to time with
copies of all amendments of or supplements to the foregoing.
3. Management. Subject always to the supervision of Trust's Board of
Trustees and the Adviser, Sub-Adviser will furnish an investment
program in respect of, and make investment decisions for, all assets of
the Fund and place all orders for the purchase and sale of securities,
all on behalf of the Fund. In the performance of its duties,
Sub-Adviser will satisfy its fiduciary duties to the Fund (as set forth
below), and will monitor the Fund's investments, and will comply with
the provisions of Trust's Declaration of Trust and By-Laws, as amended
from time to time, and the stated investment objectives, policies and
restrictions of the Fund. Sub-Adviser and Adviser will each make its
officers and employees available to the other from time to time at
reasonable times to review investment policies of the Fund and to
consult with each other regarding the investment affairs of the Fund.
Sub-Adviser will report to the Board of Trustees and to Adviser with
respect to the implementation of such program. Sub-Adviser is
responsible for compliance with the provisions of Section 817(h) of the
Internal Revenue Code of 1986, as amended, applicable to the Fund.
The Sub-Adviser further agrees that it:
a) will use the same skill and care in providing such services as
it uses in providing services to fiduciary accounts for which
it has investment responsibilities;
b) will conform with all applicable Rules and Regulations of the
Securities and Exchange Commission in all material respects
and in addition will conduct its activities under this
Agreement in accordance with any applicable regulations of any
governmental authority pertaining to its investment advisory
activities;
c) will place orders pursuant to its investment determinations
for the Fund either directly with the issuer or with any
broker or dealer, including an affiliated broker-dealer which
is a member of a national securities exchange as permitted in
accordance with guidelines established by the Board of
Trustees. In placing orders with brokers and dealers, the
Sub-Adviser will attempt to obtain the best combination of
prompt execution of orders in an effective manner and at the
most favorable price. Consistent with this obligation, when
the execution and price offered by two or more brokers or
dealers are comparable Sub-Adviser may, in its discretion,
purchase and sell portfolio securities to and from brokers and
dealers who
2
<PAGE> 3
provide the Sub-Adviser with research advice and other
services. In no instance will portfolio securities be
purchased from or sold to the Adviser, Sub-Adviser or any
affiliated person of either the Trust, Adviser, or
Sub-Adviser, except as may be permitted under the 1940 Act;
d) will report regularly to Adviser and to the Board of Trustees
and will make appropriate persons available for the purpose of
reviewing with representatives of Adviser and the Board of
Trustees on a regular basis at reasonable times the management
of the Fund, including, without limitation, review of the
general investment strategies of the Fund, the performance of
the Fund in relation to standard industry indices, interest
rate considerations and general conditions affecting the
marketplace and will provide various other reports from time
to time as reasonably requested by Adviser;
e) will prepare and maintain such books and records with respect
to the Fund's securities transactions and will furnish Adviser
and Trust's Board of Trustees such periodic and special
reports as the Board or Adviser may request;
f) will act upon instructions from Adviser not inconsistent with
the fiduciary duties hereunder;
g) will treat confidentially and as proprietary information of
Trust all such records and other information relative to Trust
maintained by the Sub-Adviser, and will not use such records
and information for any purpose other than performance of its
responsibilities and duties hereunder, except after prior
notification to and approval in writing by Trust, which
approval shall not be unreasonably withheld and may not be
withheld where the Sub-Adviser may be exposed to civil or
criminal contempt proceedings for failure to comply, when
requested to divulge such information by duly constituted
authorities, or when so requested by Trust; and
h) will vote proxies received in connection with securities held
by the Fund consistent with its fiduciary duties hereunder.
4. Expenses. During the term of this Agreement, Sub-Adviser will pay all
expenses incurred by it in connection with its activities under this
Agreement other than the cost of securities (including brokerage
commission, if any) purchased for the Fund.
5. Books and Records. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Sub-Adviser hereby agrees that all records
which it maintains for the Trust are the property of the Trust and
further agrees to surrender promptly to the Trust any of such records
upon the Trust's request. Sub-Adviser further agrees to preserve for
the periods prescribed by Rule 31a-2 under the 1940 Act the records
required to be maintained by Rule 31a-1 under the 1940 Act.
6. Compensation. For the services provided and the expenses assumed
pursuant to this Agreement, Adviser will pay the Sub-Adviser, and the
Sub-Adviser agrees to accept as full compensation therefor, a
sub-advisory fee, accrued daily and payable monthly on the average
daily net assets in the Fund or Funds excluding
3
<PAGE> 4
the net assets representing capital contributed by Jackson National
Life Insurance Company in accordance with Schedule B hereto. From time
to time, the Sub-Adviser may agree to waive or reduce some or all of
the compensation to which it is entitled under this Agreement.
The Sub-Adviser represents and warrants that in no event shall the
Sub-Adviser provide similar investment advisory services to any client
comparable to the Fund being managed under this Agreement at a
composite rate of compensation less than that provided for herein.
7. Services to Others. Adviser understands, and has advised the Trust's
Board of Trustees, that Sub-Adviser now acts, or may in the future act,
as an investment adviser to fiduciary and other managed accounts, and
as investment adviser or sub-investment adviser to other investment
companies. Adviser has no objection to Sub-Adviser acting in such
capacities, provided that whenever the Fund and one or more other
investment advisory clients of Sub-Adviser have available funds for
investment, investments selected for each will be allocated in a manner
believed by Sub-Adviser to be equitable to each. Adviser recognizes,
and has advised Trust's Board of Trustees, that in some cases this
procedure may adversely affect the size of the position that the
participating Fund may obtain in a particular security. In addition,
Adviser understands, and has advised Trust's Board of Trustees, that
the persons employed by Sub-Adviser to assist in Sub-Adviser's duties
under this Agreement will not devote their full time to such service
and nothing contained in this Agreement will be deemed to limit or
restrict the right of Sub-Adviser or any of its affiliates to engage in
and devote time and attention to other businesses or to render services
of whatever kind or nature.
8. Standard of Care and Limitation of Liability. The Sub-Adviser shall
exercise its best judgment and shall act in good faith in rendering the
services pursuant to this Agreement.
Sub-Adviser, its officers, directors, employees, agents or affiliates
will not be subject to any liability to the Adviser or the Fund or
their directors, officers, employees, agents or affiliates for any
error of judgment or mistake of law or for any loss suffered by the
Fund in connection with the performance of Sub-Adviser's duties under
this Agreement, except for a loss resulting from Sub-Adviser's willful
misfeasance, bad faith, or gross negligence in the performance of its
duties or by reason of its reckless disregard of its obligations and
duties under this Agreement.
9. Indemnification. Notwithstanding Section 8 of this Agreement, the
Sub-Adviser agrees to indemnify and hold harmless the Adviser, any
affiliated person of the Adviser, and each person, if any, who, within
the meaning of Section 15 of the 1933 Act, controls ("controlling
person") the Adviser (all of such persons being referred to as "Adviser
Indemnified Persons") against any and all losses, claims, damages,
liabilities, or litigation (including reasonable legal and other
expenses) to which an Adviser Indemnified Person may become subject
under the 1933 Act, 1940 Act, the Investment Advisers Act of 1940, the
Internal Revenue Code, under any other statute, at common law or
otherwise, arising out of the Sub-Adviser's responsibilities as
Sub-Adviser to the Fund and to the Trust which (1) may be based upon
any misfeasance, malfeasance, or nonfeasance by the Sub-Adviser, any of
its employees or representatives, or any affiliate of or any person
acting on behalf of the Sub-Adviser, (2) may be based upon a failure to
comply
4
<PAGE> 5
with Section 3 of this Agreement, or (3) may be based upon any untrue
statement or alleged untrue statement of a material fact contained in
the Prospectus, or any amendment or supplement thereto, or the omission
or alleged omission to state therein a material fact known or which
should have been known to the Sub-Adviser and was required to be stated
therein or necessary to make the statements therein not misleading, if
such a statement or omission was made in reliance upon information
furnished to the Adviser, the Trust, or any affiliated person of the
Adviser or Trust by the Sub-Adviser or any affiliated person of the
Sub-Adviser; provided, however, that in no case shall the indemnity in
favor of an Adviser Indemnified Person be deemed to protect such person
against any liability to which any such person would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence
in the performance of its duties, or by reason of its reckless
disregard of its obligations and duties under this Agreement.
10. Duration and Termination. This Agreement will become effective as to a
Fund upon execution or, if later, the date that initial capital for
such Fund is first provided to it and, unless sooner terminated as
provided herein, will continue in effect for two years from such date.
Thereafter, if not terminated as to a Fund, this Agreement will
continue in effect as to a Fund for successive periods of 12 months,
provided that such continuation is specifically approved at least
annually by the Trust's Board of Trustees or by vote of a majority of
the outstanding voting securities of such Fund, and in either event
approved also by a majority of the Trustees of the Trust who are not
interested persons of the Trust, or of the Adviser, or of the
Sub-Adviser. Notwithstanding the foregoing, this Agreement may be
terminated as to a Fund at any time, without the payment of any
penalty, on sixty days' written notice by the Trust or Adviser, or on
ninety days' written notice by the Sub-Adviser. This Agreement will
i mmediately terminate in the event of its assignment. (As used in this
Agreement, the terms "majority of the outstanding voting securities",
"interested persons" and "assignment" have the same meanings of such
terms in the 1940 Act.)
11. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally; but only by an
instrument in writing signed by the party against which enforcement of
the change, waiver, discharge or termination is sought.
12 Notice. Any notice under this Agreement shall be in writing, addressed
and delivered or mailed, postage prepaid, to the other party at such
address as such other party may designate for the receipt of such
notice.
13. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of
the provisions hereof or otherwise affect their construction or effect.
If any provision of this Agreement is held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement
will be binding upon and shall inure to the benefit of the parties
hereto.
The name "JNL Series Trust" and "Trustees of JNL Series Trust" refer
respectively to the Trust created by, and the Trustees, as trustees but
not individually or personally, acting from time to time under, the
Declaration of Trust, to which reference is hereby made and a copy of
which is on file at the office of the Secretary of State of the
Commonwealth of Massachusetts and elsewhere as required by law, and to
any and all amendments thereto so filed or
5
<PAGE> 6
hereafter filed. The obligations of the "JNL Series Trust" entered in
the name or on behalf thereof by any of the Trustees, representatives
or agents are made not individually but only in such capacities and are
not binding upon any of the Trustees, Shareholders or representatives
of the Trust personally, but bind only the assets of the Trust, and
persons dealing with the Fund must look solely to the assets of the
Trust belonging to such Fund for the enforcement of any claims against
Trust.
14. Representations and Warranties of the Sub-Adviser.
The Sub-Adviser hereby represents that this Agreement does not violate
any existing agreements between the Sub-Adviser and any other party.
The Sub-Adviser further represents and warrants that it is a duly
registered investment adviser under the Investment Advisers Act of
1940, as amended and has provided to the Adviser a copy of its most
recent Form ADV as filed with the Securities and Exchange Commission.
The Sub-Adviser further represents that is has reviewed the
post-effective amendment to the Registration Statement for the Trust
filed with the Securities and Exchange Commission that contains
disclosure about the Sub-Adviser, and represents and warrants that,
with respect to the disclosure about the Sub-Adviser or information
relating, directly or indirectly, to the Sub-Adviser, such Registration
Statement contains, as of the date hereof, no untrue statement of any
material fact and does not omit any statement of a material fact which
was required to be stated therein or necessary to make the statements
contained therein not misleading.
15. Applicable Law. This Agreement shall be construed in accordance with
applicable federal law and the laws of the State of Michigan.
IN WITNESS WHEREOF, the Adviser and the Sub-Adviser have caused this
Agreement to be executed as of this ____ day of _________________, 199_.
JACKSON NATIONAL FINANCIAL
SERVICES, INC.
By:
--------------------------------
` Name: Andrew B. Hopping
------------------------------
Title: President
-----------------------------
STANDARD & POOR'S INVESTMENT
ADVISORY SERVICES, INC.
By:
--------------------------------
` Name:
------------------------------
Title:
-----------------------------
6
<PAGE> 7
SCHEDULE A
(Funds)
JNL/S&P Conservative Growth Series I
JNL/S&P Moderate Growth Series I
JNL/S&P Aggressive Growth Series I
JNL/S&P Very Aggressive Growth Series I
JNL/S&P Equity Only-Growth Series I
JNL/S&P Equity Only-Aggressive Growth Series I
JNL/S&P Conservative Growth Series II
JNL/S&P Moderate Growth Series II
JNL/S&P Aggressive Growth Series II
JNL/S&P Very Aggressive Growth Series II
JNL/S&P Equity Only-Growth Series II
JNL/S&P Equity Only-Aggressive Growth Series II
7
<PAGE> 8
SCHEDULE B
(Compensation)
JNL/S&P Conservative Growth Series I
JNL/S&P Moderate Growth Series I
JNL/S&P Aggressive Growth Series I
JNL/S&P Very Aggressive Growth Series I
JNL/S&P Equity Only-Growth Series I
JNL/S&P Equity Only-Aggressive Growth Series I
JNL/S&P Conservative Growth Series II
JNL/S&P Moderate Growth Series II
JNL/S&P Aggressive Growth Series II
JNL/S&P Very Aggressive Growth Series II
JNL/S&P Equity Only-Growth Series II
JNL/S&P Equity Only-Aggressive Growth Series II
Average Daily Net Assets Annual Rate
------------------------ -----------
0 to $500 Million: .10%
Amounts over $500 Million: .075%
8
