497 1 four97cfiling.txt PERSPECTIVE II SM FIXED AND VARIABLE ANNUITY ISSUED BY JACKSON NATIONAL LIFE INSURANCE COMPANY(REGISTERED) AND JACKSON NATIONAL SEPARATE ACCOUNT I The CONTRACTS offered in this prospectus are the variable portions of individual and group, flexible premium, fixed and variable deferred annuity contracts, with: >> 7 FIXED ACCOUNTS, including 4 Guaranteed Fixed Accounts (with guaranteed periods of 1,3,5 and 7 years), 2 DCA+ Fixed Accounts (used for certain dollar cost averaging transfers), and an Indexed Fixed Option (see accompanying brochure - not part of the prospectus), each of which offers a minimum interest rate that is guaranteed by Jackson National Life Insurance Company ("we" or "us"); >> 43 INVESTMENT DIVISIONS of Jackson National Separate Account I (the "Separate Account") each of which purchases shares of one Series of JNL Series Trust or JNL Variable Fund LLC, mutual funds with a full range of investment objectives; >> A BASE CONTRACT designed to facilitate your RETIREMENT SAVINGS or other long-term investment purposes by permitting you to: o accumulate savings for your retirement on a TAX-DEFERRED BASIS during the ACCUMULATION PHASE on a fixed, variable, or fixed and variable basis; o receive income payments in the INCOME PHASE on a fixed, variable, or fixed and variable basis; o if you die before the income phase, receive a basic DEATH BENEFIT that will never be less than the total premiums (minus withdrawals, charges and taxes) you have paid us; and o have significant ACCESS TO YOUR CONTRACT VALUES without incurring a withdrawal charge in the event of certain serious health-related emergencies. >> A variety of OPTIONAL FEATURES that, for additional charges, give you the flexibility to add additional benefits to your base contract, according to your personal preferences, including: o 4 types of OPTIONAL DEATH BENEFITS; o 3 types of "CONTRACT ENHANCEMENTS" (under which we credit your contract values with 2%, 3% or 4% of each premium payment you make in the first contract year); o a GUARANTEED MINIMUM INCOME BENEFIT (that guarantees a minimum fixed income benefit under certain life contingent options after a period of at least 10 contract years, subject to specific conditions); o a SHORTENED WITHDRAWAL CHARGE PERIOD (5 years instead of the Contract's usual 7 year period); and o a 20% ADDITIONAL FREE WITHDRAWAL FEATURE (that permits you greater access to your contract values without a withdrawal charge). EXPENSES FOR A CONTRACT WITH A CONTRACT ENHANCEMENT WILL BE HIGHER THAN THOSE FOR A CONTRACT WITHOUT A CONTRACT ENHANCEMENT AND IN SOME CASES THE AMOUNT OF A CONTRACT ENHANCEMENT MAY BE MORE THAN OFFSET BY THOSE EXPENSES. WE OFFER OTHER VARIABLE ANNUITY PRODUCTS THAT OFFER DIFFERENT PRODUCT FEATURES, BENEFITS AND CHARGES. -------------------------------------------------------------------------------- PLEASE READ THIS PROSPECTUS BEFORE YOU PURCHASE A CONTRACT. IT CONTAINS IMPORTANT INFORMATION ABOUT THE CONTRACT THAT YOU SHOULD KNOW BEFORE INVESTING. YOU SHOULD KEEP THIS PROSPECTUS FOR FUTURE REFERENCE. To learn more about the Perspective II Fixed and Variable Annuity, you can obtain a free copy of the Statement of Additional Information (SAI) dated December 28, 2001, by calling us at (800) 766-4683 or by writing us at: Annuity Service Center, P.O. Box 378002, Denver, Colorado 80237-8002. The SAI has been filed with the Securities and Exchange Commission (SEC) and is legally a part of this prospectus. The Table of Contents of the SAI appears at the end of this prospectus. The SEC maintains a website (http://www.sec.gov) that contains the SAI, material incorporated by reference and other information regarding registrants that file electronically with the SEC. THE SEC HAS NOT APPROVED OR DISAPPROVED THE PERSPECTIVE II FIXED AND VARIABLE ANNUITY OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. IT IS A CRIMINAL OFFENSE TO REPRESENT OTHERWISE. -------------------------------------------------------------------------------- o Not FDIC/NCUA insured o Not Bank/CU guaranteed o May lose value o Not a deposit o Not insured by any federal agency -------------------------------------------------------------------------------- "JNL(Registered)", "Jackson National(Registered)" and "Jackson National Life(Registered)" are trademarks of Jackson National Life Insurance Company. December 28, 2001 TABLE OF CONTENTS KEY FACTS..................................................................1 FEE TABLE..................................................................3 THE ANNUITY CONTRACT......................................................11 JACKSON NATIONAL..........................................................11 THE FIXED ACCOUNTS........................................................11 THE SEPARATE ACCOUNT......................................................12 INVESTMENT DIVISIONS......................................................12 CONTRACT CHARGES..........................................................19 PURCHASES.................................................................23 TRANSFERS.................................................................25 ACCESS TO YOUR MONEY......................................................26 INCOME PAYMENTS (THE INCOME PHASE)........................................28 DEATH BENEFIT.............................................................31 TAXES.....................................................................35 OTHER INFORMATION.........................................................37 TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION..................40 APPENDIX A...............................................................A-1 APPENDIX B...............................................................A-2 KEY FACTS THE ANNUITY CONTRACT Your Contract permits you to accumulate your contract values o on a fixed basis through allocations to one of our fixed accounts (the "FIXED ACCOUNTS"), including four Guaranteed Fixed Accounts (with guaranteed periods of 1, 3, 5, or 7 years), two DCA+ Fixed Accounts (used in connection with certain dollar cost averaging transfers) and an Indexed Fixed Option (with a minimum guaranteed return and additional possible returns based on the performance of the S&P 500 Index), or o on a variable basis, by allocations to one or more of the investment divisions of our Separate Account (the "INVESTMENT DIVISIONS"). (We refer to the Fixed Accounts and the Investment Divisions together as "ALLOCATION OPTIONS.") Regardless of which Allocation Option(s) you select, investment earnings on your premiums will be TAX DEFERRED. Your Contract is intended to help you save for your retirement or other long-term investment purposes and provides for a DEATH BENEFIT during the ACCUMULATION PHASE (when you make premium payments to us) and a variety of income options during the INCOME PHASE (when we make income payments to you). We generally will not issue a Contract to anyone over age 90. -------------------------------------------------------------------------------- OPTIONAL FEATURES Optional features of your Contract include: o an EARNINGS PROTECTION BENEFIT ENDORSEMENT (a form of optional death benefit that may add up to 40% of your Contract's earnings to the death benefit otherwise payable at your death); o three types of OPTIONAL DEATH BENEFIT ENDORSEMENTS (you may select only one of these three optional death benefits) that permit you to protect your Contract's minimum death benefit values and/or to protect all or a portion of any investment gains under your Contract from subsequent investment losses; o a CONTRACT ENHANCEMENT ENDORSEMENT (a credit to your contract value from our general account equal to 2%, 3% or 4% of your premium payments in the first contract year); o a GUARANTEED MINIMUM INCOME BENEFIT (guarantees a minimum fixed income benefit under certain life contingent options after a period of at least 10 contract years, subject to specific conditions, regardless of the Allocation Option(s) you select during the accumulation phase); o a 20% ADDITIONAL FREE WITHDRAWAL ENDORSEMENT (permits you to withdraw 20% of premium (excluding premium in the Indexed Fixed Option) still subject to a withdrawal charge minus earnings during each contract year without a withdrawal charge); and o a FIVE-YEAR WITHDRAWAL CHARGE PERIOD ENDORSEMENT (reduces the withdrawal charge applicable through the fifth contribution year and eliminates it in years six and seven). These optional features may not be available in your state or there may be state variations in the terms of your benefits as reflected in the contract issued in your state. -------------------------------------------------------------------------------- ALLOCATION OPTIONS You may not allocate your contract values to more than 18 options (Investment Divisions and Fixed Accounts), at any one time. Each Investment Division invests in a single SERIES (investment portfolio) of an underlying mutual fund. -------------------------------------------------------------------------------- PURCHASES Under most circumstances, you must make an initial premium payment of at least $5,000 ($2,000 for a qualified plan contract). You are permitted to make subsequent premium payments at any time during the accumulation phase. Each subsequent payment must be at least $500 ($50 under an automatic payment plan). The Indexed Fixed Option has initial and subsequent allocation minimums of $5000. The Investment Divisions and Guaranteed Fixed Accounts have initial and subsequent allocation minimums of $100. -------------------------------------------------------------------------------- ACCESS TO YOUR MONEY You can withdraw all or a portion of your contract values during the accumulation phase. Withdrawals may be subject to a withdrawal charge and an "EXCESS INTEREST ADJUSTMENT". We may also deduct any withholding taxes imposed from the amount payable or your remaining values under the Contract. You may also have to pay taxes and a tax penalty on money you withdraw. -------------------------------------------------------------------------------- INCOME PAYMENTS You may choose to receive regular income payments from us (most typically, when you retire). During this "INCOME PHASE," you have the same variable allocation options as during the accumulation phase. -------------------------------------------------------------------------------- DEATH BENEFIT If you die before moving to the income phase, the person you have chosen as your BENEFICIARY will receive a death benefit of at least the greater of your contract value on the date we receive proof of death and completed claim forms from your beneficiary or the total premiums you have paid since your Contract was issued MINUS prior withdrawals (including any applicable charges and adjustments), annual contract maintenance charges, transfer charges, any applicable charges due under any optional endorsement and premium taxes. If you select the Earnings Protection Benefit Endorsement, the death benefit may be enhanced if there is positive investment performance, and if you select one of the three optional death benefit endorsements, the death benefit may be protected from poor investment performance. -------------------------------------------------------------------------------- FREE LOOK If you cancel your Contract within ten days after receiving it (or any longer period required in your state), we will return to you the amount your Contract is worth on the day we receive your request MINUS any Contract Enhancement recapture charge. This may be more or less than your original payment. If required by your state, we instead will return your premium. -------------------------------------------------------------------------------- TAXES Under the Internal Revenue Code you generally will not be taxed on the earnings on your contract value until you make a withdrawal (this is referred to as TAX-DEFERRAL). There are different rules as to how you will be taxed depending on how you take the money out and whether your Contract is non-qualified or purchased as part of a qualified plan. Earnings are taxed as ordinary income when withdrawn and, if withdrawn prior to age 59 1/2, may be subject to a tax penalty. -------------------------------------------------------------------------------- EXPENSES Your Contract has insurance features and investment features, and there are costs related to each. Each Series has its own expenses. The Contract's charges and Series expenses are described in the following Fee Table: FEE TABLE
OWNER TRANSACTION EXPENSES WITHDRAWAL CHARGE (AS A PERCENTAGE OF PREMIUM PAYMENTS): Completed Years Since Receipt of 0 1 2 3 4 5 6 7+ Premium(1) Withdrawal Charge 8.5% 8% 7% 6% 5% 4% 2% 0 Withdrawal Charge if Five-Year Period is elected 8% 7% 6% 4% 2% 0 0 0 CONTRACT ENHANCEMENT RECAPTURE CHARGE (AS A PERCENTAGE OF THE CORRESPONDING FIRST YEAR PREMIUM PAYMENTS WITHDRAWN IF AN OPTIONAL CONTRACT ENHANCEMENT IS SELECTED) Completed Years Since Receipt of 0 1 2 3 4 5 6 7+ Premium(2) Recapture Charge (2% Credit) 2% 2% 1.25% 1.25% 0.5% 0 0 0 Recapture Charge (3% Credit) 3% 3% 2% 2% 2% 1% 1% 0 Recapture Charge (4% Credit) 4% 4% 2.5% 2.5% 2.5% 1.25% 1.25% 0
TRANSFER CHARGE: $25 for each transfer in excess of 15 in a contract year(3) ANNUAL CONTRACT MAINTENANCE CHARGE: $35(4) OPTIONAL GUARANTEED MINIMUM INCOME BENEFIT CHARGE ("GMIB"): .40% of GMIB Benefit Base(5) COMMUTATION FEE: If you make a total withdrawal from your contract after income payments have commenced under income option 4, or if after your death during the period for which payments are guaranteed to be made under income option 3 your beneficiary elects to receive a lump sum payment, the amount received will be reduced by an amount equal to the difference between the present value of any remaining guaranteed payments (as of the date of calculation) calculated using a (a) discount rate that is equal to the rate assumed in calculating the initial income payment and (b) discount rate that is no more than 1% higher than (a). SEPARATE ACCOUNT ANNUAL EXPENSES (as an annual percentage of average daily account value) BASE CONTRACT CHARGES --------------------- MORTALITY AND EXPENSE RISK CHARGES 1.00% ADMINISTRATION CHARGE .15% ------ TOTAL SEPARATE ACCOUNT ANNUAL EXPENSES (WITH NO OPTIONAL BENEFITS) 1.15% --------------------- 1 Withdrawal charges are deducted on the income date if that date is within one year of the issue date, upon partial withdrawals in excess of free withdrawal amounts, and upon total withdrawals. 2 Any applicable Contract Enhancement recapture charges are deducted at the income date as well as on partial withdrawals in excess of free withdrawal amounts and upon total withdrawals. 3 Dollar cost averaging transfers and rebalancing transfers do not count against the 15 free transfers. 4 This charge is only imposed if your contract value is less than $50,000 on the date when the charge is assessed. 5 On a calendar quarter basis, the charge is .10% of the GMIB Benefit Base. This charge is deducted each calendar quarter and upon termination of the GMIB from the Investment Divisions and the Guaranteed Fixed Accounts on a pro-rata basis. When it is deducted from the Investment Divisions, it is not a part of unit value calculations but rather is normally deducted by means of a cancellation of units. The GMIB Benefit Base is an amount equal to the greater of: (1) premiums (net of premium taxes) plus Contract Enhancements, MINUS annual contract maintenance charges, transfer charges and charges due under any optional endorsement, MINUS taxes incurred, reduced proportionally by any withdrawals taken in the same proportion that the contract value was reduced on the date of withdrawal, compounded at an annual interest rate of 6% from the issue date until the earlier of the annuitant's 80th birthday or the date the GMIB is exercised or (2) the greatest contract value on any contract anniversary prior to the Annuitant's 81st birthday, plus any premium paid (net of premium taxes) subsequent to that anniversary, MINUS annual contract maintenance charges, transfer charges and charges due under any optional endorsement subsequent to that contact anniversary MINUS taxes deducted subsequent to that contract anniversary, reduced proportionally by any withdrawals subsequent to that anniversary taken in the same proportion that the contract value was reduced on the date of withdrawal. The GMIB Benefit Base is limited to 200% of premiums paid (net of any applicable premium taxes and excluding premiums paid in the 12 months prior to the date the GMIB is exercised), MINUS any withdrawals (including related charges and excess interest adjustments), MINUS annual contract maintenance charges, transfer charges and any applicable charges due under any optional endorsement, and MINUS taxes incurred since that Contract was issued. CHARGES FOR OPTIONAL ENDORSEMENTS --------------------------------- EARNINGS PROTECTION BENEFIT .30% OPTIONAL DEATH BENEFIT .25%(6) 20% ADDITIONAL FREE WITHDRAWAL .30% FIVE-YEAR WITHDRAWAL CHARGE PERIOD .30% CONTRACT ENHANCEMENT (2% Credit) .40%(7) CONTRACT ENHANCEMENT (3% Credit) .425%(8) CONTRACT ENHANCEMENT (4% Credit) .57%(8) -------- TOTAL SEPARATE ACCOUNT ANNUAL EXPENSES (WITH MAXIMUM OPTIONAL ENDORSEMENTS WITHOUT THE GMIB) 2.70%(9) SERIES ANNUAL EXPENSES (as an annual percentage of the Series' average daily net assets)
MANAGEMENT ESTIMATED AND DISTRIBUTION TOTAL SERIES SERIES NAME ADMINISTRATIVE (12b-1) OTHER ANNUAL FEE(10) FEES(11) EXPENSES EXPENSES ---------------------------------------------------------------------- ------------------ -------------- ------------ -------------- AIM/JNL Large Cap Growth Series 1.10% .01% 0% 1.11% AIM/JNL Small Cap Growth Series 1.15% .01%(12) 0% 1.16% AIM/JNL Value II Series 1.05% .01%(12) 0% 1.06% Alger/JNL Growth Series 1.07% .02% 0% 1.09% Alliance Capital/JNL Growth Series .87% .02% 0% .89% Eagle/JNL Core Equity Series .97% .04% 0% 1.01% Eagle/JNL SmallCap Equity Series 1.05% .02% 0% 1.07% J.P. Morgan/JNL Enhanced S&P 500(R)Stock Index Series .90% .01% 0% .91% Janus/JNL Aggressive Growth Series .98% .01% 0% .99% Janus/JNL Balanced Series 1.05% .03% 0% 1.08% Janus/JNL Capital Growth Series .99% .01% 0% 1.00% Janus/JNL Global Equities Series(15) 1.03% .02% 0% 1.05% Lazard/JNL Mid Cap Value Series 1.07% .05% 0% 1.12% Lazard/JNL Small Cap Value Series 1.15% .03% 0% 1.18% Mellon Capital Management/JNL S&P 500 Index Series .60% .01%(12) 0% .61% Mellon Capital Management/JNL S&P 400 Mid Cap Index Series .60% .01%(12) 0% .61% Mellon Capital Management/JNL Small Cap Index Series .60% .01%(12) 0% .61% Mellon Capital Management/JNL International Index Series .65% .01%(12) 0% .66% Mellon Capital Management/JNL Bond Index Series .60% .01%(12) 0% .61% Oppenheimer/JNL Global Growth Series 1.05% .01%(12) 0% 1.06% Oppenheimer/JNL Growth Series 1.00% .01%(12) 0% 1.01% PIMCO/JNL Total Return Bond Series .80% .01%(12) 0% .81% PPM America/JNL Balanced Series .82% .01% 0% .83% PPM America/JNL High Yield Bond Series .82% .01%(12) 0% .83% PPM America/JNL Money Market Series .70% 0% 0% .70% Putnam/JNL Growth Series .94% .01% 0% .95% Putnam/JNL International Equity Series 1.17% .05% 0% 1.22% Putnam/JNL Midcap Growth Series 1.05% .08% 0% 1.13% Putnam/JNL Value Equity Series .96% .02% 0% .98% Salomon Brothers/JNL Global Bond Series .95% .01%(12) 0% .96%
------------------------- 6 Two other optional death benefits (that provide less protection) are available for .15%. 7 This charge is only deducted for the first five contract years. 8 These charges are only deducted for the first seven contract years. 9 The 3% and 4% contract enhancements are not included in the Total Separate Account Annual Expenses (with Maximum Optional Endorsements) because only one Contract Enhancement may be selected and the 2% Credit is presumed to have been selected (along with the Earnings Protection Benefit, 20% additional free withdrawal, five-year withdrawal charge period and the most expensive optional death benefit).
MANAGEMENT ESTIMATED AND DISTRIBUTION TOTAL SERIES SERIES NAME ADMINISTRATIVE (12b-1) OTHER ANNUAL FEE(10) FEES(11) EXPENSES EXPENSES ---------------------------------------------------------------------- ------------------ -------------- ------------ -------------- Salomon Brothers/JNL U.S. Government & Quality Bond Series .80% .01%(12) 0% .81% S&P/JNL Conservative Growth Series I(13) .20% 0% 0% .20% S&P/JNL Moderate Growth Series I(13) .20% 0% 0% .20% S&P/JNL Aggressive Growth Series I(13) .20% 0% 0% .20% S&P/JNL Very Aggressive Growth Series I(13) .20% 0% 0% .20% S&P/JNL Equity Growth Series I(13) .20% 0% 0% .20% S&P/JNL Equity Aggressive Growth Series I(13) .20% 0% 0% .20% S&P/JNL Core Index 50 Series(13) .20% 0% 0% .20% S&P/JNL Core Index 75 Series(13) .20% 0% 0% .20% S&P/JNL Core Index 100 Series(13) .20% 0% 0% .20% T. Rowe Price/JNL Established Growth Series .92% .02% 0% .94% T. Rowe Price/JNL Mid-Cap Growth Series 1.02% .01%(12) 0% 1.03% T. Rowe Price/JNL Value Series 1.00% .12% 0% 1.12% First Trust/JNL The DowSM Target 10 Series(14) .85% 0% 0% .85% ---------------------------------------------------------------------- ------------------ -------------- ------------ --------------
10 Certain Series pay Jackson National Asset Management, LLC, the adviser, an administrative fee for certain services provided to the Series by the adviser. The Oppenheimer/JNL Global Growth Series pays an administrative fees of .15%; the nine S&P/JNL Series do not pay an administrative fee; the other Series pay a .10% administrative fee. The Management and Administrative Fee and the Total Series Annual Expenses columns in this table reflect the inclusion of any applicable administrative fee. 11 The Trustees of JNL Series Trust have adopted a Brokerage Enhancement Plan (the "Plan") in accordance with the provisions of Rule 12b-1 under the Investment Company Act of 1940. The Plan uses the available brokerage commissions to promote the sale of shares of the Trust. The brokerage commission rates and amounts paid by the Trust are not expected to increase as a result of the Plan. The 12b-1 fee is only paid to the extent that the commission is recaptured by an affiliated broker-dealer. The distribution fee noted is an estimate in that it is not possible to determine with accuracy actual amounts that will be paid under the Plan to affiliated broker-dealers. 12 We anticipate that the 12b-1 fee will be less than .01%. 13 UNDERLYING SERIES EXPENSES. The expenses shown above are the annual operating expenses for the S&P/JNL Series. Because the S&P/JNL Series invest in other Series of the JNL Series Trust, the S&P/JNL Series will indirectly bear their pro rata share of fees and expenses of the underlying Series in addition to the expenses shown. The total annual operating expenses for each S&P/JNL Series (including both the annual operating expenses for the S&P/JNL Series and the annual operating expenses for the underlying Series) could range from .90% to 1.42% (this range reflects an investment in the Series with the lowest and highest Total Series Annual Expenses). The total annual operating expenses for each S&P/JNL Core Index Series (including both the annual operating expenses for the S&P/JNL Core Index Series and the annual operating expenses for the underlying Series) could range from .90% to 1.42% (this range reflects an investment in the Series with the lowest and highest Total Series Annual Expenses). The table below shows estimated total annual operating expenses for each of the S&P/JNL Series based on the pro rata share of expenses that the S&P/JNL Series would bear if they invested in a hypothetical mix of underlying Series. The adviser believes the expenses shown below to be a likely approximation of the expenses the S&P/JNL Series will incur based on the actual mix of underlying Series. The expenses shown below include both the annual operating expenses for the S&P/JNL Series and the annual operating expenses for the underlying Series. The actual expenses of each S&P/JNL Series will be based on the actual mix of underlying Series in which it invests. The actual expenses may be greater or less than those shown. S&P/JNL Conservative Growth Series I........................ 0.932% S&P/JNL Moderate Growth Series I............................ 0.970% S&P/JNL Aggressive Growth Series I.......................... 1.011% S&P/JNL Very Aggressive Growth Series I..................... 1.008% S&P/JNL Equity Growth Series I.............................. 1.010% S&P/JNL Equity Aggressive Growth Series I................... 1.018% S&P/JNL Core Index 50 Series ............................... 0.815% S&P/JNL Core Index 75 Series................................ 0.762% S&P/JNL Core Index 100 Series............................... 0.712% S&P NAME. "Standard & Poor's(R)", "S&P(R)", "S&P 500(R)", "Standard & Poor's 500", and "500" are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by Jackson National Life Insurance Company. These Series are not sponsored, endorsed, sold or promoted by Standard & Poor's and Standard & Poor's makes no representation regarding the advisability of investing in these Series. Please see the Statement of Additional Information which sets forth certain additional disclaimers and limitations of liabilities on behalf of S&P. 14 DOW JONES NAME. "Dow Jones", "Dow Jones Industrial AverageSM", "DJIASM" and "The Dow 10SM" are service marks of Dow Jones & Company, Inc. (Dow Jones). Dow Jones has no relationship to the annuity, other than the licensing of the Dow Jones Industrial Average (DJIA) and its service marks for use in connection with the First Trust/JNL The DowSM Target 10 Series. Please see Appendix A for additional information. 15 The JNL/Janus Global Equities Series (the "Series") is not available through a division as an investment option and is not available as an underlying series to the S&P/JNL Core Index 50 Series and the S&P/JNL Core Index 75 Series. However, the Series is available as an underlying series 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 and the JNL/S&P Equity Aggressive Growth Series I. EXAMPLES. You would pay the following expenses on a $1,000 investment if you select the optional Earnings Protection Benefit Endorsement, the 20% Additional Free Withdrawal Endorsement, the Five-Year Withdrawal Charge Period Endorsement, the most expensive Optional Death Benefit Endorsement, the Guaranteed Minimum Income Benefit and the 2% Contract Enhancement endorsement, assuming a 5% annual return on assets: (a) if you do not surrender your Contract or if you begin receiving income payments from your Contract after the first year; (b) if you surrender your Contract at the end of each time period.
TIME PERIODS 1 3 5 10 DIVISION NAME YEAR YEARS YEARS YEARS AIM/JNL Large Cap Growth Division (a) 43 129 218 451 (b) 123 189 238 451 AIM/JNL Small Cap Growth Division (a) 43 131 221 455 (b) 123 191 241 455 AIM/JNL Value II Division (a) 42 128 216 447 (b) 122 188 236 447 Alger/JNL Growth Division (a) 42 129 217 450 (b) 122 189 237 450 Alliance Capital/JNL Growth Division (a) 40 123 208 433 (b) 120 183 228 433 Eagle/JNL Core Equity Division (a) 42 127 214 443 (b) 122 187 234 443 Eagle/JNL SmallCap Equity Division (a) 42 128 217 448 (b) 122 188 237 448 J.P. Morgan/JNL Enhanced S&P 500(R)Stock Index Division (a) 41 124 209 434 (b) 121 184 229 434 Janus/JNL Aggressive Growth Division (a) 41 126 213 441 (b) 121 186 233 441 Janus/JNL Balanced Division (a) 42 129 217 449 (b) 122 189 237 449 Janus/JNL Capital Growth Division (a) 41 126 213 442 (b) 121 186 233 442 Janus/JNL Global Equities Division* (a) 42 128 216 446 (b) 122 188 236 446 Lazard/JNL Mid Cap Value Division (a) 43 130 219 452 (b) 123 190 239 452 Lazard/JNL Small Cap Value Division (a) 43 131 222 457 (b) 123 191 242 457 Mellon Capital Management/JNL S&P 500 Index Division (a) 38 115 195 408 (b) 118 175 215 408 Mellon Capital Management/JNL S&P 400 Mid Cap Index Division (a) 38 115 195 408 (b) 118 175 215 408 Mellon Capital Management/JNL Small Cap Index Division (a) 38 115 195 408 (b) 118 175 215 408 Mellon Capital Management/JNL International Index Division (a) 38 116 197 413 (b) 118 176 217 413 Mellon Capital Management/JNL Bond Index Division (a) 38 115 195 408 (b) 118 175 215 408 Oppenheimer/JNL Global Growth Division (a) 42 128 216 447 (b) 122 188 236 447 Oppenheimer/JNL Growth Division (a) 42 127 214 443 ----------------- * The JNL/Janus Global Equities Series (the "Series") is not available through a division as an investment option and is not available as an underlying series to the S&P/JNL Core Index 50 Series and the S&P/JNL Core Index 75 Series. However, the Series is available as an underlying series 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 and the JNL/S&P Equity Aggressive Growth Series I. TIME PERIODS 1 3 5 10 DIVISION NAME YEAR YEARS YEARS YEARS (b) 122 187 234 443 PIMCO/JNL Total Return Bond Division (a) 40 121 204 426 (b) 120 181 224 426 PPM America/JNL Balanced Division (a) 40 121 205 428 (b) 120 181 225 428 PPM America/JNL High Yield Bond Division (a) 40 121 205 428 (b) 120 181 225 428 PPM America/JNL Money Market Division (a) 39 118 199 416 (b) 119 178 219 416 Putnam/JNL Growth Division (a) 41 125 211 438 (b) 121 185 231 438 Putnam/JNL International Equity Division (a) 44 133 223 460 (b) 124 193 243 460 Putnam/JNL Midcap Growth Division (a) 43 130 219 453 (b) 123 190 239 453 Putnam/JNL Value Equity Division (a) 41 126 212 440 (b) 121 186 232 440 Salomon Brothers/JNL Global Bond Division (a) 41 125 211 439 (b) 121 185 231 439 Salomon Brothers/JNL U.S. Government & Quality Bond Division (a) 40 121 204 426 (b) 120 181 224 426 S&P/JNL Conservative Growth Division I (a) 34 103 175 372 (b) 114 163 195 372 S&P/JNL Moderate Growth Division I (a) 34 103 175 372 (b) 114 163 195 372 S&P/JNL Aggressive Growth Division I (a) 34 103 175 372 (b) 114 163 195 372 S&P/JNL Very Aggressive Growth Division I (a) 34 103 175 372 (b) 114 163 195 372 S&P/JNL Equity Growth Division I (a) 34 103 175 372 (b) 114 163 195 372 S&P/JNL Equity Aggressive Growth Division I (a) 34 103 175 372 (b) 114 163 195 372 S&P/JNL Core Index 50 Division (a) 34 103 175 372 (b) 114 163 195 372 S&P/JNL Core Index 75 Division (a) 34 103 175 372 (b) 114 163 195 372 S&P/JNL Core Index 100 Division (a) 34 103 175 372 (b) 114 163 195 372 T. Rowe Price/JNL Established Growth Division (a) 41 125 211 437 (b) 121 185 231 437 T. Rowe Price/JNL Mid-Cap Growth Division (a) 42 127 215 445 (b) 122 187 235 445 T. Rowe Price/JNL Value Division (a) 43 130 219 452 (b) 123 190 239 452 First Trust/JNL The DowSM Target 10 Division (a) 40 122 206 429 (b) 120 182 226 429
EXAMPLES. You would pay the following expenses on a $1,000 investment if you do not select any optional endorsements, assuming a 5% annual return on assets: (a) if you do not surrender your Contract or if you begin receiving income payments from your contract after the first year; (b) if you surrender your Contract at the end of each time period.
Time Periods -------------------------------------------------------------------------------- ------- --------- -------- --------- 1 3 5 10 Division Name year years years years -------------------------------------------------------------------------------- ------- --------- -------- --------- AIM/JNL Large Cap Growth Division (a) 23 71 121 260 (b) 108 141 171 260 AIM/JNL Small Cap Growth Division (a) 23 72 124 265 (b) 108 142 174 265 AIM/JNL Value II Division (a) 22 69 118 254 (b) 107 139 168 254 Alger/JNL Growth Division (a) 23 70 120 257 (b) 108 140 170 257 Alliance Capital/JNL Growth Division (a) 21 64 110 237 (b) 106 134 160 237 Eagle/JNL Core Equity Division (a) 22 68 116 249 (b) 107 138 166 249 Eagle/JNL SmallCap Equity Division (a) 23 69 119 255 (b) 108 139 169 255 J.P. Morgan/JNL Enhanced S&P 500(R)Stock Index Division (a) 21 65 111 239 (b) 106 135 161 239 Janus/JNL Aggressive Growth Division (a) 22 67 115 247 (b) 107 137 165 247 Janus/JNL Balanced Division (a) 23 70 119 256 (b) 108 140 169 256 Janus/JNL Capital Growth Division (a) 22 67 115 248 (b) 107 137 165 248 Janus/JNL Global Equities Division** (a) 22 69 118 254 (b) 102 129 138 254 Lazard/JNL Mid Cap Value Division (a) 23 71 122 261 (b) 108 141 172 261 Lazard/JNL Small Cap Value Division (a) 24 73 125 267 (b) 109 143 175 267 Mellon Capital Management/JNL S&P 500 Index Division (a) 18 55 95 207 (b) 103 125 145 207 Mellon Capital Management/JNL S&P 400 Mid Cap Index Division (a) 18 55 95 207 (b) 103 125 145 207 Mellon Capital Management/JNL Small Cap Index Division (a) 18 55 95 207 (b) 103 125 145 207 Mellon Capital Management/JNL International Index Division (a) 18 57 98 213 (b) 103 127 148 213 Mellon Capital Management/JNL Bond Index Division (a) 18 55 95 207 (b) 103 125 145 207 Oppenheimer/JNL Global Growth Division (a) 22 69 118 254 (b) 107 139 168 254 Oppenheimer/JNL Growth Division (a) 22 68 116 249
---------------------- ** The JNL/Janus Global Equities Series (the "Series") is not available through a division as an investment option and is not available as an underlying series to the S&P/JNL Core Index 50 Series and the S&P/JNL Core Index 75 Series. However, the Series is available as an underlying series 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 and the JNL/S&P Equity Aggressive Growth Series I.
Time Periods -------------------------------------------------------------------------------- ------- --------- -------- --------- 1 3 5 10 Division Name year years years years -------------------------------------------------------------------------------- ------- --------- -------- --------- (b) 107 138 166 249 PIMCO/JNL Total Return Bond Division (a) 20 62 106 229 (b) 105 132 156 229 PPM America/JNL Balanced Division (a) 20 62 107 231 (b) 105 132 157 231 PPM America/JNL High Yield Bond Division (a) 20 62 107 231 (b) 105 132 157 231 PPM America/JNL Money Market Division (a) 19 58 100 217 (b) 104 128 150 217 Putnam/JNL Growth Division (a) 21 66 113 243 (b) 106 136 163 243 Putnam/JNL International Equity Division (a) 24 74 127 271 (b) 109 144 177 271 Putnam/JNL Midcap Growth Division (a) 23 71 122 262 (b) 108 141 172 262 Putnam/JNL Value Equity Division (a) 22 67 114 246 (b) 107 137 164 246 Salomon Brothers/JNL Global Bond Division (a) 21 66 113 244 (b) 106 136 163 244 Salomon Brothers/JNL U.S. Government & Quality Bond Division (a) 20 62 106 229 (b) 105 132 156 229 S&P/JNL Conservative Growth Division I (a) 14 43 74 162 (b) 99 113 124 162 S&P/JNL Moderate Growth Division I (a) 14 43 74 162 (b) 99 113 124 162 S&P/JNL Aggressive Growth Division I (a) 14 43 74 162 (b) 99 113 124 162 S&P/JNL Very Aggressive Growth Division I (a) 14 43 74 162 (b) 99 113 124 162 S&P/JNL Equity Growth Division I (a) 14 43 74 162 (b) 99 113 124 162 S&P/JNL Equity Aggressive Growth Division I (a) 14 43 74 162 (b) 99 113 124 162 S&P/JNL Core Index 50 Division (a) 14 43 74 162 (b) 99 113 124 162 S&P/JNL Core Index 75 Division (a) 14 43 74 162 (b) 99 113 124 162 S&P/JNL Core Index 100 Division (a) 14 43 74 162 (b) 99 113 124 162 T. Rowe Price/JNL Established Growth Division (a) 21 65 112 242 (b) 106 135 162 242 T. Rowe Price/JNL Mid-Cap Growth Division (a) 22 68 117 251 (b) 107 138 167 251 T. Rowe Price/JNL Value Division (a) 23 71 122 261 (b) 108 141 172 261 First Trust/JNL The DowSM Target 10 Division (a) 20 63 108 233 (b) 105 133 158 233
EXPLANATION OF FEE TABLE AND EXAMPLES. The purpose of the Fee Table and Examples is to assist you in understanding the various costs and expenses that you will bear directly or indirectly. The Fee Table reflects the expenses of the Separate Account and the Series. Premium taxes may also apply. A withdrawal charge is imposed on income payments which occur within one year of the date the Contract is issued. THE EXAMPLES DO NOT REPRESENT PAST OR FUTURE EXPENSES. THE ACTUAL EXPENSES THAT YOU INCUR MAY BE GREATER OR LESS THAN THOSE SHOWN. FINANCIAL STATEMENTS. No accumulation unit value history is contained in this prospectus because these Contracts have not yet been offered. You can find the following financial statements in the SAI: o the financial statements of the Separate Account for the year ended December 31, 2000 and o the financial statements of Jackson National for the year ended December 31, 2000. The Separate Account's financial statements for the year ended December 31, 2000, and the financial statements of Jackson National for the year ended December 31, 2000, have been audited by KPMG LLP, independent accountants. The Separate Account's financial statements relate to other contracts offered through the Separate Account. THE ANNUITY CONTRACT Your Contract is a contract between you, the owner, and us. Your Contract is intended to help facilitate your retirement savings on a tax-deferred basis, or other long-term investment purposes, and provides for a death benefit (unless purchased as part of a tax-qualified plan). We will generally not issue a Contract to someone older than 90. Your Contract permits you to accumulate contract value on a tax-deferred basis. You may allocate your contract values to o our Guaranteed Fixed Accounts, o our Indexed Fixed Option, or to o Investment Divisions of the Separate Account that invest in underlying Series. Your Contract, like all deferred annuity contracts, has two phases: o the ACCUMULATION PHASE, when you make premium payments to us, and o the INCOME PHASE, when we make income payments to you. As the owner, you can exercise all the rights under your Contract. You can assign your Contract at any time during your lifetime, but we will not be bound until we receive written notice of the assignment. An assignment may be a taxable event. The Contract is a flexible premium fixed and variable deferred annuity and may be issued as either an individual or a group contract. In those states where Contracts are issued as group contracts, references throughout the prospectus to "Contract(s)" shall also mean "certificate(s)." YOU MAY CHOOSE AMONG FIXED AND VARIABLE ALLOCATION OPTIONS IN BOTH THE ACCUMULATION AND INCOME PHASES OF YOUR CONTRACT. JACKSON NATIONAL We are a stock life insurance company organized under the laws of the state of Michigan in June 1961. Our legal domicile and principal business address is 1 Corporate Way, Lansing, Michigan 48951. We are admitted to conduct life insurance and annuity business in the District of Columbia and all states except New York. We are ultimately a wholly owned subsidiary of Prudential plc (London, England). We issue the Contracts and administer the Contracts and the Separate Account. We maintain records of the name, address, taxpayer identification number and other pertinent information for each owner; the number and type of Contracts issued to each owner; and records with respect to the value of each Contract. WE ARE A LIFE INSURANCE COMPANY AND ISSUE ANNUITIES AND LIFE INSURANCE CONTRACTS. THE FIXED ACCOUNTS Contract value that you allocate to a Fixed Account option will be placed with other assets in our general account. The Fixed Account options are not registered with the SEC, and the SEC does not review the information we provide to you about them. Each GUARANTEED FIXED ACCOUNT offers a minimum interest rate that we guarantee for a specified period (currently one, three, five or seven years). We guarantee principal and interest of any contract values while they are allocated to a Guaranteed Fixed Account if amounts allocated to the account are not withdrawn until the end of the chosen duration. The value of a Guaranteed Fixed Account may be reduced by an "EXCESS INTEREST ADJUSTMENT" and a withdrawal charge if you make a withdrawal prior to the end of the Guaranteed Fixed Account period, but will never be less than the premium payments, minus any applicable premium tax and transfers allocated to the Guaranteed Fixed Accounts, MINUS transfers, withdrawals, and charges from the Guaranteed Fixed Account, accumulated at 3%, MINUS any withdrawal charges or any tax due. Your Contract contains a more complete description of the Guaranteed Fixed Accounts. The DCA+ FIXED ACCOUNTS each offer a fixed interest rate that we guarantee for a period of up to one year in connection with dollar-cost-averaging transfers to one or more of the Investment Divisions or systematic transfers to other Fixed Accounts. From time to time, we will offer special enhanced rates on the DCA+ Fixed Accounts. DCA+ Fixed Accounts are only available for new premiums. The INDEXED FIXED OPTION offers an interest rate that is guaranteed to be at least 3% per year, and may be higher based on changes in the S&P 500 Composite Stock Price Index. If you make a withdrawal prior to the end of the specified term, however, the value of your Indexed Fixed Option will be the amount allocated to the Indexed Fixed Option accumulated at 3% per year, less any amounts cancelled or withdrawn for charges, deductions or withdrawals, any tax due, and any withdrawal charges. The Indexed Fixed option is described in your contract and supplementary materials your agent can provide you. THE FIXED ACCOUNTS ARE NOT SECURITIES. YOUR ALLOCATIONS TO ANY FIXED ACCOUNT WILL ACCUMULATE AT LEAST AT THE MINIMUM GUARANTEED RATE OF THAT FIXED ACCOUNT. THE SEPARATE ACCOUNT We established the Separate Account on June 14, 1993, pursuant to the provisions of Michigan law. The Separate Account is registered as an investment company with the SEC. The assets of the Separate Account legally belong to us and the obligations under the Contracts are our obligations. However, we are not allowed to use the contract assets in the Separate Account to pay our liabilities arising out of any other business we may conduct. All of the income, gains and losses resulting from these assets are credited to or charged against the Contracts and not against any other contracts we may issue. The Separate Account is divided into Investment Divisions. We do not guarantee the investment performance of the Separate Account or any of its Investment Divisions. INVESTMENT DIVISIONS You can allocate your contract value to any or all of the Investment Divisions; however, you may not allocate to more than 18 Allocation Options at any one time. Each Investment Division purchases the shares of one underlying Series (mutual fund portfolio) that has its own investment objective. The Investment Divisions are designed to offer the potential for a higher return than the Guaranteed Fixed Accounts. HOWEVER, THIS IS NOT GUARANTEED. IT IS POSSIBLE FOR YOU TO LOSE YOUR MONEY ALLOCATED TO ANY OF THE INVESTMENT DIVISIONS. If you allocate contract values to the Investment Divisions, the amounts you are able to accumulate in your Contract during the accumulation phase depends upon the performance of the Investment Divisions you select. The amount of the income payments you receive during the income phase also will depend, in part, on the performance of the Investment Divisions you choose for the income phase. YOUR ALLOCATIONS TO INVESTMENT DIVISIONS ARE INVESTED IN UNDERLYING SERIES AND WHETHER YOU MAKE OR LOSE MONEY DEPENDS ON THE INVESTMENT PERFORMANCE OF THOSE SERIES.
THE SERIES, INVESTMENT OBJECTIVES AND ADVISERS. ==================================== =========================================== ========================== NAME OF SERIES INVESTMENT OBJECTIVE INVESTMENT ADVISER (AND SUB-ADVISER) ==================================== =========================================== ========================== =========================================================================================================== JNL SERIES TRUST ----------------------------------------------------------------------------------------------------------- ------------------------------------ ------------------------------------------- -------------------------- AIM/JNL Large Cap Growth Seeks long-term growth of capital by Jackson National Asset investing in securities of Management, LLC (and AIM large-capitalization companies that are Capital Management, Inc.) within the top 50% of the Russell 1000(R) Index at the time of purchase. ------------------------------------ ------------------------------------------- -------------------------- ------------------------------------ ------------------------------------------- -------------------------- AIM/JNL Small Cap Growth Seeks long-term growth of capital by Jackson National Asset normally investing at least 65% of its Management, LLC (and AIM total assets in equity securities of U.S. Capital Management, Inc.) issuers that have market capitalizations less than that of the largest company in the Russell 2000(R)Index. ------------------------------------ ------------------------------------------- -------------------------- ------------------------------------ ------------------------------------------- -------------------------- AIM/JNL Value II Seeks to achieve long-term growth by Jackson National Asset investing primarily in equity securities Management, LLC (and AIM judged by the Series' investment Capital Management, Inc.) sub-adviser to be undervalued relative to the investment sub-adviser's appraisal of the current or projected earnings of the companies issuing the securities relative to their assets' current market value or to the equity markets generally. ------------------------------------ ------------------------------------------- -------------------------- ------------------------------------ ------------------------------------------- -------------------------- Alger/JNL Growth Seeks long-term capital appreciation by Jackson National Asset investing at least 65% of its total Management, LLC (and assets in a diversified portfolio of Fred Alger Management, equity securities - common stock, Inc.) preferred stock, and securities convertible into or exchangeable for common stock - of large companies which trade on U.S. exchanges or in the U.S. over-the-counter market. ------------------------------------ ------------------------------------------- -------------------------- ------------------------------------ ------------------------------------------- -------------------------- Alliance Capital/JNL Growth Seeks long-term growth of capital by Jackson National Asset investing primarily in a diversified Management, LLC (and portfolio of common stocks or securities Alliance Capital with common stock characteristics that Management L.P.) the sub-adviser believes have the potential for capital appreciation, which include securities convertible into or exchangeable for common stock. ------------------------------------ ------------------------------------------- -------------------------- ------------------------------------ ------------------------------------------- -------------------------- Eagle/JNL Core Equity Seeks long-term capital appreciation and, Jackson National Asset secondarily, current income by investing Management, LLC (and at least 65% of its total assets in a Eagle Asset Management, diversified portfolio of common stock of Inc.) U.S. companies that meet the criteria for one of three separate equity strategies: the growth equity strategy, the value equity strategy and the equity income strategy. ------------------------------------ ------------------------------------------- -------------------------- ------------------------------------ ------------------------------------------- -------------------------- Eagle/JNL SmallCap Equity Seeks long-term capital appreciation by Jackson National Asset investing at least 65% of its total Management, LLC (and assets in a diversified portfolio of Eagle Asset Management, equity securities of domestic small Inc.) capitalization companies, i.e., companies which, at the time of purchase, typically have a market capitalization of approximately $1 billion. ------------------------------------ ------------------------------------------- -------------------------- ------------------------------------ ------------------------------------------- -------------------------- J.P. Morgan/JNL Enhanced S&P 500 Seeks high total return from a broadly Jackson National Asset Stock(R)Index diversified portfolio of equity Management, LLC (and securities by investing in a diversified J.P. Morgan Investment portfolio of large- and Management, Inc.) medium-capitalization U.S. Companies. ------------------------------------ ------------------------------------------- -------------------------- ------------------------------------ ------------------------------------------- -------------------------- THE SERIES, INVESTMENT OBJECTIVES AND ADVISERS. ==================================== =========================================== ========================== NAME OF SERIES INVESTMENT OBJECTIVE INVESTMENT ADVISER (AND SUB-ADVISER) ==================================== =========================================== ========================== Janus/JNL Aggressive Growth Seeks long-term growth of capital by Jackson National Asset investing primarily in a diversified Management, LLC (and portfolio of common stocks of U.S. and Janus Capital foreign companies selected for their Corporation) growth potential. ------------------------------------ ------------------------------------------- -------------------------- ------------------------------------ ------------------------------------------- -------------------------- Janus/JNL Balanced Seeks long-term capital growth, Jackson National Asset consistent with preservation of capital Management, LLC (and and balanced by current income normally Janus Capital investing 40-60% of its assets in Corporation) securities selected primarily for their growth potential and 40-60% of its assets in securities selected primarily for their income potential. ------------------------------------ ------------------------------------------- -------------------------- ------------------------------------ ------------------------------------------- -------------------------- Janus/JNL Capital Growth Seeks long-term growth of capital in a Jackson National Asset manner consistent with the preservation Management, LLC (and of capital through a non-diversified Janus Capital portfolio consisting primarily of common Corporation) stocks of U.S. and foreign companies selected for their growth potential and normally invests at least 50% of its equity assets in medium-sized companies. ------------------------------------ ------------------------------------------- -------------------------- ------------------------------------ ------------------------------------------- -------------------------- Janus/JNL Global Equities Seeks long-term growth of capital in a Jackson National Asset manner consistent with the preservation Management, LLC (and of capital through a diversified Janus Capital portfolio of common stocks of foreign and Corporation) domestic issuers selected for their growth potential. ------------------------------------ ------------------------------------------- -------------------------- ------------------------------------ ------------------------------------------- -------------------------- Lazard/JNL Mid Cap Value Seeks capital appreciation by investing Jackson National Asset at least 80% of its total assets in a Management, LLC (and non-diversified portfolio of equity Lazard Asset Management) securities of U.S. companies with market capitalizations in the range of companies represented in the Russell Mid Cap Index and that the sub-adviser believes are undervalued based on their return on equity. ------------------------------------ ------------------------------------------- -------------------------- ------------------------------------ ------------------------------------------- -------------------------- Lazard/JNL Small Cap Value Seeks capital appreciation by investing Jackson National Asset at least 80% of its total assets in a Management, LLC (and non-diversified portfolio of equity Lazard Asset Management) securities of U.S. companies with market capitalizations in the range of companies represented by the Russell 2000 Index that the sub-adviser believes are undervalued based on their return on equity. ------------------------------------ ------------------------------------------- -------------------------- ------------------------------------ ------------------------------------------- -------------------------- Mellon Capital Management/JNL Seeks to match the performance of Jackson National Asset S&P 500 Index the S&P 500(R) Index to provide long Management, LLC (and term capital growth by investing in Mellon Capital large-capitalization company securities. Management Corporation) ------------------------------------ ------------------------------------------- -------------------------- ------------------------------------ ------------------------------------------- -------------------------- Mellon Capital Management/JNL S&P Seeks to match the performance of Jackson National Asset 400 Mid Cap Index the S&P 400(R) Index to provide long term Management, LLC (and capital growth by investing in equity Mellon Capital securities of medium capitalization Management Corporation) weighted domestic corporations. ------------------------------------ ------------------------------------------- -------------------------- ------------------------------------ ------------------------------------------- -------------------------- THE SERIES, INVESTMENT OBJECTIVES AND ADVISERS. ==================================== =========================================== ========================== NAME OF SERIES INVESTMENT OBJECTIVE INVESTMENT ADVISER (AND SUB-ADVISER) ==================================== =========================================== ========================== Mellon Capital Management/JNL Seeks to match the performance of the Jackson National Asset Small Cap Index Russell 2000(R) Index to Management, LLC (and provide long term growth of Mellon Capital capital by investing in equity securities Management Corporation) of small to mid-size domestic corporations. ------------------------------------ ------------------------------------------- -------------------------- ------------------------------------ ------------------------------------------- -------------------------- Mellon Capital Management/JNL Seeks to match the performance of the Jackson National Asset International Index Morgan Stanley Capital International Management, LLC (and Europe Australiasia Far East Free Mellon Capital Index to provide long term capital growth Management Corporation) by investing in international equity securities attempting to match the characteristics of each country within the index. ------------------------------------ ------------------------------------------- -------------------------- ------------------------------------ ------------------------------------------- -------------------------- Mellon Capital Management/JNL Bond Seeks to match the performance of the Jackson National Asset Index Lehman Brothers Aggregate Bond Index to Management, LLC (and provide a moderate rate of income by Mellon Capital investing in domestic fixed income Management Corporation) investments. ------------------------------------ ------------------------------------------- -------------------------- ------------------------------------ ------------------------------------------- -------------------------- Oppenheimer/JNL Global Growth Seek capital appreciation by investing Jackson National Asset primarily in common stocks of companies Management, LLC (and in the U.S. and foreign countries. The OppenheimerFunds, Inc.) Series can invest without limit in foreign securities and can invest in any country, including countries with developed or emerging markets. ------------------------------------ ------------------------------------------- -------------------------- ------------------------------------ ------------------------------------------- -------------------------- Oppenheimer/JNL Growth Seek capital appreciation by investing Jackson National Asset mainly in common stocks of "growth Management, LLC (and companies." The Series currently focuses OppenheimerFunds, Inc.) on stocks of companies having a large capitalization (currently more than $12 billion) or mid-capitalization ($2 billion to $12 billion), but this focus could change over time as well as the companies the Series considers to be currently large and mid-capitalization. ------------------------------------ ------------------------------------------- -------------------------- ------------------------------------ ------------------------------------------- -------------------------- PIMCO/JNL Total Return Bond Seeks maximum total return, consistent Jackson National Asset with the preservation of capital and Management, LLC (and prudent investment management, by Pacific Investment normally investing at least 65% of its Management Company LLC) assets in a diversified portfolio of investment-grade, fixed-income securities of U.S. and foreign issuers such as government, corporate, mortgage- and other asset-backed securities and cash equivalents. ------------------------------------ ------------------------------------------- -------------------------- ------------------------------------ ------------------------------------------- -------------------------- PPM America/JNL Balanced Seeks reasonable income, long-term Jackson National Asset capital growth and preservation of Management, LLC (and PPM capital by investing primarily in a America, Inc.) diversified portfolio of common stock and fixed-income securities of U.S. companies, but may also invest in securities convertible into common stocks, deferred debt obligations and zero coupon bonds. ------------------------------------ ------------------------------------------- -------------------------- ------------------------------------ ------------------------------------------- -------------------------- THE SERIES, INVESTMENT OBJECTIVES AND ADVISERS. ==================================== =========================================== ========================== NAME OF SERIES INVESTMENT OBJECTIVE INVESTMENT ADVISER (AND SUB-ADVISER) ==================================== =========================================== ========================== PPM America/JNL High Yield Bond Seeks to provide a high level of current Jackson National Asset income, with capital appreciation as a Management, LLC (and PPM secondary investment objective, by America, Inc.) investing substantially in a diversified portfolio of long-term (over 10 years to maturity) and intermediate-term (3 to 10 years to maturity) fixed-income securities of U.S. and foreign issuers, with an emphasis on higher-yielding, higher-risk, lower-rated or unrated bonds. ------------------------------------ ------------------------------------------- -------------------------- ------------------------------------ ------------------------------------------- -------------------------- PPM America/JNL Money Market Seeks a high level of current income as Jackson National Asset is consistent with the preservation Management, LLC (and PPM of capital and maintenance of America, Inc.) liquidity byinvesting in high quality, short-term money market instruments. ------------------------------------ ------------------------------------------- -------------------------- ------------------------------------ ------------------------------------------- -------------------------- Putnam/JNL Growth Seeks long-term capital growth by Jackson National Asset investing primarily in a diversified Management, LLC (and portfolio of common stock of domestic, Putnam Investment large-capitalization companies. However, Management, Inc.) the Series may also invest in preferred stocks, bonds, convertible preferred stock and convertible debentures if the sub-adviser believes that they offer the potential for capital appreciation. ------------------------------------ ------------------------------------------- -------------------------- ------------------------------------ ------------------------------------------- -------------------------- Putnam/JNL International Equity Seeks long-term growth of capital by Jackson National Asset investing at least 65% of its total Management, LLC (and assets in a diversified portfolio Putnam Investment consisting primarily of common stocks of Management, Inc.) non-U.S. companies. The Series invests in foreign securities that the sub-adviser believes offer significant potential for long-term appreciation. ------------------------------------ ------------------------------------------- -------------------------- ------------------------------------ ------------------------------------------- -------------------------- Putnam/JNL Midcap Growth Seeks capital appreciation by investing Jackson National Asset mainly in common stocks of U.S. companies Management, LLC (and with a focus on growth stocks which are Putnam Investment stocks whose earnings the sub-adviser Management, Inc.) believes are likely to grow faster than the economy as a whole. ------------------------------------ ------------------------------------------- -------------------------- ------------------------------------ ------------------------------------------- -------------------------- Putnam/JNL Value Equity Seeks capital growth, with income as a Jackson National Asset secondary objective, by investing Management, LLC (and primarily in a diversified portfolio of Putnam Investment equity securities of domestic, Management, Inc.) large-capitalization companies. At least 65% of its total assets will be invested, under normal market conditions, in equity securities. ------------------------------------ ------------------------------------------- -------------------------- ------------------------------------ ------------------------------------------- -------------------------- Salomon Brothers/JNL Global Bond Seeks a high level of current income, Jackson National Asset with capital appreciation as a Management, LLC (and secondary objective, by investing at Salomon Brothers Asset least 65% of its total assets in a Management Inc.) globally diverse portfolio of fixed-income investments. ------------------------------------ ------------------------------------------- -------------------------- ------------------------------------ ------------------------------------------- -------------------------- THE SERIES, INVESTMENT OBJECTIVES AND ADVISERS. ==================================== =========================================== ========================== NAME OF SERIES INVESTMENT OBJECTIVE INVESTMENT ADVISER (AND SUB-ADVISER) ==================================== =========================================== ========================== Salomon Brothers/JNL U.S. Seeks a high level of current income by Jackson National Asset Government & Quality Bond investing at least 65% of its assets in: Management, LLC (and (i) U.S. Treasury obligations; (ii) Salomon Brothers Asset obligations issued or guaranteed by Management Inc.) 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; and (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. ------------------------------------ ------------------------------------------- -------------------------- ------------------------------------ ------------------------------------------- -------------------------- S&P/JNL Conservative Growth Series Seeks capital growth and current income Jackson National Asset I by investing in a diversified group of Management, LLC (and other Series of the Trust that invest in Standard & Poor's equity and fixed income securities. Investment Advisory Services, Inc.) ------------------------------------ ------------------------------------------- -------------------------- ------------------------------------ ------------------------------------------- -------------------------- S&P/JNL Moderate Growth Series I Seeks capital growth with current Jackson National Asset income as a secondary objective by Management, LLC (and investing in a diversified group of other Standard & Poor's Series of the Trust that invest in equity Investment Advisory and fixed income securities. Services, Inc.) ------------------------------------ ------------------------------------------- -------------------------- ------------------------------------ ------------------------------------------- -------------------------- S&P/JNL Aggressive Growth Series I Seeks capital growth by investing in a Jackson National Asset diversified group of other Series of the Management, LLC (and Trust that invest in equity and fixed Standard & Poor's income securities. Investment Advisory Services, Inc.) ------------------------------------ ------------------------------------------- -------------------------- ------------------------------------ ------------------------------------------- -------------------------- S&P/JNL Very Aggressive Growth Seeks capital growth by investing in a Jackson National Asset Series I diversified group of other Series of the Management, LLC (and Trust that invest in equity securities. Standard & Poor's Investment Advisory Services, Inc.) ------------------------------------ ------------------------------------------- -------------------------- ------------------------------------ ------------------------------------------- -------------------------- S&P/JNL Equity Growth Series I Seeks capital growth by investing in a Jackson National Asset diversified group of other Series of the Management, LLC (and Trust that invest primarily in equity Standard & Poor's securities. Investment Advisory Services, Inc.) ------------------------------------ ------------------------------------------- -------------------------- ------------------------------------ ------------------------------------------- -------------------------- S&P/JNL Equity Aggressive Growth Seeks capital growth by investing in a Jackson National Asset Series I diversified group of other Series of the Management, LLC (and Trust that invest primarily in equity Standard & Poor's securities. Investment Advisory Services, Inc.) ------------------------------------ ------------------------------------------- -------------------------- ------------------------------------ ------------------------------------------- -------------------------- S&P/JNL Core Index 50 Seeks capital growth and current income Jackson National Asset by investing 50% of the series assets in Management, LLC (and the index series of the Trust and 50% in Standard & Poor's a diversified group of other Series of Investment Advisory the Trust that invest in equity and fixed Services, Inc.) income securities. ------------------------------------ ------------------------------------------- -------------------------- ------------------------------------ ------------------------------------------- -------------------------- S&P/JNL Core Index 75 Seeks capital growth and current income Jackson National Asset by investing 75% of the series assets in Management, LLC (and the index series of the Trust and 25% in Standard & Poor's a diversified group of other Series of Investment Advisory the Trust that invest in equity and fixed Services, Inc.) income securities. ------------------------------------ ------------------------------------------- -------------------------- ------------------------------------ ------------------------------------------- -------------------------- S&P/JNL Core Index 100 Seeks capital growth and current income Jackson National Asset by investing in the index series of the Management, LLC (and Trust and the money market series. Standard & Poor's Investment Advisory Services, Inc.) ------------------------------------ ------------------------------------------- -------------------------- ------------------------------------ ------------------------------------------- -------------------------- THE SERIES, INVESTMENT OBJECTIVES AND ADVISERS. ==================================== =========================================== ========================== NAME OF SERIES INVESTMENT OBJECTIVE INVESTMENT ADVISER (AND SUB-ADVISER) ==================================== =========================================== ========================== T. Rowe Price/JNL Established Seeks long-term growth of capital and Jackson National Asset Growth increasing dividend income by investing Management, LLC (and T. primarily in a diversified portfolio of Rowe Price Associates, common stocks of well-established U.S. Inc.) growth companies. ------------------------------------ ------------------------------------------- -------------------------- ------------------------------------ ------------------------------------------- -------------------------- T. Rowe Price/JNL Mid-Cap Growth Seeks long-term growth of capital by Jackson National Asset normally investing at least 65% of its Management, LLC (and T. total assets in a diversified portfolio Rowe Price Associates, of common stocks of medium-sized Inc.) (mid-cap) U.S. companies which the sub-adviser expects to grow at a faster rate than the average company. ------------------------------------ ------------------------------------------- -------------------------- ------------------------------------ ------------------------------------------- -------------------------- T. Rowe Price/JNL Value Seeks long-term capital appreciation by Jackson National Asset investing in common stocks believed to Management, LLC (and T. be undervalued. Income is a secondary Rowe Price Associates, objective. In taking a value approach to Inc.) investment selection, at least 65% of its total assets will be invested in common stocks the portfolio manager regards as undervalued. ------------------------------------ ------------------------------------------- -------------------------- ------------------------------------ ------------------------------------------- -------------------------- JNL VARIABLE FUND LLC ------------------------------------ ------------------------------------------- -------------------------- ------------------------------------ ------------------------------------------- -------------------------- First Trust/JNL The DowSM Seeks a high total return through a Jackson National Asset Target 10 combination of capital appreciation and Management, LLC (and dividend income by investing First Trust Advisors approximately equal amounts in L.P.) the common stock of the ten companies included in the Dow Jones Industrial AverageSM which have the highest dividend yields on a pre-determined selection date. ------------------------------------ ------------------------------------------- --------------------------
The investment objectives and policies of certain of the Series are similar to the investment objectives and policies of other mutual funds that the Series' investment sub-advisers also manage. Although the objectives and policies may be similar, the investment results of the Series may be higher or lower than the result of those other mutual funds. We cannot guarantee, and make no representation, that the investment results of similar funds will be comparable even though the funds have the same investment advisers. The Series described are available only through variable annuity contracts issued by Jackson National. They are NOT offered or made available to the general public directly. A Series' performance may be affected by risks specific to certain types of investments, such as foreign securities, derivative investments, non-investment grade debt securities, initial public offerings (IPOs) or companies with relatively small market capitalizations. IPOs and other investment techniques may have a magnified performance impact on a Series with a small asset base. A Series may not experience similar performance as its assets grow. You should read the prospectuses for the JNL Series Trust and the JNL Variable Fund LLC carefully before investing. Additional Series and Investment Divisions may be available in the future. VOTING PRIVILEGES. To the extent required by law, we will obtain instructions from you and other owners about how to vote our shares of a Series when there is a vote of shareholders of a Series. We will vote all the shares we own in proportion to those instructions from owners. SUBSTITUTION. We reserve the right to substitute a different Series or a different mutual fund for the one in which any Investment Division is currently invested, or transfer money to the General Account. We will not do this without any required approval of the SEC. We will give you notice of any substitution. CONTRACT CHARGES There are charges associated with your Contract that reduce your Contract's investment returns. These charges may be a lesser amount where required by state law or as described below, but will not be increased. These charges (and certain other expenses) are as follows: MORTALITY AND EXPENSE RISK CHARGES. Each day, as part of our calculation of the value of the accumulation units and annuity units, we make a deduction for mortality and expense risk charges. On an annual basis, these charges equal 1.00% of the average daily net asset value of your allocations to the Investment Divisions. This charge does not apply to the Fixed Accounts. This charge compensates us for the risks we assume in connection with all the Contracts, not just your Contract. Our mortality risks under the Contracts arise from our obligations: o to make income payments for the life of the annuitant during the income phase; o to waive the withdrawal charge in the event of the owner's death; and o to provide both basic and optional death benefits prior to the income date. Our expense risks under the Contracts, include the risk that our actual cost of administering the Contracts and the Investment Divisions may exceed the amount that we receive from the administration charge and the contract maintenance charge. Included among these expense risks are those that we assume in connection with waivers of withdrawal charges under the Terminal Illness Benefit, the Specified Conditions Benefit and the Extended Care Benefit. YOUR CONTRACT'S CHARGES COMPENSATE US FOR OUR EXPENSES OF SELLING AND ADMINISTERING YOUR CONTRACT AND FOR THE SERVICES AND BENEFITS WE PROVIDE AND THE MORTALITY AND EXPENSE RISKS WE ASSUME UNDER THE CONTRACTS. CONTRACT MAINTENANCE CHARGE. During the accumulation phase, we deduct a $35 ($30 in Washington) annual contract maintenance charge on each anniversary of the ISSUE DATE (the date your Contract was issued). We will also deduct the contract maintenance charge if you make a total withdrawal. This charge is for administrative expenses. We will not deduct this charge, if when the deduction is to be made, the value of your Contract is $50,000 or more. ADMINISTRATION CHARGE. Each day, as part of our calculation of the value of the accumulation units and annuity units, we make a deduction for administration charges. On an annual basis, these charges equal 0.15% of the average daily net asset value of your allocations to the Investment Divisions. This charge does not apply to the Fixed Accounts. This charge compensates us for our expenses incurred in administering the Contracts and the Separate Account. TRANSFER CHARGE. You must pay $25 for each transfer in excess of 15 in a contract year. This charge is deducted from the amount that is transferred prior to the allocation to the new Allocation Option. We waive the transfer charge in connection with dollar cost averaging or rebalancing transfers and we may charge a lesser fee where required by state law. WITHDRAWAL CHARGE. At any time during the accumulation phase (if and to the extent that contract value is sufficient to pay any remaining withdrawal charges that remain after a withdrawal), you may withdraw the following with no withdrawal charge: o PREMIUMS THAT ARE NO LONGER SUBJECT TO A WITHDRAWAL CHARGE (premiums in your annuity for at least seven (five for the five-year withdrawal option) years without being withdrawn), PLUS o EARNINGS (excess of your contract value allocated to the Investment Divisions and the Guaranteed Fixed Accounts over your remaining premiums allocated to those accounts) o during each contract year 10% (20% if you have elected the 20% Additional Free Withdrawal endorsement) of premium (excluding premium in the Indexed Fixed Option) that remains subject to withdrawal charges and have not been previously withdrawn (this can be withdrawn at once or in segments throughout the contract year), MINUS earnings. WE WILL DEDUCT A WITHDRAWAL CHARGE ON: o Withdrawals in excess of the free withdrawal amounts, or o amounts withdrawn in a total withdrawal, or o amounts applied to income payments on an income date that is within one year of the issue date. The amount of the withdrawal charge deducted varies (depending upon whether you have elected the Five Year Withdrawal Period endorsement and how many years prior to the withdrawal you made the premium payment(s) you are withdrawing) according to the following schedule: WITHDRAWAL CHARGE (AS A PERCENTAGE OF PREMIUM PAYMENTS):
COMPLETED YEARS SINCE RECEIPT OF 0 1 2 3 4 5 6 7+ PREMIUM WITHDRAWAL CHARGE 8.5% 8% 7% 6% 5% 4% 2% 0 WITHDRAWAL CHARGE IF FIVE-YEAR 8% 7% 6% 4% 2% 0 0 0 PERIOD IS ELECTED
For purposes of the withdrawal charge, we treat withdrawals as coming first from earnings and then from the oldest remaining premium. If you make a full withdrawal, or elect to commence income payments within one year of the date your Contract was issued, the withdrawal charge is based on premiums remaining in the Contract and no free withdrawal amount applies. If you withdraw only part of the value of your Contract, we deduct the withdrawal charge from the remaining value in your Contract. The withdrawal charge compensates us for costs associated with selling the Contracts. Amounts allocated to an Indexed Fixed Option are not subject to this withdrawal charge. The withdrawal charge applicable to amounts held in that option is described in the supplementary materials and your Contract. NOTE: Withdrawals under a non-qualified Contract will be taxable on an "income first" basis. This means that any withdrawal from a non-qualified Contract that does not exceed the accumulated income under the Contract will be taxable in full. Any withdrawals under a tax-qualified Contract will be taxable except to the extent that they are allocable to an investment in the Contract (any after-tax contributions). In most cases, there will be little or no investment in the Contract for a tax-qualified Contract because contributions will have been made on a pre-tax or tax-deductible basis. We do not assess the withdrawal charge on any amounts paid out as: o income payments (but the withdrawal charge is deducted at the income date if income payments are commenced in the first contract year); o death benefits; o withdrawals necessary to satisfy the minimum distribution requirements of the Internal Revenue Code; o if permitted by your state, withdrawals of up to $250,000 from the Separate Account or from the Fixed Accounts (excluding amounts in the Indexed Fixed Option) if you incur a terminal illness or if you need extended hospital or nursing home care as provided in your Contract; or o if permitted by your state, withdrawals of up to 25% of your contract value from the Separate Account or the Fixed Account (excluding amounts in the Indexed Fixed Option) (12 1/2% for each of two joint owners) if you incur certain serious medical conditions specified in your Contract. We may reduce or eliminate the amount of the withdrawal charge when the Contract is sold under circumstances that reduce our sales expense. Some examples are: the purchase of a Contract by a large group of individuals or an existing relationship between us and a prospective purchaser. We may not deduct a withdrawal charge under a Contract issued to an officer, director, agent or employee of Jackson National or any of our affiliates. o WITHDRAWAL CHARGES APPLY TO PARTIAL WITHDRAWALS IN EXCESS OF FREE WITHDRAWAL AMOUNTS AND TO ANY TOTAL WITHDRAWAL. o FREE WITHDRAWALS DO NOT REDUCE THE TOTAL WITHDRAWAL CHARGES APPLICABLE TO A TOTAL WITHDRAWAL. o WITHDRAWAL CHARGES ALSO APPLY AT THE INCOME DATE IF IT IS WITHIN ONE YEAR OF YOUR ISSUE DATE. EARNINGS PROTECTION BENEFIT CHARGE. If you select the Earnings Protection Benefit Endorsement, you will pay us a charge that equals 0.30% on an annual basis of the average daily net asset value of your allocations to the Investment Divisions. We stop deducting this charge on the income date. CONTRACT ENHANCEMENT CHARGE. If you select one of the Contract Enhancements, then for a period of seven contract years (five for the 2% Contract Enhancement) a charge will be imposed based upon the average daily net asset value of your allocations to the Investment Divisions. These charges will also be assessed against any amounts you have allocated to the Guaranteed Fixed Accounts by reducing credited rates (but not below 3%, assuming no withdrawals). The amounts of these charges (or reductions in credited rates) depends upon which of the Contract Enhancements you select: CONTRACT ENHANCEMENT 2% 3% 4% CHARGE (ON AN ANNUAL BASIS) 0.40% 0.425% 0.57% CHARGES FOR BENEFITS PROVIDED IN OPTIONAL ENDORSEMENTS ONLY APPLY IF YOU ELECT THOSE ENDORSEMENTS. CONTRACT ENHANCEMENT RECAPTURE CHARGE. If you select a Contract Enhancement and then make a partial or total withdrawal from your Contract in the first seven years (five years for the 2% Contract Enhancement) since the premium payment withdrawn was made, you will pay a Contract Enhancement recapture charge that reimburses us for all or part of the Contract Enhancements that we credited to your Contract based on your first year payments. The amounts of these charges are as follows:
CONTRACT ENHANCEMENT RECAPTURE CHARGE (AS A PERCENTAGE OF THE CORRESPONDING FIRST YEAR PREMIUM PAYMENT WITHDRAWN IF AN OPTIONAL CONTRACT ENHANCEMENT IS SELECTED) Completed Years Since Receipt of 0 1 2 3 4 5 6 7+ Premium(16) Recapture Charge (2% Credit) 2% 2% 1.25% 1.25% 0.5% 0 0 0 Recapture Charge (3% Credit) 3% 3% 2% 2% 2% 1% 1% 0 Recapture Charge (4% Credit) 4% 4% 2.5% 2.5% 2.5% 1.25% 1.25% 0
We do not assess the recapture charge on any amounts paid out as: o death benefits; o withdrawals taken under the additional free withdrawal provision; o withdrawals necessary to satisfy the minimum distribution requirements of the Internal Revenue Code; o if permitted by your state, additional withdrawals of up to $250,000 from the Separate Account or from the Fixed Accounts (excluding amounts in the Indexed Fixed Option) if you incur a terminal illness or if you need extended hospital or nursing home care as provided in your Contract; or ----------------- 16 Any applicable Contract Enhancement recapture charges are deducted at the income date as well as on partial withdrawals in excess of free withdrawal amounts, upon total withdrawals and if your contact is returned during the free look period. o if permitted by your state, additional withdrawals of up to 25% of your contract value from the Separate Account or the Fixed Accounts (excluding amounts in the Indexed Fixed Option) (12 1/2% for each of two joint owners) if you incur a certain serious medical conditions specified in your Contract. GUARANTEED MINIMUM INCOME BENEFIT CHARGE. If you select the Guaranteed Minimum Income Benefit, on a calendar quarter basis, you will pay .10% of the Guaranteed Minimum Income Benefit (GMIB) Benefit Base. This charge is deducted from the contract value (1) at the end of each calendar quarter and (2) upon termination of the GMIB on a pro-rata basis using the GMIB Benefit Base as of the date of termination and the number of days since the last deduction. The first GMIB charge will be deducted on a pro rata basis from the issue date to the end of the first calendar quarter after the issue date. The GMIB Benefit Base is explained in note 5 to the Fee Table above and again on page 27 below. OPTIONAL DEATH BENEFIT CHARGES. If you select one of the three optional death benefits available under your Contract, you will pay 0.15% OR 0.25% on an annual basis of the average daily net asset value of your allocations to the Investment Divisions, depending on which of the three death benefit options you select. We stop deducting this charge on the income date. FIVE-YEAR WITHDRAWAL CHARGE PERIOD. If you select the optional five-year withdrawal charge period feature, you will pay 0.30% on an annual basis of the average daily net asset value of your allocations to the Investment Divisions. We stop deducting this charge on the income date. 20% ADDITIONAL FREE WITHDRAWAL CHARGE. If you select the optional feature that permits you to withdraw up to 20% of premiums (excluding premiums allocated to the Indexed Fixed Option) that are still subject to a withdrawal charge minus earnings during a contract year without a withdrawal charge, you will pay 0.30% on an annual basis of the average daily net asset value of your allocations to the Investment Divisions. We stop deducting this charge on the income date. COMMUTATION FEE. If you make a total withdrawal from your Contract after income payments have commenced under income option 4, or if after your death during the period for which payments are guaranteed to be made under income option 3 your beneficiary elects to receive a lump sum payment, the amount received will be reduced by (a) minus (b) where: o (a) = the present value of the remaining income payments (as of the date of calculation) for the period for which payments are guaranteed to be made, discounted at the rate assumed in calculating the initial payment; and o (b) = the present value of the remaining income payments (as of the date of calculation) for the period for which payments are guaranteed to be made, discounted at a rate no more than 1.00% higher than the rate used in (a). OTHER EXPENSES. We pay the operating expenses of the Separate Account. There are deductions from and expenses paid out of the assets of the Series. These expenses are described in the attached prospectuses for the JNL Series Trust and the JNL Variable Fund LLC. PREMIUM TAXES. Some states and other governmental entities charge premium taxes or other similar taxes. We pay these taxes and may make a deduction from your contract values for them. Premium taxes generally range from 0% to 4% depending on the state. INCOME TAXES. We reserve the right, when calculating unit values, to deduct a credit or charge with respect to any taxes we have paid or reserved for during the valuation period that we determine to be attributable to the operation of an Investment Division. No federal income taxes are applicable under present law and we are not presently making any such deduction. IF YOUR STATE OR THE FEDERAL GOVERNMENT TAX US BECAUSE OF YOUR CONTRACT, WE CHARGE YOU FOR THOSE TAXES. DISTRIBUTION OF CONTRACTS. Jackson National Life Distributors, Inc., located at 401 Wilshire Boulevard, Suite 1200, Santa Monica, California 90401, serves as the distributor of the Contracts. Jackson National Life Distributors, Inc. is a wholly-owned subsidiary of Jackson National. Commissions are paid to broker-dealers who sell the Contracts. While commissions may vary, they are not expected to exceed 8% of any premium payment. Where lower commissions are paid, we may also pay trail commissions. We may also pay commissions on the income date. Under certain circumstances, we may pay bonuses, overrides, and marketing allowances, in addition to the standard commissions. We may, under certain circumstances where permitted by applicable law, pay a bonus to a Contract purchaser to the extent the broker-dealer waives its commission. We may use any of our corporate assets to cover the cost of distribution, including any profit from the Contract's mortality and expense risk charge and other charges. We are affiliated with the following broker-dealers: o National Planning Corporation, o SII Investments, Inc., o IFC Holdings, Inc. D/B/A Invest Financial Corporation and o Investment Centers of America, Inc. WE PAY BROKERS COMMISSIONS FOR SELLING CONTRACTS. PURCHASES MINIMUM INITIAL PREMIUM: o $5,000 under most circumstances. o $2,000 for a qualified plan Contract. MINIMUM ADDITIONAL PREMIUMS: o $500 for a qualified or non-qualified plan. o $50 for an automatic payment plan. o You can pay additional premiums at any time during the accumulation phase. These minimums apply to purchases, but do not preclude subsequent partial withdrawals that would reduce contract values below the minimum initial purchase amounts, as long as the amount left in the account is sufficient to pay the withdrawal charge. The minimum you may allocate to a Guaranteed Fixed Account or Investment Division is $100. There is a $100 minimum balance requirement for each Guaranteed Fixed Account and Investment Division. The Indexed Fixed Option has initial and subsequent allocation minimums of $5000. MAXIMUM PREMIUMS: o The maximum aggregate premiums you may make without our prior approval is $1 million. ALLOCATIONS OF PREMIUM. You may allocate your premiums to one or more of the Allocation Options. Each allocation must be a whole percentage between 0% and 100%. We will allocate any additional premiums you pay in the same way unless you instruct us otherwise. These allocations will be subject to our minimum allocation rules. Although more than 18 Investment Divisions are available under your Contract, you may not allocate your contract values among more than 18 Allocation Options at any one time. We will issue your Contract and allocate your first premium within two BUSINESS DAYS (days when the New York Stock Exchange is open) after we receive your first premium and all information that we require for the purchase of a Contract. If we do not receive all of the information that we require, we will contact you to get the necessary information. If for some reason we are unable to complete this process within five business days, we will either return your money or get your permission to keep it until we receive all of the required information. Each business day ends when the New York Stock Exchange closes, usually 4:00 p.m. Eastern time. YOU MAY SELECT NO MORE THAN 18 OF THE INVESTMENT DIVISIONS PLUS THE FIXED ACCOUNTS AT ANY ONE TIME. OPTIONAL CONTRACT ENHANCEMENTS. If you elect one of our optional Contract Enhancement endorsements, then at the end of any business day in the first contract year when we receive a premium payment, we will credit your contract values with an additional 2%, 3% or 4% of your payment, depending upon which Contract Enhancement you have selected. THE 2% CONTRACT ENHANCEMENT IS THE ONLY CONTRACT ENHANCEMENT THAT IS AVAILABLE IF YOU SELECT EITHER THE 20% ADDITIONAL FREE WITHDRAWAL OPTION OR THE FIVE-YEAR WITHDRAWAL OPTION. There is a charge that is assessed against the Investment Divisions and the Guaranteed Fixed Accounts for the Contract Enhancements whose amount depends upon which Contract Enhancement you elect. Allocations to the Indexed Fixed Option are not permitted in the first seven years (five years for the 2% Contract Enhancement). We will also impose a Contract Enhancement recapture charge if you o make withdrawals in excess of the free withdrawals permitted by your Contract (or an additional free withdrawal endorsement if elected), o elect to receive payment under an income option, or o return your Contract during the Free Look period. The amount and duration of the recapture charge depends upon which Contract Enhancement you elect. We will not impose the Contract Enhancement recapture charge if your withdrawal is made for certain health related emergencies, withdrawals of earnings, withdrawals in accordance with an additional free withdrawal or to satisfy minimum distribution requirements of the Internal Revenue Code. We expect to make a profit on these charges for the Contract Enhancements. Please see Appendix B for examples. Your contract value will reflect any gains or losses attributable to a Contract Enhancement described above. Contract Enhancements, and any gains or losses attributable to a Contract Enhancement, distributed under your Contract will be considered earnings under the Contract for tax purposes. Asset-based charges are deducted from the total value of the Separate Account. In addition, for the Guaranteed Fixed Accounts, the Contract Enhancement charge lowers the credited rate that would apply if the Contract Enhancement had not been elected. Therefore, your Contract incurs charges on the entire amounts included in your Contract, which includes premium payments made in the first seven contract years (five for the 2% Contract Enhancement), the Contract Enhancement and the earnings, if any, on such amounts for the first seven contract years (five for the 2% Contract Enhancement). As a result, the aggregate charges assessed will be higher than those that would be charged if you did not elect a Contract Enhancement. Accordingly, it is possible that upon surrender, particularly in a declining market, you will receive less money back than you would have if you had not elected a Contract Enhancement. We will impose a Contract Enhancement recapture charge if you make withdrawals in the first seven years (five years for the 2% Contract Enhancement) after a first year premium payment. We expect to profit from certain charges assessed under the Contract, including the withdrawal charge, the mortality and expense risk charge and the Contract Enhancement charge. If you elect the Contract Enhancement and then make more than relatively small premium payments during contract years two through seven (five for the 2% Contract Enhancement), you would likely have lower account values than if you had not elected the Contract Enhancement. If you make premium payments only in the first contract year, and do not make a withdrawal during the first seven (five for the 2% Contract Enhancement) years, however, it takes only a 1.20%, 1.00% and 2.05% or better rate of return for the 2%, 3% and 4% Contract Enhancements, respectively, for you to be better off having elected the Contract Enhancement. Thus, the Contract Enhancement is suitable only for those who expect to hold their contracts for at least seven years (five years for the 2% Contract Enhancement) and who expect to make substantially all of their premium payments in the first contract year or after the seventh contract year (fifth for the 2% Contract Enhancement). OPTIONAL CONTRACT ENHANCEMENTS ARE MOST SUITABLE IF YOU INTEND TO MAKE ONLY YOUR INITIAL PREMIUM PAYMENT. CAPITAL PROTECTION PROGRAM. If you select our Capital Protection program, we will allocate enough of your premium to the Guaranteed Fixed Account you select to assure that the amount so allocated will equal, at the end of a selected period of 1, 3, 5, or 7 years, your total original premium paid. You may allocate the rest of your premium to any Investment Division(s). If any part of the Guaranteed Fixed Account value is surrendered or transferred before the end of the selected guaranteed period, the value at the end of that period will not equal the original premium. For an example of Capital Protection, assume you made a premium payment of $10,000 when the interest rate for the seven-year guaranteed period was 6.75% per year. We would allocate $6,331 to that guarantee period because $6,331 would increase at that interest rate to $10,000 after seven years. The remaining $3,669 of the payment would be allocated to the Investment Division(s) you selected. ACCUMULATION UNITS. Your contract value allocated to the Investment Divisions will go up or down depending on the performance of the Investment Divisions you select. In order to keep track of the value of your Contract during the accumulation phase, we use a unit of measure called an "accumulation unit." During the income phase we use a measure called an "annuity unit." Every business day, we determine the value of an accumulation unit for each of the Investment Divisions by: o determining the total amount of assets held in the particular Investment Division; o subtracting any charges and taxes chargeable under the Contract; and o dividing this amount by the number of outstanding accumulation units. The value of an accumulation unit may go up or down from day to day and may be different for different charges. When you make a premium payment, we credit your Contract with accumulation units. The number of accumulation units we credit is determined at the close of that business day by dividing the amount of the premium allocated to any Investment Division by the value of the accumulation unit for that Investment Division. THE VALUE OF YOUR ALLOCATIONS TO INVESTMENT DIVISIONS IS MEASURED IN "ACCUMULATION UNITS." TRANSFERS You may transfer your contract value among the Investment Divisions at any time, but transfers between a Fixed Account option and an Investment Division must occur prior to the income date. Transfers from the Fixed Account will be subject to any applicable excess interest adjustment, and transfers from the Indexed Fixed Option are not permitted until the end of the Indexed Fixed Option period. If a renewal occurs within one year of the Income Date, the Company will credit interest up to the Income Date at the then Current Interest Rate for the Guaranteed Fixed Account Option. You can make 15 transfers every contract year during the accumulation phase without charge. A transfer will be effective as of the end of the business day when we receive your transfer request in good order, subject to guidelines related to transfers in and out of the Indexed Fixed Option as described in the Contract and the supplementary materials. YOU MAY MAKE UP TO 15 FREE TRANSFERS PER CONTRACT YEAR. RESTRICTIONS ON TRANSFERS. To the extent permitted by applicable law, we reserve the right to restrict the number of transfers per year that you can request and to restrict you from making transfers on consecutive business days. In addition, your right to make transfers may be modified if we determine that the exercise by one or more Contract owners is, or would be, to the disadvantage of other owners. Restrictions may be applied in any manner reasonably designed to prevent any use of the transfer right which we consider to be to the disadvantage of other owners. A modification could be applied to transfers to or from one or more of the Investment Divisions, and could include, but are not limited to: o requiring a minimum time period between each transfer; o limiting transfer requests from an agent acting on behalf of one or more Contract owners or under a power of attorney on behalf of one or more Contract owners; or o limiting the dollar amount that you may transfer at any one time. WE RESERVE THE RIGHT TO MODIFY YOUR TRANSFER RIGHTS IF WE BELIEVE IT IS NECESSARY TO PREVENT DISADVANTAGE TO OTHER OWNERS. TELEPHONE AND INTERNET TRANSACTIONS THE BASICS You can request certain transactions by telephone or at www.jnl.com, our Internet Web site. Our Customer Service representatives are available during business hours to provide you with information about your account. We require that you provide proper identification before performing transactions over the telephone or through our Internet Web site. For Internet transactions, this will include a Personal Identification Number (PIN). You may establish or change your PIN at www.jnl.com. WHAT YOU CAN DO AND HOW You may make transfers by telephone or through the Internet unless you elect not to have this privilege. Any authorization you provide to us in an application, at our Web site, or through other means will authorize us to accept transaction instructions, including fund transfers/allocations, by you and your financial representative unless you notify us to the contrary. To notify us, please call us at the Service Center number referenced in your Contract or on your quarterly statement. WHAT YOU CAN DO AND WHEN When authorizing a transfer, you must complete your telephone call by the close of the New York Stock Exchange (usually 4:00 p.m. Eastern time) in order to receive that day's accumulation unit value for an Investment Division. Transfer instructions you send electronically are considered to be received by us at the time and date stated on the electronic acknowledgement we return to you. If the time and date indicated on the acknowledgement is before the close of the New York Stock Exchange, the instructions will be carried out that day. Otherwise the instructions will be carried out the next business day. We will retain permanent records of all Web-based transactions by confirmation number. If you do not receive an electronic acknowledgement, you should telephone our Service Center immediately. HOW TO CANCEL A TRANSACTION Telephone or Internet transfer requests may currently only be cancelled by calling the Service Center before the close of the New York Stock Exchange on the day the transaction will be processed. OUR PROCEDURES Our procedures are designed to provide reasonable assurance that telephone or any other electronic authorizations are genuine. Our procedures include requesting identifying information and tape-recording telephone communications. We and our affiliates disclaim all liability for any claim, loss or expense resulting from any alleged error or mistake in connection with a transaction requested by telephone or other electronic means that you did not authorize. However, if we fail to employ reasonable procedures to ensure that all requested transactions are properly authorized, we may be held liable for such losses. We do not guarantee access to telephonic and electronic information or that we will be able to accept transaction instructions via the telephone or electronic means at all times. We also reserve the right to modify, limit, restrict, or discontinue at any time and without notice the acceptance of instruction from someone other than you and/or this telephonic and electronic transaction privilege. YOU MAY TRANSFER YOUR CONTRACT VALUES AMONG ALLOCATION OPTIONS BY TELEPHONE OR VIA THE INTERNET, BUT WITHDRAWAL REQUESTS AND INCOME PAYMENT ELECTIONS MUST BE IN WRITING. ACCESS TO YOUR MONEY You can have access to the money in your Contract: o by making either a partial or complete withdrawal, or o by electing to receive income payments. Your beneficiary can have access to the money in your Contract when a death benefit is paid. When you make a complete withdrawal you will receive the value of your Contract on the day you make the withdrawal, MINUS any applicable tax, contract maintenance charge, charges due under any optional endorsement and all applicable withdrawal charges, adjusted for any applicable Excess Interest Adjustment. Your withdrawal request must be in writing. We will accept withdrawal requests submitted via facsimile. There are risks associated with not requiring original signatures in order to disburse Contract owner monies. Except in connection with the systematic withdrawal program, you must withdraw at least $500 or, if less, the entire amount in the Guaranteed Fixed Account or Investment Division from which you are making the withdrawal. After your withdrawal, you must have at least $100 left in the Guaranteed Fixed Account or Investment Division. Amounts may not be withdrawn from an Indexed Fixed Option until all other amounts under the Contract have been withdrawn. INCOME TAXES, TAX PENALTIES AND CERTAIN RESTRICTIONS MAY APPLY TO ANY WITHDRAWAL YOU MAKE. THERE ARE LIMITATIONS ON WITHDRAWALS FROM QUALIFIED PLANS. SEE "TAXES." WITHDRAWALS MAY BE TAXED, INCLUDING A POSSIBLE PENALTY TAX IF YOU ARE UNDER AGE 59 1/2. WAIVER OF WITHDRAWAL CHARGES FOR CERTAIN EMERGENCIES. We will waive the withdrawal charge (withdrawals from the Investment Divisions and the Guaranteed Fixed Account), but not any excess interest adjustment that would otherwise apply in certain circumstances by providing you, at no charge, the following: o TERMINAL ILLNESS BENEFIT, under which we will waive any withdrawal charges on amounts of up to $250,000 of your contract value from the Separate Account and from the Fixed Accounts (excluding amounts in the Indexed Fixed Option) that you withdraw after providing us with a physician's statement that you have been diagnosed with an illness that will result in your death within 12 months; o SPECIFIED CONDITIONS BENEFIT, under which you may make a one-time withdrawal of up to 25% (for joint owners, this benefit applies to each of them for 12 1/2%) of your contract value from the Separate Account and from the Fixed Accounts (excluding amounts in the Indexed Fixed Option) with no withdrawal charge after having provided us with a physician's statement that you have been diagnosed with one of the following conditions: o Heart attack o Stroke o Coronary artery surgery o Life threatening cancer o Renal failure or o Alzheimer's disease; and o EXTENDED CARE BENEFIT, under which we will waive any withdrawal charges on amounts of up to $250,000 of your contract value from the Separate Account and from the Fixed Account (excluding amounts in the Indexed Fixed Option) that you withdraw after providing us with a physician's statement that you have been confined to a nursing home or hospital for 90 consecutive days, beginning at least 30 days after your Contract was issued. YOU MAY EXERCISE THESE BENEFITS ONCE UNDER YOUR CONTRACT. WE WILL WAIVE WITHDRAWAL CHARGES IN SEVERAL SITUATIONS WHERE YOU NEED MONEY FOR HEALTH CARE. OPTIONAL FIVE-YEAR WITHDRAWAL CHARGE PERIOD. You may elect an endorsement to your Contract that substitutes for the Contract's usual seven-year withdrawal period a five-year withdrawal period with withdrawal charges in contribution years one through five of 8%, 7%, 6%, 4% and 2% respectively, and 0% thereafter. The charge for this optional feature on an annualized basis is 0.30% of average daily net asset value of your allocations to the Investment Divisions. You may NOT elect this option if you elect the 3% or 4% Contract Enhancement endorsement. 20% ADDITIONAL FREE WITHDRAWAL. If you elect the 20% Additional Free Withdrawal endorsement, you may withdraw an additional 20% of premiums that are no longer subject to a withdrawal charge (excluding premiums allocated to the Indexed Fixed Option), minus earnings, during a contract year without a withdrawal charge and you will pay 0.30% on an annual basis of the average daily net asset value of your allocations to the Investment Divisions. You may NOT elect this option if you elect the 3% or 4% Contract Enhancement endorsement. This endorsement will replace the 10% Additional Free Withdrawal. SYSTEMATIC WITHDRAWAL PROGRAM. You can arrange to have money automatically sent to you periodically while your Contract is still in the accumulation phase. You will have to pay taxes on money you receive. You may be subject to a withdrawal charge and an excess interest adjustment. SUSPENSION OF WITHDRAWALS OR TRANSFERS. We may be required to suspend or delay withdrawals or transfers to or from an Investment Division when: o the New York Stock Exchange is closed (other than customary weekend and holiday closings); o under applicable SEC rules, trading on the New York Stock Exchange is restricted; o under applicable SEC rules, an emergency exists so that it is not reasonably practicable to dispose of securities in an Investment Division or determine the value of its assets; or, o the SEC, by order, may permit for the protection of owners. We have reserved the right to defer payment for a withdrawal or transfer from the Guaranteed Fixed Accounts and the Indexed Fixed Option for the period permitted by law, but not more than six months. INCOME PAYMENTS (THE INCOME PHASE) The income phase of your Contract occurs when you begin receiving regular income payments from us. The income date is the day those payments begin. Once income payments begin, the contract cannot be returned to the accumulation phase. You can choose the income date and an income option. The income options are described below. If you do not choose an income option, we will assume that you selected Option 3, which provides a life annuity with 120 months of guaranteed payments. You can change the income date or income option at any time before the income date, but changes of the income date may only be to a later date. You must give us written notice at least seven days before the scheduled income date. Income payments must begin by your 90th birthday under a non-qualified Contract or the calendar year in which you attain age 70 1/2 under a traditional Individual Retirement Annuity. Distributions under qualified plans and Tax-Sheltered Annuities must begin by the later of the calendar year in which you attain age 70 1/2 or the calendar year in which you retire. Distributions from Roth IRAs are not required prior to your death. At the income date, you can choose to receive fixed payments or variable payments based on the Investment Divisions. Unless you tell us otherwise, your income payments will be based on the Allocation Options that were in place on the income date. You can choose to have income payments made monthly, quarterly, semi-annually, or annually. However, if you have less than $5,000 to apply toward an income option and state law permits, we may provide your payment in a single lump sum. Likewise, if your first income payment would be less than $50 and state law permits, we may set the frequency of payments so that the first payment would be at least $50. IN YOUR CONTRACT'S INCOME PHASE, WE MAKE REGULAR PAYMENTS TO YOU. VARIABLE INCOME PAYMENTS. If you choose to have any portion of your income payments based upon one or more Investment Divisions, the dollar amount of your initial annuity payment will depend primarily upon the following: o the amount of your contract value you allocate to the Investment Division(s) on the income date; o the amount of any applicable premium taxes, recapture charges or withdrawal charges deducted from your contract value on the income date; o which income option you select; and o the investment factors listed in your Contract that translate the amount of your contract value (as adjusted for applicable charges, frequency of payment and commencement date) into initial payment amounts that are measured by the number of annuity units of the Investment Division(s) you select credited to your Contract. The investment factors in your Contract are calculated based upon a variety of factors, including an assumed investment rate of 3% for Option 4 or 4.5% for Options 1-3 and, if you select an income option with a life contingency, the age and gender of the annuitant. We calculate the dollar amount of subsequent income payments that you receive based upon the performance of the Investment Divisions you select. If that performance (measured by changes in the value of annuity units) exceeds the assumed investment rate, then your income payments will increase; if that performance is less than the assumed investment rate, then your income payments will decrease. THE AMOUNT OF YOUR INCOME PAYMENTS CAN BE GUARANTEED OR CAN VARY BASED ON THE PERFORMANCE OF THE INVESTMENT DIVISIONS YOU SELECT. INCOME OPTIONS. The annuitant is the person whose life we look to when we make income payments (each description assumes that you are the owner and annuitant). The following income options may not be available in all states. OPTION 1 - Life Income. This income option provides monthly payments for your life. OPTION 2 - Joint and Survivor. This income option provides monthly payments for your life and for the life of another person (usually your spouse) selected by you. OPTION 3 - Life Annuity With at least 120 or 240 Monthly Payments. This income option provides monthly payments for the annuitant's life, but with payments continuing to the beneficiary for the remainder of 10 or 20 years (as you select) if the annuitant dies before the end of the selected period. If the beneficiary does not want to receive the remaining scheduled payments, a single lump sum may be requested, which will be equal to the present value of the remaining payments (as of the date of calculation) discounted at an interest rate that will be no more than 1% higher than the rate used to calculate the initial payment. OPTION 4 - Income for a Specified Period. This income option provides monthly payments for any number of years from 5 to 30. If the beneficiary does not want to receive the remaining scheduled payments, a single lump sum may be requested, which will be equal to the present value of the remaining payments (as of the date of calculation) discounted at an interest rate that will be no more than 1% higher than the rate used to calculate the initial payment. ADDITIONAL OPTIONS - We may make other income options available. GUARANTEED MINIMUM INCOME BENEFIT. The optional Guaranteed Minimum Income Benefit ("GMIB") endorsement guarantees a minimum fixed income benefit (under certain life contingent options) after a period of at least 10 contract years, subject to specific conditions, regardless of the Allocation Option(s) you select during the accumulation phase. This benefit is only available if o you elect it prior to your Contract's issue date; o the annuitant is not older than age 75 on the issue date; and o you exercise it on or within 30 calendar days of your 10th, or any subsequent contract anniversary, but in no event later than the contract anniversary immediately following the annuitant's 85th birthday. The GMIB will terminate and will not be payable at the earliest of: o the income date; o the 31st calendar day following the contract anniversary immediately after the annuitant's 85th birthday; o the date you make a total withdrawal from the Contract; o upon your death (unless your spouse is your beneficiary, elects to continue the Contract and is eligible for this benefit); or o if the owner is not a natural person, upon the death of the annuitant. THE OPTIONAL GMIB LETS YOU PLAN YOUR RETIREMENT WITH GREATER CERTAINTY ABOUT THE MINIMUM AMOUNTS THAT WILL BE AVAILABLE AS FIXED INCOME PAYMENTS ON AN EXERCISE DATE AT LEAST 10 YEARS AFTER THE ISSUE DATE. READ CAREFULLY THE AGE AND TIMING RESTRICTIONS ON ISSUANCE AND EXERCISE OF THE GMIB. You have the option of taking the GMIB instead of the other income options described above. Your monthly income option payments will be calculated by applying the "GMIB Benefit Base" (described below) to the annuity rates in the table of guaranteed purchase rates attached to the GMIB endorsement. The only type of income payments available under the GMIB are fixed annuity income payments (available options are listed in the endorsement). The GMIB may not be appropriate for Owners who will be subject to any minimum distribution requirements under an IRA or other qualified plan prior to the expiration of 10 contract years. Please consult a tax advisor on this and other matters of selecting income options. Both the amount of the GMIB and the quarterly charge for the GMIB (described above in the Charges section) are based upon an amount called the "GMIB BENEFIT BASE." The GMIB Benefit Base is the GREATER OF (A) OR (B), WHERE (A) IS: o all premiums you have paid (net of any applicable premium taxes); PLUS o any Contract Enhancements credited on or before the business day the GMIB Benefit Base is being calculated; MINUS o an adjustment (described below) for any withdrawals (including any applicable charges and excess interest adjustments to those withdrawals); MINUS o annual contract maintenance charges, transfer charges and any applicable charges due under any optional endorsement; and MINUS o any taxes incurred, or chargeable under the Contract; compounded at an annual interest rate of 6% from the date your Contract was issued until the earlier of the annuitant's 80th birthday or the date the GMIB is exercised; AND (B) IS: o the greatest contract value on any contract anniversary prior to the annuitant's 81st birthday; MINUS o an adjustment (described below) for any withdrawals after that contract anniversary (including any applicable charges and excess interest adjustments for those withdrawals); PLUS o any premiums paid (net of any applicable premium taxes) after that contract anniversary; MINUS o any annual contract maintenance charge, transfer charge, and any applicable charges due under any optional endorsement deducted after that contract anniversary; and MINUS o any taxes deducted after that contract anniversary. All adjustments to the GMIB Benefit Base will be deemed to occur at the time of the withdrawal, premium payment, or the deduction of the specified charges or taxes chargeable under the Contract. Adjustments for withdrawals (including related charges and excess interest adjustments) will reduce the GMIB Benefit Base in the same proportion that contract value was reduced on the date of that withdrawal. The GMIB Benefit Base will never exceed: o 200% of premiums paid (net of any applicable premium taxes and excluding premiums paid in the 12 months prior to the date the GMIB is exercised); minus o any withdrawals (including related charges and excess interest adjustments); minus o annual contract maintenance charges, transfer charges and any applicable charges due under any optional endorsement; and minus o taxes incurred since that Contract was issued. If you are the annuitant under your Contract and your spouse continues the Contract after your death, your spouse will become the annuitant and will continue to be eligible for the GMIB as long as he or she would have been eligible as an annuitant when your Contract was issued and is age 84 or younger. If your spouse doesn't satisfy those criteria, then the GMIB will terminate and the charge for the GMIB discontinued. Similarly, if an owner who is a natural person is not the annuitant and the annuitant dies, you (the owner) may select a new annuitant (who must be a person eligible to be an annuitant on the issue date and is age 84 or younger). If the new annuitant in that situation does not satisfy those criteria then the GMIB will terminate and the GMIB charge discontinued. In the event of joint annuitants, the age of the youngest annuitant will be used for all these determinations. Among other requirements applicable to contracts issued to entities/owners, the use of multiple contracts by related entities to avoid maximum premium limits is not permitted. Selection of the GMIB is subject to our administrative rules designed to assure its appropriate use. We may update these rules as necessary. DEATH BENEFIT The death benefit paid to your beneficiary upon your death is calculated as of the date we receive completed claim forms and proof of death from the beneficiary of record. The death benefit paid will be the basic death benefit unless you have selected the Earnings Protection Benefit and/or one of the three other death benefit endorsements. BASIC DEATH BENEFIT. If you die before moving to the income phase, the person you have chosen as your beneficiary will receive a death benefit. If you have a joint owner, the death benefit will be paid when the first joint owner dies. The surviving joint owner will be treated as the beneficiary. Any other beneficiary designated will be treated as a contingent beneficiary. Only a spousal beneficiary has the right to continue the contract in force upon your death. The death benefit equals the greater of: o Your contract value on the date we receive proof of death and completed claim forms from your beneficiary; or o The total premiums you have paid since your Contract was issued minus prior withdrawals (including any applicable charges and adjustments), annual contract maintenance charges, transfer charges, any applicable charges due under any optional endorsement and premium taxes. The death benefit can be paid under one of the following death benefit options: o single lump sum payment; or o payment of entire death benefit within 5 years of the date of death; or o payment of the entire death benefit under an income option over the beneficiary's lifetime or for a period not extending beyond the beneficiary's life expectancy; or payment of a portion of the death benefit under an income option over the beneficiary's lifetime or for a period not extending beyond the beneficiary's life expectancy, with the balance of the death benefit payable to the beneficiary. Under these income options, the beneficiary may also elect to receive additional lump sums at any time. The receipt of any additional lump sums will reduce the future income payments to the beneficiary. Unless the beneficiary chooses to receive the entire death benefit in a single sum, the beneficiary must elect an income option within the 60-day period beginning with the date we receive proof of death and payments must begin within one year of the date of death. If the beneficiary chooses to receive some or all of the death benefit in a single sum and all the necessary requirements are met, we will pay the death benefit within seven days. If your beneficiary is your spouse, he/she may elect to continue the Contract in his/her own name. The Special Spousal Continuation option is one way to continue your contract. See "Special Spousal Continuation Option" below. As owner, you may also make a predetermined selection of the death benefit option to be paid if your death occurs before the Income Date. If this Predetermined Death Benefit Option Election is in force at the time of your death, the payment of the death benefit may not be postponed, nor can the Contract be continued under any other provisions of this Contract. This restriction applies even if the Beneficiary is your spouse, unless such restriction is prohibited by the Internal Revenue Code. The Predetermined Death Benefit Option may not be available in your state. IF YOU DIE BEFORE YOUR CONTRACT'S INCOME PHASE, YOUR BENEFICIARY WILL BE PAID AT LEAST THE GREATER OF YOUR CONTRACT VALUE OR YOUR NET PREMIUM PAYMENTS. EARNINGS PROTECTION BENEFIT. The Earnings Protection Benefit is an optional benefit that may increase the amount of the death benefit payable at your death. If you are 75 years of age or younger when your Contract is issued, you may elect the Earnings Protection Benefit. If you are under the age of 70 when your Contract is issued and you elect the Earnings Protection Benefit, the amount that will be added to the death benefit that is otherwise payable is 40% of the earnings in your Contract, subject to the limit described below. If you are age 70 - 75 when your Contract is issued and you elect the Earnings Protection Benefit, the amount that will be added to the death benefit that is otherwise payable is 25% of the earnings in your Contract, subject to the limit described below. For purposes of this benefit, we define EARNINGS as the amount by which the sum of your contract value exceeds the REMAINING PREMIUMS (premiums not previously withdrawn). For purposes of this calculation, your Indexed Fixed Option value will be the amount allocated to the Indexed Fixed Option accumulated at 3% annually, and adjusted for any amounts cancelled or withdrawn for charges, deductions, withdrawals or any taxes due. If the earnings amount is negative, I.E., the total remaining premiums are greater than your contract value, no Earnings Protection Benefit will be paid. In determining the maximum amount of earnings on which we will calculate your Earnings Protection Benefit, earnings shall never exceed 250% of the remaining premiums, excluding remaining premiums paid in the 12 months prior to the date of your death (other than your initial premium if you die in the first contract year). As described below, if your spouse exercises the Special Spousal Continuation Option upon your death, the Earnings Protection Benefit will be paid upon your death and your spouse may then discontinue the Earnings Protection Benefit. If your spouse fails to make such an election, the Earnings Protection Benefit will remain in force and upon your spouse's death we will pay an Earnings Protection Benefit if the Contract has accrued additional earnings since your death. In calculating that benefit, we will not take into consideration earnings accrued on or prior to the Continuation Date (as defined in "Special Spousal Continuation Option" below). In addition, the maximum earnings on which we calculate the Earnings Protection Benefit is 250% of the contract value after application of the Continuation Adjustment plus remaining premiums paid on or after the Continuation Date (excluding remaining premiums paid within 12 months of your spouse's death). You must elect the Earnings Protection Benefit when you apply for your Contract. Once elected, the benefit may not be terminated. However, if the Contract is continued under the Special Spousal Continuation Option, your spouse may then elect to discontinue the Earnings Protection Benefit. No Earnings Protection Benefit (other than a "Continuation Adjustment" described below in "Special Spousal Continuation") will be paid: o If your Contract is in the income phase at the time of your death; o If there are no earnings in your Contract; or o If your spouse exercises the Special Spousal Continuation Option (described below) and either o is age 76 or older at the Continuation Date or o elects to discontinue the Earnings Protection Benefit. If you elect this benefit, we will deduct an additional annualized charge of .30% of the average daily asset value of your allocations to the Investment Divisions during the accumulation phase of the Contract. This charge continues if your spouse elects to continue the Contract under the Special Spousal Continuation Option unless your spouse elects to discontinue it. The Earnings Protection Benefit may not be available in your state. See your financial advisor for information regarding the availability of the Earnings Protection Benefit. AN OPTIONAL EARNINGS PROTECTION BENEFIT ENDORSEMENT (FOR A CHARGE AT AN ANNUAL RATE OF 0.30%) ADDS UP TO 40% OF YOUR CONTRACT'S "EARNINGS" TO YOUR DEATH BENEFIT. EARNINGS CAN NOT EXCEED 250% OF THE REMAINING PREMIUMS. OPTIONAL DEATH BENEFITS. You may elect to protect your Contract's death benefit from certain types of poor investment performance by selecting (in lieu of or in addition to any Earnings Protection Benefit) one of three optional death benefits: I. 5% COMPOUNDED DEATH BENEFIT, changes your basic death benefit to the greatest of: (a) Your "contract value" on the date we receive proof of death and completed claim forms from your beneficiary; or (b) Total "NET PREMIUMS" (premiums you paid net of premium taxes minus any withdrawals (including any applicable charges and adjustments), annual contract maintenance charges, transfer charges, any applicable charges due under any optional endorsement and taxes we have paid); or (c) Total Net Premiums since your Contract was issued, compounded at 5% (4% if you are age 70 or older on the date your Contract is issued); or (d) Your contract value at the end of your seventh contract year, PLUS Net Premiums you paid after the seventh contract year, compounded at 5% (4% if you are age 70 or older on the date your Contract is issued). Amounts in (c) and (d) are limited to 250% of net premiums paid under your contract. II. MAXIMUM ANNIVERSARY VALUE DEATH BENEFIT changes your basic death benefit to the greatest of: (a) Your "contract value" on the date we receive proof of death and completed claim forms from your beneficiary; or (b) Total Net Premiums since your Contract was issued; or (c) Your greatest contract value on any contract anniversary prior to your 81st birthday, REDUCED by any withdrawals (including any applicable withdrawal charges and adjustments), annual contract maintenance charges, transfer charges, and any applicable charges due under any optional endorsement subsequent to that contract anniversary, PLUS any premiums paid (net of any applicable premium taxes) subsequent to that contract anniversary, minus taxes deducted subsequent to that contract anniversary. III. COMBINATION DEATH BENEFIT, changes your basic death benefit to the greatest of: (a) Your "contract value" on the date we receive proof of death and completed claim forms from your beneficiary; or (b) Total Net Premiums since your Contract was issued; or (c) Total Net Premiums since your Contract was issued, compounded at 5% (4% if you are age 70 or older on the date your Contract is issued); or (d) Your contract value at the end of your seventh contract year, plus Net Premiums you paid after the seventh contract year, compounded at 5% (4% if you are age 70 or older on the date your Contract is issued); or (e) Your greatest contract value on any contract anniversary prior to your 81st birthday, REDUCED by any withdrawals (including any applicable withdrawal charges and adjustments, annual contract maintenance charges, transfer charges and any applicable charges due under any optional endorsement subsequent to that contract anniversary, PLUS any premiums paid (net of any applicable premium taxes) subsequent to that contract anniversary, minus taxes deducted subsequent to that contract anniversary). Amounts in (c) and (d) are limited to 250% of net premiums paid under your contract. FOR ADDITIONAL FEES, WE OFFER 3 OPTIONAL ENDORSEMENTS THAT MAKE YOUR DEATH BENEFIT NO LESS THAN A VARIETY OF VALUES UNDER THE CONTRACT BASED EITHER ON NET PREMIUMS OR CONTRACT VALUE. For purposes of calculating I. (c),(d), II. (c) and III. (c), (d) and (e), all adjustments to the Net Premiums will occur at the time of the withdrawal, premium payment, or deduction of the annual contract maintenance charges, transfer charges, any applicable charges due to optional endorsement or taxes and all adjustments for amounts withdrawn will reduce the Net Premiums in items I. (c),(d), II. (c) and III. (c), (d) and (e) above in the same proportion that the contract value was reduced on the date of that withdrawal. For purposes of determining "contract value," the amount attributable to the Indexed Fixed Option will be the value of the Indexed Fixed Option on the Index Determination Date (as described in the product brochure for the Indexed Fixed option) immediately preceding the date we receive a completed request for payment in good order. You may not elect the Maximum Anniversary Value Death Benefit or the Combination Death Benefit if you are older than age 80 when your Contract is issued. The closer to age 81 you are when your Contract is issued, the less advantageous it would be for you to select these options. The optional death benefits may not be available in all states. If either the 5% Compounded Death Benefit or the Combination Death Benefit is selected, the use or multiple contracts by related entities/owners to avoid the 250% premium limit will not permitted. Selection of these Optional Benefits are subject to our administrative rules designed to assure their appropriate use. We may update these rules as necessary. EACH OF THE THREE OPTIONAL DEATH BENEFITS IS DESIGNED TO INCREASE YOUR DEATH BENEFIT FROM THAT PROVIDED BY THE BASE DEATH BENEFIT ONLY IF THE INVESTMENT PERFORMANCE AND CREDITED RATES OF THE ALLOCATION OPTIONS TO WHICH YOU HAVE ALLOCATED YOUR CONTRACT VALUES HAS NOT BEEN SUFFICIENT TO MAKE YOUR CONTRACT VALUE THE APPLICABLE DEATH BENEFIT. NORMALLY, EACH OF THE THREE OPTIONAL DEATH BENEFITS WOULD BE GREATER THAN YOUR CONTRACT'S BASE DEATH BENEFIT IF YOUR CONTRACT VALUE IS NOT GREATER THAN NET PAYMENTS. IF YOU MAKE SUBSTANTIAL WITHDRAWALS, HOWEVER, IT IS POSSIBLE IN SOME CIRCUMSTANCES FOR YOUR CONTRACT'S BASE DEATH BENEFIT TO BE GREATER THAN ANY OF THE OPTIONAL DEATH BENEFITS, EVEN IF YOUR CONTRACT VALUE IS NOT GREATER THAN YOUR NET PAYMENTS. SPECIAL SPOUSAL CONTINUATION OPTION. If your spouse is the beneficiary and elects to continue the Contract in his or her own name after your death, pursuant to the Special Spousal Continuation Option no death benefit will be paid at that time. Instead, we will contribute to the Contract a CONTINUATION ADJUSTMENT, which is the amount by which the death benefit that would have been payable (including the Earnings Protection Benefit, and optional death benefit, if any) exceeds the contract value. We calculate this amount using the contract value and death benefit as of the date we receive completed forms and due proof of death from the beneficiary of record and the spousal beneficiary's written request to continue the Contract (the "CONTINUATION DATE"). We will add this amount to the Contract based on the current allocation instructions at the time of your death, subject to any minimum allocation restrictions, unless we receive other allocation instructions from your spouse. The Special Spousal Continuation Option may not be available in your state. See your financial advisor for information regarding the availability of the Special Spousal Continuation Option. If you have contract values allocated to the Indexed Fixed Option on the Continuation Date, we will transfer your Indexed Fixed Option value to the one-year Guaranteed Fixed Account option. Your spouse may then transfer this amount to any available Investment Division or Guaranteed Fixed Account options, but your spouse may not transfer this amount back into the Indexed Fixed Option. If your spouse subsequently withdraws any of the amount transferred, we may charge a withdrawal charge on any portion of the amount withdrawn attributable to premiums. We will base the withdrawal charge on the number of years since the premium originally was allocated to the Indexed Fixed Option. Contract value may remain in the Indexed Fixed Option if your spouse continues the Contract other than under the Special Spousal Continuation Option. This means spousal continuation of the Contract does not include a Continuation Adjustment. If your spouse continues the Contract in his/her own name under the Special Spousal Continuation Option, the new contract value will be considered the initial premium for purposes of determining any future death benefit including any Earnings Protection Benefit under the Contract. The age of the surviving spouse at the time of the continuation of the Contract will be used to determine all benefits under the Contract. If your spouse elects to continue the Contract, your spouse, as new owner, cannot terminate most of the optional benefits you elected. However, your spouse may then terminate the Earnings Protection Benefit and no further Earnings Protection Benefit charges will be deducted and no Earnings Protection Benefit will be paid upon your spouse's death. The Contract, and its optional benefits, remain the same, except as described above. Your spouse will also be subject to the same fees, charges and expenses under the Contract as you were. UNLESS YOUR SPOUSE DISCONTINUES THE EARNINGS PROTECTION BENEFIT ON THE CONTINUATION DATE, CHARGES FOR THE BENEFIT WILL BE DEDUCTED EVEN THOUGH NO ENHANCED EARNINGS BENEFIT WILL APPLY IF YOUR SPOUSE IS 76 OR OLDER WHEN THE CONTRACT IS CONTINUED. If you have elected the Predetermined Death Benefit Option Election the Contract can not be continued under the Special Spousal Continuation Option, unless preventing continuation would be prohibited by the Internal Revenue Code. The Predetermined Death Benefit Option may not be available in your state. A BENEFICIARY WHO IS THE SPOUSE OF THE CONTRACT OWNER MAY ELECT TO CONTINUE THE CONTRACT RATHER THAN RECEIVE A DEATH BENEFIT PAYMENT. IN THAT CASE, THE CONTRACT VALUE WILL BE INCREASED BY THE AMOUNT (IF ANY) THAT THE DEATH BENEFIT THAT WOULD HAVE BEEN PAID EXCEEDS CONTRACT VALUE AT THE DEATH OF THE OWNER. DEATH OF OWNER ON OR AFTER THE INCOME DATE. If you or a joint owner dies, and is not the annuitant, on or after the income date, any remaining payments under the income option elected will continue at least as rapidly as under the method of distribution in effect at the date of death. If you die, the beneficiary becomes the owner. If the joint owner dies, the surviving joint owner, if any, will be the designated beneficiary. Any other beneficiary designation on record at the time of death will be treated as a contingent beneficiary. A contingent beneficiary is entitled to receive payment only after the beneficiary dies. DEATH OF ANNUITANT. If the annuitant is not an owner or joint owner and the annuitant dies before the income date, you can name a new annuitant. If you do not name a new annuitant within 30 days of the death of the annuitant, you will become the annuitant. However, if the owner is a non-natural person (for example, a corporation), then the death of the annuitant will be treated as the death of the owner, and a new annuitant may not be named. If the annuitant dies on or after the income date, any remaining guaranteed payment will be paid to the beneficiary as provided for in the income option selected. Any remaining guaranteed payment will be paid at least as rapidly as under the method of distribution in effect at the annuitant's death. TAXES THE FOLLOWING IS ONLY GENERAL INFORMATION AND IS NOT INTENDED AS TAX ADVICE TO ANY INDIVIDUAL. ADDITIONAL TAX INFORMATION IS INCLUDED IN THE SAI. YOU SHOULD CONSULT YOUR OWN TAX ADVISER AS TO HOW THESE GENERAL RULES WILL APPLY TO YOU IF YOU PURCHASE A CONTRACT. TAXES ON EARNINGS UNDER A NON-QUALIFIED CONTRACT ARE DEFERRED UNTIL DISTRIBUTED IN A WITHDRAWAL, IN-COME PAYMENT OR LOAN. EARNINGS ARE ASSUMED TO BE THE FIRST AMOUNT WITHDRAWN BUT INCOME PAYMENTS ARE ASSUMED TO BE PART EARNINGS AND PART RETURN OF PREMIUM. TAX-QUALIFIED AND NON-QUALIFIED CONTRACTS. If you purchase your Contract as a part of a tax-qualified plan such as an Individual Retirement Annuity (IRA), Tax-Sheltered Annuity (sometimes referred to as a 403(b) contract), or pension or profit-sharing plan (including a 401(k) plan or H.R. 10 Plan) your Contract will be what is referred to as a QUALIFIED CONTRACT. Tax deferral under a tax-qualified contract arises under the specific provisions of the Internal Revenue Code (Code) governing the tax-qualified plan, so a tax-qualified contract should be purchased only for the features and benefits other than tax deferral that are available under a tax-qualified contract, and not for the purpose of obtaining tax deferral. You should consult your own adviser regarding these features and benefits of the Contract prior to purchasing a tax-qualified Contract. If you do not purchase your Contract as a part of any tax-qualified pension plan, specially sponsored program or an individual retirement annuity, your Contract will be what is referred to as a NON-QUALIFIED CONTRACT. The amount of your tax liability on the earnings under and the amounts received from either a tax-qualified or a non-qualified contract will vary depending on the specific tax rules applicable to your contract and your particular circumstances. NON-QUALIFIED CONTRACTS - GENERAL TAXATION. Increases in the value of a non-qualified contract attributable to undistributed earnings are generally not taxable to the contract owner or the annuitant until a distribution (either a withdrawal or an income payment) is made from the contract. This tax deferral is generally not available under a non-qualified contract owned by a non-natural person (e.g., a corporation or certain other entities other than a trust holding the contract as an agent for a natural person). Loans based on a non-qualified contract are treated as distributions. NON-QUALIFIED CONTRACTS - WITHDRAWALS AND INCOME PAYMENTS. Any withdrawal from a non-qualified contract is taxable as ordinary income to the extent it does not exceed the accumulated earnings under the contract. A part of each income payment under a nonqualified contract is generally treated as a non-taxable return of premium. The balance of each income payment is taxable as ordinary income. The amounts of the taxable and non-taxable portions of each income payment are determined based on the amount of the investment in the contract and the length of the period over which income payments are to be made. Income payments received after you have received all of your investment in the contract are fully taxable as ordinary income. Additional information is provided in the SAI. The Code also imposes a 10% penalty on certain taxable amounts received under a non-qualified contract. This penalty tax will not apply to any amounts: o paid on or after the date you reach age 59 1/2; o paid to your beneficiary after you die; o paid if you become totally disabled (as that term is defined in the Code); o paid in a series of substantially equal payments made annually (or more frequently) for your life or for a period not exceeding your life expectancy or the life expectancy of a beneficiary; o paid under an immediate annuity; or o which come from premiums made prior to August 14, 1982. WITHDRAWALS PRIOR TO AGE 59 1/2 MAY BE SUBJECT TO A PENALTY TAX. TAX-QUALIFIED CONTRACTS - WITHDRAWALS AND INCOME PAYMENTS. The Code imposes limits on loans, withdrawals, and income payments under tax-qualified contracts. These limits and the tax computation rules are summarized in the SAI. Any withdrawals under a tax-qualified contract will be taxable except to the extent they are allocable to an investment in the contract (any after-tax contributions). In most cases, there will be little or no investment in the contract for a tax-qualified contract because contributions will have been made on a pre-tax or tax-deductible basis WITHDRAWALS FROM TAX-QUALIFIED CONTRACTS ARE TAXABLE (OTHER THAN AFTER-TAX CONTRIBUTIONS, IF ANY). WITHDRAWALS - TAX-SHELTERED ANNUITIES. The Code limits the withdrawal of amounts attributable to purchase payments made under a salary reduction agreement from Tax-Sheltered Annuities. Withdrawals can only be made when an owner: o reaches age 59 1/2; o leaves his/her job; o dies; o becomes disabled (as that term is defined in the Code); or o in the case of hardship. However, in the case of hardship, the owner can only withdraw the premium and not any earnings. WITHDRAWALS - ROTH IRAS. Subject to certain limitations, individuals may also purchase a type of non-deductible IRA annuity known as a Roth IRA annuity. Qualified distributions from Roth IRA annuities are entirely federal income tax free. A qualified distribution requires that the individual has held the Roth IRA annuities for at least five years and, in addition, that the distribution is made either after the individual reaches age 59 1/2, on account of the individual's death or disability, or as a qualified first-time home purchase, subject to $10,000 lifetime maximum, for the individual, or for a spouse, child, grandchild, or ancestor. CONSTRUCTIVE WITHDRAWALS - INVESTMENT ADVISER FEES. Withdrawals from non-qualified contracts for the payment of investment adviser fees will be considered taxable distributions from the contract. In a series of Private Letter Rulings, however, the Internal Revenue Service has held that the payment of investment adviser fees from a tax-qualified contract need not be considered a distribution for income tax purposes. Under the facts in these Rulings: o there was a written agreement providing for payments of the fees solely from the annuity contract, o the contract owner had no liability for the fees and o the fees were paid solely from the annuity contract to the adviser. DEATH BENEFITS. None of the death benefits paid under the contract to the beneficiary will be tax-exempt life insurance benefits. The rules governing the taxation of payments from an annuity contract, as discussed above, generally apply to the payment of death benefits and depend on whether the death benefits are paid as a lump sum or as annuity payments. Estate or gift taxes may also apply. DEATH BENEFITS ARE NOT LIFE INSURANCE. ESTATE OR GIFT TAXES MAY ALSO APPLY. STATUS OF EARNINGS PROTECTION BENEFIT AND THE OTHER OPTIONAL DEATH BENEFITS. With respect to IRAs, our understanding of current law is that the tax status of the Earnings Protection Benefit and the other optional death benefits is unclear. To resolve any uncertainty, we have asked the Internal Revenue Service to approve the use of the Earnings Protection Benefit Endorsement and the other optional death benefits in IRAs. We believe that use of the Earnings Protection Benefit Endorsement and the other optional death benefits should not result in adverse tax treatment. We may, in our sole discretion and in compliance with our adopted procedures, accept IRA contributions to purchase a contract with optional benefits. However, WE CAN GIVE NO ASSURANCE THAT THE INTERNAL REVENUE SERVICE WILL APPROVE THE USE OF THE OPTIONAL EARNINGS PROTECTION BENEFIT AND THE OTHER OPTIONAL DEATH BENEFITS IN IRAS. THEREFORE, THE CONTRACT OWNERS BEAR THE RISK OF ANY ADVERSE TAX TREATMENT. ASSIGNMENT. An assignment of your Contract will generally be a taxable event. Assignments of a tax-qualified contract may also be limited by the Code and the Employee Retirement Income Security Act of 1974, as amended. These limits are summarized in the SAI. You should consult your tax adviser prior to making any assignment of your Contract. DIVERSIFICATION. The Code provides that the underlying investments for a variable annuity must satisfy certain diversification requirements in order to be treated as an annuity contract. We believe that the underlying investments are being managed so as to comply with these requirements. OWNER CONTROL. In three Revenue Rulings issued between 1977 and 1982, the Internal Revenue Service (IRS) held that where a contract holder had certain forms of actual or potential control over the investments held under a variable annuity contract, the contract owner had to be treated as the owner of those assets and thus taxable on the income and gains produced by those assets. A holder of a Contract will not have any of the specific types of control that were described in those Rulings. In addition, in 1999, the IRS announced that it would not apply the holdings of these Rulings to holders of tax-qualified contracts that hold mutual fund shares as investments. However, because of the continuing uncertainty as to the scope and application of these Rulings, we reserve the right to modify the Contract to the extent required to maintain favorable tax treatment. OTHER INFORMATION DOLLAR COST AVERAGING. If the amount allocated to the Investment Divisions plus the amount allocated to Fixed Accounts (other than the Indexed Fixed Option) is at least $15,000, you can arrange to have a regular amount of money periodically transferred automatically into the Investment Divisions and other Guaranteed Fixed Accounts from the Guaranteed Fixed Accounts or any of the Investment Divisions. In the case of transfers from the Guaranteed Fixed Accounts or Investment Divisions with a stable unit value to the Investment Divisions, this can let you pay a lower average cost per unit over time than you would receive if you made a one-time purchase. Transfers from the more volatile Investment Divisions may not result in lower average costs and such Investment Divisions may not be an appropriate source of dollar cost averaging transfers in volatile markets. Certain restrictions may apply. SYSTEMATIC TRANSFERS FACILITATE A DOLLAR COST AVERAGING STRATEGY AND DO NOT COUNT AGAINST YOUR 15 FREE TRANSFERS PER YEAR. DOLLAR COST AVERAGING PLUS (DCA+). DCA+ Fixed Accounts are "source accounts" designed for dollar cost averaging transfers to Investment Divisions or systematic transfers to other Guaranteed Fixed Accounts. DCA+ Fixed Accounts are credited with an enhanced interest rate. If a DCA+ Fixed Account is selected, funds in the DCA+ Fixed Accounts will be systematically transferred to the Investment Divisions or other Guaranteed Fixed Accounts chosen over the DCA+ term selected. EARNINGS SWEEP. You can choose to move your earnings from the source accounts (only applicable from the 1-year Guaranteed Fixed Account Option and the Money Market sub-account). REBALANCING. You can arrange to have us automatically reallocate your contract value among Investment Divisions periodically to maintain your selected allocation percentages. You may cancel a Dollar Cost Averaging, Earnings Sweep or Rebalancing program using whatever methods that you use to change your allocation instructions. FREE LOOK. You may return your Contract to the selling agent or us within ten days (or longer if required by your state) after receiving it. We will return o the contract value, plus o any fees (other than asset-based fees) and expenses deducted from the premiums minus o any applicable Contract Enhancement recapture charges. We will determine the contract value in the Investment Divisions as of the date we receive your Contract if you mail it to us or the date you return it to the selling agent. We will return premium payments where required by law. YOUR CONTRACT HAS A FREE LOOK PERIOD OF 10 DAYS (OR LONGER, IF REQUIRED BY YOUR STATE). ADVERTISING. From time to time, we may advertise several types of performance of the Investment Divisions. o TOTAL RETURN is the overall change in the value of an investment in an Investment Division over a given period of time. o STANDARDIZED AVERAGE ANNUAL TOTAL RETURN is calculated in accordance with SEC guidelines. o NON-STANDARDIZED TOTAL RETURN may be for periods other than those required by, or may otherwise differ from, standardized average annual total return. For example, if a Series has been in existence longer than the Investment Division, we may show non-standardized performance for periods that begin on the inception date of the Series, rather than the inception date of the Investment Division. o YIELD refers to the income generated by an investment over a given period of time. Performance will be calculated by determining the percentage change in the value of an accumulation unit by dividing the increase (decrease) for that unit by the value of the accumulation unit at the beginning of the period. Performance will reflect the deduction of the mortality and expense risk and administration charges and may reflect the deduction of contract maintenance and withdrawal charges, but will not reflect charges for optional features except in performance data used in sales materials that promote those optional features. The deduction of withdrawal charges and/or the charges for optional features, would reduce the percentage increase or make greater any percentage decrease. WE MAY ADVERTISE SEVERAL TYPES OF PERFORMANCE OF THE INVESTMENT DIVISIONS. MARKET TIMING AND ASSET ALLOCATION SERVICES. Market timing and asset allocation services must comply with our administrative systems, rules and procedures. Prior to utilizing the market timing and asset allocation services, a market timing agreement, which sets forth certain conditions, must be signed. Because excessive trades in a Series can hurt its performance and harm contract owners, we reserve the right to refuse any transfer requests from a market timing and asset allocation service or other non-contract owners that we believe will disadvantage the Series or the contract owners. Market timing or asset allocation services may conflict with transactions under JNL's dollar cost averaging program, earnings sweep program, automatic rebalancing program or systematic withdrawal program (the "Programs"). Accordingly, when JNL receives notice that you have authorized a market timing or asset allocation service to effect transactions on your behalf, JNL will automatically terminate your participation in any Program in which you are then enrolled, unless you authorize us in writing to continue your participation. WE RESERVE THE RIGHT TO LIMIT MARKET TIMING TRANSFERS THAT WE BELIEVE WILL DISADVANTAGE OTHER CONTRACT OWNERS. RESTRICTIONS UNDER THE TEXAS OPTIONAL RETIREMENT PROGRAM (ORP). Contracts issued to participants in ORP contain restrictions required under the Texas Administrative Code. In accordance with those restrictions, a participant in ORP will not be permitted to make withdrawals prior to such participant's retirement, death, attainment of age 70 1/2 or termination of employment in a Texas public institution of higher education. The restrictions on withdrawal do not apply in the event a participant in ORP transfers the contract value to another approved contract or vendor during the period of ORP participation. MODIFICATION OF YOUR CONTRACT. Only our President, Vice President, Secretary or Assistant Secretary may approve a change to or waive a provision of your Contract. Any change or waiver must be in writing. We may change the terms of your Contract without your consent in order to comply with changes in applicable law, or otherwise as we deem necessary. LEGAL PROCEEDINGS. Jackson National is a defendant in a number of civil proceedings substantially similar to other litigation brought against many life insurers alleging misconduct in the sale of insurance products. These matters are sometimes referred to as market conduct litigation. The litigation against JNL seeks to certify various classes of policyholders who purchased either life insurance and annuity products from JNL during some period from 1981 to present. JNL has retained national and local counsel experienced in the handling of such litigation, and has obtained favorable rulings in prior similar cases. However, at this time, it is not feasible to make a meaningful estimate of the amount or range of loss that could result from an unfavorable outcome in such actions. TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION General Information and History ................. 2 Services ........................................ 2 Purchase of Securities Being Offered ............ 3 Underwriters .................................... 3 Calculation of Performance ...................... 3 Additional Tax Information ...................... 18 Net Investment Factor ........................... 18 Financial Statements ............................ 20 APPENDIX A DOW JONES DOES NOT: o Sponsor, endorse, sell or promote the First Trust/JNL The DowSM Target 10 Series. o Recommend that any person invest in the First/JNL Trust The DowSM Target 10 Series or any other securities. o Have any responsibility or liability for or make any decisions about the timing, amount or pricing of the First Trust/JNL The DowSM Target 10 Series. o Have any responsibility or liability for the administration, management or marketing of the First Trust/JNL The DowSM Target 10 Series. o Consider the needs of the First Trust/JNL The DowSM Target 10 Series in determining, composing or calculating the DJIA or have any obligation to do so. -------------------------------------------------------------------------------- DOW JONES WILL NOT HAVE ANY LIABILITY IN CONNECTION WITH THE FIRST TRUST/JNL THE DOWSM TARGET 10 SERIES. SPECIFICALLY, O DOW JONES DOES NOT MAKE ANY WARRANTY, EXPRESS OR IMPLIED, AND DOW JONES DISCLAIMS ANY WARRANTY ABOUT: o THE RESULTS TO BE OBTAINED BY THE FIRST TRUST/JNL THE DOWSM TARGET 10 SERIES, THE OWNERS OF THE FIRST TRUST/JNL THE DOWSM TARGET 10 SERIES OR ANY OTHER PERSON IN CONNECTION WITH THE USE OF THE DJIA AND THE DATA INCLUDED IN THE DJIA; O THE ACCURACY OR COMPLETENESS OF THE DJIA AND ITS DATA; O THE MERCHANTABILITY AND THE FITNESS FOR A PARTICULAR PURPOSE OR USE OF THE DJIA AND ITS DATA; O DOW JONES WILL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS OR INTERRUPTIONS IN THE DJIA OR ITS DATA; O UNDER NO CIRCUMSTANCES WILL DOW JONES BE LIABLE FOR ANY LOST PROFITS OR INDIRECT, PUNITIVE, SPECIAL OR CONSEQUENTIAL DAMAGES OR LOSSES, EVEN IF DOW JONES KNOWS THAT THEY MIGHT OCCUR. O THE LICENSING AGREEMENT BETWEEN FIRST TRUST ADVISORS L.P. (SUB-ADVISER TO THE JNL VARIABLE FUND LLC) AND DOW JONES IS SOLELY FOR THEIR BENEFIT AND NOT FOR THE BENEFIT OF THE OWNERS OF THE FIRST TRUST/JNL THE DOWSM TARGET 10 SERIES OR ANY OTHER THIRD PARTIES. -------------------------------------------------------------------------------
APPENDIX B --------------------------------------------------------------------------------------------------------------------------------- JNL EXAMPLE 1 --------------------------------------------------------------------------------------------------------------------------------- 100,000.00 : Premium 6.00% : Withdrawal Charge Year 4 4.00% : Contract Enhancement 0.57% : Contract Enhancement Charge 2.50% : Recapture Charge Year 4 8.00% : Gross Return 6.28% : Net Return (Gross Return -1.15% asset based charges - Contract Enhancement Charge) AT END OF YEAR 4 132,690.41 : Contract Value at end of year 4 100,000.00 : Net Withdrawal requested 32,690.41 : Earnings 73,562.39 : Premium withdrawn (grossed up to account for Withdrawal Charge and Recapture Charge) --------- 106,252.80 : Total Gross Withdrawal 106,252.80 : Total Gross Withdrawal -4,413.74 : Withdrawal Charge -1,839.06 : Recapture Charge --------- 100,000.00 : Total Net Withdrawal --------------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------------- JNL EXAMPLE 2 --------------------------------------------------------------------------------------------------------------------------------- 10/1/01 100,000.00 : Premium 7.00% : Withdrawal Charge Contribution Year 3 2.50% : Recapture Charge Contribution Year 3 12/1/01 100,000.00 : Premium 8.00% : Withdrawal Charge Contribution Year 2 4.00% : Recapture Charge Contribution Year 2 4.00% : Contract Enhancement 0.00% : Net Return 11/1/03 208,000.00 : Contract Value 150,000.00 : Net Withdrawal Requested 8,000.00 : Earnings 12,000.00 : 10% Additional Free Withdrawal amount 100,000.00 : Premium 1 withdrawn (grossed up to account for Withdrawal Charge and Recapture Charge) 44,886.36 : Premium 2 withdrawn (grossed up to account for Withdrawal Charge and Recapture Charge) --------- 164,886.36 : Total Gross Withdrawal 164,886.36 : Total Gross Withdrawal -7,000.00 : Withdrawal Charge from Premium 1 -2,500.00 : Recapture Charge from Premium 1 -3,590.91 : Withdrawal Charge from Premium 2 -1,795.45 : Recapture Charge from Premium 2 --------- 150,000.00 : Total Net Withdrawal ---------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- QUESTIONS: If you have any questions about your Contract, you may contact us at: -------------------------------------------------------------------------------- ANNUITY SERVICE CENTER: 1 (800) 766-4683 MAIL ADDRESS: P.O. Box 378002, Denver, Colorado 80237-8002 DELIVERY ADDRESS: 8055 East Tufts Avenue, Second Floor, Denver, Colorado 80237 INSTITUTIONAL MARKETING GROUP SERVICE CENTER: 1 (800) 777-7779 MAIL ADDRESS: P.O. Box 30386, Lansing, Michigan 48909-9692 DELIVERY ADDRESS: 1 Corporate Way, Lansing, Michigan 48951 Attn: IMG HOME OFFICE: 1 Corporate Way, Lansing, Michigan 48951 STATEMENT OF ADDITIONAL INFORMATION DECEMBER 28, 2001 INDIVIDUAL AND GROUP DEFERRED FIXED AND VARIABLE ANNUITY CONTRACTS ISSUED BY THE JACKSON NATIONAL SEPARATE ACCOUNT - I OF JACKSON NATIONAL LIFE INSURANCE COMPANY This Statement of Additional Information (SAI) is not a prospectus. It contains information in addition to and more detailed than set forth in the Prospectus and should be read in conjunction with the Prospectus dated December 28, 2001. The Prospectus may be obtained from Jackson National Life Insurance Company by writing P.O. Box 378002, Denver, Colorado 80237-8002, or calling 1-800-766-4683. Not all Investment Divisions described in this SAI may be available for investment. TABLE OF CONTENTS Page General Information and History..........................................2 Services.................................................................2 Purchase of Securities Being Offered.....................................3 Underwriters.............................................................3 Calculation of Performance...............................................3 Additional Tax Information...............................................8 Net Investment Factor ..................................................18 Financial Statements ...................................................20 GENERAL INFORMATION AND HISTORY Jackson National Separate Account - I (Separate Account) is a separate investment account of Jackson National Life Insurance Company (Jackson National). Jackson National is a wholly-owned subsidiary of Brooke Life Insurance Company, and is ultimately a wholly-owned subsidiary of Prudential plc, London, England, a life insurance company in the United Kingdom. The S&P/JNL Divisions are not sponsored, endorsed, sold or promoted by Standard & Poor's, a division of The McGraw-Hill Companies, Inc. (S&P). S&P makes no representation or warranty, express or implied, to the owners of the Divisions or any member of the public regarding the advisability of investing in securities generally or in the Divisions particularly or the ability of the S&P 500 Index to track general stock market performance. S&P's only relationship to the Separate Account (Licensee) is the licensing of certain trademarks and trade names of S&P and of the S&P 500 Index which are determined, composed and calculated by S&P without regard to the Licensee or the Divisions. S&P has no obligation to take the needs of the Licensee or the owners of the Divisions into consideration in determining, composing or calculating the S&P 500 Index. S&P is not responsible for and has not participated in the determination of the prices and amount of the Divisions or the timing of the issuance or sale of the Divisions or in the determination or calculation of the equation by which the Divisions are to be converted into cash. S&P has no obligation or liability in connection with the administration, marketing or trading of the Divisions. S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN AND S&P SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. S&P MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY LICENSEE, OWNERS OF THE DIVISIONS, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN. S&P MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL S&P HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES. SERVICES Jackson National is the custodian of the assets of the Separate Account. Jackson National has custody of all cash of the Separate Account and attends to the collection of proceeds of shares of the underlying funds bought and sold by the Separate Account. Effective October 15, 1999, KPMG LLP, 90 South Seventh Street, Minneapolis, Minnesota 55402, assumed responsibility for certain of the audit and reporting functions previously provided by PricewaterhouseCoopers LLP to Jackson National. These changes were put into effect by Jackson National as of the date referenced above. Neither Jackson National nor the Separate Account has received an adverse opinion, nor were there any disagreements with PricewaterhouseCoopers LLP. Jorden Burt LLP of Washington, D.C. has provided advice on certain matters relating to the federal securities and income tax laws in connection with the contracts described in the Prospectus. PURCHASE OF SECURITIES BEING OFFERED The contracts will be sold by licensed insurance agents in states where the contracts may be lawfully sold. The agents will be registered representatives of broker-dealers that are registered under the Securities Exchange Act of 1934 and members of the National Association of Securities Dealers, Inc. (NASD). UNDERWRITERS The contracts are offered continuously and are distributed by Jackson National Life Distributors, Inc. (JNLD), 401 Wilshire Boulevard, Suite 1200, Santa Monica, California 90401. JNLD is a subsidiary of Jackson National. No underwriting commissions are paid by Jackson National to JNLD. CALCULATION OF PERFORMANCE When Jackson National advertises performance for an investment division (except the PPM America/JNL Money Market Division), we will include quotations of standardized average annual total return to facilitate comparison with standardized average annual total return advertised by other variable annuity separate accounts. Standardized average annual total return for an investment division will be shown for periods beginning on the date the investment division first invested in the corresponding series. We will calculate standardized average annual total return according to the standard methods prescribed by rules of the Securities and Exchange Commission. Standardized average annual total return for a specific period is calculated by taking a hypothetical $1,000 investment in an investment division at the offering on the first day of the period ("initial investment"), and computing the average annual compounded rate of return for the period that would equate the initial investment with the ending redeemable value ("redeemable value") of that investment at the end of the period, carried to at least the nearest hundredth of a percent. Standardized average annual total return reflects the deduction of all recurring charges that are charged to all contracts. The redeemable value also reflects the effect of any applicable withdrawal charge that may be imposed at the end of the period. No deduction is made for premium taxes which may be assessed by certain states. The standardized average annual total returns for each Division (except the PPM America/JNL Money Market Division) for contracts with maximum endorsements (includes deduction of insurance charges and the administration charge) for the periods ended December 31, 2000 are as follows (more recent returns may be more or less than the stated returns due to market volatility):
Since Inception of One Year Five Years Investment Division --------- ----------- ------------------- Alger/JNL Growth Division(1) -23.82% 16.06% 14.91% Alliance Capital/JNL Growth Division(4) N/A N/A -29.50% Eagle/JNL Core Equity Division(2) -10.47% N/A 14.55% Eagle/JNL SmallCap Equity Division(2) -23.63% N/A 7.30% Janus/JNL Aggressive Growth Division(1) -31.12% 23.14% 22.87% Janus/JNL Balanced Division(4) N/A N/A -11.82% Janus/JNL Capital Growth Division(1) -44.56% 18.30% 19.63% Janus/JNL Global Equities Divison(1) -28.54% 18.41% 19.17% PPM America/JNL Balanced Division(1) -2.71% 6.39% 7.18% PPM America/JNL High Yield Bond Division(1) -16.21% 2.35% 2.76% Putnam/JNL Growth Division(1) -28.11% 14.10% 14.94% Putnam/JNL International Equity Division(1) -24.35% 5.82% 6.19% Putnam/JNL Midcap Growth Division(4) N/A N/A -10.84% Putnam/JNL Value Equity Division(1) -3.96% 9.49% 10.39% Salomon Brothers/JNL Global Bond Division(1) -3.75% 4.33% 4.89% Salomon Brothers/JNL U.S. Government & Quality Bond Division(1) 0.36% 3.03% 3.38% S&P/JNL Conservative Growth Division I(5) -12.33% N/A 2.96% S&P/JNL Moderate Growth Division I(6) -14.97% N/A 4.79% S&P/JNL Aggressive Growth Division I(6) -19.86% N/A 6.22% S&P/JNL Very Aggressive Growth Division I(7) -27.45% N/A 7.51% S&P/JNL Equity Growth Division I(8) -24.42% N/A 5.48% S&P/JNL Equity Aggressive Growth Division I(9) -25.54% N/A 5.95% T. Rowe Price/JNL Established Growth Division(1) -11.06% 16.51% 16.60% T. Rowe Price/JNL Mid-Cap Growth Division(1) -3.76% 15.50% 15.97% T. Rowe Price/JNL Value Division(4) N/A N/A 2.46% First Trust/JNL the DowSM Target 10 Division(3) -5.61% N/A -12.99%
1 Corresponding series commenced operations on October 16, 1995. 2 Corresponding series commenced operations on September 16, 1996. 3 Corresponding series commenced operations on July 6, 1999. 4 Corresponding series commenced operations on May 1, 2000. 5 Corresponding series commenced operations on April 9, 1998. 6 Corresponding series commenced operations on April 8, 1998. 7 Corresponding series commenced operations on April 1, 1998. 8 Corresponding series commenced operations on April 13, 1998. 9 Corresponding series commenced operations on April 15, 1998. The GMIB charge is not deducted because of the number of variables involved in the calculation that would apply on an individual contract basis. The charge is .10 basis points each quarter applied to the Benefit Base, as defined in the prospectus. No performance information is provided for AIM/JNL Large Cap Growth Division, AIM/JNL Small Cap Growth Division, Oppenheimer/JNL Global Growth Divison, Oppenheimer/JNL Growth Division, PIMCO/JNL Total Return Bond Division, Lazard/JNL Mid Cap Value Division, Lazard/JNL Small Cap Value Division and PIMCO/JNL Total Return Bond Divison since they were not in operation on December 31, 2000. Jackson National may also advertise non-standardized total return on an annualized and nonannualized (cumulative) basis. 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. The contract is designed for long term investment; therefore, Jackson National believes that non-standardized total return that does not reflect the deduction of any applicable withdrawal charge may be useful to investors. Reflecting the deduction of the withdrawal charge decreases the level of performance advertised. Non-standardized total return may also assume a larger initial investment which more closely approximates the size of a typical contract. The non-standardized average annual total returns that each investment division (except the PPM America/JNL Money Market Division) would have achieved if it had been invested in the corresponding series for the periods ending December 31, 2000, calculated in a manner similar to standardized average annual total return but assuming a hypothetical initial investment of $10,000 and without deducting the contract maintenance charge or the withdrawal charge, are shown in the table below. The table shows non-standardized returns for contracts with no optional endorsements. NON-STANDARDIZED RETURN FOR A CONTRACT WITH NO ENDORSEMENTS
One Year Period Ended December Five Years Period 31, Ended December 31, Since Inception of 2000 2000 Investment Division -------------- -------------- -------- Alger/JNL Growth Division(1) -14.43% 17.88% 16.72% Alliance Capital/JNL Growth Division(4) N/A N/A -20.61% Eagle/JNL Core Equity Division(2) -0.87% N/A 16.65% Eagle/JNL SmallCap Equity Division(2) -14.23% N/A 9.36% Janus/JNL Aggressive Growth Division(1) -21.84% 25.07% 24.79% Janus/JNL Balanced Division(4) N/A N/A -2.74% Janus/JNL Capital Growth Division(1) -35.49% 20.16% 21.50% Janus/JNL Global Equtities Division(1) -19.22% 20.27% 21.03% PPM America/JNL Balanced Division(1) 7.01% 8.06% 8.86% PPM America/JNL High Yield Bond Division(1) -6.70% 3.96% 4.38% Putnam/JNL Growth Division(1) -18.78% 15.89% 16.74% Putnam/JNL International Equity Division(1) -14.97% 7.48% 7.86% Putnam/JNL Midcap Growth Division(1) N/A N/A -1.75% Putnam/JNL Value Equity Division(1) 5.74% 11.21% 12.13% Salomon Brothers/JNL Global Bond Division(1) 5.95% 5.97% 6.54% Salomon Brothers/JNL U.S. Government & Quality Bond 10.13% 4.66% 5.00% Bond Division(1) S&P/JNL Conservative Growth Division I(5) -2.75% N/A 6.68% S&P/JNL Moderate Growth Division I(6) -5.44% N/A 8.48% S&P/JNL Aggressive Growth Division I(6) -10.41% N/A 9.88% S&P/JNL Very Aggressive Growth Division I(7) -18.11% N/A 11.13% S&P/JNL Equity Growth Division I(8) -15.04% N/A 9.16% S&P/JNL Equity Aggressive Growth Division I(9) -16.17% N/A 9.64% T. Rowe Price/JNL Established Growth Division(1) -1.47% 18.34% 18.43% T. Rowe Price/JNL Mid-Cap Growth Division(1) 5.94% 17.31% 17.79% T. Rowe Price/JNL Value Division(4) N/A N/A 11.68% First Trust/JNL the DowSM Target 10 Division(3) 4.07% N/A -6.56%
1 Corresponding series commenced operations on October 16, 1995. 2 Corresponding series commenced operations on September 16, 1996. 3 Corresponding series commenced operations on July 6, 1999. 4 Corresponding series commenced operations on May 1, 2000. 5 Corresponding series commenced operations on April 9, 1998. 6 Corresponding series commenced operations on April 8, 1998. 7 Corresponding series commenced operations on April 1, 1998. 8 Corresponding series commenced operations on April 13, 1998. 9 Corresponding series commenced operations on April 15, 1998. Prior to May 1, 2000, the Putnam/JNL International Equity Division was the T. Rowe Price/JNL International Equity Investment Division and the corresponding series was sub-advised by Rowe Price-Fleming International, Inc. 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. Both standardized average annual total return quotations and non-standardized total return quotations will be based on rolling calendar quarters and will cover at least periods of one, five, and ten years, or a period covering the time the investment division has been in existence, if it has not been in existence for one of the prescribed periods. Quotations of standardized average annual total return and non-standardized total return are based upon historical earnings and will fluctuate. Any quotation of performance should not be considered a guarantee of future performance. Factors affecting the performance of an investment division and its corresponding series include general market conditions, operating expenses and investment management. An owner's withdrawal value upon surrender of a contract may be more or less than its original cost. Jackson National may advertise the current annualized yield for a 30-day period for an investment division. The annualized yield of an investment division refers to the income generated by the investment division over a specified 30-day period. Because this yield is annualized, the yield generated by an investment division during the 30-day period is assumed to be generated each 30-day period. The yield is computed by dividing the net investment income per accumulation unit earned during the period by the price per unit on the last day of the period, according to the following formula: [OBJECT OMITTED] Where:
a = net investment income earned during the period by the series attributable to shares owned by the investment division. b = expenses for the investment division accrued for the period (net of reimbursements). c = the average daily number of accumulation units outstanding during the period. d = the maximum offering price per accumulation unit on the last day of the period.
Net investment income will be determined in accordance with rules established by the Securities and Exchange Commission. Accrued expenses will include all recurring fees that are charged to all contracts. No yield data is included here because these are new contracts. Because of the charges and deductions imposed by the Separate Account, the yield for an investment division will be lower than the yield for the corresponding series. The yield on amounts held in the investment division normally will fluctuate over time. Therefore, the disclosed yield for any given period is not an indication or representation of future yields or rates of return. An investment division's actual yield will be affected by the types and quality of portfolio securities held by the series and the series operating expenses. Any current yield quotations of the PPM America/JNL Money Market Division will consist of a seven calendar day historical yield, carried at least to the nearest hundredth of a percent. We may advertise yield for the Division based on different time periods, but we will accompany it with a yield quotation based on a seven day calendar period. The PPM America/JNL Money Market Division's yield will be calculated by determining the net change, exclusive of capital changes, in the value of a hypothetical pre-existing account having a balance of one accumulation unit at the beginning of the base period, subtracting a hypothetical charge reflecting deductions from contracts, and dividing the net change in account value by the value of the account at the beginning of the period to obtain a base period return and multiplying the base period return by (365/7). The PPM America/JNL Money Market Division's effective yield is computed similarly but includes the effect of assumed compounding on an annualized basis of the current yield quotations of the Division. The PPM America/JNL Money Market Division's yield and effective yield will fluctuate daily. Actual yields will depend on factors such as the type of instruments in the series' portfolio, portfolio quality and average maturity, changes in interest rates, and the series' expenses. Although the investment division determines its yield on the basis of a seven calendar day period, it may use a different time period on occasion. The yield quotes may reflect the expense limitations described in the series' Prospectus or Statement of Additional Information. There is no assurance that the yields quoted on any given occasion will be maintained for any period of time and there is no guarantee that the net asset values will remain constant. It should be noted that neither a contract owner's investment in the PPM America/JNL Money Market Division nor that Division's investment in the PPM America/JNL Money Market Series, is guaranteed or insured. Yields of other money market funds may not be comparable if a different base or another method of calculation is used. ADDITIONAL TAX INFORMATION NOTE: INFORMATION CONTAINED HEREIN SHOULD NOT BE SUBSTITUTED FOR THE ADVICE OF A PERSONAL TAX ADVISER. JACKSON NATIONAL DOES NOT MAKE ANY GUARANTEE REGARDING THE TAX STATUS OF ANY CONTRACT OR ANY TRANSACTION INVOLVING THE CONTRACTS. PURCHASERS BEAR THE COMPLETE RISK THAT THE CONTRACTS MAY NOT BE TREATED AS "ANNUITY CONTRACTS" UNDER FEDERAL INCOME TAX LAWS. IT SHOULD BE FURTHER UNDERSTOOD THAT THE FOLLOWING DISCUSSION IS NOT EXHAUSTIVE AND THAT OTHER SPECIAL RULES MAY BE APPLICABLE IN CERTAIN SITUATIONS. MOREOVER, NO ATTEMPT HAS BEEN MADE TO CONSIDER ANY APPLICABLE STATE OR OTHER TAX LAWS. GENERAL Section 72 of the Internal Revenue Code of 1986, as amended (the "Code"), governs taxation of annuities in general. An individual owner is not taxed on increases in the value of a contract until distribution occurs, either in the form of a withdrawal or as annuity payments under the annuity option elected. For a withdrawal received as a total surrender (total redemption or a death benefit), the recipient is taxed on the portion of the payment that exceeds the cost basis of the contract. For a payment received as a partial withdrawal, federal tax liability is generally determined on a last-in, first-out basis, meaning taxable income is withdrawn before the cost basis of the contract is withdrawn. For contracts issued in connection with non-qualified plans, the cost basis is generally the premiums, while for contracts issued in connection with tax-qualified plans there may be no cost basis. The taxable portion of a withdrawal is taxed at ordinary income tax rates. Tax penalties may also apply. For annuity payments, a portion of each payment in excess of an exclusion amount is includable in taxable income. All annuity payments in excess of the exclusion amount are fully taxable at ordinary income rates. The exclusion amount for payments based on a fixed annuity option is determined by multiplying the payment by the ratio that the cost basis of the contract (adjusted for any period certain or refund feature) bears to the expected return under the contract. The exclusion amount for payments based on a variable annuity option is determined by dividing the cost basis of the contract (adjusted for any period certain or refund guarantee) by the fixed or estimated number of years for which annuity payments are to be made. No exclusion is allowed with respect to any payments received after the investment in the contract has been recovered (i.e., when the total of the excludable amounts equals the investment in the contract). For certain types of tax-qualified plans there may be no cost basis in the contract within the meaning of Section 72 of the Code. The taxable portion is taxed at ordinary income tax rates. Owners, annuitants and beneficiaries under the contracts should seek competent financial advice about the tax consequences of distributions. Jackson National is taxed as a life insurance company under the Code. For federal income tax purposes, the Separate Account is not a separate entity from Jackson National and its operations form a part of Jackson National. WITHHOLDING TAX ON DISTRIBUTIONS The Code generally requires Jackson National (or, in some cases, a plan administrator) to withhold tax on the taxable portion of any distribution or withdrawal from a contract. For "eligible rollover distributions" from contracts issued under certain types of tax-qualified plans, 20% of the distribution must be withheld, unless the payee elects to have the distribution "rolled over" to another eligible plan in a direct transfer. This requirement is mandatory and cannot be waived by the owner. An "eligible rollover distribution" is the taxable portion of any amount received by a covered employee from a plan qualified under Section 401(a) or 403(a) of the Code, or from a tax sheltered annuity qualified under Section 403(b) of the Code (other than (1) a series of substantially equal periodic payments (not less frequently than annually) for the life (or life expectancy) of the employee, or joint lives (or joint life expectancies) of the employee, and his or her designated beneficiary, or for a specified period of ten years or more; (2) minimum distributions required to be made under the Code; and (3) hardship withdrawals). Failure to "rollover" the entire amount of an eligible rollover distribution (including an amount equal to the 20% portion of the distribution that was withheld) could have adverse tax consequences, including the imposition of a penalty tax on premature withdrawals, described later in this section. Withdrawals or distributions from a contract other than eligible rollover distributions are also subject to withholding on the estimated taxable portion of the distribution, but the owner may elect in such cases to waive the withholding requirement. If not waived, withholding is imposed (1) for periodic payments, at the rate that would be imposed if the payments were wages, or (2) for other distributions, at the rate of 10%. If no withholding exemption certificate is in effect for the payee, the rate under (1) above is computed by treating the payee as a married individual claiming 3 withholding exemptions. Generally, the amount of any payment of interest to a non-resident alien of the United States shall be subject to withholding of a tax equal to thirty (30%) percent of such amount or, if applicable, a lower treaty rate. A payment may not be subject to withholding where the recipient sufficiently establishes that such payment is effectively connected to the recipient's conduct of a trade or business in the United States and such payment is included in the recipient's gross income. DIVERSIFICATION -- SEPARATE ACCOUNT INVESTMENTS Section 817(h) of the Code imposes certain asset diversification standards on variable annuity contracts. The Code provides that a variable annuity contract will not be treated as an annuity contract for any period (and any subsequent period) for which the investments held in any segregated asset account underlying the contract are not adequately diversified, in accordance with regulations prescribed by the United States Treasury Department ("Treasury Department"). Disqualification of the contract as an annuity contract would result in imposition of federal income tax to the owner with respect to earnings allocable to the contract prior to the receipt of payments under the contract. The Code contains a safe harbor provision which provides that annuity contracts, such as the Contracts, meet the diversification requirements if, as of the close of each calendar quarter, the underlying assets meet the diversification standards for a regulated investment company, and no more than 55% of the total assets consist of cash, cash items, U.S. government securities and securities of other regulated investment companies. The Treasury Department has issued Regulations establishing diversification requirements for the mutual funds underlying variable contracts. These Regulations amplify the diversification requirements for variable contracts set forth in the Code and provide an alternative to the safe harbor provision described above. Under these Regulations, a mutual fund will be deemed adequately diversified if (1) no more than 55% of the value of the total assets of the mutual fund is represented by any one investment; (2) no more than 70% of the value of the total assets of the mutual fund is represented by any two investments; (3) no more than 80% of the value of the total assets of the mutual fund is represented by any three investments; and (4) no more than 90% of the value of the total assets of the mutual fund is represented by any four investments. Jackson National intends that each series of the JNL Series Trust will be managed by its respective investment adviser in such a manner as to comply with these diversification requirements. The Treasury Department has indicated that the diversification Regulations do not provide guidance regarding the circumstances in which contract owner control of the investments of a segregated asset account will cause the contract owner to be treated as the owner of the assets of the segregated asset account pursuant to Revenue Rulings 77-85, 80-274 and 81-225 that are referenced in the Prospectus. The Treasury Department also stated in 1986 that further guidance on this issue would be forthcoming. The only official guidance that has been issued on this issue since the regulations were published in 1986 was Revenue Procedure 99-44 which stated that satisfying the asset diversification regulations "does not prevent a contract holder's control of the investments of a segregated asset account from causing the contract holder, rather than the insurance company, to be treated as the owner of the assets in the account." The amount of owner control which may be exercised under the contract is not comparable to the kinds of control that were present in any of the situations addressed in published rulings issued by the Internal Revenue Service in which it was held that the policy owner was the owner of the assets of the separate account. At this time it cannot be determined whether additional guidance will be provided on these issues and what standards may be contained in such guidance. Due to the uncertainty in this area, Jackson National reserves the right to modify the contract to the extent required to maintain favorable tax treatment. MULTIPLE CONTRACTS The Code provides that multiple annuity contracts which are issued within a calendar year to the same contract owner by one company or its affiliates are treated as one annuity contract for purposes of determining the tax consequences of any distribution. Such treatment may result in adverse tax consequences including more rapid taxation of the distributed amounts from such multiple contracts. For purposes of this rule, contracts received in a Section 1035 exchange will be considered issued in the year of the exchange. Owners should consult a tax adviser prior to purchasing more than one annuity contract in any calendar year. PARTIAL 1035 EXCHANGES Section 1035 of the Code provides that an annuity contract may be exchanged in a tax-free transaction for another annuity contract. Historically, it was presumed that only the exchange of an entire contract, as opposed to a partial exchange, would be accorded tax-free status. In 1998 in Conway vs. Commissioner, the Tax Court held that the direct transfer of a portion of an annuity contract into another annuity contract qualified as a non-taxable exchange. On November 22, 1999, the Internal Revenue Service filed an Action on Decision which indicated that it acquiesced in the Tax Court decision in Conway. However, in its acquiescence with the decision of the Tax Court, the Internal Revenue Service stated that it will challenge transactions where taxpayers enter into a series of partial exchanges and annuitizations as part of a design to avoid application of the 10% premature distribution penalty or other limitations imposed on annuity contracts under the Code. In the absence of further guidance from the Internal Revenue Service it is unclear what specific types of partial exchange designs and transactions will be challenged by the Internal Revenue Service. Due to the uncertainty in this area owners should consult their own tax advisers prior to entering into a partial exchange of an annuity contract. CONTRACTS OWNED BY OTHER THAN NATURAL PERSONS Under Section 72(u) of the Code, the investment earnings on premiums for contracts will be taxed currently to the owner if the owner is a non-natural person, e.g., a corporation or certain other entities. Such contracts generally will not be treated as annuities for federal income tax purposes. However, this treatment is not applied to contracts held by a trust or other entity as an agent for a natural person nor to contracts held by certain tax-qualified plans. Purchasers should consult their own tax counsel or other tax adviser before purchasing a contract to be owned by a non-natural person. TAX TREATMENT OF ASSIGNMENTS An assignment or pledge of a contract may have tax consequences. Any assignment or pledge of a tax-qualified contract may also be prohibited by ERISA in some circumstances. Owners should, therefore, consult competent legal advisers should they wish to assign or pledge their contracts. DEATH BENEFITS Any death benefits paid under the Contract are taxable to the beneficiary. The rules governing the taxation of payments from an annuity contract, as discussed above, generally apply to the payment of death benefits and depend on whether the death benefits are paid as a lump sum or as annuity payments. Estate or gift taxes may also apply. STATUS OF EARNINGS PROTECTION BENEFIT AND THE OTHER OPTIONAL DEATH BENEFITS With respect to IRAs, our understanding of current law is that the tax status of the Earnings Protection Benefit and the other optional death benefits is unclear. To resolve any uncertainty, we have asked the Internal Revenue Service to approve the use of the Earnings Protection Benefit Endorsement and the other optional death benefits in IRAs. We believe that use of the Earnings Protection Benefit Endorsement and the other optional death benefits should not result in adverse tax treatment. We may, in our sole discretion and in compliance with our adopted procedures, accept IRA contributions to purchase a contract with optional benefits. However, WE CAN GIVE NO ASSURANCE THAT THE INTERNAL REVENUE SERVICE WILL APPROVE THE USE OF THE OPTIONAL EARNINGS PROTECTION BENEFIT AND THE OTHER OPTIONAL DEATH BENEFITS IN IRAS. THEREFORE, THE CONTRACT OWNERS BEAR THE RISK OF ANY ADVERSE TAX TREATMENT. TAX-QUALIFIED PLANS The contracts offered by the Prospectus are designed to be suitable for use under various types of tax-qualified plans. Taxation of owners of a tax-qualified contract will vary based on the type of plan and the terms and conditions of each specific plan. Owners, annuitants and beneficiaries are cautioned that benefits under a tax-qualified contract may be subject to the terms and conditions of the plan, regardless of the terms and conditions of the contracts issued to fund the plan. TAX TREATMENT OF WITHDRAWALS Non-Qualified Contracts ----------------------- Section 72 of the Code governs treatment of distributions from annuity contracts. It provides that if the contract value exceeds the aggregate premiums made, any amount withdrawn not in the form of an annuity payment will be treated as coming first from the earnings and then, only after the income portion is exhausted, as coming from the principal. Withdrawn earnings are included in a taxpayer's gross income. Section 72 further provides that a 10% penalty will apply to the income portion of any distribution. The penalty is not imposed on amounts received: (1) after the taxpayer reaches 59 1/2; (2) upon the death of the owner; (3) if the taxpayer is totally disabled as defined in Section 72(m)(7) of the Code; (4) in a series of substantially equal periodic payments made at least annually for the life (or life expectancy) of the taxpayer or for the joint lives (or joint life expectancies) of the taxpayer and his beneficiary; (5) under an immediate annuity; or (6) which are allocable to premium payments made prior to August 14, 1982. With respect to (4) above, if the series of substantially equal periodic payments is modified before the later of your attaining age 59 1/2 or 5 years from the date of the first periodic payment, then the tax for the year of the modification is increased by an amount equal to the tax which would have been imposed (the 10% penalty tax) but for the exception, plus interest for the tax years in which the exception was used. Tax-Qualified Contracts ----------------------- In the case of a withdrawal under a tax-qualified contract, a ratable portion of the amount received is taxable, generally based on the ratio of the individual's cost basis to the individual's total accrued benefit under the retirement plan. Special tax rules may be available for certain distributions from a tax-qualified contract. Section 72(t) of the Code imposes a 10% penalty tax on the taxable portion of any distribution from qualified retirement plans, including contracts issued and qualified under Code Sections 401 (pension and profit sharing plans), 403(b) (tax-sheltered annuities) and 408 and 408A (IRAs). To the extent amounts are not included in gross income because they have been rolled over to an IRA or to another eligible qualified plan, no tax penalty will be imposed. The tax penalty will not apply to the following distributions: (1) if distribution is made on or after the date on which the owner or annuitant (as applicable) reaches age 59 1/2; (2) distributions following the death or disability of the owner or annuitant (as applicable) (for this purpose "disability" is defined in Section 72(m)(7) of the Code); (3) after separation from service, distributions that are part of a series of substantially equal periodic payments made not less frequently than annually for the life (or life expectancy) of the owner or annuitant (as applicable) or the joint lives (or joint life expectancies) of such owner or annuitant (as applicable) and his or her designated beneficiary; (4) distributions to an owner or annuitant (as applicable) who has separated from service after he has attained age 55; (5) distributions made to the owner or annuitant (as applicable) to the extent such distributions do not exceed the amount allowable as a deduction under Code Section 213 to the owner or annuitant (as applicable) for amounts paid during the taxable year for medical care; (6) distributions made to an alternate payee pursuant to a qualified domestic relations order; (7) distributions made on account of an IRS levy upon the qualified contracts, (8) distributions from an IRA after separation from employment for the purchase of medical insurance (as described in Section 213(d)(1)(D) of the Code) for the contract owner or annuitant (as applicable) and his or her spouse and dependents if the contract owner or annuitant (as applicable) has received unemployment compensation for at least 12 weeks (this exception will no longer apply after the contract owner or annuitant (as applicable) has been re-employed for at least 60 days); (9) distributions from an IRA made to the owner or annuitant (as applicable) to the extent such distributions do not exceed the qualified higher education expenses (as defined in Section 72(t)(7) of the Code) (as applicable) for the taxable year; and (10) distributions from an individual retirement annuity made to the owner or annuitant (as applicable) which are qualified first time home buyer distributions (as defined in Section 72(t)(8) of the Code). The exceptions stated in items (4) and (6) above do not apply in the case of an IRA. The exception stated in (3) above applies to an IRA without the requirement that there be a separation from service. With respect to (3) above, if the series of substantially equal periodic payments is modified before the later of your attaining age 59 1/2 or 5 years from the date of the first periodic payment, then the tax for the year of the modification is increased by an amount equal to the tax which would have been imposed (the 10% penalty tax) but for the exception, plus interest for the tax years in which the exception was used. Withdrawals of amounts attributable to contributions made pursuant to a salary reduction agreement (in accordance with Section 403(b)(11) of the Code) are limited to the following: when the owner attains age 59 1/2, separates from services, dies, becomes disabled (within the meaning of Section 72(m)(7) of the Code), or in the case of hardship. Hardship withdrawals do not include any earnings on salary reduction contributions. These limitations on withdrawals apply to: (1) salary reduction contributions made after December 31, 1988; (2) income attributable to such contributions; and (3) income attributable to amounts held as of December 31, 1988. The limitations on withdrawals do not affect rollovers or exchanges between certain tax-qualified plans. Tax penalties may also apply. While the foregoing limitations only apply to certain contracts issued in connection with Section 403(b) plans, all owners should seek competent tax advice regarding any withdrawals or distributions. The taxable portion of a withdrawal or distribution from tax-qualified contracts may, under some circumstances, be "rolled over" into another eligible plan so as to continue to defer income tax on the taxable portion. Such treatment is available for an "eligible rollover distribution" made by certain types of plans (as described above under "Taxes -- Withholding Tax on Distributions") that is transferred within 60 days of receipt into another eligible plan or an IRA. Plans making such eligible rollover distributions are also required, with some exceptions specified in the Code, to provide for a direct transfer of the distribution to the transferee plan designated by the recipient. Amounts received from IRAs may also be rolled over into other IRAs or certain other plans, subject to limitations set forth in the Code. Generally, distributions from a tax-qualified plan must commence no later than April 1 of the calendar year following the year in which the employee attains the later of age 70 1/2 or the date of retirement. In the case of an IRA, distribution must commence no later than April 1 of the calendar year following the year in which the owner attains age 70 1/2. Required distributions must be over a period not exceeding the life or life expectancy of the individual or the joint lives or life expectancies of the individual and his or her designated beneficiary. If the required minimum distributions are not made, a 50% penalty tax on the amount not distributed is imposed on the individual. TYPES OF TAX-QUALIFIED PLANS The contracts offered herein are designed to be suitable for use under various types of tax-qualified plans. Taxation of participants in each tax-qualified plan varies with the type of plan and terms and conditions of each specific plan. Owners, Annuitants and Beneficiaries are cautioned that benefits under a tax-qualified plan may be subject to the terms and conditions of the plan regardless of the terms and conditions of the contracts issued pursuant to the plan. Some retirement plans are subject to distribution and other requirements that are not incorporated into Jackson National's administrative procedures. Jackson National is not bound by the terms and conditions of such plans to the extent such terms conflict with the terms of a contract, unless Jackson National specifically consents to be bound. Owners, Annuitants and Beneficiaries are responsible for determining that contributions, distributions and other transactions with respect to the contracts comply with applicable law. A tax-qualified contract will not provide any necessary or additional tax deferral if it is used to fund a tax-qualified plan that is tax deferred. However, the contract has features and benefits other than tax deferral that may make it an appropriate investment for a tax-qualified plan. Following are general descriptions of the types of tax-qualified plans with which the contracts may be used. Such descriptions are not exhaustive and are for general informational purposes only. The tax rules regarding tax-qualified plans are very complex and will have differing applications depending on individual facts and circumstances. Each purchaser should obtain competent tax advice prior to purchasing a contract issued under a tax-qualified plan. Contracts issued pursuant to tax-qualified plans include special provisions restricting contract provisions that may otherwise be available as described herein. Generally, contracts issued pursuant to tax-qualified plans are not transferable except upon surrender or annuitization. Various penalty and excise taxes may apply to contributions or distributions made in violation of applicable limitations. Furthermore, certain withdrawal penalties and restrictions may apply to surrenders from Tax-Qualified Contracts. (See "Tax Treatment of Withdrawals - Tax-Qualified Contracts" above.) On July 6, 1983, the Supreme Court decided in Arizona Governing Committee v. Norris that benefits provided under an employer's deferred compensation plan could not, under Title VII of the Civil Rights Act of 1964, vary between men and women. The Contracts sold by Jackson National in connection with certain Tax-Qualified Plans will utilize tables which do not differentiate on the basis of sex. Such annuity tables will also be available for use in connection with certain non-qualified deferred compensation plans. (a) Tax-Sheltered Annuities Section 403(b) of the Code permits the purchase of "tax-sheltered annuities" by public schools and certain charitable, educational and scientific organizations described in Section 501(c) (3) of the Code. These qualifying employers may make contributions to the contracts for the benefit of their employees. Such contributions are not included in the gross income of the employee until the employee receives distributions from the contract. The amount of contributions to the tax-sheltered annuity is limited to certain maximums imposed by the Code. Furthermore, the Code sets forth additional restrictions governing such items as transferability, distributions, non-discrimination and withdrawals. Employee loans are not allowed under these contracts. Any employee should obtain competent tax advice as to the tax treatment and suitability of such an investment. (b) Individual Retirement Annuities Section 408(b) of the Code permits eligible individuals to contribute to an individual retirement program known as an "individual retirement annuity" ("IRA annuity"). Under applicable limitations, certain amounts may be contributed to an IRA annuity which will be deductible from the individual's taxable income. IRA annuities are subject to limitations on eligibility, contributions, transferability and distributions. Sales of IRA annuities are subject to special requirements imposed by the Code, including the requirement that certain informational disclosure be given to persons desiring to establish an IRA. Purchasers of contracts to be qualified as IRA annuities should obtain competent tax advice as to the tax treatment and suitability of such an investment. (c) Roth IRA Annuities Section 408A of the Code provides that individuals may purchase a non-deductible IRA annuity, known as a Roth IRA annuity. Purchase payments for Roth IRA annuities are limited to a maximum of $2,000 per year and are not deductible from taxable income. The Economic Growth & Tax Relief Reconciliation Act of 2001 (the "Act") increases the maximum annual dollar limitation limit for IRA contributions (including Roth IRA contributions) from $2,000 to $3,000 for calendar years 2002 through 2004; $4,000 for calendar years 2005 through 2007; and $5,000 for 2008. After 2008, the limit will be adjusted annually for inflation in $500 increments. In addition, the Act allows individuals age 50 and older to make additional catch-up IRA contributions. The otherwise maximum contribution limit (before application of adjusted gross income phase-out limits) for an individual who had celebrated his or her 50th birthday before the end of the tax year is increased by $500 for 2002 through 2005, and $1,000 for 2006 and later. Lower maximum limitations apply to individuals with adjusted gross incomes between $95,000 and $110,000 in the case of single taxpayers, between $150,000 and $160,000 in the case of married taxpayers filing joint returns, and between $0 and $10,000 in the case of married taxpayers filing separately. An overall $2,000 annual limitation (increased as discussed above) continues to apply to all of a taxpayer's IRA annuity contributions, including Roth IRA annuities and non-Roth IRA annuities. Qualified distributions from Roth IRA annuities are free from federal income tax. A qualified distribution requires that the individual has held the Roth IRA annuity for at least five years and, in addition, that the distribution is made either after the individual reaches age 59 1/2, on the individual's death or disability, or as a qualified first-time home purchase, subject to a $10,000 lifetime maximum, for the individual, a spouse, child, grandchild, or ancestor. Any distribution which is not a qualified distribution is taxable to the extent of earnings in the distribution. Distributions are treated as made from contributions first and therefore no distributions are taxable until distributions exceed the amount of contributions to the Roth IRA annuity. The 10% penalty tax and the regular IRA annuity exceptions to the 10% penalty tax apply to taxable distributions from Roth IRA annuities. Amounts may be rolled over from one Roth IRA annuity to another Roth IRA annuity. Furthermore, an individual may make a rollover contribution from a non-Roth IRA annuity to a Roth IRA annuity, unless the individual has adjusted gross income over $100,000 or the individual is a married taxpayer filing a separate return. The individual must pay tax on any portion of the IRA annuity being rolled over that would be included in income if the distributions were not rolled over. There are no similar limitations on rollovers from one Roth IRA annuity to another Roth IRA annuity. (d) Pension and Profit-Sharing Plans The Internal Revenue Code permits employers, including self-employed individuals, to establish various types of qualified retirement plans for employees. These retirement plans may permit the purchase of the contracts to provide benefits under the plan. Contributions to the plan for the benefit of employees will not be included in the gross income of the employee until distributed from the plan. The tax consequences to owners may vary depending upon the particular plan design. However, the Code places limitations on all plans on such items as amount of allowable contributions; form, manner and timing of distributions; vesting and non-forfeitability of interests; nondiscrimination in eligibility and participation; and the tax treatment of distributions, transferability of benefits, withdrawals and surrenders. Purchasers of contracts for use with pension or profit sharing plans should obtain competent tax advice as to the tax treatment and suitability of such an investment. (e) Eligible Deferred Compensation Plans -- Section 457 Under Code provisions, employees and independent contractors performing services for state and local governments and other tax-exempt organizations may participate in eligible deferred compensation plans under Section 457 of the Code. The amounts deferred under a Plan which meets the requirements of Section 457 of the Code are not taxable as income to the participant until paid or otherwise made available to the participant or beneficiary. As a general rule, the maximum amount which can be deferred in any one year is the lesser of $8,500 or 33 1/3 percent of the participant's includible compensation. The Act increases the dollar limit on deferrals to conform to the elective deferral limitation. The Act also increases the elective deferral limitation to $11,000 for 2002 and in $1,000 annual increments thereafter until it reaches $15,000 in 2006. The limit is indexed for inflation after that in $500 increments. The Act also increases the 33 1/3 percent of compensation limitation on deferrals to 100 percent of compensation. In limited circumstances, the plan may provided for additional catch-up contributions in each of the last three years before normal retirement age. Furthermore, the Code provides additional requirements and restrictions regarding eligibility and distributions. All of the assets and income of an eligible deferred compensation plan established by a governmental employer must be held in trust for the exclusive benefit of participants and their beneficiaries. For this purpose, custodial accounts and certain annuity contracts are treated as trusts. The requirement of a trust does not apply to amounts under a Plan of a tax-exempt (non-governmental) employer. In addition, the requirement of a trust does not apply to amounts under a Plan of a governmental employer if the Plan is not an eligible plan within the meaning of section 457(b) of the Code. In the absence of such a trust, amounts under the plan will be subject to the claims of the employer's general creditors. In general, distributions from a Plan are prohibited under section 457 of the Code unless made after the participant: o attains age 701/2, o separates from service, o dies, or o suffers an unforeseeable financial emergency as defined in the regulations. Under present federal tax law, amounts accumulated in a Plan under section 457 of the Code cannot be transferred or rolled over on a tax-deferred basis except for certain transfers to other Plans under section 457. NET INVESTMENT FACTOR The net investment factor is an index applied to measure the net investment performance of an investment division from one valuation date to the next. The net investment factor for any investment division for any valuation period during the accumulation and annuity phases is determined by dividing (a) by (b) and then subtracting (c) from the result where: (a) is the net result of: (1) the net asset value of a series share held in the investment division determined as of the valuation date at the end of the valuation period, plus (2) the per share amount of any dividend or other distribution declared by the series if the "ex-dividend" date occurs during the valuation period, plus or minus (3) a per share credit or charge with respect to any taxes paid or reserved for by Jackson National during the valuation period which are determined by Jackson National to be attributable to the operation of the investment division (no federal income taxes are applicable under present law); (b) is the net asset value of the series share held in the investment division determined as of the valuation date at the end of the preceding valuation period; and (c) is the asset charge factor determined by Jackson National for the valuation period to reflect the asset-based charges (the mortality and expense risk charge), administration charge, and any applicable charges for optional benefits. Also see "Income Payments (The Income Phase)" in the Prospectus. Since the net investment factor may be greater than, less than, or equal to one, and the factor that offsets the 3% investment rate assumed is slightly less than one, the value of an annuity unit (which changes with the product of that factor) and the net investment may increase, decrease or remain the same. This page intentionally left blank. Jackson National Separate Account - I [GRAPHIC OMITTED] Financial Statements December 31, 2000 INDEPENDENT AUDITORS' REPORT To Jackson National Life Insurance Company and Contract Owners of Jackson National Separate Account - I We have audited the accompanying statement of assets and liabilities of each of the thirty-eight portfolios comprising Jackson National Separate Account - I, including the schedule of investments as of December 31, 2000, and the related statements of operations and changes in net assets for each of the periods indicated. These financial statements are the responsibility of the Separate Account's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of investments owned at December 31, 2000 by correspondence with the transfer agent of the underlying mutual funds. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the thirty-eight portfolios comprising Jackson National Separate Account - I as of December 31, 2000 and the results of its operations and changes in net assets for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. February 2, 2001 Jackson National Separate Account - I Statement of Assets and Liabilities December 31, 2000
Portfolios ----------------------------------------------------------------------------------------------------- JNL/Eagle JNL/Eagle JNL/Janus JNL/Janus JNL/Alger JNL/Alliance Core SmallCap Aggressive JNL/Janus Capital Growth Growth Equity Equity Growth Balanced Growth -------------- ------------- ------------- -------------- ------------- -------------- -------------- Assets: Investments in JNL Series Trust and JNL Variable Fund LLC, at market value (See Schedule of Investments) $360,827,138 $ 17,782,263 $ 86,430,053 $ 67,663,605 $541,956,902 $ 23,963,805 $444,915,867 Due from Jackson National Life Insurance Company 85,279 166,254 18,639 35,687 152,308 53,434 213,691 Receivable for investments sold 224,278 8,863 23,776 13,874 394,547 1,133 370,813 -------------- ------------- ------------- -------------- ------------- -------------- -------------- Total Assets 361,136,695 17,957,380 86,472,468 67,713,166 542,503,757 24,018,372 445,500,371 Liabilities: Payable for investments purchased 85,279 166,254 18,639 35,687 152,308 53,434 213,691 Due to Jackson National Life Insurance Company 224,278 8,863 23,776 13,874 394,547 1,133 370,813 -------------- ------------- ------------- -------------- ------------- -------------- -------------- Total Liabilities 309,557 175,117 42,415 49,561 546,855 54,567 584,504 -------------- ------------- ------------- -------------- ------------- -------------- -------------- Net Assets $360,827,138 $ 17,782,263 $ 86,430,053 $ 67,663,605 $541,956,902 $ 23,963,805 $444,915,867 ============== ============= ============= ============== ============= ============== ============== Total Net Assets Represented by: Number of units outstanding 16,136,216 2,233,453 4,549,021 4,810,070 17,580,395 2,453,090 17,431,473 ============== ============= ============= ============== ============= ============== ============== Unit value (net assets divided by units outstanding) $ 22.36 $ 7.96 $ 19.00 $ 14.07 $ 30.83 $ 9.77 $ 25.52 ============== ============= ============= ============== ============= ============== ==============
See accompanying notes to financial statements. 2
--------------------------------------------------------------------------------------- JNL/Janus JNL/Putnam JNL/Putnam JNL/Putnam PPM Global JNL/Putnam International Midcap Value America/JNL Equities Growth Equity Growth Equity Balanced -------------- ------------- -------------- ------------- ------------- -------------- Assets: Investments in JNL Series Trust and JNL Variable Fund LLC, at market value (See Schedule of Investments) $527,596,770 $366,466,960 $109,364,591 $ 18,054,736 $327,052,198 $150,992,068 Due from Jackson National Life Insurance Company 58,110 332,289 14,036 78,668 76,988 66,656 Receivable for investments sold 1,741,510 57,360 188,740 9,839 26,194 9,402 -------------- ------------- -------------- ------------- ------------- -------------- Total Assets 529,396,390 366,856,609 109,567,367 18,143,243 327,155,380 151,068,126 Liabilities: Payable for investments purchased 58,110 332,289 14,036 78,668 76,988 66,656 Due to Jackson National Life Insurance Company 1,741,510 57,360 188,740 9,839 26,194 9,402 -------------- ------------- -------------- ------------- ------------- -------------- Total Liabilities 1,799,620 389,649 202,776 88,507 103,182 76,058 -------------- ------------- -------------- ------------- ------------- -------------- Net Assets $527,596,770 $366,466,960 $109,364,591 $ 18,054,736 $327,052,198 $150,992,068 ============== ============= ============== ============= ============= ============== Total Net Assets Represented by: Number of units outstanding 20,248,887 16,776,830 7,353,097 1,840,603 18,374,087 10,032,286 ============== ============= ============== ============= ============= ============== Unit value (net assets divided by units outstanding) $ 26.06 $ 21.84 $ 14.87 $ 9.81 $ 17.80 $ 15.05 ============== ============= ============== ============= ============= ==============
------------------------------------------ PPM PPM America/JNL America/JNL Salomon High Yield Money Brothers/JNL Bond Market Global Bond ------------- -------------- ------------- Assets: Investments in JNL Series Trust and JNL Variable Fund LLC, at market value (See Schedule $110,480,018 $102,033,473 $ 56,541,523 of Investments) Due from Jackson National Life 2,152 27,119 158,929 Insurance Company Receivable for investments 46,547 353,714 5,276 sold ------------- -------------- ------------- 110,528,717 102,414,306 56,705,728 Total Assets Liabilities: Payable for investments 2,152 27,119 158,929 purchased Due to Jackson National 46,547 353,714 5,276 Life Insurance Company ------------- -------------- ------------- Total Liabilities 48,699 380,833 164,205 ------------- -------------- ------------- $110,480,018 $102,033,473 $ 56,541,523 Net Assets ============= ============== ============= Total Net Assets Represented by: 9,117,909 8,517,299 4,116,938 Number of units outstanding ============= ============== ============= Unit value (net assets divided by $ 12.12 $ 11.98 $ 13.73 units outstanding) ============= ============== ============= See accompanying notes to financial statements. 3 Jackson National Separate Account - I Statement of Assets and Liabilities (continued) December 31, 2000
Portfolios ----------------------------------------------------------------------------------------------------- Salomon Brothers/JNL T. Rowe T. Rowe U.S. Price/JNL Price/JNL T. Rowe JNL/S&P JNL/S&P JNL/S&P Government & Established Mid-Cap Price/JNL Conservative Moderate Aggressive Quality Bond Growth Growth Value Growth I Growth I Growth I -------------- -------------- ------------- ------------- -------------- ------------- -------------- Assets: Investments in JNL Series Trust and JNL Variable Fund LLC, at market value (See Schedule $104,633,134 $396,691,054 $343,271,181 $ 15,566,879 $136,839,281 $217,898,906 $ 90,763,857 of Investments) Due from Jackson National Life 331,899 181,331 99,981 382,601 359,070 288,150 33,900 Insurance Company Receivable for investments sold 18,849 51,504 235,236 7,583 8,682 9,707 8,338 -------------- -------------- ------------- ------------- -------------- ------------- -------------- Total Assets 104,983,882 396,923,889 343,606,398 15,957,063 137,207,033 218,196,763 90,806,095 Liabilities: Payable for investments 331,899 181,331 99,981 382,601 359,070 288,150 33,900 purchased Due to Jackson National Life Insurance Company 18,849 51,504 235,236 7,583 8,682 9,707 8,338 -------------- -------------- ------------- ------------- -------------- ------------- -------------- Total Liabilities 350,748 232,835 335,217 390,184 367,752 297,857 42,238 -------------- -------------- ------------- ------------- -------------- ------------- -------------- Net Assets $104,633,134 $396,691,054 $343,271,181 $ 15,566,879 $136,839,281 $217,898,906 $ 90,763,857 ============== ============== ============= ============= ============== ============= ============== Total Net Assets Represented by: Number of units outstanding 8,258,157 16,685,946 15,106,446 1,379,388 11,548,615 17,565,944 7,064,128 ============== ============== ============= ============= ============== ============= ============== Unit value (net assets divided by units outstanding) $ 12.67 $ 23.77 $ 22.72 $ 11.29 $ 11.85 $ 12.40 $ 12.85 ============== ============== ============= ============= ============== ============= ==============
See accompanying notes to financial statements. 4
-------------------------------------------------------------------------------------- JNL/S&P JNL/S&P JNL/First JNL/First JNL/First Very JNL/S&P Equity Trust Trust Trust Aggressive Equity Aggressive The Dow The Dow The S&P Growth I Growth I Growth I Target 5 Target 10 Target 10 -------------- ------------ -------------- ------------- ------------- -------------- Assets: Investments in JNL Series Trust and JNL Variable Fund LLC, at market value (See Schedule of Investments) $ 56,823,449 $131,645,048 $ 39,093,694 $ 5,040,476 $ 21,063,075 $ 18,966,662 Due from Jackson National Life Insurance Company 30,157 47,788 484 - 17,297 - Receivable for 2,241 6,184 9,331 28,514 5,317 147,940 investments sold -------------- ------------ -------------- ------------- ------------- -------------- 56,855,847 131,699,020 39,103,509 5,068,990 21,085,689 19,114,602 Total Assets Liabilities: Payable for investments purchased 30,157 47,788 484 - 17,297 - Due to Jackson National Life Insurance Company 2,241 6,184 9,331 28,514 5,317 147,940 -------------- ------------ -------------- ------------- ------------- -------------- Total Liabilities 32,398 53,972 9,815 28,514 22,614 147,940 -------------- ------------ -------------- ------------- ------------- -------------- Net Assets $ 56,823,449 $131,645,048 $ 39,093,694 $ 5,040,476 $ 21,063,075 $ 18,966,662 Total Net Assets Represented by: Number of units 4,279,446 10,443,838 3,066,578 663,267 2,340,312 1,617,989 outstanding ============== ============ =============== ============= ============ =============== Unit value (net assets divided by units outstanding) $ 13.28 $ 12.61 $ 12.75 $ 7.60 $ 9.00 $ 11.72 ============== ============ =============== ============= ============ ===============
----------------------------------------- JNL/First JNL/First JNL/First Trust Global Trust Trust Target Target 15 Target 25 Small-Cap ------------- ------------- ------------- Assets: Investments in JNL Series Trust and JNL Variable Fund LLC, at market value (See Schedule of Investments) $ 5,038,680 $ 3,569,048 $ 7,728,252 Due from Jackson National Life Insurance Company - - 200 Receivable for investments sold 93,345 84,795 126,370 ------------- ------------- ------------- Total Assets 5,132,025 3,653,843 7,854,822 Liabilities: Payable for investments purchased - - 200 Due to Jackson National Life Insurance Company 93,345 84,795 126,370 ------------- ------------- ------------- Total Liabilities 93,345 84,795 126,570 ------------- ------------- ------------- Net Assets $ 5,038,680 $ 3,569,048 $ 7,728,252 Total Net Assets Represented by: Number of units 588,686 458,998 521,580 outstanding ============= ============== ============= Unit value (net assets divided by units outstanding) $ 8.56 $ 7.78 $ 14.82 ============= ============= ============= See accompanying notes to financial statements. 5 Jackson National Separate Account - I Statement of Assets and Liabilities (continued) December 31, 2000
Portfolios ----------------------------------------------------------------------------------------- JNL/First JNL/First Trust JNL/First JNL/First JNL/First JNL/First Trust Pharmaceutical/ Trust Trust Trust Leading Trust Technology Healthcare Financial Energy Brands Communications Sector Sector Sector Sector Sector Sector ------------- ---------------- ------------- -------------- -------------- --------------- Assets: Investments in JNL Series Trust and JNL Variable Fund LLC, at market value (See Schedule of Investments) $ 20,077,023 $ 17,461,634 $ 11,279,997 $ 5,227,191 $ 4,301,721 $ 12,498,234 Due from Jackson National Life Insurance Company 43,099 128,751 579,172 98,064 164 578 Receivable for investments sold 1,861 885 638 196 344,815 4,427 ------------- ---------------- ------------- -------------- -------------- -------------- Total Assets 20,121,983 17,591,270 11,859,807 5,325,451 4,646,700 12,503,239 Liabilities: Payable for investments purchased 43,099 128,751 579,172 98,064 164 578 Due to Jackson National Life Insurance Company 1,861 885 638 196 344,815 4,427 ------------- ---------------- ------------- -------------- -------------- -------------- Total Liabilities 44,960 129,636 579,810 98,260 344,979 5,005 ------------- ---------------- ------------- -------------- -------------- -------------- Net Assets $ 20,077,023 $ 17,461,634 $ 11,279,997 $ 5,227,191 $ 4,301,721 $ 12,498,234 ============= ================ ============= ============== ============= ============== Total Net Assets Represented by: Number of units outstanding 1,683,181 1,311,066 1,008,606 357,749 426,052 1,158,100 ============= ================ ============= ============== ============= ============== Unit value (net assets divided by units outstanding) $ 11.93 $ $13.32 $ 11.18 $ 14.61 $ 10.10 $ 10.79 ============= ================ ============= ============== ============= ==============
See accompanying notes to financial statements. 6 Jackson National Separate Account - I Statement of Operations Year ended December 31, 2000
Portfolios --------------------------------------------------------------------------------------------------- JNL/Eagle JNL/Eagle JNL/Janus JNL/Janus JNL/Alger JNL/Alliance Core SmallCap Aggressive JNL/Janus Capital Growth Growth* Equity Equity Growth Balanced* Growth ------------ -------------- ------------- ------------- -------------- ------------- -------------- Net realized gain (loss) from sales of investments: Proceeds from sales $ 88,982,173 $ 1,011,188 $ 15,314,120 $ 19,330,132 $143,117,535 $ 4,677,201 $161,259,648 Cost of investments sold 66,029,161 1,106,017 12,503,394 17,478,851 98,532,403 4,734,789 119,617,085 ------------ -------------- ------------- ------------- -------------- ------------- -------------- Net realized gain (loss)from sales of investments 22,953,012 (94,829) 2,810,726 1,851,281 44,585,132 (57,588) 41,642,563 Change in net unrealized gain (loss) on investments: Unrealized gain beginning of year 109,223,729 - 12,725,469 8,385,650 242,173,790 - 236,103,075 Unrealized gain (loss) end of year 28,221,140 (3,083,832) 9,563,888 (3,859,999) 46,234,297 (307,911) (49,717,321) ------------ -------------- ------------- ------------- -------------- ------------- -------------- Change in net unrealized losson investments (81,002,589) (3,083,832) (3,161,581) (12,245,649) (195,939,493) (307,911) (285,820,396) ------------ -------------- ------------- ------------- -------------- ------------- -------------- Net loss on investments (58,049,577) (3,178,661) (350,855) (10,394,368) (151,354,361) (365,499) (244,177,833) Expenses: Administrative charge 577,967 10,464 109,090 98,752 936,219 12,396 874,045 Mortality and expense risk charge 4,816,389 87,197 909,080 822,932 7,801,822 103,301 7,283,707 ----------- -------------- ------------- ------------- -------------- ------------- -------------- Total expenses 5,394,356 97,661 1,018,170 921,684 8,738,041 115,697 8,157,752 ----------- -------------- ------------- ------------- -------------- ------------- -------------- Decrease in net assets resulting from operations $(63,443,933) $ (3,276,322) $ (1,369,025) $(11,316,052) $(160,092,402) $ (481,196) $(252,335,585) ============ ============= ============== ============= ============== ============= ==============
------------------------------------- * Period from May 1, 2000 (commencement of operations). See accompanying notes to financial statements. 7 Jackson National Separate Account - I Statement of Operations (continued) Year ended December 31, 2000
Portfolios ---------------------------------------------------------------------------------------------------- JNL/Janus JNL/Putnam JNL/Putnam PPM America/JNL Global JNL/Putnam International Midcap JNL/Putnam America/JNL High Yield Equities Growth Equity Growth* Value Equity Balanced Bond ------------- -------------- ------------- -------------- -------------- ------------- -------------- Net realized gain (loss) from sales of investments: Proceeds from sales $123,876,756 $ 86,901,944 $ 30,622,145 $ 1,841,600 $ 92,660,627 $ 41,854,925 $ 39,820,900 Cost of investments sold 85,780,969 68,827,786 26,051,831 1,907,559 90,209,581 39,866,779 38,896,965 ------------- -------------- ------------- -------------- -------------- ------------- -------------- Net realized gain (loss) from sales of investments 38,095,787 18,074,158 4,570,314 (65,959) 2,451,046 1,988,146 923,935 Change in net unrealized gain (loss) on investments: Unrealized gain beginning of year 226,263,009 112,672,910 26,552,259 - 11,400,330 9,179,603 5,389,211 Unrealized gain (loss) end of year 61,131,094 16,852,263 6,559,796 (378,915) 30,650,121 18,754,404 (2,290,194) ------------- -------------- ------------- -------------- -------------- ------------- -------------- Change in net unrealized gain (loss) on investments (165,131,915) (95,820,647) (19,992,463) (378,915) 19,249,791 9,574,801 (7,679,405) ------------- -------------- ------------- -------------- -------------- ------------- -------------- Net gain (loss) on investments (127,036,128) (77,746,489) (15,422,149) (444,874) 21,700,837 11,562,947 (6,755,470) Expenses: Administrative charge 904,417 600,542 153,671 6,635 439,297 208,593 176,917 Mortality and expense risk charge 7,536,807 5,004,517 1,280,592 55,288 3,660,811 1,738,272 1,474,311 ------------- -------------- ------------- -------------- -------------- ------------- -------------- Total expenses 8,441,224 5,605,059 1,434,263 61,923 4,100,108 1,946,865 1,651,228 ------------- -------------- ------------- -------------- -------------- ------------- -------------- Increase (decrease) in net assets resulting from operations $(135,477,352) $(83,351,548) $(16,856,412) $ (506,797) $ 17,600,729 $ 9,616,082 $ (8,406,698) ============== ============= ============== ============= ============= ============== =============
------------------------------------- * Period from May 1, 2000 (commencement of operations). See accompanying notes to financial statements. 8
-------------------------------------------------------------------------------------- Salomon Brothers/JNL U.S. T. Rowe T. Rowe PPM Salomon Government Price/JNL Price/JNL T. Rowe America/JNL Brothers/JNL & Quality Established Mid-Cap Price/JNL Money Market Global Bond Bond Growth Growth Value* -------------- ------------- -------------- ------------- ------------- -------------- Net realized gain (loss) from sales of investments: Proceeds from sales $293,994,278 $ 15,884,562 $ 36,032,507 $ 76,918,538 $ 66,867,654 $ 1,678,837 Cost of investments sold 288,068,426 14,831,177 34,620,256 56,531,180 48,065,870 1,645,111 -------------- ------------- -------------- ------------- ------------- -------------- Net realized gain (loss) from sales of investments 5,925,852 1,053,385 1,412,251 20,387,358 18,801,784 33,726 Change in net unrealized gain (loss) on investments: Unrealized gain beginning of year 2,681,676 2,818,188 1,131,586 100,306,409 78,830,004 - Unrealized gain (loss) end of year 2,900,756 5,539,679 10,016,508 75,224,884 78,900,402 1,148,529 Change in net -------------- ------------- -------------- ------------- ------------- -------------- unrealized gain (loss) on investments 219,080 2,721,491 8,884,922 (25,081,525) 70,398 1,148,529 -------------- ------------- -------------- ------------- ------------- -------------- Net gain (loss) on investments 6,144,932 3,774,876 10,297,173 (4,694,167) 18,872,182 1,182,255 Expenses: Administrative charge 162,260 80,186 139,726 579,275 442,937 6,458 Mortality and expense risk charge 1,352,170 668,220 1,164,386 4,827,292 3,691,143 53,814 -------------- ------------- -------------- ------------- ------------- -------------- Total expenses 1,514,430 748,406 1,304,112 5,406,567 4,134,080 60,272 -------------- ------------- -------------- ------------- ------------- -------------- Increase (decrease) in net assets resulting from operations $ 4,630,502 $ 3,026,470 $ 8,993,061 $(10,100,734) $ 14,738,102 $ 1,121,983 ============== ============= ============== ============= ============= ==============
------------------------------------------- Net realized gain JNL/S&P JNL/S&P JNL/S&P (loss) from sales Conservative Moderate Aggressive of investments: Growth I Growth I Growth I ------------- -------------- ------------- Proceeds from sales Cost of investments sold Net realized gain $ 26,105,943 $ 28,356,835 $ 9,693,819 (loss) from sales of investments 24,312,186 25,975,727 8,948,239 ------------- -------------- ------------- Change in net unrealized gain (loss) on 1,793,757 2,381,108 745,580 investments: Unrealized gain beginning of year Unrealized gain (loss) end of year Change in net unrealized gain (loss) 8,702,536 16,707,721 7,514,042 on investments 3,561,081 2,893,624 (2,632,545) ------------- -------------- ------------- Net gain (loss) on (5,141,455) (13,814,097) (10,146,587) investments ------------- -------------- ------------- (3,347,698) (11,432,989) (9,401,007) Expenses: Administrative charge Mortality and expense risk charge Total expenses 157,113 255,416 103,705 1,309,276 2,128,464 864,209 Increase (decrease) ------------- -------------- ------------- in net assets 1,466,389 2,383,880 967,914 resulting from ------------- -------------- ------------- operations $ (4,814,087) $(13,816,869) $(10,368,921) ============= ============== ============= See accompanying notes to financial statements. 9 Jackson National Separate Account - I Statement of Operations (continued) Year ended December 31, 2000
Portfolios ---------------------------------------------------------------------------------------------------- JNL/S&P JNL/First JNL/First JNL/First JNL/S&P Very JNL/S&P Equity Trust Trust Trust JNL/First Aggressive Equity Aggressive The Dow The Dow The S&P Trust Global Growth I Growth I Growth I Target 5 Target 10 Target 10 Target 15 ------------- -------------- ------------- ------------- ------------- ------------- ------------- Net realized gain (loss) from sales of investments: Proceeds from sales $ 6,561,197 $ 11,635,547 $ 4,816,171 $ 1,317,070 $ 5,730,978 $ 3,887,019 $ 4,372,996 Cost of investments sold 6,316,509 10,717,715 4,431,267 1,545,367 6,010,418 3,597,682 4,553,450 ------------- -------------- ------------- ------------- ------------- ------------- ------------- Net realized gain (loss) of investments 244,688 917,832 384,904 (228,297) (279,440) 289,337 (180,454) Change in net unrealized gain (loss) on investments: Unrealized gain (loss) beginning of year 4,375,177 12,389,968 4,216,960 (356,596) (371,340) 888,338 5,593 Unrealized gain (loss) end of year (7,188,708) (9,636,772) (3,135,211) (89,409) 1,473,376 2,239,818 446,271 ------------- -------------- ------------- ------------- ------------- ------------- ------------- Change in net unrealized gain (loss) on investments (11,563,885) (22,026,740) (7,352,171) 267,187 1,844,716 1,351,480 440,678 ------------- -------------- ------------- ------------- ------------- ------------- ------------- Net gain (loss) on investments (11,319,197) (21,108,908) (6,967,267) 38,890 1,565,276 1,640,817 260,224 Expenses: Administrative charge 66,208 154,051 46,150 6,523 21,029 23,402 5,652 Mortality and expense risk charge 551,730 1,283,762 384,579 54,358 175,239 195,019 47,099 ------------- -------------- ------------- ------------- ------------- ------------- ------------- Total expenses 617,938 1,437,813 430,729 60,881 196,268 218,421 52,751 ------------- -------------- ------------- ------------- ------------- ------------- ------------- Increase (decrease) in net assets resulting from operations $(11,937,135) $(22,546,721) $ (7,397,996) $ (21,991) $ 1,369,008 $ 1,422,396 $ 207,473 ============== ============= ============= ============= ============ ============ ============
See accompanying notes to financial statements. 10
--------------------------------------------------------------------------------------- JNL/First JNL/First JNL/First JNL/First JNL/First JNL/First Trust Trust Trust Trust Trust Trust Target Technology Pharmaceutical/ Financial Energy Target 25 Small-Cap Sector Healthcare Sector Sector Sector --------------- ---------------------------- --------------- -------------------------- Net realized gain (loss) from sales of investments: Proceeds from sales $ 1,049,789 $ 3,288,829 $ 5,182,968 $ 3,321,831 $ 2,247,833 $ 1,694,427 Cost of invesments 1,132,874 2,929,525 4,607,540 2,895,834 2,030,276 1,500,218 Net realized gain (loss) -------------- -------------- ------------- -------------- ------------- -------------- of investments (83,085) 359,304 575,428 425,997 217,557 194,209 Change in net unrealized gain (loss) on investments: Unrealized gain (loss) (108,245) 365,226 1,442,556 52,228 (49,516) 23,571 beginning of year Unrealized gain (loss) (21,347) 1,025,730 (6,228,962) 3,027,911 1,478,759 740,380 end of year -------------- -------------- ------------- -------------- ------------- -------------- Change in net unrealized gain (loss) on investments 86,898 660,504 (7,671,518) 2,975,683 1,528,275 716,809 -------------- -------------- ------------- -------------- ------------- -------------- Net gain (loss) on investments 3,813 1,019,808 (7,096,090) 3,401,680 1,745,832 911,018 Expenses: Administrative charge 4,274 8,372 29,482 16,286 9,288 3,716 Mortality and expense risk charge 35,619 69,765 245,685 135,718 77,397 30,970 -------------- -------------- ------------- -------------- ------------- -------------- Total expenses 39,893 78,137 275,167 152,004 86,685 34,686 -------------- -------------- ------------- -------------- ------------- -------------- Increase (decrease) in net assets resulting from operations $ (36,080) $ 941,671 $ (7,371,257) $ 3,249,676 $ 1,659,147 $ 876,332 ============== ============= ============== =============== ============= =============
--------------------------------- JNL/First JNL/First Trust Trust Leading Communications Brands Sector Sector ------------------ -------------- Net realized gain (loss) from sales of investments: Proceeds from sales $ 908,123 $ 3,935,435 Cost of invesments 888,117 3,800,100 Net realized gain (loss) --------------- -------------- of investments 20,006 135,335 Change in net unrealized gain (loss) on investments: Unrealized gain (loss) beginning of year (16,753) 1,148,944 Unrealized gain (loss) end of year 378,689 (4,004,110) --------------- -------------- Change in net unrealized gain (loss) on investments 395,442 (5,153,054) --------------- -------------- Net gain (loss) on investments 415,448 (5,017,719) Expenses: Administrative charge 4,472 17,893 Mortality and expense risk charge 37,263 149,110 --------------- -------------- Total expenses 41,735 167,003 --------------- -------------- Increase (decrease) in net assets resulting from operations $ 373,713 $ (5,184,722) =============== ================ See accompanying notes to financial statements. 11 Jackson National Separate Account - I Statements of Changes in Net Assets
Portfolios ---------------------------------------------------------------------------------------------------- JNL/Alger JNL/Alliance JNL/Eagle JNL/Eagle Growth Growth Core Equity SmallCap Equity ---------------------------- -------------- ----------------------------- -------------------------- Period from Year ended May 1, Year ended Year ended December 31, 2000* to December 31, December 31, December 31, ---------------------------- -------------------------------------------------------- 2000 1999 2000 2000 1999 2000 $ 1999 -------------- ------------- -------------- ------------- -------------- -------------- ------------ Operations: Net realized gain (loss) from sales of investments $ 22,953,012 $ 14,504,428 $ (94,829) $ 2,810,726 $ 1,341,928 $ 1,851,281 $ 1,276,803 Change in net unrealized gain(loss) on investments (81,002,589) 57,386,082 (3,083,832) (3,161,581) 8,588,371 (12,245,649) 6,888,343 Administrative charge (577,967) (345,974) (10,464) (109,090) (64,397) (98,752) (58,541) Mortality and expense risk charge (4,816,389) (2,883,119) (87,197) (909,080) (536,640) (822,932) (487,841) -------------- ------------- -------------- ------------- ------------- ------------- -------------- Increase (decrease) in net assets resulting from operations (63,443,933) 68,661,417 (3,276,322) (1,369,025) 9,329,262 (11,316,052) 7,618,764 Net deposits into Separate Account (Note 6) 88,975,598 113,648,719 21,058,585 27,193,473 22,426,626 27,138,716 12,423,131 -------------- ------------- -------------- ------------- ------------- ------------- -------------- Increase (decrease) in net assets 25,531,665 182,310,136 17,782,263 25,824,448 31,755,888 15,822,664 20,041,895 Net Assets: Beginning of period 335,295,473 152,985,337 - 60,605,605 28,849,717 51,840,941 31,799,046 -------------- ------------- -------------- ------------- ------------- ------------- -------------- End of period $360,827,138 $335,295,473 $ 17,782,263 $ 86,430,053 $ 60,605,605 $ 67,663,605 $ 51,840,941 ============== ============= ============== ============= ============= ============== =============
------------------------------------- * Commencement of operations. See accompanying notes to financial statements. 12
---------------------------------------------------------------------------------------------------- JNL/Janus Aggressive JNL/Janus JNL/Janus Capital JNL/Janus Global Growth Balanced Growth Equities ------------------------------------------- -------------------------------------------------------- Period from May 1, Year ended 2000* to Year ended Year ended December 31, December 31, December 31, December 31, ---------------------------- -------------------------------------------------------- 2000 1999 2000 2000 1999 2000 1999 -------------- ------------- -------------- ------------- ------------- ------------- -------------- Operations: Net realized gain (loss) from sales of investments $ 44,585,132 $ 19,331,670 $ (57,588) $ 41,642,563 $ 16,675,375 $ 38,095,787 $ 13,012,114 Change in net unrealized gain(loss) on investments (195,939,493) 192,686,429 (307,911) (285,820,396) 203,117,274 (165,131,915) 175,673,849 Administrative charge Mortality and expense (936,219) (414,275) (12,396) (874,045) (317,305) (904,417) (464,650) risk charge (7,801,822) (3,452,288) (103,301) (7,283,707) (2,644,211) (7,536,807) (3,872,079) -------------- ------------- -------------- ------------- ------------- ------------- -------------- Increase (decrease) in net assets resulting from operations (160,092,402) 208,151,536 (481,196) (252,335,585) 216,831,133 (135,477,352) 184,349,234 Net deposits into Separate Account (Note 6) 172,221,777 180,629,965 24,445,001 219,417,944 156,057,799 150,075,786 104,668,696 --------------- ------------- -------------- ------------- ------------- ------------- -------------- Increase (decrease) in net assets 12,129,375 388,781,501 23,963,805 (32,917,641) 372,888,932 14,598,434 289,017,930 Net Assets: Beginning of period 529,827,527 141,046,026 - 477,833,508 104,944,576 512,998,336 223,980,406 -------------- ------------- -------------- ------------- ------------- ------------- -------------- End of period $541,956,902 $529,827,527 $ 23,963,805 $444,915,867 $477,833,508 $527,596,770 $512,998,336 ============== ============= ============== ============= ============= ============== =============
----------------------------- JNL/Putnam Growth ----------------------------- Year ended December 31, ----------------------------- 2000 1999 -------------- ------------- Operations: Net realized gain (loss) from sales of investments $ 18,074,158 $ 11,530,773 Change in net unrealized gain(loss) on investments (95,820,647) 67,332,868 Administrative charge Mortality and expense (600,542) (387,629) risk charge (5,004,517) (3,230,242) -------------- ------------- Increase (decrease) in net assets resulting from operations (83,351,548) 75,245,770 Net deposits into Separate Account (Note 6) 70,831,709 127,343,652 - -------------- ------------ Increase (decrease) in net assets (12,519,839) 202,589,422 Net Assets: Beginning of period 378,986,799 176,397,377 -------------- ------------- End of period $366,466,960 378,986,799 ============== ============= See accompanying notes to financial statements. 13 Jackson National Separate Account - I Statements of Changes in Net Assets (continued)
Portfolios ---------------------------------------------------------------------------------------------------- JNL/Putnam JNL/Putnam Midcap JNL/Putnam PPM America/JNL International Equity Growth Value Equity Balanced ---------------------------- -------------- -------------------------------------------------------- Period from May 1, Year ended 2000* to Year ended Year ended December 31, December 31, December 31, December 31, ---------------------------- -------------------------------------------------------- 2000 1999 2000 2000 1999 2000 1999 -------------- ------------- -------------- ------------- ------------- -------------- ------------- Operations: Net realized gain (loss) from sales of investments $ 4,570,314 $ 4,323,428 $ (65,959) $ 2,451,046 $ 5,053,732 $ 1,988,146 $ 2,988,530 Change in net unrealized gain (loss) on investments (19,992,463) 19,046,358 (378,915) 19,249,791 (13,216,467) 9,574,801 (4,138,295) Administrative charge (153,671) (112,027) (6,635) (439,297) (367,974) (208,593) (183,546) Mortality and expense risk charge (1,280,592) (933,559) (55,288) (3,660,811) (3,066,453) (1,738,272) (1,529,546) -------------- ------------- -------------- ------------- ------------- -------------- ------------- Increase (decrease) in net assets resulting from operations (16,856,412) 22,324,200 (506,797) 17,600,729 (11,597,162) 9,616,082 (2,862,857) Net deposits into (withdrawals from) Separate Account (Note 6) 29,653,711 9,250,751 18,561,533 33,427,932 99,135,447 1,229,667 48,917,379 -------------- ------------- -------------- ------------- ------------- -------------- ------------- Increase (decrease) in net assets 12,797,299 31,574,951 18,054,736 51,028,661 87,538,285 10,845,749 46,054,522 Net Assets: Beginning of period 96,567,292 64,992,341 - 276,023,537 188,485,252 140,146,319 94,091,797 -------------- ------------- -------------- ------------- ------------- -------------- ------------- End of period $109,364,591 $ 96,567,292 $ 18,054,736 $327,052,198 $276,023,537 $150,992,068 $140,146,319 ============== ============= ============== ============= ============= ============== =============
------------------------------------- * Commencement of operations. See accompanying notes to financial statements. 14
-------------------------------------------------------------------------------------- PPM America/JNL PPM America/JNL Salomon Brothers/JNL High Yield Bond Money Market Global Bond --------------------------------------------------------- ---------------------------- Year ended Year ended Year ended December 31, December 31, December 31, --------------------------------------------------------- ---------------------------- 2000 1999 2000 1999 2000 1999 -------------- ------------- -------------- ------------- ------------- -------------- Operations: Net realized gain (loss) from sales of investments $ 923,935 $ 1,735,412 $ 5,925,852 $ 2,830,042 $ 1,053,385 $ 785,090 Change in net unrealized gain (loss) on investments (7,679,405) (619,648) 219,080 1,233,615 2,721,491 167,738 Administrative charge (176,917) (170,416) (162,260) (131,686) (80,186) (69,953) Mortality and expense risk charge (1,474,311) (1,420,138) (1,352,170) (1,097,388) (668,220) (582,945) -------------- ------------- -------------- ------------- ------------- -------------- Increase (decrease) in net assets resulting from operations (8,406,698) (474,790) 4,630,502 2,834,583 3,026,470 299,930 Net deposits into (withdrawals from) Separate Account (Note 6) (7,039,193) 30,401,604 (34,494,602) 76,639,607 1,918,165 10,341,124 -------------- ------------- -------------- ------------- ------------- -------------- Increase (decrease) in net assets (15,445,891) 29,926,814 (29,864,100) 79,474,190 4,944,635 10,641,054 Net Assets: Beginning of period 125,925,909 95,999,095 131,897,573 52,423,383 51,596,888 40,955,834 -------------- ------------- -------------- ------------- ------------- -------------- End of period $110,480,018 $125,925,909 $102,033,473 $131,897,573 $ 56,541,523 $ 51,596,888 ============== ============= ============== ============= ============= ==============
----------------------------- Salomon Brothers/JNL U.S. Government & Quality Bond ---------------------------- Year ended December 31, ---------------------------- 2000 1999 ------------- -------------- Operations: Net realized gain (loss) from sales of investments $ 1,412,251 $ 943,653 Change in net unrealized gain (loss) on investments 8,884,922 (2,884,667) Administrative charge (139,726) (124,766) Mortality and expense risk charge (1,164,386) (1,039,716) ------------- -------------- Increase (decrease) in net assets resulting from operations 8,993,061 (3,105,496) Net deposits into (withdrawals from) Separate Account (Note 6) 3,797,036 34,897,943 ------------- -------------- Increase (decrease) in net assets 12,790,097 31,792,447 Net Assets: Beginning of period 91,843,037 60,050,590 ------------- -------------- End of period $104,633,134 $ 91,843,037 ============= ============== See accompanying notes to financial statements. 15 Jackson National Separate Account - I Statements of Changes in Net Assets (continued)
Portfolios ---------------------------------------------------------------------------------------------------- T.Rowe JNL/S&P T. Rowe Price/JNL T. Rowe Price/JNL Price/JNL Conservative Established Growth Mid-Cap Growth Value Growth I ---------------------------- ---------------------------- -------------- --------------------------- Period from May 1, Year ended Year ended 2000* to Year ended December 31, December 31, December 31, December 31, --------------------------- ---------------------------- ---------------------------- 2000 1999 2000 1999 2000 2000 1999 ----------------------------------------- ------------- -------------- ------------- -------------- Operations: Net realized gain from sales of investments $ 20,387,358 $ 10,546,093 $ 18,801,784 $ 10,122,957 $ 33,726 $ 1,793,757 $ 410,428 Change in net unrealized gain (loss) on investments (25,081,525) 46,893,136 70,398 36,745,279 1,148,529 (5,141,455) 8,031,573 Administrative charge (579,275) (394,166) (442,937) (299,680) (6,458) (157,113) (58,172) Mortality and expense risk charge (4,827,292) (3,284,716) (3,691,143) (2,497,330) (53,814) (1,309,276) (484,763) -------------- ------------- -------------- ------------- -------------- -------------- ------------- Increase (decrease) in net assets resulting from operations (10,100,734) 53,760,347 14,738,102 44,071,226 1,121,983 (4,814,087) 7,899,066 Net deposits into Separate Account (Note 6) 66,762,054 76,788,122 77,861,372 31,804,210 14,444,896 69,915,246 53,810,357 -------------- ------------- -------------- ------------- -------------- -------------- ------------- Increase in net assets 56,661,320 130,548,469 92,599,474 75,875,436 15,566,879 65,101,159 61,709,423 Net Assets: Beginning of period 340,029,734 209,481,265 250,671,707 174,796,271 - 71,738,122 10,028,699 -------------- ------------- -------------- ------------- -------------- -------------- ------------- End of period $396,691,054 $340,029,734 $343,271,181 $250,671,707 $ 15,566,879 $136,839,281 $ 71,738,122 ============== ============= ============== ============= ============= ============== =============
------------------------------------- * Commencement of operations. See accompanying notes to financial statements. 16
--------------------------------------------------------------------------------------- JNL/S&P JNL/S&P JNL/S&P Very Moderate Aggressive Aggressive Growth I Growth I Growth I --------------------------------------------------------- ---------------------------- Year ended Year ended Year ended December 31, December 31, December 31, --------------------------------------------------------- ---------------------------- 2000 1999 2000 1999 2000 1999 -------------- ------------- -------------- ------------- -------------- -------------- Operations: Net realized gain from sales of investments $ 2,381,108 $ 801,493 $ 745,580 $ 289,918 $ 244,688 $ 930,472 Change in net unrealized gain (loss) on investments (13,814,097) 15,557,443 (10,146,587) 7,085,288 (11,563,885) 4,123,254 Administrative charge (255,416) (82,185) (103,705) (26,906) (66,208) (13,750) Mortality and expense risk charge (2,128,464) (684,875) (864,209) (224,219) (551,730) (114,581) -------------- ------------- -------------- ------------- -------------- -------------- Increase (decrease) in net assets resulting from operations (13,816,869) 15,591,876 (10,368,921) 7,124,081 (11,937,135) 4,925,395 Net deposits into Separate Account (Note 6) 122,407,048 81,105,914 61,013,373 28,570,413 45,372,045 16,021,600 -------------- ------------- -------------- ------------- -------------- -------------- Increase in net assets 108,590,179 96,697,790 50,644,452 35,694,494 33,434,910 20,946,995 Net Assets: Beginning of period 109,308,727 12,610,937 40,119,405 4,424,911 23,388,539 2,441,544 -------------- ------------- -------------- ------------- -------------- -------------- End of period $217,898,906 $109,308,727 $ 90,763,857 $ 40,119,405 $ 56,823,449 $ 23,388,539 ============== ============= ============== ============= ============= ==============
---------------------------- JNL/S&P Equity Growth I ---------------------------- Year ended December 31, ---------------------------- 2000 1999 ------------- ------------- Operations: Net realized gain from sales of investments $ 917,832 $ 667,025 Change in net unrealized gain (loss) on investments (22,026,740) 11,831,602 Administrative charge (154,051) (37,406) Mortality and expense risk charge (1,283,762) (311,718) ------------- ------------- Increase (decrease) in net assets resulting from operations (22,546,721) 12,149,503 Net deposits into Separate Account (Note 6) 94,779,487 42,226,172 ------------- ------------- Increase in net assets 72,232,766 54,375,675 Net Assets: Beginning of period 59,412,282 5,036,607 ------------- ------------- End of period $131,645,048 $ 59,412,282 ============= ============== See accompanying notes to financial statements. 17 Jackson National Separate Account - I Statements of Changes in Net Assets (continued)
Portfolios -------------------------------------------------------------------------------------- JNL/S&P Equity JNL/First Trust JNL/First Trust Aggressive Growth I The Dow Target 5 The Dow Target 10 ---------------------------- ---------------------------- ---------------------------- Period from Period from Year ended July 2, July 2, December 31, Year ended 1999* to Year ended 1999* to ---------------------------- December 31, December 31, December 31, December 31, 2000 1999 2000 1999 2000 1999 ------------- -------------- -------------- ------------- -------------- ------------- Operations: Net realized gain (loss) from sales of investments $ 384,904 $ 356,680 $ (228,297) $ (128,763) $ (279,440) $ (105,449) Change in net unrealized gain (loss) on investments (7,352,171) 3,842,848 267,187 (356,596) 1,844,716 (371,340) Administrative charge (46,150) (12,419) (6,523) (1,543) (21,029) (2,977) Mortality and expense risk charge (384,579) (103,494) (54,358) (12,863) (175,239) (24,814) -------------- ------------- -------------- ------------- -------------- ------------- Increase (decrease) in net assets resulting from operations (7,397,996) 4,083,615 (21,991) (499,765) 1,369,008 (504,580) Net deposits into Separate Account (Note 6) 28,443,353 10,727,796 1,211,547 4,350,685 11,907,680 8,290,967 -------------- ------------- -------------- ------------- -------------- ------------- Increase in net assets 21,045,357 14,811,411 1,189,556 3,850,920 13,276,688 7,786,387 Net Assets: Beginning of period 18,048,337 3,236,926 3,850,920 - 7,786,387 - -------------- ------------- -------------- ------------- -------------- ------------- End of period $ 39,093,694 $ 18,048,337 $ 5,040,476 $ 3,850,920 $ 21,063,075 $ 7,786,387 ============== ============= ============== ============= ============= ==============
------------------------------------- * Commencement of operations. See accompanying notes to financial statements. 18
---------------------------------------------------------- JNL/First Trust JNL/First Trust The S&P Target 10 Global Target 15 --------------------------------------------------------- Period from Period from July 2, July 2, Year ended 1999* to Year ended 1999* to December 31, December 31, December 31, December 31, 2000 1999 2000 1999 -------------- -------------- ------------- ------------- Operations: Net realized gain (loss) from sales of investments $ 289,337 $ 65,800 $ (180,454) $ (34,703) Change in net unrealized gain (loss) on investments 1,351,480 888,338 440,678 5,593 Administrative charge (23,402) (2,852) (5,652) (1,071) Mortality and expense risk charge (195,019) (23,766) (47,099) (8,923) -------------- -------------- ------------- ------------- Increase (decrease) in net assets resulting from operations 1,422,396 927,520 207,473 (39,104) Net deposits into Separate Account 8,354,598 8,262,148 2,796,904 2,073,407 (Note 6) -------------- -------------- ------------- ------------- Increase in net assets 9,776,994 9,189,668 3,004,377 2,034,303 Net Assets: Beginning of period 9,189,668 - - 2,034,303 - - -------------- -------------- ------------- ------------- End of period $ 18,966,662 $ 9,189,668 $ 5,038,680 $ 2,034,303 ============== ============= ============== =============
--------------------------------------------------------- JNL/First Trust JNL/First Trust Target 25 Small-Cap ---------------------------- ---------------------------- Period from Period from July 2, July 2, Year ended 1999* to Year ended 1999* to December 31, December 31, December 31, December 31, 2000 1999 2000 1999 -------------- ------------- -------------- ------------- Operations: Net realized gain (loss) from sales of investments $ (83,085) $ (98,400) $ 359,304 $ 154,302 Change in net unrealized gain (loss) on investments 86,898 (108,245) 660,504 365,226 Administrative charge (4,274) (1,043) (8,372) (1,119) Mortality and expense risk charge (35,619) (8,689) (69,765) (9,321) -------------- ------------- -------------- ------------- Increase (decrease) in net assets resulting from operations (36,080) (216,377) 941,671 509,088 Net deposits into Separate Account 1,748,672 2,072,833 4,685,913 1,591,580 (Note 6) -------------- ------------- -------------- ------------- Increase in net assets 1,712,592 1,856,456 5,627,584 2,100,668 Net Assets: Beginning of period 1,856,456 -- 2,100,668 -- -------------- ------------- -------------- ------------- End of period $ 3,569,048 $ 1,856,456 $ 7,728,252 $ 2,100,668 ============= ============== ============== =============
See accompanying notes to financial statements. 19 Jackson National Separate Account - I Statements of Changes in Net Assets (continued)
Portfolios -------------------------------------------------------------------------------------- JNL/First Trust JNL/First Trust Pharmaceutical/ JNL/First Trust Technology Sector Healthcare Sector Financial Sector ---------------------------- ---------------------------- ---------------------------- Period from Period from Period from July 2, July 2, July 2, Year ended 1999* to Year ended 1999* to Year ended 1999* to December 31, December 31, December 31, December 31, December 31, December 31, 2000 1999 2000 1999 2000 1999 ------------- -------------- ------------- -------------- ------------- -------------- Operations: Net realized gain (loss) from sales of investments $ 575,428 $ 328,642 $ 425,997 $ (18,150) $ 217,557 $ (57,631) Change in net unrealized gain (loss) on investments (7,671,518) 1,442,556 2,975,683 52,228 1,528,275 (49,516) Administrative charge (29,482) (2,164) (16,286) (1,544) (9,288) (1,179) Mortality and expense risk charge (245,685) (18,030) (135,718) (12,871) (77,397) (9,823) -------------- ------------- -------------- ------------- -------------- -------------- Increase (decrease) in net assets resulting from operations (7,371,257) 1,751,004 3,249,676 19,663 1,659,147 (118,149) Net deposits into Separate Account (Note 6) 19,615,618 6,081,658 10,165,487 4,026,808 7,123,864 2,615,135 -------------- ------------- -------------- ------------- -------------- -------------- Increase in net assets 12,244,361 7,832,662 13,415,163 4,046,471 8,783,011 2,496,986 Net Assets: Beginning of period 7,832,662 - 4,046,471 - 2,496,986 - -------------- ------------- -------------- ------------- -------------- -------------- End of period $ 20,077,023 $ 7,832,662 $ 17,461,634 $ 4,046,471 $ 11,279,997 $ 2,496,986 ============== ============= ============== ============= ============== ==============
See accompanying notes to financial statements. 20 ------------------------------------- * Commencement of operations.
-------------------------------------------------------------------------------------- JNL/First Trust JNL/First Trust JNL/First Trust Energy Sector Leading Brands Sector Communications Sector --------------------------------------------------------- ---------------------------- Period from Period from Period from July 2, July 2, July 2, Year ended 1999* to Year ended 1999* to Year ended 1999* to December 31, December 31, December 31, December 31, December 31, December 31, 2000 1999 2000 1999 2000 1999 -------------- ------------ --------------- ------------- ------------ --------------- Operations: Net realized gain (loss) from sales of investments $ 194,209 $ (29,114) $ 20,006 $ (19,706) $ 135,335 $ 318,354 Change in net unrealized gain (loss) on investments 716,809 23,571 395,442 (16,753) (5,153,054) 1,148,944 Administrative charge (3,716) (877) (4,472) (1,047) (17,893) (1,592) Mortality and expense risk charge (30,970) (7,306) (37,263) (8,725) (149,110) (13,265) -------------- ------------ --------------- ------------- ------------ --------------- Increase (decrease) in net assets resulting from operations 876,332 (13,726) 373,713 (46,231) (5,184,722) 1,452,441 Net deposits into Separate Account (Note 6) 3,589,222 775,363 2,256,306 1,717,933 12,634,822 3,595,693 -------------- ------------ --------------- ------------- ------------ --------------- Increase in net assets 4,465,554 761,637 2,630,019 1,671,702 7,450,100 5,048,134 Net Assets: Beginning of period 761,637 - 1,671,702 - 5,048,134 - -------------- ------------ --------------- ------------- ------------ --------------- End of period $ 5,227,191 $ 761,637 $ 4,301,721 $ 1,671,702 $ 12,498,234 $ 5,048,134 ============== ============= ============== ============= ============= ==============
See accompanying notes to financial statements. 21 Jackson National Separate Account - I Schedule of Investments December 31, 2000
Number Market of Shares Cost Value JNL Series Trust -------------- --------------- ---------------- ---------------- JNL/Alger Growth 19,420,190 $ 332,605,998 $ 360,827,138 JNL/Alliance Growth 1,312,344 20,866,095 17,782,263 JNL/Eagle Core Equity 5,331,897 76,866,165 86,430,053 JNL/Eagle SmallCap Equity 4,765,043 71,523,604 67,663,605 JNL/Janus Aggressive Growth 20,328,466 495,722,605 541,956,902 JNL/Janus Balanced 2,473,045 24,271,716 23,963,805 JNL/Janus Capital Growth 18,892,394 494,633,188 444,915,867 JNL/Janus Global Equities 20,315,625 466,465,676 527,596,770 JNL/Putnam Growth 15,995,939 349,614,697 366,466,960 JNL/Putnam International Equity 8,942,321 102,804,795 109,364,591 JNL/Putnam Midcap Growth 1,823,711 18,433,651 18,054,736 JNL/Putnam Value Equity 18,394,387 296,402,077 327,052,198 PPM America/JNL Balanced 11,499,777 132,237,664 150,992,068 PPM America/JNL High Yield Bond 12,846,514 112,770,212 110,480,018 PPM America/JNL Money Market 102,033,473 99,132,717 102,033,473 Salomon Brothers/JNL Global Bond 5,457,676 51,001,844 56,541,523 Salomon Brothers/JNL U.S. Government & Quality Bond 9,555,537 94,616,626 104,633,134 T. Rowe Price/JNL Established Growth 21,168,146 321,466,170 396,691,054 T. Rowe Price/JNL Mid-Cap Growth 14,625,956 264,370,779 343,271,181 T. Rowe Price/JNL Value 1,397,386 14,418,350 15,566,879 JNL/S&P Conservative Growth I 11,576,927 133,278,200 136,839,281 JNL/S&P Moderate Growth I 17,615,110 215,005,282 217,898,906 JNL/S&P Aggressive Growth I 7,057,843 93,396,402 90,763,857 JNL/S&P Very Aggressive Growth I 4,344,300 64,012,157 56,823,449 JNL/S&P Equity Growth I 10,456,318 141,281,820 131,645,048 JNL/S&P Equity Aggressive Growth I 3,102,674 42,228,905 39,093,694 JNL Variable Fund LLC JNL/First Trust The Dow Target 5 649,546 5,129,885 5,040,476 JNL/First Trust The Dow Target 10 2,291,956 19,589,699 21,063,075 JNL/First Trust The S&P Target 10 1,584,516 16,726,844 18,966,662 JNL/First Trust Global Target 15 576,508 4,592,409 5,038,680 JNL/First Trust Target 25 449,502 3,590,395 3,569,048 JNL/First Trust Target Small-Cap 510,790 6,702,522 7,728,252 JNL/First Trust Technology Sector 1,648,360 26,305,985 20,077,023 JNL/First Trust Pharmaceutical/Healthcare Sector 1,283,944 14,433,723 17,461,634 JNL/First Trust Financial Sector 987,741 9,801,238 11,279,997 JNL/First Trust Energy Sector 350,348 4,486,811 5,227,191 JNL/First Trust Leading Brands Sector 417,238 3,923,032 4,301,721 JNL/First Trust Communications Sector 1,134,141 16,502,344 12,498,234
See accompanying notes to financial statements. 22 Jackson National Separate Account - I Notes to Financial Statements Note 1 - Organization Jackson National Life Insurance Company ("JNL") established Jackson National Separate Account - I (the "Separate Account") on June 14, 1993. The Separate Account commenced operations on October 16, 1995, and is registered under the Investment Company Act of 1940 as a unit investment trust. The Separate Account receives and invests net premiums for individual flexible premium variable annuity contracts issued by JNL. The contracts can be purchased on a non-tax qualified basis or in connection with certain plans qualifying for favorable federal income tax treatment. The Separate Account currently contains thirty-eight Portfolios, each of which invests in the following series of mutual funds: JNL Series Trust JNL/Alger Growth Series JNL/Alliance Growth Series JNL/Eagle Core Equity Series JNL/Eagle SmallCap Equity Series JNL/Janus Aggressive Growth Series JNL/Janus Balanced Series JNL/Janus Capital Growth Series JNL/Janus Global Equities Series JNL/Putnam Growth Series JNL/Putnam International Equity Series JNL/Putnam Midcap 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 Mid-Cap Growth Series T. Rowe Price/JNL Value 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 23 Jackson National Separate Account - I Notes to Financial Statements (continued) Note 1 - Organization (continued) JNL Variable Fund LLC JNL/First Trust The Dow Target 5 Series JNL/First Trust The Dow Target 10 Series JNL/First Trust The S&P Target 10 Series JNL/First Trust Global Target 15 Series JNL/First Trust Target 25 Series JNL/First Trust Target Small-Cap Series JNL/First Trust Technology Sector Series JNL/First Trust Pharmaceutical/Healthcare Sector Series JNL/First Trust Financial Sector Series JNL/First Trust Energy Sector Series JNL/First Trust Leading Brands Sector Series JNL/First Trust Communications Sector Series Jackson National Financial Services, LLC, a wholly-owned subsidiary of JNL, serves as investment adviser for all the Series. Note 2 - Significant Accounting Policies The following is a summary of significant accounting policies followed by the Separate Account in the preparation of its financial statements. The policies are in conformity with accounting principles generally accepted in the United States of America. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Investments The Separate Account's investments in the corresponding series of mutual funds ("Series") are stated at the net asset values of the respective series. The average cost method is used in determining the cost of the shares sold on withdrawals by the Separate Account. Investments in the Series are recorded on trade date. The Separate Account does not record dividend income as the Series follow the accounting practice known as consent dividending, whereby all net investment income and realized gains are treated as being distributed to the Separate Account and are immediately reinvested in the Series. 24 Jackson National Separate Account - I Notes to Financial Statements (continued) Note 2 - Significant Accounting Policies (continued) Federal Income Taxes The operations of the Separate Account are included in the federal income tax return of JNL, which is taxed as a "life insurance company" under the provisions of the Internal Revenue Code. Under current law, no federal income taxes are payable with respect to the Separate Account. Therefore, no federal income tax has been provided. Note 3 - Policy Charges Charges are deducted from the Separate Account to compensate JNL for providing the insurance benefits set forth in the contracts, administering the contracts, distributing the contracts, and assuming certain risks in connection with the contracts. Contract Maintenance Charge An annual contract maintenance charge of $35 is charged against each contract to reimburse JNL for expenses incurred in establishing and maintaining records relating to the contract. The contract maintenance charge is assessed on each anniversary of the contract date that occurs on or prior to the annuity date. The charge is deducted by redeeming units. For the period ended December 31, 2000, $1,289,288 in contract maintenance charges were assessed. Transfer Fee Charge A transfer fee of $25 will apply to transfers made by contract holders between the portfolios and between the portfolios and the general account in excess of 15 transfers in a contract year. JNL may waive the transfer fee in connection with pre-authorized automatic transfer programs, or in those states where a lesser fee is required. This fee will be deducted from contract values which remain in the portfolio(s) from which the transfers were made. If such remaining contract value is insufficient to pay the transfer fee, then the fee will be deducted from transferred contract values. For the period ended December 31, 2000, $57,506 in transfer fees were assessed. Surrender or Contingent Deferred Sales Charge During the first seven contract years, certain contracts include a provision for a charge upon the surrender or partial surrender of the contract. The amount assessed under the contract terms, if any, depends upon the cost associated with distributing the particular contracts. The amount, if any, is determined based on a number of factors, including the amount withdrawn, the contract year of surrender, or the number and amount of 25 Jackson National Separate Account - I Notes to Financial Statements (continued) Note 3 - Policy Charges (continued) Surrender or Contingent Deferred Sales Charge (continued) withdrawals in a calendar year. The surrender charges are assessed by JNL and withheld from the proceeds of the withdrawals. For the period ended December 31, 2000, $5,795,041 in surrender charges were assessed. Insurance Charges JNL deducts a daily charge from the assets of the Separate Account equivalent to an annual rate of 1.25% for the assumption of mortality and expense risks. The mortality risk assumed by JNL is that the insured may receive benefits greater than those anticipated by JNL. The expense risk assumed by JNL is that the costs of administering the contracts of the Separate Account will exceed the amount received from the Administration Charge and the Contract Maintenance Charge. JNL deducts a daily charge for administrative expenses from the net assets of the Separate Account equivalent to an annual rate of 0.15%. The administration charge is designed to reimburse JNL for administrative expenses related to the Separate Account and the issuance and maintenance of contracts. 26 Jackson National Separate Account - I Notes to Financial Statements (continued) Note 4 - Purchases and Sales of Investments For the period ended December 31, 2000, purchases and proceeds from sales of investments are as follows:
Proceeds JNL Series Trust Purchases from Sales ---------------- ---------------- ---------------- JNL/Alger Growth $ 172,563,415 $ 88,982,173 JNL/Alliance Growth 21,972,112 1,011,188 JNL/Eagle Core Equity 41,489,423 15,314,120 JNL/Eagle SmallCap Equity 45,547,164 19,330,132 JNL/Janus Aggressive Growth 306,601,271 143,117,535 JNL/Janus Balanced 29,006,505 4,677,201 JNL/Janus Capital Growth 372,519,840 161,259,648 JNL/Janus Global Equities 265,511,318 123,876,756 JNL/Putnam Growth 152,128,594 86,901,944 JNL/Putnam International Equity 58,841,593 30,622,145 JNL/Putnam Midcap Growth 20,341,210 1,841,600 JNL/Putnam Value Equity 121,988,451 92,660,627 PPM America/JNL Balanced 41,137,727 41,854,925 PPM America/JNL High Yield Bond 31,130,479 39,820,900 PPM America/JNL Money Market 257,985,246 293,994,278 Salomon Brothers/JNL Global Bond 17,054,321 15,884,562 Salomon Brothers/JNL U.S. Government & Quality Bond 38,525,431 36,032,507 T. Rowe Price/JNL Established Growth 138,274,025 76,918,538 T. Rowe Price/JNL Mid-Cap Growth 140,594,946 66,867,654 T. Rowe Price/JNL Value 16,063,461 1,678,837 JNL/S&P Conservative Growth I 94,554,800 26,105,943 JNL/S&P Moderate Growth I 148,380,003 28,356,835 JNL/S&P Aggressive Growth I 69,739,278 9,693,819 JNL/S&P Very Aggressive Growth I 51,315,304 6,561,197 JNL/S&P Equity Growth I 104,977,221 11,635,547 JNL/S&P Equity Aggressive Growth I 32,828,795 4,816,171 JNL Variable Fund LLC --------------------- JNL/First Trust The Dow Target 5 2,467,736 1,317,070 JNL/First Trust The Dow Target 10 17,442,390 5,730,978 JNL/First Trust The S&P Target 10 12,023,196 3,887,019 JNL/First Trust Global Target 15 7,117,149 4,372,996 JNL/First Trust Target 25 2,758,568 1,049,789 JNL/First Trust Target Small-Cap 7,896,605 3,288,829 JNL/First Trust Technology Sector 24,523,419 5,182,968 JNL/First Trust Pharmaceutical/Healthcare Sector 13,335,314 3,321,831 JNL/First Trust Financial Sector 9,285,012 2,247,833 JNL/First Trust Energy Sector 5,248,963 1,694,427 JNL/First Trust Leading Brands Sector 3,122,694 908,123 JNL/First Trust Communications Sector 16,403,254 3,935,435
27 Jackson National Separate Account - I Notes to Financial Statements (continued) Note 5 - Accumulation of Unit Activity The following is a reconciliation of unit activity for the periods ended December 31, 2000 and 1999:
Units Units Units Outstanding Units Units Outstanding Units Units Outstanding Portfolio: at 12/31/98 Issued Redeemed at 12/31/99 Issued Redeemed at 12/31/00 ------------------------------------- ------------ ------------ ----------- --------------- --------- ---------- ------------ JNL/Alger Growth 7,704,990 7,223,188 (2,128,853) 12,799,325 6,505,156 (3,168,265) 16,136,216 JNL/Alliance Growth - - - - 2,337,492 (104,039) 2,233,453 JNL/Eagle Core Equity 1,829,363 1,849,218 (524,143) 3,154,438 2,123,771 (729,188) 4,549,021 JNL/Eagle SmallCap Equity 2,274,545 2,293,943 (1,415,540) 3,152,948 2,792,248 (1,135,126) 4,810,070 JNL/Janus Aggressive Growth 6,839,305 8,413,086 (1,852,605) 13,399,786 7,701,408 (3,520,799) 17,580,395 JNL/Janus Balanced - - - - 2,915,351 (462,261) 2,453,090 JNL/Janus Capital Growth 5,849,883 7,961,597 (1,763,331) 12,048,149 9,625,683 (4,242,359) 17,431,473 JNL/Janus Global Equities 11,242,198 6,446,656 (1,822,776) 15,866,078 8,064,287 (3,681,478) 20,248,887 JNL/Putnam Growth 8,348,592 7,881,929 (2,174,216) 14,056,305 5,905,872 (3,185,347) 16,776,830 JNL/Putnam International Equity 4,828,701 2,792,812 (2,114,107) 5,507,406 3,669,843 (1,824,152) 7,353,097 JNL/Putnam Midcap Growth - - - - 2,022,259 (181,656) 1,840,603 JNL/Putnam Value Equity 10,899,898 8,029,664 (2,572,359) 16,357,203 7,369,416 (5,352,532) 18,374,087 PPM America/JNL Balanced 6,574,171 5,185,755 (1,819,510) 9,940,416 2,977,203 (2,885,333) 10,032,286 PPM America/JNL High Yield Bond 7,350,674 4,873,455 (2,551,208) 9,672,921 2,442,164 (2,997,176) 9,117,909 PPM America/JNL Money Market 4,713,958 19,333,720 (12,556,497) 11,491,181 22,072,512 (25,046,394) 8,517,299 Salomon Brothers/JNL Global Bond 3,166,154 1,973,231 (1,168,639) 3,970,746 1,292,018 (1,145,826) 4,116,938 Salomon Brothers/JNL U.S. Government & Quality Bond 5,006,001 6,138,355 (3,180,806) 7,963,550 3,226,246 (2,931,639) 8,258,157 T. Rowe Price/JNL Established Growth 10,399,047 5,614,936 (1,956,465) 14,057,518 5,503,131 (2,874,703) 16,685,946 T. Rowe Price/JNL Mid-Cap Growth 9,941,003 3,897,001 (2,179,811) 11,658,193 6,237,507 (2,789,254) 15,106,446 T. Rowe Price/JNL Value - - - - - 1,534,277 (154,889) 1,379,388 JNL/S&P Conservative Growth I 967,674 5,520,712 (615,088) 5,873,298 7,701,247 (2,025,930) 11,548,615 JNL/S&P Moderate Growth I 1,198,566 7,885,211 (771,324) 8,312,453 11,238,355 (1,984,864) 17,565,944 JNL/S&P Aggressive Growth I 410,888 2,588,200 (208,432) 2,790,656 4,898,172 (624,700) 7,064,128 JNL/S&P Very Aggressive Growth I 220,495 2,244,126 (1,025,711) 1,438,910 3,227,564 (387,028) 4,279,446 JNL/S&P Equity Growth I 478,149 4,138,823 (622,315) 3,994,657 7,163,096 (713,915) 10,443,838 JNL/S&P Equity Aggressive Growth I 304,127 1,131,140 (251,379) 1,183,888 2,185,833 (303,143) 3,066,578
28 30 Jackson National Separate Account - I Notes to Financial Statements (continued) Note 5 - Accumulation of Unit Activity (continued)
Units Units Units Outstanding Units Units Outstanding Units Units Outstanding Portfolio (continued): at 12/31/98 Issued Redeemed at 12/31/99 Issued Redeemed at 12/31/00 ------------------------------------- ------------ ------------ ------------- ------------ ------------ ------------- ------------ JNL/First Trust The Dow Target 5 - 619,593 (121,789) 497,804 349,520 (184,057) 663,267 JNL/First Trust The Dow Target 10 - 1,067,622 (169,462) 898,160 2,116,827 (674,675) 2,340,312 JNL/First Trust The S&P Target 10 - 968,545 (131,832) 836,713 1,112,169 (330,893) 1,617,989 JNL/First Trust Global Target 15 - 341,947 (114,077) 227,870 919,505 (558,689) 588,686 JNL/First Trust Target 25 - 329,374 (104,138) 225,236 367,924 (134,162) 458,998 JNL/First Trust Target Small-Cap - 283,403 (112,532) 170,871 584,223 (233,514) 521,580 JNL/First Trust Technology Sector - 625,357 (112,847) 512,510 1,458,576 (287,905) 1,683,181 JNL/First Trust Pharmaceutical/ Healthcare Sector - 534,348 (115,989) 418,359 1,160,868 (268,161) 1,311,066 JNL/First Trust Financial Sector - 389,235 (108,914) 280,321 941,377 (213,092) 1,008,606 JNL/First Trust Energy Sector - 175,947 (101,266) 74,681 414,467 (131,399) 357,749 JNL/First Trust Leading Brands - 282,893 (106,619) 176,274 341,475 (91,697) 426,052 Sector JNL/First Trust Communications - 447,758 (110,879) 336,879 1,074,425 (253,204) 1,158,100 Sector
29 Jackson National Separate Account - I Notes to Financial Statements (continued) Note 6 - Reconciliation of Gross and Net Deposits into the Separate Account Net deposits into the Separate Account purchase shares of the JNL Series Trust and JNL Variable Fund LLC. Net deposits represent the amounts available for investment in such shares after the deduction of applicable policy charges. The following is a summary of net deposits made for the periods ended December 31, 2000 and 1999:
Portfolios ---------------------------------------------------------------------------------------------------- JNL/Alger JNL/Alliance JNL/Eagle JNL/Eagle Growth Growth Core Equity SmallCap Equity ---------------------------- -------------- -------------------------------------------------------- Period from May 1, Year ended 2000* to Year ended Year ended December 31, December 31, December 31, December 31, ---------------------------- -------------------------------------------------------- 2000 1999 2000 2000 1999 2000 1999 -------------- ------------- -------------- ------------- -------------- -------------- ------------- Proceeds from units issued $ 80,095,616 $ 88,986,412 $ 7,648,562 $ 15,509,992 $ 17,826,042 $ 18,788,611 $ 13,378,346 Value of units redeemed (24,609,838) (14,147,962) (279,013) (4,238,465) (1,884,230) (3,847,866) (1,978,835) Transfers between portfolios and between portfolios and general account 33,943,008 39,119,116 13,691,088 16,010,533 6,528,640 12,281,252 1,076,938 -------------- ------------- -------------- ------------- -------------- -------------- ------------- Total gross deposits net of transfers to general account 89,428,786 113,957,566 21,060,637 27,282,060 22,470,452 27,221,997 12,476,449 Deductions: Policyholder charges 453,188 308,847 2,052 88,587 43,826 83,281 53,318 -------------- ------------- -------------- ------------- -------------- ------------- ------------- Net deposits from policyholders $ 88,975,598 $113,648,719 $ 21,058,585 $ 27,193,473 $ 22,426,626 $ 27,138,716 $ 12,423,131 ============== ============= ============== ============= ============= ============== =============
------------------------------------- * Commencement of operations. 30
----------------------------------------------------------------------------------------------------- JNL/Janus JNL/Janus JNL/Janus Capital JNL/Janus Global Aggressive Growth Balanced Growth Equities ------------------------------------------- --------------------------------------------------------- Period from May 1, Year ended 2000* to Year ended Year ended December 31, December 31, December 31, December 31, ---------------------------- ------------- -------------- ----------------------------- 2000 1999 2000 2000 1999 2000 1999 -------------- ------------- -------------- ------------- ------------- -------------- -------------- Proceeds from units issued $153,692,000 $121,671,498 $ 10,986,431 $164,097,806 $ 93,560,282 $122,513,127 $ 82,165,122 Value of units redeemed (40,573,177) (14,502,375) (1,433,538) (39,170,052) (12,411,224) (36,169,116) (15,851,826) Transfers between portfolios and between portfolios and general account 59,919,115 73,775,298 14,942,388 95,149,706 75,148,190 64,386,414 38,712,012 -------------- ------------- -------------- ------------- ------------- -------------- -------------- Total gross deposits net of transfers to general account 173,037,938 180,944,421 24,495,281 220,077,460 156,297,248 150,730,425 105,025,308 Deductions: Policyholder charges 816,161 314,456 50,280 659,516 239,449 654,639 356,612 -------------- ------------- -------------- ------------- ------------- -------------- -------------- Net deposits from policyholders $172,221,777 $180,629,965 $ 24,445,001 $219,417,944 $156,057,799 $150,075,786 $104,668,696 ============== ============= ============== ============= ============= ============== =============
---------------------------- JNL/Putnam Growth ---------------------------- Year ended December 31, --------------------------- 2000 1999 -------------- ------------ Proceeds from units issued $ 65,271,722 $ 99,893,576 Value of units redeemed (24,616,384) (12,739,046) Transfers between portfolios and between portfolios and general account 30,715,169 40,496,775 -------------- ------------ Total gross deposits net of transfers to general account 71,370,507 127,651,305 Deductions: Policyholder charges 538,798 307,653 -------------- ------------ Net deposits from policyholders $ 70,831,709 $127,343,652 ============== ============= 31 Jackson National Separate Account - I Notes to Financial Statements (continued) Note 6 - Reconciliation of Gross and Net Deposits into the Separate Account (continued) ------------------------------------------------------------------------------
Portfolios ---------------------------------------------------------------------------------------------------- JNL/Putnam JNL/Putnam Midcap JNL/Putnam PPM America/JNL International Equity Growth Value Equity Balanced ---------------------------- -------------- ---------------------------- --------------------------- Period from May 1, Year ended 2000* to Year ended Year ended December 31, December 31, December 31, December 31, ---------------------------- ---------------------------- --------------------------- 2000 1999 2000 2000 1999 2000 1999 -------------- ------------- -------------- ------------- -------------- ------------- ------------- Proceeds from units issued $ 20,538,155 $ 11,229,183 $ 5,422,474 $ 37,518,572 $ 74,353,931 $ 13,552,561 $ 34,880,793 Value of units redeemed (7,568,625) (5,060,226) (510,680) (18,568,903) (12,933,525) (10,771,136) (7,702,753) Transfers between portfolios and between portfolios and general account 14,822,151 3,188,380 13,662,448 14,869,720 38,058,904 (1,312,956) 21,906,508 -------------- ------------- -------------- ------------- -------------- ------------- ------------- Total gross deposits (withdrawals) net of transfers to general account 29,791,681 9,357,337 18,574,242 33,819,389 99,479,310 1,468,469 49,084,548 Deductions: Policyholder charges 137,970 106,586 12,709 391,457 343,863 238,802 167,169 -------------- ------------- -------------- ------------- -------------- ------------- ------------- Net deposits (withdrawals) from policyholders $ 29,653,711 $ 9,250,751 $ 18,561,533 $ 33,427,932 $ 99,135,447 $ 1,229,667 $ 48,917,379 ============== ============= ============== ============= ============= ============== =============
32 ------------------------------------- * Commencement of operations.
-------------------------------------------------------------------------------------- PPM America/JNL PPM America/JNL Salomon Brothers/JNL High Yield Bond Money Market Global Bond --------------------------------------------------------- ---------------------------- Year ended Year ended Year ended December 31, December 31, December 31, ---------------------------- ---------------------------- ---------------------------- 2000 1999 2000 1999 2000 1999 -------------- ------------- -------------- ------------- -------------- ------------- Proceeds from units issued $ 10,508,289 $ 26,655,587 $ 92,212,778 $102,075,456 $ 5,039,201 $ 10,386,863 Value of units redeemed (8,287,897) (8,008,754) (25,842,286) (17,604,827) (3,956,727) (2,619,376) Transfers between portfolios and between portfolios and general account (9,087,006) 11,934,828 (100,242,491) (7,406,013) 907,325 2,631,811 -------------- ------------- -------------- ------------- -------------- ------------- Total gross deposits (withdrawals) net of transfers to general account (6,866,614) 30,581,661 (33,871,999) 77,064,616 1,989,799 10,399,298 Deductions: Policyholder charges 172,579 180,057 622,603 425,009 71,634 58,174 -------------- ------------- -------------- ------------- -------------- ------------- Net deposits (withdrawals) from policyholders $ (7,039,193) $ 30,401,604 $(34,494,602) $ 76,639,607 $ 1,918,165 $ 10,341,124 ============== ============= ============== ============= ============= ==============
----------------------------- Salomon Brothers/JNL U.S. Government & Quality Bond ---------------------------- Year ended December 31, ---------------------------- 2000 1999 ------------- -------------- Proceeds from units issued $ 10,096,353 $ 26,214,725 Value of units redeemed (7,983,632) (7,133,754) Transfers between portfolios and between portfolios and general account 1,852,091 16,040,824 ------------- -------------- Total gross deposits (withdrawals) net of transfers to general account 3,964,812 35,121,795 Deductions: Policyholder charges 167,776 223,852 ------------- -------------- Net deposits (withdrawals) from policyholders $ 3,797,036 $ 34,897,943 ============= ============== 33 Jackson National Separate Account - I Notes to Financial Statements (continued) Note 6 - Reconciliation of Gross and Net Deposits into the Separate Account (continued) ------------------------------------------------------------------------------
Portfolios --------------------------------------------------------------------------------------------------- T. Rowe JNL/S&P T. Rowe Price/JNL T. Rowe Price/JNL Price/JNL Conservative Established Growth Mid-Cap Growth Value Growth I ---------------------------- ---------------------------- ----------------------------------------- Period from May 1, Year ended Year ended 2000* to Year ended December 31, December 31, December 31, December 31, ---------------------------- ---------------------------- ------------ -------------- 2000 1999 2000 1999 2000 2000 1999 -------------- ------------- -------------- ------------- ------------- ------------ -------------- Proceeds from units issued $ 55,228,582 $ 66,679,044 $ 41,996,999 $ 34,080,500 $ 3,230,677 $ 35,766,333 $ 26,402,046 Value of units redeemed (29,389,015) (13,224,370) (21,256,536) (10,749,814) (627,483) (6,101,431) (2,204,223) Transfers between portfolios and between portfolios and general account 41,525,303 23,644,354 57,548,400 8,724,411 11,851,835 40,344,652 29,635,980 -------------- ------------- -------------- ------------- ------------- ------------ -------------- Total gross deposits net of transfers to general account 67,364,870 77,099,028 78,288,863 32,055,097 14,455,029 70,009,554 53,833,803 Deductions: Policyholder charges 602,816 310,906 427,491 250,887 10,133 94,308 23,446 -------------- ------------- -------------- ------------- ------------- ------------ -------------- Net deposits from policyholders $ 66,762,054 $ 76,788,122 $ 77,861,372 $ 31,804,210 $ 14,444,896 $ 69,915,246 $ 53,810,357 ============== ============= ============== ============= ============= ============== ============= ------------------------------------- * Commencement of operations.
34
-------------------------------------------------------------------------------------- JNL/S&P JNL/S&P JNL/S&P Very Moderate Aggressive Aggressive Growth I Growth I Growth I ---------------------------- ---------------------------- ---------------------------- Year ended Year ended Year ended December 31, December 31, December 31, ---------------------------- ---------------------------- ---------------------------- 2000 1999 2000 1999 2000 1999 -------------- ------------- -------------- ------------- ------------- -------------- Proceeds from units issued $ 68,213,975 $ 46,196,922 $ 36,707,352 $ 15,223,784 $ 23,676,934 $ 9,037,666 Value of units redeemed (15,860,731) (1,979,000) (3,814,668) (308,177) (2,134,086) (946,140) Transfers between portfolios and between portfolios and general account 70,516,652 36,917,726 28,220,787 13,661,585 23,873,828 7,945,645 -------------- ------------- -------------- ------------- ------------- -------------- Total gross deposits net of transfers to general account 122,869,896 81,135,648 61,113,471 28,577,192 45,416,676 16,037,171 Deductions: Policyholder charges 462,848 29,734 100,098 6,779 44,631 15,571 -------------- ------------- -------------- ------------- ------------- -------------- Net deposits from policyholders $122,407,048 $ 81,105,914 $ 61,013,373 $ 28,570,413 $ 45,372,045 $ 16,021,600 ============== ============= ============== ============= ============= ==============
----------------------------- JNL/S&P Equity Growth I ---------------------------- Year ended December 31, ---------------------------- 2000 1999 ------------- -------------- Proceeds from units issued $ 49,124,721 $ 22,783,205 Value of units redeemed (4,915,361) (703,372) Transfers between portfolios and between portfolios and general account 50,705,290 20,155,109 ------------- -------------- Total gross deposits net of transfers to general account 94,914,650 42,234,942 Deductions: Policyholder charges 135,163 8,770 ------------- -------------- Net deposits from policyholders $ 94,779,487 $ 42,226,172 ============= ============== 35 Jackson National Separate Account - I Notes to Financial Statements (continued) Note 6 - Reconciliation of Gross and Net Deposits into the Separate Account (continued) -------------------------------------------------------------------------------
Portfolios -------------------------------------------------------------------------------------- JNL/S&P Equity Aggressive JNL/First Trust JNL/First Trust Growth I The Dow Target 5 The Dow Target 10 ---------------------------- ---------------------------- ---------------------------- Period from Period from July 2, July 2, Year ended Year ended 1999* to Year ended 1999* to December 31, December 31, December December 31, December 31, 2000 1999 2000 1999 2000 1999 -------------- ------------- -------------- ------------- -------------- ------------- Proceeds from units issued $ 15,758,031 $ 7,950,953 $ 1,552,667 $ 3,865,828 $ 7,617,761 $ 5,207,901 Value of units redeemed (1,352,732) (193,168) (72,600) (5,952) (560,491) (24,223) Transfers between portfolios and between portfolios and general account 14,077,546 2,978,368 (264,912) 490,809 4,862,049 3,107,749 -------------- ------------- -------------- ------------- -------------- ------------- Total gross deposits net of transfers to general account 28,482,845 10,736,153 1,215,155 4,350,685 11,919,319 8,291,427 Deductions: Policyholder charges 39,492 8,357 3,608 - 11,639 460 -------------- ------------- -------------- --------------------------- ------------- Net deposits from policyholders $ 28,443,353 $ 10,727,796 $ 1,211,547 $ 4,350,685 $ 11,907,680 $ 8,290,967 ============== ============= ============== ============= ============= ==============
------------------------------------- * Commencement of operations. 36
-------------------------------------------------------------------------------------- JNL/First Trust JNL/First Trust JNL/First Trust The S&P Target 10 Global Target 15 Target 25 ---------------------------- ---------------------------- ---------------------------- Period from Period from Period from July 2, July 2, July 2, Year ended 1999* to Year ended 1999* to Year ended 1999* to December 31, December 31, December 31, December 31, December 31, December 31, 2000 1999 2000 1999 2000 1999 -------------- ------------- -------------- ------------- ------------- ------------- Proceeds from units issued $ 7,610,805 $ 7,839,926 $ 2,787,783 $ 1,785,627 $ 1,660,588 $ 1,707,208 Value of units redeemed (373,040) (4,931) (61,403) (472) (43,508) (1,206) Transfers between portfolios and between portfolios and general account 1,127,453 427,153 72,728 288,252 132,805 366,831 -------------- ------------- -------------- ------------- ------------- ------------- Total gross deposits net of transfers to general account 8,365,218 8,262,148 2,799,108 2,073,407 1,749,885 2,072,833 Deductions: Policyholder charges 10,620 - 2,204 - 1,213 - -------------- ------------- -------------- ------------- ------------- ------------- Net deposits from policyholders $ 8,354,598 $ 8,262,148 $ 2,796,904 $ 2,073,407 $ 1,748,672 $ 2,072,833 ============== ============= ============== ============= ============= ==============
----------------------------- JNL/First Trust Target Small-Cap ---------------------------- Period from July 2, Year ended 1999* to December 31, December 31, 2000 1999 -------------- -------------- Proceeds from units issued $ 3,860,176 $ 1,630,202 Value of units redeemed (62,440) (652) Transfers between portfolios and between portfolios and general account 891,420 (37,970) -------------- -------------- Total gross deposits net of transfers to general account 4,689,156 1,591,580 Deductions: Policyholder charges 3,243 - -------------- -------------- Net deposits from policyholders $ 4,685,913 $ 1,591,580 ============= ============== 37 Jackson National Separate Account - I Notes to Financial Statements (continued) Note 6 - Reconciliation of Gross and Net Deposits into the Separate Account (continued) -------------------------------------------------------------------------------
Portfolios -------------------------------------------------------------------------------------- JNL/First Trust JNL/First Trust Pharmaceutical/ JNL/First Trust Technology Sector Healthcare Sector Financial Sector ---------------------------- ---------------------------- ---------------------------- Period from Period from Period from July 2, July 2, July 2, Year ended 1999* to Year ended 1999* to Year ended 1999* to December 31, December 31, December 31, December 31, December 31, December 31, 2000 1999 2000 1999 2000 1999 -------------- -------------- ------------ --------------- -------------- -------------- Proceeds from units issued $ 15,200,403 $ 6,126,986 $ 8,009,986 $ 3,785,929 $ 4,632,660 $ 2,324,833 Value of units redeemed (380,058) (5,274) (155,474) (6,018) (67,574) (2,422) Transfers between portfolios and between portfolios and general account 4,807,362 (40,054) 2,317,246 246,897 2,561,478 292,724 -------------- -------------- ------------ --------------- -------------- -------------- Total gross deposits net of transfers to general account 19,627,707 6,081,658 10,171,758 4,026,808 7,126,564 2,615,135 Deductions: Policyholder charges 12,089 - 6,271 - 2,700 - -------------- -------------- ------------ --------------- -------------- -------------- Net deposits from policyholders $ 19,615,618 $ 6,081,658 $ 10,165,487 $ 4,026,808 $ 7,123,864 $ 2,615,135 ============== ============= ============== ============= ============== ===============
------------------------------------- * Commencement of operations. 38
-------------------------------------------------------------------------------------- JNL/First Trust JNL/First Trust JNL/First Trust Energy Sector Leading Brands Sector Communications Sector --------------------------------------------------------- ---------------------------- Period from Period from Period from July 2, July 2, July 2, Year ended 1999* to Year ended 1999* to Year ended 1999* to December 31, December 31, December 31, December 31, December 31, December 31, 2000 1999 2000 1999 2000 1999 -------------- ------------- -------------- ------------- ------------- -------------- Proceeds from units issued $ 2,094,114 $ 658,068 $ 1,574,977 $ 1,575,329 $ 9,146,084 $ 3,755,463 Value of units redeemed (28,973) (259) (32,553) (3,499) (259,164) (4,549)( Transfers between portfolios and between portfolios and general account 1,524,706 117,554 715,397 146,103 3,755,000 (155,221) -------------- ------------- -------------- ------------- ------------- -------------- Total gross deposits net of transfers to general account 3,589,847 775,363 2,257,821 1,717,933 12,641,920 3,595,693 Deductions: Policyholder charges 625 - 1,515 - 7,098 - -------------- ------------- -------------- ------------- ------------- -------------- Net deposits from policyholders $ 3,589,222 $ 775,363 $ 2,256,306 $ 1,717,933 $ 12,634,822 $ 3,595,693 ============== ============= ============== ============= ============= ==============
39 Jackson National Life Insurance Company and Subsidiaries [GRAPHIC OMITTED] Consolidated Financial Statements December 31, 2000 Jackson National Life Insurance Company and Subsidiaries Index to Consolidated Financial Statements December 31, 2000 ------------------------------------------------------------------ Independent Auditor's Report 1 Consolidated Balance Sheet 2 Consolidated Income Statement 3 Consolidated Statement of Stockholder's Equity and Comprehensive Income 4 Consolidated Statement of Cash Flows 5 Notes to Consolidated Financial Statements 6 Jackson National Life Insurance Company and Subsidiaries Consolidated Financial Statements See accompanying notes to consolidated financial statements. INDEPENDENT AUDITOR'S REPORT To the Board of Directors and Stockholder of Jackson National Life Insurance Company We have audited the accompanying consolidated balance sheet of Jackson National Life Insurance Company and Subsidiaries as of December 31, 2000 and 1999, and the related consolidated statements of income, stockholder's equity and comprehensive income, and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. The accompanying consolidated statements of income, stockholder's equity and comprehensive income, and cash flows of Jackson National Life Insurance Company and Subsidiaries for the year ended December 31, 1998, were audited by other auditors whose report thereon dated February 5, 1999, expressed an unqualified opinion on those statements. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on a test basis evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Jackson National Life Insurance Company and Subsidiaries as of December 31, 2000 and 1999, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. As discussed more fully in note 2 to the financial statements, effective January 1, 1999, Jackson National Life Insurance Company adopted Statement of Position 97-3, "Accounting by Insurance Companies and Other Enterprises for Insurance Related Assessments." February 2, 2001 Consolidated Balance Sheet (In thousands, except share information) --------------------------------------------------------------------------------
December 31, Assets 2000 1999 Investments: Cash and short-term investments $ 2,023,306 $ 2,162,340 Investments available for sale, at market value: Fixed maturities (amortized cost: 2000, $28,275,776; 1999, 27,296,281 26,233,916 $27,325,447) Equities (cost: 2000, $471,236; 1999, $443,781) 479,279 497,096 Mortgage loans, net of allowance 4,660,215 3,537,102 Policy loans 687,245 675,643 Other invested assets 921,572 746,599 ----------------------------------- Total investments 36,067,898 33,852,696 Accrued investment income 480,590 445,241 Deferred acquisition costs 2,187,936 2,000,305 Reinsurance recoverable 358,131 328,010 Deferred income taxes 240,389 298,215 Value of acquired insurance and goodwill 191,793 141,893 Income taxes receivable from Parent 9,117 - Other assets 161,453 159,381 Variable annuity assets 5,585,638 4,522,188 ----------------------------------- Total assets $ 45,282,945 $ 41,747,929 =================================== Liabilities and Stockholder's Equity Liabilities Policy reserves and liabilities: Reserves for future policy benefits and claims payable $ 905,128 $ 901,710 Deposits on investment contracts 24,776,433 25,339,544 Guaranteed investment contracts 4,286,503 4,658,339 Trust instruments supported by funding agreements 2,867,497 997,973 Savings deposits 732,211 105,929 Reverse repurchase agreements 1,095,623 1,439,334 Notes and bank debt 671,712 282,884 Securities lending payable 678,000 288,000 Income taxes payable to Parent - 179,123 Other liabilities 636,005 572,047 Variable annuity liabilities 5,585,638 4,522,188 ----------------------------------- Total liabilities 42,234,750 39,287,071 ----------------------------------- Minority interest - 117,759 ----------------------------------- Stockholder's Equity Capital stock, $1.15 par value; authorized 50,000 shares; issued and outstanding 12,000 shares 13,800 13,800 Additional paid-in capital 1,570,063 1,360,982 Accumulated other comprehensive loss net of tax of ($229,971) in 2000 and ($250,835) in 1999 (427,088) (465,836) Retained earnings 1,773,661 1,551,912 ----------------------------------- Total stockholder's equity 2,930,436 2,460,858 ----------------------------------- Total liabilities and stockholder's equity $ 45,282,945 $ 41,747,929 ===================================
Consolidated Income Statement (In thousands) --------------------------------------------------------------------------------
Years Ended December 31, 2000 1999 1998 ----------------- ----------------- ------------------ Revenues Premiums $ 230,801 $ 258,311 $ 263,686 Net investment income 2,610,983 2,476,196 2,478,277 Net realized investment gains (losses) (120,855) 44,318 69,446 Fee income: Mortality charges 133,969 134,744 136,040 Surrender charges 80,075 72,601 76,878 Expense charges 17,820 17,481 19,217 Variable annuity fees 75,905 41,521 21,411 Net asset management fees 24,344 13,118 7,044 Net retained commissions - - 396 ----------------- ----------------- ------------------ Total fee income 332,113 279,465 260,986 Other income 39,821 37,286 32,974 ----------------- ----------------- ------------------ Total revenues 3,092,863 3,095,576 3,105,369 ----------------- ----------------- ------------------ Benefits and Expenses Death benefits 317,350 289,220 284,753 Interest credited on deposit liabilities 1,591,921 1,637,478 1,664,133 Interest expense on notes, bank debt and reverse repurchase agreements 94,544 73,991 121,035 Interest expense on trust instruments supported by funding agreements 155,192 28,480 - Decrease in reserves, net of reinsurance (47,448) (32,199) (20,712) Commissions 361,672 312,213 208,177 General and administrative expenses 234,452 214,620 183,374 Deferral of policy acquisition costs (429,358) (360,205) (251,166) Amortization of acquisition costs: Attributable to operations 237,416 210,248 194,045 Attributable to net realized investment gains (15,491) 15,798 24,096 (losses) Amortization of acquired insurance and goodwill 18,586 16,041 14,895 ----------------- ----------------- ------------------ Total benefits and expenses 2,518,836 2,405,685 2,422,630 ----------------- ----------------- ------------------ Pretax income before minority interest 574,027 689,891 682,739 Minority interest 40,227 - - ----------------- ----------------- ------------------ Pretax income 614,254 689,891 682,739 Federal income tax expense 216,200 241,500 239,000 ----------------- ----------------- ------------------ Income before cumulative effect of change in accounting principle 398,054 448,391 443,739 Cumulative effect of change in accounting principle - 17,884 - ----------------- ----------------- ------------------ Net Income $ 398,054 $ 466,275 $ 443,739 ================= ================= ================== Pro forma net income assuming the change in accounting principle is applied retroactively $ 448,391 $ 437,811 ================= ==================
Consolidated Statement of Stockholder's Equity and Comprehensive Income (In thousands) --------------------------------------------------------------------------------
Years Ended December 31, 2000 1999 1998 ------------------- ------------------- -------------------- Common stock, beginning and end of year $ 13,800 $ 13,800 $ 13,800 ------------------- ------------------- -------------------- Additional paid-in capital Beginning of year 1,360,982 1,360,982 832,982 Capital contributions 209,081 - 528,000 ------------------- ------------------- -------------------- End of year 1,570,063 1,360,982 1,360,982 ------------------- ------------------- -------------------- Accumulated other comprehensive income (loss) Beginning of year (465,836) 325,273 440,537 Net unrealized investment (losses) gains, net of reclassification adjustment and net of tax of $20,864 in 2000, $(425,982) in 1999, and $(62,065)in 1998 38,748 (791,109) (115,264) ------------------- ------------------- -------------------- End of year (427,088) (465,836) 325,273 ------------------- ------------------- -------------------- Retained earnings Beginning of year 1,551,912 1,181,947 1,327,830 Net income 398,054 466,275 443,739 Dividends paid to stockholder (176,305) (96,310) (589,622) ------------------- ------------------- -------------------- End of year 1,773,661 1,551,912 1,181,947 ------------------- ------------------- -------------------- Total stockholder's equity $ 2,930,436 $ 2,460,858 $ 2,882,002 =================== =================== ====================
Years Ended December 31, 2000 1999 1998 ------------------- ------------------- ------------------ Comprehensive income (loss) Net income $ 398,054 $ 466,275 $ 443,739 Net unrealized holding gains (losses) arising during the period, net of tax of $24,218 in 2000, $(398,646) in 1999 and $(41,366) in 1998 44,976 (740,343) (76,823) Reclassification adjustment for gains (losses) included in net income, net of tax of $(3,354) in 2000, (6,228) (50,766) (38,441) $(27,336) in 1999 and $(20,699) in 1998 ------------------- ------------------- ------------------ Comprehensive income (loss) $ 436,802 $ (324,834) $ 328,475 =================== =================== ==================
Consolidated Statement of Cash Flows (In thousands) --------------------------------------------------------------------------------
Years Ended December 31, 2000 1999 1998 ---------------- ---------------- ----------------- Cash flows from operating activities: Net income $ 398,054 $ 466,275 $ 443,739 Adjustments to reconcile net income to net cash provided by operating activities: Net realized investment (gains) losses 120,855 (44,318) (69,446) Interest credited on deposit liabilities 1,591,921 1,637,478 1,664,133 Interest expense on trust instruments supported by funding agreements 155,192 28,480 - Other charges (231,864) (224,826) (253,546) Amortization of discount and premium on investments (23,962) (69,919) (104,586) Deferred income tax provision 37,000 104,600 42,100 Change in: Accrued investment income (35,349) (17,944) (40,885) Deferred acquisition costs (207,433) (123,659) (33,025) Value of acquired insurance and goodwill 18,586 16,041 14,895 Income taxes payable to Parent 20,841 887 34,941 Other assets and liabilities, net (21,647) 52,830 (100,244) ---------------- ---------------- ----------------- Net cash provided by operating activities 1,822,194 1,825,925 1,598,076 ---------------- ---------------- ----------------- Cash flows from investing activities: Sales of fixed maturities and equities available for sale 3,877,665 5,374,124 6,923,936 Principal repayments, maturities, calls and redemptions: Fixed maturities available for sale 912,953 2,426,270 1,020,281 Mortgage loans 280,820 113,545 127,201 Purchases of: Fixed maturities and equities available for sale (5,915,958) (8,677,736) (8,847,509) Mortgage loans (930,007) (1,071,678) (1,008,131) Acquisition of Highland Federal Bank (43,349) - - Other investing activities 149,523 15,873 (769,833) ---------------- ---------------- ----------------- Net cash used by investing activities (1,668,353) (1,819,602) (2,554,055) ---------------- ---------------- ----------------- Cash flows from financing activities: Policyholders account balances: Deposits 7,578,354 7,211,159 5,185,920 Withdrawals (6,176,725) (5,723,094) (4,306,150) Net transfers to separate accounts (1,901,367) (1,755,761) (509,182) Proceeds from notes and bank debt 374,384 33,700 - Payments on notes and bank debt (167,213) - - Increase in savings deposits 175,997 (1,095) 1,268 Payment of cash dividends to Parent (176,305) (96,310) (589,622) Capital contribution from Parent - - 528,000 ---------------- ---------------- ----------------- Net cash (used) provided by financing activities (292,875) (331,401) 310,234 ---------------- ---------------- ----------------- Net decrease in cash and short-term investments (139,034) (325,078) (645,745) Cash and short-term investments, beginning of year 2,162,340 2,487,418 3,133,163 ---------------- ---------------- ----------------- Cash and short-term investments, end of year $ 2,023,306 $ 2,162,340 $ 2,487,418 ================ ================ =================
Jackson National Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements December 31, 2000 -------------------------------------------------------------------------------- 1. Nature of Operations Jackson National Life Insurance Company (the "Company" or "JNL") is wholly owned by Brooke Life Insurance Company ("Brooke Life" or the "Parent") which is ultimately a wholly owned subsidiary of Prudential plc ("Prudential"), London, England. JNL, together with its New York subsidiary, is licensed to sell group and individual annuity products, including immediate, indexed and deferred fixed annuities, variable annuities, guaranteed investment contracts ("GICs"), and individual life insurance products in all 50 states and the District of Columbia. The accompanying consolidated financial statements include JNL and its wholly owned subsidiaries, Jackson National Life Insurance Company of New York, an insurance company; Chrissy Corporation, an advertising agency; Jackson National Financial Services, LLC, an investment advisor and transfer agent; Jackson National Life Distributors, Inc., a broker dealer; JNL Thrift Holdings, Inc., a unitary thrift holding company; PPM America Special Investments Fund, L.P. ("SIF I") and PPM America Special Investments CBO II, L.P. ("CBO II"), (collectively, "PPMA Funds"). The Company has historically accounted for its investment in the PPMA Funds using the equity method. As a result of corporate restructuring in 2000, JNL obtained effective managerial control of the PPMA Funds. Accordingly, the PPMA Funds are consolidated in 2000 in the accompanying financial statements. JNL owns a 72.0% interest in SIF I and a 15.1% interest in CBO II. The minority interest reflected in the accompanying financial statements reflects the interests of other parties in the PPMA Funds. On November 10, 1998, JNL Thrift Holdings, Inc. completed its acquisition of First Federal Savings and Loan Association of San Bernardino, a thrift located in San Bernardino, California. Following the acquisition, the thrift was renamed Jackson Federal Bank ("Jackson Federal"). On September 29, 2000 Jackson Federal acquired and merged with Highland Federal Bank ("Highland"), a bank located in California. The acquisitions were accounted for by the purchase method and the results of Jackson Federal and Highland are included in the consolidated income statement from the respective dates of acquisition. 2. Summary of Significant Accounting Policies Basis of Presentation The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). All significant intercompany accounts and transactions have been eliminated in consolidation. Certain prior year amounts have been reclassified to conform with the current year presentation. The preparation of the financial statements in conformity with GAAP requires the use of estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. Actual results may differ from those estimates. Change in Accounting Principles Effective January 1, 1999, JNL adopted Statement of Position 97-3, "Accounting by Insurance Companies and Other Enterprises for Insurance-Related Assessments" ("SOP 97-3"). SOP 97-3 establishes accounting standards for guaranty fund and other insurance related assessments. Under SOP 97-3, the Company establishes an asset for premium tax offsets and policy surcharges at the time of the assessment if certain circumstances exist. Previously, no asset was recorded for premium tax offsets. The adoption of SOP 97-3 is treated as a cumulative effect of a change in accounting principle and prior periods have not been restated. The cumulative effect of the change totaling $38.0 million, net of deferred acquisition cost amortization of $10.5 million and federal income taxes of $9.6 million is included in net income in 1999. Effective January 1, 1999, JNL adopted Statement of Position 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." The impact of adoption was not material. 2. Summary of Significant Accounting Policies (continued) Recently Issued Accounting Standards In June 1998, the Financial Accounting Standards Board issued Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("FAS 133"). FAS 133, as amended by Statement No. 137 and 138, is effective for fiscal years beginning after June 15, 2000 and establishes accounting and reporting standards for derivative instruments and for hedging activities. Under FAS 133, all derivative instruments, including certain derivative instruments embedded in other contracts, will be recognized as either assets or liabilities in the balance sheet at their fair values, and changes in such fair values must be recognized immediately in earnings unless specific hedging criteria are met. The Company will adopt this Statement effective January 1, 2001. Upon adoption, a net transitional adjustment based on the aggregate fair value of the Company's derivative instruments as of December 31, 2000 will be recorded as a cumulative effect of a change in accounting principle. Currently, the Company is continuing its analysis of the impact of FAS 133 on its financial statements. Net earnings in 2001 and future years are likely to reflect significantly increased volatility owing to fair value fluctuations on certain derivative instruments, particularly interest rate swaps, that are regularly used to manage risks associated with movements in interest rates. As noted, the fair value of derivative contracts will now be reflected in income while the largely offsetting change in fair value of the Company's investments will remain as an adjustment to equity in the balance sheet as unrealized gain and losses. Comprehensive Income Comprehensive income includes all changes in stockholder's equity (except those arising from transactions with owners/shareholders) and, in the Company's case, includes net income and net unrealized gains or losses on securities. Investments Cash and short-term investments, which primarily include commercial paper and money market instruments, are carried at cost. These investments have maturities of three months or less and are considered cash equivalents for reporting cash flows. Fixed maturities consist of debt securities and commercial loans. Debt securities include bonds, notes, redeemable preferred stocks, mortgage-backed securities and structured securities. All debt securities are considered available for sale and are carried at fair value. Debt securities are reduced to estimated net realizable value for declines in fair value considered to be other than temporary. Commercial loans include certain term and revolving notes, as well as certain receivables arising from asset based lending activities. Commercial loans are carried at outstanding principal balances, less an allowance for loan losses. Equity securities, which include common stocks and non-redeemable preferred stocks, are carried at fair value. Equity securities are reduced to estimated net realizable value for declines in fair value considered to be other than temporary. Mortgage loans are carried at aggregate unpaid principal balances, net of unamortized discounts and premiums and an allowance for loan losses. The allowance for loan losses is maintained at a level considered adequate to absorb losses inherent in the mortgage loan portfolio. Policy loans are carried at the unpaid principal balances. Real estate is carried at the lower of depreciated cost or fair value. Limited partnership investments are accounted for using the equity method. Realized gains and losses on the sale of investments are recognized in income at the date of sale and are determined using the specific cost identification method. Acquisition premiums and discounts on investments are amortized to investment income using call or maturity dates. The changes in unrealized gains or losses on investments classified as available for sale, net of tax and the effect of the deferred acquisition costs adjustment, are excluded from net income and included as a component of comprehensive income and stockholder's equity. 2. Summary of Significant Accounting Policies (continued) Derivative Financial Instruments The Company enters into financial derivative transactions, including swaps, put-swaptions, futures and options to reduce and manage business risks. These transactions manage the risk of a change in the value, yield, price, cash flows, or quantity of, or a degree of exposure with respect to assets, liabilities, or future cash flows, which the Company has acquired or incurred. Hedge accounting practices are supported by cash flow matching, duration matching and scenario testing. Interest rate swap agreements generally involve the exchange of fixed and floating payments over the life of the agreement without an exchange of the underlying principal amount. Interest rate swap agreements outstanding at December 31, 2000 and 1999 hedge available for sale securities and are carried at fair value with the change in value reflected in comprehensive income and stockholder's equity. Amounts paid or received on interest rate swap agreements are included in investment income. Accrued amounts payable to or receivable from counterparties are included in other liabilities or other assets. Realized gains and losses from the settlement or termination of the interest rate swaps are deferred and amortized over the life of the specific hedged assets as an adjustment to the yield. Purchased put-swaptions provide the Company with the right, but not the obligation, to require the writers to pay the Company the present value of a long duration interest rate swap at future exercise dates. These put-swaptions are entered into as a hedge against significant upward movements in interest rates. Premiums paid for put-swaption contracts are included in other invested assets and are being amortized to investment income over the remaining terms of the contracts with maturities of up to 9 years. Put-swaptions, designated as a hedge of available for sale securities, are carried at fair value with the change in value reflected in comprehensive income and stockholder's equity. Equity index futures contracts and equity index call options are used to hedge the Company's obligations associated with its issuance of equity index-linked immediate and deferred annuities. The variation margin on futures contracts is deferred and, upon closing of the contracts, adjusts the basis of option contracts purchased. Premiums paid for call options, adjusted for the effects of hedging, are included in net investment income ratably over the terms of the options. The call option contracts are included in other invested assets and are carried at intrinsic value. Cross-currency swaps, which embody spot and forward currency swaps and additionally, in some cases, interest rate swaps, are entered into for the purpose of hedging the Company's foreign currency denominated funding agreements supporting Trust instrument obligations. Cross-currency swaps are included in other assets at cost adjusted for transaction gains or losses using exchange rates as of the reporting date. Unrealized foreign currency transaction gains and losses related to hedging activities are excluded from net income. Derivative financial instruments are held primarily for hedging purposes. High yield bond index swaps and equity index derivatives, including swaps and futures, and emerging market bond index swaps were held for investment purposes in 1998. The Company manages the potential credit exposure for over-the-counter derivative contracts through careful evaluation of the counterparty credit standing, collateral agreements, and master netting agreements. The Company is exposed to credit-related losses in the event of nonperformance by counterparties, however, it does not anticipate nonperformance. Deferred Acquisition Costs Certain costs of acquiring new business, principally commissions, bonus interest on certain products and certain costs associated with policy issue and underwriting, which vary with and are primarily related to the production of new business, have been capitalized as deferred acquisition costs. Deferred acquisition costs are increased by interest thereon and amortized in proportion to anticipated premium revenues for traditional life policies and in proportion to estimated gross profits for annuities and interest-sensitive life products. As certain fixed maturities and equity securities available for sale are carried at fair value, an 2. Summary of Significant Accounting Policies (continued) adjustment is made to deferred acquisition costs equal to the change in amortization that would have occurred if such securities had been sold at their stated fair value and the proceeds reinvested at current yields. The change in this adjustment is included with the change in fair value of fixed maturities and equity securities available for sale, net of tax, that is credited or charged directly to stockholder's equity and is a component of other comprehensive income. Deferred acquisition costs have been increased by $300.2 million at December 31, 2000 and $320.0 million at December 31, 1999 to reflect this change. Value of Acquired Insurance and Goodwill The value of acquired insurance in-force at acquisition date represents the present value of anticipated profits of the business in-force on November 25, 1986 (the date the Company was acquired by Prudential) net of amortization. The value of acquired insurance in-force is amortized in proportion to anticipated premium revenues for traditional life insurance contracts and estimated gross profits for annuities and interest-sensitive life products over a period of 20 years. Goodwill includes both goodwill and core deposit intangibles and represents the excess of purchase price over the fair value of assets acquired in the purchase of Jackson Federal and Highland. Jackson Federal had total assets of $110.0 million and deposits of $105.8 million at the date of the acquisition. Highland had total assets of $692.0 million and deposit liabilities of $450.2 million at the date of acquisition in 2000. For these acquisitions, the excess of the purchase price over the fair value of the assets acquired was allocated to goodwill and core deposit intangibles. The core deposit intangibles are amortized over 7 years and goodwill is amortized over 15 years. Federal Income Taxes The Company provides deferred income taxes on the temporary differences between the tax and financial statement basis of assets and liabilities. JNL files a consolidated federal income tax return with Brooke Life and Jackson National Life Insurance Company of New York. The non-life insurance company subsidiaries file separate federal income tax returns. Income tax expense is calculated on a separate company basis. Policy Reserves and Liabilities Reserves for future policy benefits: For traditional life insurance contracts, reserves for future policy benefits are determined using the net level premium method and assumptions as of the issue date as to mortality, interest, policy lapsation and expenses plus provisions for adverse deviations. Mortality assumptions range from 50% to 90% of the 1975-1980 Basic Select and Ultimate tables depending on underwriting classification and policy duration. Interest rate assumptions range from 6.0% to 9.5%. Lapse and expense assumptions are based on Company experience. Deposits on investment contracts: For the Company's interest-sensitive life contracts, reserves approximate the policyholder's accumulation account. For deferred annuity, variable annuity, guaranteed investment contracts and other investment contracts, the reserve is the policyholder's account value. The reserve for equity index-linked annuities is based on two components, i) the guaranteed contract value, and ii) the intrinsic value of the option component of the contract as of the valuation date. Obligations in excess of the guaranteed contract value are hedged through the use of futures contracts and call options. Trust Instruments Supported by Funding Agreements In 1999, JNL and Jackson National Life Funding, LLC established an initial $2 billion aggregate European Medium Term Note program. Jackson National Life Funding, LLC was formed as a special purpose vehicle solely for the purposes of issuing instruments to institutional investors, the proceeds of which are deposited with JNL and secured by the issuance of Funding Agreements. Instruments issued representing obligations denominated in a foreign currency have been hedged for changes in exchange rates using cross-currency swaps. 2. Summary of Significant Accounting Policies (continued) Trust instrument liabilities are adjusted to reflect the effects of foreign currency transaction gains and losses using exchange rates as of the reporting date. Unrealized foreign currency transaction gains and losses are excluded from net income. Variable Annuity Assets and Liabilities The assets and liabilities resulting from individual variable annuity contracts which aggregated $5,528.6 million and $4,461.2 million at December 31, 2000 and 1999, respectively, are segregated in separate accounts. The Company receives administrative fees for managing the funds and other fees for assuming mortality and certain expense risks. Such fees are recorded as earned and included in variable annuity fees and net asset management fees in the consolidated income statement. The Company has issued a group variable annuity contract designed for use in connection with and issued to the Company's Defined Contribution Retirement Plan. These deposits are allocated to the Jackson National Separate Account - II and aggregated $57.0 million and $61.0 million at December 31, 2000 and 1999, respectively. The Company receives administrative fees for managing the funds and these fees are recorded as earned and included in net asset management fees in the consolidated income statement. Savings Deposits Savings deposits are comprised of banking deposits held by Jackson Federal, and include demand deposits, passbook savings, money market checking and savings and certificates of deposit. Savings deposit liabilities are reported at the outstanding balance of the accounts. Revenue and Expense Recognition Premiums for traditional life insurance are reported as revenues when due. Benefits, claims and expenses are associated with earned revenues in order to recognize profit over the lives of the contracts. This association is accomplished by provisions for future policy benefits and the deferral and amortization of acquisition costs. Deposits on interest-sensitive life products and investment contracts, principally deferred annuities and guaranteed investment contracts, are treated as policyholder deposits and excluded from revenue. Revenues consist primarily of the investment income and charges assessed against the policyholder's account value for mortality charges, surrenders and administrative expenses. Fee income also includes revenues related to asset management fees and net retained commissions. Surrender benefits are treated as repayments of the policyholder account. Annuity benefit payments are treated as reductions to the policyholder account. Death benefits in excess of the policyholder account are recognized as an expense when incurred. Expenses consist primarily of the interest credited to policyholder deposits. Underwriting expenses are associated with gross profit in order to recognize profit over the life of the business. This is accomplished by deferral and amortization of acquisition costs. 3. Fair Value of Financial Instruments The following summarizes the basis used by the Company in estimating its fair value disclosures for financial instruments: Cash and Short-Term Investments: Carrying value is considered to be a reasonable estimate of fair value. Fixed Maturities: Fair values for fixed maturities securities are based principally on quoted market prices, if available. For securities that are not actively traded, fair values are estimated using independent pricing services or analytically determined values. Equity Securities: Fair values for common and non-redeemable preferred stock are based principally on quoted market prices, if available. For securities that are not actively traded, fair values are estimated using independent pricing services or analytically determined values. 3. Fair Value of Financial Instruments (continued) Mortgage Loans: Fair values are determined by discounting the future cash flows to the present at current market rates. The fair value of mortgages approximated $5,101.1 million and $3,514.9 million at December 31, 2000 and 1999, respectively. Policy Loans: Fair value approximates carrying value since policy loan balances reduce the amount payable at death or surrender of the contract. Derivatives: Fair values are based on quoted market prices, estimates received from financial institutions, or valuation models. Variable Annuity Assets: Variable annuity assets are carried at the market value of the underlying securities. Annuity Reserves: Fair values for immediate annuities, without mortality features, are derived by discounting the future estimated cash flows using current interest rates for similar maturities. For deferred annuities, fair value is based on surrender value. The carrying value and fair value of such annuities approximated $19.6 billion and $18.7 billion, respectively, at December 31, 2000, and $20.2 billion and $19.2 billion, respectively, at December 31, 1999. Reserves for Guaranteed Investment Contracts: Fair value is based on the present value of future cash flows at current pricing rates. The fair value approximated $4.3 billion and $4.7 billion at December 31, 2000 and 1999, respectively. Trust Instruments Supported by Funding Agreements: Fair value is based on the present value of future cash flows at current pricing rates. The fair value approximated $2.9 billion and $1.0 billion at December 31, 2000 and 1999, respectively. Savings Deposits: Fair value of deposit accounts with no stated maturity (demand deposits, regular passbook and money market accounts) is equal to their carrying amounts. Fair value of certificates of deposit is based on the discounted value of contractual cash flows. The fair value approximated $732.3 million and $105.4 million at December 31, 2000 and 1999, respectively. Reverse Repurchase Agreements: Carrying value of reverse repurchase agreements is considered to be a reasonable estimate for fair value. Notes and Bank Debt: Fair value of notes and bank debt is based on the present value of future cash flows at current interest rates. Variable Annuity Liabilities: Fair value of contracts in the accumulation phase is based on account value less surrender charges. Fair values of contracts in the payout phase are based on the present value of future cash flows at assumed investment rates. The fair value approximated $5,314.7 million and $4,336.8 million at December 31, 2000 and 1999, respectively. 4. Investments Investments are comprised primarily of fixed-income securities, primarily publicly-traded industrial, mortgage-backed, utility and government bonds, and mortgage and commercial loans. Mortgage-backed securities include asset-backed and other structured securities. The Company generates the majority of its deposits from interest-sensitive individual annuity contracts, life insurance products, and guaranteed investment contracts on which it has committed to pay a declared rate of interest. The Company's strategy of investing in fixed-income securities and loans aims to ensure matching of the asset yield with the interest-sensitive liabilities and to earn a stable return on its investments. Fixed Maturities The following table sets forth fixed maturity investments at December 31, 2000, classified by rating categories as assigned by nationally recognized statistical rating organizations, the National Association of Insurance Commissioners ("NAIC"), or if not rated by such organizations, the Company's investment advisor. At December 31, 2000, investments rated by the Company's investment advisor totaled $717.8 million. For purposes of the table, if not otherwise rated higher by a nationally recognized statistical rating organization, NAIC Class 1 investments are included in the A rating; Class 2 in BBB; Class 3 in BB and Classes 4 through 6 in B and below. Percent of Total Investment Rating Assets -------------------- AAA 12.8% AA 1.9 A 16.4 BBB 21.9 -------------------- Investment grade 53.0 -------------------- BB 3.8 B and below 3.5 -------------------- Below investment grade 7.3 -------------------- Total fixed maturities 60.3 -------------------- Other assets 39.7 -------------------- Total assets 100.0% ==================== At December 31, 2000, the amortized cost and carrying value of fixed maturities in default that were anticipated to be income producing when purchased were $121.1 million and $27.4 million, respectively. 4. Investments (continued) The amortized cost and estimated fair value of fixed maturities are as follows (in thousands):
Gross Gross Estimated Amortized Unrealized Unrealized Fair December 31, 2000 Cost Gains Losses Value U.S. Treasury securities $ 4,623 $ 138 $ - $ 4,761 U.S. Government agencies and foreign governments 108,157 2,278 5,416 105,019 Public utilities 504,853 4,219 12,983 496,089 Corporate securities and commercial loans 16,957,873 241,934 1,179,355 16,020,452 Mortgage-backed securities 10,700,270 131,446 161,756 10,669,960 ---------------------------------------------------------------------------- Total $ 28,275,776 $ 380,015 $ 1,359,510 $ 27,296,281 ============================================================================ Gross Gross Estimated Amortized Unrealized Unrealized Fair December 31, 1999 Cost Gains Losses Value U.S. Treasury securities $ 9,974 $ 17 $ 380 $ 9,611 U.S. Government agencies and foreign governments 282,938 13,276 2,559 293,655 Public utilities 547,355 5,419 25,850 526,924 Corporate securities and commercial loans 15,304,146 126,822 787,942 14,643,026 Mortgage-backed securities 11,181,034 22,677 443,011 10,760,700 ---------------------------------------------------------------------------- Total $ 27,325,447 $ 168,211 $ 1,259,742 $ 26,233,916 ============================================================================
Gross unrealized gains pertaining to equity securities at December 31, 2000 and 1999 were $65.0 million and $83.3 million, respectively. Gross unrealized losses at December 31, 2000 and 1999 were $57.0 million and $30.0 million, respectively. The amortized cost and estimated fair value of fixed maturities at December 31, 2000, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without early redemption penalties.
Fixed maturities (in thousands): Amortized Estimated Cost Fair Value -------------------- ---------------------- Due in 1 year or less $ 248,037 $ 262,048 Due after 1 year through 5 years 4,635,748 4,426,226 Due after 5 years through 10 years 7,497,074 7,057,349 Due after 10 years through 20 years 2,389,543 2,233,314 Due after 20 years 2,805,104 2,647,384 Mortgage-backed securities 10,700,270 10,669,960 -------------------- ---------------------- Total $ 28,275,776 $ 27,296,281 ==================== ======================
Acquisition discounts and premiums on mortgage-backed securities are amortized over the estimated redemption period using the effective interest method. Effective yields, which are used to calculate amortization, are adjusted periodically to reflect actual payments to date and anticipated future payments. Resulting adjustments to carrying values are included in investment income. 4. Investments (continued) Fixed maturities with a carrying value of $3.1 million and $2.7 million were on deposit with regulatory authorities at December 31, 2000 and 1999, respectively, as required by law in various states in which business is conducted. Mortgage Loans Mortgage loans, net of allowance for loan losses of $33.4 million and $15.4 million at December 31, 2000 and 1999, respectively, are as follows (in thousands):
December 31, 2000 1999 ------------------ ------------------ Residential $ 652,519 $ 103,869 Commercial 4,007,696 3,433,233 ------------------ ------------------ Total $ 4,660,215 $ 3,537,102 ================== ==================
At December 31, 2000, mortgage loans were collateralized by properties located in 38 states and Canada. Approximately 26% of the aggregate carrying value of the portfolio is secured by properties located in California. Other Invested Assets Other invested assets consist primarily of investments in limited partnerships that invest in securities. Limited partnership income recognized by the Company was $73.5 million, $34.3 million and $10.2 million in 2000, 1999 and 1998, respectively. At December 31, 2000, the Company has unfunded commitments related to its investments in limited partnerships totaling $598.5 million. Derivatives The fair value of derivatives reflects the estimated amounts that the Company would receive or pay upon sale or termination of the contracts, net of payment accruals, at the reporting date. With respect to swaps and put-swaptions, the notional amount represents the stated principal balance used as a basis for calculating payments. With respect to futures and options, the contractual amount represents the market exposure of outstanding positions. A summary of the aggregate contractual or notional amounts, estimated fair values and gains and losses for derivative financial instruments outstanding is as follows (in thousands):
December 31, 2000 1999 Contractual/ Contractual/ Notional Fair Gain/ Notional Fair Gain/ Amount Value (Loss) Amount Value (Loss) Interest rate swaps $ 7,375,000 $ (215,979) $ (216,947) $ 4,610,000 $ 19,878 $ 19,878 Cross-currency swaps 2,085,701 (135,919) 808,572 (61,472) (61,472) (135,919) Put-swaptions 23,000,000 17,305 29,500,000 14,792 1,706 3,713 Futures 88,694 - (5,470) 62,557 - 4,633 Call options 1,716,003 556,739 119,729 1,501,075 628,836 339,321
During 2000, 1999, and 1998, the Company recorded net expenses of $65.5 million, $29.9 million, and $20.2 million, respectively, on derivative instruments. Included in these amounts was a loss of $6.1 million in 1998 related to investment activity. During 1999 and 1998, the Company also incurred realized losses of $81.2 thousand on the termination of interest rate swaps and $10.1 million on the termination of emerging market bond index swaps, respectively. The average notional amount of swaps outstanding was $8.1 billion and $4.6 billion in 2000 and 1999, respectively. 4. Investments (continued) Securities Lending The Company has entered into a securities lending agreement with an agent bank whereby blocks of securities are loaned to third parties, primarily major brokerage firms. As of December 31, 2000 and 1999, the estimated fair value of loaned securities was $662.2 million and $313.8 million, respectively. The agreement requires a minimum of 102 percent of the fair value of the loaned securities as collateral, calculated on a daily basis. To further minimize the credit risks related to this program, the financial condition of counterparties is monitored on a regular basis. Cash collateral received in the amount of $678.0 million and $288.0 million at December 31, 2000 and 1999, respectively, was invested by the agent bank and included in short-term investments of the Company. A securities lending payable is included in liabilities for cash collateral received. 5. Investment Income and Realized Gains and Losses The sources of net investment income by major category are as follows (in thousands):
Years ended December 31, 2000 1999 1998 ----------------- ------------------ ------------------ Fixed maturities $ 2,136,323 $ 2,094,557 $ 2,160,543 Other investment income 513,478 420,764 360,846 ----------------- ------------------ ------------------ Total investment income 2,649,801 2,515,321 2,521,389 Less investment expenses (38,818) (39,125) (43,112) ----------------- ------------------ ------------------ Net investment income $ 2,610,983 $ 2,476,196 $ 2,478,277 ================= ================== ==================
Net realized investment gains and losses are as follows (in thousands):
Years ended December 31, 2000 1999 1998 ----------------- ------------------ ------------------ Sales of fixed maturities Gross gains $ 43,458 $ 99,131 $ 120,325 Gross losses (55,497) (28,163) (29,121) Sales of equity securities Gross gains 32,577 54,849 25,682 Gross losses (1,520) (228) (100) Impairment losses (141,079) (77,076) (31,532) Other invested assets, net 1,206 (4,195) (15,808) ----------------- ------------------ ------------------ Total before minority interest (120,855) 44,318 69,446 Minority interest 49,821 - - ----------------- ------------------ ------------------ Total $ (71,034) $ 44,318 $ 69,446 ================= ================== ==================
6. Value of Acquired Insurance and Goodwill The value of acquired insurance in-force at acquisition date represents the present value of anticipated profits of the business in-force on November 25, 1986 (the date the Company was acquired by Prudential). The value of acquired insurance in-force was determined by using assumptions as to interest, persistency and mortality. Profits were then discounted to arrive at the value of the insurance in-force. Goodwill includes both goodwill and core deposit intangibles and represents the excess of purchase price over the fair value of assets acquired in the purchases of Jackson Federal and Highland. The amortization of acquired insurance and goodwill was as follows (in thousands):
Years ended December 31, 2000 1999 1998 ----------------- ----------------- ----------------- Value of insurance in force: Balance, beginning of year $ 138,734 $ 154,402 $ 169,245 Interest, at rates varying from 6.5% to 9.5% 12,201 13,690 15,095 Amortization (28,723) (29,358) (29,938) ----------------- ----------------- ----------------- Balance, end of year $ 122,212 $ 138,734 $ 154,402 ================= ================= ================= Goodwill: Balance, beginning of year $ 3,159 $ 3,774 $ - Acquisitions and adjustments 68,486 (242) 3,826 Amortization (2,064) (373) (52) ----------------- ----------------- ----------------- Balance, end of year $ 69,581 $ 3,159 $ 3,774 ================= ================= ================= Value of insurance in force and goodwill: Net amortization $ (18,586) $ (16,041) $ (14,895) ================= ================= ================= Balance, end of year $ 191,793 $ 141,893 $ 158,176 ================= ================= =================
The value of acquired insurance and goodwill estimated amortization is as follows (in thousands): 2001 $ 23,400 2002 24,500 2003 25,600 2004 26,900 2005 28,200 Thereafter 63,193 --------------- Total $ 191,793 =============== 7. Savings Deposits Savings deposits are as follows (in thousands):
December 31, 2000 1999 ---------------------------------- --------------------------------- Weighted Weighted Type Average Average Amount Rate Amount Rate ---------------- -------------- ------------- ----------------- Demand deposits $ 69,470 1.40% $ 7,979 .87% Regular passbook 33,844 2.16% 5,609 2.01% Money market checking and savings 49,174 3.56% 12,012 2.34% Certificates of deposit 579,723 6.05% 80,329 5.12% ---------- --------- --------- ----- $732,211 5.33% $105,929 4.42% ========== ========= ========= =====
The contractual maturities of certificates of deposit at December 31, 2000 were as follows: Years Ending December 31, 2001 $ 480,733 2002 87,266 2003 6,812 2004 4,071 Thereafter 841 ---------- $ 579,723 7. Savings Deposits (continued) Interest expense on deposit accounts is summarized as follows (in thousands):
Years ended December 31, -------------------------------------------- 2000 1999 ---------------- ---------------- Demand deposits, regular passbook and money market accounts $ 1,457 $ 497 Certificates of deposit 15,533 3,960 ---------------- ---------------- $ 16,990 $ 4,457 ================ ================
Certificates of deposit greater than $100,000 totaled approximately $146.2 million and $14.6 million at December 31, 2000 and 1999, respectively. 8. Notes and Bank Debt The aggregate carrying value and estimated fair value of notes and bank debt at December 31, 2000 and 1999 was as follows (in thousands):
2000 1999 ---------------------------- ---------------------------- Carrying Estimated Carrying Estimated Amount Fair Value Amount Fair Value Surplus notes $249,193 $249,800 $ 249,184 $ 248,800 Advances from the Federal Home Loan Bank 234,534 235,255 33,700 33,569 Debt of PPMA Funds 187,985 184,659 -- -- ---------------------------- ---------------------------- Total $671,712 $669,714 $ 282,884 $ 282,369 ============================ ============================
Surplus Notes On March 15, 1997, the Company issued 8.15% Notes (the "Notes") in the principal amount of $250 million due March 15, 2027. The Notes were issued pursuant to Rule 144A under the Securities Act of 1933, and are unsecured and subordinated to all present and future indebtedness, policy claims and other creditor claims. Under Michigan Insurance law, the Notes are not part of the legal liabilities of the Company and are considered capital and surplus for statutory reporting purposes. Payments of interest or principal may only be made with the prior approval of the Commissioner of Insurance of the State of Michigan and only out of surplus earnings which the Commissioner determines to be available for such payments under Michigan Insurance law. The Notes may not be redeemed at the option of the Company or any holder prior to maturity. Interest is payable semi-annually on March 15 and September 15 of each year. Interest paid on the Notes was $20.4 million in 2000, 1999 and 1998. Advances from the Federal Home Loan Bank Jackson Federal began utilizing the credit programs offered by the Federal Home Loan Bank ("FHLB") during 1999. FHLB advances, maturing in years through 2008, totaled $234.5 million and $33.7 million at December 31, 2000 and 1999, respectively, at weighted average interest rates of 6.22% and 5.93%, respectively. The advances are collateralized by mortgage loans and mortgage-backed securities totaling $407.4 million at December 31, 2000. Interest paid totaled $5.2 million and $0.5 million in 2000 and 1999, respectively. PPMA Funds As a result of the consolidation of the PPMA Funds in 2000, the related debt obligations of the funds are reflected in the Company's consolidated financial statements. SIF I has issued $70 million of 8.36% Subordinated Secured Notes ("SIF I Notes") due December 15, 2005. Interest is due semi-annually. The SIF I Notes are collateralized and secured pursuant to an Indenture between the issuer and Chase Bank of Texas, N.A., as trustee. The SIF I Notes may only be redeemed early under certain circumstances and require a make-whole payment by the issuer. 8. Notes and Bank Debt (continued) SIF I has also entered into a Senior Secured Credit Facility ("SIF I Facility") under which it may borrow up to $200 million. The SIF I Facility is a revolving extendable credit facility which matures June 15, 2004. Borrowings under the SIF I Facility bear interest at a variable rate. SIF I may choose rates based on the Eurodollar loan rate plus 1.75% per annum or the higher of the Prime lending rate of Bankers Trust Company and the Fed Funds effective rate plus .50% per annum. The outstanding borrowings in the December 31, 2000 financial statements bear interest rates ranging from 8.22% to 8.63%. CBO II has issued $70.95 million of 7.8% Subordinated Secured Notes ("CBO II Notes") due December 15, 2004. Interest is due semi-annually. The CBO II Notes are secured pursuant to an Indenture between the Issuer and Texas Commerce Bank, N.A., as trustee. The CBO II Notes may only be redeemed early under certain circumstances and require a make-whole payment by the issuer. CBO II has also entered into a Senior Secured Credit Facility ("CBO II Facility") under which it may borrow up to $236.5 million. The CBO II Facility is a revolving extendable credit facility which matures June 15, 2003. Borrowings under the CBO II Facility bear interest at a variable rate. CBO II may choose rates based on the Eurodollar loan rate plus 1.00% per annum or the higher of the Prime lending rate of Bankers Trust Company and the Fed Funds effective rate plus .50% per annum. The outstanding borrowings in the December 31, 2000 financial statements bear interest rates ranging from 7.38% to 8.13%. Outstanding debt balances on the PPMA Funds included in the December 31, 2000 financial statements are as follows (in thousands):
SIF I CBO II Total ----------------- ------------ ------------- Subordinated secured notes $ 25,000 $45,000 $ 70,000 Revolving credit facility 76,125 41,860 117,985 ----- ------ ---- ------ ---- ------- Total outstanding $ 101,125 $86,860 $187,985 ========= ======= ========
Interest expense on the debt totaled $24.2 million in 2000. 9. Reverse Repurchase Agreements During 2000, 1999 and 1998, the Company entered into reverse repurchase and dollar roll repurchase agreements (in 1998 only) whereby the Company agreed to sell and repurchase securities. These activities have been accounted for as financing transactions, with the assets and associated liabilities included in the consolidated balance sheet. Short-term borrowings under such agreements averaged $680.0 million and $987.8 million during 2000 and 1999, respectively, at weighted average interest rates of 6.52% and 5.39%, respectively. Interest paid totaled $44.3 million, $53.2 million and $100.2 million in 2000, 1999 and 1998, respectively. The highest level of short-term borrowings at any month end was $1.2 billion in 2000 and $1.5 billion in 1999. 10. Reinsurance The Company assumes and cedes reinsurance from and to other insurance companies in order to limit losses from large exposures; however, if the reinsurer is unable to meet its obligations, the originating issuer of the coverage retains the liability. The maximum amount of life insurance risk retained by the Company on any one life is generally $1.5 million. Amounts not retained are ceded to other companies on a yearly renewable-term or a coinsurance basis. 10. Reinsurance (continued) The effect of reinsurance on premiums is as follows (in thousands):
Years ended December 31, 2000 1999 1998 ------------------ ------------------ ----------------- Direct premiums $ 341,078 $ 361,367 $ 356,368 Assumed premiums 4,324 4,941 5,162 Less reinsurance ceded (114,601) (107,997) (97,844) ------------------ ------------------ ----------------- Total net premiums $ 230,801 $ 258,311 $ 263,686 ================== ================== =================
Components of the reinsurance recoverable asset are as follows (in thousands): December 31, 2000 1999 ------------------ ----------------- Ceded reserves $ 326,675 $ 289,034 Ceded claims liability 17,083 15,939 Ceded - other 14,373 23,037 ------------------ ----------------- Total $ 358,131 $ 328,010 ================== ================= Reserves reinsured through Brooke Life were $71.7 million and $76.4 million at December 31, 2000 and 1999, respectively. 11. Federal Income Taxes The components of the provision for federal income taxes are as follows (in thousands):
Years ended December 31, 2000 1999 1998 ----------------- ------------------------------ Current tax expense $ 179,200 $ 136,900 $ 196,900 Deferred tax expense 37,000 104,600 42,100 ----------------- ------------------------------ Provision for federal income taxes $ 216,200 $ 241,500 $ 239,000 ================= ==============================
The federal income tax provisions differ from the amounts determined by multiplying pretax income by the statutory federal income tax rate of 35% for 2000, 1999 and 1998 as follows (in thousands):
Years ended December 31, 2000 1999 1998 --------------- --------------- --------------- Income taxes at statutory rate $ 214,989 $ 241,462 $ 238,959 Other 1,211 38 41 --------------- Provision for federal income taxes $ 216,200 $ 241,500 $ 239,000 =============== =============== =============== Effective tax rate 35.2% 35.0% 35.0% =============== =============== ===============
Federal income taxes paid were $148.6 million, $147.4 million and $161.9 million, in 2000, 1999 and 1998, respectively. 11. Federal Income Taxes (continued) The tax effects of significant temporary differences that give rise to deferred tax assets and liabilities are as follows (in thousands):
Years ended December 31, 2000 1999 ------------------ ------------------ Gross deferred tax asset Policy reserves and other insurance items $ 615,201 $ 617,829 Difference between financial reporting and the tax basis of: Insolvency fund assessments 23,303 28,553 Net unrealized losses on available for sale securities 335,041 362,836 ------------------ ------------------ Total deferred tax asset 973,545 1,009,218 ------------------ ------------------ Gross deferred tax liability Deferred acquisition costs (627,253) (569,295) Difference between financial reporting and the tax basis of: Value of the insurance in-force (42,774) (48,557) Investment assets acquired (9,331) (40,499) Other assets (95) (6(37) Other, net (53,703) (52,615) ------------------ ------------------ Total deferred tax liability (733,156) (711,003) ------------------ ------------------ Net deferred tax asset $ 240,389 $ 298,215 ================== ==================
Management believes that it is more likely than not that the results of future operations will generate sufficient taxable income to realize the deferred tax asset. 12. Commitments and Contingencies The Company and its subsidiaries are involved in litigation arising in the ordinary course of business. It is the opinion of management that the ultimate disposition of such litigation will not have a material adverse affect on the Company's financial condition or results of operations. JNL has been named in civil litigation proceedings which appear to be substantially similar to other class action litigation brought against many life insurers alleging misconduct in the sale of insurance products. At this time, it is not possible to make a meaningful estimate of the amount or range of loss, if any, that could result from an unfavorable outcome in such actions. In addition, JNL is a defendant in several individual actions that involve similar issues, including a 1999 verdict against JNL for $32.5 million in punitive damages. JNL has appealed the verdict on the basis that it is not supported by the facts or the law, and a ruling reversing the judgement is expected. State guaranty funds provide payments for policyholders of insolvent life insurance companies. These guaranty funds are financed by assessments to solvent insurance companies based on location, volume, and types of business. The Company estimated its reserve for future state guaranty fund assessments based on data received from the National Organization of Life and Health Insurance Guaranty Associations. Based on data received at the end of 2000 and 1999, the Company's reserve for future state guaranty fund assessments was $56.3 million and $80.2 million, respectively. The Company believes the reserve is adequate for all anticipated payments for known insolvencies. The Company offers synthetic GIC contracts to group customers including pension funds and other institutional organizations. The synthetic GIC contract is an off-balance sheet, fee based product where the customer retains ownership of the assets related to these contracts and JNL guarantees the customer's obligation to meet withdrawal requirements. The contingent liability associated with the off-balance sheet guarantees was $46.1 million and $46.3 million at December 31, 2000 and 1999, respectively. 13. Stockholder's Equity Under Michigan Insurance Law, dividends on capital stock can only be distributed out of earned surplus, unless the Commissioner approves the dividend prior to payment. Furthermore, without the prior approval of the Commissioner, dividends cannot be distributed if all dividends made within the preceding 12 months exceed the greater of statutory net gain from operations or 10% of the Company's statutory surplus for the prior year. On January 1, 2001 the maximum amount of dividends that can be paid by the Company without prior approval of the Commissioner under this limitation approximated $273.9 million. The Company received capital contributions from its parent of $209.1 million in 2000 and $528.0 million in 1998. The $209.1 million capital contribution in 2000 resulted from Brooke Life forgiving an intercompany tax liability. Dividend payments were $176.3 million, $96.3 million and $589.6 million in 2000, 1999 and 1998, respectively, having received the required approval from the Michigan Division of Insurance prior to payment. Statutory capital and surplus of the Company was $2,221.9 million and $2,260.8 million at December 31, 2000 and 1999, respectively. Statutory net income of the Company was $243.8 million, $355.4 million, and $321.8 million in 2000, 1999 and 1998, respectively. Effective January 1, 2001, the Codification of Statutory Accounting Principles guidance will replace the current Accounting Practices and Procedures manual as the NAIC's primary guidance on statutory accounting. The Company is in the process of estimating the potential effect of the codification guidance and does not believe it to be material. Jackson Federal is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum requirements would subject Jackson Federal to various regulatory actions ranging from increased scrutiny to conservatorship. At December 31, 2000, the Office of Thrift Supervision categorized Jackson Federal as well capitalized under the regulatory framework for prompt corrective action. 14. Related Party Transactions The Company's investment portfolio is managed by PPM America, Inc., a registered investment advisor, and PPM Finance, Inc. (collectively, "PPM"). PPM is ultimately a wholly owned subsidiary of Prudential. The Company paid $27.1 million, $26.0 million and $28.9 million to PPM for investment advisory services during 2000, 1999 and 1998, respectively. 15. Benefit Plans The Company has a defined contribution retirement plan covering substantially all employees. To be eligible, an employee must have attained the age of 21 and completed at least 1,000 hours of service in a 12-month period. The Company's annual contributions, as declared by the board of directors, are based on a percentage of eligible compensation paid to participating employees during the year. The Company's expense related to this plan was $5.7 million, $2.9 million and $3.8 million in 2000, 1999 and 1998, respectively.