UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER
REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-10041
JNL Investors Series Trust
(Exact name of registrant as specified in charter)
1 Corporate Way, Lansing, MI 48951
(Address of principal executive offices) (Zip code)
Susan S. Rhee, Esq.
Jackson National Asset Management, LLC
1 Corporate Way
Lansing, MI 48951
(Name and address of agent for service)
Registrant's telephone number, including area code: 517 381-5500
Date of fiscal year end: October 31
Date of reporting period: April 30, 2006
Item 1. Report to Shareholders.
JNL MONEY MARKET FUND (UNAUDITED)
SCHEDULE OF INVESTMENTS (IN THOUSANDS)
April 30, 2006
Shares Value
Percentage of Total
Industry Sector Investments
Financial 75.7%
Money Market Investments 22.2%
Mortgage Securities 2.1%
100.0%
Short Term Investments - 100.1%
Certificates of Deposit - 23.0%
American Express Co., 4.87%, 06/21/06 $6,000 $6,000
ANZ Delaware Inc., 4.81%, 01/29/07 4,000 4,000
Bank of America Corp., 5.21%, 04/19/07 3,500 3,500
BNP Paribas, 5.33%, 04/30/07 3,500 3,500
Credit Suisse New York, 4.79%, 01/24/07 4,000 4,000
Deutsche Bank Securities Inc., 4.94%, 02/06/07 3,500 3,500
HBOS Plc, 4.81%, 12/07/06 3,500 3,500
HBOS Treasury Services Plc, 4.84%, 01/30/07 3,000 3,000
Marshall & Ilsley Corp., 3.77%, 06/19/06 2,800 2,795
Royal Bank of Scotland Plc, 4.82%, 01/18/07 2,825 2,825
Svenska Handelsbanken, 4.81%, 12/27/06 3,750 3,750
Wells Fargo Co., 5.09%, 03/29/07 4,500 4,500
Wilmington Trust Corp., 4.64%, 05/09/06 5,000 5,000
49,870
Commercial Paper - 49.8%
Apreco LLC, 4.75%, 05/15/06 4,500 4,492
Aspen Funding Corp., 4.80%, 05/15/06 4,600 4,591
Cafco LLC, 4.76%, 05/15/06 4,600 4,591
Cargill Global Funding Plc, 4.74%, 05/03/06 6,000 5,998
Clipper Receivables Corp., 4.92%, 05/26/06 4,000 3,986
Fairway Finance Corp., 4.77%, 05/03/06 4,500 4,499
Falcon Asset Securitization, 4.77%, 05/03/06 4,500 4,499
Galaxy Funding Inc., 4.61%, 05/08/06 4,500 4,496
General Electric Capital Corp., 4.63%, 05/01/06 6,000 6,000
GlaxoSmithKline Plc, 4.82%, 05/19/06 6,000 5,986
Goldman Sachs Group Inc., 4.76%, 05/10/06 5,000 4,994
Greyhawk Funding LLC, 4.90%, 05/22/06 4,000 3,989
Merrill Lynch Co. Inc., 4.83%, 05/16/06 4,300 4,291
Metlife Funding Inc., 4.72%, 05/05/06 5,000 4,997
Morgan Stanley, 4.86%, 05/10/06 4,500 4,495
National Utilities Inc., 4.85%, 05/22/06 5,000 4,986
Northern Rock Plc, 4.84%, 05/18/06 6,000 5,986
Park Avenue Bank, 4.85%, 05/18/06 4,500 4,490
Thunder Bay Funding LLC, 4.94%, 05/16/06 4,500 4,491
Total Capital SA, 4.75%, 05/08/06 6,000 5,994
UnitedHealth Group Inc., 4.77%, 05/08/06 5,400 5,396
Windmill Funding I Inc., 4.76%, 05/01/06 4,500 4,500
107,747
Corporate Bonds - 5.1%
Bank of America Corp., 4.80%, 05/08/06 (b) 3,500 3,500
Citigroup Global Markets Holdings Inc., 4.73%, 05/08/06 (b) 3,000 3,000
Holmes Financing Plc, 4.87%, 12/15/06 (b) 2,700 2,700
Permanent Financing Plc, 4.82%, 03/10/07 (b) (c) 1,770 1,770
10,970
Money Market Funds - 0.0%
Dreyfus Cash Management Plus Fund, 4.71% (a) 21 21
Repurchase Agreement - 22.2%
Repurchase Agreement with Bank of America Securities, 4.78%
(Collateralized by $31,193, Federal Home Loan Mortgage
Corporation, 5.00%, due 04/01/36, market value $29,463)
acquired on 04/28/06, due 05/01/06 at $29,012 $29,000 29,000
Repurchase Agreement with Morgan Stanley, 4.78%,
(Collateralized by $21,297 Federal National Mortgage Association,
5.00%, due 07/01/35, market value $20,124) acquired on 04/28/06,
due 05/01/06 at $19,108 19,100 19,100
48,100
Total Short Term Investments (cost $216,708) 216,708
Total Investments - 100.1% (cost $216,708) 216,708
Other Assets and Liabilities, Net - (0.1)% (298)
Total Net Assets - 100% $216,410
Notes to the Schedule of Investments:
(a) Dividend yield changes daily to reflect current market conditions. Rate is
the quoted yield as of April 30, 2006.
(b) Variable rate security. Rate stated is in effect as of April 30, 2006.
(c) Rule 144A, Section 4(2) provides an exemption from the registration
requirements for resale of this security to an institutional investor. The
Fund has deemed this security to be liquid based on procedures approved by
the Board of Trustees. As of April 30, 2006, the market value, in
thousands, of 144A securities, in JNL Money Market Fund is $1,770.
JNL MONEY MARKET FUND (UNAUDITED)
FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT NET ASSET VALUE PER SHARE)
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 2006
ASSETS
Investments in securities at amortized cost $ 216,708
Dividends and interest receivable 676
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Total assets 217,384
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LIABILITIES
Payables:
Advisory fees 40
Trustee fees 2
Other expenses 2
Dividends 930
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Total liabilities 974
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NET ASSETS $ 216,410
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NET ASSETS CONSIST OF:
Paid-in capital $ 216,410
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INSTITUTIONAL CLASS:
SHARES OUTSTANDING (NO PAR VALUE),
UNLIMITED SHARES AUTHORIZED 216,410
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NET ASSET VALUE PER SHARE $ 1.00
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STATEMENT OF OPERATIONS
PERIOD FROM NOVEMBER 1, 2005* TO APRIL 30, 2006
INVESTMENT INCOME
Dividends $ 1
Interest 5,000
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TOTAL INVESTMENT INCOME 5,001
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EXPENSES
Advisory fees 223
Trustees fees 3
Other expenses 4
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TOTAL EXPENSES 230
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NET INVESTMENT INCOME 4,771
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NET INCREASE IN NET ASSETS
FROM OPERATIONS $ 4,771
- -------------------------------------------- ===========
- -------------------------------------------- ===========
* Commencement of operations
See Notes to the Financial Statements.
JNL MONEY MARKET FUND (UNAUDITED)
FINANCIAL STATEMENTS
STATEMENT OF CHANGES IN NET ASSETS
PERIOD FROM NOVEMBER 1, 2005* TO APRIL 30, 2006
(IN THOUSANDS)
OPERATIONS
Net investment income $ 4,771
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NET INCREASE IN NET ASSETS
FROM OPERATIONS 4,771
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DISTRIBUTIONS TO SHAREHOLDERS
From net investment income (4,771)
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SHARE TRANSACTIONS(1)
Proceeds from the sale of shares 2,319,177
Cost of shares redeemed (2,102,767)
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NET INCREASE IN NET ASSETS FROM
SHARE TRANSACTIONS 216,410
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NET INCREASE IN NET ASSETS 216,410
NET ASSETS BEGINNING OF PERIOD -
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NET ASSETS END OF PERIOD $ 216,410
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UNDISTRIBUTED NET
INVESTMENT INCOME $ -
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(1)SHARE TRANSACTIONS
Shares sold 2,319,177
Shares redeemed (2,102,767)
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Net increase 216,410
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- ------------------------------------------------ =================
* Commencement of operations
FINANCIAL HIGHLIGHTS
PERIOD FROM NOVEMBER 1, 2005* TO APRIL 30, 2006
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00
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INVESTMENT OPERATIONS
Net investment income 0.02
DISTRIBUTIONS
Net investment income (0.02)
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NET ASSET VALUE, END OF PERIOD $ 1.00
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RATIOS AND SUPPLEMENTAL DATA
Total return (a) 2.07%
Net assets, end of year (in thousands) $ 216,410
Ratio of net investment income to average net assets (b) 4.26%
Ratio of expenses to average net assets (b) 0.20%
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- -------------------------------------------------------------
* Commencement of operations
(a) The total return is not annualized for the period.
(b) This ratio is annualized for the period.
See Notes to the Financial Statements.
JNL MONEY MARKET FUND (UNAUDITED)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
JNL MONEY MARKET FUND (UNAUDITED)
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION
JNL Investors Series Trust (the "Trust") was organized under the laws of
Massachusetts, by a Declaration of Trust, dated July 28, 2000. The Trust is
registered with the Securities and Exchange Commission under the Investment
Company Act of 1940 (the "1940 Act"), as amended, and the Securities Act of
1933, as amended, as an open-end management investment company issuing its
shares in series, each series representing a distinct portfolio with its own
investment objectives and policies. The JNL Money Market Fund (the "Fund") is
presently the only series authorized. The Fund is a "diversified" series of the
Trust and is sub-advised by Wellington Management Company, LLP. The Fund
commenced operations on November 1, 2005. The Institutional Class of shares is
the only class of shares presently being offered by the Fund.
Jackson National Asset Management, LLC ("JNAM"), a wholly-owned subsidiary of
Jackson National Life Insurance Company ("Jackson National"), serves as
investment adviser to the Fund.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed and
consistently applied by the Trust in the preparation of its financial
statements.
USE OF ESTIMATES - 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
increases and decreases in net assets from operations during the reporting
period. Actual results could differ from those estimates.
GUARANTEES AND INDEMNIFICATIONS - Under the Fund's organizational documents, its
officers and Trustees are indemnified against certain liabilities arising out of
the performance of their duties to the Fund. In addition, certain of the Fund's
contracts with its service providers contain general indemnification clauses.
The Fund's maximum exposure under these arrangements is unknown since the amount
of any future claims that may be made against the Fund cannot be determined and
the Fund has no historical basis for predicting the likelihood of any such
claims.
SECURITY VALUATION - Pursuant to Rule 2a-7 of the 1940 Act, securities in money
market funds are valued at amortized cost, which approximates market value, in
order to maintain a constant net asset value of $1.00 per share. If amortized
cost no longer approximates market value due to credit or other impairments of
the issuer, the Fund will use Board approved pricing and valuation procedures to
determine a security's fair value. Money market funds must invest exclusively in
high quality securities. To be considered high quality, a security generally
must be rated in one of the two highest short-term credit quality categories by
a nationally recognized rating organization such as Standard & Poors Corporation
or Moody's Investors Service, Inc.
SECURITY TRANSACTIONS AND INVESTMENT INCOME - Security transactions are recorded
on trade date. Dividend income is recorded on ex-dividend date. Interest income,
including straight line amortization of discounts and premiums, is accrued
daily. Realized gains and losses are determined on the specific identification
basis.
REPURCHASE AGREEMENTS - The Fund may invest in repurchase agreements. A
repurchase agreement involves the purchase of a security by a Fund and a
simultaneous agreement (generally by a bank or broker-dealer) to repurchase that
security back from the Fund at a specified price and date or upon demand.
Securities pledged as collateral for repurchase agreements are held by the
Fund's custodian bank until the maturity of the repurchase agreement. Procedures
for all repurchase agreements have been designed to assure that the daily market
value of the collateral is in excess of the repurchase agreement in the event of
default.
DISTRIBUTIONS TO SHAREHOLDERS - The Fund declares dividends daily and pays
dividends monthly. Distributions of net realized capital gains, if any, will be
distributed at least annually.
FEDERAL INCOME TAXES - The Fund intends to comply with the requirements of
Subchapter M of the Internal Revenue Code necessary to qualify as a regulated
investment company and to make the requisite distributions of taxable income and
capital gains to it's shareholders sufficient to relieve it from all or
substantially all federal income or excise taxes.
NOTE 3. INVESTMENT ADVISORY FEES AND TRANSACTIONS WITH AFFILIATES
The Trust has entered into an Investment Advisory Agreement (the "Agreement")
with JNAM whereby JNAM provides investment management services to the Fund.
Under the terms of the Agreement, the Fund pays JNAM an annual fee, computed
daily and payable monthly, based on a specified percentage of the average daily
net assets of the Fund. A portion of this fee is paid by JNAM to the sub-adviser
as compensation for their services. The following is a schedule of the fees the
Fund is currently obligated to pay JNAM.
ASSETS FEES
$0 to $750 million 0.20%
Over $750 million 0.18%
ADMINISTRATIVE SERVICES - JNAM provides or procures most of the necessary
administrative functions and services for the operations of the Fund at no
additional cost to the Institutional class of shares. In accordance with the
Administration Agreement, JNAM is responsible for payment of expenses related to
legal, audit, fund accounting, custody, printing and mailing and other services
necessary for the operation of the Fund. The Fund is responsible for expenses
including brokerage commissions, interest and taxes, other non-operating
expenses, registration fees, Trustees and officers insurance, the fees and
expenses of the disinterested Trustees and independent legal counsel to the
disinterested Trustees and a majority of the cost associated with the Chief
Compliance Officer.
TRANSFER AGENCY SERVICES - The Trust has an agreement with JNAM whereby JNAM
provides transfer agency services for the Institutional Class of shares of the
Fund at no additional cost.
NOTE 4. FEDERAL INCOME TAX MATTERS
As of April 30, 2006, the aggregate cost of investments and the composition of
unrealized appreciation and depreciation of investments for federal income tax
purposes are listed in the following table (in thousands).
Cost of Investments Gross Unrealized Appreciation Gross Unrealized Depreciation Net Unrealized Appreciation
- ------------------- ----------------------------- ------------------------------ ---------------------------
$ 216,708 $ - $ - $ -
The tax character of distributions paid during the semi-annual period ended
April 30, 2006, were as follows (in thousands):
Ordinary Income
- ---------------
$ 4,771
DISCLOSURE OF FUND EXPENSES (UNAUDITED)
The Fund is affected by ongoing costs, which include (among others) costs for
portfolio management, administrative services, and the operating expenses.
Operating expenses such as these are deducted from the Fund's gross income and
directly reduce the final investment return. These expenses are expressed as a
percentage of the Fund's average net assets; this percentage is known as the
Fund's expense ratio.
The examples below include the expense ratio and are intended to help the
investor understand the ongoing costs (in dollars) of investing in a Fund and to
compare these costs with the ongoing costs of investing in other Mutual Funds.
The examples are based on an investment of $1,000 made at the beginning of the
period shown and held for the entire period.
ACTUAL FUND RETURN. This section provides information about the actual account
values and actual expenses incurred by the Fund. Use the information in this
section, together with the amount invested, to estimate the expenses the
shareholder paid over the period. Simply divide the account value by $1,000 (for
example, an $8,600 account value divided by $1,000 = 8.6), then multiply the
result by the number in the first section under the heading entitled "Expenses
paid During Period" to estimate the expenses paid during this period.
HYPOTHETICAL 5% RETURN. The information in this section can be used to compare
each Fund's costs with those of other mutual funds. It assumes that the Fund had
an annual 5% return before expenses during the year, but that the expense ratio
for the period is unchanged. This example is useful in making comparisons
because the Securities and Exchange Commission requires all mutual funds to make
the 5% calculation.
ACTUAL FUND RETURN
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
Beginning Account Ending Account Expenses Paid
Value 11/1/05 Value 4/30/06 Annualized Expense Ratio During Period
- ---------------------------------------------------- ---------------------------- --------------------
- ------------------------- ----------------------- ---------------------------- --------------------
$ 1,000.00 $ 1,020.70 0.20% $ 1.03
HYPOTHETICAL 5% RETURN
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Beginning Account Ending Account Expenses Paid
Value 11/1/05 Value 4/30/06 Annualized Expense Ratio During Period
- ----------------------------------------------------------------- ----------------------------------------------------
- --------------------------- ---------------------------------- ------------------------ ------------------------
$ 1,000.00 $ 1,023.78 0.20% $ 1.03
ADDITIONAL DISCLOSURE
QUARTERLY PORTFOLIO HOLDINGS
The Registrants file their complete schedule of portfolio holdings with the SEC
for the first and third quarters of each fiscal year on Form N-Q. The
Registrants' Forms N-Q are available on the SEC's website at www.sec.gov. The
Registrant's Forms N-Q may be reviewed and copied at the SEC's Public Reference
Room in Washington, DC, and information on the operation of the Public Reference
Room may be obtained by calling 800-SEC-0330. It is also available upon request
from the Registrants by calling Shareholder Services toll-free at 800-644-4563.
TRUSTEES AND OFFICERS OF THE TRUST
- ------------------------------- -------------- ---------------- ----------------------------------- ------------------ -------------
NUMBER OF
CURRENT PORTFOLIOS IN OTHER
POSITION LENGTH PRINCIPAL THE FUND COMPLEX TRUSTEESHIPS
TRUSTEE/OFFICER (AGE) WITH THE OF TIME OCCUPATION OVERSEEN BY THE HELD BY
& ADDRESS TRUST SERVED FOR THE PAST 5 YEARS TRUSTEE THE TRUSTEE
- ------------------------------- -------------- ---------------- ----------------------------------- ------------------ -------------
- ------------------------------- -------------- ---------------- ----------------------------------- ------------------ -------------
INTERESTED TRUSTEE
- ------------------------------- -------------- ---------------- ----------------------------------- ------------------ -------------
- ------------------------------- -------------- ---------------- ----------------------------------- ------------------ -------------
Robert A. Fritts * (57) Trustee ** 8/97 to Senior Vice President (9/03 to 75 None
1 Corporate Way present present) and Controller of
Lansing, MI 48951 Jackson National Life Insurance
President 12/02 to Company (9/82 to present); Vice
and Chief present President and Controller of
Executive Jackson National Life Insurance
Officer Company (8/82 to 8/03); Trustee
or Manager, and (since 12/02)
President and Chief Executive
Officer, of each other investment
company in the Fund Complex.
- ------------------------------- -------------- ---------------- ----------------------------------- ------------------ -------------
- ------------------------------------------------------------------------------------------------------------------------------------
DISINTERESTED TRUSTEES
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------- -------------- ---------------- ----------------------------------- ------------------ -------------
Michael Bouchard (50) Trustee ** 12/03 to Sheriff, Oakland County, Michigan 75 None
1 Corporate Way present (1/99 to present);
Lansing, MI 48951 Senator - State of Michigan (1991
to 1999);
Chairman - Financial Services
Committee (1/95 to 1/99)
- ------------------------------- -------------- ---------------- ----------------------------------- ------------------ -------------
- ------------------------------- -------------- ---------------- ----------------------------------- ------------------ -------------
Dominic D'Annunzio (68) Chairman of 2/04 to Acting Commissioner of Insurance 75 None
1 Corporate Way the Board ** present for the State of Michigan (1/90
Lansing, MI 48951 to 5/90) (8/97 to 5/98)
Trustee 2/02 to
present
- ------------------------------- -------------- ---------------- ----------------------------------- ------------------ -------------
- ------------------------------- -------------- ---------------- ----------------------------------- ------------------ -------------
Michelle Engler (48) Trustee ** 12/03 to Attorney (1983 to present); 75 Director of
1 Corporate Way present First Lady of the State of Federal Home
Lansing, MI 48951 Michigan (1990 to 2002); Loan
Michigan Community Service Mortgage
Commission Chair (1991 to 2000) Corporation
- ------------------------------- -------------- ---------------- ----------------------------------- ------------------ -------------
- ------------------------------- -------------- ---------------- ----------------------------------- ------------------ -------------
Joseph Frauenheim (71) Trustee ** 12/94 to Consultant (Banking) 75 None
1 Corporate Way present
Lansing, MI 48951
- ------------------------------- -------------- ---------------- ----------------------------------- ------------------ -------------
- ------------------------------- -------------- ---------------- ----------------------------------- ------------------ -------------
Richard McLellan (64) Trustee ** 12/94 to Member, Dykema Gossett PLLC (Law 75 None
1 Corporate Way present Firm)
Lansing, MI 48951
- ------------------------------- -------------- ---------------- ----------------------------------- ------------------ -------------
* Mr. Fritts is an "interested person" of the Trust due to his position with
Jackson National Life Insurance Company(R), which is the parent company of
the Adviser and Distributor.
** The Chairman of the Board, interested and disinterested Trustees are elected
to serve for an indefinite term.
- ------------------------------ -------------- -------------- ---------------------------------- ------------------- ----------------
NUMBER OF
CURRENT PORTFOLIOS IN THE OTHER
POSITION LENGTH OF PRINCIPAL FUND COMPLEX TRUSTEESHIPS
TRUSTEE/OFFICER (AGE) & WITH THE TIME OCCUPATION OVERSEEN BY THE HELD BY THE
ADDRESS TRUST SERVED FOR THE PAST 5 YEARS TRUSTEE TRUSTEE
- ------------------------------ -------------- -------------- ---------------------------------- ------------------- ----------------
- ------------------------------ -------------- -------------- ---------------------------------- ------------------- ----------------
OFFICERS
- ------------------------------ -------------- -------------- ---------------------------------- ------------------- ----------------
- ------------------------------ -------------- -------------- ---------------------------------- ------------------- ----------------
Mark D. Nerud (39) Vice 8/97 to Chief Financial Officer of the Not Applicable Not Applicable
225 West Wacker Drive, President present Adviser (11/00 to present) and
Chicago, IL 60606 Managing Board Member of the
Treasurer 12/02 to Adviser (11/00 to 11/03); Vice
and Chief present President, Treasurer, Chief
Financial Financial Officer of other
Officer Investment Companies advised by
the Adviser; Vice President -
Fund Accounting & Administration
of Jackson National Life
Insurance Company (1/00 to
present)
- ------------------------------ -------------- -------------- ---------------------------------- ------------------- ----------------
- ------------------------------ -------------- -------------- ---------------------------------- ------------------- ----------------
Susan S. Rhee (34) Vice 2/04 to Secretary of the Adviser (11/00 Not Applicable Not Applicable
1 Corporate Way President, present to present); Assistant Vice
Lansing, MI 48951 Counsel and President of Jackson National
Secretary Life Insurance Company (8/03 to
present); Associate General
Counsel of Jackson National Life
Insurance Company (7/01 to
present); Senior Attorney of
Jackson National Life Insurance
Company (1/00 to 7/01)
- ------------------------------ -------------- -------------- ---------------------------------- ------------------- ----------------
- ------------------------------ -------------- -------------- ---------------------------------- ------------------- ----------------
Steven J. Fredricks (35) Chief 1/05 to Attorney of Jackson National Not Applicable Not Applicable
1 Corporate Way Compliance present Life Insurance Company (2/02 to
Lansing, MI 48951 Officer Present); Contract Attorney,
Godfrey & Kahn, S.C. (2001 -
2002); Assistant General
Counsel, Aid Association for
Lutherans (1997 to 2001)
- ------------------------------ -------------- -------------- ---------------------------------- ------------------- ----------------
- ------------------------------ -------------- -------------- ---------------------------------- ------------------- ----------------
Jeffrey C. Nellessen (44) Assistant 12/05 to Assistant Vice President of Not Applicable Not Applicable
1 Corporate Way Treasurer present Jackson National Life Insurance
Lansing, MI 48951 Company (8/05 to present);
Consultant (11/03 to 4/04);
Chief Financial Officer, Vice
President, Secretary, Treasurer
& Controller of Security Capital
(3/97 to 11/03)
- ------------------------------ -------------- -------------- ---------------------------------- ------------------- ----------------
The Statement of Additional Information includes additional information about
Fund Trustees and may be obtained at no charge by calling 1-800-392-2909, or
writing the JNL Investors Series Trust Service Center, 225 W. Wacker Drive,
Suite 1200, Chicago, IL 60606.
TRUSTEES OF THE JNL INVESTORS SERIES TRUST
The Trustees and officers that are interested persons of the Trust or the
Adviser do not receive any compensation from the Trust for their services as
Trustees or officers. The following persons, who are disinterested Trustees of
the Trust, received from the Trust the compensation amounts indicated for the
services as such for the 12 month period ended December 31, 2005.
- ------------------------------ ------------------- -------------------------- -------------------- ----------------------------
PENSION OR RETIREMENT
AGGREGATE BENEFITS ACCRUED AS PART ESTIMATED ANNUAL
COMPENSATION OF BENEFITS UPON TOTAL COMPENSATION FROM
TRUSTEE FROM TRUST* TRUST EXPENSES RETIREMENT TRUST AND FROM FUND COMPLEX
- ------------------------------ ------------------- -------------------------- -------------------- ----------------------------
- ------------------------------ ------------------- -------------------------- -------------------- ----------------------------
Michael Bouchard $60,000 $0 $0 $60,000
- ------------------------------ ------------------- -------------------------- -------------------- ----------------------------
- ------------------------------ ------------------- -------------------------- -------------------- ----------------------------
Michelle Engler $60,000 $0 $0 $60,000
- ------------------------------ ------------------- -------------------------- -------------------- ----------------------------
- ------------------------------ ------------------- -------------------------- -------------------- ----------------------------
Dominic D'Annunzio $72,500 $0 $0 $72,500**
- ------------------------------ ------------------- -------------------------- -------------------- ----------------------------
- ------------------------------ ------------------- -------------------------- -------------------- ----------------------------
Joseph Frauenheim $70,000 $0 $0 $70,000
- ------------------------------ ------------------- -------------------------- -------------------- ----------------------------
- ------------------------------ ------------------- -------------------------- -------------------- ----------------------------
Richard McLellan $65,000 $0 $0 $65,000
- ------------------------------ ------------------- -------------------------- -------------------- ----------------------------
* The fees paid to the independent Trustees are paid for combined meetings of
the Funds in the Fund complex. The fees are allocated to the Funds.
** Mr. D'Annunzio deferred $36,250.
PROXY VOTING GUIDELINES
JNAM, the Funds' adviser, is responsible for exercising the voting rights
associated with the securities purchased and/or held by the Funds. A description
of the policies and procedures used by the Funds to vote proxies relating to the
portfolio securities and information on how the Funds voted proxies relating to
portfolio securities during the 12 month period ended June 30, 2005 are
available (1) without charge, upon request by calling 1-800-766-4683 (Annuity
Service Center), 1-800-599-5651 (NY Annuity Service Center) or 1-800-777-7779
(for contracts purchased through a bank or financial institution), (2) on
Jackson National Life Insurance Company's website at WWW.JNL.COM or Jackson
National Life Insurance Company of New York's website at WWW.JNLNY.COM, and (3)
on the SEC's website at WWW.SEC.GOV.
JNL INVESTORS SERIES TRUST (THE "TRUST")
TRUSTEES' CONSIDERATION OF INVESTMENT ADVISORY
AND SUB-ADVISORY AGREEMENTS
Under the Investment Company Act of 1940 (the "1940 Act"), an investment
advisory or sub-advisory contract initially must be approved by a vote of the
majority of the outstanding voting securities of the investment company which,
in the case of a newly organized Fund (the JNL Money Market Fund, hereinafter
referred to as the "Fund"), may be a vote by the sole initial shareholder, and
may continue in effect for a period longer than two years from the date of its
execution only so long as continuance is specifically approved at least annually
by the Board of Trustees (the "Trustees") or by a vote of the majority of the
outstanding voting securities of the investment company.
Further, the 1940 Act requires that an investment advisory or sub-advisory
agreement, or the continuance thereof, be approved by a vote of the majority of
the disinterested Trustees cast in person at a meeting called for the purpose of
voting on such approval. The 1940 Act also places a specific duty upon the
Trustees to request and evaluate, and a corresponding duty upon the investment
adviser or sub-adviser to furnish, such information as reasonably may be
necessary to evaluate the terms of the agreement.
The Trustees are presented at each of their regular meetings with reports
and analyses by Jackson National Asset Management LLC ("JNAM" or the "Adviser")
and the sub-advisers on a number of matters, including (i) the investment
performance of the Fund of the Trust, in relation to benchmark indices and in
relation to other funds having similar investment objectives; (ii) Fund
brokerage; and (iii) portfolio compliance matters. In addition to submitting
quarterly written reports regarding the Fund under their management, portfolio
management representatives of the Trust's sub-adviser also make in-person
reports to the Trustees on a regular basis.
The Trustees review and consider these reports and presentations as part of
their responsibility to manage the affairs of the Trust. These reports and
presentations also form a part of the information considered by the Trustees in
determining whether to approve the continuation of the agreements with the
Adviser and the sub-adviser.
Described below is a summary of certain information provided to and
considered by the Trustees, and their conclusions with respect thereto, that
contributed to the Trustees' decision to approve of the current investment
advisory and sub-advisory agreements of the Trust.
INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT WITH THE ADVISER
The current Investment Advisory and Management Agreement between the Trust
and the Adviser contemplates a "manager of managers" structure whereby the
Adviser, with the approval of the Trustees but without necessity of obtaining
shareholder approval, may select, retain and compensate the sub-adviser for the
Fund, or materially amend agreements with sub-advisers. The Adviser and the
Trust have been granted an exemption by the SEC. The "manager of managers"
structure was approved by the Trustees at a meeting held December 13, 2001. The
form of the Investment Advisory and Management Agreement with the Adviser's
predecessor, JNFS, was approved by the Trustees at a meeting held August 10,
2000. The agreement with the Adviser was approved by the shareholders of the
Fund, and became effective as of January 31, 2001. At a shareholder meeting of
the Trust held July 11, 2005, the shareholders of all Funds approved this
multi-manager structure.
At its meeting on August 31, 2005, the Trustees, including a majority of
the Independent Trustees, considered the commencement of operations of the Fund.
The Trustees were presented by the Adviser with information regarding: (1) the
nature, quality and extent of its services, (2) the investment performance of
the Trust, (3) its profitability, including an analysis of the cost of providing
services and comparative expense information, (4) the extent to which economies
of scale are realized as the Trust grows and whether fee levels reflect these
economies of scale for the Trust's investors, and (5) other "fall-out" benefits
realized by JNAM (i.e. ancillary benefits derived by JNAM or its affiliates from
JNAM's relationship with the Trust).
NATURE, QUALITY AND EXTENT OF SERVICES
The Trustees examined the nature, quality and extent of the services to be
provided by the Adviser to the Fund. The Trustees reviewed information on the
Adviser's key personnel that will be providing investment advisory services to
the Fund, including responsibilities for serving as the Fund's administrator and
transfer agent, overseeing the Fund's sub-adviser, monitoring adherence to the
Fund's investment restrictions and monitoring compliance with various policies
and procedures of the Fund. The Trustees concluded that there was a reasonable
basis on which to conclude that the Fund would benefit from the services
provided by the Adviser under their Agreements as a result of their experience,
reputation, personnel, operations and resources.
INVESTMENT PERFORMANCE OF THE FUND
The Trustees considered information provided by the Adviser on the
performance of the Fund, including comparative performance information. The
composite performance information provided by the Sub-adviser exceeded the
Fund's benchmark performance (gross of fees) for all periods shown.
COSTS OF SERVICES AND PROFITS REALIZED BY THE ADVISER
The Trustees examined the advisory fee and expense information for the Fund
as compared to comparable funds managed by other advisers. The Fund's investment
management fee of 0.20% is below the Lipper median management fee of 0.35%.
Overall expenses of the Fund of 0.20% also compare favorably to the Lipper
median of 0.30%. The Board considered the performance of the Fund and the
Sub-adviser and the performance of the other funds managed by the Sub-adviser,
including comparative performance information. Fund operations commenced
November 1, 2005.
ECONOMIES OF SCALE
The Trustees considered the extent to which the Fund's advisory fees
reflect economies of scale for the benefit of Fund's shareholders. The Trustees
reviewed the Fund's fee arrangements, which include breakpoints that decrease
the fee rate as the Fund's assets increase. The Trustees concluded that the
breakpoints in the Adviser's contracts with the Fund, would share with
shareholders the benefits of economies of scale as the Fund's assets grow. The
Trustees concluded that, under the Agreements, shareholders would share in the
benefits to be achieved through economies of scale.
OTHER BENEFITS TO THE ADVISER AND ITS AFFILIATES
In evaluating the benefits that accrue to the Adviser, the Trustees
reviewed all of the JNL Funds as a whole, including the Fund of the JNL
Investors Series Trust. Through its relationship with the Fund, the Trustees
recognized that the Adviser, and its affiliate, Jackson National Life
Distributors, Inc. ("JNLD"), serve the Fund in various capacities, including as
Adviser, administrator, transfer agent and distributor, and receive compensation
from the Fund in connection with providing certain of these services to the
Fund. As administrator, the Adviser receives a fee for providing fund accounting
and administration services to the Fund (except the Institutional Class of the
Fund). This fee also is used by the Adviser to cover most of the Fund's
operating expenses. The Trustees also review the Administrative Fee annually.
JNAM does not receive a fee from the JNL Funds and the Institutional Class of
the Fund for its transfer agent services. As distributor, JNLD receives a 0.20%
12b-1 fee from the Fund (except for the S&P Funds and the JNL Money Market
Fund). After full consideration of these and other factors, the Trustees,
including a majority of the Independent Trustees, concluded that approval of the
Agreements were in the best interest of the Fund and its shareholders.
SUB-ADVISORY AGREEMENT WITH WELLINGTON MANAGEMENT COMPANY, LLP
At its meeting on August 31, 2005, the Trustees of the Fund, including a
majority of the Independent Trustees, considered and approved the Fund's
investment sub-advisory agreement with Wellington Management Company, LLP (the
"Sub-adviser") through June 30, 2007 (the "Agreement"). In considering the
Agreement, the Trustees reviewed and analyzed the factors it deemed relevant,
including: (1) the nature, quality and extent of the Sub-adviser's services, (2)
the investment performance of the Fund, including information comparing the
performance of the Fund with a peer group of funds and an appropriate index, (3)
the profitability of the Sub-adviser, including an analysis of the Sub-adviser's
cost of providing services and comparative expense information, and (4) the
extent to which economies of scale are realized as the Fund grows and whether
fee levels reflect these economies of scale for Fund investors.
The Trustees also periodically consider other material facts such as the
allocation of the Fund's brokerage commissions and the Fund's record of
compliance with its investment policies and restrictions on personal securities
transactions.
Before approving the Agreement, the Board's Independent Trustees met in
executive session with their independent counsel to consider the materials
provided by the Adviser and the Sub-adviser and the terms of the Agreement.
Based on its evaluation of information provided by the Sub-adviser, the
Trustees, including a majority of the Independent Trustees, concluded that the
Agreement is fair and in the best interests of shareholders. During its
deliberations, the Trustees balanced the various factors based on all the facts
and circumstances applicable to the sub-advisory relationship. The following
summary does not detail every matter considered. In reaching its conclusion, the
Trustees considered the following:
NATURE, QUALITY AND EXTENT OF SERVICES
The Trustees examined the nature, quality and extent of the services
provided by the Sub-adviser to the Fund. The Trustees reviewed the Sub-adviser's
key personnel in providing investment management services to the Fund. The
Trustees also considered the Sub-adviser's duties under the Agreement in serving
as the Fund's investment Sub-adviser including duties for investment research
and security selection, adherence to the Fund's investment restrictions and
monitoring compliance with various Fund policies and procedures. While recent
legal and regulatory issues at the Sub-adviser are cause for concern, and
require increased scrutiny by JNAM and the Trustees, the Trustees concluded that
the Fund benefits from services provided by the Sub-adviser under the Agreement,
as a result of the Sub-adviser's management and operational changes, portfolio
management and investment experience, past performance, fee structure, and
extensive resources.
INVESTMENT PERFORMANCE OF THE SUB-ADVISER AND THE FUND
The Trustees considered composite information, which showed performance of
Sub-Adviser's Money Market Composite and its benchmark. On a gross of fee basis,
the Sub-adviser out-performed its benchmark over all periods. The Trustees
concluded it was in the best interest of the Fund and its shareholders to
approve the Agreement.
COSTS OF SERVICES AND PROFITS REALIZED BY THE SUB-ADVISER
The Trustees examined the sub-advisory fee and expense information for the
Fund as compared to comparable funds managed by other advisers, in addition to
its Lipper average. The Trustees noted that the Fund's sub-adviser fee of 0.05%
is below the Lipper average of 0.09%. The Trustees noted that the Fund's
sub-advisory fee is reasonable.
ECONOMIES OF SCALE
The Trustees considered the extent to which the Fund's sub-advisory fee
reflects economies of scale for the benefit of Fund shareholders. The Trustees
reviewed the Fund's fee arrangements, which include breakpoints that decrease
the fee rate as the Fund's assets increase. The Trustees concluded that the
breakpoints shared with JNAM and that JNAM in turn, through the breakpoints in
its contract with the Fund, shares with shareholders the benefits of economies
of scale as the Fund's assets grow. In light of this, the Trustees noted that it
would be reasonable to conclude that under the Agreement, shareholders share in
the benefits to be achieved through economies of scale.
OTHER BENEFITS TO THE SUB-ADVISER AND ADVISER
Wellington Management Company, LLP is sub-adviser to other funds advised by
JNAM.
In evaluating the benefits that accrue to the Sub-adviser, the Trustees
reviewed the Fund as a whole, including the benefits accruing to the Adviser who
identifies and recommends the Sub-adviser to the JNLIST. Through its
relationship with the Fund, the Trustees recognized that the Sub-Adviser and its
affiliate serve the Fund in various capacities. After full consideration of
these and other factors, the Trustees, including a majority of the Independent
Trustees, concluded that approval of the Agreement was in the best interest of
the Fund and its shareholders.
Item 2. Code of Ethics.
Not applicable to the semi-annual filing.
Item 3. Audit Committee Financial Expert.
Not applicable to the semi-annual filing.
Item 4. Principal Accountant Fees and Services.
Not applicable to the semi-annual filing.
Item 5. Audit Committee of Listed Registrants.
Not applicable as this is not a listed issuer as defined in Rule 10A-3 under the
Exchange Act.
Item 6. Schedule of Investments
Included as a Part of the Report to Shareholders filed under Item 1.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable as this is an Open-End Management Investment Company.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable as this is an Open-End Management Investment Company.
Item 9. Purchases of Equity Securties by Closed-End Management Investment
Company and Affiliated Purchasers.
Not applicable as this is an Open-End Management Investment Company.
Item 10. Submission of Matters to a Vote of Security Holders.
The Board of Trustees/Managers formalized the procedures by which shareholders
may recommend nominees to the registrant's Board of Trustees/Managers. The
procedures were formalized after the registrant's previous response to this
Item. The procedures provide an address to which shareholder nominees may be
submitted. The procedures can be found in the Registrant's Statement of
Additional Information.
Item 11. Controls and Procedures.
(a) In order to ensure that the information that we must disclose in our filings
with the Securities and Exchange Commission is recorded, processed, summarized
and reported on a timely basis, we have adopted disclosure controls and
procedures. Our President and Chief Executive Officer, Robert A. Fritts, and our
Chief Financial Officer, Mark D. Nerud, have reviewed and evaluated our
disclosure controls and procedures as of June 22, 2006, and have concluded that
our disclosure controls and procedures are effective.
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR
270.30a-3(d)) that occurred during the registrant's first and second fiscal
quarters of the period covered by this report that has materially affected, or
is reasonably likely to materially affect, the registrant's internal control
over financial reporting.
Item 12. Exhibits
a. (1) Not applicable to the semi-annual filing.
(2) The certifications required by Rule 30a-2 of the Investment
Company Act of 1940, as amended, are attached hereto.
(3) Not Applicable.
b. (1)The certification required by Rule 30a-2(b) fo the Investment
Company Act of 1940, as amended, and Section 906 of the
Sarbanes-Oxley Act of 2002, is attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, as amended, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized
in the City of Lansing and State of Michigan, on the 28th day of June, 2006.
JNL Investors Series Trust
(Registrant)
By: /s/ Robert A. Fritts
------------------------------
Robert A. Fritts, President
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, as amended, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
Signature Title Date
/s/ Robert A. Fritts President June 28, 2006
- -----------------------------
Robert A. Fritts
/s/ Mark D. Nerud Chief Financial Officer June 28, 2006
- -----------------------------
Mark D. Nerud
EXHIBIT LIST
Exhibit 12(a)(2) Certification of the Principal Executive Officer
required by Rule 30a-2(a) under the Act.
Certification of the Principal Financial Officer
required by Rule 30a-2(a) under the Act.
Exhibit 12(b)(1) Certification required by Rule 30a-2(b) under the Act.