[Federal Register Volume 66, Number 145 (Friday, July 27, 2001)]
[Notices]
[Pages 39215-39218]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-18733]


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SECURITIES AND EXCHANGE COMMISSION

[Rel. No. IC-25071; 812-12292]


JNL Series Trust, et al.; Notice of Application

July 20, 2001.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of application for an order under sections 6(c), 
12(d)(1)(J), and 17(b) of the Investment Company Act of 1940 (the 
``Act'') for exemptions from sections 12(d)(1)(A) and (B) and 17(a) of 
the Act, and under section 17(d) of the Act and rule 17d-1 under the 
Act to permit certain joint transactions.

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SUMMARY OF APPLICATION: The request order would permit certain 
registered management investment companies to invest uninvested cash 
and cash collateral in affiliated money market funds in excess of the 
limits in sections 12(d)(1)(A) and (B) of the Act.

APPLICANTS: JNL Series Trust (``Trust''); JNL Investors Series Trust 
(``Investors Series Trust''); JNL Variable Fund LLC, JNL Variable Fund 
III LLC, JNL Variable Fund IV LLC, JNL Variable Fund V LLC, JNLNY 
Variable Fund I LLC, JNLNY Variable Fund II LLC (collectively, the 
``Variable Funds''); Jackson National Asset Management, LLC (``JNAM''); 
all existing and future registered management investment companies for 
which JNAM or an entity controlling, controlled by, or under common 
control with JNAM, serves in the future as an investment adviser 
(collectively, the ``Investment Companies'') and all existing and 
future series (each, a ``Fund'') of each of the Investment Companies.
    Filing Dates:
    The application was filed on October 5, 2000. Applicants have 
agreed to file an amendment to the application during

[[Page 39216]]

the notice period, the substance of which is reflected in this notice.
    Hearing or Notification of Hearing:
    An order granting the requested relief will be issued unless the 
Commission orders a hearing. Interested persons may request a hearing 
by writing to the Commission's Secretary and serving applicants with a 
copy of the request, personally or by mail. Hearing requests should be 
received by the Commission by 5:30 p.m. on August 14, 2001, and should 
be accompanied by proof of service on applicants, in the form of an 
affidavit or, for lawyers, a certificate of service. Hearing requests 
should state the nature of the writer's interest, the reason for the 
request, and the issues contested. Persons who wish to be notified of a 
hearing may request notification by writing to the Commission's 
Secretary.

ADDRESSES: Secretary, Securities and Exchange Commission, 450 Fifth 
Street, NW., Washington, DC, 20549-0609. Applicants, 1 Corporate Way, 
Lansing, Michigan, 48951.

FOR FURTHER INFORMATION CONTACT: Julia Kim Gilmer, Senior Counsel, at 
(202) 942-0528, or Nadya B. Roytblat, Assistant Director, at (202) 942-
0564 (Division of Investment Management, Office of Investment Company 
Regulation).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained for a fee at the 
Commission's Public Reference Branch, 450 Fifth Street, NW., 
Washington, DC, 20549-0102 (tel. 202-942-8090).

Applicants' Representations

    1. The Trust and the Investors Series Trust, Massachusetts business 
trusts, and the Variable Funds, each a Delaware limited liability 
company, are registered under the Act as open-end series management 
investment companies. The Trust currently offers 43 series, and the 
Investor Series Trust currently offers a single series. The PPM 
America/JNL Money Market Series of the Trust and the JNL Money Market 
Fund of the Investors Series Trust, hold themselves out as money market 
funds and are subject to the requirements of rule 2a-7 under the Act 
(together with any other future money market Funds subject to rule 2a-
7, ``Money Market Funds'').\1\ JNAM, a Michigan limited liability 
company, and a wholly-owned subsidiary of Jackson National Life 
Insurance Company, is registered as an investment adviser under the 
Investment Advisers Act of 1940 (``Advisers Act'') and serves as the 
investment adviser to the Trust, Investor Series Trust and the Variable 
Funds.\2\
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    \1\ All Funds that currently intend to rely on the requested 
order are named as applicants. Other existing or future Funds that 
may reply on the order in the future will do so only in accordance 
with the terms and conditions of the application.
    \2\ Applicants also request that the order extend to any entity 
or entities that result from a reorganization of JNAM into another 
jurisdiction or a change in type of business organization.
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    2. Applicants state that each of the Funds has, or may have, 
uninvested cash held by its custodian (``Univested Cash''). Uninvested 
Cash may result from a variety of sources, included dividends or 
interest received on portfolio securities, unsettled securities 
transactions, reserves held for investment strategy purposes, scheduled 
maturity of investments, proceeds from liquidation of investment 
securities, dividend payments, or money received from investors. The 
Funds also may participate in a securities lending program under which 
a Fund may lend its portfolio securities to brokers, dealers or other 
financial institutions (``Securities Lending Arrangements''). The loans 
are continuously secured by collateral equal to not less than 102% of 
the market value of the Securities loaned. Collateral for these loans 
may include cash (``Cash Collateral'' and together with Uninvested 
Cash, ``Cash Balances'').
    3. Applicants request an order to permit each of the Funds to 
invest its Cash Balances in shares of one or more Money Market Funds 
(such Funds, including Money Market Funds that purchase shares of other 
Money Market Funds, are referred to as ``Investing Funds''), and the 
Money Market Funds to sell their shares to and redeem shares from, the 
Investing Funds. Investment of Cash Balances in shares of the Money 
Market Funds will be made only if permitted by such Investing Fund's 
investment restrictions and policies as set forth in its prospectus and 
statement of additional information. Applicants believe that the 
proposed transactions may reduce transaction costs, create more 
liquidity, increase returns, and further diversify holdings.

Applicants' Legal Analysis

    1. Section 12(d)(1)(A) of the Act provides, in pertinent part, that 
no registered investment company may acquire securities of another 
investment company if such securities represent more than 3% of the 
acquired company's outstanding voting stock, more than 5% of the 
acquiring company's total assets, or if such securities, together with 
the securities of other acquired investment companies, represent more 
than 10% of the acquiring company's total assets. Section 12(d)(1)(B) 
of the Act, in pertinent part, provides that no registered open-end 
investment company may sell its securities to another investment 
company if the sale will cause the acquiring company to own more than 
3% of the acquired company's voting stock, or if the sale will cause 
more than 10% of the acquired company's voting stock to be owned by 
investment companies.
    2. Section 12(d)(1)(J) of the Act authorizes the Commission to 
exempt any person, security, or transaction from any provision of 
section 12(d)(1) if, and to the extent that, such exemption is 
consistent with the public interest and the protection of investors. 
Applicants request relief under section 12(d)(1)(J) from the 
limitations of sections 12(d)(1)(A) and (B) to permit the Investing 
Funds to invest Cash Balances in Money Market Funds.
    3. Applicants state that the proposed arrangement would not result 
in the abuses that sections 12(d)(1)(A) and (B) were intended to 
prevent. Applicants state that because each Money Market Fund will 
maintain a highly liquid portfolio, an Investing Fund will not be in a 
position to gain undue influence over a Money Market Fund through 
threat of redemption. Applicants represent that the proposed 
arrangement will not result in an inappropriate layering of fees 
because shares of the Money Market Funds sold to the Investing Funds 
will not be subject to a sales load, redemptive fee, distribution fee 
under a plan adopted in accordance with rule 12b-1 under the Act, or 
service fee (as defined in rule 2830 of the National Association of 
Securities Dealers' (``NASD'') Conduct Rules), or, if such shares are 
subject to any such sales load, redemption, distribution or service 
fee, JNAM will waive its advisory fee for each Investing Fund in an 
amount that offsets the amount of such fees incurred by the Investing 
Fund. Applicants state that if a Money Market Fund offers more than one 
class of securities, each Investing Fund will invest its Cash Balances 
only in the class with the lowest expense ratio at the time of the 
investment. Before approving any advisory contract for an Investing 
Fund, the Investing Fund's board of directors or trustees (the ``Fund 
Board''), including a majority of the director or trustees who are not 
``interested persons,'' as defined in section 2(a)(19) of the Act 
(``Independent Trustees'') will consider to what extent, if any, the 
advisory fees charged to the Investing Fund by JNAM should be reduced 
to account for reduced services provided

[[Page 39217]]

to the Investing Fund by JNAM as a result of Uninvested Cash being 
invested in a Money Market Fund. Applicants represent that no Money 
Market Fund whose shares are held by an Investing Fund will acquire 
securities of any other investment company in excess of the limitations 
contained in section 12(d)(1)(A) of the Act.
    4. Section 17(a) of the Act makes it unlawful for any affiliated 
person of a registered investment company, or an affiliated person of 
such person, acting as principal, to sell or purchase any security to 
or from the company. Section 2(a)(3) of the Act defines an ``affiliated 
person'' of an investment company to include, among others, any person 
directly or indirectly controlling, controlled by, or under common 
control with the other person and any person owning, controlling, or 
holding with power to vote, 5% or more of the other person. Applicants 
state that, because the Funds share a common investment adviser, each 
Fund may be deemed to be under common control with each of the other 
Funds, and thus an affiliated person of each of the other Funds. In 
addition, if the relief is granted, an Investing Fund could become an 
affiliated person of a Money Market Fund by owning 5% or more of a 
Money Market Fund. Accordingly, section 17(a) would prohibit the sale 
of Money Market Fund shares to the Investing Funds, and the redemption 
of such shares by the Investing Funds.
    5. Section 17(b) of the Act authorizes the Commission to exempt a 
transaction from section 17(a) if the terms of the proposed 
transaction, including the consideration to be paid or received, are 
reasonable and fair and do not involve overreaching on the part of any 
person concerned, the proposed transaction is consistent with the 
policy of each investment company concerned, and the proposed 
transaction is consistent with the general purposes of the Act. Section 
6(c) of the Act permits the Commission to exempt persons or 
transactions from any provision of the Act if the exemption is 
necessary or appropriate in the public interest and consistent with the 
protection of investors and the purposes fairly intended by the policy 
and provisions of the Act.
    6. Applicants submit that their request for relief to permit the 
purchase and redemption of shares of a Money Market Fund by the 
Investing Funds satisfies the standards in sections 6(c) and 17(b) of 
the Act. Applicants note that shares of the Money Market Funds will be 
purchased and redeemed at their net asset value, the same consideration 
paid and received for these shares by any other shareholder. Applicants 
state that the investing funds will retain their ability to invest Cash 
Balances directly in money market instruments as authorized by their 
respective investment objectives and policies if they believe they can 
obtain a higher rate of return, or for any other reason. Applicants 
also state that each Money Market Fund has the right to discontinue 
selling shares to any of the Investing Funds if the Money Market Fund's 
Independent Trustees determine that such sales would adversely affect 
the Money Market Fund's portfolio management and operations.
    7. Section 17(d) of the Act and rule 17d-1 under the Act prohibit 
an affiliated person of a registered investment company, acting as 
principal, from participating in or effecting any transaction in 
connection with any joint enterprise or joint arrangement in which the 
investment company participates. Applicants state that each Investing 
Fund, by purchasing shares of the Money Market Funds, JNAM, by managing 
the assets of the Investing Funds invested in the Money Market Funds, 
and each Money Market Fund, by selling shares to the Investing Funds, 
could be deemed to be participants in a joint enterprise or arrangement 
within the meaning of section 17(d) of the Act and rule 17d-1 under the 
Act.
    8. Rule 17d-1 permits the Commission to approve a proposed joint 
transaction covered by the terms of section 17(d) of the Act. In 
determining whether to approve a transaction, the Commission will 
consider whether the proposed transaction is consistent with the 
provisions, policies, and purposes of the Act, and the extent to which 
the participation is on a basis different from or less advantageous 
than that of other participants. Applicants submit that the investment 
by the Investing Funds in shares of the Money Market Funds would be on 
the same basis and would be indistinguishable from any other 
shareholder account maintained by the same class of Money Market Funds 
and that the transactions will be consistent with the Act.

Applicants' Conditions

    Applicants agree that any order granting the requested relief will 
be subject to the following conditions:
    1. Shares of the Money Market Funds sold to and redeemed by the 
Investing Funds will not be subject to a sales load, redemption fee, 
distribution fee under a plan adopted in accordance with rule 12b-1 
under the Act or service fee (as defined in rule 2830(b)(9) of the 
NASD's Conduct Rules), or if such shares are subject to any such fee, 
JNAM will waive its advisory fee for each Investing Fund in an amount 
that offsets the amount of such fees incurred by the Investing Fund.
    2. Prior to reliance on the order, an Investing Fund will hold a 
meeting of the Fund Board for the purpose of voting on the advisory 
contract under section 15 of the Act. Before approving any advisory 
contract for an Investing Fund, the Fund Board, including a majority of 
the Independent Trustees, taking into account all relevant factors, 
shall consider to what extent, if any, the advisory fees charged to the 
Investing Fund by JNAM should be reduced to account for reduced 
services provided to the Fund by JNAM as a result of Uninvested Cash 
being invested in a Money Market Fund. In connection with this 
consideration, JNAM will provide the Fund Board with specific 
information regarding the approximate cost to JNAM of, or portion of 
the advisory fee under the existing advisory contract attributable to, 
managing the Uninvested Cash of an Investing Fund that can be expected 
to be invested in a Money Market Fund. The minute books of the 
Investing Fund will record fully the Fund Board's considerations in 
approving the advisory contract, including the consideration relating 
to fees referred to above.
    3. Each Investing Fund will invest Uninvested Cash in, and hold 
shares of, the Money Market Funds only to the extent that the Investing 
Fund's aggregate investment in the Money Market Funds does not exceed 
25 percent of the Investing Fund's total assets. For purposes of this 
limitation, each Investing Fund will be treated as a separate 
investment company.
    4. Investment of Cash Balances in shares of the Money Market Funds 
will be in accordance with each Investing Fund's respective investment 
restrictions, if any, and will be consistent with each Investing Fund's 
policies as set forth in its prospectus and statement of additional 
information.
    5. Each Investing Fund, each Money Market Fund, and any future Fund 
that may rely on the order shall be part of the same group of 
investment companies, as defined in section 12(d)(1)(G)(ii) of the Act, 
and shall be advised by JNAM or a person controlling, controlled by, or 
under common control with JNAM.
    6. No Money Market Fund whose shares are held by an Investing Fund 
shall acquire securities of any investment company in excess of the 
limits contained in section 12(d)(1)(A) of the Act.

[[Page 39218]]

    7. Before a Fund may participate in Securities Lending 
Arrangements, a majority of the Fund Board, including a majority of the 
Independent Trustees, will approve the Fund's participation in 
Securities Lending Arrangements. Such Independent Trustees also will 
evaluate the Securities Lending Arrangements and their results no less 
frequently than annually and determine that any investment of Cash 
Collateral in the Money Market Funds is in the best interest of the 
shareholders of the Fund.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-18733 Filed 7-26-01; 8:45 am]
BILLING CODE 8010-01-M