<PAGE> 1
As filed with the Securities and Exchange Commission on November 26, 1997.
1933 Act File No:
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1940 Act File No:
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. [X]
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Post-Effective Amendment No. [ ]
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and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. [X]
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Jackson National Separate Account III
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(Exact Name of Registrant)
Jackson National Life Insurance Company
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(Name of Depositor)
5901 Executive Drive, Lansing, Michigan 48911
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(Address of Depositor's Principal Executive Offices)
Depositor's Telephone Number, including Area Code:
(517) 394-3400
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With a copy to:
Thomas J. Meyer Judith A. Hasenauer
Vice Pres. & General Counsel Principal
Jackson National Life Insurance Blazzard, Grodd &
Company Hasenauer, P.C.
5901 Executive Dr. P.O. Box 5108
Lansing, MI 48911 Westport, CT 06881
(Name and Address of Agent for Service)
Approximate date of proposed public offering: (Upon the effective date of this
Registration Statement)
Title of Securities Being Registered
Individual Deferred Variable Annuity Contracts
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE> 2
JACKSON NATIONAL SEPARATE ACCOUNT III
REFERENCE TO ITEMS REQUIRED BY FORM N-4
<TABLE>
<CAPTION>
N-4 Item Caption in Prospectus or
-------- Statement of Additional
Information relating to
each Item
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Part A. Information Required in a Prospectus Prospectus
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<S> <C> <C>
1. Cover Page Cover Page
2. Definitions Not Applicable
3. Synopsis Key Facts; Fee Tables
4. Condensed Financial Information Not Applicable
5. General Description of Registrant, The Company; The
Depositor and Portfolio Companies Separate Account;
Investment Portfolios
6. Deductions Contract Charges;
Other Information
7. General Description of Variable The Annuity Contract;
Annuity Contracts Purchases; Transfers;
Access To Your Money;
Income Payments (The
Income Phase); Death
Benefit; Other
Information
8. Annuity Period Income Payments (The
Income Phase)
9. Death Benefit Death Benefit
10. Purchases and Contract Value Purchases
11. Redemptions Access To Your Money
12. Taxes Taxes
13. Legal Proceedings Other Information
14. Table of Contents of the Statement of Appendix A
Additional Information
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Information Required in a Statement of Statement of
Part B. Additional Information Additional Information
-------- ---------------------- ----------------------
<S> <C> <C>
15. Cover Page Cover Page
16. Table of Contents Table of Contents
17. General Information and History General Information
and History
18. Services Services
19. Purchase of Securities Being Offered Purchase of Securities
Being Offered
20. Underwriters Underwriters
21. Calculation of Performance Data Calculation of
Performance
22. Annuity Payments Income Payments; Net
Investment Factor
23. Financial Statements Financial Statements
</TABLE>
Part C.
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Amendment to Registration
Statement.
<PAGE> 4
Please read this prospectus before investing, and keep it on file for future
reference. It contains important information about the Perspective Advisors
Fixed and Variable Annuity.
To learn more about the Perspective Advisors Fixed and Variable Annuity
contract, you can obtain a free copy of the Statement of Additional Information
(SAI) dated March 16, 1998, by calling Jackson National at (800) 766-4683 or by
writing Jackson National at: Annuity Service Center, 8055 East Tufts Avenue,
Second Floor, Denver, Colorado 80237. 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 is in Appendix A 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.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC NOR HAS THE
SEC PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
THE PERSPECTIVE ADVISORS
FIXED AND VARIABLE ANNUITY
ISSUED BY JACKSON NATIONAL LIFE INSURANCE COMPANY
AND JACKSON NATIONAL SEPARATE ACCOUNT III
The fixed and variable annuity contract is an individual, flexible premium
deferred annuity with 2 guaranteed accounts which offer an interest rate that
is guaranteed by Jackson National Life Insurance Company (Jackson National) and
16 investment portfolios. You can put your money in any of the guaranteed
accounts and/or the investment portfolios.
The investment portfolios purchase shares of the following series of the JNL
Series Trust:
JNL Aggressive Growth Series
JNL Global Equities Series
JNL/Alliance Growth Series
JNL/JPM International & Emerging Markets Series
JNL/PIMCO Total Return Bond Series
JNL/Putnam Growth Series
JNL/Putnam Value Equity Series
Goldman Sachs/JNL Growth & Income Series
Lazard/JNL Small Cap Value Series
Lazard/JNL Mid Cap Value Series
PPM America/JNL Money Market Series
Salomon Brothers/JNL Balanced Series
Salomon Brothers/JNL Global Bond Series
Salomon Brothers/JNL High Yield Bond Series
T. Rowe Price/JNL International Equity
Investment Series
T. Rowe Price/JNL Mid-Cap Growth Series
MARCH 16, 1998
<PAGE> 5
TABLE OF CONTENTS
Key Facts
Fee Table
The Annuity Contract
The Company
The Guaranteed Accounts
The Separate Account
Investment Portfolios
Contract Charges
Purchases
Transfers
Access to Your Money
Income Payments (The Income Phase)
Death Benefit
Taxes
Other Information
Appendix A
<PAGE> 6
KEY FACTS
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
The Annuity Contract The fixed and variable annuity contract offered by
Jackson National provides a means for investing on a
tax-deferred basis in the guaranteed accounts of
Jackson National and the investment portfolios. The
contract is intended for retirement savings or other
long-term investment purposes and provides for a death
benefit and income options.
The contract has two phases: the accumulation phase
and the income phase. During the accumulation phase,
earnings accumulate on a tax-deferred basis and are
taxed as income when you make a withdrawal. The
income phase occurs when you begin receiving regular
payments from your contract. The amount of money you
accumulate in your contract during the accumulation
phase will determine the amount of income payments
during the income phase.
Investment Options You can put money into any of the guaranteed accounts
and/or the investment portfolios but you may
not put your money in more than eighteen of the
investment options during the life of your contract.
The guaranteed accounts offer an interest rate that
is guaranteed by Jackson National. While your money
is in a guaranteed account, the interest your money
earns and your principal are guaranteed by Jackson
National.
The investment portfolios purchase shares of series
of mutual funds. These series are described in the
attached JNL Series Trust prospectus. The value of
the investment portfolios will vary in accordance
with the investment performance of the series. You
bear the investment risk under the contract for all
amounts allocated to the investment portfolios.
Expenses The contract has insurance features and investment
features, and there are costs related to each.
Jackson National makes a deduction for its insurance
charges which is equal to 1.50% of the daily value of
the contracts invested in the investment portfolios.
During the accumulation phase, Jackson National
deducts a $50 annual contract maintenance charge from
your contract.
Jackson National may assess a state premium tax
charge which ranges from 0-4%, depending upon the
state, when you begin receiving regular income
payments from your contract, when you make a
withdrawal or, in states where required, at the time
premium payments are made.
<PAGE> 7
There are also investment charges which range from
.75% to 1.25% of the average daily value of the
series, depending on the series.
Purchases Under most circumstances, you can buy a contract for
$25,000 or more. You can add $5,000 or more ($2,000
or more for a qualified plan contract) at any time
during the accumulation phase.
Access to Your Money You can take money out of your contract during the
accumulation phase. You may have to pay income tax
and a tax penalty on any money you take out.
Income Payments If you want to receive regular income from your
annuity, you can choose one of four options: (1)
monthly payments for the annuitant's life; (2) monthly
payments for the annuitant's life and the life of
another person (usually the annuitant's spouse); (3)
monthly payments for the annuitant's life, but with
payments continuing to you or your designated
beneficiary for 10 or 20 years if the annuitant dies
before the end of the selected period; and (4)
payments for a period of 5 to 30 years.
During the income phase, you have the same investment
choices you had during the accumulation phase. You
can choose to have payments come from the guaranteed
accounts, the investment portfolios or both. If you
choose to have any part of your payments come from
the investment portfolios, the dollar amount of your
payments may go up or down. If you choose a variable
income option, you may make transfers between
investment portfolios but you may not make transfers
in to or out of the guaranteed accounts.
Death Benefit If you die before moving to the income phase, the
person you have chosen as your beneficiary will
receive a death benefit.
Free Look You can cancel the contract within twenty days after
receiving it. Under most circumstances, Jackson
National will return the amount your contract is
worth on the day we receive your request. This may
be more or less than your original payment.
Taxes The Internal Revenue Code provides that you will not
be taxed on the earnings on the money held in your
contract until you take money out (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 the type of contract you have
(non-qualified or qualified).
<PAGE> 8
FEE TABLE
OWNER TRANSACTION EXPENSES
Withdrawal Charge:
None
Transfer Fee:
No charge for first 15 transfers in a contract year; thereafter, the fee
is $25 per transfer.
Contract Maintenance Charge:
$50 per contract per year
SEPARATE ACCOUNT ANNUAL EXPENSES (as a percentage of average account value)
Insurance Charges 1.50%
SERIES EXPENSES
(as a percentage of the average daily net assets of the series underlying an
investment portfolio)
<TABLE>
<CAPTION>
Other Expenses Total Series
Management (After Annual
JNL SERIES TRUST Fee Reimbursement) Expenses
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
JNL Aggressive Growth Series .95% .15% 1.10%
JNL Global Equities Series 1.00% .15% 1.15%
JNL/Alliance Growth Series .775% .15%* .925%
JNL/JPM International & Emerging Markets Series .975% .15%* 1.125%
JNL/PIMCO Total Return Bond Series .70% .15%* .85%
JNL/Putnam Growth Series .90% .15% 1.05%
JNL/Putnam Value Equity Series .90% .15% 1.05%
Goldman Sachs/JNL Growth & Income Series .925% .15%* 1.075%
Lazard/JNL Small Cap Value Series 1.05% .15%* 1.20%
Lazard/JNL Mid Cap Value Series .975% .15%* 1.125%
PPM America/JNL Money Market Series .60% .15% .75%
Salomon Brothers/JNL Balanced Series .80% .15%* .95%
Salomon Brothers/JNL Global Bond Series .85% .15% 1.00%
Salomon Brothers/JNL High Yield Bond Series .80% .15%* .95%
T. Rowe Price/JNL International Equity Investment Series 1.10% .15% 1.25%
T. Rowe Price/JNL Mid-Cap Growth Series .95% .15% 1.10%
- ------------------------------------------------------------------------------------------------
</TABLE>
*The JNL/Alliance Growth Series, JNL/JPM International & Emerging Markets
Series, JNL/PIMCO Total Return Bond Series, Goldman Sachs/JNL Growth & Income
Series, Lazard/JNL Small Cap Value Series, Lazard/JNL Mid Cap Value Series,
Salomon Brothers/JNL Balanced Series and Salomon Brothers/JNL High Yield Bond
Series commenced operations on March 1, 1998. Estimated expenses for the
first fiscal year of operation are shown. Actual expenses may be greater or
lesser than those shown.
Currently, each of the Series is reimbursed for annual expenses (excluding
management fees) in excess of .15% of average daily net assets. Prior to
reimbursement, total Series annual expenses as a percentage of net assets for
the period ended December 31, 1996, were: JNL Aggressive Growth Series --
1.40%; JNL Global Equities Series -- 1.63%; JNL/Putnam Growth Series -- 1.27%;
JNL/Putnam Value Equity Series -- 1.53%; PPM America/JNL Money Market Series --
.85%; Salomon Brothers/JNL Global Bond Series -- 1.44%; T. Rowe Price/JNL
International Equity Investment Series -- 1.29%; and T. Rowe Price/JNL Mid-Cap
Growth Series -- 1.14%; and are expected to be: JNL/Alliance Growth Series --
1.38%; JNL/JPM International & Emerging
<PAGE> 9
Markets Series -- 1.92%; JNL/PIMCO Total Return Bond Series -- 1.33%; Goldman
Sachs/JNL Growth & Income Series -- 1.56%; Lazard/JNL Small Cap Value Series --
1.65%; Lazard/JNL Mid Cap Value Series -- 1.58%; Salomon Brothers/JNL Balanced
Series -- 1.43%; and Salomon Brothers/JNL High Yield Bond Series -- 1.43%.
Voluntary reimbursements to these Series may be modified or discontinued at any
time.
EXAMPLES
You would pay the following expenses on a $1,000 investment, assuming a 5%
annual return on assets.
Time Periods
- ----------------------------------------------------------------------------
1 3
year years
- ----------------------------------------------------------------------------
JNL Aggressive Growth Portfolio $27 $84
JNL Global Equities Portfolio 28 85
JNL/Alliance Growth Portfolio 26 79
JNL/JPM International & Emerging Markets Portfolio 28 85
JNL/PIMCO Total Return Bond Portfolio 25 76
JNL/Putnam Growth Portfolio 27 82
JNL/Putnam Value Equity Portfolio 27 82
Goldman Sachs/JNL Growth & Income Portfolio 27 83
Lazard/JNL Small Cap Value Portfolio 28 87
Lazard/JNL Mid Cap Value Portfolio 28 85
PPM America/JNL Money Market Portfolio 24 73
Salomon Brothers/JNL Balanced Portfolio 26 79
Salomon Brothers/JNL Global Bond Portfolio 26 81
Salomon Brothers/JNL High Yield Bond Portfolio 26 79
T. Rowe Price/JNL International Equity Investment Portfolio 29 88
T. Rowe Price/JNL Mid-Cap Growth Portfolio 27 84
- ----------------------------------------------------------------------------
<PAGE> 10
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 underlying
the investment portfolios. Premium taxes may also apply.
The Examples reflect the contract maintenance charge which is determined by
dividing the total amount of such charges expected to be collected during the
year by the total estimated average net assets of the investment portfolios.
THE EXAMPLE DOES NOT REPRESENT PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE
GREATER OR LESS THAN THOSE SHOWN.
FINANCIAL STATEMENTS
The financial statements of Jackson National for the years ended December 31,
1997, and December 31, 1996; and the applicable auditor's reports thereon are
contained in the SAI.
<PAGE> 11
THE ANNUITY CONTRACT
The fixed and variable annuity contract offered by Jackson National is a
contract between you, the owner, and Jackson National Life Insurance Company,
an insurance company. The contract provides a means for investing on a
tax-deferred basis in guaranteed accounts and investment portfolios. The
contract is intended for retirement savings or other long-term investment
purposes and provides for a death benefit and guaranteed income options.
The contract, like all deferred annuity contracts, has two phases: the
accumulation phase and the income phase. During the accumulation phase,
earnings accumulate on a tax-deferred basis and are taxed as income when you
make a withdrawal.
The contract offers guaranteed accounts. The guaranteed accounts offer an
interest rate that is guaranteed by Jackson National for the duration of the
guaranteed account period. While your money is in a guaranteed account, the
interest your money earns and your principal are guaranteed by Jackson
National. The value of a guaranteed account may be reduced if you make a
withdrawal prior to the end of the guaranteed account period, but will never be
less than the premium payments accumulated at 3% per year. If you choose to
have your annuity payments come from the guaranteed accounts, your payments
will remain level throughout the entire income phase.
The contract also offers investment portfolios. The investment portfolios are
designed to offer a higher return than the guaranteed accounts. HOWEVER, THIS
IS NOT GUARANTEED. IT IS POSSIBLE FOR YOU TO LOSE YOUR MONEY. If you put
money in the investment portfolios, the amount of money you are able to
accumulate in your contract during the accumulation phase depends upon the
performance of the investment portfolios 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 portfolios you choose for the income phase.
As the owner, you can exercise all the rights under the contract. You and your
spouse can be joint owners. You can assign the contract at any time during
your lifetime but Jackson National will not be bound until we receive written
notice of the assignment.
THE COMPANY
Jackson National is a stock life insurance company organized under the laws of
the state of Michigan in June 1961. Its legal domicile and principal business
address is 5901 Executive Drive, Lansing, Michigan 48911. Jackson National, a
wholly-owned subsidiary of Prudential Corporation plc (London, England), is
admitted to conduct life insurance and annuity business in the District of
Columbia and all states except New York.
THE GUARANTEED ACCOUNTS
If you select a guaranteed account, your money will be placed with Jackson
National's other assets. The guaranteed accounts are not registered with the
SEC and the SEC does not review the information we provide to you about the
guaranteed accounts. Your contract contains a more complete description of the
guaranteed accounts.
THE SEPARATE ACCOUNT
The Jackson National Separate Account III was established by Jackson National
on October 23, 1997, pursuant to the provisions of Michigan law, as a
segregated asset account of the company. The separate account meets the
definition of a "separate account" under the federal securities laws and is
registered with the SEC as a unit investment trust under the Investment Company
Act of 1940, as amended.
The assets of the separate account legally belong to Jackson National.
However, the contract assets in the separate account are not chargeable with
liabilities arising out of any other business Jackson National may
<PAGE> 12
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 Jackson National may issue.
The separate account is divided into investment portfolios. Jackson National
does not guarantee the investment performance of the separate account or the
investment portfolios.
INVESTMENT PORTFOLIOS
You can put money in any or all of the investment portfolios. The investment
portfolios purchase shares of the following series of the JNL Series Trust:
JNL Aggressive Growth Series
JNL Global Equities Series
JNL/Alliance Growth Series
JNL/JPM International & Emerging Markets Series
JNL/PIMCO Total Return Bond Series
JNL/Putnam Growth Series
JNL/Putnam Value Equity Series
Goldman Sachs/JNL Growth & Income Series
Lazard/JNL Small Cap Value Series
Lazard/JNL Mid Cap Value Series
PPM America/JNL Money Market Series
Salomon Brothers/JNL Balanced Series
Salomon Brothers/JNL Global Bond Series
Salomon Brothers/JNL High Yield Bond Series
T. Rowe Price/JNL International Equity Investment Series
T. Rowe Price/JNL Mid-Cap Growth Series
The series are described in the attached JNL Series Trust prospectus. Jackson
National Financial Services, Inc. serves as investment adviser for all of the
series. Janus Capital Corporation serves as sub-adviser for the JNL Aggressive
Growth and JNL Global Equities Series; Alliance Capital Management L.P. serves
as sub-adviser for the JNL/Alliance Growth Series; J.P. Morgan Investment
Management Inc. serves as sub-adviser for the JNL/JPM International & Emerging
Markets Series; Pacific Investment Management Company serves as sub-adviser for
the JNL/PIMCO Total Return Bond Series; Putnam Investment Management, Inc.
serves as sub-adviser for the JNL/Putnam Growth and JNL/Putnam Value Equity
Series; Goldman Sachs Asset Management serves as sub-adviser for the Goldman
Sachs/JNL Growth & Income Series; Lazard Asset Management serves as sub-adviser
for the Lazard/JNL Small Cap Value and Lazard/JNL Mid Cap Value Series; PPM
America, Inc. serves as sub-adviser for the PPM America/JNL Money Market
Series; Salomon Brothers Asset Management Inc serves as sub-adviser for the
Salomon Brothers/JNL Balanced, Salomon Brothers/JNL Global Bond and Salomon
Brothers/JNL High Yield Bond Series; T. Rowe Price Associates, Inc. serves as
sub-adviser for the T. Rowe Price/JNL Mid-Cap Growth Series; and Rowe
Price-Fleming International, Inc. serves as sub-adviser for the T. Rowe
Price/JNL International Equity Investment Series.
Depending on market conditions, you can make or lose money in any of the
investment portfolios. You should read the prospectus for the series carefully
before investing. Additional investment portfolios may be available in the
future.
Voting Rights
To the extent required by law, Jackson National will obtain from you and other
owners of the contracts instructions as to how to vote when the series solicits
proxies in conjunction with a vote of shareholders. When Jackson National
receives instructions, we will vote all the shares Jackson National owns in
proportion to those instructions.
Substitution
Jackson National may be required to substitute an investment portfolio with
another portfolio. We will not do this without the prior approval of the SEC.
Jackson National will give you notice of our intent to do this.
CONTRACT CHARGES
<PAGE> 13
There are charges and other expenses associated with the contracts that reduce
the return on your investment in the contract. These charges and expenses are:
Insurance Charges
Each day Jackson National makes a deduction for its insurance charges. We do
this as part of our calculation of the value of the accumulation units and
annuity units. On an annual basis, this charge equals 1.50% of the daily value
of the contracts invested in an investment portfolio, after expenses have been
deducted. This charge is for the mortality risks, expense risks and
administrative expenses assumed by Jackson National.
Contract Maintenance Charge
During the accumulation phase, Jackson National deducts a $50 annual contract
maintenance charge on each anniversary of the date on which your contract was
issued. If you make a complete withdrawal from your contract, the contract
maintenance charge will also be deducted. This charge is for administrative
expenses.
Jackson National will not deduct this charge, if when the deduction is to be
made, the value of your contract is $50,000 or more. Jackson National may
discontinue this practice at any time.
Transfer Fee
A transfer fee of $25 will apply to transfers in excess of 15 in a contract
year. Jackson National may waive the transfer fee in connection with
pre-authorized automatic transfer programs, or may charge a lesser fee where
required by state law.
Other Expenses
There are deductions from and expenses paid out of the assets of the series.
These expenses are described in the attached JNL Series Trust prospectus.
Premium Taxes
Some states and other governmental entities charge premium taxes or other
similar taxes. Jackson National is responsible for the payment of these taxes
and may make a deduction from the value of the contract for them. Premium
taxes generally range from 0% to 4% depending on the state.
Income Taxes
Jackson National will make a deduction from the contract for any income taxes
which it incurs because of the contract. Currently, we are not making any such
deduction.
PURCHASES
You can buy a contract for $25,000 or more under most circumstances. The
maximum we accept without our prior approval is $1 million.
You can add $5,000 or more to a non-qualified plan contract or $2,000 or more
to a qualified plan contract ($50 under the automatic payment plan) at any time
during the accumulation phase.
The minimum that you may allocate to a guaranteed account or investment
portfolio is $100. There is a $100 minimum balance requirement for each
guaranteed account and investment portfolio.
When you purchase a contract, Jackson National will allocate your premium to
one or more of the guaranteed accounts and/or the investment portfolios you
have selected. Your allocations must be in whole percentages ranging from 0%
to 100%. Jackson National will allocate additional premiums in the same way
unless you tell us otherwise.
There may be more than eighteen investment options available under the
contract; however, you may not allocate your money to more than eighteen
investment options during the life of your contract.
Jackson National will issue your contract and allocate your first premium
within 2 business days after we receive your complete application and first
premium. If
<PAGE> 14
your application is not complete, we will contact you to get the necessary
information. If for some reason Jackson National is unable to complete this
process within 5 business days, we will either return your money or get your
permission to keep it until we receive all of the necessary information.
The Jackson National business day closes when the New York Stock Exchange
closes, usually 4:00 p.m. Eastern time.
Accumulation Units
The contract value allocated to the investment portfolios will go up or down
depending on the performance of the portfolios. In order to keep track of the
value of your contract, Jackson National uses a unit of measure called an
accumulation unit. (An accumulation unit is similar to a share of a mutual
fund.) During the income phase it is called an annuity unit.
Every business day Jackson National determines the value of an accumulation
unit for each of the investment portfolios. This is done by:
1. determining the total amount of money invested in the
particular investment portfolio;
2. subtracting any insurance charges and any other charges, such
as taxes deducted;
3. 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.
When you make a premium payment, Jackson National credits your contract with
accumulation units. The number of accumulation units credited is determined at
the close of Jackson National's business day by dividing the amount of the
premium allocated to any investment portfolio by the value of the accumulation
unit for that investment portfolio.
TRANSFERS
You can transfer money between guaranteed accounts and investment portfolios
during the accumulation phase. During the income phase, you can transfer money
between investment portfolios.
You can make 15 transfers every year during the accumulation phase without
charge. The minimum amount that you can transfer is $100 (unless the transfer
is made under a pre-authorized automatic transfer program). If the remaining
value in a guaranteed account or investment portfolio would be less than $100
after a transfer, you must transfer the entire value or you may not make the
transfer.
Telephone Transactions
If you elect the telephone transfer privilege on your application, you may make
transfers by telephone. You must complete your telephone call authorizing a
transfer by the close of Jackson National's business day in order to receive
that day's value for an accumulation unit of an investment portfolio.
Jackson National has procedures which are designed to provide reasonable
assurance that telephone authorizations are genuine. Our procedures include
requesting identifying information and tape recording telephone communications.
Jackson National and its affiliates disclaim all liability for any claim, loss
or expense resulting from any alleged error or mistake in connection with a
telephone transfer which was not properly authorized by you. However, if
Jackson National fails to employ reasonable procedures to ensure that all
telephone transfers are properly authorized, we may be held liable for such
losses. Jackson National reserves the right to modify or discontinue at any
time and without notice the acceptance of instructions from someone other than
you and/or the telephone transfer privilege.
ACCESS TO YOUR MONEY
You can have access to the money in your contract: (1) by making either a
partial or
<PAGE> 15
complete withdrawal or (2) 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 the contract
on the day you made the withdrawal less any premium tax and less any contract
maintenance charge. Except in connection with the systematic withdrawal
program, you must withdraw at least $500 or, if less, the entire amount in the
guaranteed account or investment portfolio from which you are making the
withdrawal. After your withdrawal, you must have at least $100 left in the
guaranteed account or investment portfolio.
INCOME TAXES, TAX PENALTIES AND CERTAIN RESTRICTIONS MAY APPLY TO ANY
WITHDRAWAL YOU MAKE.
There are limitations on withdrawals from a qualified plan referred to as a
403(b) annuity. See "Taxes."
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 and withdrawals you make before you reach 59 1/2 may be
subject to a 10% tax penalty.
We reserve the right to charge a fee for participation or to discontinue
offering this program in the future.
Suspension of Withdrawals
Jackson National may be required to suspend or delay withdrawals from a
contract when:
1. the New York Stock Exchange is closed (other than customary
weekend and holiday closings);
2. trading on the New York Stock Exchange is restricted;
3. an emergency exists so that it is not reasonably practicable to
dispose of shares of the investment portfolios or determine
investment portfolio values;
4. the SEC, by order, may permit for the protection of owners.
Jackson National has reserved the right to defer payment for a withdrawal or
transfer from the guaranteed accounts for the period permitted by law, but not
more than six months.
INCOME PAYMENTS (THE INCOME PHASE)
The income phase occurs when you begin receiving regular payments from your
contract. The income date is the month and year in which those payments begin.
The income date must be at least one year after your contract is issued. 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. You must give us 7 days notice. Income payments must begin by your 90th
birthday under a non-qualified contract (or an earlier date under a qualified
contract if required by law).
At the income date, you can choose whether payments will come from the
guaranteed accounts, the investment portfolios or both. Unless you tell us
otherwise, your income payments will be based on the investment allocations
that were in place on the income date.
If you choose to have any portion of your annuity payments come from the
investment portfolio(s), the dollar amount of your payment will depend upon
three things: 1) the value of your contract in the investment
<PAGE> 16
portfolio(s) on the income date, 2) the 3% assumed investment rate used in the
annuity table for the contract, and 3) the performance of the investment
portfolios you selected. If the actual performance exceeds the 3% assumed
rate, your income payments will increase. Similarly, if the actual rate is
less than 3%, your income payments will decrease.
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, Jackson National may provide your payment in a
single lump sum. Likewise, if your first income payment would be less than $50
and state law permits, Jackson National may set the frequency of payments so
that the first payment would be at least $50.
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.)
OPTION 1 - Life Income. This income option provides monthly payments for your
life.
OPTION 2 - Joint and Survivor Annuity. 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 120 or 240 Monthly Payments Guaranteed. This
income option provides monthly payments for your life, but with payments
continuing to your beneficiary for the remainder of 10 or 20 years (as you
select) if you die before the end of the selected period.
OPTION 4 - Income for a Specified Period. This income option provides monthly
payments for any number of years from 5 to 30.
ADDITIONAL OPTIONS - Other income options may be made available by Jackson
National.
If you choose an income option for which payments are based on life expectancy,
you cannot make a withdrawal during the income phase.
DEATH BENEFIT
Death of Owner Before the Income Date
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. Joint owners must be
spouses.
The death benefit is the greater of the guaranteed minimum death benefit or
the current value of the contract.
The guaranteed minimum death benefit prior to the first anniversary of the
contract issue date is equal to total premiums minus the sum of total
withdrawals and premium taxes incurred in the first contract year.
Within a contract year, on or after the first anniversary of the contract, the
guaranteed minimum death benefit is equal to the guaranteed minimum death
benefit on the last contract anniversary adjusted for any premiums paid minus
the sum of total withdrawals and premium taxes incurred.
The guaranteed minimum death benefit is redetermined on each anniversary of the
contract issue date based on your attained age. It is calculated as follows:
Ages 0 - 70: The greater of the guaranteed minimum death benefit on the
last contract anniversary adjusted for any premiums paid minus the sum of total
withdrawals and premium taxes incurred accumulated at 2%, and the current value
of the contract.
Ages 71 - 80: The greater of the guaranteed minimum death benefit on the
<PAGE> 17
last contract anniversary adjusted for any premiums paid minus the sum of total
withdrawals and premium taxes incurred and the current value of the contract.
Ages 81 and greater: The guaranteed minimum death benefit on the last
contract anniversary adjusted for any premiums paid minus the sum of total
withdrawals and premium taxes incurred.
The entire death benefit must be paid within 5 years of the date of death
unless the beneficiary elects to have the death benefit payable under an income
option. The death benefit payable under an income option must be paid over the
beneficiary's lifetime or for a period not extending beyond the beneficiary's
life expectancy. Payments must begin within one year of the date of death.
Unless the beneficiary chooses to receive the death benefit in a single sum,
the beneficiary must elect an income option within the 60 day period beginning
with the date Jackson National receives proof of death. If the beneficiary
chooses to receive the death benefit in a single sum and all the necessary
requirements are met, Jackson National will pay the death benefit within 7
days. If the beneficiary is your spouse, he/she can continue the contract in
his/her own name at the then current contract value.
Death of Owner After the Income Date
If you or a joint owner die after moving to the income phase, 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.
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 after the income date, the death benefit, if any, will be
as provided for in the income option selected. Death benefits will be paid at
least as rapidly as under the method of distribution in effect at the
annuitant's death.
TAXES
THE FOLLOWING IS GENERAL INFORMATION AND IS NOT INTENDED AS TAX ADVICE TO ANY
INDIVIDUAL. YOU SHOULD CONSULT YOUR OWN TAX ADVISER.
The Internal Revenue Code (Code) provides that you will not be taxed on the
earnings on the money held in your contract until you take money out (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 the type of contract you have
(non-qualified or qualified).
Non-Qualified Contracts - General Taxation
You will not be taxed on increases in the value of your contract until a
distribution (either as a withdrawal or as an income payment) occurs. When you
make a withdrawal you are taxed on the amount of the withdrawal that is
earnings. For income payments, a portion of each income payment is treated as
a partial return of your premium and will not be taxed. The remaining portion
of the income payment will be treated as ordinary income. How the income
payment is divided between taxable and non-taxable portions depends on the
period over which income payments are expected to be made. Income payments
received after you have received all of your premium are treated as income.
If a non-qualified contract is owned by a non-natural person (e.g., corporation
or certain other entities other than tax-qualified trusts),
<PAGE> 18
the contract will generally not be treated as an annuity for tax purposes.
Qualified and Non-Qualified Contracts
If you purchase the contract as an individual and not under any pension plan,
specially sponsored program or an individual retirement annuity, your contract
is referred to as a non-qualified contract.
If you purchase the contract under a pension plan, specially sponsored program,
or an individual retirement annuity, your contract is referred to as a
qualified contract. Examples of qualified plans are: Individual Retirement
Annuities (IRAs), Tax-Sheltered Annuities (sometimes referred to as 403(b)
contracts), H.R. 10 Plans (sometimes referred to as Keogh Plans), and pension
and profit-sharing plans, which include 401(k) plans.
Withdrawals - Non-Qualified Contracts
If you make a withdrawal from your contract, the Code treats the withdrawal as
first coming from earnings and then from your premium payments. Withdrawn
earnings are includible in income.
The Code also provides that any amount received under an annuity contract which
is included in income may be subject to a 10% penalty. Some withdrawals will
be exempt from the penalty. They include any amounts: (1) paid on or after
the taxpayer reaches age 59 1/2; (2) paid after you die; (3) paid if the
taxpayer becomes totally disabled (as that term is defined in the Code); (4)
paid in a series of substantially equal payments made annually (or more
frequently) under a lifetime annuity; (5) paid under an immediate annuity; or
(6) which come from premiums made prior to August 14, 1982.
Withdrawals - Qualified Contracts
There are special rules that govern qualified contracts. We have provided
additional discussion in the Statement of Additional Information.
Withdrawals - Tax-Sheltered Annuities
The Code limits the withdrawal of premiums from certain Tax-Sheltered
Annuities. Withdrawals can only be made when an owner: (1) reaches age 59
1/2; (2) leaves his/her job; (3) dies; (4) becomes disabled (as that term is
defined in the Code); or (5) 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
Beginning in 1998, individuals may purchase a new type of non-deductible IRA,
known as a Roth IRA. Qualified distributions from Roth IRAs are entirely tax
free. A qualified distribution requires that the individual has held the Roth
IRA 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 qualified first-time home purchase, subject to $10,000
lifetime maximum, for the individual, a spouse, child, grandchild, or ancestor.
Withdrawals - Investment Adviser Fees
The Internal Revenue Service has, through a series of Private Letter Rulings,
held that the payment of investment adviser financial planner fees from an IRA
or a Tax-Sheltered Annuity is permissible under certain circumstances and will
not be considered a distribution for income tax purposes. The Rulings require
that in order to receive this favorable tax treatment, the annuity contract
must, under a written agreement, be solely liable (not jointly with the contract
owner) for payment of the adviser's fee and the fee must actually be paid from
the annuity contract to the adviser. Withdrawals from non-qualified contracts
for the payment of investment fees will be considered distributions from the
contract.
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 year or termination
of employment in a Texas public institution
<PAGE> 19
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.
Assignment
An assignment may be a taxable event. If the contract is issued pursuant to a
qualified plan, there may be limitations on your ability to assign the
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. Jackson National believes that the underlying investments
are being managed so as to comply with these requirements.
Neither the Code nor the Internal Revenue Service Regulations issued to date
provide guidance as to the circumstances under which you, because of the degree
of control you exercise over the underlying investments, and not Jackson
National would be considered the owner of the shares of the investment
portfolios. If this occurs, it will result in the loss of the favorable tax
treatment for the contract.
It is unknown to what extent owners are permitted to select investment
portfolios, to make transfers among the investment portfolios or the number and
type of investment portfolios from which owners may select. If any guidance is
provided which is considered a new position, then the guidance would generally
be applied prospectively. However, if such guidance is considered not to be a
new position, it may be applied retroactively. This would mean that you, as
the owner of the contract, could be treated as the owner of the investment
portfolios. Due to the uncertainty in this area, Jackson National reserves the
right to modify the contract in an attempt to maintain favorable tax treatment.
OTHER INFORMATION
Dollar Cost Averaging
You can arrange to automatically have a regular amount of money periodically
transferred into the investment portfolios. This theoretically gives you a
lower average cost per unit over time than you would receive if you made a one
time purchase.
To participate in this program, you must have a total contract value of at
least $15,000 (unless we waive this requirement).
Jackson National does not currently charge for participation in this program.
We may do so in the future.
Rebalancing
You can arrange to have Jackson National automatically reallocate money between
investment portfolios periodically to keep the blend you select.
Jackson National does not currently charge for participation in this program.
We may do so in the future.
Free Look
If you cancel the contract within twenty days after receiving it (or whatever
period is required in your state), Jackson National will return the amount your
contract is worth on the day we receive your request. This may be more or less
than your original payment. If required by law, Jackson National will return
your premium.
Distribution of Contracts
Jackson National Financial Services, Inc., an affiliate of Jackson National, is
located at 5901 Executive Drive, Lansing, Michigan 48911 and serves as the
distributor of the contracts.
Commissions will be paid to broker-dealers who sell the contracts. While
commissions may vary, they are not expected to exceed 8% of any premium
payment. Under certain circumstances, Jackson National may pay persistency
bonuses, in addition to the
<PAGE> 20
standard commissions. Jackson National may use any of its corporate assets to
cover the cost of distribution, including any profit from the contract
insurance charges.
Advertising
From time to time, Jackson National may advertise several types of performance
for the investment portfolios. Total return is the overall change in the value
of an investment in an investment portfolio over a given period of time.
Standardized total return is calculated in accordance with SEC guidelines.
Non-standardized total return may be for periods other than those required or
may otherwise differ from standardized total return. 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 insurance charges and may reflect
the deduction of the contract maintenance charge and withdrawal charge. The
deduction of the contract maintenance and/or the withdrawal charge would reduce
the percentage increase or make greater any percentage decrease.
If a series has been in existence for a longer period than the investment
portfolio, performance will be based upon the period quoted.
Market Timing and Asset Allocation Services
Market timing and asset allocation services offered by third parties must
comply with Jackson National's administrative systems, rules and procedures.
Modification of the Contract
Only the President, Vice President, Secretary or Assistant Secretary of Jackson
National may approve a change to or waive a provision of the contract. Any
change or waiver must be in writing. Jackson National may change the terms of
the contract in order to comply with changes in applicable law, or otherwise as
deemed necessary by Jackson National.
Legal Proceedings
There are no material legal proceedings, other than ordinary routine litigation
incidental to the business, to which Jackson National Life Insurance Company,
Jackson National Financial Services, Inc., and the Jackson National Separate
Account III are parties.
Questions
If you have questions about your contract, you may call us at (800) 766-4683,
or write to us at: Jackson National Life Annuity Service Center, 8055 E. Tufts
Avenue, Second Floor, Denver, Colorado 80237.
<PAGE> 21
APPENDIX A
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
General Information and History ................................... 2
Services .......................................................... 2
Purchase of Securities Being Offered .............................. 2
Underwriters ...................................................... 2
Calculation of Performance ........................................ 2
Additional Tax Information ........................................ 7
Income Payments; Net Investment Factor ............................ 9
Financial Statements .............................................. 10
<PAGE> 22
STATEMENT OF ADDITIONAL INFORMATION
MARCH 16, 1998
INDIVIDUAL DEFERRED FIXED AND VARIABLE ANNUITY CONTRACTS
ISSUED BY THE JACKSON NATIONAL SEPARATE ACCOUNT III
OF JACKSON NATIONAL LIFE INSURANCE COMPANY
This Statement of Additional Information is not a prospectus. It contains
information in addition to and more detailed than set forth in the Prospectus
and should be read in conjunction with the Prospectus dated March 16, 1998. 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.
TABLE OF CONTENTS
PAGE
General Information and History ........................................ 2
Services ............................................................... 2
Purchase of Securities Being Offered ................................... 2
Underwriters ........................................................... 2
Calculation of Performance.............................................. 2
Additional Tax Information.............................................. 6
Income Payments; Net Investment Factor.................................. 13
Financial Statements ................................................... 14
1
<PAGE> 23
GENERAL INFORMATION AND HISTORY
Jackson National Separate Account III (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
Corporation plc, London, England.
SERVICES
Jackson National has responsibility for administration of the contracts
and the Separate Account. We maintain records of the name, address, taxpayer
identification number and other pertinent information for each contract owner
and the number and type of contracts issued to each contract owner, and records
with respect to the value of each contract.
Jackson National is also the custodian of the assets of the Separate
Account. As custodian, we maintain a record of all purchases and redemptions
of shares of the series underlying the investment portfolios.
______________________ audits and reports on Jackson National's financial
statements, including the financial statements of the Separate Account, and
performs other professional accounting, auditing and advisory services when
engaged to do so by Jackson National.
Blazzard, Grodd & Hasenauer, P.C. of Westport, Connecticut 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 Financial Services, Inc. (JNFSI), 5901 Executive Drive, Lansing,
Michigan 48911. JNFSI is a subsidiary of Jackson National.
CALCULATION OF PERFORMANCE
When Jackson National advertises performance for an investment portfolio
(except the PPM America/JNL Money Market Portfolio), we will include quotations
of standardized total
2
<PAGE> 24
return to facilitate comparison with standardized total return advertised by
other variable annuity separate accounts. We will calculate standardized total
return according to the standard methods prescribed by rules of the Securities
and Exchange Commission. Standardized total return for a specific period is
calculated by taking a hypothetical $1,000 investment in an investment
portfolio at the offering on the first day of the period ("initial
investment"), and computing the ending redeemable value ("redeemable value") of
that investment at the end of the period. The redeemable value is then divided
by the initial investment and expressed as a percentage, carried to at least
the nearest hundredth of a percent. Standardized total return is annualized
and reflects the deduction of the insurance charges and the contract
maintenance charge. 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 total returns that each investment portfolio (except the
PPM America/JNL Money Market Portfolio) would have achieved if it had been
invested in the corresponding series for the periods indicated are as follows:
<TABLE>
<CAPTION>
One Year Period Commencement of
Ended Operations to
<S> <C> <C>
JNL Aggressive Growth Portfolio* % %
JNL Global Equities Portfolio* % %
JNL/ Putnam Growth Portfolio* % %
JNL/ Putnam Value Equity Portfolio* % %
Salomon Brothers/JNL Global Bond Portfolio* % %
T. Rowe Price/JNL International Equity
Investment Portfolio* % %
T. Rowe Price/JNL Mid-Cap Growth Portfolio* % %
</TABLE>
* Corresponding series commenced operations on May 15, 1995.
The corresponding series of the JNL/Alliance Growth Portfolio, JNL/JPM
International & Emerging Markets Portfolio, JNL/PIMCO Total Return Bond
Portfolio, Goldman Sachs/JNL Growth & Income Portfolio, Lazard/JNL Small Cap
Value Portfolio, Lazard/JNL Mid Cap Value Portfolio, Salomon Brothers/JNL
Balanced Portfolio and Salomon Brothers/JNL High Yield Bond Portfolio commenced
operations on March 1, 1998.
Jackson National may also advertise non-standardized total return.
Non-standardized total return may be for periods other than those required to
be presented or may otherwise differ from standardized total return.
Non-standardized total return may assume a larger initial investment which more
closely approximates the size of a typical contract.
The non-standardized total returns that each investment portfolio (except
the PPM America/JNL Money Market Portfolio) would have achieved if it had been
invested in the
3
<PAGE> 25
corresponding series for the periods indicated, calculated in a manner similar
to standardized total return but assuming a hypothetical initial investment of
$10,000, are as follows:
<TABLE>
<CAPTION>
One Year Period Commencement of
Ended Operations to
<S> <C> <C>
JNL Aggressive Growth Portfolio* % %
JNL Global Equities Portfolio* % %
JNL/ Putnam Growth Portfolio* % %
JNL/ Putnam Value Equity Portfolio* % %
Salomon Brothers/JNL Global Bond Portfolio* % %
T. Rowe Price/JNL International Equity
Investment Portfolio* % %
T. Rowe Price/JNL Mid-Cap Growth Portfolio* % %
</TABLE>
* Corresponding series commenced operations on May 15, 1995.
The corresponding series of the JNL/Alliance Growth Portfolio, JNL/JPM
International & Emerging Markets Portfolio, JNL/PIMCO Total Return Bond
Portfolio, Goldman Sachs/JNL Growth & Income Portfolio, Lazard/JNL Small Cap
Value Portfolio, Lazard/JNL Mid Cap Value Portfolio, Salomon Brothers/JNL
Balanced Portfolio and Salomon Brothers/JNL High Yield Bond Portfolio commenced
operations on January 2, 1998.
Standardized 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 total return quotations and nonstandardized
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 portfolio has been in existence, if it has not been in
existence for one of the prescribed periods. If the corresponding series has
been in existence for longer than the investment portfolio, the standardized
total return and nonstandardized total return quotations will show the
investment performance the investment portfolio would have achieved (reduced
by the applicable charges) had it been held in the series for the period
quoted.
Quotations of standardized total return and nonstandardized 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 a 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 original
cost.
Jackson National may advertise the current annualized yield for a 30-day
period for the JNL/PIMCO Total Return Bond Portfolio, the Salomon Brothers/JNL
Balanced Portfolio, the Salomon Brothers/JNL Global Bond Portfolio and the
Salomon Brothers/JNL High Yield Bond Portfolio. The annualized yield of an
investment portfolio refers to the income generated by the
4
<PAGE> 26
investment portfolio over a specified 30-day period. Because this yield is
annualized, the yield generated by an investment portfolio 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:
a-b 6
YIELD = 2[( ---- + 1) -1]
cd
Where:
a = net investment income earned during the period by the Series
attributable to shares owned by the investment portfolio.
b = expenses for the investment portfolio 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.
Because of the charges and deductions imposed by the Separate Account, the
yield for an investment portfolio will be lower than the yield for the
corresponding series. The yield on amounts held in the investment portfolios
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 portfolio's actual yield will be affected by the
types and quality of portfolio securities held by the series and the series
operating expenses.
The yield for the 30-day period ended ______________ for the Salomon
Brothers/JNL Global Bond Portfolio was ____%. The corresponding series of the
JNL/PIMCO Total Return Bond Portfolio, the Salomon Brothers/JNL Balanced
Portfolio and the Salomon Brothers/JNL High Yield Bond Portfolio commenced
operations on January 2, 1998.
Any current yield quotations of the PPM America/JNL Money Market
Portfolio, subject to Rule 482 of the Securities Act of 1933, will consist of a
seven calendar day historical yield, carried at least to the nearest hundredth
of a percent. The 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
5
<PAGE> 27
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 Portfolio's effective yield is computed similarly but
includes the effect of assumed compounding on an annualized basis of the
current yield quotations of the Portfolio. The PPM America/JNL Money Market
Portfolio's yield and effective yield for the seven day period ended
_______________ were % and %, respectively.
The PPM America/JNL Money Market Portfolio'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
portfolio 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
Portfolio nor that Portfolio'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
SPECIAL RULES NOT DESCRIBED IN THIS PROSPECTUS 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 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
6
<PAGE> 28
is generally the premiums, while for contracts issued in connection with
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. 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 number of years over which the annuity is expected to
be paid. Payments received after the investment in the contract has been
recovered (i.e. when the total of the excludable amounts equal the investment
in the contract) are fully taxable. The taxable portion is taxed at ordinary
income tax rates. For certain types of qualified plans there may be no cost
basis in the contract within the meaning of Section 72 of the Code. 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 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 estimated 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
payments 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; and (2) minimum
distributions required to be made under the Code). 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
7
<PAGE> 29
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
recipient's gross income.
Diversification -- Separate Account Investments
Section 817(h) of the Code imposes certain diversification standards on
the underlying assets of 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 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 investment portfolios underlying variable
contracts. The 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 the Regulations, an investment
portfolio will be deemed adequately diversified if (1) no more than 55% of the
value of the total assets of the portfolio is represented by any one
investment; (2) no more than 70% of the value of the total assets of the
portfolio is represented by any two investments; (3) no more than 80% of the
value of the total assets of the portfolio is represented by any three
investments; and (4) no more than 90% of the value of the total assets of the
portfolio 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.
8
<PAGE> 30
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 the Separate Account will cause the contract
owner to be treated as the owner of the assets of the Separate Account, thereby
resulting in the loss of favorable tax treatment of the contract. At this time
it cannot be determined whether additional guidance will be provided and what
standards may be contained in such guidance.
The amount of owner control which may be exercised under the contract is
different in some respects from the situations addressed in published rulings
issued by the Internal Revenue Service in which it was held that the policy
owner was not the owner of the assets of the separate account. It is unknown
whether these differences, such as the owner's ability to transfer among
investment choices or the number and type of investment choices available,
would cause the owner to be considered as the owner of the assets of the
Separate Account resulting in the imposition of federal income tax to the owner
with respect to earnings allocable to the contract prior to receipt of payments
under the contract.
In the event any forthcoming guidance or ruling is considered to set forth
a new position, such guidance or ruling will generally be applied only
prospectively. However, if such ruling or guidance was not considered to set
forth a new position, it may be applied retroactively resulting in the owner
being retroactively determined to be the owner of the assets of the Separate
Account.
Due to the uncertainty in this area, Jackson National reserves the right
to modify the contract in an attempt to maintain favorable tax treatment.
Multiple Contracts
The Code provides that multiple non-qualified 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. Owners should consult a tax adviser prior to purchasing
more than one non-qualified annuity contract in any calendar year.
Contracts Owned by Other than Natural Persons
Under Section 72(u) of the Code, the investment earnings on premiums for
the 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 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.
9
<PAGE> 31
Tax Treatment of Assignments
An assignment or pledge of a contract may have tax consequences, and 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.
Qualified Plans
The contracts offered by the Prospectus are designed to be suitable for
use under various types of qualified plans. Taxation of owners in each
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 qualified plan 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 Plans
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.
Qualified Plans
In the case of a withdrawal under a 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 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 (H.R.
10 and Corporate Pension and Profit Sharing plans), 403(b) (tax-sheltered
annuities) and 408(b) (IRAs). To the extent amounts are not includable in
gross income because they have been rolled over to an IRA or to another
eligible qualified plan, no tax penalty will be imposed.
10
<PAGE> 32
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 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 from an
IRA 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; (8) distributions from an Individual
Retirement Annuity made to the Owner to the extent such distributions do not
exceed the qualified higher education expenses (as defined in Section 72(t)(7)
of the Code) of the Owner for the taxable year; and (9) distributions from an
Individual Retirement Annuity made to the Owner which are qualified first-time
home buyer distributions (as defined in Section 72(t)(8) of the Code). The
exception 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.
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 qualified plans. Tax penalties
may also apply. While the foregoing limitations only apply to certain
contracts issued in connection with Section 403(b) qualified plans, all owners
should seek competent tax advice regarding any withdrawals or distributions.
The taxable portion of a withdrawal or distribution from contracts issued
under certain types of plans may, under some circumstances, be "rolled over"
into another eligible plan so as to continue to defer income tax on the taxable
portion. Effective January 1, 1993, 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 qualified plan or an IRA, or an
individual retirement account described in section 408(a) of the Code. Plans
making such eligible rollover distributions are also required, with some
exceptions specified in
11
<PAGE> 33
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,
individual retirement accounts or certain other plans, subject to limitations
set forth in the Code.
Generally, distributions from a qualified plan generally 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 is imposed as to the amount not
distributed.
Types of Qualified Plans
The following are general descriptions of the types of qualified plans
with which the contracts may be used. Such descriptions are not exhaustive and
are for general information purposes only. The tax rules regarding 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 qualified plan.
Contracts issued pursuant to qualified plans include special provisions
restricting contract provisions that may otherwise be available and described
in this Prospectus. Generally, contracts issued pursuant to 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 qualified plan contracts.
(a) H.R. 10 Plans
Section 401 of the Code permits self-employed individuals to
establish plans for themselves and their employees, commonly
qualified referred to as "H.R. 10" or "Keogh" Plans. Contributions
made to the plan for the benefit of the employees will not be
included in the gross income of the employees until distributed from
the plan. The tax consequences to owners may vary depending upon the
particular plan design. However, the Code places limitations and
restrictions on all plans on such items as: amounts of allowable
contributions; form, manner and timing of distri- butions;
transferability of benefits; vesting and non-forfeitability of
interests; nondiscrimination in eligibility and participation; and
the tax treatment of distributions, withdrawals and surrenders.
Purchasers of contracts for use with an H.R. 10 Plan should obtain
competent tax advice as to the tax treatment and suitability of such
an investment.
12
<PAGE> 34
(b) 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.
(c) 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"). Under applicable limitations, certain
amounts may be contributed to an IRA which may be deductible from the
individual's gross income. These IRAs are subject to limitations on
eligibility, contributions, transferability and distributions. Sales of
contracts for use with IRAs 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 IRAs should obtain competent tax advice
as to the tax treatment and suitability of such an investment.
(d) Corporate Pension and Profit-Sharing Plans
Sections 401(a) and 401(k) of the Code permit corporate employers to
establish various types of 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 corporate pension or profit sharing plans should obtain competent
tax advice as to the tax treatment and suitability of such an investment.
(e) Non-Qualified Deferred Compensation Plans -- Section 457
13
<PAGE> 35
Under Section 457 of the Code, governmental and certain other
tax-exempt employers may establish, for the benefit of their employees,
deferred compensation plans which may invest in annuity contracts. The
Code, as in the case of qualified plans, establishes limitations and
restrictions on eligibility, contributions and distributions. Under these
plans, contributions made for the benefit of the employees will not be
included in the employees' gross income until distributed from the plan.
(f) Roth IRAs
Beginning in 1998, individuals may purchase a new type of
non-deductible IRA, known as a Roth IRA. Purchase payments for a Roth
IRA are limited to $2,000 per year. This limitation is phased out for
adjusted gross income 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 $15,000 in the case of married
taxpayers filing separately. An overall $2,000 annual limitation
continues to apply to all of a taxpayer's IRA contributions, including
Roth IRAs and non-Roth IRAs.
Qualified distributions from Roth IRAs are entirely tax free. A
qualified distribution requires that the individual has held the Roth IRA
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 qualified first-time home purchase, subject to
$10,000 lifetime maximum, for the individual, a spouse, child,
grandchild, or ancestor.
An individual may make a rollover contribution from a non-Roth IRA
to a Roth IRA, 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 being
rolled over that represents income or a previously deductible IRA
contribution. For rollovers in 1998, the individual may pay that tax
ratably in 1998 and over the succeeding three years. There are no
similar limitations on rollovers from a Roth IRA to another Roth IRA.
INCOME PAYMENTS; NET INVESTMENT FACTOR
See "Income Payments (The Income Phase)" in the Prospectus.
The net investment factor is an index applied to measure the net
investment performance of an investment portfolio from one valuation date to
the next. Since the net investment factor may be greater or 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.
The net investment factor for any investment portfolio for any valuation
period is determined by dividing (a) by (b) and then subtracting (c) from the
result where:
14
<PAGE> 36
(a) is the net result of:
(1) the net asset value of a series share held in the
investment portfolio 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 portfolio
(no federal income taxes are applicable under present law );
(b) is the net asset value of the series share held in the
investment portfolio 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 charges for assuming the
mortality and expense risks and the administration charge.
15
<PAGE> 37
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
(1) Financial statements and schedules included in Part
A:
Not Applicable
(2) Financial statements and schedules included in Part
B:
To be filed by Amendment.
Item 24.(b) Exhibits
Exhibit
No. Description
- ------- -----------
1. Resolution of Depositor's Board of Directors authorizing the
establishment of the Registrant, attached hereto.
2. Not Applicable
3. Form of General Distributor Agreement, attached
hereto.
4. Form of Perspective Advisors Fixed and Variable Annuity
Contract, attached hereto.
5. To be filed by Amendment.
<PAGE> 38
6.a. Articles of Incorporation of Depositor, attached hereto.
b. Bylaws of Depositor, attached hereto.
7. Not Applicable
8. Not Applicable
9. Opinion and Consent of Counsel, to be filed by Amendment.
10. Consent of Independent Accountants, to be filed by Amendment.
11. Not Applicable
12. Not Applicable
13. Not Applicable
14. Not Applicable
Item 25. Directors and Officers of the Depositor
Name and Principal Positions and Offices
Business Address with Depositor
---------------- ----------------------
John B. Banez Vice President -
5901 Executive Drive Systems and Programming
Lansing, Michigan 48911
Barry L. Bulakites Vice President - Sales/
5901 Executive Drive Deal Direct
Lansing, Michigan 48911
Peter Davis Chairman and Director
142 Holborn Bars
London, England EC1N 2NH
2
<PAGE> 39
<TABLE>
<S> <C>
Connie J. Dalton Vice President -
5901 Executive Drive Variable Annuity
Lansing, Michigan 48911 Administration
Gerald W. Decius Vice President -
5901 Executive Drive Customer Service Center
Lansing, Michigan 48911
Lisa C. Drake Vice President & Actuary
5901 Executive Drive
Lansing, Michigan 48911
Jay A. Elliott Senior Vice President -
5901 Executive Drive National Sales Manager
Lansing, Michigan 48911
Robert A. Fritts Vice President &
5901 Executive Drive Controller - Financial
Lansing, Michigan 48911 Operations
William A. Gray Senior Vice President -
5901 Executive Drive Corporate Communications
Lansing, Michigan 48911
Alan C. Hahn Senior Vice President -
5901 Executive Drive Deal Direct Marketing
Lansing, Michigan 48911
Andrew B. Hopping Senior Vice President -
5901 Executive Drive Finance and Director
Lansing, Michigan 48911
Victor Gallo Vice President -
5901 Executive Drive Group Pension
Lansing, Michigan 48911
Brion S. Johnson Vice President -
5901 Executive Drive Financial Operations
Lansing, Michigan 48911 and Treasurer
Timo P. Kokko Vice President - Support
5901 Executive Drive Services
Lansing, Michigan 48911
</TABLE>
3
<PAGE> 40
<TABLE>
<S> <C>
Everett W. Kunzelman Vice President - Underwriting
5901 Executive Drive
Lansing, Michigan 48911
Ted T. Lietz Vice President - Corporate
5901 Executive Drive Communications
Lansing, Michigan 48911
David B. LeRoux Senior Vice President -
5901 Executive Drive Guaranteed Investment
Lansing, Michigan 48911 Contracts
Lynn W. Lopes Vice President - Guaranteed
5901 Executive Drive Investment Contracts
Lansing, Michigan 48911
Clark P. Manning Senior Vice President -
5901 Executive Drive Chief Actuary
Lansing, Michigan 48911
Thomas J. Meyer Vice President, Secretary
5901 Executive Drive and General Counsel
Lansing, Michigan 48911
Keith R. Moore Vice President - Technology
5901 Executive Drive
Lansing, Michigan 48911
P. Chad Myers Vice President - Asset
5901 Executive Drive Liability Management
Lansing, Michigan 48911
J. George Napoles Senior Vice President and
5901 Executive Drive Chief Information Officer
Lansing, Michigan 48911
John O. Norton Vice President - Actuary
5901 Executive Drive
Lansing, Michigan 48911
Lee Pledger Vice President - Planning &
5901 Executive Drive Human Resources
Lansing, Michigan 48911
</TABLE>
4
<PAGE> 41
<TABLE>
<S> <C>
Bradley J. Powell Vice President - Institutional
5901 Executive Drive Marketing Group
Lansing, Michigan 48911
James B. Quinn Vice President - Broker
5901 Executive Drive Management
Lansing, Michigan 48911
Robert P. Saltzman President, Chief Executive
5901 Executive Drive Officer and Director
Lansing, Michigan 48911
Scott L. Stolz Senior Vice President -
5901 Executive Drive Administration and Assistant
Lansing, Michigan 48911 Secretary
Robert M. Tucker Vice President - Technical
5901 Executive Drive Support
Lansing, Michigan 48911
</TABLE>
Item 26. Persons Controlled by or Under Common Control with the Depositor or
Registrant.
<TABLE>
<CAPTION>
State of Control/
Company Organization Ownership Principal Business
------- ------------ --------- -------------------
<S> <C> <C> <C>
Brooke Delaware 100% Organized for the
Holdings, Inc. Holborn purpose of acquiring
Delaware holding,
Partnership encumbering,
transferring, or
otherwise disposing
of shares, bonds,
and other evidences
of indebtedness,
securities, and
contracts of other
persons,
associations,
corporations,
domestic or foreign
and to form or
acquire the control
of other
corporations.
Brooke Delaware 100% Brooke Holding Company
Finance Holdings, Inc. Activities
Brooke Life Michigan 100% Brooke Life Insurance
</TABLE>
5
<PAGE> 42
<TABLE>
<S> <C> <C> <C>
Insurance Holdings, Inc.
Company
Carolina North 95% Jackson Manufacturing
Steel National Life Company
Insurance
Company
Chrissy Delaware 100% Jackson Advertising Agency
Corporation National Life
Insurance
Company
Jackson New York 100% Jackson Life Insurance
National Life National Life
Insurance Insurance
Company Company
of New York
Holborn Delaware 95% Prudential Holding Company
Delaware One Limited, Activities
Partnership 2.5%
Prudential
Two Limited,
2.5%
Prudential
Three Limited
Jackson Delaware 100% Jackson Investment Adviser,
National National Life Broker/Dealer
Financial Insurance and Transfer Agent
Services, Inc. Company
</TABLE>
6
<PAGE> 43
<TABLE>
<S> <C> <C> <C>
Jackson Delaware 100% Jackson Advertising/
National National Life Marketing
Life Insurance Corporation and
Distributors, Company Broker/Dealer
Inc.
Jackson Michigan 100% Brooke Life Insurance
National Life
Life Insurance Insurance
Company Company
JNL Series Massachusetts Common Law Investment Company
Trust Trust with
contractual
association
with Jackson
National Life
Insurance
Company
Prudential United 100% Holding Company
Corporation Kingdom Prudential
Holdings Corporation
Limited PLC
Prudential United Publicly Financial
Corporation Kingdom Traded Institution
PLC
Prudential England and 100% Holding
One Limited Wales Prudential Company
Corporation Activities
Holdings
Limited
Prudential England and 100% Holding
Two Limited Wales Prudential Company
One Limited Activities
Prudential England and 100% Holding
Three Limited Wales Prudential Company
One Limited Activities
</TABLE>
7
<PAGE> 44
Item 27. Number of Contract Owners as of November 20, 1997.
0
Item 28. Indemnification
Provision is made in the Company's Amended By-Laws for indemnification by
the Company of any person who was or is a party or is threatened to be made a
party to a civil, criminal, administrative or investigative action by reason of
the fact that such person is or was a director, officer or employee of the
Company, against expenses, including attorneys' fees, judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceedings, to the extent and under the
circumstances permitted by the General Corporation Law of the State of
Michigan.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 ("Act") may be permitted to directors, officers and controlling
persons of the Company pursuant to the foregoing provisions, or otherwise, the
Company has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against liabilities (other than the payment by the Company of
expenses incurred or paid by a director, officer or controlling person of the
Company in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the Company will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Item 29. Principal Underwriter
Jackson National Financial Services, Inc. acts as general distributor for the
Jackson National Separate Account III. Jackson National Financial Services,
Inc. also acts as general distributor for the Jackson National Separate Account
- - I and the JNLNY Separate Account I and acts as investment adviser for the JNL
Series Trust.
Directors and Officers of Jackson National Financial Services, Inc.:
Name and Positions and Offices
Business Address with Underwriter
---------------- ----------------
8
<PAGE> 45
Jay A. Elliott Director
5901 Executive Dr.
Lansing, MI 48911
Andrew B. Hopping President, Chief
5901 Executive Dr. Executive Officer
Lansing, MI 48911 and Director
Thomas J. Meyer Secretary, Chief
5901 Executive Dr. Legal Officer and
Lansing, MI 48911 Director
Mark D. Nerud Chief Operating
5901 Executive Dr. Officer and Treasurer
Lansing, MI 48911
<TABLE>
<CAPTION>
Net Under-
writing
Name of Discounts Compensation
Principal and on Brokerage
Underwriter Commissions Redemption Commissions Compensation
- ----------- ----------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
Jackson
National
Financial
Services, Not NotNot Not Not
Inc. Applicable Applicable Applicable Applicable
Item 30. Location of Accounts and Records
Jackson National Life Insurance Company
5901 Executive Drive
Lansing, Michigan 48911
Jackson National Life Insurance Company
8055 East Tufts Ave., Second Floor
Denver, Colorado 80237
Item 31. Management Services
Not Applicable
Item 32. Undertakings
(a) Registrant hereby undertakes to file a
post-effective amendment to this registration statement as
frequently as is necessary to ensure that the audited
financial statements in the registration
</TABLE>
9
<PAGE> 46
statement are never more than 16 months old for so long as
payments under the variable annuity contracts may be accepted.
(b) Registrant hereby undertakes to include either
(1) as part of any application to purchase a contract offered
by the prospectus, a space that an applicant can check to
request a Statement of Additional Information, or (2) a post
card or similar written communication affixed to or included
in the prospectus that the applicant can remove to send for a
Statement of Additional Information.
(c) Registrant hereby undertakes to deliver any
Statement of Additional Information and any financial
statement required to be made available under this From
promptly upon written or oral request.
(d) Jackson National Life Insurance Company
represents that the fees and charges deducted under the
contract, in the aggregate, are reasonable in relation to the
services rendered, the expenses to be incurred, and the risks
assumed by Jackson National Life Insurance Company.
(e) Registrant hereby represents that any contract
offered by the prospectus and which is issued pursuant to
Section 403(b) of the Internal Revenue Code of 1986, as
amended, is issued by the Registrant in reliance upon, and in
compliance with, the Securities and Exchange Commission's
industry-wide no-action letter to the American Council of Life
Insurance (publicly available
November 28, 1988) which permits withdrawal restrictions to
the extent necessary to comply with IRC Section 403(b)(11).
10
<PAGE> 47
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act
of 1940, the Registrant has caused this Registration Statement to be signed on
its behalf, in the City of Lansing, and State of Michigan, on this 26th day of
November, 1997.
Jackson National Separate Account III
-------------------------------------
(Registrant)
By: Jackson National Life Insurance Company
---------------------------------------
By: /s/ Andrew B. Hopping
by Thomas J. Meyer*
-------------------------------
Andrew B. Hopping
Senior Vice President - Finance
Jackson National Life Insurance Company
--------------------------------------------
(Depositor)
By: /s/ Andrew B. Hopping
-------------------------------
Andrew B. Hopping
Senior Vice President - Finance
As required by the Securities Act of 1933, this Registration Statement has
been signed by the following persons in the capacities and on the dates
indicated.
/s/ Peter Davis by Thomas J. Meyer* November 26, 1997
- ---------------------------------------------- -----------------
Peter Davis, Chairman and Director
/s/ Robert P. Saltzman by Thomas J. Meyer* November 26, 1997
- ------------------------------------------ -----------------
Robert P. Saltzman, President, Chief
Executive Officer and Director
/s/ Andrew B. Hopping by Thomas J. Meyer* November 26, 1997
- ------------------------------------------ -----------------
Andrew B. Hopping, Senior Vice President -
Finance
/s/ Thomas J. Meyer November 26, 1997
- ------------------------------------------ -----------------
* Thomas J. Meyer, Attorney-in-Fact
<PAGE> 48
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned as directors
and/or officers of JACKSON NATIONAL LIFE INSURANCE COMPANY, a Michigan
corporation, which has filed or will file with the Securities and Exchange
Commission under the provisions of the Securities Act of 1933 and Investment
Company Act of 1940, as amended, various Registration Statements and amendments
thereto for the registration under said Acts of the sale of Individual Deferred
Fixed and Variable Annuity Contracts in connection with the Jackson National
Separate Account III and other separate accounts of Jackson National Life
Insurance Company, hereby constitute and appoint Andrew B. Hopping, Thomas J.
Meyer and Robert P. Saltzman, his attorney, with full power of substitution and
resubstitution, for and in his name, place and stead, in any and all capacities
to approve and sign such Registration Statements and any and all amendments
thereto, with power where appropriate to affix the corporate seal of said
corporation thereto and to attest with seal and to file the same, with all
exhibits thereto and other granting unto said attorneys, each of them, full
power and authority to do and perform all and every act and thing requisite to
all intents and purposes as he might or could do in person, hereby ratifying
and confirming that which said attorneys, or any of them, may lawfully do or
cause to be done by virtue hereof. This instrument may be executed in one or
more counterparts.
IN WITNESS WHEREOF, the undersigned have herewith set their names as of the
dates set forth below.
/s/ Peter Davis October 1, 1997
- ------------------------------------ ---------------
Peter Davis, Chairman and Director Date
/s/ Robert P. Saltzman October 1, 1997
- ------------------------------------ ---------------
Robert P. Saltzman, President, Chief Date
Executive Officer and Director
/s/ Andrew B. Hopping October 1, 1997
- ------------------------------------ ---------------
Andrew B. Hopping, Senior Vice Date
President - Finance
<PAGE> 49
EXHIBIT LIST
<TABLE>
<S> <C>
Exhibit
Number Description
- ------- -----------
<S> <C>
1. Resolution of Depositor's Board of Directors
authorizing the establishment of the Registrant,
attached hereto as EX-99.B1
3. Form of General Distributor Agreement,
attached hereto as EX-99.B3
4. Form of the Perspective Advisors Fixed and
Variable Annuity Contract, attached hereto as
EX-99.B4
6.a. Articles of Incorporation of Depositor, attached
hereto as EX-99.B6-a
6.b. Bylaws of Depositor, attached hereto as EX-99.B6-b
</TABLE>
<PAGE> 1
EX-99.B1
CERTIFICATE OF SECRETARY
JACKSON NATIONAL LIFE INSURANCE COMPANY
I, Thomas J. Meyer, do hereby certify that I am the duly elected and
qualified Secretary of Jackson National Life Insurance Company, a Michigan
insurance corporation ("Corporation') and am the keeper of its records and
corporate seal and that the following is a true and complete copy of a
resolution unanimously adopted at a meeting of the Board of Directors of said
Corporation, duly convened and held in accordance with the By-Laws of said
Corporation, at which meeting a majority and quorum of the Board of Directors
were present, on the 23rd day of October, 1997:
RESOLVED: That the Company take all steps necessary
to develop and offer for sale variable annuities and
that the Company's officers are directed to take all
steps, including establishment of the necessary
separate accounts, necessary to do so in full
compliance with all federal and state laws.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the corporate
seal of said Corporation this 20th day of November, 1997.
(Corporate Seal)
/s/ Thomas J. Meyer
------------------------------
Thomas J. Meyer
Secretary
<PAGE> 1
EX-99.B3
GENERAL DISTRIBUTOR AGREEMENT
IT IS HEREBY AGREED by and between JACKSON NATIONAL LIFE INSURANCE
COMPANY ("COMPANY") and JACKSON NATIONAL FINANCIAL SERVICES, INC. ("JNFSI") as
follows:
I
COMPANY proposes to issue and sell certain annuity contracts ("Annuity
Contracts") to the public through JNFSI. JNFSI agrees to provide sales services
subject to the terms and conditions hereof. Annuity Contracts to be sold
hereunder are the Jackson National Variable and Fixed Annuity Contracts and such
other contracts as may hereafter be agreed upon by the parties. Such Annuity
Contracts will be issued by COMPANY and the Jackson National Separate Account -
III (the "Separate Account"). JNFSI is registered as a broker-dealer under the
Securities Exchange Act of 1934, as amended, and is a member of the National
Association of Securities Dealers, Inc.
II
COMPANY grants to JNFSI the right, during the term of this Agreement,
subject to registration requirements of the relevant Federal securities laws, to
be the distributor of Annuity Contracts referred to above. JNFSI will distribute
Annuity Contracts at a price to be set by COMPANY and will make such
distributions to purchasers permitted to buy such Annuity Contracts as specified
in the prospectus.
III
<PAGE> 2
JNFSI is hereby authorized, subject to disapproval by COMPANY, to enter
into separate agreements with broker-dealers registered under the Securities
Exchange Act of 1934, as amended, and members of the National Association of
Securities Dealers, Inc., to participate in the distribution of Annuity
Contracts as JNFSI shall deem appropriate. COMPANY reserves the right to review
and accept or reject all applications for Annuity Contracts. All premium
payments for such Annuity Contracts shall be sent to the office designated for
such by COMPANY.
IV
COMPANY shall furnish JNFSI with copies of such information, financial
statements and other documents requested by JNFSI for use in connection with the
distribution of Annuity Contracts, as may be deemed by reasonable by COMPANY.
COMPANY shall provide to JNFSI such number of copies of the currently effective
prospectus as JNFSI and COMPANY shall agree upon from time to time.
V
JNFSI is not authorized to give any information, or to make any
representations concerning the Separate Account or COMPANY, other than as
contained in the current registration statement or prospectus filed with the
Securities and Exchange Commission or such sales literature as may be authorized
by COMPANY.
VI
Both parties to this Agreement agree to keep necessary records as
indicated by applicable state and federal law and to render the necessary
assistance to one another for the accurate and timely preparation of such
records.
2
<PAGE> 3
VII
Commissions payable with respect to Annuity Contracts shall be paid by
COMPANY, and nothing herein shall obligate JNFSI to pay any commissions or other
remuneration to the registered representatives selling the Annuity Contracts or
to reimburse such registered representatives for expenses incurred by them, nor
shall JNFSI have any interest whatsoever in any commissions or other
remuneration payable to registered representative by COMPANY.
VIII
Each party (the "Indemnifying Party") hereby agrees to release,
indemnify, and hold harmless the other party, its officers, directors,
employees, agents, servants, predecessors or successors from any claims or
liability arising out of the breach of this Agreement by the Indemnifying Party
or arising out of acts or omissions of the Indemnifying Party or its agents,
appointees, independent contractors or employees not authorized by this
Agreement, including the violation of the federal and state securities laws and
ERISA or arising from acts of misrepresentation or false declaration concerning
the products sold hereunder.
IX
This Agreement shall remain in effect unless terminated as hereinafter
provided. This Agreement shall automatically terminate in the event of its
assignment by JNFSI. This Agreement may at any time be terminated by either
party hereto upon not less than 60 days' written notice to the other party.
3
<PAGE> 4
X
All notices, requests, demands and other communications under this
Agreement shall be in writing and shall be deemed to have been given on the date
of service if served personally on the party to whom notice is to be given, or
on the date of mailing if sent by first class mail, registered or certified,
postage prepaid and properly addressed as follows:
TO COMPANY:
Jackson National Life Insurance Company
5901 Executive Drive
Lansing, Michigan 48911
Attention: Andrew B. Hopping
TO JNFSI:
Jackson National Financial Services, Inc.
5901 Executive Drive
Lansing, Michigan 48911
Attention: Mark D. Nerud
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be signed on their behalf by their respective officers thereunto duly
authorized.
This Agreement is effective as of the ____ day of ________, 199_.
JACKSON NATIONAL LIFE INSURANCE COMPANY
By:
-------------------------------------
Andrew B. Hopping
Its: Sr. Vice President
------------------------------------
JACKSON NATIONAL FINANCIAL SERVICES, INC.
By:
-------------------------------------
Mark D. Nerud
Its: Chief Operating Officer
------------------------------------
4
<PAGE> 1
EXHIBIT 99.B4
[JACKSON NATIONAL LIFE INSURANCE COMPANY LETTERHEAD]
- --------------------------------------------------------------------------------
Thank you for choosing Jackson National. If You have any questions,
please contact the Company at the Service Center address and telephone number
shown on the Contract Data Page.
THIS ANNUITY CONTRACT OFFERED BY JACKSON NATIONAL IS A CONTRACT BETWEEN YOU,
THE OWNER, AND JACKSON NATIONAL, AN INSURANCE COMPANY.
READ YOUR CONTRACT CAREFULLY.
AMOUNTS IN THE SEPARATE ACCOUNT ARE NOT GUARANTEED AND MAY INCREASE OR DECREASE
BASED UPON THE INVESTMENT EXPERIENCE OF THE INVESTMENT PORTFOLIO(S).
INFORMATION ON VARIABLE BENEFITS MAY BE FOUND ON PAGES 8-13.
THE GUARANTEED OPTIONS ARE SUBJECT TO AN EXCESS INTEREST ADJUSTMENT WHICH MAY
INCREASE OR DECREASE AMOUNTS WITHDRAWN, BUT THE GUARANTEED ACCOUNT CONTRACT
VALUE WILL NEVER DECREASE TO LESS THAN THE GUARANTEED ACCOUNT MINIMUM VALUE.
NOTICE OF [TWENTY-DAY] RIGHT TO EXAMINE POLICY
YOU MAY RETURN THIS CONTRACT TO THE SELLING AGENT OR JACKSON NATIONAL WITHIN
[20] DAYS AFTER YOU RECEIVE IT. THE COMPANY WILL REFUND THE CONTRACT VALUE FOR
THE BUSINESS DAY ON WHICH THE CONTRACT IS RECEIVED AT ITS SERVICE CENTER. IF
THIS CONTRACT WAS PURCHASED AS A REPLACEMENT, THE COMPANY WILL REFUND THE
PREMIUM PAID. UPON SUCH REFUND, THE CONTRACT SHALL BE VOID.
================================================================================
INDIVIDUAL DEFERRED VARIABLE THIS CONTRACT IS SIGNED BY THE COMPANY
AND FIXED ANNUITY CONTRACT
(FLEXIBLE PREMIUM). DEATH [sig]
BENEFIT PRIOR TO
MATURITY. MONTHLY INCOME
AT MATURITY. NON-PARTICIPATING. SECRETARY
[sig]
PRESIDENT
<PAGE> 2
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Provision Page Number
--------- -----------
Contract Data Page [ii
Definitions 1
General Provisions 3
Accumulation Provisions 5
Withdrawal Provisions 7
Death Benefit Provisions 8
Income Provisions 10
Table of Income Options 13]
i
<PAGE> 3
- --------------------------------------------------------------------------------
CONTRACT DATA PAGE
- --------------------------------------------------------------------------------
Contract Number: [1234567890]
Owner: [John Doe]
Joint Owner: [Jane Doe]
Annuitant: [John Doe]
Joint Annuitant: [Jane Doe]
Issue Date: [July 1, 1997]
Issue State: [Michigan]
Annual Contract Maintenance Charge: [$50.00]
Insurance Charges: On an annual basis, this charge equals
1.50% of the daily net asset value of the
Investment Portfolios.
Transfer/Transfer Charge: A fee of [$25.00] is charged for transfers
in excess of [15] in a Contract year.
[FROM INVESTMENT PORTFOLIO TO INVESTMENT
PORTFOLIO. Both prior to and after the
Income Date, You may transfer all or a
portion of Your investment in one
Investment Portfolio to another Investment
Portfolio.
FROM INVESTMENT PORTFOLIO TO A GUARANTEED
OPTION. Prior to the Income Date, You may
transfer all or a portion of Your
Investment Portfolio(s) to a Guaranteed
Option(s).
FROM A GUARANTEED OPTION TO A GUARANTEED
OPTION OR INVESTMENT PORTFOLIO. Other than
transfers made during the 30-day period
after the end of a maturing Guaranteed
Option period, (see Guaranteed Options
under Accumulation Provisions), transfers
of amounts between Guaranteed Options or
from a Guaranteed Option to an Investment
Portfolio are subject to an Excess Interest
Adjustment.]
ii
<PAGE> 4
- --------------------------------------------------------------------------------
CONTRACT DATA PAGE (CONT'D)
- --------------------------------------------------------------------------------
Premium(s): Premiums are flexible. This means that the
Owner may change the amounts, frequency or
timing of Premiums. The initial Premium
must be at least [$25,000]. Subsequent
Premiums must be at least [$5,000] for
Nonqualified Plan contracts and [$2,000]
for Qualified Plan contracts. Total
Premiums under a contract may not exceed
[$1,000,000]. The Company may waive the
minimums or maximums at any time.
The Owner may allocate Premiums among the
Guaranteed Options and the Investment
Portfolios. Such election may be made
in any percent from [0% to 100%] in whole
percentages, provided that the minimum that
may be allocated to a Guaranteed Option or
an Investment Portfolio is [$100].
Guaranteed Options: Guaranteed Options may be elected for
periods of [1 or 3] years
Investment Portfolios: [JNL Series Trust]
================================================================================
Jackson National Life Service Center: Express Mail:
[P.O. Box 378002 [8055 E. Tufts Ave., 2nd Floor
Denver, CO 80237 Denver, CO 80237]
800/766-4683]
iii
<PAGE> 5
- --------------------------------------------------------------------------------
DEFINITIONS
- --------------------------------------------------------------------------------
ANNUITANT. The natural person on whose life the annuity payments for this
Contract are based. The Owner may change the Annuitant at any time prior to
the Income Date, unless the Owner is a non-individual.
BENEFICIARY(IES). The person(s) designated to receive any Contract benefits
upon the death of the Owner.
BUSINESS DAY. Each day when both the Company's Service Center and the New York
Stock Exchange are open for business. The Company Business Day closes when the
New York Stock Exchange closes, usually 4:00 p.m. Eastern time.
CONTRACT OPTION. One of the options offered by the Company under this
Contract. Each option is more fully explained in the Accumulation Provisions.
CONTRACT VALUE. The sum of the Separate Account Contract Value and the
Guaranteed Account Contract Value.
EXCESS INTEREST ADJUSTMENT. An adjustment applied, with certain exceptions, to
amounts withdrawn or transferred from the Guaranteed Option(s) prior to the end
of the Guaranteed Option period.
GUARANTEED ACCOUNT. The Guaranteed Account consists of the Guaranteed Options
under this Contract. Allocations made to the Guaranteed Account are invested in
the general account of the Company. The general account is made up of all
general assets of the Company, other than those in the Separate Account, and
other segregated asset accounts.
GUARANTEED ACCOUNT CONTRACT VALUE. The sum of the Guaranteed Option Values
under this Contract.
GUARANTEED ACCOUNT MINIMUM VALUE. The sum of the Guaranteed Option Minimum
Value under this Contract.
GUARANTEED OPTION(S). A Contract Option within the Guaranteed Account which
earns a declared rate of interest for a specified number of years and which may
be subject to an Excess Interest Adjustment.
GUARANTEED OPTION MINIMUM VALUE. The sum of Premiums and any subsequent
amounts allocated to a Guaranteed Option, accumulated at [3%], less any amounts
withdrawn for transfers, charges, deductions or surrenders.
GUARANTEED OPTION VALUE. The Guaranteed Option Value is: (1) the Premium and
any subsequent amounts allocated to the Guaranteed Option period; (2) plus any
interest credited; less (3) any amounts canceled or withdrawn for transfers,
charges, deductions, or surrenders.
1
<PAGE> 6
- --------------------------------------------------------------------------------
DEFINITIONS (CONT'D)
- --------------------------------------------------------------------------------
INCOME DATE. The date on which income payments are to begin. The latest
possible Income Date is when the Owner attains age [90] under a Non-Qualified
Plan Contract or such earlier date as required by the applicable Qualified
Plan, law or regulation, unless otherwise approved by the Company.
INVESTMENT PORTFOLIO. A Contract Option with the Separate Account. Allocations
to the Investment Portfolios will go up or down depending on the performance of
the portfolios. The Investment Portfolios are named on the Contract Data Page.
NONQUALIFIED PLAN. A retirement plan which does not receive favorable tax
treatment under Section [401, 403, 408 or 457] of the Internal Revenue Code.
OWNER ("YOU," "YOUR"). The person or entity shown on the Contract Data Page who
is entitled to exercise all rights and privileges under this Contract. If Joint
Owners are named, the Joint Owners must be spouses. Joint Owners share
ownership in all respects.
PREMIUM(S). Payment(s) made by or on behalf of the Owner to the Company for the
Contract.
QUALIFIED PLAN. A retirement plan which receives favorable tax treatment under
Sections [401, 403, 408 or 457] of the Internal Revenue Code.
SEPARATE ACCOUNT. A segregated asset account, established by the Company in
accordance with Michigan law. The assets of the Separate Account belong to the
Company. However, those contract assets in the Separate Account are not
chargeable with liabilities arising out of any other business the Company may
conduct. All the income, gains and losses resulting from these assets are
credited to or charged against the contracts and not against any other
contracts the Company may issue. The Separate Account consists of several
Investment Portfolios (please see Contract Data Page).
SEPARATE ACCOUNT CONTRACT VALUE. The current value of the amounts allocated to
the Investment Portfolios.
WE, OUR, US, THE COMPANY. Jackson National Life Insurance Company.
2
<PAGE> 7
- --------------------------------------------------------------------------------
GENERAL PROVISIONS
- --------------------------------------------------------------------------------
ASSIGNMENT. The Owner may not use this Contract as collateral or security for
a loan. However, the Owner may assign this Contract before the Income Date,
but We will not be bound by an assignment unless it is in writing and has been
recorded at the Company's Service Center. An assignment will take effect when
recorded by the Company. We are not responsible for any payment made before an
assignment is recorded. The Owner may exercise these rights subject to the
interest of any assignee or irrevocable beneficiary. We assume no
responsibility for the validity or tax consequences of any assignment. If the
Contract is issued pursuant to a Qualified Plan (or a Non-Qualified Plan that
is subject to ERISA), it may not be assigned, pledged, or otherwise transferred
except under such conditions as may be allowed under the plan. If You make an
assignment, You may have to pay income tax. You are encouraged to seek
competent legal and/or tax advice.
BENEFICIARY. The Owner may designate the Beneficiary(ies) to receive any
amount payable under this Contract on the Owner's death or, as applicable, on
the Annuitant's death after the income payments begin. If two or more persons
are named, those surviving the Owner will share equally unless otherwise
stated. If there are no surviving Beneficiaries at the death of the Owner, the
Death Benefit will be paid to the Owner's estate. Upon the death of a Joint
Owner, the surviving Joint Owner, if any, will be treated as the primary
Beneficiary. The Owner may change the Beneficiary(ies) by submitting a written
request to the Service Center, unless an irrevocable Beneficiary(ies)
designation was previously filed. Any change will take effect when recorded by
the Company. The Company is not liable for any payment made or action taken
before it records the change.
CONFORMITY WITH STATE LAWS. This Contract will be interpreted under the law of
the state in which it is issued. Any provision which is in conflict with the
law of such state, is amended to conform to the minimum requirements of such
law.
DEFERMENT OF PAYMENTS. We may defer making payments from the Guaranteed Account
for up to 6 months. Interest, subject to state requirements, will be credited
during the deferral period.
DOLLAR COST AVERAGING. The Owner may arrange to have a regular amount of money
transferred automatically from the one year Guaranteed Option to (an)
Investment Portfolio(s).
ENTIRE CONTRACT. The Contract, application, if any, and any applicable
endorsements and amendments together make up the entire Contract.
MISSTATEMENT OF AGE OR SEX. If the age or sex of the Annuitant has been
misstated, the payments will be those which the Premiums paid would have
purchased at the correct age and sex. Any underpayments will be made up
immediately by the Company. Overpayments will be deducted from future payments.
MODIFICATION OF CONTRACT. Any change or waiver of the provisions of this
Contract must be in writing and signed by the President, a Vice President, the
Secretary or Assistant Secretary of the Company. No agent has authority to
change or waive any provision of this Contract.
3
<PAGE> 8
- --------------------------------------------------------------------------------
GENERAL PROVISIONS (CONT'D)
- --------------------------------------------------------------------------------
NONPARTICIPATING. This Contract does not share in Our surplus or earnings.
PREMIUM TAXES. The Company may deduct from the Contract Value any premium taxes
or other taxes payable to a state or other government entity. Should We advance
any amount so due, We are not waiving any right to collect such amounts at a
later date. The Company will deduct any withholding taxes required by
applicable law.
PROOF OF AGE, SEX OR SURVIVAL. The Company may require satisfactory proof of
correct age or sex at any time. If any payment under this Contract depends on
the Annuitant, Owner or Beneficiary being alive, the Company may require
satisfactory proof of survival.
REPORTS. The Company will send You a report at least once a year. This report
will show You information based on each Contract Option You have chosen under
the Contract. We will also send You reports as required by law.
SUBSTITUTION OF INVESTMENT PORTFOLIOS. If any Investment Portfolio is no longer
available for investment by the Separate Account or if, in the judgment of the
Company's Board of Directors, further investment in the Investment Portfolio is
no longer appropriate in view of the purpose of the Contract, the Company may
substitute one Investment Portfolio for another. No substitution of securities
may take place without prior approval of the Securities and Exchange
Commission.
SUSPENSION OF PAYMENTS. The Company may suspend or postpone any payments from
the Investment Portfolios if any of the following occur:
a) The New York Stock Exchange is closed;
b) Trading on the New York Stock Exchange is restricted;
c) An emergency exists such that it is not reasonably practical to dispose
of securities in the Separate Account or to determine the value of its
assets; or
d) The Securities and Exchange Commission, by order, so permits for the
protection of Contract holders.
TELEPHONE REQUESTS. Subject to the Contract Data Page Transfers/Transfer
Charge provisions, the Owner may transfer amounts within the Contract by
written notice or telephone request. Telephone transactions are permitted only
if the Owner has given the Company appropriate authorization. The Company has
in place procedures which are designed to provide reasonable assurance that
telephone authorizations are genuine, including tape recording of telephone
communications and requesting identifying information. Accordingly, the
Company and its affiliates are relieved of all liability for any claim, loss or
expense resulting from any alleged error or mistake in connection with a
telephone request which was not properly authorized by the Owner. The Company
reserves the right to modify or discontinue at any time and without notice the
use of telephone transfers and the acceptance of transfer instructions from
someone other than the Owner.
WRITTEN NOTICE. Any notice We send to the Owner will be sent to the Owner's
last known address unless the Owner requests otherwise. Any written request or
notice to the Company must be sent to Our Service Center. The Owner must
promptly provide the Service Center with notice of Owner's address change.
4
<PAGE> 9
- --------------------------------------------------------------------------------
ACCUMULATION PROVISIONS
- --------------------------------------------------------------------------------
An Owner may not allocate Contract Values to more than [eighteen] Contract
Options during the life of the Contract.
INVESTMENT PORTFOLIOS. The Contract offers several Investment Portfolios.
ACCUMULATION UNITS. The Separate Account Contract Value will go up or down
depending on the performance of the Investment Portfolios. In order to monitor
the Separate Account Contract Value before the Income Date, the Company uses a
unit of measure called an accumulation unit. The value of an accumulation unit
may go up or down from day to day. During the income payout phase, the unit of
measure is called an annuity unit (please see Income Provisions for further
information).
Every Business Day the Company determines the value of an accumulation unit for
each of the Investment Portfolios. This is done by:
1. determining the total amount of money invested in the particular
Investment Portfolio;
2. subtracting from the amount any insurance charges and any other
charges such as taxes;
3. dividing this amount by the number of outstanding accumulation
units.
When you make a Premium payment, the Company credits Your Contract with
accumulation units. The number of accumulation units credited is determined by
dividing the amount of the Premium allocated to any Investment Portfolio by the
value of the accumulation unit for that Investment Portfolio.
GUARANTEED OPTIONS. The Contract offers Guaranteed Options for a specified
number of years. Amounts allocated to a Guaranteed Option may be subject to an
Excess Interest Adjustment if amounts are transferred or withdrawn prior to the
end of such Guaranteed Option period.
You may allocate Premium or make transfers to one or more Guaranteed Options at
any time prior to the latest Income Date, subject to the provisions of this
Contract. If You do not specify both a Contract Option and period by the end
of the maturing option period, We will automatically allocate such amounts to a
Guaranteed Option with the same Guaranteed Option period. You will then be
permitted, within [30 calendar days] of Our allocation, to transfer (upon
written notice or telephone request to the Service Center), or withdraw (upon
written notice to the Service Center) amounts from such Guaranteed Option as
permitted under this Contract. If You do not provide Us notice within the [30
calendar day period], such amounts shall remain in the Guaranteed Option period
until You otherwise notify the Company.
If the Guaranteed Option elected extends beyond the latest Income Date, We will
automatically elect the longest period that will not extend beyond such date.
If reallocation of an amount to a Guaranteed Option period due to completion of
the then current option period occurs within one year of the latest Income
Date, We will credit interest up to the latest Income Date at the then current
One Year Guaranteed Option interest rate.
5
<PAGE> 10
- --------------------------------------------------------------------------------
ACCUMULATION PROVISIONS (CONT'D)
- --------------------------------------------------------------------------------
INTEREST TO BE CREDITED. The Company will credit interest to the Guaranteed
Option. Such interest will be credited at such rate or rates as the Company
prospectively declares from time to time, at the sole discretion of the
Company. Any such rate or rates so determined will remain in effect for a
period of not less than the selected Guaranteed Option period so long as such
deposited amount remains in the Guaranteed Option. Interest will be credited
to subsequent Guaranteed Option periods at a rate of interest declared by the
Company. The Company guarantees that it will credit interest at not less than
3%.
EXCESS INTEREST ADJUSTMENT. Any amount withdrawn or transferred from a
Guaranteed Option will be subject to an Excess Interest Adjustment unless
otherwise provided in this Contract. The Excess Interest Adjustment will be
calculated by multiplying the amount withdrawn or transferred by the formula
described below:
[1 + I](m/12)
------------ -1
[1 + J](m/12)
where:
I = the interest rate credited to the current Guaranteed Option period.
J = the interest rate that would be credited, at the time of withdrawal or
transfer, to a new Guaranteed Option period of the same duration,
increased by 0.50%. When no Guaranteed Option period of the required
duration is available, the rate will be established by linear
interpolation.
m = number of complete months remaining to the end of the current Guaranteed
Option period.
There will be no Excess Interest Adjustment when J is greater than I, provided
that the difference between J and I is less than or equal to 0.50%.
In addition, the Excess Interest Adjustment will not apply to:
a) the payment of Death Benefit proceeds;
b) amounts withdrawn for Contract charges;
c) an Income Option that results in payments spread over at least 5
years;
d) transfers relating to Dollar Cost Averaging from the one-year
Guaranteed Option;
e) amounts either withdrawn or transferred during the 30-day period
after the end of a maturing Guaranteed Option period.
In no event will a total withdrawal from a Guaranteed Option be less than the
Guaranteed Option Minimum Value.
6
<PAGE> 11
- --------------------------------------------------------------------------------
WITHDRAWAL PROVISIONS
- --------------------------------------------------------------------------------
At or before the Income Date, the Owner may withdraw all or part of the amounts
under this Contract by informing Us at Our Service Center. For full withdrawal,
this Contract, or a Lost Contract Affidavit, must be returned to Our Service
Center.
Except in connection with a systematic withdrawal program, the minimum partial
withdrawal amount is [$500], or if less, the Owner's entire interest in the
Investment Portfolio or Guaranteed Option from which a withdrawal is requested.
The Owner's interest in the Investment Portfolio or Guaranteed Option from
which the withdrawal is requested must be at least [$100] after the withdrawal
is completed if any amount remains in that Investment Portfolio or Guaranteed
Option.
Withdrawals will be based on values at the end of the Business Day in which the
request for withdrawal and the Contract or a Lost Contract Affidavit (in the
case of a full withdrawal) are received at the Service Center.
If the withdrawal request does not specify the Investment Portfolio(s) or
Guaranteed Option(s), the request will be processed by making withdrawals from
each Investment Portfolio and each Guaranteed Option in proportion to their
current value.
A withdrawal from the Guaranteed Option may incur an Excess Interest
Adjustment.
7
<PAGE> 12
- --------------------------------------------------------------------------------
DEATH BENEFIT PROVISIONS
- --------------------------------------------------------------------------------
DEATH OF OWNER BEFORE THE INCOME DATE: Upon the Owner's death, or the death of
any Joint Owner, before the Income Date, the Death Benefit will be paid to the
Beneficiary(ies) designated by the Owner. Upon the death of a Joint Owner, the
surviving Joint Owner, if any, will be treated as the primary Beneficiary. Any
other Beneficiary designation on record at the Service Center at the time of
death will be treated as a contingent Beneficiary.
- - DEATH BENEFIT AMOUNT BEFORE THE INCOME DATE: The death benefit is equal
to the greater of the current Contract Value or the Guaranteed Minimum
Death Benefit (GMDB).
For Owners under age [81], the GMDB is calculated on each anniversary of
the Contract issue date and is the greater of:
a) the GMDB on the last Contract anniversary adjusted for any
Premiums, withdrawals, charges and premium tax since such
Contract anniversary, accumulated at [2%] ([0%] if the Owner is
age [71] or older); and
b) the Contract Value on the Contract anniversary.
For Owners age [81] and over, the GMDB is equal to the GMDB on the last
Contract anniversary adjusted for any Premiums, withdrawals, charges and
premium tax since such Contract anniversary.
Prior to the first Contract anniversary, the GMDB is equal to Premiums less
withdrawals, charges and premium tax since the issuance of the Contract.
Subsequently, at any time between Contract anniversaries, the GMDB is equal
to the GMDB on the last Contract anniversary adjusted for any Premiums,
withdrawals, charges and premium tax since such Contract anniversary.
- - DEATH BENEFIT OPTIONS BEFORE INCOME DATE: In the event of the Owner's
death or any Joint Owner's death before the Income Date, a Beneficiary
must request that the Death Benefit be paid under one of the Death
Benefit Options below. In addition, if the Beneficiary is the spouse of
the Owner, he or she may elect to continue the Contract, at the current
Contract Value, in his or her own name and exercise all the Owner's
rights under the Contract. The following are the Death Benefit Options:
- Option 1 - lump-sum payment of the Death Benefit; or
- Option 2 - payment of the entire Death Benefit within 5 years
of the date of the death of the Owner or any Joint Owner; or
- Option 3 - payment of the Death Benefit under an income
option over the lifetime of the Beneficiary or over a period not
extending beyond the life expectancy of the Beneficiary, with
distribution beginning within one year of the date of the Owner's
death or the death of any Joint Owner.
Any portion of the Death Benefit not applied under Option 3 within one year
of the date of the Owner's death, must be distributed within five years of
the date of the Owner's death.
8
<PAGE> 13
- --------------------------------------------------------------------------------
DEATH BENEFIT PROVISIONS (CONT'D)
- --------------------------------------------------------------------------------
If a lump-sum payment is requested, the amount will be paid within seven (7)
days of receipt of proof of death and the election, unless either the
Suspension of Payments or Deferral of Payments under General Provisions is in
effect.
Payment to the Beneficiary, other than in a single sum, may only be elected
during the sixty-day period beginning with the date of receipt of proof of
death by Our Service Center.
DEATH OF OWNER AFTER THE INCOME DATE: If the Owner, or any Joint Owner, dies
after the Income Date, and the Owner is not an Annuitant, any remaining
payments under the income option elected will continue at least as rapidly as
under the method of distribution in effect at the Owner's death. Upon the
Owner's death after the Income Date, the Beneficiary becomes the Owner.
DEATH OF ANNUITANT BEFORE INCOME DATE: Upon the death of an Annuitant, who is
not an Owner, before the Income Date, the Owner may designate a new Annuitant,
subject to the Company's administrative rules then in effect. If the Owner is a
non-individual, the death of the Annuitant will be treated as the death of the
Owner and a new Annuitant may not be designated.
DEATH OF ANNUITANT AFTER INCOME DATE: Upon the death of the Annuitant after the
Income Date, the death benefit, if any, will be as specified in the income
option elected. Death benefits will be paid at least as rapidly as under the
method of distribution in effect at the Annuitant's death.
9
<PAGE> 14
- --------------------------------------------------------------------------------
INCOME PROVISIONS
- --------------------------------------------------------------------------------
INCOME DATE. If no Income Date is selected, the Income Date will be the latest
Income Date. The Owner may change the Income Date, to any date not later than
the latest Income Date, at any time, at least [seven days] prior to the Income
Date then indicated on the Company's records, by written notice to the Service
Center.
INCOME OPTIONS. The Owner, or any Beneficiary who is so entitled, may elect to
receive a lump sum. However, a lump-sum distribution may be deemed to be a
withdrawal, and at least a portion of it may be subject to income tax.
Alternatively, an income option may be elected. The Owner may, upon prior
written notice to the Company at its Service Center, elect an income option at
any time prior to the Income Date.
If no other income option is elected, monthly annuity payments will be made in
accordance with Option 3 below, a life annuity with 120-month period certain.
Payments will be made in monthly, quarterly, semiannual or annual installments
as selected by the Owner. However, if the amount available to apply under an
income option is less than [$5,000], and state law permits, the Company has the
right to make payments in one lump sum. In addition, if the first payment
provided would be less than [$50], and state law permits, the Company shall
have the right to require the frequency of payments be at quarterly, semiannual
or annual intervals so as to result in an initial payment of at least [$50].
NO WITHDRAWALS OF CONTRACT VALUE ARE PERMITTED DURING THE ANNUITY PERIOD FOR
ANY INCOME OPTION UNDER WHICH PAYMENTS ARE BEING MADE PURSUANT TO LIFE
CONTINGENCIES.
Upon written election filed with the Company at its Service Center, all of the
Contract Value will be applied to provide one of the following income options.
The portion of the Contract Value which is in the Guaranteed Account
immediately prior to the Income Date, applied to an income option, may be
subject to the applicable Excess Interest Adjustment.
OPTION 1 - LIFE INCOME An annuity payable monthly during the lifetime of the
Annuitant. Under this option, no further annuity payments are payable after the
death of the Annuitant, and there is no provision for a death benefit payable
to the Owner. Therefore, it is possible under Option 1 for the Owner to receive
only one monthly annuity payment under this Income Option.
OPTION 2 - JOINT AND SURVIVOR An annuity payable monthly while both the
Annuitant and a designated second person are living. Upon the death of either
person, the monthly annuity payments will continue during the lifetime of the
survivor at either the full amount previously payable or as a percentage
[(either one-half or two-thirds)] of the full amount, as chosen at the time of
election of the Income Option. If a reduced annuity payment to the survivor is
desired, variable annuity payments will be determined using either [one-half or
two-thirds] of the number of each type of annuity unit credited. Fixed annuity
payments will be equal to either [one-half or two-thirds] of the fixed annuity
payment payable during the joint life of the Annuitant and the designated
second person.
10
<PAGE> 15
- --------------------------------------------------------------------------------
INCOME PROVISIONS (CONT'D)
- --------------------------------------------------------------------------------
Annuity payments terminate automatically and immediately upon the death of the
surviving person without regard to the number or total amount of payments
received. There is no minimum number of guaranteed annuity payments, and it is
possible to have only one monthly annuity payment if both the Annuitant and the
designated second person die before the due date of the second payment.
OPTION 3 - LIFE ANNUITY WITH 120 OR 240 MONTHLY PAYMENTS GUARANTEED An annuity
payable monthly during the lifetime of the Annuitant with the guarantee that
if, at the death of the Annuitant, payments have been made for fewer than the
guaranteed 120 or 240 monthly periods, as elected, the Owner will continue
receiving the scheduled payments.
OPTION 4 - INCOME FOR A SPECIFIED PERIOD Under this income option, an Owner can
elect an annuity payable monthly for any period of years from [5 to 30]. This
election must be made for full [12-month] periods. In the event the Owner dies
before the specified number of payments has been made, the Beneficiary(ies) may
elect to continue receiving the scheduled payments or may alternatively elect
to receive the present value of any remaining guaranteed payments in a lump
sum.
ADDITIONAL OPTIONS. Other income options may be made available by the Company.
FIXED ANNUITY PAYMENTS. To the extent a fixed income option has been elected,
the proceeds payable under this Contract, less any applicable premium taxes,
shall be applied to the payment of the income option elected at whichever of
the following is more favorable to the Owner; (a) the annuity rates based upon
the applicable tables in the Contract; (b) the then current rates provided by
the Company on contracts of this type on the Income Date. In no event will the
fixed payments be changed once they begin.
VARIABLE ANNUITY PAYMENT. The initial annuity payment is determined by taking
the Contract Value allocated to that Investment Portfolio, less any premium tax
and any applicable Contract charges, and then applying it to the income option
table specified in the Contract. The appropriate rate must be determined by the
sex (except where, as in the case of certain Qualified Plans and other
employer-sponsored retirement plans, such classification is not permitted) and
age of the Annuitant and designated second person, if any.
The dollars applied are divided by 1,000 and the result multiplied by the
appropriate annuity factor appearing in the table to compute the amount of the
first monthly payment. That amount is divided by the value of an annuity unit
as of the Income Date to establish the number of annuity units representing
each variable payment. The number of annuity units determined for the first
variable payment remains constant for the second and subsequent monthly
variable payments, assuming that no reallocation of Contract Values is made.
11
<PAGE> 16
- --------------------------------------------------------------------------------
INCOME PROVISIONS (CONT'D)
- --------------------------------------------------------------------------------
The amount of the second and each subsequent monthly variable payment is
determined by multiplying the number of annuity units by the annuity unit value
as of the Business Day next preceding the date on which each payment is due.
ANNUITY UNIT VALUE. The initial value of an annuity unit of each Investment
Portfolio was set when the Investment Portfolios were established. The value
may increase or decrease from one Business Day to the next. The income option
tables contained in the Contract are based on a [3.0%] per annum assumed
investment rate. If the actual net investment rate experienced by an
Investment Portfolio exceeds [3.0%], variable payments will increase over time.
Conversely, if the actual rate is less than [3.0%], variable payments will
decrease over time. If the net investment rate equals [3.0%], the variable
payments will remain constant.
The value of a fixed number of annuity units will reflect the investment
performance of the Investment Portfolios elected, and the amount of each
payment will vary accordingly.
For each Investment Portfolio, the value of an annuity unit for any Business
Day is determined by multiplying the annuity unit value for the immediately
preceding Business Day by the net investment factor for the Business Day for
which the annuity unit value is being calculated. The result is then
multiplied by a second factor which offsets the effect of the assumed net
investment rate of [3.0%] per annum. The net investment factor, which reflects
changes in the net asset value of Investment Portfolios 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 an Investment Portfolio determined as
of the end of the Business Day, plus
2) the per share amount of any dividend or other distribution
declared by the Investment Portfolio if the "ex-dividend"
date occurs on the Business Day, plus or minus
3) a per share credit or charge with respect to any taxes paid
or reserved for by the Company which are determined by the
Company to be attributable to the operation of the
Investment Portfolio (no federal income taxes are applicable
under present law);
b) is the net asset value of the Investment Portfolio determined as
of the end of the preceding Business Day; and
c) is the Contract insurance charges.
BASIS OF COMPUTATION. The actuarial basis for the Table of Guaranteed Annuity
Rates is the 1983a Annuity Mortality Table, without projection factors, and
interest at [3.0%]. The Table of Guaranteed Annuity Rates does not include any
applicable premium tax.
12
<PAGE> 17
- --------------------------------------------------------------------------------
TABLE OF INCOME OPTIONS
- --------------------------------------------------------------------------------
The following table is for this Contract whose net proceeds are $1,000, and
will apply pro rata to the amount payable under this Contract.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
UNDER OPTION 4 MONTHLY INSTALLMENT UNDER OPTIONS 1 OR 3
- ------------------------------------------------------------------------------------------------------------------------------------
No. of Monthly Age of No. of Mos. Age of No. of Mos. Age of No. of Mos. Age of No. of Mos.
Monthly Install- Payee Payee Payee Payee
Install ments Certain Certain Certain Certain
-ments
---------------------------------------------------------------------------------------------------------------
Male Life 120 240 Male Life 120 240 Female Life 120 240 Female Life 120 240
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
60 17.95 40 3.67 3.66 3.61 70 7.28 6.64 5.28 40 3.44 3.43 3.42 70 6.29 5.99 5.14
72 15.17 41 3.72 3.71 3.68 71 7.56 6.82 5.33 41 3.48 3.47 3.45 71 6.52 6.17 5.20
84 13.19 42 3.77 3.76 3.70 72 7.86 7.00 5.36 42 3.52 3.51 3.48 72 6.78 6.35 5.24
96 11.71 43 3.82 3.81 3.74 73 8.19 7.17 5.39 43 3.56 3.55 3.52 73 7.02 6.54 5.30
108 10.56 44 3.89 3.86 3.79 74 8.52 7.35 5.41 44 3.60 3.59 3.56 74 7.31 6.73 5.34
120 9.64 45 3.95 3.92 3.83 75 8.90 7.53 5.43 45 3.64 3.63 3.60 75 7.82 6.92 5.37
132 8.89 46 4.00 3.98 3.89 76 9.30 7.71 5.45 46 3.70 3.69 3.64 76 7.96 7.12 5.40
144 8.26 47 4.07 4.04 3.94 77 9.71 7.89 5.47 47 3.75 3.74 3.69 77 8.32 7.33 5.43
156 7.73 48 4.14 4.10 3.99 78 10.17 8.05 5.48 48 3.80 3.79 3.74 78 8.72 7.53 5.45
168 7.28 49 4.21 4.17 4.04 79 10.66 8.21 5.49 49 3.86 3.84 3.79 79 9.16 7.73 5.46
180 6.88 50 4.28 4.24 4.10 80 11.19 8.37 5.50 50 3.92 3.91 3.83 80 9.62 7.93 5.48
192 6.55 51 4.37 4.31 4.16 81 11.75 8.51 5.50 51 3.98 3.96 3.89 81 10.13 8.11 5.49
204 6.25 52 4.45 4.39 4.22 82 12.34 8.65 5.51 52 4.05 4.02 3.95 82 10.68 8.30 5.50
216 5.97 53 4.53 4.47 4.27 83 12.97 8.77 5.51 53 4.11 4.09 4.00 83 11.28 8.47 5.50
228 5.74 54 4.63 4.55 4.33 84 13.65 8.90 5.52 54 4.20 4.17 4.06 84 11.93 8.83 5.51
240 5.52 55 4.72 4.65 4.40 85 14.36 9.00 5.52 55 4.27 4.24 4.13 85 12.64 8.77 5.51
252 5.34 56 4.83 4.74 4.47 86 15.11 9.10 5.52 56 4.36 4.31 4.19 86 13.39 8.91 5.52
264 5.16 57 4.94 4.84 4.53 87 15.91 9.19 5.52 57 4.44 4.40 4.25 87 14.20 9.02 5.52
276 5.00 58 5.05 4.94 4.60 88 16.74 9.26 5.52 58 4.53 4.49 4.31 88 15.07 9.13 5.52
288 4.86 59 5.18 5.05 4.68 89 17.84 9.34 5.52 59 4.64 4.57 4.39 89 15.99 9.21 5.52
300 4.72 60 5.31 5.17 4.73 90 18.59 9.39 5.52 60 4.74 4.68 4.45 90 16.96 9.30 5.52
61 5.45 5.28 4.79 91 19.61 9.44 5.52 61 4.86 4.78 4.52 91 17.97 9.36 5.52
62 5.61 5.42 4.86 92 20.71 9.49 5.52 62 4.97 4.89 4.60 92 19.04 9.41 5.52
63 5.77 5.56 4.92 93 21.89 9.52 5.52 63 5.10 5.00 4.67 93 20.15 9.46 5.52
64 5.94 5.69 4.98 94 23.16 9.56 5.52 64 5.23 5.12 4.74 94 21.31 9.50 5.52
65 6.13 5.84 5.04 95 24.55 9.58 5.52 65 5.38 5.25 4.81 95 22.51 9.54 5.52
66 6.33 5.98 5.10 96 26.07 9.60 5.52 66 5.54 5.38 4.88 96 23.78 9.57 5.52
67 6.55 6.14 5.15 97 27.73 9.62 5.52 67 5.70 5.52 4.95 97 25.14 9.59 5.52
68 6.78 6.31 5.20 98 29.58 9.62 5.52 68 5.88 5.67 5.01 98 26.62 9.61 5.52
69 7.02 6.48 5.24 99 31.63 9.63 5.52 69 6.08 5.83 5.08 99 28.27 9.62 5.52
</TABLE>
NOTE: Due to the length of the information, the Table for Option 2 is available
from the Service Center upon Your request.
13
<PAGE> 1
EX-99.B6-a
ARTICLES OF INCORPORATION
OF THE
JACKSON NATIONAL LIFE
INSURANCE COMPANY
We, the undersigned, desiring to become incorporated under the provisions
of Act No. 218 of the Public Acts of 1956, "The Insurance Code," do hereby
make, execute, and adopt the following Articles of Association, to-wit:
ARTICLE I.
The names of the incorporators and their respective places of residence
are as follows:
================================================================================
NAME PLACE OF RESIDENCE
- --------------------------------------------------------------------------------
A. J. Pasant 3226 Hartzell, Evanston, Illinois
Leslie W. Scott 304 W. Washington, Ilinsdale, Illinois
Charles H. Bruce 3445 W. 97th St., Evergreen Park, Illinois
Herbert J. Schoen 9520 Central Park, Evanston, Illinois
Joseph J. Pernick 19801 Monte Vista, Detroit, Michigan
Solomon A. Weisgal 3222, Hartzell, Evanston,
John G. Schafer 43 Beaconhill, Grosse Pointe, Michigan
Philip J. May 829 Southlawn, East Lansing, Michigan
Jordan J. Popkin 1500 W. Hillsdale, Lansing, Michigan
Jane B. Hart Mackinac Island, Michigan
Frank H. Lindquist 3128 N. Ernst St., Franklin Post, Illinois
Bert Nielsen 14018 Stahelin Avenue, Detroit, Michigan
Ira L. Grinnell 1195 Haslett Road, Williamston, Michigan
Morrice Henderson 533 Grove Street, East Lansing, Michigan
Edgar L. Harden 537 W. Kaye Avenue, Marquette, Michigan
Maurus J. Schumacher 164 Ridgemont Rd., Grosse Pte Farms, Michigan
Howard J. Grimes 403 Southlawn, East Lansing, Michigan
Richard A. McNichol 92 Shadywood Lane, Battle Creek, Michigan
Raymond Crouse 2626 Court Street, Saginaw, Michigan
Erik G. Dall Route #2, Berrien Springs, Michigan
Peter F. Hurst 5500 Browns Lake Road, Jackson, Michigan
John J. Collins 2339 Jefferson Road, Clarklake, Michigan
Apex Investment Co. 3001 Cadillac Tower, Detroit, Michigan
- --------------------------------------------------------------------------------
<PAGE> 2
ARTICLE II.
The name assumed by this Corporation and by which it shall be known in law
is JACKSON NATIONAL LIFE INSURANCE COMPANY and its principal office for the
transaction of business shall be in the City of Lansing, State of Michigan.
ARTICLE III.
This corporation is organized for the following purposes, as authorized by
Chapter 6, Act No. 218 of the Public Acts of 1956, as amended, namely:
To make insurance upon the lives and health of persons and every insurance
pertaining thereto, and to grant, purchase or dispose of annuities and
endowments of every kind and description whatsoever and to reinsure any risk
authorized to be undertaken by it and to grant reinsurance upon any similar
risk undertaken by any other insurer.
To make insurance upon any person against bodily injury or death by
accident or against disability on account of sickness or accident, including
also the granting of specific hospital benefits and medical surgical and sick
care benefits to any person, family or group, subject to such limitations as
may be prescribed with respect thereto, and to reinsure any risk authorized to
be undertaken by it and to grant reinsurance upon any similar risk undertaken
by any other insurer.
The corporation may issue Founders Policies not to exceed an aggregate
face amount of $30,000,000 to be held by not more than 3,000 holders. The
corporation shall not issue any of the aforementioned Founders Policies after
five (5) years from the date the corporation receives its certificate of
authority. The Founders Policies are subject to the rights and provisions
hereinafter set forth.
The corporation may issue participating and non-participating policies or
contracts provided that any participating policy or contract to be issued by
the corporation shall, by its terms, give the right to participate in the
divisible surplus earnings of the corporation as provided by law and as more
particularly provided by Section 4020 of The Insurance Code of 1956.
ARTICLE IV.
The term of existence of the corporation shall be perpetual.
ARTICLE V.
<PAGE> 3
The annual meeting of the Shareholders shall be held each year at a time
and place as the Board of Directors deems advisable.
ARTICLE VI.
The capital stock of the corporation shall be Fifty Seven Million Five
Hundred Thousand ($57,500,000.00) Dollars, divided into fifty million
(50,000,000) shares of Common Stock, one dollar and fifteen cents ($1.15) per
value per share.
VOTING RIGHTS
Each holder of Common Stock of the Corporation shall be entitled to one
vote for each share of Common Stock standing in his name on the books of the
Corporation and may vote the same in person or by proxy.
NO PRE-EMPTIVE RIGHTS
No holder of the Common Stock shall have any pre-emptive or preferential
right of subscription to any shares of stock of this Corporation heretofore or
hereafter authorized or to any obligations convertible into stock issued or
sold, and the Board of Directors may issue stock ofthis Corporation or
obligations convertible into stock without offering such issue of stock either
in whole or in part to the holders of the Common Stock of this Corporation,
upon such terms and conditions as the Board of Directors shall prescribe:
provided, however, that any offering of shares of stock not be at a price per
share less than the par value thereto.
ARTICLE VII.
1. In each and every calendar year commencing with the calendar year 1965,
an amount equal to twenty-five (25%) per cent of the net gain from operations
before dividends to policyholders and excluding capital gains and losses of the
corporation for such year, after making provisions for all taxes and after
deduction of the sum of Fifty-Six Thousand ($56,000.00) Dollars, all as
reflected in the annual statement for such year filed by the Corporation with
the Insurance Department of the State of Michigan, shall be set aside and make
available to eligible Founders Policyholders for the purpose and subject to the
limitation hereinafter set forth.
1.01 Eligible Founders Policyholders shall be holders of such Founders
Policies as may be sold and issued by the Corporation from time to time, who
shall have currently paid premiums on their respective Founders Policies for
the current year and who shall have paid in full all premiums on their
respective Founders Policies for the preceding three (3) years.
1.02 Each eligible Founders Policyholder shall be entitled to receive a
proportion of the amount allocated as provided in paragraph 1 hereof, which
proportion
<PAGE> 4
shall be the proportion which the amount of the annual premium for said
individual Founders Policy shall be the total amount of the annual premiums for
all Founders Policies, except those Founders Policies on which premiums have
not been paid for three (3) full years, at any time issued by the Corporation;
provided, however, that no eligible Founders Policyholder shall be entitled to
receive in any one year an amount in excess of the amount of the annual premium
for said Founders Policy.
ARTICLE VIII.
The corporate powers of the Corporation shall be exercised by a Board of
Directors consisting of not less than three (3), and at least one (1) members
of the Directors shall be a resident of the State of Michigan.
ARTICLE IX.
The Directors shall hold a meeting immediately following the Annual
Shareholders Meeting in each year; at which time they shall elect from their
membership a President and may elect a Chairman of the Board of Directors. At
such meeting, the Directors shall also elect one or more Vice Presidents, a
Secretary, a Treasurer, and such other officers and committees as the By-Laws
may require, none of whom need be Directors of the corporation, and whose
appointments shall be during the pleasure of the Board. The President shall be
the Chief Executive Officer of the corporation and the duties and
responsibilities of all other officers shall be such as may be assigned to them
from time to time by the Chief Executive Officer, or the Board of Directors in
accordance with the By-Laws of the corporation.
ARTICLE X.
The time for holding the annual meeting of the corporation shall be as
above provided and notice of all meetings of the shareholders shall be given by
mailing to each shareholder a copy of such notice, postage prepaid, directed to
his last known place of residence, at least twenty-one (21) days prior to the
time fixed for such meeting. Such notice shall state the time and place, and
if it be a Special Meeting, the purpose of such meeting.
ARTICLE XI.
The Directors may adopt By-Laws and amend the same from time to time for
the proper conduct and operation of the business of the corporation not
inconsistent with these Articles of Incorporation.
<PAGE> 1
EX-99.B6-b
BY-LAWS
OF THE
JACKSON NATIONAL LIFE INSURANCE COMPANY
(Enacted 8/61; Amended 8/64, 9/64, 2/70, 1/71, 4/72, 2/73, 4/76)
ARTICLE I
Meetings
Section 1. Place of Meeting. The meetings of the shareholders and of the
Board of Directors of this corporation shall be held at the principal office of
the corporation, in the City of Jackson, Michigan, and such other places as the
Board of Directors may from time to time determine.
Section 2. Annual Meeting of Shareholders. The annual meeting of the
shareholders shall be held in each year on the fourth Wednesday of April, at
10:30 o'clock in the morning, one of purposes of which shall be the election of
a Board of Directors. The first annual meeting shall be held in 1962.
Section 3. Notice of Annual Meeting of Shareholders. At least twenty-one
(21) days prior to the date fixed by Section 2 of this Article for the holding
of the annual meeting of shareholders, written notice of the time, place and
purpose of such meeting shall be mailed, as hereinafter provided, to each
shareholder entitled to vote at such meeting.
Section 4. Delay Annual Meeting. If for any reason the annual meeting of
the shareholders shall not be held on the day designated in Section 2 of this
Article, such meeting may be called and held as a special meeting, and the same
proceedings may be had thereat as at the annual meeting; provided, however,
that the notice of such meeting shall be the same herein required for the
annual meeting, namely, not less than a twenty-one (21) day notice.
Section 5. Order of Business at Annual Meeting. At all meetings of
shareholders the order of business shall first be the calling of the roll, and
if a quorum is found to be present, the order of business shall then continue
and be observed as follows, as far as applicable and consistent with the
purposes of the meeting; viz:
(a) Report of notice of meeting
(b) Reading minutes of preceding meeting
(c) Report of President
(d) Report of Secretary
(e) Report of Treasurer
(f) Report of Committees
<PAGE> 2
(g) Election of Directors
(h) Unfinished Business
(i) New Business
(j) Adjournment
provided that in the absence of any objection the presiding officer may vary
the order of business at his discretion.
Section 6. Special Meeting of Shareholders. A special meeting of the
shareholders may be called at any time by the President, or by a majority of
the Board of Directors, or by shareholders entitled to vote upon not less that
an aggregate of twenty (20%) per cent of outstanding shares of the corporation
having the right to vote at such special meeting. The method by which such
meeting may be called is as follows: Upon receipt of a specification in
writing setting forth the date and objects of such proposed special meeting,
signed by the President, or by a majority of the Board of Directors, or by
shareholders as above provided, the notices requisite to such meeting.
Section 7. Notice of Special Meeting of Shareholders. At least twenty-one
(21) days prior to the date fixed for the holding of any special meeting of
shareholders, written notice of the time, place and purposes of such meeting
shall be mailed, as hereinafter provided, to each shareholder entitled to vote
at such meeting. No business not mentioned in the notice shall be transacted
at the meeting.
Section 8. Organization Meeting of the Board. At the place of holding the
annual meeting of shareholders, and immediately following the same, the Board
of Directors as constituted upon final adjournment of such annual meeting shall
convene for the purpose of electing officers and transacting any other business
properly brought before it.
Section 9. Regular Meetings of the Board. Regular meetings of the Board
of Directors may be held at such times and places as the Board of Directors
shall from time to time determine. No notice of regular meetings of the Board
shall be required.
Section 10. Special Meetings of the Board. The special meetings of the
Board of Directors may be called by the President at any time and shall be
called by the President upon the written request of three members of the Board
of Directors. At least three days written notice setting forth the time, place
and purpose of the meeting shall be mailed to each Director, but action taken
at any such time shall not be invalid for want of notice if such notice shall
be waived as hereinafter provided.
Section 11. Notices and Mailing. All notices required to be given by any
provision of these By-Laws shall state the authority pursuant to which they are
issued (as "by order of the President," or "by order of the Board of
Directors," or "by order of the shareholders," as the case may be) and shall
bear the written or printed signature of the Secretary. Every notice shall be
deemed duly served when the same has been deposited
<PAGE> 3
in the United States mail, with postage full prepaid, plainly addressed to the
sendee at his, her or its last address appearing upon the original or duplicate
stock ledger of this corporation at its registered office in Michigan.
Section 12. Waiver of Notice. Notice of the time, place and purpose of
any meeting of the Board of Directors, may be waived by telegram, radiogram,
cablegram, or other writing, either before or after such meeting has been held.
ARTICLE II
Quorum
Section 1. Quorum of Shareholders. A majority of the outstanding shares
of this corporation entitled to vote, present by the record holders thereof in
person or by proxy, shall constitute a quorum at any meeting of the
shareholders. In case there is no quorum present on the day fixed for the
meeting, the shareholders present may adjourn said meeting from time to time
without further notice until said quorum is obtained, or may adjourn Sine Die.
Section 2. Quorum of Directors. A majority of the Directors shall
constitute a quorum for the transaction of business.
ARTICLE III
Voting, Elections and Proxies
Section 1. Who Entitled to Vote. Except as the Articles of Association,
or amendment or amendments thereto otherwise provide, each shareholder of this
corporation shall at every meeting of the shareholders be entitled to one vote
in person or by proxy for each share of Common Stock of this corporation, held
by such shareholder, subject, however, to the full effect of the limitations
imposed by a fixed record date for determination of shareholders set forth in
Section 2 of this Article III.
Section 2. Record Date for Determination of Shareholders. The Board of
Directors in each instance shall fix a date preceding (a) the date of any
meeting of shareholders, (b) the date for the payment of any dividends, (c) the
date for the allotment of rights, (d) the date when any change or conversion or
exchange of stock shall go into effect as the record date for the determination
of the shareholders entitled to notice of and to vote at any such meeting, or
entitled to receive payment of any such dividend, or to any such allotment of
rights, or to exercise the rights in respect of any such change, conversion or
exchange of common stock and in such case shareholders and only such
shareholders as shall be shareholders of record on the date so fixed shall be
entitled to such notice of, and to vote at, such meeting, or to receive payment
of such dividend, or to receive such allotment of rights, or exercise such
rights, as the case may be,
<PAGE> 4
notwithstanding any transfer of any stock on the books of the corporation or
otherwise after any such record date fixed as after any such record date fixed
as aforesaid.
Section 3. Proxies. No proxy shall be deemed operative unless and until
signed by the shareholder and filed with the corporation.
Section 4. Vote by Shareholder Corporation. Any other corporation owning
voting share in this corporation may vote upon such shares, or by proxy
appointed by it, unless some other person shall be appointed to vote upon such
shares by resolution of the Board of Directors of such shareholder corporation.
Section 5. Inspectors of Election. Whenever any person entitled to vote
at a meeting of the shareholders shall request the appointment of inspectors, a
majority of the shareholders present at such meeting and entitled to vote
thereat shall appoint not more than three inspectors, who need not be
shareholders. If the right of any person to vote at such meeting shall be
challenged, the inspectors shall determine such right. The inspectors shall
receive and count the vote either upon an election or for the decision of any
question and shall determine the result. Their certificate of any vote shall
be prima facie evidence thereof.
ARTICLE IV
Board of Directors
Section 1. Number and Term of Directors. The business property and
affairs of this corporation shall be managed by a Board of Directors composed
of not less than seven (7), nor more than twenty-five (25) members. No person
shall be eligible to the office of Director who is not the owner in his own
right of at least ten (10) shares of the capital stock of the corporation. At
least a majority of the Directors shall be residents of the State of Michigan.
Section 2. Vacancies. Any vacancy in the Board of Directors shall be
filled by appointment made by the remaining Directors, except that any vacancy
caused by reason of an increase in the number of Directors shall be filled by
the shareholders at an annual meeting, or at a special meeting called for that
purpose. Each person so elected to fill a vacancy shall remain a Director
until his successor has been elected by the shareholders, who may make such
election at their next annual meeting or at a special meeting duly called for
that particular purpose held prior thereto.
Section 3. Action by Unanimous Written Consent. If and when the Directors
shall severally or collectively consent in writing to any action to be taken by
the corporation, such action shall be as valid corporate action as though it
has been authorized at a meeting of the Board of Directors.
<PAGE> 5
Section 4. Power to Make By-Laws. Subject to the provisions of the
Articles of Association, the Board of Directors shall have power to make and
alter any By-Laws or By-Law, including the fixing and altering of the number of
the Directors, provided that the Board shall not make or alter any By-Law or
By-Laws fixing the qualifications, classifications, or term of office of any
member or members of the then existing Board.
Section 5. Power to Elect Officers. At the organization meeting of the
Board, provided for in Article I, Section 8 hereof, the Board of Directors
shall elect from their membership a President and may elect a Chairman of the
Board of Directors. At such meeting, the Directors shall also elect one or
more Vice Presidents, a Secretary, and a Treasurer. No officer except the
Chairman of the Board and the President need be a member of the Board of
Directors, but a Vice President who is not a Director shall not succeed to, nor
fill, the office of President.
Section 6. Power to Appoint Other Officers and Agents. The Board of
Directors shall have power to appoint such other officers and agents as the
Board may deem necessary for transaction of the business of the corporation.
Section 7. Removal of Officers and Agents. Any officer or agent may be
removed by the Board of Directors whenever in the judgement of the Board the
business interests of the corporation will be served thereby.
Section 8. Power to Fill Vacancies. The Board shall have power to fill
any vacancy in any office occurring from any reason whatsoever.
Section 9. Delegation of Powers. For any reason deemed sufficient by the
Board of Directors, whether occasioned by absence or otherwise, the Board may
delegate all or any of the powers and duties of any officer to any other
officer or Director, but no officer or Directors shall execute, acknowledge, or
verify any instrument in more one capacity.
Section 10. Power to Appoint Executive Committee. The Board of Directors
shall have power to appoint by resolution an executive committee composed of
two or more Directors who, to the extent provided in such resolution, shall
have and exercise the authority of the Board of Directors in the management of
the business of the corporation between meetings of the Board.
Section 11. Power to Require Bonds. The Board of Directors may require
any officer or agent to file with the corporation a satisfactory bond
conditioned for faithful performance of his duties.
Section 12. Compensation. The Board of Directors shall fix the salaries
of all officers of the corporation.
<PAGE> 6
ARTICLE V
Officers
Section 1. Chairman of the Board. The Board of Directors may select a
Chairman of the Board, who shall be selected by and from the membership of the
Board of Directors, and shall preside at all meetings of the shareholders,
directors, and the executive committee. He shall also perform such other
duties as may be delegated to him from time to time by the Board of Directors
or the Executive Committee.
Section 2. President. The President shall be selected by and from the
membership of the Board of Directors. He shall be the Chief Executive Officer
of the corporation, and shall see that all orders and resolutions of the Board
are carried into effect. He shall be ex-officio a member of all standing
committees, and shall have the general powers and duties of supervision and
management usually vested in the office of President and Chief Executive
Officer of a corporation.
Section 3. Vice President. There shall be such Vice Presidents as shall
be chosen from time to time by the Board. At least one Vice President shall be
chosen from the membership of the Board, who shall succeed to the office of
President in case of vacancy of such office. Other Vice Presidents may be
selected by the Board from time to time with such authority and duties as shall
be prescribed by the Board.
Section 4. Secretary. The Secretary shall attend all meetings of the
shareholders and of the Board of Directors, and of the executive committee, and
shall preserve in books of the corporation true minutes of the proceedings of
all such meetings. He shall safely keep in his custody the seal of the
corporation and shall have authority to affix the same to all instruments where
its use is required. He shall give all notices required by statue, By-Law, or
resolution. He shall perform such other duties as may be delegated to him by
the Board of Directors or by the executive committee.
Section 5. Treasurer. The Treasurer shall have custody of all corporate
funds and securities and shall keep in books belonging to the corporation full
and accurate accounts of all receipts and disbursements; he shall deposit all
moneys, securities and other valuable effects in the name of the corporation in
such depositories as may be ordered by the Board, taking proper vouchers for
such disbursements, and shall render to the President and Directors at the
regular meetings of the Board, and whenever requested by them, an account of
all his transactions as Treasurer and of the financial condition of the
corporation. If required by the Board, he shall deliver to the President of
the corporation, and shall keep in force, a bond in form, amount and with a
surety or sureties satisfactory to the Board, conditioned for faithful
performance of the duties of his office, and for restoration to the corporation
in case of his death, resignation, retirement, or removal from office, of all
books, papers, vouchers, money and property of whatever kind in his possession
or under his control belonging to the corporation.
<PAGE> 7
Section 6. Assistant Secretary and Assistant Treasurer. The Assistant
Secretary, in the absence or disability of the Secretary, shall perform the
duties and exercise the powers of the Secretary. The Assistant Treasurer, in
the absence or disability of the Treasurer, shall perform the duties and
exercise the powers of the Treasurer.
Section 7. Other Officers. Any other officers appointed by the Board of
Directors pursuant to Section 6 of Article IV hereof shall have such power and
perform such duties as shall be delegated to them by the Board of Directors.
ARTICLE VI
Shares and Transfers
Section 1. Certificates for Shares. Every shareholder shall be entitled
to a certificate of his shares signed by the President or a Vice President and
the Secretary or the Treasurer, or by the Assistant Secretary or the Assistant
Treasurer, under the seal of the corporation, certifying the number and class
of shares represented by such certificates; provided, that where such
certificate is signed (1) by a transfer agent or an assistant transfer agent or
(2) by a transfer clerk acting on behalf of the corporation, and a registrar,
the signature of any such President, Vice President, Secretary, Assistant
Secretary, Treasurer, or Assistant Treasurer, and the seal of the corporation,
may be a facsimile.
Section 2. Transfers of Stock. Transfers of stock shall be made on the
books of the corporation only by the person named in certificate or by attorney
lawfully constituted in writing and upon surrender of the certificate therefor.
Section 3. Registered Shareholders. The corporation shall have the right
to treat the registered holder of any share as the absolute owner thereof, and
shall not be bound to recognize any equitable or other claim to, or interest
in, such share on the part of any other person, whether or not the corporation
shall have express or other notice thereof save as may be otherwise provided by
the Statutes of Michigan.
Section 4. Lost Certificates. In case of loss or destruction of any
certificate of stock, the owner shall not be entitled to receive a new
certificate in lieu thereof until proof satisfactory to the Secretary of such
loss or destruction is made and ample indemnity, by bond or otherwise, as the
President and Secretary may prescribe has been given to the company. At the
option of the company, a new certificate may not be issued until sixty days
after notice of loss is received. Any such new certificate, issued in lieu of
one lost or destroyed, shall be marked "Duplicate" on its face.
Section 5. Transfer Agent and Registrar. The Board of Directors may
appoint a transfer agent and a registrar of transfers and may require all
certificates of shares to bear the signature of such transfer agent and of such
registrar of transfers, or as the Board may otherwise direct.
<PAGE> 8
Section 6. Regulations. The Board of Directors shall have power and
authority to make all such rules and regulations as the Board shall deem
expedient regulating the issue, transfer and registration of certificates for
shares in this corporation.
ARTICLE VII
Dividends and Reserves
Section 1. Sources of Dividends. The Board of Directors shall have power
and authority to declare dividends from any source permitted by law. In
determining earned surplus the judgment of the Board shall be conclusive in the
absence of bad faith or gross negligence.
Section 2. Manner of Payment of Dividend. Dividends may be paid in cash,
in property, in obligations of the corporation, or in shares of the stock of
the corporation.
Section 3. Reserves. The Board of Directors shall have power and
authority to set apart, out of any funds available for dividends, such reserve
or reserves, for any proper purpose, as the Board in its discretion shall
approve and the Board shall have power and authority to abolish any reserve
created by the Board.
ARTICLE VIII
Right of Inspection
Section 1. Inspection of List of Shareholders. At least ten (10) days
before every election of Directors a complete list of shareholders entitled to
vote at such election shall be open to examination by any registered
shareholder entitled to vote at such election, provided that no shareholder
holding less than two (2%) per cent of the outstanding common stock of the
corporation shall be entitled to exercise such privilege of inspection in
advance of such meeting.
Section 2. Inspection of Books of Account and Stock Books. The books of
account and stock books of this corporation shall be open to inspection at all
reasonable times and for any proper purpose by the shareholders, provided that
no shareholder holding of record in the aggregate less than two (2%) per cent
of the outstanding shares of such class of the stock of this corporation, and
no person, whatever his or her holdings, who has not been a shareholder of
record of this corporation for at least three (3) months prior to making such
application, shall be permitted to exercise such privilege of inspection,
except pursuant to resolution of the Board of Directors.
<PAGE> 9
ARTICLE IX
Execution of Instruments
Section 1. Checks, Etc. All checks, drafts, and orders for payment of
money shall be signed in the name of the corporation by such officers or agents
as the Board of Directors shall from time to time designate for that purpose.
Section 2. Contracts, Conveyances, Etc. When the execution of any
contract, conveyance, or other instrument has been authorized without
specification of the executing officers, the President, or any Vice President,
and the Secretary, or Assistant Secretary, may execute the same in the name and
behalf of this corporation any may affix the corporate seal thereto. The Board
of Directors shall have the power to designate the officers and agents who
shall have authority to execute any instrument in behalf of this corporation.
ARTICLE X
Seal
The seal of this corporation shall be the seal, an imprint of which is
affixed to the margin of these Articles.
ARTICLE XI
Indemnification of Directors and Officers
This Corporation shall indemnify to the full extent permitted by law any
person who was or is a party or is threatened to be made a party to civil,
criminal, administrative or investigative, by reason of the fact that he or she
is or was a director, officer, employee or agent of the Corporation, or is or
was serving at the request of the Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably believed to be in or not
opposed to the best interests of the Corporation or its shareholders, and with
respect to any criminal action or proceeding, had no reasonable cause to
believe his or her contract was unlawful. The foregoing right of
indemnification shall not be exclusive of other rights to which such person may
be entitled.
<PAGE> 10
ARTICLE XII
Amendment of By-Laws
These By-Laws may be amended, altered, changed, added to, or repealed, by
the majority vote of the Board of Directors.
ARTICLE XIII
Fiscal Year
The Fiscal Year of the corporation shall be determined and fixed from time
to time by the Board of Directors.
