<PAGE> 1
1933 Act Registration No. 33-46590
1940 Act Registration No. 811-6611
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. ___ ( )
Post-Effective Amendment No. 4 (x)
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 5 (x)
JACKSON NATIONAL CAPITAL MANAGEMENT FUNDS
(Exact name of Registrant as specified in Charter)
5901 Executive Drive, Lansing, Michigan 48911
(Address of principal executive offices) (Zip code)
Registrant's Telephone Number, including Area Code: 517-394-3400
Thomas J. Meyer, Esq. with a copy to:
5901 Executive Drive Cathy G. O'Kelly, Esq.
Lansing, Michigan 48911 Vedder, Price, Kaufman & Kammholz
222 North LaSalle Street
(Name and address of agent for service) Chicago, Illinois 60601
It is proposed that this filing will become effective (check appropriate box):
immediately upon filing pursuant to paragraph (b)
- ---
x on March 1, 1996 pursuant to paragraph (b)
- ---
60 days after filing pursuant to paragraph (a)(1)
- ---
on (date) pursuant to paragraph (a)(1)
- ---
75 days after filing pursuant to paragraph (a)(2)
- ---
on (date) pursuant to paragraph (a)(2) of rule 485.
- ---
This post-effective amendment designates a new effective date for a
- --- previously filed post-effective amendment.
DECLARATION PURSUANT TO RULE 24f-2
Pursuant to Rule 24f-2 under the Investment Company act of 1940, the Registrant
has declared that an indefinite number or amount of Shares of beneficial
interest in the Funds has been registered under the Securities Act of 1933.
The Rule 24f-2 notice for Registrant's fiscal year ended October 31, 1995 was
filed on or about December 22, 1995.
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Proposed
Maximum Maximum
Amount Offering Aggregate Amount of
Title of Securities Being Price Per Offering Registration
Being Registered Registered Unit Price* Fee
<S> <C> <C> <C> <C>
Shares of beneficial interest,
without par value
Jackson National Tax-Exempt Fund.. 907,028 10.60 72,500 25
Jackson National Income Fund...... 718,390 10.17 72,500 25
Jackson National Growth Fund...... 2,104,719 11.92 72,500 25
Jackson National Total Return Fund 1,473,072 12.31 72,500 25
</TABLE>
* The fee is calculated in accordance with Rule 24e-2
Tax-Exempt Fund (b)(2) 1,092,274; (b)(3) 192,085; (b)(4) 900,189
Income Fund (b)(2) 915,065; (b)(3) 203,803; (b)(4) 711,262
Growth Fund (b)(2) 2,423,008; (b)(3) 324,371; (b)(4) 2,098,637
Total Return Fund (b)(2) 1,762,425; (b)(3) 295,242; (b)(4) 1,467,183
<PAGE> 2
EXPLANATORY NOTE
The Registrant is a "series" company. This Registration Statement under the
Securities Act of 1933 and Registration Statement under the Investment Company
Act of 1940 (the "Registration Statement") relates to all five classes of the
Registrant's Shares: the Jackson National Money Market Fund Shares, the
Jackson National Tax-Exempt Fund Shares, the Jackson National Income Fund
Shares, the Jackson National Growth Fund Shares, and the Jackson National Total
Return Fund Shares. All five classes of the Registrant's Shares are offered
pursuant to a single Prospectus. Therefore, Parts A and B of the Registration
Statement consist of one form of Prospectus and Statement of Additional
Information. As indicated in the Note at the beginning of Part C of this
Registration Statement, Part C has been completed with respect to all five
classes of the Registrant's Shares.
<PAGE> 3
JACKSON NATIONAL CAPITAL MANAGEMENT FUNDS
CROSS-REFERENCE SHEET
(as required by Rule 485)
Caption in Prospectus or Statement of
N-1A Item No. Additional Information relating to each Fund
----------------------------- --------------------------------------------
Part A Prospectus
----------------------------- --------------------------------------------
Item 1. Cover Page Front Cover Page
Item 2. Synopsis Fund Expenses; Highlights
Item 3. Financial
Highlights Financial Highlights; Performance
Item 4. General Description
of Registrant Front Cover Page; Highlights; How the Funds
Work; How Each Fund Pursues its Investment
Objective; More Information About Certain
Investments, Practices and Risk
Considerations;
Appendix A - Money Market Instruments
Item 5. Management of the Fund Management of the Funds
Item 5A. Management's
Discussion of Fund
Performance Not Applicable
Item 6. Capital Stock and
Other Securities Organization and Description of Shares;
Distributions and Taxes; Shareholder Services
Item 7. Purchase of Shares
Being Offered Management of the Funds; How to Buy Shares
Item 8. Redemption and
Repurchase How to Buy Shares; How to Redeem Shares
Item 9. Pending Legal
Proceedings Not Applicable
Part B Statement of Additional Information
- ---------------------------- ---------------------------------------------
Item 10. Cover Page Front Cover Page
Item 11. Table of Contents Front Cover Page
Item 12. General Information
and History Not Applicable
Item 13. Investment Objectives
and Policies Investment Restrictions; Investment Policies
and Techniques; Appendix - Ratings of
Investments; Portfolio Transactions
Item 14. Management of the
Fund Officers and Trustees
Item 15. Control Persons and
Principal Holders
Securities Officers and Trustees
Item 16. Investment Advisory
and Other Services Investment Advisors
Item 17. Brokerage Allocation
and Other Practices Portfolio Transactions
Item 18. Capital Stock and
Other Securities Shareholder Rights
Item 19. Purchase, Redemption
and Pricing of
Securities Being
Offered Purchase of Shares; Redemption of Shares;
Pay-in-Kind Election
Item 20. Tax Status Dividends and Taxes
Item 21. Underwriters Distributors
Item 22. Calculation of
Performance Data Performance
Item 23. Financial
Statements Financial Statements
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 the Registration
Statement.
<PAGE> 4
PROSPECTUS
JACKSON NATIONAL CAPITAL MANAGEMENT FUNDS JNCMF LOGO
- --------------------------------------------------------------------------------
P.O. Box 419102 - Kansas City, Missouri 64141-61021 - 1-800-888-3863
Jackson National Capital Management Funds (the "Fund") is an open-end,
diversified management investment company, better known as a mutual fund. The
Fund offers five separate investment portfolios (the "Funds"):
JACKSON NATIONAL MONEY MARKET FUND
JACKSON NATIONAL TAX-EXEMPT FUND
JACKSON NATIONAL INCOME FUND
JACKSON NATIONAL GROWTH FUND
JACKSON NATIONAL TOTAL RETURN FUND
------------------------
An investment in the Jackson National Money Market Fund (the "Money Market
Fund") is neither insured nor guaranteed by the U.S. Government. There can be no
assurance that the Money Market Fund will be able to maintain a stable net asset
value of $1.00 per share.
------------------------
The Funds' shares are not deposits or obligations of, or guaranteed or
endorsed by, any bank, nor are they federally insured by the Federal Deposit
Insurance Corporation, the Federal Reserve Board or any other agency. Investment
in a Fund's shares involves risk, including the possible loss of principal.
------------------------
This Prospectus contains information about the Funds that a prospective
investor should know before investing and should be retained for future
reference. A Statement of Additional Information for the Funds, dated March 1,
1996, has been filed with the Securities and Exchange Commission and is
incorporated herein by reference. The Statement of Additional Information is
available upon request and without charge from the Funds at the address or
telephone number above.
This Prospectus does not constitute an offer to sell, or a solicitation of
an offer to buy, the shares of the Funds in any jurisdiction in which such may
not lawfully be made.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
------------------------
THIS PROSPECTUS DATED MARCH 1, 1996
<PAGE> 5
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TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
HIGHLIGHTS............................................................................ 1
FUND EXPENSES......................................................................... 2
FINANCIAL HIGHLIGHTS.................................................................. 4
HOW THE FUNDS WORK.................................................................... 6
INVESTMENT OBJECTIVES................................................................. 6
INVESTMENT RISKS...................................................................... 6
HOW EACH FUND PURSUES ITS INVESTMENT OBJECTIVE........................................ 8
MONEY MARKET FUND..................................................................... 8
TAX-EXEMPT FUND....................................................................... 9
INCOME FUND........................................................................... 10
GROWTH FUND........................................................................... 11
TOTAL RETURN FUND..................................................................... 11
MORE INFORMATION ABOUT CERTAIN INVESTMENTS, PRACTICES
AND RISK CONSIDERATIONS............................................................. 12
PERFORMANCE........................................................................... 16
MANAGEMENT OF THE FUNDS............................................................... 18
HOW TO BUY SHARES..................................................................... 19
SHAREHOLDER SERVICES.................................................................. 23
DISTRIBUTIONS AND TAXES............................................................... 27
HOW TO REDEEM SHARES.................................................................. 28
ORGANIZATION AND DESCRIPTION OF SHARES................................................ 31
APPENDIX A -- MONEY MARKET INSTRUMENTS................................................ A-1
</TABLE>
<PAGE> 6
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HIGHLIGHTS
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES. Jackson National Capital Management Funds (the
"Fund") is an open-end, diversified management investment company, currently
offering a choice of five investment portfolios (the "Funds") designed for
long-term investors. Jackson National Money Market Fund (the "Money Market
Fund") seeks as high a level of current income as is consistent with the
preservation of capital and maintenance of liquidity by investing in high
quality, short-term money market instruments. Jackson National Tax-Exempt Fund
(the "Tax-Exempt Fund") seeks as high a level of current income exempt from
federal income tax as is consistent with preservation of capital by investing in
a diversified portfolio of municipal obligations. Jackson National Income Fund
(the "Income Fund") seeks as high a level of current income as is consistent
with preservation of capital by investing primarily in investment-grade debt
securities. Jackson National Growth Fund (the "Growth Fund") seeks to replicate
the aggregate price and yield performance of the Standard & Poor's 500 Composite
Stock Price Index. Jackson National Total Return Fund (the "Total Return Fund")
seeks as high a level of total return, which is a combination of income and
capital appreciation, as is consistent with reasonable risk by investing in
stocks, bonds and money market instruments. See "How Each Fund Pursues Its
Investment Objective."
RISK FACTORS. There is no assurance that the investment objective of any
Fund will be achieved and investment in the Fund includes risks, which vary in
degree and kind depending upon the investment policies of each Fund. The returns
and per share net asset value of a Fund will fluctuate, except that the Money
Market Fund seeks to maintain a net asset value of $1.00 per share. There is no
assurance that the $1.00 net asset value will be maintained. Each Fund is
subject to market and financial risks, and in some cases, to prepayment risk. In
general, debt securities prices vary inversely with changes in interest rates.
Investors should note that investments in high yield securities by the Total
Return Fund entail relatively greater risk of loss of income and principal than
investments in higher rated securities and market prices of high yield
securities may fluctuate more than market prices of higher rated securities. The
government guarantee of the U.S. Government securities in which certain Funds
invest (Money Market, Income and Total Return) does not guarantee the market
value of the shares of such Funds, and such securities are subject to various
degrees of government backing. Foreign investments by certain Funds (Money
Market, Income and Total Return) involve risk and opportunity considerations not
typically associated with investing in U.S. companies. However, since all
investments will be U.S. dollar denominated, the Funds are not subject to
currency risks from foreign investments. See "Investment Risks" and "More
Information About Certain Investments, Practices and Risk Considerations."
INVESTMENT ADVISER AND DISTRIBUTOR. Jackson National Financial Services,
Inc. ("JNFSI") serves as investment adviser for each Fund, and PPM America, Inc.
serves as sub-investment adviser for each Fund. JNFSI is paid an investment
management fee by each Fund, and JNFSI in turn pays a sub-investment advisory
fee to PPM America, Inc., based upon average daily net assets of that Fund at an
annual rate that differs for each Fund. JNFSI also serves as distributor and
principal underwriter for the Funds. See "Management of the Funds."
PURCHASES AND REDEMPTIONS. Investors may purchase a Fund's shares at net
asset value plus a maximum sales charge of 4.75% of the offering price. There is
no sales charge on shares of the Money Market Fund. Reduced sales charges apply
to purchases of $100,000 or more. The minimum initial investment (including
applicable sales charge) is $1,000 per Fund, and investments thereafter must be
at least $50. Different minimums may apply to qualified plans. See "How To Buy
Shares." Shares may be redeemed without charge or penalty at net asset value,
which may be more or less than original cost. See "How To Redeem Shares."
1
<PAGE> 7
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FUND EXPENSES
- --------------------------------------------------------------------------------
The following table illustrates the expenses and fees that you would incur
as a shareholder of a Fund.
- --------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES.
<TABLE>
<S> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering
price)...................................................................... 4.75%*
Maximum Sales Charge Imposed on Reinvested Dividends......................... None
Deferred Sales Charge........................................................ None
Redemption Fees.............................................................. None**
Exchange Fee................................................................. None
</TABLE>
- --------------------------------------------------------------------------------
* There is no sales charge on purchases of the Money Market Fund.
** There is a $10 charge for wire redemptions.
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES.
(as a percentage of average net assets)
<TABLE>
<CAPTION>
MONEY TAX- TOTAL
MARKET EXEMPT INCOME GROWTH RETURN
FUND FUND FUND FUND FUND
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Management Fees........................... .50% .50% .60% .25% .70%
12b-1 Fees................................ None None None None None
Other Expenses After Reimbursement........ 0% .40% .40% 0% .50%
------ ------ ------ ------ ------
Total Fund Operating Expenses............. .50% .90% 1.00% .25% 1.20%
===== ====== ===== ====== =====
</TABLE>
The purpose of this table is to assist you in understanding the various
costs and expenses that you would bear directly or indirectly as an investor in
the Funds.
"Other Expenses" are based on actual amounts incurred by the Funds for the
previous fiscal year after reimbursements restated to reflect the investment
adviser's current level of voluntary reimbursements. During the period ended
October 31, 1995, certain fees were waived and certain expenses reimbursed by
the investment adviser. If the Funds had paid all of their expenses for the year
ended October 31, 1995, the Total Fund Operating Expenses would have been 1.69%
for the Money Market Fund, 1.54% for the Tax-Exempt Fund, 1.66% for the Income
Fund, 1.57% for the Growth Fund, and 1.79% for the Total Return Fund. The
adviser is currently reimbursing all Other Expenses incurred by the Money Market
Fund, and the Growth Fund. Voluntary reimbursements to these Funds may be
modified or discontinued at any time by the adviser.
2
<PAGE> 8
- --------------------------------------------------------------------------------
EXAMPLE.
The following example illustrates the expenses you would incur on a $1,000
investment, assuming (1) 5% annual return and (2) redemption at the end of each
time period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Money Market Fund.... $ 5 $16 $ 28 $ 63
Tax-Exempt Fund...... $ 56 $75 $ 95 $153
Income Fund.......... $ 57 $78 $ 100 $164
Growth Fund.......... $ 50 $55 $ 61 $ 78
Total Return Fund.... $ 59 $84 $ 110 $186
</TABLE>
- --------------------------------------------------------------------------------
THIS EXAMPLE SHOULD NOT BE CONSIDERED TO BE A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN. The example
assumes a 5% annual rate of return pursuant to the requirements of the
Securities and Exchange Commission. This hypothetical rate of return is not
intended to be representative of past or future performance of the Funds.
Reduced sales charges apply to purchases of $100,000 or more as well as to
certain other purchases. See "How to Buy Shares."
3
<PAGE> 9
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below shows, financial information for each Fund expressed in
terms of one share outstanding throughout the period.
The information in the table for each Fund is covered by the report of the
Fund's independent accountants. The report is contained in the Fund's Statement
of Additional Information and is available from the Fund. The Financial
Statements contained in the Fund's 1995 Annual Report to Shareholders are
incorporated herein by reference and may be obtained, without charge, by writing
or calling the Fund.
<TABLE>
<CAPTION>
MONEY MARKET FUND TAX-EXEMPT FUND
-------------------------------- ---------------------------------
YEAR YEAR PERIOD YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED
10/31/95 10/31/94 10/31/93* 10/31/95 10/31/94 10/31/93*
-------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA
Net asset value, beginning of period... $ 1.00 $ 1.00 $ 1.00 $ 9.87 $ 10.78 $ 10.00
Income From Investment Operations
Net investment income(c)............. 0.06 0.04 0.03 0.48 0.46 0.44
Net realized and unrealized gains
(losses) on investments............ -- -- -- 0.60 (0.91) 0.78
------- ------ ------ ------- ------- -------
Total from investment
operations.................... 0.06 0.04 0.03 1.08 (0.45) 1.22
------- ------ ------ ------- ------- -------
Less Distributions From
Net investment income................ (0.06) (0.04) (0.03) (0.48) (0.46) (0.44)
Net realized gain on
investments(f)..................... -- -- -- (0.06) -- --
------- ------ ------ ------- ------- -------
Total distributions to
shareholders.................. (0.06) (0.04) (0.03) (0.54) (0.46) (0.44)
------- ------ ------ ------- ------- -------
Net increase (decrease) in net asset
value................................ -- -- -- 0.54 (0.91) 0.78
------- ------ ------ ------- ------- -------
Net asset value, end of period......... $ 1.00 $ 1.00 $ 1.00 $ 10.41 $ 9.87 $ 10.78
======= ====== ====== ======= ======= =======
TOTAL RETURN(A)(B)..................... 5.87% 3.94% 3.25% 11.32% (4.27)% 12.82%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)........................... $24,098 $9,102 $ 4,115 $21,709 $29,464 $29,890
Ratio of net expenses to average net
assets(b)(d)......................... 0.31% 0.00% 0.00% 0.88% 0.90% 0.88%
Ratio of net investment income to
average net assets(b)(d)............. 5.71% 4.00% 3.15% 4.64% 4.46% 4.38%
Portfolio turnover rate................ -- -- -- 79.18% 41.74% 0.00%
RATIO INFORMATION ASSUMING NO EXPENSE
REIMBURSEMENT OR OFFSET
Ratio of expenses to average net
assets(b)(e)......................... 1.69% 3.19% 5.35% 1.54% 1.22% 1.07%
Ratio of net investment income to
average net assets(b)(e)............. 4.33% 0.81% (2.20)% 3.98% 4.14% 4.19%
</TABLE>
- -------------------------
* From commencement of operations on November 12, 1992.
(a) Assumes investment at net asset value at the beginning of the period,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the period.
(b) The amounts for the period ended October 31, 1993 have been annualized.
(c) For the year ended October 31, 1995, less than $.01 per share of investment
income in the Tax-Exempt Fund is subject to federal taxes. In prior years,
no investment income in the Tax-Exempt Fund was subject to federal taxes.
(d) Computed after giving effect to the Adviser's expense reimbursement, and
after fees paid indirectly for the year ended October 31, 1995.
The accompanying notes to financial statements are an integral part of these
statements.
4
<PAGE> 10
<TABLE>
<CAPTION>
INCOME FUND GROWTH FUND TOTAL RETURN FUND
--------------------------------- --------------------------------- ---------------------------------
YEAR YEAR PERIOD YEAR YEAR PERIOD YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
10/31/95 10/31/94 10/31/93* 10/31/95 10/31/94 10/31/93* 10/31/95 10/31/94 10/31/93*
-------- -------- --------- -------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 9.49 $ 10.80 $ 10.00 $ 11.38 $ 11.24 $ 10.00 $ 10.75 $ 11.48 $ 10.00
0.60 0.57 0.57 0.42 0.25 0.23 0.53 0.40 0.43
0.61 (1.24) 0.80 2.43 0.13 1.05 1.82 (0.33) 1.11
-------- ------- --------- -------- -------- --------- -------- ------- ---------
1.21 (0.67) 1.37 2.85 0.38 1.28 2.35 0.07 1.54
-------- ------- --------- -------- -------- --------- -------- ------- ---------
(0.60) (0.57) (0.57) (0.26) (0.24) (0.04) (0.41) (0.44) (0.06)
-- (0.07) -- (0.06) -- -- (0.01) (0.36) --
------- ------- --------- ------- ------- --------- ------- ------- ---------
(0.60) (0.64) (0.57) (0.32) (0.24) (0.04) (0.42) (0.80) (0.06)
------- ------- --------- ------- ------- --------- ------- ------- ---------
0.61 (1.31) 0.80 2.53 0.14 1.24 1.93 (0.73) 1.48
------- ------- --------- ------- ------- --------- ------- ------- ---------
$ 10.10 $ 9.49 $ 10.80 $ 13.91 $ 11.38 $ 11.24 $ 12.68 $ 10.75 $ 11.48
======= ======= ========= ======= ======= ========= ======= ======= =========
13.13% (6.42)% 14.50% 25.83% 3.46% 13.19% 22.72% 0.63% 15.92%
$22,105 $29,439 $30,331 $13,544 $34,968 $31,719 $23,650 $35,814 $32,418
0.97% 0.97% 0.99% 0.23% 0.46% 0.49% 1.16% 1.16% 1.18%
6.01% 5.68% 5.66% 2.60% 2.32% 2.27% 4.22% 3.82% 4.26%
100.91% 141.95% 31.49% 9.10% 2.83% 0.53% 90.23% 50.29% 56.86%
1.66% 1.30% 1.18% 1.57% 0.96% 0.85% 1.79% 1.35% 1.27%
5.32% 5.35% 5.47% 1.26% 1.83% 1.91% 3.59% 3.63% 4.17%
</TABLE>
- -------------------------
(e) For the year ended October 31, 1995, the manner in which total expenses are
calculated changed to exclude expense offsets for custodian fees (i.e., fees
paid indirectly).
(f) For the year ended October 31, 1995, all capital gain distributions were
from long-term capital gains, which are taxed as capital gains to the
shareholder. For the year ended October 31, 1994, all capital gain
distributions were from short-term capital gains, which are taxed as
ordinary income to the shareholder.
5
<PAGE> 11
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HOW THE FUNDS WORK
- --------------------------------------------------------------------------------
The Funds are designed to provide long-term investors with professional
management of their assets. There are currently five Funds, each of which
represents a separate investment portfolio that pursues a separate investment
objective. As investors change their investment outlook or objectives, they can
exchange their holdings among the Funds. THERE IS NO ASSURANCE THAT A FUND'S
OBJECTIVE WILL BE ACHIEVED.
INVESTMENT OBJECTIVES
JACKSON NATIONAL MONEY MARKET FUND (the "Money Market Fund") -- seeks as
high a level of current income as is consistent with the preservation of capital
and maintenance of liquidity. The Money Market Fund pursues this objective by
investing in high quality, short-term money market instruments.
JACKSON NATIONAL TAX-EXEMPT FUND (the "Tax-Exempt Fund") -- seeks as high a
level of current income exempt from federal income tax as is consistent with
preservation of capital. The Tax-Exempt Fund pursues this objective by investing
in a diversified portfolio of municipal obligations, the interest from which is
exempt from federal income taxes.
JACKSON NATIONAL INCOME FUND (the "Income Fund") -- seeks as high a level
of current income as is consistent with preservation of capital. The Income Fund
pursues this objective by investing primarily in investment-grade debt
securities.
JACKSON NATIONAL GROWTH FUND (the "Growth Fund") -- seeks to replicate the
aggregate price and yield performance of the Standard & Poor's 500 Composite
Stock Price Index (the "S&P 500 Index"). The Growth Fund pursues this objective
by investing in a portfolio that nearly replicates the investments in the S&P
500 Index.
JACKSON NATIONAL TOTAL RETURN FUND (the "Total Return Fund") -- seeks as
high a level of total return, which is a combination of income and capital
appreciation, as is consistent with reasonable risk. The Total Return Fund
pursues this objective by investing in stocks, bonds and money market
instruments.
In addition to the investment objectives and investment policies set forth
above, each Fund has adopted certain investment restrictions which are presented
in the Statement of Additional Information (the "SAI"). The investment
objective, as well as any investment policies and investment restrictions
specifically designated as fundamental, cannot be changed without approval by
holders of a majority of the Fund's outstanding voting shares as defined in the
Investment Company Act of 1940 ("1940 Act"). All investment policies or
restrictions of a Fund that are not specifically designated as fundamental may
be changed by the Board of Trustees of the Fund without shareholder approval.
INVESTMENT RISKS
There are risks inherent in any investment. The Funds are subject to
varying degrees of market risk, financial risk, and in some cases, prepayment
risk.
Market risk is the potential for fluctuations in the price of the security
because of market factors. For equity securities, market risk is the possibility
of change in price caused by stock market price changes; for debt securities,
market risk is the possibility that the price will fall because of changing
interest rates. In general, debt securities' prices vary inversely with changes
in interest rates. If interest rates rise, bond prices fall; if interest rates
fall, bond prices generally rise. In addition, for a given change in interest
rates, longer-maturity bonds fluctuate more in price (gaining or losing more in
value) than shorter-maturity bonds.
Financial risk is based on the financial situation of the issuer. For
equity securities, financial risk is the possibility that the price of the
security will fall because of poor earnings performance by the issuer. For debt
securities, financial risk is the possibility that a bond issuer will fail to
make timely payments
6
<PAGE> 12
of interest or principal to a Fund. The financial risk
of a Fund depends on the credit quality of its underlying securities. In
general, the lower the credit quality of a Fund's securities, the higher a
Fund's yield, all other factors such as maturity being equal.
Prepayment risk is the possibility that, during periods of falling interest
rates, a debt security with a high stated interest rate will be prepaid (or
"called") prior to its expected maturity date. If during periods of falling
interest rates a debt security with a high stated interest rate is called away,
the unanticipated proceeds would likely be invested at lower interest rates, and
the Fund's income may decline. Call provisions are most common for intermediate
and long-term municipal, corporate and mortgage-backed securities. To the extent
securities subject to call were acquired at a premium, the potential for
appreciation in the event of a decline in interest rates may be limited, and may
even result in losses.
The market value of U.S. Government securities is not guaranteed and will
fluctuate. In addition, U.S. Government securities involve various degrees of
government backing. Although investments in U.S. Government securities provide
substantial protection against financial risk, they do not protect investors
against price changes due to market risk. Obligations issued by the U.S.
Treasury and some obligations issued or guaranteed by U.S. Governmental agencies
or instrumentalities are backed by the full faith and credit of the United
States, such as Treasury bills, notes and bonds and modified pass-through
certificates issued by the Government National Mortgage Association; while
others are backed exclusively by the agency or instrumentality with limited
rights of the issuer to borrow from the U.S. Treasury (such as obligations of
the Federal National Mortgage Association and the Federal Home Loan Mortgage
Corporation), and others are backed only by the credit of the issuer itself
(such as obligations of the Student Loan Marketing Association). There is no
guarantee that the U.S. Government will provide support to such agencies.
Because of market risks, you should anticipate that the share prices of the
Funds will fluctuate. The one exception is the Money Market Fund which, although
it cannot be guaranteed, is expected to maintain a stable price of $1.00.
The following is a brief summary of the relative differences in the level
of risks associated with each Fund. For a full understanding of the risks
involved with each Fund, the complete description of each Fund should be read.
THE MONEY MARKET FUND should entail the smallest degree of market and
financial risks because of the short term and high quality nature of the debt
investments held in the portfolio.
THE TAX-EXEMPT FUND and the INCOME FUND should be subject to moderate to
high levels of market risk and low to moderate levels of financial risk. The
level of market risk for each Fund will vary depending on the maturities of the
underlying securities of each.
THE GROWTH FUND is subject to greater market risks than portfolios
investing solely in debt instruments. The U.S. stock market tends to be
cyclical, with periods when stock prices generally rise and periods when prices
generally decline. Although common stocks, as measured by the S&P 500 Index from
1935 to 1994, provided an average annual total return (capital appreciation plus
dividend income) of +10.91%, stock returns are quite volatile from year to year
(best year +52.12%, worst year -34.73%). Therefore, the Growth Fund may be
subject to sudden, sometimes substantial, fluctuations in value. Because the
Growth Fund invests in selected securities included within the S&P 500 Index,
which emphasizes large-capitalization stocks, it is less subject to market and
financial risks than portfolios invested primarily in small to medium
capitalization stocks.
THE TOTAL RETURN FUND is subject to the greatest degree of market and
financial risks. The Total Return Fund's investment policies permit total
investment in stocks or total investment in debt instruments that are primarily
investment grade, but which may include a percentage of non-investment grade
debt instruments.
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HOW EACH FUND PURSUES ITS INVESTMENT OBJECTIVE
- --------------------------------------------------------------------------------
MONEY MARKET FUND
The Money Market Fund invests exclusively in high quality money market
instruments. These instruments are considered to be among the safest investments
available because of their short maturities, liquidity and high quality ratings.
The Money Market Fund seeks to maintain a net asset value of $1.00 per share.
Nevertheless, there is no guarantee that the objective of the Money Market Fund
will be achieved or that the net asset value of $1.00 per share will be
maintained.
The Money Market Fund will invest exclusively in the following types of
high quality, U.S. dollar denominated money market instruments that mature in
397 days or less:
- Obligations issued or guaranteed as to principal and interest by the U.S.
Government, its agencies and instrumentalities.
- Obligations, such as time deposits, certificates of deposit and bankers
acceptances, issued by U.S. banks and savings banks that are members of
the Federal Deposit Insurance Corporation, including their foreign
branches and foreign subsidiaries, and issued by domestic and foreign
branches of foreign banks.
- Corporate obligations, including commercial paper, of domestic and
foreign issuers.
- Obligations issued or guaranteed by one or more foreign governments or
any of their political subdivisions, agencies or instrumentalities,
including obligations of supranational entities.
- Repurchase agreements on obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.
A more complete description of the types of investments made by the Money
Market Fund is found in Appendix A of the Prospectus. See also "More Information
About Certain Investments, Practices and Risk Considerations."
Investments are managed to meet the quality and diversification
requirements of the 1940 Act. Under Rule 2a-7 under the 1940 Act, the Money
Market Fund must maintain a dollar-weighted average portfolio maturity of 90
days or less and may only purchase U.S. dollar denominated instruments that are
determined to present minimal credit risks and that at the time of acquisition
are rated in the top two rating categories by the required number of nationally
recognized statistical rating organizations ("Rating Agencies") (at least two
or, if only one Rating Agency has rated the security, that one agency) or, if
unrated, are deemed comparable in quality. Determination of credit risks and
quality will be made by the sub-investment adviser in accordance with procedures
adopted by the Funds' Board of Trustees. The diversification requirements of
Rule 2a-7 provide generally that the Money Market Fund may not at the time of
acquisition invest more than 5% of its assets in securities of any one issuer or
invest more than 5% of its assets in securities that have not been rated in the
highest category by the required number of Rating Agencies or, if unrated, have
not been deemed comparable, except U.S. Government securities and repurchase
agreements on such securities. For example, the highest rating categories by
Standard & Poor's Corporation ("S&P") and Moody's Investors Services, Inc.
("Moody's") are A-1 and P-1, respectively. A more complete description of the
rating categories is set forth under Appendix A in the SAI.
The Money Market Fund will not invest more than 25% of its total assets in
any one industry, except that the Money Market Fund may invest more than 25% of
its total assets in the domestic banking industry, which would cause the Fund to
be more exposed to the risks of such industry. (See the SAI for a discussion of
such risks.) Bank obligations held by the Money Market Fund do not benefit
materially from insurance from the Federal Deposit
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<PAGE> 14
Insurance Corporation. The 25% limitation does not
apply to U.S. Government securities, including obligations issued or guaranteed
by its agencies or instrumentalities.
TAX-EXEMPT FUND
The Tax-Exempt Fund will invest in a diversified portfolio of Municipal
Obligations. As a fundamental policy, under normal conditions, at least 80% of
the Tax-Exempt Fund's net assets will be invested in tax-exempt securities. The
Tax-Exempt Fund may, on a temporary basis or for defensive purposes, hold and
invest up to 20% of its assets in cash and in taxable investments with the
remaining maturities of one year or less.
Municipal Obligations are debt obligations issued by states, territories
and possessions of the United States and the District of Columbia and their
political subdivisions, agencies and instrumentalities, or multistate agencies
or authorities, the interest from which is, in the opinion of bond counsel to
the issuer, exempt from federal income tax. Municipal Obligations generally
include debt obligations issued to obtain funds for various public purposes as
well as certain industrial development bonds issued by or on behalf of public
authorities. Municipal Obligations are classified as general obligation bonds,
revenue bonds and notes.
General obligation bonds are secured by the issuer's pledge of its faith,
credit and taxing power for the payment of principal and interest. Revenue bonds
are payable from the revenue derived from a particular facility or class of
facilities or, in some cases, from the proceeds of a special excise or other
specific revenue source, but not from the general taxing power. Tax exempt
industrial development bonds, in most cases, are revenue bonds that generally do
not carry the pledge of the credit of the issuing municipality, but generally
are guaranteed by the corporate entity on whose behalf they are issued. Notes
are short-term instruments which are obligations of the issuing municipalities
or agencies and are sold in anticipation of a bond sale, collection of taxes or
receipt of other revenues.
Municipal Obligations include municipal lease/purchase agreements that are
similar to installment purchase contracts for property or equipment issued by
municipalities. These obligations typically are not fully backed by the
municipality's credit and their interest may become taxable if the lease is
assigned. If the governmental user does not appropriate sufficient funds for the
following year's lease payments, the lease will terminate, with the possibility
of default on the lease obligations and significant loss to the Tax-Exempt Fund.
Municipal lease/purchase agreements will be considered illiquid investments
except where they are determined to be liquid by the sub-investment adviser in
accordance with procedures established by the Board of Trustees. The Tax-Exempt
Fund may also invest in resource recovery bonds, which may be general
obligations of the issuing municipality or supported by corporate or bank
guarantees. The viability of the resource recovery project, environmental
protection regulations and project operator tax incentives may affect the value
and credit quality of resource recovery bonds.
The Tax-Exempt Fund may also invest in zero-coupon securities and
pay-in-kind bonds. In addition, the Tax-Exempt Fund may purchase securities on a
when-issued basis and purchase or sell securities on a delayed delivery basis.
See "More Information About Certain Investments, Practices and Risk
Considerations." Municipal Obligations bear fixed, floating or variable rates of
interest.
The Tax-Exempt Fund will invest all its assets in investment grade
Municipal Obligations, at least 90% of which will be rated investment grade by a
Rating Agency. Investment grade is defined as a rating equivalent to or higher
than BBB- by S&P or Baa3 by Moody's. Up to 10% of total assets may be invested
in unrated Municipal Obligations determined by the sub-investment adviser to be
of equivalent or higher quality.
Like higher rated securities, securities rated in the BBB or Baa categories
are considered to have adequate capacity to pay principal and interest, although
they have a weakened capacity to make principal and interest payments than is
the case with
9
<PAGE> 15
higher rated securities and they may have fewer protective provisions than
higher rated securities, and thus may be adversely affected by severe economic
circumstances and are considered to have some speculative characteristics. See
Appendix A in the SAI for a complete description of ratings. Rating standards
are applied at the time an investment is made. If an instrument is subsequently
downgraded, or if the sub-investment adviser determines that its quality has
declined, the sub-investment adviser will determine whether the investment
should be sold.
The Tax-Exempt Fund may invest more than 25% of the value of its total
assets in Municipal Obligations which are related in such a way that an
economic, business or political development or change affecting one such
security also would affect the other securities; for example, securities the
interest upon which is paid from revenues of similar types of projects, or
securities whose issuers are located in the same state. As a result, the
Tax-Exempt Fund may be subject to greater risk as compared to a fund that does
not follow this practice.
INCOME FUND
The Income Fund invests in the following types of investment grade
securities:
- U.S. dollar denominated long-term debt securities of domestic or foreign
issuers, such as notes, bonds and debentures.
- Obligations of or guaranteed by the United States Government, its
agencies or instrumentalities.
- Mortgage-Backed Securities, including securities issued by U.S.
Government agencies and instrumentalities and non-government entities
such as banks, mortgage lenders, or other financial institutions.
- Asset-Backed Securities.
- U.S. dollar denominated short-term debt securities (money market
instruments) of domestic or foreign issuers.
- Convertible debt securities, convertible preferred stocks and
non-convertible preferred stocks.
In addition, the Income Fund may purchase zero coupon securities and
pay-in-kind bonds; may purchase securities on a when-issued basis and may
purchase or sell securities on a delayed delivery basis; may invest in
repurchase agreements; and may lend portfolio securities. More information about
the Fund's investments is contained under "More Information About Certain
Investments, Practices and Risk Considerations."
At least 90% of the Income Fund's total assets will be invested in
corporate debt, mortgage-backed and asset-backed securities rated investment
grade and U.S. Government securities, including repurchase agreements thereon.
Investment grade is defined as a rating equivalent to or higher than BBB- by S&P
or Baa3 by Moody's for corporate debt and A-2 by S&P or P-2 by Moody's for
commercial paper. No more than 30% of the Income Fund's total assets will
consist of investment grade securities rated below A- or A3. Up to 10% of the
Income Fund's total assets may be invested in unrated securities deemed by the
investment adviser to be of investment grade.
Securities rated in the BBB or equivalent categories by a Rating Agency are
considered to have adequate capacity to pay principal and interest, although
they have a weakened capacity to make principal and interest payments than is
the case with higher rated securities and they may have fewer protective
provisions than higher rated securities and thus may be adversely affected by
severe economic circumstances and are considered to have some speculative
characteristics. Rating standards are applied as of the time an investment is
made. If an instrument is subsequently downgraded, or if the sub-investment
adviser determines that its quality has declined, the sub-investment adviser
will determine whether the investment should be sold. A more complete
description of the rating categories is set forth under Appendix A in the SAI.
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<PAGE> 16
GROWTH FUND
The Growth Fund uses an indexing investment approach, whereby the Fund
invests in a portfolio that nearly replicates the investments in the S&P 500(R)*
Index. The Growth Fund is unlike the typical equity mutual fund, which engages
in "active" investment management based on economic, financial and market
analysis in an attempt to "beat" such market averages with often unpredictable
results. Instead, the Growth Fund seeks to "match" the S&P 500 Index and, thus,
is expected to provide a highly predictable return relative to that benchmark.
The S&P 500 Index emphasizes large-capitalization stocks. The 500 stocks
included in the Index are selected by Standard and Poor's Corporation on a
statistical basis and not on the basis that the stock is believed to be an
attractive investment. The 500 securities, most of which trade on the New York
Stock Exchange, represent approximately 75% of the market value of all U.S.
common stocks. Each stock in the S&P 500 Index is weighted by its market value.
Because of the market-value weighting, the 50 largest companies in the S&P Index
currently account for approximately 50% of the Index.
In order to reduce transaction costs, the Growth Fund will invest in a
representative sample of the stocks included in the S&P 500 Index, selected to
have aggregate investment characteristics similar to those of the S&P 500 Index.
Over time, the correlation between the Growth Fund and the S&P 500 Index is
expected to be 0.95 or greater. A correlation of 1.00 would indicate perfect
correlation.
Although the Growth Fund is designed to replicate the performance of the
S&P 500 Index, the Growth Fund has expenses and costs associated with it, such
as transactional costs, investment advisory fees and custodial costs, that do
not affect the S&P 500 Index. Therefore, performance of the Growth Fund is
expected to be lower than that of the S&P 500 Index.
Although the Growth Fund may invest in money market instruments as cash
reserves, it intends to remain fully exposed to the S&P 500 Index through
investments in stock index futures contracts and options on stock index futures
and stock indices. Cash reserves and aggregate obligations underlying futures
contracts and options are each normally expected to represent less than 5% of
the portfolio assets. See "More Information About Certain Investments." The
Growth Fund will not invest in cash reserves, futures contracts or options as a
part of a temporary defensive strategy, such as lowering the portfolio's
investment in common stock to protect against potential stock market declines.
TOTAL RETURN FUND
The Total Return Fund invests in common and preferred stocks, securities
convertible into common stocks and warrants (Equity Class), bonds and other debt
securities (Income Class) and money market instruments (Money Market Class). The
Total Return Fund may invest in any one or a combination of these classes of
investments, in any proportion.
The Equity Class includes domestic equity securities of all types (other
than adjustable rate preferred stocks, which are included in the Income Class).
The sub-investment adviser seeks to maximize total return within this asset
class by actively allocating assets to industry sectors expected to benefit from
major trends, and to individual stocks that it believes to have superior return
potential. Securities in the Equity Class may include common stocks, fixed-rate
preferred stocks (including convertible preferred stocks), warrants, rights,
securities of closed-end investment companies, and other equity securities
issued by companies of any size.
Permissible Income Class investments include all varieties of domestic
fixed-income securities with maturities greater than one year. The
sub-investment adviser seeks to maximize total returns within the Income Class
by adjusting the Fund's investments in
- ---------------
* The S&P 500(R) is a servicemark of Standard & Poor's
Corporation and has been licensed for use by Jackson National Capital
Management Funds. Jackson National Capital Management Funds' Growth Fund is
not sponsored, endorsed, sold or promoted by Standard & Poor's Corporation and
Standard & Poor's Corporation makes no representation regarding the
advisability of investing in the Growth Fund.
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<PAGE> 17
securities with different credit qualities, maturities, and coupon or dividend
rates, and by seeking to take advantage of yield differentials between
securities. Securities in this class include all investments permitted for the
Income Fund. In addition, the Fund may also invest in lower quality,
high-yielding debt securities (commonly referred to as "junk bonds"). The Fund
currently intends to limit its investments in these securities to securities
rated or determined by the sub-investment adviser to be of equivalent or higher
quality than B- by S&P or B3 by Moody's and to no more than 20% of its assets.
Rating standards are applied as of the time an investment is made. If an
instrument is subsequently downgraded, or if the sub-investment adviser
determines that its quality has declined, the sub-investment adviser will
determine whether the investment should be sold. See "High Yield Bonds" under
"More Information About Certain Investments, Practices and Risk Considerations."
More information about rating categories is set forth under Appendix A in the
SAI.
The Money Market Class includes all types of money market instruments with
remaining maturities of one year or less permitted for the Money Market Fund.
The sub-investment adviser will seek to maximize total return within the Money
Market Class by taking advantage of yield differentials between different
instruments and issuers. See "Money Market Fund."
The Total Return Fund may also purchase and sell options on securities and
stock indices and may purchase and sell financial futures contracts and options
on financial futures contracts, lend portfolio securities, enter into repurchase
agreements, and purchase securities on a when-issued basis and purchase or sell
securities on a delayed delivery basis. See "More Information About Certain
Investments, Practices and Risk Considerations."
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MORE INFORMATION ABOUT CERTAIN INVESTMENTS,
PRACTICES AND RISK CONSIDERATIONS
- --------------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES
The Income and Total Return Funds may invest in various types of
mortgage-backed securities. Mortgage-backed securities may be issued or created
by government entities and non-government entities such as banks, mortgage
lenders, or other financial institutions. The dominant issuers or guarantors of
mortgage-backed securities today are the Government National Mortgage
Association ("GNMA"), the Federal National Mortgage Association ("FNMA") and the
Federal Home Loan Mortgage Corporation ("FHLMC"). Mortgage-backed securities
include mortgage pass-through securities, mortgage-backed bonds, and mortgage
pay-through securities. A mortgage pass-through security, such as a GNMA
Certificate, is a pro-rata interest in a pool of mortgages where a cash flow
generated from the mortgage collateral is passed through to the security holder.
Mortgage-backed bonds are general obligations of their issuers, payable out of
the issuers' general funds and additionally secured by a first lien on a pool of
mortgages. Mortgage pay-through securities, such as Collateralized Mortgage
Obligations ("CMOs"), exhibit characteristics of both pass-throughs and
mortgage-backed bonds. Mortgage-backed securities also include other debt
obligations secured by mortgages on commercial real estate or residential
properties. Other types of mortgage-backed securities will likely be developed
in the future, and a Fund may invest in them, subject to any necessary
prospectus disclosure, if the sub-investment adviser determines that they are
consistent with a Fund's investment objective and policies.
The value of mortgage-backed securities may change due to changes in the
market's perception of issuers. In addition, the mortgage securities market in
general may be adversely affected by regulatory or tax changes. Non-government
mortgage-backed securities may offer a higher yield than those issued
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<PAGE> 18
by government entities but also may be subject to greater risk than government
securities.
Mortgage-backed securities are subject to prepayment (or call) risk. (See
"Investment Risks.") When prepayment occurs, unscheduled or early payments are
made on the underlying mortgages, which may shorten the effective maturities of
these securities and may lower their total returns. The returns of
mortgage-backed securities are dependent upon their actual prepayment
experience.
CMOs are pay-through securities collateralized by mortgages or
mortgage-backed securities. Interest and principal on a CMO are paid, in most
cases, monthly. CMOs are issued in classes and series that have different
maturities and often are retired in sequence. Real Estate Mortgage Investment
Conduits ("REMICs") are CMOs that qualify for special tax treatment under the
Internal Revenue Code ("Code") and invest in mortgages principally secured by
interests in real property and other investments permitted under the Code. No
Fund will invest in residual interests in REMICs.
Stripped mortgage-backed securities are created when the principal and
interest payments of a mortgage-backed security are separated by a U.S.
Government agency or a financial institution. The holder of the "principal-only"
security receives the principal payments made by the underlying mortgage-backed
security, while the holder of the "interest-only" security receives interest
payments from the same underlying security. The Funds currently intend to treat
stripped non-government mortgage-backed securities as illiquid and subject to
the 10% limitation on illiquid securities. The prices of stripped
mortgage-backed securities can be significantly affected by changes in interest
rates. As interest rates fall, prepayment rates tend to increase, which in turn
tends to reduce prices of "interest-only" securities and increase prices of
"principal-only" securities. Rising interest rates can have the opposite effect.
ASSET-BACKED SECURITIES
The Income and Total Return Funds may invest in asset-backed securities,
which represent interests in pools of consumer loans (generally unrelated to
mortgage loans) and most often are structured as pass-through securities.
Interest and principal payments ultimately depend on payment of the underlying
loans by individuals, although the securities may be supported by letters of
credit or other credit enhancements. The value of asset-backed securities may
also depend on the creditworthiness of the servicing agent for the loan pool,
the originator of the loans, or the financial institution providing the credit
enhancement. Asset-backed securities present certain risks that are not
presented by mortgage-backed obligations. Primarily, these obligations do not
have the benefit of the same security interest in the related collateral. For
example, credit card receivables are generally unsecured and the debtors are
entitled to the protection of a number of state and federal consumer credit
laws, many of which give such debtors the right to set off certain amounts owed
on the credit cards, thereby reducing the balance due. Other types of
asset-backed obligations, such as Certificates for Automobile ReceivablesSM, may
entail problems with recovery of the collateral. Therefore, there is the
possibility that the collateral may not, in some cases, be available to support
payments on these obligations.
HIGH YIELD BONDS
The Total Return Fund may invest up to 20% of its assets in fixed income
securities that are in the lower rating categories of Rating Agencies or are
non-rated. These lower-rated and non-rated fixed income securities, commonly
known as "junk bonds," are considered as predominantly speculative with respect
to capacity to pay interest and repay principal in accordance with the terms of
the obligation and generally will involve more credit risk than securities in
the higher rating categories. The market values of such securities tend to
reflect individual corporate developments to a greater extent than do those of
higher rated securities, which are affected primarily by fluctuations in the
general level of interest rates. Such lower rated securities also tend to be
more sensitive to economic conditions than are higher rated securities, and
certain securities may be subject to call risk (see "Investment Risks"). The
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<PAGE> 19
Total Return Fund may have difficulty disposing of certain high yield securities
because they may have a thin trading market. The lack of a liquid secondary
market may have an adverse effect on the market prices of the securities and may
also make it difficult for the Total Return Fund to obtain accurate market
quotations for purposes of valuing these assets.
ZERO-COUPON SECURITIES
The Tax-Exempt, Income and Total Return Funds may invest in zero coupon
securities and pay-in-kind bonds. Zero coupon securities are debt obligations
that do not entitle the holder to any periodic payments of interest prior to
maturity or a specified cash payment date when the securities begin paying
current interest (the "cash payment date") and therefore are issued and traded
at a discount from their face amount or par value. Pay-in-kind bonds pay
interest through the issuance of additional bonds. The market prices of zero
coupon securities are generally more volatile than the market prices of
securities that pay interest periodically and are likely to respond to changes
in interest rates to a greater degree than do securities paying interest
currently having similar maturities and credit quality. Zero coupon and
pay-in-kind bonds carry additional risk in that, unlike bonds that pay interest
throughout the period to maturity, a Fund will realize no cash until the cash
payment date unless a portion of such securities are sold and, if the issuer
defaults, a Fund may realize a complete loss on its investment.
For Funds other than the Tax-Exempt Fund, current federal income tax law
requires the holder of a zero coupon security or of certain pay-in-kind bonds to
accrue income with respect to these securities prior to the receipt of cash
payments. To maintain its qualification as a registered investment company and
avoid liability for federal income and excise taxes, a Fund (other than the
Tax-Exempt Fund with regard to its investments in Municipal Obligations) will be
required to distribute income accrued with respect to these securities and may
be required to dispose of portfolio securities under disadvantageous
circumstances in order to generate cash to satisfy these distribution
requirements.
FUTURES AND OPTIONS
To a limited extent, the Total Return Fund may purchase options on
securities and may sell covered call and secured put options on securities; the
Total Return and Growth Funds also may purchase and sell options on securities
indices. A call option gives the purchaser the right to buy, and the writer the
obligation to sell, the underlying security or other asset at the exercise price
during the option period. A put option gives the purchaser the right to sell,
and the writer the obligation to buy, the underlying security or other asset at
the exercise price during the option period.
To a limited extent, the Growth and Total Return Funds may also purchase
and sell stock index futures contracts and options thereon. Financial futures
contracts are commodity contracts that obligate the long or short holder to take
or make delivery of a specified quantity of a financial instrument, such as a
security, or the cash value of a securities index during a specified future
period at a specified price.
Options and futures contracts may be used for several reasons: to maintain
cash reserves while remaining fully invested, to facilitate trading, to reduce
transaction costs, to seek higher investment returns when a futures contract is
priced more attractively than the underlying security or index, or as an attempt
to hedge against market risks. A Fund may not use futures contracts or options
to leverage its assets or for speculation. Further, a Fund may enter into
futures contracts only to the extent that not more than 5% of a Fund's total
assets are required as initial margin; in addition, a Fund may enter into
futures contracts and options only to the extent that obligations underlying
such contracts or options represent not more than 20% of the Fund's total
assets.
The primary risks associated with the use of futures contracts and options
are: (i) gains and losses on investments in futures and options depend on the
investment adviser's ability to predict correctly the direction of stock prices,
interest rates and other economic factors and there is an imperfect correlation
between the change in market value of the stocks held by a Fund and the prices
of futures
14
<PAGE> 20
contracts and options; (ii) possible lack of a liquid secondary market for a
futures contract and the resulting inability to close a futures position when
desired; (iii) loss from investing in futures is not limited to the amount
invested in the contract; and (iv) an option purchased by a Fund may expire
worthless, in which case the Fund would lose the premium paid.
The risk of imperfect correlation will be minimized by investing only in
those contracts whose behavior is expected to resemble that of the Fund's
underlying securities. The risk that a Fund will be unable to close out a
futures position will be minimized by entering into such transactions on a
national exchange with an active and liquid secondary market.
FOREIGN SECURITIES
Although the Money Market, Income and Total Return Funds will invest
primarily in securities of domestic entities, such Funds have the discretion to
invest a portion of their assets in foreign securities, including foreign
securities traded principally in securities markets outside the United States,
but only to the extent that the foreign securities are denominated in U.S.
dollars. Accordingly, the Funds are not subject to currency risks.
Foreign securities may be subject to risks not applicable to domestic
securities. Foreign securities may be subject to government taxes that reduce
their attractiveness. Other risks of investing in such securities include
political or economic instability in the country involved and the difficulty of
predicting international trade patterns. The prices of such securities may be
more volatile than those of domestic securities. In addition, there may be less
publicly available information about foreign issuers than about domestic
issuers. Many foreign issuers are not subject to uniform accounting, auditing
and financial reporting standards comparable to those applicable to domestic
issuers. There is generally less regulation of stock exchanges, brokers, banks
and listed companies abroad than in the United States. With respect to certain
foreign countries, there is a possibility of expropriation or diplomatic
developments that could affect investment in these countries. To the extent the
Funds purchase foreign securities, consideration will be given to their
marketability and to regulations imposed by the domicile country of the foreign
issuer.
PORTFOLIO TURNOVER AND BORROWINGS
Although the Funds will not normally engage in the trading of securities
for the purpose of realizing short-term profits, the Funds will adjust their
portfolios as considered advisable in view of prevailing or anticipated market
conditions. Portfolio turnover rates for each Fund will vary. Higher portfolio
turnover may result in higher transactions costs for a Fund and may result in
the realization of greater net short-term capital gains. For federal income tax
purposes, less than 30% of the annual gross income of a Fund may be derived from
the sale or disposition of securities and certain other investments held by a
Fund for less than three months.
Each Fund may borrow money from banks only for temporary or emergency
purposes in an aggregate amount not exceeding one-third of the value of its
total assets.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
The Funds, other than the Growth Fund, may purchase newly-issued securities
appropriate for its portfolio on a "when-issued" basis and may purchase or sell
securities appropriate for its portfolio on a "delayed delivery" basis. These
transactions involve a commitment by the portfolio to purchase or sell
particular securities with payment and delivery to take place at a future date.
These transactions allow the Funds to lock in an attractive purchase price or
yield on a security a Fund intends to purchase or an attractive sale price on a
security a Fund intends to sell. Normally, settlement occurs within one month of
the purchase or sale. During the period between purchase or sale and settlement,
no payment is made or received by the Fund and, for delayed delivery purchases,
no interest accrues to the Fund. However, during this period the market value of
the security may increase or decrease so that the market value of the security
at the time of payment may be greater
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<PAGE> 21
or less than the purchase price. Because the Fund is required to set aside cash
or liquid high grade debt securities at least equal in value to its commitments
to purchase when-issued or delayed delivery securities, the sub-investment
adviser's ability to manage the portfolio assets is affected by such
commitments. The Funds will only make commitments to purchase securities on a
when-issued or delayed delivery basis with the intention of actually acquiring
the securities, but reserves the right to sell them before the settlement date
if deemed advisable.
LENDING PORTFOLIO SECURITIES
The Funds, other than the Tax-Exempt Fund, may from time to time lend
securities. Securities may be lent to brokers, dealers and financial
institutions, provided that: (1) the loan is continuously secured by collateral
consisting of U.S. Government securities, cash or cash equivalents adjusted
daily to have a market value at least equal to the current market value of the
securities loaned plus accrued interest; (2) the Fund may at any time call the
loan and regain the securities loaned; and (3) the sub-investment adviser has
reviewed the creditworthiness of the borrower and has found it satisfactory. The
Fund will receive from the borrower amounts equal to the interest paid on the
securities loaned, and will also earn income for having made the loan. Any cash
collateral will be invested in short-term securities, the income from which will
increase the return to the portfolio. The risks associated with lending
portfolio securities are similar to those of entering into repurchase
agreements. See "Repurchase Agreements."
REPURCHASE AGREEMENTS
The Funds, other than the Tax-Exempt Fund, may invest in or enter into
repurchase agreements. Repurchase agreements are instruments under which the
Fund acquires ownership of a security and the seller, who usually is a
broker-dealer or a bank, agrees to repurchase the security at a mutually agreed
upon date and price. A repurchase agreement may be considered a loan
collateralized by securities. The repurchase agreement serves to fix the yield
of the security during the Fund's holding period. The maturity of a security
subject to repurchase may exceed one year. The value of the security subject to
repurchase is marked to market daily. If the value of the underlying security
declines, the seller would be required to provide the Fund with cash or
additional securities so that the aggregate value of the underlying collateral
is at least equal to the repurchase price.
The Funds currently intend to enter into repurchase agreements only with
member banks of the Federal Reserve System, or with registered broker-dealers.
In all cases, the sub-investment adviser must be satisfied with the
creditworthiness of the seller before entering into a repurchase agreement. In
the event of the bankruptcy or other default of the seller of a repurchase
agreement, the Fund could incur expenses and delays enforcing its rights under
the agreement and experience a decline in the value of the underlying securities
and loss of income.
Repurchase agreements maturing in more than 7 days are considered illiquid,
and together with any other securities that are considered to be illiquid, will
not exceed 10% of the net assets of a Fund.
- --------------------------------------------------------------------------------
PERFORMANCE
- --------------------------------------------------------------------------------
A Fund's performance may be quoted in advertising in terms of yield or
total return. Both types of performance are based on historical results and are
not intended to indicate future performance. Yields are calculated according to
accounting methods that are standardized. Because yield accounting methods
differ from the methods used for financial reporting and tax accounting
purposes, the Fund's yield may not equal its distribution rate, the income paid
to your account, or the income reported in the Fund's financial statements.
Yield is a way of showing the rate of income the Fund earns on its
investments as a percentage of its
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<PAGE> 22
share price. From time to time, the Funds other than the Growth Fund may
advertise yield figures. To calculate yield, a Fund other than the Money Market
Fund takes the net investment income per share earned from its portfolio of
investments for a specific one month or 30-day period and expresses the result
as an annualized percentage rate based on the Fund's maximum offering price at
the end of the period. Yield is an annualized percentage, which means that it is
assumed that a Fund generates the same level of investment income over a one
year period.
The Money Market Fund calculates yield based on the net investment income
per share earned for a specific 7-day period and expresses the result as an
annualized percentage rate based on the Fund's offering price, which is not
subject to any sales charge, at the beginning of the period (expected to remain
stable at $1.00). In addition, the Money Market fund may advertise an effective
yield, which is calculated similarly, but the net investment earned is assumed
to be compounded weekly when annualized. The effective yield will be slightly
higher.
Total returns are based on the overall dollar or percentage change in value
of a hypothetical investment in a Fund and assume all of the Fund's dividends
and capital gain distributions are reinvested. A cumulative total return
reflects the Fund's performance over a stated period of time. An average annual
total return reflects the hypothetical annually compounded return that would
have produced the same cumulative total return if the Fund's performance had
been constant over the entire period. Because average annual returns tend to
smooth out variations in the Fund's returns, you should recognize that they are
not the same as actual year-by-year results.
The Tax-Exempt Fund may also quote tax equivalent yields, which show the
taxable yields an investor would have to earn before taxes to equal the Funds'
tax-exempt yields. A tax equivalent yield is calculated by dividing the Fund's
tax-exempt yield by the result of one minus a stated federal tax rate.
The performance of the Funds may be compared to the performance of other
mutual funds or mutual fund indices with similar objectives and policies as
reported by Lipper Analytical Services, Inc. ("Lipper"), CDA Investment
Technologies, Inc. ("CDA") or Donoghue's Money Fund Report. Lipper and CDA
performance calculations are based upon changes in net asset value with all
dividends reinvested and do not include the effect of any sales charges. The
Funds' performance may also be compared to that of the Consumer Price Index or
various unmanaged stock and bond indices including, but not limited to, Salomon
Brothers High Grade Corporate Bond Index, the Lehman Brothers Government/
Corporate Bond Index, Lehman Brothers Municipal Bond Index, Lehman Brothers
Aggregate Bond Index, the Salomon Brothers Long-Term High Yield Index, the
Merrill Lynch Government/Corporate Master Index and the Standard & Poor's 500
Composite Stock Price Index.
From time to time, a Fund also may quote information from publications
including, but not limited to, the following: Morningstar, Inc., The Wall Street
Journal, Money Magazine, Forbes, Barron's, The New York Times, USA Today,
Institutional Investor and Registered Representative. Also, investors may want
to compare the historical returns of various investments, performance indices of
those investments or economic indicators, including but not limited to stocks,
bonds, certificates of deposit and other bank products, money market funds and
U.S. Treasury obligations. Certain of these alternative investments may offer
fixed rates of return and guaranteed principal, and may be insured. Economic
indicators may include, without limitation, indicators of market rate trends and
cost of funds, such as Federal Home Loan Bank Board 11th District Cost of Funds
Index (COFI).
Each Fund's shares are sold at net asset value plus a maximum sales charge
of 4.75% of the offering price (0% for the Money Market Fund). While the maximum
sales charge is normally reflected in the Fund's performance figures, certain
total return calculations may not include such charge and those results would be
reduced if it were included. Each Fund's returns will fluctuate. Shares of a
Fund are redeemable by an investor at the then current net asset value, which
may be more or less than original cost. Additional information concerning each
Fund's performance appears in the SAI, and in the Fund's Annual Report to
Shareholders which may be obtained, without charge, by writing or calling the
Fund.
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<PAGE> 23
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUNDS
- --------------------------------------------------------------------------------
The officers of the Fund, along with the investment adviser and
sub-investment adviser, manage the day-to-day operations of each Fund, subject
to the supervision of the Board of Trustees. The Board sets broad policies for
each Fund and chooses the Fund's officers and the companies that provide the
Fund with services.
Jackson National Financial Services, Inc. ("JNFSI"), 5901 Executive Drive,
Lansing, Michigan 48911, is the investment adviser of each Fund and provides
each Fund with professional investment supervision and management. JNFSI is a
wholly-owned subsidiary of Jackson National Life Insurance Company, which is in
turn wholly-owned by Prudential Corporation plc, the largest life insurance
company in the United Kingdom.
JNFSI has entered into a sub-investment advisory agreement with PPM
America, Inc. ("PPM America"), an affiliate of JNFSI, to provide investment
advice for the assets of each of the Funds. PPM America, 225 West Wacker Drive,
Chicago, Illinois 60606, is a wholly-owned subsidiary of Prudential Portfolio
Managers Ltd., ("PPM Ltd.") an investment management company engaged in global
money management, which is in turn wholly-owned by Prudential Corporation plc.
PPM Ltd. and its subsidiaries manages over $120 billion in various currencies
and markets.
Since November of 1992, JNFSI has served as investment adviser, and PPM
America has served as sub-investment adviser, to the Fund. PPM America currently
manages over $24 billion of Jackson National Life Insurance Company assets.
Additionally, PPM America manages assets of over $4.2 billion for other
affiliated companies and over $900 million for non-affiliated entities.
For managing its investments and business affairs, the Management Agreement
provides for the payment by the Funds to JNFSI of an investment management fee,
payable monthly, based on the following annual percentage of average daily net
assets in each Fund: Money Market Fund 0.50%; Tax Exempt Fund 0.50%; Income Fund
0.60%; Growth Fund 0.25%; and Total Return Fund 0.70%.
JNFSI pays PPM America a sub-investment advisory fee, payable monthly,
based on the following annual percentages of average daily net assets of each
Fund: Money Market Fund 0.035%; Tax-Exempt Fund 0.035%; Income Fund 0.035%;
Growth Fund 0.035%; and Total Return Fund 0.035%.
In its capacity as sub-investment adviser, PPM America supervises and
manages the investment portfolios of the Funds and directs the purchase and sale
of its investment securities. PPM America utilizes teams of investment
professionals acting together to manage the assets of the Funds. The teams meet
regularly to review portfolio holdings and to discuss purchase and sale
activity. The teams adjust holdings in the portfolios as they deem appropriate
in the pursuit of the Funds' investment objectives.
Investors Fiduciary Trust Company ("IFTC"), 127 West 10th Street, P.O. Box
419102, Kansas City, Missouri 64141-6102, serves as the Fund's Transfer and
Dividend Paying Agent ("Transfer Agent") and Custodian. IFTC maintains the
Fund's shareholder records and assets and performs certain accounting services
for the Fund.
JNFSI acts as agent of the Fund in the sale of its shares. JNFSI receives
no compensation from the Fund as principal underwriter and pays all expenses of
distribution of the Fund's shares under the underwriting agreement not otherwise
paid by dealers or other financial services firms. As indicated under "How to
Buy Shares," JNFSI retains the sales charge upon the purchase of shares and pays
or allows concessions or discounts to firms for the sale of the Fund's shares.
Effective June 1, 1994, JNFSI provides information and administrative
services ("administrative services") for shareholders of the Fund pursuant to an
Administrative Services Agreement. Such administrative services may include, but
are not limited to, maintaining shareholder accounts and records,
18
<PAGE> 24
answering routine inquiries regarding the Fund and
its features, assisting shareholders with shareholder transactions, processing
purchase and redemption transactions, assisting shareholders in changing
dividend and investment options, account designations and addresses, and such
other services as the Fund may reasonably request. JNFSI may enter into related
agreements with various financial service firms, such as broker-dealers or
banks, for the provisions of such administrative services for their clients or
customers who are shareholders of the Fund. For services under the
Administrative Services Agreement, each Portfolio other than the Money Market
Fund pays JNFSI a fee, payable monthly at the annual rate of 0.25% of average
daily net assets of the Portfolio. Pursuant to its agreements with financial
service firms, JNFSI will pay such firms, for providing such administrative
services to their customers, up to 0.25% per annum of average daily net assets
of those accounts maintained and serviced for each portfolio other than the
Money Market Fund.
Other expenses paid by the Funds include: the investment management fee;
transaction costs; interest; taxes; legal, accounting, audit, transfer agent and
custodial fees; and certain other operational expenses.
- --------------------------------------------------------------------------------
HOW TO BUY SHARES
- --------------------------------------------------------------------------------
INITIAL INVESTMENT IN THE FUNDS
Shares are offered continuously for sale by JNFSI and are available through
authorized investment dealers. Your representative will help you fill out the
application contained in this Prospectus.
Initial investments in the Funds may be made by mailing a completed
application, together with a check for the total purchase price, to JNFSI at its
Home Office, P.O. Box 25127, Lansing, Michigan 48909-9979.
Initial investments may also be made by giving your completed application
and check to an authorized investment dealer who will forward them to the Fund's
Transfer Agent, P.O. Box 419102, Kansas City, Missouri 64141-6102. The dealer is
responsible for transmitting the order promptly to the Transfer Agent in order
to permit the investor to obtain the current price.
Checks must be drawn on a U.S. bank or its foreign branch or subsidiary and
must be payable in U.S. dollars.
Initial investments may also be made by wiring Federal Funds to Investors
Fiduciary Trust Company; Routing #1010-0362-1; Deposit Account: Bank Account
751-4085; From: [Shareholder Name] For purchase of: [Fund Name]. In order for a
wire investment to be processed on the same day, (1) the investor must notify
the Transfer Agent of his or her intention to make such investment by 12 noon
Eastern time on the day of his or her investment by calling the Transfer Agent
at 1-800-888-3863; and (2) the wire must be received by 4:00 p.m. Eastern time
that same day.
The minimum initial investment in each Fund is $1,000. Different minimums
may apply to qualified plans. The Fund may also reduce the minimum for certain
payroll deduction plans. If you have questions or need additional forms, call
the Transfer Agent at 1-800-888-3863.
The Funds reserve the right to withdraw all or any part of the offering
made by this Prospectus and to reject purchase orders. Also, from time to time,
each Fund may temporarily suspend the offering of its shares to new investors.
During the period of such suspension, persons who are already shareholders of a
Fund normally are permitted to continue to purchase additional shares and to
have dividends reinvested.
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<PAGE> 25
SUBSEQUENT PURCHASES
You may make subsequent purchases in a Fund by mailing your check directly
to the Transfer Agent at Jackson National Capital Management Funds c/o IFTC,
P.O. Box 419642, Kansas City, Missouri 64141-6642. Please make your check
payable to Jackson National Capital Management Funds. Indicate your account
number on the check and indicate into which Fund the money is to be invested. If
payment is wired in Federal funds, the payment should be directed to Investors
Fiduciary Trust Company; Routing #1010-0362-1: Deposit Account: Bank Account
751-4085; From: [Shareholder/Account Name and Account Number]; For purchase of:
[Fund Name]. The minimum subsequent investment in each Fund is $50.
OFFERING PRICE
Shares are sold at the offering price, which includes the net asset value
per share next computed after an order in proper form is received and accepted
by JNFSI or the Transfer Agent, plus the applicable sales charge. For Funds
other than the Money Market Fund, the order must be received by JNFSI or the
Transfer Agent prior to the calculation of the net asset value in order to
receive that day's price. Because the Money Market Fund invests in instruments
that normally require immediate payment in Federal funds (monies credited to a
bank's account with a Federal Reserve Bank), an order to purchase shares of the
Money Market Fund will not be effective until the Money Market Fund receives
payment in Federal funds. Checks drawn on a member bank of the Federal Reserve
System are normally converted into Federal funds within two business days
following receipt at the Transfer Agent.
On sales of shares other than the Money Market Fund, JNFSI, as principal
underwriter, retains the sales charge, as set forth in the table below, from
which it allows discounts or concessions from the applicable public offering
price to investment dealers, which discounts or concessions are uniform for all
dealers in the United States and its territories. The normal discount allowed to
dealers is set forth in the table. Upon notice to all dealers with whom it has
sales agreements, JNFSI may reallow up to the full applicable sales charge, as
shown in the table, during periods and for transactions specified in such notice
and such reallowances may be based upon attainment of minimum sales levels.
During periods when 90% or more of the sales charge is reallowed, such dealers
may be deemed to be underwriters as that term is defined in the Securities Act
of 1933.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SALES CHARGE FOR FUNDS
OTHER THAN THE MONEY MARKET FUND
--------------------------------------------------
AS A ALLOWED TO
AS A PERCENTAGE OF DEALERS AS A
PERCENTAGE OF NET ASSET PERCENTAGE OF
AMOUNT OF PURCHASE OFFERING PRICE VALUE* OFFERING PRICE*
- ------------------------------------------------------- -------------- ------------- ---------------
<S> <C> <C> <C>
Less than $100,000..................................... 4.75% 4.99% 4.00%
$100,000 but less than $200,000........................ 4.00 4.17 3.37
$200,000 but less than $500,000........................ 3.50 3.63 2.95
$500,000 but less than $1,000,000...................... 2.50 2.56 2.11
$1,000,000 but less than $5,000,000.................... 0.25 0.25 0.21
$5,000,000 and over.................................... 0.10 0.10 0.08
</TABLE>
- --------------------------------------------------------------------------------
* Rounded to the nearest one-hundredth percent.
No sales charge is imposed on sales of shares of the Money Market Fund.
Reductions in the sales charge are allowed for certain specific groups discussed
under "Reduced Sales Charges."
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<PAGE> 26
Banks and other financial services firms may provide administrative
services related to order placement and payment to facilitate transactions in
shares of a Fund for their clients, and JNFSI may pay them a transaction fee up
to the level of the discount allowable to dealers as described above. Banks are
currently prohibited under the Glass-Steagall Act from providing certain
underwriting or distribution services. Banks or other financial services firms
may be subject to various state laws regarding the services described above and
may be required to register as dealers pursuant to state law. If banking firms
were prohibited from acting in any capacity or providing any of the described
services, management would consider what action, if any, would be appropriate.
Management does not believe that termination of a relationship with a bank would
result in any material adverse consequences to a Fund.
In addition to the discounts from the applicable public offering price
described above, JNFSI may, from time to time, pay or allow additional discounts
or promotional incentives, in the form of cash or other compensation, to firms
that sell shares of the Funds. In some instances, such discounts or other
incentives may be offered only to certain firms that sell or are expected to
sell during specified time periods certain minimum amounts of shares of the
Funds or other funds underwritten by JNFSI.
NET ASSET VALUE
The term "net asset value," or NAV, refers to the worth of one share. Each
Fund has a separate NAV, which is computed by adding the value of all its
investments, plus cash and other assets, deducting liabilities, and then
dividing the result by the number of shares outstanding. The price of one share
(the offering price) represents the share's NAV plus the applicable sales
charge. The Funds are open for business each day the New York Stock Exchange is
open (business day). The Transfer Agent calculates each Fund's NAV (and offering
price) as of the earlier of the close of trading on the New York Stock Exchange
or 4:00 p.m. Eastern time on each business day. The Funds reserve the right to
determine the NAV more frequently than once a day if deemed desirable.
For the Money Market Fund, for purposes of calculating the NAV per share,
securities are valued by the "amortized cost" method of valuation in accordance
with Rule 2a-7 under the 1940 Act, which does not take into account unrealized
gains or losses. This involves valuing an instrument at its cost and thereafter
assuming a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market value of
the instrument. While this method provides certainty in valuation, it may result
in periods during which value, as determined by amortized cost, is higher or
lower than the price the Fund would receive if it sold the instrument.
As a condition of using amortized cost, the Money Market Fund complies with
the maturity, diversification and quality requirements of Rule 2a-7 and the
Board of Trustees has established procedures reasonably designed, taking into
account current market conditions, to stabilize the NAV per share for the
purposes of sales and redemptions at $1.00. These procedures include periodic
review, as the Trustees deem appropriate and at such intervals as are reasonable
in light of current market conditions, of the relationship between the amortized
cost value per share and a net asset value per share based upon available
indications of market value. In such a review, market based values are obtained
by using actual quotations provided by market makers, estimates of market value
or values obtained from yield data relating to classes of money market
instruments published by reputable sources at the mean between the bid and asked
prices for the instruments.
In the event of deviation of 1/2 of 1% or more between the Fund's net asset
value per share calculated by reference to market-based values and the Fund's
$1.00 per share NAV, the Trustees will promptly consider what action, if any,
should be taken. They will also take such action as they deem appropriate to
eliminate or to reduce, to the extent reasonably practicable, any material
dilution or other unfair results which might arise from differences between the
two. Such action may include
21
<PAGE> 27
redeeming shares in kind, selling instruments prior to
maturity to realize capital gains or losses or to shorten average maturity,
withholding dividends, paying distributions from capital or capital gains, or
utilizing a net asset value per share based upon available market values.
For other than the Money Market Fund, portfolio securities and other assets
generally are valued on the basis of market quotations or, if quotations are not
readily available, by a method that the Board of Trustees believes accurately
reflects fair value. Fixed income securities with remaining maturities of 60
days or less are valued on the basis of amortized cost. Other fixed income
securities are valued by using market quotations, or independent pricing
services that use prices provided by market makers or estimates of market values
obtained from yield data relating to instruments or securities with similar
characteristics. Foreign securities are valued on the basis of quotations from
the primary market in which they are traded. Otherwise, securities are valued in
good faith under the direction of the Board of Trustees.
REDUCED SALES CHARGES
CUMULATIVE DISCOUNT. You may purchase each Fund's shares at the rate
applicable to the discount bracket obtained by combining concurrent investments
in shares of any of the Funds other than the Money Market Fund.
LETTER OF INTENT. Reduced sales charges also apply to the aggregate amount
of purchases of shares of the Funds, other than the Money Market Fund, made by
any purchaser within a 13-month period under a written Letter of Intent
("Letter") provided by JNFSI. The Letter, which imposes no obligation to
purchase or sell additional shares, provides for a price adjustment depending
upon the actual amount purchased within such period. The Letter provides that
the first purchase under the Letter must be at least 5% of the amount of the
intended purchase, and that 5% of the amount of the intended purchase normally
will be held in escrow in the form of shares pending completion of the intended
purchase. If the total investments under the Letter are less than the intended
amount and thereby qualify only for a higher sales charge than actually paid,
the appropriate number of escrowed shares are redeemed and the proceeds used
toward satisfaction of the obligation to pay the increased sales charge unless
you pay the difference within 20 days after being requested. The Letter for an
employer sponsored employee benefit plan may have special provisions regarding
payment of any increased sales charge resulting from a failure to complete the
intended purchase under the Letter.
A shareholder may include the value (at the maximum offering price) of all
shares of the Funds, other than the Money Market Fund, held of record as of the
initial purchase date under the Letter as an "accumulation credit" toward the
completion of the Letter, but no price adjustment will be made on such shares.
RIGHT OF ACCUMULATION. Shares of a Fund may also be purchased at the rate
applicable to the discount bracket attained by adding to the cost of shares of a
Fund being purchased, the value of all shares of the Funds other than the Money
Market Fund (computed at the maximum offering price at the time of the purchase
for which the discount is applicable) already owned by the investor.
AVAILABILITY OF QUANTITY DISCOUNTS. An investor or the investor's dealer or
other financial services firm must notify JNFSI whenever a quantity discount or
reduced sales charge is applicable to a purchase. Upon such notification, the
investor will receive the lowest applicable sales charge. Quantity discounts
described above may be modified or terminated at any time.
The sales charge scale is applicable to purchases made at one time by any
"purchaser" which includes: an individual; or an individual, his or her spouse
and children under the age of 21; or a trustee or other fiduciary of a single
trust estate or single fiduciary account; or an organization exempt from federal
income tax under Section 501(c)(3) or (13) of the Code; or a pension,
profit-sharing or other employee benefit plan whether or not qualified under
Section 401 of the Code; or other organized group of persons whether
incorporated or not, provided the organization has been in existence for at
22
<PAGE> 28
least six months and has some purpose other than the purchase of redeemable
securities of a registered investment company at a discount. In order to qualify
for a lower sales charge, all orders from an organized group will have to be
placed through a single investment dealer or other firm and identified as
originating from a qualifying purchaser.
Purchases at Net Asset Value. Shares may be sold to officers, trustees,
directors, employees (including retirees) and sales representatives of the Fund,
its investment adviser, or sub-investment adviser, its principal underwriter or
certain affiliated companies, for themselves or their spouses, children or
parents, or to any trust, pension, profit-sharing or other benefit plan for only
such persons at net asset value and in any amount. Shares may be sold at net
asset value in any amount to registered representatives and employees of
broker-dealers having selling group agreements with JNFSI and officers,
directors and employees of service agents of the Fund, for themselves or their
spouses or dependent children, or to any trust or pension, profit-sharing or
other benefit plan for only such persons. Shares may be sold at net asset value
in any amount to selected employees (including their spouses and dependent
children) of banks and other financial services firms that provide
administrative services related to order placement and payment to facilitate
transactions in shares of the Fund for their clients pursuant to an agreement
with JNFSI or one of its affiliates. Only those employees of such banks and
other firms who as part of their usual duties provide services related to
transactions in Fund shares may purchase Fund shares at net asset value
hereunder. The Fund may also issue shares at net asset value in connection with
the acquisition of the assets of or merger or consolidation with another
investment company, or to shareholders in connection with the investment or
reinvestment of income and capital gain dividends.
- --------------------------------------------------------------------------------
SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
CHOOSING A DISTRIBUTION OPTION
When you fill out your account application, you can choose from the
following distribution options:
A. The Share Option reinvests your income dividends and capital gain
distributions in additional shares. This option will be assigned
automatically if you make no choice on your account application. Income
dividends and capital gain distributions will be reinvested at the NAV
as of the record date for the distribution.
B. The Income-Earned Option reinvests your capital gain distributions and
pays your income dividends in cash.
C. With the Cash Option, you receive both income dividends and capital gain
distributions in cash. Cash distributions will be sent to you by check
within 5 business days of the payable date, which may be more than seven
days after the reinvestment date.
If you select Option B or C and the U.S. Postal Service cannot deliver
your checks, or if your checks remain uncashed for six months, your
distribution checks may be reinvested in your account at the
then-current NAV and your election will be converted to the Share
Option.
D. You may choose the Directed Dividends Option to have all distributions
from a Fund automatically invested into another Fund, provided that the
minimum investment amounts have been satisfied. Note that certain
restrictions may apply.
EXCHANGE PRIVILEGE
Subject to the following limitations, shares of the Funds may be exchanged
for each other at their
23
<PAGE> 29
relative net asset values. Shares of the Money
Market Fund that were acquired by purchase (not including shares acquired by
dividend reinvestment) are subject to the applicable sales charge on exchange.
Shares purchased by check may not be exchanged until they have been owned for at
least 15 days.
The total value of shares being exchanged must at least equal the minimum
investment requirement of the Fund into which they are being exchanged.
Exchanges are made based on relative dollar values of the shares involved in the
exchange. There is no service fee for an exchange. Exchanges will be effected by
redemption of shares of the Fund held and purchase of shares of the other Fund.
For federal income tax purposes, any such exchange constitutes a sale upon which
a gain or loss may be realized, depending upon whether the value of the shares
being exchanged is more or less than your adjusted cost basis. Exchanges may be
accomplished by a written request with all registered owners' signatures to
Jackson National Capital Management Funds c/o IFTC, Attention: Exchange
Department, P.O. Box 419102, Kansas City, Missouri 64141-6102, or by telephone,
unless on the account application this privilege is refused or is later revoked.
So long as the telephone exchange privilege is in force, the Transfer Agent will
honor requests by telephone at 1-800-888-3863. The exchange privilege is not a
right and may be suspended, terminated or modified at any time upon 60 days'
written notice to shareholders.
TELEPHONE INSTRUCTIONS. The Transfer Agent employs procedures designed to
confirm that instructions communicated by telephone are genuine, including
requiring certain identifying information prior to acting upon instructions,
recording all telephone instructions and sending written confirmation of
telephone instructions. To the extent such procedures are reasonably designed to
prevent unauthorized or fraudulent instructions neither the Transfer Agent nor
the Fund would be liable for any losses from unauthorized or fraudulent
instructions.
During periods when it is difficult to contact the Transfer Agent by
telephone, it may be difficult to implement telephone instructions.
RESTRICTIONS. Although the exchange privilege is an important benefit, Fund
performance and shareholders can be hurt by excessive trading. To protect the
interests of shareholders, the Funds reserve the right to temporarily or
permanently terminate the exchange privilege for any person who makes more than
one exchange out of a Fund per calendar quarter. Accounts under common ownership
or control, including accounts with the same taxpayer identification number,
will be aggregated for purposes of the exchange limit. In addition, the Funds
reserve the right to refuse exchange purchases by any person or group if, in the
sub-investment adviser's judgment, a Fund would be unable to invest effectively
in accordance with its investment objective and policies, or would otherwise
potentially be adversely affected. Your exchanges may be restricted or refused
if the Fund receives or anticipates simultaneous orders affecting significant
portions of the Fund's assets. In particular, a pattern of exchanges that
coincide with a "market timing" strategy may be disruptive to the Fund. Although
the Fund will attempt to give you prior notice whenever it is reasonably able to
do so, it may impose these restrictions at any time.
SYSTEMATIC EXCHANGE PRIVILEGE
The owner of $10,000 or more of the shares of a Fund may authorize the
monthly exchange of a specified amount ($100 minimum) of such shares for shares
of another Fund. This privilege may be selected by contacting the Transfer Agent
for appropriate forms. If selected, exchanges will be made automatically until
the privilege is terminated by you or the Fund. Exchanges are subject to the
terms and conditions described under "Exchange Privilege" above, except that
there is no minimum investment requirement for the Fund acquired on exchange.
AUTOMATIC MONTHLY INVESTMENT PLAN
You may automatically purchase additional shares of a Fund through the
Automatic Monthly Investment Plan. The initial purchase of a Fund's shares may
also be made through the Plan, provided that the minimum purchase requirements
will be met within a one-year period by the initial investment plus the
annualized automatic monthly
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<PAGE> 30
investment plan amount. With the Automatic Monthly Investment Plan, monthly
investments (minimum $50) are made automatically from the shareholder's account
at a bank, savings and loan or credit union into the shareholder's Fund account.
By enrolling in the Automatic Monthly Investment Plan, the shareholder
authorizes the Fund and its agents to either draw checks or initiate Automated
Clearing House debits against the designated account at a bank or other
financial institution. Such account must have check or draft writing privileges.
This privilege may be selected by completing the appropriate section on the
Account Application or by contacting the Transfer Agent for appropriate forms.
If the shareholder also has expedited wire transfer redemption privileges with
the Fund account, the same bank, savings and loan or credit union account must
be designated for both the Automatic Monthly Investment Plan and the wire
redemption programs. You may terminate your Plan by sending written notice to
the Transfer Agent. Termination by a shareholder will become effective within
thirty days after the Transfer Agent has received the request. A Fund may
immediately terminate a shareholders' Plan in the event that any item is unpaid
by the shareholder's financial institution. Fund shares purchased through the
Automatic Monthly Investment Plan must be owned for 15 days before they may be
redeemed or exchanged. The Funds may terminate or modify this privilege at any
time.
AUTOMATIC WITHDRAWAL PLAN
The owner of $5,000 or more of a Fund's shares at the offering price (net
asset value plus the sales charge) may provide for the payment from the owner's
account of any requested dollar amount of $100 or more to be paid to the owner
or a designated payee monthly, quarterly, semiannually or annually. Shares are
redeemed on the 5th business day from the end of the month so that the payee
will receive payment approximately the first week of the following month. Any
income and capital gain dividends will be automatically reinvested at net asset
value on the reinvestment date. A sufficient number of full and fractional
shares will be redeemed to make the designated payment. Depending upon the size
of the payments requested and fluctuations in the net asset value of the shares
redeemed, redemptions for the purpose of making such payments may reduce or even
exhaust the account.
The purchase of shares while participating in an automatic withdrawal plan
will ordinarily be disadvantageous to the investor because the investor will be
paying a sales charge on the purchase of shares at the same time that the
investor is redeeming shares upon which a sales charge may have already been
paid. The Funds reserve the right to amend the automatic withdrawal plan on
thirty days' notice and to terminate this privilege at any time. The plan may be
changed or terminated at any time by you in writing, with all registered owners'
signatures guaranteed.
REDEMPTION REINSTATEMENT PRIVILEGE
If you have redeemed shares of a Fund, you may reinstate up to the full
amount redeemed at net asset value at the time of the reinstatement in shares of
that Fund under this privilege. Purchases through the reinstatement privilege
are subject to the minimum investment requirements applicable to the shares
being purchased. Investors must notify the Fund in writing of their intention to
rely on the reinstatement privilege at the time the money is sent in. The
reinstatement privilege can be used only once as to any specific shares and
reinstatement must be effected within 30 days of the redemption. If a loss is
realized on the redemption of shares of a Fund, the reinstatement may be subject
to the "wash sale" rules if made within 30 days of the redemption, resulting in
a postponement of the recognition of such loss for federal income tax purposes.
The reinstatement privilege may be terminated or modified at any time.
TAX-SAVING RETIREMENT PLANS
JNFSI can set up your account in the Funds under one of several
tax-sheltered plans. These plans let you invest for retirement and shelter your
investment income from current
25
<PAGE> 31
taxes. Minimums may differ from those listed under "How to Buy Shares."
- Individual Retirement Accounts (IRAs): retirement plans that allow anyone
under 70 1/2 years of age with earned income to contribute up to $2,000
per tax year. You may make additional contributions of up to $250 per
year, if a spousal IRA is used.
- Rollover IRAs: tax-deferred retirement plans that may retain the special
tax advantages of lump sum distributions from qualified retirement plans.
- Simplified Employee Pension Plans SEP-IRAs: designed to provide those
with self-employed income (and any eligible employees) with many of the
same advantages as a Keogh, but with fewer administrative requirements.
- Keogh or Corporate Profit-Sharing and Money-Purchase Plans: open to
self-employed people and their partners, or to corporations, to benefit
themselves and their employees.
- 403(b) Custodial Accounts: available to employees of most non-profit
organizations and public schools.
- 401(k) Program: open to corporations of all sizes. The program allows
participants to contribute a percentage of their wages on a tax-deferred
basis. (The maximum amount that may be contributed, which is adjusted
annually to reflect changes in the cost of living, is currently $9,240.)
Brochures describing the above plans and materials for establishing them
are available from IFTC upon request. Call 1-800-888-3863 for complete
information kits. The brochures for plans trusteed by IFTC describe the current
fees payable to IFTC for its services as trustee. Certain "distributions" from
qualified retirement plans and 403(b)(7) custodial accounts may be subject to a
20% withholding requirement. See "Distributions and Taxes." Investors should
consult with their own tax advisers before establishing a retirement plan.
STATEMENTS AND REPORTS
At least twice a year you will receive the Funds' financial statements with
a summary of investments. The Transfer Agent will send a confirmation statement
after every transaction (except a reinvestment of dividends or capital gains)
that affects your share balance or your account registration. In addition, an
account statement will be mailed to you quarterly. To reduce expenses only one
copy of most shareholder reports (such as the Fund's Annual Report) may be
mailed to your household. If you need additional copies or have any questions
about your account, please call or write the Transfer Agent at 1-800-888-3863,
P.O. Box 419102, Kansas City, MO 64141-6102.
The Funds pay for shareholder services, but not for special services, such
as producing and mailing historical account transcripts. You may be required to
pay fees for these special services.
If you are purchasing shares of the Funds through a program of
administrative services offered by a securities dealer or financial institution,
you should read such firm's program materials in conjunction with this
Prospectus. Certain features of a Fund, such as the minimum initial or
subsequent investment, may be modified in these programs, and administrative
charges may be imposed for the services rendered, which charges would reduce
your return. Firms also may hold the Fund's shares in nominee or street name as
agent for and on behalf of their customers. In such instances, the Fund's
transfer agent will have no information with respect to or control over the
accounts of specific shareholders. Such shareholders may obtain access to their
accounts and information about their accounts only from their firm.
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- --------------------------------------------------------------------------------
DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
DISTRIBUTIONS
Each Fund intends to distribute substantially all its net investment income
and net capital gains to shareholders each year. On each day that its net asset
value per share is determined, the Money Market Fund will declare dividends as
of 4:00 p.m. Eastern time to shareholders already of record prior to the
declaration, with such dividends being paid monthly. The Tax-Exempt and Income
Funds normally declare and distribute monthly dividends of net investment income
and distribute any net realized short-term and long-term gains after the close
of the Funds' fiscal year. The Growth and Total Return Funds normally declare
and distribute dividends of net investment income and net realized short-term
and long-term capital gains annually, normally after the close of the Funds'
fiscal year. Distributions may be made more frequently to avoid excise tax.
FEDERAL TAXES
Each Fund intends to continue to qualify as a regulated investment company
under Subchapter M of the Code and, if so qualified, will not be liable for
federal income taxes to the extent its earnings are distributed. Dividends
derived from net investment income and net short-term capital gains are taxable
to shareholders as ordinary income and long-term capital gain dividends are
taxable to shareholders as long-term capital gain regardless of how long the
shares have been held and whether received in cash or shares. Long-term capital
gain dividends received by corporate shareholders are taxed at the same rate as
ordinary income. Long-term capital gain dividends received by individual
shareholders are taxed at a maximum federal rate of 28%. Dividends declared in
October, November or December to shareholders of record as of a date in one of
those months and paid during the following January are treated as paid on
December 31 of the calendar year declared. A portion of the dividends paid by
the Growth and Total Return Funds may qualify for the dividends received
deduction available to corporate shareholders.
The Tax-Exempt Fund intends to meet the requirements of the Code applicable
to regulated investment companies distributing exempt-interest dividends and,
accordingly, dividends representing net interest received on tax-exempt
municipal obligations will not be includable by shareholders in their gross
income for federal income tax purposes, except to the extent such interest is
subject to the alternative minimum tax as discussed below. Other dividends, if
any, will be taxable as described under "Federal Taxes" above. Net interest on
certain "private activity bonds" issued on or after August 8, 1996 is treated as
an item of tax preference and may, therefore, be subject to both the individual
and corporate alternative minimum tax. To the extent provided by regulations to
be issued by the Secretary of the Treasury, exempt-interest dividends from a
Fund are to be treated as interest on "private activity bonds" in proportion to
the interest the Fund receives from private activity bonds, reduced by allowable
deductions. Exempt-interest dividends, except to the extent of interest from
"private activity bonds," are not treated as a tax preference item. For a
corporate shareholder, however, exempt-interest dividends will be included in
determining such corporate shareholder's "adjusted current earnings."
Seventy-five percent of the excess, if any, of "adjusted current earnings" over
the corporate shareholder's alternative minimum taxable income with certain
adjustments will be a tax preference item. Corporate shareholders are advised to
consult their tax advisers with respect to alternative minimum tax consequences.
Individuals whose modified income exceeds a base amount will be subject to
federal income tax on up to 85% of their Social Security benefits received.
Modified income includes adjusted gross income, one-half of Social Security
benefits, and tax-exempt interest, including exempt-interest dividends from the
Tax-Exempt Fund. All taxpayers are required to disclose on their federal income
tax returns the amount of tax-exempt interest earned
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<PAGE> 33
during the year, including exempt-interest dividends from the Tax-Exempt Fund.
Tax-Exempt Fund dividends are not necessarily exempt under the income or other
tax laws of any state or local taxing authority.
CAPITAL GAINS. You may realize a capital gain or loss when you redeem
(sell) or exchange shares of the Funds. For most types of accounts, the Funds
will report the proceeds of your redemptions to you and the IRS annually.
However, because the tax treatment also depends on your purchase price and your
personal tax position, you should also keep your regular account statements to
use in determining your tax.
"BUYING A DIVIDEND." On the record date for a distribution, the Fund's
share price is reduced by the amount of the distribution. If you buy shares just
before the record date ("buying a dividend"), you will pay the full price for
the shares and then receive a portion of the price back as a taxable
distribution.
OTHER TAX INFORMATION. Each Fund will send you a tax statement by January
31 showing the tax status of the distributions you received in the past year,
and will file a copy with the IRS.
Each Fund is required by law to withhold 31% of taxable dividends and
redemption proceeds paid to certain shareholders who do not furnish a correct
taxpayer identification number (in the case of individuals, a social security
number) and in certain other circumstances.
In addition to federal taxes, you may be subject to state or local taxes on
your investment, depending on the laws in your area.
Trustees of qualified retirement plans and 403(b)(7) accounts are required
by law to withhold 20% of the taxable portion of any distribution that is
eligible to be "rolled over." The 20% withholding requirement does not apply to
distributions from IRAs or any part of a distribution that is transferred
directly to another qualified retirement plan, 403(b)(7) account or IRA.
Investors should consult with their own tax advisors regarding the 20%
withholding requirement.
- --------------------------------------------------------------------------------
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
You may redeem all or a portion of your shares on any day that the New York
Stock Exchange is open. Your shares will be redeemed at the next NAV calculated
after the Transfer Agent has received and accepted your redemption request.
Payment for shares will be made as promptly as practicable but in no event later
than seven days after receipt of a properly executed request. When a Fund is
requested to redeem shares for which it may not have yet received good payment,
it may delay the mailing of a redemption check until it has determined that
collected funds have been received for the purchase of such shares, which will
generally be within 15 days.
TELEPHONE REDEMPTION. If the proceeds of the redemption are $50,000 or less
and the proceeds are to be payable to the shareholder of record and mailed to
the address of record, normally a telephone request by any one account owner is
sufficient for redemptions by individual account owners (including joint owners)
unless the account application has declined such privilege. Once authorization
is on file the Transfer Agent will honor requests by telephone at
1-800-888-3863. Institutional account owners may exercise this special privilege
of redeeming shares by telephone request subject to the same conditions as
individual account owners provided that this privilege has been pre-authorized
by the institutional account owner by written instruction to the Transfer Agent
with signatures guaranteed. This privilege of redeeming shares by telephone
request may not be used if any address change for the shareholder's account has
been effected within 30 days of the redemption request. The Funds reserve the
right to terminate or modify this privilege at any time. See "Telephone
Instructions" under "SHAREHOLDER SERVICES" for a discussion of liability
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in connection with unauthorized telephone instructions.
EXPEDITED WIRE REDEMPTION. If you give authorization for expedited wire
redemption, shares of the Fund can be redeemed and the proceeds sent by Federal
wire transfer to a single previously designated bank account. Requests received
by the Transfer Agent prior to calculation of the net asset value will result in
shares being redeemed that day at the next determined NAV of the Fund and
normally the proceeds being sent to the designated bank account the following
business day. Delivery of the proceeds of a wire redemption request of $250,000
or more may be delayed by the Fund for up to 7 days if deemed appropriate under
then current market conditions. Once authorization is on file, the Transfer
Agent will honor requests by telephone at 1-800-888-3863. The Funds cannot be
responsible for the efficiency of the Federal wire system or the shareholder's
financial institution. The Fund currently charges $10 for wire transfers. The
shareholder is responsible for any charges imposed by the shareholder's bank.
The minimum amount that may be wired is $2,500. The Fund reserves the right to
change this minimum or to terminate the wire redemption privilege. To change the
name of the single designated bank account to receive wire redemption proceeds,
it is necessary to send a written request with signatures guaranteed to the
Transfer Agent. See "Telephone Instructions" under "SHAREHOLDER SERVICES" for a
discussion of liability in connection with unauthorized telephone instructions.
REDEMPTION BY MAIL. When shares are held for the account of a shareholder
by the Funds' Transfer Agent, the shareholder may redeem them by making a
written request to the Transfer Agent, Attention: Redemption Department, P.O.
Box 419102, Kansas City, MO 64141-6102. If the proceeds of the redemption are
$50,000 or less on an individual account, no signature guarantee will generally
be required, unless a change in address for the shareholder's account has been
effected within 30 days of the redemption request. For all other redemptions,
signatures must be guaranteed by a bank, broker, dealer, municipal securities
broker, government securities dealer or broker, credit union, savings
association, national securities exchange, registered securities association or
clearing agency. The purpose of a signature guarantee is to protect shareholders
against the possibility of fraud. The Transfer Agent may reject redemption
instructions if the guarantor is neither a member of nor a participant in a
signature guarantee program (currently known as "STAMPsm"). Further
documentation may be requested from institution or fiduciary accounts, such as
corporations, custodians (e.g., under the Uniform Gifts to Minors Act),
executors, administrators, trustees or guardians ("institutional account
owners"). The redemption request must be signed by all registered owners exactly
as the account is registered including any special capacity of the registered
owner. The Funds currently charge for actual costs of special delivery service
of redemption proceeds.
CHECKWRITING PRIVILEGE (MONEY MARKET FUND ONLY). Upon request, shareholders
will be provided with drafts to be drawn on the Money Market Fund ("Redemption
Checks"). These Redemption Checks may be made payable to the order of any person
for not more than $1 million. Shareholders should not write Redemption Checks in
an amount less than $250 since such Redemption Checks will not be honored and a
$10 service fee will be charged as provided below. When a Redemption Check is
presented for payment, a sufficient number of full and fractional shares in the
shareholder's account will be redeemed as of the next determined net asset value
to cover the amount of the Redemption Check. This will enable the shareholder to
continue earning income dividends until the Money Market Fund receives the
Redemption Check. A shareholder wishing to use this method of redemption must
complete and file an account application which is available from the Fund or
firms through which shares were purchased. Redemption Checks should not be used
to close an account since the amount in an account may not equal the amount of
the Redemption Check. The Fund reserves the right to terminate or modify this
privilege at any time.
Unless one signer is authorized on the account application, Redemption
Checks must be signed by all account owners. If the Transfer Agent receives
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<PAGE> 35
written notice by any owner of a revocation of the authorization to sign
individually, all account owners would be required to sign Redemption Checks.
Redemption Checks must be signed exactly as the account is registered. Shares
purchased by check may not be redeemed by Redemption Check until the shares have
been owned for at least 15 days.
The Fund may refuse to honor Redemption Checks whenever the right of
redemption has been suspended or postponed, or whenever the account is otherwise
impaired. A $10 service fee may be charged when a Redemption Check is presented
to redeem Fund shares in excess of the value of a Fund account or in an amount
less than $250; when a Redemption Check is presented that would require
redemption of shares which were purchased within 15 days; or when "stop payment"
of a Redemption Check is requested, which would require that the account be
closed and another account opened.
GENERAL. Because of the high cost of maintaining small accounts, the Fund
reserves the right to redeem an account that falls below the minimum investment
level, currently $250 per Fund, as a result of redemptions. Currently,
Individual Retirement Accounts and employee benefit plan accounts are not
subject to this procedure. You will be notified in writing and will be allowed
60 days to make additional purchases to bring the account value up to the
minimum investment level before a Fund redeems the account. The investment
required to reach that level may be made at net asset value without any sales
charge.
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- --------------------------------------------------------------------------------
ORGANIZATION AND DESCRIPTION OF SHARES
- --------------------------------------------------------------------------------
The Fund is an open-end diversified management investment company,
organized as a business trust under the laws of Massachusetts on December 12,
1991. The Fund may issue an unlimited number of shares of beneficial interest in
one or more series of "Funds," all having no par value. Each Fund may be divided
by the Board of Trustees into classes of shares, to the extent permitted by
exemptive rule or order from the Securities and Exchange Commission. The Fund's
shares are not currently divided into classes. Shares of each Fund have equal
noncumulative voting rights and equal rights with respect to dividends, assets,
and liquidation of such Fund and are subject to any preferences, rights or
privileges of any classes of shares within the Fund. Shares are fully paid and
nonassessable when issued, are transferable without restriction and have no
preemptive or conversion rights. Although the Fund is not required to hold
annual shareholder meetings, it will hold special meetings as required or deemed
desirable for such purposes as electing trustees, changing fundamental policies
or approving an investment management agreement. Pursuant to the Fund's By-Laws,
the holders of at least 10% of the shares outstanding and entitled to vote may
require the Fund to hold a special meeting of shareholders. Shareholders will
vote in the aggregate except when voting by individual fund or class is required
under the 1940 Act or when the Board of Trustees determines that voting by
series or class is appropriate.
JNFSI deposited the initial seed capital in the Fund. In addition, Jackson
National Life Insurance Company purchased $25,000,000 of shares of each Fund
other than the Money Market Fund, in which it purchased $2,000,000 of shares.
These purchases resulted in the ownership of more than 25% of each such Fund and
the Funds in the aggregate, which constitutes "control" under the 1940 Act. In
February 1995, Jackson National Life Insurance Company redeemed approximately
$10,500,000 of shares of the Tax-Exempt Fund, $10,000,000 of shares of the
Income Fund, $17,400,000 of shares of the Total Return Fund, and $2,100,000 of
shares of the Money Market Fund. In March 1995, Jackson National Life Insurance
Company redeemed approximately $26,000,000 of shares of the Growth Fund. Jackson
National Life Insurance Company controls the Tax-Exempt, Income, Growth and
Total Return Funds.
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- --------------------------------------------------------------------------------
APPENDIX A -- MONEY MARKET INSTRUMENTS
- --------------------------------------------------------------------------------
COMMERCIAL PAPER. These instruments include commercial paper issued by
major corporations without registration under the Securities Act of 1933 in
reliance on the exemption from registration provided by Section 3(a)(3) of the
Act as well as commercial paper issued in reliance on the so-called "private
placement" exemption from registration afforded by Section 4(2) of the
Securities Act of 1933 ("Section 4(2) paper"). Section 4(2) paper is restricted
as to disposition under the federal securities laws, and generally is sold to
institutional investors such as the Funds who agree that they are purchasing the
paper for investment and not with a view to public distribution. Any resale by
the purchaser must be in an exempt transaction. Section 4(2) paper normally is
resold to other institutional investors through or with the assistance of the
issuer or investment dealers who make a market in the Section 4(2) paper, thus
providing liquidity. The sub-investment adviser considers the legally restricted
but readily saleable Section 4(2) paper to be liquid; however, pursuant to
procedures approved by the Board of Trustees, if a particular investment in
Section 4(2) paper is not determined to be liquid, that investment will be
included within the 10% limitation on illiquid securities. The investment
adviser monitors the liquidity of the Money Market Fund's investments in Section
4(2) paper on a continuing basis.
VARIABLE AND FLOATING RATE SECURITIES. These investments include
instruments having rates of interest that are adjusted periodically or that
"float" continuously or periodically according to formulae intended to minimize
fluctuation in the value of the instruments ("Variable Rate Securities"). The
interest rate on a Variable Rate Security is ordinarily determined by reference
to, or is a percentage of, an objective standard such as a bank's prime rate,
the 90-day U.S. Treasury Bill rate, or the rate of return on commercial paper or
bank certificates of deposit. Generally, the changes in the interest rates on
Variable Rate Securities reduce the fluctuation in the market value of such
securities. Accordingly, as interest rates decrease or increase, the potential
for capital appreciation or depreciation is less than for fixed-rate
obligations. Further, some Variable Rate Securities have a demand feature
entitling the portfolio to resell the securities to the issuer or a third party
at an amount approximately equal to the principal amount thereof plus accrued
interest ("Variable Rate Demand Securities"). As is the case for other Variable
Rate Securities, the interest rate on Variable Rate Demand Securities varies
according to some objective standard intended to minimize fluctuation in the
value of the instruments. Many of these Variable Rate Demand Securities are
unrated, their transfer is restricted by the issuer and there is little if any
secondary market for the securities. Thus, any inability of the issuers of such
securities to pay on demand could adversely affect the liquidity of these
securities.
The Money Market Fund determines the maturity of Variable Rate Securities
and Variable Rate Demand Securities in accordance with Rule 2a-7, allowing the
Money Market Fund to consider certain of such instruments as having maturities
shorter than the maturity date on the face of the instrument if they are
guaranteed by the U.S. Government or its agencies, they have a stated maturity
date of one year or less or they have demand features prior to maturity.
A-1
<PAGE> 38
FUND -
Jackson National Capital Management Funds
INVESTMENT ADVISER -
Jackson National Financial Services, Inc.
SUB INVESTMENT ADVISER -
PPM America, Inc.
SHAREHOLDER SERVICING AGENT,
CUSTODIAN AND TRANSFER AGENT -
Investors Fiduciary Trust Company
INDEPENDENT ACCOUNTANT -
Price Waterhouse LLP
COUNSEL -
Vedder, Price, Kaufman & Kammholz
For more information about the Jackson National Family of Funds
call your registered representative or
our toll-free number
800/USE-JNLI
(800/873-5654)
For shareholder servicing of your account
call our toll-free number
800/888-FUND
(800/888-3863)
- --------------------------------------- JNCMF LOGO
JACKSON NATIONAL CAPITAL MANAGEMENT FUNDS
P.O. Box 419102
Kansas City MO 64141-6102
JNCMF LOGO
JACKSON NATIONAL
CAPITAL MANAGEMENT FUNDS
Prospectus
& Application
March 1, 1996
M2084 Rev. 2/96
<PAGE> 39
STATEMENT OF ADDITIONAL INFORMATION
MARCH 1, 1996
JACKSON NATIONAL CAPITAL MANAGEMENT FUNDS
P.O. BOX 419102,
KANSAS CITY, MISSOURI 64141-6102
(800) 888-3863
This Statement of Additional Information is not a prospectus. It should be
read in conjunction with the Prospectus of Jackson National Capital Management
Funds (the "Fund") dated March 1, 1996. The Prospectus may be obtained by
writing or calling the above address or phone number.
----------
TABLE OF CONTENTS
PAGE
----
INVESTMENT POLICIES AND TECHNIQUES 3
Money Market Instruments 3
U.S. Government Securities and Custodial Receipts 3
Mortgage-Backed and Other Asset-Backed Securities 4
Variable Rate Securities 5
Restricted Securities 5
Repurchase Agreements 6
Foreign Securities 6
High Yield Bonds 6
Futures and Options Transactions 7
Options on Securities 8
Options on Securities Indices 9
Financial Futures Contracts 9
Options on Financial Futures Contracts 10
Regulatory Restrictions 11
Delayed Delivery Transactions 11
Municipal Obligations 12
Zero Coupon Bonds 13
INVESTMENT RESTRICTIONS 14
1
<PAGE> 40
INVESTMENT ADVISERS 16
The Investment Adviser 16
The Sub-Investment Adviser 18
Custodian and Transfer Agent 18
Independent Auditors and Reports to Shareholders 18
PORTFOLIO TRANSACTIONS 19
DISTRIBUTOR 20
PURCHASE OF SHARES 20
REDEMPTION OF SHARES 21
REDEMPTION-IN-KIND ELECTION 21
DIVIDENDS AND TAXES 22
Tax-Exempt, Income, Growth and Total
Return Funds Dividends 22
Money Market Fund Dividends 22
General 22
Taxes 23
PERFORMANCE 24
OFFICERS AND TRUSTEES 27
SHAREHOLDER RIGHTS 28
FINANCIAL STATEMENTS 30
APPENDIX--RATINGS OF INVESTMENTS 53
COMMERCIAL PAPER RATINGS 53
CORPORATE BONDS 53
Standard & Poor's Municipal Bond Ratings
Moody's Investors Service, Inc. Municipal
Bond Ratings
MUNICIPAL BONDS 55
Standard & Poor's Municipal Bond Ratings
Moody's Investors Service, Inc. Municipal
Bond Ratings
2
<PAGE> 41
INVESTMENT POLICIES AND TECHNIQUES
MONEY MARKET INSTRUMENTS. Each of the Funds, except for the Tax-Exempt Fund,
may invest in certain money market instruments as described in the Prospectus.
Commercial paper represents short-term unsecured promissory notes issued in
bearer form by banks or bank holding companies, corporations and finance
companies. The commercial paper purchased by the Funds consists of direct U.S.
dollar denominated obligations of domestic or foreign issuers. Bank
obligations in which the Funds may invest include certificates of deposit,
bankers' acceptances, and fixed time deposits. Certificates of deposit are
negotiable certificates issued against funds deposited in a commercial bank for
a definite period of time and earning a specified return. Bankers' acceptances
are negotiable drafts or bills of exchange, normally drawn by an importer or
exporter to pay for specific merchandise, which are "accepted" by a bank,
meaning, in effect, that the bank unconditionally agrees to pay the face value
of the instrument on maturity. Fixed time deposits are bank obligations
payable at a stated maturity date and bearing interest at a fixed rate. Fixed
time deposits may be withdrawn on demand by the investor, but may be subject to
early withdrawal penalties which vary depending upon market conditions and the
remaining maturity of the obligation. There are no contractual restrictions on
the right to transfer a beneficial interest in a fixed time deposit to a third
party, although there is no market for such deposits. The Money Market Fund
may concentrate investments in instruments issued by the "domestic banking
industry." The domestic banking industry does not include foreign branches of
U.S. banks, although it may include U.S. branches of foreign banks if the Board
of Trustees finds that such branches are subject to the same regulation as U.S.
banks. The profitability of the banking industry is dependent largely upon the
availability and cost of funds for the purpose of financing lending operations
under prevailing market conditions. General economic conditions, as well as
exposure to credit losses arising from possible financial difficulties of
borrowers play an important part in banking operations. To the extent the
investments of the Money Market Fund are concentrated in the domestic banking
industry, the fund is more exposed to these risks.
U.S. GOVERNMENT SECURITIES AND CUSTODIAL RECEIPTS. Obligations issued or
guaranteed as to principal and interest by the U.S. Government, its agencies
and instrumentalities include Treasury Bills, notes and bonds and Government
National Mortgage Association ("GNMA") certificates which are supported by the
full faith and credit of the United States; others, such as those of the
Federal Home Loan Banks, are supported by the right of the issuer to borrow
from the Treasury; others, such as those of the Federal National Mortgage
Association ("FNMA"), are supported by the discretionary authority of the U.S.
Government to purchase the agency's obligations; and still others, such as
those of the Student Loan Marketing Association, are supported only by the
credit of the instrumentality. No assurance can be given that the U.S.
Government will provide financial support to U.S. Government agencies or
instrumentalities in the future, other than as set forth above, since it is not
obligated to do so by law.
Securities issued or guaranteed as to principal and interest by the U.S.
Government may be acquired by a Fund in the form of custodial receipts that
evidence ownership of future interest payments, principal payments or both on
certain U.S. Treasury notes or bonds. Such notes and bonds are held in custody
by a bank on behalf of the owners. These custodial receipts are known by
various
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names, including "Treasury Receipts," "Treasury Investment Growth
Receipts ("TIGR's") and "Certificates of Accrual on Treasury Securities"
("CATS"). A Fund may also invest in separately traded principal and interest
components of securities issued or guaranteed by the U.S. Treasury. The
principal and interest components of selected securities are traded
independently under the Separate Trading of Registered Interest and Principal
of Securities Program ("STRIPS"). Under the STRIPS program, the principal and
interest components are individually numbered and separately issued by the U.S.
Treasury at the request of depository financial institutions, which then trade
the component parts independently.
MORTGAGE-BACKED AND OTHER ASSET-BACKED SECURITIES. The total return on
mortgage-backed securities purchased by the Income and Total Return Funds
varies with changes in the general level of interest rates. The maturities of
mortgage-backed securities are variable and unknown when issued because their
maturities depend on prepayment rates. Early repayment of principal on
mortgage pass-through securities (arising from prepayments of principal due to
sale of the underlying property, refinancing, or foreclosure, net of fees and
costs which may be incurred) may expose a Fund to a lower rate of return upon
reinvestment of principal. Also, if a security subject to prepayment has been
purchased at a premium, in the event of prepayment the value of the premium
would be lost. Mortgage prepayments generally increase with falling interest
rates and decrease with rising interest rates. Like other fixed income
securities, when interest rates rise the value of a mortgage-backed security
generally will decline; however, when interest rates are declining, the value
of mortgage-backed securities with prepayment features may not increase as much
as that of other fixed income securities.
Payment of principal and interest on some mortgage pass-through securities (but
not the market value of the securities themselves) may be guaranteed by the
full faith and credit of the U.S. Government (in the case of securities
guaranteed by GNMA); or guaranteed by agencies or instrumentalities of the U.S.
Government (in the case of securities guaranteed by FNMA or the Federal Home
Loan Mortgage Corporation ("FHLMC"), which are supported only by the
discretionary authority of the U.S. Government to purchase the agency's
obligations). Mortgage pass-through securities created by non-governmental
issuers (such as commercial banks, savings and loan institutions, private
mortgage insurance companies, mortgage bankers and other secondary market
issuers) may be supported by various forms of insurance or guarantees,
including individual loan, title, pool and hazard insurance and letters of
credit, which may be issued by governmental entities, private issuers or the
mortgage poolers.
CMOs are hybrid instruments with characteristics of both mortgage-backed bonds
and mortgage pass-through securities. Interest and principal on a CMO are
paid, in most cases, monthly. CMOs are usually collateralized by portfolios of
mortgage pass-through securities guaranteed by GNMA, FHLMC, or FNMA but may be
collateralized by whole mortgage loans or private mortgage pass-through
securities. CMOs are structured into multiple classes, with each class bearing
a different stated maturity. Under a common structure, monthly payments of
principal, including prepayments, are first returned to investors holding the
shortest maturity class; investors holding the longer maturity classes receive
principal only after the first class has been retired. The Income and Total
Return Funds may also invest in parallel pay CMOs and Planned Amortization
Class CMOs ("PAC Bonds"). Parallel pay CMOs are structured to provide payments
of principal on each payment date
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to more than one class. PAC Bonds generally require payments of a
specified amount of principal on each payment date. PAC Bonds are always
parallel pay CMOs with the required principal payment on such securities having
the highest priority after interest has been paid to all classes.
Other asset-backed securities (unrelated to mortgage loans) have been offered
to investors, such as Certificates for Automobile Receivables ("CARSsm") and
interests in pools of credit card receivables. CARSsm represent undivided
fractional interests in a trust whose assets consist of a pool of motor vehicle
retail installment sales contracts and security interests in the vehicles
securing the contracts. Payments of principal and interest on CARSsm are
"passed-through" monthly to certificate holders and are guaranteed up to
certain amounts and for a certain time period by a letter of credit issued by a
financial institution unaffiliated with the trustee or originator of the trust.
Underlying sales contracts are subject to prepayment, which may reduce the
overall return to certificate holders. If the letter of credit is exhausted,
certificate holders may also experience delays in payment or losses on CARSsm
if the full amounts due on underlying sales contracts are not realized by the
trust because of unanticipated legal or administrative costs of enforcing the
contracts, or because of depreciation, damage or loss of the vehicles securing
the contracts, or other factors. CARSsm will be deemed to be illiquid
securities. Certificates representing pools of credit card receivables have
similar characteristics although the underlying loans are unsecured. If
consistent with its investment objective and policies, a Fund may invest in
CARSsm, interests in pools of credit card receivables and in other asset-backed
securities that may be developed in the future subject to the review and
approval of the Funds' Board of Trustees. Asset-backed securities and
mortgage-backed securities, other than GNMAs, are relatively new forms of
investments. Thus, the market experience in these securities is limited and
the market's ability to sustain liquidity through all phases of the market
cycle has not been tested.
VARIABLE RATE SECURITIES. Variable Rate Securities provide for a periodic
adjustment in the interest rate paid on the obligations. The terms of such
obligations must provide that interest rates are adjusted periodically based
upon some appropriate interest rate adjustment index as provided in the
respective obligations. The adjustment intervals may be regular, and range
from daily up to annually, or may be event based, such as a change in the prime
rate. Variable Rate Securities that cannot be disposed of promptly within
seven days and in the usual course of business without taking reduced price
will be treated as illiquid and subject to the limitation on investments in
illiquid securities.
RESTRICTED SECURITIES. Each of the Funds may purchase securities that are not
registered ("restricted securities") under the Securities Act of 1933 ("1933
Act"), but can be offered and sold to "qualified institutional buyers" under
Rule 144A of the 1933 Act. However, each Fund will not invest more than 10% of
its assets in illiquid investments, which includes repurchase agreements and
fixed time deposits maturing in more than seven days, securities that are not
readily marketable and restricted securities, unless the Board of Trustees
determines, based upon a continuing review of the trading markets for the
specific restricted security, that such restricted securities are liquid. The
Board of Trustees has adopted guidelines and procedures that delegate to the
sub-investment adviser the daily function of determining and monitoring
liquidity of restricted securities. Since it is not possible to predict with
assurance exactly how this market for restricted securities sold and offered
under Rule 144A will develop, the Board will carefully monitor each Fund's
investments in
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these securities. This investment practice could have the effect of
increasing the level of illiquidity in a Fund to the extent that qualified
institutional buyers become for a time uninterested in purchasing restricted
securities held by such Fund. Each Fund will not invest more than 5% of its
total assets in unregistered securities, except commercial paper issued under
Section 4(2) of the 1933 Act and securities that may be resold pursuant to Rule
144A.
REPURCHASE AGREEMENTS. Each Fund, other than the Tax-Exempt Fund, may invest
in repurchase agreements. A repurchase agreement may be considered a loan
collateralized by securities. The Fund must take physical possession of the
security or receive written confirmation of the purchase and a custodial or
safekeeping receipt from a third party or be recorded as the owner of the
security through the Federal Reserve Book Entry System. The Funds may invest
in open repurchase agreements which vary from the typical agreement in the
following respects: (1) the agreement has no set maturity, but instead matures
upon 24 hours' notice to the seller; and (2) the repurchase price is not
determined at the time the agreement is entered into, but is instead based on a
variable interest rate and the duration of the agreement.
FOREIGN SECURITIES. It is expected that the expenses for custodian
arrangements of the Funds' foreign securities will be somewhat greater than the
expenses for the custodian arrangements for handling domestic securities of
equal value. Certain foreign governments levy withholding taxes against
dividend and interest income. Although in some countries a portion of these
taxes are recoverable, the non-recovered portion of foreign withholding taxes
will reduce the income received from the companies comprising each Fund's
respective investment portfolio.
HIGH YIELD BONDS. The Total Return Fund may invest up to 20% of its assets in
fixed-income securities offering high current income that are in the lower
rating categories of recognized rating agencies or will be non-rated. These
lower-rated fixed-income securities are considered on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation and generally will involve more
credit risk than securities in the higher rating categories.
High yield securities frequently are issued by corporations in the growth stage
of their development. They may also be issued in connection with a corporate
reorganization or a corporate takeover. Companies that issue such high
yielding securities often are highly leveraged and may not have available
to them more traditional methods of financing. Therefore, the risk associated
with acquiring the securities of such issuers generally is greater than is the
case with higher rated securities. For example, during an economic downturn or
recession, highly leveraged issuers of high yield securities may experience
financial stress. During such periods, such issuers may not have sufficient
revenues to meet their interest payment obligations. The issuer's ability to
service its debt obligations may also be adversely affected by specific
corporate developments, or the issuer's inability to meet specific projected
business forecasts, or the unavailability of additional financing. Adverse
publicity and investor perceptions regarding lower rated bonds, whether or not
based upon fundamental analysis, may also depress the price for such
securities. The risk of loss from default by the issuer is significantly
greater for the holders of high yield securities because such securities are
generally unsecured and are often subordinated to other creditors of the
issuer.
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The Total Return Fund may have difficulty disposing of certain high yield
securities because they may have a thin trading market. Because not all
dealers maintain markets in all high yield securities, the Fund anticipates
that such securities could be sold only to a limited number of dealers or
institutional investors. The lack of a liquid secondary market may also have
an adverse effect on market price and make it more difficult for the Fund to
obtain accurate market quotations for purposes of valuing the Fund's assets.
Market quotations generally are available on many high yield issues, only from
a limited number of dealers and may not necessarily represent firm bids of such
dealers or prices for actual sales.
The investment philosophy of the Total Return Fund with respect to high yield
bonds is based on the premise that over the long term an allocation of a
relatively minor portion of a diversified portfolio's assets in high yield
fixed income securities should, even taking into account possible losses,
provide a higher net return than that achievable on a portfolio of solely
higher rated securities. The Total Return Fund seeks to enhance total returns
through investment in high yield bonds while simultaneously attempting to
reduce relative risk through (a) diversification of investments, (b) credit
analysis by the sub-investment adviser of the issuers in which the Fund
invests, (c) purchase of high yield securities at discounts from par or stated
value when practicable and (d) monitoring and seeking to anticipate changes and
trends in the economy and financial markets that might affect the prices of
portfolio securities. The sub-investment adviser's judgment as to the
"reasonableness" of the risk involved in any particular investment will be a
function of its experience in managing fixed income investments and its
evaluation of general economic and financial conditions; of a specific issuer's
business and management, cash flow, earnings coverage of interest and
dividends, ability to operate under adverse economic conditions, and fair
market value of assets; and of such other considerations as the sub-investment
adviser may deem appropriate. The sub-investment adviser, while seeking
maximum current yield, will monitor current corporate developments with respect
to portfolio securities and potential investments and to broad trends in the
economy. In some circumstances, defensive strategies may be implemented to
preserve or enhance capital even at the sacrifice of current yield. Defensive
strategies, which may be used singly or in any combination, may include, but
are not limited to, investments in discount securities or investments in money
market instruments as well as futures and options strategies.
FUTURES AND OPTIONS TRANSACTIONS. The Growth and Total Return Funds
each may engage in options and futures transactions in accordance with their
respective investment objectives and policies. Each such Fund intends to
engage in such transactions if it appears to the investment adviser to be
advantageous to do so in order to pursue its investment objective and also to
hedge against the effects of market risks but not for speculative purposes.
The Money Market, Tax-Exempt and Income Funds do not engage in options and
futures transactions. The use of futures and options, and possible benefits
and attendant risks, are discussed below along with information concerning
other investment policies and techniques.
OPTIONS ON SECURITIES. The Total Return Fund may purchase (buy) put and call
options on securities and may write (sell) covered call and secured put options
on securities. A call option gives the purchaser the right to buy, and the
writer the obligation to sell, the underlying security at the exercise price
during the option period. A put option gives the purchaser the right to sell,
and the writer the obligation to buy, the underlying security at the exercise
price during the option
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period. The writer of a covered call option owns securities that are
acceptable for escrow and the writer of a secured put invests an amount not
less than the exercise price in eligible securities to the extent that it is
obligated as a writer. The premium received for writing an option will
reflect, among other things, the current market price of the underlying
security, the relationship of the exercise price to such market price, the
price volatility of the underlying security, the option period, supply and
demand and interest rates. The exercise price of an option may be below, equal
to or above the current market value of the underlying security at the time the
option is written. The buyer of a put who also owns the related security is
protected by ownership of a put option against any decline in that security's
price below the exercise price less the amount paid for the option. The ability
to purchase put options allows the Fund to protect capital gains in an
appreciated security it owns, without being required to actually sell that
security. At times a Fund may desire to establish a position in a security
upon which call options are available. By purchasing a call option, the Fund is
able to fix the cost of acquiring the security, this being the cost of the call
plus the exercise price of the option. This procedure also provides some
protection from an unexpected downturn in the market, because the Fund is only
at risk for the amount of the premium paid for the call option which it can, if
it chooses, permit to expire.
During the option period the covered call writer gives up the potential for
capital appreciation above the exercise price should the underlying security
rise in value, and the secured put writer retains the risk of loss should the
underlying security decline in value. For the covered call writer, substantial
appreciation in the value of the underlying security would result in the
security being "called away." For the secured put writer, substantial
depreciation in the value of the underlying security would result in the
security being "put to" the writer. If a covered call option expires
unexercised, the writer realizes a gain in the amount of the premium received.
If the covered call option writer has to sell the underlying security because
of the exercise of a call option, it realizes a gain or loss from the sale of
the underlying security, with the proceeds being increased by the amount of the
premium.
If a secured put option expires unexercised, the writer realizes a gain from
the amount of the premium, plus the interest income on the money market
investment. If the secured put writer has to buy the underlying security
because of the exercise of the put option, the secured put writer incurs an
unrealized loss to the extent that the current market value of the underlying
security is less than the exercise price of the put option. However, this
would be offset in whole or in part by gain from the premium received and any
interest income earned on the money market investment.
OPTIONS ON SECURITIES INDICES. The Growth and Total Return Funds, as part of
their options transactions, may also use options on securities indices in an
attempt to hedge against market conditions affecting the value of securities
that the Fund owns or intends to purchase, and not for speculation. The Funds
may both purchase and sell options on securities indices. Through the writing
or purchase of index options, a Fund can achieve many of the same objectives as
through the use of options on individual securities. Options on securities
indices are similar to options on a security except that, rather than the right
take or make delivery of a security at a specified price, an option on a
securities index gives the holder the right to receive, upon exercise of the
option, an amount of cash if the closing level of the securities index upon
which the option is based is greater than, in the case of a call, or less than,
in the case of a put, the exercise price of the option. This
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amount of cash is equal to such difference between the closing price of
the index and the exercise price of the option. The writer of the option is
obligated, in return for the premium received, to make delivery of this amount.
Unlike security options, all settlements are in cash and gain or loss depends
upon price movements in the market generally (or in a particular industry or
segment of the market), rather than upon price movements in individual
securities.
When a Fund writes an option on a securities index, it will be required to
deposit with its custodian and mark-to-market eligible securities equal in
value to 100% of the exercise price in the case of a put, or the contract value
in the case of a call. In addition, where a Fund writes a call option on a
securities index at a time when the contract value exceeds the exercise price,
the Fund will segregate and mark-to-market, until the option expires or is
closed out, cash or cash equivalents equal in value to such excess.
Options on futures contracts and index options involve risks similar to those
risks relating to transactions in financial futures contracts described below.
Also, an option purchased by a Fund may expire worthless, in which case the
Fund would lose the premium paid therefor.
FINANCIAL FUTURES CONTRACTS. The Growth and Total Return Funds may enter into
financial futures contracts for the future delivery of a financial instrument,
such as a security, or the cash value of a securities index. This investment
technique is designed primarily to hedge (i.e., protect) against anticipated
future changes in interest rate or equity market conditions which otherwise
might affect adversely the value of securities which the Fund holds or intends
to purchase. A "sale" of a futures contract means the undertaking of a
contractual obligation to deliver the securities or the cash value of an index
called for by the contract at a specified price during a specified delivery
period. A "purchase" of a futures contract means the undertaking of a
contractual obligation to acquire the securities or cash value of an index at a
specified price during a specified delivery period. The Growth and Total
Return Funds may purchase and sell financial futures contracts. At the time of
delivery, in the case of fixed income securities subject to the contract,
adjustments are made to recognize differences in value arising from the
delivery of securities with a different interest rate than that specified in the
contract. In some cases, securities called for by a futures contract may not
have been issued at the time the contract was written. The Growth and Total
Return Funds will not enter into any futures contracts or options on futures
contracts if the aggregate of the market value of the outstanding futures
contracts of the Fund and the futures contracts subject to outstanding options
written by the Fund would exceed 20% of the net assets of the Fund.
Although some futures contracts by their terms call for the actual delivery or
acquisition of securities, in most cases a party will close out the contractual
commitment before delivery without having to make or take delivery of the
security by purchasing (or selling, as the case may be) on a commodities
exchange an identical futures contract calling for delivery in the same month.
Such a transaction, if effected through a member of an exchange, cancels the
obligation to make or take delivery of the securities. All transactions in the
futures market are made, offset or fulfilled through a clearing house
associated with the exchange on which the contracts are traded. A Fund will
incur brokerage fees when it purchases or sells contracts, and will be required
to maintain margin deposits. At the time a Fund enters into a futures
contract, it is required to deposit with its
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custodian, on behalf of the broker, a specified amount of cash or
eligible securities, called "initial margin." The initial margin required for
a futures contract is set by the exchange on which the contract is traded.
Subsequent payments, called "variation margin," to and from the broker are made
on a daily basis as the market price of the futures contract fluctuates. The
costs incurred in connection with futures transactions could reduce the Fund's
return. Futures contracts entail risks. If the Subadviser's judgment about
the general direction of interest rates or markets is wrong, the overall
performance may be poorer than if no such contracts had been entered into.
There may be an imperfect correlation between movements in prices of futures
contracts and portfolio securities being hedged. In addition, the market prices
of futures contracts may be affected by certain factors. If participants in
the futures market elect to close out their contracts through offsetting
transactions rather than meet margin requirements, distortions in the normal
relationship between the securities and futures markets could result. Price
distortions could also result if investors in futures contracts decide to make
or take delivery of underlying securities rather than engage in closing
transactions because of the resultant reduction in the liquidity of the futures
market. In addition, because, from the point of view of speculators, the
margin requirements in the futures markets are less onerous than margin
requirements in the cash market, increased participation by speculators in the
futures market could cause temporary price distortions. Due to the possibility
of price distortions in the futures market and because of the imperfect
correlation between movements in the prices of securities and movements in the
prices of futures contracts, a correct forecast of market trends by the
investment adviser may still not result in a successful hedging transaction.
If any of these events should occur, a Fund could lose money on the financial
futures contracts and also on the value of its portfolio securities.
OPTIONS ON FINANCIAL FUTURES CONTRACTS. The Total Return and Growth Funds may
purchase (buy) and write (sell) call and put options on financial futures
contracts. An option on a futures contract gives the purchaser the right, in
return for the premium paid, to assume a position in a futures contract at a
specified exercise price at any time during the period of the option. Upon
exercise, the writer of the option delivers the futures contract to the holder
at the exercise price. The Fund would be required to deposit with its
custodian initial margin and maintenance margin with respect to put and call
options on futures contracts written by it. Options on futures contracts
involve risks similar to those risks relating to transactions in financial
futures contracts described above. Also, an option purchased by the Fund may
expire worthless, in which case the Fund would lose the premium paid therefor.
REGULATORY RESTRICTIONS. To the extent required to comply with SEC Release No.
IC-10666, when entering into a futures contract, or writing a put or call
option, the Fund will maintain in a segregated account cash or liquid
high-grade debt securities equal to the value of such contracts.
To the extent required to comply with Commodity Futures Trading Commission
Regulation 4.5 and thereby avoid "commodity pool operator" status, a Fund will
not enter into a futures contract or purchase an option thereon if immediately
thereafter the initial margin deposits for futures contracts held by the Fund
plus premiums paid by it for open options on futures would exceed 5% of the
Fund's total assets. A Fund will not engage in transactions in financial
futures contracts or options thereon for speculation, but only in an attempt to
hedge against changes in interest rates or market
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conditions affecting the value of securities which the Fund holds or
intends to purchase. Where futures contracts or options thereon are purchased
to protect against a price increase on securities intended to be purchased
later, it is anticipated that at least 75% of such intended purchases will be
completed. Where other futures contracts or options thereon are purchased, the
underlying value of such contracts will at all times not exceed the sum of:
(1) accrued profit on such contracts held by the broker; (2) cash or high
quality money market instruments set aside in an identifiable manner; and (3)
cash proceeds from investments due in 30 days.
DELAYED DELIVERY TRANSACTIONS. The Money Market, Tax-Exempt, Income and Total
Return Funds may purchase or sell portfolio securities on a when-issued or
delayed delivery basis. When a Fund enters into a delayed delivery
transaction, it becomes obligated to purchase securities and it has all of the
rights and risks attendant to ownership of a security, although delivery and
payment occur at a later date. The value of fixed income securities to be
delivered in the future will fluctuate as interest rates vary. At the time a
Fund makes the commitment to purchase a security on a when-issued or delayed
delivery basis, it will record the transaction and reflect the liability for
the purchase and the value of the security in determining its net asset value.
Likewise, at the time a Fund makes the commitment to sell a security on a
delayed delivery basis, it will record the transaction and include the proceeds
to be received in determining its net asset value; accordingly, any
fluctuations, the value of the security sold pursuant to a delayed delivery
commitment are ignored in calculating net asset value so long as the commitment
remains in effect. The Fund generally has the ability to close out a purchase
obligation on or before the settlement date, rather than take delivery of the
security. To the extent the Fund engages in when-issued or delayed delivery
purchases, it will do so for the purpose of acquiring portfolio securities
consistent with the Fund's investment objective and policies and not for the
purpose of investment leverage or to speculate in interest rate changes.
MUNICIPAL OBLIGATIONS. Municipal Obligations include debt obligations issued
to obtain funds for various public purposes, including the construction of a
wide range of public facilities such as bridges, highways, housing, hospitals,
mass transportation, schools, streets and water and sewer works. Other public
purposes for which Municipal Obligations may be issued include refunding
outstanding obligations, obtaining funds for general operating expenses, and
obtaining funds to loan to other public institutions and facilities. In
addition, certain types of industrial development bonds are issued by or on
behalf of public authorities to obtain funds to provide privately-operated
housing facilities, sports facilities, convention or trade show facilities,
airport, mass transit, port or parking facilities, air or water pollution
control facilities for water supply, gas, electricity or sewage or solid waste
disposal. Such obligations are included with the term Municipal Obligations if
the interest paid thereon qualifies as exempt from federal income tax. Other
types of industrial development bonds, the proceeds of which are used for the
construction, equipment, repair or improvement of privately operated industrial
or commercial facilities, may constitute Municipal Obligations, although the
current federal tax laws place substantial limitations on the size of such
issues.
The Tax-Exempt Fund may purchase floating and variable rate demand notes and
bonds, which are tax exempt obligations ordinarily having stated maturities in
excess of one year, but which permit the holder to demand payment of principal
at any time or at specified intervals. Variable rate
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demand notes include master demand notes which are obligations that
permit the Fund to invest fluctuating amounts, which may change daily without
penalty, pursuant to direct arrangements between the Fund, as lender, and the
borrower. The interest rates on these obligations fluctuate from time to time.
Frequently, such obligations are secured by letters of credit or other credit
support arrangements provided by banks. Use of letters of credit or other
credit support arrangements will not adversely affect the tax exempt status of
these obligations. Because these obligations are direct lending arrangements
between the lender and borrower, it is not contemplated that such instruments
generally will be traded, and there generally is no established secondary
market for these obligations, although they are redeemable at face value.
Accordingly, where these obligations are not secured by letters of credit or
other credit support arrangements, the Fund's right to redeem is dependent on
the ability of the borrower to pay principal and interest on demand. Each
obligation purchased by the Tax-Exempt Fund will meet the quality criteria
established for the purchase of Municipal Obligations. The sub-investment
adviser will consider on an ongoing basis the creditworthiness of the issuers
of the floating and variable rate demand obligations in the Fund's portfolio.
The Tax-Exempt Fund will not invest more than 10% of the value of its net
assets in floating or variable rate demand obligations as to which the Fund
cannot exercise the demand feature on not more than seven days' notice if there
is no secondary market available for these obligations, and in other illiquid
securities.
The Tax-Exempt Fund may acquire "stand-by commitments" with respect to
Municipal Obligations held in its portfolio. Under a stand-by commitment, the
Fund obligates a broker, dealer or bank to repurchase, at the Fund's option,
specified securities at a specified price and, in this respect, stand-by
commitments are comparable to put options. The exercise of a stand-by
commitment, therefore, is subject to the ability of the seller to make payment
on demand. The Fund will acquire stand-by commitments solely to facilitate
portfolio liquidity and does not intend to exercise its rights thereunder for
trading purposes. The Fund may pay for stand-by commitments if such action is
deemed necessary, thus increasing to a degree the cost of the underlying
Municipal Obligation and similarly decreasing such security's yield to
investors.
The Tax-Exempt Fund may purchase tender option bonds and similar securities. A
tender option bond is a Municipal Obligation (generally held pursuant to a
custodial arrangement) having a relatively long maturity and bearing interest
at a fixed-rate substantially higher than prevailing short-term tax exempt
rates, that has been coupled with the agreement of a third party, such as a
bank, broker-dealer or other financial institution, pursuant to which such
institution grants the security holders the option, at periodic intervals, to
tender their securities to the institution and receive the face value thereof.
As consideration for providing the option, the financial institution receives
periodic fees equal to the difference between the Municipal Obligations's fixed
coupon rate and the rate, as determined by a remarketing or similar agent at or
near the commencement of such period, that would cause the securities, coupled
with the tender option, to trade at par on the date of such determination.
Thus, after payment of this fee, the security holder effectively holds a demand
obligation that bears interest at the prevailing short-term tax exempt rate.
The sub-investment adviser will consider on an ongoing basis the
creditworthiness of the issuers of the underlying Municipal Obligation, of any
custodian and of the third party provider of the tender option. In certain
instances and for certain tender option bonds, the option may be terminable in
the event of a default in payment of principal or interest on the underlying
Municipal Obligations and for other
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reasons. The Fund will not invest more than 10% of the value of its
net assets in securities that are illiquid, which would include tender option
bonds as to which it cannot exercise the tender feature on not more than seven
days' notice if there is no secondary market available for these obligations.
ZERO COUPON BONDS. Subject to their investment objective and policies, the
Tax-Exempt, Income and Total Return Funds may invest in zero coupon securities.
Zero coupon bonds are purchased at a discount from the face amount. The buyer
receives only the right to receive a fixed payment on a certain date in the
future and does not receive any periodic interest payments. These securities
may include those created directly by the U.S. Treasury, private issuers and
those created as collateralized obligations through various proprietary
custodial, trust or other relationships (see "Investment Policies and
Techniques--Mortgage-Backed and Other Asset-Backed Securities" in this
Statement of Additional Information). The effect of owning instruments which
do not make current interest payments is that a fixed yield is earned not only
on the original investment but also, in effect, on all discount accretion
during the life of the obligations. This implicit reinvestment of earnings at
the same rate eliminates the risk of being unable to reinvest distributions at
a rate as high as the implicit yield on the zero coupon bond, but at the same
time eliminates any opportunity to reinvest earnings at higher rates. For this
reason, zero coupon bonds are subject to substantially greater price
fluctuations during periods of changing market interest rates than those of
comparable securities that pay interest currently, which fluctuation is greater
as the period to maturity or longer. Zero coupon bonds created as
collateralized obligations are similar to those created through the U.S.
Treasury, but the former investments do not provide absolute certainty of
maturity or of cash flows after prior classes of the collateralized obligations
are retired.
INVESTMENT RESTRICTIONS
Each of the Funds has adopted certain investment restrictions which, together
with the investment objective and fundamental policies of each Fund, cannot be
changed without approval by holders of a majority of the outstanding voting
shares of that Fund. As defined in the Investment Company Act of 1940, this
means the lesser of the vote of (a) 67% of the shares of the Fund at a meeting
where more than 50% of the outstanding shares are present in person or by proxy
or (b) more than 50% of the outstanding shares of the Fund.
A Fund individually may not:
(1) Purchase securities of any issuer (other than obligations of, or guaranteed
by, the U.S. Government, its agencies or instrumentalities) if, as a result,
more than 5% of the value of a Fund's net assets would be invested in
securities of that issuer.
(2) Purchase more than 10% of any class of securities of any issuer. All debt
securities and all preferred stocks are each considered as a class.
(3) Make loans to others (except through the purchase of debt obligations or
repurchase agreements or by lending its portfolio securities).
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(4) Borrow money, except from banks as a temporary measure for extraordinary or
emergency purposes and then only in an amount up to one-third of the value of
its total assets. If, for any reason, the current value of a Fund's total
assets falls below an amount equal to three times the amount of its
indebtedness from money borrowed, the Fund will, within three business days,
reduce its indebtedness to the extent necessary. A Fund will not borrow for
leverage purposes and will not purchase securities or make investments when
borrowings exceed 5% of net assets.
(5) Pledge, hypothecate, mortgage or otherwise encumber more than 15% of its
total assets and then only to secure borrowings permitted by restriction (4)
above. (The collateral arrangements with respect to options, financial futures
and delayed delivery transactions and any margin payments in connection
therewith are not deemed to be pledges or other encumbrances.)
(6) Purchase securities (other than securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities) if as a result of such purchase
25% or more of a Fund's total assets would be invested in any one industry;
provided, however, that the Money Market Fund may invest more than 25% of its
net assets in instruments issued by banks in accordance with its investment
objective and policies; and that the Tax-Exempt Fund may invest more than 25%
of its total assets in securities and interest upon which is paid from revenues
of similar types of projects or securities whose issues are located in the same
state.
(7) Purchase or retain the securities of any issuer if any of the officers,
trustees or directors of the Funds or the investment adviser or sub-investment
adviser owns beneficially more than 1/2 of 1% of the securities of such issuer
and together they own more than 5% of the securities of such issuer.
(8) Invest more than 5% of a Fund's total assets in securities restricted as to
disposition under the federal securities laws (except commercial paper issued
under Section 4(2) of the Securities Act of 1933 and securities that may be
resold in accordance with Rule 144A under the Securities Act of 1933).
(9) Invest for the purpose of exercising control or management of another
issuer.
(10) Invest in interests in oil, gas or other mineral exploration or
development programs or invest in oil, gas or other mineral leases, although it
may invest in the securities of issuers which invest in or sponsor such
programs.
(11) Purchase securities of other investment companies, except in connection
with a merger, consolidation, reorganization or acquisition of assets.
(12) Underwrite securities issued by others except to the extent a Fund may be
deemed to be an underwriter, under the federal securities laws, in connection
with the disposition of portfolio securities.
(13) Issue senior securities as defined in the Investment Company Act of 1940.
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(14) Make short sales of securities, or purchase any securities on margin
except to obtain such short-term credits as may be necessary for the clearance
of transactions; however, the Growth and Total Return Funds may make margin
deposits in connection with financial futures and option transactions.
(15) Engage in put or call options; however, the Growth and Total Return Funds
may write (sell) put or call options on up to 20% of their total assets and the
Total Return and Growth Funds may purchase or sell put or call options if no
more than 5% of their total assets would be invested in premiums on put and
call options, combinations thereof or similar options; the Total Return and
Growth Funds may purchase or sell options on financial futures contracts; and
the Tax-Exempt Fund may purchase Municipal obligations subject to Standby
Commitments in accordance with its investment objective and policies.
(16) Invest in commodities or commodity futures contracts, although the Growth
and Total Return Funds may each purchase and sell financial futures contracts
and options on such contracts.
(17) Invest in real estate, including real estate limited partnership
interests, although it may invest in securities which are secured by real
estate and securities of issuers which invest or deal in real estate.
In addition, to the extent so required by any state statute or regulation where
the Funds' shares are offered for sale, each of the Funds, as a non-fundamental
policy, may not:
(i) Invest in warrants if more than 5% of the Fund's net assets would be
invested in warrants. Included within that amount, but not to exceed 2% of the
Fund's net assets, may be warrants not listed on the New York or American Stock
Exchanges. Warrants acquired in units or attached to securities may be deemed
to be without value for such purposes.
(ii) Invest more than 5% of the Fund's total assets in securities of issuers
(other than asset-backed securities, collateralized mortgage obligations and
obligations of, or guaranteed by, the U.S. Government, its agencies or
instrumentalities including collateralized obligations thereof) which with
their predecessors have a record of less than three years continuous operation.
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage beyond the specified limit resulting from a
change in values or total assets will not be considered a violation. The Funds
have no present intention of borrowing during the coming year.
INVESTMENT ADVISERS
THE INVESTMENT ADVISER. Jackson National Financial Services, Inc., is the
Funds' investment adviser. Pursuant to an investment management agreement,
JNFSI acts as the Funds' investment adviser, manages its investments,
administers its business affairs, furnishes office facilities and equipment,
provides clerical, bookkeeping and administrative services and permits any of
its officers or employees to serve without compensation as trustees or officer
of the Funds if elected to such positions. The Funds pay the fees and expenses
of independent auditors, counsel, custodian
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<PAGE> 54
and transfer agent and the cost of reports and notices to shareholders,
costs of calculating net asset value, brokerage commissions or transaction
costs, taxes, registration fees, the fees and expenses of qualifying the Funds
and their shares under federal securities laws and membership dues in the
Investment Company Institute or any similar organization. The Funds' expenses
are generally allocated among the Funds on the basis of relative net assets at
the time of allocation, except that expenses directly attributable to a
particular Fund are charged to that Fund.
The investment management agreement continues in effect for each Fund
from year to year after its initial two-year term so long as its continuation
is approved at least annually by a majority of the Trustees who are not parties
to such agreement or interested persons of any such party except in their
capacity as Trustees of the Funds and by the shareholders of each Fund or the
Board of Trustees. It may be terminated at any time upon 60 days' notice by
either party, or by a majority vote of the outstanding shares of a Fund with
respect to that Fund, and will terminate automatically upon assignment. If
continuation is not approved for a Fund, the investment management agreement
nevertheless may continue in effect for the Funds for which it is approved and
JNFSI may continue to serve as investment adviser for the Fund for which it is
not approved to the extent permitted by the 1940 Act. Additional Funds may be
subject to a different agreement. The investment management agreement provides
that JNFSI shall not be liable for any error of judgment or of law, or for any
loss suffered by the Fund in connection with the matters to which the agreement
relates, except a loss resulting from willful misfeasance, bad faith or gross
negligence on the part of JNFSI in the performance of its obligations and
duties, or by reason of its reckless disregard of its obligations and duties
under the agreement.
For the services and facilities furnished, the Funds pay JNFSI an investment
management fee, payable monthly, based on the following annual percentage of
average daily net assets in each Fund: Money Market Fund 0.50%; Tax-Exempt Fund
0.50%; Income Fund 0.60%; Growth Fund 0.25%; and Total Return Fund 0.70%. The
Funds paid the following advisory fees to JNFSI for the fiscal years ended
October 31, 1995 and 1994, and for the period of November 12, 1992 to October
31, 1993, respectively: Money Market Fund $100,515, $29,349, $14,431;
Tax-Exempt Fund $118,199, $149,698, $135,241; Income Fund $142,087, $179,460,
$163,685; Growth Fund $49,986, $82,237, $71,417; and Total Return Fund
$180,773, $240,982, $201,274. The Money Market Fund was reimbursed $38,921 for
the period of November 1, 1994 to April 30, 1995, $29,349 for the fiscal year
ended October 31, 1994, and $14,431 for the period of November 12, 1992 to
October 31, 1993, by JNFSI. Pursuant to the investment management agreement,
JNFSI has agreed to reimburse the Funds to the extent required by applicable
state expense limitations should all operating expenses of the Funds, including
the investment management fee, but excluding taxes, interest, extraordinary
expenses (as determined by the Board of Trustees) and brokerage commissions or
transaction costs and any other properly excludable expenses, exceed the
applicable state expense limitations. The Funds believe that the most
restrictive state expense limitation currently in effect would require that
such operating expenses not exceed 2.5% of the first $30 million of average
daily net assets, 2% of the next $70 million and 1.5% of average daily assets
over $100 million.
Effective June 1, 1994, JNFSI began providing information and administrative
services ("administrative services") for shareholders of the Fund pursuant to
an Administrative Services
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Agreement. Such administrative services may include, but are not
limited to, maintaining shareholder accounts and records, answering routine
inquiries regarding the Fund and its features, assisting shareholders with
shareholder transactions, processing purchase and redemption transactions,
assisting shareholders in changing dividend and investment options, account
designations and addresses, and such other services as the Fund may reasonably
request. JNFSI may enter into related agreements with various financial
service firms, such as broker-dealers or banks, for the provision of such
administrative services for their clients or customers who are shareholders of
the Fund. For services under the Administrative Services Agreement, each
Portfolio other than the Money Market Fund pays JNFSI a fee, payable monthly at
the annual rate of 0.25% of average daily net assets of the Portfolio. JNFSI
received $59,099 and $31,390 from the Tax-Exempt Fund; $59,203 and $31,065 from
the Income Fund; $49,986 and $35,265 from the Growth Fund; and $64,562 and
$37,188 from the Total Return Fund for the years ended October 31, 1995 and
1994, respectively. Pursuant to its agreements with financial service firms,
JNFSI will pay such firms, for providing such administrative services to their
customers, up to 0.25% per annum of average daily net assets of those accounts
maintained and serviced for each Portfolio other than the Money Market Fund.
Certain trustees or officers of the Funds are also directors or officers of
JNFSI as indicated under "Officers and Trustees."
THE SUB-INVESTMENT ADVISER. PPM America, Inc. invests and reinvests the Funds'
assets consistent with the Funds' respective investment objectives and policies
and subject to the supervision of JNFSI and the Trustees pursuant to an
investment sub-advisory agreement entered into between JNFSI and PPM America.
The investment sub-advisory agreement continues in effect for each Fund from
year to year after its initial two-year term so long as its continuation is
approved at least annually by a majority of the Trustees who are not parties to
such agreement or interested persons of any such party except in their capacity
as Trustees of the Funds and by the shareholders of each Fund or the Board of
Trustees. It may be terminated at any time upon 60 days notice by either
party, or by a majority vote of the outstanding shares of a Fund with respect
to that Fund, and will terminate automatically upon assignment or upon the
termination of the investment management agreement between JNFSI and the Funds.
If continuation is not approved for a Fund, the investment sub-advisory
agreement nevertheless may continue in effect for the Funds for which it is
approved and PPM America may continue to serve as sub-investment adviser for
the Fund for which it is not approved to the extent permitted by the 1940 Act.
Additional Funds may be subject to a different agreement. The investment
sub-advisory agreement provides that PPM America shall not be liable for any
error of judgment or of law, or for any loss suffered by the Funds in
connection with the matters to which the agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on the part
of PPM America in the performance of its obligations and duties, or by reason
of its reckless disregard of its obligations and duties under the agreement.
PPM America is compensated monthly by JNFSI based on the following annual
percentage of average daily net assets of each Fund: Money Market Fund 0.035%;
Tax-Exempt Fund 0.035%; Income Fund 0.035%; Growth Fund 0.035%; and Total
Return Fund 0.035%. JNFSI paid the following sub-investment adviser fees to
PPM America for the fiscal years ended October 31, 1995 and 1994, and for the
period of November 12, 1992 to October 31, 1993, respectively:
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Money Market Fund $7,041, $2,055, $934; Tax-Exempt Fund $8,276, $10,474,
$8,740; Income Fund $8,290, $10,463, $8,845; Growth Fund $6,999, $11,508,
$9,248; and Total Return Fund $9,041, $12,044, $9,345.
CUSTODIAN AND TRANSFER AGENT. Investors Fiduciary Trust Company ("IFTC"), 210
West 10th Street, 8th Floor, Kansas City, Missouri 64105, as custodian, has
custody of all securities and cash of the Fund maintained in the United States.
It attends to the collection of principal and income, and payment for and
collection of proceeds of securities bought and sold by the Fund. IFTC is also
the Fund's transfer agent and dividend-paying agent.
INDEPENDENT AUDITORS AND REPORTS TO SHAREHOLDERS. The Funds' independent
auditors, Price Waterhouse LLP, 100 East Wisconsin Avenue, Milwaukee, Wisconsin
53202, audit and report on the Funds' annual financial statements, prepare the
Funds' federal income and excise tax returns, and perform other professional
accounting, auditing and advisory services when engaged to do so by the Funds.
Shareholders will receive annual audited financial statements and semi-annual
unaudited financial statements.
PORTFOLIO TRANSACTIONS
PPM America provides investment advice to the Funds as well as to other
clients, including Jackson National Life Insurance Company, the parent company
of JNFSI. At times, investment decisions may be made to purchase or sell the
same investment security for one or more Funds and for one or more of the other
clients advised by PPM America. When two or more of such clients are
simultaneously engaged in the purchase or sale of the same security, the
transactions are allocated as to amount and price in a manner considered
equitable to each and so that each receives to the extent practicable the
average price of such transactions, which may or may not be beneficial to a
Fund.
PPM America, in effecting purchases and sales of portfolio securities for the
account of a Fund, will implement the Funds' policy of seeking best execution
of orders. Consistent with this policy, orders for portfolio transactions are
placed with broker-dealer firms giving consideration to the quality, quantity
and nature of each firm's professional services which include execution,
clearance procedures, wire service quotations and statistical and other
research information provided to the Funds and PPM America. Since statistical
and other research information is only supplementary to the research efforts of
PPM America and still must be analyzed and reviewed by its staff, the receipt
of research information is not expected to reduce materially its expenses. In
selecting among the firms believed to meet the criteria for handling a
particular transaction, PPM America may give consideration to those firms that
provide market, statistical and other research information to the funds and PPM
America. PPM America is authorized to pay higher commissions to firms that
provide such services, provided that it determines, in good faith, that the
commission paid was reasonable in relation to the brokerage or research
services provided. The research services obtained may be used by PPM America
to benefit its other clients and will not necessarily be used in connection
with the Funds. While PPM America is primarily responsible for the placement
of
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the Fund's brokerage business, the policies and practices will be subject to
the review of the Board of Trustees. The Funds may purchase instruments issued
by banks which are receiving service payments or commissions; however, no
preferences will be given in making such portfolio purchases. Fixed income and
over the counter equity securities are normally purchased in principal
transactions directly from the issuer or from an underwriter or market maker.
There are normally no brokerage commissions paid for such purchases. Purchases
from underwriters include a commission or concession paid by the issuer to the
underwriter, and purchases from dealers serving as market makers include the
spread between the bid and asking prices. The Funds paid the following
brokerage commissions for the fiscal years ended October 31, 1995 and 1994,
and for the period of November 12, 1992 to October 31, 1993, respectively:
Income Fund $493, $715, $0; Growth Fund $20,505, $3,072, $20,673; and Total
Return Fund $15,119, $15,313, $29,859. During the fiscal year ended October
31, 1995, the Growth Fund purchased securities of its regular broker/dealers in
the following amounts: Merrill Lynch, $26,000; Salomon Brothers, $1,000.
In any particular year, market conditions could necessitate portfolio activity
which results in high or low portfolio turnover rates. A higher turnover rate
will not necessarily indicate a variation from the stated investment policy,
but may increase the brokerage costs payable by a Fund. Portfolio turnover is
calculated by dividing the lesser of the purchases or sales of a Fund's
securities during a fiscal year by the average monthly value of the Fund's
securities during such fiscal year. In determining the portfolio turnover
rate, all securities whose maturities or expiration dates at the time of
acquisition were one year or less are excluded.
DISTRIBUTOR
Jackson National Financial Services, Inc. also serves as distributor and
principal underwriter for the Fund. JNFSI is obligated to use its best efforts
to distribute the Fund's shares on a continuous basis at the offering price
described in the Prospectus. JNFSI bears all its expenses of providing
services pursuant to the underwriting agreement between JNFSI and the Fund,
including the payment of any commissions and service fees. JNFSI provides for
the preparation and distribution of advertising or sales literature, and bears
the cost of printing and mailing prospectuses to persons other than
shareholders. JNFSI bears the cost of qualifying and maintaining the
qualification of the Funds' shares for sale under the securities laws of the
various states and the Funds bear the expense of registering their shares with
the Securities and Exchange Commission. The total underwriting commissions for
each Fund is as follows for the fiscal years ended October 31, 1995 and 1994
and the period of November 12, 1992 to October 31, 1993, respectively: Money
Market Fund $0, $0, $0; Tax-Exempt Fund $18,104, $53,996, $59,240; Income Fund
$16,946, $67,537, $47,729; Growth Fund $71,151, $90,911, $72,573; Total Return
Fund $48,200, $115,853, $63,693. The amount retained by JNFSI as principal
underwriter for the same periods is as follows: Money Market Fund $0, $0, $0;
Tax-Exempt Fund $5,553, $15,538, $14,844; Income Fund $6,905,
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$18,002, $11,986; Growth Fund $25,311, $27,436, $18,102; and Total
Return Fund $17,318, $33,931, $15,977.
PURCHASE OF SHARES
The Fund, through the Board of Trustees or officers, reserves the right in its
sole discretion to withdraw all or any part of the offering made by the
Prospectus or to reject purchase offers. The Fund also reserves the right at
any time to waive or increase the minimum investment requirements. All orders
to purchase shares of a Fund are subject to acceptance by the Fund.
For purposes of determining net asset value, portfolio securities that are
primarily traded on a domestic securities exchange or securities listed on the
NASDAQ National Market System are valued at the last sale price on the exchange
or market where primarily traded or listed or, if there is no recent sale price
available, at the last current bid quotation. Portfolio securities that are
primarily traded on foreign securities exchanges are generally valued at the
preceding closing values of such securities on their respective exchanges where
primarily traded. A security that is listed or traded on more than one
exchange is valued at the quotation on the exchange determined to be the
primary market for such security by the Board of Trustees or its delegates.
Securities not so traded or listed are valued at the last current bid quotation
if market quotations are available. Equity options are valued at the last sale
price unless the bid price is higher or the ask price is lower, in which event
such bid or asked price is used. Exchange traded fixed income options are
valued at the last sale price unless there is no sale price, in which event
current prices provided by market makers are used. Financial futures and
options thereon are valued at the settlement price established each day by the
board of trade or exchange on which they are traded. Other securities,
including restricted securities, and other assets are valued at fair value as
determined in good faith by the Board of Trustees.
Scheduled variations in or eliminations of the sales charge of purchases by
certain classes of persons or through certain types of transactions as
described in the Prospectus is provided because of anticipated economies in
sales and sales-related efforts.
REDEMPTION OF SHARES
Upon receipt by the Transfer Agent of a request for redemption, shares will be
redeemed by a Fund at the applicable net asset value as described in the Funds'
Prospectus. When a Fund is asked to redeem shares for which it may not have
yet received good payment, it may delay the mailing of a redemption check until
it has determined that collected funds have been received for the purchase of
such shares, which will generally be within 15 days.
The Fund may suspend the right of redemption or delay payment more than seven
days (a) during any period when the New York Stock Exchange is closed (other
than customary weekend and holiday closings), (b) when trading in the markets a
Fund normally utilizes is restricted, or an emergency exists as determined by
the Securities and Exchange Commission so that disposal of the Fund's
investments or determination of its net asset value is not reasonably
practicable, or (c) for
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such other periods as the Securities and Exchange Commission by order may
permit for protection of the Fund's shareholders.
REDEMPTION-IN-KIND ELECTION
Although it is the Fund's present policy to redeem in cash, if the
Board of Trustees determines that a material adverse effect would be
experienced by the remaining shareholders if payment were made wholly in cash,
the Funds will pay the redemption price in whole or in part by a distribution
of portfolio securities in lieu of cash, in conformity with the applicable
rules of the SEC, taking such securities at the same value used to determine
net asset value, and selecting the securities in such manner as the Board of
Trustees may deem fair and equitable. If such a distribution occurs,
shareholders receiving securities and selling them could receive less than the
redemption value of such securities and in addition would incur certain
transaction costs. Such a redemption would not be as liquid as a redemption
entirely in cash. The Fund has elected to be governed by Rule 18f-1 under the
1940 Act pursuant to which each Fund is obligated to redeem shares solely in
cash up to the lesser of $250,000 or one percent of the net asset value of a
Fund during any 90-day period for any one shareholder of record.
DIVIDENDS AND TAXES
TAX-EXEMPT, INCOME, GROWTH AND TOTAL RETURN FUNDS DIVIDENDS. Net income of the
Funds for dividend purposes (from the time of the preceding determination) will
consist of interest and dividend income earned, if any, less accrued expenses.
In computing interest income, for the Income Fund and Total Return Fund,
discounts and premiums on securities purchased are amortized to maturity. In
computing interest income for the Tax-Exempt Fund, original issue discount and
tax-exempt premiums are amortized to maturity. Gains attributable to market
discount on municipal securities acquired after April 30, 1993 are treated as
ordinary income.
MONEY MARKET FUND DIVIDENDS. On each day that the net asset value per share of
the Money Market Fund is determined, the Money Market Fund's net investment
income will be declared as of 4:00 p.m. Eastern time as a dividend to
shareholders of record prior to the declaration. Dividends will be reinvested
or paid in cash monthly. If a shareholder redeems his entire account, all
dividends accrued to the time of redemption will be paid at that time. The
Money Market Fund calculates its dividends based on its daily net investment
income. For this purpose, the net investment income of the Money Market Fund
consists of (1) accrued interest income plus or minus amortized discount or
premium, (2) plus or minus all short-term realized gains and losses on
investments and (3) minus accrued expenses allocated to the Money Market Fund.
Expenses are accrued each day. While the Money Market Fund's investments are
valued at amortized cost (see "How to Buy Shares - Net Asset Value" in the
prospectus), there will be no unrealized gains or losses on such investments.
However, should the net asset value deviate significantly from market-based
value, the Board of Trustees could decide to value the investments at market
value and then unrealized gains and losses would be included in net investment
income above.
GENERAL. The Fund may at any time vary its dividend practices and, therefore,
reserves the right from time to time to either distribute or retain for
reinvestment such of its net investment income
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and its net short-term capital gains as the Board of Trustees of the
Fund determines appropriate under the then current circumstances. In
particular, and without limiting the foregoing, the Fund may make additional
distributions of net investment income or capital gain net income in order to
satisfy the minimum distribution requirements contained in the Code. Under the
Code, a 4% excise tax is imposed on the excess of the required distribution for
a calendar year over the distributed amount for such calendar year. The
distributed amount includes dividends declared in October, November and
December to shareholders of record as of a specified date in one of those
months and paid during the following January. The required distribution is the
sum of 98% of a Fund's ordinary income for the calendar year plus 98% of its
capital gain net income for the one-year period ended October 31, plus any
undistributed net investment income from the prior calendar year, plus any
undistributed capital gain net income from the one-year period ended October 31
in the prior calendar year, minus any over-distribution in the prior calendar
year. Each Fund intends to declare and distribute dividends during the
appropriate periods of an amount sufficient to prevent imposition of the 4%
excise tax.
TAXES. Each of the Funds intends to continue to qualify as a regulated
investment company under Subchapter M of the Code in order for the Fund to
avoid taxation on its net investment income and net capital gains to the extent
distributed by the Fund. One of the Subchapter M requirements to be satisfied
is that less than 30% of the Fund's gross income during the fiscal year must be
derived from gains from the sale or other disposition of securities and certain
other investments held for less than three months. A Fund may be limited in
its options and futures transactions in order to prevent recognition of such
gains.
A Fund's options and futures transactions are subject to special tax provisions
that may accelerate or defer recognition of certain gains or losses, change the
character of certain gains or losses, or alter the holding periods of certain
of a Fund's securities.
Distributions of investment income and net short-term capital gains are treated
as ordinary income for federal income tax purposes whether received in cash or
shares. A portion of the ordinary income dividends from the Growth and Total
Return Funds may be eligible for the dividends received deduction available to
corporate shareholders. The aggregate amount eligible for the dividends
received deduction may not exceed the aggregate qualifying dividends received
by the Fund for the fiscal year.
A shareholder who redeems shares of a Fund will recognize capital gain or loss
for federal income tax purposes measured by the difference between the value of
the shares redeemed and the basis of the shares. Any loss recognized on the
redemption of Fund shares held six months or less will be treated as long-term
capital loss to the extent that the shareholder has received any long-term
capital gain dividends on such shares. Any loss realized on the sale of
Tax-Exempt Fund shares that have been held for six months or less will be
disallowed to the extent of any exempt-interest dividends received by the
shareholder on such shares.
If a shareholder realized a loss on the redemption of Fund shares and reinvests
in shares of the same Fund, including dividends reinvested, within 30 days
before or after the redemption, the transactions may be subject to the wash
sale rules resulting in a postponement of the recognition on
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all or a portion of such loss for federal income tax purposes. An exchange of
Fund shares for shares of another Fund is treated as a redemption and
reinvestment for federal income tax purposes upon which gain or loss may be
recognized. A shareholder who has redeemed shares of a Fund, except purchased
shares of the Money Market Fund, may reinvest the amount redeemed at net asset
value at the time of the reinvestment in shares of another Fund, as described
in the prospectus under "Shareholder Services - Exchange Privilege." If the
redeemed shares were held less than 91 days, then the lesser of (a) the sales
charge waived on the reinvestment shares or (b) the sales charge incurred on
the redeemed shares is included in the basis of the reinvestment shares and is
not included in the basis of the redeemed shares.
Investment income received by the Money Market, Income and Total Return Funds
as a result of investing in foreign securities may be subject to foreign income
taxes withheld at the source. Because the amount of a Fund's investments in
various countries will change from time to time, it is not possible to
determine the effective rate of such taxes in advance.
Interest on indebtedness which is incurred to purchase or carry shares of a
mutual fund that distributes exempt-interest dividends during the year (e.g.,
the Tax-Exempt Fund) is not deductible for federal income tax purposes.
Further, the Tax-Exempt Fund may not be an appropriate investment for persons
who are "substantial users" of facilities financed by industrial development
bonds held by the Tax-Exempt Fund or are "related persons" to such users; such
persons should consult with their tax advisers before investing in the
Tax-Exempt Fund.
The "Superfund Act of 1986" (the "Superfund Act") imposes a separate tax on
corporations at a rate of 0.12% of the excess of such corporation's "modified
alternative minimum taxable income" over $2,000,000. A portion of tax-exempt
interest, including exempt-interest dividends from the Tax-Exempt Fund, may be
includable in modified alternative minimum taxable income. Corporate
shareholders of the Tax-Exempt Fund are advised to consult with their tax
advisers with respect to the consequences of the Superfund Act.
Shareholders who are non-resident aliens are subject to U.S. withholding tax on
ordinary income dividends (whether received in cash or shares) at a rate of 30%
or such lower rate as prescribed by any applicable tax treaty.
PERFORMANCE
As described in the prospectus, a Fund's historical performance or return may
be shown in the form of "average annual total return" and "cumulative total
return" figures in the case of all Funds except the Money Market Fund; "yield"
in the case of all Funds except the Growth Fund; "yield" and "effective yield"
in the case of the Money Market Fund; and "tax equivalent yield" in the case of
the Tax-Exempt Fund. These various measures of performance are described
below.
Average annual total return and cumulative total return measure both the net
investment income generated by, and the effect of any realized and unrealized
appreciation or depreciation of, the underlying investments of a Fund. Yield
is a measure of the net investment income per share
23
<PAGE> 62
earned over a specific one month or 30-day period (seven-day period for the
Money Market Fund) expressed as a percentage of the net asset value.
A Fund's average annual total return quotation is computed in accordance with a
standardized method prescribed by rules of the Securities and Exchange
Commission. The average annual total return for a Fund for a specific period
is found by first taking a hypothetical $1,000 investment ("initial
investment") in the Fund's shares on the first day of the period, adjusting to
deduct the maximum sales charge, and computing the "redeemable value" of that
investment at the end of the period. The redeemable value is then divided by
the initial investment, and this quotient is taken to the Nth root (N
representing the number of years in the period) and 1 is subtracted from the
result, which is then expressed as a percentage. The calculation assumes that
all income and capital gains dividends paid by the Fund have been reinvested
at net asset value on the reinvestment dates during the period. Average annual
total return for each Fund for the periods indicated was as follows:
<TABLE>
<CAPTION>
11/1/94- 11/12/92-*
10/31/95 10/31/95
<S> <C> <C>
TAX-EXEMPT FUND 6.00% 4.54%
INCOME FUND 7.80% 4.82%
GROWTH FUND 19.90% 11.97%
TOTAL RETURN FUND 16.90% 10.85%
*COMMENCEMENT OF OPERATIONS
</TABLE>
Calculation of a Fund's cumulative total return is not subject to a
standardized formula. Cumulative total return performance for a specific
period is calculated by first taking an investment ("initial investment") in
the Fund's shares on the first day of the period, either adjusting or not
adjusting to deduct the maximum sales charge, and computing the "ending value"
of that investment at the end of the period. The cumulative total return
percentage is then determined by subtracting the initial investment from the
ending value and dividing the remainder by the initial investment and
expressing the result as a percentage. The calculation assumes that all income
and capital gains dividends paid by the Fund have been reinvested at net asset
value on the reinvestment dates during the period. Cumulative total return may
also be shown as the increased dollar value of the hypothetical investment over
the period. Cumulative total return figures for various periods that do not
include the effect of the sales charge would be reduced if such charge were
included. Cumulative total return for each Fund for the periods indicated was
as follows:
24
<PAGE> 63
<TABLE>
<S> <C> <C>
11/1/94- 11/12/92*-
10/31/95 10/31/95
TAX-EXEMPT FUND 11.32% 19.82%
INCOME FUND 13.13% 20.75%
GROWTH FUND 25.83% 46.84%
TOTAL RETURN FUND 22.72% 42.56%
*COMMENCEMENT OF OPERATIONS
</TABLE>
The yield for a Fund is computed in accordance with a standardized method
prescribed by rules of the SEC. The yield for each of the Tax-Exempt Fund,
Income Fund, Growth Fund, and Total Return Fund for the 30-day period ended
October 31, 1995 was 4.07%, 5.00%, 2.03%, and 3.36%, respectively. The yield
for a Fund other than the Money Market Fund is computed by dividing the net
investment income per share earned during the specified one month or 30-day
period by the offering price per share on the last day of the period, according
to the following formula:
6
YIELD = 2 [(a - b +1) -1]
-----
cd
Where:
a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends.
d = the offering price (net asset value) per share on the last
day of the period.
In computing the foregoing yield, the Funds follow certain standardized
accounting practices specified by SEC rules. These practices are not
necessarily consistent with those that Funds use to prepare annual and interim
financial statements in accordance with generally accepted accounting
principles.
The Tax-Exempt Fund's tax equivalent yield is computed by dividing that portion
of the Tax-Exempt Fund's yield (computed as described above) that is tax-exempt
by (one minus the stated federal income tax rate) and adding the result to that
portion, if any, of the yield of the Tax-Exempt Fund that is not tax-exempt.
Based upon a marginal federal income tax rate of 31.0% and the Tax-Exempt
Fund's yield computed as described above for the 30-day period ended October
31, 1995, the Tax-Exempt Fund's yield for that period was 5.90%.
The Money Market Fund's yield is also computed in accordance with a
standardized method prescribed by rules of the SEC. Under that method, the
current yield quotation is based on a seven-day period and is computed as
follows. The first calculation is net investment income per share; which is
accrued interest on portfolio securities, plus or minus amortized discount or
premium, less accrued expenses. This number is then divided by the price per
share (expected to remain constant at $1.00) at the beginning of the period
("base period return"). The result is then divided by 7 and
25
<PAGE> 64
multiplied by 365 and the resulting yield figure is carried to the nearest
one-hundredth of one percent. Realized capital gains or losses and unrealized
appreciation or depreciation of investments are not included in the
calculation. The Money Market Fund's yield for the seven-day period ended
October 31, 1995 was 5.37%.
The Money Market Fund's effective yield is determined by taking the base
period return (computed as described above) and calculating the effect of
assumed compounding. The formula for the effective yield is:
(base period return + 1)(365/7) - 1. The Money Market Fund's effective
yield for the seven day period ended October 31, 1995 was 5.51%.
A Fund's performance quotations are based upon historical results and are not
necessarily representative of future performance. The Funds' shares are sold
at net asset value plus any applicable sale charge (maximum 4.75%) in the case
of all Funds except the Money Market Fund. Returns and net asset value will
fluctuate, except that the Money Market Fund seeks to maintain a $1.00 net
asset value per share. Factors affecting a Fund's performance include general
market conditions, operating expenses and investment management. Share of a
Fund are redeemable at the then current net asset value, which may be more or
less than original cost.
The performance of the Funds may be compared to various indexes. There are
differences and similarities between the investments which a Fund may purchase
and the investments measured by the indexes which are described herein. The
Consumer Price Index is generally considered to be a measure of inflation. The
S & P 500 Index is an unmanaged index of common stocks which is considered to
be generally representative of the United States stock market. The market
prices and yields of the stocks in this index will fluctuate. The Salomon
Brothers High Grade Corporate Bond Index generally represents the performance
of high grade long-term corporate bonds during various market conditions. The
Lehman Brothers Government and Corporate Bond Index generally represents the
performance of intermediate and long-term government and investment grade
corporate debt securities during various market conditions. The Salomon
Brothers Long-Term High Yield Index generally represents the performance of
high yield debt securities during various market conditions. The Merrill Lynch
Government and Corporate Master Index generally represents the performance of
intermediate and high grade corporate debt securities during various market
conditions. The foregoing bond indexes are unmanaged. The market prices and
yields of corporate and government bonds will fluctuate. Lipper and CDA are
widely recognized independent mutual fund reporting services. Lipper and CDA
indexes are weighted performance averages of other mutual funds with similar
investment objectives. The net asset values and returns of the Funds will also
fluctuate. No adjustments are made for taxes payable on dividends.
OFFICERS AND TRUSTEES
The officers of the Funds manage their day to day operations and are
responsible to the Funds' Board of Trustees. The trustees set broad policies
for each Fund and choose the Funds' officers. The following is a list of the
trustees and officers of the Funds and a statement of their present positions
and principal occupations during the past five years. The mailing address of
the officers and trustees, unless otherwise noted, is 5901 Executive Drive,
Lansing, Michigan 48911.
26
<PAGE> 65
JOHN A. KNUTSON*(Age 56), President, Trustee and Chairman of the Board, June
1993 to present, Chief Financial Officer, 1992 to December 1994; President,
Chief Executive Officer, Trustee and Chairman of the Board, December 1994 to
present, JNL Series Trust; President, August 1993 to present, Chief Financial
Officer, February, 1992 to present, Director, November 1991 to present,
Jackson National Financial Services, Inc.; President, June 1993 to February
1994, Senior Vice President, September 1987 to June 1993 and February 1994 to
present, Chief Financial Officer, September 1987 to June 1994, Chief Operating
Officer, September 1992 to present, Jackson National Life Insurance Company.
R. WILLIAM SHEATHELM (Age 59), Trustee; 2419 Science Parkway, Okemos, Michigan
48864; President, Schultz Snyder & Steele Lumber Company.
BEVERLY WOLKOW (Age 54), Trustee; 3725 West Howell Road, Mason, Michigan
48854; Retired; Executive Director, Michigan Education Association;
Chairperson, MEA Financial Services, a general insurance agency; 1990 to 1995,
Executive Secretary, Verity Insurance Co.
PAUL B. (PETE) PHEFFER (Age 44), Vice President and Assistant Treasurer;
Trustee, Vice President, Treasurer and Chief Financial Officer, December 1994
to present, JNL Series Trust; Senior Vice President, Chief Financial Officer
and Treasurer, May 1994 to present, Jackson National Life Insurance Company;
Chief Financial Officer and Chief Financial Officer, March 1992 to May 1994,
Vice President and Chief Financial Officer, January 1990 to February 1992,
Kemper Life Insurance Companies.
THOMAS J. MEYER (Age 49), Vice President and Secretary; Vice President, Counsel
and Secretary, December 1994 to present, JNL Series Trust; Secretary and Chief
Legal Officer, November 1991 to present, Director, June 1995 to present,
Jackson National Financial Services, Inc.; Secretary, September 1994 to
present, Vice President September 1990 to present, General Counsel, March 1985
to present, Jackson National Life Insurance Company.
LARRY C. JORDAN (Age 53), Vice President and Assistant Secretary; Vice
President, December 1994 to present, Assistant Treasurer, December 1994 to
February 1996, Assistant Secretary, February 1996 to present, JNL Series Trust;
Treasurer and Assistant Secretary, November 1991 to present, Chief Operating
Officer, September 1992 to present, Director, June 1993 to present, Jackson
National Financial Services, Inc.; Treasurer, October 1980 to September 1994,
Vice President, October 1980 to present, Jackson National Life Insurance
Company.
ROBERT A. FRITTS (Age 47), Vice President, Controller and Assistant Treasurer,
December 1994 to present; Vice President, December 1994 to present, Assistant
Secretary, December 1994 to
27
<PAGE> 66
February 1996, Assistant Treasurer, February 1996 to present, JNL Series Trust;
Assistant Treasurer, Vice President, Jackson National Life Insurance Company.
- -------------
* Trustees who are interested persons as defined in the Investment Company Act
of 1940.
On February 1, 1996, the officers and trustees of the Funds, as a group, owned
less than 1% of the then outstanding shares of the Money Market, Tax-Exempt,
Income, Growth and Total Return Funds. Jackson National Life Insurance
Company, through its initial investment of capital into each Fund controls the
Tax-Exempt, Income, Growth and Total Return Funds and thereby would control any
shareholders' vote until such time as Jackson National Life Insurance Company
no longer controls those Funds.
The trustees and officers who are "interested persons" as designated above
receive no compensation from the Funds. The table below shows amounts paid to
those trustees who are not "interested persons" during the Funds' 1995 fiscal
year.
COMPENSATION TABLE
<TABLE>
<CAPTION>
=======================================================================================
(1) (2) (3) (4) (5)
NAME OF AGGREGATE PENSION OR ESTIMATED TOTAL
PERSON, COMPENSATION RETIREMENT ANNUAL COMPENSATION
POSITION FROM BENEFITS BENEFITS FROM
REGISTRANT ACCRUED UPON REGISTRANT
AS PART OF RETIREMENT AND FUND
FUND COMPLEX PAID
TO DIRECTORS
=======================================================================================
<S> <C> <C> <C> <C>
R. William
Sheathelm,
Trustee $4,000* N/A N/A $4,000*
Beverly
Wolkow,
Trustee $4,000* N/A N/A $4,000*
</TABLE>
*For year ended October 31, 1995
SHAREHOLDER RIGHTS
The Fund generally is not required to hold meetings of its shareholders. Under
the Agreement and Declaration of Trust of the Fund ("Declaration of Trust"),
however, shareholder meetings will be held in connection with the following
matters: (1) the election or removal of trustees if a meeting is called for
such purpose; (2) the adoption of any investment advisory contract; (3) any
termination of the Funds to the extent and as provided in the Declaration of
Trust; (4) any amendment of the Declaration of Trust (other than amendments
changing the name of the Fund supplying any omission, curing any ambiguity or
curing, correcting or supplementing any defective or inconsistent provision
thereof); and (5) such additional matters as may be required by law, the
Declaration of Trust, the By-laws of the Fund, or any registration of the Fund
with the Securities and Exchange Commission or any state, or as the trustees
may consider necessary or desirable. The shareholders also would vote upon
changes in fundamental investment objectives, policies or restrictions.
28
<PAGE> 67
Each trustee serves until the next meeting of shareholders, if any, called for
the purpose of electing trustees and until the election and qualification of
his successor or until such trustee sooner dies, resigns or is removed by a
vote of two-thirds of the shares entitled to vote or a majority of the
trustees. In accordance with the 1940 Act (i) the Fund will hold a shareholder
meeting for the election of trustees at such time as less than a majority of
the trustees have been elected by shareholders, and (ii) if, as a result of a
vacancy in the Board of Trustees, less than two-thirds of the trustees have
been elected by the shareholders, that vacancy will be filled only by a vote
of the shareholders. A shareholders' meeting shall be held for the purposes
of voting upon the removal of a trustee upon the written request of the holders
of not less than 10% of the outstanding shares. Upon the written request of
ten or more shareholders who have been such for at least six months and who
hold shares constituting at least 1% of the outstanding shares of a Fund
stating that such shareholders wish to communicate with the other shareholders
for the purpose of obtaining the signatures necessary to demand a meeting to
consider removal of a trustee, the Fund has undertaken to disseminate
appropriate materials at the expense of the requesting shareholders.
The Declaration of Trust provides that the presence at a shareholder meeting in
person or by proxy of at least 30% of the shares entitled to vote on a matter
shall constitute a quorum. Thus, a meeting of shareholders of the Fund could
take place even if less than a majority of the shareholders were represented on
its scheduled date. Shareholders would in such a case be permitted to take
action which does not require a larger vote than a majority of a quorum, such
as the election of trustees and ratification of the selection of auditors.
Some matters requiring a larger vote under the Declaration of Trust, such as
termination or reorganization of the Fund and certain amendments of the
Declaration of Trust, would not be affected by this provision; nor would
matters which under the 1940 Act require the vote of a "majority of the
outstanding voting securities" as defined in the 1940 Act.
The Declaration of Trust specifically authorizes the Board of Trustees to
terminate the Fund (or any series (Fund) thereof) by notice to the shareholders
without shareholder approval.
Under Massachusetts law, shareholders of a Massachusetts business trust could,
under certain circumstances, be held personally liable for obligations of the
Fund. The Declaration of Trust, however, disclaims shareholder liability for
acts or obligations of the Fund and requires that notice of such disclaimer be
given in each agreement, obligation, or instrument entered into or executed by
the Fund or the trustees. Moreover, the Declaration of Trust provides for
indemnification out of Fund property for all losses and expenses of any
shareholder held personally liable for the obligations of the Fund and the Fund
will be covered by insurance which the trustees consider adequate to cover
foreseeable tort claims. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is considered remote, since it is
limited to circumstances in which a disclaimer is inoperative and the Fund
itself is unable to meet its obligations.
29
<PAGE> 68
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and
Board of Trustees of
Jackson National Capital Management Funds
In our opinion, the accompanying statements of assets and liabilities,
including the schedules of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of Jackson National
Money Market Fund, Jackson National Tax-Exempt Fund, Jackson National Income
Fund, Jackson National Growth Fund and Jackson National Total Return Fund
(constituting the Jackson National Capital Management Funds, hereafter referred
to as the "Funds") at October 31, 1995, the results of each of their operations
for the year then ended, the changes in each of their net assets for each of
the two years in the period then ended and the financial highlights for each of
the two years in the period ended October 31, 1995 and for the period November
12, 1992 (commencement of operations) through October 31, 1993, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Funds' management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at October 31, 1995 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
/s/ Price Waterhouse LLP
November 30, 1995
/s/ Price Waterhouse LLP
30
<PAGE> 69
JACKSON NATIONAL CAPITAL MANAGEMENT FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
OCTOBER 31, 1995
<TABLE>
<CAPTION>
MONEY MARKET TAX-EXEMPT INCOME
FUND FUND FUND
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investments in securities, at value (Cost: $24,181,808; $24,181,808 $21,365,546 $21,663,367
$20,722,121; $21,161,776; $10,769,062; and $20,230,669,
respectively)
Cash 2,932 91,698 2,593
Receivables
Dividends and interest - 373,635 485,118
Fund shares sold 60,076 20,528 -
Investments sold - 396,935 -
Prepaid expenses 10,630 10,630 10,630
- ---------------------------------------------------------------------------------------------------------------
ToTAL ASSETS 24,255,446 22,258,972 22,161,708
- ---------------------------------------------------------------------------------------------------------------
LIABILITIES
Payables
Dividends to shareholders 4,267 1,232 1,834
Fund shares redeemed 85,813 - -
Investments purchased - 494,083 -
Adviser 19,618 19,618 19,618
Accrued expenses and other liabilities 48,038 34,651 35,396
- ---------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 157,736 549,584 56,848
- ---------------------------------------------------------------------------------------------------------------
NET ASSETS $24,097,710 $21,709,388 $22,104,860
===============================================================================================================
NET ASSETS CONSIST OF
Trust capital (beneficial interest) $24,097,710 $20,982,723 $22,508,366
Accumulated undistributed net investment income - 552 489
Accumulated net realized gains (losses) on investments - 82,688 (905,586)
Accumulated net unrealized appreciation on investments - 643,425 501,591
- ---------------------------------------------------------------------------------------------------------------
NET ASSETS $24,097,710 $21,709,388 $22,104,860
===============================================================================================================
===============================================================================================================
SHARES OF BENEFICIAL INTEREST OUTSTANDING (UNLIMITED NUMBER OF
SHARES AUTHORIZED) 24,097,710 2,085,712 2,188,205
===============================================================================================================
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE $1.00 $10.41 $10.10
===============================================================================================================
MAXIMUM PUBLIC OFFERING PRICE (Net Asset Value Per Share divded by
0.9525 for a 4.75% sales charge except for the Money Market Fund) $1.00 $10.93 $10.60
===============================================================================================================
<CAPTION>
Growth Total Return
Fund Fund
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments in securities, at value (Cost: $24,181,808; $13,547,461 $23,218,924
$20,722,121; $21,161,776; $10,769,062; and $20,230,669
respectively)
Cash 99,985 39,684
Receivables
Dividends and interest 19,685 252,035
Fund shares sold 1,598 4,364
Investments sold 905 316,380
Prepaid expenses 10,630 10,630
- ---------------------------------------------------------------------------------------------------
TOTAL ASSETS 13,680,264 23,842,017
- ---------------------------------------------------------------------------------------------------
LIABILITIES
Payables
Dividends to shareholders - -
Fund shares redeemed 800 -
Investments purchased 80,224 134,276
Adviser 19,618 19,618
Accrued expenses and other liabilities 35,664 38,385
- ---------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 136,306 192,279
- ---------------------------------------------------------------------------------------------------
NET ASSETS $ 13,543,958 $23,649,738
===================================================================================================
NET ASSETS CONSIST OF
Trust capital (beneficial interest) $ 7,295,758 $18,264,481
Accumulated undistributed net investment income 352,957 842,197
Accumulated net realized gains (losses) on investments 3,116,844 1,554,805
Accumulated net unrealized appreciation on investments 2,778,399 2,988,255
- ---------------------------------------------------------------------------------------------------
NET ASSETS $13,543,958 $23,649,738
===================================================================================================
===================================================================================================
SHARES OF BENEFICIAL INTEREST OUTSTANDING (UNLIMITED NUMBER OF
SHARES AUTHORIZED) 973,881 1,864,527
===================================================================================================
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE $13.91 $12.68
===================================================================================================
MAXIMUM PUBLIC OFFERING PRICE (Net Asset Value Per Share divided by
0.9525 for a 4.75% sales charge except for the Money Market Fund) $14.60 $13.31
===================================================================================================
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
31
<PAGE> 70
JACKSON NATIONAL CAPITAL MANAGEMENT FUNDS
STATEMENTS OF OPERATIONS
YEAR ENDED OCTOBER 31, 1995
<TABLE>
<CAPTION>
MONEY MARKET TAX-EXEMPT INCOME
FUND FUND FUND
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
Dividends $ - $ - $ 36,308
Taxable interest 1,206,993 9,116 1,600,987
Tax-exempt interest - 1,289,560 -
Other income - - 7,000
Foreign tax withholding - - -
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 1,206,993 1,298,676 1,644,295
- -------------------------------------------------------------------------------------------------------------------
EXPENSES
Administrative service fees - 59,099 59,203
Adviser fees 100,515 118,199 142,087
Custodian fees 17,018 6,801 9,549
Portfolio accounting fees 42,000 42,000 42,000
Professional fees 24,251 24,251 24,251
S.E.C. and state registration fees 22,240 22,219 22,217
Transfer agency fees 124,868 83,130 83,946
Other 8,339 6,830 7,388
- -------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 339,231 362,529 390,641
Less
Reimbursement from Adviser (277,622) (149,234) (155,633)
Fees paid indirectly (81) (5,604) (6,950)
- -------------------------------------------------------------------------------------------------------------------
TOTAL NET EXPENSES 61,528 207,691 228,058
- -------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 1,145,465 1,090,985 1,416,237
- -------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Net realized gains on investments - 82,674 84,845
Net change in unrealized appreciation (depreciation) on investments - 1,448,037 1,313,114
- -------------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS - 1,530,711 1,397,959
- -------------------------------------------------------------------------------------------------------------------
===================================================================================================================
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 1,145,465 $ 2,621,696 $ 2,814,196
===================================================================================================================
<CAPTION>
GROWTH TOTAL RETURN
FUND FUND
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Dividends $565,352 $526,971
Taxable interest - 842,943
Tax-exempt interest - -
Other income - 12,197
Foreign tax withholding (2,258) -
- ----------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 563,094 1,382,111
- ----------------------------------------------------------------------------------------------------
EXPENSES
Administrative service fees 49,986 64,562
Adviser fees 49,986 180,773
Custodian fees 21,060 15,878
Portfolio accounting fees 42,000 42,000
Professional fees 24,251 24,251
S.E.C. and state registration fees 22,249 22,236
Transfer agency fees 85,267 98,913
Other 17,024 10,323
- ----------------------------------------------------------------------------------------------------
TOTAL EXPENSES 311,823 458,936
Less
Reimbursement from Adviser (262,088) (151,094)
Fees paid indirectly (4,147) (8,842)
- ----------------------------------------------------------------------------------------------------
TOTAL NET EXPENSES 45,588 299,000
- ----------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 517,506 1,083,111
- ----------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Net realized gains on investments 3,128,377 1,555,619
Net change in unrealized appreciation (depreciation) on investments (218,864) 2,295,607
- ----------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS 2,909,513 3,851,226
- ----------------------------------------------------------------------------------------------------
====================================================================================================
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $3,427,019 $4,934,337
====================================================================================================
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
32
<PAGE> 71
JACKSON NATIONAL CAPITAL MANAGEMENT FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
MONEY MARKET FUND TAX-EXEMPT FUND
Year ended Year ended Year ended Year ended
10/31/95 10/31/94 10/31/95 10/31/94
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income $1,145,465 $242,335 $1,090,985 $1,331,513
Net realized gains (losses) on investments - - 82,674 187,580
Net change in unrealized appreciation (depreciation) on investments - - 1,448,037 (2,850,463)
- ----------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 1,145,465 242,335 2,621,696 (1,331,370)
- ----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income (1,145,465) (242,335) (1,090,902) (1,331,695)
Net realized gains on investments - - (187,566) -
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (1,145,465) (242,335) (1,278,468) (1,331,695)
- ----------------------------------------------------------------------------------------------------------------------------------
TRUST SHARE TRANSACTIONS
Purchases of trust shares 41,294,922 9,912,678 666,409 1,543,929
Income dividends reinvested 1,105,023 233,871 1,077,486 1,315,151
Capital gain distributions reinvested - - 187,004 -
Redemption of trust shares (27,404,428) (5,159,230) (11,028,400) (622,347)
- ----------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN TRUST CAPITAL 14,995,517 4,987,319 (9,097,501) 2,236,733
- ----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets 14,995,517 4,987,319 (7,754,273) (426,332)
Net Assets Beginning of Period 9,102,193 4,114,874 29,463,661 29,889,993
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS END OF PERIOD $24,097,710 $9,102,193 $21,709,388 $29,463,661
==================================================================================================================================
==================================================================================================================================
UNDISTRIBUTED NET INVESTMENT INCOME $- $- $552 $469
==================================================================================================================================
<CAPTION>
INCOME FUND GROWTH FUND
Year ended Year ended Year ended Year ended
10/31/95 10/31/94 10/31/95 10/31/94
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income $1,416,237 $1,691,684 $517,506 $768,351
Net realized gains (losses) on investments 84,845 (990,465) 3,128,377 172,128
Net change in unrealized appreciation (depreciation) on investments 1,313,114 (2,705,042) (218,864) 226,877
- -----------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 2,814,196 (2,003,823) 3,427,019 1,167,356
- -----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income (1,416,253) (1,691,766) (794,089) (679,498)
Net realized gains on investments - (187,914) (183,124) (10,428)
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (1,416,253) (1,879,680) (977,213) (689,926)
- -----------------------------------------------------------------------------------------------------------------------------------
TRUST SHARE TRANSACTIONS
Purchases of trust shares 593,692 1,873,137 2,885,484 2,906,392
Income dividends reinvested 1,392,590 1,672,248 793,295 678,575
Capital gain distributions reinvested - 185,633 182,992 10,414
Redemption of trust shares (10,718,110) (739,619) (27,735,223) (823,872)
- -----------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN TRUST CAPITAL (8,731,828) 2,991,399 (23,873,452) 2,771,509
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets (7,333,885) (892,104) (21,423,646) 3,248,939
Net Assets Beginning of Period 29,438,745 30,330,849 34,967,604 31,718,665
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS END OF PERIOD $22,104,860 $29,438,745 $13,543,958 $34,967,604
===================================================================================================================================
===================================================================================================================================
UNDISTRIBUTED NET INVESTMENT INCOME $489 $505 $352,957 $629,540
===================================================================================================================================
<CAPTION>
TOTAL RETURN FUND
Year ended Year ended
10/31/95 10/31/94
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS
Net investment income $1,083,111 $1,320,616
Net realized gains (losses) on investments 1,555,619 20,197
Net change in unrealized appreciation (depreciation) on investments 2,295,607 (1,129,267)
- --------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 4,934,337 211,546
- --------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income (1,356,169) (1,258,830)
Net realized gains on investments (20,167) (1,046,251)
- --------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (1,376,336) (2,305,081)
- --------------------------------------------------------------------------------------------------
TRUST SHARE TRANSACTIONS
Purchases of trust shares 1,829,337 4,012,336
Income dividends reinvested 1,353,794 1,255,399
Capital gain distributions reinvested 20,149 1,043,399
Redemption of trust shares (18,925,616) (821,322)
- --------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN TRUST CAPITAL (15,722,336) 5,489,812
- --------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets (12,164,335) 3,396,277
Net Assets Beginning of Period 35,814,073 32,417,796
- --------------------------------------------------------------------------------------------------
NET ASSETS END OF PERIOD $23,649,738 $35,814,073
==================================================================================================
==================================================================================================
UNDISTRIBUTED NET INVESTMENT INCOME $842,197 $1,115,255
==================================================================================================
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
33
<PAGE> 72
JACKSON NATIONAL CAPITAL MANAGEMENT FUNDS
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
MONEY MARKET FUND TAX-EXEMPT FUND
Year ended Year ended Period ended Year ended Year ended
10/31/95 10/31/94 10/31/93* 10/31/95 10/31/94
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $9.87 $10.78
INCOME FROM INVESTMENT OPERATIONS
Net investment income (c) 0.06 0.04 0.03 0.48 0.46
Net realized and unrealized gains (losses) on
investments - - - 0.60 (0.91)
- -----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.06 0.04 0.03 1.08 (0.45)
- -----------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM
Net investment income (0.06) (0.04) (0.03) (0.48) (0.46)
Net realized gain on investments (f) - - - (0.06) -
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders (0.06) (0.04) (0.03) (0.54) (0.46)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net asset value - - - 0.54 (0.91)
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $10.41 $9.87
===================================================================================================================================
TOTAL RETURN (A)(B) 5.87% 3.94% 3.25% 11.32% (04.2%)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $24,098 $9,102 $4,115 $21,709 $29,464
Ratio of net expenses to average net assets (b)(d) 0.31% 0.00% 0.00% 0.88% 0.90%
Ratio of net investment income to average net assets (b)(d) 5.71% 4.00% 3.15% 4.64% 4.46%
Portfolio turnover rate - - - 79.18% 41.74%
RATIO INFORMATION ASSUMING NO EXPENSE REIMBURSEMENT
OR OFFSET
Ratio of expenses to average net assets (b)(e) 1.69% 3.19% 5.35% 1.54% 1.22%
Ratio of net investment income to average net assets (b)(e) 4.33% 0.81% (02.20%) 3.98% 4.14%
===================================================================================================================================
<CAPTION>
TAX-EXEMPT FUND INCOME FUND GROWTH FUND
Period ended Year ended Year ended Period ended Year ended
10/31/93* 10/31/95 10/31/94 10/31/93* 10/31/95
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $10.00 $9.49 $10.80 $10.00 $11.38
INCOME FROM INVESTMENT OPERATIONS
Net investment income (c) 0.44 0.60 0.57 0.57 0.42
Net realized and unrealized gains (losses) on
investments 0.78 0.61 (1.24) 0.80 2.43
- -----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.22 1.21 (0.67) 1.37 2.85
- -----------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM
Net investment income (0.44) (0.60) (0.57) (0.57) (0.26)
Net realized gain on investments (f) - - (0.07) - (0.06)
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders (0.44) (0.60) (0.64) (0.57) (0.32)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net asset value 0.78 0.61 (1.31) 0.80 2.53
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $10.78 $10.10 $9.49 $10.80 $13.91
===================================================================================================================================
TOTAL RETURN (A)(B) 12.82% 13.13% (06.42%) 14.50% 25.83%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $29,890 $22,105 $29,439 $30,331 $13,544
Ratio of net expenses to average net assets (b)(d) 0.88% 0.97% 0.97% 0.99% 0.23%
Ratio of net investment income to average net
assets (b)(d) 4.38% 6.01% 5.68% 5.66% 2.60%
Portfolio turnover rate 0.00% 100.91% 141.95% 31.49% 9.10%
RATIO INFORMATION ASSUMING NO EXPENSE REIMBURSEMENT
OR OFFSET
Ratio of expenses to average net assets (b)(e) 1.07% 1.66% 1.30% 1.18% 1.57%
Ratio of net investment income to average net
assets (b)(e) 4.19% 5.32% 5.35% 5.47% 1.26%
===================================================================================================================================
<CAPTION>
GROWTH FUND TOTAL RETURN FUND
Year ended Period ended Year ended Year ended Period ended
10/31/94 10/31/93* 10/31/95 10/31/94 10/31/93*
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $11.24 $10.00 $10.75 $11.48 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (c) 0.25 0.23 0.53 0.40 0.43
Net realized and unrealized gains (losses) on
investments 0.13 1.05 1.82 (0.33) 1.11
- -----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.38 1.28 2.35 0.07 1.54
- -----------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM
Net investment income (0.24) (0.04) (0.41) (0.44) (0.06)
Net realized gain on investments (f) - - (0.01) (0.36) -
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders (0.24) (0.04) (0.42) (0.80) (0.06)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net asset value 0.14 1.24 1.93 (0.73) 1.48
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $11.38 $11.24 $12.68 $10.75 $11.48
===================================================================================================================================
TOTAL RETURN (A)(B) 3.46% 13.19% 22.72% 0.63% 15.92%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $34,968 $31,719 $23,650 $35,814 $32,418
Ratio of net expenses to average net assets (b)(d) 0.46% 0.49% 1.16% 1.16% 1.18%
Ratio of net investment income to average net
assets (b)(d) 2.32% 2.27% 4.22% 3.82% 4.26%
Portfolio turnover rate 2.83% 0.53% 90.23% 50.29% 56.86%
RATIO INFORMATION ASSUMING NO EXPENSE REIMBURSEMENT
OR OFFSET
Ratio of expenses to average net assets (b)(e) 0.96% 0.85% 1.79% 1.35% 1.27%
Ratio of net investment income to average net
assets (b)(d) 1.83% 1.91% 3.59% 3.63% 4.17%
===================================================================================================================================
</TABLE>
* From commencement of operations on November 12, 1992.
(a) Assumes investment at net asset value at the beginning of the period,
reinvestment of all dividends and distributions, and a complete
redemption of the investment at the net asset value at the end of the
period.
(b) The amounts for the period ended October 31, 1993 have been annualized.
(c) For the year ended October 31, 1995, less than $.01 per share of
investment income in the Tax-Exempt Fund is subject to federal taxes.
In prior years, no investment income in the Tax-Exempt Fund was subject
to federal taxe
(d) Computed after giving effect to the Adviser's expense reimbursement, and
after fees paid indirectly for the year ended October 31, 1995.
(e) For the year ended October 31, 1995, the manner in which total expenses
are calculated changed to exclude expense offsets for custodian fees
(i.e., fees paid indirectly).
(f) For the year ended October 31, 1995, all capital gain distributions were
from long-term capital gains, which are taxed as capital gains to the
shareholder. For the year ended October 31, 1994, all capital gain
distributions were from short-term capital gains, which are taxed as
ordinary income to the shareholder.
The accompanying notes to financial statements are an integral part of these
statements.
34
<PAGE> 73
JACKSON NATIONAL CAPITAL MANAGEMENT FUNDS
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1995
NOTE 1 - ORGANIZATION
Jackson National Capital Management Funds (the "Trust") is a Massachusetts
Business Trust registered as an open-ended diversified management investment
company under the Investment Company Act of 1940. The Trust is comprised of
five separate investment portfolios (the "Funds"): the Money Market Fund,
Tax-Exempt Fund, Income Fund, Growth Fund and Total Return Fund.
The costs associated with the organization of the Trust and certain other
initial period costs have been borne by Jackson National Financial Services,
Inc., the Trust's investment adviser ("Adviser"). The Adviser is a subsidiary
of Jackson National Life Insurance Company ("Jackson National").
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Funds in the preparation of their financial statements.
SECURITY VALUATION - Portfolio securities traded on national exchanges are
valued at the last reported sales prices. Each over-the-counter security for
which the last sale price is available from NASDAQ is valued at that price.
Portfolio securities which are debt instruments are valued based on valuations
supplied by independent pricing services, including services using matrix
pricing formulas and/or independent broker bid quotations. Instruments held by
the Money Market Fund and fixed income securities purchased with remaining
maturities of 60 days or less held by the other Funds are valued on an
amortized cost basis. Otherwise, securities are valued in good faith under the
direction of the Board of Trustees.
FEDERAL INCOME TAXES - The Funds' policy is to comply with the requirements of
the Internal Revenue Code which are applicable to regulated investment
companies and to distribute substantially all of their taxable income to their
shareholders. The Funds have paid no federal income or excise taxes and no
federal income or excise tax provision is required.
The percentage of income from the Income Fund, the Growth Fund and the Total
Return Fund which is eligible for the corporate dividend received deduction,
for the year ended
35
<PAGE> 74
October 31, 1995, is 2%, 99% and 28%, respectively. The percentage of income
from the Tax-Exempt Fund which is exempt from federal income tax, for the year
ended October 31, 1995, is 99%. The Income Fund has $905,740 in net capital
losses which expire October 31, 2002 that may be used to offset capital gains
in future years to the extent provided by tax regulations. For the year ended
October 31, 1995, the Income Fund utilized $84,725 of its net capital loss
carryforward.
DISTRIBUTIONS TO SHAREHOLDERS - Net investment income is distributed to each
shareholder as a dividend. Dividends to shareholders are recorded on the
ex-dividend date. Dividends from the Money Market Fund are declared daily and
distributed monthly. Dividends from the Tax-Exempt Fund and Income Fund are
declared and paid monthly. Dividends from the Growth Fund and Total Return
Fund are declared and paid annually, but may be done more frequently to avoid
excise tax. Net realized gains from securities transactions, if any, are
distributed at least annually, after the close of the Fund's fiscal year.
CREDIT RISK - The Funds hold investments in variable rate demand notes, which
are unsecured instruments. The Funds may be susceptible to credit risk with
respect to these instruments to the extent the issuer defaults on its payment
obligation. The Funds' policy is to monitor the creditworthiness of the
variable rate demand note issuer and does not anticipate nonperformance on
these instruments.
OTHER - Investment security transactions are accounted for on trade date. All
discounts and premiums on securities purchased are amortized to expected
maturity. Realized gains or losses on sales are determined on a specific cost
identification basis, or if not specified, on a first-in-first-out basis.
Dividend income is recorded on the ex-dividend date, and interest income
is recorded as earned.
NOTE 3 - INVESTMENT MANAGEMENT FEES AND TRANSACTIONS
WITH AFFILIATES
The Trust has entered into an Investment Management Agreement with the Adviser
for management of each Fund's portfolio and for the administration of other
Trust affairs. As compensation for its services, the Adviser receives a fee
based on the net assets of the Funds as of the close of business on each
valuation day. The adviser fee is computed based on an annual rate of the
average daily net assets of each Fund as follows:
Money Market Fund .50%
Tax-Exempt Fund .50%
Income Fund .60%
36
<PAGE> 75
Growth Fund .25%
Total Return Fund .70%
The Trust has also entered into an Administrative Services Agreement with the
Adviser. Under the agreement, effective June 1, 1994, the Adviser appoints
various broker-dealers and other firms to provide, or itself provides,
information and administrative services to the Funds' shareholders. The
administration fee is computed at an annual rate of .25% of each Fund's average
daily net assets, with the exception of the Money Market Fund, which does not
pay the administration fee.
The Adviser has entered into a Sub-Advisory Agreement with PPM America, Inc.,
an affiliate of the Adviser. The sub-advisory fee, which is paid by the
Adviser, is at an annual rate of .035% of each Fund's average daily net assets.
Trustees not affiliated with Jackson National or the Adviser receive a fee of
one thousand dollars for each meeting of the Board of Trustees attended. No
remuneration has been paid by the Trust to any of the officers or affiliated
Trustees. The Trust paid fees of $8,000 to non-affiliated Trustees for the
year ended October 31, 1995.
Each Fund is charged for those expenses that are directly attributable to it,
such as advisory, administration, custodian, accounting services and certain
shareholder service fees, while other expenses that cannot be directly
attributable to a Fund are allocated in equal proportion to each Fund. Each
Fund earns credits on uninvested cash balances. These credits are used to
offset custodian expenses and are not included in the total operating expenses
for purposes of calculating the Adviser expense reimbursements for all Funds.
Each Fund could have invested cash balances in an income producing asset if it
had not agreed to a reduction in custodian expenses under the expense offset
arrangement.
The Adviser reimburses the Funds for annual expenses in excess of the lowest
expense limitation imposed by the states. In addition to this reimbursement,
the Adviser has voluntarily reimbursed the Funds for total operating expenses
(before custodian expense reduction) exceeding the following percentages of
average daily net assets:
Money Market Fund .50%
Tax-Exempt Fund .90%
Income Fund 1.00%
Growth Fund .25%
Total Return Fund 1.20%
37
<PAGE> 76
Prior to May 1, 1995, the Adviser reimbursed all expenses in the Money Market
Fund. Prior to October 1, 1994, the expenses that exceeded .50% of average
daily net assets in the Growth Fund were reimbursed by the Adviser. Voluntary
reimbursements to these Funds may be modified or discontinued at any time by
the Adviser.
For the year ended October 31, 1995, the Adviser, who is also the distributor
of the Funds, received sales charges of $18,104; $16,946; $71,151; and $48,200
on sales of shares of the Tax-Exempt Fund, Income Fund, Growth Fund, and Total
Return Fund, respectively.
NOTE 4 - INVESTMENT TRANSACTIONS
During the year ended October 31, 1995, purchases and sales or maturities of
securities, other than short-term obligations, were as follows (in thousands):
<TABLE>
<CAPTION>
Tax- Total
Exempt Income Growth Return
Fund Fund Fund Fund
------- ------- ------ -------
<S> <C> <C> <C> <C>
Purchases $17,748 $21,853 $1,889 $22,840
Proceeds from
sales and maturities 24,022 26,407 26,062 38,163
</TABLE>
Included in these transactions were purchases and sales of U.S. Government
obligations in the Income Fund of $16,807,266, and $10,606,269, respectively,
and in the Total Return Fund of $12,015,015, and $11,242,689, respectively.
Cost of investments is substantially the same for financial reporting purposes
and federal income tax purposes.
The gross unrealized appreciation and depreciation on investments at October
31, 1995, were as follows (in thousands):
<TABLE>
<CAPTION>
Tax- Total
Exempt Income Growth Return
Fund Fund Fund Fund
------ ------ ------ ------
<S> <C> <C> <C> <C>
Appreciation $650 $558 $3,083 $3,051
Depreciation (7) (56) (305) (63)
------ ------ ------ ------
Net unrealized
appreciation $643 $502 $2,778 $2,988
====== ====== ====== ======
</TABLE>
NOTE 5 - TRUST TRANSACTIONS
Transactions in trust shares were as follows (in thousands):
38
<PAGE> 77
<TABLE>
Money Tax- Total
Market Exempt Income Growth Return
Fund Fund Fund Fund Fund
----------- ----------- ------- ------- -------
For year ended October 31, 1995:
<S> <C> <C> <C> <C> <C>
Shares purchased 41,295 66 61 234 162
Income dividends
reinvested 1,105 107 143 73 132
Capital gain
distributions
reinvested 0 19 0 17 2
Shares redeemed (27,404) (1,092) (1,119) (2,423) (1,763)
----------- ----------- ------- ------- -------
Net increase
(decrease)
of trust shares 14,996 (900) (915) (2,099) (1,467)
=========== =========== ======= ======= =======
<CAPTION>
Money Tax- Total
Market Exempt Income Growth Return
Fund Fund Fund Fund Fund
----------- ----------- ------- ------- -------
For year ended October 31, 1994:
<S> <C> <C> <C> <C> <C>
Shares purchased 9,912 148 183 264 371
Income dividends
reinvested 234 127 168 61 117
Capital gain
distributions
reinvested 0 0 18 1 97
Shares redeemed (5,159) (61) (74) (75) (76)
----------- ----------- ------- ------- -------
Net increase of
trust shares 4,987 214 295 251 509
=========== =========== ======= ======= =======
</TABLE>
In February 1995, Jackson National redeemed approximately 2,100,000; 1,040,000;
1,047,000; and 1,630,000 shares in the Money Market Fund, Tax-Exempt Fund,
Income Fund and Total Return Fund, respectively. In March 1995, Jackson
National redeemed approximately 2,277,000 shares of the Growth Fund. Jackson
National continues to have ownership of more than 25% of the outstanding shares
of the Tax-Exempt Fund, Income Fund, Growth Fund and Total Return Fund.
39
<PAGE> 78
JACKSON NATIONAL MONEY MARKET FUND
SCHEDULE OF INVESTMENTS
OCTOBER 31, 1995
<TABLE>
<CAPTION>
Principal Market
Amount Value
<S> <C> <C>
COMMERCIAL PAPER - 100%
CAPTIVE FINANCE COMPANIES - 20.01%
American Express Credit
5.70%, 11/17/1995 $300,000 $299,240
American Express Credit
5.70%, 12/29/1995 650,000 644,031
Chrysler Financial Corporation
5.75%, 11/03/1995 350,000 349,888
Chrysler Financial Corporation
5.70%, 11/07/1995 700,000 699,335
Ford Motor Credit Corporation
5.67%, 11/22/1995 450,000 448,512
Ford Motor Credit Corporation
5.69%, 01/12/1995 500,000 494,310
General Motors Acceptance Corporation
5.67%, 11/16/1995 710,000 708,323
General Motors Acceptance Corporation
5.60%, 12/18/1995 235,000 233,282
J.C. Penney Funding Corporation
5.73%, 11/06/1995 815,000 814,351
J.C. Penney Funding Corporation
5.72%, 12/08/1995 150,000 149,118
---------
Subtotal 4,840,390
COMPUTERS & TECHNOLOGY - 6.48%
Hewlett-Packard Company
5.60%, 12/21/1995 875,000 868,194
IBM Corporation
5.75%, 11/15/1995 700,000 698,435
---------
Subtotal 1,566,629
CONSUMER FINANCE - 12.90%
American General Finance Corporation
5.72%, 11/27/1995 115,000 114,525
American General Finance Corporation
5.69%, 12/15/1995 280,000 278,053
American General Finance Corporation
5.70%, 01/29/1996 545,000 537,320
Beneficial Corporation
5.72%, 12/06/1995 435,000 432,581
Household Finance Corporation
5.73%, 11/30/1995 165,000 164,238
Household Finance Corporation
5.70%, 12/04/1995 800,000 795,820
Norwest Financial, Inc.
5.70%, 11/29/1995 800,000 796,453
---------
Subtotal 3,118,990
CONSUMER PRODUCTS - 13.27%
Coca-Cola Company
5.70%, 01/11/1996 400,000 395,503
ConAgra, Inc.
5.78%, 11/10/1995 475,000 474,314
Hasbro, Inc.
5.60%, 12/18/1995 700,000 694,882
Hasbro, Inc.
5.69%, 12/20/1995 250,000 248,064
H.J. Heinz Company
5.78%, 11/01/1995 125,000 125,000
H.J. Heinz Company
5.73%, 11/14/1995 800,000 798,345
Tyson Foods, Inc.
5.85%, 11/27/1995 475,000 472,993
Subtotal 3,209,101
---------
ELECTRIC UTILITIES - .58%
Florida Power Corporation
5.73%, 11/14/1995 140,000 139,710
</TABLE>
40
<PAGE> 79
<TABLE>
<S> <C> <C>
ENERGY - 7.58%
CHEVRON OIL FINANCE COMPANY
5.70%, 11/29/1995 735,000 731,741
Consolidated Natural Gas Company
5.72%, 11/01/1995 297,000 297,000
Consolidated Natural Gas Company
5.72%, 11/02/1995 500,000 499,921
Dresser Industries, Inc.
5.72%, 11/06/1995 305,000 304,758
---------
Subtotal 1,833,420
HEALTH CARE - 4.84%
A.H. Robins Company, Inc.
5.72%, 01/16/1996 325,000 321,075
Allergan, Inc.
5.66%, 12/05/1995 250,000 248,664
American Home Products
5.75%, 11/02/1995 600,000 599,904
---------
Subtotal 1,169,643
INDEPENDENT FINANCE COMPANIES - 11.04%
Associates Corporation
5.68%, 12/22/1995 885,000 877,879
CIT Group Holding, Inc.
5.73%, 11/13/1995 505,000 504,035
CIT Group Holding, Inc.
5.73%, 12/14/1995 525,000 521,407
General Electric Capital Corporation
5.70%, 11/20/1995 505,000 503,481
General Electric Capital Corporation
5.69%, 11/27/1995 265,000 263,911
---------
Subtotal 2,670,713
INSURANCE - 3.82%
USAA Capital Corporation
5.67%, 12/19/1995 930,000 922,969
MORTGAGE BANKING - 3.93%
Countrywide Funding Corporation
5.77%, 12/07/1995 450,000 447,404
Countrywide Funding Corporation
5.77%, 12/08/1995 505,000 502,005
---------
Subtotal 949,409
RETAIL - 2.37%
Wal-Mart Corporation
5.72%, 11/21/1995 575,000 573,173
TELECOMMUNICATIONS - 13.18%
AT&T Corporation
5.65%, 11/21/1995 265,000 264,168
AT&T Corporation
5.65%, 11/22/1995 210,000 209,308
BellSouth Telecommunications, Inc.
5.72%, 11/13/1995 930,000 928,227
GTE Northwest, Inc.
5.73%, 11/09/1995 900,000 898,854
GTE Corporation
5.78%, 11/28/1995 225,000 224,025
GTE Corporation
5.79%, 11/28/1995 365,000 363,415
US West Communications, Inc.
5.75%, 11/08/1995 300,000 299,664
---------
Subtotal 3,187,661
---------
TOTAL INVESTMENTS - 100%
(amortized cost $24,181,808) $24,181,808
===========
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
41
<PAGE> 80
JACKSON NATIONAL TAX-EXEMPT FUND
SCHEDULE OF INVESTMENTS
OCTOBER 31, 1995
<TABLE>
<CAPTION>
Principal Market
Amount Value
<S> <C> <C>
MUNICIPAL BONDS - 99.53%
ARIZONA - 2.59%
Arizona State Transportation Board
Highway Revenue
4.70%, 07/01/2005 $350,000 $345,912
Salt River Project AZ Electric
Systems Revenue
5.20%, 01/01/2002 200,000 206,910
----------
Subtotal 552,822
COLORADO - 1.25%
Aurora CO
4.75%, 11/01/2014 300,000 266,868
CONNECTICUT - 1.96%
Connecticut State Housing Financing
Authority 6.70%, 11/15/2012 400,000 419,304
FLORIDA - 5.32%
Florida State
5.125%, 07/01/2017 300,000 279,372
Florida State Board Education Capital
Outlay 5.00%, 06/01/2015 500,000 461,215
Jacksonville FL Electric Authority Revenue
5.20%, 10/01/2009 400,000 396,080
----------
Subtotal 1,136,667
GEORGIA - 4.49%
DeKalb County GA Water & Sewer Revenue
5.125%, 10/01/2014 400,000 377,988
Georgia State Series D
6.80%, 08/01/2006 500,000 580,880
----------
Subtotal 958,868
ILLINOIS - 8.56%
Chicago IL Metropolitan Water
5.40%, 12/01/2006 400,000 413,128
Chicago IL Public Building Revenue
5.80%, 01/01/2013 (a) 250,000 252,098
Chicago IL Wastewater Transmission Revenue
5.375%, 01/01/2013 (a) 500,000 488,730
Illinois Health Facilities Authority
Revenue 6.00%, 02/15/2019 250,000 240,285
Illinois State Sales Tax Revenue Series M
6.80%, 06/15/2009 400,000 434,168
----------
Subtotal 1,828,409
INDIANA - 3.65%
Indiana State Office Building Commission
Correctional Facilities Revenue
6.375%, 07/01/2016 350,000 361,452
Indianapolis IN Transportation Revenue
6.00%, 07/01/2010 405,000 418,458
----------
Subtotal 779,910
KENTUCKY - 2.41%
Kentucky State Turnpike Authority Economic
Development Revenue
5.375%, 01/01/2000 500,000 515,655
MARYLAND - 5.92%
Maryland State Department of Transportation
6.25%, 09/01/2003 350,000 377,783
University of Maryland System Auxiliary
Facility & Tuition Revenue
6.30%, 02/01/2008 365,000 392,094
Washington Suburban Sanitation District
Maryland 3.75%, 06/01/1998 500,000 494,750
----------
Subtotal 1,264,627
</TABLE>
42
<PAGE> 81
<TABLE>
<S> <C> <C>
MASSACHUSETTS - 6.57%
Boston MA Revenue
5.75%, 02/15/2013 (b) 330,000 330,884
Massachusetts State Convention Center
Authority Hynes Convention Center
5.90%, 09/01/1998 400,000 416,984
Massachusetts State Health & Educational
Facilities Authority Revenue
5.60%, 11/01/2014 250,000 253,053
Massachusetts State Water Pollution
Abatement Treatment
5.70%, 02/01/2014 400,000 402,936
---------
Subtotal 1,403,857
MICHIGAN - 1.89%
Michigan State Building Authority Revenue
5.625%, 10/01/2010 400,000 402,904
MINNESOTA - 2.92%
Minneapolis & St. Paul MN Housing &
Redevelopment Authority & Health
Care Systems
5.00%, 11/15/2013 (c) 300,000 277,473
Rochester MN Health Care
5.75%, 11/15/2021 350,000 345,615
---------
Subtotal 623,088
MISSOURI - 2.02%
Missouri State Environmental Improvement
& Energy Resource Authority
6.45%, 07/01/2008 400,000 432,336
NEBRASKA - 1.41%
Lincoln NE Electric Systems Revenue
5.25%, 09/01/2015 320,000 301,910
NEW JERSEY - 4.51%
New Jersey Building Authority State
Building Revenue
5.00%, 06/15/2010 (b) 500,000 486,325
New Jersey Sports & Exposition
5.20%, 01/01/2020 510,000 477,992
---------
Subtotal 964,317
NEW YORK - 6.30%
New York State Dormatory Authority Revenue
5.70%, 07/01/2011 (b) 450,000 463,149
New York State Urban Development
5.375%, 01/01/2012 (b) 500,000 492,270
Triborough Bridge & Tunnel Authority
5.05%, 01/01/2017 400,000 390,684
---------
Subtotal 1,346,103
NORTH CAROLINA - 1.85%
Mecklenburg County NC
5.00%, 04/01/2009 400,000 395,364
OHIO - 4.60%
Columbus OH Water System Revenue
6.10%, 11/01/2003 415,000 453,408
Ohio State Public Facilities Commission
5.75%, 11/01/2006 (c) 500,000 529,140
---------
Subtotal 982,548
PENNSYLVANIA - 4.32%
Pennsylvania Housing and Finance Authority
5.55%, 07/01/2007 (d) 400,000 401,300
Pennsylvania State University
5.40%, 08/15/2004 500,000 520,905
---------
Subtotal 922,205
SOUTH CAROLINA - 2.09%
Columbia SC Waterworks and Sewer System
Revenue
6.50%, 02/01/2002 405,000 446,120
</TABLE>
43
<PAGE> 82
<TABLE>
<S> <C> <C>
TEXAS - 8.89%
Dallas TX Waterworks & Sewer
5.90%, 10/01/1999 300,000 316,650
Harris County TX
5.125%, 10/01/2013 380,000 361,175
Lower Colorado River Authority TX Revenue
5.25%, 01/01/2015 300,000 279,723
San Antonio TX Electric & Gas
5.00%, 02/01/2014 225,000 207,736
Tarrant County TX Health Facilities Development
Corporation Health System Revenue
6.40%, 09/01/1998 (a) 500,000 527,805
University Texas University Revenue
6.10%, 08/15/1997 200,000 206,956
---------
Subtotal 1,900,045
UTAH - .89%
Intermountain Power Agency UT Power Supply Revenue
5.25%, 07/01/2014 200,000 190,166
VIRGINIA - 2.72%
Virginia State Transportation Board Transportation
Contract Revenue
5.25%, 05/15/2012 600,000 581,928
WASHINGTON - 8.58%
Seattle WA Water System Revenue
5.50%, 06/01/2018 410,000 394,104
South Columbia Basin Revenue
6.00%, 12/01/2003 440,000 478,698
Washington State
6.50%, 05/01/2004 400,000 447,304
Washington State Public Power Supply System
Nuclear Project
5.45%, 07/01/2000 500,000 513,620
---------
1,833,726
WISCONSIN - 3.82%
Wisconsin State
6.25%, 05/01/2012 400,000 434,536
Wisconsin State Transportation Revenue
4.75%, 07/01/2012 425,000 381,263
---------
Subtotal 815,799
---------
Total Municipal Bonds
(cost $20,622,121) 21,265,546
----------
SHORT TERM INVESTMENTS - .47%
VARIABLE RATE DEMAND NOTES - .47%
Ohio State Water Development Authority Revenue
11/01/2015 100,000 100,000
----------
Total Short Term Investments
(cost $100,000) 100,000
----------
TOTAL INVESTMENTS - 100%
(cost $20,722,121) $21,365,546
===========
(a) Insured by Financial Guarantee Insurance Company.
(b) Insured by MBIA Insurance Corporation.
(c) Insured by AMBAC Indemnity Corporation.
(d) Insured by Federal National Mortgage Association.
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
44
<PAGE> 83
JACKSON NATIONAL INCOME FUND
SCHEDULE OF INVESTMENTS
OCTOBER 31, 1995
<TABLE>
<CAPTION>
Shares
or Principal Market
Amount Value
<S> <C> <C> <C>
PREFERRED STOCKS - 1.29%
ENERGY - 1.29%
Atlantic Richfield Company
9.00% Convertible 12,445 $ 280,013
-------------
Total Preferred Stocks
(cost $335,293) 280,013
-------------
CORPORATE OBLIGATIONS - 17.80%
AEROSPACE & DEFENSE - 1.03%
Northrop Grumman Corporation
8.625%, 10/15/2004 $ 200,000 223,156
CAPITAL GOODS & MANUFACTURING - 1.42%
Case Corporation
7.25%, 08/01/2005 300,000 307,065
CHEMICALS - 2.08%
Occidental Petroleum Corporation
8.75%, 01/15/2023 200,000 229,162
Union Carbide Corporation
8.75%, 08/01/2022 200,000 221,080
-------------
Subtotal 450,242
CONSUMER PRODUCTS - .93%
Joseph Seagram & Sons
7.00%, 04/15/2008 200,000 201,248
DOMESTIC BANKS - .97%
Nationsbank Corporation
7.75%, 08/15/2015 200,000 209,894
ENERGY - 3.64%
Phillips Petroleum Company
8.86%, 05/15/2022 200,000 221,044
Vastar Resources, Inc.
8.75%, 02/01/2005 250,000 280,788
Western Atlas, Inc.
8.55%, 06/15/2024 250,000 287,820
-------------
Subtotal 789,652
FOREIGN GOVERNMENT - .68%
Quebec Province
7.50%, 07/15/2023 150,000 148,665
INDEPENDENT FINANCE COMPANIES - 2.34%
Associates Corporation North America
8.625%, 11/15/2004 200,000 227,440
Household Finance Corporation
9.00%, 09/28/2001 250,000 279,715
-------------
Subtotal 507,155
INSURANCE - 1.03%
American Reinsurance Corporation
10.875% 09/15/2004 200,000 222,752
MEDIA - .53%
Tele-Communications, Inc.
9.80%, 02/01/2012 100,000 114,556
</TABLE>
45
<PAGE> 84
<TABLE>
<S> <C> <C>
METALS & MINING - 2.12%
ASARCO, Inc.
7.875%, 04/15/2013 200,000 205,142
WMC Finance Limited USA
7.25%, 11/15/2013 250,000 253,623
-------------
Subtotal 458,765
PAPER & FOREST PRODUCTS - 1.03%
Georgia-Pacific Corporation
9.50%, 05/15/2022 200,000 223,190
-------------
Total Corporate Obligations
(cost $3,616,502) 3,856,340
-------------
U.S. GOVERNMENT SECURITIES - 80.91%
U.S. TREASURY BONDS - 16.37%
U.S. Treasury Bond
11.125%, 08/15/2003 185,000 243,245
U.S. Treasury Bond
10.625%, 08/15/2015 250,000 368,945
U.S. Treasury Bond
7.25%, 05/15/2016 200,000 218,938
U.S. Treasury Bond
8.125%, 08/15/2019 215,000 258,806
U.S. Treasury Bond
8.50%, 02/15/2020 1,500,000 1,875,240
U.S. Treasury Bond
7.625%, 02/15/2025 500,000 580,470
-------------
Subtotal 3,545,644
U.S. TREASURY NOTES - 64.54%
U.S. Treasury Note
7.375%, 05/15/1996 1,350,000 1,362,447
U.S. Treasury Note
7.50%, 12/31/1996 750,000 765,585
U.S. Treasury Note
6.75%, 05/31/1997 2,300,000 2,337,743
U.S. Treasury Note
6.00%, 11/30/1997 200,000 201,468
U.S. Treasury Note
5.625%, 01/31/1998 1,200,000 1,198,872
U.S. Treasury Note
6.125%, 05/15/1998 735,000 742,695
U.S. Treasury Note
5.125%, 11/30/1998 1,200,000 1,180,128
U.S. Treasury Note
6.75%, 06/30/1999 1,880,000 1,939,634
U.S. Treasury Note
6.25%, 05/31/2000 500,000 508,515
U.S. Treasury Note
8.50%, 11/15/2000 1,150,000 1,282,606
U.S. Treasury Note
6.375%, 08/15/2002 1,300,000 1,333,514
U.S. Treasury Note
7.875%, 11/15/2004 450,000 507,163
U.S. Treasury Note
6.50%, 05/15/2005 600,000 621,000
-------------
Subtotal 13,981,370
-------------
Total U.S. Government Securities
(cost $17,209,981) 17,527,014
-------------
TOTAL INVESTMENTS - 100%
(cost $21,161,776) $ 21,663,367
=============
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
46
<PAGE> 85
JACKSON NATIONAL GROWTH FUND
SCHEDULE OF INVESTMENTS
OCTOBER 31, 1995
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
--------- ----------
<S> <C> <C>
PREFERRED STOCK - 0.00%
DIVERSIFIED - 0.00%
Teledyne, Inc. Series E 2 29
--------
Total Preferred Stock
(cost $0) 29
--------
WARRANTS - 0.00%
ENGINEERING - 0.00%
Emcor Group, Inc. Warrant-Z 2 -
--------
Total Warrants
(cost $0) -
--------
COMMON STOCKS - 100%
AEROSPACE & DEFENSE - 2.66%
Allied-Signal, Inc. 871 37,017
Applied Materials, Inc. (a) 600 30,075
Boeing Company 1,046 68,644
EG&G, Inc. 155 2,887
General Dynamics Corporation 182 10,078
Lockheed Martin Corporation 612 41,692
Loral Corporation 540 15,998
McDonnell Douglas Corporation 339 27,713
Northrop Grumman Corporation 139 7,958
Raytheon Company 712 31,061
Rockwell International Corporation 700 31,150
Textron, Inc. 253 17,394
United Technologies Corporation 356 31,595
Western Atlas, Inc. (a) 149 6,537
---------
Subtotal 359,799
APPAREL & TEXTILES - 0.41%
Fruit of the Loom, Inc. - Class A (a) 200 3,475
Liz Claiborne, Inc. 220 6,243
NIKE, Inc. - Class B 418 23,721
Reebok International, Ltd. 234 7,956
Russell Corporation - Class A 113 2,797
Springs Industries, Inc. 50 2,144
V.F. Corporation 187 8,953
---------
Subtotal 55,289
AUTOMOTIVE - 2.49%
Chrysler Corporation 1,200 61,950
Cooper Tire & Rubber Company 236 5,457
Dana Corporation 400 10,250
Echlin, Inc. 167 5,970
Ford Motor Company 3,300 94,875
General Motors Corporation 2,350 102,813
Genuine Parts Company 400 15,850
Goodyear Tire & Rubber Company 500 19,000
Pep Boys-Manny, Moe & Jack 173 3,784
Snap-On, Inc. 121 5,127
TRW, Inc. 185 12,164
---------
Subtotal 337,240
BROKERAGE - 0.49%
Merrill Lynch & Company, Inc. 544 30,192
Morgan Stanley Group, Inc. 250 21,750
Salomon, Inc. 400 14,450
---------
Subtotal 66,392
</TABLE>
47
<PAGE> 86
<TABLE>
<S> <C> <C>
CAPITAL GOODS & MANUFACTURING - 5.74%
AMP, Inc. 700 27,475
Ball Corporation 84 2,320
Briggs & Stratton Corporation 82 3,311
Browning-Ferris Industries, Inc. 672 19,572
Caterpillar, Inc. 650 36,481
Cincinnati Milacron, Inc. 95 2,446
Cooper Industries, Inc. 310 10,463
Corning, Inc. 800 20,900
Crane Company 85 3,007
Cummins Engine Company, Inc. 117 4,110
Deere & Company 247 22,076
Dover Corporation 326 12,877
Eaton Corporation 225 11,531
Emerson Electric Company 700 49,875
Fluor Corporation 239 13,503
FMC Corporation (a) 103 7,377
Foster Wheeler Corporation 101 3,788
General Electric Company 5,300 335,225
General Signal Corporation 133 4,239
Giddings & Lewis, Inc. 97 1,564
Grainger (W.W.), Inc. 145 9,062
Harnischfeger Industries, Inc. 130 4,095
Honeywell, Inc. 369 15,498
Illinois Tool Works, Inc. 400 23,250
Ingersoll-Rand Company 301 10,648
Johnson Controls, Inc. 115 6,699
Laidlaw, Inc. - Class B 849 7,641
Morrison Knudsen Corporation 93 605
NACCO Industries, Inc. - Class A 25 1,431
Navistar International Corporation (a) 212 2,173
Ogden Corporation 137 3,117
PACCAR, Inc. 110 4,592
Pall Corporation 335 8,166
Parker-Hannifin Corporation 207 6,986
Raychem Corporation 122 5,658
Safety-Kleen Corporation 163 2,506
Thomas & Betts Corporation 55 3,554
Timken Company 88 3,542
Trinova Corporation 81 2,278
Varity Corporation (a) 124 4,495
Westinghouse Electric Corporation 1,200 16,950
WMX Technologies, Inc. 1,500 42,188
Zurn Industries, Inc. 35 875
---------
Subtotal 778,149
CHEMICALS - 3.01%
Air Products & Chemicals, Inc. 323 16,675
Avery Dennison Corporation 155 6,936
B.F. Goodrich Company 73 4,809
Dow Chemical Company 900 61,762
Du Pont (E.I.) De Nemours & Company 1,700 106,038
Eastman Chemical Company 236 14,042
Ecolab, Inc. 191 5,539
Grace (W.R.) & Company 268 14,941
Great Lakes Chemical Corporation 195 13,089
Hercules, Inc. 339 18,094
Mallinckrodt Group, Inc. 216 7,506
Millipore Corporation 140 4,953
Monsanto Company 335 35,091
Morton International, Inc. 500 15,250
Nalco Chemical Company 192 5,760
PPG Industries, Inc. 700 29,750
Praxair, Inc. 500 13,500
Rohm & Haas Company 193 10,663
Sigma-Aldrich Corporation 141 6,698
Union Carbide Corporation 424 16,059
---------
Subtotal 407,155
</TABLE>
48
<PAGE> 87
<TABLE>
<S> <C> <C>
COMPUTERS & TECHNOLOGY - 10.83%
Advanced Micro Devices, Inc. 311 7,425
Amdahl Corporation (a) 400 3,700
Andrew Corporation (a) 108 4,563
Apple Computer, Inc. 400 14,525
Autodesk, Inc. 133 4,522
Automatic Data Processing, Inc. 500 35,750
Cabletron Systems (a) 200 15,725
Ceridian Corporation (a) 127 5,524
Cisco Systems, Inc. (a) 900 69,750
COMPAQ Computer Corporation (a) 860 47,945
Computer Associates International, Inc. 750 41,250
Computer Sciences Corporation (a) 155 10,366
Cray Research, Inc. (a) 72 1,494
Data General Corporation (a) 102 1,173
Digital Equipment Corporation (a) 500 27,063
DSC Communications Corporation (a) 400 14,800
First Data Corporation 700 46,288
Harris Corporation 111 6,452
Hewlett-Packard Company 1,572 145,606
Intel Corporation 2,550 178,181
Intergraph Corporation (a) 126 1,528
International Business Machines Corporation 1,793 174,369
Micron Technology, Inc. 650 45,906
Microsoft Corporation (a) 1,800 180,000
Motorola, Inc. 1,900 124,688
National Semiconductor Corporation (a) 358 8,726
Novell, Inc. (a) 1,122 18,513
Oracle Systems Corporation (a) 1,400 61,075
Perkin-Elmer Corporation 120 4,215
Pitney Bowes, Inc. 450 19,631
Scientific-Atlanta, Inc. 214 2,648
Silicon Graphics Corporation (a) 520 17,290
Sun Microsystems, Inc. (a) 271 21,138
Tandem Computers, Inc. (a) 400 4,500
Tektronix, Inc. 86 5,096
Texas Instruments, Inc. 600 40,950
Unisys Corporation (a) 600 3,375
Xerox Corporation 400 51,900
---------
Subtotal 1,467,650
CONSUMER PRODUCTS - 12.83%
Alberto-Culver Company - Class B 80 2,510
American Brands, Inc. 581 24,910
American Greetings Corporation - Class A 210 6,615
Anheuser-Busch Companies, Inc. 800 52,800
Archer-Daniels-Midland Company 1,667 26,880
Avon Products, Inc. 199 14,154
Bausch & Lomb, Inc. 167 5,782
Black & Decker Corporation 245 8,299
Brown Group, Inc. 51 701
Brown-Forman Corporation - Class B 195 7,434
Campbell Soup Company 800 41,900
Clorox Company 153 10,978
Coca-Cola Company 3,950 283,906
Colgate-Palmolive Company 500 34,625
ConAgra, Inc. 800 30,900
Coors (Adolph) Company - Clss B 108 1,931
CPC International, Inc. 500 33,188
CUC International, Inc. (a) 600 20,775
Dial Corporation 300 7,313
Eastman Kodak Company 1,043 65,319
General Mills, Inc. 600 34,425
Gillette Company 1,358 65,693
H.J. Heinz Company 800 37,200
Hershey Foods Corporation 248 14,818
International Flavors & Fragrances, Inc 400 19,300
Jostens, Inc. 128 2,896
Kellogg Company 700 50,575
National Service Industries, Inc. 139 4,135
Newell Company 500 12,063
Pepsico, Inc. 2,500 131,875
Philip Morris Companies, Inc. 2,600 219,700
Pioneer Hi-Bred International, Inc. 243 12,059
</TABLE>
49
<PAGE> 88
<TABLE>
<S> <C> <C>
Polaroid Corporation 130 5,557
Premark International, Inc. 182 8,417
Proctor & Gamble Company 2,150 174,150
Quaker Oats Company 500 17,063
Ralston-Ralston Purina Group 400 23,750
Rubbermaid, Inc. 550 14,369
Sara Lee Corporation 1,500 44,062
Seagram Company, Ltd. 1,142 41,112
Service Corporation International 300 12,038
Sherwin-Williams Company 244 9,180
Unilever N.V. 500 65,500
UST, Inc. 579 17,370
Wrigley (W.M.) Jr. Company 400 18,600
Zenith Electronics Corporation (a) 125 1,047
---------
Subtotal 1,737,874
DIVERSIFIED - 1.45%
Alco Standard Corporation 156 13,806
ITT Corporation 400 49,000
Loews Corporation 200 29,325
Minnesota Mining & Manufacturing Compan 1,300 73,938
Teledyne, Inc. 156 3,880
Tyco International, Ltd. 300 18,225
Whitman Corporation 400 8,500
---------
Subtotal 196,674
DOMESTIC BANKS - 6.64%
Ahmanson (H.F.) & Company 400 10,000
Banc One Corporation 1,200 40,500
Bank of Boston Corporation 494 21,983
Bank of New York Company, Inc. 700 29,400
BankAmerica Corporation 1,179 67,792
Bankers Trust New York Corporation 222 14,153
Barnett Banks, Inc. 277 15,304
Boatmen's Bancshares, Inc. 368 13,984
Chase Manhattan Corporation 517 29,469
Chemical Banking Corporation 800 45,500
Citicorp 1,235 80,121
Corestates Financial Corporation 417 15,168
First Bank System, Inc. 425 21,144
First Chicago Corporation 262 17,783
First Fidelity Bancorporation 233 15,232
First Interstate Bancorp 228 29,412
First Union Corporation 508 25,210
Fleet Financial Group, Inc. 500 19,375
Golden West Financial Corporation 171 8,571
Great Western Financial Corporation 603 13,643
KeyCorp 800 27,000
MBNA Corporation 500 18,438
Mellon Bank Corporation 500 25,062
Morgan (J.P.) & Company 600 46,275
National City Corporation 429 13,245
Nationsbank Corporation 850 55,888
NBD Bancorp, Inc. 500 19,000
Norwest Corporation 1,000 29,500
PNC Bank Corporation 750 19,688
Republic New York Corporation 160 9,380
Shawmut National Corporation 450 15,244
Suntrust Banks, Inc. 337 21,736
U.S. Bancorp, Inc. 278 8,236
Wachovia Corporation 600 26,475
Wells Fargo & Company 149 31,309
---------
Subtotal 900,220
ELECTRIC UTILITIES - 3.94%
American Electric Power Company, Inc. 600 22,875
Baltimore Gas & Electric Company 500 13,375
Carolina Power & Light Company 500 16,375
Central & Southwest Corporation 700 18,725
Cinergy Corporation 500 14,188
Consolidated Edison Company of New York 800 24,300
Detroit Edison Company 500 16,875
Dominion Resources, Inc. 600 23,850
Duke Power Company 809 36,203
</TABLE>
50
<PAGE> 89
<TABLE>
<S> <C> <C>
Entergy Corporation 698 19,893
FPL Group, Inc. 700 29,313
General Public Utilities Corporation 400 12,500
Houston Industries, Inc. 400 18,550
Niagara Mohawk Power Corporation 500 5,375
Northern States Power Company 189 8,930
Ohio Edison Company 500 11,438
Pacific Gas & Electric Company 1,400 41,125
Pacificorp 900 16,988
PECO Energy Company 740 21,645
Public Service Enterprise Group, Inc. 800 23,500
SCE Corporation 1,400 23,800
Southern Company 2,100 50,137
Texas Utilities Company 800 29,400
Unicom Corporation 720 23,580
Union Electric Company 291 11,349
---------
Subtotal 534,289
ENERGY - 9.68%
Amerada Hess Corporation 265 11,958
Amoco Corporation 1,533 97,920
Ashland, Inc. 230 7,274
Atlantic Richfield Company 500 53,375
Baker Hughes, Inc. 500 9,813
Burlington Resources, Inc. 400 14,400
Chevron Corporation 2,050 95,837
Coastal Corporation 299 9,680
Columbia Gas System, Inc. (a) 143 5,506
Consolidated Natural Gas Company 265 10,070
Dresser Industries, Inc. 600 12,450
Eastern Enterprises 58 1,733
Enron Corporation 800 27,500
ENSERCH Corporation 189 2,740
Exxon Corporation 3,900 297,863
Halliburton Company 400 16,600
Helmerich & Payne, Inc. 70 1,811
Kerr-McGee Corporation 146 8,048
Louisiana Land & Exploration 94 3,325
McDermott International, Inc. 152 2,413
Mobil Corporation 1,200 120,900
Nicor, Inc. 147 3,951
NorAm Energy Corporation 400 3,100
Occidental Petroleum Corporation 972 20,898
ONEOK, Inc. 75 1,828
Oryx Energy Company 400 4,600
Pacific Enterprises 300 7,425
Panhandle Eastern Corporation 500 12,625
Pennzoil Company 130 4,908
Peoples Energy Corporation 98 2,817
Phillips Petroleum Company 860 27,735
Rowan Companies, Inc. (a) 238 1,577
Royal Dutch Petroleum Company 1,700 208,888
Santa Fe Energy Resources, Inc. 254 2,254
Schlumberger, Ltd. 800 49,800
Sonat, Inc. 246 7,072
Sun Company, Inc. 210 6,011
Tenneco, Inc. 544 23,868
Texaco, Inc. 900 61,313
The Williams Companies, Inc. 310 11,974
Unocal Corporation 800 21,000
USX Corporation - Marathon Group 920 16,330
---------
Subtotal 1,311,190
HEALTHCARE - 10.19%
Abbott Laboratories 2,500 99,375
Allergan, Inc. 179 5,258
ALZA Corporation (a) 300 6,600
American Home Products Corporation 944 83,662
Amgen, Inc. (a) 850 40,800
Bard (C.R.), Inc. 147 4,153
Baxter International, Inc. 900 34,763
Becton, Dickinson & Company 192 12,480
Beverly Enterprises, Inc. (a) 300 3,525
Biomet, Inc. (a) 335 5,569
</TABLE>
51
<PAGE> 90
<TABLE>
<S> <C> <C>
Boston Scientific Corporation (a) 500 21,062
Bristol-Myers Squibb Company 1,573 119,941
Columbia/HCA Healthcare Corporation 1,380 67,793
Community Psychiatric Centers 123 1,338
Eli Lilly & Company 950 91,794
Johnson & Johnson 2,000 163,000
Manor Care, Inc. 176 5,764
Medtronic, Inc. 700 40,425
Merck & Company , Inc. 3,850 221,375
Pfizer, Inc. 2,000 114,750
Schering-Plough Corporation 1,200 64,350
Shared Medical Systems Corporation 65 2,511
St. Jude Medical, Inc. 131 6,976
Tenet Healthcare Corporation (a) 700 12,512
U.S. Healthcare, Inc. 600 23,100
U.S. Surgical Corporation 160 3,920
United HealthCare Corporation 600 31,875
Upjohn Company 1,050 53,288
Warner-Lambert Company 450 38,306
---------
Subtotal 1,380,265
HOSPITALITY - .93%
Hilton Hotels Corporation 139 9,313
Luby's Cafeterias, Inc. 72 1,494
Marriott International, Inc. 400 14,750
McDonald's Corporation 2,200 90,200
Ryan's Family Steak House, Inc. (a) 151 1,170
Shoney's, Inc. (a) 116 1,291
Wendy's International, Inc. 400 7,950
-------
Subtotal 126,168
HOUSING RELATED - 1.00%
Armstrong World Industries, Inc. 106 6,294
Centex Corporation 85 2,784
Fleetwood Enterprises, Inc. 130 2,665
Home Depot, Inc. 1,500 55,875
Kaufman & Broad Home Corporation 91 1,058
Lowe's Companies, Inc. 600 16,200
Masco Corporation 500 14,062
Maytag Corporation 400 7,600
Owens-Corning Fiberglas Corporation (a) 200 8,475
Pulte Corporation 78 2,467
Stanley Works 126 6,016
Whirlpool Corporation 218 11,554
-------
Subtotal 135,050
INDEPENDENT FINANCE COMPANIES - 2.42%
American Express Company 1,600 65,000
Beneficial Corporation 148 7,252
Dean Witter Discover & Company 600 29,850
Federal Home Loan Mortgage Corporation 600 41,550
Federal National Mortgage Association 888 93,129
H&R Block, Inc. 302 12,457
Household International, Inc. 275 15,469
Transamerica Corporation 200 13,550
Transport Holdings, Inc.-Class A (a) 4 157
Travelers Group, Inc. 979 49,440
-------
Subtotal 327,854
INSURANCE - 3.08%
Aetna Life & Casualty Company 400 28,150
Alexander & Alexander Services, Inc. 124 2,774
Allstate Corporation 1,400 51,450
American General Corporation 700 23,013
American International Group, Inc. 1,530 129,094
Chubb Corporation 249 22,379
CIGNA Corporation 206 20,420
General Re Corporation 236 34,190
Jefferson - Pilot Corporation 137 9,042
Lincoln National Corporation 360 16,065
Marsh & McLennan Companies, Inc. 213 17,439
Providian Corporation 280 10,990
SAFECO Corporation 182 11,682
St. Paul Companies, Inc. 240 12,180
</TABLE>
52
<PAGE> 91
<TABLE>
<S> <C> <C>
Torchmark Corporation 202 8,383
UNUM Corporation 207 10,893
USF&G Corporation 360 6,030
USLIFE Corporation 96 2,736
-------
Subtotal 416,910
LEISURE & ENTERTAINMENT - 1.01%
Bally Entertainment Corporation (a) 132 1,452
Brunswick Corporation 300 5,850
Disney (Walt) Company 1,595 91,912
Handleman Company 95 736
Harrah's Entertainment Inc. (a) 292 7,227
Hasbro, Inc. 253 7,717
Mattel, Inc. 700 20,125
Outboard Marine Corporation 56 1,162
-------
Subtotal 136,181
MEDIA - 2.80%
Capital Cities/ABC, Inc. 444 52,669
CBS, Inc. 175 14,131
Comcast Corporation Special - Class A 800 14,300
Donnelley (R.R.) & Sons Company 500 18,250
Dow Jones & Company, Inc. 280 9,870
Dun & Bradstreet Corporation 600 35,850
Gannett Company, Inc. 500 27,188
Harcourt General, Inc. 225 8,916
Harland (J.H.) Company 86 1,784
Interpublic Group 222 8,603
King World Productions, Inc. (a) 104 3,627
Knight-Ridder, Inc. 151 8,381
McGraw-Hill, Inc. 142 11,626
Meredith Corporation 78 2,788
New York Times Company - Class A 281 7,798
Tele-Communications, Inc. - Class A (a) 2,000 34,000
Time Warner, Inc. 1,164 42,486
Times Mirror Company - Class A 363 10,527
Tribune Company 191 12,057
Viacom, Inc. - Class B (a) 1,102 55,100
-------
Subtotal 379,951
METALS & MINING - 1.73%
Alcan Aluminium, Ltd. 700 22,137
Aluminum Company of America 600 30,600
Armco, Inc. (a) 400 2,450
ASARCO, Inc. 119 3,838
Barrick Gold Corporation 1,109 25,646
Bethlehem Steel Corporation (a) 400 5,250
Crown Cork & Seal Company, Inc. (a) 255 8,893
Cyprus Amax Minerals Company 261 6,819
Echo Bay Mines, Ltd. 400 3,600
Englehard Corporation 500 12,437
Freeport-McMoran Copper-B 700 15,925
Homestake Mining Company 450 6,919
Inco, Ltd. 400 13,750
Inland Steel Industries, Inc. 125 2,922
Newmont Mining Corporation 246 9,286
Nucor Corporation 249 11,983
Phelps Dodge Corporation 202 12,802
Placer Dome, Inc. 800 17,500
Reynolds Metals Company 179 9,017
USX Corporation - U.S. Steel Group 300 8,963
Worthington Industries, Inc. 256 4,256
-------
Subtotal 234,993
PAPER & FOREST PRODUCTS - 1.91%
Bemis Company, Inc. 144 3,744
Boise Cascade Corporation 132 4,785
Champion International Corporation 300 16,050
Deluxe Corporation 233 6,262
Federal Paper Board Company, Inc. 200 8,400
Georgia-Pacific Corporation 261 21,533
International Paper Company 800 29,600
James River Corporation 230 7,389
Kimberly-Clark Corporation 500 36,312
</TABLE>
53
<PAGE> 92
<TABLE>
<S> <C> <C>
Louisiana-Pacific Corporation 320 7,640
Mead Corporation 168 9,681
Moore Corporation, Ltd. 350 6,694
Potlatch Corporation 82 3,454
Scott Paper Company 500 26,625
Stone Container Corporation 300 4,950
Temple-Inland, Inc. 159 7,234
Union Camp Corporation 200 10,175
Westvaco Corporation 291 8,075
Weyerhaeuser Company 650 28,681
Willamette Industries, Inc. 200 11,600
--------
Subtotal 258,884
RESTAURANTS - 0.04%
Darden Restaurants, Inc. 500 5,688
RETAIL - 4.13%
Albertson's, Inc. 900 29,925
American Stores Company 500 14,937
Charming Shoppes, Inc. 290 834
Circuit City Stores, Inc. 300 10,013
Dayton Hudson Corporation 207 14,231
Dillard Department Stores, Inc. - Class A 326 8,843
Fleming Companies, Inc. 105 2,376
Gap (The), Inc. 500 19,687
Giant Food, Inc. - Class A 167 5,365
Great Atlantic & Pacific Tea Co., Inc. 108 2,187
Kmart Corporation 1,400 11,375
Kroger Company (a) 400 13,350
Limited, Inc. 1,094 20,102
Longs Drug Stores Corporation 58 2,320
May Department Stores Company 800 31,400
Melville Corporation 301 9,632
Mercantile Stores Company, Inc. 104 4,667
Nordstrom, Inc. 237 8,784
Penney (J.C.) Company, Inc. 800 33,700
Price/Costco, Inc. (a) 600 10,200
Rite Aid Corporation 238 6,426
Sears, Roebuck and Company 1,200 40,800
Stride Rite Corporation 140 1,575
Supervalu, Inc. 202 6,212
Sysco Corporation 600 18,225
Tandy Corporation 210 10,369
TJX Companies, Inc. 207 2,794
Toys 'R' Us, Inc. (a) 920 20,125
Wal-Mart Stores, Inc. 7,150 154,619
Walgreen Company 800 22,800
Winn-Dixie Stores, Inc. 215 13,975
Woolworth Corporation 500 7,313
--------
Subtotal 559,161
TELECOMMUNICATIONS - 8.92%
Airtouch Communications, Inc. (a) 1,600 45,600
Alltel Corporation 600 18,375
Ameritech Corporation 1,690 91,260
AT&T Corporation 4,900 313,600
Bell Atlantic Corporation 1,360 86,530
BellSouth Corporation 1,531 117,122
GTE Corporation 3,000 123,750
MCI Communications Corporation 2,150 53,616
Northern Telecom, Ltd. 776 27,936
NYNEX Corporation 1,317 61,899
Pacific Telesis Group 1,300 39,487
SBC Communications Inc. 1,900 106,163
Sprint Corporation 1,068 41,118
Tellabs, Inc. (a) 300 10,200
U.S. West, Inc. 1,500 71,437
---------
Subtotal 1,208,093
TRANSPORTATION - 1.67%
AMR Corporation (a) 217 14,322
Burlington Northern Santa Fe, Inc. 460 38,582
Conrail, Inc. 225 15,469
Consolidated Freightways, Inc. 121 2,813
</TABLE>
54
<PAGE> 93
<TABLE>
<S> <C> <C>
CSX Corporation 302 25,292
Delta Air Lines, Inc. 144 9,450
Federal Express Corporation (a) 160 13,140
Norfolk Southern Corporation 388 29,973
Pittston Services Group 118 3,245
Roadway Services, Inc. 114 5,101
Ryder System, Inc. 222 5,355
Santa Fe Pacific Gold Corporation 450 4,443
Southwest Airlines Company 500 10,000
Union Pacific Corporation 700 45,762
USAir Group, Inc. (a) 171 2,329
Yellow Corporation 79 1,037
----------
Subtotal 226,313
----------
Total Common Stocks
(cost $10,769,062) 13,547,432
----------
TOTAL INVESTMENTS - 100%
(cost $10,769,062) $13,547,461
===========
(a) Non-income producing.
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
55
<PAGE> 94
JACKSON NATIONAL TOTAL RETURN FUND
SCHEDULE OF INVESTMENTS
OCTOBER 31, 1995
<TABLE>
<CAPTION>
Shares or
Principal Market
Amount Value
------------- -------------
<S> <C> <C>
COMMON STOCKS - 55.39%
AEROSPACE & DEFENSE - 4.36%
Lockheed Martin Corporation 3,900 $265,688
Raytheon Company 6,400 279,200
Rockwell International Corporation 4,100 182,450
United Technologies Corporation 3,200 284,000
---------
Subtotal 1,011,338
APPAREL & TEXTILES - 1.70%
NIKE, Inc. - Class B 2,500 141,875
V.F. Corporation 5,300 253,738
---------
Subtotal 395,613
AUTOMOTIVE - 1.52%
Ford Motor Company 3,900 112,125
General Motors Corporation 5,500 240,625
---------
Subtotal 352,750
CAPITAL GOODS & MANUFACTURING - 0.84%
General Electric Company 3,100 196,075
CHEMICALS - 1.91%
Grace (W.R.) & Company 3,700 206,275
PPG Industries, Inc. 5,600 238,000
---------
Subtotal 444,275
COMPUTER & TECHNOLOGY - 2.19%
Harris Corporation 4,300 249,937
Xerox Corporation 2,000 259,500
---------
Subtotal 509,437
CONSUMER PRODUCTS - 5.57%
RJR Nabisco Holdings Corporation 8,500 261,375
American Brands, Inc. 4,500 192,937
Anheuser-Busch Companies, Inc. 3,100 204,600
Dial Corporation 7,400 180,375
Philip Morris Companies, Inc. 3,200 270,400
Polaroid Corporation 4,300 183,825
----------
Subtotal 1,293,512
DIVERSIFIED - 1.06%
ITT Corporation 2,000 245,000
DOMESTIC BANKS - 5.11%
BankAmerica Corporation 3,800 218,500
Boatmen's Bancshares, Inc. 5,200 197,600
Chemical Banking Corporation 4,200 238,875
KeyCorp 7,400 249,750
Mellon Bank Corporation 5,600 280,700
---------
Subtotal 1,185,425
ELECTRIC UTILITIES - 4.42%
General Public Utilities Corporation 8,700 271,875
Ohio Edison Company 11,500 263,063
PECO Energy Company 9,900 289,575
Texas Utilities Company 5,500 202,125
---------
Subtotal 1,026,638
</TABLE>
56
<PAGE> 95
<TABLE>
<S> <C> <C>
ENERGY - 4.59%
Ashland, Inc. 8,000 253,000
Chevron Corporation 5,300 247,775
Exxon Corporation 4,000 305,500
Texaco, Inc. 3,800 258,875
---------
Subtotal 1,065,150
HEALTHCARE - 6.22%
Baxter International, Inc. 5,400 208,575
Bristol-Myers Squibb Company 3,300 251,625
Columbia/HCA Healthcare Corporation 4,600 225,975
Lilly (Eli) & Company 2,200 212,575
U.S. Healthcare, Inc. 7,700 296,450
Upjohn Company 4,900 248,675
---------
Subtotal 1,443,875
INDEPENDENT FINANCE COMPANIES - 3.21%
Beneficial Corporation 4,800 235,200
Student Loan Marketing Association 4,400 259,050
Transamerica Corporation 3,700 250,675
---------
Subtotal 744,925
INSURANCE - 2.16%
American General Corporation 7,400 243,275
CIGNA Corporation 2,600 257,725
---------
Subtotal 501,000
LEISURE & ENTERTAINMENT - 0.14%
Hasbro, Inc. 1,100 33,550
METALS & MINING - 1.12%
Phelps Dodge Corporation 4,100 259,837
RETAIL - 3.60%
Dayton Hudson Corporation 3,400 233,750
Federated Department Stores, Inc. (a) 8,500 215,688
Melville Corporation 5,000 160,000
Penney (J.C.) Company, Inc. 5,400 227,475
---------
Subtotal 836,913
TELECOMMUNICATIONS - 3.21%
BellSouth Corporation 2,700 206,550
Sprint Corporation 7,200 277,200
U.S. West, Inc. 5,500 261,937
---------
Subtotal 745,687
TRANSPORTATION - 2.46
Burlington Northern Santa Fe, Inc. 3,500 293,563
CSX Corporation 3,300 276,375
---------
Subtotal 569,938
---------
TOTAL COMMON STOCKS
(cost $10,014,255) 12,860,938
----------
CORPORATE OBLIGATIONS - 9.49%
APPAREL & TEXTILES - 1.24%
CMI Industries, Inc.
9.50%, 10/01/2003 $100,000 89,000
Day International Group
11.125%, 06/01/2005 (144A) 100,000 102,000
Hartmarx Corporation
10.875%, 01/15/2002 100,000 98,000
--------
Subtotal 289,000
CAPITAL GOODS & MANUFACTURING - 0.44%
Case Corporation
7.25%, 08/01/2005 100,000 102,355
</TABLE>
57
<PAGE> 96
<TABLE>
<S> <C> <C>
CONSUMER PRODUCTS - 1.29%
Coty, Inc.
10.25%, 05/01/2005 100,000 106,250
Joseph Seagram & Sons
7.00%, 04/15/2008 100,000 100,624
Specialty Foods Company
11.125%, 10/01/2002 100,000 93,750
--------
Subtotal 300,624
DOMESTIC BANKS - 0.45%
Nationsbank Corporation
7.75%, 08/15/2015 100,000 104,947
FOREIGN GOVERNMENTS - 0.43%
Quebec Province
7.50%, 07/15/2023 100,000 99,110
HEALTHCARE - 0.49%
Lilly (Eli) & Company
8.375%, 12/01/2006 100,000 113,949
HOTEL & GAMING - 0.47%
Showboat, Inc.
13.00%, 08/01/2009 100,000 110,000
HOUSING RELATED - 0.48%
Schuller International Group, Inc.
10.875%, 12/15/2004 100,000 111,125
INDEPENDENT FINANCE COMPANIES - 0.49%
Associated Corporation N.A.
8.625%, 11/15/2004 100,000 113,720
INSURANCE - 0.48%
American Reinsurance Corporation
10.875% 09/15/2004 100,000 111,376
MEDIA - 0.90%
Continental Cablevision, Inc.
8.875%, 09/15/2005 100,000 104,500
TCI Communications, Inc.
8.00%, 08/01/2005 100,000 103,384
--------
Subtotal 207,884
METALS & MINING - 1.42%
AK Steel Corporation
10.75%, 04/01/2004 100,000 109,000
UCAR Global Enterprises, Inc.
12.00%, 01/15/2005 105,000 118,256
WMC Finance Limited USA
7.25%, 11/15/2013 100,000 101,449
--------
Subtotal 328,705
PAPER & FOREST PRODUCTS - 0.91%
Rainy River Forest Products, Inc.
10.75%, 10/15/2001 100,000 109,500
Repap New Brunswick, Inc.
10.625%, 04/15/2005 100,000 102,000
--------
Subtotal 211,500
--------
Total Corporate Obligations
(cost $2,153,165) 2,204,295
</TABLE> ---------
58
<PAGE> 97
<TABLE>
<S> <C> <C>
U.S. GOVERNMENT SECURITIES - 34.26%
U.S. TREASURY BONDS - 10.23%
U.S. Treasury Bond
7.25%, 08/15/2004 625,000 676,756
U.S. Treasury Strip Bond
0.00% to 11/15/2009; 11.75% to
11/15/2014 150,000 60,986
U.S. Treasury Strip Bond
0.00%, 02/15/2015 300,000 98,451
U.S. Treasury Bond
9.00%, 11/15/2018 650,000 848,958
U.S. Treasury Strip Bond
0.00%, 08/15/2021 250,000 46,325
U.S. Treasury Bond
8.00%, 11/15/2021 300,000 358,593
U.S. Treasury Bond
7.50%, 11/15/2024 250,000 285,625
---------
Subtotal 2,375,694
U.S. TREASURY NOTES - 24.03%
U.S. Treasury Note
8.00%, 10/15/1996 1,100,000 1,123,892
U.S. Treasury Strip Note
0.00%, 11/15/1997 200,000 178,532
U.S. Treasury Note
8.875%, 11/15/1997 850,000 902,063
U.S. Treasury Note
9.00%, 05/15/1998 900,000 969,606
U.S. Treasury Note
5.875%, 08/15/1998 200,000 200,938
U.S. Treasury Note
6.875%, 07/31/1999 1,100,000 1,139,699
U.S. Treasury Note
8.00%, 05/15/2001 700,000 770,434
U.S. Treasury Strip Note
0.00%, 02/15/2003 450,000 292,895
---------
Subtotal 5,578,059
Total U.S. Government Securities
(cost $7,863,311) 7,953,753
---------
SHORT TERM INVESTMENTS - 0.86%
COMMERCIAL PAPER - 0.86%
General Electric Capital Corporation
5.60%, 11/03/1995 200,000 199,938
Total Short Term Investments
(cost $199,938) 199,938
-------
TOTAL INVESTMENTS - 100%
(cost $20,230,669) $23,218,924
===========
(a) Non-income producing.
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
59
<PAGE> 98
APPENDIX A -- RATINGS OF INVESTMENTS
COMMERCIAL PAPER RATINGS
A-1, A-2 AND PRIME-1, PRIME-2 COMMERCIAL PAPER RATINGS
Commercial paper rated by Standard & Poor's Corporation has the following
characteristics: Liquidity ratios are adequate to meet cash requirements.
Long-term senior debt is rated "A" or better. The issuer has access to at
least two additional channels of borrowing. Basic earnings and cash flow have
an upward trend with allowance made for unusual circumstances. Typically, the
issuer's industry is well established and the issuer has a strong position
within the industry. The reliability and quality of management are
unquestioned. Relative strength or weakness of the above factors determine
whether the issuer's commercial paper is rated A-1 or A-2.
The ratings Prime-1 and Prime-2 are the two highest commercial paper ratings
assigned by Moody's Investors Service, Inc. Among the factors considered by it
in assigning ratings are the following: (1) evaluation of the management of
the issuer; (2) economic evaluation of the issuer's industry or industries and
an appraisal of speculative-type risks which may be inherent in certain areas;
(3) evaluation of the issuer's products in relation to competition and
customer-acceptance; (4) liquidity; (5) amount and quality of long-term debt;
(6) trend of earnings over a period of ten years; (7) financial strength of a
parent company and the relationships which exist with the issuer; and (8)
recognition by the management of obligations which may be present or may arise
as a result of public interest questions and preparations to meet such
obligations. Relative strength or weakness of the above factors determines
whether the issuer's commercial paper is rated Prime-1 or 2.
CORPORATE BONDS
STANDARD & POOR'S CORPORATION BOND RATINGS
AAA. Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA. Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issued only in small degree.
A. Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB. Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
60
<PAGE> 99
BB, B, CCC, CC, C. Debt rated BB, B, CCC, CC, and C is regarded, on balance,
as predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and C the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
CI. The rating CI is reserved for income bonds on which no interest is being
paid.
D. Debt rated D is in default, and payment of interest and/or repayment of
principal is in arrears.
MOODY'S INVESTORS SERVICE, INC. BOND RATINGS
Aaa. Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt-edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa. Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
A. Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa. Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time.
Such bonds lack outstanding investment characteristics and, in fact, have
speculative characteristics as well.
Ba. Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
61
<PAGE> 100
B. Bonds which are rated B generally lack characteristics of the desirable
investment.
Assurance of interest and principal payments or of maintenance of other terms
of the contract over any long period of time may be small.
Caa. Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
and interest.
Ca. Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
C. Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
MUNICIPAL BONDS
STANDARD & POOR'S MUNICIPAL BOND RATINGS
AAA. Bonds rated AAA have the highest rating assigned by Standard & Poors.
Capital to pay interest and repay principal is extremely sharp.
AA. Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the higher rated issues only in small degree.
A. Bonds which are rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debit in higher rated
categories.
BBB. Bonds which are rated BBB are regarded as having an adequate capacity to
pay interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to pay interest and repay
principal for bonds in this category than for bonds in higher rated categories.
PLUS (+) OR MINUS (-): The ratings from "AA" to "B" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
MOODY'S INVESTORS SERVICE, INC. MUNICIPAL BOND RATINGS
Aaa. Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"glit-edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most
62
<PAGE> 101
unlikely to impair the fundamentally strong position of such issues.
Aa. Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the AAA group, they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
A. Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa. Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and, in
fact, have speculative characteristics as well.
NOTE: Moody's applies numerical modifiers, 1, 2 AND 3 in each generic rating
classification from "Aa" through "B" in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
63
<PAGE> 102
JACKSON NATIONAL CAPITAL MANAGEMENT FUNDS
PART C
OTHER INFORMATION
Note: Items 24-33 have been answered with respect to all five investment
portfolios of the Registrant.
Item 24. Financial Statements and Exhibits.
(a) Financial Statements
(i) Financial statements included in Part A of the
Registration Statement: Financial Highlights
(ii) Financial statements included in Part B of the
Registration Statement:
Report of Independent Accountants
Statement of Assets and Liabilities at
October 31, 1995
Statement of Operations for the year
ended October 31, 1995
Statement of Changes in Net Assets for
the two years ended October 31, 1995
Financial Highlights for the period from
November 12, 1992 (commencement of
operations) to October 31, 1995
Notes to Financial Statements
Schedule of Investments at October 31, 1995
(b) Exhibits:
1
<PAGE> 103
Exhibit
Number Description
- ------- -----------
1. Agreement and Declaration of Trust of Registrant dated December 12,
1991, attached hereto (refiling by EDGAR)
2. By-laws of Registrant, attached hereto (refiling by EDGAR)
3. Not Applicable
4. Article III, Article V, Article VI, Article VIII and Article IX of the
Agreement and Declaration of Trust of the Registrant, attached
hereto; Section 2, Section 7 and Section 8 of the By-laws of the
Registrant, attached hereto.
5. (a) Investment Management Agreement between Registrant and Jackson
National Financial Services, Inc. dated November 1, 1992, attached
hereto (refiling by EDGAR)
(b) Investment Sub-Advisory Agreement between Jackson National Financial
Services, Inc. and PPM America, Inc. dated November 1, 1992, attached
hereto (refiling by EDGAR)
6. (a) Underwriting Agreement between Registrant and Jackson National
Financial Services, Inc. dated August 10, 1992, attached hereto
(refiling by EDGAR)
(b) Form of Selling Group Agreement between Jackson National Financial
Services, Inc. and Additional Selling Agents, attached hereto
(refiling by EDGAR)
7. Not Applicable
8. (a) Custody Agreement between Registrant and Investors Fiduciary Trust
Company dated September 10, 1992, attached hereto (refiling by EDGAR)
(b) Amendment to Custody Agreement dated August 17, 1994, attached hereto
9. (a) Agency Agreement between Registrant and Investors Fiduciary Trust
Company dated September 10, 1992, attached hereto (refiling by EDGAR)
2
<PAGE> 104
(b) Administrative Services Agreement between Registrant and Jackson
National Financial Services, Inc. dated June 1, 1994, attached
hereto (refiling by EDGAR)
(c) Account Application, attached hereto (refiling by EDGAR)
10. Opinion and Consent of Vedder, Price, Kaufman & Kammholz, attached
hereto
11. Consent of Price Waterhouse LLP, attached hereto
12. Not Applicable.
13.(a) Form of Purchase Agreement between Registrant and Jackson National
Financial Services, Inc. with respect to the Funds, attached hereto
(refiling by EDGAR)
14.(a) Individual Retirement Account documents, attached hereto (refiling by
EDGAR)
(b) Section 403(b)(7) Account documents, attached hereto (refiling by
EDGAR)
15. Not Applicable.
16. Computation of Performance Quotations, attached hereto (refiling by
EDGAR)
17. Financial Data Schedule, attached hereto
18. Not Applicable
Item 25. Persons Controlled by or Under Common Control with Registrant.
Jackson National Financial Services, Inc. is a wholly-owned subsidiary of
Jackson National Life Insurance Company, which through its ownership of shares
of the Tax-Exempt, Income, Growth, and Total Return Funds, also controls those
Funds.
Item 26. Number of Holders of Securities.
3
<PAGE> 105
As of January 31, 1996, there were the following holders of record of each
Fund.
<TABLE>
<CAPTION>
FUND NAME HOLDERS
---------------- -------
<S> <C>
Money Market 2,293
Tax-Exempt 266
Income 514
Growth 1,541
Total Return 1,498
</TABLE>
Item 27. Indemnification.
Article VIII of the Registrant's Agreement and Declaration of Trust
provides that each of its Trustees and Officers (including persons who serve at
the Registrant's request as directors, officers or trustees of another
organization in which the Registrant has any interest as a shareholder,
creditor or otherwise) (each, a "Covered Person") shall be indemnified by the
Registrant against all liabilities and expenses that may be incurred by reason
of being or having been such a Covered Person, except that no Covered Person
shall be indemnified against any liability to the Registrant or its
shareholders to which such Covered Person would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of such Covered Person's office.
The foregoing indemnification arrangements are subject to the provisions
of Section 17(h) of the Investment Company Act of 1940.
Insofar as indemnification by the Registrant for liabilities arising under
the Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful defense of any
action, suit or
4
<PAGE> 106
proceeding) is asserted against the Registrant by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
In addition to the above indemnification, Jackson National Life Insurance
Company extends its indemnification of its own officers, directors and
employees to cover such persons' activities as officers, trustees or employees
of the Registrant, and by separate agreement Jackson National Life Insurance
Company has agreed to indemnify trustees of the Registrant who are not
interested persons of the Registrant or its investment adviser.
Item 28. Business and Other Connections of Investment Adviser.
Incorporated herein by reference from the Statement of Additional
Information relating to the Funds are the following: the description of the
business of Jackson National Financial Services, Inc. (the "JNFSI") contained
in the section entitled "Investment Advisers" and the biographical information
pertaining to Messrs. Jordan, Knutson, and Meyer contained in the section
entitled "Officers and Trustees."
Item 29. Principal Underwriters.
(a) JNFSI, the investment adviser and principal underwriter
of the Funds, also serves as investment adviser for
another investment company, the JNL Series Trust.
(b) The following information is furnished with respect to
each director and officer of JNFSI:
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Office
Business Address with JNFSI with Registrant
- ------------------ --------------------- --------------------
<S> <C> <C>
John A. Knutson President, Chief President, Trustee
5901 Executive Dr. Executive Officer, and Chairman of the
</TABLE>
5
<PAGE> 107
<TABLE>
<S> <C> <C>
Lansing MI 48911 Chief Financial Board
Officer and Director
Larry C. Jordan Chief Operating Officer, Vice President
5901 Executive Dr. Treasurer, Assistant and Assistant
Lansing MI 48911 Secretary and Director Secretary
Thomas J. Meyer Vice President, Vice President
5901 Executive Dr. Secretary, Chief and Secretary
Lansing MI 48911 Legal Officer and
Director
</TABLE>
(c) Not Applicable
Item 30. Location of Accounts and Records.
Accounts, books and other documents required to be maintained pursuant to
Rule 31a-1(b)(4), (5), (6), (7), (9), (10), and (11) are in the physical
possession of the Registrant at 5901 Executive Drive, Lansing, Michigan 48911;
all other books, accounts and other documents required to be maintained under
Section 31(a) of the Investment Company Act of 1940 and the Rules promulgated
thereunder are in the physical possession of Investors Fiduciary Trust Company,
210 West 10th Street, 8th Floor, Kansas City, Missouri 64105-1716.
Item 31. Management Services.
Not Applicable
Item 32. Undertakings.
(c) Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest annual report to
shareholders upon request and without charge.
6
<PAGE> 108
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Post-Effective Amendment pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Post-Effective Amendment to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Lansing and the State of Michigan on
the 26th day of February, 1996.
JACKSON NATIONAL CAPITAL MANAGEMENT FUNDS
/s/ John A. Knutson
-------------------------------
John A. Knutson, President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment has been signed below by the following persons in the
capacities and on the date indicated.
<TABLE>
<S> <C> <C>
/s/ John A. Knutson
- ------------------------ President, Trustee February 26, 1996
John A. Knutson and Chairman of the
Board
/s/ R. William Sheathelm
- ------------------------ Trustee February 26, 1996
R. William Sheathelm
/s/ Beverly Wolkow
- ------------------------ Trustee February 26, 1996
Beverly Wolkow
</TABLE>
7
<PAGE> 109
Exhibit Index
Exhibit Description
1. Agreement and Declaration of Trust of Registrant dated December 12,
1991, attached hereto as Exhibit EX-99.B1-trust
2. By-laws of Registrant, attached hereto as Exhibit EX-99.B2-bylaws
5. (a) Investment Management Agreement between Jackson National Financial
Services, Inc. dated November 1, 1992, attached hereto as Exhibit
EX-99.B5-invtmgmt
(b) Investment Sub-Advisory Agreement between Jackson National Financial
Services, Inc. and PPM America, Inc. dated November 1, 1992,
attached hereto as Exhibit EX-99.B5-sub-advi
6. (a) Underwriting Agreement between Registrant and Jackson National
Financial Services, Inc. dated August 10, 1992, attached hereto as
Exhibit EX-99.B6-underwri
(b) Form of Selling Group Agreement between Jackson National Financial
Services, Inc. and Additional Selling Agents, attached hereto as
Exhibit EX-99.B6-selling
8. (a) Custody Agreement between Registrant and Investors Fiduciary Trust
Company dated September 10, 1992, attached hereto as
Exhibit EX-99.B8-custodya
(b) Amendment to Custody Agreement dated August 17, 1994, attached hereto
as Exhibit EX-99.B8-feesch
9. (a) Agency Agreement between Registrant and Investors Fiduciary Trust
Company dated September 10, 1992, attached hereto as
Exhibit EX-99.B9-agency
(b) Administrative Services Agreement between Registrant and Jackson
National Financial Services, Inc., attached hereto as
Exhibit EX-99.B9-adminis
(c) Account Application, attached hereto as Exhibit EX-99.B9-applic
8
<PAGE> 110
10. Opinion and Consent of Vedder, Price, Kaufman & Kammholz, attached
hereto as Exhibit EX-99.B10-vpkkcon
11. Consent of Price Waterhouse LLP, attached hereto as Exhibit
EX-99.B11-pwcon
13. (a) Form of Purchase Agreement between Registrant and Jackson National
Financial Services, Inc. with respect to the Funds, attached hereto
as Exhibit EX-99.B13-purch
14. (a) Individual Retirement Account documents, attached hereto as Exhibit
EX-99.B14-ira
(b) Section 403(b)(7) Account documents, attached hereto as Exhibit
EX-99.B14-403b
16. Computation of Performance Quotations, attached hereto as Exhibit
EX-99.B16-perfcomp
17. Financial Data Schedule, attached hereto as Exhibit EX-27.B17-jncmfds
__ Counsel Letter Regarding Filing under Rule 485(b), attached hereto
as Exhibit 485(b)
<PAGE> 1
EX-99.B1-TRUST
JACKSON NATIONAL CAPITAL MANAGEMENT FUNDS
AGREEMENT AND DECLARATION OF TRUST
AGREEMENT AND DECLARATION OF TRUST made at Boston, the Trustee Massachusetts,
this 12th day of December, 1991 by hereunder, and by the Trustees hereunder,
and by the holders of shares of beneficial interest to be issued hereunder as
hereinafter provided.
WITNESSETH that
WHEREAS, this Trust has been formed to carry on the business of an
investment company; and
WHEREAS, the Trustees have agreed to manage all property coming into their
hands as trustees of a Massachusetts business trust in accordance with the
provisions hereinafter set forth.
NOW, THEREFORE, the Trustees hereby declare that they will hold all cash,
securities and other assets, which they may from time to time acquire in any
manner as Trustees hereunder, IN TRUST to manage and dispose of the same upon
the following terms and conditions for the pro rata benefit of the holders from
time to time of Shares in this Trust as hereinafter set forth.
ARTICLE I
NAME AND DEFINITIONS
Name
Section 1. This Trust shall be known as "Jackson National Capital
Management Funds", and the Trustees shall conduct the business of the Trust
under that name or any other name as they may from time to time determine.
Definitions
Section 2. Whenever used herein, unless otherwise required by the context
or specifically provided:
(a) The "Trust" refers to the Massachusetts business trust established by
this Agreement and Declaration of Trust, as amended from time to time;
(b) "Trustees" refers to the Trustee or Trustees of the Trust named herein
or elected in accordance with Article IV;
<PAGE> 2
(c) "Shares" means the equal proportionate transferable units of interest
into which the beneficial interest in the Trust shall be divided from time to
time or, if more than one series of Shares is authorized by the Trustees, the
equal proportionate units into which each series of Shares shall be divided
from time to time or, if more than one class of Shares of any series is
authorized by the Trustees, the equal proportionate units into which each class
of such series of Shares shall be divided from time to time;
(d) "Shareholder" means a record owner of Shares;
(e) The "1940 Act" refers to the Investment Company Act of 1940 and the
Rules and Regulations thereunder, all as amended from time to time;
(f) The terms "Affiliated Person," "Assignment," "Commission," "Interested
Person," "Principal Underwriter" and "Majority Shareholder Vote" (the 67% or
50% requirement of the third sentence of Section 2(a)(42) of the 1940 Act,
whichever may be applicable) shall have the meanings given them in the 1940
Act;
(g) "Declaration of Trust" shall mean this Agreement and Declaration of
Trust as amended or restated from time to time; and
(h) "By-Laws" shall mean the By-Laws of the Trust as amended from time to
time.
ARTICLE II
PURPOSE
The purpose of the Trust is to engage in the business of a management
investment company and to provide investors a managed investment primarily in
securities, commodities and debt instruments.
ARTICLE III
SHARES
Division of Beneficial Interest
Section 1. The Shares of the Trust shall be issued in one or more series
as the Trustees may, without Shareholder approval, authorize. The Trustees may,
without Shareholder approval, divide the Shares of any series into two or more
classes, Shares of each such class having such preferences or special or
relative rights or privileges (including conversion rights, if any) as the
Trustees may determine and as are not inconsistent with any provision of this
Declaration of Trust. Each series shall be preferred over all other series in
respect of the assets allocated to that series. The beneficial interest in each
series shall at all times be divided into Shares, without par value, each of
which shall, except as the Trustees may otherwise authorize in the case of any
series that is divided into two or more classes, represent an equal
proportionate interest in the series with each other Share of the same
<PAGE> 3
series, none having priority or preference over another. The number of Shares
authorized shall be unlimited, and the Shares so authorized may be represented
in part by fractional shares. The Trustees may from time to time divide or
combine the Shares of any series or class into a greater or lesser number
without thereby changing the proportionate beneficial interests in the series
or class.
Ownership of Shares
Section 2. The ownership of Shares shall be recorded on the books of the
Trust or its transfer or similar agent. No certificates certifying the
ownership of Shares shall be issued except as the Trustees may otherwise
determine from time to time. The Trustees may make such rules as they consider
appropriate for the issuance of Share certificates, the transfer of Shares and
similar matters. The record books of the Trust as kept by the Trust or any
transfer or similar agent of the Trust, as the case may be, shall be conclusive
as to who are the Shareholders of each series and class and as to the number of
Shares of each series and class held from time to time by each Shareholder.
Investments in the Trust; Assets of the Series
Section 3. The Trustees may accept investments in the Trust from such
persons and on such terms and, subject to any requirements of law, for such
consideration, which may consist of cash or tangible or intangible property or
a combination thereof, as they from time to time authorize.
All consideration received by the Trust for the issue or sale of Shares of
each series, together with all income, earnings, profits and proceeds thereof,
including any proceeds derived from the sale, exchange or liquidation thereof,
and any funds or payments derived from any reinvestment of such proceeds in
whatever form the same may be, shall irrevocably belong to the series of Shares
with respect to which the same were received by the Trust for all purposes,
subject only to the rights of creditors, and shall be so handled upon the books
of account of the Trust and are herein referred to as "assets of" such series.
No Preemptive Rights; Prior Demand by Shareholders
Section 4. Shareholders shall have no preemptive or other right to
receive, purchase or subscribe for any additional Shares or other securities
issued by the Trust. No action may be brought by a Shareholder on behalf of the
Trust unless a prior demand regarding such matter has been made on the Trustees
and Shareholders of the Trust.
Status of Shares and Limitation of Personal Liability
Section 5. Shares shall be deemed to be personal property giving only the
rights provided in this instrument. Every Shareholder by virtue of having
become a Shareholder shall be held to have expressly assented and agreed to the
terms hereof and to have become a party hereto. The death of a Shareholder
during the continuance of the Trust shall not operate to terminate the same nor
entitle the representative of any
<PAGE> 4
deceased Shareholder to an accounting or to take any action in court or
elsewhere against the Trust or the Trustees, but only to the rights of said
decedent under this Trust. Ownership of Shares shall not entitle the
Shareholder to any title in or to the whole or any part of the Trust property
or right to call for a partition or division of the same or for an accounting,
nor shall the ownership of Shares constitute the Shareholders partners. Neither
the Trust nor the Trustees, nor any officer, employee or agent of the Trust,
shall have any power to bind personally any Shareholder, nor except as
specifically provided herein to call upon any Shareholder for the payment of
any sum of money or assessment whatsoever other than such as the Shareholder
may at any time personally agree to pay.
ARTICLE IV
Election; Removal
THE TRUSTEES
Section 1. The number of Trustees shall be fixed by the Trustees,
except that, subsequent to any sale of Shares pursuant to a public offering,
there shall be not less than three Trustees. Any vacancies occurring in the
Board of Trustees may be filled by the Trustees if, immediately after filling
any such vacancy, at least two-thirds of the Trustees then holding office shall
have been elected to such office by the Shareholders. In the event that at any
time less than a majority of the Trustees then holding office were elected to
such office by the Shareholders, the Trustees shall call a meeting of
Shareholders for the purpose of electing Trustees. Each Trustee elected by the
Shareholders or by the Trustees shall serve until the next meeting of
Shareholders called for the purpose of electing Trustees and until the election
and qualification of his or her successor, or until he or she sooner dies,
resigns or is removed. The initial Trustee, who shall serve until the first
meeting of Shareholders at which Trustees are elected and until his or her
successor is elected and qualified, or until he or she sooner dies, resigns or
is removed, shall be Larry C. Jordan and such other persons as the Trustee or
Trustees then in office shall, prior to any sale of Shares pursuant to a public
offering, appoint. By vote of a majority of the Trustees then in office, the
Trustees may remove a Trustee with or without cause. At any meeting called for
the purpose, a Trustee may be removed, with or without cause, by vote of the
holders of two-thirds of the outstanding Shares.
Effect of Death, Resignation, etc. of a Trustee
Section 2. The death, declination, resignation, retirement, removal or
incapacity of the Trustees, or any one of them, shall not operate to annul the
Trust or to revoke any existing agency created pursuant to the terms of this
Declaration of Trust.
<PAGE> 5
Powers
Section 3. Subject to the provisions of this Declaration of Trust, the
business of the Trust shall be managed by the Trustees, and they shall have all
powers necessary or convenient to carry out that responsibility. Without
limiting the foregoing, the Trustees may adopt By-Laws not inconsistent with
this Declaration of Trust providing for the conduct of the business of the
Trust and may amend and repeal them to the extent that such By-Laws do not
reserve that right to the Shareholders; they may fill vacancies in their
number, including vacancies resulting from increases in their number, and may
elect and remove such officers and appoint and terminate such agents as they
consider appropriate; they may appoint from their own number, and terminate,
any one or more committees consisting of two or more Trustees, including an
executive committee which may, when the Trustees are not in session, exercise
some or all of the power and authority of the Trustees as the Trustees may
determine; they may appoint an advisory board, the members of which shall not
be Trustees and need not be shareholders; they may employ one or more
custodians of the assets of the Trust and may authorize such custodians to
employ subcustodians and to deposit all or any part of such assets in a system
or systems for the central handling of securities, retain a transfer agent or a
Shareholder services agent, or both, provide for the distribution of Shares by
the Trust, through one or more principal underwriters or otherwise, set record
dates for the determination of Shareholders with respect to various matters,
and in general delegate such authority as they consider desirable to any
officer of the Trust, to any committee of the Trustees and to any agent or
employee of the Trust or to any such custodian or underwriter.
Without limiting the foregoing, the Trustees shall have power and
authority:
(a) To invest and reinvest in securities, options, futures contracts,
options on futures contracts and other property, and to hold cash uninvested;
(b) To sell, exchange, lend, pledge, mortgage, hypothecate, write options
on and lease any or all of the assets of the Trust;
(c) To vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property; and to execute and deliver
proxies or powers of attorney to such person or persons as the Trustees shall
deem proper, granting to such person or persons such power and discretion with
relation to securities or property as the Trustees shall deem proper;
(d) To exercise powers and rights of subscription or otherwise which in
any manner arise out of ownership of securities or other assets;
(e) To hold any security or property in a form not indicating any trust,
whether in bearer, unregistered or other negotiable form, or in
<PAGE> 6
the name of the Trustees or of the Trust or in the name of a custodian,
subcustodian or other depository or a nominee or nominees or otherwise;
(f) Subject to the provisions of Article III, Section 3, to allocate
assets, liabilities and expenses of the Trust to a particular series of Shares
or to apportion the same among two or more series, provided that any
liabilities or expenses incurred by a particular series of Shares shall be
payable solely out of the assets of that series; and to the extent necessary or
appropriate to give effect to the preferences and special or relative rights
and privileges of any classes of Shares, to allocate assets, liabilities,
income and expenses of a series to a particular class of Shares of that series
or to apportion the same among two or more classes of Shares of that series;
(g) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or issuer, any security of which is
or was held in the Trust; to consent to any contract, lease, mortgage, purchase
or sale of property by such corporation or issuer, and to pay calls or
subscriptions with respect to any security held in the Trust;
(h) To join with other security holders in acting through a committee,
depositary, voting trustee or otherwise, and in that connection to deposit any
security with, or transfer any security to, any such committee, depositary or
trustee, and to delegate to them such power and authority with relation to any
security whether or not so deposited or transferred) as the Trustees shall deem
proper, and to agree to pay, and to pay, such portion of the expenses and
compensation of such committee, depositary or trustee as the Trustees shall
deem proper;
(i) To compromise, arbitrate or otherwise adjust claims in favor of or
against the Trust on any matter in controversy, including but not limited to
claims for taxes;
(j) To enter into joint ventures, general or limited partnerships and any
other combinations or associations;
(k) To borrow funds, securities or other assets;
(l) To endorse or guarantee the payment of any notes or other obligations
of any person; to make contracts of guaranty or suretyship, or otherwise assume
liability for payment thereof; and to mortgage and pledge the Trust property or
any part thereof to secure any of or all of such obligations or obligations
incurred pursuant to subparagraph (k) hereof;
(m) To purchase and pay for entirely out of Trust property such insurance
as they may deem necessary or appropriate for the conduct of the business,
including, without limitation, insurance policies insuring the assets of the
Trust and payment of distributions and principal on its portfolio investments,
and insurance policies insuring the Shareholders, Trustees, officers,
employees, agents, investment advisers or managers, principal underwriters or
independent contractors of the
<PAGE> 7
Trust individually against all claims and liabilities of every nature arising
by reason of holding, being or having held any such office or position, or
by reason of any action alleged to have been taken or omitted by any such
person as Shareholder, Trustee, officer, employee, agent, investment adviser or
manager, principal underwriter or independent contractor, including any action
taken or omitted that may be determined to constitute negligence, whether or
not the Trust would have the power to indemnify such person against such
liability; and
(n) To pay pensions for faithful service, as deemed appropriate by the
Trustees, and to adopt, establish and carry out pension, profit-sharing, share
bonus, share purchase, savings, thrift and other retirement, incentive and
benefit plans, trusts and provisions, including the purchasing of life
insurance and annuity contracts as a means of providing such retirement and
other benefits, for any or all of the Trustees, officers, employees and agents
of the Trust.
The Trustees shall not in any way be bound or limited by any present or
future law or custom in regard to investments by Trustees. Except as otherwise
provided herein or from time to time in the By-Laws, any action to be taken by
the Trustees may be taken by a majority of the Trustees present at a meeting of
the Trustees (a quorum as defined in the By-Laws being present), within or
without Massachusetts, including any meeting held by means of a conference
telephone or other communications equipment by means of which all persons
participating in the meeting can hear each other at the same time, and
participation by such means shall constitute presence in person at a meeting,
or by written consents of a majority of the Trustees then in office.
Payment of Expenses by Trust
Section 4. The Trustees are authorized to pay or to cause to be paid out
of the principal or income of the Trust, or partly out of principal and partly
out of income, as they deem fair, all expenses, fees, charges, taxes and
liabilities incurred or arising in connection with the Trust, or in connection
with the management thereof, including, but not limited to, the Trustees'
compensation and such expenses and charges for the services of the Trust's
officers, employees, investment adviser or manager, principal underwriter,
auditor, counsel, custodian, transfer agent, Shareholder services agent and
such other agents or independent contractors, and such other expenses and
charges, as the Trustees may deem necessary or proper to incur, Provided,
however, that all expenses, fees, charges, taxes and liabilities incurred or
arising in connection with a particular series of Shares, as determined by the
Trustees, shall be payable solely out of the assets of that series.
Ownership of Assets of the Trust
Section 5. Title to all of the assets of each series of Shares and of the
Trust shall at all times be considered as vested in the Trustees.
<PAGE> 8
Advisory, Management and Distribution
Section 6. Subject to a favorable Majority Shareholder Vote, the Trustees
may, at any time and from time to time, contract for exclusive or nonexclusive
advisory and/or management services with any partnership, corporation, trust,
association or other organization (the "Adviser"), every such contract to
comply with such requirements and restrictions as may be set forth in the
By-Laws; and any such contract may contain such other terms interpretive of or
in addition to said requirements and restrictions as the Trustees may
determine, including, without limitation, authority to determine from time to
time what investments shall be purchased, held, sold or exchanged and what
portion, if any, of the assets of the Trust shall held uninvested, and to make
changes in the Trust's investments. The Trustees may also, at any time and from
time to time, contract with the Adviser or any other corporation, trust,
association or other organization, appointing it exclusive or nonexclusive
distributor or principal underwriter for the Shares, every such contract to
comply with such requirements and restrictions as may be set forth in the
By-Laws; and any such contract may contain such other terms interpretive of or
in addition to said requirements and restrictions as the Trustees may
determine.
The fact that:
(i) any of the Shareholders, Trustees or officers of the Trust is a
shareholder, director, officer, partner, trustee, employee, manager,
adviser, principal underwriter or distributor or agent of or for any
corporation, trust, association or other organization, or of or for any
parent or affiliate of any organization, with which an advisory or
management contract, or principal underwriter's or distributor's
contract, or transfer, Shareholder services or other agency contract may
have been or may hereafter be made, or that any organization, or any
parent or affiliate thereof, is a Shareholder or has an interest in the
Trust, or that
(ii) any corporation, trust, association or other organization with which
an advisory or management contract or principal underwriter's or
distributor's contract, or transfer, Shareholder services or other agency
contract may have been or may hereafter be made also has an advisory or
management contract, or principal underwriter's or distributor's
contract, or transfer, shareholder services or other agency contract
with one or more other corporations, trusts, associations or other
organizations, or has other business or interests
shall not affect the validity of any such contract or disqualify any
Shareholder, Trustee or officer of the Trust from voting upon or executing the
same or create any liability or accountability to the Trust or its
Shareholders.
<PAGE> 9
ARTICLE V
SHAREHOLDERS' VOTING POWERS AND MEETINGS
Voting Powers
Section 1. The Shareholders shall have power to vote only (i) for the
election of Trustees as provided in Article IV, Section 1, (ii) with respect to
any Adviser as provided in Article IV, Section 6, (iii) with respect to any
termination of this Trust to the extent and as provided in Article IX, Section
4, (iv) with respect to any amendment of this Declaration of Trust to the
extent and as provided in Article IX, Section 7, and (v) with respect to such
additional matters relating to the Trust as may be required By-law, this
Declaration of Trust, the By-Laws or any registration of the Trust with the
Securities and Exchange Commission (or any successor agency) or any state, or
as the Trustees may consider necessary or desirable. Each whole Share shall be
entitled to one vote as to any matter on which it is entitled to vote and each
fractional Share shall be entitled to a proportionate fractional vote.
Notwithstanding any other provision of this Declaration of Trust, on any matter
submitted to a vote of Shareholders, all Shares of the Trust then entitled to
vote shall be voted in the aggregate as a single class without regard to series
or class except: (i) when required by the 1940 Act or when the Trustees shall
have determined that the matter affects one or more series or classes
materially differently, Shares shall be voted by individual series or class;
and (2) when the Trustees have determined that the matter affects only the
interests of one or more series or classes, then only Shareholders of such
series or classes shall be entitled to vote thereon. There shall be no
cumulative voting in the election of Trustees.
Shares may be voted in person or by proxy. A proxy with respect to Shares
held in the name of two or more persons shall be valid if executed by any one
of them unless at or prior to exercise of the proxy the Trust receives a
specific written notice to the contrary from any one of them. A proxy
purporting to be executed by or on behalf of a Shareholder shall be deemed
valid unless challenged at or prior to its exercise and the burden of proving
invalidity shall rest on the challenger. At all meetings of Shareholders,
unless inspectors of election have been appointed, all questions relating to
the qualification of voters and the validity of proxies and the acceptance or
rejection of votes shall be decided by the chairman of the meeting. Unless
otherwise specified in the proxy, the proxy shall apply to all Shares of each
series of the Trust owned by the Shareholder.
Until Shares are issued, the Trustees may exercise all rights of
Shareholders and may take any action required by law, this Declaration of Trust
or the By-Laws to be taken by Shareholders.
Voting Power and Meetings
Section 2. Meetings of Shareholders or the Trust or of any series or class
may be called by the Trustees or such other person or persons as may be
specified in the By-Laws and held from time to time for the
<PAGE> 10
purpose of taking action upon any matter requiring the vote or the authority of
the Shareholders of the Trust or any series or class as herein provided or upon
any other matter deemed by the Trustees to be necessary or desirable. Meetings
of Shareholders of the Trust or of any series or class shall be called by the
Trustees or such other person or persons as may be specified in the By-Laws
upon written application. The Shareholders shall be entitled to at least seven
days' written notice of any meeting of the Shareholders.
Quorum and Required Vote
Section 3. Thirty per cent of the Shares entitled to vote shall be a
quorum for the transaction of business at a Shareholders meeting, except that
where any provision of law or of this Declaration of Trust permits or requires
that holders of any series or class shall vote as a series or class, then
thirty percent of the aggregate number of Shares of that series or class
entitled to vote shall be necessary to constitute a quorum for the transaction
of business by that series or class. Any lesser number, however, shall be
sufficient for adjournments. Any adjourned session or sessions may be held
within a reasonable time after the date set for the original meeting without
the necessity of further notice. Except when a larger vote is required by any
provision of this Declaration of Trust or the By-Laws, a majority of the Shares
voted shall decide any questions and a plurality shall elect a Trustee,
provided that where any provision of law or of this Declaration of Trust
permits or requires that the holders of any series or class shall vote as a
series or class, then a majority of the Shares of that series or class voted on
the matter (or a plurality with respect to the election of a Trustee) shall
decide that matter insofar as that series or class is concerned.
Action by Written Consent
Section 4. Any action taken by Shareholders may be taken without a meeting
if a majority of Shareholders entitled to vote on the matter (or such larger
proportion thereof as shall be required by any express provision of this
Declaration of Trust or the By-Laws consent to the action in writing and such
written consents are filed with the records of the meetings of Shareholders.
Such consent shall be treated for all purposes as a vote taken at a meeting of
Shareholders.
Additional Provisions
Section 5. The By-Laws may include further provisions for Shareholders'
votes and meetings and related matters.
<PAGE> 11
ARTICLE VI
DISTRIBUTIONS, REDEMPTIONS AND REPURCHASES,
AND DETERMINATION OF NET ASSET VALUE
Distributions
Section 1. The Trustees may, but need not, each year distribute to the
Shareholders of each series or class such income and gains, accrued or
realized, as the Trustees may determine, after providing for actual and accrued
expenses and liabilities (including such reserves as the Trustees may
establish) determined in accordance with good accounting practices. The
Trustees shall have full discretion to determine which items shall be treated
as income and which items as capital and their determination shall be binding
upon the Shareholders. Distributions of each year's income of each series, if
any be made, may be made in one or more payments, which shall be in Shares, in
cash or otherwise and on a date or dates and as of a record date or dates
determined by the Trustees. At any time and from time to time in their
discretion, the Trustees may distribute to the Shareholders of any one or more
series or classes as of a record date or dates determined by the Trustees, in
Shares, in cash or otherwise, all or part of any gains realized on the sale or
disposition of property of the series or otherwise, or all or part of any other
principal of the Trust attributable to the series. In the case of any series
not divided into two or more classes of Shares, each distribution pursuant to
this Section 1 shall be made ratably according to the number of Shares of the
series held by the several Shareholders on the applicable record date thereof,
provided that no distribution need be made on Shares purchased pursuant to
orders received, or for which payment is made, after such time or times as the
Trustees may determine. In the case of any series divided into two or more
classes, each distribution pursuant to this Section 1 may be made in whole or
in such parts as the Trustees may determine to the Shareholders of any one or
more classes, and the distribution to the Shareholders of any class shall be
made ratably according to the number of Shares of the class (but need not be
made ratably according to the number of Shares of the series, considered
without regard to class) held by the several Shareholders on the record date
thereof, provided that no distribution need be made on Shares purchased
pursuant to orders received, or for which payment is made, after such time or
times as the Trustees may determine. Any such distribution paid in Shares will
be paid at the net asset value thereof as determined in accordance with Section
7 of this Article VI.
Redemptions and Repurchases
Section 2. Any holder of Shares of the Trust may by presentation of a
written request, together with his or her certificates, if any, for such
Shares, in proper form for transfer, at the office of the Trust or at a
principal office of a transfer agent appointed by the Trust, redeem his or her
Shares for the net asset value thereof determined and computed in accordance
with the provisions of this Section 2 and the provisions of Section 7 of this
Article VI.
<PAGE> 12
Upon receipt by the Trust or its transfer agent of such written request
for redemption of Shares, such Shares shall be redeemed at the net asset value
per share of the appropriate series next determined after such Shares are
tendered in proper order for transfer to the Trust or determined as of such
other time fixed by the Trustees as may be permitted or required by the 1940
Act, provided that no such tender shall be required in the case of Shares for
which a certificate or certificates have not been issued, and in such case such
Shares shall be redeemed at the net asset value per share of the appropriate
series next determined after such request has been received or determined at
such other time fixed by the Trustees as may be permitted or required by the
1940 Act.
The obligation of the Trust to redeem its Shares of each series or
class as set forth above in this Section 2 shall be subject to the conditions
that during any time of emergency, as hereinafter defined, such obligation may
be suspended by the Trust by or under authority of the Trustees for such period
or periods during such time of emergency as shall be determined by or under
authority of the Trustees. If there is such a suspension, any Shareholder may
withdraw any demand for redemption and any tender of Shares which has been
received by the Trust during any such period and any tender of Shares, the
applicable net asset value of which would but for such suspension be calculated
as of a time during such period. Upon such withdrawal, the Trust shall return
to the Shareholder the certificates therefor, if any. For the purposes of any
such suspension, "time of emergency" shall mean, either with respect to all
Shares or any series of Shares, any period during which:
a. the New York Stock Exchange is closed other than for customary
weekend and holiday closings; or
b. the Trustees or authorized officers of the Trust shall have
determined, in compliance with any applicable rules and regulations of
the Securities and Exchange Commission, either that trading on the New
York Stock Exchange is restricted, or that an emergency exists as a
result of which (i) disposal by the Trust of securities owned by it is
not reasonably practicable or (ii) it is not reasonably practicable for
the Trust fairly to determine the current value of its net assets; or
c. the suspension or postponement of such obligations is permitted
by order of the Securities and Exchange Commission.
The Trust may also purchase, repurchase or redeem Shares in accordance
with such other methods, upon such other terms and subject to such other
conditions as the Trustees may from time to time authorize at a price not
exceeding the net asset value of such Shares in effect when the purchase or
repurchase or any contract to purchase or repurchase is made.
<PAGE> 13
Payment in Kind
Section 3. Subject to any generally applicable limitation imposed by the
Trustees, any payment on redemption of Shares may, if authorized by the
Trustees, be made wholly or partly in kind, instead of in cash. Such payment in
kind shall be made by distributing securities or other property constituting,
in the opinion of the Trustees, a fair representation of the various types of
securities and other property then held by the series of Shares being redeemed
(but not necessarily involving a portion of each of the series' holdings) and
taken at their value used in determining the net asset value of the Shares in
respect of which payment is made.
Redemptions at the Option of the Trust
Section 4. The Trust shall have the right at its option and at any time to
redeem Shares of any Shareholder at the net asset value thereof as determined
in accordance with Section 7 of Article VI of this Declaration of Trust: (i) if
at such time such Shareholder owns fewer Shares than, or Shares having an
aggregate net asset value of less than, an amount determined from time to time
by the Trustees; or (ii) to the extent that such Shareholder owns Shares of a
particular series of Shares equal to or in excess of a percentage of the
outstanding Shares of that series (determined without regard to class)
determined from time to time by the Trustees; or (iii) to the extent that such
Shareholder owns Shares of the Trust representing a percentage equal to or in
excess of such percentage of the aggregate number of outstanding Shares of the
Trust or the aggregate net asset value of the Trust determined from time to
time by the Trustees.
Dividends, Distributions, Redemptions and Repurchases
Section 5. No dividend or distribution (including, without limitation, any
distribution paid upon termination of the Trust or of any series) with respect
to, nor any redemption or repurchase of, the Shares of any series (or of any
class) shall be effected by the Trust other than from the assets of such series
(or of the series of which such class is a part).
Additional Provisions Relating to Redemptions and Repurchases
Section 6. The completion of redemption of Shares shall constitute a full
discharge of the Trust and the Trustees with respect to such shares, and the
Trustees may require that any certificate or certificates issued by the Trust
to evidence the ownership of such Shares shall be surrendered to the Trustees
for cancellation or notation.
Determination of Net Asset Value
Section 7. The term "net asset value" of the Shares of each series or
class shall mean: (i) the value of all the assets of such series or class; (ii)
less the total liabilities of such series or class; (iii) divided by the number
of Shares of such series or class outstanding, in
<PAGE> 14
each case at the time of each determination. The "number of Shares of such
series or class outstanding" for the purposes of such computation shall be
exclusive of any Shares of such series or class to be redeemed and not then
redeemed as to which the redemption price has been determined, but shall
include Shares of such series or class presented for repurchase and not then
repurchased and Shares of such series or class to be redeemed and not then
redeemed as to which the redemption price has not been determined and Shares of
such series or class the sale of which has been confirmed. Any fractions
involved in the computation of net asset value per share shall be adjusted to
the nearer cent unless the Trustees shall determine to adjust such fractions to
a fraction of a cent.
The Trustees, or any officer or officers or agent of this Trust
designated for the purpose by the Trustees, shall determine the net asset value
of the Shares of each series or class, and the Trustees shall fix the times as
of which the net asset value of the Shares of each series or class shall be
determined and shall fix the periods during which any such net asset value
shall be effective as to sales, redemptions and repurchases of, and other
transactions in, the Shares of such series or class, except as such times and
periods for any such transaction may be fixed by other provisions of this
Declaration of Trust or by the By-Laws.
In valuing the portfolio investments of any series or class for
determination of net asset value per share of such series or class:
(a) Each security for which market quotations are readily available
shall be valued at current market value determined by methods specified
by the Board of Trustees;
(b) Each other security, including any security within (a) for which
the specified price does not appear to represent a dependable quotation
for such security as of the time of valuation, shall be valued at a fair
value as determined in good faith by the Trustees;
(c) Any cash on hand shall be valued at the face amount thereof;
(d) Any cash on deposit, accounts receivable, and cash dividends and
interest declared or accrued and not yet received, any prepaid expenses,
and any other current asset shall be valued at the face amount thereof,
unless the Trustees shall determine that any such item is not worth its
face amount, in which case such asset shall be valued at a fair value
determined in good faith by the Trustees; and
(e) Any other asset shall be valued at a fair value determined in
good faith by the Trustees.
Notwithstanding the foregoing, short-term debt obligations, commercial paper
and repurchase agreements may be, but need not be, valued on the
<PAGE> 15
basis of quoted yields for securities of comparable maturity, quality and type,
or on the basis of amortized cost.
Liabilities of any series or class for accounts payable for investments
purchased and for Shares tendered for redemption and not then redeemed as to
which the redemption price has been determined shall be stated at the amounts
payable therefor. In determining the net asset value of any series or class,
the person or persons making such determination on behalf of the Trust may
include in liabilities such reserves, estimated accrued expenses and
contingencies as such person or persons may in its, his or their best judgment
deem fair and reasonable under the circumstances. Any income dividends and
gains distributions payable by the Trust shall be deducted as of such time or
times on the record date therefor as the Trustees shall determine.
The manner of determining the net assets of any series or class or of
determining the net asset value of the Shares of any series or class may from
time to time be altered as necessary or desirable in the judgment of the
Trustees to conform to any other method prescribed or permitted by any
applicable law or regulation.
Determinations under this Section 7 made in good faith and in accordance
with the provisions of the 1940 Act shall be binding on all parties concerned.
ARTICLE VII
COMPENSATION AND LIMITATION
OF LIABILITY OF TRUSTEES
Compensation
Section 1. The Trustees as such shall be entitled to reasonable
compensation from the Trust; they may fix the amount of their compensation.
Nothing herein shall in any way prevent the employment of any Trustee for
advisory, management, legal, accounting, investment banking or other services
and payment for the same by the Trust.
Limitation of Liability
Section 2. The Trustees shall not be responsible or liable in any event
for any neglect or wrongdoing of any officer, agent, employee, adviser or
principal underwriter of the Trust, nor shall any Trustee be responsible for
the act or omission of any other Trustee, but nothing herein contained shall
protect any Trustee against any liability to which he or she would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his or her office.
Every note, bond, contract, instrument, certificate, Share or undertaking
and every other act or thing whatsoever executed or done by or on behalf of the
Trust or the Trustees or any of them in connection with the Trust shall be
conclusively deemed to have been executed or
<PAGE> 16
done only in or with respect to their or his or her capacity as Trustees or
Trustee, and such Trustees or Trustee shall not be personally liable thereon.
ARTICLE VIII
INDEMNIFICATION
Trustees, Officers, etc.
Section 1. The Trust shall indemnify each of its Trustees and officers
(including persons who serve at the Trust's request as directors, officers or
trustees of another organization in which the Trust has any interest as a
Shareholder, creditor or otherwise) (hereinafter referred to as a "Covered
Person") against all liabilities and expenses, including but not limited to
amounts paid in satisfaction of judgments, in compromise or as fines and
penalties, and counsel fees reasonably incurred by any Covered Person in
connection with the defense or disposition of any action, suit or other
proceeding, whether civil, criminal, administrative or investigative, and any
appeal therefrom, before any court or administrative or legislative body, in
which such Covered Person may be or may have been involved as a party or
otherwise or with which such person may be or may have been threatened, while
in office or thereafter, by reason of being or having been such a Covered
Person, except that no Covered Person shall be indemnified against any
liability to the Trust or its Shareholders to which such Covered Person would
otherwise be subject by reason of wilful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of such
Covered Person's office.
Expenses, including counsel fees so incurred by any such Covered Person
(but excluding amounts paid in satisfaction of judgments, in compromise or as
fines or penalties), may be paid from time to time by the Trust in advance of
the final disposition of any such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such Covered Person to repay amounts so paid to
the Trust if it is ultimately determined that indemnification of such expenses
is not authorized under this Article, provided that (a) such Covered Person
shall provide security for his undertaking, (b) the Trust shall be insured
against losses arising by reason of such Covered Person's failure to fulfill
his undertaking or (c) a majority of the Trustees who are disinterested persons
and who are not Interested Persons (provided that a majority of such Trustees
then in office act on the matter), or independent legal counsel in a written
opinion, shall determine, based on a review of readily available facts (but not
a full trial-type inquiry), that there is reason to believe such Covered Person
ultimately will be entitled to indemnification.
Compromise Payment
Section 2. As to any matter disposed of (whether by a compromise
payment, pursuant to a consent decree or otherwise) without an adjudication in
a decision on the merits by a court, or by any other body before which the
proceeding was brought, that such Covered Person
<PAGE> 17
is liable to the Trust or its Shareholders by reason of wilful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in
the conduct of such Covered Person's office, indemnification shall be provided
if (a) approved as in the best interest of the Trust, after notice that it
involves such indemnification, by at least a majority of the Trustees who are
disinterested persons and are not Interested Persons (provided that a majority
of such Trustees then in office act on the matter), upon a determination, based
upon a review of readily available facts (but not a full trial-type inquiry)
that such Covered Person is not liable to the Trust or its Shareholders by
reason of wilful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of such Covered Person's office, or (b)
there has been obtained an opinion in writing of independent legal counsel,
based upon a review of readily available facts (but not a full-trial type
inquiry) to the effect that such indemnification would not protect such Covered
Person against any liability to the Trust to which such Covered Person would
otherwise be subject by reason of wilful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office.
Any approval pursuant to this Section shall not prevent the recovery from
any Covered Person of any amount paid to such Covered Person in accordance with
this Section as indemnification if such Covered Person is subsequently
adjudicated by a court of competent jurisdiction to have been liable to the
Trust or its Shareholders by reason of wilful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of such
Covered Person's office.
Indemnification Not Exclusive; Definitions
Section 3. The right of indemnification hereby provided shall not be
exclusive of or affect any other rights to which any such Covered Person may be
entitled. As used in this Article VIII, the term "Covered Person" shall include
such person's heirs, executors and administrators, and a "disinterested person"
is a person against whom none of the actions, suits or other proceedings in
question or another action, suit or other proceeding on the same or similar
grounds is then or has been pending. Nothing contained in this article shall
affect any rights to indemnification to which personnel of the Trust, other
than Trustees and officers, and other persons may be entitled by contract or
otherwise under law, nor the power of the Trust to purchase and maintain
liability insurance on behalf of such persons.
Shareholders
Section 4. In case any Shareholder or former Shareholder shall be held to
be personally liable solely by reason of his or her being or having been a
Shareholder and not because of his or her acts or omissions or for some other
reason, the Shareholder or former Shareholder (or his or her heirs, executors,
administrators or other legal representatives or, in the case of a corporation
or other entity, its corporate or other general successor) shall be entitled to
be held
<PAGE> 18
harmless from and indemnified against all loss and expense arising from
such liability, but only out of the assets of the particular series of Shares
of which he or she is or was a Shareholder.
ARTICLE IX
MISCELLANEOUS
Trustees, Shareholders, etc. Not Personally Liable; Notice
Section 1. All persons extending credit to, contracting with or having any
claim against the Trust or a particular series of Shares shall look only to the
assets of the Trust or the assets of that particular series of Shares for
payment under such credit, contract or claim; and neither the Shareholders nor
the Trustees, nor any of the Trustees officers, employees or agents, whether
past, present or future, shall be personally liable therefor. Nothing in this
Declaration of Trust shall protect any Trustee against any liability to which
such Trustee would otherwise be subject by reason of wilful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of the office of Trustee.
Every note, bond, contract, instrument, certificate or undertaking made or
issued by the Trustees or by any officers or officer shall give notice that
this Declaration of Trust is on file with the Secretary of State of The
Commonwealth of Massachusetts and shall recite that the same was executed or
made by or on behalf of the Trust or by them as Trustees or Trustee or as
officers or officer and not individually and that the obligations of such
instrument are not binding upon any of them or the Shareholders individually
but are binding only upon the assets and property of the Trust, and may contain
such further recital as he or she or they may deem appropriate, but the
omission thereof shall not operate to bind any Trustees or Trustee or officers
or officer or Shareholders or Shareholder individually.
Trustee's Good Faith Action, Expert Advice, No Bond or Surety
Section 2. The exercise by the Trustees of their powers and discretions
hereunder shall be binding upon everyone interested. A Trustee shall be liable
for his or her own wilful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of the office of Trustee, and
for nothing else, and shall not be liable for errors of judgment or mistakes of
fact or law. The Trustees may take advice of counsel or other experts with
respect to the meaning and operation of this Declaration of Trust, and shall be
under no liability for any act or omission in accordance with such advice or
for failing to follow such advice. The Trustees shall not be required to give
any bond as such, nor any surety if a bond is required.
Liability of Third Persons Dealing with Trustees
Section 3. No person dealing with the Trustees shall be bound to make any
inquiry concerning the validity of any transaction made or to
<PAGE> 19
be made by the Trustees or to see to the application of any payments made or
property transferred to the Trust or upon its order.
Duration and Termination of Trust
Section 4. Unless terminated as provided herein, the Trust shall continue
without limitation of time. The Trust may be terminated at any time by vote of
Shareholders holding at least two-thirds of the Shares of each series entitled
to vote or by the Trustees by written notice to the Shareholders. Any series of
Shares may be terminated at any time by vote of Shareholders holding at least
two-thirds of the Shares of such series entitled to vote or by the Trustees by
written notice to the Shareholders of such series.
Upon termination of the Trust or of any one or more series of Shares,
after paying or otherwise providing for all charges, taxes, expenses and
liabilities, whether due or accrued or anticipated as may be determined by the
Trustees, the Trust shall in accordance with such procedures as the Trustees
consider appropriate reduce the remaining assets to distributable form in cash
or shares or other securities, or any combination thereof, and distribute the
proceeds to the Shareholders of the series involved, ratably according to the
number of Shares of such series held by the several Shareholders of such series
on the date of termination, except to the extent otherwise required or
permitted by the preferences and special or relative rights and privileges of
any classes of Shares of that series, provided that any distribution to the
Shareholders of a particular class of Shares shall be made to such Shareholders
pro rata in proportion to the number of Shares of such class held by each of
them.
Filing of Copies, References, Headings
Section 5. The original or a copy of this instrument and of each amendment
hereto shall be kept at the office of the Trust where it may be inspected by
any Shareholder. A copy of this instrument and of each amendment hereto shall
be filed by the Trust with the Secretary of State of The Commonwealth of
Massachusetts and with the Clerk of the City of Boston, as well as any other
governmental office where such filing may from time to time be required. Anyone
dealing with the Trust may rely on a certificate by an officer of the Trust as
to whether or not any such amendments have been made and as to any matters in
connection with the Trust hereunder; and, with the same effect as if it were
the original, may rely on a copy certified by an officer of the Trust to be a
copy of this instrument or of any such amendments. In this instrument and in
any such amendment, references to this instrument, and all expressions such as
"herein, "hereof" and "hereunder," shall be deemed to refer to this instrument
as amended or affected by any such amendments. Headings are placed herein for
convenience of reference only and shall not be taken as a part hereof or
control or affect the meaning, construction or effect of this instrument. This
instrument may be executed in any number of counterparts, each of which shall
be deemed an original.
<PAGE> 20
Applicable Law
Section 6. This Declaration of Trust is made in The Commonwealth of
Massachusetts, and it is created under and is to be governed by and construed
and administered according to the laws of said Commonwealth. The Trust shall be
of the type commonly called a Massachusetts business trust, and without
limiting the provisions hereof, the Trust may exercise all powers which are
ordinarily exercised by such a trust.
Amendments
Section 7. This Declaration of Trust may be amended at any time by an
instrument in writing signed by a majority of the then Trustees when authorized
so to do by a vote of Shareholders holding a majority of the Shares entitled to
vote, except that an amendment which shall affect the holders of one or more
series or classes of Shares but not the holders of all outstanding series and
classes shall be authorized by vote of the Shareholders holding a majority of
the Shares entitled to vote of each series and class affected and no vote of
Shareholders of a series or class not affected shall be required. Amendments
having the purpose of changing the name of the Trust or of supplying any
omission, curing any ambiguity or curing, correcting or supplementing any
defective or inconsistent provision contained herein shall not require
authorization by Shareholder vote.
<PAGE> 21
IN WITNESS WHEREOF the undersigned has hereunto set his hand in the City of
Boston, Massachusetts for himself and his assigns, as of this 12th day of
December, 1991.
_____________________________
/s/ Larry C. Jordan
THE COMMONWEALTH OF MASSACHUSETTS
Boston ss. December 12, 1991
Then personally appeared the above-named Trustee and acknowledged the
foregoing instrument to be his free act and deed, before me.
/s/
Notary Public
My commission expires:1-7-92
(Notary's Seal)
The address of the Trust is 5901 Executive Drive,
Lansing, Michigan 48911
The address of the Trustee is 5901 Executive Drive,
c/o the Trust Lansing, Michigan 48911
The Trust's resident agent is The Prentice-Hall Corporation
System, Inc., 84 State Street, Boston, Massachusetts
<PAGE> 1
EX-99.B2-BY-LAWS
BY-LAWS
OF
JACKSON NATIONAL CAPITAL MANAGEMENT FUNDS
Section 1. Agreement and Declaration of
Trust and Principal Office
1.1 Agreement and Declaration of Trust. These By-Laws shall be subject to
the Agreement and Declaration of Trust, as from time to time in effect (the
"Declaration of Trust"), of Jackson National Capital Management Funds, a
Massachusetts business trust established by the Declaration of Trust (the
"Trust").
1.2 Principal Office of the Trust. The principal office of the Trust shall
be located in Lansing, Michigan.
Section 2. Shareholders
2.1 Shareholder Meetings. A meeting of the shareholders of the Trust or of
any one or more series or classes of shares may be called at any time by the
Trustees, by the president or, if the Trustees and the president shall fail to
call any meeting of shareholders for a period of 30 days after written
application of one or more shareholders who hold at least 10% of all
outstanding shares of the Trust, if shareholders of all series are required
under the Declaration of Trust to vote in the aggregate and not by individual
series at such meeting, or of any series or class, if shareholders of such
series or class are entitled under the Declaration of Trust to vote by
individual series or class at such meeting, then such shareholders may call
such meeting. If the meeting is a meeting of the shareholders of one or more
series or classes of shares, but not a meeting of all shareholders of the
Trust, then only the shareholders of such one or more series or classes shall
be entitled to notice of and to vote at the meeting. Each call of a meeting
shall state the place, date, hour and purposes of the meeting.
2.2 Place of Meetings. All meetings of the shareholders shall be held
at the principal office of the Trust, or, to the extent permitted by the
Declaration of Trust, at such other place within the United States as shall
be designated by the Trustees or the president of the Trust.
2.3 Notice of Meetings. A written notice of such meeting of
shareholders, stating the place, date and hour and the purposes of the meeting,
shall be given at least seven days before the meeting to each shareholder
entitled to vote thereat by leaving such notice with him or her or at his or
her residence or usual place of business or by mailing it, postage prepaid, and
addressed to such shareholder at his or her address as it appears in the
records of the Trust. Such notice shall be given by the
<PAGE> 2
secretary or an assistant secretary or by an officer designated by the
Trustees. No notice of any meeting of shareholders need be given to a
shareholder if a written waiver of notice, executed before or after the meeting
by such shareholder or his or her attorney thereunto duly authorized, is filed
with the records of the meeting.
2.4 Ballots. No ballot shall be required for any election unless
requested by a shareholder present or represented at the meeting and
entitled to vote in the election.
2.5 Proxies. Shareholders entitled to vote may vote either in
person or by proxy in writing dated not more than six months before the meeting
named therein, which proxies shall be filed with the secretary or other person
responsible to record the proceedings of the meeting before being voted. Unless
otherwise specifically limited to their terms, such proxies shall entitle the
holders thereof to vote at any adjournment of such meeting but shall not be
valid after the final adjournment of such meeting.
Section 3. Trustees
3.1 Committees and Advisory Board. The Trustees may appoint from their
number an executive committee and other committees. Except as the Trustees may
otherwise determine, any such committee may make rules for conduct of its
business. The Trustees may appoint an advisory board to consist of not less
than two nor more than five members. The members of the advisory board shall
be compensated in such manner as the Trustees may determine and shall confer
with and advise the Trustees regarding the investments and other affairs of the
Trust. Each member of the advisory board shall hold office until the first
meeting of the Trustees following the next meeting of the shareholders and
until his or her successor is elected and qualified, or until he or she sooner
dies, resigns, is removed or becomes disqualified, or until the advisory board
is sooner abolished by the Trustees.
3.2 Regular Meeting. Regular meetings of the Trustees may be held
without call or notice at such places and at such times as the trustees may
from time to time determine, provided that the notice of the first regular
meeting following any such determination shall be given to absent Trustees.
3.3 Special Meetings. Special meetings of the Trustees may be held at
any time and at any place designated in the call of the meeting, when called by
the president or the treasurer or by two or more Trustees, sufficient notice
thereof being given to each Trustee by the secretary or an assistant secretary
or by the officer or one of the Trustees calling the meeting.
3.4 Notice. It shall be sufficient notice to a Trustee to send
notice by mail at least forty-eight hours or by telegram at least twenty-four
hours before the meeting addressed to the Trustee at his or her usual or
last known business or residence address or to give notice to him or her in
person or by telephone at least twenty-four hours before
2
<PAGE> 3
the meeting. Notice of a meeting need not be given to any Trustee if a written
waiver of notice, executed by him or her before or after the meeting, is
filed with the records of the meeting, or to any Trustee who attends the
meeting without protesting prior thereto or at its commencement the lack of
notice to him or her. Neither notice of a meeting nor a waiver of a notice
need specify the purposes of the meeting.
3.5 Quorum. At any meeting of the Trustees one-third of the
Trustees then in office shall constitute a quorum; provided, however, a quorum
shall not be less than two. Any meeting may be adjourned from time to
time by a majority of the votes cast upon the question, whether or not a quorum
is present, and the meeting may be held as adjourned without further notice.
Section 4. Officers and Agents
4.1 Enumeration; Qualification. The officers of the Trust shall be a
president, a chief operating officer, a chief financial officer, a treasurer, a
controller, a secretary and such other officers, if any, as the Trustees from
time to time may in their discretion elect or appoint. The Trust may also have
such agents, if any, as the Trustees from time to time may in their discretion
appoint. Any officer may be but none need be a Trustee or shareholder. Any
two or more offices may be held by the same person.
4.2 Powers. Subject to the other provisions of these By-Laws, each
officer shall have, in addition to the duties and powers herein and in the
Declaration of Trust set forth, such duties and powers as are commonly incident
to his or her office as if the Trust were organized as a Massachusetts business
corporation and such other duties and powers as the Trustees may from time to
time designate, including without limitation the power to make purchases and
sales of portfolio securities of the Trust pursuant to recommendations of the
Trust's investment adviser in accordance with the policies and objectives of
the Trust set forth in its prospectus and with such general or specific
instructions as the Trustees may from time to time have issued.
4.3 Election. The president, the chief operating officer, the chief
financial officer, the treasurer, the controller and the secretary shall be
elected annually by the Trustees. Other officers, if any, may be elected or
appointed by the Trustees at any time.
4.4 Tenure. The president, the chief operating officer, the chief
financial officer, the treasurer, the controller and the secretary shall hold
office until their respective successors are chosen and qualified, or in each
case until he or she sooner dies, resigns, is removed or becomes disqualified.
Each other officer shall hold office at the pleasure of the Trustees. Each
agent shall retain his or her authority at the pleasure of the Trustees.
3
<PAGE> 4
4.5 President. The president shall be the chief executive officer of
the Trust. Subject to the control of the Board of Trustees, he shall in general
supervise the business and affairs of the Trust and he shall see that the
resolutions and directions of the Board of Trustees are carried into effect
except when that responsibility is specifically assigned to some other person
by the Board of Trustees. In general, he shall perform all duties incident to
the office of President and such other duties as from time to time may be
prescribed by the Board of Trustees. The president shall preside at all
meetings of the shareholders and of the Trustees at which he or she is present,
except as otherwise voted by the Trustees.
4.6 Chief Operating Officer. In the absence of the president or in
the event of this inability or refusal to act, the chief operating officer
shall perform the duties of the president. The chief operating officer
shall perform such other duties as from time to time may be prescribed by the
president or the Board of Trustees.
4.7 Chief Financial Officer. The chief financial officer shall be
the principal financial officer of the Trust, and shall (a) be responsible for
all funds and securities of the Trust; (b) from time to time prepare or cause
to be prepared financial statements of the Trust at the request of the
President or the Board of Trustees; and, (c) in general, perform all duties
incident to the office of chief financial officer and such other duties as from
time to time may be prescribe by the president or the Board of Trustees.
4.8 Treasurer and Assistant Treasurer. Subject to any arrangement
made by the Trustees with a bank or trust company or other organization as
custodian or transfer or shareholder services agent, the treasurer shall be in
charge of the Trust's valuable papers, and shall keep or cause to be kept
correct and complete books and records of account. The treasurer shall perform
such other duties as from time to time may be prescribed by the president or
the Board of Trustees. Any assistant treasurer shall have such duties and
powers as shall be designated from time to time by the Trustees.
4.9 Controller. The controller shall be the chief accounting officer
of the Trust and shall be in charge of its books of account and accounting
records. The controller shall be responsible for preparation of financial
statements of the Trust and shall have such other duties and powers as may be
designated from time to time by the Trustees or the President.
4.10 Secretary and Assistant Secretaries. The secretary shall record all
proceedings of the shareholders and the Trustees in books to be kept therefor,
which books shall be kept at the principal office of the Trust. In the absence
of the secretary from any meeting of shareholders or Trustees, an assistant
secretary, or if there be none or he or she is absent, a temporary clerk chosen
at the meeting, shall record the proceedings thereof in the aforesaid books.
4
<PAGE> 5
Section 5. Resignations and Removals
Any Trustees, officer or advisory board member may resign at any time by
delivering his or her resignation in writing to the president, the chief
operating officer or the secretary or to a meeting of the Trustees. The
Trustees may remove any officer elected by them with or without cause by the
vote of a majority of the Trustees then in office. Except to the extent
expressly provided in a written agreement with the Trust, no Trustee, officer,
or advisory board member resigning, and no officer or advisory board member
removed, shall have any right to any compensation for any period following his
or her resignation or removal, or any right to damages on account of such
removal.
Section 6. Vacancies
A vacancy in any office may be filled at any time. Each successor shall hold
office for the unexpired term, and in the case of the president, the chief
operating officer, the chief financial officer, the treasurer, the controller
and the secretary, until his or her successor is chosen and qualified, or in
each case until he or she sooner dies, resigns, is removed or becomes
disqualified.
Section 7. Shares of Beneficial Interest
7.1 Share Certificates. No certificates certifying the ownership of
shares shall be issued except as the Trustees may otherwise authorize. In the
event that the Trustees authorize the issuance of share certificates, subject
to the provisions of Section 7.3, each shareholder shall be entitled to a
certificate stating the number of shares owned by him or her, in such form as
shall be prescribed from time to time by the Trustees. Such certificate shall
be signed by the president or the chief operating officer or chief financial
officer and by the treasurer or an assistant treasurer. Such signatures may be
facsimiles if the certificate is signed by a transfer agent or by a registrar,
other than a Trustee, officer or employee of the Trust. In case any officer
who has signed or whose facsimile signature has been placed on such certificate
shall have ceased to be such officer before such certificate is issued, it may
be issued by Trust with the same effect as if he or she were such officer at
the time of its issue.
In lieu of issuing certificates for shares, the Trustees or the transfer
agent may either issue receipts therefor or keep accounts upon the books of the
Trust for the record holders of such shares, who shall in either case be
deemed, for all purposes hereunder, to be the holders of certificates for such
shares as if they had accepted such certificates and shall be held to have
expressly assented and agreed to the terms hereof.
5
<PAGE> 6
7.2 Loss of Certificates. In the case of the alleged loss or destruction
or the mutilation of a share certificate, a duplicate certificate may be
issued in place thereof, upon such terms as the Trustees may prescribe.
7.3 Discontinuance of Issuance of Certificates. The Trustees may at any
time discontinue the issuance of share certificates and may, be written notice
to each shareholder, require the surrender of share certificates to the
Trust for cancellation. Such surrender and cancellation shall not affect the
ownership of shares in the Trust.
Section 8. Record Date and
Closing Transfer Books
The Trustees may fix in advance a time, which shall not be more than 90 days
before the date of any meeting of shareholders or the date for the payment of
any dividend or making of any other distribution to shareholders, as the record
date for determining the shareholders having the right to notice and to vote at
such meeting and any adjournment thereof or the right to receive such dividend
or distribution, and in such case only shareholders of record on such record
date shall have such right, notwithstanding any transfer of shares of the books
of the Trust after the record date; or without fixing such record date the
Trustees may for any of such purposes close the transfer books for all or any
part of such period.
Section 9. Seal
The seal of the Trust shall, subject to alteration by the Trustees, consist of
a flat-face circular die with the word "Massachusetts," together with the name
of the Trust and the year of its organization, cut or engraved thereon; but,
unless otherwise required by Trustees, the seal shall not be necessary to be
placed on, and its absence shall not impair the validity of, any document,
instrument or other paper executed and delivered by or on behalf of the Trust.
Section 10. Execution of Papers
Except as the Trustees may generally or in particular cases authorize the
execution thereof in some other manner, all deeds, leases, transfers,
contracts, bonds, notes, checks, drafts and other obligations made, accepted or
endorsed by the Trust shall be signed, and all transfers of securities standing
in the name of the Trust shall be executed, by the president, treasurer or
assistant treasurer or by whomsoever else shall be designated for that purpose
by the vote of the Trustees and need not bear the seal of the Trust.
6
<PAGE> 7
Section 11. Fiscal Year
Except as from time to time otherwise provided by the Trustees, the fiscal year
of the Trust shall end on October 31.
Section 12. Amendments
These By-Laws may be amended or repealed, in whole or in part, by a majority of
the Trustees then in office at any meeting of the Trustees, or by one or more
writings signed by such a majority.
7
<PAGE> 1
EX-99.B5-INVTMGMT
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made this 1st day of November, 1992, by and between JACKSON
NATIONAL CAPITAL MANAGEMENT FUNDS, a Massachusetts business trust (the "Fund"),
and JACKSON NATIONAL FINANCIAL SERVICES, INC., a Delaware corporation (the
"Adviser").
WHEREAS, the Fund is an open-end, diversified management investment
company registered under the Investment Company Act of 1940, the shares of
beneficial interest ("Shares") of which are registered under the Securities Act
of 1933;
WHEREAS, the Fund is authorized to issue Shares in separate series or
portfolios with each representing the interests in a separate portfolio of
securities and other assets;
WHEREAS, the Fund intends to offer Shares in five portfolios, Jackson
National Money Market Fund, Jackson National Tax-Exempt Fund, Jackson National
Income Fund, Jackson National Growth Fund and Jackson National Total Return
Fund, such portfolios (the "Initial Portfolios"), together with any other Fund
portfolios which may be established later and served by the Adviser hereunder,
being herein referred to collectively as the "Portfolios" and individually
referred to as a "Portfolio" and
WHEREAS, the Fund desires at this time to retain the Adviser to render
investment advisory and management services to the Initial Portfolios, and the
Adviser is willing to render such services;
NOW THEREFORE, in consideration of the mutual covenants hereinafter
contained, it is hereby agreed by and between the parties hereto as follows:
1. Employment; Services to Be Performed. The Fund hereby employs the Adviser to
act as the investment adviser for the Initial Portfolios and other Portfolios
hereunder and to manage the investment and reinvestment of the assets of such
Portfolios, to continuously review, supervise and administer the Portfolios'
investment programs, and to determine in its discretion the securities to be
purchased or sold and the portion of each Portfolio's assets to be held
uninvested, in accordance with the applicable investment objectives and
policies and limitations, to administer the affairs of such Portfolios to the
extent requested by the Board of Trustees of the Fund, and to provide the Fund
with records concerning the Adviser's activities which the Fund is required to
maintain, and to render regular reports to the Fund's officers and Board of
Trustees concerning the Adviser's discharge of the foregoing responsibilities,
all for the period and upon the terms herein set forth. The Adviser shall
discharge the foregoing responsibilities subject to the control of the officers
and the Board of Trustees of the Fund, and in compliance with the objectives,
policies and limitations set forth in the Fund's prospectus, the Agreement and
Declaration of Trust and the By-Laws of the Fund, as may from time to time be
in force, as well as applicable laws and regulations.
The Adviser accepts such employment and agrees during such period to
render such services, to furnish office facilities and equipment and clerical,
bookkeeping and administrative services for the Fund, to permit any of its
<PAGE> 2
officers or employees to serve without compensation as trustees or officers of
the Fund if elected to such positions and to assume the obligations herein set
forth for the compensation herein provided. It is understood and agreed that
the Adviser, by separate agreements with the Fund, may also serve the Fund in
other capacities. Notwithstanding anything in this Agreement to the contrary,
the Adviser may arrange for some investment advisory services to be provided by
another person at the expense of the Adviser; provided that any such
arrangement shall comply with the Investment Company Act of 1940 ("1940 Act"),
including Section 15 thereof.
2. Additional Portfolios. In the event that the Fund establishes one or
more portfolios other than the Initial Portfolios with respect to which it
desires to retain the Adviser to render investment advisory and management
services hereunder, it shall notify the Adviser in writing. If the Adviser is
willing to render such services, it shall notify the Fund in writing whereupon
such portfolio or portfolios shall become a Portfolio or Portfolios hereunder.
3. Portfolio Transactions. The Adviser is authorized to select the brokers or
dealers that will execute the purchases and sales of portfolio securities for
the Portfolios and is directed to use its best efforts to obtain best
execution, which includes most favorable net results and execution of the
Fund's orders, taking into account all appropriate factors, including price,
dealer spread or commission, size and difficulty of the transaction and
research or other services provided. It is understood that the Adviser will not
be deemed to have acted unlawfully, or to have breached a fiduciary duty to the
Fund or in respect of any Portfolio, or be in breach of any obligation owing to
the Fund or in respect of any Portfolio under this Agreement, or otherwise,
solely by reason of its having caused the Fund to pay a member of a securities
exchange, a broker or a dealer a commission for effecting a securities
transaction for the Fund in excess of the amount of commission another member
of an exchange, broker or dealer would have charged if the Adviser determined
in good faith that the commission paid was reasonable in relation to the
brokerage or research services provided by such member, broker or dealer,
viewed in terms of that particular transaction or the Adviser's overall
responsibilities with respect to its accounts, including the Fund, as to which
it exercises investment discretion. In addition, if in the judgment of the
Adviser, the Fund would be benefited by supplemental services, the Adviser is
authorized to pay spreads or commissions to brokers or dealers furnishing such
services in excess of spreads or commissions which another broker or dealer may
charge for the same transaction, provided that the Adviser determined in good
faith that the commission or spread paid was reasonable in relation to the
services provided. The Adviser will properly communicate to the officers and
trustees of the Fund such information relating to transactions for any
Portfolio as they may reasonably request.
4. Compensation of the Adviser. For the services and facilities described
in Section 1, the Fund will pay to the Adviser at the end of each calendar
month, an investment management fee computed at an annual rate of the average
daily net assets of the Portfolios subject to this Agreement as follows:
<PAGE> 3
<TABLE>
Annual Rate of Average
Portfolios Daily Net Assets
<S> <C>
Jackson National Money Market .50%
Jackson National Tax-Exempt .50%
Jackson National Income Fund .60%
Jackson National Growth Fund .25%
Jackson National Total Return Fund .70%
</TABLE>
For the month and year in which this Agreement becomes effective or terminates,
there shall be an appropriate proration on the basis of the number of days that
the Agreement is in effect during the month and year, respectively.
5. Expenses. In addition to the fee of the Adviser, the Fund shall assume and
pay any expenses for services rendered by a custodian for the safekeeping of
the Fund's securities or other property, for keeping its books of account, for
any other charges of the custodian, and for calculating the net asset value of
the Fund as provided in the prospectus of the Fund. The Adviser shall not be
required to pay and the Fund shall assume and pay the charges and expenses of
its operations, including compensation of the trustees (other than those
affiliated with the Adviser), charges and expenses of independent auditors, of
legal counsel, of any transfer or dividend disbursing agent, and of any
registrar of the Fund, costs of acquiring and disposing of portfolio
securities, interest, if any, on obligations incurred by the Fund, costs of
share certificates and of reports, membership dues in the Investment Company
Institute or any similar organization, costs of reports and notices to
shareholders, stationery, printing, postage, other like miscellaneous expenses
and all taxes and fees payable to federal, state or other governmental agencies
on account of the registration of securities issued by the Fund, filing of
trust documents or otherwise. The Fund shall not pay or incur any obligation
for any expenses for which the Fund intends to seek reimbursement from the
Adviser as herein provided without first obtaining the written approval of the
Adviser. The Adviser shall arrange, if desired by the Fund, for officers or
employees of the Adviser to serve, without compensation from the Fund, as
trustees, officers or agents of the Fund if duly elected or appointed to such
positions and subject to their individual consent and to any limitations
imposed by law.
If expenses borne by the Fund for those Portfolios which the Adviser
manages in any fiscal year (including the Adviser's fee, but excluding
interest, taxes, fees incurred in acquiring and disposing of portfolio
securities, distribution services fees, extraordinary expenses and any other
expenses excludable under state securities law limitations) exceed any
applicable limitation arising under state securities laws, the Adviser will
reduce its fee or reimburse the Fund for any excess to the extent required by
applicable law. The expense limitation guarantee shall be allocated to each
such Portfolio upon a fee reduction or reimbursement based upon the relative
average daily net assets of each such Portfolio. If for any month the expenses
of the Fund properly chargeable to the income account shall exceed 1/12 of the
percentage of average net assets allowable as expenses, the payment to the
Adviser for that month shall be reduced and if necessary the Adviser shall make
a refund payment to the Fund so that the total net expense will not exceed such
percentage. As of the end of the Fund's fiscal year, however, the
<PAGE> 4
foregoing computations and payments shall be readjusted so that the aggregate
compensation payable to the Adviser for the year is equal to the percentage set
forth in Section 4 hereof of the average net asset value as determined as
described herein through out the fiscal year, diminished to the extent
necessary so that the total of the aforementioned expense items of the Fund
shall not exceed the expense limitation. The aggregate of repayments, if any,
by the Adviser to the Fund for the year shall be the amount necessary to limit
the said net expense to said percentage.
Notwithstanding anything in the foregoing to the contrary, the Adviser
shall not be obligated to reimburse the Fund in an amount exceeding its
advisory fee for the period.
The net asset value for each Portfolio shall be calculated in accordance
with the provisions of the Fund's prospectus or at such other time or times as
the trustees may determine in accordance with the provisions of the 1940 Act.
On each day when net asset value is not calculated, the net asset value of a
share of a Portfolio shall be deemed to be the net asset value of such a share
as of the close of business on the last day on which such calculation was made
for the purpose of the foregoing computations.
6. Affiliations. Subject to applicable statutes and regulations, it is
understood that trustees, officers or agents of the Fund are or may be
interested in the Adviser as officers, directors, agents, shareholders or
otherwise, and that the officers, directors, shareholders and agents of the
Adviser may be interested in the Fund otherwise than as a trustee, officer or
agent.
7. Liability of Adviser. The Adviser shall not be liable for any error of
judgment or of law or for any loss suffered by the Fund in connection with the
matters to which this Agreement relates, except for a loss resulting from
willful misfeasance, bad faith or gross negligence on the part of the Adviser
in the performance of its obligations and duties or by reason of its reckless
disregard of its obligations and duties under this Agreement.
8. Activities of the Adviser. The services of the Adviser to the Fund
under this Agreement are not to be deemed exclusive, and the Adviser shall be
free to render similar services or other services to others so long as its
services hereunder are not impaired thereby. It is agreed that the Adviser may
use any supplemental research obtained for the benefit of the Fund in providing
investment advice to its other investment advisory accounts or for managing its
own or its affiliates accounts. The Adviser shall for all purposes herein
provided be deemed to be an independent contractor and, unless otherwise
expressly provided or authorized, shall have no authority to act for or
represent the Fund in any way or otherwise be deemed an agent of the Fund.
9. Term; Termination; Amendment. This Agreement shall become effective
with respect to the Initial Portfolios on November 1, 1992, provided that it
has been approved by vote of a majority of the outstanding voting securities of
each Portfolio in accordance with the requirements of the 1940 Act and shall
remain in full force until February 28, 1994, unless sooner terminated as
hereinafter provided. This Agreement shall continue in force from year to year
thereafter with respect to each Portfolio, but only as long as such continuance
is specifically approved for each Portfolio at least annually in
<PAGE> 5
the manner required by the 1940 Act and the rules and regulations thereunder;
provided, however, that if the continuation of this Agreement is not approved
for a Portfolio, the Adviser may continue to serve in such capacity for such
Portfolio in the manner and to the extent permitted by the 1940 Act and the
rules and regulations thereunder
This Agreement shall automatically terminate in the event of its
assignment and may be terminated at any time without the payment of any penalty
by the Fund or by the Adviser on sixty (60) days written notice to the other
party. The Fund also may effect termination with respect to any Portfolio by
action of the Board of Trustees or by a vote of a majority of the outstanding
voting securities of such Portfolio.
This Agreement may be terminated with respect to any Portfolio at any time
without the payment of any penalty by the Board of Trustees or by vote of a
majority of the outstanding voting securities of such Portfolio in the event
that it shall have been established by a court of competent jurisdiction that
the Adviser or any officer or director of the Adviser has taken any action
which results in a breach of the covenants of the Adviser set forth herein.
The terms "assignment" and "vote of a majority of the outstanding voting
securities" shall have the meanings set forth in the 1940 Act and the rules and
regulations thereunder.
Termination of this Agreement shall not affect the right of the Adviser to
receive payments on any unpaid balance of the compensation described in Section
4 earned prior to such termination.
No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the other
party against which enforcement of the charge, waiver, discharge or termination
is sought.
10. Notice. Any notice under this Agreement shall be in writing, addressed
and delivered or mailed, postage prepaid, to the other party at such address as
such other party may designate for the receipt of such notice.
11. Limitations on Liability. All parties hereto are expressly put on
notice of the Fund's Agreement and Declaration of Trust and all amendments
thereto, all of which are on file with the Secretary of The Commonwealth of
Massachusetts, and the limitation of shareholder and trustee liability
contained therein. This Agreement has been executed by and on behalf of the
Fund by its representatives as such representatives and not individually, and
the obligations of the Fund hereunder are not binding upon any of the trustees,
officers, or shareholders of the Fund individually but are binding upon only
the assets and property of the Fund. With respect to any claim by the Adviser
for recovery of that portion of the investment management fee (or any other
liability of the Fund arising hereunder) allocated to a particular Portfolio,
whether in accordance with the express terms hereof or otherwise, the Adviser
shall have recourse solely against the assets of that Portfolio to satisfy such
claim and shall have no recourse against the assets of any other Portfolio for
such purpose.
<PAGE> 6
12. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement is held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement will not be
affected thereby. This Agreement will be binding upon and shall inure to the
benefit of the parties hereto and their respective successors.
13. Applicable Law. This Agreement shall be construed in accordance with
applicable federal law and (except as to Section 11 hereof which shall be
construed in accordance with the laws of The Commonwealth of Massachusetts) the
laws of the State of Michigan.
IN WITNESS WHEREOF, the Fund and the Adviser have caused this Agreement to
be executed as of the day and year first above written.
JACKSON NATIONAL CAPITAL
MANAGEMENT FUNDS
By: /s/
Title: President
ATTEST:
/s/ John A. Knutson
Title: Chief Financial Officer
JACKSON NATIONAL FINANCIAL
SERVICES, INC.
By: /s/ Larry C. Jordan
Title: Chief Operating Officer
ATTEST:
/s/ Thomas J. Meyer
Title: Secretary
<PAGE> 1
EX-99.B5-SUB-ADVI
INVESTMENT SUB-ADVISORY AGREEMENT
AGREEMENT made this 1st day of November, 1992, by and between JACKSON
NATIONAL FINANCIAL SERVICES, INC., a Delaware corporation and registered
investment adviser ("Adviser"), and PPM AMERICA, INC., a Delaware corporation
and registered investment adviser ("Sub-Adviser").
WHEREAS, Adviser is the investment manager for the Jackson National
Capital Management Funds (the "Fund"), an open-end diversified, management
investment company registered under the Investment Company Act of 1940, as
amended ("1940 Act"), currently consisting of five separate series or
portfolios including Jackson National Money Market Fund, Jackson National
Tax-Exempt Fund, Jackson National Income Fund, Jackson National Growth Fund and
Jackson National Total Return Fund (the "Initial Portfolios"); and
WHEREAS, Adviser desires to retain Sub-Adviser as its agent to furnish
investment advisory services for the Initial Portfolios, upon the terms and
conditions hereafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
1. Appointment. Adviser hereby appoints Sub-Adviser to provide certain
sub-investment advisory services to the Initial Portfolios for the period and
on the terms set forth in this Agreement. Sub-Adviser accepts such
appointments and agrees to furnish the services herein set forth for the
compensation herein provided.
2. Additional Portfolios. In the event that the Fund establishes one or
more portfolios other than the Initial Portfolios, with respect to which the
Adviser desires to engage the Sub-Adviser to render investment advisory
services hereunder, the Adviser shall notify the Sub-Adviser of such desire. If
the Sub-Adviser is willing to render such services, it shall notify the Adviser
in writing whereupon such portfolio or portfolios shall become a Portfolio or
Portfolios hereunder.
3. Services to Be Performed. Subject always to the supervision of Fund's
Board of Trustees and the Adviser, Sub-Adviser will furnish an investment
program in respect of, and make investment decisions for, all assets of the
Initial Portfolios and other Portfolios hereunder and place all orders for the
purchase and sale of securities, all on behalf of such Portfolios. In the
performance of its duties, Sub-Adviser will satisfy its fiduciary duties to the
Fund (as set forth in Section 7, below), and will monitor the Portfolios'
investments, and will comply with the provisions of Fund's Declaration of Trust
and By-laws, as amended from time to time, and the stated investment
objectives,
-1-
<PAGE> 2
policies and restrictions of the Portfolios. Adviser will provide Sub-Adviser
with current copies of the Fund's Declaration of Trust, By-laws, prospectus and
any amendments thereto, and any objectives, policies or limitations not
appearing therein as they may be relevant to Sub-Adviser's performance under
this Agreement. Sub-Adviser and Adviser will each make its officers and
employees available to the other from time to time at reasonable times to
review investment policies of the Portfolios and to consult with each other
regarding the investment affairs of the Portfolios. Sub-Adviser will report to
the Board of Trustees and to Adviser with respect to the implementation of such
program.
Sub-Adviser further agrees that it:
(a) will use the same skill and care in providing such services as it uses
in providing services to fiduciary accounts for which it has investment
responsibilities;
(b) will conform with all applicable Rules and Regulations of the
Securities and Exchange Commission in all material respects and in addition
will conduct its activities under this Agreement in accordance with any
applicable regulations of any governmental authority pertaining to its
investment advisory activities;
(c) Sub-Adviser is authorized to select the brokers or dealers that will
execute the purchases and sales of portfolio securities for the Por'fclios and
is directed to use its best efforts to obtain best execution, which includes
most favorable net results and execution of the Fund's orders, taking into
account all appropriate factors, including price, dealer spread or commission,
size and difficulty of the transaction and research or other services provided.
It is understood that the Sub-Adviser will not be deemed to have acted
unlawfully, or to have breached a fiduciary duty to the Fund or in respect of
any Portfolio, or be in breach of any obligation owing to the Fund or in
respect of any Portfolio under this Agreement, or otherwise, solely by reason
of its having caused the Fund to pay a member of a securities exchange, a
broker or a dealer a commission for effecting a securities transaction for the
Fund in excess of the amount of commission another member of an exchange,
broker or dealer would have charged if the Sub-Adviser determined in good faith
that the commission paid was reasonable in relation to the brokerage or
research services provided by such member, broker or dealer, viewed in terms of
that particular transaction or the Sub-Adviser's overall responsibilities with
respect to its accounts, including the Fund, as to which it exercises
investment discretion. In addition, if in the judgment of the Sub-Adviser, the
Fund would be benefited by supplemental services, the Sub-Adviser is authorized
to pay spreads or commissions to brokers or dealers
-2-
<PAGE> 3
furnishing such services in excess of spreads or commissions which another
broker or dealer may charge for the same transaction, provided that the
Sub-Adviser determined in good faith that the commission or spread paid was
reasonable in relation to the services provided. The Sub-Adviser will properly
communicate to the officers and trustees of the Fund such information relating
to transactions for any Portfolio as they may reasonably request. In no
instance will portfolio securities be purchased from or sold to the Adviser,
Sub-Adviser or any affiliated person of either the Fund, Adviser, or
Sub-Adviser, except as may be permitted under the 1940 Act;
(d) will report regularly to Adviser and to the Board of Trustees and will
make appropriate persons available for the purpose of reviewing with
representatives of Adviser and the Board of Trustees on a regular basis at
reasonable times the management of the Portfolios, including, without
limitation, review of the general investment strategies of the Portfolios, the
performance of the Portfolios in relation to standard industry indices,
interest rate considerations and general conditions affecting the marketplace
and will provide various other reports from time to time as reasonably
requested by Adviser;
(e) will prepare such books and records with respect to the Portfolios'
securities transactions as requested by the Adviser and will furnish Adviser
- -nd Fund's Board of Trustees such periodic and special reports as the Board or
Adviser may reasonably request;
(f) will act upon instructions from Adviser which, in the reasonable
determination of Sub-Adviser, are not inconsistent with the fiduciary duties
hereunder;
(g) will receive the recommendations of Adviser with respect to the
investment and reinvestment of the assets of the Portfolios.
4. Expenses. During the term of this Agreement, Sub-Adviser will pay all
expenses incurred by it in connection with its activities under this Agreement
other than the cost of securities (including brokerage commission, if any)
purchased for the Fund.
5. Compensation. For the services provided and the expenses assumed
pursuant to this Agreement, Adviser will pay the Sub-Adviser, and the
Sub-Adviser agrees to accept as full compensation therefor, at the end of each
calendar month a sub-advisory fee computed at an annual rate of the average
daily net assets of the Portfolios subject to this Agreement as follows:
-3-
<PAGE> 4
<TABLE>
Portfolios Annual Rate of Average
Daily Net Assets
<S> <C>
Jackson National Money Market Fund .035%
Jackson National Tax-Exempt Fund .035%
Jackson National Income Fund .035%
Jackson National Growth Fund .035%
Jackson National Total Return Fund .035%
</TABLE>
For the month and year in which this Agreement becomes effective or
terminates, there shall be an appropriate proration on the basis of the number
of days that the Agreement is in effect during the month and year,
respectively.
6. Services to Others. Adviser understands, and has advised Fund's Board
of Trustees, that Sub-Adviser now acts, or may in the future act, as an
investment adviser to fiduciary and other managed accounts, and as investment
adviser or sub-investment adviser to other investment companies. Adviser has no
objection to Sub-Adviser acting in such capacities, provided that whenever the
Fund and one or more other investment advisory clients of Sub-Adviser have
available funds for investment, investments suitable and appropriate for each
will be allocated in a manner believed by Sub-Adviser to be equitable to each.
Adviser recognizes, and has advised Fund's Board of Trustees, that in some
cases this procedure may adversely affect the size of the position that a
Portfolio may obtain in a particular security. It is further agreed that, on
occasions when the Sub-Adviser deems the purchase or sale of a security to be
in the best interests of the Fund as well as other accounts, it may, to the
extent permitted by applicable law, but will not be obligated to, aggregate the
securities to be so sold or purchased for the Fund with those to be sold or
purchased for other accounts in order to obtain favorable execution and lower
brokerage commissions. In addition, Adviser understands, and has advised Fund's
Board of Trustees, that the persons employed by Sub-Adviser to assist in
Sub-Adviser's duties under this Agreement will not devote their full time to
such service and nothing contained in this Agreement will be deemed to limit or
restrict the right of Sub-Adviser or any of its affiliates to engage in and
devote time and attention to other businesses or to render services of whatever
kind or nature. It is also agreed that the Sub-Adviser may use any supplemental
research obtained for the benefit of the Fund in providing investment advice to
its other investment advisory accounts or for managing its own accounts.
7. Limitation of Liability. Adviser will not take any action against
Sub-Adviser to hold Sub-Adviser liable for any error of judgment or mistake of
law or for any loss suffered by the Fund in connection with the performance of
Sub-Adviser's duties under this Agreement, except for a loss resulting from
Sub-Adviser's willful misfeasance, bad faith, or gross negligence in the
performance of its duties or by reason of its reckless disregard of its
obligations and duties under this Agreement.
-4-
<PAGE> 5
8. Term; Termination; Amendment. This Agreement shall become effective
with respect to the Initial Portfolios on November 1, 1992, provided that it
has been approved by a vote of a majority of the outstanding voting securities
of each Portfolio in accordance with the requirements of the 1940 Act and shall
remain in full force until February 28, 1994, unless sooner terminated as
hereinafter provided. This Agreement shall continue in force from year to year
thereafter with respect to each Portfolio, but only as long as such continuance
is specifically approved for each Portfolio at least annually in the manner
required by the 1940 Act and the rules and regulations thereunder; provided,
however, that if the continuation of this Agreement is not approved for a
Portfolio, the Sub-Adviser may continue to serve in such capacity for such
Portfolio in the manner and to the extent permitted by the 1940 Act and the
rules and regulations thereunder.
This Agreement shall automatically terminate in the event of its
assignment and may be terminated at any time without the payment of any penalty
by the Adviser or by the Sub-Adviser on sixty (60) days written notice to the
other party. This Agreement may also be terminated by the Fund with respect to
any Portfolio by action of the Board of Trustees or by a vote of a majority of
the outstanding voting securities of such Portfolio on sixty (60) days written
notice to Sub-Adviser by the Fund.
This Agreement may be terminated with respect to any Portfolio at any time
without the payment of any penalty by the Adviser, the Board of Trustees or by
vote of a majority of the outstanding voting securities of such Portfolio in
the event that it shall have been established by a court of competent
jurisdiction that the Sub-Adviser or any officer or director of the Sub-Adviser
has taken any action which results in a breach of the covenants of the
Sub-Adviser set forth herein.
The terms "assignment" and "vote of a majority of the outstanding voting
securities" shall have the meanings set forth in the 1940 Act and the rules and
regulations thereunder.
Termination of this Agreement shall not affect the right of the
Sub-Adviser to receive payments on any unpaid balance of the compensation
described in Section 5 earned prior to such termination.
This Agreement shall automatically terminate in the event the Investment
Management Agreement between Adviser and the Fund is terminated, assigned or
not renewed.
9. Notice. Any notice under this Agreement shall be in writing, addressed
and delivered or mailed, postage prepaid, to the other party at such address as
such other party may designate for the receipt of such notice.
10. Limitations on Liability. All parties hereto are expressly put on
notice of the Fund's Agreement and Declaration of Trust and all amendments
thereto, all of which are on file with the Secretary of The Commonwealth of
Massachusetts, and the limitation of shareholder and
-5-
<PAGE> 6
trustee liability contained therein. The obligations of the Fund entered in the
name or on behalf thereof by any of the Trustees, representatives or agents are
made not individually but only in such capacities and are not binding upon any
of the Trustees, officers, or shareholders of the Fund individually but are
binding upon only the assets and property of the Fund, and persons dealing with
the Fund must look solely to the assets of the Fund and those assets belonging
to the subject Portfolio, for the enforcement of any claims.
11. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement is held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement will not be
affected thereby. This Agreement will be binding upon and shall inure to the
benefit of the parties hereto and their respective successors.
12. Applicable Law. This Agreement shall be construed in accordance with
applicable federal law and (except as to Section 10 hereof which shall be
construed in accordance with the laws of The Commonwealth of Massachusetts) the
laws of the State of Michigan.
IN WITNESS WHEREOF, the Adviser and the Sub-Adviser have caused this
Agreement to be executed as of the day and year first above written.
JACKSON NATIONAL FINANCIAL
SERVICES, INC.
By: /s/
Title: President
ATTEST:
/s/ Larry C. Jordan
Title: Chief Operating Officer
PPM AMERICA,INC.
By: /s/
Title: Chief Executive Officer
ATTEST:
/s/
Title:
<PAGE> 1
EX-99.B6-UNDERWRI
UNDERWRITING AGREEMENT
AGREEMENT made as of this 10th day of August, 1992 between JACKSON
NATIONAL CAPITAL MANAGEMENT FUNDS, a Massachusetts business trust (hereinafter
called the "Fund"), and JACKSON NATIONAL FINANCIAL SERVICES, INC., a Delaware
corporation (hereinafter called the "Underwriter").
In consideration of the mutual covenants hereinafter contained, it is
hereby agreed by and between the parties hereto as follows:
1. The Fund hereby appoints the Underwriter its agent for the
distribution of shares of beneficial interest (hereinafter called "shares") of
the Fund in jurisdictions wherein shares of the Fund may legally be offered for
sale; provided, however, that the Fund in its absolute discretion may (a)
issue or sell shares directly to holders of shares of the Fund upon such terms
and conditions and for such consideration, if any, as it may determine, whether
in connection with the distribution of subscription or purchase rights, the
payment or reinvestment of dividends or distributions, or otherwise; or (b)
issue or sell shares at net asset value to the shareholders of any other
investment company, for which the underwriter shall act as exclusive
distributor, who wish to exchange all or a portion of their investment in
shares of such other investment company for shares of the Fund.
2. The Underwriter hereby accepts appointment as agent for the
distribution of the shares of the Fund and agrees that it will use its best
efforts with reasonable promptness to sell such part of the authorized shares
of the Fund remaining unissued as from time to time shall be effectively
registered under the Securities Act of 1933 ("Securities Act"), at prices
determined as hereinafter provided and on terms hereinafter set forth, all
subject to applicable Federal and state laws and regulations and to the
Agreement and Declaration of Trust of the Fund.
3. The Fund agrees that it will use its best efforts to keep
effectively registered under the Securities Act for sale as herein contemplated
such shares as the Underwriter shall reasonably request and as the Securities
and Exchange Commission shall permit to be so registered.
4. Notwithstanding any other provision hereof, the Fund may terminate,
suspend or withdraw the offering of shares whenever, in its sole discretion, it
deems such action to be desirable.
5. The Underwriter shall sell shares of the Fund to or through
qualified dealers or others insuch manner, not inconsistent with the provisions
hereof and the then effective registration statement of the Fund under the
Securities Act (and related prospectus), as the Underwriter may determine from
time to time, provided that no dealer or other person shall be appointed or
authorized to act as agent of the Fund without the
<PAGE> 2
prior consent of the Fund. It is mutually agreed that, in
addition to sales made by it as agent of the Fund, the Underwriter may, in its
discretion, also sell shares of the Fund as principal to persons with whom it
does not have dealer selling group agreements.
6. Shares of the Fund offered for sale or sold by the Underwriter
shall be so offered or sold at a price per share determined in accordance with
the then current prospectus relating to the sale of such shares except as
departure from such prices shall be permitted by the rules and regulations of
the Securities and Exchange Commission; provided however, that any public
offering price for shares of the Fund shall be the net asset value per share
plus a distribution charge in the amount set forth in the then current
prospectus of the Fund relating to such shares. The net asset value per share
shall be determined in the manner and at the times set forth in the then
current prospectus of the Fund relating to such shares.
7. The price the Fund shall receive for all shares purchased from the
Fund shall be the net asset value used in determining the public offering price
applicable to the sale of such shares. The excess, if any, of the sales price
over the net asset value of the shares of the Fund sold by the Underwriter as
agent shall be retained by the Underwriter as a commission for its services
hereunder. Out of such commission the Underwriter may allow commissions or
concessions to dealers and may allow them to other in its discretion in such
amounts as the Underwriter shall determine from time to time. Except as may be
otherwise determined by the Underwriter and the Fund from time to time, such
commissions or concessions shall be uniform to all dealers.
8. The Underwriter shall issue and deliver on behalf of the Fund such
confirmations of sales made by it as agent pursuant to this agreement as may be
required. At or prior to the time of issuance of shares, the Underwriter will
pay or cause to be paid to the Fund the amount due the Fund for the sale of
such shares. Shares shall be registered on the transfer books of the Fund in
such names and denominations as the Underwriter may specify.
9. The Fund will execute any and all documents and furnish any and all
information which may be reasonably necessary in connection with the
qualification of its shares for sale (including the qualification of the Fund
as a dealer where necessary or advisable) in such states as the Underwriter may
reasonably request (it being understood that the Fund shall not be required
without its consent to comply with any requirement which in its opinion is
unduly burdensome).
10. The Fund will furnish to the Underwriter from time to time such
information with respect to the Fund and its shares as the Underwriter may
reasonably request for use in connection with the sale of shares of the Fund.
The Underwriter agrees that it will not use or distribute or authorize the use,
distribution or dissemination by its dealers or others in connection with the
sale of such shares any statements, other than those contained in the Fund's
current prospectus, except such supplemental literature or
2
<PAGE> 3
advertising as shall be lawful under Federal and state securities laws and
regulations, and that it will furnish the Fund with copies of all such material.
11. The Underwriter shall order shares of the Fund from the Fund only to
the extent that it shall have received purchase orders therefor. The
Underwriter will not make, or authorize any dealers or others to make: (a) any
short sales of shares of the Fund; or (b) any sales of such shares to any
trustee or officer of the Fund or to any officer or director of the Underwriter
or of any corporation or association furnishing investment advisory, managerial
or supervisory services to the Fund, or to any such corporation or association,
unless such sales are made in accordance with the then current prospectus
relating to the sale of such shares.
12. The Underwriter, as agent of and for the account of the Fund, may
repurchase the shares of the Fund at such prices and upon such terms and
conditions as shall be specified in the current prospectus of the Fund.
13. In selling or reacquiring shares of the Fund for the account of the
Fund, the Underwriter will in all respects conform to the requirements of all
state and Federal laws and the Rules of Fair Practice of the National
Association of Securities Dealers, Inc., relating to such sale or
reacquisition, as the case may be, and will indemnify and save harmless the
Fund from any damage or expense on account of any wrongful act by the
Underwriter or any employee, representative or agent of the Underwriter. The
Underwriter will observe and be bound by all the provisions of the Agreement
and Declaration of Trust of the Fund (and of any fundamental policies adopted
by the Fund pursuant to the Investment Company Act of 1940, notice of which
shall have been given to the Underwriter) which at the time in any way require,
limit, restrict or prohibit or otherwise regulate any action on the part of the
Underwriter.
14. The Underwriter will require each dealer to conform to the
provisions hereof and the Registration Statement (and related prospectus) at
the time in effect under the Securities Act with respect to the public offering
price of the Fund's shares, and neither the Underwriter nor any such dealers
shall withhold the placing of purchase orders so as to make a profit thereby.
15. The Fund shall assume and pay all charges and expenses of its
operations not specifically assumed or otherwise to be provided by the
Underwriter under this Agreement. The Fund will pay or cause to be paid
expenses (including the fees and disbursements of its own counsel) of any
registration of the Fund and its shares under the United States securities laws
and expenses incident to the issuance of shares of beneficial interest, such as
issue taxes and fees of the transfer agent. The Underwriter will pay all
expenses (other than expenses which one or more Firms may bear pursuant to any
agreement with the Underwriter) incident to the sale and distribution of the
shares issued or sold hereunder, including, without limiting the generality of
the foregoing, all (a) expenses of printing and distributing any prospectus and
of preparing, printing and distributing or disseminating any other literature,
advertising and selling aids in connection with the offering of the shares for
sale (except that such expenses need not include expenses incurred by the Fund
in connection with the preparation, typesetting, printing and distribution of
any registration statement, prospectus or report or other communication to
shareholders in their capacity as such), (b) expenses of advertising in
connection with such offering and (c) expenses (other than the Fund's auditing
expenses) of qualifying or continuing the qualification for the shares for sale
and, in connection therewith, of qualifying or continuing the qualification of
the fund as a dealer or broker under the laws of such states as may be
designated by the Underwriter under the
3
<PAGE> 4
condition wherein specified. No transfer taxes, if any, which may be payable
in connection with the issue or delivery of shares sold as herein contemplated
or of the certificates for such shares shall be borne by the Fund, and the
Underwriter will indemnify and hold harmless the Fund against liability for all
such transfer taxes.
16. This agreement shall become effective on the date hereof and shall
continue in effect until February 28, 1994 and from year to year thereafter,
but only so long as such continuance is approved in the manner required by the
Investment Company Act of 1940. Either party hereto may terminate this
agreement on any date by giving the other party at least six months prior
written notice of such termination specifying the date fixed therefor. Without
prejudice to any other remedies of the fund in any such event the Fund may
terminate this agreement at any time immediately upon any failure of
fulfillment of any of the obligations of the Underwriter hereunder.
17. This agreement shall automatically terminate in the event of its
assignment.
18. Any notice under this agreement shall be in writing, addressed and
delivered or mailed, postage postpaid, to the other party at such address as
such other party may designate for the receipt of such notice.
4
<PAGE> 5
19. All parties hereto are expressly put on notice of the Fund's
Agreement and Declaration of Trust and all amendments hereto, all of which are
on file with the Secretary of The Commonwealth of Massachusetts, and the
limitation of shareholder and trustees liability contained therein. This
Agreement has been executed by and on behalf of the Fund by its representatives
as such representatives and not individually, and the obligations of the Fund
hereunder are not binding upon any of the Trustees, officers or shareholders of
the fund individually but are binding upon only the assets and the property of
the Fund. With respect to any claim by the Underwriter for recovery of any
liability of the fund arising hereunder allocated to a particular series of the
Fund, whether in accordance with the express terms hereof or otherwise, the
Underwriter shall have recourse solely against the assets of that series to
satisfy such claim and shall have no recourse against the assets of any other
Portfolio for such purpose.
IN WITNESS WHEREOF, the Fund and the Underwriter have caused this
Agreement to be executed as of the day and year first above written.
JACKSON NATIONAL CAPITAL
MANAGEMENT FUNDS
By: /s/ Larry C. Jordan
Title: Treasurer
ATTEST:
/s/ George S. Yochmowitz
Title: Associate General Counsel
JACKSON NATIONAL FINANCIAL
SERVICES, INC.
By: /s/ Thomas J. Meyer
Title: Chief Legal Officer
ATTEST:
/s/ George S. Yochmowitz
Title: Associate General Counsel
5
<PAGE> 1
EX-99.B6-selling
SELLING GROUP AGREEMENT JACKSON NATIONAL FINANCIAL SERVICES, INC.
5901 Executive Drive, P. O. Box 24068 Lansing, Michigan 48909
Date__________________________
Dear Sirs:
As principal underwriter and distributor, we invite you to join a Selling
Group for the distribution of shares of the Jackson National Capital Management
Funds (herein called "Funds"), but only in those states in which the shares of
the Funds may legally be offered for sale. As exclusive agent of the Funds, we
offer to sell to you shares of the Funds on the following terms:
1. In all sales of these shares to the public you shall act as dealer for
your own account, and in no transaction shall you have any authority to act as
agent for the issuer, for us, or for any other member of the Selling Group.
2. Orders received from you will be accepted by us only at the public
offering price applicable to each order, as established by the Prospectus of
the Funds, subject to the discount, commission or other concession, if any, as
provided in such Prospectus. Upon receipt from you of any order to purchase
shares of a Fund, we shall confirm to you in writing or by wire to be followed
by a confirmation in writing. Additional instructions may be forwarded to you
from time to time. All orders are subject to acceptance or rejection by us in
our sole discretion.
3. You may offer and sell shares to your customers only at the public
offering price determined in the manner described in the Prospectus. The
public offering price is the net asset value per share as provided in the
Prospectus plus, with respect to certain Funds, a sales charge from which you
shall receive a discount equal to a percentage of the applicable offering price
as provided in the Prospectus. You shall receive concession or sales
commission, with respect to the sale of shares of certain Funds, equal to a
percentage of the amount invested as provided in the Prospectus. You may also
receive a concession with respect to the sale of shares of certain Funds at net
asset value to certain employee benefit plans subject to the terms and
conditions specified in the Prospectus. The discounts or other concessions to
which you may be entitled in connection with sales to your customers pursuant
to any special features of a Fund (such as cumulative discounts, letters of
intent, etc., the terms of which shall be as described in the Prospectus and
related forms) shall be in accordance with the terms of such features. You may
receive an administrative service fee for the services described in section 15
below with respect to certain Funds for which such fees are available, as
provided in the Prospectus, which administrative service fee shall be payable
in such amounts and for such periods and at such intervals as are specified by
us in schedule A to this Agreement as maybe amended from time to time.
4. By accepting this Agreement, you agree:
<PAGE> 2
(a) To purchase shares only from us or from your customers.
(b) That you will purchase shares from us only to cover purchase orders
already received from your customers, or for your own bona fide
investment.
(c) That you will not withhold placing with us orders received from your
customers so as to profit yourself as a result of such withholding.
5. We will not accept from you any conditional orders for shares.
6. If any shares confirmed to you under the terms of this Agreement are
repurchased by the issuing Fund or by us as agent for the Fund, or are tendered
for repurchase, within seven business days after the date of our confirmation
of the original purchase order, you shall forthwith refund to us the full
discount, commission, finder's fee or other concession, if any, allowed or paid
to you on such shares.
7. Payment in good funds for shares ordered from us must be received by
the appropriate Funds' transfer agent within seven days after our acceptance of
your order. If such payment is not received, we reserve the right, without
notice, forthwith to cancel the sale or, at our option, to sell the shares
ordered back to the Fund, in which case we may hold you responsible for any
loss, including loss of profit suffered by us as a result of your failure to
make such payment.
8. All sales will be made subject to our receipt of shares from the
Funds. We reserve the right, in our discretion, without notice, to suspend
sales or withdraw the offering of shares entirely. We reserve the right to
modify, cancel or change the terms of this Agreement, upon 15 days prior
written notice to you. Also, the sales charges, discounts, commissions,
administrative service fees or other concessions of any kind provided for
hereunder are subject to change at any time by the Funds and us.
9. All communications to us should be sent to the address in the heading
above. Any notice to you shall be duly given if mailed, telegraphed, or faxed
to you at the address specified by you below.
10. As a result of the necessity to compute the amount of any contingent
deferred sales charge due with respect to the redemption of shares, you may not
hold shares of a Fund, imposing such a charge in an account registered in your
name or in the name of your nominee for the benefit of certain of your
customers except with our prior written consent. Except as otherwise permitted
by us, shares of such a Fund owned by a shareholder must be in a separate
identifiable account for such shareholder.
11. This Agreement shall be in substitution of any prior selling group
agreement.
12. You agree to release, indemnify and hold harmless the Funds, us and
our respective representatives and agents from any and all direct or indirect
liabilities or losses resulting from request, directions, actions or inactions
of or by you, your officers, employees or
<PAGE> 3
agents regarding the purchase, redemption or transfer of registration of shares
of the Funds for accounts of you, your customers and other shareholders or from
any unauthorized or improper use of any on-line computer facilities. You shall
prepare such periodic reports of us as shall reasonably be requested by us.
You shall immediately inform Funds or us of all written complaints received by
you from Fund shareholders relating to the maintenance of their accounts and
shall promptly answer all such complaints and other similar correspondence.
You shall provide the Funds and us on a timely basis with such information as
may be required to complete various regulatory forms.
13. No person is authorized to make any representations concerning shares
of any Fund except those contained in the Prospectus of such Fund and in
printed information subsequently issued by the Fund or by us as information
supplemental to such Prospectus. If you wish to use your own advertising with
respect to a Fund, all such advertising must be approved by us or by the Fund
prior to use. You shall be responsible for any required filing of such
advertising.
14. Your acceptance of this agreement constitutes a representation (I)
that you are a registered security dealer and a member in good standing of the
National Association of Securities Dealers, Inc., and that you agree to comply
with all state and federal laws, rules and regulations applicable to
transactions hereunder and to the Rules of Fair Practice of the National
Association of Securities Dealers, Inc., including specifically Section 26,
Article III thereof, or (ii) if you are offering and selling shares of the
Funds only in jurisdictions outside of the several states, territories and
possessions of the United States and are not otherwise required to be a member
of the National Association of Securities Dealers, Inc., that you nevertheless
agree to conduct your business in accordance with the spirit of the Rules of
Fair Practice of the National Association of Securities Dealers, Inc., and to
observe the laws and regulations of the applicable jurisdiction. You likewise
agree that you will not offer or sell shares of any Fund in any state or other
jurisdiction in which they may not lawfully be offered for sale.
15. You shall make available an investment management account for your
customers through the Funds and shall provide such office space and equipment,
telephone facilities, personnel and literature distribution as is necessary or
appropriate for providing information and services to your customers. Such
services and assistance may include, but not be limited to, establishment and
maintenance of shareholder accounts and records, processing purchase and
redemption transactions, answering routine inquiries regarding the Funds, and
such other services as may be agreed upon from time to time and as may be
permitted by applicable statute, rule, or regulation. You agree to release,
indemnify and hold harmless the Funds, us and our respective representatives
and agents from any and all direct or indirect liabilities or losses resulting
from requests, directions, actions or inactions of or by you, your officers,
employees or agents regarding the purchase, redemption or transfer of
registration of shares of the Funds for accounts of you, your customers and
other shareholders or from any unauthorized or improper use of any on-line
computer facilities. You shall prepare such periodic reports for us as shall
reasonably be requested by us. You shall immediately inform the Funds or us of
all written complaints received by you from Fund shareholders relating to the
maintenance of their accounts and shall promptly answer all such complaints and
other similar correspondence. You shall
<PAGE> 4
provide the Funds and us on a timely basis with such information as may be
required to complete various regulatory forms.
16. This Agreement shall be construed in accordance with the laws of
Michigan. This Agreement is subject to the Prospectus of the Funds from time
to time in effect, and, in the event of a conflict, the terms of the Prospectus
shall control. References herein to the "Prospectus" of the Funds shall mean
the prospectus and statement of additional information of such Fund as from
time to time in effect. Any changes, modifications or additions reflected in
any such Prospectus shall be effective on the date of such Prospectus (or
supplement thereto) unless specified otherwise.
JACKSON NATIONAL FINANCIAL
SERVICES, INC.
By:_____________________________________
Authorized Signature
Title:__________________________________
We have read the foregoing agreement and accept and agree to the terms and
conditions thereof.
Firm:___________________________________________________________________
By:_____________________________________________________________________
Title:__________________________________________________________________
Address:________________________________________________________________
________________________________________________________________
Telephone:______________________________________________________________
Tax ID #:_______________________________________________________________
Contact Person:_________________________________________________________
Witness:________________________________________________________________
The above agreement should be executed and one copy returned to the dealer.
<PAGE> 5
JACKSON NATIONAL FINANCIAL SERVICES, INC.
SCHEDULE A TO
SELLING GROUP AGREEMENT
<TABLE>
<CAPTION>
FUND FEE RATE
---------------------------------- ----------
<S> <C>
JACKSON NATIONAL MONEY MARKET FUND 0.00%
JACKSON NATIONAL TAX-EXEMPT FUND 0.25%
JACKSON NATIONAL INCOME FUND 0.25%
JACKSON NATIONAL GROWTH FUND 0.25%
JACKSON NATIONAL TOTAL RETURN FUND 0.25%
</TABLE>
FREQUENCY OF PAYMENTS: SEMIANNUALLY (June 30 and December 31)
MINIMUM PAYMENT: $50 (WITH RESPECT TO ALL FUNDS IN THE AGGREGATE.)
The fee paid with respect to each Fund will be calculated at the end of each
payment period for each business day of the Fund during such payment period at
the annual rate set forth above as applied to the average net asset value of
the shares of such Fund purchased or acquired through exchange. Fees
calculated in this manner shall be paid to you only if your firm is the dealer
of record at the close of business on the last business day of the applicable
payment period, for the account in which such shares are held.
<PAGE> 1
EX-99.B8-CUSTODYA
CUSTODY AGREEMENT
THIS AGREEMENT made the 10th day of September, 1992, by and between
INVESTORS FIDUCIARY TRUST COMPANY, a trust company chartered under the laws of
the state of Missouri, having its trust office located at 127 West 10th Street,
Kansas City, Missouri 64105 ("Custodian"), and JACKSON NATIONAL CAPITAL
MANAGEMENT FUNDS, a Massachusetts business trust, having its principal office
and place of business at 5901 Executive Drive, Lansing, Michigan 48911
("Fund").
WITNESSETH:
WHEREAS, Fund desires to appoint Investors Fiduciary Trust Company as
Custodian and recordkeeper for the securities and monies of Fund's investment
portfolio; and
WHEREAS, Investors Fiduciary Trust Company is willing to accept such
appointment;
NOW THEREFORE, for and in consideration of the mutual promises contained
herein, the parties hereto, intending to be legally bound, mutually covenant
and agree as follows:
1. APPOINTMENT OF CUSTODIAN. Fund hereby constitutes and appoints Custodian
as custodian of the Fund which is to include:
A. Appointment as custodian of the securities and monies at any time
owned by the Fund; and
B. Appointment as agent to perform certain accounting and
recordkeeping functions required of a duly registered investment
company in compliance with applicable provisions of federal, state
and local laws, rules and regulations including, as may be required:
1. Providing information necessary for Fund to file
required financial reports: maintaining and preserving
required books, accounts and records as the basis for such
reports; and performing certain daily functions in
connection with such accounts and records.
2. Calculating daily net asset value of the Fund, and
3. Acting as liaison with independent auditors.
C. Appointment as agent to perform certain tax and compliance
function required of the Fund.
2. DELIVERY OF CORPORATE DOCUMENTS. Fund has delivered or will deliver to
Custodian prior to the effective date of this Agreement, copies of the
following documents and all amendments or supplements thereto, properly
certified or authenticated:
A. Resolutions of the Board of Trustees of Fund appointing Custodian as
custodian hereunder and approving the form of this Agreement; and
B. Resolutions of the Board of Trustees of Fund designating
certain persons to give instructions on behalf of Fund to Custodian
and
<PAGE> 2
authorizing Custodian to rely upon written instructions over
their signatures.
3. DUTIES AND RESPONSIBILITIES OF CUSTODIAN.
A. Delivery of Assets
Fund will deliver or cause to be delivered to Custodian on the
effective date of this Agreement, or as soon thereafter as
practicable, and from time to time thereafter, all portfolio
securities acquired by it and monies then owned by it except as
permitted by the Investment Company Act of 1940 or from time to
time coming into its possession during the time this Agreement
shall continue in effect. Custodian shall have no responsibility or
liability whatsoever for or on account of securities or monies not
so delivered. All securities so delivered to Custodian (other than
bearer securities) shall be registered in the name of Fund or its
nominee, or of a nominee of Custodian, or shall be properly
endorsed and in form for transfer satisfactory to Custodian.
B. Delivery of Accounts and Records
Fund shall turn over to Custodian all of the Fund's relevant
accounts and records previously maintained by it. Custodian shall
be entitled to rely conclusively on the completeness and
correctness of the accounts and records turned over to it by the
Fund, and Fund shall indemnify and hold Custodian harmless of and
from any and all expenses, damages and losses whatsoever arising
out of or in connection with any error, omission, inaccuracy or
other deficiency of such accounts and records or in the failure o
Fund to provide any portion of such or to provide any information
needed by the Custodian knowledgeably to perform its function
hereunder.
C. Delivery of Assets to Third Parties
Custodian will receive delivery of and keep safely the assets of
Fund delivered to it from time to time segregated in a separate
account. Custodian will not deliver, assign, pledge or hypothecate
any such assets to any person except as permitted by the provisions
of this Agreement or any agreement executed by it according to the
terms of section 3.S. of this Agreement. Upon delivery of any such
assets to a subcustodian pursuant to Section 3.S. of this
agreement, Custodian will create and maintain records identifying
those assets which have been delivered to the subcustodian as
belonging to Fund. The Custodian is responsible for the securities
and monies of Fund only until they have been transmitted to and
received by other persons as permitted under the terms of this
Agreement, except for securities and monies transmitted to United
Missouri Bank of Kansas City, N.A. (UMBKC) and United Missouri
Trust Company of New York (UMBNY) for which Custodian remains
responsible as defined in Section 5 of this Agreement. Custodian
shall be responsible for the monies and securities of Fund held by
eligible foreign custodians under this Agreement to the extent the
domestic subcustodian with which the Custodian contracts is
responsible to Custodian. Custodian may participate directly or
indirectly through a subcustodian in the Depository Trust Company,
Treasury/Federal Reserve Book Entry System or Participant Trust
Company (PTC) (as such entities are defined at 17 CFR Section
270.17f-4(b)) or other depository
<PAGE> 3
approved by the Fund and with which Custodian has a satisfactory
direct or indirect contractual relationship.
D. Registration of Securities
Custodian will hold stocks and other registerable portfolio
securities of Fund registered in the name of Fund or in the name of
any nominee of Custodian for whose fidelity and liability Custodian
will be fully responsible or in street certificate form, so-called,
with or without any indication of fiduciary capacity.
Unless otherwise instructed, Custodian will register all such
portfolio securities in the name of its authorized nominee. All
securities, and the ownership thereof by Fund, which are held by
Custodian hereunder, however, shall at all times be identifiable on
the records of the Custodian. The Fund agrees to hold Custodian and
its nominee harmless for any liability solely as a recordholder of
securities held in custody.
E. Exchange of Securities
Upon receipt of instructions as defined herein in Section 4.A,
Custodian will exchange, or cause to be exchanged, portfolio
securities held by it for the account of Fund for other securities
or cash issued or paid in connection with any reorganization,
recapitalization, merger, consolidation, split-up of shares, change
of par value, conversion or otherwise, and will deposit any such
securities in accordance with the terms of any reorganization or
protective plan. Without instructions, Custodian is authorized to
exchange securities held by it in temporary form for securities in
definitive form, to effect an exchange of shares when the par value
of the stock is changed, and, upon receiving payment therefore, to
surrender bonds or other securities held by it at maturity or when
advised of earlier call for redemption, except that Custodian shall
receive instructions prior to surrendering any convertible
security.
F. Purchases of Investments of the Fund
Fund will, on each business day on which a purchase of securities
shall be made by it, deliver to Custodian instructions which shall
specify with respect to each such purchase:
1. The name of the Portfolio making such purchase;
2. The name of the issuer and description of the security;
3. The number of shares or the principal amount purchased, and
accrued interest, if any;
4. The trade date;
5. The settlement date;
6. The purchase price per unit and the brokerage commission,
taxes and other expenses payable in connection with the
purchase;
7. The total amount payable upon such purchase; and
8. The name of the person from whom or the broker or dealer
through whom the purchase was made.
In accordance with such instructions, Custodian will pay for out of
monies held for the account of Fund, but only insofar as monies are
available therein for such purpose, and receive the portfolio
securities so purchased by or for the account of Fund except that
Custodian may in its sole discretion advance funds to the Fund
which may result in an overdraft because the monies held by the
Custodian on behalf of the Fund are insufficient to pay the total
<PAGE> 4
amount payable upon such purchase. If the Custodian does not
advance monies to pay for portfolio securities, the Custodian will
so notify the Fund. Such payment will be made only upon receipt by
Custodian of the securities so purchased in form for transfer
satisfactory to Custodian.
G. Sales and Deliveries of Investments of the Fund - Other than
Options and Futures Fund will, on each business day on which a
sale of investment securities of Fund has been made, deliver to
Custodian instructions specifying with respect to each such sale:
1. The name of the Portfolio making such sale;
2. The name of the issuer and description of the securities;
3. The number of shares or principal amount sold, and accrued
interest, if any;
4. The date on which the securities sold were purchased or other
information identifying the securities sold and to be
delivered;
5. The trade date;
6. The settlement date;
7. The sale price per unit and the brokerage commission, taxes
or other expenses payable in connection with such sale;
8. The total amount to be received by Fund upon such sale; and
9. The name and address of the broker or dealer
through whom or person to whom the sale was made.
In accordance with such instructions, Custodian will deliver or
cause to be delivered the securities thus designated as sold for
the account of Fund to the broker or other person specified in the
instructions relating to such sale, such delivery to be made only
upon receipt of payment therefor in such form as is satisfactory to
Custodian, with the understanding that Custodian may deliver or
cause to be delivered securities for payment in accordance with
H. Purchases or Sales of Security Options, Options on Indices
and Security Index Futures Contracts Fund will, on each business
day on which a purchase or sale of the following options and/or
futures shall be made by it, deliver to Custodian instructions
which shall specify with respect to each such purchase or sale:
1. The name of the Portfolio making such purchase or sale;
2. Security Options
a. The underlying security;
b. The price at which purchased or sold;
c. The expiration date;
d. The number of contracts;
e. The exercise price;
f. Whether the transaction is an opening, exercising,
expiring or closing transaction;
g. Whether the transaction involves a put or call;
h. Whether the option is written or purchased;
i. Market on which option traded;
j. Name and address of the broker or
dealer through whom the sale or purchase was made.
<PAGE> 5
3. Options on Indices
a. The index;
b. The price at which purchased or sold;
c. The exercise price;
d. The premium;
e. The multiple;
f. The expiration date;
g. Whether the transaction is an opening, exercising,
expiring or closing transaction;
h. Whether the transaction involves a put or call;
i. Whether the option is written or purchased;
j. The name and address of the broker or dealer through
whom the sale or purchase was made, or other applicable
settlement instructions.
4. Security Index Futures Contracts
a. The last trading date specified in the contract and,
when available, the closing level, thereof;
b. The index level on the date the contract is entered into;
c. The multiple;
d. Any margin requirements;
e. The need for a segregated margin account (in addition
to instructions, and if not already in the possession
of Custodian, Fund shall deliver a substantially
complete and executed custodial safekeeping account and
procedural agreement which shall be incorporated by
reference into this Custody Agreement); and
f. The name and address of the futures
commission merchant through whom the sale or purchase
was made, or other applicable settlement instructions.
5. Option on Index Future Contracts
a. The underlying index futures contract;
b. The premium;
c. The expiration date;
d. The number of options;
e. The exercise price;
f. Whether the transaction involves an opening, exercising,
expiring or closing transaction;
g. Whether the transaction involves a put or call;
h. Whether the option is written or purchased; and
i. The market on which the option is traded.
I. Securities Pledged or Loaned
If specifically allowed for in the prospectus of Fund:
1. Upon receipt of instructions, Custodian will release or
cause to be released securities held in custody to the
pledgee designated in such instructions by way of pledge
or hypothecation to secure any loan incurred by Fund;
provided, however, that the securities shall be released only
upon payment to Custodian of the monies borrowed, except that
in cases where additional collateral is required to secure a
borrowing already made, further securities may be released or
caused to be released for that purpose upon receipt of
instructions. Upon receipt of instructions, Custodian will
<PAGE> 6
pay, but only from funds available for such purpose, any such
loan upon redelivery to it of the securities pledged or
hypothecated therefore and upon surrender of the note or
notes evidencing such loan.
2. Upon receipt of instructions, Custodian will release
securities held in custody to the borrower designated in such
instructions; provided, however, that the securities will be
released only upon deposit with Custodian of full cash
collateral as specified in such instructions, and that Fund
will retain the right to any dividends, interest or
distribution on such loaned securities. Upon receipt of
instructions and the loaned securities, Custodian will
release the cash collateral to the borrower.
J. Routine Matters
Custodian will, in general, attend to all routine and mechanical
matters in connection with the sale, exchange, substitution,
purchase, transfer, or other dealings with securities or other
property of Fund except as may be otherwise provided in this
Agreement or directed from time to time by the Board of Trustees of
Fund or its designees.
K. Deposit Account
Custodian will open and maintain a special purpose deposit accounts
with the approval of the Fund, which approval shall not be
unreasonably denied, in the name of Custodian ("Account"), subject
only to draft or order by Custodian upon receipt of instructions.
All monies received by Custodian from or for the account of a
portfolio shall be deposited in said Account, barring events not in
the control of the Custodian such as strikes, lockouts or labor
disputes, riots, war or equipment or transmission failure or
damage, fire, flood, earthquake or other natural disaster, action
or inaction of governmental authority or other causes beyond its
control, at 9:OO a.m., Kansas City time, on the second business day
after deposit of any check into Fund's Account, Custodian agrees to
make Fed Funds available to the Fund in the amount of the check.
Deposits made by Federal Reserve wire will be available to the Fund
immediately and ACH wires will be available to the Fund on the next
business day. Income earned on the portfolio securities will be
credited to the applicable portfolio of the Fund based on the
schedule attached as Exhibit A. The Custodian will be entitled to
reverse any credited amounts where credits have been made and
monies are not finally collected. If monies are collected after
such reversal, the Custodian will credit the applicable portfolio
in that amount. Custodian may open and maintain an Account in such
other banks or trust companies by properly authorized resolution of
the Board of Trustees of Fund, such Account, however, to be in the
name of custodian and subject only to its draft or order.
L. Income and other Payments to Fund
Custodian will:
1. Collect, claim and receive and deposit for the Account of
Fund all income and other payments which become due and
payable on or after the effective date of this Agreement with
respect to the securities deposited under this
<PAGE> 7
Agreement, and credit the account of Fund in accordance with
the schedule attached hereto as Exhibit A. If, for any
reason, the Fund is credited with income that is not
subsequently collected, Custodian may reverse that credited
amount;
2. Execute ownership and other certificates and affidavits for
all federal, state and local tax purposes in connection with
the collection of bond and note coupons; and
3. Take such other action as may be necessary or proper in
connection with:
a. the collection, receipt and deposit of such income and
other payments, including but not limited to the
presentation for payment of:
1. all coupons and other income items requiring
presentation; and
2. all other securities which may mature or be
called, redeemed, retired or otherwise become
payable and regarding which the Custodian has
actual knowledge, or notice of which is
contained in publications of the type to which a
custodian would normally subscribe for such
purpose and
b. the endorsement for collection, in the name of Fund,
of all checks, drafts or other negotiable instruments.
Custodian, however, will not be required to institute suit or take
other extraordinary action to enforce collection except upon
receipt of instructions and upon being indemnified to its
satisfaction against the costs and expenses of such suit or other
actions. Custodian will receive, claim and collect all stock
dividends, rights and other similar items and will deal with the
same pursuant to instructions. Unless prior instructions have been
received to the contrary, Custodian will, without further
instructions, sell any rights held for the account of Fund on the
last trade date prior to the date of expiration of such rights.
M. Payment of Dividends and other Distributions
On the declaration of any dividend or other distribution on the
shares of Capital Stock of Fund ("Fund Shares") by the Board of
Trustees of Fund, Fund shall deliver to Custodian instructions with
respect thereto, including a copy of the Resolution of said Board
of Trustees certified by the Secretary or an Assistant Secretary of
Fund wherein there shall be set forth the record date as of which
shareholders entitled to receive such dividend or other
distribution shall be determined, the date of payment of such
dividend or distribution, and the amount payable per share on such
dividend or distribution. Except if the ex-dividend date and the
reinvestment date of any dividend are the same, in which case funds
shall remain in the Custody Account, on the date specified in such
Resolution for the payment of such dividend or other distribution,
Custodian will pay out of the monies held for the account of Fund,
insofar as the same shall be available for such purposes, and
credit to the account of the Dividend Disbursing Agent for Fund,
such amount as may be necessary to pay the amount per share payable
in cash on Fund Shares issued and outstanding on the record date
established by such Resolution.
<PAGE> 8
N. Shares of Fund Purchased by Fund
Whenever any Fund Shares are repurchased or redeemed by Fund, Fund
or its agent shall advise Custodian of the aggregate dollar amount
to be paid for such shares and shall confirm such advice in
writing. Upon receipt of such advice, Custodian shall charge such
aggregate dollar amount to the Account of Fund and either deposit
the same in the account maintained for the purpose of paying for
the repurchase or redemption of Fund Shares or deliver the same in
accordance with such advice.
Custodian shall not have any duty or responsibility to determine
that Fund Shares have been removed from the proper shareholder
account or accounts or that the proper number of such shares have
been cancelled and removed from the shareholder records.
O. Shares of Fund Purchased from Fund
Whenever Fund Shares are purchased from Fund, Fund will deposit or
cause to be deposited with Custodian the amount received for such
shares.
Custodian shall not have any duty or responsibility to determine
that Fund Shares purchased from Fund have been added to the proper
shareholder account or accounts or that the proper number of such
shares have been added to the shareholder records.
P. Proxies and Notices
Custodian will promptly deliver or mail or have delivered or mailed
to Fund all proxies properly signed, all notices of meetings, all
proxy statements and other notices, requests or announcements
affecting or relating to securities held by Custodian for Fund and
will, upon receipt of instructions, execute and deliver or cause
its nominee to execute and deliver or mail or have delivered or
mailed such proxies or other authorizations as may be required.
Except as provided by this Agreement or pursuant to instructions
hereafter received by Custodian, neither it nor its nominee will
exercise any power inherent in any such securities, including any
power to vote the same, or execute any proxy, power of attorney, or
other similar instrument voting any of such securities, or give any
consent, approval or waiver with respect thereto, or take any other
similar action.
Q. Disbursements
Custodian will pay or cause to be paid insofar as funds are
available for the purpose, bills, statements and other obligations
of Fund (including but not limited to obligations in connection
with the conversion, exchange or surrender of securities owned by
Fund, interest charges, dividend disbursements, taxes, management
fees, custodian fees, legal fees, auditors' fees, transfer agents'
fees, brokerage commissions, compensation to personnel, and other
operating expenses of Fund) pursuant to instructions of Fund
setting forth the name of the person to whom payment is to be made,
the amount of the payment, and the purpose of the payment.
R. Daily Statement of Accounts
Custodian will render to Fund as of the close of business on each
day but in no event later than 10:00 a.m. Central/Standard Time the
next business day, a detailed statement of the amounts received or
paid and of securities received or delivered for the account of
Fund during said day. Custodian will, from time to
<PAGE> 9
time, upon request by Fund, render a detailed statement of the
securities and monies held for Fund under this Agreement, and
Custodian will maintain such books and records as are necessary to
enable it to do so and will permit such persons as are authorized
by Fund including Fund's independent public accountants, access to
such records or confirmation of the contents of such records; and
if demanded, will permit federal and state regulatory agencies to
examine the securities, books and records.
Upon the written instructions of Fund or as demanded by federal or
state regulatory agencies, Custodian will instruct any subcustodian
to give such persons as are authorized by Fund including Fund's
independent public accountants, access to such records or
confirmation of the contents of such records; and if demanded, to
permit federal and state regulatory agencies to examine the books,
records and securities held by subcustodian
S. Appointment of Subcustodian
1. Notwithstanding any other provisions of this Agreement, all
or any of the monies or securities of Fund may be held in
Custodian's own custody or in the custody of one or more other
banks or trust companies selected by Custodian and
approved by the Fund including contracts if Custodian is not
completely responsible for the appointment of such bank or
trust company), which approval shall not be unreasonably
withheld. Any such subcustodian must have the qualifications
required for custodian under the Investment Company Act of
1940, as amended. The subcustodian may participate directly or
indirectly in the Depository Trust Company, Treasury/Federal
Reserve Book Entry System, Participant Trust Company (as such
entities are defined at 17 CFR Sec. 270.17f-4(b)), or other
depository approved by the Fund and with which Custodian has a
satisfactory direct or indirect contractual relationship.
Custodian will appoint UMBKC and UMBNY as subcustodians and
Custodian shall be responsible for UMBKC and UMBNY to the same
extent it is responsible to the Fund under Section 5 of this
Agreement. Custodian is not responsible for DTC, the
Treasury/Federal Reserve Book Entry System, and PTC except to
the extent such entities are responsible to Custodian. Upon
instruction of the Fund, Custodian shall be willing to
contract with such entities as Bank of New York (BONY), Morgan
and Guaranty Trust Company (MGTC), Chemical Bank (CB), and
Bankers Trust Company (BT) for variable rate securities, and
Custodian will be responsible to the Fund to the same extent
those entities are responsible to Custodian. The Fund shall be
entitled to review and approve Custodian's contracts with
BONY, MGTC, CB, and BT.
2. Notwithstanding any other provisions of this Agreement,
Fund's foreign securities (as defined in Rule 17f-5(c)(1)
under the Investment Company Act of 1940) and Fund's cash or
cash equivalents, in amounts reasonably necessary to effect
Fund's foreign securities transactions, may be held in the
custody of one or more banks or trust companies acting as
subcustodians, according to Section 3.S.l; and thereafter,
pursuant to a written contract or contracts as approved by
<PAGE> 10
Fund's governing Board, may be transferred to an account
maintained by such subcustodian with an eligible foreign
custodian, as defined in Rule 17f-5(c)(2), provided that any
such arrangement involving a foreign custodian shall be in
accordance with the provisions of Rule 17f-5 under the
Investment Company Act of 1940 as that Rule may be amended
from time to time. The Fund shall be provided the contract
with the domestic subcustodian who shall contract with the
eligible foreign subcustodians. The Custodian shall be
responsible for the monies and securities of Fund held by
eligible foreign subcustodians to the extent the domestic
subcustodian with which the Custodian contracts is responsible
to Custodian.
T. Accounts and Records
Custodian, with the direction and as interpreted by the Fund,
Fund's accountants and/or other tax advisors, will prepare and
maintain as complete, accurate and current all accounts and records
required to be maintained by Fund and under the general Rules and
Regulations under the Investment Company Act of 1940 ("Rules"), as
amended, as agreed upon between the parties and will preserve said
records in the manner and for the periods prescribed in said Rules,
or for such longer period as is agreed upon by the parties.
Custodian relies upon Fund to furnish, in writing, accurate and
timely information to complete Fund's records and perform daily
calculation of the Fund's net asset value, as provided in Section
3.W. below.
Custodian shall incur no liability and Fund shall indemnify and
hold harmless Custodian from and against any liability arising from
any failure of Fund to furnish such information in a timely and
accurate manner, even if Fund subsequently provides accurate but
untimely information. It shall be the responsibility of Fund to
furnish Custodian with the declaration, record and payment dates
and amounts of any dividends or income and any other special actions
required concerning each of its securities when such information is
not readily available from generally accepted securities industry
services or publications.
U. Accounts and Records Property of Fund
Custodian acknowledges that all of the accounts and records
maintained by Custodian pursuant to this Agreement are the property
of Fund, and will be made available to Fund for inspection or
reproduction within a reasonable period of time, upon demand.
Custodian will assist Fund's independent auditors, or upon approval
of Fund, or upon demand, any regulatory body having jurisdiction
over the Fund or Custodian, in any requested review of Fund's
accounts and records but shall be reimbursed for all expenses and
employee time invested in any such review outside of routine
and normal periodic reviews. Upon receipt from Fund of the
necessary information, Custodian will supply necessary data for
Fund's completion of any necessary tax returns, questionnaires,
periodic reports to Shareholders and such other reports and
information requests as Fund and Custodian shall agree upon from
<PAGE> 11
V. Adoption of Procedures
Custodian and Fund may from time to time adopt procedures as they
agree upon, and Custodian may conclusively assume that no procedure
approved by Fund, or directed by Fund, conflicts with or violates
any requirements of its prospectus, "Articles of Incorporation,"
Bylaws, or any rule or regulation of any regulatory body or
governmental agency. Fund will be responsible to notify Custodian
of any changes in statutes, regulations, rules or policies which
might necessitate changes in Custodian's responsibilities or
procedures.
W. Calculation of Net Asset Value
Custodian will calculate Fund's net asset value, in accordance with
Fund's prospectus, once daily. Custodian will prepare and maintain
a daily evaluation of securities for which market quotations are
available by the use of outside services normally used and
contracted for this purpose; all other securities will be evaluated
in accordance with Fund's instructions. Custodian will have no
responsibility for the accuracy of the prices quoted by these
outside services, for the information supplied by Fund, or for
acting upon the instructions of the Fund.
X. Overdrafts
If Custodian shall in its sole discretion advance funds to the
account of the Fund which results in an overdraft because the
monies held by Custodian on behalf of the Fund are insufficient to
pay the total amount payable upon a purchase of securities as
specified in Fund's instructions or for some other reason, the
amount of the overdraft shall be payable by the Fund to Custodian
upon demand and shall bear an interest rate determined by Custodian
and as so disclosed in the fee schedule from the date advanced
until the date of payment. Custodian shall have a lien on the
assets of the Fund in the amount of any outstanding overdraft.
Y. Compliance & Tax
The Custodian shall provide the reports, records, and information
described in Exhibit B.
4. INSTRUCTION.
A. The term "instruction", as used herein, means written or oral
instructions to Custodian from a designated representative of Fund.
Certified copies of resolutions of the Board of Trustees of Fund
naming one or more designated representatives to give instructions
in the name and on behalf of Fund, may be received and accepted from
time to time by Custodian as conclusive evidence of the authority of
any designated representative to act for Fund and may be considered
to be in full force and effect (and Custodian will be fully
protected in acting in reliance thereon) until receipt by Custodian
of notice to the contrary. Unless the resolution delegating
authority to any person to give instructions specifically requires
that the approval of anyone else will first have been obtained,
Custodian will be under no obligation to inquire into the right of
the person giving such instructions to do so. Notwithstanding any of
the foregoing provisions of this Section 4. no authorizations or
instructions received by Custodian from Fund, will be deemed to
authorize or permit any director,
<PAGE> 12
trustee, officer, employee, or agent of Fund to withdraw any of the
securities or similar investments of Fund upon the mere receipt
of such authorization or instructions from such director, trustee,
officer, employee or agent.
Notwithstanding any other provision of this Agreement, Custodian,
upon receipt (and acknowledgment if required at the discretion of
Custodian) of the instructions of a designated representative of
Fund will undertake to deliver for Fund's account monies, provided
such monies are on hand or available) in connection with Fund's
transactions and to wire transfer such monies to such broker,
dealer, subcustodian, bank or other agent specified in such
instructions by a designated representative of Fund.
B. No later than the next business day immediately following
each oral instruction, Fund will send Custodian written
confirmation of such oral instruction. At Custodian's sole
discretion, Custodian may record on tape, or otherwise, any oral
instruction whether given in person or via telephone, each such
recording identifying the parties, the date and the time of the
beginning and ending of such oral instruction.
5. LIMITATION OF LIABILITY OF CUSTODIAN.
A. Custodian shall hold harmless and indemnify Fund from and
against any loss or liability (including attorneys' fees) arising
out of Custodian's negligence or bad faith. Custodian shall not be
liable for consequential, special, or punitive damages. Custodian
may request and obtain the advice and opinion of counsel for Fund,
or of its own counsel with respect to questions or matters of law,
and it shall be without liability to Fund for any action taken or
omitted by it in good faith, in conformity with such advice or
opinion. If Custodian reasonably believes that it could not
lawfully act according to the instructions of the Fund or
the Fund's counsel, it may in its discretion, with prior notice to
the Fund, not act according to such instructions.
B. Fund shall hold harmless and indemnify Custodian from and
against any loss or liability (including attorneys' fees) in
connection with any matter not related to Custodian's negligence or
bad faith in performance of its duties hereunder.
C. Custodian may rely upon the advice of Fund and upon
statements of Fund's public accountants and other persons
representing the Fund believed by Custodian in good faith, to be
expert in matters upon which they are consulted, and Custodian shall
not be liable for any actions taken, in good faith, upon such
statements.
D. If Fund requires Custodian in any capacity to take, with
respect to any securities, any action which involves the payment of
money by it, or which in Custodian's opinion might make it or its
nominee liable for payment of monies or in any other way, Custodian,
upon notice to Fund given prior to such actions, shall be and be
kept indemnified by Fund in an amount and form satisfactory to
Custodian against any liability on account of such action.
E. Custodian shall be entitled to receive, and Fund agrees to
pay to Custodian, on demand, reimbursement for such cash
disbursements, costs and expenses as may be agreed upon from time to
time by Custodian and Fund.
<PAGE> 13
F. Custodian shall be protected in acting as custodian hereunder
upon any instructions, advice, notice, request, consent, certificate
or other instrument or paper reasonably appearing to it to be
genuine and to have been properly executed and shall, unless
otherwise specifically provided herein, be entitled to receive as
conclusive proof of any fact or matter required to be ascertained
from Fund hereunder, a certificate signed by the Fund's President,
or other officer specifically authorized for such purpose.
G. Without limiting the generality of the foregoing, Custodian
shall be under no duty or obligation to inquire into, and shall not
be liable for:
1. The validity of the issue of any securities purchased by or
for Fund, the legality of the purchase thereof or
evidence of ownership required by Fund to be received by
Custodian, or the propriety of the decision to purchase or
amount paid therefore;
2. The legality of the sale of any securities by or for Fund, or
the propriety of the amount for which the same are sold;
3. The legality of the issue or sale of any shares of the
Capital Stock of Fund, or the sufficiency of the amount
to be received therefore;
4. The legality of the repurchase or redemption of any Fund
Shares, or the propriety of the amount to be paid therefor; or
5. The legality of the declaration of any dividend by Fund, or
the legality of the issue of any Fund Shares in payment of
any stock dividend.
H. Custodian shall not be liable for, or considered to be
Custodian of, any money represented by any check, draft, wire
transfer, clearinghouse funds, uncollected funds, or instrument for
the payment of money received by it on behalf of Fund, until
Custodian actually receives such money, provided only that it shall
advise Fund promptly if it fails to receive any such money in the
ordinary course of business, and use its best efforts and cooperate
with Fund toward the end that such money shall be received.
I. To the extent not inconsistent with Sections 3.C. and 3.S.
herein, Custodian shall not be responsible for loss occasioned by
the acts, neglects, defaults or insolvency of any broker, bank,
trust company, or any other person with whom Custodian may deal in
the absence of negligence, or bad faith on the part of Custodian.
J. Notwithstanding anything herein to the contrary, Custodian
may, and with respect to any foreign subcustodian appointed under
Section 3.S.2. must, provide Fund for its approval, agreements with
banks or trust companies which will act as subcustodians for Fund
pursuant to Section 3.S of this Agreement.
6. COMPENSATION. Fund will pay to Custodian such compensation as is
stated in the Fee Schedule attached hereto as Exhibit C which may be
changed from time to time as agreed to in writing by Custodian and Fund.
Custodian may charge such compensation against monies held by it for the
account of Fund. Custodian will also be entitled, notwithstanding the
provisions of Sections 5.C. or 5.D. hereof, to charge against any monies
held by it for the account of Fund the amount of any loss, damage,
liability, advance, or expense for which it shall be entitled to
<PAGE> 14
reimbursement under the provisions of this Agreement, including fees or
expenses due to Custodian for other services provided to the Fund by the
Custodian.
7. TERMINATION. Either party to this Agreement may terminate the same by
notice in writing, delivered or mailed, postage prepaid, to the other
party hereto and received not less than ninety (90) days prior to the
date upon which such termination will take effect. Upon termination of
this Agreement, Fund will pay to Custodian such compensation for its
reimbursable disbursements, costs and expenses paid or incurred to such
date and Fund will use its best efforts to obtain a successor custodian.
Unless the holders of a majority of the outstanding shares of "Capital
Stock" of Fund vote to have the securities, funds and other properties
held under this Agreement delivered and paid over to some other person,
firm or corporation specified in the vote, having not less the two
million dollars ($2,000,000) aggregate capital, surplus and undivided
profits, as shown by its last published report, and meeting such other
qualifications for custodian as set forth in the Bylaws of Fund, the
Board of Trustees of Fund will, forthwith upon giving or receiving notice
of termination of this Agreement, appoint as successor custodian a bank
or trust company having such qualifications. Custodian will, upon
termination of this Agreement, deliver to the successor custodian so
specified or appointed, at Custodian's office, all securities then held
by Custodian hereunder, duly endorsed and in form for transfer, all funds
and other properties of Fund deposited with or held by Custodian
hereunder, or will cooperate in effecting changes in book-entries at the
Depository Trust Company or in the Treasury/Federal Reserve Book-Entry
System pursuant to 31 CFR Sec. 306.118. In the event no such vote has
been adopted by the stockholders of Fund and no written order designating
a successor custodian has been delivered to Custodian on or before the
date when such termination becomes effective, then Custodian will deliver
the securities, funds and properties of Fund to a bank or trust company
at the selection of Custodian and meeting the qualifications for
custodian, if any, set forth in the Bylaws of Fund and having not less
that two million dollars ($2,000,000) aggregate capital, surplus and
undivided profits, as shown by its last published report. Upon either
such delivery to a successor custodian, Custodian will have no further
obligations or liabilities under this Agreement. Thereafter such bank or
trust company will be the successor custodian under this Agreement and
will be entitled to reasonable compensation for its services. In the
event that no such successor custodian can be found, Fund will submit to
its shareholders, before permitting delivery of the cash and securities
owned by Fund to anyone other than a successor custodian, the question of
whether Fund will be liquidated or function without a custodian.
Notwithstanding the foregoing requirement as to delivery upon termination
of this Agreement, Custodian may make any other delivery of the
securities, funds and property of Fund which is permitted by the
Investment Company Act of 1940, Fund's Certificate of Incorporation and
Bylaws then in effect or apply to a court of competent jurisdiction for
the appointment of a successor custodian.
8. NOTICES. Notices, requests, instructions and other writings received by
Fund at 5901 Executive Drive, Lansing, MI 48911 or at such other address
as Fund may have designated to Custodian in writing, will be deemed to
have been properly given to Fund hereunder; and notices, requests,
instructions and other writings received by Custodian at its offices at
<PAGE> 15
127 West 10th Street, Kansas City, Missouri 64105, or to such other
address as it may have designated to Fund in writing, will be deemed to
have been properly given to Custodian hereunder.
9. MISCELLANEOUS.
A. This Agreement is executed and delivered in the State of
Missouri and shall be governed by the laws of said state.
B. All the terms and provisions of this Agreement shall be
binding upon, inure to the benefit of, and be enforceable by the
respective successor and assigns of the parties hereto.
C. No provisions of the Agreement may be amended or modified, in
any manner except by a written agreement properly authorized and
executed by both parties hereto.
D. The captions in this Agreement are included for convenience
of reference only, and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
E. This Agreement may be executed simultaneously in two or more
counterparts, each of which will be deemed an original but all of
which together will constitute one and the same instrument.
F. If any part, term or provision of this Agreement is by the
courts held to be illegal, in conflict with any law or otherwise
invalid, the remaining portion or portions shall be considered
severable and not be affected, and the rights and obligations of
the parties shall be construed and enforced as if the Agreement did
not contain the particular part, term or provision held to be
illegal or invalid.
G. Custodian will not release the identity of Fund to an issuer which
requests such information pursuant to the Shareholder
Communications Act of 1985 for the specific purpose of direct
communications between such issuer and Fund unless the Fund directs
the Custodian otherwise.
H. This Agreement may not be assigned by either party without
prior written consent of the other party.
I. If any provision of the Agreement, either in its present form
or as amended from time to time, limits, qualifies, or conflicts
with the Investment Company Act of 1940 and the rules and
regulations promulgated thereunder, such statutes, rules and
regulations shall be deemed to control and supersede such provision
without nullifying or terminating the remainder of the provisions of
this Agreement.
10. Termination Assistance. Commencing upon any notice of termination or
expiration of this Agreement, IFTC shall provide to the Company or its
designee termination assistance as defined below in order to allow the
services provided hereunder to continue without interruption or adverse
effect and to facilitate the orderly transfer of responsibility for such
services to the Company or its designee. If and to the extent that such
assistance is provided after the date the termination is to be effective,
the company will pay for such assistance at the then-prevailing rate
under this Agreement. The termination assistance to be provided to the
Company shall include the following:
A. Continuing to perform, for a period of not more than 90 days
following the date the termination is to be effective, any or all of
the services then being performed by IFTC.
<PAGE> 16
B. Developing, with the assistance of the Company, a plan for the
transition of operations from IFTC to the Company or its designee.
C. Prior to providing any of the foregoing termination
assistance to the Company or its designee, IFTC shall be entitled to
receive from such designee, in a form and substance acceptable to
IFTC, written assurances that (i) such designee will maintain at all
times the confidentiality of any IFTC proprietary information,
software or materials required to be disclosed or provided to, or
learned by, such designee in connection with the transaction of
duties to Company or designee therewith.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective duly authorized officers.
INVESTORS FIDUCIARY TRUST COMPANY
By: /s/
Title: Executive Vice President
JACKSON NATIONAL CAPITAL MANAGEMENT FUNDS
By: /s/ Larry C. Jordan
Title: Treasuer
<PAGE> 17
EXHIBIT A
IFTC AVAILABILITY SCHEDULE BY TRANSACTION TYPE
<TABLE>
<CAPTION>
TRANSACTION DTC PHYSICAL FED
TYPE CR DATE FDS TYPE CR DATE FDS TYPE CR DATE FDS TYPE
<S> <C> <C> <C> <C> <C> <C>
Calls Puts As Received C or F* As Received C or F*
Maturities As Received C or F* Mat. Date C or F* Mat. Date F
Tender Reorgs. As Received C As Received C N/A
Dividends Paydate C Paydate C N/A
Floating Paydate C Paydate C N/A
Rate Int.
Floating N/A As Rate C N/A
Rate Int. Received
(No Rate)
Mtg. Backed Paydate C Paydate +1 C Paydate F
P&I Bus. Day
Fixed Rate Paydate C Paydate C Paydate F
Int .
Euroclear N/A C Paydate C
</TABLE>
Legend
C = Clearinghouse Funds
F = Fed Funds
N/A = Not Applicable
*Availability based on how received.
<PAGE> 18
Exhibit B
1. Notify Fund of inconsistencies between securities purchased and
investment restrictions recited in the prospectus, the diversification
requirements of the Investment Company Act of 1940, as amended, and the
Internal Revenue Code of 1986, as amended; and
2. Prepare federal tax returns for review by the Fund; and
3. Notify the Fund when it appears it has not met the requirements of
Section 851(b)(2) or Section 851(b)(3)of the Internal Revenue Code of
1986, as amended; and
4. Assist in monitoring Investment Company Act of 1940, as amended, Section
12(d)(3) upon the instructions of the Fund; and
5. Maintain financial records pursuant to Investment Company Act of 1940, as
amended, Sections 31a-1(a) and 31a-1(b).
<PAGE> 19
INVESTORS FIDUCIARY TRUST COMPANY
JACKSON NATIONAL CAPITAL MANAGEMENT FUNDS
FEE SCHEDULE
I. TRANSFER AGENCY
A. Base Fee
There is a monthly base fee of $1,500 per fund/portfolio. (This is
not included in the monthly minimum fee discussed in I.B. below.)
B. Minimum Fee
There is a monthly minimum fee of $2,500 per fund/portfolio. The
monthly minimum fee supersedes items listed in I.C. below provided
the total applicable charges based on I.C. do not exceed the monthly
minimum.
C. Account Maintenance and Processing Fees
Open Accounts:
Money Market and Daily Dividend Funds - $17.25 per account per year
Monthly Dividend Funds - $16.25 per account per year
Quarterly Dividend and Equity Funds - $14.25 per account per year
Closed Accounts - $2.65 per account per year
Omnibus Accounts - $2.50 per transaction
New Account Set Up - $2.50 per account
Financial Transactions - $1.50 per transaction
D. Federal Funds Wire
There is a $6.00 fee for each federal funds wire received or
delivered. ACH transactions are provided at no additional cost.
E. Miscellaneous
Fiduciary Trustee Fees:
IRAs/SEPs - $12.00 per account per year
Qualified Plans - $25.00 per social security number per plan
Optional Services
A. Sales Reporting - $250 per month/per applicable portfolio
B. NSCC - $100 per month/per applicable portfolio
C. INVESTOR (linking all individual portfolios under a
single investor hierarchy) - $1.20 per account (production is
an out-of-pocket expense)
Page 1 of 4
<PAGE> 20
Jackson National Capital Management Funds
Proposed Fee Schedule (Continued)
D. 12b-1 processing will be charged at a rate of $0.30
per account per payment cycle with a $0.60 per year minimum.
E. Checkwriting Privileges - $0.35 per check clearing
F. Deferred Contingent Sales Feature - $3.00 per account per year
G. Dealer Maintenance - $2.50 per transaction
II. PORTFOLIO ACCOUNTING
A. Monthly Base Fee Per Portfolio
$500 (not included in minimum monthly asset fee discussed in II.B.
below.)
B. Minimum Monthly Asset Fee
There is a monthly minimum fee of $3,000 per fund/portfolio. The
monthly minimum fee per portfolio does not apply to any portfolio if
the asset based fee discussed in II.C. below produces greater
revenue than the aggregate minimum.
C. Asset Based Fee on a Total Relationship Basis
6/100 of 1% (6 basis points) on the first $150 million in assets
4/100 of 1% (4 basis points) on the next $150 million in assets
2/100 of 1% (2 basis points) on the next $200 million is assets
1/100 of 1% (1 basis point) on all assets in excess of $500 million
D. Foreign Securities Premium on Month-End Foreign Assets
There is a foreign securities premium of 2/100 of 1% (2 basis
points) in addition to either the asset based fees (II.C. above), or
the minimum monthly asset fee (II.B. above).
III. COMPLIANCE
$30 per incurred hour
Monitoring of internal revenue code section 851 diversification, 30%
income and 90% income tests Initial preparation of:
1. Federal tax return.
2. Book tax difference schedules for wash sales.
3. Selected filing such as semi-annual and annual reports, 24(f)(2)
notices and Form N-SAR.
This list of services can be expanded based upon additional
responsibilities and related fees as agreed to between parties. Travel
expenses incurred by IFTC on behalf of supporting the above services will
be billed to the fund as an out-of-pocket expense.
Page 2 of 4
<PAGE> 21
Jackson National Capital Management Funds
Proposed Fee Schedule (Continued)
IV. SECURITY CUSTODY
A. Domestic Securities
Asset-Based Fee on a total relationship basis:
2/100 of 1% (2 basis points) on the first $250 million is assets
1.5/100 of 1% (1.5 basis points) on the next $250 million is assets
1/100 of 1% (1 basis point) on all assets in excess of $500 million
Transaction Fee, per transaction:
Physical Delivery - $22.00
Depository Eligible - $12.00
GNMA Paydown - $12.00
PTC - $12.00
B. Foreign Securities
Asset-Based Fee on a total relationship basis:
16/100 of 1% (16 basis points) on all assets held in foreign
securities
6/100 of 1% (6 basis points) on all assets held in
Euroclear/CEDEL/First Chicago Clearing
Investments in emerging markets will be priced at the time of
investment and should approximate 50 basis points.
Transaction Fee, per transaction:
Euroclear/CEDEL/First Chicago Clearing - $45.00
Emerging Markets - $90.00- $120.00
C. Balance Credits
IFTC will offset fees with balance credits calculated at 75% of the
bank credit rate (see below) applied to average custody collected
cash balances for the month. Balance credits will be applied on a
fund by fund basis and can be used to offset custody, portfolio
accounting, and transfer agency fees. Any credits in excess of fees
will be carried forward from month to month through the end of the
calendar year. For calculation purposes, IFTC uses an actual/actual
basis.
Note: The bank credit rate is the equivalent to the lesser of:
The average 91-day Treasury Bill discount rate for the month
or
The average Federal Funds rate for the month less 50 basis
points.
D. Overdraft Charges
Fund overdrafts will be calculated at the Prime rate (as published
in the Wall Street Journal) and charged on a daily basis.
Page 3 of 4
<PAGE> 22
Jackson National Capital Management Funds
Proposed Fee Schedule (Continued)
V. NOTES TO THE ABOVE FEE SCHEDULE
A. Annual maintenance fees are payable monthly at 1/12th of the annual
stated rate.
B. Asset based fees will be billed monthly at 1/12th of the annual
stated rate based on monthly average net assets, except for the foreign
securities premium which will be billed on month-end market value at 1/12th
of the annual stated rate.
C. The above schedule does not include out-of-pocket expenses that
would be incurred by IFTC on the fund's behalf. Examples of out-of-pocket
expenses include but are not limited to pricing services, forms, postage,
mailing services, magnetic tapes, printing, proxy processing,
microfilm/microfiche, FDIC insurance, foreign registration and script
fees, back-up recovery for mainframe services by third parties, etc.
Out-of-pocket expenses incurred by IFTC in planning and executing the
conversion will be passed on to the fund. IFTC bills out-of-pocket expenses
separately from service fees.
D. The fees stated above are exclusive of terminal equipment
required in the client's location(s) and communication line costs.
E. Any fees or out-of-pocket expenses not paid within 30 days of
the date of the original invoice will be charged a late payment fee
of 1% per month until payment of the fees are received by IFTC.
F. The above fee schedule is predicated on the fact that IFTC be
allowed a minimum of 90 calendar days between notification of hiring
and when the selection is effective, and that IFTC receive adequate
cooperation from the client during the implementation period.
G. The balance credits listed in IV.C. will apply for each fund in
which the applicable fees for transfer agency and portfolio
accounting services exceed the minimum fees, respectively.
H. The above fee schedule commences on the effective date of the
service agreement between IFTC and the client and is guaranteed
through September 9, 1994. The minimum fees for transfer agency and
portfolio accounting services will December 31, 1992.
/s/ /s/ Larry C. Jordan, Treasurer
Investors Fiduciary Trust Company Jackson National Capital Management Funds
September 10, 1992 September 9, 1992
Date Date
Page 4 of 4
<PAGE> 1
EX-99.B8-FEESCH
INVESTORS FIDUCIARY TRUST COMPANY
FEE SCHEDULE
JACKSON NATIONAL CAPITAL MANAGEMENT FUNDS
I. TRANSFER AGENCY
A. Base Fee
September 9, 1994 through December 31, 1994 - $1,500 per
portfolio/cusip per month
January 1, 1995 through December 31, 1995 - $1,750 per
portfolio/cusip per month
Note: Includes TA2000 System and Corporate Support; base fee is
excluded from monthly minimum fee.
B. Minimum Fee
$3,000 per portfolio/cusip per month
Note: Minimum supersedes items outlined in I.C. provided the total
applicable charges per portfolio included in I.C. do not exceed
the minimum.
C. Account Maintenance and Processing Fees
Open Accounts:
Daily Dividend Portfolios - $19.25 per account per year
Monthly Dividend Portfolios - $17.25 per account per year
Quarterly (or less frequent) Dividend Portfolios - $14.25
per account year
Closed Accounts - $2.95 per account per year
<PAGE> 2
INVESTORS FIDUCIARY TRUST COMPANY
FEE SCHEDULE
JACKSON NATIONAL CAPITAL MANAGEMENT FUNDS
PAGE 2 OF 4
IFTC Processed Transaction Fees:
New Account Set Up - $3.50
NSCC New Account Set Up - $1.50
Manual Financial Transactions - $1.60
Maintenance Transactions - $1.30
Research Items (non-AWD) - $2.65
Correspondence - $2.65
Shareholder Related Calls - $2.10
Confirmed Orders/Wire Orders/Omnibus Account
Transactions - $2.65
Checkwriting Transactions (including signature
verification) - $.035
D. Federal Fund Wires
Federal Fund Wires received or delivered - $6.00
E. Shareowner Charges
Fiduciary Trustee Fees:
IRAs/SEPs - $12 per account per year
Qualified Plans - $25 per social security number per plan
<PAGE> 3
INVESTOR FIDUCIARY TRUST COMPANY
FEE SCHEDULE
JACKSON NATIONAL CAPITAL MANAGEMENT FEES
PAGE 3 OF 4
F. Optional Services
Asset Allocation - $2.50 per nucleus account per year
Asset Reallocation - $.30 per nucleus account per year
Dealer Maintenance - $2.50 per transaction
Front End Load Fund - $1.45 per account per year
Contingent Deferred Sales Charge/Sharelot Accounting - $3.00 per
account per year
12b- 1 Processing - $0.30 per open and closed account per cycle
($.90 minimum per year)
Fulfillment Calls - $2.50
Sales and Management Information System (SAMIS):
Mainframe Hardcopy Reporting - $265 per month per applicable
portfolio
PC Based Remote SAMIS - $1,200 per month for the relationship
Investor Facility - $1.20 per open account per year
Average Cost System - $5,000 per year of history converted
Mainframe Programming:
Dedicated Programmer - $85,000 per year
Mainframe Programmer - $85,000 per year
Client Services Technical Support - $70,000 per year
On-Request:
Mainframe Programmer - $65 per hour
Client Services Technical Support - $55 per hour
*Business Analysis:
Senior Staff Support - $55 per hour
Staff Support - $35 per hour
Clerical Support - $22 per hour
*Audio Response System - see Exhibit A
*NSCC - see Exhibit B
Conversion Costs:
Out of pocket expenses including costs such as travel and
accommodations, programming, training, equipment installation, etc.
Escheatment Costs - as incurred
<PAGE> 4
INVESTORS FIDUCIARY TRUST COMPANY
FEE SCHEDULE
JACKSON NATIONAL CAPITAL MANAGEMENT FUNDS
PAGE 4 OF 4
NOTES TO THE ABOVE FEE SCHEDULE
A. The above schedule does not include out-of-pocket expenses that would be
incurred by IFTC on the Fund's behalf. Examples of out-of-pocket expenses
include but are not limited to forms, postage, mailing services, telephone
line and long distance charges, disaster recover, magnetic tapes,
printing, ACH bank charges, NSCC charges, proxy processing,
microfilm/microfiche, etc. IFTC bills out-of-pocket expenses, separately
from service fees on a monthly basis.
B. The fees stated above are exclusive of terminal equipment required at the
client's location(s), communication line costs and all AWD/IWS licensing
and hardware costs.
C. IFTC bills service fees monthly. Any fees or out-of-pocket expenses not
paid within 30 days of the date of the original invoice will be charges a
late payment fee of 1% per month until payment of the fees are received by
IFTC.
D. These fees, except for those indicated by an "*", are guaranteed through
December 1995, subject to an annual increase in an amount not less than
the annual percentage change in the Consumer Price Index (CPI) of the
Kansas City Metropolitan Area. All changes to the fee schedule will be
communicated in writing at least 60 days prior to their effective date.
Those items which have been marked by an "*" are established by other
entities and therefore are subject to change with a 60 day notice and
cannot be guaranteed for a one year period.
Fees Accepted By:
/s/ /s/ Larry C. Jordan
Investors Fiduciary Trust Company Jackson National Capital Management
08-16-94 08-17-94
Date Date
<PAGE> 1
EX-99.B9-AGENCY
AGENCY AGREEMENT
THIS AGREEMENT made the 10th day of September 1992, by and between JACKSON
NATIONAL CAPITAL MANAGEMENT FUNDS, a Massachusetts business trust, having its
principal place of business at 5901 Executive Drive, Lansing, Michigan 48911
("Fund"), and INVESTORS FIDUCIARY TRUST COMPANY, a state chartered trust
company organized and existing under the laws of the State of Missouri, having
its principal place of business at 127 West 10th Street, Kansas City, Missouri
64105 ("IFTC"):
WITNESSETH:
WHEREAS, Fund desires to appoint IFTC as Transfer Agent and Dividend
Disbursing Agent, and IFTC desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
1. Documents to be Filed with Appointment.
In connection with the appointment of IFTC as Transfer Agent and
Dividend Disbursing Agent for Fund, there will be filed with IFTC
the following documents:
A. A certified copy of the resolutions of the
Board of Trustees of Fund appointing IFTC as Transfer Agent
and Dividend Disbursing Agent, approving the form of this
Agreement, and designating certain persons to give
instructions and requests on behalf of Fund;
B. A certified copy of the Articles of
Incorporation of Fund and all amendments thereto;
C. A certified copy of the Bylaws of Fund;
D. Copies of Registration Statements and
amendments thereto, filed with the Securities and Exchange
Commission.
2. Certain Representations and Warranties of IFTC.
IFTC represents and warrants to Fund that:
A. It is a trust company duly organized and existing and in good
standing under the laws of Missouri.
B. It is duly qualified to carry on its business in the State of
Missouri.
C. It is empowered under applicable laws and by its Articles of
Incorporation and bylaws to enter into and perform the
services contemplated in this Agreement.
D. It is registered as a transfer agent to the extent required
under the Securities Exchange Act of 1934.
E. All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.
F. It has and will continue to have and maintain the necessary
facilities, equipment and personnel to perform its duties and
obligations under this Agreement in a timely and professional
manner.
3. Certain Representations and Warranties of Fund.
Fund represents and warrants to IFTC that:
A. It is a Massachusetts business trust duly organized a and
existing and in good standing under the laws of the
Commonwealth of Massachusetts.
B. It is an open-end diversified management investment company
registered under the Investment Company Act of 1940, as
amended.
C. A registration statement under the Securities Act of 1933 has
been filed and will be effective with respect to all shares
of Fund being offered for sale.
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D. All requisite steps have been or will be taken to register
Fund's shares for sale in all applicable states.
E. Fund is empowered under applicable laws and by its charter
and bylaws to enter into and perform this Agreement.
4. Scope of Appointment.
A. Subject to the conditions set forth in this Agreement, Fund
hereby employs and appoints IFTC as Transfer Agent and
Dividend Disbursing Agent effective the day of , 199 .
B. IFTC hereby accepts such employment and appointment and
agrees that it will act as Fund's Transfer Agent and
Dividend Disbursing Agent. IFTC agrees that it will also act
as agent in connection with Fund's periodic withdrawal
payment accounts and other open accounts or similar plans for
shareholders, if any.
C. IFTC agrees to provide the necessary facilities, equipment and
personnel to perform its duties and obligations hereunder in
accordance with industry practice.
D. Fund agrees to use its best efforts to deliver to IFTC in
Kansas City, Missouri, as soon as they are available, all of
its shareholder account records.
E. Subject to the provisions of Sections 19. and 20. hereof,
IFTC agrees that it will perform all of the usual and
ordinary services of Transfer Agent and Dividend Disbursing
Agent and as Agent for the various shareholder accounts,
including, without limitation, the following: maintaining all
shareholder accounts, preparing shareholder meeting lists,
mailing proxies, receiving and tabulating proxies, mailing
shareholder reports and prospectuses, withholding taxes on
nonresident alien and foreign corporation accounts, for
pension and deferred income, backup withholding or other
instances agreed upon by the parties, preparing and mailing
checks for disbursement of income dividends and capital gains
distributions, preparing and filing U.S. Treasury Department
Form 1099 for all shareholders, preparing and mailing
confirmation forms to shareholders and dealers with respect
to all purchases and redemptions of Fund shares and other
transactions in shareholder accounts for which confirmations
are required, recording reinvestments of dividends and
distributions in Fund shares, cooperating with broker-dealers
and financial intermediaries who represent shareholders of
the Fund, and shareholder servicing, including, but not
limited to responding to telephone and written shareholder
inquiries.
5. Limit of Authority.
Unless otherwise expressly limited by the resolution of
appointment or by subsequent action by the Fund, the appointment
of IFTC as Transfer Agent will be construed to cover the full
amount of authorized stock of the class or classes for which IFTC
is appointed as the same will, from time to time, be constituted,
and any subsequent increases in such authorized amount. In case of
such increase Fund will file with IFTC:
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A. If the appointment of IFTC was theretofore expressly limited,
a certified copy of a resolution of the Board of Trustee of
Fund increasing the authority of IFTC;
B. A certified copy of the amendment to the Articles of
Incorporation of Fund authorizing the increase of stock;
C. A certified copy of the order or consent of each governmental
or regulatory authority required by law to consent to the
issuance of the increased stock, and an opinion of counsel
that the order or consent of no other governmental or
regulatory authority is required;
D. Opinion of counsel for Fund stating:
(1) The status of the additional shares of stock of Fund
under the Securities Act of 1933, as amended, and any
other applicable federal or state statute; and
(2) That the additional shares are, or when issued will be,
validly issued, fully paid and nonassessable.
6. Compensation and Expenses.
A. In consideration for its services hereunder as Transfer Agent
and Dividend Disbursing Agent, Fund will pay to IFTC
compensation as set forth in the attached Exhibit A for all
services rendered as Agent, and also, all its reasonable
out-of-pocket expenses including but not limited to those
described in the fee schedule, charges, counsel fees approved
by the Fund, and other disbursements (Compensation and
Expenses) incurred in connection with the agency. Such
initial Compensation and Expenses are set forth in Exhibit A
attached hereto. If the Fund has not paid such Compensation
and Expenses to IFTC within a reasonable time, IFTC may
charge against any monies held under this Agreement, the
amount of any Compensation and/or Expenses for which it shall
be entitled to reimbursement under this Agreement. IFTC will
provide to Fund no less often than monthly a detailed
accounting of all such expenses on behalf of the Fund.
7. Operation of IFTC System.
A. In connection with the performance of its services under this
Agreement, IFTC is responsible for such items as:
(1) Accurately entering orders and instructions received by IFTC
from dealers, shareholders, Fund or its principal underwriter;
(2) Providing shareholder lists, shareholder account
verifications, confirmations and other shareholder account
information from IFTC's records which accurately reflects the
information contained in such records or data;
(3) The accurate and timely issuance of dividend and distribution
checks in accordance with instructions received from Fund;
(4) The accuracy of redemption transactions and payments in
accordance with redemption instructions received from
dealers, shareholders or Fund;
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(5) The deposit daily in Fund's appropriate special bank account
of all checks and payments received from dealers or
shareholders for investment in shares;
(6) The requiring of proper forms of instructions, signatures and
signature guarantees and any necessary documents supporting
the legality of transfers, redemptions and other shareholder
account transactions, all in conformance with IFTC's present
procedures with such changes as may be required or approved
by Fund; and
(7) The maintenance of a disaster recovery plan consistent with
industry standards, including a current duplicate set of
Fund's essential records at a secure distant location, in a
form available and usable forthwith in the event of any such
breakdown or a disaster which may disrupt its main operation.
8. Indemnification.
A. IFTC will not be responsible for, and Fund will hold harmless
and indemnify IFTC from and against any loss by or liability
to the Fund or a third party, including attorneys' fees, in
connection with any claim or suit asserting any such
liability arising out of or attributable to actions taken or
omitted by IFTC pursuant to this Agreement, unless IFTC has
acted negligently or in bad faith. The matters covered by
this indemnification include but are not limited to those of
Section 14. hereof. Fund will be responsible for, and will
have the right to conduct or control the defense of any
litigation asserting liability against which IFTC is
indemnified hereunder. IFTC will not be under any obligation
to prosecute or defend any action or suit in respect of the
agency relationship hereunder, which, in its opinion, may
involve it in expense or liability, unless Fund will, as
often as requested, furnish IFTC with reasonable,
satisfactory security and indemnity against such expense or
liability.
B. IFTC will hold harmless and indemnify Fund from and against
any loss or liability, including attorneys' fees, arising out
of IFTC's negligence or bad faith in performing its duties
under the Agreement.
9. Certain Covenants of IFTC and Fund.
A. All requisite steps will be taken by Fund from time to time
when and as necessary to register the Fund's shares for sale
in all states in which Fund's shares shall at the time be
offered for sale and require registration. If at any
time Fund will receive notice of any stop order or other
proceeding in any such state affecting such registration or
the sale of Fund's shares, or of any stop order or other
proceeding under the federal securities laws affecting the
sale of Fund's shares, Fund will give prompt notice thereof
to IFTC.
<PAGE> 5
B. IFTC agrees to maintain adequate insurance and at this time
is insured as described on Exhibit B. IFTC agrees to notify
the Fund if such insurance is substantially reduced.
C. To the extent required by Section 31 of the Investment
Company Act of 1940 as amended and Rules thereunder, IFTC
agrees that all records maintained by IFTC relating to the
services to be performed by IFTC under this Agreement are the
property of Fund and will be preserved and will be
surrendered promptly to Fund on request.
D. IFTC agrees to furnish Fund semiannual reports of its
financial condition, consisting of a balance sheet, earnings
statement and any other financial information reasonably
requested by Fund. The annual financial statements will be
certified by IFTC's certified public accountants.
E. IFTC represents and agrees that it will use its best efforts
to keep current on the trends of the investment company
industry relating to shareholder services and will use its
best efforts to continue to modernize and improve.
F. IFTC will permit Fund and its authorized representatives to
make periodic inspections of its operations as such would
involve the Fund at reasonable times during business hours.
10. Death, Resignation or Removal of Signing Officer.
Fund will file promptly with IFTC written notice of any change
in the officers authorized to sign written instructions or
requests, together with two signature cards bearing the specimen
signature of each newly authorized officer.
11. Future Amendments of Charter and Bylaws.
Fund will promptly file with IFTC copies of all material
amendments to its Articles of Incorporation or bylaws made after
the date of this Agreement.
12. Instructions, Opinion of Counsel and Signatures.
At any time IFTC may apply to any person authorized by the Fund to
give instructions to IFTC, and may with the approval of a Fund
officer consult with legal counsel for Fund or its own legal
counsel at the expense of Fund, with respect to any matter arising
in connection with the agency and it will not be liable for any
action taken or omitted by it in good faith in reliance upon such
instructions or upon the opinion of such counsel. IFTC will be
protected in acting upon any paper or document reasonably believed
by it to be genuine and to have been signed by the proper person
or persons and will not be held to have notice of any change of
authority of any person, until receipt of written notice thereof
from Fund.
13. Papers Subject to Approval of Counsel.
The acceptance by IFTC, of its appointment as Transfer Agent and
Dividend Disbursing Agent and all documents filed in connection
with such appointment and thereafter in connection with the
agencies, will be subject to the approval of legal counsel for
IFTC (which approval will not be unreasonably withheld and which
approval will be presumed after 15 days after receipt of such
documents by IFTC).
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14. Certification of Documents.
The required copy of the Articles of Incorporation of Fund and
copies of all amendments thereto will be certified by the
Secretary of State (or other appropriate official) of the State of
Incorporation, and if such Articles of Incorporation and
amendments are required by law to be also filed with a county,
city or other officer of official body, a certificate of such
filing will appear on the certified copy submitted to IFTC. The
copy of the Bylaws and copies of all amendments thereto, and
copies of resolutions of the Board of Trustees of Fund, will be
certified by the Secretary or an Assistant Secretary of Fund under
the Fund's seal.
15. Records.
IFTC will maintain customary records in connection with its
agency, and particularly will maintain those records required to
be maintained pursuant to subparagraph (2) (iv) of paragraph (b)
of Rule 31a-1 under the Investment Company Act of 1940, if any.
16. Disposition of Books, Records and Cancelled Certificates.
IFTC will send periodically to Fund, or to where designated by the
Secretary or an Assistant Secretary of Fund, all books, documents,
and all records no longer deemed needed for current purposes, upon
the understanding that such books, documents, and records will
not be destroyed by Fund without the consent of IFTC (which
consent will not be unreasonably withheld), but will be safely
stored for possible future reference.
17. Provisions Relating to IFTC as Transfer Agent.
A. Shares of stock will be transferred or redeemed and funds
remitted therefor, upon receipt of such documents as IFTC may
deem necessary to evidence that authority of the person
making the transfer or redemption, and bearing satisfactory
evidence of the payment of any applicable stock transfer
taxes. IFTC reserves the right to refuse to transfer shares
until it has received reasonable assurance acceptable to it
that the endorsement or signature is valid and genuine, and
for that purpose it may require a signature guarantee in
accordance with applicable securities law and the Fund's
direction. IFTC also reserves the right to refuse to transfer
or redeem shares until it has received reasonable assurance
that the requested transfer or redemption is legally
authorized, and it will incur no liability for the refusal in
good faith to make transfers or redemptions which, in its
judgment, are improper or unauthorized. IFTC may, in
effecting transfers or redemptions, rely upon Simplification
Acts or other statutes which protect it and Fund in not
requiring complete fiduciary documentation. In cases in which
IFTC is not directed or otherwise required to maintain the
consolidated records of shareholder's accounts, IFTC will not
be liable for any loss which may arise by reason of not
having such records.
B. IFTC will supply a shareholder's list to Fund for its annual
meeting upon receiving a request from an
<PAGE> 7
officer of Fund. It will also supply lists at such other
times as may be requested by an officer of Fund.
C. Upon receipt of written instructions of an officer of Fund,
IFTC will address and mail notices to shareholders.
D. In case of any request or demand for the inspection of the
stock books of Fund or any other books in the possession of
IFTC, IFTC will endeavor to notify Fund and to secure
instructions as to permitting or refusing such
inspection. IFTC reserves the right, however, to exhibit the
stock books or other books to any person when it is advised
by its counsel that it may be held responsible for the
failure to exhibit the stock books or other books to such
person.
18. Provisions Relating to Dividend Disbursing Agency.
A. IFTC will, at the expense of Fund, provide a special form of
check containing the imprint of any device or other matter
desired by Fund. Said checks must, however, be of a form and
size convenient for use by IFTC.
B. If Fund desires to include additional printed matter,
financial statements, etc., with the dividend checks, the
same will be furnished to IFTC within a reasonable time prior
to the date of mailing of the dividend checks, at the expense
of Fund.
C. If Fund desires its distributions mailed in any special form
of envelopes, sufficient supply of the same will be furnished
to IFTC but the size and form of said envelopes will be
subject to the approval of IFTC. If stamped envelopes are
used, they must be furnished by Fund; or if postage stamps
are to be affixed to the envelopes, the stamps or the cash
necessary for such stamps must be furnished by Fund.
D. IFTC will maintain one or more deposit accounts as Agent for
Fund at banks or trust companies approved by the Fund (which
approval shall not be unreasonably withheld), into which the
funds for payment of dividends, distributions, redemptions or
other disbursements provided for hereunder will be deposited,
and against which checks will be drawn.
E. IFTC is authorized and directed to stop payment of checks
theretofore issued hereunder, but not presented for payment,
when the payees thereof allege either that they have not
received the checks or that such checks have been
mislaid, lost, stolen, destroyed or through no fault of
theirs, are otherwise beyond their control, and cannot be
produced by them for presentation and collection, and, to
issue and deliver duplicate checks in replacement thereof.
19. Assumption of Duties By the Fund.
The Fund may assume certain duties and responsibilities of IFTC or
those usual and ordinary services of Transfer Agent and Dividend
Disbursement Agent as those terms are referred to in Section 4.E.
of this Agreement including but not limited to accepting
shareholder instructions and transmitting orders based on such
instructions to IFTC, preparing and mailing confirmations,
obtaining certified TIN numbers, and disbursing monies of the
Fund. To the extent the Fund or its agent or affiliate assumes
such duties and
<PAGE> 8
responsibilities, IFTC shall be relieved from all responsibility
and liability therefore.
20. Termination of Agreement.
A. This Agreement may be terminated by either party upon
receipt of ninety (90) days written notice from the other
party.
B. Fund, in addition to any other rights and remedies, shall
have the right to terminate this Agreement forthwith upon the
occurrence at any time of any of the following events:
(1) Any interruption or cessation of operations by IFTC or
its assigns which materially interferes with the
business operation of Fund;
(2) The bankruptcy of IFTC or its assigns or the
appointment of a receiver for IFTC or its assigns;
(3) Any merger, consolidation or sale of substantially all
the assets of IFTC or its assigns;
(4) The acquisition of a controlling interest in IFTC or
its assigns, by any broker, dealer, investment adviser
or investment company except as may presently exist; or
(5) Failure by IFTC or its assigns to perform its duties
in accordance with the Agreement.
(6) In the event of termination, Fund will promptly pay
IFTC all amounts due to IFTC hereunder.
21. Assignment.
A. Neither this Agreement nor any rights or obligations hereunder
may be assigned by IFTC without the written consent of Fund;
provided, however, no assignment will relieve IFTC of any of
its obligations hereunder. IFTC may, however, employ agents to
assist it in performing its duties hereunder.
B. This Agreement will inure to the benefit of and be binding
upon the parties and their respective successors and assigns.
22. Confidentiality.
A. IFTC agrees that, except as provided in the last sentence of
Section l9.J hereof, or as otherwise required by law, IFTC
will keep confidential all records of and information in
its possession relating to Fund or its shareholders or
shareholder accounts and will not disclose the same to any
person except at the request or with the consent of Fund.
B. Fund agrees to keep confidential all financial statements and
other financial records (other than statements and records
relating solely to Fund's business dealings with IFTC) and
all manuals, systems and other technical information and
data, not publicly disclosed, relating to IFTC's operations
and programs furnished to it by IFTC pursuant to this
Agreement and will not disclose the same to any person except
at the request or with the consent of IFTC.
C. The Fund acknowledges that IFTC and DST Systems, Inc. (DST)
have proprietary rights in and to the computerized data
processing recordkeeping system used by IFTC to perform
services hereunder including, but not limited to the
maintenance of shareholder accounts and records, processing
of related information and
<PAGE> 9
generation of output (the TA2000T(TM) System), including,
without limitation any changes or modifications of the
TA2000(TM) System and any other IFTC or DST programs, data
bases, supporting documentation, or procedures
("collectively" IFTC Protected Information") which the Fund's
access to the TA2000T(TM) System or computer hardware or
software may
permit the Fund or its employees or agents to become aware of or
to access and that the IFTC Protected Information constitutes
confidential material and trade secrets of IFTC. The Fund agrees
to maintain the confidentiality of the IFTC Protected Information.
The Fund acknowledges that any unauthorized use, misuse,
disclosure or taking of IFTC Protected Information, which is
confidential as provided by law, or which is a trade secret,
residing or existing internal or external to a computer, computer
system, or computer network, or the knowing and unauthorized
accessing or causing to be accessed of any computer, computer
system, or computer network, may be subject to civil liabilities
and criminal penalties under applicable state law. The Fund will
advise all of its employees and agents who have access to any IFTC
Protected Information or to any computer equipment capable of
accessing IFTC or DST hardware or software of the foregoing. IFTC
and DST are intended to be, and shall be, third party
beneficiaries of the Fund's obligations and undertakings contained
in this Section.
23. Survival of Representations and Warranties.
A. All representations and warranties by either party herein
contained will survive the execution and delivery of this
Agreement.
24. Miscellaneous.
A. This Agreement is executed and delivered in the
State of Missouri and shall be governed by the laws of said
state.
B. All the terms and provisions of this Agreement
shall be binding upon, inure to the benefit of, and be
enforceable by the respective successor and assigns of the
parties hereto.
C. No provisions of the Agreement may be amended
or modified, in any manner except by a written agreement
properly authorized and executed by both parties hereto.
D. The captions in this Agreement are included for
convenience of reference only, and in no way define or
delimit any of the provisions hereof or otherwise affect
their construction or effect.
E. This Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed an
original but all of which together shall constitute one and
the same instrument.
F. If any part, term or provision of this
Agreement is by the courts held to be illegal, in conflict
with any law or otherwise invalid, the remaining portion or
portions shall be considered severable and not be affected,
and the rights and obligations of the parties shall be
construed and enforced as if the
<PAGE> 10
Agreement did not contain the particular part, term or
provision held to be illegal or invalid.
25. Termination Assistance.
Commencing upon any notice of termination or expiration of this
Agreement, IFTC shall provide to the Company or its designee
termination assistance as defined below in order to allow the
services provided hereunder to continue without interruption or
adverse effect and to facilitate the orderly transfer of
responsibility for such services to the Company or its designee.
If and to the extent that such assistance is provided after the
date the termination is to be effective, the company will pay for
such assistance at the then-prevailing rate under this Agreement.
The termination assistance to be provided to the Company shall
include the following:
A. Continuing to perform, for a period of not more
than 90 days following the date the termination is to be
effective, any or all of the services then being performed by
IFTC.
B. Developing, with the assistance of the Company,
a plan for the transition of operations from IFTC to the
Company or its designee.
C. Prior to providing any of the foregoing
termination assistance to the Company or its designee, IFTC
shall be entitled to receive from such designee, in a form
and substance acceptable to IFTC, written assurances that (i)
such designee will maintain at all times the confidentiality
of any IFTC proprietary information, software or materials
required to be disclosed or provided to, or learned by, such
designee in connection with the transaction of duties to
Company or designee.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective duly authorized officers.
INVESTORS FIDUCIARY TRUST COMPANY
By: /s/
Title: Executive Vice President
JACKSON NATIONAL CAPITAL MANAGEMENT FUNDS
By: /s/ Larry C. Jordan
Title: Treasurer
<PAGE> 11
INVESTORS FIDUCIARY TRUST COMPANY
JACKSON NATIONAL CAPITAL MANAGEMENT FUNDS
FEE SCHEDULE
I. TRANSFER AGENCY
A. Base Fee
There is a monthly base fee of $1,500 per fund/portfolio. (This is
not included in the monthly minimum fee discussed in I.B. below.)
B. Minimum Fee
There is a monthly minimum fee of $2,500 per fund/portfolio. The
monthly minimum fee supersedes items listed in I.C below provided
the total applicable charges based on I.C do not exceed the
monthly minimum.
C. Account Maintenance and Processing Fees
Open Accounts:
Money Market and Daily Dividend Funds - $17.25 per account per year
Monthly Dividend Funds - $16.25 per account per year
Quarterly Dividend and Equity Funds - $14.25 per account per year
Closed Accounts - $2.65 per account per year
Omnibus Accounts - $2.50 per transaction
New Account Set Up - $2.50 per account
Financial Transactions - $1.50 per transaction
D. Federal Funds Wire
There is a $6.00 fee for each federal funds wire received or
delivered. ACH transactions are provided at no additional cost.
E. Miscellaneous
Fiduciary Trustee Fees:
IRAs/SEPs - $12.00 per account per year
Qualified Plans - $25.00 per social security
number per plan
Optional Services
A. Sales Reporting - $250 per month/per applicable portfolio
B. NSCC - $100 per month/per applicable portfolio
<PAGE> 12
C. INVESTOR (linking all individual portfolios
under a single investor hierarchy) - $1.20 per account
(production is an out-of-pocket expense)
D. 12b-1 processing will be charged at a rate of
$0.30 per account per payment cycle with a $0.60 per year
minimum.
E. Checkwriting Privileges - $0.35 per check
clearing
F. Deferred Contingent Sales Feature - $3.00 per account
per year
g. Dealer Maintenance - $2.50 per transaction
II. PORTFOLIO ACCOUNTING
A. Monthly Base Fee Per Portfolio
$500 (not included in minimum monthly asset fee
discussed in II.B. below.)
B. Minimum Monthly Asset Fee
There is a monthly minimum fee of $3,000 per fund/portfolio. The
monthly minimum fee per portfolio does not apply to any portfolio
if the asset based fee discussed in II.C. below produces greater
revenue than the aggregate minimum.
C. Asset Based Fee on a Total Relationship Basis
6/100 of 1% (6 basis points) on the first $150 million in
assets
4/100 of 1% (4 basis points) on the next $150 million in
assets
2/100 of 1% (2 basis points) on the next $200 million is
assets
1/100 of 1% (1 basis point) on all assets in excess
of $500 million
D. Foreign Securities Premium on Month-End Foreign Assets
There is a foreign securities premium of 2/100 of 1% (2 basis
points) in addition to either the asset based fees (II.C. above),
or the minimum monthly asset fee (II.B. above).
III. COMPLIANCE
$30 per incurred hour
Monitoring of internal revenue code section 851 diversification,
30% income and 90% income tests Initial preparation of:
<PAGE> 13
1. Federal tax return.
2. Book tax difference schedules for wash sales.
3. Selected filing such as semi-annual and annual
reports, 24(f)(2) notices and Form N-SAR.
This list of services can be expanded based upon additional
responsibilities and related fees as agreed to between parties. Travel
expenses incurred by IFTC on behalf of supporting the above services will
be billed to the fund as an out-of-pocket expense.
SECURITY CUSTODY
A. Domestic Securities
Asset-Based Fee on a total relationship basis: 2/100 of 1% (2
basis points) on the first $250 million is assets
1.5/100 of 1% (1.5 basis points) on the next $250 million is
assets
1/100 of 1% (1 basis point) on all assets in excess of $500
million
Transaction Fee, per transaction:
Physical Delivery - $22.00
Depository Eligible - $12.00
GNMA Paydown - $12.00
PTC - $12.00
B. Foreign Securities
Asset-Based Fee on a total relationship basis:
16/100 of 1% (16 basis points) on all assets held in foreign
securities
6/100 of 1%(6 basis points) on all assets held in
Euroclear/CEDEL/First Chicago Clearing
Investments in emerging markets will be priced at the time of
investment and should approximate 50 basis points.
Transaction Fee, per transaction:
Euroclear/CEDEL/First Chicago Clearing - $45.00
Emerging Markets - $90.00 - $120.00
C. Balance Credits
IFTC will offset fees with balance credits calculated at 75% of
the bank credit rate (see below) applied to average custody
collected cash balances for the month. Balance credits will be
applied on a fund by fund basis and can be used to offset custody,
portfolio accounting, and transfer agency fees. Any credits in
excess of fees will be
<PAGE> 14
carried forward from month to month through the end of the
calendar year. For calculation purposes, IFTC uses an
actual/actual basis.
Note: The bank credit rate is the equivalent to the lesser of:
The average 91-day Treasury Bill discount rate
for the month
or
The average Federal Funds rate for the month
less 50 basis points.
D. Overdraft Charges
Fund overdrafts will be calculated at the Prime rate (as published
in the Wall Street Journal) and charged on a daily basis.
V. NOTES TO THE ABOVE FEE SCHEDULE
A. Annual maintenance fees are payable monthly at 1/12th of the
annual stated rate.
B Asset based fees will be billed monthly at
1/12th of the annual stated rate based on monthly average net
assets, except for the foreign securities premium which will
be billed on month-end market value at 1/12th of the annual
stated rate.
C. The above schedule does not include out-of-pocket expenses
that would be incurred by IFTC on the fund's behalf Examples
of out-of-pocket expenses include but are not limited to
pricing services, forms, postage, mailing services, magnetic
tapes, printing, proxy processing, microfilm/microfiche, FDIC
insurance, foreign registration and script fees, back-up
recovery for mainframe services by third parties, etc.
Out-out-of-pocket expenses incurred by IFTC in planning
and executing the conversion will be passed on
to the fund. IFTC bills out-of-pocket expenses separately
from service fees.
D. The fees stated above are exclusive of terminal
equipment required in the client's location(s) and
communication line costs.
E. Any fees or out-of-pocket expenses not paid
within 30 days of the date of the original invoice will be
charged a late payment fee of 1% per month until payment of
the fees are received by IFTC.
F. The above fee schedule is predicated on the
fact that IFTC be allowed a minimum of 90 calendar days
between notification of hiring and when the selection is
effective, and that
<PAGE> 15
IFTC receive adequate cooperation from the client during the
implementation period.
G. The balance credits listed in IV.C. will apply
for each fund in which the applicable fees for transfer
agency and portfolio accounting services exceed the minimum
fees, respectively.
H. The above fee schedule commences on the effective date of
the service agreement between IFTC and the client and is
guaranteed through September 9, 1994. The minimum fees for
transfer agency and portfolio accounting services will
December 31, 1992.
/s/ /s/Larry Jordan, Treasurer
Investors Fiduciary Trust Company Jackson National Capital
Management Funds
September 10, 1992 September 10, 1992
Date Date
<PAGE> 16
EXHIBIT B
INSURANCE COVERAGE
Insurance coverages maintained by IFTC effective March 10, 1991
Description of Policy:
Brokers Blanket Bond, Standard Form 14
Covering losses caused by dishonesty of employees, physical loss of
securities on or outside of premises while in possession of
authorized person, loss caused by forgery or alteration of checks
or similar instruments. Coverage: $75,000,000
Errors and Omissions Insurance
Indemnifies against loss in providing shareholder accounting
services by reason of neglect, error or omission.
Coverage: $10,000,000
Special Forgery Bond
Covering losses through forgery or alteration of checks or drafts
of customers processed by insured but drawn on or against them.
Coverage: $1,000,000
Mail Insurance (applies to all full service operations) Provides
indemnity for security lost in the mails.
Coverage:
$10,000,000 nonnegotiable securities mailed to domestic locations
via registered mail.
$1,000,000 nonnegotiable securities mailed to domestic locations
via first-class or certified mail.
$1,000,000 nonnegotiable securities mailed to foreign locations via
registered mail.
$1,000,000 negotiable securities mailed to all locations via
registered mail.
<PAGE> 1
EX-99.B9-ADMINIS
ADMINISTRATIVE SERVICES AGREEMENT
AGREEMENT, made this 1st day of June, 1994, by and between Jackson
National Capital Management Funds, a business trust organized under the laws of
the Commonwealth of Massachusetts (the "Fund"), which is authorized to issue
shares of beneficial interest in separate series, with each such series
representing interests in a separate portfolio of securities and other assets
(any such series being referred to as a "Portfolio"), and Jackson National
Financial Services, Inc., a Delaware corporation ("JNFSI").
In consideration of the mutual covenants hereinafter contained, it is
hereby agreed by and between the parties hereto as follows:
1. The Fund hereby appoints JNFSI to provide information and
administrative services for the benefit of the Fund and its shareholders. In
carrying out its duties and responsibilities, JNFSI shall provide such office
space and equipment, telephone facilities and personnel as is necessary or
beneficial for providing information and services to shareholders of the Fund.
Such services and assistance may include, but are not limited to, maintaining
shareholder accounts and records, answering routine inquiries regarding the
Fund and its features, assisting shareholders with shareholder transactions,
processing purchase and redemption transactions, assisting shareholders in
changing dividend and investment options, account designations and addresses,
and such other services as the Fund may reasonably request. In this regard,
JNFSI shall enter into related agreements with other broker-dealers or other
financial service firms, such as banks, (the "Firms") that provide such
services and facilities for their customers who are shareholders of the Fund
("Customers").
JNFSI accepts such appointment and agrees during such period to render
such services and to assume the obligations herein set forth for the
compensation herein provided. JNFSI shall for all purposes herein provided be
deemed to be an independent contractor and, unless otherwise expressly provided
or authorized, shall have no authority to act for or represent the Fund in any
way or otherwise be deemed an agent of the Fund. JNFSI, by separate agreement
with the Fund, may also serve the Fund in other capacities. In carrying out its
duties and responsibilities hereunder, JNFSI will appoint various Firms to
provide administrative and other services described herein directly to or for
the benefit of their Customers. Such Firms shall at all times be deemed to be
independent contractors retained by JNFSI and not the Fund. JNFSI and not the
Fund will be responsible for the payment of compensation to such Firms for such
services.
2. For the services and facilities described in Section 1, the Fund will
pay to JNFSI at the end of each calendar month an administrative service fee
based on the percentage per annum on Schedule A hereto applied to the average
daily net assets of the applicable Portfolio. For the month and year in which
this Agreement becomes effective or terminates, there shall be an appropriate
proration on the basis of the number of days that the Agreement is in effect
during such month and year, respectively. The services of JNFSI to the Fund
under this Agreement are not to be deemed exclusive, and JNFSI shall be free to
render similar services or other services to others. The net asset value for
each share of each Portfolio of the Fund shall be calculated in accordance with
the provisions of the Fund's current prospectus.
3. The Fund shall assume and pay all charges and expenses of its operations not
specifically assumed or otherwise to be provided by JNFSI under this Agreement.
<PAGE> 2
4. The Agreement may be terminated at any time without the payment of any
penalty by the Fund or by JNFSI on sixty (60) days written notice to the other
party. Termination of this Agreement shall not affect the right of JNFSI to
receive payments on any unpaid balance of the compensation described in Section
2 hereof earned prior to such termination. All material amendments to this
Agreement, including any increase in fees, must be approved by vote of the
Board of Trustees of the Fund. This Agreement may not be assigned without the
consent of the Fund.
5. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder shall not be thereby
affected.
6. Any notice under this Agreement shall be in writing, addressed and
delivered and mailed, postage prepaid, to the other party at such address as
such other party may designate for the receipt of such notice.
7. This Agreement has been executed by and on behalf of the Fund by its
representatives as such representatives and not individually, and the
obligations of the Fund hereunder are not binding upon any of the directors,
officers or shareholders of the Fund individually but are binding upon only the
assets and property of the Fund.
8. All parties hereto are expressly put on notice of the Fund's Agreement
and Declaration of Trust and all amendments thereto, all of which are on file
with the Secretary of The Commonwealth of Massachusetts, and the limitation of
shareholder and trustee liability contained therein. This Agreement has been
executed by and on behalf of the Fund by its representatives as such
representatives and not individually, and the obligations of the Fund hereunder
are not binding upon any of the trustees, officers or shareholders of the Fund
individually but are binding upon only the assets and property of each
respective Portfolio.
9. This Agreement shall be construed in accordance with applicable federal
law and the laws of the State of Michigan (except as to Section 8 hereof, which
shall be construed in accordance with the laws of The Commonwealth of
Massachusetts).
<PAGE> 3
IN WITNESS WHEREOF, the Fund and JNFSI have caused this Agreement to be
executed as of the day and year first above written.
JACKSON NATIONAL JACKSON NATIONAL
CAPITAL MANAGEMENT FUNDS FINANCIAL SERVICES, INC.
By: /s/ John A. Knutson By: /s/ Larry C. Jordan
Title: President Title: Chief Operating Officer
<PAGE> 4
SCHEDULE A
<TABLE>
<CAPTION>
Portfolio Administrative Services Fee
<S> <C>
Jackson National Money Market Fund 0.00%
Jackson National Tax-Exempt Fund 0.25%
Jackson National Income Fund 0.25%
Jackson National Growth Fund 0.25%
Jackson National Total Return Fund 0.25%
</TABLE>
Dated: June 1, 1994
JACKSON NATIONAL JACKSON NATIONAL
CAPITAL MANAGEMENT FUNDS FINANCIAL SERVICES, INC.
By: /s/ John A. Knutson By: /s/ Larry C. Jordan
Title: President Title: Chief Operating Officer
<PAGE> 1
EX-99.B9-applic
JACKSON NATIONAL CAPITAL MANAGEMENT FUNDS [JNCMF LOGO]
<TABLE>
<S><C>
ACCOUNT APPLICATION
Instructions: Please read the prospectus, and choose the Jackson National
Capital Management Funds (JNCMF) portfolio that fits your investment objective.
Complete this application (please print), and mail to Jackson National
Financial Services, Inc. (JNFSI), P.O. Box 25127, Lansing, MI 48909-9979, THE
FUND, or give this application and check to an authorized investment dealer
having a sales agreement with JNFSI. Checks must be drawn on U.S. banks in U.S.
dollars. Cash not accepted. (Separate application is available for IRAs and
other retirement plans.)
SECTION I
INDIVIDUAL OWNER
- --------------------------------------------------------------------------------------------------------------------------------
First Name Middle Initial Last Name
SECTION II
JOINT OWNER
For Joint Application, use both individual and Joint Owner lines.
- --------------------------------------------------------------------------------------------------------------------------------
First Name Middle Initial Last Name
Registration will be Joint Tenancy with Rights of Survivorship unless otherwise indicated here:
--------------------------------
SECTION III
GIFTS/TRANSFERS
TO MINOR
(Only one permitted per account)
as custodian for
- ----------------------------------------------------------------------------------------------------------------
Custodian's First Name Middle Initial Last Name
- --------------------------------------------------------------------------------------------------------------------------------
Minor's First Name Middle Initial Last Name Name of State
SECTION IV
TRUST
as Trustee(s) for
- ----------------------------------------------------------------------------------------------------------------
Name of Trustee(s)
- ----------------------------------------------------------------------------------- ---------------------------------------
Name of Trust Trust Date
SECTION V ENTITY
- --------------------------------------------------------------------------------------------------------------------------------
Name of Entity
Type of Entity: / / Sole Proprietorship / / Corporation / / Partnership / / Other (specify)
-----------------------
- ------------------------------------------ ----------------------------------------- ---------------------------------------
Authorized Individual (Title) Authorized Individual (Title) Authorized Individual (Title)
SECTION VI
ADDRESS AND
TAX INFORMATION
- --------------------------------------------------------------------------------------------------------------------------------
Address (number & street) City State ZIP
- --------------------------------------------------------------------------------------------------------------------------------
Mailing Address (if different from above) City State ZIP
( ) ( )
- --------------------------------------------------------------------------------------------------------------------------------
Daytime Phone Number Evening Phone Number
Social Security or Tax Identification Number Required Birth Date / / Age
--------------------------- ------ ----- ------ -----------
(Joint account use first Owner's Social Security number; Gifts/Transfers to Minor use minor's Social Security number.)
Is owner a U.S. citizen? / / Yes / / No If no, name country of residence
-------------------------------------------------
SECTION VII
FUND SECTION
Please list beside each FUND being purchased the AMOUNT OF INITIAL INVESTMENT submitted with this application. Minimum investment is
$1,000 per FUND.
INITIAL AMIP*
INVESTMENT AMOUNT
Jackson National Money Market (250) $ $
---------- -----------
Jackson National Tax-Exempt (252) $ $
---------- -----------
Jackson National Income (253) $ $
---------- -----------
Jackson National Growth (254) $ $
---------- -----------
Jackson National Total Return (255) $ $
---------- -----------
TOTAL INVESTMENT AMOUNT $ $
---------- -----------
SECTION VIII
*AUTOMATIC MONTHLY
INVESTMENT PLAN
(AMIP)
(Must complete this section for AMIP and/or telephone redemptions by wire or ACH)
/ / The OWNER authorizes THE TRANSFER AGENT, INVESTORS FIDUCIARY TRUST COMPANY (IFTC) to draw funds from the following
checking account to purchase additional shares or make an initial purchase of JNCMF shares, provided the minimum purchase
requirements will be met within a one-year period. The minimum monthly AMIP investment amount is $50 for each FUND selected. The
investment will be drawn on the / / 5th or / / 20th of each month. Please attach a voided check or deposit slip for the bank
account to be debited, and list the information below. (Please verify wiring instructions for any credit union or savings bank.)
USE FOR WIRING INSTRUCTIONS IF NECESSARY
NAME OF BANK ACCOUNT BANK ACCOUNT NUMBER BANK ACCOUNT NUMBER
- --------------------------------------------------------------------------------------------------------------------------------
NAME OF BANK BANK ADDRESS ABA/ROUTING NUMBER ABA/ROUTING NUMBER
- --------------------------------------------------------------------------------------------------------------------------------
SECTION IX
RIGHT OF
ACCUMULATION
(Use Section XIX if necessary.)
/ / List any existing JNCMF accounts, other than the MONEY MARKET FUND, that qualify for the reduced sales charge as outlined in
the prospectus.
ACCOUNT# NAME RELATIONSHIP TO OWNER
- --------------------------------------------- ------------------------------------- -----------------------------------------
- --------------------------------------------- ------------------------------------- -----------------------------------------
- --------------------------------------------- ------------------------------------- -----------------------------------------
</TABLE>
<PAGE> 2
<TABLE>
<S><C>
SECTION X
LETTER OF INTENT
/ / Although not obligated to do so, in order to receive a reduced sales charge, I/we intend to invest, over a 13-month period from
the date of the original purchase of shares, in one or more of the above FUNDS (other than the MONEY MARKET FUND), in an
aggregate amount at least equal to:
/ / $100,000 / / $200,000 / / $500,000 / / $1,000,000 / / $5,000,000
The OWNER understands and agrees to the following provisions:
- The first purchase under the letter must be 5% or more of the intended
investment amount.
- Shares equal to 5% of the intended investment amount will be held in escrow, pending completion of the intended investment
amount.
- If the intended investment amount is not completed within 13 months, IFTC, on behalf of the FUND, is authorized to redeem
a sufficient amount of the escrowed shares to pay any difference between the lower sales charge and the sales charge on the
actual purchase, unless the OWNER pays this difference directly to IFTC within 20 days after payment is requested.
- The OWNER may include the value (at the maximum offering price) of any shares of the Funds (other than the MONEY MARKET
FUND), held of record as of the initial purchase date as an "Accumulation Credit" toward the completion of the LETTER OF
INTENT, but no price adjustment will be made on such shares. Use RIGHT OF ACCUMULATION space to list existing JNCMF
accounts.
SECTION XI
DISTRIBUTION OPTIONS
Dividends and Capital Gains will be reinvested into additional shares of the same FUND unless checked below:
/ / Reinvest capital gains and pay / / Pay dividends and capital gains in cash. / / Distributions from a fund are automatically
dividends in cash. invested into another fund.
Must complete this Section to automatically invest FROM FUND AND ACCOUNT NUMBER TO FUND AND ACCOUNT NUMBER
distributions from a JNCMF fund to another JNCMF fund.
----------------------------- ------------------------------
SECTION XII
SYSTEMATIC
EXCHANGE
/ / This option allows the OWNER to automatically transfer dollar amounts between JNCMF accounts. The OWNER authorizes IFTC to
redeem shares of the JNCMF account (the FROM account), and invest into shares of the JNCMF account indicated (the TO account).
The OWNER on both accounts must be identical. The minimum initial account balance of the FROM account for fund shares being
exchanged is $10,000, and the minimum monthly exchange amount is $100.
Frequency: / / Monthly / / Quarterly / / Semiannually / / Annually
FROM FUND AND ACCOUNT NUMBER TO FUND AND ACCOUNT NUMBER AMOUNT OF EXCHANGE ($100 minimum)
- ---------------------------------------- ---------------------------------------- -------------------------------------------
SECTION XIII
CHECK-WRITING PRIVILEGES
/ / The OWNER requests a signature card to implement check-writing privileges. (MONEY MARKET FUND ONLY. Minimum check amount $250.)
SECTION XIV
TELEPHONE REDEMPTIONS
The maximum allowable redemption amount is $50,000. The OWNER wishes to redeem shares by telephone and have the proceeds mailed to
the OWNER and address of record. This privilege is automatically established on the account unless the following item is checked:
/ / I/WE DO NOT WANT TELEPHONE REDEMPTION PRIVILEGES.
SECTION XV
TELEPHONE REDEMPTIONS
(Sent by wire or ACH)
/ / The OWNER authorizes IFTC to honor the request believed to be authentic to redeem shares by wire or automated clearing house
(ACH) redemption to the Financial Institution indicated in the Automatic Monthly Investment Plan (AMIP) section VIII. The minimum
amount for wire transfer is $2,500. The OWNER is responsible for all wire or ACH and institutional charges. Corporations must
contact IFTC for additional procedures after the account is established.
SECTION XVI
AUTOMATIC WITHDRAWAL
/ / The OWNER authorizes IFTC to redeem shares of the OWNER's JNCMF account as instructed below. Must own $5,000 or more of the
Fund's shares at the offering price (NAV plus sales charge) and request a dollar amount of $100 or more. Redemptions may be made by
ACH.
WITHDRAW FROM FUND:
--------------------- ----------------------
AMOUNT OF WITHDRAWAL: $ $
--------------------- ----------------------
Frequency: / / Monthly / / Quarterly / / Semiannually / / Annually
Payee if different than owner: Name of Payee:
-------------------------------
Address:
-------------------------------
-------------------------------
SECTION XVII
SIGNATURES AND CERTIFICATION
I/We have received the current prospectus and agree to the terms and conditions contained therein. I/We acknowledge that this
account will automatically have Exchange Privilege capability within JNCMF. I/We represent that I/we are of legal age.
The undersigned OWNER certifies, under penalties of perjury, that 1) the tax identification number shown on this application is
correct and 2) the OWNER is NOT subject to backup withholding because a) OWNER is exempt from backup withholding, or b) OWNER has
not been notified by the Internal Revenue Service (IRS) that OWNER is subject to backup withholding as a result of a failure to
report all interest or dividend income on OWNER'S tax return, or the IRS has provided notification that the OWNER is no longer
subject to backup withholding.
**PLEASE NOTE: If you have been notified by the IRS that you are currently subject to backup withholding, you must cross out item
(2) above & check here. / /
OWNER has delivered a check with this application, which shall not be considered payment or acceptance hereunder unless actually
honored upon presentation in the normal course of business.
ALL OWNERS
MUST SIGN
SIGNATURE OF OWNER (or custodian, trustee, corporate officer, partner)(Sign using legal capacity.) DATE
- -----------------------------------------------------------------------------------------------------------------------------------
CO-OWNER (if applicable) DATE
- -----------------------------------------------------------------------------------------------------------------------------------
SECTION XVIII
DEALER USE ONLY
DEALER NAME (as on selling group agreement) DEALER # ADDRESS DEALER TELEPHONE #
- -----------------------------------------------------------------------------------------------------------------------------------
REGISTERED
REPRESENTATIVE
RR NAME (print) RR SIGNATURE RR # BRANCH #
- -----------------------------------------------------------------------------------------------------------------------------------
DEALER
AUTHORIZATION
SIGNATURE DATE TITLE
- -----------------------------------------------------------------------------------------------------------------------------------
SECTION XIX
ADDITIONAL INFORMATION
(Use when additional space is
needed to complete Application.)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 1
Ex-99.B10-vpkkcon
February 21, 1996
Jackson National Capital Management Funds
5901 Executive Drive
Lansing, Michigan 48911
Ladies and Gentlemen:
Reference is made to Post-Effective Amendment No. 4 to the
Registration Statement on Form N-1A under the Securities Act of 1933 being
filed by Jackson National Capital Management Funds (the "Fund") in
connection with the proposed public offering of units of beneficial
interest, no par value ("Shares"), in five authorized series
("Portfolios").
We have acted as counsel to the Fund since its inception and in such
capacity are familiar with the Fund's organization and have counseled the Fund
regarding various legal matters. We have examined such Fund records and other
documents and certificates as we have considered necessary or appropriate for
the purposes of this opinion. In our examination of such materials, we have
assumed the genuineness of all signatures and the conformity to original
documents of all copies submitted to us.
Based upon the foregoing and upon the opinion dated August 19, 1992 by
Ropes & Gray of Boston, Massachusetts, and assuming that the Fund's Agreement
and Declaration of Trust dated December 12, 1991 and the By-Laws of the Fund
adopted August 10, 1992 are presently in full force and effect and have not
been amended in any respect and that the resolutions adopted by the Board of
Trustees of the Fund on December 12, 1991 and August 10, 1992 relating to
organizational matters, securities matters and the issuance of shares are
presently in full force and effect and have not been amended in any respect, we
advise you and opine that (a) the Fund is a duly authorized and validly
existing voluntary association with transferrable shares under the laws of the
Commonwealth of Massachusetts and is authorized to issue an unlimited number of
Shares in its presently authorized Portfolios; and (b) upon the issuance of the
Shares in accordance with the Fund's Agreement and Declaration of Trust and the
receipt by the Portfolios of a purchase price not less than the net asset value
per Share, the Shares will be legally issued and outstanding, fully paid and
non-assessable (although shareholders of the Fund may be subject to liability
under certain circumstances described in the opinion from Ropes & Gray).
This opinion is solely for the benefit of the Fund, the Fund's Board of
Trustees and the Fund's officers and may not be relied upon by any other person
without our prior written consent. We hereby consent to the use of this
opinion in connection with said Post-Effective Amendment.
Very truly yours,
/s/ Vedder, Price Kaufman & Kammholz
VEDDER, PRICE, KAUFMAN & KAMMHOLZ
COK:dd
<PAGE> 1
Ex-99.B11-pwcon
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 4 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
November 30, 1995, relating to the financial statements and financial
highlights of Jackson National Money Market Fund, Jackson National Tax-Exempt
Fund, Jackson National Income Fund, Jackson National Growth Fund and Jackson
National Total Return Fund (constituting the Jackson National Capital
Management Funds), which appears in such Statement of Additional Information,
and to the incorporation by reference of our report into the Prospectus which
constitutes part of this Registration Statement. We also consent to the
reference to us under the heading "Independent Auditors and Reports to
Shareholders" in such Statement of Additional Information and to the reference
to us under the heading "Financial Highlights" in such Prospectus.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
MILWAUKEE, WISCONSIN
FEBRUARY 21, 1996
<PAGE> 1
EX-99.B13-purch
July 13, 1992
Board of Trustees
Jackson National Capital Management Funds
5901 Executive Drive
Lansing, Michigan 48911
RE: Subscription for Shares of Jackson National Capital Management
Funds
Dear Trustees:
Jackson National Financial Services, Inc., the principal underwriter
of Jackson National Capital Management Funds (the "Fund"), offers to purchase
from the Fund 10,000 shares of beneficial interest in the Fund of the Jackson
National Total Return Fund at $10.00 per share for an aggregate purchase price
of $100,000 cash, all such shares to be validly issued, fully paid and
non-accessible upon issuance of such shares and receipt of said payment by the
Fund.
These shares are not being purchased with any present intent of
distributing or reselling the same to the public, and will be held for the
investment of Jackson National Life Insurance Company.
Sincerely,
JACKSON NATIONAL FINANCIAL
SERVICES, INC.
By:____________________________
Accepted and agreed to this ____
day of ________________, 1992.
JACKSON NATIONAL CAPITAL
MANAGEMENT FUNDS
By:_______________________________
<PAGE> 1
EX-99.B14-IRA
Jackson National Capital Management Funds [JNCMF LOGO]
- --------------------------------------------------------------------------------
JACKSON NATIONAL CAPITAL MANAGEMENT FUNDS
INDIVIDUAL RETIREMENT ACCOUNT KIT
Complete all sections of the Individual Retirement Custodial Agreement Account
Application. Complete the Beneficiary Designation section and sign Section X if
appropriate. To transfer assets from another IRA, complete and sign the Request
to Transfer IRA Assets to a Jackson National Capital Management Funds IRA
section immediately following the Application.
<TABLE>
<S> <C> <C>
FORM 5305-A
(Rev. October 1992) INDIVIDUAL RETIREMENT CUSTODIAL ACCOUNT DO NOT FILE
Department of the Treasury (UNDER SECTION 408(A) OF THE INTERNAL REVENUE CODE) WITH INTERNAL
Internal Revenue Service REVENUE SERVICE
</TABLE>
- --------------------------------------------------------------------------------
GENERAL INSTRUCTIONS
(Section references are to the Internal Revenue Code unless otherwise noted.)
PURPOSE OF FORM
Form 5305-A is a model custodial account agreement that meets the requirements
of section 408(a) and has been automatically approved by the IRS. An Individual
Retirement Account (IRA) is established after the form is fully executed by
both the individual (Depositor) and the Custodian and must be completed no
later than the due date of the individual's income tax return for the tax year
(without regard to extensions). This account must be created in the United
States for the exclusive benefit of the Depositor or his or her beneficiaries.
Individuals may rely on regulations for the Tax Reform Act of 1986 to the
extent specified in those regulations.
Do not file Form 5305-A with the IRS. Instead, keep it for your records.
For more information on IRAs, including the required disclosure you can get
from your custodian, get PUB. 590, Individual Retirement Arrangements (IRAs).
DEFINITIONS
CUSTODIAN. -- The Custodian must be a bank or savings and loan association, as
defined in section 408(n), or any person who has the approval of the IRS to act
as custodian.
DEPOSITOR.-- The Depositor is the person who establishes the custodial account.
IDENTIFYING NUMBER
The depositor's Social Security number will serve as an identification number
of his or her IRA. An employer identification number is only required for each
participant-directed IRA. An employer identification number is required for a
common fund created for IRAs.
IRA FOR NONWORKING SPOUSE
Form 5305-A may be used to establish the IRA custodial account for a nonworking
spouse.
Contributions to an IRA custodial account for a nonworking spouse must be made
to a separate IRA custodial account established by the nonworking spouse.
SPECIFIC INSTRUCTIONS
ARTICLE IV.--Distributions made under this article may be made in a single sum,
periodic payment, or a combination of both. The distribution option should be
reviewed in the year the Depositor reaches age 70-1/2 to ensure that the
requirements of section 408(a)(6) have been met.
ARTICLE VIII. -- Article VIII and any that follow it may incorporate additional
provisions that are agreed to by the depositor and custodian to complete the
agreement. They may include, for example, definitions, investment powers,
voting rights, exculpatory provisions, amendment and termination, removal of
the custodian, custodian's fees, state law requirements, beginning date of
distributions, accepting only cash, treatment of excess contributions,
prohibited transactions with the depositor, etc. Use additional pages if
necessary and attach them to this form.
NOTE: Form 5305-A may be reproduced and reduced in size for adoption to
passbook purposes.
I
<PAGE> 2
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Page
How to Use This Document ............................................... III
Attachment to IRA Form 5305-A: Article VIII ............................ 2
Individual Retirement Account Disclosure Statement ..................... 3
Individual Retirement Custodial Agreement Account Application .......... 6
Request to Transfer IRA Assets or Direct Rollover to a
Jackson National Capital Management Funds IRA .......................... 9
II
<PAGE> 3
- --------------------------------------------------------------------------------
WELCOME TO JACKSON NATIONAL CAPITAL MANAGEMENT FUNDS
- --------------------------------------------------------------------------------
RELATIONSHIP
Jackson National Financial Services, Inc., is the Investment Adviser to Jackson
National Capital Management Funds.
FLEXIBILITY
Jackson National Capital Management Funds offers a variety of investment
objectives, so you can choose the funds that match your personal financial
goals. You can exchange one fund for another as your investment goals change,
simply by calling our toll-free telephone number, 1/800/888-FUND.
(800/888-3863)
SERVICE
Call toll free, for prompt, courteous, and knowledgeable answers to any
questions you may have about your account.
PRESERVE RETIREMENT ASSETS
You may be able to deduct all or part of your IRA investment. For example, if
you are entitled to deduct the full amount of the maximum annual contribution
to an IRA.
An even greater IRA benefit is tax deferral. Your Jackson National Capital
Management Funds IRA grows faster if earnings can accumulate free of current
taxation. This IRA advantage can be important, even if you have already
retired.
- --------------------------------------------------------------------------------
HOW TO USE THIS DOCUMENT
- --------------------------------------------------------------------------------
1. EASY TO USE. Read all the information in this booklet.
2. REMOVE the Individual Retirement Custodial Agreement Account Application and
the Request to Transfer IRA Assets to a Jackson National Capital Management
Funds IRA.
3. COMPLETE the information requested on the Custodial Agreement Account
Application. Be sure to sign the agreement.
4. TO TRANSFER an existing IRA account to Jackson National Capital Management
Funds, you must also complete and sign the Request to Transfer IRA Assets.
5. DETACH the appropriate forms for completion, and keep the remainder of this
document for your tax records.
THANK YOU FOR THE INTEREST YOU HAVE EXPRESSED
IN JACKSON NATIONAL CAPITAL MANAGEMENT FUNDS.
III
<PAGE> 4
- --------------------------------------------------------------------------------
INDIVIDUAL RETIREMENT CUSTODIAL ACCOUNT
(UNDER SECTION 408(A) OF THE INTERNAL REVENUE CODE)
- --------------------------------------------------------------------------------
ARTICLE I
The Custodian may accept additional cash contributions on behalf of the
Depositor for a tax year of the Depositor. The total cash contributions are
limited to $2,000 for the tax year unless the contribution is a rollover
contribution described in section 402(c) (but only after December 31, 1992),
403(a)(4), 403(b)(8), 408(d)(3) or an employer contribution to a simplified
employee pension plan as described in section 408(k). Rollover contributions
before January 1, 1993, include rollovers described in section 402(a)(5),
402(a)(6), 402(a)(7), 403(a)(4), 403(b)(8), 403(d)(3), or an employer
contribution to a simplified employee pension plan as descried in section
408(k).
ARTICLE II
The Depositor's interest in the balance in the custodial account is
nonforfeitable.
ARTICLE III
1. No part of the custodial funds may be invested in life insurance
contracts, nor may the assets of the custodial account be commingled with other
property except in a common trust fund or common investment fund (within the
meaning of section 408(a)(5)).
2. No part of the custodial funds may be invested in collectibles (within
the meaning of section 408(m)) except as otherwise permitted by section
408(m)(3) which provides an exception for certain gold and silver coins and
coins issued under the laws of any state.
ARTICLE IV
1. Notwithstanding any provision of this agreement to the contrary, the
distribution of the Depositor's interest in the custodial account shall be made
in accordance with the following requirements and shall otherwise comply with
section 408(a)(6) and Proposed Regulations section 1.408-8, including the
incidental death benefit provisions of Proposed Regulations section
1.401(a)(9)-2, the provisions of which are incorporated by reference.
2. Unless otherwise elected by the time distributions are required to
begin to the Depositor under paragraph 3, or to the surviving spouse under
paragraph 4, other than in the case of a life annuity, life expectancies shall
be recalculated annually. Such election shall be irrevocable as to the
Depositor and the surviving spouse and shall apply to all subsequent years. The
life expectancy of a nonspouse beneficiary may not be recalculated.
3. The Depositor's entire interest in the custodial account must be, or
begin to be, distributed by the Depositor's required beginning date (April 1
following the calendar year end in which the Depositor reaches age 70-1/2). By
that date, the Depositor may elect, in a manner acceptable to the Custodian, to
have the balance in the custodial account distributed in:
(A) A single sum payment.
(B) An annuity contract that provides equal or substantially equal
monthly, quarterly, or annual payments over the life of the Depositor.
(C) An annuity contract that provides equal or substantially equal
monthly, quarterly, or annual payments over the joint and last survivor lives
of the Depositor and his or her designated beneficiary.
(D) Equal or substantially equal annual payments over a specified period
that may not be longer than the Depositor's life expectancy.
(E) Equal or substantially equal annual payments over a specified period
that may not be longer than the joint life and last survivor expectancy of the
Depositor and his or her designated beneficiary.
4. If the Depositor dies before his or her entire interest is distributed
to him or her, the entire remaining interest will be distributed as follows:
(A) If the Depositor dies on or after distribution of his or her interest
has begun, distribution must continue to be made in accordance with paragraph 3.
(B) If the Depositor dies before distribution of his or her interest
has begun, the entire remaining interest will, at the election of the Depositor
or, if the Depositor has not elected, at the election of the beneficiary or
beneficiaries, either
(i) Be distributed by the December 31 of the year containing the fifth
anniversary of the Depositor's death or
(ii) Be distributed in equal or substantially equal payments over the life
or life expectancy of the designated beneficiary or beneficiaries starting by
December 31 of the year following the year of the Depositor's death. If,
however, the beneficiary is the Depositor's surviving spouse, then this
distribution is not required to begin before December 31 of the year in which
the Depositor would have turned age 70-1/2.
(C) Except where distribution in the form of an annuity meeting the
requirements of section 408(b)(3) and its related regulations has irrevocably
commenced, distributions are treated as having begun on the Depositor's
required beginning date, even though payments may actually have been made
before that date.
(D) If the Depositor dies before his or her entire interest has been
distributed and if the beneficiary is other than the surviving spouse, no
additional cash contributions or rollover contributions may be accepted in the
account.
5. In the case of a distribution over life expectancy in equal or
substantially equal annual payments, to determine the minimum annual payment
for each year, divide the Depositor's entire interest in the Custodial account
as of the close of business on December 31 of the preceding year by the life
expectancy of the Depositor (or the joint life and last survivor expectancy of
the Depositor and the Depositor's designated beneficiary, or the life
expectancy of the designated beneficiary, whichever applies). In the case of
distributions under paragraph 3, determine the initial life expectancy (or
joint life and last survivor expectancy) using the attained ages of the
Depositor and designated beneficiary as of their birthdays in the year the
Depositor reaches age 70-1/2. In the case of a distribution in accordance with
paragraph 4(b)(ii), determine life expectancy using the attained age of the
designated beneficiary as of the beneficiary's birthday in the year
distributions are required to commence.
6. The owner of two or more individual retirement accounts may use the
"alternative method" described in Notice 88-38, 1988-1 C.B. 524, to satisfy the
minimum distribution requirements described above. This method permits an
individual to satisfy these requirements by taking from one individual
retirement account the amount required to satisfy the requirement for another.
ARTICLE V
1. The Depositor agrees to provide the Custodian with information
necessary for the Custodian to prepare any reports required under section
408(i) and Regulations 1.408-5 and 1.408-6.
2. The Custodian agrees to submit reports to the Internal Revenue Service
and the Depositor prescribed by the Internal Revenue Service.
ARTICLE VI
Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through III and this sentence will be controlling. Any
additional articles that are not consistent with section 408(a) and the related
regulations will be invalid.
ARTICLE VII
This agreement will be amended from time to time to comply with the
provisions of the Code and related regulations. Other amendments may be made
with the consent of the persons whose signatures appear below.
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NOTE:The following space (Article VIII) may be used for any other
provisions you want to add. If you do not want to add any other provisions,
draw a line through this space. If you do add provisions, they must comply with
applicable requirements of state law and the Internal Revenue Code.
ARTICLE VIII
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ATTACHMENT T0 IRS FORM 5305-A: ARTICLE VIII
1. DEFINITIONS. The following definitions shall apply to terms used in this
Article VIII:
a."Application" shall mean the IRA Application submitted by the Depositor
to the Custodian.
b."Code" shall mean the Internal Revenue Code of 1986, as amended,
including any regulations, procedures, rulings, or notices issued thereunder.
c."Company" shall mean Jackson National Capital Management Funds.
d."Custodial Account" shall mean the custodial account established under
this agreement.
2. INVESTMENT OF CONTRIBUTIONS. Contributions shall be invested in shares of
the Company mutual funds in accordance with the Depositor's written
instructions in the Application, and with subsequent written instructions of
the Depositor (or, following the death of the Depositor, his or her
beneficiary) in a form acceptable to and filed with the Custodian. By giving
such instructions, the Depositor (or beneficiary, where applicable) will be
deemed to have acknowledged receipt of the then-current prospectus for any
shares in which the Depositor (or beneficiary) directs the Custodian to invest
contributions. The Depositor, by making a rollover contribution, as described
in Article I, hereby certifies that the contribution meets all requirements for
rollover contributions. The amount of each contribution shall be applied to
the purchase of such shares at the price and in the manner in which such shares
are then being publicly offered by the Company in accordance with the
then-current prospectus, and such shares shall be credited to the Custodial
Account. All dividends and capital gain distributions received on the shares
of the fund held in each Custodial Account shall (unless received in additional
shares of such fund) be reinvested in such shares which shall be credited to
such Custodial Account. If any distribution on shares of the fund may be
received at the election of the shareholder in additional shares or in cash or
other property, the Custodian shall elect to receive such distribution in
additional shares. The Custodian shall not be liable for interest on any cash
balance in the Custodial Account. All Company shares acquired by the Custodian
shall be registered in the name of the Custodian or its registered nominee.
3. VOTING WITH RESPECT TO SHARES. The Custodian shall not vote any of the
shares of a Company mutual fund held in the Custodial Account except in
accordance with written instructions of the Depositor, timely received, in a
form acceptable to the Custodian.
4. ALTERNATIVE DISTRIBUTION METHODS: Notwithstanding Article IV, a Depositor
may elect in writing in a form acceptable to and filed with the Custodian, to
have the balance in the Custodial Account distributed only in a lump sum or in
substantially equal payments over a period that does not exceed the Depositor's
life expectancy or the joint and last survivor life expectancy of the Depositor
and his or her designated beneficiary. For this purpose, life expectancies
must be determined by using applicable Internal Revenue Service tables.
Notwithstanding paragraph 2 of Article IV, unless an election to have life
expectancies recalculated annually is made by the time distributions are
required to begin to the Depositor under paragraph 3, or to the surviving
spouse under paragraph 4, of Article IV, life expectancies shall not be
recalculated. Such election shall be irrevocable as to the Depositor and the
surviving spouse and shall apply to all subsequent years. The life expectancy
of a nonspouse beneficiary may not be recalculated. To receive an annuity
distribution, a Depositor may roll over a lump-sum distribution to purchase an
individual retirement annuity payable in equal or substantially equal payments
over the Depositor's life expectancy or the joint and last survivor life
expectancy of the Depositor and his or her designated beneficiary. The
distribution option should be reviewed in the year the Depositor reaches age
70 1/2 to make sure the requirements of Code Section 408(a)(6) have been met.
Consistent with paragraph 6 of Article IV, the Custodian is not obligated to
make any distribution absent a specific written direction, in a form acceptable
to and filed with the Custodian, from the Depositor or designated beneficiary
to do so.
5. AMENDMENT AND TERMINATION. The Depositor may at any time and from time to
time terminate this Agreement in whole or in part by delivering to the
Custodian a signed written notice of such termination, in a form acceptable to
the Custodian. The Depositor and the Custodian delegate to the Company the
right to amend this Agreement (including retroactive amendments) by written
notice to the Custodian and the Depositor. The Depositor shall be deemed to
have consented to any such amendment, provided that (a) no amendment shall
cause or permit any part of the assets of the Custodial Account to be diverted
to purposes other than for the exclusive benefit of the Depositor or his or her
beneficiaries; (b) any amendment which affects the rights, duties or
responsibilities of the Custodian may only be made with the Custodian's
consent; and (c) no amendment shall be made except in accordance with any
applicable laws and regulations affecting this Agreement and the Custodial
Account.
6. RESIGNATION OR REMOVAL OF CUSTODIAN. The Custodian may resign at any time
upon thirty (30) days notice in writing to the Depositor and the Company. Upon
such resignation, the Depositor delegates to the Company the responsibility to
appoint a successor custodian under this Agreement. The Depositor or the
Company, at any time, may remove the Custodian upon 30 days' written notice to
that effect in a form acceptable to and filed with the Custodian. Such notice
must include designation of a successor custodian. The successor custodian
shall satisfy the requirements of section 408(h) of the Code. Upon receipt by
the Custodian of written acceptance of such appointment by the successor
custodian, the Custodian shall transfer and pay over to such successor the
assets of and records relating to the Custodial Account. The Custodian is
authorized, however, to reserve such sum of money as it may deem advisable for
payment of all its fees, compensation, costs and expenses, or for payment of
any other liability constituting a charge on or against the assets of the
Custodial Account or on or against the Custodian, and where necessary may
liquidate shares in the Custodial Account for such payments. Any
balance of such reserve remaining after the payment of all such items shall be
paid over to the successor Custodian. The Custodian shall not be liable for
the acts or omissions of any successor custodian.
7. CUSTODIAN'S ANNUAL FEES: The Depositor shall be charged by the Custodian
for its services under this Agreement in such amount as the Custodian shall
establish from time to time. Sufficient shares may be liquidated from the
Custodial Account to pay the fee. The annual fee in effect on the date of this
Agreement is set forth in the Application. A different fee may be substituted
at any time upon written notice to the Depositor. A Depositor who does not
consent to such new fee should terminate this Agreement pursuant to paragraph 5
of Article VIII within 30 days of the notice of the new fee. If no such
termination is made within 30 days of the notice of the new fee, the Depositor
will be deemed to have consented to the new fee.
8. OTHER FEES AND EXPENSES. Any income or other taxes of any kind whatsoever
that may be levied or assessed upon or with respect to the Custodial Account or
the income thereof, any transfer taxes incurred in connection with the
investment and reinvestment of the assets of the Custodial Account, all other
reasonable administrative expenses incurred by the Custodian with respect to
any such taxes, or with respect to any controversies concerning the Custodial
Account, including, but not limited to, fees for legal services rendered to the
Custodian and related costs, and such reasonable compensation to the Custodian
for acting in that capacity with respect to any such taxes or controversies,
may, in the discretion of the Custodian, be charged against and paid from the
assets of the Custodial Account. Sufficient shares may be liquidated from the
Custodial Account to pay any such taxes, expenses and compensation.
9. INALIENABILITY OF ASSETS: No interest, right or claim in or to any part of
the Custodial Account, nor any assets held therein or benefits provided
hereunder shall be subject to alienation, assignment, garnishment, attachment,
execution or levy of any kind, and any attempt to cause any such interest,
right, claim, assets or benefits to be so subjected shall not be recognized,
except to the extent as may be required by law.
10. EXCHANGE PRIVILEGE: With respect to any Company shares held in the
Custodial Account, the Depositor (or beneficiary, where applicable) may, upon
submission of written instructions in a form acceptable to and filed with the
Custodian, cause shares of any fund to be exchanged for shares of any other
fund of the Company meeting the requirements of this Agreement, upon the terms
and within the limitations imposed by the then-current prospectus of the fund
of the Company which are acquired in the exchange. By giving such
instructions, the Depositor (or beneficiary) will be deemed to have
acknowledged receipt of such prospectus.
11. DESIGNATION OF BENEFICIARY. The Depositor may designate a beneficiary or
change or revoke the designation of a beneficiary, by written notice in a form
acceptable to and filed with the Custodian, prior to the complete distribution
of the balance in the Custodial Account. If the Depositor has not by the date
of his or her death properly designated a beneficiary in accordance with the
preceding sentence, or if no designated beneficiary survives the Depositor, the
Depositor's beneficiary shall be his or her estate. If a beneficiary dies
before receiving his or her entire interest in the Custodial Account, his or
her remaining interest in the Custodial Account shall be paid to the
beneficiary's estate.
12. RESPONSIBILITY AS TO CONTRIBUTIONS OR DISTRIBUTIONS. The Custodian will
not under any circumstances be responsible for the timing, purpose or propriety
of any contribution or of any distribution made hereunder, nor shall the
Custodian incur any liability or responsibility for any tax imposed on account
of any such contribution or distribution.
13. OTHER LIMITS ON RESPONSIBILITIES OF THE CUSTODIAN. The Custodian shall
not incur any liability or responsibility in taking or omitting to take any
action based on any notice, election, or instruction or any written instrument
believed by the Custodian to be genuine and to have been properly executed.
The Custodian shall be under no duty of inquiry with respect to any such
notice, election, instruction, or written instrument, but in its discretion may
request any tax waivers, proof of signatures or other evidence which it
reasonably deems necessary for its protection. The Depositor and the
successors of the Depositor including any executor or administrator of the
Depositor shall, to the extent permitted by law, indemnify the Custodian and
its successors and assigns against any and all claims, actions or liabilities
of the Custodian to the Depositor or the successors or beneficiaries of the
Depositor whatsoever (including without limitation all reasonable expenses
incurred in defending against or settlement of such claims actions or
liabilities) which may arise in connection with this Agreement or the Custodial
Account, except those due to the Custodian's own bad faith, gross negligence or
willful misconduct. The Custodian shall not be under any duty to take any
action not specified in this Agreement, unless the Depositor shall furnish it
with instructions in proper form and such instructions shall have been
specifically agreed to by the Custodian, or to defend or engage in any suit
with respect hereto unless it shall have first agreed in writing to do so and
shall have been fully indemnified to its satisfaction.
14. NOTICES. All written notices required or permitted to be given by the
Custodian shall be deemed to have been given when sent by mail to the Depositor
at the Depositor's last address of record provided to the Custodian. All
written notices required or permitted to be given to the Custodian shall be
deemed to have been given when received by the Custodian if mailed to the
Custodian at [insert address for account processing] or such other address as
the Custodian shall provide to the Depositor from time to time.
15. TIMING OF CONTRIBUTIONS. A contribution is deemed to have been made on
the last day of the preceding taxable year if the contribution is made by the
deadline for filing the Depositor's income tax return (not including
extensions) and if the Depositor designates the contribution as a contribution
for the preceding taxable year in a manner acceptable to the Custodian. The
Custodian will not be liable or responsible for any consequences of postal
delays or delays resulting from an incomplete Application or a designation made
in an unacceptable form. Applications received by IFTC postmarked after the
deadline will be treated as a contribution for the Depositor's current tax
year. Improperly completed applications will be returned to the sender.
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16. GOVERNING LAW. This Agreement and the Custodial Account shall be
construed, administered and enforced according to the laws of the State of
Missouri.
17. WHEN EFFECTIVE. This Agreement shall not become effective until
acceptance of the Application by the Custodian at its principal offices, as
evidenced by a written confirmation to the Depositor.
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INDIVIDUAL RETIREMENT ACCOUNT DISCLOSURE STATEMENT
- --------------------------------------------------------------------------------
The following information is provided to you in accordance with the
requirements of the Internal Revenue Code (the "Code") and Treasury regulations
and should be reviewed in conjunction with the Individual Retirement Custodial
Account Agreement (the "Custodial Agreement"), the Application for your IRA
(the "Application"), and the prospectus for the mutual funds of [insert name of
Investment Company] that are allowable investments for your IRA. The provisions
of the Custodial Agreement, Application and prospectus govern in any instance
where the Disclosure Statement is incomplete or appears to conflict. This
Disclosure Statement reflects the provisions of the Internal Revenue Code in
effect on January 1, 1993. This Disclosure Statement provides a nontechnical
summary of the law. Please consult with your tax advisor for more complete
information and refer to IRS Publication 590.
I.IRA STATUTORY REQUIREMENTS
An IRA is a trust or custodial account established for the exclusive
benefit of you and your beneficiaries. Current law requires that your IRA
agreement be in writing and that it meet the following requirements:
1. All contributions must be in cash and, for any taxable year, cannot exceed
100% of your compensation or $2,000, whichever is less, unless the
contribution is a rollover contribution or an employer contribution to a
simplified employee pension plan ("SEP").
2. The custodian or trustee must be a bank or other institution or person that
is approved by the Internal Revenue Service to administer your IRA in
accordance with current tax laws.
3. None of your IRA assets may be invested in life insurance contracts or
commingled with the assets of other people except in a common trust fund or
common investment fund.
4. Your interest in your IRA account is nonforfeitable.
5. Distribution from your IRA must be in accordance with certain minimum
distribution rules, which are explained in Section VII below.
II.RIGHT TO REVOKE
You may revoke your IRA at any time within seven days of the time your
Application is signed. To revoke your IRA, mail or deliver a written notice
stating "I hereby elect to revoke my JACKSON NATIONAL CAPITAL MANAGEMENT FUNDS
IRA." Sign your name exactly as it appears on your Application, include your
Social Security number, and mail the notice to:
Investors Fiduciary Trust Company (IFTC)
P.O. Box 419102
Kansas City, MO 64141-6102
Your notice will be considered mailed on the date of postmark, or the date
of certification or registration if it is sent by certified or registered mail.
When IFTC receives the proper notice of revocation, you will be entitled
to a refund of your full IRA contribution, without any adjustment for expenses
or market fluctuations. If your have any questions concerning your right of
revocation, please call [Insert phone number of individual handling
revocations] during regular business hours.
III.ELIGIBILITY
You may make regular contributions to an IRA if you receive compensation
from employment, earnings from self-employment, or alimony, and you have not
reached age 70 1/2 by the end of the tax year for which the contribution is
made. In addition, if you are married and file a joint tax return, you may make
contributions to an IRA for your spouse whether or not your spouse receives
compensation. You may make a rollover contribution to an IRA if you have
received an eligible rollover distribution from a qualified retirement plan or
tax-sheltered annuity or an eligible distribution from another IRA and elect
rollover treatment within 60 days. You may also make a trustee-to-trustee
transfer from another IRA. Finally, your employer may contribute to your IRA,
and if your employer sponsors a simplified employee pension ("SEP"), your
employer can make contributions to a SEP/IRA on your behalf.
IV. CONTRIBUTIONS
A. REGULAR CONTRIBUTIONS
You may contribute each year up to $2,000 or 100% of your compensation,
whichever is less, to your IRA. If you also establish a spousal IRA for your
spouse, you may contribute up to $2,250 or 100% of your compensation, if less,
which may be split between the two IRAs as you choose, provided that no more
than $2,000 may be contributed to either your IRA or the spousal IRA. If your
spouse has compensation in excess of $250, you and your spouse can make a
larger total contribution if you each contribute to a regular IRA. If your
employer contributes to your IRA, the contribution is treated as compensation
paid to you, whether or not the contribution is deductible, unless the
contribution is made under a SEP (see below). Compensation for these purposes
means wages, salaries, professional fees, or other amounts derived from or
received for personal services actually rendered. It includes earned income
from self-employment and alimony or separate maintenance payments includable in
income. It does not include pension or annuity payments or deferred
compensation.
B. TIME FOR MAKING REGULAR CONTRIBUTIONS
You may make regular contributions to your IRA and/or your spousal IRA
anytime during a year, up to and including the due date for filing your tax
return for the year (without extensions).
No regular contributions may be made to an IRA for the calendar year in which
you reach age 70 1/2 or later years. No regular contributions to a spousal IRA
may be made for years in which your spouse is age 70 1/2 or older.
C. DEDUCTIBILITY
Regular IRA contributions are fully deductible unless you or your spouse
are active participants in a tax-qualified plan of an employer. If you or your
spouse are active participants in such a plan, then your allowable deduction
for regular IRA contributions is reduced or eliminated if your Adjusted Gross
Income ("AGI") exceeds certain levels. (If you file separately and are married,
but live apart from your spouse at all times during the year, you will be
considered to be single when applying the following rules regarding deduction
limitations.) The deductible amount is determined as follows:
1. If you (and your spouse) are not active participants in a tax-qualified
plan, any contribution up to the maximum amount is deductible.
2. If you (or your spouse) are an active participant in a tax-qualified
plan, and
(a) your AGI is $25,000 or less ($40,000 for a married couple
filing a joint return and $0 for a married person filing
separately), any contribution up to the maximum amount is
deductible;
(b) your AGI is $35,000 or more ($50,000 for a married couple
filing a joint return and $10,000 for a married person filing
separately), no IRA contribution is deductible;
(c) your AGI is between $25,000 and $35,000 ($40,000 and $50,000
for a married couple filing a joint return and $0 to $10,000
for a married person filing separately), the deductible amount
is reduced. In the case of a regular IRA, the reduction is
$0.20 for each $1.00 of AGI over $25,000 ($40,000 for a married
couple filing a joint return and $10,000 for a married person
filing separately). For a spousal IRA, the reduction is $0.225
for each $1.00 of AGI over $40,000 if filing jointly. The limit
will not be reduced below $200 unless it is eliminated
entirely.
To the extent that the deductibility of IRA contributions is reduced or
eliminated, then nondeductible contributions may be made to your IRA. Earnings
on all IRA contributions, whether or not the contributions themselves are
deductible, are tax-deferred until receipt. You must designate the amount of
nondeductible IRA contributions when filing your tax return for the year. If
you overstate the amount of your nondeductible contributions, you must pay a
$100 penalty, unless you can show that such overstatement was due to reasonable
cause. If you fail to report nondeductible IRA contributions, you will be
subject to a $50 penalty, unless your failure was due to reasonable cause.
D. ROLLOVER CONTRIBUTIONS
1. AMOUNTS ELIGIBLE FOR ROLLOVER FROM PLANS AND TAX-SHELTERED ANNUITIES
You may make a rollover contribution to your IRA of an "eligible rollover
distribution" from an employer tax-qualified plan (an "employer plan") or a
tax-sheltered annuity (including a 403(b)(7) account). The administrator of the
employer plan or the payor of a distribution from the tax-sheltered annuity
should be able to tell you what portion of your payment is an eligible rollover
distribution. The following types of payments cannot be rolled over:
NONTAXABLE PAYMENTS. In general, only the "taxable portion" of your
payment is an eligible rollover distribution. If you have made "after-tax"
employee contributions to the plan or annuity, these contributions will be
nontaxable when they are paid to you, and they cannot be rolled over.
(After-tax employee contributions generally are contributions you made from
your own pay that were already taxed.)
PAYMENTS SPREAD OVER LONG PERIODS. You cannot roll over a payment if it is
part of a series of equal (or almost equal) payments that are made at least
once a year and that will last for
- your lifetime (or your life expectancy), or
- your lifetime and your beneficiary's lifetime (or life expectancies), or
- a period of ten years or more.
REQUIRED MINIMUM PAYMENTS. Beginning in the year you reach age 701/2, a
certain portion of your payment cannot be rolled (or transferred) over because
it is a "required minimum payment" that must be paid to you.
2. DIRECT ROLLOVER
You can choose a direct rollover of all or any portion of your payment
from an employer plan or a tax-sheltered annuity that is an "eligible rollover
distribution," as described above. In a direct rollover, the eligible rollover
distribution is paid directly from the plan or tax-sheltered annuity to your
IRA. If you choose a direct rollover, you are not taxed on a payment until you
later take it out of the IRA.
3. ROLLOVER OF PLAN PAYMENTS PAID TO YOU
A payment to you of an eligible rollover distribution from an employer
plan or tax-sheltered annuity is taxed in the year you receive it unless,
within 60 days, you roll it over to an IRA (or another plan that accepts
rollovers). If you do not roll it over, special tax rules may apply. If any
portion of the payment to you is an eligible rollover distribution, the payor
is required by law to withhold 20% of that amount. This amount is sent to the
IRS as income tax withholding.
SIXTY-DAY ROLLOVER OPTION. If you have an eligible rollover distribution
paid to you, you
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<PAGE> 7
can still decide to roll over all or part of it to an IRA (or another employer
plan that accepts rollovers). If YOU DECIDE TO ROLL OVER, YOU MUST MAKE THE
ROLLOVER WITHIN 60 DAYS AFTER YOU RECEIVE THE PAYMENT. The portion of your
payment that is rolled over will not be taxed until you take it out of the IRA
(or the employer plan).
You can roll over up to 100% of the eligible rollover distribution,
including an amount equal to the 20% that was withheld. If you choose to roll
over 100%, you must find other money within the 60-day period to contribute to
the IRA or the employer plan to replace the 20% that was withheld. (On the
other hand, if you roll over only the 80% that you received, you will be taxed
on the 20% that was withheld.)
See the Special Tax Notice Regarding Plan Payments, that must be provided
by the plan administrator or payor of your employer plan or tax-sheltered
annuity, for additional information on the rules governing rollover and
taxation of plan distributions, or consult your tax advisor for more details.
You should maintain a separate IRA account for any rollovers of funds from
an employer plan if you want to preserve your ability to later roll over these
funds and earnings into another employer plan. Similarly, you should maintain a
separate account for any rollover of funds from a tax-sheltered annuity.
You can make a rollover from a tax-qualified plan of your spouse's
employer if you received all or a part of your spouse's share as a result of
his or her death. A spouse or former spouse who is a recipient of a
distribution made under a qualified domestic relations order may roll over all
or part of the distribution.
Because complex rules apply to distribution and rollovers of payments from
employer plans and tax-sheltered annuities, you should seek competent tax
advice whenever you contemplate receiving a distribution from a qualified plan
or tax-sheltered annuity or an IRA funded by a rollover from a qualified plan
or tax-sheltered annuity.
4. ROLLOVERS FROM OTHER IRAs
You may also make a rollover contribution of amounts held in another IRA.
There are no limits on the amount of rollover contributions made to an IRA from
another IRA, except you may not roll over (or transfer) the required minimum
amount (described in VII.D.). However, the distribution from the first IRA must
be rolled over within 60 days of receipt, and no more than one distribution per
year from an IRA may be rolled over into another IRA.
5. TAX-DEFERRAL ON IRA ROLLOVER OR TRUSTEE-TO-TRUSTEE TRANSFER
An effective rollover allows you to postpone paying taxes on the amount
distributed from an employer plan, tax-sheltered annuity or IRA until it is
withdrawn from the recipient IRA. You do not report the distribution as income
and you do not take a deduction for the rollover contribution. Earnings on your
rollover IRA are tax-deferred until receipt. (Similarly, a trustee-to-trustee
transfer is not treated as a distribution, and the amount transferred and
earnings are tax-deferred until receipt.)
E. SEP CONTRIBUTIONS
If your employer has established a simplified employee pension ("SEP"),
your employer may make contributions to your SEP/IRA. If the SEP contains a
salary reduction arrangement, you may elect to reduce your salary by up to the
lesser of 15% of compensation or $7,000 (indexed), and have that amount
contributed to your SEP/IRA. The maximum SEP contribution, including salary
reduction amounts and employer contributions, is the lesser of 15% compensation
or $30,000. SEP contributions are not included in your taxable income.
V. EXCESS CONTRIBUTIONS
Amounts contributed to an IRA which exceed the maximum allowable
contribution are treated as "excess contributions" and are subject to a
nondeductible 6% penalty tax for each year in which the excess remains in the
IRA. Excess contributions may be corrected and the 6% penalty tax avoided by
withdrawal of the excess and any earnings thereon BEFORE THE DUE DATE
(including extensions) of the tax return for the tax year for which the excess
contribution was made. No deduction may be taken for the excess contributions,
and the earnings must be included in taxable income for the year the
contribution was made. The earnings withdrawn may be subject to a 10% premature
distribution tax if you are under age 59 1/2. See Section VII.B.
An excess contribution may be withdrawn AFTER THE DUE DATE of the tax
return (including extensions) with the following consequences:
(a) If your total contribution for the tax year the excess contribution
was made is $2,250 or less (or below the limit of your employer's SEP
contribution) the excess contribution may be withdrawn without being
included in income or being subject to the 10% premature distribution
tax. No deduction may be taken for the excess contribution. Any
earnings withdrawn will be included in income and may be subject to the
premature distribution tax.
(b) If your total contribution for the tax year, the excess contribution
was made exceeds $2,250 (or, if higher, the limit of your employer's
SEP contribution), any excess contribution and any earnings on the
excess withdrawn after the due date for tax filing (including
extensions), will be includable in income in the year received and will
be subject to any 10% premature distribution tax that may apply.
Additionally, no deduction may be taken for the excess contribution for
the year in which it is made.
(c) Any excess contribution withdrawn after the due date for the tax
filing (including extensions) for the year for which the contribution
was made is subject to the 6% penalty tax on the amount of the
excess contribution for the taxable year in which made and each tax
year that it is still in your IRA at the end of the year.
You may also correct an excess contribution to your IRA by treating the
excess amount as contributed to your IRA in a subsequent year to the extent
that the excess, when aggregated with your IRA contribution (if any) for the
subsequent year, does not exceed the maximum amount for that year. You may be
entitled to a deduction for the amount of the excess contribution that is
applied in the subsequent year.
VI. INVESTMENT OF ACCOUNT AND FINANCIAL DISCLOSURE
The assets in your IRA will be invested by IFTC in mutual fund shares made
available for investment by JACKSON NATIONAL CAPITAL MANAGEMENT FUNDS in
accordance with your instructions and Article VIII, paragraphs [2] and [10] of
the Custodial Agreement.
Growth in the value of your IRA cannot be guaranteed or projected.
However, the income and operating expenses of each allowable investment that
you select for your IRA will affect the value of its shares and, therefore, the
value of your IRA. THE JACKSON NATIONAL CAPITAL MANAGEMENT FUNDS prospectus for
such shares contains information regarding current income and expenses of each
of these investments. Reasonable fees and other expenses of maintaining your
IRA may be charged to you or your IRA. The current annual Custodian's fee is
set forth in the Application. A new fee may be substituted from time to time as
provided in paragraph [7] of Article VIII of the Custodial Agreement.
VII. DISTRIBUTIONS
A. TAXATION OF DISTRIBUTION AS ORDINARY INCOME
In general, you must include distributions from your IRA in your gross
income for the year in which the distributions are received. There is a 10%
additional income tax assessed against premature distributions to the extent
such distributions are includable in income, as described in B. below.
You may exclude from your income that portion of a distribution that
constitutes a return of your properly reported nondeductible contributions. The
amount of the distribution excludable from income is the portion that bears the
same ratio to the total distribution that your aggregate nondeductible
contributions (not distributed in prior years) bear to the balance at the end
of the year (calculated after adding back distributions made during the year)
of your IRA. For this purpose, all of your IRAs are treated as a single IRA,
and all distributions from an IRA during a taxable year are to be treated as
one distribution.
In addition, your gross income does not include any distribution from an
IRA that is properly rolled over. Except as provided in D. below, you may roll
over all or any part of property received in a distribution of assets, within
60 days of receipt, into another IRA or individual retirement annuity, and
maintain the tax-deferred status of such assets. A rollover from one IRA to
another may be made once every twelve months. Also, certain qualifying
distributions which were rolled over into an IRA from employer tax-qualified
plans may be rolled over into another employer tax-qualified plan. (You should
seek competent tax advice regarding these rollovers.)
As explained in Section V, certain distributions of excess contributions
are not included in income. In addition, IRA contributions for a taxable year
which do not exceed the contribution limits for such year may also be withdrawn
without being included in income or being subject to a 10% premature
distribution tax, as long as such contributions and earnings thereon are
withdrawn prior to the due date (including extensions) of your federal income
tax return for the tax year for which the contribution was made. The earnings
withdrawn must be included in taxable income for the year in which the
contribution was made and may be subject to the 10% premature distribution tax.
B. TAX ON PREMATURE DISTRIBUTIONS
To the extent they are included in income, distributions from your IRA
made before you reach age 59 1/2 will be subject to a 10% nondeductible penalty
tax (in addition to being taxable as ordinary income) unless the distribution
is made on account of your death or disability, or the distribution is one of a
scheduled series of payments over your life expectancy or the joint life
expectancies of you and your beneficiary.
C. TAX ON EXCESS DISTRIBUTIONS
There is a 15% excise tax assessed against annual distributions from
tax-favored retirement plans, including IRAs, which exceed the greater of
$150,000 or $112,500 adjusted after 1988 to reflect cost-of-living increases.
To determine whether you have distributions in excess of this limit, you must
aggregate the amounts of all distributions received by you during the calendar
year from all retirement plans, including IRAs. If you have account balances or
accrued benefits equal to at least $562,500 as of August 1, 1986, you may have
a portion of the excess distributions exempted from the 15% additional tax.
Please consult with you tax advisor for more complete information, including
the availability of favorable elections.
D. REQUIRED MINIMUM DISTRIBUTIONS
1. DURING YOUR LIFE
The minimum distribution rules require that for your "70-1/2 year," and
each year thereafter, you must make withdrawals from your IRA accounts that are
at least equal to the "minimum distribution." Your 70-1/2 year is the calendar
year that contains the date six months after your 70th birthday.
Generally, you must withdraw an amount at least equal to the minimum
distribution by December 31 of each year. However, for your 70-1/2 year, you
may wait to withdraw the minimum distribution until April 1 of the following
year. (This means that if you wait to make your withdrawal for the 70-1/2 year
until April 1 of the following year, your total withdrawal in that year must
equal the minimum distributions for two years - a withdrawal by April 1 that is
equal to the minimum distribution for the 70-1/2 year and a second withdrawal
by December 31 that is equal to the minimum distribution for that year. In each
year thereafter, you must withdraw the minimum distribution for the year by
December 31.)
The amount of the minimum distribution is usually determined by dividing
the account balance of your IRA, as of December 31 of the prior year, by a
divisor (determined by Internal Revenue Service actuarial tables) that is based
on your life expectancy or the joint life and last survivor expectancy for you
and your beneficiary. See Article IV of the Custodial Agreement for a more
detailed explanation of how to calculate the minimum distribution. The
distributions
4
<PAGE> 8
must also satisfy the minimum distribution incidental benefit
rule, which generally will require distributions over a period less than the
joint and last survivor expectancy of you and your designated beneficiary
unless your beneficiary is your spouse or is no more than ten years younger
than you. The IRS provides tables for determining the distribution needed to
satisfy incidental benefit requirements.
The minimum distribution required must be calculated separately for each
IRA you own, but the amounts so determined may be totalled and taken from any
one or more of your IRAs.
You will be subject to a 50% excise tax on the amount by which the
distribution you actually received in any year falls short of the minimum
distribution required for the year.
You may take your distribution in:
- a lump sum;
- equal or substantially equal payments over a specified period no longer
than your life expectancy or the joint life and last survivor expectancy of you
and your designated beneficiary.
Also, as described in Section VII.A., you may roll over your lump-sum
distribution to purchase an individual retirement annuity payable in equal or
substantially equal payments over your life or the joint and last survivor
lives of you and your designated beneficiary. (See Article IV and Article VIII,
paragraph 4, of the Custodial Agreement and IRS Publication 590 for a full
description of permissible distribution methods.)
2. AFTER YOUR DEATH
If you die before you reach age 70 1/2, distribution must be made to your
beneficiary by December 31 of the fifth year following the year of your death
unless, by December 31 of the year following your death, your beneficiary
begins receiving distributions over a period not extending beyond your
beneficiary's life expectancy. When your beneficiary is your spouse, however,
distributions can be postponed until December 31 of the year in which you would
have reached age 70 1/2, at which time your spouse must take them over a period
not extending beyond his or her life expectancy. See Article IV of the
Custodial Agreement and IRA Publication 590 for a more detailed explanation of
how to calculate the minimum distribution.
If you die after your required beginning date, the balance in the
Custodial Account must continue to be paid at least as rapidly as under the
method of payment being used prior to your death.
If your beneficiary is your spouse, your beneficiary can elect to treat
your IRA as his or her own IRA.
The minimum distribution required must be calculated separately for each
IRA, but the amounts so determined may be totalled and taken from any one or
more IRAs.
A payee is subject to a 50% excise tax on the amount by which a
distribution for the year falls short of the minimum distribution required.
Your beneficiary may take his or her distribution in:
- a lump sum;
- equal or substantially equal payments over a specified period no longer
than his or her life expectancy.
Also, as described in Section VII.A., a spousal beneficiary may roll over
a lump-sum distribution to purchase an individual retirement annuity payable in
equal or substantially equal payments over his or her life expectancy. (See
Article IV and Article VIII, paragraph 4, of the Custodial Agreement and IRS
Publication 590 for a full description of permissible distribution methods.)
3. FURTHER INFORMATION. This explanation only summarizes the minimum
distribution rules. Other rules and exceptions may apply to you that are not
discussed in this summary, including rules which, in some cases, would prevent
you from using certain options described above. You should consult your
personal tax advisor or IRS Publication 590 for more detailed information.
VIII. LOSS OF TAX-EXEMPT STATUS OF IRA
If you engage in any of the prohibited transactions listed in Section 4975
of the Code (such as any sale, exchange, or leasing of any property between you
and your IRA) or if you take a loan from your IRA, your account will be
disqualified, and the entire balance of your account will be treated as if it
had been distributed to you as of the first day of the year in which the
prohibited transaction occurred. The fair market value of your IRA will be
included in income in the year the prohibited transaction takes place and, if
you are under age 59 1/2 at the time, you may be subject to the 10% penalty tax
on premature distributions. Should you or your beneficiary pledge all or any
portion of your IRA as security for a loan, the portion so pledged will be
treated as if distributed to you, will be included in your income, and may be
subject to the 10% premature distribution penalty during the year in which the
pledge occurred.
IX. OTHER TAX CONSIDERATIONS
A. FEDERAL INCOME TAX WITHHOLDING
Federal income tax will be withheld on amounts distributed from your IRA
unless you elect not to have withholding apply. Generally, tax will be withheld
at a 10% rate. At the time of distribution from your IRA, you will be notified
of your right to elect not to have withholding apply and will be provided with
the appropriate election form. If your IRA distribution is to be delivered
outside of the U.S., you may elect not to have withholding apply only if you
certify to the Custodian that you are not a U.S. citizen residing overseas or a
"tax avoidance expatriate" as described in Section 877 of the Internal Revenue
Code. (The distribution may also be subject to state withholding laws.)
B. DISTRIBUTION NOT ELIGIBLE FOR LUMP-SUM AVERAGING OR CAPITAL GAINS
TREATMENT
No distribution to you or anyone else from your account can qualify for
capital gains treatment under the federal income tax laws or for the five- or
ten-year averaging available with respect to certain lump-sum distributions
from other types of retirement plans. The distribution is taxed to the person
receiving it as ordinary income.
C. GIFT TAX
If you elect during your lifetime to have all or any part of your account
payable to a beneficiary at or after your death, the election will not subject
you to any gift tax liability.
D. REPORTING FOR TAX PURPOSES
You must report deductible IRA contributions and distributions on your tax
Form 1040 or 1040A for the taxable year in which the contributions or
distributions were made. If you make any nondeductible contributions, you must
include the amount of such nondeductible contributions and the aggregate
account balance of all your IRAs as of the end of the calendar year on Form
8606. Additional reporting is required in the event that special taxes or
penalties described herein are due. You must file Form 5329 with the IRS for
each taxable year in which the contribution limits are exceeded, a premature
distribution takes place, less than the required minimum amount is distributed
from your IRA, or excess distributions are made.
X. IRS APPROVAL & INFORMATION
This IRA has not been submitted to the IRS for approval as to form because
it incorporates Form 5305-A issued by the IRS. This Disclosure Statement
provides only a summary of the laws governing IRAs. You should consult your
personal tax advisor or IRS Publication 590, Individual Retirement
Arrangements, for more detailed information. This publication is available from
your local IRS office or by calling 1-800-TAX-FORMS.
5
<PAGE> 9
JACKSON NATIONAL CAPITAL MANAGEMENT FUNDS [JNCMF LOGO]
INDIVIDUAL RETIREMENT CUSTODIAL AGREEMENT ACCOUNT APPLICATION
INSTRUCTIONS: Please read the prospectus, and choose the Jackson National
Capital Management Funds (JNCMF) portfolio that fits your investment objective.
Complete this application (please print) and mail to Jackson National Financial
Services, Inc. (JNFSI), P.O. Box 24068, Lansing, MI 48909, or to any of JNFSI's
Regional Offices, or give this application and check (if any) to an authorized
investment dealer who will forward them to Investors Fiduciary Trust Company.
MAKE YOUR CHECK PAYABLE TO INVESTORS FIDUCIARY TRUST COMPANY. Checks must
be drawn on U.S. banks in U.S. dollars. Cash not accepted.
<TABLE>
<S><C>
SECTION I
INDIVIDUAL
OWNER
- -----------------------------------------------------------------------------------------------------------------------------------
First Name Middle Initial Last Name
SECTION II
ADDRESS
AND TAX
INFORMATION
- -----------------------------------------------------------------------------------------------------------------------------------
Address (number and street) City State ZIP
- -----------------------------------------------------------------------------------------------------------------------------------
Mailing Address (if different from above) City State ZIP
( ) ( )
- --------------------------------------------------------------------------------------------------------------------
Daytime Phone Number Evening Phone Number
Social Security or Tax Identification Number Required:
-------------------------------------------------------------
Is owner a U.S. citizen? / / Yes / / No
If no, name country of residence
-----------------------------------------------------------------------------------
SECTION III
TYPE OF
ACCOUNT
(Select appropriate boxes)
SELECT ONE
/ / Regular IRA / / Direct Transfer of Assets from another
/ / SEP IRA Prior Tax-year 19 contribution $ IRA $
/ / Spousal IRA ----------- ---------- ---------
amount (A transfer of assets form must also be
(Spouse must complete Current Tax-year 19 contribution $ completed.)
separate application.) --------- ---------- Allocation of Rollover of Transfer Amount:
amount JNCMF Portfoilo Percentages
%
/ / Rollover (indicate source of funds below - select one) ------------------- ----------------
/ / Direct Rollover from an Employer's qualified plan or 403(b) plan $_______ %
/ / From an Employer's qualified plan OR 403(b) plan ------------------- ----------------
/ / From a Regular (contributory) IRA or a SEP-IRA %
------------------- ----------------
SECTION IV
FUND
SECTION
Please list beside each FUND being purchased the AMOUNT OF INITIAL INVESTMENT submitted with this application. Minimum initial
investment is $1,000 per FUND, except for the spousal IRA which is $250 per FUND MAKE CHECKS PAYABLE TO INVESTORS FIDUCIARY TRUST
COMPANY.
INITIAL AMIP*
INVESTMENT AMOUNT
Jackson National Money Market (250) $ $ Class A Class B Class C
--------- --------- (Contingent (Asset-based
Jackson National Income (253) $ $ (Initial Sales Deferred Sales
--------- --------- (Charge) Sales Charge) Charge)
Jackson National Growth (254) $ $
--------- --------- / / / / / /
Jackson National Total Return (255) $ $
--------- --------- / / / / / /
Initial Investment (total of above four funds) $ $
--------- --------- / / / / / /
Custodian Fee $ $
--------- --------- / / / / / /
Total Investment Amount $ $
--------- ---------
Please refer to Article VIII Paragraph 10 for investments to which you may exchange the existing investment. Unless additional
instructions are received, all proceeds from your investment shall be reinvested in the same fund.
IFTC, as Custodian of your IRA, charges an annual administrative fee of $12.00 per fund investment. PLEASE ENCLOSE A SEPARATE CHECK
PAYABLE TO IFTC FOR THIS FEE. If this fee is not received, the Custodian is entitled to liquidate a sufficient amount of shares from
your account to cover this fee. This fee is subject to change. All contributions and all rollover amounts made with this Application
will be allocated proportionately if more than one FUND is selected, unless otherwise indicated here:
SECTION V
*AUTOMATIC MONTHLY PAYMENT PLAN (AMIP)
(Must complete this section for AMIP.)
/ / THE OWNER authorizes THE TRANSFER AGENT, INVESTORS FIDUCIARY TRUST COMPANY (IFTC) to draw funds from the following checking
account to purchase additional shares or make an initial purchase of JNCMF shares, provided the minimum purchase requirements will
be met within a one-year period. The minimum monthly AMIP investment amount is $50 for each FUND selected. The investment will be
drawn on the / / 5th or / / 20th of each month. Please attach a voided check or deposit slip for the bank account to be debited,
and list the information below.
- ------------------------------------------------------------------- ----------------------------------------------------------
Name of Bank Account Bank Account Number
- ------------------------------------------------------------------- ----------------------------------------------------------
Name of Bank ABA/Routing Number
- ----------------------------------------------------------------------------------------------------------------------------------
Bank Address City State Zip
</TABLE>
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<PAGE> 10
<TABLE>
<S><C>
SECTION VI
RIGHT OF
ACCUMULATION
(Attach a separate sheet if necessary.)
/ / List any existing JNCMF accounts, other than the MONEY MARKET FUND, that qualify for the reduced sales charge as outlined in
the prospectus.
(REGIONAL OFFICE USE ONLY)
ACCOUNT # NAME RELATIONSHIP TO OWNER ACCOUNT BALANCE
- -------------------------- ------------------------- -------------------------------------- ---------------------------------
- -------------------------- ------------------------- -------------------------------------- ---------------------------------
- -------------------------- ------------------------- -------------------------------------- ---------------------------------
SECTION VII
DESIGNATION
OF BENEFICIARY(IES)
You may specify one or more persons to receive any benefits that may become payable on account of your death. If a Primary
Beneficiary(ies) survives you, payment will be made to your Primary Beneficiary(ies); if not, payment will be made to your
surviving Contingent Beneficiary(ies). If you are not survived by any Primary or Contingent Beneficiary(ies), payment will be made
to your surviving spouse or, if none, your estate. This designation is not valid unless it is received by Investors Fiduciary Trust
Company prior to your death. You may revoke this designation, and designate a different Beneficiary(ies) by completing and filing
another Beneficiary Designation Form.
I hereby designate as my Primary Beneficiary(ies) the person or persons listed below who survives me. If more than one person is
listed, benefits shall be divided according to the percentage indicated. If no percentage is indicated, I intend that all of
the persons listed below who survive me shall receive equal portions.
Primary Beneficiary(ies):
Name SS# Birth Date / /
---------------------------------------------------- ------------------------------------- ---- ----- -----
Address City State ZIP
-------------------------------------------------- ---------------- -------------- --------------------
Relationship % of Account
--------------------------------------------- -------------------------------------------------------
Name SS# Birth Date / /
---------------------------------------------------- ------------------------------------- ---- ----- -----
Address City State ZIP
-------------------------------------------------- ---------------- -------------- --------------------
Relationship % of Account
--------------------------------------------- -------------------------------------------------------
If no person(s) named as Primary Beneficiary(ies) survives me, I hereby designate as my Beneficiary(ies) the person or persons
listed below who survives me. If more than one person is listed, benefits shall be divided according to the percentages indicated.
If no percentage is indicated, I intend that all of the persons listed below who survive me shall receive equal portions.
Contingent Beneficiary(ies):
Name SS# Birth Date / /
---------------------------------------------------- ------------------------------------- ---- ----- -----
Address City State ZIP
-------------------------------------------------- ---------------- -------------- --------------------
Relationship % of Account
--------------------------------------------- -------------------------------------------------------
Name SS# Birth Date / /
---------------------------------------------------- ------------------------------------- ---- ----- -----
Address City State ZIP
-------------------------------------------------- ---------------- -------------- --------------------
Relationship % of Account
--------------------------------------------- -------------------------------------------------------
SECTION VIII
OWNER FINANCIAL
AND PERSONAL DATA
ANNUAL MARGINAL LIQUID NET WORTHTOTAL
INCOME TAX BRACKET (Net worth excluding NET WORTH
------------------------- ------------- home or autos) --------------------
--------------------
LIFE INSURANCE COVERAGE SOURCE OF FUNDS FOR THIS INVESTMENT
/ / CASH SAVINGS / / EARNED INCOME
/ / LIFE INSURANCE or ANNUITY (/ / proceeds / / loan / / cash value)
- -------------------------------------------------
(amount) / / LIQUIDATION OF SECURITIES - Owner understands that he or she
will have to pay an additional sales charge and may incur a tax liability.
Birth Date/Age / / Marital Status: / / Single / / Married / / Divorced / /Separated
------ ----- -----
- ----------------------------------------------------------------------------------------------------------------------------------
Employer's Name Address (number & street) City State ZIP
Occupation/Type of Business Work Number ( )
---------------------------------------------- ---------------------------------------
Is applicant an associated person of another NASD FIRM? / / Yes / / No
If YES, name and address of NASD FIRM:
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
SECTION IX
INVESTMENT
OBJECTIVES
/ / CURRENT INCOME / / CURRENT INCOME / / LONG-TERM GROWTH / / INCOME and CAPITAL
Preservation of capital and Willing to accept moderate-to- Fluctuations in value in line with APPRECIATION
maintenance of liquidity. high levels of market risk and those of S&P 500 index. Willing to accept risk
low-to-moderate levels to principal.
of financial risk.
</TABLE>
7
<PAGE> 11
<TABLE>
<S><C>
SECTION X
DISTRIBUTION OPTIONS
Dividends and Capital Gains will be reinvested into additional shares of the same FUND unless checked below:
/ / Reinvest capital gains and pay / / Pay dividends and capital gains in cash / / Distributions from a fund are automatically
dividends in cash invested into another fund
Must complete this Section to automatically invest FROM FUND AND ACCOUNT NUMBER TO FUND AND ACCOUNT NUMBER
distributions from a fund to another fund.
----------------------------- ------------------------------
SECTION XI
SYSTEMATIC
EXCHANGE
/ / This option allows the OWNER to automatically transfer dollar amounts between JNCMF accounts. The OWNER authorizes IFTC to
redeem shares of the JNCMF account (the FROM account), and invest into shares of the JNCMF account indicated (the TO account).
The OWNER on both accounts must be identical. The minimum initial account balance of the FROM account for fund shares being
exchanged is $10,000, and the minimum monthly exchange amount is $100.
Frequency: / / Monthly / / Quarterly / / Semiannually / / Annually
FROM FUND AND ACCOUNT NUMBER TO FUND AND ACCOUNT NUMBER AMOUNT OF EXCHANGE ($100 minimum)
- ---------------------------------------- ---------------------------------------- -------------------------------------------
SECTION XII
COMMUNITY
PROPERTY
(Must be signed
by spouse
and witness if
applicable)
SPOUSAL CONSENT - FOR USE IN COMMUNITY OR MARITAL PROPERTY STATES
(This section should be reviewed if either the trust or the residence of the Account Holder is located in a community or
marital property state, and the Account Holder is married and is designating a Beneficiary other than the spouse. It is the Account
Holder's responsibility to determine if this section applies. The Account Holder may need to consult with legal counsel. Neither the
Custodian or the Sponsor will be liable for any consequences resulting from a failure of the Account Holder to provide proper
spousal consent.)
I am the spouse of the above-named Account Holder. I acknowledge that I have received a full and reasonable disclosure of my
spouse's property and financial obligations. Due to any possible consequences of giving up my community property interest in this
IRA, I have been advised to consult a tax adviser or attorney for advice.
I hereby give the Account Holder any interest I have in the funds or property deposited in the IRA and consent to the Beneficiary
designation(s) indicated above. I assume full responsibility for any adverse consequences that may result.
No tax or legal advice was given to me by the Custodian.
-------------------------------------------------------------- -------------------------------------------------
Signature of Spouse Date
-------------------------------------------------------------- -------------------------------------------------
Signature of Witness for Spouse Date
SECTION XIII
SIGNATURES
ACCEPTANCE
AND CERTIFICATION
I have received, read and agree to the terms and conditions contained in the current prospectus and in this application. I
acknowledge that this account will automatically have Exchange Privilege capability within JNCMF. I represent that I am of legal
age.
By signing the Application establishing an IRA, the undersigned: (1) establishes an Individual Retirement Account pursuant to the
Internal Revenue Code of 1986, as amended, and in accordance with all the terms of the Custodial Agreement of Form 5305A, (2)
appoints Investors Fiduciary Trust Company, or its successors, as Custodian on the Account, (3) states that he or she has
received, read, accepts and specifically incorporates herein the Custodial Agreement on Form 5305A and Disclosure Statement, (4)
agrees to promptly give instructions to the Custodian necessary to enable the Custodian to carry out its duties under the Custodial
Agreement and (5) agrees that this account will be subject to the Custodial Agreement as amended from time to time.
The undersigned OWNER certifies, under penalties of perjury, that 1) the Tax Identification number shown on this application is
correct, and 2) the OWNER is NOT subject to backup withholding because a) OWNER is exempt from backup withholding, or b) OWNER has
not been notified by the Internal Revenue Service (IRS) that OWNER is subject to backup withholding as a result of a failure to
report all interest or dividend income on OWNER'S tax return, or the IRS has provided notification that the OWNER is no longer
subject to backup withholding.
**PLEASE NOTE: IF YOU HAVE BEEN NOTIFIED BY THE IRS THAT YOU ARE CURRENTLY SUBJECT TO BACKUP WITHHOLDING, YOU MUST CROSS OUT ITEM
(2) ABOVE AND CHECK HERE. / /
The OWNER has delivered a check with this application payable to INVESTORS FIDUCIARY TRUST COMPANY, which shall not be considered
payment hereunder unless actually honored upon presentation in the normal course of business.
- ------------------------------------------------------------------------- ----------------------------------------------------
SIGNATURE OF OWNER DATE
Investors Fiduciary Trust Company hereby accepts its appointment as Custodian under the Jackson National Capital Management Funds
IRA Agreement Account Application for the benefit of the Owner and hereby agrees to the terms and conditions of such Agreement.
Accepted by: INVESTORS FIDUCIARY TRUST COMPANY
SECTION XIV
REGISTERED
REPRESENTATIVE
- ------------------------------------------------------------------------- ----------------------------------------------------
NAME (Print) RR NUMBER
- ------------------------------------------------------------------------- ----------------------------------------------------
S-CODE DATE
- ------------------------------------------------------------------------- ----------------------------------------------------
SIGNATURE REGION NUMBER
</TABLE>
8
<PAGE> 12
<TABLE>
<S><C>
SECTION XV
PRINCIPAL
APPROVAL
- ------------------------------------------------------------------------- ----------------------------------------------------
NAME (Print) DATE
- ------------------------------------------------------------------------- ----------------------------------------------------
SIGNATURE TITLE
SECTION XVI
DEALER
USE ONLY
- ------------------------------------------------------------------------- ----------------------------------------------------
DEALER NAME (as on Selling Group Agreement) DEALER NUMBER
- ------------------------------------------------------------------------- ----------------------------------------------------
ADDRESS TELEPHONE NUMBER
SECTION XVII
ADDITIONAL
INFORMATION
(Use when additional space is needed to complete Application.)
</TABLE>
9
<PAGE> 13
REQUEST TO TRANSFER IRA ASSETS OR DIRECT ROLLOVER TO A
JACKSON NATIONAL CAPITAL MANAGEMENT FUNDS IRA
<TABLE>
<S><C>
Complete this form to transfer assets from an existing IRA or to complete a direct rollover from a qualified employer plan,
403(b) account or Keogh to a Jackson National Capital Management Funds IRA. Attach your completed IRA application to this form.
CUSTODIAN OF EXISTING ACCOUNT
- ------------------------------------------------------------------------- ----------------------------------------------------
Custodian's Name Owner's Name
- ------------------------------------------------------------------------- ----------------------------------------------------
Custodian's Address Owner's Social Security Number
INSTRUCTIONS TO CUSTODIAN OF EXISTING ACCOUNT, ACCT. NO.
--------------------------------------------------
I have established a Jackson National Capital Management Funds Individual Retirement Account with Investors Fiduciary Trust
Company as Custodian. Please withdraw assets from my account in your custody in the following manner, and send a check payable to
Investors Fiduciary Trust Company and mail to P.O. Box 419102, Kansas City, Missouri 46141-6102 for the account of:
(Owner's name).
- --------------------------------------------------
TYPE OF ACCOUNT TO BE TRANSFERRED (CHECK ONE):
/ / IRA / / SEP-IRA / / Spousal IRA / / Rollover from qualified employer plan or Keogh
/ / 403(b) Custodial Account or Annuity / / Other (List Type)
PORTION OF ACCOUNT TRANSFERRED (CHECK ONE): (NOTE: IF YOU ARE AGE 70 1/2 OR OLDER, YOU MUST TAKE OUT YOUR MINIMUM REQUIRED
DISTRIBUTION FROM YOUR IRA BEFORE COMPLETING A TRANSFER OR DIRECT ROLLOVER.)
1. All of the assets in my account
- -------
2. $ in my account
- ------- ---------------
IF YOU ARE TRANSFERRING A CERTIFICATE OF DEPOSIT IRA, CHOOSE ONE OF THE OPTIONS BELOW:
1. Liquidate prior to maturity date. I am aware of and acknowledge the penalty I will incur from an early withdrawal.
- -------
2. Liquidate at maturity. (Maturity date must be within 60 days. If the maturity date is less than 15 days from the date
- ------- of this request, you may want to contact your custodian bank to prevent automatic reinvestment of the account.
AUTHORIZATIONS:
SHAREHOLDER AUTHORIZATION: I hereby authorize Investors Fiduciary Trust Company to deposit the assets in my existing IRA, qualified
employer plan or Section 403(b) account according to the terms stated in this request to Transfer IRA Assets Form. I hereby
acknowledge that strict requirements must be met to qualify for tax-free rollover or transfer treatment; I hereby certify that the
source of the transfer or rollover contribution qualifies the contribution as such.
- ------------------------------------------------------------ --------------------------------------------
Signature Date
AUTHORIZED SIGNATURE:
Your present Custodian may require you to obtain a signature guarantee.
Signature guaranteed by:
-----------------------------------------------------------------------
Bank or Firm
-----------------------------------------------------------------------
Officer's Signature Title
CUSTODIAN AUTHORIZATION: Investors Fiduciary Trust Company hereby accepts its appointment as Custodian of the above IRA account and
upon receipt of assets, will deposit such assets in a Jackson National Capital Management Funds IRA on behalf of the Depositor
authorizing this transfer or special rollover.
Accepted By: INVESTORS FIDUCIARY TRUST COMPANY
IF YOU HAVE ANY PROBLEMS COMPLETING THIS TRANSFER, CALL 1/800/888-FUND.
</TABLE>
10
<PAGE> 14
A VARIETY OF INVESTMENT OPPORTUNITIES AND SERVICES TO MEET YOUR FINANCIAL NEEDS
CHOOSE AMONG THE JACKSON NATIONAL CAPITAL MANAGEMENT FUNDS TO FIT YOUR
INVESTMENT OBJECTIVES
<TABLE>
<S> <C> <C>
IF YOU'RE SEEKING . . . SELECT . . . WITH THIS INVESTMENT FOCUS . . . .
Preservation of capital and maintenance Jackson National Money Market Fund Invests in high-quality, short-term
of liquidity money market instruments.
To accept moderate to high levels of Jackson National Income Fund Invests primarily in investment-grade
market risk and low to moderate levels debt securities.
of financial risk.
To accept risk to principal Jackson National Growth Fund Invests in a statistically selected
sample of the 500 stocks in the S&P
500 Index.
To accept greater market risks than Jackson National Total Return Fund Invests in stocks, bonds and money
portfolios investing solely in debt market instruments.
investments.
Current income exempt from federal Jackson National Tax-Exempt Fund Invests in a diversified portfolio of
income tax. (NOT AVAILABLE FOR IRA ACCOUNTS) municipal obligations, the interest
from which is exempt from federal income
taxes.
</TABLE>
The use of this material is authorized only when preceded or accompanied
by a Jackson National Capital Management Funds prospectus. For more complete
information about any of the Funds listed above, including charges and expenses,
please call 1/800/888-FUND to obtain a prospectus. Please read it carefully
before you invest or send money.
There are special risk considerations associated with mutual fund investing.
11
<PAGE> 15
FOR ADDITIONAL INFORMATION AND A PROSPECTUS, WRITE OR CALL:
FUND
Jackson National Capital Management Funds
P.O. Box 419102
Kansas City, MO 64141-6102
800/888-FUND
CUSTODIAN/TRANSFER AGENT
Investors Fiduciary Trust Company
P.O. Box 419102
Kansas City, MO 64141-6102
800/888-FUND
INVESTMENT ADVISER
Jackson National Financial Services, Inc.
5901 Executive Drive
Lansing, MI 48911
800/USE-JNLI
The use of this brochure is authorized only when preceded or accompanied by a
Jackson National Capital Management Funds prospectus containing detailed
information, including investment objectives and policies, fees, and other
expenses. It is important to read a prospectus before you invest or send money.
To obtain a prospectus, call or write The Fund or Custodian/Transfer Agent.
Jackson National Financial Services, Inc., is an NASD member.
12
<PAGE> 16
INTENTIONALLY LEFT BLANK
<PAGE> 17
INTENTIONALLY LEFT BLANK
<PAGE> 1
EX-99.B14-403b
JACKSON NATIONAL CAPITAL MANAGEMENT FUNDS
SECTION 403(b)(7)
CUSTODIAL
AGREEMENT
Complete all sections of the Custodial Account Application.
[JNCMF LOGO]
I
<PAGE> 2
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Page
How to Use This Document.................................................. III
Definitions............................................................... 1
Establishment of Account.................................................. 1
Contributions............................................................. 1
Investments............................................................... 2
Distribution of Assets of Account......................................... 2
Responsibilities and Duties of Custodian.................................. 3
Fees and Expenses of the Custodian........................................ 4
Registration or Removal of Custodian...................................... 4
Amendment and Termination................................................. 4
Loans..................................................................... 4
Miscellaneous............................................................. 5
Section 403(b)(7) Custodial Account Application........................... 6
(Remove for processing)
Asset Transfer Authorization Form for Section 403(b)(7)
Custodial Account........................................................ 9
(Remove for processing - if applicable)
Salary Reduction Agreement for 403(b)(7) Custodial Account............... 11
(Remove for processing - if applicable)
Section 403(b)(7) Custodial Account Worksheet #1 for Calculating Maximum
403(b) Salary Reduction Contributions and 403(b) Exclusion Allowance...... 12
Section 403(b)(7) Custodial Account Worksheet #2 Special Rules............ 13
II
<PAGE> 3
- --------------------------------------------------------------------------------
WELCOME TO JACKSON NATIONAL CAPITAL MANAGEMENT FUNDS
- --------------------------------------------------------------------------------
RELATIONSHIP
Jackson National Financial Services, Inc., is the Investment Adviser to Jackson
National Capital Management Funds.
FLEXIBILITY
Jackson National Capital Management Funds offers a variety of investment
objectives, so you can choose the funds that match your personal financial
goals. You can exchange one fund for another as your investment goals change,
simply by calling our toll-free telephone number.
SERVICE
Call tollfree, for prompt, courteous, and knowledgeable answers to any
questions you may have about your account.
ELIGIBILITY
As an Employee of an Educational Institution or of a Tax-Exempt, Nonprofit
Organization, organized and operated for other specific purposes, you may
establish a 403(b)(7) Custodial Account. Refer to sections 501(a), (c)(3) and
170 (b)(1)(a)(i) of the Code.
ADVANTAGES
You are not taxed on current year's contributions that do not exceed the annual
limits. Investment earnings accumulate tax free until distribution.
LOANS
Upon written application to the Custodian, the Custodian may make a loan to an
Employee from his other Custodial Account. Only one loan may be made to an
Employee in any year. Loans are subject to certain other restrictions specified
in the Custodial Agreement and the Internal Revenue Code. In addition, the
Custodian has reserved the right to implement rules and impose conditions on a
uniform basis in connection with the making and administration of loans as it
deems necessary. For example, the Custodian may require that an Employee
maintain a specified, substantial Account balance before becoming eligible to
apply for a loan. Also, the Custodian may charge a loan application fee and an
additional annual fee for servicing loans. An Employee who applies for and
receives a loan must adhere to the terms of the Promissory Note and Security
Agreement executed in connection with the loan.
Any failure to pay principal or interest, when due, on any loan may be treated
as a taxable distribution from the Custodial Account and may result in other
adverse tax consequences (such as the loss of the Custodial Account's
tax-exempt status).
- --------------------------------------------------------------------------------
HOW TO USE THIS DOCUMENT
- --------------------------------------------------------------------------------
1. EASY TO USE. Read all the information in this booklet.
2. REMOVE the Section 403(b)(7) Custodial Account Application. Be sure to
complete and sign the Application.
3. TO TRANSFER an existing 403(b)(7) account to Jackson National Capital
Management Funds, you must also complete and sign the Asset Transfer
Authorization Form for Section 403(b)(7) Custodial Account. Be sure to complete
and sign the appropriate form.
4. PROVIDED FOR YOUR USE is the Salary Reduction Agreement for 403(b)(7)
Custodial Account and Worksheet #1 and Worksheet #2.
5. DETACH the appropriate forms for completion, and keep the remainder of this
document for your tax records.
THANK YOU FOR THE INTEREST YOU HAVE EXPRESSED
IN JACKSON NATIONAL CAPITAL MANAGEMENT FUNDS.
III
<PAGE> 4
- --------------------------------------------------------------------------------
ARTICLE I DEFINITIONS
- --------------------------------------------------------------------------------
1.1 ACCOUNT: The Custodial Account established and maintained under this
Agreement on behalf of the Employee pursuant to Section 403(b)(7) of the Code.
1.2 ACCOUNT HOLDER: The Employee, or, after the death of the Employee, the
beneficiary of the Employee, or executor or administrator of the estate of the
Employee entitled to direct investment of assets held in the Account.
1.3 AGREEMENT: The Jackson National Capital Management Funds Section 403(b)(7)
Custodial Account as set forth herein.
1.4 APPLICATION: The Application for the Jackson National Capital Management
Funds Section 403(b)(7) Custodial Account executed by the Employee and the
Custodian providing for the establishment of the Account in accordance with the
terms and conditions of this Agreement.
1.5 BENEFICIARY: The person or persons designated in accordance with the
provisions of Article 5.6 to receive any undistributed amounts credited to the
Account upon the death of the Employee.
1.6 CODE: The Internal Revenue Code of 1986, as amended, and including any
regulations or rulings issued thereunder.
1.7 COMPANY: Jackson National Capital Management Funds in which contributions
to the Account shall be invested.
1.8 CUSTODIAN: Investors Fiduciary Trust Company or any successor thereto
appointed in accordance with the provisions of Article 8, provided that such
successor is either a bank or another person who satisfies the requirements of
Section 401(f)(2) of the Code.
1.9 DIRECT CONTRIBUTION: The amount, other than a Salary Reduction
Contribution, contributed by the Employer to the Account.
1.10 DISABILITY: A determination that the Employee is unable to engage in any
substantial, gainful activity by reason of a medically determinable physical or
mental impairment which can be expected to result in death or to be of
long-continued and indefinite duration.
1.11 EMPLOYEE: The individual who has executed the Application and who is
employed by the Employer on a full or part-time basis or who is a former or
retired employee of the Employer.
1.12 EMPLOYER: The employer that is:
(a)described in Section 501(c)(3) of the Code and exempt from tax under Section
501(a) of the Code; or
(b)a State, a political subdivision of a State, or an agency or instrumentality
thereof, but only with respect to employees who perform or have performed
services for an educational organization described in Section 170(b)(1)(A)(ii)
of the Code;
and, except with respect to an Account to which no contributions other than
rollovers or transfers are made, the Employer that has executed the
Application.
1.13 ERISA: The Employee Retirement Income Security Act of 1974, as amended,
including any regulations issued thereunder.
1.14 FINANCIAL HARDSHIP: A determination that the Employee has an immediate and
heavy financial need requiring a distribution from the Account. Any
determination of the existence of a qualifying financial hardship on the part
of the Employee, and the amount required to be distributed to meet the need
created by the hardship, shall be made in accordance with the rules and
regulations under Section 403(b)(7) of the Code. Contact the Custodian for this
form.
1.15 FUND(S): One or more of the regulated investment companies offered by
Jackson National Capital Management Funds, a Massachusetts Trust, as available
investments under this Agreement.
1.16 SALARY REDUCTION AGREEMENT: The Salary Reduction Agreement described in
Article 3.2.
1.17 SALARY REDUCTION CONTRIBUTION: The amount contributed by the Employer to
the Account in accordance with a Salary Reduction Agreement.
- --------------------------------------------------------------------------------
ARTICLE II ESTABLISHMENT OF ACCOUNT
- --------------------------------------------------------------------------------
2.1 PURPOSE: This Agreement is intended to provide for the establishment and
administration of an Account to receive contributions by the Employer on behalf
of the Employee in accordance with Section 403(b)(7) of the Code.
2.2 ESTABLISHMENT OF ACCOUNT: The Custodian shall establish and maintain the
Account for the benefit of the Employee according to the terms and conditions
of this Agreement. The name, address and Social Security number of the Employee
and Beneficiary are set forth on the Application, and it shall be the
obligation of the Employee to notify the Custodian of any changes thereto. The
Application and, if applicable, the Salary Reduction Agreement, are
incorporated herein by reference. The Account will become effective upon
acceptance by or on behalf of the Custodian at its offices, as evidenced by
written confirmation to the Employee bearing the name of the Custodian.
- --------------------------------------------------------------------------------
ARTICLE III CONTRIBUTIONS
- --------------------------------------------------------------------------------
3.1 EMPLOYER CONTRIBUTIONS: The Employer shall make Salary Reduction
Contributions to the Account on behalf of the Employee in accordance with the
Salary Reduction Agreement between the Employer and the Employee as described
in Article 3.2, subject to the limitations of Articles 3.4, 3.5, and 3.6.
3.2 SALARY REDUCTION AGREEMENT: The Salary Reduction Agreement shall be a
legally binding agreement between the Employer and the Employee whereby the
Employee irrevocably agrees to take a reduction in salary or to forego an
increase in salary with respect to amounts earned after the agreement's
effective date, and whereby the Employer agrees to contribute the amount of
salary reduced or foregone by the Employee to the Account. The Employer and
Employee shall not enter into more than one such Salary Reduction Agreement in
any one taxable year of the Employee. The Salary Reduction Agreement may be
terminated at any time by the Employee with respect to amounts not yet earned
by the Employee.
3.3 LIMITATIONS IN GENERAL: The Employee shall compute and determine the
maximum amount that may be contributed on behalf of the Employee in accordance
with the Employee's exclusion allowance, as defined in Section 403(b)(2) of the
Code, and in accordance with the applicable limitations under Section 415(c) of
the Code. Neither the Custodian nor the Company shall have any liability or
responsibility with respect to such computations or determinations, or for any
tax imposed on any excess contributions that exceed the limitations or
exclusion allowance.
3.4 CONTRIBUTION LIMITATIONS:
(a) No amount shall be contributed on behalf of the Employee for any
limitation year in excess of the applicable limitations of Section 415(c) of
the Code. In the absence of a special election by the Employee under Section
415(c)(4) of the Code, the amount contributed shall not exceed the lesser
of:
(i) $30,000 (or, if greater, one-fourth the defined benefit plan dollar
limitation in effect under Section 415(b)(1) of the Code for the
limitation year); or
(ii) 25 percent of the Employee's compensation (within the meaning of
Section 415(c)(3) of the Code) for the limitation year.
(b) The term "limitation year" shall mean the calendar year, unless the
Employee elects to change the limitation year to another 12-month period
by attaching a statement to his or her federal income tax return in
accordance with the regulations under Section 415 of the Code. If the
Employee is in control (within the meaning of Code Section 414(b) or (c),
as modified by Code Section 415(h) of the Employer, the limitation year
shall be the same as the limitation year of the Employer under Section 415
of the Code.
(c) If the Employer, or any affiliated employer as described in Section 415(h)
of the Code, makes contributions on behalf of the Employee to any other
annuity contract described in Section 403(b) of the Code, then the
contributions to such annuity contract shall be combined with the
contributions to the Account for purposes of the limitations of subsection
(a). If the Employee is covered by a qualified plan sponsored by an entity
controlled by the Employee, then contributions to such a plan shall also
be included for the purposes of the limitations of subsection (a).
3.5 EXCLUSION FROM GROSS INCOME: For federal tax purposes, the Employee may
exclude from gross income for any taxable year, the Employer contributions that
are made to the Account, to the extent such contributions do not exceed the
Employee's exclusion allowance under Section 403(b)(2) of the Code for the
taxable year.
3.6 EXCESS CONTRIBUTIONS: Any excess contributions (as defined in Section
4973(c) of the Code) that are made to the Account shall be subject to the 6
percent excise tax of Section 4973(a) of the Code. Neither the Custodian nor
the Company shall have any duty or responsibility for determining whether any
contributions to the Account are excludable from the Employee's gross income,
or for assuring that any contributions to the Account do not constitute excess
contributions for purposes of Code Section 4973. If, during any taxable year
the Employer contributes an amount which is an "excessive contribution," such
excess contribution and any income attributable thereto shall, upon the written
request of the Employee to the Custodian specifying the amount of such excess
contribution and income, be paid to the Employee by the Custodian, or, at the
Employee's election, be applied toward a contribution for the next year.
3.7 LIMITATION ON SALARY REDUCTION CONTRIBUTIONS:
(a) Employer contributions that are made to the Account pursuant to a
Salary Reduction Agreement shall not exceed the amount of $9,500, as
adjusted in accordance with
1
<PAGE> 5
Section 402(g)(4) of the Code, or such greater amounts as may be
permitted with respect to the Employee for the taxable year under
Section 402(g)(8) of the Code, reduced by the aggregate amounts
contributed in any calendar year at the election of the Employee to
any qualified cash and deferred arrangement described in Section 401(k)
of the Code, any simplified employee pension described in Section
408(k)(6) of the Code, and any eligible deferred compensation plan
described in Section 457 of the Code.
(b) Notwithstanding any provision of this Agreement to the contrary, if
the Employee determines that an amount contributed during a taxable
year to the Account exceeds the limitation set forth in subsection (a),
and no later than March 1 of the following taxable year notifies the
Custodian in writing of the excess amount the Employee has determined,
then the Custodian shall distribute such excess amount, plus any income
or minus any losses allocable thereto, to the Employee no later than
the following April 15. The Employee shall have the sole responsibility
for timely allocating any excess deferrals to the Account and notifying
the Custodian in accordance with these procedures.
(c) Neither the Custodian nor the Company shall have any duty or
responsibility for determining whether any contributions to the Account
constitute excess deferrals as described in Section 402(g)(2)(A) of the
Code, or for assuring that any excess deferrals are timely allocated to
the Account in accordance with the procedures of Section
402(g)(2)(A)(i) of the Code.
3.8 ROLLOVER CONTRIBUTIONS AND TRANSFERS:
(a) The Employee shall be permitted to make a rollover contribution to
the Account of an amount received by the Employee that is attributable
to participation in another annuity contract or Custodial Account
described in Section 403(b) of the Code, provided such rollover
contribution complies with all requirements of Section 403(b)(8) or
Section 408(d)(3)(A)(iii) of the Code, whichever is applicable.
(b) The Custodian may accept a direct transfer of assets to the Account
on behalf of the Employee from another annuity contract or Custodial
Account described in Section 403(b) of the Code to the extent
permitted by the Code and the regulations and rulings thereunder. The
Employee shall not request or initiate a transfer from a contract or
account covered by ERISA, unless the transferee Account is part of an
employee benefit plan which provides distribution restrictions
which meet the requirements of Section 205 of ERISA and the regulations
thereunder with respect to any amount transferred.
(c) Neither the Custodian nor the Company shall have any duty or
responsibility for determining whether any rollover contribution or
transfer of assets by or on behalf of the Employee pursuant to this
Article 3.6 is a proper rollover contribution or transfer of assets
under the Code, or for the tax treatment to the Employee of any
transfer or rollover.
(d) The Employee reserves the right to transfer or roll over the assets
of the Account to such other form of annuity contract or Custodial
Account described in Section 403(b) of the Code or to such Individual
Retirement Account (IRA) or other plan established pursuant to Section
408 of the Code as the Employee may determine, upon written
instructions to the Custodian, in a form acceptable to the Custodian,
provided, however, that the Custodian shall have no responsibility for
the tax treatment to the Employee of any such transfer or rollover.
(e) The Custodian shall not be liable for losses arising from the acts,
omissions, or delays or other inaction of any party transferring assets
to the Account or receiving assets transferred from the Account
pursuant to this Article.
3.9 MANNER OF MAKING CONTRIBUTIONS: All contributions to the Account shall be
paid directly to the Custodian. Contributions may be made by check or bank
wire. Contributions shall be preceded or accompanied by written instructions
directing the investment of the amount contributed on behalf of the Employee in
accordance with Article 4.1.
- --------------------------------------------------------------------------------
ARTICLE IV INVESTMENTS
- --------------------------------------------------------------------------------
4.1 INVESTMENT OF ACCOUNT: All contributions to the Account, and all assets in
the Account, shall be invested in the Fund(s) in accordance with instructions
given to the Custodian by the Account Holder in a manner acceptable to the
Custodian. By giving such instructions, the Account Holder will be deemed to
have acknowledged receipt of the then-current prospectus of any Fund in which
the Account Holder instructs the Custodian to invest such contributions or
assets. If the Custodian receives any contribution to the Account that is not
accompanied by acceptable instructions directing its investment, the Custodian
may hold or return all or a part of the contribution, uninvested, without
liability for loss of income or appreciation, pending receipt of acceptable
instructions.
4.2 INVESTMENT ADVICE: The Account Holder agrees that neither the Custodian nor
the Company undertakes to provide any advice with respect to the investment of
the Account, and that the responsibility of the Custodian to invest in shares
of a particular Fund, pursuant to the directions of the Account Holder, does
not constitute an endorsement by the Custodian of that Fund. Neither the
Custodian nor the Company shall be liable for any loss that results from the
exercise of control over the Account by the Account Holder.
4.3 ACCOUNT EARNINGS: All dividends, capital gains distributions and other
earnings received by the Custodian on any shares held in the Account, shall be
automatically reinvested in additional shares.
4.4 INVESTMENT EXCHANGES: The Account Holder may direct the Custodian to redeem
any or all shares of any Fund that are held in the Account and to reinvest the
proceeds in any other Fund available under this Agreement. Any such exchange
transaction shall conform with the provisions of the current prospectus for the
applicable Fund.
4.5 RECORD OWNERSHIP: Voting of Shares: All shares of the Company acquired by
the Custodian pursuant to this Agreement shall be registered in the name of the
Custodian or its nominee. The Custodian shall mail or transmit to the Account
Holder all notices, prospectuses, financial statements, proxies and proxy
soliciting materials relating to the shares held in the Account. The Custodian
shall not vote any such shares except in accordance with written instructions
received from the Account Holder, provided however, that the Custodian may, in
the absence of instructions, vote "present" for the sole purpose of allowing
such shares to be counted for establishment of a quorum at a shareholder's
meeting.
- --------------------------------------------------------------------------------
ARTICLE V DISTRIBUTION OF ASSETS OF ACCOUNT
- --------------------------------------------------------------------------------
5.1 REQUEST FOR DISTRIBUTION: The Custodian shall distribute the assets of the
Account to the Employee upon receipt by the Custodian of a written request for
distribution submitted by the Employee, in a form acceptable to the Custodian,
subject to the limitations of Article 5.2.
5.2 LIMITATIONS ON DISTRIBUTIONS: Except as may otherwise be provided in
Article 3.6, the assets of the Account shall not be distributed to the Employee
before the Employee attains age 59 1/2 unless the Employee has:
(a) separated from the service of the Employer,
(b) incurred a Disability, or
(c) encountered Financial Hardship.
Any distribution that is made to the Employee for reason of Financial Hardship
shall not exceed the amount of Employer contributions made to the Account,
pursuant to a salary reduction agreement with the Employee, excluding earnings
thereon.
5.3 METHOD OF DISTRIBUTION: Subject to the limitations of this Article 5, the
Employee may elect to have distribution of the assets of the Account made in
one or a combination of the following ways:
(a) lump-sum payment; or
(b) monthly, quarterly or annual installment payments over a period certain
not to exceed the life expectancy of the Employee or the joint and last
survivor life expectancy of the Employee and his or her Beneficiary
in a manner that satisfies the minimum distribution requirements of
Article 5.4.
If no election of the method of distribution is made by the Employee within 30
days of receipt by the Custodian of the written request for distribution
referred to in Article 5.1, the Custodian shall make such distribution to the
Employee in a lump-sum payment of cash.
5.4 MINIMUM DISTRIBUTION REQUIREMENTS PRIOR TO DEATH OF EMPLOYEE:
(a) COMMENCEMENT OF DISTRIBUTIONS: Notwithstanding any provision of this
Agreement to the contrary, distribution of the Account shall commence
no later than the "Required Beginning Date." For any Employee who
attained age 70 1/2 prior to January 1, 1988, the Required Beginning
Date is the April 1 following the calendar year in which the Employee
attains age 70 1/2 or terminates employment, whichever is later. For
any employee who attained age 70 1/2 in 1988, and had not retired by
January 1, 1989, the Required Beginning Date is April 1, 1990. For any
other Employee who attained age 70 1/2 after December 31, 1987, the
Required Beginning Date is April 1 following the calendar year
in which the Employee attains age 70 1/2, regardless of whether the
Employee has then retired.
(b) MINIMUM AMOUNTS TO BE DISTRIBUTED: The minimum amount to be distributed
to the Employee for each taxable year, beginning no later than the
Required Beginning Date under subsection (a) above, must equal or
exceed the minimum distribution required under Sections 401(a)(9) and
403(b)(10) of the Code and must meet the incidental death benefit
requirement of these Sections.
5.5 DISTRIBUTION UPON DEATH OF EMPLOYEE: In the event the Employee dies prior
to the complete distribution of the assets of the Account, all assets remaining
in the Account shall be distributed to the Employee's Beneficiary in a lump-sum
payment or in monthly, quarterly or annual installment payments over a
specified period as selected in writing by the Beneficiary in accordance with
the following rules:
2
<PAGE> 6
(a) WHERE DISTRIBUTION HAD ALREADY COMMENCED:
If distribution to the Employee had already commenced, and the Employee
died after the Employee's Required Beginning Date, the assets of the
Account shall be distributed to the Beneficiary at least as rapidly
as under the method of distribution in effect prior to the Employee's
death.
(b) FIVE-YEAR RULE: If the Employee died before the Employee's Required
Beginning Date, the assets of the Account shall be distributed to the
Beneficiary by December 31 of the calendar year which contains the
fifth anniversary of the death of the Employee.
(c) EXCEPTION FOR DISTRIBUTIONS OVER LIFE EXPECTANCY: Notwithstanding
subsection (b) above, the assets of the Account may be distributed to
the Beneficiary in installment payments over a period certain not
exceeding the Beneficiary's life expectancy, provided such distribution
commences by December 31 of the calendar year immediately following the
year of the Employee's death or, if the
Beneficiary is the surviving spouse of the Employee, by December 31 of
the later of (1) the calendar year immediately following the calendar
year in which the Employee died or (2) the calendar year in which the
Employee would have attained age 70 1/2.
Notwithstanding any provision of this Agreement to the contrary, to the extent
permitted under regulation, ruling procedures or notice of the Internal Revenue
Service, the minimum distribution calculated in accordance with Code sections
403(b)(10) and 401(a)(9) may be taken from any 403(b) annuity or account of the
Employee. If the Beneficiary dies while receiving payments from the Account,
all remaining assets in the Account shall be distributed as soon as practicable
to the estate of the Beneficiary.
5.6 DESIGNATION OF BENEFICIARY: The Employee may, from time to time, designate
any person, persons or entity as the Beneficiary who shall receive any
undistributed assets held in the Account at the time of the Employee's death.
Any beneficiary designation by the Employee shall be made on a form prescribed
by the Custodian, and shall be effective only when filed with the Custodian
during the lifetime of the Employee. If the Employee fails to designate a
Beneficiary in the manner provided above, or if the Beneficiary designated by
the Employee predeceases the Employee, the assets of the Account shall be
distributed, upon the death of the Employee, in the following order or
priority: first to the Employee's surviving spouse, if any, and second, to the
estate of the Employee.
Notwithstanding the foregoing, if any direct contributions are made to the
Account, or if this Agreement constitutes part of an "employee benefit plan"
under ERISA, then the Beneficiary of a married Employee must be the spouse of
the Employee, unless the spouse of the Employee consents in writing to
designation of a different Beneficiary, and such consent acknowledges the
effect of the designation, specifies the nonspouse Beneficiary designated, and
is witnessed by a notary public. Furthermore, such a designation of a nonspouse
Beneficiary may be changed only if the spouse of the Employee provides a new
consent that meets all requirements of the preceding sentence.
5.7 DISTRIBUTIONS PURSUANT TO QUALIFIED DOMESTIC RELATIONS ORDERS: In the case
of an Account that is part of an "employee pension benefit plan" (as defined in
ERISA), nothing in this Agreement shall prohibit distribution to any person in
accordance with the terms of a "qualified domestic relations order" as defined
in Section 206(d) of ERISA.
5.8 DIRECT ROLLOVERS. This section applies to distributions made on or after
January 1, 1993. Notwithstanding any provision of this Agreement to the
contrary that would otherwise limit a distributee's election under this
section, a distributee may elect at the time and in the manner prescribed by
the Custodian and fund transfer agent, to have any portion of an eligible
rollover distribution paid directly to an eligible retirement plan specified by
the distributee in a direct rollover. For the purpose of this section, the
following definitions apply:
(a) Eligible rollover distribution: An eligible rollover is any
distribution of all or any portion of the balance to the credit of the
distributee, except that an eligible rollover distribution does not
include: any distribution that is one of a series of substantially equal
periodic payments (no less frequently than annually) made for the life
(or life expectancy) of the distributee or the joint lives (or joint
life expectancies) of the distributee and the distributee's designated
beneficiary, or for a specified period of ten years or more; any
distribution to the extent such distribution is required to comply with
the minimum distribution and incidental benefit requirements of section
401(a)(9) and 403(b)(10) of the Code; and the portion of any
distribution that is not includible in gross income. An eligible
rollover distribution also does not include any other amounts that may
be excluded under regulations, procedures, notices, or rulings
interpreting the term eligible rollover distribution under sections
401(a)(31), 402, or 403(b) of the Code.
(b) Eligible retirement plan: An eligible retirement plan is an individual
retirement account described in Section 408(a) of the Code, an
individual retirement annuity described in Section 408(b) of the Code,
or another 403(b) annuity that accepts the distributee's eligible
rollover distribution. However, in the case of an eligible rollover
distribution to the surviving spouse, an eligible retirement plan is
an individual retirement account or individual retirement annuity.
(c) Distributee: A distributee includes an Employee or former Employee. In
addition, the Employee's or former Employee's surviving spouse and the
Employee's or former Employee's spouse or former spouse who is the
alternate payee under a qualified domestic relations order, as defined
in Section 414(p) of the Code, are distributees with regard to the
interest of the spouse or former spouse.
(d) Direct rollover: A direct rollover is a payment by the plan to the
eligible retirement plan specified by the distributee.
(e) The Custodian and fund transfer agent may prescribe reasonable
procedures for the election of direct rollovers under this section,
including, but not limited to, requirements that the distributee provide
the Custodian with adequate information, including, but not limited to:
the name of the eligible retirement plan to which the rollover is to be
made; a representation that the recipient plan is an individual
retirement plan or a 403(b) annuity, as appropriate; acknowledgement
from the recipient plan that it will accept the direct rollover; and
any other information necessary to make the direct rollover.
- --------------------------------------------------------------------------------
ARTICLE VI RESPONSIBILITIES AND DUTIES OF CUSTODIAN
- --------------------------------------------------------------------------------
6.1 ASSET RETENTION: The Custodian shall hold all contributions to the
Account which are received by it subject to the terms and conditions of this
Agreement and for the purposes set forth herein. The Custodian shall be
responsible only for such assets as shall actually be received by it.
6.2 RECORDING AND REPORTS: The Custodian shall file such reports with the
Internal Revenue Service as may be required to be filed by the Custodian (not
including such reports as may be required to be filed by the Employer) under
Treasury Regulations. The Custodian, the Employer, Employee and Beneficiary
shall furnish to one another such information relevant to the Account as may be
required in connection with such reports. Unless the Employee (or Beneficiary,
where applicable) sends the Custodian written objection to a report within
sixty (60) days after its receipt, the Employee (or Beneficiary, where
applicable) shall be deemed to have approved such report, and in such case, the
Custodian shall be forever released and discharged from all liability and
accountability to anyone with respect to all matters and things included
therein. The Custodian may seek a judicial settlement of its accounts. In any
such proceeding, the only necessary party thereto in addition to the Custodian
shall be the Employee.
6.3 LIMITATIONS ON RESPONSIBILITIES AND DUTIES:
(a) The Custodian shall not be responsible in any way for the collection of
contributions provided for under this Agreement, the selection of the
investments for the Account, the purpose or propriety of any
distribution made pursuant to Article 5 hereof, or any other action
taken at the direction of the Employee (or Beneficiary, where
applicable). The Custodian shall not be obliged to take any action
whatsoever with respect to the Account except upon receipt of
directions in a form acceptable to the Custodian from the Employee (or
Beneficiary, where applicable). The Custodian shall be under no
obligation to determine the accuracy or propriety of any such
directions and shall be fully protected in acting in accordance
therewith.
(b) The Custodian is an agent appointed by the Account Holder to perform
solely the duties assigned to it under the Agreement, it being
acknowledged that certain of such duties may be performed by the
Custodian in any event pursuant to one or more other contractual
arrangements or relationships. The Custodian shall not be deemed to be
a Fiduciary under ERISA in carrying out the following duties:
(1) to receive contributions pursuant to the provisions of the
Agreement;
(2) to hold, invest and reinvest the contributions in Fund shares;
(3) to register any property held by the Custodian in its own name, or
in nominee or bearer form that will pass delivery; and
(4) to make distributions from the Account in cash or in Fund shares
pursuant to the provisions of the Agreement.
(5) to process loans from an Employee's Account.
(c) The Employer shall be solely responsible for assuring compliance at all
times with the nondiscrimination requirements of Code Section
403(b)(12), and the Custodian shall not be responsible in any way for
such compliance.
6.4 INDEMNIFICATION OF CUSTODIAN: The Employee and the successors of the
Employee, including any executor or administrator of the Employee, shall to the
fullest extent permitted by law, at all times fully indemnify and save harmless
the Custodian, its successors and assigns from any and all claims, actions, or
liabilities arising from investments or distributions made or actions taken at
the direction of the Employee, and from any and all other liability whatsoever
(including, without limitation, all reasonable costs incurred in defending
against, or settlement of, such claims, actions or liabilities) which may arise
in connection with this Agreement or the Account, except liability arising from
the gross negligence or willful misconduct of the Custodian.
6.5 LIABILITY OF CUSTODIAN: The Custodian's liability under this Agreement, and
matters which it contemplates, shall be limited to matters arising from the
Custodian's gross negligence or willful misconduct. The Custodian shall be
entitled to rely conclusively upon, and shall be fully protected in any action
or nonaction taken in reliance upon, any written notices or other
communications or instruments believed by the Custodian to be genuine and to
have been properly executed. The Custodian shall not, under any circumstances,
be responsible for the timing, purpose, or propriety of any contribution or of
any distribution made hereunder, nor shall the Custodian incur any liability or
responsibility for any tax imposed on account of any such contribution or
distribution. The Custodian shall not be obligated or expected to commence or
defend any legal action or proceeding in connection with this Agreement unless
agreed upon by the Custodian and Employee, and unless fully indemnified for so
doing to the satisfaction of the Custodian.
3
<PAGE> 7
- --------------------------------------------------------------------------------
ARTICLE VII FEES AND EXPENSES OF THE CUSTODIAN
- --------------------------------------------------------------------------------
7.1 COMPENSATION OF CUSTODIAN: In consideration for its services hereunder, the
Custodian shall be entitled to receive the applicable fees specified in the
Application. The Custodian may substitute a revised fee schedule from time to
time upon 30-days' written notice to the Employee. The Custodian shall be
entitled to such reasonable additional fees as it may from time to time
determine for services required of it and not clearly identified on the fee
schedule.
7.2 CHARGES UPON THE ACCOUNT: Any income taxes or other taxes of any kind
whatsoever that may be levied or assessed upon, or in respect of, the Account
(including any transfer taxes incurred in connection with the investment and
reinvestment of Account assets), expenses, fees and administrative costs
incurred by the Custodian in the performance of its duties (including fees for
legal services rendered to the Custodian), and the Custodian's compensation as
determined under Article 7.1, shall constitute a charge upon the assets of the
Account. At the Custodian's option, such fees, taxes or expenses shall be paid
from the Account or by the Employee. The Custodian may redeem Fund shares, and
use the proceeds of redemption to pay such fees, taxes or expenses.
7.3 LOAN RELATED FEE: The Custodian may charge a loan application and an
additional annual fee for servicing loans.
- --------------------------------------------------------------------------------
ARTICLE VIII RESIGNATION OR REMOVAL OF CUSTODIAN
- --------------------------------------------------------------------------------
8.1 RESIGNATION OR REMOVAL: The Custodian may resign at any time by written
notice to the Employee which shall be effective 30 days after delivery thereof.
The Company shall appoint a successor Custodian who shall accept such
appointment in a writing provided to the Custodian and Employee within such
30-day period. The Custodian may be removed by the Company at any time upon
30-days' written notice to the Custodian, provided that the Company designates
a successor Custodian that accepts such appointment in writing to the Employee
and the Custodian within such 30-day period. Upon such resignation or removal,
the Custodian shall transfer and deliver all assets of the Account and all
records relative thereto to the successor Custodian appointed by the Company,
provided such successor Custodian has, in writing, accepted this Agreement as
it is or may be then amended. Notwithstanding the foregoing, the Custodian is
authorized to reserve such sum of money as it may deem advisable for payment of
all of its fees, compensation, costs and expenses, or for payment of any other
liability constituting a charge on or against the assets of the Account or on
or against the Custodian, and where necessary, may liquidate shares in the
Account for such payments. Any balance of such reserve remaining after the
payment of all such items shall be paid over to the successor Custodian.
8.2 LIABILITY FOR SUCCESSOR'S ACTS: Upon its resignation or removal, the
Custodian shall not be liable for the acts or omissions of any successor
Custodian. Upon the transfer of assets of the Account to a successor Custodian,
the resigning or removed Custodian shall be relieved of all further liability
with respect to this Agreement, the Account and the assets thereof.
- --------------------------------------------------------------------------------
ARTICLE IX AMENDMENT AND TERMINATION
- --------------------------------------------------------------------------------
9.1 AMENDMENT OF AGREEMENT:
(a) The Employee, Employer, and Custodian hereby delegate to the Company
the power to amend this Agreement, including any retroactive amendment
necessary for the purpose of conforming the Agreement to the
requirements of the Code. The Company shall deliver written notice of
any such amendment to the Employee, Custodian and any Employer who is
party to this Agreement.
(b) No amendment to this Agreement shall cause or permit:
(i) any part of the assets of the Account to be used for, or diverted
to, purposes other than for the exclusive benefit of the
Employee or Beneficiary, except with regard to payment of the
expenses of the Custodian and the Company as authorized by the
provisions of this Agreement and except to the extent required
by law;
(ii) the Employee to be deprived of any accrued benefits under this
Agreement unless such amendment is required for the purpose of
conforming the Agreement to the requirements of any law,
government regulation or ruling; or
(iii) the imposition of any additional duties or obligations on the
Custodian without its consent.
9.2 TERMINATION OF AGREEMENT: This Agreement shall terminate when all assets in
the Account have been distributed or otherwise transferred out of the Account.
Upon completion of such distribution, the Custodian shall be released from all
further liability with respect to all amounts so paid to the extent permitted
by applicable law.
- --------------------------------------------------------------------------------
ARTICLE X LOANS
- --------------------------------------------------------------------------------
10.1 LOANS MAY BE MADE TO EMPLOYEES ON THE FOLLOWING BASIS:
(a) Upon written application to the Custodian by an Employee, the
Custodian may make a loan to an Employee from his or her vested
Account balance. All loans shall be secured by 50% of the
Employee's vested Account balance. The minimum amount of a loan
shall be $1,000.
(b) In no event shall the total of any outstanding loan to any Employee
exceed the lesser of $50,000 or 50% of the nonforfeitable Account
balance, or such other amount as determined by the Custodian pursuant
to paragraph (g) of this Article X provided, however, that if this
Agreement is part of a plan subject to Title I of ERISA, in no event
shall the loan exceed the 50% limitation. An Employee may not
request more than one loan from an account.
(c) The loan shall bear a reasonable rate of interest as provided in the
Promissory Note incorporated herein by reference. The loan applicant
shall receive a clear statement of the charges involved in the
loan transaction. The statement shall include the dollar amount
financed, the total amount of payments, the annual
percentage rate and the finance charge. Interest payments on the loan
shall be credited to the Employee's Account.
(d) Loans shall be made available to all Employees on a reasonably
equivalent basis.
(e) Any such loan shall be repaid by the Employee over a specified period
of time, in the form and manner selected by the Employee in the Loan
Application to the Custodian. The loan repayment period shall not
extend beyond the first to occur of (i) the above specified period or
(ii) the Employee's Required Beginning Date for taking distributions
from the Account as defined in Article XI of this Agreement. Such
loan must be amortized in level monthly payments, over the term of
the loan. Any such loan shall be for a term of not more than five
years, except that such loan may be paid back over a period
of up to ten years if the loan is used to acquire any dwelling
unit which, within a reasonable time, is to be used as the principal
residence of the Employee. Full or partial payment of a loan shall be
permitted at any time without penalty. Principal payments made by the
Employee shall be reinvested at net asset value; interest payments
are reinvested at the lowest possible offering price.
(f) If a scheduled payment of both principal and interest is not received
by the Custodian within ninety days of the due date, the Custodian
shall declare the loan in default. Late payment notices may be issued
by the Custodian within thirty days of the loan repayment due date.
Neither the mailing by the Custodian nor the receipt by the Employee
of a late payment notice shall be deemed to be a condition precedent
to the loan being declared in default. Such default may result in the
reclassification of the outstanding loan balance as a taxable
distribution which must be reported as such by the Custodian to the
Internal Revenue Service. In the event the Employee does not repay
all or any portion of the principal amount on such loan within the
time prescribed, he or she shall continue to be liable for any
balance on the loan not paid, in addition to interest which will
continue to accrue on the unpaid balance.
(g) With the consent of the Sponsor, the Custodian shall prescribe such
rules, as from time to time it deems necessary, in order to
administer the provisions of this Article X. With the consent of the
Sponsor, the Custodian may also impose additional terms and
conditions in connection with the making of any loan which shall be
as provided in the Employee's promissory note, incorporated herein by
reference, including but not limited to the requirement that an
Employee maintain a minimum Account balance before becoming eligible
for a loan, and that an Employee agrees to a loan service fee to be
charged directly against his or her Account.
4
<PAGE> 8
- --------------------------------------------------------------------------------
ARTICLE XI MISCELLANEOUS
- --------------------------------------------------------------------------------
11.1 RETIREMENT PLAN PROVISIONS SHALL CONTROL: In the event contributions are
being made to the Account pursuant to any retirement plan or program sponsored
by the Employer, to the extent any provisions of this Agreement are
inconsistent with such retirement plan or program, the provisions of the
Employer's retirement plan or program shall control, provided:
(a) such provisions are not contrary to the rules and regulations under
Section 403(b)(7) of the Code; and
(b) such provisions do not impose any additional responsibilities or
duties on the Custodian without its prior consent. The Employer shall
be responsible for delivering the most recent copy of any such
retirement plan or program to the Custodian.
11.2 ERISA REQUIREMENTS: If this Agreement is determined to constitute part of
an "Employee benefit plan" established or maintained by the Employer subject to
Title I of ERISA, then the Employer shall be solely responsible for assuring
such Employee benefit plan complies at all times with the requirements of Title
I of ERISA.
11.3 EXCLUSIVE BENEFIT: The assets of the Account shall not be used for, or
diverted to, purposes other than for the exclusive benefit of the Employee or
his or her Beneficiary. The assets of the Account shall not be subject to the
claims of the creditors of the Employee.
11.4 NONFORFEITABILITY AND NONTRANSFERABILITY: The interest of the Employee in
the balance of the Account shall at all times be nonforfeitable and
nontransferable. All rights under this Agreement are enforceable solely by the
Employee or his or her Beneficiary, or any duly authorized representative of
the Employee or Beneficiary.
11.5 NONALIENATION: The assets of the Account shall not be subject in any
manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, charge, garnishment, execution, or levy of any kind, either
voluntary or involuntary, except with regard to payment of expenses of the
Custodian as authorized by the provisions of the Agreement and except to the
extent required by law.
11.6 NOTICES: Any notice, accounting, or other communication which the
Custodian may give to the Employer or the Employee, shall be deemed given when
mailed to the Employee at the latest address which has been furnished to the
Custodian. Any notice or other communication which the Employer or Employee may
give to the Custodian shall not become effective until actual receipt of said
notice by the Custodian.
11.7 APPLICABLE LAW: This Agreement shall be construed and enforced in
accordance with the laws of Missouri, to the extent not preempted by Federal
Law. No provision of this Agreement shall be construed to conflict with any
provision of an Internal Revenue Service regulation, ruling, release, or other
order which affects, or could affect, the terms of this Agreement or its
compliance with the requirements of Section 403(b)(7) of the Code.
5
<PAGE> 9
JACKSON NATIONAL CAPITAL MANAGEMENT FUNDS [JNCMF LOGO]
SECTION 403(B) (7) CUSTODIAL ACCOUNT APPLICATION
Instructions: Please read the prospectus, and choose the Jackson National
Capital Management Funds (JNCMF) portfolio that fits your investment objective.
Complete this application (please print) and mail to Jackson National Financial
Services, Inc. (JNFSI), P.O. Box 24068, Lansing, MI 48909, or to any of JNFSI's
Regional Offices, or give this application and check (if any) to an authorized
investment dealer who will forward them to Investors Fiduciary Trust Company.
Make your check payable to Investors Fiduciary Trust Company. Checks must be
drawn on U.S. banks in U.S. dollars. Cash not accepted.
<TABLE>
<S><C>
SECTION I
EMPLOYEE
INFORMATION
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
First Name Middle Initial Last Name
- ----------------------------------------------------------------------------------------------------------------------------------
Address (number & street) City State ZIP
- ----------------------------------------------------------------------------------------------------------------------------------
Mailing Address (if different from above) City State ZIP
( ) ( )
- ------------------------------------------------
Daytime Phone Number Evening Phone Number
Social Security or Tax Identification Number Required
--------------------------------------------------
Is owner a U.S. citizen? / / Yes / / No
If no, name country of residence.
-----------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
SECTION II
EMPLOYER
INFORMATION
- ----------------------------------------------------------------------------------------------------------------------------------
Name of Employer
- ----------------------------------------------------------------------------------------------------------------------------------
Employer Address (number & street) City State ZIP
( )
- ----------------------------------------------------------- -------------------------
Contact Name Telephone Number
- ----------------------------------------------------------------------------------------------------------------------------------
SECTION III
INVESTMENT
ACCOUNTS
(Indicate the type(s) of contributions that will be made and the amount of each type.)
/ / A. Current Payroll Contributions: / / C. Rollover Contribution:
(per pay period) If you are making a rollover contribution to your
Jackson National Capital Management Funds
/ / Employee Salary Reduction $ account from another 403(b)(7) Custodial account
------- or an existing Tax-Sheltered Annuity $
/ / B. Transfer from an existing Plan: If you are opening ----------
an existing Tax-Sheltered Annuity or 403(b)(7) Custo- / / D. Annual Custodian Fee:
dial account, please complete the Transfer Form as Include payment of $12.00 for each Jackson
instructed, and forward it with this application. National Capital Management Funds account selected
(see Investment of Contributions section of the
application).
Previous Contributions TOTAL CUSTODIAN FEE REMITTED $
Employee Salary Reduction $ -------------
--------
Employer Direct Contributions (if any) $
--------
/ / E. Allocation of Transfer Amount:
JNCMF Portfolio Percentage JNCMF Portfolio Percentage
% %
--------------- ----------- --------------- ----------
% %
--------------- ----------- --------------- ----------
- ----------------------------------------------------------------------------------------------------------------------------------
SECTION IV
INVESTMENT OF CONTRIBUTIONS
Please list beside each FUND the amount of your contribution you wish credited
to each FUND. The amount of the salary reduction must equal $1,000 per FUND to
be met within a one-year period.
Amount of Salary Reduction per pay period
Jackson National Money Market (250) $
-----------------------------------------
Jackson National Income (253) $ (REGIONAL OFFICE USE ONLY)
----------------------------------------- (affix account number sticker here)
Jackson National Growth (254) $
-----------------------------------------
Jackson National Total Return (255) $ NOTE: Allocation changes must be indicated
----------------------------------------- in writing to the Custodian by the
Initial Investment (Total of above Employee. Please enclose a separate check
four [4] funds) $ payable to IFTC for the Custodian's fee. If
----------------------------------------- the Custodian's fee is not received, the
Custodian's Fee (See Investment Custodian is entitled to liquidate a
Accounts.) $ sufficient amount of shares from your
----------------------------------------- account to cover this fee. This fee is
Total Investment Amount $ subject to change.
-----------------------------------------
FREQUENCY OF CONTRIBUTION: / / Weekly / / Twice a Month / / Monthly
</TABLE>
6
<PAGE> 10
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
SECTION V
RIGHT OF ACCUMULATION
(Attach a separate
sheet if
necessary.)
/ / List any existing JNCMF accounts, other than the MONEY MARKET FUND, that qualify for the reduced sales charge as outlined in
the prospectus.
(REGIONAL OFFICE USE ONLY)
ACCOUNT # NAME RELATIONSHIP TO OWNER ACCOUNT BALANCE
- --------------------- ------------------------------- ---------------------------------------- -----------------------------
- --------------------- ------------------------------- ---------------------------------------- -----------------------------
- --------------------- ------------------------------- ---------------------------------------- -----------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
SECTION VI
INVESTMENT
OBJECTIVES
/ / CURRENT INCOME / / CURRENT INCOME
Preservation of capital and maintenance liquidity. Willing to accept moderate-to-high levels of market risk and
low-to-moderate levels of financial risk.
/ / LONG-TERM GROWTH / / INCOME and CAPITAL APPRECIATION
Fluctuations in Value in line with those of S&P 500 index. Willing to accept risk to principal.
- ------------------------------------------------------------------------------------------------------------------------------------
SECTION VII
EMPLOYEE
FINANCIAL
AND PERSONAL
DATA
ANNUAL MARGINAL LIQUID NET WORTH TOTAL
INCOME TAX BRACKET (Net worth excluding NET WORTH
----------------------------- --------------- home or autos) ---------------
------------------
LIFE INSURANCE COVERAGE SOURCE OF FUNDS FOR THIS INVESTMENT
/ / CASH SAVINGS / / EARNED INCOME
$ / / LIFE INSURANCE or ANNUITY
----------------------------- Check (/ / proceeds / / loan / / cash value)
(amount) / / LIQUIDATION OF SECURITIES - I understand that I will have
to pay an additional sales charge and may incur a tax
Birth Date/Age / / liability.
------------
Marital Status: / / Single / / Married / / Divorced / / Separated
Occupation/Type of Business Work Number ( )
--------------------------------------------------------- -------------------------------
Is applicant an associated person of another NASD FIRM? / / Yes / / No
If YES, name and address of NASD FIRM:
---------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
SECTION VIII
DESIGNATION
OF
BENEFICIARY(IES)
You may specify one or more persons to receive any benefits that may become payable on account of your death. If a Primary
Beneficiary(ies) survives you, payment will be made to your Primary Beneficiary(ies); if not, payment will be made to your surviving
Contingent Beneficiary(ies). If you are not survived by any Primary or Contingent Beneficiary(ies), payment will be made to your
surviving spouse or, if none, your estate. This designation is not valid unless it is received by Investors Fiduciary Trust Company
prior to your death. You may revoke this designation, and designate a different Beneficiary(ies) by completing and filing another
Beneficiary Designation Form.
I hereby designate as my Primary Beneficiary(ies) the person or persons listed below who survive(s) me. If more than one person is
listed, benefits shall be divided according to the percentage indicated. If no percentage is indicated, I intend that all of the
persons listed below who survive me shall receive equal portions.
Primary Beneficiary(ies):
Name SS# Birth Date / /
---------------------------------------- --------------------------------------------- ---------
Address City State ZIP
-------------------------------------- ----------------------------- --------- ----------------
Relationship % of Account
--------------------------------- ----------------------------------------------------------
Name SS# Birth Date / /
---------------------------------------- --------------------------------------------- ---------
Address City State ZIP
-------------------------------------- ----------------------------- --------- ----------------
Relationship % of Account
--------------------------------- ----------------------------------------------------------
If no person(s) named as Primary Beneficiary(ies) survive(s) me, I hereby designate as my Beneficiary(ies) the person or persons
listed below who survives me. If more than one person is listed, benefits shall be divided according to the percentages indicated.
If no percentage is indicated, I intend that all of the persons listed below who survive me shall receive equal portions.
Contingent Beneficiary(ies):
Name SS# Birth Date / /
---------------------------------------- --------------------------------------------- ---------
Address City State ZIP
-------------------------------------- ----------------------------- --------- ----------------
Relationship % of Account
--------------------------------- ----------------------------------------------------------
Name SS# Birth Date / /
---------------------------------------- --------------------------------------------- ---------
Address City State ZIP
-------------------------------------- ----------------------------- --------- ----------------
Relationship % of Account
--------------------------------- ----------------------------------------------------------
</TABLE>
7
<PAGE> 11
<TABLE>
<S><C>
- -------------------------------------------------------------------------------------------------------------------------------
SECTION IX
COMMUNITY
PROPERTY
(Must be signed
by spouse and
witness if
applicable)
SPOUSAL CONSENT - FOR USE IN COMMUNITY OR MARITAL PROPERTY STATES
(This section should be reviewed if either the trust or the residence of the Account Holder is located in a community or marital
property state, and the Account Holder is married and is designating a Beneficiary other than the spouse. It is the Account Holder's
responsibility to determine if this section applies. The Account Holder may need to consult with legal counsel. Neither the
Custodian nor the Sponsor will be liable for any consequences resulting from a failure of the Account Holder to provide proper
spousal consent.)
I am the spouse of the above-named Account Holder. I acknowledge that I have received a full and reasonable disclosure of my
spouse's property and financial obligations. Due to any possible consequences of giving up my community property interest in this
account, I have been advised to consult a tax adviser or attorney for advice.
I hereby give the Account Holder any interest I have in the funds or property deposited in the account and consent to the
Beneficiary designation(s) indicated above. I assume full responsibility for any adverse consequences that may result.
No tax or legal advice was given to me by the Custodian.
- -------------------------------------------------------------------------------- -------------------------------------------
Signature of Spouse Date
- -------------------------------------------------------------------------------- -------------------------------------------
Signature of Spouse Date
- --------------------------------------------------------------------------------------------------------------------------------
SECTION X
SIGNATURE
ACCEPTANCE AND CERTIFICATE
A. EMPLOYEE ACCEPTANCE: I have received, read and agree to the terms and conditions of the Jackson National Capital Management
Funds Section 403(b)(7) Custodial Account Agreement and the current prospectus. I acknowledge that this Account will
automatically have exchange privilege capability within JNCMF. I acknowledge that I am of legal age. I certify, under penalties
of perjury, that: 1) the Tax Identification number shown above on this application is correct, and 2) I am NOT subject to backup
withholding because a) I am exempt from backup withholding, or b) I have not been notified by the Internal Revenue Service (IRS)
that I am subject to backup withholding as a result of failure to report all interest or dividend income on my tax return, or the
IRS has provided notification that I am no longer subject to backup withholding.
**PLEASE NOTE: IF YOU HAVE BEEN NOTIFIED BY THE IRS THAT YOU ARE CURRENTLY SUBJECT TO BACKUP WITHHOLDING, YOU MUST CROSS OUT ITEM
(2) ABOVE AND CHECK HERE. / /
B. THE EMPLOYEE CERTIFIES THAT he or she has conferred with the Employer and agrees that the Employer is an Employer of the type
described in Section 403(b)(1) (A) of the Internal Revenue Code, as amended, and the undersigned and the Employer have
executed the Salary Reduction Agreement for Section 403(b)(7) Custodial Account.
Signature: Date:
------------------------------------------------------------- ------------------------------------
C. CUSTODIAN ACCEPTANCE: Investors Fiduciary Trust Company hereby accepts its appointment as Custodian under the Jackson National
Capital Management Funds Section 403(b)(7) Custodial Account Agreement for the benefit of the Employee named
above, and hereby agrees to the terms and conditions of such Agreement. Accepted by: INVESTORS FIDUCIARY TRUST COMPANY
- ---------------------------------------------------------------------------------------------------------------------------------
REGISTERED
REPRESENTATIVE
- ----------------------------------------------------------------------- ----------------------------------------
Name (print) RR Number
- ----------------------------------------------------------------------- ----------------------------------------
S-Code Date
- ----------------------------------------------------------------------- ----------------------------------------
Signature Region Number
- ---------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
APPROVAL
- ----------------------------------------------------------------------- ----------------------------------------
Name (print) Date
- -----------------------------------------------------------------------
Signature
- ---------------------------------------------------------------------------------------------------------------------------------
FOR DEALER
USE ONLY
- ----------------------------------------------------------------------- ----------------------------------------
Dealer Name Dealer Number
- ----------------------------------------------------------------------- ----------------------------------------
Branch Office Location Branch Office Number
- ---------------------------------------------------------------------------------------------------------------------------------
SECTION XI
ADDITIONAL INFORMATION
(Use when
additional space
is needed to
complete Application)
</TABLE>
8
<PAGE> 12
JACKSON NATIONAL CAPITAL MANAGEMENT FUNDS [JNCMF LOGO]
ASSET TRANSFER AUTHORIZATION FORM FOR
SECTION 403(B)(7) CUSTODIAL ACCOUNT
INSTRUCTIONS: Please complete the following. Upon receipt, Investors Fiduciary
Trust Company will arrange for the transfer on your behalf, and the assets will
be invested in your Jackson National Capital Management Funds Section 403
(b)(7) Custodial Account on the day they are received by Investors Fiduciary
Trust Company. Most insurers or Custodians will accept this transfer
authorization with your signature alone; others require a signature guarantee.
Failure to secure proper signature could delay your transfer. If you are making
a transfer to a new account, please indicate on application. Please check with
your tax adviser about rules relating to 403(b) transfers.
<TABLE>
<S><C>
SECTION I
EMPLOYEE INFORMATION
(Please Print)
Name of Employee:
---------------------------------------------------------------
Social Security Number:
---------------------------------------------------------
Name of Employer:
---------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
SECTION II
EXISTING ANNUITY/
CUSTODIAL ACCOUNT
INFORMATION
(Where your account
is presently held)
Name of Insurer or Custodian:
---------------------------------------------------
Mailing Address:
----------------------------------------------------------------
City: State: ZIP:
-------------------------------- ----------- --------------------
Contract/Account Number:
--------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
SECTION III
TRANSFER
INSTRUCTIONS
Transfer all or part of my existing account as follows:
/ / $ or
------------------
/ / the entire balance in the Section 403(b) Annuity Contract or Section
403 (b)(7) Custodial Account.
- -------------------------------------------------------------------------------------------------------------------------------
SECTION IV
SOURCE OF
CONTRIBUTIONS
A. / / Employee voluntary pretax contributions made through
salary reductions $
--------------
B. / / Employee mandatory (matched) pretax contributions
required in order to receive Employer Contributions $
--------------
C. / / Employer Contributions $
--------------
D. / / Earnings $
--------------
- -------------------------------------------------------------------------------------------------------------------------------
SECTION V
TRANSFER AGREEMENT
AND AUTHORIZATION
(a) The above-named Individual hereby irrevocably agrees to surrender his or her entire interest in the Section 403(b) annuity
contract or Section 403(b)(7) Custodial Account identified in Section III above to the issuing insurer or Custodian
thereof for purposes of having the proceeds received by the insurer or Custodian upon surrender transferred directly to
Investors Fiduciary Trust Company for immediate deposit in a Jackson National Capital Management Funds Section 403(b)(7)
Custodial Account established on behalf of the Individual. The above-named Individual certifies, under penalties of perjury,
that no amounts transferred are subject to distribution restriction under the Employee Retirement Income Security Act of 1974
as amended.*
(b) The above-named Individual hereby authorizes Investors Fiduciary Trust Company to take whatever action is necessary to
effect the transfer identified in (a) above and directs Investors Fiduciary Trust Company to deposit the proceeds
received in the Jackson National Capital Management Funds Section 403(b)(7) Custodial Account established on behalf of the
Individual.
</TABLE>
9
<PAGE> 13
<TABLE>
<S><C>
SECTION VI
AUTHORIZATION AND
ACCEPTANCE
(a) INDIVIDUAL ACCEPTANCE: I hereby agree to the terms and conditions set forth in this Asset Transfer Authorization, and
acknowledge having established a Jackson National Capital Management Funds 403(b)(7) Custodial Account through execution of
an Application for Jackson National Capital Management Funds Section 403(b)(7) Custodial Account.
Signature: Date:
--------------------------------------------------------------------------- --------------------------------------
AUTHORIZED SIGNATURE
Your present Custodian may require you to obtain a signature guaranteed by:
- -------------------------------------------------- ---------------------------------------------------------------------------
Bank or Firm Officer's Signature Title
(b) CUSTODIAN ACCEPTANCE: Investors Fiduciary Trust Company hereby agrees to accept the transfer described above and upon
receipt, will deposit the proceeds in the Jackson National Capital Management Funds 403(b)(7) Custodial Account established
on behalf of the Individual.
Accepted by: INVESTORS FIDUCIARY TRUST COMPANY
* Note that such restrictions will apply if your Employer is not a governmental unit or church and made contributions, other
than voluntary salary reduction contributions, to your 403(b) Annuity Contract or 403(b)(7) Custodial Account.
</TABLE>
10
<PAGE> 14
JACKSON NATIONAL CAPITAL MANAGEMENT FUNDS [JNCMF LOGO]
SALARY REDUCTION AGREEMENT FOR SECTION 403(B)(7) CUSTODIAL ACCOUNT
INSTRUCTIONS: This form is provided for use only where no similar form is
available from the Employer. Copies of this form should be retained by the
Employee and the Employer.
<TABLE>
<S><C>
SECTION I
EMPLOYEE AND
EMPLOYER INFORMATION
Name of Employee:
-----------------------------------------------------------------------------------------------------------------
Employee's Address:
---------------------------------------------------------------------------------------------------------------
City: State: ZIP:
------------------------------------------------------------ --------------------------------- --------------------
Social Security Number:
-----------------------------------------------------------------------------------------------------------
Name of Employer:
-----------------------------------------------------------------------------------------------------------------
Employer's Address:
---------------------------------------------------------------------------------------------------------------
City: State: ZIP:
----------------------------------------------------------- ----------------------------------- -------------------
- ----------------------------------------------------------------------------------------------------------------------------------
SECTION II
SALARY REDUCTION
AGREEMENT
(i) The Employee identified above, hereby irrevocably agrees to reduce his or her compensation from the Employer by
$_____________________, or by ____________%, for each regular period beginning _________________________,19_____, for
purposes of having such reduced compensation amounts contributed by the Employer as salary reduction contributions to the
Jackson National Capital Management Funds Section 403(b)(7) Custodial Account established on behalf of the Employee.
(ii) All such salary reduction contributions shall be forwarded by the Employer to:
Investors Fiduciary Trust Company
P.O. Box 419102
Kansas City, Missouri 64141-6102
(iii) This Salary Reduction Agreement shall be automatically renewed as of January 1 of each calendar year hereafter, unless
prior thereto the Employee and Employer agree in writing to amend this Agreement effective as of any such January 1. The
Employee and Employer shall not enter into more than one Salary Reduction Agreement in any one calendar year.
(iv) This Salary Reduction Agreement may be terminated at any time by either the Employee or the Employer with respect to
compensation not yet earned by the Employee.
(v) The Employee shall be solely responsible for determining that any salary reduction contributions pursuant to this Agreement
do not exceed the exclusion allowance limitations of Section 403(b)(2) of the Internal Revenue Code, the annual additions
limitations of Section 415(c) of the Internal Revenue Code, or the limits on elective deferrals of Section 402(g) of the
Internal Revenue Code.
- -----------------------------------------------------------------------------------------------------------------------------------
SECTION III
ACCEPTANCE
Employee's Signature: Date:
--------------------------------------------------------------- ----------------------------------------
Employer's Authorized Signature:
---------------------------------------------------------------------------------------------------
Title: Date:
------------------------------------------------------------------------------ ----------------------------------------
</TABLE>
11
<PAGE> 15
JACKSON NATIONAL CAPITAL MANAGEMENT FUNDS [JNCMF LOGO]
SECTION 403(B)(7) CUSTODIAL ACCOUNT WORKSHEET #1
FOR CALCULATING MAXIMUM 403(B) SALARY REDUCTION CONTRIBUTIONS
AND 403(B) EXCLUSION ALLOWANCE
/ / IMPORTANT NOTICE
These worksheets are intended to help you determine the maximum amount of
SALARY REDUCTION CONTRIBUTIONS that may be made to your 403(b) plan and should
be used only if no other types of contributions are made by your employer to
your 403(b) plan or other tax-favored retirement plan on your behalf and if you
make no salary reduction contributions to any other plan. You are responsible
for determining the maximum amount you can contribute to your 403(b) plan and
exclude from gross income. When determining your maximum salary reduction and
exclusion allowance and for more information, you should refer to IRS
Publication 571, TAX-SHELTERED ANNUITY PROGRAMS FOR EMPLOYEES OF PUBLIC SCHOOLS
AND TAX-EXEMPT ORGANIZATIONS, and consult a tax adviser.
/ / LIMITATION A:
$9,500 LIMITATION ON SALARY
REDUCTION CONTRIBUTIONS
Your total salary reduction contributions for any calendar year may not exceed
$9,500 (unless you qualify for the special rule described on Worksheet #2).
/ / LIMITATION B:
EXCLUSION ALLOWANCE LIMITATION
"OFFICIAL" CALCULATION
(1) 20% $ .20
-------------
(2) Gross annual compensation
for your most recent year of
service with your employer* $
-------------
(3) Salary reduction contributions
for this year of service $
-------------
(4) Your "includable compensation"
(line (2) minus line (3)) $
-------------
(5) Your total years of service with
your employer
-------------
(6) Multiply lines (1) x (4) x (5) $
-------------
(7) Your total salary reduction
contributions for all prior years
with employer $
-------------
(8) Your exclusion allowance limitation
equals line (6) minus line (7) $
-------------
* Full-time employees who worked a full year should enter gross compensation
for the calendar year ending with the tax year for which the exclusion is
determined.
OR
ALTERNATIVE "SHORT-CUT" CALCULATION
(9) 16 2/3% .166
-------------
(10) Your projected "gross"
compensation for your most
recent year of service
(line 2) $
-------------
(11) Multiply lines (9) x (10) $
-------------
NOTE: If you use the short-cut alternative to estimate your exclusion allowance
limitation at the beginning of the year, you should recalculate your limitation
using the "official" calculation prior to the end of the year (particularly if
your compensation changes during the year).
/ / LIMITATION C:
LIMITATION ON ANNUAL EMPLOYER CONTRIBUTIONS
(1) 25% .25
-------------
(2) Your gross compensation from
your employer for the current
calendar year $
-------------
(3) Your salary reduction
contributions for the current
calendar year $
-------------
(4) Your taxable compensation
(line (2) minus line (3)). $
-------------
(5) Your limitation on annual
employer contributions is the
LESSER OF $30,000 or line (2)
minus line (4) $
-------------
/ / SUMMARY:
Your total salary reduction contributions for any calendar year may not exceed
the least of:
(A) $ $9,500 limit on Salary Reduction Contributions (Limitation #A)
-----------
(B) $ Your Exclusion Allowance Limitation (Limitation #B, line (8))
-----------
(C) $ Your limitation on Annual Employer Contributions (Limitation
----------- #C, line (5))
There are several special elections available to employees of certain
tax-exempt organizations which may permit greater amounts of salary reduction
contributions to be made to your 403(b) plan. See Worksheet #2, IRS Publication
571, and consult a tax adviser for further details.
12
<PAGE> 16
JACKSON NATIONAL CAPITAL MANAGEMENT FUNDS [JNCMF LOGO]
SECTION 403(B)(7) CUSTODIAL ACCOUNT
WORKSHEET #2
SPECIAL RULES
/ / ALTERNATIVE OPTIONS AVAILABLE ONLY TO CERTAIN EMPLOYEES
If you are an employee of an educational organization, hospital, home
health service agency, health and welfare service agency, church, or convention
or association of churches, you may be permitted to make salary reduction
contributions in excess of Limitation A, Limitation B or Limitation C
calculated on Worksheet #1. (Additional rules not covered by this Worksheet
also apply to certain employees of churches and conventions and associations of
churches.) For more information, you should refer to IRS Publication 571,
TAX-SHELTERED ANNUITY PROGRAMS FOR EMPLOYEES OF PUBLIC SCHOOLS AND TAX-EXEMPT
ORGANIZATIONS, AND CONSULT A TAX ADVISER.
/ / LIMITATION A
If you are an employee of one of the organizations listed above, and you
have COMPLETED AT LEAST 15 YEARS OF SERVICE with the organization, you may make
additional salary reduction contributions each year above the $9,500 limit in
an amount equal to the LEAST of the following:
(1) $3,000
(2) $15,000, reduced by the amount of any additional salary
reduction contributions you made for prior years to your 403(b) plan
under this special rule; or
(3) the excess of $5,000, multiplied by the number of your total
years of service with the organization, over the total amount of your
salary reduction contributions for prior years.
If you qualify for this special rule, enter $9,500 PLUS the lesser of line
(1), (2), or (3) in Line (A) of the Summary on Worksheet #1.
/ / LIMITATION B AND C
If you are an employee of one of the organizations listed above, you may
be eligible to make one of three special elections.
I. SPECIAL ELECTION I
This election may be made only for the year you separate from service with
your employer. Under Special Election I, the maximum amount of contributions
that may be made to your 403(b) plan for that year will be the lesser of:
(1) $30,000; or
(2) your exclusion allowance limitation for the year, using the
"official calculation" from Worksheet #1, taking into account,
however, only your years of service and the prior contributions by
your employer on your behalf during the 10-YEAR PERIOD PRECEDING YOUR
SEPARATION FROM SERVICE.
II. SPECIAL ELECTION II
This election may be made for any year. Under Special Election II, the
maximum amount of contributions that may be made to your 403(b) plan will be
the LEAST of:
(1) 25% of your "includable compensation" for your most recent year
of service with your employer (i.e., Worksheet #1, limitation (B),
line (4)) plus $4,000;
(2) your exclusion allowance limitation for the year; or
(3) $15,000
III. SPECIAL ELECTION III
This election may be made for any year. Under Special Election III, the
limitation on annual employer contributions - and NOT the exclusion allowance
limitation - will apply. Thus, the maximum amount of contributions that may be
made to your 403(b) plan will be the lesser of 25% of your taxable compensation
or $30,000.
If you elect Special Election I, Special Election II or Special Election
III, you may not elect any one of the other special elections in any future
year. Special Election I may be used only once in your lifetime. If you elect
Special Election I, Special Election II, or Special Election III, enter the
amount determined under the Special Election on lines (B) and (C) of the
Summary on Worksheet #1.
13
<PAGE> 17
- --------------------------------------------------------------------------------
A VARIETY OF INVESTMENT OPPORTUNITIES AND SERVICES TO MEET YOUR FINANCIAL NEEDS
- --------------------------------------------------------------------------------
CHOOSE AMONG THE JACKSON NATIONAL CAPITAL MANAGEMENT FUNDS TO FIT YOUR
INVESTMENT OBJECTIVES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
IF YOU'RE SEEKING ... SELECT ... WITH THIS INVESTMENT FOCUS ...
Perservation of Jackson National Money Market Fund Invests in high-quality,
capital and short-term money market
maintenance of instruments.
liquidity
To accept moderate Jackson National Income Fund Invests primarily in
of high levels of investment-grade debt
market risk and low securities.
to moderate levels
of financial risk.
To accept greater Jackson National Growth Fund Invests in a statistically
market risks than selected sample of the 500
portfolios investing stocks in the S&P 500 Index.
solely in debt
investments.
To accept the Jackson National Total Return Fund Invests in stocks, bonds and
greatest degree of money market instruments.
market and financial
risks
Current income Jackson National Tax-Exempt Fund Invests in a diversified
exempt from federal (NOT AVAILABLE FOR IRA ACCOUNTS) portfolio of municipal
income tax. obligations, the interest
from which is exempt from
federal income taxes.
</TABLE>
The use of this material is authorized only when preceded or accompanied by a
Jackson National Capital Management Funds prospectus. For more complete
information about any of the Funds listed above, including charges and
expenses, please call 1/800/888-FUND to obtain a prospectus. Please read
it carefully before you invest or send money.
There are special risk consideration associated with mutual fund investing.
14
<PAGE> 18
FOR ADDITIONAL INFORMATION AND A PROSPECTUS, WRITE OR CALL:
FUND
Jackson National Capital Management Funds
P.O. Box 419102
Kansas City, MO 64141-6102
800/888-FUND
CUSTODIAN/TRANSFER AGENT
Investors Fiduciary Trust Company
P.O. Box 419102
Kansas City, MO 64141-6102
800/888-FUND
INVESTMENT ADVISER
Jackson National Financial Services, Inc.
5901 Executive Drive
Lansing, MI 48911
800/USE-JNLI
The use of this brochure is authorized only when preceded or accompanied by a
Jackson National Capital Management Funds prospectus containing detailed
information, including investment objectives and policies, fees, and other
expenses. It is important to read a prospectus before you invest or send money.
To obtain a prospectus, call or write The Fund or Custodian/Transfer Agent.
Jackson National Financial Services, Inc., is an NASD member.
15
<PAGE> 1
EX-99.B16-perfcomp
EXHIBIT OF PERFORMANCE CALCULATIONS
THIS EXHIBIT REFLECTS THE CALCULATION OF CERTAIN PERFORMANCE FIGURES THAT
APPEAR UNDER "PERFORMANCE" IN THE PART B STATEMENT OF ADDITIONAL INFORMATION
("PART B") OF JACKSON NATIONAL CAPITAL MANAGEMENT FUNDS (THE "FUNDS").
A. CUMULATIVE TOTAL RETURN.
1. Formula. The cumulative total return performance of the Funds (except
the Money Market Fund) for a specified period equals the change in the value of
a hypothetical $10,000 Investment ("Initial Investment") from the beginning of
the period to the end of the period. It is assumed that all dividends are
reinvested. Cumulative total return may be computed either with or without
adjustment for effect of the sales charge that may be imposed at the beginning
of the period. It may be expressed either as a dollar value change or as a
percentage change. Cumulative total return information is set forth in the
discussion of cumulative total return that appears under "Performance" in the
Part B.
2. Performance Reflected. The representative cumulative total return
calculations reflected in this Section A are for the Income Fund (the "Fund")
for the period beginning November 12, 1992 and ending February 28, 1993.
3. Unadjusted Cumulative Total Return. The cumulative total return
information for the Fund shows the cumulative total return of that Fund as a
percentage change without adjustment for the effect of the sales charge. The
percentage change in value of the Initial Investment for the period is
calculated by determining the percentage increase in the net asset value per
share ("NAV") of the Fund over the period and adjusting that for the dividends
reinvested over the period. There were four monthly dividends during the
period. The percentage change is then calculated as follows:
Shares x Ending NAV
Percentage Change =-------------------- - 1
Beginning NAV
Ending NAV = NAV on February 28, 1993 = 10.43/Share
Beginning NAV = NAV on November 12, 1992 = 10.00/Share
Shares = Number of shares at the end of the period assuming a one share
investment at the beginning of the period and reinvestment of
dividends. "Shares" is computed under the following formula.
<PAGE> 2
Shares = (1 + DIV ) x (1 + DIV ) x (1 + DIV ) x (1 + DIV )
---1 ---2 ---3 ---4
RNAV RNAV RNAV RNAV
1 2 3 4
DIV = Dollar amount distributed for the nth dividend of the period. n
n varies from 1 to 4 in the present example since there were 4 monthly
dividends distributed.
RNAV = NAV on the date that the nth dividend in the period was reinvested. n
n varies from 1 to 4 in the present example.
The following data is presented:
<TABLE>
<S> <C> <C>
n DIV RNVA
n n
----- ----- -----
1 $.02130/Share $ 9.91/Share
2 .04988 10.01
3 .04900 10.24
4 .05190 10.43
</TABLE>
B. AVERAGE ANNUAL TOTAL RETURN.
1. Formula. The average annual total return of the Funds (except the Money
Market Fund) for a specific period is found by taking a hypothetical $1,000
investment ("Initial Investment") at the beginning of the period and computing
the redeemable value at the end of the period ("Redeemable Value"). The
Redeemable Value includes the effect of the sales charge that may be imposed at
the beginning of the period. The Redeemable Value is then divided by the
Initial Investment, and this quotient is taken to the Nth root (N represents
the number of years in the period) and 1 is subtracted from the result, which
is then expressed as a percentage. Thus, the following formula applies.
Redeemable Value
Average Annual Total Return = (------------------)1/N - 1
Initial Investment
2. Performance Reflected. The representative average annual total return
calculation reflected in this Section B is for the Income Fund (the "Fund") for
the period from commencement of operations November 12, 1992 to February 28,
1993.
3. Calculation. The maximum sales charge for the Fund is 4.75% of the
offering price. On the $1,000 initial investment, the 4.75% sales charge would
equal $47.50.
4.75% of $1,000 = 0.0475 X $1,000 = $47.50
The initial investment adjusted for the maximum sales charge ("adjusted Initial
Investment" is calculated by deducting the sales charge from the Initial
Investment.
<PAGE> 3
$1,000 - $47.50 = $952.50
The Redeemable Value is equal to the adjusted Initial Investment plus the
percentage change in the value of such investment over the period. The
percentage change over the period is calculated in Sub-section 3 of Section A
above.
Redeemable Value = $952.50 + (6.07% of $952.50) = $952.50 + (0.0607 x
$952.50) = $1,010
The period covered is from November 12, 1992 to February 28, 1993 or .2985
years.
N = number of years in the period = .2985
Using the formula provided above, average annual total return for the period
may then be calculated.
The Redeemable Value is divided by the initial investment.
($1,010 / $1,000) = 1.01
This quotient is taken to the Nth root.
The .2985 root of 1.01 = 1.0339
1 is subtracted from the result.
1.0339 - 1 + .0339
The decimal return is converted to a percentage by multiplying by 100.
.0339 X 100 = 3.39%
C. YIELD (NON MONEY MARKET).
1. Formula. The yield for the Funds (other than the Money Market Fund) is
computed by dividing the net investment income per share earned during a
specified one month or 30-day period by the offering price per share on the
last day of the period, according to the following formula:
a - b 6
YIELD = 2[(------- + 1) - 1]
cd
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the period
that were entitled to receive dividends.
<PAGE> 4
d = the offering price per share on the last day of the period.
2. Performance Reflected. The representative yield calculation reflected
in this Section C is for the Income Fund (the "Fund") for the 30-day period
ended February 28, 1993.
3. Calculation. For the period reflected, the following figures are
provided for use in the formula provided in Sub-section 1 above:
a = $146,509
b = $21,533
c = 2,540,228
d = 10.95
Thus, yield is calculated as follows:
146,509 - 21,533 6
YIELD = 2[(------------------ + 1) - 1]
(2,540,228) (10.95)
124,976 6
= 2[(---------------- + 1) - 1]
27,815,496
6
= 2[(1.004493) - 1]
= 2[1.027262 - 1]
= .0545
The decimal return is converted to a percentage by multiplying by 100.
.0545 X 100 = 5.45%
D. YIELD (MONEY MARKET).
1. Formula. The Money Market Fund's current yield quotation is based on
a seven-day period and is computed as follows. The first calculation is net
investment income per share; which is accrued interest on portfolio securities,
plus or minus amortized discount or premium, less accrued expenses. This
number is then divided by the price per share (expected to remain constant at
$1.00) at the beginning of the period ("base period return"). The result is
then divided by 7 and multiplied by 365 and the resulting yield figure is
carried to the nearest one-hundredth of one percent. Realized capital gains or
losses and unrealized appreciation or depreciation of investments are not
included in the calculation.
<PAGE> 5
The Money Market Portfolio's effective yield is determined by taking the base
period return (computed as described above) and calculating the effect of
assumed compounding. The formula for the effective yield is: (base period
365/7
return + 1) - 1.
2. Performance Reflected. The representative yield calculations
reflected in this Section D are for the Money Market Fund for the seven-day
period ended February 28, 1993.
3. Yield. First, net investment income per share for the last day of the
seven-day period is calculated. The following figures are provided for this
purpose:
a. Accrued interest, including amortization of premium and discount, for
February 28, 1993 equals $1,469.32.
b. Accrued expenses for February 28, 1993 equal $0.
c. The number of outstanding shares of record for dividend purposes on
February 28, 1993 equals 2,517,723.13.
Net investment income per share for February 28, 1993 is then calculated as
follows:
Net Investment Income Per Share = Accrued Interest-Accrued Expenses
---------------------------------
Record Date Shares
$1469.32 - $0
------------- = $.00008193/Share
2,517,723.13
Net investment income for the other six days in the seven-day period is then
calculated in the same manner. The resulting figures for each of the seven
days in the period are added together to obtain the net investment income per
share for the period as follows:
<TABLE>
<CAPTION>
NET INVESTMENT
DATE INCOME PER SHARE
---- ----------------
<S> <C>
February 28, 1993 $.000081931/Share
February 27, 1993 .000081959
February 26, 1993 .000081959
February 25, 1993 .000081923
February 24, 1993 .000086416
February 23, 1993 .000086554
February 22, 1993 .000083105
------------------
TOTAL $0.000583847/Share
</TABLE>
<PAGE> 6
Then, base period return is calculated.
Base Period Return = Net Investment Income Per Share
-------------------------------
Price Per Share
$.000583847/Share
-----------------= .000583847
1.00 Share
Then, yield is calculated.
Base Period Return
Yield = ------------------ X 365
7
.000583847
= ------------------ X .0304
7
The decimal return is converted to a percentage by multiplying by 100.
.0304 X 100 = 3.04%
4. Effective Yield. The base period return for use in the formula for
effective yield is the same as calculated in Sub-section 3 above.
365/7
Effective Yield = (Base Period Return + 1) - 1
365/7
= (.000583847 + 1) - 1
365/7
= (1.000583847) - 1
= 1.0309 - 1
= .0309
The decimal return is converted to a percentage by multiplying by 100.
.0309 X 100 = 3.09%
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 01
<NAME> JACKSON NATIONAL MONEY MARKET FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-START> NOV-01-1994
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 24,181,808
<INVESTMENTS-AT-VALUE> 24,181,808
<RECEIVABLES> 60,076
<ASSETS-OTHER> 13,562
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 24,255,446
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> (157,736)
<TOTAL-LIABILITIES> (157,736)
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 24,097,710
<SHARES-COMMON-STOCK> 24,097,710
<SHARES-COMMON-PRIOR> 9,102,193
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 24,097,710
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,206,993
<OTHER-INCOME> 0
<EXPENSES-NET> (61,528)
<NET-INVESTMENT-INCOME> 1,145,465
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 1,145,465
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,145,465)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 41,294,922
<NUMBER-OF-SHARES-REDEEMED> (27,404,428)
<SHARES-REINVESTED> 1,105,023
<NET-CHANGE-IN-ASSETS> 14,995,517
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 29,349
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</TABLE>
<TABLE> <S> <C>
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<SERIES>
<NUMBER> 02
<NAME> JACKSON NATIONAL TAX-EXEMPT FUND
<S> <C>
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<PERIOD-START> NOV-01-1994
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 03
<NAME> JACKSON NATIONAL INCOME FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-START> NOV-01-1994
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<EXPENSE-RATIO> 0.010
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 4
<NAME> JACKSON NATIONAL GROWTH FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-START> NOV-1-1994
<PERIOD-END> OCT-31-1995
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 5
<NAME> JACKSON NATIONAL TOTAL RETURN FUND
<S> <C>
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<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-START> NOV-01-1994
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</TABLE>
