<cover page>
VA
Variable Annuity
Union Central (logo)
1996 Prospectuses
- -----------------------------------------------
Carillon Account of The Union Central Life Insurance Company;
Carillon Fund, Inc.;
MFS Variable Insurance Trust;
Scudder Variable Life Investment Fund; and
TCI Portfolios, Inc.
Distributed by: Carillon Investments, Inc.,
P.O. Box 40409, Cincinnati, Ohio 45240
<PAGE>
PROSPECTUS
Flexible Premium Deferred Variable Annuity
CARILLON ACCOUNT
of
THE UNION CENTRAL LIFE INSURANCE COMPANY
Home Office:
1876 Waycross Road
P.O. Box 40888
Cincinnati, Ohio 45240-40888
Telephone: 1-800-999-1840
This Prospectus describes a Flexible Premium Deferred Variable
Annuity Contract ("Contract") offered by The Union
Central Life Insurance Company ("Union Central"). The Contract is
designed to aid employers, employees, and other groups
and individuals in long-term financial planning, and it provides
for the accumulation of capital on a tax-deferred basis for
retirement or other long-term purposes. The Contract is designed
for use in connection with retirement plans regardless of
whether the plan qualifies for favored federal income tax
treatment.
Funds may be accumulated and annuity payments made on a variable
basis, a fixed basis, or a combination variable
and fixed basis. The Contract allows for significant flexibility
with respect to premium payments, annuity payments,
withdrawals, and transfers. Within the limits, if any, applicable
to particular retirement plans, the Contract provides the
flexibility necessary to permit a Contract Owner to devise a
financial plan that best fits the particular needs.
Premiums may be allocated in whole or in part to the Carillon
Account ("CA"), a separate account of Union Central.
CA invests its assets in shares of the Carillon Fund, Inc. (the
"Carillon Fund"), a mutual fund consisting of four separate
portfolios: Equity Portfolio, Bond Portfolio, Capital Portfolio
and S&P 500 Index Portfolio; in shares of the Capital
Growth Portfolio Class A, International Portfolio Class A, and
Money Market Portfolio of Scudder Variable Life Investment Fund
(the "Scudder Fund"); in shares of the TCI Growth Portfolio of
TCI Portfolios, Inc. (the "TCI Fund"); and in shares of the MFS
Growth With Income Series and MFS High Income Series of MFS
Variable Insurance Trust (the "MFS Fund," and with
Carillon Fund, Scudder Fund and TCI Fund, collectively referred
to as the "Funds"). To the extent that premiums are
allocated to CA, the Accumulation Value will vary in accordance
with the investment performance of the Portfolio or
Portfolios selected by the Contract Owner. Similarly, if a
variable annuity settlement is selected, the amount of the
annuity payments will vary with the investment performance of the
Portfolio(s). The Contract Owner bears the investment risk for
any amounts allocated to CA. This Prospectus generally describes
only the variable portion of the Contract. For a brief
description of the fixed portion, see "The Guaranteed Account" on
page 20.
This Prospectus sets forth the information about CA that
prospective purchasers of Contracts ought to know.
Additional information about CA has been filed with the
Securities and Exchange Commission in the form of a Statement
of Additional Information ("SAI") which is incorporated herein by
reference. The SAI is dated May 1, 1996, and may be
obtained without charge by writing Union Central at the address
given above or calling the listed telephone number. A Table
of Contents for the SAI is given on page 3.
This Prospectus Must be Accompanied or Preceded by a Current
Prospectus for the Carillon Fund, Inc.; for the Capital Growth
Portfolio Class A, International Portfolio Class A and Money
Market Portfolio of Scudder Variable Life Investment Fund;
for the TCI Growth Portfolio of TCI Portfolios, Inc.; and the MFS
Growth with Income Series and MFS High Income Series of MFS
Variable Insurance Trust.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Please Read This Prospectus Carefully and Retain It for Future
Reference
The Date of This Prospectus is May 1, 1996.
<PAGE>
TABLE OF CONTENTS
Page
Definitions . . . . . . . . .. . . . . . . . . 3
Summary . . . . . . . . .. . . . . . . . . 4
Summary of Separate Account Expenses . . . . . . . . . 6
Performance Data . . . . . . . . .. . . . . . . . . 9
Accumulation Unit Values . . . . . . . . .. . . . . . . 10
The Union Central Life Insurance Company and Carillon Account. 11
Union Central . . . . . . . . .. . . . . . . . . 11
Carillon Account . . . . . . . . .. . . . . . . . . 11
The Funds. . . . . . . . . .. . . . . . . . . 11
Additions, Deletions, or Substitutions of Investments. .12
The Contract . . . . . . . . .. . . . . . . . . 13
Purchasing a Contract . . . . . . . . .. . . . . . . . . 13
Premiums . . . . . . . . .. . . . . . . . . 13
Crediting of Accumulation Units . . . . . . . . . 13
Value of Accumulation Units . . . . . . . . . 14
Transfers . . . . . . . . . . . . . . . . . . . . . . . 14
Special Transfers - Dollar Cost Averaging . . . . . . . 15
Portfolio Rebalancing Plan. . . . . . . . . . . . . . . 16
Surrenders. . . . . . . . . . .. . . . . . . . . . . . . 16
Personal Income Plan. . . . . .. . . . . . . . . . . . . 17
Charges and Other Deductions . . . . . . . . . . . . . . . 17
Administration Fee. . . . . . . . . . . . . . . . . . . 17
Mortality and Expense Risk Charge . .. . . . . . . . . . 17
Surrender Charge (Contingent Deferred Sales Charge) .. . 18
Terminal Illness/Confinement. . . . .. . . . . . . . 18
Premium Taxes . . . . . . . . . . . . . . . . .. . . . . 19
Fund Expenses . . . . . . . . . . . . . . . . . . . . . 20
Benefits Under the Contract. . . . . . . . . . . . . . . . 20
Death Benefits. . . . . . . . . . . . . . . . . .. . . . 20
Annuity Payments. . . . . . . . . . . . . . . . . . . . 20
The Guaranteed Account . . . . . . . . . . . . . . . . . . 22
General Matters. . . . . . . . . . . . . . . .. . . . . . . 23
Federal Tax Matters. . . . . . . . . . . . . . .. . . . . . 23
Restrictions Under the Texas Optional Retirement Program .. 25
Distribution of the Contracts. . . . . . . . . . . . . . . 25
Voting Rights. . . . . . . . . . . . . . . . . . . . . . . 26
Financial Statements . . . . . . . . . . . . . . . . . . . 26
Appendix A . . . . . . . . . . . . . . . . . . . . . .. . . 27
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
Distribution of Contracts. . . . . . . . . . . . . . . . .B-2
Determination of Annuity Payments. . . . . . . . .. . . . .B-2
Performance Data Advertising . . . . . . . . . . . . . . .B-3
Federal Tax Matters. . . . . . . . . . . . . . . . . . . .B-5
Miscellaneous Contract Provisions. . . . . . . . . .. . . .B-7
Custody of CA's Assets . . . . . . . . . . . . . . . . . .B-8
Experts. . . . . . . . . . . . . . . . . . . .. . . . . . .B-8
Financial Statements of CA and of Union Central
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY
JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO
DEALER, SALESMAN, OR OTHER PERSON IS AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON.<PAGE>
DEFINITIONS
Accumulation Period - The period before the Maturity Date and
during the lifetime of the Annuitant.
Accumulation Unit - An accounting unit of measure used to
calculate the value of the Variable Account prior to the
Maturity Date.
Accumulation Value - The sum of the Guaranteed Account and
the Variable Account credited to a Contract.
Annuitant - The person or persons whose life determines the
duration of annuity payments involving life contingencies.
Annuity Period - The period after the Maturity Date during
which Union Central makes annuity payments.
Annuity Unit - An accounting unit of measure used to
calculate Variable Annuity payments.
CA - A separate account of The Union Central Life Insurance
Company called the Carillon Account. CA currently is
divided into ten Subaccounts, and each Subaccount invests
exclusively in a different Portfolio of the Funds.
Contract Owner ("Owner") - During the Annuitant's lifetime
and prior to the Maturity Date, the person designated
as the Owner in the Contract or as subsequently changed. After
the Maturity Date, the Annuitant is the Contract Owner.
After the Annuitant's death, the beneficiary is the Contract
Owner.
If a Contract has been absolutely assigned, the assignee is
the Contract Owner. A collateral assignee is not a Contract
Owner.
Contract Year - A period of 12 consecutive months beginning
on the Contract Date or any anniversary thereof.
Due Proof of Death - One of the following:
(a) A certified copy of a death certificate.
(b) A certified copy of a decree of a court of competent
jurisdiction as to the finding of death.
(c) A written statement by a medical doctor who attended
the deceased.
(d) Any other proof satisfactory to Union Central.
Fixed Annuity - An annuity with payments fixed in amount
throughout the annuity period.
Guaranteed Account - The Contract's value that is part of the
general assets of Union Central other than assets in any
of its separate accounts.
Investment Option - The Guaranteed Account and the ten
subdivisions of the Variable Account constitute the eleven
Investment Options.
Maturity Date - The date on which annuity payments will
begin.
Nonqualified Contracts - Contracts that do not qualify for
special federal income tax treatment.
Portfolio or Fund Portfolio - A separate Portfolio of the
Funds, the mutual funds in which CA invests, its successor
or assigns.
Qualified Contracts - Contracts issued in connection with
plans that qualify for special federal income tax treatment.
Subaccount - A part of CA. Each Subaccount invests
exclusively in shares of a different Fund Portfolio.
Variable Account - That part of the value of a Contract that
is invested in one or more Subaccounts of CA. Each Contract's
Variable Account is divided into one or more subdivisions, one
for each Subaccount of CA in which the Contract is invested.
Variable Annuity - An annuity with payments that (1) are not
predetermined or guaranteed as to dollar amount, and (2) vary in
amount in relation to the investment experience of one or more
specified Subaccounts.<PAGE>
SUMMARY
The Contract and the Investment Options
The individual variable annuity contracts described in this
Prospectus are designed and offered to aid in the
accumulation of funds on a tax-deferred basis for retirement in
connection with the following types of plans: (a) plans
established by persons entitled to the benefits of the
Self-Employed Individuals Tax Retirement Act of 1962, as amended
(H.R. 10); (b) certain qualified employee pension and
profit-sharing trusts or plans (described in Section 401(a) and
tax-exempt under Section 501(a) of the Internal Revenue Code of
1986, as amended ("the Code") and qualified annuity plans
(described in Section 403(a) of the Code); (c) annuity purchase
plans adopted by public school systems and certain tax-exempt
organizations under Section 403(b) of the Code; (d) Individual
Retirement Annuities purchased by or on behalf of individuals
pursuant to Section 408 of the Code; (e) government deferred
compensation plans pursuant to Section 457 of the Code; (f)
other qualified plans; and (g) nontax-favored plans. Qualified
plans provide special tax treatment to participating employees
and self-employed individuals and their beneficiaries.
Contract Owners may allocate their premiums in whole or in part
to one or more subdivisions of the Contract's Variable Account,
to the Guaranteed Account, or to a combination of the Variable
Account subdivisions and the Guaranteed Account. Each subdivision
of a Contract's Variable Account corresponds to a different
Subaccount of CA, and each Subaccount invests solely in a
specified Portfolio of the Funds.
The Carillon Fund Equity Portfolio seeks primarily long-term
appreciation of capital by investing primarily in common
stocks and other equity securities.
The Carillon Fund Bond Portfolio seeks as high a level of current
income as is consistent with reasonable investment risk by
investing primarily in investment-grade corporate bonds.
The Carillon Fund Capital Portfolio seeks the highest total
return through a combination of income and capital appreciation
consistent with the reasonable risks associated with an
investment portfolio of above-average quality by investing
in equity securities, debt instruments and money market
instruments.
The Carillon Fund S&P 500 Index Portfolio seeks investment
results that correspond to the total return performance
of U.S. common stocks, as represented by the Standard & Poor's
500 Composite Stock Index (the "S&P 500"). The S&P 500 is a
well-known stock market index that includes common stocks of
companies representing approximately 71% of the market value of
all common stocks publicly traded in the United States. The
investment adviser of the Portfolio believes that
the performance of the S&P 500 is representative of the
performance of publicly traded common stocks in general.
The Scudder Fund Capital Growth Portfolio Class A seeks to
maximize long-term capital growth through a broad and
flexible investment program. The Portfolio invests in marketable
securities, principally common stocks and, consistent with
its objective of long-term capital growth, preferred stocks.
The Scudder Fund International Portfolio Class A seeks long-term
growth of capital principally from a diversified portfolio of
foreign equity securities.
The Scudder Fund Money Market Portfolio seeks stability and
current income from a portfolio of money market instruments.
Money market funds are neither insured nor guaranteed by the U.S.
Government, and there can be no assurance that this Portfolio
will maintain a stable net asset value per share.
The TCI Growth Portfolio seeks capital growth by investing
primarily in common stocks that are considered by its management
to have better-than-average prospects for appreciation.
The MFS Growth With Income Series seeks to provide reasonable
current income and long-term growth of capital and income.
The MFS High Income Series seeks high current income by investing
primarily in a professionally managed diversified portfolio of
fixed income securities, some of which may involve equity
features. The MFS High Income Series may invest up to 100% of
its assets in lower-rated bonds commonly known as junk bonds.
Before allocating any portion of premiums to the subdivision
corresponding to this Portfolio, Contract Owners should read the
risk disclosure in the accompanying Prospectus for the MFS High
Income Series.
There can be no assurance that any Portfolio will achieve its
objective. See "The Funds," page 11, and the accompanying Fund
Prospectuses.
The Accumulation Value of the Contract will vary according to the
investment experience of the Portfolio or Portfolios selected by
the Contract Owner. Similarly, the dollar amount of variable
annuity payments will vary according to the investment experience
of the Portfolio(s) selected. The Contract Owner bears the entire
investment risk for all amounts allocated to the Contract's
Variable Account. Premiums may also be allocated to the
Guaranteed Account. See "The Guaranteed Account," page 20.
Premiums
Each premium payment must be at least $25 for Qualified Contracts
and $50 for Nonqualified Contracts, but Contract Owners may pay
premiums at any time and in any amount, subject to the $25/$50
minimum and a maximum (which may be waived by Union Central) of
$10,000 per Contract Year. However, if no premiums are paid for
two consecutive Contract Years (three in New York), then under
certain circumstances Union Central may pay the Owner the
Accumulation Value (less the administration fee and surrender
charge, if applicable) and cancel the Contract. See "Premiums,"
page 13.
Surrenders
Total or partial surrenders, which are cash withdrawals of all or
part of the Accumulation Value, are permitted at any time prior
to the Maturity Date, except in the case of certain surrenders
under contracts issued in connection with annuity purchase plans
adopted pursuant to Section 403(b) of the Code (see page 22).
Certain surrenders may be subject to a surrender charge (see page
17) and a penalty tax may be imposed (see "Federal Tax Matters"
in the Statement of Additional Information). In addition,
Contract Owners may return the Contract for a refund within 20
days after receiving it (see page 21).
Transfers
Before the Maturity Date, amounts may be transferred among
subdivisions of the Contract's Variable Account or between those
subdivisions and the Guaranteed Account, as frequently as
desired. Transfers generally must be at least $300. Prior to the
Maturity Date, up to six transfers may be made each Contract Year
without charge. However, a transaction charge (currently $10) is
imposed for each transfer in excess of that number. See
"Transfers," page 14. There is no limit on the amount that may be
transferred out of a subdivision of the Variable Account. For
transfers out of the Guaranteed Account, see page 20.
Similarly, after the Maturity Date, the Contract Owner may, once
each year, change the investment base upon which the amount of
the variable annuity payments are calculated by requesting that
Union Central transfer annuity reserves among
the Fund Portfolios.
Benefits
Contract Owners can choose among various types of annuity
benefits, including life annuities with a period certain
and joint and survivor life annuities. See "Annuity Payments,"
page 19.
If the Annuitant dies before the Maturity Date and the Annuitant
was the Owner or the Owner is still living, then Union Central
will pay the beneficiary a death benefit equal to the greater of
(a) the Accumulation Value, or (b) the sum of all premiums paid
less any amounts deducted in connection with partial surrenders.
See "Death Benefits," page 18.
Charges
No sales charge is deducted from premiums. However, a surrender
charge is imposed on certain early surrenders. This
surrender charge depends on how long the Contract has been in
force. During the first two Contract Years the surrender
charge is 7% of the amount surrendered. This charge is reduced by
1% on each subsequent Contract anniversary until the
eighth anniversary when it becomes zero. Notwithstanding the
charges described above, partial surrenders totaling not more
than 10% of the Accumulation Value (as of the first day of the
Contract Year) may be made each Contract Year without the
imposition of the surrender charge. Also, the surrender charge
will be waived in the event of the Owner's hospital confinement
or terminal illness as defined in the Contract. The total
surrender charge assessed over the life of the Contract will not
exceed 9% of premiums paid. See "Surrender Charge," page 17.
As partial compensation for administrative expenses, an
administration fee of $30 per year is deducted prior to the
Maturity Date. The annual administration fee will be waived for
any year in which the Accumulation Value of the Contract
is $25,000 or more on the last day of that Contract Year. This
annual fee is not imposed after the Maturity Date. A daily
charge at the rate of 0.25% of net assets per year is also
deducted (both before and after the Maturity Date) to defray the
expenses of administering the Contract. See "Administration Fee,"
page 16.
As compensation for Union Central's assumption of the mortality
and expense risks, a charge that is currently 1.2% of net assets
per year (and that will never exceed 1.7% per year) is deducted
from CA. See "Mortality and Expense Risk Charge," page 17. In
accordance with state laws, premium taxes will be deducted from
some policies. See "Premium Taxes," page 18.
Finally, the Funds in which CA invests will pay an investment
advisory fee and other expenses which are described in the Fund
Prospectuses. See "The Funds," page 11.
SUMMARY OF SEPARATE ACCOUNT EXPENSES
Contract Owner Transaction Expenses
Sales Load Imposed on Purchases (as a percentage of purchase
payments). . . . . None
Surrender Charge (Contingent Deferred Sales Charge) (as a
percentage of amount surrendered)
<TABLE>
<CAPTION>
Contract Year Surrender Charge Percentage*
<S> <C>
1 7%
2 7%
3 6%
4 5%
5 4%
6 3%
7 2%
8 1%
After 8 0%
</TABLE>
Exchange Fee . . . . . . . . . . . . . . . . . $10 **
Annual Administration Fee . . . . . . . . . . $30***
Separate Account Annual Expenses (as a percentage of average
account value)
<TABLE>
<CAPTION>
Equity Bond
Capital
Subaccount Subaccount
Subaccount
<S> <C> <C>
<C>
Mortality and Expense Risk Charge 1.20% 1.20%
1.20%
Administration Fee .25% .25%
.25%
Total Separate Account Annual Expenses 1.45% 1.45%
1.45%
</TABLE>
<TABLE>
<CAPTION>
S&P 500 Capital
Money
Index Growth International
Market
Subaccount Subaccount Subaccount
Subaccount
<S> <C> <C> <C>
Mortality and
Expense Risk Charge 1.20% 1.20% 1.20%
1.20%
Administration Fee .25% .25% .25%
.25%
Total Separate Account
Annual Expenses 1.45% 1.45% 1.45%
1.45%
</TABLE>
<TABLE>
<CAPTION>
Growth With
High
Growth Income
Income
Subaccount Subaccount
Subaccount
<S> <C> <C>
<C>
Mortality and Expense Risk Charge 1.20% 1.20%
1.20%
Administration Fee .25% .25%
.25%
Total Separate Account Annual Expenses 1.45% 1.45%
1.45%
</TABLE>
<TABLE>
<CAPTION>
Carillon Fund, Inc. Annual Expenses+
S&P 500
Equity Bond Capital
Index
Portfolio Portfolio Portfolio
Portfolio
<S> <C> <C> <C>
<C>
Management Fees .59% .49% .68%
.30%
Other Expenses .07% .16% .09%
.30%
Total Carillon Fund, Inc.
Annual Expenses .66% .65% .77%
.60%
</TABLE>
<TABLE>
<CAPTION>
Scudder Variable Life Investment Fund Annual Expenses+
Capital
Growth International
Money
Portfolio Portfolio
Market
Class A Class A
Portfolio
<S> <C> <C> <C>
Management Fees .48% .88%
.37%
Other Expenses .09% .20%
.13%
Total Scudder Variable Life
Investment Fund Annual Expenses .57% 1.08%
.50%
</TABLE>
<TABLE>
<CAPTION>
TCI Portfolios, Inc. Annual Expenses+
Growth Portfolio
<S> <C>
Management Fees 1.00%
Other Expenses++ --
Total TCI Portfolios, Inc. Annual Expenses 1.00%
</TABLE>
<TABLE>
<CAPTION>
MFS Variable Insurance Trust Annual Expenses+
Growth With High
Income
Income Series Series
<S> <C> <C>
Management Fees .75% .75%
Other Expenses
(after fee reductions) .25% .25%
Total MFS Variable Insurance
Trust Annual Expenses 1.00% 1.00%
</TABLE>
* Partial surrenders totaling up to 10% of the Accumulation
Value may be made each Contract Year without the surrender
charge being assessed.
** Prior to the Maturity Date, up to six transfers may be made
each Contract Year without charge.
*** Waived for any year in which the Accumulation Value of the
Contract is $25,000 or more on the last day of the Contract
Year.
+ "Other Expenses" for the S&P 500 Index Portfolio are based on
estimates, and for each other Portfolio are based on the actual
expenses incurred by the Portfolio for the year ended December
31, 1995. Total Annual Expenses in excess of .60% for the S&P
500 Index Portfolio are paid by the investment adviser.
++ All expenses except brokerage, taxes, interest and fees and
expenses of non-interested person directors are paid by the
investment adviser.
<PAGE>
Example* If you surrender your Contract at the end of the
applicable time period, you would pay the following expenses
on a $1,000 investment, assuming 5% annual return on assets:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10
Years
<S> <C> <C> <C> <C>
Equity Subaccount $95 $135 $166 $259
Bond Subaccount $95 $135 $166 $258
Capital Subaccount $96 $139 $172 $270
S&P 500 Index Subaccount $94 $134 NA NA
Capital Growth Subaccount $96 $139 $172 $270
International Subaccount $96 $139 $172 $270
Money Market Subaccount $96 $139 $172 $270
Growth Subaccount $96 $139 $172 $270
Growth With Income Subaccount $96 $139 $172 $270
High Income Subaccount $96 $139 $172 $270
</TABLE>
If you annuitize at the end of the applicable time period
or if you do not surrender your Contract, you would pay
the following expenses on a $1,000 investment, assuming
5% annual return on assets:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10
Years
<S> <C> <C> <C> <C>
Equity Subaccount $23 $70 $121 $259
Bond Subaccount $23 $70 $120 $258
Capital Subaccount $24 $74 $126 $270
S&P 500 Index Subaccount $22 $69 NA NA
Capital Growth Subaccount $24 $74 $126 $270
International Subaccount $24 $74 $126 $270
Money Market Subaccount $24 $74 $126 $270
Growth Subaccount $24 $74 $126 $270
Growth With Income Subaccount $24 $74 $126 $270
High Income Subaccount $24 $74 $126 $270
</TABLE>
The purpose of this table is to assist the Contract Owner in
understanding the various costs and expenses that a
Contract Owner will bear directly or indirectly. The table
reflects expenses of CA as well as the Funds. See "Charges and
Other Deductions," page 16, and the accompanying Prospectuses.
The table does not reflect any deduction made for premium
taxes that may be applicable (see page 18).
THIS TABLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES AND THE ACTUAL EXPENSES THAT WILL BE PAID MAY BE
GREATER OR LESSER THAN THOSE SHOWN.
* In the example above, the $30 annual administration fee has
been reflected in the calculation of annual expenses by
converting the fee to a percent of average net assets
attributable to the Contracts, adding it to the Total Separate
Account Annual Expenses and the Fund Annual Expenses shown above
and multiplying the resulting percentage figure by the average
annual assets of the hypothetical account. The fee has been
converted to a percent by dividing the total amount of the fee
collected during 1995 by the total average net assets
attributable to the Contracts. Net assets attributable to the
Contracts includes amounts allocated to both CA and the
Guaranteed Account except for such amounts as are held as
reserves for annuity payments.
<PAGE>
PERFORMANCE DATA
From time to time CA may publish advertisements containing total
return performance data relating to its Subaccounts
(including graphs, charts, tables and examples depicting that
data). More detailed information on computation of performance
data is included in the Statement of Additional Information. All
performance data quoted represents only historical
performance and is not intended to indicate future performance
of the Subaccounts.
Total return for a Subaccount is the sum of all the Subaccount's
earnings plus any changes in the value of its assets, reduced by
all expenses accrued during a measuring period, expressed as a
percentage of the amount invested for a one-year period. The
total return figures advertised are average annual total returns
for periods of one year and, when applicable, five years and ten
years, and since inception of the Subaccounts. Total return
omitting the effect of surrender charges may also be advertised
for the same and other periods, to illustrate change in the
value of the Variable Account during times when there is no
surrender. Total return omitting the effect of charges not
reflected in Accumulation Unit Values (surrender charges and the
portion of the annual administration fee attributable to the
Subaccount whose return is shown) may also be advertised for the
same and other periods, usually in comparison with certain
unmanaged market indices. Total return (whether including or
excluding the effects of the charges described above) also may
be shown in some advertisements on
a cumulative basis. <PAGE>
<TABLE>
<CAPTION>
ACCUMULATION UNIT VALUES
(for a unit outstanding throughout the period)
Year ended December 31,
1995 1994 1993 1992
1991
<S> <C> <C> <C> <C>
<C>
EQUITY SUBACCOUNT
Accumulation unit value
at beginning of period $27.147 $26.628 $23.676 $21.491
$14.979
Accumulation unit value
at end of period $33.969 $27.147 $26.628 $23.676
$21.491
Number of accumulation
units outstanding,
end of period 2,337,986 1,981,958 1,723,790
1,312,947 1,057,669
Payout unit value $33.969 $27.147
Number of payout units
outstanding, end of period 9,796 10,476
BOND SUBACCOUNT
Accumulation unit value
at beginning of period $20.341 $20.977 $19.014 $17.921
$15.424
Accumulation unit value
at end of period $23.865 $20.341 $20.977 $19.014 $17.921
Number of accumulation
units outstanding,
end of period 574,421 508,398 513,613 348,420
283,493
CAPITAL SUBACCOUNT
Accumulation unit value
at beginning of period $14.394 $14.467 $13.022 $12.241
$ 9.850
Accumulation unit value
at end of period $16.214 $14.394 $14.467 $13.022
$12.241
Number of accumulation
units outstanding,
end of period 2,521,521 2,271,375 1,790,938
1,181,036 627,636
CAPITAL GROWTH SUBACCOUNT
Accumulation unit value
at beginning of period $11.351 $12.749 $10.700
$10.000<F3>
Accumulation unit value
at end of period $14.394 $11.351 $12.749 $10.700
Number of accumulation
units outstanding,
end of period 1,162,999 906,428 439,914 70,218
INTERNATIONAL SUBACCOUNT
Accumulation unit value
at beginning of period $12.958 $13.259 $9.760
$10.000<F3>
Accumulation unit value
at end of period $14.192 $12.958 $13.259 $ 9.760
Number of accumulation
units outstanding,
end of period 1,220,160 1,095,214 362,172 43,624
MONEY MARKET SUBACCOUNT
Accumulation unit value
at beginning of period $14.850 $14.526 $14.369 $14.122
$13.576
Accumulation unit value
at end of period $15.468 $14.850 $14.526 $14.369
$14.122
Number of accumulation
units outstanding,
end of period 368,444 280,575 119,598 120,547
83,623
</TABLE>
<TABLE>
<CAPTION>
1990 1989 1988 1987 1986
1985
<S> <C> <C> <C> <C> <C>
<C>
EQUITY SUBACCOUNT
Accumulation unit value
at beginning of period $17.977 $16.316 $12.565 $12.624
$11.362 $10.000<F1>
Accumulation unit value
at end of period $14.979 $17.977 $16.316 $12.565
$12.624 $11.362
Number of accumulation
units outstanding,
end of period 936,036 799,268 561,682 521,067
219,512 2,969
Payout unit value
Number of payout
units outstanding,
end of period
BOND SUBACCOUNT
Accumulation unit
value at beginning
of period $14.403 $13.199 $12.475 $12.272
$10.674
$10.000<F1>
Accumulation unit
value at end
of period $15.424 $14.403 $13.199 $12.475
$12.272 $10.674
Number of accumulation
units outstanding,
end of period 285,370 250,631 225,777 224,900
126,113 1,276
CAPITAL SUBACCOUNT
Accumulation unit value
at beginning of period $10.000<F2>
Accumulation unit
value at end
of period $ 9.850
Number of accumulation
units outstanding,
end of period 279,289
CAPITAL GROWTH
SUBACCOUNT
Accumulation unit
value at beginning
of period
Accumulation unit value
at end of period
Number of accumulation
units outstanding,
end of period
INTERNATIONAL SUBACCOUNT
Accumulation unit value
at beginning of period
Accumulation unit
value at end
of period
Number of accumulation
units outstanding,
end of period
MONEY MARKET SUBACCOUNT
Accumulation unit value
at beginning of period $12,709 $11,846 $11,226 $10,708
$10,205 $10.000<F1>
Accumulation unit value
at end of period $13.576 $12.709 $11.846 $11.226
$10.708 $10.205
Number of accumulation
units outstanding,
end of period 103,405 75,006 52,666 50,467
21,967 310
<FN>
<F1> Commencement of operations was June 7, 1985.
<F2> Commencement of operations was May 1, 1990.
<F3> Commencement of operations was May 4, 1992.
</TABLE>
The S&P 500 Index Subaccount, the Growth Subaccount, the Growth
With Income Subaccount and the High Income Subaccount did not
exist on December 31, 1995.
<PAGE>
THE UNION CENTRAL LIFE INSURANCE COMPANY
AND CARILLON ACCOUNT
Union Central
The Union Central Life Insurance Company ("Union Central"), a
mutual insurance company, was organized in 1867 under the laws of
Ohio. Union Central is primarily engaged in the sale of life and
disability insurance and annuities and is currently licensed to
operate in all states and the District of Columbia. The Contract
is available in all states.
Carillon Account
CA is a separate account of Union Central that is registered
with the Securities and Exchange Commission as a unit
investment trust under the Investment Company Act of 1940. Such
Registration does not signify that the Commission supervises the
management or investment practices or policies of CA. Union
Central's Board of Directors established CA by resolution on
February 6, 1984.
Although the assets of CA belong to Union Central, these assets
are held separately from the other assets of Union Central, and
are not chargeable with liabilities incurred in any other
business operations of Union Central (except to the extent that
assets in CA exceed the liabilities under the variable portion of
the Contracts). Accordingly, the income, capital gains, and
capital losses incurred on the assets of CA are credited to or
charged against the assets of CA, without regard to the income,
capital gains or capital losses arising out of any other business
Union Central may conduct. Therefore, the investment performance
of CA is entirely independent of both the investment performance
of Union Central's general assets and the performance of any
other separate account.
CA has been divided into ten subaccounts, each of which invests
in a different Portfolio of the Funds. Additional Subaccounts
may be added at Union Central's discretion.
The Funds
The Funds are mutual funds of the series type which are
registered with the Securities and Exchange Commission as
open-end, diversified, management investment companies. Such
registration does not signify that the Commission supervises
the management or investment practices or policies of Funds. The
investment adviser to Carillon Fund is Carillon Advisers,
Inc. (a wholly-owned subsidiary of Union Central). Scudder,
Stevens & Clark, Inc. is the investment adviser to the Scudder
Fund.
>R>
The investment adviser to the TCI Fund is Investors Research
Corporation, the adviser to the Twentieth Century
Mutual Fund group. The investment adviser to the MFS Fund is
Massachusetts Financial Services Company.
CA invests in four Portfolios of Carillon Fund: the Equity
Portfolio, the Bond Portfolio, the Capital Portfolio and the
S&P 500 Index Portfolio. CA invests in three Portfolios of the
Scudder Fund: the Capital Growth Portfolio Class A, the
International Portfolio Class A and the Money Market Portfolio
Class A. (The Scudder Fund has four additional Portfolios
that are not available through the Contract.) CA invests in one
Portfolio of the TCI Fund: TCI Growth Portfolio. (The TCI
Fund has four additional Portfolios that are not available
through the Contract.) CA invests in two Portfolios of the MFS
Fund: MFS Growth With Income Series and MFS High Income Series.
(The MFS Fund has ten additional Portfolios that are not
available through the Contract.) The assets of each Portfolio
are separate from the others and each Portfolio has different
investment objectives and policies. As a result, each Portfolio
operates as a separate investment fund and the investment
performance of one Portfolio has no effect on the investment
performance of any other Portfolio.
The Carillon Fund Equity Portfolio seeks primarily long-term
appreciation of capital by investing primarily in common stocks
and other equity securities.
The Carillon Fund Bond Portfolio seeks as high a level of
current income as is consistent with reasonable investment
risk by investing primarily in investment-grade corporate bonds.
The Carillon Fund Capital Portfolio seeks the highest total
return through a combination of income and capital appreciation
consistent with the reasonable risk associated with an investment
portfolio of above-average quality by investing in equity
securities, debt instruments and money market instruments.
The Carillon Fund S&P 500 Index Portfolio seeks investment
results that correspond to the total return performance
of U.S. common stocks, as represented by the Standard & Poor's
500 Composite Stock Index (the "S&P 500"). The S&P 500 is a
well-known stock market index that includes common stocks of
companies representing approximately 71% of the market value of
all common stocks publicly traded in the United States. The
investment adviser of the Portfolio believes that
the performance of the S&P 500 is representative of the
performance of publicly traded common stocks in general.
The Scudder Fund Capital Growth Portfolio Class A seeks to
maximize long-term capital growth through a broad and
flexible investment program. The Portfolio invests in marketable
securities, principally common stocks and, consistent with
its objective of long-term capital growth, preferred stocks.
The Scudder Fund International Portfolio Class A seeks
long-term growth of capital principally from a diversified
portfolio of foreign equity securities.
The Scudder Fund Money Market Portfolio seeks stability and
current income from a portfolio of money market instruments.
Money market funds are neither insured nor guaranteed by the U.S.
Government, and there can be no assurance that this Portfolio
will maintain a stable net asset value per share.
The TCI Growth Portfolio seeks capital growth by investing
primarily in common stocks that are considered by management to
have better-than-average prospects for appreciation.
The MFS Growth With Income Series seeks to provide reasonable
current income and long-term growth of capital and income.
The MFS High Income Series seeks high current income by
investing primarily in a professionally managed diversified
portfolio of fixed income securities, some of which may involve
equity features. The MFS High Income Portfolio may invest
up to 100% of its assets in lower-rated bonds commonly known as
junk bonds. Before allocating any portion of premiums to the
subdivision corresponding to this Portfolio, the Contract Owners
should read the risk disclosure in the accompanying Prospectus
for the MFS High Income Series.
THERE IS NO ASSURANCE THAT ANY OF THE PORTFOLIOS WILL ACHIEVE
THEIR RESPECTIVE STATED OBJECTIVES. Additional information
concerning the investment objectives and policies of the Funds
can be found in the current Fund Prospectuses which are attached
and accompany this Prospectus. The Fund Prospectuses should be
read carefully before any decision is made concerning the
allocation of premiums to a particular Subaccount of CA.
Additions, Deletions or Substitutions of Investments
Union Central retains the right, subject to any applicable law,
to make additions to, deletions from or substitutions for the
Portfolio shares held by any Subaccount of CA or that CA may
purchase. Union Central reserves the right to eliminate the
shares of any of the Portfolios and to substitute shares of
another Fund Portfolio, or of another open-end, registered
investment company, if the shares of the Portfolio are no longer
available for investment, or if in Union Central's judgment
investment in any Portfolio would become inappropriate in view of
the purposes of CA. To the extent required by the Investment
Company Act of 1940, substitutions of shares attributable to a
Contract Owner's interest in a Subaccount will not be made until
the Owner has been notified of the change, and until the
Securities and Exchange Commission has approved the change. In
the case of such substitution, affected Contract Owners will have
the right, within 30 days after notification, to surrender the
Contract without the imposition of any withdrawal charge. Nothing
contained in this Prospectus shall prevent CA from purchasing
other securities for other series or classes of contracts, or
from effecting a conversion between series or classes of
contracts on the basis of requests made by Contract Owners.
The Company may also establish additional Subaccounts of CA.
Each additional Subaccount would purchase shares in a new Fund
Portfolio, in another mutual fund, or in a combination of these.
New Subaccounts may be established when, in the sole discretion
of Union Central, marketing needs or investment conditions
warrant, and any new Subaccounts will be made available to
existing Contract Owners only on a basis to be determined by
Union Central, if at all. Union Central may also eliminate one or
more Subaccounts if, in its sole discretion, marketing, tax or
investment conditions so warrant.
In the event of any such substitution or change, Union Central
may, by appropriate endorsement, make such changes in Contracts
offered by this Prospectus as may be necessary or appropriate to
reflect such substitution or change. If deemed by Union Central
to be in the best interests of persons having voting rights under
the Contracts, CA may be operated as a management company under
the Investment Company Act of 1940 or it may be deregistered
under such Act in the event such registration is no longer
required, or it may be combined with one or more other separate
accounts.
THE CONTRACT
Purchasing a Contract
A Contract can be purchased by completing an application and
having it and a premium of at least $25 for Qualified Contracts
or $50 for Nonqualified Contracts sent to Union Central by a
representative of Union Central who is also a qualified
securities representative under federal law. Acceptance of an
application is subject to Union Central's underwriting rules and
Union Central reserves the right to reject any application. If an
initial premium cannot be credited to the Contract within five
business days of receipt by Union Central, then Union Central
will return the premium to the payor immediately unless the
applicant consents to Union Central holding the premium for a
longer period. Initial premiums accompanied by completed
applications will be credited to the Contract not later than two
business days following receipt.
Premiums
After the first premium has been paid and accepted, the Owner
has flexibility, within the limits of any applicable retirement
plan, in determining the size and frequency of subsequent
premiums. Premiums may be paid at any time and in any amount,
subject only to the $25/$50 minimum and to a maximum of $10,000
per Contract Year. (Union Central may waive the maximum but a
waiver in one instance does not constitute a waiver for any
additional premiums.)
If no premiums are paid for two consecutive Contract Years
(three in New York), Union Central may cancel the
Contract and return the Accumulation Value (less the
administration fee and surrender charge, if applicable) but only
if (1) the Accumulation Value is less than $2,000 at the end of
the two-year period (three-year period in New York); and (2) the
total premium paid, less any partial surrenders, is less than
$2,000. Union Central will not cancel a Contract unless it first
gives the Contract Owner at least 30 days' notice to pay an
additional premium to prevent cancellation.
Premiums will be allocated among the eleven Investment Options
(the ten subdivisions of the Variable Account and the Guaranteed
Account) in accordance with the instructions of the Contract
Owner, as specified in the application for the Contract or as
subsequently changed by the Owner. Any portion of the premium,
subject to a $10 minimum, may be allocated to these Investment
Options. The allocation may be changed at any time, without
charge, by notifying Union Central in writing.
Crediting of Accumulation Units
Premiums that are allocated to the Contract's Variable Account
are credited to the Contract in the form of Accumulation Units.
The number of Accumulation Units credited to a Contract is
determined by dividing the amount allocated to each subdivision
of the Variable Account by the Accumulation Unit value for the
corresponding Subaccount of CA for the Valuation Period during
which the premium is received. (In the case of the initial
premium, units are credited when the application is accepted.)
The value of the Accumulation Units will vary in accordance with
investment experience and expenses of the Portfolio in which the
Subaccount invests.
Prior to the Maturity Date, the Accumulation Value equals the
sum of the Variable Account and the Guaranteed Account credited
to the Contract. The Variable Account is the sum of the value of
all subdivisions of the Variable Account. The value in a
subdivision equals the number of Accumulation Units credited to
that subdivision times the value of the Accumulation Units for
the corresponding Subaccount. For the value of the Guaranteed
Account, see page 20.
Value of Accumulation Units
The value of Accumulation Units is expected to change every
valuation period, and will depend upon the investment
performance and expenses of the Portfolio in which each
Subaccount invests. The Accumulation Units in each Subaccount
of CA are valued separately.
A valuation period is the period between successive valuation
dates, commencing at the close of business of each valuation date
and ending at the close of business of the next succeeding
valuation date. A valuation date is each day, Monday through
Friday, when there are purchases or redemptions of Fund shares,
except (i) when the New York Stock Exchange is closed (currently
New Year's Day, President's Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, and Christmas
Day); (ii) the day following Thanksgiving Day; (iii) December 24,
1996; and (iv) any day on which changes in the value of the
Portfolio securities of the Funds will not materially affect the
current net asset value of the shares of a Portfolio.
The value of each Accumulation Unit was initially set at $10.
Thereafter, the value of an Accumulation Unit for any valuation
period equals the value of such a unit as of the immediately
preceding valuation period, multiplied by the "Net Investment
Factor" for the current valuation period.
The Net Investment Factor for each Subaccount for any Valuation
Period is determined by dividing (A) by (B) and subtracting (C)
from the result, where:
(A) is:
(1) the net asset value per share of a Portfolio
share held in the Subaccount determined as of the end of the
current valuation period; plus
(2) the per share amount of any dividend or capital
gains distributions made by the Portfolio on shares held in
the Subaccount if the "ex-dividend" date occurs during the
current valuation period; plus or minus
(3) a per share charge or credit for any taxes
incurred by or provided for in the Subaccount, which Union
Central determines to have resulted from the maintenance of the
Subaccount (Union Central does not believe that currently any
taxes are incurred by CA); and
(B) is:
(1) the net asset value per share of a Portfolio
share held in the Subaccount determined as of the end of the
immediately preceding valuation period (adjusted for an
"ex-dividend"); plus or minus
(2) the per share charge or credit for any taxes
provided for during the immediately preceding valuation period;
and
(C) is a factor representing the daily charges deducted
from CA by Union Central for administrative expenses and
assumption of the mortality and expense risks under the Contract.
The factor is equal to 0.00004% for a one-day valuation period.
Transfers
Amounts may be transferred among subdivisions of a Contract's
Variable Account, or between the Guaranteed Account
and subdivisions of the Variable Account, at any time prior to
the Maturity Date. Prior to the Maturity Date, Contract
Owners may transfer up to the greater of $1,000 or 20% of the
value of the Guaranteed Account to one or more subdivisions
of the Variable Account each Contract Year. There is no maximum
on amounts that may be transferred out of a subdivision
of the Variable Account. The minimum amount that may be
transferred is $300, or if less, the entire amount in the
Investment Option.
Prior to the Maturity Date, up to six transfers may be made each
Contract Year without charge. However, a transaction charge is
imposed for each transfer in excess of that number, and is
deducted from the Investment Option from which the transfer is
made (or from the amount transferred, if the entire amount in any
Investment Option is transferred). The transfer charge is
currently $10 and may be increased, but it will never be more
than $15.
If after a transfer the amount remaining in any Investment
Option is less than $25, then the entire amount will be
transferred instead of the requested amount.
Transfer requests must be made pursuant to proper written
or telephone instructions which specify in detail the
requested changes. Transfers from subdivisions of the Variable
Account will be made based on the Accumulation Unit values
at the end of the valuation period during which Union Central
receives the transfer request.
After the Maturity Date, the Annuitant can change the
reserve basis (contract reserves for the specific variable
annuity contract involved) for the variable annuity payments he
or she is receiving once in each 12 months after the first 12
months. Such a change in reserve basis for variable annuity
payments will result in subsequent annuity payments being based
on the investment performance of the Subaccount to which annuity
reserves have been transferred.
Telephone Transfers: To effect a telephone transfer,
authorization must have been properly provided to Union Central
in a telephone transfer authorization form. Such authorization
must be on file at Union Central's Home Office before
telephone transfer instructions will be honored by Union Central.
Telephone transfer instructions may be made by calling
1-800-456-9319 between 9:00 a.m. and 3:30 p.m. (Eastern
Time Zone) on days when Union Central is open for business. Each
telephone exchange request must include a precise
identification of the Contract and the Contract Owner's Personal
Security Code. Union Central may accept telephone
exchange requests from any person representing himself or herself
to be the Contract Owner or any other person who
properly identifies the correct Contract Number and Personal
Security Code. Thus, Contract Owners risk possible loss of
interest, capital appreciation and principal in the event of an
unauthorized telephone exchange. Neither Union Central nor
the Funds nor Carillon Investments, Inc., the principal
underwriter of the Contracts, will be liable for complying with
telephone instructions it reasonably believes to be authentic,
nor for any loss, damage, cost or expense in acting on such
telephone instructions, and Contract Owners will bear the risk of
any such loss. Union Central will employ reasonable
procedures to confirm that telephone instructions are genuine.
If Union Central does not employ such procedures, it may
be liable for losses due to unauthorized or fraudulent
instructions. Such procedures may include, among others,
requiring forms of personal identification prior to acting upon
telephone instructions, providing written confirmation of such
transactions to Contract Owners, and/or tape recording of
telephone transfer request instructions received from Contract
Owners. All or part of any telephone conversation relating to
transfer instructions may be recorded by Union Central without
prior disclosure.
Telephone instructions apply only to previously invested
amounts and do not change the investment of any future
premiums paid under the Contract. Allocations of future premium
payments can only be changed by proper written request.
(See "Premiums" on page 13.)
NOTE: During periods of drastic economic or market changes,
telephone transfers may be difficult to implement. At
such times, requests may be made by regular or express mail and
will be processed pursuant to the terms and restrictions
described in this "Transfers" section.
Additional information concerning this transfer privilege
may be obtained from Union Central. Union Central reserves
the right to modify, suspend or discontinue the telephone
transfer privilege at any time and without prior notice.
Special Transfers - Dollar Cost Averaging
Union Central administers a Dollar Cost Averaging ("DCA")
program that enables the Contract Owner to pre-authorize a
periodic exercise of the right to transfer amounts among
subdivisions of the Variable Account. Contract Owners
entering into a DCA agreement instruct Union Central to transfer
monthly (as of the first business day of the month) a
predetermined dollar amount (a minimum of $100) from the Money
Market subdivision to other subdivisions of the Variable
Account until the amount in the Money Market subdivision is
exhausted. A DCA agreement may be terminated at any time
upon the Contract Owner notifying Union Central in writing at
least five business days prior to the next transfer date so that
the transfer scheduled to take effect on such date can be
cancelled.
Transfers made pursuant to the DCA program are not subject
to a transfer charge and do not affect a Contract Owner's
right to make up to six transfers each Contract Year without
charge, prior to the Maturity Date.
By allocating specific amounts on a regularly scheduled
basis, as opposed to allocating the total amount at one
particular time, a Contract Owner may be less susceptible to the
impact of market fluctuations. There is no guarantee,
however, that such an investment method will result in profits or
prevent losses.
Contract Owners interested in the DCA program may elect to
participate in this program by separate application.
Portfolio Rebalancing Plan
Union Central administers a Portfolio Rebalancing Plan that
enables Contract Owners with a minimum balance of $5,000 in the
Variable Account to indicate to Union Central the percentage
levels he or she would like to maintain among the subdivisions of
the Variable Account. On a quarterly, semi-annual or annual
basis as selected by the Contract Owner, Union Central will
automatically rebalance the subdivisions of the Contract Owner's
Variable Account to maintain the indicated percentages by
transfers among the subdivisions. (The Portfolio Rebalancing
Plan is not available for amounts in the Guaranteed Account.)
The entire value of the subdivisions of the Variable Account must
be included in the Portfolio Rebalancing Plan. Other investment
programs, such as the DCA program, or other transfers or
withdrawals may not work in concert with the Portfolio
Rebalancing Plan. Therefore, Contract Owners should monitor
their use of these other programs and any other transfers or
withdrawals while the Portfolio Rebalancing Plan is being used.
The Portfolio Rebalancing Plan may be terminated at any
time upon the Contract Owner notifying Union Central in writing
at least five business days prior to the date of the next
rebalancing.
Transfers made pursuant to the Portfolio Rebalancing Plan
are not subject to a transfer charge and do not affect a
Contract Owner's right to make up to six transfers each Contract
Year without charge, prior to the Maturity Date.
Union Central reserves the right to alter the terms or
suspend or eliminate the availability of the Portfolio
Rebalancing Plan at any time.
Contract Owners may elect to participate in this program by
separate application.
Surrenders
The Contract Owner may make cash withdrawals (surrenders)
of all or part of the Accumulation Value at any time
prior to the earlier of the death of the Annuitant or the
Maturity Date (subject to any restrictions imposed in connection
with
a particular retirement plan). Surrender requests must be made
pursuant to proper written instructions. Surrenders cannot
be made by telephone. The amount available is the Accumulation
Value at the end of the valuation period during which Union
Central receives the written request, less any surrender charges,
administration fee and premium taxes not previously
deducted. Surrenders from the Variable Account generally will be
paid within seven days of receipt of the written request
(see "Miscellaneous Contract Provisions" in the Statement of
Additional Information). For surrenders from the Guaranteed
Account, see page 21. For restrictions applicable to certain
surrenders under Contracts issued in connection with annuity
purchase plans adopted pursuant to Section 403(b) of the Code,
see "Qualified Plans," page 22.
The minimum partial surrender is $100 or the entire amount
in the Investment Option, whichever is less. If after the
surrender (and deduction of the surrender charge, if any) the
amount remaining in the Investment Option would be less than
$25, then the request will be considered to be a request for
surrender of the entire amount held in the Investment Option.
If a partial surrender plus any surrender charge would reduce the
Accumulation Value to less than $100, then a request for
a partial surrender will be treated as a total surrender of the
Contract and the entire Accumulation Value, less any charges,
will be paid out.
Under certain circumstances, surrenders will be subject to
the surrender charge set forth below under "Surrender
Charge" at page 17. Surrenders of Contracts may be subject to a
10% tax penalty (see "Federal Tax Matters" in the Statement of
Additional Information).
The full administration fee will also be deducted at the time
of total surrender regardless of the date of surrender.
For total surrenders, any surrender charge and administration fee
will be deducted from the amount paid.
Partial surrenders will be implemented by canceling
Accumulation Units in an amount equal to the withdrawal and
any applicable surrender charge. The Contract Owner should
designate the Investment Option from which the surrender
should be made. If no designation is made, the requested amount
will be withdrawn from each Investment Option in the same
proportion that the interest therein bears to the Accumulation
Value. The surrender charge, if any, will be deducted from
the value remaining after payment of the requested amount, or
from the amount paid if the entire amount in an Investment
Option is surrendered.
Since the Contract Owner assumes the investment risk with
respect to amounts allocated to the Variable Account (and
because there are certain charges), the total amount paid upon
total surrender of the Contract (including any prior surrenders)
may be more or less than the total premiums paid.
Personal Income Plan
Union Central administers a Personal Income Plan ("PIP")
that enables a Contract Owner to pre-authorize a periodic
exercise of the contractual surrender rights described above.
Contract Owners entering into a PIP agreement instruct Union
Central to withdraw a level dollar amount or percentage of the
Accumulation Value on a monthly, quarterly, semi-annual
or annual basis. To the extent that the total of PIP surrenders
in a Contract Year exceeds 10% of the Contract Owner's
Accumulation Value (in the initial year, as of the date the PIP
agreement is approved by Union Central; in subsequent years,
as of the first day of that Contract Year), a surrender charge
may be applicable (see "Surrender Charge" at page 17.) PIP
surrenders may also be subject to the 10% federal tax on early
withdrawals (see "Federal Tax Matters" in the Statement of
Additional Information).
CHARGES AND OTHER DEDUCTIONS
Administration Fee
Prior to the Maturity Date, an annual administration fee of
$30 will be deducted from the Accumulation Value as partial
reimbursement for actual expenses related to the administration
of each Contract and the Variable Account. The annual
administration fee will be waived for any year in which the
Accumulation Value of the Contract is $25,000 or more on the
last day of that Contract Year. Union Central guarantees that
the amount of this fee will not increase over the life of the
Contract. This annual administration fee is not deducted after
the Maturity Date.
The annual administration fee will be deducted on the last day
of each Contract Year. The fee will be deducted pro
rata from all Investment Options in the same proportion that the
Contract Owner's interest in each bears to the total
Accumulation Value. The full administration fee will also be
deducted at the time of total surrender, regardless of the date
of surrender. However, in the case of a total surrender, the
annual administration fee will also be waived if the Accumulation
Value of the Contract is $25,000 or more on the date of
surrender.
There will also be a deduction, on a daily basis, at an
annual rate of 0.25% of the assets of the Variable Account to
help defray the expenses of administering CA and the Contract.
This deduction also is guaranteed not to increase over the
life of the Contract. Because this fee is a percentage of assets,
rather than a flat amount, larger contracts will, in effect, pay
a higher proportion of the total administrative expenses of CA
than smaller contracts. The deduction for 1995 was $383,696.
Administrative expenses include expenses incurred in
connection with premium billing and collection, record keeping,
processing death benefit claims, cash surrenders and Contract
changes, calculating Accumulation Unit and Annuity Unit
values, reporting and other communications to Owners and other
similar expense and overhead costs.
Mortality and Expense Risk Charge
A Mortality and Expense Risk Charge will be deducted daily
at a rate equal, on an annual basis, to 1.2% of each
Contract's Variable Account. THIS CHARGE MAY INCREASE BUT UNION
CENTRAL GUARANTEES THAT IT WILL NEVER BE MORE THAN 1.7%. Although
Union Central does not believe it is possible to allocate this
charge to different risks, Union Central feels that a reasonable
estimate is .8% for mortality risk and .4% for expense risk.
The mortality risk arises from Union Central's guarantees
to make annuity payments in accordance with the annuity
tables, regardless of how long the Annuitant lives and regardless
of any improvement in life expectancy generally. This
relieves annuitants of the risk that they might outlive the funds
that have been accumulated for retirement. The mortality risk
also arises from Union Central's guarantee to pay death benefits
equal to the total of all premiums paid under the Contract,
with adjustments for any partial surrenders (including surrender
charges), should an Annuitant die before the Maturity Date.
Union Central's expense risk arises from the possibility
that the amounts realized from the administration fee and
surrender charge (which are guaranteed not to increase) will be
insufficient to cover actual administrative and distribution
expenses. If these charges are insufficient to cover the
expenses, the deficiency will be met from Union Central's general
corporate funds, including amounts derived from the Mortality and
Expense Risk Charge.
If amounts derived from the Mortality and Expense Risk
Charge are insufficient to cover mortality costs and excess
expenses, Union Central will bear the loss. If the charge is more
than sufficient, Union Central will retain the balance as
profit. Union Central currently expects a profit from this
charge. The Mortality and Expense Risk Charge for 1995 was
$1,873,337.
Surrender Charge (Contingent Deferred Sales Charge)
The Accumulation Value may, as explained above, be
withdrawn in whole or in part by totally or partially
surrendering the Contract, at any time before the earlier of the
Maturity Date or the Annuitant's death. However, if a
surrender takes place in the first eight Contract Years, then a
surrender charge will be imposed on the amount withdrawn
as shown below:
Contract Year 1 2 3 4 5 6 7 8 Thereafter
---------------------------------------------------------
7% 7% 6% 5% 4% 3% 2% 1% 0%
Notwithstanding the charges described above, partial surrenders
totaling not more than 10% of the Accumulation Value
(as of the first day of the Contract Year) may be made each
Contract Year without the imposition of the surrender charge.
Also, PIP surrenders (see "Personal Income Plan" at page 16) in a
Contract Year totaling not more than 10% of the Accumulation
Value (in the initial year, as of the date the PIP agreement is
approved by Union Central; in subsequent years, as of the first
day of that Contract Year) may be made without the imposition of
the surrender charge.
Terminal Illness/Confinement
Also, where permitted by state law, the surrender charge will
be waived upon a full surrender or one or more partial
surrenders in the event of (1) or (2) below:
(1) The Contract Owner becomes confined in a qualified
institution for a period of at least 30 consecutive days after
the later of the issue date of the Contract ("Contract Date") or
May 1, 1993, subject to the following:
(a) The Owner must be a natural person (not a Trust,
Corporation, or other legal entity).
(b) The Owner must have been an Owner of the Contract
continuously since the Contract Date.
(c) The Owner was not confined in a qualified institution
at any time during the 60 day period just prior to the later of
the Contract Date or May 1, 1993.
(d) Union Central receives a written request for full or
partial surrender along with due proof of confinement within 12
months following such confinement.
(e) A "qualified institution" means any licensed hospital
or licensed skilled or intermediate care nursing facility at
which:
(i) medical treatment is available on a daily basis; and
(ii) daily medical records are kept for each patient.
(2) The Contract Owner acquires a terminal illness after the
later of the Contract Date or May 1, 1993, subject to the
following:
(a) The Owner must be a natural person (not a Trust,
Corporation, or other legal entity).
(b) The Owner must have been an Owner of the Contract
continuously since the Contract Date.
(c) The Owner has less than 12 months to live.
(d) Union Central must receive a written request for full
or partial surrender together with a certificate from the Owner's
attending physician stating the Owner's life expectancy and any
other proof Union Central may require.
(e) "Physician" means a medical doctor licensed in the
United States who:
(i) is operating within the scope of that license; and
(ii) is not the Owner and is not related to the Owner.
The cumulative total of all surrender charges is guaranteed
never to exceed 9% of premiums.
The surrender charge may be reduced in certain instances where
a large number of Contracts are issued in connection with a
single sale. For example, the charge may be reduced where a
Corporate Pension Plan funded by the Contracts results
in the issuance of a number of Contracts to the same owner, or
where an employer-sponsored salary-deduction plan results
in Contracts being issued to a number of employees of one
employer. Any reduction in the surrender charge will be
nondiscriminating by class of purchaser, and will be based on
reduced selling and other expenses.
The surrender charge may be modified for Contracts where the
initial premium is a result of a transfer (i) from another
Contract owned by the employer or another person for the benefit
of the Contract Owner in connection with an employee benefit
plan, (ii) from a Certificate (account) under certain Union
Central Group Retirement Annuity Contracts, or (iii) from
certain Union Central Single-Premium Deferred Annuity Contracts.
In addition, the surrender charge will be eliminated with
respect to any amount payable in connection with the surrender of
a Contract where such amount (i) is applied to another Contract
in the circumstances described in (i) above or (ii) is forfeited
by an employee under the terms of an employee benefit plan and
credited to another Contract issued in connection with the plan.
The reduction or elimination of the surrender charge in the
foregoing circumstances recognizes the reduction of selling
expense in such circumstances.
Surrender charges on partial surrenders will be deducted pro
rata from the value remaining in the Investment Option
or Options from which the amount paid was withdrawn. However, if
insufficient value remains to pay the surrender charges
or if the entire amount in an Investment Option is withdrawn,
then to the extent necessary, any surrender charge will be
deducted from the amount to be paid. Any surrender charges on a
total surrender of a Contract will be deducted from the
amount paid.
The amounts obtained from the surrender charge will be used to
offset the distribution fee paid Carillon Investments.
See page 23.
The surrender charge is not expected to recover all of the
distribution costs associated with the Contracts. Any shortfall
will be paid by Union Central out of its general surplus, which
may include profits derived from the mortality and expense
risk charge.
Certain surrenders of Contracts may also be subject to federal
tax penalties. See Federal Tax Matters, page 21.
Premium Taxes
Union Central will, where such taxes are imposed by state law,
deduct premium taxes or other taxes relative to the
Contract (collectively referred to as "premium taxes") when
incurred, which could be (1) at the Maturity Date, (2) when a
total surrender occurs, or (3) when premiums are paid. If the
charge for premium taxes is deducted at the Maturity Date,
it will be taken from each Investment Option in the proportion
that the Contract Owner's interest in the Investment Option
bears to the total Accumulation Value. If the charge for premium
taxes is deducted when premiums are paid, it will be
deducted from the premium before the premium has been allocated
to the Investment Option(s). Applicable premium tax rates
depend upon such factors as the Contract Owner's state of
residency and the insurance laws and status of Union Central in
that state when the premium taxes are incurred. Current premium
tax rates range from 0 to 3.5%. Applicable premium tax
rates are subject to change by legislation, administrative
interpretations or judicial acts.
<PAGE>
Fund Expenses
There are deductions from and expenses paid out of the assets
of the Funds that are fully described in the Fund
Prospectuses.
BENEFITS UNDER THE CONTRACT
Death Benefits
If the Annuitant is the Owner and dies prior to the Maturity
Date, or if the Annuitant dies prior to the Maturity Date
while the Owner is living, then a death benefit will be paid to
the designated Beneficiary. The death benefit will be the greater
of: (a) the sum of all premiums paid less any amounts deducted in
connection with partial surrenders, including any surrender
charges associated with those partial withdrawals; or (b) the
Accumulation Value on the date Union Central receives Due
Proof of Death. This formula guarantees that the death benefit
will at least equal the sum of all premiums paid (less any
partial surrenders and surrender charges on such partial
withdrawals), independent of the investment experience of CA.
If the Owner is not the Annuitant and the Owner dies before the
Maturity Date and while the Annuitant is living, Union
Central will pay the Accumulation Value (measured as of the date
Union Central receives Due Proof of Death) to the Owner's
estate or to a successor owner. Notwithstanding the foregoing
sentence to the contrary, if the Owner's spouse is the
designated beneficiary under the Contract, such spouse will
become the Owner of the Contract and no distribution will be
required as a result of the death of the original Owner.
If the Annuitant dies after the Maturity Date, Union Central
will provide the death benefit, if any, contained in the
particular Annuity Option elected. See page 19.
Annuity Payments
Maturity Date The Contract Owner specifies a Maturity Date in
the application, which is the day that annuity payments will
commence under the Contract. The Contract Owner may change the
Maturity Date at any time, provided written notice of the change
is received by Union Central at least 30 days before the
previously specified Maturity Date. The Maturity Date must be:
(a) at least a month after the Contract Date; (b) the first day
of a calendar month; and (c) no later than the Annuitant's 95th
(85th in New York and Pennsylvania) birthday (particular
retirement plans may impose additional limitations).
Type of Income Payments A Contract Owner may specify any
proportion of the Accumulation Value (less premium taxes, if any)
to be applied to a Variable Annuity or a Fixed Annuity. Variable
Annuity payments will vary in accordance with the investment
experience of the Subaccount selected by the Contract Owner.
At least 30 days before the Maturity Date, the Contract Owner
must select how the Accumulation Value will be used to provide
the monthly annuity payments. If no selection is made, Union
Central will provide a Fixed Annuity with the proceeds of the
Guaranteed Account and a Variable Annuity with the proceeds of
the Variable Account. The first Variable Annuity payment will be
based on the allocation of the Variable Account among the
subdivisions.
If a Variable Annuity is selected, the amount of the first
monthly income payment will be obtained from the appropriate
Option Table in the Contract. Subsequent monthly income payments
will vary based on the investment experience of the Subaccount(s)
used to reserve for the annuity.
Amount of Variable Annuity Payments The amount of Variable
Annuity payments will depend not only upon the investment
experience of the Subaccount selected by the Contract Owner, but
also upon the amount of any premium tax, the age (and possibly
sex) of the Annuitant, and the Annuity Option chosen. Union
Central guarantees that the annuity payments (1) will not be
affected by any variation in the actual mortality experience of
the Annuitants from what was assumed in determining the amount of
the first monthly payment, and (2) will not be affected by the
actual amount of expenses incurred by Union Central in
administering the Contract.
Since Variable Annuity payments will vary in accordance with
the investment results of the Subaccounts, the amount of the
Variable Annuity payments cannot be predetermined.
If the total Accumulation Value to be applied to an Annuity
Option is less than $5,000 ($2,000 in Massachusetts and
New York), Union Central will have the option of paying the
Accumulation Value in a lump sum. If the total first monthly
payment (combined Fixed and Variable) determined under the
Annuity Option selected is less than $50 ($20 in New York),
Union Central may change the payment frequency of annuity
payments to quarterly, semiannually or annually.
Annuity Options The Contract Owner may elect a Fixed Annuity, a
Variable Annuity, or a combination Fixed and Variable Annuity.
All of the Annuity Options listed below (except the Alternate
Annuity Option) are available as either Fixed or Variable
Annuities.
Up to 30 days before the Maturity Date, the Contract Owner may
change the Annuity Option. If an Annuity Option is chosen which
depends on the continuation of the life of the Annuitant or of a
contingent Annuitant, proof of age will be required before
annuity payments begin. The Annuity Options include:
Option 1: Life Annuity (a) Nonrefund. Union Central will make
payments during the lifetime of the Annuitant. No payments are
due after the death of the Annuitant. It is possible under this
Option that only one payment will be made if the Annuitant dies
before a second payment is due, or that only two payments will be
made if the Annuitant dies before the third payment, and so
forth.
(b) 5-Years Certain. Union Central will make payments for at
least five years, and after that during the lifetime of the
Annuitant. No payments are due after the death of the Annuitant
or, if later, the end of the five-year period certain.
(c) 10-Years Certain. Union Central will make payments for at
least 10 years, and after that during the lifetime of the
Annuitant. No payments are due after the death of the Annuitant
or, if later, the end of the 10-year period certain. (This
option will apply unless the Contract Owner selects a different
option.)
(d) Installment Refund. Union Central will make payments for a
period certain and after that during the lifetime of the
Annuitant. No payments are due after the death of the Annuitant
or, if later, the end of the period certain. The number of
period certain payments is equal to the amount applied under this
Installment Refund Option divided by the amount of the
first annuity payment; provided, however, that the amount of the
final period certain payment shall be multiplied by that part
of the answer which is not a whole number.
Option 2: Joint and Survivor Life Annuity (a) Joint and
Survivor Nonrefund. Union Central will make payments during
the joint lifetime of the Annuitant and contingent Annuitant.
Payments will then continue during the remaining lifetime of
the survivor of them. No payments are due after the death of the
last survivor of the Annuitant and contingent Annuitant.
It is possible under this option that only one monthly annuity
payment will be made if the Annuitant and contingent Annuitant
both die before the second payment is made, or that only two
payments will be made if they both die before the third
payment, and so forth.
(b) Joint and Survivor with 10-Year Certain. Union Central will
make payments for 10 years and after that during the joint
lifetime of the Annuitant and contingent Annuitant. Payments will
then continue during the remaining lifetime of the survivor of
them. No payments are due after the death of the survivor of the
Annuitant and contingent Annuitant or, if later, the end of the
10-year period certain.
Instead of the settlement in accordance with the Annuity
Options described above, Contract Owners may choose an
alternate type of Fixed Annuity payment. Such alternate annuity
option shall be based on rates at least as favorable as those
for fixed-dollar single-premium immediate annuities being issued
by Union Central on the Maturity Date. This alternate
annuity option may only be elected within 30 days before the
Maturity Date.
If the Annuitant dies on or after the Maturity Date, but before
annuity payments have been made for a guaranteed period, if any,
Union Central will continue payments to the beneficiary until the
rest of the guaranteed payments have been made. If no beneficiary
is living, Union Central will commute any unpaid guaranteed
payments to a single sum (on the basis of the interest rate used
in the Annuity Option Table from which the payments were
determined) and pay that sum to the estate of the last to die of
the Annuitant and the Beneficiary.
<PAGE>
THE GUARANTEED ACCOUNT
Premiums allocated to the Guaranteed Account and transfers to
the Guaranteed Account become part of the general assets of Union
Central, which support insurance and annuity obligations. Because
of exemptive and exclusionary provisions, interests in the
Guaranteed Account have not been registered under the Securities
Act of 1933 ("1933 Act") nor is Union Central registered as an
investment company under the Investment Company Act of 1940
("1940 Act "). Accordingly, neither Union Central nor any
interests in its general assets generally are subject to the
provisions of the 1933 or 1940 Acts and it is understood that the
staff of the Securities and Exchange Commission has not reviewed
the disclosures in this Prospectus which relate to the fixed
portion of the Contract. Disclosures regarding the fixed portion
of the Contract and Union Central, however, may be subject to
certain generally applicable provisions of the federal securities
laws relating to the accuracy and completeness of statements made
in prospectuses. For complete details regarding the fixed
portion, see the Contract itself.
General Description
The Guaranteed Account is the value of the Contract that is
part of the general assets of Union Central, other than
those allocated to separate investment accounts such as CA.
Contract Owners may elect to allocate all or part of their
premiums to the Guaranteed Account, and they may also transfer
values from the Variable Account to the Guaranteed
Account. Union Central bears the full investment risk for all
amounts allocated or transferred to the Guaranteed Account,
whereas the Contract Owners bear the investment risk for amounts
allocated or transferred to the Variable Account. Union
Central has sole discretion to invest its general assets,
including assets funding the Guaranteed Account, subject to
applicable law.
Guaranteed Account Accumulations
Union Central guarantees that it will credit interest to the
Guaranteed Account at an effective rate of at least 4.0% per
year (compounded annually). Interest in excess of the guaranteed
rate may be used in the calculation of the Guaranteed
Account at such increased rates and in such a manner as Union
Central may determine. ANY INTEREST CREDITED TO THE GUARANTEED
ACCOUNT IN EXCESS OF THE MINIMUM GUARANTEED RATE OF 4.0% PER YEAR
WILL BE DETERMINED IN THE SOLE DISCRETION OF UNION CENTRAL.
Union Central guarantees that, at any time prior to the
Maturity Date, the Guaranteed Account of the Contract will
be at least equal to:
(1) the total of all net premiums allocated to the Guaranteed
Account; plus
(2) the total of all amounts transferred to the Guaranteed
Account from the Variable Account; minus
(3) the total of all amounts transferred from the Guaranteed
Account to the Variable Account (including the transfer fee);
minus
(4) the total of all administration fees attributable to the
Guaranteed Account; minus
(5) the total of all partial surrenders from the Guaranteed
Account (including any surrender charges); plus
(6) interest at the guaranteed annual effective interest rate
of 4.0%.
Fixed Annuity Payments
A fixed annuity is an annuity with payments that have a dollar
amount that is fixed and guaranteed by the insurance company
issuing the Contract. The amount of the annuity payments will be
determined by applying the Guaranteed Account to rates at least
as favorable as those in the applicable annuity option table in
accordance with the Annuity Option elected. This will be done at
the Maturity Date. The annuity option tables contained in the
Contract are based on a 4.0% interest rate.
Union Central guarantees the amount of fixed annuity payments.
The payment depends only on the annuity option elected, the age
(and possibly sex) of the Annuitant, and the amount applied to
purchase the fixed annuity.
<PAGE>
Surrenders
The Contract Owner may surrender all or part of the Guaranteed
Account value at any time prior to the Maturity Date or the death
of the Annuitant. Union Central intends to pay surrender requests
upon receipt but reserves the right to delay payment of all
surrenders from the Guaranteed Account for up to six months.
Surrenders from the Guaranteed Account generally are subject to
the same provisions that apply to surrenders from the Variable
Account, discussed under "Surrenders" on page 15.
Transfers
Amounts may be transferred among subdivisions of a Contract's
Variable Account, or between the Guaranteed Account and
subdivisions of the Variable Account, at any time prior to the
Maturity Date. Prior to the Maturity Date, Contract Owners may
transfer up to the greater of $1,000 or 20% of the value of the
Guaranteed Account to one or more subdivisions of the Variable
Account each Contract Year. There is no maximum on amounts that
may be transferred out of a subdivision of the Variable Account.
The minimum amount that may be transferred is $300, or if less,
the entire amount in the investment option. No transfers may be
made with respect to fixed annuity payments.
GENERAL MATTERS
Designation of Beneficiary
The Beneficiary is the person designated as such in the
application and is the person or persons to whom benefits will
be paid upon the death of the Annuitant. Subject to the terms of
any existing assignment or the rights of any irrevocable
Beneficiary, the Contract Owner may change the Beneficiary while
the Annuitant is living by providing Union Central with
written notice. Any change will be effective at the time it is
signed by the Contract Owner, whether or not the Annuitant is
living when the change is received by Union Central. Union
Central will not, however, be liable as to any payment or
settlement made prior to receiving the written notice.
20-Day Right to Examine Contract
If a Contract Owner is not satisfied with the Contract, it may
be voided by returning it to Union Central or the agent of Union
Central from which it was purchased within 20 days of receipt.
The Contract Owner will then receive a full refund of any premium
paid or in certain states the Accumulation Value.
Contract Owner's Inquiry
Contract Owners may make inquiries concerning their contracts
by calling Union Central at (513) 595-2728, or writing
c/o Annuity Administration, P.O. Box 40888, Cincinnati, Ohio
45240.
FEDERAL TAX MATTERS
Introduction
The following discussion is general and is not intended as tax
advice. This discussion is based upon Union Central's
understanding of the present federal income tax laws as they are
currently interpreted by the Internal Revenue Service
("Service"). No representation is made as to the likelihood of
continuation of these present federal income tax laws or of the
current interpretations by the Service. Moreover, no attempt has
been made to consider any applicable state or other tax laws.
The Contract may be used in connection with retirement plans
that are qualified for special tax treatment under Sections 401,
403, 408, or 457 of the Internal Revenue Code of 1986, as amended
("Code"). The ultimate effect of federal income taxes on the
Accumulation Value, on annuity payments, and on the economic
benefit to the Contract Owner, the Annuitant or the Beneficiary
depends on the type of retirement plan for which the Contract is
purchased, on the tax and employment status of the individual
concerned, on Union Central's tax status, and on other factors.
Any person concerned about these tax implications should consult
a competent tax adviser.
<PAGE>
Tax Status of Contracts
The following discussion assumes that the Contracts will be
treated as annuities under Section 72 of the Internal
Revenue Code.
Union Central believes that an annuity owner generally is not
taxed on increases in the value of a Contract until
distribution occurs either in the form of a lump sum received by
withdrawing all or part of the cash value (i.e., "surrenders")
or as annuity payments under the annuity option elected. The
exception to this rule is the treatment afforded to owners that
are not natural persons. Generally, an owner of any deferred
annuity contract who is not a natural person must include in
income any increase in the excess of the Owner's cash value over
the Owner's investment in the contract during the taxable
year. However, there are some exceptions to this exception and
you may wish to discuss these with your tax counsel. The
taxable portion of a distribution (in the form of an annuity or
lump-sum payment) is taxed as ordinary income. For this
purpose, the assignment, pledge, or agreement to assign or pledge
any portion of the cash value (and in the case of a
Qualified Contract, any portion of an interest in the qualified
employer plan) generally will be treated as a distribution.
The following discussion applies generally to Contracts owned
by natural persons.
In the case of a surrender under Qualified Contracts, amounts
received are treated as taxable income to the extent that
they exceed the "investment in the contract." Any additional
amount withdrawn is not taxable. The "investment in a contract"
generally equals the portion, if any, of any premium paid by or
on behalf of an individual under a contract which is not
excluded from the individual's gross income. For contracts issued
in connection with tax-qualified plans, the "investment
in the contract" can be zero. A special rule may apply to
surrenders under Qualified Contracts with respect to the
"investment in the contract" as of December 31, 1986. In the case
of a surrender under Nonqualified Contracts, amounts received are
first treated as taxable income to the extent that the cash value
of the contract immediately before the surrender exceeds the
"investment in the contract" at that time. Any additional amount
withdrawn is not taxable. For purposes of determining
amounts treated as taxable income, all annuity contracts issued
by the same company to the same person during any calendar
year are treated as a single contract.
The recipient of an annuity payment under the Contract is
generally taxed on the portion of such payment that exceeds
the "investment in the contract." For variable annuity payments,
the taxable portion is determined by a formula which establishes
a specific dollar amount of each payment that is not taxed until
the investment in the Contract is recovered. The dollar amount is
determined by dividing the "investment in the contract" by the
total number of expected periodic payments. For fixed annuity
payments, in general, there is no tax on the portion of each
payment which represents the same ratio that the "investment in
the contract" bears to the total expected value of the annuity
payments for the term of the Contract until the investment in the
Contract is recovered; the remainder of each payment is taxable.
Once the investment in the Contract is recovered, the entire
amount of each payment is taxable.
For Nonqualified Contracts, there may be imposed a penalty tax
on surrenders equal to 10% of the amount treated as taxable
income. In general, there is no penalty tax on surrenders (1)
made on or after age 59-1/2, (2) made as a result of death or
disability, or (3) received in substantially equal installments
as a life annuity. For some Qualified Contracts, there
may be imposed a penalty tax on certain surrenders.
A transfer of ownership of a Contract, or designation of an
annuitant or other beneficiary who is not also the owner,
may result in certain tax consequences to the owner that are not
discussed herein. An owner contemplating any such transfer
or assignment of a Contract should contact a competent tax
adviser with respect to the potential tax effects of such a
transaction.
Distributions from tax-deferred annuities or qualified pension
or profit sharing plans that are eligible for "tax-free
rollover" will be subject to an automatic 20% federal income tax
withholding unless such amounts are directly rolled over
to another qualified plan or individual retirement arrangement
permitted under the Code. Withholding for federal income
taxes on annuity payments is required unless the recipient elects
not to have any such amounts withheld and properly notifies
Union Central of that election. Failure to provide your taxpayer
identification number will automatically subject any payments
under the Contract to withholding.
Qualified Plans
The Contract may be used with several types of qualified plans.
The tax rules applicable to participants in such qualified plans
vary according to the type of plan and the terms and conditions
of the plan itself. Purchasers of Contracts for use with any
qualified plan should seek competent legal and tax advice
regarding the suitability of the Contract.
(a) Section 403(b) Plans. Under Section 403(b) of the Code,
payments made by public school systems and certain tax-exempt
organizations to purchase annuity contracts for their employees,
directly or through voluntary salary reductions, are excludable
from the gross income of the employee, subject to certain
limitations. However, such payments may be subject to FICA
(Social Security) taxes. In addition, effective January 1, 1989,
cash distributions from a Section 403(b) annuity may not begin
before the employee attains age 59-1/2, separates from his or her
employer's service, dies or becomes disabled, except that cash
distributions limited to the amount of premiums may be paid in
the event of the employee's hardship. These restrictions apply to
distributions attributable to contributions made after December
31, 1988 pursuant to a salary reduction agreement, earnings on
those contributions, and earnings on amounts attributable to
contributions held as of December 31, 1988 and made pursuant to a
salary reduction agreement.
(b) Individual Retirement Annuities. Sections 219 and 408 of
the Code permit individuals or their employers to contribute to
an individual retirement program known as an "Individual
Retirement Annuity" or "IRA." Individual Retirement Annuities are
subject to limitations on the amount which may be contributed and
deducted and the time when distributions may commence. In
addition, distributions from certain other types of qualified
plans may be placed into an Individual Retirement Annuity on a
tax-deferred basis.
(c) Corporate Pension and Profit-Sharing Plans. Sections
401(a) and 403(a) of the Code permit corporate employers to
establish various types of retirement plans for employees. Such
retirement plans may permit the purchase of the Contracts to
provide benefits under the plans.
(d) H.R. 10 Plans. The Self-Employed Individuals Tax
Retirement Act of 1962, as amended, commonly referred to as "H.R.
10," permits self-employed individuals to establish tax-qualified
plans for themselves and their employees. These plans are limited
by law to maximum permissible contributions, distribution dates,
and nonforfeitability of interests. In order to establish such a
plan, a plan document, usually in a form approved in advance by
the Internal Revenue Service, is adopted and implemented by the
employer.
(e) State and Local Government Deferred Compensation Plans.
Section 457 of the Code, while not actually providing for a
qualified plan as that term is normally used, provides for
certain deferred compensation plans with respect to service for
state governments, local governments, certain tax-exempt
organizations, political subdivisions, agencies,
instrumentalities and certain affiliates of such entities which
enjoy special treatment. The Contracts can be used with such
plans.
RESTRICTIONS UNDER THE TEXAS OPTIONAL RETIREMENT PROGRAM
Section 36.105 of the Texas Education Code permits participants
in the Texas Optional Retirement Program ("ORP") to redeem their
interest in a variable annuity contract issued under the ORP only
upon (1) termination of employment in the Texas public
institutions of higher education, (2) retirement, or (3) death.
Accordingly, a participant in the ORP, or the participant's
estate if the participant has died, will be required to obtain a
certificate of termination from the employer before the Contract
can be surrendered.
DISTRIBUTION OF THE CONTRACTS
Carillon Investments, Inc. (a wholly-owned subsidiary of Union
Central whose principal business address is 1876 Waycross Road,
Cincinnati, Ohio 45240), the principal underwriter of the
Contracts, is registered with the Securities and Exchange
Commission under the Securities Exchange Act of 1934 as a
broker-dealer and is a member of the National Association of
Securities Dealers, Inc. Union Central will pay Carillon
Investments, Inc., an amount not in excess of 5% of premiums
received over the duration of the Contract, from which Carillon
Investments will pay commissions to its own registered
representatives or pay a reallowance to other broker-dealers who
distribute the Contracts. In those cases where the surrender
charges are reduced (see page 18), the amount paid to Carillon
Investments will be less than 5% of premiums.
VOTING RIGHTS
To the extent required by law, the Portfolio shares held by CA
will be voted by Union Central at shareholder meetings of the
Funds in accordance with instructions received from persons
having voting interests in the corresponding Subaccounts of CA.
However, if the Investment Company Act of 1940 or any regulation
thereunder should be amended or if the present interpretation
thereof should change, and as a result, Union Central determines
that it is allowed to vote the Portfolio shares in its own right,
Union Central may elect to do so.
The number of votes which a person has the right to instruct
will be calculated separately for each Subaccount. Prior to the
Maturity Date, the number of votes for which a Contract Owner has
a right to give instructions will be determined by dividing the
Accumulation Value attributable to a subdivision by the net asset
value per share of the corresponding Portfolio. After the
Maturity Date, the Annuitant has the voting interest. The number
of votes after the Maturity Date will be determined by dividing
the reserve for such Contract held in a Subaccount by the net
asset value per share of the corresponding Portfolio. After the
Maturity Date, the votes attributable to a Contract decrease as
the reserves underlying the Contract decrease. In determining the
number of votes, fractional shares will be recognized. Voting
instructions will be solicited prior to such meeting in
accordance with procedures established by Union Central. Fund
shares held in CA as to which no timely instructions are received
will be voted or not voted by Union Central in proportion to the
voting instructions received. Each person having a voting
interest in a Subaccount will receive proxy material, reports and
other materials relating to the appropriate Portfolio.
In accordance with an amendment to the Maryland General
Corporation Law, the Board of Directors of Carillon Fund has
adopted an amendment to its By-laws providing that unless
otherwise required by the Investment Company Act of 1940,
Carillon Fund shall not be required to hold an annual meeting of
shareholders unless the Board of Directors determines to hold an
annual meeting. Carillon Fund intends to hold shareholder
meetings only when required by law and such other times as may be
deemed appropriate by its Board of Directors.
Scudder Fund, which was organized in the Commonwealth of
Massachusetts as a "Massachusetts business trust," does not
intend to hold annual meetings. However, shareholders of Scudder
Fund have certain rights, as set forth in the Declaration of
Trust of Scudder Fund, including the right to call a meeting of
shareholders for the purpose of voting on the removal of one or
more Trustees.
TCI Fund was organized as a Maryland corporation. An insurance
company issuing a variable contract invested in shares issued by
the TCI Fund will request voting instructions from Contract
Owners and will vote shares in proportion to the voting
instructions received.
MFS Fund was organized in the CommonwR> ealth of Massachusetts
as a "Massachusetts business trust." It does not intend to hold
annual shareholder meetings.
FINANCIAL STATEMENTS
Financial statements of CA and the balance sheet of Union
Central are included in the SAI which may be obtained by writing
Union Central at P.O. Box 40409, Cincinnati, Ohio 45240-0409.
<PAGE>
APPENDIX A
IRA DISCLOSURE STATEMENT
This statement is designed to help you understand the present
requirements of federal tax law which apply to your
Individual Retirement Annuity (IRA), your Simplified Employee
Pension IRA (SEP-IRA for employer contributions), or to
one you purchase for your spouse (see Spousal IRAs below). You
can obtain more information regarding your IRA either
from your sales representative or from any district office of the
Internal Revenue Service.
Seven-day Review Period
You have seven days after you sign your application to review
this statement and the Prospectus without obligation.
If you notify Union Central or your sales representative either
orally or in writing within the seven-day period that you want
to revoke your application, your entire purchase payment will be
refunded to you. The address and telephone number of
Union Central are as follows:
The Union Central Life Insurance Company
P.O. Box 40888
Cincinnati, Ohio 45240
Telephone: (513) 595-2728 8:15 a.m.-4:30 p.m. (Eastern Time
Zone)
Eligibility Requirements
If neither you, nor your spouse, is an active participant (see
A. below) you may make a contribution of up to the lesser
of $2,000 (or $2,250 in the case of a Spousal IRA) or 100% of
compensation and take a deduction for the entire amount
contributed. If you are an active participant but have an
adjusted gross income (AGI) below a certain level (see B. below),
you may make a fully deductible contribution. If, however, you or
your spouse is an active participant and your combined
AGI is above the specified level, the amount of the deductible
contribution you may make to an IRA is phased down and
eventually eliminated.
A. Active Participant
You are an "active participant" for a year if you are covered
by a retirement plan. You are covered by a "retirement
plan" for a year if your employer or union has a retirement plan
under which money is added to your account or you are
eligible to earn retirement credits. For example, if you are
covered under a profit-sharing plan, certain government plans,
a salary-reduction arrangement (such as a tax-sheltered annuity
arrangement or a 401(k) plan), a simplified employee pension
plan SEP or a plan which promises you a retirement benefit which
is based upon the number of years of service you have
with the employer, you are likely to be an active participant.
Your Form W-2 for the year should indicate your participation
status.
You are an active participant for a year even if you are not
yet vested in your retirement benefit. Also, if you make
required contributions or voluntary employee contributions to a
retirement plan, you are an active participant. In certain plans
you may be an active participant even if you were only with the
employer for part of the year.
You are not considered an active participant if you are covered
in a plan only because of your service as (1) an Armed
Forces Reservist, for less than 90 days of active service; or (2)
a volunteer firefighter covered for firefighting service by a
government plan. Of course, if you are covered in any other plan,
these exceptions do not apply.
If your spouse is an active participant, you will also be
treated as an active participant, unless you file separately and
do not live together at any time during the tax year.
B. Adjusted Gross Income (AGI)
If you are an active participant, you must look at your
Adjusted Gross Income for the year (if you and your spouse
file a joint tax return you use your combined AGI) to determine
whether you can make a deductible IRA contribution. Your
tax return will show you how to calculate your AGI for this
purpose. If you are at or below a certain AGI level, called the
Threshold Level, you are treated as if you were not an active
participant and can make a deductible contribution under the
same rules as a person who is not an active participant.
If you are single, your Threshold Level is $25,000. The
Threshold Level if you are married and file a joint tax return
is $40,000, and if you are married but file a separate tax
return, the Threshold Level is $0. If you are married but file
separately and you live apart from your spouse for the entire
year, the IRS will treat you as not being married for purposes
of active participant status and the Threshold Level. Thus, your
Threshold Level is $25,000.
If your AGI is less than $10,000 above your Threshold Level,
you will still be able to make a deductible contribution
but it will be limited in amount. The amount by which your AGI
exceeds your Threshold Level (AGI--Threshold Level) is
called your Excess AGI. The Maximum Allowable Deduction is $2,000
(or $2,250 for a Spousal IRA). You can estimate
your Deduction Limit or calculate it as follows:
$10,000 - Excess AGI
- -------------------- X Maximum Allowable Deduction = Deduction
$10,000 Limit
You must round up the result to the next highest $10 level
(the next highest number which ends in zero). For example,
if the result is $1,525, you must round it up to $1,530. If the
final result is below $200 but above zero, your Deduction Limit
is $200. Your Deduction Limit cannot, in any event, exceed 100%
of your compensation.
Deductible Contributions
If you satisfy the eligibility requirements described above,
contributions to your IRA will be deductible whether or not you
itemize deductions on your federal income tax return. IRA or
SEP-IRA contributions must be made by no later than the time you
file your income tax return for that year (i.e., April 15 if you
are a calendar-year taxpayer) with no extensions.
Under certain circumstances an employee may elect to have the
employer make up to $7,000 ($9,500 in 1996 as adjusted for
inflation) in salary-reduction contributions to a SEP. Under a
SEP-IRA agreement, the maximum annual contribution which your
employer may make to a SEP-IRA contract is 15% of your
compensation. For plan years after 1993, compensation is limited
to $150,000. Employer contributions to a SEP-IRA are excludable
from the employee's gross income
rather than deductible.
If you or your employer should contribute more than the
maximum contribution amount of your IRA or SEP-IRA, the
excess amount will be considered an "excess contribution." You
are permitted to withdraw an excess contribution from your
IRA or SEP-IRA before your tax filing date without adverse tax
consequences. If, however, you fail to withdraw any such excess
contribution before your tax filing date, a 6% excise tax will be
imposed on the excess for the tax year of contribution.
Once the 6% excise tax has been imposed, an additional 6%
penalty for the following tax year can be avoided if the excess
is (1) withdrawn before the end of the following year, or (2)
treated as a current contribution for the following year.
No contribution may be made to your IRA during or after the
tax year in which you attain age 70-1/2.
Nondeductible Contributions
Even if you are above the threshold level and thus may not
make a deductible contribution of $2,000 ($2,250 for a Spousal
IRA), you may still contribute up to the lesser of 100% of
compensation or $2,000 to an IRA ($2,250 for a Spousal IRA). The
amount of your contribution which is not deductible will be a
nondeductible contribution to the IRA. You may also choose to
make a contribution nondeductible even if you could have deducted
part or all of the contribution. Interest or other earnings on
your IRA contribution, whether from deductible or nondeductible
contributions, will not be taxed until taken out of your IRA and
distributed to you.
If you make a nondeductible contribution to an IRA you must
report the amount of the nondeductible contribution to the IRS as
a part of your tax return for the year. There is a $50 penalty
for failure to file Form 8606, entitled Nondeductible IRA
Contributions, IRA Basis, and Nontaxable IRA Distributions.
You may make a $2,000 contribution at any time during the
year, if your compensation for the year will be at least $2,000,
without having to know how much will be deductible. When you fill
out your tax return you may then figure out how
much is deductible.
You may withdraw an IRA contribution made for a year any time
before April 15 of the following year. If you do so, you must
also withdraw the earnings attributable to that portion and
report the earnings as income for the year for which the
contribution was made. If some portion of your contribution is
not deductible, you may decide either to withdraw the
nondeductible amount, or to leave it in the IRA and designate
that portion as a nondeductible contribution on your tax return.
Spousal IRAs
You may contribute to a Spousal IRA if your spouse has no
compensation or elects to be treated as having no compensation
during the year. Provided your spouse does not make a
contribution to an IRA, you may set up a Spousal IRA consisting
of an account for your spouse as well as an account for yourself.
The total of contributions to your IRA and that of your spouse
for the tax year is limited to the least of (1) the amount
contributed, (2) $2,250, or (3) 100% of your compensation. You
may split the contributions between the IRAs as you wish, but no
more than $2,000 can be contributed to your IRA or the IRA of
your nonworking spouse for any tax year. Contributions in excess
of the contribution limits may be subject to penalty.
You may not make a contribution to your IRA for the tax year
in which you reach age 70-1/2 nor can any contribution be made
for any tax year thereafter. Contributions to your spouse's IRA
can be made until the tax year in which your spouse reaches age
70-1/2.
Rollover Contributions
Once every year, you are permitted to withdraw any portion of
the value of your IRA or SEP-IRA and reinvest it in another IRA.
Withdrawals may also be made from other IRAs and contributed to
this IRA. This transfer of funds from one IRA to another is
called a "rollover" IRA. To qualify as a rollover contribution,
the entire portion of the withdrawal must be reinvested in
another IRA within 60 days after the date it is received. You
will not be allowed a tax deduction for the amount of any
rollover contribution. A direct transfer of funds from one IRA to
another IRA is permitted. Such direct transfers are not limited
to one per year.
A similar type of rollover can be made with the proceeds of a
qualified distribution from a qualified retirement plan
(including TDA and HR-10 plans). Distributions from tax-deferred
annuities or qualified pension or profit sharing plans that are
eligible for "tax-free rollover" will be subject to an automatic
20% federal income tax withholding unless such amounts are
directly rolled over to another qualified plan or individual
retirement arrangement permitted under the Code. Properly made,
such a distribution will not be taxable until you receive
payments from the IRA created with it. Unless you were a
self-employed participant in the distributing plan, you may later
rollover such a contribution to another qualified retirement plan
as long as you have not mixed it with IRA or SEP-IRA
contributions.
Premature Distributions
At no time can interest in your IRA or SEP-IRA be forfeited.
To insure that your contributions will be used for your
retirement, the federal tax law does not permit you to use your
IRA or SEP-IRA as a security for a loan. Furthermore, as a
general rule, you may not sell or assign your interest in your
IRA or SEP-IRA to anyone. Use of an IRA or SEP-IRA as security or
assignment of it to another will invalidate the entire annuity.
The portion attributable to your deductible contributions and all
earnings will be includable in your income in the year it is
invalidated and will be subject to a 10% penalty if you are not
at least age 59-1/2 or totally disabled, or if you do not meet
certain other limited exceptions. (You may, however, assign your
IRA or SEP-IRA without penalty to your former spouse in
accordance with the terms of a divorce
decree.)
You may surrender any portion of the value of your IRA or
SEP-IRA. In the case of a partial surrender which does not
qualify as a rollover, the amount withdrawn which is attributable
to your deductible contributions and all earnings will be
includable in your income and subject to the 10% penalty if you
are not at least age 59-1/2 or totally disabled, or if you do not
meet certain other limited exceptions.
The 10% penalty tax does not apply to the distribution of
excess contributions if you receive such distribution on or
before the due date (including extensions of time) for filing
your tax return, you did not deduct such excess contribution, and
you also received the net income attributable for such excess
contribution. Unless you are 59-1/2, totally disabled, or meet
certain other limited exceptions, a 10% penalty tax will be
imposed on the part of an excess contribution greater than $2,250
which is withdrawn after your tax filing date.
There is no 10% penalty if the IRA distributions are in
substantially equal amounts (at least annually) over your life or
life expectancy, or the joint lives or life expectancies of you
and your beneficiary.
Because nondeductible IRA contributions are made using income
which has already been taxed (that is, they are not deductible
contributions), the portion of the IRA distributions consisting
of nondeductible contributions will not be taxed again when
received by you. If you make any nondeductible IRA contributions,
each distribution from your IRAs will consist of a nontaxable
portion (return of nondeductible contributions) and a taxable
portion (return of deductible contributions, if any, and account
earnings).
The following formula is used to determine the nontaxable
portion of your distributions for a taxable year:
Remaining Nondeductible Contribution
- ------------------------------------ X Total Distributions =
Year-end total IRA account balances (for the year)
Nontaxable Distribution (for the year)
To figure the year-end total IRA account balance you treat all
of your IRAs as a single IRA. This includes all regular IRAs, as
well as SEP-lRAs, and Rollover IRAs. You also add back the
distributions taken during the year.
Inadequate or Underdistributions 50% Tax
Your IRA or SEP-IRA is intended to provide retirement benefits
over your lifetime. Thus, federal law requires that you either
receive a lump-sum distribution of your IRA or start to receive
distribution payments by the April 1 following the end of the
calendar year in which you attain age 70-1/2. If you elect other
than a lump-sum distribution, the distribution must begin not
later than the commencement date previously stated and your
interest must be distributed over (1) your life, (2) your life
and that of your beneficiary, (3) a period not extending beyond
your life expectancy, or (4) a period not extending beyond your
life expectancy and the life expectancy of your beneficiary. If
you elect to receive periodic payments, those payments must be
sufficient to pay out the entire value of your IRA during your
life expectancy (or over the joint life expectancies of you and
your beneficiary). Your life expectancy (and that of your spouse
in the case of joint life) can be redetermined up to once a year.
If the payments are not sufficient to meet the requirements, an
excise tax of 50% will be imposed on the amount of any
underpayment.
Death Benefits
If you die after distribution has commenced but before
receiving your entire interest in your IRA or SEP-IRA, the
remaining portion must be distributed to your designated
beneficiary at least as rapidly as under the method of
distribution in effect prior to your death.
If you die before distribution has commenced, your entire
interest in your IRA or SEP-IRA must be distributed within
five years.
An election can be made to receive distributions beyond the
five years referred to in the preceding paragraph, where (1)
distributions are made over the lifetime (or over a period not to
exceed the life expectancy) of your surviving spouse as
designated beneficiary where distributions commence no later than
the date upon which you would have attained age 70-1/2, or (2)
distributions are made over the lifetime (or over a period not to
exceed the life expectancy) of a designated beneficiary (other
than your surviving spouse) where distributions commence no later
than one year after your death (or such later date as the IRS
regulations may prescribe). If (1) is elected and your spouse
dies before payments begin, subsequent distributions will be made
as if your spouse was the owner of the IRA. For distribution
purposes, any amount paid to your minor child or children will be
treated as though it is paid to your surviving spouse if the
surviving spouse receives the distribution when the child or
children reach majority.
Your surviving spouse, as a designated beneficiary, qualifies
for tax-free rollover treatment of a distribution from your IRA
or SEP-IRA by reason of your death. No other beneficiary has this
privilege, nor can any other beneficiary effect a tax-free
transaction by having the funds directly transferred to another
IRA account.
A distribution of the balance of your IRA upon your death will
not be considered a gift for federal tax purposes.
Prototype Status
The Internal Revenue Service reviewed the format of your IRA,
and issued an opinion letter on May 19, 1986, to The Union
Central Life Insurance Company stating that your IRA qualifies as
a prototype IRA.
Reporting to the IRS
Whenever you are liable for one of the penalty taxes discussed
above (6% for excess contributions, 10% for premature
distributions, or 50% for distribution underpayments), you must
file Form 5329 with the Internal Revenue Service. The form is to
be attached to your federal income tax return for the tax year in
which the penalty applies. Normal contributions and distributions
must be shown on your income tax return for the year to which
they relate.
<PAGE>
CARILLON FUND, INC.
- ----------------------------------------------------------------
Carillon Fund, Inc. (the "Fund"), is a no-load, diversified,
open-end management investment company which is intended to meet
a wide range of investment objectives with its four separate
Portfolios: Equity Portfolio, Bond Portfolio, Capital Portfolio
and S&P 500 Index Portfolio. Each Portfolio generally operates
as a separate fund issuing its own shares.
The Equity Portfolio seeks primarily long-term appreciation
of capital, without incurring unduly high risk, by investing
primarily in common stocks and other equity securities. Current
income is a secondary objective.
The Bond Portfolio seeks as high a level of current income
as is consistent with reasonable investment risk, by investing
primarily in long-term, fixed-income, investment-grade corporate
bonds.
The Capital Portfolio seeks to provide the highest total
return through a combination of income and capital appreciation
consistent with the reasonable risks associated with an
investment
portfolio of above-average quality by investing in equity
securities, debt instruments and money market instruments.
The S&P 500 Index Portfolio seeks investment results that
correspond to the total return performance of U.S. common stocks,
as represented by the S&P 500 Index.
There can be no assurance that any Portfolio will achieve
its objectives.
This Prospectus sets forth concisely the information that a
prospective investor should know before investing in the Fund,
and it should be read and kept for future reference. A Statement
of Additional Information dated May 1, 1996, which contains
further information about the Fund, has been filed with the
Securities and Exchange Commission and is incorporated by
reference into this Prospectus. A copy of the Statement of
Additional Information may be obtained without charge by calling
the Fund at (513) 595-2600, or by writing the Fund at P.O. Box
40409, Cincinnati, Ohio
45240-0409.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
May 1, 1996
UCCF 514 4-96<PAGE>
<PAGE>
CARILLON FUND, INC.
TABLE OF CONTENTS
Page
The Fund . . . . . . . . . . . . . 2
Annual Fund Operating Expenses . . . . 3
Financial Highlights . . . . . . . 4
Investment Objectives and Policies . . . . . 7
Equity Portfolio. . . . . . . 7
Bond Portfolio. . . . . . . . 7
Capital Portfolio . . . . . . 8
S&P 500 Index Portfolio . . . . . 9
Principal Risk Factors. . . . . . 10
Repurchase Agreements . . . . 11
Reverse Repurchase Agreements . . . . . 11
Futures Contracts and
Options on Futures Contracts. . . . . 11
Options . . . . . . . . . . . 12
Options on Securities Indices . . . . . 12
Collateralized Mortgage Obligations . . . . 13
Lending Portfolio Securities. . . . . . 13
Other Information . . . . . . 13
The Fund and Its Management. . . . . . 13
Investment Adviser. . . . . . 13
Advisory Fee. . . . . . . . . 14
Expenses. . . . . . . . . . . 14
Capital Stock . . . . . . . . 14
Purchase and Redemption of Shares. . . . . . 14
Dividends and Distributions. . . . . . 15
Taxes. . . . . . . . . . . . . . . 15
Custodian, Transfer and
Dividend Disbursing Agent . . . . 15
Appendix
Bond and Commercial Paper Ratings . . . 16
THE FUND
Carillon Fund, Inc. (the "Fund"), a Maryland corporation, is
a no-load, diversified, open-end investment company.
The Fund has four Portfolios, which in many ways operate as
separate funds issuing separate classes of common stock. An
interest in the Fund is limited to the assets of the Portfolio in
which shares are held, and shareholders of each Portfolio are
entitled to a pro rata share of all dividends and distributions
arising from the net income and capital gains on the investments
of such Portfolio.
Currently, the shares of the Fund are sold only to The Union
Central Life Insurance Company ("Union Central")
and to certain of its separate accounts to fund the benefits
under certain variable annuity contracts and variable universal
life
insurance policies (the "contracts") issued by Union Central. The
separate accounts invest in shares of the Fund in accordance
with allocation instructions received from Contract Owners.
To the extent that the shares of the Fund's four Portfolios
are sold to Union Central in order to fund the benefits
under the contracts, the structure of the Fund permits Contract
Owners, within the limitations described in the contracts, to
determine the type of investment underlying their contracts in
response to or in anticipation of changes in market or economic
conditions. Contract Owners should consider that the investment
return experience of the Portfolio or Portfolios they select
will affect the value of the contract and the amount of annuity
payments received under a contract. See the attached
Prospectus for the Flexible Premium Deferred Variable Annuity for
a description of the relationship between increases or
decreases in the net asset value of Fund shares (and any
distributions on such shares) and the benefits provided under a
contract.<PAGE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
EXPENSES (as a percentage of average net assets)
S&P 500
Equity Bond Capital
Index
Portfolio Portfolio Portfolio
Portfolio
- -------------------------------------------------------------------------
<S> <C> <C> <C>
<C>
Management Fees .59% .49% .68%
.30%
Other Expenses .07% .16% .09%
.30%*
Total Operating Expenses .66% .65% .77%
.60%*
</TABLE>
EXAMPLE
The table below shows the amount of expenses a Shareholder
would pay on a $1,000 investment assuming a 5% annual
return.+
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10
Years
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Equity Portfolio $ 7 $ 21 $ 37 $ 82
Bond Portfolio $ 7 $ 21 $ 36 $ 81
Capital Portfolio $ 8 $ 25 $ 43 $ 96
S&P 500 Index Portfolio $ 6 $ 19 $ -- $
- --
</TABLE>
The purpose of this table is to assist the Contract Owner
in understanding the various expenses that the Contract
Owner will bear indirectly by providing information on expenses
associated with the Contract's investment in the Fund. This
table does not include any contract or variable account charges.
This table should not be considered a representation of
past or future expenses and the actual expenses that will
be paid may be greater or lesser than those shown.
- ---------------
* "Other Expenses" for the S&P 500 Index Portfolio are based on
estimates. Total Operating Expenses in excess of .60% for that
Portfolio are paid by the investment adviser.
+ The 5% annual return is a standardized rate prescribed for the
purpose of this example and does not represent the past or future
return of the Fund.<PAGE>
<PAGE>
FINANCIAL HIGHLIGHTS
The financial information in the tables which follow
(pages 4-6), insofar as it pertains to each of the five years in
the period ended December 31, 1995, have been audited in
conjunction with the annual audit of the financial statements of
the Fund . The financial statements for the year ended December
31, 1995, have been audited by Deloitte & Touche LLP, whose
unqualified report thereon is included in the Statement of
Additional Information. The financial statements for the four
years ended December 31, 1994 have been audited by Price
Waterhouse LLP, whose reports expressed unqualified opinions on
those statements. These financial highlights should be read in
conjunction with the financial statements and notes thereto
included in the Statement of Additional Information. Further
information about the performance of the Fund is contained in the
Fund's annual report which may be obtained without charge. (See
"Other Information" below.)
<TABLE>
<CAPTION>
Equity Portfolio
Year ended December 31,
1995 1994 1993
1992 1991
- --------------------------------------------
<S> <C> <C> <C>
<C> <C>
Net Asset Value,
Beginning of year $14.30 $14.58 $13.74
$12.60 $ 8.81
Investment Activities:
Net investment income .24 .20 .16
.19 .20<F1>
Net realized and
unrealized gains (losses) 3.36 .31 1.69
1.27 3.79
Total from Investment Operations 3.60 .51 1.85
1.46 3.99
Distributions:
Net investment income (.23) (.19) (.16)
(.19) (.20)
Net realized gains (1.13) (.60) (.85)
(.13) --
Total Distributions (1.36) (.79) (1.01)
(.32) (.20)
Net Asset Value,
End of year $16.54 $14.30 $14.58
$13.74 $12.60
Ratios/Supplemental Data:
Total Return <F2> 26.96% 3.42% 14.11%
11.78% 45.55%
Ratio of Expenses to
Average Net Assets .66% .69% .70%
.72% .75%<F1>
Ratio of Net Investment
Income to Average Net Assets 1.73% 1.45% 1.18%
1.47% 1.79%<F1>
Portfolio Turnover Rate 34.33% 40.33% 37.93%
46.75% 55.17%
Net Assets, End of Period
(in thousands) $219,563 $157,696 $138,239
$102,306 $79,352
</TABLE>
<TABLE>
<CAPTION>
1990 1989 1988
1987 1986
- --------------------------------------------
<S> <C> <C> <C>
<C> <C>
Net Asset Value,
Beginning of year $10.79 $10.88 $ 8.57 $
9.62 $12.72
Investment Activities:
Net investment income .28<F1> .58 .38
.34 .55
Net realized and
unrealized gains (losses) (1.91) .69 2.33
(.22) 1.08
Total from Investment Operations (1.63) 1.27 3.71
.12 1.63
Distributions:
Net investment income (.31) (.59) (.34)
(.35) (.56)
Net realized gains (.04) (.77) (.06)
(.82) (4.17)
Total Distributions (.35) (1.36) (.40)
(1.17) (4.73)
Net Asset Value,
End of year $ 8.81 $10.79 $10.88 $
8.57 $ 9.62
Ratios/Supplemental Data:
Total Return<F2> (15.45%) 11.79% 31.79%
.85% 12.72%
Ratio of Expenses to
Average Net Assets .82%<F1> .95% .95%
.97% .89%
Ratio of Net Investment
Income to Average Net Assets 2.98%<F1> 5.34% 3.74%
3.30% 3.78%
Portfolio Turnover Rate 99.90% 61.49% 57.98%
70.17% 84.23%
Net Assets, End of Period
(in thousands) $52,514 $56,194 $37,723
$28,915 $17,956
<FN>
<F1>
Net of expenses waived by the Adviser of $.002 per share in 1991
and $.01 per share in 1990.
<F2>
Total Return does not reflect expenses that apply to the separate
account or the related insurance
policies. Inclusion of these charges would reduce the Total
Return figures for all periods shown.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(Continued)
Bond Portfolio
Year ended December 31,
1995 1994 1993
1992 1991
- --------------------------------------------
<S> <C> <C> <C>
<C> <C>
Net Asset Value,
Beginning of year $10.04 $11.30 $10.91
$10.96 $10.10
Investment Activities:
Net investment income .88 .77 .73
.82 .86
Net realized and
unrealized gains (losses) .98 (.95) .54
(.01) .87
Total from Investment Operations 1.86 (.18) 1.27
.81 1.73
Distributions:
Net investment income (.83) (.78) (.73)
(.82) (.87)
Net realized gains (.30) (.15) (.04)
- -- --
Total Distributions (.83) (1.08) (.88)
(.86) (.87)
Net Asset Value,
End of year $11.07 $10.04 $11.30
$10.91 $10.96
Ratios/Supplemental Data:
Total Return<F1> 19.03% (1.63%) 11.94%
7.65% 17.89%
Ratio of Expenses to
Average Net Assets .65% .68% .66%
.69% .73%
Ratio of Net Investment
Income to Average Net Assets 7.43% 7.21% 6.65%
7.59% 8.27%
Portfolio Turnover Rate 111.01% 70.27% 137.46%
40.91% 39.82%
Net Assets, End of Period
(in thousands) $73,568 $55,929 $54,128
$38,557 $31,009
</TABLE>
<TABLE>
<CAPTION>
1990 1989 1988
1987 1986
- --------------------------------------------
<S> <C> <C> <C>
<C> <C>
Net Asset Value,
Beginning of year $10.02 $ 9.82 $ 9.96
$10.51 $11.22
Investment Activities: .81 .83 .85
.82 1.12
Net investment income
Net realized and
unrealized gains (losses) .03 .20 (.13)
(.51) .67
Total from Investment Operations .84 1.03 .72
.31 1.79
Distributions:
Net investment income (.76) (.83) (.86)
(.86) (1.13)
Net realized gains -- -- --
- -- (1.37)
Total Distributions (.76) (.83) (.86)
(.86) (2.50)
Net Asset Value,
End of year $10.10 $10.02 $ 9.82 $
9.96 $10.51
Ratios/Supplemental Data:
Total Return<F1> 8.66% 10.72% 7.36%
3.15% 16.59%
Ratio of Expenses to
Average Net Assets .79% .86% .82%
.72% .65%
Ratio of Net Investment
Income to Average Net Assets 8.57% 8.38% 8.34%
8.34% 8.65%
Portfolio Turnover Rate 110.90% 17.70% 24.11%
80.35% 103.44%
Net Assets, End of Period
(in thousands) $24,446 $15,941 $12,460
$15,796 $11,487
<FN>
<F1>
Total Return does not reflect expenses that apply to the separate
account or the related insurance
policies. Inclusion of these charges would reduce the Total
Return figures for all periods shown.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(Continued)
Capital Portfolio
Year ended December 31,
Period Ended
- --------------------------------------------- December 31,
1995 1994 1993 1992
1991 1990<F1>
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
<C> <C>
Net asset value:
Beginning of period $13.19 $13.81 $12.99 $12.82
$10.57 $10.95
Investment Activities:
Net investment income .64 .52 .43 .42
.47 .34
Net realized and
unrealized gains (losses) 1.15 (.39) 1.17 .56
2.25 (.40)
Total from
Investment Operations 1.79 .13 1.60 .98
2.72 (.06)
Distributions:
Net investment income (.64) (.52) (.42) (.42)
(.47) (.32)
Net realized gains (.62) (.23) (.36) (.39)
-- --
Total Distributions (1.26) (.75) (.78) (.81)
(.47) (.32)
Net Asset Value,
End of period $13.72 $13.19 $13.81 $12.99
$12.82 $10.57
Ratios/Supplemental Data:
Total Return<F2> 14.28% .94% 12.72% 7.93%
26.10% (.54%)
Ratio of Expenses
to Average Net Assets .77% .80% .82% .88%
.95% 1.03%<F3>
Ratio of Net Investment
Income to Average
Net Assets 4.99% 4.25% 3.31% 3.49%
4.05% 5.08%3
Portfolio Turnover Rate 43.83% 41.89% 32.42% 39.74%
47.93% 16.02%
Net Assets,
End of Period
(in thousands) $145,623 $119,263 $100,016 $68,674
$41,844 $23,813
<FN>
<F1>
Period from May 1, 1990 (commencement of operations) through
December 31, 1990.
<F2>
Total Return does not reflect expenses that apply to the separate
account or the related insurance
policies. Inclusion of these charges would reduce the Total
Return figures for all periods shown.
<F3>
Annualized
</FN>
</TABLE>
S&P 500 Index Portfolio
The financial highlights table is not presented because
the activity for the period from December 29, 1995 to
December 31, 1995 did not round to $.01 in any category
of the reconciliation of beginning to ending net asset
value per share of $10.00. The total return and the ratios
and supplemental data were all less than 0.1%. The net
assets at December 31, 1995 were $305,148.
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
Each Portfolio has a different investment objective which it
pursues through separate investment policies. The differences in
objectives and policies among the various Portfolios can be
expected to affect the investment return of each Portfolio and
the
degree of market and financial risks to which each Portfolio is
subject. The investment objectives of each Portfolio (described
on
the cover of this Prospectus) are fundamental policies and may
not
be changed without shareholder approval. There can be no
assurance
that the investment objectives of any Portfolio will be realized.
Equity Portfolio
The investment objectives of the Equity Portfolio are to seek
long-term appreciation of capital with secondary opportunities
for growth in current income, without incurring unduly high
risks.
A major portion of the Portfolio will be invested in common
stocks. The Portfolio's investment policy is to seek special
opportunities in securities that are selling at a discount from
theoretical price/earnings ratios and that seem capable of
recovering from their temporary out-of-favor status. A portion of
the Portfolio may be invested in money market instruments pending
investment or to effectively utilize cash reserves.
Since no one class or type of security at all times affords the
greatest promise of capital appreciation and growth in income,
the
Portfolio may invest all or a portion of its assets in preferred
stocks, bonds, convertible preferred stocks, convertible bonds,
and convertible debentures if it is believed that such
investments
will further its investment objectives. When market conditions
for
equity securities are adverse, and for temporary defensive
purposes, the Portfolio may invest in Government securities,
money
market instruments, or other fixed-income securities, or retain
cash or cash equivalents. However, the Portfolio will remain
well
invested in equities to take advantage of stocks' relatively
higher long-term potential.
The Equity Portfolio's policy of investing is based upon the
belief that the pricing mechanism of the securities market lacks
total efficiency and has a tendency to inflate prices of some
securities and depress prices of other securities in different
market climates. Management believes that favorable changes in
market prices are more likely to begin when securities are
out-of-favor, price/earnings ratios are relatively low,
investment
expectations are limited, and there is little interest in a
particular security or industry. Management believes that
securities with relatively low price/earnings ratios in relation
to their profitability are better positioned to benefit from
favorable but generally unanticipated events than are securities
with relatively high price/earnings ratios which are more
susceptible to unexpected adverse developments. The current
institutionally-dominated market tends to ignore the numerous
second tier issues whose market capitalizations are below those
of
a limited number of established large companies. Although this
segment of the market may be more volatile and speculative, it is
expected that a well-diversified Portfolio represented in this
segment of the market has potential long-term rewards greater
than
the potential rewards from investments in more highly capitalized
equities.
Bond Portfolio
The investment objectives of the Bond Portfolio are to provide
as high a level of current income as is believed to be consistent
with reasonable investment risk and to seek preservation and
growth of shareholders' capital. In seeking to achieve these
objectives, it is anticipated that the Portfolio will invest at
least 75% of the value of its assets in publicly-traded straight
debt securities rated BBB or Baa or higher by a nationally
recognized rating service such as Standard & Poor's or Moody's,
or
obligations issued or guaranteed by the U.S. Government or its
agencies or instrumentalities or cash and cash equivalents. Up to
25% of the Bond Portfolio's total assets may be invested in
straight debt securities that are unrated or less than
investment-grade bonds, in convertible debt securities,
convertible preferred and preferred stocks, or other securities.
Debt securities that are unrated or less than investment-grade
bonds are often referred to as "high-yield" bonds because they
generally offer higher interest rates. High-yield bonds run a
higher risk of default. In the case of default, they are more
difficult to sell and could present a liquidity problem to the
Portfolio. (See "Principal Risk Factors," page 9.) As of March
31,
1996, 20% of the debt securities held by the Bond Portfolio were
unrated or less than investment-grade bonds. For a more complete
discussion of the risk factors associated with high-yield bonds,
see the discussion below under "Principal Risk Factors," and
"Certain Risk Factors Relating to High-Yield, High-Risk Bonds" in
the Statement of Additional Information.
The Bond Portfolio will not directly purchase common stocks.
However, it may retain up to 10% of the value of its
total assets in common stocks acquired either by conversion of
fixed-income securities or by the exercise of warrants attached
thereto.
The Bond Portfolio may also write covered call options on U.S.
Treasury Securities and options on futures contracts for such
securities. See "Options," page 11.
The Bond Portfolio may invest without limit in money market
instruments pending investment in accordance with its
investment policies or when market conditions dictate a
"defensive" investment strategy. To the extent a portion is
invested in commercial paper rated "A" or "Prime" it will be
included in the 75% guideline noted above.
A description of the corporate bond ratings assigned by
Standard
& Poor's and Moody's is included in the Appendix.
Capital Portfolio
The Capital Portfolio seeks to obtain the highest total return
through a combination of income and capital appreciation
consistent with the reasonable risks associated with an
investment
portfolio of above-average quality. The Capital Portfolio
invests in equity, debt and money market securities.
There are no percentage limitations on the type of securities
in
which the Capital Portfolio may invest. The Capital Portfolio may
invest entirely in equity securities, entirely in debt, entirely
in money market instruments, or in any combination of these type
of securities at the sole discretion of the investment adviser,
subject only to the investment objective of the Capital Portfolio
and the policies adopted by the Board of Directors. The
investment
adviser determines the proportion of Capital Portfolio assets
invested in equity, debt and money market securities based on
fundamental value analysis; analysis of historical long-term
returns among equity, debt and money market investments; and
other
market influencing factors. The fundamental value analysis
considers the adviser's outlook over both the near and long-term,
for corporate profitability, short and long-term interest rates,
stock price earnings ratios for the market in total and
individual
stocks and inflation rates. When the investment climate as
indicated by the fundamental factors is near historical
relationships, the Portfolio will be structured approximately 63%
in equity, 30% in debt and 7% in money market securities. In
addition, market influencing factors relating to monetary policy,
equity momentum, market sentiment, economic influences and market
cycles are taken into consideration in making the asset
allocation
decision.
Deviations from historical fundamental market relationships on
either a current or anticipated basis, along with the
influences of market factors, may result under most foreseeable
circumstances in changes as much as 40%, plus or minus, in the
percentages allocated to equity, debt or money market securities
within the Portfolio.
Equity Securities. In its equity investments, the Capital
Portfolio emphasizes a combination of several themes in order
to diversify its investment exposure. Most stocks purchased by
the
Portfolio display one or more of the following criteria:
* Low price earnings ratios in relation to their return on
equity.
* High asset values in relation to stock price.
* Foreign shares, listed on the New York or American Stock
Exchanges or purchased in the form of American Depository
Receipts, of companies judged to represent better fundamental
value than those of similar domestic companies.
* A high level of dividend payment providing a yield that is
competitive with debt investments.
Debt Securities. The Capital Portfolio may invest in rated or
unrated debt securities, including obligations of the U.S.
Government and its agencies, and corporate debt obligations rated
BBB or Baa or higher by a nationally recognized rating service
such as Standard & Poor's or Moody's, or, if not rated, of
equivalent quality as determined by the investment adviser.
Only 25% of the value of any bonds held by the Capital Portfolio
may be unrated or less than investment-grade bonds. For a
discussion of the risk factors associated with "high-yield"
bonds,
see the "Bond Portfolio" on page 7 and "Certain Risk Factors
Relating to High-Yield, High-Risk Bonds" in the Statement of
Additional Information.
Money Market Instruments. The Capital Portfolio may at any time
be 100% invested in money market instruments although it likely
will invest in these securities only temporarily pending
investment in equity and debt securities, or on a limited basis.
The following securities, which are described in the Statement of
Additional Information, are considered money market instruments
if
their remaining maturities are less than 13 months: repurchase
agreements, U.S. government obligations, government agency
securities, certificates of deposit, time deposits, bankers'
acceptances, commercial paper and corporate debt securities.
The Capital Portfolio may also write covered call options on
U.S. Treasury Securities and options on futures contracts for
such
securities. See "Options," page 11.
S&P 500 Index Portfolio
The S&P 500 Index Portfolio ("Index Portfolio") seeks
investment
results that correspond to the total return performance of U.S.
common stocks, as represented by the Standard & Poor's 500
Composite Stock Index (the "S&P 500"). The S&P 500 is a
well-known stock market index that includes common stocks of
companies representing approximately 71% of the market value of
all common stocks publicly traded in the United States. The
investment adviser believes that the performance of the S&P 500
is
representative of the performance of publicly traded common
stocks
in general. As with all mutual funds, there can be no assurance
that the Index Portfolio will achieve its investment objective.
Index funds, such as the Index Portfolio, seek to create, to
the
extent feasible, a portfolio which substantially replicates
the total return of the securities comprising the applicable
index, taking into consideration redemptions, sales of additional
shares, and other adjustments described below. Index funds are
not managed through traditional methods of fund management, which
typically involve frequent changes in a portfolio of securities
on
the basis of economic, financial, and market analyses.
Therefore,
brokerage costs, transfer taxes, and certain other transaction
costs for index funds may be lower than those incurred by
non-index, traditionally managed funds. Precise replication of
the holdings of the Index Portfolio and the capitalization
weighting of the securities in the S&P 500 is not feasible, but
the Index Portfolio seeks a high correlation between the total
return performance of securities comprising the S&P 500 and the
investment results of the Index Portfolio. The Index Portfolio
will attempt to achieve, in both rising and falling markets, a
correlation of at least 95% between the total return of its net
assets before expenses and the total return of the S&P 500. A
correlation of 100% would represent perfect correlation between
Index Portfolio and index performance. It is anticipated that
the
correlation of the Index Portfolio's performance to that of the
S&P 500 will increase as the size of the Index Portfolio
increases. There can be no assurance that the Index Portfolio
will achieve this correlation.
The Index Portfolio may invest up to 5% of its assets in
Standard & Poor's Depositary Receipts(R) ("SPDRs(R)").
SPDRs are units of beneficial interest in a unit investment
trust,
representing proportionate undivided interests in a portfolio
of securities in substantially the same weighting as the
component
common stocks of the S&P 500.
Although the Adviser will attempt to invest as much of the
Index
Portfolio's assets as is practical in stocks comprising the S&P
500 and futures contracts and options relating thereto, a portion
of the Index Portfolio may be invested in money market
instruments
pending investment or to meet redemption requests or other needs
for liquid assets. In addition, for temporary defensive
purposes,
the Index Portfolio may invest in Government securities, money
market instruments, or other fixed-income securities, or retain
cash or cash equivalents.
Principal Risk Factors
Because the Portfolios are intended to serve a variety of
investment objectives, they are subject to varying degrees of
financial and market risks and current income volatility.
Financial risk refers to the ability of an issuer of a debt
security to pay principal and interest on that security and to
the
earning stability and overall financial soundness of an issuer of
an equity security. Market risk refers to the volatility of the
reaction of the price of the security to changes in conditions in
the securities markets in general and, with respect to debt
securities, changes in the overall level of interest rates.
Current income volatility refers to the degree and rapidity with
which changes in the overall level of interest rates become
reflected in the level of current income of the portfolio.
The Equity Portfolio should be subject to moderate levels of
both market and financial risk, since it invests in equity
securities chosen primarily for potential long-term appreciation.
The Bond Portfolio invests most of its assets in investment-
grade corporate bonds, and these should be subject to little
financial risk, to moderately high levels of market risk, and to
moderately low current income volatility.
The Capital Portfolio invests in equity, debt and money market
instruments, and therefore the financial and market risks
to which it is subject will vary from time to time depending on
the extent of its holdings in each of those classes of
securities.
The Portfolio is subject to the further risk that in order to
meet
its objectives, the Adviser must determine the proper mix
of equity, debt and money market securities. Moreover, the timing
of movements from one type of security to another could
have a negative effect on the Portfolio's overall objective.
Inherent in the fact that the Adviser has great latitude with
respect to portfolio composition is the risk that it may not
properly ascertain the appropriate mix of securities for any
particular economic cycle.
The market value of fixed-income debt securities is affected by
changes in general market interest rates. If interest rates
fall, the market value of fixed-income securities tends to rise;
but if interest rates rise, the value of fixed-income securities
tends to fall. This market risk affects all fixed-income
securities, but lower-rated and unrated securities may be subject
to a greater market risk than higher-rated (lower-yield)
securities.
Bonds rated below the four highest grades used by Standard &
Poor's or Moody's are frequently referred to as "junk"
bonds, reflecting the greater market and investment risks
associated with such bonds. Such risks relate not only to the
greater financial weakness of the issuers of such securities but
also to other factors including: (i) the sensitivity of such
securities to interest rates and economic changes (high-yield,
high-risk bonds are very sensitive to adverse economic and
corporate developments; their yields will fluctuate over time and
either an economic downturn or rising interest rates could create
financial stress on the issuers of such bonds, possibly resulting
in their defaulting on their obligations); (ii) the payment
expectations of holders of such securities (high-yield, high-risk
bonds may contain redemption or call provisions which if
exercised in a period of lower interest rates would result in
their being replaced by lower yielding securities); (iii) the
liquidity of such securities (there may be little trading in
certain high-yield, high-risk bonds which may make it more
difficult to dispose of the securities and more difficult to
determine their fair value). See "Certain Risk Factors Relating
to
High-Yield, High-Risk Bonds" in the Statement of Additional
Information for a further discussion of the risks summarized
above.
The S&P 500 Index Portfolio is subject to equity market risk
(i.e., the possibility that common stock prices will decline
over short or even extended periods). The U.S. stock market
tends
to be cyclical, with periods when stock prices generally rise and
periods when stock prices generally decline.
To illustrate the volatility of stock prices, the following
table sets forth the average returns of the S&P 500 for the
period from 1926 to 1995:
<TABLE>
<CAPTION>
S&P 500 Returns (1926-1995)
Over Various Time Horizons
----------------------------
1 Year 5 Years 10 Years 20 Years
----- ------- -------- --------
<S> <C> <C> <C> <C>
Best +54.0% +23.9% +20.1% +16.9%
Worst -43.3 -12.5 - 0.9 +3.1
Average +12.5 +10.3 +10.7 +10.7
Standard Deviation 20.3 8.2 5.4 3.3
</TABLE>
As shown, common stocks have provided annual total returns
(capital appreciation plus dividend income) averaging 10.7%
for all 10-year periods from 1926 to 1995. Average return may
not
be useful for forecasting future returns in any particular
period, as stock returns are quite volatile from year to year.
Repurchase Agreements
A repurchase agreement is a transaction where a Portfolio
buys a security at one price and simultaneously agrees
to sell that same security back to the original owner at a higher
price. The Adviser reviews the creditworthiness of the other
party to the agreement and must find it satisfactory before
engaging in a repurchase agreement. A majority of such
agreements will mature in seven days or less. In the event of the
bankruptcy of the other party, the Portfolio could experience
delays in recovering its money, may realize only a partial
recovery or even no recovery, and may also incur disposition
costs. It is not anticipated that any Portfolio will regularly
utilize repurchase agreements extensively, since they are
intended
to be used to invest otherwise idle cash.
Reverse Repurchase Agreements
The S&P 500 Index Portfolio may enter into reverse
repurchase
agreements. Under reverse repurchase agreements, the Portfolio
transfers possession of portfolio securities to banks in return
for cash in an amount equal to a percentage of the portfolio
securities' market value and agrees to repurchase the securities
at a future date by repaying the cash with interest. The
Portfolio
retains the right to receive interest and principal payments from
the securities while they are in the possession of the financial
institutions. Cash or liquid high quality debt obligations from
the Portfolio's portfolio equal in value to the repurchase price
(including any accrued interest) will be segregated by the
Custodian on the Portfolio's records while a reverse repurchase
agreement is in effect.
Futures Contracts and Options on Futures Contracts
For hedging purposes, including protecting the price or
interest rate of securities that the Portfolio intends to buy,
the S&P 500 Index Portfolio may enter into futures contracts that
relate to securities in which it may directly invest and
indices comprised of such securities and may purchase and write
call and put options on such contracts. As a temporary
investment strategy until the Index Portfolio reaches $25 million
in net assets, the Index Portfolio may invest up to 100%
of its assets in such futures and/or options contracts.
Thereafter, the Portfolio may invest up to 20% of its assets in
such futures and/or options contracts.
A financial futures contract is a contract to buy or sell a
specified quantity of financial instruments such as U.S.
Treasury bills, notes and bonds, commercial paper and bank
certificates of deposit or the cash value of a financial
instrument index at a specified future date at a price agreed
upon
when the contract is made. A stock index futures contract is a
contract to buy or sell specified units of a stock index at a
specified future date at a price agreed upon when the contract is
made. The value of a unit is based on the current value of the
contract index. Under such contracts no delivery of the actual
stocks making up the index takes place. Rather, upon expiration
of the contract, settlement is made by exchanging cash in an
amount equal to the difference between the contract price and the
closing price of the index at expiration, net of variation
margin previously paid.
Substantially all futures contracts are closed out before
settlement date or called for cash settlement. A futures
contract is closed out by buying or selling an identical
offsetting futures contract. Upon entering into a futures
contract, the Portfolio is required to deposit an initial margin
with the Custodian for the benefit of the futures broker. The
initial margin serves as a "good faith" deposit that the
Portfolio
will honor their futures commitments. Subsequent payments
(called
"variation margin") to and from the broker are made on a daily
basis as the price of the underlying investment fluctuates.
In the event of the bankruptcy of the futures broker that holds
margin on behalf of the Portfolio, the Portfolio may be entitled
to return of margin owed to it only in proportion to the amount
received by the broker's other customers. The Adviser will
attempt to minimize this risk by monitoring the creditworthiness
of the futures brokers with which the Portfolio does
business.
Because the value of index futures depends primarily on the
value of their underlying indexes, the performance of the
broad-based contracts will generally reflect broad changes in
common stock prices. However, because the Portfolio may
not be invested in precisely the same proportion as the S&P 500,
it is likely that the price changes of the Portfolio's index
futures positions will not match the price changes of the
Portfolio's other investments.
Options on futures contracts give the purchaser the right to
assume a position at a specified price in a futures contract at
any time before expiration of the option contract.
Options
The Bond and Capital Portfolios may engage in certain
limited
options strategies as hedging techniques. These options
strategies
are limited to selling/writing call option contracts on U.S.
Treasury Securities and call option contracts on futures on such
securities held by the Portfolio (covered calls). The Portfolio
may purchase call option contracts to close out a position
acquired through the sale of a call option. The Portfolio will
only write options that are traded on a domestic exchange or
board
of trade.
The S&P 500 Index Portfolio may write and purchase covered
put and call options on securities in which it may directly
invest. Option transactions of the Portfolio will be conducted
so
that the total amount paid on premiums for all put and call
options outstanding will not exceed 5% of the value of the
Portfolio's total assets. Further, the Portfolio will not
write put or call options or combination thereof if, as a result,
the aggregate value of all securities or collateral used to cover
its outstanding options would exceed 25% of the value of the
Portfolio's total assets.
A call option is a short-term contract (generally nine
months
or less) which gives the purchaser of the option the right to
purchase from the seller of the option (the Portfolio) the
underlying security or futures contract at a fixed exercise
price at any time prior to the expiration of the option period
regardless of the market price of the underlying instrument
during the period. A futures contract obligates the buyer to
purchase and the seller to sell a predetermined amount of a
security at a predetermined price at a selected time in the
future. A call option on a futures contract gives the purchaser
the right to assume a "long" position in a futures contract,
which
means that if the option is exercised the seller of the option
(the Portfolio) would have the legal right (and obligation) to
sell the underlying security to the purchaser at the specified
price and future time.
As consideration for the call option, the buyer pays the
seller (the Portfolio) a premium, which the seller retains
whether or not the option is exercised. The selling of a call
option will benefit the Portfolio if, over the option period, the
underlying security or futures contract declines in value or does
not appreciate to a price higher than the total of the exercise
price and the premium. The Portfolio risks an opportunity loss of
profit if the underlying instrument appreciates to a price
higher than the exercise price and the premium. When the Adviser
anticipates that interest rates will increase, the Portfolio
may write call options in order to hedge against an expected
decline in value of portfolio securities.
The Portfolio may close out a position acquired through
selling a call option by buying a call option on the same
security or futures contract with the same exercise price and
expiration date as the option previously sold. A profit or loss
on the transaction will result depending on the premium paid for
buying the closing call option. If a call option on a futures
contract is exercised, the Portfolio intends to close out the
position immediately by entering into an offsetting transaction
or
by delivery of the underlying security (or other related
securities).
Options transactions may increase the Portfolio's portfolio
turnover rate and attendant transaction costs, and may
be somewhat more speculative than other investment strategies. It
may not always be possible to close out an options position,
and with respect to options on futures contracts there is a risk
of imperfect correlation between price movements of a futures
contract (or option thereon) and the underlying security. Options
strategies and related risks and limitations are described
in more detail in the Statement of Additional Information.
Options on Securities Indices
The S&P 500 Index Portfolio may purchase or sell options on
the S&P 500, subject to the limitations set forth above
and provided such options are traded on a national securities
exchange or in the over-the-counter market. Options on
securities indices are similar to options on securities except
there is no transfer of a security and settlement is in cash. A
call option on a securities index grants the purchaser of the
call, for a premium paid to the seller, the right to receive in
cash
an amount equal to the difference between the closing value of
the
index and the exercise price of the option times a multiplier
established by the exchange upon which the option is traded.
Collateralized Mortgage Obligations
The Portfolios other than the S&P 500 Index Portfolio may
invest in collateralized mortgage obligations ("CMOs")
or mortgage-backed bonds issued by financial institutions such as
commercial banks, savings and loan associations, mortgage
banks and securities broker-dealers (or affiliates of such
institutions established to issue these securities). To a
limited
extent, the Portfolios may also invest in a variety of more risky
CMOs, including interest only ("IOs"), principal only ("Pos"),
inverse floaters, or a combination of these securities. See
"Money Market Instruments and Investment Techniques" in the
Statement of Additional Information for a further discussion.
Lending Portfolio Securities
The S&P 500 Index Portfolio may lend portfolio securities
with a value up to 10% of its total assets. Such loans
may be terminated at any time. The Portfolio will continuously
maintain as collateral cash or obligations issued by the U.S.
government, its agencies or instrumentalities in an amount equal
to not less than 100% of the current market value (on a daily
marked-to-market basis) of the loaned securities plus declared
dividends and accrued interest.
The Portfolio will retain most rights of beneficial
ownership, including the right to receive dividends, interest or
other distributions on loaned securities. The Portfolio will
call
loans to vote proxies if a material issue affecting the
investment is to be voted upon. Should the borrower of the
securities fail financially, the Portfolio may experience delay
in recovering the securities or loss of rights in the collateral.
Loans are to be made only to borrowers that are deemed by
the Adviser to be of good financial standing.
Other Information
In addition to the investment policies described above, each
Portfolio's investment program is subject to further
restrictions which are described in the Statement of Additional
Information. Unless otherwise specified, each Portfolio's
investment objectives, policies and restrictions are not
fundamental policies and may be changed without shareholder
approval. Shareholder inquiries and requests for the Fund's
annual
report should be directed to the Fund at (513) 595-2600,
or at P.O. Box 40409, Cincinnati, Ohio 45240-0409.
THE FUND AND ITS MANAGEMENT
The Fund is a mutual fund, technically known as an open-end,
diversified, management investment company. The Board of
Directors
is responsible for supervising the business affairs and
investments of the Fund, which are managed on a daily basis by
the
Fund's investment adviser. The Fund was incorporated under the
laws of the State of Maryland on January 30, 1984. The Fund is a
series fund with four classes of stock, one for each Portfolio.
The S&P 500 Index Portfolio was authorized on September 15, 1995
and commenced operations on December 29, 1995. Union Central has
invested approximately $10.3 million in this Portfolio.
Investment Adviser
The Fund's investment adviser is Carillon Advisers, Inc.
(the
"Adviser"), P.O. Box 40407, Cincinnati, Ohio 45240. The Adviser
was incorporated under the laws of Ohio on August 18, 1986, as
successor to the advisory business of Carillon Investments, Inc.,
the investment adviser for the Fund since 1984. The Adviser is a
wholly-owned subsidiary of Union Central, a mutual life insurance
company organized in 1867 under the laws of Ohio. Subject to the
direction and authority of the Fund's Board of Directors, the
Adviser manages the investment and reinvestment of the assets of
each Portfolio and provides administrative services and manages
the Fund's business affairs.
George L. Clucas has been primarily responsible for the
day-to-day management of the Equity Portfolio since 1988
and the Capital Portfolio since its inception in 1990. Mr.
Clucas
is Director, President and Chief Executive Officer of the
Fund, and President and Chief Executive Officer of the Adviser.
He has been affiliated with the Adviser and Union Central
since 1987. Steven R. Sutermeister (since 1990) has been
primarily
responsible for the day-to-day management of the Bond
Portfolio. Mr. Sutermeister is Vice President of the Adviser and
has been affiliated with the Adviser and Union Central since
1990. Previously, he was Senior Vice President of Washington
Square Capital, Inc.
Advisory Fee
The Fund pays the Adviser, as full compensation for all
facilities and services furnished, a monthly fee computed
separately for each Portfolio on a daily basis, at an annual
rate,
as follows:
(a) for the Equity Portfolio .65% of the first $50,000,000,
.60% of the next $100,000,000, and .50% of all over
$150,000,000 of the current value of the net assets;
(b) for the Bond Portfolio .50% of the first $50,000,000,
.45% of the next $100,000,000, and .40% of all over
$150,000,000 of the current value of the net assets; and
(c) for the Capital Portfolio .75% of the first $50,000,000,
.65% of the next $100,000,000, and .50% of all over
$150,000,000 of the current value of the net assets.
(d) for the S&P 500 Index Portfolio .30% of the current
value of the net assets.
The fee paid for the Capital Portfolio is somewhat higher than
the average fee paid in the industry. However, breakpoints at
which fees are reduced are set at lower than normal amounts. It
is
the desire of the Fund and Adviser to reflect in the fee
arrangement the effort involved in advising the separate
Portfolios.
Expenses
The Fund's expenses are deducted from total income before
dividends are paid. These expenses, which are accrued
daily, include: the fee of the Adviser; taxes; legal, dividend
disbursing, bookkeeping and transfer agent, custodian and
auditing fees; and printing and other expenses relating to the
Fund's operations which are not expressly assumed by the
Adviser under its investment advisory agreement with the Fund.
Certain expenses are paid by the particular Portfolio that
incurs them, while other expenses are allocated among the
Portfolios on the basis of their relative size (i.e., the amount
of their net assets). The Adviser will pay any expenses of the
S&P 500 Index Portfolio, other than the advisory fee for that
Portfolio, to the extent that such expenses exceed .30% of that
Portfolio's net assets.
Capital Stock
The Fund currently has four classes of stock, one for each
Portfolio. Shares (including fractional shares) of each
Portfolio have equal rights with regard to voting, redemptions,
dividends, distributions, and liquidations with respect to that
Portfolio. When issued, shares are fully paid and nonassessable
and do not have preemptive or conversion rights or
cumulative voting rights. The Fund's sole shareholder, Union
Central, will vote Fund shares allocated to its registered
separate accounts in accordance with instructions received from
Contract Owners. However, by virtue of Fund shares
allocated to its other separate accounts, Union Central currently
has voting control and can make fundamental changes
regardless of the voting instructions received from Contract
Owners.
PURCHASE AND REDEMPTION OF SHARES
The Fund offers its shares, without sales charge, only for
purchase by Union Central and its separate accounts to fund
benefits under both variable annuity contracts and variable
universal life insurance policies. The Fund's Board of Directors
will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of variable annuity
contractowners investing in the Fund and interests of holders of
variable universal life insurance policies investing in the
Fund. Union Central will report any potential or existing
conflicts to the Directors of the Fund. If a material
irreconcilable conflict arises, Union Central will, at its own
cost, remedy such conflict up to and including establishing a new
registered management company and segregating the assets
underlying the variable annuity contracts and variable universal
life insurance policies. It is possible that at some later date
the Fund may offer shares to other investors. The Fund
continuously offers shares in each of its Portfolios at prices
equal to the respective net asset values of the shares of each
Portfolio.
The Fund redeems all full and fractional shares of the Fund for
cash. No redemption fee is charged. The redemption
price is the net asset value per share. Payment for shares
redeemed will generally be made within seven days after receipt
of a proper notice of redemption.
The net asset value of the shares of each Portfolio of the Fund
is determined once daily, Monday through Friday, as of the close
of regular trading on the New York Stock Exchange (normally 4:00
p.m., Eastern Time), when there are purchases or redemptions of
Fund shares, except (i) when the New York Stock Exchange is
closed
(currently New Year's Day, President's Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas
Day); (ii) the day following Thanksgiving Day; (iii) December 24,
1996; and (iv) any day on which changes in the value of the
Portfolio securities of the Fund will not materially affect the
current net asset value of the shares of a Portfolio. Such
determination is made by adding the values of all securities and
other assets of the Portfolio, subtracting liabilities and
expenses, and dividing by the number of shares of the Portfolio
outstanding. Expenses, including the investment advisory
fee payable to the Adviser, are accrued daily.
Securities held by the Portfolios, except for money market
instruments maturing in 60 days or less, are valued at their
market value if market quotations are readily available.
Otherwise, such securities are valued at fair value as determined
in good faith by the Board of Directors, although the actual
calculations may be made by persons acting pursuant to the
direction of the Board.
All money market instruments with a remaining maturity of 60
days or less are valued on an amortized cost basis.
DIVIDENDS AND DISTRIBUTIONS
It is the Fund's intention to distribute substantially all of
the net investment income, if any, of each Portfolio. For
dividend purposes, net investment income of the Equity, Bond,
Capital and S&P 500 Index Portfolios consists of all dividends
or interest earned by such Portfolio less estimated expenses
(including the investment advisory fee). All net realized capital
gains, if any, of each Portfolio are distributed periodically, no
less frequently than annually. All dividends and distributions
are reinvested in additional shares of the respective Portfolio
at
net asset value.
TAXES
Each Portfolio has qualified and has elected to be taxed as a
"regulated investment company" under the provisions of
Subchapter M of the Internal Revenue Code of 1986, as amended
(the
"Code"). If a Portfolio qualifies as a "regulated
investment company" and complies with the appropriate provisions
of the Code, the Portfolio will be relieved of federal
income tax on the amounts distributed.
Since the sole shareholder of the Fund is Union Central, no
discussion is included herein as to the federal income tax
consequences at the shareholder level. For information concerning
the federal tax consequences to purchasers of the contracts,
see the attached Prospectus for such contracts.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT
Firstar Trust Company, Mutual Fund Services, P.O. Box 701,
Milwaukee, Wisconsin 53201-0701, acts as Custodian
of the Fund's assets, and is its bookkeeping, transfer and
dividend disbursing agent.<PAGE>
APPENDIX
CORPORATE BOND RATINGS
Moody's Investors Services, Inc.
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.
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 or 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.
Standard & Poor's Corporation
AAA This is the highest rating assigned by Standard & Poor's to
a debt obligation and indicates an extremely strong capacity to
pay principal and interest.
AA Bonds rated AA also qualify as high-quality debt
obligations.
Capacity to pay principal and interest is very strong, and in the
majority of instances they differ from AAA issues only in a small
degree.
A Bonds rated A have a strong capacity to pay principal and
interest, although they are somewhat more susceptible
to the adverse effect of changes in circumstances and economic
conditions.
BBB Bonds rated BBB are regarded as having an adequate capacity
to pay principal and interest. Whereas they
normally exhibit protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a
weakened capacity to pay principal and interest for bonds in this
category than for bonds in the A category.
BB-B-CCC-CC Bonds rated BB, B, CCC, and CC are regarded, on
balance, as predominately speculative with respect
to the issuer's capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and CC the highest degree of
speculation. While such bonds will likely have some quality and
protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
COMMERCIAL PAPER RATINGS
Moody's Investors Services, Inc.
A Prime rating is the highest commercial paper rating assigned
by Moody's Investors Services, Inc. Issuers rated Prime are
further referred to by use of numbers 1, 2 and 3 to denote
relative strength within this highest classification. Among the
factors considered by Moody's in assigning ratings for an issuer
are the following: (1) management; (2) economic evaluation of the
industry and an appraisal of speculative type risks which may be
inherent in certain areas; (3) competition and customer
acceptance of products; (4) liquidity; (5) amount and quality of
long-term debt; (6) ten-year earnings trends; (7) financial
strength of a parent company and the relationships which exist
with the issuer; and (8) recognition by management of obligations
which may be present or may arise as a result of public interest
questions and preparations to meet such
obligations.
Standard & Poor's Corporation
Commercial paper rated A by Standard & Poor's Corporation has
the following characteristics: Liquidity ratios are
better than the industry average. Long-term senior debt rating is
"A" or better. In some cases, BBB credits may be
acceptable. 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, the issuer has a
strong
position within its industry and the reliability and quality of
management is unquestioned. Issuers rated A are further referred
to by use of numbers 1, 2 and 3 to denote relative strength
within
this classification.
<PAGE>
<PAGE>
APPENDIX I FOR CROSS REFERENCING INFORMATION
Included here in the Prospectus booklet is a prospectus for the
MFS GROWTH WITH INCOME SERIES AND THE MFS HIGH INCOME SERIES,
which are two series of the MFS Variable Insurance Trust.
Cross reference the Prospectus in EDGAR filing for MFS VARIABLE
INSURANCE TRUST as follows:
File Date: May 3, 1996.
File No.: 33-74668
CIK No. 918571
Accession No. 912057-96-008079
<PAGE>
APPENDIX II FOR CROSS REFERENCING INFORMATION
Included here in the Prospectus booklet is a prospectus for the
SCUDDER MONEY MARKET PORTFOLIO, SCUDDER CAPITAL GROWTH PORTFOLIO
and SCUDDER INTERNATIONAL PORTFOLIO, which are portfolios of the
Scudder Variable Life Investment Fund.
Cross reference the Prospectus for SCUDDER VARIABLE LIFE
INVESTMENT FUND as filed with the SEC via EDGAR:
File Date: April 30, 1996.
CIK No. 0000764797
File Numbers: 811-4257 and 2-96461
Accession No. 950135-96-001848
<PAGE>
APPENDIX III FOR CROSS REFERENCING INFORMATION
Prospectus for the TCI GROWTH PORTFOLIO, a portfolio of TCI
Portfolios, Inc.
Cross reference the prospectus for TCI Portfolios, Inc. as filed
with the SEC via EDGAR:
File Date: September 27, 1996.
CIK No. 0000814680
Accession No. 0000814680-96-000014
<PAGE>
CARILLON ACCOUNT
CARILLON FUND, INC.
- -----------------------------------------------------
STATEMENTS OF
ADDITIONAL INFORMATION
May 1, 1996
- ----------------------------------------------------
UC 188 4-96
<PAGE>
CARILLON ACCOUNT
of
THE UNION CENTRAL LIFE INSURANCE COMPANY
1876 Waycross Road - Cincinnati, Ohio 45240 - 513-595-2600
STATEMENT OF ADDITIONAL INFORMATION
May 1, 1996
This Statement of Additional Information is not a
prospectus.
Much of the information contained in this Statement of Additional
Information expands upon subjects discussed in the Prospectus.
Accordingly, this Statement should be read in conjunction with
Carillon Account's ("CA") current Prospectus, dated May 1, 1996,
which may be obtained by calling The Union Central Life Insurance
Company ("Union Central") at (513) 595-2600, or writing to P.O.
Box 40409, Cincinnati, Ohio 45240-0409.
-----------------------------------
TABLE OF CONTENTS
Page
Distribution of Contracts B-2
Determination of Annuity Payments B-2
Performance Data Advertising B-3
Federal Tax Matters B-4
Miscellaneous Contract Provisions B-6
Custody of CA's Assets B-7
Experts B-9
Financial Statements of CA and of Union Central
<PAGE>
<PAGE>
DISTRIBUTION OF CONTRACTS
Contracts are offered on a continuous basis through life
insurance agents of Union Central who are also registered
representatives of Carillon Investments, Inc., or another
broker-dealer member of the National Association of Securities
Dealers,
Inc.
As underwriter of the Contracts, the following distribution
fees were paid to Carillon Investments, Inc., by Union Central:
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
1995 $1,636,172
1994 $1,975,636
1993 $1,643,968
</TABLE>
DETERMINATION OF ANNUITY PAYMENTS
The amount of the first Variable Annuity payment is
calculated by applying the Accumulation Value (less any premium
tax charge deducted at this time), measured as of a date not more
than 10 business days prior to the Maturity Date, to the Annuity
Tables in the Contract. This is done separately for each amount
to be used to provide an annuity reserved for in a different
Subaccount.
The first Variable Annuity payment is divided by the
appropriate Annuity Unit value (as of the same date that the
amount of the first payment was determined) to determine the
number of Annuity Units upon which later annuity payments will be
based. This number of Annuity Units will not change. Variable
Annuity payments after the first will be equal to the number of
Annuity Units determined in this manner times the Annuity Unit
value for each respective Subaccount calculated on a uniform
basis
not more than 10 business days before each annuity payment is
due.
Annuity Unit Value - The value of an Annuity Unit in each
Subaccount of CA was initially set at $10. Annuity Units of each
Subaccount are valued separately and will vary with the
investment
experience of the particular Subaccount.
The value of the Annuity Unit for each Subaccount at the end
of any valuation period is calculated by: (a) multiplying the
prior Annuity Unit value by the Subaccount's Net Investment
Factor
for the period; and then (b) adjusting the result to compensate
for the interest rate assumed in the annuity tables used to
determine the dollar amount of the first Variable Annuity
payment.
In this manner, the Annuity Unit values will most likely change
(except when the investment performance exactly equals the
assumed
interest rate) for each annuity payment (although the number of
Annuity Units will remain fixed) and therefore the amount of the
Variable Annuity payments will most likely vary.
<PAGE>
Performance Data Advertising
<TABLE>
<CAPTION>
As noted in the Prospectus, CA occasionally may publish
advertisements that contain total return
performance data relating to its Subaccounts. Tables of
historical Accumulation Unit Values for each
Subaccount may be included in advertising or sales literature
that contains total return calculations as
described below. The following table sets forth the performance
data for each of the Subaccounts of the
type that will be used in advertising, in each case for the
period ended December 31, 1995.
Average Annual Total Return
Average Annual Total Return
(Based on Accumulation Unit Values)
(Standardized Total Return)
Inception One Five Ten Since
One Five Ten Since
Subaccounts Date Year Years Years Inception
Year Years Years Inception
- ----------- ---- ---- ----- ----- ---------
- ---- ----- ----- ---------
<S> <C> <C> <C> <C> <C>
<C> <C> <C> <C>
Equity 6/7/85 25.13% 17.95% 11.57% 12.26%
16.25% 16.84% 11.31% 11.94%
Bond 8/26/85 17.32% 9.16% 8.38% 8.76%
8.99% 8.13% 8.12% 8.47%
Capital 5/2/90 12.65% 10.56% - 8.90%
4.65% 9.52% - 8.16%
S&P 500 Index 5/1/96 - - - -
- - - - -
International 5/1/92 9.52% - - 10.01%
1.74% - - 8.35%
Capital Growth 5/1/92 26.81% - - 10.44%
17.81% - - 8.77%
Money Market * 7/15/85 4.11% 2.70% 4.13% 4.19%
- -3.29% 1.72% 3.88% 3.90%
Growth 5/1/96 - - - -
- - - - -
Growth with Income 5/1/96 - - - -
- - - - -
High Income 5/1/96 - - - -
- - - - -
</TABLE>
*Although the Money Market Subaccount began investing in the
Scudder Variable Life Investment Fund Money Market Portfolio on
November 12, 1993, the performance data quoted reflects the
performance of the Scudder Fund Money Market Portfolio since
the inception of the Money Market Subaccount.<PAGE>
Average
annual total return is the average annual compounded
rate of return that equates a purchase payment on the first day
to
the market value of that purchase payment on the last day of the
period for which total return is calculated. For purposes of the
calculation, it is assumed that an initial payment of $1,000 is
made on the first day of the period for which the return is
calculated. Expenses and charges incurred by the Fund and
charges
measured as a percentage of Subaccount assets are reflected in
changes in unit values. The typical effect of the annual
administration fee is included in the total return calculations,
other than those measured by changes in Accumulation Unit Value,
by multiplying $30 by the total number of contracts in CA and
then
dividing that total by the average net assets of CA (including
contract assets allocated to the Guaranteed Account) for the year
measured. The resulting percentage is then multiplied by the
average value of the $1,000 investment during the year measured.
For less than one year periods, 1/365 of the fee is assumed to be
deducted for each day of the period. Total return figures that
include the impact of surrender charges assume that the
investment
is withdrawn from the Subaccount at the end of the period for
which return is calculated.
From time to time, advertisements for CA may include
comparisons of performance of the Subaccounts to that of various
market indices, including, but not limited to: the Salomon
Brothers Investment Grade Bond Index, the Salomon Brothers U.S.
Treasury Bill Index, the Shearson Lehman Government/Corporate
Bond
Index, the S&P 500 Index, the Dow Jones Industrial Average, the
Donoghue Money Fund 30-Day Average Yield, and the Lipper Variable
Insurance Products Performance Analysis Service.
CA advertisements may also include performance rankings (or
information based on those rankings) compiled by various
independent organizations, including but not limited to: Lipper
Analytical Services Mutual Funds Survey, Lipper Variable
Insurance
Products Performance Analysis Service, The VARDS Report, Sylvia
Porter Personal Finance, Financial Services Week, Consumer
Reports, Money Magazine, Forbes Magazine, and Fortune Magazine.
FEDERAL TAX MATTERS
Taxation of Union Central
Union Central is taxed as a life insurance company under
Part
I of Subchapter L of the Internal Revenue Code ("Code"). Since
CA
is not an entity separate from Union Central, and its operations
form a part of Union Central, it will not be taxed separately as
a
"regulated investment company" under Subchapter M of the Code.
Investment income and realized capital gains on the assets of CA
are reinvested and taken into account in determining the
Accumulation and Annuity Unit values. As a result, such
investment income and realized capital gains are automatically
applied to increase reserves under the Contract. Under existing
federal income tax law, separate account investment income and
capital gains are not taxed to the extent they are applied to
increase reserves under a Contract issued in connection with CA.
Accordingly, Union Central does not anticipate that it will incur
any federal income tax liability attributable to CA, and
therefore
Union Central does not intend to make provisions for any such
taxes. However, if changes in the federal tax laws or
interpretations thereof result in Union Central being taxed on
income or gains attributable to CA or certain types of Contracts,
then Union Central may impose a charge against CA (with respect
to
some or all Contracts) in order to set aside provisions to pay
such taxes.
Tax Status of the Contracts
Section 817(h) of the Code provides that separate account
investments (or the investments of a mutual fund the shares of
which are owned by separate accounts of insurance companies)
underlying the Contract must be "adequately diversified" in
accordance with Treasury regulations in order for the Contract to
qualify as an annuity contract under Section 72 of the Code. The
Separate Account, through each Portfolio of the Funds, intends to
comply with the diversification requirements prescribed in
regulations, which affect how the assets in each Portfolio of the
Funds in which the Separate Account invests may be invested.
Union Central does not have control over the Funds or their
investments. However, Union Central believes that each Portfolio
in which the Separate Account owns shares will meet the
diversification requirements and that therefore the Contracts
will
be treated as annuities under the Code.
The Treasury has stated that regulations on diversification
requirements do not provide guidance concerning the extent to
which contract holders may direct their investments to the
Portfolios of the Funds. Regulations in this regard may be
issued
in the future. It is possible that when regulations are issued
the Funds may not be in compliance with such regulations.
Although Union Central can provide no assurances that any such
regulations will not adversely affect the tax treatment of
existing Contracts in all events, based upon a private letter
ruling Union Central has received on the Contracts, Union Central
believes that any such regulations would be applied only on a
prospective basis. For these reasons, Union Central reserves the
right to modify the Contract as necessary to prevent the contract
holder from being considered the owner of the assets of the Funds
or otherwise to qualify the contract for favorable tax treatment.
In addition, Nonqualified Contracts will not be treated as
annuity contracts for purposes of Section 72 unless such
contracts
provide: (a) that if the contract holder dies on or after the
annuity starting date but prior to the time before the entire
interest in the contract has been distributed, the remaining
portion of such interest must be distributed at least as rapidly
as under the method of distribution in effect at the time of the
contract holder's death; and (b) if the contract holder dies
prior
to the annuity starting date, the entire interest must be
distributed within five years after the death of the contract
holder. These requirements should be considered satisfied if any
portion of the contract holder's interest which is payable to or
for the benefit of a "designated beneficiary" is distributed over
the life of such designated beneficiary (or over a period that
does not extend beyond the life expectancy of the designated
beneficiary) and such distributions begin within one year of the
contract holder's death. (A contract holder's designated
beneficiary is the person to whom ownership of the Contract
passes
by reason of death and must be a natural person.) However, if
the
contract holder's designated beneficiary is the surviving spouse
of the contract holder, the contract may be continued in the name
of the spouse as the contract holder. Union Central believes
that
the Contracts described in this Prospectus meet these
requirements. However, no assurance can be given that the
provisions contained in the Contracts satisfy all such Code
requirements. The provisions contained in the Contracts will be
reviewed and modified if necessary to assure that they comply
with
the Code requirements. Other rules may apply to Qualified
Contracts.
For a discussion of the tax treatment of the contracts as
annuities under Section 72, see "Tax Status of the Contracts" in
the Prospectus.
MISCELLANEOUS CONTRACT PROVISIONS
Delay of Payments
Union Central will pay all amounts due from the Variable
Account under the Contract within seven days, unless:
(1)The New York Stock Exchange is closed for other than usual
weekends or holidays, or trading on the Exchange is otherwise
restricted;
(2)An emergency exists as defined by the Securities and Exchange
Commission; or
(3)The Securities and Exchange Commission permits delay for the
protection of the security holders.
Participating
The Contract is issued on a participating basis, and as such
is eligible to share in Union Central's profits and surplus to
the
extent determined by Union Central's Board of Directors in its
sole discretion. Union Central anticipates that such
participation, if at all, will be small in amount and will occur
only in later years of the Contract.
Misstatement and Proof of Age, Sex or Survival
Proof of age, sex, or survival of the Annuitant and any
contingent Annuitant may be required prior to making annuity
payments under any Annuity Option which depends on the
continuation of life. If any age or sex has been misstated,
Union
Central will pay the amounts which would have been provided at
the
correct age and sex. After the annuity payments begin, Union
Central will make up any underpayments in a lump sum with the
next
annuity payment. Any overpayments will be deducted from future
annuity payments until the overpayment is made up.
Settlements
Union Central may require the return of the Contract prior
to
any settlement. Due proof of the Annuitant's death must be
received prior to settlement of a death claim.
Assignments
The Contract Owner may assign the Contract prior to the
Maturity Date and during the Annuitant's lifetime, subject to the
rights of any irrevocable Beneficiary, although the ability to
assign certain Qualified Contracts may be restricted. An
assignment will not be binding until received in writing by Union
Central, and Union Central will not be responsible for the
validity of an assignment. An assignment or pledge of the
Contract may result in income tax liability to the owner.
No Beneficiary may assign benefits under the Contract until
they are due, and to the extent permitted by law, payments are
not
subject to the debts of any Beneficiary or to any judicial
process
for payment of the Beneficiary's debts.
Modification
Union Central may not modify the Contract without the
consent
of the Contract Owner except to make the Contract meet the
requirements of the Investment Company Act of 1940, or to make
the
Contract comply with any changes in the Internal Revenue Code or
as required by the Code or by any other applicable law in order
to
continue treatment of the Contract as an annuity.
CUSTODY OF CA'S ASSETS
Title to the assets of CA is held by Union Central. Records
are maintained of all purchases and redemptions of Portfolio
shares held by each of the Subaccounts.
EXPERTS
The financial statements of CA at December 31, 1995 and the
statements of financial condition of Union Central at December
31,
1995 and 1994 appearing in this Statement of Additional
Information have been audited by Ernst & Young LLP, independent
auditors, as set forth in their reports thereon also appearing
elsewhere herein. Such financial statements have been included
herein in reliance upon such reports given upon the authority of
such firm as experts in accounting and auditing.
<PAGE>
CARILLON ACCOUNT
FINANCIAL STATEMENTS
December 31, 1995
<PAGE>
Report of Independent Auditors
=====================================================
To the Contractholders of Carillon
Account and the Board of Directors of
The Union Central Life Insurance Company
We have audited the accompanying statements of assets and
liabilities of the Carillon Account (comprised of the Carillon
Fund, Inc. Equity, Capital, and Bond Subaccounts, and Scudder
Variable Life Investment Fund Money Market, Capital Growth, and
International Subaccounts) as of December 31, 1995, the related
statements of operations for the year then ended and the
statements of changes in net assets for each of the two years in
the period then ended. These financial statements are the
responsibility of the Company's management. Our responsibility
is
to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. Our
procedures included confirmation of the number of shares owned as
of December 31, 1995, by correspondence with the transfer agents
for Carillon Fund, Inc. and Scudder Variable Life Investment
Fund.
An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above
present
fairly, in all material respects, the financial position of each
of the subaccounts constituting the Carillon Account at December
31, 1995, the results of their operations for the year then ended
and the changes in their net assets for each of the two years in
the period then ended in conformity with generally accepted
accounting principles.
/S/ Ernst & Young LLP
Ernst & Young LLP
Cincinnati, Ohio
March 26, 1996
<PAGE>
<TABLE>
<CAPTION>
CARILLON ACCOUNT
STATEMENT OF ASSETS AND LIABILITIES
===========================================================
DECEMBER 31, 1995
Carillon Fund, Inc.
(affiliated
issuers)
- --------------------------------
Equity Capital
Bond
Subaccount Subaccount
Subaccount
---------- ----------
- ----------
<S> <C> <C>
<C>
ASSETS
Investments in securities of
unaffiliated issuers, at value
(cost $5,712,736;
$15,016,573; $15,963,222)
Investments in shares of
Carillon Fund, Inc.,
at value (cost $64,947,128;
$39,367,221; $13,563,000) $79,979,981 $40,965,697
$13,733,275
----------- -----------
- -----------
Total Assets $79,979,981 $40,965,697
$13,733,275
=========== ===========
===========
LIABILITIES
Payable to The Union Central
Life Insurance Company for
mortality and expense risk
charges, and administration fee $ 227,411 $ 80,816
$ 24,566
NET ASSETS (Contract Owners' Equity)
Equity Subbacount:
2,337,986.47 Accumulation
Units @ $33.96932 79,419,811
9,795.88 Payout
Units @ $33.96932 332,759
Capital Subaccount:
2,521,521.39 Accumulation
Units @ $16.21437 40,884,881
Bond Subaccount:
574,420.86 Accumulation
Units @ $23.86527
13,708,709
Total Liabilities and
Net Assets $79,979,981 $40,965,697
$13,733,275
=========== ===========
===========
</TABLE>
<TABLE>
<CAPTION>
Scudder Variable
Life
Investment
Fund
(unaffiliated
issuers)
Money Capital
Market Growth
International
Subaccount Subaccount
Subaccount
---------- ----------
- -------------
<S> <C> <C>
<C>
ASSETS
Investments in securities of
unaffiliated issuers, at value
(cost $5,712,736;
$15,016,573; $15,963,222) $ 5,712,736 $16,778,046
$17,357,023
Investments in shares of
Carillon Fund, Inc.,
at value (cost $64,947,128;
$39,367,221; $13,563,000) ----------- -----------
- -----------
Total Assets $ 5,712,736 $16,778,046
$17,357,023
=========== ===========
===========
LIABILITIES
Payable to The Union Central
Life Insurance Company for
mortality and expense risk
charges, and administration fee $ 13,810 $ 37,481
$ 40,585
NET ASSETS (Contract Owners' Equity)
Money Market Subaccount:
368,443.98 Accumulation
Units @ $15.46755 5,698,926
Capital Growth Subaccount:
1,162,998.78 Accumulation
Units @ $14.39431 16,740,565
International Subaccount:
1,220,160.02 Accumulation
Units @ $14.19194
17,316,438
----------- -----------
- -----------
Total Liabilities and
Net Assets $ 5,712,736 $16,778,046
$17,357,023
=========== ===========
===========
</TABLE>
The accompanying notes are an integral part of the
financial statements.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
CARILLON ACCOUNT
STATEMENT OF OPERATIONS
==================================================================
YEAR ENDED DECEMBER 31, 1995
Carillon Fund, Inc.
(affiliated issuers)
Equity Capital
Bond
Subaccount Subaccount
Subaccount
---------- ----------
- ----------
<S> <C> <C>
<C>
INVESTMENT INCOME
Dividend income $ 5,410,243 $ 3,343,995
$ 915,646
----------- -----------
- -----------
EXPENSES
Mortality and expense
risk charge 873,695 456,949
147,754
Administration fee 178,949 93,592
30,263
----------- -----------
- -----------
Total expenses 1,052,644 550,541
178,017
----------- -----------
- -----------
NET INVESTMENT
INCOME (EXPENSE) 4,357,599 2,793,454
737,629
----------- -----------
- -----------
REALIZED AND UNREALIZED
GAIN ON INVESTMENTS
Net realized gain on
investments 694,386 228,784
61
Net unrealized appreciation
of investments 9,553,916 1,298,776
1,088,507
----------- -----------
- -----------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS 10,248,302 1,527,560
1,088,568
----------- -----------
- -----------
NET INCREASE IN NET
ASSETS FROM OPERATIONS $14,605,901 $ 4,321,014
$ 1,826,197
=========== ===========
===========
</TABLE>
<TABLE>
<CAPTION>
Scudder Variable
Life
Investment
Fund
(unaffiliated
issuers)
- ------------------------------------
Money Capital
Market Growth
International
Subaccount Subaccount
Subaccount
---------- ----------
- ----------
<S> <C> <C>
<C>
INVESTMENT INCOME
Dividend income $ 238,562 $ 456,038
$ 67,127
---------- ----------
- ----------
EXPENSES
Mortality and expense
risk charge 51,997 155,530
187,412
Administration fee 10,650 31,856
38,386
---------- ----------
- ----------
Total expenses 62,647 187,386
225,798
---------- ----------
- ----------
NET INVESTMENT
INCOME (EXPENSE) 175,915 268,652
(158,671)
---------- ----------
- ----------
REALIZED AND UNREALIZED
GAIN ON INVESTMENTS
Net realized gain on
investments --- 26,006
240,636
Net unrealized appreciation
of investments --- 2,607,035
1,354,983
---------- ----------
- ----------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS --- 2,633,041
1,595,619
---------- ----------
- ----------
NET INCREASE IN NET
ASSETS FROM OPERATIONS $ 175,915 $2,901,693
$1,436,948
========== ==========
==========
</TABLE>
The accompanying notes are an integral part of the
financial statements.
<PAGE>
<TABLE>
<CAPTION>
CARILLON ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
======================================================================
Carillon Fund,
Inc.
Equity
Subaccount
- ---------------------
Year ended
December 31,
1995
1994
----
- ----
<S> <C>
<C>
OPERATIONS
Net investment income $ 4,357,599 $
1,915,126
Net realized gain on investments 694,386
595,056
Net unrealized appreciation/
(depreciation) of investments 9,553,916
(1,672,715)
-----------
- -----------
Net increase in net assets
resulting from operations 14,605,901
837,467
-----------
- -----------
EQUITY TRANSACTIONS
Contract purchase payments 13,375,897
11,135,901
Transfers from other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company 2,803,916
1,235,084
Transfers to other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company (1,514,951)
(2,622,356)
Surrenders (3,607,918)
(2,398,564)
-----------
- -----------
Net proceeds from equity transactions 11,056,944
7,350,065
-----------
- -----------
NET INCREASE IN NET ASSETS 25,662,845
8,187,532
NET ASSETS (Beginning of year) 54,089,725
45,902,193
-----------
- -----------
NET ASSETS (End of year) $79,752,570
$54,089,725
</TABLE>
The accompanying notes are an integral part of the
financial statements.
<PAGE>
<TABLE>
<CAPTION>
CARILLON ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
=================================================================
Carillon Fund,
Inc.
Capital Subaccount
- ------------------------
Year ended December
31,
1995
1994
----
- ----
<S> <C>
<C>
OPERATIONS
Net investment income $ 2,793,454 $
1,182,992
Net realized gain on investments 228,784
271,660
Net unrealized appreciation/
(depreciation) of investments 1,298,776
(1,608,572)
-----------
- -----------
Net increase/(decrease) in
net assets resulting from operations 4,321,014
(153,920)
-----------
- -----------
EQUITY TRANSACTIONS
Contract purchase payments 6,490,922
9,098,670
Transfers from other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company 970,203
549,788
Transfers to other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company (1,912,855)
(1,360,315)
Surrenders (1,677,734)
(1,351,199)
-----------
- -----------
Net proceeds from equity transactions 3,870,536
6,936,944
-----------
- -----------
NET INCREASE IN NET ASSETS 8,191,550
6,783,024
NET ASSETS (Beginning of year) 32,693,331
25,910,307
NET ASSETS (End of year) $40,884,881
$32,693,331
===========
===========
</TABLE>
The accompanying notes are an integral part of the
financial statements.
<PAGE>
<TABLE>
<CAPTION>
CARILLON ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
================================================================
Carillon Fund,
Inc.
Bond
Subaccount
- -------------------
Year ended
December 31,
1995
1994
----
- ----
<S> <C>
<C>
OPERATIONS
Net investment income $ 737,629 $
942,283
Net realized gain on investments 61
84,259
Net unrealized appreciation/
(depreciation) of investments 1,088,507
(1,370,511)
-----------
- -----------
Net increase/ decrease)
in net assets resulting from operations 1,826,197
(343,969)
-----------
- -----------
EQUITY TRANSACTIONS
Contract purchase payments 2,396,149
2,640,665
Transfers from other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company 471,042
125,362
Transfers to other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company (537,207)
1,960,684)
Surrenders (788,960)
(894,227)
-----------
- -----------
Net proceeds/(surrenders)
from equity transactions 1,541,024
(88,884)
-----------
- -----------
NET INCREASE / (DECREASE) IN NET ASSETS 3,367,221
(432,853)
NET ASSETS (Beginning of year) 10,341,488
10,774,341
-----------
- -----------
NET ASSETS (End of year) $13,708,709
$10,341,488
===========
===========
</TABLE>
The accompanying notes are an integral part of the
financial statements.
<PAGE>
<TABLE>
<CAPTION>
CARILLON ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
===================================================================
Scudder Variable Life
Investment Fund
Money Market
Subaccount
- -------------------------------------
Year ended December
31,
1995
1994
----
- ----
<S> <C>
<C>
OPERATIONS
Net investment income $ 175,915 $
67,479
-----------
- -----------
Net increase in net assets
resulting from operations 175,915
67,479
-----------
- -----------
EQUITY TRANSACTIONS
Contract purchase payments 3,269,680
2,349,832
Transfers from other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company 1,868,283
2,056,350
Transfers to other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company (3,591,075)
(1,867,808)
Surrenders (190,316)
(176,693)
-----------
- -----------
Net proceeds from equity transactions 1,356,572
2,361,681
-----------
- -----------
NET INCREASE IN NET ASSETS 1,532,487
2,429,160
NET ASSETS (Beginning of year) 4,166,439
1,737,279
-----------
- -----------
NET ASSETS (End of year) $ 5,698,926 $
4,166,439
===========
===========
</TABLE>
The accompanying notes are an integral part of the
financial statements.
<PAGE>
<TABLE>
CARILLON ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
==================================================================
Scudder Variable Life
Investment Fund
Capital Growth
Subaccount
- --------------------------------------
Year ended
December 31,
1995
1994
----
- ----
<S> <C>
<C>
OPERATIONS
Net investment income $ 268,652 $
493,852
Net realized gain on investments 26,006
9,076
Net unrealized appreciation/
(depreciation) of investments 2,607,035
(1,330,693)
-----------
- -----------
Net increase/(decrease) in
net assets resulting from operations 2,901,693
(827,731)
-----------
- -----------
EQUITY TRANSACTIONS
Contract purchase payments 3,831,260
5,841,484
Transfers from other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company 947,249
961,935
Transfers to other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company (779,187)
(1,036,353)
Surrenders (449,607)
(258,610)
-----------
- -----------
Net proceeds from equity transactions 3,549,715
5,508,456
-----------
- -----------
NET INCREASE IN NET ASSETS 6,451,408
4,680,725
NET ASSETS (Beginning of year) 10,289,157
5,608,432
-----------
- -----------
NET ASSETS (End of year) $16,740,565
$10,289,157
===========
===========
</TABLE>
The accompanying notes are an integral part of the
financial statements.
<PAGE>
<TABLE>
CARILLON ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
============================================================
Scudder Variable Life
Investment Fund
International
Subaccount
- ---------------------------
Year ended
December 31,
1995
1994
----
- ----
<S> <C>
<C>
OPERATIONS
Net investment expense $ (158,671) $
(109,858)
Net realized gain on investments 240,636
116,056
Net unrealized appreciation/
(depreciation) of investments 1,354,983
(442,972)
-----------
- -----------
Net increase/(decrease) in net
assets resulting from operations 1,436,948
(436,774)
-----------
- -----------
EQUITY TRANSACTIONS
Contract purchase payments 3,361,698
8,446,173
Transfers from other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company 598,178
2,382,493
Transfers to other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company (1,523,833)
(639,344)
Surrenders (748,667)
(362,617)
-----------
- -----------
Net proceeds from equity transactions 1,687,376
9,826,705
-----------
- -----------
NET INCREASE IN NET ASSETS 3,124,324
9,389,931
NET ASSETS (Beginning of year) 14,192,114
4,802,183
NET ASSETS (End of year) $17,316,438
$14,192,114
===========
===========
</TABLE>
The accompanying notes are an integral part of the
financial statements
<PAGE>
CARILLON ACCOUNT
NOTES TO FINANCIAL STATEMENTS
=================================================================
DECEMBER 31, 1995
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
Carillon Account of The Union Central Life Insurance Company (the
Account) is a separate account registered under the Investment
Company Act of 1940, as amended, as a unit investment trust. The
Account was established on February 6, 1984 by resolution of the
Board of Directors of The Union Central life Insurance Company
(Union Central) and commenced operations on June 7, 1985.
Carillon Account is comprised of six subaccounts, each of which
invests in a corresponding Portfolio of Carillon Fund, Inc. or
Scudder Variable Life Investment Fund (the "Funds"). The Funds
are no-load, diversified, open-end management investment
companies
registered under the Investment Company Act of 1940, as amended.
The shares of Carillon Fund, Inc. are sold only to Union Central
and its separate accounts to fund the benefits under certain
variable annuity contracts. Carillon Investments, Inc., a
broker-
dealer registered under the Securities Exchange Act of 1934 and a
wholly-owned subsidiary of Union Central , serves as the
distributor of variable annuity contracts issued by Carillon
Fund,
Inc. The shares of Scudder Variable Life Investment Fund are
available and are being marketed exclusively as a pooled funding
vehicle for life insurance companies writing all types of
variable
life insurance policies and variable annuity contracts. Scudder
Investor Services, Inc., a wholly-owned subsidiary of Scudder
Stevens & Clark Inc. serves as distributor of variable life
insurance policies and variable annuity contracts issued by
Scudder Variable Life Investment Fund.
The assets of the Account are segregated from the other assets of
Union Central and the investment performance of the Account is
independent of the investment performance of both Union Central's
general assets and other separate accounts.
Investment valuation - Assets of the Account are invested in
shares of the Funds at the net asset value of the Fund shares.
Investments in Fund shares are subsequently valued at the net
asset value of the Fund shares held.
Securities transactions and investment income - Securities
transactions are recorded on the trade date (the date the order
to
buy or sell is executed), and dividend income is recorded on the
ex-
dividend date. Gains and losses on sales of Fund shares are
calculated on the first-in, first-out basis for financial
reporting and tax purposes. All dividends and distributions from
the Subaccount are reinvested in additional shares of the
respective Subaccount at the net asset value per share.
Federal income taxes - The operations of the Account form a part
of and are taxed with the operations of Union Central. Union
Central is taxed as a life insurance company under Subchapter L
of
the Internal Revenue Code. Under existing federal income tax
law,
separate account investment income and capital gains are not
taxed
to the extent they are applied to increase reserves under a
contract issued in connection with the Account. Investment
income
and realized capital gains and losses on assets of the Account
are
automatically applied to increase or decrease reserves under the
contract. Accordingly, no provision for federal income taxes has
been made in these financial statements.
NOTE 2 - INVESTMENT IN CARILLON FUND, INC.
The subaccounts of the Account held the following investment in
the corresponding Portfolios of Carillon Fund, Inc. and Scudder
Variable Life Investment Fund as of December 31, 1995:
<TABLE>
<CAPTION>
Carillon Fund, Inc.
- ------------------------------------
Equity Capital Bond
Subaccount Subaccount
Subaccount
---------- ----------
- ----------
<S> <C> <C> <C>
Net asset value per share $16.54 $13.72 $11.07
Number of shares 4,834,217 2,986,277
1,240,745
</TABLE>
<TABLE>
Scudder Variable Life
Investment Fund
- ----------------------------------------
Money Capital
Market Growth
International
Subaccount Subaccount
Subaccount
---------- ----------
- ----------
<S> <C> <C> <C>
Net asset value per share $1.00 $15.08
$11.82
Number of shares 5,712,736 1,112,603
1,468,445
</TABLE>
NOTE 3 - ACCOUNT CHARGE
Mortality and expense risk charge - A mortality and expense risk
charge for Union Central at an annual rate of 1.2% of the net
assets of the Account is determined daily. The charge may be
increased or decreased by Union Central's Board of Directors but
cannot exceed a 1.7% annual rate. The mortality risk results
from
a provision in the contract in which Union Central agrees to make
annuity payments in accordance with the annuity tables,
regardless
of how long a particular annuitant or other payee lives. The
expense risk assumed by Union Central is the risk that deductions
for administration fees and surrender charges will be
insufficient
to cover actual administrative and distribution expenses.
Administrative fee - An administrative fee for Union Central, at
an annual rate of 0.25% of the net assets of the Account, is
determined daily. This fee is intended to defray expenses
incurred by Union Central in connection with premium billing and
collection, record keeping, processing death benefit claims, cash
surrenders and contract changes, calculating accumulation unit
values, reporting and other communications to contract owners,
and
other similar expenses and overhead costs.
NOTE 4 - SELECTED PER UNIT DATA
The following selected per unit data is computed on the basis
of an accumulation unit outstanding at December 31, of
each year except as noted.
<TABLE>
<CAPTION>
1995 1994 1993
1992 1991
---- ---- ----
----
<S> <C> <C> <C>
<C> <C>
CARILLON FUND, INC.
EQUITY SUBACCOUNT
Accumulation unit value $33.97 $27.15 $26.63
$23.68 $21.49
Number of accumulation
units outstanding,
end of period 2,337,986.47 1,981,958.18
1,723,790.37 1,312,947.47 1,057,669.36
Payout unit value $33.97
Number of payout
units outstanding,
end of period 9,795.88
CAPITAL SUBACCOUNT
Accumulation unit value $16.21 $14.39
$14.47 $13.02 $12.24
Number of accumulation
units outstanding,
end of period 2,521,521.39 2,271,374.95
1,790,938.05 1,181,036.39 627,636.09
BOND SUBACCOUNT
Accumulation unit value $23.87 $20.34 $20.98
$19.01 $17.92
Number of accumulation
units outstanding,
end of period 574,420.86 508,398.32
513,613.17 348,420.48 283,492.73
SCUDDER VARIABLE LIFE
INVESTMENT FUND
MONEY MARKET SUBACCOUNT<F3>
Accumulation unit value $15.47 $14.85
$14.53 $14.37 $14.12
Number of accumulation
units outstanding,
end of period 368,443.98 280,575.27
119,598.28 120,546.54 83,622.68
CAPITAL GROWTH
SUBACCOUNT
Accumulation unit value $14.39 $11.35 $12.75
$10.70<2>
Number of accumulation
units outstanding,
end of period 1,162,998.78 906,428.22
439,913.95 70,218.22
INTERNATIONAL
SUBACCOUNT
Accumulation unit value $14.19 $12.96
$13.26 $9.76<F2>
Number of accumulation
units outstanding,
end of period 1,220,160.02 1,095,214.21
362,171.94 43,624.42
<CAPTION>
1990 1989 1988
1987 1986
---- ---- ----
----
<S> <C> <C> <C>
<C> <C>
CARILLON FUND, INC.
EQUITY SUBACCOUNT
Accumulation unit value $14.98 $17.98 $16.32
$12.57 $12.62
Number of accumulation
units outstanding,
end of period 936,036.25 799,268.16
561,681.97 521,066.65 219,511.85
Payout unit value
Number of payout units
outstanding,
end of period
CAPITAL SUBACCOUNT
Accumulation unit value $9.85<F1>
Number of accumulation
units outstanding,
end of period 279,289.41
BOND SUBACCOUNT
Accumulation unit value $15.42 $14.40 $13.20
$12.48 $12.27
Number of accumulation
units outstanding,
end of period 285,369.81 250,631.38
225,777.14 224,899.83 126,112.86
SCUDDER VARIABLE LIFE
INVESTMENT FUND
MONEY MARKET SUBACCOUNT<F3>
Accumulation unit value $13.58 $12.71 $11.85
$11.23 $10.71
Number of accumulation
units outstanding,
end of period 103,404.70 75,006.15
52,665.63 50,466.90 21,967.25
CAPITAL GROWTH
SUBACCOUNT
Accumulation unit value
Number of accumulation
units outstanding,
end of period
INTERNATIONAL
SUBACCOUNT
Accumulation unit value
Number of accumulation
units outstanding,
end of period
<FN>
<F1>
Commencement of operations was May 1, 1990, with a beginning
accumulation unit value of $10.00.
<F2>
Commencement of operations was May 1, 1992, with a beginning
accumulation unit value of $10.00.
<F3>
Assets of Carillon Money Market Subaccount were transferred to
the Scudder Money Market Subaccount on
November 12, 1993.
</FN>
</TABLE>
<PAGE>
<PAGE>
Statements of Financial Condition
Statutory Basis of Accounting
The Union Central Life
Insurance Company
Years ended December 31, 1995 and 1994
with Report of Independent Auditors
<PAGE>
(letterhead)
ERNST & YOUNG LLP Phone: 513 621-6454
1300 Chiquita Center
150 East Fifth Street
Cincinnati Ohio 45202
Report of Independent Auditors
To the Board of Directors of
The Union Central Life Insurance Company
We have audited the accompanying statutory-basis balance
sheets of The Union Central Life Insurance Company as of
December 31, 1995 and 1994. These statutory-basis balance
sheets are the responsibility of the Company's management.
Our responsibility is to express an opinion on these
balance sheets based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the balance sheets are free of
material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and
disclosures in the balance sheets. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the
overall balance sheet presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the statutory-basis balance sheets
referred to above present fairly, in all material respects,
the financial position of The Union Central Life Insurance
Company at December 31, 1995 and 1994 in conformity with
generally accepted accounting principles for mutual life
insurance companies and with reporting practices prescribed
or permitted by the Ohio Insurance Department.
As described in Note 4, in 1995, the Company changed its
method of accounting for income taxes.
/s/ Ernst & Young LLP
February 9, 1996
Ernst & Young LLP is a member of Ernst & Young International, Ltd
<PAGE>
The Union Central Life Insurance Company
BALANCE SHEETS
STATUTORY BASIS OF ACCOUNTING
<TABLE>
<CAPTION>
December 31
--------------
1995 1994
---- ----
(000's Omitted)
<S> <C> <C>
ADMITTED ASSETS
Cash and Investments:
Bonds $2,432,086
$2,439,982
Common stocks in subsidiaries 22,494
25,270
Preferred and other common stocks 50,715
46,333
Mortgage loans 523,260
443,586
Real estate,
including home office building 62,396
60,916
Policy loans 156,115
156,098
Cash and short-term investments 9,309
9,347
Other invested assets 40,382
27,877
----------
- ----------
Total Cash and Investments 3,296,757
3,209,409
Deferred and uncollected premiums 12,696
10,793
Investment income due and accrued 40,147
37,235
Other admitted assets 11,228
10,404
Separate account assets 729,792
509,492
----------
- ----------
Total Admitted Assets $4,090,620
$3,777,333
==========
==========
LIABILITIES AND SURPLUS
Policy and Contract Liabilities:
Reserves for life, accident
and health policies $1,489,780
$1,428,262
Deposit funds 1,518,369
1,501,600
Policy claims 17,284
18,275
Interest maintenance reserve 21,041
30,046
Dividends payable to policyholders 15,935
15,661
----------
- ----------
Total Policy and Contract Liabilities 3,062,409
2,993,844
Accrued commissions, expenses and taxes 31,467
21,677
Asset valuation reserve 44,759
34,804
Other liabilities 23,332
30,525
Separate account liabilities 727,160
505,718
----------
- ----------
Total Liabilities 3,889,127
3,586,568
Total Surplus 201,493
190,765
----------
- ----------
Total Liabilities and Surplus $4,090,620
$3,777,333
==========
==========
</TABLE>
The accompanying notes are an integral part of the
financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS -
STATUTORY BASIS OF ACCOUNTING-CONTINUED
NOTE 1 - NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
Organization
The Union Central Life Insurance Company (the Company) is a
mutual life insurance company chartered by the State of Ohio.
At December 31, 1995, the Company owned the following
unconsolidated subsidiaries and affiliates wholly or in part: 1)
Carillon Advisers, Inc., a registered investment advisor company,
wholly owned; 2) Carillon Investments, Inc., a broker-dealer,
wholly owned; 3) Carillon Marketing Agency, Inc., an insurance
agency, wholly owned; 4) Summit High Yield Fund, a high-yield
bond mutual fund, 97% owned; 5) Manhattan Life Insurance Company,
a mixed charter life insurance company of which the Company owns
73% of the outstanding guarantee capital shares; and 6) Carillon
Capital Fund, a public allocation mutual fund, 48% owned; and 7)
Carillon S&P Fund, a common stock index fund, wholly owned. The
financial statements reflect the results of the Company's
operations and the appropriate equity in its subsidiaries as
valued at December 31, 1995. See Notes 5 and 6 for further
information about the investments and operations of the
subsidiaries.
Union Central provides financial products and related services,
for the benefits of individual, group, and pension policyholders,
which include:
* Insurance to provide for financial needs resulting from loss
of life or income
* Managing funds accumulated for pre-retirement and retirement
needs
The Company is licensed to do business in all 50 states in the
U.S.
Basis of Presentation
The accompanying financial statements have been prepared in
conformity with statutory accounting practices prescribed or
permitted by the Ohio Insurance Department. Such practices
presently are regarded as generally accepted accounting
principles (GAAP) for mutual life insurance companies. However,
beginning in 1996, under the requirements of Financial Accounting
Standards Board (FASB) Interpretation 40 (FIN-40), "Applicability
of Generally Accepted Accounting Principles to Mutual Life
Insurance and Other Enterprises", as amended, financial
statements prepared on the basis of statutory accounting
practices will no longer be described as prepared "in conformity
with GAAP." As a result the financial statements included herein
would have to be restated to reflect all applicable authoritative
GAAP pronouncements, including: Financial Accounting Standard
(FAS-120), "Accounting and Reporting by Mutual Life Insurance
Enterprises and by Insurance Enterprises for certain
Long-Duration Participating Contracts - an amendment of FAS-60,
97,
and 113 and FIN-40", for the year ending December 31, 1996.
FAS-120 extends the requirements of FAS-60, "Accounting and
Reporting
by Insurance Enterprises", FAS-97, "Accounting and Reporting by
Insurance Enterprises for certain Long-Duration Contracts and for
Realized Gains and Losses from the Sale of Investments", and
FAS-113 "Accounting and Reporting for Reinsurance of
Short-Duration
and Long-Duration Contracts", to mutual life insurance companies.
FAS-120 is effective for fiscal years beginning after December
15, 1995. The Company has not determined the effect of adoption
but anticipates it having a material impact on the financial
statements.
The preparation of financial statements of insurance companies
requires management to make estimates and assumptions that affect
amounts reported in the financial statements and accompanying
notes. Such estimates and assumptions could change in the future
as more information becomes known, which could impact the amounts
reported and disclosed herein.
Significant accounting practices are as follows:
Investments
Investments are stated at values prescribed by the National
Association of Insurance Commissioners (NAIC) which are as
follows: bonds not backed by other loans are stated at amortized
cost, and loan-backed bonds, collateralized mortgage obligations
and other structured securities are stated at amortized cost
using the interest method including anticipated prepayments at
the date of purchase. Significant changes in estimated cash
flows from the original purchase assumptions are reviewed
quarterly. Prepayment assumptions for loan-backed bonds and
structured securities were obtained from broker dealer survey
values or internal estimates. These assumptions are consistent
with the current interest rate and economic environment. The
retrospective adjustment method is used to value all securities
except for inverse floating securities which are valued using the
prospective method.
Preferred stocks are stated at cost and investments in stocks of
unconsolidated subsidiaries and affiliates in which the Company
has an interest of 20% or more are reported equal to the
Company's proportionate share of the equity in the underlying
statutory-basis net assets for insurance subsidiaries plus the
admitted portion of goodwill, and equal to the Company's
proportionate share of the GAAP-basis net assets for noninsurance
subsidiaries. Goodwill is amortized on a straight-line basis
over ten years. Investment real estate or property is stated on
the equity basis. Mortgage loans are stated at the unpaid
principal balance less unamortized discounts. Short-term
investments are investments with maturities of one year or less
at the date of acquisition, and are valued at cost which
approximates market. Policy loans are stated at the aggregate
unpaid principal balance.
For securities carried at market value, unrealized gains and
losses resulting from differences between the cost and carrying
value of investments are credited or charged directly to
unassigned surplus.
As prescribed by the NAIC, the Asset Valuation Reserve (AVR) is
computed in accordance with a prescribed formula and represents a
provision for possible fluctuations in the value of bonds, equity
securities, mortgage loans, real estate, and other invested
assets. The AVR is reported as a liability rather than as a
valuation allowance or an appropriation of surplus and changes to
the AVR are charged or credited directly to unassigned surplus.
Based on a formula prescribed by the NAIC, the Company defers a
portion of realized gains and losses on sales of fixed income
investments, principally fixed maturities, attributable to
changes in the general level of interest rates and amortizes
those deferrals into income over the remaining period to maturity
according to the Grouped Method, as allowed by the NAIC; the net
deferral is reported as the Interest Maintenance Reserve (IMR) in
the balance sheets.
Real Estate
Real estate is valued at cost less accumulated depreciation. The
value of real estate acquired through foreclosure is recorded at
the lower of cost or net realizable value. Net realizable value
for real estate is determined based upon fair value of a
property, which may take into consideration a number of factors,
including; (i) discounted cash flows; (ii) sales of comparable
properties; (iii) geographic location of property and related
market conditions; and (iv) disposition costs. Subsequent to
foreclosure, the value of the property is evaluated and written
down, if appropriate, to reflect any additional amounts
considered unrecoverable upon sale. Depreciation expense is
determined by the declining balance method for acquisitions or
renovations prior to 1990 and by the straight line method for
acquisitions or renovations beginning in 1990. At the time of
the sale, the difference between the sales price and the carrying
value is recorded as a realized gain or loss.
Real estate owned and occupied by the Company is included in
investments.
Cash and Short - Term Investments
Cash and short-term investments presented on the balance sheet
consists of cash-in-bank, cash-in-transit and commercial paper
that has a maturity date of 90 days or less from the date
acquired.
Nonadmitted Assets
In accordance with statutory requirements, certain assets,
designated as nonadmitted assets, are excluded from the balance
sheet and are charged directly to surplus. Nonadmitted assets
consist primarily of advances to agents, furniture and equipment,
application software, and accrued income on certain securities in
default. The net change in these assets during the year is
reflected as a change in surplus.
Reserves for Life, Accident and Health Policy Benefits
Life, annuity, and accident and health benefit reserves are
developed using accepted actuarial methods and are determined
based on published tables using statutorily specified interest
rates and valuation methods that will provide, in the aggregate,
reserves that are greater than or equal to the minimum amounts
required by the Ohio Insurance Department or guaranteed policy
cash values.
Deposit Funds
The liability for deposit funds is generally established at the
policyholders' accumulated cash values plus amounts providing for
guaranteed interest, less applicable surrender charges.
Dividends to Policyholders
All of the Company's life insurance policies contain dividend
payment provisions which enable the policyholder to participate
in the earnings of the Company. Dividend payments are approved
by the Company's Board of Directors on an annual basis.
Policy Claims
Policy claim reserves represent the estimated ultimate net cost
of all reported and unreported claims incurred through December
31, 1995. The reserves for unpaid claims are estimated using
individual case-basis valuations and statistical analyses. These
estimates are subject to the effects of trends in claim severity
and frequency. Although considerable variability is inherent in
such estimates, management believes that the reserves for claims
are adequate. The estimates are continually reviewed and
adjusted as necessary as experience develops or new information
becomes known; such adjustments are included in current
operations.
Separate Accounts
Separate account assets and liabilities reported in the
accompanying financial statements represent funds that are
separately administered, principally for annuity contracts, and
for which the contract holders rather than the Company bears the
investment risk. Separate account contract holders have no claim
against the assets of the general account of the Company.
Separate account investments are carried at market value.
Investment income and gains and losses from these accounts accrue
directly to contract holders and are not included in the
accompanying financial statements.
Reinsurance
Reinsurance premiums and claims are accounted for on bases
consistent with those used in accounting for the original
policies issued and the terms of the reinsurance contracts.
Premiums, benefits, and the reserves for policy and contract
liabilities are reported net of reinsured amounts.
<PAGE>
Reclassifications
Previously reported amounts for 1994 have in some instances been
reclassified to conform to the 1995 presentation.
NOTE 2 - INVESTMENTS
The cost or amortized cost and estimated fair value of bonds are
summarized as follows:
<TABLE>
<CAPTION>
Cost or Gross Gross
Amortized Unrealized
Unrealized Fair
Cost Gains (Losses)
Value
--------- ----------
- ---------- -----
(000's Omitted)
<S> <C> <C> <C>
<C>
December 31, 1995:
U.S. treasury securities
and obligations of U.S.
government corporations
and agencies $ 60,873 $ 994 $
0 $ 1,867
Public utilities securities 168,415 9,875
(257) 178,033
Corporate securities and other 930,783 56,223
(4,229) 982,777
Mortgage-backed securities
and collateralized mortgage
obligations 1,266,755 27,351
(28,931) 1,265,175
Debt securities issued by
foreign governments 5,260 38
(651) 4,647
---------- ----------
- ---------- ----------
Total $2,432,086 $ 94,481 $
(34,068) $2,492,499
========== ==========
========== ==========
December 31, 1994:
U.S. treasury securities
and obligations of U.S.
government corporations
and agencies $ 23,553 $ 6 $
(262) $ 23,297
Public utilities securities 175,758 655
(9,196) 167,217
Corporate securities and other 719,394 4,425
(39,147) 684,672
Mortgage-backed securities and
collateralized mortgage
obligations 1,496,871 2,949
(190,416) 1,309,404
Debt securities issued by
foreign governments 24,406 239
(4,832) 19,813
---------- ----------
- ---------- ----------
Total $2,439,982 $ 8,274 $
(243,853) $2,204,403
========== ==========
========== =========
</TABLE>
The majority of the fair values for publicly traded bonds,
except collateralized mortgage obligations (CMO's),
were obtained from an independent bond pricing service.
Fair values for CMO's and private placement bonds were
obtained from independent securities broker dealers. The
remaining
fair values were based on values obtained from independent
securities broker dealers or based on values for comparable,
publicly offered bonds of the same rate, maturity and quality.
The cost or amortized cost and estimated fair value of the
Company's
investment in fixed maturities at December 31, 1995, by
contractual
maturity, are as follows:
<TABLE>
<CAPTION>
Cost or
Amortized Fair
Cost Value
---- -----
(000's Omitted)
<S> <C> <C>
Due in one year or less $ 5,427 $ 5,479
Due after one year
through five years 117,202 120,413
Due after five years
through ten years 498,740 526,614
Due after ten years 148,519 158,009
---------- ----------
Subtotal 769,888 810,515
Mortgage-backed securities 1,266,755 1,265,175
Other securities with
multiple repayment dates 395,443 416,809
---------- ----------
Total $2,432,086 $2,492,499
========== ==========
</TABLE>
The expected maturities in the foregoing table may differ from
contractual maturities because certain borrowers have the right
to
call or prepay obligations with or without call or prepayment
penalties.
At December 31, 1995 and 1994, the Company held unrated or less-
than-investment grade (defined as level three and lower by the
NAIC) corporate bonds of $105,560,000 and $92,975,000,
respectively, with an aggregate fair value of $103,858,000 and
$83,505,000, respectively. Those holdings amounted to 4.3% and
3.8%, respectively, of the Company's investments in bonds and
less
than 2.6% and 2.5%, respectively, of the Company's total admitted
assets. The holdings of less-than-investment grade bonds are
widely diversified and of satisfactory quality based on the
Company's investment policies and credit standards.
At December 31, 1995 and 1994, investments in bonds with an
admitted asset value of $2,538,000 and $1,846,000, respectively,
were on deposit with state insurance departments to satisfy
regulatory requirements.
The Company sponsors three mutual funds, the investments in which
are carried at market value and are included in "Preferred and
other common stocks" on the Balance Sheets, as follows:
<TABLE>
<CAPTION>
December 31,
1995 1994
---- ----
(000's Omitted)
<S> <C> <C>
Carillon Capital Fund $ 22,900 $ 19,939
Summit High Yield Fund 25,369 24,933
Carillon S & P Fund 305 0
-------- --------
Total $ 48,574 $ 44,872
======== ========
</TABLE>
The Company's equity investments in preferred stock are carried
at
cost or amortized cost. At December 31, 1995, the carrying value
was $2,000,000 and the fair value was $3,600,000. At December
31,
1994, the carrying value was $1,352,000 and the fair value was
$2,098,000.
The Company has no material off-balance sheet risk.
Unrealized gains and losses on investments in preferred stocks
and
subsidiaries are reported directly in surplus and do not affect
net
income. At December 31, 1995, the Company had gross unrealized
gains of $5,636,000 and gross unrealized losses of $3,789,000 on
these investments.
Mortgage loans are stated at their aggregate unpaid balances on
the balance sheet, less unamortized discounts. The mortgage loan
portfolio is well diversified both geographically and by property
type, as follows:
<TABLE>
<CAPTION>
December 31, 1995
-----------------------
Principal Percent of
Balance Principal
------- ---------
(000's Omitted)
<S> <C> <C>
Region
- ------
New England and Mid-Atlantic $ 61,245 11.7%
South Atlantic 74,259 14.2
North Central 130,598 25.0
South Central 51,766 9.9
Mountain 67,594 12.9
Pacific 137,798 26.3
-------- ------
Total $523,260 100%
======== ======
Property Type
- -------------
Apartment and residential $113,599 21.7%
Warehouses and industrial 88,431 16.9
Retail and shopping center 160,108 30.6
Offices 156,236 29.9
Other 4,886 .9
-------- -----
Total $523,260 100%
======== =====
</TABLE>
<TABLE>
<CAPTION>
December 31, 1994
-----------------------
Principal Percent of
Balance Principal
------- ---------
(000's Omitted)
<S> <C> <C>
Region
- ------
New England and Mid-Atlantic $ 54,665 12.3%
South Atlantic 54,657 12.3
North Central 117,564 26.5
South Central 39,810 9.0
Mountain 53,699 12.1
Pacific 123,191 27.8
-------- -----
Total $443,586 100.0%
Property Type
Apartment and residential $ 96,477 21.8%
Warehouses and industrial 68,387 15.4
Retail and shopping center 133,396 30.1
Offices 145,199 32.7
Other 127 0.0
-------- -----
Total $443,586 100.0%
======== =====
</TABLE>
At December 31, 1995, the average size of an individual mortgage
loan was approximately $2,265,000. The Company's policy is to
obtain a first mortgage lien and to require a loan to value ratio
of 75% or less at acquisition. At December 31, 1995,
approximately 98.75% of loans were current as to payment terms
and
1.25% were in process of foreclosure. Included in mortgage loans
are two loans with an aggregate principal balance of $6,520,000
that were non-income producing for the twelve month period ending
December 31, 1995. The Company had mortgage reserves (the
mortgage component of the asset valuation reserve) of $4,783,000
and $4,989,000 at December 31, 1995 and 1994, respectively. As
of
December 31, 1995, the maximum and minimum rates of interest in
the Company's mortgage loan portfolio was 11.00% and 4.00%.
In 1995, the Company issued 67 new commercial loans at the
maximum
and minimum rates of interest of 9.875% and 8.00% totalling
$146,057,000. No other categories of mortgage loans were issued.
Fire insurance is carried on all properties covered by mortgage
loans at least equal to the excess of the loan over the maximum
loan which would be permitted by law on the land without the
buildings.
During the fourth quarter of 1994, the Company began
participating
in new mortgage fundings with the Manhattan Life Insurance
Company. In 1995, the Company participated in 60 new
originations, with the Company's percentage totalling
$115,540,000
out of a total loan amount of $134,487,000. This investment
strategy will continue in 1996.
At December 31, 1995, the Company held mortgages with interest
more than one year overdue of $4,925,000, with interest due of
$1,789,000. During 1995, the Company reduced interest rates of
outstanding mortgages as follows:
<TABLE>
<CAPTION>
Percentage Reduced Statement Value Number of Loans
------------------ --------------- ---------------
<C> <C> <C>
2.0 - 2.9% $ 2,660,000 1 loan
1.0 - 1.9% 6,998,000 2 loans
0.5 - 0.9% 3,909,000 3 loans
</TABLE>
At December 31, 1995, the statement value of mortgage loans that
were restructured to require payment of principal or interest
based upon the cash flows generated by the property serving as
collateral for the loans or that require a diminutive payment
totalled $12,643,000.
Real estate consists of the home office property, investment real
estate under lease, and foreclosed real estate. The cost of
these
properties totalled $82,396,000, accumulated depreciation as of
December 31, 1995 was $20,000,000, and the total net book value
was $62,396,000. The net book value of foreclosed real estate
was
$38,982,000 and $36,948,000 at December 31, 1995 and 1994,
respectively.
NOTE 3 - REINSURANCE
In the ordinary course of business, the Company assumes and cedes
reinsurance with other insurers and reinsurers. These
arrangements provide greater diversification of business and
limit
the maximum net loss potential on large or hazardous risks.
These
reinsured risks are treated in the financial statements as risks
for which the Company is not liable. Accordingly, policy
liabilities and accruals, including incurred but not reported
claims, are reported in the financial statements net of
reinsurance assumed and ceded. A contingent liability exists
with
respect to the amount of such reinsurance in the event that the
reinsuring companies are unable to meet their obligations.
Reinsurance of risk does not discharge the primary liability of
the Company, the Company remains contingently liable with respect
to any reinsurance ceded, and this contingency would become an
actual liability in the event that the assuming company becomes
unable to meet its obligation under the reinsurance treaty. The
Company retains the risk for varying amounts of individual or
group insurance written up to a maximum of $1,000,000 on any one
life or $4,000 per month disability risk and reinsures the
balance.
Reinsurance transactions with other insurance companies for the
years ended December 31, 1995 and 1994 are summarized as follows:
<TABLE>
<CAPTION>
December 31, 1995
--------------------------------------
Direct Assumed Ceded Net
------ ------- ----- ---
(000's Omitted)
<C> <C> <C> <C> <C>
Life insurance in force $26,222,671 $ 96,011 $3,257,271
$23,061,411
=========== ======== ==========
===========
</TABLE>
<TABLE>
<CAPTION>
December 31, 1994
--------------------------------------
Direct Assumed Ceded Net
------ ------- ----- ---
(000's Omitted)
<S> <C> <C> <C> <C>
Life insurance in force $25,958,093 $103,557 $3,774,748
$22,286,902
=========== ======== ==========
===========
</TABLE>
Amounts recoverable from reinsurers for paid losses were
$1,005,000 and $720,000 at December 31, 1995 and 1994,
respectively, and they are included in other assets in the
financial statements. Benefits paid or provided were reduced by
$2,657,000 and $4,285,000 at December 31, 1995 and 1994,
respectively, for estimated recoveries under reinsurance
treaties.
The liabilities for future policy benefits were also reduced due
to reinsurance treaties by $11,049,000 and $12,783,000 at
December
31, 1995 and 1994, respectively.
The Company had ceded 22.5% of a block of ordinary life insurance
under a coinsurance/modified coinsurance agreement in 1988. The
amount of life insurance inforce ceded under the agreement was
$160,127,000 and $169,660,000 at December 31, 1995 and 1994,
respectively. The net effect of this reinsurance ceded
transaction was to reduce the Company's gain from operations by
$2,103,000 in 1995 and 1994. This reinsurance agreement will
terminate January 1, 1996. There will be no effect on gain from
operations in 1996.
The Company, nor any of its related parties control, either
directly or indirectly, any reinsurers in which the Company
conducts business, except that the Company does assume an
immaterial amount of business from its insurance subsidiary
Manhattan Life Insurance Company. No policies issued by the
Company have been reinsured with a foreign company which is
controlled, either directly or indirectly, by a party not
primarily engaged in the business of insurance.
The Company has not entered into any reinsurance agreements in
which the reinsurer may unilaterally cancel any reinsurance for
reasons other than nonpayment of premiums or other similar
credits. The Company does not have any reinsurance agreements in
effect in which the amount of losses paid or accrued through
December 31, 1995 would result in a payment to the reinsurer of
amounts which, in the aggregate and allowing for offset of mutual
credits from other reinsurance agreements with the same
reinsurer,
exceed the total direct premiums collected under the reinsured
policies.
NOTE 4 - FEDERAL INCOME TAX
Federal income taxes are calculated under both the regular tax
system and the alternative minimum tax (AMT) system, and the tax
payable is the higher of the two calculated amounts. In 1995 and
1994, there were no net operating losses available to carry
forward and utilize against taxable income. In the event of
future net losses, the Company has $54,759,000 available in the
carryback period for recoupment. The tax allocated to the
realized capital gains or losses in the Statement of Income and
Changes in Surplus is based on the tax basis realized capital
gains or losses plus bad debt losses.
As a mutual life insurance company, Union Central Life is subject
to the differential earnings rate ("DER") calculation or the
surplus tax as it is referred to above. A "tentative" DER amount
is determined annually based upon a rate published by the
Internal
Revenue Service ("IRS"). The IRS also publishes a "recomputed"
DER rate in the year following the release of the tentative rate.
These DER's are applied to a mutual life company's equity base,
as
adjusted, to determine the reduction in the company's deduction
for policyholders dividends for purposes of the tax return. The
Company changed its policy for purposes of reporting tax in the
financial statements in 1995 from a cash basis to an accrual
basis
approach. Under the accrual method, the surplus tax is
calculated
by using an estimate of the current year's DER multiplied by the
actual mean tax surplus for the year. The effect of this change
in method is $6.3 million and has been reported as an adjustment
to surplus in 1995.
NOTE 5 - INVESTMENTS IN UNCONSOLIDATED SUBSIDIARIES
In 1991, the Company owned approximately 73% of the outstanding
common stock of Manhattan National Corporation (MNC), an
insurance
holding company that owned 100% of the outstanding guarantee
capital shares of The Manhattan Life Insurance Company (MLIC).
At December 31, 1991, MNC was liquidated. MNC shareholders
received prorata distributions of cash, guarantee capital shares
of MLIC, and an interest in a liquidating trust (MNC Liquidating
Trust). As a result, the Company obtained 73% of the outstanding
guarantee capital shares of MLIC and of the MNC Liquidating
Trust.
The investment in MLIC guarantee capital shares is recorded in
the
balance sheet at $20,950,071 and $24,739,000, respectively, at
December 31, 1995 and 1994. This value represents 73% of the
statutory-basis net assets of MLIC, plus unamortized goodwill of
$948,000 at December 31, 1994. Goodwill was fully amortized at
December 31, 1995.
Statutory-basis financial information of the Company's insurance
subsidiary (MLIC) is summarized below:
<TABLE>
<CAPTION>
December 31,
1995 1994
---- ----
(000's Omitted)
<S> <C> <C>
Balance Sheets
Investments $ 443,042 $ 437,483
Other assets 15,482 14,897
--------- ---------
Total assets $ 458,524 $ 452,380
========= =========
Insurance reserves $ 413,355 $ 405,262
Liabilities 16,399 14,447
Surplus 28,770 32,671
--------- ---------
Total liabilities and surplus $ 458,524 $ 452,380
========= =========
Statements of Operations
Revenues $ 86,045 $ 79,169
Benefits, expenses and taxes (87,985) (75,365)
Net realized capital losses (162) (2,448)
--------- ---------
Net income (loss) (2,102) 1,356
Other changes in surplus (1,799) 674
--------- ---------
Increase (decrease) in surplus $ (3,901) $ 2,030
--------- ---------
</TABLE>
In 1993, the Company proposed a plan to eliminate the minority
interest in MLIC's guarantee capital shares. A special committee
of independent directors of MLIC has been formed to consider the
fairness of this proposal which involves using a reverse stock
split to reduce all outstanding minority shares to fractional
shares payable in cash. The Company would become the sole
remaining holder of the capital shares. Under the plan, the
Company will return its guarantee capital shares and pay cash in
the amount of $1,823,000 to MLIC in exchange for eight new
guarantee capital shares. It is anticipated the remaining
guarantee capital shares held by minority shareholders will be
returned in exchange for cash of $4,655,000 ($5.125 per share).
The proposal is subject to approval of MLIC's guarantee capital
shareholders, as well as its Board of Directors. The proposal is
currently being reviewed by the New York Insurance Department and
its independent consultants.
The MNC Liquidating Trust was fully liquidated as of September
30,
1994. Assets of the trust consisted primarily of commercial
mortgage loans.
NOTE 6 - RELATED PARTY TRANSACTIONS
The Company transacts business with certain companies that are
affiliated through common ownership.
The Company provided facilities and certain data processing,
accounting, legal, administrative, and executive services to
various subsidiaries (primarily MLIC) for fees totalling
$4,004,000 and $4,427,000 in 1995 and 1994, respectively. At
December 31, 1995, the Company had a $1,906,000 balance due from
affiliates.
NOTE 7 - COMMITMENTS AND CONTINGENT LIABILITIES
Leases
The Company leased office space for various field agency offices
with lease terms of varying duration from 1 to 15 years. Some of
these leases include escalation clauses which vary with levels of
operating expense. The Company also leases furniture and
equipment under leases which expire in 2001.
The Company accounts for all leases as operating leases. At
December 31, 1995, the future minimum lease payments for all
noncancelable operating leases are as follows:
<TABLE>
<CAPTION>
Year Amount
---- ------
(000's Omitted)
<C> <C>
1996 $ 2,971
1997 2,419
1998 1,732
1999 1,297
After 1999 3,398
-------
Total $11,817
=======
</TABLE>
Other Commitments
At December 31, 1995, the Company has outstanding agreements to
fund 26 mortgages totalling $38,511,000 in early 1996. In
addition, the Company has committed to invest $15,100,000 in
limited partnerships during the years 1996 to 1999. These
transactions are in the normal course of business for the
Company.
The Company had no outstanding liability for borrowed money as of
December 31, 1995.
Litigation
In the normal course of business, the Company is party to various
claims and litigation primarily arising from claims made under
insurance policies and contracts. Those actions are considered
by
the Company in estimating the policy and contract liabilities.
The Company's management believes that the resolution of those
actions will not have a material adverse effect on the Company's
financial position.
Guaranty Fund Assessments
The economy and other factors have caused an increase in the
number of insurance companies that are under regulatory
supervision. This circumstance is expected to result in an
increase in assessments by state guaranty funds, or voluntary
payments by solvent insurance companies, to fund policyholder
losses or liabilities of insurance companies that become
insolvent. These assessments may be deferred or forgiven under
most guaranty laws if they would threaten an insurers financial
strength and, in certain instances, may be offset against future
premium taxes. The estimated liability of $1,985,000 at December
31, 1995 was based on data provided by the National Organization
of Life and Health Insurance Guaranty Associations.
NOTE 8 - ANNUITY RESERVES
The Company's annuity reserves and deposit fund liabilities that
are subject to discretionary withdrawal (with adjustment),
subject
to discretionary withdrawal (without adjustment), and not subject
to discretionary withdrawal provisions are summarized as follows:
<TABLE>
<CAPTION>
December 31, 1995
Amount Percent
------ -------
(000's Omitted)
<S> <C> <C>
Subject to discretionary withdrawal
(with adjustment):
With market value adjustment $ 200,982 8.5%
At book value less surrender charge 135,229 5.8
At market value 717,594 30.5
---------- -----
Total 1,053,805 44.8
Subject to discretionary withdrawal
(without adjustment):
At book value with minimal or
no charge or adjustment 1,139,915 48.4
Not subject to discretionary withdrawal 160,880 6.8
---------- -----
1,300,795 55.2
Total annuity reserves and deposit
fund liabilities - none reinsured $2,354,600* 100%
========== =====
</TABLE>
* Includes: deposit funds ($1,518,369); premiums on deposit
($810) included in other liabilities; annuities and supplementary
contracts with life contingencies ($117,827) included in reserves
for life, accident and health policies; and annuities reported in
the separate account liability ($717,594).
NOTE 9 - EMPLOYEE BENEFITS
The Company has pension plans covering substantially all of its
employees. Pension expense was determined according to
regulations as specified by ERISA and subsequent amendments.
Benefits are based on years of service and the employee's highest
five consecutive years of compensation out of the last ten years.
The amounts funded were $2,178,000 and $1,887,000 in 1995 and
1994, respectively. The Company's policy is to charge
contributions to expense in the year they were contributed or
accrued. Total pension reserves for the Company's employee
pension plan are included in the liability for deposit funds on
the balance sheets.
A summary of the accumulated benefit obligation as determined by
the Plan's actuaries and plan net assets as of October 1, 1995
are
as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
(000's Omitted)
<S> <C> <C>
Accumulated benefit obligation:
Vested $ 34,444 $ 28,241
Nonvested 5,270 5,512
-------- --------
Total $ 39,714 $ 33,753
======== ========
Net assets available for benefits $ 38,062 $ 34,444
======== ========
</TABLE>
It is the Company's intention to fund the unfunded liability by
making additional contributions within the time periods allowed
by
the Employee Retirement Individual Savings Association.
The accumulated benefit obligation was calculated based on an
assumed interest rate of 8.5%. Plan assets are primarily
composed
of mutual funds and unallocated insurance funds. At December 31,
1995 and 1994, $33,639,000 and $26,631,000, respectively, was
invested in affiliated mutual funds.
The Company has a contributory savings plan for employees meeting
certain service requirements which qualifies under Section 401(k)
of the Internal Revenue Code. This plan allows eligible
employees
to contribute up to certain prescribed limits of their pre-
tax compensation, with the Company matching 50% of the first 6%
of
participants' contributions. The value of the plan's assets were
$29,866,000 and $22,852,000 at December 31, 1995 and 1994,
respectively. The assets are held in the deposit fund or under
the variable accounts of a group annuity policy. At December 31,
1995 and 1994, $13,069,000 and $10,204,000, respectively, was
invested in affiliated mutual funds.
NOTE 10 - POSTRETIREMENT BENEFITS
The Company provides certain health care and life insurance
benefits for its eligible retired employees. Substantially all
of
the Company's employees may become eligible for these benefits if
they reach normal retirement age while working for the Company.
At December 31, 1995 and 1994, the postretirement benefit
obligation for retirees and other fully eligible or vested plan
participants was $15,105,000 and $14,668,00, respectively. Of
these amounts, $9,053,000 and $9,167,000 was unfunded and
included
in "Other liabilities" on the Balance Sheets, and $6,052,000 and
$5,501,000 was pre-funded in Voluntary Employee Benefit
Associations (VEBAS) at December 31, 1995 and 1994, respectively.
The health care cost trend rate assumption has an insignificant
effect on the amounts reported. To illustrate, increasing the
assumed health care cost trend rates by one percentage point in
each year would increase the postretirement benefit obligation as
of December 31, 1995 by $82,000 and the interest cost and
estimated eligibility cost components of the net periodic
postretirement benefit cost by $7,000 and less than $1,000,
respectively.
NOTE 11 - FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
Cash and short-term investments: The carrying amounts
reported in the balance sheet for these instruments approximate
their fair values.
Investment securities: Fair values for bonds and preferred
stock are based on quoted market prices, where available, which
may differ from NAIC fair values. If quoted market prices are
not
available, fair values are estimated using values obtained from
independent securities broker dealers or quoted market prices of
comparable instruments. The fair values of common stock in
Company sponsored mutual funds are based on quoted market prices
and are recognized in the balance sheet.
Mortgage loans: The fair values for commercial and
residential mortgages in good standing are estimated using
discounted cash flow analysis using interest rates currently
being
offered for similar loans to borrowers with similar credit
ratings
in comparison with actual interest rates and maturity dates.
Fair
values for mortgages with potential loan losses are based on
discounted cash flow analysis of the underlying properties.
Policy loans: Management is unable to ascertain the
estimated life of the policy loan portfolio. Due to the
excessive
costs which would be incurred to determine this information,
management considers the estimation of its fair value to be
impracticable. The nature of a policy loan insures that the
outstanding loan balance will be fully recoverable because the
balance owed to the Company is always equal to or lower than the
cash value of the insurance policy owed to the policyholder.
Policy loans are stated at their aggregate unpaid balance on the
balance sheet.
Investment contracts: Fair values for the Company's
liabilities under investment-type insurance contracts are
estimated using discounted cash flow calculations, based on
interest rates currently being offered for similar contracts with
maturities consistent with those remaining for the contracts
being
valued.
The carrying amounts and fair values of the Company's mortgage
loans are summarized as follows:
<TABLE>
<CAPTION>
December 31, 1995 December 31,
1994
Carrying Fair Carrying
Fair
Amount Value Amount
Value
------ ----- ------
- -----
(000's Omitted)
<S> <C> <C> <C>
<C>
Commercial mortgages $ 523,260 $ 551,235 $ 443,586
$ 446,757
========== ========== ==========
==========
</TABLE>
The carrying amounts and fair values of the Company's liabilities
for investment-type insurance contracts (deposit funds) are as
follows:
<TABLE>
<CAPTION>
December 31, 1995 December 31,
1994
Carrying Fair Carrying
Fair
Amount Value Amount
Value
------ ----- ------
- -----
(000's Omitted)
<S> <C> <C> <C>
<C>
Group annuities $ 923,583 $ 927,544 $ 947,514
$ 937,924
Single premium
deferred annuities 346,230 340,848 331,260
325,928
Variable annuities 166,485 164,267 147,327
144,118
Supplementary contracts 61,062 60,942 60,561
60,289
Traditional annuities 14,970 15,002 8,932
8,414
Other 6,039 6,039 6,006
6,006
---------- ---------- ----------
- ----------
Total $1,518,369 $1,514,642 $1,501,600
$1,428,679
========== ========== ==========
==========
</TABLE>
The Company's other insurance contracts are excluded from
Financial Accounting Standard (FAS-107), "Disclosures about Fair
Value of Financial Instruments", disclosure requirements.
However, the fair values of liabilities under all insurance
contracts are taken into consideration in the Company's overall
management of interest rate risk, which minimizes exposure to
changing interest rates through the matching of investment
maturities with amounts due under insurance contracts.
Additional
data with respect to fair value of the Company's investments is
disclosed in Note 2.
NOTE 12 - PERMITTED STATUTORY ACCOUNTING PRACTICES
The Company, which is domiciled in Ohio, prepares its statutory
financial statements in accordance with accounting practices
prescribed or permitted by the Ohio Insurance Department.
Prescribed statutory accounting practices include a variety of
publications of the NAIC, as well as state laws, regulations, and
general administrative rules. Permitted statutory accounting
practices encompass all accounting practices not so prescribed.
Such practices may differ from state to state, may differ from
company to company within a state, and may change in the future.
The NAIC currently is in the process of recodifying statutory
accounting practices, the result of which is expected to
constitute the only source of "prescribed" statutory accounting
practices. Accordingly, that project, which is expected to be
completed in 1996, will likely change, to some extent, prescribed
statutory accounting practices, and may result in changes to the
accounting practices that the Company uses to prepare its
statutory financial statements.
The Company obtained approval during 1989 from the Ohio Insurance
Department to record the appraisal value of its mineral rights as
an admitted asset. This value is being depleted on the straight
line basis by reducing net investment income over a ten-year
period, and depletion expense amounted to $486,000 in 1995 and
1994. The value of the mineral rights after accumulated
depletion
was $1,945,000 at December 31, 1995.
The Company amortized the goodwill associated with the
acquisition
of MLIC using the straight-line method over a ten year period in
accordance with NAIC guidelines. There is no specific statutory
guidance which addresses the accounting treatment of the costs
associated with the reverse stock split. To be consistent with
the accounting for goodwill, the Company capitalizes all costs
incurred in connection with the MLIC reverse stock split. To be
conservative, the Company writes-off the capitalized costs of the
reverse stock split by charging surplus in the year the costs are
incurred. The capitalized costs associated with the reverse
stock
split which were written off totalled $487,000 in 1994. There
were no capitalized costs in 1995.
The Company changed its method of accounting for the mutual
company surplus tax in 1995. Prior to 1995, the Company
accounted
for the surplus tax on a cash basis, which was computed based on
two components: 1) An estimated tax for the current year based
in
part on the actual mutual company earnings rate for the second
preceding year, plus 2) A true up of the prior year's estimated
tax; computed using the actual differential earnings rate for
prior year. Beginning in 1995, the Company used the accrual
method and estimated the actual differential earnings rate for
the
current year, rather than the actual differential rate for the
second preceding year. The Company believes this change will
better match income-tax expense with pre-tax income, and improve
the conservatism and comparability of its financial statements.
The effect in 1995 of this change in accounting principle was a
$6.3 million charge to surplus which represents the true up
adjustment for 1994.
NOTE 13 - LIABILITY FOR UNPAID CLAIMS AND CLAIM ADJUSTMENT
EXPENSES
Activity in the liability for unpaid accident and health claims
and claim adjustment expense (net of reinsurance) is summarized
as
follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
(000's omitted)
<S> <C> <C>
Balance as of January 1,
net of reinsurance
recoverables of $738 and $446 $ 86,727 $ 84,898
Incurred related to:
Current year 25,182 35,602
Prior years (1,410) (8,669)
-------- --------
Total incurred 23,772 26,933
-------- --------
Paid related to:
Current year 2,811 11,165
Prior years 16,624 13,939
-------- --------
Total paid 19,435 25,104
-------- --------
Balance as of December 31,
net of reinsurance
recoverables of $642 and $738 $ 91,064 $ 86,727
======== ========
</TABLE>
As a result of changes in estimates of insured events in prior
years, the provision of claims and claim adjustment expenses, net
of reinsurance recoveries of $642,000 and $738,000 in 1995 and
1994, respectively, decreased by $1,410,000 in 1995 and
$8,669,000
in 1994 due to higher than expected rates of claim terminations.
<PAGE>
NOTE 14 - SEPARATE ACCOUNTS
Separate and variable accounts held by the Company
represent funds which support Group Annuities (ESP)
and Individual Annuities (Variable). The assets are
carried at market value.
<TABLE>
<CAPTION>
Non Guaranteed
Separate
Accounts
- -----------------
(000's Omitted)
<S> <C>
Premiums, considerations or deposits for
year ended December 31, 1995 $ 217,136
Reserves at December 31, 1995
For accounts with assets at:
Market value $ 717,594
Amortized cost 0
----------
Total Reserves $ 717,594
----------
Reserves subject to discretionary withdrawal:
With market value adjustment $ 717,594
At book value without market value
adjustment and with current surrender
charge of 5% or more 0
At market value 0
At book value without market value
adjustment and with current surrender
charge less than 5% $ 0
----------
Subtotal $ 717,594
----------
Not subject to discretionary withdrawal $ 0
----------
Total $ 717,594
==========
</TABLE>
Following is a reconciliation of net transfers
to the Separate Accounts:
<TABLE>
<CAPTION>
December 31,
1995
- -----------------
(000's Omitted)
<S> <C>
Transfers as reported in the summary
of operations of the Separate
Accounts Statement:
Transfers to the Separate Accounts $ 217,136
Transfers from the Separate Accounts 123,196
----------
Net transfers to the Separate Accounts 93,941
Reconciling adjustments:
Charges for investment management,
administration, and contract guarantees 7,427
Interest and gain on seed money 356
----------
Net transfers to Separate Accounts $ 101,724
==========
</TABLE>
<<PAGE>
<PAGE>
The Union Central Life Insurance Company
STATEMENTS OF CASH FLOWS
STATUTORY BASIS OF ACCOUNTING
<TABLE>
<CAPTION>
December 31
--------------
1995 1994
---- ----
(000's Omitted)
<S> <C> <C>
OPERATING ACTIVITIES
Premium income $ 241,965 $
246,007
Annuity and other fund deposits 398,689
391,305
Net investment income 249,879
231,673
Other income 4,083
4,702
Life and health claims paid (94,375)
(91,517)
Surrender benefits and other
fund withdrawals paid (298,340)
(264,087)
Dividends to policyholders paid (15,176)
(15,099)
Other benefits to policyholders paid (146,825)
(114,448)
Commissions, expenses, and premium
and other taxes paid (110,537)
(117,965)
Transfers to separate accounts (110,063)
(115,806)
Federal income taxes paid (18,995)
(6,312)
Other items, net (394)
(305)
----------
- ----------
Net Cash Provided by Operating Activities 99,911
148,148
----------
- ----------
INVESTING ACTIVITIES
Sale, maturity, or repayment of investments 2,633,275
1,775,029
Purchase of investments (2,733,224)
(1,937,873)
----------
- ----------
Net Cash Used in Investing Activities (99,949)
(162,844)
----------
- ----------
Net Decrease in Cash and
Short-Term Investments (38)
(14,696)
Cash and short-term investments
at beginning of the year 9,347
24,043
----------
- ----------
Cash and Short-Term Investments
at End of the Year $ 9,309 $
9,347
==========
==========<PAGE>
</TABLE>
The accompanying notes are an integral part of the
financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS -
STATUTORY BASIS OF ACCOUNTING-CONTINUED
NOTE 1 - NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
Organization
The Union Central Life Insurance Company (the Company) is a
mutual
life insurance company chartered by the State of Ohio.
At December 31, 1995, the Company owned the following
unconsolidated subsidiaries and affiliates wholly or in part: 1)
Carillon Advisers, Inc., a registered investment advisor company,
wholly owned; 2) Carillon Investments, Inc., a broker-dealer,
wholly owned; 3) Carillon Marketing Agency, Inc., an insurance
agency, wholly owned; 4) Summit High Yield Fund, a high-yield
bond
mutual fund, 97% owned; 5) Manhattan Life Insurance Company, a
mixed charter life insurance company of which the Company owns
73%
of the outstanding guarantee capital shares; and 6) Carillon
Capital Fund, a public allocation mutual fund, 48% owned; and 7)
Carillon S&P Fund, a common stock index fund, wholly owned. The
financial statements reflect the results of the Company's
operations and the appropriate equity in its subsidiaries as
valued at December 31, 1995. See Notes 5 and 6 for further
information about the investments and operations of the
subsidiaries.
Union Central provides financial products and related services,
for the benefits of individual, group, and pension policyholders,
which include:
* Insurance to provide for financial needs resulting from loss
of life or income
* Managing funds accumulated for pre-retirement and retirement
needs
The Company is licensed to do business in all 50 states in the
U.S.
Basis of Presentation
The accompanying financial statements have been prepared in
conformity with statutory accounting practices prescribed or
permitted by the Ohio Insurance Department. Such practices
presently are regarded as generally accepted accounting
principles
(GAAP) for mutual life insurance companies. However, beginning
in
1996, under the requirements of Financial Accounting Standards
Board (FASB) Interpretation 40 (FIN-40), "Applicability of
Generally Accepted Accounting Principles to Mutual Life Insurance
and Other Enterprises", as amended, financial statements prepared
on the basis of statutory accounting practices will no longer be
described as prepared "in conformity with GAAP." As a result the
financial statements included herein would have to be restated to
reflect all applicable authoritative GAAP pronouncements,
including: Financial Accounting Standard (FAS-120), "Accounting
and Reporting by Mutual Life Insurance Enterprises and by
Insurance Enterprises for certain Long-Duration Participating
Contracts - an amendment of FAS-60, 97, and 113 and FIN-40", for
the year ending December 31, 1996. FAS-120 extends the
requirements of FAS-60, "Accounting and Reporting by Insurance
Enterprises", FAS-97, "Accounting and Reporting by Insurance
Enterprises for certain Long-Duration Contracts and for Realized
Gains and Losses from the Sale of Investments", and FAS-113
"Accounting and Reporting for Reinsurance of Short-Duration and
Long-Duration Contracts", to mutual life insurance companies.
FAS-120 is effective for fiscal years beginning after December
15,
1995. The Company has not determined the effect of adoption but
anticipates it having a material impact on the financial
statements.
The preparation of financial statements of insurance companies
requires management to make estimates and assumptions that affect
amounts reported in the financial statements and accompanying
notes. Such estimates and assumptions could change in the future
as more information becomes known, which could impact the amounts
reported and disclosed herein.
Significant accounting practices are as follows:
Investments
Investments are stated at values prescribed by the National
Association of Insurance Commissioners (NAIC) which are as
follows: bonds not backed by other loans are stated at amortized
cost, and loan-backed bonds, collateralized mortgage obligations
and other structured securities are stated at amortized cost
using
the interest method including anticipated prepayments at the date
of purchase. Significant changes in estimated cash flows from
the
original purchase assumptions are reviewed quarterly. Prepayment
assumptions for loan-backed bonds and structured securities were
obtained from broker dealer survey values or internal estimates.
These assumptions are consistent with the current interest rate
and economic environment. The retrospective adjustment method is
used to value all securities except for inverse floating
securities which are valued using the prospective method.
Preferred stocks are stated at cost and investments in stocks of
unconsolidated subsidiaries and affiliates in which the Company
has an interest of 20% or more are reported equal to the
Company's
proportionate share of the equity in the underlying
statutory-basis net assets for insurance subsidiaries plus the
admitted
portion of goodwill, and equal to the Company's proportionate
share of the GAAP-basis net assets for noninsurance subsidiaries.
Goodwill is amortized on a straight-line basis over ten years.
Investment real estate or property is stated on the equity basis.
Mortgage loans are stated at the unpaid principal balance less
unamortized discounts. Short-term investments are investments
with maturities of one year or less at the date of acquisition,
and are valued at cost which approximates market. Policy loans
are stated at the aggregate unpaid principal balance.
Realized investment gains and losses are determined using the
specific identification basis. For securities carried at market
value, unrealized gains and losses resulting from differences
between the cost and carrying value of investments are credited
or
charged directly to unassigned surplus.
As prescribed by the NAIC, the Asset Valuation Reserve (AVR) is
computed in accordance with a prescribed formula and represents a
provision for possible fluctuations in the value of bonds, equity
securities, mortgage loans, real estate, and other invested
assets. The AVR is reported as a liability rather than as a
valuation allowance or an appropriation of surplus and changes to
the AVR are charged or credited directly to unassigned surplus.
Based on a formula prescribed by the NAIC, the Company defers a
portion of realized gains and losses on sales of fixed income
investments, principally fixed maturities, attributable to
changes
in the general level of interest rates and amortizes those
deferrals into income over the remaining period to maturity
according to the Grouped Method, as allowed by the NAIC; the net
deferral is reported as the Interest Maintenance Reserve (IMR) in
the balance sheets.
Real Estate
Real estate is valued at cost less accumulated depreciation. The
value of real estate acquired through foreclosure is recorded at
the lower of cost or net realizable value. Net realizable value
for real estate is determined based upon fair value of a
property,
which may take into consideration a number of factors, including;
(i) discounted cash flows; (ii) sales of comparable properties;
(iii) geographic location of property and related market
conditions; and (iv) disposition costs. Subsequent to
foreclosure, the value of the property is evaluated and written
down, if appropriate, to reflect any additional amounts
considered
unrecoverable upon sale. Depreciation expense is determined by
the declining balance method for acquisitions or renovations
prior
to 1990 and by the straight line method for acquisitions or
renovations beginning in 1990. At the time of the sale, the
difference between the sales price and the carrying value is
recorded as a realized gain or loss.
Real estate owned and occupied by the Company is included in
investments, and investment income and operating expenses include
rent for the Company's occupancy of its owned properties.
Cash and Short - Term Investments
Cash and short-term investments presented on the balance sheet
consists of cash-in-bank, cash-in-transit and commercial paper
that has a maturity date of 90 days or less from the date
acquired.
Nonadmitted Assets
In accordance with statutory requirements, certain assets,
designated as nonadmitted assets, are excluded from the balance
sheet and are charged directly to surplus. Nonadmitted assets
consist primarily of advances to agents, furniture and equipment,
application software, and accrued income on certain securities in
default. The net change in these assets during the year is
reflected as a change in surplus.
Reserves for Life, Accident and Health Policy Benefits
Life, annuity, and accident and health benefit reserves are
developed using accepted actuarial methods and are determined
based on published tables using statutorily specified interest
rates and valuation methods that will provide, in the aggregate,
reserves that are greater than or equal to the minimum amounts
required by the Ohio Insurance Department or guaranteed policy
cash values.
Deposit Funds
The liability for deposit funds is generally established at the
policyholders' accumulated cash values plus amounts providing for
guaranteed interest, less applicable surrender charges.
Dividends to Policyholders
All of the Company's life insurance policies contain dividend
payment provisions which enable the policyholder to participate
in
the earnings of the Company. Dividend payments are approved by
the Company's Board of Directors on an annual basis. Dividends
to
policyholders are reflected in the statements of income at
amounts
estimated to be paid or credited to policyholders during the
subsequent year on the policy anniversary dates. Amounts
recorded
in 1995 and 1994 totalled $15,450,000 and $15,234,000,
respectively. Insurance in force receiving dividends accounted
for 8.50% and 8.45% of total insurance in force at December 31,
1995 and 1994, respectively.
Policy Claims
Policy claim reserves represent the estimated ultimate net cost
of
all reported and unreported claims incurred through December 31,
1995. The reserves for unpaid claims are estimated using
individual case-basis valuations and statistical analyses. These
estimates are subject to the effects of trends in claim severity
and frequency. Although considerable variability is inherent in
such estimates, management believes that the reserves for claims
are adequate. The estimates are continually reviewed and
adjusted
as necessary as experience develops or new information becomes
known; such adjustments are included in current operations.
Separate Accounts
Separate account assets and liabilities reported in the
accompanying financial statements represent funds that are
separately administered, principally for annuity contracts, and
for which the contract holders rather than the Company bears the
investment risk. Separate account contract holders have no claim
against the assets of the general account of the Company.
Separate account investments are carried at market value.
Investment income and gains and losses from these accounts accrue
directly to contract holders and are not included in the
accompanying financial statements.
Recognition of Premium Revenues and Related Costs
For ordinary life insurance contracts and accident and health
insurance contracts, premiums are recognized as revenues when
premiums are due. For universal life insurance contracts and
deposit funds, revenues are recognized when premiums are received
and consists of all premiums received. Commissions and other
costs applicable to the acquisition of new business, primarily
underwriting and policy issue costs, are charged to operations as
incurred.
Reinsurance
Reinsurance premiums and claims are accounted for on bases
consistent with those used in accounting for the original
policies
issued and the terms of the reinsurance contracts. Premiums,
benefits, and the reserves for policy and contract liabilities
are
reported net of reinsured amounts.
Income Taxes
Deferred income taxes are not provided for differences between
the
statutory and taxable income.
Reclassifications
Previously reported amounts for 1994 have in some instances been
reclassified to conform to the 1995 presentation.
NOTE 2 - INVESTMENTS
The cost or amortized cost and estimated fair value of bonds are
summarized as follows:
<TABLE>
<CAPTION>
Cost or Gross Gross
Amortized Unrealized
Unrealized Fair
Cost Gains (Losses)
Value
--------- ----------
- ---------- -----
(000's Omitted)
<S> <C> <C> <C>
<C>
December 31, 1995:
U.S. treasury securities
and obligations of U.S.
government corporations
and agencies $ 60,873 $ 994 $
0 $ 1,867
Public utilities securities 168,415 9,875
(257) 178,033
Corporate securities and other 930,783 56,223
(4,229) 982,777
Mortgage-backed securities
and collateralized mortgage
obligations 1,266,755 27,351
(28,931) 1,265,175
Debt securities issued by
foreign governments 5,260 38
(651) 4,647
---------- ----------
- ---------- ----------
Total $2,432,086 $ 94,481 $
(34,068) $2,492,499
========== ==========
========== ==========
December 31, 1994:
U.S. treasury securities
and obligations of U.S.
government corporations
and agencies $ 23,553 $ 6 $
(262) $ 23,297
Public utilities securities 175,758 655
(9,196) 167,217
Corporate securities and other 719,394 4,425
(39,147) 684,672
Mortgage-backed securities and
collateralized mortgage
obligations 1,496,871 2,949
(190,416) 1,309,404
Debt securities issued by
foreign governments 24,406 239
(4,832) 19,813
---------- ----------
- ---------- ----------
Total $2,439,982 $ 8,274 $
(243,853) $2,204,403
========== ==========
========== =========
</TABLE>
<PAGE>
The majority of the fair values for publicly traded bonds, except
collateralized mortgage obligations (CMO's), were obtained from
an
independent bond pricing service. Fair values for CMO's and
private
placement bonds were obtained from independent securities broker
dealers. The remaining fair values were based on values obtained
from independent securities broker dealers or based on values for
comparable, publicly offered bonds of the same rate, maturity and
quality.
The cost or amortized cost and estimated fair value of the
Company's
investment in fixed maturities at December 31, 1995, by
contractual
maturity, are as follows:
<TABLE>
<CAPTION>
Cost or
Amortized Fair
Cost Value
---- -----
(000's Omitted)
<S> <C> <C>
Due in one year or less $ 5,427 $ 5,479
Due after one year
through five years 117,202 120,413
Due after five years
through ten years 498,740 526,614
Due after ten years 148,519 158,009
---------- ----------
Subtotal 769,888 810,515
Mortgage-backed securities 1,266,755 1,265,175
Other securities with
multiple repayment dates 395,443 416,809
---------- ----------
Total $2,432,086 $2,492,499
========== ==========
</TABLE>
The expected maturities in the foregoing table may differ from
contractual maturities because certain borrowers have the right
to
call or prepay obligations with or without call or prepayment
penalties.
At December 31, 1995 and 1994, the Company held unrated or
less-than-investment grade (defined as level three and lower by
the
NAIC) corporate bonds of $105,560,000 and $92,975,000,
respectively, with an aggregate fair value of $103,858,000 and
$83,505,000, respectively. Those holdings amounted to 4.3% and
3.8%, respectively, of the Company's investments in bonds and
less
than 2.6% and 2.5%, respectively, of the Company's total admitted
assets. The holdings of less-than-investment grade bonds are
widely diversified and of satisfactory quality based on the
Company's investment policies and credit standards.
Proceeds, gross realized gains, and gross realized losses from
the
sales and maturities of investments in debt securities follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
(000's Omitted)
<S> <C> <C>
Proceeds $2,573,360
$1,726,486
Gross realized gains 30,419
26,423
Gross realized losses 43,081
37,623
</TABLE?
At December 31, 1995 and 1994, investments in bonds with an
admitted asset
value of $2,538,000 and $1,846,000, respectively, were on deposit
with state
insurance departments to satisfy regulatory requirements.
The Company sponsors three mutual funds, the investments in which
are carried
at market value and are included in "Preferred and other common
stocks" on
the Balance Sheets, as follows:
</TABLE>
<TABLE>
<CAPTION>
December 31,
1995 1994
---- ----
(000's Omitted)
<S> <C> <C>
Carillon Capital Fund $ 22,900 $ 19,939
Summit High Yield Fund 25,369 24,933
Carillon S & P Fund 305 0
-------- --------
Total $ 48,574 $ 44,872
======== ========
</TABLE>
The Company's equity investments in preferred stock are carried
at cost or
amortized cost. At December 31, 1995, the carrying value was
$2,000,000 and the
fair value was $3,600,000. At December 31, 1994, the carrying
value was
$1,352,000 and the fair value was $2,098,000.
The Company has no material off-balance sheet risk.
Unrealized gains and losses on investments in preferred stocks
and subsidiaries
are reported directly in surplus and do not affect net income.
At December 31,
1995, the Company had gross unrealized gains of $5,636,000 and
gross unrealized
losses of $3,789,000 on these investments.
Mortgage loans are stated at their aggregate unpaid balances on
the balance
sheet, less unamortized discounts. The mortgage loan portfolio is
well
diversified both geographically and by property type, as follows:
<TABLE>
<CAPTION>
December 31, 1995
-----------------------
Principal Percent of
Balance Principal
------- ---------
(000's Omitted)
<S> <C> <C>
Region
- ------
New England and Mid-Atlantic $ 61,245 11.7%
South Atlantic 74,259 14.2
North Central 130,598 25.0
South Central 51,766 9.9
Mountain 67,594 12.9
Pacific 137,798 26.3
-------- ------
Total $523,260 100%
======== ======
Property Type
- -------------
Apartment and residential $113,599 21.7%
Warehouses and industrial 88,431 16.9
Retail and shopping center 160,108 30.6
Offices 156,236 29.9
Other 4,886 .9
-------- -----
Total $523,260 100%
======== =====
</TABLE>
<TABLE>
<CAPTION>
December 31, 1994
-----------------------
Principal Percent of
Balance Principal
------- ---------
(000's Omitted)
<S> <C> <C>
Region
- ------
New England and Mid-Atlantic $ 54,665 12.3%
South Atlantic 54,657 12.3
North Central 117,564 26.5
South Central 39,810 9.0
Mountain 53,699 12.1
Pacific 123,191 27.8
-------- -----
Total $443,586 100.0%
Property Type
Apartment and residential $ 96,477 21.8%
Warehouses and industrial 68,387 15.4
Retail and shopping center 133,396 30.1
Offices 145,199 32.7
Other 127 0.0
-------- -----
Total $443,586 100.0%
======== =====
</TABLE>
At December 31, 1995, the average size of an individual mortgage
loan was approximately $2,265,000. The Company's policy is to
obtain a first mortgage lien and to require a loan to value ratio
of 75% or less at acquisition. At December 31, 1995,
approximately 98.75% of loans were current as to payment terms
and 1.25% were in process of foreclosure. Included in mortgage
loans are two loans with an aggregate principal balance of
$6,520,000 that were non-income producing for the twelve month
period ending December 31, 1995. The Company had mortgage
reserves (the mortgage component of the asset valuation reserve)
of $4,783,000 and $4,989,000 at December 31, 1995 and 1994,
respectively. As of December 31, 1995, the maximum and minimum
rates of interest in the Company's mortgage loan portfolio was
11.00% and 4.00%.
In 1995, the Company issued 67 new commercial loans at the
maximum and minimum rates of interest of 9.875% and 8.00%
totalling $146,057,000. No other categories of mortgage loans
were issued. Fire insurance is carried on all properties covered
by mortgage loans at least equal to the excess of the loan over
the maximum loan which would be permitted by law on the land
without the buildings.
During the fourth quarter of 1994, the Company began
participating in new mortgage fundings with the Manhattan Life
Insurance Company. In 1995, the Company participated in 60 new
originations, with the Company's percentage totalling
$115,540,000 out of a total loan amount of $134,487,000. This
investment strategy will continue in 1996.
At December 31, 1995, the Company held mortgages with interest
more than one year overdue of $4,925,000, with interest due of
$1,789,000. During 1995, the Company reduced interest rates of
outstanding mortgages as follows:
<TABLE>
<CAPTION>
Percentage Reduced Statement Value Number of Loans
------------------ --------------- ---------------
<C> <C> <C>
2.0 - 2.9% $ 2,660,000 1 loan
1.0 - 1.9% 6,998,000 2 loans
0.5 - 0.9% 3,909,000 3 loans
</TABLE>
At December 31, 1995, the statement value of mortgage loans that
were restructured to require payment of principal or interest
based upon the cash flows generated by the property serving as
collateral for the loans or that require a diminutive payment
totalled $12,643,000.
Real estate consists of the home office property, investment real
estate under lease, and foreclosed real estate. The cost of
these properties totalled $82,396,000, accumulated depreciation
as of December 31, 1995 was $20,000,000, and the total net book
value was $62,396,000. The net book value of foreclosed real
estate was $38,982,000 and $36,948,000 at December 31, 1995 and
1994, respectively.
Major categories of net investment income by class of investment
are summarized as follows:
<TABLE>
<CAPTION>
Year Ended December 31
1995 1994
---- ----
(000's Omitted)
<S> <C> <C>
Income:
Fixed maturities $ 188,915 $
179,442
Preferred stocks (16)
31
Common Stock: non-affiliated 1
0
Common stocks in subsidiaries 4,904
5,219
Mortgage loans 43,435
41,814
Real estate * 11,053
9,673
Policy loans and liens 9,618
9,596
Short-term investments 1,808
1,188
Other invested assets 8,393
2,544
Amortization of interest
maintenance reserve 1,734
2,462
----------
- ----------
Gross investment income 269,845
251,969
----------
- ----------
Expenses:
Depreciation 2,374
2,236
Other 11,919
12,859
----------
- ----------
Total investment expenses 14,293
15,095
----------
- ----------
Net investment income $ 255,552 $
236,874
==========
==========
</TABLE>
* Includes amounts for the occupancy of company-owned property of
$3,425,000 in 1995 and 1994.
NOTE 3 - REINSURANCE
In the ordinary course of business, the Company assumes and cedes
reinsurance with other insurers and reinsurers. These
arrangements provide greater diversification of business and
limit
the maximum net loss potential on large or hazardous risks.
These
reinsured risks are treated in the financial statements as risks
for which the Company is not liable. Accordingly, policy
liabilities and accruals, including incurred but not reported
claims, are reported in the financial statements net of
reinsurance assumed and ceded. A contingent liability exists
with
respect to the amount of such reinsurance in the event that the
reinsuring companies are unable to meet their obligations.
Reinsurance of risk does not discharge the primary liability of
the Company, the Company remains contingently liable with respect
to any reinsurance ceded, and this contingency would become an
actual liability in the event that the assuming company becomes
unable to meet its obligation under the reinsurance treaty. The
Company retains the risk for varying amounts of individual or
group insurance written up to a maximum of $1,000,000 on any one
life or $4,000 per month disability risk and reinsures the
balance.
<PAGE>
Reinsurance transactions with other insurance companies for the
years ended December 31, 1995 and 1994 are summarized as follows:
<TABLE>
<CAPTION>
December 31, 1995
--------------------------------------
Direct Assumed Ceded Net
------ ------- ----- ---
(000's Omitted)
<S> <C> <C> <C> <C>
Life insurance in force $26,222,671 $ 96,011 $3,257,271 $23,061,411
=========== ======== ========== ===========
Premiums and other
considerations:
Life $ 197,863 $ 467 $ 16,853 $ 181,477
Annuity 30,626 0 0 30,626
Health 29,715 8,395 6,535 31,575
---------- -------- ---------- -----------
Total $ 258,204 $ 8,862 $ 23,388 $ 243,678
=========== ======== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
December 31, 1994
--------------------------------------
Direct Assumed Ceded Net
------ ------- ----- ---
(000's Omitted)
<S> <C> <C> <C> <C>
Life insurance in force $25,958,093 $103,557 $3,774,748 $22,286,902
=========== ======== ========== ===========
Premiums and other
considerations:
Life $ 199,345 $ 494 $ 15,677 $ 184,162
Annuity 31,425 0 0 31,425
Health 31,268 8,830 9,485 30,613
---------- -------- ---------- -----------
Total $ 262,038 $ 9,324 $ 25,162 $ 246,200
=========== ======== ========== ===========
</TABLE>
Amounts recoverable from reinsurers for paid losses were
$1,005,000 and $720,000 at December 31, 1995 and 1994,
respectively, and they are included in other assets in the
financial statements. Benefits paid or provided were reduced by
$2,657,000 and $4,285,000 at December 31, 1995 and 1994,
respectively, for estimated recoveries under reinsurance
treaties.
The liabilities for future policy benefits were also reduced due
to reinsurance treaties by $11,049,000 and $12,783,000 at
December
31, 1995 and 1994, respectively.
The Company had ceded 22.5% of a block of ordinary life insurance
under a coinsurance/modified coinsurance agreement in 1988. The
amount of life insurance inforce ceded under the agreement was
$160,127,000 and $169,660,000 at December 31, 1995 and 1994,
respectively. The net effect of this reinsurance ceded
transaction was to reduce the Company's gain from operations by
$2,103,000 in 1995 and 1994. This reinsurance agreement will
terminate January 1, 1996. There will be no effect on gain from
operations in 1996.
The Company, nor any of its related parties control, either
directly or indirectly, any reinsurers in which the Company
conducts business, except that the Company does assume an
immaterial amount of business from its insurance subsidiary
Manhattan Life Insurance Company. No policies issued by the
Company have been reinsured with a foreign company which is
controlled, either directly or indirectly, by a party not
primarily engaged in the business of insurance.
The Company has not entered into any reinsurance agreements in
which the reinsurer may unilaterally cancel any reinsurance for
reasons other than nonpayment of premiums or other similar
credits. The Company does not have any reinsurance agreements in
effect in which the amount of losses paid or accrued through
December 31, 1995 would result in a payment to the reinsurer of
amounts which, in the aggregate and allowing for offset of mutual
credits from other reinsurance agreements with the same
reinsurer,
exceed the total direct premiums collected under the reinsured
policies.
<PAGE>
NOTE 4 - FEDERAL INCOME TAX
Federal income taxes are calculated under both the regular tax
system and the alternative minimum tax (AMT) system, and the tax
payable is the higher of the two calculated amounts. In 1995 and
1994, there were no net operating losses available to carry
forward and utilize against taxable income. In the event of
future net losses, the Company has $54,759,000 available in the
carryback period for recoupment. The tax allocated to the
realized capital gains or losses in the Statement of Income and
Changes in Surplus is based on the tax basis realized capital
gains or losses plus bad debt losses.
An analysis of the primary components of the total income tax on
operations follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
(000's Omitted)
<S> <C> <C>
Regular tax on statutory gain
from operations $17,136 $12,611
Surplus tax 2,151 0
DAC premium tax 3,031 3,130
Reserve adjustments 1,206 584
Other, net (793)
(2,676)
------- -------
Total tax expense - operations $22,731 $13,649
======= =======
</TABLE>
The allocation of tax at December 31, 1995 and 1994 is as
follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
(000's Omitted)
<S> <C> <C>
Operations $22,731 $13,649
Net realized capital gains (losses) (992) 194
------- -------
Total tax recorded in the
Statement of Operations 21,739 13,843
Tax allocated to the IMR (3,915)
(4,170)
------- -------
Total federal income tax expense $17,824 $ 9,673
======= =======
</TABLE>
As a mutual life insurance company, Union Central Life is subject
to the differential earnings rate ("DER") calculation or the
surplus tax as it is referred to above. A "tentative" DER amount
is determined annually based upon a rate published by the
Internal Revenue Service ("IRS"). The IRS also publishes a
"recomputed" DER rate in the year following the release of the
tentative rate. These DER's are applied to a mutual life
company's equity base, as adjusted, to determine the reduction in
the company's deduction for policyholders dividends for purposes
of the tax return. The Company changed its policy for purposes
of reporting tax in the financial statements in 1995 from a cash
basis to an accrual basis approach. Under the accrual method,
the surplus tax is calculated by using an estimate of the current
year's DER multiplied by the actual mean tax surplus for the
year. The effect of this change in method is $6.3 million and
has been reported as an adjustment to surplus in 1995.
NOTE 5 - INVESTMENTS IN UNCONSOLIDATED SUBSIDIARIES
In 1991, the Company owned approximately 73% of the outstanding
common stock of Manhattan National Corporation (MNC), an
insurance holding company that owned 100% of the outstanding
guarantee capital shares of The Manhattan Life Insurance Company
(MLIC).
At December 31, 1991, MNC was liquidated. MNC shareholders
received prorata distributions of cash, guarantee capital shares
of MLIC, and an interest in a liquidating trust (MNC Liquidating
Trust). As a result, the Company obtained 73% of the outstanding
guarantee capital shares of MLIC and of the MNC Liquidating
Trust. The investment in MLIC guarantee capital shares is
recorded in the balance sheet at $20,950,071 and $24,739,000,
respectively, at December 31, 1995 and 1994. This value
represents 73% of the statutory-basis net assets of MLIC, plus
unamortized goodwill of $948,000 at December 31, 1994. Goodwill
was fully amortized at December 31, 1995.
Statutory-basis financial information of the Company's insurance
subsidiary (MLIC) is summarized below:
<TABLE>
<CAPTION>
December 31,
1995 1994
---- ----
(000's Omitted)
<S> <C> <C>
Balance Sheets
Investments $ 443,042 $ 437,483
Other assets 15,482 14,897
--------- ---------
Total assets $ 458,524 $ 452,380
========= =========
Insurance reserves $ 413,355 $ 405,262
Liabilities 16,399 14,447
Surplus 28,770 32,671
--------- ---------
Total liabilities and surplus $ 458,524 $ 452,380
========= =========
Statements of Operations
Revenues $ 86,045 $ 79,169
Benefits, expenses and taxes (87,985) (75,365)
Net realized capital losses (162) (2,448)
--------- ---------
Net income (loss) (2,102) 1,356
Other changes in surplus (1,799) 674
--------- ---------
Increase (decrease) in surplus $ (3,901) $ 2,030
--------- ---------
</TABLE>
In 1993, the Company proposed a plan to eliminate the minority
interest in MLIC's guarantee capital shares. A special committee
of independent directors of MLIC has been formed to consider the
fairness of this proposal which involves using a reverse stock
split to reduce all outstanding minority shares to fractional
shares payable in cash. The Company would become the sole
remaining holder of the capital shares. Under the plan, the
Company will return its guarantee capital shares and pay cash in
the amount of $1,823,000 to MLIC in exchange for eight new
guarantee capital shares. It is anticipated the remaining
guarantee capital shares held by minority shareholders will be
returned in exchange for cash of $4,655,000 ($5.125 per share).
The proposal is subject to approval of MLIC's guarantee capital
shareholders, as well as its Board of Directors. The proposal is
currently being reviewed by the New York Insurance Department and
its independent consultants.
The MNC Liquidating Trust was fully liquidated as of September
30, 1994. Assets of the trust consisted primarily of commercial
mortgage loans. Interest income totalling $640,000 from the
trust is included in the Statements of Income and Changes in
Surplus in 1994.
<PAGE>
NOTE 6 - RELATED PARTY TRANSACTIONS
The Company transacts business with certain companies that are
affiliated through common ownership.
The Company provided facilities and certain data processing,
accounting, legal, administrative, and executive services to
various subsidiaries (primarily MLIC) for fees totalling
$4,004,000 and $4,427,000 in 1995 and 1994, respectively. At
December 31, 1995, the Company had a $1,906,000 balance due from
affiliates.
The Company received the following dividends from its
subsidiaries and affiliates in 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
---- ----
(000's Omitted)
<S> <C> <C>
Carillon Advisers, Inc. $ 1,000 $ 1,250
Carillon Investments, Inc. 150 400
Manhattan Life Insurance Company 142 142
Carillon Capital Fund 1,104 2,334
Summit High Yield Fund 2,508 1,093
------- -------
Total $ 4,904 $ 5,219
======= =======
</TABLE>
NOTE 7 - COMMITMENTS AND CONTINGENT LIABILITIES
Leases
The Company leased office space for various field agency offices
with lease terms of varying duration from 1 to 15 years. Some of
these leases include escalation clauses which vary with levels of
operating expense. Rental expense under these leases totalled
$2,420,000 and $2,414,000 in 1995 and 1994, respectively. The
Company also leases furniture and equipment under leases which
expire in 2001. Rental expense under these leases totalled
$671,000 and $638,000 in 1995 and 1994, respectively.
The Company accounts for all leases as operating leases. At
December 31, 1995, the future minimum lease payments for all
noncancelable operating leases are as follows:
<TABLE>
<CAPTION>
Year Amount
---- ------
(000's Omitted)
<C> <C>
1996 $ 2,971
1997 2,419
1998 1,732
1999 1,297
After 1999 3,398
-------
Total $11,817
=======
</TABLE>
The Company leased a portion of its computer software from a bank
under a series of agreements that expired in 1994. Payments
under these leases totalled $2,765,000 in 1994.
Other Commitments
At December 31, 1995, the Company has outstanding agreements to
fund 26 mortgages totalling $38,511,000 in early 1996. In
addition, the Company has committed to invest $15,100,000 in
limited partnerships during the years 1996 to 1999. These
transactions are in the normal course of business for the
Company. The Company had no outstanding liability for borrowed
money as of December 31, 1995.
Litigation
In the normal course of business, the Company is party to various
claims and litigation primarily arising from claims made under
insurance policies and contracts. Those actions are considered
by the Company in estimating the policy and contract liabilities.
The Company's management believes that the resolution of those
actions will not have a material adverse effect on the Company's
financial position or results of operations.
Guaranty Fund Assessments
The economy and other factors have caused an increase in the
number of insurance companies that are under regulatory
supervision. This circumstance is expected to result in an
increase in assessments by state guaranty funds, or voluntary
payments by solvent insurance companies, to fund policyholder
losses or liabilities of insurance companies that become
insolvent. These assessments may be deferred or forgiven under
most guaranty laws if they would threaten an insurers financial
strength and, in certain instances, may be offset against future
premium taxes. The Company provided for future assessments
caused by companies which have become insolvent by charging
$1,074,000 directly to operations in 1994. There were no charges
to operations in 1995. The estimated liability of $1,985,000 at
December 31, 1995 was based on data provided by the National
Organization of Life and Health Insurance Guaranty Associations.
NOTE 8 - ANNUITY RESERVES
The Company's annuity reserves and deposit fund liabilities that
are subject to discretionary withdrawal (with adjustment),
subject to discretionary withdrawal (without adjustment), and not
subject to discretionary withdrawal provisions are summarized as
follows:
<TABLE>
<CAPTION>
December 31, 1995
Amount Percent
------ -------
(000's Omitted)
<S> <C> <C>
Subject to discretionary withdrawal
(with adjustment):
With market value adjustment $ 200,982 8.5%
At book value less surrender charge 135,229 5.8
At market value 717,594 30.5
---------- -----
Total 1,053,805 44.8
Subject to discretionary withdrawal
(without adjustment):
At book value with minimal or
no charge or adjustment 1,139,915 48.4
Not subject to discretionary withdrawal 160,880 6.8
---------- -----
1,300,795 55.2
Total annuity reserves and deposit
fund liabilities - none reinsured $2,354,600* 100%
========== =====
</TABLE>
* Includes: deposit funds ($1,518,369); premiums on deposit
($810) included in other liabilities; annuities and supplementary
contracts with life contingencies ($117,827) included in reserves
for life, accident and health policies; and annuities reported in
the separate account liability ($717,594).
NOTE 9 - EMPLOYEE BENEFITS
The Company has pension plans covering substantially all of its
employees. Pension expense was determined according to
regulations as specified by ERISA and subsequent amendments.
Benefits are based on years of service and the employee's highest
five consecutive years of compensation out of the last ten years.
The amounts funded were $2,178,000 and $1,887,000 in 1995 and
1994, respectively. The Company's policy is to charge
contributions to expense in the year they were contributed or
accrued. Total pension reserves for the Company's employee
pension plan are included in the liability for deposit funds on
the balance sheets.
<PAGE>
A summary of the accumulated benefit obligation as determined by
the Plan's actuaries and plan net assets as of October 1, 1995
are as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
(000's Omitted)
<S> <C> <C>
Accumulated benefit obligation:
Vested $ 34,444 $ 28,241
Nonvested 5,270 5,512
-------- --------
Total $ 39,714 $ 33,753
======== ========
Net assets available for benefits $ 38,062 $ 34,444
======== ========
</TABLE>
It is the Company's intention to fund the unfunded liability by
making additional contributions within the time periods allowed
by the Employee Retirement Individual Savings Association.
The accumulated benefit obligation was calculated based on an
assumed interest rate of 8.5%. Plan assets are primarily
composed of mutual funds and unallocated insurance funds. At
December 31, 1995 and 1994, $33,639,000 and $26,631,000,
respectively, was invested in affiliated mutual funds.
The Company has a contributory savings plan for employees meeting
certain service requirements which qualifies under Section 401(k)
of the Internal Revenue Code. This plan allows eligible employees
to contribute up to certain prescribed limits of their pre-tax
compensation, with the Company matching 50% of the first 6% of
participants' contributions. The Company's matching
contributions to this plan were $1,116,000 and $993,000 for 1995
and 1994, respectively. The value of the plan's assets were
$29,866,000 and $22,852,000 at December 31, 1995 and 1994,
respectively. The assets are held in the deposit fund or under
the variable accounts of a group annuity policy. At December 31,
1995 and 1994, $13,069,000 and $10,204,000, respectively, was
invested in affiliated mutual funds.
NOTE 10 - POSTRETIREMENT BENEFITS
The Company provides certain health care and life insurance
benefits for its eligible retired employees. Substantially all
of the Company's employees may become eligible for these benefits
if they reach normal retirement age while working for the
Company.
Postretirement benefit costs for the years ended December 31,
1995 and 1994 were $621,000 and $765,000, respectively, and
include the expected cost of such benefits for newly eligible or
vested employees, interest cost, and gains and losses arising
from differences between actuarial assumptions and actual
experience. The Company paid benefits in cash of $754,000 and
$822,000, respectively, in 1995 and 1994.
At December 31, 1995 and 1994, the postretirement benefit
obligation for retirees and other fully eligible or vested plan
participants was $15,105,000 and $14,668,00, respectively. Of
these amounts, $9,053,000 and $9,167,000 was unfunded and
included in "Other liabilities" on the Balance Sheets, and
$6,052,000 and $5,501,000 was pre-funded in Voluntary Employee
Benefit Associations (VEBAS) at December 31, 1995 and 1994,
respectively.
The health care cost trend rate assumption has an insignificant
effect on the amounts reported. To illustrate, increasing the
assumed health care cost trend rates by one percentage point in
each year would increase the postretirement benefit obligation as
of December 31, 1995 by $82,000 and the interest cost and
estimated eligibility cost components of the net periodic
postretirement benefit cost by $7,000 and less than $1,000,
respectively.
<PAGE>
NOTE 11 - FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
Cash and short-term investments: The carrying amounts
reported in the balance sheet for these instruments approximate
their fair values.
Investment securities: Fair values for bonds and preferred
stock are based on quoted market prices, where available, which
may differ from NAIC fair values. If quoted market prices are
not available, fair values are estimated using values obtained
from independent securities broker dealers or quoted market
prices of comparable instruments. The fair values of common
stock in Company sponsored mutual funds are based on quoted
market prices and are recognized in the balance sheet.
Mortgage loans: The fair values for commercial and
residential mortgages in good standing are estimated using
discounted cash flow analysis using interest rates currently
being offered for similar loans to borrowers with similar credit
ratings in comparison with actual interest rates and maturity
dates. Fair values for mortgages with potential loan losses are
based on discounted cash flow analysis of the underlying
properties.
Policy loans: Management is unable to ascertain the estimated
life of the policy loan portfolio. Due to the excessive costs
which would be incurred to determine this information, management
considers the estimation of its fair value to be impracticable.
The nature of a policy loan insures that the outstanding loan
balance will be fully recoverable because the balance owed to the
Company is always equal to or lower than the cash value of the
insurance policy owed to the policyholder. Policy loans are
stated at their aggregate unpaid balance on the balance sheet.
Investment contracts: Fair values for the Company's
liabilities under investment-type insurance contracts are
estimated using discounted cash flow calculations, based on
interest rates currently being offered for similar contracts with
maturities consistent with those remaining for the contracts
being valued.
The carrying amounts and fair values of the Company's mortgage
loans are summarized as follows:
<TABLE>
<CAPTION>
December 31, 1995 December 31,
1994
Carrying Fair Carrying
Fair
Amount Value Amount
Value
------ ----- ------
- -----
(000's Omitted)
<S> <C> <C> <C>
<C>
Commercial mortgages $ 523,260 $ 551,235 $ 443,586
$ 446,757
========== ========== ==========
==========
</TABLE>
The carrying amounts and fair values of the Company's
liabilities for investment-type insurance contracts
(deposit funds) are as follows:
<TABLE>
<CAPTION>
December 31, 1995 December 31,
1994
Carrying Fair Carrying
Fair
Amount Value Amount
Value
------ ----- ------
- -----
(000's Omitted)
<S> <C> <C> <C>
<C>
Group annuities $ 923,583 $ 927,544 $ 947,514
$ 937,924
Single premium
deferred annuities 346,230 340,848 331,260
325,928
Variable annuities 166,485 164,267 147,327
144,118
Supplementary contracts 61,062 60,942 60,561
60,289
Traditional annuities 14,970 15,002 8,932
8,414
Other 6,039 6,039 6,006
6,006
---------- ---------- ----------
- ----------
Total $1,518,369 $1,514,642 $1,501,600
$1,428,679
========== ========== ==========
==========
</TABLE>
The Company's other insurance contracts are excluded from
Financial Accounting Standard (FAS-107), "Disclosures about Fair
Value of Financial Instruments", disclosure requirements.
However, the fair values of liabilities under all insurance
contracts are taken into consideration in the Company's overall
management of interest rate risk, which minimizes exposure to
changing interest rates through the matching of investment
maturities with amounts due under insurance contracts.
Additional
data with respect to fair value of the Company's investments is
disclosed in Note 2.
NOTE 12 - PERMITTED STATUTORY ACCOUNTING PRACTICES
The Company, which is domiciled in Ohio, prepares its statutory
financial statements in accordance with accounting practices
prescribed or permitted by the Ohio Insurance Department.
Prescribed statutory accounting practices include a variety of
publications of the NAIC, as well as state laws, regulations, and
general administrative rules. Permitted statutory accounting
practices encompass all accounting practices not so prescribed.
Such practices may differ from state to state, may differ from
company to company within a state, and may change in the future.
The NAIC currently is in the process of recodifying statutory
accounting practices, the result of which is expected to
constitute the only source of "prescribed" statutory accounting
practices. Accordingly, that project, which is expected to be
completed in 1996, will likely change, to some extent, prescribed
statutory accounting practices, and may result in changes to the
accounting practices that the Company uses to prepare its
statutory financial statements.
The Company obtained approval during 1989 from the Ohio Insurance
Department to record the appraisal value of its mineral rights as
an admitted asset. This value is being depleted on the straight
line basis by reducing net investment income over a ten-year
period, and depletion expense amounted to $486,000 in 1995 and
1994. The value of the mineral rights after accumulated
depletion
was $1,945,000 at December 31, 1995.
The Company amortized the goodwill associated with the
acquisition
of MLIC using the straight-line method over a ten year period in
accordance with NAIC guidelines. There is no specific statutory
guidance which addresses the accounting treatment of the costs
associated with the reverse stock split. To be consistent with
the accounting for goodwill, the Company capitalizes all costs
incurred in connection with the MLIC reverse stock split. To be
conservative, the Company writes-off the capitalized costs of the
reverse stock split by charging surplus in the year the costs are
incurred. The capitalized costs associated with the reverse
stock
split which were written off totalled $487,000 in 1994. There
were no capitalized costs in 1995.
The Company changed its method of accounting for the mutual
company surplus tax in 1995. Prior to 1995, the Company
accounted
for the surplus tax on a cash basis, which was computed based on
two components: 1) An estimated tax for the current year based
in
part on the actual mutual company earnings rate for the second
preceding year, plus 2) A true up of the prior year's estimated
tax; computed using the actual differential earnings rate for
prior year. Beginning in 1995, the Company used the accrual
method and estimated the actual differential earnings rate for
the
current year, rather than the actual differential rate for the
second preceding year. The Company believes this change will
better match income-tax expense with pre-tax income, and improve
the conservatism and comparability of its financial statements.
The effect in 1995 of this change in accounting principle was a
$6.3 million charge to surplus which represents the true up
adjustment for 1994.
NOTE 13 - LIABILITY FOR UNPAID CLAIMS AND CLAIM ADJUSTMENT
EXPENSES
Activity in the liability for unpaid accident and health claims
and claim adjustment expense (net of reinsurance) is summarized
as
follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
(000's omitted)
<S> <C> <C>
Balance as of January 1,
net of reinsurance
recoverables of $738 and $446 $ 86,727 $ 84,898
Incurred related to:
Current year 25,182 35,602
Prior years (1,410) (8,669)
-------- --------
Total incurred 23,772 26,933
-------- --------
Paid related to:
Current year 2,811 11,165
Prior years 16,624 13,939
-------- --------
Total paid 19,435 25,104
-------- --------
Balance as of December 31,
net of reinsurance
recoverables of $642 and $738 $ 91,064 $ 86,727
======== ========
</TABLE>
As a result of changes in estimates of insured events in prior
years, the provision of claims and claim adjustment expenses, net
of reinsurance recoveries of $642,000 and $738,000 in 1995 and
1994, respectively, decreased by $1,410,000 in 1995 and
$8,669,000
in 1994 due to higher than expected rates of claim terminations.
NOTE 14 - SEPARATE ACCOUNTS
Separate and variable accounts held by the Company represent
funds
which support Group Annuities (ESP) and Individual Annuities
(Variable). The assets are carried at market value.
<TABLE>
<CAPTION>
Non Guaranteed
Separate
Accounts
- -----------------
(000's Omitted)
<S> <C>
Premiums, considerations or deposits for
year ended December 31, 1995 $ 217,136
Reserves at December 31, 1995
For accounts with assets at:
Market value $ 717,594
Amortized cost 0
----------
Total Reserves $ 717,594
----------
Reserves subject to discretionary withdrawal:
With market value adjustment $ 717,594
At book value without market value
adjustment and with current surrender
charge of 5% or more 0
At market value 0
At book value without market value
adjustment and with current surrender
charge less than 5% $ 0
----------
Subtotal $ 717,594
----------
Not subject to discretionary withdrawal $ 0
----------
Total $ 717,594
==========
</TABLE>
Following is a reconciliation of net transfers to the Separate
Accounts:
<TABLE>
<CAPTION>
December 31,
1995
- -----------------
(000's
Omitted)
<S> <C>
Transfers as reported in the summary
of operations of the Separate
Accounts Statement:
Transfers to the Separate Accounts $ 217,136
Transfers from the Separate Accounts 123,196
----------
Net transfers to the Separate Accounts 93,941
Reconciling adjustments:
Charges for investment management,
administration, and contract guarantees 7,427
Interest and gain on seed money 356
----------
Net transfers to Separate Accounts $ 101,724
==========
</TABLE>
<PAGE>
CARILLON FUND, INC.
- ----------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
May 1, 1996
This Statement of Additional Information is not a
prospectus. Much of the information contained in this Statement
of Additional Information expands upon subjects discussed in the
Prospectus. Accordingly, this Statement should be read in
conjunction with Carillon Fund, Inc.'s ("Fund") current
Prospectus, dated May 1, 1996, which may be obtained by calling
the Fund at (513) 595-2600, or writing the Fund at P.O. Box
40409, Cincinnati, Ohio 45240-0409.
TABLE OF CONTENTS
Page
Investment Policies (7) 2
Money Market Instruments and Investment Techniques 2
Certain Risk Factors Relating to High-Yield, High-Risk Bonds 6
Futures Contracts 6
Options 7
Lending Portfolio Securities 11
Investment Restrictions 12
Portfolio Turnover 15
Management of the Fund (13) 16
Directors and Officers 16
Investment Adviser 18
Payment of Expenses 19
Advisory Fee 20
Investment Advisory Agreement 20
Administration 21
Service Agreement 22
Securities Activities of Adviser 22
Determination of Net Asset Value (14) 23
Purchase and Redemption of Shares (14) 23
Taxes (15) 24
Portfolio Transactions and Brokerage 24
General Information (2) 25
Capital Stock 25
Voting Rights 26
Additional Information 27
Independent Auditors 27
( ) indicates page on which the corresponding section appears in
the Prospectus.
UCCF 515 4-96<PAGE>
<PAGE>
CARILLON FUND, INC.
- --------------------------------------------------------
INVESTMENT POLICIES
The following specific policies supplement the Fund's
"Investment Objectives and Policies" set forth in the Prospectus.
Money Market Instruments and Investment Techniques
Certain money market instruments and investment techniques
are described below. Money market instruments may be purchased
extensively by the Capital Portfolio. They may also be purchased
by the Equity, Bond and S&P 500 Index ("Index Portfolio")
Portfolios to a very limited extent (to invest otherwise idle
cash) or on a temporary basis (if invested in money market
instruments for defensive purposes).
Small Bank Certificates of Deposit. The Fund may invest in
certificates of deposit issued by commercial banks, savings
banks, and savings and loan associations having assets of less
than $1 billion, provided that the principal amount of such
certificates is insured in full by the Federal Deposit Insurance
Corporation ("FDIC"). The FDIC presently insures accounts up to
$100,000, but interest earned above such amount is not insured by
the FDIC.
Repurchase Agreements. A repurchase agreement is an instrument
under which the purchaser (i.e., one of the Portfolios) acquires
ownership of the obligation (the underlying security) and the
seller (the "issuer" of the repurchase agreement) agrees, at the
time of sale, to repurchase the obligation at a mutually agreed
upon time and price, thereby determining the yield during the
purchaser's holding period. This results in a fixed rate of
return insulated from market fluctuations during such period.
The underlying securities will only consist of securities in
which the respective Portfolio may otherwise invest. Repurchase
agreements usually are for short periods, normally under one
week, and are considered to be loans under the Investment Company
Act of 1940. Repurchase agreements will be fully collateralized
at all times and interest on the underlying security will not be
taken into account for valuation purposes. The investments by a
Portfolio in repurchase agreements may at times be substantial
when, in the view of the Adviser, unusual market, liquidity, or
other conditions warrant.
If the issuer of the repurchase agreement defaults and does
not repurchase the underlying security, the Portfolio might incur
a loss if the value of the underlying security declines, and the
Fund might incur disposition costs in liquidating the underlying
security. In addition, if the issuer becomes involved in
bankruptcy proceedings, the Portfolio may be delayed or prevented
from obtaining the underlying security for its own purposes. In
order to minimize any such risk, the Portfolio will only engage
in repurchase agreements with recognized securities dealers and
banks determined to present minimal credit risk by the Adviser,
under the direction and supervision of the Board of Directors.
U.S. Government Obligations. Securities issued and guaranteed as
to principal and interest by the United States Government include
a variety of Treasury securities, which differ only in their
interest rates, maturities and times of issuance. Treasury bills
have a maturity of one year or less. Treasury notes have
maturities of one to seven years and Treasury bonds generally
have a maturity of greater than five years.
Government Agency Securities. Government agency securities that
are permissible investments consist of securities either issued
or guaranteed by agencies or instrumentalities of the United
States Government. Agencies of the United States Government
which issue or guarantee obligations include, among others,
Export-Import Banks of the United States, Farmers Home
Administration, Federal Housing Administration, Government
National Mortgage Association ("GNMA"), Maritime Administration,
Small Business Administration and The Tennessee Valley Authority.
Obligations of instrumentalities of the United States Government
include securities issued or guaranteed by, among others, the
Federal National Mortgage Association ("FNMA"), Federal Home Loan
Banks, Federal Home Loan Mortgage Corporation ("FHLMC"), Federal
Intermediate Credit Banks, Banks for Cooperatives, and the U.S.
Postal Service. Some of these securities, such as those
guaranteed by GNMA, are supported by the full faith and credit of
the U.S. Treasury; others, such as those issued by The Tennessee
Valley Authority, are supported by the right of the issuer to
borrow from the Treasury; while still others, such as those
issued by the Federal Land Banks, are supported only by the
credit of the instrumentality. The Fund's primary usage of these
types of securities will be GNMA certificates and FNMA and FHLMC
mortgage-backed obligations which are discussed in more detail
below.
Certificates of Deposit. Certificates of deposit are generally
short-term, interest-bearing negotiable certificates issued by
banks or savings and loan associations against funds deposited in
the issuing institution.
Time Deposits. Time Deposits are deposits in a bank or other
financial institution for a specified period of time at a fixed
interest rate for which a negotiable certificate is not received.
Bankers' Acceptance. A bankers' acceptance is a time draft drawn
on a commercial bank by a borrower usually in connection with an
international commercial transaction (to finance the import,
export, transfer or storage of goods). The borrower is liable
for payment as well as the bank, which unconditionally guarantees
to pay the draft at its face amount on the maturity date. Most
acceptances have maturities of six months or less and are traded
in secondary markets prior to maturity.
Commercial Paper. Commercial paper refers to short-term,
unsecured promissory notes issued by corporations to finance
short-term credit needs. Commercial paper is usually sold on a
discount basis and has a maturity at the time of issuance not
exceeding nine months.
Corporate Debt Securities. Corporate debt securities with a
remaining maturity of less than one year tend to become extremely
liquid and are traded as money market securities. Such issues
with between one and two years remaining to maturity tend to have
greater liquidity and considerably less market value fluctuations
than longer-term issues.
When-issued and Delayed-delivery Securities. From time to time,
in the ordinary course of business, each Portfolio of the Fund
may purchase securities on a when-issued or delayed-delivery
basis i.e., delivery and payment can take place a month or more
after the date of the transactions. The securities so purchased
are subject to market fluctuation and no interest accrues to the
purchaser during this period. At the time a Portfolio makes the
commitment to purchase securities on a when-issued or
delayed-delivery basis, the Fund will record the transaction and
thereafter reflect the value, each day, of such security in
determining the net asset value of such Portfolio. At the time
of delivery of the securities, the value may be more or less than
the purchase price. Each Portfolio will also establish a
segregated account with the Fund's custodian bank in which it
will maintain cash or cash equivalents or other Portfolio
securities equal in value to commitments for such when-issued or
delayed-delivery securities.
GNMA Certificates GNMA certificates are mortgage-backed
securities representing part ownership of a pool of mortgage
loans on which timely payment of interest and principal is
guaranteed by the full faith and credit of the U.S. government.
GNMA certificates differ from typical bonds because principal is
repaid monthly over the term of the loan rather than returned in
a lump sum at maturity. Because both interest and principal
payments (including prepayments) on the underlying mortgage loans
are passed through to the holder of the certificate, GNMA
certificates are called "pass-through" securities.
Although the mortgage loans in the pool have maturities of
up to 30 years, the actual average life of the GNMA certificates
typically will be substantially less because the mortgages are
subject to normal principal amortization and may be prepaid prior
to maturity. Prepayment rates vary widely and may be affected by
changes in market interest rates. In periods of falling interest
rates, the rate of prepayment tends to increase, thereby
shortening the actual average life of the GNMA certificates.
Conversely, when interest rates are rising, the rate of
prepayment tends to decrease, thereby lengthening the actual
average life of the GNMA certificates. Accordingly, it is not
possible to predict accurately the average life of a particular
pool. Reinvestment of prepayments may occur at higher or lower
rates that the original yield on the certificates. Due to the
prepayment feature and the need to reinvest prepayments of
principal at current rates, GNMA certificates can be less
effective than typical bonds of similar maturities at "locking-
in" yields during periods of declining interest rates, although
they may have comparable risks of decline in value during periods
of rising interest rates.
FNMA and FHLMC Mortgage-Backed Obligations The Federal National
Mortgage Association ("FNMA"), a federally chartered and
privately owned corporation, issues pass-through securities
representing an interest in a pool of conventional mortgage
loans. FNMA guarantees the timely payment of principal and
interest but this guarantee is not backed by the full faith and
credit of the U.S. government. The Federal Home Loan Mortgage
Corporation ("FHLMC"), a corporate instrumentality of the United
States, issues participation certificates that represent an
interest in a pool of conventional mortgage loans. FHLMC
guarantees the timely payment of interest and the ultimate
collection of principal and maintains reserves to protect holders
against losses due to default, but the certificates are not
backed by the full faith and credit of the U.S. government. As is
the case with GNMA certificates, the actual maturity of and
realized yield on particular FNMA and FHLMC pass-through
securities will vary based on the prepayment experience of the
underlying pool of mortgages.
Mortgage-Related Securities Each Portfolio of the Fund other
than the S&P 500 Index Portfolio may invest in collateralized
mortgage obligations ("CMOs") or mortgage-backed bonds issued by
financial institutions such as commercial banks, savings and loan
associations, mortgage banks and securities broker-dealers (or
affiliates of such institutions established to issue these
securities). CMOs are obligations fully collateralized directly
or indirectly by a pool of mortgages on which payments of
principal and interest are dedicated to payment of principal and
interest on the CMOs. Payments on the underlying mortgages (both
interest and principal) are passed through to the holders,
although not necessarily on a pro rata basis, on the same
schedule as they are received. Mortgage-backed bonds are general
obligations of the issuer fully collateralized directly or
indirectly by a pool of mortgages. The mortgages serve as
collateral for the issuer's payment obligations on the bonds, but
interest and principal payments on the mortgages are not passed
through either directly (as with GNMA certificates and FNMA and
FHLMC pass-through securities) or on a modified basis (as with
CMOs). Accordingly, a change in the rate of prepayments on the
pool of mortgages could change the effective maturity of a CMO
but not that of a mortgage-backed bond (although, like many
bonds, mortgage-backed bonds may be callable by the issuer prior
to maturity).
Each Portfolio of the Fund other than the S&P 500 Index
Portfolio may also invest in a variety of more risky CMOs,
including interest only ("IOs"), principal only ("POs"), inverse
floaters, or a combination of these securities. Stripped
mortgage-backed securities ("SMBS") are usually structured with
several classes that receive different proportions of the
interest and principal distributions from a pool of mortgage
assets. A common type of SMBS will have one class receiving all
of the interest from the mortgage assets (an IO), while the other
class will receive all of the principal (a PO). However, in some
instances, one class will receive some of the interest and most
of the principal while the other class will receive most of the
interest and the remainder of the principal. If the underlying
mortgage assets experience greater-than-anticipated or less-than-
anticipated prepayments of principal, the Fund may fail to fully
recoup its initial investment or obtain its initially assumed
yield on some of these securities. The market value of the class
consisting entirely of principal payments generally is unusually
volatile in response to changes in interest rates. The yields on
classes of SMBS that have more uncertain timing of cash flows are
generally higher than prevailing market yields on other
mortgage-backed securities because there is a greater risk that
the
initial investment will not be fully recouped or received as
planned over time.
Each Portfolio of the Fund other than the S&P 500 Index
Portfolio may invest in another CMO class known as leveraged
inverse floating rate debt instruments ("inverse floaters"). The
interest rate on an inverse floater resets in the opposite
direction from the market rate of interest to which the inverse
floater is indexed. An inverse floater may be considered to be
leveraged to the extent that its interest rate varies by a
magnitude that exceeds the magnitude of the change in the index
rate of interest. The higher degree of leverage inherent in
inverse floaters is associated with greater volatility in their
market values. Accordingly, the duration of an inverse floater
may exceed its stated final maturity.
Certain CMOs may be deemed to be illiquid securities for
purposes of the Fund's 10% limitation on investments in such
securities. The investment adviser limits investments in more
risky CMOs (IOs, POs, inverse floaters) to no more than 5% of its
total assets.
<PAGE>
Certain Risk Factors Relating to High-Yield, High-Risk Bonds
The descriptions below are intended to supplement the
material in the Prospectus regarding high-yield, high-risk bonds.
Sensitivity to Interest Rates and Economic Changes. High-yield
bonds are very sensitive to adverse economic changes and
corporate developments and their yields will fluctuate over time.
During an economic downturn or substantial period of rising
interest rates, highly leveraged issuers may experience financial
stress that would adversely affect their ability to service their
principal and interest payment obligations, to meet projected
business goals, and to obtain additional financing. If the
issuer of a bond defaulted on its obligations to pay interest or
principal or entered into bankruptcy proceedings, the Portfolio
may incur losses or expenses in seeking recovery of amounts owed
to it. In addition, periods of economic uncertainty and changes
can be expected to result in increased volatility of market
prices of high-yield bonds and the Portfolio's net asset value.
Payment Expectations. High-yield bonds may contain redemption or
call provisions. If an issuer exercised these provisions in a
declining interest rate market, the Portfolio would have to
replace the security with a lower-yielding security, resulting in
a decreased return for investors. Conversely, a high-yield
bond's value will decrease in a rising interest rate market, as
will the value of the Portfolio's assets. If the Portfolio
experiences unexpected net redemptions, this may force it to sell
high-yield bonds without regard to their investment merits,
thereby decreasing the asset base upon which expenses can be
spread and possibly reducing the Portfolio's rate of return.
Liquidity and Valuation. There may be little trading in the
secondary market for particular bonds, which may affect adversely
the Portfolio's ability to value accurately or dispose of such
bonds. Adverse publicity and investor perceptions, whether or
not based on fundamental analysis, may decrease the values and
liquidity of high-yield bonds, especially in a thin market.
Futures Contracts
For hedging purposes, including protecting the price or
interest rate of securities that the Portfolio intends to buy,
the S&P 500 Index Portfolio may enter into futures contracts that
relate to securities in which it may directly invest and indices
comprised of such securities and may purchase and write call and
put options on such contracts. As a temporary investment
strategy until the Index Portfolio reaches $25 million in net
assets, the Index Portfolio may invest up to 100% of its assets
in such futures and/or options contracts. Thereafter, the
Portfolio may invest up to 20% of its assets in such futures
and/or options contracts. The Index Portfolio does not intend to
enter into futures contracts that are not traded on exchanges or
boards of trade.
A financial futures contract is a contract to buy or sell a
specified quantity of financial instruments such as U.S. Treasury
bills, notes and bonds, commercial paper and bank certificates of
deposit or the cash value of a financial instrument index at a
specified future date at a price agreed upon when the contract is
made. A stock index futures contract is a contract to buy or
sell specified units of a stock index at a specified future date
at a price agreed upon when the contract is made. The value of a
unit is based on the current value of the contract index. Under
such contracts no delivery of the actual stocks making up the
index takes place. Rather, upon expiration of the contract,
settlement is made by exchanging cash in an amount equal to the
difference between the contract price and the closing price of
the index at expiration, net of variation margin previously paid.
Substantially all futures contracts are closed out before
settlement date or called for cash settlement. A futures
contract is closed out by buying or selling an identical
offsetting futures contract. Upon entering into a futures
contract, the Portfolio is required to deposit an initial margin
with the Custodian for the benefit of the futures broker. The
initial margin serves as a "good faith" deposit that the
Portfolio will honor their futures commitments. Subsequent
payments (called "variation margin"} to and from the broker are
made on a daily basis as the price of the underlying investment
fluctuates. In the event of the bankruptcy of the futures broker
that holds margin on behalf of the Portfolio, the Portfolio may
be entitled to return of margin owed to it only in proportion to
the amount received by the broker's other customers. The Adviser
will attempt to minimize this risk by monitoring the
creditworthiness of the futures brokers with which the Portfolio
does business.
Because the value of index futures depends primarily on the
value of their underlying indexes, the performance of the
broad-based contracts will generally reflect broad changes in
common
stock prices. However, because the Portfolio may not be invested
in precisely the same proportion as the S&P 500, it is likely
that the price changes of the Portfolio's index futures positions
will not match the price changes of the Portfolio's other
investments.
Options on futures contracts give the purchaser the right to
assume a position at a specified price in a futures contract at
any time before expiration of the option contract.
Options
The Bond and Capital Portfolios may sell (write) listed
options on U.S. Treasury Securities and options on contracts for
the future delivery of U.S. Treasury Securities as a means of
hedging the value of such securities owned by the Portfolio. The
S&P 500 Index Portfolio may enter into futures contracts that
relate to securities in which it may directly invest and indices
comprised of such securities and may purchase and write call and
put options on such contracts.
As a writer of a call option, a Portfolio may terminate its
obligation by effecting a closing purchase transaction. This is
accomplished by purchasing an option of the same series as the
option previously written. However, once the Portfolio has been
assigned an exercise notice, the Portfolio will be unable to
effect a closing purchase transaction. There can be no assurance
that a closing purchase transaction can be effected when the
Portfolio so desires.
The Portfolio will realize a profit from a closing
transaction if the price of the transaction is less than the
premium received from writing the option; the Portfolio will
realize a loss from a closing transaction if the price of the
transaction is more than the premium received from writing the
option. Since the market value of call options generally
reflects increases in the value of the underlying security, any
loss resulting from the closing transaction may be wholly or
partially offset by unrealized appreciation of the underlying
security. Conversely, any gain resulting from the closing
transaction may be wholly or partially offset by unrealized
depreciation of the underlying security. The principal factors
affecting the market value of call options include supply and
demand, the current market price and price volatility of the
underlying security, and the time remaining until the expiration
date.
Although the Bond and Capital Portfolios will write only
options on U.S. Treasury Securities and options on futures
contracts with respect to such securities which are traded on a
national exchange or Board of Trade, and the S&P 500 Index
Portfolio will write only options on securities among the
Standard & Poor's 500 Composite Stock Price Index (the "S&P
500"*) and options of futures contracts with respect to such
securities, there is no assurance that a liquid secondary market
will exist for any particular option. In the event it is not
possible to effect a closing transaction, the Portfolio will not
be able to sell the underlying security, until the option expires
or the option is exercised by the holder.
* The S&P 500 is an unmanaged index of stocks comprised of 500
industrial, financial, utility and transportation companies.
"Standard & Poor's(R)", "S&P(R)", "S&P 500(R)", "Standard &
Poor's 500(R)", "Standard & Poor's Depositary Receipts(R)",
"SPDRs(R)", and "500" are trademarks of McGraw-Hill, Inc. The
Carillon S&P 500 Index Portfolio is not sponsored, endorsed, sold
or promoted by Standard & Poor's and Standard & Poor's makes no
representation regarding the advisability of investing in the
Portfolio or in SPDRs.
The Portfolio will effect a closing transaction to realize a
profit on an outstanding call option, to prevent an underlying
security from being called, to permit the sale of an underlying
security prior to the expiration date of the option, or to allow
for the writing of another call option on the same underlying
security with either a different exercise price or expiration
date or both.
Possible reasons for the absence of a liquid secondary
market on an exchange include the following: (a) insufficient
trading interest in certain options; (b) restrictions on
transactions imposed by an exchange; (c) trading halts,
suspensions or other restrictions imposed with respect to
particular classes or series of options or underlying securities;
(d) inadequacy of the facilities of an exchange or the Clearing
Corporation to handle trading volume; or (e) a decision by one or
more exchanges to discontinue the trading of options or impose
restrictions on types of orders. There can be no assurance that
higher than anticipated trading activity or order flow or other
unforeseen events might not at times render the trading
facilities inadequate and thereby result in the institution of
special trading procedures or restrictions which could interfere
with the Portfolio's ability to effect closing transactions.
The Bond and Capital Portfolios may write call options on
futures contracts on U.S. Treasury Securities as a hedge against
the adverse effect of expected increases in interest rates on the
value of Portfolio securities, in order to establish more
definitely the effective return on securities held by the
Portfolio. The S&P 500 Index Portfolio will write call options
on futures contracts on the S&P 500 or securities included
therein only for hedging purposes to protect the price of
securities it intends to buy and when such transactions enable it
to correlate its investment performance more closely to that of
the S&P 500 than would a direct purchase of securities included
in the S&P 500. The Portfolios will not write options on futures
contracts for speculative purposes.
A futures contract on a debt security is a binding
contractual commitment which will result in an obligation to make
or accept delivery, during a specified future time, of securities
having standardized face value and rate of return. Selling a
futures contract on debt securities (assuming a short position)
would give the Portfolio a legal obligation and right as seller
to make future delivery of the security against payment of the
agreed price.
Upon the exercise of a call option on a futures contract,
the writer of the option (the Portfolio) is obligated to sell the
futures contract (to deliver a long position to the option
holder) at the option exercise price, which will presumably be
lower than the current market price of the contract in the
futures market. However, as with the trading of futures, most
participants in the options markets do not seek to realize their
gains or losses by exercise of their option rights. Instead, the
holder of an option will usually realize a gain or loss by buying
or selling an offsetting option at a market price that will
reflect an increase or a decrease from the premium originally
paid. Nevertheless, if an option on a futures contract written
by the Portfolio is exercised, the Portfolio intends to either
close out the futures contract by purchasing an offsetting
futures contract, or deliver the underlying securities
immediately, in order to avoid assuming a short position. There
can be no assurance that the Portfolio will be able to enter into
an offsetting transaction with respect to a particular contract
at a particular time, but it may always deliver the underlying
security.
As a writer of options on futures contracts, the Portfolio
will receive a premium but will assume a risk of adverse movement
in the price of the underlying futures contract. If the option
is not exercised, the Portfolio will gain the amount of the
premium, which may partially offset unfavorable changes in the
value of securities held in the Portfolio. If the option is
exercised, the Portfolio might incur a loss in the option
transaction which would be reduced by the amount of the premium
it has received.
While the holder or writer of an option on a futures
contract may normally terminate its position by selling or
purchasing an offsetting option, the Portfolio's ability to
establish and close out options positions at fairly established
prices will be subject to the maintenance of a liquid market.
The Portfolio will not write options on futures contracts unless,
in the Adviser's opinion, the market for such options has
sufficient liquidity that the risks associated with such options
transactions are not at unacceptable levels.
Risks. While options will be sold in an effort to reduce certain
risks, those transactions themselves entail certain other risks.
Thus, while the Portfolio may benefit from the use of options,
unanticipated changes in interest rates or security price
movements may result in a poorer overall performance for the
Portfolio than if it had not entered into any options
transactions. The price of U.S. Treasury Securities futures are
volatile and are influenced, among other things, by changes in
prevailing interest rates and anticipation of future interest
rate changes. The price of S&P 500 futures are also volatile and
are influenced, among other things, by changes in conditions in
the securities markets in general. .
In the event of an imperfect correlation between a futures
position (and a related option) and the Portfolio position which
is intended to be protected, the desired protection may not be
obtained. The correlation between changes in prices of futures
contracts and of the securities being hedged is generally only
approximate. The amount by which such correlation is imperfect
depends upon many different circumstances, such as variations in
speculative market demand for futures and for debt securities
(including technical influences in futures trading) and
differences between the financial instruments being hedged and
the instruments underlying the standard options on futures
contracts available for trading.
Due to the imperfect correlation between movements in the
prices of futures contracts and movements in the prices of the
underlying debt securities, the price of a futures contract may
move more than or less than the price of the securities being
hedged. If the price of the future moves less than the price of
the securities which are the subject of the hedge, the hedge will
not be fully effective and if the price of the securities being
hedged has moved in an unfavorable direction, the Portfolio would
be in a better position than if it had not hedged at all. If the
price of the futures moves more than the price of the security,
the Portfolio will experience either a gain or loss on the option
on the future which will not be completely offset by movements in
the price of the securities which are the subject of the hedge.
The market prices of futures contracts and options thereon
may be affected by various factors. If participants in the
futures market elect to close out their contracts through
offsetting transactions rather than meet margin deposit
requirements, distortions in the normal relationship between the
debt securities and futures markets could result. Price
distortions could also result if investors in futures contracts
make or take delivery of underlying securities rather than engage
in closing transactions. This could occur, for example, if there
is a lack of liquidity in the futures market. From the point of
view of speculators, the deposit requirements in the futures
markets are less onerous than margins requirements in the
securities markets; accordingly, increased participation by
speculators in the futures market could cause temporary price
distortions. A correct forecast of interest rate trends by the
adviser may still not result in a successful hedging transaction
because of possible price distortions in the futures market and
because of the imperfect correlation between movements in the
prices of debt securities and movements in the prices of futures
contracts. A well-conceived hedge may be unsuccessful to some
degree because of market behavior or unexpected interest rate
trends.
Limitations on the Use of Options on Futures. The Portfolio will
only write options on futures that are traded on exchanges and
are standardized as to maturity date and underlying financial
instrument. The principal exchanges in the United States for
trading options on Treasury Securities are the Board of Trade of
the City of Chicago and the Chicago Mercantile Exchange. These
exchanges and trading options on futures are regulated under the
Commodity Exchange Act by the Commodity Futures Trading
Commission ("CFTC").
It is the Fund's opinion that it is not a "commodity pool"
as defined under the Commodity Exchange Act and in accordance
with rules promulgated by the CFTC.
The Portfolio will not write options on futures contracts
for which the aggregate premiums exceed 5% of the fair market
value of the Portfolio's assets, after taking into account
unrealized profits and unrealized losses on any such contracts it
has entered into (except that, in the case of an option that is
in-the-money at the time of purchase, the in-the-money amount
generally may be excluded in computing the 5%).
All of the futures options transactions employed by the
Portfolio will be BONA FIDE hedging transactions, as that term is
used in the Commodity Exchange Act and has been interpreted and
applied by the CFTC. To ensure that its futures options
transactions meet this standard, the Fund will enter into such
transactions only for the purposes and with the intent that CFTC
has recognized to be appropriate.
Custodial Procedures and Margins. The Fund's Custodian acts as
the Fund's escrow agent as to securities on which the Fund has
written call options and with respect to margin which the Fund
must deposit in connection with the writing of call options on
futures contracts. The Clearing Corporation (CC) will release
the securities or the margin from escrow on the expiration of the
call, or when the Fund enters into a closing purchase
transaction. In this way, assets of the Fund will never be
outside the control of the Fund's custodian, although such
control might be limited by the escrow receipts issued.
At the time the Portfolio sells a call option on a contract
for future delivery of U.S. Treasury Securities ("Treasury
futures contract"), it is required to deposit with its custodian,
in an escrow account, a specified amount of cash or U.S.
Government securities ("initial margin"). The account will be in
the name of the CC. The amount of the margin generally is a
small percentage of the contract amount. The margin required is
set by the exchange on which the contract is traded and may be
modified during the term of the contract. The initial margin is
in the nature of a performance bond or good faith deposit, and it
is released from escrow upon termination of the option assuming
all contractual obligations have been satisfied. The Portfolio
will earn interest income on its initial margin deposits.
In accordance with the rules of the exchange on which the
option is traded, it might be necessary for the Portfolio to
supplement the margin held in escrow. This will be done by
placing additional cash or U.S. Government securities in the
escrow account. If the amount of required margin should
decrease, the CC will release the appropriate amount from the
escrow account.
The assets in the margin account will be released to the CC
only if the Portfolio defaults or fails to honor its commitment
to the CC and the CC represents to the custodian that all
conditions precedent to its right to obtain the assets have been
satisfied.
Lending Portfolio Securities
The S&P 500 Index Portfolio may lend portfolio securities
with a value up to 10% of its total assets. Such loans may be
terminated at any time. The Portfolio will continuously maintain
as collateral cash or obligations issued by the U.S. government,
its agencies or instrumentalities in an amount equal to not less
than 100% of the current market value (on a daily marked-to-
market basis) of the loaned securities plus declared dividends
and accrued interest. While portfolio securities are on loan,
the borrower will pay the Portfolio any income accruing thereon,
and the Portfolio may invest or reinvest the collateral
(depending on whether the collateral is cash or U.S. Government
securities) in portfolio securities, thereby earning additional
income. Loans are typically subject to termination by the
Portfolio in the normal settlement time, currently five business
days after notice, or by the borrower on one day's notice.
Borrowed securities must be returned when the loan is terminated.
Any gain or loss in the market price of the borrowed securities
which occurs during the term of the loan inures to the Portfolio
and its shareholders. The Portfolio may pay reasonable finders',
borrowers', administrative, and custodial fees in connection with
a loan of its securities. The Adviser will review and monitor
the creditworthiness of such borrowers on an ongoing basis.
The S&P 500 Index Portfolio may invest in Standard & Poor's
Depositary Receipts(R) ("SPDRs(R)"). SPDRs are units of
beneficial interest in a unit investment trust, representing
proportionate undivided interests in a portfolio of securities in
substantially the same weighting as the component common stocks
of the S&P 500. While the investment objective of such a unit
investment trust is to provide investment results that generally
correspond to the price and yield performance of the component
common stocks of the S&P 500, there can be no assurance that this
investment objective will be met fully. As SPDRs are securities
issued by an investment company, non-fundamental restriction (6)
below restricts purchases of SPDRs to 5% of the Portfolio's
assets.
INVESTMENT RESTRICTIONS
The Fund has adopted the following fundamental restrictions
relating to the investment of assets of the Portfolios and other
investment activities. These are fundamental policies and may
not be changed without the approval of holders of the majority of
the outstanding voting shares of each Portfolio affected (which
for this purpose means the lesser of: [i] 67% of the shares
represented at a meeting at which more than 50% of the
outstanding shares are represented, or [ii] more than 50% of the
outstanding shares). A change in policy affecting only one
Portfolio may be effected with the approval of the majority of
the outstanding voting shares of that Portfolio only. The Fund's
fundamental investment restrictions provide that no Portfolio of
the Fund is allowed to:
(1) Issue senior securities (except that each Portfolio may
borrow money as described in restriction [9] below).
(2) With respect to 75% of the value of its total assets,
invest more than 5% of its total assets in securities (other than
securities issued or guaranteed by the United States Government
or its agencies or instrumentalities) of any one issuer.
(3) Purchase more than either: (i) 10% in principal amount
of the outstanding debt securities of an issuer, or (ii) 10% of
the outstanding voting securities of an issuer, except that such
restrictions shall not apply to securities issued or guaranteed
by the United States Government or its agencies or
instrumentalities.
(4) Invest more than 25% of its total assets in the
securities of issuers primarily engaged in the same industry.
For purposes of this restriction, gas, gas transmission,
electric, water, and telephone utilities each will be considered
a separate industry. This restriction does not apply to
obligations of banks or savings and loan associations or to
obligations issued or guaranteed by the United States Government,
its agencies or instrumentalities.
(5) Purchase or sell commodities, commodity contracts, or
real estate, except that each Portfolio may purchase securities
of issuers which invest or deal in any of the above, and except
that each Portfolio may invest in securities that are secured by
real estate. This restriction does not apply to obligations
issued or guaranteed by the United States Government, its
agencies or instrumentalities or to futures contracts or options
purchased by the S&P 500 Index Portfolio in compliance with
non-fundamental restrictions [8 and 9] below.
(6) Purchase any securities on margin (except that the Fund
may obtain such short-term credit as may be necessary for the
clearance of purchases and sales of portfolio securities) or make
short sales of securities or maintain a short position.
(7) Make loans, except through the purchase of obligations
in private placements or by entering into repurchase agreements
(the purchase of publicly traded obligations not being considered
the making of a loan).
(8) Lend its securities, except that the S&P 500 Index
Portfolio may lend securities in compliance with non-fundamental
restriction [7] below.
(9) Borrow amounts in excess of 10% of its total assets,
taken at market value at the time of the borrowing, and then only
from banks (and, in the case of the S&P 500 Index Portfolio by
entering into reverse repurchase agreements) as a temporary
measure for extraordinary or emergency purposes, or to meet
redemption requests that might otherwise require the untimely
disposition of securities, and not for investment or leveraging.
(10) Mortgage, pledge, hypothecate or in any manner
transfer, as security for indebtedness, any securities owned or
held by such Portfolio.
(11) Underwrite securities of other issuers except insofar
as the Fund may be deemed an underwriter under the Securities Act
of 1933 in selling shares of each Portfolio and except as it may
be deemed such in a sale of restricted securities.
(12) Invest more than 10% of its total assets in repurchase
agreements maturing in more than seven days, "small bank"
certificates of deposit that are not readily marketable, and
other illiquid investments.
The Fund has also adopted the following additional
investment restrictions that are not fundamental and may be
changed by the Board of Directors without shareholder approval.
Under these restrictions, no Portfolio of the Fund may:
(1) Invest in securities of foreign issuers except American
Depository Receipts, securities listed for trading on the New
York or American Stock Exchange, and Canadian bank short-term
obligations.
(2) Participate on a joint (or a joint and several) basis in
any trading account in securities (but this does not prohibit the
"bunching" of orders for the sale or purchase of Portfolio
securities with the other Portfolios or with other accounts
advised or sponsored by the Adviser or any of its affiliates to
reduce brokerage commissions or otherwise to achieve best overall
execution).
(3) Purchase or retain the securities of any issuer, if, to
the knowledge of the Fund, officers and directors of the Fund,
the Adviser or any affiliate thereof each owning beneficially
more than 1/2% of one of the securities of such issuer, own in
the aggregate more than 5% of the securities of such issuer.
(4) Purchase or sell interests in oil, gas, or other mineral
exploration or development programs, or real estate mortgage
loans, except that each Portfolio may purchase securities of
issuers which invest or deal in any of the above, and except that
each Portfolio may invest in securities that are secured by real
estate mortgages. This restriction does not apply to obligations
or other securities issued or guaranteed by the United States
Government, its agencies or instrumentalities.
(5) Invest in companies for the purpose of exercising
control (alone or together with the other Portfolios).
(6) Purchase securities of other investment companies with
an aggregate value in excess of 5% of the Portfolio's total
assets, except in connection with a merger, consolidation,
acquisition or reorganization, or by purchase in the open market
of securities of closed-end investment companies where no
underwriter or dealer's commission or profit, other than
customary broker's commission, is involved, and only if
immediately thereafter not more than 10% of such Portfolio's
total assets, taken at market value, would be invested in such
securities.
The Fund has also adopted the following additional
investment restrictions that are not fundamental and may be
changed by the Board of Directors without shareholder approval.
Under these restrictions:
The S&P 500 Index Portfolio of the Fund may not:
(7) Lend portfolio securities with an aggregate value of
more than 10% of its total assets.
(8) Invest more than 20% of its assets in futures contracts
and/or options on futures contracts, except as a temporary
investment strategy until the Index Portfolio reaches $25 million
in net assets, the Index Portfolio may invest up to 100% of its
assets in such futures and/or options contracts.
(9) Invest in options unless no more than 5% of its assets
is paid for premiums for outstanding put and call options
(including options on futures contracts) and unless no more than
25% of the Portfolio's assets consist of collateral for
outstanding options.
If a percentage restriction (for either fundamental or
nonfundamental policies) 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 of portfolio securities
or amount of net assets shall not be considered a violation.
In addition to the investment restrictions described above,
the Fund will comply with restrictions contained in any current
insurance laws in order that the assets of The Union Central Life
Insurance Company's ("Union Central") separate accounts may be
invested in Fund shares.
PORTFOLIO TURNOVER
Each Portfolio has a different expected annual rate of
Portfolio turnover, which is calculated by dividing the lesser of
purchases or sales of Portfolio securities during the fiscal year
by the monthly average of the value of the Portfolio's securities
(excluding from the computation all securities, including
options, with maturities at the time of acquisition of one year
or less). A high rate of Portfolio turnover generally involves
correspondingly greater brokerage commission expenses, which must
be borne directly by the Portfolio. Turnover rates may vary
greatly from year to year as well as within a particular year and
may also be affected by cash requirements for redemptions of each
Portfolio's shares and by requirements which enable the Fund to
receive certain favorable tax treatments. The Portfolio turnover
rates will, of course, depend in large part on the level of
purchases and redemptions of shares of each Portfolio. Higher
Portfolio turnover can result in corresponding increases in
brokerage costs to the Portfolios of the Fund and their
shareholders. However, because rate of Portfolio turnover is not
a limiting factor, particular holdings may be sold at any time,
if investment judgment or Portfolio operations make a sale
advisable.
The annual Portfolio turnover rates for the Equity Portfolio
were 34.33% and 40.33%, respectively, for 1995 and 1994. The
annual Portfolio turnover rates for the Bond Portfolio were
111.01% and 70.27%, respectively, for 1995 and 1994. The annual
Portfolio turnover rates for the Capital Portfolio were 43.83%
and 41.89%, respectively, for 1995 and 1994. The annual turnover
rate for the S&P 500 Index Portfolio is expected to be less than
50%.
<PAGE>
MANAGEMENT OF THE FUND
Directors and Officers
The directors and executive officers of the Fund and their
principal occupations during the past five years are set forth
below. Unless otherwise noted, the address of each executive
officer and director is 1876 Waycross Road, Cincinnati, Ohio
45240.
<TABLE>
<CAPTION>
Position(s)
Name, Address with Principal
Occupation(s)
and Age the Fund During Past Five
Years
- ------------- -----------
- ----------------------
<S> <C> <C>
George M. Callard, M.D. Director Cardiovascular
Surgeon and
3021 Erie Avenue Professor of
Clinical
Cincinnati, Ohio 45208 Surgery, University
of
(Age 62) Cincinnati
George L. Clucas* Director, Senior Vice
President,
(52) President and Union Central;
Director,
Chief Executive President and Chief
Officer Executive Officer,
Carillon Advisers,
Inc.
("Adviser");
Director,
Carillon
Investments,
Inc. ("CII")
Theodore H. Emmerich Director Consultant; former
Partner,
1201 Edgecliff Place Ernst & Whinney,
Accountants
Cincinnati, Ohio 45206
(69)
James M. Ewell Director Retired Senior Vice
9000 Indian Ridge Road President and
Director,
Cincinnati, Ohio 45243 The Procter and
Gamble
(80) Company
Richard H. Finan Director Attorney at Law;
11137 Main Street President Pro
Tempore
Cincinnati, Ohio 45241 of the Ohio State
Senate
(61)
Jean Patrice Director Former Executive
Director,
Harrington, S.C. Cincinnati Youth
3217 Whitfield Avenue Collaborative;
President
Cincinnati, Ohio 45220 Emeritus (formerly,
(70) President) College
of
Mount St. Joseph
John H. Jacobs* Director Senior Vice
President,
(49) Union Central; prior
to
December, 1992,
Officer
and employee, Union
Central
Charles W. McMahon Director Retired Senior Vice
2031 W. Galbraith Road, #E President and
Director,
Cincinnati, Ohio 45239 Union Central
(77)
Harry Rossi* Director Director Emeritus,
Union
641 Flagstaff Drive Central; Director,
Cincinnati, Ohio 45215 Adviser; former
Chairman,
(76) President and Chief
Executive Officer,
Union Central
Stephen R. Hatcher Senior Vice Senior Vice
President and
(53) President Chief Financial
Officer, Union
Central
John F. Labmeier Vice President Second Vice
President,
(47) and Secretary Associate General
Counsel and
Assistant
Secretary, Union
Central;
Vice President and
Secretary,
CII; Secretary,
Adviser
Thomas G. Knipper Controller Assistant
Controller,
(38) Union Central; prior
to
July, 1995,
Treasurer of
The Gateway Trust
and Vice
President and
Controller
of Gateway Advisers,
Inc.;
prior to April 1992,
Senior Manager of
Deloitte & Touche
Joseph A. Tucker Treasurer Assistant to the
Treasurer,
(61) Union Central; prior
to
October 1992,
Officer
and employee, Union
Central
John M. Lucas Assistant Assistant Counsel
and
(45) Secretary Assistant to the
Secretary,
Union Central; prior
to
October, 1992,
Officer
and employee, Union
Central
</TABLE>
* Messrs. Clucas, Jacobs and Rossi are considered to be
"interested persons" of the Fund (within the meaning of the
Investment Company Act of 1940) because of their affiliation with
the Adviser.
Each of the directors also serves as a trustee of Carillon
Investment Trust.
All directors who are not "interested persons" of the
Company are members of the Audit Committee.
As of the date of this Statement of Additional Information,
officers and directors of the Fund do not own any of the
outstanding shares of the Fund. Directors who are not officers
or employees of Union Central or Adviser are paid a fee plus
actual out-of-pocket expenses by the Fund for each meeting of the
Board of Directors attended. Total fees and expenses incurred
for 1995 were $41,944.<PAGE>
<TABLE>
<CAPTION>
Compensation Table
(1) (2) (3) (4) (5)
Name of Aggregate Pension or Estimated Total
Person, Compensation Retirement Retirement
Compensation
Position From Benefits Benefits From
Registrant
Registrant Accrued As Upon and
Fund
Part of Retirement
Complex*
Fund Expenses Paid
to
Directors
<S> <C> <C> <C> <C>
George M. Callard, 7,300** -- --
10,600
M.D.
Director
George L. Clucas N/A N/A N/A N/A
Director
Theodore H. Emmerich 7,500 -- --
10,800
Director
James M. Ewell 7,300 -- --
10,600
Director
Richard H. Finan 7,300 -- --
10,600
Director
Jean Patrice
Harrington, S.C. 7,300 -- --
10,600
Director
John H. Jacobs N/A N/A N/A N/A
Director
Charles W. McMahon 7,300** -- --
10,600
Director
Harry Rossi N/A N/A N/A N/A
Director
</TABLE>
* Each of the Directors also serves as a Trustee of Carillon
Investment Trust.
** Messrs. Callard and McMahon have been deferring their
compensation each year. As of December 31, 1995, the total
amount deferred, including interest, was as follows: Dr. Callard
- -$52,325; Mr. McMahon - $23,988.
Investment Adviser
The Fund has entered into an Investment Advisory Agreement
("Agreement") with Carillon Advisers, Inc. ("Adviser") whose
principal business address is 1876 Waycross Road, Cincinnati,
Ohio 45240 (P.O. Box 40407, Cincinnati, Ohio 45240). The
Adviser was incorporated under the laws of Ohio on August 18,
1986, and is a wholly-owned subsidiary of Union Central.
Executive officers and directors of the Adviser who are
affiliated with the Fund are George L. Clucas, President and
Chief Executive Officer; Thomas G. Knipper, Treasurer; and John
F. Labmeier, Secretary.
Pursuant to the Agreement, the Fund has retained the Adviser
to manage the investment of the Fund's assets, including the
placing of orders for the purchase and sale of Portfolio
securities. The Adviser is at all times subject to the direction
and supervision of the Board of Directors of the Fund.
The Adviser continuously furnishes an investment program for
each Portfolio, is responsible for the actual management of each
Portfolio and has responsibility for making decisions to buy,
sell or hold any particular security. The Adviser obtains and
evaluates such information and advice relating to the economy,
securities markets, and specific securities as it considers
necessary or useful to continuously manage the assets of the
Portfolios in a manner consistent with their investment
objectives, policies and restrictions. The Adviser considers
analyses from various sources, makes necessary investment
decisions and effects transactions accordingly. The Adviser also
performs certain administrative functions for the Fund. The
Adviser may utilize the advisory services of subadvisers for one
or more of the Portfolios.
Payment of Expenses
Under the terms of the Agreement, in addition to managing
the Fund's investments, the Adviser, at its expense, maintains
certain of the Fund's books and records (other than those
provided by Firstar Trust Company, by agreement) and furnishes
such office space, facilities, equipment, and clerical help as
the Fund may reasonably require in the conduct of business. In
addition, the Adviser pays for the services of all executive,
administrative, clerical, and other personnel, including officers
of the Fund, who are employees of Union Central. The Adviser
also bears the cost of telephone service, heat, light, power and
other utilities provided to the Fund. Expenses not expressly
assumed by the Adviser under the Agreement will be paid by the
Fund.
Each Portfolio pays all other expenses incurred in its
operation and a portion of the Fund's general administration
expenses allocated on the basis of the asset size of the
respective Portfolios. Expenses other than the Adviser's fee
that are borne directly and paid individually by a Portfolio
include, but are not limited to, brokerage commissions, dealer
markups, expenses incurred in the acquisition of Portfolio
securities, transfer taxes, transaction expenses of the
custodian, pricing services used by only one or more Portfolios,
and other costs properly payable by only one or more Portfolios.
Expenses which are allocated on the basis of size of the
respective Portfolios include custodian (portion based on asset
size), dividend disbursing agent, transfer agent, bookkeeping
services (except annual per Portfolio base charge), pricing,
shareholder's and directors' meetings, directors' fees, proxy
statement and Prospectus preparation, registration fees and
costs, fees and expenses of legal counsel not including employees
of the Adviser, membership dues of industry associations,
postage, insurance premiums including fidelity bond, and all
other costs of the Fund's operation properly payable by the Fund
and allocable on the basis of size of the respective Portfolios.
The Adviser will pay any expenses of the S&P 500 Index Portfolio,
other than the advisory fee for that Portfolio, to the extent
that such expenses exceed .30% of that Portfolio's net assets.
Depending on the nature of a legal claim, liability or
lawsuit, litigation costs, payment of legal claims or liabilities
and any indemnification relating thereto may be directly
applicable to a Portfolio or allocated on the basis of the size
of the respective Portfolios. The directors have determined that
this is an appropriate method of allocation of expenses.
The Agreement also provides that if the total operating
expenses of the Fund, exclusive of the advisory fee, taxes,
interest, brokerage fees and certain legal claims and liabilities
and litigation and indemnification expenses, as described in the
Agreement, for any fiscal year exceed 1.0% of the average daily
net assets of the Fund, the Adviser will reimburse the Fund for
such excess, up to the amount of the advisory fee for that year.
Such amount, if any, will be calculated daily and credited on a
monthly basis.
Advisory Fee
As full compensation for the services and facilities
furnished to the Fund and expenses of the Fund assumed by the
Adviser, the Fund pays the Adviser monthly compensation
calculated daily as described on page 11 of the Prospectus. The
compensation after all waivers for each Portfolio was as
follows:
<TABLE>
<CAPTION>
Equity Bond Capital S&P 500 Index
Year Portfolio Portfolio Portfolio Portfolio
<S> <C> <C> <C> <C>
1995 $1,108,596 $314,237 $913,378 -0-
1994 $924,881 $273,068 $766,664 N/A
1993 $750,859 $232,954 $593,388 N/A
</TABLE>
There is no assurance that the Portfolios will reach a net
asset level high enough to realize a reduction in the rate of the
advisory fee. Any reductions in the rate of advisory fee will be
applicable to each Portfolio separately in accordance with the
schedule of fees applicable to each Portfolio.
Investment Advisory Agreement
The Investment Advisory Agreement was initially approved by
the Fund's Board of Directors, including a majority of the
directors who are not interested persons of the Adviser, on March
22, 1984. Unless earlier terminated as described below, the
Agreement will continue in effect from year to year if approved
annually: (a) by the Board of Directors of the Fund or by a
majority of the outstanding shares of the Fund, including a
majority of the outstanding shares of each Portfolio; and (b) by
a majority of the directors who are not parties to such contract
or interested persons (as defined by the Investment Company Act
of 1940) of any such party. The Agreement is not assignable and
may be terminated without penalty by the Fund on 60 days notice,
and by the Adviser on 90 days notice. On March 25, 1996, the
Agreement was approved for continuance for one (1) year by the
Board of Directors by unanimous vote of those present, including
a majority of the directors who are not parties to such contract
or interested persons of any such party.
On March 21, 1990, the Board of Directors took steps to
activate the Capital Portfolio of the Fund by authorizing the
issuance of shares of that Portfolio to a separate account of
Union Central. The Board of Directors also approved an amendment
to the Investment Advisory Agreement so as to make the Agreement
applicable to the Capital Portfolio and to specify the advisory
fee payable by it. The Board determined that the amendment did
not affect the interests of the classes of Fund shares other than
Capital Portfolio shares and that therefore only the holders of
Capital Portfolio shares were entitled to vote on the amendment.
On May 1, 1990, the Union Central separate account invested $15.2
million in the Capital Portfolio in exchange for 1,390,516 shares
at a price of $10.95 per share. Union Central, as legal owner of
the Capital Portfolio shares purchased by its separate account
and as sole shareholder of the Capital Portfolio, approved the
Agreement as amended.
On September 15, 1995, the Board of Directors took steps to
activate the S&P 500 Index Portfolio of the Fund by authorizing
the issuance of shares of that Portfolio. On December 13, 1995,
the Board of Directors also approved an amendment to the
Investment Advisory Agreement so as to make the Agreement
applicable to the Index Portfolio and to specify the advisory fee
payable by it. The Board determined that the amendment did not
affect the interests of the classes of Fund shares other than
Index Portfolio shares and that therefore only the holders of
Index Portfolio shares were entitled to vote on the amendment.
The sole shareholder of the Index Portfolio approved the
Agreement as amended on January 3, 1996.
The Investment Advisory Agreement provides that the Adviser
shall not be liable to the Fund or to any shareholder for any
error of judgment or mistake of law or for any loss suffered by
the Fund or by any shareholder in connection with matters to
which the Investment Advisory Agreement relates, except a loss
resulting from willful misfeasance, bad faith, gross negligence,
or reckless disregard on the part of the Adviser in the
performance of its duties thereunder. In the case of
administration services, the Adviser will be held to a normal
standard of liability.
The Agreement in no way restricts the Adviser from acting as
investment manager or adviser to others.
If the question of continuance of the Agreement (or adoption
of any new Agreement) is presented to shareholders, continuance
(or adoption) with respect to a Portfolio shall be effective only
if approved by a majority vote of the outstanding voting
securities of that Portfolio. If the shareholders of any one or
more of the Portfolios should fail to approve the Agreement, the
Adviser may nonetheless serve as an adviser with respect to any
Portfolio whose shareholders approved the Agreement.
Administration
The Adviser is responsible for providing certain
administrative functions to the Fund and has entered into an
Administration Agreement with Carillon Investments, Inc. ("CII")
under which CII furnishes substantially all of such services for
an annual fee of .20% of the average net assets of the Bond,
Capital and Equity Portfolios, and .05% of the average net assets
of the S&P 500 Index Portfolio. The fee is borne by the Adviser,
not the Fund. Under the Administration Agreement, CII is
obligated to provide persons for clerical, accounting,
bookkeeping, administrative and other similar services, to supply
office space, stationery and office supplies, and to prepare tax
returns, reports to stockholders, and filings with the Securities
and Exchange Commission and state securities authorities.
Service Agreement
Under a Service Agreement between the Adviser and Union
Central, Union Central has agreed to make available to the
Adviser the services of certain employees of Union Central on a
part-time basis for the purpose of better enabling the Adviser to
fulfill its obligations to the Fund under the Agreement.
Pursuant to the Service Agreement, the Adviser shall reimburse
Union Central for all costs allocable to the time spent on the
affairs of the Adviser by the employees provided by Union
Central. In performing their services for the Adviser pursuant
to the Service Agreement, the specified employees shall report
and be solely responsible to the officers and directors of the
Adviser or persons designated by them. Union Central shall have
no responsibility for the investment recommendations or decisions
of the Adviser. The obligation of performance under the
Agreement is solely that of the Adviser and Union Central
undertakes no obligation in respect thereto except as otherwise
expressly provided in the Service Agreement. The Service
Agreement was approved by the shareholders of the Equity, Bond
and Capital Portfolios at a meeting held on March 20, 1992. The
sole shareholder of the S&P 500 Index Portfolio approved the
Service Agreement on January 3, 1996.
Securities Activities of Adviser
Securities held by the Fund may also be held by Union
Central or by other separate accounts or mutual funds for which
the Adviser acts as an adviser. Because of different investment
objectives or other factors, a particular security may be bought
by Union Central or by the Adviser or for one or more of its
clients, when one or more other clients are selling the same
security. If purchases or sales of securities for one or more of
the Fund's Portfolios or other clients of the Adviser or Union
Central arise for consideration at or about the same time,
transactions in such securities will be made, insofar as
feasible, for the Fund's Portfolios, Union Central, and other
clients in a manner deemed equitable to all. To the extent that
transactions on behalf of more than one client of the Adviser
during the same period may increase the demand for securities
being purchased or the supply of securities being sold, there may
be an adverse effect on price.
On occasions when the Adviser deems the purchase or sale of
a security to be in the best interests of the Fund as well as
other accounts or companies, it may, to the extent permitted by
applicable laws and regulations, but will not be obligated to,
aggregate the securities to be sold or purchased for the Fund (or
for two or more Portfolios) with those to be sold or purchased
for other accounts or companies in order to obtain more favorable
execution and low brokerage commissions. In that event,
allocation of the securities purchased or sold, as well as the
expenses incurred in the transaction, will be made by the Adviser
in the manner it considers to be most equitable and consistent
with its fiduciary obligations to the Fund Portfolio(s) and to
such other accounts or companies. In some cases this procedure
may adversely affect the size of the position obtainable for a
Portfolio.
<PAGE>
DETERMINATION OF NET ASSET VALUE
As described on page 12 of the Prospectus, the net asset
value of shares of the Fund is determined once daily, Monday
through Friday as of the close of regular trading on the New York
Stock Exchange (normally 4:00 p.m., Eastern Time), when there are
purchases or redemptions of Fund shares, except: (i) when the New
York Stock Exchange is closed (currently New Year's Day,
President's Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day, and Christmas Day); (ii) the day
following Thanksgiving Day; (iii) December 24, 1996, and (iv) any
day on which changes in the value of the Portfolio securities of
the Fund will not materially affect the current net asset value
of the shares of a Portfolio.
Securities held by the Portfolios, except for money market
instruments maturing in 60 days or less, will be valued as
follows: Securities which are traded on stock exchanges
(including securities traded in both the over-the-counter market
and on exchange), or listed on the NASDAQ National Market System,
are valued at the last sales price as of the close of the New
York Stock Exchange on the day the securities are being valued,
or, lacking any sales, at the closing bid prices. Securities
traded only in the over-the-counter market are valued at the last
bid prices quoted by brokers that make markets in the securities
at the close of trading on the New York Stock Exchange.
Securities and assets for which market quotations are not readily
available are valued at fair value as determined in good faith by
or under the direction of the Board of Directors.
Money market instruments with a remaining maturity of 60
days or less are valued on an amortized cost basis. Under this
method of valuation, the instrument is initially valued at cost
(or in the case of instruments initially valued at market value,
at the market value on the day before its remaining maturity is
such that it qualifies for amortized cost valuation); thereafter,
the Fund assumes a constant proportionate amortization in value
until 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 that would be
received upon sale of the instrument.
PURCHASE AND REDEMPTION OF SHARES
The Fund offers its shares, without sales charge, only to
Union Central and its separate accounts. It is possible that at
some later date the Fund may offer shares to other investors.
The Fund is required to redeem all full and fractional
shares of the Fund for cash at the net asset value per share.
Payment for shares redeemed will generally be made within seven
days after receipt of a proper notice of redemption. The right
to redeem shares or to receive payment with respect to any
redemption may only be suspended for any period during which: (a)
trading on the New York Stock Exchange is restricted as
determined by the Securities and Exchange Commission or such
exchange is closed for other than weekends and holidays; (b) an
emergency exists, as determined by the Securities and Exchange
Commission, as a result of which disposal of Portfolio securities
or determination of the net asset value of a Portfolio is not
reasonably practicable; and (c) the Securities and Exchange
Commission by order permits postponement for the protection of
shareholders.
TAXES
Each Portfolio of the Fund will be treated as a separate
entity for federal income tax purposes. Each Portfolio has
qualified and has elected to be taxed as a "regulated investment
company" under the provisions of Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"). If a Portfolio
qualifies as a "regulated investment company" and complies with
the provisions of the Code by distributing substantially all of
its net income (both ordinary income and capital gain), the
Portfolio will be relieved from federal income tax on the amounts
distributed.
In order to qualify as a regulated investment company, in
each taxable year each Portfolio must, among other things: (a)
derive at least 90 percent of its gross income from dividends,
interest, payments with respect to loans of securities, and gains
from the sale or other disposition of stocks or securities or
foreign currencies (subject to the authority of the Secretary of
the Treasury to exclude certain foreign currency gains) or other
income (including, but not limited to, gains from options,
futures, or forward contracts which are ancillary to the
Portfolio's principal business of investing in stocks or
securities or options and futures with respect to stocks or
securities) derived with regard to its investing in such stocks,
securities or currencies; and (b) derive less than 30 percent of
its gross income from gains (without deduction for losses)
realized on the sale or other disposition of any of the following
held for less than three months: securities, options, futures or
forward contracts (other than options, futures or forward
contracts on foreign currencies) or certain foreign currencies.
In order to meet the requirements noted above, the Fund may be
required to defer disposing of certain options, futures contracts
and securities beyond the time when it might otherwise be
advantageous to do so. These requirements may also affect the
Fund's investments in various ways, such as by limiting the
Fund's ability to:(a) sell investments held for less than three
months; (b) effect closing transactions on options written less
than three months previously; (c) write options for a period of
less than three months; and (d) write options on securities held
for less than the long-term capital gains holding period. For a
discussion of tax consequences to owners of annuity contracts,
see the Prospectus for those contracts.
The discussion of "Taxes" in the Prospectus, in conjunction
with the foregoing, is a general and abbreviated summary of the
applicable provisions of the Code and Treasury Regulations
currently in effect as interpreted by the Courts and the Internal
Revenue Service.
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Adviser is primarily responsible for the investment
decisions of each Portfolio, including decisions to buy and sell
securities, the selection of brokers and dealers to effect the
transactions, the placing of investment transactions, and the
negotiation of brokerage commissions, if any. No Portfolio has
any obligation to deal with any dealer or group of dealers in the
execution of transactions in Portfolio securities. In placing
orders, it is the policy of the Fund to obtain the most favorable
net results, taking into account various factors, including
price, dealer spread or commission, if any, size of the
transaction, and difficulty of execution. While the Adviser
generally seeks reasonably competitive spreads or commissions,
the Portfolios will not necessarily be paying the lowest spread
or commission available.
If the securities in which a particular Portfolio of the
Fund invests are traded primarily in the over-the-counter market,
where possible the Portfolio will deal directly with the dealers
who make a market in the securities involved unless better prices
and execution are available elsewhere. Such dealers usually act
as principals for their own account. On occasion, securities may
be purchased directly from the issuer. Bonds and money market
instruments are generally traded on a net basis and do not
normally involve either brokerage commissions or transfer taxes.
The cost of Portfolio securities transactions of each Portfolio
will consist primarily of brokerage commission or dealer or
underwriter spreads.
While the Adviser seeks to obtain the most favorable net
results in effecting transactions in the Portfolio securities,
brokers who provide supplemental investment research to the
Adviser may receive orders for transactions by the Fund. Such
supplemental research service ordinarily consists of assessments
and analyses of the business or prospects of a company, industry,
or economic sector. If, in the judgment of the Adviser, the Fund
will be benefited by such supplemental research services, the
Adviser is authorized to pay commissions to brokers furnishing
such services which are in excess of commissions which another
broker may charge for the same transaction. Information so
received will be in addition to and not in lieu of the services
required to be performed by the Adviser under its Investment
Advisory Agreement. The expenses of the Adviser will not
necessarily be reduced as a result of the receipt of such
supplemental information. In some cases, the Adviser may use
such supplemental research in providing investment advice to its
other advisory accounts.
During 1995, 34% of the Fund's total brokerage was allocated
to brokers who furnish statistical data or research information.
Brokerage commissions paid during 1995, 1994 and 1993 were
$349,679, $232,642 and $226,635, respectively.
GENERAL INFORMATION
Capital Stock
The Fund was incorporated in Maryland on January 30, 1984.
The authorized capital stock of the Fund consists of
sixty-million shares of common stock, par value ten cents ($0.10)
per
share. Fifty-five million shares of the authorized capital stock
is currently divided into the following classes: Equity
Portfolio consisting of twenty-million authorized shares; Capital
Portfolio consisting of fifteen-million authorized shares; Bond
Portfolio consisting of ten-million authorized shares; and S&P
500 Index Portfolio consisting of ten-million authorized shares.
The balance of the shares may be issued to the existing
Portfolios, or to new Portfolios having the number of shares and
descriptions, powers, and rights, and the qualifications,
limitations, and restrictions as the Board of Directors may
determine. The Board of Directors may also change the
designation of any Portfolio and may increase or decrease the
number of authorized shares of any Portfolio, but may not
decrease the number of authorized shares of any Portfolio below
the number of shares then outstanding.
Each issued and outstanding share is entitled to participate
equally in dividends and distributions declared by the respective
Portfolio and, upon liquidation or dissolution, in net assets of
such Portfolio remaining after satisfaction of outstanding
liabilities.
Voting Rights
In accordance with an amendment to the Maryland General
Corporation Law, the Board of Directors of the Fund has adopted
an amendment to its Bylaws providing that unless otherwise
required by the Investment Company Act of 1940, the Fund shall
not be required to hold an annual shareholder meeting unless the
Board of Directors determines to hold an annual meeting. The
Fund intends to hold shareholder meetings only when required by
law and such other times as may be deemed appropriate by its
Board of Directors.
All shares of common stock have equal voting rights
(regardless of the net asset value per share) except that on
matters affecting only one Portfolio, only shares of the
respective Portfolio are entitled to vote. The shares do not
have cumulative voting rights. Accordingly, the holders of more
than 50% of the shares of the Fund voting for the election of
directors can elect all of the directors of the Fund if they
choose to do so and in such event the holders of the remaining
shares would not be able to elect any directors.
Matters in which the interests of all Portfolios are
substantially identical (such as the election of directors or the
approval of independent public accountants) will be voted on by
all shareholders without regard to the separate Portfolios.
Matters that affect all Portfolios but where the interests of the
Portfolios are not substantially identical (such as approval of
the Investment Advisory Agreement) would be voted on separately
by each Portfolio. Matters affecting only one Portfolio, such as
a change in its fundamental policies, are voted on separately by
that Portfolio.
Matters requiring separate shareholder voting by Portfolio
shall have been effectively acted upon with respect to any
Portfolio if a majority of the outstanding voting securities of
that Portfolio votes for approval of the matter, notwithstanding
that: (1) the matter has not been approved by a majority of the
outstanding voting securities of any other Portfolio; or (2) the
matter has not been approved by a majority of the outstanding
voting securities of the Fund.
The phrase "a majority of the outstanding voting securities"
of a Portfolio (or of the Fund) means the vote of the lesser of:
(1) 67% of the shares of the Portfolio (or the Fund) present at a
meeting if the holders of more than 50% of the outstanding shares
are present in person or by proxy; or (2) more than 50% of the
outstanding shares of the Portfolio (or the Fund).
As noted in the Prospectus, Union Central currently has
voting control of the Fund. With voting control, Union Central
could make fundamental and substantial changes (such as electing
a new Board of Directors, changing the investment adviser or
advisory fee, changing a Portfolio's fundamental investment
objectives and policies, etc.) regardless of the views of
Contract Owners. However, under current interpretations of
presently applicable law, Contract Owners are entitled to give
voting instructions with respect to Fund shares held in
registered separate accounts and therefore all Contract Owners
would receive advance notice before any such changes could be
made.
Additional Information
This Statement of Additional Information and the Prospectus
do not contain all the information set forth in the registration
statement and exhibits relating thereto, which the Fund has filed
with the Securities and Exchange Commission, Washington, D.C.,
under the Securities Act of 1933 and the Investment Company Act
of 1940, to which reference is hereby made.
INDEPENDENT AUDITORS
The financial statements of the Fund have been audited by
Deloitte & Touche LLP, 1700 Courthouse Plaza NE, Dayton, Ohio
45402, independent auditors, whose report follows. The financial
statements are included in this Statement of Additional
Information in reliance upon the report of Deloitte & Touche LLP,
given upon their authority as experts in auditing and accounting.
<PAGE>
CARILLON FUND, INC.
FINANCIAL STATEMENTS
DECEMBER 31, 1995
<PAGE>
Independent Auditor's Report
==================================================
To the Board of Trustees and Shareholders of Carillon Fund, Inc.
We have audited the accompanying statements of assets and
liabilities of the Equity Portfolio, the Capital Portfolio, and
the Bond Portfolio of Carillon Fund, Inc., (the "Fund"),
including the schedules of investments, as of December 31, 1995,
the related statements of operations, and the statements of
changes in net assets and financial highlights for the year then
ended. These financial statements and financial highlights
("financial statements") are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these
financial statements based on our audits. The financial
highlights for the other years presented and the statements of
changes in net assets for the year ended December 31, 1994 were
audited by other auditors whose report, dated February 6, 1995,
expressed an unqualified opinion on those statements.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of
December 31, 1995, by correspondence with the custodian and
brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements as of December 31,
1995, present fairly, in all material respects, the financial
position of the Fund, as of December 31, 1995, and the results
of its operations, the changes in its net assets, and the
financial highlights for the year then ended, in conformity with
generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Dayton, Ohio
February 2, 1996
<PAGE>
CARILLON FUND, INC.
SCHEDULE OF INVESTMENTS
- ----------------------------------------------------------------
DECEMBER 31, 1995
EQUITY PORTFOLIO
- ----------------------------------------------------------------
COMMON STOCKS - 91.72%
- ----------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------ -----
<S> <C> <C>
AEROSPACE - DEFENSE - 2.78%
Lockheed Martin Corporation 40,000 $3,160,000
Raytheon Company 30,000 1,417,500
Thiokol Corporation 45,000 1,524,375
----------
6,101,875
AIR TRANSPORTATION - .64%
Atlantic Southeast Airlines Incorporated 65,000 1,397,500
----------
APPLIANCE - .32%
Scotsman Industries Incorporated 40,000 705,000
----------
AUTO & TRUCK - .46%
Ford Motor Company 35,000 1,015,000
----------
AUTO PARTS - 1.97%
Breed Technologies Incorporated 65,000 1,202,500
Donnelly Corporation 48,500 715,375
Masland Corporation* 70,000 980,000
Strattec Security Corporation* 80,000 1,420,000
----------
4,317,875
----------
BANK & BANK HOLDING COMPANIES - 7.27%
ABN AMRO Holdings NV Sponsored ADR 31,574 1,439,847
Banco Latinoamericano De Exportationes
Sponsored ADR 75,000 3,487,500
Deutsche Bank AG Sponsored ADR 42,000 1,994,538
Dresdner Bank AG Sponsored ADR 55,000 1,471,761
GBC Bancorp California 40,900 715,750
River Forest Bancorporation 70,000 1,785,000
Southtrust Corporation 55,000 1,409,375
Wilmington Trust Corporation 40,000 1,235,000
Zions Bancorporation 30,000 2,407,500
----------
15,946,271
----------
BUILDING & HOUSING - 1.79%
ABT Building Products Company* 115,000 1,638,750
Falcon Products Incorporated 147,730 1,938,956
Rottlund Company Incorporated* 50,000 350,000
----------
3,927,706
----------
BUILDING MATERIAL - .91%
NCI Building Systems, Incorporated* 80,700 1,997,325
----------
BUSINESS-MECHANICS & SOFTWARE - 2.13%
DH Technology , Incorporated* 135,000 3,307,500
Macneal - Schwendler Corporation 85,000 1,360,000
----------
4,667,500
----------
CHEMICAL - 2.43%
Bayer AG Sponosored ADR 135,000 3,570,062
Ciba-Geigy Sponsored ADR 27,000 1,190,848
Shanghai Petro Chemical Company Ltd
Sponsored ADR* 20,000 570,000
----------
5,330,910
----------
CONGLOMERATE - .68%
Mannesman AG Sponsored ADR 4,700 1,499,703
----------
</TABLE>
The accompanying notes are an integral part of the
financial statements.
<PAGE>
EQUITY PORTFOLIO
- -------------------------------------------------------------------
COMMON STOCKS (continued)
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------ -----
<S> <C> <C>
CONSUMER - .07%
Supercuts Incorporated* 20,000 $ 161,500
----------
CONTAINER - 1.79%
AEP Industries, Incorporated 107,550 2,366,100
Alltrista Corporation* 86,000 1,548,000
----------
3,914,100
----------
DRUGS - 1.20%
Merck & Company Incorporated 40,000 2,630,000
----------
ELECTRIC - UTILITIES - 3.75%
Cinergy Corporation 29,400 900,375
CMS Energy Corporation 50,000 1,493,750
Duke Power Company 12,500 592,188
Empresa Nacional de Electricidad
Sponsored ADR 30,000 1,717,500
Public Service Company of New Mexico* 54,000 951,750
Texas Utilities Electric Company 45,000 1,850,625
Utilitcorp United Incorporated 25,000 734,375
----------
8,240,563
----------
ELECTRONIC - .04%
Recoton Corporation* 4,400 81,714
----------
ENERGY - MISCELLANEOUS - 1.60%
Giant Industries Incorporated 120,000 1,470,000
Holly Corporation 90,000 2,036,250
----------
3,506,250
----------
ENGINEERING & CONSTRUCTION - .19%
Mestek, Incorporated* 36,200 425,350
----------
ENTERTAINMENT & LEISURE - .59%
Artco, Incorporated 100,000 1,300,000
----------
FINANCIAL SERVICE - 2.64%
CMAC Investment Corporation 25,500 1,122,000
Dean Witter Discover & Company 45,000 2,115,000
Jefferies Group, Incorporated 32,000 1,512,000
Raymond James Financial Corporation 50,000 1,056,250
----------
5,805,250
----------
FOOD, BEVERAGE, & TOBACCO - 1.60%
Goodmark Foods Incorporated 85,000 1,508,750
Morningstar Group Incorporated* 183,000 1,464,000
Todhunter International, Incorporated* 70,000 542,500
----------
3,515,250
----------
GOLD & PRECIOUS METALS - 1.08%
Echo Bay Mines Limited 90,000 933,750
Minorco Sponsored ADR 50,000 1,431,250
----------
2,365,000
----------
HEALTH & BEAUTY AIDS - .41%
Perrigo Company* 75,000 890,625
----------
</TABLE>
The accompanying notes are an integral part of the
financial statements.
<PAGE>
EQUITY PORTFOLIO
- -------------------------------------------------------------------
COMMON STOCKS (continued)
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------ -----
<S> <C> <C>
HEALTH CARE - 3.45%
Advocat, Incorporated* 100,500 $1,118,063
Lunar Corporation* 103,200 2,838,000
Orthofix International NV* 113,036 833,640
Research Industries Corporation* 35,000 945,000
Sofamor / Danek Group* 65,200 1,850,050
----------
7,584,753
----------
HEALTH CARE SERVICE - .98%
Rightchoice Managed Care Incorporated
- Class A* 105,500 1,371,500
United Wisconsin Services, Incorporated 34,700 763,400
----------
2,134,900
----------
HOSPITAL SUPPLY & SERVICE - 1.92%
Allied Healthcare Products Incorporated 90,100 1,441,600
Sterile Concepts Holdings, Incorporated 50,900 738,050
Utah Medical Products Incorporated* 103,200 2,044,650
----------
4,224,300
----------
HOUSEHOLD PRODUCT - 4.31%
Chromcraft Revington Incorporated* 75,000 1,996,875
Conso Products Company* 97,500 1,779,375
Fingerhut Companies, Incorporated 40,000 555,000
Helen of Troy Limited, Bermuda* 115,000 2,415,000
Lifetime-Hoan Corporation* 174,482 1,613,959
Winsloew Furniture Incorporated* 188,300 1,106,263
----------
9,466,472
----------
HOUSING - 1.18%
Schult Homes Corporation 50,000 875,000
Toll Brothers, Incorporated* 75,000 1,725,000
----------
2,600,000
----------
INSURANCE - 8.26%
AEGON N.V. Sponsored ADR 43,755 1,925,220
Capital American Financial Corporation 30,000 678,750
Gainsco Incorporated 217,762 2,477,043
Harleysville Group Incorporated 45,300 1,466,588
Penncorp Financial Group Incorporated 95,000 2,790,625
PXRE Corporation 41,000 1,086,500
RLI Corporation 68,625 1,715,625
Sphere Drake Holdings Limited 70,000 980,000
Torchmark Corporation 40,000 1,810,000
Transnational RE Corporation - Class A 40,000 980,000
Triad Guaranty Incorporated* 45,000 1,192,500
United Insurance Companies Incorporated* 54,400 1,026,800
----------
18,129,651
----------
INVESTMENT COMPANIES - .51%
Allied Capital Corporation 25,000 340,625
Chile Fund Incorporated* 30,000 780,000
----------
1,120,625
----------
MACHINERY-AGRICULTURE & CONSTRUCTION
- 2.13%
AGCO Corporation* 18,000 918,000
Astec Industries Incorporated* 75,000 740,625
Lindsay Manufacturing Company* 78,575 3,025,138
----------
4,683,763
----------
MACHINERY - INDUSTRIAL - .57%
Alamo Group Incorporated 70,000 1,260,000
----------
</TABLE>
The accompanying notes are an integral part of the
financial statements.
<PAGE>
EQUITY PORTFOLIO
- -------------------------------------------------------------------
COMMON STOCKS (continued)
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------ -----
<S> <C> <C>
MANUFACTURING - MISCELLANEOUS - 1.56%
Foamex International Incorporated* 75,000 $553,125
Griffon Corporation* 170,000 1,530,000
ILC Technology, Incorporated* 79,300 733,525
Versa Technologies Incorporated 40,500 617,625
----------
3,434,275
----------
METAL & MINERAL - 1.32%
AK Steel Holding Corporation 25,000 856,250
J & L Specialty Steel Incorporated* 50,000 937,500
Pohang Iron & Steel Company* 50,000 1,093,750
----------
2,887,500
----------
NON-FERROUS METAL - .59%
Western Mining Holdings Corporation
Ltd Sponsored ADR 50,000 1,306,250
OFFICE PRODUCT - .54%
Nam Tai Electronics, Incorporated* 101,700 1,194,975
----------
OIL & GAS - DOMESTIC 3.78%
Apache Corporation 73,118 2,156,981
Horsham Corporation 150,000 2,025,000
Newfield Exploration Company* 48,000 1,296,000
Plains Resources Incorporated* 120,000 1,080,000
Pogo Producing Company* 36,000 1,017,000
Swift Energy Company* 60,000 720,000
----------
8,294,981
----------
OIL & GAS - INTERNATIONAL - 2.27%
Repsol S.A. Sponsored ADR 60,000 1,972,500
Total S.A. Sponsored ADR 42,014 1,428,476
World Fuel Services Incorporated 24,500 388,938
YPF S.A. Sponsored ADR 55,000 1,189,375
----------
4,979,289
----------
OIL & GAS - SERVICE - 2.06%
Global Industries Incorporated* 100,000 3,000,000
Offshore Logistics Incorporated* 120,000 1,515,000
----------
4,515,000
----------
PAPER & FOREST PRODUCTS - 1.42%
Consolidated Papers, Incorporated* 18,000 1,010,250
Federal Paper Board Incorporated 25,000 1,296,875
Longview Fibre Company 50,000 812,500
----------
3,119,625
----------
PRODUCTION - .59%
Briggs & Stratton Corporation 30,000 1,301,250
----------
RAILROAD - .96%
Illinois Central Corporation - Class A 55,000 2,110,625
----------
REAL ESTATE - 10.05%
Associated Estates Realty Corporation 65,000 1,397,500
CBL & Associates Properties Incorporated 70,000 1,522,500
Columbus Realty Trust 90,000 1,743,750
Duke Realty Investments Incorporated 28,000 878,500
Felcor Suite Hotels Incorporated 52,600 1,459,650
Health Care Property Investors,
Incorporated 50,000 1,756,250
Healthcare Realty Trust Incorporated* 8,700 200,100
<CAPTION>
EQUITY PORTFOLIO
- -------------------------------------------------------------------
COMMON STOCKS (continued)
- -------------------------------------------------------------------
SHARES VALUE
------ -----
<S> <C> <C>
REAL ESTATE - continued
IRT Property Company 120,000 $1,110,000
LTC Properties Incorporated 65,000 975,000
Merry Land & Investments Company 75,000 1,771,875
Mid-America Apartment Communities 80,000 1,980,000
NAB Asset Corporation* 51,000 229,500
National Health Investors Incorporated 40,000 1,325,000
Post Properties Incorporated 35,000 1,115,625
Public Storage Incorporated 80,000 1,520,000
Shurgard Storage Centers Incorporated 70,000 1,890,000
Winston Hotels Incorporated 100,000 1,187,500
----------
22,062,750
----------
RETAIL - FOOD AND DRUGS - .42%
Dairy Farm International Limited
- Sponsored ADR 200,000 920,000
RETAIL - GENERAL - 2.84%
Claire's Stores Incorporated 100,000 1,762,500
Crown Books Corporation* 44,800 548,800
Dart Group Corporation - Class A 7,500 701,250
Forschner Group Incorporated* 65,000 804,375
Roberds Incorporated* 90,000 810,000
Shopko Stores, Incorporated 90,700 1,020,375
Tractor Supply Company* 30,000 592,500
----------
6,239,800
----------
SAVINGS & LOAN - 1.04%
Standard Federal Bancorporation 57,900 2,279,813
----------
SERVICE - MISCELLANEOUS - .89%
PCA International Incorporated 100,200 1,102,200
TBC Corporation* 100,000 862,500
----------
1,964,700
----------
SHOES - .25%
K-Swiss Incorporated - Class A 50,000 543,750
----------
TELEPHONE - .38%
Stet Societa Finanziaria Telefonica 30,000 836,250
----------
TEXTILE & APPAREL - .26%
Cone Mills Corporation* 40,000 450,000
Speizman Industries Incorporated* 40,000
115,000
----------
565,000
----------
TRUCKING - .85%
Landstar System, Incorporated* 40,000 1,070,000
U.S. Xpress Enterprises, Incorporated
- Class A* 110,000 797,496
----------
1,867,496
----------
Total Common Stocks
(cost $158,454,956)
$201,370,060
- -----------
</TABLE>
The accompanying notes are an integral part of the
financial statements.
<PAGE>
EQUITY PORTFOLIO
- -------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 7.95%
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE
--------- -----
<S> <C> <C>
COMMERCIAL PAPER - 5.90%
CBI Industries Incorporated
(6.040% due 01/25/96) 2,000,000 $
1,991,947
Circus Circus Enterprises Incorporated
(6.000% due 01/10/96) 2,000,000
1,997,000
Columbia Healthcare Corporation
(6.050% due 01/08/96) 1,000,000
998,824
Crown Cork & Seal Company
(5.990% due 01/12/96) 1,000,000
998,170
Crown Cork & Seal Company
(6.020% due 01/26/96) 1,000,000
995,819
Illinois Power Fuel Company
(5.990% due 01/26/96) 1,000,000
995,840
Tele-Communications Incorporated
(6.100% due 02/14/96) 1,000,000
992,544
Tyson Foods Incorporated
(6.060% due 01/11/96) 2,000,000
1,996,633
Yellow Freight System Incorporated
(6.000% due 01/03/96) 1,000,000
999,667
Yellow Freight System Incorporated
(6.000% due 01/31/96) 1,000,000
995,000
- ------------
12,961,444
- ------------
VARIABLE RATE DEMAND NOTES <F1> - 2.05%
General Mills, Incorporated
(5.290% due 01/03/96) 1,278,820
1,278,820
Pitney Bowes Credit Corporation
(5.295% due 01/03/96) 2,933,267
2,933,267
Wisconsin Electric Power Company
(5.337% due 01/03/96) 291,728
291,728
- ------------
4,503,815
- ------------
Total Short-Term Investments
(cost $17,465,259)
$17,465,259
- ------------
TOTAL INVESTMENTS - 99.67%
(cost $175,920,205)
$218,835,319 <F2>
OTHER ASSETS AND LIABILITIES - .33% $
727,928
- ------------
TOTAL NET ASSETS - 100.00%
$219,563,247
============
_____________
*Non-income producing
(ADR) American Depository Receipt
<FN>
<F1>
Interest rates vary periodically based on current market rates.
The
maturity shown for each variable rate demand note is the later of
the
next scheduled interest rate adjustment date or the date on which
principal can be recovered through demand. Information shown is
as of
December 31, 1995.
<F2>
Gross unrealized appreciation and depreciation of securities at
December 31, 1995 for financial reporting purposes was
$49,383,954 and
$6,468,840 respectively; tax amounts were substantially the same.
</FN>
</TABLE>
The accompanying notes are an integral part of the
financial statements.
<PAGE> CARILLON FUND, INC.
SCHEDULE OF INVESTMENTS
- ------------------------------------------------------------
DECEMBER 31, 1995
CAPITAL PORTFOLIO
- ------------------------------------------------------------
COMMON STOCKS - 37.39%
- ------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------ -----
<S> <C> <C>
AUTO PARTS - .85%
Breed Technologies, Incorporated 28,500 $ 527,240
Strattec Security Corporation* 40,000 710,000
-----------
1,237,240
-----------
BANK & BANK HOLDING COMPANIES - 3.01%
ABN AMRO Holdings NV Sponsored ADR 21,049 959,883
Banco Latinoamericano
de Exportaciones ADR* 30,000 1,395,000
Deutsche Bank AG Sponsored ADR 18,000 854,802
Dresdner Bank AG Sponsored ADR 20,000 535,186
River Forest Bancorporation 25,000 637,500
-----------
4,382,371
-----------
BUILDING & HOUSING - .90%
ABT Building Products Company* 45,000 641,250
Falcon Products, Incorporated 50,820 667,013
-----------
1,308,263
-----------
BUILDING MATERIAL - .51%
NCI Building Systems Incorporated* 30,000 742,500
-----------
BUSINESS - MECHANICS & SOFTWARE - .68%
DH Technology, Incorporated* 40,260 986,370
-----------
CHEMICAL - 1.88%
Bayer AG Sponsored ADR 75,000 1,983,367
Ciba - Geigy Sponsored ADR 17,000 749,793
-----------
2,733,160
-----------
CONGLOMERATE - .59%
Lonrho Plc Sponosred ADR 150,000 409,875
Mannesman AG Sponsored ADR 1,400 446,720
-----------
856,595
-----------
CONTAINER - 1.17%
AEP Industries, Incorporated 45,831 1,008,282
Alltrista Corporation* 38,800 698,400
-----------
1,706,682
-----------
DRUGS - .77%
Merck & Company Incorporated 17,000 1,117,750
-----------
ELECTRIC - UTILITIES - .83%
CMS Energy Corporation 20,000 597,500
Texas Utilities Electric Company 15,000 616,875
-----------
1,214,375
-----------
ENERGY - .77%
Nuevo Energy Company* 30,000 671,250
Swift Energy Company* 37,200 446,400
-----------
1,117,650
-----------
ENERGY - MISCELLANEOUS - .31%
Holly Corporation 20,000 452,500
-----------
ENGINEERING & CONSTRUCTION - .12%
Mestek, Incorporated* 15,300 179,775
-----------
</TABLE>
The accompanying notes are an integral part of the
financial statements.
<PAGE>
CAPITAL PORTFOLIO
- ----------------------------------------------------------
COMMON STOCKS (continued)
- ----------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------ -----
<S> <C> <C>
SHARES VALUE
FINANCIAL SERVICE - .48%
Dean Witter, Discover & Company 15,000 $ 705,000
-----------
FOOD, BEVERAGE, & TOBACCO - .13%
Todhunter International, Incorporated * 25,000 193,750
-----------
GOLD & PRECIOUS METALS - 1.27%
Free State Consolidated Gold Mines
Limited ADR 20,000 145,000
Minorco Sponsored ADR 29,000 830,125
Royal Oak Mines , Incorporated* 125,000 445,313
Santa Fe Pacific Gold Corporation 35,000 424,375
-----------
1,844,813
-----------
HEALTH CARE - .97%
Orthofix International NV* 38,000 280,250
Sofamor / Danek Group* 40,000 1,135,000
-----------
1,415,250
- -----------
HEALTH CARE SERVICE - .40%
Rightchoice Managed Care Incorporated
- Class A* 45,000 585,000
-----------
HOSPITAL SUPPLY & SERVICE - .43%
Allied Healthcare Products Incorporated 39,500 632,000
-----------
HOUSEHOLD PRODUCT - 1.53%
Chromcraft Revington Incorporated* 25,000 665,625
Helen of Troy Limited, Bermuda* 55,000 1,155,000
Lifetime - Hoan Corporation 44,141 408,304
-----------
2,228,929
-----------
INSURANCE - 2.18%
Gainsco Incorporated 63,000 716,625
RLI Corporation 30,480 762,000
Torchmark Corporation 22,000 995,500
United Insurance Companies, Incorporated* 36,800 694,600
-----------
3,168,725
-----------
INVESTMENT COMPANIES - 1.98%
Allied Capital Corporation 30,000 408,750
BlackRock Strategic Term Trust 75,000 571,875
France Growth Fund, Incorporated 59,000 582,625
New Germany Fund 70,000 813,750
Templeton Global Income Fund 75,000 515,625
-----------
2,892,625
-----------
MACHINERY - AGRICULTURE & CONSTRUCTION - .92%
Astec Industries Incorporated* 50,000 493,750
Lindsay Manufacturing Company* 21,939 844,652
-----------
1,338,402
-----------
MACHINERY - INDUSTRIAL - .38%
Alamo Group Incorporated 30,900 556,200
-----------
MANUFACTURING - MISCELLANEOUS - .95%
Griffon Corporation* 55,000 495,000
ILC Technology, Incorporated* 30,500 282,125
Versa Technologies, Incorporated 40,000 610,000
-----------
1,387,125
-----------
METAL & MINERAL - .48%
Pohang Iron & Steel Company* 32,000 700,000
-----------
</TABLE>
The accompanying notes are an integral part of the
financial statements.
<PAGE>
CAPITAL PORTFOLIO
- ------------------------------------------------------------
COMMON STOCKS (continued)
- ------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------ -----
<S> <C> <C>
OIL & GAS - DOMESTIC - .77%
Horsham Corporation 40,000 $ 540,000
Plains Resources, Incorporated* 65,000 585,000
-----------
1,125,000
-----------
OIL & GAS - INTERNATIONAL - .96%
YPF S.A. Sponsored ADR 25,000 540,625
Repsol S.A. Sponsored ADR 26,000 854,750
-----------
1,395,375
-----------
OIL & GAS - SERVICE - 1.01%
Global Industries Incorporated* 30,000 900,000
Offshore Logistics, Incorporated* 45,000 568,125
-----------
1,468,125
-----------
PAPER & FOREST PRODUCTS - .46%
Consolidated Papers Incorporated* 12,000 673,500
-----------
REAL ESTATE - 8.48%
Associated Estates Realty Corporation 50,000 1,075,000
Bradley Real Estate Incorporated 41,000 553,500
CBL & Associates Properties Incorporated 45,000 978,750
Columbus Realty Trust 46,000 891,250
Duke Realty Investments Incorporated 36,000 1,129,500
Felcor Suite Hotels Incorporated 27,000 749,250
Glimcher Realty Trust 45,000 776,250
Health Care Property Investors,
Incorporated 26,296 923,647
IRT Property Company 85,000 786,250
LTC Properties Incorporated 46,000 690,000
Merry Land & Investments Company 47,000 1,110,375
Mid-America Apartment Communities 52,000 1,287,000
NAB Asset Corporation* 49,000 220,500
Shurgard Storage Centers Incorporated 43,000 1,161,000
-----------
12,332,272
-----------
RETAIL - GENERAL - .31%
Shopko Stores, Incorporated 40,000 450,000
-----------
SAVINGS & LOAN -.68%
Standard Federal Bancorporation 25,000 984,375
-----------
SERVICE - MISCELLANEOUS - .23%
PCA International Incorporated 30,000 330,000
-----------
Total Common Stocks (cost $46,324,013) $54,441,697
-----------
<CAPTION>
- -----------------------------------------------------------------
PREFERRED STOCK - .44%
- -----------------------------------------------------------------
SHARES VALUE
------ -----
<S> <C> <C>
METALS & MINERALS - .44%
Freeport McMoran Copper Series Gold 20,000 $ 650,000
-----------
Total Preferred Stock (cost $709,837) $ 650,000
-----------
</TABLE>
The accompanying notes are an integral part of the
financial statements.
<PAGE>
CAPITAL PORTFOLIO
- ------------------------------------------------------------
U.S. TREASURY OBLIGATIONS - 13.07%
- ------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE
--------- -----
<S> <C> <C>
U.S. TREASURY NOTES - 13.07%
7.500% due 02/29/96 $ 750,000 $ 752,578
7.625% due 04/30/96 500,000 504,063
7.250% due 11/15/96 500,000 508,438
6.125% due 12/31/96 900,000 908,438
8.000% due 01/15/97 1,000,000 1,027,187
6.750% due 02/28/97 650,000 661,171
8.500% due 04/15/97 500,000 520,313
6.750% due 05/31/97 1,000,000 1,020,625
7.875% due 04/15/98 500,000 528,125
5.500% due 02/28/99 1,000,000 1,006,562
6.375% due 07/15/99 1,000,000 1,033,437
6.000% due 10/15/99 5,900,000 6,030,902
8.875% due 05/15/00 500,000 567,813
7.500% due 11/15/01 500,000 551,093
6.375% due 08/15/02 3,250,000 3,414,531
Total U.S. Treasury Notes
(cost $18,398,484) $19,035,276
-----------
<CAPTION>
- ------------------------------------------------------------
MORTGAGE - BACKED SECURITIES - 17.68%
- ------------------------------------------------------------
PRINCIPAL VALUE
--------- -----
<S> <C> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS
- .76%
FHLMC (8.500% due 06/15/17) $1,100,000 $ 1,103,509
-----------
FEDERAL HOME LOAN MORTGAGE CORPORATION
- 3.36%
8.000% due 10/01/96 467,072 470,253
7.500% due 06/01/07 67,593 68,777
5.470% due 11/15/07 <F1> 1,000,000 993,500
9.500% due 10/01/08 282,814 302,218
6.250% due 01/15/09 1,181,675 1,160,606
8.250% due 03/01/12 138,273 143,290
8.500% due 03/01/16 134,793 140,300
7.500% due 07/01/17 80,515 82,227
11.000% due 04/01/19 82,858 91,869
11.000% due 11/01/19 117,762 130,569
11.000% due 05/01/20 292,010 323,819
11.000% due 06/01/20 362,916 402,318
7.000% due 09/15/22 596,485 583,141
-----------
4,892,887
-----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
- 10.82%
10.000% due 02/01/04 11,005
11,683
9.500% due 09/01/05 203,091 215,488
9.000% due 11/01/05 74,056 78,348
7.500% due 02/25/06 1,645,000 1,700,058
7.500% due 03/25/07 1,200,000 1,248,612
8.000% due 05/01/07 179,696 186,192
7.000% due 07/25/07 1,500,000 1,551,810
6.000% due 12/01/08 982,678 973,077
5.500% due 01/01/09 997,437 971,942
6.000% due 03/01/09 1,101,724 1,090,960
5.500% due 04/01/09 1,012,760 986,712
9.500% due 12/25/18 869,078 923,690
</TABLE>
The accompanying notes are an integral part of the
financial statements.
<PAGE>
CAPITAL PORTFOLIO
- ------------------------------------------------------------
MORTGAGE - BACKED SECURITIES (continued)
- ------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE
--------- -----
<S> <C> <C>
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(continued)
8.500% due 03/01/19 $ 21,853 $ 22,873
7.500% due 07/25/20 1,000,000 1,023,330
8.000% due 07/25/20 1,000,000 1,035,330
8.000% due 12/25/20 1,500,000 1,558,380
4.980% due 10/25/21 <F1> 1,000,000 939,770
6.344% due 05/25/22 <F1> 1,241,593 1,245,467
-----------
15,763,722
-----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -.67%
7.990% due 12/16/15 126,397 128,310
9.000% due 11/15/16 177,234 188,859
10.500% due 11/20/19 442,564 485,590
9.000% due 12/15/19 164,993 175,366
-----------
978,125
-----------
NON-GOVERNMENTAL AGENCY - 2.07%
GE Capital Mtg. Services, Inc.
(6.000% due 08/25/09) 600,150 569,020
Prudential Home Mortgage Securities
(7.500% due 07/25/10) 540,869 548,139
Merrill Lynch Mortgage Investors
(7.000% due 09/15/17) 2,000,000 1,897,500
-----------
3,014,659
-----------
Total Mortgage-Backed Securities
(cost $25,055,728) $25,752,902
-----------
<CAPTION>
- ------------------------------------------------------------
CORPORATE BONDS AND NOTES - 6.41%
- ------------------------------------------------------------
PRINCIPAL VALUE
--------- -----
<S> <C> <C>
BANK & BANK HOLDING COMPANIES - .40%
Boatmens Bancshares, Inc. Sub. Note
(9.250% due 11/01/01) $ 260,000 $ 300,093
Comerica Inc., Sub. Note
(9.750% due 05/01/99) 250,000 277,649
-----------
577,742
-----------
CONGLOMERATES - .47%
Teledyne Corp.
(10.000% due 06/01/04) 151,000 152,125
Westinghouse Electric Corp. Deb.
(8.875% due 06/01/01) 500,000 521,642
-----------
673,767
-----------
FINANCIAL SERVICES - .81%
Pacific Gulf Properties, Inc.
Sub. Convertible Deb.
(8.375% due 02/15/01) 750,000 693,750
The Helicon Group, L.P.
(9.000% due 11/01/03) 500,000 480,000
-----------
1,173,750
-----------
GAMING INDUSTRY - .18%
Circus Circus Enterprises, Inc.
Senior Sub. Note
(10.625% due 06/15/97) 250,000 266,225
-----------
INSURANCE - .35%
The Penn Central Corp.
(9.750% due 08/01/99) 130,000 132,119
Reliance Financial Services Corp.
Senior Note 9.480% due 11/01/00) 375,000 379,688
-----------
511,807
-----------
MISCELLANEOUS - .65%
Parisian Inc. Sub. Notes
(9.875% due 07/15/03) 500,000 420,000
Toll Corporation Sub. Note
(10.500% due 03/15/02) 500,000 525,625
-----------
945,625
-----------
</TABLE>
The accompanying notes are an integral part of the
financial statements.
<PAGE>
CAPITAL PORTFOLIO
- ------------------------------------------------------------
CORPORATE BONDS AND NOTES (continued)
- ------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE
--------- -----
<S> <C> <C>
OIL & GAS EXPLORATION SERVICES - 1.63%
Columbia Gas Systems Inc. (5.22% PFD) $ 1,757 $ 69,402
Maxus Energy Debentures
(11.250% due 05/01/13) 208,000 211,640
Rowan Companies, Inc. Senior Note
(11.875% due 12/01/01) 750,000 808,125
Tenneco Inc. (10.000% due 08/01/98) 700,000 770,265
Trans Texas Gas, Corp. Senior Notes
(11.500% due 06/15/02) 500,000 516,250
-----------
2,375,682
-----------
SAVINGS & LOAN - .10%
Golden West Financial Corp. Sub. Note
(10.250% due 12/01/00) 130,000 152,875
-----------
TELEPHONE & TELECOMMUNICATIONS - .12%
United Telecommunications, Inc. Note
(9.750% due 04/01/00) 156,000 176,981
-----------
UTILITIES - ELECTRIC- 1.70%
Connecticut Light & Power Co.
1st Ref Mtg. (7.625% due 04/01/97) 691,000 702,083
El Paso Electric 1st Mtg.
(6.750% due 05/01/98) <F2> 500,000 515,000
New Orleans Public Service Inc.
1st Mtg. Note (8.670% due 04/01/05) 1,200,000 1,257,514
-----------
2,474,597
-----------
Total Corporate Bond and Notes
(cost $9,098,447) $ 9,329,051
-----------
<CAPTION>
- ------------------------------------------------------------
SHORT-TERM INVESTMENTS - 24.37%
- ------------------------------------------------------------
PRINCIPAL VALUE
--------- -----
<S> <C> <C>
COMMERCIAL PAPER - 19.85%
CBI Industries Incorporated
(6.040% due 01/25/96) $2,000,000 $ 1,991,947
Circus Circus Enterprises Incorporated
(6.000% due 01/10/96) 2,000,000 1,997,000
Columbia Healthcare Corporation
(6.030% due 01/09/96) 1,000,000 998,667
Columbia Healthcare Corporation
(6.000% due 02/02/96) 1,000,000 994,667
Conagra Incorporation
(6.030% due 01/16/96) 2,000,000 1,994,975
Crown Cork & Seal Company
(5.900% due 02/23/96) 2,000,000 1,982,628
Illinois Power Fuel Company
(5.990% due 01/26/96) 2,000,000 1,991,681
Nabisco Incorporated
(6.030% due 01/08/96) 2,000,000 1,997,655
Niantic Bay Fuel Trust
(6.000% due 01/02/96) 2,000,000 1,999,667
Penn Power & Light
(6.020% due 01/04/96) 2,000,000 1,998,997
Sprint Corp. (6.020% due 01/18/96) 2,000,000 1,994,314
Tele-Communications, Incorporated
(6.120% due 02/09/96) 1,000,000 993,370
Tele-Communications, Incorporated
(6.100% due 02/14/96) 1,000,000 992,544
Tyson Foods Incorporated
(6.060% due 01/11/96) 2,000,000 1,996,633
Union Oil Company of California
(6.000% due 01/22/96) 1,000,000 996,500
Union Oil Company of California
(5.930% due 02/09/96) 1,000,000 993,576
White Consolidated Industries
Incorporated (5.970% due 01/08/96) 1,000,000 998,839
Yellow Freight System Incorporated
(6.010% due 01/22/96) 2,000,000 1,992,988
-----------
28,906,648
-----------
</TABLE>
The accompanying notes are an integral part of the
financial statements.
<PAGE>
CAPITAL PORTFOLIO
- ------------------------------------------------------------
SHORT-TERM INVESTMENTS (continued)
- ------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE
--------- -----
<S> <C> <C>
VARIABLE RATE DEMAND NOTES <F3> - 4.52%
General Mills, Incorporated
(5.290% due 01/03/96) $2,065,990 $ 2,065,990
Pitney Bowes Credit Corporation
(5.295% due 01/03/96) 1,756,782 1,756,782
Sara Lee Corporation
(5.275% due 01/03/96) 2,187,278 2,187,278
Southwestern Bell Telephone Company
(5.275% due 01/03/96) 142,711 142,711
Wisconsin Electric Power Company
(5.337% due 01/03/96) 421,858 421,858
-----------
6,574,619
-----------
Total Short-Term Investments
(cost $35,481,267) $35,481,267
-----------
TOTAL INVESTMENTS - 99.36%
(cost $135,067,776)
$144,690,193 <F4>
OTHER ASSETS AND LIABILITIES - 0.64% $ 932,315
-----------
TOTAL NET ASSETS - 100.00%
$145,622,508
===========
_______________
*Non-Income producing
(ADR) American Depository Receipt
<FN>
<F1>
Interest rates vary periodically based on current market rates.
Rates shown
are as of December 31, 1995.
<F2>
Interest payments in default.
<F3>
Interest rates vary periodically based on current market rates.
The maturity
shown for each variable rate demand note is the later of the next
scheduled
interest rate adjustment date or the date on which principal can
be recovered
through demand. Information shown is as of December 31, 1995.
<F4>
Gross unrealized appreciation and depreciation of securities at
December 31,
1995 for financial reporting purposes was $12,049,175 and
$2,426,758
respectively; tax amounts were substantially the same.
</FN>
</TABLE>
The accompanying notes are an integral part of the
financial statements.
<PAGE>
CARILLON FUND, INC.
SCHEDULE OF INVESTMENTS
- ---------------------------------------------------------------
DECEMBER 31, 1995
BOND PORTFOLIO
- ---------------------------------------------------------------
U.S. TREASURY OBLIGATIONS - 31.43%
- ---------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE
--------- -----
<S> <C> <C>
U.S. TREASURY NOTES - 21.79%
6.000% due 10/15/99 $4,000,000 $ 4,088,747
6.750% due 04/30/00 2,000,000 2,105,000
7.750% due 02/15/01 2,500,000 2,761,717
5.875% due 02/15/04 2,000,000 2,040,624
7.500% due 02/15/05 3,500,000 3,972,500
6.500% due 08/15/05 1,000,000 1,065,312
----------
16,033,900
----------
U.S. TREASURY STRIPS - 5.45%
0.000% due 02/15/00 3,250,000 2,611,569
0.000% due 08/15/02 2,000,000 1,399,220
----------
4,010,789
----------
U.S. TREASURY BOND - 4.19%
6.250% due 08/15/23 3,000,000 3,083,439
----------
Total U.S. Treasury Obiligations
(cost $21,702,281) $23,128,128
----------
</TABLE>
- ---------------------------------------------------------------
MORTGAGE - BACKED SECURITIES - 14.72%
- ---------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE
--------- -----
<S> <C> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS
- 3.57%
FNMA (9.500% due 12/25/18) $ 274,061 $ 294,199
FHLMC (8.811% due 11/15/20)<F1> 850,536 943,924
FHLMC (8.250% due 12/15/20) 1,000,000 1,067,680
FNMA (5.804% due 12/25/23)<F1> 500,000 322,190
----------
2,627,993
----------
FEDERAL HOME LOAN MORTGAGE
CORPORATION - 3.50%
7.500% due 02/01/02 65,841 67,343
9.500% due 04/01/05 121,154 126,189
7.500% due 06/01/07 148,765 151,370
11.000% due 05/01/10 80,427 89,048
12.500% due 08/01/10 23,966 27,044
8.000% due 11/01/16 80,826 83,200
9.500% due 02/01/18 77,227 81,547
6.500% due 07/01/23 949,009 940,192
8.250% due 01/15/24 1,000,000 1,011,630
----------
2,577,563
----------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION - 2.99%
12.000% due 04/01/00 85,644 91,879
9.000% due 08/01/01 59,317 62,394
8.500% due 01/01/02 72,957 76,012
10.500% due 06/01/04 26,261 27,870
10.500% due 05/01/05 217,116 230,414
6.500% due 06/01/08 1,355,660 1,363,495
8.000% due 08/01/17 332,276 344,010
----------
2,196,074
----------
</TABLE>
The accompanying notes are an integral part of the
financial statments.
<PAGE>
BOND PORTFOLIO
- ---------------------------------------------------------------
MORTGAGE - BACKED SECURITIES (continued)
- ---------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE
--------- -----
<S> <C> <C>
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - .34%
11.000% due 03/15/10 $ 63,528 $ 70,913
11.250% due 09/15/13 51,651 57,979
10.750% due 02/15/16 8,635 9,564
9.000% due 05/15/20 107,121 113,448
----------
251,904
----------
NON-GOVERNMENTAL AGENCY - 4.32%
Securitized Asset Sales, Inc.
(6.500% due 07/25/08) 323,178 309,543
CMC2 Securities Inc.
(0.000% due 12/25/08) 441,484 320,906
Country Wide Mortgage-Backed
Securities, Inc.
(6.000% due 03/01/09) 923,433 864,564
Capstead Mortgage Securities Corp.
(10.950% due 02/01/14) 271,628 295,436
Greenwich Capital Acceptance
(7.527% due 08/25/24)<F1> 989,978 890,980
Residential Funding Mortgage
Securities, Inc.
(7.125% due 11/25/25) 487,366 495,071
----------
3,176,500
----------
Total Mortgage-Backed Securities
(cost $10,529,312) $10,830,034
----------
</TABLE>
- ---------------------------------------------------------------
CORPORATE BONDS AND NOTES - 48.56%
- ---------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE
--------- -----
<S> <C> <C>
BANK & BANK HOLDING COMPANIES - 2.24%
Comerica Inc. Sub Capital
(9.750% due 05/01/99) $ 500,000 $ 555,297
Nationsbank Corp. Sub
Notes (7.625% due 04/15/05) 1,000,000 1,094,780
----------
1,650,077
----------
BROADCASTING / CABLE - 4.24%
Adelphia Communications Series B PIK
(9.500% due 02/15/04) 573,925 487,836
CF Cable TV Inc. Notes
(9.125% due 07/15/07) 1,000,000 1,027,500
Jones Intercable, Inc.
(9.625% due 03/15/02) 500,000 536,875
Time Warner Inc. (0.000% due 08/15/06) 1,000,000 1,069,486
----------
3,121,697
----------
CONGLOMERATES - 1.36%
Figgie International Inc. Notes
(9.875% due 10/01/99) 1,000,000 997,500
----------
CONSUMER PRODUCTS - 3.88%
First Brands Corp. Senior Sub Notes
(9.125% due 04/01/99) 500,000 515,000
Hasbro Inc. Convertible Deb.
(6.000% due 11/15/98) 500,000 548,125
Nabisco Inc. Deb.
(7.550% due 06/15/15)<F1> 1,000,000 1,048,124
Revlon Consumer Products Corp.
Senior Sec. Notes
(0.000% due 03/15/98) 1,000,000 740,000
----------
2,851,249
----------
FINANCE COMPANIES - .71%
GMAC Senior Notes (7.000% due 03/01/00) 500,000 519,690
----------
FOOD, BEVERAGE, & TOBACCO - .66%
RJR Nabisco, Inc. Capital Corporation
(7.625% due 09/15/03) 500,000 484,283
----------
FOREIGN - 1.37%
Quebec Province CDA Deb.
(7.125% due 02/09/24) 1,000,000 1,007,950
----------
</TABLE>
The accompanying notes are an integral part of the
financial statments.
<PAGE>
BOND PORTFOLIO
- ---------------------------------------------------------------
CORPORATE BONDS AND NOTES (continued)
- ---------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE
--------- -----
<S> <C> <C>
GAMING INDUSTRY - 6.41%
Boomtown, Inc. 1st Mtg.
(11.500% due 11/01/03) $1,000,000 $ 835,000
Casino America, Inc.
(11.500% due 11/15/01) 1,000,000 932,500
Circus Circus Enterprises, Inc.
Senior Notes
(6.750% due 07/15/03) 1,000,000 1,010,359
Empress River Casino Finance Corp.
Senior Notes
(10.750% due 04/01/02) 1,000,000 1,020,000
Hollywood Casino Corp.
Senior Notes (12.750% due 11/01/03) 1,000,000 915,000
ITT Corporation (6.750% due 11/15/05) 1,000,000 1,023,118
----------
5,735,977
----------
HEALTH CARE - 3.60%
Columbia / HCA Healthcare Corp.
(7.690% due 06/15/25) 500,000 551,687
Foundation Health Corp. Notes
(7.750% due 06/01/03) 500,000 526,528
Tenet Healthcare Corp.
(10.125% due 03/01/05) 500,000 553,750
Universal Health Services Senior Notes
(8.750% due 08/15/05) 1,000,000 1,020,000
----------
2,651,965
----------
INDUSTRIAL POWER PRODUCTION - .90%
Calpine Corp. Senior Note
(9.250% due 02/01/04) 750,000 660,000
----------
INSURANCE - 6.01%
Berkley (W.R.) Corp. Deb.
(9.875% due 05/15/08) 500,000 627,651
Home Holdings, Inc. Senior Notes
(7.750% due 12/15/98) 1,000,000 897,500
Leucadia National Corp. Senior Sub.
(8.250% due 06/15/05) 1,000,000 1,056,682
Leucadia National Corp.
(10.375% due 06/15/02) 1,000,000 1,081,851
The Penn Central Corp.
(9.750% due 08/01/99) 500,000 508,149
Reliance Group Holdings, Inc.
(9.480% due 11/01/00)<F1> 245,000 248,063
----------
4,419,896
----------
MANUFACTURING - 2.67%
International Wire Group Inc.
(11.750% due 06/01/05) 500,000 475,000
Terex Corp. Senior Sec. Note
(13.750% due 05/15/02) 1,000,000 887,500
UCAR Global Enterprises Inc.
(12.000% due 01/15/05) 530,000 602,875
----------
1,965,375
----------
OIL & GAS - PETROLEUM REFINING - 2.38%
Coastal Corp. Senior Notes
(9.750% due 08/01/03) 1,000,000 1,193,097
Penzoil Company Note
(9.625% due 11/15/99) 500,000 560,130
----------
1,753,227
----------
OIL & GAS
- - FIELD EXPLORATION SERVICES - 5.34%
Mesa Incorporated
(12.750% due 06/30/96) 243,000 216,270
Mitchell Energy Development Corp.
Senior Note
(6.750% due 02/15/04) 750,000 759,744
PDV America, Inc. Senior Note
(7.750% due 08/01/00) 1,000,000 970,000
Triton Incorporated Senior Sub. Note
(0.000% due 11/01/97) 1,000,000 862,500
Union Texas Petroleum
(8.375% due 03/15/05) 1,000,000 1,122,970
----------
3,931,484
----------
PAPER & FOREST PRODUCTS - .73%
Westvaco Corp. (10.300% due 01/15/19) 500,000 533,693
----------
RETAIL - FOOD - .56%
Great American Cookie Company
(10.875% due 01/15/01) 500,000 415,000
----------
RETAIL - GENERAL - 1.49%
Hook - SuperX Inc.
(10.125% due 06/01/02) 1,000,000 1,094,960
----------
</TABLE>
The accompanying notes are an integral part of the
financial statments.
<PAGE>
BOND PORTFOLIO
- ---------------------------------------------------------------
CORPORATE BONDS AND NOTES (continued)
- ---------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE
--------- -----
<S> <C> <C>
SAVINGS & LOANS - 1.09%
Western Financial Savings Bank Deb.
(8.500% due 07/01/03) $ 750,000 $ 803,457
----------
TRANSPORTATION - 1.53%
NWA Trust Senior Notes - Class B
(10.230% due 06/21/14)<F1> 975,384 1,127,837
----------
Total Corporate Bonds & Notes
(cost $34,480,965) $35,725,317
----------
</TABLE>
- ---------------------------------------------------------------
COMMON STOCKS - .09%
- ---------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------ -----
<S> <C> <C>
OIL & GAS - DOMESTIC - .03%
Mesa Incorproated* 6,417 $ 24,064
----------
TRAVEL & RECREATION - .06%
Host Marriot* 752 9,964
Marriott International 752 28,764
----------
38,728
----------
Total Common Stocks (cost $62,998) $ 62,792
----------
<CAPTION>
- -------------------------------------------------------------
WARRANTS - .02%
- -------------------------------------------------------------
SHARES VALUE
------ -----
<S> <C> <C>
GAMING INDUSTRY - .01%
Boomtown Incorporated Warrants 1,000 $ 1,000
Hemmeter Enterprises Warrants 6,000 9,000
----------
10,000
----------
RETAIL - FOOD - .01%
Great American Cookie Warrants 90 2,250
----------
Total Warrants (cost $28,050) $ 12,250
----------
<CAPTION>
- ---------------------------------------------------------------
PREFERRED STOCKS - 1.22%
- ---------------------------------------------------------------
SHARES VALUE
------ -----
<S> <C> <C>
PACKAGING - 1.22%
Earthshell Container Corporation
Series A
Cumulative Senior Convertible 8%<F2> 500 $ 900,000
----------
Total Preferred Stocks (cost $500,000) $ 900,000
----------
</TABLE>
The accompanying notes are an integral part of the
financial statments.
<PAGE>
BOND PORTFOLIO
- ---------------------------------------------------------------
SHORT-TERM INVESTMENTS - 2.16%
- ---------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE
--------- -----
<S> <C> <C>
VARIABLE RATE DEMAND NOTES<F3> - 2.16%
General Mills, Incorporated
(5.2909% due 01/03/96) $ 562,987 $ 562,987
Pitney Bowes Credit Corporation
(5.295% due 01/03/96) 88,438 88,438
Sara Lee Corporation
(5.275% due 01/03/96) 573,324 573,324
Southwestern Bell Telephone Company
(5.275% due 01/03/96) 32,607 32,607
Wisconsin Electric Power Company
(5.337% due 01/03/96) 330,833 330,833
----------
1,588,189
----------
Total Short-Term Investments
(cost $1,588,189) $ 1,588,189
----------
TOTAL INVESTMENTS - 98.20%
(cost $68,891,795) $72,246,710
<F4>
OTHER ASSETS AND LIABILITIES - 1.80% $ 1,320,989
----------
TOTAL NET ASSETS - 100.00% $73,567,699
===========
_____________
*Non-income Producing
(PIK) Payment in Kind
<FN>
<F1>
Interest rates vary periodically based on current market rates.
Rates shown
are as of December 31, 1995.
<F2>
144 A - Privately placed security traded among qualified
institutional
buyers.
<F3>
Interest rates vary periodically based on current market rates.
The maturity
shown for each variable rate demand note is the later of the
next scheduled
interest rate adjustment date or the date on which principal can
be recovered
through demand. Information shown is as of December 31, 1995.
<F4>
Gross unrealized appreciation and depreciation of securities at
December 31,
1995 for financial reporting purposes was $4,048,528 and $693,613
respectively; tax amounts were substantially the same.
</FN>
</TABLE>
The accompanying notes are an integral part of the
financial statments.
<PAGE>
CARILLON FUND, INC.
STATEMENTS OF ASSETS AND LIABILITIES
- --------------------------------------------------------------
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Equity Capital Bond
Portfolio Portfolio
Portfolio
--------- ---------
- ---------
<S> <C> <C> <C>
ASSETS
Investments in securities,
at value (cost $175,920,205; $218,835,319 $144,690,193
$72,246,710
$135,067,776; $68,891,795)
Receivables:
Shares sold 613,564 346,931
200,974
Interest and dividends 500,951 974,672
1,239,833
Prepaid expenses 4,007 9,131
2,529
------------ ------------
- -----------
219,953,841 146,020,927
73,690,046
------------ ------------
- -----------
LIABILITIES
Investment securities
purchased 242,864 ---
- ---
Investment advisory fees 105,836 83,450
29,747
Custodial and portfolio
accounting fees 5,550 6,824
5,817
Professional fees 9,055 7,919
7,643
Deferred compensation
for directors --- ---
78,097
Bank overdraft 26,250 299,101
- ---
Other accrued expenses 1,039 1,125
1,043
------------ ------------
- -----------
390,594 398,419
122,347
------------ ------------
- -----------
NET ASSETS
Paid-in capital 166,237,225 133,657,394
70,344,243
Undistributed net
investment income 448,232 369,776
573,990
Accumulated net realized
gain/(loss) 9,962,676 1,972,921
(705,449)
Net unrealized appreciation 42,915,114 9,622,417
3,354,915
$219,563,247 $145,622,508
$73,567,699
============ ============
===========
Shares authorized
($.10 par value) 20,000,000 15,000,000
10,000,000
============ ============
===========
Shares outstanding 13,271,036 10,615,444
6,646,535
============ ============
===========
Net asset value,
offering and redemption price
per share (Net assets/shares
outstanding) $ 16.54 $ 13.72 $
11.07
============ ============
===========
</TABLE>
The accompanying notes are an integral part of the
financial statements.
<PAGE>
CARILLON FUND, INC.
STATEMENTS OF OPERATIONS
- -----------------------------------------------------------
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Equity Capital Bond
Portfolio Portfolio
Portfolio
--------- ---------
- ---------
<S> <C> <C> <C>
INVESTMENT INCOME
Interest $ 1,334,466 $ 6,396,152 $
5,599,409
Dividends (net of foreign
withholding taxes of
$77,205; $35,722; $0) 3,125,590 1,327,680
211
----------- -----------
- -----------
4,460,056 7,723,832
5,599,620
----------- -----------
- -----------
EXPENSES
Investment advisory fees 1,108,596 913,378
314,237
Custodial fees and expenses 42,765 26,602
19,216
Portfolio accounting fees 32,383 42,247
37,387
Professional fees 9,683 10,278
9,724
Directors' fees 13,981 13,982
13,981
Transfer agent fees 5,766 5,760
5,778
Registration and filing fees 5,560 4,666
5,650
Other 11,247 10,099
9,074
----------- -----------
- -----------
1,229,981 1,027,012
415,047
----------- -----------
- -----------
NET INVESTMENT INCOME 3,230,075 6,696,820
5,184,573
----------- -----------
- -----------
REALIZED AND UNREALIZED
GAIN/(LOSS) ON INVESTMENTS
Net realized gain/loss)
on investments 9,962,775 1,973,190
(162,632)
Net change in unrealized
appreciation/depreciation
of investments 31,418,181 8,952,302
6,104,034
----------- -----------
- -----------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS 41,380,956 10,925,492
5,941,402
----------- -----------
- -----------
NET INCREASE IN NET ASSETS
FROM OPERATIONS $44,611,031 $17,622,312
$11,125,975
=========== ===========
===========
</TABLE>
The accompanying notes are an integral part of the
financial statements.
<PAGE>
CARILLON FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
- ------------------------------------------------------
<TABLE>
<CAPTION>
Equity Portfolio
For the Year Ended December
31,
- -------------------------------
1995 1994
---- ----
<S> <C> <C>
OPERATIONS
Net investment income $ 3,230,075 $ 2,179,435
Net realized gain on investments 9,962,775 12,644,565
Net change in unrealized
appreciation/(depreciation)
of investments 31,418,181 (10,119,382)
------------ ------------
44,611,031 4,704,618
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income (3,023,061) (2,008,382)
Net realized gain on investments (12,644,665) (5,834,819)
------------ ------------
(15,667,726) (7,843,201)
------------ ------------
FUND SHARE TRANSACTIONS
Proceeds from shares sold 29,948,214 24,726,975
Net asset value of shares
issued to shareholders
in reinvestment of dividends
and distributions 15,667,726 7,843,201
Payments for shares redeemed (12,692,274) (9,973,908)
------------ ------------
32,923,666 22,596,268
------------ ------------
NET INCREASE IN NET ASSETS 61,866,971 19,457,685
NET ASSETS
Beginning of year 157,696,276 138,238,591
------------ ------------
End of year (including
undistributed net investment
income of $448,232 in 1995
and $241,218 in 1994) $219,563,247 $157,696,276
============ ============
FUND SHARE TRANSACTIONS:
Sold 1,968,821 1,706,967
Issued in reinvestment of
dividends and distributions 1,111,633 535,871
Redeemed (837,546) (693,517)
------------ ------------
Net increase from
fund share transactions 2,242,908 1,549,321
============ ============
</TABLE>
The accompanying notes are an integral part of the
financial statements.
<PAGE>
CARILLON FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
- ------------------------------------------------------
<TABLE>
<CAPTION>
Capital Portfolio
For the Year Ended December
31,
- -------------------------------
1995 1994
---- ----
<C> <C>
OPERATIONS
Net investment income $ 6,696,820 $ 4,674,137
Net realized gain on investments 1,973,190 5,500,010
Net unrealized appreciation/
(depreciation) of investments 8,952,302
(9,024,428)
------------ ------------
17,622,312 1,149,719
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income (6,389,872)
(4,389,579)
Net realized gain on investments (5,716,244)
(1,768,494)
------------ ------------
(12,106,116)
(6,158,073)
------------ ------------
FUND SHARE TRANSACTIONS
Proceeds from shares sold 21,179,705 25,455,114
Net asset value of shares
issued to shareholders
in reinvestment of dividends
and distributions 12,106,115 6,158,073
Payments for shares redeemed (12,442,444)
(7,358,153)
------------ ------------
20,843,376 24,255,034
------------ ------------
NET INCREASE IN NET ASSETS 26,359,572 19,246,680
NET ASSETS
Beginning of year 119,262,936 100,016,256
End of year
(including undistributed
net investment income of
$369,776 in 1995 and
$278,793 in 1994) $145,622,508 $119,262,936
============ ============
FUND SHARE TRANSACTIONS:
Sold 1,579,714 1,885,321
Issued in reinvestment of
dividends and distributions 922,915 458,326
Redeemed (928,220)
(547,407)
------------ ------------
Net increase from fund
share transactions 1,574,409 1,796,240
============ ============
</TABLE>
The accompanying notes are an integral part of the
financial statements.
<PAGE>
CARILLON FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
- ---------------------------------------------------------
<TABLE>
<CAPTION>
Bond Portfolio
For the Year Ended December
31,
- -------------------------------
1995 1994
---- ----
<S> <C> <C>
OPERATIONS
Net investment income $ 5,184,573 $ 3,971,668
Net realized (loss) on investments (162,632)
(305,057)
Net unrealized appreciation/
(depreciation) of investments 6,104,034
(4,551,099)
----------- -----------
11,125,975
(884,488)
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income (5,049,814)
(4,072,051)
Net realized gain on investments ---
(1,473,887)
----------- -----------
(5,049,814)
(5,545,938)
----------- -----------
FUND SHARE TRANSACTIONS
Proceeds from shares sold 12,251,770 12,029,310
Net asset value of shares
issued to shareholders
in reinvestment of dividends
and distributions 5,049,814 5,545,938
Payments for shares redeemed (5,739,318)
(9,343,895)
----------- -----------
11,562,266 8,231,353
----------- -----------
NET INCREASE IN NET ASSETS 17,638,427 1,800,927
NET ASSETS
Beginning of year 55,929,272 54,128,345
----------- -----------
End of year (including
undistributed net investment
income of $573,990 in 1995
and $201,471 in 1994) $73,567,699 $55,929,272
=========== ===========
FUND SHARE TRANSACTIONS:
Sold 1,141,491 1,136,443
Issued in reinvestment of
dividends and distributions 469,937 532,039
Redeemed (538,145)
(886,187)
----------- -----------
Net increase from
share transactions 1,073,283 782,295
=========== ===========
</TABLE>
The accompanying notes are an integral part of the
financial statements.
<PAGE>
CARILLON FUND, INC.
NOTES TO FINANCIAL STATEMENTS
- ---------------------------------------------------------------
DECEMBER 31, 1995
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
Carillon Fund, Inc. (the Fund) is registered under the
Investment Company Act of 1940, as amended, as a no-load,
diversified, open-end management investment company. The shares
of the Fund are sold only to The Union Central Life Insurance
Company (Union Central) and its separate accounts to fund the
benefits under certain variable insurance products. The Fund's
shares are offered in four different series - Equity Portfolio,
Capital Portfolio, Bond Portfolio, and S&P 500 Index Portfolio.
The Equity Portfolio seeks long-term appreciation of capital by
investing primarily in common stocks and other equity
securities. The Capital Portfolio seeks the highest total
return through a combination of income and capital appreciation
consistent with the reasonable risks associated with an
investment portfolio of above-average quality by investing in
equity securities, debt instruments, and money market
instruments. The Bond Portfolio seeks a high level of current
income as is consistent with reasonable investment risk by
investing primarily in long-term, fixed-income, investment-grade
corporate bonds. The financial statements for the S&P 500 Index
Portfolio are presented separately.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Securities valuation - Securities held by the Equity, Capital,
and Bond Portfolios, except for money market instruments
maturing in 60 days or less, are valued as follows: Securities
traded on stock exchanges (including securities traded in both
the over-the-counter market and on an exchange), or listed on
the NASDAQ National Market System, are valued at the last sales
price as of the close of the New York Stock Exchange on the day
the securities are being valued, or, lacking any sales, at the
closing bid prices. Securities traded only in the
over-the-counter market are valued at the last bid price, as of
the close
of trading on the New York Stock Exchange, quoted by brokers
that make markets in the securities. Other securities for which
market quotations are not readily available are valued at fair
value as determined in good faith under procedures adopted by
the Board of Directors. Money market instruments with a
remaining maturity of 60 days or less held by the Equity,
Capital, and Bond Portfolios are valued at amortized cost which
approximates market.
Securities transactions and investment income - Securities
transactions are recorded on the trade date (the date the order
to buy or sell is executed). Dividend income is recorded on the
ex-dividend date and interest income is recorded on the accrual
basis. Accretion of market discounts are deferred until sale.
Accretion of original issue discounts are recognized currently.
Gains and losses on sales of investments are calculated on the
identified cost basis for financial reporting and tax purposes.
The cost of investments is substantially the same for financial
reporting and tax purposes.
Federal taxes - It is the intent of the Fund to comply with the
requirements of the Internal Revenue Code applicable to
regulated investment companies and to distribute all of its net
investment income and any net realized capital gains. Regulated
investment companies owned by the segregated asset accounts of a
life insurance company, held in connection with variable annuity
contracts, are exempt from excise tax on undistributed income.
Therefore, no provision for income or excise taxes has been
recorded. The Bond Portfolio has a capital loss carryforward
for tax purposes of $704,492 at December 31, 1995, of which
$446,614 expires in 2002, and $257,878 expires in 2003.
Dividends and capital gains distributions - Dividends from net
investment income in the Equity, Capital and Bond Portfolios are
declared and paid quarterly. Net realized capital gains are
distributed periodically, no less frequently than annually.
Dividends from net investment income and capital gains
distributions are recorded on the ex-dividend date. All
dividends and distributions are reinvested in additional shares
of the respective Portfolio at the net asset value per share.
The amount of dividends and distributions are determined in
accordance with federal income tax regulations which may differ
from generally accepted accounting principles. These "book/tax"
differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in
nature, such amounts are reclassified within the capital
accounts based on their federal tax-basis treatment; temporary
differences do not require reclassification. Dividends and
distributions which exceed net investment income and net
realized capital gains for financial reporting purposes but not
for tax purposes are reported as dividends in excess of net
investment income or distributions in excess of net realized
capital gains. To the extent they exceed net investment income
and net realized capital gains for tax purposes, they are
reported as distributions of paid-in-capital.
Expenses - Allocable expenses of the Fund are charged to each
Portfolio based on the ratio of the net assets of each Portfolio
to the combined net assets of the Fund. Nonallocable expenses
are charged to each Portfolio based on specific identification.
<PAGE>
NOTE 2 - TRANSACTIONS WITH AFFILIATES
Investment advisory fees - The Fund pays investment advisory
fees to Carillon Advisers, Inc. (the Adviser), under terms of an
Investment Advisory Agreement (the Agreement). Certain officers
and directors of the Adviser are affiliated with the Fund. The
Fund pays the Adviser, as full compensation for all services and
facilities furnished, a monthly fee computed separately for each
Portfolio on a daily basis, at an annual rate, as follows:
(a) for the Equity Portfolio - .65% of the first
$50,000,000, .60% of the next $100,000,000, and .50% of all over
$150,000,000 of the current net asset value:
(b) for Capital Portfolio - .75% of the first $50,000,000,
.65% of the next $100,000,000, and .50% of all over $150,000,000
of the current net asset value.
(c) for the Bond Portfolio - .50% of the first
$50,000,000, .45% of the next $100,000,000, and .40% of all over
$150,000,000 of the current net asset value.
The Agreement provides that if the total operating expenses of
the Fund, exclusive of the advisory fee and certain other
expenses as described in the Agreement, for any fiscal quarter
exceed an annual rate of 1% of the average daily net assets of
the Fund, the Adviser will reimburse the Fund for such excess,
up to the amount of the advisory fee for that year. Such
amount, if any, will be calculated daily and credited on a
monthly basis. No such reimbursements were required for the
periods presented in the financial statements.
In addition to providing investment advisory services, the
Adviser is responsible for providing certain administrative
functions to the Fund. The Adviser has entered into an
Administration Agreement with Carillon Investments, Inc. (the
Distributor) under which the Distributor furnishes substantially
all of such services for an annual fee of .20% of the Fund's
average net assets. The fee is borne by the Adviser, not the
Fund.
Carillon Advisers, Inc. and Carillon Investments, Inc. are
wholly-owned subsidiaries of Union Central.
Directors' fees - Each director who is not affiliated with the
Adviser receives fees from the Fund for service as a director.
Members of the Board of Directors who are not affiliated with
the Adviser are eligible to participate in a deferred
compensation plan. The value of each director's deferred
compensation account will increase or decrease at the same rate
as if it were invested in shares of the Scudder Money Market
Fund.
NOTE 3 - SUMMARY OF PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of securities for the year ended December
31, 1995, excluding short-term obligations, follow:
<TABLE>
<CAPTION>
Equity Capital Bond
Portfolio Portfolio
Portfolio
--------- ---------
- ---------
<S> <C> <C> <C>
Total Cost of Purchases of:
Common Stocks $81,844,932 $30,431,474 $
- -----
U.S. Government Securities ----- 16,949,124
23,228,059
Corporate Bonds ----- 7,156,718
57,777,602
----------- -----------
- -----------
$81,844,932 $54,537,316
$81,005,661
=========== ===========
===========
Total Proceeds from Sales of:
Common Stocks $56,668,208 $14,222,567 $
- -----
U.S. Government Securities ----- 23,511,177
23,527,665
Corporate Bonds ----- 7,440,376
44,784,519
----------- -----------
- -----------
$56,668,208 $45,174,120
$68,312,184
=========== ===========
===========
</TABLE>
<PAGE>
NOTE 4 -FINANCIAL HIGHLIGHTS
Computed on the basis of a share of capital stock outstanding
throughout the year.
<TABLE>
<CAPTION>
Equity Portfolio
Year Ended December 31,
---------------------------------
1995 1994 1993 1992
1991
<S> <C> <C> <C> <C>
<C>
Net Asset Value,
Beginning of Year $ 14.30 $ 14.58 $ 13.74 $
12.60 $ 8.81
Investment Activities:
Net investment income .24 .20 .16
.19 .20<F1>
Net realized and
unrealized gains/
(losses) 3.36 .31 1.69
1.27 3.79
-------- -------- --------
- -------- --------
Total from Investment
Operations 3.60 .51 1.85
1.46 3.99
-------- -------- --------
- -------- --------
Distributions:
Net investment income (.23) (.19) (.16)
(.19) (.20)
Net realized gains (1.13) (.60) (.85)
(.13) ---
-------- -------- --------
- -------- --------
Total Distributions (1.36) (.79) (1.01)
(.32) (.20)
-------- -------- --------
- -------- --------
Net Asset Value,
End of Year $ 16.54 $ 14.30 $ 14.58 $
13.74 $12.60
======== ======== ========
======== ========
Total Return 26.96% 3.42% 14.11%
11.78% 45.55%
Ratios/Supplemental Data:
- ------------------------
Ratio of Expenses to
Average Net Assets .66% .69% .70%
.72% .75%<F1>
Ratio of Net Investment
Income to Average
Net Assets 1.73% 1.45% 1.18%
1.47% 1.79%<F1>
Portfolio Turnover Rate 34.33% 40.33% 37.93%
46.75% 55.17%
Net Assets,
End of Year (000's) $219,563 $157,696 $138,239
$102,306 $79,352
<FN>
<F1>
Net of expenses waived by the Adviser of $.002 per share.
</FN>
</TABLE>
<PAGE>
NOTE 4 -FINANCIAL HIGHLIGHTS (continued)
Computed on the basis of a share of capital stock
outstanding throughout the year.
<TABLE>
<CAPTION>
Capital Portfolio
Year Ended December 31,
----------------------
1995 1994 1993 1992
1991
<S> <C> <C> <C> <C>
<C>
Net Asset Value,
Beginning of Year $ 13.19 $ 13.81 $ 12.99 $
12.82 $ 10.57
Investment Activities:
Net investment income .64 .52 .43 .42
.47
Net realized and
unrealized gains/(losses) 1.15 (.39) 1.17 .56
2.25
------- ------- -------
- ------- -------
Total from Investment
Operations 1.79 .13 1.60 .98
2.72
------- ------- -------
- ------- -------
Distributions:
Net investment income (.64) (.52) (.42) (.42)
(.47)
Net realized gains (.62) (.23) (.36) (.39)
---
------- ------- -------
- ------- -------
Total Distributions (1.26) (.75) (.78)
(.81) (.47)
------- ------- -------
- ------- -------
Net Asset Value,
End of Year $ 13.72 $ 13.19 $ 13.81 $
12.99 $ 12.82
======= ======= =======
======= =======
Total Return 14.28% .94% 12.72%
7.93% 26.10%
Ratios/Supplemental Data:
- ------------------------
Ratio of Expenses to
Average Net Assets .77% .80% .82% .88%
.95%
Ratio of Net
Investment Income to
Average Net Assets 4.99% 4.25% 3.31% 3.49%
4.05%
Portfolio Turnover Rate 43.83% 41.89% 32.42% 39.74%
47.93%
Net Assets,
End of Year (000's) $145,623 $119,263 $100,016
$68,674 $41,844
</TABLE>
<PAGE>
NOTE 4 -FINANCIAL HIGHLIGHTS (continued)
Computed on the basis of a share of capital stock
outstanding throughout the year.
<TABLE>
<CAPTION>
Bond Portfolio
Year Ended December 31,
-----------------------
1995 1994 1993 1992
1991
<S> <C> <C> <C> <C>
<C>
Net Asset Value,
Beginning of Year $10.04 $11.30 $10.91 $10.96
$10.10
------- ------- -------
- ------- -------
Investment Activities:
Net investment income .88 .77 .73 .82
.86
Net realized and
unrealized gains/(losses) .98 (.95) .54 (.01)
.87
------- ------- -------
- ------- -------
Total from Investment
Operations 1.86 (.18) 1.27 .81
1.73
------- ------- -------
- ------- -------
Distributions:
Net investment income (.83) (.78) (.73)
(.82) (.87)
------- ------- -------
- ------- -------
Net realized gains --- (.30) (.15)
(.04) ---
------- ------- -------
- ------- -------
Total Distributions (.83) (1.08) (.88)
(.86) (.87)
------- ------- -------
- ------- -------
Net Asset Value,
End of Year $ 11.07 $ 10.04 $ 11.30 $
10.91 $ 10.96
======= ======= =======
======= =======
Total Return 19.03% (1.63%) 11.94% 7.65%
17.89%
Ratios/Supplemental Data:
- ------------------------
Ratio of Expenses to
Average Net Assets .65% .68% .66% .69%
.73%
Ratio of Net Investment
Income to Average
Net Assets 7.43% 7.21% 6.65% 7.59%
8.27%
Portfolio Turnover Rate 111.01% 70.27% 137.46%
40.91% 39.82%
Net Assets,
End of Year (000's) $73,568 $55,929 $54,128
$38,557 $31,009
</TABLE>
<PAGE>
Independent Auditor's Report
- ------------------------------------------------------
To the Board of Trustees and Shareholders of
S&P 500 Index Portfolio
We have audited the accompanying statement of net assets of the
S&P 500 Index
Portfolio of Carillon Fund, Inc. (the "Fund"), as of December 31,
1995, the
related statement of operations, and the statement of changes in
net assets
for the period from December 29, 1995 (date of inception) to
December 31,
1995. These financial statements are the responsibility of the
Fund's
management. Our responsibility is to express an opinion on these
financial
statements based on our audit.
We conducted our audit in accordance with generally accepted
auditing
standards. Those standards require that we plan and perform the
audit to
obtain reasonable assurance about whether the financial
statements are free
of material misstatement. An audit includes examining, on a test
basis,
evidence supporting the amounts and disclosures in the financial
statements.
Our procedures included confirmation of securities owned as of
December 31,
1995, by correspondence with the custodian and a broker. An
audit also
includes assessing the accounting principles used and significant
estimates
made by management, as well as evaluating the overall financial
statement
presentation. We believe that our audit provides a reasonable
basis for our
opinion.
In our opinion, the financial statements as of December 31, 1995,
present
fairly, in all material respects, the financial position of the
Fund, as of
December 31, 1995, and the results of its operations and the
changes in its
net assets for the period presented in conformity with generally
accepted
accounting principles.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Dayton, Ohio
February 2, 1996
<PAGE>
S&P 500 INDEX PORTFOLIO
STATEMENT OF NET ASSETS
- --------------------------------------------------
December 31, 1995
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investment in securities, at value:
$300,000 United States Treasury Bill
due September 9, 1996
(Amortized cost $289,225) $ 289,225
Variation margin receivable on 1
Standard & Poor's 500 Index Futures Contract
(Strike price 624.10 expiring June 1996) 25
Cash 15,898
-----------
Total Assets 305,148
-----------
LIABILITIES -----
NET ASSETS
Paid-in capital 305,000
Undistributed net investment income 123
Net unrealized appreciation
on futures contract 25
$ 305,148
===========
Shares authorized ($.10 par value) 10,000,000
===========
Shares outstanding 30,500
===========
Net asset value, offering and
redemption price per share
(Net assets / shares outstanding) $ 10.00
===========
</TABLE>
The accompanying notes are an integral part of
the financial statements.
<PAGE>
S&P 500 INDEX PORTFOLIO
STATEMENT OF OPERATIONS
- ------------------------------------------------
<TABLE>
<CAPTION>
For the Period From December 29, 1995
to December 31, 1995
<S> <C>
INVESTMENT INCOME
Interest $ 123
EXPENSES ----
--------
NET INVESTMENT INCOME 123
--------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS
Net change in unrealized appreciation
on futures contract 25
--------
NET INCREASE IN NET ASSETS
FROM OPERATIONS $ 148
========
</TABLE>
The accompanying notes are an integral part of
the financial statements.
<PAGE>
S&P 500 INDEX PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- -----------------------------------------------------------
<TABLE>
<CAPTION>
For the Period From December 29, 1995
to December 31, 1995
<S> <C>
OPERATIONS
Net investment income $ 123
Net change in unrealized
appreciation on futures contract 25
--------
148
--------
FUND SHARE TRANSACTIONS
Proceeds from shares sold 305,000
Net asset value of share issued
to shareholders in reinvestment
of dividends and distributions -----
Payments for shares redeemed -----
--------
305,000
--------
NET INCREASE IN NET ASSETS 305,148
NET ASSETS
Beginning of period -----
--------
End of period
(including undistributed
net investment income of $123) $305,148
========
FUND SHARE TRANSACTIONS:
Sold 30,500
Issued in reinvestment of
dividends and distributions ----
Redeemed ----
--------
Net increase from fund share
transactions 30,500
========
</TABLE>
The accompanying notes are an integral part of
the financial statements.
<PAGE>
S&P 500 INDEX PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------
December 31, 1995
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
The S&P 500 Index Portfolio (Index) is a series of Carillon Fund,
Inc. (the Fund), a no-load, diversified, open-end management
investment company registered under the Investment Company Act of
1940, as amended. The shares of Index are sold only to The Union
Central Life Insurance Company (Union Central) and its separate
accounts to fund benefits under certain variable insurance
products. Index seeks investment results that correspond to the
total return performance of U.S. commons stocks, as represented
in
the Standard & Poors 500 Index. Index commenced operations on
December 29, 1995.
The Funds shares are offered in four different series - Equity
Portfolio, Capital Portfolio, Bond Portfolio, and the S&P 500
Index Portfolio. The financial statements for the Equity Capital
and Bond Portfolios are presented separately.
Securities valuation - Securities, except for money market
instruments maturing in 60 days or less, are valued as follows:
Securities traded on stock exchanges (including securities traded
in both the over-the-counter market and on an exchange), or
listed
on the NASDAQ National Market System, are valued at the last
sales
price as of the close of the New York Stock Exchange on the day
the securities are being valued, or, lacking any sales, at the
closing bid prices. Securities traded only in the
over-the-counter market are valued at the last bid price, as of
the close
of trading on the New York Stock Exchange, quoted by brokers that
make markets in the securities. Other securities for which
market
quotations are not readily available are valued at fair value as
determined in good faith under procedures adopted by the Board of
Directors. Money market instruments with a remaining maturity of
60 days or less are valued at amortized cost which approximates
market.
Securities transactions and investment income - Securities
transactions are recorded on the trade date (the date the order
to
buy or sell is executed). Dividend income is recorded on the
ex-dividend date and interest income is recorded on the accrual
basis. Gains and losses on sales of investments are calculated
on
the identified cost basis for financial reporting and tax
purposes. The cost of investments is substantially the same for
financial reporting and tax purposes.
Federal taxes - It is the intent of Index to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its net investment
income and any net realized capital gains. Regulated investment
companies owned by the segregated asset accounts of a life
insurance e company, held in connection with variable annuity
contracts, are exempt from excise tax on undistributed income.
Therefore, no provision for income or excise taxes has been
recorded.
Dividends and capital gains distributions - Dividends from net
investment income are declared and paid quarterly. Net realized
capital gains are distributed periodically, no less frequently
than annually. Dividends from net investment income and capital
gains distributions are recorded on the ex-dividend date. All
dividends and distributions are reinvested in additional shares
of
the respective Portfolio at the net asset value per share.
The amount of dividends and distributions are determined in
accordance with federal income tax regulations which may differ
from generally accepted accounting principles. These "book/tax"
differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature,
such amounts are reclassified within the capital accounts based
on
their federal tax-basis treatment; temporary differences do not
require reclassification. Dividends and distributions which
exceed net investment income and net realized capital gains for
financial reporting purposes but not for tax purposes are
reported
as dividends in excess of net investment income or distributions
in excess of net realized capital gains. To the extent they
exceed net investment income and net realized capital gains for
tax purposes, they are reported as distributions of
paid-in-capital
Expenses - Allocable expenses of the Fund are charged to each
Portfolio based on the ratio of the net assets of each Portfolio
to the combined net assets of the Fund. Nonallocable expenses
are
charged to each Portfolio based on specific identification.
NOTE 2 - TRANSACTIONS WITH AFFILIATES
Investment advisory fees - Index pays investment advisory fees to
Carillon Advisers, Inc. (the Adviser), under terms of an
Investment Advisory Agreement (the Agreement). Certain officers
and directors of the Adviser are affiliated with Index. Index
pays the Adviser, as full compensation for all services and
facilities furnished, a monthly fee computed on a daily basis, at
an annual rate of 0.30% of the current net asset value. The
Agreement provides that the Adviser will limit the operating
expenses of Index, other than the advisory fee, to an annual rate
of 0.30% of the average daily net assets. The Adviser will
reimburse Index for expenses exceeding this rate. No such
reimbursements were required for the period presented in the
financial statements.
In addition to providing investment advisory services, the
Adviser
is responsible for providing certain administrative functions to
the Fund. The Adviser has entered into an Administration
Agreement with Carillon Investments, Inc. (the Distributor) under
which the Distributor furnishes substantially all of such
services
for an annual fee of .05% of the Funds average net assets. The
fee is borne by the Adviser, not the Fund.
Carillon Advisers, Inc. and Carillon Investments, Inc. are
wholly-owned subsidiaries of Union Central.
Directors fees - Each director who is not affiliated with the
Adviser receives fees from the Fund for service as a director.
Members of the Board of Directors who are not affiliated with the
Adviser are eligible to participate in a deferred compensation
plan. The value of each directors deferred compensation account
will increase or decrease at the same rate as if it were invested
in shares of the Scudder Money Market Fund.
NOTE 3 - FUTURES CONTRACTS
Index may purchase futures contracts on the Standard & Poors 500
Stock Index. These contracts provide for the sale of a specified
quantity of a financial instrument at a fixed price at a future
date. When Index enters into a futures contract, it is required
to deposit and maintain as collateral such initial margin as
required by the exchange on which the contract is traded. Under
terms of the contract, Index agrees to receive from or pay to the
broker an amount equal to the daily fluctuation in the value of
the contract (known as the variation margin). The variation
margin is recorded as unrealized gain or loss until the contract
expires or is otherwise closed, at which time the gain or loss is
realized. Index invests in futures as a substitute to investing
in the 500 common stock positions in the Standard & Poors 500
Index. The potential risk to Index is that the change in the
value in the underlying securities may not correlate to the value
of the contracts. At December 31, 1995 Index had one open
futures
contract on the Standard & Poors 500 Index expiring in June 1996.
The opening notional value of the contract was $312,050 and the
market value on December 31, 1995 was $312,075. The initial
margin requirement of $10,000 was satisfied by segregating a
portion of the U.S. Treasury Bill into a separate custodial
account held in the brokers name.
NOTE 4 - FINANCIAL HIGHLIGHTS
The financial highlights table is not presented because the
activity for the period presented did not round to $.01 in any
category of the reconciliation of beginning to ending net asset
value per share. The total return and the ratios and
supplemental
data were all less than 0.1%. The net assets at December 31,
1995
were $305,148.
