Registration No. 2-90309
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. ___ ___
Post-Effective Amendment No. 22 X
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and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 23 X
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CARILLON FUND, INC.
(Exact Name of Registrant as Specified in Charter)
1876 Waycross Road, Cincinnati, Ohio 45240
(Address of Principal Executive Offices)
(513) 595-2600
(Registrant's Telephone Number)
John F. Labmeier, Esq.
The Union Central Life Insurance Company
P.O. Box 40888
Cincinnati, Ohio 45240
(Name and Address of Agent for Service)
Copy to:
Jones and Blouch L.L.P.
Suite 405 West
1025 Thomas Jefferson St., N.W.
Washington, D.C. 20007
_________________
It is proposed that this filing will become effective (check
appropriate box)
( ) immediately upon filing pursuant to paragraph (b) of Rule 485
(X) on May 1, 1999 pursuant to paragraph (b) of Rule 485
( ) 60 days after filing pursuant to paragraph (a)(1) of Rule 485
( ) on (date)pursuant to paragraph (a)(1) of Rule 485
( ) 75 days after filing pursuant to paragraph (a)(2) of Rule 485
( ) on (date) pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
( ) This post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
_________________
<PAGE>
PART A
INFORMATION REQUIRED IN A PROSPECTUS
May 1, 1999
CARILLON FUND, INC.
- -----------------------------------------------------------
Carillon Fund, Inc. is a mutual fund with seven separate
Portfolios, each with its own investment objective. We cannot
assure you that any Portfolio will meet its objective. The
Portfolios' investment objectives are:
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.
THE S&P MIDCAP 400 INDEX PORTFOLIO seeks investment
results that correspond to the total return performance of U.S.
common stocks, as represented by the S&P MidCap 400 Index.
THE BALANCED INDEX PORTFOLIO seeks investment results, with
respect to 60% of its assets, that correspond to the total
return performance of U.S. common stocks, as represented by the
S&P 500 Index and, with respect to 40% of its assets, that
correspond to the total return performance of investment grade
bonds, as represented by the Lehman Brothers Aggregate Bond
Index.
THE MICRO-CAP PORTFOLIO seeks long-term appreciation of
capital by investing primarily in the common stocks of domestic
companies with smaller market capitalizations.
THIS PROSPECTUS CONTAINS INFORMATION YOU SHOULD KNOW BEFORE
ALLOCATING YOUR CONTRACT VALUES TO ANY OF THE PORTFOLIOS. WE
SUGGEST THAT YOU READ IT AND KEEP IT FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION ("SEC") NOR ANY STATE.
NEITHER THE SEC NOR ANY STATE HAS DETERMINED WHETHER THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
INTRODUCTION TO THE FUND..................................1
PORTFOLIO PROFILES........................................1
EQUITY PORTFOLIO PROFILE................................1
BOND PORTFOLIO PROFILE..................................3
CAPITAL PORTFOLIO PROFILE...............................5
S&P 500 INDEX PORTFOLIO PROFILE.........................7
S&P MIDCAP 400 INDEX PORTFOLIO..........................9
BALANCED INDEX PORTFOLIO................................9
MICRO-CAP PORTFOLIO PROFILE.............................9
PORTFOLIO OPERATING EXPENSES.............................11
OTHER INVESTMENT POLICIES, STRATEGIES AND RISKS..........12
FOREIGN SECURITIES.....................................12
FOREIGN CURRENCY TRANSACTIONS..........................12
JUNK BONDS.............................................13
REPURCHASE AGREEMENTS..................................13
REVERSE REPURCHASE AGREEMENTS..........................13
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS....13
OPTIONS ON SECURITIES INDICES..........................15
COLLATERALIZED MORTGAGE OBLIGATIONS....................15
LENDING PORTFOLIO SECURITIES...........................16
MIXED FUNDING..........................................16
OTHER INFORMATION......................................16
FUND MANAGEMENT..........................................16
INVESTMENT ADVISER.....................................16
ADVISORY FEE...........................................17
EXPENSES...............................................17
CAPITAL STOCK..........................................17
VALUATION OF PORTFOLIO SHARES..........................18
DIVIDENDS AND DISTRIBUTIONS..............................18
TAXES....................................................18
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT........19
PREPARING FOR YEAR 2000..................................19
S&P DISCLAIMER...........................................19
CORPORATE BOND RATINGS.................................20
COMMERCIAL PAPER RATINGS...............................21
APPENDIX B: FINANCIAL HIGHLIGHTS........................22
<PAGE>
INTRODUCTION TO THE FUND
This prospectus explains the objectives, risks and strategies of
the seven Portfolios of Carillon Fund, Inc. (the "Fund"). The
Portfolios are mutual funds used solely as investment options
for variable annuity or variable life insurance contracts
offered by The Union Central Life Insurance Company ("Union
Central"). Although you cannot purchase shares of the
Portfolios directly, you can instruct Union Central how to
allocate your contract's values among the Portfolios. Each
Portfolio Profile below summarizes important facts about the
Portfolio, including its investment objective, strategy, risks
and past investment performance. More detailed information
about some of the Portfolios' investment policies and strategies
is provided after the Profiles, along with information about
Portfolio expenses, share pricing and Financial Highlights for
each Portfolio.
PORTFOLIO PROFILES
EQUITY PORTFOLIO PROFILE
Investment Objective
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.
Investment Strategies
A major portion of the Equity Portfolio will be invested in
common stocks. The Portfolio seeks 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 "value" investment
style). The Portfolio may invest all or a portion of its assets
in preferred stocks, bonds, convertible preferred stocks,
convertible bonds, and convertible debentures. 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 normally will remain primarily invested in common
stocks.
The Equity Portfolio's investment strategy is based upon the
belief of the Fund's investment adviser (the "Adviser") 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. The Adviser 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.
The Adviser 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, the Adviser expects 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.
PRIMARY RISKS
> Market risk: The Equity Portfolio's total return, like stock
prices generally, will fluctuate within a wide range in response
to stock market trends. As a result, shares of the Portfolio
could drop in value over short or even long periods. Stock
markets tend to move in cycles, with periods of rising prices
and periods of falling prices.
> Financial risk: The Equity Portfolio's total return will
fluctuate with fluctuations in the earnings stability or overall
financial soundness of the companies whose stock the Portfolio
purchases.
> Investment style risk: The Equity Portfolio's investment
style risks that returns from "value" stocks it purchases will
trail returns from other asset classes or the overall stock
market.
Bar Chart and Performance Table
The bar chart and table below provide an indication of the risk
of investing in the Equity Portfolio. The bar chart shows the
Portfolio's performance in each of the past 10 calendar years.
The table shows how the Portfolio's average annual returns for
one, five and 10 calendar years compare with those of a broad-
based stock market index. The Portfolio's returns are net of
its expenses, but do NOT reflect the additional fees and
expenses of your variable annuity or variable life insurance
contract. If those contract fees and expenses were included,
the returns would be lower. Keep in mind that the Portfolio's
past performance does not indicate how it will perform in the
future.
<PAGE>
Annual Total Return
[The bar chart displayed here shows the Total Returns for the
calendar years as follows:
11.79%, 1989
-15.45%, 1990
45.55%, 1991
11.78%, 1992
14.11%, 1993
3.42%, 1994
26.96%, 1995
24.52%, 1996
20.56%, 1997
-15.31%, 1998 ]
The Equity Portfolio's return for the most recent calendar
quarter ended March 31, 1999, was -7.12%. During the period
shown in the bar chart, the highest return for a calendar
quarter was 26.7% (quarter ending 3/31/91) and the lowest return
for a quarter was -23.9% (quarter ending 9/30/90).
Average Annual Total Returns for Years Ended December 31, 1998
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years
<S> <C> <C> <C>
Equity Portfolio -15.3%% 10.8% 15.0%
Russell 2000 -3.5% 10.2% 11.1%
</TABLE>
BOND PORTFOLIO PROFILE
Investment 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.
Investment Strategies
The Bond Portfolio normally will invest at least 75% of the
value of its assets in:
- - publicly-traded or 144a debt securities rated BBB or BAA3 or
higher by a nationally recognized rating service such as
Standard & Poor's or Moody's,
- - 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:
- - debt securities that are unrated or below investment-grade
bonds ("high yield" or "junk" bonds),
- - convertible debt securities,
- - convertible preferred and preferred stocks, or
- - other securities.
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 Portfolio may also write covered call options on
U.S. Treasury Securities and options on futures contracts for
such securities. A description of the corporate bond ratings
assigned by Standard & Poor's and Moody's is included in
Appendix A: Ratings - Corporate Bond Ratings.
Primary Risks
- - Interest Rate Risk: Interest rate risk is the potential for
fluctuation in bond prices due to changing interest rates. Bond
prices generally rise when interest rates fall. Likewise, bond
prices generally fall when interest rates rise. Furthermore,
the price of bonds with a longer maturity generally fluctuates
more than bonds with a shorter maturity. To compensate
investors for larger fluctuations, longer maturity bonds usually
offer higher yields than shorter maturity bonds. Interest rate
risk is a risk inherent in all bonds, regardless of credit
quality.
The Portfolio maintains an intermediate-term average
maturity (5 to 15 years), and is therefore subject to a moderate
to high level of interest rate risk.
- - Credit Risk: Credit risk is the risk that an issuer of a
security will be unable to make payments of principal and/or
interest on a security held by the Portfolio. When an issuer
fails to make a scheduled payment of principal or interest on a
security, or violates other terms and agreements of a security,
the issuer and security are in default. A default by the issuer
of a security generally has a severe negative affect on the
market value of that security.
The credit risk of the Portfolio is a function of the
credit quality of its underlying securities. The average credit
quality of the Portfolio is expected to be very high.
Therefore, the credit risk of the Portfolio is expected to be
low. As of December 31, 1998, the average quality of the
Portfolio, as rated by Moody's Investors Service, was AA2 (See
Appendix A: Ratings - Corporate Bond Ratings). However,
certain individual securities held in the Portfolio may have
substantial credit risk. The Portfolio may contain up to 25% of
securities rated below investment grade. Securities rated below
investment grade generally have substantially more credit risk
than securities rated investment grade. Securities rated below
investment grade are defined as having a rating below Baa by
Moody's Investors Services and below BBB by Standard & Poor's
Corporation (See Appendix A: Ratings - Corporate Bond Ratings).
As of December 31, 1998, 15.1% of the debt securities held by
the Bond Portfolio were of less than investment grade.
- - Income Risk: Income risk is the risk of a decline in the
Portfolio's income due to falling market interest rates. Income
risk is generally higher for portfolios with short term average
maturities and lower for portfolios with long term average
maturities. Income risk is also generally higher for portfolios
that are actively traded and lower for portfolios that are less
actively traded. The Portfolio maintains an intermediate
average maturity and is actively traded. Therefore, income risk
is expected to be moderate to high.
- - Prepayment Risk: Prepayment risk is the risk that, during
periods of declining interest rates, the principal of mortgage-
backed securities and callable bonds will be repaid earlier than
scheduled, and the portfolio manager will be forced to reinvest
the unanticipated repayments at generally lower interest rates.
The Portfolio's exposure to mortgage-backed securities and
currently callable bonds is generally low to moderate.
Therefore, the prepayment risk of the Portfolio is expected to
be low to moderate. Other factors, including interest rate risk
and credit risk can cause fluctuation in bond prices.
Bar Chart and Performance Table
The bar chart and table below provide an indication of the risk
of investing in the Bond Portfolio. The bar chart shows the
Portfolio's performance in each of the past 10 calendar years.
The table shows how the Portfolio's average annual returns for
one, five and 10 calendar years and compare with those of a
broad-based bond index. The Portfolio's returns are net of its
expenses, but do not reflect the additional fees and expenses of
your variable annuity or variable life insurance contract. If
those contract fees and expenses were included, the returns
would be lower. Keep in mind that the Portfolio's past
performance does not indicate how it will perform in the future.
Annual Total Return
[The bar chart displayed here shows the Total Returns for the
calendar years as follows:
10.72%, 1989
8.66%, 1990
17.89%, 1991
7.65%, 1992
11.94%, 1993
-1.63%, 1994
19.03%, 1995
7.19%, 1996
11.02%, 1997
6.52%, 1998 ]
The Bond Portfolio's return for the most recent calendar quarter
ended March 31, 1999, was -0.1%.During the period shown in the
bar chart, the highest return for a calendar quarter was 6.1%
(quarter ending 6/30/95) and the lowest return for a quarter was
- -1.6% (quarter ending 3/31/94).
Average Annual Total Returns for Years Ended December 31, 1998
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years
<S> <C> <C> <C>
Bond Portfolio 6.5% 8.2% 9.8%
Lehman Aggregate Bond Index 8.7% 7.3% 9.3%
</TABLE>
CAPITAL PORTFOLIO PROFILE
Investment Objective
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.
Investment Strategies
There are no percentage limitations on the class 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 types of securities at the sole discretion of the Adviser.
The 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 55%-65% in equity, 35%-45% in debt and
0%-5% in money market securities. In addition, the Adviser
considers market monetary policy, equity momentum, market
sentiment, economic influences and market cycles in making its
asset allocation decision.
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 securities 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.
Money Market Instruments. The following securities 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 "Futures Contracts and Options on Futures
Contracts," page 19.
Primary Risks
- - Asset allocation risks: Because the Adviser has complete
discretion regarding allocation of the Capital Portfolio's
investments among equity, debt and money market instruments, the
primary risk of that Portfolio is that the Adviser will not
accurately predict the relative performance of those market
segments for any particular economic cycle and may not optimally
time reallocations of the Portfolio's assets among those market
segments.
- - Market risk: When the Capital Portfolio is substantially
invested in equity securities, its total return, like stock
prices generally, will fluctuate within a wide range in response
to stock market trends. As a result, shares of the Portfolio
could drop in value over short or even long periods. Stock
markets tend to move in cycles, with periods of rising prices
and periods of falling prices.
- - Financial risk: The Capital Portfolio's total return will
fluctuate with fluctuations in the earnings stability or overall
financial soundness of the companies whose stock the Portfolio
purchases and in the ability of an issuer of a debt security it
purchases to pay principal and interest on that security.
- - Other risks: The risks relating to the Capital Portfolio's
investments in debt securities are the same as those described
above for the Bond Portfolio.
Bar Chart and Performance Table
The bar chart and table below provide an indication of the risk
of investing in the Capital Portfolio. The bar chart shows the
Portfolio's performance in each calendar year since inception.
The table shows how the Portfolio's average annual returns for
one and five calendar years and since inception compare with
those of a broad-based bond and a stock market index. The
Portfolio's returns are net of its expenses, but do not reflect
the additional fees and expenses of your variable annuity or
variable life insurance contract. If those contract fees and
expenses were included, the returns would be lower. Keep in
mind that the Portfolio's past performance does not indicate how
it will perform in the future.
Annual Total Return
[The bar chart displayed here shows the Total Returns for the
calendar years as follows:
26.10%, 1991
7.93%, 1992
12.72%, 1993
0.94%, 1994
14.28%, 1995
14.94%, 1996
7.40%, 1997
-13.25%, 1998 ]
The Capital Portfolio's return for the most recent calendar
quarter ended March 31, 1999, was -2.67%. During the period
shown in the bar chart, the highest return for a calendar
quarter was 13.5% (quarter ending 3/31/91) and the lowest return
for a quarter was -15.2% (quarter ending 9/30/98).
Average Annual Total Returns for Years Ended December 31, 1998
<TABLE>
<CAPTION>
Since
1 Year 5 Years Inception*
<S> <C> <C> <C>
Capital Portfolio -13.1% 4.3% 7.6%
Lehman Aggregate Bond Index 8.7% 7.3% 9.3%
S&P 500 Index 28.6% 24.0% 18.3%
</TABLE>
*May 1, 1990
S&P 500 INDEX PORTFOLIO PROFILE
Investment Objective
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.
Investment Strategies
The S&P 500 Index Portfolio seeks to substantially replicate the
total return of the securities comprising the S&P 500 Index,
taking into consideration redemptions, sales of additional
shares, and other adjustments described below. Precise
replication of the capitalization weighting of the securities in
the S&P 500 is not feasible. 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 the Portfolio
and index performance. The correlation of the Portfolio's
performance to that of the S&P 500 should increase as the
Portfolio grows. There can be no assurance that the Portfolio
will achieve a 95% correlation.
The S&P 500 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 common
stocks that comprise the S&P 500.
Although the Adviser will attempt to invest as much of the S&P
500 Index Portfolio's assets as is practical in stocks included
among the S&P 500 and futures contracts and related options, a
portion of the 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 Portfolio may invest in government
securities, money market instruments, or other fixed-
income securities, or retain cash or cash equivalents.
Primary Risks
- - Market risk: The S&P 500 Index Portfolio's total return,
like stock prices generally, will fluctuate within a wide range
in response to stock market trends, so a share of the Portfolio
could drop in value over short or even long periods. Stock
markets tend to move in cycles, with periods of rising prices
and periods of falling prices.
- - Investment style risk: Stocks of large companies, such as
those listed among the S&P 500 Index, occasionally go through
cycles of doing worse (or better) than the stock markets in
general or other types of investments.
- - Correlation risk: Because the S&P Index Portfolio has
expenses, and the S&P 500 Index does not, the Portfolio may be
unable to replicate precisely the performance of the Index.
While the Portfolio remains small, it may have a greater risk
that its performance will not match that of the Index.
Bar Chart and Performance Table
The bar chart and table below provide an indication of the risk
of investing in the S&P 500 Index Portfolio. The bar chart
shows the Portfolio's performance in each calendar year since
its inception. The table shows how the Portfolio's average
annual returns for one year and since inception compare with
those of the S&P 500 Index whose performance it seeks to
replicate. The Portfolio's returns are net of its expenses, but
do NOT reflect the additional fees and expenses of your variable
annuity or variable life insurance contract. If those contract
fees and expenses were included, the returns would be lower.
Keep in mind that the Portfolio's past performance does not
indicate how it will perform in the future.
Annual Total Return
[The bar chart displayed here shows the Total Returns for the
calendar years as follows:
23.37%, 1996
32.72%, 1997
28.54%, 1998 ]
The S&P 500 Index Portfolio's return for the most recent
calendar quarter ended March 31, 1999, was 4.83%. During the
period shown in the bar chart, the highest return for a calendar
quarter was 21.2% (quarter ending 12/31/98) and the lowest
return for a quarter was -9.9% (quarter ending 9/30/98).
Average Annual Total Returns for Years Ended December 31, 1998
<TABLE>
<CAPTION>
Since
1 Year Inception*
<S> <C> <C>
S&P 500 Index Portfolio 28.5% 28.2%
S&P 500 Index 28.6% 28.1%
</TABLE>
*December 29, 1995
S&P MidCap 400 INDEX PORTFOLIO PROFILE
Investment Objective
The S&P MidCap 400 Index Portfolio seeks investment results that
correspond to the total return performance of U.S. common
stocks, as represented by the S&P MidCap 400 Index.
Investment Strategies
The S&P MidCap 400 Index Portfolio seeks to substantially
replicate the total return of the securities comprising the S&P
MidCap 400 Index, taking into consideration redemptions, sales
of additional shares, and other adjustments described below.
Precise replication of the capitalization weighting of the
securities in the S&P MidCap 400 Index is not feasible. The
Carillon S&P MidCap 400 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 MidCap 400 Index. A
correlation of 100% would represent perfect correlation between
the Portfolio and index performance. The correlation of the
Portfolio's performance to that of the S&P MidCap 400 Index
should increase as the Portfolio grows. There can be no
assurance that the Portfolio will achieve a 95% correlation.
The S&P MidCap 400 Index Portfolio may invest up to 5% of its
assets in Standard & Poor's Mid-Cap Depositary Receipts(R)
("Mid-Cap SPDR's(R)"). Mid-Cap SPDR's 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 common stocks that
comprise the S&P MidCap 400 Index.
Although the Adviser will attempt to invest as much of the S&P
MidCap 400 Index Portfolio's assets as is practical in stocks
included among the S&P MidCap 400 Index and futures contracts
and options relating thereto, a portion of the 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 Portfolio may
invest in government securities, money market instruments, or
other fixed-income securities, or retain cash or cash
equivalents.
Primary Risks
- Market risk: The S&P MidCap 400 Index Portfolio's total
return, like stock prices generally, will fluctuate within a
wide range in response to stock market trends, so a share of the
Portfolio could drop in value over short or even long periods.
Stock markets tend to move in cycles, with periods of rising
prices and periods of falling prices.
- Investment style risk: Stocks of medium sized (mid-cap)
companies, such as those listed among the S&P MidCap 400 Index
occasionally go through cycles of doing worse (or better) than
the stock markets in general or other types of investments.
- Correlation risk: Because the S&P MidCap 400 Index
Portfolio has expenses, and the S&P MidCap 400 Index does not,
the Portfolio may be unable to replicate precisely the
performance of the Index. While the Portfolio remains small, it
may have a greater risk that its performance will not match that
of the Index.
BALANCED INDEX PORTFOLIO PROFILE
Investment Objective
The Balanced Index Portfolio seeks investment results, with
respect to 60% of its assets, that correspond to the total
return performance of U.S. common stocks, as represented by the
S&P 500 Index and, with respect to 40% of its assets, that
correspond to the total return performance of investment grade
bonds, as represented by the Lehman Brothers Aggregate Bond
Index.
Investment Strategies
The Portfolio will invest approximately 60% of its net assets in
a portfolio of common stocks, futures (in combination with the
appropriate amount of U.S. Treasury securities as collateral),
and Standard & Poor's Depositary Receipts(R) ("SPDR's") to track
the S&P 500 Index and approximately 40% of its net assets in a
portfolio of investment grade bonds designed to track the Lehman
Brothers Aggregate Bond Index (the "Lehman Brothers Index").
The Portfolio may also hold cash or cash equivalent securities,
although the amount of cash and cash equivalent securities is
expected to represent a small percentage of the funds assets.
The Portfolio's common stock portfolio seeks to substantially
replicate the total return of the securities comprising the S&P
500 Index, taking into consideration redemptions, sales of
additional shares, and other adjustments described below.
Precise replication of the S&P 500 is not feasible. The
Portfolio will attempt to achieve, in both rising and falling
markets, a correlation of at least 95% between the total return
of its common stock portfolio before expenses and the total
return of the S&P 500. A correlation of 100% would represent
perfect correlation between the Portfolio and index performance.
There can be no assurance that the Portfolio will achieve a 95%
correlation.
The Portfolio may invest up to 5% of its assets in Standard &
Poor's Depositary Receipts(R) ("SPDRs(R)"). SPDR's 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 common stocks that
comprise the S&P 500.
The Portfolio's bond portfolio seeks to substantially replicate
the total return of the securities comprising the Lehman
Brothers Aggregate Bond Index taking into consideration
redemptions, sales of additional shares, and other adjustments
described below. Precise replication of the Lehman Aggregate
Bond Index is not feasible due to the large number of securities
in the index (over 7,000). The Portfolio will invest in a
representative sample of fixed income securities, which, taken
together, are expected to perform similarly to the Lehman
Brothers Aggregate Index. The Portfolio will attempt to
achieve, in both rising and falling markets, a correlation of at
least 95% between the total return of its bond portfolio before
expenses and the total return of the Lehman Brothers Aggregate
Bond Index. A correlation of 100% would represent perfect
correlation between the Portfolio and index performance. There
can be no assurance that the Portfolio will achieve a 95%
correlation.
The Portfolio may invest up to 20% of its assets in stock or
bond futures contracts and options in order to invest
uncommitted cash balances, to maintain liquidity to meet
shareholder redemptions, or minimize trading costs.
Primary Risks
- Stock Market risk: The Portfolio's common stock
portfolio, like stock prices generally, will fluctuate within a
wide range in response to stock market trends, so a share of the
Portfolio could drop in value over short or even long periods.
Stock markets tend to move in cycles, with periods of rising
prices and periods of falling prices.
- Interest Rate risk: The Portfolio's bond portfolio is
subject to interest rate risk. Interest rate risk is the
potential for fluctuation in bond prices due to changing
interest rates. Bond prices generally rise when interest rates
fall. Likewise, bond prices generally fall when interest rates
rise. Furthermore, the price of bonds with a longer maturity
generally fluctuate more than bonds with a shorter maturity. To
compensate investors for larger fluctuations, longer maturity
bonds usually offer higher yields than shorter maturity bonds.
Interest rate risk is a risk inherent in all bonds, regardless
of credit quality. The Portfolio's bond portfolio has an
intermediate-term average maturity (5 to 15 years), and is
therefore expected to have moderate to high level of interest
rate risk.
- Credit Risk: The Portfolio's bond portfolio is subject to
credit risk. Credit risk is the risk that an issuer of a
security will be unable to make payments of principal and/or
interest on a security held by the Portfolio. When an issuer
fails to make a scheduled payment of principal or interest on a
security, or violates other terms and agreements of a security,
the issuer and security are in default. A default by the issuer
of a security generally has a severe negative affect on the
market value of that security.
The credit risk of the Portfolio is a function of the
credit quality of its underlying securities. The average credit
quality of the Portfolio is expected to be very high.
Therefore, the credit risk of the Portfolio is expected to be
low. The average quality of the Lehman Brothers Aggregate Bond
Index, which the Portfolio attempts to replicate, was AA2 using
Moody's Investors Service (See Appendix A: Ratings - Corporate
Bond Ratings). Other factors, including interest rate risk and
prepayment risk, cause fluctuation in bond prices.
- Income Risk: The Portfolio's bond portfolio is subject to
income risk. Income risk is the risk of a decline in the
Portfolio's income due to falling market interest rates. Income
risk is generally higher for portfolios with short term average
maturities and lower for portfolios with long term average
maturities. Income risk is also generally higher for portfolios
that are actively traded and lower for portfolios that are less
actively traded. The Portfolio's bond portfolio is expected to
maintain an intermediate average maturity and have moderate
trading activity. Therefore, income risk is expected to be
moderate.
- Prepayment Risk: Prepayment risk is the risk that, during
periods of declining interest rates, the principal of mortgage-
backed securities and callable bonds will be repaid earlier than
scheduled, and the portfolio manager will be forced to reinvest
the unanticipated repayments at generally lower interest rates.
The Portfolio's exposure to mortgage-backed securities and
currently callable bonds is generally low to moderate.
Therefore, the prepayment risk of the Portfolio is expected to
be low to moderate.
- Correlation risk: Because the Balanced Index Portfolio has
expenses, and the S&P 500 Index and Lehman Brothers Aggregate
Bond Index do not, the Portfolio may be unable to replicate
precisely the performance of the Index. In addition, the
Portfolio intends to hold a sampling of both the stocks in the
S&P 500 Index and the bonds in the Lehman Brothers Aggregate
Bond Index, rather than exactly matching the market weighting of
each security in its respective index. While the Portfolio
remains small, it may have a greater risk that its performance
will not match that of the Index.
MICRO-CAP PORTFOLIO PROFILE
Investment Objective
The Micro-Cap Portfolio seeks long-term appreciation of capital
by investing primarily in the common stocks of domestic
companies with smaller market capitalizations.
Investment Strategies
The Micro-Cap Portfolio invests at least 70% of its assets in
common stocks of companies with market capitalizations of less
than $250 million at the time of initial purchase and that the
Adviser believes are undervalued in the marketplace. The
Portfolio seeks current income from dividends, interest and
other sources only when consistent with its primary objective.
The Portfolio generally invests the remaining 30% of its total
assets similarly, but may invest in other equity securities
including foreign securities. A portion of the Portfolio may be
invested in money market instruments pending investment or to
utilize cash reserves.
Individual security selection will focus on companies which the
Adviser believes possess above-average levels of profitability,
revenue growth and earnings growth that are selling at
price/earnings ratios below their internal growth rate. A
significant emphasis will be placed on technical analysis in an
effort to identify when a recognition of value occur in the
marketplace.
Primary Risks
- Market risk: The Micro-Cap Portfolio's total return, like
stock prices generally, will fluctuate within a wide range, so a
share of the Micro-Cap Portfolio could drop in value over short
or even long periods. Stock markets tend to move in cycles,
with periods of rising prices and periods of falling prices.
- Investment style risk: Small companies may lack the depth
of management, diversified product offering, financial
resources, and competitive strengths of larger companies. Due to
these and other factors, some small companies may suffer
significant losses. Stocks of small companies may be more
volatile than the stocks of larger companies because of lower
levels of trading volume and wider spreads between the bid and
asked prices of these securities. The prices of the shares of
small companies may move independently of the values of larger
companies such as those which comprise the Dow Jones Industrial
Average and the S&P 500 Index.
- Financial risk: The Micro-Cap Portfolio's total return
will fluctuate with fluctuations in the earnings stability or
overall financial soundness of the companies whose stock the
Portfolio purchases.
Bar Chart and Performance Table
The bar chart and table below provide an indication of the risk
of investing in the Micro-Cap Portfolio. The bar chart shows
the Portfolio's performance in each calendar year since its
inception. The table shows how the Portfolio's average annual
returns for one year and since inception compare with those of a
broad-based stock market index. The Portfolio's returns are net
of its expenses, but do NOT reflect the additional fees and
expenses of your variable annuity or variable life insurance
contract. If those contract fees and expenses were included,
the returns would be lower. Keep in mind that the Portfolio's
past performance does not indicate how it will perform in the
future.
Annual Total Return
[The bar chart displayed here shows the Total Returns for the
calendar years as follows:
-12.89%, 1998
The Micro-Cap Portfolio's return for the most recent calendar
quarter ended March 31, 1999, was -1.16%. During the period
shown in the bar chart, the highest return for a calendar
quarter was 5.6% (quarter ending 3/31/98) and the lowest return
for a quarter was -20.4% (quarter ending 9/30/98).
Average Annual Total Returns for Years Ended December 31, 1998
<TABLE>
<CAPTION>
1 Year Since Inception*
------ ---------------
<S> <C> <C>
Micro-Cap Portfolio -12.9% -13.5%
Russell 2000 -2.2% 0.0%
*November 24, 1997
</TABLE>
PORTFOLIO OPERATING EXPENSES
This table describes the fees and expenses of the Portfolios:
EXPENSES (as a percentage of average net assets)
<TABLE>
<CAPTION>
S&P
MidCap
S&P 500 400 Balanced
Equity Bond Capital Index Micro-Cap Index Index
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
<S> <C> <C> <C> <C> <C> <C> <C>
Management
Fees .56% .47% .69% .30% 1.00% .30% .30%
Other
Expenses .06% .11% .10% .13% .97% .30%** .30%**
---- ---- ---- ---- ----- ---- ----
Total
Operating
Expenses .62% .58% .79% .43% 1.07%* .60%* .60%*
</TABLE>
* Total Operating Expenses in excess of 2.00% for the Micro-Cap
Portfolio, and in excess of .60% for the S&P MidCap 400 Index
and Balanced Index Portfolios are paid by the investment
adviser.
** "Other Expenses" for the S&P MidCap 400 Index and Balanced
Index Portfolios are based on estimates.
EXAMPLE
The table below shows the amount of expenses a Shareholder would
pay on a $10,000 investment assuming a 5% annual return.+
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
Equity Portfolio $64 $199 $347 $776
Bond Portfolio $59 $186 $325 $727
Capital Portfolio $81 $253 $440 $981
S&P 500 Index Portfolio $44 $138 $241 $543
Micro-Cap Portfolio $202 $624 $1,072 $2,313
S&P MidCap 400 Index Portfolio $62 $193 N/A N/A
Balanced Index Portfolio $62 $193 N/A N/A
</TABLE>
The purpose of this table is to help you understand the Fund
expenses that you may bear indirectly through your purchase of a
Union Central contract. This table does NOT include any contract
or variable account charges. Those charges, along with the
Fund's expenses, are contained in the prospectus for your
contract.
This table should not be considered a representation of past or
future expenses. Actual expenses may be more or less than those
shown.
- -------------
+ 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.
OTHER INVESTMENT POLICIES, STRATEGIES AND RISKS
FOREIGN SECURITIES
Each Portfolio may invest in foreign securities that are
suitable for the Portfolio's investment objectives and policies.
Foreign securities investments are limited to 25% of net assets
for the Equity, Bond, Balanced Index and Micro-Cap Portfolios
and to 35% of net assets for the Capital Portfolio. The S&P
500 Index Portfolio and S&P MidCap 400 Index Portfolio are
limited to investing in those foreign securities included in the
Standard & Poor's 500 Composite Stock Index and S&P MidCap 400
Index, respectively. Each Portfolio that invests in foreign
securities limits not only its total purchases of foreign
securities, but also its purchases for any single country. For
"major countries," the applicable limit is 10% of Portfolio net
assets for the Equity, Bond, Balanced Index and Micro-Cap
Portfolios and 20% for the Capital Portfolio; for other
countries, the applicable limit is 5% for each Portfolio.
"Major countries" currently include: The United Kingdom,
Germany, France, Italy, Switzerland, Netherlands, Spain,
Belgium, Canada, Mexico, Argentina, Chile, Brazil, Australia,
Japan, Singapore, New Zealand, Hong Kong, Sweden and Norway.
Investing in foreign securities involves risks which are not
ordinarily associated with investing in domestic securities,
including:
- political or economic instability in the foreign country;
- diplomatic developments that could adversely affect the
value of the foreign security;
- foreign government taxes;
- costs incurred by a Portfolio in converting among various
currencies;
- fluctuation in currency exchange rates;
- the possibility of imposition of currency controls,
expropriation or nationalization measures or withholding
dividends at the source;
- in the event of a default on a foreign debt security,
possible difficulty in obtaining or enforcing a judgment
against the issuer;
- less publicly available information about foreign issuers
than domestic issuers;
- foreign accounting and financial reporting requirements
are generally less extensive than those in the U.S.;
- securities of foreign issuers are generally less liquid
and more volatile than those of comparable domestic
issuers;
- there is often less governmental regulation of exchanges,
broker-dealers and issuers and brokerage costs may be
higher than in the United States.
Foreign securities purchased by the Portfolios may include
securities issued by companies located in countries not
considered to be major industrialized nations. Such countries
are subject to more economic, political and business risk than
major industrialized nations, and the securities they issue may
be subject to abrupt or erratic price fluctuations, and are
expected to be more volatile and more uncertain as to payments
of interest and principal. Developing countries may have
relatively unstable governments, economies based only on a few
industries, and securities markets that trade only a small
number of securities. The secondary market for such securities
is expected to be less liquid than for securities of major
industrialized nations.
FOREIGN CURRENCY TRANSACTIONS
Each Portfolio other than the S&P 500 Index Portfolio, S&P
MidCap 400 Index Portfolio and Balanced Index Portfolio may
engage in forward foreign currency contracts ("forward
contracts") in connection with the purchase or sale of a
specific security. A forward contract involves an obligation to
purchase or sell a specific foreign currency at a future date,
which may be any fixed number of days from the date of the
contract agreed upon by the parties, at a price set at the time
of the contract.
Portfolios will not enter into forward contracts for longer-term
hedging purposes. The possibility of changes in currency
exchange rates will be incorporated into the long-term
investment considerations when purchasing the investment and
subsequent considerations for possible sale of the investment.
JUNK BONDS
The Capital and Bond Portfolios may each invest up to 25% of its
assets in bonds rated below the four highest grades used by
Standard & Poor's or Moody's (frequently referred to as "junk"
bonds). These bonds present greater credit and market risks
than higher rated bonds. Such risks relate not only to the
greater financial weakness of the issuers of such securities but
also to other factors including:
- greater likelihood that 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 than is the case with higher-rated bonds;
- greater likelihood that redemption or call provisions,
if exercised in a period of lower interest rates, would result
in the bonds being replaced by lower yielding securities;
- limited trading markets that may make it more difficult
to dispose of the bonds and more difficult to determine their
fair value.
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.
None of the Portfolios engage extensively in repurchase
agreements, but each may engage in them from time to time. 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 these agreements will mature
in seven days or less. In the event of the bankruptcy of the
other party, a Portfolio could experience delays in recovering
its money, may realize only a partial recovery or even no
recovery, and may also incur disposition costs.
REVERSE REPURCHASE AGREEMENTS
The S&P 500 Index Portfolio, the S&P MidCap 400 Index Portfolio
and the Balanced 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. While a reverse
repurchase agreement is in effect, the Custodian will segregate
from other Portfolio assets an amount of cash or liquid high
quality debt obligations equal in value to the repurchase price
(including any accrued interest).
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, the S&P MidCap 400 Index Portfolio and the
Balanced 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. 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 or S&P
MidCap 400 Index, 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.
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). These
Portfolios may purchase call option contracts to close out a
position acquired through the sale of a call option. These
Portfolios will only write options that are traded on a domestic
exchange or board of trade.
The S&P 500 Index, S&P MidCap 400 Index and Balanced Index
Portfolios 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 ON SECURITIES INDICES
The S&P 500 Index and S&P MidCap 400 Index Portfolios may
purchase or sell options on the S&P 500 and S&P MidCap 400
Index, respectively, 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. The Balanced Index
Portfolio may purchase or sell options on the S&P 500 Index,
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 and S&P MidCap 400
Index Portfolios 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.
LENDING PORTFOLIO SECURITIES
The S&P 500 Index, S&P MidCap 400 Index and Balanced Index
Portfolios 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. 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 will be made only to borrowers that the
Adviser deems to be of good financial standing.
MIXED FUNDING
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.
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.
FUND MANAGEMENT
INVESTMENT ADVISER
The Adviser is Carillon Advisers, Inc., 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.
Gary R. Rodmaker, CFA is primarily responsible for the day-to-
day management of the S&P 500 Index Portfolio, Equity Portfolio,
and Capital Portfolio. The Adviser is in the process of hiring
a Portfolio Manager for the Equity Portfolio who will manage the
Portfolio on a permanent basis.
Mr. Rodmaker is the Corporate Bond Portfolio Manager of the
Adviser and has been affiliated with the Adviser and Union
Central since 1989. Mr. Rodmaker is also primarily responsible
for the day-to-day management of the Micro-Cap Portfolio, which
is currently not available as an investment option under Union
Central's variable annuity contracts and variable universal life
insurance policies.
Mr. Rodmaker and Michael J. Schultz are primarily responsible
for the day-to-day management of the Bond Portfolio. Mr.
Schultz is the Mortgage-backed Securities Portfolio Manager of
the Adviser and has been affiliated with the Adviser and Union
Central as a portfolio manager since 1992.
Mr. Rodmaker and David M. Weisenburger, CFA, are primarily
responsible for the day-to-day management of the S&P MidCap 400
Index Portfolio and the Balanced Index Portfolio. Mr.
Weisenburger is the Assistant Portfolio Manager of the Adviser
and has been affiliated with the Adviser and Union Central since
July, 1996. Prior thereto, Mr. Weisenburger was a general
securities trader for Ohio National Equity Sales Corp. and a
registered representative for Fidelity Investments.
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:
<TABLE>
<CAPTION>
Portfolio Advisory Fee
<S> <C>
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;
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;
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;
S&P 500 Index Portfolio .30% of the current value of the net assets;
Micro-Cap Portfolio 1.00% of the current value of the net assets;
S&P MidCap 400
Index Portfolio .30% of the current value of net assets; and
Balanced Index Portfolio .30% of the current value of net assets.
</TABLE>
The effective rates paid by each Portfolio are set forth in
"Portfolio Operating Expenses" section on page 16.
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, the S&P MidCap 400 Index Portfolio and the Balanced
Index Portfolio, other than the advisory fee for that Portfolio,
to the extent that such expenses exceed .30% of that Portfolio's
net assets. The Adviser will also pay any expenses of the Micro-
Cap Portfolio, other than the advisory fee for that Portfolio,
to the extent that such expenses exceed 1.00% of that
Portfolio's net assets.
CAPITAL STOCK
The Fund currently has seven 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 its 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 its contract owners.
VALUATION OF PORTFOLIO SHARES
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:
- when the New York Stock Exchange is closed and
- 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.
Portfolio shares are valued 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. Other-
wise, such securities are valued at fair value as determined in
good faith by the Fund's 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
The Fund intends to distribute substantially all of the net
investment income, if any, of each Portfolio. For dividend
purposes, net investment income of each Portfolio consists of
all dividends or interest earned by that Portfolio, minus
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 of a Portfolio are reinvested in
additional shares of the 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 pay no federal income taxes on
the amounts distributed.
Because the sole shareholder of the Fund is Union Central, no
discussion is included herein as to the federal income tax
consequences to shareholders. For information about the federal
tax consequences of purchasing the contracts, see the prospectus
for your contract.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT
Firstar Mutual Fund Services, LLC, 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.
PREPARING FOR YEAR 2000
Like all financial services providers, the Adviser utilizes
systems that may be affected by Year 2000 transition issues. In
addition to the Adviser, the Fund relies on service providers,
including the Fund's custodian, transfer agent, and dividend
disbursing agent, that also may be affected. The Adviser has
advised the Fund that it has developed, and is in the process of
implementing, a Year 2000 transition plan. Management of the
Fund is in the process of confirming that the service providers
to the Fund are also engaged in similar transition plans. While
the Adviser has made representations to Management that each
party is implementing a Year 2000 transition plan, the resources
that are being devoted to this effort are substantial and it is
difficult to predict with precision whether the amount of
resources ultimately devoted, or the outcome of these efforts,
will have any negative impact on their operations. However, as
of the date of this prospectus, Fund management does not
anticipate that shareholders will experience negative effects on
their investment, or on the services provided in connection
therewith, as a result of Year 2000 transition implementation.
The Adviser has advised Fund management that it currently
anticipates that its systems will be Year 2000 compliant on or
about June 30, 1999, but there can be no assurance that it will
be successful, or that interaction with other service providers
will not impair the Adviser's services at that time.
S&P 500 DISCLAIMER
The S&P 500 is an unmanaged index of common 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)", "500", "S&P MidCap 400 Index", and "Standard &
Poor's MidCap 400 Index" are trademarks of The McGraw-Hill
Companies, Inc. and have been licensed for use by the Fund. The
Portfolio is not sponsored, endorsed, sold or promoted by
Standard & Poor's ("S&P"). S&P makes no representation or
warranty, express or implied, to the beneficial owners of the
Portfolio or any member of the public regarding the advisability
of investing in securities generally or in the Portfolio
particularly or the ability of the S&P 500 Index or the S&P
MidCap 400 Index to track general stock market performance.
S&P's only relationship to the Fund is the licensing of certain
trademarks and trade names of S&P and of the S&P 500 Index and
the S&P MidCap 400 Index which is determined, composed and
calculated by S&P without regard to the Fund or the Portfolio.
S&P has no obligation to take the needs of the Fund or the
beneficial owners of the Portfolio into consideration in
determining, composing or calculating the S&P 500 Index and the
S&P MidCap 400 Index. S&P is not responsible for and has not
participated in the determination of the prices and amount of
the Portfolio or the timing of the issuance or sale of the
Portfolio or in the determination or calculation of the equation
by which the Portfolio is to be converted into cash. S&P has no
obligation or liability in connection with the administration,
marketing or trading of the Portfolio.
See further information in the Statement of Additional
Information.
<PAGE>
FINANCIAL HIGHLIGHTS
The financial statements for the year ended December 31, 1998,
have been audited by Deloitte & Touche LLP, whose unqualified
report thereon is included in the Statement of Additional
Information. The financial statements for the years ended
December 31, 1997, December 31, 1996 and December 31, 1995 have
been audited by Deloitte & Touche LLP, whose reports expressed
unqualified opinions on those statements. The financial
statements for the year ended December 31, 1994 have been
audited by another independent accountant, whose report
expressed an unqualified opinion 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.)
<PAGE>
<TABLE>
<CAPTION>
Equity Portfolio
Year ended December 31,
1998 1997 1996 1995 1994
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of year $20.35 $19.45 $16.54 $14.30 $14.58
Investment Activities:
Net investment income .25 .23 .29 .24 .20
Net realized and
unrealized gains (losses) (2.80) 3.23 3.61 3.36 .31
------- ------- ------- ------- -------
Total from
Investment Operations (2.55) 3.46 3.90 3.60 .51
Distributions:
Net investment income (.23) (.27) (.27) (.23) (.19)
Net realized gains (2.68) (2.29) (.72) (1.13) (.60)
------- ------- ------- ------- -------
Total Distributions (2.91) (2.56) (.99) (1.36) (.79)
Net Asset Value,
End of year $14.89 $20.35 $19.45 $16.54 $14.30
====== ====== ====== ====== ======
Ratios/Supplemental Data:
Total Return <F1> (15.31%) 20.56% 24.52% 26.96% 3.42%
Ratio of Expenses to
Average Net Assets .62% .62% .64% .66% .69%
Ratio of Net Investment
Income to Average
Net Assets 1.41% 1.23% 1.66% 1.73% 1.45%
Portfolio Turnover Rate 62.50% 57.03% 52.53% 34.33% 40.33%
Net Assets, End of Period
(in thousands) $248,783 $335,627 $288,124 $219,563 $157,696
<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>
FINANCIAL HIGHLIGHTS
(Continued)
<TABLE>
<CAPTION>
Bond Portfolio
Year ended December 31,
1998 1997 1996 1995 1994
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of year $11.29 $10.91 $11.07 $10.04 $11.30
Investment Activities:
Net investment income .77 .79 .79 .88 .77
Net realized and
unrealized gains (losses) (.05) .37 (.04) .98 (.95)
------- ------- ------- ------- -------
Total from
Investment Operations .72 1.16 .75 1.86 (.18)
Distributions:
Net investment income (.76) (.72) (.87) (.83) (.78)
In excess of
net investment income -- -- (.04) -- --
Net realized gains (.12) (.06) -- -- (.30)
------- ------- ------- ------- -------
Total Distributions (.88) (.78) (.91) (.83) (1.08)
Net Asset Value,
End of year $11.13 $11.29 $10.91 $11.07 $10.04
======= ======= ======= ======= =======
Ratios/Supplemental Data:
Total Return <F1> 6.52% 11.02% 7.19% 19.03% (1.63%)
Ratio of Expenses to
Average Net Assets .58% .60% .62% .65% .68%
Ratio of Net Investment
Income to
Average Net Assets 6.8% 7.15% 7.24% 7.43% 7.21%
Portfolio Turnover Rate 67.57% 113.41% 202.44% 111.01% 70.27%
Net Assets, End of Period
(in thousands) $113,762 $99,892 $85,634 $73,568 $55,929
<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>
FINANCIAL HIGHLIGHTS
(Continued)
<TABLE>
<CAPTION>
Capital Portfolio
Year ended December 31,
1998 1997 1996 1995 1994
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net Asset Value:
Beginning of period $14.10 $14.95 $13.72 $13.19 $13.81
Investment Activities:
Net investment income .41 .62 .63 .64 .52
Net realized and
unrealized gains (losses) (2.14) .37 1.36 1.15 (.39)
------ ------ ------ ------ ------
Total from
Investment Operations (1.73) .99 1.99 1.79 .13
Distributions:
Net investment income (.45) (.66) (.57) (.64) (.52)
Net realized gains (.72) (1.18) (.19) (.62) (.23)
------ ------ ------ ------ ------
Total Distributions (1.17) (1.84) (.76) (1.26) (.75)
Net Asset Value,
End of period $11.20 $14.10 $14.95 $13.72 $13.19
====== ====== ====== ====== ======
Ratios/Supplemental Data:
Total Return <F1> (13.25%) 7.40% 14.94% 14.28% .94%
Ratio of Expenses
to Average Net Assets .79% .77% .77% .77% .80%
Ratio of Net Investment
Income to Average
Net Assets 3.27% 4.22% 4.42% 4.99% 4.25%
Portfolio Turnover Rate 165.00% 60.84% 53.11% 43.83% 41.89%
Net Assets, End of Period
(in thousands) $109,678 $148,830 $159,294 $145,623 $119,263
<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>
FINANCIAL HIGHLIGHTS
(Continued)
<TABLE>
<CAPTION>
S&P 500 Index Portfolio
Year Ended December 31,
1998 1997 1996 <F1>
---- ---- ----
<S> <C> <C> <C>
Net Asset Value,
Beginning of Year $15.74 $12.13 $10.00
Investment Activities:
Net investment income .20 .20 .20
Net realized and unrealized
gains/(losses) 4.21 3.72 2.12
------ ------ ------
Total from Investment Operations 4.41 3.92 2.32
Distributions:
Net investment income (.20) (.21) (.19)
Net realized gains (.46) (.10) --
------ ------ ------
Total Distributions (.66) (.31) (.19)
Net Asset Value,
End of Year $19.49 $15.74 $12.13
====== ====== ======
Total Return, not annualized 28.54% 32.72% 23.37%
Ratios/Supplemental Data
Ratio of Net Expenses to
Average Net Assets .43% .50% .59%<F2>
Ratio of Net Investment
Income to Average Net Assets 1.25% 1.48% 2.14%<F2>
Portfolio Turnover Rate 2.64% 9.06% 1.09%
Net Assets, End of Year (000's) $131,345 $55,595 $29,205
<FN>
<F1> The portfolio commenced operation on December 29, 1995. The financial
highlights table for the period ending December 31, 1995 is not presented
because the activity for the period did not round to $0.01 in any category of
the reconciliation of beginning to ending net asset value per share. The ratios
and total return were all less than 0.1%. The net assets at December 31, 1995
were $305,148.
<F2> The ratios of net expenses to average net assets would have increased and
net investment income to average net assets would have decreased by .25% for
the year ended December 31, 1996, had the Adviser not waived a portion of its
fee.
</FN>
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS
(Continued)
<TABLE>
<CAPTION>
Micro-Cap Portfolio
Year Ended For the Period
December 31, From November 24, 1997
1998 to December 31, 1997(1)
------ ------
<S> <C> <C>
Net Asset Value,
Beginning of Year $ 9.93 $10.00
Investment Activities:
Net investment income (loss) (.10) (.01)
Net realized and unrealized
gains/(losses) (1.18) (.06)
------ ------
Total from Investment Operations (1.28) (.07)
Distributions:
Net investment income -- --
Net realized gains -- --
------ ------
Total Distributions -- --
Net Asset Value,
End of Year $ 8.65 $ 9.93
------ ------
Total Return (12.89%) ( 0.7%)
Ratios/Supplemental Data
Ratio of Net Expenses to
Average Net Assets 1.97%<F1> 2.00%<F1>
Ratio of Net Investment loss
to Average Net Assets (1.10%)<F1> (1.16%)<F1>
Portfolio Turnover Rate 64.22% --
Net Assets, End of Year (000's) $2,595 $2,980
<FN>
<F1> The ratios of net expenses to average net assets would have increased and
net investment income to average net assets would have decreased by .74% for
the year ended December 31, 1998, and 3.00% for the period ended December 31,
1997, had the Adviser not reimbursed expenses. These ratios are annualized.
</FN>
</TABLE>
<PAGE>
APPENDIX A: RATINGS
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 Rating Services
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:
- management;
- economic evaluation of the industry and an appraisal of
speculative type risks which may be inherent in certain
areas;
- competition and customer acceptance of products;
- liquidity;
- amount and quality of long-term debt;
- ten-year earnings trends;
- financial strength of a parent company and the
relationships which exist with the issuer; and
- 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 Rating Services
Commercial paper rated A by Standard & Poor's Rating Services 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>
APPENDIX B: S&P 500 and S&P MIDCAP 400 RETURNS
S&P 500 RETURNS
To illustrate the market risks relating to changes in stock prices, the
following table shows the average returns of the S&P 500 for the period from
1926 to 1998:
<TABLE>
<CAPTION>
S&P 500 Returns (1926-1998)
Over Various Time Horizons
1 Year 5 Years 10 Years 20 Years
<S> <C> <C> <C> <C>
Best 54.0% 24.1% 20.1% 17.75%
Worst -43.3 % -12.5% -0.9% 3.1%
Average 13.2% 10.7% 11.2% 11.1%
</TABLE>
Average return may not be useful for forecasting future returns in any
particular period, as stock returns are quite volatile from year to year.
These returns are those of the S&P 500 and NOT of our S&P 500 Index Portfolio.
There is no assurance that the Portfolio will be able to replicate the
performance of the Index.
S&P MIDCAP 400 RETURNS
To illustrate the market risks relating to changes in stock prices, the
following table shows the average returns of the S&P MidCap 400 Index for the
period from the inception date of the Index (July, 1991) to 1998:
S&P MidCap 400 Returns (July, 1991-1998)
Over Various Time Horizons
<TABLE>
<CAPTION>
Since
1 Year 5 Years Inception
<S> <C> <C> <C>
Best % % %
Worst % % %
Average % -- --
</TABLE>
Average return may not be useful for forecasting future returns in any
particular period, as stock returns are quite volatile from year to year. These
returns are those of the S&P MidCap 400 Index and not of our S&P MidCap 400
Index Portfolio. There is no assurance that the Portfolio will be able to
replicate the performance of the Index. Further, for almost the entire period
of the existence of the S&P MidCap 400 Index, there has been a bull market.
There can be no assurance that these market conditions will continue.
<PAGE>
[Back Cover Page]
A Statement of Additional Information dated May 1, 1999, which contains further
information about the Fund, has been filed with the Securities and Exchange
Commission and is incorporated by reference into this Prospectus. Additional
information about the Fund's investments is available in the Fund's annual and
semi-annual reports to shareholders. In the Fund's annual report, you will
find a discussion of the market conditions and investment strategies that
significantly affected the Fund's performance during its last fiscal year. A
copy of the Statement of Additional Information or its annual and semi-annual
reports 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.
The Fund's Statement of Additional Information, annual and semi-annual reports
and certain other information about the Fund can be reviewed and copied at the
SEC's public reference room (which will send copies of these documents upon
request and for a fee). Information about the operation of the SEC's public
reference room may be obtained by calling the SEC at 1-800-SEC-0330. Copies of
Fund documents may be requested by writing to the Public reference Section of
the SEC, Washington, D.C. 20549-6009.
These fund Documents and other information about the Fund are also available
without charge at the SEC's web site: http://www.sec.gov.
File 811-04000
<PAGE>
PART B
INFORMATION REQUIRED IN A
STATEMENT OF ADDITIONAL INFORMATION
<PAGE>
CARILLON FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
May 1, 1999
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, 1999, 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.
Carillon Fund, Inc. is a diversified, open-end management
investment company.
TABLE OF CONTENTS
Page
Investment Policies (1)........................................2
Money Market Instruments and Investment Techniques...........2
Certain Risk Factors Relating to High-Yield, High-Risk Bonds..6
Investments in Foreign Securities.............................6
Futures Contracts.............................................7
Options.......................................................9
Lending Portfolio Securities.................................13
Investment Restrictions.......................................13
Portfolio Turnover ...........................................16
Management of the Fund (22)...................................17
Directors and Officers.......................................17
Investment Adviser...........................................19
Payment of Expenses..........................................20
Advisory Fee.................................................21
Investment Advisory Agreement................................21
Administration...............................................22
Service Agreement............................................23
Securities Activities of Adviser.............................23
Determination of Net Asset Value (24).........................24
Purchase and Redemption of Shares (23)........................24
Taxes (24)....................................................25
Portfolio Transactions and Brokerage..........................25
General Information ..........................................26
Capital Stock................................................26
Voting Rights................................................27
Additional Information ......................................28
Independent Auditors .........................................28
- ----------
( ) indicates page on which the corresponding section appears in
the Prospectus.
UCCF 515 5-99
<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, S&P 500 Index, S&P Midcap 400
Index, Balanced Index and Micro-Cap 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 and S&P Midcap 400 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 and the S&P Midcap 400 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 and the S&P Midcap 400 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.
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.
Investments in Foreign Securities
AMERICAN DEPOSITARY RECEIPTS. American Depositary Receipts
("ADRs") may be issued in sponsored or unsponsored programs. In
sponsored programs, the issuer makes arrangements to have its
securities traded in the form of ADRs; in unsponsored programs,
the issuer may not be directly involved in the creation of the
program. Although the regulatory requirements with respect to
sponsored and unsponsored programs are generally similar, the
issuers of unsponsored ADRs are not obligated to disclose
material information in the United States and, therefore, such
information may not be reflected in the market value of the
ADRs.
FOREIGN EXCHANGE. If a foreign country cannot generate
sufficient earnings from foreign trade to service its external
debt, it may need to depend on continuing loans and aid from
foreign governments, commercial banks, multilateral
organizations, and inflows of foreign investment. The cost of
servicing external debt will also generally be adversely
affected by rising international interest rates because many
external debt obligations bear interest at rates which are
adjusted based upon international interest rates. The ability to
service external debt will also depend on the level of the
relevant government's international currency reserves and its
access to foreign currencies. Currency devaluations may affect
the ability of an obligor to obtain sufficient foreign
currencies to service its external debt.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS. Each Portfolio that
engages in foreign currency exchange transactions may do so on
a spot (i.e., cash) basis at the spot rate prevailing in the
foreign exchange currency market, or on a forward basis to "lock
in" the U.S. dollar price of the security. By entering into a
forward contract for the purchase or sale, for a fixed amount of
U.S. dollars, of the amount of foreign currency involved in the
underlying transactions, a Portfolio attempts to protect itself
against possible loss resulting from an adverse change in the
relationship between the U.S. dollar and the applicable foreign
currency during the period between the date on which the
security is purchased or sold and the date on which related
payments are made or received.
Portfolios will not enter into forward contracts for
longer-term hedging purposes. The possibility of changes in
currency exchange rates will be incorporated into the long-term
investment considerations when purchasing the investment and
subsequent considerations for possible sale of the investment.
FOREIGN MARKETS. Delays in settlement which may occur in
connection with transactions involving foreign securities could
result in temporary periods when a portion of the assets of a
portfolio is uninvested and no return is earned thereon. The
inability of a portfolio to make intended security purchases due
to settlement problems could cause the portfolio to miss
attractive investment opportunities. Inability to dispose of
portfolio securities due to settlement problems could result in
losses to a portfolio due to subsequent declines in values of
the portfolio securities or, if the portfolio has entered into a
contract to sell the security, possible liability to the
purchaser. Certain foreign markets, especially emerging markets,
may require governmental approval for the repatriation of
investment income, capital or the proceeds of sales of
securities by foreign investors. A portfolio could be adversely
affected by delays in, or a refusal to grant, any required
governmental approval for repatriation of capital, as well as by
the application to the portfolio of any restrictions on
investments.
FOREIGN DEBT SECURITIES. Investing in foreign debt securities
will expose the Portfolios to the direct or indirect
consequences of political, social or economic changes in the
industrialized developing and emerging countries that issue the
securities. The ability and willingness of obligor or the
governmental authorities that control repayment of their
external debt to pay principal and interest on such debt when
due may depend on general economic and political conditions
within the relevant country. Additional country-related
factors unique to foreign issuers which may influence the
ability or willingness to service debt include, but are not
limited to, a country's cash flow situation, the availability of
sufficient foreign exchange on the date a payment is due, the
relative size of its debt service burden to the economy as a
whole, and its government's relationships with the International
Monetary Fund, the World Bank and other international agencies.
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, the S&P Midcap 400 Index Portfolio
and the Balanced 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 a Portfolio reaches $25
million in net assets, the 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 Portfolios do 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 or S&P
400, 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, Balanced Index 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 and S&P Midcap 400 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, Balanced Index 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 and S&P Midcap 400 Index Portfolio will write
only options on securities among the Standard & Poor's 500
Composite Stock Price Index (the "S&P 500" )** and the Standard
& Poor's 400 Mid-Cap Composite Stock Price Index (the "S&P 400
Index")** respectively, 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 common 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)", "500", "S&P Midcap 400 Index", and
"Standard & Poor's Midcap 400 Index" are trademarks of The
McGraw-Hill Companies, Inc. and have been licensed for use by
the Fund. The Portfolio is not sponsored, endorsed, sold or
promoted by Standard & Poor's ("S&P"). S&P makes no
representation or warranty, express or implied, to the
beneficial owners of the Portfolio or any member of the public
regarding the advisability of investing in securities generally
or in the Portfolio particularly or the ability of the S&P 500
Index or the S&P Midcap 400 Index to track general stock market
performance. S&P's only relationship to the Fund is the
licensing of certain trademarks and trade names of S&P and of
the S&P 500 Index which is determined, composed and calculated
by S&P without regard to the Fund or the Portfolio. S&P has no
obligation to take the needs of the Fund or the beneficial
owners of the Portfolio into consideration in determining,
composing or calculating the S&P 500 Index and the S&P Midcap
400 Index. S&P is not responsible for and has not participated
in the determination of the prices and amount of the Portfolio
or the timing of the issuance or sale of the Portfolio or in the
determination or calculation of the equation by which the
Portfolio is to be converted into cash. S&P has no obligation or
liability in connection with the administration, marketing or
trading of the Portfolio.
S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF
THE S&P 500 OR S&P 400 INDEX OR ANY DATA INCLUDED THEREIN AND
S&P SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR
INTERRUPTIONS THEREIN. S&P MAKES NO WARRANTY, EXPRESS OR
IMPLIED, AS TO RESULTS TO BE OBTAINED BY CARILLON FUND,
BENEFICIAL OWNERS OF THE PORTFOLIO, OR ANY OTHER PERSON OR
ENTITY FROM THE USE OF THE S&P 500 INDEX OR ANY DATA INCLUDED
THEREIN. S&P MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND
EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE S&P 500 OR
S&P 400 INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY
OF THE FOREGOING, IN NO EVENT SHALL S&P HAVE ANY LIABILITY FOR
ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES
(INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF
SUCH DAMAGES. **
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, Balanced Index 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, the S&P
Midcap 400 Index Portfolio or the Balanced Index Portfolio may
write call options on futures contracts on the S&P 500 or S&P
Midcap 400 Index 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 or S&P Midcap
400 Index than would a direct purchase of securities included in
the S&P 500 or S&P Midcap 400 Index. 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 and S&P 400 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, S&P Midcap 400 Index Portfolio
and Balanced 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)") and the S&P Midcap 400 Index
Portfolio may invest in Standard & Poor's Mid-Cap Depository
Receipts ("MIDCAP SPDRs(R)"). SPDRs and MIDCAP 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 and S&P Midcap 400 Index respectively.
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 and S&P 400, there can be no assurance that this
investment objective will be met fully. As SPDRs and MIDCAP
SPDRs are securities issued by an investment company, non-
fundamental restriction (5) below restricts purchases of SPDRs
and MIDCAP SPDRs to 10% 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,
S&P Midcap 400 Index Portfolio or Balanced 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, S&P 400 Index Portfolio and Balanced 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, S&P Midcap 400 Index Portfolio and Balanced 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) 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).
(2) 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.
(3) 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.
(4) Invest in companies for the purpose of exercising
control (alone or together with the other Portfolios).
(5) 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, or by purchase of
SPDRs or MIDCAP SPDRs 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, the S&P Midcap 400 Index
Portfolio and the Balanced Index Portfolio of the Fund may not:
(6) Lend portfolio securities with an aggregate value
of more than 10% of its total assets.
(7) Invest more than 20% of its assets in futures
contracts and/or options on futures contracts, except as a
temporary investment strategy until the Portfolio reaches $25
million in net assets, the Portfolio may invest up to 100% of
its assets in such futures and/or options contracts.
(8) 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 _____% and 57.03%, respectively, for 1998 and
1997. The annual Portfolio turnover rates for the Bond
Portfolio were _____% and 113.41%, respectively, for 1998 and
1997. The annual Portfolio turnover rates for the Capital
Portfolio were _____% and 60.84%, respectively, for 1998 and
1997. The annual Portfolio turnover rates for the S&P 500 Index
Portfolio were _____% and 9.06%, respectively for 1998 and 1997.
The annual Portfolio turnover rate for the Micro-Cap Portfolio
was _____% for 1998. The annual Portfolio turnover rate for the
Micro-Cap Portfolio was _____% for 1998. The annual Portfolio
turnover rate for the S&P 400 Midcap Index Portfolio and the
Balanced Index Portfolio is expected to be 10% and 10%,
respectively.
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>
Name, Address Position(s) with Principal Occupation(s)
and Age the Fund During Past Five Years
- ------------- ---------------- ----------------------
<S> <C> <C>
George M. Callard, M.D. Director Professor of Clinical Surgery,
3021 Erie Avenue University of Cincinnati
Cincinnati, Ohio 45208
(Age 65)
Theodore H. Emmerich Director Consultant; former Partner,
1201 Edgecliff Place Ernst & Whinney, Accountants
Cincinnati, Ohio 45206
(72)
James M. Ewell Director Retired Senior Vice President
9000 Indian Ridge Road and Director, The Procter and
Cincinnati, Ohio 45243 Gamble Company
(83)
Richard H. Finan Director Attorney at Law; President of
11137 Main Street the Ohio State Senate
Cincinnati, Ohio 45241
(64)
Jean Patrice Director Former Interim President,
Harrington, S.C. Cincinnati State Technical and
3217 Whitfield Avenue Community College; Former
Cincinnati, Ohio 45220 Executive Director, Cincinnati
(76) Youth Collaborative; President
Emeritus (formerly, President)
College of Mount St. Joseph
John H. Jacobs* Director, President and Chief Operating
(52) President Officer, Union Central;
and Chief Director, President and Chief
Executive Executive Officer, Carillon
Officer Advisers, Inc. ("Adviser");
Director, Carillon Investments,
Inc.; prior to July, 1998,
Officer and employee, Union
Central
Charles W. McMahon Director Retired Senior Vice President
19 Iron Woods Drive and Director, Union Central
Cincinnati, Ohio 45239
(79)
Harry Rossi* Director Director Emeritus, Union
8548 Wyoming Club Drive Central; Director, Adviser;
Cincinnati, Ohio 45215 former Chairman, President and
(79) Chief Executive Officer, Union
Central
Stephen R. Hatcher Senior Vice Executive Vice President and
(56) President Chief Financial Officer, Union
Central; prior to June, 1995,
Officer and employee, Union
Central
John F. Labmeier Vice President Vice President, Associate
(50) and Secretary General Counsel and Assistant
Secretary, Union Central; Vice
President and Secretary,
Carillon Investments, Inc.;
Secretary, Adviser
Thomas G. Knipper Controller Treasurer, Adviser; prior to
(41) July, 1995, Treasurer of The
Gateway Trust and Vice
President and Controller of
Gateway Advisers, Inc.
John M. Lucas Assistant Counsel and Assistant to
(48) Secretary Secretary, Union Central
</TABLE>
- -----------
* Messrs. 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 1998 were $63,657.
<TABLE>
<CAPTION>
Compensation Table
(1) (2) (3) (4) (5)
Name of Person, Aggregate Pension or Estimated Total
Position Compensation Retirement Annual Compensation
From Benefits Benefits From
Registrant Accrued As Upon Registrant
Part of Fund Retirement and Fund
Expenses Complex*
Paid to
Directors
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
George M. Callard, $14,800 -- -- $14,800
M.D.
Director
Theodore H. Emmerich $15,900 -- -- $15,900
Director
James M. Ewell $15,300 -- -- $15,300
Director
Richard H. Finan $15,300 -- -- $15,300
Director
Jean Patrice
Harrington, S.C. $15,500 -- -- $15,500
Director
John H. Jacobs N/A N/A N/A N/A
Director
Charles W. McMahon $14,800 -- -- $14,800
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, 1998, the total
amount deferred, including interest, was as follows: Dr.
Callard - $$88,337; Mr. McMahon - $116,300.
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 John H. Jacobs, President and Chief
Executive Officer; Harry Rossi, Director; 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, S&P Midcap 400 Index Portfolio and
Balanced Index Portfolios, other than the advisory fee for those
Portfolios, to the extent that such expenses exceed .30% of that
Portfolio's net assets. The Adviser will also pay any expenses
of the Micro-Cap Portfolio, other than the advisory fee for
those Portfolios, to the extent that such expenses exceed 1.00%
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>
S&P 500 S&P Midcap Balanced
Equity Bond Capital Index Micro-Cap 400 Index Index
Year Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
- ---- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1998 $1,704,750 $551,146 $914,153 $274,418 $7,291 -0- -0-
1997 $1,731,351 $427,729 $1,058,086 $129,253 -0- -0- -0-
1996 $1,436,998 $384,084 $1,032,861 $ 8,233 N/A -0- -0-
</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 19, 1999 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.
On June 16, 1997, the Board of Directors took steps to
activate the Micro-Cap Portfolio of the Fund by authorizing the
issuance of shares of that Portfolio. On September 18, 1997,
the Board of Directors also approved an amendment to the
Investment Advisory Agreement making the Agreement applicable to
the Micro-Cap Portfolio and specifying 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 Micro-Cap
Portfolio shares and that therefore only the holders of Micro-
Cap Portfolio shares were entitled to vote on the amendment.
The sole shareholder of the Micro-Cap Portfolio approved the
Agreement on December 10, 1997.
On December 16, 1998, the Board of Directors took steps to
activate the S&P Midcap 400 Index Portfolio and the Balanced
Index Portfolio of the Fund by authorizing the issuance of
shares of those Portfolios. On March 19, 1999, the Board of
Directors also approved an amendment to the Investment Advisory
Agreement making the Agreement applicable to the S&P Midcap 400
Index Portfolio and the Balanced Index Portfolio, and specifying
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 S&P Midcap 400 Index Portfolio and Balanced
Index Portfolio shares and that therefore only the holders of
S&P Midcap 400 Index Portfolio and Balanced Index Portfolio
shares were entitled to vote on the amendment. It is
anticipated that the sole shareholder of the S&P Midcap 400
Index Portfolio and the Balanced Index Portfolio will approve
the Agreement as amended on or about May 1, 1999.
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, .10% of the average net assets of
the Micro-Cap Portfolio, and .05% of the average net assets of
the S&P 500 Index Portfolio, S&P Midcap 400 Index Portfolio and
Balanced 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. The sole shareholder of
the Micro-Cap Portfolio approved the Service Agreement on
December 10, 1997. It is anticipated that the sole shareholder
of the S&P Midcap 400 Index Portfolio and the Balanced Index
Portfolio will approve the Service Agreement on or about May 1,
1999.
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.
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); and (ii)
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 1998, 27% of the Fund's total brokerage was
allocated to brokers who furnish statistical data or research
information. Brokerage commissions paid during 1998, 1997 and
1996 were $740,176, $587,069 and $475,382, respectively.
GENERAL INFORMATION
Capital Stock
The Fund is a mutual fund. Its board of directors is
responsible for supervising its business affairs and
investments, which are managed on a daily basis by the Adviser.
The Fund was incorporated under the laws of the State of
Maryland on January 30, 1984. The Fund is a series fund with
seven classes of stock, one for each Portfolio. The authorized
capital stock of the Fund consists of one hundred and ninety
million shares of common stock, par value ten cents ($0.10) per
share. The shares of the authorized capital stock are currently
divided into the following classes: Equity Portfolio consisting
of forty million authorized shares; Capital Portfolio consisting
of thirty million authorized shares; Bond Portfolio consisting
of thirty million authorized shares; S&P 500 Index Portfolio
consisting of thirty million authorized shares; Micro-Cap
Portfolio consisting of twenty million shares; S&P Midcap 400
Index Portfolio, consisting of twenty million shares; and
Balanced Index Portfolio, consisting of twenty million shares.
The Board of Directors may 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, as stated in their report appearing
herein. 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
YEAR ENDED DECEMBER 31, 1998
<PAGE>
CARILLON FUND, INC.
Report of Independent Auditor
To the Board of Directors and Shareholders
of Carillon Fund, Inc.
We have audited the accompanying statements of assets and
liabilities, including the schedules of investments, of Carillon
Fund, Inc. (the "Fund") consisting of the Equity Portfolio,
Capital Portfolio, Bond Portfolio and the S&P Index Portfolio,
as of December 31, 1998, and the related statements of
operations and the statements of changes in net assets for the
periods presented, and the financial highlights for each of the
four years in the period ended December 31, 1998. 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
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 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 disclosure in the financial statements. Our
procedures included confirmation of securities owned as of
December 31, 1998, by correspondence with the Fund's 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 audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements present fairly, in all
material respects, the financial position of the Fund as of
December 31, 1998, the results of its operations, and the
changes in its net assets and the financial highlights for the
respective stated periods in conformity with generally accepted
accounting principles.
Deloitte & Touche LLP
Dayton, Ohio
February 5, 1999
<PAGE>
CARILLON FUND, INC.
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1998
<TABLE>
<CAPTION>
Equity Capital Bond S&P 500 Index
Portfolio Portfolio Portfolio Portfolio
<S> <C> <C> <C> <C>
ASSETS
Investments in
securities, at value $249,084,446 $109,810,560 $125,954,016 $132,530,285
(cost $260,807,637;
$122,506,433;
$122,738,988;
$99,748,400)
Cash --- --- --- 408
Receivables:
Shares sold 13,845 4,575 28,918 522,067
Securities sold 158,992 95,917 --- 674,863
Interest and Dividends 546,959 790,063 1,927,178 133,145
Variation Margin --- --- --- 14,725
Prepaid expenses
and other 21,200 8,567 6,424 4,254
------------ ------------ ------------ ------------
249,825,442 110,709,682 127,916,536 133,879,747
------------ ------------ ------------ ------------
LIABILITIES
Payables:
Investment securities
purchased --- --- --- 1,668,247
Shares redeemed 886,644 937,634 13,962,489 800,771
Investment advisory fees 118,980 64,923 50,741 29,782
Custodian and portfolio
accounting fees 25,472 17,135 10,201 12,145
Professional fees 10,472 10,421 11,598 10,788
Other accrued expenses 1,066 1,487 1,308 13,229
Deferred directors'
compensation --- --- 117,888 ---
------------ ------------ ------------ ------------
1,042,634 1,031,600 14,154,225 2,534,962
------------ ------------ ------------ ------------
NET ASSETS
Paid-in capital 230,628,352 124,790,149 110,569,343 97,290,742
Undistributed net
investment income 548,105 233,033 382,160 81,932
Accumulated net
realized gain/(loss)
on investments and
futures contracts 29,329,542 (2,649,227) (404,220) 1,028,876
Net unrealized
appreciation/
(depreciation)
on investments,
futures contracts,
and translation of
assets and liabilities
in foreign currencies (11,723,191) (12,695,873) 3,215,028 32,943,235
------------ ------------ ------------ ------------
$248,782,808 $109,678,082 $113,762,311 $131,344,785
============ ============ ============ ============
Shares authorized
($.10) par value 40,000,000 30,000,000 30,000,000 30,000,000
Shares outstanding 16,703,745 9,792,816 10,219,371 6,738,069
Net asset value,
offering and
redemption price
per share $14.89 $11.20 $11.13 $19.49
</TABLE>
The accompanying notes are an integral part of
the financial statements.
<PAGE>
CARILLON FUND, INC.
STATEMENTS OF OPERATIONS
Year Ended December 31, 1998
<TABLE>
<CAPTION>
S&P 500
Equity Capital Bond Index
Portfolio Portfolio Portfolio Portfolio
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Interest $ 1,391,343 $ 4,340,298 $ 8,498,462 $ 234,683
Dividends (net of
foreign withholding
taxes of $180,249;
$74,781; $0; $11,694) 4,827,377 1,059,547 181,630 1,298,904
------------ ------------ ----------- -----------
6,218,720 5,399,845 8,680,092 1,533,587
------------ ------------ ----------- -----------
EXPENSES
Investment advisory
fees 1,704,750 914,153 551,146 274,418
Custodian fees
and expenses 74,271 44,000 26,932 36,950
Portfolio accounting
fees 54,418 41,264 45,638 39,738
Professional fees 10,786 11,529 10,637 9,316
Director's fees 12,473 12,505 12,940 12,478
Transfer agent fees 6,513 7,254 7,376 6,683
Other 39,537 22,838 22,541 9,779
------------ ------------ ----------- -----------
1,902,748 1,053,543 677,210 389,362
------------ ------------ ----------- -----------
NET INVESTMENT INCOME 4,315,972 4,346,302 8,002,882 1,144,225
------------ ------------ ----------- -----------
REALIZED AND
UNREALIZED
GAIN/(LOSS)
Net realized gain/
(loss) on
investments 29,356,244 (2,555,124) (382,978) 396,848
Net realized gain
on futures contracts --- --- --- 791,348
29,356,244 (2,555,124) (382,978) 1,188,196
------------ ------------ ----------- -----------
Net change in
unrealized
appreciation/
(depreciation)
in investments,
futures contracts
and translation
of assets and
liabilities in
foreign currencies (82,894,401) (21,439,855) (644,567) 20,913,178
------------ ------------ ----------- -----------
NET REALIZED AND
UNREALIZED GAIN(LOSS) (53,538,157) (23,994,979) (1,027,545) 22,101,374
------------ ------------ ----------- -----------
NET INCREASE
(DECREASE)
IN NET ASSETS
FROM OPERATIONS $(49,222,185) $(19,648,677) $ 6,975,337 $23,245,599
============ ============ =========== ===========
</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
Year Ended December 31,
1998 1997
<S> <C> <C>
OPERATIONS
Net investment income $ 4,315,972 $ 3,840,384
Net realized gain/(loss) on investments
and futures 29,356,244 43,526,118
Net change in unrealized appreciation/
(depreciation) on investments,futures
contracts, and translation of assets and
liabilities in foreign currencies (82,894,401) 10,788,049
------------ ------------
(49,222,185) 58,154,551
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income (3,999,567) (4,343,382)
Net realized gain (43,531,579) (34,344,113)
------------ ------------
(47,531,146) (38,687,495)
------------ ------------
FUND SHARE TRANSACTIONS
Proceeds from shares sold 27,909,508 27,675,023
Reinvestment of distributions 47,531,146 38,687,495
Payments for shares redeemed (65,531,975) (38,325,837)
------------ ------------
9,908,679 28,036,681
------------ ------------
NET INCREASE/(DECREASE) IN NET ASSETS (86,844,652) 47,503,737
NET ASSETS
Beginning of year 335,627,460 288,123,723
------------ ------------
End of year $248,782,808 $335,627,460
============ ============
UNDISTRIBUTED NET INVESTMENT INCOME $ 548,106 $ 231,700
============ ============
FUND SHARE TRANSACTIONS
Sold 1,482,774 1,441,326
Reinvestment of distributions 2,544,159 2,276,903
Redeemed (3,814,089) (2,041,013)
------------ ------------
Net increase from fund share transactions 212,844 1,677,216
============ ============
</TABLE>
The accompanying notes are an integral part of
the financial statements.
CARILLON FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Capital Portfolio
Year Ended December 31,
1998 1997
<S> <C> <C>
OPERATIONS
Net investment income $ 4,346,302 $ 6,609,920
Net realized gain/(loss) on investments
and futures (2,555,124) 7,443,577
Net change in unrealized appreciation/
(depreciation) on investments, futures
contracts, and translation of assets and
liabilities in foreign currencies. (21,439,855) (2,869,048)
------------ ------------
(19,648,677) 11,184,449
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income (4,682,563) (7,176,810)
Net realized gain on investments (7,315,800) (12,519,532)
------------ ------------
(11,998,363) (19,696,342)
------------ ------------
FUND SHARE TRANSACTIONS
Proceeds from shares sold 23,465,642 12,291,701
Reinvestment of distributions 11,998,363 19,696,342
Payments for shares redeemed (42,968,753) (33,940,166)
------------ ------------
(7,504,748) (1,952,123)
------------ ------------
NET INCREASE/(DECREASE) IN NET ASSETS (39,151,788) (10,464,016)
NET ASSETS
Beginning of year 148,829,870 159,293,886
------------ ------------
End of year $109,678,082 $148,829,870
============ ============
UNDISTRIBUTED NET INVESTMENT INCOME $ 233,033 $ 541,406
============ ============
FUND SHARE TRANSACTIONS
Sold 1,762,635 867,273
Reinvestment of distributions 925,235 1,450,496
Redeemed (3,453,975) (2,414,218)
------------ ------------
Net decrease from fund share transactions (766,105) (96,449)
============ ============
</TABLE>
The accompanying notes are an integral part of
the financial statements.
CARILLON FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Bond Portfolio
Year Ended December 31,
--------------------------
1998 1997
<S> <C> <C>
OPERATIONS
Net investment income $ 8,002,882 $ 6,405,311
Net realized gain/(loss) on
investments and futures (382,978) 1,127,264
Net change in unrealized
appreciation/(depreciation)
on investments, futures
contracts, and translation
of assets and liabilities
in foreign currencies (644,567) 1,821,402
------------ -----------
6,975,337 9,353,977
------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income (7,895,961) (5,860,151)
Net realized gain (1,121,637) (481,254)
------------ -----------
(9,017,598) (6,341,405)
------------ -----------
FUND SHARE TRANSACTIONS
Proceeds from shares sold 50,015,086 19,937,289
Reinvestment of distributions 9,017,598 6,341,405
Payments for shares redeemed (43,120,208) (15,033,299)
------------ -----------
15,912,476 11,245,395
------------ -----------
NET INCREASE IN NET ASSETS 13,870,215 14,257,967
NET ASSETS
Beginning of year 99,892,096 85,634,129
------------ -----------
End of year $113,762,311 $99,892,096
============ ===========
UNDISTRIBUTED NET INVESTMENT INCOME $ 383,384 $ 264,047
============ ===========
FUND SHARE TRANSACTIONS
Sold 4,379,828 1,786,820
Reinvestment of distributions 799,240 575,269
Redeemed (3,811,138) (1,358,088)
------------ -----------
Net increase from
fund share transactions 1,367,930 1,004,001
============ ===========
</TABLE>
The accompanying notes are an integral part of
the financial statements.
CARILLON FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
S&P 500 Index Portfolio
Year Ended December 31,
1998 1997
<S> <C> <C>
OPERATIONS
Net investment income $ 1,144,225 $ 640,069
Net realized gain/(loss) on investments
and futures 1,188,196 1,839,946
Net change in unrealized appreciation/
(depreciation) on investments, futures
contracts, and translation of assets and
liabilities in foreign currencies. 20,913,178 8,999,183
------------- -----------
23,245,599 11,479,198
------------- -----------
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income (1,101,958) (642,656)
Net realized gain on investments (1,947,719) (270,297)
------------- -----------
(3,049,677) (912,953)
------------- -----------
FUND SHARE TRANSACTIONS
Proceeds from shares sold 58,542,452 35,592,857
Reinvestment of distributions 3,049,677 912,953
Payments for shares redeemed (6,037,935) (20,681,996)
------------- -----------
55,554,194 15,823,814
------------- -----------
NET INCREASE IN NET ASSETS 75,750,116 6,390,059
NET ASSETS
Beginning of year 55,594,669 29,204,610
------------- -----------
End of year $131,344,785 $55,594,669
============= ===========
UNDISTRIBUTED NET INVESTMENT INCOME $ 81,932 $ 39,665
============= ===========
FUND SHARE TRANSACTIONS
Sold 3,377,397 2,463,755
Reinvestment of distributions 175,601 66,017
Redeemed (345,887) (1,406,317)
------------- -----------
Net increase from fund share transactions 3,207,111 1,123,455
============= ===========
</TABLE>
The accompanying notes are an integral part of
the financial statements.
<PAGE>
CARILLON FUND, INC.
SCHEDULE OF INVESTMENTS
EQUITY PORTFOLIO
DECEMBER 31, 1998
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
COMMON STOCKS - 95.14%
BANKING & FINANCIAL SERVICE - 15.23%
Allied Capital Corporation 33,639 $ 582,375
Amresco, Incorporated* 110,000 962,500
Banco BHIF ADR 127,500 988,125
Banco Latinoamericano De Exportanciones
Sponsored ADR 75,000 1,246,875
Charter One Financial, Incorporated 115,762 3,212,396
Chile Fund, Incorporated 100,000 906,250
Corvel Corporation* 66,000 2,326,500
Duff & Phelps Credit Rating Company 65,000 3,562,813
Fahnestock Viner Holdings 150,000 2,625,000
First Bell Bancorp, Incorporated 100,000 1,550,000
FPIC Insurance Group, Incorporated* 126,000 6,024,375
Hamilton Bancorp, Incorporated* 50,000 1,334,375
Jefferies Group, Incorporated 105,000 5,210,625
Peoples Heritage Financial, Incorporated 100,000 2,000,000
Raymond James Financial Corporation 148,725 3,141,816
UICI* 90,000 2,205,000
------------
37,879,025
------------
CAPITAL GOODS - 4.76%
CTS Corporation 50,000 2,175,000
Encore Wire Corporation* 200,000 1,850,000
Gulf Island Fabrication, Incorporated* 103,000 798,250
Lindsay Manufacturing Company 227,689 3,372,643
LSI Industries 140,000 3,141,250
Unifab International, Incorporated* 61,000 488,000
------------
11,825,143
------------
CONSUMER CYCLICAL - 9.70%
CPAC, Incorporated 114,200 856,500
Claire's Stores, Incorporated 58,100 1,191,050
Maxwell Shoe Company, Incorporated* 167,500 1,832,031
National RV Holdings, Incorporated* 100,000 2,575,000
Nautica Enterprises, Incorporated* 90,500 1,357,500
NCI Building Systems, Incorporated* 161,400 4,539,375
Stanley Furniture Company* 158,800 2,898,100
Strattec Security Corporation* 145,000 4,350,000
Supreme International Corporation* 162,500 1,950,000
Toll Brothers* 115,000 2,594,688
------------
24,144,244
------------
CONSUMER NON-DURABLE - 13.56%
Anchor Gaming* 53,000 2,987,874
Charoen Pok Feedmill ADR* 100,000 489,900
Dairy Farm International Holdings
Sponsored ADR 200,000 1,150,000
Dentsply International, Incorporated 33,000 849,750
Ethan Allen Interiors 41,600 1,705,600
Equity Marketing, Incorporated* 105,500 870,374
Gymboree Corporation* 130,000 828,750
ICN Pharmeaceuticals, Incorporated 79,900 1,807,737
Invacare Corporation 117,000 2,808,000
Laboratorio Chile ADR 156,700 2,252,562
Landry's Seafood Restaurants* 277,000 2,077,500
Luxottica Group S.P.A. 185,000 2,220,000
Orthofix International N.V.* 125,536 1,757,503
Richfood Holdings, Incorporated 172,000 3,569,000
Schlotzsky's, Incorporated* 156,900 1,549,387
Scientific Games Holdings Corporation* 146,100 2,757,637
St. John Knits, Incorporated 105,000 2,730,000
Young Innovations, Incorporated* 101,000 1,325,624
------------
33,737,198
------------
ENERGY - 9.93%
Atwood Oceanics, Incorporated* 55,000 935,000
Basin Exploration, Incorporated* 185,000 2,324,062
Bayard Drilling Technologies* 275,000 1,375,000
Cabot Oil & Gas Corporation 85,000 1,275,000
Callon Petroleum Company* 165,000 1,918,125
Comstock Resources, Incorporated* 330,000 1,010,625
Forest Oil Corporation* 100,000 850,000
Giant Industries, Incorporated 140,000 1,312,500
Global Industries, Incorporated* 62,500 382,813
Houston Exploration Company* 100,000 1,987,500
Marine Drilling Company, Incorporated* 210,000 1,614,375
Newfield Exploration Company* 100,000 2,087,500
Offshore Logistics, Incorporated* 145,300 1,725,438
OYO Geospace Corporation* 10,500 90,563
Pride International, Incorporated* 160,000 1,130,000
Range Resources Corporation 211,452 726,866
Southern Energy Homes Blder. 200,000 1,225,000
Southern Mineral Corporation* 350,000 251,563
Stone Energy Corporation* 63,000 1,811,250
Superior Energy Services, Incorporated* 240,000 682,500
------------
24,715,680
------------
MANUFACTURING - 14.68%
American Building Company* 75,000 1,837,500
Carbide Graphite Group, Incorporated* 81,000 1,194,750
Champion Enterprises, Incorporated* 75,000 2,053,125
CompX International, Incorporated* 197,000 5,195,875
Cotelligent, Incorporated* 100,000 2,131,250
DeBeers Consolidated Mines ADR 125,000 1,593,750
D.R. Horton, Incorporated 190,000 4,370,000
Fibermark, Incorporated* 115,000 1,566,875
Giant Cement Holding, Incorporated* 95,000 2,351,250
J. Ray McDermott, Incorporated* 45,000 1,099,688
Matthews International Corporation - Class A 154,000 4,851,000
Mueller Industries* 60,000 1,218,750
Northwest Pipe Company* 125,800 2,028,525
Omniquip International, Incorporated 218,000 3,270,000
STB Systems, Incorporated* 180,000 1,203,750
Zindart Limited ADR* 76,600 550,563
------------
36,516,651
------------
REAL ESTATE - 11.46%
City Developments Limited 250,000 1,083,350
Commercial Net Lease Realty 13,200 174,900
Felcor Lodging Trust, Incorporated 115,600 2,666,025
Gables Residential Trust 80,000 1,855,000
Healthcare Realty Trust 116,400 2,597,175
Hospitality Properties Trust 64,000 1,544,000
Lexington Corporation Properties Trust 100,000 1,256,250
Mid-America Apartment Communities 90,000 2,041,875
Mills Corporation 85,000 1,689,375
Omega Healthcare Investors, Incorporated 30,000 905,625
Pacific Gulf Properties 74,000 1,484,625
Parkway Properties, Incorporated 109,000 3,406,250
Prime Retail, Incorporated 150,000 1,471,875
RFS Hotel Investors, Incorporated 115,700 1,417,325
Trinet Corporate Realty Trust, Incorporated 80,000 2,140,000
United Investor Realty Trust, Incorporated 200,000 1,350,000
Winston Hotels, Incorporated 175,000 1,432,813
------------
28,516,463
------------
SERVICE - .37%
Kevco, Incorporated* 128,000 928,000
------------
TECHNOLOGY - 9.51%
Axiohm Technology* 11,438 74,347
Cybex Corporation* 133,500 3,921,563
ECI Telecommunications 106,100 3,779,813
ESC Medical Systems Limited* 120,000 1,260,000
Nam Tai Electronics, Incorporated 250,000 2,812,500
Performance Technologies, Incorporated* 115,500 1,515,938
SPSS, Incorporated* 127,500 2,406,563
Vertex Communications Corporation* 104,000 1,651,000
Vtech Holdings Limited 142,900 6,234,684
------------
23,656,408
------------
TRANSPORTATION - 5.33%
America West Holding Corporation* 100,000 1,700,000
Comair Holdings, Incorporated 120,000 4,050,000
FDX Corporation* 25,000 2,225,000
Gulfmark Offshore, Incorporated* 70,000 1,102,500
Midwest Express Holdings* 123,750 3,256,172
Trico Marine Services* 190,000 926,250
------------
13,259,922
------------
UTILITIES - .61%
Washington Water Power* 79,000 1,520,750
------------
Total Common Stocks (cost $248,237,222) 236,699,484
------------
FOREIGN STOCK - .70%
HONG KONG - .70%
Smartone Telecommunications 626,000 1,737,250
------------
Total Foreign Stock (cost $1,811,553) 1,737,250
------------
WARANTS AND RIGHTS - .03%
TECHNOLOGY - .03%
Nam Tai Electronics, Incorporated* 62,500 78,125
------------
Total Warrants and Rights (cost $189,275) 78,125
------------
SHORT-TERM INVESTMENTS - 4.25%
<CAPTION>
PRINCIPAL VALUE
<S> <C> <C>
COMMERCIAL PAPER - 1.20%
DuPont (E.I.) DeNemours (5.300% due 01/26/99) $3,000,000 2,988,958
------------
2,988,958
------------
VARIABLE RATE DEMAND NOTES<F1> - 3.05%
Firstar Bank (5.378% due 12/31/31) 7,580,629 7,580,629
------------
7,580,629
------------
Total Short-Term Investments (cost $10,569,587) 10,569,587
------------
TOTAL INVESTMENTS - 100.12%
(cost $260,807,637)<F2> 249,084,446
------------
OTHER ASSETS AND LIABILITIES - (.12%) (301,638)
------------
TOTAL NET ASSETS - 100% $248,782,808
============
____________
*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, 1998.
<F2> Cost for income tax purposes is $261,125,710, which is substantially the
same for financial reporting purposes. Gross unrealized appreciation and
depreciation of securities as of December 31, 1998 was $48,961,760 and
($61,003,024) respectively.
</FN>
</TABLE>
The accompanying notes are an integral part of
the financial statements.
<PAGE>
Carillon Fund, Inc.
Schedule of Investments
CAPITAL PORTFOLIO
DECEMBER 31, 1998
<TABLE>
<CAPTION>
SHARES/
PRINCIPAL VALUE
<S> <C> <C>
COMMON STOCKS - 55.66%
BANKING & FINANCIAL SERVICE - 9.11%
AFP Provida S.A. 80,000 $ 1,075,000
Amresco, Incorporated* 56,000 490,000
Duff & Phelps Credit Rating Company 37,000 2,028,063
Fahnestock Viner Holdings Class A 86,500 1,513,750
Investment Tech Group* 26,500 1,644,656
Jefferies Group, Incorporated 40,000 1,985,000
Texas Regional Bancshares-A 50,000 1,253,125
------------
9,989,594
------------
CAPITAL GOODS - 1.70%
CTS Corporation 25,000 1,087,500
LMI Aerospace, Incorporated* 124,000 775,000
------------
1,862,500
------------
CONSUMER CYCLICAL - 4.06%
Claire's Stores, Incorporated 46,000 943,000
Nautica Enterprises, Incorporated* 44,500 667,500
Newmark Homes Corporation* 160,000 1,120,000
Winsloew Furniture, Incorporated* 65,000 1,722,500
------------
4,453,000
------------
CONSUMER NON-DURABLE - 11.51%
Anchor Gaming* 24,000 1,353,000
Corrections Corporation of America* 16,000 282,000
DENTSPLY International, Incorporated 27,000 695,250
ESC Medical Systems Limited* 58,000 609,000
Invacare Corporation 70,000 1,680,000
ICN Pharmaceuticals, Incorporated 62,000 1,402,750
Landry's Seafood Restaurants, Incorporated* 98,000 735,000
Luxottica Group S.p.A. Sponsored ADR 95,000 1,140,000
Orthofix International N.V.* 65,000 910,000
Richfood Holdings, Incorporated 63,000 1,307,250
Schlotzsky's, Incorporated* 88,500 873,937
Scientific Games Holdings Corporation* 87,000 1,642,124
------------
12,630,311
------------
ENERGY - 4.40%
Dawson Geophysical Company* 84,400 606,624
Gulf Island Fabrication, Incorporated* 83,500 647,125
Marine Drilling Company, Incorporated* 65,000 499,687
Miller Exploration Company* 187,000 841,500
OYO Geospace Corporation* 17,500 150,937
Pride International, Incorporated* 71,000 501,437
Range Resources Corporation 57,998 199,368
Stone Energy Corporation* 14,000 402,500
YPF S.A. Sponsored ADR 35,000 977,813
------------
4,826,991
------------
MANUFACTURING - 8.27%
American Building Company* 50,000 1,225,000
Champion Enterprises, Incorporated* 36,000 985,500
D.R. Horton, Incorporated 70,000 1,610,000
DeBeers Consolidated Mines ADR 32,000 408,000
Lindberg Corporation 100,000 909,375
National RV Holdings, Incorporated* 30,000 772,500
Northwest Pipe Company* 79,600 1,283,550
Omniquip International, Incorporated 86,000 1,290,000
York Group, Incorporated 62,000 589,000
------------
9,072,925
------------
REAL ESTATE - 4.42%
FelCor Lodging Trust, Incorporated 33,000 761,063
Healthcare Realty Trust 32,000 714,000
Parkway Properties, Incorporated 47,000 1,468,750
St. Joe Company 44,500 1,042,969
Trinet Corporate Realty Trust 32,000 856,000
------------
4,842,782
------------
TECHNOLOGY - 7.48%
Cybex Corporation* 34,500 1,013,438
ECI Telecommunications 92,000 3,277,500
Nam Tai Electronics, Incorporated 77,333 869,996
Vertex Communications Corporation* 76,000 1,206,500
Vtech Holdings Limited 42,000 1,832,447
------------
8,199,881
------------
TRANSPORTATION - 3.83%
American West Holdings, Incorporated* 65,000 1,105,000
Comair Holdings, Incorporated 25,000 843,750
FDX Corporation* 12,000 1,068,000
Midwest Express Holdings, Incorporated* 45,000 1,184,063
------------
4,200,813
------------
UTILITIES - .88%
Washington Water Power* 50,000 962,500
------------
Total Common Stocks (cost $73,049,298) 61,041,297
------------
UNIT INVESTMENT TRUST - 3.93%
S & P Depository Receipt 35,000 4,315,938
------------
Total Unit Investment Trust (cost $3,880,850) 4,315,938
------------
WARRANTS AND RIGHTS - .02%
ELECTRONIC - .02%
Nam Tai Electronics Warrants* 14,333 17,916
------------
Total Warrants and Rights (cost $43,406) 17,916
------------
FOREIGN COMMON STOCK - 1.43%
HONG KONG - 1.21%
Smartone Telecommunications 310,000 860,300
Techtronic Industries 2,617,800 466,300
------------
1,326,600
------------
MALAYSIA - .22%
Bumi Armada Berhad* 500,000 239,411
------------
Total Foreign Common Stock (cost $2,434,732) 1,566,011
------------
U.S. TREASURY OBLIGATIONS - 9.05%
5.625% due 02/28/01 $3,000,000 3,060,939
7.500% due 02/15/05 6,000,000 6,868,128
------------
9,929,067
------------
Total U.S. Treasury Notes ($9,907,021) 9,929,067
------------
COLLATERALIZED MORTGAGE OBLIGATIONS - 3.55%
FEDERAL HOME LOAN MORTGAGE CORPORATION - .37%
1662 H (6.250% due 01/15/09) 343,135 345,297
1399 PAC (7.000% due 09/15/22) 62,871 63,056
------------
408,353
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 1.41%
Remic 93-163 PN
(7.000% due 07/25/07) 1,500,000 1,541,049
------------
PRIVATE SECTOR - 1.77%
GE Capital MTG Services (6.000% due 08/25/09) 498,505 485,290
Prudential Home Mortgage Securities
(7.500% due 07/25/10) 464,890 471,109
MSC 1998-WF 1(7.120% due 01/15/08) 1,000,000 988,130
------------
1,944,529
------------
Total Collateralized Mortgage Obligations
(cost $3,738,586) 3,893,931
MORTGAGE - BACKED SECURITIES - 2.14%
FEDERAL HOME LOAN MORTGAGE CORPORATION - .70%
7.500% due 06/01/07 $ 30,454 $ 30,747
9.500% due 10/01/08 128,515 135,879
8.250% due 03/01/12 85,303 88,492
8.500% due 03/01/16 52,111 54,590
7.500% due 07/01/17 21,418 21,940
11.000% due 04/01/19 23,643 25,874
11.000% due 11/01/19 52,349 57,289
11.000% due 05/01/20 125,022 136,785
11.000% due 06/01/20 195,461 213,939
------------
765,535
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 1.19%
9.500% due 09/01/05 85,059 90,097
9.000% due 11/01/05 22,334 23,473
8.000% due 05/01/07 81,483 83,843
5.500% due 01/01/09 675,528 670,862
5.500% due 04/01/09 443,356 439,237
------------
1,307,512
------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - .25%
9.000% due 11/15/16 79,053 85,135
10.500% due 11/20/19 121,012 133,847
9.000% due 12/15/19 55,308 59,324
------------
278,306
------------
Total Mortgage Backed Securities
(cost $2,229,715) 2,351,353
------------
ASSET - BACKED SECURITY - .89%
PaineWebber Mtg. Accpt. 96 M1 E
(7.655% due 01/02/12) 1,005,805 975,319
------------
Total Asset-Backed Securities
(cost $1,040,070) 975,319
------------
CORPORATE BONDS AND NOTES - 23.10%
AIR TRANSPORTATION - 1.67%
America West Airlines (6.850% due 07/02/09) $ 291,297 $ 291,055
Continental Airlines (8.560% due 07/02/14) 948,930 1,041,526
Midway Airlines (7.140% due 01/02/15) 500,000 503,395
------------
1,835,976
------------
BANKING & FINANCIAL SERVICE - 1.84%
AB Spintab (7.500% due 08/14/49) 1,000,000 1,017,225
Credit Suisse (7.900% due 05/01/07) 1,000,000 1,000,000
------------
2,017,225
------------
ELECTRIC - 1.65%
Niagra Mohawk Power (7.750% due 11/01/05) 1,500,000 1,808,828
------------
FOOD, BEVERAGE & TOBACCO - .91%
RJR Nabisco (8.250% due 07/01/04) 1,000,000 998,676
------------
INSURANCE - .91%
Fairfax Financial Holdings
(6.875% due 04/15/08) 1,000,000 996,100
------------
MANUFACTURING - 1.84%
Blount Inc. (7.000% due 06/15/05) 1,000,000 1,000,306
Federal-Mogul Co. (7.750% due 07/01/06) 500,000 1,022,124
------------
2,022,430
------------
METALS/MINING - .24%
Barrick Gold Corp. (7.500% due 05/01/07) 250,000 268,418
------------
OIL & GAS - 3.14%
Citgo Petroleum (7.875% due 05/15/06) 1,000,000 1,007,620
Gulf Canada Res. (8.350% due 08/01/06) 1,500,000 1,462,500
Union Pacific Resource Inc
(6.750% due 05/15/08) 1,000,000 970,191
------------
3,440,311
------------
REAL ESTATE - 2.17%
Camden Properties (7.000% due 11/15/06) 500,000 477,605
Colonial Properties (7.000% due 07/14/07) 1,000,000 957,091
Healthcare Properties Notes
(6.875% due 06/08/05) 1,000,000 941,875
------------
2,376,571
------------
SERVICE - .70%
Loewen Group International, Inc.
(8.250% due 04/15/03) 900,000 765,000
------------
SUPERMARKET - .94%
American Stores Company (6.500% due 03/20/08) 1,000,000 1,035,081
------------
TECHNOLOGY - .92%
Lexmark International (6.750% due 05/15/08) 1,000,000 1,014,324
------------
TELECOMMUNICATION - 2.96%
Comcast Cellular Holdings
(9.500% due 05/01/07) 1,000,000 1,060,000
Crown Castle Sr. Nt. (0.000% due 11/15/07) 1,500,000 1,050,000
Qwest Communications Nt. (0.000% due 02/01/08) 1,500,000 1,132,500
------------
3,242,500
------------
UTILITIES - 3.21%
Cal Energy (7.630% due 10/15/07) 1,000,000 1,068,741
Enersis (6.600% due 12/01/26) 1,500,000 1,397,114
NRG Energy (7.500% due 06/15/07) 1,000,000 1,053,458
------------
3,519,313
------------
Total Corporate Bonds (cost $ 25,803,780) 25,340,753
------------
SHORT-TERM INVESTMENTS - .35%
VARIABLE RATE DEMAND NOTES <F1> - .35%
Firstar Bank (5.378% due 12/31/31) 378,975 378,975
------------
Total Short Term Investments (cost $378,975) 378,975
------------
TOTAL INVESTMENTS - 100.12%
(cost $122,506,433)<F2> 109,810,560
------------
OTHER ASSETS AND LIABILITIES - (.12%) (132,478)
------------
TOTAL NET ASSETS - 100% $109,678,082
============
*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, 1998
<F2> Cost for income tax purposes is $122,606,851, which is substantially the
same for financial reporting purposes. Gross unrealized appreciation and
depreciation of securities as of December 31, 1998 was $7,101,748 and
($19,898,039) respectively.
</FN>
</TABLE>
The accompanying notes are an integral part of
the financial statements.
<PAGE>
CARILLON FUND, INC.
SCHEDULE OF INVESTMENTS
BOND PORTFOLIO
DECEMBER 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL VALUE
<S> <C> <C>
U.S. TREASURY OBLIGATIONS - 44.87%
U.S. TREASURY NOTES - 44.87%
6.000% due 10/15/99 $4,000,000 $ 4,041,252
0.000% due 02/15/00 3,250,000 3,088,082
6.750% due 04/30/00 2,000,000 2,052,500
7.750% due 02/15/01 5,000,000 5,307,815
0.000% due 08/15/02 2,000,000 1,690,878
5.875% due 11/15/05 5,000,000 5,334,375
5.625% due 02/15/06 5,000,000 5,273,440
7.000% due 07/15/06 5,000,000 5,693,750
6.250% due 02/15/07 5,000,000 5,484,375
6.625% due 05/15/07 5,000,000 5,623,440
5.500% due 02/15/08 2,000,000 2,120,000
5.625% due 05/15/08 5,000,000 5,334,375
------------
51,044,282
------------
Total U.S. Treasury Obligations
(cost $48,795,442) 51,044,282
------------
MORTGAGE - BACKED SECURITIES - 1.71%
FEDERAL HOME LOAN MORTGAGE CORPORATION - .64%
7.500% due 02/01/02 20,719 21,024
9.500% due 04/01/05 38,085 40,144
7.500% due 06/01/07 67,025 67,671
11.000% due 05/01/10 3,700 3,917
12.500% due 08/01/10 11,311 12,602
8.000% due 11/01/16 40,128 41,603
9.500% due 02/01/18 73,784 78,477
6.500% due 07/01/23 456,476 459,827
------------
725,265
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 1.01%
12.000% due 04/01/00 6,308 6,593
9.000% due 08/01/01 24,483 25,362
8.500% due 01/01/02 20,320 20,951
10.500% due 06/01/04 6,967 7,496
10.500% due 05/01/05 155,812 167,642
6.500% due 06/01/08 769,705 780,834
8.000% due 08/01/17 136,888 142,537
------------
1,151,415
------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - .06%
9.000% due 05/15/20 61,379 65,853
------------
Total Mortgage-backed Securities
(cost $1,878,139) 1,942,533
------------COLLATERALIZED MORTGAGE OBLIGATIONS - 4.53%
FEDERAL HOME LOAN MORTGAGE CORPORATION - 1.61%
59 E (8.900% due 11/15/20) $ 773,087 $ 798,572
106 G (8.250% due 12/15/20) 1,000,000 1,031,942
------------
1,830,514
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - .11%
1988-30 D (9.500% due 12/25/18) 113,909 119,780
PRIVATE SECTOR - 2.81%
Securitized Asset Sales, Inc. 1993-2 B2
(6.500% due 07/25/08) 259,836 257,885
CMC2 Securities Corp. 1993 E 1 E 1CP
(0.000% due 12/25/08) 274,771 230,294
Country Wide Mortgage-Backed Securities, Inc.
1994 - 8B1 (6.000% due 03/01/09) 770,541 750,900
Capstead Mortgage Securities Corp. C - 4
(10.950% due 02/01/14) 123,690 123,690
NSCOR 1996 - 5 B1 (8.000% due 11/25/26) 1,633,977 1,664,096
MSC 1998 - 1PO (0.000% due 03/25/28) 251,481 169,986
------------
3,196,851
------------
Total Collateralized Mortgage Obligations
(cost $4,943,062) 5,147,145
------------
ASSET - BACKED SECURITIES - 7.14%
COMMERCIAL MORTGAGE-BACKED SECURITIES- 5.48%
Chase Commercial Mortgage Sec.
(6.600% due 12/19/07) 2,609,885 2,311,392
MSC 1998 - WF1 (7.120% due 01/15/08) 2,000,000 1,976,260
Paine Webber Mortgage Acceptance 96 M1 E
(7.655% due 01/02/12) 2,000,000 1,939,380
------------
6,227,032
------------
HOME EQUITY - 1.66%
Ditech Home Loan Owner Trust
(7.250% due 06/15/21) 2,000,000 1,893,120
------------
Total Asset backed Securities
(cost $8,597,901) 8,120,152
------------
CORPORATE BONDS AND NOTES - 43.51%
AIR TRANSPORTATION - 1.79%
Continental Airlines (7.820% due 10/15/13) 954,115 987,041
NWA Trust No. 2 Class B
(10.230% due 06/21/14) 901,538 1,054,665
------------
2,041,706
------------
BANK, BANK HOLDING COMPANIES,
& OTHER BANK SERVICERS - 4.61%
Ahmanson Capital Trust (8.360% due 12/01/26) 1,500,000 1,672,643
Banc Tec Inc. (7.500% due 06/01/08) 1,500,000 1,479,126
NationsBank Corp. (7.625% due 04/15/05) 1,000,000 1,099,437
Svenska Handelsbanken (7.125% due 03/07/07) 1,000,000 998,943
------------
5,250,149
------------
ENERGY - 4.75%
All Star Gas Corp. (7.000% due 07/15/04) 1,000,000 780,000
Costilla Energy Sr. Notes
(10.250% due 10/01/06) 1,000,000 700,000
Eagle Geophysical Inc. (10.75 % due 07/15/08) 1,000,000 830,000
Louis Dreyfus Notes (6.875% due 12/01/07) 1,500,000 1,383,081
Mitchell Energy Development Corp.
(6.750% due 02/15/04) 1,750,000 1,707,263
------------
5,400,344
------------
ENTERTAINMENT & LEISURE - 2.21%
Imax Corp. Sr. Nt. (7.875% due 12/01/05) 1,000,000 1,010,000
Royal Caribbean (7.000% due 10/15/07) 1,500,000 1,501,284
------------
2,511,284
------------
FOOD, BEVERAGE, & TOBACCO - 2.57%
Fresh Food, Inc. (10.750% due 06/01/06) 1,000,000 940,000
Nabisco Inc. (7.550% due 06/15/15) 1,000,000 1,003,883
RJR Nabisco, Inc. (7.625% due 09/15/03) 1,000,000 976,798
------------
2,920,681
------------
GAMING INDUSTRY - 1.98%
Argosy Gaming (13.2500% due 06/01/04) 1,000,000 1,120,000
Casino Magic of Louisiana
(13.000% due 08/15/03) 1,000,000 1,130,000
------------
2,250,000
------------
HEALTH CARE - 3.06%
Rural/Metro Corp. Sr. Nt.
(7.875% due 03/15/08) 1,000,000 910,000
Tenet Healthcare Corp. (7.875% due 01/15/03) 1,000,000 1,025,641
Universal Health Services Sr. Notes
(8.750% due 08/15/05) 1,500,000 1,545,000
------------
3,480,641
------------
INSURANCE - 3.86%
Farmers Insurance Exchange
(8.500% due 08/01/04) 1,000,000 1,114,317
Leucadia National Corp. (8.250% due 06/15/05) 1,000,000 1,012,873
Prudential Ins. Surplus Notes
(8.100% due 07/15/15) 1,000,000 1,142,952
USF&G Capital (8.470% due 01/10/27) 1,000,000 1,121,819
------------
4,391,961
------------
MANUFACTURING - .90%
International Knife & Saw Corp.
(11.375% due 11/15/06) 1,000,000 1,025,000
------------
MEDIA & CABLE - 3.72%
CF Cable TV Inc. (9.125% due 07/15/07) 1,000,000 1,062,500
Continental Cablevision (8.300% due 05/15/06) 1,000,000 1,109,839
Spanish Broadcasting Systems
(11.000% due 03/15/04) 1,000,000 1,060,000
Tri-State Outdoor Media (11.000 due 05/15/08) 1,000,000 995,000
------------
4,227,339
------------
MEDIA CONGLOMERATE - 3.82%
News American Holdings (6.625% due 01/09/08) 1,500,000 1,543,373
Time Warner Inc. (8.110% due 08/15/06) 1,500,000 1,714,791
Viacom Inc. Sr. Notes (7.750% due 06/01/05) 1,000,000 1,091,918
------------
4,350,082
------------
PAPER & FOREST PRODUCT - .47%
Westvaco Corp. (10.300% due 01/15/19) 500,000 529,800
------------
REAL ESTATE - 2.58%
Colonial Properties Sr. Notes
(8.050% due 07/15/06) 1,500,000 1,525,640
Healthcare Properties Notes
(6.875% due 06/08/05) 1,500,000 1,412,812
------------
2,938,452
------------
TELECOMMUNICATIONS - 6.25%
360 Communications Sr. Notes
(7.500% due 03/01/06) 1,500,000 1,652,174
Arch Comm Group Sub Debentures
(6.750% due 12/01/2003) 1,000,000 545,000
Call-Net Enterprises (0.000% due 12/01/04) 1,250,000 1,212,500
Comcast Cellular Holdings
(9.500% due 05/01/07) 1,000,000 1,060,000
Talton Holdings Inc. Sr. Notes
(11.000% due 06/30/07) 1,000,000 950,000
Worldcom Inc. (7.750% due 04/01/07) 1,500,000 1,692,129
------------
7,111,803
------------
UTILITY - .94%
Cal Energy (7.630% due 10/15/07) 1,000,000 1,068,741
------------
Total Corporate Bond and Notes
(cost $48,837,051) 49,497,983
------------
<CAPTION>
SHARES VALUE
<S> <C> <C>
COMMON STOCKS - .66%
PACKAGING - .66%
Earthshell Container Corporation 63,360 756,360
------------
Total Common Stocks (cost $241,832) 756,360
------------
<caption<
PRINCIPAL VALUE
<S> <C> <C>
SHORT TERM INVESTMENTS - 8.30%
COMMERCIAL PAPER - 5.27%
Block Financial Corp. (5.400% due 01/04/99) $2,000,000 1,999,100
Duke Power Co. (5.550% due 01/04/99) 2,000,000 1,999,075
Koch Industries (5.130% due 01/04/99) 2,000,000 1,999,145
------------
5,997,320
------------
VARIABLE RATE DEMAND NOTES <F1> - 3.03%
Firstar Bank (5.378% due 12/31/31) 3,448,241 3,448,241
------------
Total Short-Term Investments (cost 9,445,561) 9,445,561
------------
TOTAL INVESTMENTS - 110.72%
(cost $122,738,988)<F2> 125,954,016
------------
OTHER ASSETS AND LIABILITIES - (10.72%) (12,191,705)
------------
TOTAL NET ASSETS - 100.00% $113,762,311
============
<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, 1998.
<F2> Represents cost for income tax purposes which is substantially the same
for financial reporting purposes. Gross unrealized appreciation and
depreciation of securities as of December 31, 1998 was $5,213,614 and
($1,998,586) respectively.
</FN>
</TABLE>
The accompanying notes are an integral part of the
financial statements.
<PAGE>
CARILLON FUND, INC.
SCHEDULE OF INVESTMENTS
S&P 500 INDEX PORTFOLIO
DECEMBER 31, 1998
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
COMMON STOCKS - 96.56%
BANKING & FINANCIAL SERVICE - 15.29%
Aetna Life and Casualty Company 1,900 $ 149,388
Allstate (The) Corporation 10,700 413,288
American Express Company 5,900 603,275
American General Corporation 3,300 257,400
American International Group, Incorporated 13,550 1,309,269
Aon Corporation 2,200 121,825
Associates First Capital Corporation 9,000 381,375
Banc One Corporation 15,046 768,286
Bank of New York Company, Incorporated 9,600 386,400
BankAmerica Corporation 22,352 1,343,914
Bankboston Corporation 3,800 147,963
Bankers Trust Corporation 1,200 102,525
BB&T Corporation* 3,700 149,156
Capital One Financial Corporation 900 103,500
Charles Schwab Corporation 5,100 286,556
Chase Manhattan Corporation 11,000 748,688
Chubb Corporation 2,100 136,238
CIGNA Corporation 2,700 208,744
Cincinnati Financial Corporation 2,200 80,575
Citigroup, Incorporated 29,400 1,455,300
Comerica, Incorporated 2,000 136,375
Conseco, Incorporated 4,000 122,250
Countrywide Credit Industries, Incorporated 1,400 70,263
Fannie Mae 13,400 991,600
Federal Home Loan Mortgage Corporation 8,700 560,606
Fifth Third Bancorp 3,400 242,463
First Union Corporation 12,500 760,156
Firstar Bank NA 3,035 282,255
Fleet Financial Group, Incorporated 7,300 326,219
Franklin Resources, Incorporated 3,300 105,600
Golden West Financial 700 64,181
Hartford Financial Services Group 3,000 164,625
Household International, Incorporated 6,300 249,638
Huntington Bancshares 2,720 81,770
Jefferson-Pilot Corporation 1,400 105,000
KeyCorp 5,700 182,400
Lehman Brothers Holdings 1,500 66,094
Lincoln National Corporation 1,300 106,356
Loews Corporation 1,500 147,375
Marsh & McLennan Companies, Incorporated 3,300 192,844
MBIA, Incorporated 1,300 85,231
MBNA Corporation 9,700 241,894
Mellon Bank Corporation 3,400 233,750
Mercantile Bancorporation 2,000 92,250
Merrill Lynch & Company 4,500 300,375
MGIC Investment Corporation 1,500 59,719
Morgan (J. P.) & Company 2,300 241,644
Morgan Stanley, Dean Witter & Company 7,500 532,500
National City Corporation 4,200 304,500
Northern Trust Corporation 1,400 122,238
PNC Bank Corporation 3,900 211,088
Progressive Corporation 900 152,438
Providian Financial Corporation 1,800 135,000
Regions Financial Corporation 2,800 112,875
Republic New York Corporation 1,400 63,788
SAFECO Corporation 1,800 77,288
SLM Holding Corporation 2,200 105,600
State Street Corporation 2,100 146,081
St. Paul Companies 3,000 104,250
Summit Bancorp 2,200 96,113
SunAmerica, Incorporated 2,700 219,038
SunTrust Banks, Incorporated 2,700 206,550
Synovus Financial Corporation 3,400 82,875
Torchmark Corporation 1,800 63,563
Transamerica Corporation 800 92,400
Union Planters Corporation 1,600 72,500
UNUM Corporation 1,800 105,074
U.S. Bancorp 9,600 340,800
Wachovia Corporation 2,700 236,081
Waddell & Reed Financial, Incorporated 96 2,272
Waddell & Reed Financial-Cl B* 416 9,672
Washingon Mutual, Incorporated 7,684 293,432
Wells Fargo & Company 20,800 830,700
------------
20,085,314
------------
CAPITAL GOODS - 6.78%
AlliedSignal, Incorporated 7,200 319,050
AMP, Incorporated 2,768 144,109
Avery Dennison Company 1,500 67,594
Boeing Company 13,000 424,125
Briggs & Stratton Corporation 300 14,963
Browning-Ferris Industries 2,200 62,563
Case Equipment 1,000 21,813
Caterpillar, Incorporated 4,700 216,200
Cincinnati Milacron, Incorporated 500 9,625
Cooper Industries, Incorporated 1,500 71,531
Deere & Company 3,200 106,000
Dover Corporation 2,900 106,213
EG& G, Incorporated 600 16,688
Emerson Electric Company 5,700 344,850
Fluor Corporation 1,000 42,563
Foster Wheeler Corporation 500 6,594
General Dynamics Corporation 1,600 93,800
General Electric Company 41,900 4,276,419
Grainger (W.W.), Incorporated 1,300 54,113
Honeywell, Incorporated 1,600 120,500
Illinois Tool Works, Incorporated 3,200 185,600
Ingersoll-Rand Company 2,100 98,569
Johnson Controls, Incorporated 1,100 64,900
Lockheed Martin Corporation 2,500 211,875
Minnesota Mining & Manufacturing Company 5,200 369,850
NACCO Industries-Class A 100 9,200
Northrop Grumman Corporation 900 65,813
Pall Corporation 1,600 40,500
PACCAR, Incorporated 1,000 41,125
Parker-Hannifin Corporation 1,400 45,850
Perkin-Elmer Corporation 600 58,538
Raychem Corporation 1,100 35,544
Sealed Air Corporation* 1,100 56,169
Tektronix, Incorporated 600 18,038
Tenneco, Incorporated 2,200 74,938
Thermo Electron Corporation* 2,100 35,569
Thomas & Betts Corporation 700 30,319
Tyco International Limited 8,284 624,924
United Technologies Corporation 2,900 315,375
------------
8,902,009
------------
CONSUMER CYCLICAL - 8.10%
American Greetings Company Class A 900 36,955
AutoZone, Incorporated* 2,000 65,875
Black & Decker Corporation 1,200 67,275
Brunswick Corporation 1,300 32,175
Carnival Corporation 7,900 379,200
Consolidated Stores Corporation* 1,400 28,263
Costco Companies, Incorporated* 2,800 202,123
Dana Corporation 2,149 87,840
Dayton Hudson Corporation 5,700 309,225
Dillard, Incorporated Class A 1,400 39,725
Dow Jones & Company 1,200 57,750
Eaton Corporation 900 63,617
Federated Department Stores* 3,700 117,618
Ford Motor Company 15,600 915,525
Gannett Company, Incorporated 3,700 238,650
Gap, Incorporated 7,650 430,313
General Motors Corporation 8,400 601,125
Genuine Parts Company 2,300 76,905
Goodyear Tire & Rubber 2,000 100,875
Harcourt General, Incorporated 900 47,867
Harrah's Entertainment, Incorporated* 1,300 20,394
Hasbro, Incorporated 1,700 61,413
Hilton Hotels Corporation 3,400 65,025
Home Depot, Incorporated 18,900 1,156,444
ITT Industries, Incorporated 1,500 59,625
Jostens, Incorporated 500 13,092
K Mart Corporation* 6,300 96,469
Knight-Ridder, Incorporated 1,000 51,125
Kohl's Corporation* 2,000 122,875
Liz Claiborne, Incorporated 900 28,406
Lowe's Companies, Incorporated 4,500 230,344
Marriott International Class A 3,200 92,800
Masco Company 4,400 126,500
Mattel, Incorporated 3,800 86,687
May Department Stores Company 3,000 181,125
McGraw-Hill Companies, Incorporated 1,300 132,437
Meyer (Fred), Incorporated* 2,000 120,500
Mirage Resorts, Incorporated* 2,300 34,354
New York Times Class A 2,400 83,250
NIKE, Incorporated Class B 3,700 150,081
Nordstrom, Incorporated 1,900 65,906
Owens Corning Corporation 700 24,806
Penney, (J.C.) Company, Incorporated 3,300 154,687
Reebok International Limited* 700 10,413
Russell Corporation 500 10,155
Sears Roebuck & Company 5,100 216,750
Sherwin-Williams Company 2,200 64,625
Snap-On Tools, Incorporated 800 27,850
Springs Industries, Incorporated 200 8,287
Stanley (The) Works 1,100 30,525
Staples, Incorporated* 3,700 161,644
Tandy Corporation 1,300 53,542
Limited (The), Incorporated 2,900 84,463
Times Mirror Company 1,100 61,600
TJX Cos, Incorporated 4,100 118,900
Toys "R" Us, Incorporated* 3,400 57,375
Tribune Company 1,600 105,600
TRW, Incorporated 1,600 89,900
Wal-Mart Stores, Incorporated 28,800 2,345,400
Whirlpool Corporation 1,000 55,375
V.F. Corporation 1,600 75,000
------------
10,634,650
------------
CONSUMER NON-DURABLE - 25.06%
Abbott Laboratories 19,800 970,200
Albertson's, Incorporated 3,200 203,800
Allergan, Incorporated 800 51,800
American Home Products Corporation 16,900 951,680
American Stores Company 3,500 129,280
Anheuser-Busch Companies, Incorporated 6,200 406,874
Archer-Daniels-Midland Company 7,725 132,773
Avon Products, Incorporated 3,400 150,450
Bausch & Lomb, Incorporated 700 42,000
Baxter International, Incorporated 3,700 237,956
Becton, Dickinson Company 3,200 136,600
BestFoods, Incorporated 3,700 197,025
Boston Scientific Corporation* 5,000 134,062
Bristol-Meyers Squibb Company 12,800 1,712,800
Campbell Soup Company 5,800 319,000
Cardinal Health, Incorporated 2,600 197,275
CBS, Corporation 9,200 301,300
Clear Channel Communications* 3,200 174,400
Clorox Company 1,300 151,855
Coca-Cola Company 31,800 2,126,625
Coca-Cola Enterprises 5,200 185,900
Colgate-Palmolive Company 3,800 352,925
Columbia/HCA Healthcare Corporation 8,300 205,425
Comcast Corporation Class A Special 4,800 281,700
ConAgra, Incorporated 6,300 198,450
CVS Corporation 5,000 275,000
Deluxe Corporation 1,000 36,561
Donnelly (RR) & Sons Company 1,800 78,862
Fortune Brands, Incorporated 2,200 69,575
General Mills, Incorporated 2,000 155,500
Gillette Company 14,500 700,531
Great Atlantic & Pacific Tea
Company, Incorporated 500 14,813
Guidant Corporation 1,900 209,475
HCR Manor Care, Incorporated* 1,400 41,125
Heinz (H.J.) Company 4,700 266,135
Healthsouth Corporation* 5,400 83,363
Hershey Foods Corporation 1,800 111,936
Humana, Incorporated* 2,100 37,406
Johnson & Johnson Company 17,300 1,451,037
Kellogg Company 5,200 177,450
King World Productions, Incorporated 900 26,492
Kroger Company* 3,300 199,650
Lilly,(Eli) & Company 14,200 1,262,025
Mallincrokdt, Incorporated 900 27,731
McDonald's Corporation 8,800 674,300
Medtronic, Incorporated 6,000 445,500
Merck & Company, Incorporated 15,300 2,259,617
Newell Company 2,100 86,625
PepsiCo, Incorporated 19,000 777,813
Pfizer, Incorporated 16,800 2,107,350
Pharmacia & Upjohn, Incorporated 6,500 368,063
Philip Morris Companies, Incorporated 31,300 1,674,550
Pioneer Hi-Bred International 3,100 83,700
Procter & Gamble Company 17,300 1,579,706
Quaker Oats 1,800 107,100
RJR Nabisco Holdings Corporation 4,150 123,203
Ralston-Ralston Purina Group 4,000 129,500
Rite Aid Corporation 3,300 163,556
Rubbermaid, Incorporated 1,900 59,731
Safeway, Incorporated* 6,300 383,906
Sara Lee Corporation 12,000 338,250
Schering-Plough Corporation 19,000 1,049,750
Seagram Company, Limited 4,500 171,000
Supervalu, Incorporated 1,600 44,800
St. Jude Medical* 1,100 30,456
Sysco Corporation 4,300 117,981
Tele-Communications, Incorporated* 6,700 370,594
Tenet Healthcare Corporation* 4,000 105,000
Time Warner, Incorporated 15,400 955,763
TRICON Global Restaurants* 2,000 100,250
Unilever N.V. ADR 8,200 680,088
United HealthCare Corporation 2,500 107,656
UST, Incorporated 2,400 83,700
Viacom, Incorporated - Class B* 4,600 340,400
Walgreen Company 6,400 374,800
Walt Disney Company, The 26,400 792,000
Warner-Lambert Company 10,600 796,988
Wendy's International 1,600 34,900
Winn-Dixie Stores, Incorporated 1,900 85,260
Wrigley, (Wm), Jr. Company 1,500 134,345
------------
32,915,023
------------
ENERGY - 5.47%
Amerada Hess Corporation 1,200 59,700
Anadarko Petroleum Corporation 1,500 46,313
Ashland, Incorporated 1,100 48,375
Atlantic Richfield Company 4,100 267,525
Baker Hughes, Incorporated 4,090 72,342
Burlington Resources, Incorporated 2,300 82,369
Chevron Corporation 8,400 696,675
Exxon Corporation 31,400 2,296,125
Halliburton Company 5,700 168,863
Kerr-McGee Company 600 22,950
Mobil Corporation 10,100 879,963
Occidental Petroleum 4,500 75,938
Oryx Energy* 1,400 18,813
PennzEnergy Company 600 9,788
Pennzoil-Quaker State Company* 600 8,888
Phillips Petroleum Company 3,300 140,663
Royal Dutch Petroleum ADR 27,600 1,321,350
Schlumberger Limited 7,000 322,875
Sunoco, Incorporated 1,200 43,275
Texaco, Incorporated 6,900 364,838
Union Pacific Resources Group 3,200 29,000
Unocal Corporation 3,100 90,481
USX-Marathon 4,000 120,500
------------
7,187,609
------------
MANUFACTURING - 3.73%
Air Products & Chemicals, Incorporated 3,000 120,000
Alcan Aluminum Limited 2,900 78,481
Allegheny Teledyne, Incorporated 2,500 51,094
Aluminum Company of America 2,400 178,950
Applied Materials, Incorporated* 4,700 200,631
Armco, Incorporated* 1,400 6,125
ASARCO, Incorporated 500 7,531
Ball Corporation 400 18,300
Barrick Gold Corporation 4,800 93,600
Bemis Company 700 26,556
Bethlehem Steel Corporation* 1,700 14,238
Centex Corporation 800 36,050
Champion International Corporation 1,200 48,600
Corning, Incorporated 3,000 135,000
Crown Cork & Seal Company, Incorporated 1,600 49,300
Dow Chemical Company 2,900 263,719
DuPont (E.I.) De Nemours & Company 14,600 774,713
Eastman Chemical Company 1,000 44,750
Englehard Corporation 1,900 37,050
FMC Corporation* 400 22,400
Fort James Corporation 2,800 112,000
Freeport-McMoRan Copper & Gold 2,300 24,006
Georgia-Pacific Company 1,200 70,275
Grace, (W.R.) & Company* 1,000 15,688
Great Lakes Chemical Corporation 800 32,000
Hercules, Incorporated 1,200 32,850
Inco, Limited 2,100 22,181
International Flavors & Fragrance,
Incorporated 1,400 61,863
International Paper Company 4,000 179,250
Kaufman & Broad Home Corporation 500 14,375
Kimberly-Clark Corporation 7,000 381,500
Louisiana Pacific Corporation 1,400 25,638
Mead Corporation 1,300 38,106
Monsanto Company 7,700 365,750
Morton International, Incorporated 1,700 41,650
Nalco Chemical Company 800 24,800
National Service Industries 500 19,000
Newmont Mining Corporation 2,200 39,738
Nucor Corporation 1,100 47,575
Owens-Illinois, Incorporated* 2,000 61,250
Phelps Dodge Corporation 800 40,700
Pitney-Bowes, Incorporated 3,500 231,219
Placer Dome, Incorporated 3,200 36,800
PPG Industries, Incorporated 2,300 133,975
Praxair, Incorporated 2,000 70,500
Pulte Corporation 600 16,688
Reynolds Metals Company 900 47,419
Rohm & Haas Company 2,300 69,288
Sigma-Aldrich Corporation 1,300 38,188
Temple-Inland 700 41,519
Union Camp Corporation 900 60,750
Union Carbide Corporation 1,700 72,250
USX-U.S. Steel Group 1,100 25,300
Weyerhaeuser Company 2,600 132,113
Willamette Industries 1,400 46,900
Worthington Industries, Incorporated 1,200 15,000
------------
4,895,192
------------
SERVICE - 1.73%
Automatic Data Processing, Incorporated 3,900 312,731
Block (H&R), Incorporated 1,300 58,500
Cendant Corporation* 11,000 209,688
Dun & Bradstreet Corporation 2,200 69,438
Electronic Data Systems Corporation 6,354 319,289
Equifax, Incorporated 1,900 64,956
First Data Corporation 5,800 183,788
IMS Health, Incorporated 2,100 158,417
Interpublic Group Companies, Incorporated 1,800 143,550
Laidlaw, Incorporated 4,200 42,263
Omnicom Group 2,200 127,600
Paychex, Incorporated 2,100 108,019
Service Corporation International 3,300 125,606
Waste Management, Incorporated 7,370 343,626
------------
2,267,471
------------
TECHNOLOGY - 18.16%
3COM Corporation* 4,600 206,138
Adobe Systems, Incorporated 900 42,075
Advanced Micro Devices, Incorporated* 1,900 54,981
American Online 6,000 960,000
Amgen, Incorporated* 3,300 345,056
Andrew Corporation* 1,100 18,150
Apple Computer, Incorporated* 1,700 69,594
Ascend Communications, Incorporated* 2,800 184,100
BMC Software, Incorporated* 2,700 120,319
Cabletron Systems, Incorporated* 2,100 17,588
Cisco Systems, Incorporated* 20,050 1,860,891
COMPAQ Computers Corporation 21,500 901,656
Computer Associates International,
Incorporated 7,200 306,900
Computer Sciences Corporation* 2,000 128,875
Compuware, Incorporated 2,400 187,500
Data General Corporation* 600 9,863
Dell Computer Corporation* 16,300 1,192,956
Eastman Kodak Company 4,200 302,400
EMC Corporation Massachusetts* 6,400 544,000
Gateway 2000, Incorporated* 2,000 102,375
General Instrument Corporation* 1,900 64,481
HBO & Company 5,600 160,650
Hewlett-Packard Company 13,400 915,388
IKON Office Solution 1,700 14,556
Intel Corporation 21,600 2,560,950
International Business Machines Corporation 12,000 2,217,000
LSI Logic Corporation* 1,800 29,025
Lucent Technologies 16,900 1,859,000
Micron Technology, Incorporated* 2,700 136,519
Microsoft Corporation* 31,700 4,396,394
Motorola, Incorporated 7,700 470,181
National Semiconductor* 2,100 28,350
Nothern Telecom, Limited 8,420 422,053
Novell, Incorporated* 4,600 83,375
Oracle Systems Corporation* 12,500 539,063
Parametric Technology Company* 3,500 56,875
PeopleSoft, Incorporated* 3,000 56,813
Raytheon Company - Class B 4,400 234,300
Rockwell International Corporation 2,500 121,406
Seagate Technology, Incorporated* 3,100 93,775
Scientific-Atlanta, Incorporated 1,000 22,813
Silicon Graphics, Incorporated* 2,400 30,900
Sun Microsystems, Incorporated* 4,900 419,563
Tellabs, Incorporated* 2,500 171,406
Texas Instruments, Incorporated 5,000 427,813
Textron, Incorporated 2,100 159,469
Unisys Corporation* 3,300 113,644
Xerox Corporation 4,200 495,600
------------
23,856,779
------------
TRANSPORTATION - .92%
AMR Corporation* 2,300 136,563
Burlington Northern Santa Fe Corporation 6,100 205,875
CSX Corporation 2,800 116,200
Delta Air Lines 2,000 104,000
FDX Corporation* 1,900 169,100
Norfolk Southern Company 4,900 155,269
Ryder System 900 23,400
Southwest Airlines Company 4,300 96,481
Union Pacific Corporation 3,200 144,200
US Airways Group, Incorporated* 1,200 62,400
------------
1,213,488
------------
UTILITIES - 11.32%
AES Corporation* 2,300 108,963
AirTouch Communications* 7,400 533,725
Alcatel 1,141 27,883
ALLTELL Corporation 3,500 209,344
Ameren Corporation 1,800 76,838
AT & T Corporation 23,300 1,753,325
American Electric Power Company 2,500 117,656
Ameritech Corporation 14,200 899,925
Baltimore Gas & Electric Company 1,900 58,663
Bell Atlantic Corporation 20,000 1,060,000
BellSouth Corporation 25,400 1,266,825
Carolina Power & Light Company 1,900 89,419
Central & SouthWest Corporation 2,700 74,081
CINergy Corporation 2,000 68,750
Coastal Corporation 2,700 94,331
Columbia Energy Group 1,100 63,525
Consolidated Edison, Incorporated 3,000 158,625
Consolidated Natural Gas Company 1,200 64,800
Dominion Resources 2,500 116,875
Duke Energy 4,700 301,094
DTE Energy Company 1,900 81,463
Eastern Enterprises 300 13,125
Edison International 4,600 128,225
Enron Corporation 4,200 239,663
Entergy Corporation 3,200 99,600
FirstEnergy Corporation 3,100 100,944
Frontier Corporation 2,200 74,800
FPL Group, Incorporated 2,300 141,738
GPU, Incorporated 1,600 70,700
GTE Corporation 12,400 806,000
Houston Industries, Incorporated 3,800 122,075
MCI WorldCom, Incorporated* 22,873 1,641,138
Mediaone Group* 7,800 366,600
Nextel Communications, Incorporated* 3,700 87,413
Niagara Mohawk Power Corporation* 2,400 38,700
Northern States Power Company 1,900 52,725
ONEOK, Incorporated 400 14,450
PacifiCorp 3,800 80,038
PECO Energy Company 2,900 120,713
PG & E Corporation 4,900 154,350
PP & L Resources, Incorporated 1,900 52,963
Public Service Enterprises Group, Incorporated 3,000 120,000
SBC Communications, Incorporated 25,200 1,351,350
Sempra Energy 3,100 78,663
Sonat, Incorporated 1,400 37,888
Southern Company 9,000 261,563
Sprint Corporation FON Group 5,500 462,688
Sprint PCS Group, Incorporated 2,750 63,594
Texas Utilities Holdings Cos. 3,600 168,075
Unicom Corporation 2,800 107,975
US West Communications Group 6,500 420,063
Williams Cos. 5,500 171,531
------------
14,875,460
------------
Total Common Stocks (cost $94,051,110) 126,832,995
------------
<CAPTION>
PRINCIPAL VALUE
<S> <C> <C>
SHORT-TERM INVESTMENTS<F2> - 4.34%
U.S. Treasury Bill (0.000% due 04/08/99) $5,199,597 5,199,597
Firstar U.S. Federal Money Market Fund 497,693 497,693
------------
Total Short-Term Investments (cost $5,697,290) 5,697,290
------------
TOTAL INVESTMENTS - 100.90%
(cost $99,748,400)<F1> 132,530,285
------------
OTHER ASSETS AND LIABILITIES -(.90%) (1,185,500)
------------
TOTAL NET ASSETS - 100% $131,344,785
============
- ---------------
*Non-income producing
<FN>
<F1> Represents cost for income tax purposes which is substantially the same
for financial reporting purposes. Gross unrealized appreciation and
depreciation of securities as of December 31, 1998 was $36,612,438 and
($3,830,553) respectively.
<F2> Securities with an aggregate market value of $5,293,375 have been
segregated with the custodian to cover margin requirements for the following
open futures contracts at December 31, 1998:
<CAPTION>
Unrealized
Appreciation/
Type Contracts (Depreciation)
<S> <C> <C>
Standard & Poor's 500 Index (03/99) 1 $ 10,250
Standard & Poor's 500 Index (03/99) 1 10,125
Standard & Poor's 500 Index (03/99) 1 10,925
Standard & Poor's 500 Index (03/99) 1 18,875
Standard & Poor's 500 Index (03/99) 1 13,450
Standard & Poor's 500 Index (03/99) 1 12,375
Standard & Poor's 500 Index (03/99) 1 14,125
Standard & Poor's 500 Index (03/99) 1 12,250
Standard & Poor's 500 Index (03/99) 1 17,325
Standard & Poor's 500 Index (03/99) 2 27,950
Standard & Poor's 500 Index (03/99) 1 7,900
Standard & Poor's 500 Index (03/99) 1 3,500
Standard & Poor's 500 Index (03/99) 1 1,500
Standard & Poor's 500 Index (03/99) 1 1,175
Standard & Poor's 500 Index (03/99) 1 (1,500)
Standard & Poor's 500 Index (03/99) 1 1,125
--------
$161,350
========
</FN>
</TABLE>
The accompanying notes are an integral part of
the financial statements.
<PAGE>
CARILLON FUND, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
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 and retirement
products. The Fund's shares are offered in five different
series - Equity Portfolio, Capital Portfolio, Bond Portfolio,
S&P 500 Index Portfolio and Micro-Cap Portfolio (individually
"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 S&P 500 Index Portfolio seeks
investment results that correspond to the total return
performance of U.S. common stocks, as represented in the
Standard & Poor's 500 Index. The financial statements of the
Micro-Cap 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 in each Portfolio, except
for short-term fixed income securities 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. Short-term fixed income securities with
a remaining maturity of 60 days or less held in each Portfolio
are valued at amortized cost which approximates market. Non-
U.S. dollar securities are translated into U.S. dollars using
the spot exchange rate at the close of the London 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. All amortization of discount is recognized currently
under the effective interest method. Gains and losses on sales
of investments are calculated on the identified cost basis for
financial reporting and tax purposes.
Federal taxes - It is the intent of each Portfolio 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 Capital Portfolio and the Bond Portfolio have a
capital loss carry forward of $2,649,227 and $404,220 which can
be carried forward until 2006.
Distributions -Distributions from net investment income in all
Portfolios are declared and paid quarterly. Net realized
capital gains are distributed periodically, no less frequently
than annually. Distributions are recorded on the ex-dividend
date. All distributions are reinvested in additional shares of
the respective Portfolio at the net asset value per share.
The amount of 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. Distributions which exceed net
investment income and net realized capital gains for financial
reporting purposes but not for tax purposes are reported as
distributions 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.
Foreign Currency-The Funds' accounting records are maintained in
U.S. dollars. All Portfolios may purchase foreign securities
within certain limitations set forth in the Prospectus. Amounts
denominated in or expected to settle in foreign currencies are
translated into U.S. dollars at the spot rate at the close of
the London Market. The Fund does not isolate that portions of
the results of operations resulting from changes in foreign
exchange rates on investments from the underlying fluctuation in
the securities resulting from market prices. All are included
in net realized and unrealized gain or loss for investments.
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 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 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.
(d) for the S&P 500 Index Portfolio - .30% 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 Equity, Capital, or Bond Portfolios, the Adviser will
reimburse the Fund for such excess, up to the amount of the
advisory fee for that year. The Adviser has agreed to waive its
advisory fee and pay any other expenses of the S&P 500 Index
Portfolio to the extent that such expenses exceed 0.60% of its
average annual net assets.
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 for the Equity, Capital, and Bond Portfolios,
and .05% of the Fund's average net assets for the S&P 500 Index
Portfolio. 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 - FUTURES AND FORWARD CURRENCY CONTRACTS
S&P 500 Index Portfolio ("Index") may purchase futures contracts
on the Standard & Poor's 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 on 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 & Poor's 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.
All portfolios may enter into forward foreign currency exchange
contacts for the purchase or sale of a specific foreign currency
at a fixed price on a future date. Risks may arise upon entering
these contracts from the potential inability of counterparties
to meet the terms of their contracts and from unanticipated
movements in their value of a foreign currency relative to the
U.S. dollar. The funds typically utilize the contracts as a
hedge against fluctuation in currency values between the trade
and settlement dates of security transactions.
NOTE 4 - SUMMARY OF PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of securities for the year ended
December 31, 1998 excluding short-term obligations, follow:
<TABLE>
<CAPTION>
Equity Capital Bond S&P 500 Index
Portfolio Portfolio Portfolio Portfolio
<S> <C> <C> <C> <C>
Total Cost
of Purchases of:
Common Stocks $176,565,997 $95,496,275 $ 500,000 $57,204,221
U.S. Government Securities --- 66,200,913 38,169,352 ---
Corporate Bonds --- 52,847,328 57,048,754 ---
------------ ------------ ----------- ----------
$176,565,997 $214,544,516 $95,718,106 $57,204,221
------------ ------------ ----------- ----------
Total Proceeds
from Sales of:
Common Stocks $157,825,885 $ 64,391,326 $ 1,897,784 $ 2,300,118
U.S. Government Securities --- 94,201,280 19,232,107 ---
Corporate Bonds --- 38,998,914 52,432,185 ---
------------ ------------ ----------- -----------
$157,825,885 $197,591,520 $73,562,076 $ 2,300,118
============ ============ =========== ===========
</TABLE>
Note 5 - FINANCIAL HIGHLIGHTS
Computed on the basis of a share of capital stock outstanding
throughout the year.
<TABLE>
<caption
Equity Portfolio
Year Ended December 31,
1998 1997 1996 1995 1994
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of year $ 20.35 $ 19.45 $ 16.54 $ 14.30 $ 14.58
------- ------- ------- ------- -------
Investment Activities:
Net investment income .25 .23 .29 .24 .20
Net realized
and unrealized
gains/(losses) (2.80) 3.23 3.61 3.36 .31
------- ------- ------- ------- -------
Total from
Investment Activities (2.55) 3.46 3.90 3.60 .51
------- ------- ------- ------- -------
Distributions:
Net investment income (.23) (.27) (.27) (.23) (.19)
Net realized gains (2.68) (2.29) (.72) (1.13) (.60)
------- ------- ------- ------- -------
Total Distributions (2.91) (2.56) (.99) (1.36) (.79)
------- ------- ------- ------- -------
Net Asset Value,
End of year $14.89 $20.35 $19.45 $16.54 $14.30
======= ======= ======= ======= =======
Total Return (15.31%) 20.56% 24.52% 26.96% 3.42%
Ratios/Supplemental Data:
Ratio of Expenses to
Average Net Assets .62% .62% .64% .66% .69%
Ratio of Net Investment
Income to Average
Net Assets 1.41% 1.23% 1.66% 1.73% 1.45%
Portfolio Turnover Rate 62.50% 57.03% 52.53% 34.33% 40.33%
Net Assets, End of Year
(000's) $248,783 $335,627 $288,124 $219,563 $157,696
</TABLE>
<PAGE>
Note 5 - FINANCIAL HIGHLIGHTS
Computed on the basis of a share of capital stock outstanding
throughout the year.
<TABLE>
<CAPTION>
Capital Portfolio
Year Ended December 31,
1998 1997 1996 1995 1994
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of year $ 14.10 $ 14.95 $ 13.72 $ 13.19 $ 13.81
------- ------- ------- ------- -------
Investment Activities:
Net investment income .41 .62 .63 .64 .52
Net realized
and unrealized
gains/(losses) (2.14) .37 1.36 1.15 (.39)
------- ------- ------- ------- -------
Total from
Investment Activities (1.73) .99 1.99 1.79 .13
------- ------- ------- ------- -------
Distributions:
Net investment income (.45) (.66) (.57) (.64) (.52)
Net realized gains (.72) (1.18) (.19) (.62) (.23)
------- ------- ------- ------- -------
Total Distributions (1.17) (1.84) (.76) (1.26) (.75)
------- ------- ------- ------- -------
Net Asset Value,
End of year $ 11.20 $ 14.10 $ 14.95 $ 13.72 $ 13.19
======= ======= ======= ======= =======
Total Return (13.25%) 7.40% 14.94% 14.28% .94%
Ratios/Supplemental Data:
Ratio of Expenses to
Average Net Assets .79% .77% .77% .77% .80%
Ratio of Net Investment
Income to Average
Net Assets 3.27% 4.22% 4.42% 4.99% 4.25%
Portfolio Turnover Rate 165.00% 60.84% 53.11% 43.83% 41.89%
Net Assets,
End of Year (000's) $109,678 $148,830 $159,294 $145,623 $119,263
</TABLE>
<PAGE>Note 5 - FINANCIAL HIGHLIGHTS
Computed on the basis of a share of capital stock outstanding
throughout the year.
<TABLE>
<CAPTION>
Bond Portfolio
Year Ended December 31,
1998 1997 1996 1995 1994
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of year $ 11.29 $ 10.91 $ 11.07 $ 10.04 $ 11.30
------- ------- ------- ------- -------
Investment Activities:
Net investment income .77 .79 .79 .88 .7
Net realized and
unrealized gains/
(losses) (.05) .37 (.04) .98 (.95)
------- ------- ------- ------- -------
Total from
Investment Activities .72 1.16 .75 1.86 (.18)
------- ------- ------- ------- -------
Distributions:
Net investment income (.76) (.72) (.87) (.83) (.78)
In excess of net
investment income ---- ---- (.04) ---- ----
Net realized gains (.12) (.06) ---- ---- (.30)
------- ------- ------- ------- -------
Total Distributions (.88) (.78) (.91) (.83) (1.08)
------- ------- ------- ------- -------
Net Asset Value,
End of year $ 11.13 $ 11.29 $ 10.91 $ 11.07 $ 10.04
======= ======= ======= ======= =======
Total Return 6.52% 11.02% 7.19% 19.03% (1.63%)
Ratios/Supplemental Data:
Ratio of Expenses to
Average Net Assets .58% .60% .62% .65% .68%
Ratio of Net Investment
Income to Average
Net Assets 6.84% 7.15% 7.24% 7.43% 7.21%
Portfolio Turnover Rate 67.57% 113.41% 202.44% 111.01% 70.27%
Net Assets,
End of Year (000's) $113,762 $ 99,892 $ 85,634 $ 73,568 $55,929
</TABLE>
<PAGE>
Note 5 - FINANCIAL HIGHLIGHTS
Computed on the basis of a share of capital stock outstanding
throughout the year.
<TABLE>
<CAPTION>
S&P 500 INDEX PORTFOLIO
Year Ended December 31,
1998 1997 1996<F1>
------- ------- -------
<S> <C> <C> <C>
Net Asset Value,
Beginning of year $ 15.74 $ 12.13 $ 10.00
------- ------- -------
Investment Activities:
Net investment income .20 .20 .20
Net realized and unrealized
gains /(losses) 4.21 3.72 2.12
------- ------- -------
Total from Investment Activities 4.41 3.92 2.32
------- ------- -------
Distributions:
Net investment income (.20) (.21) (.19)
Net realized gains (.46) (.10) ---
------- ------- -------
Total Distributions (.66) (.31) (.19)
------- ------- -------
Net Asset Value,
End of year $ 19.49 $ 15.74 $ 12.13
------- ------- -------
Total Return 28.54% 32.72% 23.37%
Ratios / Supplemental Data:
Ratio of Net Expenses to
Average Net Assets .43% .50% .59%<F2>
Ratio of Net Investment
Income to Average Net Assets 1.25% 1.48% 2.14%<F2>
Portfolio Turnover Rate 2.64% 9.06% 1.09%
Net Assets, End of Year (000's) $131,345 $ 55,595 $ 29,205
<FN>
<F1> The portfolio commenced operation on December 29, 1995. The financial
highlights table for the period ending December 31, 1995 is not presented
because the activity for the period did not round to $0.01 in any category of
the reconciliation of beginning to ending net asset value per share. The
ratios and total return were all less than 0.1%. The net assets at December
31, 1995 were $305,148.
<F2> The ratios of net expenses to average net assets would have increased
and net investment income to average net assets would have decreased by .25%
for the six months ended December 31, 1996, had the Adviser not waived a
portion of its fee.
</FN>
</TABLE>
<PAGE>
Carillon Fund, Inc.
MICRO-CAP PORTFOLIO
<PAGE>
Independent Auditors' Report
To the board of Directors and Shareholders of
Micro-Cap Portfolio of Carillon Fund, Inc.
We have audited the accompanying statement of assets and
liabilities, including the schedule of investments, of the
Micro-Cap Portfolio of Carillon Fund, Inc. (the "Fund"), as of
December 31, 1998, and the related statements of operations and
of changes in net assets, and the financial highlights for the
periods presented. 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.
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 securities owned as of
December 31, 1998, by correspondence with the Fund's 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 audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements present fairly, in all
material respects, the financial position of the Fund, as of
December 31, 1998, and the results of its operations, the
changes in its net assets and the financial highlights for the
respective stated periods in conformity with generally accepted
accounting principles.
Deloitte & Touche LLP
Dayton, Ohio
February 5, 1999
<PAGE>
CARILLON FUND, INC.
MICRO-CAP PORTFOLIO
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1998
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments in securities, at value $2,686,368
(cost $2,783,700)
Interest and dividends receivable 2,293
Prepaid expenses and other 173
----------
2,688,834
----------
LIABILITIES
Payables:
Investment securities purchased 72,328
Professional fees 9,123
Custodial and portfolio accounting fees 4,634
Investment advisory fees 7,291
Other accrued expenses 618
----------
93,994
----------
NET ASSETS
Paid-in capital 2,965,352
Accumulated net realized gain/(loss) (273,180)
of investments
Net unrealized/(depreciation) appreciation
of investments (97,332)
----------
$2,594,840
==========
Shares authorized ($.10) par value 20,000,000
Shares outstanding 300,000
Net asset value, offering and
redemption price per share $8.65
==========
</TABLE>
The accompanying notes are an integral part of
the financial statement.
<PAGE>
CARILLON FUND, INC.
MICRO-CAP PORTFOLIO
STATEMENT OF OPERATIONS
Year Ended December 31, 1998
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME
Dividends (net of foreign withholding
taxes of $529) 20,340
Interest 4,351
---------
24,691
---------
EXPENSES
Investment advisory fees 28,186
Portfolio accounting fees 22,728
Director's fees 13,261
Professional fees 8,273
Custodial fees and expenses 1,423
Transfer agent fees 1,352
Other 1,257
---------
76,480
Expense Reimbursement (20,895)
---------
55,585
---------
NET INVESTMENT LOSS (30,894)
---------
REALIZED AND UNREALIZED LOSS
Net realized loss on investments (273,180)
---------
Net change in unrealized appreciation/
(depreciation) of investments, and
translation of assets and
liabilities in foreign currencies (81,476)
---------
NET REALIZED AND UNREALIZED GAIN/(LOSS) (354,656)
---------
NET DECREASE IN NET ASSETS FROM OPERATIONS $(385,550)
=========
</TABLE>
The accompanying notes are an integral part of
the financial statements.
<PAGE>
CARILLON FUND, INC.
MICRO-CAP PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
- ----------------------------------------
<TABLE>
<CAPTION>
Period from
For the Year November 24,1997
Ended December 31,1998 to December 31,1997
<S> <C> <C>
OPERATIONS
Net investment loss $ (30,894) $ (3,754)
Net realized loss on investments (273,180) ---
Net change in unrealized
appreciation/(depreciation)
on investments, and translation
of assets and liabilities in
foreign currencies (81,476) (15,856)
---------- ----------
(385,550) (19,610)
---------- ----------
FUND SHARE TRANSACTIONS
Proceeds from shares sold --- 3,000,000
---------- ----------
NET INCREASE (DECREASE)
IN NET ASSETS (385,550) 2,980,390
NET ASSETS
Beginning of year 2,980,390 ---
---------- ----------
End of year $2,594,840 $2,980,390
========== ==========
FUND SHARE TRANSACTIONS:
Sold --- 300,000
---------- ----------
Net increase from fund
share transactions --- 300,000
========== ==========
</TABLE>
The accompanying notes are an integral part of
the financial statements.
<PAGE>
CARILLON FUND, INC.
MICRO-CAP PORTFOLIO
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
COMMON STOCKS - 96.06%
BANKING & FINANCIAL SERVICE - 15.81%
Duff & Phelps Credit Rating Company 2,300 $ 126,069
Jefferies Group, Incorporated 2,500 124,063
Mid-Iowa Financial 7,700 103,950
Warren Bancorp, Incorporated 6,200 56,188
----------
410,270
----------
CAPITAL GOODS - 1.44%
LMI Aerospace, Incorporated* 6,000 37,500
----------
CONSUMER CYCLICAL - 19.34%
Decorator Industries, Incorporated 7,500 59,063
Maxwell Shoe Company Incorporated - A* 5,000 54,688
Musicland Stores, Incorporated* 4,000 59,750
Newmark Homes Corporation* 10,000 70,000
Strattec Security Corporation* 3,200 96,000
Supreme International Corporation* 6,900 82,800
Winsloew Furniture, Incorporated* 3,000 79,500
----------
501,801
----------
CONSUMER NON-DURABLE - 22.26%
Advanced Marketing Services 5,000 96,250
Boston Acoustics 4,050 107,324
Marinemax, Incorporated* 9,000 70,875
Orthofix International N.V.* 6,300 88,200
Schlotzsky's, Incorporated* 4,500 44,437
Scientific Games Holdings Corporation* 5,000 94,374
Young Innovations, Incorporated* 5,800 76,124
----------
577,584
----------
ENERGY - 3.65%
Dawson Geophysical Company* 4,000 28,750
Mitcham Industries, Incorporated* 4,000 18,375
OYO Geospace Corporation* 3,300 28,463
Range Resources Corporation 5,558 19,106
----------
94,694
----------
MANUFACTURING - 11.71%
American Building Company* 2,600 63,700
CFC International, Incorporated* 7,500 60,000
CompX International, Incorporated* 3,500 92,313
Lindberg Corporation 4,700 42,741
Omniquip International, Incorporated 3,000 45,000
----------
303,754
----------
SERVICE - 5.59%
Innotrac Corporation* 8,000 145,000
----------
TECHNOLOGY - 16.26%
LCA-Vision, Incorporated* 44,300 60,913
Nam Tai Electronics, Incorporated 4,700 52,874
SPSS, Incorporated* 3,500 66,063
Vertex Communications Corporation* 3,300 52,388
Vtech Holdings Limited 2,400 104,711
Xircom, Incorporated* 2,500 85,000
----------
421,949
----------
Total Common Stocks (cost $ 2,565,859) 2,492,552
----------
FOREIGN COMMON STOCK - 1.60%
HONG KONG - 1.60%
Techtronic Industries 232,800 41,468
----------
Total Foreign Common Stock (cost $65,493) 41,468
----------
SHORT-TERM INVESTMENTS - 5.87%
<CAPTION>
PRINCIPAL VALUE
<S> <C> <C>
VARIABLE RATE DEMAND NOTES<F1> - 5.87%
Firstar Bank (5.378% due 12/31/31) 62,392 $ 62,392
Pitney Bowes (5.233% due 12/31/31) 89,956 89,956
----------
152,348
----------
Total Short-Term Investments (cost $152,348) 152,348
----------
TOTAL INVESTMENTS - 103.53%
(cost $2,783,700)<F2> 2,686,368
----------
OTHER ASSETS AND LIABILITIES - (3.53%) (91,528)
----------
TOTAL NET ASSETS - 100% $2,594,840
==========
_________
* 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 as of December 31, 1998.
<F2> Represents cost for income tax purposes which is substantially the same
for financial reporting purposes. Gross unrealized appreciation and
depreciation of securities as of December 31, 1998 was $396,775 and ($494,108),
respectively.
</FN>
</TABLE>
The accompanying notes are an integral part of
the financial statements.
<PAGE>
CARILLON FUND, INC.
MICRO-CAP PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------
DECEMBER 31, 1998
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
The Micro-Cap Portfolio (Micro-Cap) of 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 and retirement products. The Fund's shares are
offered in five different series - Equity Portfolio, Capital
Portfolio, Bond Portfolio, S&P 500 Index Portfolio and Micro-Cap
Portfolio. Micro-Cap seeks long-term appreciation by investing
primarily in the common stocks of domestic companies with
smaller market capitalization. The financial statements of the
Equity, Bond, Capital and S&P 500 Index Portfolios 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 except for short-term fixed
income securities 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. Short-term
fixed income securities with a remaining maturity of 60 days or
less held in each Portfolio are valued at amortized cost which
approximates market. Non-U.S. dollar securities are translated
into U.S. dollars using the spot exchange rate at the close of
the London 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. All amortization of discount is recognized currently
under the effective interest method. Gains and losses on sales
of investments are calculated on the identified cost basis for
financial reporting and tax purposes. Net investment loss for
federal income tax purposes is reclassified to paid-in capital.
Federal taxes - It is Micro-Cap's intent 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 fund has a capital loss carry forward of $273,180
which can be carried forward until 2002.
Distributions - Distributions from net investment income are
declared and paid quarterly. Net realized capital gains are
distributed periodically, no less frequently than annually.
Distributions are recorded on the ex-dividend date. All
distributions are reinvested in additional shares at the net
asset value per share.
The amount of 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. Distributions which exceed net
investment income and net realized capital gains for financial
reporting purposes but not for tax purposes are reported as
distributions 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.
Foreign Currency - The Fund's accounting records are maintained
in U.S. dollars. All Portfolios may purchase foreign securities
within certain limitations set forth in the Prospectus. Amounts
dominated in or expected to settle in foreign currencies are
translated into U.S. dollars at the spot rate reported at the
close of the London market. The Fund does not isolate that
portion of the results of operations resulting from changes in
foreign exchange rates on investments from the underlying
fluctuation in the securities resulting from market prices. All
are included in net realized and unrealized gain or loss for
investments.
NOTE 2 - TRANSACTIONS WITH AFFILIATES
Investment advisory fees - Micro-Cap 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 on a daily basis,
at an annual rate of 1.0% of net assets.
The Adviser has agreed to limit expenses of the Fund to 2% of
the average annual net assets.
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 .10% 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 - FORWARD CURRENCY CONTRACTS
All portfolios may enter into forward foreign currency exchange
contacts for the purchase or sale of a specific foreign currency
at a fixed price on a future date. Risks may arise upon entering
these contracts from the potential inability of counter-parties
to meet the terms of their contracts and from unanticipated
movements in their value of a foreign currency relative to the
U.S. dollar. The funds typically utilize the contracts as a
hedge against fluctuation in currency values between the trade
and settlement dates of security transactions.
NOTE 4 - SUMMARY OF PURCHASES AND SALES OF INVESTMENTS
Micro-Cap purchased $1,775,565 and sold $1,801,078 of securities
for the year ended December 31, 1998, excluding short-term
obligations.
<PAGE>
Note 5 - FINANCIAL HIGHLIGHTS
Computed on the basis of a share of capital stock outstanding
throughout the year.
<TABLE>
<CAPTION>
For the Year Period from
Ended November 24, 1997
December 31, 1998 to December 31, 1997
----------------- --------------------
<S> <C> <C>
Net Asset Value,
Beginning of year $ 9.93 $ 10.00
------- -------
Investment Activities:
Net investment income (loss) (.10) (.01)
Net realized and unrealized
gains / (losses) (1.18) (.06)
------- -------
Total from investment Operations (1.28) (.07)
------- -------
Net Asset Value,
End of Year $ 8.65 $ 9.93
======= =======
Total Return (12.89%) (0.7%)
Ratios/Supplemental Data:
Ratio of Net Expenses to
Average Net Assets 1.97% <F1> 2.00% <F1>
Ratio of Net Investment loss
to Average Net Assets (1.10%) <F1> (1.16%)<F1>
Portfolio Turnover Rate 64.22% ----
Net Assets, End of Year (000's) $ 2,595 $ 2,980
<FN>
<F1> The ratios of net expenses to average net assets would have increased
and net investment income to average net assets would have decreased by .74%
for the year ended December 31, 1998, and 3.00% for the period ended
December 31, 1997, had the Adviser not reimbursed expenses.
</FN>
</TABLE>
<PAGE>
PART C
OTHER INFORMATION
<PAGE>
CARILLON FUND, INC.
PART C - OTHER INFORMATION
Item 23. Exhibits
All references are to Registrant's Registration Statement on Form N-1A
(Registration No. 2-90309)
(a) Articles of Incorporation of Carillon Fund, Inc. -
previously filed (initial filing on April 3, 1984)
(b) By-laws of Carillon Fund, Inc. - previously filed
(initial filing on April 3 1984)
(c) Not Applicable
(d) (1) Investment Advisory Agreement - previously filed
(initial filing on April 3, 1984)
(2) Amendment to Investment Advisory Agreement - previously
filed (Post-Effective Amendment No. 3 - May 1, 1987)
(3) Amendment to Investment Advisory Agreement - previously
filed (Post-Effective Amendment No. 15 - May 1, 1996)
(e) Not Applicable
(f) Not Applicable
(g) (1) Custodian Agreement - previously filed (Post-Effective
Amendment No. 6 - May 1, 1990)
(2) Portfolio Accounting Agreement - previously filed
(Post-Effective Amendment No. 6 - May 1, 1990)
(h) (1) Transfer Agency Agreement - previously filed
(Post-Effective Amendment No. 6 - May 1, 1990)
(2) Service Agreement - previously filed (Post-Effective
Amendment No. 9 - May 1, 1992)
(i) Opinion and consent of counsel - previously filed
(Pre-Effective Amendment No. 1 - July 2 , 1984)
(j) Consent of Deloitte & Touche LLP - filed herewith
(k) Not Applicable
(l) Letter regarding initial capital - previously filed
(Pre-Effective Amendment No. 1 - July 2, 1984)
(m) Not Applicable
(n) Financial Data Schedule - filed herewith
(o) Not Applicable
Item 24. Persons Controlled by or Under Common Control with Registrant
The Union Central Life Insurance Company ("Union Central") provided the
initial investment in Carillon Fund, Inc. Union Central votes the shares of
the Fund held with respect to registered variable contracts in accordance
with instructions received from such variable contract owners. Shares of the
Fund held in unregistered separate accounts and in its general assets are
voted by Union Central in its discretion.
Set forth below is a chart showing the entities controlled by Union Central,
the jurisdictions in which such entities are organized, and the percentage of
voting securities owned by the person immediately controlling each such
entity.
THE UNION CENTRAL LIFE INSURANCE COMPANY,
its Subsidiaries and Affiliates
I. The Union Central Life Insurance Company (Ohio)
A. Carillon Investments, Inc. (Ohio) -100% owned
B. Carillon Marketing Agency, Inc. (Delaware) -100% owned
a. Carillon Marketing Agency of Alabama, Inc. (Alabama) -
100% owned
b. Carillon Marketing Agency of Idaho, Inc. (Idaho) -100%
owned
c. Carillon Marketing Agency of Kentucky, Inc. (Kentucky) -
100 owned
d. Carillon Marketing Agency of Maine, Inc. (Maine) - 100%
owned
e. Carillon Insurance Agency of Massachusetts, Inc.
(Massachusetts) 100% owned
f. Carillon Marketing Agency of New Mexico, Inc. (New
Mexico) - 100% owned
g. Carillon Marketing Agency of Ohio, Inc. (Ohio) -100%
owned
h. Carillon Marketing Agency of Pennsylvania, Inc.
(Pennsylvania) 100% owned
i. Carillon Marketing Agency of Texas, Inc. (Texas) - 100%
owned
C. Carillon Advisers, Inc. (Ohio) -100% owned
<PAGE>
D. The Manhattan Life Insurance Company (New York) - 100%
owned
E. Family Enterprise Institute, Inc. (Delaware) -100% owned
F. PRBA, Inc. (California) - 100% owned
a. Price, Raffel & Browne Administrators, Inc. (Delaware) -
100% owned
G. B&B Benefits Administration, Inc. (California) - 100% owned
H. Summit Investment Partners, LLC (Ohio) - 100% owned
a. First Summit Capital Management (Ohio) - 51% owned
II. Mutual Funds of the Carillon Group
A. Carillon Fund, Inc.* (Maryland)
B. Carillon Investment Trust** (Massachusetts)
* At February 28, 1999, The Union Central Life Insurance Company
owned 100% of the outstanding shares of Carillon Fund, Inc.
** At February 28, 1999, The Union Central Life Insurance
Company owned 69% of the outstanding shares of Carillon
Investment Trust.
III. Summit Investment Trust (Massachusetts) - a mutual fund
whose investment adviser is First Summit Capital
Management.
Item 25. Indemnification
See Exhibits (a) and (b).
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
the registrant, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense of any such
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Item 26. Business and other Connections of Investment Adviser
Information regarding the officers and directors of Carillon Advisers, Inc.
("CAI") and their business, profession or employment of a substantial nature
during the last two years is set forth below. The address of all the persons
listed below is 1876 Waycross Road, Cincinnati, Ohio 45240.
<TABLE>
<CAPTION>
Name and Position with Principal Occupation(s)
Address the Adviser During Past Two Years
- ------- ------------ ----------------------
<S> <C> <C>
Harry Rossi Director Director Emeritus, The Union Central
Life Insurance Company ("Union
Central"); Director, Carillon Group
of Mutual Funds
John H. Jacobs Director, President and Chief Operating
President and Officer, Union Central; Director,
Chief President and Chief Executive
Executive Officer,Carillon Group of Mutual
Officer Funds; prior thereto, Executive Vice
President, Union Central
D. Stephen Cole Vice President Vice President, Union Central
Thomas G. Knipper Treasurer Treasurer, CAI; Controller and
Treasurer, Carillon Group of Mutual
Funds
John F. Labmeier Secretary Vice President, Associate General
Counsel and Assistant Secretary,
Union Central; Vice President and
Secretary, Carillon Group of Mutual
Funds and Carillon Investments, Inc.
</TABLE>
Item 27. Principal Underwriters
None.
Item 28. Location of Accounts and Records
All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act and the Rules thereunder will be
maintained at the offices of the Fund or at Firstar Mutual Fund
Services, LLC, P.O. Box 701, Milwaukee, WI 53201-0701.
Item 29. Management Services
All management-related service contracts are discussed in Part A or B of
this Registration Statement.
Item 30. Undertakings
Registrant hereby undertakes to furnish each person to whom a prospectus
is delivered with a copy of its latest annual report to shareholders,
upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933
and the Investment Company Act of 1940, the Registrant, Carillon
Fund, Inc., certifies that it meets all of the requirements for
effectiveness of this Post-effective Amendment to the
Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Post-effective
Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the
City of Cincinnati, State of Ohio on the 29th day of April,
1999.
CARILLON FUND, INC.
(SEAL)
Attest: /s/ John F. Labmeier By: /s/ John H. Jacobs
-------------------- ------------------
John H. Jacobs, President
Pursuant to the requirements of the Securities Act of 1933,
this Post-effective Amendment to the Registration Statement has
been signed below by the following persons in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ John H. Jacobs President 4-29-99
John H. Jacobs and Director
(Principal
Executive
Officer)
/s/ Thomas G. Knipper Controller 4-29-99
Thomas G. Knipper and Treasurer
(Principal
Financial
and Accounting
Officer)
* /s/ George M. Callard, M.D. Director 4-29-99
George M. Callard, M.D.
* /s/ Theodore H Emmerich Director 4-29-99
Theodore H. Emmerich
* /s/ James M. Ewell Director 4-29-99
James M. Ewell
* /s/ Richard H. Finan Director 4-29-99
Richard H. Finan
* /s/ Jean Patrice Harrington, S.C. Director 4-29-99
Jean Patrice Harrington, S.C.
* /s/ Charles W. McMahon Director 4-29-99
Charles W. McMahon
* /s/ Harry Rossi Director 4-29-99
Harry Rossi
</TABLE>
*By John F. Labmeier, pursuant to Power of Attorney previously
filed.
<PAGE>
TABLE OF EXHIBITS
(j) Consent of Deloitte & Touche LLP
(n) Financial Data Schedules
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 22 to
the Registration Statement under the Securities Act of 1933,
filed under Registration Statement No. 2-90309 of our report
dated February 5, 1999, relating to Carillon Fund Inc.
incorporated by reference in the Statement of Additional
Information, which is part of such Registration Statement, and to
the references to us under the captions "Financial Highlights"
and "Independent Auditors" in such Registration Statement.
/s/ Deloitte & Touche
Dayton, Ohio
April 28, 1999
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000743773
<NAME> CARILLON FUND, INC.
<SERIES>
<NUMBER> 1
<NAME> BOND PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 122,738,988
<INVESTMENTS-AT-VALUE> 125,954,016
<RECEIVABLES> 1,956,096
<ASSETS-OTHER> 6,424
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 127,916,536
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 14,154,225
<TOTAL-LIABILITIES> 14,154,225
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 110,569,343
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 382,160
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (404,220)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,215,028
<NET-ASSETS> 113,762,311
<DIVIDEND-INCOME> 181,630
<INTEREST-INCOME> 8,498,462
<OTHER-INCOME> 0
<EXPENSES-NET> 677,210
<NET-INVESTMENT-INCOME> 8,002,882
<REALIZED-GAINS-CURRENT> (382,978)
<APPREC-INCREASE-CURRENT> (644,567)
<NET-CHANGE-FROM-OPS> 6,975,337
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 7,895,961
<DISTRIBUTIONS-OF-GAINS> 1,121,637
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,379,828
<NUMBER-OF-SHARES-REDEEMED> 3,811,138
<SHARES-REINVESTED> 799,240
<NET-CHANGE-IN-ASSETS> 13,870,215
<ACCUMULATED-NII-PRIOR> 264,047
<ACCUMULATED-GAINS-PRIOR> 1,111,587
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 551,146
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 677,210
<AVERAGE-NET-ASSETS> 116,921,333
<PER-SHARE-NAV-BEGIN> 11.29
<PER-SHARE-NII> 0.77
<PER-SHARE-GAIN-APPREC> (0.05)
<PER-SHARE-DIVIDEND> 0.76
<PER-SHARE-DISTRIBUTIONS> 0.12
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.13
<EXPENSE-RATIO> .006
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000743773
<NAME> CARILLON FUND, INC.
<SERIES>
<NUMBER> 4
<NAME> CAPITAL PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 122,506,433
<INVESTMENTS-AT-VALUE> 109,810,560
<RECEIVABLES> 890,555
<ASSETS-OTHER> 8,567
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 110,709,682
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