Registration No. 2-92146
- ------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
Post-Effective Amendment No. 16 X
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and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 15 X
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CARILLON ACCOUNT
(Exact Name of Registrant)
The Union Central Life Insurance Company
(Name of Depositor)
1876 Waycross Road, Cincinnati, Ohio 45240
(Address of Depositor's Principal Executive Offices)
(513) 595-2600
(Depositor'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 & Blouch L.L.P.
Suite 405 West
1025 Thomas Jefferson St., N.W.
Washington, D.C. 20007
Pursuant to Rule 24f-2 under the Investment Company Act of
1940, the Registrant has registered an indefinite amount of
securities under the Securities Act of 1933. A Rule 24f-2 Notice
for Registrant's 1997 fiscal year was filed on March 27, 1998.
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, 1998 pursuant to paragraph (b) of Rule 485
____ 60 days after filing pursuant to paragraph (a) of Rule 485
____ on May 1, 1998 pursuant to paragraph (a) of Rule 485
<PAGE>
PART A
INFORMATION REQUIRED IN A PROSPECTUS
PROSPECTUS
Flexible Premium Deferred Variable Annuity
- --------------------------------------------------------------
CARILLON ACCOUNT
of
THE UNION CENTRAL LIFE INSURANCE COMPANY
Home Office:
1876 Waycross Road
P.O. Box 40888
Cincinnati, Ohio 45240
Telephone: 1-800-999-1840
This Prospectus describes a Flexible Premium Deferred Variable
Annuity Contract ("Contract") offered by The Union Central Life
Insurance Company ("Union Central"). The Contract is designed to
aid employers, employees, and other groups and individuals in
long-term financial planning, and it provides for the accumula-
tion of capital on a tax-deferred basis for retirement or other
long-term purposes. The Contract is designed for use in
connection with retirement plans regardless of whether the plan
qualifies for favored federal income tax treatment.
Funds may be accumulated and annuity payments made on a variable
basis, a fixed basis, or a combination variable and fixed basis.
The Contract allows for significant flexibility with respect to
premium payments, annuity payments, withdrawals, and transfers.
Within the limits, if any, applicable to particular retirement
plans, the Contract provides the flexibility necessary to permit
a Contract Owner to devise a financial plan that best fits the
particular needs.
Premiums may be allocated in whole or in part to the Carillon
Account ("CA"), a separate account of Union Central. CA invests
its assets in shares of the Equity Portfolio, Bond Portfolio,
Capital Portfolio and S&P 500 Index Portfolio of Carillon Fund,
Inc. (the "Carillon Fund"); in shares of the Capital Growth
Portfolio Class A, International Portfolio Class A, and Money
Market Portfolio of Scudder Variable Life Investment Fund (the
"Scudder Fund"); in shares of the American Century VP Capital
Appreciation Portfolio of American Century Variable Portfolios,
Inc. (the "American Century Fund"); in shares of the MFS Growth
With Income Series, MFS High Income Series and MFS Emerging
Growth Series of MFS Variable Insurance Trust (the "MFS Fund");
and in shares of the Templeton International Fund Class 2 of
Templeton Variable Products Series Fund (the "Templeton Fund,"
and with Carillon Fund, Scudder Fund, American Century Fund and
MFS Fund, collectively referred to as the "Funds"). To the
extent that premiums are allocated to CA, the Accumulation Value
will vary in accordance with the investment performance of the
Portfolio or Portfolios selected by the Contract Owner.
Similarly, if a variable annuity settlement is selected, the
amount of the annuity payments will vary with the investment
performance of the Portfolio(s). The Contract Owner bears the
investment risk for any amounts allocated to CA. This Prospectus
generally describes only the variable portion of the Contract.
For a brief description of the fixed portion, see "The
Guaranteed Account" on page 25.
This Prospectus sets forth the information about CA that
prospective purchasers of Contracts ought to know. Additional
information about CA has been filed with the Securities and
Exchange Commission in the form of a Statement of Additional
Information ("SAI") which is incorporated herein by reference.
The SAI is dated May 1, 1998, and may be obtained without charge
by writing Union Central at the address given above or calling
the listed telephone number. A Table of Contents for the SAI is
given on page 3.
This Prospectus Must be Accompanied or Preceded by a Current
Prospectus for the Carillon Fund, Inc.; for the Capital Growth
Portfolio Class A, International Portfolio Class A, and Money
Market Portfolio of Scudder Variable Life Investment Fund; for
the American Century VP Capital Appreciation Portfolio of
American Century Variable Portfolios, Inc.; for the MFS Growth
with Income Series, MFS High Income Series, and MFS Emerging
Growth Series of MFS Variable Insurance Trust; and for the
Templeton International Fund Class 2 of Templeton Variable
Products Series Fund.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION, NOR HAS THE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Please Read This Prospectus Carefully and Retain It for Future
Reference
The Date of This Prospectus is May 1, 1998.
TABLE OF CONTENTS
Page
DEFINITIONS ................................................. 4
SUMMARY ..................................................... 5
SUMMARY OF SEPARATE ACCOUNT EXPENSES ........................ 8
PERFORMANCE DATA ............................................ 11
ACCUMULATION UNIT VALUES .................................... 12
THE UNION CENTRAL LIFE INSURANCE COMPANY AND CARILLON ACCOUNT.14
Union Central .......................................... 14
Carillon Account ....................................... 14
The Funds .............................................. 14
Additions, Deletions, or Substitutions of Investments .. 16
THE CONTRACT ................................................ 16
Purchasing a Contract .................................. 16
Premiums ............................................... 16
Crediting of Accumulation Units ........................ 17
Value of Accumulation Units ............................ 17
Transfers .............................................. 18
Special Transfers - Dollar Cost Averaging .............. 19
Portfolio Rebalancing Plan ............................. 19
Interest Sweep ......................................... 19
Surrenders ............................................. 20
Personal Income Plan ................................... 20
CHARGES AND OTHER DEDUCTIONS ................................ 21
Administration Fee ..................................... 21
Mortality and Expense Risk Charge ...................... 21
Surrender Charge (Contingent Deferred Sales Charge) .... 21
Terminal Illness/Confinement ....................... 22
Premium Taxes .......................................... 23
Fund Expenses .......................................... 23
BENEFITS UNDER THE CONTRACT ................................. 23
Death Benefits ......................................... 23
Annuity Payments ....................................... 24
THE GUARANTEED ACCOUNT ...................................... 25
GENERAL MATTERS ............................................. 26
FEDERAL TAX MATTERS ......................................... 27
RESTRICTIONS UNDER THE TEXAS OPTIONAL RETIREMENT PROGRAM .... 29
DISTRIBUTION OF THE CONTRACTS ............................... 29
VOTING RIGHTS ............................................... 29
PREPARING FOR YEAR 2000 ..................................... 30
FINANCIAL STATEMENTS ........................................ 30
APPENDIX A .................................................. 31
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
DISTRIBUTION OF CONTRACTS ................................ B-2
DETERMINATION OF ANNUITY PAYMENTS ......................... B-2
PERFORMANCE DATA ADVERTISING .............................. B-3
FEDERAL TAX MATTERS ....................................... B-5
MISCELLANEOUS CONTRACT PROVISIONS ......................... B-7
CUSTODY OF CA'S ASSETS .................................... B-8
EXPERTS ................................................... B-8
FINANCIAL STATEMENTS OF CA AND OF UNION CENTRAL
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY
JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO
DEALER, SALESMAN, OR OTHER PERSON IS AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON.
DEFINITIONS
Accumulation Period The period before the Maturity Date and
during the lifetime of the Annuitant.
Accumulation Unit An accounting unit of measure used to
calculate the value of the Variable Account prior to the
Maturity Date.
Accumulation Value The sum of the Guaranteed Account and the
Variable Account credited to a Contract.
Annuitant The person or persons whose life determines the
duration of annuity payments involving life contingencies.
Annuity Period The period after the Maturity Date during which
Union Central makes annuity payments.
Annuity Unit An accounting unit of measure used to calculate
Variable Annuity payments.
CA A separate account of The Union Central Life Insurance
Company called the Carillon Account. CA currently is divided
into twelve Subaccounts, and each Subaccount invests exclusively
in a different Portfolio of the Funds.
Contract Owner ("Owner") During the Annuitant's lifetime and
prior to the Maturity Date, the person designated as the Owner
in the Contract or as subsequently changed. After the Maturity
Date, the Annuitant is the Contract Owner. After the Annuitant's
death, the beneficiary is the Contract Owner.
If a Contract has been absolutely assigned, the assignee is the
Contract Owner. A collateral assignee is not a Contract Owner.
Contract Year A period of 12 consecutive months beginning on the
Contract Date or any anniversary thereof.
Due Proof of Death One of the following:
(a) A certified copy of a death certificate.
(b) A certified copy of a decree of a court of competent
jurisdiction as to the finding of death.
(c) A written statement by a medical doctor who attended the
deceased.
(d) Any other proof satisfactory to Union Central.
Fixed Annuity An annuity with payments fixed in amount
throughout the annuity period.
Guaranteed Account The Contract's value that is part of the
general assets of Union Central other than assets in any of its
separate accounts.
Investment Option The Guaranteed Account and the twelve
subdivisions of the Variable Account constitute the thirteen
Investment Options.
Maturity Date The date on which annuity payments will begin.
Nonqualified Contracts Contracts that do not qualify for special
federal income tax treatment.
Portfolio or Fund Portfolio A separate Portfolio of the Funds,
the mutual funds in which CA invests, its successor or assigns.
Qualified Contracts Contracts issued in connection with plans
that qualify for special federal income tax treatment.
Subaccount A part of CA. Each Subaccount invests exclusively in
shares of a different Fund Portfolio.
Variable Account That part of the value of a Contract that is
invested in one or more Subaccounts of CA. Each Contract's
Variable Account is divided into one or more subdivisions, one
for each Subaccount of CA in which the Contract is invested.
Variable Annuity An annuity with payments that (1) are not
predetermined or guaranteed as to dollar amount, and (2) vary in
amount in relation to the investment experience of one or more
specified Subaccounts.
SUMMARY
The Contract and the Investment Options
The individual variable annuity contracts described in this
Prospectus are designed and offered to aid in the accumulation
of funds on a tax-deferred basis for retirement in connection
with the following types of plans: (a) plans established by
persons entitled to the benefits of the Self-Employed
Individuals Tax Retirement Act of 1962, as amended (H.R. 10);
(b) certain qualified employee pension and profit-sharing trusts
or plans (described in Section 401(a) and tax-exempt under
Section 501(a) of the Internal Revenue Code of 1986, as amended
("the Code") and qualified annuity plans (described in Section
403(a) of the Code); (c) annuity purchase plans adopted by
public school systems and certain tax-exempt organizations under
Section 403(b) of the Code; (d) Individual Retirement Annuities
purchased by or on behalf of individuals pursuant to Sections
408 (traditional and Simple IRA's) and 408A (Roth IRA's) of the
Code; (e) government deferred compensation plans pursuant to
Section 457 of the Code; (f) other qualified plans; and (g)
nontax-favored plans. Qualified plans provide special tax
treatment to participating employees and self-employed
individuals and their beneficiaries.
Contract Owners may allocate their premiums in whole or in part
to one or more subdivisions of the Contract's Variable Account,
to the Guaranteed Account, or to a combination of the Variable
Account subdivisions and the Guaranteed Account. Each
subdivision of a Contract's Variable Account corresponds to a
different Subaccount of CA, and each Subaccount invests solely
in a specified Portfolio of the Funds.
The Carillon Fund Equity Portfolio seeks primarily long-term
appreciation of capital by investing primarily in common stocks
and other equity securities.
The Carillon Fund Bond Portfolio seeks as high a level of
current income as is consistent with reasonable investment risk
by investing primarily in investment-grade corporate bonds.
The Carillon Fund Capital Portfolio seeks the highest total
return through a combination of income and capital appreciation
consistent with the reasonable risks associated with an
investment portfolio of above-average quality by investing in
equity securities, debt instruments and money market
instruments.
The Carillon Fund S&P 500 Index Portfolio seeks investment
results that correspond to the total return performance of U.S.
common stocks, as represented by the Standard & Poor's 500
Composite Stock Index (the "S&P 500"). The S&P 500 is a well-
known stock market index that includes common stocks of
companies representing approximately 70% of the market value of
all common stocks publicly traded in the United States. The
investment adviser of the Portfolio believes that the
performance of the S&P 500 is representative of the performance
of publicly traded common stocks in general.
The Scudder Fund Capital Growth Portfolio Class A seeks to
maximize long-term capital growth through a broad and flexible
investment program. The Portfolio invests in marketable
securities, principally common stocks and, consistent with its
objective of long-term capital growth, preferred stocks.
The Scudder Fund International Portfolio Class A seeks long-term
growth of capital principally from a diversified portfolio of
foreign equity securities.
The Scudder Fund Money Market Portfolio seeks stability and
current income from a portfolio of money market instruments.
Money market funds are neither insured nor guaranteed by the
U.S. Government, and there can be no assurance that this
Portfolio will maintain a stable net asset value per share.
The American Century VP Capital Appreciation Portfolio seeks
capital growth by investing primarily in common stocks that are
considered by its management to have better-than-average
prospects for appreciation.
The MFS Growth With Income Series seeks to provide reasonable
current income and long-term growth of capital and income.
The MFS High Income Series seeks high current income by
investing primarily in a professionally managed diversified
portfolio of fixed income securities, some of which may involve
equity features. The MFS High Income Series may invest up to
100% of its assets in lower-rated bonds commonly known as junk
bonds. Before allocating any portion of premiums to the
subdivision corresponding to this Portfolio, Contract Owners
should read the risk disclosure in the accompanying Prospectus
for the MFS High Income Series.
The MFS Emerging Growth Series seeks to provide long-term growth
of capital. Dividend and interest income from portfolio
securities, if any, is incidental to the Series' investment
objective of long-term growth of capital.
The Templeton International Fund Class 2 seeks long-term capital
growth through a flexible policy of investing in stocks and debt
obligations of companies and governments outside the United
States.
There can be no assurance that any Portfolio will achieve its
objective. See "The Funds," page 14, and the accompanying Fund
Prospectuses.
The Accumulation Value of the Contract will vary according to
the investment experience of the Portfolio or Portfolios
selected by the Contract Owner. Similarly, the dollar amount of
variable annuity payments will vary according to the investment
experience of the Portfolio(s) selected. The Contract Owner
bears the entire investment risk for all amounts allocated to
the Contract's Variable Account. Premiums may also be allocated
to the Guaranteed Account. See "The Guaranteed Account," page
25.
Premiums
Each premium payment must be at least $25 for Qualified
Contracts and $50 for Nonqualified Contracts, but Contract
Owners may pay premiums at any time and in any amount, subject
to the $25/$50 minimum and a maximum (which may be waived by
Union Central) of $10,000 per Contract Year. However, if no
premiums are paid for two consecutive Contract Years (three in
New York), then under certain circumstances Union Central may
pay the Owner the Accumulation Value (less the administration
fee and surrender charge, if applicable) and cancel the
Contract. See "Premiums," page 16.
Surrenders
Total or partial surrenders, which are cash withdrawals of all
or part of the Accumulation Value, are permitted at any time
prior to the Maturity Date, except in the case of certain
surrenders under contracts issued in connection with annuity
purchase plans adopted pursuant to Section 403(b) of the Code
(see page 28). Certain surrenders may be subject to a surrender
charge (see page 21) and a penalty tax may be imposed (see
"Federal Tax Matters" in the Statement of Additional
Information). In addition, Contract Owners may return the
Contract for a refund within 20 days after receiving it (see
page 27).
Transfers
Before the Maturity Date, amounts may be transferred among
subdivisions of the Contract's Variable Account or between those
subdivisions and the Guaranteed Account, as frequently as
desired. Transfers generally must be at least $300. Prior to
the Maturity Date, up to six transfers may be made each Contract
Year without charge. However, a transaction charge (currently
$10) is imposed for each transfer in excess of that number. See
"Transfers," page 18. There is no limit on the amount that may
be transferred out of a subdivision of the Variable Account. For
transfers out of the Guaranteed Account, see page 26.
Similarly, after the Maturity Date, the Contract Owner may, once
each year, change the investment base upon which the amount of
the variable annuity payments are calculated by requesting that
Union Central transfer annuity reserves among the Fund
Portfolios.
Benefits
Contract Owners can choose among various types of annuity
benefits, including life annuities with a period certain and
joint and survivor life annuities. See "Annuity Payments," page
24.
If the Annuitant dies before the Maturity Date and the Annuitant
was the Owner or the Owner is still living, then Union Central
will pay the beneficiary a death benefit equal to the greater of
(a) the Accumulation Value, or (b) the sum of all premiums paid
less any amounts deducted in connection with partial surrenders.
See "Death Benefits," page 23.
Charges
No sales charge is deducted from premiums. However, a surrender
charge is imposed on certain early surrenders. This surrender
charge depends on how long the Contract has been in force.
During the first two Contract Years the surrender charge is 7%
of the amount surrendered. This charge is reduced by 1% on each
subsequent Contract anniversary until the eighth anniversary
when it becomes zero. Notwithstanding the charges described
above, partial surrenders totaling not more than 10% of the
Accumulation Value (as of the date of the first partial
surrender in the Contract Year) may be made each Contract Year
without the imposition of the surrender charge. Also, the
surrender charge will be waived in the event of the Owner's
hospital confinement or terminal illness as defined in the
Contract. The total surrender charge assessed over the life of
the Contract will not exceed 9% of premiums paid. See "Surrender
Charge," page 21.
As partial compensation for administrative expenses, an
administration fee of $30 per year is deducted prior to the
Maturity Date. The annual administration fee will be waived for
any year in which the Accumulation Value of the Contract is
$25,000 or more on the last day of that Contract Year. Union
Central also reserves the right to waive this fee for select
classes of employer sponsored retirement plan contracts. This
annual fee is not imposed after the Maturity Date. A daily
charge at the rate of 0.25% of net assets per year is also
deducted (both before and after the Maturity Date) to defray the
expenses of administering the Contract. See "Administration
Fee," page 21.
As compensation for Union Central's assumption of the mortality
and expense risks, a charge that is currently 1.0% of net assets
per year (and that will never exceed 1.7% per year) is deducted
from CA. See "Mortality and Expense Risk Charge," page 21. In
accordance with state laws, premium taxes will be deducted from
some policies. See "Premium Taxes," page 23.
Finally, the Funds in which CA invests will pay an investment
advisory fee and other expenses which are described in the Fund
Prospectuses. See "The Funds," page 14.
SUMMARY OF SEPARATE ACCOUNT EXPENSES
Contract Owner Transaction Expenses
Sales Load Imposed on Purchases (as a percentage of purchase
payments) ............................................None
Surrender Charge (Contingent Deferred Sales Charge) (as a
percentage of amount surrendered)
<TABLE>
<CAPTION>
Contract Year Surrender Charge Percentage*
-------------------------------------------------
<S> <C>
1 7%
2 7%
3 6%
4 5%
5 4%
6 3%
7 2%
8 1%
After 8 0%
</TABLE>
Exchange Fee ..................................$10**
Annual Administration Fee .....................$30***
<TABLE>
<CAPTION>
Separate Account Annual Expenses (as a percentage of average account value)
Equity Bond Capital
Subaccount Subaccount Subaccount
<S> <C> <C> <C>
Mortality and Expense Risk Charge 1.00% 1.00% 1.00%
Administration Fee .25% .25% .25%
Total Separate Account Annual Expenses 1.25% 1.25% 1.25%
</TABLE>
<TABLE>
<CAPTION>
S&P 500 Capital Scudder Money
Index Growth International Market
Subaccount Subaccount Subaccount Subaccount
<S> <C> <C> <C> <C>
Mortality and
Expense Risk Charge 1.00% 1.00% 1.00% 1.00%
Administration Fee .25% .25% .25% .25%
Total Separate Account
Annual Expenses 1.25% 1.25% 1.25% 1.25%
</TABLE>
<TABLE>
<CAPTION>
Capital Growth With High
Appreciation Income Income
Subaccount Subaccount Subaccount
<S> <C> <C> <C>
Mortality and Expense Risk Charge 1.00% 1.00% 1.00%
Administration Fee .25% .25% .25%
Total Separate Account
Annual Expenses 1.25% 1.25% 1.25%
</TABLE>
<TABLE>
<CAPTION>
Emerging Templeton
Growth International
Subaccount Subaccount
<S> <C> <C>
Mortality and Expense Risk Charge 1.00% 1.00%
Administration Fee .25% .25%
Total Separate Account Annual Expenses 1.25% 1.25%
</TABLE>
- -------------
* Partial surrenders totaling up to 10% of the Accumulation
Value may be made each Contract Year without the surrender
charge being assessed.
** Prior to the Maturity Date, up to six transfers may be made
each Contract Year without charge.
*** Waived for any year in which the Accumulation Value of the
Contract is $25,000 or more on the last day of the Contract
Year.
<TABLE>
<CAPTION>
Carillon Fund, Inc. Annual Expenses+
S&P 500
Equity Bond Capital Index
Portfolio Portfolio Portfolio Portfolio
<S> <C> <C> <C> <C>
Management Fees .56% .48% .68% .30%
Other Expenses .06% .12% .09% .20%
Total Carillon Fund, Inc.
Annual Expenses .62% .60% .77% .50%
<CAPTION>
Scudder Variable Life Investment Fund Annual Expenses+
Capital
Growth International Money
Portfolio Portfolio Market
Class A Class A Portfolio
<S> <C> <C> <C>
Management Fees .47% .83% .37%
Other Expenses .04% .17% .09%
Total Scudder Variable Life
Investment Fund Annual Expenses .51% 1.00% .46%
</TABLE>
<TABLE>
<CAPTION>
American Century Variable Portfolios, Inc. Annual Expenses
VP Capital Appreciation Portfolio
<S> <C>
Management Fees 1.00%
Other Expenses++
Total American Century Variable
Portfolios, Inc. Annual Expenses 1.00%
<CAPTION>
MFS Variable Insurance Trust Annual Expenses+*
Emerging
Growth With High Income Growth
Income Series(2) Series(2) Series
<S> <C> <C> <C>
Management Fees .75% .75% .75%
Other Expenses
(after fee reductions) .25% .25% .12%
Total MFS Variable Insurance
Trust Annual Expenses 1.00% 1.00% .87%
<CAPTION>
Templeton Variable Products Series Fund Annual Expenses+
Templeton
International
Fund Class 2
<S> <C>
Management Fees .69%
Rule 12b-1 Fees .25%
Other Expenses .19%
Total Fund Annual Expenses 1.13%
</TABLE>
+ Templeton International Fund Class 2 has a distribution plan
or "Rule 12b-1 plan" which is described in the Fund's
prospectus. Because Class 2 shares were not offered until May 1,
1997, figures (other than "12b-1 Fees") are estimates for 1998
based on the historical expenses of the Fund's Class 1 shares
for the fiscal year ended December 31, 1997, except that
Management Fees and Total Fund Operating Expenses have also been
restated to reflect the management fee schedule approved by
shareholders and effective May 1, 1997. Actual Management Fees
and Total Fund Operating Expenses during 1997 were lower. See
fund prospectus for details. For each other Portfolio figures
are based on the actual expenses incurred by the Portfolio for
the year ended December 31, 1997. Actual Portfolio expenses may
vary.
++ All expenses except brokerage, taxes, interest and fees and
expenses of non-interested person directors are paid by the
investment adviser.
(1) Each Series has an expense offset arrangement which reduces
the Series' custodian fee based upon the amount of cash
maintained by the Series with its custodian and dividend
disbursing agent, and may enter into other such arrangements and
directed brokerage arrangements (which would also have the
effect of reducing the Series' expenses). Any such fee
reductions are not reflected under "Other Expenses."
(2) The Adviser has agreed to bear expenses for these Series,
subject to reimbursement by these Series, such that each such
Series' "Other Expenses" shall not exceed 0.25% of the average
daily net assets of the Series during the current fiscal year.
See "Information Concerning Shares of Each Series - Expenses"
(in the Series' Prospectus). Otherwise, "Other Expenses" for the
Growth With Income Series and the High Income Series would be
0.35% and 0.40%, respectively, and "Total Operating Expenses"
would be 1.10% and 1.15%, respectively, for these Series.
<PAGE>
Example* - If you surrender your Contract at the end of the
applicable time period, you would pay the following expenses on
a $1,000 investment, assuming 5% annual return on assets:
<TABLE>
<CAPTION>
1 3 5 10
Year Years Years Years
<S> <C> <C> <C> <C>
Equity Subaccount $92 $128 $153 $230
Bond Subaccount $92 $127 $152 $228
Capital Subaccount $94 $132 $160 $246
S&P 500 Index Subaccount $91 $124 $147 $217
Capital Growth Subaccount $91 $124 $147 $218
Scudder International Subaccount $96 $139 $172 $270
Money Market Subaccount $91 $123 $145 $213
Capital Appreciation Subaccount $96 $139 $172 $270
Growth With Income Subaccount $96 $139 $172 $270
High Income Subaccount $96 $139 $172 $270
Emerging Growth Subaccount $95 $135 $165 $257
Templeton International Subaccount $97 $137 $168 $259
</TABLE>
If you annuitize at the end of the applicable time period or if
you do NOT surrender your Contract, you would pay the following
expenses on a $1,000 investment, assuming 5% annual return on
assets:
<TABLE>
<CAPTION>
1 3 5 10
Year Years Years Years
<S> <C> <C> <C> <C>
Equity Subaccount $20 $62 $107 $230
Bond Subaccount $20 $61 $106 $228
Capital Subaccount $22 $67 $114 $246
S&P 500 Index Subaccount $19 $58 $100 $217
Capital Growth Subaccount $19 $59 $101 $218
Scudder International Subaccount $24 $74 $126 $270
Money Market Subaccount $18 $57 $98 $213
Capital Appreciation Subaccount $24 $74 $126 $270
Growth With Income Subaccount $24 $74 $126 $270
High Income Subaccount $24 $74 $126 $270
Emerging Growth Subaccount $23 $70 $120 $257
Templeton International Subaccount $25 $72 $122 $259
</TABLE>
The purpose of this table is to assist the Contract Owner in
understanding the various costs and expenses that a Contract
Owner will bear directly or indirectly. The table reflects
expenses of CA as well as the Funds. See "Charges and Other
Deductions," page 21, and the accompanying Prospectuses. The
table does not reflect any deduction made for premium taxes that
may be applicable (see page 23).
THIS TABLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES AND THE ACTUAL EXPENSES THAT WILL BE PAID MAY BE
GREATER OR LESSER THAN THOSE SHOWN.
- -----------------
* In the example above, the $30 annual administration fee has
been reflected in the calculation of annual expenses by
converting the fee to a percent of average net assets
attributable to the Contracts, adding it to the Total Separate
Account Annual Expenses and the Fund Annual Expenses shown above
and multiplying the resulting percentage figure by the average
annual assets of the hypothetical account. The fee has been
converted to a percent by dividing the total amount of the fee
collected during 1997 by the total average net assets
attributable to the Contracts. Net assets attributable to the
Contracts includes amounts allocated to both CA and the
Guaranteed Account except for such amounts as are held as
reserves for annuity payments.
<PAGE>
PERFORMANCE DATA
From time to time CA may publish advertisements containing total
return performance data relating to its Subaccounts (including
graphs, charts, tables and examples depicting that data). More
detailed information on computation of performance data is
included in the Statement of Additional Information. All
performance data quoted represents only historical performance
and is not intended to indicate future performance of the
Subaccounts.
Total return for a Subaccount is the sum of all the Subaccount's
earnings plus any changes in the value of its assets, reduced by
all expenses accrued during a measuring period, expressed as a
percentage of the amount invested for a one-year period. The
total return figures advertised are average annual total returns
for periods of one year and, when applicable, five years and ten
years, and since inception of the Subaccounts. Total return
omitting the effect of surrender charges may also be advertised
for the same and other periods, to illustrate change in the
value of the Variable Account during times when there is no sur-
render. Total return omitting the effect of charges not
reflected in Accumulation Unit Values (surrender charges and the
portion of the annual administration fee attributable to the
Subaccount whose return is shown) may also be advertised for the
same and other periods, usually in comparison with certain
unmanaged market indices. Total return (whether including or
excluding the effects of the charges described above) also may
be shown in some advertisements on a cumulative basis.
ACCUMULATION UNIT VALUES
(for a unit outstanding throughout the period)
<TABLE>
<CAPTION>
Year ended December 31,
--------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
EQUITY SUBACCOUNT
Accumulation unit
value at beginning
of period $41.682 $33.969 $27.147 $26.628 $23.676
Accumulation unit
value at end of
period $49.527 $41.682 $33.969 $27.147 $26.628
Number of
accumulation units
outstanding,
end of period 2,907,000 2,723,705 2,337,986 1,981,958 1,723,790
Payout unit value 49.527 $41.682 $33.969 $27.147
Number of payout
units outstanding,
end of period 8,952 9,142 9,796 10,476
<CAPTION>
Year ended December 31,
--------------------------------------------
1992 1991 1990 1989 1988
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
EQUITY SUBACCOUNT
Accumulation unit
value at beginning
of period $21.491 $14.979 $17.977 $16.316 $12.565
Accumulation unit
value at end of
period $23.676 $21.491 $14.979 $17.977 $16.316
Number of
accumulation units
outstanding,
end of period 1,312,947 1,057,669 936,036 799,268 561,682
Payout unit value
Number of payout
units outstanding,
end of period
</TABLE>
<TABLE>
<CAPTION>
Year ended December 31,
--------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
BOND SUBACCOUNT
Accumulation unit
value at beginning
of period $25.210 $23.865 $20.341 $20.977 $19.014
Accumulation unit
value at end of
period $27.584 $25.210 $23.865 $20.341 $20.977
Number of accumulation
units outstanding,
end of period 766,722 672,511 574,421 508,398 513,613
<CAPTION>
Year ended December 31,
--------------------------------------------
1992 1991 1990 1989 1988
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
BOND SUBACCOUNT
Accumulation unit
value at beginning
of period $17.921 $15.424 $14.403 $13.199 $12.475
Accumulation unit
value at end of
period $19.014 $17.921 $15.424 $14.403 $13.199
Number of accumulation
units outstanding,
end of period 348,420 283,493 285,370 250,631 225,777
<CAPTION>
Year ended December 31,
--------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
CAPITAL SUBACCOUNT
Accumulation unit
value at beginning
of period $18.367 $16.214 $14.394 $14.467 $13.022
Accumulation unit
value at end of period $19.439 $18.367 $16.214 $14.394 $14.467
Number of accumulation
units outstanding,
end of period 2,590,389 2,632,591 2,521,521 2,271,375 1,790,938
<CAPTION>
Year ended December 31,
--------------------------------------------
1992 1991 1990 1989 1988
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
CAPITAL SUBACCOUNT
Accumulation unit
value at beginning
of period $12.241 $ 9.850 $10.000<F1>
Accumulation unit
value at end of period $13.022 $12.241 $ 9.850
Number of accumulation
units outstanding,
end of period 1,181,036 627,636 279,289
<CAPTION>
Year ended December 31,
--------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
S&P 500 INDEX
SUBACCOUNT
Accumulation unit
value at beginning
of period $11.375 $10.00<F2>
Accumulation unit
value at end of
period $14.878 $11.375
Number of accumulation
units outstanding,
end of period 2,041,455 869,681
<CAPTION>
Year ended December 31,
--------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
CAPITAL GROWTH
SUBACCOUNT
Accumulation unit
value at beginning
of period $17.041 $14.394 $11.351 $12.749 $10.700
Accumulation unit
value at end of
period $22.803 $17.041 $14.394 $11.351 $12.749
Number of accumulation
units outstanding,
end of period 1,896,320 1,593,634 1,162,999 906,428 439,914
<CAPTION>
Year ended December 31,
--------------------------------------------
1992 1991 1990 1989 1988
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
CAPITAL GROWTH
SUBACCOUNT
Accumulation unit
value at beginning
of period $10.000<F3>
Accumulation unit
value at end of
period $10.700
Number of accumulation
units outstanding,
end of period 70,218
<CAPTION>
Year ended December 31,
--------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
SCUDDER INTERNATIONAL
SUBACCOUNT
Accumulation unit
value at beginning
of period $16.054 $14.192 $12.958 $13.259 $9.760
Accumulation unit
value at end of period $17.256 $16.054 $14.192 $12.958 $13.259
Number of accumulation
units outstanding,
end of period 1,669,242 1,564,591 1,220,160 1,095,214 362,172
<CAPTION>
Year ended December 31,
---------------------------------------------
1992 1991 1990 1989 1988
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
SCUDDER INTERNATIONAL
SUBACCOUNT
Accumulation unit
value at beginning
of period $10.000<F3>
Accumulation unit
value at end of period 9.760
Number of accumulation
units outstanding,
end of period 43,624
<FN>
<F1> Commencement of operations was May 1, 1990.
<F2> Commencement of operations was May 1, 1996.
<F3> Commencement of operations was May 4, 1992.
</FN>
</TABLE>
<PAGE>
ACCUMULATION UNIT VALUES
(for a unit outstanding throughout the period)
Year ended December 31,
--------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
[S] [C] [C] [C] [C] [C]
MONEY MARKET
SUBACCOUNT
Accumulation unit
value at beginning
of period $16.028 $15.468 $14.850 $14.526 $14.369
Accumulation unit
value at end of period $16.627 $16.028 $15.468 $14.850 $14.526
Number of accumulation
units outstanding,
end of period 433,296 477,679 368,444 280,575 119,598
[CAPTION]
Year ended December 31,
--------------------------------------------
1992 1991 1990 1989 1988
---- ---- ---- ---- ----
[S] [C] [C] [C] [C] [C]
MONEY MARKET
SUBACCOUNT
Accumulation unit
value at beginning
of period $14.122 $13.576 $12.709 $11.846 $11.226
Accumulation unit
value at end of period $14.369 $14.122 $13.576 $12.709 $11.846
Number of accumulation
units outstanding,
end of period 120,547 83,623 103,405 75,006 52,666
[CAPTION]
Year ended December 31,
--------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
[S] [C] [C] [C] [C] [C]
CAPITAL APPRECIATION
SUBACCOUNT
Accumulation unit
value at beginning
of period $9.062 $10.000<F2>
Accumulation unit
value at end of period $8.640 $9.062
Number of accumulation
units outstanding,
end of period 640,421 424,022
[CAPTION]
Year ended December 31,
--------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
[S] [C] [C] [C] [C] [C]
GROWTH WITH INCOME
SUBACCOUNT
Accumulation unit
value at beginning
of period $11.352 $10.000<F2>
Accumulation unit
value at end of period $14.521 $11.352
Number of accumulation
units outstanding,
end of period 1,002,705 425,068
[CAPTION]
Year ended December 31,
--------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
[S] [C] [C] [C] [C] [C]
HIGH INCOME SUBACCOUNT
Accumulation unit
value at beginning
of period $10.841 $10.000<F2>
Accumulation unit
value at end of period $12.139 $10.841
Number of accumulation
units outstanding,
end of period 269,398 108,723
[CAPTION]
Year ended December 31,
--------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
[S] [C] [C] [C] [C] [C]
EMERGING GROWTH
SUBACCOUNT
Accumulation unit
value at beginning
of period $10.000<F3>
Accumulation unit
value at end of period $12.409
Number of accumulation
units outstanding,
end of period 224,193
<TABLE>
<CAPTION>
Year ended December 31,
--------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
TEMPLETON INTERNATIONAL
SUBACCOUNT
Accumulation unit value
at beginning of period $10.000<F3>
Accumulation unit value
at end of period $10.893
Number of accumulation
units outstanding,
end of period 266,657
<FN>
<F2> Commencement of operations was May 1, 1996.
<F3> Commencement of operations was May 1, 1997.
</FN>
</TABLE>
<PAGE>
THE UNION CENTRAL LIFE INSURANCE COMPANY
AND CARILLON ACCOUNT
Union Central
The Union Central Life Insurance Company ("Union Central"), a
mutual insurance company, was organized in 1867 under the laws
of Ohio. Union Central is primarily engaged in the sale of life
and disability insurance and annuities and is currently licensed
to operate in all states and the District of Columbia. The
Contract is available in all states.
Carillon Account
CA is a separate account of Union Central that is registered
with the Securities and Exchange Commission as a unit investment
trust under the Investment Company Act of 1940. Such
Registration does not signify that the Commission supervises the
management or investment practices or policies of CA. Union
Central's Board of Directors established CA by resolution on
February 6, 1984.
Although the assets of CA belong to Union Central, these assets
are held separately from the other assets of Union Central, and
are not chargeable with liabilities incurred in any other
business operations of Union Central (except to the extent that
assets in CA exceed the liabilities under the variable portion
of the Contracts). Accordingly, the income, capital gains, and
capital losses incurred on the assets of CA are credited to or
charged against the assets of CA, without regard to the income,
capital gains or capital losses arising out of any other
business Union Central may conduct. Therefore, the investment
performance of CA is entirely independent of both the investment
performance of Union Central's general assets and the
performance of any other separate account.
CA has been divided into twelve subaccounts, each of which
invests in a different Portfolio of the Funds. Additional
Subaccounts may be added at Union Central's discretion.
The Funds
The Funds are mutual funds of the series type which are
registered with the Securities and Exchange Commission as open-
end, diversified, management investment companies. Such
registration does not signify that the Commission supervises the
management or investment practices or policies of Funds. The
investment adviser to Carillon Fund is Carillon Advisers, Inc.
(a wholly-owned subsidiary of Union Central). Scudder Kemper
Investments, Inc. is the investment adviser to the Scudder Fund.
The investment adviser to the American Century Fund is American
Century Investment Management, Inc. , the adviser to the
American Century Investments group. The investment adviser to
the MFS Fund is Massachusetts Financial Services Company. The
investment adviser to the Templeton Fund is Templeton Investment
Counsel, Inc.
CA invests in four Portfolios of Carillon Fund: the Equity
Portfolio, the Bond Portfolio, the Capital Portfolio and the S&P
500 Index Portfolio. (The Carillon Fund has one additional
Portfolio that is not available through the Contract). CA
invests in three Portfolios of the Scudder Fund: the Capital
Growth Portfolio Class A, the International Portfolio Class A
and the Money Market Portfolio. (The Scudder Fund has four
additional Portfolios that are not available through the
Contract.) CA invests in one Portfolio of the American Century
Fund: American Century VP Capital Appreciation Portfolio. (The
American Century Fund has four additional Portfolios that are
not available through the Contract.) CA invests in three
Portfolios of the MFS Fund: MFS Growth With Income Series, MFS
High Income Series and MFS Emerging Growth Series. (The MFS
Fund has nine additional Portfolios that are not available
through the Contract.) CA invests in one Portfolio of the
Templeton Fund: Templeton International Fund Class 2. (The
Templeton Fund has several additional Portfolios that are not
available through the Contract.) The assets of each Portfolio
are separate from the others and each Portfolio has different
investment objectives and policies. As a result, each Portfolio
operates as a separate investment fund and the investment
performance of one Portfolio has no effect on the investment
performance of any other Portfolio.
The Carillon Fund Equity Portfolio seeks primarily long-term
appreciation of capital by investing primarily in common stocks
and other equity securities.
The Carillon Fund Bond Portfolio seeks as high a level of
current income as is consistent with reasonable investment risk
by investing primarily in investment-grade corporate bonds.
The Carillon Fund Capital Portfolio seeks the highest total
return through a combination of income and capital appreciation
consistent with the reasonable risk associated with an
investment portfolio of above-average quality by investing in
equity securities, debt instruments and money market
instruments.
The Carillon Fund S&P 500 Index Portfolio seeks investment
results that correspond to the total return performance of U.S.
common stocks, as represented by the Standard & Poor's 500
Composite Stock Index (the "S&P 500"). The S&P 500 is a well-
known stock market index that includes common stocks of
companies representing approximately 70% of the market value of
all common stocks publicly traded in the United States. The
investment adviser of the Portfolio believes that the
performance of the S&P 500 is representative of the performance
of publicly traded common stocks in general.
The Scudder Fund Capital Growth Portfolio Class A seeks to
maximize long-term capital growth through a broad and flexible
investment program. The Portfolio invests in marketable
securities, principally common stocks and, consistent with its
objective of long-term capital growth, preferred stocks.
The Scudder Fund International Portfolio Class A seeks long-term
growth of capital principally from a diversified portfolio of
foreign equity securities.
The Scudder Fund Money Market Portfolio seeks stability and
current income from a portfolio of money market instruments.
Money market funds are neither insured nor guaranteed by the
U.S. Government, and there can be no assurance that this
Portfolio will maintain a stable net asset value per share.
The American Century VP Capital Appreciation Portfolio seeks
capital growth by investing primarily in common stocks that are
considered by management to have better-than-average prospects
for appreciation.
The MFS Growth With Income Series seeks to provide reasonable
current income and long-term growth of capital and income.
The MFS High Income Series seeks high current income by
investing primarily in a professionally managed diversified
portfolio of fixed income securities, some of which may involve
equity features. The MFS High Income Portfolio may invest up to
100% of its assets in lower-rated bonds commonly known as junk
bonds. Before allocating any portion of premiums to the
subdivision corresponding to this Portfolio, the Contract Owners
should read the risk disclosure in the accompanying Prospectus
for the MFS High Income Series.
The MFS Emerging Growth Series seeks to provide long-term growth
of capital. Dividend and interest income from portfolio
securities, if any, is incidental to the Series' investment
objective of long-term growth of capital.
The Templeton International Fund seeks long-term capital growth
through a flexible policy of investing in stocks and debt
obligations of companies and governments outside the United
States.
THERE IS NO ASSURANCE THAT ANY OF THE PORTFOLIOS WILL ACHIEVE
THEIR RESPECTIVE STATED OBJECTIVES. Additional information
concerning the investment objectives and policies of the Funds
can be found in the current Fund Prospectuses which are attached
and accompany this Prospectus. The Fund Prospectuses should be
read carefully before any decision is made concerning the
allocation of premiums to a particular Subaccount of CA.
Additions, Deletions or Substitutions of Investments
Union Central retains the right, subject to any applicable law,
to make additions to, deletions from or substitutions for the
Portfolio shares held by any Subaccount of CA or that CA may
purchase. Union Central reserves the right to eliminate the
shares of any of the Portfolios and to substitute shares of
another Fund Portfolio, or of another open-end, registered
investment company, if the shares of the Portfolio are no longer
available for investment, or if in Union Central's judgment
investment in any Portfolio would become inappropriate in view
of the purposes of CA. To the extent required by the Investment
Company Act of 1940, substitutions of shares attributable to a
Contract Owner's interest in a Subaccount will not be made until
the Owner has been notified of the change, and until the
Securities and Exchange Commission has approved the change. In
the case of such substitution, affected Contract Owners will
have the right, within 30 days after notification, to surrender
the Contract without the imposition of any withdrawal charge.
Nothing contained in this Prospectus shall prevent CA from
purchasing other securities for other series or classes of
contracts, or from effecting a conversion between series or
classes of contracts on the basis of requests made by Contract
Owners.
The Company may also establish additional Subaccounts of CA.
Each additional Subaccount would purchase shares in a new Fund
Portfolio, in another mutual fund, or in a combination of these.
New Subaccounts may be established when, in the sole discretion
of Union Central, marketing needs or investment conditions
warrant, and any new Subaccounts will be made available to
existing Contract Owners only on a basis to be determined by
Union Central, if at all. Union Central may also eliminate one
or more Subaccounts if, in its sole discretion, marketing, tax
or investment conditions so warrant.
In the event of any such substitution or change, Union Central
may, by appropriate endorsement, make such changes in Contracts
offered by this Prospectus as may be necessary or appropriate to
reflect such substitution or change. If deemed by Union Central
to be in the best interests of persons having voting rights
under the Contracts, CA may be operated as a management company
under the Investment Company Act of 1940 or it may be
deregistered under such Act in the event such registration is no
longer required, or it may be combined with one or more other
separate accounts.
THE CONTRACT
Purchasing a Contract
A Contract can be purchased by completing an application and
having it and a premium of at least $25 for Qualified Contracts
or $50 for Nonqualified Contracts sent to Union Central by a
representative of Union Central who is also a qualified
securities representative under federal law. Acceptance of an
application is subject to Union Central's underwriting rules and
Union Central reserves the right to reject any application. If
an initial premium cannot be credited to the Contract within
five business days of receipt by Union Central, then Union
Central will return the premium to the payor immediately unless
the applicant consents to Union Central holding the premium for
a longer period. Initial premiums accompanied by completed
applications will be credited to the Contract not later than two
business days following receipt.
Premiums
After the first premium has been paid and accepted, the Owner
has flexibility, within the limits of any applicable retirement
plan, in determining the size and frequency of subsequent
premiums. Premiums may be paid at any time and in any amount,
subject only to the $25/$50 minimum and to a maximum of $10,000
per Contract Year. (Union Central may waive the maximum but a
waiver in one instance does not constitute a waiver for any
additional premiums.)
If no premiums are paid for two consecutive Contract Years
(three in New York), Union Central may cancel the Contract and
return the Accumulation Value (less the administration fee and
surrender charge, if applicable) but only if (1) the
Accumulation Value is less than $2,000 at the end of the two-
year period (three-year period in New York); and (2) the total
premium paid, less any partial surrenders, is less than $2,000.
Union Central will not cancel a Contract unless it first gives
the Contract Owner at least 30 days' notice to pay an additional
premium to prevent cancellation.
Premiums will be allocated among the thirteen Investment Options
(the twelve subdivisions of the Variable Account and the
Guaranteed Account) in accordance with the instructions of the
Contract Owner, as specified in the application for the Contract
or as subsequently changed by the Owner. Any portion of the
premium, subject to a $10 minimum, may be allocated to these
Investment Options. The allocation may be changed at any time,
without charge, by providing proper instructions to Union
Central in a form acceptable to Union Central.
Crediting of Accumulation Units
Premiums that are allocated to the Contract's Variable Account
are credited to the Contract in the form of Accumulation Units.
The number of Accumulation Units credited to a Contract is
determined by dividing the amount allocated to each subdivision
of the Variable Account by the Accumulation Unit value for the
corresponding Subaccount of CA for the Valuation Period during
which the premium is received. (In the case of the initial
premium, units are credited when the application is accepted.)
The value of the Accumulation Units will vary in accordance with
investment experience and expenses of the Portfolio in which the
Subaccount invests.
Prior to the Maturity Date, the Accumulation Value equals the
sum of the Variable Account and the Guaranteed Account credited
to the Contract. The Variable Account is the sum of the value of
all subdivisions of the Variable Account. The value in a
subdivision equals the number of Accumulation Units credited to
that subdivision times the value of the Accumulation Units for
the corresponding Subaccount. For the value of the Guaranteed
Account, see page 25.
Value of Accumulation Units
The value of Accumulation Units is expected to change every
valuation period, and will depend upon the investment
performance and expenses of the Portfolio in which each
Subaccount invests. The Accumulation Units in each Subaccount of
CA are valued separately.
A valuation period is the period between successive valuation
dates, commencing at the close of business of each valuation
date and ending at the close of business of the next succeeding
valuation date. A valuation date is each day, Monday through
Friday, when there are purchases or redemptions of Fund shares,
except (i) when the New York Stock Exchange is closed (currently
New Year's Day, President's Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, and Christmas
Day); and (ii) any day on which changes in the value of the
Portfolio securities of the Funds will not materially affect the
current net asset value of the shares of a Portfolio.
The value of each Accumulation Unit was initially set at $10.
Thereafter, the value of an Accumulation Unit for any valuation
period equals the value of such a unit as of the immediately
preceding valuation period, multiplied by the "Net Investment
Factor" for the current valuation period.
The Net Investment Factor for each Subaccount for any Valuation
Period is determined by dividing (A) by (B) and subtracting (C)
from the result, where:
(A) is:
(1) the net asset value per share of a Portfolio share held
in the Subaccount determined as of the end of the current
valuation period; plus
(2) the per share amount of any dividend or capital gains
distributions made by the Portfolio on shares held in the
Subaccount if the "ex-dividend" date occurs during the current
valuation period; plus or minus
(3) a per share charge or credit for any taxes incurred by
or provided for in the Subaccount, which Union Central
determines to have resulted from the maintenance of the
Subaccount (Union Central does not believe that currently any
taxes are incurred by CA); and
(B) is:
(1) the net asset value per share of a Portfolio share held
in the Subaccount determined as of the end of the immediately
preceding valuation period (adjusted for an "ex-dividend"); plus
or minus
(2) the per share charge or credit for any taxes provided
for during the immediately preceding valuation period; and
(C) is a factor representing the daily charges deducted from
CA by Union Central for administrative expenses and assumption
of the mortality and expense risks under the Contract. The
factor is equal to 0.00003% for a one-day valuation period.
Transfers
Amounts may be transferred among subdivisions of a Contract's
Variable Account, or between the Guaranteed Account and
subdivisions of the Variable Account, at any time prior to the
Maturity Date. Prior to the Maturity Date, Contract Owners may
transfer up to the greater of (1) 20% of the value of the
Guaranteed Account (as of the first day of the Contract Year),
or (2) $1,000 to one or more subdivisions of the Variable
Account each Contract Year. There is no maximum on amounts that
may be transferred out of a subdivision of the Variable Account.
The minimum amount that may be transferred is $300, or if less,
the entire amount in the Investment Option.
Prior to the Maturity Date, up to six transfers may be made each
Contract Year without charge. However, a transaction charge is
imposed for each transfer in excess of that number, and is
deducted from the Investment Option from which the transfer is
made (or from the amount transferred, if the entire amount in
any Investment Option is transferred). The transfer charge is
currently $10 and may be increased, but it will never be more
than $15.
If after a transfer the amount remaining in any Investment
Option is less than $25, then the entire amount will be
transferred instead of the requested amount.
Transfer requests must be made pursuant to proper written or
telephone instructions which specify in detail the requested
changes. Transfers from subdivisions of the Variable Account
will be made based on the Accumulation Unit values at the end of
the valuation period during which Union Central receives the
transfer request at its Home Office.
After the Maturity Date, the Annuitant can change the reserve
basis (contract reserves for the specific variable annuity
contract involved) for the variable annuity payments he or she
is receiving once in each 12 months after the first 12 months.
Such a change in reserve basis for variable annuity payments
will result in subsequent annuity payments being based on the
investment performance of the Subaccount to which annuity
reserves have been transferred.
Telephone Transfers: Contract Owners are eligible to effect
transfers pursuant to telephone instructions unless they elect
out of the option by writing Union Central.
Telephone transfer instructions may be made by calling
1-800-456-9319 between 9:00 a.m. and 3:30 p.m. (Eastern Time
Zone) on
days when Union Central is open for business. Each telephone
exchange request must include a precise identification of the
Contract and the Contract Owner's Personal Security Code or
other designated identifiers. Union Central may accept telephone
exchange requests from any person representing himself or
herself to be the Contract Owner or any other person who
properly identifies the correct Contract Number and Personal
Security Code or other designated identifiers. Thus, Contract
Owners risk possible loss of interest, capital appreciation and
principal in the event of an unauthorized telephone exchange.
Neither Union Central nor the Funds nor Carillon Investments,
Inc., the principal underwriter of the Contracts, will be liable
for complying with telephone instructions it reasonably believes
to be authentic, nor for any loss, damage, cost or expense in
acting on such telephone instructions, and Contract Owners will
bear the risk of any such loss. Union Central will employ
reasonable procedures to confirm that telephone instructions are
genuine. If Union Central does not employ such procedures, it
may be liable for losses due to unauthorized or fraudulent
instructions. Such procedures may include, among others,
requiring forms of personal identification prior to acting upon
telephone instructions, providing written confirmation of such
transactions to Contract Owners, and/or tape recording of
telephone transfer request instructions received from Contract
Owners. All or part of any telephone conversation relating to
transfer instructions may be recorded by Union Central without
prior disclosure.
Telephone instructions apply only to previously invested amounts
and do not change the investment of any future premiums paid
under the Contract. Allocations of future premium payments can
only be changed by proper written request. (See "Premiums" on
page 16.)
NOTE: During periods of drastic economic or market changes,
telephone transfers may be difficult to implement. At such
times, requests may be made by regular or express mail and will
be processed pursuant to the terms and restrictions described in
this "Transfers" section.
Additional information concerning this transfer privilege may be
obtained from Union Central. Union Central reserves the right to
modify, suspend or discontinue the telephone transfer privilege
at any time and without prior notice.
Special Transfers - Dollar Cost Averaging
Union Central administers a Dollar Cost Averaging ("DCA")
program that enables the Contract Owner to pre-authorize a
periodic exercise of the right to transfer amounts among
subdivisions of the Variable Account. Contract Owners entering
into a DCA agreement instruct Union Central to transfer monthly
(as of the first business day of the month) a predetermined
dollar amount (a minimum of $100) from the Money Market
subdivision to other subdivisions of the Variable Account until
the amount in the Money Market subdivision is exhausted. A DCA
agreement may be terminated at any time upon the Contract Owner
notifying Union Central in writing at least five business days
prior to the next transfer date so that the transfer scheduled
to take effect on such date can be cancelled.
Transfers made pursuant to the DCA program are not subject to a
transfer charge and do not affect a Contract Owner's right to
make up to six transfers each Contract Year without charge,
prior to the Maturity Date.
By allocating specific amounts on a regularly scheduled basis,
as opposed to allocating the total amount at one particular
time, a Contract Owner may be less susceptible to the impact of
market fluctuations. There is no guarantee, however, that such
an investment method will result in profits or prevent losses.
Contract Owners interested in the DCA program may elect to
participate in this program by separate application.
Portfolio Rebalancing Plan
Union Central administers a Portfolio Rebalancing Plan that
enables Contract Owners with a minimum balance of $5,000 in the
Variable Account to indicate to Union Central the percentage
levels he or she would like to maintain among the subdivisions
of the Variable Account. On a quarterly, semi-annual or annual
basis as selected by the Contract Owner, Union Central will
automatically rebalance the subdivisions of the Contract Owner's
Variable Account to maintain the indicated percentages by
transfers among the subdivisions. (The Portfolio Rebalancing
Plan is not available for amounts in the Guaranteed Account.)
The entire value of the subdivisions of the Variable Account
must be included in the Portfolio Rebalancing Plan. Other
investment programs, such as the DCA program, Interest Sweep
Plan (see below), or other transfers or withdrawals may not work
in concert with the Portfolio Rebalancing Plan. Therefore,
Contract Owners should monitor their use of these other programs
and any other transfers or withdrawals while the Portfolio
Rebalancing Plan is being used.
The Portfolio Rebalancing Plan may be terminated at any time
upon the Contract Owner notifying Union Central in writing at
least five business days prior to the date of the next
rebalancing.
Transfers made pursuant to the Portfolio Rebalancing Plan are
not subject to a transfer charge and do not affect a Contract
Owner's right to make up to six transfers each Contract Year
without charge, prior to the Maturity Date.
Union Central reserves the right to alter the terms or suspend
or eliminate the availability of the Portfolio Rebalancing Plan
at any time.
Contract Owners may elect to participate in this program by
separate application.
Interest Sweep
Contract Owners with a minimum balance of $5,000 in the
Guaranteed Account may elect to have the interest credited to
the Guaranteed Account periodically transferred (or "swept")
into specified subdivisions of the Variable Account. The sweep
may be done on a quarterly, semi-annual or annual basis.
The Interest Sweep Plan may be terminated at any time upon the
Contract Owner notifying Union Central in writing at least five
business days prior to the date of the next periodic sweep.
Transfers made pursuant to the Interest Sweep Plan are not
subject to a transfer charge and do not affect a Contract
Owner's right to make up to six transfers each Contract Year
without charge, prior to the Maturity Date.
Union Central reserves the right to alter the terms or suspend
or eliminate the availability of the Interest Sweep Plan at any
time.
Contract Owners may elect to participate in this program by
separate application.
Surrenders
The Contract Owner may make cash withdrawals (surrenders) of all
or part of the Accumulation Value at any time prior to the
earlier of the death of the Annuitant or the Maturity Date
(subject to any restrictions imposed in connection with a
particular retirement plan). Surrender requests must be made in
writing on forms provided by Union Central. Surrenders cannot be
made by telephone. Surrenders include, but are not limited to,
transactions commonly referred to as withdrawals, external
transfers, rollovers and exchanges under Section 1035 of the
Code. The amount available is the Accumulation Value at the end
of the valuation period during which Union Central receives the
proper written request, less any surrender charges,
administration fee and premium taxes not previously deducted.
Surrenders from the Variable Account generally will be paid
within seven days of receipt of the written request (see
"Miscellaneous Contract Provisions" in the Statement of
Additional Information). For surrenders from the Guaranteed
Account, see page 26. For restrictions applicable to certain
surrenders under Contracts issued in connection with annuity
purchase plans adopted pursuant to Section 403(b) of the Code,
see "Qualified Plans," page 28.
The minimum partial surrender is $100 or the entire amount in
the Investment Option, whichever is less. If after the surrender
(and deduction of the surrender charge, if any) the amount
remaining in the Investment Option would be less than $25, then
the request will be considered to be a request for surrender of
the entire amount held in the Investment Option. If a partial
surrender plus any surrender charge would reduce the
Accumulation Value to less than $100, then a request for a
partial surrender will be treated as a total surrender of the
Contract and the entire Accumulation Value, less any charges,
will be paid out.
Under certain circumstances, surrenders will be subject to the
surrender charge set forth below under "Surrender Charge" at
page 21. Surrenders of Contracts may be subject to a 10% tax
penalty (see "Federal Tax Matters" in the Statement of
Additional Information).
The full administration fee will also be deducted at the time of
total surrender regardless of the date of surrender. For total
surrenders, any surrender charge and administration fee will be
deducted from the amount paid.
Partial surrenders will be implemented by canceling Accumulation
Units in an amount equal to the withdrawal and any applicable
surrender charge. The Contract Owner should designate the
Investment Option from which the surrender should be made. If no
designation is made, the requested amount will be withdrawn from
each Investment Option in the same proportion that the interest
therein bears to the Accumulation Value. The surrender charge,
if any, will be deducted from the value remaining after payment
of the requested amount, or from the amount paid if the entire
amount in an Investment Option is surrendered.
Since the Contract Owner assumes the investment risk with
respect to amounts allocated to the Variable Account (and
because there are certain charges), the total amount paid upon
total surrender of the Contract (including any prior surrenders)
may be more or less than the total premiums paid.
Personal Income Plan
Union Central administers a Personal Income Plan ("PIP") that
enables a Contract Owner to pre-authorize a periodic exercise of
the contractual surrender rights described above. Contract
Owners entering into a PIP agreement instruct Union Central to
withdraw a level dollar amount or percentage of the Accumulation
Value on a monthly, quarterly, semi-annual or annual basis. To
the extent that the total of PIP surrenders in a Contract Year
exceeds 10% of the Contract Owner's Accumulation Value (in the
initial year, as of the date the PIP agreement is approved by
Union Central; in subsequent years, as of the first day of that
Contract Year), a surrender charge may be applicable (see
"Surrender Charge" at page 21.) PIP surrenders may also be
subject to the 10% federal tax on early withdrawals (see
"Federal Tax Matters" in the Statement of Additional
Information).
CHARGES AND OTHER DEDUCTIONS
Administration Fee
Prior to the Maturity Date, an annual administration fee of $30
will be deducted from the Accumulation Value as partial
reimbursement for actual expenses related to the administration
of each Contract and the Variable Account. The annual
administration fee will be waived for any year in which the
Accumulation Value of the Contract is $25,000 or more on the
last day of that Contract Year. Union Central also reserves the
right to waive this fee for select classes of employer sponsored
retirement plan contracts. Union Central guarantees that the
amount of this fee will not increase over the life of the
Contract. This annual administration fee is not deducted after
the Maturity Date.
The annual administration fee will be deducted on the last day
of each Contract Year. The fee will be deducted pro rata from
all Investment Options in the same proportion that the Contract
Owner's interest in each bears to the total Accumulation Value.
The full administration fee will also be deducted at the time of
total surrender, regardless of the date of surrender. However,
in the case of a total surrender, the annual administration fee
will also be waived if the Accumulation Value of the Contract is
$25,000 or more on the date of surrender.
There will also be a deduction, on a daily basis, at an annual
rate of 0.25% of the assets of the Variable Account to help
defray the expenses of administering CA and the Contract. This
deduction also is guaranteed not to increase over the life of
the Contract. Because this fee is a percentage of assets, rather
than a flat amount, larger contracts will, in effect, pay a
higher proportion of the total administrative expenses of CA
than smaller contracts. The deduction for 1997 was $754,374.
Administrative expenses include expenses incurred in connection
with premium billing and collection, record keeping, processing
death benefit claims, cash surrenders and Contract changes,
calculating Accumulation Unit and Annuity Unit values, reporting
and other communications to Owners and other similar expense and
overhead costs.
Mortality and Expense Risk Charge
A Mortality and Expense Risk Charge will be deducted daily at a
rate equal, on an annual basis, to 1.0% of each Contract's
Variable Account. THIS CHARGE MAY INCREASE BUT UNION CENTRAL
GUARANTEES THAT IT WILL NEVER BE MORE THAN 1.7%. Although Union
Central does not believe it is possible to allocate this charge
to different risks, Union Central feels that a reasonable
estimate is .7% for mortality risk and .3% for expense risk.
The mortality risk arises from Union Central's guarantees to
make annuity payments in accordance with the annuity tables,
regardless of how long the Annuitant lives and regardless of any
improvement in life expectancy generally. This relieves
annuitants of the risk that they might outlive the funds that
have been accumulated for retirement. The mortality risk also
arises from Union Central's guarantee to pay death benefits
equal to the total of all premiums paid under the Contract, with
adjustments for any partial surrenders (including surrender
charges), should an Annuitant die before the Maturity Date.
Union Central's expense risk arises from the possibility that
the amounts realized from the administration fee and surrender
charge (which are guaranteed not to increase) will be
insufficient to cover actual administrative and distribution
expenses. If these charges are insufficient to cover the
expenses, the deficiency will be met from Union Central's
general corporate funds, including amounts derived from the
Mortality and Expense Risk Charge.
If amounts derived from the Mortality and Expense Risk Charge
are insufficient to cover mortality costs and excess expenses,
Union Central will bear the loss. If the charge is more than
sufficient, Union Central will retain the balance as profit.
Union Central currently expects a profit from this charge. The
Mortality and Expense Risk Charge for 1997 was $3,683,113.
Surrender Charge (Contingent Deferred Sales Charge)
The Accumulation Value may, as explained above, be withdrawn in
whole or in part by totally or partially surrendering the
Contract, at any time before the earlier of the Maturity Date or
the Annuitant's death. However, if a surrender takes place in
the first eight Contract Years, then a surrender charge will be
imposed on the amount withdrawn as shown below:
Contract Year 1 2 3 4 5 6 7 8 Thereafter
--------------------------------------------
7% 7% 6% 5% 4% 3% 2% 1% 0%
Notwithstanding the charges described above, partial surrenders
totaling not more than 10% of the Accumulation Value (as of the
date of the first partial surrender in the Contract Year) may be
made each Contract Year without the imposition of the surrender
charge. Also, PIP surrenders (see "Personal Income Plan" at
page 20) in a Contract Year totaling not more than 10% of the
Accumulation Value (in the initial year, as of the date the PIP
agreement is approved by Union Central; in subsequent years, as
of the first day of that Contract Year) may be made without the
imposition of the surrender charge.
Terminal Illness/Confinement
Also, where permitted by state law, the surrender charge will be
waived upon a full surrender or one or more partial surrenders
in the event of (1) or (2) below:
(1) The Contract Owner becomes confined in a qualified
institution for a period of at least 30 consecutive days after
the later of the issue date of the Contract ("Contract Date") or
May 1, 1993, subject to the following:
(a) The Owner must be a natural person (not a Trust,
Corporation, or other legal entity).
(b) The Owner must have been an Owner of the Contract
continuously since the Contract Date.
(c) The Owner was not confined in a qualified institution
at any time during the 60 day period just prior to the later of
the Contract Date or May 1, 1993.
(d) Union Central receives a written request for full or
partial surrender along with due proof of confinement within 12
months following such confinement.
(e) A "qualified institution" means any licensed hospital
or licensed skilled or intermediate care nursing facility at
which:
(i) medical treatment is available on a daily basis; and
(ii) daily medical records are kept for each patient.
(2) The Contract Owner acquires a terminal illness after the
later of the Contract Date or May 1, 1993, subject to the
following:
(a) The Owner must be a natural person (not a Trust,
Corporation, or other legal entity).
(b) The Owner must have been an Owner of the Contract
continuously since the Contract Date.
(c) The Owner has less than 12 months to live.
(d) Union Central must receive a written request for full
or partial surrender together with a certificate from the
Owner's attending physician stating the Owner's life expectancy
and any other proof Union Central may require.
(e) "Physician" means a medical doctor licensed in the
United States who:
(i) is operating within the scope of that license; and
(ii) is not the Owner and is not related to the Owner.
The cumulative total of all surrender charges is guaranteed
never to exceed 9% of premiums.
The surrender charge may be reduced in certain instances where a
large number of Contracts are issued in connection with a single
sale. For example, the charge may be reduced where a Corporate
Pension Plan funded by the Contracts results in the issuance of
a number of Contracts to the same owner, or where an employer-
sponsored salary-deduction plan results in Contracts being
issued to a number of employees of one employer. Any reduction
in the surrender charge will be nondiscriminating by class of
purchaser, and will be based on reduced selling and other
expenses.
The surrender charge may be modified for Contracts where the
premium is a result of a transfer to or from (i) another
Contract owned by the employer or another person for the benefit
of the Contract Owner in connection with an employee benefit
plan, (ii) a Certificate (account) under certain Union Central
Group Retirement Annuity Contracts, or (iii) certain Union
Central Life Insurance Policies or Annuity Contracts. In
addition, the surrender charge will be eliminated with respect
to any amount payable in connection with the surrender of a
Contract where such amount is forfeited by an employee under the
terms of an employee benefit plan and credited to another
Contract issued in connection with the plan. The reduction or
elimination of the surrender charge in the foregoing
circumstances recognizes the reduction of selling expense in
such circumstances.
Surrender charges on partial surrenders will be deducted pro
rata from the value remaining in the Investment Option or
Options from which the amount paid was withdrawn. However, if
insufficient value remains to pay the surrender charges or if
the entire amount in an Investment Option is withdrawn, then to
the extent necessary, any surrender charge will be deducted from
the amount to be paid. Any surrender charges on a total
surrender of a Contract will be deducted from the amount paid.
The amounts obtained from the surrender charge will be used to
offset the distribution fee paid Carillon Investments. See page
29.
The surrender charge is not expected to recover all of the
distribution costs associated with the Contracts. Any shortfall
will be paid by Union Central out of its general surplus, which
may include profits derived from the mortality and expense risk
charge.
Certain surrenders of Contracts may also be subject to federal
tax penalties. See Federal Tax Matters, page 27.
Premium Taxes
Union Central will, where such taxes are imposed by state law,
deduct premium taxes or other taxes relative to the Contract
(collectively referred to as "premium taxes") when incurred,
which could be (1) at the Maturity Date, (2) when a total
surrender occurs, or (3) when premiums are paid. If the charge
for premium taxes is deducted at the Maturity Date, it will be
taken from each Investment Option in the proportion that the
Contract Owner's interest in the Investment Option bears to the
total Accumulation Value. If the charge for premium taxes is
deducted when premiums are paid, it will be deducted from the
premium before the premium has been allocated to the Investment
Option(s). Applicable premium tax rates depend upon such factors
as the Contract Owner's state of residency and the insurance
laws and status of Union Central in that state when the premium
taxes are incurred. Current premium tax rates range from 0 to
3.5%. Applicable premium tax rates are subject to change by
legislation, administrative interpretations or judicial acts.
Fund Expenses
There are deductions from and expenses paid out of the assets of
the Funds that are fully described in the Fund Prospectuses.
BENEFITS UNDER THE CONTRACT
Death Benefits
If the Annuitant is the Owner and dies prior to the Maturity
Date, or if the Annuitant dies prior to the Maturity Date while
the Owner is living, then a death benefit will be paid to the
designated Beneficiary. The death benefit will be the greater
of: (a) the sum of all premiums paid less any amounts deducted
in connection with partial surrenders, including any surrender
charges associated with those partial withdrawals; or (b) the
Accumulation Value on the date Union Central receives Due Proof
of Death. This formula guarantees that the death benefit will at
least equal the sum of all premiums paid (less any partial
surrenders and surrender charges on such partial withdrawals),
independent of the investment experience of CA.
If the Owner is not the Annuitant and the Owner dies before the
Maturity Date and while the Annuitant is living, Union Central
will pay the Accumulation Value (measured as of the date Union
Central receives Due Proof of Death) to the Owner's estate or to
a successor owner. Notwithstanding the foregoing sentence to
the contrary, if the Owner's spouse is the designated
beneficiary under the Contract, such spouse will become the
Owner of the Contract and no distribution will be required as a
result of the death of the original Owner.
If the Annuitant dies after the Maturity Date, Union Central
will provide the death benefit, if any, contained in the
particular Annuity Option elected. See page 24.
Annuity Payments
Maturity Date The Contract Owner specifies a Maturity Date in
the application, which is the day that annuity payments will
commence under the Contract. The Contract Owner may change the
Maturity Date at any time, provided written notice of the change
is received by Union Central at least 30 days before the
previously specified Maturity Date. The Maturity Date must be:
(a) at least a month after the Contract Date; (b) the first day
of a calendar month; and (c) no later than the Annuitant's 95th
(85th in New York and Pennsylvania) birthday (particular
retirement plans may impose additional limitations).
Type of Income Payments A Contract Owner may specify any
proportion of the Accumulation Value (less premium taxes, if
any) to be applied to a Variable Annuity or a Fixed Annuity.
Variable Annuity payments will vary in accordance with the
investment experience of the Subaccount selected by the Contract
Owner.
At least 30 days before the Maturity Date, the Contract Owner
must select how the Accumulation Value will be used to provide
the monthly annuity payments. If no selection is made, Union
Central will provide a Fixed Annuity with the proceeds of the
Guaranteed Account and a Variable Annuity with the proceeds of
the Variable Account. The first Variable Annuity payment will be
based on the allocation of the Variable Account among the
subdivisions.
If a Variable Annuity is selected, the amount of the first
monthly income payment will be obtained from the appropriate
Option Table in the Contract. Subsequent monthly income payments
will vary based on the investment experience of the
Subaccount(s) used to reserve for the annuity.
Amount of Variable Annuity Payments The amount of Variable
Annuity payments will depend not only upon the investment
experience of the Subaccount selected by the Contract Owner, but
also upon the amount of any premium tax, the age (and possibly
sex) of the Annuitant, and the Annuity Option chosen. Union
Central guarantees that the annuity payments (1) will not be
affected by any variation in the actual mortality experience of
the Annuitants from what was assumed in determining the amount
of the first monthly payment, and (2) will not be affected by
the actual amount of expenses incurred by Union Central in
administering the Contract.
Since Variable Annuity payments will vary in accordance with the
investment results of the Subaccounts, the amount of the
Variable Annuity payments cannot be predetermined.
If the total Accumulation Value to be applied to an Annuity
Option is less than $5,000 ($2,000 in Massachusetts and New
York), Union Central will have the option of paying the
Accumulation Value in a lump sum. If the total first monthly
payment (combined Fixed and Variable) determined under the
Annuity Option selected is less than $50 ($20 in New York),
Union Central may change the payment frequency of annuity
payments to quarterly, semiannually or annually.
Annuity Options The Contract Owner may elect a Fixed Annuity, a
Variable Annuity, or a combination Fixed and Variable Annuity.
All of the Annuity Options listed below (except the Alternate
Annuity Option) are available as either Fixed or Variable
Annuities.
Up to 30 days before the Maturity Date, the Contract Owner may
change the Annuity Option. If an Annuity Option is chosen which
depends on the continuation of the life of the Annuitant or of a
contingent Annuitant, proof of age will be required before
annuity payments begin. The Annuity Options include:
Option 1: Life Annuity (a) Nonrefund. Union Central will make
payments during the lifetime of the Annuitant. No payments are
due after the death of the Annuitant. It is possible under this
Option that only one payment will be made if the Annuitant dies
before a second payment is due, or that only two payments will
be made if the Annuitant dies before the third payment, and so
forth.
(b) 5-Years Certain. Union Central will make payments for at
least five years, and after that during the lifetime of the
Annuitant. No payments are due after the death of the Annuitant
or, if later, the end of the five-year period certain.
(c) 10-Years Certain. Union Central will make payments for at
least 10 years, and after that during the lifetime of the
Annuitant. No payments are due after the death of the Annuitant
or, if later, the end of the 10-year period certain. (This
option will apply unless the Contract Owner selects a different
option.)
(d) Installment Refund. Union Central will make payments for a
period certain and after that during the lifetime of the
Annuitant. No payments are due after the death of the Annuitant
or, if later, the end of the period certain. The number of
period certain payments is equal to the amount applied under
this Installment Refund Option divided by the amount of the
first annuity payment; provided, however, that the amount of the
final period certain payment shall be multiplied by that part of
the answer which is not a whole number.
Option 2: Joint and Survivor Life Annuity (a) Joint and Survivor
Nonrefund. Union Central will make payments during the joint
lifetime of the Annuitant and contingent Annuitant. Payments
will then continue during the remaining lifetime of the survivor
of them. No payments are due after the death of the last
survivor of the Annuitant and contingent Annuitant. It is
possible under this option that only one monthly annuity payment
will be made if the Annuitant and contingent Annuitant both die
before the second payment is made, or that only two payments
will be made if they both die before the third payment, and so
forth.
(b) Joint and Survivor with 10-Year Certain. Union Central will
make payments for 10 years and after that during the joint
lifetime of the Annuitant and contingent Annuitant. Payments
will then continue during the remaining lifetime of the survivor
of them. No payments are due after the death of the survivor of
the Annuitant and contingent Annuitant or, if later, the end of
the 10-year period certain.
Instead of the settlement in accordance with the Annuity Options
described above, Contract Owners may choose an alternate type of
Fixed Annuity payment. Such alternate annuity option shall be
based on rates at least as favorable as those for fixed-dollar
single-premium immediate annuities being issued by Union Central
on the Maturity Date. This alternate annuity option may only be
elected within 30 days before the Maturity Date.
If the Annuitant dies on or after the Maturity Date, but before
annuity payments have been made for a guaranteed period, if any,
Union Central will continue payments to the beneficiary until
the rest of the guaranteed payments have been made. If no
beneficiary is living, Union Central will commute any unpaid
guaranteed payments to a single sum (on the basis of the
interest rate used in the Annuity Option Table from which the
payments were determined) and pay that sum to the estate of the
last to die of the Annuitant and the Beneficiary.
THE GUARANTEED ACCOUNT
Premiums allocated to the Guaranteed Account and transfers to
the Guaranteed Account become part of the general assets of
Union Central, which support insurance and annuity obligations.
Because of exemptive and exclusionary provisions, interests in
the Guaranteed Account have not been registered under the
Securities Act of 1933 ("1933 Act") nor is Union Central
registered as an investment company under the Investment Company
Act of 1940 ("1940 Act "). Accordingly, neither Union Central
nor any interests in its general assets generally are subject to
the provisions of the 1933 or 1940 Acts and it is understood
that the staff of the Securities and Exchange Commission has not
reviewed the disclosures in this Prospectus which relate to the
fixed portion of the Contract. Disclosures regarding the fixed
portion of the Contract and Union Central, however, may be
subject to certain generally applicable provisions of the
federal securities laws relating to the accuracy and
completeness of statements made in prospectuses. For complete
details regarding the fixed portion, see the Contract itself.
General Description
The Guaranteed Account is the value of the Contract that is part
of the general assets of Union Central, other than those
allocated to separate investment accounts such as CA. Contract
Owners may elect to allocate all or part of their premiums to
the Guaranteed Account, and they may also transfer values from
the Variable Account to the Guaranteed Account. Union Central
bears the full investment risk for all amounts allocated or
transferred to the Guaranteed Account, whereas the Contract
Owners bear the investment risk for amounts allocated or
transferred to the Variable Account. Union Central has sole
discretion to invest its general assets, including assets
funding the Guaranteed Account, subject to applicable law.
Guaranteed Account Accumulations
Union Central guarantees that it will credit interest to the
Guaranteed Account at an effective rate of at least 4.0% per
year (compounded annually). Interest in excess of the guaranteed
rate may be used in the calculation of the Guaranteed Account at
such increased rates and in such a manner as Union Central may
determine. ANY INTEREST CREDITED TO THE GUARANTEED ACCOUNT IN
EXCESS OF THE MINIMUM GUARANTEED RATE OF 4.0% PER YEAR WILL BE
DETERMINED IN THE SOLE DISCRETION OF UNION CENTRAL.
Union Central guarantees that, at any time prior to the Maturity
Date, the Guaranteed Account of the Contract will be at least
equal to:
(1) the total of all net premiums allocated to the Guaranteed
Account; plus
(2) the total of all amounts transferred to the Guaranteed
Account from the Variable Account; minus
(3) the total of all amounts transferred from the Guaranteed
Account to the Variable Account (including the transfer fee);
minus
(4) the total of all administration fees attributable to the
Guaranteed Account; minus
(5) the total of all partial surrenders from the Guaranteed
Account (including any surrender charges); plus
(6) interest at the guaranteed annual effective interest rate
of 4.0%.
Fixed Annuity Payments
A fixed annuity is an annuity with payments that have a dollar
amount that is fixed and guaranteed by the insurance company
issuing the Contract. The amount of the annuity payments will be
determined by applying the Guaranteed Account to rates at least
as favorable as those in the applicable annuity option table in
accordance with the Annuity Option elected. This will be done at
the Maturity Date. The annuity option tables contained in the
Contract are based on a 4.0% interest rate.
Union Central guarantees the amount of fixed annuity payments.
The payment depends only on the annuity option elected, the age
(and possibly sex) of the Annuitant, and the amount applied to
purchase the fixed annuity.
Surrenders
The Contract Owner may surrender all or part of the Guaranteed
Account value at any time prior to the Maturity Date or the
death of the Annuitant. Union Central intends to pay surrender
requests upon receipt but reserves the right to delay payment of
all surrenders from the Guaranteed Account for up to six months.
Surrenders from the Guaranteed Account generally are subject to
the same provisions that apply to surrenders from the Variable
Account, discussed under "Surrenders" on page 20.
Transfers
Amounts may be transferred among subdivisions of a Contract's
Variable Account, or between the Guaranteed Account and
subdivisions of the Variable Account, at any time prior to the
Maturity Date. Prior to the Maturity Date, Contract Owners may
transfer up to the greater of (1) 20% of the value of the
Guaranteed Account (as of the first day of the Contract Year),
or (2) $1,000 to one or more subdivisions of the Variable
Account each Contract Year. There is no maximum on amounts that
may be transferred out of a subdivision of the Variable Account.
The minimum amount that may be transferred is $300, or if less,
the entire amount in the investment option. No transfers may
be made with respect to fixed annuity payments.
GENERAL MATTERS
Designation of Beneficiary
The Beneficiary is the person designated as such in the
application and is the person or persons to whom benefits will
be paid upon the death of the Annuitant. Subject to the terms of
any existing assignment or the rights of any irrevocable
Beneficiary, the Contract Owner may change the Beneficiary while
the Annuitant is living by providing Union Central with written
notice. Any change will be effective at the time it is signed by
the Contract Owner, whether or not the Annuitant is living when
the change is received by Union Central. Union Central will not,
however, be liable as to any payment or settlement made prior to
receiving the written notice.
20-Day Right to Examine Contract
If a Contract Owner is not satisfied with the Contract, it may
be voided by returning it to Union Central or the agent of Union
Central from which it was purchased within 20 days of receipt.
The Contract Owner will then receive a full refund of any
premium paid or in certain states the Accumulation Value.
Contract Owner's Inquiry
Contract Owners may make inquiries concerning their contracts by
calling Union Central at (513) 595-2728, or writing c/o Annuity
Administration, P.O. Box 40888, Cincinnati, Ohio 45240.
FEDERAL TAX MATTERS
Introduction
The following discussion is general and is not intended as tax
advice. This discussion is based upon Union Central's
understanding of the present federal income tax laws as they are
currently interpreted by the Internal Revenue Service
("Service"). No representation is made as to the likelihood of
continuation of these present federal income tax laws or of the
current interpretations by the Service. Moreover, no attempt has
been made to consider any applicable state or other tax laws.
The Contract may be used in connection with retirement plans
that are qualified for special tax treatment under Sections 401,
403, 408, 408A or 457 of the Internal Revenue Code of 1986, as
amended ("Code"). The ultimate effect of federal income taxes on
the Accumulation Value, on annuity payments, and on the economic
benefit to the Contract Owner, the Annuitant or the Beneficiary
depends on the type of retirement plan for which the Contract is
purchased, on the tax and employment status of the individual
concerned, on Union Central's tax status, and on other factors.
Any person concerned about these tax implications should consult
a competent tax adviser.
Tax Status of Contracts
The following discussion assumes that the Contracts will be
treated as annuities under Section 72 of the Internal Revenue
Code.
Union Central believes that an annuity owner generally is not
taxed on increases in the value of a Contract until distribution
occurs either in the form of a lump sum received by withdrawing
all or part of the cash value (i.e., "surrenders") or as annuity
payments under the annuity option elected. The exception to this
rule is the treatment afforded to owners that are not natural
persons. Generally, an owner of any deferred annuity contract
who is not a natural person must include in income any increase
in the excess of the Owner's cash value over the Owner's
investment in the contract during the taxable year. However,
there are some exceptions to this exception and you may wish to
discuss these with your tax counsel. The taxable portion of a
distribution (in the form of an annuity or lump-sum payment) is
taxed as ordinary income. For this purpose, the assignment,
pledge, or agreement to assign or pledge any portion of the cash
value (and in the case of a Qualified Contract, any portion of
an interest in the qualified employer plan) generally will be
treated as a distribution.
The following discussion applies generally to Contracts owned by
natural persons.
In the case of a surrender under Qualified Contracts, amounts
received are treated as taxable income to the extent that they
exceed the "investment in the contract." Any additional amount
withdrawn is not taxable. The "investment in a contract"
generally equals the portion, if any, of any premium paid by or
on behalf of an individual under a contract which is not
excluded from the individual's gross income. For contracts
issued in connection with tax-qualified plans, the "investment
in the contract" can be zero. A special rule may apply to
surrenders under Qualified Contracts with respect to the
"investment in the contract" as of December 31, 1986. In the
case of a surrender under Nonqualified Contracts, amounts
received are first treated as taxable income to the extent that
the cash value of the contract immediately before the surrender
exceeds the "investment in the contract" at that time. Any
additional amount withdrawn is not taxable. For purposes of
determining amounts treated as taxable income, all annuity
contracts issued by the same company to the same person during
any calendar year are treated as a single contract.
The recipient of an annuity payment under the Contract is
generally taxed on the portion of such payment that exceeds the
"investment in the contract." For variable annuity payments, the
taxable portion is determined by a formula which establishes a
specific dollar amount of each payment that is not taxed until
the investment in the Contract is recovered. The dollar amount
is determined by dividing the "investment in the contract" by
the total number of expected periodic payments. For fixed
annuity payments, in general, there is no tax on the portion of
each payment which represents the same ratio that the
"investment in the contract" bears to the total expected value
of the annuity payments for the term of the Contract until the
investment in the Contract is recovered; the remainder of each
payment is taxable. Once the investment in the Contract is
recovered, the entire amount of each payment is taxable.
For Nonqualified Contracts, there may be imposed a penalty tax
on surrenders equal to 10% of the amount treated as taxable
income. In general, there is no penalty tax on surrenders (1)
made on or after age 59 1/2, (2) made as a result of death or
disability, or (3) received in substantially equal installments
as a life annuity. For some Qualified Contracts, there may be
imposed a penalty tax on certain surrenders.
A transfer of ownership of a Contract, or designation of an
annuitant or other beneficiary who is not also the owner, may
result in certain tax consequences to the owner that are not
discussed herein. An owner contemplating any such transfer or
assignment of a Contract should contact a competent tax adviser
with respect to the potential tax effects of such a transaction.
Distributions from tax-deferred annuities or qualified pension
or profit sharing plans that are eligible for "tax-free
rollover" will be subject to an automatic 20% federal income tax
withholding unless such amounts are directly rolled over to
another qualified plan or individual retirement arrangement
permitted under the Code. Withholding for federal income taxes
on annuity payments is required unless the recipient elects not
to have any such amounts withheld and properly notifies Union
Central of that election. Failure to provide your taxpayer
identification number will automatically subject any payments
under the Contract to withholding.
Qualified Plans
The Contract may be used with several types of qualified plans.
The tax rules applicable to participants in such qualified plans
vary according to the type of plan and the terms and conditions
of the plan itself. Purchasers of Contracts for use with any
qualified plan should seek competent legal and tax advice
regarding the suitability of the Contract.
(a) Section 403(b) Plans. Under Section 403(b) of the Code,
payments made by public school systems and certain tax-exempt
organizations to purchase annuity contracts for their employees,
directly or through voluntary salary reductions, are excludable
from the gross income of the employee, subject to certain
limitations. However, such payments may be subject to FICA
(Social Security) taxes. In addition, effective January 1, 1989,
cash distributions from a Section 403(b) annuity may not begin
before the employee attains age 59 1/2, separates from his or her
employer's service, dies or becomes disabled, except that cash
distributions limited to the amount of premiums may be paid in
the event of the employee's hardship. These restrictions apply
to distributions attributable to contributions made after
December 31, 1988 pursuant to a salary reduction agreement,
earnings on those contributions, and earnings on amounts
attributable to contributions held as of December 31, 1988 and
made pursuant to a salary reduction agreement.
(b) Individual Retirement Annuities. Sections 219, 408 and
408A of the Code permit individuals or their employers to
contribute to an individual retirement program known as an
"Individual Retirement Annuity" or "IRA." Individual Retirement
Annuities are subject to limitations on the amount which may be
contributed and deducted and the time when distributions may
commence. In addition, distributions from certain other types of
qualified plans may be placed into an Individual Retirement
Annuity on a tax-deferred basis.
(c) Corporate Pension and Profit-Sharing Plans. Sections
401(a) and 403(a) of the Code permit corporate employers to
establish various types of retirement plans for employees. Such
retirement plans may permit the purchase of the Contracts to
provide benefits under the plans.
(d) H.R. 10 Plans. The Self-Employed Individuals Tax
Retirement Act of 1962, as amended, commonly referred to as
"H.R. 10," permits self-employed individuals to establish tax-
qualified plans for themselves and their employees. These plans
are limited by law to maximum permissible contributions,
distribution dates, and nonforfeitability of interests. In order
to establish such a plan, a plan document, usually in a form
approved in advance by the Internal Revenue Service, is adopted
and implemented by the employer.
(e) State and Local Government Deferred Compensation Plans.
Section 457 of the Code, while not actually providing for a
qualified plan as that term is normally used, provides for
certain deferred compensation plans with respect to service for
state governments, local governments, certain tax-exempt
organizations, political subdivisions, agencies,
instrumentalities and certain affiliates of such entities which
enjoy special treatment. The Contracts can be used with such
plans.
RESTRICTIONS UNDER THE TEXAS OPTIONAL RETIREMENT PROGRAM
Section 36.105 of the Texas Education Code permits participants
in the Texas Optional Retirement Program ("ORP") to redeem their
interest in a variable annuity contract issued under the ORP
only upon (1) termination of employment in the Texas public
institutions of higher education, (2) retirement, or (3) death.
Accordingly, a participant in the ORP, or the participant's
estate if the participant has died, will be required to obtain a
certificate of termination from the employer before the Contract
can be surrendered.
DISTRIBUTION OF THE CONTRACTS
Carillon Investments, Inc. (a wholly-owned subsidiary of Union
Central whose principal business address is 1876 Waycross Road,
Cincinnati, Ohio 45240), the principal underwriter of the
Contracts, is registered with the Securities and Exchange
Commission under the Securities Exchange Act of 1934 as a
broker-dealer and is a member of the National Association of
Securities Dealers, Inc. Union Central will pay Carillon
Investments, Inc., an amount not in excess of 5% of premiums
received over the duration of the Contract, from which Carillon
Investments will pay commissions to its own registered
representatives or pay a reallowance to other broker-dealers who
distribute the Contracts. In those cases where the surrender
charges are reduced (see page 22), the amount paid to Carillon
Investments will be less than 5% of premiums.
VOTING RIGHTS
To the extent required by law, the Portfolio shares held by CA
will be voted by Union Central at shareholder meetings of the
Funds in accordance with instructions received from persons
having voting interests in the corresponding Subaccounts of CA.
However, if the Investment Company Act of 1940 or any regulation
thereunder should be amended or if the present interpretation
thereof should change, and as a result, Union Central determines
that it is allowed to vote the Portfolio shares in its own
right, Union Central may elect to do so.
The number of votes which a person has the right to instruct
will be calculated separately for each Subaccount. Prior to the
Maturity Date, the number of votes for which a Contract Owner
has a right to give instructions will be determined by dividing
the Accumulation Value attributable to a subdivision by the net
asset value per share of the corresponding Portfolio. After the
Maturity Date, the Annuitant has the voting interest. The number
of votes after the Maturity Date will be determined by dividing
the reserve for such Contract held in a Subaccount by the net
asset value per share of the corresponding Portfolio. After the
Maturity Date, the votes attributable to a Contract decrease as
the reserves underlying the Contract decrease. In determining
the number of votes, fractional shares will be recognized.
Voting instructions will be solicited prior to such meeting in
accordance with procedures established by Union Central. Fund
shares held in CA as to which no timely instructions are
received will be voted or not voted by Union Central in
proportion to the voting instructions received. Each person
having a voting interest in a Subaccount will receive proxy
material, reports and other materials relating to the
appropriate Portfolio.
In accordance with an amendment to the Maryland General
Corporation Law, the Board of Directors of Carillon Fund has
adopted an amendment to its By-laws providing that unless
otherwise required by the Investment Company Act of 1940,
Carillon Fund shall not be required to hold an annual meeting of
shareholders unless the Board of Directors determines to hold an
annual meeting. Carillon Fund intends to hold shareholder
meetings only when required by law and such other times as may
be deemed appropriate by its Board of Directors.
Scudder Fund, which was organized in the Commonwealth of
Massachusetts as a "Massachusetts business trust," does not
intend to hold annual meetings. However, shareholders of
Scudder Fund have certain rights, as set forth in the
Declaration of Trust of Scudder Fund, including the right to
call a meeting of shareholders for the purpose of voting on the
removal of one or more Trustees.
American Century Fund was organized as a Maryland corporation.
An insurance company issuing a variable contract invested in
shares issued by the American Century Fund will request voting
instructions from Contract Owners and will vote shares in
proportion to the voting instructions received.
MFS Fund was organized in the Commonwealth of Massachusetts as a
"Massachusetts business trust." It does not intend to hold
annual shareholder meetings.
Templeton Fund was organized in the Commonwealth of
Massachusetts as a "Massachustees business trust." Massachusetts
business trust law does not require the Trust to hold annual
shareholder meetings.
PREPARING FOR YEAR 2000
Like all financial services providers, Union Central utilizes
systems that may be affected by Year 2000 transition issues and
it relies on service providers, including banks, custodians, and
investment managers that also may be affected. Union Central
and its affiliates have developed, and are in the process of
implementing, a Year 2000 transition plan, and are confirming
that their service providers are also so engaged. The resources
that are being devoted to this effort are substantial. 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 Union Central. However, as of
the date of this prospectus, it is not anticipated that Contract
Owners will experience negative effects on their investment, or
on the services provided in connection therewith, as a result of
Year 2000 transition implementation. Union Central currently
anticipates that its systems will be Year 2000 compliant on or
about January 2, 1999, but there can be no assurance that Union
Central will be successful. The failure of Union Central or one
of its service providers to achieve timely and complete
compliance could materially impair Union Central's ability to
conduct its business, including its ability to accurately and
timely value interests in the Contracts.
FINANCIAL STATEMENTS
Financial statements of CA and Union Central are included in the
SAI which may be obtained without charge by writing or
telephoning Union Central at: address - P.O. Box 40409,
Cincinnati, Ohio 45240-0409; telephone - 1-800-999-1840.
APPENDIX A
IRA DISCLOSURE STATEMENT
Part I of this statement is designed to help you understand the
requirements, as they exist for tax years beginning on and after
1-1-98, of federal tax law which apply to your traditional
Individual Retirement Annuity (traditional IRA), your Simplified
Employee Pension IRA (SEP-IRA for employer contributions), or to
one purchased by your spouse (see Spousal IRAs below). Part II
describes the requirements for your SIMPLE IRA, and Part III
describes the requirements for your Roth IRA. You can obtain
more information regarding your IRA either from your sales
representative or from any district office of the Internal
Revenue Service.
Seven-day Review Period
You have seven days after you sign your application to review
this statement and the Prospectus without obligation. If you
notify Union Central or your sales representative either orally
or in writing within the seven-day period that you want to
revoke your application, your entire purchase payment will be
refunded to you. The address and telephone number of Union
Central are as follows:
The Union Central Life Insurance Company
P.O. Box 40888
Cincinnati, Ohio 45240
Telephone: (513) 595-2728 8:15 a.m.-4:30 p.m. (Eastern
Time Zone)
Part I. Traditional IRA and SEP-IRA
Eligibility Requirements
If neither you, nor your spouse, is an active participant (see
A. below) you may make a contribution of up to the lesser of
$2,000 or 100% of compensation and take a deduction for the
entire amount contributed. (Combined contributions to a
traditional IRA and Roth IRA may not exceed $2,000 for the
taxable year.) If you or your spouse is an active participant
but have a combined adjusted gross income (AGI) below a certain
level (see B. below), you may make a fully deductible
contribution. If, however, you or your spouse is an active
participant and your combined AGI is above the specified level,
the amount of the deductible contribution you may make to an IRA
is scaled down and eventually eliminated.
A. Active Participant
You are an "active participant" for a year if you are covered by
a retirement plan during any part of that year. You are covered
by a "retirement plan" for a year if your employer or union has
a retirement plan under which money is added to your account or
you are eligible to earn retirement credits. For example, if
you are covered under a profit-sharing plan, certain government
plans, a salary-reduction arrangement (such as a tax-sheltered
annuity arrangement or a 401(k) plan), a simplified employee
pension plan (SEP), a SIMPLE plan, or a plan which promises you
a retirement benefit which is based upon the number of years of
service you have with the employer, you are likely to be an
active participant. Your Form W-2 for the year should indicate
your participation status.
You are an active participant for a year even if you are not yet
vested in your retirement benefit. Also, if you make required
contributions or voluntary employee contributions to a
retirement plan, you are an active participant. In certain
plans you may be an active participant even if you were only
with the employer for part of the year.
You are not considered an active participant if you are covered
in a plan only because of your service as (1) an Armed Forces
Reservist, for less than 90 days of active service; or (2) a
volunteer firefighter covered for firefighting service by a
government plan, which will not provide more than $1,800 per
year at age 65. Of course, if you are covered in any other
plan, these exceptions do not apply.
If your spouse is an active participant, by employing similar
rules as above to his or her situation, but you are not,
deductibility for your traditional IRA will be phased out as
described below, unless you file separately and do not live
together at any time during the tax year.
B. Adjusted Gross Income (AGI)
If you are an active participant, you must look at your Adjusted
Gross Income for the year (if you and your spouse file a joint
tax return you use your combined AGI) to determine whether you
can make a deductible IRA contribution. Your tax return will
show you how to calculate your AGI for this purpose. If you are
at or below a certain AGI level, called the Threshold Level, you
are treated as if you were not an active participant and can
make a deductible contribution under the same rules as a person
who is not an active participant.
If you are single, your Threshold Level is $30,000 for taxable
years beginning in 1998. The Threshold Level if you are married
and file a joint tax return is $50,000 for taxable years
beginning in 1998, and if you are married but file a separate
tax return, the Threshold Level is $0. If you are married but
file separately and you live apart from your spouse for the
entire year, the IRS will treat you as not being married for
purposes of active participant status and the Threshold Level.
Thus, your Threshold Level is $30,000 for 1998. The Threshold
Level is established for future years as follows:
<TABLE>
<CAPTION>
Joint Returns
The applicable
For taxable years beginning in: Threshold Level
<S> <C>
1999 $51,000
2000 $52,000
2001 $53,000
2002 $54,000
2003 $60,000
2004 $65,000
2005 $70,000
2006 $75,000
2007 and thereafter $80,000
"Single" Returns
The applicable
For taxable years beginning in: Threshold Level
<S> <C>
1999 $31,000
2000 $32,000
2001 $33,000
2002 $34,000
2003 $40,000
2004 $45,000
2005 and thereafter $50,000
</TABLE>
If your AGI is less than $10,000 above your Threshold Level, you
will still be able to make a deductible contribution but it will
be limited in amount. The amount by which your AGI exceeds your
Threshold Level (AGI--Threshold Level) is called your Excess AGI.
The Maximum Allowable Deduction is $2,000. You can estimate your
Deduction Limit or calculate it as follows:
$10,000 - Excess AGI X Maximum Allowable Deduction =
Deduction Limit
- --------------------
$10,000
You must round up the result to the next highest $10 level (the
next highest number which ends in zero). For example, if the
result is $1,524, you must round it up to $1,530. If the final
result is below $200 but above zero, your Deduction Limit is $200.
Your Deduction Limit cannot, in any event, exceed 100% of your
compensation.
If you and your spouse file a joint tax return, and only one of
you is an active participant, the applicable Threshold Level for
the one who is not an active participant is $150,000 and the
denominator of the fraction given above remains at $10,000.
Deductible Contributions
If you satisfy the eligibility requirements described above,
contributions to your IRA will be deductible up to the deduction
limit whether or not you itemize deductions on your federal income
tax return. IRA or SEP-IRA contributions must be made by no later
than the time you file your income tax return for that year (i.e.,
April 15 if you are a calendar-year taxpayer) with no extensions.
Under certain circumstances an employee may elect to have the
employer make up to $7,000 ($10,000 in 1998 as adjusted for
inflation) in salary-reduction contributions to a SEP. Under a
SEP-IRA agreement, the maximum annual contribution which your
employer may make to a SEP-IRA contract is 15% of your
compensation. Compensation is limited to $160,000 in 1998 ( as
adjusted for inflation.) Employer contributions to a SEP-IRA are
excludable from the employee's gross income rather than
deductible.
If you or your employer should contribute more than the maximum
contribution amount of your IRA or SEP-IRA, the excess amount will
be considered an "excess contribution." You are permitted to
withdraw an excess contribution from your IRA or SEP-IRA before
your tax filing date without adverse tax consequences. If,
however, you fail to withdraw any such excess contribution before
your tax filing date, a 6% excise tax will be imposed on the
excess for the tax year of contribution.
Once the 6% excise tax has been imposed, an additional 6% penalty
for the following tax year can be avoided if the excess is (1)
withdrawn before the end of the following year, or (2) treated as
a current contribution for the following year.
No contribution may be made to your traditional IRA or SEP-IRA
during or after the tax year in which you attain age 70 1/2.
Nondeductible Contributions
Even if you are above the threshold level and thus may not make a
deductible contribution of $2,000, you may still contribute up to
the lesser of 100% of compensation or $2,000 to a traditional IRA.
The amount of your contribution which is not deductible will be a
nondeductible contribution to the IRA. You may also choose to
make a contribution nondeductible even if you could have deducted
part or all of the contribution. Interest or other earnings on
your IRA contribution, whether from deductible or nondeductible
contributions, will not be taxed until taken out of your IRA and
distributed to you.
If you make a nondeductible contribution to an IRA you must report
the amount of the nondeductible contribution to the IRS by
including form 8606 as a part of your tax return for the year.
There is a $50 penalty for failure to file Form 8606, entitled
Nondeductible IRA Contributions, IRA Basis, and Nontaxable IRA
Distributions.
You may make a $2,000 contribution at any time during the year, if
your compensation for the year will be at least $2,000, without
having to know how much will be deductible. When you fill out
your tax return you may then figure out how much is deductible.
You may withdraw an IRA contribution made for a year any time
before April 15 of the following year. If you do so, you must
also withdraw the earnings attributable to that portion and report
the earnings as income for the year for which the contribution was
made. If some portion of your contribution is not deductible, you
may decide either to withdraw the nondeductible amount, or to
leave it in the IRA and designate that portion as a nondeductible
contribution on your tax return.
Spousal IRAs
Your spouse may make a contribution to a spousal IRA if he or she
files a joint tax return with you and his or her gross income (if
any) for the taxable year is less than yours. The maximum amount
allowable as a contribution to the spousal IRA is limited to the
lesser of (a) $2,000, and (b) the total of both spouses' gross
income reduced by the amount contributed for your own IRA and your
own Roth IRA. This means that the total contributions that can be
made to your and your spouse's IRAs can be as much as $4,000 for
the taxable year.
The amount which your spouse may deduct for a spousal IRA is
limited by application of the rules for active participation as
described in "Eligibility Requirements," above.
You may not make a contribution to your IRA for any tax year
during which and after you attain age 70 1/2. Your spouse,
however, may make contributions to his or her spousal IRA until
the tax year in which he or she reaches age 70 1/2 if the other
conditions mentioned in the previous paragraphs are met.
Rollover Contributions
Once every year, you are permitted to withdraw any portion of the
value of your traditional IRA or SEP-IRA and reinvest it in
another traditional IRA. Withdrawals may also be made from other
traditional IRAs and contributed to this IRA. This transfer of
funds from one traditional IRA to another is called a "rollover"
IRA. To qualify as a rollover contribution, the entire portion of
the withdrawal must be reinvested in another traditional IRA
within 60 days after the date it is received. You will not be
allowed a tax deduction for the amount of any rollover
contribution. A direct transfer of funds from one IRA to another
IRA is permitted. Such direct transfers are not limited to one
per year.
A similar type of rollover can be made with the proceeds of a
qualified distribution from a qualified retirement plan (including
TDA and HR-10 plans). Distributions from tax-deferred annuities
or qualified pension or profit sharing plans that are eligible for
"tax-free rollover" will be subject to an automatic 20% federal
income tax withholding unless such amounts are directly rolled
over to another qualified plan or individual retirement
arrangement permitted under the Code. Properly made, such a
distribution will not be taxable until you receive payments from
the IRA created with it. Unless you were a self-employed
participant in the distributing plan, you may later rollover such
a contribution to another qualified retirement plan as long as you
have not mixed it with IRA or SEP-IRA contributions.
Premature Distributions
At no time can interest in your IRA or SEP-IRA be forfeited. To
insure that your contributions will be used for your retirement,
the federal tax law does not permit you to use your IRA or SEP-IRA
as a security for a loan or borrow on your IRA or SEP-IRA.
Furthermore, as a general rule, you may not sell or assign your
interest in your IRA or SEP-IRA to anyone. Use of an IRA or SEP-
IRA as security or assignment of it to another will invalidate the
entire annuity. The portion attributable to your deductible
contributions and all earnings will be includable in your income
in the year it is invalidated and will be subject to a 10% penalty
if you are not at least age 59 1/2 or totally disabled, or if you do
not meet certain other limited exceptions. (You may, however,
assign your IRA or SEP-IRA without penalty to your former spouse
in accordance with the terms of a divorce decree.)
You may surrender any portion of the value of your IRA or SEP-IRA.
In the case of a surrender which does not qualify as a rollover,
the amount withdrawn which is attributable to your deductible
contributions and all earnings will be includable in your income
and subject to the 10% penalty if you are not at least age 59 1/2 or
totally disabled, or if you do not meet certain other limited
exceptions described in the following sentences. The 10% penalty
does not apply to an amount equal to medical expenses in excess of
7.5% of your Adjusted Gross Income (AGI), nor does it apply to
amounts withdrawn to pay for medical expenses for you and your
spouse and dependents if you have separated from employment and
received unemployment compensation for at least 12 consecutive
weeks, and the withdrawal is made in the year unemployment
compensation is received or in the following year. In addition,
the 10% penalty does not apply to surrenders for qualified higher
education expenses or for withdrawals up to $10,000 which is a
qualified first-time home distribution.
Qualified higher education expenses include tuition, as well as
room and board, fees, books, supplies and equipment required for
enrollment or attendance at a post-secondary education
institution. Such qualified higher education expenses may be
incurred by you or your spouse, or any child or grandchild of you
or your spouse. A qualified first-time home distribution is one
which is used within 120 days to rebuild, build or buy your
principal residence or the principal residence of your spouse,
child, grandchild or ancestor in a situation in which you or your
spouse did not have any ownership interest in a principal
residence in the two years ending on the date of acquisition of
the residence at issue.
There is no 10% penalty if the IRA distributions are in
substantially equal amounts (at least annually) over your life or
life expectancy, or the joint lives or life expectancies of you
and your beneficiary, and there is no 10% penalty for payments due
to your death.
The 10% penalty tax does not apply to the distribution of excess
contributions if you receive such distribution on or before the
due date (including extensions of time) for filing your tax
return, you did not deduct such excess contribution, and you also
received the net income attributable to such excess contribution.
However, the net income must be reported and may be subject to the
10% penalty tax. Unless you are 59 1/2, totally disabled, or meet
the limited exceptions mentioned in the previous paragraph, a 10%
penalty tax will be imposed on the part of an excess contribution
greater than $2,000 which is withdrawn after your tax filing date.
Because nondeductible IRA contributions are made using income
which has already been taxed (that is, they are not deductible
contributions), the portion of the IRA distributions consisting of
nondeductible contributions will not be taxed again when received
by you. If you make any nondeductible IRA contributions, each
distribution from your IRAs will consist of a nontaxable portion
(return of nondeductible contributions) and a taxable portion
(return of deductible contributions, if any, and account
earnings).
The following formula is used to determine the nontaxable portion
of your distributions for a taxable year:
Remaining Nondeductible Contributions X Total Distributions =
Nontaxable Distribution
- ------------------------------------- (for the year)
(for the year)
Year-end total of traditional
IRA account balances
To compute the year-end total of traditional IRA account balances
you treat all of your traditional IRAs as a single IRA. This
includes all traditional IRAs, as well as SEP-IRAs, and Rollover
IRAs. You also add back the distributions taken during the year.
Distributions
A. Inadequate or Underdistributions 50% Tax
Your IRA or SEP-IRA is intended to provide retirement benefits
over your lifetime. Thus, federal law requires that you either
receive a lump-sum distribution of your IRA or start to receive
distribution payments by the April 1 following the end of the
calendar year in which you attain age 70 1/2. If you elect other
than a lump-sum distribution, the distribution must begin not
later than the commencement date previously stated, and for each
succeeding year a distribution must be made on or before December
31. If the payments are not sufficient to meet the requirements,
an excise tax of 50% will be imposed on the amount of any
underpayment.
B. Distribution Forms
By the required beginning date, you may elect to have the balance
in the account disbursed in one of the following forms:
(1) a single sum payment;
(2) equal or substantially equal payments over your life;
(3) equal or substantially equal payments over the lives of
you and your designated beneficiary;
(4) equal or substantially equal payments over a specified
period that may not be longer than your life expectancy; or
(5) equal or substantially equal payments over a specified
period that may not be longer than the joint life and last
survivor expectancy of you and your designated beneficiary.
C. Death Benefits
If you die before your entire interest is distributed, the entire
remaining interest will be disbursed as follows:
(1) If you die on or after disbursements have begun under B.,
the entire remaining interest must be disbursed at least as
rapidly as provided under B.
(2) If you die before disbursements have begun under B., the
entire remaining interest must be disbursed as elected by you or,
if you have not so elected, as elected by the beneficiary or
beneficiaries, as follows:
(i) by December 31st of the year containing the fifth anniversary
of your death;
or
(ii)in equal or substantially equal payments over the life or life
expectancy of the designated beneficiary or beneficiaries starting
by December 31st of the year following the year of your death.
If, however, the beneficiary is your surviving spouse, then this
disbursement is not required to begin before December 31st of the
year in which you would have turned 70 1/2.
Unless otherwise elected by you prior to the commencement of
disbursements under B. or, if applicable, by the surviving spouse
where you die before disbursements have commenced, life
expectancies of you or your spouse beneficiary shall be
recalculated annually for purposes of disbursements under B. and
C. An election not to recalculate shall be irrevocable and shall
apply to all subsequent years. The life expectancy of a non-
spouse beneficiary shall not be recalculated.
Prototype Status
The Internal Revenue Service reviewed the format of your IRA, and
issued an opinion letter on May 19, 1986, to The Union Central
Life Insurance Company stating that your IRA qualifies as a
prototype IRA.
Reporting to the IRS
Whenever you are liable for one of the penalty taxes discussed
above (6% for excess contributions, 10% for premature
distributions, or 50% for distribution underpayments), you must
file Form 5329 with the Internal Revenue Service. The form is to
be attached to your federal income tax return for the tax year in
which the penalty applies. Normal contributions and distributions
must be shown on your income tax return for the year to which they
relate.
Part II. SIMPLE IRA
A SIMPLE-IRA is one that is issued in conjunction with your
employer's "savings incentive match plan for employees" (SIMPLE-
IRA plan) which meets the requirements of Section 408 (p) of the
Internal Revenue Code (Code). You should consult with your
employer concerning the actual provisions of the SIMPLE-IRA plan
pertaining to participation requirements, the amount of employee
and employer contributions and other SIMPLE-IRA plan provisions.
The following discussion concerns your SIMPLE-IRA in place of the
discussion concerning a traditional IRA or SEP-IRA in Part I,
above or the discussion in Part III of Roth IRA, unless otherwise
noted.
Contributions
Your SIMPLE IRA will accept only a cash contribution made by an
employer on your behalf under a SIMPLE-IRA plan that meets the
requirements of Section 408(p) of the Code, and a rollover
contribution or a transfer of assets from another SIMPLE-IRA of
yours. No other contributions will be accepted.
Any refund of premiums (other than those attributable to excess
contributions) will be applied, before the close of the calendar
year following the year of the refund, toward the payment of
future premiums or the purchase of additional benefits.
Rollovers and Transfers
Prior to the expiration of the two-year period beginning on the
date you first participated in any SIMPLE-IRA plan maintained by
your employer, any rollover or transfer by you of funds from this
SIMPLE-IRA must be made to another SIMPLE-IRA of yours. Any
distribution of funds to you during this two-year period may be
subject to a 25% additional tax if you do not roll over the amount
distributed into a SIMPLE-IRA. After the expiration of this two-
year period, you may roll over or transfer funds to any of your
IRAs that are qualified under Section 408(a), (b) or (p) of the
Code.
Premature Distributions, Distributions and Reporting to the IRS
Rules similar to those pertaining to SEP-IRAs as discussed in Part
I, above, in relation to premature distributions and distributions
generally apply to your SIMPLE-IRA. See the section entitled
"Reporting to the IRS" in Part I for an appropriate discussions of
those requirements.
Prototype Status
The Internal Revenue Service reviewed the format of your SIMPLE
IRA and issued an opinion letter on September 26, 1997, to the
Union Central Life Insurance Company stating that your policy
qualifies as a prototype SIMPLE-IRA.
Part III. Roth IRA
The Taxpayer Relief Act of 1997 created a new type of IRA called
the Roth IRA, effective for tax years beginning in 1998. Such an
IRA must meet the requirements of Section 408A of the Code. The
following discussion concerns your Roth IRA in place of the
discussion concerning a traditional IRA or SEP-IRA in Part I, or
the discussion of the SIMPLE-IRA in Part II, above, unless
otherwise noted.
Contributions
If your Roth IRA is not designated as a Roth Conversion IRA, then,
except in the case of a rollover contribution described in Section
408A(e) of the Code, it will accept only cash contributions and
only up to a maximum amount of $2,000 for any of your tax years.
(The aggregate amount of contributions for all of your Roth IRAs
and traditional IRAs may not exceed $2,000.) If this Roth IRA is
designated as a Roth Conversion IRA, no contributions other than
IRA Conversion Contributions made during the same tax year will be
accepted. Contributions may be made even after you attain age 70
1/2.
A Roth Conversion IRA is a Roth IRA that accepts only IRA
Conversion Contributions made during the same tax year.
IRA Conversion Contributions are amounts rolled over, transferred,
or considered transferred from a non-Roth IRA to a Roth IRA. A
non-Roth IRA is an individual retirement account or annuity
described in Section 408(a) or 408(b) of the Code, other than a
Roth IRA.
Any refund of premiums (other than those attributable to excess
contributions) will be applied, before the close of the calendar
year following the year of the reund, toward the payment of future
premiums or the purchase of additional benefits.
Limitations on Contributions
The $2,000 limit described in the previous section is gradually
reduced to $0 between certain levels of Adjusted Gross Income
("AGI"). If you are single, the $2,000 annual contributions is
phased out between AGI of $95,000 and $110,000; if you are married
and file jointly, between AGI of $150,000 and $160,000; and if you
are married and file separately, between $0 and $10,000. You may
not make an IRA Conversion Contribution during a tax year if your
AGI for that year exceeds $100,000 or if you are married and file
a separate return for that tax year.
If you should contribute more than the maximum contribution amount
to your Roth IRA, the excess amount will be considered an "excess
contribution." You are permitted to withdraw an excess
contribution from your Roth IRA before your tax filing date
without adverse tax consequences. If, however, you fail to
withdraw any such excess contribution before your tax filing date,
a 6% excise tax will be imposed on the excess for the tax year of
contribution. (See Reporting to the IRS in Part I, above.).
Tax Treatment of Contributions
No federal tax deduction is allowed for your contributions to a
Roth IRA.
Required Distribution on Benefits (Required Only Upon Your Death)
(The term "designated beneficiary" means any individual designated
as beneficiary by you.)
A. If you die before your entire interest is distributed and
your surviving spouse is not your sole designated beneficiary,the
entire remaining interest will at your election, or it you have
not so elected, at the election of the designated beneficiary,
either:
(1) be distributed by December 31 of the year containing the
fifth anniversary of your death; or
(2) be distributed over the life expectancy of the designated
beneficiary starting no later than December 31 of the year
following your death. If distributions do not begin by the date
described in (2) above, distribution method (1) will apply.
B. In the case of distribution method (A)(2) above, to determine
the minimum annual payment for each year, divide your entire
interest as of the close of business on December 31 of the
preceding year, by the life expectancy of the designated
beneficiary, using the attained age of the designated beneficiary
as of the beneficiary's birthday in the year disbributions are
required to commence, and subtract one for each subsequent year.
C. If your spouse is your sole designated beneficiary on your
death, such spouse will then be treated as you, the person
originally establishing this Roth IRA.
Taxation of Distributions.
A distribution from your Roth IRA is not includible in income if
it is a "qualified distribution." A "qualified distribution" is
one that is not made within the first five years beginning with
the first tax year in which you made a contribution to your Roth
IRA, and which is made when you are at least age 59-1/2 or totally
disabled or to your estate upon your death or due to a qualified
first-time home distribution. (See the discussion under the
Premature Distributions section of Part I, above, concerning what
a qualified first-time home distribution is.)
If a distribution from your Roth IRA is not a qualified
distribution as described in the previous paragraph, it will be
includible in your income to the extent that it is not treated as
made from a contribution. This is determined by adding your
current distribution to the total amount of all previous
distributions and comparing this total with the amount of your
contributions to your Roth IRA.
As with a Traditional IRA, you may not use your Roth IRA as a
security for a loan or borrow on your Roth IRA.
Prototype Status
Internal Revenue Service review of your Roth IRA is pending.
PART B
INFORMATION REQUIRED IN A
STATEMENT OF ADDITIONAL INFORMATION
CARILLON ACCOUNT
- -------------------------------------------------------------
of
THE UNION CENTRAL LIFE INSURANCE COMPANY
1876 Waycross Road Cincinnati, Ohio 45240 513-595-2600
STATEMENT OF ADDITIONAL INFORMATION
May 1, 1998
This Statement of Additional Information is not a prospectus.
Much of the information contained in this Statement of Additional
Information expands upon subjects discussed in the Prospectus.
Accordingly, this Statement should be read in conjunction with
Carillon Account's ("CA") current Prospectus, dated May 1, 1998,
which may be obtained by calling The Union Central Life Insurance
Company ("Union Central") at (513) 595-2600, or writing to P.O.
Box 40409, Cincinnati, Ohio 45240-0409.
TABLE OF CONTENTS
Page
Distribution of Contracts .............................. B-2
Determination of Annuity Payments ...................... B-2
Performance Data Advertising ........................... B-3
Federal Tax Matters .................................... B-4
Miscellaneous Contract Provisions ...................... B-6
Custody of CA's Assets ................................. B-7
Experts ................................................ B-9
Financial Statements of CA and of Union Central
- -------------------------------------------------------------
<PAGE>
DISTRIBUTION OF CONTRACTS
Contracts are offered on a continuous basis through life
insurance agents of Union Central who are also registered
representatives of Carillon Investments, Inc., or another broker-
dealer member of the National Association of Securities Dealers,
Inc.
As underwriter of the Contracts, the following distribution
fees were paid to Carillon Investments, Inc., by Union Central:
<TABLE>
<CAPTION>
Year Amount
---- ----------
<S> <C>
1997 $3,447,836
1996 $2,723,411
1995 $1,636,172
</TABLE>
DETERMINATION OF ANNUITY PAYMENTS
The amount of the first Variable Annuity payment is calculated
by applying the Accumulation Value (less any premium tax charge
deducted at this time), measured as of a date not more than 10
business days prior to the Maturity Date, to the Annuity Tables in
the Contract. This is done separately for each amount to be used
to provide an annuity reserved for in a different Subaccount.
The first Variable Annuity payment is divided by the
appropriate Annuity Unit value (as of the same date that the
amount of the first payment was determined) to determine the
number of Annuity Units upon which later annuity payments will be
based. This number of Annuity Units will not change. Variable
Annuity payments after the first will be equal to the number of
Annuity Units determined in this manner times the Annuity Unit
value for each respective Subaccount calculated on a uniform basis
not more than 10 business days before each annuity payment is due.
Annuity Unit Value - The value of an Annuity Unit in each
Subaccount of CA was initially set at $10. Annuity Units of each
Subaccount are valued separately and will vary with the investment
experience of the particular Subaccount.
The value of the Annuity Unit for each Subaccount at the end of
any valuation period is calculated by: (a) multiplying the prior
Annuity Unit value by the Subaccount's Net Investment Factor for
the period; and then (b) adjusting the result to compensate for
the interest rate assumed in the annuity tables used to determine
the dollar amount of the first Variable Annuity payment. In this
manner, the Annuity Unit values will most likely change (except
when the investment performance exactly equals the assumed
interest rate) for each annuity payment (although the number of
Annuity Units will remain fixed) and therefore the amount of the
Variable Annuity payments will most likely vary.
<PAGE>
Performance Data Advertising
As noted in the Prospectus, CA occasionally may publish
advertisements that contain total return performance data relating
to its Subaccounts. Tables of historical Accumulation Unit Values
for each Subaccount may be included in advertising or sales
literature that contains total return calculations as described
below. The following table sets forth the performance data for
each of the Subaccounts of the type that will be used in
advertising, in each case for the period ended December 31, 1997.
<TABLE>
<CAPTION>
Average Annual Total Return
(Based on Accumulation Unit Values)
-----------------------------------
Inception One Five Ten Since
Subaccounts Date Year Years Years Inception
- ----------- --------- ---- ----- ----- ---------
<S> <C> <C> <C> <C> <C>
Equity 6/7/85 18.82% 15.91% 14.70% 13.57%
Bond 8/26/85 9.42% 7.72% 8.26% 8.56%
Capital 5/2/90 5.84% 8.34% - 9.05%
S&P 500 Index 5/1/96 30.80% - - 26.89%
Scudder International 5/1/92 7.49% 12.07% - 10.10%
Capital Growth 5/1/92 33.81% 16.34% - 15.64%
Money Market * 7/15/85 3.75% 2.95% 3.99% 4.11%
Capital Appreciation 5/1/96 -4.66% - - -8.39%
Growth with Income 5/1/96 27.92% - - 45.21%
High Income 5/1/96 11.98% - - 21.39%
Emerging Growth 5/1/97 - - - 24.09%
Templeton International 5/1/97 - - - 8.93%
<CAPTION>
Average Annual Total Return
(Standardized Total Return)
---------------------------
Inception One Five Ten Since
Subaccounts Date Year Years Years Inception
- ----------- --------- ---- ----- ----- ---------
<S> <C> <C> <C> <C> <C>
Equity 6/7/85 10.41% 14.84% 14.52% 13.28%
Bond 8/26/85 1.67% 6.73% 8.08% 8.30%
Capital 5/2/90 -1.65% 7.34% - 8.77%
S&P 500 Index 5/1/96 21.55% - - 21.38%
Scudder International 5/1/92 -0.12% 11.04% - 9.39%
Capital Growth 5/1/92 24.35% 15.27% - 14.90%
Money Market * 7/15/85 -3.60% 1.99% 3.81% 3.85%
Capital Appreciation 5/1/96 -11.41% - - -12.37%
Growth with Income 5/1/96 18.87% - - 19.62%
High Income 5/1/96 4.05% - - 7.44%
Emerging Growth 5/1/97 - - - 15.34%
Templeton International 5/1/97 - - - 1.24%
</TABLE>
* Although the Money Market Subaccount began investing in the
Scudder Variable Life Investment Fund Money Market Portfolio on
November 12, 1993, the performance data quoted reflects the
performance of the Scudder Fund Money Market Portfolio since the
inception of the Money Market Subaccount. Average annual total
return is the average annual compounded rate of return that
equates a purchase payment on the first day to the market value of
that purchase payment on the last day of the period for which
total return is calculated. For purposes of the calculation, it
is assumed that an initial payment of $1,000 is made on the first
day of the period for which the return is calculated. Expenses
and charges incurred by the Fund and charges measured as a
percentage of Subaccount assets are reflected in changes in unit
values. The typical effect of the annual administration fee is
included in the total return calculations, other than those
measured by changes in Accumulation Unit Value, by multiplying $30
by the total number of contracts in CA and then dividing that
total by the average net assets of CA (including contract assets
allocated to the Guaranteed Account) for the year measured. The
resulting percentage is then multiplied by the average value of
the $1,000 investment during the year measured. For less than one
year periods, 1/365 of the fee is assumed to be deducted for each
day of the period. Total return figures that include the impact
of surrender charges assume that the investment is withdrawn from
the Subaccount at the end of the period for which return is
calculated.
From time to time, advertisements for CA may include
comparisons of performance of the Subaccounts to that of various
market indices, including, but not limited to: the Salomon
Brothers Investment Grade Bond Index, the Salomon Brothers U.S.
Treasury Bill Index, the Shearson Lehman Government/Corporate Bond
Index, the S&P 500 Index, the Dow Jones Industrial Average, the
Donoghue Money Fund 30-Day Average Yield, and the Lipper Variable
Insurance Products Performance Analysis Service.
CA advertisements may also include performance rankings (or
information based on those rankings) compiled by various
independent organizations, including but not limited to: LIPPER
ANALYTICAL SERVICES MUTUAL FUNDS SURVEY, LIPPER VARIABLE INSURANCE
PRODUCTS PERFORMANCE ANALYSIS SERVICE, THE VARDS REPORT, SYLVIA
PORTER PERSONAL FINANCE, FINANCIAL SERVICES WEEK, CONSUMER
REPORTS, MONEY MAGAZINE, FORBES MAGAZINE, and FORTUNE MAGAZINE.
FEDERAL TAX MATTERS
Taxation of Union Central
Union Central is taxed as a life insurance company under Part
I of Subchapter L of the Internal Revenue Code ("Code"). Since CA
is not an entity separate from Union Central, and its operations
form a part of Union Central, it will not be taxed separately as
a "regulated investment company" under Subchapter M of the Code.
Investment income and realized capital gains on the assets of CA
are reinvested and taken into account in determining the
Accumulation and Annuity Unit values. As a result, such
investment income and realized capital gains are automatically
applied to increase reserves under the Contract. Under existing
federal income tax law, separate account investment income and
capital gains are not taxed to the extent they are applied to
increase reserves under a Contract issued in connection with CA.
Accordingly, Union Central does not anticipate that it will incur
any federal income tax liability attributable to CA, and therefore
Union Central does not intend to make provisions for any such
taxes. However, if changes in the federal tax laws or
interpretations thereof result in Union Central being taxed on
income or gains attributable to CA or certain types of Contracts,
then Union Central may impose a charge against CA (with respect to
some or all Contracts) in order to set aside provisions to pay
such taxes.
Tax Status of the Contracts
Section 817(h) of the Code provides that separate account
investments (or the investments of a mutual fund the shares of
which are owned by separate accounts of insurance companies)
underlying the Contract must be "adequately diversified" in
accordance with Treasury regulations in order for the Contract to
qualify as an annuity contract under Section 72 of the Code. The
Separate Account, through each Portfolio of the Funds, intends to
comply with the diversification requirements prescribed in
regulations, which affect how the assets in each Portfolio of the
Funds in which the Separate Account invests may be invested.
Union Central does not have control over the Funds or their
investments. However, Union Central believes that each Portfolio
in which the Separate Account owns shares will meet the
diversification requirements and that therefore the Contracts will
be treated as annuities under the Code.
The Treasury has stated that regulations on diversification
requirements do not provide guidance concerning the extent to
which contract holders may direct their investments to the
Portfolios of the Funds. Regulations in this regard may be issued
in the future. It is possible that when regulations are issued
the Funds may not be in compliance with such regulations.
Although Union Central can provide no assurances that any such
regulations will not adversely affect the tax treatment of
existing Contracts in all events, based upon a private letter
ruling Union Central has received on the Contracts, Union Central
believes that any such regulations would be applied only on a
prospective basis. For these reasons, Union Central reserves the
right to modify the Contract as necessary to prevent the contract
holder from being considered the owner of the assets of the Funds
or otherwise to qualify the contract for favorable tax treatment.
In addition, Nonqualified Contracts will not be treated as
annuity contracts for purposes of Section 72 unless such contracts
provide: (a) that if the contract holder dies on or after the
annuity starting date but prior to the time before the entire
interest in the contract has been distributed, the remaining
portion of such interest must be distributed at least as rapidly
as under the method of distribution in effect at the time of the
contract holder's death; and (b) if the contract holder dies prior
to the annuity starting date, the entire interest must be
distributed within five years after the death of the contract
holder. These requirements should be considered satisfied if any
portion of the contract holder's interest which is payable to or
for the benefit of a "designated beneficiary" is distributed over
the life of such designated beneficiary (or over a period that
does not extend beyond the life expectancy of the designated
beneficiary) and such distributions begin within one year of the
contract holder's death. (A contract holder's designated
beneficiary is the person to whom ownership of the Contract passes
by reason of death and must be a natural person.) However, if the
contract holder's designated beneficiary is the surviving spouse
of the contract holder, the contract may be continued in the name
of the spouse as the contract holder. Union Central believes that
the Contracts described in this Prospectus meet these
requirements. However, no assurance can be given that the
provisions contained in the Contracts satisfy all such Code
requirements. The provisions contained in the Contracts will be
reviewed and modified if necessary to assure that they comply with
the Code requirements. Other rules may apply to Qualified
Contracts.
For a discussion of the tax treatment of the contracts as
annuities under Section 72, see "Tax Status of the Contracts" in
the Prospectus.
MISCELLANEOUS CONTRACT PROVISIONS
Delay of Payments
Union Central will pay all amounts due from the Variable
Account under the Contract within seven days, unless:
(1) The New York Stock Exchange is closed for other than
usual weekends or holidays, or trading on the Exchange is
otherwise restricted;
(2) An emergency exists as defined by the Securities and
Exchange Commission; or
(3) The Securities and Exchange Commission permits delay for
the protection of the security holders.
Participating
The Contract is issued on a participating basis, and as such is
eligible to share in Union Central's profits and surplus to the
extent determined by Union Central's Board of Directors in its
sole discretion. Union Central anticipates that such
participation, if at all, will be small in amount and will occur
only in later years of the Contract.
Misstatement and Proof of Age, Sex or Survival
Proof of age, sex, or survival of the Annuitant and any
contingent Annuitant may be required prior to making annuity
payments under any Annuity Option which depends on the
continuation of life. If any age or sex has been misstated, Union
Central will pay the amounts which would have been provided at the
correct age and sex. After the annuity payments begin, Union
Central will make up any underpayments in a lump sum with the next
annuity payment. Any overpayments will be deducted from future
annuity payments until the overpayment is made up.
Settlements
Union Central may require the return of the Contract prior to
any settlement. Due proof of the Annuitant's death must be
received prior to settlement of a death claim.
Assignments
The Contract Owner may assign the Contract prior to the
Maturity Date and during the Annuitant's lifetime, subject to the
rights of any irrevocable Beneficiary, although the ability to
assign certain Qualified Contracts may be restricted. An
assignment will not be binding until received in writing by Union
Central, and Union Central will not be responsible for the
validity of an assignment. An assignment or pledge of the
Contract may result in income tax liability to the owner.
<PAGE>
No Beneficiary may assign benefits under the Contract until
they are due, and to the extent permitted by law, payments are not
subject to the debts of any Beneficiary or to any judicial process
for payment of the Beneficiary's debts.
Modification
Union Central may not modify the Contract without the consent
of the Contract Owner except to make the Contract meet the
requirements of the Investment Company Act of 1940, or to make the
Contract comply with any changes in the Internal Revenue Code or
as required by the Code or by any other applicable law in order to
continue treatment of the Contract as an annuity.
CUSTODY OF CA'S ASSETS
Title to the assets of CA is held by Union Central. Records
are maintained of all purchases and redemptions of Portfolio
shares held by each of the Subaccounts.
EXPERTS
The financial statements of CA at December 31, 1997 and the
statements of financial condition of Union Central at December 31,
1997 and 1996 appearing in this Statement of Additional
Information have been audited by Ernst & Young LLP, independent
auditors, as set forth in their reports thereon also appearing
elsewhere herein. Such financial statements have been included
herein in reliance upon such reports given upon the authority of
such firm as experts in accounting and auditing.
<PAGE>
CARILLON ACCOUNT
FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1997
<PAGE>
Report of Independent Auditors
- --------------------------------------------------
To the Contractholders of Carillon
Account and the Board of Directors of
The Union Central Life Insurance Company
We have audited the accompanying statement of assets and
liabilities of the Carillon Account (comprised of the Carillon
Fund, Inc.'s Equity, Capital, Bond, and S&P 500 Index Subaccounts,
the Scudder Variable Life Investment Fund's Money Market, Capital
Growth, and International Subaccounts, the MFS Variable Insurance
Trust's Growth with Income, High Income, and Emerging Growth
subaccounts, the American Century Variable Portfolios, Inc.'s
Growth Subaccount and the Templeton Variable Products Series
Fund's Templeton International Subaccount) as of December 31,
1997, the related statement of operations for the year then ended
and the statements of changes in net assets for each of the two
years in the period then ended. These financial statements are
the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of
December 31, 1997, by correspondence with the applicable transfer
agent. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of each
of the respective subaccounts constituting the Carillon Account at
December 31, 1997, the results of their operations for the year
then ended and changes in their net assets for each of the two
years in the period then ended in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
Cincinnati, Ohio
March 2, 1998<PAGE>
Carillon Account
Statement of Assets and Liabilities
DECEMBER 31, 1997
Carillon Fund, Inc.
(affiliated issuers)
Equity Capital Bond S&P 500 Index
Subaccount Subaccount Subaccount Subaccount
[S] [C] [C] [C] [C]
ASSETS
Investments in securities
of unaffiliated issuers,
at value (cost $7,206,727;
$32,053,355; $24,010,681;
$12,468,334; $3,031,854;
$2,774,076; $5,787,297;
$2,963,559)
Investments in shares
of Carillon Fund, Inc.,
t value (cost $108,933,827;
$48,431,215; $20,470,292;
$25,281,160) $144,427,295 $ 50,359,938 $ 21,150,664 $ 30,373,908
------------ ------------ ------------ ------------
Total Assets $144,427,295 $ 50,359,938 $ 21,150,664 $ 30,373,908
============ ============ ============ ============
LIABILITIES
Payable to The Union
Central Life Insurance
Company for mortality
and expense risk
charges, and
administration fee $ 8,110 $ 4,305 $ 1,243 $ 442
Net Assets Attributable
to Contract Owners'
Equity Subacount:
2,907,000.69 Accumulation
Units @ $49.52728 143,975,837
8,951.59 Payout
Units @ $49.52728 443,348
Capital Subaccount:
2,590,388.93 Accumulation
Units @ $19.43941 50,355,633
Bond Subaccount:
766,722.29 Accumulation
Units @ $27.58420 21,149,421
S & P 500 Index Subaccount:
2,041,455.30 Accumulation
Units @ $14.87834 30,373,466
Money Market Subaccount:
433,295.76 Accumulation
Units @ $16.62749
Capital Growth Subaccount:
1,896,319.89 Accumulation
Units @ $22.80317
International Subaccount:
1,669,242.06 Accumulation
Units @ $17.25641
Growth with Income Subaccount
1,002,704.64 Accumulation
Units @ $14.52080
High Income Subaccount
269,397.73 Accumulation
Units @ $12.13880
Emerging Growth Subaccount
224,192.63 Accumulation
Units @ $12.40912 <PAGE>
Growth Subaccount
640,420.71 Accumulation
Units @ $8.64025
Templeton International Subaccount
266,656.62 Accumulation
Units @ $10.89275
Total Liabilities $144,427,295 $ 50,359,938 $ 21,150,664 $ 30,373,908
============ ============ ============ ============
[CAPTION]
CARILLON ACCOUNT
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
Carillon Fund, Inc.
(affiliated issuers)
Equity Capital Bond S&P 500 Index
Subaccount Subaccount Subaccount Subaccount
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend income $15,563,894 $ 6,150,366 $ 1,342,479 $ 403,217
----------- ----------- ----------- -----------
EXPENSES
Mortality and expense
risk charge 1,539,270 597,585 227,028 236,057
Administration fee 315,272 122,397 46,500 48,349
----------- ----------- ----------- -----------
Total expenses 1,854,542 719,982 273,528 284,406
----------- ----------- ----------- -----------
NET INVESTMENT
INCOME (EXPENSE) 13,709,352 5,430,384 1 ,068,951 118,811
----------- ----------- ----------- -----------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net realized gain(loss) on
investments 2,760,942 577,152 34,777 219,061
Net unrealized
appreciation (depreciation)
of investments 6,066,663 (3,122,210) 673,620 4,348,348
----------- ----------- ----------- -----------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS 8,827,605 (2,545,058) 708,397 4,567,409
----------- ----------- ----------- -----------
NET INCREASE (DECREASE)
IN NET ASSETS FROM
OPERATIONS $22,536,957 $ 2,885,326 $ 1,777,348 $ 4,686,220
=========== =========== =========== ===========
<CAPTION>
Scudder Variable Life
Investment Fund
(unaffiliated issuers)
Money Capital
Market Growth International
Subaccount Subaccount Subaccount
---------- ---------- ----------
<S> <C> <C> <C>
INVESTMENT INCOME
Dividend income $ 413,434 $2,455,798 $ 619,181
---------- ---------- ----------
EXPENSES
Mortality and expense
risk charge 95,513 429,635 341,939
Administration fee 19,563 87,998 70,036
---------- ---------- ----------
Total expenses 115,076 517,633 411,975
---------- ---------- ----------
NET INVESTMENT
INCOME (EXPENSE) 298,358 1,938,165 207,206
---------- ---------- ----------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on
investments -- 546,856 641,941
---------- ---------- ----------
Net unrealized appreciation
(depreciation) of investments) -- 7,226,508 1,106,621
---------- ---------- ----------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS) -- 7,773,364 1,748,562
---------- ---------- ----------
NET INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 298,358 $9,711,529 $1,955,768
---------- ---------- ----------
<CAPTION>
INVESTMENT INCOME
Dividend income $ 413,434 $2,455,798 $ 619,181
---------- ---------- ----------
EXPENSES
Mortality and expense
risk charge 95,513 429,635 341,939
Administration fee 19,563 87,998 70,036
---------- ---------- ----------
Total expenses 115,076 517,633 411,975
---------- ---------- ----------
NET INVESTMENT
INCOME (EXPENSE) 298,358 1,938,165 207,206
---------- ---------- ----------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on
investments -- 546,856 641,941
---------- ---------- ----------
Net unrealized appreciation
(depreciation)
of investments -- 7,226,508 1,106,621
---------- ---------- ----------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS -- 7,773,364 1,748,562
---------- ---------- ----------
NET INCREASE (DECREASE)
IN NET ASSETS
FROM OPERATIONS $ 298,358 $9,711,529 $1,955,768
========== ========== ==========
<CAPTION>
MFS Variable
Insurance Trust
(unaffiliated issuer)
Growth High Emerging
with Income Income Growth
Subaccount Subaccount Subaccount
<S> <C> <C> <C>
INVESTMENT INCOME
Dividend income $ 337,790 $ -- $ --
---------- ---------- ----------
EXPENSES
Mortality and expense
risk charge 109,045 25,850 10,808
Administration fee 22,334 5,295 2,214
---------- ---------- ----------
Total expenses 131,379 31,145 13,022
---------- ---------- ----------
NET INVESTMENT
INCOME (EXPENSE) 206,411 (31,145) (13,022)
---------- ---------- ----------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on
investments 80,328 20,126 34,777
Net unrealized appreciation
(depreciation)
of investments 1,773,391 247,666 7,930
---------- ---------- ----------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS 1,853,719 267,792 42,707
---------- ---------- ----------
NET INCREASE(DECREASE) IN NET
ASSETS FROM OPERATIONS $2,060,130 $ 236,647 $ 29,685
========== ========== ==========
<CAPTION>
American
Century Variable Templeton Variable
Portfolios, Inc. Products Series Fund
(unaffiliated issuer) (unaffiliated issuer)
Templeton
Growth International
Subaccount Subaccount
---------- ----------
<S> <C> <C>
INVESTMENT INCOME
Dividend income $ 84,275 $ --
---------- ----------
EXPENSES
Mortality and expense
risk charge 57,367 13,016
Administration fee 11,750 2,666
---------- ----------
Total expenses 69,117 15,682
---------- ----------
NET INVESTMENT 15,158 (15,682)
---------- ----------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on
investments (98,024) 8,496
Net unrealized appreciation
(depreciation) of investments (65,002) (59,106)
---------- ----------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (163,026) (50,610)
---------- ----------
NET INCREASE(DECREASE)
IN NET ASSETS FROM
OPERATIONS $ (147,868) $ (66,292)
========== ==========
</TABLE>
<PAGE>
CARILLON ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Carillon Fund, Inc.
Equity Subaccount
Year ended December 31,
1997 1996
<S> <C> <C>
OPERATIONS
Net investment income $13,709,352 $ 3,699,161
Net realized gain on investments 2,760,942 1,812,837
Net unrealized appreciation of investments 6,066,663 14,393,952
----------- -----------
Net increase in net assets resulting
from operations 22,536,957 19,905,950
----------- -----------
EQUITY TRANSACTIONS
Contract purchase payments 15,986,143 17,670,408
Transfers from other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company 4,738,400 6,004,201
Transfers to other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company (4,719,121) (3,610,691)
Surrenders (8,033,026) (5,812,606)
----------- -----------
Net proceeds from equity transactions 7,972,396 14,251,312
NET INCREASE IN NET ASSETS 30,509,353 34,157,262
NET ASSETS (Beginning of year) 113,909,832 79,752,570
------------ -------------
NET ASSETS (End of year) $144,419,185 $113,909,832
------------ ------------
/TABLE
<PAGE>
CARILLON ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Carillon Fund, Inc.
Capital Subaccount
Year ended December 31,
1997 1996
<S> <C> <C>
OPERATIONS
Net investment income $ 5,430,384 $ 1,708,176
Net realized gain on investments 577,152 438,750
Net unrealized appreciation
(depreciation) of investments (3,122,210) 3,452,457
----------- -----------
Net increase in net assets resulting
from operations 2,885,326 5,599,383
----------- -----------
EQUITY TRANSACTIONS
Contract purchase payments 5,608,723 5,734,653
Transfers from other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company 1,616,500 1,976,596
Transfers to other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company (4,360,920) (3,029,990)
Surrenders (3,745,584) (2,813,935)
----------- -----------
Net proceeds (withdrawals)
from equity transactions (881,281) 1,867,324
----------- -----------
NET INCREASE IN NET ASSETS 2,004,045 7,466,707
NET ASSETS (Beginning of year) 48,351,588 40,884,881
----------- -----------
NET ASSETS (End of year) $50,355,633 $48,351,588
=========== ===========
</TABLE> <PAGE>
CARILLON ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Carillon Fund, Inc.
Bond Subaccount
Year ended December 31,
1997 1996
<S> <C> <C>
OPERATIONS
Net investment income $ 1,068,951 $ 1,042,377
Net realized gain (loss) on investments 34,777 (13,540)
Net unrealized appreciation
(depreciation) of investments 673,620 (163,522)
----------- -----------
Net increase in net assets resulting
from operations 1,777,348 865,315
----------- -----------
EQUITY TRANSACTIONS
Contract purchase payments 3,714,158 3,598,278
Transfers from other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company 1,466,270 1,232,814
Transfers to other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company (1,131,879) (1,607,281)
Surrenders (1,630,662) (843,649)
----------- -----------
Net proceeds from equity transactions 2,417,887 2,380,162
----------- -----------
NET INCREASE IN NET ASSETS 4,195,235 3,245,477
NET ASSETS (Beginning of year) 16,954,186 13,708,709
----------- -----------
NET ASSETS (End of year) $21,149,421 $16,954,186
=========== ===========
</TABLE>
<PAGE>
CARILLON ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Scudder Variable Life Investment Fund
Money Market Subaccount
Year ended December 31,
1997 1996
<S> <C> <C>
OPERATIONS
Net investment income $ 298,358 $ 229,531
----------- -----------
Net increase in net assets
resulting from operations 298,358 229,531
----------- -----------
EQUITY TRANSACTIONS
Contract purchase payments 6,937,504 6,319,738
Transfers from other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company 2,421,088 2,438,282
Transfers to other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company (9,231,596) (6,169,979)
Surrenders (876,835) (860,396)
----------- -----------
Net proceeds (withdrawals) from
equity transactions (749,839) 1,727,645
----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS (451,481) 1,957,176
NET ASSETS (Beginning of year) 7,656,102 5,698,926
----------- -----------
NET ASSETS (End of year) $ 7,204,621 $ 7,656,102
=========== ===========
/TABLE
<PAGE>
CARILLON ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Scudder Variable Life Investment Fund
Capital Growth Subaccount
Year ended December 31,
1997 1996
<S> <C> <C>
OPERATIONS
Net investment income $ 1,938,165 $ 1,436,584
Net realized gain on investments 546,856 165,975
Net unrealized appreciation of investments 7,266,508 2,198,938
----------- -----------
Net increase in net assets resulting
from operations 9,711,529 3,801,497
----------- -----------
EQUITY TRANSACTIONS
Contract purchase payments 6,744,341 6,225,412
Transfers from other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company 3,049,342 2,457,281
Transfers to other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company (1,329,403) (1,294,901)
Surrenders (2,090,905) (772,653)
----------- -----------
Net proceeds from equity transactions 6,373,375 6,615,139
----------- -----------
NET INCREASE IN NET ASSETS 16,084,904 10,416,636
NET ASSETS (Beginning of year)
27,157,201 16,740,565
----------- -----------
NET ASSETS (End of year) $43,242,105 $27,157,201
----------- -----------
/TABLE
<PAGE>
CARILLON ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Scudder Variable Life Investment Fund
International Subaccount
Year ended December 31,
1997 1996
<S> <C> <C>
OPERATIONS
Net investment $ 207,206 $ 118,682
Net realized gain on investments 641,941 171,655
Net unrealized appreciation of investments 1,106,621 2,292,031
----------- -----------
Net increase in net assets resulting
from operations 1,955,768 2,582,368
----------- -----------
EQUITY TRANSACTIONS
Contract purchase payments 4,154,168 4,746,264
Transfers from other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company 1,336,600 2,157,750
Transfers to other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company (2,286,229) (824,341)
Surrenders (1,472,467) (861,194)
----------- -----------
Net proceeds from equity transactions 1,732,072 5,218,479
----------- -----------
NET INCREASE IN NET ASSETS 3,687,840 7,800,847
NET ASSETS (Beginning of year) 25,117,285 17,316,438
----------- -----------
NET ASSETS (End of year) $28,805,125 $25,117,285
=========== ===========
/TABLE
<PAGE>
CARILLON ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
MFS Variable Insurance Trust
Growth with Income Subaccount
Year ended December 31,
1997 1996
<S> <C> <C>
OPERATIONS
Net investment income $ 206,411 $ 54,330
Net realized gain on investments 80,328 3,524
Net unrealized appreciation of investments 1,773,391 318,190
----------- -----------
Net increase in net assets resulting
from operations 2,060,130 376,044
----------- -----------
EQUITY TRANSACTIONS
Contract purchase payments 5,560,205 2,163,387
Transfers from other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company 2,638,400 2,336,016
Transfers to other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company (299,135) (36,171)
Surrenders (224,688) (14,114)
----------- -----------
Net proceeds from equity transactions 7,674,782 4,449,118
----------- -----------
NET INCREASE IN NET ASSETS 9,734,912 4,825,162
NET ASSETS (Beginning of year) 4,825,162 --
----------- -----------
NET ASSETS (End of year) $14,560,074 $ 4,825,162
=========== ===========
</TABLE>
CARILLON ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
MFS Variable Insurance Trust
High Income Subaccount
Year ended December 31,
1997 1996
<S> <C> <C>
OPERATIONS
Net investment income (expense) ($ 31,145) $ 56,091
Net realized gain on investments 20,126 755
Net unrealized appreciation
(depreciation) of investments 247,666 (9,308)
----------- -----------
Net increase in net assets resulting
from operations 236,647 47,538
----------- -----------
EQUITY TRANSACTIONS
Contract purchase payments 1,413,011 740,317
Transfers from other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company 591,126 403,782
Transfers to other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company (77,101) (11,050)
Surrenders (72,141) (1,964)
----------- -----------
Net proceeds from equity transactions 1,854,895 1,131,085
----------- -----------
NET INCREASE IN NET ASSETS 2,091,542 1,178,623
NET ASSETS (Beginning of year) 1,178,623 0
NET ASSETS (End of year) $ 3,270,165 $ 1,178,623
=========== ===========
/TABLE
<PAGE>
CARILLON ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Carillon Fund, Inc.
S&P 500 Index Subaccount
Year ended December 31,
1997 1996
<S> <C> <C>
OPERATIONS
Net investment income $ 118,811 $ 25,396
Net realized gain on investments 219,061 11,131
Net unrealized appreciation of investments 4,348,348 744,401
----------- -----------
Net increase in net assets resulting
from operations 4,686,220 780,928
----------- -----------
EQUITY TRANSACTIONS
Contract purchase payments 12,093,801 5,067,645
Transfers from other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company 5,500,238 4,416,451
Transfers to other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company (1,006,314) (325,162)
Surrenders (793,045) (47,296)
----------- -----------
Net proceeds from equity transactions 15,794,680 9,111,638
----------- -----------
NET INCREASE IN NET ASSETS 20,480,900 9,892,566
NET ASSETS (Beginning of year) 9,892,566 --
----------- -----------
NET ASSETS (End of year) $30,373,466 $ 9,892,566
=========== ===========
</TABLE>
/tab.e
<PAGE>
CARILLON ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
American Century Variable Portfolios, Inc.
Growth Subaccount
Year ended December 31,
1997 1996
<S> <C> <C>
OPERATIONS
Net investment income (expense) $ 15,158 $ (23,280)
Net realized loss on investments (98,024) (3,651)
Net unrealized depreciation
of investments (65,002) (188,669)
---------- ----------
Net decrease in net assets
resulting from operations (147,868) (215,600)
---------- ----------
EQUITY TRANSACTIONS
Contract purchase payments 1,843,602 2,210,548
Transfers from other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company 959,074 1,995,290
Transfers to other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company (820,744) (107,926)
Surrenders (143,278) (39,703)
---------- ----------
Net proceeds from equity transactions 1,838,654 4,058,209
---------- ----------
NET INCREASE IN NET ASSETS 1,690,786 3,842,609
NET ASSETS (Beginning of year) 3,842,609 --
---------- ----------
NET ASSETS (End of year) $5,533,395 $3,842,609
---------- ----------
/TABLE
<PAGE>
CARILLON ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
MFS Variable Insurance Trust
Emerging Growth Subaccount
Year ended December 31, 1997
<S> <C>
OPERATIONS
Net investment expense ($ 13,022)
Net realized gain on investments 34,777
Net unrealized appreciation of investments 7,930
Net decrease in net assets resulting
from operations 29,685
----------
EQUITY TRANSACTIONS
Contract purchase payments 1,784,772
Transfers from other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company 1,173,883
Transfers to other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company (185,498)
Surrenders (20,809)
----------
Net proceeds from equity transactions 2,752,348
----------
NET INCREASE IN NET ASSETS 2,782,003
NET ASSETS (Beginning of year) --
----------
NET ASSETS (End of year) $2,782,033
==========
</TABLE>
The accompanying notes are an integral part of
the financial statements.
<PAGE>
<TABLE>
<CAPTION>
CARILLON ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
Templeton Variable Products Series Fund
Templeton International Subaccount
Year ended December 31, 1997
<S> <C>
OPERATIONS
Net investment expense ($ 15,682)
Net realized gain on investments 8,496
Net unrealized depreciation of investments (59,106)
Net decrease in net assets
resulting from operations (66,292)
----------
EQUITY TRANSACTIONS
Contract purchase payments 1,661,111
Transfers from other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company 1,368,511
Transfers to other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company (49,883)
Surrenders (8,823)
----------
Net proceeds from equity transactions 2,970,916
----------
NET INCREASE IN NET ASSETS 2,904,624
NET ASSETS (Beginning of year) --
----------
NET ASSETS (End of year) $2,904,624
==========
</TABLE>
<PAGE>
The accompanying notes are an integral part of
the financial statements.
<PAGE>
CARILLON ACCOUNT
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
Carillon Account of The Union Central Life Insurance Company (the
Account) is a separate account registered under the Investment
Company Act of 1940, as amended, as a unit investment trust. The
Account was established on February 6, 1984 by resolution of the
Board of Directors of The Union Central life Insurance Company
(Union Central) and commenced operations on June 7, 1985.
Carillon Account is comprised of twelve subaccounts, each of which
invests in a corresponding Portfolio of Carillon Fund, Inc.,
Scudder Variable Life Investment Fund, MFS Variable Insurance
Trust, American Century Variable Portfolios, Inc., or Tempelton
Variable Product Series Fund (the "Funds"). The Funds are no-
load, diversified, open-end management investment companies
registered under the Investment Company Act of 1940, as amended.
The shares of Carillon Fund, Inc. are sold only to Union Central
and its separate accounts to fund the benefits under certain
variable annuity contracts. Carillon Investments, Inc., a broker-
dealer registered under the Securities Exchange Act of 1934 and a
wholly-owned subsidiary of Union Central , serves as the
distributor of variable annuity contracts issued by Carillon Fund,
Inc. The shares of Scudder Variable Life Investment Fund are
available and are being marketed exclusively as a pooled funding
vehicle for life insurance companies writing all types of variable
life insurance policies and variable annuity contracts. Scudder
Investor Services, Inc., a wholly-owned subsidiary of Scudder
Stevens & Clark Inc. serves as distributor of variable life
insurance policies and variable annuity contracts issued by
Scudder Variable Life Investment Fund. MFS Fund Distributors,
Inc., a wholly-owned subsidiary of MFS, is the distributor of the
shares issued by the MFS Variable Insurance Trust. American
Century Investment Services, Inc., an affiliate of the fund's
investment manager, serves as distributor of variable annuity
contracts issued by American Century Variable Portfolios, Inc.;
Franklin Templeton Distributors, Inc. serves as the distributor of
variable annuity and variable life insurance contracts issued by
Templeton Variable Products Series Fund.
The assets of the Account are segregated from the other assets of
Union Central and the investment performance of the Account is
independent of the investment performance of both Union Central's
general assets and other separate accounts.
Investment valuation - Assets of the Account are invested in
shares of the Funds at the net asset value of the Fund shares.
Investments in Fund shares are subsequently valued at the net
asset value of the Fund shares held.
Use of estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that effect the
reported amounts of assets and liabilities and disclosure of
contingent assets and labilities at the date of the financial
statements. Estimates also effect the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ for those estimates.
Securities transactions and investment income - Securities
transactions are recorded on the trade date (the date the order to
buy or sell is executed), and dividend income is recorded on the
ex-dividend date. Gains and losses on sales of Fund shares are
calculated on the first-in, first-out basis for financial
reporting and tax purposes. All dividends and distributions from
the Subaccount are reinvested in additional shares of the
respective Subaccount at the net asset value per share.
Federal income taxes - The operations of the Account form a part
of and are taxed with the operations of Union Central. Union
Central is taxed as a life insurance company under Subchapter L of
the Internal Revenue Code. Under existing federal income tax law,
separate account investment income and capital gains are not taxed
to the extent they are applied to increase reserves under a
contract issued in connection with the Account. Investment income
and realized capital gains and losses on assets of the Account are
automatically applied to increase or decrease reserves under the
contract. Accordingly, no provision for federal income taxes has
been made in these financial statements.
Impact of Year 2000 (Unaudited) - Some of Union Central's computer
programs were written using two digits rather than four to define
the applicable year. As a result, those computer programs have
software that may recognize a date using 00' as the year 1900
rather than the year 2000. Union Central software incorrectly
recognizing a date would cause the Company's computing environment
to not function as expected. Among the results could be
miscalculations causing disruptions of operations.
A comprehensive assessment of Union Central's Year 2000 sensitive
software has been performed and the primary risks and required
software modifications have been identified. Union Central will
both modify existing software, and install new software, in time
to ensure the Year 2000 problem does not impact its operations, or
the operations of Carillon Account.
NOTE 2 - INVESTMENT IN AFFILIATED AND NON-AFFILIATED FUND
The subaccounts of the Account held the following investment in
the corresponding Portfolios of Carillon Fund, Inc., Scudder
Variable Life Investment Fund, MFS Variable Insurance Trust,
American Century Variable Portfolio, Inc., and Templeton Variable
Products Series Fund as of December 31, 1997:
<TABLE>
<CAPTION>
Carillon Fund, Inc.
Equity Capital Bond S&P 500
Subaccount Subaccount Subaccount Subaccount
Net asset value per share $ 20.35 $ 14.10 $ 11.29 $ 15.74
Number of shares 7,097,164 3,571,627 1,873,398 1,929,727
<CAPTION>
Scudder Variable Life Investment Fund
Money Capital
Market Growth International
Subaccount Subaccount Subaccount
<S> <C> <C> <C>
Net asset value per share $ 1.00 $ 20.63 $ 14.11
Number of shares 7,206,727 2,095,990 2,041,328
<CAPTION>
MFS Variable Insurance Trust
Growth Emerging
with Income High Income Growth
Subaccount Subaccount Subaccount
<S> <C> <C> <C>
Net asset value per share $ 16.44 $ 12.35 $ 16.14
Number of shares 885,640 264,795 172,367
<CAPTION>
American Century Variable Portfolios, Inc.
Growth
Subaccount
<S> <C>
Net asset value per share $ 9.68
Number of shares 571,656
<CAPTION>
Templeton Products Series Fund
International
Subaccount
<S> <C>
Net asset value per share $ 20.14
Numbers of shares 144,213
</TABLE>
NOTE 3 - ACCOUNT CHARGE
Mortality and expense risk charge - A mortality and expense risk
charge for Union Central at an annual rate of 1.2% of the net
assets of the Account is determined daily. The charge may be
increased or decreased by Union Central's Board of Directors but
cannot exceed a 1.7% annual rate. The mortality risk results from
a provision in the contract in which Union Central agrees to make
annuity payments in accordance with the annuity tables, regardless
of how long a particular annuitant or other payee lives. The
expense risk assumed by Union Central is the risk that deductions
for administration fees and surrender charges will be insufficient
to cover actual administrative and distribution expenses.
Administrative fee - An administrative fee for Union Central, at
an annual rate of 0.25% of the net assets of the Account, is
determined daily. This fee is intended to defray expenses
incurred by Union Central in connection with premium billing and
collection, record keeping, processing death benefit claims, cash
surrenders and contract changes, calculating accumulation unit
values, reporting and other communications to contract owners, and
other similar expenses and overhead costs.
NOTE 4 - SELECTED PER UNIT DATA
The following selected per unit data is computed on the basis of
an accumulation unit outstanding at December 31, of each year
except as noted.
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
CARILLON FUND, INC.
EQUITY SUBACCOUNT
Accumulation unit
value $49.53 $41.68 $33.67 $27.15 $26.63
Number of
accumulation units
outstanding,
end of period 2,907,000.69 2,723,705.33 2,337,986.47 1,981,958.18 1,723,790.37
Payout unit value $49.53 $41.68 $33.97
Number of payout
units outstanding,
end of period 8,951.59 9,142.02 9,795.88
CAPITAL SUBACCOUNT
Accumulation
unit value $19.44 $18.37 $16.21 $14.39 $14.47
Number of
accumulation units
outstanding,
end of period 2,590,388.93 2,632,591.00 2,521,521.39 2,271,374.95 1,790,938.05
BOND SUBACCOUNT
Accumulation
unit value $27.58 $25.21 $23.87 $20.34 $20.98
Number of
accumulation units
outstanding,
end of period 766,722.29 672,511.33 574,420.86 508,398.32 513,613.17
S&P 500 SUBACCOUNT
Accumulation unit
value $14.88 $11.37<F4>
Number of
accumulation units
outstanding,
end of period 2,041,455.30 869,681.47
SCUDDER
VARIABLE LIFE
INVESTMENT FUND
MONEY MARKET
SUBACCOUNT<F3>
Accumulation
unit value $16.63 $16.03 $15.47 $14.85 $14.53
units
outstanding,
end of period 433,295.76 477,679.12 368,443.98 280,575.27 119,598.28
CAPITAL GROWTH
SUBACCOUNT
Accumulation
unit value $22.80 $17.04 $14.39 $11.35 $12.75
Number of
accumulation units
outstanding,
end of period 1,896,319.89 1,593,634.26 1,162,998.78 906,428.22 439,913.95
INTERNATIONAL
SUBACCOUNT
Accumulation
unit value $17.26 $16.05 $14.19 $12.96 $13.26
Number of
accumulation units
outstanding,
end of period 1,669,242.06 1,564,590.89 1,220,160.02 1,095,214.21 362,171.94
INSURANCE TRUST
GROWTH WITH INCOME
SUBACCOUNT
Accumulation
unit value $14.52 $11.35<F4>
Number of
accumulation units
outstanding,
end of period 1,002,704.64 425,068.19
HIGH INCOME
SUBACCOUNT
Accumulation
unit value $12.14 $10.84<F4>
Number of
accumulation units
outstanding,
end of period 269,397.73 108,772.82
EMERGING GROWTH
SUBACCOUNT
Accumulation
unit value $12.41<F5>
Number of
accumulation units
outstanding,
end of period 224,192.63
AMERICAN CENTURY
VARIABLE
PORTFOLIOS, INC.
GROWTH
SUBACCOUNT
Accumulation
unit value $8.64 $9.06<F4>
Number of
accumulation units
outstanding,
end of period 640,420.71 424,022.29
TEMPLETON PRODUCTS
SERIES FUND
GROWTH
SUBACCOUNT
Accumulation
unit value $10.89<F5>
Number of
accumulation units
outstanding,
end of period 266,656.62
<CAPTION>
1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C>
CARILLON FUND, INC.
EQUITY SUBACCOUNT
Accumulation
unit value $23.68 $21.49 $14.98 $17.98 $16.32
Number of
accumulation units
outstanding,
end of period 1,312,947.47 1,057,669.36 936,036.25 799,268.16 561,681.97
Payout unit value
Number of payout units
CAPITAL SUBACCOUNT
Accumulation
unit value $13.02 $12.24 $9.85<F1>
Number of
accumulation units
outstanding,
end of period 1,181,036.39 627,636.09 279,289.41
BOND SUBACCOUNT
Accumulation
unit value $19.01 $17.92 $15.42 $14.40 $13.20
Number of
accumulation units
outstanding,
end of period 348,420.48 283,492.73 285,369.81 250,631.38 225,777.14
S&P 500 SUBACCOUNT
Accumulation
unit value
Number of
accumulation units
outstanding,
end of period 2,041,455.30 869,681.47
SCUDDER
VARIABLE LIFE
INVESTMENT FUND
MONEY MARKET
SUBACCOUNT<F3>
Accumulation
unit value $14.37 $14.12 $13.58 $12.71 $11.85
Number of
accumulation units
outstanding,
end of period 120,546.54 83,622.68 103,404.70 75,006.15 52,665.63
CAPITAL GROWTH
SUBACCOUNT
Accumulation
unit value $10.70<F2>
Number of
accumulation units
outstanding,
end of period 70,218.22
INTERNATIONAL
SUBACCOUNT
Accumulation
unit value $9.76<F2>
Number of
accumulation units
outstanding,
end of period 43,624.42
<FN>
<F1> Commencement of operations was May 1, 1990, with a beginning accumulation unit
value of $10.00.
<F2> Commencement of operations was May 1, 1992, with a beginning accumulation unit
value of $10.00.
<F3> Assets of Carillon Money Market Subaccount were transferred to the Scudder Money
Market Subaccount on November 12, 1993.
<F4> Commencement of operations was May 1, 1996, with a beginning accumulation value of
$10.00
<F5> Commencement of operations was May 1, 1997, with a beginning accumulation value of
$10.00.
</FN>
</TABLE>
Consolidated Financial Statements
The Union Central Life
Insurance Company and Subsidiaries
Years ended December 31, 1997 and 1996
with Report of Independent Auditors
<PAGE>
THE UNION CENTRAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 1997 and 1996
CONTENTS
Page
Report of Independent Auditors ...................... 1
Consolidated Balance Sheets ......................... 2
Consolidated Statements of Income ................... 3
Consolidated Statements of Equity ................... 4
Consolidated Statements of Cash Flows ............... 5
Notes to Consolidated Financial Statements .......... 6
<PAGE>
Report of Independent Auditors
To the Board of Directors
The Union Central Life Insurance Company
We have audited the accompanying consolidated balance sheets of
The Union Central Life Insurance Company and subsidiaries as of
December 31, 1997 and 1996, and the related consolidated
statements of income, equity, and cash flows for the years
then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of The Union Central Life Insurance Company
and subsidiaries at December 31, 1997, and 1996, and the
consolidated results of their operations and their cash flows
for the years then ended in conformity with generally accepted
accounting principles.
March 16, 1998
<PAGE>
THE UNION CENTRAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
December 31,
1997 1996
<S> <C> <C>
ASSETS
Investments:
Fixed maturities available-for-sale
at fair value (amortized cost: $2,758,113 $2,749,772
1997 - $2,697,869;
and 1996 - $2,727,178)
Equity securities available-for-sale
at fair value (cost: 1997 - $59,675
and 1996 - $54,504) 63,138 61,458
Cash and short-term investments 4,872 1,040
Other invested assets 54,342 42,490
Mortgage loans 744,395 663,351
Real estate 50,409 58,601
Policy loans 203,481 206,889
---------- ----------
Total investments 3,878,750 3,783,601
Accrued investment income 48,846 47,491
Deferred policy acquisition costs 371,295 414,458
Property, plant and equipment,
at cost, less accumulated
depreciation (1997 - $59,096
and 1996 - $55,798) 24,205 22,561
Federal income tax recoverable 6,595 6,394
Other assets 91,758 89,251
Separate account assets 1,288,349 1,000,469
---------- ----------
Total assets $5,709,798 $5,364,225
========== ==========
LIABILITIES AND EQUITY
Policy liabilities:
Future policy benefits $1,933,823 $1,892,875
Deposit funds 1,549,965 1,568,566
Policy and contract claims 31,869 28,413
Policyholders' dividends 37,624 37,492
---------- ----------
Total policy liabilities 3,553,281 3,527,346
Deferred revenue 110,130 130,176
Accrued commissions, expenses and taxes 21,391 16,373
Other liabilities 32,620 49,604
Deferred federal income taxes 33,341 35,149
Surplus notes payable 49,749 49,740
Separate account liabilities 1,310,391 1,014,960
---------- ----------
Total liabilities 5,110,903 4,823,348
MINORITY INTEREST IN SUBSIDIARY'S EQUITY 42,391 46,076
EQUITY
Policyholders' equity 531,164 481,799
Unrealized gain on available-for-sale securities 25,340 13,002
---------- ----------
Total equity 556,504 494,801
---------- ----------
Total liabilities and equity $5,709,798 $5,364,225
========== ==========
</TABLE>
THE UNION CENTRAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands)
<TABLE>
<CAPTION>
December 31,
1997 1996
<S> <C> <C>
REVENUE
Insurance revenue:
Traditional insurance premiums $ 131,974 $ 136,448
Universal life policy charges 88,645 80,746
Annuities 37,569 34,740
Net investment income 298,509 296,912
Net realized gains (losses) on investments 20,617 (22,710)
Other 8,059 6,162
---------- ----------
Total revenue 585,373 532,298
BENEFITS AND EXPENSES
Benefits 181,587 184,368
Increase (decrease) in reserves for
future policy benefits (7,912) 2,985
Interest expense:
Universal life 53,756 50,461
Investment products 91,239 95,654
Underwriting, acquisition and insurance expense 168,504 130,582
Policyholders' dividends 20,304 17,306
---------- ----------
Total benefits and expenses 507,478 481,356
Income before federal income tax and minority
interest in subsidiary income 77,895 50,942
Federal income tax expense 27,175 22,642
---------- ----------
Income before minority interest in
subsidiary income 50,720 28,300
Minority interest in subsidiary income (2,034) (2,704)
---------- ----------
Net Income $ 48,686 $ 25,596
========== ==========
</TABLE>
<PAGE> THE UNION CENTRAL LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF EQUITY
(in thousands)
<TABLE>
<CAPTION>
Unrealized
Gain on
Policyholders' Available-for-Sale Total
Equity Securities Equity
------------- ------------------ ------
<S> <C> <C> <C>
Balance at January 1, 1996 $456,203 $ 29,541 $485,744
Net income 25,596 -- 25,596
Net unrealized depreciation -- (16,539) (16,539)
-------- -------- --------
Balance at December 31, 1996 481,799 13,002 494,801
-------- -------- --------
Net income 48,686 -- 48,686
Net unrealized appreciation -- 12,338 12,338
Other 679 -- 679
-------- -------- --------
Balance at December 31, 1997 $531,164 $ 25,340 $556,504
======== ======== ========
</TABLE>
<PAGE>
THE UNION CENTRAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
December 31,
1997 1996
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 48,686 $ 25,596
Adjustments to net income not affecting cash:
Interest credited to universal life policies 53,756 50,461
Interest credited to interest sensitive products 91,239 95,654
Accrual of discounts on investments, net (2,610) (1,487)
Net realized (gains) and losses on investments (20,617) 22,710
Depreciation 4,355 6,472
Amortization of deferred policy acquisition costs 60,979 33,523
Amortization of deferred revenue (17,633) (10,073)
Deferred federal income tax (benefit) (9,452) 4,134
Change in operating assets and liabilities:
Accrued investment income (1,355) (623)
Policy cost deferred (41,608) (40,471)
Revenue deferred 2,340 2,188
Policy liabilities (53,705) (72,417)
Federal income tax recoverable (payable) 294 (54)
Change in other liabilities (15,786) (17,127)
Other items, net 10,630 11,557
---------- ----------
Cash Provided by Operating Activities 109,513 110,043
---------- ----------
INVESTING ACTIVITIES
Costs of investments acquired (3,295,204) (3,393,082)
Proceeds from sale, maturity or repayment of
investments 3,264,331 3,297,247
Decrease in policy loans 3,408 966
Purchases of property and equipment, net (5,627) (6,986)
---------- ----------
Cash Used in Investing Activities (33,092) (101,855)
---------- ----------
FINANCING ACTIVITIES
Receipts from universal life
and investment contracts 607,809 534,974
Withdrawals from universal life
and investment contracts (673,586) (603,300)
Cash provided by issuance of surplus notes -- 49,740
Purchase of stock from minority shareholders (6,812) --
---------- ----------
Cash Used by Financing Activities (72,589) (18,586)
---------- ----------
Increase (decrease) in cash
and short term investments 3,832 (10,398)
---------- ----------
Cash and short term investments
at beginning of year 1,040 11,438
---------- ----------
Cash and short term investments at end of year $ 4,872 $ 1,040
========== ==========
Supplemental disclosure
of cash flow information:
Cash paid during the year
for federal income taxes $ 36,297 $ 27,905
Cash paid during the year
for interest on surplus notes $ 4,066 $ --
</TABLE>
The accompanying notes are an integral part of the
financial statements.
<PAGE>
NOTE 1 - NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Organization
The accompanying consolidated financial statements have been
prepared in accordance with generally accepted accounting
principles (GAAP) and include the accounts of The Union Central
Life Insurance Company (Union Central) and the following
subsidiaries: The Manhattan Life Insurance Company (Manhattan
Life), a mixed charter life insurance company of which Union
Central owns 100% of the outstanding guarantee capital shares,
Carillon Advisers, Inc. (CAI), a registered investment advisor
company, wholly-owned and Carillon Investments, Inc. (CII) a
registered broker dealer, wholly-owned. The consolidated entity
will be referred to as "the Company". All significant intercompany
accounts and transactions have been eliminated in the accompanying
consolidated financial statements. Union Central also has the
following unconsolidated investment affiliates: Carillon Fund,
Inc., a variable products mutual fund consisting of five investment
portfolios (equity, bond, asset allocation, S&P 500 indexed and
micro-cap); Summit Investment Trust, consisting of two mutual funds
(Summit Emerging Markets Bond Fund, an emerging markets corporate
and government bond mutual fund and Summit High Yield Fund, a high-
yield bond mutual fund). In addition, Carillon Advisors, Inc.,
owns 51% of First Summit Capital Management, a registered
investment advisor.
The Company provides a wide spectrum of financial products and
related services for the benefit of individual, group and pension
policyholders. Such products and services include insurance to
provide for financial needs resulting from loss of life or income
and management of funds accumulated for preretirement and
retirement needs.
The Company is licensed to do business in all 50 states of the
United States.
The preparation of financial statements requires management to make
estimates and assumptions that affect amounts reported in the
financial statements and accompanying notes. Such estimates and
assumptions could change in the future as more information becomes
known, which could impact the amounts reported and disclosed
herein.
At December 31, 1996, Union Central owned approximately 73% of
Manhattan Life's guarantee capital shares. On January 28, 1997,
the guarantee capital shareholders constituting at least two-thirds
of the outstanding guarantee capital shares of Manhattan Life
(including the shares owned by Union Central) approved Union
Central's plan to eliminate the minority interests in Manhattan
Life's guarantee capital shares by effecting a reverse stock split
(the "Plan") that had previously been approved by the New York
Insurance Department. Under the Plan, each holder of guarantee
capital shares received a cash payment in lieu of the issuance of
any resulting fractional guarantee capital shares, with Union
Central becoming sole remaining holder of Manhattan Life's
guarantee capital shares. The cost of redeeming the fractional
shares, $6,812,000, was funded by Manhattan Life; however, as part
of the Plan, Union Central made a cash contribution of $1,823,000
to Manhattan Life's guarantee capital share account. As a result
of effecting the reverse stock split, Union Central's policyholders
equity increased by $1,919,000. This represents the cumulative
prior years' amount of the minority shareholders' share of
Manhattan Life's shareholders equity of $8,731,000, less the cost
of redeeming the fractional shares. The increase in policyholders'
equity is included in "Other" in the Statements of Equity. In
connection with effecting the reverse stock split, the Company
incurred and capitalized $2,782,000 of issuance cost. This cost
was recorded in "Other assets" in the Balance Sheets, and will be
amortized under the straight-line method to expense over 15 years.
Amortization of capitalized expenses was commenced in 1997 with
$185,000 amortized to "Underwriting, acquisition and insurance
expense" in the Statements of Income.
The Company adopted in 1997 FASB Statement No. 125," Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities". The effect of adoption was immaterial.
Investments
Fixed maturity and equity securities classified as available-for-
sale are carried at fair value with net unrealized gains and losses
reported as a separate component of equity.
Other investments are reported on the following bases:
* Mortgage loans on real estate are carried at their aggregate
unpaid balance less unamortized discount and less an
allowance for possible losses.
* Real estate acquired through foreclosure is carried at the
lower of cost or its net realizable value.
* Policy loans are reported at unpaid balances.
* Cash and short-term investments presented on the Balance
Sheets consist of cash-in-bank, cash-in-transit and
commercial paper that has a maturity date of 90 days or less
from the date acquired.
The fair values of fixed maturity and equity securities represent
quoted market values from published sources or calculated market
values using the "yield method" if no quoted market values are
obtainable.
Realized gains and losses on sales of investments, net of related
deferred policy acquisition cost and unearned revenue amortization,
and declines in the value of investments judged to be other-than-
temporary, are recognized on a specific identification basis.
Interest is not accrued on mortgage loans or bonds for which
principal or interest payments are determined to be uncollectible.
The Company purchases call options to hedge insurance contracts
whose credited interest is linked to returns in Standard & Poor's
500 Stock Index (Index) based on a formula which applies
participation rates to the returns in the Index. Call options are
contracts which give the option purchaser the right, but not the
obligation, to buy securities at a specified price during a
specified period. The Company holds call options which expire
quarterly until December 31, 1998. The Company paid initial fees
(the option premium) to enter the option contracts. The Index call
options give the Company the right to receive cash at settlement
if the closing Index value is above the strike price. These
proceeds do not result in income to the Company because the hedged
insurance contracts would be credited interest for an equivalent
amount.
The Company is exposed to credit-related losses in the event of
nonperformance by counterparties to the call options. To minimize
this risk, the Company only enters into private options contracts
with counterparties having Standard & Poor's credit ratings of AA-
or above or listed contracts guaranteed by the Chicago Board
Options Exchange. The credit exposure is limited to the value of
the call options at December 31, 1997, and is immaterial to the
Company.
The call options were carried at their fair value of $1,877,000 at
December 31, 1997, and were reflected in "Other invested assets"
in the Balance Sheets. The liabilities for the hedged insurance
contracts were adjusted based on the market value of the call
options of $1,877,000, and were reflected in "Deposit funds" in the
Balance Sheets.
Deferred Policy Acquisition Costs
The costs of acquiring new business, principally commissions,
certain expenses of the policy issue and underwriting department
and certain variable agency expenses have been deferred. Deferred
policy acquisition costs are amortized consistent with the methods
described in "Policy Liabilities, Revenues, Benefits and Expenses,"
and the effect of realized gains and losses on deferred policy
acquisition cost amortization is restored or amortized and is
netted against "Net realized gains (losses) on investments".
Amortization of deferred policy acquisition costs totalled
$60,979,000 and $33,523,000, net of the effect of realized gains
and (losses) on amortization of $13,309,000 and ($9,176,000) for
the years ended December 31, 1997 and 1996, respectively, and were
included in "Underwriting, acquisition and insurance expense" in
the Statements of Income. Deferred policy acquisition costs are
adjusted to reflect the impact of unrealized gains on available-
for-sale securities. Adjustments reducing deferred policy
acquisition costs related to unrealized gains totalled $17,627,000,
and $7,143,000 at 1997 and 1996, respectively.
In 1997, the Company revised its estimates of future gross profits,
and as a result amortization of deferred policy acquisition costs
included in "Underwriting, acquisition and insurance expense" in
the Statements of Income was increased by $16,988,000.
Property, Plant and Equipment
Property, plant and equipment is valued at historical cost less
accumulated depreciation in the Balance Sheets. It consists
primarily of Union Central's home office, capital leases for
furniture and equipment, furniture and fixtures and electronic data
processing equipment.
Depreciation is computed with the straight-line method over the
estimated useful lives of the respective assets, not to exceed 10
years for office furniture and 5 years for electronic data
processing equipment. Depreciation is computed for leasehold
improvements with the straight-line method over the shorter of the
remaining lease term or useful life of the improvements.
Deposit Funds
The liability for deposit funds is generally established at the
policyholders' accumulated cash values plus amounts provided for
guaranteed interest.
Policy Claims
Policy claim reserves represent the estimated ultimate net cost of
all reported and unreported claims incurred. In addition, a claim
adjustment expense reserve is held to account for the expenses
associated with administering these claims. The reserves for
unpaid claims are estimated using individual case basis valuations
and statistical analyses. The claim adjustment expense reserve is
estimated using statistical analyses. These estimates are subject
to the effects of trends in claim severity and frequency. Although
some variability is inherent in such estimates, management believes
that the reserves for claims and claim related expenses are
adequate. The estimates are continually reviewed and adjusted as
necessary as experience develops or new information becomes known;
and such adjustments are included in current operations.
Dividends to Policyholders
Union Central's dividend liability is the amount estimated to have
accrued to policyholders' as of each year end. Manhattan Life's
dividend liability is based on the dividend scale in effect at the
time the policy was issued.
Separate Accounts
Separate account assets and liabilities reported in the
accompanying financial statements represent funds that are
separately administered for our individual annuity, group annuity
and variable universal life lines of business, and for which the
contract holders rather than the Company bear the investment risk.
Separate account contract holders have no claim against the assets
of the general account of the Company. Separate account
investments are carried at market value. Investment income and
gains and losses from these accounts accrue directly to contract
holders and are not included in the accompanying financial
statements. Union Central derives certain fees for maintaining and
managing the separate accounts, but bears no investment risk on
these assets, except to the extent that it participates in a
particular separate account.
Policy Liabilities, Revenues, Benefits and Expenses
Traditional Insurance Products
Traditional insurance products include those products with fixed
and guaranteed premiums and benefits and consist primarily of whole
life insurance policies, term insurance policies and disability
income policies. Premiums for traditional products are recognized
as revenue when due.
The liability for future policy benefits for participating
traditional life is computed using a net level premium method and
the guaranteed mortality and dividend fund interest. The mortality
and interest assumptions are equivalent to statutory assumptions.
The liabilities for future policy benefits and expenses for
nonparticipating traditional life policies and disability income
policies are generally computed using a net level premium method
and assumptions for investment yields, morbidity, and withdrawals
based principally on company experience projected at the time of
policy issue, with provision for possible adverse deviations.
Interest assumptions for participating traditional life reserves
for all policies ranged from 2.25% to 8.87% for the years ended
1997 and 1996.
The costs of acquiring new traditional business, principally
commissions, certain policy issue and underwriting expenses (such
as medical examination and inspection report fees) and certain
agency expenses, all of which vary with and are primarily related
to the production of new and renewal business, are deferred to the
extent that such costs are deemed recoverable through future gross
premiums. Such non-participating deferred acquisition costs are
amortized over the anticipated premium paying period of the related
policies, generally not to exceed 30 years, using assumptions
consistent with those used to develop policy benefit reserves. For
participating life insurance products, deferred policy acquisition
costs are being amortized in proportion to estimated gross margins
of the related policies. Gross margins are determined for each
issue year and are equal to premiums plus investment income less
death claims, surrender benefits, administrative costs,
policyholder dividends, and the increase in reserves for future
policy benefits. The future investment yields are assumed to range
from 7.3% to 8.6% for the years ended 1997 and 1996. Changes in
dividend payouts are assumed with changes in yields.
Universal Life and Other Interest Sensitive Products
Interest sensitive products include universal life and single
premium whole life products. They are distinguished by the
existence of a separately definable fund that is credited with
interest and from which any policy charges are taken. Revenues for
these products consist of policy charges for the cost of insurance,
policy administration charges, and surrender charges that have been
assessed against policyholder account balances during the period.
Benefit reserves for universal life and other interest sensitive
products are computed in accordance with the retrospective deposit
method and represent policy account balances before applicable
surrender charges. Policy benefits that are charged to expense
include benefit claims incurred in the period in excess of related
policy account balances and interest credited to account balances.
Interest crediting rates ranged from 4.5% to 7.6% for the years
ended 1997 and 1996.
The cost of acquiring universal life and other interest sensitive
products, principally commissions, certain policy issue and
underwriting expenses (such as medical examination and inspection
report fees) and certain agency expenses, all of which vary with
and are primarily related to the production of new and renewal
business, are deferred to the extent that such costs are deemed
recoverable through future estimated gross profits. Acquisition
costs for universal life and other interest sensitive products are
amortized over the life of the policies in proportion to the
present value of expected gross profits from surrender charges and
investment, mortality and expense margins. The amortization is
adjusted retrospectively when estimates of current or future gross
profits (including the impact of investment gains and losses) to
be realized from a group of products are revised.
Amounts assessed policyholders that represent revenue for services
to be provided in future periods are reported as unearned revenue
and recognized in income over the life of the policies, using the
same assumptions and factors as are used to amortize deferred
acquisition costs. These charges consist of policy fees and
premium loads that are larger in the initial policy years than they
are in the later policy years. Amortization of unearned revenue
totalled $17,633,000 and $10,073,000, net of the effect of realized
gains (losses) on amortization of $4,752,000 and ($3,597,000) for
the years ended December 31, 1997 and 1996, respectively, and was
included in "Universal life policy charges" in the Statements of
Income.
In 1997, the Company revised its estimates of future gross profits,
and as a result amortization of unearned revenue included in
"Universal life policy charges" in the Statements of Income was
increased by $5,999,000.
Group Products
Group products consist primarily of group life insurance, and group
long and short term disability income products. Premiums for group
insurance products are recognized as revenue when due.
The liabilities for future policy benefits and expenses for group
life and disability income products are computed using statutory
methods and assumptions, which approximate net level premium
reserves using assumptions for investment yields, mortality, and
withdrawals based principally on company experience projected at
the time of policy issue, with provisions for possible adverse
deviations. Interest assumptions are based on assumed investment
yields that range from 7.5% to 8.1% for the years ended 1997 and
1996.
The costs of acquiring new group life and disability income
business, principally commissions, certain policy issue and
underwriting expenses (such as medical examination and inspection
report fees) and certain agency expenses, all of which vary with
and are primarily related to the production of new and renewal
business, are deferred to the extent that such costs are deemed
recoverable through future gross premiums. Such deferred
acquisition costs are amortized over the anticipated premium paying
period of the related policies, generally not to exceed ten years.
Pension Products
Pension products include deferred annuities and payout annuities.
Revenues for the deferred annuity products consist of investment
income on policy funds, mortality and expense charges, contract
administration fees, and surrender charges that have been assessed
against policyholder account balances. Expenses for deferred
annuity products include the interest credited on policy funds and
expenses incurred in the administration and maintenance of the
contracts. For payout annuities, premiums are recognized as
revenue when due while expenses exclude the interest credited on
policy funds.
Benefit reserves for the deferred annuity contracts represent the
policy account balances before applicable surrender charges.
Interest assumptions on payout annuities are based on assumed
investment yields that ranged from 2.0% to 8.0% for the years ended
1997 and 1996.
Commissions and other related costs of acquiring annuity contracts
that vary with and are primarily related to the production of new
and renewal business are deferred to the extent that such costs are
deemed recoverable through future estimated gross profits.
Acquisition costs are amortized over the life of the contracts in
direct proportion to the present value of expected gross profits
from surrender charges and investment and expense margins. The
amortization is adjusted retrospectively when estimates of current
or future gross profits (including the impact of investment gains
or losses) to be realized on a group of contracts are revised.
Reinsurance
Reinsurance premiums and claims are accounted for on bases
consistent with those used in accounting for the original policies
issued and the terms of the reinsurance contracts. Premiums and
benefits are reported net of reinsured amounts.
Allocation of Manhattan Life's Income and Equity
Manhattan Life's charter provides for the allocation of its profits
between its shareholders and its policyholders on a one-eighth/seven-
eighths basis. The profits allocated are equal to
income after taxes and interest on the Guaranteed Capital Reserve
((GCR) see Note 5 for further discussion) but before policyholders'
dividends. As a result of the reverse stock split described in
Note 1, in 1997 only Manhattan Life's policyholders' share of
profits/losses were included in "Minority Interest in Subsidiary's
Income" in the Statements of Income. In 1996, Manhattan Life's
policyholders' and minority shareholders' share of profits/losses
were included in "Minority Interest in Subsidiary's Income" in the
Statements of Income. In 1997, Manhattan Life's policyholders'
equity was included in "Minority Interest in Subsidiary's Equity"
in the Balance Sheets, and includes policyholders' share of
Manhattan Life's change in unrealized gains on available-for-sale
securities. In 1996, Manhattan Life's policyholders' and minority
shareholders' equity was included in "Minority Interest in
Subsidiary's Equity" in the Balance Sheets, and includes
policyholders' and minority shareholders' share of Manhattan Life's
change in unrealized gains on available for sale securities. (See
Note 5 for more in-depth discussion of Manhattan Life's corporate
charter.)
Federal Income Taxes
The Company accounts for income taxes using the liability method
for financial accounting and reporting of income taxes. Under this
method, deferred income taxes are recognized for the tax
consequences of "temporary differences" by applying the applicable
tax rate to differences between the financial statement carrying
amounts and the tax bases of existing assets and liabilities.
Reclassifications
Previously reported amounts for 1996 have in some instances been
reclassified to conform to the 1997 presentation.
NOTE 2 - INVESTMENTS
Available-for-sale securities are summarized as follows:
<TABLE>
<CAPTION>
Cost or Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
---- ----- -------- -----
(in thousands)
<S> <S> <C> <C> <C>
DECEMBER 31, 1997:
U.S. treasury securities
and obligations of U.S.
government corporations
and agencies $ 213,411 $ 1,891 $ (238) $ 215,064
Corporate securities and other 1,447,640 50,318 (5,320) 1,492,638
Mortgage-backed securities,
collateralized mortgage
obligations and
other structured securities 1,028,745 20,386 (7,169) 1,041,962
Debt securities issued
by foreign governments 8,073 376 -- 8,449
---------- ------- -------- ----------
Subtotal 2,697,86 72,971 (12,727) 2,758,113
Equity securities 59,675 4,142 (679) 63,138
---------- ------- -------- ----------
Total $2,757,544 $77,113 $(13,406) $2,821,251
========== ======= ======== ==========
DECEMBER 31, 1996:
U.S. treasury securities and obligations
of U.S. government corporations
and agencies $ 107,704 $ 469 $ (1,714) $ 106,459
Corporate securities and other 1,484,274 34,617 (9,385) 1,509,506
Mortgage-backed securities,
collateralized mortgage
obligations and other
structured securities 1,127,290 17,145 (18,884) 1,125,551
Debt securities issued
by foreign governments 7,910 346 -- 8,256
---------- ------- -------- ----------
Subtotal 2,727,178 52,577 (29,983) 2,749,772
Equity securities 54,504 6,997 (43) 61,458
---------- ------- -------- ----------
Total $2,781,682 $59,574 $(30,026) $2,811,230
========== ======= ======== ==========
</TABLE>
Fixed maturity available-for-sale securities, at December 31, 1997,
are summarized by stated maturity as follows:
<TABLE>
<CAPTION>
Amortized Fair
Cost Value
---------- ----------
(in thousands)
<S> <C> <C>
Due in one year or less $ 228 $ 230
Due after one year through five years 225,814 229,246
Due after five years through ten years 751,502 764,791
Due after ten years 239,541 247,434
---------- ----------
Subtotal 1,217,085 1,241,701
Mortgage-backed securities 1,065,212 1,078,310
Other securities with multiple
repayment dates 415,572 438,102
---------- ----------
Total $2,697,869 $2,758,113
========== ==========
</TABLE>
Significant components of the unrealized gain on available-for-sale
securities included in equity in the accompanying Balance Sheets
are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996
---- ----
(in thousands)
<S> <C> <C>
Gross unrealized gain on available-
for-sale securities $ 63,707 $ 29,548
Amortization of deferred policy
acquisition costs (17,627) (7,143)
Minority interests (4,607) (1,573)
Deferred taxes (16,133) (7,830)
-------- --------
Net unrealized gain on available-for-
sale securities $ 25,340 $ 13,002
-------- --------
</TABLE>
See Note 10 for discussion of the methods and assumptions used by
the Company in estimating the fair values of available-for-sale
securities.
At December 31, 1997 and 1996, the Company held unrated or less-
than-investment grade (investment grade is defined as "Baa3" and
higher on Moody's ratings and "BBB" and higher on Standard and
Poor's bond ratings) corporate bonds of $198,255,000 and
$177,364,000. Those holdings amounted to 7.2% and 6.5%,
respectively, of the Company's investments in fixed maturities and
3.5% and 3.3%, respectively, of the Company's total assets. The
holdings of less-than-investment grade bonds are widely diversified
and of satisfactory quality based on the Company's investment
policies and credit standards.
At December 31, 1997 and 1996, the Company invested $45,031,000 and
$52,397,000 in affiliated mutual funds. The Company's holdings in
affiliated mutual funds were included in "Equity securities
available-for-sale at fair value" in the Balance Sheets.
Proceeds, gross realized gains, and gross realized losses from the
sales and maturities of available-for-sale securities follows:
<TABLE>
<caption
Year Ended December 31,
1997 1996
---- ----
(in thousands)
<S> <C> <C>
Proceeds $3,148,909 $3,170,351
Gross realized gains 52,460 28,154
Gross realized losses 28,173 55,069
</TABLE>
At December 31, 1997 and 1996, investments in bonds of $6,450,000
and $6,178,000, respectively, were on deposit with state insurance
departments to satisfy regulatory requirements.
Mortgage loans are stated at their aggregate unpaid balances in the
Balance Sheets, less unamortized discounts.
Activity in the allowance for mortgage loss is summarized as
follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996
(in thousands)
<S> <C> <C>
Balances at the beginning of the year $ 2,224 $ 2,711
Provisions for potential
mortgage loan loss 1,307 263
Losses charged against the mortgage
loan loss reserve (2,093) (750)
Balance at the end of the year $ 1,438 $ 2,224
======= =======
</TABLE>
The provision for mortgage losses has fluctuated between periods.
The Company establishes the mortgage reserve based upon its
continuing review of the mortgage portfolio and individual problem
mortgages. The allowance for potential loan losses is affected to
a significant degree by general economic conditions. While the
Company believes it has provided adequate mortgage reserves,
subsequent economic and market conditions may require establishing
additional reserves.
The Company's mortgage portfolio is monitored closely through the
review of loan and property information such as debt service
coverage, annual operating statements and property inspection
reports. This information is evaluated in light of current
economic conditions and other factors such as geographic and
property-type loan concentrations. This evaluation is part of the
regular review to determine whether adjustments to the allowance
for potential loan losses are warranted. Management believes the
mortgage loss reserve is sufficient to provide for potential loan
losses. However, management cannot predict with assurance where
the economy is headed or how the mortgage and real estate
portfolios would be affected by various economic circumstances.
A summary of the characteristics of the Company's mortgage
portfolio (before deducting valuation reserves of $1,438,000 and
$2,224,000 at December 31, 1997 and 1996, respectively) follows:
<TABLE>
<CAPTION>
December 31, 1997
Principal Percent of
Balance Principal
------- ---------
(in thousands)
<S> <C> <C>
Region
New England and Mid-Atlantic $ 52,400 7.0%
South Atlantic 122,648 16.4
North Central 190,928 25.6
South Central 80,335 10.8
Mountain 111,684 15.0
Pacific 187,838 25.2
--------- -----
Total $ 745,833 100.0 %
========= =====
Property Type
Apartment and residential $ 106,190 14.2%
Warehouses and industrial 127,960 17.2
Retail and shopping center 243,152 32.6
Offices 238,970 32.0
Other 29,561 4.0
--------- -----
Total $ 745,833 100.0%
========= =====
<CAPTION>
December 31, 1997
Principal Percent of
Balance Principal
------- ---------
(in thousands)
<S> <C> <C>
Region
New England and Mid-Atlantic $ 75,893 11.4%
South Atlantic 109,859 16.5
North Central 150,586 22.6
South Central 70,968 10.7
Mountain 93,394 14.0
Pacific 164,875 24.8
--------- -----
Total $ 665,575 100.0%
========= =====
Property Type
Apartment and residential $ 106,099 15.9%
Warehouses and industrial 111,363 16.7
Retail and shopping center 225,105 33.8
Offices 199,011 30.0
Other 23,997 3.6
--------- -----
Total $ 665,575 100.0%
--------- -----
</TABLE>
Real estate consists of investment real estate under lease and
foreclosed real estate. The investment real estate under lease is
depreciated over 40 years. The cost of the property totalled
$17,481,000 and $17,383,000 at December 31, 1997 and 1996,
respectively, and accumulated depreciation totalled $4,586,000 and
$4,212,000 at December 31, 1997 and 1996, respectively. The book
value of foreclosed real estate was $37,514,000 and $45,430,000 at
December 31, 1997 and 1996, respectively. The decrease in
foreclosed real estate is a result of the sale of four properties
in 1997.
NOTE 3 - REINSURANCE
In the ordinary course of business, the Company assumes and cedes
reinsurance with other insurers and reinsurers. These arrangements
provide greater diversification of business and limit the maximum
net loss potential on large or hazardous risks. Reinsurance ceded
contracts do not relieve the Company from its obligations to
policyholders. Reinsurance ceded is recorded as an asset and is
recorded in "Other assets" in the Balance Sheets. The Company
remains liable to its policyholders for the portion reinsured to
the extent that any reinsurer does not meet its obligations for
reinsurance ceded to it under the reinsurance agreements. Failure
of reinsurers to honor their obligations could result in losses to
the Company; consequently, allowances will be established for
amounts deemed or estimated to be uncollectible. To minimize its
exposure to significant losses from reinsurance insolvencies, the
Company evaluates the financial condition of its reinsurers and
monitors concentrations of credit risk arising from similar
geographic regions, activities, or economic characteristics of the
reinsurers. No losses are anticipated, and, based on management's
evaluation, there are no concentrations of credit risk at December
31, 1997 and 1996. The Company retains the risk for varying
amounts of individual or group insurance written up to a maximum
of $1,000,000 on any one life or $4,000 per month disability risk
and reinsures the balance.
Reinsurance transactions with other insurance companies for the
years ended December 31, 1997 and 1996 are summarized as follows:
<TABLE>
<CAPTION>
December 31, 1997
----------------------------------------
Direct Assumed Ceded Net
------ ------- ----- ---
(in thousands)
<S> <C> <C> <C> <C>
Life insurance in force $30,333,849 $556,694 $5,066,377 $25,824,166
=========== ======== ========== ===========
Premiums and other
considerations:
Traditional insurance
premiums and
universal life $ 240,155 $ 10,154 $ 29,690 $ 220,619
Annuity 37,569 -- -- 37,569
----------- -------- ---------- -----------
Total $ 274,724 $ 10,154 $ 26,690 $ 258,188
=========== ======== ========== ===========
<CAPTION>
Direct Assumed Ceded Net
------ ------- ----- ---
(in thousands)
<S> <C> <C> <C> <C>
Life insurance in force $29,748,174 $595,713 $4,177,415 $26,166,472
=========== ======== ========== ===========
Premiums and other
considerations:
Traditional insurance
premiums and
universal life $ 231,158 $ 10,693 $ 28,254 $ 213,597
Annuity 34,740 -- -- 34,740
----------- -------- ---------- -----------
Total $ 265,898 $ 10,693 $ 28,254 $ 248,337
=========== ======== ========== ===========
</TABLE>
Benefits paid or provided were reduced by $14,779,000 and
$18,747,000 at December 31, 1997 and 1996, respectively, for
estimated recoveries under reinsurance treaties.
The Company nor any of its related parties control, either directly
or indirectly, any reinsurers in which the Company conducts
business. No policies issued by the Company have been reinsured
with a foreign company which is controlled, either directly or
indirectly, by a party not primarily engaged in the business of
insurance.
The Company has not entered into any reinsurance agreements in
which the reinsurer may unilaterally cancel any reinsurance for
reasons other than nonpayment of premiums or other similar credits.
NOTE 4 - FEDERAL INCOME TAX
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income
tax purposes. Significant components of the Company's deferred tax
liabilities and assets are as follows :
<TABLE>
<CAPTION>
December 31,
1997 1996
(in thousands)
<S> <C> <C>
Deferred tax liabilities:
Deferred policy acquisition costs $ 137,637 $ 146,947
Basis differences on bonds 1,382 1,740
Unrealized gains - SFAS 115 16,133 7,830
Other 3,835 2,647
--------- ---------
Total deferred tax liabilities 158,987 159,164
--------- ---------
Deferred tax assets:
Policyholders' dividends 11,393 11,100
Future policy benefits 74,225 76,471
Premium - based DAC adjustment 25,780 23,643
Investment valuation reserves 1,006 1,147
Retirement plan accruals 10,722 9,494
Investment income differences 499 273
Basis differences on bonds and mortgages 266 266
Other 1,755 1,621
--------- ---------
Total deferred tax assets 125,646 124,015
--------- ---------
Net deferred tax liabilities $ 33,341 $ 35,149
========= =========
</TABLE>
Significant components of the provision for income taxes
attributable to continuing operations are as follows:
<TABLE>
<CAPTION>
December 31,
1997 1996
---- ----
(in thousands)
<S> <C> <C>
Current $ 36,603 $ 18,509
Deferred (9,428) 4,133
--------- ---------
Total $ 27,175 $ 22,642
========= =========
</TABLE>
Federal income tax expense is calculated based on applying the
statutory corporate tax rate to taxable income, and adjusting this
amount for permanent differences between deductions allowed for
financial statement purposes versus federal income tax purposes.
Significant differences would include the surplus tax adjustment
applicable to Union Central and the small company deduction for
life insurance companies that was available to Manhattan Life prior
to completing the reverse stock split transaction in 1997 described
in Note 1.
Prior to 1984, a portion of Manhattan Life's income was not subject
to income tax, but was accumulated for income tax purposes in a
special memorandum tax account designated "policyholders' surplus
account" (PSA). Under provisions of the Tax Reform Act of 1984,
the PSA was frozen at its December 31, 1983 balance. The PSA will
become subject to tax at current rates if these amounts are
distributed or if the balance of the account exceeds certain
limitations under the Internal Revenue Code. The balance in the
PSA at December 31, 1997 and 1996 was $1,348,000, and the maximum
tax at current rates would be $472,000.
NOTE 5 - SHAREHOLDER DIVIDENDS AND RESTRICTION ON TRANSFER OF FUNDS
FROM SUBSIDIARY
As stated in Note 1, Manhattan Life's charter provides for the
allocation of its profits between its shareholders and its
policyholders on a one-eight/seven-eighths basis. The profits
allocated are equal to income after taxes and interest on the GCR
but before policyholder dividends.
In administering Manhattan Life's charter's profit-sharing
provision, Manhattan Life and the New York Insurance Department
(the Department) have deemed the shareholders' portion of Manhattan
Life's profits to be equal to $1 for every $7 of policyholder
dividends paid on traditional, participating contracts. Manhattan
Life's charter provides for three types of shareholder
distributions, including distribution based on profits:
a) Interest at a specified rate on the par value of the
guarantee capital shares issued and outstanding
($195,000 annually), which may be paid in any year
dividends are distributed to policyholders and is
not subject to prior regulatory approval,
b) A distribution of the shareholders' portion of Manhattan
Life's profits. Such amounts may, at the discretion of
the Company's Board of Directors, be distributed as a
stock dividend of additional guarantee capital shares,
paid in cash subject to certain limits and prior
regulatory approval, or reserved for the benefit of the
shareholders in the GCR, and
c) Interest, at the Company's portfolio earnings rate on
invested assets, on the accumulated balance in the GCR.
Manhattan Life's cash distributions to shareholders are subject to
prior approval by the Department. Further, Manhattan Life and the
Department have agreed to the following guidelines under which
shareholder distributions from the GCR would be permitted, subject
to prior approval by the Department:
If Manhattan Life's statutory-basis surplus is less than
or equal to 9% of its statutory policy reserves, then
principal and interest distributions are limited to the
lesser of the prior year statutory gain from operations
(after policyholders' dividends and federal income taxes
and before realized gains and losses), or the prior year's
increase in statutory surplus or,
If its statutory-basis surplus exceeds 9% of statutory
policy reserves, the principal and interest distributions
are limited to the greater of the prior year statutory
gain from operations (after policyholders' dividends and
federal income taxes and before realized gains and losses),
or the prior year increase in statutory surplus.
The foregoing limits are subject to adjustment, by the Department,
for unusually large realized gains or the effects of surplus relief
reinsurance transactions. As Manhattan Life's statutory-basis
surplus was less than 9% of its statutory policy reserves at
December 31, 1996 and 1995, respectively, and a loss from
operations was recorded for the year ended December 31, 1995, and
statutory surplus decreased for the year ended December 31, 1996,
no shareholder's dividends were paid in 1996 or 1997.
The GCR represents a restricted segment of statutory unassigned
surplus, and as such, does not represent a commitment or liability
to pay shareholder dividends. In Manhattan Life's stand-alone
financial statements prepared in accordance with generally accepted
accounting principles, the GCR is included in shareholders' equity.
The balance in the GCR of $12,750,000 and $16,127,000 and the
Company's share of $12,750,000 and $11,740,000 was included in
"Policyholders' equity" in the Consolidated Balance Sheets at
December 31, 1997 and 1996, respectively. In 1996, the minority
shareholders' share of the GCR was included in "Minority Interest
in Subsidiary's Equity" in the Balance Sheets. Interest added to
the GCR amounted to $919,000 and $1,230,000, for the years ended
December 31, 1997 and 1996, respectively.
Manhattan Life is the only existing life insurance company
domiciled in New York which has authorized and outstanding
guarantee capital shares. Neither applicable New York state law
nor Manhattan Life's charter contain express provisions
establishing the extent of the interest of the holders of the
guarantee capital shares in the statutory unassigned surplus (total
surplus less guarantee capital shares and GCR) of Manhattan Life
and there has never been a judicial determination of the extent of
such interest. Further, the laws applicable to Manhattan Life do
not provide for its voluntary liquidation or dissolution; the
Company may only be liquidated under the supervision of the New
York Superintendent of Insurance in the event of insolvency. In
such a liquidation or dissolution, all of the assets of Manhattan
Life would be used to satisfy claims of creditors and policyholders
and there would be no statutory unassigned surplus for distribution
to the holders of the guarantee capital shares. Accordingly, in
the opinion of counsel to Manhattan Life, no unqualified legal
opinion can be rendered as to the degree, if any, to which the
holders of the guarantee capital shares would be entitled to
participate in any current or liquidating distribution of
unassigned surplus. However, in the view of such counsel, if there
should occur a liquidation or other winding-up of Manhattan Life's
business in which assets exceeded liabilities on policies and the
claims of other creditors, or if there should occur a partial
distribution of surplus in the absence of such a liquidation or
winding-up, although there are reasonable arguments which could be
made to the effect that the entire unassigned surplus would be
distributable solely to the policyholders or solely to the
shareholders, the more likely outcome if the question should be
litigated is that it would be held that one-eighth of the
unassigned surplus would be distributable to the shareholders and
seven-eighths to the policyholders.
NOTE 6 - COMMITMENTS AND CONTINGENT LIABILITIES
Leases
The leases for office space for Manhattan Life and various field
agency offices vary in duration from 1 to 15 years. Some of these
leases include escalation clauses which vary with levels of
operating expense. Rental expense under these operating leases
totalled $3,972,000 and $3,907,000 in 1997 and 1996, respectively.
The Company also leases furniture and equipment under operating
leases which expire in 2001. Rental expense under these leases
included in "Underwriting, acquisition and insurance expense" in
the Statements of Income totalled $154,000 and $182,000 in 1997 and
1996, respectively.
At December 31, 1997, the future minimum lease payments for all
noncancelable operating leases are as follows:
<TABLE>
<CAPTION>
Year Amount
---- ------
(in thousands)
<C> <C>
1998 $ 3,553
1999 2,893
2000 2,562
2001 2,316
2002 1,785
After 2002 1,112
-------
Total $14,221
=======
</TABLE>
The Company also has capital leases for office furniture. Lease
expense under these leases was $437,000 and $466,000 in 1997 and
1996, respectively.
At December 31, 1997 the future minimum lease payments for all
noncancelable capital leases are as follows:
<TABLE>
<CAPTION>
Year Amount
---- ------
(in thousands)
<C> <C>
1998 $ 470
1999 470
2000 470
2001 39
-------
Total $ 1,449
=======
</TABLE>
Other Commitments
At December 31, 1997, the Company had outstanding agreements to
fund 33 mortgages totalling $52,263,000 in early 1998. In
addition, the Company has committed to invest $17,800,000 in
limited partnerships during the years 1998 to 2001. These
transactions are in the normal course of business for the Company.
Litigation
In the normal course of business, the Company is party to various
claims and litigation primarily arising from claims made under
insurance policies and contracts. Those actions are considered by
the Company in estimating the policy and contract liabilities. The
Company's management believes that the resolution of those actions
will not have a material adverse effect on the Company's financial
position or results of operations.
Guaranty Fund Assessments
The economy and other factors have caused an increase in the number
of insurance companies that are under regulatory supervision. This
circumstance is expected to result in an increase in assessments
by state guaranty funds, or voluntary payments by solvent insurance
companies, to fund policyholder losses or liabilities of insurance
companies that become insolvent. These assessments may be deferred
or forgiven under most guaranty laws if they would threaten an
insurers financial strength and, in certain instances, may be
offset against future premium taxes. The $300,800 and $0 charge
to operations in 1997 and 1996, respectively, was included in
"Underwriting, acquisition and insurance expense" in the Statements
of Income. The estimated liability of $1,411,000 and $1,399,000
at December 31, 1997 and 1996 respectively, was based on data
provided by the National Organization of Life and Health Insurance
Guaranty Associations and is included in "Other liabilities" in the
Balance Sheets.
NOTE 7 - STATUTORY SURPLUS AS REPORTED TO REGULATORY AUTHORITIES
Union Central and Manhattan Life file statutory-basis financial
statements with regulatory authorities. Union Central's statutory-
basis financial statements are prepared in conformity with
accounting practices prescribed or permitted by the Department of
Insurance of Ohio, Union Central's state of domicile. Manhattan
Life's statutory-basis financial statements are prepared in
conformity with accounting practices prescribed or permitted by the
Department of Insurance of New York, Manhattan Life's state of
domicile. Surplus as reflected in the statutory-basis financial
statements are as follows:
<TABLE>
<CAPTION>
Year ended December 31,
1997 1996
---- ----
(in thousands)
<S> <C> <C>
Capital and surplus
Union Central $ 317,952 $ 277,202
========= =========
Manhattan Life $ 22,327 $ 28,211
========= =========
</TABLE>
The National Association of Insurance Commissioners is currently
in the process of recodifying statutory accounting practices, the
result of which is expected to constitute the only source of
"prescribed" statutory accounting practices. The project, expected
to be completed in 1998, will likely change certain prescribed
accounting practices, and may result in changes to the accounting
practices the Company uses to prepare its statutory financial
statements.
NOTE 8 - EMPLOYEE BENEFITS
The Company has pension plans covering substantially all of its
employees (The Plans). Benefits are based on years of service and
the employee's highest five consecutive years of compensation out
of the last ten years. The contributions totalled $3,492,000 and
$2,750,000 in 1997 and 1996, respectively. The Company's funding
policy is determined according to regulations as specified by ERISA
and subsequent amendments.
Pension expense includes the following components:
<TABLE>
<CAPTION>
Year ended December 31,
1997 1996
---- ----
(in thousands)
<S> <C> <C>
Service cost-benefits earned
during the year $ 2,622 $ 1,982
Interest cost on projected
benefit obligation 5,689 5,330
Actual return on plan assets (4,373) (4,786)
Net amortization and deferral 390 625
-------- --------
Net pension expense included
in "Underwriting, acquisition,
and insurance expense" $ 4,328 $ 3,151
======== ========
</TABLE>
Also, $1,240,000 (net of tax) was charged directly to
policyholders' equity in 1997 as a result of recognizing an
additional minimum pension liability adjustment under Statement of
Financial Accounting Standard (SFAS-87) "Employers' Accounting for
Pensions", and is included in "Other" in the Statements of Equity.
The following table setting forth the Plans' funded status and the
pension liability included in "Other liabilities" in the Company's
Balance Sheets is based on the latest actuarial report available,
which is as of October 1, 1997 and 1996.
<TABLE>
<CAPTION>
Union Central
1997 1996
---- ----
(in thousands)
<S> <C> <C>
Actuarial present value of benefit
obligations:
Accumulated benefit obligation,
including vested benefits of
$44,909 and $43,920 for 1997
and 1996, respectively $ 54,164 $ 50,954
======== ========
Projected benefit obligation $ 64,547 $ 60,216
Plan assets at fair value 48,836 41,912
-------- --------
Projected benefit obligation higher
than plan assets 15,711 18,304
Unrecognized net loss (12,660) (16,184)
Unrecognized net obligation being
recognized over 15 years 368 409
Adjustment required to recognize
minimum liability 1,907 6,514
-------- --------
Pension liability included in
"Other liabilities" at end of year $ 5,326 $ 9,043
======== ========
<CAPTION>
Manhattan Life
1997 1996
---- ----
(in thousands)
<S> <C> <C>
Actuarial present value
of benefit obligations:
Accumulated benefit obligation,
including vested benefits of
$18,375 and $17,674 for 1997
and 1996, respectively $ 18,771 $ 17,886
======== ========
Projected benefit obligation $ 20,217 $ 19,840
Plan assets at fair value 16,817 16,865
-------- --------
Projected benefit obligation
higher than plan assets 3,400 2,975
Unrecognized net loss (1,826) (1,344)
Prior service cost not yet
recognized in net periodic
pension cost (8) (11)
Unrecognized net obligation being
recognized over 15 years (280) (325)
Adjustment required to recognize
minimum liability 2 135
-------- --------
Pension liability included in
"Other liabilities" at end of year $ 1,288 $ 1,430
======== ========
</TABLE>
The unfunded accumulated benefit obligation (ABO) will vary from
year to year as changes in the market value of the plans' assets
differs from changes in the ABO. The ABO varies from year to year
as the rate used to discount future pension benefits related to the
past service of plan participants changes. The discount rate at
each valuation date reflects available rates on high quality fixed
income investments. The investment strategy for the plans' assets
is designed to achieve somewhat higher yields over the long term
than would be achieved by investing entirely in high quality fixed
income investments. Therefore, the market value of the plans'
assets and the ABO do not change in the same amount from year to
year. The Company believes that its current funding policy will
be adequate to meet all future plan obligations over the long term.
<TABLE>
<caption
1997 1996
---- ----
<S> <C> <C>
Union Centra
Assumptions used to determine the
status of the plans were:
Discount rate 7.25% 7.25%
Rate of increase in future
compensation levels 4.25% 4.25%
Expected long-term rate of
return on assets 8.50% 8.50%
<CAPTION>
Manhattan Life
1997 1996
---- ----
<S> <C> <C>
Assumptions used to determine the
status of the plans were:
Discount rate 7.25% 7.25%
Rate of increase in future
compensation levels 4.25% 4.25%
Expected long-term rate of
return on assets 8.50% 8.50%
</TABLE>
Plan assets are primarily composed of mutual funds, unallocated
insurance funds, and guaranteed interest contracts. At December
31, 1997 and 1996, Union Central's pension plans invested
$44,391,000 and $37,261,000, respectively, in affiliated mutual
funds.
The Company has contributory savings plans for employees meeting
certain service requirements which qualifies under Section 401(k)
of the Internal Revenue Code. These plans allows eligible
employees to contribute up to certain prescribed limits of
their pre-tax compensation, with the Company matching 50% of the
first 6% of participants' contributions. The Company's matching
contributions to these Plans were $1,280,000 and $1,199,000 for
1997 and 1996, respectively. The value of the Plans' assets were
$52,519,000 and $44,240,000 at December 31, 1997 and 1996,
respectively. The assets are held in the Company's deposit fund,
in guaranteed interest contracts, or under the variable accounts
of a group annuity policy sponsored by the Company. At December
31, 1997 and 1996, $20,435,000 and $17,632,000, respectively, was
invested in affiliated mutual funds.
NOTE 9 - POSTRETIREMENT BENEFITS
The Company provides certain health care and life insurance
benefits for its eligible retired employees. The plans provide
postretirement medical and life benefits to full time employees who
have worked 15 years and attained age 55 while in service with the
Company. The plans are contributory and contains other cost-
sharing features such as deductibles and coinsurance. The
accounting of the plans anticipates future cost-sharing changes
which are consistent with the Company's expressed intent to require
current and future retirees to pay the cost of medical,
prescription drug and dental benefits in excess of 175 percent of
the costs incurred by the Company to provide such benefits in 1993.
The accumulated postretirement benefit obligation ("APBO") at
December 31, 1997 and 1996 totalled $19,607,000 and $19,294,000,
respectively.
The following table presents the plan's funded status reconciled
with amounts recognized in the Company's Balance Sheets:
<TABLE>
<CAPTION>
December 31,
1997 1996
---- ----
(in thousands)
<S> <C> <C>
Plan Assets $ 6,836 $ 6,934
Accumulated postretirement
benefit obligation:
Retirees 12,242 12,610
Fully eligible active plan participants 3,511 2,541
Other active plan participants 3,854 4,143
------- -------
Accumulated postretirement benefit
obligation in excess of
plan assets 12,771 12,360
Unrecognized net gain
from past experience (3,996) (4,172)
Other 336 --
------- -------
Accrued postretirement benefit cost
included in "Other liabilities" $16,431 $16,532
======= =======
</TABLE>
Net periodic postretirement benefit cost included the following
components:
<TABLE>
<CAPTION>
Year ended December 31,
1997 1996
---- ----
(in thousands)
<S> <C> <C>
Service cost $ 427 $ 393
Interest cost 1,350 1,375
Expected (gain) loss on assets 101 (1,279)
Net amortization and deferral (799) 738
------- -------
Net periodic postretirement benefit
cost included in "Underwriting,
acquisition, and insurance expense" $ 1,079 $ 1,227
======= =======
</TABLE>
The plan assets are invested in Carillon Capital Fund, an
affiliated mutual fund.
The health care cost trend rate assumption has an insignificant
effect on the amounts reported. To illustrate, increasing the
assumed health care cost trend rates by one percentage point in
each year would increase the Company's postretirement benefit
obligation as of December 31, 1997 by $188,000 and the interest
cost and estimated eligibility cost components of the net periodic
postretirement benefit cost by $13,000 and less than $1,000,
respectively.
The weighted-average discount rate used in determining the
accumulated postretirement benefit obligation was 7.25% at December
31, 1997 and 1996.
NOTE 10 - FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
Cash and short-term investments: The carrying amounts
reported in the Balance Sheets for these instruments
approximate their fair values.
Investment securities: Fair values for bonds and preferred
stock are based on quoted market prices, where available.
If quoted market prices are not available, fair values are
estimated using values obtained from independent securities
broker dealers or quoted market prices of comparable
instruments. The fair values of common stock in Company
sponsored mutual funds are based on quoted market prices and
are recognized in "Equity securities available-for-sale at
fair value" in the Balance Sheets.
Mortgage loans: The fair values for commercial and
residential mortgages in good standing are estimated using
discounted cash flow analysis using interest rates currently
being offered for similar loans to borrowers with similar
credit ratings in comparison with actual interest rates and
maturity dates. Fair values for mortgages with potential
loan losses are based on discounted cash flow analysis of the
underlying properties.
Policy loans: Management is unable to ascertain the
estimated life of the policy loan portfolio. Due to the
excessive costs which would be incurred to determine this
information, management considers the estimation of its fair
value to be impracticable. The nature of a policy loan
insures that the outstanding loan balance will be fully
recoverable because the balance owed to the Company is always
equal to or lower than the cash value of the insurance policy
owed to the policyholder. Policy loans are stated at their
aggregate unpaid balance in the Balance Sheets.
Investment contracts: Fair values for the Company's
liabilities under investment-type insurance contracts are
estimated using discounted cash flow calculations, based on
interest rates currently being offered for similar contracts
with maturities consistent with those remaining for the
contracts being valued.
The carrying amounts and fair values of the Company's mortgage
loans are as follows:
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1996
----------------- -----------------
Carrying Fair Carrying Fair
Amount Value Amount Value
------ ----- ------ -----
(in thousands)
<S> <C> <C> <C> <C>
Mortgage loans $745,833 $783,165 $665,575 $702,843
======== ======== ======== ========
</TABLE>
The carrying amounts and fair values of the Company's liabilities
for investment-type insurance contracts are as follows:
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1996
Carrying Fair Carrying Fair
Amount Value Amount Value
---------- ---------- ---------- ----------
(in thousands)
<S> <C> <C> <C> <C>
Group annuities $ 809,990 $ 807,137 $ 871,481 $ 867,562
Single premium
deferred annuities 354,318 351,494 359,469 355,074
Single premium
immediate annuities 25,864 27,576 28,910 31,557
Variable annuities 175,197 172,917 167,336 165,103
Supplementary contracts 56,472 58,157 58,989 59,330
Traditional annuities 24,181 24,465 20,414 20,636
Guaranteed interest
contracts 17,199 17,077 17,138 17,120
Flexible annuities 32,891 31,592 -- --
Other 7,193 7,193 5,989 5,989
---------- ---------- ---------- ----------
Total $1,503,305 $1,497,608 $1,529,726 $1,522,371
========== ========== ========== ==========
</TABLE>
The Company's other insurance contracts are excluded from Statement
of Financial Accounting Standard (SFAS-107) "Disclosures about Fair
Value of Financial Instruments" disclosure requirements. However,
the fair values of liabilities under all insurance contracts are
taken into consideration in the Company's overall management of
interest rate risk, which minimizes exposure to changing interest
rates through the matching of investment maturities with amounts
due under insurance contracts. Additional data with respect to the
carrying value and fair value of the Company's investments is
disclosed in Note 2.
NOTE 12 - LIABILITY FOR UNPAID CLAIMS AND CLAIM ADJUSTMENT EXPENSES
Activity in the liability for unpaid claims and claim adjustment
expense is summarized as follows:
<TABLE>
<CAPTION>
December 31,
1997 1996
---- ----
(in thousands)
<S> <C> <C>
Balance as of January 1 $ 141,508 $ 132,670
Incurred related to:
Current year 138,719 143,216
Prior years 6,027 7,237
--------- ---------
Total incurred 144,746 150,453
--------- ---------
Paid related to :
Current year 94,462 103,245
Prior years 37,677 38,370
--------- ---------
Total paid 132,139 141,615
--------- ---------
Balance as of December 31 $ 154,115 $ 141,508
========= =========
</TABLE>
The balance in the liability for unpaid claims and claim adjustment
expenses is included in "Future policy benefits" and "Policy and
contract claims" in the Balance Sheets.
As a result of changes in estimates of insured events in prior
years, the provision of claims and claim adjustment expenses
increased by $6,027,000 and $7,237,000 in 1997 and 1996,
respectively, due to lower than expected rates of claim
terminations. Included in the above balances are reinsurance
recoverables of $986,000 and $1,287,000 at 1997 and 1996,
respectively.
NOTE 13 - SURPLUS NOTES
On November 1, 1996, Union Central issued $50,000,000 of 8.20%
Surplus Notes (Notes). These Notes mature on November 1, 2026 and
may not be redeemed prior to maturity. The Notes are unsecured and
subordinated to all present and future policy claims, prior claims
and senior indebtedness. Subject to prior written approval of the
Superintendent of the Ohio Insurance Department, these Notes will
pay interest semi-annually on May 1 and November 1. Interest
expense of $4,100,000 and $637,000 was incurred in 1997 and 1996,
respectively, and was recorded as a reduction of "Net investment
income" in the Statements of Income. In connection with issuing
the Notes, Union Central incurred and capitalized $765,000 of
issuance cost. This cost is recorded in "Other assets" in the
Balance Sheets. In 1997, $25,000 of issuance cost was amortized
to "Underwriting, acquisition and insurance expense" in the
Statements of Income. Additionally, the Notes have an original
issue discount of $260,000, which is deducted from the balance of
the Notes. Issuance costs and original issue discount will be
amortized under the straight-line method over the term of the
Notes. In 1997, $9,000 of amortization relating to original issue
discount was recorded in "Underwriting, acquisition and insurance
expense" in the Statements of Income.
NOTE 14 - IMPACT OF YEAR 2000 (UNAUDITED)
Some of the Company's computer programs were written using two
digits rather than four to define the applicable year. As a
result, those computer programs have software that may recognize
a date using "00" as the year 1900 rather than the year 2000.
Computer software incorrectly recognizing a date would cause the
Company's computing environment to not function as expected. Among
the results could be miscalculations causing disruptions of
operations.
A comprehensive assessment of the Company's Year 2000 sensitive
software has been performed and the primary risks and required
software modifications have been identified. The Company will both
modify existing software, and install new software, in time to
ensure the Year 2000 problem does not impact its operations.
PART C
OTHER INFORMATION
CARILLON ACCOUNT
PART C - OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
(1) The Financial Statements of the Registrant,
Carillon Account, are included in Part B.
(2) The Financial Statements of the Depositor, The
Union Central Life Insurance Company, are
included in Part B.
(3) The Schedule of Investments in securities of
unaffiliated issuers is included in the
Carillon Account Financials and Notes.
(b) Exhibits
(1) Resolution of the Board of Directors of The
Union Central Life Insurance Company
authorizing establishment of CA - previously
filed (initial filing on July 11, 1984)
(2) Proposed form of Custodianship Agreement -
previously filed (initial filing on July 11,
1984)
(3) Proposed form of Principal Underwriting
Agreement - previously filed (initial filing
on July 11, 1984)
(4) Specimen Contract - previously filed (initial
filing on July 11, 1984)
(5) Specimen Application - previously filed (Post-
Effective Amendment No. 14 - May 1, 1996)
(6) (a) Certificate of Incorporation of The Union
Central Life Insurance Company - previously
filed (initial filing on July 11, 1984)
(b) Code of Regulations of The Union Central Life
Insurance Company - previously filed (initial
filing on July 11, 1984)
(7) Not Applicable
(8) None
(9) Opinion of John F. Labmeier, Esq., The Union
Central Life Insurance Company - previously
filed (initial filing on July 11, 1984)
(10) Consent of Ernst & Young - filed herewith
(11) None
(12) Not applicable
(13) Performance Calculations - previously filed
(Post-Effective Amendment No. 5 - May 1,
1989)
Item 25. Directors and Officers of the Depositor
Set forth below is a list of the directors and executive
officers of The Union Central Life Insurance Company and the
position held with the Company by each person.
<TABLE>
<CAPTION>
Name and Principal Positions and
Business Address Offices with Depositor
<S> <C>
Philip G. Barach Director
9403 Kenwood Road
Suite D100
Cincinnati, Ohio 45242
V. Anderson Coombe Director
2503 Spring Grove Avenue
Cincinnati, Ohio 45214
William A. Friedlander Director
36 East Fourth Street
Cincinnati, Ohio 45202
William G. Kagler Director
18 Hampton Court
Cincinnati, Ohio 45208
Lawrence A. Leser Director
312 Walnut Street
Cincinnati, Ohio 45202
Francis V. Mastrianna, Ph.D. Director
Slippery Rock University
of Pennsylvania
Slippery Rock, Pennsylvania
16057
Mary D. Nelson, FSA Director
105 West Fourth Street
Cincinnati, Ohio 45202
Paul G. Pearson, Ph.D. Director
5110 Bonham Road
Oxford, Ohio 45056
Thomas E. Petry Director
250 East Fifth Street
Suite 500
Cincinnati, Ohio 45202
Larry R. Pike* Chairman, President and
Chief Executive Officer
Myrtis H. Powell, Ph.D. Director
Miami University
113 Warfield Hall
Oxford, Ohio 45056
Dudley S. Taft Director
312 Walnut Street
Suite 3550
Cincinnati, Ohio 45202
John M. Tew, Jr., M.D. Director
506 Oak Street
Cincinnati, Ohio 45219
George L. Clucas* Senior Vice President
Charles W. Grover* Executive Vice President
Stephen R. Hatcher* Executive Vice President
and Chief Financial Officer
John H. Jacobs* Executive Vice President
Dale D. Johnson* Senior Vice President
Gerald A. Lockwood* Senior Vice President
and Corporate Actuary
David F. Westerbeck* Senior Vice President, General
Counsel and Secretary
</TABLE>
* P.O. Box 40888
Cincinnati, Ohio 45240
Item 26. Persons Controlled by or Under Common Control with
the Depositor or Registrant
Set forth below is a chart showing the entities controlled by
The Union Central Life Insurance Company, 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
a. First Summit Capital Management (Ohio) - 51% owned
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
II. Mutual Funds of the Carillon Group
A. Carillon Fund, Inc.* (Maryland)
B. Carillon Investment Trust** (Massachusetts)
* At January 31, 1998, The Union Central Life Insurance Company
owned 100% of the outstanding shares of Carillon Fund, Inc.
** At January 31, 1998, The Union Central Life Insurance Company
owned 81% 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 27. Number of Contractowners
As of January 31, 1998, the total number of contractowners of
qualified and non-qualified contracts offered by the Registrant was
14,539.
***
Item 29. Principal Underwriters
(a) The principal underwriter of contracts for the
Registrant is Carillon Investments, Inc. Carillon Investments,
Inc. also acts as a principal underwriter for Carillon Investment
Trust and Carillon Life Account.
(b) Set forth below is a list of each officer and director
of Carillon Investments, Inc. and the position held with the
company by each person.
<TABLE>
<CAPTION>
Name and Principal Positions and
Business Address* Offices with Underwriter
<S> <C>
Harry Rossi Director
George L. Clucas Director
Charles W. Grover Director
John H. Jacobs Director
Elizabeth G. Monsell Director and President
Lothar A. Vasholz Director
Kevin W. O'Toole Vice President
Connie S. Grosser Treasurer
Patricia M. Heim Compliance Officer
John F. Labmeier Vice President and Secretary
John M. Lucas Assistant Secretary
(c) Other than distribution fees in the amount of
$3,447,836, Carillon Investments, Inc. received no commissions or
other compensation from the Registrant during 1997.
* The principal business address of each person is
1876 Waycross Road, Cincinnati, Ohio 45240
Item 30. 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 are maintained by the Depositor at its principal office,
1876 Waycross Road, Cincinnati, Ohio 45240.
Item 31. Management Services
None.
Item 32. Undertakings and Representations
The Registrant is relying on a no-action letter issued to the
American Council of Life Insurance published November 28, 1988.
The no-action letter provides certain assurances relying on
compliance with Internal Revenue Code Section 403(b)(11) and
certain provisions of the Investment Company Act of 1940. The
Registrant represents it will comply with paragraph 1 - 4 of the
no-action letter.
The Union Central Life Insurance Company hereby represents
that the fees and charges deducted under the Contract, in the
aggregate, are reasonable in relation to the services rendered, the
expenses expected to be incurred, and the risks assumed by The
Union Central Life Insurance Company.
SIGNATURES
As required by the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant, Carillon Account, certifies
that it meets the requirements of Securities Act Rule 485(b) for
effectiveness of this Registration Statement and has duly caused
this Post-effective Amendment to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized,
and its seal to be hereunto affixed and attested, all in
Cincinnati, State of Ohio on the 29th day of April, 1998.
CARILLON ACCOUNT
(Registrant)
THE UNION CENTRAL LIFE INSURANCE COMPANY
(SEAL) (Depositor)
Attest: /s/ John F. Labmeier By: /s/ Larry R. Pike
Larry R. Pike
Chairman, President and
Chief Executive Officer
The Union Central Life Insurance Company
As required by the Securities Act of 1933, this Registration
Statement has been signed below by the following Directors and
Officers of The Union Central Life Insurance Company in the
capacities and on the dates indicated.
</TABLE>
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Larry R. Pike Chairman, President and
Larry R. Pike Chief Executive Officer
(Principal Executive Officer) 4-29-98
/s/ Stephen R. Hatcher Executive Vice President
Stephen R. Hatcher and Chief Financial Officer
(Principal Financial and
Accounting Officer) 4-29-98
*/s/ Phillip G. Barach Director 4-29-98
Philip G. Barach
*/s/ V. Anderson Coombe Director 4-29-98
V. Anderson Coombe
*/s/ William A. Friedlander Director 4-29-98
William A. Friedlander
*/s/ William G. Kagler Director 4-29-98
William G. Kagler
*/s/ Lawrence A. Leser Director 4-29-98
Lawrence A. Leser
*/s/ Francis V. Mastrianna Director 4-29-98
Francis V. Mastrianna, Ph.D.
*/s/ Mary D. Nelson Director 4-29-98
Mary D. Nelson, FSA
*/s/ Paul G. Pearson Director 4-29-98
Paul G. Pearson, Ph.D.
*/s/ Thomas E. Petry Director 4-29-98
Thomas E. Petry
*/Myrtis H. Powell Director 4-29-98
Myrtis H. Powell, Ph.D.
*/s/ Dudley S. Taft Director 4-29-98
Dudley S. Taft
*/s/ John M. Tew Director 4-29-98
John M. Tew, Jr., M.D.
</TABLE>
* By /s/ David F. Westerbeck, pursuant to Power of Attorney
previously filed.
TABLE OF EXHIBITS
(10) Consent of Ernst & Young
Consent of Independent Auditors
We consent to the reference to our firm under the caption
"Experts" and to the use of our reports pertaining to The Union
Central Life Insurance Company and Carillon Account dated March
16, 1998 and March 2, 1998 respectively, in Post-Effective
Amendment Number 16 to the Registration Statement (Form N-4 No.
2-92146) and related Prospectus of Carillon Account of The Union
Central Life Insurance Company.
/s/ Ernst & Young LLP
Ernst & Young LLP
Cincinnati, Ohio
April 27, 1998
