SUPPLEMENT DATED MAY 1, 2000
TO THE PROSPECTUS DATED MAY 1, 2000
of
CARILLON ACCOUNT
Effective May 1, 2000, the prospectus for Carillon Account dated
May 1, 2000 (the "Prospectus") is amended by including as a part
thereof the following information regarding policies issued in
the State of California:
Nine Portfolios:
AIM V.I. Growth Portfolio
American Century VP Income and Growth Portfolio
American Century VP Value Portfolio
MFS VIT New Discovery Series
Neuberger Berman AMT Guardian Portfolio
Oppenheimer Global Securities Portfolio/VA
Oppenheimer Main Street Growth & Income Portfolio/VA
Summit Pinnacle Nasdaq-100 Index Portfolio
Summit Pinnacle Russell 2000 Small Cap Index Portfolio
are currently not available.
The foregoing provision is only applicable to policies issued in
the State of California.
CA
California
May 1, 2000
<PAGE>
Home Office:
1876 Waycross Road
P.O. Box 40888
Cincinnati, Ohio 45240
Telephone: 1-800-999-1840
PROSPECTUS
Flexible Premium Deferred Variable Annuity
- ---------------------------------------------------------------
CARILLON ACCOUNT
of
THE UNION CENTRAL LIFE INSURANCE COMPANY
This prospectus describes an annuity contract ("the Contract")
offered by The Union Central Life Insurance Company ("we" or
"us" or "Union Central"). The Contract is a flexible premium,
combination fixed and variable annuity contract. The Contract
is designed for use in connection with all types of retirement
plans.
Your Contract's premiums may be allocated in whole or in part:
- to our general account, and accumulate on a guaranteed,
fixed basis, or
- to the Carillon Account, one of our variable annuity
separate accounts where accumulation values are NOT
guaranteed and vary with the performance of one or
or more underlying mutual funds.
Carillon Account is divided into twenty-three "Subaccounts,"
each of which invests in shares of a single investment portfolio
("Portfolio") of an underlying mutual fund ("Fund"). We will
provide you with a prospectus for each Portfolio with this
Prospectus. The available Portfolios consist of:
- seven Portfolios of Summit Mutual Funds, Inc. Pinnacle
Series ("Summit Fund")
- three Portfolios of Scudder Variable Life Investment Fund
("Scudder Fund"),
- five Portfolios of MFS Variable Insurance Trust ("MFS
Fund"),
- two Portfolios of American Century Variable Portfolios,
Inc. ("American Century Fund"),
- one Portfolio of Franklin Templeton Variable Insurance
Products Trust ("Franklin Templeton Fund"),
- two Portfolios of AIM Variable Insurance Funds, Inc.
("AIM Fund"),
- two Portfolios of Oppenheimer Variable Account Fund
("Oppenheimer Fund"),
- one Portfolio of Neuberger Berman Advisers Management
Trust ("Neuberger Berman Fund").
Premiums that you allocate to Carillon Account will vary with
the investment performance of the Portfolio(s) you select.
Similarly, the amount of any variable annuity benefit payments
will vary with the investment performance of the Portfolio(s)
you select. This Prospectus generally describes only the
variable portion of the Contract.
Additional information about Carillon Account and the variable
portion of the Contracts has been filed with the Securities and
Exchange Commission ("SEC") in the form of a Statement of
Additional Information ("SAI"). The SAI is dated May 1, 2000,
and is incorporated herein by reference. You may obtain the SAI
without charge by writing us at the address given above or by
calling the listed telephone number.
THE SEC HAS NOT APPROVED OR DISAPPROVED THE CONTRACTS. NEITHER
THE SEC NOR ANY STATE HAS DETERMINED WHETHER THIS PROSPECTUS IS
TRUTHFUL OR COMPLETE. 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, 2000.
<PAGE>
TABLE OF CONTENTS
DEFINITIONS....................................................4
SUMMARY .......................................................5
SUMMARY OF SEPARATE ACCOUNT EXPENSES...........................8
THE UNION CENTRAL LIFE INSURANCE COMPANY AND CARILLON ACCOUNT.11
The Union Central Life Insurance Company .....................11
Carillon Account .............................................11
The Funds ....................................................11
Additions, Deletions or Substitutions of Investments .........14
THE CONTRACT .................................................15
Purchasing a Contract.........................................15
Premiums......................................................15
Crediting of Accumulation Units...............................15
Value of Accumulation Units...................................16
Transfers.....................................................17
Special Transfers - Dollar Cost Averaging.....................18
Portfolio Rebalancing Plan....................................18
Interest Sweep................................................19
Surrenders....................................................19
Personal Income Plan..........................................20
CHARGES AND OTHER DEDUCTIONS..................................20
Administration Fees...........................................20
Mortality and Expense Risk Charge.............................21
Surrender Charge (Contingent Deferred Sales Charge)...........21
Premium Taxes.................................................23
Fund Expenses.................................................23
BENEFITS UNDER THE CONTRACT...................................23
Death Benefits................................................23
Annuity Benefit Payments .....................................24
THE GUARANTEED ACCOUNT........................................26
General Description...........................................26
Guaranteed Account Accumulations..............................27
Fixed Annuity Benefit Payments................................27
Surrenders....................................................27
Transfers.....................................................28
GENERAL MATTERS...............................................28
Designation of Beneficiary....................................28
20-Day Right to Examine Contract..............................28
Contract Owner's Inquiry......................................28
FEDERAL TAX MATTERS...........................................28
Introduction..................................................28
Tax Status of Contracts.......................................29
Qualified Plans...............................................30
TEXAS OPTIONAL RETIREMENT PROGRAM RESTRICTIONS................31
DISTRIBUTION OF THE CONTRACTS.................................31
VOTING RIGHTS.................................................31
PERFORMANCE DATA..............................................32
FINANCIAL STATEMENTS..........................................32
APPENDIX A - ACCUMULATION UNIT VALUES.........................33
APPENDIX B - IRA DISCLOSURE STATEMENT.........................35
<PAGE>
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-4
MISCELLANEOUS CONTRACT PROVISIONS............................B-6
CUSTODY OF CARILLON ACCOUNT'S ASSETS.........................B-7
EXPERTS......................................................B-7
FINANCIAL STATEMENTS OF CARILLON ACCOUNT AND OF UNION CENTRAL
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY
JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE.
NO DEALER, SALESMAN, OR OTHER PERSON IS AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON.
<PAGE>
DEFINITIONS
accumulation unit - A unit of measure used to calculate the
value of your Variable Account during the Pay-in Period.
accumulation value - The sum of the values of your Contract's
Guaranteed Account and Variable Account.
Annuitant - A person whose life determines the duration of
annuity benefit payments involving life contingencies.
annuity unit - A unit of measure used to calculate variable
annuity benefit payments (during the Pay-out Period).
Beneficiary - The person you designate to receive the Contract's
death benefit.
Carillon Account - One of our variable annuity separate
accounts. Carillon Account currently is divided into twenty-
three Subaccounts, each of which invests exclusively in one
Portfolio of a Fund.
Contract Date - The date we issue your Contract.
Contract Owner ("You") - During the Annuitant's lifetime and
prior to the Maturity Date, the person designated as the owner
in the Contract or as subsequently changed. During the Pay-out
Period, 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 certified copy of a death certificate;
- A certified copy of a decree of a court of competent
jurisdiction as to the finding of death;
- A written statement by a medical doctor who attended the
deceased; or
- Any other proof satisfactory to us.
fixed annuity benefit payments - Annuity benefit payments that
are fixed in amount throughout the Pay-out Period.
The Funds - Mutual funds, one or more investment portfolios of
which are purchased by Carillon Account. Currently the eight
Funds are: Summit Fund, Scudder Fund, MFS Fund, American Century
Fund, Franklin Templeton Fund, AIM Fund, Oppenheimer Fund, and
Neuberger Berman Fund.
Guaranteed Account - The portion (if any) of your Contract's
accumulation value that is held in our general account and
accumulates at a guaranteed rate of at least 4%.
Investment Options - The Guaranteed Account and the twenty-three
Subaccounts of Carillon Account.
Maturity Date - The date on which the Pay-out Period commences
(i.e., when you stop making premium payments to us and we start
making annuity benefit payments to you).
Nonqualified Contracts - Contracts that do not qualify for
special federal income tax treatment.
Pay-in Period - The period during which you may make payments to
us and accumulate Contract values on a fixed or variable basis
(referred to in the Contract as the "Accumulation Period"). The
Pay-in Period commences on the Contract Date and lasts until the
Maturity Date.
Pay-out Period - The period after the Maturity Date during which
we make annuity benefit payments to you (referred to in the
Contract as the "Annuity Period").
Portfolio - A separate investment portfolio of one of the Funds.
Qualified Contracts - Contracts issued in connection with plans
that qualify for special federal income tax treatment.
Subaccount - A part of Carillon Account. Each Subaccount invests
exclusively in shares of a different Portfolio.
Variable Account - The portion of your Contract's accumulation
value that is invested in one or more Subaccounts of Carillon
Account. Your Variable Account is divided into one or more
subdivisions, one for each Subaccount to which you have
allocated your accumulation value.
variable annuity benefit payments - Annuity benefit payments
that vary in amount in relation to the investment performance of
the Subaccount(s) you select during the Pay-Out Period.
SUMMARY
The Contract and the Investment Options
The Contract is designed and offered to aid in the accumulation
of funds on a tax-deferred basis for retirement in connection
with a broad range of retirement plans, including:
- plans established by persons entitled to the benefits of
the Self-Employed Individuals Tax Retirement Act of 1962,
as amended ("H.R. 10 plans");
- 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")
- qualified annuity plans described in Section 403(a) of the
Code;
- annuity purchase plans adopted by public school systems
and certain tax-exempt organizations under Section 403(b)
of the Code;
- Individual Retirement Annuities purchased by or on behalf
of individuals pursuant to Sections 408 (traditional and
Simple IRAs) and 408A (Roth IRA) of the Code;
- government deferred compensation plans pursuant to Section
457 of the Code;
- other qualified plans; and
- nonqualified plans.
Qualified plans provide special tax treatment to participating
employees and self-employed individuals and their beneficiaries.
You may allocate your Contract's accumulation value among the
Contract's 24 Investment Options, which consist of the
Guaranteed Account and the 23 Subaccounts of Carillon Account.
Each Subaccount of Carillon Account invests in one of the
following Portfolios:
- Summit Pinnacle Zenith Portfolio (formerly Carillon Equity
Portfolio)
- Summit Pinnacle Bond Portfolio
- Summit Pinnacle Russell 2000* Index Portfolio
- Summit Pinnacle S&P 500 Index Portfolio**
- Summit Pinnacle S&P MidCap 400 Index Portfolio**
- Summit Pinnacle Balanced Index Portfolio
- Summit Pinnacle Nasdaq-100 Index Portfolio***
- ----------
(footnotes)
*The Russell 2000 Index is a trademark/service mark of the Frank
Russell Company. Russell is a trademark of the Frank Russell
Company. Summit Mutual Funds and the Russell 2000 Small Cap
Index Portfolio are not promoted, sponsored or endorsed by, nor
in any way affiliated with Frank Russell Company. Frank Russell
is not responsible for and has not reviewed the Prospectus, and
Frank Russell makes no representation or warranty, express or
implied, as to its accuracy, or completeness, or otherwise.
Frank Russell Company reserves the right, at any time and
without notice, to alter, amend, terminate or in any way change
its Index. Frank Russell has no obligation to take the needs of
any particular fund or its participants or any other product or
person into consideration in determining, composing or
calculating the Index.
Frank Russell Company's publication of the Index in no way
suggests or implies an opinion by Frank Russell Company as to
the attractiveness or appropriateness of the investment in any
or all securities upon which the Index is based.
FRANK RUSSELL COMPANY MAKES NO REPRESENTATION, WARRANTY, OR
GUARANTEE AS TO THE ACCURACY, COMPLETENESS, RELIABILITY, OR
OTHERWISE OF THE INDEX OR DATA INCLUDED IN THE INDEX. FRANK
RUSSELL COMPANY MAKES NO REPRESENTATION OR WARRANTY REGARDING
THE USE, OR THE RESULTS OF USE, OF THE INDEX OR ANY DATA
INCLUDED THEREIN, OR ANY SECURITY (OR COMBINATION THEREOF)
COMPRISING THE INDEX. FRANK RUSSELL COMPANY MAKES NO OTHER
EXPRESS OR IMPLIED WARRANTY, AND EXPRESSLY DISCLAIMS ANY
WARRANTY OF ANY KIND, INCLUDING, WITHOUT MEANS OF LIMITATION,
ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE WITH RESPECT TO THE INDEX OR ANY DATA OR ANY SECURITY
(OR COMBINATION THEREOF) INCLUDED THEREIN.
**"Standard & Poor's(R)", "S&P(R)," "S&P 500(R)", "Standard &
Poor's 500(R)", "500," "S&P MidCap 400 Index," and "Standard &
Poor's Midcap 400 Index" are trademarks of The McGraw-Hill
Companies, Inc. and have been licensed for use by Summit Fund.
The Portfolio is not sponsored, endorsed, sold or promoted by
Standard & Poor's. See further discussion in the Summit Fund
prospectus.
***The Product(s) is not sponsored, endorsed, sold or promoted
by The Nasdaq Stock Market, Inc.(including its affiliates)
(Nasdaq, with its affiliates, are referred to as the
Corporations). The Corporations have not passed on the legality
or suitability of, or the accuracy or adequacy of descriptions
and disclosures relating to, the Product(s). The Corporations
make no representation or warranty, express or implied to the
owners of the Product(s) or any member of the public regarding
the advisability of investing in securities generally or in the
Product(s) particularly, or the ability of the Nasdaq-100 Index
to track general stock market performance. The Corporations'
only relationship to The Union Central Life Insurance Company
(Licensee) is in the licensing of the Nasdaq-100(R), Nasdaq-100
Index(R), and Nasdaq(R) trademarks or service marks, and certain
trade names of the Corporations and the use of the Nasdaq-100
Index which is determined, composed and calculated by Nasdaq
without regard to Licensee or the Product(s). Nasdaq has no
obligation to take the needs of the Licensee or the owners of
the Product(s) into consideration in determining, composing or
calculating the Nasdaq-100 Index(R). The Corporations are not
responsible for and have not participated in the determination
of the timing of, prices at, or quantities of the Product(s) to
be issued or in the determination or calculation of the equation
by which the Product(s) is to be converted into cash. The
Corporations have no liability in connection with the
administration, marketing or trading of the Product(s).
THE CORPORATIONS DO NOT GUARANTEE THE ACCURACY AND/OR
UNINTERRUPTED CALCULATION OF THE NASDAQ-100 INDEX(R) OR ANY DATA
INCLUDED THEREIN. THE CORPORATIONS MAKE NO WARRANTY, EXPRESS OR
IMPLIED, AS TO RESULTS TO BE OBTAINED BY LICENSEE, OWNERS OF THE
PRODUCT(S), OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE
NASDAQ-100 INDEX(R) OR ANY DATA INCLUDED THEREIN. THE
CORPORATIONS MAKE NO EXPRESS OR IMPLIED WARRANTIES, AND
EXPRESSLY DISCLAIM ALL WARRANTIES OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE NASDAQ-100
INDEX(R) OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF
THE FOREGOING, IN NO EVENT SHALL THE CORPORATIONS HAVE ANY
LIABILITY FOR ANY LOST PROFITS OR SPECIAL, INCIDENTAL, PUNITIVE,
INDIRECT, OR CONSEQUENTIAL DAMAGES, EVEN IF NOTIFIED OF THE
POSSIBILITY OF SUCH DAMAGES.
- -----------
- Scudder Fund Capital Growth Portfolio Class A
- Scudder Fund International Portfolio Class A
- Scudder Fund Money Market Portfolio
- MFS Growth With Income Series
- MFS High Income Series
- MFS Emerging Growth Series
- MFS Total Return Series
- MFS New Discovery Series
- American Century VP Income & Growth Portfolio
- American Century VP Value Portfolio
- Templeton International Securities Fund Class 2
(previously Templeton International Fund)
- Neuberger Berman AMT Guardian Portfolio
- AIM V.I. Capital Appreciation Fund
- AIM V.I. Growth Fund
- Oppenheimer Fund Global Securities Portfolio
- Oppenheimer Fund Main Street Growth & Income Fund
Your Contract's accumulation value will vary according to the
investment experience of the Portfolio(s) you select. Similarly,
the dollar amount of variable annuity benefit payments will vary
according to the investment experience of the Portfolio(s)
selected. You bear the entire investment risk for all amounts
you allocate to any of the 23 variable investment options.
Allocations to the Guaranteed Account accumulate at a guaranteed
rate of at least 4% on an annual basis.
Premiums
Each premium payment must be at least $25 for Qualified
Contracts and $50 for Nonqualified Contracts. You may pay
premiums at any time and in any amount, subject to the $25/$50
minimum and a maximum (which we may waive) of $10,000 per
Contract Year. However, if you pay no premiums for two
consecutive Contract Years (three in New York), then under
certain circumstances we may pay you your Contract's
accumulation value (minus the administration fee and surrender
charge, if applicable) and cancel your Contract.
Surrenders
You may totally or partially surrender your Contract and be paid
all or part of its accumulation value at any time during the
Pay-in Period (unless your Contract was issued in connection
with a plan adopted pursuant to Section 403(b) of the Code --
see page 30). Certain surrenders may be subject to a surrender
charge and a penalty tax may be imposed. In addition, you may
return your Contract for a refund within 20 days after receiving
it.
Transfers
During the Pay-in Period, you may transfer your accumulation
values among the subdivisions of your Variable Account or
between those subdivisions and your Guaranteed Account, as
frequently as desired. Transfers generally must be at least
$300. 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. During
the Pay-in Period, you may transfer up to the greater of 20% of
the value of your Guaranteed Account (as of the first day of the
Contract Year), or $1,000 to one or more subdivisions of your
Variable Account each Contract Year.
During the Pay-out Period, you may, once each year, change the
investment option upon which the amount of your variable annuity
benefit payments are calculated by requesting that we transfer
annuity reserves among the Portfolios.
Annuity Benefit Payments
You can choose among a variety of types of fixed and variable
annuity benefit payments to be made during the Pay-out Period.
If the Annuitant dies before the Maturity Date and the Annuitant
was the Contract Owner or the Contract Owner is still living,
then we will pay the beneficiary a death benefit equal to the
greater of:
- the Contract's accumulation value, or
- the sum of all premiums paid less any amounts deducted in
connection with partial surrenders.
Charges
No sales charge is deducted from your premiums. However, we
will deduct a surrender charge upon certain early surrenders or
withdrawals. This surrender charge depends on how long your
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 your Contract's 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 Contract 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.
We deduct an administration fee of $30 per year from your
Contract's accumulation value during the Pay-in Period. We will
waive the annual administration fee for any year in which the
accumulation value of your Contract is $25,000 or more on the
last day of that Contract Year. We also reserve the right to
waive this fee for Contracts sold to select classes of employer-
sponsored retirement plans. We also deduct a daily
administrative charge at the rate of 0.25% of net assets per
year during both the Pay-in and Pay-out Periods.
As compensation for our assumption of mortality and expense
risks, we deduct a charge from Carillon Account that is
currently 1.00% of net assets per year and will never exceed
1.70% per year. In accordance with state laws, premium taxes
will be deducted from some Contracts.
The Funds in which Carillon Account invests pay an investment
advisory fee and other expenses which are described in the Fund
prospectuses.
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 of surrender 1 2 3 4 5 6 7 8 Thereafter
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Applicable Charge* 7% 7% 6% 5% 4% 3% 2% 1% Free
</TABLE>
Transfer Fee ......................................... $10**
Annual Administration Fee ............................ $30***
Separate Account Annual Expenses
(as a percentage of average account value)
Mortality and Expense Risk Charge 1.00%
Administration Fee .25%
Total Separate Account Annual Expenses 1.25%
- ----------
* Partial surrenders totaling up to 10% of a Contract's
accumulation value may be made each Contract Year without
the surrender charge being assessed.
** During the Pay-in Period, up to six transfers may be made
each Contract Year without charge.
*** Waived for any year in which the Contract's accumulation
value is $25,000 or more on the last day of the Contract
Year.
<PAGE>
Fund Portfolio Expenses
<TABLE>
<CAPTION>
Management Other Total
Fees Expenses Expenses
<S> <C> <C> <C>
Summit Mutual Funds, Inc.
Zenith Portfolio<F1><F7> 0.60% 0.09% 0.69%
Bond Portfolio<F1><F7> 0.47% 0.13% 0.60%
S&P 500 Index Portfolio<F1><F7> 0.30% 0.09% 0.39%
S&P MidCap 400 Index Portfolio<F5> 0.30% 0.30% 0.60%
Balanced Index Portfolio<F5> 0.30% 0.17% 0.47%
Russell 2000 Small Cap Index Portfolio<6> 0.35% 0.40% 0.75%
Nasdaq-100 Index Portfolio<F6> 0.35% 0.30% 0.65%
Scudder Variable Life Investment Fund<F1>
Capital Growth Portfolio Class A 0.46% 0.03% 0.49%
International Portfolio Class A 0.85% 0.18% 1.03%
Money Market Portfolio 0.37% 0.06% 0.43%
MFS Variable Insurance Trust <F1><F2>
Growth With Income Series 0.75% 0.13% 0.88%
High Income Series<F8> 0.75% 0.26% 1.01%
Emerging Growth Series 0.75% 0.09% 0.84%
Total Return Series 0.75% 0.15% 0.90%
New Discovery Series<F9> 0.90% 0.27% 1.17%
American Century Variable Portfolios, Inc.<F1>
VP Value 1.00% <F3> 1.00%
VP Income & Growth 0.70% <F3> 0.70%
AIM Variable Insurance Funds, Inc.<F1>
AIM V.I. Capital Appreciation Fund 0.61% 0.12% 0.73%
AIM V.I. Growth Fund 0.63% 0.10% 0.73%
<CAPTION>
12b-1 Management Other Total
Fees Fees Expenses Expenses
<S> <C> <C> <C> <C>
Templeton Variable Insurance Products
Trust<F4><F10>
Templeton International Securities Fund
Class 2 0.25% 0.69% 0.19% 1.13%
<CAPTION>
Management Other Total
Fees Expenses Expenses
<S> <C> <C> <C>
Neuberger Berman Advisers Management Trust<F1>
AMT Guardian Portfolio 0.85% 0.15% 1.00%
Oppenheimer Variable Account Fund<F1>
Global Securities Fund 0.67% 0.02% 0.69%
Main Street Growth & Income Fund 0.73% 0.05% 0.78%
<FN>
<F1> Figures are based on the actual expenses incurred by the Portfolio for the
year ended December 31, 1999 Actual Portfolio expenses may vary.
<F2> 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' expense). Any such fee reductions are not
reflected under "Other Expenses."
<F3> All expenses except brokerage, taxes, interest and fees and expenses of
non-interested person directors are paid by the investment adviser.
<F4> Class 2 of the Fund has a distribution plan or "Rule 12b-1 plan" which is
described in the Fund's prospectus.
<F5> This Portfolio commenced operations on May 3, 1999. Actual expenses would
be higher for the period shown above if the Adviser had not reimbursed
expenses.
<F6> This Portfolio commenced operations on December 27, 1999; therefore, the
expense figures for this Portfolio are estimated.
<F7> The adviser has reduced its management fee from those shown above for a
period of one year beginning April 1, 2000, as follows: .03% (S&P 500); .08%
(Zenith); .20% (Bond).
<F8> Subject to reimbursement, the adviser is paying, under a temporary expense
reimbursement agreement, all operating expenses, exclusive of management fees.
In consideration, the Portfolio pays the adviser a fee not greater than 0.25%
of average daily net assets. To the extent actual expenses deviated from this
limitation, the expense ratio would have been 0.97%.
<F9> Subject to reimbursement, the adviser is paying all operating expenses,
exclusive of management fees. In consideration, the Portfolio pays the adviser
a fee not greater than 0.25% of average daily net assets. To the extent actual
expenses deviated from this limitation, the expense ratio would have been
2.49%.
<F10> On 2/8/00, shareholders approved a merger and reorganization that
combined the fund with the Templeton International Equity Fund, effective
5/1/00. The shareholders of that fund had approved new management fees, which
apply to the combined fund effective 5/1/00. The table shows restated total
expenses based on the new fees and the assets of the fund as of 12/31/99, and
not the combined assets. The fund's expenses after 5/1/00 would be estimated
as: Management Fees 0.65%, 12b-1 fees 0.25%, Other Expenses 0.20%, and Total
Expenses 1.10%.
</TABLE>
<PAGE>
Example*: If you surrender your Contract at the end of the
applicable time period, you would pay the following expenses
on a $1,000 investment, assuming 5% annual return on assets:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Zenith Subaccount $93 $129 $156 $236
Bond Subaccount $92 $127 $151 $227
S&P 500 Index Subaccount $90 $121 $141 $204
S&P MidCap 400 Index Subaccount $92 $127 $152 $227
Balanced Index Subaccount $91 $123 $145 $213
Russell 2000 Small Cap Index Subaccount $93 $131 $159 $242
Nasdaq 100 Index Subaccount $92 $128 $154 $232
Capital Growth Subaccount $91 $123 $146 $215
Scudder International Subaccount $96 $139 $173 $272
Money Market Subaccount $90 $122 $143 $208
Growth With Income Subaccount $95 $135 $165 $256
High Income Subaccount $96 $139 $172 $269
Emerging Growth Subaccount $94 $134 $163 $252
Total Return Subaccount $95 $135 $166 $258
New Discovery Subaccount $97 $143 $179 $286
VP Value Subaccount $96 $138 $171 $268
VP Income & Growth Subaccount $93 $130 $156 $237
AIM V.I. Capital Appreciation Fund $93 $130 $158 $240
AIM V.I. Growth Subaccount $93 $130 $158 $240
Templeton International Subaccount-Class 2 $97 $142 $177 $282
AMT Guardian Subaccount $96 $138 $171 $269
Global Securities Subaccount $93 $129 $156 $237
Main Street Growth & Income Subaccount $94 $132 $160 $246
</TABLE>
If you annuitize at the end of the applicable time period
or if you do not surrender your Contract, you would pay
the following expenses on a $1,000 investment, assuming
5% annual return on assets:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Zenith Subaccount $21 $64 $110 $236
Bond Subaccount $20 $61 $105 $227
S&P 500 Index Subaccount $18 $54 $94 $204
S&P MidCap 400 Index Subaccount $20 $61 $105 $227
Balanced Index Subaccount $18 $57 $98 $213
Russell 2000 Small Cap Index Subaccount $21 $66 $113 $242
Nasdaq-100 Index Subaccount $20 $63 $107 $232
Capital Growth Subaccount $19 $58 $99 $215
Scudder International Subaccount $24 $74 $127 $272
Money Market Subaccount $18 $56 $96 $208
Growth With Income Subaccount $23 $70 $119 $256
High Income Subaccount $24 $74 $126 $269
Emerging Growth Subaccount $22 $68 $117 $252
Total Return Subaccount $23 $70 $120 $258
New Discovery Subaccount $26 $79 $134 $286
VP Value Subaccount $24 $73 $126 $268
VP Income & Growth Subaccount $21 $64 $110 $237
AIM V.I. Capital Appreciation Fund $21 $65 $112 $240
AIM V.I. Growth Subaccount $21 $65 $112 $240
Templeton International Subaccount-Class 2 $25 $77 $132 $282
AMT Guardian Subaccount $24 $74 $126 $269
Global Securities Subaccount $21 $64 $110 $237
Main Street Growth & Income Subaccount $22 $67 $114 $246
</TABLE>
The purpose of this table is to assist you in understanding the
various costs and expenses that you will bear directly or
indirectly. The table reflects expenses of Carillon Account as
well as those of the Funds. 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 1998 by the total average net assets
attributable to the Contracts. Net assets attributable to the
Contracts includes amounts allocated to both Carillon Account
and the Guaranteed Account except for such amounts as are held
as reserves for annuity benefit payments.
<PAGE>
THE UNION CENTRAL LIFE INSURANCE COMPANY
AND CARILLON ACCOUNT
[TO THE LEFT OF THE NEXT PARAGRAPH THE FOLLOWING IS ENCASED IN A
BOX: We are a mutual insurance company.]
The Union Central Life Insurance Company
We are a mutual insurance company, organized in 1867 under the
laws of Ohio. We are primarily engaged in the sale of life and
disability insurance and annuities and are currently licensed to
operate in all states and the District of Columbia. The Contract
is available in all states.
[TO THE LEFT OF THE NEXT PARAGRAPH THE FOLLOWING IS ENCASED IN A
BOX: Carillon Account is one of our separate accounts.]
Carillon Account
Carillon Account is one of our separate accounts. It is
registered with the SEC as a unit investment trust under the
Investment Company Act of 1940. Such registration does not mean
that the SEC supervises the management or investment practices
or policies of Carillon Account. Our Board of Directors
established Carillon Account on February 6, 1984.
Although the assets of Carillon Account belong to us, those
assets are held separately from our other assets, and are not
chargeable with our liabilities incurred in any other business
operations (except to the extent that assets in Carillon Account
exceed our liabilities under the variable portion of the
Contracts). Accordingly, the income, capital gains, and capital
losses incurred on the assets of Carillon Account are credited
to or charged against the assets of Carillon Account, without
regard to the income, capital gains or capital losses arising
out of any other business we may conduct. Therefore, the
investment performance of Carillon Account is entirely
independent of both the investment performance of our general
assets and the performance of any other of our separate
accounts.
[TO THE LEFT OF THE NEXT PARAGRAPH THE FOLLOWING IS ENCASED IN A
BOX: Each Subaccount of Carillon Account invests in a different
Fund Portfolio.]
Carillon Account has been divided into twenty-three Subaccounts,
each of which invests in a different Portfolio of the Funds. We
may add additional Subaccounts at our discretion.
The Funds
The Funds are mutual funds registered with the SEC. Such
registration does not mean that the SEC supervises the
management or investment practices or policies of the Funds. The
Funds and their investment advisers are:
<TABLE>
<CAPTION>
Fund Investment Adviser
<C> <C>
Summit Fund................Summit Investment Partners, Inc.
Scudder Fund...............Scudder Kemper Investments, Inc.
MFS Fund...................Massachusetts Financial Services Company
American Century Fund......American Century Investment Management, Inc.
Franklin Templeton Fund....Templeton Investment Counsel, Inc.
AIM Fund...................AIM Advisors, Inc.
Oppenheimer Fund...........OppenheimerFunds, Inc.
Neuberger Berman Fund......Neuberger Berman Management, Inc.
</TABLE>
[TO THE LEFT OF THE NEXT PARAGRAPH THE FOLLOWING IS ENCASED IN A
BOX: Twenty-three Portfolios currently are available.
Carillon Account invests in the:
- Zenith, Bond, Russell 2000 Index, S&P 500 Index, S&P MidCap
400 Index, Nasdaq-100 Index, and Balanced Index Portfolios
of Summit Fund;
- Capital Growth and International Portfolios (Class A), and
Money Market Portfolio, of Scudder Fund;
- MFS Growth With Income, MFS High Income, MFS Emerging
Growth and MFS Total Return, and MFS New Discovery Series
of MFS Fund;
- American Century VP Income & Growth and Value Portfolios of
American Century Fund;
- Templeton International Securities Fund Class 2 Portfolio
of Franklin Templeton Fund;
- AIM V.I. Capital Appreciation Fund and Growth Fund of AIM
Fund.
- Neuberger Berman AMT Guardian Portfolio of Neuberger Berman
Fund; and
- Oppenheimer Global Securities Fund and Main Street Growth &
Income Fund of Oppenheimer Fund;
Each Fund has one or more 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 Summit Pinnacle Zenith Portfolio seeks primarily long-term
appreciation of capital by investing primarily in common stocks
and other equity securities.
The Summit Pinnacle 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 Summit Pinnacle Russell 2000 Index Portfolio seeks investment
results that correspond to the investment performance of U.S. common
stocks, as represented by the Russell 2000 Index. The Portfolio
invests primarily in stocks of companies listed in the Russell 2000
Index, as well as futures contracts and options relating to those
stocks.
The Summit Pinnacle 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 Summit Pinnacle S&P MidCap 400 Index Portfolio seeks
investment results that correspond to the total return
performance of U.S. common stocks, as represented by the S&P
MidCap 400 Index.
The Summit Pinnacle Balanced Index Portfolio seeks investment
results, with respect to 60% of its assets, that correspond to
the total return performance of U.S. common stocks, as
represented by the S&P 500 Index and, with respect to 40% of its
assets, that correspond to the total return performance of
investment grade bonds, as represented by the Lehman Brothers
Aggregate Bond Index.
The Summit Pinnacle Nasdaq-100 Index Portfolio seeks investment
results that correspond to the investment performance of U.S.
common stocks, as represented by the Nasdaq-100 Index. The
Portfolio invests primarily in stocks of companies listed in the
Nasdaq-100 Index, as well as futures contracts and options
relating to those stocks.
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 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.
The MFS Emerging Growth Series seeks to provide long-term growth
of capital.
The MFS Total Return Series seeks primarily to provide above-
average income (compared to a portfolio invested entirely in
equity securities) consistent with the prudent employment of
capital, and secondarily to provide a reasonable opportunity for
growth of capital and income.
The MFS New Discovery Series seeks capital appreciation by,
under normal market conditions, investing at least 65% of its
total assets in equity securities of emerging growth companies.
Its focus is on small emerging growth companies.
The American Century VP Income & Growth Fund seeks dividend
growth, current income and capital appreciation by investing in
common stocks. The Portfolio selects its investments primarily
from the largest 1,500 publicly traded U.S. companies.
The American Century VP Value Fund seeks long-term capital
growth, with income being a secondary objective. The Portfolio
invests primarily in stocks of medium to large companies that
the portfolio managers believe are undervalued at the time of
purchase.
The Templeton International Securities Fund Class 2 seeks long-
term capital growth. The fund invests in equity securities of
companies located outside the United States, including emerging
markets.
The AIM V.I. Capital Appreciation Fund seeks growth of capital
through investment in common stocks, with emphasis on medium and
small-sized growth companies.
The AIM V.I. Growth Fund seeks growth of capital primarily by
investing in established and large companies considered to have
strong earnings momentum.
The Neuberger Berman AMT Guardian Portfolio seeks long-term
growth of capital; current income is a secondary goal. The
Portfolio invests mainly in common stocks of large companies.
The Oppenheimer Global Securities Fund/VA seeks long-term
capital appreciation by investing a substantial portion of
assets in securities of foreign issuers, "growth-type"
companies, cyclical industries and special situations that are
considered to have appreciation possibilities.
The Oppenheimer Main Street Growth & Income Fund/VA seeks high
total return (which includes growth in the value of its shares
as well as current income) from equity and debt securities. It
invests mainly in common stocks of U.S. companies, with an
emphasis on large-capitalization companies.
[TO THE LEFT OF THE NEXT PARAGRAPH THE FOLLOWING IS ENCASED IN A
BOX: Portfolio performance is NOT guaranteed.]
THERE IS NO ASSURANCE THAT ANY PORTFOLIO WILL ACHIEVE ITS STATED
OBJECTIVE. Additional information about the investment
objectives and policies of the Portfolios can be found in the
current Fund prospectuses which are attached to this prospectus.
You should read the Fund prospectuses carefully before making
any decision about the allocation of your premiums to a
particular Subaccount of Carillon Account.
[TO THE LEFT OF THE NEXT PARAGRAPH THE FOLLOWING IS ENCASED IN A
BOX: We may add, delete or modify the Portfolios available under
the Contract.]
Additions, Deletions or Substitutions of Investments
We retain the right, subject to any applicable law, to make
additions to, deletions from, or substitutions for, the
Portfolio shares purchased by any Subaccount of Carillon
Account. We reserve the right to eliminate the shares of any of
the Portfolios and to substitute shares of another Portfolio, or
of another open-end, registered investment company, if the
shares of the Portfolio are no longer available for investment,
or if in our judgment investment in any Portfolio would become
inappropriate. To the extent required by applicable law,
substitutions of shares attributable to your interest in a
Subaccount will not be made until you have been notified of the
change, and until the SEC has approved the change. In the case
of such a 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 Carillon
Account 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.
We may also establish additional Subaccounts of Carillon
Account. Each additional Subaccount would purchase shares in a
new Portfolio or in another Fund. New Subaccounts may be
established when, in our discretion, marketing needs or
investment conditions warrant, and any new Subaccounts will be
made available to existing Contract Owners, if at all, only on a
basis we determine. We may also eliminate one or more
Subaccounts if we believe that marketing, tax or investment
conditions so warrant.
In the event of any such substitution or change, we may, by
appropriate endorsement, make corresponding changes in the
Contracts. If we deem it to be in the best interests of persons
having voting rights under the Contracts, Carillon Account may
be operated as a management company under the Investment Company
Act of 1940 or it may be deregistered under that Act in the
event such registration is no longer required, or it may be
combined with one or more other separate accounts.
THE CONTRACT
[TO THE LEFT OF THE NEXT PARAGRAPH THE FOLLOWING IS ENCASED IN A
BOX: Minimum premium payments are $25 for Qualified Contracts
and $50 for Nonqualified Contracts.]
Purchasing a Contract
You can purchase a Contract by completing an application and
having it and a premium of at least $25 for Qualified Contracts
or $50 for Nonqualified Contracts sent to us by one of our
registered representatives. Acceptance of an application is
subject to our underwriting rules and we reserve the right to
reject any application. If we cannot credit an initial premium
to the Contract within five business days of our receipt of it,
then we will return the premium immediately unless the applicant
consents to our holding the premium for a longer period. We will
credit initial premiums accompanied by completed applications to
the Contract not later than two business days following receipt.
[TO THE LEFT OF THE NEXT PARAGRAPH THE FOLLOWING IS ENCASED IN A
BOX: Subsequent premiums may be made at any time.]
Premiums
After the first premium has been paid and accepted, you have
flexibility (within the limits of your retirement plan, if any)
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. We may waive the maximum but a waiver in one instance does
not constitute a waiver for any additional premiums.
[TO THE LEFT OF THE NEXT PARAGRAPH THE FOLLOWING IS ENCASED IN A
BOX: If you stop making premium payments and have a small
accumulation value, we may terminate your Contract.]
If you pay no premiums for two consecutive Contract Years (three
if you live in New York), we may cancel your Contract and return
its accumulation value (minus the administration fee and
surrender charge, if applicable) but only if:
- the accumulation value is less than $2,000 at the end of
the two-year period (three in New York);
- the total premium paid, less any partial surrenders, is
less than $2,000; and
- we have given you at least 30 days notice to pay an
additional premium to prevent cancellation.
Your premiums will be allocated among the twenty-four Investment
Options in accordance with the instructions specified in your
application for the Contract or as you may subsequently change
them. You may allocate any portion of your premiums (subject to
a $10 minimum) to any of the Investment Options. You may change
your payment allocation instructions at any time, without
charge, by providing us new instructions in a form acceptable to
us.
[TO THE LEFT OF THE NEXT PARAGRAPH THE FOLLOWING IS ENCASED IN A
BOX: Accumulation units are used to measure the value of your
Variable Account subdivisions.]
Crediting of Accumulation Units
We credit premiums that you allocate to your Variable Account to
your Contract in the form of Accumulation Units. The number of
Accumulation Units credited to your Contract is determined by
dividing the amount you allocate to each subdivision of the
Variable Account by the Accumulation Unit value for the
corresponding Subaccount of Carillon Account for the Valuation
Period during which your 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.
During the Pay-in Period, your Contract's accumulation value
equals the sum of the Variable Account and the Guaranteed
Account credited to your 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 26.
[TO THE LEFT OF THE NEXT PARAGRAPH THE FOLLOWING IS ENCASED IN A
BOX: The values of accumulation units vary with the performance
of corresponding Portfolios. The values of accumulation units are
computed at the close of business on each "valuation date."]
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
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:
- when the New York Stock Exchange is closed (currently,
New Year's Day, Martin Luther King, Jr. Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day
(observed), Labor Day, Thanksgiving Day, and Christmas
Eve); and
- any day on which changes in the value of the portfolio
securities of a Portfolio will not materially affect the
current net asset value of the shares of that 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:
- the net asset value per Portfolio share held in the
Subaccount determined as of the end of the current
valuation period; plus
- 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
- a per share charge or credit for any taxes incurred by
or provided for in the Subaccount, which we determine
to have resulted from the maintenance of the Subaccount
(we do not believe that currently any taxes are incurred
by Carillon Account); and
(B) is:
- the net asset value per 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
- 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 we deduct from
Carillon Account 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.
[TO THE LEFT OF THE NEXT PARAGRAPH THE FOLLOWING IS ENCASED IN A
BOX: During the Pay-in Period, you may make 6 free transfers per Contract
Year from or among the Variable Account subdivisions. Additional transfers
cost $10 each. Transfers from the Guaranteed Account are subject to
restrictions.]
Transfers
During the Pay-in Period, you may transfer amounts among
subdivisions of your Contract's Variable Account or between the
Guaranteed Account and subdivisions of the Variable Account.
You may transfer up to the greater of:
- 20% of the value of the Guaranteed Account (as of the
first day of the Contract Year), or
- $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.
During the Pay-in Period, you may make up to six free transfers
each Contract Year. However, we will impose a transaction
charge (currently $10 and guaranteed not to exceed $15) for each
transfer in excess of six. 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.
Your transfer requests must be made by 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 we receive the transfer request at
our Home Office (address and phone number on the first page of
this prospectus).
During the Pay-out Period, the Annuitant can change the reserve
basis (contract reserves for the specific variable annuity
contract involved) for the variable annuity benefit 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
benefit payments will result in subsequent annuity benefit
payments being based on the investment performance of the
Subaccount to which annuity reserves have been transferred.
[TO THE LEFT OF THE NEXT PARAGRAPH THE FOLLOWING IS ENCASED IN A
BOX: You may make transfers by telephone. ]
Telephone Transfers: You are eligible to make transfers pursuant
to telephone instructions unless you tell us in writing that you
do not want to make transfers by telephone.
Telephone transfer instructions may be made by calling 1-800-
456-9319 between 9:00 a.m. and 3:30 p.m. (Eastern Time) on days
when we are open for business. Each telephone exchange request
must include a precise identification of your Contract and your
"Personal Security Code" or other designated identifiers. We may
accept telephone exchange requests from any person who properly
identifies the correct Contract Number and Personal Security
Code or other designated identifiers. Thus, you risk possible
loss of interest, capital appreciation and principal in the
event of an unauthorized telephone exchange. Neither we nor the
Funds nor Carillon Investments, Inc. (the principal underwriter
of the Contracts) will be liable for complying with telephone
instructions we reasonably believe to be authentic, nor for any
loss, damage, cost or expense in acting on such telephone
instructions, and you will bear the risk of any such loss. We
will employ reasonable procedures to confirm that telephone
instructions are genuine. If we do not employ such procedures,
we 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. We may record all or part of any telephone conversation
relating to transfer instructions 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. You may change allocations of future premium
payments by providing us new instructions in a form acceptable
to us.
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 we
will process them pursuant to the terms and restrictions already
described in this section.
We reserve the right to modify, suspend or discontinue the
telephone transfer privilege at any time and without prior
notice.
[TO THE LEFT OF THE NEXT PARAGRAPH THE FOLLOWING IS ENCASED IN A
BOX: You may pre-arrange certain types of transfers, including
ones in connection with Dollar Cost Averaging, Portfolio
Rebalancing and Interest Sweep programs.]
Special Transfers - Dollar Cost Averaging
We administer a dollar cost averaging ("DCA") program that
enables you to pre-authorize a periodic exercise of your right
to transfer amounts among subdivisions of the Variable Account.
Contract Owners entering into a DCA agreement instruct us to
transfer monthly (as of the first business day of the month) a
predetermined dollar amount from the Money Market subdivision to
other subdivisions of your Variable Account until the amount in
your Money Market subdivision is exhausted. The minimum amount
of a DCA transfer is $100. You may terminate your DCA agreement
at any time by notifying us in writing at least five business
days prior to the next scheduled transfer date.
Transfers made pursuant to the DCA program are not subject to a
transfer charge and do not affect your Contract right during the
Pay-in Period to make up to six transfers each Contract Year
without charge.
By allocating specific amounts on a regularly scheduled basis,
as opposed to allocating the total amount at one particular
time, you 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.
If you are interested in the DCA program, you may elect to
participate in it by separate application.
Portfolio Rebalancing Plan
If you have at least $5,000 in your Variable Account, you may
elect to establish a Portfolio Rebalancing Plan. Under such a
plan, you may tell us (in your application or by separate
application) the percentage levels you would like to maintain
among the subdivisions of your Variable Account. On a
quarterly, semi-annual or annual basis (as you select), we will
automatically rebalance the subdivisions of your Variable
Account to maintain the indicated percentages by transfers among
the subdivisions. The entire value of the subdivisions of your
Variable Account must be included in your Portfolio Rebalancing
Plan. Other investment programs, such as the DCA program,
Interest Sweep Plan (see below), or other transfers or
withdrawals may not be appropriate in concert with the Portfolio
Rebalancing Plan. Transfers made pursuant to the Portfolio
Rebalancing Plan are not subject to a transfer charge and do not
affect your right to make up to six free transfers each Contract
Year during the Pay-in Period. You may terminate your Portfolio
Rebalancing Plan at any time by notifying us in writing at least
five business days prior to the date of the next rebalancing.
The Portfolio Rebalancing Plan is not available for amounts in
the Guaranteed Account. We reserve the right to alter the terms
or suspend or eliminate the availability of the Portfolio
Rebalancing Plan at any time.
Interest Sweep Plan
If you have at least $5,000 in the Guaranteed Account, you may
elect (in your application or by separate application) 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. You may terminate your Interest Sweep
Plan at any time by notifying us 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 your right to
make up to six free transfers each Contract Year during the Pay-
in Period. We reserve the right to alter the terms or suspend
or eliminate the availability of the Interest Sweep Plan at any
time.
[TO THE LEFT OF THE NEXT PARAGRAPH THE FOLLOWING IS ENCASED IN A
BOX: Full or partial surren-ders give you access to your
Contract's accumulation values. Surrender charges and penalty
taxes may apply to some surrenders.]
Surrenders
You may make cash withdrawals (surrenders) of all or part of
your Contract's accumulation value at any time during the Pay-in
Period prior to the death of the Annuitant (subject to any
restrictions imposed in connection with your retirement plan).
Surrender requests must be made in writing on forms that we
provide. 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 your
Contract's accumulation value at the end of the valuation period
during which we receive the proper written request, minus 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. For surrenders from the Guaranteed Account, see
page 26. For restrictions applicable to certain surrenders under
Contracts issued in connection with plans adopted pursuant to
Section 403(b) of the Code, see "Qualified Plans," page 30.
The minimum partial surrender is $100 or the entire amount in
the Investment Option, whichever is less. If the amount
remaining in the Investment Option would be less than $25 after
the surrender (and deduction of the surrender charge, if any),
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
Contract's 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
surrender charges described below (at page 21) and may be
subject to a 10% tax penalty.
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.
We will implement partial surrenders by canceling Accumulation
Units in an amount equal to the withdrawal and any applicable
surrender charge. You should designate the Investment Option
from which your surrender should be made. If you make no
designation, your requested amount will be withdrawn from each
of your Investment Options (in the proportion the Investment
Option bears to your 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 you assume the investment risk with respect to amounts
allocated to your Variable Account (and because there are
certain charges), the total amount paid upon total surrender of
your Contract (including any prior surrenders) may be more or
less than the total premiums that you paid.
[TO THE LEFT OF THE NEXT PARAGRAPH THE FOLLOWING IS ENCASED IN A
BOX: Personal Income Plans allow you to pre-arrange surrenders.]
Personal Income Plan
We administer a Personal Income Plan ("PIP") that enables you to
pre-authorize periodic surrenders by entering into a PIP
agreement with us that instructs us to withdraw a level dollar
amount or percentage of your Contract's 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 your accumulation value (in the initial year, as of the date
we approve the PIP agreement; in subsequent years, as of the
first day of that Contract Year), a surrender charge may be
applicable. PIP surrenders may also be subject to the 10%
federal tax on early withdrawals.
CHARGES AND OTHER DEDUCTIONS
[TO THE LEFT OF THE NEXT PARAGRAPH THE FOLLOWING IS ENCASED IN A
BOX: You pay a $30 administration fee each Contract Year
during the Pay-in Period if your accumulation value is less than
$25,000. ]
Administration Fees
During the Pay-in Period, we will deduct an administration fee
of $30 from your Contract's accumulation value on the last day
of each Contract Year for our expenses related to administration
of your Contract and Variable Account. The annual administration
fee will be waived for any year in which the accumulation value
of your Contract is $25,000 or more on the last day of that
Contract Year. We reserve the right to waive this fee for
Contracts sold to select classes of employer-sponsored
retirement plans. We guarantee that the amount of this fee will
not increase over the life of the Contract. This annual
administration fee is not deducted during the Pay-out Period.
The fee will be deducted pro rata from all Investment Options in
the same proportion that your interest in each bears to your
Contract's 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.
[TO THE LEFT OF THE NEXT PARAGRAPH THE FOLLOWING IS ENCASED IN A
BOX: We deduct daily asset-based charges of 0.25% for
administering the Contracts and Carillon Account and 1.00% for
assuming certain mortality and expense risks. We may increase
the mortality and expense risk charge to as much as 1.70%.]
We also deduct a daily administrative fee at an annual rate of
0.25% of the assets of your Variable Account to help defray our
expenses of administering Carillon Account and the Contract.
This deduction also is guaranteed not to increase over the life
of the Contract.
Mortality and Expense Risk Charge
A "mortality and expense risk" charge will be deducted daily at
a rate equal, on an annual basis, to 1.00% of each Contract's
Variable Account. THIS CHARGE MAY INCREASE BUT WE GUARANTEE THAT
IT WILL NEVER BE MORE THAN 1.70%.
The mortality risk arises from our guarantees to make annuity
benefit payments in accordance with the annuity tables in the
Contract, 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 our 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 during the Pay-in Period.
Our expense risk arises from the possibility that the amounts
realized from the administration fees and surrender charge
(which are guaranteed not to increase) will be insufficient to
cover our actual administrative and distribution expenses. If
these charges are insufficient to cover the expenses, the
deficiency will be met from our 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,
we will bear the loss. If the charge is more than sufficient, we
will retain the balance as profit. We currently expect a profit
from this charge.
[TO THE LEFT OF THE NEXT PARAGRAPH THE FOLLOWING IS ENCASED IN A
BOX: Surrender charges may be deducted upon surrenders. 10% of
your accumulation value may be withdrawn each Contract Year
without a surrender charge. Aggregate surrender charges will
never exceed 9% of aggregate premiums paid. ]
Surrender Charge (Contingent Deferred Sales Charge)
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:
<TABLE>
<CAPTION>
Contract Year of Surrender 1 2 3 4 5 6 7 8 Thereafter
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Applicable Surrender Charge 7% 7% 6% 5% 4% 3% 2% 1% 0%
</TABLE>
Notwithstanding the charges described above, partial surrenders
totaling not more than 10% of your Contract's 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. The cumulative total of all surrender
charges is guaranteed never to exceed 9% of premiums. Also, PIP
surrenders in a Contract Year totaling not more than 10% of the
accumulation value (in the initial year, as of the date we
approve the PIP agreement; in subsequent years, as of the first
day of that Contract Year) may be made without the imposition of
the surrender charge.
Surrender charges on partial surrenders will be deducted pro
rata from the value remaining in the Investment Option(s) 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 charge on a total surrender of a
Contract will be deducted from the amount paid.
The amounts we obtain from the surrender charge will be used to
offset the distribution fee we pay to Carillon Investments, Inc.
The surrender charge is not expected to recover all of the
distribution costs associated with the Contracts. We will pay
any shortfall out of our 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 30.
[TO THE LEFT OF THE NEXT PARAGRAPH THE FOLLOWING IS ENCASED IN A
BOX: If state law allows, we will waive surrender charges if
your sur-render is because you have a terminal illness or are
confined to a "qualified" health care institution.]
Terminal Illness/Confinement
Also, where permitted by state law, we will waive the surrender
charge 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 Contract Date or May 1, 1993, subject to the
following:
- The Contract Owner must be a natural person (not a trust,
corporation, or other legal entity).
- The Contract Owner must have been an owner of the Contract
continuously since the Contract Date.
- The Contract 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.
- We receive a written request for full or partial surrender
along with due proof of confinement within 12 months
following such confinement.
- A "qualified institution" means any licensed hospital or
licensed skilled or intermediate care nursing facility at
which:
^ medical treatment is available on a daily basis; and
^ daily medical records are kept for each patient.
(2) The Contract Owner contracts a terminal illness after the
later of the Contract Date or May 1, 1993, subject to the
following:
- The Contract Owner must be a natural person (not a Trust,
Corporation, or other legal entity).
- The Contract Owner must have been an owner of the Contract
continuously since the Contract Date.
- The Contract Owner has less than 12 months to live.
- We must receive a written request for full or partial
surrender together with a certificate from the Contract
Owner's attending physician stating the Contract Owner's
life expectancy and any other proof we may require.
- "Physician" means a medical doctor licensed in the United
States who:
- is operating within the scope of that license; and
- is not the Contract Owner and is not related to the
Contract Owner.
[TO THE LEFT OF THE NEXT PARAGRAPH THE FOLLOWING IS ENCASED IN A
BOX: The surrender charge may be reduced in certain
circumstances, including in connection with sales to groups or
upon certain types of exchanges.]
Other Waivers or Reductions of Surrender Charge
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:
- another Contract owned by the employer or another person
for the benefit of the Contract Owner in connection with
an employee benefit plan,
- a certificate (account) under certain of our group
retirement annuity contracts, or
- certain of our 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.
Premium Taxes
We will deduct any premium taxes imposed by state or local law
when incurred, which could be:
- at the Maturity Date,
- when a total surrender occurs, or
- 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 Contract's 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 our status 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.
[TO THE LEFT OF THE NEXT PARAGRAPH THE FOLLOWING IS ENCASED IN A
BOX: The Funds pay investment advisory fees and other expenses.]
Fund Expenses
There are deductions from and expenses paid out of the assets of
the Funds that are fully described in the Fund prospectuses and
summarized in the table on page 9.
BENEFITS UNDER THE CONTRACT
[TO THE LEFT OF THE NEXT PARAGRAPH THE FOLLOWING IS ENCASED IN A
BOX: A death benefit at least equal to premiums paid (less
surrenders and related surrender charges) will be paid to the
Beneficiary upon the death of the Annuitant during the Pay-in
Period.]
Death Benefits
If the Annuitant is the Contract Owner and dies during the Pay-
in Period, or if the Annuitant dies during the Pay-in Period
while the Contract Owner is living, then a death benefit will be
paid to the Beneficiary. The death benefit will be the greater
of:
- the sum of all premiums paid less any amounts deducted in
connection with partial surrenders, including any surrender
charge associated with those partial withdrawals; or
- the Contract's accumulation value on the date we receive
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 Carillon Account.
If a Contract Owner who is not the Annuitant dies during the
Pay-in Period and while the Annuitant is living, we normally
will pay the Contract's accumulation value (measured as of the
date we receive Due Proof of Death) to the Contract Owner's
estate or to a successor Contract Owner. However, if the
Contract Owner's spouse is the designated beneficiary under the
Contract, that spouse will become the Contract Owner and no
distribution will be required as a result of the death of the
original Contract Owner.
If the Annuitant dies during the Pay-out Period, we will provide
the death benefit, if any, contained in the particular annuity
benefit option elected. See page 25.
Annuity Benefit Payments
[TO THE LEFT OF THE NEXT PARAGRAPH THE FOLLOWING IS ENCASED IN A
BOX: You select the Maturity Date (when you stop paying premiums
and start receiving annuity benefit payments) in your Contract
appli-cation and may change it subsequently by giving us 30 days
written notice.]
Maturity Date - You specify in your application the day that
annuity benefit payments will commence under the Contract (the
"Maturity Date"). You may change your Maturity Date at any time,
provided we receive written notice of the change at least 30
days before the previously specified Maturity Date. The Maturity
Date must be:
- at least one month after the Contract Date;
- the first day of a calendar month; and
- 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 - You may specify any proportion of your
Contract's accumulation value (less premium taxes, if any) to be
applied to a variable annuity or a fixed annuity. Variable
annuity benefit payments will vary in accordance with the
investment experience of the Subaccount(s) you select.
[TO THE LEFT OF THE NEXT PARAGRAPH THE FOLLOWING IS ENCASED IN A
BOX: You select a fixed or variable annuity benefit payment
option at least 30 days prior to the Maturity Date. ]
At least 30 days before the Maturity Date, you must select how
your Contract's accumulation value will be used to provide the
monthly annuity benefit payments. If no selection is made, we
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 benefit payment will be
based on the allocation of the Variable Account among the
subdivisions.
If you select a variable annuity, the amount of the first
monthly annuity benefit payment will be obtained from the
appropriate Option Table in your 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 Benefit Payments - The amount of
variable annuity benefit payments will depend not only upon the
investment experience of the Subaccount you select, but also
upon the amount of any premium tax, the age (and possibly sex)
of the Annuitant, and the annuity benefit option chosen. We
guarantee that the annuity benefit payments:
- 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
- will not be affected by the actual amount of expenses we
incur in administering the Contract.
Because variable annuity benefit payments will vary with the
investment results of the Subaccounts, the amounts of those
payments cannot be predetermined.
If the total accumulation value to be applied to an annuity
benefit option is less than $5,000 ($2,000 in Massachusetts and
New York), we 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
benefit option selected is less than $50 ($20 in New York), we
may change the payment frequency of annuity benefit payments to
quarterly, semiannually or annually.
Annuity Benefit Payment Options - You may elect a fixed annuity,
a variable annuity, or a combination fixed and variable annuity.
All of the annuity benefit options listed below (except the
alternate annuity option) are available as either fixed or
variable annuities.
Up to 30 days before the Maturity Date, you may change the
annuity benefit option. If an 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 benefit
payments begin. The annuity benefit options include:
[TO THE LEFT OF THE NEXT PARAGRAPH THE FOLLOWING IS ENCASED IN A
BOX: A variety of annuity benefit payment options are available, including
ones in which you receive payments for life or for the longer of life or a
specified number of years and ones based on a single life or on the joint
lives of two or more people.]
Option 1: Life Annuity -
- Nonrefund. We 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.
- 5-Years Certain. We 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.
- 10-Years Certain. We 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 you select a different option.)
- Installment Refund. We 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 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 -
- Joint and Survivor Nonrefund. We 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.
- Joint and Survivor with 10-Year Certain. We 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 benefit
options described above, you 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 we are issuing 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 benefit payments have been made for a guaranteed period,
if any, we will continue payments to the beneficiary until the
rest of the guaranteed payments have been made. If no
beneficiary is living, we 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
[TO THE LEFT OF THE NEXT PARAGRAPH THE FOLLOWING IS ENCASED IN A
BOX: Interests in the Guaranteed Account are not securities
and Union Central is not an investment company.]
Premiums allocated to the Guaranteed Account and transfers to
the Guaranteed Account become part of our general assets, which
support our 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 our general assets generally are subject to the
provisions of the 1933 or 1940 Acts and it is understood that
the SEC staff 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 our general assets, other than those allocated to separate
investment accounts such as Carillon Account. You may elect to
allocate all or part of your premiums to the Guaranteed Account,
and you may also transfer values from your Variable Account to
the Guaranteed Account. We bear the full investment risk for all
amounts allocated or transferred to the Guaranteed Account,
whereas you bear the investment risk for amounts allocated or
transferred to your Variable Account. We have sole discretion to
invest our general assets, including assets funding the
Guaranteed Account, subject to applicable law.
[TO THE LEFT OF THE NEXT PARAGRAPH THE FOLLOWING IS ENCASED IN A
BOX: We guarantee that amounts you allocate to the Guaranteed
Account will accumulate at a rate of at least 4.00% per year.
We may credit more than 4.00% interest at our discretion.]
Garanteed Account Accumulations
We guarantee that we 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 we 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
OUR SOLE DISCRETION.
We guarantee that, during the Pay-in Period, the Guaranteed
Account of the Contract will be at least equal to:
- the total of all net premiums allocated to the Guaranteed
Account; plus
- the total of all amounts transferred to the Guaranteed
Account from the Variable Account; minus
- the total of all amounts transferred from the Guaranteed
Account to the Variable Account (including the transfer
fee); minus
- the total of any administration fees attributable to the
Guaranteed Account; minus
- the total of all partial surrenders from the Guaranteed
Account (including any surrender charge); plus
- interest accumulated in the Guaranteed Account (the
minimum guaranteed annual effective interest rate is 4.0%).
[TO THE LEFT OF THE NEXT PARAGRAPH THE FOLLOWING IS ENCASED IN A
BOX: Fixed annuity benefit payments are based on interest
credited at a guaranteed 4.00% rate.]
Fixed Annuity Benefit Payments
A fixed annuity is an annuity with benefit payments that have a
dollar amount that is fixed and guaranteed by the insurance
company issuing the contract. The amount of the annuity benefit
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 benefit
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.
We guarantee the amount of fixed annuity benefit payments. The
payment depends only on the annuity benefit option elected, the
age (and possibly sex) of the Annuitant, and the amount applied
to purchase the fixed annuity.
[TO THE LEFT OF THE NEXT PARAGRAPH THE FOLLOWING IS ENCASED IN A
BOX: You may surrender all or part of your Guaran-teed Account
during the Pay-in Period, but we may delay paying your surrender
proceeds for up to 6 months.
Surrenders
You may surrender all or part of your Guaranteed Account value
at any time during the Pay-in Period prior to the death of the
Annuitant. We intend to pay surrender requests upon receipt but
reserve 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 19.
[TO THE LEFT OF THE NEXT PARAGRAPH THE FOLLOWING IS ENCASED IN A
BOX: Transfers from the Guaranteed Account to the Variable
Account may be made during the Pay-in Period. No more than the
greater of 20% of your Guaranteed Account (as of the first day
of the Contract Year) or $1,000 may be so transferred in a
Contract Year.]
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 during the
Pay-in Period. During the Pay-in Period, you may transfer up to
the greater of
- 20% of the value of your Guaranteed Account (as of the
first day of the Contract Year), or
- $1,000
to one or more subdivisions of your Variable Account each
Contract Year. 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 benefit
payments.
GENERAL MATTERS
[TO THE LEFT OF THE NEXT PARAGRAPH THE FOLLOWING IS ENCASED IN A
BOX: You designate a Beneficiary to receive benefits upon the
death of the Annuitant.]
Designation of Beneficiary
The Beneficiary is the person you designate as such in your
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, you may change the Beneficiary while the Annuitant
is living by providing us with written notice. Any change will
be effective at the time you signed it, whether or not the
Annuitant is living when we receive the change. We will not,
however, be liable as to any payment or settlement made prior to
receiving the written notice.
[TO THE LEFT OF THE NEXT PARAGRAPH THE FOLLOWING IS ENCASED IN A
BOX: In the first 20 days after you receive your Contract, you
may return it and receive a refund from which surrender charges
are not deducted. ]
20-Day Right to Examine Contract
If you are not satisfied with the Contract, you may void it by
returning it to us or our agent from which it was purchased
within 20 days of receipt. You will then receive a full refund
of any premium paid or in certain states the Contract's
accumulation value.
Contract Owner's Inquiry
You may make inquiries concerning your Contract by calling us 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 our understanding of the
present federal income tax laws as they are currently
interpreted by the Internal Revenue Service ("IRS"). We make no
representation about the likelihood of continuation of these
federal income tax laws or of the current interpretations by the
IRS. Moreover, we have made no attempt 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 Code. The ultimate effect of
federal income taxes on the Contract's accumulation value, on
annuity benefit 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
our 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 Code.
[TO THE LEFT OF THE NEXT PARAGRAPH THE FOLLOWING IS ENCASED IN A
BOX: Gains inside an annuity contract are usually tax-deferred
(if the contract owner is a natural person) until there is a
surrender or receipt of annuity benefit payments or a death
benefit payment. When taxed, those gains are taxed as ordinary
income.]
We believe that an annuity owner generally is not taxed on
increases in the value of an annuity 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), as annuity
benefit payments under the annuity option elected, or as a death
benefit payment. 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 benefit payment 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 benefit payment under the Contract
is generally taxed on the portion of that payment that exceeds
the investment in the Contract. For variable annuity benefit
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 benefit 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.
[TO THE LEFT OF THE NEXT PARAGRAPH THE FOLLOWING IS ENCASED IN A
BOX: A 10% penalty tax may apply to gains distributed in a
surrender prior to age 59-1/2.]
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
- made on or after age 59-1/2,
- made as a result of death or disability, or
- 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 an annuity 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. If you are contemplating any such transfer or
assignment of your Contract, you should contact a competent tax
adviser with respect to its potential tax effects.
[TO THE LEFT OF THE NEXT PARAGRAPH THE FOLLOWING IS ENCASED IN A
BOX: Federal income tax withholding provisions may apply to
certain distributions.]
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 us of
that election. Failure to provide your taxpayer identification
number will automatically subject any payments under the
Contract to withholding.
Qualified Plans
[TO THE LEFT OF THE NEXT PARAGRAPH THE FOLLOWING IS ENCASED IN A
BOX: You should seek legal and tax advice prior to purchasing
the Contract for use in a qualified plan.]
The Contract may be used with several types of qualified plans.
The tax rules applicable to participants in 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.
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.
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.
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.
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 IRS, is adopted and implemented by the employer.
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.
TEXAS OPTIONAL RETIREMENT PROGRAM
RESTRICTIONS
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:
- termination of employment in the Texas public institutions
of higher education,
- retirement, or
- 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
[TO THE LEFT OF THE NEXT PARAGRAPH THE FOLLOWING IS ENCASED IN A
BOX: We pay brokers to sell the Contracts.]
Carillon Investments, Inc. ("Carillon Investments," a wholly-
owned subsidiary of Union Central whose principal business
address is 1876 Waycross Road, Cincinnati, Ohio 45240), is the
principal underwriter of the Contracts. Carillon Investments is
registered with the SEC as a broker-dealer and is a member of
the National Association of Securities Dealers, Inc. We will pay
Carillon Investments an amount no more than 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. When the surrender charges are
reduced, the amount paid to Carillon Investments will be less
than 5% of premiums.
VOTING RIGHTS
[TO THE LEFT OF THE NEXT PARAGRAPH THE FOLLOWING IS ENCASED IN A
BOX: You instruct us how to vote Fund shares.]
To the extent required by law, we will vote the Portfolio shares
held by Carillon Account at shareholder meetings of the Funds in
accordance with instructions received from persons having voting
interests in the corresponding Subaccounts of Carillon Account.
However, if legal requirements should change, and as a result,
we determine that we are allowed to vote the Portfolio shares in
our own right, we may elect to do so.
The number of votes which a person has the right to instruct
will be calculated separately for each Subaccount. During the
Pay-in Period, the number of votes for which you have a right to
give instructions will be determined by dividing your Contract's
accumulation value attributable to a subdivision by the net
asset value per share of the corresponding Portfolio. During the
Pay-out Period, the Annuitant has the voting interest. The
number of votes during the Pay-out Period will be determined by
dividing the reserve for that Contract held in a Subaccount by
the net asset value per share of the corresponding Portfolio.
During the Pay-out Period, 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 a
Fund's shareholder meeting. We will vote Fund shares held in
Carillon Account as to which we receive no timely instructions
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.
PERFORMANCE DATA
From time to time we may publish advertisements containing total
return performance data relating to the Subaccounts of Carillon
Account (including graphs, charts, tables and examples depicting
that data). 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.
FINANCIAL STATEMENTS
Financial statements of Carillon Account and Union Central are
included in the SAI which may be obtained without charge by
writing us at: P.O. Box 40409, Cincinnati, Ohio 45240-0409 or
telephoning us at: 1-800-999-1840.
<PAGE>
APPENDIX A
ACCUMULATION UNIT VALUES
(for a unit outstanding throughout the period)
<TABLE>
<CAPTION>
Year ended December 31,
--------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
ZENITH SUBACCOUNT
(formerly Equity
Subaccount)
Accumulation unit
value at beginning
of period $41,397 $49.527 $41.682 $33.969 $27.147
Accumulation unit
value at end of
period $41.72 $41.397 $49.527 $41.682 $33.969
Number of
accumulation units
outstanding,
end of period 1,334,722 2,575,127 2,907,000 2,723,705 1,981,958
Payout unit value $41.72 $41.397 $49.527 $41.682 $33.969
Number of payout
units outstanding,
end of period 7,689 8,295 8,952 9,142 9,796
<CAPTION>
Year ended December 31,
--------------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
ZENITH SUBACCOUNT
Accumulation unit
value at beginning
of period $26.628 $23.676 $21.491 $14.979 $17.977
Accumulation unit
value at end of
period $27.147 $26.628 $23.676 $21.491 $14.979
Number of
accumulation units
outstanding,
end of period 2,337,986 1,723790 1,312,947 1,057,669 936,036
Payout unit value $27.147
Number of payout
units outstanding,
end of period 10,476
<CAPTION>
Year ended December 31,
--------------------------------------------
1999
----
<S> <C>
BALANCED INDEX
SUBACCOUNT
Accumulation unit
value at beginning
of period $10.00(f1>
Accumulation unit
value at end of period $10.44
Number of accumulation
units outstanding,
end of period 1,590,562
<CAPTION>
Year ended December 31,
--------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
BOND SUBACCOUNT
Accumulation unit
value at beginning
of period $29,003 $27.584 $25.210 $23.865 $20.341
Accumulation unit
value at end of
period $28.33 $29.003 $27.584 $25.210 $23.865
Number of accumulation
units outstanding,
end of period 840,552 1,011,680 766,722 672,511 574,421
<CAPTION>
Year ended December 31,
--------------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
BOND SUBACCOUNT
Accumulation unit
value at beginning
of period $20.977 $19.014 $17.921 $15.424 $14.403
Accumulation unit
value at end of
period $20.341 $20.977 $19.014 $17.921 $15.424
Number of accumulation
units outstanding,
end of period 508,398 513,613 348,420 283,493 285,370
<CAPTION>
Year ended December 31,
--------------------------------------------
1999 19978 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
S&P 500 INDEX
SUBACCOUNT
Accumulation unit
value at beginning
of period $18,876 $14.878 $11.375 $10.00<F2>
Accumulation unit
value at end of
period $22.47 $18.876 $14.878 $11.375
Number of accumulation
units outstanding,
end of period 4,969,188 3,469,857 2,041,455 869,681
<CAPTION>
Year ended December 31,
--------------------------------------------
1999
----
<S> <C>
S&P MIDCAP 400
SUBACCOUNT
Accumulation unit
value at beginning
of period $10.00(f3>
Accumulation unit
value at end of period $11.02
Number of accumulation
units outstanding,
end of period 264,810
<CAPTION>
Year ended December 31,
--------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
CAPITAL GROWTH
SUBACCOUNT
Accumulation unit
value at beginning
of period $27.733 $22.803 $17.041 $14.394 $11.351
Accumulation unit
value at end of
period $37.04 $27.733 $22.803 $17.041 $14.394
Number of accumulation
units outstanding,
end of period 2,505,505 2,278,985 1,896,320 1,593,634 1,162,999
<CAPTION>
Year ended December 31,
--------------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
CAPITAL GROWTH
SUBACCOUNT
Accumulation unit
value at beginning
of period $12.749 $10.700 $10.000
Accumulation unit
value at end of
period $11.351 $12.749 $10.700
Number of accumulation
units outstanding,
end of period 439,914 70,218
<CAPTION>
Year ended December 31,
--------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
SCUDDER INTERNATIONAL
SUBACCOUNT
Accumulation unit
value at beginning
of period $20.180 $17.256 $16.054 $14.192 $12.958
Accumulation unit
value at end of period $30.80 $20.180 $17.256 $16.054 $14.192
Number of accumulation
units outstanding,
end of period 1,683,640 1,695,187 1,669,242 1,564,591 1,220,160
<CAPTION>
Year ended December 31,
---------------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
SCUDDER INTERNATIONAL
SUBACCOUNT
Accumulation unit
value at beginning
of period $13.259 $9.760 $10.000
Accumulation unit
value at end of period $12.958 $13.259 $9.760
Number of accumulation
units outstanding,
end of period 1,095,214 362,172 43,624
<CAPTION>
Year ended December 31,
--------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
MONEY MARKET
SUBACCOUNT<F4>
Accumulation unit
value at beginning
of period $17.28 $16.627 $16.028 $15.468 $14.850
Accumulation unit
value at end of period $17.92 $17.280 $16.627 $16.028 $15.468
Number of accumulation
units outstanding,
end of period 695,976 489,588 433,296 477,679 368,444
<CAPTION>
Year ended December 31,
--------------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
MONEY MARKET
SUBACCOUNT<F4>
Accumulation unit
value at beginning
of period $14.526 $14.369 $14.122 $13.576 $12.709
Accumulation unit
value at end of period $14.850 $14.526 $14.369 $14.122 $13.576
Number of accumulation
units outstanding,
end of period 280,575 119,598 120,547 83,623 103,405
<CAPTION>
Year ended December 31,
-----------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
GROWTH WITH INCOME
SUBACCOUNT
Accumulation unit
value at beginning
of period $17.531 $14.521 $11.352 $10.000<F2>
Accumulation unit
value at end of period $18.48 $17.531 $14.521 $11.352
Number of accumulation
units outstanding,
end of period 2,643,372 1,960,448 1,002,705 425,068
<CAPTION>
Year ended December 31,
--------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
HIGH INCOME SUBACCOUNT
Accumulation unit
value at beginning
of period $11.961 $12.139 $10.841 $10.000<F2>
Accumulation unit
value at end of period $12.58 $11.961 $12.139 $10.841
Number of accumulation
units outstanding,
end of period 569,104 442,315 269,398 108,723
<CAPTION>
Year ended December 31,
-----------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
EMERGING GROWTH
SUBACCOUNT
Accumulation unit
value at beginning
of period $16.431 $12.409 $10.000<F5>
Accumulation unit
value at end of period $28.68 $16.431 $12.409
Number of accumulation
units outstanding,
end of period 1,778,952 855,018 224,193
<CAPTION>
Year ended December 31,
--------------------------------------------
1999
----
<S> <C>
MFS TOTAL RETURN
SUBACCOUNT
Accumulation unit
value at beginning
of period $10.00(f3>
Accumulation unit
value at end of period $9.76
Number of accumulation
units outstanding,
end of period 141,613
<CAPTION>
Year ended December 31,
--------------------------------------------
1999
----
<S> <C>
CAPITAL APPRECIATION
SUBACCOUNT
Accumulation unit
value at beginning
of period $10.00<F3>
Accumulation unit
value at end of period $13.95
Number of accumulation
units outstanding,
end of period 610,330<F6>
<CAPTION>
Year ended December 31,
--------------------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
TEMPLETON INTERNATIONAL
SUBACCOUNT
Accumulation unit value
at beginning of period $11.727 $10.893 $10.000<F5>
Accumulation unit value
at end of period $14.27 $11.727 $10.893
Number of accumulation
units outstanding,
end of period 516,736 466,880 266,657
<FN>
<F1> Commencement of operations was May 3, 1999. Assets of Carillon Capital
subaccount were transferred to the Carillon Balanced Index Subaccount on
October 29, 1999.
<F2> Commencement of operations was May 1, 1996.
<F3> Commencement of operations was May 3, 1999.
<F4> Assets of Carillon Money Market Subaccount were transferred to the Scudder
Money Market Subaccount on November 12, 1993.
<F5> Commencement of operations was May 1, 1997.
<F6> Assets of American Century VP Capital Appreciation Subaccount were
transferred to the AIM V.I. Capital Appreciation subaccount on October 29,
1999.
</FN>
</TABLE>
*Due to a change in accounting practices in 1999, values are no
longer calculated to the thousandth place.
<PAGE>
APPENDIX B
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
1-1-2000, 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 IRS, or by
obtaining Publication 590 from IRS.
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 us 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. Our address and telephone number 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 pension 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. (This includes Keogh/H.R. 10
plans.) 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
- an Armed Forces Reservist, for less than 90 days of active
service; or
- 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 $32,000 for taxable
years beginning in 2000. The Threshold Level if you are married
and file a joint tax return is $52,000 for taxable years
beginning in 2000, 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 $32,000 for 2000. The Threshold
Level is established for future years as follows:
<TABLE>
<CAPTION>
Joint Returns
For taxable years The applicable
beginning in: Threshold Level
<S> <C>
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
</TABLE>
<TABLE>
<CAPTION>
"Single" Returns
For taxable years The applicable
beginning in: Threshold Level
<S> <C>
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 minus Excess AGI divided by $10,000 times Maximum
Allowable Deduction equals Deduction Limit
You must round up the result to the next highest $10 level (the
next highest number which ends in zero). For example, if the
result is $1,524, 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 $10,000 (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 $170,000 in 2000 (as adjusted for inflation.) Employer
contributions to a SEP-IRA are excludable from the employee's
gross income rather than being 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:
- withdrawn before the end of the following year, or
- treated as a current contribution for the following year.
No contribution may be made to your traditional IRA or no
independent contribution by you to your 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 Internal Revenue 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 unreimbursed medical expenses in excess
of 7.5% of your Adjusted Gross Income (AGI), or
- amounts withdrawn to pay for medical insurance 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, or
- surrenders for "qualified higher education expenses," or
- a withdrawal 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 divided by Year-end total of
traditional IRA account balances times Total Distributions (for
the year) equals Nontaxable Distribution (for the year)
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:
- a single sum payment;
- equal or substantially equal payments over your life;
- equal or substantially equal payments over the lives of
you and your designated beneficiary;
- equal or substantially equal payments over a specified
period that may not be longer than your life expectancy; or
- 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:
- - 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.
- - 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:
- by December 31st of the year containing the
fifth anniversary of your death;or
- in equal or substantially equal payments over
period no longer than 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 you otherwise elect 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 IRS reviewed the format of your IRA, and issued an opinion
letter to us on May 19, 1986, 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 IRS. 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 as a premature distribution
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 discussion of those requirements.
Prototype Status
The IRS reviewed the format of your SIMPLE-IRA and issued an
opinion letter to us on September 26, 1997, stating that your
Contract qualifies as a prototype SIMPLE-IRA.
Part III. Roth IRA
A Roth 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 refund, 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. Roth
IRA contributions must be made 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.
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
distributions 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.
If, within the 5 year period starting with the year of a
Conversion Contribution, any part of a withdrawal from this Roth
IRA is from the taxable part of an amount converted, the 10% tax
on premature distributions applies, unless one of the exceptions
applies.
For purposes of determining the correct tax treatment of
withdrawals (other than the withdrawal of excess contributions
and the earnings on them), the following rule sets forth the
order of withdrawal:
1. regular contributions;
2. Conversion Contributions, on a first-in-first-out
basis, and then taken account of as the taxable
portion first and then the nontaxable portion;
3. earnings on contributions.
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
Your Roth IRA is deemed to meet the statutory requirement for a
Roth IRA pursuant to IRS guidelines.
Part IV. Recharacterizations
You may be able to treat a contribution made to one type of IRA
as having been made to a different type of IRA, for example,
going from a Roth IRA to a traditional IRA. This is called
recharacterizing the contribution.
To recharacterize a contribution, you generally must have the
contribution transferred from the first IRA (the one to which it
was made) to the second IRA in a trustee-to-trustee transfer.
If the transfer is made by the due date (including extensions)
for your tax return for the year during which the contribution
was made, you can elect to treat the contribution as having been
originally made to the second IRA instead of to the first IRA.
It will be treated as having been made to the second IRA on the
same date that it was actually made to the first IRA. The
contribution will not be treated as having been made to the
second IRA unless the transfer includes any net earnings
allocable to the contribution. After the transfer has taken
place, you cannot change your election to recharacterize.
You must report the recharacterization, and must treat the
contribution as having been made to the second IRA, instead of
the first IRA, on your tax return for the year during which the
contribution was made. No deduction is allowed for the
contribution to the first IRA and any net earnings transferred
with the recharacterized contribution are treated as earned in
the second IRA. The contribution will not be treated as having
been made to the second IRA to the extent that any deduction was
allowed with respect to the contribution to the first IRA.
<PAGE>
CARILLON ACCOUNT
- ----------------------------------------------------------------
of
THE UNION CENTRAL LIFE INSURANCE COMPANY
1876 Waycross Road . Cincinnati, Ohio 45240 . 513-595-2600
STATEMENT OF ADDITIONAL INFORMATION
May 1, 2000
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, 2000, 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-7
Financial Statements of CA and of Union Central
<PAGE>
<PAGE>
DISTRIBUTION OF CONTRACTS
Contracts are offered on a continuous basis through life
insurance agents of Union Central who are also registered
representatives of Carillon Investments, Inc., or another
broker-dealer member of the National Association of Securities
Dealers, Inc.
As underwriter of the Contracts, the following distribution
fees were paid to Carillon Investments, Inc., by Union Central:
Year Amount
1999 $3,015,423
1998 $3,313,196
1997 $3,447,836
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.
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,
1999.
<TABLE>
<CAPTION>
Average Annual Total Return Average Annual Total Return
(Based on Accumulation Unit Values) (Standardized Total Return)
Inception One Five Ten Since One Five Ten Since
Subaccounts Date Year Years Years Inception Year Years Years Inception
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Zenith (formerly Equity) 6/7/85 0.78% 8.97% 8.78% 10.30% -6.34% 7.99% 8.65% 10.04%
Bond 8/26/85 -2.32% 6.85% 7.00% 7.52% -9.23% 5.89% 6.86% 7.29%
S&P MidCap 400 Index 5/3/99 - - - 10.22% - - - 2.46%
S&P 500 Index 5/1/96 19.03% - - 24.69% 10.63% - - 22.86%
Balanced Index 5/3/99 - - - 4.44% - - - -2.92%
Scudder International 5/1/92 52.62% 18.90% - 15.79% 41.85% 17.83% - 15.52%
Capital Growth 5/1/92 33.56% 26.69% - 18.61% 24.13% 25.55% - 18.34%
Money Market * 7/15/85 3.74% 3.85% 3.49% 4.08% -3.59% 2.91% 3.36% 3.84%
AIM Capital Appreciation 5/3/99 - - - 39.49% - - - 29.67%
Growth with Income 5/1/96 5.38% - - 18.21% -2.07% - - 16.48%
High Income 5/1/96 5.16% - - 6.45% -2.28% - - 4.89%
Emerging Growth 5/1/97 74.53% - - 48.41% 62.22% - - 44.90%
Total Return 5/3/99 - - - -2.37% - - - -9.25%
Templeton International 5/1/97 21.71% - - 14.26% 13.12% - - 11.56%
</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 S&P MidCap 400 Index, the
Russell 2000 Index, the Nasdaq-100 Index, the Dow Jones
Industrial Average, the Donoghue Money Fund 30-Day Average
Yield, and the Lipper Variable Insurance Products Performance
Analysis Service.
CA advertisements may also include performance rankings (or
information based on those rankings) compiled by various
independent organizations, including but not limited to: LIPPER
ANALYTICAL SERVICES MUTUAL FUNDS SURVEY, LIPPER VARIABLE
INSURANCE PRODUCTS PERFORMANCE ANALYSIS SERVICE, THE VARDS
REPORT, SYLVIA PORTER PERSONAL FINANCE, FINANCIAL SERVICES WEEK,
CONSUMER REPORTS, MONEY MAGAZINE, FORBES MAGAZINE, AND FORTUNE
MAGAZINE.
FEDERAL TAX MATTERS
Taxation of Union Central
Union Central is taxed as a life insurance company under
Part I of Subchapter L of the Internal Revenue Code ("Code").
Since CA is not an entity separate from Union Central, and its
operations form a part of Union Central, it will not be taxed
separately as a "regulated investment company" under Subchapter
M of the Code. Investment income and realized capital gains on
the assets of CA are reinvested and taken into account in
determining the Accumulation and Annuity Unit values. As a
result, such investment income and realized capital gains are
automatically applied to increase reserves under the Contract.
Under existing federal income tax law, separate account
investment income and capital gains are not taxed to the extent
they are applied to increase reserves under a Contract issued in
connection with CA. Accordingly, Union Central does not
anticipate that it will incur any federal income tax liability
attributable to CA, and therefore Union Central does not intend
to make provisions for any such taxes. However, if changes in
the federal tax laws or interpretations thereof result in Union
Central being taxed on income or gains attributable to CA or
certain types of Contracts, then Union Central may impose a
charge against CA (with respect to some or all Contracts) in
order to set aside provisions to pay such taxes.
Tax Status of the Contracts
Section 817(h) of the Code provides that separate account
investments (or the investments of a mutual fund the shares of
which are owned by separate accounts of insurance companies)
underlying the Contract must be "adequately diversified" in
accordance with Treasury regulations in order for the Contract
to qualify as an annuity contract under Section 72 of the Code.
The Separate Account, through each Portfolio of the Funds,
intends to comply with the diversification requirements
prescribed in regulations, which affect how the assets in each
Portfolio of the Funds in which the Separate Account invests may
be invested. Union Central does not have control over the Funds
or their investments. However, Union Central believes that each
Portfolio in which the Separate Account owns shares will meet
the diversification requirements and that therefore the
Contracts will be treated as annuities under the Code.
The Treasury has stated that regulations on diversification
requirements do not provide guidance concerning the extent to
which contract holders may direct their investments to the
Portfolios of the Funds. Regulations in this regard may be
issued in the future. It is possible that when regulations are
issued the Funds may not be in compliance with such regulations.
Although Union Central can provide no assurances that any such
regulations will not adversely affect the tax treatment of
existing Contracts in all events, based upon a private letter
ruling Union Central has received on the Contracts, Union
Central believes that any such regulations would be applied only
on a prospective basis. For these reasons, Union Central
reserves the right to modify the Contract as necessary to
prevent the contract holder from being considered the owner of
the assets of the Funds or otherwise to qualify the contract for
favorable tax treatment.
In addition, Nonqualified Contracts will not be treated as
annuity contracts for purposes of Section 72 unless such
contracts provide: (a) that if the contract holder dies on or
after the annuity starting date but prior to the time before the
entire interest in the contract has been distributed, the
remaining portion of such interest must be distributed at least
as rapidly as under the method of distribution in effect at the
time of the contract holder's death; and (b) if the contract
holder dies prior to the annuity starting date, the entire
interest must be distributed within five years after the death
of the contract holder. These requirements should be considered
satisfied if any portion of the contract holder's interest which
is payable to or for the benefit of a "designated beneficiary"
is distributed over the life of such designated beneficiary (or
over a period that does not extend beyond the life expectancy of
the designated beneficiary) and such distributions begin within
one year of the contract holder's death. (A contract holder's
designated beneficiary is the person to whom ownership of the
Contract passes by reason of death and must be a natural
person.) However, if the contract holder's designated
beneficiary is the surviving spouse of the contract holder, the
contract may be continued in the name of the spouse as the
contract holder. Union Central believes that the Contracts
described in this Prospectus meet these requirements. However,
no assurance can be given that the provisions contained in the
Contracts satisfy all such Code requirements. The provisions
contained in the Contracts will be reviewed and modified if
necessary to assure that they comply with the Code requirements.
Other rules may apply to Qualified Contracts.
For a discussion of the tax treatment of the contracts as
annuities under Section 72, see "Tax Status of the Contracts" in
the Prospectus.
MISCELLANEOUS CONTRACT PROVISIONS
Delay of Payments
Union Central will pay all amounts due from the Variable
Account under the Contract within seven days, unless:
(1) The New York Stock Exchange is closed for other than
usual weekends or holidays, or trading on the Exchange is
otherwise restricted;
(2) An emergency exists as defined by the Securities and
Exchange Commission; or
(3) The Securities and Exchange Commission permits delay
for the protection of the security holders.
Participating
The Contract is issued on a participating basis, and as
such is eligible to share in Union Central's profits and surplus
to the extent determined by Union Central's Board of Directors
in its sole discretion. Union Central anticipates that such
participation, if at all, will be small in amount and will occur
only in later years of the Contract.
Misstatement and Proof of Age, Sex or Survival
Proof of age, sex, or survival of the Annuitant and any
contingent Annuitant may be required prior to making annuity
payments under any Annuity Option which depends on the
continuation of life. If any age or sex has been misstated,
Union Central will pay the amounts which would have been
provided at the correct age and sex. After the annuity payments
begin, Union Central will make up any underpayments in a lump
sum with the next annuity payment. Any overpayments will be
deducted from future annuity payments until the overpayment is
made up.
Settlements
Union Central may require the return of the Contract prior
to any settlement. Due proof of the Annuitant's death must be
received prior to settlement of a death claim.
Assignments
The Contract Owner may assign the Contract prior to the
Maturity Date and during the Annuitant's lifetime, subject to
the rights of any irrevocable Beneficiary, although the ability
to assign certain Qualified Contracts may be restricted. An
assignment will not be binding until received in writing by
Union Central, and Union Central will not be responsible for the
validity of an assignment. An assignment or pledge of the
Contract may result in income tax liability to the owner.
No Beneficiary may assign benefits under the Contract until
they are due, and to the extent permitted by law, payments are
not subject to the debts of any Beneficiary or to any judicial
process for payment of the Beneficiary's debts.
Modification
Union Central may not modify the Contract without the
consent of the Contract Owner except to make the Contract meet
the requirements of the Investment Company Act of 1940, or to
make the Contract comply with any changes in the Internal
Revenue Code or as required by the Code or by any other
applicable law in order to continue treatment of the Contract as
an annuity.
CUSTODY OF CA'S ASSETS
Title to the assets of CA is held by Union Central.
Records are maintained of all purchases and redemptions of
Portfolio shares held by each of the Subaccounts.
EXPERTS
The financial statements of CA at December 31, 1999 and
1998 and for the years then ended, and of the Union Central Life
Insurance Company at December 31, 1999 and 1998 and for the
years then ended 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, 1999
<PAGE>
Ernst & Young
Ernst & Young LLP Phone: (513) 621-6454
1300 Chiquita Center www.ey.com
250 East Fifth Street
Cincinnati, Ohio 45202
Report of Independent Auditors
- ---------------------------------------------------------------
To the Contract holders 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, Balanced Index, Bond, S&P MidCap 400 Index,
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, Total Return, and Emerging
Growth Subaccounts, the AIM Variable Insurance Fund, Inc.'s
Capital Appreciation Subaccount, and the Templeton Variable
Products Series Fund's International Subaccount) as of December
31, 1999, 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 for the Carillon Fund,
Inc.'s Equity, Bond and S&P 500 Index Subaccounts, the Scudder
Variable Life Investment Fund's Money Market, Capital Growth and
International Subaccounts, MFS Variable Insurance Trust's Growth
with Income, High Income and Emerging Growth Subaccounts, and
the Templeton Variable Products Series Fund's International
Subaccount, the related statement of operations and the
statement of changes in net assets for the period from May 3,
1999 to December 31, 1999 for the Carillon Fund, Inc.'s Balanced
Index and S&P MidCap 400 Index Subaccounts, MFS Variable
Insurance Trust's Total Return Subaccount, and the AIM Variable
Insurance Fund, Inc.'s Capital Appreciation Subaccount, and the
related statement of operations for the period January 1, 1999
to October 29, 1999 and the statement of changes in net assets
for the year ended December 31, 1998 and the period January 1,
1999 to October 29, 1999 for the Carillon Fund, Inc.'s Capital
Subaccount and the American Century Variable Portfolio, Inc.'s
Capital Appreciation Subaccount. 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 auditing standards
generally accepted in the United States. 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, 1999, 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, 1999, 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 or for the period from
May 3, 1999 to December 31, 1999 in conformity with accounting
principles generally accepted in the United States.
/s/ Ernst & Young
Cincinnati, Ohio
February 28, 2000
<PAGE>
CARILLON ACCOUNT
STATEMENT OF ASSETS AND LIABILITIES
- ---------------------------------------------------------
DECEMBER 31, 1999
<TABLE>
<CAPTION>
Carillon Fund, Inc.
(affiliated issuers)
-----------------------------------------------------------------
Balanced S&P S&P MidCap
Equity Index Bond 500 Index 400 Index
Subaccount Subaccount Subaccount Subaccount Subaccount
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments in securities
of unaffiliated issuers
at fair value (cost
$8,614,108; $61,023,719;
$36,627,391; $42,307,669;
$7,350,207; $29,250,651;
$1,397,529; $6,537,660;
$6,729,356)
Investments in shares
of Carillon Fund, Inc.,
at fair value (cost
$72,623,613; $15,522,245;
$25,602,462; $84,383,681;
$2,755,933) $55,943,215 $16,218,300 $23,883,520 $111,856,633 $2,989,910
----------- ----------- ----------- ------------ ----------
Total Invested Assets 55,943,215 16,218,300 23,883,520 111,856,633 2,989,910
OTHER ASSETS &
(LIABILITIES) 62,512 393,089 (70,577) (205,284) (71,150)
----------- ----------- ----------- ------------ ----------
NET ASSETS
(Contract Owners' Equity) $56,005,727 $16,611,389 $23,812,943 $111,651,349 $2,918,760
=========== =========== =========== ============ ==========
Accumulation units 1,334,722.37 1,590,562.40 840,551.83 4,969,188.25 264,810.05
Accumulation unit value $41.72024 $10.44366 $28.33013 $22.46873 $11.02209
Payout units 7,689.05
Accumulation unit value $41.72024
<CAPTION>
Scudder Variable Life
Investment Fund
(unaffiliated issuers)
---------------------------------------------------
Money Capital
Market Growth International
Subaccount Subaccount Subaccount
---------- ---------- ----------
<S> <C> <C> <C>
ASSETS
Investments in securities
of unaffiliated issuers
at fair value (cost
$8,614,108; $61,023,719;
$36,627,391; $42,307,669;
$7,350,207; $29,250,651;
$1,397,529; $6,537,660;
$6,729,356) $8,614,108 $92,840,468 $51,711,719
Investments in shares
of Carillon Fund, Inc.,
at fair value (cost
$72,623,613; $15,522,245;
$25,602,462; $84,383,681;
$2,755,933)
---------- ----------- -----------
Total Invested Assets 8,614,108 92,840,468 51,711,719
OTHER ASSETS &
(LIABILITIES) 3,856,097 (33,404) 143,383
---------- ----------- -----------
NET ASSETS
(Contract Owners' Equity) $12,470,205 $92,807,064 $51,855,102
========== =========== ===========
Accumulation units 695,976.35 2,505,505.04 1,683,640.01
Accumulation unit value $17.91757 $37.04126 $30.79940
Payout units
Accumulation unit value
<CAPTION>
MFS Variable
Insurance Trust
(unaffiliated issuers)
------------------------------------------------------------
Growth High Emerging Total
With Income Income Growth Return
Subaccount Subaccount Subaccount Subaccount
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
ASSETS
Investments in securities
of unaffiliated issuers
at fair value (cost
$8,614,108; $61,023,719;
$36,627,391; $42,307,669;
$7,350,207; $29,250,651;
$1,397,529; $6,537,660;
$6,729,356) $48,856,749 $7,414,012 $51,079,501 $1,392,106
Investments in shares
of Carillon Fund, Inc.,
at fair value (cost
$72,623,613; $15,522,245;
$25,602,462; $84,383,681;
$2,755,933)
----------- ---------- ----------- ----------
Total Invested Assets 48,856,749 7,414,012 51,079,501 1,392,106
OTHER ASSETS &
(LIABILITIES) (20,374) 17,243 (65,576) (9,480)
----------- ---------- ----------- ----------
NET ASSETS
(Contract Owners' Equity) $48,836,375 $7,158,255 $51,013,925 $1,382,626
=========== ========== =========== ==========
Accumulation units 2,643,371.91 569,103.74 1,778,952.12 141,613.20
Accumulation unit value $18.47503 $12.57812 $28.67639 $9.76340
Payout units
Accumulation unit value
<CAPTION>
Templeton
AIM Variable Variable Products
Insurance Fund, Inc. Series Fund
(unaffiliated issuer) (unaffiliated issuer)
--------------------- ---------------------
Capital
Appreciation International
Subaccount Subaccount
---------- ----------
<S> <C> <C>
ASSETS
Investments in securities
of unaffiliated issuers
at fair value (cost
$8,614,108; $61,023,719;
$36,627,391; $42,307,669;
$7,350,207; $29,250,651;
$1,397,529; $6,537,660;
$6,729,356) $8,000,929 $7,383,222
Investments in shares
of Carillon Fund, Inc.,
at fair value (cost
$72,623,613; $15,522,245;
$25,602,462; $84,383,681;
$2,755,933)
---------- ----------
Total Invested Assets 8,000,929 7,383,222
OTHER ASSETS &
(LIABILITIES) 512,585 (7,723)
---------- ----------
NET ASSETS
(Contract Owners' Equity) $8,513,787 $7,375,499
========== ==========
Accumulation units 610,329.61 516,736.13
Accumulation unit value $13.94901 $14.27324
Payout units
Accumulation unit value
The accompanying notes are an integral part of the financial
statements.
<PAGE>
CARILLON ACCOUNT
STATEMENT OF OPERATIONS
- ---------------------------------------------------------
YEAR ENDED DECEMBER 31, 1999(A)
</TABLE>
<TABLE>
<CAPTION>
Carillon Fund, Inc.
(affiliated issuers)
-----------------------------------------------------------------------
Balanced S&P S&P MidCap
Equity Capital Index Bond 500 Index 400 Index
Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment Income
Dividend income $13,167,539 $356,623 $9,768 $1,642,923 $1,432,885 $15,283
EXPENSES
Mortality and expense
risk charge 724,219 177,451 29,763 274,853 918,845 8,444
Administration Fee 181,055 44,363 7,441 68,963 229,711 2,111
----------- ---------- --------- ---------- ----------- --------
Total expenses 905,274 221,814 37,204 344,816 1,298,107 10,555
----------- ---------- --------- ---------- ----------- --------
NET INVESTMENT
INCOME (LOSS) 12,262,265 134,809 (27,436) 1,298,107 284,329 4,728
----------- ---------- --------- ---------- ----------- --------
REALIZED AND
UNREALIZED GAIN
(LOSS) ON
INVESTMENTS
Net realized gain
(loss) on
investments (7,980,328) (1,014,557) 27,767 (58,191) 3,440,311 8,705
Net unrealized
appreciation
(depreciation)
of investments (4,962,680) --- 696,055 (1,916,250) 12,670,376 233,977
----------- ---------- --------- ---------- ----------- --------
NET REALIZED AND
UNREALIZED GAIN
(LOSS) ON
INVESTMENTS (12,943,008) (1,014,557) 723,822 (1,974,441) 16,110,687 242,682
----------- ---------- --------- ---------- ----------- --------
NET INCREASE
(DECREASE) IN
NET ASSETS FROM
OPERATIONS ($680,743) ($879,748) $696,386 ($676,333) $16,395,016 $247,410
=========== ========== ========= ========== =========== ========
<CAPTION>
Scudder Variable Life
Investment Fund
(unaffiliated issuers)
-----------------------------------------
Money Capital
Market Growth International
Subaccount Subaccount Subaccount
---------- ---------- ----------
<S> <C> <C> <C>
Investment Income
Dividend income $507,588 $7,171,949 $3,496,023
EXPENSES
Mortality and expense
risk charge 103,859 728,951 376,989
Administration Fee 25,965 182,238 94,247
-------- ----------- -----------
Total expenses 129,824 922,189 471,236
-------- ----------- -----------
NET INVESTMENT
INCOME (LOSS) 377,764 6,260,760 3,024,787
-------- ----------- -----------
REALIZED AND
UNREALIZED GAIN
(LOSS) ON
INVESTMENTS
Net realized gain
(loss) on
investments --- 3,154,191 4,845,697
Net unrealized
appreciation
(depreciation)
of investments --- 13,586,758 9,841,902
-------- ----------- -----------
NET REALIZED AND
UNREALIZED GAIN
(LOSS) ON
INVESTMENTS --- 16,740,949 14,687,599
-------- ----------- -----------
NET INCREASE
(DECREASE) IN
NET ASSETS FROM
OPERATIONS $377,764 $23,001,709 $17,712,386
======== =========== ===========
<CAPTION>
Scudder Variable Life
Investment Fund
(unaffiliated issuers)
------------------------------------------------------
Growth High Emerging Total
With Income Income Growth Return
Subaccount Subaccount Subaccount Subaccount
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Investment Income
Dividend income $308,963 $451,883 --- ---
EXPENSES
Mortality and expense
risk charge 443,773 67,975 260,742 6,133
Administration Fee 110,943 16,994 65,185 1,533
---------- -------- ----------- ---------
Total expenses 554,716 84,969 325,927 7,666
---------- -------- ----------- ---------
NET INVESTMENT
INCOME (LOSS) (245,753) 366,914 (325,927) (7,666)
---------- -------- ----------- ---------
REALIZED AND
UNREALIZED GAIN
(LOSS) ON
INVESTMENTS
Net realized gain
(loss) on
investments 2,208,459 9,192 723,666 (2,890)
Net unrealized
appreciation
(depreciation)
of investments 499,828 (72,922) 19,545,325 (5,423)
---------- -------- ----------- ---------
NET REALIZED AND
UNREALIZED GAIN
(LOSS) ON
INVESTMENTS 2,708,287 (63,730) 20,268,991 (8,313)
---------- -------- ----------- ---------
NET INCREASE
(DECREASE) IN
NET ASSETS FROM
OPERATIONS $2,462,534 $303,184 $19,943,064 ($15,979)
========== ======== =========== =========
<CAPTION>
American Templeton
Century Variable AIM Variable Variable Products
Portfolios, Inc. Insurance Fund, Inc. Series Fund
(unaffiliated issuer) (unaffiliated issuer) (unaffiliated issuer)
-------------------- -------------------- --------------------
Capital Capital
Appreciation Appreciation International
Subaccount Subaccount Subaccount
---------- ---------- ----------
<S> <C> <C> <C>
INVESTMENT INCOME
Dividend income --- $163,499 $693,969
EXPENSES
Mortality and expense
risk charge 40,035 15,498 62,401
Administration Fee 10,009 3,875 15,600
-------- ---------- ----------
Total expenses 50,044 19,373 78,001
-------- ---------- ----------
NET INVESTMENT
INCOME (LOSS) (50,044) 144,126 615,968
-------- ---------- ----------
REALIZED AND
UNREALIZED GAIN
(LOSS) ON
INVESTMENTS
Net realized gain
(loss) on
investments 831,003 86,702 (98,240)
Net unrealized
appreciation
(depreciation)
of investments --- 1,463,269 784,048
-------- ---------- ----------
NET REALIZED AND
UNREALIZED GAIN
(LOSS) ON
INVESTMENTS 831,003 1,549,971 685,808
-------- ---------- ----------
NET INCREASE
(DECREASE) IN
NET ASSETS FROM
OPERATIONS $780,959 $1,694,097 $1,301,776
======== ========== ==========
</TABLE>
(A) "Year ended December 31, 1999 for the Carillon Fund, Inc.'s
Equity, Bond, and S&P 500 Index Subaccounts, the Scudder
Variable Life Investment Fund's Money Market, Capital Growth and
International Subaccounts, MFS Variable Insurance Trust's Growth
with Income, High Income and Emerging Growth Subaccounts, and
the Templeton Variable Products" Series Fund's International
Subaccount.
"Period from May 3, 1999 to December 31, 1999 for the
Carillon Fund, Inc.'s Balanced Index and S&P MidCap 400 Index
Subaccounts, MFS Variable Insurance Trust's Total Return
Subaccount, and the AIM Variable Insurance Fund, Inc.'s Capital
Appreciation Subaccount."
"Period from January 1, 1999 to October 29, 1999 for the
Carillon Fund, Inc.'s Capital Subaccount and the American
Century Variable Portfolios, Inc.'s Capital Appreciation
Suabccount."
The accompanying notes are an integral part of the financial
statements.
<PAGE>
CARILLON ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Carillon Fund, Inc
Equity Subaccount
Year Ended December 31,
1999 1998
<S> <C> <C>
OPERATIONS
Net investment income $12,262,265 $18,853,117
Net realized gain (loss) on investments (7,980,328) 4,726,040
Net unrealized depreciation of investments (4,962,680) (47,211,185)
------------ ------------
Net decrease in net assets resulting
from operations (680,743) (23,632,028)
------------ ------------
EQUITY TRANSACTIONS
Contract purchase payments 3,450,589 11,387,044
Transfers from other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company 1,451,697 3,971,203
Transfers to other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company (38,584,977) (17,622,833)
Surrenders (16,575,614) (11,577,796)
------------ ------------
Net withdrawals from equity transactions (50,258,305) (13,842,382)
------------ ------------
NET DECREASE IN NET ASSETS (50,939,048) (37,474,410)
NET ASSETS (Beginning of year) 106,944,775 144,419,185
------------ ------------
NET ASSETS (End of year) $56,005,727 $106,944,775
============ ============
</TABLE>
The accompanying notes are an integral part of
the financial statements.
<PAGE>
CARILLON ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Carillon Fund, Inc.
Capital Subaccount
Period from Year Ended
January 1, 1999 to December 31,
October 29, 1999 1998
<S> <C> <C>
OPERATIONS
Net investment income $134,809 $3,399,362
Net realized loss on investments (1,014,557) (1,519,853)
Net unrealized depreciation of investments --- (8,463,137)
----------- -----------
Net decrease in net assets resulting
from operations (879,748) (6,583,628)
----------- -----------
EQUITY TRANSACTIONS
Contract purchase payments 1,176,451 3,414,598
Transfers from other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company --- 684,696
Transfers to other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company (25,976,570) (12,038,715)
Surrenders (5,603,856) (4,548,861)
----------- -----------
Net withdrawals from equity transactions (30,403,975) (12,488,282)
----------- -----------
NET DECREASE IN NET ASSETS (31,283,723) (19,071,910)
NET ASSETS (Beginning of year) 31,283,723 50,355,633
----------- -----------
NET ASSETS (End of year) $ --- $31,283,723
=========== ===========
</TABLE>
The accompanying notes are an integral part of
the financial statements.
<PAGE>
CARILLON ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Carillon Fund, Inc.
Balanced Index Subaccount
Period From May 3, 1999 to
December 31, 1999
<S> <C>
OPERATIONS
Net investment loss ($27,436)
Net realized gain on investments 27,767
Net unrealized appreciation of investments 696,055
-----------
Net increase in net assets resulting
from operations 696,386
-----------
EQUITY TRANSACTIONS
Contract purchase payments 380,386
Transfers from other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company 15,820,521
Transfers to other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company (254,924)
Surrenders (30,980)
-----------
Net proceeds from equity transactions 15,915,003
-----------
NET INCREASE NET ASSETS 16,611,389
NET ASSETS (Beginning of year) ---
-----------
NET ASSETS (End of year) $16,611,389
===========
</TABLE>
The accompanying notes are an integral part of
the financial statements.
<PAGE>
CARILLON ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Carillon Fund, Inc.
Bond Subaccount
Year Ended December 31,
1999 1998
<S> <C> <C>
OPERATIONS
Net investment income $1,298,107 $1,625,047
Net realized gain (loss) on investments (58,191) 10,407
Net unrealized depreciation of investments (1,916,250) (483,065)
------------ ------------
Net increase (decrease) in net assets
resulting from operations (676,334) 1,152,389
------------ ------------
EQUITY TRANSACTIONS
Contract purchase payments 3,121,882 5,639,429
Transfers from other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company 3,289,286 6,011,719
Transfers to other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company (7,308,463) (2,463,116)
Surrenders (3,955,000) (2,148,270)
------------ ------------
Net procceeds (withdrawals)
from equity transactions (4,852,295) 7,039,762
------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS (5,528,629) 8,192,151
NET ASSETS (Beginning of year) 29,341,572 21,149,421
------------ ------------
NET ASSETS (End of year) $23,812,943 $29,341,572
============ ============
</TABLE>
The accompanying notes are an integral part of
the financial statements.
<PAGE>
CARILLON ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Carillon Fund, Inc.
S&P 500 Index Subaccount
Year Ended December 31,
1999 1998
<S> <C> <C>
OPERATIONS
Net investment income $284,329 $982,063
Net realized gain on investments 3,440,311 460,154
Net unrealized appreciation of investments 12,670,376 9,709,828
------------ ------------
Net increase in net assets resulting
from operations 16,395,016 11,152,045
------------ ------------
EQUITY TRANSACTIONS
Contract purchase payments 16,476,245 13,428,381
Transfers from other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company 27,471,624 15,677,559
Transfers to other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company (5,015,554) (2,190,362)
Surrenders (9,172,449) (2,944,622)
------------ ------------
Net proceeds from equity transactions 29,759,866 23,970,956
------------ ------------
NET INCREASE IN NET ASSETS 46,154,882 35,123,001
NET ASSETS (Beginning of year) 65,496,467 30,373,466
------------ ------------
NET ASSETS (End of year) $111,651,349 $65,496,467
============ ============
</TABLE>
The accompanying notes are an integral part of
the financial statements.
<PAGE>
CARILLON ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Carillon Fund, Inc.
S&P MidCap 400 Index Subaccount
Period from May 3, 1999 to
December 31, 1999
<S> <C>
OPERATIONS
Net investment income $4,728
Net realized gain on investments 8,705
Net unrealized appreciation of investments 233,977
-----------
Net increase in net assets resulting
from operations 247,410
-----------
EQUITY TRANSACTIONS
Contract purchase payments 1,057,466
Transfers from other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company 1,718,556
Transfers to other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company (32,523)
Surrenders (72,149)
-----------
Net proceeds from equity transactions 2,671,350
-----------
NET INCREASE IN NET ASSETS
NET ASSETS (Beginning of year) ---
NET ASSETS (End of year) $2,918,760
===========
</TABLE>
The accompanying notes are an integral part of
the financial statements.
<PAGE>
CARILLON ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Scudder Variable Life Investment Fund
Money Market Subaccount
Year Ended December 31,
1999 1998
<S> <C> <C>
OPERATIONS
Net investment income $377,764 $277,640
Net increase in net assets
resulting from operations 377,764 277,640
------------ ------------
EQUITY TRANSACTIONS
Contract purchase payments 7,228,619 4,950,684
Transfers from other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company 8,308,583 5,559,795
Transfers to other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company (9,488,720) (8,282,874)
Surrenders (2,415,826) (1,250,081)
------------ ------------
Net proceeds from equity transactions 3,632,656 977,524
------------ ------------
NET INCREASE IN NET ASSETS 4,010,420 1,255,164
NET ASSETS (Beginning of year) 8,459,785 7,204,621
------------ ------------
NET ASSETS (End of year) $12,470,205 $8,459,785
============ ============
</TABLE>
The accompanying notes are an integral part of
the financial statements.
<PAGE>
CARILLON ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION> Scudder Variable Life Investment Fund
Capital Growth Subaccount
Year Ended December 31,
1999 1998
<S> <C> <C>
OPERATIONS
Net investment income $6,260,760 $2,147,658
Net realized gain on investments 3,154,191 1,101,198
Net unrealized appreciation of investments 13,586,758 7,043,071
------------ ------------
Net increase in net assets resulting
from operations 23,001,709 10,291,927
------------ ------------
EQUITY TRANSACTIONS
Contract purchase payments 8,411,261 8,868,534
Transfers from other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company 10,917,471 7,573,481
Transfers to other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company (3,806,422) (3,011,159)
Surrenders (8,920,175) (3,761,668)
------------ ------------
Net proceeds from equity transactions 6,602,135 9,669,188
------------ ------------
NET INCREASE IN NET ASSETS 29,603,844 19,961,115
NET ASSETS (Beginning of year) 63,203,220 43,242,105
------------ ------------
NET ASSETS (End of year) $92,807,064 $63,203,220
============ ============
</TABLE>
The accompanying notes are an integral part of
the financial statements.
<PAGE>
CARILLON ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Scudder Variable Life Investment Fund
International Subaccount
Year Ended December 31,
1999 1998
<S> <C> <C>
OPERATIONS
Net investment income $3,024,787 $3,552,294
Net realized gain on investments 4,845,697 793,314
Net unrealized appreciation of investments 9,841,902 449,974
------------ ------------
Net increase in net assets resulting
from operations 17,712,386 4,795,582
------------ ------------
EQUITY TRANSACTIONS
Contract purchase payments 4,612,737 3,659,238
Transfers from other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company 2,845,832 1,956,986
Transfers to other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company (2,804,497) (2,847,715)
Surrenders (4,720,627) (2,159,945)
------------ ------------
Net proceeds (withdrawals)
from equity transactions (66,555) 608,564
------------ ------------
NET INCREASE IN NET ASSETS 17,645,831 5,404,146
NET ASSETS (Beginning of year) 34,209,271 28,805,125
------------ ------------
NET ASSETS (End of year) $51,855,102 $34,209,271
============ ============
</TABLE>
The accompanying notes are an integral part of
the financial statements.
<PAGE>
CARILLON ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
MFS Variable Insurance Trust
Growth with Income Subaccount
Year Ended December 31,
1999 1998
<S> <C> <C>
OPERATIONS
Net investment loss $(245,753) $(305,507)
Net realized gain on investments 2,208,459 716,995
Net unrealized appreciation of investments 499,828 3,957,672
------------ ------------
Net increase in net assets resulting
from operations 2,462,534 4,369,160
------------ ------------
EQUITY TRANSACTIONS
Contract purchase payments 8,668,879 8,332,646
Transfers from other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company 11,521,175 9,394,838
Transfers to other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company (3,681,446) (1,225,425)
Surrenders (4,503,838) (1,062,222)
------------ ------------
Net proceeds from equity transactions 12,004,770 15,439,837
------------ ------------
NET INCREASE IN NET ASSETS 14,467,304 19,808,997
NET ASSETS (Beginning of year) 34,369,071 14,560,074
------------ ------------
NET ASSETS (End of year) $48,836,375 $34,369,071
============ ============
</TABLE>
The accompanying notes are an integral part of
the financial statements.
<PAGE>
CARILLON ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
MFS Variable Insurance Trust
High Income Subaccount
Year Ended December 31,
1999 1998
<S> <C> <C>
OPERATIONS
Net investment income $366,914 $216,754
Net realized gain on investments 9,192 32,595
Net unrealized depreciation of investments (72,922) (374,632)
------------ ------------
Net increase (decrease) in net assets
resulting from operations 303,184 (125,283)
------------ ------------
EQUITY TRANSACTIONS
Contract purchase payments 1,791,039 1,566,549
Transfers from other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company 1,395,653 1,322,305
Transfers to other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company (776,022) (567,375)
Surrenders (846,340) (175,620)
------------ ------------
Net proceeds from equity transactions 1,564,330 2,145,859
------------ ------------
NET INCREASE IN NET ASSETS 1,867,514 2,020,576
NET ASSETS (Beginning of year) 5,290,741 3,270,165
------------ ------------
NET ASSETS (End of year) $7,158,255 $5,290,741
============ ============
</TABLE>
The accompanying notes are an integral part of
the financial statements.
<PAGE>
CARILLON ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
MFS Variable Insurance Trust
Emerging Growth Subaccount
Year Ended December 31,
1999 1998
<S> <C> <C>
OPERATIONS
Net investment loss ($325,927) ($49,428)
Net realized gain on investments 723,666 165,546
Net unrealized appreciation of investments 19,545,325 2,275,596
----------- -----------
Net increase in net assets resulting
from operations 19,943,064 2,391,714
----------- -----------
EQUITY TRANSACTIONS
Contract purchase payments 8,009,178 4,714,681
Transfers from other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company 13,107,779 5,060,877
Transfers to other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company (1,825,500) (357,529)
Surrenders (2,269,028) (543,344)
----------- -----------
Net proceeds from equity transactions 17,022,429 8,874,685
----------- -----------
NET INCREASE IN NET ASSETS 36,965,493 11,266,399
NET ASSETS (Beginning of year) 14,048,432 2,782,033
----------- -----------
NET ASSETS (End of year) $51,013,925 $14,048,432
=========== ===========
</TABLE>
The accompanying notes are an integral part of
the financial statements.
<PAGE>
CARILLON ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
MFS Variable Insurance Trust
Total Return Subaccount
Period from May 3, 1999 to
December 31, 1999
<S> <C>
OPERATIONS
Net investment loss $(7,666)
Net realized loss on investments (2,890)
Net unrealized depreciation of investments (5,423)
---------
Net decrease in net assets resulting
from operations (15,979)
---------
EQUITY TRANSACTIONS
Contract purchase payments 503,719
Transfers from other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company 992,849
Transfers to other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company (34,166)
Surrenders (63,797)
---------
Net proceeds from equity transactions 1,398,605
---------
NET INCREASE IN NET ASSETS 1,382,626
NET ASSETS (Beginning of year) ---
---------
NET ASSETS (End of year) $1,382,626
=========
</TABLE>
The accompanying notes are an integral part of
the financial statements.
<PAGE>
CARILLON ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
American Century Variable Portfolios, Inc.
Capital Appreciation Subaccount
Period from Year Ended
January 1, 1999 to December 31,
October 29, 1999 1998
<S> <C> <C>
OPERATIONS
Net investment income (loss) ($50,044) $200,624
Net realized gain (loss) on investments 831,003 (328,073)
Net unrealized depreciation of investments --- (90,825)
---------- ---------
Net increase (decrease) in net assets
resulting from operations 780,959 (218,274)
---------- ---------
EQUITY TRANSACTIONS
Contract purchase payments 1,289,174 1,030,535
Transfers from other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company --- 465,083
Transfers to other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company (5,628,713) (1,497,877)
Surrenders (1,399,495) (354,787)
---------- ---------
Net withdrawals from equity transactions (5,739,034) (357,046)
---------- ---------
NET DECREASE IN NET ASSETS (4,958,075) (575,320)
NET ASSETS (Beginning of year) 4,958,075 5,533,395
---------- ---------
NET ASSETS (End of year) $ --- $4,958,075
========== =========
</TABLE>
The accompanying notes are an integral part of
the financial statements.
<PAGE>
CARILLON ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
AIM Variable Insurance Fund, Inc.
Capital Appreciation Subaccount
Period from May 3, 1999 to
December 31, 1999
<S> <C>
OPERATIONS
Net investment income $144,126
Net realized gain on investments 86,702
Net unrealized appreciation on investments 1,463,269
----------
Net increase in net assets resulting
from operations 1,694,097
----------
EQUITY TRANSACTIONS
Contract purchase payments 684,389
Transfers from other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company 6,352,793
Transfers to other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company (18,748)
Surrenders (198,744)
----------
Net proceeds from equity transactions 6,819,690
----------
NET INCREASE IN NET ASSETS 8,513,787
NET ASSETS (Beginning of year) ---
----------
NET ASSETS (End of year) $8,513,787
==========
</TABLE>
The accompanying notes are an integral part of
the financial statements.
<PAGE>
CARILLON ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Templeton Variable Products Series Fund
International Subaccount
Year Ended December 31,
1999 1998
<S> <C> <C>
OPERATIONS
Net investment income $615,968 $157,426
Net realized gain (loss) on investments (98,240) 42,335
Net unrealized appreciation
(depreciation) on investments 784,048 (71,075)
------------ ------------
Net increase in net assets resulting
from operations 1,301,776 128,686
------------ ------------
EQUITY TRANSACTIONS
Contract purchase payments 1,319,540 1,697,331
Transfers from other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company 426,209 1,403,473
Transfers to other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company (453,521) (471,667)
Surrenders (693,517) (187,435)
------------ ------------
Net proceeds from equity transactions 598,711 2,441,702
------------ ------------
NET INCREASE IN NET ASSETS 1,900,487 2,570,388
NET ASSETS (Beginning of year) 5,475,012 2,904,624
------------ ------------
NET ASSETS (End of year) $7,375,499 $5,475,012
============ ============
</TABLE>
The accompanying notes are an integral part of
the financial statements.
<PAGE>
CARILLON ACCOUNT
NOTES TO FINANCIAL STATEMENTS
===============================================================
December 31, 1999
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. The Account is comprised of fourteen subaccounts,
each of which invests in a corresponding Portfolio of Carillon
Fund, Inc., Scudder Variable Life Investment Fund, MFS Variable
Insurance Trust, AIM Variable Insurance Fund,Inc., or Templeton
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 life policies and variable annuity contracts. Carillon
Investments, Inc. (the Distributor), 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 life policies and variable annuity contracts issued by
Carillon Fund, Inc. The shares of Scudder Variable Life
Investment Fund, MFS Variable Insurance Trust, AIM Variable
Insurance Funds, Inc., and Templeton Variable Products Series
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
Massachusetts Financial Services Company, is the distributor of
the shares issued by the MFS Variable Insurance Trust. AIM
Distributors, Inc. is the distributor of the shares issued by
AIM Variable Insurance Fund, Inc. Franklin Templeton
Distributors, Inc. serves as the distributor of variable annuity
and variable life insurance contracts issued by Templeton
Variable Products Series Fund.
On May 3, 1999, the Account began operations in the Carillon
Fund, Inc.'s Balanced Index and S&P MidCap 400 Index
Subaccounts, the MFS Variable Insurance Trust's Total Return
Subaccount, and the AIM Variable Insurance Fund, Inc.'s Capital
Appreciation Subaccount. On October 29, 1999, the Account
terminated the operations of the Carillon Fund, Inc.'s Capital
Subaccount (Capital Account) and the American Century Variable
Portfolios, Inc.'s Capital Appreciation Subaccount (American
Century Account). At the date of termination, all funds in the
Capital Account and the American Century Account were
transferred to the Carillon Fund, Inc.'s Balanced Index and the
AIM Variable Insurance Fund, Inc.'s Capital Appreciation
Subaccounts, respectively.
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 Funds' shares.
Investments in the Funds' shares are subsequently valued at the
net asset value of the Funds' shares held.
Use of estimates - The preparation of financial statements in
conformity with accounting principles generally accepted in the
United States requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements. Estimates also affect
the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from 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 the Funds'
shares are calculated on the first-in, first-out basis for
financial reporting and tax purposes. All dividends and
distributions from the Subaccount are reinvested in additional
shares of the respective Subaccount at the net asset value per
share.
Federal income taxes - The operations of the Account form a part
of and are taxed with the operations of Union Central. Union
Central is taxed as a life insurance company under Subchapter L
of the Internal Revenue Code. Under existing federal income tax
law, separate account investment income and capital gains are
not taxed to the extent they are applied to increase reserves
under a contract issued in connection with the Account.
Investment income and realized capital gains and losses on
assets of the Account are automatically applied to increase or
decrease reserves under the contract. Accordingly, no provision
for federal income taxes has been made in these financial
statements.
NOTE 2 - INVESTMENT IN AFFILIATED AND NON-AFFILIATED FUND (now a
Lotus spreadsheet)
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, AIM
Varaible Insurance Fund, and Templeton Variable Products Series
Fund as of December 31, 1999:
<TABLE>
<CAPTION>
Carillon Fund, Inc.
Balanced S&P MidCap
Equity Index Bond S&P 500 400 Index
Subaccount Subaccount Subaccount Subaccount Subaccount
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value per share $12.62 $10.41 $10.36 $23.12 $11.04
Number of shares 4,432,901 1,557,954 2,305,359 4,838,090 270,825
<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 $29.13 $20.34
Number of shares 8,614,108 3,187,108 2,542,366
<CAPTION>
MFS Variable Insurance Trust
Growth Emerging
with Income High Income Growth Total Return
Subaccount Subaccount Subaccount Subaccount
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net asset value per share $21.31 $11.49 $37.94 $17.75
Number of shares 2,292,668 621,498 1,346,323 78,429
<CAPTION>
AIM Variable Insurance Fund, Inc
Capital
Appreciation
Subaccount
------------
<S> <C>
Net asset value per share $35.58
Number of shares 224,872
<CAPTION>
Templeton Variable Products Series Fund
International
Subaccount
-------------
<S> <C>
Net asset value per share $23.13
Number of shares 333,630
</TABLE>
NOTE 3 - ACCOUNT CHARGE
Mortality and expense risk charge - A mortality and expense risk
charge for Union Central at an annual rate of 1.0% 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 - IMPACT OF YEAR 2000 (UNAUDITED)
Union Central has made a successful transition to the Year 2000.
Union Central's computer systems and facilities are fully
operational and Union Central is prepared to continue to serve
its customers in the twenty-first century.
Union Central began preparations for the Year 2000 in 1996. From
1996 to 2000, significant resources in both time and money were
allocated to the Year 2000 project. Union Central's efforts
included Year 2000 system modifications, future date testing for
virtually all of Union Central's computer systems, Year 2000
readiness of Union Central's building systems (i.e. heating,
lighting, and security systems), and formal communications with
all significant vendors, suppliers and business partners to
determine their Year 2000 status.
The goal was to continue to meet Union Central's obligations to
its customers and business partners without interruption as
Union Central transitioned to the Year 2000. Union Central has
achieved that goal and is not aware of any Year 2000 problems
occurring in its computer systems or embedded systems.
Union Central is continuing to monitor all systems closely as
there is still the potential for Year 2000 related problems to
occur. Union Central is confident, however, that it will not
encounter any problems that have a material effect on its
ability to continue to provide service to its customers and
business partners.
NOTE 5- RELATED PARTY TRANSACTIONS
Investment advisory fees - The Portfolios within Carillon Fund,
Inc. (the CFI Funds) pay investment advisory fees to Carillon
Advisers, Inc. (the Adviser), under terms of an Investment
Advisory Agreement (the Agreement). Certain officers and
directors of the Adviser are affiliated with the CFI Funds. The
CFI Funds pay the Adviser, as full compensation for all services
and facilities furnished, a monthly fee computed separately for
each Portfolio on a daily basis, at an annual rate, as follows:
(a) for the Equity Portfolio - .65% of the first
$50,000,000, .60% of the next $100,000,000, and
.50% of all over $150,000,000 of the current net
asset value:
(b) for the Bond Portfolio - .50% of the first
$50,000,000, .45% of the next $100,000,000, and
.40% of all over $150,000,000 of the current net
asset value.
(c) for the S&P 500 Index Portfolio - .30% of the
current net asset value.
(d) for the S&P MidCap 400 Index Portfolio - .30% of
the current net asset value.
(e) for the Balanced Index Portfolio - .30% of the
current net asset value.
The Agreement provides that if the total operating expenses of
the CFI Funds, exclusive of the advisory fee and certain other
expenses as described in the Agreement, for any fiscal quarter
exceed an annual rate of 1% of the average daily net assets of
the Equity or Bond Portfolios, the Adviser will reimburse the
CFI Funds for such excess, up to the amount of the advisory fee
for that year. The Adviser has agreed to pay any other expenses
of the S&P 500 Index Portfolio, the S&P MidCap 400 Index
Portfolio, and the Balanced Index Portfolio, other than the
advisory fee for that Portfolio, to the extent that such
expenses exceed 0.30% of its average annual net assets. As a
result, for the period ended December 31, 1999, the adviser
reimbursed the S&P MidCap 400 Index Portfolio $12,912 and the
Balanced Index Portfolio $13,736.
In addition to providing investment advisory services, the
Adviser is responsible for providing certain administrative
functions to the CFI Funds. The Adviser has entered into an
Administration Agreement with the Distributor under which the
Distributor furnishes substantially all of such services for an
annual fee of .20% of the CFI Funds' average net assets for the
Equity and Bond Portfolios, and .05% of the CFI Funds' average
net assets for the S&P 500 Index Portfolio, the S&P MidCap 400
Index Portfolio, and the Balanced Index Portfolio. The fee is
borne by the Adviser, not the CFI Funds.
The Adviser is a wholly-owned subsidiary of Union Central.
<PAGE>
NOTE 6 - SELECTED PER UNIT DATA
The following selected per unit data is computed on the basis of
an accumulation unit outstanding at December 31 except as noted
(ratio of expenses and total return are of the underlying
funds):
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
CARILLON FUND, INC.
EQUITY SUBACCOUNT
Accumulation unit value $41.72 $41.40 $49.53 $41.68 $33.97
Number of accumulation
units outstanding,
end of period 1,334,722.37 2,575,126.63 2,907,000.69 2,723,705.33 2,337,986.47
Payout unit value $41.72 $41.40 $49.53 $41.68 $33.97
Number of payout units
outstanding,
end of period 7,689.05 8,295.16 8,951.59 9,142.02 9,795.88
Ratio of expenses to
average net assets 0.69% 0.62% 0.62% 0.64% 0.66%
Total return 2.05% -15.31% 20.56% 24.52% 26.96%
BALANCED INDEX SUBACCOUNT
Accumulation unit value $10.44<F1>
Number of accumulation
units outstanding,
end of period 1,590,562.40
Ratio of expenses to
average net assets 0.47%
Total return 5.31%
<CAPTION>
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
BOND SUBACCOUNT
Accumulation unit value $28.33 $29.00 $27.58 $25.21 $23.87
Number of accumulation
units outstanding,
end of period 840,551.83 1,011,679.98 766,722.29 672,511.33 574,420.86
Ratio of expenses
to average net assets 0.60% 0.58% 0.60% 0.62% 0.65%
Total return -1.11% 6.52% 11.02% 7.19% 19.03%
<CAPTION>
1999 1998 1997 1996
<S> <C> <C> <C> <C>
S&P 500 INDEX SUBACCOUNT
Accumulation unit value $22.47 $18.88 $14.88 $11.37<F2>
Number of accumulation
units outstanding,
end of period 4,969,188.25 3,469,857.07 2,041,455.30 869,681.47
Ratio of expenses to
average net assets 0.39% 0.43% 0.50% 0.59%
Total return 20.52% 28.54% 32.72% 23.37%
<CAPTION>
1999
<S> <C>
S&P MIDCAP 400 INDEX
SUBACCOUNT
Accumulation unit value $11.02<F3>
Number of accumulation
units outstanding,
end of period 264,810.05
Ratio of expenses to
average net assets 0.60%
Total return 11.14%
<CAPTION>
SCUDDER VARIABLE LIFE INVESTMENT FUND
MONEY MARKET SUBACCOUNT<F4>
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Accumulation unit value $17.92 $17.28 $16.63 $16.03 $15.47
Number of accumulation
units outstanding,
end of period 695,976.35 489,587.90 433,295.76 477,679.12 368,443.98
Ratio of expenses to
average net assets 0.43% 0.44% 0.46% 0.46% 0.50%
Total return 4.99% 5.29% 5.25% 5.09% 5.65%
<CAPTION>
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
CAPITAL GROWTH SUBACCOUNT
Accumulation unit value $37.04 $27.73 $22.80 $17.04 $14.39
Number of accumulation
units outstanding,
end of period 2,505,505.04 2,278,984.71 1,896,319.89 1,593,634.26 1,162,998.78
Ratio of expenses to
average net assets 0.49% 0.50% 0.51% 0.53% 0.57%
Total return 35.23% 23.23% 35.76% 20.13% 28.65%
INTERNATIONAL SUBACCOUNT
Accumulation unit value $30.80 $20.18 $17.26 $16.05 $14.19
Number of accumulation
units outstanding,
end of period 1,683,640.01 1,695,186.53 1,669,242.06 1,564,590.89 1,220,160.02
Ratio of expenses to
average net assets 1.03% 1.04% 1.00% 1.05% 1.08%
Total return 54.51% 18.49% 9.07% 14.78% 11.11%
<CAPTION>
GROWTH WITH INCOME SUBACCOUNT
1999 1998 1997 1996
<S> <C> <C> <C> <C>
Accumulation unit value $18.48 $17.53 $14.52 $11.35<F2>
Number of accumulation
units outstanding,
end of period 2,643,371.91 1,960,448.36 1,002,704.64 425,068.19
Ratio of expenses to
average net assets 0.88% 0.95% 1.00% 1.01%
Total return 6.69% 22.32% 29.78% 24.46%
HIGH INCOME SUBACCOUNT
Accumulation unit value $12.58 $11.96 $12.14 $10.84<F2>
Number of accumulation
units outstanding,
end of period 569,103.74 442,315.26 269,397.73 108,772.82
Ratio of expenses to
average net assets 1.01% 1.03% 1.01% 1.01%
Total return 6.44% -0.18% 13.52% 11.80%
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
EMERGING GROWTH SUBACCOUNT
Accumulation unit value $28.68 $16.43 $12.41<F5>
Number of accumulation
units outstanding,
end of period 1,778,952.12 855,017.91 224,192.63
Ratio of expenses to
average net assets 0.84% 0.85% 0.90%
Total return 76.71% 34.16% 21.90%
<CAPTION>
1999
<S> <C>
TOTAL RETURN SUBACCOUNT
Accumulation unit value $9.76<F3>
Number of accumulation
units outstanding,
end of period 141,613.20
Ratio of expenses to
average net assets 0.90%
Total return 3.08%
<CAPTION>
AIM VARIABLE INSURANCE FUND, INC.
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
CAPITAL APPRECIATION
SUBACCOUNT
Accumulation unit value $13.95<F6>
Number of accumulation
units outstanding,
end of period 610,329.61
Ratio of expenses to
average net assets 0.73%
Total return 44.61%
<CAPTION>
TEMPLETON VARIABLE PRODUCTS SERIES FUND
1999 1998 1997
<S> <C> <C> <C>
INTERNATIONAL SUBACCOUNT
Accumulation unit value $14.27 $11.73 $10.89<F5>
Number of accumulation
units outstanding,
end of period 516,736.13 466,879.96 266,656.62
Ratio of expenses to
average net assets 1.13% 1.11% 1.13%
Total return 23.23% 9.08% 9.46%
<FN>
<F1> Commencement of operations was May 3, 1999, with a beginning accumulation
unit value of $10.00. Assets of Carillon Capital subaccount were transferred
to the Carillon Balanced Index subaccount on October 29, 1999.
<F2> Commencement of operations was May 1, 1996, with a beginning accumulation
unit value of $10.00.
<F3> Commencement of operations was May 3, 1999, with a beginning accumulation
unit value of $10.00.
<F4> Assets of Carillon Money Market Subaccount were transferred to the
Scudder Money Market Subaccount on November 12, 1993.
<F5> Commencement of operations was May 1, 1997, with a beginning accumulation
unit value of $10.00.
<F4> Commencement of operations was May 3, 1999, with a beginning accumulation
unit value of $10.00. Assets of American Century Capital Appreciation
subaccount were transferred to the AIM Capital Appreciation subaccount on
October 29, 1999.
</FN>
</TABLE>
<PAGE>
Consolidated Financial Statements
The Union Central Life
Insurance Company and Subsidiaries
Years ended December 31, 1999 and 1998
with Report of Independent Auditors
<PAGE>
THE UNION CENTRAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 1999 and 1998
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>
Ernst & Young LLP 1300 Chiquita Center Phone: 513 621 6454
250 East Fifth Street
Cincinnati, Ohio 45202
Report of Independent Auditors
To the Board of Directors of
The Union Central Life Insurance Company
We have audited the accompanying consolidated balance sheets of
The Union Central Life Insurance Company and subsidiaries as of
December 31, 1999 and 1998, 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 auditing standards
generally accepted in the United States. 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, 1999, and 1998, and the consolidated
results of their operations and their cash flows for the years
then ended in conformity with accounting principles generally
accepted in the United States.
/s/ Ernst & Young LLP
February 4, 2000
<PAGE>
The Union Central Life Insurance Company and Subsidiaries
Consolidated Balance Sheets
(in thousands)
<TABLE>
<CAPTION>
December 31,
1999 1998
-----------------
<S> <C> <C>
ASSETS
Investments:
Fixed maturities available-for-sale at fair
value (amortized cost: 1999 - $2,526,023
and 1998 - $2,637,815) $2,407,439 $2,674,832
Equity securities available-for-sale at fair
value (cost: 1999 - $82,269 and 1998 - $100,429) 70,539 82,269
Cash and short-term investments 1,892 57,376
Other invested assets 42,666 49,810
Mortgage loans 726,753 790,337
Real estate 42,509 43,205
Policy loans 150,703 201,958
---------- ----------
Total investments 3,442,501 3,899,787
Accrued investment income 42,963 46,857
Deferred policy acquisition costs 432,401 382,971
Property, plant and equipment, at cost,
less accumulated depreciation (1999 - $64,069
and 1998 - $60,201) 33,154 25,272
Federal income tax recoverable 5,720 6,415
Deferred federal income tax asset 5,877 --
Other assets 154,151 101,735
Separate account assets 1,919,566 1,530,755
---------- ----------
Total assets $6,036,333 $5,993,792
========== ==========
LIABILITIES AND EQUITY
Policy liabilities:
Future policy benefits $3,210,466 $3,411,158
Deposit funds 101,187 131,225
Policy and contract claims 31,163 34,499
Policyholders' dividends 12,275 37,192
---------- ----------
Total policy liabilities 3,355,091 3,614,074
Deferred revenue 101,477 101,823
Other liabilities 88,812 84,792
Deferred federal income tax liability -- 15,744
Surplus notes payable 49,767 49,758
Separate account liabilities 1,916,954 1,524,810
---------- ----------
Total liabilities 5,512,101 5,391,001
MINORITY INTEREST IN SUBSIDIARY'S EQUITY -- 36,320
EQUITY
Policyholders' equity 593,349 571,895
Accumulated other comprehensive loss (69,117) (5,424)
---------- ----------
Total equity 524,232 566,471
---------- ----------
Total liabilities and equity $6,036,333 $5,993,792
========== ==========
</TABLE>
The accompanying notes are an integral part of the
financial statements.
<PAGE>
THE UNION CENTRAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands)
<TABLE>
<CAPTION>
December 31,
1999 1998
-----------------
<S> <C> <C>
REVENUE
Insurance revenue:
Traditional insurance premiums $149,343 $138,358
Universal life policy charges 61,907 82,729
Annuities 43,540 43,778
Net investment income 277,382 307,839
Net realized losses on investments (20,256) (12,535)
Other 17,665 8,999
-------- --------
Total revenue 529,581 569,168
BENEFITS AND EXPENSES
Benefits 168,288 188,217
Increase in reserves for future policy benefits 7,307 1,791
Interest expense:
Universal life 55,643 57,364
Investment products 82,107 89,150
Underwriting, acquisition and insurance expense 146,052 158,887
Policyholders' dividends 16,225 20,626
Impairment loss on subsidiary 5,689 --
-------- --------
Total benefits and expenses 481,311 516,035
Income before federal income tax expense
and minority interest in subsidiary loss 48,270 53,133
Federal income tax expense 26,816 16,687
-------- --------
Income before minority interest in
subsidiary loss 21,454 36,446
Minority interest in subsidiary loss -- 3,045
-------- --------
Net Income $21,454 $39,491
======== ========
</TABLE>
The accompanying notes are an integral part of the
financial statements.
<PAGE>
THE UNION CENTRAL LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF EQUITY
(in thousands)
<TABLE>
<CAPTION>
Accumulated
Other
Comprehensive Policyholders'
Income (Loss) Equity Total
------------- -------------- -----
<S> <C> <C> <C>
Balance at January 1, 1998 $ 24,100 $532,404 $556,504
Net income 39,491 39,491
Unrealized losses on securities,
net of tax and reclassification
adjustment (23,393) (23,393)
Minimum pension liability
adjustment (6,131) (6,131)
-------
Comprehensive income 9,967
-------- -------- --------
Balance at December 31, 1998 (5,424) 571,895 566,471
-------- -------- --------
Net income 21,454 21,454
Unrealized losses on securities,
net of tax and reclassification
adjustment (62,358) (62,358)
Minimum pension liability
adjustment (1,335) (1,335)
Comprehensive loss (42,239)
-------- -------- --------
Balance at December 31, 1999 $(69,117) $593,349 $524,232
======== ======== ========
The accompanying notes are an integral part of the
financial statements.
<PAGE>
THE UNION CENTRAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
</TABLE>
<TABLE>
<CAPTION>
December 31,
1999 1998
-----------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 21,454 $ 39,491
Adjustments to net income not affecting cash:
Impairment loss on subsidiary 5,689 --
Interest credited to universal life policies 82,107 57,364
Interest credited to interest sensitive products 55,643 89,150
Accrual of discounts on investments, net 940 628
Net realized losses on investments 20,256 12,535
Depreciation 4,750 5,081
Amortization of deferred policy acquisition costs 21,910 34,559
Amortization of deferred revenue (3,900) (10,267)
Deferred federal income tax expense (benefit) 11,916 (71)
Change in operating assets and liabilities:
Accrued investment income (1,742) 1,989
Policy cost deferred (60,779) (43,382)
Revenue deferred 3,555 1,959
Policy liabilities (28,944) (27,465)
Other liabilities (26,963) (21,515)
Other items, net 13,005 (3,312)
---------- ----------
Cash Provided by Operating Activities 118,897 136,744
---------- ----------
INVESTING ACTIVITIES
Costs of investments acquired (2,612,555) (2,421,256)
Proceeds from sale, maturity or repayment
of investments 2,413,784 2,399,096
Decrease in policy loans 3,409 1,523
Purchases of property and equipment, net (11,598) (5,780)
---------- ----------
Cash Used in Investing Activities (206,960) (26,417)
---------- ----------
FINANCING ACTIVITIES
Receipts from universal life and
investment contracts 695,971 733,489
Withdrawals from universal life and
investment contracts (663,392) (791,312)
---------- ----------
Cash Provided (Used) by Financing Activities 32,579 (57,823)
---------- ----------
Increase (decrease) in cash and short term
investments (55,484) 52,504
---------- ----------
Cash and short term investments
at beginning of year 57,376 4,872
---------- ----------
Cash and short term investments at end of year $ 1,892 $ 57,376
========== ==========
Supplemental disclosure of cash flow information:
Cash paid during the year for federal income taxes $ 13,680 $ 24,277
Cash paid during the year for interest
on surplus notes $ 4,100 $ 4,100
</TABLE>
The accompanying notes are an integral part of the
financial statements.
<PAGE>
The Union Central Life Insurance Company and Subsidiaries
Notes to Consolidated Financial Statements
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 accounting principles generally
accepted in the U.S. (GAAP) and include the accounts of The
Union Central Life Insurance Company (Union Central) and the
following subsidiaries: Carillon Advisors, Inc., wholly-owned, a
registered investment advisor; Carillon Investments, Inc.,
wholly-owned, a registered broker-dealer that offers investment
products and related services through its registered
representatives; Payday of America, LLC, wholly-owned, a payroll
company; and Family Enterprise Institute, Inc., wholly-owned, a
national membership organization for family business owners.
The consolidated company will be referred to as "the Company".
At December 31, 1998, the consolidated company included the
Manhattan Life Insurance Company (MLIC). In accordance with the
impairment loss recognized on MLIC in 1999 (see discussion
below), MLIC was not included in the consolidated company at
December 31, 1999. 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 registered investment company consisting of five
investment portfolios (Carillon S&P Midcap 400 Index Portfolio,
Carillon Lehman Aggregate Bond Index Portfolio, Carillon Equity
Fund, Carillon NASDAQ 100 Index Fund and Carillon Russel 2000
Index Fund) and Summit Investment Trust, consisting of two
mutual funds (Summit Emerging Markets Bond Fund, an emerging
markets corporate and government bond fund and Summit High Yield
Fund, a high yield bond mutual fund). In 1999, the Company
formally dissolved the Carillon Investment Trust, a registered
investment company, and withdrew its entire investment in the
Carillon Capital Fund, the sole mutual fund that was offered
through the Carillon Investment Trust.
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.
On May 27, 1999, the Company entered into a definitive agreement
to sell all of the Company's guarantee capital shares in MLIC to
Connecticut Reassurance Corporation (CRC), an insurance company
formed under Connecticut law, for $27,250,000. On January 26,
2000, the New York Insurance Department approved the sale of
MLIC to CRC, and on February 2, 2000, the sale was completed.
Because the proceeds from the sale of MLIC to CRC were less than
the net assets of MLIC, an impairment loss was recognized in
1999 ($5,689,000 loss before federal income tax expense of
$5,621,000). The $5,689,000 pre-tax loss is presented in
"Impairment loss on subsidiary" in the Statements of Income, and
the federal income tax expense of $5,621,000 recognized on the
impairment was included in "Federal income tax expense" in the
Statements of Income. As the purchase price of $27,250,000 was
received subsequent to December 31, 1999, it was recorded as a
receivable in "Other assets" in the Balance Sheets at December
31, 1999. Also, the impairment loss on MLIC included the
write-off of unamortized goodwill of $2,200,000 recorded by
Union Central related to expenses Union Central incurred in
becoming the sole shareholder in MLIC. As of December 31, 1999
and 1998, respectively, MLIC reported assets of $431,425,000 and
$482,935,000, liabilities of $387,585,000 and $416,260,000,
policyholders' equity of $14,884,000 and $36,320,000 (reported
as "Minority interest in subsidiary equity" in the Balance
Sheets at December 31, 1998) and shareholders' equity of
$28,956,000 and $30,355,000. MLIC reported revenue of
$54,732,000 and $66,031,000 and expenses of $64,176,000 and
$69,555,000 for the years ended December 31, 1999 and 1998,
respectively. MLIC reported policyholders' share of net loss of
$10,938,000 and $3,045,000 (reported as "Minority interest in
subsidiary loss" in the Statements of Income for the year ended
December 31, 1998) and shareholders' share of net income of
$101,000 and $1,172,000 for the years ended December 31, 1999
and 1998, respectively.
During the third quarter of 1999, the Company entered into an
agreement with Swiss Re to reinsure Swiss Re's entire group
operations (formally Royal Maccabees and Royal Life). The block
was reinsured on a 100% coinsurance basis with an effective date
of January 1, 1999. As part of the agreement, the Company paid
an allowance of $13,400,000 to Swiss Re, which was capitalized
in "Deferred Policy Acquisition Costs" in the Balance Sheets.
During the third quarter of 1999, the Company formed Payday of
America, LLC. The Company contributed $1,600,000 of paid in
capital related to the formation of Payday of America.
During 1999, the Company recognized a realized gain of
$5,040,000 recorded in "Net realized losses on investments" in
the Statements of Income resulting from sales of mortgage loans
to a third party. The realized gain was computed in accordance
with Financial Accounting Standards No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities" (FAS 125) and represented the present value of
compensation related to the mortgage loan sales that Union
Central will receive over the life of the mortgage loans sold.
Also, at December 31, 1999, an interest-only strip asset of
$4,354,000 was recorded in "Other assets" in the Balance Sheets.
The asset represented the present value of compensation of
$5,040,000 related to the mortgage loan sales, less amortization
expense of $684,000, which was recorded in "Net investment
income" in the Statements of Income.
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 Company's carrying value of investments in limited
partnerships are adjusted to reflect the GAAP earnings of the
investments underlying the limited partnership portfolios.
During 1998, the Company declared two of its hedge fund limited
partnerships permanently impaired and recorded a realized loss
of $15,800,000.
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 are recognized
on a first-in, first-out basis. 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 29, 2000. 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 a particular point in time.
The value of the call options was $5,382,000 at December 31,
1999.
The call options were carried at their fair value of $5,382,000
at December 31, 1999, and were reflected in "Other invested
assets" in the Balance Sheets. The liabilities for the hedged
insurance contracts were adjusted based on the returns in
Standard & Poor's 500 Stock Index, 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". Amortization of deferred policy acquisition
costs totalled $21,910,000 and $34,559,000 for the years ended
December 31, 1999 and 1998, 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 (increasing) or decreasing
deferred policy acquisition costs related to unrealized gains or
losses totalled $(37,373,000) and $11,474,000 at 1999 and 1998,
respectively.
In 1999 and 1998, 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 decreased
$12,022,000 and $2,991,000 for the years ended 1999 and 1998,
respectively.
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.
Capitalization of Software Costs
In 1999, the Company adopted Statement of Position 98-1,
"Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use" (SOP 98-1). SOP 98-1 requires that
certain software costs be capitalized and subsequently amortized
over the software's estimated useful life. The asset of
$5,669,000 established due to the capitalization of certain
software costs was recorded in "Other assets" in the Balance
Sheets.
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
The Company's dividend liability is the amount estimated to have
accrued to policyholders' as of each year end.
Separate Accounts
Separate account assets and liabilities reported in the
accompanying financial statements (excluding seed money provided
by the Company) represent funds that are separately administered
for the 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 2.3% to 6.0% for the years ended 1999 and 1998.
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 the premium paying lifetime of the
policies using assumptions consistent with those used to develop
policy benefit reserves. For participating life insurance
products, deferred policy acquisition costs are 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 7.1% to 8.9% and
from 5.7% to 8.8% for the years ended 1999 and 1998,
respectively. Changes in dividend payouts are assumed with
changes in yields.
Universal Life and Other Interest Sensitive Products
Interest sensitive products include universal life, single
premium whole life and annuity 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 8.2% and from 4.5% to 7.5% for the years ended 1999 and 1998,
respectively.
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 $3,900,000 and
$10,267,000 for the years ended December 31, 1999 and 1998,
respectively, and was included in "Universal life policy
charges" in the Statements of Income.
In 1999 and 1998, 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 $1,000,000 and $545,000 for the years
ended 1999 and 1998, respectively.
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 ranged
from 8.3% to 8.4% for the years ended 1999 and 1998.
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 1999 and 1998, respectively.
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
MLIC'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, but before policyholders' dividends. At December 31,
1998, MLIC's policyholders' share of MLIC's net loss was
recorded as "Minority Interest in Subsidiary Loss" in the Income
Statements and MLIC's policyholders' share of MLIC'S equity was
recorded as "Minority Interest in Subsidiary's Equity" in the
Balance Sheets. Due to the impairment loss recognized on MLIC
by Union Central in 1999 (discussed previously), MLIC's
policyholders' share of MLIC's net loss and MLIC's equity was
not recorded in 1999.
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 1998 have in some instances been
reclassified to conform to the 1999 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> <C> <C> <C> <C>
December 31, 1999:
U.S. treasury securities and
obligations of U.S. government
corporations and agencies $ 109,655 $ 291 $ (1,013) $ 108,933
Corporate securities and other 1,483,286 4,231 (69,868) 1,417,649
Mortgage-backed securities,
collateralized mortgage
obligations and other
structured securities 933,082 2,195 (54,420) 880,857
Debt securities issued by foreign
governments -- -- -- --
---------- ------ -------- ----------
Subtotal 2,526,023 6,717 (125,301) 2,407,439
Equity securities 82,269 592 (12,322) 70,539
---------- ------ -------- ----------
Total $2,608,292 $7,309 $(137,623) $2,477,978
========== ====== ========= ==========
</TABLE>
<TABLE>
<CAPTION>
Cost or Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
---------- -------- -------- ----------
(in thousands)
<S> <C> <C> <C> <C>
December 31, 1998:
U.S. treasury securities and
obligations of U.S. government
corporations and agencies $ 19,737 $ 1,897 $ -- $ 21,634
Corporate securities and other 1,542,363 51,352 (21,912) 1,571,803
Mortgage-backed securities,
collateralized mortgage
obligations and other
structured securities 1,068,084 19,811 (14,566) 1,073,329
Debt securities issued by foreign
governments 7,631 436 (1) 8,066
---------- ------- -------- ----------
Subtotal 2,637,815 73,496 (36,479) 2,674,832
Equity securities 100,429 2,063 (20,223) 82,269
---------- ------- -------- ----------
Total $2,738,244 $75,559 $(56,702) $2,757,101
========== ======= ======== ==========
</TABLE>
Fixed maturity available-for-sale securities, at December 31, 1999, are
summarized by stated maturity as follows:
<TABLE>
<CAPTION>
Amortized Fair
Cost Value
-------- -----
(in thousands)
<S> <C> <C>
Due in one year or less $ 750 $ 752
Due after one year through five years 332,041 322,757
Due after five years through ten years 728,615 691,519
Due after ten years 169,243 160,054
---------- ----------
Subtotal 1,230,649 1,175,082
Mortgage-backed securities 962,854 909,794
Other securities with multiple repayment dates 332,520 322,563
---------- ----------
Total $2,526,023 $2,407,439
========== ==========
</TABLE>
Significant components of the unrealized gain (loss) on
available-for-sale securities included in "Accumulated other
comprehensive loss" in the accompanying Balance Sheets are
as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1999 1998
---- ----
(in thousands)
<S> <C> <C>
Gross unrealized gain (loss) on available-
for-sale securities $(130,314) $18,857
Amortization of deferred policy acquisition costs 37,373 (11,474)
Minority interests -- (2,853)
Deferred tax asset (liability) 32,530 (2,583)
Net unrealized gain (loss) on available-
for-sale securities $ (60,411) $ 1,947
========= =======
</TABLE>
See Note 9 for discussion of the methods and assumptions used by
the Company in estimating the fair values of available-for-sale
securities.
At December 31, 1999 and 1998, 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 $161,596,000 and
$198,696,000. Those holdings amounted to 6.8% and 7.4%,
respectively, of the Company's investments in fixed maturities
and 2.7% 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, 1999 and 1998, the Company invested $65,578,000
and $62,588,000 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,
-----------------------
1999 1998
---- ----
(in thousands)
<S> <C> <C>
Proceeds $2,220,492 $2,220,765
Gross realized gains 15,159 33,774
Gross realized losses 42,898 26,564
</TABLE>
A summary of the characteristics of the Company's mortgage
portfolio (before deducting valuation reserves of $278,000 and
$2,372,000 at December 31, 1999 and 1998, respectively) follows:
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
-------------------- --------------------
Principal Percent of Principal Percent of
Balance Principal Balance Principal
------- --------- ------- ---------
(000's Omitted)
<S> <C> <C> <C> <C>
Region
New England and Mid-Atlantic $ 46,176 6.4% $ 61,616 7.8%
South Atlantic 119,900 16.5 130,361 16.4
North Central 157,812 21.7 188,870 23.8
South Central 76,796 10.6 90,802 11.5
Mountain 135,472 18.6 128,136 16.2
Pacific 190,875 26.2 192,924 24.3
-------- ----- -------- -----
Total $727,031 100.0% $792,709 100.0%
======== ===== ======== =====
Property Type
Apartment and residential $ 75,584 10.4% $111,040 14.0%
Warehouses and industrial 141,597 19.5 143,910 18.2
Retail and shopping center 262,606 36.1 256,406 32.3
Office 202,130 27.8 245,514 31.0
Other 45,114 6.2 35,839 4.5
-------- ----- -------- -----
Total $727,031 100.0% $792,709 100.0%
======== ===== ======== =====
</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
$18,782,000 and $17,521,000 at December 31, 1999 and 1998,
respectively, and accumulated depreciation totalled $5,391,000
and $4,960,000 at December 31, 1999 and 1998, respectively. The
book value of foreclosed real estate was $29,118,000 and
$30,644,000 at December 31, 1999 and 1998, respectively.
NOTE 3 - REINSURANCE
In the ordinary course of business, the Company assumes and
cedes reinsurance with other insurers and reinsurers. These
arrangements provide greater diversification of business and
limit the maximum net loss potential on large or hazardous
risks. Reinsurance ceded contracts do not relieve the Company
from its obligations to policyholders. Reinsurance ceded 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 are 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, 1999 and 1998.
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, 1999 and 1998 are summarized as
follows:
<TABLE>
<CAPTION>
December 31, 1999
Direct Assumed (Ceded) Net
------ ------- ----- ---
(in thousands)
<S> <C> <C> <C> <C>
Life insurance in force $39,612,937 $142,772 $(6,303,368) $33,452,341
=========== ======== =========== ===========
Premiums and other
considerations:
Traditional insurance
premiums and universal life $ 197,859 $ 50,345 $ (36,954) $ 211,250
Annuity 43,540 -- -- 43,540
----------- -------- ----------- -----------
Total $241,399 $ 50,345 $ (36,954) $ 254,790
=========== ======== =========== ===========
<CAPTION>
December 31, 1998
Direct Assumed (Ceded) Net
------ ------- ----- ---
(in thousands)
<S> <C> <C> <C> <C>
Life insurance in force $30,400,267 $502,058 $(5,627,695) $25,274,630
=========== ======== =========== ===========
Premiums and other
considerations:
Traditional insurance
premiums and universal life $ 243,287 $ 10,056 $ (32,256) $ 221,087
Annuity 43,778 -- -- 43,778
----------- -------- ----------- -----------
Total $ 287,065 $ 10,056 $ (32,256) $ 264,865
=========== ======== =========== ===========
</TABLE>
Benefits paid or provided were reduced by $1,844,000 and
$2,454,000 at December 31, 1999 and 1998, 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,
1999 1998
---- ----
(in thousands)
<S> <C> <C>
Deferred tax liabilities:
Deferred policy acquisition costs $139,923 $139,593
Basis differences on bonds and mortgage loans 2,276 26
Unrealized gains - FAS 115 -- 2,583
Partnership income differences 3,069 5,132
Capitalization of software 2,642 --
Impairment loss on subsidiary 5,621 --
Other 2,921 3,145
-------- --------
Total deferred tax liabilities 156,452 150,479
-------- --------
Deferred tax assets:
Policyholders' dividends 2,630 11,295
Future policy benefits 79,098 74,506
Premium - based DAC adjustment 27,437 28,175
Investment valuation reserves 521 826
Retirement plan accruals 13,893 15,229
Investment income differences 2,535 1,343
Unrealized losses - FAS 115 32,530 --
Other 3,685 3,361
-------- --------
Total deferred tax assets 162,329 134,735
-------- --------
Net deferred tax (assets) liabilities $(5,877) $15,744
======== ========
</TABLE>
Significant components of the provision for income taxes
attributable to continuing operations are as follows:
<TABLE>
<CAPTION>
Year ended December 31,
----------------------
1999 1998
---- ----
(in thousands)
<S> <C> <C>
Current $14,900 $16,759
Deferred 11,916 (72)
-------- --------
Total $ 26,816 $ 16,687
======== ========
</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.
NOTE 5 - COMMITMENTS AND CONTINGENT LIABILITIES
Leases
The Company leases office space for various field agency offices
with lease terms that 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 $2,350,000 and $3,498,000 in 1999 and
1998, 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 $88,000 and $116,000 in 1999 and 1998, respectively.
At December 31, 1999, the future minimum lease payments for all
noncancelable operating leases are as follows:
<TABLE>
<CAPTION>
Year Amount
---- ------
(in thousands)
<C> <C>
2000 $2,358
2001 2,136
2002 1,510
2003 848
2004 537
After 2004 506
------
Total $7,895
======
</TABLE>
The Company also has capital leases for office furniture. Lease
expense under these leases was $369,000 and $434,000 in 1999 and
1998, respectively.
At December 31, 1999 the future minimum lease payments for all
noncancelable capital leases are as follows:
<TABLE>
<CAPTION>
Year Amount
---- ------
(in thousands)
<C> <C>
2000 $470
2001 39
----
Total $509
====
</TABLE>
Other Commitments
At December 31, 1999, the Company had outstanding agreements to
fund mortgages totalling $20,425,000 in early 2000. In
addition, the Company has committed to invest $3,907,000 in
equity-type limited partnerships during the years 2000 to 2002.
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, in certain instances, be
offset against future premium taxes. For 1999 and 1998, the
charge to operations related to these assessments was not
significant. The estimated liability of $1,046,000 and
$1,149,000 at December 31, 1999 and 1998, respectively, was
based on data provided by the National Organization of Life and
Health Insurance Guaranty Associations and was included in
"Other liabilities" in the Balance Sheets.
NOTE 6 - STATUTORY SURPLUS AS REPORTED TO REGULATORY AUTHORITIES
Union Central files 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. Surplus as
reflected in the statutory-basis financial statements was as
follows:
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------
1999 1998
-------- -------
(in thousands)
<S> <C> <C>
Capital and surplus $347,396 $343,896
======== ========
</TABLE>
In 1999, the National Association of Insurance Commissioners
adopted codified statutory accounting practices (Codification).
Codification must be adopted by the various states before it
becomes the prescribed statutory basis of accounting for
insurance companies domiciled in those states. For Codification
to be effective for Union Central, Ohio must adopt Codification
as the prescribed basis of accounting on which Ohio insurers
must report their statutory basis results. During 1999, Ohio
formally adopted Codification with an effective date of January
1, 2001. Codification will likely change prescribed accounting
practices and may result in changes to the accounting practices
that Union Central uses to prepare its statutory basis financial
statements. The effect of the adoption of Codification is not
known at this time.
NOTE 7 - EMPLOYEE BENEFITS
The Company has pension plans covering substantially all of its
employees (The Plans). Effective August 31, 1999, MLIC's defined
benefit pension plan and excess benefit pension plan were merged
with the pension plans of Union Central. MLIC's pension plans
were fully funded at the effective date of the merger. The
accumulated benefit obligation (ABO) of the MLIC pension plans
at the effective date of the merger was $19,700,000.
Benefits are based on years of service and the employee's
highest five consecutive years of compensation out of the last
ten years. The Company's funding policy is determined according
to regulations as specified by ERISA and subsequent amendments.
In 1999, the Company's funding increased due to MLIC fully
funding its pension plans in accordance with the merger of its
pension plans with Union Central's. The contributions totalled
$8,342,000 and $3,994,000 in 1999 and 1998, respectively. The
Company's net periodic pension expense was calculated in
accordance with FAS 87 and was $5,121,000 and $3,869,000 for the
years ended December 31, 1999 and 1998, respectively. Benefits
paid in 1999 and 1998 were $3,688,000 and $3,811,000,
respectively. Plan assets are primarily composed of mutual
funds, unallocated insurance funds, and guaranteed interest
contracts. At December 31, 1999 and 1998, $62,140,000 and
$42,468,000, respectively, was invested in affiliated mutual
funds.
A table setting forth the funded status and the pension
liability included in the Company's Balance Sheets follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
(in thousands)
<S> <C> <C>
Actuarial present value of benefits obligations:
Accumulated benefit obligation, including vested
benefits of $74,603 and $72,321 for 1999 and 1998,
respectively $85,512 $81,244
======= =======
Projected benefit obligation $97,705 $92,376
Plan assets at fair value 66,559 63,066
------- -------
Projected benefit obligation higher than plan assets $31,146 $29,310
======= =======
Pension liability included in "Other liabilities"
at end of year $18,581 $18,178
</TABLE>
Also, $1,335,000 and $6,131,000 (net of tax) was charged
directly to policyholders' equity in 1999 and 1998,
respectively, as a result of recognizing an additional minimum
pension liability adjustment under Statement of Financial
Accounting Standard (SFAS-87) "Employers' Accounting for
Pensions", and was included in "Minimum pension liability
adjustment" in the Statements of Equity.
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>
1999 1998
---- ----
<S> <C> <C>
Assumptions used to determine the
status of the plans were:
Discount rate 7.50% 7.00%
Rate of increase in future compensation levels 4.00% 4.00%
Expected long-term rate of return on assets 8.50% 8.50%
</TABLE>
The Company has contributory savings plans for employees meeting
certain service requirements which qualify under Section 401(k)
of the Internal Revenue Code. These plans allow 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 $1,547,000 and
$1,472,000 for 1999 and 1998, respectively. The value of the
Plans' assets were $72,855,000 and $59,649,000 at December 31,
1999 and 1998, respectively. The assets are held in the
Company's deposit fund or under the variable accounts of a group
annuity policy sponsored by the Company. At December 31, 1999
and 1998, $18,884,000 and $18,660,000, respectively, was
invested in affiliated mutual funds. During 1999, the
contributory savings plan of MLIC was merged with the savings
plan of the Company.
NOTE 8 - POSTRETIREMENT BENEFITS
The Company provides certain health care and life insurance
benefits for its eligible retired employees. Substantially all
of the Company's employees may become eligible for these
benefits if they reach normal retirement age while working for
the Company.
Effective August 31, 1999, MLIC's group life and major medical
plans were merged with the Company's. MLIC's group life and
major medical plans were fully funded at the effective date of
the merger. The postretirement benefit obligation of MLIC's
group life and major medical plans at the effective date of the
merger was $3,100,000.
Information related to the postretirement benefits follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
(in thousands)
<S> <C> <C>
Postretirement costs $1,440 $1,143
Cash benefits paid 976 1,494
Employer contributions 1,244 1,231
Participant contributions 123 140
</TABLE>
A summary of the accrued postretirement liability included in
"Other liabilities" in the Consolidated Balance Sheet as
determined by the Plan's actuaries follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
(in thousands)
<S> <C> <C>
Postretirement benefit obligation $17,265 $20,443
Fair value of plan assets 6,149 5,866
------- -------
Unfunded status 11,116 14,577
Unrecognized net gain 5,494 1,949
Other -- (346)
------- -------
Accrued postretirement liability $16,610 $16,180
======= =======
</TABLE>
The discount rate used in determining the accumulated
postretirement benefit obligation was 7.50% and 7.00% at
December 31, 1999 and 1998, respectively. The long-term rate on
assets was 7.00% for 1999 and 1998.
A one percentage point increase in the health care cost trend
rate in each year would not materially impact the postretirement
benefit obligation, the interest cost and estimated eligibility
cost components of the net periodic postretirement benefit cost
as of and for the year ended December 31, 1999.
NOTE 9 - 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 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. The fair values for limited partnerships are based
on the quoted market prices of the investments underlying
the limited partnership portfolios.
Mortgage loans: The fair values for commercial 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, 1999 December 31, 1998
----------------- -----------------
Carrying Fair Carrying Fair
Amount Value Amount Value
(in thousands)
<S> <C> <C> <C> <C>
Mortgage loans $727,031 $697,703 $792,709 $876,287
======== ======== ======== ========
</TABLE>
The carrying amounts and fair values of the Company's
liabilities for investment-type insurance contracts are as
follows:
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
----------------- -----------------
Carrying Fair Carrying Fair
Amount Value Amount Value
(in thousands)
<S> <C> <C> <C> <C>
Direct access $50,271 $50,271 $44,547 $44,547
Traditional annuities 26,674 26,245 26,233 27,324
Supplementary contracts 13,592 13,693 14,436 11,014
GPA not involving life 1,810 1,915 2,284 2,516
Group dividends 30 30 28 28
Traditional life dividends 5,571 5,571 5,611 5,611
Group life dividends 176 176 171 171
Guaranteed interest contracts -- -- 17,277 17,293
Single premium deferred annuities -- -- 20,401 23,480
------- ------- -------- --------
Total $98,124 $97,901 $130,988 $131,984
======= ======= ======== ========
</TABLE>
The Company's other insurance contracts are excluded from
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 10 - 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,
-------------------
1999 1998
---- ----
(in thousands)
<S> <C> <C>
Balance as of January 1 $126,859* $130,687
Incurred related to:
Current year 94,448 119,586
Prior years (3,649) (3,931)
-------- --------
Total incurred 90,799 115,655
-------- --------
Paid related to :
Current year 53,114 78,748
Prior years 29,162 35,265
-------- --------
Total paid 82,276 114,013
-------- --------
Balance as of December 31 $135,382 $132,329
======== ========
</TABLE>
* Balance as of January 1, 1999 excludes MLIC (see Note 1 for
discussion of sale of MLIC).
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
decreased by $3,649,000 and $3,931,000 in 1999 and 1998,
respectively, due to higher than expected rates of claim
terminations. Included in the above balances are reinsurance
recoverables of $1,952,000 and $2,454,000 at 1999 and 1998,
respectively.
NOTE 11 - SURPLUS NOTES
On November 1, 1996, Union Central issued $50,000,000 of 8.20%
Surplus Notes (Notes). The 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 pay interest semi-annually on May 1 and November 1.
Interest expense of $4,100,000 was incurred in 1999 and 1998,
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. Issuance cost of $25,000 was amortized in 1999 and
1998, respectively, and recorded 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.
Amortization relating to original issue discount of $9,000 was
recorded in 1999 and 1998, in "Underwriting, acquisition and
insurance expense" in the Statements of Income.
NOTE 12 - IMPACT OF YEAR 2000 (UNAUDITED)
The Company has made a successful transition to the Year 2000.
The Company's computer systems and facilities are fully
operational and the Company is prepared to continue to serve its
customers in the twenty-first century.
The Company began preparations for the Year 2000 in 1996. From
1996 to 2000, significant resources in both time and money were
allocated to the Year 2000 project. The Company efforts
included Year 2000 system modifications, future date testing for
virtually all of the Company's computer systems, Year 2000
readiness of the Company's building systems (i.e. heating,
lighting, and security systems), and formal communications, with
all significant vendors, suppliers and business partners to
determine their Year 2000 status.
The goal was to continue to meet the Company's obligations to
its customers and business partners without interruption as the
Company transitioned to the Year 2000. The Company has achieved
that goal and is not aware of any Year 2000 problems occurring
in its computer systems or embedded systems.
The Company is continuing to monitor all systems closely as
there is still the potential for Year 2000 related problems to
occur. The Company is confident, however, that it will not
encounter any problems that have a material effect on its
ability to continue to provide service to its customers and
business partners.
NOTE 13 - COMPREHENSIVE INCOME
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" (FAS 130) establishes the requirement for
the reporting and display of comprehensive income and its
components in the financial statements. Comprehensive income is
defined by the FASB as all changes in an enterprise's equity
during a period other than those resulting from investments by
owners and distributions to owners. Comprehensive income
includes net income and other comprehensive income, which
includes all other non-owner related changes to equity and
includes unrealized gains and losses on available-for-sale debt
and equity securities and minimum pension liability adjustments.
FAS 130 also requires separate presentation of the accumulated
balance of other comprehensive income within the equity section
of a statement of financial position. The Company has presented
the required displays of total comprehensive income and its
components, along with the separate presentation of the
accumulated balance of other comprehensive income within the
Consolidated Statements of Equity.
Following are the FAS 130 disclosures of the related tax effects
allocated to each component of other comprehensive income and
the accumulated other comprehensive income balances required by
FAS 130.
The related federal income tax effects allocated to each
component of other comprehensive income are as follows:
<TABLE>
<CAPTION>
Year Ended December 31, 1999
----------------------------
Before-Tax Tax Net-of-Tax
Amount Benefit Amount
---------- ------- ----------
(in thousands)
<S> <C> <C> <C>
Unrealized losses on securities:
Unrealized losses arising during 1999 $(96,070) $33,624 $(62,446)
Less: reclassification adjustments
for losses realized in net income 135 (47) 88
-------- ------- --------
Net unrealized losses (95,935) 33,577 (62,358)
-------- ------- --------
Minimum pension liability adjustment (2,054) 719 (1,335)
-------- ------- --------
Other comprehensive income $(97,989) $34,296 $(63,693)
======== ======= ========
<CAPTION>
Year Ended December 31, 1998
----------------------------
Before-Tax Tax Net-of-Tax
Amount Benefit Amount
---------- ------- ----------
(in thousands)
<S> <C> <C> <C>
Unrealized losses on securities:
Unrealized losses arising during 1998 $(30,429) $10,650 $(19,779)
Less: reclassification adjustments
for gains realized in net income (5,560) 1,946 (3,614)
-------- ------- --------
Net unrealized losses (35,989) 12,596 (23,393)
-------- ------- --------
Minimum pension liability adjustment (9,432) 3,301 (6,131)
-------- ------- --------
Other comprehensive income $(45,421) $15,897 $(29,524)
======== ======= ========
</TABLE>
