(Cover)
Excel
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CHOICE (SM)
(the above is printed in very large letters)
(Centered on the cover is a graphic collage: upper right half
shows the top and two sides of a cube. On the top of the cube
there is a sky w/clouds; a house scene is on the left; and city
skyscraper buildings are on right. Under the cube is the upper
third of a globe. Next to the globe are two sides of a pyramid
showing portions of a dollar bill.)
(Union Central logo)
Union Central
May 1, 1996 Prospectuses
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Carillon Life Account of The Union Central Life Insurance
Company;
Carillon Fund, Inc.;
MFS Variable Insurance Trust;
Scudder Variable Life Investment Fund; and
TCI Portfolios, Inc.
Distributed by: Carillon Investments, Inc.
P.O. Box 40409, Cincinnati, Ohio 45240
PROSPECTUS
Individual Flexible Premium Variable Universal Life Insurance
Policies
___________________________________________________________
CARILLON LIFE ACCOUNT
of THE UNION CENTRAL LIFE INSURANCE COMPANY
Home Office:
1876 Waycross Road
P.O. Box 40888
Cincinnati, Ohio 45240-4088
Telephone: 1-800-999-1840
______________________________________________________
This prospectus describes an individual flexible
premium variable universal life insurance policy (the policy)
offered by The Union Central Life Insurance Company ("Union
Central," "we," "us" or "our"). The policy is designed to
provide insurance protection on the insured named in the policy,
and at the same time provide the owner ("you" or "your") with the
flexibility to vary the amount and timing of premium payments and
to change the amount of death benefits payable under the policy.
This flexibility allows you to provide for your changing
insurance needs under a single insurance policy.
You also have the opportunity to allocate net premiums to one or
more subdivisions of the variable account or to the guaranteed
account or to both. This prospectus generally describes only
that portion of the account value allocated to the variable
account, through which account value is invested in subaccounts
of Carillon Life Account (the "separate account"). For a brief
summary of the guaranteed account, see "The Guaranteed Account,"
page 15. The assets of each subaccount are invested in a
corresponding portfolio of Carillon Fund, Inc., Scudder Variable
Life Investment Fund, TCI Portfolios, Inc., or MFS Variable
Insurance Trust. The accompanying prospectuses provide
additional information regarding the portfolios.
You can select from two death benefit options available under the
policy: a level death benefit ("Option A") and a death benefit
that includes the account value ("Option B"). Union Central
guarantees that the death benefit will never be less than the
specified amount of insurance (less any outstanding policy debt
and past due charges) so long as sufficient premiums are paid to
keep the policy in force.
The policy provides for a cash surrender value that can be
obtained by surrendering the policy. Because this value is based
on the performance of the portfolios to the extent that net
premiums are allocated to the variable account, there is no
guaranteed minimum cash surrender value.
If the cash surrender value is insufficient to cover the charges
due under the policy, the policy will lapse without value.
However, Union Central guarantees to keep the policy in force
during the minimum guaranteed period, so long as the minimum
monthly premium requirement and other conditions have been met.
The policy also permits loans and partial cash surrenders, within
limits.
It may not be advantageous to replace existing insurance with the
policy. Within certain limits, you may return the policy, or
convert it to a policy that provides benefits that do not vary
with the investment results of a separate account by exercising
the Conversion Right.
AN INVESTMENT IN THE POLICY IS NOT A DEPOSIT OR OBLIGATION OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK, NOR IS THE POLICY FEDERALLY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENT AGENCY. AN INVESTMENT IN THE POLICY INVOLVES CERTAIN
RISKS, INCLUDING THE LOSS OF PREMIUM PAYMENTS (PRINCIPAL).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The Date of this Prospectus is May 1, 1996.<PAGE>
<PAGE>
PROSPECTUS CONTENTS
Page
DEFINITIONS OF TERMS
SUMMARY AND DIAGRAM OF THE POLICY
GENERAL INFORMATION ABOUT UNION CENTRAL,
THE SEPARATE ACCOUNT AND THE PORTFOLIOS
The Union Central Life Insurance Company
Carillon Life Account
The Portfolios
Addition, Deletion or Substitution of Investments
Voting Rights
PREMIUM PAYMENTS AND ALLOCATIONS
Applying for a Policy
Purchase of the Policy for Specialized Purposes
Free Look Right to Cancel the Policy
Premiums
Net Premium Allocations
Crediting Net Premiums
Transfer Privilege
Dollar Cost Averaging Plan
Portfolio Rebalancing Plan
Earnings Sweep Plan
GUARANTEED ACCOUNT
Minimum Guaranteed and Current Interest Rates
Calculation of Guaranteed Account Value
Transfers from Guaranteed Account
Payment Deferral
CHARGES AND DEDUCTIONS
Premium Expense Charge
Monthly Deduction
Daily Mortality and Expense Risk Charge
Transfer Charge
Surrender Charge
Special Arrangements
Fund Expenses
Cost of Additional Benefits Provided by Riders
Income Tax Charge
HOW YOUR ACCOUNT VALUES VARY
Determining the Account Value
Cash Value
Cash Surrender Value
DEATH BENEFIT AND CHANGES IN SPECIFIED AMOUNT
Amount of Death Benefit Proceeds
Death Benefit Options
Initial Specified Amount and Death Benefit Option
Changes in Death Benefit Option
Changes in Specified Amount
Selecting and Changing the Beneficiary
CASH BENEFITS
Loans
Surrendering the Policy for Cash Surrender Value
Partial Cash Surrenders
Maturity Benefit
Payment Options
ILLUSTRATIONS OF ACCOUNT VALUES, CASH SURRENDER VALUES,
DEATH BENEFITS AND ACCUMULATED PREMIUM PAYMENTS
OTHER POLICY BENEFITS AND PROVISIONS
Limits on Rights to Contest the Policy
Changes in the Policy or Benefits
When Proceeds Are Paid
Reports to Policy Owners
Assignment
Reinstatement
Supplemental and/or Rider Benefits
Participating
State Variations
TAX CONSIDERATIONS
Tax Status of Policy
Treatment of Policy Benefits
Possible Charge for Union Central's Taxes
OTHER INFORMATION ABOUT THE POLICIES AND UNION CENTRAL
Sale of the Policies
Union Central Directors and Executive Officers
State Regulation
Additional Information
Experts
Actuarial Matters
Litigation
Legal Matters
Financial Statements
APPENDIX A
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY
JURISDICTION IN WHICH SUCH OFFERING MAY NOT BE LAWFULLY MADE. NO
PERSON IS AUTHORIZED TO MAKE ANY REPRESENTATIONS IN CONNECTION
WITH THE OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS,
THE PROSPECTUSES FOR THE PORTFOLIOS, OR THE STATEMENTS OF
ADDITIONAL INFORMATION FOR THE PORTFOLIOS.<PAGE>
<PAGE>
DEFINITIONS OF TERMS
account value - The sum of the variable account, the guaranteed
account, and the loan account. Calculation of the account value
is described on page 20.
age - The insured's age as of the birthday nearest to the date on
which age is determined.
annual date - The same day in each policy year as the policy
date.
beneficiary - The person or persons who will receive any death
benefit proceeds when the insured dies. The primary beneficiary
and the contingent beneficiary, if any, are designated in the
application or in the last notice filed with us. The contingent
beneficiary, if any, will become the beneficiary should the
primary beneficiary die prior to the date of death of the
insured.
cash surrender value - The cash value minus any outstanding
policy debt.
cash value - Account value minus any applicable surrender charge.
death benefit option - Specified amount (Option A), or specified
amount plus account value (Option B), depending on the option
selected. See page 22.
guaranteed account - The account value that is part of Union
Central's general assets and is not part of or dependent upon
investment performance of the separate account. The guaranteed
interest rate on the account value allocated to the guaranteed
account is 4%. The guaranteed account is not FDIC-insured and is
subject to claims from our creditors.
home office - 1876 Waycross Road, P.O. Box 40888, Cincinnati,
Ohio 45240-4088.
initial specified amount - The specified amount on the policy
date.
insured - The person whose life is covered by the policy.
issue date - The date from which the suicide and contestable
periods start. It is shown in your policy.
lapse - Termination of the policy at the expiration of the grace
period while the insured is still living.
loan account - An account that is part of Union Central's general
assets and to which account values are transferred from the
variable account and/or guaranteed account as collateral for
policy loans.
maturity date - The date when coverage terminates and the
maturity benefit is paid. It is generally the insured's 100th
birthday, and is shown in the policy form.
minimum monthly premium - An amount used to measure premium
payments paid for purposes of determining whether the minimum
guaranteed period is in effect. See page 12.
monthly date - The same day as the policy date for each
succeeding month. The monthly deduction is deducted on each
monthly date.
net premium - A premium payment minus the applicable premium
expense charge. See page 13.
notice - A written request notice or request in a form
satisfactory to us that is signed by the owner and received at
the home office.
owner, you - The person(s) who owns a policy.
planned periodic premium - The premium determined by the owner as
a level amount which is planned to be paid at fixed intervals
over a specified period of time.
policy - The individual flexible premium variable universal life
insurance policy, together with the application and any riders or
endorsements thereto, that is described in this prospectus.
policy debt - The sum of all outstanding policy loans plus
accrued interest.
policy date - The date from which policy months, years, and
anniversaries are measured.
policy month - Each one-month period beginning with a monthly
date and ending with the day immediately preceding the next
following monthly date.
policy year - Each period of twelve months commencing with the
policy date and ending immediately preceding the first annual
date, or any following year commencing with an annual date and
ending immediately preceding the next annual date.
portfolio - An investment company or series thereof in which a
subaccount of the separate account invests.
premium payment(s) - The amount(s) paid by the owner(s) to
purchase the policy; either a planned periodic premium or
unscheduled premium.
risk amount - As of any monthly date, the death benefit under the
policy less the account value (after deduction of the monthly
deduction on that day, except for the cost of insurance charge).
separate account - Carillon Life Account, a separate investment
account of Union Central.
specified amount - A dollar amount used to determine the death
benefit under a policy. See page 22.
subaccount - A separate division of the separate account
established to invest in a particular portfolio and available for
investment under the policies through subdivisions of the
variable account.
subdivision - That portion of your variable account that is
invested in a particular subaccount of the separate account.
Union Central, we, our, us - The Union Central Life Insurance
Company.
unscheduled premium - Any premium other than a planned periodic
premium.
valuation date - Each day on which both the New York Stock
Exchange and Union Central are open for business.
valuation period - The interval of time commencing at the close
of business on one valuation date and ending at the close of
business on the next succeeding valuation date.
variable account - The account value that is attributable to one
or more subdivisions corresponding to subaccounts of the separate
account.
<PAGE>
SUMMARY AND DIAGRAM OF THE POLICY
The following summary of Prospectus information and diagram of
the policy should be read in conjunction with the detailed
information appearing elsewhere in this Prospectus. Unless
otherwise indicated, the description of the policy in this
Prospectus assumes that the policy is in force and there is no
outstanding policy debt.
The policy is similar in many ways to fixed-benefit life
insurance. As with fixed-benefit life insurance, the owner of a
policy pays premium payments for insurance coverage on the person
insured. Also like fixed-benefit life insurance, the policy
provides for accumulation of net premiums and a cash surrender
value which is payable if the policy is surrendered during the
insured's lifetime. As with fixed-benefit life insurance, the
cash surrender value during the early policy years is likely to
be substantially lower than the premium payments paid.
However, the policy differs from fixed-benefit life insurance in
several important respects. Unlike fixed-benefit life insurance,
the death benefit may and the account value will increase or
decrease to reflect the investment performance of the
subdivisions to which the account value is allocated. Also,
there is no guaranteed minimum cash surrender value.
Nonetheless, Union Central guarantees to keep the policy in force
during the first three policy years so long as the minimum
monthly premium requirement has been met. See "Minimum
Guaranteed Period," page 13. Otherwise, if the cash surrender
value is insufficient to pay charges due, the policy will lapse
without value after a grace period. See "Premiums to Prevent
Lapse," page 13. If a policy lapses while loans are
outstanding, adverse tax consequences may result. See "Tax
Considerations," page 36.
The most important features of the policy, such as charges, cash
benefits, death benefits, and calculation of policy values, are
summarized in the diagram on the following pages.
Purpose of the Policy. The policy is designed to be a long-term
investment providing insurance benefits. The policy should be
evaluated in conjunction with other insurance policies owned by
you, as well as your need for insurance and the policy's long-
term investment potential. It may not be advantageous to replace
existing insurance coverage with the policy. In particular,
replacement should be carefully considered if the decision to
replace existing coverage is based primarily on a comparison of
policy illustrations (see below).
Illustrations. Illustrations in this prospectus or used in
connection with the purchase of a policy are based on
hypothetical rates of return. These rates are not guaranteed.
They are illustrative only and should not be deemed a
representation of past or future performance. Actual rates of
return may be higher or lower than those reflected in any
illustrations, and therefore, actual values will be different
from these illustrated.
Tax Considerations. Union Central intends for the policy to
satisfy the definition of a life insurance contract under Section
7702 of the Internal Revenue Code. Certain policy transactions,
including the payment of premiums, may cause a policy to be a
modified endowment contract under the Internal Revenue Code. For
further discussion of the tax status of a policy and the tax
consequences of being treated as a life insurance contract or a
modified endowment contract, see page 36.
Free Look Right to Cancel and Conversion Right. For a limited
time after the policy is issued, you have the right to cancel
your policy and receive a refund. See "Free Look Right to Cancel
Policy," page 12. Until the end of this "free look" period,
Union Central will allocate net premiums to the subaccount
investing in the Money Market Portfolio of the Scudder Variable
Life Investment Fund. (See "Net Premium Allocations," page 13.)
At any time within the first 24 months after the issue date, you
may transfer all or a portion of the variable account to the
guaranteed account without payment of any transfer fee. This
transfer effectively "converts" the policy into a contract that
provides fixed (non-variable) benefits. See "Conversion Right,"
page 14.
Owner Inquiries. If you have any questions, you may write or
call Union Central's home office at 1876 Waycross Road, P.O. Box
40888, Cincinnati, Ohio 45240-4088; telephone 1-800-219-8525.
<PAGE>
<PAGE>
DIAGRAM OF POLICY
(DESCRIPTION OF DIAGRAM: Each heading with the information
following is encased in a block. A down arrow appears at the
bottom of each block pointing to the next block)
PREMIUM PAYMENTS
* You select a plan for making planned periodic premiums, but
are not required to pay premium payments according to the plan.
You can vary the amount and frequency and can skip planned
periodic premiums. See page 12 for rules and limits.
* There is no minimum initial premium payment or planned
periodic premium.
* Unplanned premium payments may be made, within limits. See
page 12.
* If sufficient premiums are paid, a minimum guaranteed period
may keep the policy in force during the first three policy years.
See page 13.
* Under certain circumstances, which include taking excessive
loans, extra premium payments may be required to prevent lapse.
See page 13.
(a down arrow is centered here between blocks)
DEDUCTIONS FROM PREMIUM PAYMENTS
* For sales charges (4% of premium payments made through
policy year 10; 2% of premium payments thereafter). See page 16.
* For state and local premium taxes (2.50% of premium
payments). See page 16.
(a down arrow is centered here between blocks)
NET PREMIUMS
* You direct the allocation of net premiums among ten
subdivisions of the variable account and the guaranteed account.
See page 13 for rules and limits on net premium allocations.
* The subdivisions are invested in corresponding portfolios of
Carillon Fund, Inc., Scudder Variable Life Investment Fund, TCI
Portfolios, Inc. and MFS Variable Insurance Trust. See page 9.
Portfolios available are:
Carillon Equity Portfolio
Carillon Bond Portfolio
Carillon Capital Portfolio
Carillon S&P 500 Index Portfolio
Scudder Capital Growth Portfolio Class A
Scudder International Portfolio Class A
Scudder Money Market Portfolio
TCI Growth Portfolio
MFS Growth With Income Series
MFS High Income Series
* Interest is credited on amounts allocated to the guaranteed
account at a guaranteed minimum interest rate of 4%. See page 16
for rules and limits on guaranteed account allocations.
(a down arrow is centered here between blocks)
<PAGE>
(the next two items are encased in one block)
DEDUCTIONS FROM ACCOUNT VALUE
* Monthly deduction for cost of insurance, administrative
charge, and charges for any supplemental and/or rider benefits.
The administrative charge is currently $25.00 per month for the
first policy year and $5.00 per month thereafter.
DEDUCTIONS FROM ASSETS
* Daily charge at a guaranteed annual rate of 0.75% during the
first ten policy years, and 0.25% thereafter, from the
subaccounts for mortality and expense risks. See page 18.
This charge is not deducted from the guaranteed account.
* Investment advisory fees and fund operating expenses are
deducted from the assets of each portfolio. See page 19.
(a down arrow is centered here between blocks)
ACCOUNT VALUE
* Is the amount credited to your policy. It is equal to net
premiums, as adjusted each valuation date to reflect
subdivision investment experience, interest credited
on the guaranteed account, charges deducted and other
policy transactions (such as transfers and partial cash
surrenders). See page 20.
* Varies from day to day. There is no minimum guaranteed
account value. The policy may lapse if the cash surrender
value is insufficient to cover a monthly deduction due. See
page 20.
* Can be transferred among the subdivisions and the guaranteed
account. Currently, a transfer fee of $10 applies to each
transfer in excess of the first 12 transfers in a policy
year. See page 14 for rules and limits. Policy loans
reduce the amount available for allocations and transfers.
* Is the starting point for calculating certain values under a
policy, such as the cash value, cash surrender value, and
the death benefit used to determine death benefit proceeds.
(the above item has two down arrows under it, each pointing to
one of the next two items which are blocked side by side)
CASH BENEFITS
* Loans may be taken for amounts up to 90% of the variable
account, plus 100% of the guaranteed account, less loan
interest due on the next annual date and any surrender
charges. See page 23 for rules and limits.
* Partial cash surrenders generally can be made provided there
is sufficient remaining cash surrender value. See page 24
for rules and limits.
* The policy may be surrendered in full at any time for its
cash surrender value. A surrender charge will apply during
the first fifteen policy years after issue and after any
increase in specified amount. See page 18.
* Payment options are available. See page 25.
* Loans, partial cash surrenders, and surrenders in full may
have adverse tax consequences. See page 36.
DEATH BENEFITS
* Income tax free to beneficiary.
* Available as lump sum or under a variety of payment options.
* For all policies, a minimum initial specified amount of
$50,000.
* Two death benefit options available:
Option A, equal to the specified amount, and Option B, equal
to the specified amount plus account value. See page 22.
* Flexibility to change the death benefit option and specified
amount. See page 22 for rules and limits.
* Supplemental and/or rider benefits may be available. See
page 35.
(end of graphic material)<PAGE>
<PAGE>
GENERAL INFORMATION ABOUT UNION CENTRAL, THE SEPARATE ACCOUNT AND
THE PORTFOLIOS
The Union Central Life Insurance Company
The policies are issued by The Union Central Life Insurance
Company, which is a mutual life insurance company organized
under the laws of the State of Ohio in 1867. Union Central is
primarily engaged in the sale of life and disability insurance
and annuities and is currently licensed to transact life
insurance business in all states and the District of Columbia.
Union Central is subject to regulation by the Department of
Insurance of the State of Ohio as well as by the insurance
departments of all other states and jurisdictions in which it
does business. We submit annual statements on our operations and
finances to insurance officials in such states and jurisdictions.
The forms for the policy described in this Prospectus are filed
with and (where required) approved by insurance officials in each
state and jurisdiction in which policies are sold.
Carillon Life Account
Carillon Life Account was established as a separate investment
account under Ohio law on July 10, 1995. It is used to support
the policies and may be used to support other variable life
insurance policies, and for other purposes permitted by law. The
separate account is registered with the Securities and Exchange
Commission ("SEC") as a unit investment trust under the
Investment Company Act of 1940 (the "1940 Act") and is a
"separate account" within the meaning of the federal securities
laws. Union Central has established other separate investment
accounts that may also be registered with the SEC.
The assets in the separate account are owned by Union Central.
The separate account is divided into subaccounts which correspond
to subdivisions of the variable account. Subaccounts of the
separate account invest in shares of the portfolios. The
separate account may include other subaccounts that are not
available through the policies and are not otherwise discussed in
this Prospectus.
Income, gains and losses, realized or unrealized, of a subaccount
are credited to or charged against the subaccount without regard
to any other income, gains or losses of Union Central.
Applicable insurance law provides that assets equal to the
reserves and other contract liabilities of the separate account
shall not be chargeable with liabilities arising out of any other
business of Union Central. Union Central is obligated to pay all
benefits provided under the policies.
The Portfolios
Subaccounts of the separate account currently invest in ten
designated portfolios of four series-type mutual funds: Carillon
Fund, Inc. ("Carillon Fund"); Scudder Variable Life Investment
Fund ("Scudder Fund"), TCI Portfolios, Inc. ("TCI Fund") and MFS
Variable Insurance Trust ("MFS Fund"). The investment experience
of each subaccount of the separate account depends on the
investment performance of its corresponding portfolio. Each of
these portfolios is registered with the SEC under the 1940 Act as
a series of an open-end diversified investment company. The SEC
does not, however, supervise the management or the investment
practices and policies of the portfolios. The investment adviser
to Carillon Fund is Carillon Advisers, Inc. (a wholly-owned
subsidiary of Union Central). Scudder, Stevens & Clark, Inc. is
the investment adviser to the Scudder Fund. The investment
adviser to the TCI Fund is Investors Research Corporation, the
adviser to the Twentieth Century Mutual Fund group. The
investment adviser to the MFS Fund is Massachusetts Financial
Services Company.
The separate account invests in four portfolios of Carillon Fund:
the Equity Portfolio, the Bond Portfolio, the Capital Portfolio,
and the S&P 500 Index Portfolio. The separate account invests in
three portfolios of the Scudder Fund: the Capital Growth
Portfolio Class A, the International Portfolio Class A, and the
Money Market Portfolio. (The Scudder Fund has four additional
portfolios that are not available through the policy.) The
separate account invests in one portfolio of the TCI Fund: TCI
Growth Portfolio. (The TCI Fund has four additional portfolios
that are not available through the policy.) The separate account
invests in two portfolios of the MFS Fund: MFS Growth With Income
Series and MFS High Income Series. (The MFS Fund has ten
additional portfolios that are not available through the policy.)
The assets of each portfolio are separate from assets of 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 investment objective of each portfolio is set
forth below.
The Carillon Equity Portfolio seeks primarily long-term
appreciation of capital by investing primarily in common stocks
and other equity securities.
The Carillon Bond Portfolio seeks as high a level of current
income as is consistent with reasonable investment risk by
investing primarily in investment-grade corporate bonds.
The Carillon Capital Portfolio seeks the highest total
return through a combination of income and capital appreciation
consistent with the reasonable risk associated with an investment
portfolio of above-average quality by investing in equity
securities, debt instruments and money market instruments.
The Carillon S&P 500 Index Portfolio seeks investment
results that correspond to the total return performance of U.S.
common stocks, as represented by the Standard & Poor's 500
Composite Stock Index (the "S&P 500" *). The S&P 500 is a
well-known stock market index that includes common stocks of
companies representing approximately 71% of the market value of
all common stocks publicly traded in the United States. The
investment adviser of the portfolio believes that the performance
of the S&P 500 is representative of the performance of publicly
traded common stocks in general.
* The S&P 500 is an unmanaged index of common stocks comprised of
500 industrial, financial, utility and transportation companies.
"Standard & Poor's(R)", "S&P 500(R)", "S&P(R)", "Standard &
Poor's 500(R)", and "500" are trademarks of McGraw-Hill, Inc.
The Carillon S&P 500 Index Portfolio is not sponsored, endorsed,
sold or promoted by Standard & Poor's and Standard & Poor's
makes no representation regarding the advisability of investing
in this portfolio.*
The Scudder 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 International Portfolio Class A seeks long-term
growth of capital principally from a diversified portfolio of
foreign equity securities.
The Scudder Money Market Portfolio seeks stability and
current income from a portfolio of money market instruments.
Money market funds are neither insured nor guaranteed by the U.S.
Government, and there can be no assurance that this portfolio
will maintain a stable net asset value per share.
The TCI Growth Portfolio seeks capital growth by investing
primarily in common stocks that are considered by management to
have better-than-average prospects for appreciation.
The MFS Growth With Income Series seeks to provide
reasonable current income and long-term growth of capital and
income.
The MFS High Income Series seeks high current income by
investing primarily in a professionally managed diversified
portfolio of fixed income securities, some of which may involve
equity features. The MFS High Income Portfolio may invest up to
100% of its assets in lower-rated bonds commonly known as junk
bonds. BEFORE ALLOCATING ANY PORTION OF NET PREMIUMS TO THE
SUBDIVISION CORRESPONDING TO THIS PORTFOLIO, OWNERS SHOULD READ
THE RISK DISCLOSURE IN THE ACCOMPANYING PROSPECTUS FOR THE MFS
HIGH INCOME SERIES.
THERE IS NO ASSURANCE THAT ANY OF THE PORTFOLIOS WILL ACHIEVE
THEIR RESPECTIVE STATED OBJECTIVES. Additional information
concerning the investment objectives and policies of the
portfolios, as well as risks, can be found in the current
portfolio prospectuses that accompany this Prospectus. The
prospectuses for the portfolios should be read carefully before
any decision is made concerning the allocation of net premiums to
a particular subdivision. Certain subdivisions invest in
portfolios that have similar investment objectives and/or
policies. Therefore, you should carefully read the individual
prospectuses for the portfolios along with this Prospectus.
Please note that all of the portfolios described in the
Prospectuses for the portfolios may not be available under the
policy. Moreover, Union Central cannot guarantee that each fund
will always be available for its variable life contracts, but in
the unlikely event that a Fund is not available, Union Central
will take reasonable steps to secure the availability of a
comparable fund. Shares of each portfolio are purchased and
redeemed at net asset value, without a sales charge.
The portfolios presently serve as the investment media for the
policies. In addition, the portfolios may sell shares to
separate accounts of other insurance companies to fund variable
annuity contracts and/or variable life insurance policies, and/or
to certain retirement plans qualifying under Section 401 of the
Code. Union Central currently does not foresee any disadvantages
to owners that would arise from the possible sale of shares to
support the variable contracts of other insurance companies, or
from the possible sale of shares to such retirement plans.
However, the board of directors of each fund will monitor events
in order to identify any material irreconcilable conflicts that
might possibly arise if the shares of that fund were also offered
to support variable contracts other than the policies or to
support retirement plans. In event of such a conflict, the board
of directors of that fund would determine what action, if any,
should be taken in response to the conflict. In addition, if
Union Central believes that the fund's response to any such
conflicts insufficiently protects owners, it will take
appropriate action on its own, which may include withdrawing the
separate account's investment in that fund. (See the
prospectuses for the portfolios for more detail.)
Investors Research Corporation, the investment adviser to the TCI
Fund, and Massachusetts Financial Services Company, the
investment adviser to the MFS Fund, have agreed to compensate
Union Central for the performance of certain administrative and
other services. This compensation is based on the assets of the
TCI Fund and the MFS Fund, respectively, that are attributable to
the policies.
Addition, Deletion or Substitution of Investments
Union Central reserves the right, subject to applicable law, to
make additions to, deletions from, or substitutions for the
shares that are held in the separate account or that the separate
account may purchase. If the shares of a portfolio are no longer
available for investment or if in Union Central's judgment
further investment in any portfolio should become inappropriate
in view of the purposes of the separate account, Union Central
may redeem the shares, if any, of that portfolio and substitute
shares of another registered open-end management company or unit
investment trust. Union Central will not substitute any shares
attributable to a policy's interest in the separate account
without notice and prior approval of the SEC and state insurance
authorities, to the extent required by the 1940 Act or other
applicable law.
Union Central also reserves the right to establish additional
subaccounts of the separate account, each of which would invest
in shares corresponding to a new portfolio or in shares of
another investment company having a specific investment
objective. Subject to applicable law and any required SEC
approval, Union Central may in its sole discretion establish new
subaccounts or eliminate one or more subaccounts if marketing
needs, tax considerations or investment conditions warrant. Any
new subaccount may be made available to existing owner(s) on a
basis to be determined by Union Central.
If any of these substitutions or changes are made, Union Central
may by appropriate endorsement change the policy to reflect the
substitution or other change. If Union Central deems it to be in
the best interests of owner(s), and subject to any approvals that
may be required under applicable law, the separate account may be
operated as a management company under the 1940 Act, it may be
deregistered under that Act if registration is no longer
required, or it may be combined with other Union Central separate
accounts. Union Central reserves the right to make any changes
to the separate account required by the 1940 Act or other
applicable law or regulation.
Voting Rights
Union Central is the legal owner of shares held by the
subaccounts and as such has the right to vote on all matters
submitted to shareholders of the portfolios. However, as
required by law, Union Central will vote shares held in the
subaccounts at regular and special meetings of shareholders of
the portfolios in accordance with instructions received from
owners with account value in the subdivisions. Should the
applicable federal securities laws, regulations or
interpretations thereof change, Union Central may be permitted to
vote shares of the portfolios in its own right, and if so, Union
Central may elect to do so.
To obtain voting instructions from owners, before a meeting
owners will be sent voting instruction material, a voting
instruction form and any other related material. The number of
shares held by each subaccount for which an owner may give voting
instructions is currently determined by dividing the portion of
the owner's account value in the subdivision corresponding to the
subaccount by the net asset value of one share of the applicable
portfolio. Fractional votes will be counted. The number of
votes for which an owner may give instructions will be determined
as of the date coincident with the date established by the fund
for determining shareholders eligible to vote at the relevant
meeting of the fund. Shares held by a subaccount for which no
timely instructions are received will be voted by Union Central
in the same proportion as those shares for which voting
instructions are received.
Union Central may, if required by state insurance officials,
disregard owner voting instructions if such instructions would
require shares to be voted so as to cause a change in
sub-classification or investment objectives of one or more of the
portfolios, or to approve or disapprove an investment advisory
agreement. In addition, Union Central may under certain
circumstances disregard voting instructions that would require
changes in the investment advisory agreement or investment
adviser of one or more of the portfolios, provided that Union
Central reasonably disapproves of such changes in accordance with
applicable federal regulations. If Union Central ever disregards
voting instructions, owners will be advised of that action and of
the reasons for such action in the next semiannual report.
Finally, Union Central reserves the right to modify the manner in
which the weight to be given to pass-through voting instructions
is calculated when such a change is necessary to comply with
current federal regulations or the current interpretation
thereof.
PREMIUM PAYMENTS AND ALLOCATIONS
Applying for a Policy
To purchase a policy, you must complete an application and submit
it through an authorized Union Central agent. There is no
minimum initial premium payment. Your policy coverage will
become effective on the policy date. If an initial premium
payment is submitted with the application, then the policy date
is generally the date of approval of your application. If the
application is not accompanied by an initial premium payment,
then the policy date will generally be two weeks after the date
that your application is approved.
As provided for under state insurance law, the owner, to preserve
insurance age, may be permitted to backdate the policy. In no
case may the policy date be more than six months prior to the
date the application was completed. Charges for the monthly
deduction for the backdated period are deducted on the issue
date. Temporary life insurance coverage may be provided prior to
the policy date under the terms of a temporary insurance
agreement. In accordance with Union Central's underwriting
rules, temporary life insurance coverage may not exceed $500,000
and will not remain in effect for more than sixty (60) days.
Union Central requires satisfactory evidence of the insured's
insurability, which may include a medical examination of the
insured. The available issue ages are 0 through 75. Age is
determined on the insured's age as of the birthday nearest the
policy date. The minimum specified amount is $50,000.
Acceptance of an application depends on Union Central's
underwriting rules, and Union Central reserves the right to
reject an application for any reason.
As the owner of the policy, you exercise all rights provided
under the policy. The insured is the owner, unless a different
owner is named in the application. The owner may by notice name
a contingent owner or a new owner while the insured is living.
If more than one person is named as owner, they are joint owners.
Any transaction under the policy except for telephone transfers
of account value will require the authorization of all owners.
Unless provided otherwise, in the event of a joint owner's death,
ownership passes to the surviving joint owner. Unless a
contingent owner has been named, on the death of the last
surviving owner, ownership of the policy passes to the estate of
the last surviving owner, who will become the owner if the
owner(s) die. The owner may also be changed prior to the
insured's death by notice satisfactory to us. A change in owner
may have tax consequences. See "Tax Considerations," page 36.
Purchase of the Policy for Specialized Purposes
The policy provides a death benefit and an accumulation of
account value. It can be used for various individual and business
planning purposes. Purchasing the policy for such purposes
entails certain risks. For example, if the investment
performance of the subaccounts to which account value is
allocated is poorer than anticipated, or if sufficient premiums
are not paid or account value maintained, the policy may lapse or
may not accumulate sufficient account value to fund the purpose
for which the policy was purchased. Loans and partial cash
surrenders may significantly affect current and future account
value, cash surrender value, and death benefit proceeds.
Depending upon subaccount investment performance and the amount
of loans and partial cash surrenders, the policy may lapse.
Because the policy is designed to provide benefits on a long-term
basis, before purchasing a policy for a specialized purpose, a
purchaser should consider whether the long-term nature of the
policy and the impact of loans and partial cash surrenders is
consistent with the purpose for which it is being considered.
Using a policy for a specialized purpose may have tax
consequences. (See "Tax Considerations.")
Free Look Right to Cancel the Policy
You may cancel your policy for a refund during your "free-look"
period. This period expires 20 days after you receive your
policy, 45 days after your application is signed, or 10 days
after Union Central mails or delivers a cancellation notice,
whichever is latest. (A longer period may apply to policies
issued in certain states.) If you decide to cancel the policy,
you must return it by mail or delivery to the home office or to
the authorized Union Central agent who sold it. Immediately
after mailing or delivery, the policy will be deemed void from
the beginning. Within seven calendar days after Union Central
receives the returned policy, Union Central will refund the
greater of any premiums paid, less any partial cash surrenders,
or account value.
Premiums
Planned Periodic Premiums. When applying for a policy, you
select a plan for paying level premium payments at specified
intervals, e.g., quarterly, semi-annually or annually, until the
maturity date. If you elect, Union Central will also arrange for
payment of planned period premiums on a monthly basis under a
pre-authorized payment arrangement. You are not required to pay
premium payments in accordance with these plans; rather, you can
pay more or less than planned or skip a planned periodic premium
entirely. (See, however, "Premium Payments to Prevent Lapse,"
page 13.) Currently, there is no minimum amount for each
premium. Union Central may establish a minimum amount 90 days
after we send the owner a written notice of such increase.
Subject to the limits described below, you can change the amount
and frequency of planned periodic premiums whenever you want by
sending notice to the home office. However, Union Central
reserves the right to limit the amount of a premium payment or
the total premium payments paid.
Unless otherwise requested, you will be sent reminder notices for
planned periodic premiums. Reminder notices will not be sent if
you have arranged to pay planned periodic premiums by
pre-authorized payment arrangement.
Additional Unscheduled Premiums. Additional unscheduled premium
payments can be made at any time while the policy is in force.
Union Central has the right to limit the number and amount of
such premium payments.
Limitations on Premium Payments. Total premium payments paid in
a policy year may not exceed guideline premium payment
limitations for life insurance set forth in the Internal Revenue
Code. Union Central will promptly refund any portion of any
premium payment that is determined to be in excess of the premium
payment limit established by law to qualify a policy as a
contract for life insurance.
The payment of premiums may cause a policy to be a modified
endowment contract under the Internal Revenue Code. We have
established procedures for monitoring premium payments and making
efforts to notify you on timely basis if your policy is in
jeopardy of becoming a modified endowment contract as a result of
premium payments. See "Tax Considerations," page 36.
Union Central reserves the right to reject any requested increase
in planned periodic premiums, or any unscheduled premium. We
also reserve the right to require satisfactory evidence of
insurability prior to accepting any premium which increases the
risk amount of the policy. See "Net Premium Allocations," page
13.
No premium payment will be accepted after the maturity date.
Premium payments must be made by check payable to The Union
Central Insurance Company or by any other method that Union
Central deems acceptable. The owner may specify that a specific
unscheduled premium payment is to be applied as a repayment of
policy debt, if any.
Premium payments after the initial premium payment must be made
to the home office.
Minimum Guaranteed Period. Union Central guarantees that a
policy will remain in force during the minimum guaranteed period,
regardless of the sufficiency of the cash surrender value, if the
sum of the premiums paid to date, less any partial cash
surrenders and policy debt equals or exceeds the minimum monthly
premium (shown in the policy) multiplied by the number of
complete policy months since the policy date, including the
current policy month. The minimum guaranteed period is three
years following the policy date.
The minimum monthly premium is calculated for each policy based
on the age, sex and rate class of the insured, the requested
specified amount and any supplemental and/or rider benefits. The
minimum monthly premium may change due to changes made during a
minimum guaranteed period to the specified amount, the death
benefit option, ratings, and supplemental and/or rider benefits.
Union Central will notify you of any increase in the minimum
monthly premium.
An extended minimum guaranteed period may be available under a
Guaranteed Death Benefit Rider. See "Supplemental Benefits
and/or Riders," page 35.
Premium Payments Upon Increase in Specified Amount. Depending on
the account value at the time of an increase in the specified
amount and the amount of the increase requested, an additional
premium payment may be necessary or a change in the amount of
planned periodic premiums may be advisable. See "Changes in
Specified Amount," page 22. In the event that you
increase the specified amount, you should contact your Union
Central agent to assist you in determining if additional premium
payments are necessary or appropriate.
Premium Payments to Prevent Lapse. Failure to pay planned
periodic premiums will not necessarily cause a policy to lapse.
Conversely, paying all planned periodic premiums will not
necessarily guarantee that a policy will not lapse (except when
the minimum guaranteed period is in effect). Rather, whether a
policy lapses depends on whether its cash surrender value is
sufficient to cover the monthly deduction (see page 16) when
due.
If the cash surrender value on a monthly date is less than the
amount of the monthly deduction to be deducted on that date and
the minimum guaranteed period is not in effect, the policy will
be in default and a grace period will begin. This could happen
if investment experience has been sufficiently unfavorable that
it has resulted in a decrease in cash surrender value or the cash
surrender value has decreased because you have not paid
sufficient premium payments to offset the monthly deduction.
Grace Period. If your policy goes into default, you will be
allowed a 61-day grace period to pay a premium payment sufficient
to cover the monthly deductions due during the grace period.
Union Central will send notice of the amount required to be paid
during the grace period ("grace period premium payment") to your
last known address and the address of any assignee of record.
The grace period will begin when the notice is sent. Your policy
will remain in effect during the grace period. If the insured
should die during the grace period and before the grace period
premium payment is paid, the death benefit proceeds will still be
payable to the beneficiary, although the amount paid will reflect
a reduction for the monthly deductions due on or before the date
of the insured's death (and for any policy debt). See "Amount of
Death Benefit," page 22. If the grace period premium payment
has not been paid before the grace period ends, your policy will
lapse. It will have no value and no benefits will be payable.
See "Reinstatement," page 35.
A grace period also may begin if policy debt becomes excessive.
See "Loan Repayment; Effect if not Repaid," page 24.
Net Premium Allocations
In the application, you specify the percentage of a net premium
to be allocated to each subdivision and to the guaranteed
account. This allocation must comply with the allocation rules
described below. Net premiums will generally be allocated to the
subdivisions and to the guaranteed account on the valuation date
that Union Central receives them in accordance with the
allocations specified in the application or subsequent notice.
Union Central will allocate all net premiums received before the
end of the "free look" period (including the initial net premium)
to the subdivision invested in the Scudder Money Market
Portfolio. After the end of the "free look" period, the account
value will be allocated to the subdivisions and to the guaranteed
account based on the premium payment allocation percentages in
the application. See "Determining the Account Value," page 20.
For this purpose, the end of the "free look" period is deemed to
be 25 days after the date the policy is issued and mailed to your
agent for delivery.
The net premium allocation percentages specified in the
application will apply to subsequent premium payments until you
change the percentages. You can change the allocation
percentages at any time, subject to the rules below, by sending
notice to the home office. The change will apply to all premium
payments received with or after receipt of your notice.
Allocation Rules. The minimum allocation percentage you may
specify for a subdivision or the guaranteed account is 5%, and
your allocation percentages must be whole numbers. The sum of
your allocations must equal 100%. Union Central reserves the
right to limit the number of subdivisions to which account value
may be allocated.
Crediting Net Premiums
The initial net premium will be credited to the policy on the
policy date, or, if later, the date we receive the initial
premium payment. For backdated policies, the initial net premium
will be credited on the issue date. Planned periodic premiums
and unscheduled premiums that are not underwritten will be
credited to the policy and the net premiums will be invested as
requested on the valuation date they are received by the home
office. However, any premium payment that is underwritten will
be allocated to the subdivision corresponding to the Scudder
Money Market Portfolio until underwriting has been completed and
the premium payment has been accepted. When accepted, the
account value allocated to the subdivision corresponding to the
Scudder Money Market Portfolio and attributable to the resulting
net premium will be credited to the policy and allocated in
accordance with your instructions. If an additional premium
payment is rejected, Union Central will return the premium
payment promptly, without any adjustment for investment
experience.
Transfer Privilege
After the free-look period and prior to the maturity date, you
may transfer all or part of your account value from subdivisions
investing in one portfolio to other subdivision(s) or to the
guaranteed account, or transfer a part of an amount in the
guaranteed account to the subdivision(s), subject to the
following restrictions. The minimum transfer amount is the
lesser of $100 or the entire amount in that subdivision or the
guaranteed account. A transfer request that would reduce the
amount in a subdivision or the guaranteed account below $25 will
be treated as a transfer request for the entire amount in that
subdivision or the guaranteed account. With the exception of the
Conversion Right described below, we reserve the right to limit
the number or frequency of transfers permitted in the future.
We will make the transfer as of the end of the valuation period
during which we receive notice requesting such transfer.
Currently, there is no limit on the number of transfers that can
be made between subdivisions or to the guaranteed account.
However, transfers from the guaranteed account during any policy
year are limited to an amount equal to 20% of the account value
in the guaranteed account on the annual date at the beginning of
such policy year. (See "Transfers from Guaranteed Account," page
16, for restrictions). Currently, we assess a transfer charge
equal to $10 for each transfer during a policy year in excess of
the first twelve transfers. (We reserve the right to decrease or
eliminate the number of free transfers; in addition, the transfer
charge may be increased, but is guaranteed not to exceed $15 per
transfer.) The transfer charge will be deducted from the
subdivisions or the guaranteed account from which the requested
transfer is being made, on a pro-rata basis.
Telephone Transfers. Telephone transfers will be based upon
instructions given by telephone, provided the appropriate
election has been made at the time of application or proper
authorization has been provided to us. We reserve the right to
suspend telephone transfer privileges at any time, for any
reason, if we deem such suspension to be in the best interests of
owners.
We will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine, and if we follow those
procedures we will not be liable for any losses due to
unauthorized or fraudulent instructions. We may be liable for
such losses if we do not follow those reasonable procedures. The
procedures we will follow for telephone transfers include
requiring some form of personal identification prior to acting on
instructions received by telephone, providing written
confirmation of the transaction, and making a tape recording of
the instructions given by telephone.
Conversion Right. During the first twenty-four policy months
following the issue date, and within sixty days of the later of
notification of a change in the investment policy of the separate
account or the effective date of such change, the owner may
exercise a one-time Conversion Right by requesting that all or a
portion of the variable account be transferred to the guaranteed
account. Exercise of the Conversion Right is not subject to the
transfer charge. Following the exercise of the Conversion Right,
net premiums may not be allocated to the subdivisions of the
variable account, and transfers of account value to the
subdivisions will not be permitted. The other terms and
conditions of the policy will continue to apply.
Dollar Cost Averaging Plan
The Dollar Cost Averaging Plan, if elected, enables you to
transfer systematically and automatically, on a monthly,
quarterly, semi-annual, or annual basis, specified dollar amounts
from a subdivision you specify to other subdivisions or to the
guaranteed account. (Dollar Cost Averaging Plan transfers may
not be made from the guaranteed account.) By allocating 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. However, we make no guarantee
that the Dollar Cost Averaging Plan will result in a profit.
You specify the amount to be transferred automatically; you can
specify either a fixed dollar amount, or a percentage of the
account value in the subdivision from which transfers will be
made. At the time that you elect the Dollar Cost Averaging Plan,
the account value in the subdivision from which transfers will be
made must be at least $2,000. The required amounts may be
allocated to the subdivision through initial or subsequent net
premiums or by transferring amounts into the subdivision from the
other subdivisions or from the guaranteed account (which may be
subject to certain restrictions).
You may elect this plan at the time of application by completing
the authorization on the application or at any time after the
policy is issued by properly completing the election form and
returning it to us. Dollar Cost Averaging Plan transfers may not
commence until the end of the free-look period.
Once elected, transfers from the subdivision will be processed
until the number of designated transfers have been completed, or
the value of the subdivision is completely depleted, or you send
us notice instructing us to cancel the transfers.
Currently, transfers made under the Dollar Cost Averaging Plan
will not be subject to any transfer charge and will not count
against the number of free transfers permitted in a policy year.
We reserve the right to impose a $15 transfer charge for each
transfer effected under a Dollar Cost Averaging Plan. We also
reserve the right to alter the terms or suspend or eliminate the
availability of the Dollar Cost Averaging Plan at any time.
Portfolio Rebalancing Plan
You may elect to have the accumulated balance of each subdivision
periodically redistributed (or "rebalanced") to equal the
allocation percentages you have specified in the election form.
This rebalancing may be done on a quarterly, semi-annual, or
annual basis.
You may elect the Portfolio Rebalancing Plan at the time of
application by completing the authorization on the application or
at any time after the policy is issued by properly completing the
election form and returning it to us. Portfolio Rebalancing Plan
transfers may not commence until the end of the free-look period.
Transfers pursuant to the Portfolio Rebalancing Plan will
continue until you send us notice terminating the plan, or the
policy terminates. The Portfolio Rebalancing Plan cannot be
elected if either a Dollar Cost Averaging Plan or an Earnings
Sweep Plan is in effect.
Currently, transfers made under the Portfolio Rebalancing Plan
will not be subject to any transfer charge and will not count
against the number of free transfers permitted in a policy year.
We reserve the right to impose a $15 transfer charge for each
transfer effected under the plan. We also reserve the right to
alter the terms or suspend or eliminate the availability of the
Portfolio Rebalancing Plan at any time.
Earnings Sweep
You may elect to have the accumulated earnings of one or more
specified subdivisions or the interest credited to the guaranteed
account periodically transferred (or "swept") into specified
subdivisions or the guaranteed account. The sweep may be done
on a quarterly, semi-annual, or annual basis.
You may elect the Earnings Sweep Plan at the time of application
by completing the authorization on the application or at any time
after the policy is issued by properly completing the election
form and returning it to us. Earnings Sweep Plan transfers may
not commence until the end of the free-look period. Transfers
pursuant to the Earnings Sweep Plan will continue until you send
us notice terminating the plan, or the policy terminates.
Currently, transfers made under the Earnings Sweep Plan will not
be subject to any transfer charge and will not count against the
number of free transfers permitted in a policy year. We reserve
the right to impose a $15 transfer charge for each transfer
effected under the plan. We also reserve the right to alter the
terms or suspend or eliminate the availability of the Earnings
Sweep Plan at any time.
GUARANTEED ACCOUNT
BECAUSE OF EXEMPTIVE AND EXCLUSIONARY PROVISIONS, INTERESTS IN
THE GUARANTEED ACCOUNT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 NOR HAS THE GUARANTEED ACCOUNT BEEN
REGISTERED AS AN INVESTMENT COMPANY UNDER THE INVESTMENT COMPANY
ACT OF 1940. ACCORDINGLY, NEITHER THE GUARANTEED ACCOUNT NOR ANY
INTERESTS THEREIN ARE SUBJECT TO THE PROVISIONS OF THESE ACTS
AND, AS A RESULT, THE STAFF OF THE SECURITIES AND EXCHANGE
COMMISSION HAS NOT REVIEWED THE DISCLOSURE IN THIS PROSPECTUS
RELATING TO THE GUARANTEED ACCOUNT. THE DISCLOSURE REGARDING THE
GUARANTEED ACCOUNT MAY, HOWEVER, BE SUBJECT TO CERTAIN GENERALLY
APPLICABLE PROVISIONS OF THE FEDERAL SECURITIES LAWS RELATING TO
THE ACCURACY AND COMPLETENESS OF STATEMENTS MADE IN PROSPECTUSES.
You may allocate some or all of your net premiums and transfer
some or all of the variable account to the guaranteed account,
which is part of our general account and pays interest at
declared rates (subject to a minimum interest rate we guarantee
to be at least 4%). The principal, after deductions, is also
guaranteed. Our general account assets support our insurance and
annuity obligations.
The portion of the account value allocated to the guaranteed
account will be credited with interest, as described below.
Since the guaranteed account is part of our general account, we
assume the risk of investment gain or loss on this amount. All
assets in the general account are subject to our general
liabilities from business operations.
Minimum Guaranteed and Current Interest Rates
The guaranteed account is guaranteed to accumulate at a minimum
effective annual interest rate of 4%. We may credit the
guaranteed account with current rates in excess of the minimum
guarantee, but we are not obligated to do so. These current
interest rates are influenced by, but do not necessarily
correspond to, prevailing general market interest rates. Since
we, in our sole discretion, anticipate changing the current
interest rate from time to time, different allocations to and
from the guaranteed account will be credited with different
current interest rates, based upon the date amounts are allocated
into the guaranteed account. We may change the interest rate
credited to new deposits at any time. Any interest credited on
the amounts in the guaranteed account in excess of the minimum
guaranteed rate of 4% per year will be determined in our sole
discretion. You assume the risk that interest credited may not
exceed the guaranteed rate.
Amounts deducted from the guaranteed account for the monthly
deduction, partial cash surrenders, transfers to the
subdivisions, or charges are currently, for the purpose of
crediting interest, accounted for on a last-in, first-out
("LIFO") method. We reserve the right to change the method of
crediting from time to time, provided that such changes do not
have the effect of reducing the guaranteed rate of interest below
4% per annum.
Calculation of Guaranteed Account Value
The guaranteed account at any time is equal to net premiums
allocated or account value transferred to it, plus interest
credited to it, minus amounts deducted, transferred, or
surrendered from it.
Transfers from the Guaranteed Account
The amount transferred from the guaranteed account may not exceed
20% of the guaranteed account on the annual date immediately
preceding the date of the transfer, unless the balance after the
transfer is less than $25, in which case we will transfer the
entire amount.
Payment Deferral
We reserve the right to defer payment of any partial cash
surrender, full surrender, or transfer from the guaranteed
account for up to six months from the date of receipt of the
notice for the partial or full surrender or transfer. However,
we will not defer payment of any amounts needed to pay premiums
on other policies in force with us.
CHARGES AND DEDUCTIONS
Premium Expense Charge
A sales charge is deducted from each premium payment. This
charge is equal to 4% of premiums paid through policy year 10;
and 2% thereafter. It is guaranteed not to increase for the life
of the policy. The sales charge is intended to partially
reimburse Union Central for some of the expenses incurred in the
distribution of the policies. The sales charge may be
insufficient to recover distribution expenses related to the sale
of the policies. Unrecovered expenses are borne by Union
Central's general assets, which may include profits, if any, from
the mortality and expense risk charge and mortality gains from
cost of insurance charges. See "Daily Mortality and Expense Risk
Charge," page 18, and "Cost of Insurance Charge," page 17.
A 2.50% charge for state and local premium taxes and expenses is
also deducted from each premium payment. The state and local
premium tax charge reimburses Union Central for premium taxes
associated with the policies and related administrative costs.
The stated premium tax rates in the jurisdictions in which Union
Central does business range from 0.75% to 4.00%, and the
jurisdiction in which a policy is issued may impose no premium
tax, or a premium tax higher or lower than the charge deducted
under the policies. The 2.5% charge, which is based on the
average state and local premium tax rate that we expect to pay in
all states and on certain administrative costs associated with
state filings, is not intended to produce a profit.
Monthly Deduction
On each monthly date, Union Central will deduct from the account
value the monthly deductions due, commencing as of the policy
date. Your policy date is the date used to determine your
monthly date. The monthly deduction consists of (1) cost of
insurance charges ("cost of insurance charge"), (2) the monthly
administrative charge (the "administrative charge"), and (3) any
charges for supplemental and/or rider benefits ("supplemental
and/or rider benefit charges"), as described below. The monthly
deduction is deducted from the subdivisions and from the
guaranteed account pro rata on the basis of the portion of
account value in each.
Cost of Insurance Charge. This charge compensates Union Central
for the expense of providing insurance coverage. The charge
depends on a number of variables and therefore will vary from
policy to policy and from monthly date to monthly date. For any
policy, the cost of insurance on a monthly date is calculated by
multiplying the current cost of insurance rate for the insured by
the risk amount under the policy for that monthly date.
The risk amount for a monthly date is the difference between the
death benefit (see page 21) for a policy (as adjusted to take
into account assumed monthly earnings at an annual rate of 4%)
and the account value, as calculated on that monthly date less
any monthly deduction due on that date (except the cost of
insurance).
The current cost of insurance rate for a policy is based on the
age at issue, sex and rate class of the insured and on the policy
year, and therefore varies from time to time. Different current
cost of insurance rates apply to policies with a specified amount
under $250,000 than to policies with a specified amount of
$250,000 or more and, in general, policies with a specified
amount of $250,000 or more may have lower current cost of
insurance rates. Union Central currently places insureds in the
following rate classes, based on underwriting: Standard Tobacco
(ages 0-75), Standard Nontobacco (ages 20-75), or Preferred (ages
20-70). The Preferred rate class is only available under
policies with specified amounts of $100,000 or more. We also may
place an insured in a substandard rate class, which involves a
higher mortality risk than the standard tobacco or standard
nontobacco classes.
Union Central will determine a cost of insurance rate for
increases in coverage based on the age of the insured at the time
of the increase. The following rules will apply for purposes of
determining the risk amount for each rate.
Union Central places the insured in a rate class when the policy
is issued, based on Union Central's underwriting of the
application. This original rate class applies to the initial
specified amount. When an increase in specified amount is
requested, Union Central conducts underwriting before approving
the increase (except as noted below) to determine whether a
different rate class will apply to the increase. If the rate
class for the increase has lower cost of insurance rates than the
original rate class, then the rate class for the increase will
also be applied to the initial specified amount. If the rate
class for the increase has higher cost of insurance rates than
the original rate class, the rate class for the increase will
apply only to the increase in specified amount, and the original
rate class will continue to apply to the initial specified
amount.
Union Central does not conduct underwriting for an increase in
specified amount if the increase is requested by exercising an
option to increase the specified amount automatically, without
underwriting. See "Supplemental and/or Rider Benefits," page
35. In such case, the insured's rate class for an increase will
be the class in effect when the guaranteed option rider was
issued.
For purposes of determining the risk amount associated with a
specified amount, we will attribute the account value solely to
the initial specified amount unless the account value exceeds the
initial specified amount. If the account value exceeds the
initial specified amount, the excess will be considered
attributable to the increases in specified amount in the order of
the increases. If there is a decrease in specified amount after
an increase, a decrease is applied first to decrease any prior
increases in specified amount, starting with the most recent
increase and then each prior increase.
Union Central guarantees that the cost of insurance rates used to
calculate the monthly cost of insurance charge will not exceed
the maximum cost of insurance rates set forth in the policies.
The guaranteed rates for standard classes are based on the 1980
Commissioners' Standard Ordinary Mortality Tables, Male or
Female, Smoker or Nonsmoker Mortality Rates ("1980 CSO Tables").
The guaranteed rates for substandard classes are based on
multiples of or additives to the 1980 CSO Tables.
Union Central's current cost of insurance rates may be less than
the guaranteed rates that are set forth in the policy. Current
cost of insurance rates will be determined based on Union
Central's expectations as to future mortality, investment
earnings, expenses, taxes, and persistency experience. These
rates may change from time to time.
Cost of insurance rates (whether guaranteed or current) for an
insured in a standard nontobacco class are equal to or lower than
guaranteed rates for an insured of the same age and sex in a
standard tobacco class. Cost of insurance rates (whether
guaranteed or current) for an insured in a standard nontobacco or
tobacco class are generally lower than guaranteed rates for an
insured of the same age and sex and tobacco status in a
substandard class.
Legal Considerations Relating to Sex-Distinct Premium
Payments and Benefits. Mortality tables for the policies
generally distinguish between males and females. Thus,
premium payments and benefits under policies covering males
and females of the same age will generally differ.
Union Central does, however, also offer policies based on
unisex mortality tables if required by state law. Employers
and employee organizations considering purchase of a policy
should consult with their legal advisors to determine
whether purchase of a policy based on sex-distinct actuarial
tables is consistent with Title VII of the Civil Rights Act
of 1964 or other applicable law. Upon request, Union
Central may offer policies with unisex mortality tables to
such prospective purchasers.
Monthly Administrative Charge. Union Central deducts a monthly
administrative charge from the account value on each monthly
date. The administrative charge is currently equal to $25 per
month during the first policy year, and $5 per month thereafter.
We reserve the right to increase the administrative charge after
the first policy year up to $10 per month. The administrative
charge is guaranteed not to increase during the first policy
year, and is guaranteed not to exceed $10 per month thereafter.
The monthly administrative charge reimburses Union Central for
expenses incurred in the administration of the policies and the
separate account. Such expenses include but are not limited to:
confirmations, annual reports and account statements, maintenance
of policy records, maintenance of separate account records,
administrative personnel costs, mailing costs, data processing
costs, legal fees, accounting fees, filing fees, the costs of
other services necessary for owner servicing and accounting,
valuation, regulatory and updating requirements.
We do not expect to profit from these charges. Should the
guaranteed charges prove to be insufficient, we will not increase
the charges above such guaranteed levels.
Supplemental and/or Rider Benefit Charges. See "Supplemental
and/or Rider Benefits," page 35.
Daily Mortality and Expense Risk Charge
Union Central deducts a daily charge from assets in the separate
account attributable to the policies. This charge does not apply
to guaranteed account assets attributable to the policies.
During the first ten policy years, the charge is equal on an
annual basis to 0.75% of assets. Thereafter, the charge is equal
on an annual basis to 0.25% of assets. These rates are
guaranteed not to increase for the duration of a policy. Union
Central may realize a profit from this charge. Although Union
Central does not believe that it is possible to allocate this
charge to different risks, Union Central feels that a reasonable
estimate is that during the first ten policy years, 0.30% of this
charge is allocable to mortality risk, and 0.45% to expense risk;
and thereafter, 0.10% of this charge is allocable to mortality
risk, and 0.15% to expense risk.
The mortality risk Union Central assumes is that the insureds on
the policies may die sooner than anticipated and therefore Union
Central will pay an aggregate amount of death benefits greater
than anticipated. The expense risk Union Central assumes is that
expenses incurred in issuing and administering the policies and
the separate account will exceed the amounts realized from the
administrative charges assessed against the policies.
Transfer Charge
We currently assess a transfer charge of $10 for each transfer
made during a policy year after the first twelve transfers. We
reserve the right to decrease or eliminate the number of free
transfers; in addition the transfer charge may be increased, but
is guaranteed not to exceed $15 per transfer. We will deduct the
transfer charge from the remaining account value in the
subdivisions or the guaranteed account from which the transfer is
being made on a pro rata basis. We do not expect a profit from
this charge.
Surrender Charge
If a policy is completely surrendered or lapses, Union Central
may deduct a surrender charge from the account value. The
surrender charge includes a sales surrender charge and an
administrative surrender charge. The maximum surrender charge is
set forth in your policy. There is no additional sales surrender
charge applicable to increases in specified amount. However, if
the policy is completely surrendered following an increase in
specified amount, an additional administrative surrender charge
may apply, as described below.
Any surrender charge deducted upon lapse is credited back to the
policy's account value upon reinstatement. The surrender charge
on the date of reinstatement will be the same as it was on the
date of lapse. For purposes of determining the surrender charge
on any date after reinstatement, the period the policy was lapsed
will not count.
Sales Surrender Charge. A sales surrender charge is deducted if
the policy is surrendered or lapses during the first fifteen
policy years following the policy date. The maximum sales
surrender charge is 26% of the premiums paid up to a sales
surrender premium shown in the policy. The maximum amount shown
in the policy is based on the age at issue, sex, specified
amount, death benefit option, and rate class applicable to the
insured. Increases in the policy's specified amount will not
affect the amount of the sales surrender premium, or the amount
of the maximum sales surrender charge. Decreases in the policy's
specified amount may reduce the sales surrender premium if the
decrease is effective prior to the payment of cumulative premiums
in an amount equal to the initial sales surrender premium shown
in the policy. We will notify you of any reduction in the sales
surrender premium, and the amount of the maximum sales surrender
charge, at the time of any decrease in specified amount that
causes such reductions.
The greatest sales surrender charge applicable to a portion of
account value is paid if you lapse or surrender in policy years
one through five. The maximum sales surrender charge in these
years equals 26% of actual premiums paid up to the sales
surrender premium shown in the policy. After the fifth policy
year, the maximum sales surrender charge percentage declines on a
monthly basis in level increments until it reaches 0% at the end
of the fifteenth policy year, as shown in the table below:
<TABLE>
<CAPTION>
END OF POLICY YEAR SALES SURRENDER CHARGE
PERCENTAGE
- ------------------
- --------------------------------
<S> <C>
1-5 26%
6 23.4%
7 20.8%
8 18.2%
9 15.6%
10 13.0%
11 10.4%
12 7.8%
13 5.2%
14 2.6%
15 0%
</TABLE>
The purpose of the sales surrender charge is to reimburse Union
Central for some of the expenses incurred in the distribution of
the policies. The sales surrender charge may be insufficient to
recover distribution expenses related to the sale of the
policies. Unrecovered expenses are borne by Union Central's
general assets, which may include profits, if any, from the
mortality and expense risk charge and mortality gains from cost
of insurance charges. See "Daily Mortality and Expense Risk
Charge," page 18, and "Cost of Insurance Charge," page 17.
Administrative Surrender Charge. An administrative surrender
charge is deducted if the policy is surrendered or lapses during
the first fifteen policy years following the policy date or any
increase in specified amount (see "Surrender Charge" above). The
administrative surrender charge is equal to an amount per $1000
of specified amount, and depends upon the age of the insured at
the time that the specified amount to which it applies was
issued, and the policy year in which the charge is imposed. For
issue ages 30 to 39, the amount per $1000 is $3.50 during policy
years 1 through 5; for issue ages 40 to 49, the amount per $1000
is $4.50 during policy years 1 through 5; for issue ages 50 to
59, the amount per $1000 is $5.50 during policy years 1 through
5; and for issue ages 60 to 69, the amount per $1000 is $6.50
during policy years 1 through 5. The charge declines monthly
after the end of the fifth policy year to zero at the end of
policy year fifteen. Applicable administrative surrender charge
rates, which increase with issue age, are set forth in full in
the policy.
If the specified amount is increased, the increase is subject to
a new administrative surrender charge. This charge is imposed if
the policy is surrendered or lapses within fifteen policy years
from the effective date of the increase, and is in addition to
any sales surrender charge or administrative surrender charge
that may be applicable if the policy is surrendered or lapses
within fifteen policy years after the policy date.
The administrative surrender charge partially covers the
administrative costs of processing surrenders, lapses, and
increases and reductions in specified amount, as well as legal,
actuarial, systems, mailing, and other overhead costs connected
with Union Central's variable life insurance operations. This
charge has been designed to cover actual costs and is not
intended to produce a profit.
Fund Expenses
The value of the net assets of each subaccount reflects the
investment advisory fees and other expenses incurred by the
corresponding portfolio in which the subaccount invests. See the
prospectuses for the portfolios.
Cost of Additional Benefits Provided by Riders
The cost of additional benefits provided by riders is part of the
monthly deduction and is charged to the account value on the
monthly date.
Income Tax Charge
Union Central does not currently assess any charge for income
taxes incurred as a result of the operations of the subaccounts
of the separate account. We reserve the right, however, to
assess a charge for such taxes against the subaccounts if we
determine that such taxes will be incurred.
Special Arrangements
>R>
Where permitted by state regulation, Union Central may reduce or
waive the sales charge component of the premium expense charge;
the monthly administrative charge; and/or the surrender charge,
under policies purchased by (i) directors, officers, employees,
or agents of Union Central, or affiliates thereof, or their
spouses or dependents; (ii) directors, officers, employees, or
agents of broker-dealers that have entered into selling
agreements with Carillon Investments, Inc. relating to the
policies, or their spouses or dependents; or (iii) directors,
officers, employees, or affiliates of the portfolios or
investment advisers or sub-advisers or distributors thereof, or
their spouses or dependents. In addition, in the future, Union
Central may reduce or waive the sales charge component of the
premium expense charge; and/or the surrender charge if a policy
is purchased by the owner of another policy issued by Union
Central, and/or through transfer or exchange from a life
insurance policy issued by Union Central, each in accordance with
rules established by Union Central and applied on a uniform
basis. Reductions or waivers of the sales charge component of
the premium expense charge, the monthly administrative charge,
and the surrender charge reflect the reduced sales and
administrative effort associated with policies sold to the owners
specified. The home office can provide advice regarding the
availability of reduced or waived charges to such owners.
The Policies may be issued to group or sponsored arrangements, as
well as on an individual basis. A "group arrangement" includes a
program under which a trustee, employer or similar entity
purchases policies covering a group of individuals. An example
of such an arrangement is a non-qualified deferred compensation
plan. A "sponsored arrangement" includes a program under which
an employer permits group solicitation of its employees or an
association permits group solicitation of its members for the
purchase of policies on an individual basis. The policies may
not be available in connection with group or sponsored
arrangements in all states.
For policies issued in connection with group or sponsored
arrangements, Union Central may reduce or waive one or more of
the following charges: the sales charge component of the premium
expense charge; the surrender charge; the monthly charge for the
cost of insurance; rider charges; monthly administrative charges;
daily mortality and expense risk charges; and/or the transfer
charge. In addition, the interest rate credited on amounts taken
from the subdivisions as a result of a loan may be increased for
these policies. Union Central will waive or reduce these charges
as described below and according to its rules in effect when the
policy application is approved.
To qualify for a waiver or reduction, a group or sponsored
arrangement must satisfy certain criteria, for example, size of
the group, or number of years in existence. Generally, the sales
contacts and effort, administrative costs, and insurance cost and
mortality expense risk per policy may vary based on such factors
as the size of the group or sponsored arrangement, its stability,
the purposes for which the policies are purchased, and certain
characteristics of its members (including underwriting-related
factors that are determined by Union Central to result in lower
anticipated expenses of providing insurance coverage, and/or
lower mortality expense risk, under policies sold to members of
the group or through the sponsored arrangement). The amount of
any reduction and the criteria for qualification will reflect the
reduced sales and administrative effort resulting from sales to
qualifying group or sponsored arrangements, and/or the reduced
anticipated cost of insurance or mortality expense risk under
such policies. Union Central may modify from time to time the
amount or availability of any charge reduction or waiver, or the
criteria for qualification.
Charge reductions or waivers will not be unfairly discriminatory
against any person, including the affected owners and all other
owners of policies funded by the separate account.
<
HOW YOUR ACCOUNT VALUES VARY
There is no minimum guaranteed account value or cash surrender
value. These values will vary with the investment experience of
the subaccounts and/or the daily crediting of interest in the
guaranteed account, and will depend on the allocation of account
value. If the cash surrender value on a monthly date is less
than the amount of the monthly deduction to be deducted on that
date (see page 16) and the minimum guaranteed period is not then
in effect, the policy will be in default and a grace period will
begin. See "Minimum Guaranteed Period," page 13, and "Grace
Period," page 13.
Determining the Account Value
On the policy date, the account value is equal to the initial net
premium credited, less the monthly deduction made as of the
policy date. On each valuation date thereafter, the account
value is the sum of the variable account, the guaranteed account,
and the loan account. The account value will vary to reflect the
performance of the subdivisions to which amounts have been
allocated, interest credited on amounts allocated to the
guaranteed account, interest credited on amounts in the loan
account, charges, transfers, partial cash surrenders, loans and
loan repayments.
Subaccount Values. When you allocate an amount to a subdivision,
either by net premium allocation or transfer, your policy is
credited with accumulation units in the subaccount corresponding
to that subdivision. The number of accumulation units is
determined by dividing the amount allocated to the subdivision by
the subaccount's accumulation unit value for the valuation date
when the allocation is effected.
The number of accumulation units credited to your policy will
increase when net premiums are allocated to the subdivision,
amounts are transferred to the subdivision, and loan repayments
are credited to the subdivision. The number of accumulation
units credited to a policy will decrease when the allocated
portion of the monthly deduction is taken from the subdivision, a
loan is made, an amount is transferred from the subdivision, or a
partial surrender is taken from the subdivision.
Determination of Unit Value. The unit value for each subaccount
was arbitrarily set at $10 when the subaccount began operations.
Thereafter, the unit value at the end of every valuation date is
the unit value at the end of the previous valuation date times
the net investment factor, as described below. The variable
account for a policy is determined on any day by multiplying the
number of units attributable to each subaccount corresponding to
subdivisions in which account value is invested by the unit value
for that subaccount on that day, and aggregating the resulting
subaccount values.
Net Investment Factor. The net investment factor is an index
applied to measure the investment performance of a subaccount
from one valuation period to the next. Each subaccount has a net
investment factor for each valuation period which may be greater
or less than one. Therefore, the value of a unit may increase or
decrease. The net investment factor for any subaccount for any
valuation period is determined by dividing (1) by (2) and
subtracting (3) from the result, where:
(1) is the net result of:
a. the net asset value per share of the portfolio held in
the subaccount, determined at the end of the current
valuation period; plus
b. the per share amount of any dividend or capital gain
distributions made by the portfolio to the subaccount,
if the "ex-dividend" date occurs during the current
valuation period; plus or minus
c. a per share charge or credit for any taxes incurred by
or reserved for in the subaccount, which is determined
by us to have resulted from the operations of the
subaccount.
(2) is the net result of:
a. the net asset value per share of the portfolio held in
the subaccount, determined at the end of the last prior
valuation period (adjusted for an "ex-dividend"); plus
or minus
b. the per share charge or credit for any taxes reserved
for the immediately preceding valuation period.
(3) is a daily factor representing the mortality and expense
risk charge deducted from the subaccount for the policy
adjusted for the number of days in the valuation period.
Guaranteed Account. On any valuation date, the guaranteed
account of a policy is the total of all net premiums allocated to
the guaranteed account, plus any amounts transferred to the
guaranteed account, plus interest credited on such net premiums
and amounts, less the amount of any transfers, including transfer
charges, taken from the guaranteed account, less the amount of
any partial cash surrenders taken from the guaranteed account,
less any amounts transferred from the guaranteed account in
connection with loans, and less the pro-rata portion of the
monthly deduction deducted from the guaranteed account.
Loan Account. On any valuation date, if there have been any
loans, the loan account is equal to amounts transferred to the
loan account from the subaccounts and from the guaranteed account
as collateral for loans and for due and unpaid loan interest,
amounts transferred from the loan account to the subaccounts and
the guaranteed account as policy debt is repaid, and interest
credited on the loan account.
Cash Value
The cash value on a valuation date is the account value less the
surrender charge that would be applicable on that valuation date.
Cash Surrender Value
The cash surrender value on a valuation date is the cash value
reduced by any policy debt. Cash surrender value is used to
determine whether a partial cash surrender may be taken, and
whether policy debt is excessive (see page 24). It is also the
amount that is available upon full surrender of the policy (see
page 24).
DEATH BENEFIT AND CHANGES IN SPECIFIED AMOUNT
As long as the policy remains in force, Union Central will pay
the death benefit proceeds upon receipt at the home office of
proof of the insured's death that Union Central deems
satisfactory. Union Central may require return of the policy.
The death benefit proceeds will be paid in a lump sum generally
within seven calendar days of receipt of satisfactory proof (see
"When Proceeds Are Paid," page 34) or, if elected, under a
payment option (see "Payment Options," page 25). The death
benefit will be paid to the beneficiary. See "Selecting and
Changing the Beneficiary," page 23.
Amount of Death Benefit Proceeds
The death benefit proceeds are equal to the sum of the death
benefit under the death benefit option selected calculated on the
date of the insured's death, plus any supplemental and/or rider
benefits, minus any policy debt on that date. If the date of
death occurred during a grace period, the death benefit proceeds
are the death benefit immediately prior to the start of the grace
period, minus policy debt and minus any past due monthly
deductions. Under certain circumstances, the amount of the death
benefit may be further adjusted. See "Limits on Rights to
Contest the Policy" and "Misstatement of Age or Sex," page 34.
If part or all of the death benefit is paid in one sum, Union
Central will pay interest on this sum as required by applicable
state law from the date of receipt of due proof of the insured's
death to the date of payment.
Death Benefit Options
The owner may choose one of two death benefit options, which will
be used to determine the death benefit. Under Option A, the
death benefit is the greater of the specified amount or the
Applicable Percentage of account value on the date of the
insured's death. Under Option B, the death benefit is the
greater of the specified amount plus the account value on the
date of death, or the Applicable Percentage of the account value
on the date of the insured's death.
If investment performance is favorable, the amount of the death
benefit may increase. However, under Option A, the death benefit
ordinarily will not change for several years to reflect any
favorable investment performance and may not change at all.
Under Option B, the death benefit will vary directly with account
value, which reflects the investment performance of the
subaccounts as well as interest credited to the guaranteed
account. For an illustration of the impact that investment
performance may have on the death benefit, see the illustrations
beginning on page 25.
The "Applicable Percentage" is 250% when the insured has attained
age 40 or less, and decreases each year thereafter to 100% when
the insured has attained age 95. A table showing the Applicable
Percentages for Attained Ages 0 to 95 is included in Appendix A.
Initial Specified Amount and Death Benefit Option
The initial specified amount is set at the time the policy is
issued. You may change the specified amount from time to time,
as discussed below. You select the death benefit option when you
apply for the policy. You also may change the death benefit
option, as discussed below.
Changes in Death Benefit Option
On or after one year from the policy date, you may change the
death benefit option on your policy, by notice to us, subject to
the following rules. After any change, the specified amount must
be at least $50,000. The effective date of the change will be
the monthly date next following the day that Union Central
receives and accepts notice of the request for change. Union
Central may require satisfactory evidence of insurability.
When a change from Option A to Option B is made, the specified
amount after the change is effected will be equal to the
specified amount before the change less the account value on the
effective date of the change. When a change from Option B to
Option A is made, unless requested by notice to us, the specified
amount after the change will be equal to the specified amount
before the change is effected and the death benefit will be
reduced by the account value on the effective date of the change.
Changes in Specified Amount
On or after one year from the policy date, you may request a
change in the specified amount, by notice to us, subject to the
following rules. If a change in the specified amount would
result in total premiums paid exceeding the premium limitations
prescribed under current tax law to qualify your policy as a life
insurance contract, Union Central will refund promptly to the
owner the amount of such excess above the premium limitations.
The minimum amount of any decrease in specified amount is $5,000,
and any decrease in specified amount will become effective on the
monthly date next following the date that notice requesting the
decrease is received and approved by us. Union Central reserves
the right to decline a requested decrease in the specified amount
if compliance with the guideline premium limitations under
current tax law resulting from this decrease would result in
immediate termination of the policy, or if to effect the
requested decrease, payments to the owner would have to be made
from the accumulated value for compliance with the guideline
premium limitations, and the amount of such payments would exceed
the cash surrender value under the policy.
Decreasing the specified amount of the policy may have the effect
of decreasing monthly cost of insurance charges.
Any increase in the specified amount must be at least $5,000
(unless the increase is effected pursuant to a rider providing
for automatic increases in specified amount), and an application
must be submitted. Any increase that is not guaranteed by rider
will require satisfactory evidence of insurability and must meet
Union Central's underwriting rules. A change in planned periodic
premiums may be advisable. See "Premium Payments Upon Increase
in Specified Amount," page 13. The increase in specified amount
will become effective on the monthly date next following the date
the request for the increase is received and approved, and the
account value will be adjusted to the extent necessary to reflect
a monthly deduction as of the effective date based on the
increase in specified amount.
A new administrative surrender charge period will apply to each
portion of the policy resulting from an increase in specified
amount, starting with the effective date of the increase. (See
"Surrender Charge," page 18).
Selecting and Changing the Beneficiary
You select one or more beneficiary(ies) in your application. You
may later change the beneficiary(ies) in accordance with the
terms of the policy. The primary beneficiary, or, if the primary
beneficiary is not living, the contingent beneficiary, is the
person entitled to receive the death benefit proceeds under the
policy. If the insured dies and there is no surviving
beneficiary, the owner or the estate of the owner will be the
beneficiary. If a beneficiary is designated as irrevocable, then
the beneficiary's consent must be obtained to change the
beneficiary.
CASH BENEFITS
Loans
After the first policy year and while the insured is living, and
provided the policy is not in the grace period, you may borrow
against your policy at any time by submitting notice to the home
office. (In certain states, loans may also be available during
the first policy year.) The minimum amount of any loan request
is $500 (subject to state regulation). The maximum loan amount
is equal to the sum of 90% of the variable account, plus 100% of
the guaranteed account, less any surrender charges that would be
applicable on the effective date of the loan, less loan interest
to the annual date. Outstanding loans reduce the amount
available for new loans. Loans will be processed as of the date
your notice is received and approved. Loan proceeds generally
will be sent to you within seven calendar days. See "When
Proceeds Are Paid," page 34, and "Payments from the Guaranteed
Account," page 16.
Interest. Each year Union Central will set the annual loan
interest rate. The rate will never be more than the maximum
permitted by law, and will not be changed more frequently than
once per year. The rate for a policy year may not exceed the
greater of (i) the Published Monthly Average for the calendar
month ending two months before the annual date at the beginning
of the policy year; or (ii) the guaranteed minimum interest rate
applicable to the guaranteed account, plus 1.0%. The Published
Monthly Average means Moody's Corporate Bond Yield Average -
Monthly Average Corporates, as published by Moody's Investor
Service, Inc., or any successor to that service; or if the
average is no longer published, a substantially similar average,
established by regulation issued by the insurance supervisory
official of the state in which the policy is delivered.
If the maximum annual loan interest rate for a policy year is at
least 0.5% higher than the rate set for the previous policy year,
we may increase the rate to no more than that limit. If the
maximum limit for a policy year is at least 0.5% lower than the
rate set for the previous policy year, we will reduce the rate to
at least that limit.
Union Central will notify owners of the initial rate of interest
when a loan is made. We will notify the owner at least thirty
days in advance of any increase in the annual loan interest rate
applicable to any outstanding loan.
Interest is due and payable at the end of each policy year while
a loan is outstanding. If interest is not paid when due, the
amount of the interest is added to the loan and becomes part of
the outstanding loan.
Policy Debt. Outstanding loans (including unpaid interest added
to the loan) plus accrued interest not yet due equals the policy
debt.
Loan Collateral. When a policy loan is made, an amount
sufficient to secure the loan is transferred out of the variable
account and the guaranteed account and into the policy's loan
account. Thus, a loan will have no immediate effect on the
account value, but other policy values, such as the cash
surrender value and the death benefit proceeds, will be reduced
immediately by the amount transferred to the loan account. This
transfer is made against the account value in each subdivision
and the guaranteed account in proportion to the account value in
each on the effective date of the loan, unless the owner
specifies that transfers be made from specific subdivisions. An
amount of account value equal to any due and unpaid loan interest
which exceeds interest credited to the loan account will also be
transferred to the loan account on each annual date. Such
interest will be transferred from each subdivision and the
guaranteed account in the same proportion that account value in
each subdivision and the guaranteed account bears to the total
unloaned account value.
The loan account will be credited with interest at an effective
annual rate of not less than the annual loan interest rate, less
1.25% during the first ten policy years, and 0.50% thereafter.
Thus, the maximum net cost of a loan per year is 1.25% during the
first ten policy years, and 0.50% thereafter (the net cost of a
loan is the difference between the rate of interest charged on
policy loans and the amount credited on the equivalent amount
held in the loan account). Union Central will determine the rate
of interest to be credited to the loan account in its sole
discretion, and the rate may change from time to time.
Loan Repayment; Effect if Not Repaid. You may repay all or part
of your policy debt at any time while the insured is living and
the policy is in force. Loan repayments must be sent to the home
office and will be credited as of the date received. The owner
may give us notice that a specific unscheduled premium made while
a loan is outstanding is to be applied as a loan repayment.
(Loan repayments, unlike unscheduled premiums, are not subject to
premium expense charges.) We will apply any planned periodic
premiums, and any unscheduled premiums without notice, as
premium payments. When a loan repayment is made, account value
in the loan account in an amount equivalent to the repayment is
transferred from the loan account to the subdivisions and the
guaranteed account. Thus, a loan repayment will have no
immediate effect on the account value, but other policy values,
such as the cash surrender value, will be increased immediately
by the amount of the loan repayment. Amounts will be transferred
to the subdivisions and the guaranteed account in accordance with
the owner's current net premium allocation instructions.
If the death benefit becomes payable while a loan is outstanding,
the policy debt will be deducted in calculating the death benefit
proceeds.
If on a monthly date the cash value less any policy debt (the
cash surrender value) exceeds the amount of the monthly deduction
due for the following policy month, the policy will be in
default. You, and any assignee of record, will be sent notice of
the default. You will have a 61-day grace period to submit a
sufficient payment to avoid termination of coverage under the
policy. The notice will specify the amount that must be repaid
to prevent termination.
Effect of Policy Loan. A loan, whether or not repaid, will have
a permanent effect on the death benefit and policy values because
the investment results of the subaccounts of the separate account
and current interest rates credited on account value in the
guaranteed account will apply only to the non-loaned portion of
the account value. The longer the loan is outstanding, the
greater the effect is likely to be. Depending on the investment
results of the subaccounts or credited interest rates for the
guaranteed account while the loan is outstanding, the effect
could be favorable or unfavorable. Loans may increase the
potential for lapse if investment results of the subaccounts are
less than anticipated. Also, loans could, particularly if not
repaid, make it more likely than otherwise for a policy to
terminate. See "Tax Considerations," page 36, for a discussion
of the tax treatment of policy loans, and the adverse tax
consequences if a policy lapses with loans outstanding. In
addition, if your policy is a modified endowment contract, loans
may be currently taxable and subject to a 10% penalty tax.
Surrendering the Policy for Cash Surrender Value
You may surrender your policy at any time for its cash surrender
value by submitting notice to the home office. Union Central may
require return of the policy. A surrender charge may apply. See
"Surrender Charges," page 18. A surrender request will be
processed as of the date your notice and all required documents
are received. Payment will generally be made within seven
calendar days. See "When Proceeds are Paid," page 34, and
"Payments from the Guaranteed Account," page 16. The cash
surrender value may be taken in one lump sum or it may be applied
to a payment option acceptable to you and to us. See "Payment
Options," page 25. Your policy will terminate and cease to be in
force if it is surrendered. It cannot later be reinstated. A
surrender may result in adverse tax consequences, and if your
policy is a modified endowment contract, may also trigger a 10%
penalty tax. See "Tax Considerations," page 36.
Partial Cash Surrenders
You may make partial cash surrenders under your policy at any
time subject to the conditions below. You must submit notice to
the home office. Each partial cash surrender must be at least
$500. The partial surrender amount may not exceed the cash
surrender value. There is no fee or charge imposed on a partial
cash surrender. As of the date Union Central receives notice of
a partial cash surrender request, the cash value will be reduced
by the partial cash surrender amount.
Unless the owner requests that a partial cash surrender be
deducted from specified subdivisions, the partial cash surrender
amount will be deducted from your account value in the
subdivisions and in the guaranteed account pro-rata in proportion
to the account value in each.
If death benefit Option A is in effect, Union Central will reduce
the specified amount by the partial cash surrender amount. Union
Central may reject a partial cash surrender request if the
partial cash surrender would reduce the specified amount below
$50,000, or if the partial cash surrender would cause the policy
to fail to qualify as a life insurance contract under applicable
tax laws, as interpreted by Union Central.
Partial cash surrender requests will be processed as of the date
notice is received by us, and generally will be paid within seven
calendar days. See "When Proceeds Are Paid," page 34, and
"Payments from the Guaranteed Account," page 16.
A partial cash surrender may result in adverse tax consequences,
and if your policy is a modified endowment contract, may also
trigger a 10% penalty tax. See "Tax Considerations," page 36.
Maturity Benefit
The maturity date is generally the insured's age 100. If the
policy is still in force on the maturity date, the maturity
benefit will be paid to you. The maturity benefit is equal to
the cash surrender value on the maturity date.
Payment Options
Surrender proceeds and death benefit proceeds under the policy
are generally payable in a lump sum. We may offer alternative
payment options. Owners or beneficiaries should contact Union
Central or their Union Central agent for information regarding
payment options that may be available at the time of payment.
ILLUSTRATIONS OF ACCOUNT VALUES, CASH SURRENDER VALUES, DEATH
BENEFITS AND ACCUMULATED PREMIUM PAYMENTS
The following tables have been prepared to illustrate
hypothetically how certain values under a policy may change with
investment performance over an extended period of time. The
tables illustrate how account values, cash surrender values and
death benefits under a policy covering an insured of a given age
on the issue date, would vary over time if periodic planned
premiums were paid annually and the return on the assets in the
each of the portfolios were an assumed uniform gross annual rate
of 0%, 6% and 12%. The values would be different from those
shown if the returns averaged 0%, 6% or 12% but fluctuated over
and under those averages throughout the years shown. The tables
also show planned periodic premiums accumulated at 5% interest
compounded annually. THE HYPOTHETICAL INVESTMENT RATES OF RETURN
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION
OF PAST OR FUTURE INVESTMENT RATES OF RETURN. Actual rates of
return for a particular policy may be more or less than the
hypothetical investment rates of return and will depend on a
number of factors, including the investment allocations made by
an owner and prevailing rates. These illustrations assume that
net premiums are allocated equally among the subdivisions
available under the policy, and that no amounts are allocated to
the guaranteed account.
The illustrations reflect the fact that the net investment return
on the assets held in the subaccounts is lower than the gross
after tax return of the selected portfolios. The tables assume
an average annual expense ratio of 0.799% of the average daily
net assets of the portfolios available under the policies. This
average annual expense ratio is based on (i) the expense ratios
of each of the portfolios except the Carillon S&P 500 Index
Portfolio for the last fiscal year, adjusted, as appropriate, for
any material changes in expenses effective for the current fiscal
year of a portfolio; and (ii) for the Carillon S&P 500 Index
Portfolio, which commenced operations on December 29, 1995, the
estimated expense ratio for the first year of operations, net of
the effect of a voluntary expense reimbursement arrangement with
the portfolio's adviser. (This arrangement can be terminated at
any time. If the arrangement is terminated, the amounts shown in
the following illustrations could be lower.) For information on
the portfolios' expenses, see the prospectuses for the portfolios
accompanying this Prospectus.
In addition, the illustrations reflect the daily charge to the
separate account for assuming mortality and expense risks, which
is equal on an annual basis to 0.75% during the first ten policy
years, and 0.25% thereafter. After deduction of portfolio
expenses and the mortality and expense risk charge, the
illustrated gross annual investment rates of return of 0%, 6% and
12% would correspond to approximate net annual rates of -1.537%,
4.371% and 10.278%, respectively, during the first ten policy
years, and -1.044%, 4.894%, and 10.831%, respectively,
thereafter.
The illustrations also reflect the deduction of the applicable
premium expense charge, and the monthly deduction, including the
monthly cost of insurance charge for the hypothetical insured.
Union Central's current cost of insurance charges, and the higher
guaranteed maximum cost of insurance charges that Union Central
has the contractual right to charge, are reflected in separate
illustrations on each of the following pages. All the
illustrations reflect the fact that no charges for federal or
state income taxes are currently made against the separate
account and assume no policy debt or charges for supplemental
and/or rider benefits.
The illustrations are based on Union Central's sex distinct
preferred rates. Upon request, owner(s) will be furnished with a
comparable illustration based upon the proposed insured's
individual circumstances. Such illustrations may assume
different hypothetical rates of return than those illustrated in
the following tables.
<PAGE>
<PAGE>
- ----------------------------------------------------------------
THE UNION CENTRAL LIFE INSURANCE COMPANY
- ----------------------------------------------------------------
VARIABLE UNIVERSAL LIFE INSURANCE
EXCEL CHOICE
<TABLE>
<CAPTION>
MALE ISSUE AGE: 40 $5,000 ANNUAL PREMIUM USING CURRENT
CHARGES
400,000 SPECIFIED AMOUNT
PREFERRED
DEATH BENEFIT OPTION A
VARIABLE INVESTMENT
DEATH BENEFIT
ACCOUNT VALUE
CASH SURRENDER VALUE
-----------------------
- -----------------------
-----------------------
Assuming Hypothetical Assuming
Hypothetical
Assuming Hypothetical
PREMIUMS Gross Annual Gross
Annual
Gross Annual
ACCUM Investment Return of Investment
Return of
Investment Return of
END AT 5% -----------------------
- -----------------------
-----------------------
OF INTEREST 0% 6% 12% 0% 6%
12 %
0% 6% 12%
YEAR PER YEAR Gross Gross Gross Gross
Gross Gross
Gross Gross Gross
- ---- -------- ------ ------ ------ ------
- ------ ------
------ ----- ------
<S> <C> <C> <C> <C> <C>
<C> <C>
<C> <C> <C>
1 5250 400000 400000 400000 3486
3727 3968
386 627 868
2 10762 400000 400000 400000 7108
7812 8546
3938 4642 5376
3 16551 400000 400000 400000 10626
12028 13548
7456 8859 10378
4 22628 400000 400000 400000 14034
16373 19008
10864 13203 15839
5 29010 400000 400000 400000 17336
20856 24981
14167 17687 21812
6 35710 400000 400000 400000 20535
25485 31522
17682 22632 28669
7 42746 400000 400000 400000 23638
30274 38699
21103 27738 36163
8 50133 400000 400000 400000 26647
35231 46581
24429 33012 44362
9 57889 400000 400000 400000 29563
40363 55244
27661 38462 53342
10 66034 400000 400000 400000 32380
45676 64767
30795 44091 63182
11 74586 400000 400000 400000 35380
51542 75739
34112 50275 74471
12 83565 400000 400000 400000 38283
57645 87873
37332 56694 86922
13 92993 400000 400000 400000 41081
63987 101295
40447 63353 100661
14 102893 400000 400000 400000 43767
70577 116152
43450 70260 115835
15 113287 400000 400000 400000 46331
77419 132603
46331 77419 132603
20 173596 400000 400000 400000 58488
117246 247396
58488 117246 247396
25 250567 400000 400000 538433 66270
165497 441338
66270 165497 441338
30 348804 400000 400000 885322 67998
224883 763209
67998 224883 763209
(1) Assumes that no policy loans have been made.
(2) Current values reflect applicable Premium Expense Charges,
current cost of insurance rates, a monthly administrative charge
of $25.00 per month in year 1 and $5.00 per month thereafter, and
a mortality and expense risk charge of 0.75% of assets during the
first ten policy years, and 0.25% thereafter.
(3) Net investment returns are calculated as the hypothetical
gross investment returns less all charges and deductions shown in
the prospectus.
(4) Assumes that the planned periodic premium is paid at the
beginning of each policy year. Values would be different if
the premiums are paid with a different frequency or in different
amounts.
(5) The illustrated gross annual investment rates of return of
0%, 6%, and 12% would correspond to approximate net annual rates
of - 1.537%, 4.371%, and 10.278% respectively, during the first
ten policy years, and -1.044%, 4.894%, and 10.831% respectively
thereafter.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND
ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD
NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT
RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS
THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS
INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER AND
PREVAILING RATES. THE DEATH BENEFIT AND ACCOUNT VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF
RETURN AVERAGED 0%, 6%, OR 12% OVER A PERIOD OF YEARS BUT ALSO
FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS.
NO REPRESENTATION CAN BE MADE BY THE COMPANY OR THE PORTFOLIOS
THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY
ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
/TABLE
<PAGE>
<PAGE>
- ----------------------------------------------------------------
THE UNION CENTRAL LIFE INSURANCE COMPANY
- ----------------------------------------------------------------
VARIABLE UNIVERSAL LIFE INSURANCE
EXCEL CHOICE
<TABLE>
<CAPTION>
MALE ISSUE AGE: 40 $5,000 ANNUAL PREMIUM USING GUARANTEED
CHARGES
$400,000 SPECIFIED AMOUNT
PREFERRED
DEATH BENEFIT OPTION A
VARIABLE INVESTMENT
DEATH BENEFIT ACCOUNT
VALUE
CASH SURRENDER VALUE
-----------------------
- -----------------------
- --------------------
Assuming Hypothetical Assuming
Hypothetical
Assuming Hypothetical
PREMIUMS Gross Annual Gross Annual
Gross Annual
ACCUM Investment Return of Investment
Return of
Investment Return of
END AT 5% --------------------
- -----------------------
- --------------------
OF INTEREST 0% 6% 12% 0% 6%
12%
0% 6% 12%
YEAR PER YEAR Gross Gross Gross Gross Gross
Gross
Gross Gross Gross
- ---- -------- ------ ------ ------ ------
- ------ ------
- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
<C>
<C> <C> <C>
1 5250 400000 400000 400000 3409 3647
3885
309 547 785
2 10762 400000 400000 400000 6881 7574
8296
3711 4404 5126
3 16551 400000 400000 400000 10239 11611
13098
7070 8441 9928
4 22628 400000 400000 400000 13474 15753
18323
10305 12584 15153
5 29010 400000 400000 400000 16589 20007
24018
13419 16838 20849
6 35710 400000 400000 400000 19571 24365
30221
16718 21512 27368
7 42746 400000 400000 400000 22416 28826
36979
19880 26290 34444
8 50133 400000 400000 400000 25120 33389
44350
22901 31170 42131
9 57889 400000 400000 400000 27678 38055
52396
25776 36153 50494
10 66034 400000 400000 400000 30079 42817
61179
28494 41233 59595
11 74586 400000 400000 400000 32586 48026
71252
31318 46758 69984
12 83565 400000 400000 400000 34919 53360
82320
33968 52409 81369
13 92993 400000 400000 400000 37056 58805
94485
36422 58171 93851
14 102893 400000 400000 400000 38978 64353
107868
38661 64036 107551
15 113287 400000 400000 400000 40657 69984
122598
40657 69984 122598
20 173596 400000 400000 400000 44599 99031
222930
44599 99031 222930
25 250567 400000 400000 480255 37678
127808 393651
37678 127808 393651
30 348804 400000 400000 782929 10583
151454 674938
10583 151454 674938
</TABLE>
(1) Assumes that no policy loans have been made.
(2) Guaranteed values reflect applicable Premium Expense
Charges,
guaranteed cost of insurance rates, a monthly administrative
charge of
$25.00 per month in year 1 and $10.00 per month thereafter, and a
mortality and expense risk charge of 0.75% of assets during the
first ten policy years, and 0.25% thereafter.
(3) Net investment returns are calculated as the hypothetical
gross investment returns less all charges and deductions shown in
the prospectus.
(4) Assumes that the planned periodic premium is paid at the
beginning of each policy year. Values would be different if the
premiums are paid with a different frequency or in different
amounts.
(5) The illustrated gross annual investment rates of return of
0%, 6%, and 12% would correspond to approximate net annual rates
of - 1.537%, 4.371%, and 10.278% respectively, during the first
ten policy years, and -1.044%, 4.894% and 10.831% respectively
thereafter.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND
ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT
BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF
RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE
SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER AND PREVAILING RATES.
THE DEATH BENEFIT AND ACCOUNT VALUE FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED
0%, 6%, OR 12% OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE
OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS.
NO REPRESENTATION CAN BE MADE BY THE COMPANY OR THE PORTFOLIOS
THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY
ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
<PAGE>
- ----------------------------------------------------------------
THE UNION CENTRAL LIFE INSURANCE COMPANY
- ----------------------------------------------------------------
VARIABLE UNIVERSAL LIFE INSURANCE
EXCEL CHOICE
<TABLE>
<CAPTION>
MALE ISSUE AGE: 40 $5,000 ANNUAL PREMIUM USING CURRENT CHARGES
$400,000 SPECIFIED AMOUNT
PREFERRED
DEATH BENEFIT OPTION B
VARIABLE INVESTMENT
DEATH BENEFIT ACCOUNT
VALUE
CASH SURRENDER VALUE
-----------------------
- ----------------------
- --------------------
Assuming Hypothetical Assuming
Hypothetical
Assuming Hypothetical
PREMIUMS Gross Annual Gross Annual
Gross Annual
ACCUM Investment Return of Investment
Return of
Investment Return of
END AT 5% -----------------------
- -----------------------
- --------------------
OF INTEREST 0% 6% 12% 0% 6%
12 %
0% 6% 12%
YEAR PER YEAR Gross Gross Gross Gross
Gross Gross
Gross Gross Gross
- ---- ------- ------ ------ ------ ------
- ------ -----
- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
<C>
<C> <C> <C>
1 5250 403478 403718 403958 3478
3718 3958
378 618 858
2 10762 407082 407784 408515 7082
7784 8515
3913 4614 5346
3 16551 410574 411969 413480 10574
11969 13480
7405 8800 10311
4 22628 413946 416268 418884 13946
16268 18884
10776 13099 15715
5 29010 417201 420689 424775 17201
20689 24775
14032 17519 21605
6 35710 420341 425235 431202 20341
25235 31202
17488 22382 28349
7 42746 423374 429920 438227 23374
29920 38227
20839 27384 35692
8 50133 426301 434747 445911 26301
34747 45911
24082 32528 43692
9 57889 429121 439722 454319 29121
39722 54319
27219 37821 52417
10 66034 431829 444844 463518 31829
44844 63518
30244 43259 61934
11 74586 434702 450478 474074 34702
50478 74074
33434 49210 72806
12 83565 437461 456302 485683 37461
56302 85683
36510 55351 84732
13 92993 440094 462310 498447 40094
62310 98447
39460 61676 97813
14 102893 442594 468504 512482 42594
68504 112482
42277 68188 112165
15 113287 444948 474877 527909 44948
74877 127909
44948 74877 127909
20 173596 455828 511246 633602 55828
111246 233602
55828 111246 233602
25 250567 461378 551913 803999 61378
151913 403999
61378 151913 403999
30 348804 459569 595424 107966 59569
195424 679666
59569 195424 679666
</TABLE>
(1) Assumes that no policy loans have been made.
(2) Current values reflect applicable Premium Expense Charges,
current cost of insurance rates, a monthly administrative charge
of
$25.00 per month in year 1 and $5.00 per month thereafter, and a
mortality and expense risk charge of 0.75% of assets during the
first
ten policy years, and 0.25% thereafter.
(3) Net investment returns are calculated as the hypothetical
gross
investment returns less all charges and deductions shown in the
prospectus.
(4) Assumes that the planned periodic premium is paid at the
beginning of each policy year. Values would be different if
the
premiums are paid with a different frequency or in different
amounts.
(5) The illustrated gross annual investment rates of return of
0%,
6%, and 12% would correspond to approximate net annual rates of -
1.537%, 4.371%, and 10.278% respectively, during the first ten
policy
years, and -1.044%, 4.894%, and 10.831% respectively thereafter.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND
ELSEWHERE
IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A
REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN.
ACTUAL
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL
DEPEND
ON A NUMBER OF FACTORS INCLUDING THE INVESTMENT ALLOCATIONS MADE
BY AN
OWNER AND PREVAILING RATES. THE DEATH BENEFIT AND ACCOUNT VALUE
FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF
RETURN AVERAGED 0%, 6%, OR 12% OVER A PERIOD OF YEARS BUT ALSO
FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS.
NO REPRESENTATION CAN BE MADE BY THE COMPANY OR THE PORTFOLIOS
THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
<PAGE>
- ----------------------------------------------------------------
THE UNION CENTRAL LIFE INSURANCE COMPANY
- ----------------------------------------------------------------
VARIABLE UNIVERSAL LIFE INSURANCE
EXCEL CHOICE
<TABLE>
<CAPTION>
MALE ISSUE AGE: 40 $5,000 ANNUAL PREMIUM USING GUARANTEED
CHARGES
$400,000 SPECIFIED AMOUNT
PREFERRED
DEATH BENEFIT OPTION B
VARIABLE INVESTMENT
DEATH BENEFIT ACCOUNT
VALUE
CASH SURRENDER VALUE
-----------------------
- -----------------------
--------------------
Assuming Hypothetical Assuming
Hypothetical
Assuming Hypothetical
PREMIUMS Gross Annual Gross
Annual
Gross Annual
ACCUM Investment Return of Investment
Return of
Investment Return of
END AT 5% -----------------------
- -----------------------
-----------------------
OF INTEREST 0% 6% 12% 0% 6%
12%
0% 6% 12%
YEAR PER YEAR Gross Gross Gross Gross Gross
Gross
Gross Gross Gross
- ---- ------- ------ ------ ------ ------
- ------ ------
------ ------ -----
<S> <C> <C> <C> <C> <C> <C>
<C>
<C> <C> <C>
1 5250 403399 403637 403875 3399 3637
3875
299 537 775
2 10762 406854 407543 408262 6854 7543
8262
3684 4374 5093
3 16551 410184 411547 413025 10184 11547
13025
7014 8377 9855
4 22628 413379 415640 418188 13379 15640
18188
10209 12470 15019
5 29010 416442 419825 423794 16442 19825
23794
13273 16656 20624
6 35710 419359 424092 429871 19359 24092
29871
16507 21239 27018
7 42746 422124 428434 436458 22124 28434
36458
19589 25898 33922
8 50133 424732 432848 443600 24732 32848
43600
22513 30629 41381
9 57889 427177 437327 451345 27177 37327
51345
25275 35426 49444
10 66034 429445 441859 459740 29445 41859
59740
27860 40275 58155
11 74586 431793 446781 469301 31793 46781
69301
30525 45513 68034
12 83565 433942 451762 479713 33942 51762
79713
32991 50811 78762
13 92993 435865 456778 491036 35865 56778
91036
35231 56144 90402
14 102893 437541 461805 503345 37541 61805
103345
37224 61488 103028
15 113287 438936 466806 516707 38936 66806
116707
38936 66806 116707
20 173596 440817 490305 602602 40817 90305
202602
40817 90305 202602
25 250567 430671 506475 730620 30671
106475 330620
30671 106475 330620
30 348804 400355 503252 917553 355
103252 517553
355 103252 517553
</TABLE>
(1) Assumes that no policy loans have been made.
(2) Guaranteed values reflect applicable Premium Expense
Charges,
guaranteed cost of insurance rates, a monthly administrative
charge of
$25.00 per month in year 1 and $10.00 per month thereafter, and a
mortality and expense risk charge of 0.75% of assets during the
first
ten policy years, and 0.25% thereafter.
(3) Net investment returns are calculated as the hypothetical
gross
investment returns less all charges and deductions shown in the
prospectus.
(4) Assumes that the planned periodic premium is paid at the
beginning of each policy year. Values would be different if the
premiums are paid with a different frequency or in different
amounts.
(5) The illustrated gross annual investment rates of return of
0%,
6%, and 12% would correspond to approximate net annual rates of -
1.537%, 4.371%, and 10.278% respectively, during the first ten
policy
years, and -1.044%, 4.894% and 10.831% respectively thereafter.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND
ELSEWHERE
IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A
REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN.
ACTUAL
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL
DEPEND
ON A NUMBER OF FACTORS INCLUDING THE INVESTMENT ALLOCATIONS MADE
BY AN
OWNER AND PREVAILING RATES. THE DEATH BENEFIT AND ACCOUNT VALUE
FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF
RETURN AVERAGED 0%, 6%, OR 12% OVER A PERIOD OF YEARS BUT ALSO
FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS.
NO REPRESENTATION CAN BE MADE BY THE COMPANY OR THE PORTFOLIOS
THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
<PAGE>
- ----------------------------------------------------------------
THE UNION CENTRAL LIFE INSURANCE COMPANY
- ----------------------------------------------------------------
VARIABLE UNIVERSAL LIFE INSURANCE
EXCEL CHOICE
<TABLE>
<CAPTION>
MALE ISSUE AGE: 50 $5,300 ANNUAL PREMIUM USING CURRENT
CHARGES
$250,000 SPECIFIED AMOUNT
PREFERRED
DEATH BENEFIT OPTION A
VARIABLE INVESTMENT
DEATH BENEFIT ACCOUNT
VALUE
CASH SURRENDER VALUE
-----------------------
- -----------------------
-----------------------
Assuming Hypothetical Assuming
Hypothetical
Assuming Hypothetical
PREMIUMS Gross Annual Gross
Annual
Gross Annual
ACCUM Investment Return of Investment
Return of
Investment Return of
END AT 5% -----------------------
- -----------------------
-----------------------
OF INTEREST 0% 6% 12% 0% 6%
12 %
0% 6% 12%
YEAR PER YEAR Gross Gross Gross Gross
Gross Gross
Gross Gross Gross
- ---- -------- ------ ------ ------ ------
- ------ ------
------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
<C>
<C> <C> <C>
1 5565 250000 250000 250000 3619
3872 4125
866 1119 1372
2 11408 250000 250000 250000 7368
8106 8876
4543 5281 6050
3 17544 250000 250000 250000 10998
12465 14055
8173 9639 11229
4 23986 250000 250000 250000 14509
16953 19709
11683 14128 16883
5 30750 250000 250000 250000 17895
21571 25884
15069 18746 23059
6 37853 250000 250000 250000 21154
26324 32637
18611 23781 30094
7 45310 250000 250000 250000 24296
31226 40040
22035 28965 37779
8 53141 250000 250000 250000 27336
36302 48183
25358 34324 46205
9 61363 250000 250000 250000 30284
41570 57161
28589 39875 55465
10 69996 250000 250000 250000 33148
47048 67073
31735 45635 65660
11 79061 250000 250000 250000 36219
53131 78545
35089 52001 77414
12 88579 250000 250000 250000 39223
59505 91304
38375 58657 90456
13 98573 250000 250000 250000 42154
66181 105503
41589 65616 104937
14 109066 250000 250000 250000 45006
73175 121314
44723 72893 121031
15 120085 250000 250000 250000 47780
80510 138938
47780 80510 138938
20 184012 250000 250000 304279 59187
122107 262310
59187 122107 262310
25 265601 250000 250000 502069 65703
174896 469223
65703 174896 469223
30 369732 250000 256734 854050 59274
244509 813381
59274 244509 813381
</TABLE>
(1) Assumes that no policy loans have been made.
(2) Current values reflect applicable Premium Expense Charges,
current cost of insurance rates, a monthly administrative charge
of
$25.00 per month in year 1 and $5.00 per month thereafter, and a
mortality and expense risk charge of 0.75% of assets during the
first
ten policy years, and 0.25% thereafter.
(3) Net investment returns are calculated as the hypothetical
gross
investment returns less all charges and deductions shown in the
prospectus.
(4) Assumes that the planned periodic premium is paid at the
beginning of each policy year. Values would be different if
the
premiums are paid with a different frequency or in different
amounts.
(5) The illustrated gross annual investment rates of return of
0%,
6%, and 12% would correspond to approximate net annual rates of -
1.537%, 4.371%, and 10.278% respectively, during the first ten
policy
years, and -1.044%, 4.894%, and 10.831% respectively thereafter.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND
ELSEWHERE
IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A
REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN.
ACTUAL
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL
DEPEND
ON A NUMBER OF FACTORS INCLUDING THE INVESTMENT ALLOCATIONS MADE
BY AN
OWNER AND PREVAILING RATES. THE DEATH BENEFIT AND ACCOUNT VALUE
FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF
RETURN AVERAGED 0%, 6%, OR 12% OVER A PERIOD OF YEARS BUT ALSO
FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS.
NO REPRESENTATION CAN BE MADE BY THE COMPANY OR THE PORTFOLIOS
THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
<PAGE>
- ----------------------------------------------------------------
THE UNION CENTRAL LIFE INSURANCE COMPANY
- ----------------------------------------------------------------
VARIABLE UNIVERSAL LIFE INSURANCE
EXCEL CHOICE
<TABLE>
<CAPTION>
MALE ISSUE AGE: 50 $5,300 ANNUAL PREMIUM USING GUARANTEED
CHARGES
$250,000 SPECIFIED AMOUNT
PREFERRED
DEATH BENEFIT OPTION A
VARIABLE INVESTMENT
DEATH BENEFIT ACCOUNT
VALUE
CASH SURRENDER VALUE
-----------------------
- -----------------------
-----------------------
Assuming Hypothetical Assuming
Hypothetical
Assuming Hypothetical
PREMIUMS Gross Annual Gross
Annual
Gross Annual
ACCUM Investment Return of Investment
Return of
Investment Return of
END AT 5% -----------------------
- -----------------------
-----------------------
OF INTEREST 0% 6% 12% 0% 6%
12 %
0% 6% 12%
YEAR PER YEAR Gross Gross Gross Gross Gross
Gross
Gross Gross Gross
- ---- -------- ------ ------ ------ ------ ------
------
------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
<C>
<C> <C> <C>
1 5565 250000 250000 250000 3386 3632
3878
633 879 1125
2 11408 250000 250000 250000 6810 7516
8254
3984 4691 5428
3 17544 250000 250000 250000 10078 11468
12977
7252 8642 10151
4 23986 250000 250000 250000 13180 15479
18076
10354 12653 15250
5 30750 250000 250000 250000 16101 19536
23577
13276 16711 20752
6 37853 250000 250000 250000 18831 23631
29516
16288 21088 26973
7 45310 250000 250000 250000 21355 27754
35931
19095 25493 33671
8 53141 250000 250000 250000 23669 31901
42877
21691 29923 40899
9 61363 250000 250000 250000 25762 36065
50411
24066 34369 48716
10 69996 250000 250000 250000 27612 40229
58591
26199 38816 57178
11 79061 250000 250000 250000 29457 44720
67950
28327 43590 66820
12 88579 250000 250000 250000 31022 49220
78213
30174 48372 77365
13 98573 250000 250000 250000 32270 53704
89487
31705 53139 88921
14 109066 250000 250000 250000 33157 58143
101900
32874 57861 101618
15 120085 250000 250000 250000 33635 62506
115611
33635 62506 115611
20 184012 250000 250000 250000 28249 82325
212416
28249 82325 212416
25 265601 250000 250000 407525 1086 94296
380864
1086 94296 380864
30 369732 0 250000 692589 0 83739
659608
0 83739 659608
</TABLE>
(1) Assumes that no policy loans have been made.
(2) Guaranteed values reflect applicable Premium Expense
Charges, guaranteed cost of insurance rates, a monthly
administrative charge of $25.00 per month in year 1 and $10.00
per month thereafter, and a mortality and expense risk charge of
0.75% of assets during the first ten policy years, and 0.25%
thereafter.
(3) Net investment returns are calculated as the hypothetical
gross investment returns less all charges and deductions shown in
the prospectus.
(4) Assumes that the planned periodic premium is paid at the
beginning of each policy year. Values would be different if the
premiums are paid with a different frequency or in different
amounts.
(5) The illustrated gross annual investment rates of return of
0%, 6%, and 12% would correspond to approximate net annual rates
of - 1.537%, 4.371%, and 10.278% respectively, during the first
ten policy years, and -1.044%, 4.894% and 10.831% respectively
thereafter.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND
ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT
BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF
RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE
SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER AND PREVAILING RATES.
THE DEATH BENEFIT AND ACCOUNT VALUE FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED
0%, 6%, OR 12% OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE
OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS.
NO REPRESENTATION CAN BE MADE BY THE COMPANY OR THE PORTFOLIOS
THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY
ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
<PAGE>
- ----------------------------------------------------------------
THE UNION CENTRAL LIFE INSURANCE COMPANY
- ----------------------------------------------------------------
VARIABLE UNIVERSAL LIFE INSURANCE
EXCEL CHOICE
<TABLE>
<CAPTION>
MALE ISSUE AGE: 50 $5,300 ANNUAL PREMIUM USING CURRENT
CHARGES
$250,000 SPECIFIED AMOUNT
PREFERRED
DEATH BENEFIT OPTION B
VARIABLE INVESTMENT
DEATH BENEFIT ACCOUNT
VALUE
CASH SURRENDER VALUE
-----------------------
- -----------------------
-----------------------
Assuming Hypothetical Assuming
Hypothetical
Assuming Hypothetical
PREMIUMS Gross Annual Gross
Annual
Gross Annual
ACCUM Investment Return of Investment
Return of
Investment Return of
END AT 5% -----------------------
- -----------------------
-----------------------
OF INTEREST 0% 6% 12% 0% 6%
12 %
0% 6% 12%
YEAR PER YEAR Gross Gross Gross Gross
Gross Gross
Gross Gross Gross
- ---- -------- ------ ------ ------ ------
- ------ ------
------ ------ -----
<S> <C> <C> <C> <C> <C> <C>
<C>
<C> <C> <C>
1 5565 53602 253854 254106 3602 3854
4106
849 1101 1353
2 11408 257318 258051 258815 7318 8051
8815
4492 5225 5989
3 17544 260896 262348 263921 10896
12348 13921
8070 9522 11095
4 23986 264334 266744 269461 14334
16744 19461
11508 13919 16635
5 30750 267624 271236 275471 17624
21236 25471
14798 18410 22645
6 37853 270763 275819 281991 20763
25819 31991
18220 23276 29447
7 45310 273759 280505 289080 23759
30505 39080
21498 28245 36819
8 53141 276627 285312 296811 26627
35312 46811
24649 33334 44833
9 61363 279378 290253 305259 29378
40253 55259
27683 38558 53564
10 69996 282018 295340 314503 32018
45340 64503
30605 43927 63090
11 79061 284833 300949 325122 34833
50949 75122
33703 49819 73992
12 88579 287550 306762 336818 37550
56762 86818
36702 55914 85970
13 98573 290160 312779 349699 40160
62779 99699
39595 62213 99134
14 109066 292657 319001 363883 42657
69001 113883
42374 68718 113600
15 120085 295040 325437 379511 45040
75437 129511
45040 75437 129511
20 184012 303526 359250 483221 53526
109250 233221
53526 109250 233221
25 265601 305062 394724 648146 55062
144724 398146
55062 144724 398146
30 369732 289317 420111 901627 39317
170111 651627
39317 170111 651627
</TABLE>
(1) Assumes that no policy loans have been made.
(2) Current values reflect applicable Premium Expense Charges,
current cost of insurance rates, a monthly administrative charge
of $25.00 per month in year 1 and $5.00 per month thereafter, and
a mortality and expense risk charge of 0.75% of assets during the
first ten policy years, and 0.25% thereafter.
(3) Net investment returns are calculated as the hypothetical
gross investment returns less all charges and deductions shown in
the prospectus.
(4) Assumes that the planned periodic premium is paid at the
beginning of each policy year. Values would be different if the
premiums are paid with a different frequency or in different
amounts.
(5) The illustrated gross annual investment rates of return of
0%, 6%, and 12% would correspond to approximate net annual rates
of -1.537%, 4.371%, and 10.278% respectively, during the first
ten policy years, and -1.044%, 4.894%, and 10.831% respectively
thereafter.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND
ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT
BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF
RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE
SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER AND PREVAILING RATES.
THE DEATH BENEFIT AND ACCOUNT VALUE FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED
0%, 6%, OR 12% OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE
OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS.
NO REPRESENTATION CAN BE MADE BY THE COMPANY OR THE PORTFOLIOS
THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY
ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
<PAGE>
- ----------------------------------------------------------------
THE UNION CENTRAL LIFE INSURANCE COMPANY
- ----------------------------------------------------------------
VARIABLE UNIVERSAL LIFE INSURANCE
EXCEL CHOICE
<TABLE>
<CAPTION>
MALE ISSUE AGE: 50 $5,300 ANNUAL PREMIUM USING GUARANTEED
CHARGES
$250,000 SPECIFIED AMOUNT
PREFERRED
DEATH BENEFIT OPTION B
VARIABLE INVESTMENT
DEATH BENEFIT ACCOUNT
VALUE
CASH SURRENDER VALUE
---------------------
- -----------------------
---------------------
Assuming Hypothetical Assuming
Hypothetical
Assuming Hypothetical
PREMIUMS Gross Annual Gross
Annual
Gross Annual
ACCUM Investment Return of Investment
Return of
Investment Return of
END AT 5% ---------------------
- -----------------------
--------------------
OF INTEREST 0% 6% 12% 0% 6%
12 %
0% 6% 12%
YEAR PER YEAR Gross Gross Gross Gross Gross
Gross
Gross Gross Gross
- ---- -------- ------ ------ ----- ------
- ------ ------
------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
<C>
<C> <C> <C>
1 5565 253366 253610 253855 3366 3610
3855
613 857 1102
2 11408 256749 257449 258180 6749 7449
8180
3924 4624 5354
3 17544 259954 261326 262815 9954 11326
12815
7128 8500 9989
4 23986 262968 265226 267775 12968 15226
17775
10142 12400 14950
5 30750 265772 269127 273072 15772 19127
23072
12946 16301 20246
6 37853 268351 273011 278719 18351 23011
28719
15808 20468 26176
7 45310 270689 276857 284733 20689 26857
34733
18428 24596 32472
8 53141 272777 280650 291137 22777 30650
41137
20799 28672 39159
9 61363 274601 284370 297953 24601 34370
47953
22905 32674 46258
10 69996 276135 287982 305192 26135 37982
55192
24722 36569 53779
11 79061 277602 291777 313304 27602 41777
63304
26472 40647 62174
12 88579 278729 295422 321950 28729 45422
71950
27881 44574 71102
13 98573 279472 298862 331137 29472 48862
81137
28907 48297 80571
14 109066 279783 302032 340868 29783 52032
90868
29500 51750 90585
15 120085 279609 304861 351142 29609 54861
101142
29609 54861 101142
20 184012 269982 311450 410970 19982 61450
160970
19982 61450 160970
25 265601 0 294985 482672 0 44985
232672
0 44985 232672
30 369732 0 0 554128 0 0
304128
0 0 304128
</TABLE>
(1) Assumes that no policy loans have been made.
(2) Guaranteed values reflect applicable Premium Expense
Charges, guaranteed cost of insurance rates, a monthly
administrative charge of $25.00 per month in year 1 and $10.00
per month thereafter, and a mortality and expense risk charge of
0.75% of assets during the first ten policy years, and 0.25%
thereafter.
(3) Net investment returns are calculated as the hypothetical
gross investment returns less all charges and deductions shown in
the prospectus.
(4) Assumes that the planned periodic premium is paid at the
beginning of each policy year. Values would be different if the
premiums are paid with a different frequency or in different
amounts.
(5) The illustrated gross annual investment rates of return of
0%, 6%, and 12% would correspond to approximate net annual rates
of - 1.537%, 4.371%, and 10.278% respectively, during the first
ten policy years, and -1.044%, 4.894% and 10.831% respectively
thereafter.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND
ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT
BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF
RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE
SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER AND PREVAILING RATES.
THE DEATH BENEFIT AND ACCOUNT VALUE FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED
0%, 6%, OR 12% OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE
OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS.
NO REPRESENTATION CAN BE MADE BY THE COMPANY OR THE PORTFOLIOS
THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY
ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
<PAGE>
OTHER POLICY BENEFITS AND PROVISIONS
Limits on Rights to Contest the Policy
Incontestability. Subject to state regulation, Union Central
will not contest the policy, or any supplemental and/or rider
benefits (except accidental death and/or disability benefits),
after the policy or rider has been in force during the insured's
lifetime for two years from the issue date or the effective date
of the rider, unless fraud is involved. Any increase in the
specified amount will be incontestable with respect to statements
made in the evidence of insurability for that increase after the
increase has been in force during the life of the insured for two
years after the effective date of the increase.
Suicide Exclusion. Subject to state regulation, if the insured
dies by suicide within two years after the issue date, we will
not pay a death benefit. The policy will be terminated, and we
will return the premium payments made before death, less any
policy debt and any partial cash surrenders. If the insured dies
by suicide within two years after an increase in specified amount
that is subject to evidence of insurability, we will not pay any
death benefit attributable to the increase. In such case, prior
to calculating the death benefit, Union Central will restore to
the cash value the sum of the monthly cost of insurance charges
made for that increase.
Changes in the Policy or Benefits
Misstatement of Age or Sex. If the insured's age or sex has been
misstated in the application for the policy or in any application
for supplemental and/or rider benefits:
if the misstatement becomes known after the death of the insured,
then the death benefit under the policy or such supplemental
and/or rider benefits will be adjusted to the correct amount
(reflecting the correct age or sex) for the monthly deduction
made for the month in which death occurred;
if the misstatement becomes known during the lifetime of the
insured, policy values will be adjusted to those based on the
correct monthly deductions (reflecting the correct age or sex)
since the policy date. If the policy's values are insufficient
to cover the monthly deduction on the prior monthly date, the
grace period will be deemed to have begun on such date, and
notification will be sent to the owner at least 61 days prior to
the end of the grace period.
Other Changes. At any time Union Central may make such changes
in the policy as are necessary to assure compliance at all times
with the definition of life insurance prescribed by the Internal
Revenue Code or to make the policy conform with any law or
regulation issued by any government agency to which it is
subject.
When Proceeds Are Paid
Union Central will ordinarily pay any death benefit proceeds,
loan proceeds, partial cash surrender proceeds, or full surrender
proceeds within seven calendar days after receipt at the home
office of all the documents required for such a payment. Other
than the death benefit, which is determined as of the date of
death, the amount will be determined as of the date of receipt of
required documents. However, Union Central may delay making a
payment or processing a transfer request if (1) the New York
Stock Exchange is closed for other than a regular holiday or
weekend, trading on the New York Stock Exchange is restricted by
the SEC, or the SEC declares that an emergency exists as a result
of which the disposal or valuation of separate account assets is
not reasonably practicable; or (2) the SEC by order permits
postponement of payment to protect Union Central's policy owners.
See also "Payments from the Guaranteed Account," page 16.
Reports to Policy Owners
Each year you will be sent a report at your last known address
showing, as of the end of the current report period: account
value; cash value; death benefit; amount of interest credited to
the guaranteed account; change in value of the variable account;
premiums paid since the last report; loans; partial cash
surrenders; expense charges; and cost of insurance charges since
the prior report; and any other information required by law. You
will also be sent an annual and a semi-annual report for each
portfolio underlying a subdivision to which you have allocated
account value, including a list of the securities held in each
portfolio, as required by the 1940 Act. In addition, when you
pay premium payments, or if you take out a loan, transfer amounts
or make partial cash surrenders, you will receive a written
confirmation of these transactions.
Assignment
The policy may be assigned in accordance with its terms. In
order for any assignment to be binding upon Union Central, it
must be in writing and filed at the home office. Once Union
Central has received a signed copy of the assignment, the owner's
rights and the interest of any beneficiary (or any other person)
will be subject to the assignment. Union Central assumes no
responsibility for the validity or sufficiency of any assignment.
An assignment is subject to any policy debt.
Reinstatement
The policy may be reinstated within five years after lapse and
before the maturity date, subject to compliance with certain
conditions, including the payment of a necessary premium payment
and submission of satisfactory evidence of insurability. See
your policy for further information.
Supplemental and/or Rider Benefits
The following supplemental and/or rider benefits may be available
and added to your policy. Any monthly charges for these benefits
and/or riders will be deducted from your account value as part of
the monthly deduction (see page 16). The supplemental and/or
rider benefits available with the policies provide fixed benefits
that do not vary with the investment experience of the separate
account.
Term Insurance Rider for Other Insured Persons. Provides a
death benefit amount payable on the death of other insured
persons specified. The other insured death benefit amount
may be changed, subject to certain conditions. In addition,
the rider coverage may be converted to a new policy on the
other insured, subject to certain conditions.
Scheduled Increase Option Rider for the Insured. Provides
for automatic increases in the specified amount on each
annual date, subject to the terms of the rider; the amount
of the increase is specified in the rider. The rate class
applicable to the scheduled increases will be the rate class
of the insured on the issue date of the rider. There is no
cost for this rider.
Guaranteed Death Benefit Rider. Provides that the policy
will remain in force and will not lapse during the
Guaranteed Death Benefit Period, provided that the sum of
premium payments to date, less any partial cash surrenders
and any policy debt, equals or exceeds the Guaranteed Death
Benefit Premium times the number of policy months since the
policy date. This rider terminates on any monthly date when
the sum of premium payments, less any partial cash
surrenders and any policy debt, is less than the Guaranteed
Death Benefit Premium multiplied by the number of policy
months since the policy date. This rider is not available
for all ages and rate classes, or under certain
circumstances where the Term Insurance Rider for Other
Insured Persons is also added to the policy.
Cost of Living Rider for the Insured. Provides for
automatic increases in the specified amount on each annual
date, subject to the terms of the rider; the amount of the
increase will be based on increases in the Consumer Price
Index, as specified in the rider. The rate class applicable
to the cost of living increases will be the rate class of
the insured on the issue date of the rider. There is no
cost for this rider.
Guaranteed Insurability Option Rider. Provides the right to
increase the specified amount on each option date by the
benefit amount shown in the rider. No evidence of
insurability will be required. Option dates are the annual
dates nearest the insured's 25th, 28th, 31st, 34th, 37th,
and 40th birthdays. Option dates may be advanced in the
event of the insured's marriage or adoption of a child.
Accidental Death Benefit Rider. Provides an additional
death benefit payable if the insured's death results from
certain accidental causes. There is no cash value for this
benefit.
Total Disability Benefit Rider - Waiver of Monthly
Deduction. Provides for waiver of the monthly deduction
during the total disability of the insured.
Total Disability Benefit Rider - Policy Continuation to
Maturity Date Not Guaranteed. Provides for the crediting to
the policy as premium payments the monthly total disability
benefit set forth in the rider during the total disability
of the insured.
Children's Insurance Rider. Provides a death benefit
payable on the death of a child of the insured. More than
one child can be covered. There is no cash value for this
benefit.
Insurance Exchange Rider. Provides the right to exchange
the policy for a new policy on the life of a substitute
insured. Exercise of the right is subject to satisfactory
evidence of insurability of the substitute insured, and may
result in a cost or credit to the owner. The new policy can
be any adjustable life insurance policy issued by Union
Central at the time the exchange privilege is exercised.
The policy date for the new policy will generally be the
same as the policy date of the exchanged policy; the issue
date for the new policy will be the date of exchange. The
initial cash value under the new policy will be the same as
the cash value of the policy on the date of the exchange.
There is no cost for this rider, and there are no charges or
other fees imposed under the policy or the new policy at the
time of the exchange. For purposes of calculating any
surrender charges subsequently imposed on the policy
acquired by exchange, we will take into account the number
of policy years that this policy, and the policy acquired by
exchange, have been in force. Exercise of this rider will
result in a taxable exchange.
Accelerated Benefits Rider. Union Central intends to offer
in the future a rider benefit that will allow you to receive
an accelerated payment of a portion of the policy's death
benefit. This advance payment of the death benefit will be
available where certain special needs exist, as described
briefly below. The right to exercise the rider will be
subject to conditions specified in the rider. We will make
the accelerated benefits rider available to you only if (1)
your state insurance department has approved the rider, and
(2) the availability of the rider will not jeopardize the
qualification of the policy as life insurance under federal
income tax law. However, Union Central may determine not to
offer the benefit, or may offer a substantially different
benefit, to the extent that we deem advisable in light of
future clarification or interpretation of applicable federal
income tax law. If the accelerated benefit rider is
offered, it is expected to provide that if the insured is
diagnosed as terminally ill, as defined in the rider, you
may request an accelerated payment of the policy's death
benefit. The payment may be subject to discounting and
charges. Payment will be subject to evidence satisfactory
to Union Central.
ADDITIONAL RULES AND LIMITS APPLY TO THESE SUPPLEMENTAL AND/OR
RIDER BENEFITS. NOT ALL SUCH BENEFITS MAY BE AVAILABLE AT ANY
TIME AND IN ANY GIVEN STATE, AND SUPPLEMENTAL AND/OR RIDER
BENEFITS IN ADDITION TO THOSE LISTED ABOVE MAY BE MADE AVAILABLE.
PLEASE ASK YOUR UNION CENTRAL AGENT FOR FURTHER INFORMATION, OR
CONTACT THE HOME OFFICE.
Participating
The policy 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 our Board of Directors in its sole
discretion. Union Central does not currently anticipate that the
policies will participate in profits or surplus in the
foreseeable future.
State Variations
Certain policy features, including the "free look,"
incontestability, and suicide provisions, are subject to state
variation. The owner should read his or her policy carefully to
determine whether any variations apply in the state in which the
policy is issued.
TAX CONSIDERATIONS
The following summary provides a general description of the
Federal income tax considerations associated with the policy and
does not purport to be complete or to cover all situations. This
discussion is not intended as tax advice. Counsel or other
competent tax advisers should be consulted for more complete
information. This discussion is based upon Union Central's
understanding of the present Federal income tax laws as they are
currently interpreted by the Internal Revenue Service (the
"Service"). No representation is made as to the likelihood of
continuation of the present Federal income tax laws or of the
current interpretations by the Internal Revenue Service.
Tax Status of the Policy
Section 7702 of the Internal Revenue Code of 1986, as amended
(the "Code") sets forth a definition of a life insurance contract
for Federal income tax purposes. Although the Secretary of the
Treasury (the "Treasury") is authorized to prescribe regulations
implementing Section 7702, while proposed regulations and other
interim guidance has been issued, final regulations have not been
adopted. In short, guidance as to how Section 7702 is to be
applied is limited. If a policy were determined not to be a life
insurance contract for purposes of Section 7702, such policy
would not provide the tax advantages normally provided by a life
insurance policy.
With respect to a policy issued on a standard basis, Union
Central believes that such a policy should meet the Section 7702
definition of a life insurance contract. With respect to a
policy that is issued on a substandard basis (i.e., a premium
class with extra rating involving higher than standard mortality
risk), there is less guidance, in particular as to how the
mortality and other expense requirements of Section 7702 are to
be applied in determining whether such a policy meets the section
7702 definition of a life insurance contract. Thus, it is not
clear whether or not a policy issued on a substandard basis would
satisfy section 7702, particularly if the owner pays the full
amount of premiums permitted under the policy.
If it is subsequently determined that a policy does not satisfy
Section 7702, Union Central may take whatever steps are
appropriate and reasonable to attempt to cause such a policy to
comply with Section 7702. For these reasons, Union Central
reserves the right to modify the policy as necessary to attempt
to qualify it as a life insurance contract under Section 7702.
Section 817(h) of the Code requires that the investments of each
of the subaccounts must be "adequately diversified" in accordance
with Treasury regulations in order for the policy to qualify as a
life insurance contract under Section 7702 of the Code (discussed
above). The subaccounts, through the portfolios, intend to
comply with the diversification requirements prescribed in Treas.
Reg. Section 1.817-5, which affect how the portfolio's assets are
to be
invested. Union Central believes that the subaccounts will,
thus, meet the diversification requirements, and Union Central
will monitor continued compliance with this requirement.
In certain circumstances, owners of variable life insurance
contracts may be considered the owners, for federal income tax
purposes, of the assets of the subaccounts used to support their
contracts. In those circumstances, income and gains from the
subaccount assets would be includible in the variable contract
owner's gross income. The IRS has stated in published rulings
that a variable contract owner will be considered the owner of
subaccount assets if the contract owner possesses incidents of
ownership in those assets, such as the ability to exercise
investment control over the assets. The Treasury Department has
also announced, in connection with the issuance of regulations
concerning diversification, that those regulations "do not
provide guidance concerning the circumstances in which investor
control of the investments of a segregated asset account may
cause the investor (i.e., the policyowner), rather than the
insurance company, to be treated as the owner of the assets in
the account." This announcement also stated that guidance would
be issued by way of regulations or rulings on the "extent to
which policyholders may direct their investments to particular
subaccounts without being treated as owners of the underlying
assets."
The ownership rights under the policy are similar to, but
different in certain respects from, those described by the IRS in
rulings in which it was determined that policyowners were not
owners of subaccount assets. For example, an owner has
additional flexibility in allocating premium payments and account
value. These differences could result in an owner being treated
as the owner of a pro rata portion of the assets of the
subaccounts. In addition, Union Central does not know what
standards will be set forth, if any, in the regulations or
rulings which the Treasury Department has stated it expects to
issue. Union Central therefore reserves the right to modify the
policy as necessary to attempt to prevent an owner from being
considered the owner of a pro rata share of the assets of the
subaccounts.
The following discussion assumes that the policy will qualify as
a life insurance contract for Federal income tax purposes.
Tax Treatment of Policy Benefits
In General. Union Central believes that the proceeds and cash
value increases of a policy should be treated in a manner
consistent with a fixed-benefit life insurance policy for Federal
income tax purposes. Thus, the death benefit under the policy
should be excludible from the gross income of the beneficiary
under Section 101(a)(1) of the Code.
Depending on the circumstances, the exchange of a policy, a
change in the policy's death benefit option, a policy loan, a
partial cash surrender, a surrender, a change in ownership, or an
assignment of the policy may have Federal income tax
consequences. In addition, federal, state and local transfer,
and other tax consequences of ownership or receipt of policy
proceeds depends on the circumstances of each owner or
beneficiary.
The policy may also be used in various arrangements, including
nonqualified deferred compensation or salary continuance plans,
split dollar insurance plans, executive bonus plans, retiree
medical benefit plans and others. The tax consequences of such
plans may vary depending on the particular facts and
circumstances of each individual arrangement. Therefore, if you
are contemplating the use of a policy in any arrangement the
value of which depends in part on its tax consequences, you
should be sure to consult a qualified tax advisor regarding the
tax attributes of the particular arrangement.
Generally, the owner will not be deemed to be in constructive
receipt of the account value, including increments thereof, until
there is a distribution. The tax consequences of distributions
from, and loans taken from or secured by, a policy depend on
whether the policy is classified as a "Modified Endowment
Contract." Whether a policy is or is not a Modified Endowment
Contract, upon a complete surrender or lapse of a policy or when
benefits are paid at a policy's maturity date, if the amount
received plus the amount of indebtedness exceeds the total
investment in the policy, the excess will generally be treated as
ordinary income subject to tax.
Modified Endowment Contracts. Section 7702A establishes a class
of life insurance contracts designated as "Modified Endowment
Contracts," which applies to life insurance contracts entered
into or materially changed after June 20, 1988. The rules
relating to whether a policy will be treated as a Modified
Endowment Contract are extremely complex and cannot be fully
described in the limited confines of this summary. In general, a
policy will be a Modified Endowment Contract if the accumulated
premiums paid at any time during the first seven policy years
exceeds the sum of the net level premiums which would have been
paid on or before such time if the policy provided for paid-up
future benefits after the payment of seven level annual premiums.
A policy may also become a Modified Endowment Contract after a
material change. The determination of whether a policy will be a
Modified Endowment Contract after a material change generally
depends upon the relationship of the death benefit and account
value at the time of such change and the additional premiums paid
in the seven years following the material change.
Due to the policy's flexibility, classification as a Modified
Endowment Contract will depend on the individual circumstances of
each policy. In view of the foregoing, a current or prospective
owner should consult with a competent tax advisor to determine
whether a policy transaction will cause the policy to be treated
as a Modified Endowment Contract. Union Central has established
procedures for monitoring premium payments made under the
policies and for making efforts to notify you on a timely basis
if your policy is in jeopardy of becoming a Modified Endowment
Contract due to the payment of premiums. If acceptance of a
premium paid would, in Union Central's view, cause the policy to
become a Modified Endowment Contract, then to the extent feasible
Union Central will not accept that portion of the premium that
would cause the policy to become a Modified Endowment Contract
unless the owner confirms in writing the owner's intent to
convert the policy to a Modified Endowment Contract. Union
Central may return that portion of the payment pending receipt of
instructions from the owner.
Distributions from Policies Classified as Modified Endowment
Contracts. Policies classified as Modified Endowment Contracts
will be subject to the following tax rules: First, all
distributions, including distributions upon surrender and partial
cash surrender from such a policy are treated as ordinary income
subject to tax up to the amount equal to the excess (if any) of
the account value immediately before the distribution over the
investment in the policy described below) at such time. Second,
loans taken from or secured by such a policy are treated as
distributions from the policy and taxed accordingly. Past due
loan interest that is added to the loan amount will be treated as
a loan. Third, a 10 percent additional income tax is imposed on
the portion of any distribution from, or loan taken from or
secured by, such a policy that is included in income except where
the distribution or loan is made on or after the owner attains
age 59-1/2, is attributable to the owner's becoming disabled, or
is part of a series of substantially equal periodic payments for
the life (or life expectancy) of the owner or the joint lives (or
joint life expectancies) of the owner and the owner's
beneficiary.
If a policy becomes a modified endowment contract after it is
issued, distributions made during the policy year in which it
becomes a modified endowment contract, distributions in any
subsequent policy year and distributions within two years before
the policy becomes a modified endowment contract will be subject
to the tax treatment described above. This means that a
distribution from a policy that is not a modified endowment
contract could later become taxable as a distribution from a
modified endowment contract.
Distributions From Policies Not Classified as Modified Endowment
Contracts. Distributions from a policy that is not a Modified
Endowment Contract are generally treated as first, recovering the
investment in the policy (described below) and then, only after
the return of all such investment in the policy, as distributing
taxable income. An exception to this general rule occurs in the
case of a decrease in the policy's death benefit or any other
change that reduces benefits under the policy in the first 15
years after the policy is issued and that results in a cash
distribution to the owner in order for the policy to continue
complying with the Section 7702 definitional limits. Such a cash
distribution will be taxed in whole or in part as ordinary income
(to the extent of any gain in the policy) under rules prescribed
in Section 7702.
Loans from, or secured by, a policy that is not a Modified
Endowment Contract are not treated as distributions. Instead,
such loans are treated as indebtedness of the owner.
Finally, neither distributions (including distributions upon
surrender) nor loans from, or secured by, a policy that is not a
Modified Endowment Contract are subject to the 10 percent
additional income tax rule.
Policy Loan Interest. Interest paid on any loan under a policy
may not be deductible. A qualified tax adviser should be
consulted before deducting any policy loan interest.
Investment in the Policy. Investment in the policy means: (i)
the aggregate amount of any premiums or other consideration paid
for a policy, minus (ii) the aggregate amount received under the
policy which is excluded from gross income of the owner (except
that the amount of any loan from, or secured by, a policy that is
a Modified Endowment Contract, to the extent such amount is
excluded from gross income, will be disregarded), plus (iii) the
amount of any loan from, or secured by, a policy that is a
Modified Endowment Contract to the extent that such amount is
included in the gross income of the owner.
Multiple Policies. All Modified Endowment Contracts that are
issued by Union Central (or its affiliates) to the same owner
during any calendar year are treated as one Modified Endowment
Contract for purposes of determining the amount includible in an
owner's gross income under Section 72(e) of the Code.
Possible Charge for Union Central's Taxes
At the present time, Union Central makes no charge for any
Federal, state or local taxes (other than the charge for state
premium taxes) that it incurs that may be attributable to the
subaccounts or to the policies. Union Central, however, reserves
the right in the future to make additional charges for any such
tax or other economic burden resulting from the application of
the tax laws that it determines to be properly attributable to
the subaccounts or to the policies. Owners will be notified in
advance of the imposition of any such charges for taxes. If any
tax charges are made in the future, they will be accumulated
daily and transferred from the applicable subaccount to Union
Central's General Account. Any investment earnings on tax
charges accumulated in a subaccount will be retained by Union
Central.
OTHER INFORMATION ABOUT THE POLICIES AND UNION CENTRAL
Sale of the Policies
The policies will be offered to the public on a continuous basis,
and we do not anticipate discontinuing the offering of the
policies. However, we reserve the right to discontinue the
offering. Applications for policies are solicited by agents who
are licensed by applicable state insurance authorities and
appointed by us to sell our variable life contracts and who are
also registered representatives of Carillon Investments, Inc.
("Carillon Investments") or of a broker-dealer that has entered
into a selling agreement with Carillon Investments. The address
of Carillon Investments, one of our wholly-owned subsidiaries, is
1876 Waycross Road, Cincinnati, Ohio 45240. Carillon
Investments is registered with the SEC under the Securities
Exchange Act of 1934 as a broker-dealer and is a member of the
National Association of Securities Dealers, Inc.
Carillon Investments acts as the principal underwriter (as
defined in the 1940 Act) for the separate account, pursuant to an
underwriting agreement between Union Central and Carillon
Investments. Carillon Investments is not obligated to sell any
specific number of policies. Selling agents may be paid a
maximum of 50% of planned periodic premiums paid up to an amount
equal to one "target premium," plus 2% of any other first-year
premiums. A "target premium" is an amount of premium based on
the insured's age at issue, sex, rate class, specified amount,
and supplemental and/or rider benefits. Selling agents may also
receive service fees in policy years after the first, additional
compensation based on persistency or other policy-related
factors, as well as non-cash compensation. Sales managers may
also be compensated.
Union Central Directors and Executive Officers
The following table sets forth the name, age, address and
principal occupations during the past five years of each of Union
Central's directors and executive officers.
<TABLE>
<CAPTION>
Name and Principal
Business Address* Positions with Depositor and
Background
- ---------------
- ---------------------------------------
<S> <C>
Philip G. Barach Director, Union Central; prior to
1994,
9403 Kenwood Road Chairman of the Board, U.S. Shoe
Corporation
Suite D100
Cincinnati, Ohio 45242
V. Anderson Coombe Director, Union Central; Chairman
of the Board,
2503 Spring Grove Avenue The Wm. Powell Company
Cincinnati, Ohio 45214
William A. Friedlander Director, Union Central; Chairman,
36 East Fourth Street Bartlett & Co.
Cincinnati, Ohio 45202
William G. Kagler Director, Union Central; former
Chairman of the
18 Hampton Court Board, Swallen's, Inc.; prior to
November, 1995
Cincinnati, Ohio 45208 various executive positions with
Skyline Chili,
Inc.
Lawrence A. Leser Director, Union Central; Chairman
and CEO, The
P.O. Box 5380 E.W. Scripps Company; prior to
August, 1994,
Cincinnati, Ohio 45202 President and CEO, The E.W. Scripps
Company
Francis V. Mastrianna, Ph.D. Director, Union Central; Dean,
College of
Slippery Rock University Information Science and Business
of Pennsylvania Administration, Slippery Rock
University of
Slippery Rock, PA 16057 of Pennsylvania
Mary D. Nelson, FSA Director, Union Central; President,
Nelson and
105 West Fourth Street Company
Cincinnati, Ohio 45202
Paul G. Pearson, Ph.D. Director, Union Central; President
Emeritus,
5110 Bonham Road Miami University; prior to 1993,
President,
Oxford, Ohio 45056 Miami University
Thomas E. Petry Director, Union Central; Chairman
of the Board,
580 Walnut Street President and CEO, Eagle-Picher
Industries, Inc
Cincinnati, Ohio 45202
Larry R. Pike* Chairman, President and Chief
Executive Officer,
Union Central
Dudley S. Taft Director, Union Central; President,
Taft
312 Walnut Street Broadcasting Company
Suite 3550
Cincinnati, Ohio 45202
John M. Tew, Jr., M.D. Director, Union Central; Professor
and
506 Oak Street Chairman, Department of
Neurosurgery,
Cincinnati, Ohio 45219 University of Cincinnati Medical
Center, and
Member, Mayfield Neurological
Institute
George L. Clucas* Senior Vice President, Union
Central; Chairman,
President and Chief Executive
Officer,
Carillon Advisers, Inc.
Charles W. Grover* Executive Vice President, Union
Central;
prior to August, 1994, Vice
President of
U.S. Marketing, Manufacturers Life
Insurance
Company; prior to 1992, Vice
President of
Marketing, State Mutual Life
Insurance Company
Stephen R. Hatcher* Executive Vice President and Chief
Financial
Officer, Union Central
John H. Jacobs* Executive Vice President, Union
Central
Dale D. Johnson* Senior Vice President, Union
Central
Gerald A. Lockwood* Senior Vice President and Corporate
Actuary,
Union Central
David F. Westerbeck* Senior Vice President, General
Counsel and
Secretary, Union Central
</TABLE>
* The principal business address of the person designated is
1876 Waycross Road, Cincinnati, Ohio 45240.
State Regulation
Union Central is subject to regulation by the Department of
Insurance of the State of Ohio, which periodically examines the
financial condition and operations of Union Central. Union
Central is also subject to the insurance laws and regulations of
all jurisdictions where it does business. The policy described
in this prospectus has been filed with and, where required,
approved by, insurance officials in those jurisdictions where it
is sold.
Union Central is required to submit annual statements of
operations, including financial statements, to the insurance
departments of the various jurisdictions where it does business
to determine solvency and compliance with applicable insurance
laws and regulations.
Additional Information
A registration statement under the Securities Act of 1933 has
been filed with the SEC relating to the offering described in
this prospectus. This prospectus does not include all the
information set forth in the registration statement. The omitted
information may be obtained at the SEC's principal office in
Washington, D.C. by paying the SEC's prescribed fees.
Experts
The financial statements of The Union Central Life Insurance
Company at December 31, 1995 and 1994 and for the years then
ended, appearing in this Prospectus and Registration Statement
have been audited by Ernst & Young LLP, independent auditors, as
set forth in their report thereon appearing elsewhere herein and
in the Registration Statement, and are included in reliance upon
such report given upon the authority of such firm as experts in
accounting and auditing.
Actuarial Matters
Actuarial matters included in this prospectus have been examined
by Kristal E. Hambrick, FSA, MAAA, of Union Central, whose
opinion is filed as an exhibit to the Registration Statement.
Litigation
No litigation is pending that would have a material effect upon
the separate account.
Legal Matters
Sutherland, Asbill & Brennan of Washington, D.C. has provided
advice on certain matters relating to the federal securities
laws.
Financial Statements
No financial statements of the separate account are included
herein because, as of December 31, 1995, the separate
account had not yet commenced operations, had no assets, and had
incurred no liabilities. The financial statements of Union
Central appear on the following pages. The financial statements
of Union Central should be distinguished from financial
statements of the separate account and should be considered only
as bearing upon Union Central's ability to meet its obligations
under the policies.
<PAGE>
Financial Statements
Statutory Basis of Accounting
The Union Central Life
Insurance Company
Years ended December 31, 1995 and 1996
with Report of Independent Auditors
<PAGE>
The Union Central Life Insurance Company
Financial Statements
Statutory Basis of Accouonting
Years ended December 31, 1995 and 1994
CONTENTS
Page
Report of Independent Auditors 1
Balance Sheets -
Statutory Basis of Accounting 2
Statements of Income and Changes in Surplus -
Statutory Basis of Accounting 3
Statements of Cash Flows -
Statutory Basis of Accounting 4
Notes to Financial Statements -
Statutory Basis of Accounting 5
<PAGE>
(letterhead)
ERNST &YOUNG LLP Phone: 513 621-6454
1300 Chiquita Center150 East Fifth Street
Cincinnati Ohio 45202
Report of Independent Auditors
To the Board of Directors of
The Union Central Life Insurance Company
We have audited the accompanying statutory-basis balance sheets
of The Union
Central Life Insurance Company as of December 31, 1995 and 1994,
and the
related statutory basis statements of income and changes in
surplus, and cash
flows for the years then ended. These financial statements are
the
responsibility of the Company's management. Our responsibility is
to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing
standards. Those standards require that we plan and perform the
audit to
obtain reasonable assurance about whether the financial
statements are free of
material misstatement. An audit includes examining, on a test
basis, evidence
supporting the amounts and disclosures in the financial
statements. An audit
also includes assessing the accounting principles used and
significant
estimates made by management, as well as evaluating the overall
financial
statement presentation. We believe that our audits provide a
reasonable basis
for our opinion.
In our opinion, the statutory-basis financial statements referred
to above
present fairly, in all material respects, the financial position
of The Union
Central Life Insurance Company at December 3 1, 1 995 and 1 994,
and the
results of its operations and its cash flows for the years then
ended, in
conformity with generally accepted accounting principles for
mutual life
insurance companies and with reporting practices prescribed or
permitted by
the Ohio Insurance Department.
As described in Note 4, in 1995, the Company changed its method
of accounting
for income taxes.
/s/ Ernst & Young LLP
February 9, 1996
Ernst & Young LLP is a member of Ernst & Young International, Ltd
<PAGE>
The Union Central Life Insurance Company
BALANCE SHEETS
STATUTORY BASIS OF ACCOUNTING
<TABLE>
<CAPTION>
December 31
--------------
1995 1994
---- ----
(000's Omitted)
<S> <C> <C>
ADMITTED ASSETS
Cash and Investments:
Bonds $2,432,086
$2,439,982
Common stocks in subsidiaries 22,494
25,270
Preferred and other common stocks 50,715
46,333
Mortgage loans 523,260
443,586
Real estate,
including home office building 62,396
60,916
Policy loans 156,115
156,098
Cash and short-term investments 9,309
9,347
Other invested assets 40,382
27,877
----------
- ----------
Total Cash and Investments 3,296,757
3,209,409
Deferred and uncollected premiums 12,696
10,793
Investment income due and accrued 40,147
37,235
Other admitted assets 11,228
10,404
Separate account assets 729,792
509,492
----------
- ----------
Total Admitted Assets $4,090,620
$3,777,333
==========
==========
LIABILITIES AND SURPLUS
Policy and Contract Liabilities:
Reserves for life, accident
and health policies $1,489,780
$1,428,262
Deposit funds 1,518,369
1,501,600
Policy claims 17,284
18,275
Interest maintenance reserve 21,041
30,046
Dividends payable to policyholders 15,935
15,661
----------
- ----------
Total Policy and Contract Liabilities 3,062,409
2,993,844
Accrued commissions, expenses and taxes 31,467
21,677
Asset valuation reserve 44,759
34,804
Other liabilities 23,332
30,525
Separate account liabilities 727,160
505,718
----------
- ----------
Total Liabilities 3,889,127
3,586,568
Total Surplus 201,493
190,765
----------
- ----------
Total Liabilities and Surplus $4,090,620
$3,777,333
==========
==========
</TABLE>
The accompanying notes are an integral part of the
financial statements
<PAGE>
The Union Central Life Insurance Company
STATEMENTS OF INCOME AND CHANGES IN SURPLUS
STATUTORY BASIS OF ACCOUNTING
<TABLE>
<CAPTION>
Year Ended December 31
- ------------------------
1995 1994
---- ----
(000's Omitted)
<S> <C> <C>
Premiums and Other Revenue:
Premium income $ 243,679 $
246,200
Annuity and other fund deposits 398,689
391,305
Net investment income 255,552
236,874
Other income 4,185
4,548
----------
- ----------
Total Premiums and Other Revenue 902,105
878,927
----------
- ----------
Benefits Paid or Provided:
Benefits and dividends 656,868
607,772
Provision for future benefits 78,250
117,417
----------
- ----------
Total Benefits Paid or Provided 735,118
725,189
----------
- ----------
Insurance Expenses:
Operating expenses and commissions 109,359
108,144
Premium and other insurance taxes 8,630
9,563
----------
- ----------
Total Insurance Expenses 117,989
117,707
----------
- ----------
Gain from Operations before Federal Income
Tax and Net Realized Capital Losses 48,998
36,031
Federal income tax expense 22,731
13,649
----------
- ----------
Gain from Operations before
Net Realized Capital Losses 26,267
22,382
Net realized capital losses,
net of related tax credits
(1995 - $(4,907); 1994 - $(3,976))
and excluding net transfers to
the interest maintenance reserve
(1995 - $(7,271); 1994 - $(7,744)) (2,119)
(1,785)
----------
- ----------
Net Income 24,148
20,597
Unrealized capital gain (losses)
in subsidiaries 1,100
(2,524)
Other unrealized capital gains 779
455
Change in asset valuation reserve (9,955)
(3,814)
Surplus tax (6,332)
0
Other changes, net 988
(1,974)
----------
- ----------
Increase in Surplus 10,728
12,740
Surplus at the beginning of the year 190,765
178,025
Surplus at the End of the Year $ 201,493 $
190,765
==========
==========
</TABLE>
The accompanying notes are an integral part of the
financial statements.
<PAGE>
<PAGE>
The Union Central Life Insurance Company
STATEMENTS OF CASH FLOWS
STATUTORY BASIS OF ACCOUNTING
<TABLE>
<CAPTION>
December 31
--------------
1995 1994
---- ----
(000's Omitted)
<S> <C> <C>
OPERATING ACTIVITIES
Premium income $ 241,965 $
246,007
Annuity and other fund deposits 398,689
391,305
Net investment income 249,879
231,673
Other income 4,083
4,702
Life and health claims paid (94,375)
(91,517)
Surrender benefits and other
fund withdrawals paid (298,340)
(264,087)
Dividends to policyholders paid (15,176)
(15,099)
Other benefits to policyholders paid (146,825)
(114,448)
Commissions, expenses, and premium
and other taxes paid (110,537)
(117,965)
Transfers to separate accounts (110,063)
(115,806)
Federal income taxes paid (18,995)
(6,312)
Other items, net (394)
(305)
----------
- ----------
Net Cash Provided by Operating Activities 99,911
148,148
----------
- ----------
INVESTING ACTIVITIES
Sale, maturity, or repayment of investments 2,633,275
1,775,029
Purchase of investments (2,733,224)
(1,937,873)
----------
- ----------
Net Cash Used in Investing Activities (99,949)
(162,844)
----------
- ----------
Net Decrease in Cash and
Short-Term Investments (38)
(14,696)
Cash and short-term investments
at beginning of the year 9,347
24,043
----------
- ----------
Cash and Short-Term Investments
at End of the Year $ 9,309 $
9,347
==========
==========<PAGE>
</TABLE>
The accompanying notes are an integral part of the
financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS -
STATUTORY BASIS OF ACCOUNTING-CONTINUED
NOTE 1 - NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
Organization
The Union Central Life Insurance Company (the Company) is a
mutual
life insurance company chartered by the State of Ohio.
At December 31, 1995, the Company owned the following
unconsolidated subsidiaries and affiliates wholly or in part: 1)
Carillon Advisers, Inc., a registered investment advisor company,
wholly owned; 2) Carillon Investments, Inc., a broker-dealer,
wholly owned; 3) Carillon Marketing Agency, Inc., an insurance
agency, wholly owned; 4) Summit High Yield Fund, a high-yield
bond
mutual fund, 97% owned; 5) Manhattan Life Insurance Company, a
mixed charter life insurance company of which the Company owns
73%
of the outstanding guarantee capital shares; and 6) Carillon
Capital Fund, a public allocation mutual fund, 48% owned; and 7)
Carillon S&P Fund, a common stock index fund, wholly owned. The
financial statements reflect the results of the Company's
operations and the appropriate equity in its subsidiaries as
valued at December 31, 1995. See Notes 5 and 6 for further
information about the investments and operations of the
subsidiaries.
Union Central provides financial products and related services,
for the benefits of individual, group, and pension policyholders,
which include:
* Insurance to provide for financial needs resulting from loss
of life or income
* Managing funds accumulated for pre-retirement and retirement
needs
The Company is licensed to do business in all 50 states in the
U.S.
Basis of Presentation
The accompanying financial statements have been prepared in
conformity with statutory accounting practices prescribed or
permitted by the Ohio Insurance Department. Such practices
presently are regarded as generally accepted accounting
principles
(GAAP) for mutual life insurance companies. However, beginning
in
1996, under the requirements of Financial Accounting Standards
Board (FASB) Interpretation 40 (FIN-40), "Applicability of
Generally Accepted Accounting Principles to Mutual Life Insurance
and Other Enterprises", as amended, financial statements prepared
on the basis of statutory accounting practices will no longer be
described as prepared "in conformity with GAAP." As a result the
financial statements included herein would have to be restated to
reflect all applicable authoritative GAAP pronouncements,
including: Financial Accounting Standard (FAS-120), "Accounting
and Reporting by Mutual Life Insurance Enterprises and by
Insurance Enterprises for certain Long-Duration Participating
Contracts - an amendment of FAS-60, 97, and 113 and FIN-40", for
the year ending December 31, 1996. FAS-120 extends the
requirements of FAS-60, "Accounting and Reporting by Insurance
Enterprises", FAS-97, "Accounting and Reporting by Insurance
Enterprises for certain Long-Duration Contracts and for Realized
Gains and Losses from the Sale of Investments", and FAS-113
"Accounting and Reporting for Reinsurance of Short-Duration and
Long-Duration Contracts", to mutual life insurance companies.
FAS-120 is effective for fiscal years beginning after December
15,
1995. The Company has not determined the effect of adoption but
anticipates it having a material impact on the financial
statements.
The preparation of financial statements of insurance companies
requires management to make estimates and assumptions that affect
amounts reported in the financial statements and accompanying
notes. Such estimates and assumptions could change in the future
as more information becomes known, which could impact the amounts
reported and disclosed herein.
Significant accounting practices are as follows:
Investments
Investments are stated at values prescribed by the National
Association of Insurance Commissioners (NAIC) which are as
follows: bonds not backed by other loans are stated at amortized
cost, and loan-backed bonds, collateralized mortgage obligations
and other structured securities are stated at amortized cost
using
the interest method including anticipated prepayments at the date
of purchase. Significant changes in estimated cash flows from
the
original purchase assumptions are reviewed quarterly. Prepayment
assumptions for loan-backed bonds and structured securities were
obtained from broker dealer survey values or internal estimates.
These assumptions are consistent with the current interest rate
and economic environment. The retrospective adjustment method is
used to value all securities except for inverse floating
securities which are valued using the prospective method.
Preferred stocks are stated at cost and investments in stocks of
unconsolidated subsidiaries and affiliates in which the Company
has an interest of 20% or more are reported equal to the
Company's
proportionate share of the equity in the underlying
statutory-basis net assets for insurance subsidiaries plus the
admitted
portion of goodwill, and equal to the Company's proportionate
share of the GAAP-basis net assets for noninsurance subsidiaries.
Goodwill is amortized on a straight-line basis over ten years.
Investment real estate or property is stated on the equity basis.
Mortgage loans are stated at the unpaid principal balance less
unamortized discounts. Short-term investments are investments
with maturities of one year or less at the date of acquisition,
and are valued at cost which approximates market. Policy loans
are stated at the aggregate unpaid principal balance.
Realized investment gains and losses are determined using the
specific identification basis. For securities carried at market
value, unrealized gains and losses resulting from differences
between the cost and carrying value of investments are credited
or
charged directly to unassigned surplus.
As prescribed by the NAIC, the Asset Valuation Reserve (AVR) is
computed in accordance with a prescribed formula and represents a
provision for possible fluctuations in the value of bonds, equity
securities, mortgage loans, real estate, and other invested
assets. The AVR is reported as a liability rather than as a
valuation allowance or an appropriation of surplus and changes to
the AVR are charged or credited directly to unassigned surplus.
Based on a formula prescribed by the NAIC, the Company defers a
portion of realized gains and losses on sales of fixed income
investments, principally fixed maturities, attributable to
changes
in the general level of interest rates and amortizes those
deferrals into income over the remaining period to maturity
according to the Grouped Method, as allowed by the NAIC; the net
deferral is reported as the Interest Maintenance Reserve (IMR) in
the balance sheets.
Real Estate
Real estate is valued at cost less accumulated depreciation. The
value of real estate acquired through foreclosure is recorded at
the lower of cost or net realizable value. Net realizable value
for real estate is determined based upon fair value of a
property,
which may take into consideration a number of factors, including;
(i) discounted cash flows; (ii) sales of comparable properties;
(iii) geographic location of property and related market
conditions; and (iv) disposition costs. Subsequent to
foreclosure, the value of the property is evaluated and written
down, if appropriate, to reflect any additional amounts
considered
unrecoverable upon sale. Depreciation expense is determined by
the declining balance method for acquisitions or renovations
prior
to 1990 and by the straight line method for acquisitions or
renovations beginning in 1990. At the time of the sale, the
difference between the sales price and the carrying value is
recorded as a realized gain or loss.
Real estate owned and occupied by the Company is included in
investments, and investment income and operating expenses include
rent for the Company's occupancy of its owned properties.
Cash and Short - Term Investments
Cash and short-term investments presented on the balance sheet
consists of cash-in-bank, cash-in-transit and commercial paper
that has a maturity date of 90 days or less from the date
acquired.
Nonadmitted Assets
In accordance with statutory requirements, certain assets,
designated as nonadmitted assets, are excluded from the balance
sheet and are charged directly to surplus. Nonadmitted assets
consist primarily of advances to agents, furniture and equipment,
application software, and accrued income on certain securities in
default. The net change in these assets during the year is
reflected as a change in surplus.
Reserves for Life, Accident and Health Policy Benefits
Life, annuity, and accident and health benefit reserves are
developed using accepted actuarial methods and are determined
based on published tables using statutorily specified interest
rates and valuation methods that will provide, in the aggregate,
reserves that are greater than or equal to the minimum amounts
required by the Ohio Insurance Department or guaranteed policy
cash values.
Deposit Funds
The liability for deposit funds is generally established at the
policyholders' accumulated cash values plus amounts providing for
guaranteed interest, less applicable surrender charges.
Dividends to Policyholders
All of the Company's life insurance policies contain dividend
payment provisions which enable the policyholder to participate
in
the earnings of the Company. Dividend payments are approved by
the Company's Board of Directors on an annual basis. Dividends
to
policyholders are reflected in the statements of income at
amounts
estimated to be paid or credited to policyholders during the
subsequent year on the policy anniversary dates. Amounts
recorded
in 1995 and 1994 totalled $15,450,000 and $15,234,000,
respectively. Insurance in force receiving dividends accounted
for 8.50% and 8.45% of total insurance in force at December 31,
1995 and 1994, respectively.
Policy Claims
Policy claim reserves represent the estimated ultimate net cost
of
all reported and unreported claims incurred through December 31,
1995. The reserves for unpaid claims are estimated using
individual case-basis valuations and statistical analyses. These
estimates are subject to the effects of trends in claim severity
and frequency. Although considerable variability is inherent in
such estimates, management believes that the reserves for claims
are adequate. The estimates are continually reviewed and
adjusted
as necessary as experience develops or new information becomes
known; such adjustments are included in current operations.
Separate Accounts
Separate account assets and liabilities reported in the
accompanying financial statements represent funds that are
separately administered, principally for annuity contracts, and
for which the contract holders rather than the Company bears the
investment risk. Separate account contract holders have no claim
against the assets of the general account of the Company.
Separate account investments are carried at market value.
Investment income and gains and losses from these accounts accrue
directly to contract holders and are not included in the
accompanying financial statements.
Recognition of Premium Revenues and Related Costs
For ordinary life insurance contracts and accident and health
insurance contracts, premiums are recognized as revenues when
premiums are due. For universal life insurance contracts and
deposit funds, revenues are recognized when premiums are received
and consists of all premiums received. Commissions and other
costs applicable to the acquisition of new business, primarily
underwriting and policy issue costs, are charged to operations as
incurred.
Reinsurance
Reinsurance premiums and claims are accounted for on bases
consistent with those used in accounting for the original
policies
issued and the terms of the reinsurance contracts. Premiums,
benefits, and the reserves for policy and contract liabilities
are
reported net of reinsured amounts.
Income Taxes
Deferred income taxes are not provided for differences between
the
statutory and taxable income.
Reclassifications
Previously reported amounts for 1994 have in some instances been
reclassified to conform to the 1995 presentation.
NOTE 2 - INVESTMENTS
The cost or amortized cost and estimated fair value of bonds are
summarized as follows:
<TABLE>
<CAPTION>
Cost or Gross Gross
Amortized Unrealized
Unrealized Fair
Cost Gains (Losses)
Value
--------- ----------
- ---------- -----
(000's Omitted)
<S> <C> <C> <C>
<C>
December 31, 1995:
U.S. treasury securities
and obligations of U.S.
government corporations
and agencies $ 60,873 $ 994 $
0 $ 1,867
Public utilities securities 168,415 9,875
(257) 178,033
Corporate securities and other 930,783 56,223
(4,229) 982,777
Mortgage-backed securities
and collateralized mortgage
obligations 1,266,755 27,351
(28,931) 1,265,175
Debt securities issued by
foreign governments 5,260 38
(651) 4,647
---------- ----------
- ---------- ----------
Total $2,432,086 $ 94,481 $
(34,068) $2,492,499
========== ==========
========== ==========
December 31, 1994:
U.S. treasury securities
and obligations of U.S.
government corporations
and agencies $ 23,553 $ 6 $
(262) $ 23,297
Public utilities securities 175,758 655
(9,196) 167,217
Corporate securities and other 719,394 4,425
(39,147) 684,672
Mortgage-backed securities and
collateralized mortgage
obligations 1,496,871 2,949
(190,416) 1,309,404
Debt securities issued by
foreign governments 24,406 239
(4,832) 19,813
---------- ----------
- ---------- ----------
Total $2,439,982 $ 8,274 $
(243,853) $2,204,403
========== ==========
========== =========
</TABLE>
<PAGE>
The majority of the fair values for publicly traded bonds, except
collateralized mortgage obligations (CMO's), were obtained from
an
independent bond pricing service. Fair values for CMO's and
private
placement bonds were obtained from independent securities broker
dealers. The remaining fair values were based on values obtained
from independent securities broker dealers or based on values for
comparable, publicly offered bonds of the same rate, maturity and
quality.
The cost or amortized cost and estimated fair value of the
Company's
investment in fixed maturities at December 31, 1995, by
contractual
maturity, are as follows:
<TABLE>
<CAPTION>
Cost or
Amortized Fair
Cost Value
---- -----
(000's Omitted)
<S> <C> <C>
Due in one year or less $ 5,427 $ 5,479
Due after one year
through five years 117,202 120,413
Due after five years
through ten years 498,740 526,614
Due after ten years 148,519 158,009
---------- ----------
Subtotal 769,888 810,515
Mortgage-backed securities 1,266,755 1,265,175
Other securities with
multiple repayment dates 395,443 416,809
---------- ----------
Total $2,432,086 $2,492,499
========== ==========
</TABLE>
The expected maturities in the foregoing table may differ from
contractual maturities because certain borrowers have the right
to
call or prepay obligations with or without call or prepayment
penalties.
At December 31, 1995 and 1994, the Company held unrated or less-
than-investment grade (defined as level three and lower by the
NAIC) corporate bonds of $105,560,000 and $92,975,000,
respectively, with an aggregate fair value of $103,858,000 and
$83,505,000, respectively. Those holdings amounted to 4.3% and
3.8%, respectively, of the Company's investments in bonds and
less
than 2.6% and 2.5%, respectively, of the Company's total admitted
assets. The holdings of less-than-investment grade bonds are
widely diversified and of satisfactory quality based on the
Company's investment policies and credit standards.
Proceeds, gross realized gains, and gross realized losses from
the
sales and maturities of investments in debt securities follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
(000's Omitted)
<S> <C> <C>
Proceeds $2,573,360
$1,726,486
Gross realized gains 30,419
26,423
Gross realized losses 43,081
37,623
</TABLE>
At December 31, 1995 and 1994, investments in bonds with an
admitted asset
value of $2,538,000 and $1,846,000, respectively, were on deposit
with state
insurance departments to satisfy regulatory requirements.
The Company sponsors three mutual funds, the investments in which
are carried
at market value and are included in "Preferred and other common
stocks" on
the Balance Sheets, as follows:
<TABLE>
<CAPTION>
December 31,
1995 1994
---- ----
(000's Omitted)
<S> <C> <C>
Carillon Capital Fund $ 22,900 $ 19,939
Summit High Yield Fund 25,369 24,933
Carillon S & P Fund 305 0
-------- --------
Total $ 48,574 $ 44,872
======== ========
</TABLE>
The Company's equity investments in preferred stock are carried
at cost or
amortized cost. At December 31, 1995, the carrying value was
$2,000,000 and the
fair value was $3,600,000. At December 31, 1994, the carrying
value was
$1,352,000 and the fair value was $2,098,000.
The Company has no material off-balance sheet risk.
Unrealized gains and losses on investments in preferred stocks
and subsidiaries
are reported directly in surplus and do not affect net income.
At December 31,
1995, the Company had gross unrealized gains of $5,636,000 and
gross unrealized
losses of $3,789,000 on these investments.
Mortgage loans are stated at their aggregate unpaid balances on
the balance
sheet, less unamortized discounts. The mortgage loan portfolio is
well
diversified both geographically and by property type, as follows:
<TABLE>
<CAPTION>
December 31, 1995
-----------------------
Principal Percent of
Balance Principal
------- ---------
(000's Omitted)
<S> <C> <C>
Region
- ------
New England and Mid-Atlantic $ 61,245 11.7%
South Atlantic 74,259 14.2
North Central 130,598 25.0
South Central 51,766 9.9
Mountain 67,594 12.9
Pacific 137,798 26.3
-------- ------
Total $523,260 100%
======== ======
Property Type
- -------------
Apartment and residential $113,599 21.7%
Warehouses and industrial 88,431 16.9
Retail and shopping center 160,108 30.6
Offices 156,236 29.9
Other 4,886 .9
-------- -----
Total $523,260 100%
======== =====
</TABLE>
<TABLE>
<CAPTION>
December 31, 1994
-----------------------
Principal Percent of
Balance Principal
------- ---------
(000's Omitted)
<S> <C> <C>
Region
- ------
New England and Mid-Atlantic $ 54,665 12.3%
South Atlantic 54,657 12.3
North Central 117,564 26.5
South Central 39,810 9.0
Mountain 53,699 12.1
Pacific 123,191 27.8
-------- -----
Total $443,586 100.0%
Property Type
Apartment and residential $ 96,477 21.8%
Warehouses and industrial 68,387 15.4
Retail and shopping center 133,396 30.1
Offices 145,199 32.7
Other 127 0.0
-------- -----
Total $443,586 100.0%
======== =====
</TABLE>
At December 31, 1995, the average size of an individual mortgage
loan was
approximately $2,265,000. The Company's policy is to obtain a
first mortgage
lien and to require a loan to value ratio of 75% or less at
acquisition. At
December 31, 1995, approximately 98.75% of loans were current as
to payment
terms and 1.25% were in process of foreclosure. Included in
mortgage loans
are two loans with an aggregate principal balance of $6,520,000
that were
non-income producing for the twelve month period ending December
31, 1995.
The Company had mortgage reserves (the mortgage component of the
asset
valuation reserve) of $4,783,000 and $4,989,000 at December 31,
1995 and
1994, respectively. As of December 31, 1995, the maximum and
minimum rates
of interest in the Company's mortgage loan portfolio was 11.00%
and 4.00%.
In 1995, the Company issued 67 new commercial loans at the
maximum and
minimum rates of interest of 9.875% and 8.00% totalling
$146,057,000. No
other categories of mortgage loans were issued. Fire insurance
is carried on
all properties covered by mortgage loans at least equal to the
excess of the
loan over the maximum loan which would be permitted by law on the
land
without the buildings.
During the fourth quarter of 1994, the Company began
participating in new
mortgage fundings with the Manhattan Life Insurance Company. In
1995, the
Company participated in 60 new originations, with the Company's
percentage
totalling $115,540,000 out of a total loan amount of
$134,487,000. This
investment strategy will continue in 1996.
At December 31, 1995, the Company held mortgages with interest
more than one
year overdue of $4,925,000, with interest due of $1,789,000.
During 1995,
the Company reduced interest rates of outstanding mortgages as
follows:
<TABLE>
<CAPTION>
Percentage Reduced Statement Value Number of Loans
------------------ --------------- ---------------
<C> <C> <C>
2.0 - 2.9% $ 2,660,000 1 loan
1.0 - 1.9% 6,998,000 2 loans
0.5 - 0.9% 3,909,000 3 loans
</TABLE>
At December 31, 1995, the statement value of mortgage loans that
were
restructured to require payment of principal or interest based
upon the cash
flows generated by the property serving as collateral for the
loans or that
require a diminutive payment totalled $12,643,000.
Real estate consists of the home office property, investment real
estate
under lease, and foreclosed real estate. The cost of these
properties
totalled $82,396,000, accumulated depreciation as of December 31,
1995 was
$20,000,000, and the total net book value was $62,396,000. The
net book
value of foreclosed real estate was $38,982,000 and $36,948,000
at December
31, 1995 and 1994, respectively.
Major categories of net investment income by class of investment
are
summarized as follows:
<TABLE>
<CAPTION>
Year Ended December 31
1995 1994
---- ----
(000's Omitted)
<S> <C> <C>
Income:
Fixed maturities $ 188,915 $
179,442
Preferred stocks (16)
31
Common Stock: non-affiliated 1
0
Common stocks in subsidiaries 4,904
5,219
Mortgage loans 43,435
41,814
Real estate * 11,053
9,673
Policy loans and liens 9,618
9,596
Short-term investments 1,808
1,188
Other invested assets 8,393
2,544
Amortization of interest
maintenance reserve 1,734
2,462
----------
- ----------
Gross investment income 269,845
251,969
----------
- ----------
Expenses:
Depreciation 2,374
2,236
Other 11,919
12,859
----------
- ----------
Total investment expenses 14,293
15,095
----------
- ----------
Net investment income $ 255,552 $
236,874
==========
==========
</TABLE>
* Includes amounts for the occupancy of company-owned property of
$3,425,000 in 1995 and 1994.
NOTE 3 - REINSURANCE
In the ordinary course of business, the Company assumes and cedes
reinsurance with other insurers and reinsurers. These
arrangements provide greater diversification of business and
limit
the maximum net loss potential on large or hazardous risks.
These
reinsured risks are treated in the financial statements as risks
for which the Company is not liable. Accordingly, policy
liabilities and accruals, including incurred but not reported
claims, are reported in the financial statements net of
reinsurance assumed and ceded. A contingent liability exists
with
respect to the amount of such reinsurance in the event that the
reinsuring companies are unable to meet their obligations.
Reinsurance of risk does not discharge the primary liability of
the Company, the Company remains contingently liable with respect
to any reinsurance ceded, and this contingency would become an
actual liability in the event that the assuming company becomes
unable to meet its obligation under the reinsurance treaty. The
Company retains the risk for varying amounts of individual or
group insurance written up to a maximum of $1,000,000 on any one
life or $4,000 per month disability risk and reinsures the
balance.
<PAGE>
Reinsurance transactions with other insurance companies for the
years ended December 31, 1995 and 1994 are summarized as follows:
<TABLE>
<CAPTION>
December 31, 1995
--------------------------------------
Direct Assumed Ceded Net
------ ------- ----- ---
(000's Omitted)
<S> <C> <C> <C> <C.
Life insurance in force $26,222,671 $ 96,011 $3,257,271
$23,061,411
=========== ======== ==========
===========
Premiums and other
considerations:
Life $ 197,863 $ 467 $ 16,853 $
181,477
Annuity 30,626 0 0
30,626
Health 29,715 8,395 6,535
31,575
---------- -------- ----------
- -----------
Total $ 258,204 $ 8,862 $ 23,388 $
243,678
=========== ======== ==========
===========
</TABLE>
<TABLE>
<CAPTION>
December 31, 1994
--------------------------------------
Direct Assumed Ceded Net
------ ------- ----- ---
(000's Omitted)
<S> <C> <C> <C> <C>
Life insurance in force $25,958,093 $103,557 $3,774,748
$22,286,902
=========== ======== ==========
===========
Premiums and other
considerations:
Life $ 199,345 $ 494 $ 15,677 $
184,162
Annuity 31,425 0 0
31,425
Health 31,268 8,830 9,485
30,613
---------- -------- ----------
- -----------
Total $ 262,038 $ 9,324 $ 25,162 $
246,200
=========== ======== ==========
===========
</TABLE>
Amounts recoverable from reinsurers for paid losses were
$1,005,000 and $720,000 at December 31, 1995 and 1994,
respectively, and they are included in other assets in the
financial statements. Benefits paid or provided were reduced by
$2,657,000 and $4,285,000 at December 31, 1995 and 1994,
respectively, for estimated recoveries under reinsurance
treaties.
The liabilities for future policy benefits were also reduced due
to reinsurance treaties by $11,049,000 and $12,783,000 at
December
31, 1995 and 1994, respectively.
The Company had ceded 22.5% of a block of ordinary life insurance
under a coinsurance/modified coinsurance agreement in 1988. The
amount of life insurance inforce ceded under the agreement was
$160,127,000 and $169,660,000 at December 31, 1995 and 1994,
respectively. The net effect of this reinsurance ceded
transaction was to reduce the Company's gain from operations by
$2,103,000 in 1995 and 1994. This reinsurance agreement will
terminate January 1, 1996. There will be no effect on gain from
operations in 1996.
The Company, nor any of its related parties control, either
directly or indirectly, any reinsurers in which the Company
conducts business, except that the Company does assume an
immaterial amount of business from its insurance subsidiary
Manhattan Life Insurance Company. No policies issued by the
Company have been reinsured with a foreign company which is
controlled, either directly or indirectly, by a party not
primarily engaged in the business of insurance.
The Company has not entered into any reinsurance agreements in
which the reinsurer may unilaterally cancel any reinsurance for
reasons other than nonpayment of premiums or other similar
credits. The Company does not have any reinsurance agreements in
effect in which the amount of losses paid or accrued through
December 31, 1995 would result in a payment to the reinsurer of
amounts which, in the aggregate and allowing for offset of mutual
credits from other reinsurance agreements with the same
reinsurer,
exceed the total direct premiums collected under the reinsured
policies.
<PAGE>
NOTE 4 - FEDERAL INCOME TAX
Federal income taxes are calculated under both the regular tax
system and the alternative minimum tax (AMT) system, and the tax
payable is the higher of the two calculated amounts. In 1995 and
1994, there were no net operating losses available to carry
forward and utilize against taxable income. In the event of
future net losses, the Company has $54,759,000 available in the
carryback period for recoupment. The tax allocated to the
realized capital gains or losses in the Statement of Income and
Changes in Surplus is based on the tax basis realized capital
gains or losses plus bad debt losses.
An analysis of the primary components of the total income tax on
operations follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
(000's Omitted)
<S> <C> <C>
Regular tax on statutory gain
from operations $17,136 $12,611
Surplus tax 2,151 0
DAC premium tax 3,031 3,130
Reserve adjustments 1,206 584
Other, net (793)
(2,676)
------- -------
Total tax expense - operations $22,731 $13,649
======= =======
</TABLE>
The allocation of tax at December 31, 1995 and 1994 is as
follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
(000's Omitted)
<S> <C> <C>
Operations $22,731 $13,649
Net realized capital gains (losses) (992) 194
------- -------
Total tax recorded in the
Statement of Operations 21,739 13,843
Tax allocated to the IMR (3,915)
(4,170)
------- -------
Total federal income tax expense $17,824 $ 9,673
======= =======
</TABLE>
As a mutual life insurance company, Union Central Life is subject
to the differential earnings rate ("DER") calculation or the
surplus tax as it is referred to above. A "tentative" DER amount
is determined annually based upon a rate published by the
Internal
Revenue Service ("IRS"). The IRS also publishes a "recomputed"
DER rate in the year following the release of the tentative rate.
These DER's are applied to a mutual life company's equity base,
as
adjusted, to determine the reduction in the company's deduction
for policyholders dividends for purposes of the tax return. The
Company changed its policy for purposes of reporting tax in the
financial statements in 1995 from a cash basis to an accrual
basis
approach. Under the accrual method, the surplus tax is
calculated
by using an estimate of the current year's DER multiplied by the
actual mean tax surplus for the year. The effect of this change
in method is $6.3 million and has been reported as an adjustment
to surplus in 1995.
NOTE 5 - INVESTMENTS IN UNCONSOLIDATED SUBSIDIARIES
In 1991, the Company owned approximately 73% of the outstanding
common stock of Manhattan National Corporation (MNC), an
insurance
holding company that owned 100% of the outstanding guarantee
capital shares of The Manhattan Life Insurance Company (MLIC).
At December 31, 1991, MNC was liquidated. MNC shareholders
received prorata distributions of cash, guarantee capital shares
of MLIC, and an interest in a liquidating trust (MNC Liquidating
Trust). As a result, the Company obtained 73% of the outstanding
guarantee capital shares of MLIC and of the MNC Liquidating
Trust.
The investment in MLIC guarantee capital shares is recorded in
the
balance sheet at $20,950,071 and $24,739,000, respectively, at
December 31, 1995 and 1994. This value represents 73% of the
statutory-basis net assets of MLIC, plus unamortized goodwill of
$948,000 at December 31, 1994. Goodwill was fully amortized at
December 31, 1995.
Statutory-basis financial information of the Company's insurance
subsidiary (MLIC) is summarized below:
<TABLE>
<CAPTION>
December 31,
1995 1994
---- ----
(000's Omitted)
<S> <C> <C>
Balance Sheets
Investments $ 443,042 $ 437,483
Other assets 15,482 14,897
--------- ---------
Total assets $ 458,524 $ 452,380
========= =========
Insurance reserves $ 413,355 $ 405,262
Liabilities 16,399 14,447
Surplus 28,770 32,671
--------- ---------
Total liabilities and surplus $ 458,524 $ 452,380
========= =========
Statements of Operations
Revenues $ 86,045 $ 79,169
Benefits, expenses and taxes (87,985) (75,365)
Net realized capital losses (162) (2,448)
--------- ---------
Net income (loss) (2,102) 1,356
Other changes in surplus (1,799) 674
--------- ---------
Increase (decrease) in surplus $ (3,901) $ 2,030
--------- ---------
</TABLE>
In 1993, the Company proposed a plan to eliminate the minority
interest in MLIC's guarantee capital shares. A special committee
of independent directors of MLIC has been formed to consider the
fairness of this proposal which involves using a reverse stock
split to reduce all outstanding minority shares to fractional
shares payable in cash. The Company would become the sole
remaining holder of the capital shares. Under the plan, the
Company will return its guarantee capital shares and pay cash in
the amount of $1,823,000 to MLIC in exchange for eight new
guarantee capital shares. It is anticipated the remaining
guarantee capital shares held by minority shareholders will be
returned in exchange for cash of $4,655,000 ($5.125 per share).
The proposal is subject to approval of MLIC's guarantee capital
shareholders, as well as its Board of Directors. The proposal is
currently being reviewed by the New York Insurance Department and
its independent consultants.
The MNC Liquidating Trust was fully liquidated as of September
30,
1994. Assets of the trust consisted primarily of commercial
mortgage loans. Interest income totalling $640,000 from the
trust
is included in the Statements of Income and Changes in Surplus in
1994.
<PAGE>
NOTE 6 - RELATED PARTY TRANSACTIONS
The Company transacts business with certain companies that are
affiliated through common ownership.
The Company provided facilities and certain data processing,
accounting, legal, administrative, and executive services to
various subsidiaries (primarily MLIC) for fees totalling
$4,004,000 and $4,427,000 in 1995 and 1994, respectively. At
December 31, 1995, the Company had a $1,906,000 balance due from
affiliates.
The Company received the following dividends from its
subsidiaries
and affiliates in 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
---- ----
(000's Omitted)
<S> <C> <C>
Carillon Advisers, Inc. $ 1,000 $ 1,250
Carillon Investments, Inc. 150 400
Manhattan Life Insurance Company 142 142
Carillon Capital Fund 1,104 2,334
Summit High Yield Fund 2,508 1,093
------- -------
Total $ 4,904 $ 5,219
======= =======
</TABLE>
NOTE 7 - COMMITMENTS AND CONTINGENT LIABILITIES
Leases
The Company leased office space for various field agency offices
with lease terms of varying duration from 1 to 15 years. Some of
these leases include escalation clauses which vary with levels of
operating expense. Rental expense under these leases totalled
$2,420,000 and $2,414,000 in 1995 and 1994, respectively. The
Company also leases furniture and equipment under leases which
expire in 2001. Rental expense under these leases totalled
$671,000 and $638,000 in 1995 and 1994, respectively.
The Company accounts for all leases as operating leases. At
December 31, 1995, the future minimum lease payments for all
noncancelable operating leases are as follows:
<TABLE>
<CAPTION>
Year Amount
---- ------
(000's Omitted)
<C> <C>
1996 $ 2,971
1997 2,419
1998 1,732
1999 1,297
After 1999 3,398
-------
Total $11,817
=======
</TABLE>
The Company leased a portion of its computer software from a bank
under a series of agreements that expired in 1994. Payments
under
these leases totalled $2,765,000 in 1994.
Other Commitments
At December 31, 1995, the Company has outstanding agreements to
fund 26 mortgages totalling $38,511,000 in early 1996. In
addition, the Company has committed to invest $15,100,000 in
limited partnerships during the years 1996 to 1999. These
transactions are in the normal course of business for the
Company.
The Company had no outstanding liability for borrowed money as of
December 31, 1995.
Litigation
In the normal course of business, the Company is party to various
claims and litigation primarily arising from claims made under
insurance policies and contracts. Those actions are considered
by
the Company in estimating the policy and contract liabilities.
The Company's management believes that the resolution of those
actions will not have a material adverse effect on the Company's
financial position or results of operations.
Guaranty Fund Assessments
The economy and other factors have caused an increase in the
number of insurance companies that are under regulatory
supervision. This circumstance is expected to result in an
increase in assessments by state guaranty funds, or voluntary
payments by solvent insurance companies, to fund policyholder
losses or liabilities of insurance companies that become
insolvent. These assessments may be deferred or forgiven under
most guaranty laws if they would threaten an insurers financial
strength and, in certain instances, may be offset against future
premium taxes. The Company provided for future assessments
caused
by companies which have become insolvent by charging $1,074,000
directly to operations in 1994. There were no charges to
operations in 1995. The estimated liability of $1,985,000 at
December 31, 1995 was based on data provided by the National
Organization of Life and Health Insurance Guaranty Associations.
NOTE 8 - ANNUITY RESERVES
The Company's annuity reserves and deposit fund liabilities that
are subject to discretionary withdrawal (with adjustment),
subject
to discretionary withdrawal (without adjustment), and not subject
to discretionary withdrawal provisions are summarized as follows:
<TABLE>
<CAPTION>
December 31, 1995
Amount Percent
------ -------
(000's Omitted)
<S> <C> <C>
Subject to discretionary withdrawal
(with adjustment):
With market value adjustment $ 200,982 8.5%
At book value less surrender charge 135,229 5.8
At market value 717,594 30.5
---------- -----
Total 1,053,805 44.8
Subject to discretionary withdrawal
(without adjustment):
At book value with minimal or
no charge or adjustment 1,139,915 48.4
Not subject to discretionary withdrawal 160,880 6.8
---------- -----
1,300,795 55.2
Total annuity reserves and deposit
fund liabilities - none reinsured $2,354,600* 100%
========== =====
</TABLE>
* Includes: deposit funds ($1,518,369); premiums on deposit
($810) included in other liabilities; annuities and supplementary
contracts with life contingencies ($117,827) included in reserves
for life, accident and health policies; and annuities reported in
the separate account liability ($717,594).
NOTE 9 - EMPLOYEE BENEFITS
The Company has pension plans covering substantially all of its
employees. Pension expense was determined according to
regulations as specified by ERISA and subsequent amendments.
Benefits are based on years of service and the employee's highest
five consecutive years of compensation out of the last ten years.
The amounts funded were $2,178,000 and $1,887,000 in 1995 and
1994, respectively. The Company's policy is to charge
contributions to expense in the year they were contributed or
accrued. Total pension reserves for the Company's employee
pension plan are included in the liability for deposit funds on
the balance sheets.
<PAGE>
A summary of the accumulated benefit obligation as determined by
the Plan's actuaries and plan net assets as of October 1, 1995
are
as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
(000's Omitted)
<S> <C> <C>
Accumulated benefit obligation:
Vested $ 34,444 $ 28,241
Nonvested 5,270 5,512
-------- --------
Total $ 39,714 $ 33,753
======== ========
Net assets available for benefits $ 38,062 $ 34,444
======== ========
</TABLE>
It is the Company's intention to fund the unfunded liability by
making additional contributions within the time periods allowed
by
the Employee Retirement Individual Savings Association.
The accumulated benefit obligation was calculated based on an
assumed interest rate of 8.5%. Plan assets are primarily
composed
of mutual funds and unallocated insurance funds. At December 31,
1995 and 1994, $33,639,000 and $26,631,000, respectively, was
invested in affiliated mutual funds.
The Company has a contributory savings plan for employees meeting
certain service requirements which qualifies under Section 401(k)
of the Internal Revenue Code. This plan allows eligible
employees
to contribute up to certain prescribed limits of their pre-
tax compensation, with the Company matching 50% of the first 6%
of
participants' contributions. The Company's matching
contributions
to this plan were $1,116,000 and $993,000 for 1995 and 1994,
respectively. The value of the plan's assets were $29,866,000
and
$22,852,000 at December 31, 1995 and 1994, respectively. The
assets are held in the deposit fund or under the variable
accounts
of a group annuity policy. At December 31, 1995 and 1994,
$13,069,000 and $10,204,000, respectively, was invested in
affiliated mutual funds.
NOTE 10 - POSTRETIREMENT BENEFITS
The Company provides certain health care and life insurance
benefits for its eligible retired employees. Substantially all
of
the Company's employees may become eligible for these benefits if
they reach normal retirement age while working for the Company.
Postretirement benefit costs for the years ended December 31,
1995
and 1994 were $621,000 and $765,000, respectively, and include
the
expected cost of such benefits for newly eligible or vested
employees, interest cost, and gains and losses arising from
differences between actuarial assumptions and actual experience.
The Company paid benefits in cash of $754,000 and $822,000,
respectively, in 1995 and 1994.
At December 31, 1995 and 1994, the postretirement benefit
obligation for retirees and other fully eligible or vested plan
participants was $15,105,000 and $14,668,00, respectively. Of
these amounts, $9,053,000 and $9,167,000 was unfunded and
included
in "Other liabilities" on the Balance Sheets, and $6,052,000 and
$5,501,000 was pre-funded in Voluntary Employee Benefit
Associations (VEBAS) at December 31, 1995 and 1994, respectively.
The health care cost trend rate assumption has an insignificant
effect on the amounts reported. To illustrate, increasing the
assumed health care cost trend rates by one percentage point in
each year would increase the postretirement benefit obligation as
of December 31, 1995 by $82,000 and the interest cost and
estimated eligibility cost components of the net periodic
postretirement benefit cost by $7,000 and less than $1,000,
respectively.
<PAGE>
NOTE 11 - FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
Cash and short-term investments: The carrying amounts
reported
in the balance sheet for these instruments approximate their fair
values.
Investment securities: Fair values for bonds and preferred
stock are based on quoted market prices, where available, which
may differ from NAIC fair values. If quoted market prices are
not
available, fair values are estimated using values obtained from
independent securities broker dealers or quoted market prices of
comparable instruments. The fair values of common stock in
Company sponsored mutual funds are based on quoted market prices
and are recognized in the balance sheet.
Mortgage loans: The fair values for commercial and
residential
mortgages in good standing are estimated using discounted cash
flow analysis using interest rates currently being offered for
similar loans to borrowers with similar credit ratings in
comparison with actual interest rates and maturity dates. Fair
values for mortgages with potential loan losses are based on
discounted cash flow analysis of the underlying properties.
Policy loans: Management is unable to ascertain the estimated
life of the policy loan portfolio. Due to the excessive costs
which would be incurred to determine this information, management
considers the estimation of its fair value to be impracticable.
The nature of a policy loan insures that the outstanding loan
balance will be fully recoverable because the balance owed to the
Company is always equal to or lower than the cash value of the
insurance policy owed to the policyholder. Policy loans are
stated at their aggregate unpaid balance on the balance sheet.
Investment contracts: Fair values for the Company's
liabilities under investment-type insurance contracts are
estimated using discounted cash flow calculations, based on
interest rates currently being offered for similar contracts with
maturities consistent with those remaining for the contracts
being
valued.
The carrying amounts and fair values of the Company's mortgage
loans are summarized as follows:
<TABLE>
<CAPTION>
December 31, 1995 December 31,
1994
Carrying Fair Carrying
Fair
Amount Value Amount
Value
------ ----- ------
- -----
(000's Omitted)
<S> <C> <C> <C>
<C>
Commercial mortgages $ 523,260 $ 551,235 $ 443,586
$ 446,757
========== ========== ==========
==========
</TABLE>
The carrying amounts and fair values of the Company's
liabilities for investment-type insurance contracts
(deposit funds) are as follows:
<TABLE>
<CAPTION>
December 31, 1995 December 31,
1994
Carrying Fair Carrying
Fair
Amount Value Amount
Value
------ ----- ------
- -----
(000's Omitted)
<S> <C> <C> <C>
<C>
Group annuities $ 923,583 $ 927,544 $ 947,514
$ 937,924
Single premium
deferred annuities 346,230 340,848 331,260
325,928
Variable annuities 166,485 164,267 147,327
144,118
Supplementary contracts 61,062 60,942 60,561
60,289
Traditional annuities 14,970 15,002 8,932
8,414
Other 6,039 6,039 6,006
6,006
---------- ---------- ----------
- ----------
Total $1,518,369 $1,514,642 $1,501,600
$1,428,679
========== ========== ==========
==========
</TABLE>
The Company's other insurance contracts are excluded from
Financial Accounting Standard (FAS-107), "Disclosures about Fair
Value of Financial Instruments", disclosure requirements.
However, the fair values of liabilities under all insurance
contracts are taken into consideration in the Company's overall
management of interest rate risk, which minimizes exposure to
changing interest rates through the matching of investment
maturities with amounts due under insurance contracts.
Additional
data with respect to fair value of the Company's investments is
disclosed in Note 2.
NOTE 12 - PERMITTED STATUTORY ACCOUNTING PRACTICES
The Company, which is domiciled in Ohio, prepares its statutory
financial statements in accordance with accounting practices
prescribed or permitted by the Ohio Insurance Department.
Prescribed statutory accounting practices include a variety of
publications of the NAIC, as well as state laws, regulations, and
general administrative rules. Permitted statutory accounting
practices encompass all accounting practices not so prescribed.
Such practices may differ from state to state, may differ from
company to company within a state, and may change in the future.
The NAIC currently is in the process of recodifying statutory
accounting practices, the result of which is expected to
constitute the only source of "prescribed" statutory accounting
practices. Accordingly, that project, which is expected to be
completed in 1996, will likely change, to some extent, prescribed
statutory accounting practices, and may result in changes to the
accounting practices that the Company uses to prepare its
statutory financial statements.
The Company obtained approval during 1989 from the Ohio Insurance
Department to record the appraisal value of its mineral rights as
an admitted asset. This value is being depleted on the straight
line basis by reducing net investment income over a ten-year
period, and depletion expense amounted to $486,000 in 1995 and
1994. The value of the mineral rights after accumulated
depletion
was $1,945,000 at December 31, 1995.
The Company amortized the goodwill associated with the
acquisition
of MLIC using the straight-line method over a ten year period in
accordance with NAIC guidelines. There is no specific statutory
guidance which addresses the accounting treatment of the costs
associated with the reverse stock split. To be consistent with
the accounting for goodwill, the Company capitalizes all costs
incurred in connection with the MLIC reverse stock split. To be
conservative, the Company writes-off the capitalized costs of the
reverse stock split by charging surplus in the year the costs are
incurred. The capitalized costs associated with the reverse
stock
split which were written off totalled $487,000 in 1994. There
were no capitalized costs in 1995.
The Company changed its method of accounting for the mutual
company surplus tax in 1995. Prior to 1995, the Company
accounted
for the surplus tax on a cash basis, which was computed based on
two components: 1) An estimated tax for the current year based
in
part on the actual mutual company earnings rate for the second
preceding year, plus 2) A true up of the prior year's estimated
tax; computed using the actual differential earnings rate for
prior year. Beginning in 1995, the Company used the accrual
method and estimated the actual differential earnings rate for
the
current year, rather than the actual differential rate for the
second preceding year. The Company believes this change will
better match income-tax expense with pre-tax income, and improve
the conservatism and comparability of its financial statements.
The effect in 1995 of this change in accounting principle was a
$6.3 million charge to surplus which represents the true up
adjustment for 1994.
NOTE 13 - LIABILITY FOR UNPAID CLAIMS AND CLAIM ADJUSTMENT
EXPENSES
Activity in the liability for unpaid accident and health claims
and claim adjustment expense (net of reinsurance) is summarized
as
follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
(000's omitted)
<S> <C> <C>
Balance as of January 1,
net of reinsurance
recoverables of $738 and $446 $ 86,727 $ 84,898
Incurred related to:
Current year 25,182 35,602
Prior years (1,410) (8,669)
-------- --------
Total incurred 23,772 26,933
-------- --------
Paid related to:
Current year 2,811 11,165
Prior years 16,624 13,939
-------- --------
Total paid 19,435 25,104
-------- --------
Balance as of December 31,
net of reinsurance
recoverables of $642 and $738 $ 91,064 $ 86,727
======== ========
</TABLE>
As a result of changes in estimates of insured events in prior
years, the provision of claims and claim adjustment expenses, net
of reinsurance recoveries of $642,000 and $738,000 in 1995 and
1994, respectively, decreased by $1,410,000 in 1995 and
$8,669,000
in 1994 due to higher than expected rates of claim terminations.
NOTE 14 - SEPARATE ACCOUNTS
Separate and variable accounts held by the Company represent
funds
which support Group Annuities (ESP) and Individual Annuities
(Variable). The assets are carried at market value.
<TABLE>
<CAPTION>
Non Guaranteed
Separate
Accounts
- -----------------
(000's Omitted)
<S> <C>
Premiums, considerations or deposits for
year ended December 31, 1995 $ 217,136
Reserves at December 31, 1995
For accounts with assets at:
Market value $ 717,594
Amortized cost 0
----------
Total Reserves $ 717,594
----------
Reserves subject to discretionary withdrawal:
With market value adjustment $ 717,594
At book value without market value
adjustment and with current surrender
charge of 5% or more 0
At market value 0
At book value without market value
adjustment and with current surrender
charge less than 5% $ 0
----------
Subtotal $ 717,594
----------
Not subject to discretionary withdrawal $ 0
----------
Total $ 717,594
==========
</TABLE>
Following is a reconciliation of net transfers to the Separate
Accounts:
<TABLE>
<CAPTION>
December 31,
1995
- -----------------
(000's
Omitted)
<S> <C>
Transfers as reported in the summary
of operations of the Separate
Accounts Statement:
Transfers to the Separate Accounts $ 217,136
Transfers from the Separate Accounts 123,196
----------
Net transfers to the Separate Accounts 93,941
Reconciling adjustments:
Charges for investment management,
administration, and contract guarantees 7,427
Interest and gain on seed money 356
----------
Net transfers to Separate Accounts $ 101,724
==========
</TABLE>
<PAGE>
APPENDIX A
TABLE OF APPLICABLE PERCENTAGES
<TABLE>
<CAPTION>
Attained
Age Percentage
- ---- ----------
<S> <C>
0-40 250%
41 243%
42 236%
43 229%
44 222%
45 215%
46 209%
47 203%
48 197%
49 191%
50 185%
51 178%
52 171%
53 164%
54 157%
55 150%
56 146%
57 142%
58 138%
59 134%
60 130%
61 128%
62 126%
63 124%
64 122%
65 120%
66 119%
67 118%
68 117%
69 116%
70 115%
71 113%
72 111%
73 109%
74 107%
75-90 105%
91 104%
92 103%
93 102%
94 101%
95+ 100%
</TABLE>
<PAGE>
<PAGE>
CARILLON FUND, INC.
- ----------------------------------------------------------------
Carillon Fund, Inc. (the "Fund"), is a no-load, diversified,
open-end management investment company which is intended to meet
a
wide range of investment objectives with its four separate
Portfolios: Equity Portfolio, Bond Portfolio, Capital Portfolio
and S&P 500 Index Portfolio. Each Portfolio generally operates
as
a separate fund issuing its own shares.
The Equity Portfolio seeks primarily long-term appreciation
of capital, without incurring unduly high risk, by investing
primarily in common stocks and other equity securities. Current
income is a secondary objective.
The Bond Portfolio seeks as high a level of current income
as
is consistent with reasonable investment risk, by investing
primarily in long-term, fixed-income, investment-grade corporate
bonds.
The Capital Portfolio seeks to provide the highest total
return through a combination of income and capital appreciation
consistent with the reasonable risks associated with an
investment
portfolio of above-average quality by investing in equity
securities, debt instruments and money market instruments.
The S&P 500 Index Portfolio seeks investment results that
correspond to the total return performance of U.S. common stocks,
as represented by the S&P 500 Index.
There can be no assurance that any Portfolio will achieve
its
objectives.
This Prospectus sets forth concisely the information that a
prospective investor should know before investing in the Fund,
and
it should be read and kept for future reference. A Statement of
Additional Information dated May 1, 1996, which contains further
information about the Fund, has been filed with the Securities
and
Exchange Commission and is incorporated by reference into this
Prospectus. A copy of the Statement of Additional Information may
be obtained without charge by calling the Fund at (513) 595-2600,
or by writing the Fund at P.O. Box 40409, Cincinnati, Ohio
45240-0409.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
May 1, 1996
UCCF 514 4-96<PAGE>
<PAGE>
CARILLON FUND, INC.
TABLE OF CONTENTS
Page
The Fund . . . . . . . . . . . . . 2
Annual Fund Operating Expenses . . . . 3
Financial Highlights . . . . . . . 4
Investment Objectives and Policies . . . . . 7
Equity Portfolio. . . . . . . 7
Bond Portfolio. . . . . . . . 7
Capital Portfolio . . . . . . 8
S&P 500 Index Portfolio . . . . . 9
Principal Risk Factors. . . . . . 10
Repurchase Agreements . . . . 11
Reverse Repurchase Agreements . . . . . 11
Futures Contracts and
Options on Futures Contracts. . . . . 11
Options . . . . . . . . . . . 12
Options on Securities Indices . . . . . 12
Collateralized Mortgage Obligations . . . . 13
Lending Portfolio Securities. . . . . . 13
Other Information . . . . . . 13
The Fund and Its Management. . . . . . 13
Investment Adviser. . . . . . 13
Advisory Fee. . . . . . . . . 14
Expenses. . . . . . . . . . . 14
Capital Stock . . . . . . . . 14
Purchase and Redemption of Shares. . . . . . 14
Dividends and Distributions. . . . . . 15
Taxes. . . . . . . . . . . . . . . 15
Custodian, Transfer and
Dividend Disbursing Agent . . . . 15
Appendix
Bond and Commercial Paper Ratings . . . 16
THE FUND
Carillon Fund, Inc. (the "Fund"), a Maryland corporation, is
a no-load, diversified, open-end investment company.
The Fund has four Portfolios, which in many ways operate as
separate funds issuing separate classes of common stock. An
interest in the Fund is limited to the assets of the Portfolio in
which shares are held, and shareholders of each Portfolio are
entitled to a pro rata share of all dividends and distributions
arising from the net income and capital gains on the investments
of such Portfolio.
Currently, the shares of the Fund are sold only to The Union
Central Life Insurance Company ("Union Central")
and to certain of its separate accounts to fund the benefits
under
certain variable annuity contracts and variable universal life
insurance policies (the "contracts") issued by Union Central. The
separate accounts invest in shares of the Fund in accordance
with allocation instructions received from Contract Owners.
To the extent that the shares of the Fund's four Portfolios
are sold to Union Central in order to fund the benefits
under the contracts, the structure of the Fund permits Contract
Owners, within the limitations described in the contracts, to
determine the type of investment underlying their contracts in
response to or in anticipation of changes in market or economic
conditions. Contract Owners should consider that the investment
return experience of the Portfolio or Portfolios they select
will affect the value of the contract and the amount of annuity
payments received under a contract. See the attached
Prospectus for the Flexible Premium Deferred Variable Annuity for
a description of the relationship between increases or
decreases in the net asset value of Fund shares (and any
distributions on such shares) and the benefits provided under a
contract.<PAGE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
EXPENSES (as a percentage of average net assets)
S&P 500
Equity Bond Capital
Index
Portfolio Portfolio Portfolio
Portfolio
- -------------------------------------------------------------------------
<S> <C> <C> <C>
<C>
Management Fees .59% .49% .68%
.30%
Other Expenses .07% .16% .09%
.30%*
Total Operating Expenses .66% .65% .77%
.60%*
</TABLE>
EXAMPLE
The table below shows the amount of expenses a Shareholder
would pay on a $1,000 investment assuming a 5% annual
return.+
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10
Years
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Equity Portfolio $ 7 $ 21 $ 37 $ 82
Bond Portfolio $ 7 $ 21 $ 36 $ 81
Capital Portfolio $ 8 $ 25 $ 43 $ 96
S&P 500 Index Portfolio $ 6 $ 19 $ -- $
- --
</TABLE>
The purpose of this table is to assist the Contract Owner
in understanding the various expenses that the Contract
Owner will bear indirectly by providing information on expenses
associated with the Contract's investment in the Fund. This
table does not include any contract or variable account charges.
This table should not be considered a representation of
past or future expenses and the actual expenses that will
be paid may be greater or lesser than those shown.
- ---------------
* "Other Expenses" for the S&P 500 Index Portfolio are based on
estimates. Total Operating Expenses in excess of .60% for that
Portfolio are paid by the investment adviser.
+ The 5% annual return is a standardized rate prescribed for the
purpose of this example and does not represent the past or future
return of the Fund.<PAGE>
<PAGE>
FINANCIAL HIGHLIGHTS
The financial information in the tables which follow
(pages 4-6), insofar as it pertains to each of the five years in
the period ended December 31, 1995, have been audited in
conjunction with the annual audit of the financial statements of
the Fund . The financial statements for the year ended December
31, 1995, have been audited by Deloitte & Touche LLP, whose
unqualified report thereon is included in the Statement of
Additional Information. The financial statements for the four
years ended December 31, 1994 have been audited by Price
Waterhouse LLP, whose reports expressed unqualified opinions on
those statements. These financial highlights should be read in
conjunction with the financial statements and notes thereto
included in the Statement of Additional Information. Further
information about the performance of the Fund is contained in the
Fund's annual report which may be obtained without charge. (See
"Other Information" below.)
<TABLE>
<CAPTION>
Equity Portfolio
Year ended December 31,
1995 1994 1993
1992 1991
- --------------------------------------------
<S> <C> <C> <C>
<C> <C>
Net Asset Value,
Beginning of year $14.30 $14.58 $13.74
$12.60 $ 8.81
Investment Activities:
Net investment income .24 .20 .16
.19 .20<F1>
Net realized and
unrealized gains (losses) 3.36 .31 1.69
1.27 3.79
Total from Investment Operations 3.60 .51 1.85
1.46 3.99
Distributions:
Net investment income (.23) (.19) (.16)
(.19) (.20)
Net realized gains (1.13) (.60) (.85)
(.13) --
Total Distributions (1.36) (.79) (1.01)
(.32) (.20)
Net Asset Value,
End of year $16.54 $14.30 $14.58
$13.74 $12.60
Ratios/Supplemental Data:
Total Return <F2> 26.96% 3.42% 14.11%
11.78% 45.55%
Ratio of Expenses to
Average Net Assets .66% .69% .70%
.72% .75%<F1>
Ratio of Net Investment
Income to Average Net Assets 1.73% 1.45% 1.18%
1.47% 1.79%<F1>
Portfolio Turnover Rate 34.33% 40.33% 37.93%
46.75% 55.17%
Net Assets, End of Period
(in thousands) $219,563 $157,696 $138,239
$102,306 $79,352
</TABLE>
<TABLE>
<CAPTION>
1990 1989 1988
1987 1986
- --------------------------------------------
<S> <C> <C> <C>
<C> <C>
Net Asset Value,
Beginning of year $10.79 $10.88 $ 8.57 $
9.62 $12.72
Investment Activities:
Net investment income .28<F1> .58 .38
.34 .55
Net realized and
unrealized gains (losses) (1.91) .69 2.33
(.22) 1.08
Total from Investment Operations (1.63) 1.27 3.71
.12 1.63
Distributions:
Net investment income (.31) (.59) (.34)
(.35) (.56)
Net realized gains (.04) (.77) (.06)
(.82) (4.17)
Total Distributions (.35) (1.36) (.40)
(1.17) (4.73)
Net Asset Value,
End of year $ 8.81 $10.79 $10.88 $
8.57 $ 9.62
Ratios/Supplemental Data:
Total Return<F2> (15.45%) 11.79% 31.79%
.85% 12.72%
Ratio of Expenses to
Average Net Assets .82%<F1> .95% .95%
.97% .89%
Ratio of Net Investment
Income to Average Net Assets 2.98%<F1> 5.34% 3.74%
3.30% 3.78%
Portfolio Turnover Rate 99.90% 61.49% 57.98%
70.17% 84.23%
Net Assets, End of Period
(in thousands) $52,514 $56,194 $37,723
$28,915 $17,956
<FN>
<F1>
Net of expenses waived by the Adviser of $.002 per share in 1991
and $.01 per share in 1990.
<F2>
Total Return does not reflect expenses that apply to the separate
account or the related insurance
policies. Inclusion of these charges would reduce the Total
Return figures for all periods shown.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(Continued)
Bond Portfolio
Year ended December 31,
1995 1994 1993
1992 1991
- --------------------------------------------
<S> <C> <C> <C>
<C> <C>
Net Asset Value,
Beginning of year $10.04 $11.30 $10.91
$10.96 $10.10
Investment Activities:
Net investment income .88 .77 .73
.82 .86
Net realized and
unrealized gains (losses) .98 (.95) .54
(.01) .87
Total from Investment Operations 1.86 (.18) 1.27
.81 1.73
Distributions:
Net investment income (.83) (.78) (.73)
(.82) (.87)
Net realized gains (.30) (.15) (.04)
- -- --
Total Distributions (.83) (1.08) (.88)
(.86) (.87)
Net Asset Value,
End of year $11.07 $10.04 $11.30
$10.91 $10.96
Ratios/Supplemental Data:
Total Return<F1> 19.03% (1.63%) 11.94%
7.65% 17.89%
Ratio of Expenses to
Average Net Assets .65% .68% .66%
.69% .73%
Ratio of Net Investment
Income to Average Net Assets 7.43% 7.21% 6.65%
7.59% 8.27%
Portfolio Turnover Rate 111.01% 70.27% 137.46%
40.91% 39.82%
Net Assets, End of Period
(in thousands) $73,568 $55,929 $54,128
$38,557 $31,009
</TABLE>
<TABLE>
<CAPTION>
1990 1989 1988
1987 1986
- --------------------------------------------
<S> <C> <C> <C>
<C> <C>
Net Asset Value,
Beginning of year $10.02 $ 9.82 $ 9.96
$10.51 $11.22
Investment Activities: .81 .83 .85
.82 1.12
Net investment income
Net realized and
unrealized gains (losses) .03 .20 (.13)
(.51) .67
Total from Investment Operations .84 1.03 .72
.31 1.79
Distributions:
Net investment income (.76) (.83) (.86)
(.86) (1.13)
Net realized gains -- -- --
- -- (1.37)
Total Distributions (.76) (.83) (.86)
(.86) (2.50)
Net Asset Value,
End of year $10.10 $10.02 $ 9.82 $
9.96 $10.51
Ratios/Supplemental Data:
Total Return<F1> 8.66% 10.72% 7.36%
3.15% 16.59%
Ratio of Expenses to
Average Net Assets .79% .86% .82%
.72% .65%
Ratio of Net Investment
Income to Average Net Assets 8.57% 8.38% 8.34%
8.34% 8.65%
Portfolio Turnover Rate 110.90% 17.70% 24.11%
80.35% 103.44%
Net Assets, End of Period
(in thousands) $24,446 $15,941 $12,460
$15,796 $11,487
<FN>
<F1>
Total Return does not reflect expenses that apply to the separate
account or the related insurance
policies. Inclusion of these charges would reduce the Total
Return figures for all periods shown.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(Continued)
Capital Portfolio
Year ended December 31,
Period Ended
- --------------------------------------------- December 31,
1995 1994 1993 1992
1991 1990<F1>
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
<C> <C>
Net asset value:
Beginning of period $13.19 $13.81 $12.99 $12.82
$10.57 $10.95
Investment Activities:
Net investment income .64 .52 .43 .42
.47 .34
Net realized and
unrealized gains (losses) 1.15 (.39) 1.17 .56
2.25 (.40)
Total from
Investment Operations 1.79 .13 1.60 .98
2.72 (.06)
Distributions:
Net investment income (.64) (.52) (.42) (.42)
(.47) (.32)
Net realized gains (.62) (.23) (.36) (.39)
-- --
Total Distributions (1.26) (.75) (.78) (.81)
(.47) (.32)
Net Asset Value,
End of period $13.72 $13.19 $13.81 $12.99
$12.82 $10.57
Ratios/Supplemental Data:
Total Return<F2> 14.28% .94% 12.72% 7.93%
26.10% (.54%)
Ratio of Expenses
to Average Net Assets .77% .80% .82% .88%
.95% 1.03%<F3>
Ratio of Net Investment
Income to Average
Net Assets 4.99% 4.25% 3.31% 3.49%
4.05% 5.08%3
Portfolio Turnover Rate 43.83% 41.89% 32.42% 39.74%
47.93% 16.02%
Net Assets,
End of Period
(in thousands) $145,623 $119,263 $100,016 $68,674
$41,844 $23,813
<FN>
<F1>
Period from May 1, 1990 (commencement of operations) through
December 31, 1990.
<F2>
Total Return does not reflect expenses that apply to the separate
account or the related insurance
policies. Inclusion of these charges would reduce the Total
Return figures for all periods shown.
<F3>
Annualized
</FN>
</TABLE>
S&P 500 Index Portfolio
The financial highlights table is not presented because
the activity for the period from December 29, 1995 to
December 31, 1995 did not round to $.01 in any category
of the reconciliation of beginning to ending net asset
value per share of $10.00. The total return and the ratios
and supplemental data were all less than 0.1%. The net
assets at December 31, 1995 were $305,148.
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
Each Portfolio has a different investment objective which it
pursues through separate investment policies. The differences in
objectives and policies among the various Portfolios can be
expected to affect the investment return of each Portfolio and
the
degree of market and financial risks to which each Portfolio is
subject. The investment objectives of each Portfolio (described
on
the cover of this Prospectus) are fundamental policies and may
not
be changed without shareholder approval. There can be no
assurance
that the investment objectives of any Portfolio will be realized.
Equity Portfolio
The investment objectives of the Equity Portfolio are to seek
long-term appreciation of capital with secondary opportunities
for growth in current income, without incurring unduly high
risks.
A major portion of the Portfolio will be invested in common
stocks. The Portfolio's investment policy is to seek special
opportunities in securities that are selling at a discount from
theoretical price/earnings ratios and that seem capable of
recovering from their temporary out-of-favor status. A portion of
the Portfolio may be invested in money market instruments pending
investment or to effectively utilize cash reserves.
Since no one class or type of security at all times affords the
greatest promise of capital appreciation and growth in income,
the
Portfolio may invest all or a portion of its assets in preferred
stocks, bonds, convertible preferred stocks, convertible bonds,
and convertible debentures if it is believed that such
investments
will further its investment objectives. When market conditions
for
equity securities are adverse, and for temporary defensive
purposes, the Portfolio may invest in Government securities,
money
market instruments, or other fixed-income securities, or retain
cash or cash equivalents. However, the Portfolio will remain
well
invested in equities to take advantage of stocks' relatively
higher long-term potential.
The Equity Portfolio's policy of investing is based upon the
belief that the pricing mechanism of the securities market lacks
total efficiency and has a tendency to inflate prices of some
securities and depress prices of other securities in different
market climates. Management believes that favorable changes in
market prices are more likely to begin when securities are
out-of-favor, price/earnings ratios are relatively low,
investment
expectations are limited, and there is little interest in a
particular security or industry. Management believes that
securities with relatively low price/earnings ratios in relation
to their profitability are better positioned to benefit from
favorable but generally unanticipated events than are securities
with relatively high price/earnings ratios which are more
susceptible to unexpected adverse developments. The current
institutionally-dominated market tends to ignore the numerous
second tier issues whose market capitalizations are below those
of
a limited number of established large companies. Although this
segment of the market may be more volatile and speculative, it is
expected that a well-diversified Portfolio represented in this
segment of the market has potential long-term rewards greater
than
the potential rewards from investments in more highly capitalized
equities.
Bond Portfolio
The investment objectives of the Bond Portfolio are to provide
as high a level of current income as is believed to be consistent
with reasonable investment risk and to seek preservation and
growth of shareholders' capital. In seeking to achieve these
objectives, it is anticipated that the Portfolio will invest at
least 75% of the value of its assets in publicly-traded straight
debt securities rated BBB or Baa or higher by a nationally
recognized rating service such as Standard & Poor's or Moody's,
or
obligations issued or guaranteed by the U.S. Government or its
agencies or instrumentalities or cash and cash equivalents. Up to
25% of the Bond Portfolio's total assets may be invested in
straight debt securities that are unrated or less than
investment-grade bonds, in convertible debt securities,
convertible preferred and preferred stocks, or other securities.
Debt securities that are unrated or less than investment-grade
bonds are often referred to as "high-yield" bonds because they
generally offer higher interest rates. High-yield bonds run a
higher risk of default. In the case of default, they are more
difficult to sell and could present a liquidity problem to the
Portfolio. (See "Principal Risk Factors," page 9.) As of March
31,
1996, 20% of the debt securities held by the Bond Portfolio were
unrated or less than investment-grade bonds. For a more complete
discussion of the risk factors associated with high-yield bonds,
see the discussion below under "Principal Risk Factors," and
"Certain Risk Factors Relating to High-Yield, High-Risk Bonds" in
the Statement of Additional Information.
The Bond Portfolio will not directly purchase common stocks.
However, it may retain up to 10% of the value of its
total assets in common stocks acquired either by conversion of
fixed-income securities or by the exercise of warrants attached
thereto.
The Bond Portfolio may also write covered call options on U.S.
Treasury Securities and options on futures contracts for such
securities. See "Options," page 11.
The Bond Portfolio may invest without limit in money market
instruments pending investment in accordance with its
investment policies or when market conditions dictate a
"defensive" investment strategy. To the extent a portion is
invested in commercial paper rated "A" or "Prime" it will be
included in the 75% guideline noted above.
A description of the corporate bond ratings assigned by
Standard
& Poor's and Moody's is included in the Appendix.
Capital Portfolio
The Capital Portfolio seeks to obtain the highest total return
through a combination of income and capital appreciation
consistent with the reasonable risks associated with an
investment
portfolio of above-average quality. The Capital Portfolio
invests in equity, debt and money market securities.
There are no percentage limitations on the type of securities
in
which the Capital Portfolio may invest. The Capital Portfolio may
invest entirely in equity securities, entirely in debt, entirely
in money market instruments, or in any combination of these type
of securities at the sole discretion of the investment adviser,
subject only to the investment objective of the Capital Portfolio
and the policies adopted by the Board of Directors. The
investment
adviser determines the proportion of Capital Portfolio assets
invested in equity, debt and money market securities based on
fundamental value analysis; analysis of historical long-term
returns among equity, debt and money market investments; and
other
market influencing factors. The fundamental value analysis
considers the adviser's outlook over both the near and long-term,
for corporate profitability, short and long-term interest rates,
stock price earnings ratios for the market in total and
individual
stocks and inflation rates. When the investment climate as
indicated by the fundamental factors is near historical
relationships, the Portfolio will be structured approximately 63%
in equity, 30% in debt and 7% in money market securities. In
addition, market influencing factors relating to monetary policy,
equity momentum, market sentiment, economic influences and market
cycles are taken into consideration in making the asset
allocation
decision.
Deviations from historical fundamental market relationships on
either a current or anticipated basis, along with the
influences of market factors, may result under most foreseeable
circumstances in changes as much as 40%, plus or minus, in the
percentages allocated to equity, debt or money market securities
within the Portfolio.
Equity Securities. In its equity investments, the Capital
Portfolio emphasizes a combination of several themes in order
to diversify its investment exposure. Most stocks purchased by
the
Portfolio display one or more of the following criteria:
* Low price earnings ratios in relation to their return on
equity.
* High asset values in relation to stock price.
* Foreign shares, listed on the New York or American Stock
Exchanges or purchased in the form of American Depository
Receipts, of companies judged to represent better fundamental
value than those of similar domestic companies.
* A high level of dividend payment providing a yield that is
competitive with debt investments.
Debt Securities. The Capital Portfolio may invest in rated or
unrated debt securities, including obligations of the U.S.
Government and its agencies, and corporate debt obligations rated
BBB or Baa or higher by a nationally recognized rating service
such as Standard & Poor's or Moody's, or, if not rated, of
equivalent quality as determined by the investment adviser.
Only 25% of the value of any bonds held by the Capital Portfolio
may be unrated or less than investment-grade bonds. For a
discussion of the risk factors associated with "high-yield"
bonds,
see the "Bond Portfolio" on page 7 and "Certain Risk Factors
Relating to High-Yield, High-Risk Bonds" in the Statement of
Additional Information.
Money Market Instruments. The Capital Portfolio may at any time
be 100% invested in money market instruments although it likely
will invest in these securities only temporarily pending
investment in equity and debt securities, or on a limited basis.
The following securities, which are described in the Statement of
Additional Information, are considered money market instruments
if
their remaining maturities are less than 13 months: repurchase
agreements, U.S. government obligations, government agency
securities, certificates of deposit, time deposits, bankers'
acceptances, commercial paper and corporate debt securities.
The Capital Portfolio may also write covered call options on
U.S. Treasury Securities and options on futures contracts for
such
securities. See "Options," page 11.
S&P 500 Index Portfolio
The S&P 500 Index Portfolio ("Index Portfolio") seeks
investment
results that correspond to the total return performance of U.S.
common stocks, as represented by the Standard & Poor's 500
Composite Stock Index (the "S&P 500"). The S&P 500 is a
well-known stock market index that includes common stocks of
companies representing approximately 71% of the market value of
all common stocks publicly traded in the United States. The
investment adviser believes that the performance of the S&P 500
is
representative of the performance of publicly traded common
stocks
in general. As with all mutual funds, there can be no assurance
that the Index Portfolio will achieve its investment objective.
Index funds, such as the Index Portfolio, seek to create, to
the
extent feasible, a portfolio which substantially replicates
the total return of the securities comprising the applicable
index, taking into consideration redemptions, sales of additional
shares, and other adjustments described below. Index funds are
not managed through traditional methods of fund management, which
typically involve frequent changes in a portfolio of securities
on
the basis of economic, financial, and market analyses.
Therefore,
brokerage costs, transfer taxes, and certain other transaction
costs for index funds may be lower than those incurred by
non-index, traditionally managed funds. Precise replication of
the holdings of the Index Portfolio and the capitalization
weighting of the securities in the S&P 500 is not feasible, but
the Index Portfolio seeks a high correlation between the total
return performance of securities comprising the S&P 500 and the
investment results of the Index Portfolio. The Index Portfolio
will attempt to achieve, in both rising and falling markets, a
correlation of at least 95% between the total return of its net
assets before expenses and the total return of the S&P 500. A
correlation of 100% would represent perfect correlation between
Index Portfolio and index performance. It is anticipated that
the
correlation of the Index Portfolio's performance to that of the
S&P 500 will increase as the size of the Index Portfolio
increases. There can be no assurance that the Index Portfolio
will achieve this correlation.
The Index Portfolio may invest up to 5% of its assets in
Standard & Poor's Depositary Receipts(R) ("SPDRs(R)").
SPDRs are units of beneficial interest in a unit investment
trust,
representing proportionate undivided interests in a portfolio
of securities in substantially the same weighting as the
component
common stocks of the S&P 500.
Although the Adviser will attempt to invest as much of the
Index
Portfolio's assets as is practical in stocks comprising the S&P
500 and futures contracts and options relating thereto, a portion
of the Index Portfolio may be invested in money market
instruments
pending investment or to meet redemption requests or other needs
for liquid assets. In addition, for temporary defensive
purposes,
the Index Portfolio may invest in Government securities, money
market instruments, or other fixed-income securities, or retain
cash or cash equivalents.
Principal Risk Factors
Because the Portfolios are intended to serve a variety of
investment objectives, they are subject to varying degrees of
financial and market risks and current income volatility.
Financial risk refers to the ability of an issuer of a debt
security to pay principal and interest on that security and to
the
earning stability and overall financial soundness of an issuer of
an equity security. Market risk refers to the volatility of the
reaction of the price of the security to changes in conditions in
the securities markets in general and, with respect to debt
securities, changes in the overall level of interest rates.
Current income volatility refers to the degree and rapidity with
which changes in the overall level of interest rates become
reflected in the level of current income of the portfolio.
The Equity Portfolio should be subject to moderate levels of
both market and financial risk, since it invests in equity
securities chosen primarily for potential long-term appreciation.
The Bond Portfolio invests most of its assets in investment-
grade corporate bonds, and these should be subject to little
financial risk, to moderately high levels of market risk, and to
moderately low current income volatility.
The Capital Portfolio invests in equity, debt and money market
instruments, and therefore the financial and market risks
to which it is subject will vary from time to time depending on
the extent of its holdings in each of those classes of
securities.
The Portfolio is subject to the further risk that in order to
meet
its objectives, the Adviser must determine the proper mix
of equity, debt and money market securities. Moreover, the timing
of movements from one type of security to another could
have a negative effect on the Portfolio's overall objective.
Inherent in the fact that the Adviser has great latitude with
respect to portfolio composition is the risk that it may not
properly ascertain the appropriate mix of securities for any
particular economic cycle.
The market value of fixed-income debt securities is affected by
changes in general market interest rates. If interest rates
fall, the market value of fixed-income securities tends to rise;
but if interest rates rise, the value of fixed-income securities
tends to fall. This market risk affects all fixed-income
securities, but lower-rated and unrated securities may be subject
to a greater market risk than higher-rated (lower-yield)
securities.
Bonds rated below the four highest grades used by Standard &
Poor's or Moody's are frequently referred to as "junk"
bonds, reflecting the greater market and investment risks
associated with such bonds. Such risks relate not only to the
greater financial weakness of the issuers of such securities but
also to other factors including: (i) the sensitivity of such
securities to interest rates and economic changes (high-yield,
high-risk bonds are very sensitive to adverse economic and
corporate developments; their yields will fluctuate over time and
either an economic downturn or rising interest rates could create
financial stress on the issuers of such bonds, possibly resulting
in their defaulting on their obligations); (ii) the payment
expectations of holders of such securities (high-yield, high-risk
bonds may contain redemption or call provisions which if
exercised in a period of lower interest rates would result in
their being replaced by lower yielding securities); (iii) the
liquidity of such securities (there may be little trading in
certain high-yield, high-risk bonds which may make it more
difficult to dispose of the securities and more difficult to
determine their fair value). See "Certain Risk Factors Relating
to
High-Yield, High-Risk Bonds" in the Statement of Additional
Information for a further discussion of the risks summarized
above.
The S&P 500 Index Portfolio is subject to equity market risk
(i.e., the possibility that common stock prices will decline
over short or even extended periods). The U.S. stock market
tends
to be cyclical, with periods when stock prices generally rise and
periods when stock prices generally decline.
To illustrate the volatility of stock prices, the following
table sets forth the average returns of the S&P 500 for the
period from 1926 to 1995:
<TABLE>
<CAPTION>
S&P 500 Returns (1926-1995)
Over Various Time Horizons
----------------------------
1 Year 5 Years 10 Years 20 Years
----- ------- -------- --------
<S> <C> <C> <C> <C>
Best +54.0% +23.9% +20.1% +16.9%
Worst -43.3 -12.5 - 0.9 +3.1
Average +12.5 +10.3 +10.7 +10.7
Standard Deviation 20.3 8.2 5.4 3.3
</TABLE>
As shown, common stocks have provided annual total returns
(capital appreciation plus dividend income) averaging 10.7%
for all 10-year periods from 1926 to 1995. Average return may
not
be useful for forecasting future returns in any particular
period, as stock returns are quite volatile from year to year.
Repurchase Agreements
A repurchase agreement is a transaction where a Portfolio
buys a security at one price and simultaneously agrees
to sell that same security back to the original owner at a higher
price. The Adviser reviews the creditworthiness of the other
party to the agreement and must find it satisfactory before
engaging in a repurchase agreement. A majority of such
agreements will mature in seven days or less. In the event of the
bankruptcy of the other party, the Portfolio could experience
delays in recovering its money, may realize only a partial
recovery or even no recovery, and may also incur disposition
costs. It is not anticipated that any Portfolio will regularly
utilize repurchase agreements extensively, since they are
intended
to be used to invest otherwise idle cash.
Reverse Repurchase Agreements
The S&P 500 Index Portfolio may enter into reverse
repurchase
agreements. Under reverse repurchase agreements, the Portfolio
transfers possession of portfolio securities to banks in return
for cash in an amount equal to a percentage of the portfolio
securities' market value and agrees to repurchase the securities
at a future date by repaying the cash with interest. The
Portfolio
retains the right to receive interest and principal payments from
the securities while they are in the possession of the financial
institutions. Cash or liquid high quality debt obligations from
the Portfolio's portfolio equal in value to the repurchase price
(including any accrued interest) will be segregated by the
Custodian on the Portfolio's records while a reverse repurchase
agreement is in effect.
Futures Contracts and Options on Futures Contracts
For hedging purposes, including protecting the price or
interest rate of securities that the Portfolio intends to buy,
the S&P 500 Index Portfolio may enter into futures contracts that
relate to securities in which it may directly invest and
indices comprised of such securities and may purchase and write
call and put options on such contracts. As a temporary
investment strategy until the Index Portfolio reaches $25 million
in net assets, the Index Portfolio may invest up to 100%
of its assets in such futures and/or options contracts.
Thereafter, the Portfolio may invest up to 20% of its assets in
such futures and/or options contracts.
A financial futures contract is a contract to buy or sell a
specified quantity of financial instruments such as U.S.
Treasury bills, notes and bonds, commercial paper and bank
certificates of deposit or the cash value of a financial
instrument index at a specified future date at a price agreed
upon
when the contract is made. A stock index futures contract is a
contract to buy or sell specified units of a stock index at a
specified future date at a price agreed upon when the contract is
made. The value of a unit is based on the current value of the
contract index. Under such contracts no delivery of the actual
stocks making up the index takes place. Rather, upon expiration
of the contract, settlement is made by exchanging cash in an
amount equal to the difference between the contract price and the
closing price of the index at expiration, net of variation
margin previously paid.
Substantially all futures contracts are closed out before
settlement date or called for cash settlement. A futures
contract is closed out by buying or selling an identical
offsetting futures contract. Upon entering into a futures
contract, the Portfolio is required to deposit an initial margin
with the Custodian for the benefit of the futures broker. The
initial margin serves as a "good faith" deposit that the
Portfolio
will honor their futures commitments. Subsequent payments
(called
"variation margin") to and from the broker are made on a daily
basis as the price of the underlying investment fluctuates.
In the event of the bankruptcy of the futures broker that holds
margin on behalf of the Portfolio, the Portfolio may be entitled
to return of margin owed to it only in proportion to the amount
received by the broker's other customers. The Adviser will
attempt to minimize this risk by monitoring the creditworthiness
of the futures brokers with which the Portfolio does
business.
Because the value of index futures depends primarily on the
value of their underlying indexes, the performance of the
broad-based contracts will generally reflect broad changes in
common stock prices. However, because the Portfolio may
not be invested in precisely the same proportion as the S&P 500,
it is likely that the price changes of the Portfolio's index
futures positions will not match the price changes of the
Portfolio's other investments.
Options on futures contracts give the purchaser the right to
assume a position at a specified price in a futures contract at
any time before expiration of the option contract.
Options
The Bond and Capital Portfolios may engage in certain
limited
options strategies as hedging techniques. These options
strategies
are limited to selling/writing call option contracts on U.S.
Treasury Securities and call option contracts on futures on such
securities held by the Portfolio (covered calls). The Portfolio
may purchase call option contracts to close out a position
acquired through the sale of a call option. The Portfolio will
only write options that are traded on a domestic exchange or
board
of trade.
The S&P 500 Index Portfolio may write and purchase covered
put and call options on securities in which it may directly
invest. Option transactions of the Portfolio will be conducted
so
that the total amount paid on premiums for all put and call
options outstanding will not exceed 5% of the value of the
Portfolio's total assets. Further, the Portfolio will not
write put or call options or combination thereof if, as a result,
the aggregate value of all securities or collateral used to cover
its outstanding options would exceed 25% of the value of the
Portfolio's total assets.
A call option is a short-term contract (generally nine
months
or less) which gives the purchaser of the option the right to
purchase from the seller of the option (the Portfolio) the
underlying security or futures contract at a fixed exercise
price at any time prior to the expiration of the option period
regardless of the market price of the underlying instrument
during the period. A futures contract obligates the buyer to
purchase and the seller to sell a predetermined amount of a
security at a predetermined price at a selected time in the
future. A call option on a futures contract gives the purchaser
the right to assume a "long" position in a futures contract,
which
means that if the option is exercised the seller of the option
(the Portfolio) would have the legal right (and obligation) to
sell the underlying security to the purchaser at the specified
price and future time.
As consideration for the call option, the buyer pays the
seller (the Portfolio) a premium, which the seller retains
whether or not the option is exercised. The selling of a call
option will benefit the Portfolio if, over the option period, the
underlying security or futures contract declines in value or does
not appreciate to a price higher than the total of the exercise
price and the premium. The Portfolio risks an opportunity loss of
profit if the underlying instrument appreciates to a price
higher than the exercise price and the premium. When the Adviser
anticipates that interest rates will increase, the Portfolio
may write call options in order to hedge against an expected
decline in value of portfolio securities.
The Portfolio may close out a position acquired through
selling a call option by buying a call option on the same
security or futures contract with the same exercise price and
expiration date as the option previously sold. A profit or loss
on the transaction will result depending on the premium paid for
buying the closing call option. If a call option on a futures
contract is exercised, the Portfolio intends to close out the
position immediately by entering into an offsetting transaction
or
by delivery of the underlying security (or other related
securities).
Options transactions may increase the Portfolio's portfolio
turnover rate and attendant transaction costs, and may
be somewhat more speculative than other investment strategies. It
may not always be possible to close out an options position,
and with respect to options on futures contracts there is a risk
of imperfect correlation between price movements of a futures
contract (or option thereon) and the underlying security. Options
strategies and related risks and limitations are described
in more detail in the Statement of Additional Information.
Options on Securities Indices
The S&P 500 Index Portfolio may purchase or sell options on
the S&P 500, subject to the limitations set forth above
and provided such options are traded on a national securities
exchange or in the over-the-counter market. Options on
securities indices are similar to options on securities except
there is no transfer of a security and settlement is in cash. A
call option on a securities index grants the purchaser of the
call, for a premium paid to the seller, the right to receive in
cash
an amount equal to the difference between the closing value of
the
index and the exercise price of the option times a multiplier
established by the exchange upon which the option is traded.
Collateralized Mortgage Obligations
The Portfolios other than the S&P 500 Index Portfolio may
invest in collateralized mortgage obligations ("CMOs")
or mortgage-backed bonds issued by financial institutions such as
commercial banks, savings and loan associations, mortgage
banks and securities broker-dealers (or affiliates of such
institutions established to issue these securities). To a
limited
extent, the Portfolios may also invest in a variety of more risky
CMOs, including interest only ("IOs"), principal only ("Pos"),
inverse floaters, or a combination of these securities. See
"Money Market Instruments and Investment Techniques" in the
Statement of Additional Information for a further discussion.
Lending Portfolio Securities
The S&P 500 Index Portfolio may lend portfolio securities
with a value up to 10% of its total assets. Such loans
may be terminated at any time. The Portfolio will continuously
maintain as collateral cash or obligations issued by the U.S.
government, its agencies or instrumentalities in an amount equal
to not less than 100% of the current market value (on a daily
marked-to-market basis) of the loaned securities plus declared
dividends and accrued interest.
The Portfolio will retain most rights of beneficial
ownership, including the right to receive dividends, interest or
other distributions on loaned securities. The Portfolio will
call
loans to vote proxies if a material issue affecting the
investment is to be voted upon. Should the borrower of the
securities fail financially, the Portfolio may experience delay
in recovering the securities or loss of rights in the collateral.
Loans are to be made only to borrowers that are deemed by
the Adviser to be of good financial standing.
Other Information
In addition to the investment policies described above, each
Portfolio's investment program is subject to further
restrictions which are described in the Statement of Additional
Information. Unless otherwise specified, each Portfolio's
investment objectives, policies and restrictions are not
fundamental policies and may be changed without shareholder
approval. Shareholder inquiries and requests for the Fund's
annual
report should be directed to the Fund at (513) 595-2600,
or at P.O. Box 40409, Cincinnati, Ohio 45240-0409.
THE FUND AND ITS MANAGEMENT
The Fund is a mutual fund, technically known as an open-end,
diversified, management investment company. The Board of
Directors
is responsible for supervising the business affairs and
investments of the Fund, which are managed on a daily basis by
the
Fund's investment adviser. The Fund was incorporated under the
laws of the State of Maryland on January 30, 1984. The Fund is a
series fund with four classes of stock, one for each Portfolio.
The S&P 500 Index Portfolio was authorized on September 15, 1995
and commenced operations on December 29, 1995. Union Central has
invested approximately $10.3 million in this Portfolio.
Investment Adviser
The Fund's investment adviser is Carillon Advisers, Inc.
(the
"Adviser"), P.O. Box 40407, Cincinnati, Ohio 45240. The Adviser
was incorporated under the laws of Ohio on August 18, 1986, as
successor to the advisory business of Carillon Investments, Inc.,
the investment adviser for the Fund since 1984. The Adviser is a
wholly-owned subsidiary of Union Central, a mutual life insurance
company organized in 1867 under the laws of Ohio. Subject to the
direction and authority of the Fund's Board of Directors, the
Adviser manages the investment and reinvestment of the assets of
each Portfolio and provides administrative services and manages
the Fund's business affairs.
George L. Clucas has been primarily responsible for the
day-to-day management of the Equity Portfolio since 1988
and the Capital Portfolio since its inception in 1990. Mr.
Clucas
is Director, President and Chief Executive Officer of the
Fund, and President and Chief Executive Officer of the Adviser.
He has been affiliated with the Adviser and Union Central
since 1987. Steven R. Sutermeister (since 1990) has been
primarily
responsible for the day-to-day management of the Bond
Portfolio. Mr. Sutermeister is Vice President of the Adviser and
has been affiliated with the Adviser and Union Central since
1990. Previously, he was Senior Vice President of Washington
Square Capital, Inc.
Advisory Fee
The Fund pays the Adviser, as full compensation for all
facilities and services furnished, a monthly fee computed
separately for each Portfolio on a daily basis, at an annual
rate,
as follows:
(a) for the Equity Portfolio .65% of the first $50,000,000,
.60% of the next $100,000,000, and .50% of all over
$150,000,000 of the current value of the net assets;
(b) for the Bond Portfolio .50% of the first $50,000,000,
.45% of the next $100,000,000, and .40% of all over
$150,000,000 of the current value of the net assets; and
(c) for the Capital Portfolio .75% of the first $50,000,000,
.65% of the next $100,000,000, and .50% of all over
$150,000,000 of the current value of the net assets.
(d) for the S&P 500 Index Portfolio .30% of the current
value of the net assets.
The fee paid for the Capital Portfolio is somewhat higher than
the average fee paid in the industry. However, breakpoints at
which fees are reduced are set at lower than normal amounts. It
is
the desire of the Fund and Adviser to reflect in the fee
arrangement the effort involved in advising the separate
Portfolios.
Expenses
The Fund's expenses are deducted from total income before
dividends are paid. These expenses, which are accrued
daily, include: the fee of the Adviser; taxes; legal, dividend
disbursing, bookkeeping and transfer agent, custodian and
auditing fees; and printing and other expenses relating to the
Fund's operations which are not expressly assumed by the
Adviser under its investment advisory agreement with the Fund.
Certain expenses are paid by the particular Portfolio that
incurs them, while other expenses are allocated among the
Portfolios on the basis of their relative size (i.e., the amount
of their net assets). The Adviser will pay any expenses of the
S&P 500 Index Portfolio, other than the advisory fee for that
Portfolio, to the extent that such expenses exceed .30% of that
Portfolio's net assets.
Capital Stock
The Fund currently has four classes of stock, one for each
Portfolio. Shares (including fractional shares) of each
Portfolio have equal rights with regard to voting, redemptions,
dividends, distributions, and liquidations with respect to that
Portfolio. When issued, shares are fully paid and nonassessable
and do not have preemptive or conversion rights or
cumulative voting rights. The Fund's sole shareholder, Union
Central, will vote Fund shares allocated to its registered
separate accounts in accordance with instructions received from
Contract Owners. However, by virtue of Fund shares
allocated to its other separate accounts, Union Central currently
has voting control and can make fundamental changes
regardless of the voting instructions received from Contract
Owners.
PURCHASE AND REDEMPTION OF SHARES
The Fund offers its shares, without sales charge, only for
purchase by Union Central and its separate accounts to fund
benefits under both variable annuity contracts and variable
universal life insurance policies. The Fund's Board of Directors
will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of variable annuity
contractowners investing in the Fund and interests of holders of
variable universal life insurance policies investing in the
Fund. Union Central will report any potential or existing
conflicts to the Directors of the Fund. If a material
irreconcilable conflict arises, Union Central will, at its own
cost, remedy such conflict up to and including establishing a new
registered management company and segregating the assets
underlying the variable annuity contracts and variable universal
life insurance policies. It is possible that at some later date
the Fund may offer shares to other investors. The Fund
continuously offers shares in each of its Portfolios at prices
equal to the respective net asset values of the shares of each
Portfolio.
The Fund redeems all full and fractional shares of the Fund for
cash. No redemption fee is charged. The redemption
price is the net asset value per share. Payment for shares
redeemed will generally be made within seven days after receipt
of a proper notice of redemption.
The net asset value of the shares of each Portfolio of the Fund
is determined once daily, Monday through Friday, as of the close
of regular trading on the New York Stock Exchange (normally 4:00
p.m., Eastern Time), when there are purchases or redemptions of
Fund shares, except (i) when the New York Stock Exchange is
closed
(currently New Year's Day, President's Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas
Day); (ii) the day following Thanksgiving Day; (iii) December 24,
1996; and (iv) any day on which changes in the value of the
Portfolio securities of the Fund will not materially affect the
current net asset value of the shares of a Portfolio. Such
determination is made by adding the values of all securities and
other assets of the Portfolio, subtracting liabilities and
expenses, and dividing by the number of shares of the Portfolio
outstanding. Expenses, including the investment advisory
fee payable to the Adviser, are accrued daily.
Securities held by the Portfolios, except for money market
instruments maturing in 60 days or less, are valued at their
market value if market quotations are readily available.
Otherwise, such securities are valued at fair value as determined
in good faith by the Board of Directors, although the actual
calculations may be made by persons acting pursuant to the
direction of the Board.
All money market instruments with a remaining maturity of 60
days or less are valued on an amortized cost basis.
DIVIDENDS AND DISTRIBUTIONS
It is the Fund's intention to distribute substantially all of
the net investment income, if any, of each Portfolio. For
dividend purposes, net investment income of the Equity, Bond,
Capital and S&P 500 Index Portfolios consists of all dividends
or interest earned by such Portfolio less estimated expenses
(including the investment advisory fee). All net realized capital
gains, if any, of each Portfolio are distributed periodically, no
less frequently than annually. All dividends and distributions
are reinvested in additional shares of the respective Portfolio
at
net asset value.
TAXES
Each Portfolio has qualified and has elected to be taxed as a
"regulated investment company" under the provisions of
Subchapter M of the Internal Revenue Code of 1986, as amended
(the
"Code"). If a Portfolio qualifies as a "regulated
investment company" and complies with the appropriate provisions
of the Code, the Portfolio will be relieved of federal
income tax on the amounts distributed.
Since the sole shareholder of the Fund is Union Central, no
discussion is included herein as to the federal income tax
consequences at the shareholder level. For information concerning
the federal tax consequences to purchasers of the contracts,
see the attached Prospectus for such contracts.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT
Firstar Trust Company, Mutual Fund Services, P.O. Box 701,
Milwaukee, Wisconsin 53201-0701, acts as Custodian
of the Fund's assets, and is its bookkeeping, transfer and
dividend disbursing agent.<PAGE>
APPENDIX
CORPORATE BOND RATINGS
Moody's Investors Services, Inc.
Aaa Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk
and are generally referred to as "gilt-edge." Interest payments
are protected by a large or by an exceptionally stable margin
and principal is secure. While the various protective elements
are
likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such
issues.
Aa Bonds which are rated Aa are judged to be of high quality by
all standards. Together with the Aaa group they
comprise what are generally known as high-grade bonds. They are
rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or
fluctuation
of protective elements may be of greater amplitude or there
may be other elements present which make the long-term risks
appear somewhat larger than in Aaa securities.
A Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium-grade
obligations. Factors giving security to principal and interest
are
considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa Bonds which are rated Baa are considered as medium-grade
obligations, i.e., they are neither highly protected
nor poorly secured. Interest payments and principal security
appear adequate for the present but certain protective elements
may be lacking or may be characteristically unreliable over any
great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as
well.
Ba Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well
assured. Often the protection of interest and principal payments
may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and
principal payments or of maintenance of other terms of the
contract over any long period of time may be small.
Caa Bonds which are rated Caa are of poor standing. Such issues
may be in default or there may be present elements
of danger with respect to principal or interest.
Ca Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in
default or have other marked shortcomings.
Standard & Poor's Corporation
AAA This is the highest rating assigned by Standard & Poor's to
a debt obligation and indicates an extremely strong capacity to
pay principal and interest.
AA Bonds rated AA also qualify as high-quality debt
obligations.
Capacity to pay principal and interest is very strong, and in the
majority of instances they differ from AAA issues only in a small
degree.
A Bonds rated A have a strong capacity to pay principal and
interest, although they are somewhat more susceptible
to the adverse effect of changes in circumstances and economic
conditions.
BBB Bonds rated BBB are regarded as having an adequate capacity
to pay principal and interest. Whereas they
normally exhibit protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a
weakened capacity to pay principal and interest for bonds in this
category than for bonds in the A category.
BB-B-CCC-CC Bonds rated BB, B, CCC, and CC are regarded, on
balance, as predominately speculative with respect
to the issuer's capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and CC the highest degree of
speculation. While such bonds will likely have some quality and
protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
COMMERCIAL PAPER RATINGS
Moody's Investors Services, Inc.
A Prime rating is the highest commercial paper rating assigned
by Moody's Investors Services, Inc. Issuers rated Prime are
further referred to by use of numbers 1, 2 and 3 to denote
relative strength within this highest classification. Among the
factors considered by Moody's in assigning ratings for an issuer
are the following: (1) management; (2) economic evaluation of the
industry and an appraisal of speculative type risks which may be
inherent in certain areas; (3) competition and customer
acceptance of products; (4) liquidity; (5) amount and quality of
long-term debt; (6) ten-year earnings trends; (7) financial
strength of a parent company and the relationships which exist
with the issuer; and (8) recognition by management of obligations
which may be present or may arise as a result of public interest
questions and preparations to meet such
obligations.
Standard & Poor's Corporation
Commercial paper rated A by Standard & Poor's Corporation has
the following characteristics: Liquidity ratios are
better than the industry average. Long-term senior debt rating is
"A" or better. In some cases, BBB credits may be
acceptable. The issuer has access to at least two additional
channels of borrowing. Basic earnings and cash flow have an
upward
trend with allowance made for unusual circumstances. Typically,
the issuer's industry is well established, the issuer has a
strong
position within its industry and the reliability and quality of
management is unquestioned. Issuers rated A are further referred
to by use of numbers 1, 2 and 3 to denote relative strength
within
this classification.
<PAGE>
<PAGE>
APPENDIX I FOR CROSS REFERENCING INFORMATION
Included here in the Prospectus booklet is a prospectus for the
MFS GROWTH WITH INCOME SERIES AND THE MFS HIGH INCOME SERIES,
which are two series of the MFS Variable Insurance Trust.
Cross reference the Prospectus in EDGAR filing for MFS VARIABLE
INSURANCE TRUST as follows:
File Date: May 3, 1996.
File No.: 33-74668
CIK No. 918571
Accession No. 912057-96-008079
<PAGE>
APPENDIX II FOR CROSS REFERENCING INFORMATION
Included here in the Prospectus booklet is a prospectus for the
SCUDDER MONEY MARKET PORTFOLIO, SCUDDER CAPITAL GROWTH PORTFOLIO
and SCUDDER INTERNATIONAL PORTFOLIO, which are portfolios of the
Scudder Variable Life Investment Fund.
Cross reference the Prospectus for SCUDDER VARIABLE LIFE
INVESTMENT FUND as filed with the SEC via EDGAR:
File Date: April 30, 1996.
CIK No. 0000764797
File Numbers: 811-4257 and 2-96461
Accession No. 950135-96-001848
<PAGE>
APPENDIX III FOR CROSS REFERENCING INFORMATION
Prospectus for the TCI GROWTH PORTFOLIO, a portfolio of TCI
Portfolios, Inc.
Cross reference the prospectus for TCI Portfolios, Inc. as filed
with the SEC via EDGAR:
File Date: September 27, 1996.
CIK No. 0000814680
Accession No. 0000814680-96-000014
<PAGE>
(back cover)
Union Central (logo)
Insurance and Investments
At Union Central, being Reliable for Generations (SM) is more
than
a slogan. It's our mission.
Securities products offered through registered representatives of
Carillon Investments, Inc., a subsidiary of The Union Central
Life
Insurance Company, P.O. Box 40409, Cincinnati, Ohio 45240-0409,
(800) 999-1840.
UC 2304 5/96
