(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, 1997Prospectuses
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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;
American Century Variable Portfolios, Inc.; and
Templeton Variable Products Series Fund
Distributed by: Carillon Investments, Inc.
P.O. Box 40409, Cincinnati, Ohio 45240
<PAGE>
EXCEL CHOICE: Insert in first section, Carillon Life Account
1997 Prospectus.
SUPPLEMENT DATED AUGUST 1, 1997
TO THE PROSPECTUS DATED MAY 1, 1997 OF
CARILLON LIFE ACCOUNT
Effective August 1, 1997, the prospectus for Carillon Life
Account dated May 1, 1997 (the "Prospectus") is amended by
including as a part thereof the following information regarding
policies issued in the State of New York:
1. Two Portfolios - the MFS Emerging Growth Series and the
Templeton International Fund Class 2 - are currently not
available.
2. The annual percentage limit on transfers from the guaranteed
account is changed from 20% to 25%. (See "Transfer Privilege" on
page 14 of the Prospectus, and "Transfers from the Guaranteed
Account" on page 16 of the Prospectus.)
3. The maximum monthly administrative charge applicable after
the first policy year is changed from $10 to $7.50. (See
"Monthly Administrative Charge" on page 18 of the Prospectus.)
4. Two rider benefits - the Guaranteed Death Benefit Rider and
the Total Disability Benefit Rider-Policy Continuation to
Maturity Date Not Guaranteed - are currently not available.
The foregoing provisions are only applicable to policies issued
in the State of New York.
New York Variations
August 1, 1997
<PAGE>
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 . The assets of each subaccount are invested in a
corresponding portfolio of Carillon Fund, Inc., Scudder Variable
Life Investment Fund, American Century Variable Portfolios, Inc.
(formerly known as TCI Portfolios, Inc.),or Templeton Variable
Products Series Fund. 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, 1997.
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>
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 .
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 .
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 .
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 .
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 . 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 . If a policy lapses while loans are
outstanding, adverse tax consequences may result. See "Tax
Considerations," page .
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
.
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 . 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 .)
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 .
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>
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 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 .
* If sufficient premiums are paid, a minimum guaranteed period
may keep the policy in force during the first three policy
years. See page .
* Under certain circumstances, which include taking excessive
loans, extra premium payments may be required to prevent lapse.
See page .
(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
.
* For state and local premium taxes (2.50% of premium
payments). See page .
(a down arrow is centered here between blocks)
NET PREMIUMS
* You direct the allocation of net premiums among twelve
subdivisions of the variable account and the guaranteed account.
See page for rules and limits on net premium allocations.
* The subdivisions are invested in corresponding portfolios of
Carillon Fund, Inc., Scudder Variable Life Investment Fund,
American Century Variable Portfolios, Inc., MFS Variable
Insurance Trust and Templeton Variable Products Series Fund.
See page . 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
American Century VP Capital Appreciation
Portfolio (formerly known as TCI Growth Portfolio
MFS Growth With Income Series
MFS High Income Series
MFS Emerging Growth Series
Templeton International Fund Class 2
* Interest is credited on amounts allocated to the guaranteed
account at a guaranteed minimum interest rate of 4%. See page
for rules and limits on guaranteed account allocations.
(a down arrow is centered here between blocks)
(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 .
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 .
(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 .
* 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 .
* 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 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 for rules and limits.
* Partial cash surrenders generally can be made provided
there
is sufficient remaining cash surrender value. See page
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 .
* Payment options are available. See page .
* Loans, partial cash surrenders, and surrenders in full may
have adverse tax consequences. See page .
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 .
* Flexibility to change the death benefit option and
specified
amount. See page for rules and limits.
* Supplemental and/or rider benefits may be available. See
page .
(end of graphic material)
<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 twelve
designated portfolios of five series-type mutual funds:
Carillon Fund, Inc. ("Carillon Fund"); Scudder Variable Life
Investment Fund ("Scudder Fund"); American Century Variable
Portfolios, Inc. ("American Century Fund"); MFS Variable
Insurance Trust ("MFS Fund"); and Templeton Variable Products
Series Fund ("Templeton 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 American Century Fund is American
Century Investment Management, Inc., the adviser to the American
Century Investments group. The investment adviser to the MFS
Fund is Massachusetts Financial Services Company. The
investment adviser to the Templeton Fund is Templeton Investment
Counsel, Inc.
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
American Century Fund: American Century VP Capital Appreciation
Portfolio. (The American Century Fund has four additional
portfolios that are not available through the policy.) The
separate account invests in three portfolios of the MFS Fund:
MFS Growth With Income Series, MFS High Income Series and MFS
Emerging Growth Series. (The MFS Fund has nine additional
portfolios that are not available through the policy.) The
separate account invests in one Portfolio of the Templeton Fund:
Templeton International Fund Class 2. (The Templeton Fund has
five 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 70% of the market value of all common
stocks publicly traded in the United States. The investment
adviser of the portfolio believes that the performance of the
S&P 500 is representative of the performance of publicly traded
common stocks in general.
* The S&P 500 is an unmanaged index of common stocks comprised
of 500 industrial, financial, utility and transportation
companies. "Standard & Poor's(R)", "S&P(R)", "S&P 500(R)",
"Standard & Poor's 500(R)", and "500" are trademarks of The
McGraw-Hill Companies, Inc. and have been licensed for use by
Carillon Fund. The Portfolio is not sponsored, endorsed, sold or
promoted by Standard & Poor's ("S&P"). S&P makes no
representation or warranty, express or implied, to the
beneficial owners of the Portfolio or any member of the public
regarding the advisability of investing in securities generally
or in the Portfolio particularly or the ability of the S&P 500
Index to track general stock market performance. S&P's only
relationship to Carillon Fund is the licensing of certain
trademarks and trade names of S&P and of the S&P 500 Index which
is determined, composed and calculated by S&P without regard to
Carillon Fund or the Portfolio. S&P has no obligation to take
the needs of Carillon Fund or the beneficial owners of the
Portfolio into consideration in determining, composing or
calculating the S&P 500 Index. S&P is not responsible for and
has not participated in the determination of the prices and
amount of the Portfolio or the timing of the issuance or sale of
the Portfolio or in the determination or calculation of the
equation by which the Portfolio is to be converted into cash.
S&P has no obligation or liability in connection with the
administration, marketing or trading of the Portfolio.
S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF
THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN AND S&P SHALL
HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS
THEREIN. S&P MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO
RESULTS TO BE OBTAINED BY CARILLON FUND, BENEFICIAL OWNERS OF
THE PORTFOLIO, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE
S&P 500 INDEX OR ANY DATA INCLUDED THEREIN. S&P MAKES NO EXPRESS
OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH
RESPECT TO THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN.
WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL S&P
HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR
CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED
OF THE POSSIBILITY OF SUCH DAMAGES. *
The 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 American Century VP Capital Appreciation Portfolio seeks
capital growth by investing primarily in common stocks that are
considered by management to have better-than-average prospects
for appreciation.
The MFS Growth With Income Series seeks to provide reasonable
current income and long-term growth of capital and income.
The MFS High Income Series seeks high current income by
investing primarily in a professionally managed diversified
portfolio of fixed income securities, some of which may involve
equity features. The MFS High Income Portfolio may invest up to
100% of its assets in lower-rated bonds commonly known as junk
bonds. BEFORE ALLOCATING ANY PORTION OF 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.
The MFS Emerging Growth Series seeks to provide long-term growth
of capital. Dividend and interest income from portfolio
securities, if any, is incidental to the Series' investment
objective of long-term growth of capital.
The Templeton International Fund Class 2 seeks long-term capital
growth through a flexible policy of investing in stocks and debt
obligations of companies and governments outside the United
States.
THERE 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.)
American Century Investment Management, Inc., the investment
adviser to the American Century 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 American Century 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 .
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 .) 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 a timely basis if your policy is
in jeopardy of becoming a modified endowment contract as a
result of premium payments. See "Tax Considerations," page .
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 .
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 .
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 . 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 ) 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 . 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 .
A grace period also may begin if policy debt becomes excessive.
See "Loan Repayment; Effect if not Repaid," page .
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 .
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 , 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. See "Daily Mortality and Expense
Risk Charge," page , and "Cost of Insurance Charge," page .
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.
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 ) 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
. 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.
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 .
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. See "Daily Mortality and Expense Risk Charge," page
, and "Cost of Insurance Charge," page .
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.
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.
<TABLE>
<CAPTION>
Carillon Fund, Inc. Annual Expenses+
S&P 500
Equity Bond Capital Index
Portfolio Portfolio Portfolio Portfolio
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Management Fees .57% .48% .68% .29%
Other Expenses .07% .14% .09% .30%
Total Carillon Fund, Inc.
Annual Expenses .64% .62% .77% .59%
</TABLE>
<TABLE>
<CAPTION>
Scudder Variable Life Investment Fund Annual Expenses+
Capital Money
Growth International Market
Portfolio Portfolio Portfolio
Class A Class A Class A
<S> <C> <C> <C>
Management Fees .48% .88% .37%
Other Expenses .05% .17% .09%
Total Scudder Variable Life
Investment Fund
Annual Expenses .53% 1.05% .46%
</TABLE>
<TABLE>
<CAPTION>
American Century Variable Portfolios, Inc.+
Growth Portfolio
----------------
<S> <C>
Management Fees 1.00%
Other Expenses++
Total American Century
Variable Portfolios, Inc.
Annual Expenses 1.00%
</TABLE>
<TABLE>
<CAPTION>
MFS Variable Insurance Trust Annual Expenses+(1)(2)
Emerging
Growth With High Income Growth
Income Series Series Series
------------- ----------- --------
<S> <C> <C> <C>
Management Fees .75% .75% .75%
Other Expenses
(after fee reductions) .25% .25% .25%
Total MFS Variable Insurance
Trust Annual Expenses 1.00% 1.00% 1.00%
</TABLE>
<TABLE>
<CAPTION>
Templeton Variable Products Series Fund Annual Expenses+
Templeton
International
Fund Class 2
-------------
<S> <C>
Management Fees .70%
Rule 12b-1 Fees .25%
Other Expenses .18%
Total Templeton Variable Products
Series Fund Annual Expenses 1.13%
</TABLE>
+ Because the Templeton International Fund Class 2 shares were
not offered until May 1, 1997, the figures for "Management Fees"
and "Other Expenses" are based on the historical expenses of the
Templeton International Fund Class 1 shares for the year ended
December 31, 1996. Class 1 management fees and total operating
expenses have been restated to reflect the management fee
schedule approved by shareholders and effective May 1, 1997.
Class 1 actual management fees and total fund operating expenses
before May 1, 1997 were lower. For each other Portfolio they are
based on the actual expenses incurred by the Portfolio for the
year ended December 31, 1996. Total Annual Expenses in excess of
.60% for the S&P 500 Index Portfolio are paid by the investment
adviser.
++ All expenses except brokerage, taxes, interest and fees and
expenses of non-interested person directors are paid by the
investment adviser.
(1) Each Series has an expense offset arrangement which reduces
the Series' custodian fee based upon the amount of cash
maintained by the Series with its custodian and dividend
disbursing agent, and may enter into other such arrangements and
directed brokerage arrangements (which would also have the effect
of reducing the Series' expenses). Any such fee reductions are
not reflected under "Other Expenses."
(2) The Adviser has agreed to bear expenses for each Series,
subject to reimbursement by each Series, such that each Series'
"Other Expenses" shall not exceed 0.25% of the average daily net
assets of the Series during the current fiscal year. See
"Information Concerning Shares of Each Series - Expenses (in the
Series' Prospectus). Otherwise, "Other Expenses" for the Emerging
Growth Series, the Growth With Income Series and the High Income
Series would be 0.41%, 1.32% and 0.87%, respectively, and "Total
Operating Expenses" would be 1.16%, 2.07% and 1.62%,
respectively, for these Series.
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
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, current or
retired employees ("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 ) 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 , and "Grace
Period," page .
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 ). It is also the
amount that is available upon full surrender of the policy (see
page ).
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 ) or, if elected, under a
payment option (see "Payment Options," page ). The death
benefit will be paid to the beneficiary. See "Selecting and
Changing the Beneficiary," page .
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 .
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 .
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
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
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 . 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 ).
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 , and "Payments from the Guaranteed
Account," page .
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 , 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 . 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 , and
"Payments from the Guaranteed Account," page . 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 . 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 .
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 , and
"Payments from the Guaranteed Account," page .
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 .
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 0.816% 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 Templeton International
Fund Class 2, 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 Templeton
International Fund Class 2, which commenced operations on May 1,
1997, the historical expenses of the Templeton International Fund
Class 1 shares for the period ended December 31, 1996, and the
Rule 12b-1 fees applicable to the Class 2 shares. 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 -1.554%,
4.353% and 10.260%, respectively, during the first ten policy
years, and -1.060%, 4.876%, and 10.812%, 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>
<TABLE>
<CAPTION>
THE UNION CENTRAL LIFE INSURANCE COMPANY
VARIABLE UNIVERSAL LIFE INSURANCE
MALE ISSUE AGE: 40 EXCEL CHOICE $400,000 SPECIFIED AMOUNT
PREFERRED DEATH BENEFIT OPTION A
VARIABLE INVESTMENT
$5,000 ANNUAL PREMIUM USING CURRENT CHARGES
<PAGE>
CASH
DEATH BENEFIT ACCOUNT VALUE SURRENDER VALUE
-------------------- -------------------- --------------------
PREMIUMS Assuming Hypothetical Assuming Hypothetical Assuming Hypothetical
ACCUM. Gross Annual Gross Annual Gross Annual
AT 5% Investment Return of Investment Return of Investment Return of
END INTEREST -------------------- -------------------- --------------------
OF PER 0% 6% 12% 0% 6% 12% 0% 6% 12%
YEAR 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 3726 3967 386 626 867
2 10762 400000 400000 400000 7106 7810 8544 3936 4640 5374
3 16551 400000 400000 400000 10622 12024 13542 7452 8854 10373
4 22628 400000 400000 400000 14027 16366 18999 10858 13196 15830
5 29010 400000 400000 400000 17327 20845 24967 14157 17675 21797
6 35710 400000 400000 400000 20522 25468 31500 17669 22615 28647
7 42746 400000 400000 400000 23621 30251 38668 21086 27715 36132
8 50133 400000 400000 400000 26626 35200 46538 24407 32981 44320
9 57889 400000 400000 400000 29536 40325 55187 27635 38423 53285
10 66034 400000 400000 400000 32348 45627 64694 30763 44042 63109
11 74586 400000 400000 400000 35342 51482 75643 34074 50214 74375
12 83565 400000 400000 400000 38239 57571 87751 37288 56620 86800
13 92993 400000 400000 400000 41029 63898 101142 40395 63264 100508
14 102893 400000 400000 400000 43708 70471 115962 43391 70154 115645
15 113287 400000 400000 400000 46264 77293 132368 46264 77293 132368
20 173596 400000 400000 400000 58376 116985 246782 58376 116985 246782
25 250567 400000 400000 536714 66103 165011 439929 66103 165011 439929
30 348804 400000 400000 881859 67770 224035 760223 67770 224035 760223
</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 -1.554%, 4.353%, and 10.260% respectively, during the first
ten policy years, and -1.060%, 4.876%, and 10.812%.
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 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>
<TABLE>
<CAPTION>
THE UNION CENTRAL LIFE INSURANCE COMPANY
VARIABLE UNIVERSAL LIFE INSURANCE
MALE ISSUE AGE: 40 EXCEL CHOICE $400,000 SPECIFIED AMOUNT
PREFERRED DEATH BENEFIT OPTION A
VARIABLE INVESTMENT
$5,000 ANNUAL PREMIUM USING GUARANTEED CHARGES
CASH
DEATH BENEFIT ACCOUNT VALUE SURRENDER VALUE
-------------------- -------------------- --------------------
PREMIUMS Assuming Hypothetical Assuming Hypothetical Assuming Hypothetical
ACCUM. Gross Annual Gross Annual Gross Annual
AT 5% Investment Return of Investment Return of Investment Return of
END INTEREST -------------------- -------------------- --------------------
OF PER 0% 6% 12% 0% 6% 12% 0% 6% 12%
YEAR 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 3408 3646 3885 308 546 785
2 10762 400000 400000 400000 6879 7571 8293 3709 4402 5124
3 16551 400000 400000 400000 10235 11607 13093 7066 8437 9923
4 22628 400000 400000 400000 13468 15746 18314 10298 12576 15145
5 29010 400000 400000 400000 16580 19996 24004 13410 16826 20835
6 35710 400000 400000 400000 19558 24349 30200 16706 21496 27347
7 42746 400000 400000 400000 22400 28803 36950 19864 26268 34414
8 50133 400000 400000 400000 25099 33360 44309 22880 31141 42091
9 57889 400000 400000 400000 27652 38018 52341 25751 36116 50440
10 66034 400000 400000 400000 30048 42771 61108 28464 41186 59523
11 74586 400000 400000 400000 32549 47968 71160 31282 46700 69892
12 83565 400000 400000 400000 34876 53289 82203 33925 52338 81252
13 92993 400000 400000 400000 37007 58720 94338 36373 58086 93705
14 102893 400000 400000 400000 38923 64252 107685 38606 63935 107368
15 113287 400000 400000 400000 40594 69866 122372 40594 69866 122372
20 173596 400000 400000 400000 44497 98786 222340 44497 98786 222340
25 250567 400000 400000 478593 37534 127353 392289 37534 127353 392289
30 348804 400000 400000 779679 10401 150646 672137 10401 150646 672137
</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 -1.554%, 4.353%, and 10.260% respectively, during the first
ten policy years, and -1.060%, 4.876%, and 10.812%.
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 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>
<TABLE>
<CAPTION>
THE UNION CENTRAL LIFE INSURANCE COMPANY
VARIABLE UNIVERSAL LIFE INSURANCE
MALE ISSUE AGE: 40 EXCEL CHOICE $400,000 SPECIFIED AMOUNT
PREFERRED DEATH BENEFIT OPTION B
VARIABLE INVESTMENT
$5,000 ANNUAL PREMIUM USING CURRENT CHARGES
CASH
DEATH BENEFIT ACCOUNT VALUE SURRENDER VALUE
-------------------- -------------------- --------------------
PREMIUMS Assuming Hypothetical Assuming Hypothetical Assuming Hypothetical
ACCUM. Gross Annual Gross Annual Gross Annual
AT 5% Investment Return of Investment Return of Investment Return of
END INTEREST -------------------- -------------------- --------------------
OF PER 0% 6% 12% 0% 6% 12% 0% 6% 12%
YEAR YEAR Gross Gross Gross Gross Gross Gross Gross Gross Gross
- ---- ---- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 5250 403477 403717 403958 3477 3717 3958 377 617 858
2 10762 407080 407782 408513 7080 7782 8513 3911 4612 5343
3 16551 410571 411965 413475 10571 11965 13475 7401 8795 10305
4 22628 413940 416261 418875 13940 16261 18875 10770 13091 15706
5 29010 417192 420677 424761 17192 20677 24761 14022 17508 21591
6 35710 420328 425218 431181 20328 25218 31181 17476 22366 28328
7 42746 423358 429897 438197 23358 29897 38197 20822 27361 35661
8 50133 426280 434717 445869 26280 34717 45869 24061 32499 43650
9 57889 429095 439684 454264 29095 39684 54264 27193 37782 52362
10 66034 431798 444796 463446 31798 44796 63446 30213 43212 61861
11 74586 434665 450419 473981 34665 50419 73981 33397 49151 72713
12 83565 437417 456230 485565 37417 56230 85565 36466 55279 84614
13 92993 440044 462224 498299 40044 62224 98299 39410 61590 97665
14 102893 442537 468402 512298 42537 68402 112298 42220 68085 111981
15 113287 444884 474757 527683 44884 74757 127683 44884 74757 127683
20 173596 455722 511001 633025 55722 111001 233025 55722 111001 233025
25 250567 461225 551471 802687 61225 151471 402687 61225 151471 402687
30 348804 459371 594691 1076880 59371 194691 676880 59371 194691 676880
</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 -1.554%, 4.353%, and 10.260% respectively, during the first
ten policy years, and -1.060%, 4.876%, and 10.812%.
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 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>
<TABLE>
<CAPTION>
THE UNION CENTRAL LIFE INSURANCE COMPANY
VARIABLE UNIVERSAL LIFE INSURANCE
MALE ISSUE AGE: 40 EXCEL CHOICE $400,000 SPECIFIED AMOUNT
PREFERRED DEATH BENEFIT OPTION B
VARIABLE INVESTMENT
$5,000 ANNUAL PREMIUM USING GUARANTEED CHARGES
CASH
DEATH BENEFIT ACCOUNT VALUE SURRENDER VALUE
-------------------- -------------------- --------------------
PREMIUMS Assuming Hypothetical Assuming Hypothetical Assuming Hypothetical
ACCUM. Gross Annual Gross Annual Gross Annual
AT 5% Investment Return of Investment Return of Investment Return of
END INTEREST -------------------- -------------------- --------------------
OF PER 0% 6% 12% 0% 6% 12% 0% 6% 12%
YEAR YEAR Gross Gross Gross Gross Gross Gross Gross Gross Gross
- ---- ---- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 5250 403399 403636 403874 3399 3636 3874 299 536 774
2 10762 406852 407541 408260 6852 7541 8260 3682 4371 5090
3 16551 410180 411543 413020 10180 11543 13020 7010 8373 9850
4 22628 413373 415632 418180 13373 15632 18180 10203 12463 15010
5 29010 416433 419814 423780 16433 19814 23780 13263 16644 20610
6 35710 419347 424076 429850 19347 24076 29850 16494 21223 26997
7 42746 422108 428412 436729 22108 28412 36429 19572 25877 33893
8 50133 424712 432819 443560 24712 32819 43560 22493 30600 41341
9 57889 427152 437291 451292 27152 37291 51292 25250 35389 49391
10 66034 429415 441814 459670 29415 41814 59670 27830 40229 58086
11 74586 431758 446725 469213 31758 46725 69213 30490 45457 67945
12 83565 433901 451694 479600 33901 51694 79600 32950 50743 78649
13 92993 435818 456697 490895 35818 56697 90895 35184 56063 90261
14 102893 437488 461709 503171 37488 61709 103171 37171 61392 102854
15 113287 438876 466693 516493 38876 66693 116493 38876 66693 116493
20 173596 440724 490083 602068 40724 90083 202068 40724 90083 202068
25 250567 430550 506093 729433 30550 106093 329433 30550 106093 329433
30 348804 400224 502661 915100 224 102661 515100 224 102661 515100
</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 -1.554%, 4.353%, and 10.260% respectively, during the first
ten policy years, and -1.060%, 4.876%, and 10.812%.
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 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>
<TABLE>
<CAPTION>
THE UNION CENTRAL LIFE INSURANCE COMPANY
VARIABLE UNIVERSAL LIFE INSURANCE
MALE ISSUE AGE: 50 EXCEL CHOICE $250,000 SPECIFIED AMOUNT
PREFERRED DEATH BENEFIT OPTION A
VARIABLE INVESTMENT
$5,300 ANNUAL PREMIUM USING CURRENT CHARGES
CASH
DEATH BENEFIT ACCOUNT VALUE SURRENDER VALUE
-------------------- -------------------- --------------------
PREMIUMS Assuming Hypothetical Assuming Hypothetical Assuming Hypothetical
ACCUM. Gross Annual Gross Annual Gross Annual
AT 5% Investment Return of Investment Return of Investment Return of
END INTEREST -------------------- -------------------- --------------------
OF PER 0% 6% 12% 0% 6% 12% 0% 6% 12%
YEAR 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 3618 3871 4125 865 1118 1372
2 11408 250000 250000 250000 7366 8104 8873 4541 5278 6047
3 17544 250000 250000 250000 10994 12461 14050 8168 9635 11224
4 23986 250000 250000 250000 14502 16945 19700 11676 14120 16874
5 30750 250000 250000 250000 17885 21559 25869 15059 18733 23044
6 37853 250000 250000 250000 21140 26306 32614 18597 23763 30071
7 45310 250000 250000 250000 24278 31202 40008 22017 28941 37747
8 53141 250000 250000 250000 27313 36270 48139 25335 34292 46161
9 61363 250000 250000 250000 30257 41529 57101 28561 39834 55406
10 69996 250000 250000 250000 33114 46997 66995 31701 45584 65583
11 79061 250000 250000 250000 36180 53068 78444 35049 51938 77314
12 88579 250000 250000 250000 39177 59427 91176 38329 58580 90328
13 98573 250000 250000 250000 42100 66087 105341 41535 65522 104776
14 109066 250000 250000 250000 44944 73064 121112 44661 72781 120829
15 120085 250000 250000 250000 47710 80378 138688 47710 80378 138688
20 184012 250000 250000 303524 59068 121826 261659 59068 121826 261659
25 265601 250000 250000 500489 65522 174357 467747 65522 174357 467747
30 369732 250000 255684 850747 59014 243508 810235 59014 243508 810235
</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 -1.554%, 4.353%, and 10.260% respectively, during the first
ten policy years, and -1.060%, 4.876%, and 10.812%.
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 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>
<TABLE>
<CAPTION>
THE UNION CENTRAL LIFE INSURANCE COMPANY
VARIABLE UNIVERSAL LIFE INSURANCE
MALE ISSUE AGE: 50 EXCEL CHOICE $250,000 SPECIFIED AMOUNT
PREFERRED DEATH BENEFIT OPTION A
VARIABLE INVESTMENT
$5,300 ANNUAL PREMIUM USING GUARANTEED CHARGES
CASH
DEATH BENEFIT ACCOUNT VALUE SURRENDER VALUE
-------------------- -------------------- --------------------
PREMIUMS Assuming Hypothetical Assuming Hypothetical Assuming
Hypothetical
ACCUM. Gross Annual Gross Annual Gross Annual
AT 5% Investment Return of Investment Return of Investment Return of
END INTEREST -------------------- -------------------- --------------------
OF PER 0% 6% 12% 0% 6% 12% 0% 6% 12%
YEAR 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 3631 3877 633 878 1124
2 11408 250000 250000 250000 6808 7514 8251 3982 4688 5425
3 17544 250000 250000 250000 10074 11463 12972 7248 8638 10146
4 23986 250000 250000 250000 13174 15471 18067 10348 12646 15242
5 30750 250000 250000 250000 16092 19525 23563 13266 16699 20737
6 37853 250000 250000 250000 18818 23615 29495 16275 21072 26952
7 45310 250000 250000 250000 21339 27732 35901 19078 25471 33641
8 53141 250000 250000 250000 23649 31872 42836 21671 29893 40858
9 61363 250000 250000 250000 25737 36028 50357 24041 34332 48661
10 69996 250000 250000 250000 27582 40183 58520 26169 38770 57107
11 79061 250000 250000 250000 29422 44663 67858 28291 43533 66728
12 88579 250000 250000 250000 30981 49150 78095 30133 48302 77247
13 98573 250000 250000 250000 32222 53620 89338 31657 53055 88773
14 109066 250000 250000 250000 33103 58043 101715 32820 57761 101433
15 120085 250000 250000 250000 33574 62388 115381 33574 62388 115381
20 184012 250000 250000 250000 28152 82075 211786 28152 82075 211786
25 265601 250000 250000 406077 952 93798 379511 952 93798 379511
30 369732 0 250000 689664 0 82710 656823 0 82710 656823
</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 -1.554%, 4.353%, and 10.260% respectively, during the first
ten policy years, and -1.060%, 4.876%, and 10.812%.
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 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>
<TABLE>
<CAPTION>
THE UNION CENTRAL LIFE INSURANCE COMPANY
VARIABLE UNIVERSAL LIFE INSURANCE
MALE ISSUE AGE: 50 EXCEL CHOICE $250,000 SPECIFIED AMOUNT
PREFERRED DEATH BENEFIT OPTION B
VARIABLE INVESTMENT
$5,300 ANNUAL PREMIUM USING CURRENT CHARGES
CASH
DEATH BENEFIT ACCOUNT VALUE SURRENDER VALUE
-------------------- -------------------- --------------------
PREMIUMS Assuming Hypothetical Assuming Hypothetical Assuming Hypothetical
ACCUM. Gross Annual Gross Annual Gross Annual
AT 5% Investment Return of Investment Return of Investment Return of
END INTEREST -------------------- -------------------- --------------------
OF PER 0% 6% 12% 0% 6% 12% 0% 6% 12%
YEAR YEAR Gross Gross Gross Gross Gross Gross Gross Gross Gross
- ---- ---- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> THE
1 5565 253601 253853 254105 3601 3853 4105 848 1100 1352
2 11408 257316 258049 258812 7316 8049 8812 4490 5223 5986
3 17544 260892 262343 263915 10892 12343 13915 8066 9517 11090
4 23986 264327 266736 269452 14327 16736 19452 11501 13911 16626
5 30750 267614 271224 275456 17614 21224 25456 14789 18398 22630
6 37853 270750 275802 281969 20750 25802 31969 18207 23259 29425
7 45310 273742 280482 289049 23742 30482 39049 21481 28221 36788
8 53141 276605 285281 296768 26605 35281 46768 24627 33303 44790
9 61363 279351 290214 305202 29351 40214 55202 27656 38519 53507
10 69996 281986 295291 314429 31986 45291 64429 30573 43879 63016
11 79061 284795 300889 325027 34795 50889 75027 33665 49759 73896
12 88579 287506 306688 336697 37506 56688 86697 36658 55841 85850
13 98573 290109 312691 349547 40109 62691 99547 39544 62126 98982
14 109066 292599 318896 363695 42599 68896 113695 42316 68614 113412
15 120085 294975 325314 379280 44975 75314 129280 44975 75314 129280
20 184012 303420 359002 482635 53420 109002 232635 53420 109002 232635
25 265601 304913 394283 646820 54913 144283 396820 54913 144283 396820
30 369732 289132 419393 898834 39132 169393 648834 39132 169393 648834
</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 -1.554%, 4.353%, and 10.260% respectively, during the first
ten policy years, and -1.060%, 4.876%, and 10.812%.
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 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>
<TABLE>
<CAPTION>
THE UNION CENTRAL LIFE INSURANCE COMPANY
VARIABLE UNIVERSAL LIFE INSURANCE
MALE ISSUE AGE: 50 EXCEL CHOICE $250,000 SPECIFIED AMOUNT
PREFERRED DEATH BENEFIT OPTION B
VARIABLE INVESTMENT
$5,300 ANNUAL PREMIUM USING GUARANTEED CHARGES
CASH
DEATH BENEFIT ACCOUNT VALUE SURRENDER VALUE
-------------------- -------------------- --------------------
PREMIUMS Assuming Hypothetical Assuming Hypothetical Assuming Hypothetical
ACCUM. Gross Annual Gross Annual Gross Annual
AT 5% Investment Return of Investment Return of Investment Return of
END INTEREST -------------------- -------------------- --------------------
OF PER 0% 6% 12% 0% 6% 12% 0% 6% 12%
YEAR YEAR Gross Gross Gross Gross Gross Gross Gross Gross Gross
- ---- ---- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 5565 253365 253609 253854 3365 3609 3854 612 856 1101
2 11408 256747 257447 258177 6747 7447 8177 3922 4621 5352
3 17544 259950 261321 262810 9950 11321 12810 7125 8496 9984
4 23986 262962 265218 267767 12962 15218 17767 10136 12393 14941
5 30750 265763 269116 273058 15763 19116 23058 12937 16290 20232
6 37853 268339 272995 278699 18339 22995 28699 15796 20452 26156
7 45310 270673 276836 284704 20673 26836 34704 18413 24575 32444
8 53141 272757 280622 291098 22757 30622 41098 20779 28644 39120
9 61363 274577 284335 297902 24577 34335 47902 22881 32639 46206
10 69996 276106 287938 305125 26106 37938 55125 24693 36525 53712
11 79061 277569 291724 313219 27569 41724 63219 26439 40594 62089
12 88579 278691 295358 321842 28691 45358 71842 27843 44510 70994
13 98573 279429 298786 331003 29429 48786 81003 28864 48221 80438
14 109066 279735 301943 340704 29735 51943 90704 29452 51661 90421
15 120085 279556 304758 350942 29556 54758 100942 29556 54758 100942
20 184012 269907 311258 410489 19907 61258 160489 19907 61258 160489
25 265601 0 294684 481645 0 44684 231645 0 44684 231645
30 369732 0 0 552104 0 0 302104 0 0 302104
</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 -1.554%, 4.353%, and 10.260% respectively, during the first
ten policy years, and -1.060%, 4.876%, and 10.812%.
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 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>
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 .
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 ). 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. Once terminated,
this rider will not be reinstated. 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, in Union Central's view, 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. You should
consult your tax adviser before you request accelerated payment.
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
is generally not 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, The E. W.
312 Walnut Street 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
Slippery Rock, PA 16057 Administration, Slippery Rock University of
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 and CEO, Eagle-Picher Industries, Inc.
Cincinnati, Ohio 45202
Larry R. Pike* Chairman, President and Chief Executive Officer,
Union Central
Myrtis H. Powell, Ph.D. Director, Union Central; Vice President of
Miami University Student Affairs, Miami University
113 Warfield Hall
Oxford, Ohio 45056
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 Clinic
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
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 Carillon Life Account at December 31, 1996 and for
the year then ended, and of The Union Central Life Insurance Company at
December 31, 1996 and 1995 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, L.L.P. of Washington, D.C. has provided advice on
certain matters relating to the federal securities laws.
Financial Statements
The financial statements of the separate account and 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
Carillon Life Account
December 31, 1996
<PAGE>
(letterhead)
ERNST & YOUNG LLP
1300 Chiquita Center
250 East Fifth Street
Cincinnati, Ohio 45202
Phone: 513 621 6454
Report of Independent Auditors
=============================================================
To the Contractholders of Carillon Life
Account and the Board of Directors of
The Union Central Life Insurance Company
We have audited the accompanying statements of assets and
liabilities of the Carillon Life Account (comprised of the
Carillon Fund, Inc. Equity, Capital, Bond, and S & P 500 Index
Subaccounts, the Scudder Variable Life Investment Fund Money
Market, Capital Growth, and International Subaccounts, MFS
Variable Insurance Trust Growth with Income and High Income
Subaccounts, and TCI Portfolios, Inc. Growth Subaccount) as of
December 31, 1996, the related statements of operations for the
year then ended and the statements of changes in net assets for
the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our
procedures included confirmation of the number of shares owned
as of December 31, 1996, by correspondence with the transfer
agents for Carillon Fund, Inc. Scudder Variable Life Investment
Fund, MFS Variable Insurance Trust, and TCI Portfolios, Inc. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of each of the subaccounts constituting the Carillon Life
Account at December 31, 1996, the results of their operations
and changes in net assets for the year then ended in conformity
with generally accepted accounting principles.
/s/ Ernst & Young LLP
March 5, 1997
<PAGE>
CARILLON LIFE ACCOUNT
STATEMENT OF ASSETS AND LIABILITIES
====================================================
DECEMBER 31, 1996
<TABLE>
<CAPTION>
Carillon Fund, Inc
(affiliated issuers)
S&P 500
Equity Capital Bond Index
Subaccount Subaccount Subaccount Subaccount
<S> <C> <C> <C> <C>
ASSETS
Investments in shares
of Carillon Fund, Inc.
at value (cost $290,249;
$37,220; $41,761; $558,108) $315,492 $38,788 $41,912 $595,950
-------- ------- ------- --------
Due from The Union Central
Life Insurance Co.
Total Assets $315,492 $38,788 $41,912 $595,950
======== ======= ======= ========
LIABILITIES
Payable to The Union Central
Life Insurance Co.
mortality and expense risk
charges $1,687 $159 $369 $3,025
NET ASSETS
(Contract Owners' Equity)
Equity Subaccount:
26,326.12 Accumulation units
@ $11.91990 313,805
Capital Subaccount:
3,475.76 Accumulation units
@ $11.11389 38,629
Bond Subaccount:
3,914.14 Accumulation units
@ $10.61350 41,543
S & P Subaccount:
50,735.13 Accumulation units
@ $11.68668 592,925
-------- ------- ------- --------
Total Liabilities and Net Assets $315,492 $38,788 $41,912 $595,950
======== ======= ======= ========
<PAGE>
Scudder Variable Life
Investment Fund
(unaffiliated issuers)
Money Capital
Market Growth International
Subaccount Subaccount Subaccount
---------- ---------- ----------
<S> <C> <C> <C>
ASSETS
Investments in securities of
unaffiliated issuers at value
(cost $ 222,740; $177,641
$195,916; $139,140; $40,560;
$273,206) $ 222,740 $ 192,136 $ 205,512
Due from The Union Central
Life Insurance Co.
--------- --------- ---------
Total Assets $ 222,740 $ 192,136 $ 205,512
--------- --------- ---------
LIABILITIES
Payable to The Union Central
Life Insurance Co.
mortality and expense
risk charges $ 3,658 $ 1,400 $ 1,777
NET ASSETS
(Contract Owners' Equity)
Money Market Subaccount:
21,025.06 Accumulation units
@ $10.42006 219,082
Capital Growth Subaccount:
16,877.42 Accumulation units
@ $11.30123 190,736
International Subaccount:
18,261.97 Accumulation units
@ $11.15627 203,735
--------- --------- ---------
Total Liabilities and Net Assets $222,740 $192,136 $205,512
========= ========= =========
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
MFS Variable
Insurance Trust TCI Portfolio, Inc.
(unaffiliated issuers) (unaffiliated issuer)
Growth
With High
Income Income Growth
Subaccount Subaccount Subaccount
---------- ---------- ----------
<S> <C> <C> <C>
ASSETS
Investments in securities
of unaffiliated issuers at
value (cost $ 222,740;
$177,641 $195,916; $139,140;
$40,560; $273,206) $146,226 $ 40,446 $257,956
Due from The Union Central
Life Insurance Co. $ 4,087
-------- -------- --------
Total Assets $146,226 $ 40,446 $262,043
======== ======== ========
LIABILITIES
Payable to The Union Central
Life Insurance Co.
mortality and expense
risk charges $ 3,683 $ 2,369 $ 799
NET ASSETS
(Contract Owners' Equity)
Growth with Income Subaccount:
12,377.12 Accumulation units
@ $11.51668 142,543
High Income Subaccount:
3,704.87 Accumulation units
@ $10.27768 38,077
Growth Subaccount:
27,704.30 Accumulation units
@ $9.42973 261,244
-------- -------- --------
Total Liabilities and Net Assets $146,226 $ 40,446 $262,043
======== ======== ========
</TABLE>
<PAGE>
CARILLON LIFE ACCOUNT
STATEMENT OF OPERATIONS
===================================================
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Carillon Fund, Inc
(affiliated issuers)
----------------------------------------------
Equity Capital Bond S&P 500 Index
Subaccount Subaccount Subaccount Subaccount
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend Income $ 2,494 $ 644 $ 1,160 $ 4,674
EXPENSES
Mortality and expense
risk charge 1,952 243 424 3,516
------- ------ ------- -------
NET INVESTMENT
INCOME(EXPENSE) 542 401 736 1,158
------- ------ ------- -------
REALIZED AND UNREALIZED
GAIN(LOSS) ON INVESTMENTS
Net realized gain(loss)
on invesetments 324 40 (73) 1,486
------- ------ ------- -------
Net unrealized
appreciation(depreciation)
of invesetments 25,243 1,569 151 37,842
------- ------ ------- -------
NET REALIZED
AND UNREALIZED
GAIN(LOSS) ON
INVESTMENTS 25,567 1,609 78 39,328
------- ------ ------- -------
NET INCREASE(DECREASE)
IN NET ASSETS FROM
OPERATIONS $26,109 $2,010 $ 814 $40,486
======= ====== ======= =======
</TABLE>
<TABLE>
<CAPTION>
Scudder Variable Life
Investment Fund
(unaffiliated issuers)
--------------------------------
Money Capital
Market Growth International
Subaccount Subaccount Subaccount
---------- ---------- ----------
<S> <C> <C> <C>
INVESTMENT INCOME
Dividend Income $ 4,564 $ 745 $ 6
EXPENSES
Mortality and expense
risk charge 3,658 1,404 1,877
------- ------- -------
NET INVESTMENT
INCOME(EXPENSE) 906 (659) (1,871)
------- ------- -------
REALIZED AND UNREALIZED
GAIN/(LOSS) ON INVESTMENTS
Net realized gain/(loss) 0 383 216
on invesetments
------- ------- -------
Net unrealized
appreciation(depreciation)
of invesetments 0 14,495 9,596
------- ------- -------
NET REALIZED AND UNREALIZED
GAIN(LOSS) ON INVESTMENTS 0 14,878 9,812
------- ------- -------
NET INCREASE/(DECREASE)
IN NET ASSETS FROM
OPERATIONS $ 906 $14,219 $7,941
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
MFS Variable
Insurance Trust TCI Portfolio, Inc.
(unaffiliated issuers) (unaffiliated issuers)
---------------------- --------------------
Growth High
with Income Income Growth
Subaccount Subaccount Subaccount
---------- ---------- ----------
<S> <C> <C> <C>
INVESTMENT INCOME
Dividend Income $ 2,505 $ 2,223 $ 1,673
EXPENSES
Mortality and expense
risk charge 3,747 2,510 2,647
------- ------- --------
NET INVESTMENT
INCOME(EXPENSE) (1,242) (287) (974)
------- ------- --------
REALIZED AND UNREALIZED
GAIN(LOSS) ON INVESTMENTS
Net realized gain(loss)
on invesetments 642 108 (669)
------- ------- --------
Net unrealized
appreciation(depreciation)
of invesetments 7,086 (115) (11,163)
------- ------- --------
NET REALIZED
AND UNREALIZED
GAIN(LOSS) ON
INVESTMENTS 7,728 (7) (11,832)
------- ------- --------
NET INCREASE(DECREASE)
IN NET ASSETS
FROM OPERATIONS $ 6,486 $ (294) $(12,806)
======= ======= ========
</TABLE>
The accompanying notes are an integral part
of the financial statements.
<PAGE>
CARILLON LIFE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS
==================================================
<TABLE>
<CAPTION>
Carillon Fund, Inc.
Equity Subaccount
----------------------------
Year Ended December 31, 1996
<S> <C>
OPERATIONS
Net investment income $ 542
Net realized gain on investments 324
Net unrealized appreciation of investments 25,243
--------
Net increase in net assets resulting from operations 26,109
--------
EQUITY TRANSACTIONS
Contract purchase payments 162,065
Transfers from other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company 163,877
Transfers to other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company (37,005)
Surrenders (1,241)
--------
Net proceeds from equity transactions 287,696
--------
NET INCREASE IN NET ASSETS 313,805
NET ASSETS (Beginning of year) 0
--------
NET ASSETS (End of year) $313,805
========
</TABLE>
The accompanying notes are an integral part
of the financial statements.
<PAGE>
<PAGE>
CARILLON LIFE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS
===================================================
<TABLE>
<CAPTION>
Carillon Fund, Inc.
Capital Subaccount
----------------------------
Year Ended December 31, 1996
<S> <C>
OPERATIONS
Net investment income $401
Net realized gain on investments 40
Net unrealized appreciation of investments 1,569
--------
Net increase in net assets resulting from operations 2,010
--------
EQUITY TRANSACTIONS
Contract purchase payments 19,390
Transfers from other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company 24,457
Transfers to other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company (6,529)
Surrenders (700)
--------
Net proceeds from equity transactions 36,619
--------
NET INCREASE IN NET ASSETS 38,629
NET ASSETS (Beginning of year) 0
--------
NET ASSETS (End of year) $ 38,629
========
</TABLE>
The accompanying notes are an integral part
of the financial statements.
<PAGE>
CARILLON LIFE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS
=================================================
<TABLE>
<CAPTION>
Carillon Fund, Inc.
Bond Subaccount
----------------------------
Year Ended December 31, 1996
<S> <C>
OPERATIONS
Net investment income $736
Net realized loss on investments (73)
Net unrealized appreciation of investments 151
--------
Net increase in net assets resulting from operations 814
--------
EQUITY TRANSACTIONS
Contract purchase payments 16,343
Transfers from other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company 31,830
Transfers to other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company (6,741)
Surrenders (703)
--------
Net proceeds from equity transactions 40,729
--------
NET INCREASE IN NET ASSETS 41,543
NET ASSETS (Beginning of year) 0
--------
NET ASSETS (End of year) $41,543
========
</TABLE>
The accompanying notes are an integral part
of the financial statements.
<PAGE>
CARILLON LIFE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS
=============================================
<TABLE>
<CAPTION>
Carillon Fund, Inc.
S&P 500 Index Subaccount
----------------------------
Year Ended December 31, 1996
<S> <C>
OPERATIONS
Net investment income $ 1,158
Net realized gain on investments 1,486
Net unrealized appreciation of investments 37,842
--------
Net increase in net assets resulting from operations 40,486
--------
EQUITY TRANSACTIONS
Contract purchase payments 350,824
Transfers from other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company 289,698
Transfers to other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company (87,357)
Surrenders (726)
--------
Net proceeds from equity transactions 552,439
--------
NET INCREASE IN NET ASSETS 592,925
NET ASSETS (Beginning of year) 0
--------
NET ASSETS (End of year) $592,925
========
</TABLE>
The accompanying notes are an integral part
of the financial statements.
<PAGE>
CARILLON LIFE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS
===============================================
<TABLE>
<CAPTION>
Scudder Variable Life Investment Fund
Money Market Subaccount
-------------------------------------
Year Ended December 31, 1996
<S> <C>
OPERATIONS
Net investment income $ 906
----------
Net increase in net assets resulting from operations 906
----------
EQUITY TRANSACTIONS
Contract purchase payments 1,382,766
Transfers from other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company 59,085
Transfers to other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company (1,223,675)
----------
Net proceeds from equity transactions 218,176
----------
NET INCREASE IN NET ASSETS 219,082
NET ASSETS (Beginning of year) 0
----------
NET ASSETS (End of year) $ 219,082
==========
</TABLE>
The accompanying notes are an integral part
of the financial statements.
<PAGE>
CARILLON LIFE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS
============================================
<TABLE>
<CAPTION>
Scudder Variable Life Investment Fund
Capital Growth Subaccount
-------------------------------------
Year Ended December 31, 1996
<S> <C>
OPERATIONS
Net investment expense ($659)
Net realized gain on investments 383
Net unrealized appreciation of investments 14,495
--------
Net increase in net assets resulting from operations 14,219
--------
EQUITY TRANSACTIONS
Contract purchase payments 88,184
Transfers from other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company 117,736
Transfers to other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company (28,683)
Surrenders (721)
--------
Net proceeds from equity transactions 176,517
--------
NET INCREASE IN NET ASSETS 190,736
NET ASSETS (Beginning of year) 0
--------
NET ASSETS (End of year) $190,736
========
</TABLE>
The accompanying notes are an integral part
of the financial statements.
<PAGE>
CARILLON LIFE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS
=============================================
<TABLE>
<CAPTION>
Scudder Variable Life Investment Fund
International Subaccount
-------------------------------------
Year Ended December 31, 1996
<S> <C>
OPERATIONS
Net investment expense ($1,871)
Net realized gain on investments 216
Net unrealized appreciation of investments 9,596
--------
Net increase in net assets resulting from operations 7,941
--------
EQUITY TRANSACTIONS
Contract purchase payments 78,115
Transfers from other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company 147,720
Transfers to other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company (28,424)
Surrenders (1,617)
--------
Net proceeds from equity transactions 195,794
--------
NET INCREASE IN NET ASSETS 203,735
NET ASSETS (Beginning of year) 0
--------
NET ASSETS (End of year) $203,735
========
</TABLE>
The accompanying notes are an integral part
of the financial statements.
<PAGE>
CARILLON LIFE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS
=============================================
<TABLE>
<CAPTION>
MFS Variable Insurance Trust
Growth with Income Subaccount
-----------------------------
Year Ended December 31, 1996
<S> <C>
OPERATIONS
Net investment expense ($1,242)
Net realized gain on investments 642
Net unrealized appreciation of investments 7,086
--------
Net increase in net assets resulting from operations 6,486
--------
EQUITY TRANSACTIONS
Contract purchase payments 73,157
Transfers from other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company 82,680
Transfers to other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company (19,053)
Surrenders (726)
--------
Net proceeds from equity transactions 136,057
--------
NET INCREASE IN NET ASSETS 142,543
NET ASSETS (Beginning of year) 0
--------
NET ASSETS (End of year) $142,543
========
</TABLE>
The accompanying notes are an integral part
of the financial statements.
<PAGE>
<PAGE>
CARILLON LIFE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS
=============================================
<TABLE>
<CAPTION>
MFS Variable Insurance Trust
High Income Subaccount
-----------------------------
Year Ended December 31, 1996
<S> <C>
OPERATIONS
Net investment expense ($287)
Net realized gain on investments 108
Net unrealized depreciation of investments (115)
--------
Net increase in net assets resulting from operations (294)
--------
EQUITY TRANSACTIONS
Contract purchase payments 16,133
Transfers from other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company 28,673
Transfers to other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company (5,463)
Surrenders (972)
--------
Net proceeds from equity transactions 38,371
--------
NET INCREASE IN NET ASSETS 38,077
NET ASSETS (Beginning of year) 0
--------
NET ASSETS (End of year) $38,077
========
</TABLE>
The accompanying notes are an integral part
of the financial statements.
<PAGE>
CARILLON LIFE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS
=================================================
<TABLE>
<CAPTION>
TCI Portfolio, Inc.
Growth Subaccount
----------------------------
Year Ended December 31, 1996
<S> <C>
OPERATIONS
Net investment expense ($974)
Net realized loss on investments (669)
Net unrealized depreciation of investments (11,163)
--------
Net increase in net assets resulting from operations (12,806)
--------
EQUITY TRANSACTIONS
Contract purchase payments 141,190
Transfers from other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company 176,594
Transfers to other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company (43,069)
Surrenders (665)
--------
Net proceeds from equity transactions 274,050
--------
NET INCREASE IN NET ASSETS 261,244
NET ASSETS (Beginning of year) 0
--------
NET ASSETS (End of year) $261,244
========
</TABLE>
The accompanying notes are an integral part
of the financial statements.
<PAGE>
CARILLON LIFE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
=============================================================
DECEMBER 31, 1996
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
Carillon Life Account of The Union Central Life Insurance
Company (the Life Account) is a separate account registered
under the Investment Company Act of 1940, as amended, as a unit
investment trust. The Life Account was established on July 10,
1995 under Ohio law and by resolution of the Board of
Directors of The Union Central life Insurance Company (Union
Central) and commenced operations on December 29, 1995.
Carillon Account is comprised of ten subaccounts, each of which
invests in a corresponding Portfolio of Carillon Fund, Inc.,
Scudder Variable Life Investment Fund, MFS Variable Insurance
Trust, or TCI Portfolios, Inc. (the "Funds"). The Funds are
no-load, diversified, open-end management investment companies
registered under the Investment Company Act of 1940, as
amended. The shares of Carillon Fund, Inc. are sold only to
Union Central and its separate accounts to fund the benefits
under certain variable annuity contracts. Carillon
Investments, Inc., a broker-dealer registered under the
Securities Exchange Act of 1934 and a wholly-owned subsidiary
of Union Central , serves as the distributor of variable
annuity contracts issued by Carillon Fund, Inc. The shares of
Scudder Variable Life Investment Fund, MFS Variable Insurance
Trust, and TCI Portfolios, Inc. are available and are being
marketed exclusively as a pooled funding vehicle for life
insurance companies writing all types of variable life
insurance policies and variable annuity contracts. Scudder
Investor Services, Inc., a wholly-owned subsidiary of Scudder
Stevens & Clark Inc. serves as distributor of variable life
insurance policies and variable annuity contracts issued by
Scudder Variable Life Investment Fund; MFS Fund Distributors,
Inc., a wholly-owned subsidiary of Massachusetts Financial
Services Company serves as distributor of shares issued by the
MFS Variable Insurance Trust. Twentieth Century Securities,
Inc. a wholly-owned subsidiary of Twentieth Century Companies,
Inc. serves as the distributor of variable life insurance
contracts issued by TCI Portfolios, Inc.
The assets of the Life Account are segregated from the other
assets of Union Central and the investment performance of the
Account is independent of the investment performance of both
Union Central's general assets and other separate accounts.
Investment valuation - Assets of the Life Account are invested
in shares of the Funds at the net asset value of the Fund
shares. Investments in Fund shares are subsequently valued at
the net asset value of the Fund shares held.
Securities transactions and investment income - Securities
transactions are recorded on the trade date (the date the order
to buy or sell is executed), and dividend income is recorded on
the ex-dividend date. Gains and losses on sales of Fund shares
are calculated on the first-in, first-out basis for financial
reporting and tax purposes. All dividends and distributions
from the Subaccount are reinvested in additional shares of the
respective Subaccount at the net asset value per share.
Federal income taxes - The operations of the Life Account form
a part of and are taxed with the operations of Union Central.
Union Central is taxed as a life insurance company under
Subchapter L of the Internal Revenue Code. Under existing
federal income tax law, separate account investment income and
capital gains are not taxed to the extent they are applied to
increase reserves under a contract issued in connection with
the Life Account. Investment income and realized capital gains
and losses on assets of the Life Account are automatically
applied to increase or decrease reserves under the contract.
Accordingly, no provision for federal income taxes has been
made in these financial statements.
NOTE 2 - INVESTMENT IN AFFILIATED & NON-AFFILIATED FUNDS
The subaccounts of the Life Account held the following
investment in the corresponding Portfolios of Carillon Fund,
Inc., Scudder Variable Life Investment Fund, MFS Variable
Insurance Trust, and TCI Portfolios, Inc. as of December 31,
1996:
<TABLE>
<CAPTION>
Carillon Fund Inc.
---------------------------------------------
Equity Capital Bond S&P 500
Subaccount Subaccount Subaccount Subaccount
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net asset value per share $ 19.45 $ 14.95 $ 10.91 $ 12.13
Number of shares 16,221 2,594 3,842 49,130
</TABLE>
<TABLE>
<CAPTION>
Scudder Variable Life
Investment Fund
-------------------------------------
Money Capital
Market Growth International
Subaccount Subaccount Subaccount
---------- ---------- ----------
<S> <C> <C> <C>
Net asset value per share $ 1.00 $ 16.50 $ 13.25
Number of shares 222,740 11,645 15,510
</TABLE>
<TABLE>
<CAPTION>
MFS Variable Insurance Trust
--------------------------------
Growth with Income High Income
Subaccount Subaccount
---------- ----------
<S> <C> <C>
Net asset value per share $ 12.98 $ 10.87
Number of shares 11,265 3,721
</TABLE>
<TABLE>
<CAPTION>
TCI Portfolio, Inc.
-------------------
Growth
Subaccount
----------
<S> <C>
Net asset value per share $ 10.24
Number of shares 25,590
</TABLE>
NOTE 3 - ACCOUNT CHARGE
Mortality and expense risk charge - A mortality and expense
risk charge for Union Central at an annual rate of .75% of the
net assets during the first ten policy years and .25% of net
assets thereafter of the Life Account is determined daily. 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 assumed by Union
Central is that expenses incurred in assuming and administering
the policies and the separate account will exceed the amounts
realized from the administrative charges assessed against the
policies.
<PAGE>
NOTE 4 - SELECTED PER UNIT DATA
The following selected per unit data is computed on the basis
of an accumulation unit outstanding at December 31, of year
except as noted.
<TABLE>
<CAPTION>
1996
----
<S> <C>
CARILLON FUND, INC.
EQUITY SUBACCOUNT
Accumulation unit value $11.92
Number of accumulation units outstanding,
end of period 26,326.12
CAPITAL SUBACCOUNT
Accumulation unit value $11.11
Number of accumulation units outstanding,
end of period 3,475.76
BOND SUBACCOUNT
Accumulation unit value $10.61
Number of accumulation units outstanding,
end of period 3,914.14
S&P 500 SUBACCOUNT
Accumulation unit value $11.69
Number of accumulation units outstanding,
end of period 50,735.13
SCUDDER VARIABLE LIFE INVESTMENT FUND
MONEY MARKET SUBACCOUNT
Accumulation unit value $10.42
Number of accumulation units outstanding,
end of period 21,025.06
CAPITAL GROWTH SUBACCOUNT
Accumulation unit value $11.30
Number of accumulation units outstanding,
end of period 16,877.42
INTERNATIONAL SUBACCOUNT
Accumulation unit value $11.16
Number of accumulation units outstanding,
end of period 18,261.97
MFS VARIABLE INSURANCE TRUST
GROWTH WITH INCOME SUBACCOUNT
Accumulation unit value $11.52
Number of accumulation units outstanding,
end of period 12,377.12
HIGH INCOME SUBACCOUNT
Accumulation unit value $10.28
Number of accumulation units outstanding,
end of period 3,704.87
TCI PORTFOLIO, INC.
GROWTH SUBACCOUNT
Accumulation unit value $9.43
Number of accumulation units outstanding,
end of period 27,704.30
</TABLE>
<PAGE>
Consolidated Financial Statements
The Union Central Life Insurance Company
Years ended December 31, 1996 and 1995
with Report of Independent Auditors
<PAGE>
THE UNION CENTRAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 1996 and 1995
CONTENTS
Page
Report of Independent Auditors..........................63
Consolidated Balance Sheets as of
December 31, 1996 and 1995..............................64
Consolidated Statements of Income for the years ended
December 31, 1996 and 1995..............................65
Consolidated Statements of Equity for the years ended
December 31, 1996 and 1995..............................66
Consolidated Statements of Cash Flows for the years
ended December 31, 1996 and 1995........................67
Notes to Consolidated Financial Statements..............68
<PAGE>
(letterhead)
ERNST & YOUNG LLP
1300 Chiquita Center
250 East Fifth Street
Cincinnati, Ohio 45202
Phone: 513 621 6454
Report of Independent Auditors
To the Board of Directors
The Union Central Life Insurance Company
We have audited the accompanying consolidated balance sheets of
The Union Central Life Insurance Company and subsidiaries as of
December 31, 1996 and 1995, and the related consolidated
statements of income, equity, and cash flows for the years then
ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of The Union Central Life Insurance Company
and subsidiaries at December 31, 1996, and 1995, and the
consolidated results of their operations and their cash flows
for the years then ended in conformity with generally accepted
accounting principles.
/s/ ERNST & Young LLP
March 24, 1997
<PAGE>
The Union Central Life Insurance Company and Subsidiaries
Consolidated Balance Sheets
(in thousands)
<TABLE>
<CAPTION>
December 31,
-----------------------
1996 1995
---------- ----------
<S> <C> <C>
ASSETS
Investments:
Fixed maturities available-for-sale
at fair value (amortized cost: $2,749,772 $2,817,219
1996 - $2,727,178; and 1995 - $2,744,458)
Equity securities available-for-sale
at fair value
(cost: 1996 - $54,504 and 1995 - $45,998) 61,458 51,824
Cash and short-term investments 1,040 11,438
Other invested assets 42,490 34,058
Mortgage loans 663,351 591,978
Real estate 58,601 61,196
Policy loans 206,889 207,855
---------- ----------
Total investments 3,783,601 3,775,568
Accrued investment income 47,491 46,868
Deferred policy acquisition costs 414,458 383,563
Property, plant and equipment, at cost,
less accumulated depreciation
(1996 - $55,798 and 1995 - $53,726) 22,561 21,679
Federal income tax recoverable 6,394 --
Other assets 89,251 79,141
Separate account assets 1,000,469 729,792
---------- ----------
Total assets $5,364,225 $5,036,611
========== ==========
LIABILITIES AND EQUITY
Policy liabilities:
Future policy benefits $1,892,875 $1,861,520
Deposit funds 1,568,566 1,595,829
Policy and contract claims 28,413 28,587
Policyholders' dividends 37,492 35,957
---------- ----------
Total policy liabilities 3,527,346 3,521,893
Deferred revenue 130,176 134,464
Accrued commissions, expenses and taxes 16,373 24,461
Other liabilities 49,604 41,768
Deferred federal income taxes 35,149 42,892
Federal income tax payable -- 890
Surplus notes payable 49,740 --
Separate account liabilities 1,014,960 735,334
---------- ----------
Total liabilities 4,823,348 4,501,702
MINORITY INTEREST IN SUBSIDIARY'S EQUITY 46,076 49,165
EQUITY
Policyholders' equity 481,799 456,203
Unrealized gain on
available-for-sale securities 13,002 29,541
---------- ----------
Total equity 494,801 485,744
---------- ----------
Total liabilities and equity $5,364,225 $5,036,611
========== ==========
</TABLE>
The accompanying notes are an integral part of
the financial statements.
<PAGE>
THE UNION CENTRAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands)
<TABLE>
<CAPTION>
Year ended December 31
----------------------
1996 1995
---- ----
<S> <C> <C>
REVENUE
Insurance revenue:
Traditional insurance premiums $136,448 $133,068
Universal life policy charges 77,149 69,088
Annuities 34,740 35,128
Net investment income 296,912 290,548
Net realized losses on investments (19,113) (7,147)
Other 6,162 7,074
-------- --------
Total revenue 532,298 527,759
BENEFITS AND EXPENSES
Benefits 184,368 170,208
Increase in reserves for
future policy benefits 2,985 12,132
Interest expense:
Universal life 50,461 47,683
Investment products 95,654 100,081
Underwriting, acquisition
and insurance expenses 130,582 135,273
Policyholders' dividends 17,306 20,247
-------- --------
Total benefits and expenses 481,356 485,624
Income before federal income taxes
and minority interest in
subsidiary (income) loss 50,942 42,135
Federal income tax expense 22,642 14,347
-------- --------
Income before minority interest in
subsidiary (income) loss 28,300 27,788
Minority interest in
subsidiary (income) loss (2,704) 1,458
-------- --------
Net Income $ 25,596 $ 29,246
======== ========
</TABLE>
The accompanying notes are an integral part of the
financial statements.
<PAGE>
THE UNION CENTRAL LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF EQUITY
(in thousands)
<TABLE>
<CAPTION>
Unrealized
Gain (Loss)
on Available-
Policyholders' for-Sale Total
Equity Securities Equity
------------- ------------- ---------
<S> <C> <C> <C>
Balance at
December 31, 1994 $ 426,957 $(100,401) $ 326,556
Net income 29,246 -- 29,246
Net unrealized
appreciation -- 129,942 129,942
--------- --------- ---------
Balance at
December 31, 1995 456,203 29,541 485,744
--------- --------- ---------
Net income 25,596 -- 25,596
Net unrealized
depreciation -- (16,539) (16,539)
--------- --------- ---------
Balance at
December 31, 1996 $ 481,799 $ 13,002 $ 494,801
========= ========= =========
</TABLE>
The accompanying notes are an integral part of the
financial statements.
<PAGE>
THE UNION CENTRAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Year ended December 31
----------------------
1996 1995
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 25,596 $ 29,246
Adjustments to net income not affecting cash:
Interest credited to interest
sensitive products 95,654 100,081
Interest credited to universal life policies 50,461 47,683
Accrual of discounts on investments, net (1,487) (4,443)
Net realized losses on investments 19,113 7,147
Depreciation 6,472 4,019
Amortization of deferred policy
acquisition costs 33,523 35,744
Amortization of deferred revenue (6,476) (8,974)
Deferred federal income taxes (benefit) 4,134 (2,429)
Change in operating assets and liabilities:
Accrued investment income (623) (2,885)
Policy cost deferred (40,471) (41,246)
Revenue deferred 2,188 4,656
Policy liabilities (72,417) (41,922)
Federal income tax recoverable (payable) (54) 845
Change in other liabilities (17,127) (12,634)
Other items, net 11,557 5,048
---------- ----------
Cash Provided by Operating Activities 110,043 119,936
---------- ----------
INVESTING ACTIVITIES
Costs of investments acquired (3,393,082) 2,879,846)
Proceeds from sale, maturity or repayment of
investments 3,297,247 2,779,000
(Increase) decrease in policy loans 966 (1,037)
Purchases of property and equipment, net (6,986) (4,249)
---------- ----------
Cash Used in Investing Activities (101,855) (106,132)
---------- ----------
FINANCING ACTIVITIES
Receipts from universal life and
investment contracts 534,974 514,772
Withdrawals from universal life and
investment contracts (603,300) (529,487)
Cash provided by issuance of surplus notes 49,740 --
---------- ----------
Cash Used by Financing Activities (18,586) (14,715)
---------- ----------
Decrease in cash and short term investments (10,398) (911)
---------- ----------
Cash and short term investments
at beginning of year 11,438 12,349
---------- ----------
Cash and short term investments
at end of year $ 1,040 $ 11,438
========== ==========
Supplemental disclosure of
cash flow information:
Cash paid during the year
for federal income taxes $27,905 $20,785
</TABLE>
The accompanying notes are an integral part of the
financial statements.
<PAGE>
THE UNION CENTRAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Organization
The accompanying consolidated financial statements have been
prepared in accordance with generally accepted accounting
principles (GAAP) and include the accounts of The Union Central
Life Insurance Company (Union Central) and its subsidiaries: The
Manhattan Life Insurance Company (Manhattan Life), a mixed
charter life insurance company of which Union Central owns 73% of
the outstanding guarantee capital shares, Carillon Advisers, Inc.
(CAI), a registered investment advisor company, wholly owned,
Carillon Investments, Inc. (CII) a broker dealer, wholly owned,
and Carillon Marketing Agency, Inc. (CMAI) an insurance agency,
wholly owned. The consolidated entity will be referred to as
"the Company". All significant intercompany accounts and
transactions have been eliminated in the accompanying
consolidated financial statements. Union Central also has the
following unconsolidated investment affiliates: Carillon Fund,
Inc., a variable products mutual fund consisting of four
investment portfolios (equity, bond, asset allocation, and S&P
500 indexed); Carillon Investment Trust, a mutual fund; and
Summit Investment Trust, a high-yield mutual fund. In addition,
Carillon Advisors, Inc., owns 51% of First Summit Capital
Management, a registered investment advisor.
The Company provides a wide spectrum of financial products and
related services for the benefit of individual, group and pension
policyholders. Such products and services include insurance to
provide for financial needs resulting from loss of life or income
and management of funds accumulated for preretirement and
retirement needs.
The Company is licensed to do business in all 50 states in the
United States.
The preparation of financial statements requires management to
make estimates and assumptions that affect amounts reported in
the financial statements and accompanying notes. Such estimates
and assumptions could change in the future as more information
becomes known, which could impact the amounts reported and
disclosed herein.
Accounting Changes
On November 15, 1995, the Financial Accounting Standards Board
(FASB) issued a Special Report "A Guide to Implemention of
Statement 115 on Accounting for Certain Investments in Debt and
Equity Securities"(SFAS 115 Special Report). In accordance with
provisions in the SFAS 115 Special Report, the Company
reclassified all "Held-to-Maturity" securities to "Available-for-
Sale." The adoption had an immaterial effect on the Company's
equity.
In 1995, the Company adopted FASB Statement No. 114," Accounting
by Creditors for Impairment of a Loan" as amended by FASB
Statement No. 118, "Accounting by Creditors for Impairment of a
Loan-Income Recognition and Disclosures." The effect of adoption
was immaterial.
Investments
Fixed maturity and equity securities classified as available-for-
sale are carried at fair value with net unrealized gains and
losses reported as a separate component of equity.
Other investments are reported on the following bases:
* Mortgage loans on real estate are carried at their
aggregate unpaid balance less unamortized discount and
less an allowance for possible losses.
* Real estate acquired through foreclosure is carried at
the lower of cost or its net realizable value.
* Policy loans are reported at unpaid balances.
* Cash and short-term investments presented on the Balance
Sheets consist of cash-in-bank, cash-in-transit and
commercial paper that has a maturity date of 90 days or
less from the date acquired.
The fair values of fixed maturity and equity securities represent
quoted market values from published sources or calculated market
values using the "yield method" if no quoted market values are
obtainable.
Realized gains and losses, net of related deferred policy
acquisition cost amortization, on sales of investments, and
declines in the value of investments judged to be other-than-
temporary, are recognized on a specific identification basis.
Interest is not accrued on mortgage loans or bonds for which
principal or interest payments are determined to be
uncollectible.
Deferred Policy Acquisition Costs
The costs of acquiring new business, principally commissions,
certain expenses of the policy issue and underwriting department
and certain variable agency expenses have been deferred.
Deferred policy acquisition costs are amortized consistent with
the methods described in "Policy Liabilities, Revenues, Benefits
and Expenses," and the effect of realized gains and losses on
deferred policy acquisition cost amortization is restored or
amortized and is netted against "Net realized losses on
investments". Amortization of deferred policy acquisition costs
totalled $33,523,000 and $35,774,000, net of the effect of
realized losses on amortization of ($9,176,000) and ($5,180,000)
for the years ended December 31, 1996 and 1995, respectively.
Deferred policy acquisition costs for participating life and
universal life business are adjusted to reflect the impact of
unrealized gains and losses on fixed maturity securities
available-for-sale. These adjustments totalled $7,143,000, and
$21,914,000 at 1996 and 1995, respectively.
Property, Plant and Equipment
Property, plant and equipment is valued at historical cost less
accumulated depreciation in the Balance Sheets. It consists
primarily of Union Central's home office, capital leases for
furniture and equipment, furniture and fixtures and electronic
data processing equipment.
Depreciation is computed with the straight-line method over the
estimated useful lives of the respective assets, not to exceed 10
years for office furniture and 5 years for electronic data
processing equipment. Depreciation is computed for leasehold
improvements with the straight-line method over the shorter of
the remaining lease term or useful life of the improvements.
Deposit Funds
The liability for deposit funds is generally established at the
policyholders' accumulated cash values plus amounts provided for
guaranteed interest.
Policy Claims
Policy claim reserves represent the estimated ultimate net cost
of all reported and unreported claims incurred. In addition, a
claim adjustment expense reserve is held to account for the
expenses associated with administering these claims. The
reserves for unpaid claims are estimated using individual case
basis valuations and statistical analyses. The claim adjustment
expense reserve is estimated using statistical analyses. These
estimates are subject to the effects of trends in claim severity
and frequency. Although some variability is inherent in such
estimates, management believes that the reserves for claims and
claim related expenses are adequate. The estimates are
continually reviewed and adjusted as necessary as experience
develops or new information becomes known; and such adjustments
are included in current operations.
Dividends to Policyholders
Union Central's dividend liability is the amount estimated to
have accrued to policyholders' as of each year end. Manhattan
Life's dividend liability is based on the dividend scale in
effect at the time the policy was issued.
Separate Accounts
Separate Account assets and liabilities reported in the
accompanying financial statements pertain to segregated funds
which are administered for pension and other clients, including
purchasers of Union Central's variable insurance and annuity
contracts. Other than amounts derived from, or otherwise
attributable to, the General Account (which amounts are included
in surplus), assets of Separate Accounts are not available to
fund the liabilities of the General Account. Separate Account
assets include common stocks, long-term bonds, mortgages and
short-term investments. Separate Account liabilities represent
reserves established to meet withdrawal and future benefits
payment contractual provisions. Union Central derives certain
fees for maintaining and managing the Separate Accounts, but
bears no investment risk on these assets, except to the extent
that it participates in a particular Separate Account.
Investment risk associated with market value changes are borne by
the owner of the contract and not by Union Central.
Recognition of Premium Revenues and Related Costs
POLICY LIABILITIES, REVENUES, BENEFITS AND EXPENSES
Traditional Insurance Products
Traditional insurance products include those products with fixed
and guaranteed premiums and benefits and consist primarily of
whole life insurance policies, term insurance policies and
disability income policies. Premiums for traditional products
are recognized as revenue when due.
The liability for future policy benefits for participating
traditional life is computed using a net level premium method and
the guaranteed mortality and dividend fund interest. The
mortality and interest assumptions are equivalent to statutory
assumptions. The liabilities for future policy benefits and
expenses for nonparticipating traditional life policies and
disability income policies are generally computed using a net
level premium method and assumptions for investment yields,
morbidity, and withdrawals based principally on company
experience projected at the time of policy issue, with provision
for possible and adverse deviations. Interest assumptions for
participating traditional life reserves for all policies ranged
from 2.25% to 5.50% for the years ended 1996 and 1995.
The costs of acquiring new traditional business, principally
commissions, certain policy issue and underwriting expenses (such
as medical examination and inspection report fees) and certain
agency expenses, all of which vary with and are primarily related
to the production of new and renewal business, are deferred to
the extent that such costs are deemed recoverable through future
gross premiums. Such non-participating deferred acquisition
costs are amortized over the anticipated premium paying period of
the related policies, generally not to exceed 30 years, using
assumptions consistent with those used to develop policy benefit
reserves. For participating life insurance products, deferred
policy acquisition costs are being amortized in proportion to
estimated gross margins of the related policies. Gross margins
are determined for each issue year and are equal to premiums plus
investment income less death claims, surrender benefits,
administrative costs, policyholder dividends, and the increase in
reserve for future policy benefits. The future investment yields
are assumed to range from 7.36% to 8.62% for the years ended 1996
and 1995. Changes in dividend payouts are assumed with changes
in yields.
Universal Life and Other Interest Sensitive Products
Interest sensitive products include universal life and single
premium whole life products. They are distinguished by the
existence of a separately definable fund that is credited with
interest and from which any policy charges are taken. Revenues
for these products consist of policy charges for the cost of
insurance, policy administration charges, and surrender charges
that have been assessed against policyholder account balances
during the period.
Benefit reserves for universal life and other interest sensitive
products are computed in accordance with the retrospective
deposit method and represent policy account balances before
applicable surrender charges. Policy benefits that are charged
to expense include benefit claims incurred in the period in
excess of related policy account balances and interest credited
to account balances. Interest crediting rates ranged from 4.75%
to 7.60% for the years ended 1996 and 1995.
The cost of acquiring universal life and other interest sensitive
products, principally commissions, certain policy issue and
underwriting expenses (such as medical examination and inspection
report fees) and certain agency expenses, all of which vary with
and are primarily related to the production of new and renewal
business, are deferred to the extent that such costs are deemed
recoverable through future estimated gross profits. Acquisition
costs for universal life and other interest sensitive products
are amortized over the life of the policies in proportion to the
present value of expected gross profits from surrender charges
and investment, mortality and expense margins. The amortization
is adjusted retrospectively when estimates of current or future
gross profits (including the impact of investment gains and
losses) to be realized from a group of products are revised.
Amounts assessed policyholders that represent revenue for
services to be provided in future periods are reported as
unearned revenue and recognized in income over the life of the
policies, using the same assumptions and factors as are used to
amortize deferred acquisition costs. These charges consist of
policy fees and premium loads that are larger in the initial
policy years than they are in the later policy years.
Group Products
Group products consist primarily of group life insurance, and
group long and short term disability income products. Premiums
for group insurance products are recognized as revenue when due.
The liabilities for future policy benefits and expenses for group
life and disability income products are computed using statutory
methods and assumptions, which approximate net level premium
reserves using assumptions for investment yields, mortality, and
withdrawals based principally on company experience projected at
the time of policy issue, with provisions for possible adverse
deviations. Interest assumptions are based on assumed investment
yields that range from 2.00% to 6.00% for the years ended 1996
and 1995.
The costs of acquiring new group life and disability income
business, principally commissions, certain policy issue and
underwriting expenses (such as medical examination and inspection
report fees) and certain agency expenses, all of which vary with
and are primarily related to the production of new and renewal
business, are deferred to the extent that such costs are deemed
recoverable through future gross premiums. Such deferred
acquisition costs are amortized over the anticipated premium
paying period of the related policies, generally not to exceed
ten years.
Pension Products
Pension products include deferred annuities, guaranteed
investment contracts and payout annuities. Revenues for the
deferred annuity products and guaranteed investment contracts
consist of investment income on policy funds, asset charges,
contract administration fees, and surrender charges that have
been assessed against policyholder account balances. Expenses
for deferred annuity and guaranteed investment contracts products
include the interest credited on policy funds and expenses
incurred in the administration and maintenance of the contracts.
For payout annuities, premiums are recognized as revenue when due
and expenses exclude the interest credited on policy funds.
Benefit reserves for the deferred annuity contracts and
guaranteed investment contracts represent the policy account
balances before applicable surrender charges. Interest
assumptions on payout annuities are based on assumed investment
yields that ranged from 2.00% to 6.00% for the years ended 1996
and 1995.
Commissions and other related costs of acquiring annuity
contracts that vary with and are primarily related to the
production of new and renewal business are deferred to the extent
that such costs are deemed recoverable through future estimated
gross profits. Acquisition costs are amortized over the life of
the contracts in direct proportion to the present value of
expected gross profits from surrender charges and investment and
expense margins. The amortization is adjusted retrospectively
when estimates of current or future gross profits (including the
impact of investment gains or losses) to be realized on a group
of contracts are revised.
Reinsurance
Reinsurance premiums and claims are accounted for on bases
consistent with those used in accounting for the original
policies issued and the terms of the reinsurance contracts.
Premiums and benefits are reported net of reinsured amounts.
Allocation of Manhattan Life's Income and Equity
Manhattan Life's charter provides for the allocation of its
profits between its shareholders and its policyholders on a one-
eighth/seven-eighths basis. The profits allocated are equal to
income after taxes and interest on the Guaranteed Capital Reserve
((GCR) see Note 5 for further discussion) but before policyholder
dividends. Manhattan Life's policyholders' and minority
shareholders' share of profits/losses are included in minority
interest in subsidiary's (income) loss in the Statements of
Income. Manhattan Life's policyholders' and minority
shareholders' equity is included in minority interest in
subsidiary's equity in the Balance Sheets, and includes
policyholders' and minority shareholders' share of Manhattan
Life's change in unrealized gains or (losses) on available for
sale securities. (See Note 5 for more in-depth discussion of
Manhattan Life's corporate charter.)
Federal Income Taxes
The Company accounts for income taxes using the liability method
for financial accounting and reporting of income taxes. Under
this method, deferred income taxes are recognized for the tax
consequences of "temporary differences" by applying the
applicable tax rate to differences between the financial
statement carrying amounts and the tax bases of existing assets
and liabilities.
NOTE 2 - INVESTMENTS
Available-for-sale securities are summarized as follows:
<TABLE>
<CAPTION>
Cost or Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
---- ----- -------- -----
(in thousands)
<S> <C> <C> <C> <C>
December 31, 1996:
- -----------------
U.S. treasury securities
and obligations of U.S.
government corporations
and agencies $ 49,325 $ 325 $ (189) $ 49,461
Corporate securities and other 1,484,274 4,617 (9,385) 1,509,506
Mortgage-backed securities
and collateralized mortgage
obligations 1,185,669 17,289 (20,409) 1,182,549
Debt securities issued by
foreign governments 7,910 346 -- 8,256
---------- ------- -------- ----------
Subtotal 2,727,178 52,577 (29,983) 2,749,772
Equity securities 54,504 6,997 (43) 61,458
---------- ------- -------- ----------
Total $2,781,682 $59,574 $(30,026) $2,811,230
========== ======= ======== ==========
</TABLE>
<TABLE>
<CAPTION>
Cost or Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
---- ----- -------- -----
(in thousands)
<S> <C> <C> <C> <C>
December 31, 1995:
- -----------------
U.S. treasury securities
and obligations of U.S.
government corporations
and agencies $ 84,278 $ 1,689 $ -- $ 85,967
Corporate securities and other 1,290,356 77,993 (5,548) 1,362,801
Mortgage-backed securities
and collateralized mortgage
obligations 1,364,415 30,116 (30,880) 1,363,651
Debt securities issued by
foreign governments 5,409 42 (651) 4,800
---------- -------- -------- ----------
Subtotal 2,744,458 109,840 (37,079) 2,817,219
Equity securities 45,998 5,826 -- 51,824
---------- -------- -------- ----------
Total $2,790,456 $115,666 $(37,079) $2,869,043
========== ======== ======== ==========
</TABLE>
Fixed maturity available-for-sale securities, at
December 31, 1996, are summarized by stated maturity
as follows:
<TABLE>
<CAPTION>
Amortized Fair
Cost Value
(in thousands)
<S> <C> <C>
Due in one year or less $ 4,859 $ 4,923
Due after one year through five years 193,625 197,055
Due after five years through ten years 622,628 632,021
Due after ten years 227,356 228,858
---------- ----------
Subtotal 1,048,468 1,062,857
Mortgage-backed securities 1,185,669 1,182,549
Other securities with multiple
repayment dates 493,041 504,366
---------- ----------
Total $2,727,178 $2,749,772
========== ==========
</TABLE>
Significant components of the unrealized gain on available-
for-sale securities included in equity on the accompanying
Balance Sheets are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------
1996 1995
---- ----
(in thousands)
<S> <C> <C>
Gross unrealized gain on available-
for-sale securities $ 29,548 $ 78,587
Amortization of deferred policy
acquisition costs (7,143) (21,914)
Minority interests (1,573) (7,426)
Deferred taxes (7,830) (19,706)
---------- ----------
Net unrealized gain on available-
for-sale securities $ 13,002 $ 29,541
========== ==========
</TABLE>
See Note 10 for discussion of the methods and assumptions used by
the Company in estimating the fair values of fixed maturity
available-for-sale securities.
At December 31, 1996 and 1995, the Company held unrated or less-
than-investment grade (investment grade is defined as "Baa3" and
higher on Moody's ratings and "BBB-" and higher on Standard and
Poor's bond ratings) corporate bonds of $177,364,000 and
$127,215,000. Those holdings amounted to 6.5% and 4.5%,
respectively, of the Company's investments in bonds and 3.3% and
2.5%, respectively, of the Company's total assets. The holdings
of less-than-investment grade bonds are widely diversified and of
satisfactory quality based on the Company's investment policies
and credit standards.
Proceeds, gross realized gains, and gross realized losses from
the sales and maturities of available-for-sale securities
follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1996 1995
---- ----
(in thousands)
<S> <C> <C>
Proceeds $3,170,351 $2,679,377
Gross realized gains 28,154 33,705
Gross realized losses 55,069 44,778
</TABLE>
At December 31, 1996 and 1995, investments in bonds of
$6,452,000 and $4,683,000, respectively, were on deposit
with state insurance departments to satisfy regulatory
requirements.
The Company has no material off-balance sheet risk.
Mortgage loans are stated at their aggregate unpaid balances
on the Balance Sheets, less unamortized discounts.
Activity in the allowance for mortgage loss is summarized
as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1996 1995
---- ----
(in thousands)
<S> <C> <C>
Balances at the beginning of the year $ 2,711 $ 2,836
Provisions (release of provisions)
for potential mortgage loan loss 263 1,875
Losses charged against the mortgage
loan loss reserve (750) (2,000)
--------- ---------
Balance at the end of the year $ 2,224 $ 2,711
========= =========
</TABLE>
The provision for mortgage losses has fluctuated between periods.
The Company establishes the mortgage reserve based upon its
continuing review of the mortgage portfolio and individual
problem mortgages. The allowance for potential loan losses is
affected to a significant degree by general economic conditions.
While the Company believes it has provided adequate mortgage
reserves, subsequent economic and market conditions may require
establishing additional reserves.
The Company's mortgage portfolio is monitored closely through the
review of loan and property information such as debt service
coverage, annual operating statements and property inspection
reports. This information is evaluated in light of current
economic conditions and other factors such as geographic and
property-type loan concentrations. This evaluation is part of
the regular review to determine whether adjustments to the
allowance for potential loan losses are warranted. Management
believes the mortgage loss reserve is sufficient to provide for
potential loan losses. However, management cannot predict with
assurance where the economy is headed or how the mortgage and
real estate portfolios would be affected by various economic
circumstances.
A summary of the characteristics of the Company's mortgage
portfolio (before deducting valuation reserves of $2,224,000 and
$2,711,000 at December 31, 1996 and 1995, respectively) follows:
<TABLE>
<CAPTION>
December 31, 1996
-----------------------
Principal Percent of
Region Balance Principal
- ------ --------- ----------
(in thousands)
<S> <C> <C>
New England and Mid-Atlantic $ 75,893 11.4%
South Atlantic 109,859 16.5
North Central 150,586 22.6
South Central 70,968 10.7
Mountain 93,394 14.0
Pacific 164,875 24.8
--------- ------
Total $ 665,575 100.0%
========= ======
Property Type
Apartment and residential $ 106,099 15.9%
Warehouses and industrial 111,363 16.7
Retail and shopping center 225,105 33.8
Offices 199,011 30.0
Other 23,997 3.6
--------- ------
Total $ 665,575 100.0%
========= ======
</TABLE>
<TABLE>
<CAPTION>
December 31, 1995
-----------------------
Principal Percent of
Region Balance Principal
- ------ --------- ----------
(in thousands)
<S> <C> <C>
New England and Mid-Atlantic $ 89,760 15.1%
South Atlantic 80,576 13.5
North Central 141,540 23.8
South Central 62,353 10.5
Mountain 73,483 12.4
Pacific 146,977 24.7
--------- ------
Total $ 594,689 100.0%
========= ======
Property Type
Apartment and residential $ 137,949 23.2%
Warehouses and industrial 94,864 16.0
Retail and shopping center 184,416 31.0
Offices 172,314 29.0
Other 5,146 .8
--------- ------
Total $ 594,689 100.0%
========= ======
</TABLE>
Real estate consists of investment real estate under lease and
foreclosed real estate. The investment real estate under lease
is depreciated over 40 years. The cost of the property totalled
$17,383,000 at December 31, 1996 and 1995, and accumulated
depreciation totalled $4,212,000 and $3,839,000 at December 31,
1996 and 1995, respectively. The net book value of foreclosed
real estate was $45,430,000 and $47,652,000 at December 31, 1996
and 1995, respectively.
NOTE 3 - REINSURANCE
In the ordinary course of business, the Company assumes and cedes
reinsurance with other insurers and reinsurers. These
arrangements provide greater diversification of business and
limit the maximum net loss potential on large or hazardous risks.
Reinsurance ceded contracts do not relieve the Company from its
obligations to policyholders. Reinsurance ceded is recorded as
an asset and is recorded in "Other assets" in the Balance Sheets.
The Company remains liable to its policyholders for the portion
reinsured to the extent that any reinsurer does not meet its
obligations for reinsurance ceded to it under the reinsurance
agreements. Failure of reinsurers to honor their obligations
could result in losses to the Company; consequently, allowances
will be established for amounts deemed or estimated to be
uncollectible. To minimize its exposure to significant losses
from reinsurance insolvencies, the Company evaluates the
financial condition of its reinsurers and monitors concentrations
of credit risk arising from similar geographic regions,
activities, or economic characteristics of the reinsurers. No
losses are anticipated, and, based on management's evaluation,
there are no concentrations of credit risk at December 31, 1996
and 1995. The Company retains the risk for varying amounts of
individual or group insurance written up to a maximum of
$1,000,000 on any one life or $4,000 per month disability risk
and reinsures the balance.
Reinsurance transactions with other insurance companies for the
years ended December 31, 1996 and 1995 are summarized as follows:
<TABLE>
<CAPTION>
December 31, 1996
------------------------------------------
Direct Assumed Ceded Net
------ ------- ----- ---
(in thousands)
<S> <C> <C> <C> <C>
Life insurance in force $29,748,174 $595,713 $4,177,415 $26,166,472
Premiums and other
considerations:
Traditional insurance
premiums and universal life $ 231,158 $ 10,693 $ 28,254 $ 213,597
Annuity 34,740 -- -- 34,740
----------- -------- ---------- -----------
Total $ 265,898 $ 10,693 $ 28,254 $ 248,337
=========== ======== ========== ===========
<CAPTION>
December 31, 1995
------------------------------------------
Direct Assumed Ceded Net
------ ------- ----- ---
(in thousands)
<S> <C> <C> <C> <C>
Life insurance in force $29,548,758 $667,125 $4,037,446 $26,178,437
=========== ======== ========== ===========
Premiums and other
considerations:
Traditional insurance
premiums and universal life $ 216,126 $ 11,122 $ 25,092 $ 202,156
Annuity 35,128 -- -- 35,128
----------- -------- ---------- -----------
Total $ 251,254 $ 11,122 $ 25,092 $ 237,284
=========== ======== ========== ===========
</TABLE>
Benefits paid or provided were reduced by $18,747,000 and
$27,155,000 at December 31, 1996 and 1995, respectively, for
estimated recoveries under reinsurance treaties.
Union Central had ceded 22.5% of a block of ordinary life
insurance under a coinsurance/modified coinsurance agreement in
1988. The amount of life insurance in-force ceded under the
agreement was $160,127,000 at December 31, 1995. This
reinsurance agreement was terminated January 1, 1996. There was
no effect on net income in 1996.
The Company, nor any of its related parties control, either
directly or indirectly, any reinsurers in which the Company
conducts business. No policies issued by the Company have been
reinsured with a foreign company which is controlled, either
directly or indirectly, by a party not primarily engaged in the
business of insurance.
The Company has not entered into any reinsurance agreements in
which the reinsurer may unilaterally cancel any reinsurance for
reasons other than nonpayment of premiums or other similar
credits.
NOTE 4 - FEDERAL INCOME TAX
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used
for income tax purposes. Significant components of the Company's
deferred tax liabilities and assets are as follows :
<TABLE>
<CAPTION>
December 31,
------------
1996 1995
---- ----
(in thousands)
<S> <C> <C>
Deferred tax liabilities:
Deferred policy acquisition costs $ 146,947 $ 141,329
Basis differences on bonds 1,740 784
Unrealized gains - SFAS 115 7,830 19,706
Other 2,647 2,745
--------- ---------
Total deferred tax liabilities 159,164 164,564
--------- ---------
Deferred tax assets:
Policyholder dividends 11,100 11,994
Future policy benefits 76,471 74,240
Premium - based DAC adjustment 23,643 21,253
Investment valuation reserves 1,147 1,610
Retirement plan accruals 9,494 9,976
Investment income differences 273 479
Basis differences on bonds and mortgages 266 266
Other 1,621 1,854
--------- ---------
Total deferred tax assets 124,015 121,672
--------- ---------
Net deferred tax liabilities $ 35,149 $ 42,892
========= =========
</TABLE>
Significant components of the provision for income
taxes attributable to continuing operations are as follows:
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------
1996 1995
---- ----
(in thousands)
<S> <C> <C>
Current $ 18,509 $ 16,776
Deferred 4,133 (2,429)
--------- ---------
Total $ 22,642 $ 14,347
========= =========
</TABLE>
Federal income tax expense is calculated based on applying the
statutory corporate tax rate to taxable income, and adjusting
this amount for permanent differences between deductions allowed
for financial statement purposes versus federal income tax
purposes. Significant differences would include the surplus tax
adjustment applicable to Union Central and the small company
deduction for life insurance companies that was available to
Manhattan Life prior to completing the reverse stock split
transaction described in Note 14.
Prior to 1984, a portion of Manhattan Life's income was not
subject to income tax, but was accumulated for income tax
purposes in a special memorandum tax account designated
"policyholders' surplus account" (PSA). Under provisions of the
Tax Reform Act of 1984, the PSA was frozen at its December 31,
1983 balance. The PSA will become subject to tax at current
rates if these amounts are distributed or if the balance of the
account exceeds certain limitations under the Internal Revenue
Code. The balance in the PSA at December 31, 1996 was $1,348,000
and the maximum tax at current rates would be $472,000.
NOTE 5 - SHAREHOLDER DIVIDENDS AND RESTRICTION ON TRANSFER OF
FUNDS FROM SUBSIDIARY
As stated in Note 1, Manhattan Life's charter provides for the
allocation of its profits between its shareholders and its
policyholders on a one-eight/seven-eighths basis. The profits
allocated are equal to income after taxes and interest on the
Guaranteed Capital Reserve (GCR) but before policyholder
dividends.
In administering Manhattan Life's charter's profit-sharing
provision, Manhattan Life and the New York Insurance Department
(the Department) have deemed the shareholders' portion of
Manhattan Life's profits to be equal to $1 for every $7 of
policyholder dividends paid on traditional, participating
contracts. Manhattan Life's charter provides for three types of
shareholder distributions, including distribution based on
profits:
a) Interest at a specified rate on the par value of the
guarantee capital shares issued and outstanding
($195,000 annually), which may be paid in any year
dividends are distributed to policyholders and is
not subject to prior regulatory approval,
b) A distribution of the shareholders' portion of Manhattan
Life's profits. Such amounts may, at the discretion of
the Company's Board of Directors, be distributed as a
stock dividend of additional guarantee capital shares,
paid in cash subject to certain limits and prior
regulatory approval, or reserved for the benefit of the
shareholders in the GCR, and
c) Interest, at the Company's portfolio earnings rate on
invested assets, on the accumulated balance in the GCR.
Manhattan Life's cash distributions to shareholders are subject
to prior approval by the Department. Further, Manhattan Life and
the Department have agreed to the following guidelines under
which shareholder distributions from the GCR would be permitted,
subject to prior approval by the Department:
If Manhattan Life's statutory-basis surplus is less than or
equal to 9% of its statutory policy reserves, then principal
and interest distributions are limited to the lesser of the
prior year statutory gain from operations (after
policyholders' dividends and federal income taxes and before
realized gains and losses), or the prior year's increase in
statutory surplus or,
If its statutory-basis surplus exceeds 9% of statutory policy
reserves, the principal and interest distributions are limited
to the greater of the prior year statutory gain from
operations (after policyholders' dividends and federal income
taxes and before realized gains and losses), or the prior year
increase in statutory surplus.
The foregoing limits are subject to adjustment, by the
Department, for unusually large realized gains or the effects of
surplus relief reinsurance transactions. Since Union Central
plans to eliminate minority interests in the Manhattan Life's
guarantee capital shares by using a reverse stock split to reduce
all outstanding minority shares to fractional shares payable in
cash, Manhattan Life made no cash dividend payments to its
shareholders from principal or interest accumulated in the GCR
for the year ended December 31, 1996. See Note 14 of Notes to
the Consolidated Financial Statements for detailed discussion
about the reverse stock split. Based on the formula described
above, no shareholder dividends were made for the year ended
December 31, 1995, as Manhattan Life recorded both a statutory
loss before net realized gains and losses and a decrease in
statutory surplus.
The GCR represents a restricted segment of statutory unassigned
surplus, and as such, does not represent a commitment or
liability to pay shareholder dividends. For financial statements
prepared in accordance with generally accepted accounting
principles, the GCR is included in shareholders' equity. The
balance in the GCR of $16,127,000 and $14,910,000 and the
Company's share of $11,740,000 and $10,854,000 is included in
"Policyholders' equity" on the Balance Sheets at December 31,
1996 and 1995, respectively. The minority shareholders' share of
the GCR is included in minority interest in the Balance Sheets.
The ratio of Manhattan Life's surplus to its policy reserves was
7.59% and 7.70%, respectively. Interest added to the GCR
amounted to $1,230,000 and $995,000, for the years ended December
31, 1996 and 1995, respectively.
The following table summarizes the allocation of the Manhattan
Life's net income between the shareholders and the policyholders:
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------
1996 1995
---- ----
(in thousands)
<S> <C> <C>
Distributable income:
Net income $ 1,832 $ 1,446
Policyholders' dividends and
participation in operations 4,222 3,157
Less interest credited to GCR (1,230) (995)
--------- ---------
Distributable income $ 4,824 $ 3,608
========= =========
Shareholders' share of net income:
1/8 of distributable income $ 602 451
Interest credited to GCR 1,230 995
--------- ---------
Net income $ 1,832 $ 1,446
========= =========
Union Central's share $ 1,334 $ 1,052
========= =========
Other shareholders' share of distributable
income (included in minority interest in
subsidiary (income) loss in the Statements
of Income)
$ 498 $ 394
========= =========
Policyholders' 7/8th share of distributable
income (included in minority interest in
subsidiary (income) loss in the Statements
of Income) $ 4,222 $ 3,157
========= =========
</TABLE>
Manhattan Life is the only existing life insurance company
domiciled in New York which has authorized and outstanding
guarantee capital shares. Neither applicable New York state law
nor Manhattan Life's charter contain express provisions
establishing the extent of the interest of the holders of the
guarantee capital shares in the statutory unassigned surplus
(total surplus less guarantee capital shares and GCR) of
Manhattan Life and there has never been a judicial determination
of the extent of such interest. Further, the laws applicable to
Manhattan Life do not provide for its voluntary liquidation or
dissolution; the Company may only be liquidated under the
supervision of the New York Superintendent of Insurance in the
event of insolvency. In such a liquidation or dissolution, the
entire assets of Manhattan Life would be used to satisfy claims
of creditors and policyholders and there would be no statutory
unassigned surplus for distribution to the holders of the
guarantee capital shares. Accordingly, in the opinion of counsel
to Manhattan Life, no unqualified legal opinion can be rendered
as to the degree, if any, to which the holders of the guarantee
capital shares would be entitled to participate in any current or
liquidating distribution of unassigned surplus. However, in the
view of such counsel, if there should occur a liquidation or
other winding-up of Manhattan Life's business in which assets
exceeded liabilities on policies and the claims of other
creditors, or if there should occur a partial distribution of
surplus in the absence of such a liquidation or winding-up,
although there are reasonable arguments which could be made to
the effect that the entire unassigned surplus would be
distributable solely to the policyholders or solely to the
shareholders, the more likely outcome if the question should be
litigated is that it would be held that one-eighth of the
unassigned surplus would be distributable to the shareholders and
seven-eighths to the policyholders.
NOTE 6 - COMMITMENTS AND CONTINGENT LIABILITIES
Leases
The leases for office space for Manhattan Life and various field
agency offices vary in duration from 1 to 15 years. Some of
these leases include escalation clauses which vary with levels of
operating expense. Rental expense under these operating leases
totalled $3,907,000 and $3,413,000 in 1996 and 1995,
respectively. The Company also leases furniture and equipment
under operating leases which expire in 2001. Rental expense
under these leases totalled $182,000 and $206,000 in 1996 and
1995, respectively.
At December 31, 1996, the future minimum lease payments for all
noncancelable operating leases are as follows:
<TABLE>
<CAPTION>
Year Amount
---- ------
(in thousands)
<C> <C>
1997 $ 3,847
1998 3,047
1999 2,362
2000 2,057
2001 1,923
After 2001 2,621
-------
Total $15,857
=======
</TABLE>
The Company also has capital leases for office furniture.
Lease expense under these leases was $466,000 and $493,000
in 1996 and 1995, respectively.
At December 31, 1996 the future minimum lease payments for
all noncancelable capital leases are as follows:
<TABLE>
<CAPTION>
Year Amount
---- ------
(in thousands)
<C> <C>
1997 $ 470
1998 470
1999 470
2000 470
2001 39
-------
Total $ 1,919
=======
</TABLE>
Other Commitments
At December 31, 1996, the Company has outstanding agreements to
fund 41 mortgages totalling $37,280,000 in early 1997. In
addition, the Company has committed to invest $20,800,000 in
limited partnerships during the years 1997 to 2000. These
transactions are in the normal course of business for the
Company.
Litigation
In the normal course of business, the Company is party to various
claims and litigation primarily arising from claims made under
insurance policies and contracts. Those actions are considered
by the Company in estimating the policy and contract liabilities.
The Company's management believes that the resolution of those
actions will not have a material adverse effect on the Company's
financial position or results of operations.
Guaranty Fund Assessments
The economy and other factors have caused an increase in the
number of insurance companies that are under regulatory
supervision. This circumstance is expected to result in an
increase in assessments by state guaranty funds, or voluntary
payments by solvent insurance companies, to fund policyholder
losses or liabilities of insurance companies that become
insolvent. These assessments may be deferred or forgiven under
most guaranty laws if they would threaten an insurers financial
strength and, in certain instances, may be offset against future
premium taxes. There were no charges to income in 1996 or 1995.
The estimated liability of $1,399,000 at December 31, 1996 was
based on data provided by the National Organization of Life and
Health Insurance Guaranty Associations and is included in "Other
liabilities" on the Balance Sheets.
NOTE 7 - STATUTORY SURPLUS AS REPORTED TO REGULATORY AUTHORITIES
Union Central and Manhattan Life file statutory-basis financial
statements with regulatory authorities. Union Central's
statutory-basis financial statements are prepared in conformity
with accounting practices prescribed or permitted by the
Department of Insurance of Ohio, Union Central's state of
domicile. Manhattan Life's statutory - basis financial
statements are prepared in conformity with accounting practices
prescribed or permitted by the Department of Insurance of New
York, Manhattan Life's state of domicile. Surplus as reflected
in the statutory-basis financial statements are as follows:
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------
1996 1995
---- ----
(in thousands)
<S> <C> <C>
Capital and surplus
Union Central $ 277,202 $ 201,493
=========== ===========
Manhattan Life $ 28,211 $ 28,770
=========== ===========
</TABLE>
The National Association of Insurance Commissioners is currently
in the process of recodifying statutory accounting practices, the
result of which is expected to constitute the only source of
"prescribed" statutory accounting practices. The project,
expected to be completed in 1999 will likely change certain
prescribed accounting practices, and may result in changes to the
accounting practices the Company uses to prepare its statutory
financial statements.
NOTE 8 - EMPLOYEE BENEFITS
The Company has pension plans covering substantially all of its
employees (The Plans). Benefits are based on years of service
and the employee's highest five consecutive years of compensation
out of the last ten years. The contributions totalled $2,750,000
and $2,393,000 in 1996 and 1995, respectively. The Company's
funding policy is to contribute an amount between the minimum
required to meet ERISA funding standards and the maximum amount
that can be deducted for federal income tax purposes.
Pension expense includes the following components:
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------
1996 1995
---- ----
(in thousands)
<S> <C> <C>
Service cost-benefits earned during the year $ 1,982 $ 1,913
Interest cost on projected benefit obligation 5,330 4,453
Actual return on plan assets (4,786) (4,286)
Net amortization and deferral 625 639
------- -------
Net pension expense included in "Underwriting,
acquisition, and insurance expenses"
at end of year $ 3,151 $ 2,719
======= =======
</TABLE>
The following table setting forth the Plans' funded status and
the pension liability included in "Other liabilities" in the
Company's Balance Sheets is based on the latest actuarial report
available, which is as of October 1, 1996 and 1995.
<TABLE>
<CAPTION>
Union Central
December 31,
------------
1996 1995
---- ----
(in thousands)
<S> <C> <C>
Actuarial present value
of benefit obligations:
Accumulated benefit obligation,
including vested benefits of
$43,920 and $34,444 for 1996
and 1995 respectively $ 50,954 $ 39,714
======== ========
Projected benefit obligation $ 60,216 $ 47,122
Plan assets at fair value 41,912 38,062
-------- --------
Projected benefit obligation
higher than plan assets 18,304 9,060
Unrecognized net gain (16,184) (7,718)
Unrecognized net obligation being
recognized over 15 years 409 450
Adjustment required to recognize
minimum liability 6,514 348
-------- --------
Pension liability included in
"Other liabilities" at end of year $ 9,043 $ 2,140
======== ========
<CAPTION>
Manhattan Life
December 31,
------------
1996 1995
---- ----
(in thousands)
<S> <C> <C>
Actuarial present value
of benefit obligations:
Accumulated benefit obligation,
including vested benefits of
$17,674 and $16,084 for 1996
and 1995 respectively $ 17,886 $ 16,173
======== ========
Projected benefit obligation $ 19,840 $ 18,239
Plan assets at fair value 16,865 16,616
-------- --------
Projected benefit obligation
higher than plan assets 2,975 1,623
Unrecognized net (gain) loss (1,344) 249
Prior service cost not yet recognized
in net periodic pension cost (11) (14)
Unrecognized net obligation being
recognized over 15 years (325) (371)
Adjustment required to recognize
minimum liability 135 60
-------- --------
Pension liability included in
"Other liabilities" at end of year $ 1,430 $ 1,547
======== ========
</TABLE>
The unfunded accumulated benefit obligation (ABO) will vary from year to
year as changes in the market value of the plans' assets differs from
changes in the ABO. The ABO varies from year to year as the rate used
to discount future pension benefits related to the past service of plan
participants changes. The discount rate at each valuation date reflects
available rates on high quality fixed income investments. The
investment strategy for the plans' assets is designed to achieve
somewhat higher yields over the long term than would be achieved by
investing entirely in high quality fixed income investments. Therefore,
the market value of the plans' assets and the ABO do not change in the
same amount from year to year. The Company believes that its current
funding policy will be adequate to meet all
future plan obligations over the long term.
<TABLE>
<CAPTION>
Union Central
December 31,
------------
1996 1995
---- ----
(in thousands)
<S> <C> <C>
Assumptions used to determine
the status of the plans were:
Discount rate 7.25% 8.50%
Rate of increase in future compensation levels 4.25% 5.00%
Expected long-term rate of return on assets 8.50% 8.50%
<CAPTION>
Manhattan Life
December 31,
------------
1996 1995
---- ----
(in thousands)
<S> <C> <C>
Assumptions used to determine
the status of the plans were:
Discount rate 7.25% 8.00%
Rate of increase in future compensation levels 4.25% 5.00%
Expected long-term rate of return on assets 8.50% 8.00%
</TABLE>
Plan assets are primarily composed of mutual funds, unallocated
insurance funds, and guaranteed interest contracts. At December 31,
1996 and 1995, Union Central's and Manhattan Life's pension plans
invested $37,261,000 and $32,460,000, respectively, in affiliated mutual
funds.
The Company has contributory savings plans for employees meeting certain
service requirements which qualifies under Section 401(k) of the
Internal Revenue Code. These plans allows eligible employees to
contribute up to certain prescribed limits of their pre-tax
compensation, with the Company matching 50% of the first 6% of
participants' contributions. The Company's matching contributions to
these Plans were $1,199,000 and $1,206,000 for 1996 and 1995,
respectively. The value of the Plans' assets were $43,905,000 and
$37,401,000 at December 31, 1996 and 1995, respectively. The assets are
held in the Company's deposit fund, in guaranteed interest contracts, or
under the variable accounts of a group annuity policy sponsored by the
Company. At December 31, 1996 and 1995, $17,436,000 and $14,718,000,
respectively, was invested in affiliated mutual funds.
NOTE 9 - POSTRETIREMENT BENEFITS
The Company provides certain health care and life insurance benefits for
its eligible retired employees. The plans provide postretirement
medical and life benefits to full time employees who have worked 15
years and attained age 55 while in service with the Company. The plans
are contributory and contains other cost-sharing features such as
deductibles and coinsurance. The accounting of the plans anticipates
future cost-sharing changes which are consistent with the Company's
expressed intent to require current and future retirees to pay the cost
of medical, prescription drug and dental benefits in excess of 175
percent of the costs incurred by the Company to provide such benefits in
1993.
The accumulated postretirement benefit obligation ("APBO") at December
31, 1996, and 1995 totalled $19,294,000 and $19,027,000, respectively.
The following table presents the plan's funded status reconciled with
amounts recognized in the Company's Balance Sheets:
<TABLE>
<CAPTION>
December 31,
------------
1996 1995
---- ----
(in thousands)
<S> <C> <C>
Plan Assets: $ 6,934 $ 6,052
Accumulated postretirement benefit obligation:
Retirees 12,610 12,298
Fully eligible active plan participants 2,541 3,353
Other active plan participants 4,143 3,376
------- -------
Accumulated postretirement benefit
obligation in excess of plan assets 12,360 12,975
Unrecognized net gain from past experience (4,172) (3,213)
------- -------
Accrued postretirement benefit cost included
in "Other liabilities" at end of year $16,532 $16,188
======= =======
</TABLE>
Net periodic postretirement benefit cost included
the following components:
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------
1996 1995
---- ----
(in thousands)
<S> <C> <C>
Service cost $ 393 $ 321
Interest cost 1,375 1,393
Expected return on assets (1,279) (331)
Net amortization and deferral 738 (232)
------- -------
Net periodic postretirement benefit cost
included in "Underwriting, acquisition,
and insurance expenses" at end of year $ 1,227 $ 1,151
======= =======
</TABLE>
The plan assets are invested in Carillon Capital Fund, an affiliated
mutual fund.
The health care cost trend rate assumption has an insignificant effect
on the amounts reported. To illustrate, increasing the assumed health
care cost trend rates by one percentage point in each year would
increase the postretirement benefit obligation as of December 31, 1996
by $124,000 and the interest cost and estimated eligibility cost
components of the net periodic postretirement benefit cost by $6,000
and less than $1,000, respectively.
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 7.25% and 7.50% at December 31,
1996 and 1995, respectively.
NOTE 10 - FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
Cash and short-term investments: The carrying amounts reported
in the balance sheets for these instruments approximate their fair
values.
Investment securities: Fair values for bonds and preferred stock
are based on quoted market prices, where available. If quoted
market prices are not available, fair values are estimated using
values obtained from independent securities broker dealers or
quoted market prices of comparable instruments. The fair values
of common stock in Company sponsored mutual funds are based on
quoted market prices and are recognized in "Equity securities"
on the Balance Sheets.
Mortgage loans: The fair values for commercial and residential
mortgages in good standing are estimated using discounted cash
flow analysis using interest rates currently being offered for
similar loans to borrowers with similar credit ratings in
comparison with actual interest rates and maturity dates.
Fair values for mortgages with potential loan losses are based
on discounted cash flow analysis of the underlying properties.
Policy loans: Management is unable to ascertain the estimated
life of the policy loan portfolio. Due to the excessive costs
which would be incurred to determine this information,
management considers the estimation of its fair value to be
impracticable. The nature of a policy loan insures that the
outstanding loan balance will be fully recoverable because the
balance owed to the Company is always equal to or lower than
the cash value of the insurance policy owed to the policyholder.
Policy loans are stated at their aggregate unpaid balance in the
balance sheets.
Investment contracts: Fair values for the Company's liabilities
under investment-type insurance contracts are estimated using
discounted cash flow calculations, based on interest rates
currently being offered for similar contracts with maturities
consistent with those remaining for the contracts being valued.
The carrying amounts and fair values of the Company's mortgage loans
and liabilities for instrument type contracts are summarized as
follows:
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995
----------------- -----------------
Carrying Fair Carrying Fair
Amount Value Amount Value
------ ----- ------ -----
(in thousands)
<S> <C> <C> <C> <C>
Mortgage loans $ 663,351 $ 702,843 $ 591,978 $ 625,492
</TABLE>
The carrying amounts and fair values of the Company's
liabilities for investment-type insurance contracts are
as follows:
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995
----------------- -----------------
Carrying Fair Carrying Fair
Amount Value Amount Value
------ ----- ------ -----
(in thousands)
<S> <C> <C> <C> <C>
Group annuities $ 871,481 $ 867,562 $ 923,583 $ 927,544
S.P.D.A.* 359,469 355,074 346,230 340,848
S.P.I.A.** 28,910 31,557 32,222 36,169
Variable annuities 167,336 165,103 166,485 164,267
Supplementary contracts 58,989 59,330 61,062 60,942
Traditional annuities 20,414 20,636 14,970 15,002
Guaranteed interest contracts 17,138 17,120 18,154 18,201
Other 5,989 5,989 6,039 6,039
---------- ---------- ---------- ----------
Total $1,529,726 $1,522,371 $1,568,745 $1,569,012
========== ========== ========== ==========
</TABLE>
* Single premium deferred annuities
** Single premium immediate annuities
The Company's other insurance contracts are excluded from Statement of
Financial Accounting Standard (SFAS-107), "Disclosures about Fair Value
of Financial Instruments", disclosure requirements. However, the fair
values of liabilities under all insurance contracts are taken into
consideration in the Company's overall management of interest rate
risk, which minimizes exposure to changing interest rates through the
matching of investment maturities with amounts due under insurance
contracts. Additional data with respect to the carrying value and fair
value of the Company's investments is disclosed in Note 2.
NOTE 12 - LIABILITY FOR UNPAID CLAIMS AND CLAIM ADJUSTMENT EXPENSES
Activity in the liability for unpaid claims and claim adjustment
expense is summarized as follows:
<TABLE>
<CAPTION>
December 31,
------------
1996 1995
---- ----
(in thousands)
<S> <C> <C>
Balance as of January 1 $132,670 $122,343
Incurred related to:
Current year 143,216 140,333
Prior years 7,237 5,878
-------- --------
Total incurred 150,453 146,211
Paid related to :
Current year 103,245 98,019
Prior years 38,370 37,865
-------- --------
Total paid 141,615 135,884
-------- --------
Balance as of December 31 $141,508 $132,670
======== ========
</TABLE>
As a result of changes in estimates of insured events in prior years,
the provision of claims and claim adjustment expenses, increased by
$7,237,000 and $5,989,000 in 1996 and 1995 due to lower than expected
rates of claim terminations. Included in the above balances are
reinsurance recoverables of $1,287,000 and $2,713,000 at 1996 and
1995, respectively.
NOTE 13 - SURPLUS NOTES
On November 1, 1996, Union Central issued $50,000,000 of 8.20% Surplus
Notes (Notes). These Notes mature on November 1, 2026 and may not be
redeemed prior to maturity. The Notes are unsecured and subordinated
to all present and future policy claims, prior claims and senior
indebtedness. Subject to prior written approval of the Superintendent
of the Ohio Insurance Department, these Notes will pay interest semi-
annually on May 1 and November 1. Interest expense of $637,000 was
accrued as of December 31, 1996, and is recorded in "Other
liabilities" in the Balance Sheets. In connection with issuing the
Notes, Union Central incurred and capitalized $765,000 of issuance
cost. This cost is recorded in "Other assets" in the Balance Sheets,
and will be amortized to expense over the life of the Notes.
NOTE 14 - SUBSEQUENT EVENTS
At December 31, 1996 and 1995, Union Central owned approximately 73%
of Manhattan Life's guarantee capital shares. On January 28, 1997,
the guarantee capital shareholders constituting at least two-thirds of
the outstanding guarantee capital shares of Manhattan Life (including
the shares owned by Union Central) approved Union Central's plan to
eliminate the minority interests in Manhattan Life's guarantee capital
shares by effecting a reverse stock split (the "Plan") that had
previously been approved by the New York Insurance Department. Under
the Plan, each holder of guarantee capital shares received a cash
payment in lieu of the issuance of any resulting fractional guarantee
capital shares, with the Company becoming sole remaining holder of
Manhattan Life's guarantee capital shares. The cost of redeeming the
fractional shares, approximately $6,800,000, was funded by Manhattan
Life; however, as part of the Plan, Union Central made a cash
contribution of approximately $1,800,000 to Manhattan Life's guarantee
capital share account.
<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>
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, 1997, 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, 1997
UCCF 514 4-97<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
Investment in Foreign Securities. . . . . . . . 11
Foreign Currency Transactions . . . . . . . . . 12
Repurchase Agreements . . . . . . . . . . . . . 12
Reverse Repurchase Agreements . . . . . . . . . 12
Futures Contracts and
Options on Futures Contracts. . . . . . . . . 12
Options . . . . . . . . . . . . . . . . . . . . 13
Options on Securities Indices . . . . . . . . . 14
Collateralized Mortgage Obligations . . . . . . 14
Lending Portfolio Securities. . . . . . . . . . 14
Other Information . . . . . . . . . . . . . . . 14
The Fund and Its Management. . . . . . . . . . . . . 14
Investment Adviser. . . . . . . . . . . . . . . 15
Advisory Fee. . . . . . . . . . . . . . . . . . 15
Expenses. . . . . . . . . . . . . . . . . . . . 15
Capital Stock . . . . . . . . . . . . . . . . . 16
Purchase and Redemption of Shares. . . . . . . . . . 16
Dividends and Distributions. . . . . . . . . . . . . 16
Taxes. . . . . . . . . . . . . . . . . . . . . . . . 17
Custodian, Transfer and
Dividend Disbursing Agent . . . . . . . . . . . 17
Appendix
Bond and Commercial Paper Ratings . . . . . . . 18
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 Union Central contract 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.
<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 .57% .48% .68% .29%
Other Expenses .07% .14% .09% .30%*
Total Operating Expenses .64% .62% .77% .59%*
</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 $36 $80
Bond Portfolio $6 $20 $35 $78
Capital Portfolio $8 $25 $43 $96
S&P 500 Index Portfolio $6 $19 $33 $74
</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.
- ---------------
* 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, 1996, 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, 1996, have been audited by
Deloitte & Touche LLP, whose unqualified report thereon is included in
the Statement of Additional Information. The financial statements for
the year ended December 31, 1995 have been audited by Deloitte & Touche
LLP. The financial statements for the three years ended December 31,
1994 have been audited by another independent accountant, 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,
1996 1995 1994 1993 1992
---------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of year $16.54 $14.30 $14.58 $13.74 $12.60
Investment Activities:
Net investment income .29 .24 .20 .16 .19
Net realized and
unrealized gains
(losses) 3.61 3.36 .31 1.69 1.27
------ ------ ------ ------ ------
Total from Investment
Operations 3.90 3.60 .51 1.85 1.46
Distributions:
Net investment income (.27) (.23) (.19) (.16) (.19)
Net realized gains (.72) (1.13) (.60) (.85) (.13)
------ ------ ------ ------ ------
Total Distributions (.99) (1.36) (.79) (1.01) (.32)
Net Asset Value,
End of year $19.45 $16.54 $14.30 $14.58 $13.74
====== ====== ====== ====== ======
Ratios/Supplemental Data:
Total Return <F2> 24.52% 26.96% 3.42% 14.11% 11.78%
Ratio of Expenses to
Average Net Assets .64% .66% .69% .70% .72%
Ratio of Net Investment
Income to
Average Net Assets 1.66% 1.73% 1.45% 1.18% 1.47%
Portfolio
Turnover Rate 52.53% 34.33% 40.33% 37.93% 46.75%
Average Commission
Rate Paid $.0628<F3>
Net Assets,
End of Period
(in thousands) $288,124 $219,563 $157,696 $138,239 $102,306
<CAPTION>
Year Ended December 31,
1991 1990 1989 1988 1987
--------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of year $ 8.81 $10.79 $10.88 $ 8.57 $ 9.62
Investment Activities:
Net investment income .20<F1> .28<F1> .58 .38 .34
Net realized and
unrealized gains (losses) 3.79 (1.91) .69 2.33 (.22)
------ ------ ------ ------ ------
Total from Investment
Operations 3.99 (1.63) 1.27 3.71 .12
Distributions:
Net investment income (.20) (.31) (.59) (.34) (.35)
Net realized gains -- (.04) (.77) (.06) (.82)
------ ------ ------ ------ ------
Total Distributions (.20) (.35) (1.36) (.40) (1.17)
Net Asset Value,
End of year $12.60 $ 8.81 $10.79 $10.88 $ 8.57
====== ====== ====== ====== ======
Ratios/Supplemental Data:
Total Return<F2> 45.55% (15.45%) 11.79% 31.79% .85%
Ratio of Expenses to
Average Net Assets .75% .82%<F1> .95% .95% .97%
Ratio of Net Investment
Income to Average
Net Assets 1.79%<F1> 2.98%<F1> 5.34% 3.74% 3.30%
Portfolio Turnover Rate 55.17% 99.90% 61.49% 57.98% 70.17%
Net Assets, End of Period
(in thousands) $79,352 $52,514 $56,194 $37,723 $28,915
<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.
<F3>
Represents the dollar amount of commissions paid on portfolio transactions
divided by the total number of shares purchased and sold for which
commissions were charged. Disclosure not required for periods prior to 1996.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(Continued)
Bond Portfolio
Year ended December 31,
1996 1995 1994 1993 1992
---------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of year $11.07 $10.04 $11.30 $10.91 $10.96
Investment Activities:
Net investment income .79 .88 .77 .73 .82
Net realized and
unrealized gains
(losses) (.04) .98 (.95) .54 (.01)
------ ------ ------ ------ ------
Total from Investment
Operations .75 1.86 (.18) 1.27 .81
Distributions:
Net investment income (.87) (.83) (.78) (.73) (.82)
In excess of net
investment income (.04) -- -- -- --
Net realized gains -- -- (.30) (.15) (.04)
------ ------ ------ ------ ------
Total Distributions (.91) (.83) (1.08) (.88) (.86)
Net Asset Value,
End of year $10.91 $11.07 $10.04 $11.30 $10.91
====== ====== ====== ====== ======
Ratios/Supplemental Data:
Total Return<F1> 7.19% 19.03% (1.63%) 11.94% 7.65%
Ratio of Expenses to
Average Net Assets .62% .65% .68% .66% .69%
Ratio of Net Investment
Income to Average
Net Assets 7.24% 7.43% 7.21% 6.65% 7.59%
Portfolio Turnover Rate 202.44% 111.01% 70.27% 137.46% 40.91%
Net Assets,
End of Period
(in thousands) $85,634 $73,568 $55,929 $54,128 $38,557
<CAPTION>
Year ended December 31,
1991 1990 1989 1988 1987
-----------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of year $10.10 $10.02 $ 9.82 $ 9.96 $10.51
Investment Activities: .86 .81 .83 .85 .82
Net investment income
Net realized and
unrealized gains (losses) .87 .03 .20 (.13) (.51)
------ ------ ------ ------ ------
Total from Investment
Operations 1.73 .84 1.03 .72 .31
Distributions:
Net investment income (.87) (.76) (.83) (.86) (.86)
In excess of net
investment income -- -- -- -- --
Net realized gains -- -- -- -- --
------ ------ ------ ------ ------
Total Distributions (.87) (.76) (.83) (.86) (.86)
Net Asset Value,
End of year $10.96 $10.10 $10.02 $ 9.82 $ 9.96
====== ====== ====== ====== ======
Ratios/Supplemental Data:
Total Return<F1> 17.89% 8.66% 10.72% 7.36% 3.15%
Ratio of Expenses to
Average Net Assets .73% .79% .86% .82% .72%
Ratio of Net Investment
Income to Average
Net Assets 8.27% 8.57% 8.38% 8.34% 8.34%
Portfolio Turnover Rate 39.82% 110.90% 17.70% 24.11% 80.35%
Net Assets, End of Period
(in thousands) $31,009 $24,446 $15,941 $12,460 $15,796
<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,
-------------------------------------
1996 1995 1994 1993
- -----------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value:
Beginning of period $13.72 $13.19 $13.81 $12.99
Investment Activities:
Net investment income .63 .64 .52 .43
Net realized and
unrealized gains
(losses) 1.36 1.15 (.39) 1.17
------ ------ ------ ------
Total from
Investment Operations 1.99 1.79 .13 1.60
Distributions:
Net investment income (.57) (.64) (.52) (.42)
Net realized gains (.19) (.62) (.23) (.36)
------ ------ ------ ------
Total Distributions (.76) (1.26) (.75) (.78)
Net Asset Value,
End of period $14.95 $13.72 $13.19 $13.81
====== ====== ====== ======
Ratios/Supplemental
Data:
Total Return<F2> 14.94% 14.28% .94% 12.72%
Ratio of Expenses
to Average
Net Assets .77% .77% .80% .82%
Ratio of Net
Investment Income
to Average
Net Assets 4.42% 4.99% 4.25% 3.31%
Portfolio
Turnover Rate 53.11% 43.83% 41.89% 32.42%
Average Commission
Rate Paid $.0615<F4>
Net Assets,
End of Period
(in thousands) $159,294 $145,623 $119,263 $100,016
<CAPTION>
Year ended December 31, Period Ended
---------------------------December 31,
1992 1991 1990<F1>
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value:
Beginning of period $12.82 $10.57 $10.95
Investment Activities:
Net investment income .42 .47 .34
Net realized and
unrealized gains
(losses) .56 2.25 (.40)
------ ------ ------
Total from
Investment Operations .98 2.72 (.06)
Distributions:
Net investment income (.42) (.47) (.32)
Net realized gains (.39) -- --
------ ------ ------
Total Distributions (.81) (.47) (.32)
Net Asset Value,
End of period $12.99 $12.82 $10.57
====== ====== ======
Ratios/Supplemental
Data:
Total Return<F2> 7.93% 26.10% (.54%)
Ratio of Expenses to
Average Net Assets .88% .95% 1.03%<F3>
Ratio of Net
Investment Income
to Average Net Assets 3.49% 4.05% 5.08%3
Portfolio Turnover Rate 39.74% 47.93% 16.02%
Net Assets,
End of Period
(in thousands) $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
<F4<
Represents the dollar amount of commissions paid on portfolio transactions
divided by the total number of shares purchased and sold for which
commissions were charged. Disclosure not required for periods prior to 1996.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(Continued)
S&P 500 Index Portfolio
Year Ended
December 31, 1996<F1>
---------------------
<S> <C>
Net Asset Value, $10.00
Beginning of Year
Investment Activities:
Net investment income .20
Net realized and unrealized
gains/(losses) 2.12
Total from Investment Operations 2.32
Distributions:
Net investment income (.19)
Net realized gains --
------
Total Distributions (.19)
Net Asset Value,
End of Year $12.13
Total Return, not annualized 22.37%
Ratios/Supplemental Data
Ratio of Net Expenses to
Average Net Assets .59%<F2>
Ratio of Net Investment
Income to Average Net Assets 2.14%
Portfolio Turnover Rate 1.09%
Average Commission Rate Paid $.0601<F3>
Net Assets, End of Year (000's) $29,205
_____________
<FN>
<F1> The portfolio commenced operation on December 29, 1995. The
financial highlights table for the period ending December 31, 1995 is not
presented because the activity for the period did not round to $0.01 in
any category of the reconciliation of beginning to ending net asset value
per share. The ratios and total return were all less than 0.1%. The net
assets at December 31, 1995 were $305,148.
<F2> The ratios of net expenses to average net assets would have
increased and net investment income to average net assets would have
decreased by .25% for the year ended December 31, 1996, had the Adviser
not waived a portion of its fee.
<F3> Represents the dollar amount of commissions paid on portfolio
transactions divided by the total number of shares purchased and sold for
which commissions were charged.
</FN>
</TABLE>
<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 February 25, 1997, 24% 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 class of securities in
which the Capital Portfolio may invest. The Capital Portfolio may
invest entirely in equity securities, entirely in debt, entirely in
money market instruments, or in any combination of these 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 securities of companies judged to represent better
fundamental value than those of similar domestic companies.
* A high level of dividend payment providing a yield that is
competitive with debt investments.
Debt Securities. The Capital Portfolio may invest in rated or unrated
debt securities, including obligations of the U.S. Government and its
agencies, and corporate debt obligations rated BBB or Baa or higher by
a nationally recognized rating service such as Standard & Poor's or
Moody's, or, if not rated, of equivalent quality as determined by the
investment adviser.
Only 25% of the value of any bonds held by the Capital Portfolio may be
unrated or less than investment-grade bonds. 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 70% 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.
- ------
**The S&P 500 is an unmanaged index of common stocks comprised of 500
industrial, financial, utility and transportation companies. "Standard
& Poor's(R)", "S&P(R)", "S&P 500(R)", "Standard & Poor's 500(R)", and
"500" are trademarks of The McGraw-Hill Companies, Inc. and have been
licensed for use by Carillon Fund. The Portfolio is not sponsored,
endorsed, sold or promoted by Standard & Poor's ("S&P"). S&P makes no
representation or warranty, express or implied, to the beneficial
owners of the Portfolio or any member of the public regarding the
advisability of investing in securities generally or in the Portfolio
particularly or the ability of the S&P 500 Index to track general stock
market performance. S&P's only relationship to Carillon Fund is the
licensing of certain trademarks and trade names of S&P and of the S&P
500 Index which is determined, composed and calculated by S&P without
regard to Carillon Fund or the Portfolio. S&P has no obligation to take
the needs of Carillon Fund or the beneficial owners of the Portfolio
into consideration in determining, composing or calculating the S&P 500
Index. S&P is not responsible for and has not participated in the
determination of the prices and amount of the Portfolio or the timing
of the issuance or sale of the Portfolio or in the determination or
calculation of the equation by which the Portfolio is to be converted
into cash. S&P has no obligation or liability in connection with the
administration, marketing or trading of the Portfolio.
S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P
500 INDEX OR ANY DATA INCLUDED THEREIN AND S&P SHALL HAVE NO LIABILITY
FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. S&P MAKES NO
WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY CARILLON
FUND, BENEFICIAL OWNERS OF THE PORTFOLIO, OR ANY OTHER PERSON OR ENTITY
FROM THE USE OF THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN. S&P
MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR
USE WITH RESPECT TO THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN.
WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL S&P HAVE ANY
LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES
(INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH
DAMAGES.
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 1996:
<TABLE>
<CAPTION>
S&P 500 Returns (1926-1996)
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% -.9% 3.1%
Average 12.6% -- -- --
</TABLE>
Average return may not be useful for forecasting future returns in any
particular period, as stock returns are quite volatile from year to
year.
Investment in Foreign Securities
Each Portfolio may invest in foreign securities that are suitable
for the Portfolio's investment objectives and policies. Foreign
securities investments are limited to 25% of net assets for the Equity
and Bond Portfolios and to 35% of net assets for the Capital
Portfolio. The S&P 500 Index Portfolio is limited to investing in those
foreign securities included in the Standard & Poor's 500 Composite
Stock Index. The term "foreign securities" refers to equity and debt
securities of corporate issuers whose principal stock or bond exchange
listing is outside of the United States, to American Depositary
Receipts ("ADRs") that hold such securities, and to debt securities
issued by foreign governments or foreign government agencies.
Investing in foreign securities involves risks which are not
ordinarily associated with investing in domestic securities. These
risks include political or economic instability in the foreign country,
diplomatic developments that could adversely affect the value of the
foreign security, foreign government taxes, the costs incurred by a
Portfolio in converting among various currencies, fluctuation in
currency exchange rates and the possibility of imposition of currency
controls, expropriation or nationalization measures or withholding
dividends at the source. In the event of a default on any foreign
obligation, it may be difficult legally to obtain or to enforce a
judgment against the issuer.
Currency exchange rates are determined by forces of supply and
demand. These forces are affected by international balance of
payments, other economic and financial conditions, government
intervention and other factors. The ability of a foreign obligor to
make timely payments on its external debt obligations will be strongly
influenced by the country's balance of payments, including export
performance, its access to international credits and investments,
fluctuations in interest rates and the extent of its foreign reserves.
There may be less publicly available information about a foreign
issuer than about a domestic issuer. Foreign issuers are subject to
accounting and reporting requirements which are generally less
extensive than those applicable to domestic issuers. Securities of
foreign issuers are generally less liquid and more volatile than those
of comparable domestic issuers. There is frequently less governmental
regulation of exchanges, broker-dealers and issuers and brokerage costs
may be higher than in the United States.
Foreign securities other than ADRs typically will be traded on the
applicable country's principal stock or bond exchange but may also be
traded on regional exchanges or over-the-counter. Foreign markets,
especially emerging markets, may have different clearance and
settlement procedures, and in certain markets there have been times
when settlements have been unable to keep pace with the volume of
securities transactions, making it difficult to conduct such
transactions.
A country whose exports are concentrated in a few commodities or
whose economy depends on certain strategic imports could be vulnerable
to fluctuations in international prices of these commodities or
imports. To the extent that a country receives payment for its exports
in currencies other than dollars, its ability to make debt payments
denominated in dollars could be adversely affected.
ADRs are receipts, typically issued by a U.S. bank or trust
company, evidencing ownership of the underlying foreign securities.
ADRs are denominated in U.S. dollars and trade in the U.S. securities
markets. ADRs are subject to certain of the same risks as direct
investment in foreign securities, including the risk that changes in
the value of the currency in which the security underlying an ADR is
denominated relative to the U.S. dollar may adversely affect the value
of the ADR.
Foreign securities purchased by the Portfolios may include
securities issued by companies located in countries not considered to
be major industrialized nations. Such countries are subject to more
economic, political and business risk than major industrialized
nations, and the securities they issue are expected to be more volatile
and more uncertain as to payments of interest and principal. The
secondary market for such securities is expected to be less liquid than
for securities of major industrialized nations.
To limit the risks of investing in any one country, each Portfolio
that invests in foreign securities limits not only its total purchases
of foreign securities, but also its purchases for any single country.
For "major countries," the applicable limit is 10% of Portfolio net
assets for the Equity and Bond Portfolios and 20% for the Capital
Portfolio; for other countries, the applicable limit is 5% for each
Portfolio. "Major countries" currently include: The United Kingdom,
Germany, France, Italy, Switzerland, Netherlands, Spain, Belgium,
Canada, Mexico, Argentina, Chile, Brazil, Australia, Japan, Singapore,
New Zealand, Hong Kong, Sweden and Norway.
Foreign Currency Transactions
Each Portfolio that purchases foreign securities may also engage
in forward foreign currency contracts ("forward contracts") in
connection with the purchase or sale of a specific security. A forward
contract involves an obligation to purchase or sell a specific foreign
currency at a future date, which may be any fixed number of days from
the date of the contract agreed upon by the parties, at a price set at
the time of the contract. These contracts are traded in the interbank
market conducted directly between currency traders (usually large
commercial banks) and their customers. A forward contract generally
has no margin or other deposit requirement.
Portfolios will not enter into forward contracts for longer-term
hedging purposes. The possibility of changes in currency exchange
rates will be incorporated into the long-term investment considerations
when purchasing the investment and subsequent considerations for
possible sale of the investment.
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, but reserves the right to redeem any portion
or all of its investment at any time.
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); and any day on
which changes in the value of the Portfolio securities of the Fund will
not materially affect the current net asset value of the shares of a
Portfolio. 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>
APPENDIX I FOR CROSS REFERENCING INFORMATION
Included here in the Prospectus booklet is a prospectus for the MFS
EMERGING GROWTH SERIES, MFS GROWTH WITH INCOME SERIES AND THE MFS HIGH
INCOME SERIES, which are three series of the MFS Variable Insurance
Trust.
Cross reference the Prospectus in EDGAR filing for MFS VARIABLE
INSURANCE TRUST as follows:
File Date: May 1, 1997.
Accession No. 912938-97-000256
<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, 1997
Accession No. 0000764797-97-000011
<PAGE>
APPENDIX III FOR CROSS REFERENCING INFORMATION
Included here in the Prospectus booklet is a prospectus for the
AMERICAN CENTURY VP CAPITAL APPRECIATION, a portfolio of American
Century Variable Portfolios, Inc.
Cross reference the prospectus for AMERICAN CENTURY VARIABLE
PORTFOLIOS, INC. as filed with the SEC via EDGAR:
File Date: May 1, 1997
Accession No. 0000814680-97-000006
APPENDIX IV FOR CROSS REFERENCING INFORMATION
Included here in the Prospectus booklet is a prospectus for the
TEMPLETON INTERNATIONAL FUND, a portfolio of Templeton Variable
Products Series Fund
Cross reference the prospectus for TEMPLETON VARIABLE PRODUCTS SERIES
FUND as filed with the SEC via EDGAR:
File Date: April 30, 1997
Accession No. 0000829959-97-000027
<PAGE>
(back cover)
(Union Central logo)
Insurance and Investments
At Union Central, being RELIABLE FOR GENERATIONS (SM) IS MORE THAN A
SLOGAN. IT IS 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.
Printed on recycled paper
UC 2304 5/97
(C) 1997 - The Union Central Life Insurance Company
1876 Waycross Road, Cincinnati, Ohio 45240
(end of back cover)
