As filed with Securities and Exchange Commission on April 30,
1998
Registration No. 33-94858
______________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________
POST-EFFECTIVE AMENDMENT NO. 3 TO
FORM S-6
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
CARILLON LIFE ACCOUNT
(Exact Name of Trust)
THE UNION CENTRAL LIFE INSURANCE COMPANY
(Name of Depositor)
1876 Waycross Road
P.O. Box 40888
Cincinnati, Ohio 45240
(Address of depositor's principal executive offices)
JOHN F. LABMEIER, ESQ.
The Union Central Life Insurance Company
1876 Waycross Road
P.O. Box 40888
Cincinnati, Ohio 45240
(Name and address of agent for service)
Copies to:
STEPHEN E.ROTH, ESQ.
Sutherland, Asbill & Brennan LLP
1275 Pennsylvania Ave.,N.W.
Washington, D.C. 20004-2404
______________
It is proposed that this filing will become effective (check
appropriate box)
[ ] Immediately upon filing pursuant to paragraph (b)
[ X ] on May 1, 1998 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1) of rule 485
[ ] this post effective amendment designates a new
effective date for a previously filed post-effective
amendment
______________
Flexible Premium Variable Universal Life Insurance Policies
Pursuant to Rule 24f-2 under the Investment Company Act of
1940, the registrant has registered an indefinite amount of
securities under the Securities Act of 1933. A Rule 24f-2 Notice
for the for Registrant's 1997 fiscal year was filed on March 27,
1998
CARILLON LIFE ACCOUNT
Registration Statement on Form S-6
Reconciliation and Tie Between Items
In Form N-8B-2 and the Prospectus
Form N-8B-2
Item No. Caption in Prospectus
1 Cover Page
2 Cover Page
3 Inapplicable
4 Sale of the Policies
5 Information about Union Central
6 Carillon Life Account
9 Inapplicable
10(a) Other Policy Benefits and Provisions
10(b) Summary and Diagram of the Policy
10(c), (d), (e) Death Benefit Options; Cash Value; Summary and
Diagram of the Policy; Other Policy Benefits
and Provisions; Surrendering the Policy for
Cash Surrender Value; Partial Cash Surrenders;
Loans; Transfer Privilege; Premiums;
Supplemental and/or Rider Benefits
10(f), (g), (h) Voting Rights; Other Policy Benefits and
Provisions
10(i) Other Policy Benefits and Provisions; Death
Benefit Options; Carillon Life Account;
Supplemental and/or Rider Benefits
11 Carillon Life Account
12 Carillon Life Account; The Portfolios; Sale of
the Policies
13 Charges and Deductions; Sale of the Policies;
The Portfolios
14 Premiums; Charges and Deductions; Sale of the
Policies
15 Premiums
16 Carillon Life Account; The Portfolios
17 Captions referenced under Items 10(c), (d), (e)
and (i) above
18 Carillon Life Account; Cash Value
19 Reports to Policy Owners; Sale of the Policies
20 Captions referenced under Items 6 and 10(g)
above
21 Loans
22 Inapplicable
23 Sale of the Policies
24 Other Policy Benefits and Provisions
25 Information about Union Central
26 Sale of the Policies
27 Information about Union Central
28 Union Central Directors and Executive Directors
29 Information about Union Central
30 Inapplicable
31 Inapplicable
32 Inapplicable
33 InapplicableForm N-8B-2
34 Sale of the Policies
35 Information about Union Central
36 Inapplicable
37 Inapplicable
38 Sale of the Policies
39 Sale of the Policies
40 Sale of the Policies
41(a) Sale of the Policies
42 Inapplicable
43 Inapplicable
44(a) Carillon Life Account; The Portfolios;
Premiums; Charges and Deductions
44(b) Charges and Deductions
44(c) Premiums; Charges and Deductions
45 Inapplicable
46 The Portfolios; Captions referenced under Items
10(c), (d) and (e) above
47 Inapplicable
48 Inapplicable
49 Inapplicable
50 Inapplicable
51 Cover Page; Summary and Diagram of the Policy;
Death Benefit Options; Loan Repayment; Effect
If Not Repaid; Changes in Specified Amount;
Charges and Deductions; Supplemental and/or
Rider Benefits; Other Policy Benefits and
Provisions; Premiums; Sale of the Policies
52 Other Policy Benefits and Provisions
53 Tax Considerations
54 Inapplicable
55 Inapplicable
59 Financial Statements
<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 16. Special limits on transfers from the Guaranteed
Account apply. 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., MFS Variable Insurance Trust, 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, 1998.
<PAGE>
PROSPECTUS CONTENTS
Page
DEFINITIONS OF TERMS ....................................... 4
SUMMARY AND DIAGRAM OF THE POLICY .......................... 6
GENERAL INFORMATION ABOUT UNION CENTRAL,
THE SEPARATE ACCOUNT AND THE PORTFOLIOS ................ 9
The Union Central Life Insurance Company ............... 9
Carillon Life Account .................................. 9
The Portfolios ......................................... 9
Addition, Deletion or Substitution of Investments ......11
Voting Rights ..........................................12
PREMIUM PAYMENTS AND ALLOCATIONS ...........................12
Applying for a Policy ..................................12
Purchase of the Policy for Specialized Purposes ........13
Free Look Right to Cancel the Policy ...................13
Premiums ...............................................13
Net Premium Allocations ................................14
Crediting Net Premiums .................................15
Transfer Privilege .....................................15
Dollar Cost Averaging Plan .............................15
Portfolio Rebalancing Plan .............................16
Earnings Sweep Plan ....................................16
GUARANTEED ACCOUNT .........................................16
Minimum Guaranteed and Current Interest Rates ..........17
Calculation of Guaranteed Account Value ................17
Transfers from the Guaranteed Account ..................17
Payment Deferral from the Guaranteed Account ...........17
CHARGES AND DEDUCTIONS .....................................17
Premium Expense Charge .................................17
Monthly Deduction ......................................17
Daily Mortality and Expense Risk Charge ................19
Transfer Charge ........................................19
Surrender Charge .......................................19
Fund Expenses ..........................................20
Cost of Additional Benefits Provided by Riders .........22
Income Tax Charge ......................................22
Special Arrangements ...................................22
HOW YOUR ACCOUNT VALUES VARY ...............................22
Determining the Account Value ..........................23
Cash Value .............................................24
Cash Surrender Value ...................................24
DEATH BENEFIT AND CHANGES IN SPECIFIED AMOUNT ..............24
Amount of Death Benefit Proceeds ......................24
Death Benefit Options .................................24
Initial Specified Amount and Death Benefit Option......24
Changes in Death Benefit Option .......................24
Changes in Specified Amount ...........................25
Selecting and Changing the Beneficiary ................25
CASH BENEFITS ..............................................25
Loans .................................................25
Surrendering the Policy for Cash Surrender Value.......26
Partial Cash Surrenders ...............................27
Maturity Benefit ......................................27
Payment Options .......................................27
ILLUSTRATIONS OF ACCOUNT VALUES, CASH SURRENDER VALUES,
DEATH BENEFITS AND ACCUMULATED PREMIUM PAYMENTS.......28
OTHER POLICY BENEFITS AND PROVISIONS .......................37
Limits on Rights to Contest the Policy ................37
Changes in the Policy or Benefits .....................37
When Proceeds Are Paid ................................37
Reports to Policy Owners ..............................37
Assignment ............................................37
Reinstatement .........................................38
Supplemental and/or Rider Benefits ....................38
Participating .........................................39
State Variations ......................................39
TAX CONSIDERATIONS .........................................39
Tax Status of Policy ..................................39
Treatment of Policy Benefits ..........................40
Possible Charge for Union Central's Taxes .............42
OTHER INFORMATION ABOUT THE POLICIES AND UNION CENTRAL......42
Sale of the Policies ..................................42
Union Central Directors and Executive Officers.........42
State Regulation ......................................44
Preparing for Year 2000 ...............................44
Additional Information ................................44
Experts ...............................................44
Actuarial Matters .....................................44
Litigation ............................................44
Legal Matters .........................................44
Financial Statements ..................................44
APPENDIX A .................................................94
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 23.
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 24.
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 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 14.
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 14.
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 25
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. 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 14. 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 14. If a policy lapses while loans are
outstanding, adverse tax consequences may result. See "Tax
Considerations," page 39.
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
39.
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 13. 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 14.)
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 15.
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.
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 13 for rules and limits.
*There is no minimum initial payment or planned periodic
premium.
*Unplanned premium payments may be made, within limits. See
page 13.
*If sufficient premiums are paid, a minimum guaranteed period
may keep the policy in force during the first three policy
years. See page 14.
*Under certain circumstances, which include taking excessive
loans, extra premium payments may be required to prevent lapse.
See page 14.
(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 17.
*For state and local premium taxes (2.50% of premium payments).
See page 17.
(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 14 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 9. Portfolios available are:
Carillon Equity Portfolio
Scudder Capital Growth Portfolio Class A
MFS Growth With Income Series
Carillon Bond Portfolio
Scudder International Portfolio Class A
MFS High Income Series
Carillon Capital Portfolio
Scudder Money Market Portfolio
MFS Emerging Growth Series
Carillon S&P 500 Index Portfolio
American Century VP Capital Appreciation Portfolio
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
16 for rules and limits on guaranteed account allocations.
(a down arrow is centered here between blocks)
(the following 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 19.
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 20.
(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 23.
*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 23.
*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 15 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 25 for rules and limits.
*Partial cash surrenders generally can be made provided there is
sufficient remaining cash surrender value. See page 27 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 19.
*Payment options are available. See page 27.
*Loans, partial cash surrenders, and surrenders in full may have
adverse tax consequences. See page 39.
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 24.
*Flexibility to change the death benefit option and specified
amount. See page 24 for rules and limits.
*Supplemental and/or rider benefits may be available. See page
38.
(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 Kemper
Investments, Inc. is the investment adviser to the Scudder Fund.
The investment adviser to the American Century Fund is American
Century Investment Management, Inc., the adviser to the American
Century Investments group. The investment adviser to the MFS
Fund is Massachusetts Financial Services Company. The
investment adviser to the Templeton Fund is Templeton Investment
Counsel, Inc.
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 Carillon Fund
has one additional portfolio that is not available through the
policy.) 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 several 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.
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** 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.
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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.
The investment objectives and policies of certain portfolios are
similar to the investment objectives and policies of other funds
that may be managed by the same investment adviser. The
investment results of the portfolios, however, may be higher or
lower than the results of such other funds. There can be no
assurance, and no representation is made, that the investment
results of any of the portfolios will be comparable to the
investment results of any other fund, even if the other fund has
the same investment adviser.
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.)
Scudder Kemper Investments, Inc., the investment adviser to the
Scudder Fund; American Century Investment Management, Inc., the
investment adviser to the American Century Fund; Massachusetts
Financial Services Company, the investment adviser to the MFS
Fund; and Franklin Templeton Distributors, Inc., the principal
underwriter for the Templeton 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
Scudder Fund, the American Century Fund, the MFS Fund and the
Templeton 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
transactions 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 39.
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 14.) 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 39.
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 14.
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 38.
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 25. 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 17) 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 24. 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 38.
A grace period also may begin if policy debt becomes excessive.
See "Loan Repayment; Effect if not Repaid," page 26.
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 23. 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
providing notice to the home office, in a form acceptable to
Union Central. 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 17, 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. Owners are eligible to effect transfers
pursuant to telephone instructions unless they elect out of the
option by writing 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 from the Guaranteed Account
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
- ---------------------------------------------------------------
Union Central deducts the charges described below to cover costs
and expenses, services provided, and risks assumed under the
policies. The amount of a charge may not necessarily correspond
to the costs associated with providing the services or benefits
indicated by the designation of the charge or associated with
the particular policy. For example, the sales charge and sales
surrender charge may not fully cover all of the sales and
distribution expenses actually incurred by Union Central, and
proceeds from other charges, including the mortality and expense
risk charge, may be used in part to cover such expenses.
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 19, and "Cost of Insurance Charge," shown
below.
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 23) 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
38. 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 38.
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 SALES SURRENDER
POLICY YEAR 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
19, and "Cost of Insurance Charge," page 17.
Administrative Surrender Charge. An administrative surrender
charge is deducted if the policy is surrendered or lapses during
the first fifteen policy years following the policy date or any
increase in specified amount (see "Surrender Charge" above).
The administrative surrender charge is equal to an amount per
$1000 of specified amount, and depends upon the age of the
insured at the time that the specified amount to which it
applies was issued, and the policy year in which the charge is
imposed. For issue ages 30 to 39, the amount per $1000 is $3.50
during policy years 1 through 5; for issue ages 40 to 49, the
amount per $1000 is $4.50 during policy years 1 through 5; for
issue ages 50 to 59, the amount per $1000 is $5.50 during policy
years 1 through 5; and for issue ages 60 to 69, the amount per
$1000 is $6.50 during policy years 1 through 5. The charge
declines monthly after the end of the fifth policy year to zero
at the end of policy year fifteen. Applicable administrative
surrender charge rates, which increase with issue age, are set
forth in full in the policy.
If the specified amount is increased, the increase is subject to
a new administrative surrender charge. This charge is imposed
if the policy is surrendered or lapses within fifteen policy
years from the effective date of the increase, and is in
addition to any sales surrender charge or administrative
surrender charge that may be applicable if the policy is
surrendered or lapses within fifteen policy years after the
policy date.
The administrative surrender charge partially covers the
administrative costs of processing surrenders, lapses, and
increases and reductions in specified amount, as well as legal,
actuarial, systems, mailing, and other overhead costs connected
with Union Central's variable life insurance operations.
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.
<PAGE>
<TABLE>
<CAPTION>
Carillon Fund, Inc. Annual Expenses+
S&P 500
Equity Bond Capital Index
Portfolio Portfolio Portfolio Portfolio
<S> <C> <C> <C> <C>
Management Fees .56% .48% .68% .30%
Other Expenses .06% .12% .09% .20%
Total Carillon Fund, Inc.
Annual Expenses .62% .60% .77% .50%
<CAPTION>
Scudder Variable Life Investment Fund Annual Expenses+
Capital
Growth International Money
Portfolio Portfolio Market
Class A Class A Portfolio
<S> <C> <C> <C>
Management Fees .47% .83% .37%
Other Expenses .04% .17% .09%
Total Scudder Variable Life
Investment Fund Annual Expenses .51% 1.00% .46%
<CAPTION>
American Century Variable Portfolios, Inc. Annual Expenses
VP Capital Appreciation Portfolio
<S> <C>
Management Fees 1.00%
Other Expenses++
Total American Century Variable
Portfolios, Inc. Annual Expenses 1.00%
<CAPTION>
MFS Variable Insurance Trust Annual Expenses+*
Emerging
Growth With High Income Growth
Income Series(2) Series(2) Series
<S> <C> <C> <C>
Management Fees .75% .75% .75%
Other Expenses
(after fee reductions) .25% .25% .12%
Total MFS Variable Insurance
Trust Annual Expenses 1.00% 1.00% .87%
<CAPTION>
Templeton Variable Products Series Fund Annual Expenses+
Templeton
International
Fund Class 2
<S> <C>
Management Fees .69%
Rule 12b-1 Fees .25%
Other Expenses .19%
Total Fund Annual Expenses 1.13%
</TABLE>
+ Templeton International Fund Class 2 has a distribution plan
or "Rule 12b-1 plan" which is described in the Fund's
prospectus. Because Class 2 shares were not offered until May 1,
1997, figures (other than "12b-1 Fees") are estimates for 1998
based on the historical expenses of the Fund's Class 1 shares
for the fiscal year ended December 31, 1997, except that
Management Fees and Total Fund Operating Expenses have also been
restated to reflect the management fee schedule approved by
shareholders and effective May 1, 1997. Actual Management Fees
and Total Fund Operating Expenses during 1997 were lower. See
fund prospectus for details. For each other Portfolio figures
are based on the actual expenses incurred by the Portfolio for
the year ended December 31, 1997. Actual Portfolio expenses may
vary.
++ All expenses except brokerage, taxes, interest and fees and
expenses of non-interested person directors are paid by the
investment adviser.
(1) Each Series has an expense offset arrangement which reduces
the Series' custodian fee based upon the amount of cash
maintained by the Series with its custodian and dividend
disbursing agent, and may enter into other such arrangements and
directed brokerage arrangements (which would also have the
effect of reducing the Series' expenses). Any such fee
reductions are not reflected under "Other Expenses."
(2) The Adviser has agreed to bear expenses for these Series,
subject to reimbursement by these Series, such that each such
Series' "Other Expenses" shall not exceed 0.25% of the average
daily net assets of the Series during the current fiscal year.
See "Information Concerning Shares of Each Series - Expenses"
(in the Series' Prospectus). Otherwise, "Other Expenses" for the
Growth With Income Series and the High Income Series would be
0.35% and 0.40%, respectively, and "Total Operating Expenses"
would be 1.10% and 1.15%, respectively, for these Series.
<PAGE>
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 17) 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 14, and "Grace
Period," page 14.
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 27). It is also the
amount that is available upon full surrender of the policy (see
page 26).
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 37) or, if elected, under a
payment option (see "Payment Options," page 27). The death
benefit will be paid to the beneficiary. See "Selecting and
Changing the Beneficiary," page 25.
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 37.
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 28.
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 14. 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 19).
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 37, and "Transfers from the Guaranteed
Account," page 17.
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
1.5% during the first ten policy years, and 0.50% thereafter.
Thus, the maximum net cost of a loan per year is 1.5% 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) is less than 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 39, 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 19. 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 37, and
"Transfers from the Guaranteed Account," page 17. 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," shown below. 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 39.
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 37, and
"Transfers from the Guaranteed Account," page 17.
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 39.
Maturity Benefit
The maturity date is 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.
<PAGE>
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 0.788% 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 Rule 12b-1 fees applicable to the Class 2
shares and the historical expenses of the Templeton
International Fund Class 1 shares for the period ended December
31, 1997, except that Management Fees and Total Fund Operating
Expenses have also been restated to reflect the management fee
schedule approved by shareholders and effective May 1, 1997. 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
- -1.526%, 4.382% and 10.291%, respectively, during the first ten
policy years, and -1.033%, 4.905%, and 10.843%, 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
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 3487 3727 3968 387 627 868
2 10762 400000 400000 400000 7109 7813 8548 3939 4644 5378
3 16551 400000 400000 400000 10628 12031 13551 7459 8861 10381
4 22628 400000 400000 400000 14038 16378 19014 10868 13208 15844
5 29010 400000 400000 400000 17342 20864 24990 14172 17694 21821
6 35710 400000 400000 400000 20543 25495 31535 17690 22643 28682
7 42746 400000 400000 400000 23649 30288 38718 21113 27752 36182
8 50133 400000 400000 400000 26661 35249 46607 24442 33031 44388
9 57889 400000 400000 400000 29580 40388 55279 27678 38486 53377
10 66034 400000 400000 400000 32400 45706 64813 30815 44121 63229
11 74586 400000 400000 400000 35404 51580 75798 34136 50312 74530
12 83565 400000 400000 400000 38311 57691 87949 37360 56740 86998
13 92993 400000 400000 400000 41113 64042 101391 40479 63408 100757
14 102893 400000 400000 400000 43804 70643 116272 43487 70326 115955
15 113287 400000 400000 400000 46373 77497 132751 46373 77497 132751
20 173596 400000 400000 400000 58558 117410 247780 58558 117410 247780
25 250567 400000 400000 539510 66375 165801 442221 66375 165801 442221
30 348804 400000 400000 887494 68141 225416 765081 68141 225416 765081
</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 -1.526%, 4.382%, and 10.291% respectively, during the first
ten policy years, and -1.033%, 4.905%, and 10.843%.
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
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 3409 3647 3886 309 547 786
2 10762 400000 400000 400000 6882 7575 8297 3713 4405 5128
3 16551 400000 400000 400000 10242 11614 13101 7072 8444 9931
4 22628 400000 400000 400000 13478 15758 18329 10308 12588 15159
5 29010 400000 400000 400000 16595 20015 24027 13425 16845 20858
6 35710 400000 400000 400000 19579 24375 30234 16726 21522 27381
7 42746 400000 400000 400000 22426 28839 36998 19890 26304 34462
8 50133 400000 400000 400000 25133 33407 44376 22914 31188 42157
9 57889 400000 400000 400000 27694 38078 52430 25792 36177 50528
10 66034 400000 400000 400000 30098 42847 61224 28513 41262 59639
11 74586 400000 400000 400000 32608 48062 71309 31340 46794 70041
12 83565 400000 400000 400000 34945 53404 82393 33994 52453 81442
13 92993 400000 400000 400000 37086 58858 94577 36452 58224 93943
14 102893 400000 400000 400000 39013 64416 107982 38696 64099 107665
15 113287 400000 400000 400000 40696 70059 122739 40696 70059 122739
20 173596 400000 400000 400000 44662 99184 223299 44662 99184 223299
25 250567 400000 400000 481296 37768 128093 394505 37768 128093 394505
30 348804 400000 400000 784967 10697 151961 676696 10697 151961 676696
</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 -1.526%, 4.382%, and 10.291% respectively, during the first
ten policy years, and -1.033%, 4.905%, and 10.843%.
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 403478 403718 403959 3478 3718 3959 378 618 859
2 10762 407083 407785 408517 7083 7785 8517 3914 4616 5347
3 16551 410577 411972 413483 10577 11972 13483 7407 8802 10314
4 22628 413950 416273 418890 13950 16273 18890 10780 13103 15720
5 29010 417207 420696 424784 17207 20696 24784 14037 17526 21614
6 35710 420349 425245 431215 20349 25245 31215 17496 22393 28362
7 42746 423385 429934 438246 23385 29934 38246 20849 27398 35710
8 50133 426314 434766 445937 26314 34766 45937 24095 32547 43718
9 57889 429137 439746 454354 29137 39746 54354 27236 37844 52452
10 66034 431849 444874 463564 31849 44874 63564 30264 43289 61979
11 74586 434725 450515 474132 34725 50515 74132 33457 49247 72864
12 83565 437488 456347 485757 37488 56347 85757 36537 55396 84806
13 92993 440125 462364 498540 40125 62364 98540 39491 61730 97906
14 102893 442630 468569 512597 42630 68569 112597 42313 68252 112280
15 113287 444988 474953 528051 44988 74953 128051 44988 74953 128051
20 173596 455894 511400 633963 55894 111400 233963 55894 111400 233963
25 250567 461474 552191 804822 61474 152191 404822 61474 152191 404822
30 348804 459694 595884 1081414 59694 195884 681414 59694 195884 681414
</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 -1.526%, 4.382%, and 10.291% respectively, during the first
ten policy years, and -1.033%, 4.905%, and 10.843%.
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 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 403400 403637 403876 3400 3637 3876 300 537 776
2 10762 406855 407545 408264 6855 7545 8264 3685 4375 5094
3 16551 410186 411550 413028 10186 11550 13028 7016 8380 9858
4 22628 413383 415644 418194 13383 15644 18194 10213 12475 15024
5 29010 416448 419832 423803 16448 19832 23803 13278 16663 20633
6 35710 419367 424102 429883 19367 24102 29883 16514 21249 27031
7 42746 422134 428448 436476 22134 28448 36476 19599 25912 33940
8 50133 424745 432866 443625 24745 32866 43625 22526 30647 41406
9 57889 427192 437350 451379 27192 37350 51379 25290 35448 49477
10 66034 429463 441888 459783 29463 41888 59783 27879 40303 58198
11 74586 431815 446816 469357 31815 46816 69357 30547 45548 68089
12 83565 433967 451805 479783 33967 51805 79783 33016 50854 78832
13 92993 435894 456829 491124 35894 56829 91124 35260 56195 90490
14 102893 437574 461865 503454 37574 61865 103454 37257 61548 103137
15 113287 438973 466877 516841 38973 66877 116841 38973 66877 116841
20 173596 440875 490445 602936 40875 90445 202936 40875 90445 202936
25 250567 430747 506714 731364 30747 106714 331364 30747 106714 331364
30 348804 400438 503624 919092 438 103624 519092 438 103624 519092
</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 -1.526%, 4.382%, and 10.291% respectively, during the first
ten policy years, and -1.033%, 4.905%, and 10.843%.
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 3620 3872 4126 867 1119 1373
2 11408 250000 250000 250000 7370 8108 8877 4544 5282 6052
3 17544 250000 250000 250000 11001 12468 14058 8175 9642 11233
4 23986 250000 250000 250000 14513 16958 19715 11687 14133 16889
5 30750 250000 250000 250000 17901 21579 25894 15075 18753 23068
6 37853 250000 250000 250000 21162 26335 32651 18619 23792 30108
7 45310 250000 250000 250000 24307 31241 40060 22046 28980 37800
8 53141 250000 250000 250000 27350 36321 48211 25372 34343 46233
9 61363 250000 250000 250000 30302 41595 57198 28606 39900 55502
10 69996 250000 250000 250000 33168 47080 67121 31756 45667 65709
11 79061 250000 250000 250000 36244 53171 78607 35114 52041 77477
12 88579 250000 250000 250000 39252 59553 91384 38405 58705 90536
13 98573 250000 250000 250000 42187 66239 105604 41622 65674 105039
14 109066 250000 250000 250000 45044 73245 121440 44762 72963 121157
15 120085 250000 250000 250000 47824 80593 139094 47824 80593 139094
20 184012 250000 250000 304752 59262 122283 262717 59262 122283 262717
25 265601 250000 250000 503059 65816 175234 470148 65816 175234 470148
30 369732 250000 257391 856121 59437 245135 815353 59437 245135 815353
</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 -1.526%, 4.382%, and 10.291% respectively, during the first
ten policy years, and -1.033%, 4.905%, and 10.843%.
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 3387 3632 3879 634 879 1126
2 11408 250000 250000 250000 6811 7518 8255 3985 4692 5429
3 17544 250000 250000 250000 10080 11471 12980 7254 8645 10154
4 23986 250000 250000 250000 13184 15484 18082 10358 12658 15256
5 30750 250000 250000 250000 16107 19544 23586 13281 16718 20760
6 37853 250000 250000 250000 18839 23642 29529 16295 21098 26986
7 45310 250000 250000 250000 21366 27768 35950 19105 25507 33689
8 53141 250000 250000 250000 23682 31919 42903 21704 29941 40925
9 61363 250000 250000 250000 25778 36088 50446 24082 34393 48750
10 69996 250000 250000 250000 27631 40258 58636 26218 38846 57223
11 79061 250000 250000 250000 29479 44756 68008 28349 43626 66878
12 88579 250000 250000 250000 31048 49264 78286 30200 48416 77439
13 98573 250000 250000 250000 32300 53757 89579 31735 53192 89014
14 109066 250000 250000 250000 33191 58206 102016 32908 57924 101734
15 120085 250000 250000 250000 33673 62581 115755 33673 62581 115755
20 184012 250000 250000 250000 28310 82482 212811 28310 82482 212811
25 265601 250000 250000 408431 1169 94607 381711 1169 94607 381711
30 369732 0 250000 694420 0 84385 661353 0 84385 661353
</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 -1.526%, 4.382%, and 10.291% respectively, during the first
ten policy years, and -1.033%, 4.905%, and 10.843%.
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>
1 5565 253603 253854 254107 3603 3854 4107 850 1101 1354
2 11408 257320 258052 258816 7320 8052 8816 4494 5227 5991
3 17544 260899 262351 263924 10899 12351 13924 8073 9525 11098
4 23986 264338 266749 269467 14338 16749 19467 11512 13923 16641
5 30750 267630 271243 275480 17630 21243 25480 14804 18417 22654
6 37853 270771 275830 282004 20771 25830 32004 18228 23287 29461
7 45310 273770 280520 289099 23770 30520 39099 21509 28259 36839
8 53141 276641 285331 296838 26641 35331 46838 24663 33353 44860
9 61363 279395 290278 305295 29395 40278 55295 27699 38582 53599
10 69996 282038 295371 314550 32038 45371 64550 30625 43958 63137
11 79061 284857 300987 328182 34857 50987 75182 33726 49856 74051
12 88579 287577 306808 336894 37577 56808 86894 36730 55960 86046
13 98573 290192 312834 349794 40192 62834 99794 39627 62268 99229
14 109066 292693 319066 364001 42693 69066 114001 42411 68783 113718
15 120085 295081 325514 379655 45081 75514 129655 45081 75514 129655
20 184012 303593 359405 483588 53593 109405 233588 53593 109405 233588
25 265601 305156 395000 648977 55156 145000 398977 55156 145000 398977
30 369732 289433 420561 903379 39433 170561 653379 39433 170561 653379
</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 -1.526%, 4.382%, and 10.291% respectively, during the first
ten policy years, and -1.033%, 4.905%, and 10.843%.
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 253366 253610 253855 3366 3610 3855 613 857 1102
2 11408 256751 257451 258181 6751 7451 8181 3925 4625 5356
3 17544 259957 261329 262818 9957 11329 12818 7131 8503 9992
4 23986 262972 265230 267781 12972 15230 17781 10146 12404 14955
5 30750 265778 269134 273080 15778 19134 23080 12952 16308 20255
6 37853 268359 273021 278732 18359 23021 28732 15815 20478 26189
7 45310 270699 276870 284751 20699 26870 34751 18438 24610 32490
8 53141 272789 280668 291162 22789 30668 41162 20811 28689 39184
9 61363 274616 284392 297986 24616 34392 47986 22920 32696 46290
10 69996 276152 288009 305234 26152 38009 55234 24739 36596 53821
11 79061 277623 291811 313358 27623 41811 63358 26493 40680 62228
12 88579 278753 295462 322017 28753 45462 72017 27905 44615 71169
13 98573 279499 298910 331220 29499 48910 81220 28934 48345 80655
14 109066 279813 302088 340970 29813 52088 90970 29531 51806 90688
15 120085 279643 304926 351267 29643 54926 101267 29643 54926 101267
20 184012 270028 311570 411272 20028 61570 161272 20028 61570 161272
25 265601 0 295173 483316 0 45173 233316 0 45173 233316
30 369732 0 0 555397 0 0 305397 0 0 305397
</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 -1.526%, 4.382%, and 10.291% espectively, during the first
ten policy years, and -1.033%, 4.905%, and 10.843%.
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 "Payment Deferral from
the Guaranteed Account," page 17.
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 17). 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. In recent years,
moreover, Congress has adopted new rules relating to life
insurance owned by businesses. Any business should consult a tax
advisor regarding possible tax consequences associated with the
policy prior to the acquisition of a policy and also before
entering into any subsequent changes to or transactions under a
policy.
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 Changes in Taxation. Although the likelihood of
legislative change is uncertain, there is always the possibility
that the tax treatment of the policies could change by
legislation or other means. For instance, the President's 1999
Budget Proposal recommended legislation that, if enacted, would
adversely modify the federal taxation of the policies. It is
also possible that any change could be retroactive (that is,
effective prior to the date of the change). A tax adviser should
be consulted with respect to legislative developments and their
effect on the policy.
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 Positions with Depositor
Business Address* and Background
<C> <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, Bartlett &
36 East Fourth Street 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,
312 Walnut Street The E. W. Scripps Company; prior to August,
Cincinnati, Ohio 45202 1994, 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 Administration,
Slippery Rock, PA 16057 Slippery Rock University 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; Former Chairman of the
250 East Fifth Street Board and CEO, Eagle-Picher Industries, Inc.
Suite 500
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
Cincinnati, Ohio 45202
John M. Tew, Jr., M.D. Director, Union Central; Professor and Chairman,
506 Oak Street Department of Neurosurgery, University of
Cincinnati, Ohio 45219 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.
Preparing for Year 2000
Like all financial services providers, Union Central utilizes
systems that may be affected by Year 2000 transition issues and
it relies on service providers, including banks, custodians, and
investment managers that also may be affected. Union Central
and its affiliates have developed, and are in the process of
implementing, a Year 2000 transition plan, and are confirming
that their service providers are also so engaged. The resources
that are being devoted to this effort are substantial. It is
difficult to predict with precision whether the amount of
resources ultimately devoted, or the outcome of these efforts,
will have any negative impact on Union Central. However, as of
the date of this prospectus, it is not anticipated that policy
owners will experience negative effects on their investment, or
on the services provided in connection therewith, as a result of
Year 2000 transition implementation. Union Central currently
anticipates that its systems will be Year 2000 compliant on or
about January 2, 1999, but there can be no assurance that Union
Central will be successful. The failure of Union Central or one
of its service providers to achieve timely and complete
compliance could materially impair Union Central's ability to
conduct its business, including its ability to accurately and
timely value interests in the policies.
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, 1997 and 1996 and for the years then ended, and of The Union
Central Life Insurance Company at December 31, 1997 and 1996 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 reports thereon
appearing elsewhere herein and in the Registration Statement,
and are included in reliance upon such reports 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 LLP 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>
Carillon Life Account
Financial Statements
Year Ended December 31, 1997
<PAGE>
(letterhead)
ERNST & YOUNG LLP 1300 Chiquita Center Phone: 513 621 6454
250 East Fifth Street
Cincinnati, Ohio 45202
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 statement of assets and
liabilities of the Carillon Life Account (comprised of the
Carillon Fund, Inc.'s Equity, Capital, Bond, and S & P 500 Index
Subaccounts, the Scudder Variable Life Investment Fund's Money
Market, Capital Growth, and International Subaccounts, MFS
Variable Insurance Trust's Growth with Income, High Income, and
Emerging Growth Subaccounts, The American Century Variable
Portfolios, Inc.'s Growth Subaccount, and Templeton Variable
Products Series Fund's International Subaccount) as of December
31, 1997, the related statement of operations for the year then
ended and the statements of changes in net assets for each of
the two years in the period then ended. These financial
statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our
procedures included confirmation of the number of shares owned
as of December 31, 1997, by correspondence with the transfer
agents for Carillon Fund, Inc. Scudder Variable Life Investment
Fund, MFS Variable Insurance Trust, American Century Variable
Portfolios, Inc., and Templeton Variable Products Series Fund.
An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of each of the respective subaccounts constituting the Carillon
Life Account at December 31, 1997, the results of their
operations for then year then ended and changes in net assets
for each of the two years in the period then ended in conformity
with generally accepted accounting principles.
/s/ Ernst & Young LLP
Cincinnati, Ohio
March 2, 1998
(letterhead footer: Ernst & Young LLP is a member of Ernst &
Youong International, Ltd.)
<PAGE>
CARILLON LIFE ACCOUNT
STATEMENT OF ASSETS AND LIABILITIES
- ----------------------------------------------------------------------------
December 31, 1997
Carillon Fund, Inc.
(affiliated issuers)
------------------------------------------------
Equity Capital Bond S&P 500 Index
Subaccount Subaccount Subaccount Subaccount
---------- ---------- ---------- ----------
[S] [C] [C] [C] [C]
ASSETS
Investments in securities
of unaffiliated issuers
at value (cost $535,196;
$583,531; $630,756;
$783,993; $123,702;
$211,017; $708,971;
$129,419)
Investments in shares of
Carillon Fund, Inc.,
at value
(cost $1,108,894;
$135,481; $134,607;
$2,701,804) $1,188,591 $133,613 $137,219 $2,944,958
---------- -------- -------- ----------
Total Assets $1,188,591 $133,613 $137,219 $2,944,958
---------- -------- -------- ----------
LIABILITIES
Payable to The Union
Central Life Insurance
Company for mortality
and expense risk
charges $1,709 $275 $158 $8,560
NET ASSETS (Contract
Owners' Equity)
Equity Subaccount:
83,212.46 Accumulation
Units @ $14.26327 1,186,882
Capital Subaccount:
11,255.09 Accumulation
Units @ $11.84689 133,338
Bond Subaccount:
11,719.47 Accumulation
Units @ $11.69516 137,061
S & P 500 Index
Subaccount:
190,744.45 Accumulation
Units @ $15,39441 2,936,398
Money Market Subaccount
49,222.39 Accumulation
Units @ $10.88678
Capital Growth Subaccount
44,339.15 Accumulation
Units $15.22763
International Subaccount
54,168.43 Accumulation
Units @ $12.07680
Growth with Income
Subaccount:
58,000.19 Accumulation
Units @ $14.83512
High Income Subaccount:
11,350.02 Accumulation
Units @ $11.58952
Emerging Growth Subaccount
16,511.82 Accumulation
Units @ $12.46822
Growth Subaccount:
75,378.70 Accumulation
Units @ $9.05435
International Subaccount:
11,859.30 Accumulation
Units @ $10.94424
Total Liabilities and
Net Assets $1,188,591 $133,613 $137,219 $2,944,958
---------- -------- -------- ----------
[CAPTION]
Scudder Variable Life
Investment Fund
(unaffiliated issuers)
--------------------------------------
Market Growth International
Subaccount Subaccount Subaccount
---------- ---------- ----------
[S] [C] [C] [C]
ASSETS
Investments in securities
of unaffiliated issuers
at value (cost $535,196;
$583,531; $630,756;
$783,993; $123,702;
$211,017; $708,971;
$129,419) $535,195 $675,597 $655,107
Investments in shares of
Carillon Fund, Inc.,
at value
(cost $1,108,894;
$135,481; $134,607;
$2,701,804)
-------- -------- --------
Total Assets $535,195 $675,597 $655,107
-------- -------- --------
LIABILITIES
Payable to The Union
Central Life Insurance
Company for mortality
and expense risk
charges ($678) $417 $926
NET ASSETS (Contract
Owners' Equity)
Equity Subaccount:
83,212.46 Accumulation
Units @ $14.26327
Capital Subaccount:
11,255.09 Accumulation
Units @ $11.84689
Bond Subaccount:
11,719.47 Accumulation
Units @ $11.69516
S & P 500 Index
Subaccount:
190,744.45 Accumulation
Units @ $15,39441
Money Market Subaccount
49,222.39 Accumulation
Units @ $10.88678 535,873
Capital Growth Subaccount
44,339.15 Accumulation
Units $15.22763 675,181
International Subaccount
54,168.43 Accumulation
Units @ $12.07680 654,181
Growth with Income
Subaccount:
58,000.19 Accumulation
Units @ $14.83512
High Income Subaccount:
11,350.02 Accumulation
Units @ $11.58952
Emerging Growth Subaccount
16,511.82 Accumulation
Units @ $12.46822
Growth Subaccount:
75,378.70 Accumulation
Units @ $9.05435
International Subaccount:
11,859.30 Accumulation
Units @ $10.94424
Total Liabilities and
Net Assets $535,195 $675,597 $655,107
-------- -------- --------
[CAPTION]
MFS Variable
Insurance Trust
(unaffiliated issuers)
-----------------------------------
Growth High Emerging
with Income Income Growth
Subaccount Subaccount Subaccount
---------- ---------- ----------
[S] [C] [C] [C]
ASSETS
Investments in securities
of unaffiliated issuers
at value (cost $535,196;
$583,531; $630,756;
$783,993; $123,702;
$211,017; $708,971;
$129,419) $861,574 $131,447 $206,035
Investments in shares of
Carillon Fund, Inc.,
at value
(cost $1,108,894;
$135,481; $134,607;
$2,701,804)
Total Assets $861,574 $131,447 $206,035
-------- -------- --------
LIABILITIES
Payable to The Union
Central Life Insurance
Company for mortality
and expense risk
charges $1,134 ($98) $162
NET ASSETS (Contract
Owners' Equity)
Equity Subaccount:
83,212.46 Accumulation
Units @ $14.26327
Capital Subaccount:
11,255.09 Accumulation
Units @ $11.84689
Bond Subaccount:
11,719.47 Accumulation
Units @ $11.69516
S & P 500 Index
Subaccount:
190,744.45 Accumulation
Units @ $15,39441
Money Market Subaccount
49,222.39 Accumulation
Units @ $10.88678
Capital Growth Subaccount
44,339.15 Accumulation
Units $15.22763
International Subaccount
54,168.43 Accumulation
Units @ $12.07680
Growth with Income
Subaccount:
58,000.19 Accumulation
Units @ $14.83512 860,440
High Income Subaccount:
11,350.02 Accumulation
Units @ $11.58952 131,545
Emerging Growth Subaccount
16,511.82 Accumulation
Units @ $12.46822 205,873
Growth Subaccount:
75,378.70 Accumulation
Units @ $9.05435
International Subaccount:
11,859.30 Accumulation
Units @ $10.94424
-------- -------- --------
Total Liabilities and
Net Assets $861,574 $131,447 $206,035
-------- -------- --------
<TABLE>
<CAPTION>
American Century Templeton Variable
Variable Portfolios, Inc. Products Series Fund
(unaffiliated issuer) (unaffiliated issuer)
---------------------- ---------------------
Growth International
Subaccount Subaccount
---------- ----------
<S> <C> <C>
ASSETS
Investments in securities
of unaffiliated issuers
at value (cost $535,196;
$583,531; $630,756;
$783,993; $123,702;
$211,017; $708,971;
$129,419) $682,897 $127,804
Investments in shares of
Carillon Fund, Inc.,
at value
(cost $1,108,894;
$135,481; $134,607;
$2,701,804)
Total Assets $682,897 $127,804
-------- --------
LIABILITIES
Payable to The Union
Central Life Insurance
Company for mortality
and expense risk
charges $392 ($1,987)
NET ASSETS (Contract
Owners' Equity)
Equity Subaccount:
83,212.46 Accumulation
Units @ $14.26327
Capital Subaccount:
11,255.09 Accumulation
Units @ $11.84689
Bond Subaccount:
11,719.47 Accumulation
Units @ $11.69516
S & P 500 Index
Subaccount:
190,744.45 Accumulation
Units @ $15,39441
Money Market Subaccount
49,222.39 Accumulation
Units @ $10.88678
Capital Growth Subaccount
44,339.15 Accumulation
Units $15.22763
International Subaccount
54,168.43 Accumulation
Units @ $12.07680
Growth with Income
Subaccount:
58,000.19 Accumulation
Units @ $14.83512
High Income Subaccount:
11,350.02 Accumulation
Units @ $11.58952
Emerging Growth Subaccount
16,511.82 Accumulation
Units @ $12.46822
Growth Subaccount:
75,378.70 Accumulation
Units @ $9.05435 682,505
International Subaccount:
11,859.30 Accumulation
Units @ $10.94424 $129,791
-------- --------
Total Liabilities and
Net Assets $682,897 $127,804
-------- --------
</TABLE>
The accompanying notes are an integral part of
the financial statements.
<PAGE>
CARILLON LIFE ACCOUNT
STATEMENT OF OPERATIONS
- ----------------------------------------------------------------------------
Carillon Fund, Inc.
(affiliated issuers)
-------------------------------------------------
Equity Capital Bond S&P 500 Index
Subaccount Subaccount Subaccount Subaccount
---------- ---------- ---------- ----------
[S] [C] [C] [C] [C]
INVESTMENT INCOME $ 63,286 $9,592 $6,384 $ 37,614
Dividend Income
EXPENSES
Mortality and
expense risk
charge 5,804 2,174 613 12,500
-------- ------ ------ --------
NET INVESTMENT
INCOME(EXPENSE) 57,482 7,418 5,771 25,114
-------- ------ ------ --------
REALIZED AND
UNREALIZED
GAIN(LOSS) ON
INVESTMENTS
Net realized
gain(loss) on
investments 5,374 68 275 171,324
-------- ------ ------ --------
Net unrealized
appreciation
(depreciation)
of investments 54,454 (3,436) 2,461 205,312
-------- ------ ------ --------
NET REALIZED
AND UNREALIZED
GAIN(LOSS) ON
INVESTMENTS 59,828 (3,368) 2,736 376,636
-------- ------ ------ --------
NET INCREASE
(DECREASE) IN
NET ASSETS FROM
OPERATIONS $117,310 $4,050 $8,507 $401,750
-------- ------ ------ --------
[CAPTION]
Scudder Variable Life
Investment Fund
(unaffiliated Issuers)
----------------------------------
Money Capital
Market Growth International
Subaccount Subaccount Subaccount
---------- ---------- ----------
[S] [C] [C] [C]
INVESTMENT INCOME $13,861 $20,418 $ 6,561
Dividend Income
EXPENSES
Mortality and
expense risk
charge 1,793 3,700 3,350
------- ------- -------
NET INVESTMENT
INCOME(EXPENSE) 12,068 16,718 3,211
------- ------- -------
REALIZED AND
UNREALIZED
GAIN(LOSS) ON
INVESTMENTS
Net realized
gain(loss) on
investments 0 4,194 3,099
------- ------- -------
Net unrealized
appreciation
(depreciation)
of investments 0 77,571 14,756
------- ------- -------
NET REALIZED
AND UNREALIZED
GAIN(LOSS) ON
INVESTMENTS 0 81,765 17,855
------- ------- -------
NET INCREASE
(DECREASE) IN
NET ASSETS FROM
OPERATIONS $12,068 $98,483 $21,066
------- ------- -------
[CAPTION]
MFS Variable
Insurance Trust
(unaffilitate issuers)
----------------------------------
Growth High Emerging
with Income Income Growth
Subaccount Subaccount Subaccount
---------- ---------- ----------
[S] [C] [C] [C]
INVESTMENT INCOME $20,221 $0 $0
Dividend Income
EXPENSES
Mortality and
expense risk
charge 3,465 1,092 11
------- ------- -------
NET INVESTMENT
INCOME(EXPENSE) 16,756 (1,092) (11)
------- ------- -------
REALIZED AND
UNREALIZED
GAIN(LOSS) ON
INVESTMENTS
Net realized
gain(loss) on
investments 3,633 2,033 146
------- ------- -------
Net unrealized
appreciation
(depreciation)
of investments 70,494 7,859 (4,982)
------- ------- -------
NET REALIZED
AND UNREALIZED
GAIN(LOSS) ON
INVESTMENTS 74,127 9,892 (4,836)
------- ------- -------
NET INCREASE
(DECREASE) IN
NET ASSETS FROM
OPERATIONS $90,883 $8,800 ($4,847)
------- ------- -------
<TABLE>
<CAPTION>
American Century Templeton Variable
Variable Portfolios, Inc. Products Series Fund
(unaffiliated issuer) (unaffiliated issuer)
---------------------- ----------------------
Growth International
Subaccount Subaccount
---------- ----------
<S> <C> <C>
INVESTMENT INCOME $ 8,658 $0
Dividend Income
EXPENSES
Mortality and
expense risk
charge 5,354 7
-------- -------
NET INVESTMENT
IONCOME(EXPENSE) 3,304 (7)
-------- -------
REALIZED AND
UNREALIZED
GAIN(LOSS) ON
INVESTMENTS
Net realized
gain(loss) on
investments ( 4,996) 43
-------- -------
Net unrealized
appreciation
(depreciation)
of investments (14,910) (1,615)
-------- -------
NET REALIZED
AND UNREALIZED
GAIN(LOSS) ON
INVESTMENTS (19,906) (1,572)
-------- -------
NET INCREASE
(DECREASE) IN
NET ASSETS FROM
OPERATIONS ($16,602) ($1,579)
-------- -------
</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,
1997 1996
---- ----
<S> <C> <C>
OPERATIONS
Net investment income $ 57,482 $ 542
Net realized gain on investments 5,374 324
Net unrealized appreciation of investments 54,454 25,243
---------- --------
Net increase in net assets
resulting from operations 117,310 26,109
---------- --------
EQUITY TRANSACTIONS
Contract purchase payments 541,015 162,065
Transfers from other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company 476,305 163,877
Transfers to other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company (237,426) (37,005)
Surrenders (24,127) (1,241)
---------- --------
Net proceeds from equity transactions 755,767 287,696
---------- --------
NET INCREASE IN NET ASSETS 873,077 313,805
NET ASSETS (Beginning of year) 313,805 0
---------- --------
NET ASSETS (End of year) $1,186,882 $313,805
========== ========
</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.
Capital Subaccount
----------------------
Year Ended December 31,
1997 1996
---- ----
<S> <C> <C>
OPERATIONS
Net investment income $ 7,418 $ 401
Net realized gain on investments 68 40
Net unrealized appreciation
(depreciation) of investments (3,436) 1,569
-------- -------
Net increase in net assets
resulting from operations 4,050 2,010
-------- -------
EQUITY TRANSACTIONS
Contract purchase payments 77,042 19,391
Transfers from other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company 54,466 24,457
Transfers to other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company (40,555) (6,529)
Surrenders (294) (700)
-------- -------
Net proceeds from equity transactions 90,659 36,619
-------- -------
NET INCREASE IN NET ASSETS 94,709 38,629
NET ASSETS (Beginning of year) 38,629 0
-------- -------
NET ASSETS (End of year) $133,338 $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,
1997 1996
---- ----
<S> <C> <C>
OPERATIONS
Net investment income $ 5,771 $ 736
Net realized gain (loss) on investments 275 (73)
Net unrealized appreciation of investments 2,461 151
-------- -------
Net increase in net assets
resulting from operations 8,507 814
-------- -------
EQUITY TRANSACTIONS
Contract purchase payments 75,946 6,343
Transfers from other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company 65,499 31,830
Transfers to other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company (49,957) (6,741)
Surrenders (4,477) (703)
-------- -------
Net proceeds from equity transactions 87,011 0,729
-------- -------
NET INCREASE IN NET ASSETS 95,518 41,543
NET ASSETS (Beginning of year) 41,543 0
-------- -------
NET ASSETS (End of year) $137,061 $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,
1997 1996
---- ----
<S> <C> <C>
OPERATIONS
Net investment income $ 25,114 $ 1,158
Net realized gain on investments 171,324 1,486
Net unrealized appreciation of investments 205,312 37,842
Net increase in net assets
resulting from operations 401,750 40,486
EQUITY TRANSACTIONS
Contract purchase payments 1,526,494 350,824
Transfers from other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company 1,500,209 289,698
Transfers to other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company (1,053,114) (87,357)
Surrenders (31,866) (726)
Net proceeds from equity transactions 1,941,723 552,439
---------- --------
NET INCREASE IN NET ASSETS 2,343,473 592,925
NET ASSETS (Beginning of year) 592,925 0
---------- --------
NET ASSETS (End of year) $2,936,398 $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,
1997 1996
---- ----
<S> <C> <C>
OPERATIONS
Net investment income $ 12,068 $ 906
---------- --------
Net increase in net assets
resulting from operations 12,068 906
---------- --------
EQUITY TRANSACTIONS
Contract purchase payments 2,943,446 1,382,766
Transfers from other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company 255,367 59,085
Transfers to other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company (2,884,504) (1,223,675)
Surrenders (9,586)
---------- --------
Net proceeds from equity transactions 304,723 18,176
---------- --------
NET INCREASE IN NET ASSETS 316,791 219,082
NET ASSETS (Beginning of year) 219,082 0
---------- --------
NET ASSETS (End of year) $ 535,873 $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,
1997 1996
---- ----
<S> <C> <C>
OPERATIONS
Net investment income (expense) $ 16,718 ($659)
Net realized gain on investments 4,194 383
Net unrealized appreciation of investments 77,571 14,495
-------- --------
Net increase in net assets
resulting from operations 98,483 14,219
-------- --------
EQUITY TRANSACTIONS
Contract purchase payments 300,623 88,185
Transfers from other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company 241,177 117,736
Transfers to other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company (149,666) (28,683)
Surrenders (6,173) (721)
-------- --------
Net proceeds from equity transactions 385,961 176,517
-------- --------
NET INCREASE IN NET ASSETS 484,444 190,736
NET ASSETS (Beginning of year) 190,736 0
-------- --------
NET ASSETS (End of year) $675,180 $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,
1997 1996
---- ----
<S> <C> <C>
OPERATIONS
Net investment income (expense) $ 3,211 ($1,871)
Net realized gain on investments 3,099 216
Net unrealized appreciation of investments 14,756 9,596
-------- --------
Net increase in net assets
resulting from operations 21,066 7,941
-------- --------
EQUITY TRANSACTIONS
Contract purchase payments 402,988 78,115
Transfers from other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company 214,864 147,720
Transfers to other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company (178,811) (28,424)
Surrenders (9,661) (1,617)
-------- --------
Net proceeds from equity transactions 429,380 195,794
-------- --------
NET INCREASE IN NET ASSETS 450,446 203,735
NET ASSETS (Beginning of year) 203,735 0
-------- --------
NET ASSETS (End of year) $654,181 $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,
1997 1996
---- ----
<S> <C> <C>
OPERATIONS
Net investment income (expense) $ 16,756 ($1,242)
Net realized gain on investments 3,633 642
Net unrealized appreciation of investments 70,494 7,086
-------- --------
Net increase in net assets
resulting from operations 90,883 6,486
-------- --------
EQUITY TRANSACTIONS
Contract purchase payments 363,999 73,156
Transfers from other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company 427,622 82,680
Transfers to other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company (158,180) (19,053)
Surrenders (6,427) (726)
-------- --------
Net proceeds from equity transactions 627,014 136,057
-------- --------
NET INCREASE IN NET ASSETS 717,897 142,543
NET ASSETS (Beginning of year) 142,543 0
NET ASSETS (End of year) $860,440 $142,543
======== ========
</TABLE>
The accompanying notes are an integral part of
the financial statements.
<PAGE>
CARILLON LIFE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------
<TABLE>
<CAPTION>
MFS Variable Insurance Trust
High Income Subaccount
----------------------------
Year Ended December 31,
1997 1996
---- ----
<S> <C> <C>
OPERATIONS
Net investment expense ($1,092) ($287)
Net realized gain on investments 2,033 108
Net unrealized appreciation
(depreciation) of investments 7,859 (115)
-------- --------
Net increase (decrease) in net
assets resulting from operations 8,800 (294)
-------- --------
EQUITY TRANSACTIONS
Contract purchase payments 74,122 16,133
Transfers from other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company 64,425 28,673
Transfers to other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company (51,927) (5,463)
Surrenders (1,952) (972)
-------- --------
Net proceeds from equity transactions 84,668 38,371
-------- --------
NET INCREASE IN NET ASSETS 93,468 38,077
NET ASSETS (Beginning of year) 38,077 0
-------- --------
NET ASSETS (End of year) $131,545 $ 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>
MFS Variable Insurance Trust
Emerging Growth Subaccount
---------------------------
Year Ended December 31, 1997
<S> <C>
OPERATIONS
Net investment expense ($11)
Net realized gain on investments 146
Net unrealized depreciation of investments (4,982)
Net decrease in net assets
resulting from operations (4,847)
--------
EQUITY TRANSACTIONS
Contract purchase payments 36,456
Transfers from other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company 185,734
Transfers to other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company (11,470)
--------
Net proceeds from equity transactions 210,720
--------
NET INCREASE IN NET ASSETS 205,873
NET ASSETS (Beginning of year) 0
--------
NET ASSETS (End of year) $205,873
--------
</TABLE>
The accompanying notes are an integral part of
the financial statements.
<PAGE>
CARILLON LIFE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS
- -----------------------------------------------------------
<TABLE>
<CAPTION>
American Century Variable Portfolios, Inc.
Growth Subaccount
------------------------------------------
Year Ended December 31,
1997 1996
---- ----
<S> <S> <C>
OPERATIONS
Net investment income (expense) $ 3,304 ($974)
Net realized loss on investments (4,996) (669)
Net unrealized depreciation on investments (14,910) (11,163)
-------- --------
Net decrease in net assets
resulting from operations (16,602) (12,806)
-------- --------
EQUITY TRANSACTIONS
Contract purchase payments 508,141 141,190
Transfers from other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company 154,646 176,594
Transfers to other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company (214,444) (43,069)
Surrenders (10,480) (665)
-------- --------
Net proceeds from equity transactions 437,863 274,050
-------- --------
NET INCREASE IN NET ASSETS 421,261 261,244
NET ASSETS (Beginning of year) 261,244 0
-------- --------
NET ASSETS (End of year) $682,505 $261,244
======== ========
</TABLE>
The accompanying notes are an integral part of
the financial statements.
<PAGE>
CARILLON LIFE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS
- -----------------------------------------------------------
<TABLE>
<CAPTION>
Templeton Variable Products Series Fund
International Subaccount
---------------------------------------
Year Ended December 31, 1997
<S> <C>
OPERATIONS
Net investment expense ($7)
Net realized gain on investments 43
Net unrealized depreciation on investments (1,615)
--------
Net decrease in net assets
resulting from operations (1,579)
--------
EQUITY TRANSACTIONS
Contract purchase payments 56,373
Transfers from other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company 89,306
Transfers to other subaccounts and
Guaranteed Account of The Union
Central Life Insurance Company (14,309)
--------
Net proceeds from equity transactions 131,370
--------
NET INCREASE IN NET ASSETS 129,791
NET ASSETS (Beginning of year) 0
--------
NET ASSETS (End of year) $129,791
========
</TABLE>
The accompanying notes are an integral part of
the financial statements.
<PAGE>
CARILLON LIFE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------
DECEMBER 31, 1997
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 Life
Account is comprised of twelve subaccounts, each of which
invests in a corresponding Portfolio of Carillon Fund, Inc.,
Scudder Variable Life Investment Fund, MFS Variable Insurance
Trust, American Century Variable Portfolios, Inc., or Templeton
Variable Products Series Fund (the "Funds"). The Funds are
no-load, diversified, open-end management investment companies
registered under the Investment Company Act of 1940, as amended.
The shares of Carillon Fund, Inc. are sold only to Union Central
and its separate accounts to fund the benefits under certain
variable life policies and variable annuity contracts. Carillon
Investments, Inc., a broker-dealer registered under the
Securities Exchange Act of 1934 and a wholly-owned subsidiary of
Union Central, serves as the distributor of variable life
policies and variable annuity contracts issued by Carillon Fund,
Inc. The shares of Scudder Variable Life Investment Fund, MFS
Variable Insurance Trust, American Century Variable Portfolios,
Inc., and Templeton Variable Products Series Fund, are available
and are being marketed exclusively as a pooled funding vehicle
for life insurance companies writing all types of variable life
insurance policies and variable annuity contracts. Scudder
Investor Services, Inc., a wholly-owned subsidiary of Scudder
Stevens & Clark Inc. serves as distributor of variable life
insurance policies and variable annuity contracts issued by
Scudder Variable Life Investment Fund; MFS Fund Distributors,
Inc., a wholly-owned subsidiary of Massachusetts Financial
Services Company serves as distributor of shares issued by the
MFS Variable Insurance Trust; American Century Investment
Services, Inc., an affiliate of the fund's investment manager,
serves as the distributor of variable life insurance contracts
issued by American Century Variable Portfolios, Inc.; Franklin
Templeton Distributors, Inc. serves as the distributor of
variable annuity and variable life insurance contracts issued
by Templeton Variable Products Series Fund.
The assets of the Life Account are segregated from the other
assets of Union Central and the investment performance of the
Life 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.
Use of estimates - The preparation of financial statements in
conformity with generally accounting principles requires
management to make estimates and assumptions that effect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements. Estimates also effect the reported amounts of
revenues and expenses during the reporting period. Actual
results could differ for those estimates.
Securities transactions and investment income - Securities
transactions are recorded on the trade date (the date the order
to buy or sell is executed), and dividend income is recorded on
the ex-dividend date. Gains and losses on sales of Fund shares
are calculated on the first-in, first-out basis for financial
reporting and tax purposes. All dividends and distributions
from the Subaccount are reinvested in additional shares of the
respective Subaccount at the net asset value per share.
Federal income taxes - The operations of the 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, American Century Variable Portfolios, Inc., and
Templeton Variable Products Series Fund as of December 31,
1997:
<TABLE>
<CAPTION>
Carillon Fund Inc.
Equity Capital Bond S&P 500 Index
Subaccount Subaccount Subaccount Subaccount
<S> <C> <C> <C> <C>
Net asset value
per share $ 20.35 $ 14.10 $ 11.29 $ 15.74
Number of shares 58,407 9,476 12,154 187,100
<CAPTION>
Scudder Variable Life
Investment Fund
Money Capital
Market Growth International
Subaccount Subaccount Subaccount
<S> <C> <C> <C>
Net asset value per share $ 1.00 $ 20.63 $ 14.11
Number of shares 535,196 32,748 46,429
<CAPTION>
MFS Variable Insurance Trust
Growth Emerging
with Income High Income Growth
Subaccount Subaccount Subaccount
<S> <C> <C> <C>
Net asset value per share $ 16.44 $ 12.35 $ 16.14
Number of shares 52,407 10,643 12,766
<CAPTION>
American Century Variable Portfolios, Inc.
Growth
Subaccount
<S> <C>
Net asset value per share $ 9.68
Number of shares 70,547
<CAPTION>
Templeton Variable Products Series Fund
International
Subaccount
<S> <C>
Net asset value per share $ 20.14
Number of shares 6,346
</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.
NOTE 4 - IMPACT OF YEAR 2000 (UNAUDITED)
Some of Union Central's computer programs were written using two
digits rather than four to define the applicable year. As a
result, those computer programs have software that may recognize
a date using 00' as the year 1900 rather than the year 2000.
Computer software incorrectly recognizing a date would cause the
Company's computing environment to not function as expected.
Among the results could be miscalculations causing disruptions
of operations.
A comprehensive assessment of the Union Central Year 2000
sensitive software has been performed and the primary risks and
required software modifications have been identified. Union
Central will both modify existing software, and install new
software, in time to ensure the Year 2000 problem does not
impact its operations, or the operations of Carillon Life
Account.
NOTE 5 - SELECTED PER UNIT DATA
The following selected per unit data is computed on the
basis of an accumulation unit outstanding at December 31 :
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
CARILLON FUND, INC.
- -------------------
EQUITY SUBACCOUNT
Accumulation unit value $14.26 $11.92
Number of accumulation units outstanding,
end of period 83,212.46 26,326.12
CAPITAL SUBACCOUNT
Accumulation unit value $11.85 $11.11
Number of accumulation units outstanding,
end of period 11,255.09 3,475.76
BOND SUBACCOUNT
Accumulation unit value $11.70 $10.61
Number of accumulation units outstanding,
end of period 11,719.47 3,914.14
S&P 500 INDEX SUBACCOUNT
Accumulation unit value $15.39 $11.69
Number of accumulation units outstanding,
end of period 190,744.45 50,735.13
SCUDDER VARIABLE LIFE INVESTMENT FUND
- -------------------------------------
MONEY MARKET SUBACCOUNT
Accumulation unit value $10.89 $10.42
Number of accumulation units outstanding,
end of period 49,222.39 21,025.06
CAPITAL GROWTH SUBACCOUNT
Accumulation unit value $15.23 $11.30
Number of accumulation units outstanding,
end of period 44,339.15 16,877.42
INTERNATIONAL SUBACCOUNT
Accumulation unit value $12.08 $11.16
Number of accumulation units outstanding,
end of period 54,168.43 18,261.97
MFS VARIABLE INSURANCE TRUST
- ----------------------------
GROWTH WITH INCOME SUBACCOUNT
Accumulation unit value $14.84 $11.52
Number of accumulation units outstanding,
end of period 58,000.19 12,377.12
HIGH INCOME SUBACCOUNT
Accumulation unit value $11.59 $10.28
Number of accumulation units outstanding,
end of period 11,350.02 3,704.87
EMERGING GROWTH SUBACCOUNT
Accumulation unit value 12.47 --
Number of accumulation units outstanding,
end of period 16,511.82 --
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
- -----------------------------------------
GROWTH SUBACCOUNT
Accumulation unit value $9.05 $9.43
Number of accumulation units outstanding,
end of period 75,378.70 27,704.30
Templeton Variable Products Series Fund
- ---------------------------------------
INTERNATIONAL SUBACCOUNT
Accumulation unit value $10.94 --
Number of accumulation units outstanding,
end of period 11,859.30 --
</TABLE>
<PAGE>
Consolidated Financial Statements
The Union Central Life
Insurance Company and Subsidiaries
Years ended December 31, 1997 and 1996
with Report of Independent Auditors
<PAGE>
THE UNION CENTRAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 1997 and 1996
CONTENTS
Page
Report of Independent Auditors ...................... 1
Consolidated Balance Sheets ......................... 2
Consolidated Statements of Income ................... 3
Consolidated Statements of Equity ................... 4
Consolidated Statements of Cash Flows ............... 5
Notes to Consolidated Financial Statements .......... 6
<PAGE>
Report of Independent Auditors
To the Board of Directors
The Union Central Life Insurance Company
We have audited the accompanying consolidated balance sheets of The Union
Central Life Insurance Company and subsidiaries as of December 31, 1997 and
1996, and the related consolidated statements of income, equity, and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of The Union
Central Life Insurance Company and subsidiaries at December 31, 1997, and
1996, and the consolidated results of their operations and their cash flows
for the years then ended in conformity with generally accepted accounting
principles.
March 16, 1998
<PAGE>
THE UNION CENTRAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
December 31,
1997 1996
<S> <C> <C>
ASSETS
Investments:
Fixed maturities available-for-sale
at fair value (amortized cost: $2,758,113 $2,749,772
1997 - $2,697,869;
and 1996 - $2,727,178)
Equity securities available-for-sale
at fair value (cost: 1997 - $59,675
and 1996 - $54,504) 63,138 61,458
Cash and short-term investments 4,872 1,040
Other invested assets 54,342 42,490
Mortgage loans 744,395 663,351
Real estate 50,409 58,601
Policy loans 203,481 206,889
---------- ----------
Total investments 3,878,750 3,783,601
Accrued investment income 48,846 47,491
Deferred policy acquisition costs 371,295 414,458
Property, plant and equipment,
at cost, less accumulated
depreciation (1997 - $59,096
and 1996 - $55,798) 24,205 22,561
Federal income tax recoverable 6,595 6,394
Other assets 91,758 89,251
Separate account assets 1,288,349 1,000,469
---------- ----------
Total assets $5,709,798 $5,364,225
========== ==========
LIABILITIES AND EQUITY
Policy liabilities:
Future policy benefits $1,933,823 $1,892,875
Deposit funds 1,549,965 1,568,566
Policy and contract claims 31,869 28,413
Policyholders' dividends 37,624 37,492
---------- ----------
Total policy liabilities 3,553,281 3,527,346
Deferred revenue 110,130 130,176
Accrued commissions, expenses and taxes 21,391 16,373
Other liabilities 32,620 49,604
Deferred federal income taxes 33,341 35,149
Surplus notes payable 49,749 49,740
Separate account liabilities 1,310,391 1,014,960
---------- ----------
Total liabilities 5,110,903 4,823,348
MINORITY INTEREST IN SUBSIDIARY'S EQUITY 42,391 46,076
EQUITY
Policyholders' equity 531,164 481,799
Unrealized gain on available-for-sale securities 25,340 13,002
---------- ----------
Total equity 556,504 494,801
---------- ----------
Total liabilities and equity $5,709,798 $5,364,225
========== ==========
</TABLE>
THE UNION CENTRAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands)
<TABLE>
<CAPTION>
December 31,
1997 1996
<S> <C> <C>
REVENUE
Insurance revenue:
Traditional insurance premiums $ 131,974 $ 136,448
Universal life policy charges 88,645 80,746
Annuities 37,569 34,740
Net investment income 298,509 296,912
Net realized gains (losses) on investments 20,617 (22,710)
Other 8,059 6,162
---------- ----------
Total revenue 585,373 532,298
BENEFITS AND EXPENSES
Benefits 181,587 184,368
Increase (decrease) in reserves for
future policy benefits (7,912) 2,985
Interest expense:
Universal life 53,756 50,461
Investment products 91,239 95,654
Underwriting, acquisition and insurance expense 168,504 130,582
Policyholders' dividends 20,304 17,306
---------- ----------
Total benefits and expenses 507,478 481,356
Income before federal income tax and minority
interest in subsidiary income 77,895 50,942
Federal income tax expense 27,175 22,642
---------- ----------
Income before minority interest in
subsidiary income 50,720 28,300
Minority interest in subsidiary income (2,034) (2,704)
---------- ----------
Net Income $ 48,686 $ 25,596
========== ==========
</TABLE>
<PAGE> THE UNION CENTRAL LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF EQUITY
(in thousands)
<TABLE>
<CAPTION>
Unrealized
Gain on
Policyholders' Available-for-Sale Total
Equity Securities Equity
------------- ------------------ ------
<S> <C> <C> <C>
Balance at January 1, 1996 $456,203 $ 29,541 $485,744
Net income 25,596 -- 25,596
Net unrealized depreciation -- (16,539) (16,539)
-------- -------- --------
Balance at December 31, 1996 481,799 13,002 494,801
-------- -------- --------
Net income 48,686 -- 48,686
Net unrealized appreciation -- 12,338 12,338
Other 679 -- 679
-------- -------- --------
Balance at December 31, 1997 $531,164 $ 25,340 $556,504
======== ======== ========
</TABLE>
<PAGE>
THE UNION CENTRAL LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
December 31,
1997 1996
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 48,686 $ 25,596
Adjustments to net income not affecting cash:
Interest credited to universal life policies 53,756 50,461
Interest credited to interest sensitive products 91,239 95,654
Accrual of discounts on investments, net (2,610) (1,487)
Net realized (gains) and losses on investments (20,617) 22,710
Depreciation 4,355 6,472
Amortization of deferred policy acquisition costs 60,979 33,523
Amortization of deferred revenue (17,633) (10,073)
Deferred federal income tax (benefit) (9,452) 4,134
Change in operating assets and liabilities:
Accrued investment income (1,355) (623)
Policy cost deferred (41,608) (40,471)
Revenue deferred 2,340 2,188
Policy liabilities (53,705) (72,417)
Federal income tax recoverable (payable) 294 (54)
Change in other liabilities (15,786) (17,127)
Other items, net 10,630 11,557
---------- ----------
Cash Provided by Operating Activities 109,513 110,043
---------- ----------
INVESTING ACTIVITIES
Costs of investments acquired (3,295,204) (3,393,082)
Proceeds from sale, maturity or repayment of
investments 3,264,331 3,297,247
Decrease in policy loans 3,408 966
Purchases of property and equipment, net (5,627) (6,986)
---------- ----------
Cash Used in Investing Activities (33,092) (101,855)
---------- ----------
FINANCING ACTIVITIES
Receipts from universal life
and investment contracts 607,809 534,974
Withdrawals from universal life
and investment contracts (673,586) (603,300)
Cash provided by issuance of surplus notes -- 49,740
Purchase of stock from minority shareholders (6,812) --
---------- ----------
Cash Used by Financing Activities (72,589) (18,586)
---------- ----------
Increase (decrease) in cash
and short term investments 3,832 (10,398)
---------- ----------
Cash and short term investments
at beginning of year 1,040 11,438
---------- ----------
Cash and short term investments at end of year $ 4,872 $ 1,040
========== ==========
Supplemental disclosure
of cash flow information:
Cash paid during the year
for federal income taxes $ 36,297 $ 27,905
Cash paid during the year
for interest on surplus notes $ 4,066 $ --
</TABLE>
The accompanying notes are an integral part of the
financial statements.
<PAGE>
NOTE 1 - NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING
POLICIES
Basis of Presentation and Organization
The accompanying consolidated financial statements have been
prepared in accordance with generally accepted accounting
principles (GAAP) and include the accounts of The Union Central
Life Insurance Company (Union Central) and the following
subsidiaries: The Manhattan Life Insurance Company (Manhattan
Life), a mixed charter life insurance company of which Union
Central owns 100% of the outstanding guarantee capital shares,
Carillon Advisers, Inc. (CAI), a registered investment advisor
company, wholly-owned and Carillon Investments, Inc. (CII) a
registered broker dealer, wholly-owned. The consolidated entity
will be referred to as "the Company". All significant
intercompany accounts and transactions have been eliminated in
the accompanying consolidated financial statements. Union
Central also has the following unconsolidated investment
affiliates: Carillon Fund, Inc., a variable products mutual
fund consisting of five investment portfolios (equity, bond,
asset allocation, S&P 500 indexed and micro-cap); Summit
Investment Trust, consisting of two mutual funds (Summit
Emerging Markets Bond Fund, an emerging markets corporate and
government bond mutual fund and Summit High Yield Fund, a high-
yield bond mutual fund). In addition, Carillon Advisors, Inc.,
owns 51% of First Summit Capital Management, a registered
investment advisor.
The Company provides a wide spectrum of financial products and
related services for the benefit of individual, group and
pension policyholders. Such products and services include
insurance to provide for financial needs resulting from loss of
life or income and management of funds accumulated for
preretirement and retirement needs.
The Company is licensed to do business in all 50 states of the
United States.
The preparation of financial statements requires management to
make estimates and assumptions that affect amounts reported in
the financial statements and accompanying notes. Such estimates
and assumptions could change in the future as more information
becomes known, which could impact the amounts reported and
disclosed herein.
At December 31, 1996, Union Central owned approximately 73% of
Manhattan Life's guarantee capital shares. On January 28, 1997,
the guarantee capital shareholders constituting at least two-
thirds of the outstanding guarantee capital shares of Manhattan
Life (including the shares owned by Union Central) approved
Union Central's plan to eliminate the minority interests in
Manhattan Life's guarantee capital shares by effecting a reverse
stock split (the "Plan") that had previously been approved by
the New York Insurance Department. Under the Plan, each holder
of guarantee capital shares received a cash payment in lieu of
the issuance of any resulting fractional guarantee capital
shares, with Union Central becoming sole remaining holder of
Manhattan Life's guarantee capital shares. The cost of
redeeming the fractional shares, $6,812,000, was funded by
Manhattan Life; however, as part of the Plan, Union Central made
a cash contribution of $1,823,000 to Manhattan Life's guarantee
capital share account. As a result of effecting the reverse
stock split, Union Central's policyholders equity increased by
$1,919,000. This represents the cumulative prior years' amount
of the minority shareholders' share of Manhattan Life's
shareholders equity of $8,731,000, less the cost of redeeming
the fractional shares. The increase in policyholders' equity is
included in "Other" in the Statements of Equity. In connection
with effecting the reverse stock split, the Company incurred and
capitalized $2,782,000 of issuance cost. This cost was recorded
in "Other assets" in the Balance Sheets, and will be amortized
under the straight-line method to expense over 15 years.
Amortization of capitalized expenses was commenced in 1997 with
$185,000 amortized to "Underwriting, acquisition and insurance
expense" in the Statements of Income.
The Company adopted in 1997 FASB Statement No. 125," Accounting
for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities". The effect of adoption was
immaterial.
Investments
Fixed maturity and equity securities classified as available-
for-sale are carried at fair value with net unrealized gains and
losses reported as a separate component of equity.
Other investments are reported on the following bases:
* Mortgage loans on real estate are carried at their aggregate
unpaid balance less unamortized discount and less an
allowance for possible losses.
* Real estate acquired through foreclosure is carried at the
lower of cost or its net realizable value.
* Policy loans are reported at unpaid balances.
* Cash and short-term investments presented on the Balance
Sheets consist of cash-in-bank, cash-in-transit and
commercial paper that has a maturity date of 90 days or less
from the date acquired.
The fair values of fixed maturity and equity securities
represent quoted market values from published sources or
calculated market values using the "yield method" if no quoted
market values are obtainable.
Realized gains and losses on sales of investments, net of
related deferred policy acquisition cost and unearned revenue
amortization, and declines in the value of investments judged to
be other-than-temporary, are recognized on a specific
identification basis.
Interest is not accrued on mortgage loans or bonds for which
principal or interest payments are determined to be
uncollectible.
The Company purchases call options to hedge insurance contracts
whose credited interest is linked to returns in Standard &
Poor's 500 Stock Index (Index) based on a formula which applies
participation rates to the returns in the Index. Call options
are contracts which give the option purchaser the right, but not
the obligation, to buy securities at a specified price during a
specified period. The Company holds call options which expire
quarterly until December 31, 1998. The Company paid initial
fees (the option premium) to enter the option contracts. The
Index call options give the Company the right to receive cash at
settlement if the closing Index value is above the strike price.
These proceeds do not result in income to the Company because
the hedged insurance contracts would be credited interest for an
equivalent amount.
The Company is exposed to credit-related losses in the event of
nonperformance by counterparties to the call options. To
minimize this risk, the Company only enters into private options
contracts with counterparties having Standard & Poor's credit
ratings of AA- or above or listed contracts guaranteed by the
Chicago Board Options Exchange. The credit exposure is limited
to the value of the call options at December 31, 1997, and is
immaterial to the Company.
The call options were carried at their fair value of $1,877,000
at December 31, 1997, and were reflected in "Other invested
assets" in the Balance Sheets. The liabilities for the hedged
insurance contracts were adjusted based on the market value of
the call options of $1,877,000, and were reflected in "Deposit
funds" in the Balance Sheets.
Deferred Policy Acquisition Costs
The costs of acquiring new business, principally commissions,
certain expenses of the policy issue and underwriting department
and certain variable agency expenses have been deferred.
Deferred policy acquisition costs are amortized consistent with
the methods described in "Policy Liabilities, Revenues, Benefits
and Expenses," and the effect of realized gains and losses on
deferred policy acquisition cost amortization is restored or
amortized and is netted against "Net realized gains (losses) on
investments". Amortization of deferred policy acquisition costs
totalled $60,979,000 and $33,523,000, net of the effect of
realized gains and (losses) on amortization of $13,309,000 and
($9,176,000) for the years ended December 31, 1997 and 1996,
respectively, and were included in "Underwriting, acquisition
and insurance expense" in the Statements of Income. Deferred
policy acquisition costs are adjusted to reflect the impact of
unrealized gains on available-for-sale securities. Adjustments
reducing deferred policy acquisition costs related to unrealized
gains totalled $17,627,000, and $7,143,000 at 1997 and 1996,
respectively.
In 1997, the Company revised its estimates of future gross
profits, and as a result amortization of deferred policy
acquisition costs included in "Underwriting, acquisition and
insurance expense" in the Statements of Income was increased by
$16,988,000.
Property, Plant and Equipment
Property, plant and equipment is valued at historical cost less
accumulated depreciation in the Balance Sheets. It consists
primarily of Union Central's home office, capital leases for
furniture and equipment, furniture and fixtures and electronic
data processing equipment.
Depreciation is computed with the straight-line method over the
estimated useful lives of the respective assets, not to exceed
10 years for office furniture and 5 years for electronic data
processing equipment. Depreciation is computed for leasehold
improvements with the straight-line method over the shorter of
the remaining lease term or useful life of the improvements.
Deposit Funds
The liability for deposit funds is generally established at the
policyholders' accumulated cash values plus amounts provided for
guaranteed interest.
Policy Claims
Policy claim reserves represent the estimated ultimate net cost
of all reported and unreported claims incurred. In addition, a
claim adjustment expense reserve is held to account for the
expenses associated with administering these claims. The
reserves for unpaid claims are estimated using individual case
basis valuations and statistical analyses. The claim adjustment
expense reserve is estimated using statistical analyses. These
estimates are subject to the effects of trends in claim severity
and frequency. Although some variability is inherent in such
estimates, management believes that the reserves for claims and
claim related expenses are adequate. The estimates are
continually reviewed and adjusted as necessary as experience
develops or new information becomes known; and such adjustments
are included in current operations.
Dividends to Policyholders
Union Central's dividend liability is the amount estimated to
have accrued to policyholders' as of each year end. Manhattan
Life's dividend liability is based on the dividend scale in
effect at the time the policy was issued.
Separate Accounts
Separate account assets and liabilities reported in the
accompanying financial statements represent funds that are
separately administered for our individual annuity, group
annuity and variable universal life lines of business, and for
which the contract holders rather than the Company bear the
investment risk. Separate account contract holders have no
claim against the assets of the general account of the Company.
Separate account investments are carried at market value.
Investment income and gains and losses from these accounts
accrue directly to contract holders and are not included in the
accompanying financial statements. Union Central derives
certain fees for maintaining and managing the separate accounts,
but bears no investment risk on these assets, except to the
extent that it participates in a particular separate account.
Policy Liabilities, Revenues, Benefits and Expenses
Traditional Insurance Products
Traditional insurance products include those products with fixed
and guaranteed premiums and benefits and consist primarily of
whole life insurance policies, term insurance policies and
disability income policies. Premiums for traditional products
are recognized as revenue when due.
The liability for future policy benefits for participating
traditional life is computed using a net level premium method
and the guaranteed mortality and dividend fund interest. The
mortality and interest assumptions are equivalent to statutory
assumptions. The liabilities for future policy benefits and
expenses for nonparticipating traditional life policies and
disability income policies are generally computed using a net
level premium method and assumptions for investment yields,
morbidity, and withdrawals based principally on company
experience projected at the time of policy issue, with provision
for possible adverse deviations. Interest assumptions for
participating traditional life reserves for all policies ranged
from 2.25% to 8.87% for the years ended 1997 and 1996.
The costs of acquiring new traditional business, principally
commissions, certain policy issue and underwriting expenses
(such as medical examination and inspection report fees) and
certain agency expenses, all of which vary with and are
primarily related to the production of new and renewal business,
are deferred to the extent that such costs are deemed
recoverable through future gross premiums. Such non-
participating deferred acquisition costs are amortized over the
anticipated premium paying period of the related policies,
generally not to exceed 30 years, using assumptions consistent
with those used to develop policy benefit reserves. For
participating life insurance products, deferred policy
acquisition costs are being amortized in proportion to estimated
gross margins of the related policies. Gross margins are
determined for each issue year and are equal to premiums plus
investment income less death claims, surrender benefits,
administrative costs, policyholder dividends, and the increase
in reserves for future policy benefits. The future investment
yields are assumed to range from 7.3% to 8.6% for the years
ended 1997 and 1996. Changes in dividend payouts are assumed
with changes in yields.
Universal Life and Other Interest Sensitive Products
Interest sensitive products include universal life and single
premium whole life products. They are distinguished by the
existence of a separately definable fund that is credited with
interest and from which any policy charges are taken. Revenues
for these products consist of policy charges for the cost of
insurance, policy administration charges, and surrender charges
that have been assessed against policyholder account balances
during the period.
Benefit reserves for universal life and other interest sensitive
products are computed in accordance with the retrospective
deposit method and represent policy account balances before
applicable surrender charges. Policy benefits that are charged
to expense include benefit claims incurred in the period in
excess of related policy account balances and interest credited
to account balances. Interest crediting rates ranged from 4.5%
to 7.6% for the years ended 1997 and 1996.
The cost of acquiring universal life and other interest
sensitive products, principally commissions, certain policy
issue and underwriting expenses (such as medical examination and
inspection report fees) and certain agency expenses, all of
which vary with and are primarily related to the production of
new and renewal business, are deferred to the extent that such
costs are deemed recoverable through future estimated gross
profits. Acquisition costs for universal life and other
interest sensitive products are amortized over the life of the
policies in proportion to the present value of expected gross
profits from surrender charges and investment, mortality and
expense margins. The amortization is adjusted retrospectively
when estimates of current or future gross profits (including the
impact of investment gains and losses) to be realized from a
group of products are revised.
Amounts assessed policyholders that represent revenue for
services to be provided in future periods are reported as
unearned revenue and recognized in income over the life of the
policies, using the same assumptions and factors as are used to
amortize deferred acquisition costs. These charges consist of
policy fees and premium loads that are larger in the initial
policy years than they are in the later policy years.
Amortization of unearned revenue totalled $17,633,000 and
$10,073,000, net of the effect of realized gains (losses) on
amortization of $4,752,000 and ($3,597,000) for the years ended
December 31, 1997 and 1996, respectively, and was included in
"Universal life policy charges" in the Statements of Income.
In 1997, the Company revised its estimates of future gross
profits, and as a result amortization of unearned revenue
included in "Universal life policy charges" in the Statements of
Income was increased by $5,999,000.
Group Products
Group products consist primarily of group life insurance, and
group long and short term disability income products. Premiums
for group insurance products are recognized as revenue when due.
The liabilities for future policy benefits and expenses for
group life and disability income products are computed using
statutory methods and assumptions, which approximate net level
premium reserves using assumptions for investment yields,
mortality, and withdrawals based principally on company
experience projected at the time of policy issue, with
provisions for possible adverse deviations. Interest
assumptions are based on assumed investment yields that range
from 7.5% to 8.1% for the years ended 1997 and 1996.
The costs of acquiring new group life and disability income
business, principally commissions, certain policy issue and
underwriting expenses (such as medical examination and
inspection report fees) and certain agency expenses, all of
which vary with and are primarily related to the production of
new and renewal business, are deferred to the extent that such
costs are deemed recoverable through future gross premiums.
Such deferred acquisition costs are amortized over the
anticipated premium paying period of the related policies,
generally not to exceed ten years.
Pension Products
Pension products include deferred annuities and payout
annuities. Revenues for the deferred annuity products consist
of investment income on policy funds, mortality and expense
charges, contract administration fees, and surrender charges
that have been assessed against policyholder account balances.
Expenses for deferred annuity products include the interest
credited on policy funds and expenses incurred in the
administration and maintenance of the contracts. For payout
annuities, premiums are recognized as revenue when due while
expenses exclude the interest credited on policy funds.
Benefit reserves for the deferred annuity contracts represent
the policy account balances before applicable surrender charges.
Interest assumptions on payout annuities are based on assumed
investment yields that ranged from 2.0% to 8.0% for the years
ended 1997 and 1996.
Commissions and other related costs of acquiring annuity
contracts that vary with and are primarily related to the
production of new and renewal business are deferred to the
extent that such costs are deemed recoverable through future
estimated gross profits. Acquisition costs are amortized over
the life of the contracts in direct proportion to the present
value of expected gross profits from surrender charges and
investment and expense margins. The amortization is adjusted
retrospectively when estimates of current or future gross
profits (including the impact of investment gains or losses) to
be realized on a group of contracts are revised.
Reinsurance
Reinsurance premiums and claims are accounted for on bases
consistent with those used in accounting for the original
policies issued and the terms of the reinsurance contracts.
Premiums and benefits are reported net of reinsured amounts.
Allocation of Manhattan Life's Income and Equity
Manhattan Life's charter provides for the allocation of its
profits between its shareholders and its policyholders on a one-
eighth/seven-eighths basis. The profits allocated are equal to
income after taxes and interest on the Guaranteed Capital
Reserve ((GCR) see Note 5 for further discussion) but before
policyholders' dividends. As a result of the reverse stock
split described in Note 1, in 1997 only Manhattan Life's
policyholders' share of profits/losses were included in
"Minority Interest in Subsidiary's Income" in the Statements of
Income. In 1996, Manhattan Life's policyholders' and minority
shareholders' share of profits/losses were included in "Minority
Interest in Subsidiary's Income" in the Statements of Income.
In 1997, Manhattan Life's policyholders' equity was included in
"Minority Interest in Subsidiary's Equity" in the Balance
Sheets, and includes policyholders' share of Manhattan Life's
change in unrealized gains on available-for-sale securities. In
1996, Manhattan Life's policyholders' and minority shareholders'
equity was included in "Minority Interest in Subsidiary's
Equity" in the Balance Sheets, and includes policyholders' and
minority shareholders' share of Manhattan Life's change in
unrealized gains on available for sale securities. (See Note 5
for more in-depth discussion of Manhattan Life's corporate
charter.)
Federal Income Taxes
The Company accounts for income taxes using the liability method
for financial accounting and reporting of income taxes. Under
this method, deferred income taxes are recognized for the tax
consequences of "temporary differences" by applying the
applicable tax rate to differences between the financial
statement carrying amounts and the tax bases of existing assets
and liabilities.
Reclassifications
Previously reported amounts for 1996 have in some instances been
reclassified to conform to the 1997 presentation.
NOTE 2 - INVESTMENTS
Available-for-sale securities are summarized as follows:
<TABLE>
<CAPTION>
Cost or Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
---- ----- -------- -----
(in thousands)
<S> <S> <C> <C> <C>
DECEMBER 31, 1997:
U.S. treasury securities
and obligations of U.S.
government corporations
and agencies $ 213,411 $ 1,891 $ (238) $ 215,064
Corporate securities and other 1,447,640 50,318 (5,320) 1,492,638
Mortgage-backed securities,
collateralized mortgage
obligations and
other structured securities 1,028,745 20,386 (7,169) 1,041,962
Debt securities issued
by foreign governments 8,073 376 -- 8,449
---------- ------- -------- ----------
Subtotal 2,697,86 72,971 (12,727) 2,758,113
Equity securities 59,675 4,142 (679) 63,138
---------- ------- -------- ----------
Total $2,757,544 $77,113 $(13,406) $2,821,251
========== ======= ======== ==========
DECEMBER 31, 1996:
U.S. treasury securities and obligations
of U.S. government corporations
and agencies $ 107,704 $ 469 $ (1,714) $ 106,459
Corporate securities and other 1,484,274 34,617 (9,385) 1,509,506
Mortgage-backed securities,
collateralized mortgage
obligations and other
structured securities 1,127,290 17,145 (18,884) 1,125,551
Debt securities issued
by foreign governments 7,910 346 -- 8,256
---------- ------- -------- ----------
Subtotal 2,727,178 52,577 (29,983) 2,749,772
Equity securities 54,504 6,997 (43) 61,458
---------- ------- -------- ----------
Total $2,781,682 $59,574 $(30,026) $2,811,230
========== ======= ======== ==========
</TABLE>
Fixed maturity available-for-sale securities, at December 31,
1997, are summarized by stated maturity as follows:
<TABLE>
<CAPTION>
Amortized Fair
Cost Value
---------- ----------
(in thousands)
<S> <C> <C>
Due in one year or less $ 228 $ 230
Due after one year through five years 225,814 229,246
Due after five years through ten years 751,502 764,791
Due after ten years 239,541 247,434
---------- ----------
Subtotal 1,217,085 1,241,701
Mortgage-backed securities 1,065,212 1,078,310
Other securities with multiple
repayment dates 415,572 438,102
---------- ----------
Total $2,697,869 $2,758,113
========== ==========
</TABLE>
Significant components of the unrealized gain on available-for-
sale securities included in equity in the accompanying Balance
Sheets are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996
---- ----
(in thousands)
<S> <C> <C>
Gross unrealized gain on available-
for-sale securities $ 63,707 $ 29,548
Amortization of deferred policy
acquisition costs (17,627) (7,143)
Minority interests (4,607) (1,573)
Deferred taxes (16,133) (7,830)
-------- --------
Net unrealized gain on available-for-
sale securities $ 25,340 $ 13,002
-------- --------
</TABLE>
See Note 10 for discussion of the methods and assumptions used
by the Company in estimating the fair values of available-for-sale securities.
At December 31, 1997 and 1996, the Company held unrated or less-
than-investment grade (investment grade is defined as "Baa3" and
higher on Moody's ratings and "BBB" and higher on Standard and
Poor's bond ratings) corporate bonds of $198,255,000 and
$177,364,000. Those holdings amounted to 7.2% and 6.5%,
respectively, of the Company's investments in fixed maturities
and 3.5% and 3.3%, respectively, of the Company's total assets.
The holdings of less-than-investment grade bonds are widely
diversified and of satisfactory quality based on the Company's
investment policies and credit standards.
At December 31, 1997 and 1996, the Company invested $45,031,000
and $52,397,000 in affiliated mutual funds. The Company's
holdings in affiliated mutual funds were included in "Equity
securities available-for-sale at fair value" in the Balance
Sheets.
Proceeds, gross realized gains, and gross realized losses from
the sales and maturities of available-for-sale securities
follows:
<TABLE>
<caption
Year Ended December 31,
1997 1996
---- ----
(in thousands)
<S> <C> <C>
Proceeds $3,148,909 $3,170,351
Gross realized gains 52,460 28,154
Gross realized losses 28,173 55,069
</TABLE>
At December 31, 1997 and 1996, investments in bonds of
$6,450,000 and $6,178,000, respectively, were on deposit with
state insurance departments to satisfy regulatory requirements.
Mortgage loans are stated at their aggregate unpaid balances in
the Balance Sheets, less unamortized discounts.
Activity in the allowance for mortgage loss is summarized as
follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996
(in thousands)
<S> <C> <C>
Balances at the beginning of the year $ 2,224 $ 2,711
Provisions for potential
mortgage loan loss 1,307 263
Losses charged against the mortgage
loan loss reserve (2,093) (750)
Balance at the end of the year $ 1,438 $ 2,224
======= =======
</TABLE>
The provision for mortgage losses has fluctuated between
periods. The Company establishes the mortgage reserve based
upon its continuing review of the mortgage portfolio and
individual problem mortgages. The allowance for potential loan
losses is affected to a significant degree by general economic
conditions. While the Company believes it has provided adequate
mortgage reserves, subsequent economic and market conditions may
require establishing additional reserves.
The Company's mortgage portfolio is monitored closely through
the review of loan and property information such as debt service
coverage, annual operating statements and property inspection
reports. This information is evaluated in light of current
economic conditions and other factors such as geographic and
property-type loan concentrations. This evaluation is part of
the regular review to determine whether adjustments to the
allowance for potential loan losses are warranted. Management
believes the mortgage loss reserve is sufficient to provide for
potential loan losses. However, management cannot predict with
assurance where the economy is headed or how the mortgage and
real estate portfolios would be affected by various economic
circumstances.
A summary of the characteristics of the Company's mortgage
portfolio (before deducting valuation reserves of $1,438,000 and
$2,224,000 at December 31, 1997 and 1996, respectively) follows:
<TABLE>
<CAPTION>
December 31, 1997
Principal Percent of
Balance Principal
------- ---------
(in thousands)
<S> <C> <C>
Region
New England and Mid-Atlantic $ 52,400 7.0%
South Atlantic 122,648 16.4
North Central 190,928 25.6
South Central 80,335 10.8
Mountain 111,684 15.0
Pacific 187,838 25.2
--------- -----
Total $ 745,833 100.0 %
========= =====
Property Type
Apartment and residential $ 106,190 14.2%
Warehouses and industrial 127,960 17.2
Retail and shopping center 243,152 32.6
Offices 238,970 32.0
Other 29,561 4.0
--------- -----
Total $ 745,833 100.0%
========= =====
<CAPTION>
December 31, 1997
Principal Percent of
Balance Principal
------- ---------
(in thousands)
<S> <C> <C>
Region
New England and Mid-Atlantic $ 75,893 11.4%
South Atlantic 109,859 16.5
North Central 150,586 22.6
South Central 70,968 10.7
Mountain 93,394 14.0
Pacific 164,875 24.8
--------- -----
Total $ 665,575 100.0%
========= =====
Property Type
Apartment and residential $ 106,099 15.9%
Warehouses and industrial 111,363 16.7
Retail and shopping center 225,105 33.8
Offices 199,011 30.0
Other 23,997 3.6
--------- -----
Total $ 665,575 100.0%
--------- -----
</TABLE>
Real estate consists of investment real estate under lease and
foreclosed real estate. The investment real estate under lease
is depreciated over 40 years. The cost of the property totalled
$17,481,000 and $17,383,000 at December 31, 1997 and 1996,
respectively, and accumulated depreciation totalled $4,586,000
and $4,212,000 at December 31, 1997 and 1996, respectively. The
book value of foreclosed real estate was $37,514,000 and
$45,430,000 at December 31, 1997 and 1996, respectively. The
decrease in foreclosed real estate is a result of the sale of
four properties in 1997.
NOTE 3 - REINSURANCE
In the ordinary course of business, the Company assumes and
cedes reinsurance with other insurers and reinsurers. These
arrangements provide greater diversification of business and
limit the maximum net loss potential on large or hazardous
risks. Reinsurance ceded contracts do not relieve the Company
from its obligations to policyholders. Reinsurance ceded is
recorded as an asset and is recorded in "Other assets" in the
Balance Sheets. The Company remains liable to its policyholders
for the portion reinsured to the extent that any reinsurer does
not meet its obligations for reinsurance ceded to it under the
reinsurance agreements. Failure of reinsurers to honor their
obligations could result in losses to the Company; consequently,
allowances will be established for amounts deemed or estimated
to be uncollectible. To minimize its exposure to significant
losses from reinsurance insolvencies, the Company evaluates the
financial condition of its reinsurers and monitors
concentrations of credit risk arising from similar geographic
regions, activities, or economic characteristics of the
reinsurers. No losses are anticipated, and, based on
management's evaluation, there are no concentrations of credit
risk at December 31, 1997 and 1996. The Company retains the
risk for varying amounts of individual or group insurance
written up to a maximum of $1,000,000 on any one life or $4,000
per month disability risk and reinsures the balance.
Reinsurance transactions with other insurance companies for the
years ended December 31, 1997 and 1996 are summarized as
follows:
<TABLE>
<CAPTION>
December 31, 1997
----------------------------------------
Direct Assumed Ceded Net
------ ------- ----- ---
(in thousands)
<S> <C> <C> <C> <C>
Life insurance in force $30,333,849 $556,694 $5,066,377 $25,824,166
=========== ======== ========== ===========
Premiums and other
considerations:
Traditional insurance
premiums and
universal life $ 240,155 $ 10,154 $ 29,690 $ 220,619
Annuity 37,569 -- -- 37,569
----------- -------- ---------- -----------
Total $ 274,724 $ 10,154 $ 26,690 $ 258,188
=========== ======== ========== ===========
<CAPTION>
Direct Assumed Ceded Net
------ ------- ----- ---
(in thousands)
<S> <C> <C> <C> <C>
Life insurance in force $29,748,174 $595,713 $4,177,415 $26,166,472
=========== ======== ========== ===========
Premiums and other
considerations:
Traditional insurance
premiums and
universal life $ 231,158 $ 10,693 $ 28,254 $ 213,597
Annuity 34,740 -- -- 34,740
----------- -------- ---------- -----------
Total $ 265,898 $ 10,693 $ 28,254 $ 248,337
=========== ======== ========== ===========
</TABLE>
Benefits paid or provided were reduced by $14,779,000 and
$18,747,000 at December 31, 1997 and 1996, respectively, for
estimated recoveries under reinsurance treaties.
The Company nor any of its related parties control, either
directly or indirectly, any reinsurers in which the Company
conducts business. No policies issued by the Company have been
reinsured with a foreign company which is controlled, either
directly or indirectly, by a party not primarily engaged in the
business of insurance.
The Company has not entered into any reinsurance agreements in
which the reinsurer may unilaterally cancel any reinsurance for
reasons other than nonpayment of premiums or other similar
credits.
NOTE 4 - FEDERAL INCOME TAX
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts
used for income tax purposes. Significant components of the
Company's deferred tax liabilities and assets are as follows :
<TABLE>
<CAPTION>
December 31,
1997 1996
(in thousands)
<S> <C> <C>
Deferred tax liabilities:
Deferred policy acquisition costs $ 137,637 $ 146,947
Basis differences on bonds 1,382 1,740
Unrealized gains - SFAS 115 16,133 7,830
Other 3,835 2,647
--------- ---------
Total deferred tax liabilities 158,987 159,164
--------- ---------
Deferred tax assets:
Policyholders' dividends 11,393 11,100
Future policy benefits 74,225 76,471
Premium - based DAC adjustment 25,780 23,643
Investment valuation reserves 1,006 1,147
Retirement plan accruals 10,722 9,494
Investment income differences 499 273
Basis differences on bonds and mortgages 266 266
Other 1,755 1,621
--------- ---------
Total deferred tax assets 125,646 124,015
--------- ---------
Net deferred tax liabilities $ 33,341 $ 35,149
========= =========
</TABLE>
Significant components of the provision for income taxes
attributable to continuing operations are as follows:
<TABLE>
<CAPTION>
December 31,
1997 1996
---- ----
(in thousands)
<S> <C> <C>
Current $ 36,603 $ 18,509
Deferred (9,428) 4,133
--------- ---------
Total $ 27,175 $ 22,642
========= =========
</TABLE>
Federal income tax expense is calculated based on applying the
statutory corporate tax rate to taxable income, and adjusting
this amount for permanent differences between deductions allowed
for financial statement purposes versus federal income tax
purposes. Significant differences would include the surplus tax
adjustment applicable to Union Central and the small company
deduction for life insurance companies that was available to
Manhattan Life prior to completing the reverse stock split
transaction in 1997 described in Note 1.
Prior to 1984, a portion of Manhattan Life's income was not
subject to income tax, but was accumulated for income tax
purposes in a special memorandum tax account designated
"policyholders' surplus account" (PSA). Under provisions of the
Tax Reform Act of 1984, the PSA was frozen at its December 31,
1983 balance. The PSA will become subject to tax at current
rates if these amounts are distributed or if the balance of the
account exceeds certain limitations under the Internal Revenue
Code. The balance in the PSA at December 31, 1997 and 1996 was
$1,348,000, and the maximum tax at current rates would be
$472,000.
NOTE 5 - SHAREHOLDER DIVIDENDS AND RESTRICTION ON TRANSFER OF
FUNDS FROM SUBSIDIARY
As stated in Note 1, Manhattan Life's charter provides for the
allocation of its profits between its shareholders and its
policyholders on a one-eight/seven-eighths basis. The profits
allocated are equal to income after taxes and interest on the
GCR but before policyholder dividends.
In administering Manhattan Life's charter's profit-sharing
provision, Manhattan Life and the New York Insurance Department
(the Department) have deemed the shareholders' portion of
Manhattan Life's profits to be equal to $1 for every $7 of
policyholder dividends paid on traditional, participating
contracts. Manhattan Life's charter provides for three types of
shareholder distributions, including distribution based on
profits:
a) Interest at a specified rate on the par value of the
guarantee capital shares issued and outstanding
($195,000 annually), which may be paid in any year
dividends are distributed to policyholders and is
not subject to prior regulatory approval,
b) A distribution of the shareholders' portion of Manhattan
Life's profits. Such amounts may, at the discretion of
the Company's Board of Directors, be distributed as a
stock dividend of additional guarantee capital shares,
paid in cash subject to certain limits and prior
regulatory approval, or reserved for the benefit of the
shareholders in the GCR, and
c) Interest, at the Company's portfolio earnings rate on
invested assets, on the accumulated balance in the GCR.
Manhattan Life's cash distributions to shareholders are subject
to prior approval by the Department. Further, Manhattan Life
and the Department have agreed to the following guidelines under
which shareholder distributions from the GCR would be permitted,
subject to prior approval by the Department:
If Manhattan Life's statutory-basis surplus is less than
or equal to 9% of its statutory policy reserves, then
principal and interest distributions are limited to the
lesser of the prior year statutory gain from operations
(after policyholders' dividends and federal income taxes
and before realized gains and losses), or the prior year's
increase in statutory surplus or,
If its statutory-basis surplus exceeds 9% of statutory
policy reserves, the principal and interest distributions
are limited to the greater of the prior year statutory
gain from operations (after policyholders' dividends and
federal income taxes and before realized gains and losses),
or the prior year increase in statutory surplus.
The foregoing limits are subject to adjustment, by the
Department, for unusually large realized gains or the effects of
surplus relief reinsurance transactions. As Manhattan Life's
statutory-basis surplus was less than 9% of its statutory policy
reserves at December 31, 1996 and 1995, respectively, and a loss
from operations was recorded for the year ended December 31,
1995, and statutory surplus decreased for the year ended
December 31, 1996, no shareholder's dividends were paid in 1996
or 1997.
The GCR represents a restricted segment of statutory unassigned
surplus, and as such, does not represent a commitment or
liability to pay shareholder dividends. In Manhattan Life's
stand-alone financial statements prepared in accordance with
generally accepted accounting principles, the GCR is included in
shareholders' equity. The balance in the GCR of $12,750,000 and
$16,127,000 and the Company's share of $12,750,000 and
$11,740,000 was included in "Policyholders' equity" in the
Consolidated Balance Sheets at December 31, 1997 and 1996,
respectively. In 1996, the minority shareholders' share of the
GCR was included in "Minority Interest in Subsidiary's Equity"
in the Balance Sheets. Interest added to the GCR amounted to
$919,000 and $1,230,000, for the years ended December 31, 1997
and 1996, respectively.
Manhattan Life is the only existing life insurance company
domiciled in New York which has authorized and outstanding
guarantee capital shares. Neither applicable New York state law
nor Manhattan Life's charter contain express provisions
establishing the extent of the interest of the holders of the
guarantee capital shares in the statutory unassigned surplus
(total surplus less guarantee capital shares and GCR) of
Manhattan Life and there has never been a judicial determination
of the extent of such interest. Further, the laws applicable to
Manhattan Life do not provide for its voluntary liquidation or
dissolution; the Company may only be liquidated under the
supervision of the New York Superintendent of Insurance in the
event of insolvency. In such a liquidation or dissolution, all
of the assets of Manhattan Life would be used to satisfy claims
of creditors and policyholders and there would be no statutory
unassigned surplus for distribution to the holders of the
guarantee capital shares. Accordingly, in the opinion of
counsel to Manhattan Life, no unqualified legal opinion can be
rendered as to the degree, if any, to which the holders of the
guarantee capital shares would be entitled to participate in any
current or liquidating distribution of unassigned surplus.
However, in the view of such counsel, if there should occur a
liquidation or other winding-up of Manhattan Life's business in
which assets exceeded liabilities on policies and the claims of
other creditors, or if there should occur a partial distribution
of surplus in the absence of such a liquidation or winding-up,
although there are reasonable arguments which could be made to
the effect that the entire unassigned surplus would be
distributable solely to the policyholders or solely to the
shareholders, the more likely outcome if the question should be
litigated is that it would be held that one-eighth of the
unassigned surplus would be distributable to the shareholders
and seven-eighths to the policyholders.
NOTE 6 - COMMITMENTS AND CONTINGENT LIABILITIES
Leases
The leases for office space for Manhattan Life and various field
agency offices vary in duration from 1 to 15 years. Some of
these leases include escalation clauses which vary with levels
of operating expense. Rental expense under these operating
leases totalled $3,972,000 and $3,907,000 in 1997 and 1996,
respectively. The Company also leases furniture and equipment
under operating leases which expire in 2001. Rental expense
under these leases included in "Underwriting, acquisition and
insurance expense" in the Statements of Income totalled $154,000
and $182,000 in 1997 and 1996, respectively.
At December 31, 1997, the future minimum lease payments for all
noncancelable operating leases are as follows:
<TABLE>
<CAPTION>
Year Amount
---- ------
(in thousands)
<C> <C>
1998 $ 3,553
1999 2,893
2000 2,562
2001 2,316
2002 1,785
After 2002 1,112
-------
Total $14,221
=======
</TABLE>
The Company also has capital leases for office furniture. Lease
expense under these leases was $437,000 and $466,000 in 1997 and
1996, respectively.
At December 31, 1997 the future minimum lease payments for all
noncancelable capital leases are as follows:
<TABLE>
<CAPTION>
Year Amount
---- ------
(in thousands)
<C> <C>
1998 $ 470
1999 470
2000 470
2001 39
-------
Total $ 1,449
=======
</TABLE>
Other Commitments
At December 31, 1997, the Company had outstanding agreements to
fund 33 mortgages totalling $52,263,000 in early 1998. In
addition, the Company has committed to invest $17,800,000 in
limited partnerships during the years 1998 to 2001. These
transactions are in the normal course of business for the
Company.
Litigation
In the normal course of business, the Company is party to
various claims and litigation primarily arising from claims made
under insurance policies and contracts. Those actions are
considered by the Company in estimating the policy and contract
liabilities. The Company's management believes that the
resolution of those actions will not have a material adverse
effect on the Company's financial position or results of
operations.
Guaranty Fund Assessments
The economy and other factors have caused an increase in the
number of insurance companies that are under regulatory
supervision. This circumstance is expected to result in an
increase in assessments by state guaranty funds, or voluntary
payments by solvent insurance companies, to fund policyholder
losses or liabilities of insurance companies that become
insolvent. These assessments may be deferred or forgiven under
most guaranty laws if they would threaten an insurers financial
strength and, in certain instances, may be offset against future
premium taxes. The $300,800 and $0 charge to operations in 1997
and 1996, respectively, was included in "Underwriting,
acquisition and insurance expense" in the Statements of Income.
The estimated liability of $1,411,000 and $1,399,000 at December
31, 1997 and 1996 respectively, was based on data provided by
the National Organization of Life and Health Insurance Guaranty
Associations and is included in "Other liabilities" in the
Balance Sheets.
NOTE 7 - STATUTORY SURPLUS AS REPORTED TO REGULATORY AUTHORITIES
Union Central and Manhattan Life file statutory-basis financial
statements with regulatory authorities. Union Central's
statutory-basis financial statements are prepared in conformity
with accounting practices prescribed or permitted by the
Department of Insurance of Ohio, Union Central's state of
domicile. Manhattan Life's statutory-basis financial
statements are prepared in conformity with accounting practices
prescribed or permitted by the Department of Insurance of New
York, Manhattan Life's state of domicile. Surplus as reflected
in the statutory-basis financial statements are as follows:
<TABLE>
<CAPTION>
Year ended December 31,
1997 1996
---- ----
(in thousands)
<S> <C> <C>
Capital and surplus
Union Central $ 317,952 $ 277,202
========= =========
Manhattan Life $ 22,327 $ 28,211
========= =========
</TABLE>
The National Association of Insurance Commissioners is currently
in the process of recodifying statutory accounting practices,
the result of which is expected to constitute the only source of
"prescribed" statutory accounting practices. The project,
expected to be completed in 1998, will likely change certain
prescribed accounting practices, and may result in changes to
the accounting practices the Company uses to prepare its
statutory financial statements.
NOTE 8 - EMPLOYEE BENEFITS
The Company has pension plans covering substantially all of its
employees (The Plans). Benefits are based on years of service
and the employee's highest five consecutive years of
compensation out of the last ten years. The contributions
totalled $3,492,000 and $2,750,000 in 1997 and 1996,
respectively. The Company's funding policy is determined
according to regulations as specified by ERISA and subsequent
amendments.
Pension expense includes the following components:
<TABLE>
<CAPTION>
Year ended December 31,
1997 1996
---- ----
(in thousands)
<S> <C> <C>
Service cost-benefits earned
during the year $ 2,622 $ 1,982
Interest cost on projected
benefit obligation 5,689 5,330
Actual return on plan assets (4,373) (4,786)
Net amortization and deferral 390 625
-------- --------
Net pension expense included
in "Underwriting, acquisition,
and insurance expense" $ 4,328 $ 3,151
======== ========
</TABLE>
Also, $1,240,000 (net of tax) was charged directly to
policyholders' equity in 1997 as a result of recognizing an
additional minimum pension liability adjustment under Statement
of Financial Accounting Standard (SFAS-87) "Employers'
Accounting for Pensions", and is included in "Other" in the
Statements of Equity.
The following table setting forth the Plans' funded status and
the pension liability included in "Other liabilities" in the
Company's Balance Sheets is based on the latest actuarial report
available, which is as of October 1, 1997 and 1996.
<TABLE>
<CAPTION>
Union Central
1997 1996
---- ----
(in thousands)
<S> <C> <C>
Actuarial present value of benefit
obligations:
Accumulated benefit obligation,
including vested benefits of
$44,909 and $43,920 for 1997
and 1996, respectively $ 54,164 $ 50,954
======== ========
Projected benefit obligation $ 64,547 $ 60,216
Plan assets at fair value 48,836 41,912
-------- --------
Projected benefit obligation higher
than plan assets 15,711 18,304
Unrecognized net loss (12,660) (16,184)
Unrecognized net obligation being
recognized over 15 years 368 409
Adjustment required to recognize
minimum liability 1,907 6,514
-------- --------
Pension liability included in
"Other liabilities" at end of year $ 5,326 $ 9,043
======== ========
<CAPTION>
Manhattan Life
1997 1996
---- ----
(in thousands)
<S> <C> <C>
Actuarial present value
of benefit obligations:
Accumulated benefit obligation,
including vested benefits of
$18,375 and $17,674 for 1997
and 1996, respectively $ 18,771 $ 17,886
======== ========
Projected benefit obligation $ 20,217 $ 19,840
Plan assets at fair value 16,817 16,865
-------- --------
Projected benefit obligation
higher than plan assets 3,400 2,975
Unrecognized net loss (1,826) (1,344)
Prior service cost not yet
recognized in net periodic
pension cost (8) (11)
Unrecognized net obligation being
recognized over 15 years (280) (325)
Adjustment required to recognize
minimum liability 2 135
-------- --------
Pension liability included in
"Other liabilities" at end of year $ 1,288 $ 1,430
======== ========
</TABLE>
The unfunded accumulated benefit obligation (ABO) will vary from
year to year as changes in the market value of the plans' assets
differs from changes in the ABO. The ABO varies from year to
year as the rate used to discount future pension benefits
related to the past service of plan participants changes. The
discount rate at each valuation date reflects available rates on
high quality fixed income investments. The investment strategy
for the plans' assets is designed to achieve somewhat higher
yields over the long term than would be achieved by investing
entirely in high quality fixed income investments. Therefore,
the market value of the plans' assets and the ABO do not change
in the same amount from year to year. The Company believes that
its current funding policy will be adequate to meet all future
plan obligations over the long term.
<TABLE>
<caption
1997 1996
---- ----
<S> <C> <C>
Union Centra
Assumptions used to determine the
status of the plans were:
Discount rate 7.25% 7.25%
Rate of increase in future
compensation levels 4.25% 4.25%
Expected long-term rate of
return on assets 8.50% 8.50%
<CAPTION>
Manhattan Life
1997 1996
---- ----
<S> <C> <C>
Assumptions used to determine the
status of the plans were:
Discount rate 7.25% 7.25%
Rate of increase in future
compensation levels 4.25% 4.25%
Expected long-term rate of
return on assets 8.50% 8.50%
</TABLE>
Plan assets are primarily composed of mutual funds, unallocated
insurance funds, and guaranteed interest contracts. At December
31, 1997 and 1996, Union Central's pension plans invested
$44,391,000 and $37,261,000, respectively, in affiliated mutual
funds.
The Company has contributory savings plans for employees meeting
certain service requirements which qualifies under Section
401(k) of the Internal Revenue Code. These plans allows
eligible employees to contribute up to certain prescribed
limits of their pre-tax compensation, with the Company
matching 50% of the first 6% of participants' contributions.
The Company's matching contributions to these Plans were
$1,280,000 and $1,199,000 for 1997 and 1996, respectively. The
value of the Plans' assets were $52,519,000 and $44,240,000 at
December 31, 1997 and 1996, respectively. The assets are held
in the Company's deposit fund, in guaranteed interest contracts,
or under the variable accounts of a group annuity policy
sponsored by the Company. At December 31, 1997 and 1996,
$20,435,000 and $17,632,000, respectively, was invested in
affiliated mutual funds.
NOTE 9 - POSTRETIREMENT BENEFITS
The Company provides certain health care and life insurance
benefits for its eligible retired employees. The plans provide
postretirement medical and life benefits to full time employees
who have worked 15 years and attained age 55 while in service
with the Company. The plans are contributory and contains other
cost-sharing features such as deductibles and coinsurance. The
accounting of the plans anticipates future cost-sharing changes
which are consistent with the Company's expressed intent to
require current and future retirees to pay the cost of medical,
prescription drug and dental benefits in excess of 175 percent
of the costs incurred by the Company to provide such benefits in
1993.
The accumulated postretirement benefit obligation ("APBO") at
December 31, 1997 and 1996 totalled $19,607,000 and $19,294,000,
respectively.
The following table presents the plan's funded status reconciled
with amounts recognized in the Company's Balance Sheets:
<TABLE>
<CAPTION>
December 31,
1997 1996
---- ----
(in thousands)
<S> <C> <C>
Plan Assets $ 6,836 $ 6,934
Accumulated postretirement
benefit obligation:
Retirees 12,242 12,610
Fully eligible active plan participants 3,511 2,541
Other active plan participants 3,854 4,143
------- -------
Accumulated postretirement benefit
obligation in excess of
plan assets 12,771 12,360
Unrecognized net gain
from past experience (3,996) (4,172)
Other 336 --
------- -------
Accrued postretirement benefit cost
included in "Other liabilities" $16,431 $16,532
======= =======
</TABLE>
Net periodic postretirement benefit cost included the following
components:
<TABLE>
<CAPTION>
Year ended December 31,
1997 1996
---- ----
(in thousands)
<S> <C> <C>
Service cost $ 427 $ 393
Interest cost 1,350 1,375
Expected (gain) loss on assets 101 (1,279)
Net amortization and deferral (799) 738
------- -------
Net periodic postretirement benefit
cost included in "Underwriting,
acquisition, and insurance expense" $ 1,079 $ 1,227
======= =======
</TABLE>
The plan assets are invested in Carillon Capital Fund, an
affiliated mutual fund.
The health care cost trend rate assumption has an insignificant
effect on the amounts reported. To illustrate, increasing the
assumed health care cost trend rates by one percentage point in
each year would increase the Company's postretirement benefit
obligation as of December 31, 1997 by $188,000 and the interest
cost and estimated eligibility cost components of the net
periodic postretirement benefit cost by $13,000 and less than
$1,000, respectively.
The weighted-average discount rate used in determining the
accumulated postretirement benefit obligation was 7.25% at
December 31, 1997 and 1996.
NOTE 10 - FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company
in estimating its fair value disclosures for financial
instruments:
Cash and short-term investments: The carrying amounts
reported in the Balance Sheets for these instruments
approximate their fair values.
Investment securities: Fair values for bonds and preferred
stock are based on quoted market prices, where available.
If quoted market prices are not available, fair values are
estimated using values obtained from independent securities
broker dealers or quoted market prices of comparable
instruments. The fair values of common stock in Company
sponsored mutual funds are based on quoted market prices and
are recognized in "Equity securities available-for-sale at
fair value" in the Balance Sheets.
Mortgage loans: The fair values for commercial and
residential mortgages in good standing are estimated using
discounted cash flow analysis using interest rates currently
being offered for similar loans to borrowers with similar
credit ratings in comparison with actual interest rates and
maturity dates. Fair values for mortgages with potential
loan losses are based on discounted cash flow analysis of the
underlying properties.
Policy loans: Management is unable to ascertain the
estimated life of the policy loan portfolio. Due to the
excessive costs which would be incurred to determine this
information, management considers the estimation of its fair
value to be impracticable. The nature of a policy loan
insures that the outstanding loan balance will be fully
recoverable because the balance owed to the Company is always
equal to or lower than the cash value of the insurance policy
owed to the policyholder. Policy loans are stated at their
aggregate unpaid balance in the Balance Sheets.
Investment contracts: Fair values for the Company's
liabilities under investment-type insurance contracts are
estimated using discounted cash flow calculations, based on
interest rates currently being offered for similar contracts
with maturities consistent with those remaining for the
contracts being valued.
The carrying amounts and fair values of the Company's mortgage
loans are as follows:
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1996
----------------- -----------------
Carrying Fair Carrying Fair
Amount Value Amount Value
------ ----- ------ -----
(in thousands)
<S> <C> <C> <C> <C>
Mortgage loans $745,833 $783,165 $665,575 $702,843
======== ======== ======== ========
</TABLE>
The carrying amounts and fair values of the Company's
liabilities for investment-type insurance contracts are as
follows:
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1996
Carrying Fair Carrying Fair
Amount Value Amount Value
---------- ---------- ---------- ----------
(in thousands)
<S> <C> <C> <C> <C>
Group annuities $ 809,990 $ 807,137 $ 871,481 $ 867,562
Single premium
deferred annuities 354,318 351,494 359,469 355,074
Single premium
immediate annuities 25,864 27,576 28,910 31,557
Variable annuities 175,197 172,917 167,336 165,103
Supplementary contracts 56,472 58,157 58,989 59,330
Traditional annuities 24,181 24,465 20,414 20,636
Guaranteed interest
contracts 17,199 17,077 17,138 17,120
Flexible annuities 32,891 31,592 -- --
Other 7,193 7,193 5,989 5,989
---------- ---------- ---------- ----------
Total $1,503,305 $1,497,608 $1,529,726 $1,522,371
========== ========== ========== ==========
</TABLE>
The Company's other insurance contracts are excluded from
Statement of Financial Accounting Standard (SFAS-107)
"Disclosures about Fair Value of Financial Instruments"
disclosure requirements. However, the fair values of
liabilities under all insurance contracts are taken into
consideration in the Company's overall management of interest
rate risk, which minimizes exposure to changing interest rates
through the matching of investment maturities with amounts due
under insurance contracts. Additional data with respect to the
carrying value and fair value of the Company's investments is
disclosed in Note 2.
NOTE 12 - LIABILITY FOR UNPAID CLAIMS AND CLAIM ADJUSTMENT
EXPENSES
Activity in the liability for unpaid claims and claim adjustment
expense is summarized as follows:
<TABLE>
<CAPTION>
December 31,
1997 1996
---- ----
(in thousands)
<S> <C> <C>
Balance as of January 1 $ 141,508 $ 132,670
Incurred related to:
Current year 138,719 143,216
Prior years 6,027 7,237
--------- ---------
Total incurred 144,746 150,453
--------- ---------
Paid related to :
Current year 94,462 103,245
Prior years 37,677 38,370
--------- ---------
Total paid 132,139 141,615
--------- ---------
Balance as of December 31 $ 154,115 $ 141,508
========= =========
</TABLE>
The balance in the liability for unpaid claims and claim
adjustment expenses is included in "Future policy benefits" and
"Policy and contract claims" in the Balance Sheets.
As a result of changes in estimates of insured events in prior
years, the provision of claims and claim adjustment expenses
increased by $6,027,000 and $7,237,000 in 1997 and 1996,
respectively, due to lower than expected rates of claim
terminations. Included in the above balances are reinsurance
recoverables of $986,000 and $1,287,000 at 1997 and 1996,
respectively.
NOTE 13 - SURPLUS NOTES
On November 1, 1996, Union Central issued $50,000,000 of 8.20%
Surplus Notes (Notes). These Notes mature on November 1, 2026
and may not be redeemed prior to maturity. The Notes are
unsecured and subordinated to all present and future policy
claims, prior claims and senior indebtedness. Subject to prior
written approval of the Superintendent of the Ohio Insurance
Department, these Notes will pay interest semi-annually on May 1
and November 1. Interest expense of $4,100,000 and $637,000 was
incurred in 1997 and 1996, respectively, and was recorded as a
reduction of "Net investment income" in the Statements of
Income. In connection with issuing the Notes, Union Central
incurred and capitalized $765,000 of issuance cost. This cost
is recorded in "Other assets" in the Balance Sheets. In 1997,
$25,000 of issuance cost was amortized to "Underwriting,
acquisition and insurance expense" in the Statements of Income.
Additionally, the Notes have an original issue discount of
$260,000, which is deducted from the balance of the Notes.
Issuance costs and original issue discount will be amortized
under the straight-line method over the term of the Notes. In
1997, $9,000 of amortization relating to original issue discount
was recorded in "Underwriting, acquisition and insurance
expense" in the Statements of Income.
NOTE 14 - IMPACT OF YEAR 2000 (UNAUDITED)
Some of the Company's computer programs were written using two
digits rather than four to define the applicable year. As a
result, those computer programs have software that may recognize
a date using "00" as the year 1900 rather than the year 2000.
Computer software incorrectly recognizing a date would cause the
Company's computing environment to not function as expected.
Among the results could be miscalculations causing disruptions
of operations.
A comprehensive assessment of the Company's Year 2000 sensitive
software has been performed and the primary risks and required
software modifications have been identified. The Company will
both modify existing software, and install new software, in time
to ensure the Year 2000 problem does not impact its operations.
<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>
PART II - OTHER INFORMATION
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d)
of the Securities Exchange Act of 1934, the undersigned
Registrant hereby undertakes to file with the Securities and
Exchange Commission such supplementary and periodic information,
documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly
adopted pursuant to authority conferred in that section.
RULE 484 UNDERTAKING
Reference is made to the Amended Articles of
Incorporation and Code of Regulations of The Union Central Life
Insurance Company (the "Code of Regulations"), filed as an
exhibit to this Registration Statement. Specifically, Article
VII of the Code of Regulations provides that Depositor shall, to
the full extent permitted by the General Corporation Law of
Ohio, indemnify any person who is or was a director or officer
of the Depositor and whom it may indemnify pursuant thereto.
The Depositor may, within the sole discretion of its Board of
Directors, indemnify in whole or in part any other person whom
it may indemnify pursuant thereto.
Section 1701.13 of the Ohio General Corporation Law
provides as follows:
(E)(1) A corporation may indemnify or agree to
indemnify any person who was or is a party, or is threatened to
be made a party, to any threatened, pending, or completed
action, suit, or proceeding, whether civil, criminal,
administrative, or investigative, other than an action by or in
the right of the corporation, by reason of the fact that he is
or was a director, officer, employee, or agent of the
corporation, or is or was serving at the request of the
corporation as a director, trustee, officer, employee, member,
manager, or agent of another corporation, domestic or foreign,
nonprofit or for profit, a limited liability company, or a
partnership, joint venture, trust, or other enterprise, against
expenses, including attorney's fees, judgments, fines, and
amounts paid in settlement actually and reasonably incurred by
him in connection with such action, suit, or proceeding, if he
acted in good faith and in a manner he reasonably believed to be
in or not opposed to the best interests of the corporation, and,
with respect to any criminal action or proceeding, if he had no
reasonable cause to believe his conduct was unlawful. The
termination of any action, suit, or proceeding by judgment,
order, settlement, or conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of it self, create a
presumption that the person did not act in good faith and in a
manner he reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any
criminal action or proceeding, he had reasonable cause to
believe that his conduct was unlawful.
(2) A corporation may indemnify or agree to indemnify
any person who was or is a party, or is threatened to made a
party, to any threatened, pending, or completed action or suit
by or in the right of the corporation to procure a judgement in
its favor, by reason of the fact that he is or was a director,
officer, employee, or agent of the corporation, or is or was
serving at the request of the corporation as a director,
trustee, officer, employee, member, manager, or agent of another
corporation, domestic or foreign, nonprofit or for profit, a
limited liability company, or a partnership, joint venture,
trust, or other enterprise, against expenses, including
attorney's fees, actually and reasonably incurred by him in
connection with the defense or settlement of such action or
suit, if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the
corporation, except that no indemnification shall be made in
respect of any of the following:
(a) Any claim, issue, or matter as to which such
person is adjudged to be liable for negligence or misconduct in
the performance of his duty to the corporation unless, and only
to the extent that, the court of common pleas or the court in
which such action or suit was brought determines, upon
application, that, despite the adjudication of liability, but in
view of all the circumstances of the case, such person is fairly
and reasonably entitled to indemnity for such expenses as the
court of common pleas or such other court shall deem proper;
(b) Any action or suit in which the only
liability asserted against a director is pursuant to section
1701.95 of the Revised Code.
(3) To the extent that a director, trustee, officer,
employee, member, manager, or agent has been successful on the
merits or otherwise in defense of any action, suit, or
proceeding referred to in division (E)(1) or (2) of this
section, or in defense of any claim, issue, or matter therein,
he shall be indemnified against expenses, including attorney's
fees, actually and reasonably incurred by him in connection with
the action, suit, or proceeding.
(4) Any indemnification under division (E)(1) or (2)
of this section, unless ordered by a court, shall be made by the
corporation only as authorized in the specific case, upon a
determination that indemnification of the director, trustee,
officer, employee, member, manager, or agent is proper in the
circumstances because he has met the applicable standard of
conduct set forth in division (E)(1) or (2) of this section.
Such determination shall be made as follows:
(a) By a majority vote of a quorum consisting of
directors of the indemnifying corporation who were not and are
not parties to or threatened with the action, suit, or
proceeding referred to in division (E)(1) or (2) of this
section;
(b) If the quorum described in division
(E)(4)(a) of this section is not obtainable or if a majority
vote of a quorum of disinterested directors so directs, in a
written opinion by independent legal counsel other than an
attorney, or a firm having associated with it an attorney, who
has been retained by or who has performed services for the
corporation or any person to be indemnified within the past five
years;
(c) By the shareholders;
(d) By the court of common pleas or the court in
which the action, suit, or proceeding referred to in division
(E)(1) or (2) of this section was brought.
Any determination made by the disinterested
directors under division (E)(4)(a) or by independent legal
counsel under division (E)(4)(b) of this section shall be
promptly communicated to the person who threatened or brought
the action or suit by or in the right of the corporation under
division (E)(2) of this section, and, within ten days after
receipt of such notification, such person shall have the right
to petition the court of common pleas or the court in which such
action or suit was brought to review the reasonableness of such
determination.
(5)(a) Unless at the time of a director's act or
omission that is the subject of an action, suit, or proceeding
referred to in division (E)(1) or (2) of this section, the
articles or the regulations of a corporation state, by specific
reference to this division, that the provisions of this division
do not apply to the corporation and unless the only liability
asserted against a director in an action, suit, or proceeding
referred to in division (E)(1) or (2) of this section is
pursuant to section 1701.95 of the Revised Code, expenses,
including attorney's fees, incurred by a director in defending
the action, suit, or proceeding shall be paid by the corporation
as they are incurred, in advance of the final disposition of the
action, suit, or proceeding, upon receipt of an undertaking by
or on behalf of the director in which he agrees to do both of
the following:
(i) Repay such amount if it is proved by
clear and convincing evidence in a court of competent
jurisdiction that his action or failure to act involved an act
or omission undertaken with deliberate intent to cause injury to
the corporation or undertaken with reckless disregard for the
best interests of the corporation;
(ii) Reasonably cooperate with the
corporation concerning the action, suit, or proceeding.
(b) Expenses, including attorney's fees,
incurred by a director, trustee, officer, employee, member,
manager, or agent in defending any action, suit, or proceeding
referred to in division (E)(1) or (2) of this section, may be
paid by the corporation as they are incurred, in advance of the
final disposition of the action, suit, or proceeding, as
authorized by the directors in the specific case, upon the
receipt of an undertaking by or on behalf of the director,
trustee, officer, employee, member, manager, or agent to repay
such amount, if it ultimately is determined that he is not
entitled to be indemnified by the corporation.
(6) The indemnification authorized by this section
shall not be exclusive of, and shall be in addition to, any
other rights granted to those seeking indemnification under the
articles, the regulations, any agreement, a vote of shareholders
or disinterested directors, or otherwise, both as to action in
their official capacities and as to action in another capacity
while holding their offices or positions, and shall continue as
to a person who has ceased to be a director, trustee, officer,
employee, member, manager or agent and shall inure to the
benefit of the heirs, executors, and administrators of such a
person.
(7) A corporation may purchase and maintain insurance
or furnish similar protection, including, but not limited to,
trust funds, letters of credit, or self-insurance, on behalf of
or for any person who is or was a director, officer, employee,
or agent of the corporation, or is or was serving at the request
of the corporation as a director, trustee, employee, member,
manager, or agent of another corporation, domestic or foreign,
nonprofit or for profit, a limited liability company, or a
partnership, joint venture, trust, or other enterprise, against
any liability asserted against him and incurred by him in any
such capacity, or arising out of his status as such, whether or
not the corporation would have the power to indemnify him
against such liability under this section. Insurance may be
purchased from or maintained with a person in which the
corporation has financial interest.
(8) The authority of a corporation to indemnify
persons pursuant to division (E)(1) or (2) of this section does
not limit the payment of expenses as they are incurred,
indemnification, insurance, or other protection that may be
provided pursuant to divisions (E)(5), (6), and (7) of this
section. Divisions (E)(1) and (2) of this section do not create
any obligation to repay or return payments made by the
corporation pursuant to division (E)(5), (6), or (7).
(9) As used in division (E) of this section,
"corporation" includes all constituent entities in a
consolidation or merger and the new or surviving corporation, so
that any person who is or was a director, officer, employee,
trustee, member, manager, or agent of such a constituent entity,
or is or was serving at the request of such constituent entity
as a director, trustee, officer, employee, member, manager, or
agent of another corporation, domestic or foreign, nonprofit or
for profit, a limited liability company, or a partnership, joint
venture, trust, or other enterprise, shall stand in the same
position under this section with respect to the new or surviving
corporation as he would if he had served the new or surviving
corporation in the same capacity.
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification may be against public policy as
expressed in the Act and may be, therefore, unenforceable. In
the event that a claim for indemnification against such
liabilities (other than payment by the Registrant of expenses
incurred or paid by a director, officer, or controlling person
of the Registrant in the successful defense of any action, suit
or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final
adjudication of such issue.
REPRESENTATIONS PURSUANT TO SECTION 26(e)
The Union Central Life Insurance Company hereby represents
that the fees and charges deducted under the Policy, in the
aggregate, are reasonable in relation to the services rendered,
the expenses expected to be incurred, and the risks assumed by
The Union Central Life Insurance Company.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement consists of the following
papers and documents:
The facing sheet.
A reconciliation and tie of the information shown in the
prospectus with the items of Form N-8B-2.
The prospectus consisting of ___ pages.
The Undertaking to File Reports.
The Rule 484 Undertaking.
The signatures.
Written consents of the following persons:
Kristal E. Hambrick, FSA, MAAA
Sutherland, Asbill & Brennan, L.L.P.
Ernst & Young LLP
The following exhibits:
1.A. (1) Resolutions Establishing Carillon Life Account *
(2) None
(3)(a) Underwriting Agreement****
(b) Form of Selling Agreement***
(c) Sales Representatives Agent Agreement
(Including Compensation Schedule)****
(4) None
(5)(a) Specimen of Policy***
(b) Riders and Endorsements **
(6) Amended Articles of Incorporation and Code of
Regulations of The Union Central Life Insurance
Company *
(7) None
(8) None
(9)(a) Participation Agreement - Scudder Variable Life
Investment Fund***
(b) Participation Agreement - TCI Portfolios, Inc.***
(c) Participation Agreement - MFS Variable Insurance
Trust***
(10) Form of Application for Policy *
2. See Exhibit 3.(i)
3.(i) Opinion and Consent of John F. Labmeier, Esq., As
to the Legality of the Securities Being
Registered***
(ii) Opinion and Consent of Kristal E. Hambrick, FSA,
MAAA, As to Actuarial Matters Pertaining to the
Securities Being Registered
4. None
5. Inapplicable
6. Consent of Sutherland, Asbill & Brennan
7. Powers of Attorney *****
8. Notice of Withdrawal Right for Policies***
9. Consent of Ernst & Young LLP
10. Memorandum describing Certain Procedures, filed
pursuant to Rule 6e-3(T)(b)(12)(iii)***
* Incorporated by reference to the Registrant's initial
registration statement on Form S-6 (File No. 33-94858), filed
July 21, 1995.
** Incorporated by reference to the Registrant's initial
registration statement on Form S-6 (File No. 33-94858), filed
July 21, 1995, and to Pre-Effective Amendment No. 1 to the
Registrant's registration statement on Form S-6 (File No.
33-94858), filed November 30, 1995.
*** Incorporated by reference to Pre-Effective Amendment No.
1 to the Registrant's registration statement on Form S-6 (file
No. 33-94858), filed November 30, 1995.
**** Incorporated by reference to Post-Effective Amendment
No. 1 to the Registrant's registration statement on Form S-6
(file No. 33-94858), filed April 30, 1996.
***** In addition to the exhibit item filed herewith,
additional items are incorporated by reference to the
Registrant's initial registration statement on Form S-6 (File
No. 33-94858), filed July 21, 1995, and to Pre-Effective
Amendment No. 1 to the Registrant's registration statement on
Form S-6 (File No. 33-94858), filed November 30, 1995.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Carillon Life Account, certifies that it meets all
of the requirements for effectiveness of this Registration
Statement pursuant to Rule 485(b) under the Securities Act of
1933 and has duly caused this Post-Effective Amendment to this
Registration Statement to be signed on its behalf by the
undersigned thereunto duly authorized in the City of Cincinnati
and the State of Ohio, on the 30th day of April, 1998.
CARILLON LIFE ACCOUNT
(Registrant)
THE UNION CENTRAL LIFE INSURANCE COMPANY
(Depositor)
ATTEST: /s/ John F. Labmeier By: /s/ Larry R. Pike
Larry R. Pike
Chairman, President and
Chief Executive Officer
The Union Central Life Insurance Company
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Larry R. Pike Chairman, President and
Larry R. Pike Chief Executive Officer
(Principal Executive Officer) 4-30-98
/s/ Stephen R. Hatcher Executive Vice President
Stephen R. Hatcher and Chief Financial Officer
(Principal Financial and
Accounting Officer) 4-30-98
*/s/ Phillip G. Barach Director 4-30-98
Philip G. Barach
*/s/ V. Anderson Coombe Director 4-30-98
V. Anderson Coombe
*/s/ William A. Friedlander Director 4-30-98
William A. Friedlander
*/s/ William G. Kagler Director 4-30-98
William G. Kagler
*/s/ Lawrence A. Leser Director 4-30-98
Lawrence A. Leser
*/s/ Francis V. Mastrianna, Ph.D. Director 4-30-98
Francis V. Mastrianna, Ph.D.
*/s/ Mary D. Nelson, FSA Director 4-30-98
Mary D. Nelson, FSA
*/s/ Paul G. Pearson, Ph.D. Director 4-30-98
Paul G. Pearson, Ph.D.
*/s/ Thomas E. Petry Director 4-30-98
Thomas E. Petry
*/s/ Myrtis H. Powell, Ph.D. Director 4-30-98
Myrtis H. Powell, Ph.D.
*/s/ Dudley S. Taft Director 4-30-98
Dudley S. Taft
*/s/ John M. Tew, Jr., M.D. Director 4-30-98
John M. Tew, Jr., M.D.
</TABLE>
* By /s/ John F. Labmeier, pursuant to Power of Attorney
previously filed.
EXHIBIT INDEX
Exhibit 3.(ii) Opinion and Consent of Kristal E. Hambrick,
FSA, MAAA, As to Actuarial Matters Pertaining
to the Securities Being Registered
Exhibit 6 Consent of Sutherland, Asbill & Brennan, LLP
Exhibit 9 Consent of Independent Auditors
Consent of Independent Auditors
We consent to the reference to our firm under the caption
"Experts" and to the use of our report pertaining to The Union
Central Life Insurance Company and Carillon Life Account dated
March 16, 1998 and March 2, 1998, respectively, in Post-Effective
Amendment Number 3 to the Registration Statement (Form S-6 No.
33-94858) and related Prospectus of Carillon Life Account of The
Union Central Life Insurance Company.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Cincinnati, Ohio
April 27, 1998
[Sutherland, Asbill & Brennan LLP]
CONSENT OF SUTHERLAND, ASBILL & BRENNAN LLP
We consent to the reference to our firm under the
heading "Legal Matters" in the prospectus included in Post-
Effective Amendment No. 3 to the Registration Statement on Form
S-6 for certain individual flexible premium variable universal
life insurance policies issued through Carillon Life Account of
The Union Central Life Insurance Company (File No. 33-94858).
In giving this consent, we do not admit that we are in the
category of persons whose consent is required under Section 7 of
the Securities Act of 1933.
SUTHERLAND, ASBILL & BRENNAN LLP
By: /s/ Kimberly J. Smith
Kimberly J. Smith
Washington, D.C.
April 29, 1998
Actuarial Opinion and Consent
This opinion is furnished in connection with the registration of
the individual flexible premium variable universal life policy
of the Carillon Life Account of The Union Central Life Insurance
Company, file number 94858.
I am familiar with the terms of the Registration Statement and
the accompanying exhibits. The prospectus included in the
Registration Statement describes the policy issued by Union
Central. In my professional opinion:
1. The sales load of the policy, as defined in
Rule 6e-3(T), does not exceed 9% of the sum of the guideline
annual premiums that would be paid during the period equal to
the lesser of 20 years or the life expectancy based on the 1980
CSO mortality table used as the guaranteed mortality basis of
the policy. During the first two policy years, the sales load
does not exceed the sum of: a) 30% of premium payments up to
one guideline annual premium, plus b) 10% of each payment made
in excess of one guideline annual premium but less than or equal
to two guideline annual premiums plus c) 9% of each payment made
in excess of two guideline annual premiums. The proportionate
amount of the sales load deducted from any payment does not
exceed the proportionate amount deducted from any prior payment.
2. The illustrations of accumulated premium, death
benefits, account values, and cash surrender values that appear
in the prospectus are consistent with the provisions of the
policy, and are based on the assumptions stated in the
accompanying text.
3. The illustrations show values on both a current
basis and a guaranteed basis. The current basis uses the
charges that are currently assessed by the company. The
guaranteed basis uses the maximum charges that could be assessed
at any future date during the lifetime of a policy.
4. The specific ages, sex, rate class, and the
premium amounts used in these illustrations have not been
selected so as to make the relationship between premiums and
benefits look more favorable in these specific instances than it
would for prospective male or female purchasers at other ages or
paying other premium amounts. Generally, the rates are lower
for the preferred rate class than the standard non-tobacco rate
class, and the rates are lower for the standard non-tobacco rate
class than the standard tobacco rate class.
I hereby consent to the use of this opinion as an Exhibit to the
registration, and to the reference to my name as an "Expert" in
the prospectus.
/s/ Kristal E. Hambrick,
_____________________________
Kristal E. Hambrick, MAAA, FSA,
Vice President and Actuary,
The Union Central Life Insurance
Company,
April 27, 1998
