<PAGE>
Separate Account Ten
of
Integrity Life Insurance Company
Semi-Annual Report
June 30, 1998
Contents
<TABLE>
<S> <C>
President's Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Financial Statements, Financial Highlights, and Schedule of
Investments:
Select Ten Plus Division-June . . . . . . . . . . . . . . . . . . . 2
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . 6
</TABLE>
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR THE
GENERAL INFORMATION OF THE UNIT HOLDERS OF THE SEPARATE ACCOUNT. THIS REPORT IS
NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE SEPARATE ACCOUNT
UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS. NEITHER THE SEPARATE
ACCOUNT NOR ARM SECURITIES CORPORATION, THE PRINCIPAL UNDERWRITER FOR SEPARATE
ACCOUNT UNITS, IS A BANK AND SEPARATE ACCOUNT UNITS ARE NOT BACKED OR GUARANTEED
BY ANY BANK OR INSURED BY THE FEDERAL DEPOSITORY INSURANCE CORPORATION.
<PAGE>
June 30, 1998
Dear Unit Holders:
I am pleased to introduce the Separate Account Ten semi-annual report for the
fiscal period ended June 30, 1998. The semi-annual report details the
investment holdings in the June Division of Separate Account Ten as of June 30,
1998, as well as other financial information.
Separate Account Ten, which follows the popular "Dogs of the Dow" investment
strategy, exists for the sole purpose of helping to provide a valuable tool that
assists you in meeting your investment objectives.
Thank you for your confidence. If you have any questions or comments, please
contact us at your convenience.
Sincerely,
Edward J. Haines
President
1
<PAGE>
Separate Account Ten of Integrity Life Insurance Company
Statement of Assets and Liabilities
Unaudited
<TABLE>
<CAPTION>
SELECT TEN PLUS
DIVISION-JUNE
-------------
JUNE 30, 1998
-------------
<S> <C>
ASSETS
Investments in securities, at value (cost $1,949,101)--See accompanying schedule $1,930,528
Receivable for units sold 1,962,710
----------
TOTAL ASSETS 3,893,238
LIABILITIES
Payable for investment securities purchased 1,949,101
Accrued expenses 99
----------
TOTAL LIABILITIES 1,949,200
----------
NET ASSETS $1,944,038
----------
----------
UNIT VALUE, offering and redemption price per unit $ 9.90
----------
----------
Units outstanding 196,284
----------
----------
</TABLE>
Statement of Operations
Unaudited
<TABLE>
<CAPTION>
JUNE 29, 1998
(COMMENCEMENT OF
OPERATIONS)
THROUGH
JUNE 30, 1998
-------------
<S> <C>
INVESTMENT INCOME $ -
EXPENSES
Mortality and expense risk and administrative charges (72)
Investment advisory and management fees (27)
--------
Total expenses (99)
--------
Net investment loss (99)
UNREALIZED LOSS ON INVESTMENTS
Unrealized depreciation on investment securities (18,573)
--------
Net loss on investments (18,573)
--------
Net decrease in net assets resulting from operations $(18,672)
--------
--------
</TABLE>
SEE ACCOMPANYING NOTES.
2
<PAGE>
Separate Account Ten of Integrity Life Insurance Company
Statement of Changes in Net Assets
Unaudited
<TABLE>
<CAPTION>
SELECT TEN
PLUS
DIVISION-JUNE
-------------
JUNE 29, 1998
(COMMENCEMENT
OF OPERATIONS)
THROUGH
JUNE 30, 1998
-------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment loss $ (99)
Change in unrealized depreciation (18,573)
-----------
Net decrease in net assets resulting from operations (18,672)
Contract related transactions:
Contributions from contract holders 1,962,710
-----------
Total increase in net assets 1,944,038
NET ASSETS
Beginning of period -
-----------
End of period $ 1,944,038
-----------
-----------
</TABLE>
SEE ACCOMPANYING NOTES.
3
<PAGE>
Separate Account Ten of Integrity Life Insurance Company
Financial Highlights
Unaudited
<TABLE>
<CAPTION>
SELECT TEN
PLUS
DIVISION-JUNE
-------------
JUNE 29, 1998
(COMMENCEMENT
OF
OPERATIONS)
THROUGH
JUNE 30, 1998
-------------
<S> <C>
SELECTED PER-UNIT DATA
Unit value, beginning of period $ 10.00
Loss from investment operations:
Net investment loss -
Net unrealized loss on investments (0.10)
------
Total from investment operations (0.10)
------
Unit value, end of period $ 9.90
------
------
TOTAL RETURN (1.00%)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $ 1,944
Ratio of expenses to average net assets 1.86%*
Ratio of net investment loss to average net assets 1.86%*
</TABLE>
* Annualized
4
<PAGE>
Separate Account Ten of Integrity Life Insurance Company
Schedule of Investments
June 30, 1998
Unaudited
<TABLE>
<CAPTION>
SELECT TEN PLUS DIVISION-JUNE
-----------------------------
NUMBER
OF SHARES VALUE
--------- -----
<S> <C> <C>
COMMON STOCKS (100%)
BASIC MATERIALS (10.7%)
International Paper Company 4,800 $206,400
CAPITAL GOODS (21.0%)
Caterpillar, Inc. 3,890 205,684
Minnesota Mining & Manufacturing 2,440 200,538
-------
406,222
COMMUNICATION SERVICES (10.5%)
AT&T Corporation 3,550 202,794
CONSUMER CYCLICAL (21.2%)
Eastman Kodak Company 2,840 207,495
General Motors Corporation 3,030 202,442
-------
409,937
CONSUMER STAPLE (10.5%)
Philip Morris Company, Inc. 5,140 202,388
ENERGY (21.1%)
Chevron Corporation 2,450 203,503
Exxon Corporation 2,850 203,241
-------
406,744
FINANCIAL (5.0%)
J.P. Morgan Company, Inc. 820 96,043
---------
TOTAL COMMON STOCKS (Cost $1,949,101) 1,930,528
---------
TOTAL INVESTMENTS (100.0%) $1,930,528
---------
---------
</TABLE>
OTHER INFORMATION:
At June 30, 1998, net unrealized depreciation for tax purposes aggregated
$18,573 of which $2,053 related to appreciated investment securities and $20,626
related to depreciated investment securities. The aggregate cost of securities
is the same for book and tax purposes.
SEE ACCOMPANYING NOTES.
5
<PAGE>
Separate Account Ten of Integrity Life Insurance Company
Notes to Financial Statements
June 30, 1998
Unaudited
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Separate Account Ten of Integrity Life Insurance Company (the "Separate
Account") was formed as of February 4, 1998. The Separate Account is registered
under the Investment Company Act of 1940 as a management investment company.
Contributions to the Separate Account are presently limited to PINNACLE contract
holders. PINNACLE is a flexible premium variable annuity product issued by
Integrity Life Insurance Company ("Integrity"). The Separate Account is
currently divided into four divisions: Select Ten Plus Division-March, Select
Ten Plus Division-June, Select Ten Plus Division-September, and Select Ten Plus
Division-December ("Division(s)"). Each Division is a non-diversified investment
company which invests directly in securities. The Divisions seek total return by
acquiring the ten highest yielding stocks in the Dow Jones Industrial Average
("DJIA") in equal weights and holding them for approximately twelve months. To
the extent any of the ten highest yielding stocks qualifying for a Division are
reasonably believed to receive 15% or more of their revenues from
securities-related activities, the Division will allocate a maximum of 5% of its
assets to each of those stocks, and will allocate the remainder of its assets
among the remaining stocks not so limited. The Separate Account has applied to
the Securities and Exchange Commission for exemptive relief from this
limitation, but there is no assurance as to when or if it will be granted. Each
Division is open for new investments on only one day of each year. The twelve
month holding period begins on the last business day of the month for which the
Division is named. For example, the Select Ten Plus Division-June invests only
on the last business day of June each year. As of June 30, 1998, the June
Division was the only Division that had invested assets. The assets of the
Separate Account are owned by Integrity.
ARM Securities Corporation ("ARM Securities"), a registered broker-dealer under
the Securities Exchange Act of 1934 and a member of the National Association of
Securities Dealers, Inc., distributes units of the Separate Account. Integrity
Capital Advisors, Inc. ("Integrity Capital"), an investment adviser registered
under the Investment Advisers Act of 1940, provides management services to the
Separate Account pursuant to a management agreement. National Asset Management
Corporation ("National Asset"), an investment adviser registered under the
Investment Advisers Act of 1940, serves as the sub-adviser of the Divisions
pursuant to a sub-advisory agreement.
ARM Financial Group, Inc. ("ARM") is the ultimate parent of Integrity, Integrity
Capital and ARM Securities. ARM specializes in the asset accumulation business,
providing retail and institutional customers with products and services designed
to serve the growing long-term savings and retirement markets. At June 30, 1998,
ARM had approximately $8.4 billion of assets under management.
6
<PAGE>
Separate Account Ten of Integrity Life Insurance Company
Notes to Financial Statement (continued)
Unaudited
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
BASIS OF PRESENTATION
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles for investment companies.
SECURITY VALUATION
Common stocks are valued at the last sale price on the exchange on which they
are primarily traded.
SECURITY TRANSACTIONS
Securities transactions are accounted for as of trade date net of brokerage
fees, commissions and transfer fees. Interest income is accrued daily. Dividend
income is recorded on the ex-dividend date. Realized gains and losses on sales
of investments are determined on the basis of the first-in, first-out method for
all of the Divisions.
FEDERAL INCOME TAX MATTERS
The Separate Account complied with the requirements of the Internal Revenue Code
applicable to regulated investment companies and distributed its taxable net
investment income and net realized gains. Therefore, no provision for federal or
state income tax is required.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increases and decreases in net assets
from operations during the reporting period. Actual results could differ from
those estimates.
2. EXPENSES
Integrity assumes mortality and expense risks and incurs certain administrative
expenses related to the operations of the Separate Account and deducts a charge
from the assets of the Separate Account at an annual rate of 1.20% and 0.15% of
net assets, respectively, to cover these risks and expenses. In addition, an
annual charge of $30 per contract is assessed if the contract holder's account
value is less than $50,000 at the end of any participation year prior to the
contract holder's retirement date (as defined by the contract).
7
<PAGE>
Separate Account Ten of Integrity Life Insurance Company
Notes to Financial Statements (continued)
Unaudited
3. INVESTMENT ADVISORY AGREEMENTS AND PAYMENTS TO RELATED PARTIES
Integrity Capital serves as investment adviser of the Divisions and National
Asset serves as the sub-adviser of the Divisions. For providing investment
management services to the Divisions, Integrity Capital receives a monthly fee
based on an annual rate of .50% of each Division's average daily net assets.
Integrity Capital pays sub-advisory fees to National Asset for its services
under a sub-advisory agreement at an annual rate of .10% of the Divisions'
average daily net assets up to $100 million, and .05% of the Divisions' average
daily net assets in excess of $100 million. Integrity Capital has guaranteed it
will pay National Asset a minimum sub-advisory fee of $25,000 during the
Divisions' first year of operations.
Certain officers and directors of the Separate Account are also officers of ARM,
ARM Securities, Integrity Capital Advisors, and Integrity. The Separate Account
does not pay any amounts to compensate these individuals.
8
