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Previous: INTEGRITY LIFE INSURANCE CO SEPARATE ACCOUNT TEN, 497, 1999-08-30 |
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<PAGE>
SEPARATE ACCOUNT TEN
OF
INTEGRITY LIFE INSURANCE COMPANY
SEMI-ANNUAL REPORT
JUNE 30, 1999
CONTENTS
President's Letter.............................................................1
Financial Statements, Financial Highlights, and Schedule of Investments:
Select Ten Plus Division-March.............................................2
Select Ten Plus Division-June..............................................6
Select Ten Plus Division-September........................................10
Select Ten Plus Division-December.........................................14
Notes to Financial Statements.................................................18
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>
[LOGO]
INTEGRITY
Life Insurance Company
A member of the ARM Financial Group
July 30, 1999
Dear Unit Holders:
Enclosed is the Separate Account Ten semi-annual report for the fiscal period
ended June 30, 1999. The report includes details on the investment holdings in
the March, June, September, and December Divisions of Separate Account Ten as of
June 30, 1999, as well as other pertinent financial information.
Separate Account Ten follows the popular investment methodology often referred
to as the "Dow Ten" or the "Dow Dividend Strategy." Separate Account Ten is
dedicated to assisting you in achieving your long-term investment goals.
Thank you for your confidence. If you have any questions or comments, please
feel free to contact us at your convenience.
Sincerely,
/s/ Edward J. Haines
Edward J. Haines
President, Separate Account Ten of Integrity Life Insurance Company
515 West Market Street
Louisville, Kentucky 40202-3319
1
<PAGE>
SELECT TEN PLUS DIVISION - MARCH
STATEMENT OF ASSETS AND LIABILITIES
UNAUDITED
<TABLE>
<CAPTION>
JUNE 30, 1999
-------------------
<S> <C>
ASSETS
Investments in securities, at value (cost $7,727,452)--See accompanying schedule $ 8,852,988
Cash 934
Dividends, interest and other receivables 22,143
-------------------
TOTAL ASSETS 8,876,065
LIABILITIES
Accrued expenses 22,383
-------------------
NET ASSETS $ 8,853,682
-------------------
-------------------
UNIT VALUE, offering and redemption price per unit $ 11.47
-------------------
-------------------
Units outstanding 771,860
-------------------
-------------------
STATEMENT OF OPERATIONS
UNAUDITED
MARCH 31, 1999
(COMMENCEMENT OF
OPERATIONS) THROUGH
JUNE 30, 1999
-------------------
INVESTMENT INCOME - DIVIDENDS $ 55,615
EXPENSES
Mortality and expense risk and administrative charges 29,921
Investment advisory and management fees 11,082
Custody and accounting fees 5,057
Professional fees 1,654
Directors' fees and expenses 2,068
Printing and filing fees 1,090
Other expenses 1,629
-------------------
Total expenses before reimbursement 52,501
Less: expense reimbursement (3,741)
-------------------
Net expenses 48,760
-------------------
Net investment income 6,855
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments 28,752
Change in net unrealized appreciation on investments 1,125,536
-------------------
Net realized and unrealized gain on investments 1,154,288
-------------------
Net increase in net assets resulting from operations $ 1,161,143
-------------------
-------------------
</TABLE>
SEE ACCOMPANYING NOTES.
2
<PAGE>
SELECT TEN PLUS DIVISION - MARCH
STATEMENT OF CHANGES IN NET ASSETS
UNAUDITED
<TABLE>
<CAPTION>
MARCH 31, 1999
(COMMENCEMENT OF
OPERATIONS) THROUGH
JUNE 30, 1999
-------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income $ 6,855
Net realized gain on investments 28,752
Change in net unrealized appreciation on investments 1,125,536
-------------------
Net increase in net assets resulting from operations 1,161,143
Contract related transactions:
Contributions from contract holders (793,970 units) 7,944,994
Cost of units redeemed (22,110 units) (252,455)
-------------------
Net increase in net assets resulting from unit transactions 7,692,539
-------------------
TOTAL INCREASE IN NET ASSETS 8,853,682
NET ASSETS
Beginning of period -
-------------------
End of period $ 8,853,682
-------------------
-------------------
</TABLE>
SEE ACCOMPANYING NOTES.
3
<PAGE>
SELECT TEN PLUS DIVISION - MARCH
FINANCIAL HIGHLIGHTS
UNAUDITED
<TABLE>
<CAPTION>
MARCH 31, 1999
(COMMENCEMENT OF
OPERATIONS) THROUGH
JUNE 30, 1999
-------------------
<S> <C>
SELECTED PER-UNIT DATA
Unit value, beginning of period $ 10.00
Income from investment operations:
Net investment income 0.01
Net realized and unrealized gain on investments 1.46
-------------------
Total from investment operations 1.47
-------------------
Unit value, end of period $ 11.47
-------------------
-------------------
TOTAL RETURN 14.70%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $ 8,854
Ratio of net investment income to average net assets 0.31%
Ratio of expenses to average net assets 2.20%
Ratio of net investment income to average net assets before voluntary
expense reimbursement 0.14%
Ratio of expenses to average net assets before voluntary expense reimbursement 2.37%
Portfolio turnover rate 3%
</TABLE>
PERCENTAGE AMOUNTS ARE ANNUALIZED, EXCEPT TOTAL RETURN AND PORTFOLIO TURNOVER
RATE.
4
<PAGE>
SELECT TEN PLUS DIVISION - MARCH
SCHEDULE OF INVESTMENTS
JUNE 30, 1999
UNAUDITED
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
------------------- -------------------
<S> <C> <C>
COMMON STOCKS (100.0%)
BASIC MATERIALS (20.1%)
Du Pont (E.I.) de Nemours and Company 13,188 $ 900,905
International Paper Company 17,414 879,407
-------------------
1,780,312
CAPITAL GOODS (21.8%)
Caterpillar, Inc. 16,449 986,940
Minnesota Mining and Manufacturing Company 10,903 947,880
-------------------
1,934,820
CONSUMER CYCLICAL (19.5%)
Eastman Kodak Company 11,856 803,244
The Goodyear Tire & Rubber Company 15,668 921,474
-------------------
1,724,718
CONSUMER STAPLE (9.5%)
Phillip Morris Companies, Inc. 20,868 838,633
ENERGY (19.1%)
Chevron Corporation 9,005 857,163
Exxon Corporation 10,843 836,266
-------------------
1,693,429
FINANCIAL (10.0%)
J.P. Morgan & Company, Inc. 6,271 881,076
-------------------
TOTAL COMMON STOCKS (Cost $7,727,452) 8,852,988
-------------------
TOTAL INVESTMENTS (100.0%) $ 8,852,988
-------------------
-------------------
</TABLE>
OTHER INFORMATION:
Purchases and sales of securities, excluding short-term securities, for
the period ended June 30, 1999 aggregated $7,944,453 and $217,001,
respectively. At June 30, 1999, net unrealized appreciation for tax
purposes aggregated $1,125,536 of which $1,125,536 related to appreciated
investments. The aggregate cost of investments was the same for book and
tax purposes.
SEE ACCOMPANYING NOTES.
5
<PAGE>
SELECT TEN PLUS DIVISION - JUNE
STATEMENT OF ASSETS AND LIABILITIES
UNAUDITED
<TABLE>
<CAPTION>
JUNE 30, 1999
-------------------
<S> <C>
ASSETS
Investments in securities, at value (cost $7,893,301)--See accompanying schedule $ 8,027,375
Cash 5,884,265
Dividends, interest and other receivables 8,644
Receivable for investments sold 497,147
-------------------
TOTAL ASSETS 14,417,431
LIABILITIES
Accrued expenses 24,310
Payable for investments purchased 6,390,171
-------------------
TOTAL LIABILITIES 6,414,481
-------------------
NET ASSETS $ 8,002,950
-------------------
-------------------
UNIT VALUE, offering and redemption price per unit $ 11.37
-------------------
-------------------
Units outstanding 703,839
-------------------
-------------------
STATEMENT OF OPERATIONS
UNAUDITED
SIX MONTHS
ENDED
JUNE 30, 1999
-------------------
INVESTMENT INCOME - DIVIDENDS $ 26,150
EXPENSES
Mortality and expense risk and administrative charges 13,830
Investment advisory and management fees 5,122
Custody and accounting fees 10,125
Professional fees 3,466
Directors' fees and expenses 3,099
Printing and filing fees 3,258
Other expenses 3,019
-------------------
Total expenses before reimbursement 41,919
Less: expense reimbursement (19,382)
-------------------
Net expenses 22,537
-------------------
Net investment income 3,613
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments 133,356
Change in net unrealized appreciation on investments 55,310
-------------------
Net realized and unrealized gain on investments 188,666
-------------------
Net increase in net assets resulting from operations $ 192,279
-------------------
-------------------
</TABLE>
SEE ACCOMPANYING NOTES.
6
<PAGE>
SELECT TEN PLUS DIVISION - JUNE
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS JUNE 30, 1998
ENDED (COMMENCEMENT OF
JUNE 30, 1999 OPERATIONS) THROUGH
(UNAUDITED) DECEMBER 31, 1998
--------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income $ 3,613 $ 4,944
Net realized gain on investments 133,356 925
Change in net unrealized appreciation on investments 55,310 78,763
--------------------------------------------
Net increase in net assets resulting from operations 192,279 84,632
Contract related transactions:
Contributions from contract holders (520,911 and 196,589 units,
respectively) 5,908,869 1,965,893
Cost of units redeemed (12,913 and 748 units, respectively) (141,218) (7,505)
--------------------------------------------
Net increase in net assets resulting from unit transactions 5,767,651 1,958,388
-------------------------------------------
TOTAL INCREASE IN NET ASSETS 5,959,930 2,043,020
NET ASSETS
Beginning of period 2,043,020 -
--------------------------------------------
End of period $ 8,002,950 $ 2,043,020
--------------------------------------------
--------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES.
7
<PAGE>
SELECT TEN PLUS DIVISION - JUNE
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS JUNE 30,1998
ENDED (COMMENCEMENT OF
JUNE 30, 1999 OPERATIONS) THROUGH
(UNAUDITED) DECEMBER 31, 1998
--------------------------------------------
<S> <C> <C>
SELECTED PER-UNIT DATA
Unit value, beginning of period $ 10.43 $ 10.00
Income from investment operations:
Net investment income 0.01 0.03
Net realized and unrealized gain on investments 0.93 0.40
--------------------------------------------
Total from investment operations 0.94 0.43
--------------------------------------------
Unit value, end of period $ 11.37 $ 10.43
--------------------------------------------
--------------------------------------------
TOTAL RETURN 9.01% 4.30%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $ 8,003 $ 2,043
Ratio of net investment income to average net assets 0.35% 0.50%
Ratio of expenses to average net assets 2.20% 2.20%
Ratio of net investment loss to average net assets before voluntary
expense reimbursement (1.54%) (1.50%)
Ratio of expenses to average net assets before voluntary expense
Reimbursement 4.09% 4.20%
Portfolio turnover rate 23% 1%
</TABLE>
PERCENTAGE AMOUNTS ARE ANNUALIZED, EXCEPT TOTAL RETURN AND PORTFOLIO TURNOVER
RATE.
8
<PAGE>
SELECT TEN PLUS DIVISION - JUNE
SCHEDULE OF INVESTMENTS
JUNE 30, 1999
UNAUDITED
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
------------------- -------------------
<S> <C> <C>
COMMON STOCKS (100.0%)
BASIC MATERIALS (10.0%)
Du Pont (E.I.) de Nemours and Company 11,730 $ 799,693
International Paper Company 1 40
-------------------
799,733
CAPITAL GOODS (19.7%)
Caterpillar, Inc. 13,049 782,940
Minnesota Mining and Manufacturing Company 9,161 796,434
-------------------
1,579,374
CONSUMER CYCLICAL (30.1%)
Eastman Kodak Company 11,481 777,838
General Motors Corporation 12,437 820,842
The Goodyear Tire & Rubber Company 13,880 817,012
-------------------
2,415,692
CONSUMER STAPLE (9.9%)
Phillip Morris Companies, Inc. 19,873 798,646
ENERGY (20.0%)
Chevron Corporation 8,519 810,902
Exxon Corporation 10,347 798,012
-------------------
1,608,914
FINANCIAL (10.3%)
J.P. Morgan & Company, Inc. 5,872 825,016
-------------------
TOTAL COMMON STOCKS (Cost $7,893,301) 8,027,375
-------------------
TOTAL INVESTMENTS (100.0%) $8,027,375
-------------------
-------------------
</TABLE>
OTHER INFORMATION:
Purchases and sales of securities, excluding short-term securities, for the
period ended June 30, 1999 aggregated $6,459,526 and $544,143, respectively.
At June 30, 1999, net unrealized appreciation for tax purposes aggregated
$134,073 of which $155,354 related to appreciated investments and $21,281
related to depreciated investments. The aggregate cost of investments was
the same for book and tax purposes.
SEE ACCOMPANYING NOTES.
9
<PAGE>
SELECT TEN PLUS DIVISION - SEPTEMBER
STATEMENT OF ASSETS AND LIABILITIES
UNAUDITED
<TABLE>
<CAPTION>
JUNE 30, 1999
-------------------
<S> <C>
ASSETS
Investments in securities, at value (cost $9,958,557)--See accompanying schedule $11,443,598
Dividends, interest and other receivables 28,777
-------------------
TOTAL ASSETS 11,472,375
LIABILITIES
Cash overdraft 3,833
Payable for investments purchased 65,288
-------------------
TOTAL LIABILITIES 69,121
-------------------
-------------------
NET ASSETS $11,403,254
-------------------
-------------------
UNIT VALUE, offering and redemption price per unit $ 11.61
-------------------
-------------------
Units outstanding 982,614
-------------------
-------------------
STATEMENT OF OPERATIONS
UNAUDITED
SIX MONTHS
ENDED
JUNE 30, 1999
-------------------
INVESTMENT INCOME - DIVIDENDS $ 148,530
EXPENSES
Mortality and expense risk and administrative charges 74,570
Investment advisory and management fees 27,618
Custody and accounting fees 10,125
Professional fees 6,894
Directors' fees and expenses 6,165
Printing and filing fees 6,480
Other expenses 6,006
-------------------
Total expenses before reimbursement 137,858
Less: expense reimbursement (16,337)
-------------------
Net expenses 121,521
-------------------
Net investment income 27,009
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments 103,240
Change in net unrealized appreciation on investments 1,216,976
-------------------
-------------------
Net realized and unrealized gain on investments 1,320,216
-------------------
Net increase in net assets resulting from operations $ 1,347,225
-------------------
-------------------
</TABLE>
SEE ACCOMPANYING NOTES.
10
<PAGE>
SELECT TEN PLUS DIVISION - SEPTEMBER
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS SEPTEMBER 30, 1998
ENDED (COMMENCEMENT OF
JUNE 30, 1999 OPERATIONS) THROUGH
(UNAUDITED) DECEMBER 31, 1998
--------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income $ 27,009 $ 16,164
Net realized gain on investments 103,240 2,620
Change in net unrealized appreciation on investments 1,216,976 268,066
--------------------------------------------
Net increase in net assets resulting from operations 1,347,225 286,850
Contract related transactions:
Contributions from contract holders (0 and 1,084,432 units,
respectively) - 10,841,972
Cost of units redeemed (90,340 and 11,478 units, respectively) (956,357) (116,436)
--------------------------------------------
Net increase (decrease) in net assets resulting from unit transactions (956,357) 10,725,536
--------------------------------------------
TOTAL INCREASE IN NET ASSETS 390,868 11,012,386
NET ASSETS
Beginning of period 11,012,386 -
--------------------------------------------
End of period $11,403,254 $11,012,386
--------------------------------------------
--------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES.
11
<PAGE>
SELECT TEN PLUS DIVISION - SEPTEMBER
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
SIX MONTHS ENDED (COMMENCEMENT OF
JUNE 30, 1999 OPERATIONS) THROUGH
(UNAUDITED) DECEMBER 31, 1998
--------------------------------------------
<S> <C> <C>
SELECTED PER-UNIT DATA
Unit value, beginning of period $ 10.26 $ 10.00
Income from investment operations:
Net investment income 0.03 0.02
Net realized and unrealized gain on investments 1.32 0.24
--------------------------------------------
Total from investment operations 1.35 0.26
--------------------------------------------
Unit value, end of period $ 11.61 $ 10.26
--------------------------------------------
--------------------------------------------
TOTAL RETURN 13.16% 2.60%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $ 11,403 $ 11,012
Ratio of net investment income to average net assets 0.49% 0.57%
Ratio of expenses to average net assets 2.20% 2.20%
Ratio of net investment income to average net assets before voluntary
expense reimbursement 0.19% 0.28%
Ratio of expenses to average net assets before voluntary expense
reimbursement 2.50% 2.49%
Portfolio turnover rate 3% 1%
</TABLE>
PERCENTAGE AMOUNTS ARE ANNUALIZED, EXCEPT TOTAL RETURN AND PORTFOLIO TURNOVER
RATE.
12
<PAGE>
SELECT TEN PLUS DIVISION - SEPTEMBER
SCHEDULE OF INVESTMENTS
JUNE 30, 1999
UNAUDITED
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
------------------- -------------------
<S> <C> <C>
COMMON STOCKS (100.0%)
BASIC MATERIALS (10.0%)
Du Pont (E.I.) de Nemours and Company 16,712 $ 1,141,638
CAPITAL GOODS (20.5%)
Caterpillar, Inc. 20,592 1,235,520
Minnesota Mining and Manufacturing Company 12,824 1,114,887
-------------------
2,350,407
CONSUMER CYCLICAL (29.2%)
Eastman Kodak Company 12,400 840,100
General Motors Corporation 20,825 1,374,450
The Goodyear Tire & Rubber Company 19,241 1,131,611
-------------------
3,346,161
CONSUMER STAPLE (7.4%)
Phillip Morris Companies, Inc. 20,992 843,616
ENERGY (19.2%)
Chevron Corporation 11,762 1,119,595
Exxon Corporation 13,908 1,072,655
-------------------
2,192,250
FINANCIAL (13.7%)
J.P. Morgan & Company, Inc. 11,171 1,569,526
-------------------
TOTAL COMMON STOCKS (Cost $9,958,557) 11,443,598
-------------------
TOTAL INVESTMENTS (100.0%) $11,443,598
-------------------
-------------------
</TABLE>
OTHER INFORMATION:
Purchases and sales of securities, excluding short-term securities, for the
period ended June 30, 1999 aggregated $336,918 and $1,124,510, respectively.
At June 30, 1999, net unrealized appreciation for tax purposes aggregated
$1,485,042 of which $1,755,615 related to appreciated investments and
$270,573 related to depreciated investments. The aggregate cost of
investments was the same for book and tax purposes.
SEE ACCOMPANYING NOTES.
13
<PAGE>
SELECT TEN PLUS DIVISION - DECEMBER
STATEMENT OF ASSETS AND LIABILITIES
UNAUDITED
<TABLE>
<CAPTION>
JUNE 30, 1999
-------------------
<S> <C>
ASSETS
Investments in securities, at value (cost $13,808,505)--See accompanying schedule $15,455,796
Dividends, interest and other receivables 31,741
Cash 6,341
-------------------
TOTAL ASSETS 15,493,878
LIABILITIES
Accrued expenses 29,869
-------------------
NET ASSETS $15,464,009
-------------------
-------------------
UNIT VALUE, offering and redemption price per unit $ 11.20
-------------------
-------------------
Units outstanding 1,380,946
-------------------
-------------------
STATEMENT OF OPERATIONS
UNAUDITED
SIX MONTHS
ENDED
JUNE 30, 1999
-------------------
INVESTMENT INCOME - DIVIDENDS $ 198,783
EXPENSES
Mortality and expense risk and administrative charges 101,711
Investment advisory and management fees 37,671
Custody and accounting fees 10,129
Professional fees 2,480
Directors' fees and expenses 3,099
Printing and filing fees 1,634
Other expenses 2,440
-------------------
Net expenses 159,163
-------------------
Net investment income 39,620
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments 88,732
Change in net unrealized appreciation on investments 1,912,416
------------------
Net realized and unrealized gain on investments 2,001,148
-------------------
Net increase in net assets resulting from operations $ 2,040,768
-------------------
-------------------
</TABLE>
SEE ACCOMPANYING NOTES.
14
<PAGE>
SELECT TEN PLUS DIVISION - DECEMBER
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE ONE DAY
SIX MONTHS PERIOD ENDED
ENDED DECEMBER 31, 1998
JUNE 30, 1999 (COMMENCEMENT
(UNAUDITED) OF OPERATIONS)
--------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) $ 39,620 $ (844)
Net realized gain on investments 88,732 -
Change in net unrealized appreciation (depreciation) on investments 1,912,416 (265,125)
--------------------------------------------
Net increase (decrease) in net assets resulting from operations 2,040,768 (265,969)
Contract related transactions:
Contributions from contract holders (40,275 and 1,478,641 units,
respectively) 413,420 14,786,409
Cost of units redeemed (137,970 and 0 units, respectively) (1,510,619) -
--------------------------------------------
Net increase (decrease) in net assets resulting from unit
transactions (1,097,199) 14,786,409
--------------------------------------------
TOTAL INCREASE IN NET ASSETS 943,569 14,520,440
NET ASSETS
Beginning of period 14,520,440 -
--------------------------------------------
End of period $15,464,009 $14,520,440
--------------------------------------------
--------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES.
15
<PAGE>
SELECT TEN PLUS DIVISION - DECEMBER
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE ONE DAY
SIX MONTHS PERIOD ENDED
ENDED DECEMBER 31, 1998
JUNE 30, 1999 (COMMENCEMENT
(UNAUDITED) OF OPERATIONS)
--------------------------------------------
<S> <C> <C>
SELECTED PER-UNIT DATA
Unit value, beginning of period $ 9.82 $ 10.00
Income (loss) from investment operations:
Net investment income (loss) 0.03 -*
Net realized and unrealized gain (loss) on investments 1.35 (0.18)
--------------------------------------------
Total from investment operations 1.38 (0.18)
--------------------------------------------
Unit value, end of period $ 11.20 $ 9.82
--------------------------------------------
--------------------------------------------
TOTAL RETURN 14.05% (1.80%)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $ 15,464 $ 14,520
Ratio of net investment income (loss) to average net assets 0.53% (2.12%)
Ratio of expenses to average net assets 2.11% 2.12%
Portfolio turnover rate 5% -
* Less than $0.01
</TABLE>
PERCENTAGE AMOUNTS ARE ANNUALIZED, EXCEPT TOTAL RETURN AND PORTFOLIO TURNOVER
RATE.
16
<PAGE>
SELECT TEN PLUS DIVISION - DECEMBER
SCHEDULE OF INVESTMENTS
JUNE 30, 1999
UNAUDITED
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
------------------- -------------------
<S> <C> <C>
COMMON STOCKS (100.0%)
BASIC MATERIALS (21.3%)
Du Pont (E.I.) de Nemours and Company 25,289 $ 1,727,555
International Paper Company 30,885 1,559,705
-------------------
3,287,260
CAPITAL GOODS (22.0%)
Caterpillar, Inc. 29,537 1,772,220
Minnesota Mining and Manufacturing Company 18,757 1,630,687
-------------------
3,402,907
CONSUMER CYCLICAL (28.7%)
Eastman Kodak Company 18,689 1,266,180
General Motors Corporation 23,417 1,545,546
The Goodyear Tire & Rubber Company 27,696 1,628,871
-------------------
4,440,597
CONSUMER STAPLE (6.1%)
Phillip Morris Companies, Inc. 23,246 934,199
ENERGY (10.3%)
Chevron Corporation 16,787 1,597,912
FINANCIAL (11.6%)
J.P. Morgan & Company, Inc. 12,761 1,792,921
-------------------
TOTAL COMMON STOCKS (Cost $13,808,505) 15,455,796
-------------------
TOTAL INVESTMENTS (100.0%) $15,455,796
-------------------
-------------------
</TABLE>
OTHER INFORMATION:
Purchases and sales of securities, excluding short-term securities, for the
period ended June 30, 1999 aggregated $743,845 and $1,720,077 ,
respectively. At June 30, 1999, net unrealized appreciation for tax purposes
aggregated $1,647,292 of which $2,063,860 related to appreciated investments
and $416,568 related to depreciated investments. The aggregate cost of
investments was the same for book and tax purposes.
SEE ACCOMPANYING NOTES.
17
<PAGE>
SEPARATE ACCOUNT TEN OF INTEGRITY LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999
UNAUDITED
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Separate Account Ten of Integrity Life Insurance Company (the "Separate
Account") was established 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 currently limited to PINNACLE
contract holders and SYNDICATED SELECT TEN PLUS contract holders. PINNACLE and
SYNDICATED SELECT TEN PLUS are flexible premium variable annuity products 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 (the "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 in equal weights and holding them for approximately twelve
months. 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-March
invests only on the last business day of March each year. 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 growing asset accumulation
business with particular emphasis on retirement savings and investment products.
At June 30, 1999, ARM had approximately $10.4 billion of assets under
management.
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SEPARATE ACCOUNT TEN OF INTEGRITY LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENT (CONTINUED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
BASIS OF PRESENTATION
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles ("GAAP") 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
Security transactions are accounted for as of trade date net of brokerage fees,
commissions and transfer fees. Dividend income is recorded on the ex-dividend
date. Interest income is accrued daily. 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
Operations of the Separate Account are included in the income tax return of
Integrity, which is taxed as a life insurance company under the Internal Revenue
Code. The Separate Account will not be taxed as a regulated investment company
under Subchapter M of the Internal Revenue Code. Under existing federal income
tax law, no taxes are payable on the investment income or on the capital gains
of the Separate Account.
USE OF ESTIMATES
The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. 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 Divisions at an annual rate of 1.20% and 0.15% of average
daily 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).
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SEPARATE ACCOUNT TEN OF INTEGRITY LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. INVESTMENT ADVISORY AGREEMENTS AND PAYMENTS TO RELATED PARTIES
Integrity Capital serves as investment adviser for the Divisions and National
Asset serves as the sub-adviser for 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, not the Separate Account, pays sub-advisory fees to National
Asset based on the combined average daily net assets of the Integrity Divisions
and the portfolios that comprise Select Ten Plus Fund, LLC of National Integrity
Life Insurance Company (collectively, the "net asset base"). Fees under the
sub-advisory agreement are paid at an annual rate of .10% of the net asset base
up to $100 million and .05% of the net asset base in excess of $100 million.
Integrity Capital has guaranteed it will pay National Asset a minimum
sub-advisory fee of $25,000 during the first year of operations for the Separate
Account and Select Ten Plus Fund, LLC of National Integrity Life Insurance
Company. Integrity Capital has agreed to reimburse each Division for operating
expenses (excluding management fees and mortality and expense charges) above an
annual rate of .35% of the Divisions' average net assets.
Certain officers and directors of the Separate Account are also officers of ARM,
ARM Securities, Integrity Capital, and Integrity. The Separate Account does not
pay any amounts to compensate these individuals.
4. SUBSEQUENT EVENTS RELATING TO ARM AND INTEGRITY
On July 29, 1999, ARM (the "Company") announced that it is restructuring
its institutional business and positioning its retail business and technology
operations for the sale of the Company. The Company's efforts to find a buyer
have been unsuccessful. As a result, the Company has sought protection with
respect to its insurance subsidiary, Integrity Life Insurance Company, from the
Ohio Department of Insurance. Integrity is domiciled in Ohio. On August 20,
1999, Integrity consented to a Supervision Order issued by the Ohio Department
of Insurance. The Supervision Order will remain in effect for 60 days. Unless
the Ohio Department of Insurance begins proceedings for the appointment of a
rehabilitator or liquidator, the Supervision Order may automatically be extended
for successive 60-day periods until written notice is given to Integrity ending
the supervision.
This regulatory action is intended to ensure an orderly process for
addressing the financial obligations of Integrity and to protect the interests
of its individual policyholders. The Company believes that Integrity has
adequate assets to meet its obligations to individual retail policyholders.
Integrity will continue payments of death benefits, previously scheduled
systematic withdrawals, previously scheduled immediate annuity payments, and
agent commissions, but must receive written consent from the Ohio Department of
Insurance for other payments. In particular, the Supervision Order suspends the
processing of surrenders of policies except in cases of approved hardship.
Integrity intends to seek appropriate relief to the extent necessary from the
Securities and Exchange Commission to effectuate the suspension of surrenders.
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The Board of Directors of ARM is continuing to explore all strategic
alternatives, including the sale of the Company's subsidiaries (including
Integrity) or its businesses. There can be no assurance that a transaction for
the sale of the Company's insurance subsidiaries or its businesses will be
developed or consummated or as to the price or value that might be obtained.
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