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Previous: SOLOMON ALLIANCE GROUP INC /AZ, S-8, EX-23.2, 2000-08-29 |
Next: INTEGRITY LIFE INSURANCE CO SEPARATE ACCOUNT TEN, NSAR-A, 2000-08-29 |
<PAGE>
Separate Account Ten
of
Integrity Life Insurance Company
Semi-Annual Report
June 30, 2000
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 TOUCHSTONE SECURITIES, INC., 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>
August 2, 2000
Dear Unit Holders:
Enclosed is the Separate Account Ten semi-annual report for the six months ended
June 30, 2000. The report includes details on the investment holdings in the
March, June, September, and December Divisions of Separate Account Ten as of
June 30, 2000, 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
1
<PAGE>
Select Ten Plus Division - March
Statement of Assets and Liabilities
Unaudited
<TABLE>
<CAPTION>
JUNE 30, 2000
------------------------
<S> <C>
ASSETS
Investments in securities, at value (cost $5,061,663)--See accompanying schedule $ 4,290,305
Due from investment advisor 10,913
Dividends receivable 15,600
Receivable for investments sold 2,625
------------------------
TOTAL ASSETS 4,319,443
LIABILITIES
Cash overdraft 2,585
Accrued expenses 26,148
------------------------
TOTAL LIABILITIES 28,733
------------------------
NET ASSETS $ 4,290,710
========================
UNIT VALUE, offering and redemption price per unit $ 8.45
========================
Units outstanding 507,947
========================
</TABLE>
Statement of Operations
Unaudited
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, 2000
------------------------
<S> <C>
INVESTMENT INCOME - DIVIDENDS $ 83,404
EXPENSES
Mortality and expense risk and administrative charges 35,235
Investment advisory and management fees 13,050
Custody and accounting fees 10,114
Professional fees 3,309
Directors' fees and expenses 4,137
Printing and filing fees 2,180
Other expenses 3,258
------------------------
Total expenses before reimbursement 71,283
Less: expense reimbursement (13,862)
------------------------
Net expenses 57,421
------------------------
Net investment income 25,983
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Net realized loss on investments (266,225)
Net unrealized depreciation during the period on investments (830,884)
------------------------
Net realized and unrealized loss on investments (1,097,109)
------------------------
Net decrease in net assets resulting from operations $ (1,071,126)
========================
</TABLE>
SEE ACCOMPANYING NOTES.
2
<PAGE>
Select Ten Plus Division - March
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
SIX MONTHS MARCH 31, 1999
ENDED (COMMENCEMENT OF
JUNE 30, 2000 OPERATIONS) THROUGH
(UNAUDITED) DECEMBER 31, 1999
----------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income $ 25,983 $ 24,254
Net realized gain (loss) on investments (266,225) 147,764
Net unrealized appreciation (depreciation) during the period on
investments (830,884) 59,526
----------------------------------------------
Net increase (decrease) in net assets resulting from operations (1,071,126) 231,544
Contract related transactions:
Contributions from contract holders (119,382 and 798,422 units,
respectively) 1,105,617 7,991,654
Cost of units redeemed (275,816 and 134,041 units, respectively) (2,543,780) (1,423,199)
----------------------------------------------
Net increase (decrease) in net assets resulting from unit
transactions (1,438,163) 6,568,455
----------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (2,509,289) 6,799,999
NET ASSETS
Beginning of period 6,799,999 --
----------------------------------------------
End of period $ 4,290,710 $ 6,799,999
==============================================
</TABLE>
SEE ACCOMPANYING NOTES.
3
<PAGE>
Select Ten Plus Division - March
Financial Highlights
<TABLE>
<CAPTION>
SIX MONTHS MARCH 31, 1999
ENDED (COMMENCEMENT OF
JUNE 30, 2000 OPERATIONS) THROUGH
(UNAUDITED) (a) DECEMBER 31, 1999
-----------------------------------------------
<S> <C> <C>
SELECTED PER-UNIT DATA
Unit value, beginning of period $ 10.24 $ 10.00
Income (loss) from investment operations:
Net investment income 0.01 0.04
Net realized and unrealized gain (loss) on investments (1.80) 0.20
-----------------------------------------------
Total from investment operations (1.79) 0.24
-----------------------------------------------
Unit value, end of period $ 8.45 $ 10.24
===============================================
TOTAL RETURN (17.47%) 2.35%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $ 4,291 $ 6,800
Ratio of net investment income to average net assets 0.99% 0.38%
Ratio of expenses to average net assets 2.20% 2.20%
Ratio of net investment income to average net assets before
voluntary expense reimbursement 0.46% 0.18%
Ratio of expenses to average net assets before voluntary
expense reimbursement 2.73% 2.40%
Portfolio turnover rate 34% 22%
</TABLE>
PERCENTAGE AMOUNTS ARE ANNUALIZED, EXCEPT TOTAL RETURN AND PORTFOLIO TURNOVER
RATE.
(a) EFFECTIVE MARCH 3, 2000, TOUCHSTONE ADVISORS, INC. REPLACED INTEGRITY
CAPITAL ADVISORS, INC. AS INVESTMENT ADVISER FOR THE SEPARATE ACCOUNT.
4
<PAGE>
Select Ten Plus Division - March
Schedule of Investments
June 30, 2000
Unaudited
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
-------------- ---------------
<S> <C> <C>
COMMON STOCKS (100.0%)
BASIC MATERIALS (28.7%)
Du Pont (E.I.) de Nemours and Company 9,020 $ 394,625
Exxon Mobil Corporation 5,732 449,962
International Paper Company 12,933 385,563
---------------
1,230,150
CAPITAL GOODS (20.5%)
Caterpillar, Inc. 12,218 413,885
Minnesota Mining and Manufacturing Company 5,632 464,640
---------------
878,525
COMMUNICATION SERVICES (11.6%)
SBC Communications, Inc. 11,566 500,230
CONSUMER CYCLICAL (20.2%)
Eastman Kodak Company 8,566 509,677
General Motors Corporation 6,173 358,420
---------------
868,097
CONSUMER STAPLE (10.6%)
Philip Morris Companies, Inc. 17,049 452,864
FINANCIAL (8.4%)
J.P. Morgan & Company, Inc. 3,273 360,439
---------------
TOTAL COMMON STOCKS (Cost $5,061,663) 4,290,305
---------------
TOTAL INVESTMENTS (100.0%) $ 4,290,305
===============
</TABLE>
OTHER INFORMATION:
Cost of purchases and proceeds from sales of securities, excluding
short-term securities, for the period ended June 30, 2000 aggregated
$1,793,198 and $3,218,526, respectively. At June 30, 2000, net unrealized
depreciation for tax purposes aggregated $771,358 of which $88,867 related
to appreciated investments and $860,225 related to depreciated 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, 2000
----------------------
<S> <C>
ASSETS
Investments in securities, at value (cost $4,640,523)--See accompanying schedule $ 3,862,445
Cash 400,222
Due from investment advisor 12,233
Dividends receivable 12,538
Receivable for investments sold 1,083,245
Receivable for fund shares sold 2,912
----------------------
TOTAL ASSETS 5,373,595
LIABILITIES
Accrued expenses 34,724
Payable for investments purchased 1,489,048
----------------------
TOTAL LIABILITIES 1,523,772
----------------------
NET ASSETS $ 3,849,823
======================
UNIT VALUE, offering and redemption price per unit $ 8.96
======================
Units outstanding 429,809
======================
</TABLE>
Statement of Operations
Unaudited
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 2000
----------------------
<S> <C>
INVESTMENT INCOME - DIVIDENDS $ 72,755
EXPENSES
Mortality and expense risk and administrative charges 30,591
Investment advisory and management fees 11,330
Custody and accounting fees 10,114
Professional fees 3,485
Directors' fees and expenses 3,116
Printing and filing fees 3,276
Other expenses 3,036
----------------------
Total expenses before reimbursement 64,948
Less: expense reimbursement (15,096)
----------------------
Net expenses 49,852
----------------------
Net investment income 22,903
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Net realized loss on investments (542,830)
Net unrealized depreciation during the period on investments (56,746)
----------------------
Net realized and unrealized loss on investments (599,576)
----------------------
Net decrease in net assets resulting from operations $ (576,673)
======================
</TABLE>
SEE ACCOMPANYING NOTES.
6
<PAGE>
Select Ten Plus Division - June
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
-------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income $ 22,903 $ 25,679
Net realized gain (loss) on investments (542,830) 109,186
Net unrealized depreciation during the period
on investments (56,746) (800,095)
-------------------------------------------
Net decrease in net assets resulting from operations (576,673) (665,230)
Contract related transactions:
Contributions from contract holders (45,085 and 557,624 units,
respectively) 409,866 6,304,246
Cost of units redeemed (249,485 and 119,256 units, respectively) (2,414,344) (1,251,062)
-------------------------------------------
Net increase in net assets resulting from unit transactions (2,004,478) 5,053,184
-------------------------------------------
TOTAL INCREASE IN NET ASSETS (2,581,151) 4,387,954
NET ASSETS
Beginning of period 6,430,974 2,043,020
-------------------------------------------
End of period $ 3,849,823 $ 6,430,974
===========================================
</TABLE>
SEE ACCOMPANYING NOTES.
7
<PAGE>
Select Ten Plus Division - June
Financial Highlights
<TABLE>
<CAPTION>
JUNE 30, 1998
(COMMENCEMENT
SIX MONTHS OF OPERATIONS)
ENDED YEAR ENDED THROUGH
JUNE 30, 2000 DECEMBER 31, DECEMBER 31,
(UNAUDITED) (a) 1999 1998
-------------------------------------------------------
<S> <C> <C> <C>
SELECTED PER-UNIT DATA
Unit value, beginning of period $ 10.14 $ 10.43 $ 10.00
Income (loss) from investment operations:
Net investment income 0.01 0.02 0.03
Net realized and unrealized gain (loss) on investments (1.19) (0.31) 0.40
-------------------------------------------------------
Total from investment operations (1.18) (0.29) 0.43
-------------------------------------------------------
Unit value, end of period $ 8.96 $ 10.14 $ 10.43
=======================================================
TOTAL RETURN (11.67%) (2.78%) 4.30%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $ 3,850 $ 6,431 $ 2,043
Ratio of net investment income to average net assets 1.01% 0.54% 0.50%
Ratio of expenses to average net assets 2.20% 2.20% 2.20%
Ratio of net investment income (loss) to average net assets before
voluntary expense reimbursement 0.34% (0.08%) (1.50%)
Ratio of expenses to average net assets before voluntary expense
reimbursement 2.87% 2.82% 4.20%
Portfolio turnover rate 32% 43% 1%
</TABLE>
PERCENTAGE AMOUNTS FOR PERIODS LESS THAN ONE YEAR ARE ANNUALIZED, EXCEPT
TOTAL RETURN AND PORTFOLIO TURNOVER RATE.
(a) EFFECTIVE MARCH 3, 2000, TOUCHSTONE ADVISORS, INC. REPLACED INTEGRITY
CAPITAL ADVISORS, INC. AS INVESTMENT ADVISER FOR THE SEPARATE ACCOUNT.
8
<PAGE>
Select Ten Plus Division - June
Schedule of Investments
June 30, 2000
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 8,914 $ 389,987
International Paper Company 12,956 386,251
----------------
776,238
CAPITAL GOODS (19.7%)
Caterpillar, Inc. 11,360 384,820
Minnesota Mining and Manufacturing Company 4,573 377,272
----------------
762,092
COMMUNICATION SERVICES (9.9%)
AT&T Corporation 12,052 381,145
CONSUMER CYCLICAL (19.7%)
Eastman Kodak Company 6,374 379,253
General Motors Corporation 6,598 383,105
----------------
762,358
CONSUMER STAPLE (20.7%)
Philip Morris Companies, Inc. 14,617 388,264
Proctor & Gamble Co. 7,198 412,086
----------------
800,350
FINANCIAL (9.9%)
J.P. Morgan & Company, Inc. 3,453 380,262
----------------
TOTAL COMMON STOCKS (Cost $4,640,523) 3,862,445
----------------
TOTAL INVESTMENTS (100.0%) $3,862,445
================
</TABLE>
OTHER INFORMATION:
Cost of purchases and proceeds from sales of securities, excluding
short-term securities, for the period ended June 30, 2000 aggregated
$1,505,112 and $3,484,498, respectively. At June 30, 2000, net unrealized
depreciation for tax purposes aggregated $778,078 of which $25,733 related
to appreciated investments and $803,811 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, 2000
----------------------
<S> <C>
ASSETS
Investments in securities, at value (cost $8,159,083)--See accompanying schedule $ 6,653,040
Due from investment advisor 18,723
Dividends receivable 32,087
Receivable for investments sold 3,760
----------------------
TOTAL ASSETS 6,707,610
LIABILITIES
Cash overdraft 3,651
Accrued expenses 74,476
Payable for investments repurchased 74
----------------------
TOTAL LIABILITIES 78,201
----------------------
NET ASSETS $ 6,629,409
======================
UNIT VALUE, offering and redemption price per unit $ 8.94
======================
Units outstanding 741,446
======================
</TABLE>
Statement of Operations
Unaudited
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, 2000
----------------------
<S> <C>
INVESTMENT INCOME - DIVIDENDS $ 144,456
EXPENSES
Mortality and expense risk and administrative charges 57,541
Investment advisory and management fees 21,311
Custody and accounting fees 10,114
Professional fees 6,932
Directors' fees and expenses 6,199
Printing and filing fees 6,516
Other expenses 6,039
----------------------
Total expenses before reimbursement 114,652
Less: expense reimbursement (20,881)
----------------------
Net expenses 93,771
----------------------
Net investment income 50,685
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on investments 161,985
Net unrealized depreciation during the period on investments (1,226,527)
----------------------
Net realized and unrealized loss on investments (1,064,542)
----------------------
Net decrease in net assets resulting from operations $ (1,013,857)
======================
</TABLE>
SEE ACCOMPANYING NOTES.
10
<PAGE>
Select Ten Plus Division-September
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
----------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income $ 50,685 $ 65,716
Net realized gain on investments 161,985 278,707
Net unrealized depreciation during the period on investments (1,226,527) (547,581)
----------------------------------------------
Net decrease in net assets resulting from operations (1,013,857) (203,158)
Contract related transactions:
Contributions from contract holders (3,259 and 427,004 units,
respectively) 33,565 4,567,272
Cost of units redeemed (373,796 and 387,975 units, respectively) (3,636,853) (4,129,946)
----------------------------------------------
Net increase in net assets resulting from unit transactions (3,603,288) 437,326
----------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (4,617,145) 234,168
NET ASSETS
Beginning of period 11,246,554 11,012,386
----------------------------------------------
End of period $ 6,629,409 $11,246,554
==============================================
</TABLE>
SEE ACCOMPANYING NOTES.
11
<PAGE>
Select Ten Plus Division-September
Financial Highlights
<TABLE>
<CAPTION>
SIX MONTHS SEPTEMBER 30,1998
ENDED (COMMENCEMENT OF
JUNE 30, 2000 YEAR ENDED OPERATIONS) THROUGH
(UNAUDITED) (a) DECEMBER 31, 1999 DECEMBER 31, 1998
------------------------------------------------------------
<S> <C> <C> <C>
SELECTED PER-UNIT DATA
Unit value, beginning of period $ 10.11 $ 10.26 $ 10.00
Income (loss) from investment operations:
Net investment income (loss) (0.02) 0.05 0.02
Net realized and unrealized gain (loss) on investments (1.15) (0.20) 0.24
------------------------------------------------------------
Total from investment operations (1.17) (0.15) 0.26
------------------------------------------------------------
Unit value, end of period $ 8.94 $ 10.11 $ 10.26
============================================================
TOTAL RETURN (11.59%) (1.42%) 2.60%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $ 6,629 $ 11,247 $ 11,012
Ratio of net investment income to average net assets 1.19% 0.57% 0.57%
Ratio of expenses to average net assets 2.20% 2.20% 2.20%
Ratio of net investment income to average net assets before voluntary
expense reimbursement 0.70% 0.29% 0.28%
Ratio of expenses to average net assets before voluntary expense
reimbursement 2.69% 2.48% 2.49%
Portfolio turnover rate 0% 50% 1%
</TABLE>
PERCENTAGE AMOUNTS FOR PERIODS LESS THAN ONE YEAR ARE ANNUALIZED, EXCEPT
TOTAL RETURN AND PORTFOLIO TURNOVER RATE.
(a) EFFECTIVE MARCH 3, 2000, TOUCHSTONE ADVISORS, INC. REPLACED INTEGRITY
CAPITAL ADVISORS, INC. AS INVESTMENT ADVISER FOR THE SEPARATE ACCOUNT.
12
<PAGE>
Select Ten Plus Division - September
Schedule of Investments
June 30, 2000
Unaudited
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
------------- -----------------
<S> <C> <C>
COMMON STOCKS (100.0%)
BASIC MATERIALS (10.3%)
Du Pont (E.I.) de Nemours and Company 15,690 $ 686,438
CAPITAL GOODS (19.8%)
Caterpillar, Inc. 17,639 597,521
Minnesota Mining and Manufacturing Company 8,740 721,050
-----------------
1,318,571
CONSUMER CYCLICAL (25.8%)
Eastman Kodak Company 13,285 790,458
General Motors Corporation 10,495 609,379
The Goodyear Tire & Rubber Company 15,861 317,220
-----------------
1,717,057
CONSUMER STAPLE (23.6%)
Philip Morris Companies, Inc. 28,637 760,670
Sears, Roebuck and Company 24,670 804,859
-----------------
1,565,529
ENERGY (11.3%)
Chevron Corporation 8,862 751,608
FINANCIAL (9.2%)
J.P. Morgan & Company, Inc. 5,574 613,837
-----------------
TOTAL COMMON STOCKS (Cost $8,159,083) 6,653,040
-----------------
TOTAL INVESTMENTS (100.0%) $ 6,653,040
=================
</TABLE>
OTHER INFORMATION:
Cost of purchases and proceeds from sales of securities, excluding
short-term securities, for the period ended June 30, 2000 aggregated $31,028
and $3,575,797, respectively. At June 30, 2000, net unrealized depreciation
for tax purposes aggregated $1,506,043 of which $113,726 related to
appreciated investments and $1,619,769 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, 2000
----------------------
<S> <C>
ASSETS
Investments in securities, at value (cost $6,867,042)--See accompanying schedule $ 5,989,262
Dividends receivable 25,820
Due from investment advisor 4,688
----------------------
TOTAL ASSETS 6,019,770
LIABILITIES
Cash overdraft 8,660
Accrued expenses 15,725
----------------------
TOTAL LIABILITIES 24,385
----------------------
NET ASSETS $ 5,995,385
======================
UNIT VALUE, offering and redemption price per unit $ 8.53
======================
Units outstanding 702,584
======================
</TABLE>
Statement of Operations
Unaudited
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 2000
----------------------
<S> <C>
INVESTMENT INCOME - DIVIDENDS $ 132,850
EXPENSES
Mortality and expense risk and administrative charges 57,202
Investment advisory and management fees 21,186
Custody and accounting fees 10,114
Professional fees 2,493
Directors' fees and expenses 3,116
Printing and filing fees 1,643
Other expenses 2,453
----------------------
Total expenses before reimbursement 98,207
Less: expense reimbursement (5,313)
----------------------
Net expenses 92,894
----------------------
Net investment income 39,956
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Net realized loss on investments (305,354)
Net unrealized depreciation during the period on investments (1,357,086)
----------------------
Net realized and unrealized loss on investments (1,662,440)
----------------------
Net decrease in net assets resulting from operations $ (1,622,484)
======================
</TABLE>
SEE ACCOMPANYING NOTES.
14
<PAGE>
Select Ten Plus Division - December
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) $ 39,956 $ 74,132
Net realized loss on investments (305,354) (161,661)
Net unrealized appreciation (depreciation) during the period on investments (1,357,086) 744,431
------------------------------------------
Net increase (decrease) in net assets resulting from operations (1,622,484) 656,902
Contract related transactions:
Contributions from contract holders (60 and 218,388 units,
respectively) 226 2,213,528
Cost of units redeemed (589,215 and 405,290 units, respectively) (5,495,082) (4,278,145)
------------------------------------------
Net decrease in net assets resulting from unit transactions (5,494,856) (2,064,617)
------------------------------------------
TOTAL DECREASE IN NET ASSETS (7,117,340) (1,407,715)
NET ASSETS
Beginning of period 13,112,725 14,520,440
------------------------------------------
End of period $ 5,995,385 $ 13,112,725
==========================================
</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, 2000 YEAR ENDED (COMMENCEMENT OF
(UNAUDITED) (a) DECEMBER 31, 1999 OPERATIONS)
-----------------------------------------------------------
<S> <C> <C> <C>
SELECTED PER-UNIT DATA
Unit value, beginning of period $ 10.15 $ 9.82 $ 10.00
Income (loss) from investment operations:
Net investment income (loss) (0.03) 0.05 -*
Net realized and unrealized gain (loss) on investments (1.59) 0.28 (0.18)
-----------------------------------------------------------
Total from investment operations (1.62) 0.33 (0.18)
-----------------------------------------------------------
Unit value, end of period $ 8.53 $ 10.15 $ 9.82
===========================================================
TOTAL RETURN (15.93%) 3.38% (1.80%)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $ 5,995 $ 13,113 $ 14,520
Ratio of net investment income to average net assets 0.94% 0.51% (2.12%)
Ratio of expenses to average net assets 2.20% 2.12% 2.12%
Ratio of net investment income to average net assets
before voluntary expense reimbursement 0.82% 0.51% (2.12%)
Ratio of expenses to average net assets before
voluntary expense reimbursement 2.32% 2.12% 2.12%
Portfolio turnover rate 0% 36% 0%
</TABLE>
* Less than $0.01
PERCENTAGE AMOUNTS FOR PERIODS LESS THAN ONE YEAR ARE ANNUALIZED, EXCEPT
TOTAL RETURN AND PORTFOLIO TURNOVER RATE.
(a) EFFECTIVE MARCH 3, 2000, TOUCHSTONE ADVISORS, INC. REPLACED INTEGRITY
CAPITAL ADVISORS, INC. AS INVESTMENT ADVISER FOR THE SEPARATE ACCOUNT.
16
<PAGE>
Select Ten Plus Division - December
Schedule of Investments
June 30, 2000
Unaudited
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
------------- ----------------
<S> <C> <C>
COMMON STOCKS (100.0%)
BASIC MATERIALS (28.9%)
Du Pont (E.I.) de Nemours and Company 12,298 $ 538,037
Exxon Mobil Corporation 8,630 677,455
International Paper Company 17,305 515,919
----------------
1,731,411
CAPITAL GOODS (18.3%)
Caterpillar, Inc. 14,122 478,383
Minnesota Mining and Manufacturing Company 7,507 619,328
----------------
1,097,711
COMMUNICATION SERVICES (11.2%)
SBC Communications Inc. 15,438 667,694
CONSUMER CYCLICAL (18.3%)
Eastman Kodak Company 10,513 625,523
General Motors Corporation 8,128 471,947
----------------
1,097,470
CONSUMER STAPLE (13.5%)
Philip Morris Companies, Inc. 30,357 806,358
FINANCIAL (9.8%)
J.P. Morgan & Company, Inc. 5,345 588,618
----------------
TOTAL COMMON STOCKS (Cost $6,867,042) 5,989,262
----------------
TOTAL INVESTMENTS (100.0%) $ 5,989,262
================
</TABLE>
OTHER INFORMATION:
Cost of purchases and proceeds from sales of securities, excluding
short-term securities, for the period ended June 30, 2000 aggregated $27,604
and $5,226,152, respectively. At June 30, 2000, net unrealized depreciation
for tax purposes aggregated $877,780 of which $159,738 related to
appreciated investments and $1,037,518 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, 2000 (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.
Touchstone Securities, Inc. ("Touchstone 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. Touchstone Advisors, Inc. ("Touchstone Advisors"), 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.
The Western and Southern Life Insurance Company ("W&S") is the ultimate parent
of Integrity, Touchstone Advisors and Touchstone Securities. ARM Financial
Group, Inc. ("ARM") was the parent of Integrity prior to March 3, 2000. In
addition, prior to March 3, 2000, ARM Securities Corporation and Integrity
Capital Advisors, Inc. were the principal underwriter and investment adviser to
the Separate Account, respectively. (See Note 4.)
18
<PAGE>
Separate Account Ten of Integrity Life Insurance Company
Notes to Financial Statements (continued)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
BASIS OF PRESENTATION
The accompanying financial statements have been prepared in accordance with
accounting principles generally accepted in the United States.
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 accounting principles
generally accepted in the United States 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). Touchstone
Advisors has agreed to reimburse each Division for operating expenses (excluding
management fees and mortality and expense charges) above an annual rate of 0.35%
of the Divisions' average net assets.
19
<PAGE>
Separate Account Ten of Integrity Life Insurance Company
Notes to Financial Statements (continued)
3. INVESTMENT ADVISORY AGREEMENTS AND PAYMENTS TO RELATED PARTIES
Touchstone Advisors 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, Touchstone Advisors receives
a monthly fee based on an annual rate of 0.50% of each Division's average
daily net assets. Touchstone Advisors, 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 (collectively, the "net asset base"). Fees under the
sub-advisory agreement are paid at an annual rate of 0.10% of the net asset
base up to $100 million and 0.05% of the net asset base in excess of $100
million.
Certain officers and directors of the Separate Account are also officers of
Touchstone Securities, Touchstone Advisors, and Integrity. The Separate Account
does not pay any amounts to compensate these individuals.
4. EVENTS RELATING TO INTEGRITY
On July 29, 1999, ARM announced that it was restructuring its institutional
business and positioning its retail business and technology operations for
the sale of ARM or its businesses or its assets. On December 17, 1999 ARM
announced that it had signed a definitive agreement whereby W&S would acquire
ARM's insurance subsidiaries, Integrity and National Integrity Life Insurance
Company. The transaction closed on March 3, 2000. ARM Securities Corporation
and Integrity Capital Advisors, Inc. ceased to be affiliated with Integrity
subsequent to March 3, 2000 when the acquisition by W&S was complete. In
conjunction with the acquisition, Touchstone Securities became the principal
underwriter of variable annuities for Integrity and Touchstone Advisors
became the investment adviser for the Separate Account.
W&S is part of the Western-Southern Enterprise, a financial services group
which also includes Western-Southern Life Assurance Company, Columbus Life
Insurance Company, Touchstone Advisors, Inc., Fort Washington Investment
Advisors, Inc., Todd Investment Advisors, Inc., Countrywide Financial
Services, Capital Analysts Incorporated and Eagle Realty Group, Inc. Assets
owned or under management by the group exceed $20 billion. W&S is rated A++
(Superior) by A.M. Best, AAA (Highest) by Duff & Phelps, AAA (Extremely
Strong) by Standard & Poor's, and Aa2 (Excellent) by Moody's.
20
<PAGE>
Separate Account Ten of Integrity Life Insurance Company
Notes to Financial Statements (continued)
5. CONTRACT HOLDER MEETINGS
A Special Meeting of Contract Holders of the March, June, September and December
Divisions was held on April 4, 2000. Each matter voted upon at that meeting, as
well as the number of votes cast for, against or withheld, the number of
abstentions, and the number of broker non-votes with respect to such matters,
are set forth below. Abstentions have the effect of a negative vote on a
proposal.
1. (a) March Division Contract Holders approved a new investment management
agreement (the "New Management Agreement") between the Separate
Account and Touchstone Advisors.
<TABLE>
<CAPTION>
Units Units Broker
Voted "For" Voted "Against" Abstentions Non-Votes
------------------------- --------------------- -------------------- ----------------------
<S> <C> <C> <C>
290,984.981 3,501.193 28,107.057 -
</TABLE>
(b) June Division Contract Holders approved the New Management Agreement
between the Separate Account and Touchstone Advisors.
<TABLE>
<CAPTION>
Units Units Broker
Voted "For" Voted "Against" Abstentions Non-Votes
------------------------- --------------------- -------------------- ----------------------
<S> <C> <C> <C>
230,974.114 4,365.481 20,697.375 -
</TABLE>
(c) September Division Contract Holders approved the New Management
Agreement between the Separate Account and Touchstone Advisors.
<TABLE>
<CAPTION>
Units Units Broker
Voted "For" Voted "Against" Abstentions Non-Votes
------------------------- --------------------- -------------------- ----------------------
<S> <C> <C> <C>
497,909.225 4,128.633 23,890.137 -
</TABLE>
(d) December Division Contract Holders approved the New Management
Agreement between the Separate Account and Touchstone Advisors.
<TABLE>
<CAPTION>
Units Units Broker
Voted "For" Voted "Against" Abstentions Non-Votes
------------------------- --------------------- -------------------- ----------------------
<S> <C> <C> <C>
434,809.422 9,852.932 37,808.929 -
</TABLE>
21
<PAGE>
Separate Account Ten of Integrity Life Insurance Company
Notes to Financial Statements (continued)
5. CONTRACT HOLDER MEETINGS (CONTINUED)
2. (a) March Division Contract Holders approved a new sub-advisory
agreement (the "New Sub-Advisory Agreement") between Touchstone
Advisors and National Asset.
<TABLE>
<CAPTION>
Units Units Broker
Voted "For" Voted "Against" Abstentions Non-Votes
------------------------- --------------------- -------------------- ----------------------
<S> <C> <C> <C>
290,510.366 3,975.808 28,107.057 -
</TABLE>
(b) June Division Contract Holders approved the New Sub-Advisory
Agreement between Touchstone Advisors and National Asset.
<TABLE>
<CAPTION>
Units Units Broker
Voted "For" Voted "Against" Abstentions Non-Votes
------------------------- --------------------- -------------------- ----------------------
<S> <C> <C> <C>
232,305.221 3,069.953 20,661.796 -
</TABLE>
(c) September Division Contract Holders approved the New Sub-Advisory
Agreement between Touchstone Advisors and National Asset.
<TABLE>
<CAPTION>
Units Units Broker
Voted "For" Voted "Against" Abstentions Non-Votes
------------------------- --------------------- -------------------- ----------------------
<S> <C> <C> <C>
494,808.223 7,783.553 23,336.219 -
</TABLE>
(d) December Division Contract Holders approved the New Sub-Advisory
Agreement between Touchstone Advisors and National Asset.
<TABLE>
<CAPTION>
Units Units Broker
Voted "For" Voted "Against" Abstentions Non-Votes
------------------------- --------------------- -------------------- ----------------------
<S> <C> <C> <C>
434,738.423 9,619.069 38,113.791 -
</TABLE>
3. (a) The Separate Account approved John R. Lindholm as a member of the
Board of Managers until a successor is duly elected and qualified.
<TABLE>
<CAPTION>
Units Units Broker
Voted "For" Voted "Against" Abstentions Non-Votes
------------------------- --------------------- -------------------- ----------------------
<S> <C> <C> <C>
1,518,127.419 68,902.060 - -
</TABLE>
22
<PAGE>
Separate Account Ten of Integrity Life Insurance Company
Notes to Financial Statements (continued)
5. CONTRACT HOLDER MEETINGS (CONTINUED)
(b) The Separate Account approved Chris L. Mahai as a member of the
Board of Managers until a successor is duly elected and qualified.
<TABLE>
<CAPTION>
Units Units Broker
Voted "For" Voted "Against" Abstentions Non-Votes
------------------------- --------------------- -------------------- ----------------------
<S> <C> <C> <C>
1,518,127.419 68,902.060 - -
</TABLE>
(c) The Separate Account approved William B. Faulkner as a member of
the Board of Managers until a successor is duly elected and
qualified.
<TABLE>
<CAPTION>
Units Units Broker
Voted "For" Voted "Against" Abstentions Non-Votes
------------------------- --------------------- -------------------- ----------------------
<S> <C> <C> <C>
1,517,931.136 69,098.343 - -
</TABLE>
(d) The Separate Account approved John Katz as a member of the Board of
Managers until a successor is duly elected and qualified.
<TABLE>
<CAPTION>
Units Units Broker
Voted "For" Voted "Against" Abstentions Non-Votes
------------------------- --------------------- -------------------- ----------------------
<S> <C> <C> <C>
1,520,545.859 66,483.620 - -
</TABLE>
(e) The Separate Account approved Irvin W. Quesenberry, Jr. as a member
of the Board of Managers until a successor is duly elected and
qualified.
<TABLE>
<CAPTION>
Units Units Broker
Voted "For" Voted "Against" Abstentions Non-Votes
------------------------- --------------------- -------------------- ----------------------
<S> <C> <C> <C>
1,516,243.419 70,786.060 - -
</TABLE>
4. (a) The Separate Account approved the selection of Ernst & Young, LLP as
the Separate Account's independent accountants for the fiscal year
ending December 31, 2000.
<TABLE>
<CAPTION>
Units Units Broker
Voted "For" Voted "Against" Abstentions Non-Votes
------------------------- --------------------- -------------------- ----------------------
<S> <C> <C> <C>
1,480,903.000 14,629.674 91,496.805 -
</TABLE>
23
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