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INTEGRITY
Life Insurance Company
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GrandMaster II
Flexible Payment Variable Annuity
Prospectus
May 1, 1996
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PROSPECTUS
FLEXIBLE PREMIUM VARIABLE ANNUITY
issued by INTEGRITY LIFE INSURANCE COMPANY
This prospectus describes a flexible premium variable annuity offered by
Integrity Life Insurance Company, an indirect wholly owned subsidiary of ARM
Financial Group, Inc. The individual contracts and group certificates
(contracts) offered by this prospectus provide several types of benefits, some
of which have tax-favored status under the Internal Revenue Code of 1986, as
amended. Contributions under the contracts may be allocated to the various
investment divisions of our Separate Account I (Variable Account Options, or
individually, Option) or to our Fixed Accounts, or both.
Contributions to the Variable Account Options are invested in shares of
corresponding portfolios of the Variable Insurance Products Fund and Variable
Insurance Products Fund II (the Funds or Fund). The Funds are part of the
Fidelity Investments/(R)/ group of companies. The values allocated to the
Options reflect the investment performance of the Funds' portfolios. The
prospectus for the Funds describes the investment objectives, policies and risks
of each of the Funds' portfolios. There are ten Variable Account Options
available:
. Money Market . Investment Grade Bond
. High Income . Asset Manager
. Equity-Income . Index 500
. Growth . Contrafund
. Overseas . Asset Manager: Growth
We currently offer Guaranteed Rate Options and a Systematic Transfer Option,
together referred to as Fixed Accounts. Your allocation to a Guaranteed Rate
Option accumulates at a fixed interest rate we declare at the beginning of the
duration you select. A market value adjustment (Market Value Adjustment) will be
made for withdrawals, surrenders, transfers and certain other transactions
before the expiration of your GRO Account, but your value under a GRO Account
may not be decreased below an amount equal to your allocation plus interest
compounded at an annual effective rate of 3% (Minimum Value), less previous
withdrawals and any applicable contingent withdrawal charges. Your allocation to
the Systematic Transfer Option accumulates at a fixed interest rate that we
declare each calendar quarter, guaranteed never to be less than an effective
annual yield of 3%. You must transfer all contributions you make to the
Systematic Transfer Option into other Investment Options within one year of
contribution.
This prospectus contains information about the contracts that you should know
before investing. You should read this prospectus and any supplements, and
retain them for future reference. This prospectus is not valid unless provided
with the current prospectus for the Funds, which you should also read.
For further information and assistance, you should contact our Administrative
Office at Integrity Life Insurance Company, P.O. Box 182080, Columbus, OH
43218. The express mail address is Integrity Life Insurance Company, 200 East
Wilson Bridge Road, Worthington, Ohio 43085. You may also call the following
toll-free number: 1-800-325-8583.
A registration statement relating to the contracts, which includes a Statement
of Additional Information (SAI) dated May 1, 1996, has been filed with the
Securities and Exchange Commission. The SAI is incorporated by reference into
this prospectus. A copy of the SAI is available free of charge by writing to or
calling our Administrative Office. A table of contents for the SAI follows the
table of contents for this prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMSSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE 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, 1996.
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PART 1 1 Your Variable Annuity Contract
SUMMARY AND DEFINITIONS 1 Your Benefits
1 How Your Contract is Taxed
1 Your Contributions
1 Your Investment Options
1 Variable Account Options
1 Account Value, Adjusted Account Value, and
Cash Value
2 Transfers
2 Charges and Fees
2 Withdrawals
2 Your Initial Right to Revoke
3 Table of Annual Fees and Expenses
5 Financial Information
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PART 2 6 Integrity Life Insurance Company
INTEGRITY AND THE SEPARATE ACCOUNT 6 The Separate Account and the Variable
Account Options
6 Assets of Our Separate Account
6 Changes In How We Operate
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PART 3 7 THE FUNDS
YOUR INVESTMENT OPTIONS 8 The Funds' Investment Adviser
9 Investment Objectives of the Portfolios
10 FIXED ACCOUNTS
10 Guaranteed Rate Options
10 Renewals of GRO Accounts
11 Market Value Adjustments
11 Systematic Transfer Option
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PART 4 12 Separate Account Charges
DEDUCTIONS AND CHARGES 12 Annual Administrative Charge
13 Fund Charges
13 State Premium Tax Deduction
13 Contingent Withdrawal Charge
14 Transfer Charge
14 Tax Reserve
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PART 5 14 Contributions Under Your Contract
TERMS OF YOUR VARIABLE ANNUITY 15 Your Account Value
15 Your Purchase of Units in Our Separate Account
15 How We Determine Unit Value
16 Transfers
16 Withdrawals
16 Assignments
17 Death Benefits and Similar Benefit Distributions
17 Annuity Benefits
17 Annuities
18 Annuity Payments
18 Timing of Payment
18 How To Make Requests and Give Instructions
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PART 6 19 Fund Voting Rights
VOTING RIGHTS 19 How We Determine Your Voting Shares
19 How Fund Shares Are Voted
19 Separate Account Voting Rights
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PART 7 20 Introduction
TAX ASPECTS OF THE CONTRACTS 20 Your Contract is an Annuity
20 Taxation of Annuities Generally
21 Distribution-at-Death Rules
21 Diversifications Standards
22 TAX FAVORED RETIREMENT PROGRAMS
22 Individual Retirement Annuities
22 Tax-Sheltered Annuities
22 Simplified Employee Pensions
22 Corporate and Self-Employed (H.R. 10 and Keogh)
Pension and Profit Sharing Plans
23 Deferred Compensation Plans of State and Local
Governments and Tax-Exempt Organizations
23 Distributions Under Tax-Favored Programs
23 Federal and State Income Tax Withholding
24 Impact of Taxes to Integrity
24 Transfers among Investment Options
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PART 8 - ADDITIONAL INFORMATION 24 Systematic Withdrawals
24 Dollar Cost Averaging
25 Systematic Transfer Program
25 Asset Rebalancing
25 Systematic Contributions
25 Performance Information
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APPENDIX A - ILLUSTRATION OF A MARKET VALUE ADJUSTMENT
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS.
SAI TABLE OF CONTENTS
Part 1 - Integrity and Custodian
Part 2 - Distribution of the Contracts
Part 3 - Performance Information
Part 4 - Death Benefit Information for Contracts Issued Prior to January 1, 1996
Part 5 - Independent Auditor and Financial Statements
If you would like to receive a copy of the Statement of Additional Information,
please complete the form below and send it to:
Administrative Office
Integrity Life Insurance Company
P.O. Box 182080
Columbus, OH 43218
ATTN: Request for SAI of Separate Account I
Name:___________________________________________________________________________
Address:________________________________________________________________________
City:________________________________ State:_______________ Zip:________________
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PART 1 SUMMARY
YOUR VARIABLE ANNUITY CONTRACT
In this prospectus, we, our and us mean Integrity Life Insurance Company
(Integrity), an indirect wholly owned subsidiary of ARM Financial Group, Inc.
(ARM Financial Group). We offer individual variable annuity contracts. In
certain states, we offer certificates under a group variable annuity contract
instead of contracts. When we use the words contract or certificate, we are
referring to both the individual contracts and the group certificates.
You can invest for retirement by purchasing a contract if you properly complete
a Customer Profile form (an application or enrollment form may be required in
some states) and make a minimum initial contribution. In this prospectus, you
and your mean the Annuitant, the person upon whose life the Annuity Benefit and
the Death Benefit are based, usually the Owner of the contract. If the Annuitant
does not own the contract, all of the rights under the contract belong to the
Owner until annuity payments begin.
Your retirement or endowment date (Retirement Date) will be the date you
specify, but no later than your 85th birthday or the tenth contract anniversary,
whichever is later.
YOUR BENEFITS
Your contract provides an Account Value, an annuity benefit, and a death
benefit. See "Your Account Value," "Death Benefits and Similar Benefit
Distributions" and "Annuity Benefits" in Part 5.
Your benefits may be received under a contract subject to the usual rules for
taxation of annuities, including the tax-deferral of earnings until withdrawal.
The contract also can provide your benefits under certain tax-favored retirement
programs, which are subject to special rules covering such matters as
eligibility and contribution amounts. See Part 7, "Tax Aspects of the Contracts"
for detailed information.
HOW YOUR CONTRACT IS TAXED
Under current law, any increases in the value of your contributions to your
contract are tax deferred and will not be included in your taxable income until
withdrawn. See Part 7, "Tax Aspects of the Contracts."
YOUR CONTRIBUTIONS
The minimum initial contribution currently is $1,000. Subsequent contributions
of at least $100 can be made. Special rules for lower minimum initial and
subsequent contributions apply for certain tax-favored retirement plans. See
"Contributions Under Your Contract" in Part 5.
YOUR INVESTMENT OPTIONS
You may allocate contributions to the Variable Account Options or to the Fixed
Accounts, or both. The Variable Account Options and the Fixed Accounts are
together referred to as the Investment Options. Contributions may be allocated
to up to nine Investment Options. See "Contributions Under Your Contract" in
Part 5. To select Investment Options most suitable for you, see Part 3, "Your
Investment Options."
VARIABLE ACCOUNT OPTIONS
The Variable Account Options invest in shares of corresponding investment
portfolios of the Funds, each a "series" type of mutual fund. Each investment
portfolio is referred to as a Portfolio. The investment objective of each
Variable Account Option and its corresponding Portfolio is the same. Your value
in a Variable Account Option will vary depending on the performance of the
corresponding Portfolio. For a full description of the Funds, see the Funds'
prospectus and the Funds' Statement of Additional Information.
ACCOUNT VALUE, ADJUSTED ACCOUNT VALUE AND CASH VALUE
The sum of your values under the Fixed Accounts plus your values in the Variable
Account Options is referred to as the Account Value. Your Adjusted Account Value
is your Account Value, as increased or decreased (but not below the Minimum
Value) by any Market Value Adjustments. Your Cash Value is equal to your
Adjusted Account Value, reduced by any applicable contingent withdrawal charge
and will be reduced by the pro rata portion of the annual administrative charge,
if applicable. See "Charges and Fees" below.
1
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TRANSFERS
You may transfer all or portions of your Account Value among the Investment
Options, subject to the conditions described under "Transfers" in Part 5.
Transfers from any Investment Option must be for at least $250. Transfers may be
arranged through our telephone transfer service. See Part 5, "Transfers."
Transfers may also be made under special services we offer to dollar cost
average or rebalance your investment in the Variable Account Options, or to
transfer your Systematic Transfer Option contributions. See Part 8, "Dollar Cost
Averaging," "Asset Rebalancing," and "Systematic Transfer Program."
CHARGES AND FEES
If your Account Value is less than $50,000 as of the last day of any contract
year prior to your Retirement Date, an annual administrative expense charge of
$30 is deducted from your contract. See Part 4, "Deductions and Charges."
A charge at an effective annual rate of 1.35% of the Account Value in the
Variable Account Options is made daily. We make this charge to cover mortality
and expense risks (1.20%) and certain administrative expenses (.15%). The charge
will never be greater than an effective annual rate of 1.35% of the Account
Value in the Variable Account Options. See Part 4, "Deductions and Charges."
Investment advisory fees and other expenses are deducted from amounts invested
by the Separate Account in the Funds. For providing investment management
services to the Portfolios of the Funds, Fidelity Management and Research
Company (Fidelity Management) receives fees from the Portfolios based on the
average net assets of each Portfolio. The highest annual rate at which any of
the Portfolios paid advisory fees in 1995 was .76% of average net assets.
Advisory fees cannot be increased without the consent of Fund shareholders. See
"Table of Annual Fees and Expenses" below and "The Funds' Investment Adviser" in
Part 3.
If you frequently transfer funds from one Investment Option to another, certain
transfers may become subject to a charge. We will not, however, charge more than
$20 per transfer. See "Transfer Charge" in Part 4.
When you make withdrawals from your contract, a contingent withdrawal charge may
be deducted from your Account Value. This sales charge will be in addition to
the Market Value Adjustment applicable to early withdrawals from GRO Accounts.
See "Withdrawals" below and "Guaranteed Rate Options" in Part 3.
WITHDRAWALS
You may make an unlimited number of withdrawals from your contract as frequently
as you wish. Each withdrawal must be for at least $300. A sales charge of up to
7% of the amount withdrawn, in excess of any free withdrawal amount (defined
below), will be deducted from your Account Value, unless one of the exceptions
applies. This charge defrays marketing expenses. See "Contingent Withdrawal
Charge" in Part 4. Most withdrawals made by you prior to age 59 1/2 are also
subject to a 10% federal tax penalty. In addition, some tax-favored retirement
programs limit withdrawals. See Part 7, "Tax Aspects of the Contracts." For
partial withdrawals, the total amount deducted from your Account Value will
include the withdrawal amount requested, any applicable Market Value Adjustment,
and any applicable withdrawal charge, so that the net amount you receive will be
the amount requested.
The free withdrawal amount is a non-cumulative amount which you may take as a
partial withdrawal each contract year without being subject to the contingent
withdrawal charge or any Market Value Adjustment. It is equal to the greater of
(i) 10% of the Account Value, minus cumulative prior withdrawals in the current
contract year, and (ii) the investment gain under the contract during the prior
contract year, minus such cumulative withdrawals.
YOUR INITIAL RIGHT TO REVOKE
Within ten days after you receive your contract, you may cancel it by returning
it to our Administrative Office. We will refund all your contributions with an
adjustment for any investment gain or loss on the contributions put into each
Variable Account Option from the date units were purchased until the date your
contract is received by us. If state law instead requires a refund of your
contributions without any adjustment, we will return that amount to you. For
allocations to Fixed Accounts, we will refund to you the amount of your
contributions.
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TABLE OF ANNUAL FEES AND EXPENSES
CONTRACT OWNER TRANSACTION EXPENSES
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Sales Load on Purchases..................................... $ 0
Deferred Sales Load (1)...............................7% Maximum
Exchange Fee (2)............................................ $ 0
Annual Administrative Charge (3)............................ $30
SEPARATE ACCOUNT ANNUAL EXPENSES (AS A PERCENTAGE OF AVERAGE ACCOUNT VALUE) (4)
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Mortality and Expense Risk Fees........................... 1.20%
Administrative Expenses................................... .15%
Total Separate Account Annual Expenses.................... 1.35%
FUND ANNUAL EXPENSES AFTER REIMBURSEMENT (AS A PERCENTAGE OF AVERAGE NET
ASSETS) (5)
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MANAGEMENT OTHER TOTAL ANNUAL
FEES(6) EXPENSES EXPENSES
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<S> <C> <C> <C>
Money Market Portfolio .24% .09% .33%
High Income Portfolio .60% .11% .71%(7)
Equity-Income Portfolio .51% .10% .61%
Growth Portfolio .61% .09% .70%
Overseas Portfolio .76% .15% .91%
Investment Grade Bond Portfolio .45% .14% .59%
Asset Manager Portfolio .71% .10% .81%(7)
Index 500 Portfolio .09% .19% .28%(8)
Contrafund Portfolio .61% .11% .72%(7)
Asset Manager: Growth Portfolio .59% .41% 1.00%(7)(8)
</TABLE>
(1) See "Deductions and Charges - Contingent Withdrawal Charge" in Part 4. You
may make a partial withdrawal of up to 10% of the Account Value in any contract
year or the investment gain under the contract during the previous contract
year, whichever is greater, less withdrawals during the current contract year,
without assessment of any withdrawal charge.
(2) After the first twelve transfers during a contract year, Integrity has the
right to impose a transfer charge of $20 per transfer. This charge would not
apply to transfers made for dollar cost averaging, asset rebalancing, or
systematic transfers. See "Deductions and Charges - Transfer Charge" in Part 4.
(3) The annual administrative charge is $30. This charge applies only if the
Account Value is less than $50,000 at the end of any contract year prior to your
Retirement Date. See "Deductions and Charges - Annual Administrative Charge" in
Part 4.
(4) See "Deductions and Charges - Separate Account Charges" in Part 4.
(5) In the Funds' prospectus, see "Management, Distribution and Service Fees."
(6) Management fees for all Portfolios, other than Index 500 Portfolio, are
calculated by adding a group fee rate to an individual fund fee rate, and
multiplying the result by the Portfolio's average net assets. The individual
fund fee rate ranges from .03% to .45% and is shown by Portfolio on Page 10. The
group fee rate is based on the average net assets of all mutual funds advised by
Fidelity Management, and it drops as total assets under management increase.
This rate cannot rise above .52% for Equity-Income, Growth, Overseas, Asset
Manager, Asset Manager: Growth, and Contrafund Portfolios. It cannot rise above
.37% for Money Market, High Income, and Investment Grade Bond Portfolios. The
Money Market fee also includes an income based component. The income based
component is 6% of that portion of the portfolio's gross yield which exceeds a
5% return (but capped at a maximum of .24%). The 1995 aggregate rates, comprised
of the individual and group fee rates, are shown on page 10. Absent
reimbursement, Index 500 Portfolio would have paid a monthly management fee at
the annual rate of .28% of the Portfolio's average net assets. The management
fees in the above table reflect management fees paid in 1995.
(7) A portion of the brokerage commissions the Portfolio paid was used to
reduce its expenses. With this reduction, total fund annual expenses actually
were .79% for Asset Manager Portfolio. The reduction in expenses for the High
Income, Contrafund, and Asset Manager: Growth Portfolios did not impact the
total fund annual expense percentage.
(8) The Portfolio's expenses were voluntarily reduced by the fund's investment
adviser. Absent such reimbursement, management fees, other expenses, and total
fund annual expenses would have been .28%, .19% and .47%, respectively for Index
500 Portfolio, and would have been .71%, .42% and 1.13%, respectively for Asset
Manager: Growth Portfolio.
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EXAMPLES
The examples below show the expenses that would be borne by the Annuitant per
$1,000 investment, assuming a $40,000 average contract value and a 5% annual
rate of return on assets.
EXPENSES PER $1,000 INVESTMENT IF YOU SURRENDER YOUR CONTRACT AT THE END OF THE
APPLICABLE PERIOD:
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PORTFOLIO 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Money Market $87.96 $105.54 $125.44 $206.36
High Income $91.86 $117.34 $145.29 $246.89
Equity-Income $90.83 $114.25 $140.10 $236.37
Growth $91.76 $117.03 $144.77 $245.84
Overseas $93.91 $123.51 $155.60 $267.61
Investment Grade Bond $90.63 $113.63 $139.06 $234.26
Asset Manager $92.88 $120.43 $150.46 $257.30
Index 500 $87.45 $103.98 $122.81 $200.91
Contrafund $91.96 $117.65 $145.81 $247.94
Asset Manager: Growth $94.83 $126.28 $160.22 $276.79
</TABLE>
EXPENSES PER $1,000 INVESTMENT IF YOU DO NOT SURRENDER YOUR CONTRACT AT THE END
OF THE APPLICABLE PERIOD:
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<CAPTION>
PORTFOLIO 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Money Market $17.96 $55.54 $ 95.44 $206.36
High Income $21.86 $67.34 $115.29 $246.89
Equity-Income $20.83 $64.25 $110.10 $236.37
Growth $21.76 $67.03 $114.77 $245.84
Overseas $23.91 $73.51 $125.60 $267.61
Investment Grade Bond $20.63 $63.63 $109.06 $234.26
Asset Manager $22.88 $70.43 $120.46 $257.30
Index 500 $17.45 $53.98 $ 92.81 $200.91
Contrafund $21.96 $67.65 $115.81 $247.94
Asset Manager: Growth $24.83 $76.28 $130.22 $276.79
</TABLE>
EXPENSES PER $1,000 INVESTMENT IF YOU ELECT THE NORMAL FORM OF ANNUITY AT THE
END OF THE APPLICABLE PERIOD:
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Same expenses per $1,000 investment as shown in table immediately above.
These examples assume a continuation of the fixed charges that are borne by the
Separate Account and of the investment advisory fees and other expenses of the
Funds as they were for the year ended December 31, 1995. ACTUAL FUND EXPENSES
MAY BE GREATER OR LESS THAN THOSE ON WHICH THESE EXAMPLES WERE BASED. The annual
rate of return assumed in the examples is not an estimate or guarantee of future
investment performance. The table also assumes an estimated $40,000 average
contract value, so that the administrative charge per $1,000 of net asset value
in the Separate Account is $0.75. Such per $1,000 charge would be higher for
smaller Account Values and lower for higher values.
The above table and examples are intended to assist your understanding of the
various costs and expenses that apply to your contract, directly or indirectly.
These tables reflect expenses of the Separate Account as well as those of the
Portfolios. Premium taxes upon annuitization also may be applicable.
4
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FINANCIAL INFORMATION
The table below shows the unit value for each Variable Account Option at
inception, the number of units outstanding at December 31 of each year since
inception, and the unit value at the end of each period. The unit value at the
beginning of each period is the unit value as of the end of the previous period.
<TABLE>
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UNIT VALUES AND UNITS OUTSTANDING
Investment Asset
Money High Equity- Grade Asset Index Manager:
Market Income Income Growth Overseas Bond Manager 500 Contrafund Growth
Division Division Division Division Division Division Division Division Division Division
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
DATE OF INCEPTION* $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00
December 31, 1987 $ 10.18 - $ 7.74 $ 7.51 $ 8.13 $ 10.21 $ 8.00 - - -
Number of units 1,952 - 25,560 50 7,250 26,988 29,166 - - -
December 31, 1988 $ 10.75 - $ 8.49 $ 7.48 $ 8.93 $ 10.69 $ 8.98 - - -
Number of units 2,062 - 8,962 2,043 2,019 45,789 11,300 - - -
December 31, 1989 $ 11.57 - $ 10.41 $ 10.45 $ 11.02 $ 12.20 $ 11.16 - - -
Number of units 43,299 - 8,517 2,284 1,937 4,372 10,635 - - -
December 31, 1990 $ 12.34 - $ 9.04 $ 11.04 $ 10.16 $ 12.82 $ 11.02 - - -
Number of units 2,427 - 29,446 2,060 1,779 3,350 12,194 - - -
December 31, 1991 $ 12.90 - $ 12.92 $ 17.96 $ 12.44 $ 14.38 $ 13.60 - - -
Number of units 1,422 - 7,198 1,777 945 1,160 5,272 - - -
December 31, 1992 $ 13.22 - $ 14.90 $ 19.36 $ 10.95 $ 15.13 $ 15.01 - - -
Number of units 68,139 - 124,911 129,511 35,346 80,734 309,292 - - -
December 31, 1993 $ 13.46 $ 11.45 $ 17.38 $ 22.80 $ 14.83 $ 16.57 $ 17.92 $ 10.52 - -
Number of units 346,644 615,289 748,436 444,077 480,406 330,360 1,748,246 98,288 - -
December 31, 1994 $ 13.84 $ 11.12 $ 18.35 $ 22.49 $ 14.88 $ 15.73 $ 16.60 $ 10.49 - -
Number of units 1,363,372 989,407 1,206,683 988,674 1,272,218 454,358 3,509,145 218,119 - -
December 31, 1995 $ 14.46 $ 13.23 $ 24.46 $ 30.03 $ 16.10 $ 18.20 $ 19.15 $ 14.20 $ 13.50 $ 12.03
Number of units 1,823,146 2,238,450 2,264,897 1,665,857 1,308,440 627,020 2,973,440 474,834 1,068,907 175,138
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</TABLE>
*Inception dates for the High Income Option and the Index 500 Option were
February 19, 1993 and March 4, 1993, respectively. The Inception date for the
Contrafund Option and the Asset Manager: Growth Option was February 6, 1995.
Inception dates for the remaining Options all were in the third quarter of 1987.
Prior to September 3, 1991, the Variable Account Options invested in shares of
corresponding portfolios of Prism Investment Trust, and the Money Market,
Equity-Income, Growth, Overseas, Investment Grade Bond and Asset Manager Options
were known as the Money Market, Common Stock, Aggressive Stock, Global, Bond and
Balanced Options, respectively.
5
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PART 2 INTEGRITY AND THE SEPARATE ACCOUNT
INTEGRITY LIFE INSURANCE COMPANY
Integrity is a stock life insurance company organized under the laws of Ohio.
Our home office is in Worthington, Ohio and our principal executive office is in
Louisville, Kentucky. We are authorized to sell life insurance and annuities in
45 states and the District of Columbia. In addition to the contracts, we sell
flexible premium annuity contracts with an underlying investment medium other
than the Funds, fixed single premium annuity contracts, and flexible premium
annuity contracts offering both traditional fixed guaranteed interest rates
along with fixed equity indexed options. We are currently licensed to sell
variable contracts in 44 states and the District of Columbia. In addition to
issuing annuity products, we have entered into agreements with other insurance
companies to provide administrative and investment support for products to be
designed, underwritten and sold by these companies.
Integrity is an indirect wholly owned subsidiary of ARM Financial Group. ARM
Financial Group is a financial services company providing retail and
institutional products and services to the long-term savings and retirement
market. At December 31, 1995, ARM Financial Group had $5.4 billion of customer
deposits and funds under management.
THE SEPARATE ACCOUNT AND THE VARIABLE ACCOUNT OPTIONS
The Separate Account is established and maintained under the insurance laws of
the State of Ohio. It is a unit investment trust registered with the Securities
and Exchange Commission (the SEC) under the Investment Company Act of 1940 (1940
Act). A unit investment trust is a type of investment company. SEC registration
does not involve any supervision by the SEC of the management or investment
policies of the Separate Account. Each Variable Account Option invests in shares
of a corresponding Portfolio of the Funds. We plan to establish additional
Options, some of which may not be available for your allocations. The Variable
Account Options currently available to you are listed on the cover page of this
prospectus. Prior to September 3, 1991, the Portfolios then offered invested in
shares of corresponding portfolios of Prism Investment Trust.
ASSETS OF OUR SEPARATE ACCOUNT
Under Ohio law, we own the assets of our Separate Account and use them to
support the variable portion of your contract and other variable annuity
contracts. Annuitants under other variable annuity contracts will participate in
the Separate Account in proportion to the amounts relating to their contracts.
The Separate Account's assets supporting the variable portion of these variable
contracts may not be used to satisfy liabilities arising out of any other
business of ours. Under certain unlikely circumstances, one Variable Account
Option may be liable for claims relating to the operations of another Option.
Income, gains and losses, whether or not realized, from assets allocated to the
Separate Account are credited to or charged against the Separate Account without
regard to our other income, gains or losses. We may permit charges owed to us to
stay in the Separate Account, and thus may participate proportionately in the
Separate Account. Amounts in the Separate Account in excess of reserves and
other liabilities belong to us, and we may transfer them to our general account
(General Account).
CHANGES IN HOW WE OPERATE
We may modify how we or our Separate Account operate, subject to your approval
when required by the 1940 Act or other applicable law or regulation. You will be
notified if any changes result in a material change in the underlying
investments of a Variable Account Option. WE MAY:
. add Options to, or remove Options from, our Separate Account, combine two or
more Options within our Separate Account, or withdraw assets relating to your
contract from one Option and put them into another;
. register or end the registration of the Separate Account under the 1940 Act;
. operate our Separate Account under the direction of a committee or discharge
such a committee at any time (the committee may be composed of a majority of
persons who are "interested persons" of Integrity under the 1940 Act);
. restrict or eliminate any voting rights of Owners or others who have voting
rights that affect our Separate Account;
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. cause one or more Options to invest in a mutual fund other than or in addition
to the Funds;
. operate our Separate Account or one or more of the Options in any other form
the law allows, including a form that allows us to make direct investments. We
may make any legal investments we wish. In choosing these investments, we
will rely on our own or outside counsel for advice.
PART 3 YOUR INVESTMENT OPTIONS
THE FUNDS
Each of the Funds is an open-end diversified management investment company
registered under the 1940 Act. Such registration does not involve supervision by
the SEC of the investments or investment policies of the Funds. The Funds are
each a "series" type of investment company with diversified portfolios. The
Funds do not impose a sales charge or "load" for buying and selling their
shares. The shares of the Portfolios of the Funds are bought and sold by the
Separate Account at their respective net asset values.
The Funds are designed to serve as investment vehicle for variable annuity and
variable life contracts of insurance companies. Shares of the Portfolios of the
Funds currently are available to the separate accounts of a number of insurance
companies, both affiliated and unaffiliated with Fidelity Management or
Integrity. The Board of Trustees of each of the Funds is responsible for
monitoring the Fund for the existence of any material irreconcilable conflict
between the interests of the policyowners of all separate accounts investing in
the Fund and determining what action, if any, should be taken in response. If we
believe that a Fund's response to any of those events insufficiently protects
our contract owners, we will see to it that appropriate and available action is
taken to protect our contract owners. See "The Fund and the Fidelity
Organization" in the Funds' prospectus for a further discussion of the risks
associated with the offering of Fund shares to our Separate Account and the
separate accounts of other insurance companies.
Shares of Portfolios of the Funds are made available to the Separate Account
under two essentially identical Participation Agreements (Participation
Agreement or Agreements). The Participation Agreements are among the applicable
Fund, Fidelity Distributors Corporation which is the principal underwriter for
shares of the Funds (Distributor), and Integrity. If state or federal law
precludes the sale of the Funds' or any Portfolio's shares to the Separate
Account, or in certain other circumstances, sales of shares to the Separate
Account may be
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suspended and/or the Participation Agreements may be terminated as to the Funds
or the affected Portfolio. Also, the Participation Agreements may be terminated
by any party thereto with one year's written notice.
Notwithstanding termination of the Participation Agreement, the Fund and the
Distributor are obligated to continue to make the Funds' shares available for
contracts outstanding on the date the Participation Agreement terminates, unless
the Participation Agreement was terminated due to an irreconcilable conflict
among contractowners of different separate accounts. If for any reason the
shares of any Portfolio are no longer available for purchase by the Separate
Account for outstanding contracts, the parties to the Participation Agreements
have agreed to cooperate to comply with the 1940 Act in arranging for the
substitution of another funding medium as soon as reasonably practicable and
without disruption of sales of shares to the Separate Account or any Variable
Account Option.
The Funds' Investment Adviser. Fidelity Management & Research Company (Fidelity
Management), a registered investment adviser under the Investment Advisers Act
of 1940, serves as the investment adviser to each Fund. Fidelity Management,
whose principal address is 82 Devonshire Street, Boston, Massachusetts, is a
wholly owned subsidiary of FMR Corp. and is part of Fidelity Investments/(R)/,
one of the largest investment management organizations in the United States.
Fidelity Investments/(R)/ includes a number of different companies, which
provide a variety of financial services and products to individuals and
corporations.
Fidelity Management provides investment research and portfolio management
services to mutual funds and other clients. At December 31, 1995, Fidelity
Management advised funds having more than 23 million shareholder accounts with a
total value of more than $354 billion. For certain of the Portfolios, Fidelity
Management has entered into sub-advisory agreements with affiliated companies
that are part of the Fidelity Investments(R) organization. Fidelity Management,
not the Portfolios, pays the sub-advisers for their services to the Portfolios.
The Portfolios of the Funds pay monthly advisory fees to Fidelity Management.
The advisory fee payable by each of the Portfolios, other than the Money Market
Portfolio and the Index 500 Portfolio, is composed of a group fee rate and an
individual fund fee rate. The group fee rate is based on the average monthly net
assets of all mutual funds advised by Fidelity Management. For the Equity-
Income, Growth, Overseas, Asset Manager, Contrafund, and Asset Manager: Growth
Portfolios, the group fee rate cannot rise above .52%. For the High Income and
Investment Grade Bond Portfolios, the group fee rate cannot rise above .37%. The
group fee rate drops as total assets under management increase.
The Money Market Portfolio's advisory fee is made up of two components: a basic
fee rate and an income-based component. The basic fee rate is the sum of a group
fee rate as described above (but capped at a maximum of .37%) and an individual
fund fee rate of .03%. The income based component is 6% of that portion of the
fund's gross yield which exceeds a 5% return (but capped at a maximum of .24%).
The Index 500 Portfolio pays a monthly fee at the annual rate of .28% of the
Portfolio's average net assets.
Set forth in the table below is the individual fund fee rate for the portfolios
and their 1995 aggregate advisory rate, comprised of the individual and group
rates, as a percentage of average net assets, and the Index 500 Portfolio's 1995
advisory rate as a percentage of average net assets.
1995
INDIVIDUAL AGGREGATE
PORTFOLIO RATE RATE
- --------- ---------- ---------
Money Market .03% .24%
High Income .45% .60%
Equity-Income .20% .51%
Growth .30% .61%
Overseas .45% .76%
Investment Grade Bond .30% .45%
Asset Manager .40% .71%
Index 500 N/A .00%
Contrafund .30% .61%
Asset Manager: Growth .40% .71%
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Investment Objectives of the Portfolios. Set forth below is a summary of the
investment objectives of the Portfolios of the Funds. There can be no assurance
that these objectives will be achieved. YOU SHOULD READ THE FUNDS' PROSPECTUS
CAREFULLY BEFORE INVESTING.
MONEY MARKET PORTFOLIO
Money Market Portfolio seeks to obtain as high a level of current income as is
consistent with preserving capital and providing liquidity. It invests only in
high-quality, U.S. dollar denominated money market securities of domestic and
foreign issuers, such as certificates of deposit, obligations of governments and
their agencies, and commercial paper and notes.
HIGH INCOME PORTFOLIO
High Income Portfolio seeks to obtain a high level of current income by
investing primarily in high-yielding, lower rated, fixed-income securities,
while also considering growth of capital. It normally invests at least 65% of
its total assets in income-producing debt securities and preferred stocks,
including convertible securities, and up to 20% in common stocks and other
equity securities. In view of the types of securities in which this Portfolio
invests, you should read the complete risk disclosure for this Portfolio in the
Funds' prospectus before investing in it.
EQUITY-INCOME PORTFOLIO
Equity-Income Portfolio seeks reasonable income by investing primarily in income
producing equity securities, with the potential for capital appreciation as a
consideration. It normally invests at least 65% of its assets in income-
producing common or preferred stock and the remainder in debt securities.
GROWTH PORTFOLIO
Growth Portfolio seeks to achieve capital appreciation, normally by purchase of
common stocks, although investments are not restricted to any one type of
security. Capital appreciation may also be found in other types of securities,
including bonds and preferred stocks.
OVERSEAS PORTFOLIO
Overseas Portfolio seeks long-term growth of capital primarily through
investments in foreign securities. It normally invests at least 65% of its
assets in securities from at least three countries outside North America.
INVESTMENT GRADE BOND PORTFOLIO
Investment Grade Bond Portfolio seeks as high a level of current income as is
consistent with the preservation of capital by investing in a broad range of
investment-grade fixed-income securities. It will maintain a dollar-weighted
average portfolio maturity of ten years or less. For 80% of its assets, the
Investment Grade Bond Portfolio purchases only securities rated A or better by
Moody's Investors Service, Inc. or Standard & Poor's Corporation or unrated
securities judged by Fidelity Management to be of equivalent quality.
ASSET MANAGER PORTFOLIO
Asset Manager Portfolio seeks high total return with reduced risk over the long-
term by allocating its assets among stocks, bonds and short-term fixed-income
instruments. The expected "neutral" mix of assets, which will occur when the
investment adviser concludes there is minimal relative difference in value
between the three asset classes, is 40% in equities, 40% in intermediate to
long-term bonds and 20% in short-term fixed income instruments.
INDEX 500 PORTFOLIO
Index 500 Portfolio seeks to provide investment results that correspond to the
total return (i.e., the combination of capital changes and income) of common
stocks publicly traded in the United States. In seeking this objective, the
Portfolio attempts to duplicate the composition and total return of the Standard
& Poor's 500 Composite Stock Price Index while keeping transaction costs and
other expenses low.
CONTRAFUND PORTFOLIO
Contrafund Portfolio is a growth fund which seeks to increase the value of your
investment over the long term by investing in equity securities of
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companies that are undervalued or out of favor. This approach focuses on
companies that are currently out of public favor but show potential for capital
appreciation. Contrafund Portfolio invests primarily in common stock and
securities convertible into common stock, but it has the flexibility to invest
in any type of security that may produce capital appreciation.
ASSET MANAGER: GROWTH PORTFOLIO
Asset Manager: Growth Portfolio is an asset allocation fund which seeks to
maximize total return over the long term through investments in stocks, bonds,
and short-term instruments. The fund has a neutral mix which represents the way
the fund's investments will generally be allocated over the long term. The range
and approximate neutral mix for each asset class are shown below:
NEUTRAL
RANGE MIX
------ -------
Stock Class 0-100% 65%
Bond Class 0-100% 30%
Short-Term Class 0-100% 5%
FIXED ACCOUNTS
Because of applicable exemptive and exclusionary provisions, interests in
contracts attributable to Fixed Accounts have not been registered under the
Securities Act of 1933 ("1933 Act"), nor under the Investment Company Act of
1940 ("1940 Act"). Thus, neither such contracts nor our General Account, which
guarantees the values and benefits under those contracts, are generally subject
to regulation under the provisions of the 1933 Act or the 1940 Act. Accordingly,
we have been advised that the staff of the Securities and Exchange Commission
has not reviewed the disclosure in this prospectus relating to the Fixed
Accounts or the General Account. Disclosures regarding the Fixed Accounts or the
General 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.
GUARANTEED RATE OPTIONS
We offer Guaranteed Rate Options (GROs) with durations of two, four, six and ten
years. We may from time to time change the durations available. Each allocation
to a Guaranteed Rate Option locks in a fixed effective annual interest rate
declared by us (Guaranteed Interest Rate) for the duration you select (your GRO
Account). Each contribution or transfer to a Guaranteed Rate Option establishes
a new GRO Account at the then-current Guaranteed Interest Rate declared by us.
We will not declare an interest rate less than 3%. Each GRO Account expires at
the end of the duration you have selected. See "Renewals of GRO Accounts" below.
Values and benefits under your contract attributable to Guaranteed Rate Options
are guaranteed by the reserves in our GRO separate account as well as by our
General Account.
The value of each of your GRO Accounts is referred to as a GRO Value. The GRO
Value at the expiration of the GRO Account, assuming you have not transferred or
withdrawn any amounts, will be the amount allocated plus interest at the
Guaranteed Interest Rate. We credit interest daily at an effective annual rate
equal to the Guaranteed Interest Rate. We allocate interest at the end of each
contract year and at the time of any transfer, full or partial withdrawal,
payment of a death benefit or purchase of any annuity benefit.
Each group of GRO Accounts of the same duration is referred to as a Guaranteed
Rate Option, i.e. all of your two-year GRO Accounts are one Guaranteed Rate
Option while all of your four-year GRO Accounts are another Guaranteed Rate
Option.
You may obtain information about our current Guaranteed Interest Rates by
calling our Administrative Office.
ALLOCATIONS TO GUARANTEED RATE OPTIONS MAY NOT BE MADE UNDER CONTRACTS ISSUED IN
CERTAIN STATES.
Renewals of GRO Accounts. When a GRO Account expires, a new GRO Account of the
same duration, at the then-current Guaranteed Interest Rate, will be established
unless you withdraw your GRO Value or transfer it to another Investment Option.
We will notify you in writing before the expiration of your GRO Accounts. You
must notify us prior to the
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expiration of your GRO Accounts of any changes you desire to make. See
"Transfers" in Part 5.
Any renewal of a GRO Account will be implemented on the expiration date of the
GRO Account. You will receive the current Guaranteed Interest Rate applicable on
the expiration date. If a GRO Account expires and it cannot be renewed for the
same duration, it will be renewed for the next shortest available duration,
unless you instruct us otherwise within 30 days prior to expiration of the GRO
Account. You may not choose, and we will not renew a GRO Account that expires
after your Retirement Date.
Market Value Adjustments. A Market Value Adjustment is an adjustment, either up
or down, in your GRO Value prior to the expiration of your GRO Account. A Market
Value Adjustment will be made for each transfer, partial withdrawal in excess of
the free withdrawal amount, surrender, or purchase of an annuity benefit from a
GRO Account that occurs other than within 30 days prior to the expiration of the
GRO Account. There will be no Market Value Adjustment made for a death benefit.
The market adjusted value may be higher or lower than the GRO Value. In no
event, however, may the market adjusted value in each GRO Account be less than
the Minimum Value, an amount equal to your allocation to such GRO Account plus
3% interest, compounded annually, less previous withdrawals from such GRO
Account and less any applicable contingent withdrawal charges. The Minimum Value
for partial withdrawals or transfers will be calculated on a pro-rata basis.
The Market Value Adjustment applicable to a GRO Account prior to its expiration
reflects the relationship between the Guaranteed Interest Rate for such GRO
Account and the then-current Guaranteed Interest Rate applicable to a newly
elected GRO Account of a duration equal to the time remaining in your GRO
Account. The Market Value Adjustment will reduce the GRO Value (but not below
the Minimum Value) if the current Guaranteed Interest Rate is higher than the
Guaranteed Interest Rate being credited to amounts under your GRO Account. Con-
versely, the Market Value Adjustment will increase the GRO Value if the current
Guaranteed Interest Rate is lower than the Guaranteed Interest Rate being
credited to amounts under your GRO Account.
The Market Value Adjustment for a GRO Account is determined under the following
formula:
N/12 N/12
MVA = GRO Value x [(1 + I) / (1 + J + .0025) - 1],
where
I is the Guaranteed Interest Rate being credited to the GRO Account subject to
the Market Value Adjustment,
J is the current Guaranteed Interest Rate, as of the effective date of the
application of the Market Value Adjustment, for current allocations to a GRO
Account, the length of which is equal to the number of whole months remaining
in your GRO Account. Subject to certain adjustments, if such remaining period
is not equal to an exact period for which we have declared a new Guaranteed
Interest Rate, J will be determined by interpolating between the Guaranteed
Interest Rates for GRO Accounts of durations closest to (next higher and next
lower) the remaining period described above.
N is the number of whole months remaining in your GRO Account.
For contracts issued in certain states, the formula above will be adjusted to
comply with applicable state requirements.
If the remaining term of your GRO Account is 30 days or less, the Market Value
Adjustment for your GRO Account shall be zero. If for any reason we are no
longer declaring current Guaranteed Interest Rates, then for purposes of
determining J we will use the yield to maturity of United States Treasury Notes
with the same remaining term as your GRO Account, interpolating when necessary,
in place of the current Guaranteed Interest Rate or Rates.
For illustrations of the application of the Market Value Adjustment formula, see
Appendix A.
SYSTEMATIC TRANSFER OPTION
We also offer a Systematic Transfer Option (STO) which guarantees an interest
rate that we declare in advance for each calendar quarter. You MUST transfer all
STO contributions into other Investment Options within one year of your most
recent STO contribution. Transfers will be made automatically
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in equal quarterly or monthly installments of not less than $1,000 each. No
transfers into the STO from other Investment Options are permitted. Withdrawals
from the STO are subject to normal contingent withdrawal charges. We guarantee
that the STO's effective annual yield will never be less than 3.0%. See
"Systematic Transfer Program" in Part 8 for details on this program.
PART 4 DEDUCTIONS AND CHARGES
SEPARATE ACCOUNT CHARGES
Integrity deducts from the unit value every calendar day an amount equal to an
effective annual rate of 1.35% of the Account Value in the Variable Account
Options. This daily expense rate cannot be increased without your consent.
Various portions of this total charge, as described below, pay for certain
services to the Separate Account and the contracts.
A daily charge equal to an effective annual rate of .15% of the value of each
Variable Account Option is deducted for administrative expenses not covered by
the annual administrative charge described below. The daily administrative
charge, like the annual administrative charge, is designed to reimburse
Integrity for expenses actually incurred, without profit.
A daily charge equal to an effective annual rate of 1.20% of the value of each
Variable Account Option is deducted for Integrity's assuming the expense risk
(.85%) and the mortality risk (.35%) under the contract. The expense risk is the
risk that our actual expenses of administering the contracts will exceed the
annual administrative expense charge. In this context, mortality risk refers to
the cost of insuring the risk Integrity takes that annuitants, as a class of
persons, will live longer than estimated and therefore require Integrity to pay
out more annuity benefits than anticipated. The relative proportion of the
mortality and expense risk charges may be modified, but the total effective
annual risk charge of 1.20% of the value of the Variable Account Options may not
be increased.
Integrity may realize a gain from these daily charges to the extent they are not
needed to meet the actual expenses incurred.
ANNUAL ADMINISTRATIVE CHARGE
If your Account Value is less than $50,000 on the last day of any contract year
prior to the your Retirement Date, Integrity charges an annual administrative
charge of $30. This charge is deducted from your Account Value in each
Investment Option on a pro-rata basis. The portion of the charge applicable to
the Variable Account Options will reduce the number of units credited to
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you. The portion of the charge applicable to Fixed Accounts is withdrawn in
dollars. The annual administrative charge will be pro-rated based on the number
of days that have elapsed in the contract year in the event of the Annuitant's
retirement, death, or termination of a contract during a contract year. The
annual administrative charge is waived for employees of Integrity or National
Integrity Life Insurance Company, a wholly owned subsidiary of Integrity
(National Integrity), who purchase contracts under the salary allotment program
of either company.
FUND CHARGES
Our Separate Account purchases shares of the Funds at net asset value. That
price reflects investment advisory fees and other direct expenses that have
already been deducted from the assets of the Funds. The amount charged for
investment management may not be increased without the prior approval of the
Funds' respective shareholders. See "The Funds" in Part 3.
STATE PREMIUM TAX DEDUCTION
Integrity will not deduct state premium taxes from your contributions before
applying the contributions to the Investment Options, unless required to pay
such taxes under applicable state law. If the Annuitant elects an annuity
benefit, Integrity will deduct any applicable state premium taxes from the
amount otherwise available for an annuity benefit. State premium taxes, if
applicable, currently range up to 4%.
CONTINGENT WITHDRAWAL CHARGE
No sales charges are applied when you make a contribution to the contract.
Contributions withdrawn will be subject to a withdrawal charge of up to 7%. As
shown below, the percentage charge varies, depending upon the "age" of the
contributions included in the withdrawal that is, the contract year in which
each contribution was made. The maximum percentage of 7% would apply if the
entire amount of the withdrawal consisted of contributions made during your
current contract year. No withdrawal charge applies when you withdraw
contributions made earlier than your fifth prior contract year. For purposes of
calculating the withdrawal charge, (1) the oldest contributions will be treated
as the first withdrawn and more recent contributions next, and (2) partial
withdrawals up to the free withdrawal amount will not be considered a withdrawal
of any contributions. For partial withdrawals, the total amount deducted from
your Account Value will include the withdrawal amount requested, any applicable
Market Value Adjustment, and any applicable withdrawal charge, so that the net
amount you receive will be the amount requested.
During any contract year, no charge will be applied to your partial withdrawals
that do not exceed the free withdrawal amount. On any Business Day, the free
withdrawal amount is the greater of (i) 10% of your Account Value or (ii) any
investment gain during the prior contract year; less withdrawals during the
current contract year. Investment gain is calculated as the increase in the
Account Value during the prior contract year, minus contributions during such
year, plus withdrawals made during such year. If any partial withdrawal exceeds
the free withdrawal amount, we will deduct the applicable contingent withdrawal
charge with respect to such excess amount. The contingent withdrawal charge is a
sales charge to defray our costs of selling and promoting the contracts. We do
not expect that revenues from contingent withdrawal charges will cover all of
such costs. Any shortfall will be made up from our General Account assets,
including any profits from other charges under the contracts.
CONTRACT YEAR IN WHICH CHARGE AS
WITHDRAWN CONTRIBUTION % OF THE CONTRIBUTION
WAS MADE WITHDRAWN
- ------------------------------------------------
Current 7%
First Prior 6
Second Prior 5
Third Prior 4
Fourth Prior 3
Fifth Prior 2
Sixth Prior and Earlier 0
No contingent withdrawal charge will be applied to any amount withdrawn if the
Annuitant uses the withdrawal either to purchase from Integrity an immediate
annuity benefit with life contingencies or an immediate annuity without life
contingencies which provides for level payments over five or more years, with a
restricted prepayment option.
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Similarly, no charge will be applied if the Annuitant dies and the withdrawal is
made by the Annuitant's beneficiary. See "Death Benefits and Similar Benefit
Distributions" in Part 5.
Unless specifically instructed otherwise, Integrity will make withdrawals
(including any applicable charges) from the Investment Options in the same ratio
the Annuitant's Account Value in each Investment Option bears to the Annuitant's
total Account Value. The minimum withdrawal permitted is $300.
TRANSFER CHARGE
No charge is made for your first twelve transfers (excluding dollar cost
averaging and asset rebalancing transfers, and systematic transfers from the
STO) among the Variable Account Options or the Guaranteed Rate Options during a
contract year. We are, however, permitted to charge up to $20 for each
additional transfer during that contract year. See "Transfers" in Part 5.
Transfers from a Guaranteed Rate Option may be subject to a Market Value
Adjustment. See "Guaranteed Rate Options" in Part 3.
TAX RESERVE
We have the right to make a charge in the future for taxes or for reserves set
aside for taxes, which will reduce the investment experience of the Variable
Account Options.
PART 5 TERMS OF YOUR VARIABLE ANNUITY
CONTRIBUTIONS UNDER YOUR CONTRACT
You can make contributions of at least $100 at any time up to the Annuitant's
Retirement Date. Your first contribution, however, cannot be less than $1,000.
We will accept contributions of at least $50 for salary allotment programs. We
have special rules for minimum contribution amounts for tax-favored retirement
programs. See "Special Rules for Tax-Favored Retirement Programs" in Part 7.
We may limit the total contributions under one contract to $1,000,000 if you are
under age 76 or to $250,000 if you are 76 to 79 years of age. Once you reach age
80, we may refuse to accept any contribution made for you. Contributions may
also be limited by various laws or prohibited by Integrity for all Annuitants
under the contract. If your contributions are made under a tax-favored
retirement program, we will not measure them against the maximum limits set by
law.
Contributions are applied to the various Investment Options selected by you and
are used to pay annuity and death benefits.
Each contribution is credited as of the date we have received (as defined below)
at our Administrative Office both the contribution and instructions for
allocation among the Investment Options. At any time you may have amounts in not
more than nine Investment Options. For purposes of calculating the nine
Investment Options, each of your GRO Accounts counts as one Investment Option.
Wire transfers of federal funds are deemed received on the day of transmittal if
credited to our account by 3 p.m. Eastern Time, otherwise they are deemed
received on the next Business Day. Contributions by check or mail are deemed
received not later than the second Business Day after they are delivered to our
Administrative Office. A Business Day is any day other than a weekend or a
national bank holiday.
You can change your choice of Investment Options at any time by writing to the
Administrative Office. The request should indicate your contract number and the
specific change, and you should sign the request. When it is received by the
Administrative Office, the change will be effective for any contribution which
accompanies it and for all future contributions.
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YOUR ACCOUNT VALUE
Your Account Value reflects various charges. See Part 4, "Deductions and
Charges." Annual deductions are made as of the last day of each contract year.
Withdrawal charges and Market Value Adjustments, if applicable, are made as of
the effective date of the transaction. Charges against our Separate Account are
reflected daily. Any amount allocated to a Variable Account Option will go up or
down in value depending on the investment experience of that Option. For
contributions allocated to the Variable Account Options, there are no guaranteed
values. The value of your contributions allocated to Fixed Accounts is
guaranteed, subject to any applicable Market Value Adjustments. See "Guaranteed
Rate Options" in Part 3.
YOUR PURCHASE OF UNITS IN OUR SEPARATE ACCOUNT
Allocations to the Variable Account Options are used to purchase units. On any
given day, the value you have in a Variable Account Option is the unit value
multiplied by the number of units credited to you in that Option. The units of
each Variable Account Option have different unit values.
The number of units purchased or redeemed (sold) in any Variable Account Option
is calculated by dividing the dollar amount of the transaction by the Option's
unit value, calculated after the close of business that day. The number of units
for a Variable Account Option at any time is the number of units purchased less
the number of units redeemed. The value of units fluctuates with the investment
performance of the corresponding Portfolios of the Funds which in turn reflects
the investment income and realized and unrealized capital gains and losses of
the Portfolios, as well as the Funds' expenses. The unit values also change
because of deductions and charges we make to our Separate Account. The number of
units credited to you, however, will not vary because of changes in unit values.
Units of a Variable Account Option are purchased when you allocate new
contributions or transfer prior contributions to that Option. Units are redeemed
when you make withdrawals or transfer amounts from a Variable Account Option. We
also redeem units to pay the death benefit when the Annuitant dies and to pay
the annual administrative charge.
HOW WE DETERMINE UNIT VALUE
We determine unit values for each Variable Account Option at the end of each day
we are open for business and changes in the value of Fund shares have a material
effect on unit values. We are closed on national business holidays and also on
Martin Luther King, Jr. Day and the Friday after Thanksgiving. The end of a day
for purposes of determining unit values is 4 pm Eastern Time.
The unit value of each Variable Account Option for any day on which we determine
unit values is equal to the unit value for the last day on which a unit value
was determined multiplied by the net investment factor for that Option on the
current day. We determine a net investment factor for each Option as follows:
. First, we take the value of the shares belonging to the Option in the
corresponding Portfolio at the close of business that day (before giving
effect to any transactions for that day, such as contributions or
withdrawals). For this purpose, we use the share value reported to us by the
Funds.
. Next, we add any dividends or capital gains distributions by the Funds on that
day.
. Then, we divide this amount by the value of the amounts in the Option at the
close of business on the last day on which a unit value was determined (after
giving effect to any transactions on that day).
. Then, we subtract a daily asset charge for each calendar day since the last
day on which a unit value was determined (for example, a Monday calculation
will include charges for Saturday and Sunday). The daily charge is .00003723,
which is an effective annual rate of 1.35%. This charge is for the mortality
risk, administrative expenses and expense risk assumed by us under the
contract.
. Finally, we subtract any daily charge for taxes or amounts set aside as a
reserve for taxes.
Generally, this means that we adjust unit values to reflect what happens to the
Funds, and also for the mortality and expense risk charge and any charge for
administrative expenses or taxes.
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TRANSFERS
You may transfer your Account Value among the Variable Account Options and the
Guaranteed Rate Options, subject to Integrity's then current transfer
restrictions. You may not make a transfer into the STO. Transfers to a
Guaranteed Rate Option must be to a newly elected Guaranteed Rate Option (i.e.
to a Guaranteed Rate Option that you have not elected before) at the then-
current Guaranteed Interest Rate, unless Integrity otherwise consents. Transfers
from a Guaranteed Rate Option other than within 30 days prior to the expiration
date of a GRO Account are subject to a Market Value Adjustment. See "Guaranteed
Rate Options" in Part 3. For amounts in Guaranteed Rate Options, transfers will
be made according to the order in which monies were originally allocated to any
Guaranteed Rate Option.
The amount transferred must be at least $250 or, if less, the entire amount in
the Investment Option. After twelve transfers have been made by you during a
contract year, a charge of up to $20 may apply to each additional transfer
during that contract year, except that no charge will be made for transfers
under our dollar cost averaging, asset rebalancing or systematic transfer
programs, described in Part 8. Once annuity payments begin, transfers are no
longer permitted.
Written transfer requests must be sent directly to the Administrative Office.
Each Annuitant's request for a transfer must specify the contract number, the
amounts to be transferred and the Investment Options to and from which the
amounts are to be transferred. Transfers may also be arranged through our
telephone transfer service provided you have established a Personal
Identification Number (PIN Code). We will honor telephone transfer instructions
from any person who provides correct identifying information, and we are not
responsible in the event of a fraudulent telephone transfer which is believed to
be genuine in accordance with these procedures. Accordingly, you bear the risk
of loss if unauthorized persons make transfers on your behalf.
A transfer request will be effective as of the Business Day it is received by
our Administrative Office. A transfer request does not change the allocation of
current or future contributions among the Investment Options. Telephone
transfers may be requested from 8:30 am - 5:00 pm, Eastern Time, on any day we
are open for business. You will receive the Variable Account Options' unit
values as of the close of business on the day you call. Accordingly, transfer
requests received after 4:00 pm Eastern Time will be processed using unit values
as of the close of business on the next Business Day after the day you call. All
transfers will be confirmed in writing.
WITHDRAWALS
You may make an unlimited number of withdrawals from your contract as frequently
as you wish. Each withdrawal must be for at least $300. A withdrawal charge of
up to 7% of the total withdrawal, as adjusted for any applicable Market Value
Adjustment and the withdrawal charge itself will be deducted from your Account
Value, unless one of the exceptions applies. See "Guaranteed Rate Options" in
Part 3 and "Contingent Withdrawal Charge" in Part 4. Most withdrawals made by
you prior to age 59-1/2 are also subject to a 10% federal tax penalty. In
addition, some tax-favored retirement programs limit withdrawals. See Part 7,
"Tax Aspects of the Contracts" for further information regarding various tax
consequences associated with the contracts.
ASSIGNMENTS
You may not assign the contract as collateral or security for a loan, but an
Annuitant whose contract is not related to a tax-favored program may otherwise
assign the contract before the Annuitant's Retirement Date. An assignment of the
contract as a gift may, however, have adverse tax consequences. See Part 7,
"Tax Aspects of the Contracts." Integrity will not be bound by an assignment
unless it is in writing and we have received it at the Administrative Office.
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DEATH BENEFITS AND SIMILAR BENEFIT DISTRIBUTIONS
A death benefit is available to a beneficiary if the Annuitant dies prior to the
Retirement Date. The amount of the death benefit is the greatest of:
. your Account Value
. the highest Account Value at the beginning of any contract year,
plus subsequent contributions and minus subsequent withdrawals
. your total contributions less the sum of withdrawals
"Subsequent withdrawals" for purposes of calculation of a death benefit reflect
any market value adjustments applicable to such withdrawals.
See the Statement of Additional Information dated May 1, 1996 regarding death
benefit information for contracts issued prior to January 1, 1996.
The death benefit amount is determined as of the date proof of death and
instructions for payment of proceeds are received by the Administrative Office.
Death benefits (and benefit distributions required because of a separate Owner's
death) can be paid in a lump sum or as an annuity. If no benefit option is
selected for the beneficiary at the Annuitant's death, the beneficiary can
select an option.
The beneficiary of the death benefit under a contract is selected by the Owner.
An Owner may change beneficiaries by submitting the appropriate form to the
Administrative Office. If no Annuitant's beneficiary survives the Annuitant,
then the death benefit is generally paid to the Annuitant's estate. No death
benefit will be paid after the Annuitant's death if there is a contingent
Annuitant. In that case, the contingent Annuitant becomes the new Annuitant
under the contract.
Generally, the Owner also may select his or her own beneficiary. If the Owner
dies before the Annuitant's Retirement Date, an Owner's beneficiary will become
the Owner of the contract and may be required to receive benefit distributions.
ANNUITY BENEFITS
All annuity benefits under your contract are calculated as of the Retirement
Date selected by you. The Retirement Date can be changed by written notice to
the Administrative Office any time prior to the Retirement Date. The Retirement
Date may be no later than your 85th birthday or the tenth contract anniversary,
whichever is later. The terms of the contracts applicable to the various
retirement programs, along with the federal tax laws, establish certain minimum
and maximum retirement ages.
Annuity benefits may take the form of a lump sum payment or an annuity. A lump
sum payment will provide the Annuitant with the Cash Value under the contract,
shortly after the Retirement Date. The amount applied for the purchase of an
annuity benefit will be the Adjusted Account Value, except that the Cash Value
will be the amount applied if the annuity benefit does not have a life
contingency and either the term is less than five years or the annuity can be
commuted to a lump sum payment without a withdrawal charge applying.
ANNUITIES
Alternate forms of annuity benefits can provide for fixed payments which may be
made monthly, quarterly, semi-annually or annually. For any annuity, the minimum
amount applied to the annuity must be $2,000 and the minimum initial payment
must be at least $20.
If you have not already selected a form of annuity, we will send you, within six
months prior to your Retirement Date, an appropriate notice form on which you
may indicate the type of annuity you desire or confirm to us that the normal
form of annuity, as defined below, is to be provided. However, if we do not
receive a completed form from you on or before your Retirement Date, we will
deem the Retirement Date to have been extended until we receive your written
instructions at our Administrative Office. During such extension, the values
under your contract in the various Investment Options will remain invested in
such options and amounts remaining in Variable Account Options will continue to
be subject to the investment risks associated with those Options. However, your
Retirement Date cannot be extended
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beyond your 85th birthday or your tenth contract anniversary, whichever is
later. You will receive a lump sum benefit if you do not make an election by
such date.
We currently offer the following types of annuities:
A period certain annuity provides for fixed payments to the Annuitant or the
Annuitant's beneficiary (the payee) for a fixed period. The amount is determined
by the period selected. The Annuitant, or if the payee dies before the end of
the period selected, the payee's beneficiary, may elect to receive the total
present value of future payments in cash.
A period certain life annuity provides for fixed payments for at least the
period selected and thereafter for the life of the payee or the payee and
another annuitant under a joint and survivor annuity. You may not change or
redeem the annuity once payments have begun. If the payee (or the payee and the
other annuitant under a joint and survivor annuity) dies before the period
selected ends, the remaining payments will go to another named payee who may
have the right to redeem the annuity and secure the present value of future
guaranteed payments in a lump sum. The NORMAL FORM OF ANNUITY is a fixed life
income annuity with 10 years of payments guaranteed, funded through our General
Account.
A life income annuity provides fixed payments for the life of the payee or the
payee and another annuitant under a joint and survivor annuity. Once a life
income annuity is selected, the form of annuity cannot be changed or redeemed
for a lump sum payment by the Annuitant or any payee.
ANNUITY PAYMENTS
Fixed annuity payments will not change and are based upon annuity rates provided
in your contract. The size of payments will depend on the form of annuity that
was chosen and, in the case of a life income annuity, on the payee's age (or
payee and a joint annuitant in the case of a joint and survivor annuity) and sex
(except under most tax-favored retirement programs). If Integrity's current
annuity rates then in effect would yield a larger payment, those current rates
will apply instead of the tables.
If the age or sex of an annuitant has been misstated, any benefits will be those
which would have been purchased at the correct age and sex. Any overpayments or
underpayments made by us will be charged or credited with interest at the rate
of 6% per year. If we have made overpayments because of incorrect information
about age or sex, we will deduct the overpayment from the next payment or
payments due. We add underpayments to the next payment.
TIMING OF PAYMENT
We normally make payments from the Variable Account Options, or apply your
Adjusted Account Value to the purchase of an annuity within seven days after
receipt of the required form at our Administrative Office. Our action can be
deferred, however, for any period during which (1) the New York Stock Exchange
has been closed or trading on it is restricted; (2) sales of securities or
determination of the fair value of Separate Account assets is not reasonably
practicable because of an emergency; or (3) the SEC, by order, permits Integrity
to defer action in order to protect persons with interests in the Separate
Account. Integrity can defer payment of your Fixed Accounts for up to six
months, and interest will be paid on any such payment delayed for 30 days or
more.
HOW YOU MAKE REQUESTS AND GIVE INSTRUCTIONS
When you communicate in writing with our Administrative Office, use the address
on the first page of this prospectus. Your request or instruction cannot be
honored unless it is in proper and complete form. Whenever possible, use one of
our printed forms, which may be obtained from our Administrative Office.
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PART 6 VOTING RIGHTS
FUND VOTING RIGHTS
Integrity is the legal owner of the shares of the Funds held by the Separate
Account and, as such, has the right to vote on certain matters. Among other
things, we may vote to elect the Funds' Board of Directors, to ratify the
selection of independent auditors for the Funds, and on any other matters
described in the Funds' current prospectus or requiring a vote by shareholders
under the 1940 Act.
Whenever a shareholder vote is taken, we give you the opportunity to tell us how
to vote the number of shares purchased as a result of contributions to your
contract. We will send you Fund proxy materials and a form for giving us voting
instructions.
If we do not receive instructions in time from all Owners, we will vote shares
in a Portfolio for which no instructions have been received in the same
proportion as we vote shares for which we have received instructions. Under EDC
Plans and certain Qualified Plans, your voting instructions must be communicated
to us indirectly, through your employer, but we are not responsible for any
failure by your employer to solicit your instructions or to communicate your
instructions to us. We will vote any Fund shares that we are entitled to vote
directly, because of amounts we have accumulated in our Separate Account, in the
same proportions that other Owners vote. If the federal securities laws or
regulations or interpretations of them change so that we are permitted to vote
shares of the Funds in our own right or to restrict Owner voting, we may do so.
HOW WE DETERMINE YOUR VOTING SHARES
You may participate in voting only on matters concerning the Portfolios in which
your contributions have been invested. We determine the number of Fund shares in
each Variable Account Option that are attributable to your contract by dividing
the amount of your Account Value allocated to that Option by the net asset value
of one share of the corresponding Portfolio as of the record date set by the
Funds' Board for the Funds' shareholders' meeting. The record date for this
purpose must be no more than 60 days before the meeting of the Funds. We count
fractional shares. After annuity payments have commenced, voting rights are
calculated in a similar manner based on the actuarially determined value of your
interest in each Variable Account Option.
HOW FUND SHARES ARE VOTED
All Fund shares are entitled to one vote; fractional shares have fractional
votes. Voting is on a Portfolio-by-Portfolio basis, except for certain matters
(for example, election of Directors) which require collective approval. On
matters on which the interests of the individual Portfolios differ, the approval
of the shareholders in one Portfolio is not needed in order to make a decision
in another Portfolio. To the extent shares of the Funds are sold to separate
accounts of other insurance companies, the shares voted by such companies in
accordance with instructions received from their contract holders will dilute
the effect of voting instructions received by Integrity from its Owners.
SEPARATE ACCOUNT VOTING RIGHTS
Under the 1940 Act, certain actions (such as some of those described under
"Changes in How We Operate" in Part 2) may require Owner approval. In that case,
you will be entitled to a number of votes based on the value you have in the
Variable Account Options, as described above under "How We Determine Your Voting
Shares." We will cast votes attributable to amounts we have in the Variable
Account Options in the same proportions as votes cast by Owners.
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PART 7 TAX ASPECTS OF THE CONTRACTS
INTRODUCTION
The effect of federal income taxes on the amounts held under a contract, on
annuity payments, and on the economic benefits to the Owner, Annuitant, and the
beneficiary or other payee may depend on Integrity's tax status, on the type of
retirement plan, if any, for which the contract is purchased, and upon the tax
and employment status of the individuals concerned.
The following discussion of the federal income tax treatment of the contract is
not exhaustive, does not purport to cover all situations and is not intended to
be tax advice. It is based upon understanding of the present federal income tax
laws as currently interpreted by the Internal Revenue Service (IRS). No
representation is made regarding the likelihood of continuation of the present
federal income tax laws or of the current interpretations by the IRS or the
courts. Future legislation may affect annuity contracts adversely. Moreover, no
attempt has been made to consider any applicable state or other laws. Because of
the inherent complexity of such laws and the fact that tax results will vary
according to the particular circumstances of the individual involved and, if
applicable, the qualified plan, any person contemplating the purchase of a
contract, contemplating selection of annuity payments under the contract, or
receiving annuity payments under a contract should consult a qualified tax
adviser. INTEGRITY DOES NOT MAKE ANY GUARANTEE REGARDING THE TAX STATUS,
FEDERAL, STATE, OR LOCAL, OF ANY CONTRACT OR ANY TRANSACTION INVOLVING THE
CONTRACTS.
YOUR CONTRACT IS AN ANNUITY
Under the federal tax law, any individual can purchase an annuity with after-tax
dollars and exclude any annuity earnings in taxable income until an actual
distribution is taken from the annuity. Alternatively, the individual (or
employer) may purchase the annuity to fund a tax-favored retirement program
(contributions are with pre-tax dollars), such as an IRA or qualified plan.
This prospectus covers the basic tax rules that apply to an annuity purchased
directly with after-tax dollars, (nonqualified annuity), and some of the special
tax rules which apply to an annuity purchased to fund a tax-favored retirement
program, (qualified annuity). A qualified annuity may restrict your rights and
benefits in order to qualify for its special treatment under the federal tax
law.
TAXATION OF ANNUITIES GENERALLY
Section 72 of the Internal Revenue Code of 1986, as amended (the Code), governs
the taxation of annuities. In general, a contract Owner is not taxed on
increases in value under a contract until some form of withdrawal or
distribution is made under the contract. However, under certain circumstances,
the increase in value may be subject to current federal income tax. For example,
corporations, partnerships, trusts and other non-natural persons cannot defer
the taxation of current income credited to the contract unless an exception
applies. In addition, if an Owner transfers an annuity as a gift to someone
other than a spouse (or divorced spouse), any increase in its value will be
taxed at the time of transfer. The assignment or pledge of any portion of the
value of a contract will be treated as a distribution of that portion of the
value of the contract.
Section 72 provides that the proceeds of a full or partial withdrawal from a
contract prior to the date on which annuity payments begin are treated first as
taxable income to the extent that the Account Value exceeds the "investment" or
"basis" in the contract and then as non-taxable recovery of the investment or
basis in the contract. Generally, the investment or basis in the contract
equals the contributions made by or on your behalf, less any amounts previously
withdrawn which were not treated as taxable income. Special rules may apply if
the contract includes contributions made prior to August 14, 1982 which were
rolled over to the contract in a tax-free exchange.
Once annuity payments begin, the Annuitant recovers a portion of the investment
tax-free from each payment. The non-taxable portion of each payment is based on
the ratio of the Annuitant's investment to his or her expected return under the
contract (exclusion Ratio). The remainder of each payment will be ordinary
income.
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After you have recovered your total investment, future payments are fully
included in income. If the Annuitant dies prior to recovering the total
investment, a deduction for the remaining basis will generally be allowed on the
Annuitant's final federal income tax return.
Withholding of federal income taxes on all distributions may be required unless
the recipient who is eligible elects not to have any amounts withheld and
properly notifies Integrity of that election.
The taxable portion of a distribution is treated as ordinary income and is taxed
at ordinary income tax rates. In addition, a tax penalty of 10% applies to the
taxable portion of a distribution unless the distribution is: (1) on or after
the date on which the taxpayer attains age 59-1/2; (2) as a result of the death
of the Owner; (3) attributable to the taxpayer becoming disabled within the
meaning of Code Section 72(m)(7); (4) part of a series of substantially equal
periodic payments (not less frequently than annually) for the life (or life
expectancy) of the taxpayer or joint lives (or joint life expectancies) of the
taxpayer and beneficiary; (5) from certain qualified plans (note, however, other
penalties may apply); (6) under a qualified funding asset (as defined in Section
130(d) of the Code); (7) purchased by an employer on termination of certain
types of qualified plans and held by the employer until the employee separates
from service; or (8) under an immediate annuity as defined in Code Section
72(u)(4).
All annuity contracts issued by Integrity or its affiliates to one Annuitant
during any calendar year are treated as a single contract in measuring the
taxable income that results from surrenders and withdrawals under any one of the
contracts.
DISTRIBUTION-AT-DEATH RULES
Under section 72(s) of the Code, in order to be treated as an annuity, a
contract must provide the following distribution rules: (a) if any Owner dies
on or after the Retirement Date and before the entire interest in the contract
has been distributed, then the remaining portion of such interest must be
distributed at least as quickly as the method in effect on the date of the
Owner's death; and (b) if any Owner dies before the Retirement Date, the entire
interest in the contract must be distributed within five years after the date of
the Owner's death. To the extent such interest is payable to a beneficiary,
however, such interest may be annuitized over the life of that beneficiary or
over a period not extending beyond the life expectancy of that beneficiary, so
long as distributions commence within one year after the Owner's death. If the
beneficiary is the spouse of the Owner, the contract (along with the deferred
tax status) may be continued in the name of the spouse as the Owner.
If the Owner is not an individual, the "primary annuitant," as defined in the
Code, is considered the Owner. The primary annuitant is the individual who is of
primary importance in affecting the timing of the amount of payout under a
contract. In addition, when the Owner is not an individual, a change in the
primary annuitant is treated as the death of the Owner. Finally, in the case of
joint owners, the distribution-at-death rules will be applied at the death of
the first Owner.
DIVERSIFICATION STANDARDS
Each Portfolio of the Fund will be required to adhere to regulations adopted by
the Treasury Department pursuant to Section 817(h) of the Code prescribing asset
diversification requirements for investment companies whose shares are sold to
insurance company separate accounts funding variable contracts. The investment
manager for the Funds monitors the investments in order to comply with the
regulations to assure that the contracts continue to be treated as annuities for
federal income tax purposes.
The IRS has stated in published rulings that a variable contract owner will be
considered the owner of separate account assets if the contract owner possesses
incidents of ownership in those assets, such as the ability to exercise
investment control over the assets. In those circumstances, income and gains
from the separate account assets would be includable in the variable contract
owner's gross income. The Treasury Department 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
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investments of a segregated asset account may cause the investor (i.e., the
Contract Owner), 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." As of the date of this prospectus, no such
guidance has been issued.
TAX FAVORED RETIREMENT PROGRAMS
The contract is designed for use in connection with certain types of retirement
plans which receive favorable treatment under the Code. Numerous special tax
rules apply to the participants in such qualified plans and to the contracts
used in connection with such qualified plans. These tax rules vary according to
the type of plan and the terms and conditions of the plan itself. Contract
Owners, Annuitants, and beneficiaries are cautioned that the rights of any
person to any benefits under qualified plans may be subject to the terms and
conditions of the plans themselves, regardless of the terms and conditions of
the contract. In addition, loans from qualified contracts, where allowed, are
subject to a variety of limitations, including restrictions as to the amount
that may be borrowed, the duration of the loan, and the manner in which the
loans must be repaid. (Owners should always consult their tax advisors and
retirement plan fiduciaries prior to exercising their loan privileges.) Also,
special rules apply to the time at which distributions must commence and the
form in which the distributions must be paid. THEREFORE, NO ATTEMPT IS MADE TO
PROVIDE MORE THAN GENERAL INFORMATION ABOUT THE USE OF CONTRACTS WITH THE
VARIOUS TYPES OF QUALIFIED PLANS.
Integrity reserves the right to change its administrative rules, such as minimum
contribution amounts, as needed to comply with the Code as to tax-favored
retirement programs.
Following are brief descriptions of various types of qualified plans in
connection with which Integrity may issue a contract.
Individual Retirement Annuities
- -------------------------------
Code Section 408 permits eligible individuals to contribute to an individual
retirement program known as an IRA. An individual who receives compensation and
who has not reached age 70-1/2 by the end of the tax year may establish an IRA
and make contributions up to the deadline for filing his or her federal income
tax return for that year (without extensions). IRAs are subject to limitations
on the amount that may be contributed, the persons who may be eligible, and on
the time when distributions may commence. An individual may also rollover
amounts distributed from another IRA or another tax-favored retirement program
to an IRA contract. Your IRA contract will be issued with a rider outlining the
special terms of your contract which apply to IRAs.
Tax Sheltered Annuities
- -----------------------
Section 403(b) of the Code permits the purchase of tax-sheltered annuities (TSA)
by public schools and certain charitable, educational and scientific
organizations described in Section 501(c)(3) of the Code. The contract is not
intended to accept other than employee contributions. Such contributions are not
includible in the gross income of the employee until the employee receives
distributions from the contract. The amount of contributions to the TSA is
limited to certain maximums imposed by Code sections 403(b), 415 and 402(g).
Furthermore, the Code sets forth additional restrictions governing such items as
transferability, distributions and withdrawals. Any employee should obtain
competent tax advice as to the tax treatment and suitability of such an
investment. Your contract will be issued with a rider outlining the special
terms which apply to a TSA.
Simplified Employee Pensions
- ----------------------------
Section 408(k) of the Code allows employers to establish simplified employee
pension plans (SEP-IRAs) for their employees, using the employees' IRAs for such
purposes, if certain criteria are met. Under these plans the employer may,
within specified limits, make deductible contributions on behalf of the
employees to IRAs. Employers intending to use the contract in connection with
such plans should seek competent advice. The SEP-
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IRA will be issued with a rider outlining the special terms of the contract.
Corporate and Self-Employed (H.R. 10 and Keogh) Pension and Profit Sharing Plans
- --------------------------------------------------------------------------------
Sections 401(a) and 403(a) of the Code permit corporate employers to establish
various types of tax-favored retirement plans for employees. The Self-Employed
Individuals' Tax Retirement Act of 1962, as amended, commonly referred to as
"H.R. 10" or "Keogh," permits self-employed individuals also to establish such
tax-favored retirement plans for themselves and their employees. Such retirement
plans may permit the purchase of the contract in order to provide benefits under
the plans. Employers intending to use the contract in connection with such plans
should seek competent advice. The Company reserves the right to request
documentation to substantiate that a qualified plan exists and is being properly
administered. Integrity does not administer such plans.
Deferred Compensation Plans of State and Local Governments and Tax-Exempt
- -------------------------------------------------------------------------
Organizations
- -------------
Section 457 of the Code permits employees of state and local governments and
tax-exempt organizations to defer a portion of their compensation without paying
current taxes. The employees must be participants in an eligible deferred
compensation plan. To the extent the contracts are used in connection with an
eligible plan, employees are considered general creditors of the employer and
the employer as Owner of the contract has the sole right to the proceeds of the
contract. Loans to employees are not permitted under such plans. Contributions
to a contract in connection with an eligible government plan are subject to
limitations. Those who intend to use the contracts in connection with such plans
should seek competent advice. The Company reserves the right to request
documentation to substantiate that a qualified plan exists and is being properly
administered. Integrity does not administer such plans.
DISTRIBUTIONS UNDER TAX FAVORED RETIREMENT PROGRAMS
Distributions from tax favored plans are subject to certain restrictions.
Distributions of minimum amounts specified by the Code must commence by April 1
of the calendar year following the calendar year in which the participant
reaches age 70 1/2. Additional distribution rules apply after the participant's
death. Failure to make mandatory distributions may result in the imposition of a
50% penalty tax on any difference between the required distribution amount and
the amount distributed. Distributions to a participant from all plans (other
than 457 plans) in a calendar year that exceed a specific limit under the Code
are generally subject to a 15% penalty tax (in addition to any ordinary income
tax) on the excess portion of the distributions.
Distributions from a tax favored plan (not including an IRA subject to Code
Section 408) to an employee, surviving spouse, or former spouse who is an
alternate payee under a qualified domestic relations order, in the form of a
lump sum settlement or periodic annuity payments for a fixed period of fewer
than 10 years are subject to mandatory income tax withholding of 20% of the
taxable amount of the distribution, unless (1) the distributee directs the
transfer of such amounts in cash to another plan or an IRA; or (2) the payment
is a minimum distribution required under the Code. The taxable amount is the
amount of the distribution less the amount allocable to after-tax contributions.
All other types of taxable distributions are subject to withholding unless the
distributee elects not to have withholding apply.
We are not permitted to make distributions from a contract unless a request has
been made. It is therefore your responsibility to comply with the minimum
distribution rules. You should consult your tax adviser regarding these rules
and their proper application.
The above description of the federal income tax consequences of the different
types of tax favored retirement plans which may be funded by the contract is
only a brief summary and is not intended as tax advice. The rules governing the
provisions of plans are extremely complex and often difficult to comprehend.
Anything less than full compliance with all applicable rules, all of which are
subject to change, may have adverse tax consequences. A prospective contract
Owner considering adoption of a plan and purchase of a contract in connection
therewith should first consult a qualified and
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competent tax adviser, with regard to the suitability of the contract as an
investment vehicle for the plan.
FEDERAL AND STATE INCOME TAX WITHHOLDING
Integrity will withhold and remit to the U.S. government a part of the taxable
portion of each distribution made under a contract unless the distributee
notifies Integrity at or before the time of the distribution of an election not
to have any amounts withheld. In certain circumstances, Integrity may be
required to withhold tax, as explained above. The withholding rates applicable
to the taxable portion of periodic annuity payments (other than eligible
rollover distributions) are the same as the withholding rates generally
applicable to payments of wages. In addition, the withholding rate applicable to
the taxable portion of non-periodic payments (including withdrawals prior to the
maturity date) is 10%. As discussed above, the withholding rate applicable to
eligible rollover distributions is 20%.
Certain states have indicated that pension and annuity withholding will apply to
payments made to residents. Generally, an election out of federal withholding
will also be considered an election out of state withholding. For more
information concerning a particular state, call our Administrative Office at the
toll-free number.
IMPACT OF TAXES TO INTEGRITY
The contracts provide that Integrity may charge the Separate Account for taxes.
Integrity can also set up reserves for taxes.
TRANSFERS AMONG INVESTMENT OPTIONS
There will not be any tax liability if you transfer any part of the Account
Value among the Investment Options of your contract.
PART 8 ADDITIONAL INFORMATION
SYSTEMATIC WITHDRAWALS
We offer a program for systematic withdrawals that allows you to pre-authorize
periodic withdrawals from your contract prior to your retirement date. You may
choose to have withdrawals made monthly, quarterly, semi-annually or annually
and may specify the day of the month (other than the 29th, 30th or 31st) on
which the withdrawal is to be made. You may specify a dollar amount for each
withdrawal or an annual percentage to be withdrawn. The minimum systematic
withdrawal currently is $300. You may also specify an account for direct deposit
of your systematic withdrawals. To enroll under our systematic withdrawal
program, you must deliver the appropriate administrative form to our
Administrative Office. Withdrawals may begin not less than one business day
after our receipt of the form. You or we may terminate your participation in the
program upon one day's prior written notice, and we may terminate or amend the
systematic withdrawal program at any time. If on any withdrawal date you do not
have sufficient values to make all of the withdrawals you have specified, no
withdrawals will be made and your enrollment in the program will be ended.
Amounts withdrawn by you under the systematic withdrawal program may be within
the free withdrawal amount in which case neither a contingent withdrawal charge
nor a Market Value Adjustment will be made. See "Contingent Withdrawal Charge"
in Part 4. AMOUNTS WITHDRAWN UNDER THE SYSTEMATIC WITHDRAWAL PROGRAM IN EXCESS
OF THE FREE WITHDRAWAL AMOUNT WILL BE SUBJECT TO A CONTINGENT WITHDRAWAL CHARGE
AND A MARKET VALUE ADJUSTMENT IF APPLICABLE. WITHDRAWALS ALSO MAY BE SUBJECT TO
THE 10% FEDERAL TAX PENALTY FOR EARLY WITHDRAWALS UNDER THE CONTRACTS AND TO
INCOME TAXATION. See Part 7, "Tax Aspects of the Contracts."
DOLLAR COST AVERAGING
We offer a dollar cost averaging program under which allocations to the Money
Market Option are automatically transferred on a monthly or quarterly basis to
one or more other Variable Account Options. You must specify a dollar amount to
be
24
<PAGE>
transferred into each Variable Account Option, and the current minimum
transfer to each Option is $250. No transfer charge will apply to transfers
under our dollar cost averaging program, and such transfers will not count
towards the twelve transfers you may make in a contract year before we may
impose a transfer charge.
To enroll under our dollar cost averaging program, you must deliver the
appropriate administrative form to our Administrative Office. You or we may
terminate your participation in the program upon one day's prior written notice,
and we may terminate or amend the dollar cost averaging program at any time. If
you do not have sufficient funds in the Money Market Option to transfer to each
Variable Account Option specified, no transfer will be made and your enrollment
in the program will be ended.
SYSTEMATIC TRANSFER PROGRAM
We also offer a systematic transfer program under which contributions to the
Systematic Transfer Option (STO) are automatically transferred on a monthly or
quarterly basis, as selected by you, to one or more other Investment Options.
Your STO contributions will be transferred in equal installments of not less
than $1,000 over a one year period. If you do not have sufficient funds in the
STO to transfer to each Option specified, a final transfer will be made on a pro
rata basis and your enrollment in the program will be ended. Any funds remaining
in the STO at the end of the one year period during which transfers are required
to be made will be transferred at the end of such period on a pro rata basis to
the Options previously elected by you for this program. No transfer charge will
apply to transfers under our systematic transfer program, and such transfers
will not count towards the twelve transfers you may make in a contract year
before we may impose a transfer charge.
To enroll under our systematic transfer program, you must deliver the
appropriate administrative form to our Administrative Office. We reserve the
right to terminate the systematic transfer program in whole or in part, or to
place restrictions on contributions to the program.
ASSET REBALANCING
We offer an asset rebalancing program. You can select the frequency for
rebalancing. Frequencies available include rebalancing monthly, quarterly, semi-
annually or annually. The value in the Variable Account Options will be
automatically rebalanced by transfers among such Variable Account Options, and
you will receive a confirmation notice after each rebalancing. Transfers will
occur only to and from those Variable Account Options where you have current
contribution allocations. No transfer charge will apply to transfers under our
asset rebalancing program, and such transfers will not count towards the twelve
transfers you may make in a contract year before we may impose a transfer
charge.
Fixed Accounts are not eligible for the asset rebalancing program.
To enroll under our asset rebalancing program, you must deliver the appropriate
administrative form to our Administrative Office. You should be aware that other
allocation programs, such as dollar cost averaging, as well as transfers and
withdrawals that you make, may not work in concert with the asset rebalancing
program. You should, therefore, monitor your use of such other programs,
transfers, and withdrawals while the asset rebalancing program is in effect. You
or we may terminate your participation in the program upon one day's prior
written notice, and we may terminate or amend the asset rebalancing program at
any time.
SYSTEMATIC CONTRIBUTIONS
We offer a program for systematic contributions that allows you to pre-authorize
monthly withdrawals from your checking account for payment to us. To enroll
under our program, you must deliver the appropriate administrative form to our
Administrative Office. You or we may terminate your participation in the program
upon 30 days' prior written notice. Your participation may be terminated by us
if your bank declines to make any payment. The minimum amount for systematic
contributions is $100 per month.
PERFORMANCE INFORMATION
Performance data for the Variable Account Options, including the yield and
effective yield of the Money
25
<PAGE>
Market Option, the yield of the other Options, and the total return of all of
the Options may appear in advertisements or sales literature. Performance data
for any Option reflects only the performance of a hypothetical investment in the
Option during the particular time period on which the calculations are based.
Performance information should be considered in light of the investment
objectives and policies of the Portfolio in which the Option invests and the
market conditions during the given time period, and it should not be considered
as a representation of performance to be achieved in the future.
Total returns are based on the overall dollar or percentage change in value of a
hypothetical investment in an Option. Total return quotations reflect changes in
Fund share price, the automatic reinvestment by the Option of all distributions
and the deduction of applicable contract charges and expenses, including any
contingent withdrawal charge that would apply if a contract Owner surrendered
the contract at the end of the period indicated. Total returns also may be shown
that do not take into account the contingent withdrawal charge or the annual
administrative charge applicable where the Account Value is less than $50,000 at
the end of a contract year.
A cumulative total return reflects an Option's performance over a stated period
of time. An average annual total return reflects the hypothetical annually
compounded return that would have produced the same cumulative total return if
the Option's performance had been constant over the entire period. Because
average annual total returns tend to smooth out variations in an Option's
returns, you should recognize that they are not the same as actual year-by-year
results.
Some Options may also advertise yield. These measures reflect the income
generated by an investment in the Option over a specified period of time. This
income is annualized and shown as a percentage. Yields do not take into account
capital gains or losses or the contingent withdrawal charge.
The Money Market Option may advertise its current and effective yield. Current
yield reflects the income generated by an investment in the Option over a
specified 7-day period. Effective yield is calculated in a similar manner except
that income earned is assumed to be reinvested. The Investment Grade Bond and
High Income Option may advertise a 30-day yield which reflects the income
generated by an investment in such Option over a specified 30-day period.
For a detailed description of the methods used to determine yield and total
return for the Variable Account Options, see the SAI.
26
<PAGE>
APPENDIX A
ILLUSTRATION OF A MARKET VALUE ADJUSTMENT
Contribution: $40,000.00
GRO Account duration: 6 Years
Guaranteed Interest Rate: 5% Annual Effective Rate
The following examples illustrate how the Market Value Adjustment and the
contingent withdrawal charge may effect the values of a contract upon a
withdrawal. The 5% assumed Guaranteed Interest Rate is the same rate used in the
Example under "Table of Annual Fees and Expenses" in this Prospectus. In these
examples, the withdrawal occurs three years after the Participation Date. The
Market Value Adjustment operates in a similar manner for transfers. No
contingent withdrawal charge applies to transfers.
The GRO Value for this $40,000 contribution is $53,603.83 at the expiration of
the GRO Account. After three years, the GRO Value is $46,305.00. It is also
assumed, for the purposes of these examples, that no prior partial withdrawals
or transfers have occurred.
The Market Value Adjustment will be based on the rate we are then crediting (at
the time of the withdrawal) on new contributions to GRO Accounts of the same
duration as the time remaining in your GRO Account, rounded to the next higher
number of complete months. If we do not declare a rate for the exact time
remaining, we will interpolate between the Guaranteed Interest Rates for GRO
Accounts of durations closest to (next higher and next lower) the remaining
period described above. Three years after the initial contribution, there would
have been three years remaining in your GRO Account. These examples also show
the withdrawal charge which would be calculated separately.
27
<PAGE>
EXAMPLE OF A DOWNWARD MARKET VALUE ADJUSTMENT:
A downward Market Value Adjustment results from a full or partial withdrawal
that occurs when interest rates have increased. Assume interest rates have
increased three years after the initial contribution and we are then crediting
6.5% for a three-year GRO Account. Upon a full withdrawal, the Market Value
Adjustment, applying the above formula would be:
36/12 36/12
-0.0483785 = [(1 + .05) / (1 + .065 + .0025) ] - 1
The Market Value Adjustment is a reduction of $2,240.17 from the GRO Value:
-$2,240.17 = -0.0483785 X $46,305.00
The Market Adjusted Value would be:
$44,064.83 = $46,305.00 - $2,240.17
A withdrawal charge of 4% would be assessed against the $40,000 original
contribution:
$1,600.00 = $40,000.00 X .04
Thus, the amount payable on a full withdrawal would be:
$42,464.83 = $46,305.00 - $2,240.17 - $1,600.00
If instead of a full withdrawal, $20,000 was requested, we would first determine
the free withdrawal amount:
Greater of:
a) $4,630.50 = $46,305.00 X .10
or
b) $2,205.00 = gain in prior contract year
Free Amount = $4,630.50
The non-free amount would be:
$15,369.50 = $20,000.00 - $4,630.50
The Market Value Adjustment, which is only applicable to the non-free amount,
would be
- $743.55 = - .0483785 X $15,369.50
The withdrawal charge would be:
$671.38 = [($15,369.50 + $743.55)/1 - .04] - ($15,369.50 + 743.55)
Thus, the total amount needed to provide $20,000 after the Market Value
Adjustment and withdrawal charge would be:
$21,414.93 = $20,000.00 + $743.55 + $671.38
28
<PAGE>
EXAMPLE OF AN UPWARD MARKET VALUE ADJUSTMENT:
An upward Market Value Adjustment results from a full or partial withdrawal that
occurs when interest rates have decreased. Assume interest rates have decreased
three years after the initial contribution and we are then crediting 4% for a
three-year GRO Account. Upon a full withdrawal, the Market Value Adjustment,
applying the formula set forth in the prospectus, would be:
36/12 36/12
0.0217384 = [(1 + .05) / (1 + .04 + .0025) ] - 1
The Market Value Adjustment is an increase of $1,006.60 to the GRO Value:
$1,006.60 = 0.0217384 X $46,305.00
The Market Adjusted Value would be:
$47,311.60 = $46,305.00 + $1,006.60
A withdrawal charge of 4% would be assessed against the $40,000 original
contribution:
$1,600.00 = $40,000.00 X .04
Thus, the amount payable on a full withdrawal would be:
$45,711.60 = $46,305.00 + $1,006.60 - $1,600.00
If instead of a full withdrawal, $20,000 was requested, the free withdrawal
amount and non-free amount would first be determined as above:
Free Amount = $ 4,630.50
Non-Free Amount = $15,369.50
The Market Value Adjustment would be:
$334.11 = .0217384 X $15,369.50
The withdrawal charge would be:
$626.47 = [($15,369.50 - $334.11)/1 - .04] - ($15,369.50 - $334.11)
Thus, the total amount needed to provide $20,000 after the Market Value
Adjustment and withdrawal charge would be:
$20,292.36 = $20,000.00 - $334.11 + $626.47
Actual Market Value Adjustments may have a greater or lesser impact than shown
in the examples, depending on the actual change in interest crediting rate and
the timing of the withdrawal or transfer in relation to the time remaining in
the GRO Account.
29
<PAGE>
<TABLE>
<CAPTION>
INTEGRITY
APPLICATION FORM FOR A VARIABLE ANNUITY CONTRACT
INTEGRITY LIFE INSURANCE COMPANY
Worthington, Ohio
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C>
[1]
ANNUITANT'S NAME ____________________________________________________________________________ Sex [ ] M [ ] F
First Middle Last
Residence Address _______________________________________________________________ Age | | | Birth Date | | | | | | |
P.O. Box or Street No. Apt. No. Month Day Year
___________________________________________________________________ | | | | | | | | | |
City State Zip Code Social Security No.
ANNUITANT'S BENEFICIARY _________________________________________________________ _________________________________________
(Receives the Death Benefit if the Annuitant dies Relationship to Annuitant
prior to the Retirement Date)
- --------------------------------------------------------------------------------------------------------------------------------
[1a]
ANNUITANT'S RETIREMENT AGE (When payments will begin) | | | In Years
If no Retirement Age is specified, we will assume at age 70 1/2 (or age of at issue, if greater) for Tax-Qualified and age 85
for Non-Qualified.
- --------------------------------------------------------------------------------------------------------------------------------
[2] Do NOT complete Section 2 if the Owner and Annuitant are the same.
OWNER _______________________________________________________________________________________ Sex [ ] M [ ] F
First Middle Last
Mailing Address _________________________________________________________________ Age | | | Birth Date | | | | | | |
P.O. Box or Street No. Apt. No. Month Day Year
___________________________________________________________________ | | | | | | | | | |
City State Zip Code Tax I.D. or Social Security No.
JOINT OWNER'S NAME ______________________________________________________________ Age | | | Birth Date | | | | | | |
Joint Owner may be listed only for Non-Qualified programs Month Day Year
(See instructions, Item 8)
COMPLETE OWNER'S BENEFICIARY ONLY FOR NON-QUALIFIED PROGRAM. Sex [ ] M [ ] F | | | | | | | | | |
Do you want to elect joint ownership and name each other as Owner's Beneficiary? Tax I.D. or Social Security No.
[ ] Yes [ ] No If "No", complete the following:
OWNER'S BENEFICIARY _____________________________________________________________ _________________________________________
Relationship to Owner
- --------------------------------------------------------------------------------------------------------------------------------
[3] For NON-QUALIFIED programs only: (Optional) CONTINGENT ANNUITANT (Must be Annuitant's Spouse)
NAME ________________________________________________________________________________________ Sex [ ] M [ ] F
First Middle Last
Residence Address _______________________________________________________________ Age | | | Birth Date | | | | | | |
P.O. Box or Street No. Apt. No. Month Day Year
___________________________________________________________________ | | | | | | | | | |
City State Zip Code Social Security No.
- --------------------------------------------------------------------------------------------------------------------------------
[4] INITIAL CONTRIBUTION $__________________________________. Check one of the following:
[ ] Check Attached [ ] Wire Transfer [ ] 1035 Exchange Checks to be made payable to: "Integrity Life Insurance Company".
- --------------------------------------------------------------------------------------------------------------------------------
[5] Will the annuity applied for replace any existing annuity or life insurance?
[ ] Yes [ ] No If "Yes", explain: ___________________________________________________________________________________
- --------------------------------------------------------------------------------------------------------------------------------
[6] CONTRIBUTION ALLOCATION (must be in whole percentages)
Investment Options:
Guaranteed Period Options
Guarantee Period - 2 Year Guarantee* _____________________________% 412
Guarantee Period - 4 Year Guarantee* _____________________________% 414
Guarantee Period - 6 Year Guarantee* _____________________________% 416
Guarantee Period - 10 Year Guarantee* ____________________________% 410
Variable Insurance Products Fund and
Variable Insurance Products Funds II
Equity-Income Division ___________________________________________% 302
Money Market Division ____________________________________________% 303
Asset Manager Division ___________________________________________% 304
Growth Division __________________________________________________% 305
Overseas Division ________________________________________________% 307
Investment Grade Bond Division ___________________________________% 308
Asset Manager: Growth Division ___________________________________% 320
Contrafund Division ______________________________________________% 330
Index 500 Division _______________________________________________% 350
High Income Division _____________________________________________% 360
Total to Equal 100%
*Market Value Adjustment will be applicable.
- --------------------------------------------------------------------------------------------------------------------------------
[7]
[ ] TAX QUALIFIED [ ] NON-QUALIFIED
For TAX-QUALIFIED programs only, check:
[ ] IRA [ ] SEP-IRA [ ] EDC [ ] 401(a) [ ] TSA
Tax year to which the IRA contribution is made _____________________
Check if a rollover [ ] transfer [ ]
- --------------------------------------------------------------------------------------------------------------------------------
[8] Special Instructions: If Joint Owner, insert mailing address
if different from Owner:
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
- --------------------------------------------------------------------------------------------------------------------------------
INT-960 Cat. #001261 (02/95)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C>
[9]
I acknowledge receipt of a Variable Annuity and Fund Prospectus.
- --------------------------------------------------------------------------------------------------------------------------------
[10]
TELEPHONE TRANSFER PRIVILEGE: I authorize Integrity Life to act on telephone transfer instructions from any person who
represents himself or herself as the Owner under this contract and furnishes my Personal Identification Number (PIN).
Please enter PIN | | | | | |. No transfer will be made unless the PIN is furnished. This authorization and PIN
will remain in effect unless revoked by me in writing. Changes in these terms and conditions or additional limitations
will be made by notice to me from Integrity Life, and will be effective upon receipt. I understand: (a) that Integrity
Life will not be liable for any loss, liabilities, costs or expense arising out of transfers authorized by telephone;
and (b) that Integrity Life reserves the right to discontinue the telephone transfer service at any time without notice.
- --------------------------------------------------------------------------------------------------------------------------------
[11]
IT IS UNDERSTOOD THAT THE ANNUITANT'S VALUES ATTRIBUTABLE TO ALLOCATIONS TO THE SEPARATE ACCOUNT INVESTMENT DIVISIONS AND
VARIABLE ANNUITY BENEFIT PAYMENTS MAY INCREASE OR DECREASE AND ARE NOT GUARANTEED AS TO DOLLAR AMOUNT.
I, the Owner, certify under penalties of perjury, (i) that the number shown on this form is my taxpayer identification
number and; (ii) that I am not subject to back-up withholding either because I have not been notified that I am subject
to back-up withholding as a result of a failure to report all interest and dividends or the Internal Revenue Service has
notified me that I am no longer subject to back-up withholding.
INSTRUCTIONS: The Owner must strike out clause (ii) if the Owner has been notified that he or she is subject to back-up
withholding due to underreporting and he or she has not received a notice from the IRS advising that such back-up
withholding has been terminated.
The statements and answers in all parts of this application are true and complete to the best of my knowledge and belief
and are made to induce Integrity Life to enter into this Agreement and to issue any contract which may be issued upon
this application.
OWNER ________________________________________________________ Signed at ______________________________________________
Signature of Owner Date City State Zip Code
JOINT OWNER __________________________________________________
Signature of Owner (if any) Date
- --------------------------------------------------------------------------------------------------------------------------------
[12]
Sales Representative: Do you have reason to believe the contract applied for is to replace existing annuities or
insurance? [ ] Yes [ ] No
Sales Representative _________________________________________________ Social Security No. | | | | | | | | | |
Print Name
Sales Representative _________________________________________________ Telephone Number ________________________________
Signature
Branch Office Address _____________________________________________________________________________________________________
Home Office Address _______________________________________________________________________________________________________
- --------------------------------------------------------------------------------------------------------------------------------
[13]
Firm Name ____________________________________________________________ Firm Telephone Number ___________________________
FOR BROKER DEALER USE ONLY: APPROPRIATE SIGNATURE _______________________________________________ DATE ____________________
- --------------------------------------------------------------------------------------------------------------------------------
[14]
CONTRACT MAILING INSTRUCTIONS. Check One:
[ ] Mail to Sales Representative's Branch Office (above)
[ ] Mail to Sales Representative's Home Office Address (above)
[ ] Other (please specify) ______________________________________________________________
NOTE: All contracts will be mailed to the Sales Representative's Branch Office unless otherwise indicated.
- --------------------------------------------------------------------------------------------------------------------------------
Send completed application form to:
REGULAR MAIL: Integrity Life, P.O. Box 182080, Columbus, Ohio 43218
EXPRESS DELIVERY: Integrity Life, 200 E. Wilson Bridge Road, Worthington, Ohio 43085
- --------------------------------------------------------------------------------------------------------------------------------
INT-960 Cat. #001261 (02/95)
</TABLE>
<PAGE>
TRANSFER REQUEST FORM
- --------------------------------------------------------------------------------
1. Existing account, contract or policy to be transferred
---------------------------------------------------------------------------
Name
---------------------------------------------------------------------------
Address
---------------------------------------------------------------------------
City
---------------------------------------------------------------------------
Company phone Contract number
---------------------------------------------------------------------------
Annuitant's name Annuitant's SSN
---------------------------------------------------------------------------
Owner's name Owner's SSN:
Contract is: [ ] Enclosed [ ] Misplaced [ ] Destroyed
...........................................................................
2. Qualified or non-qualified transfer (Complete only the appropriate side.)
For qualified plan transfer:
[ ] Total withdrawal
[ ] Partial withdrawal $__________________
1. IRA [ ] Trustee transfer [ ] Direct rollover
2. SEP [ ] Trustee transfer
3. 403(b) [ ] 90-24 transfer [ ] Direct rollover
4. 401(a) or (k) [ ] Trustee transfer [ ] Direct rollover
For non-qualified (1035) transfer:
I do absolutely assign and transfer the above identified life/annuity
contract to Integrity Life Insurance Company, its successors and assignors,
along with any and all claims, options, privileges, rights, title, and
interest, therein, and subject to all conditions of such contract as
consideration and in exchange for an annuity contract to be issued by
Integrity in conformance with Section 1035 of the Internal Revenue Code.
All power, elections, appointments, options, and rights exercisable by me
as owner of this contract (including the right to surrender this contract)
are now exercisable by Integrity, which shall relate back to the date of my
signature.
[ ] 1035 Exchange [ ] CD - New deposit [ ] Mutual funds
...........................................................................
3. Signature
I request that the above referenced contract/policy/account(s) be
transferred to Integrity Life Insurance Company. I am aware that any tax
consequences, penalties or surrender charges of this transaction are solely
my own.
[ ] Please do not withhold taxes.
---------------------------------------------------------------------------
Contract owner's signature Date
---------------------------------------------------------------------------
Joint owner's signature (if applicable) Date
...........................................................................
4. Notification of acceptance
On the basis of the above authorization and/or assignment, please liquidate
the above assets, provide cost basis information with the check, and send
the proceeds to: Integrity Life Insurance Company, 1035/Transfer Unit, P.O.
Box 182080, Columbus, Ohio, 43218-2080. Integrity Life Insurance telephone:
1-800-325-8583.
---------------------------------------------------------------------------
For the benefit of Contract number
---------------------------------------------------------------------------
Plan type Dated
---------------------------------------------------------------------------
By Title
Qualified 403(b), please provide value as of:
12/31/86: ___________________ 12/31/88: ___________________
INT-TRF Cat. #001434 (04/96)
<PAGE>
REPLACEMENT NOTICE
NOTICE TO APPLICANTS REGARDING REPLACEMENT OF ANNUITY POLICIES
THIS NOTICE IS FOR YOUR BENEFIT AND IS REQUIRED BY REGULATION
PRINT NAME OF ANNUITANT ________________________________________________________
ADDRESS ________________________________________________________________________
CITY _________________________________ STATE ______________ ZIP ________________
1. If you are urged to purchase an annuity policy and to surrender or change
the status of existing annuities, the agent is required to give you this
notice.
2. It is to your advantage to receive the advice of the present Insurer
regarding the proposed replacement or change of existing policies. The
Insurer to whom you are applying for the new policy is required by
regulation to advise the home office of the Insurer or Insurers which sold
the existing policy or policies of the proposed replacement.
3. As a general rule, it is not to your advantage to drop or change existing
annuities in favor of new annuities, whether issued by the same or
different Insurer. Some of the reasons for this are as follows:
(A) You may incur surrender charges on your present annuity.
(B) There may be differences in interest guarantees, annuity factors and
other features to consider.
4. There may be a situation when a replacement is advantageous. For your
protection, however, you should receive the comments of the present Insurer
before arriving at a decision in this important financial matter.
5. If, in the negotiation to replace existing annuities, it is suggested by an
agent or employee of the present Insurer that the existing annuities not be
replaced, you are entitled to request in writing and receive directly from
the person making the suggestion a written statement setting forth all the
pertinent facts bearing on the advantages of the suggestion.
___________________________ _________________________________________________
Date Signature of Agent
I hereby acknowledge that I received the "Notice to Applicants Regarding
Replacement of Annuity Policies."
___________________________ _________________________________________________
Date Signature of Applicant/Annuitant
NOT FOR USE IN MASSACHUSETTS AND OREGON
Cat. #001559 (10/95)
<PAGE>
SYSTEMATIC WITHDRAWAL FORM
- --------------------------------------------------------------------------------
Participant/Annuitant __________________________________________________________
Certificate/Contract No. _______________________________________________________
Owner(s) _______________ Owner(s) Social Security or Tax I.D. No.(s)___________
I(We) hereby request and authorize Integrity Life Insurance Company (Company)
to systematically withdraw $__________ or ________%, beginning ____/____
(Mo/Day) (except the 29th, 30th or 31st of any month) and continuing on such
day of the month at the interval specified below, from the Investment Options
then invested in at the time of each withdrawal, allocated by values in the
Investment Options. I(We) understand that, as described in the prospectus, a
contingent withdrawal charge may be applicable if the amount withdrawn is
greater than the free corridor amount, a Market Value Adjustment may be
applicable to withdrawals from Guaranteed Rate Options and a federal tax penalty
of 10% may apply to withdrawals before age 59-1/2.
Please indicate the frequency to be used for the Systematic Withdrawal Option:
[ ] Monthly [ ] Quarterly [ ] Semi-Annually [ ] Annually
Amounts received as withdrawals from a non-tax qualified annuity
certificate/contract prior the maturity date are first treated as taxable income
to the extent of any gain. This authorization applies to only the
certificate/contract number shown above. A separate authorization must be
completed for any additional variable annuity certificates/contracts. Systematic
withdrawals will continue on the elected basis until the earlier of: (1) the
date that the value in the investment division(s) would not support an
additional withdrawal; (2) the date Integrity receives written instructions from
me(us) to cancel the withdrawals; or (3) the date Integrity discontinues this
withdrawal option.
I(We) understand and agree to the terms and conditions set forth in the
prospectus.
Signature of Owner _______________________________________ Date _______________
Signature of Joint Owner (if any) ________________________ Date _______________
IMPORTANT: NOTICE BELOW MUST BE SIGNED CONCERNING WITHHOLDING
OF INCOME TAX BEFORE YOUR REQUEST CAN BE COMPLETED.
................................................................................
NOTICE OF WITHHOLDING OF INCOME TAX ON WITHDRAWALS OR DISTRIBUTIONS
Federal Tax Law requires Integrity Life Insurance Company (Integrity) to
withhold federal income tax from the taxable portion of any distribution or
withdrawal, unless the recipient elects NOT to have withholding apply. The
amount to be withheld is, in the case of periodic payments (over a period
lasting more than one year), the same amount that would have been withheld if
the payment were wages, and, in the case of non-periodic payments, 10% of the
taxable portion.
Certain states may also require income tax withholding from the taxable portion
of your distribution. In most cases, your federal withholding election would
also apply to any state withholding election, although the rate of tax may vary
among states. Please note, however, that Integrity will perform mandatory
withholding if required by state law.
If you elect NOT to have tax withheld from a distribution or withdrawal or if
the amount of federal income tax withheld is insufficient, you may be
responsible for payment of estimated tax. You may incur penalties under the
estimated tax rules if your withholding and estimated tax payments are not
sufficient. For this purpose, you may wish to consult your tax advisor.
Federal law also requires that you provide us with your correct Taxpayer
Identification Number (TIN) if you elect NOT to have tax withheld from your
distribution or withdrawal. (For most taxpayers, their TIN is their Social
Security Number.) If you fail to provide us with your TIN, we are required to
withhold any taxable payment to you. The rate for this backup withholding
increases from 20% to 31% beginning in 1993.
[ ] I elect NOT to have taxes withheld.
[ ] I understand that Federal and applicable State income tax WILL BE withheld
from my distribution.
SOCIAL SECURITY NUMBER or EMPLOYER I.D. NUMBER
| | | | | | | | | | | | | | | | | | | |
Signed ___________________________________________________ Date _______________
<PAGE>
- --------------------------------------------------------------------------------
Authorization for direct deposit of systematic withdrawals
Participant/Annuitant __________________________________________________________
Certificate/Contract No. _______________________________________________________
Owner(s) _______________________________________________________________________
Owner(s) Social Security or Tax I.D. No.(s) ____________________________________
Financial Institution Information
Owner's Bank Account Number: _______________________
[ ] Checking Account [ ] Savings Account
(Attach copy of "void" check) (Attach copy of savings deposit slip)
Bank Name: _____________________________________________________________
Bank Address: _____________________________________________________________
_____________________________________________________________
Bank Phone Number: ________________________________________
I(We) authorize Integrity Life Insurance Company to credit my(our) account for
any future systematic withdrawals at the above named financial institution. This
agreement will remain active until written notification is received and in such
a time as to afford the Company reasonable opportunity to act upon my(our)
request.
I(we) authorize the bank to debit my(our) account and to refund any overpayment
to the Company.
Signature of Owner _______________________________________ Date _______________
Signature of Joint Owner (if any) ________________________ Date _______________
For Company Use Only:
Bank ABA Routing Number: _________________________________
[LOGO OF INTEGRITY LIFE INSURANCE COMPANY]
Cat. #001812 (05/96)
<PAGE>
DCA/SYSTEMATIC TRANSFER/ASSET REBALANCING FORM
- --------------------------------------------------------------------------------
Dollar Cost Averaging Option
Frequency to be used for the
Dollar Cost Averaging Program: [ ] Monthly [ ] Quarterly
[ ] Semi-annually [ ] Annually
I (we) have elected to have $____________ (minimum $250) withdrawn from my (our)
MONEY MARKET Division to the following Investment Division(s) indicated below.
Transfers should be made as indicated below.
$______________ or ______% to the _________________________ Investment Division
$______________ or ______% to the _________________________ Investment Division
$______________ or ______% to the _________________________ Investment Division
$______________ or ______% to the _________________________ Investment Division
$______________ or ______% to the _________________________ Investment Division
$______________ or ______% to the _________________________ Investment Division
I (we) hereby authorize Integrity Life Insurance Company (the Company) to make
the above transfers. I (we) understand that the transfer date will be the same
calendar day of the month as the contract/certificate participation date. I (we)
further understand that this authorization will automatically terminate: (1)
when there are insufficient amounts in my (our) Money Market Division to make
the requested transfer; (2) when the Company receives written notification from
me (us) to terminate the Dollar Cost Averaging program; or (3) the date the
Company discontinues the Dollar Cost Averaging program.
- --------------------------------------------------------------------------------
Systematic Transfer Option
Frequency to be used for the
Systematic Transfer Program: [ ] Monthly [ ] Quarterly
I (we) elect to have $____________ (minimum $1,000 per option) transferred to
the following Guaranteed Rate Options indicated below.
$____________ to the Two-Year Guaranteed Rate Option
$____________ to the Four-Year Guaranteed Rate Option
$____________ to the Six-Year Guaranteed Rate Option
$____________ to the Ten-Year Guaranteed Rate Option
The transfer date will be the same calendar day of the month as the
contract/certificate participation date. This authorization will automatically
terminate: (1) when there are insufficient amounts in the account to make the
requested transfer; (2) when the Company receives written notification to
terminate the Systematic Transfer program; or (3) the date the Company
discontinues the Systematic Transfer Program.
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Asset Rebalancing Option
Do you wish to participate in the Asset Rebalancing Program? [ ] Yes [ ] No
Rebalancing should occur: [ ] Monthly [ ] Quarterly
[ ] Annually [ ] Semi-annually
Day of month of which assets should be rebalanced: _____________________________
[LOGO OF INTEGRITY LIFE INSURANCE COMPANY]
Catalog #001814 (05/96)
<PAGE>
INTEGRITY
Life Insurance Company
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Integrity Life Insurance Company
[LOGO] 200 E. Wilson Bridge Road
Worthington, Ohio 43085
Catalog #001255(05/96)
