SEPARATE ACCOUNT I OF NATIONAL INTEGRITY LIFE INS CO, 485APOS, 1998-03-02

SEPARATE ACCOUNT I OF NATIONAL INTEGRITY LIFE INS CO
485APOS, 1998-03-02

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<PAGE>

As filed with the Securities and Exchange Commission
on May 1, 1998

Registration No. 33-56658

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-4

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. ___ [ ]
Post-Effective Amendment No. 8 [X]

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 17 [X]

(Check appropriate box or boxes)

Separate Account I of National Integrity Life Insurance Company
(Exact Name of Registrant)

National Integrity Life Insurance Company
(Name of Depositor)

515 West Market Street, Louisville, KY 40202
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code (502) 582-7900

John McGeeney
National Integrity Life Insurance Company
515 West Market Street
Louisville, Kentucky 40202
(Name and Address of Agent for Service)

Approximate Date of Proposed Public Offering: As soon after the effective date
of this Registration Statement as is practicable.

It is proposed that this filing will become effective (check appropriate box)

|X| immediately upon filing pursuant to paragraph (b) of Rule 485

|_| on (date) pursuant to paragraph (b) of Rule 485

|_| 60 days after filing pursuant to paragraph (a)(1) of Rule 485

|_| on (date) pursuant to paragraph (a)(1) of Rule 485

If appropriate, check the following box:

|_| this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

The registrant has registered an indefinite amount of securities under the
Securities Act of 1933 pursuant to Rule 24f-2 under the Investment Company Act
of 1940.

<PAGE>

CROSS REFERENCE SHEET - GrandMaster II

Showing Location in Part A (Prospectus) and Part B (Statement of Additional
Information) of Information required By Form N-4

PART A: INFORMATION REQUIRED IN PROSPECTUS - GrandMaster II

Form N-4 Item No. Location in Prospectus

1. Cover Page Cover Page

2. Definitions Part 1 - Summary

3. Synopsis Part 1 - Summary; Table of
Annual Fees and Expenses;
Examples

4. Condensed Financial Information Part 1 - Financial Information

5. General Description of Registrant, Part 2 - National Integrity and
the Separate Account;
Annuity Contracts Part 3 - Your Investment
Options

6. Deductions Part 4 - Deductions and Charges

7. General Description of Variable Part 5 - Terms of Your Variable
Annuity contracts Annuity Contract

8. Annuity Period Part 5 - Terms of Your Variable
Annuity Contract

9. Death Benefit Part 5 - Terms of Your Variable
Annuity Contract

10. Purchases and Contract Value Part 5 - Terms of Your Variable
Annuity Contract

11. Redemptions Part 5 - Terms of Your Variable
Annuity Contract

12. Taxes Part 7 - Tax Aspects of the
Contracts

13. Legal Proceedings Not Applicable

14. Table of Contents of the Statement Table of Contents
of Additional Information
<PAGE>

PART B: INFORMATION REQUIRED IN STATEMENT OF ADDITIONAL INFORMATION -
GrandMaster II

Form N-4 Item No. Location in Statement of Additional
Information

15. Cover Page Cover Page

16. Table of Contents Cover Page

17. General Information and History Part 1 - National Integrity and
Custodian

18. Services Part 1 - National Integrity and
Custodian

19. Purchase of Securities Being Offered Part 2 - Distribution of the
Contracts

20. Underwriters Part 2 - Distribution of the
Contracts

21. Calculation of Performance Data Part 3 - Performance Information

22. Annuity Payments Part 4 - Determination of
Annuity Unit Values

23. Financial Statements Part 6 - Financial
Statements

<PAGE>

PART A
<PAGE>

Prospectus

GrandMaster II
Flexible Premium Variable Annuity
issued by National Integrity Life Insurance Company

This prospectus describes a flexible premium variable annuity offered by
National 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 Guaranteed Rate Options (GROs), or both.

Contributions to the Variable Account Options are invested in shares of
corresponding portfolios of the Variable Insurance Products Fund (VIP), Variable
Insurance Products Fund II (VIP II), and Variable Insurance Products Fund III
(VIP III), (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 thirteen Variable Account Options, which invest in the following
portfolios:

o VIP Money Market Portfolio o VIP II Investment Grade Bond Portfolio
o VIP High Income Portfolio o VIP II Asset Manager Portfolio
o VIP Equity-Income Portfolio o VIP II Index 500 Portfolio
o VIP Growth Portfolio o VIP II Contrafund Portfolio
o VIP Overseas Portfolio o VIP II Asset Manager: Growth Portfolio
o VIP III Balanced Portfolio o VIP III Growth Opportunities Portfolio
o VIP III Growth & Income Portfolio

Your allocation to a GRO 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).

Withdrawal charges and an annual administrative charge may be applicable, which
may invade principal.

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 National Integrity Life Insurance Company, 200 Park Avenue, 20th
Floor, New York, New York 10166. You may also call the following toll-free
number: 1-800-433-1778.

A registration statement relating to the contracts, which includes a Statement
of Additional Information (SAI) dated May 1, 1998, 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 COMMISSION 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 CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF OR GUARANTEED BY ANY BANK, NOR
ARE THEY INSURED BY THE FDIC; THEY ARE SUBJECT TO INVESTMENT RISKS, INCLUDING
POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.

<PAGE>

The date of this Prospectus is May 1, 1998.

<PAGE>

TABLE OF CONTENTS

Part 1 - Summary Page

Your Variable Annuity Contract.................................................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..............................................4
Financial Information......................................................... 7

Part 2 - National Integrity And The Separate Account

National Integrity Life Insurance Company......................................9
The Separate Account and the Variable Account Options..........................9
Assets of Our Separate Account.................................................9
Changes In How We Operate......................................................9

Part 3 - Your Investment Options

The Funds.....................................................................10
The Funds' Investment Adviser...........................................10
Investment Objectives of the Portfolios.................................12
Guaranteed Rate Options.......................................................14
Renewals of GRO Accounts.............................................14
Market Value Adjustments.............................................15

Part 4 - Deductions and Charges

Separate Account Charges......................................................16
Annual Administrative Charge..................................................16
Fund Charges..................................................................16
State Premium Tax Deduction...................................................16
Contingent Withdrawal Charge..................................................17
Transfer Charge...............................................................17
Tax Reserve...................................................................18

Part 5 - Terms of Your Variable Annuity

Contributions Under Your Contract.............................................18
Your Account Value............................................................18
Your Purchase of Units in Our Separate Account................................18
How We Determine Unit Value...................................................19
Transfers.....................................................................19
Withdrawals...................................................................20
Assignments...................................................................20
Death Benefits and Similar Benefit Distributions..............................20
<PAGE>

Page

Annuity Benefits..............................................................21
Annuities.....................................................................21
Annuity Payments..............................................................22
Timing of Payment.............................................................22
How You Make Requests and Give Instructions...................................22

Part 6 - Voting Rights

Fund Voting Rights............................................................23
How We Determine Your Voting Shares...........................................23
How Fund Shares Are Voted.....................................................23
Separate Account Voting Rights................................................23

Part 7 - Tax Aspects of the Contracts

Introduction..................................................................24
Your Contract is an Annuity...................................................24
Taxation of Annuities Generally...............................................24
Distribution-at-Death Rules...................................................25
Diversification Standards.....................................................25
Tax-Favored Retirement Programs...............................................26
Individual Retirement Annuities.........................................26
Tax Sheltered Annuities.................................................26
Simplified Employee Pensions............................................26
Corporate and Self-Employed (H.R. 10 and Keogh) Pension
and Profit Sharing Plans..............................................27
Deferred Compensation Plans of State and Local Governments and
Tax-Exempt Organizations..............................................27
Distributions Under Tax-Favored Retirement Programs...........................27
Federal and State Income Tax Withholding......................................28
Impact of Taxes to National Integrity.........................................28
Transfers Among Investment Options............................................28

Part 8 - Additional Information

Systematic Withdrawals........................................................28
Dollar Cost Averaging.........................................................29
Individual Asset Rebalancing..................................................29
Systematic Contributions......................................................29
Performance Information.......................................................29

Appendix A - Illustration of a Market Value Adjustment......................31

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.
<PAGE>

SAI Table of Contents

Part 1 - National Integrity and Custodian
Part 2 - Distribution of the Contracts
Part 3 - Performance Information
Part 4 - Determination of Annuity Unit Values
Part 5 - Death Benefit Information for Contracts Issued Prior to January 1, 1995
Part 6 - 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
National Integrity Life Insurance Company
200 Park Avenue, 20th Floor
New York, New York 10166
ATTN: Request for SAI of Separate Account I (Grandmaster II)

Name: _____________________________

Address: __________________________

City: ________ State: __ Zip: _____
<PAGE>

PART 1 -- SUMMARY

Your Variable Annuity Contract

In this prospectus, we, our and us mean National Integrity Life Insurance
Company (National Integrity), a subsidiary of Integrity Life Insurance Company
(Integrity) and an indirect wholly owned subsidiary of ARM Financial Group, Inc.
(ARM). 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. If a Joint Owner is named, the contract
rights are shared with the Owner. Contract changes or any transactions allowed
under the Contract require both signatures. The rules governing distribution at
death apply when the first Owner dies, see Section 7, "Distribution-at-Death
Rules."

Your retirement or endowment date (Retirement Date) will be no later than your
85th birthday or the tenth contract anniversary, whichever is later, unless you
notify us of a different date.

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 in most states is currently $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 GROs,
or both. The Variable Account Options and the GROs are together referred to as
the Investment Options. Contributions may be allocated to up to nine Investment
Options at any one time. 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 (also referred to as Divisions) 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.

1
<PAGE>

Account Value, Adjusted Account Value and Cash Value

The sum of your values under the GROs 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.

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. See Part
8, "Dollar Cost Averaging" and "Individual Asset Rebalancing."

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 of the assets
in each Variable Account Option 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 of the assets in each 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 1996 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 $100. 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. However, as explained above, a
tax penalty still applies if you are under age 59-1/2.

Your Initial Right to Revoke

2
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Within ten days after you receive your contract, you may cancel it by returning
it to our Administrative Office. The 10-day period may be extended if required
by state law. 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, including any charges deducted. If state law instead requires a
refund of your contributions without any adjustment, we will return that amount
to you. For allocations to GROs, we will refund to you the amount of your
contributions.

Table of Annual Fees and Expenses

Contract Owner Transaction Expenses

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)

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)

Management Other Total Annual
Portfolio Fees (6) Expenses Expenses
- --------- -------- -------- --------

VIP Money Market .......................... .21% .10% .31%

VIP High Income ........................... .59% .12% .71%(6)

VIP Equity-Income ......................... .50% .08% .58%

VIP Growth ................................ .60% .09% .69%

VIP Overseas .............................. .75% .17% .92%

VIP II Investment Grade Bond .............. .44% .14% .58%

VIP II Asset Manager ...................... .55% .10% .65%(6)(7)

VIP II Index 500 .......................... .24% . 4% .28%(7)

VIP II Contrafund ......................... .60% .11% .71%(6)

VIP II Asset Manager: Growth .............. .60% .17% .77%(6)(7)

VIP III Balanced .......................... .45% .16% .61%(6)

VIP III Growth Opportunities .............. .60% .14% .74%(6)

VIP III Growth & Income ................... .49% .21% .70%(6)(8)

- ----------

(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.

3
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(4) See "Deductions and Charges - Separate Account Charges" in Part 4.

(5) In the Funds' prospectus, see "Management, Distribution and Service Fees."

(6) A portion of the brokerage commissions that certain funds pay was used to
reduce funds' expenses. In addition, certain funds have entered into
arrangements with their custodian whereby credits realized, as a result of
uninvested cash balances were used to reduce custodian expenses. Including these
reductions, the total operating expenses presented in the table would have been
.57% for VIP Equity-Income Portfolio, .67% for VIP Growth Portfolio, .90% for
VIP Overseas Portfolio, .64% for VIP II Asset Manager Portfolio, .68% for VIP II
Contrafund Portfolio, .76% for VIP II Asset Manager: Growth Portfolio, and .73%
for VIP III Growth Opportunities Portfolio, and .60% for VIP III Balanced
Portfolio.

(7) The investment adviser agreed to reimburse a portion of VIP II Index 500
Portfolio's expenses during the period. Without this reimbursement, the fund's
management fee, other expenses and total expenses would have been .27%, .13%,
and .40%, respectively.

(8) Annualized

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:

Portfolio 1 year 3 years 5 years 10 years
- --------- ------ ------- ------- --------

VIP Money Market............................ $87.66 $104.61 $123.86 $203.09
VIP High Income............................. $91.86 $117.34 $145.29 $246.89
VIP Equity-Income........................... $90.53 $113.32 $138.53 $233.20
VIP Growth.................................. $91.65 $116.72 $144.25 $244.80
VIP Overseas................................ $94.11 $124.13 $156.63 $269.66
VIP II Investment Grade Bond................ $90.53 $113.32 $138.53 $233.20
VIP II Asset Manager........................ $92.17 $118.27 $146.84 $250.03
VIP II Index 500............................ $87.45 $103.98 $122.81 $200.91
VIP II Contrafund........................... $92.17 $118.27 $146.84 $250.03
VIP II Asset Manager: Growth................ $93.50 $122.28 $153.55 $263.50
VIP III Balanced............................ $91.96 $117.65 $145.81 $247.94
VIP III Growth Opportunities................ $92.47 $119.19 $148.39 $253.15
VIP III Growth & Income..................... $91.76 $117.03 $144.77 $245.84

4
<PAGE>

Expenses per $1,000 investment if you do not surrender your contract at the end
of the applicable period:

Portfolio 1 year 3 years 5 years 10 years
- --------- ------ ------- ------- --------

VIP Money Market........................... $17.66 $54.61 $ 93.86 $203.09
VIP High Income............................ $21.86 $67.34 $115.29 $246.89
VIP Equity-Income.......................... $20.53 $63.32 $108.53 $233.20
VIP Growth................................. $21.65 $66.72 $114.25 $244.80
VIP Overseas............................... $24.11 $74.13 $126.63 $269.66
VIP II Investment Grade Bond............... $20.53 $63.32 $108.53 $233.20
VIP II Asset Manager....................... $22.17 $68.27 $116.84 $250.03
VIP II Index 500........................... $17.45 $53.98 $ 92.81 $200.91
VIP II Contrafund.......................... $22.17 $68.27 $116.84 $250.03
VIP II Asset Manager: Growth............... $23.50 $72.28 $123.55 $263.50
VIP III Balanced........................... $21.96 $67.65 $115.81 $247.94
VIP III Growth Opportunities............... $22.47 $69.19 $118.39 $253.15
VIP III Growth & Income.................... $21.76 $67.03 $114.77 $245.84

Expenses per $1,000 investment if you elect the normal form of annuity at the
end of the applicable period:

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, 1996, except for VIP III
Growth & Income Portfolio, which were based on estimated current expenses.
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.

5
<PAGE>

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.

UNIT VALUES AND UNITS OUTSTANDING

<TABLE>
<CAPTION>
Money High Equity- Investment
Market Income Income Growth Overseas Grade Bond
Division Division Division Division Division Division
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Date of Inception $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00

December 31, 1987 -- -- -- -- -- --

Number of Units -- -- -- -- -- --

December 31, 1988 -- -- -- -- $ 9.79 $ 10.05

Number of Units -- -- -- -- 1,646 1,287

December 31, 1989 -- -- $ 10.99 $ 11.13 $ 12.08 $ 11.48

Number of Units -- -- 12,808 91 1,646 1,286

December 31, 1990 $ 10.17 -- $ 9.54 $ 11.76 $ 11.13 $ 12.06

Number of Units 2,001 -- 10,281 90 1,697 1,283

December 31, 1991 $ 10.64 -- $ 13.63 $ 19.12 $ 13.63 $ 12.25

Number of Units 3,961 -- 12,059 927 2,789 --

December 31, 1992 $ 10.9 -- $ 15.72 $ 20.62 $ 12.01 $ 13.44

Number of Units 2,744 -- 32,842 30,140 3,816 5,995

December 31, 1993 $ 11.10 $ 11.22 $ 18.33 $ 24.29 $ 16.25 $ 14.72

Number of Units 109,685 120,243 192,745 136,418 97,667 52,787

December 31, 1994 $ 11.42 $ 10.90 $ 19.37 $ 23.95 $ 16.31 $ 13.98

Number of Units 782,370 512,098 503,403 372,307 432,518 97,548

December 31, 1995 $ 11.93 $ 12.97 $ 25.81 $ 31.99 $ 17.65 $ 16.18

Number of Units 1,692,564 1,131,907 1,316,163 657,586 426,045 264,608

December 31, 1996 $ 12.40 $ 14.58 $ 29.09 $ 36.19 $ 19.71 $ 16.47

Number of Units 1,453,359 1,605,055 1,895,597 942,118 596,757 340,273

$ 12.90 $ 16.93 $ 36.77 $ 44.09 $ 21.69 $ 17.72

Number of Units 1,407,666 2,108,548 2,245,172 1,026,856 703,364 403,402
</TABLE>

* Inception dates for the VIP High Income Option and the VIP II Index 500 Option
were February 19, 1993 and March 4, 1993, respectively. The inception date for
the VIP III Balanced Option, VIP III Growth Opportunities Option, and VIP III
Growth & Income Option was December 31, 1996. The Inception date for the VIP II
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 VIP Money Market,
VIP Equity-Income, VIP Growth, VIP Overseas, VIP II Investment Grade Bond and
VIP II Asset Manager Options were known as the Money Market, Common Stock,
Aggressive Stock, Global, Bond and Balanced Options, respectively.

6
<PAGE>

UNIT VALUES AND UNITS OUTSTANDING

<TABLE>
<CAPTION>
Asset
Asset Index Contra- Manager Growth Growth
Manager 500 fund Growth Balanced Income Opportunities
Division Division Division Division Division Division Division
---------- ---------- - --------- ---------- - --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Date of Inception* $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00

December 31, 1987 $ 7.92 -- -- -- -- -- --

Number of Units 15,626 -- -- -- -- -- --

December 31, 1988 $ 8.89 -- -- -- -- -- --

Number of Units 23,806 -- -- -- -- -- --

December 31, 1989 $ 11.05 -- -- -- -- -- --

Number of Units 26,296 -- -- -- -- -- --

December 31, 1990 $ 10.9 -- -- -- -- -- --

Number of Units 33,770 -- -- -- -- -- --

December 31, 1991 $ 13.45 -- -- -- -- -- --

Number of Units 28,066 -- -- -- -- -- --

December 31, 1992 $ 14.85 -- -- -- -- -- --

Number of Units 57,934 -- -- -- -- -- --

December 31, 1993 $ 17.73 $ 10.65 -- -- -- -- --

Number of Units 744,402 16,821 -- -- -- -- --

December 31, 1994 $ 16.43 $ 10.62 -- -- -- -- --

Number of Units 1,706,592 99,982 -- -- -- -- --

December 31, 1995 $ 18.95 $ 14.37 $ 13.31 $ 12.02 -- -- --

Number of Units 1,460,833 2,93,436 954,037 85,146 -- -- --

December 31, 1996 $ 21.42 $ 17.41 $ 15.92 $ 14.22 -- -- --

Number of Units 1,351,936 738,488 1,865,749 282,677 -- -- --

$ 25.5 $ 22.79 $ 19.5 $ 17.55 -- -- --

Number of Units 1,277,528 1,458,2803 2,463,777 447,420 -- -- --
</TABLE>

* Inception dates for the VIP High Income Option and the VIP II Index 500 Option
were February 19, 1993 and March 4, 1993, respectively. The inception date for
the VIP III Balanced Option, VIP III Growth Opportunities Option, and VIP III
Growth & Income Option was December 31, 1996. The Inception date for the VIP II
Contrafund Option and the VIP II 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 VIP Money
Market, VIP Equity-Income, VIP Growth, VIP Overseas, VIP II Investment Grade
Bond and VIP II Asset Manager Options were known as the Money Market, Common
Stock, Aggressive Stock, Global, Bond and Balanced Options, respectively.

7
<PAGE>

PART 2 - NATIONAL INTEGRITY AND THE SEPARATE ACCOUNT

National Integrity Life Insurance Company

National Integrity is a stock life insurance company organized under the laws of
New York. Our home office is located in New York, New York. We are authorized to
sell life insurance and annuities in eight 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, and fixed single premium
annuity contracts. We are currently licensed to sell variable contracts in five
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.

National Integrity is an indirect wholly owned subsidiary of ARM. ARM
specializes in the asset accumulation business, providing retail and
institutional customers with products and services designed to serve the growing
long-term savings and retirement markets. At December 31, 1997, ARM had $6.9
billion of assets 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 New York. 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 may 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 New York 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 National Integrity
under the 1940 Act);
- - restrict or eliminate any voting rights of Owners or others who have
voting rights that affect our Separate Account;
- - cause one or more Options to invest in a mutual fund other than or in
addition to the Funds;

8
<PAGE>

- - 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 National
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 three 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 National 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 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, 1996, 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.

9
<PAGE>

The Portfolios of the Funds pay monthly advisory fees to Fidelity Management.
The advisory fee payable by each of the Portfolios, other than the VIP Money
Market Portfolio and the VIP II 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
VIP Equity-Income, VIP Growth, VIP Overseas, VIP II Asset Manager, VIP II
Contrafund, and VIP II Asset Manager: Growth Portfolios, the group fee rate
cannot rise above .52%. For the VIP High Income and VIP II Investment Grade Bond
Portfolios, the group fee rate cannot rise above .37%. The group fee rate drops
as total assets under management increase.

The VIP 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%).

Pursuant to approval of shareholders of VIP II Index 500 at a shareholder
meeting held on November 19, 1997, effective December 1, 1997 Bankers Trust
Company ("BT") has been appointed as the fund's sub- adviser. BT chooses the
fund's investments and acts as the fund's custodian. BT, a New York banking
corporation with principal offices at 130 Liberty Street, New York, New York
10006, is a wholly owned subsidiary of Bankers Trust New York Corporation.

Index 500's management fees are paid out of the fund's assets to Fidelity
Management and BT. The fund also incurs other expenses for services such as
maintaining shareholder records and furnishing shareholder account statements
and financial reports.

Management and sub-advisory fees are calculated and paid every month to Fidelity
Management and BT, respectively. The fund pays the fees at the annual rate of
0.24% of its average net assets. These fees include a management fee of 0.24%
payable to Fidelity Management, and estimated sub-advisory fees of less than
0.01% payable to BT (representing 40% of net income from securities lending).

For investment management, securities lending and custodial services to the
fund, Fidelity Management pays BT fees at an annual rate of 0.006% of the
average net assets of the fund. In addition, the fund pays BT fees equal to 40%
of net income from the fund's securities lending program. The remaining 60% of
net income from the fund's securities lending program goes to the fund.

Set forth in the table below is the individual fund fee rate for the portfolios
and their 1996 aggregate advisory rate, comprised of the individual and group
rates, as a percentage of average net assets, and the VIP II Index 500
Portfolio's 1996 advisory rate as a percentage of average net assets.

1996
Portfolio Individual Rate Aggregate Rate
--------- --------------- --------------
VIP Money Market .03% .21%
VIP High Income .45% .59%
VIP Equity-Income .20% .51%
VIP Growth .30% .61%
VIP Overseas .45% .76%
VIP II Investment Grade Bond .30% .45%
VIP II Asset Manager .25% .64%
VIP II Index 500 N/A .13%
VIP II Contrafund .30% .61%
VIP II Asset Manager: Growth .30% .65%

10
<PAGE>

VIP III Balanced .20% .48%
VIP III Growth Opportunities .30% .61%
VIP III Growth & Income .20% .50%

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.

VIP Money Market Portfolio

VIP Money Market Portfolio seeks to earn a high 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.

VIP High Income Portfolio

VIP High Income Portfolio seeks a high 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.

VIP Equity-Income Portfolio

VIP 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.

VIP Growth Portfolio

VIP 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.

VIP Overseas Portfolio

VIP Overseas Portfolio seeks long-term growth of capital primarily through
investments in foreign securities. It normally invests at least 65% of its
assets in foreign securities.

VIP II Investment Grade Bond Portfolio

VIP II 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.

VIP II Asset Manager Portfolio

VIP II Asset Manager Portfolio seeks high total return with reduced risk over
the long-term by allocating its assets among stocks, bonds and short-term money
market 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 50% in equities, 40% in intermediate to
long-term bonds and 10% in short-term money market instruments.

<PAGE>

VIP II Index 500 Portfolio

VIP II 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.

VIP II Contrafund Portfolio

VIP II 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
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. VIP II 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.

VIP II Asset Manager: Growth Portfolio

VIP II 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 money market 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:

Range Neutral Mix
----- -----------

Stock Class 50-100% 70%
Bond Class 0-50% 25%
Short-Term/
Money Market Class 0-50% 5%

VIP III Growth Opportunities Portfolio

VIP III Growth Opportunities Portfolio seeks to provide capital growth by
investing primarily in common stocks and securities convertible into common
stock.

VIP III Balanced Portfolio

VIP III Balanced Portfolio seeks both income and growth of capital by investing
in a diversified portfolio of equity and fixed-income securities. It uses a
balanced approach to provide the best possible total return from investments in
foreign and domestic equity securities, convertible securities, preferred and
common stocks paying any combination of dividends and capital gains, and fixed
income securities.

VIP III Growth & Income Portfolio

VIP III Growth & Income Portfolio seeks long-term growth of capital with some
current income. It invests primarily in stocks of companies that offer potential
for growth in earnings while paying dividends, but offer the potential for
capital appreciation on future income. Investments may include common and
preferred stocks, convertible securities, fixed-income securities and foreign
securities.

Guaranteed Rate Options

Because of applicable exemptive and exclusionary provisions, interests in
contracts attributable to GROs 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 GROs or the General
Account. Disclosures regarding the GROs 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.

12
<PAGE>

We offer GROs with durations of two, four, six and ten years. We may from time
to time change the durations available. Each allocation to a GRO locks in a
fixed effective annual interest rate declared by us (Guaranteed Interest Rate)
for the duration you select (your GRO Account). The duration of your GRO Account
is the Guarantee Period. Each contribution or transfer to a GRO 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 GROs 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.

We may declare a higher rate of interest in the first year for any Contribution
allocated to a GRO which will exceed the Guaranteed Interest Rate credited
during the remaining years of the Guarantee Period (Enhanced Rate). This
Enhanced Rate will be guaranteed for the Guaranteed Period's first year and
declared at the time of purchase. We reserve the right to declare and credit
additional interest based on Contribution, Account Value, withdrawal dates,
economic conditions or on any other lawful, nondiscriminatory basis (Additional
Interest). Any Enhanced Rate and Additional Interest credited to your GRO
Account will be separate from the Guaranteed Interest Rate and not used in the
Market Value Adjustment formula. The Enhanced Rate or Additional Interest may
not be made applicable under contracts issued in certain states.

Each group of GRO Accounts of the same duration is referred to as a GRO, (i.e.
all of your two-year GRO Accounts are one GRO while all of your four-year GRO
Accounts are another GRO.)

You may obtain information about our current Guaranteed Interest Rates by
calling our Administrative Office.

Allocations to GROs 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 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.
Withdrawal charges and the administrative expense charge may invade principal.

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.
Conversely, the

13
<PAGE>

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 (MVA) for a GRO Account is determined under the
following formula:

MVA = GRO Value x [(1 + A)N/12 / (1 + B + .0025)N/12 - 1], where

A is the Guaranteed Interest Rate being credited to the GRO Account
subject to the Market Value Adjustment,

B 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, B 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 B 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.

PART 4 -- DEDUCTIONS AND CHARGES

Separate Account Charges

National 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 National
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 National 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 National Integrity takes that
annuitants, as a class of persons, will live longer than estimated and therefore
require National 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 on your Contract.

National 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

14
<PAGE>

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 National Integrity or Integrity, the parent of National Integrity,
who purchase contracts under the salary allotment program of either company.

Reduction or Elimination of Separate Account or Administrative Charges

The separate account or administrative charges may be reduced or eliminated when
contract sales are made to individuals or to a group of individuals in such a
manner that results in savings of expenses. The entitlement to such a reduction
will be based on: (1) the size and type of the group of individuals to whom the
Contract is offered; and (2) the amount of expected contributions. Any reduction
or elimination of the separate account or administrative charges will not be
unfairly discriminatory against any person.

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

National 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, National 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 number of years that have
elapsed since 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 contribution year. No withdrawal charge applies when you
withdraw contributions made earlier than your fifth prior contribution 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 and
administrative expense 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 and (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.

Contribution Year in Which Charge as a % of the
Withdrawn Contribution Was Made Contribution Withdrawn
- ------------------------------- ----------------------

Current................................... 7%
First Prior............................... 6
Second Prior.............................. 5
Third Prior............................... 4
Fourth Prior.............................. 3

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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 National
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.
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, National 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.

Reduction or Elimination of the Contingent Withdrawal Charge

We may reduce or eliminate the contingent withdrawal charge when sales of
the contracts are made to individuals or a group of individuals in such a
manner that results in savings of expenses. The entitlement to such a
reduction in the contingent withdrawal charge will be based on the
following: (1) the size and type of the group of individuals to whom the
contract is offered; (2) the amount of expected contributions; and (3)
whether there is a prior or existing relationship with Integrity such as
being an employee of Integrity or an affiliate, receiving distributions or
making internal transfers from other contracts issued by Integrity, or
making transfers of amounts held under qualified plans sponsored by
Integrity or an affiliate. Any reduction or elimination of the contingent
withdrawal charge will not be unfairly discriminatory against any person.

Transfer Charge

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
eight years before your Retirement Date, we may refuse to accept any
contribution made for you. Contributions may also be limited by various laws or
prohibited by National 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.

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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 defined as any day that the New
York Stock Exchange is open.

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. We will accept changes by
telephone transfer. See "Transfers" in Part 5.

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 GROs is guaranteed, subject
to any applicable Market Value Adjustments. See "Guaranteed Rate Options" in
Part 3.

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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 on the Valuation Date.
The Valuation Date for purposes of determining unit values is 4 p.m. Eastern
Time on each day the New York Stock Exchange is open for business.

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 Fund on
that day.

- - Then, we charge or credit for any taxes or amounts set aside as a reserve
for taxes.

- - 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).

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<PAGE>

- - Finally, 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 .00003721, 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.

Generally, this means that we adjust unit values to reflect what happens to the
Fund, and also for the mortality and expense risk charge and any charge for
administrative expenses or taxes.

Transfers

You may transfer your Account Value among the Variable Account Options and the
GROs, subject to National Integrity's then current transfer restrictions.
Transfers to a GRO must be to a newly elected GRO (i.e. to a GRO that you have
not elected before) at the then-current Guaranteed Interest Rate, unless
National Integrity otherwise consents. Transfers from a GRO 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 GROs,
transfers will be made according to the order in which monies were originally
allocated to any GRO.

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 or Individual Asset Rebalancing 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 9:00 a.m. - 5:00 p.m., 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 p.m. Eastern Time (or the close of the New York
Stock Exchange, if earlier) 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.

Transfer requests submitted by agents or market timing services that represent
multiple policies will be processed not later than the next Business Day after
the requests are received by our Administrative Office.

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 contribution amount withdrawn, 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.

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<PAGE>

Assignments

You may not assign the contract as collateral or security for a loan, but an
Owner 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." National Integrity will not be bound by an assignment
unless it is in writing and we have received it at the Administrative Office.

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, 1998 regarding death
benefit information for contracts issued prior to January 1, 1995.

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.

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<PAGE>

Annuities

Alternate forms of annuity benefits can provide for fixed or variable payments
which may be made monthly, quarterly, semi-annually or annually. Variable
payments will be funded through one or more Separate Account Divisions. 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 beyond your 85th birthday or the 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 or variable payments, or both, 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 or variable payments, or both,
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 National Integrity's
current annuity rates then in effect would yield a larger payment, those current
rates will apply instead of the tables.

Variable annuity payments are funded only in the Separate Account Divisions
through the purchase of annuity units. The Variable Account Option or Options
selected cannot be changed after annuity payments begin. The SAI provides
further information concerning the determination of annuity payments. The number
of units purchased is equal to the amount of the first annuity payment divided
by the new annuity unit value for the valuation period which includes the due
date of the first annuity payment. The amount of the first annuity payment is
determined in the same manner for a variable annuity as it is for a fixed
annuity. The number of annuity units stays the same for the annuity payment
period but the new annuity unit value changes to reflect the investment income
and the realized and unrealized capital gains and losses of the Variable Account
Option or Options selected, after charges made against it. Annuity unit values
assume a base rate of net investment return of 5%, except in states which
require a lower rate in which case 3.5% will be used. The annuity unit value
will rise or fall depending on whether the actual rate of net investment return
is higher or lower than the assumed base rate. In the SAI, see "Determination of
Annuity Unit Values."

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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 National
Integrity to defer action in order to protect persons with interests in the
Separate Account. National Integrity can defer payment of your GROs 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.

PART 6 - VOTING RIGHTS

Fund Voting Rights

National 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
eligible deferred compensation 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

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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 National 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.

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 National 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. NATIONAL 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, an 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.

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<PAGE>

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.

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 National 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) 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; (4)
attributable to the taxpayer becoming disabled within the meaning of Code
Section 72(m)(7); (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; (8) under an immediate annuity as defined in Code Section
72(u)(4); or (9) purchase of a first home (distribution up to $10,000).

However, the withdrawal provision of your contract still apply. See
"Withdrawals" in Section 5.

All annuity contracts issued by National 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.

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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 investments of a segregated asset account may cause the investor (i.e.,
the 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. 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.

National 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 National Integrity may issue a contract.

Traditional Individual Retirement Annuities

Code Section 408 (b) permits eligible individuals to contribute to an individual
retirement program known as a Traditional IRA. An individual who receives
compensation and who has not reached age 70-1/2 by the end of the tax year may
establish a Traditional IRA and make contributions up to the deadline for filing
his or her federal income tax return for that year (without extensions).
Traditional 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
Traditional IRA, Roth IRA or another tax-favored retirement program to a
Traditional IRA contract. Your Traditional IRA contract will be issued with a
rider outlining the special terms of your contract which apply to Traditional
IRAs.

The Owner will be deemed to have consented to any other amendment unless the
Owner notifies us that he or she does not consent within 30 days from the date
we mail the amendment to the Owner.

Roth Individual Retirement Annuities

Section 408A of the Code permits eligible individuals to contribute to an
individual retirement program known as a Roth IRA. An individual who receives
compensation may establish a Roth IRA and make contributions up to the deadline
for filing his or her federal income tax return for that year (without
extensions). Roth IRAs are subject to limitations on the amount that may be
contributed, the persons who are eligible to contribute, and on the time when a
tax-favored distribution may commence. An individual may also rollover amounts
distributed from another Roth IRA or Traditional IRA to a Roth IRA contract.
Your Roth IRA contract will be issued with a rider outlining the special terms
of your contract which apply to Roth IRAs. Any amendment made for the purpose of
complying with provisions of the Code and related regulations may be made
without the consent of the Owner. The Owner will be deemed to have consented to
any other amendment unless the Owner notifies us that he or she does not consent
within 30 days form the date we mail the amendment to the Owner.

Simple Individual Retirement Annuities

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<PAGE>

Currently, we do not issue Individual Retirement Annuities known as a "SIMPLE
IRA" as defined in Section 408 (p) of the Code.

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-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. National 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. However, Section 457(g), as added by the Small Business and Jobs
Protection Act (SBJPA) of 1996, provides that on and after August 20, 1996, a
plan maintained by an eligible governmental employer must hold all assets and
income of the plan in a trust, custodial account, or annuity contract for the
exclusive benefit of participants and their beneficiaries. If the plan is in
existence on August 20, 1996, the employer need not establish a trust, custodial
account, or annuity contract until January 1, 1999. Loans to employees may be
permitted under such plans; however, a Section 457 plan is not required to allow
loans. 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. National Integrity does not administer such
plans.

Distributions under Tax Favored Retirement Program

Distributions from tax-favored plans are subject to certain restrictions. Prior
to the enactment of the 1996 SBJPA, distributions of minimum amounts specified
by the Code must have commenced by April 1 of the calendar year following the
calendar year in which the participant reaches age 70-1/2. The SBJPA provides
participants in qualified plans, with the exception of five-percent owners and
Traditional IRA holders, to begin receiving distributions by April 1 of the
calendar year following the later of either (i) the calendar year in which the
employee reaches age 70-1/2, or (ii) the calendar year in which the employee
retires. 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

25
<PAGE>
the distributions. However, the SBJPA of 1996 has suspended the excise tax on
excess distributions. The provision relating to the excise tax on excess
distributions is effective with respect to distributions received in 1997, 1998
and 1999.

The Taxpayer Relief Act of 1997 creating Roth IRAs eliminates mandatory
distribution at age 70 1/2 required for Traditional IRAs and other qualified
plans.

Distributions from a tax-favored plan (not including a Traditional IRA subject
to Code Section 408 or Roth IRA) 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 Traditional 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 Owner
considering adoption of a plan and purchase of a contract in connection
therewith should first consult a qualified and competent tax adviser, with
regard to the suitability of the contract as an investment vehicle for the plan.

Federal and State Income Tax Withholding

When required, 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 National Integrity

The contracts provide that National Integrity may charge the Separate Account
for taxes. National 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 $100. 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.

26
<PAGE>

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,
an administrative expense 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."

Income Plus Withdrawal Program

We offer the Income Plus Withdrawal Program that allows you to pre-authorize
substantially equal periodic withdrawals from your contract prior to your
reaching age 59-1/2. Income Plus Withdrawals are exempt from the 10% penalty
tax, normally applicable to early distributions made prior to age 59-1/2. See
"Taxation of Annuities Generally," in Section 7. Once distributions begin they
should not be changed or stopped until the later of age 59-1/2 or five years
from the date of the first distribution. If you change or stop the distribution
or take an additional withdrawal, you may be liable for the 10% penalty tax that
would have otherwise been due on all prior distributions made under the Income
Plus Program and for any interest thereon.

The Income Plus Withdrawal Program may be elected at any time if you are below
age 59-1/2. You can elect this option by submitting the proper election form to
our Administrative Office. 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. We will
calculate the amount of the distribution under a method selected by you. The
minimum Income Plus Withdrawal currently is $100. You must also specify an
account for direct deposit of your Income Plus Withdrawals.

To enroll under our Income Plus 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 seven Business Day's prior
written notice, and we may terminate or amend the Income Plus 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. This program is not available in
concert with the Systematic Withdrawal Program, Dollar Cost Averaging,
Systematic Transfer Option or Asset Allocation and Rebalancing Program.

Amounts withdrawn by you under the Income Plus 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 Income Plus Withdrawal Program in excess
of the free withdrawal amount will be subject to a contingent withdrawal charge
and a Market Value Adjustment if applicable.

Dollar Cost Averaging

We offer a dollar cost averaging program under which allocations to the VIP
Money Market Option are automatically transferred on a monthly, quarterly,
semi-annual or annual basis to one or more other Variable Account Options. You
must specify a dollar amount to be 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 VIP 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.

Individual Asset Rebalancing

We offer an individual asset rebalancing program whereby 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 Individual 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.

GROs are not eligible for the Individual Asset Rebalancing program.

27
<PAGE>

To enroll under our Individual 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
Individual Asset Rebalancing program. You should, therefore, monitor your use of
such other programs, transfers, and withdrawals while the Individual 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 Individual 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 VIP Money 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 an 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 VIP 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 VIP II Investment
Grade Bond and VIP 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.

APPENDIX A

ILLUSTRATION OF A MARKET VALUE ADJUSTMENT

Contribution: ................................ $50,000.00

28
<PAGE>

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 affect 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 initial contribution. The
Market Value Adjustment operates in a similar manner for transfers. No
contingent withdrawal charge applies to transfers.

The GRO Value for this $50,000 contribution is $67,004.78 at the expiration of
the GRO Account. After three years, the GRO Value is $57,881.25. 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.

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:

-0.0483785 = [(1 + .05)^(36/12) / (1 + .065 + .0025)^(36/12)]- 1

The Market Value Adjustment is a reduction of $2,800.21 from the GRO Value:

-$2,800.21 = -0.0483785 X $57,881.25

The Market Adjusted Value would be:

$55,081.04 = $57,881.25 - $2,800.21

A withdrawal charge of 4% would be assessed against the $50,000 original
contribution:

$2,000.00 = $50,000.00 X .04

Thus, the amount payable on a full withdrawal would be:

$53,081.04 = $57,881.25 - $2,800.21 - $2,000.00

If instead of a full withdrawal, $20,000 was requested, we would first determine
the free withdrawal amount:

Greater of:

a) $5,788.13 = $57,881.25 X .10

b) $2,756.25 = gain in prior contract year
<PAGE>

Free Amount = $5,788.13

The non-free amount would be:

$14,211.87 = $20,000.00 - $5,788.13

The Market Value Adjustment, which is only applicable to the non-free amount,
would be:

- $687.55 = -0.0483785 X $14,211.87

The withdrawal charge would be:

$620.81 = [($14,211.87 + $687.55)/(1 - .04)] - ($14,211.87 + 687.55)

Thus, the total amount needed to provide $20,000 after the Market Value
Adjustment and withdrawal charge would be:

$21,308.36 = $20,000.00 + $687.55 + $620.81

The ending Account Value would be:

$36,572.89 = $57,881.25 - $21,308.36

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:

0.0217384 = [(1 + .05)^(36/12) / (1 + .04 + .0025)^(36/12)]- 1

The Market Value Adjustment is an increase of $1,258.25 to the GRO Value:

$1,258.25 = 0.0217384 X $57,881.25

The Market Adjusted Value would be:

$59,139.50 = $57,881.25 + $1,258.25

A withdrawal charge of 4% would be assessed against the $50,000 original
contribution:

$2,000.00 = $50,000.00 X .04

Thus, the amount payable on a full withdrawal would be:

$57,139.50 = $57,881.25 + $1,258.25 - $2,000.00

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 = $5,788.13

Non-Free Amount = $14,211.87

The Market Value Adjustment would be:

$308.94 = .0217384 X $14,211.87
<PAGE>

The withdrawal charge would be:

$572.29 = [($14,211.87 - $308.94)/(1 - .04)] - ($14,211.87 - $308.94)

Thus, the total amount needed to provide $20,000 after the Market Value
Adjustment and withdrawal charge would be:

$20,270.35 = $20,000.00 - $308.94 + $579.29

The ending Account Value would be:

$37,610.90 = $57,881.25 - $20,270.35

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. Also, the Market Value Adjustment can never decrease the
Account Value below premium plus 3% interest, before any applicable charges.
Account values less than $50,000 will be subject to a $30 annual charge.

<PAGE>

PART B
<PAGE>

STATEMENT OF ADDITIONAL INFORMATION

MAY 1, 1998

FOR

GRANDMASTER II

FLEXIBLE PREMIUM VARIABLE ANNUITY

ISSUED BY

NATIONAL INTEGRITY LIFE INSURANCE COMPANY

AND

FUNDED THROUGH ITS SEPARATE ACCOUNT I

Table of Contents
Page

Part 1 - National Integrity and Custodian......................................2
Part 2 - Distribution of the Contracts.........................................2
Part 3 - Performance Information...............................................3
Part 4 - Determination of Annuity Unit Values.................................10

Part 5 - Death Benefit Information for Contracts Issued Prior to
January 1, 1995......................................................11

Part 6 - Financial Statements.................................................12

This Statement of Additional Information (SAI) is not a prospectus. It should be
read in conjunction with the prospectus for the contracts, dated May 1, 1998.
For definitions of special terms used in the SAI, please refer to the
prospectus.

A copy of the prospectus to which this SAI relates is available at no charge by
writing the Administrative Office at National Integrity Life Insurance Company
("National Integrity"), 200 Park Avenue, 20th Floor, New York, New York 10166,
or by calling 1-800-433-1778.

<PAGE>

PART 1 - NATIONAL INTEGRITY AND CUSTODIAN

National Integrity is a New York stock life insurance company that sells life
insurance and annuities. Its offices are located at 200 Park Avenue, 20th Floor,
New York, New York 10166. National Integrity, the depositor of Separate Account
I, is a wholly owned subsidiary of Integrity Life Insurance Company. Integrity
Life Insurance Company is a wholly owned subsidiary of Integrity Holdings, Inc.,
a Delaware corporation which is a holding company engaged in no active business.
All outstanding shares of Integrity Holdings, Inc. are owned by ARM Financial
Group, Inc. (ARM), a Delaware corporation which is a financial services company
focusing on the long-term savings and retirement marketplace by providing retail
and institutional products and services throughout the United States. ARM owns
100% of the stock of (i) ARM Securities Corporation (ARM Securities), a
Minnesota corporation, registered with the SEC as a broker-dealer and a member
of the National Association of Securities Dealers, Inc., (ii) Integrity Capital
Advisors, Inc., a New York corporation registered with the SEC as an investment
adviser, (iii) SBM Certificate Company, a Minnesota corporation registered with
the SEC as an issuer of face-amount certificates, and (iv) ARM Transfer Agency,
Inc., a Delaware corporation registered with the SEC as a transfer and dividend
disbursing agency. Approximately 91% of the outstanding voting stock of ARM is
owned by The Morgan Stanley Leveraged Equity Fund II, L.P., Morgan Stanley
Capital Partners III, L.P., Morgan Stanley Capital Investors, L.P., and MSCP III
892 Investors, L.P., each of which is a Delaware limited partnership
(collectively, the MSCP Funds). The MSCP Funds are private equity funds
sponsored by Morgan Stanley Group, Inc., a Delaware corporation that, through
its subsidiaries, provides a wide range of financial services on a global basis
(Morgan Stanley). The general partner of each of the MSCP Funds is a wholly
owned subsidiary of Morgan Stanley. Oldarm Limited Partnership, a Kentucky
limited partnership, New ARM, LLC, a Kentucky limited liability company, and
certain current and former employees and management of ARM own in the aggregate
approximately 9% of the voting stock of ARM.

No person has the direct or indirect power to control Morgan Stanley except
insofar as he or she may have such power by virtue of his or her capacity as a
director or executive officer thereof. Morgan Stanley is publicly held; no
individual beneficially owns more than 5% of the common shares; however,
approximately 31% of such shares are subject to a stockholders' agreement or
voting agreement among certain current and former principals and employees of
Morgan Stanley and its predecessor.

Beginning in 1995, ARM provided substantially all of the services required to be
performed on behalf of the Separate Account. Total fees paid to ARM by National
Integrity for management services in 1996 and 1997, including services
applicable to the Registrant, were $__________ and $___________, respectively.

National Integrity is the custodian for the shares of the Funds owned by the
Separate Account. The Funds' shares are held in book-entry form.

Reports and marketing materials, from time to time, may include information
concerning the rating of National Integrity, as determined by A.M. Best Company,
Moody's Investor Service, Standard & Poor's Corporation, Duff & Phelps
Corporation, or other recognized rating services. National Integrity is
currently rated "A" (Excellent) by A.M. Best Company, and has received claims
paying ability ratings of "A" (Good) from Standard & Poor's Corporation, "Baa1"
from Moody's Investors Service, Inc., and "A+" (High) from Duff and Phelps
Credit Rating Company. However, National Integrity does not guarantee the
investment performance of the portfolios, and these ratings do not reflect
protection against investment risk.

PART 2 - DISTRIBUTION OF THE CONTRACTS

ARM Securities, a wholly owned subsidiary of ARM, is the principal underwriter
of the contracts. ARM Securities is registered with the SEC as a broker-dealer
and is a member in good standing of the National Association of Securities
Dealers, Inc. ARM Securities' address is 515 West Market Street, Louisville,
Kentucky 40202. The contracts are offered through ARM Securities on a continuous
basis.

We generally pay a maximum distribution allowance of 6% of initial
contributions. The amount of distribution allowances paid was $__________,
$_________, and $__________ for the years ended December 31, 1997, 1996, and
1995, respectively. No distribution allowances were retained by ARM Securities
during these years. National Integrity may from time to time pay or allow
additional promotional incentives, in the form

2
<PAGE>

of cash or other compensation, to broker-dealers that sell contracts. In some
instances, such other incentives may be offered only to certain broker-dealers
that sell or are expected to sell during specified time periods certain minimum
amounts of the contracts.

PART 3 - PERFORMANCE INFORMATION

Each Variable Account Option may from time to time include the Average Annual
Total Return, the Cumulative Total Return, and Yield of its shares in
advertisements or in information furnished to shareholders. The VIP Money Market
Option may also from time to time include the Yield and Effective Yield of its
shares in information furnished to shareholders. Performance information is
computed separately for each Option in accordance with the formulas described
below. At any time in the future, total return and yields may be higher or lower
than in the past and there can be no assurance that any historical results will
continue.

Total Returns

Total returns reflect all aspects of an Option's return, including the automatic
reinvestment by the Option of all distributions and the deduction of all
applicable charges to the Option on an annual basis, including mortality risk
and expense charges, the annual administrative charge and other charges against
contract values. For purposes of charges not based upon a percentage of contract
values, an average account value of $40,000 has been used. Quotations also will
assume a termination (surrender) at the end of the particular period and reflect
the deductions of the contingent withdrawal charge, if applicable. Any such
total return calculation will be based upon the assumption that the Option
corresponding to the investment portfolio was in existence throughout the stated
period and that the applicable contractual charges and expenses of the Option
during the stated period were equal to those currently applicable under the
contract. Total returns may be shown simultaneously that do not take into
account deduction of the contingent withdrawal charge, and/or the annual
administrative charge.

Average annual total returns are calculated by determining the growth or decline
in value of a hypothetical historical investment in the Option over certain
periods, including 1, 3, 5, and 10 years (up to the life of the Option), and
then calculating the annually compounded percentage rate that would have
produced the same result if the rate of growth or decline in value had been
constant over the period. Investors should realize that the Option's performance
is not constant over time, but changes from year to year, and that the average
annual returns represent the averages of historical figures as opposed to the
actual historical performance of an Option during any portion of the period
illustrated. Average annual returns are calculated pursuant to the following
formula: P(1+T)n = ERV, where P is a hypothetical initial payment of $1,000, T
is the average annual total return, n is the number of years, and ERV is the
withdrawal value at the end of the period.

Cumulative total returns are unaveraged and reflect the simple percentage change
in the value of a hypothetical investment in the Option over a stated period of
time. In addition to the period since inception, cumulative total returns may be
calculated on a year-to-date basis at the end of each calendar month in the
current calendar year. The last day of the period for year-to-date returns is
the last day of the most recent calendar month at the time of publication.

Yields

Some Options may advertise yields. Yields quoted in advertising reflect the
change in value of a hypothetical investment in the Option over a stated period
of time, not taking into account capital gains or losses or the imposition of
any contingent withdrawal charge. Yields are annualized and stated as a
percentage.

Current yield and effective yield are calculated for the VIP Money Market
Option. Current Yield is based on the change in the value of a hypothetical
investment (exclusive of capital changes) over a particular 7-day period, less a
hypothetical charge reflecting deductions from contract values during the period
(the base period), and stated as a percentage of the investment at the start of
the base period (the base period return). The base period return is then
annualized by multiplying by 365/7, with the resulting yield figure carried to
at least the nearest hundredth of one percent. Effective yield assumes that all
dividends received during an annual period have been reinvested. This
compounding effect causes effective yield to be higher than current

3
<PAGE>

yield. Calculation of effective yield begins with the same base period return
used in the calculation of current yield, which is then annualized to reflect
weekly compounding pursuant to the following formula:

Effective Yield = {(Base Period Return) + 1)^(365/7)} - 1

Performance Comparisons

Performance information for an Option may be compared, in reports and
advertising, to: (1) Standard & Poor's Stock Index (S&P 500), Dow Jones
Industrial Averages, (DJIA), Donoghue Money Market Institutional Averages, or
other unmanaged indices generally regarded as representative of the securities
markets; (2) other variable annuity separate accounts or other investment
products tracked by Lipper Analytical Services, Inc. or the Variable Annuity
Research and Data Service, which are widely used independent research firms that
rank mutual funds and other investment companies by overall performance,
investment objectives, and assets; and (3) the Consumer Price Index (measure of
inflation) to assess the real rate of return from an investment in a contract.
Unmanaged indices may assume the reinvestment of dividends but generally do not
reflect deductions for annuity charges, investment management costs, brokerage
costs and other transaction costs that are normally paid when directly investing
in securities.

Each Option may from time to time also include the ranking of its performance
figures relative to such figures for groups of mutual funds categorized by
Lipper Analytical Services (Lipper) as having the same or similar investment
objectives or by similar services that monitor the performance of mutual funds.
Each Option may also from time to time compare its performance to average mutual
fund performance figures compiled by Lipper in Lipper Performance Analysis.
Advertisements or information furnished to present shareholders or prospective
investors may also include evaluations of an Option published by nationally
recognized ranking services and by financial publications that are nationally
recognized such as Barron's, Business Week, CDA Technologies, Inc., Changing
Times, Consumer's Digest, Dow Jones Industrial Average, Financial Planning,
Financial Times, Financial World, Forbes, Fortune, Global Investor, Hulbert's
Financial Digest, Institutional Investor, Investors Daily, Money, Morningstar
Mutual Funds, The New York Times, Personal Investor, Stanger's Investment
Adviser, Value Line, The Wall Street Journal, Wiesenberger Investment Company
Service and USA Today.

The performance figures described above may also be used to compare the
performance of an Option's shares against certain widely recognized standards or
indices for stock and bond market performance. The following are the indices
against which the Options may compare performance:

The Standard & Poor's Composite Index of 500 Stocks (the S&P 500) is a market
value-weighted and unmanaged index showing the changes in the aggregate market
value of 500 stocks relative to the base period 1941-43. The S&P 500 Index is
composed almost entirely of common stocks of companies listed on the NYSE,
although the common stocks of a few companies listed on the American Stock
Exchange or traded OTC are included. The 500 companies represented include 400
industrial, 60 transportation and 50 financial services concerns. The S&P 500
Index represents about 80% of the market value of all issues traded on the NYSE.

The Dow Jones Composite Average (or its component averages) is an unmanaged
index composed of 30 blue-chip industrial corporation stocks (Dow Jones
Industrial Average), 15 utilities company stocks and 20 transportation stocks.
Comparisons of performance assume reinvestment of dividends.

The New York Stock Exchange composite or component indices are unmanaged indices
of all industrial, utilities, transportation and finance company stocks listed
on the New York Stock Exchange.

The Wilshire 5000 Equity Index (or its component indices) represents the return
of the market value of all common equity securities for which daily pricing is
available. Comparisons of performance assume reinvestment of dividends.

The Morgan Stanley Capital International EAFE Index is an arithmetic, market
value-weighted average of the performance of over 900 securities on the stock
exchanges of countries in Europe, Australia and the Far East.

4
<PAGE>

The Morgan Stanley Capital International World Index - An arithmetic, market
value-weighted average of the performance of over 1,470 securities listed on the
stock exchanges of countries in Europe, Australia, the Far East, Canada and the
United States.

The Goldman Sachs 100 Convertible Bond Index currently includes 67 bonds and 33
preferred stocks. The original list of names was generated by screening for
convertible issues of $100 million or greater in market capitalization. The
index is priced monthly.

The Lehman Brothers Government Bond Index (the Lehman Government Index) is a
measure of the market value of all public obligations of the U.S. Treasury; all
publicly issued debt of all agencies of the U.S. Government and all
quasi-federal corporations; and all corporate debt guaranteed by the U.S.
Government. Mortgage-backed securities, flower bonds and foreign targeted issues
are not included in the Lehman Government Index.

The Lehman Brothers Government/Corporate Bond Index (the Lehman
Government/Corporate Index) is a measure of the market value of approximately
5,300 bonds with a face value currently in excess of $1 million, which have at
least one year to maturity and are rated "Baa" or higher (investment grade) by a
nationally recognized statistical rating agency.

The Lehman Brothers Government/Corporate Intermediate Bond Index (the Lehman
Government/Corporate Intermediate Index) is composed of all bonds covered by the
Lehman Brothers Government/Corporate Bond Index with maturities between one and
9.99 years. Total return comprises price appreciation/depreciation and income as
a percentage of the original investment. Indexes are rebalanced monthly by
market capitalization.

The Lehman Brothers Intermediate Treasury Bond Index includes bonds with
maturities between one and ten years with a face value currently in excess of $1
million, that are rated investment grade or higher by a nationally recognized
statistical rating agency.

The Shearson Lehman Long-Term Treasury Bond Index is composed of all bonds
covered by the Shearson Lehman Hutton Treasury Bond Index with maturities of 10
years or greater.

The National Association of Securities Dealers Automated Quotation System
(NASDAQ) Composite Index covers 4,500 stocks traded over the counter. It
represents many small company stocks but is heavily influenced by about 100 of
the largest NASDAQ stocks. It is a value-weighted index calculated on price
change only and does not include income.

The NASDAQ Industrial Index is composed of more than 3,000 industrial issues. It
is a value-weighted index calculated on price change only and does not include
income.

The Value Line (Geometric) Index is an unweighted index of the approximately
1,700 stocks followed by the Value Line Investment Survey.

The Salomon Brothers GNMA Index includes pools of mortgages originated by
private lenders and guaranteed by the mortgage pools of the Government National
Mortgage Association.

The Salomon Brothers' World Market Index is a measure of the return of an
equally weighted basket of short-term (three month U.S. Government securities
and bank deposits) investments in eight major currencies: the U.S. dollars, UK
pounds sterling, Canadian dollars, Japanese yen, Swiss francs, French francs,
German deutsche mark and Netherlands guilder.

The Salomon Brothers Broad Investment-Grade Bond Index contains approximately
3,800 Treasury and agency, corporate and mortgage bonds with a rating of BBB or
higher, a stated maturity of at least one year, and a par value outstanding of
$25 million or more. The index is weighted according to the market value of all
bond issues included in the index.

5
<PAGE>

The Salomon Brothers High Grade Corporate Bond Index consists of publicly
issued, non-convertible corporate bonds rated AA or AAA. It is a value-weighted,
total return index, including approximately 800 issues with maturities of 12
years or grater.

The Salomon Brothers World Bond Index measures the total return performance of
high-quality securities in major sectors of the international bond market. The
index covers approximately 600 bonds from 10 currencies: Australian dollars,
Canadian dollars, European Currency Units, French francs, Japanese yen,
Netherlands guilder, Swiss francs, UK pounds sterling, U.S. dollars, and German
deutsche marks.

The J.P. Morgan Global Government Bond Index is a total return, market
capitalization weighted index, rebalanced monthly consisting of the following
countries: Australia, Belgium, Canada, Denmark, France, Germany, Italy, Japan,
Netherlands, Spain, Sweden, United Kingdom and United States.

The 50/50 Index assumes a static mix of 50% of the S&P 500 Index and 50% of the
Lehman Government Corporate Index.

Other Composite Indices: 70% S&P 500 Index and 30% NASDAQ Industrial Index; 35%
S&P 500 Index and 65% Salomon Brothers High Grade Bond Index; and 65% S&P Index
and 35% Salomon Brothers High Grade Bond Index.

The SEI Median Balanced Fund Universe measures a group of funds with an average
annual equity commitment and an average annual bond - plus - private - placement
commitment greater than 5% each year. SEI must have at least two years of data
for a fund to be considered for the population.

The Russell 2000/Small Stock Index comprises the smallest 2000 stocks in the
Russell 3000 Index, and represents approximately 11% of the total U.S. equity
market capitalization. The Russell 3000 Index comprises the 3,000 largest U.S.
companies by market capitalization. The smallest company has a market value of
roughly $20 million.

The Russell 2500 Index is comprised of the bottom 500 stocks in the Russell 1000
Index which represents the universe of stocks from which most active money
managers typically select; and all the stocks in the Russell 2000 Index. The
largest security in the index has a market capitalization of approximately 1.3
billion.

The Consumer Price Index (or Cost of Living Index), published by the United
States Bureau of Labor Statistics is a statistical measure of change, over time,
in the price of goods and services in major expenditure groups.

Stocks, Bonds, Bills and Inflation, published by Hobson Associates, presents an
historical measure of yield, price and total return for common and small company
stocks, long-term government bonds, Treasury bills and inflation.

Savings and Loan Historical Interest Rates as published in the United States
Savings & Loan League Fact Book.

Historical data supplied by the research departments of First Boston
Corporation, the J.P. Morgan companies, Salomon Brothers, Merrill Lynch, Pierce,
Fenner & Smith, Shearson Lehman Hutton and Bloomberg L.P.

The MSCI Combined Far East Free ex Japan Index is a market-capitalization
weighted index comprising stocks in Hong Kong, Indonesia, Korea, Malaysia,
Philippines, Singapore and Thailand. Korea is included in the MSCI Combined Far
East Free ex Japan Index at 20% of its market capitalization.

The First Boston High Yield Index generally includes over 180 issues with an
average maturity range of seven to ten years with a minimum capitalization of
$100 million. All issues are individually trader-priced monthly.

In reports or other communications to shareholders, the Fund may also describe
general economic and market conditions affecting the Options and may compare the
performance of the Options with (1) that of mutual funds included in the
rankings prepared by Lipper or similar investment services that monitor the
performance of insurance company separate accounts or mutual funds, (2)
IBC/Donoghue's Money Fund Report, (3) other appropriate indices of investment
securities and averages for peer universe of funds which

6
<PAGE>

are described in this Statement of Additional Information, or (4) data developed
by National Integrity or any of the Sub-Advisers derived from such indices or
averages.

Individualized Computer Generated Illustrations

National Integrity may from time to time use computer-based software available
through Morningstar, CDA/Wiesenberger and/or other firms to provide registered
representatives and existing and/or potential owners of the contracts with
individualized hypothetical performance illustrations for some or all of the
Variable Account Options. Such illustrations may include, without limitation,
graphs, bar charts and other types of formats presenting the following
information: (i) the historical results of a hypothetical investment in a single
Option; (ii) the historical fluctuation of the value of a single Option (actual
and hypothetical); (iii) the historical results of a hypothetical investment in
more than one Option; (iv) the historical performance of two or more market
indices in relation to one another and/or one or more Options; (v) the
historical performance of two or more market indices in comparison to a single
Option or a group of Options; (vi) a market risk/reward scatter chart showing
the historical risk/reward relationship of one or more mutual funds or Options
to one or more indices and a broad category of similar anonymous variable
annuity subaccounts; and (vii) Option data sheets showing various information
about one or more Options (such as information concerning total return for
various periods, fees and expenses, standard deviation, alpha and beta,
investment objective, inception date and net assets). We reserve the right to
republish figures independently provided by Morningstar or any similar agency or
service.

PART 4 - DETERMINATION OF ANNUITY UNIT VALUES

The annuity unit value was initially fixed at $1.00 for contracts with assumed
base rates of net investment return of 5% and 3.5% a year, respectively. For
each valuation period thereafter, it is the annuity value for the preceding
valuation period multiplied by the adjusted net investment factor under the
contracts. For each valuation period, the adjusted net investment factor is
equal to the net investment factor reduced for each day in the valuation period
by:

* .00013366 for a contract with an assumed base rate of net investment
return of 5% a year; or

* .00009425 for a contract with an assumed base rate of net investment
return of 3.5% a year.

Because of this adjustment, the annuity unit value rises and falls depending on
whether the actual rate of net investment return (after charges) is higher or
lower than the assumed base rate.

All certificates have a 5% assumed base rate, except in states where that rate
is not permitted. Annuity payments under contracts with an assumed base rate of
3.5% will at first be smaller than those under contracts with a 5% assumed base
rate. Payments under the 3.5% contracts, however, will rise more rapidly when
unit values are rising, and payments will fall more slowly when unit values are
falling, than those under 5% contracts.

The amounts of variable annuity payments are determined as follows:

Payments normally start on the Annuitant's retirement date. The first three
monthly payments are the same. Each of the first three monthly payments will be
based on the amount taken from the tables in the contract or on our current
rates, whichever is more favorable to the participant. Where the Company's
current annuity rates are used, contributions in the current and five prior
participation years will qualify for the Company's current individual annuity
rates applicable to funds derived from sources outside the Company. The balance
of the proceeds will qualify for the Company's current individual annuity rates
for payment of proceeds.

The first three monthly payments depend on the assumed base rate of net
investment return and the forms of annuity chosen (and any fixed period). If the
annuity involves a life contingency, the risk class and the age of the
annuitants will affect payments.

7
<PAGE>

annuity unit value for the valuation period that includes the due date of the
first annuity payment. The average annuity unit value is the average of the
annuity unit values for the valuation periods ending in that month. Each
business day together with any non-business day or consecutive non-business day
immediately preceding such business day will constitute a valuation period.

Illustration of Changes in Annuity Unit Values. To show how we determine
variable annuity payments from month to month, assume that the contract value on
a retirement date is enough to fund an annuity with a monthly payment of $363
and that the annuity unit value for the valuation period that includes the due
date of the first annuity payment is $1.05. The number of annuity units credited
under your contract would be 345.71 (363 divided by 1.05 = 345.71).

If the fourth monthly payment is due in March, and the average annuity unit
value for January was $1.10, the annuity payment for March would be the number
of units (345.71) times the average annuity unit value ($1.10), or $380.28. If
the average annuity unit value was $1.00 in February, the annuity payment for
April would be 345.71 times $1.00, or $345.71.

For period certain life annuities and life income annuities, the participant may
not surrender or redeem once annuity payments commence. For period certain life
annuities only, 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 present value of future guaranteed payments for a period certain is
based on the number of payments left, the assumed base rate of net return, the
number of annuity units and the annuity unit value for the date the Company
receives a written request for lump sum payment of remaining values. Assets held
in the Account at least equal to all statutory reserves required for such
Separate Account.

PART 5 - DEATH BENEFIT INFORMATION FOR CONTRACTS ISSUED PRIOR TO JANUARY 1, 1995

Notwithstanding anything in the prospectus to the contrary, for contracts issued
prior to January 1, 1995, the amount of the death benefit is the greatest of:

* your Account Value
* the Account Value at the beginning of the seventh 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.

PART 6 - FINANCIAL STATEMENTS

Ernst & Young LLP, Suite 2100, 400 West Market Street, Louisville, Kentucky
40202, is our independent auditor and serves as independent auditor of the
Separate Account. Ernst & Young LLP on an annual basis will audit certain
financial statements prepared by management and express an opinion on such
financial statements based on their audits.

The financial statements of the Separate Account as of December 31, 1997, and
for the periods indicated in the financial statements and the statutory-basis
financial statements of National Integrity as of and for the years ended
December 31, 1997 and 1996 included in this SAI have been audited by Ernst &
Young LLP, independent auditors, as set forth in their reports included herein.

The financial statements of National Integrity should be distinguished from the
financial statements of the Separate Account and should be considered only as
they relate to the ability of National Integrity to meet its obligations under
the contract. They should not be considered as relating to the investment
performance of the assets held in the Separate Account.

8
<PAGE>

CROSS REFERENCE SHEET - GrandMaster III

Showing Location in Part A (Prospectus) and Part B (Statement of Additional
Information) of Information required By Form N-4

PART A: INFORMATION REQUIRED IN PROSPECTUS - GrandMaster III

Form N-4 Item No. Location in Prospectus

1. Cover Page Cover Page

2. Definitions Part 1 - Summary

3. Synopsis Part 1 - Summary; Table of
Annual Fees and Expenses;
Examples

4. Condensed Financial Information Part 1 - Financial Information

5. General Description of Registrant, Part 2 - National Integrity and
the Separate Account;
Annuity Contracts Part 3 - Your Investment Options

6. Deductions Part 4 - Deductions and Charges

7. General Description of Variable Part 5 - Terms of Your Variable
Annuity contracts Annuity Contract

8. Annuity Period Part 5 - Terms of Your Variable
Annuity Contract

9. Death Benefit Part 5 - Terms of Your Variable
Annuity Contract

10. Purchases and Contract Value Part 5 - Terms of Your Variable
Annuity Contract

11. Redemptions Part 5 - Terms of Your Variable
Annuity Contract

12. Taxes Part 7 - Tax Aspects of the
Contracts

13. Legal Proceedings Not Applicable

14. Table of Contents of the Statement Table of Contents
of Additional Information
<PAGE>

PART B: INFORMATION REQUIRED IN STATEMENT OF ADDITIONAL INFORMATION -
GrandMaster III

Form N-4 Item No. Location in Statement of
Additional Information

15. Cover Page Cover Page

16. Table of Contents Cover Page

17. General Information and History Part 1 - National Integrity and
Custodian

18. Services Part 1 - National Integrity
and Custodian

19. Purchase of Securities Being Offered Part 2 - Distribution of the
Contracts

20. Underwriters Part 2 - Distribution of the
Contracts

21. Calculation of Performance Data Part 3 - Performance Information

22. Annuity Payments Part 4 - Determination of
Annuity Unit Values

23. Financial Statements Part 5 - Financial Statements

<PAGE>

PART A
<PAGE>

Prospectus
GrandMaster III
Flexible Premium Variable Annuity
issued by National Integrity Life Insurance Company

Contributions to the Variable Account Options are invested in shares of
corresponding portfolios of the Variable Insurance Products Fund (VIP), Variable
Insurance Products Fund II (VIP II), and Variable Insurance Products Fund III
(VIP III) (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 thirteen Variable Account Options, which invest in the following
portfolios:

Withdrawal charges and an annual administrative charge may be applicable, which
may invade principal.

<PAGE>

The date of this Prospectus is May 1, 1998.
<PAGE>

TABLE OF CONTENTS

Part 1 - Summary Page

Part 2 - National Integrity And The Separate Account

Part 3 - Your Investment Options

Part 4 - Deductions and Charges

Separate Account Charges......................................................16
Annual Administrative Charge..................................................16
Fund Charges..................................................................16
State Premium Tax Deduction...................................................16
Contingent Withdrawal Charge..................................................16
Transfer Charge...............................................................17
Hardship Waiver...............................................................18
Tax Reserve...................................................................18

Part 5 - Terms of Your Variable Annuity

Contributions Under Your Contract.............................................18
Your Account Value............................................................19
Your Purchase of Units in Our Separate Account................................19
How We Determine Unit Value...................................................19
Transfers.....................................................................20
Withdrawals...................................................................20
Assignments...................................................................21
Death Benefits and Similar Benefit Distributions..............................21
<PAGE>

Page

Annuity Benefits..............................................................21
Annuities.....................................................................22
Annuity Payments..............................................................22
Timing of Payment.............................................................23
How You Make Requests and Give Instructions...................................23

Part 6 - Voting Rights

Fund Voting Rights............................................................23
How We Determine Your Voting Shares...........................................23
How Fund Shares Are Voted.....................................................24
Separate Account Voting Rights................................................24

Part 7 - Tax Aspects of the Contracts

Introduction..................................................................24
Your Contract is an Annuity...................................................24
Taxation of Annuities Generally...............................................25
Distribution-at-Death Rules...................................................25
Diversification Standards.....................................................26
Tax-Favored Retirement Programs...............................................26
Individual Retirement Annuities.........................................26
Tax Sheltered Annuities.................................................27
Simplified Employee Pensions............................................27
Corporate and Self-Employed (H.R. 10 and Keogh) Pension
and Profit Sharing Plans..............................................27
Deferred Compensation Plans of State and Local Governments and
Tax-Exempt Organizations..............................................28
Distributions Under Tax-Favored Retirement Programs...........................28
Federal and State Income Tax Withholding......................................29
Impact of Taxes to National Integrity.........................................29
Transfers Among Investment Options............................................29

Part 8 - Additional Information

Systematic Withdrawals........................................................29
Dollar Cost Averaging.........................................................30
Individual Asset Rebalancing..................................................30
Ibbotson Asset Allocation and Rebalancing Program.............................30
Systematic Contributions......................................................31
Performance Information.......................................................32

Appendix A - Illustration of a Market Value Adjustment......................33

SAI Table of Contents

Part 1 - National Integrity and Custodian
Part 2 - Distribution of the Contracts
Part 3 - Performance Information
Part 4 - Determination of Annuity Unit Values
Part 5 - 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
National Integrity Life Insurance Company
200 Park Avenue, 20th Floor
New York, New York 10166
ATTN: Request for SAI of Separate Account I (Grandmaster III)

Name: ________________________________

Address: _____________________________

City: __________ State: __ Zip: ______
<PAGE>

PART 1 -- SUMMARY

Your Variable Annuity Contract

Your retirement or endowment date (Retirement Date) will be no later than your
90th birthday or earlier, if required by law, unless you notify us of a
different date.

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.

How Your Contract is Taxed

Your Contributions

The minimum initial contribution in most states is currently $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

Variable Account Options

1
<PAGE>

Account Value, Adjusted Account Value and Cash Value

Transfers

Charges and Fees

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.
Under certain circumstances, the contingent withdrawal charge and market value
adjustment may be waived. 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 contribution 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 10% of the
Account Value, minus cumulative prior withdrawals in the current contract year.
However, as explained above, a tax penalty still applies if you are under age
59-1/2.

2
<PAGE>

Your Initial Right to Revoke

Table of Annual Fees and Expenses

Contract Owner Transaction Expenses

Separate Account Annual Expenses (as a
percentage of average account value) (4)

Fund Annual Expenses After Reimbursement
(as a percentage of average net assets) (5)

Management Other Total Annual
Portfolio Fees (6) Expenses Expenses
- --------- -------- -------- --------

VIP Money Market .......................... .21% .10% .31%

VIP High Income ........................... .59% .12% .71%(6)

VIP Equity-Income ......................... .50% .08% .58%

VIP Growth ................................ .60% .09% .69%

VIP Overseas .............................. .75% .17% .92%

VIP II Investment Grade Bond .............. .44% .14% .58%

VIP II Asset Manager ...................... .55% .10% .65%(6)(7)

VIP II Index 500 .......................... .24% . 4% .28%(7)

VIP II Contrafund ......................... .60% .11% .71%(6)

VIP II Asset Manager: Growth .............. .60% .17% .77%(6)(7)

VIP III Balanced .......................... .45% .16% .61%(6)

VIP III Growth Opportunities .............. .60% .14% .74%(6)

VIP III Growth & Income ................... .49% .21% .70%(6)(8)

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(4) See "Deductions and Charges - Separate Account Charges" in Part 4.

(5) In the Funds' prospectus, see "Management, Distribution and Service Fees."

(8) Annualized

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:

Portfolio 1 year 3 years 5 years 10 years
- --------- ------ ------- ------- --------

VIP Money Market.......................... $ 97.66 $114.61 $133.86 $203.09
VIP High Income........................... $101.86 $127.34 $155.29 $246.89
VIP Equity-Income......................... $100.53 $123.32 $148.53 $233.20
VIP Growth................................ $101.65 $126.72 $154.25 $244.80
VIP Overseas.............................. $104.11 $134.13 $166.63 $269.66
VIP II Investment Grade Bond.............. $100.53 $123.32 $148.53 $233.20
VIP II Asset Manager...................... $102.17 $128.27 $156.84 $250.03
VIP II Index 500.......................... $ 97.45 $113.98 $132.81 $200.91
VIP II Contrafund......................... $102.17 $128.27 $156.84 $250.03
VIP II Asset Manager: Growth.............. $103.50 $132.28 $163.55 $263.50
VIP III Balanced.......................... $101.96 $127.65 $155.81 $247.94
VIP III Growth Opportunities.............. $102.47 $129.19 $158.39 $253.15
VIP III Growth & Income................... $101.76 $127.03 $154.77 $245.84

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Expenses per $1,000 investment if you do not surrender your contract at the end
of the applicable period:

Portfolio 1 year 3 years 5 years 10 years
- --------- ------ ------- ------- --------

VIP Money Market............................ $17.66 $54.61 $ 93.86 $203.09
VIP High Income............................. $21.86 $67.34 $115.29 $246.89
VIP Equity-Income........................... $20.53 $63.32 $108.53 $233.20
VIP Growth.................................. $21.65 $66.72 $114.25 $244.80
VIP Overseas................................ $24.11 $74.13 $126.63 $269.66
VIP II Investment Grade Bond................ $20.53 $63.32 $108.53 $233.20
VIP II Asset Manager........................ $22.17 $68.27 $116.84 $250.03
VIP II Index 500............................ $17.45 $53.98 $ 92.81 $200.91
VIP II Contrafund........................... $22.17 $68.27 $116.84 $250.03
VIP II Asset Manager: Growth................ $23.50 $72.28 $123.55 $263.50
VIP III Balanced............................ $21.96 $67.65 $115.81 $247.94
VIP III Growth Opportunities................ $22.47 $69.19 $118.39 $253.15
VIP III Growth & Income..................... $21.76 $67.03 $114.77 $245.84