SEPARATE ACCOUNT II OF NATIONAL INTEGRITY LIFE INSURANCE CO, 497, 1997-11-17

SEPARATE ACCOUNT II OF NATIONAL INTEGRITY LIFE INSURANCE CO
497, 1997-11-17

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<PAGE>

Rule 497(c)
Registration No. 33-51126

STATEMENT OF ADDITIONAL INFORMATION

NOVEMBER 1, 1997

FOR

PINNACLE(VERSION II)

FLEXIBLE PREMIUM VARIABLE ANNUITY

ISSUED BY

NATIONAL INTEGRITY LIFE INSURANCE COMPANY

AND

FUNDED THROUGH ITS SEPARATE ACCOUNT II

TABLE OF CONTENTS
Page

Part 1 - National Integrity and Custodian. . . . . . . . . . . . . . . . . 2
Part 2 - Distribution of the Contracts . . . . . . . . . . . . . . . . . . 3
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 November 1,
1997. 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 1-800-325-8583.

<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 II, 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) ARM
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.

In June 1997, ARM Financial completed an initial public offering (the
"Offering") of 9.2 million shares of Class A common stock, par value of $.01 per
share (the "New Class As Common Stock"), of which 5.75 million shares were sold
by ARM Financial and 3.45 million shares were sold by the Morgan Stanley
Stockholders (as defined below). Concurrent with the closing of the Offering,
ARM Financial amended and restated its Certificate of Incorporation to
effectuate a recapitalization such that (i) the common equity of ARM Financial
consists of New Class A Common Stock and Class B Non-Voting Common Stock, par
value of $.01 per share (the "New Class B Common Stock" and, together with the
New Class A Common Stock, the "New Common Stock"), (ii) authorized shares of the
New Class A Common Stock and New Class B common Stock were increased to 150
million shares and 50 million shares, respectively, (iii) each outstanding share
of common stock of ARM Financial was converted into one share of New Class A
Common Stock, (iv) certain shares of the New Class A Common Stock owned by
private equity funds sponsored by Morgan Stanley, Dean Witter, Discover & Co.
(the successor to Morgan Stanley Group Inc. in its merger with Dean Witter,
Discover & Co.) (the "Morgan Stanley Stockholders") were converted into New
Class B Common Stock such that, after giving effect to such conversion, but not
giving effect to the Offering, the Morgan Stanley Stockholders owned, in the
aggregate, 49% of the outstanding New Class A Common Stock, and (v) each share
of New Common Stock was split into 706 shares of New Common Stock. Holders of
New Class B Common Stock have not right to vote on matters submitted to a vote
of stockholders, except in certain circumstances. Shares of the New Class B
Common Stock have no preemptive or other subscription rights and are convertible
into an equal number of shares of New Class A Common Stock (1) at the option of
the holder thereof to the extent that, following such conversion, the Morgan
Stanley Stockholders will not, in the aggregate, own more than 49% of the
outstanding shares of New Class A Common Stock, and (2) automatically upon the
transfer of such shares by any Morgan Stanley Stockholder to a person that is
not a Morgan Stanley Stockholder or an affiliate of a Morgan Stanley
Stockholder. The Morgan Stanley Stockholders owned approximately 91% of the
outstanding shares of ARM Financial's common stock prior to the Offering and
approximately 53% following the Offering.

No person has the direct or indirect power to control Morgan Stanley, Dean
Witter, Discover & Co., 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, Dean Witter, Discover & Co., is publicly held; no individual
beneficially owns more than 5% of the common shares; however, approximately 13%
of such shares are subject to a stockholders' agreement or voting agreement
among certain current and former principals and employees of Morgan Stanley,
Dean Witter, Discover & Co., and its predecessor.

Beginning in 1994, 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 1995 and 1996, including services
applicable to the Registrant, were $5,640,827 and $6,007,766, respectively.

National Integrity is the custodian for the shares of Portfolios owned by the
Separate Account. The Portfolios' 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

<PAGE>

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.

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 other information furnished to shareholders. The Janus
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. 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. Total returns may be shown simultaneously that
do not take into account deduction of the contingent withdrawal charge, and/or
the annual administrative charge.

Nonstandardized "total return" will be calculated in a similar manner and for
the same time periods as the average annual total return and for three years
except total return will assume an initial investment of $60,000 and will not
reflect the deduction of any applicable contingent withdrawal charge, which, if
reflected, would decrease the level of performance shown. The contingent
withdrawal charge is not reflected because the contracts are designed for long
term investment. An assumed initial investment of $60,000 will be used because
that figure more closely approximates the size of a typical contract than does
the $1,000 figure used in calculating the standardized average annual total
return quotations. The amount of the hypothetical initial investment assumed
affects performance because the annual administrative charge is a fixed per
contract charge.

AVERAGE ANNUAL TOTAL RETURNS are calculated by determining the growth or
decline in the value of a hypothetical historical investment in the Option
over certain periods, including 1, 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
n
are calculated pursuant to the following formula: P(1+T) = 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.

3
<PAGE>

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 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 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:

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

<PAGE>

NON-STANDARD AVERAGE TOTAL RETURN - The table provides cumulative and average
annual total returns for each Option for the 1, 3, 5 and 10 Year Periods Ended
December 31, 1996, and from inception through December 31, 1996. The
calculation assumes the policy is still in force and therefore does not take
withdrawal charges into consideration. The performance information is based on
the historical investment experience of the Options and does not indicate or
represent future experience. This table is based upon average Account Value
over $60, 000 for which the annual charge is $0.

RETURNS WITHOUT SURRENDER CHARGES

CUMULATIVE TOTAL RETURN AVERAGE ANNUAL RETURN
------------------------------------- -----------------------------------------------
INCEPTION LIFE OF LIFE OF
VARIABLE OPTIONS DATE (1) 3 YEAR 5 YEAR 10 YEAR FUND 1 YEAR 3 YEAR 5 YEAR 10 YEAR FUND
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EAFE Equity Index 6/21/96 n/a n/a n/a 0.94% n/a n/a n/a n/a 1.79%
Equity 500 Index 12/31/92 63.79% n/a n/a 74.17% 23.23% 17.88% n/a n/a 14.87%
Small Cap Index 8/13/96 n/a n/a n/a 10.76% n/a n/a n/a n/a 30.54%
VIP Equity-Income 10/9/86 58.69% 92.44% 185.01% 215.90% 12.74% 16.64% 13.99% 11.04% 11.89%
VIP II Contrafund 1/3/95 n/a n/a n/a 64.85% 19.57% n/a n/a n/a 24.48%
VIP III Growth & Income 12/31/96 n/a n/a n/a n/a n/a n/a n/a n/a
VIP III Growth Opportunities 1/3/95 n/a n/a n/a 52.55% 16.67% n/a n/a n/a 23.58%
Harris Bretall Sullivan &
Smith Equity Growth 1/12/93 49.91% n/a n/a 47.05% 12.42% 14.45% n/a n/a 10.20%
Zurich Kemper Value 1/12/93 72.72% n/a n/a 83.89% 22.78% 19.98% n/a n/a 16.58%
Zweig Asset Allocation 3/26/93 34.45% n/a n/a 44.52% 13.32% 10.37% n/a n/a 10.26%
Zweig Equity (Small Cap) 1/4/93 36.96% n/a n/a 46.94% 16.87% 11.05% n/a n/a 10.20%
Janus Balanced 9/13/93 40.37% n/a n/a 49.87% 14.60% 11.97% n/a n/a 13.04%
Janus Capital Appreciation 5/1/97 n/a n/a n/a n/a n/a n/a n/a n/a n/a
Janus Worldwide Growth 9/13/93 60.21% n/a n/a 90.05% 27.28% 17.01% n/a n/a 21.47%
JPM Bond 1/3/95 n/a n/a n/a 13.97% 0.55% n/a n/a n/a 6.78%
JPM International Equity 1/3/95 n/a n/a n/a 23.75% 11.63% n/a n/a n/a 11.28%
Morgan Stanley Asian Equity 12/31/91 -11.18% 112.93% n/a 112.93% 1.88% -3.88% 16.32% n/a 16.30%
Morgan Stanley Emerging
Markets Debt 2/1/94 n/a n/a n/a 59.81% 48.64% n/a n/a n/a 17.45%
Morgan Stanley High Yield 8/31/92 29.27% n/a n/a 56.07% 13.10% 8.94% n/a n/a 10.81%
Morgan Stanley U.S.
Real Estate 1/31/95 n/a n/a n/a 64.45% 37.53% n/a n/a n/a 29.61%

</TABLE>

<PAGE>

STANDARD AVERAGE TOTAL RETURN - The table provides cumulative and average
annual total returns for each Option for the 1, 5 and 10 Year Periods Ended
December 31, 1996, and from inception through December 31, 1996. The
calculation includes any withdrawal charges that would apply if an owner
terminated the policy at the end of the period, but excludes deductions for
applicable premium tax charges. The performance information is based on the
historical investment experience of the Options and does not indicate or
represent future experience. This table is based upon average Account Value
over $60, 000 for whcih the annual charge is $0.

SEC STANDARDIZED
RETURNS WITH SURRENDER CHARGES CUMULATIVE TOTAL RETURN AVERAGE ANNUAL RETURN
--------------------------- ------------------------------------
INCEPTION LIFE OF LIFE OF
VARIABLE OPTIONS DATE (1) 5 YEAR 10 YEAR FUND 1 YEAR 5 YEAR 10 YEAR FUND
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
EAFE Equity Index 6/21/96 n/a n/a -6.06% n/a n/a n/a -11.15%
Equity 500 Index 12/31/92 n/a n/a 71.17% 16.23% n/a n/a 14.37%
Small Cap Index 8/13/96 n/a n/a 3.76% n/a n/a n/a 10.11%
VIP Equity-Income 10/9/86 92.44% 185.01% 215.90% 5.74% 13.99% 11.04% 11.89%
VIP II Contrafund 1/3/95 n/a n/a 58.85% 12.57% n/a n/a 26.11%
VIP III Growth & Income 12/31/96 n/a n/a n/a n/a n/a n/a n/a
VIP III Growth Opportunities 1/3/95 n/a n/a 46.55% 9.67% n/a n/a 21.12%
Harris Bretall Sullivan &
Smith Equity Growth 1/12/93 n/a n/a 43.05% 5.42% n/a n/a 9.44%
Zurich Kemper Value 1/12/93 n/a n/a 79.89% 15.78% n/a n/a 15.94%
Zweig Asset Allocation 3/26/93 n/a n/a 40.52% 6.32% n/a n/a 9.44%
Zweig Equity (Small Cap) 1/4/93 n/a n/a 42.94% 9.87% n/a n/a 9.43%
Janus Balanced 9/13/93 n/a n/a 45.87% 7.60% n/a n/a 12.12%
Janus Capital Appreciation 5/1/97 n/a n/a n/a n/a n/a n/a n/a
Janus Worldwide Growth 9/13/93 n/a n/a 86.05% 20.28% n/a n/a 20.69%
JPM Bond 1/3/95 n/a n/a 7.97% -6.45% n/a n/a 3.92%
JPM International Equity 1/3/95 n/a n/a 17.75% 4.63% n/a n/a 8.54%
Morgan Stanley Asian Equity 12/31/91 112.93% n/a 110.93% -5.12% 16.32% n/a 16.08%
Morgan Stanley Emerging
Markets Debt 2/1/94 n/a n/a 54.81% 41.64% n/a n/a 16.17%
Morgan Stanley High Yield 8/31/92 n/a n/a 53.07% 6.10% n/a n/a 10.31%
Morgan Stanley U.S.
Real Estate 1/31/95 n/a n/a 58.45% 30.53% n/a n/a 27.12%

</TABLE>

n/a Not applicable.
(1) Represents the inception date of the underlying funds. Performance data
for periods prior to the actual inception of the variable account options
is hypothetical and based on the performance of the underlying funds. This
performance data has been adjusted to include all insurance company
contract charges and management fees of the underlying funds.

<PAGE>

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.

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.

<PAGE>

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.

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.

8
<PAGE>

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 Funds 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 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.

For those underlying Options which have not been held as Sub-Accounts within the
Separate Account for one of the quoted periods, the standardized average annual
total return and nonstandardized total return quotations will show the
investment performance such underlying Options would have achieved (reduced by
the applicable charges) had they been held as Sub-Accounts within the Separate
Account for the period quoted.

<PAGE>

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% or 3.5% a year. 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.

Payments after the first three months will vary according to the investment
performance of the Variable Account Option or Options selected. After that,
each payment will be calculated by multiplying the number of annuity units
credited by the average annuity unit value for the second calendar month before
the due date of the payment. The number of annuity units credited equals the
initial periodic payment divided by the 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.

<PAGE>

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
- for Annuitants less than 70 years old on the birthday nearest the date
on which their contract was issued, an enhanced minimum death benefit.

"Subsequent withdrawals" for purposes of calculation of a death benefit reflect
any market value adjustments applicable to such withdrawals.

The ENHANCED MINIMUM DEATH BENEFIT is equal to the guaranteed death benefit,
except that the guaranteed death benefit may not exceed the maximum guaranteed
death benefit. The guaranteed death benefit on your Participation Date is your
initial contribution. On a monthly basis thereafter we recalculate that portion
of your guaranteed death benefit allocated to the Separate Account by adding
interest at an annual rate of 7% until the contract anniversary on which your
nearest birthday is your 70th, subject to the maximum, and subtracting the sum
of any withdrawals or transfers from the Separate Account during the month and a
pro rata amount of the interest accumulated relative to such withdrawn or
transferred amount. Therefore, your guaranteed death benefit at any time,
subject to the maximum, is equal to the sum of (1) your Guarantee Period Values,
and (2) your Separate Account contributions and the amount of interest
calculated on your Separate Account values for purposes of determining the
guaranteed death benefit less any withdrawals or transfers and less the interest
calculated on a pro rata basis on such withdrawn or transferred amount. Your
maximum guaranteed death benefit is determined by totalling your contributions
during your first five participation years, subtracting all withdrawals
inclusive of any market value adjustments made under the contract, multiplying
the result by two, and then adding to that amount your total contributions made
after the first five participation years.

<PAGE>

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, 1996, 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, 1996 and 1995 incorporated herein by reference to this SAI have
been audited by Ernst & Young LLP as set forth in their reports incorporated
herein by reference to this SAI.

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.

12
<PAGE>

Rule 497(c)
Registration No. 33-51126

STATEMENT OF ADDITIONAL INFORMATION

NOVEMBER 1, 1997

FOR

PINNACLE(VERSION III)

FLEXIBLE PREMIUM VARIABLE ANNUITY

ISSUED BY

NATIONAL INTEGRITY LIFE INSURANCE COMPANY

AND

FUNDED THROUGH ITS SEPARATE ACCOUNT II

TABLE OF CONTENTS
Page

Part 1 - National Integrity and Custodian. . . . . . . . . . . . . . . . . 2
Part 2 - Distribution of the Contracts . . . . . . . . . . . . . . . . . . 3
Part 3 - Performance Information . . . . . . . . . . . . . . . . . . . . . 3
Part 4 - Determination of Annuity Unit Values. . . . . . . . . . . . . . . 10
Part 5 - Financial Statements. . . . . . . . . . . . . . . . . . . . . . . 11

This Statement of Additional Information (SAI) is not a prospectus. It should be
read in conjunction with the prospectus for the contracts, dated November 1,
1997. For definitions of special terms used in the SAI, please refer to the
prospectus.

PART 1 - NATIONAL INTEGRITY AND CUSTODIAN

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

2
<PAGE>

PART 2 - DISTRIBUTION OF THE CONTRACTS

We generally pay a maximum distribution allowance of 6.5% of initial
contributions. The amount of distribution allowances paid was $51,204, $123,719
and $684,838 for the years ended December 31, 1996, 1995, and 1994,
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 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

TOTAL RETURNS

AVERAGE ANNUAL TOTAL RETURNS are calculated by determining the growth or decline
in the value of a hypothetical historical investment in the Option over certain
periods, including 1, 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

3
<PAGE>

n
pursuant to the following formula: P(1+T) = 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

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

4
<PAGE>

RETURNS WITHOUT SURRENDER CHARGES

</TABLE>

5
<PAGE>

STANDARD AVERAGE TOTAL RETURN - The table provides cumulative and average
annual total returns for each Option for the 1, 5 and 10 Year Periods
Ended December 31, 1996, and from inception through December 31, 1996.
The calculation includes any withdrawal charges that would apply if an
owner terminated the policy at the end of the period, but excludes
deductions for applicable premium tax charges. The performance
information is based on the historical investment experience of the
Options and does not indicate or represent future experience. This table
is based upon average Account Value over $60, 000 for whcih the annual
charge is $0.

</TABLE>

6
<PAGE>

PERFORMANCE COMPARISONS

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.

7
<PAGE>

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 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.

8
<PAGE>

Canadian dollars, European Currency Units, French francs, Japanese yen,
Netherlands guilder, Swiss francs, UK pounds sterling, U.S. dollars, and German
deutsche marks.

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

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

9
<PAGE>

INDIVIDUALIZED COMPUTER GENERATED ILLUSTRATIONS

PART 4 - DETERMINATION OF ANNUITY UNIT VALUES

* .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.

The amounts of variable annuity payments are determined as follows:

10
<PAGE>

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.

PART 5 - FINANCIAL STATEMENTS