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[SENTRY LOGO]
Sentry Variable Account I
THE PATRIOT
A FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY
FUNDED BY NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
[LOGO]
SEMI-ANNUAL REPORT
JUNE 30, 1997
SENTRY LIFE INSURANCE COMPANY OF NEW YORK
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Dear Contract Owner: August 15, 1997
Thank you for selecting the Patriot for your long-term investment needs. Your
confidence in Sentry to provide this service is greatly appreciated.
The following are comments of the adviser, Neuberger & Berman Management
Incorporated for the following Advisers Management Trust Portfolios:
Liquid Assets - Bullish fundamentals for the fixed income markets became more
apparent in the second quarter of 1997. The budget deficit appears to have
shrunk dramatically, the Federal Reserve has remained friendly, and inflation
statistics are the lowest in a generation. With this backdrop, 91-Day
Treasury Bill rates dropped from their April high of 5.34% to 5.17% at the
end of the second quarter. During the second quarter we saw remarkable
reductions in U.S. Treasury debt issuance, a welcome circumstance for U.S.
taxpayers, which aided the reduction in rates. During the same period, major
corporations continued to finance their activities by borrowing in the short
term commercial paper market at a substantial discount to long term borrowing
rates. This continued supply of commercial debt kept rates in this sector
significantly higher than comparable maturity Treasury Bills, a beneficial
circumstance for our money market investors. In this environment, we have
extended our target maturity to the 65-70 day range adding incremental yields
by selecting assets in the six months maturity factor.
Balanced Portfolio - During the first quarter of 1997, the market was very
volatile and was led mostly by large-cap stocks. Our best performer during
the first quarter was the technology sector, specifically Micron Technology.
The top three holding for the first quarter were General Nutrition, CITICORP,
and GTECH. The health care group had a good rebound from a poor 1996,
specifically the HMO group. The lagging parts of the Portfolio during the
first quarter were the communications area and the entertainment industry.
We indicated in past reports that the fundamentals for fixed income
securities were positive and that we participated in the rally by maintaining
a positive viewpoint on the market. We have maintained a position of assets
in the mortgage area, while selectively purchasing a variety of corporate
bonds in different sectors and industries.
Limited Maturity Bond Portfolio - The first quarter of 1997 started out as a
very interesting one in the bond arena. In the opinion of the Federal Reserve
Board, the financial markets had become irrationally exuberant and at the end
of the quarter it raised interest rates. This brought about our decision to
stay defensive through most of the quarter in order to protect principal in
what could be described as a very difficult market.
The top three holdings included General Motors Acceptance Corp. Medium-Term
Notes, First USABank Medium-Term Deposit Notes and Nations Bank Credit Card
Master Trust Class A Serials. At the end of the period there were 177
holdings in the portfolio.
As we focus on the final six months of 1997, it is still our opinion that
fixed income securities, in light of powerful fundamental forces, present
good investment opportunities. As usual, we will be vigilant in our sector
and security selection, and will attempt to find values that are not always
recognized by the general market.
Your account with us is appreciated.
Sincerely,
Harold A. Rice
- -------------------------------------------------------
Harold A. Rice, President and Chief Operating Officer
Sentry Life of New York>
The composition and holdings of the Portfolios are subject to change. Shares of
the separate Portfolios of Neuberger & Berman Advisers Management Trust are
sold only through the currently effective prospectus and are not available to
the general public. Shares of the Government Income, Growth, Limited Maturity
Bond, Liquid Asset and Partners Portfolio may be purchased only by life
insurance companies to be used with their separate accounts which fund variable
annuity and variable life insurance policies. Shares of the Balanced Portfolio
are also available as a underlying investment fund for certain qualified
retirement plans. This material is authorized for distribution only when
preceded or accompanied by a prospectus.
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SENTRY LIFE INSURANCE COMPANY OF NEW YORK
SENTRY VARIABLE ACCOUNT I
STATEMENT OF ASSETS, LIABILITIES
AND CONTRACT OWNERS' EQUITY
June 30, 1997 (Unaudited)
ASSETS:
Investments at market value:
Neuberger & Berman Advisers Management Trust:
Liquid Asset Portfolio, 120,320
shares (cost $120,320) $0,120,320
Growth Portfolio, 49,645
shares (cost $1,151,292) 1,377,163
Limited Maturity Bond Portfolio, 10,114
shares (cost $138,854) 137,751
Balanced Portfolio, 15,402
shares (cost $240,851) 255,367
----------
Total investments 1,890,601
Dividends receivable 453
----------
Total assets 1,891,054
LIABILITIES:
Accrued expenses 2,717
----------
CONTRACT OWNERS' EQUITY (NET ASSETS) $1,888,337
==========
The accompanying notes are an integral part of these financial statements
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SENTRY LIFE INSURANCE COMPANY OF NEW YORK
SENTRY VARIABLE ACCOUNT I
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
For the six months ended June 30, 1997 and 1996 (Unaudited)
<TABLE>
<CAPTION>
SUB-ACCOUNTS INVESTING IN:
--------------------------
LIQUID ASSET GROWTH
PORTFOLIO PORTFOLIO
------------------------ -----------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Income:
Dividends 2,723 5,571 -- 546
Expenses:
Mortality and expense risk 730 1,538 8,073 9,154
--------- --------- --------- ---------
Net investment income (loss) 1,993 4,033 (8,073) (8,608)
--------- --------- --------- ---------
Realized net investment gain -- -- 32,700 32,572
Unrealized appreciation (depreciation), net -- -- 70,701 (79,554)
Capital gain distributions received -- -- 110,632 127,915
--------- --------- --------- ---------
Realized and unrealized gain (loss)
on investments and capital
gains distributions, net -- -- 214,033 80,933
--------- --------- --------- ---------
Net increase (decrease) in contract owners'
equity from operations 1,993 4,033 205,960 72,325
--------- --------- --------- ---------
Purchase payments 5,501 13,835 16,127 20,942
Transfers between subaccounts, net -- 40,560 -- 28,600
Withdrawals (17,589) (70,041) (211,558) (74,416)
Contract maintenance fees (199) (351) (1,355) (1,507)
Surrender charges (91) (289) (1,720) (125)
--------- --------- --------- ---------
Net increase (decrease) in contract owners'
equity derived from principal transactions (12,378) (16,286) (198,506) (26,506)
--------- --------- --------- ---------
Total increase (decrease) in contract
owners' equity (10,385) (12,253) 7,454 45,819
Contract owners' equity at beginning of period 130,654 240,959 1,368,676 1,465,612
--------- --------- --------- ---------
Contract owners' equity at end of period 120,269 228,706 1,376,130 1,511,431
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements
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SENTRY LIFE INSURANCE COMPANY
SENTRY VARIABLE ACCOUNT II
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
For the six months ended June 30, 1997 and 1996 (Unaudited)
<TABLE>
<CAPTION>
LIMITED MATURITY BALANCED
BOND PORTFOLIO PORTFOLIO TOTAL
- --------------------------- ------------------------ ---------------------
1997 1996 1997 1996 1997 1996
- --------- ---------- ------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
9,357 22,382 4,981 6,319 17,061 34,818
923 1,644 1,604 1,620 11,330 13,956
- --------- ---------- ------- -------- --------- ---------
8,434 20,738 3,377 4,699 5,731 20,862
- --------- ---------- ------- -------- --------- ---------
(1,625) 1,835 3,114 2,562 34,189 36,969
(3,369) (23,172) 5,911 (35,139) 73,243 (137,865)
-- -- 12,785 35,141 123,417 163,056
- --------- ---------- ------- -------- --------- ---------
(4,994) (21,337) 21,810 2,564 230,849 62,160
- --------- ---------- ------- -------- --------- ---------
3,440 (599) 25,187 7,263 236,580 83,022
- --------- ---------- ------- -------- --------- ---------
(1) 232 12,013 15,256 36,640 50,265
-- (12,560) -- (56,600) - -
(46,020) (16,747) (48,464) (3,807) (323,631) (165,011)
(159) (241) (237) (301) (1,950) (2,400)
(428) (25) (635) (235) (2,874) (674)
- --------- ---------- ------- -------- --------- ---------
(46,608) (29,341) (37,323) (45,687) (294,815) (117,820)
- --------- ---------- ------- -------- --------- ---------
(43,168) (29,940) (12,136) (38,424) (58,235) (34,798)
180,635 308,715 266,607 282,697 1,946,572 2,297,983
- --------- ---------- ------- -------- --------- ----------
137,467 278,775 254,471 244,273 1,888,337 2,263,185
========= ========== ======= ======== ========= ==========
</TABLE>
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NOTES TO FINANCIAL STATEMENTS (Unaudited)
June 30, 1997 and 1996
1. ORGANIZATION AND CONTRACTS
--------------------------
The Sentry Variable Account I (the Variable Account) is a segregated
investment account of the Sentry Life Insurance Company of New York (the
Company) and is registered with the Securities and Exchange Commission as a
unit investment trust pursuant to the provisions of the Investment Company
Act of 1940. The Variable Account was established by the Company on August
24, 1983 and commenced operations on May 3, 1984. Accordingly, it is an
accounting entity wherein all segregated account transactions are reflected.
The assets of the Variable Account are invested in one or more of the
portfolios of Neuberger & Berman Advisers Management Trust (the Trust) at
the portfolio's net asset value in accordance with the selection made by the
contract owners.
A copy of the Neuberger & Berman Advisers Management Trust Annual Report is
included in the Variable Account's Annual Report.
2. SIGNIFICANT ACCOUNTING POLICIES
-------------------------------
VALUATION OF INVESTMENTS
Investments in the Trust are valued by using net asset values which are
based on the daily closing prices of the underlying securities in the
Trust's portfolios.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded on the trade date (the date the order
to buy and sell is executed). Dividend income is recorded on the ex-dividend
date. The cost of investments sold and the corresponding capital gains and
losses are determined on a specific identification basis.
FEDERAL INCOME TAXES
The Company is taxed as a life insurance company under the provisions of the
Internal Revenue Code. The operations of the Variable Account are part of
the total operations of the Company and are not taxed as a separate entity.
Under Federal income tax law, net investment income and net realized capital
gains of the Variable Account which are applied to increase contract owners'
equity are not taxed.
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NOTES TO FINANCIAL STATEMENTS (Unaudited-continued)
June 30, 1997 and 1996
3. EXPENSES
--------
A mortality and expense risk premium is deducted by the Company from the
Variable Account on a daily basis which is equal, on an annual basis, to
1.20% (.80% mortality and .40% expense risk) of the daily net asset value of
the Variable Account. This mortality and expense risk premium compensates
the Company for assuming these risks under the variable annuity contract.
The liability for accrued mortality and expense risk premium amounted to
$2,717 at June 30, 1997.
The Company deducts, on the contract anniversary date, an annual contract
maintenance charge of $30, per contract holder, from the contract value by
canceling accumulation units. If the contract is surrendered for its full
surrender value, on other than the contract anniversary, the contract
maintenance charge will be deducted at the time of such surrender. This
charge reimburses the Company for administrative expenses relating to
maintenance of the contract.
There are no deductions made from purchase payments for sales charges at the
time of purchase. However, a contingent deferred sales charge may be
deducted in the event of a surrender to reimburse the Company for expenses
incurred which are related to contract sales. Contingent deferred sales
charges apply to each purchase payment and are graded from 6% during the
first contract year to 0% in the seventh contract year.
Any premium tax payable to a governmental entity as a result of the
existence of the contracts or the Variable Account will be charged against
the contract value. Premium taxes up to 4% are currently imposed by certain
states. Some states assess their premium taxes at the time purchase payments
are made; others assess their premium taxes at the time of annuitization. In
the event contracts would be issued in states assessing their premium taxes
at the time purchase payments are made, the Company currently intends to
advance such premium taxes and to deduct the premium taxes from a contract
owner's contract value at the time of annuitization or surrender.
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NOTES TO FINANCIAL STATEMENTS (Unaudited-continued)
June 30, 1997 and 1996
4. CONTRACT OWNERS' EQUITY
-----------------------
Contract owners' equity is represented by accumulation units in the related
Variable Account. At June 30, 1997 ownership of the Variable Account was
represented by the following accumulation units and accumulation unit
values:
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION
UNITS UNIT VALUE VALUE
------------ --------------- -------------
<S> <C> <C> <C>
Neuberger & Berman
Advisers Management Trust:
Liquid Asset Portfolio 7,051 $ 17.06 $ 120,269
Growth Portfolio 29,786 46.20 1,376,130
Limited Maturity Bond Portfolio 5,833 23.57 137,467
Balanced Portfolio 13,312 19.12 254,471
-------------
Total contract owners' equity $ 1,888,337
=============
</TABLE>
At June 30, 1996 ownership of the Variable Account was represented by the
following accumulation units and accumulation unit values:
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION
UNITS UNIT VALUE VALUE
------------ --------------- -------------
<S> <C> <C> <C>
Neuberger & Berman
Advisers Management Trust:
Liquid Asset Portfolio 13,855 $ 16.51 $ 228,706
Growth Portfolio 39,087 38.67 1,511,431
Limited Maturity Bond Portfolio 12,516 22.27 278,775
Balanced Portfolio 14,569 16.77 244,273
-------------
Total contract owners' equity $ 2,263,185
=============
</TABLE>
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5. PURCHASES AND SALES OF SECURITIES
In 1997, purchases and proceeds on sales of the Trust's shares aggregated
$177,406 and $342,698, respectively, and were as follows:
<TABLE>
<CAPTION>
LIQUID ASSET GROWTH LIMITED MATURITY BALANCED
PORTFOLIO PORTFOLIO BOND PORTFOLIO PORTFOLIO TOTAL
------------ --------- ---------------- --------- ----------
<S> <C> <C> <C> <C> <C>
Purchases $ 11,310 $ 126,960 $ 9,357 $ 29,779 $ 177,406
Proceeds on sales $ 21,920 $ 222,834 $ 47,608 $ 50,336 $ 342,698
</TABLE>
In 1996, purchases and proceeds on sales of the Trust's shares aggregated
$418,661 and $350,452, respectively, and were as follows:
<TABLE>
<CAPTION>
LIQUID ASSET GROWTH LIMITED MATURITY BALANCED
PORTFOLIO PORTFOLIO BOND PORTFOLIO PORTFOLIO TOTAL
------------ --------- ---------------- --------- -----------
<S> <C> <C> <C> <C> <C>
Purchases $ 92,384 $225,046 $144,517 $56,714 $ 418,661
Proceeds on sales $103,945 $132,089 $52,475 $61,943 $ 350,452
</TABLE>
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[SENTRY LIFE INSURANCE COMPANY OF NEW YORK LOGO]
251 Salina Meadows Parkway, Suite 100
P.O. Box 4944
Syracuse, NY 13221
(315) 453-6301
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