<PAGE> 1
[SENTRY LOGO]
VOLUME 1 OF 2
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Sentry Variable Account I
THE PATRIOT
A FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY
FUNDED BY NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
SEMI-ANNUAL REPORT
JUNE 30, 1998
SENTRY LIFE INSURANCE COMPANY OF NEW YORK
<PAGE> 2
Dear Contract Owner: August 14, 1998
We are pleased to present you with the following comments of Neuberger & Berman
Management Incorporated, the investment advisers for the Adviser Management
Trust Portfolios:
Jennifer Silver and Brooke Cobb took over management of Neuberger & Berman
Advisers Management Trust (AMT) Growth Portfolio and the equity portion of AMT
Balanced Portfolio in July 1997.
Neuberger & Berman AMT Growth Portfolio and the equity portion of the AMT
Balanced Portfolio out-performed their benchmark, the Russell Mid-Cap Growth
Index, during the second quarter, even though large-caps outperformed mid-caps
overall. Portfolio Co-Managers Jennifer Silver and Brooke Cobb believe over the
long term, medium-sized companies have better long-term growth potential.
Jennifer and Brooke believe the portfolio's strong performance relative to its
benchmark was the result of maintaining a highly diversified portfolio by
industry group and stock selection. Technology holdings contributed greatly to
the portfolio's overall performance. Jennifer and Brooke believe the portfolio's
success in technology was largely the result of focusing on productivity
enhancing tech companies serving niche markets and avoiding commodity-oriented
tech stocks whose earnings might be vulnerable to Asian economic weakness.
Jennifer and Brooke are optimistic on the mid-cap asset class and will continue
to invest in fast growing companies trading at reasonable multiples relative to
annual earnings growth rates. They believe the Portfolio is well positioned for
the potential to reward shareholders over the long-term.
Neuberger & Berman AMT Limited Maturity Bond Portfolio and the fixed income
portion of the AMT Balanced Portfolio co-managers Ted Giuliano and Tom Wolfe
believe favorable fundamentals such as low inflation and historically high real
rates of return have helped spawn this year's bond rally. Ted and Tom believe
they were able to enhance returns in the corporate sector through selectively
buying "split-rated" bonds (securities rated investment grade by one, but not
all the major rating services) and "crossover" bonds (securities with the
potential to move from a below investment grade or a split-grade rating to a
full investment grade rating). The co-managers emphasize that they have been
steadfast in their faith in fixed income, praising the virtues of income and
relative safety of principal. They will continue to invest in securities and
sectors they believe can add the best value. Ted and Tom have a positive outlook
on the fixed income market and will continue their same value investment
selection process.
THE INVESTMENTS FOR THE PORTFOLIOS ARE MANAGED BY THE SAME PORTFOLIO MANAGER(S)
WHO MANAGE ONE OR MORE OTHER MUTUAL FUNDS THAT HAVE SIMILAR NAMES, INVESTMENT
OBJECTIVES AND INVESTMENT STYLES AS THE PORTFOLIO. YOU SHOULD BE AWARE THAT THE
PORTFOLIOS ARE LIKELY TO DIFFER FROM THE OTHER MUTUAL FUNDS IN SIZE, CASH FLOW
PATTERN AND TAX MATTERS. ACCORDINGLY, THE HOLDINGS AND PERFORMANCE OF THE
PORTFOLIOS CAN BE EXPECTED TO VARY FROM THOSE OF THE OTHER MUTUAL FUNDS.
Thank you for choosing Sentry to help meet your long-term investment needs. We
value your business and appreciate your confidence in Sentry to provide this
service.
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 Advisers Management Trust Portfolios 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 an underlying investment
fund for certain qualified retirement plans. This material is authorized for
distribution only when preceded or accompanied by a prospectus.
<PAGE> 3
SENTRY LIFE INSURANCE COMPANY OF NEW YORK
SENTRY VARIABLE ACCOUNT I
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1998 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investments at market value:
Neuberger & Berman Advisers Management Trust:
Liquid Asset Portfolio, 115,738
shares (cost $115,738) $ 115,738
Growth Portfolio, 60,268
shares (cost $1,413,120) 1,585,973
Limited Maturity Bond Portfolio, 7,546
shares (cost $102,991) 102,397
Balanced Portfolio, 17,677
shares (cost $276,950) 284,768
----------
Total investments 2,088,876
Dividends receivable 428
----------
Total assets 2,089,304
LIABILITIES:
Accrued expenses 2,522
----------
NET ASSETS $2,086,782
==========
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE> 4
SENTRY LIFE INSURANCE COMPANY OF NEW YORK
SENTRY VARIABLE ACCOUNT I
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
For the six months ended June 30, 1998 and 1997 (Unaudited)
<TABLE>
<CAPTION>
SUB-ACCOUNTS INVESTING IN:
--------------------------
LIQUID ASSET GROWTH
PORTFOLIO PORTFOLIO
-------------------------- ---------------------------
1998 1997 1998 1997
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Income:
Dividends 2,536 2,723 -- --
Expenses:
Mortality and expense risk 667 730 9,019 8,073
-------- -------- ---------- ----------
Net investment income (loss) 1,869 1,993 (9,019) (8,073)
-------- -------- ---------- ----------
Realized net investment gain -- -- 3,972 32,700
Unrealized appreciation (depreciation), net -- -- (172,928) 70,701
Capital gain distributions received -- -- 392,328 110,632
-------- -------- ---------- ----------
Realized and unrealized gain (loss)
on investments and capital
gains distributions, net -- -- 223,372 214,033
-------- -------- ---------- ----------
Net increase in net assets from
operations 1,869 1,993 214,353 205,960
-------- -------- ---------- ----------
Purchase payments 5,461 5,501 7,321 16,127
Transfers between subaccounts, net -- -- 926 --
Withdrawals (568) (17,589) (89,577) (211,558)
Contract maintenance fees (194) (199) (1,247) (1,355)
Surrender charges -- (91) (1,447) (1,720)
-------- -------- ---------- ----------
Net increase (decrease) in net assets
derived from principal transactions 4,699 (12,378) (84,024) (198,506)
-------- -------- ---------- ----------
Total increase (decrease) in net assets 6,568 (10,385) 130,329 7,454
Net assets at beginning of period 108,749 130,654 1,454,779 1,368,676
-------- -------- ---------- ----------
Net assets at end of period 115,317 120,269 1,585,108 1,376,130
======== ======== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE> 5
<TABLE>
<CAPTION>
LIMITED MATURITY BALANCED
BOND PORTFOLIO PORTFOLIO TOTAL
- ----------------------------- ----------------------------- -----------------------------
1998 1997 1998 1997 1998 1997
- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
6,445 9,357 6,179 4,981 15,160 17,061
626 923 1,647 1,604 11,959 11,330
- ---------- ---------- ---------- ---------- ---------- ----------
5,819 8,434 4,532 3,377 3,201 5,731
- ---------- ---------- ---------- ---------- ---------- ----------
(3) (1,625) 1,148 3,114 5,117 34,189
(3,883) (3,369) (23,061) 5,911 (199,872) 73,243
-- -- 43,400 12,785 435,728 123,417
- ---------- ---------- ---------- ---------- ---------- ----------
(3,886) (4,994) 21,487 21,810 240,973 230,849
- ---------- ---------- ---------- ---------- ---------- ----------
1,933 3,440 26,019 25,187 244,174 236,580
- ---------- ---------- ---------- ---------- ---------- ----------
-- (1) 5,277 12,013 18,059 33,640
(926) -- -- -- -- --
(1,895) (46,020) (9,560) (48,464) (101,600) (323,631)
(118) (159) (213) (237) (1,772) (1,950)
-- (428) (99) (635) (1,546) (2,874)
- ---------- ---------- ---------- ---------- ---------- ----------
(2,939) (46,608) (4,595) (37,323) (86,859) (294,815)
- ---------- ---------- ---------- ---------- ---------- ----------
(1,006) (43,168) 21,424 (12,136) 157,315 (58,235)
102,797 180,635 263,142 266,607 1,929,467 1,946,572
- ---------- ---------- ---------- ---------- ---------- ----------
101,791 137,467 284,566 254,471 2,086,782 1,888,337
========== ========== ========== ========== ========== ==========
</TABLE>
<PAGE> 6
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
June 30, 1998 and 1997
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 net assets are
not taxed.
<PAGE> 7
NOTES TO FINANCIAL STATEMENTS (UNAUDITED - CONTINUED)
June 30, 1998 and 1997
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 $2,522
at June 30, 1998.
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.
<PAGE> 8
NOTES TO FINANCIAL STATEMENTS (UNAUDITED - CONTINUED)
June 30, 1998 and 1997
4. NET ASSETS
Net assets are represented by accumulation units in the related Variable
Account.
At June 30, 1998 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 6,531 $17.66 $ 115,317
Growth Portfolio 27,268 58.13 1,585,108
Limited Maturity Bond Portfolio 4,114 24.74 101,791
Balanced Portfolio 12,688 22.43 284,566
----------
Total net assets $2,086,782
==========
</TABLE>
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 net assets $1,888,337
==========
</TABLE>
<PAGE> 9
NOTES TO FINANCIAL STATEMENTS (UNAUDITED - CONTINUED)
June 30, 1998 and 1997
5. PURCHASES AND SALES OF SECURITIES
In 1998, purchases and proceeds on sales of the Trust's shares aggregated
$469,879 and $117,843, 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 $ 8,002 $400,575 $ 6,445 $54,857 $469,879
Proceeds on sales 761 101,271 3,939 11,872 117,843
</TABLE>
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>
<PAGE> 10
[SENTRY LIFE INSURANCE
COMPANY OF NEW YORK LOGO]
SENTRY LIFE INSURANCE
COMPANY OF NEW YORK
A MEMBER OF THE SENTRY FAMILY OF INSURANCE COMPANIES
251 Salina Meadows Parkway, Suite 100
P.O. Box 4944
Syracuse, NY 13221
(315) 453-6301
32-95A Volume 1 8-98
