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[SENTRY LOGO]
Sentry Variable Life Account I
SELF-DIRECTED LIFE
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
FUNDED BY NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
[SEMI-ANNUAL REPORT]
JUNE 30, 1997
SENTRY LIFE INSURANCE COMPANY
<PAGE> 2
Dear Policy Owner: August 15, 1997
Thank you for choosing Sentry Life for your insurance and long-term investment
needs. Your Self-Directed Life Policy provides you with life insurance
protection while at the same time providing you with the ability to control
your investment strategy.
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 USA Bank 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,
Dale R. Schuh, President
Sentry Life Insurance Company
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
Sentry Variable Life 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, 201,036
shares (cost $201,036) $ 201,036
Growth Portfolio, 129,329
shares (cost $3,054,752) 3,587,539
Limited Maturity Bond Portfolio, 11,488
shares (cost $159,151) 156,502
Balanced Portfolio, 58,982
shares (cost $915,051) 977,934
----------
Total investments 4,923,011
Dividends receivable 828
----------
Total assets 4,923,839
Liabilities:
Accrued expenses 3,160
----------
Contract owners' equity (Net Assets) $4,920,679
==========
The accompanying notes are an integral part of these financial statements
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SENTRY LIFE INSURANCE COMPANY
Sentry Variable Life Account I
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
For the six months ended June 30, 1997, 1996 and 1995 (Unaudited)
<TABLE>
<CAPTION>
SUB-ACCOUNTS INVESTING IN:
--------------------------
Liquid Asset Growth
Portfolio Portfolio
--------------------------------------------------------------------
1997 1996 1995 1997 1996 1995
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Income:
Dividends 4,839 4,781 4,406 -- 997 4,390
Expenses:
Risk charges 1,126 1,145 928 16,990 14,415 10,448
-------- -------- -------- ---------- ---------- ----------
Net investment income (loss) 3,713 3,636 3,478 (16,990) (13,418) (6,058)
-------- -------- -------- ---------- ---------- ----------
Realized net investment gain -- -- -- 31,075 32,347 4,501
Unrealized appreciation (depreciation), net -- -- -- 221,423 (119,520) 328,213
Capital gain distributions received -- -- -- 264,588 233,304 58,834
-------- -------- -------- ---------- ---------- ----------
Realized and unrealized gain (loss)
on investments and capital
gains distributions, net -- -- -- 517,086 146,131 391,548
-------- -------- -------- ---------- ---------- ----------
Net increase (decrease) in contract owners'
equity from operations 3,713 3,636 3,478 500,096 132,713 385,490
-------- -------- -------- ---------- ---------- ----------
Purchase payments 92,587 54,569 30,251 309,656 273,124 255,668
Transfers between subaccounts, net (73,514) (35,049) (51,452) 77,806 33,315 29,595
Withdrawals and surrenders (34,108) (16) (219) (129,843) (88,220) (70,740)
Monthly deductions (7,327) (6,651) (5,920) (120,647) (103,527) (89,211)
Policy loans (38) (685) (9) (28,284) (17,814) (33,337)
-------- -------- -------- ---------- ---------- ----------
Net increase (decrease) in contract owners'
equity derived from principal
transactions (22,400) 12,168 (27,349) 108,688 96,878 91,975
-------- -------- -------- ---------- ---------- ----------
Total increase (decrease) in contract
owners' equity (18,687) 15,804 (23,871) 608,784 229,591 477,465
Contract owners' equity at beginning of year 219,666 221,447 190,683 2,978,276 2,574,908 1,811,605
-------- -------- -------- ---------- ---------- ----------
Contract owners' equity at end of year 200,979 237,251 166,812 3,587,060 2,804,499 2,289,070
======== ======== ======== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements
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<TABLE>
<CAPTION>
Limited Maturity Balanced
Bond Portfolio Portfolio Total
- --------------------------------------------------------------------------------------------------------------
1997 1996 1995 1997 1996 1995 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
8,980 15,386 9,541 16,109 18,652 11,714 29,928 39,816 30,051
797 951 942 4,709 4,322 3,491 23,622 20,833 15,809
- ------- -------- -------- --------- --------- -------- ---------- ---------- ----------
8,183 14,435 8,599 11,400 14,330 8,223 6,306 18,983 14,242
- ------- -------- -------- --------- --------- -------- ---------- ---------- ----------
(941) (838) 115 3,382 6,027 4,584 33,516 37,536 9,200
(3,578) (14,063) 1,349 35,795 (104,364) 79,075 253,640 (237,947) 408,637
-- -- -- 41,345 103,719 3,765 305,933 337,023 62,599
- ------- -------- -------- --------- --------- -------- ---------- ---------- ----------
(4,519) (14,901) 1,464 80,522 5,382 87,424 593,089 136,612 480,436
- ------- -------- -------- --------- --------- -------- ---------- ---------- ----------
3,664 (466) 10,063 91,922 19,712 95,647 599,395 155,595 494,678
- ------- -------- -------- --------- --------- -------- ---------- ---------- ----------
10,765 12,509 15,995 91,593 61,414 94,605 504,601 401,616 396,519
25 (11,586) 10,336 (4,317) 13,320 11,521 - - -
(5,934) (59) (11,850) (6,415) (3,204) (21,987) (176,800) (91,499) (104,796)
(5,741) (6,051) (6,768) (46,305) (43,770) (40,022) (180,020) (159,999) (141,921)
2,027 (1,028) 23 7,246 (2,806) 4,375 (19,049) (22,333) (28,948)
- ------- -------- -------- --------- --------- -------- ---------- ---------- ----------
1,142 (6,215) 7,736 41,802 24,954 48,492 129,232 127,785 120,854
- ------- -------- -------- --------- --------- -------- ---------- ---------- ----------
4,806 (6,681) 17,799 133,724 44,666 144,139 728,627 283,380 615,532
150,962 180,182 167,729 843,148 793,604 607,854 4,192,052 3,770,141 2,777,871
- ------- -------- -------- --------- --------- -------- ---------- ---------- ----------
155,768 173,501 185,528 976,872 838,270 751,993 4,920,679 4,053,521 3,393,403
======= ======== ======== ========= ========= ======== ========== ========== ==========
</TABLE>
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NOTES TO FINANCIAL STATEMENTS (Unaudited)
June 30, 1997 and 1996
1. Organization and Contracts
The Sentry Variable Life Account I (the Variable Life Account) is a
segregated investment account of the Sentry Life Insurance Company (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 Life Account was established by the Company on
February 12, 1985 and commenced operations on January 13, 1987.
Accordingly, it is an accounting entity wherein all segregated account
transactions are reflected.
The assets of the Variable Life 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 Life 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 Life 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 and a death benefit guarantee risk
charge are deducted by the Company from the Variable Life Account on a
daily basis which is equal, on an annual basis, to 1.05% (.90% mortality
and expense risk and .15% death benefit guarantee risk charge) of the daily
net asset value of the Variable Life Account. These charges compensate the
Company for assuming these risks under the variable life contract. The
liability for accrued mortality and expense risk premium and death benefit
guarantee risk charge amounted to $3,160 at June 30, 1997.
At the beginning of each policy month, the company makes a deduction,
per contract holder, from the cash value of the policy by canceling
accumulation units. This deduction consists of the cost of insurance for
the policy and any additional benefits provided by rider, if any, for the
policy month and a $5 monthly administrative fee. The administrative fee
reimburses the Company for administrative expenses relating to the issuance
and maintenance of the contract.
The Company deducts a front-end sales expense charge of 5.0% from each
premium payment. A surrender charge may be deducted in the event of a
surrender to reimburse the Company for expenses incurred in connection with
issuing a policy. The full surrender charge will be reduced during the
first nine contract years until it reaches zero in the tenth contract year.
The Company deducts from each premium payment the amount of premium
taxes levied by any state or government entity. Premium taxes up to 4% are
imposed by certain states.
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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 Life Account.
At June 30, 1997 ownership of the Variable Life 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 13,140 $15.30 $ 200,979
Growth Portfolio 135,360 26.50 3,587,060
Limited Maturity Bond Portfolio 9,176 16.97 155,768
Balanced Portfolio 50,063 19.51 976,872
----------
Total contract owners' equity $4,920,679
==========
</TABLE>
At June 30, 1996 ownership of the Variable Life 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 16,053 $14.78 $ 237,251
Growth Portfolio 126,634 22.15 2,804,499
Limited Maturity Bond Portfolio 10,832 16.02 173,501
Balanced Portfolio 49,056 17.09 838,270
----------
Total contract owners' equity $4,053,521
==========
</TABLE>
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NOTES TO FINANCIAL STATEMENTS (Unaudited - continued)
June 30, 1997 and 1996
5. Purchases and Sales of Securities
In 1997, purchases and proceeds on sales of the Trust's shares aggregated
$1,017,526 and $575,465, 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 $137,231 $689,853 $21,786 $168,656 $1,017,526
Proceeds on sales $155,823 $333,576 $12,665 $ 73,401 $ 575,465
</TABLE>
In 1996, purchases and proceeds on sales of the Trust's shares aggregated
$851,706 and $367,019, 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 $ 66,321 $560,216 $ 27,983 $197,186 $ 851,706
Proceeds on sales $ 50,311 $243,039 $ 19,811 $ 53,858 $ 367,019
</TABLE>
In 1995, purchases and proceeds on sales of the Trust's shares aggregated
$572,002 and $374,412, 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 $37,340 $360,449 $35,872 $138,341 $572,002
Proceeds on sales $61,199 $216,249 $19,594 $ 77,370 $374,412
</TABLE>
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[SENTRY LOGO]
SENTRY LIFE
INSURANCE COMPANY
1800 North Point Drive
Stevens Point, WI 54481
32-301A 8-97
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