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[Sentry Logo]
VOLUME 1 OF 2
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, 1998
SENTRY LIFE INSURANCE COMPANY
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Dear Policy Owner: August 14, 1998
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.
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,
Dale R. Schuh
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 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.
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SENTRY LIFE INSURANCE COMPANY
SENTRY VARIABLE LIFE ACCOUNT I
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1998 (Unaudited)
ASSETS:
Investments at market value:
Neuberger & Berman Advisers Management Trust:
Liquid Asset Portfolio, 156,983
shares (cost $156,983) $ 156,983
Growth Portfolio, 180,721
shares (cost $4,544,267) 4,756,530
Limited Maturity Bond Portfolio, 12,126
shares (cost $167,104) 164,585
Balanced Portfolio, 85,056
shares (cost $1,347,704) 1,370,259
------------
Total investments 6,448,357
Dividends receivable 593
------------
Total assets 6,448,950
LIABILITIES:
Accrued expenses 2,342
------------
NET ASSETS $ 6,446,608
============
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 NET ASSETS
For the six months ended June 30, 1998, 1997 and 1996 (Unaudited)
<TABLE>
<CAPTION>
SUB-ACCOUNTS INVESTING IN:
--------------------------------------
LIQUID ASSET GROWTH
PORTFOLIO PORTFOLIO
-------------------------------------- --------------------------------------
1998 1997 1996 1998 1997 1996
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Income:
Dividends 3,646 4,839 4,781 -- -- 997
Expenses:
Risk charges 830 1,126 1,145 23,286 16,990 14,415
---------- ---------- ---------- ---------- ---------- ----------
Net investment income (loss) 2,816 3,713 3,636 (23,286) (16,990) (13,418)
---------- ---------- ---------- ---------- ---------- ----------
Realized net investment gain -- -- -- 104,579 31,075 32,347
Unrealized appreciation (depreciation), net -- -- -- (587,913) 221,423 (119,520)
Capital gain distributions received -- -- -- 1,138,697 264,588 233,304
---------- ---------- ---------- ---------- ---------- ----------
Realized and unrealized gain (loss)
on investments and capital
gains distributions, net -- -- -- 655,363 517,086 146,131
---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) in net assets
from operations 2,816 3,713 3,636 632,077 500,096 132,713
---------- ---------- ---------- ---------- ---------- ----------
Purchase payments 71,735 92,587 54,569 347,272 309,656 273,124
Transfers between subaccounts, net (60,100) (73,514) (35,049) 33,601 77,806 33,315
Withdrawals and surrenders (832) (34,108) (16) (271,542) (129,843) (88,220)
Monthly deductions (7,922) (7,327) (6,651) (142,403) (120,647) (103,527)
Policy loans (4) (38) (685) (14,264) (28,284) (17,814)
---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) in net assets
derived from principal transactions 2,877 (22,400) 12,168 (47,336) 108,688 96,878
---------- ---------- ---------- ---------- ---------- ----------
Total increase (decrease) in net assets 5,693 (18,687) 15,804 584,741 608,784 229,591
Net assets at beginning of year 150,989 219,666 221,447 4,171,215 2,978,276 2,574,908
---------- ---------- ---------- ---------- ---------- ----------
Net assets at end of year 156,682 200,979 237,251 4,755,956 3,587,060 2,804,499
========== ========== ========== ========== ========== ==========
</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
------------------------------------- -------------------------------------- --------------------------------------
1998 1997 1996 1998 1997 1996 1998 1997 1996
--------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<C> <C> <C> <C> <C> <C> <C> <C> <C>
10,093 8,980 15,386 28,603 16,109 18,652 42,342 29,928 39,816
851 797 951 6,663 4,709 4,322 31,630 23,622 20,833
--------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
9,242 8,183 14,435 21,940 11,400 14,330 10,712 6,306 18,983
--------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
(121) (941) (838) 4,535 3,382 6,027 108,993 33,516 37,536
(5,912) (3,578) (14,063) (104,719) 35,795 (104,364) (698,544) 253,640 (237,947)
-- -- -- 200,904 41,345 103,719 1,339,601 305,933 337,023
--------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
(6,033) (4,519) (14,901) 100,720 80,522 5,382 750,050 593,089 136,612
--------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
3,209 3,664 (466) 122,660 91,922 19,712 760,762 599,395 155,595
--------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
12,150 10,765 12,509 102,114 91,593 61,414 533,271 504,601 401,616
(3,274) 25 (11,586) 29,773 (4,317) 13,320 -- -- --
(6,866) (5,934) (59) (26,239) (6,415) (3,204) (305,479) (176,300) (91,499)
(4,577) (5,741) (6,051) (51,076) (46,305) (43,770) (205,978) (180,020) (159,999)
12 2,027 (1,028) 842 7,246 (2,806) (13,414) (19,049) (22,333)
--------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
(2,555) 1,142 (6,215) 55,414 41,802 24,954 8,400 129,232 127,785
--------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
654 4,806 (6,681) 178,074 133,724 44,666 769,162 728,627 283,380
163,497 150,962 180,182 1,191,745 843,148 793,604 5,677,446 4,192,052 3,770,141
--------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
164,151 155,768 173,501 1,369,819 976,872 838,270 6,446,608 4,920,679 4,053,521
========= ========== ========== ========== ========== ========== ========== ========== ==========
</TABLE>
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NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
June 30, 1998 and 1997
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 net assets
are not taxed.
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NOTES TO FINANCIAL STATEMENTS (UNAUDITED - CONTINUED)
June 30, 1998 and 1997
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 $2,342 at June 30, 1998.
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, 1998 and 1997
4. NET ASSETS
Net assets are represented by accumulation units in the related Variable Life
Account.
At June 30, 1998 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 9,880 $ 15.86 $ 156,682
Growth Portfolio 142,419 33.93 4,755,956
Limited Maturity Bond Portfolio 9,194 17.85 164,151
Balanced Portfolio 59,739 22.93 1,369,819
-----------
Total net assets $ 6,446,608
===========
</TABLE>
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 net assets $4,920,679
==========
</TABLE>
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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
$2,076,766 and $717,421, 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 $ 121,950 $ 1,569,929 $ 22,631 $ 362,256 $ 2,076,766
Proceeds on sales $ 115,422 $ 501,571 $ 16,094 $ 84,334 $ 717,421
</TABLE>
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>
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[Sentry Life Insurance Company Logo]
1800 North Point Drive
Stevens Point, WI 54481
32-301A Volume 1 8-98
