<PAGE> 1
SENTRY'S
SELF-DIRECTED
LIFE
[SENTRY LIFE INSURANCE COMPANY LOGO]
VARIABLE UNIVERSAL LIFE
SEMI-ANNUAL REPORT
JUNE 30, 1999
Funded by Neuberger Berman
Advisers Managment Trust
VOLUME 1 OF 2
<PAGE> 2
Dear Policy Owner: August 13, 1999
We are pleased to present you with the following comments of Neuberger Berman
Management Inc., the investment advisers for your Patriot variable annuity.
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 co-managers, Jennifer Silver and Brooke
Cobb, attribute the portfolio's performance to their stock selection strategy,
which favors a diverse array of companies in a variety of industries. Silver and
Cobb increased their AMT Growth holdings of Internet-related stocks during the
first quarter. When Internet stocks began to give back some of their previous
gains, Silver and Cobb sold some of their larger positions that had previously
provided strong returns. During the second half of the six-month period,
domestic interest rates began to rise. The stocks of many consumer cyclical
companies, such as retailers, experienced heightened volatility. Silver and Cobb
attempted to take advantage of this volatility by increasing existing holdings
and establishing new positions on perceived price weakness. Looking forward,
Silver and Cobb remain optimistic. In their view, the shift in market leadership
from large-cap to smaller stocks may persist, especially if interest rates
remain at or near current levels. Silver and Cobb report that they have
continued to seek fundamentally strong companies in the mid-cap market that have
good earnings and are selling at attractive valuations.
When 1999 began, the Neuberger Berman AMT Balanced Portfolio's assets were
apportioned 61.9% to equity and 38.1% to fixed income. Fixed income securities
provided competitive returns in a moderately rising interest rate environment,
and growth stocks continued to lead the equity markets.
Neuberger Berman AMT Limited Maturity Bond Portfolio co-managers are
Ted Giuliano and Catherine Waterworth, who also co-manage the fixed-income
portion of AMT Balanced Portfolio. During the first quarter, the portfolio's
allocation to U.S. Government Agency securities was reduced and those assets
were redeployed into mortgage-backed securities. During the second half of the
reporting period, the relative peace and quiet in the bond market was shattered
when fixed-income investors awoke to the conclusion that faster-than-expected
economic growth in domestic and overseas markets might rekindle inflation
pressures. The portfolio co-managers believe that investment environments such
as the one that dominated the second quarter provide true tests of fixed-income
managers' skills. According to Giuliano, "higher interest rates are like a
receding tide. You don't know which portfolio manager is exposed until the tide
goes out." When interest rates rise, bond prices fall. Giuliano and Waterworth
gradually reduced the portfolio's average duration to 2.0 years. If interest
rates rise further, Giuliano and Waterworth believe that the portfolio's current
posture should help it maintain competitive yields. If interest rates decline,
the portfolio co-managers stand ready to make the changes required to lock in
high yields.
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,
/s/ Dale R. Schuh
Dale R. Schuh, President
Sentry Life Insurance Company
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.
The composition, industries 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
SENTRY VARIABLE LIFE ACCOUNT I
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments at market value:
Neuberger Berman Advisers Management Trust:
Liquid Asset Portfolio, 154,007
shares (cost $154,007) $ 154,007
Growth Portfolio, 205,514
shares (cost $5,167,949) 5,246,726
Limited Maturity Bond Portfolio, 13,273
shares (cost $181,313) 173,788
Balanced Portfolio, 92,843
shares (cost $1,463,862) 1,483,628
------------
Total investments 7,058,149
Dividends receivable 527
------------
Total assets 7,058,676
LIABILITIES:
Accrued expenses 2,001
------------
NET ASSETS $ 7,056,675
============
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE> 4
SENTRY LIFE INSURANCE COMPANY
SENTRY VARIABLE LIFE ACCOUNT I
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
For the six months ended June 30, 1999, 1998 and 1997 (Unaudited)
<TABLE>
<CAPTION>
SUB-ACCOUNTS INVESTING IN:
--------------------------------------
LIQUID ASSET GROWTH
PORTFOLIO PORTFOLIO
-------------------------------------- --------------------------------------
1999 1998 1997 1999 1998 1997
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Income:
Dividends 3,225 3,646 4,839 -- -- --
Expenses:
Risk charges 850 830 1,126 25,254 23,286 16,990
---------- ---------- ---------- ---------- ---------- ----------
Net investment income (loss) 2,375 2,816 3,713 (25,254) (23,286) (16,990)
---------- ---------- ---------- ---------- ---------- ----------
Realized net investment gain (loss) -- -- -- (802) 104,579 31,075
Unrealized appreciation (depreciation), net -- -- -- (103,575) (587,913) 221,423
Capital gain distributions received -- -- -- 263,051 1,138,697 264,588
---------- ---------- ---------- ---------- ---------- ----------
Realized and unrealized gain (loss)
on investments and capital
gains distributions, net -- -- -- 158,674 655,363 517,086
---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) in net assets
from operations 2,375 2,816 3,713 133,420 632,077 500,096
---------- ---------- ---------- ---------- ---------- ----------
Purchase payments 131,541 71,735 92,587 450,373 347,272 309,656
Transfers between subaccounts, net (132,497) (60,100) (73,514) 135,170 33,601 77,806
Withdrawals and surrenders (1,716) (832) (34,108) (113,766) (271,542) (129,843)
Monthly deductions (10,219) (7,922) (7,327) (168,098) (142,403) (120,647)
Policy loans (77) (4) (38) (17,980) (14,264) (28,284)
Death Benefit -- -- -- (7,184) -- --
---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) in net assets
derived from principal transactions (12,968) 2,877 (22,400) 278,515 (47,336) 108,688
---------- ---------- ---------- ---------- ---------- ----------
Total increase (decrease) in net assets (10,593) 5,693 (18,687) 411,935 584,741 608,784
Net assets at beginning of year 164,474 150,989 219,666 4,833,999 4,171,215 2,978,276
---------- ---------- ---------- ---------- ---------- ----------
Net assets at end of year 153,881 156,682 200,979 5,245,934 4,755,956 3,587,060
========== ========== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE> 5
<TABLE>
<CAPTION>
Limited Maturity Balanced
Bond Portfolio Portfolio Total
- -------------------------------------- ------------------------------------- -------------------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
- ---------- ------- ------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
9,279 10,093 8,980 23,533 28,603 16,109 36,037 42,342 29,928
888 851 797 7,307 6,663 4,709 34,299 31,630 23,622
- ---------- ------- ------- --------- --------- --------- --------- --------- ---------
8,391 9,242 8,183 16,226 21,940 11,400 1,738 10,712 6,306
- ---------- ------- ------- --------- --------- --------- --------- --------- ---------
(524) (121) (941) (5,811) 4,535 3,382 (7,137) 108,993 33,516
(8,220) (5,912) (3,578) (21,004) (104,719) 35,795 (132,799) (698,544) 253,640
-- -- -- 34,863 200,904 41,345 297,914 1,339,601 305,933
- ---------- ------- ------- --------- --------- --------- --------- --------- ---------
(8,744) (6,033) (4,519) 8,048 100,720 80,522 157,978 750,050 593,089
- ---------- ------- ------- --------- --------- --------- --------- --------- ---------
(353) 3,209 3,664 24,274 122,660 91,922 159,716 760,762 599,395
- ---------- ------- ------- --------- --------- --------- --------- --------- ---------
13,178 12,150 10,765 153,763 102,114 91,593 748,855 533,271 504,601
2,565 (3,274) 25 (5,238) 29,773 (4,317) -- -- --
(4,493) (6,866) (5,934) (45,108) (26,239) (6,415) (165,083) (305,479) (176,300)
(5,862) (4,577) (5,741) (58,205) (51,076) (46,305) (242,384) (205,978) (180,020)
(8) 12 2,027 (194) 842 7,246 (18,259) (13,414) (19,049)
-- -- -- (4,150) -- -- (11,334) -- --
- ---------- ------- ------- --------- --------- --------- --------- --------- ---------
5,380 (2,555) 1,142 40,868 55,414 41,802 311,795 8,400 129,232
- ---------- ------- ------- --------- --------- --------- --------- --------- ---------
5,027 654 4,806 65,142 178,074 133,724 471,511 769,162 728,627
168,556 163,497 150,962 1,418,135 1,191,745 843,148 6,585,164 5,677,446 4,192,052
- ---------- ------- ------- --------- --------- --------- --------- --------- ---------
173,583 164,151 155,768 1,483,277 1,369,819 976,872 7,056,675 6,446,608 4,920,679
========== ======= ======= ========= ========= ========= ========= ========= =========
</TABLE>
<PAGE> 6
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
June 30, 1999, 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.
<PAGE> 7
NOTES TO FINANCIAL STATEMENTS (UNAUDITED - CONTINUED)
JUNE 30, 1999, 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 $2,001 at June 30, 1999.
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.
<PAGE> 8
NOTES TO FINANCIAL STATEMENTS (UNAUDITED - CONTINUED)
JUNE 30, 1999, 1998 AND 1997
4. NET ASSETS
Net assets are represented by accumulation units in the related Variable
Life Account.
At June 30, 1999 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 9,398 $ 16.37 $ 153,881
Growth Portfolio 154,272 34.00 5,245,934
Limited Maturity Bond Portfolio 9,616 18.05 173,583
Balanced Portfolio 63,079 23.51 1,483,277
--------------
Total net assets $ 7,056,675
==============
</TABLE>
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>
<PAGE> 9
NOTES TO FINANCIAL STATEMENTS (UNAUDITED - CONTINUED)
JUNE 30, 1999, 1998 AND 1997
5. PURCHASES AND SALES OF SECURITIES
In 1999, purchases and proceeds on sales of the Trust's shares aggregated
$1,273,332 and $661,442, 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 $ 137,340 $ 863,843 $ 25,135 $ 247,014 $1,273,332
Proceeds on sales 147,938 347,276 11,478 154,750 661,442
</TABLE>
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>
