<PAGE> 1
VARIABLE UNIVERSAL LIFE
ANNUAL REPORT
DECEMBER 31, 1999
FUNDED BY NEUBERGER BERMAN
ADVISERS MANAGEMENT TRUST
VOLUME 1 OF 2
SENTRY'S
SELF-DIRECTED
LIFE
[SENTRY LIFE INSURANCE COMPANY LOGO]
32-301
<PAGE> 2
Dear Policy Owner: February 15, 2000
I am pleased to announce that as of January 7, 2000 the Variable Account invests
in shares of T. Rowe Price Fixed Income Series, Inc., T. Rowe Price Equity
Series, Inc., and Janus Aspen Institutional Series. The Variable Account no
longer invests in Neuberger Berman Advisers Management Trust, Inc.
The investment managers for these new portfolios are: T. Rowe Price and
Associates, Inc. and Janus Capital Corporation.
On January 7, 2000 each Sentry Life variable policy owner was sent a Notice of
Substitution of Shares and a new contract prospectus. Please refer to your
contract prospectus dated January 7, 2000 for a complete description of the
following portfolios:
T. Rowe Price Fixed Income Series, Inc.
- T. Rowe Price Prime Reserve Portfolio
- T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price Equity Series, Inc.
- T. Rowe Price Personal Strategy Balanced Portfolio
Janus Aspen Institutional Series
- Janus Aggressive Growth Portfolio
You may make transfers as you wish among the new portfolios without charge. To
initiate a transfer, make a written request or call (800) 533-7827 to authorize
a telephone transfer.
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 composition and holdings of the Portfolios are subject to change. Shares of
the separate Portfolios of Neuberger Berman Advisers Management Trust, T. Rowe
Price Fixed Income Series, Inc., T. Rowe Price Equity Series, Inc. and Janus
Aspen Institutional Series are sold only through the currently effective
prospectus and are not available to the general public. Shares of these
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. This material is authorized for distribution only when preceded or
accompanied by a prospectus. 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
Portfolios. You should be aware that the Portfolios are likely to differ from
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.
<PAGE> 3
SENTRY LIFE INSURANCE COMPANY
SENTRY VARIABLE LIFE ACCOUNT I
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments at market value:
Neuberger Berman Advisers Management Trust:
Liquid Asset Portfolio, 208,539
shares (cost $208,539) $ 208,539
Growth Portfolio, 198,110
shares (cost $5,015,604) 7,383,501
Limited Maturity Bond Portfolio, 13,631
shares (cost $185,245) 180,508
Balanced Portfolio, 88,903
shares (cost $1,422,388) 1,857,191
-----------
Total investments 9,629,739
Dividends receivable 923
-----------
Total assets 9,630,662
LIABILITIES:
Accrued expenses 2,018
-----------
NET ASSETS $ 9,628,644
===========
</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
For the Years ended December 31, 1999, 1998 and 1997
<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 $ 7,204 $ 7,551 $10,121 $ - $ - $ -
Expenses:
Risk charges 1,794 1,740 2,305 55,295 45,238 37,804
------- ------- ------- ---------- ---------- ----------
Net investment income (loss) 5,410 5,811 7,816 (55,295) (45,238) (37,804)
------- ------- ------- ---------- ---------- ----------
Realized gains (losses) on investments:
Realized net investment gain (loss) - - - 100,296 130,456 143,719
Capital gain distributions received - - - 263,051 1,138,697 264,588
------- ------- ------- ---------- ---------- ----------
Realized gain (loss) on investments and
capital gain distributions, net - - - 363,347 1,269,153 408,307
Unrealized appreciation (depreciation), net - - - 2,185,546 (607,832) 478,813
------- ------- ------- ---------- ---------- ----------
Net increase in net assets from operations $ 5,410 $ 5,811 $ 7,816 $2,493,598 $ 616,083 $ 849,316
======= ======= ======== ========== ========== ==========
</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 $ 40,016 $ 46,247 $ 35,210
1,826 1,731 1,647 15,401 13,274 10,422 74,316 61,983 52,178
-------- -------- --------- --------- --------- ---------- ---------- ----------- ----------
7,453 8,362 7,333 8,132 15,329 5,687 (34,300) (15,736) (16,968)
-------- -------- --------- --------- --------- ---------- ---------- ----------- ----------
(1,292) (290) (1,219) 9,272 14,003 15,467 108,276 144,169 157,967
- - - 34,863 200,904 41,345 297,914 1,339,601 305,933
-------- -------- --------- --------- --------- ---------- ---------- ----------- ----------
(1,292) (290) (1,219) 44,135 214,907 56,812 406,190 1,483,770 463,900
(5,431) (2,702) 2,465 394,033 (86,499) 100,185 2,574,148 (697,033) 581,463
-------- -------- --------- --------- --------- ---------- ---------- ----------- ----------
$ 730 $ 5,370 $ 8,579 $ 446,300 $ 143,737 $ 162,684 $2,946,038 $ 771,001 $1,028,395
======== ======== ========= ========= ========= ========== ========== =========== ==========
</TABLE>
<PAGE> 6
SENTRY LIFE INSURANCE COMPANY
SENTRY VARIABLE LIFE ACCOUNT I
STATEMENTS OF CHANGES IN NET ASSETS
For the Years ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
SUB-ACCOUNTS INVESTING IN:
--------------------------
LIQUID ASSET GROWTH
PORTFOLIO PORTFOLIO
------------------------------------ -----------------------------------
1999 1998 1997 1999 1998 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net increase (decrease) in net assets
from operations:
Net investment income (loss) $ 5,410 $ 5,811 $ 7,816 $ (55,295) $ (45,238) $ (37,804)
Realized gains (losses) - - - 363,347 1,269,153 408,307
Unrealized appreciation (depreciation) - - - 2,185,546 (607,832) 478,813
-------- --------- --------- ----------- ---------- -----------
Net increase in net assets from operations 5,410 5,811 7,816 2,493,598 616,083 849,316
-------- --------- --------- ----------- ---------- -----------
Contract transactions:
Purchase payments 246,966 229,539 447,087 922,776 690,677 698,213
Transfers between subaccounts, net (183,953) (200,831) (427,134 141,942 134,665 304,525
Withdrawals and surrenders (4,075) (2,093) (80,269) (400,076) (460,042) (375,499)
Monthly deductions (19,814) (18,659) (16,117) (347,478) (291,193) (250,870)
Policy loans (142) (282) (60) (232,500) (27,406) (32,746)
Death benefits - - - (29,589) - -
-------- --------- --------- ----------- ---------- -----------
Net increase (decrease) in net assets
derived from principal transactions 38,982 7,674 (76,493) 55,075 46,701 343,623
-------- --------- --------- ----------- ---------- -----------
Total increase (decrease) in net assets 44,392 13,485 (68,677) 2,548,673 662,784 1,192,939
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 $208,866 $ 164,474 $ 150,989 $ 7,382,672 $4,833,999 $ 4,171,215
======== ========= ========= =========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE> 7
<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>
$ 7,453 $ 8,362 $ 7,333 $ 8,132 $ 15,329 $ 5,687 $ (34,300) $ (15,736) $ (16,968)
(1,292) (290) (1,219) 44,135 214,907 56,812 406,190 1,483,770 463,900
(5,431) (2,702) 2,465 394,033 (86,499) 100,185 2,574,148 (697,033) 581,463
-------- -------- -------- ---------- ---------- ---------- ---------- ---------- ----------
730 5,370 8,579 446,300 143,737 162,684 2,946,038 771,001 1,028,395
-------- -------- -------- ---------- ---------- ---------- ---------- ---------- ----------
28,494 24,332 20,154 275,290 222,905 176,611 1,473,526 1,167,453 1,342,065
1,011 (2,103) 793 41,000 68,269 121,816 - - -
(6,359) (10,939) (7,924) (204,024) (98,008) (19,038) (614,534) (571,082) (482,730)
(11,956) (11,050) (11,054) (112,051) (109,415) (93,257) (491,299) (430,317) (371,298)
(115) (551) 1,987 (3,742) (1,098) (219) (236,499) (29,337) (31,038)
- - - (4,163) - - (33,752) - -
-------- -------- -------- ---------- ---------- ---------- ---------- ---------- ----------
11,075 (311) 3,956 (7,690) 82,653 185,913 97,442 136,717 456,999
-------- -------- -------- ---------- ---------- ---------- ---------- ---------- ----------
11,805 5,059 12,535 438,610 226,390 348,597 3,043,480 907,718 1,485,394
168,556 163,497 150,962 1,418,135 1,191,745 843,148 6,585,164 5,677,446 4,192,052
-------- -------- -------- ---------- ---------- ---------- ---------- ---------- ----------
$180,361 $168,556 $163,497 $1,856,745 $1,418,135 $1,191,745 $9,628,644 $6,585,164 $5,677,446
======== ======== ======== ========== ========== ========== ========== ========== ==========
</TABLE>
<PAGE> 8
NOTES TO FINANCIAL STATEMENTS
December 31, 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 financial statements have been prepared in conformity with
generally accepted accounting principles which permit management to make
certain estimates and assumptions at the date of the financial statements.
Actual results could differ from those estimates.
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 at the reported net asset values of the
portfolios, which value their investment securities at fair value.
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 investment 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
investment gains of the Variable Life Account which are applied to increase
net assets are not taxed.
<PAGE> 9
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 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 $2,018 at December 31, 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> 10
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1999, 1998 and 1997
4. NET ASSETS
At December 31, 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>
Liquid Asset Portfolio 12,542 $16.65 $ 208,866
Growth Portfolio 149,488 $49.39 $7,382,672
Limited Maturity Bond Portfolio 9,931 $18.16 $ 180,361
Balanced Portfolio 60,712 $30.58 $1,856,745
----------
Total net assets $9,628,644
==========
</TABLE>
At December 31, 1999 significant concentrations of ownership were as follows:
<TABLE>
<CAPTION>
NUMBER OF
CONTRACT OWNERS PERCENTAGE OWNED
--------------- ----------------
<S> <C> <C>
Liquid Asset Portfolio 3 44.4
Limited Maturity Bond Portfolio 1 29.2
</TABLE>
At December 31, 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>
Liquid Asset Portfolio 10,192 $16.14 $ 164,474
Growth Portfolio 145,685 $33.18 $4,833,999
Limited Maturity Bond Portfolio 9,319 $18.09 $ 168,556
Balanced Portfolio 61,296 $23.14 $1,418,135
----------
Total net assets $6,585,164
==========
</TABLE>
At December 31, 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>
Liquid Asset Portfolio 9,691 $15.58 $150,989
Growth Portfolio 143,731 29.02 4,171,215
Limited Maturity Bond Portfolio 9,339 17.51 163,497
Balanced Portfolio 57,188 20.84 1,191,745
----------
Total net assets $5,677,446
==========
</TABLE>
<PAGE> 11
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1999, 1998 and 1997
5. PURCHASES AND SALES OF SECURITIES
In 1999, purchases and proceeds on sales of the Trust's shares aggregated
$2,187,782 and $1,826,660, 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 $318,521 $1,391,451 $40,920 $436,890 $2,187,782
Proceeds on sales $274,587 $1,128,326 $22,563 $401,184 $1,826,660
</TABLE>
In 1998, purchases and proceeds on sales of the Trust's shares aggregated
$2,839,658 and $1,379,167, 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 $272,325 $2,009,596 $35,610 $522,127 $2,839,658
Proceeds on sales $258,175 $ 869,198 $27,828 $223,966 $1,379,167
</TABLE>
In 1997, purchases and proceeds on sales of the Trust's shares aggregated
$2,245,774 and $1,500,435, 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 $501,151 $1,310,732 $32,033 $401,858 $2,245,774
Proceeds on sales $570,324 $740,521 $21,099 $168,491 $1,500,435
</TABLE>
6. SUBSEQUENT EVENT
On January 7, 2000, the Variable Account transferred assets from Neuberger
Berman Advisers Management Trust to T. Rowe Price Fixed Income Series, Inc.,
T. Rowe Price Equity Series, Inc., and Janus Aspen Institutional Series. The
transfer had no effect on the Variable Life Account Portfolios' unit value or
number of units.
<PAGE> 12
REPORT OF INDEPENDENT ACCOUNTANTS
THE BOARD OF DIRECTORS
SENTRY LIFE INSURANCE COMPANY
AND
THE CONTRACT OWNERS OF
SENTRY VARIABLE LIFE ACCOUNT I:
In our opinion, the accompanying combined statement of assets and liabilities
and the related statements of operations and changes in net assets present
fairly, in all material respects, the financial position of the Sentry Variable
Life Account I, and the Liquid Asset Portfolio, Growth Portfolio, Limited
Maturity Bond Portfolio and Balanced Portfolio thereof, at December 31, 1999,
and the results of each of their operations and changes in each of their net
assets for each of the three years in the period then ended, in conformity with
accounting principles generally accepted in the United States. These financial
statements are the responsibility of Sentry Life Insurance Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with auditing standards generally accepted in the United States,
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 1999, by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
/S/ PRICEWATERHOUSECOOPER L.L.P.
Chicago, Illinois
February 10, 2000
<PAGE> 13
[SENTRY EQUITY SERVICES, INC. LOGO]
SENTRY EQUITY SERVICES, INC.
- --------------------------------------
1800 North Point Drive
Stevens Point, WI 54481
1-800-533-7827
