<PAGE> 1
SENTRY FUND, INC.
1800 North Point Drive - Stevens Point, Wisconsin 54481
MESSAGE TO SHAREHOLDERS December 4, 1997
We are pleased to provide you this Sentry Fund report covering the fiscal year
ended October 31, 1997. Significant asset growth was achieved during the period
with net assets increasing from $97.2 million on October 31, 1996 to $118.3
million on October 31, 1997.
The US financial markets came down with the 'Asian Flu' in October. Reacting to
a currency collapse in Southeast Asia, the Dow Jones Industrial Average, on
Monday, October 27, suffered its largest one day point decline in history. Much
of the decline was recouped the following day with a record point gain and
trading volume exceeding one billion shares. While we would not dismiss the
situation in Southeast Asia as trivial, we believe the fundamental strengths of
the US economy and the equity markets remains unchanged.
The events in Southeast Asia have had, in the words of Alan Greenspan, some
'salutary effects'. Long-term government bond yields have declined to their
lowest levels of the year. And, if we correctly interpret Mr. Greenspan's
recent testimony before Congress, the risk of further Federal Reserve Board
tightening of monetary policy has been pushed much further into the future.
In summary, we believe the six and one-half year economic expansion will
continue into 1998, we believe the inflation and interest rate backdrop has
improved, and we remain positive on the equity markets. Should you have any
questions about your Sentry Fund account, or wish to open a Fund account,
please feel free to contact us at 1-800-533-7827.
Sincerely,
/s/ Steven R. Boehlke
- ---------------------
Steven R. Boehlke
President
[LINE GRAPH]
Average Annual Total Return** Periods Ended October 31, 1997
1 year 5 year 10 year
Sentry Fund 39.2% 16.8% 16.0%
S&P "500" 32.8% 19.4% 17.5%
**"Total Return" is calculated including reinvestment of all income dividends
and capital gain distributions. Results represent past performance, and do not
indicate future results. The value of an investment in the Fund and the return
on the investment both will fluctuate, and redemption proceeds may be higher or
lower than an investor's original cost. When first organized in 1970, the Fund
applied a sales charge to each share purchase. The Fund's sales charge was
eliminated on March 1, 1991. The performance data shown does not reflect its
deduction, and had it been reflected, the charge would reduce the performance
quoted.
The S&P "500" Index is an unmanaged index generally considered to be
representative of stock market activity. This data is derived by Sentry Equity
Services, Inc. and the Total Return includes reinvestment of all income.
<PAGE> 2
PORTFOLIO OF INVESTMENT SECURITIES -- October 31, 1997 SENTRY FUND, INC.
Value
Shares (Note 1)
- ---------- ----------
COMMON STOCKS (96.7%)
BUSINESS & CONSUMER SERVICES (13.5%)
100,000 Analysts Int'l Corp. $4,512,500
25,000 Deluxe Corp. 818,750
110,000 + Diamond Home Service, Inc. 935,000
100,000 Ennis Business Form Inc. 1,050,000
67,500 + Fiserv, Inc. 3,020,625
25,000 Block (H & R), Inc. 925,000
196,500 Richardson Electronics 2,407,125
235,000 + Richey Electronics, Inc. 2,291,250
DRUG & HEALTH CARE (5.4%)
40,000 Bristol-Myers Squibb Co. 3,510,000
100,000 Dentsply International Inc. 2,837,500
ELECTRICAL EQUIPMENT (1.6%)
30,000 General Electric Co. 1,936,890
ELECTRONICS (5.0%)
60,000 Int'l. Business Machines Corp. 5,883,780
ENERGY (22.2%)
27,300 Cabot Oil & Gas Corp. 655,200
451,700 + Coho Energy, Inc. 5,307,475
81,000 + Dawson Production Service 1,964,250
10,000 Exxon Corporation 614,380
30,000 + Marine Drilling Companies 888,750
70,000 + Noble Drilling Corp. 2,489,410
35,000 + Nuevo Energy Co. 1,450,330
80,000 + Oceaneering International, Inc. 1,985,040
193,000 + Petroglyph Energy Inc. 2,147,125
35,000 Pogo Producing Co. 1,266,580
78,000 + Pool Energy Services Co. 2,647,164
25,000 + Reading & Bater Corp. 1,059,375
20,000 Texaco, Inc. 1,138,760
30,500 Tidewater Inc. 2,003,484
20,000 USX - Marathon Group 715,000
FINANCIAL (10.3%)
38,633 Associated Banc - Corp. 1,936,454
40,000 Firstar Corp. 1,445,000
40,400 National City Corp. 2,413,900
60,000 PNC Bank Corp. 2,850,000
40,500 Southtrust Corp. 1,944,000
54,450 Washington Federal, Inc. 1,606,275
FOODS & RESTAURANT (9.4%)
46,400 + Consolidated Products 893,200
41,000 Cooker Restaurant Corp. 410,000
90,000 + Ihop Corp. 3,037,500
55,000 Lancaster Colony Corp. 2,722,500
70,000 McDonald's Corp. 3,136,910
43,900 + Morton's Restaurant Group 949,338
MANUFACTURING (9.8%)
75,000 Applied Power 4,640,625
31,400 Belden Inc. 1,075,450
40,000 BMC Industries Inc. 1,287,520
60,000 + ITI Technoligies 1,537,500
145,000 + Shaw Group Inc. 3,026,875
RETAIL (7.5%)
112,500 + Mac Frugal's Bargains - Close 3,825,000
180,000 Walgreen Company 5,062,500
TOBACCO (6.3%)
120,000 Philip Morris Cos., Inc. 4,755,000
90,000 UST, Inc. 2,694,420
TRANSPORTATION (5.7%)
90,000 + Global Motorsport Group Inc. 1,372,500
120,000 Harley-Davidson, Inc. 3,330,000
66,800 Wabash National Corp. 1,995,650
------------
Total Common Stocks 114,408,860
(Cost $60,648,838) ------------
Principal
Amount
- ------------
SHORT-TERM SECURITIES (3.0%)
COMMERCIAL PAPER - DISCOUNTED
$1,116,000 Commercial Credit Co.
Note due 11/4/97 1,115,489
179,000 General Electric Co.
Note due 11/6/97 178,863
530,000 Ford Motor Credit Co.
Note due 11/6/97 529,593
736,000 General Electric Capital Corp.
Note due 11/6/97 735,423
1,000,000 American General Finance Corp.
Note due 11/10/97 998,590
------------
TOTAL SHORT-TERM SECURITIES 3,557,958
(Cost $3,557,958) ------------
TOTAL INVESTMENTS (99.7%) 117,966,818
(Cost $64,206,796)
CASH AND RECEIVABLES
LESS LIABILITIES (0.3%) 311,323
------------
NET ASSETS (100%) $118,278,141
============
+Non-income producing security during the year ended October 31, 1997.
See accompanying notes to financial statements
<PAGE> 3
SENTRY FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1997
ASSETS:
Investments in securities, at
market value (cost $64,206,796) $117,966,818
Cash 192,111
Receivables:
Investment securities sold 809,348
Dividends 62,973
------------
Total assets $119,031,250
LIABILITIES:
[S]
Investment securities purchased 522,000
Investment advisory fees 219,045
Transfer agent fees 2,202
Custodian fees 462
Professional services 9,400
------------
Total liabilities 753,109
------------
NET ASSETS $118,278,141
============
ANALYSIS OF NET ASSETS:
Capital shares $45,426,384
Undistributed net investment income 251,985
Undistributed net realized gain on
sales of investments 18,839,750
Unrealized appreciation on investments 53,760,022
------------
Net assets applicable to outstanding shares $118,278,141
============
Capital Shares Outstanding 4,939,353
============
Net Asset Value and
Redemption and Offering Price per Share $23.95
============
STATEMENT OF OPERATIONS
For the Year Ended October 31, 1997
INVESTMENT INCOME:
Income:
Dividends $1,263,845
Interest 297,132
------------
Total investment income $1,560,977
Expenses:
Investment advisory fees 810,738
Transfer agent fees 25,236
Professional services 12,975
Printing, stationery and postage 5,712
Licenses and fees 17,060
Directors' fees 3,000
Other expenses 23,413
------------
Total expenses 898,134
------------
Net investment income 662,843
------------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on sales of investments 19,070,123
Increase in unrealized appreciation
of investments 15,950,516
------------
Net realized and unrealized gain
on investments 35,020,639
------------
Net increase in net assets resulting
from operations $35,683,482
============
See accompanying notes to financial statements
<PAGE> 4
SENTRY FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended October 31, 1997 and 1996
1997 1996
------------ ----------
OPERATIONS:
Net investment income $ 662,843 $ 871,853
Net realized gain on sales
of investments 19,070,123 4,921,007
Increase in unrealized
appreciation on investments 15,950,516 11,259,861
------------ -----------
Change in net assets
resulting from operations 35,683,482 17,052,721
------------ -----------
DISTRIBUTIONS:
Dividends from net
investment income (861,685) (894,861)
Distributions of net realized gains (4,859,092) (5,784,937)
------------ -----------
Total distributions to shareholders (5,720,777) (6,679,798)
------------ -----------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 6,180,829 20,647,795
Net asset value of shares issued to
shareholders in reinvestment
of distributions 5,658,760 6,625,630
------------ -----------
11,839,589 27,273,425
Cost of shares redeemed (20,677,679) (24,866,512)
------------ -----------
(Decrease) Increase in net assets
derived from capital share
transactions (8,838,090) 2,406,913
------------ -----------
Total increase in net assets 21,124,615 12,779,836
NET ASSETS:
Beginning of year 97,153,526 84,373,690
------------ -----------
End of year (including
undistributed net investment
income of $251,985 and
$450,827, respectively) $118,278,141 $97,153,526
============ ===========
See accompanying notes to financial statements
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies
Sentry Fund, Inc. (Fund) is registered with the Securities and Exchange
Commission under the Investment Company Act of 1940, as amended, as a
diversified, open-end management investment company. The financial statements
have been prepared in conformity with generally accepted accounting principles
which permit mangement to make certain estimates and assumptions at the date of
the financial statements.
The following summarizes the significant accounting policies of the Fund.
Security Valuation -- Securities traded on any national securities exchange
or over-the-counter market are valued at the last reported sales price;
short-term securities are stated at amortized cost, which approximates current
value.
Federal Income and Excise Taxes -- No provision for Federal income or excise
taxes is considered necessary since the Fund intends to distribute to its
shareholders substantially all of its taxable income, and to otherwise comply
with the provisions of the Internal Revenue Code applicable to regulated
investment companies.
Investment Income and Security Transactions -- Security transactions are
accounted for on the trade date. Dividend income and distributions to
shareholders are recorded on the ex-dividend date and the record date,
respectively. Interest income is recognized when earned. Realized gains and
losses from securities transactions are determined by comparing the identified
cost of the security lot sold with the net sales proceeds.
<PAGE> 5
NOTES TO FINANCIAL STATEMENTS (Continued)
2. CAPITAL SHARES
At October 31, 1997, there were 10,000,000 shares of $1 par value capital
stock authorized. Transactions in capital stock for the years ended
October 31, 1997 and 1996 were as follows:
1997 1996
--------- ---------
Shares sold 301,671 1,259,981
Shares issued to shareholders
in reinvestment of distributions 302,598 412,197
--------- ---------
604,269 1,672,178
Shares redeemed (1,005,067) (1,511,484)
--------- ---------
Net (decrease) increase in shares outstanding (400,798) 160,694
========= =========
3. PURCHASES AND SALES OF SECURITIES
Purchases and sales of common stock during the year ended October 31, 1997
aggregated $41,665,786 and $57,505,594, respectively.
4. INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Under terms of its investment advisory agreement with Sentry Investment
Management, Inc., the Fund pays an advisory fee equal to .75% of the average
daily net asset value of the Fund. However, under the terms of the agreement,
if the total annual expenses of the Fund (excluding taxes, portfolio
brokerage commissions and interest, but including investment advisory fees)
exceed 1-1/2% of the first $30,000,000 and 1% of the balance of the average
daily net asset value of the Fund in any one fiscal year, the investment
adviser will reimburse the Fund for such excess. Expenses did not exceed the
applicable limitation for the year ended October 31, 1997.
Sentry Equity Services, Inc., (SESI), as principal underwriter of the Fund,
paid $25,917 in commissions to sales representatives for the year ended
October 31, 1997. In addition, SESI also acts as transfer agent and receives
annual fees from the Fund of $8.50 per shareholder account.
As of October 31, 1997, Sentry Insurance and the Sentry 401K Plan held 21%
and 37%, respectively, of the Fund's outstanding capital stock.
5. DISTRIBUTIONS TO SHAREHOLDERS
Net realized gains from security transactions are distributed to shareholders
by the end of the succeeding year, unless there are capital loss carryovers
which may be applied against such realized gains. On December 18, 1996 and
June 11, 1997, the Fund distributed $4,583,693 ($.86 per share) and $275,399
($.05 per share) related to net realized capital gains. Undistributed
realized capital gains and net investment income as of October 31, 1997 will
be paid out on December 18, 1997. On December 18, 1996, and June 11, 1997,
the Fund distributed $586,286 ($.11 per share) and $275,399 ($.05 per share),
respectively, from net investment income.
<PAGE> 6
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. INCOME TAX INFORMATION
Unrealized gains and losses on investment securities for both financial
statement and Federal income tax purposes at October 31, 1997 were as
follows:
Gross unrealized gains $56,416,545
Gross unrealized losses 2,656,523
-----------
Net $53,760,022
===========
The aggregate investment cost for both financial statement and Federal income
tax purposes at October 31, 1997 was $64,206,796.
FINANCIAL HIGHLIGHTS
The following presents information relating to a share of capital stock of
the Fund outstanding for the entire period:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------------------------
1997 1996 1995 1994 1993
------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 18.19 $ 16.29 $ 15.39 $ 15.93 $ 15.17
-------- ------- ------- ------- -------
Income From Investment Operations
Net Investment Income .13 .17 .18 .18 .23
Net Realized and Unrealized Gains
on Investments 6.70 3.01 1.65 .53 1.12
-------- ------ ------- ------- -------
Total from Investment Operations 6.83 3.18 1.83 .71 1.35
Less Distributions
Dividends From Net Investment Income (.16) (.17) (.17) (.22) (.23)
Distribution From Net Realized Gains (.91) (1.11) (.76) (1.03) (.36)
-------- ------ ------- ------- -------
Total Distributions (1.07) (1.28) (.93) (1.25) (.59)
Net Asset Value End of Period $ 23.95 $ 18.19 $ 16.29 $ 15.39 $ 15.93
======== ======= ======= ======= =======
Total Return 39.23% 20.60% 12.97% 4.86% 9.17%
Net Assets, End of Period (in Thousands) $118,278 $97,154 $84,374 $79,622 $76,315
Ratio of Expenses to Average Net Assets .83% .84% .86% .86% .87%
Ratio of Net Investment Income to
Average Net Assets .61% .95% 1.17% 1.19% 1.48%
Portfolio Turnover Rate 40.75% 28.28% 26.54% 16.31% 22.34%
*Average Commission Rate $ .04 $ .03
</TABLE>
*Disclosure required, effective for reporting periods beginning after
September 1, 1995.
<PAGE> 7
INDEPENDENT ACCOUNTANTS' REPORT
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF SENTRY FUND, INC.:
We have audited the accompanying statement of assets and liabilities of Sentry
Fund, Inc., including the portfolio of investment securities, as of October 31,
1997, and the related statement of operations for the year then ended, the
statement of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the period
then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1997 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Sentry Fund, Inc. as of October 31, 1997, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended, in conformity with generally accepted accounting
principles.
Coopers & Lybrand L.L.P.
Chicago, Illinois
November 21, 1997
1997 FEDERAL INCOME TAX INFORMATION
Long term capital gains are taxable to shareholders as long term capital gains,
regardless of how long a person has been a shareholder. In order to avoid an
excise tax on undistributed amounts, the Fund must declare by the end of the
calendar year a dividend representing 98% of its ordinary income for the
calendar year and 98% of its net capital gains for the period of November 1 of
the previous year through October 31 of the current year. Capital gains and
income distributions declared and made payable to shareholders of record before
the end of the calendar year will be "deemed" to have been received by the
shareholders on December 31 so long as the dividends are actually paid during
January of the following year.
For individual tax information, shareholders should consult their own tax
advisors.
<PAGE> 8
Board of Directors
Thomas R. Copps
David W. Graebel
Alfred C. Noel
Dale R. Schuh
Steven J. Umland
Officers
Steven R. Boehlke, President
John A. Stenger, V.P.
William M. O'Reilly, Secy.
William J. Lohr, Treas.
Investment Advisor
Sentry Investment Management, Inc.
Stevens Point, Wisconsin
Underwriter
Sentry Equity Services, Inc.
Stevens Point, Wisconsin
Custodian
Citibank, N.A.
New York, New York
Legal Counsel
Godfrey & Kahn
Milwaukee, Wisconsin
Independent Auditors
Coopers & Lybrand L.L.P.
Chicago, Illinois
This report has been prepared for the general information of shareholders of
the Fund and is not authorized for distribution to prospective investors unless
preceded or accompanied by an effective Prospectus which contains details
concerning sales charges and other pertinent information.
SENTRY FUND, INC.
[PHOTO]
No sales charges
---
No redemption fees
---
No 12b-1 fees
ANNUAL REPORT
October 31, 1997
[SENTRY FUND, INC. LOGO]
