<PAGE> 1
SENTRY FUND, INC.
1800 North Point Drive Stevens Point, Wisconsin 54481
MESSAGE TO SHAREHOLDERS DECEMBER 5, 1996
We are pleased to provide you with this Sentry Fund report covering the fiscal
year ended October 31, 1996. This past year was especially gratifying with Fund
net assets increasing from $84.4 million on October 31, 1995 to $97.2 million
on October 31, 1996, an all-time high for the Fund at the end of a fiscal
reporting period. We are happy that you, as a shareholder, are a part of this
growth.
Real GDP increased at a 2.2% annual rate in the third calendar quarter of 1996.
This follows increases of 2.0% and 4.7% in the first and second quarters,
respectively, of the year. Current projections call for continued, steady
economic growth for the fourth quarter of 1996 and into 1997.
After some midyear concerns that the Federal Reserve Board might tighten
monetary policy, it now appears that the FED will maintain its existing
posture. Reflecting this, long term government bond yields declined from 7.2%
at midyear to 6.5% recently. Inflation remains in check with the Producer Price
Index increasing at a 3% annual rate during the past year.
The stock market, as measured by the S&P 500 Index, increased approximately 16%
during the first 10 months of 1996. As long as the underlying support factors
for the market remain in place - continued profit growth, controlled inflation
and steady or declining bond yields - we remain optimistic on the outlook for
the Equity market.
Please feel free to contact us at any time should you have questions about
Sentry Fund or the information contained in the report. We can be reached at
1-800-533-7827.
Sincerely,
Steven R. Boehlke
President
Average Annual Total Return** Periods Ended October 31, 1996
1 year 5 year 10 year
Sentry Fund 20.6% 11.2% 11.5%
S&P "500" 22.0% 15.4% 14.4%
**"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, 1996 SENTRY FUND, INC.
<TABLE>
<CAPTION>
Value
Shares (Note 1)
- ---------- ------------
<S> <C> <C>
COMMON STOCKS (98.1%)
BUSINESS & CONSUMER SERVICES (14.3%)
148,500 Analysts Int'l Corp................. $ 3,712,500
25,000 Deluxe Corp......................... 815,625
100,000 + Diamond Home Service, Inc........... 2,300,000
67,500 + Fiserv, Inc......................... 2,590,313
25,000 Block (H & R), Inc.................. 618,750
75,000 + Jaco Electronics, Inc............... 590,625
150,000 Richardson Electronics.............. 1,125,000
239,500 + Richey Electronics, Inc............. 2,095,625
DRUG & HEALTH CARE (11.3%)
41,200 Bristol-Myers Squibb Co............. 4,356,900
50,000 Dentsply International Inc.......... 2,106,250
10,000 + Lunar Corp.......................... 311,250
40,000 + Steris Corp......................... 1,510,000
262,500 + Uromed Corp......................... 2,657,813
ELECTRICAL EQUIPMENT (3.4%)
33,600 General Electric Co................. 3,250,800
ELECTRONICS (7.4%)
40,000 Int'l. Business Machines Corp....... 5,160,000
110,000 + Recoton Corp........................ 1,995,000
ENERGY (11.5%)
27,300 Cabot Oil & Gas Corp................. 423,150
83,000 + Coho Energy, Inc..................... 581,000
41,000 + Dawson Production Service............ 497,125
5,000 Exxon Corporation.................... 443,125
100,000 + Marine Drilling Companies............ 1,387,500
30,800 + Nuevo Energy Co...................... 1,536,150
60,000 + Oceaneering International, Inc....... 1,080,000
203,000 + Pool Energy Services Co.............. 2,994,250
25,000 + Pride Petroleum Services, Inc........ 437,500
10,000 Texaco, Inc.......................... 1,016,250
20,000 USX-Marathon Group................... 437,500
12,675 + Weatherford Enterra, Inc............. 367,575
FINANCIAL (13.5%)
50,000 First Financial Corp. (Wisc)......... 1,356,250
20,000 Firstar Corp......................... 980,000
40,400 National City Corp................... 1,752,350
35,000 PMI Group............................ 1,999,375
80,000 PNC Bank Corp........................ 2,900,000
45,000 Security Capital Corp................ 2,970,000
49,500 Washington Federal, Inc.............. 1,188,000
FOODS & RESTAURANT (10.0%)
90,000 + Ihop Corp............................ 1,980,000
45,000 + Int'l Dairy Queen Class A............ 866,250
65,000 Lancaster Colony Corp................ 2,437,500
100,000 McDonald's Corp...................... 4,437,500
MANUFACTURING (6.9%)
75,000 Applied Power........................ 2,700,000
31,400 Belden Inc........................... 902,750
20,000 + Department 56, Inc................... 440,000
90,000 NN Ball & Roller..................... 1,215,000
50,000 + Plexus Corp.......................... 850,000
14,500 + Wolverine Rube....................... 578,187
RETAIL (5.4%)
140,000 Walgreen Company..................... 5,285,000
TOBACCO (7.4%)
50,000 Philip Morris Cos., Inc.............. 4,631,250
90,000 UST, Inc............................. 2,598,750
TRANSPORTATION (7.0%)
100,000 + Custom Chrome, Inc................... 1,887,500
75,000 Harley-Davidson, Inc................. 3,384,375
114,000 + Starcraft Automotive Corp............ 413,250
66,800 Wabash National Corp................. 1,077,150
-----------
TOTAL COMMON STOCKS 95,228,013
(Cost $57,418,507) -----------
Principal
Amount
- ---------
SHORT-TERM SECURITIES (0.3%)
COMMERCIAL PAPER - DISCOUNTED
336,000 Ford Motor Credit Corp.
Note due 11/5/96 335,800
-----------
TOTAL SHORT-TERM SECURITIES 335,800
(Cost $335,800) -----------
TOTAL INVESTMENTS (98.4%) 95,563,813
(Cost $57,754,307)
CASH AND RECEIVABLES
LESS LIABILITIES (1.6%) 1,589,713
-----------
NET ASSETS (100%) $97,153,526
===========
</TABLE>
+Non-income producing security during the year ended October 31, 1996.
See accompanying notes to financial statements
<PAGE> 3
SENTRY FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1996
<TABLE>
<S> <C> <C>
ASSETS:
Investments in securities, at
market value (cost $57,754,307) $95,563,813
Cash 50,559
Receivables:
Investment securities sold 1,660,145
Dividends 67,015
-----------
Total assets $97,341,532
LIABILITIES:
Investment advisory fees 176,129
Transfer agent fees 2,147
Custodian fees 730
Professional services 9,000
-----------
Total liabilities 188,006
-----------
NET ASSETS $97,153,526
===========
ANALYSIS OF NET ASSETS:
Capital shares $54,264,474
Undistributed net investment income 450,827
Undistributed net realized gain on
sales of investments 4,628,719
Unrealized appreciation on investments 37,809,506
-----------
Net assets applicable to outstanding shares $97,153,526
===========
Capital Shares Outstanding 5,340,151
===========
Net Asset Value and
Redemption and Offering Price per Share $ 18.19
===========
</TABLE>
STATEMENT OF OPERATIONS
For the Year Ended October 31, 1996
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Income:
Dividends $ 1,410,076
Interest 234,966
-----------
Total investment income $ 1,645,042
Expenses:
Investment advisory fees 689,374
Transfer agent fees 24,907
Professional services 12,579
Printing, stationery and postage 6,709
Licenses and fees 18,092
Directors' fees 3,000
Other expenses 18,528
-----------
Total expenses 773,189
-----------
Net investment income 871,853
-----------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on sales of investments 4,921,007
Increase in unrealized appreciation
of investments 11,259,861
-----------
Net realized and unrealized gain
on investments 16,180,868
-----------
Net increase in net assets resulting
from operations $17,052,721
===========
</TABLE>
See accompanying notes to financial statements
<PAGE> 4
SENTRY FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended October 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 871,853 $ 950,220
Net realized gain on sales
of investments 4,921,007 5,767,028
Increase in unrealized
appreciation on investments 11,259,861 3,352,885
----------- -----------
Net change in net assets
resulting from operations 17,052,721 10,070,133
----------- -----------
DISTRIBUTIONS:
Dividends from net
investment income (894,861) (891,072)
Distributions of net realized gains (5,784,937) (3,961,557)
----------- -----------
Total distributions to shareholders (6,679,798) (4,852,629)
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 20,647,795 4,714,480
Net asset value of shares issued to
shareholders in reinvestment
of distributions 6,625,630 4,805,308
----------- -----------
27,273,425 9,519,788
Cost of shares redeemed (24,866,512) (9,985,556)
----------- -----------
Increase (Decrease) in net assets
derived from capital share
transactions 2,406,913 (465,768)
----------- -----------
Total increase in net assets 12,779,836 4,751,736
NET ASSETS:
Beginning of year 84,373,690 79,621,954
----------- -----------
End of year (including
undistributed net investment
income of $450,827 and
$473,835, respectively) $ 97,153,526 $ 84,373,690
============ ============
</TABLE>
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 following is a
summary of significant accounting policies followed by the Fund in the
preparation of its financial statements.
a. 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.
b. 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.
c. 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, 1996, there were 10,000,000 shares of $1 par value
capital stock authorized. Transactions in capital stock for the years
ended October 31, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
--------- -------
<S> <C> <C>
Shares sold 1,259,981 312,285
Shares issued to shareholders in reinvestment of distributions 412,197 345,286
--------- -------
1,672,178 657,571
Shares redeemed 1,511,484 (652,520)
--------- -------
Net increase in shares outstanding 160,694 5,051
========= =======
</TABLE>
3. PURCHASES AND SALES OF SECURITIES
Purchases and sales of common stock during the year ended October 31,
1996 aggregated $27,257,657 and $24,796,683, 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, 1996.
Sentry Equity Services, Inc., (SESI), as principal underwriter of the
Fund, paid $13,282 in commissions to sales representatives for the
year ended October 31, 1996. 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, 1996, affiliates of Sentry Insurance and the Sentry
401K Plan held 27% and 36%, 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 19, 1995 and June 7, 1996, the Fund distributed $5,514,341 ($1.06
per share) and $270,596 ($.05 per share) related to net realized capital
gains. Undistributed realized capital gains and net investment income as
of October 31, 1996 will be paid out on December 19, 1996. On December 19,
1995, and June 8, 1996, the Fund distributed $624,265 ($.12 per share) and
$270,596 ($.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, 1996 were as
follows:
Gross unrealized gains $42,411,703
Gross unrealized losses 4,602,197
-----------
Net $37,809,506
===========
The aggregate investment cost for both financial statement and Federal
income tax purposes at October 31, 1996 was $57,754,307.
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,
---------------------------------------------------------------------
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 16.29 $ 15.39 $ 15.93 $ 15.17 $ 15.34
------- ------- ------- ------- -------
Income From Investment Operations
Net Investment Income 0.17 0 .18 .18 .23 .29
Net Realized and Unrealized Gains
on Investments 3.01 1.65 .53 1.12 1.03
------- ------- ------- ------- -------
Total from Investment Operations 3.18 1.83 .71 1.35 1.32
Less Distributions
Dividends From Net Investment Income (.17) (.17) (.22) (.23) (.35)
Distribution From Net Realized Gains (1.11) (.76) (1.03) (.36) (1.14)
------- ------- ------- ------- -------
Total Distributions (1.28) (.93) (1.25) (.59) (1.49)
Net Asset Value End of Period $ 18.19 $ 16.29 $ 15.39 $ 15.93 $ 15.17
======= ======= ======= ======= =======
Total Return 20.60% 12.97% 4.86% 9.17% 9.09%
Net Assets, End of Period (in Thousands) $97,154 $84,374 $79,622 $76,315 $69,454
Ratio of Expenses to Average Net Assets .84% .86% .86% .87% .88%
Ratio of Net Investment Income to
Average Net Assets .95% 1.17% 1.19% 1.48% 1.95%
Portfolio Turnover Rate 28.28% 26.54% 16.31% 22.34% 12.58%
*Average Commission Rate $ .03
</TABLE>
*Disclosure of the current year only is required.
<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,
1996, 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, 1996 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, 1996, 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.
/s/ Coopers & Lybrand L.L.P.
Chicago, Illinois
November 22, 1996
1996 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
Dale R. Schuh
Steven J. Umland
OFFICERS
Steven R. Boehlke, President
John A. Stenger, V.P.
William M. O'Reilly, Secy.
Thomas H. Weingarten, 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. Logo]
SENTRY FUND, INC.
ANNUAL
REPORT
NO SALES CHARGES
NO REDEMPTION FEES
OCTOBER 31, 1996
