<PAGE> 1
SENTRY FUND, INC.
1800 North Point Drive - Stevens Point, Wisconsin 54481
MESSAGE TO SHAREHOLDERS DECEMBER 10, 1998
We are pleased to provide this Sentry Fund report covering the fiscal year ended
October 31, 1998.
The big event during the past several months has been the volatility of the
equity markets in response to an unsettled world economic environment. After
displaying strong appreciation during the first two calendar quarters, the
popular U.S. stock markets averages turned abruptly downward in late July. Both
the Dow Jones Industrial Average and the Standard and Poors 500 Stock Index
evidenced significant recovery in September and October, with each ending the
period approximately 8% below the all-time highs recorded in July. For the first
ten months of 1998 the Dow was up 10%, while the S&P 500 had added more than
14%.
The steep decline in domestic stock markets during the third calendar quarter
was in response to foreign uncertainties and concern regarding the extent to
which weakness abroad would spill over into the U.S. economy. The Federal
Reserve Board of Governors voted reductions in the Federal Funds Rate in
September and early October, signaling a willingness to accommodate needs within
the U.S. banking system. While concern remains whether easier monetary policy
will be sufficient, some stock market investors have been emboldened by the
Fed's actions.
Longer term, excess worldwide productive capacity is likely to pressure U.S.
producers to continue cost reduction measures to remain competitive in the
global economy. The lack of pricing power and the need to contain costs
threatens to squeeze corporate profits in 1999.
Your fund's management has taken these economic trends to signal a change from
the near ideal investment conditions which have dominated for most of this
decade. While remaining confident of the positive momentum for the stock market
longer term, near-term implementation of the fund's investment policy and
objectives can be expected to reflect the current uncertainties.
Sincerely,
Steven R. Boehlke
President
[GRAPH]
**"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, 1998 SENTRY FUND, INC.
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
COMMON STOCKS (92.9%)
---------------------
BUSINESS & CONSUMER SERVICES (12.9%)
<S> <C> <C>
150,000 Analysts Int'l Corp........... $2,634,375
25,000 Deluxe Corp................... 809,375
140,000 Ennis Business Form Inc....... 1,400,000
101,250 +Fiserv, Inc................... 4,708,125
25,000 Block (H & R), Inc............ 1,120,312
186,500 Richardson Electronics........ 1,445,375
235,000 +Richey Electronics, Inc....... 2,364,688
DRUG & HEALTH CARE (1.1%)
160,000 +Endosonics Corp............... 1,230,000
ELECTRONICS (8.2%)
50,000 Int'l. Business Machines Corp. 7,421,875
190,000 +Savior Technology Group....... 1,745,625
ENERGY (8.9%)
27,300 Cabot Oil & Gas Corp.......... 464,100
451,700 +Coho Energy, Inc.............. 2,032,650
10,000 Exxon Corporation............. 712,500
65,000 +Marine Drilling Companies .... 727,188
45,800 +Noble Drilling Corp........... 787,187
56,800 +Oceaneering International, Inc. 816,500
250,000 +Petroglyph Energy Inc......... 1,375,000
29,500 +R&B Falcon Corp............... 400,094
150,000 Range Resources Corp.......... 853,125
20,000 Texaco Inc.................... 1,186,250
20,000 USX - Marathon Group.......... 653,750
FINANCIAL (13.8%)
26,250 Amsouth Bancorporation........ 1,051,641
48,290 Associated Banc - Corp........ 1,696,186
40,000 Firstar Corp.................. 2,270,000
30,000 Home Federal Bancorp Co....... 712,500
40,400 National City Corp............ 2,598,225
60,000 PNC Bank Corp................. 3,000,000
60,750 Southtrust Corp............... 2,217,375
10,000 TCF Financial Corp............ 235,625
59,895 Washington Federal, Inc....... 1,598,448
FOODS & RESTAURANT (13.3%)
70,000 +Consolidated Products......... 1,295,000
41,000 Cooker Restaurant Corp........ 248,562
90,000 +Ihop Corp..................... 3,532,500
82,500 Lancaster Colony Corp......... 2,475,000
60,000 McDonald's Corp............... 4,012,500
93,900 +Morton's Restaurant Group..... 1,831,050
27,000 +Rare Hospitality Int'l........ 324,000
70,000 Ruby Tuesday Inc.............. 1,181,250
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
MANUFACTURING (14.5%)
<S> <C> <C>
150,000 Applied Power................. 4,134,375
170,000 General Cable Corp............ 3,357,500
63,000 +ITI Technologies.............. 1,819,125
167,500 +Jason Inc..................... 1,319,062
60,000 Manitowoc Co. Inc............. 2,100,000
72,500 +Rayovac Corp.................. 1,472,656
72,500 Regal - Beloit Corp........... 1,527,031
55,000 +Shaw Group Inc. .............. 529,375
RETAIL (7.8%)
9,678 +Consolidated Stores Corp...... 159,082
195,000 Hancock Fabrics Inc........... 1,694,063
140,000 Walgreen Company ............. 6,816,250
TOBACCO (8.2%)
120,000 Philip Morris Cos., Inc....... 6,135,000
90,000 UST, Inc...................... 3,060,000
TRANSPORTATION (4.2%)
120,000 Harley-Davidson, Inc.......... 4,650,000
------------
TOTAL COMMON STOCKS 103,941,475
(Cost $62,753,447) ------------
<CAPTION>
PRINCIPAL
AMOUNT
------
SHORT-TERM SECURITIES (8.0%)
----------------------------
COMMERCIAL PAPER - DISCOUNTED
<S> <C> <C>
$ 253,000 Household Financial Co.
Note due 11/2/98 252,961
1,023,000 Norwest Financial Inc.
Note due 11/3/98 1,022,698
1,000,000 Norwest Financial Inc.
Note due 11/3/98 999,716
2,094,000 General Motors Accept. Co.
Note due 11/5/98 2,092,810
1,500,000 American General Finance Corp.
Note due 11/9/98 1,498,301
1,319,000 Norwest Financial Inc.
Note due 11/9/98 1,317,458
1,765,000 General Electric Capital Corp.
Note due 11/12/98 1,762,251
------------
TOTAL SHORT-TERM SECURITIES 8,946,195
(Cost $8,946,195) ------------
TOTAL INVESTMENTS (100.9%) 112,887,670
(Cost $71,699,642)
CASH AND RECEIVABLES
LESS LIABILITIES (-0.9%) (1,038,096)
------------
NET ASSETS (100%) $111,849,574
============
</TABLE>
+Non-income producing security during the year ended October 31, 1998.
See accompanying notes to financial statements
<PAGE> 3
SENTRY FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1998
<TABLE>
<S> <C> <C>
ASSETS:
Investments in securities, at
market value (cost $71,699,642) $112,887,670
Cash 59,536
Dividends receivable 66,792
------------
Total assets $113,013,998
LIABILITIES:
Investment securities purchased 953,174
Investment advisory fees 199,226
Transfer agent fees 2,533
Custodian fees 430
Professional services 9,000
Redemption payable 61
------------
Total liabilities 1,164,424
------------
NET ASSETS $111,849,574
============
ANALYSIS OF NET ASSETS:
Paid in capital $59,507,801
Undistributed net investment income 309,561
Accumulated undistributed net realized gain
on sales of investments 10,844,184
Net unrealized appreciation on investments 41,188,028
------------
Net assets, for 5,649,128 shares outstanding $111,849,574
============
Net Asset Value and
Redemption and Offering Price per Share $19.80
============
</TABLE>
STATEMENT OF OPERATIONS
For the Year Ended October 31, 1998
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Income:
Dividends $1,332,388
Interest 287,989
----------
Total investment income $1,620,377
Expenses:
Investment advisory fees 877,820
Transfer agent fees 28,261
Professional services 15,704
Printing, stationery and postage 5,883
Licenses and fees 24,149
Directors' fees 3,000
Other expenses 20,028
----------
Total expenses 974,845
-----------
Net investment income 645,532
-----------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on sales of investments 11,134,702
Decrease in unrealized appreciation
of investment securities (12,571,994)
-----------
Net realized and unrealized loss
on investments (1,437,292)
-----------
Net decrease in net assets resulting
from operations ($791,760)
===========
</TABLE>
See accompanying notes to financial statements
<PAGE> 4
SENTRYFUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended October 31, 1998 and 1997
1998 1997
------------ ------------
INCREASE(DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income $ 645,532 $ 662,843
Net realized gain on sales
of investments 11,134,702 19,070,123
(Decrease) increase in unrealized
appreciation on investments (12,571,994) 15,950,516
------------ ------------
Net change in net assets
resulting from operations (791,760) 35,683,482
------------ ------------
DISTRIBUTIONS:
Dividends from net
investment income (587,956) (861,685)
Distributions of net realized gains (19,130,268) (4,859,092)
------------ ------------
Total distributions to shareholders (19,718,224) (5,720,777)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 7,148,297 6,180,829
Net asset value of shares issued to
shareholders in reinvestment
of distributions 19,569,199 5,658,760
------------ ------------
26,717,496 11,839,589
Cost of shares redeemed (12,636,079) (20,677,679)
------------ ------------
Net increase (decrease) in net assets
derived from share transactions 14,081,417 (8,838,090)
------------ ------------
Total (decrease) increase in net assets (6,428,567) 21,124,615
NET ASSETS:
Beginning of year 118,278,141 97,153,526
------------ ------------
End of year (including
undistributed net investment
income of $309,561 and
$251,985, respectively) $111,849,574 $118,278,141
============ ============
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 require management to make certain estimates and assumptions
at the date of the financial statements. Actual results could differ from
those estimates.
The following summarizes the significant accounting policies of the Fund.
Security Valuation -- Portfolio securities which are traded on a national
securities exchange are valued at the last price as of the close of trading
on the New York Stock Exchange or, if there has been no sale on that day, at
the last bid price. Securities traded on the over-the-counter market are
valued at the mean between the last quoted bid and asked prices. 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, 1998, there were 10,000,000 shares of $1 par value capital
stock authorized. Transactions in capital stock for the years ended October
31, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
1998 1997
-------- ----------
<S> <C> <C>
Shares sold 343,870 301,671
Shares issued to shareholders in reinvestment of distributions 985,343 302,598
--------- ----------
1,329,213 604,269
Shares redeemed (619,438) (1,005,067)
--------- ----------
Net (decrease) increase in shares outstanding 709,775 (400,798)
========= ==========
</TABLE>
3. PURCHASES AND SALES OF SECURITIES
Purchases and sales of common stock during the year ended October 31, 1998
aggregated $33,426,861 and $42,435,165, 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 assets 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 1.5%
of the first $30,000,000 and 1% of the balance of the average daily net
assets 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, 1998.
Sentry Equity Services, Inc., (SESI), as principal underwriter of the Fund,
paid $28,199 in commissions to sales representatives for the year ended
October 31, 1998. 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, 1998, Sentry Insurance and the Sentry 401K Plan held 22%
and 34%, 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, 1997 and
June 11, 1998, the Fund distributed $18,839,782 ($3.80 per share) and
$290,486 ($.05 per share) related to net realized capital gains.
Undistributed realized capital gains and net investment income as of October
31, 1998 will be paid out on December 17, 1998. On December 18, 1997, and
June 11, 1998, the Fund distributed $297,470 ($.06 per share) and $290,486
($.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, 1998 were as
follows:
<TABLE>
<S> <C>
Gross unrealized gains $49,655,090
Gross unrealized losses 8,467,062
-----------
Net $41,188,028
===========
</TABLE>
The aggregate investment cost for both financial statement and Federal income
tax purposes at October 31, 1998 was $71,699,642.
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,
-----------------------------------------------------------------------
1998 1997 1996 1995 1994
----------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 23.95 $ 18.19 $ 16.29 $ 15.39 $ 15.93
----------- ----------- ---------- ---------- ----------
Income From Investment Operations
Net Investment Income .11 .13 .17 .18 .18
Net Realized and Unrealized Gains (Losses)
on Investments (.30) 6.70 3.01 1.65 .53
----------- ----------- ---------- ---------- ----------
Total from Investment Operations (.19) 6.83 3.18 1.83 .71
Less Distributions
Dividends From Net Investment Income (.11) (.16) (.17) (.17) (.22)
Distribution From Net Realized Gains (3.85) (.91) (1.11) (.76) (1.03)
----------- ----------- ---------- ---------- ----------
Total Distributions (3.96) (1.07) (1.28) (.93) (1.25)
Net Asset Value End of Period $ 19.80 $ 23.95 $ 18.19 $ 16.29 $ 15.39
=========== =========== ========== ========== ==========
Total Return (.76%) 39.23% 20.60% 12.97% 4.86%
Net Assets, End of Period (in Thousands) $ 111,850 $ 118,278 $ 97,154 $84,374 $79,622
Ratio of Expenses to Average Net Assets .83% .83% .84% .86% .86%
Ratio of Net Investment Income to
Average Net Assets .55% .61% .95% 1.17% 1.19%
Portfolio Turnover Rate 29.85% 40.75% 28.28% 26.54% 16.31%
</TABLE>
See accompanying notes to financial statements
<PAGE> 7
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF SENTRY FUND, INC.:
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investment securities, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Sentry Fund, Inc. (the "Fund") at
October 31, 1998, 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. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund'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 generally
accepted auditing standards 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 October 31, 1998 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
/s/PricewaterhouseCooper L.L.P.
Chicago, Illinois
November 19, 1998
1998 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
SENTRY FUND, INC.
[PHOTO]
No sales charges
-
No redemption fees
-
No 12b-1 fees
ANNUAL REPORT
October 31, 1998
[SENTRY FUND, INC. LOGO]
BOARD OF DIRECTORS
Thomas R. Copps
David W. Graebel
William J. Lohr
Dale R. Schuh, Chairman
Steven J. Umland
OFFICERS
Steven R. Boehlke, President
Susan M. DeBruin, Vice President
William M. O'Reilly, Secretary
William J. Lohr, Treasurer
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
PricewaterhouseCoopers LLP
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.
